<PAGE>
As filed with the Securities and Exchange Commission on April 23, 1996
Registration No. 33-25623
811-5690
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 20 X
-
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940
Amendment No. 19 X
-
----------
FIRST INVESTORS SERIES FUND
(Exact name of Registrant as specified in charter)
Ms. Concetta Durso
Secretary and Vice President
First Investors Series Fund
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 $.01 per share, 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>
FIRST INVESTORS SERIES FUND
Blue Chip Fund
Investment Grade Fund
Special Situations Fund
Total Return Fund
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.......... Alternative Purchase
Plan; 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
14. Management of the Fund....................... Trustees and Officers
15. Control Persons and Principal
Holders of Securities........................
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
<PAGE>
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
N-1A Item No. Location
- ------------- --------
20. Tax Status................................... Taxes
21. Underwriters................................. Underwriter
22. Performance Data............................. Performance Information
23. Financial Statements......................... Financial Statements;
Report of Independent
Accountants
PART C: OTHER INFORMATION
Information required to be included in Part C is set forth under the appropriate
item so numbered, in Part C hereof.
<PAGE>
FIRST INVESTORS SERIES FUND
BLUE CHIP FUND SPECIAL SITUATIONS FUND
INVESTMENT GRADE FUND TOTAL RETURN FUND
95 Wall Street, New York, New York 10005/1-800-423-4026
This is a Prospectus for FIRST INVESTORS BLUE CHIP FUND, FIRST INVESTORS
INVESTMENT GRADE FUND, FIRST INVESTORS SPECIAL SITUATIONS FUND and FIRST
INVESTORS TOTAL RETURN FUND, each of which is a separate series of FIRST
INVESTORS SERIES FUND ("Series Fund"). Series Fund is an open-end diversified
management investment company which presently offers five separate investment
series. This Prospectus relates to the four series of Series Fund listed above
(singularly, "Fund," and collectively, "Funds"). Each Fund sells two classes of
shares. Investors may select Class A or Class B shares, each with a public
offering price that reflects different sales charges and expense levels. See
"Alternative Purchase Plans."
BLUE CHIP FUND seeks to provide investors with high total investment return
consistent with the preservation of capital. This 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.
INVESTMENT GRADE FUND seeks to generate a maximum level of income consistent
with investment in investment grade debt securities. This Fund seeks to achieve
its objective by investing, under normal market conditions, at least 65% of its
total assets in investment grade debt securities, which are securities rated in
one of the four highest rating categories by Moody's Investors Service, Inc. or
Standard & Poor's Ratings Group or, if unrated, are deemed to be of comparable
quality by the Fund's investment adviser.
SPECIAL SITUATIONS FUND seeks long-term growth of capital. This Fund seeks to
achieve its objective by investing, under normal market conditions, at least 65%
of its total assets in the common stock of companies with small to medium market
capitalization that the Fund's investment adviser considers to be undervalued or
less well known in the current marketplace and to have potential for capital
growth.
TOTAL RETURN FUND seeks to provide investors with high long-term total
investment return consistent with moderate investment risk. This Fund seeks to
achieve its objective by investing, under normal market conditions, primarily in
stocks, bonds and money market instruments.
There can be no assurance that any Fund will achieve its investment objective.
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. First Investors Management Company, Inc. ("FIMCO" or
"Adviser") serves as investment adviser to the Funds and First Investors
Corporation ("FIC" 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 Series
Fund at the address or telephone number indicated above.
An investment in these securities is not a deposit or obligation of, or
guaranteed or endorsed by, any bank and is not federally insured or protected by
the Federal Deposit Insurance Corporation, the Federal Reserve Board or any
other government agency.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISS-
ION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADE-
QUACY 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 class of shares of a Fund. Shares of
a Fund issued prior to January 12, 1995 have been designated as Class A shares.
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
Class A Class B
Shares Shares
---------- ----------
<S> <C> <C>
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) 6.25% None
Deferred Sales Load
(as a percentage of the lower of
original purchase price or
redemption proceeds) None* 4% in the first year;
declining to 0% after
the sixth year
</TABLE>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
<TABLE>
<CAPTION>
TOTAL FUND
MANAGEMENT 12B-1 OTHER OPERATING
FEES(1)+ FEES EXPENSES(2) EXPENSES(3)+
----------- ------ ----------- -------------
<S> <C> <C> <C> <C>
BLUE CHIP FUND
Class A Shares........... 0.75% 0.30% 0.44% 1.49%
Class B Shares........... 0.75 1.00 0.44 2.19
INVESTMENT GRADE FUND
Class A Shares........... 0.65 0.30 0.15+ 1.10
Class B Shares........... 0.65 1.00 0.15+ 1.80
SPECIAL SITUATIONS FUND
Class A Shares........... 0.75 0.30 0.55 1.60
Class B Shares........... 0.75 1.00 0.55 2.30
TOTAL RETURN FUND
Class A Shares........... 0.75 0.30 0.53 1.58
Class B Shares........... 0.75 1.00 0.53 2.28
</TABLE>
- -------------------------
* A contingent deferred sales charge of 1.00% will be assessed on certain
redemptions of Class A shares that are purchased without a sales charge.
See "How to Buy Shares."
+ Net of waiver and/or reimbursement
(1) For the fiscal year ended December 31, 1995, the Adviser waived Management
Fees in excess of 0.75% for each Fund, except that it waived Management
Fees in excess of 0.65% for INVESTMENT GRADE FUND. Absent the waiver, such
fees would have been 1.00% for each Fund, other than INVESTMENT GRADE FUND,
which would have been 0.75%. The Adviser expects to continue to waive such
fees for a minimum period ending December 31, 1996.
(2) Other Expenses for INVESTMENT GRADE FUND have been restated to reflect
current expenses. For the fiscal year ended December 31, 1995, the Adviser
reimbursed INVESTMENT GRADE FUND for certain Other Expenses. Absent such
reimbursement, Other Expenses would have been 0.38% for each class of
shares. The Adviser will reimburse each class of that Fund for Other
Expenses in excess of 0.15% for a minimum period ending December 31, 1996.
(3) If certain fees and expenses had not been waived or reimbursed, Total Fund
Operating Expenses would have been as follows: BLUE CHIP FUND - 1.74% for
Class A and 2.44% for Class B; INVESTMENT GRADE FUND - 1.43% for Class A
and 2.13% for Class B; SPECIAL SITUATIONS FUND - 1.85% for Class A and
2.55% for Class B; TOTAL RETURN FUND - 1.83% for Class A and 2.53 % for
Class B.
2
<PAGE>
For a more complete description of the various costs and expenses, see
"Alternative Purchase Plans," "How to Buy Shares," "How to Redeem Shares,"
"Management" and "Distribution Plans." Due to the imposition of 12b-1 fees, it
is possible that long-term shareholders of a 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 Class A and Class B 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>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
-------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
BLUE CHIP FUND
Class A.................. $77 $107 $139 $229
Class B.................. 62 99 137 235*
INVESTMENT GRADE FUND
Class A.................. 73 95 119 188
Class B.................. 58 87 117 193*
SPECIAL SITUATIONS FUND
Class A.................. 78 110 144 241
Class B.................. 63 102 143 246*
TOTAL RETURN FUND
Class A.................. 78 109 143 239
Class B.................. 63 101 142 244*
</TABLE>
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) no redemption at the end of each time period:
<TABLE>
<CAPTION>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
-------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
BLUE CHIP FUND
Class A.................. $77 $107 $139 $229
Class B.................. 22 69 117 235*
INVESTMENT GRADE FUND
Class A.................. 73 95 119 188
Class B.................. 18 57 97 193*
SPECIAL SITUATIONS FUND
Class A.................. 78 110 144 241
Class B.................. 23 72 123 246*
TOTAL RETURN FUND
Class A.................. 78 109 143 239
Class B.................. 23 71 122 244*
</TABLE>
* Assumes conversion to Class A shares eight years after purchase.
THE EXPENSES IN THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION BY THE
FUNDS OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES IN FUTURE YEARS MAY BE
GREATER OR LESS THAN THOSE SHOWN.
3
<PAGE>
FINANCIAL HIGHLIGHTS
The table below 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 Series Fund.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA
--------------------------------------------------------------------------------------------------------
Income from
Investment Operations
----------------------------------------
Net Net
Asset Net Realized Less Distributions from Asset
Value and Unrealized ----------------------- Value
-------------- Net Gain Total from Net Net ------
Beginning Investment (Loss) on Investment Investment Realized Total End of
of Period Income Investments Operations Income Gains Distributions Period
-------------- ---------- --------------- ----------- ------------ --------- ------------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BLUE CHIP FUND
- --------------
CLASS A
- -------
1/3/89* to 12/31/89... $11.13 $.50 $ 1.18 $1.68 $.40 $ -- $ .40 $12.41
1990.................. 12.41 .32 (.74) (.42) .35 -- .35 11.64
1991.................. 11.64 .21 2.96 3.17 .22 -- .22 14.59
1992.................. 14.59 .13 .82 .95 .13 .12 .25 15.29
1993.................. 15.29 .10 1.08 1.18 .10 .79 .89 15.58
1994.................. 15.58 .11 (.58) (.47) .09 1.56 1.65 13.46
1995.................. 13.46 .19 4.37 4.56 .20 .60 .80 17.22
CLASS B
- -------
1/12/95* to 12/31/95.. 13.51 .10 4.31 4.41 .16 .60 .76 17.16
INVESTMENT GRADE
FUND
- ----------------
CLASS A
- -------
2/19/91* to 12/31/91.. 9.31 .57 .67 1.24 .57 .05 .62 9.93
1992.................. 9.93 .71 .04 .75 .72 .06 .78 9.90
1993.................. 9.90 .65 .50 1.15 .65 .07 .72 10.33
1994.................. 10.33 .62 (1.09) (.47) .62 -- .62 9.24
1995.................. 9.24 .64 1.10 1.74 .64 -- .64 10.34
CLASS B
- -------
1/12/95* to 12/31/95.. 9.26 .54 1.10 1.64 .55 -- .55 10.35
</TABLE>
- -----------------------------
* Commencement of operations of Class A shares or date Class B shares first
offered
** Calculated without sales charge
+ Annualized
++ Net of expenses waived or assumed by the investment adviser
4
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------------------------------
Ratio to Average
Net Assets Before
Ratio to Average Expenses Waived
Net Assets++ or Assumed
Net Assets -------------------------------- ---------------------------------
Total End of Net Net Portfolio
Return** Period (in Investment Investment Turnover
(%) thousands) Expenses(%) Income(%) Expenses(%) Income(%) Rate(%)
- -------------------------- ----------- ------------------ ------------ ------------------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
15.40 $ 27,212 .02 3.72 1.48 2.26 49
(3.50) 55,816 .77 2.57 1.88 1.46 49
27.52 79,932 1.28 1.63 1.78 1.14 31
6.56 99,501 1.46 .95 1.73 .67 44
7.77 117,929 1.48 .66 1.73 .41 39
(3.02) 123,694 1.54 .80 1.79 .55 82
34.01 170,271 1.49 1.22 1.74 .97 25
32.76 5,481 2.20+ .53+ 2.46+ .26+ 25
15.70+ 18,153 -- 7.79+ 1.48+ 6.31+ 51
7.83 37,922 .57 7.20 1.41 6.36 44
11.82 48,507 .86 6.27 1.40 5.73 38
(4.62) 46,179 .95 6.46 1.47 5.94 17
19.40 49,997 1.10 6.41 1.43 6.09 27
18.08 1,167 1.80+ 5.91+ 2.13+ 5.57+ 27
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA
---------------------------------------------------------------------------------------------------------
Income from
Investment Operations
-----------------------------------------
Net Net
Asset Net Realized Less Distributions from Asset
Value and Unrealized ----------------------- Value
-------------- Net Gain Total from Net Net ------
Beginning Investment (Loss) on Investment Investment Realized Total End of
of Period Income Investments Operations Income Gains Distributions Period
-------------- ----------- --------------- ----------- ------------ --------- ------------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SPECIAL SITUATIONS
FUND
- ------------------
CLASS A
- -------
9/18/90* to 12/31/90.. $ 9.31 $ .09 $ .27 $ .36 $.09 $ -- $ .09 $ 9.58
1991.................. 9.58 .10 4.74 4.84 .10 .33 .43 13.99
1992.................. 13.99 -- 2.41 2.41 -- .78 .78 15.62
1993.................. 15.62 (.08) 3.29 3.21 -- .83 .83 18.00
1994.................. 18.00 (.04) (.62) (.66) -- .91 .91 16.43
1995.................. 16.43 (.01) 3.94 3.93 -- .73 .73 19.63
CLASS B
- -------
1/12/95* to 12/31/95.. 16.40 (.01) 3.85 3.84 -- .73 .73 19.51
TOTAL RETURN FUND
- -----------------
CLASS A
- -------
4/24/90* to 12/31/90.. 11.17 .32 (.12) .20 .32 -- .32 11.05
1991.................. 11.05 .37 1.97 2.34 .34 .12 .46 12.93
1992.................. 12.93 .27 (.41) (.14) .30 -- .30 12.49
1993.................. 12.49 .26 .63 .89 .26 1.24 1.50 11.88
1994.................. 11.88 .21 (.62) (.41) .19 .39 .58 10.89
1995.................. 10.89 .39 2.50 2.89 .37 .44 .81 12.97
CLASS B
- -------
1/12/95* to 12/31/95.. 10.90 .25 2.54 2.79 .33 .44 .77 12.92
</TABLE>
- -----------------------------
* Commencement of operations of Class A shares or date Class B shares first
offered
** Calculated without sales charge
+ Annualized
++ Net of expenses waived or assumed by the investment adviser
6
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------------------------------------------
Ratio to Average
Net Assets Before
Ratio to Average Expenses Waived
Net Assets++ or Assumed
Net Assets -------------------------------- ---------------------------------
Total End of Net Net Portfolio
Return** Period (in Investment Investment Turnover
(%) thousands) Expenses(%) Income(%) Expenses(%) Income(%) Rate(%)
- -------------------------- ----------- ------------------ ------------ ------------------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
13.58+ $ 1,321 -- 3.93+ 2.74+ 1.19+ 0
50.47 9,183 -- 1.44 2.31 (.87) 86
17.26 25,814 1.06 (.05) 1.92 (.91) 88
20.52 59,148 1.55 (.63) 1.89 (.96) 71
(3.66) 89,906 1.65 (.26) 1.90 (.51) 53
23.92 125,331 1.60 (.10) 1.85 (.35) 80
23.42 4,566 2.33+ (.86)+ 2.59+ (1.12)+ 80
2.67+ 41,499 -- 5.85+ 2.11+ 3.74+ 13
21.51 60,888 .83 3.20 1.88 2.14 51
(1.00) 65,537 1.29 2.25 1.78 1.76 75
7.18 58,176 1.45 2.00 1.83 1.62 131
(3.45) 50,714 1.63 1.91 1.88 1.66 124
26.71 55,442 1.58 3.08 1.83 2.83 135
25.74 270 2.41+ 2.32+ 2.67+ 2.05+ 135
</TABLE>
7
<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 AT&T
Corp., General Electric Co., PepsiCo Inc. and Bristol-Myers Squibb Co.
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 net 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.
INVESTMENT GRADE FUND
INVESTMENT GRADE FUND seeks to generate a maximum level of income consistent
with investment in investment grade debt securities. The Fund seeks to achieve
its objective by investing, under normal market conditions, at least 65% of its
total assets in debt securities of U.S. issuers that are rated in the four
highest rating categories by Moody's or S&P, or in unrated securities that are
deemed to be of comparable quality by the Adviser ("investment grade
securities"). The Fund may invest up to 35% of its total assets in U.S.
Government Obligations, including mortgage-backed
8
<PAGE>
securities, dividend-paying common and preferred stocks, obligations convertible
into common stocks, repurchase agreements, debt securities rated below
investment grade and money market instruments. The Fund may invest up to 5% of
its net assets in corporate or government debt securities of foreign issuers
which are U.S. dollar denominated and traded in U.S. markets. The Fund also may
borrow money for temporary or emergency purposes in amounts not exceeding 5% of
its total assets. The Fund may purchase securities on a when-issued basis,
engage in short sales "against the box" and make loans of portfolio securities.
The Fund may invest up to 5% of its net assets in zero coupon or pay-in-kind
securities. See "Description of Certain Securities, Other Investment Policies
and Risk Factors," below, and the SAI for additional information concerning
these securities.
The published reports of rating services are considered by the Adviser in
selecting rated securities for the Fund's portfolio. The Adviser also relies,
among other things, on its own credit analysis, which includes a study of the
existing debt's capital structure, the issuer's ability to service debt (or to
pay dividends, if investing in common or preferred stock) and the current trend
of earnings for the issuer. Although up to 100% of the Fund's total assets can
be invested in debt securities rated at least Baa by Moody's or at least BBB by
S&P, or unrated debt securities deemed to be of comparable quality by the
Adviser, no more than 5% of the Fund's net assets may be invested in debt
securities rated lower than Baa by Moody's or BBB by S&P (including securities
that have been downgraded), or if unrated, deemed to be of comparable quality by
the Adviser, or in any equity securities of any issuer if a majority of the debt
securities of such issuer are rated lower than Baa by Moody's or BBB by S&P.
The Adviser continually monitors the investments in the Fund's portfolio and
carefully evaluates on a case-by-case basis whether to dispose of or retain a
debt security which has been downgraded to a rating lower than investment grade.
See "Debt Securities--Risk Factors" and Appendix A for a description of
corporate bond ratings.
SPECIAL SITUATIONS FUND
SPECIAL SITUATIONS FUND seeks long-term growth of capital. The Fund seeks to
achieve its objective by investing, under normal market conditions, at least 65%
of its total assets in the common stock of companies with small to medium market
capitalization that the Adviser considers to be undervalued or less well known
in the current marketplace and to have potential for capital growth. The Fund
may invest up to 35% of its total assets in other common stocks, in preferred
stock that is convertible into common stock issued by U.S. corporations and in
the common stock of companies located outside the United States.
SPECIAL SITUATIONS FUND seeks to invest in the common stock of companies that
the Adviser believes are undervalued in the current market in relation to
fundamental economic values such as earnings, sales, cash flow and tangible book
value; that are early in their corporate development (i.e., before they become
widely recognized and well known and while their reputations and track records
are still emerging); or that offer the possibility of greater earnings because
of revitalized management, new products or structural changes in the economy.
Such companies primarily are those with small to medium market capitalization,
which the Fund considers to be market capitalization of up to $1.5 billion. The
Adviser believes that, over time, these securities are more likely to appreciate
in price than securities whose market prices have already reached their
perceived economic value. In addition, the Fund intends to diversify its
holdings among as many companies and industries as the Adviser deems
appropriate.
9
<PAGE>
Companies that are early in their corporate development may be dependent on
relatively few products or services, may lack adequate capital reserves, may be
dependent on one or two management individuals and may have less of a track
record or historical pattern of performance. In addition, there may be less
information available as to the issuers and their securities may not be well
known to the general public and may not yet have wide institutional ownership.
Thus, the investment risk is higher than that normally associated with larger,
older or better-known companies.
Investments in securities of companies with small to medium market
capitalization are generally considered to offer greater opportunity for
appreciation and to involve greater risk of depreciation than securities of
companies with larger market capitalization. These include the equity
securities of companies which represent new or changing industries and those
which, in the opinion of the Adviser, represent special situations, the
potential future value of which has not been fully recognized. Growth
securities of companies with small to medium market capitalization which
represent a special situation bear the risk that the special situation will not
develop as favorably as expected, or the situation may deteriorate. For
example, a merger with favorable implications may be blocked, an industrial
development may not enjoy anticipated market acceptance or a bankruptcy may not
be as profitably resolved as had been expected. Because the securities of most
companies with small to medium market capitalization are not as broadly traded
as those of companies with larger market capitalization, these securities are
often subject to wider and more abrupt fluctuations in market price. In the
past, there have been prolonged periods when these securities have substantially
underperformed or outperformed the securities of larger capitalization
companies. In addition, smaller capitalization companies generally have fewer
assets available to cushion an unforeseen adverse occurrence and thus such an
occurrence may have a disproportionately negative impact on these companies.
The majority of SPECIAL SITUATIONS FUND'S investments are expected to be
securities listed on the New York Stock Exchange ("NYSE") or other national
securities exchanges, or securities that have an established over-the-counter
("OTC") market, although the depth and liquidity of the OTC market may vary from
time to time and from security to security.
SPECIAL SITUATIONS FUND may invest up to 15% of its total assets in common
stocks issued by foreign companies which are traded on a recognized domestic or
foreign securities exchange. In addition to the fundamental analysis of
companies and their industries which it performs for U.S. issuers, the Adviser
evaluates the economic and political climate of the country in which the company
is located and the principal securities markets in which such securities are
traded. Although the foreign stocks in which the Fund invests are primarily
denominated in foreign currencies, the Fund also may invest in ADRs. The
Adviser does not attempt to time actively either short-term market trends or
short-term currency trends in any market. See "Foreign Securities--Risk
Factors" and "American Depository Receipts."
The Fund may invest up to 5% of its total assets in the securities of other
registered investment companies. Such investments will probably involve
additional advisory or distribution fees. The Fund may borrow money for
temporary or emergency purposes in amounts not exceeding 5% of its total assets.
The Fund also may enter into repurchase agreements and engage in short sales
"against the box." See "Description of Certain Securities, Other Investment
Policies and Risk Factors" and the SAI for more information regarding these
securities.
10
<PAGE>
TOTAL RETURN FUND
TOTAL RETURN FUND seeks to provide investors with high long-term investment
return consistent with moderate investment risk. The Fund employs a flexible
investment strategy which emphasizes investments in stocks, bonds and money
market instruments. The amount of Fund assets which may be invested in any of
these securities is not fixed. The Fund may invest in domestic and foreign
common stocks and other equity securities, such as preferred stocks, securities
convertible into common stocks and warrants to purchase common stock. The Fund
also may invest in fixed-income securities, including money market instruments
(consisting of prime commercial paper, certificates of deposit of domestic
branches of U.S. banks and bankers' acceptances), U.S. Government Obligations,
including mortgage-backed securities, municipal bonds and corporate and foreign
debt securities. The Fund also may borrow money for temporary or emergency
purposes in amounts not exceeding 5% of its total assets, enter into repurchase
agreements, purchase securities on a when-issued basis and make loans of
portfolio securities. The Fund may invest up to 5% of its net assets in zero
coupon and pay-in-kind securities. See "Description of Certain Securities,
Other Investment Policies and Risk Factors," below, and the SAI for additional
information concerning these securities. There is the possibility that 100% of
the Fund's total assets could be invested in corporate debt securities and
municipal bonds. No more than 25% of the Fund's net assets may be invested in
corporate debt securities and municipal bonds rated below Baa by Moody's or BBB
by S&P. See "Debt Securities--Risk Factors" and Appendix A for a description of
corporate and municipal bond ratings.
The type of equity securities in which the Fund generally invests include
growth and value equity securities. Growth equity securities include securities
of seasoned companies, i.e., companies with above-average earnings growth as
compared to the average of the stocks in the S&P 500, other companies which the
Adviser believes demonstrate changing or accelerating growth profiles and
smaller companies with outstanding growth records and potential based on the
Adviser's fundamental analysis of the company. Growth equity securities tend to
have above-average price/earnings ratios and less-than-average current yields as
compared to other equity securities. Value equity securities tend to have below
average price/earnings ratios, low price to book value and potentially high
current yields.
The majority of the Fund's equity investments are expected to be securities
listed on the NYSE, other national securities exchanges or securities that have
an established OTC market, although the depth and liquidity of the OTC market
may vary from time to time and from security to security. The Fund also may
invest in newer and less seasoned companies with small to medium market
capitalizations, which the Fund considers to be market capitalization of up to
$1.5 billion. The Fund's ability to invest in unseasoned companies with above-
average earnings growth, other companies with changing or accelerating growth
profiles and smaller companies with outstanding growth records and potential
subjects the Fund to greater risk than may be involved in investing in
securities which are not selected for such growth characteristics.
TOTAL RETURN FUND does not intend to invest more than 25% of its total assets
in foreign securities. Foreign securities include equity and debt securities
issued by foreign companies and government instrumentalities which usually are
denominated in foreign currencies. Although the foreign securities in which the
Fund invests are primarily denominated in foreign currencies, the Fund also may
invest in ADRs. In addition to the fundamental analysis of companies and their
industries which it performs for U.S. issuers, the Adviser evaluates the
economic and political
11
<PAGE>
climate of the country in which the company is located and the principal
securities markets in which such securities are traded. The Fund does not
purchase foreign securities which are not traded on a recognized domestic or
foreign securities exchange. The Adviser does not attempt to time actively
either short-term market trends or short-term currency trends in any market.
See "Foreign Securities--Risk Factors" and "American Depository Receipts."
GENERAL
In any period of market weakness or of uncertain market or economic
conditions, each Fund may establish a temporary defensive position to preserve
capital by having all or part of its assets invested in short-term fixed income
securities or retained in cash or cash equivalents, including bank certificates
of deposit, bankers' acceptances, U.S. Government Obligations and commercial
paper issued by domestic corporations. See the SAI for a description of these
securities.
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
AMERICAN DEPOSITORY RECEIPTS. SPECIAL SITUATIONS FUND, BLUE CHIP FUND and
TOTAL RETURN FUND may invest in sponsored and unsponsored ADRs. 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. In addition, the
issuers of the securities underlying unsponsored ADRs are not obligated to
disclose material information in the United States and, therefore, there may be
less information available regarding such issuers and there may not be a
correlation between such information and the market value of the ADRs. ADRs are
considered to be foreign securities by each of the Funds. See "Foreign
Securities--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.
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
12
<PAGE>
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.
The prices of lower-rated debt obligations 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. 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, the Fund might incur additional expenses to
seek recovery. Generally, when interest rates rise, the value of fixed rate
debt obligations tends to decrease; when interest rates fall, the value of fixed
rate debt obligations tends to increase. Factors which could result in a rise
in interest rates, and a decrease in market value of debt securities, include an
increase in inflation or inflation expectations, an increase in the rate of U.S.
economic growth, an expansion in the Federal budget deficit, or an increase in
the price of commodities such as oil. In addition, the market value of debt
securities is influenced by perceptions of the credit risks associated with such
securities. If a Fund 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 the 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 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 lower-rated
debt 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. The Adviser continually monitors the investments in a Fund's
portfolio and carefully evaluates whether to dispose of or retain lower-rated
debt securities whose credit ratings have changed.
Lower-rated debt securities are typically traded among a smaller number of
broker-dealers rather than in a broad secondary market. Purchasers of such
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 lower-rated debt securities may not be as
liquid as higher-grade securities. A less active and thinner market for such
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 fair value during unsettled market conditions. The ability of a Fund to
value or sell lower-rated debt securities will be adversely affected to the
extent that such securities are thinly traded or illiquid. See "Risks Factors
of High Yield Securities" in the SAI.
FOREIGN SECURITIES--RISK FACTORS. SPECIAL SITUATIONS FUND and TOTAL RETURN
FUND may sell a security denominated in a foreign currency and retain the
proceeds in that foreign currency
13
<PAGE>
to use at a future date (to purchase other securities denominated in that
currency) or the Funds may buy foreign currency outright to purchase securities
denominated in that foreign currency at a future date. Because the Funds do not
intend to hedge their foreign investments against the risk of foreign currency
fluctuations, changes in the value of these currencies can significantly affect
each Fund's share price. In addition, the Funds 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 Funds held in foreign countries.
MARKET RISK. BLUE CHIP FUND, SPECIAL SITUATIONS FUND and TOTAL RETURN FUND
are subject to market risk because they invest 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.
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.
MORTGAGE-BACKED SECURITIES. Mortgage loans often are assembled into pools,
the interests in which are issued and guaranteed by an agency or instrumentality
of the U.S. Government, though not necessarily by the U.S. Government itself.
Interests in such pools are referred to herein as "mortgage-backed securities."
The market value of these securities can and will fluctuate as interest rates
and market conditions change. In addition, prepayment of principal by the
mortgagees which often occurs with mortgage-backed securities when interest
rates decline, can significantly change the realized yield of these securities.
See the SAI for more information concerning mortgage-backed securities.
RISKS OF MORTGAGE-BACKED SECURITIES. Investments in mortgage-backed
securities entail both market and prepayment risk. Fixed-rate mortgage-backed
securities are priced to reflect, among other things, current and perceived
interest rate conditions. As conditions change, market values will fluctuate.
In addition, the mortgages underlying mortgage-backed securities generally may
be prepaid in whole or in part at the option of the individual buyer.
Prepayments of the underlying mortgages can affect the yield to maturity on
mortgage-backed securities and, if interest rates decline, the prepayment may
only be invested at the then prevailing lower interest rate. Changes
14
<PAGE>
in market conditions, particularly during periods of rapid or unanticipated
changes in market interest rates, may result in volatility and reduced liquidity
of the market value of certain mortgage-backed securities.
MUNICIPAL BONDS. TOTAL RETURN FUND may invest in municipal bonds that are
rated Baa or better by Moody's or BBB or better by S&P. Municipal bonds are
debt 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, generally 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, conditions of
the municipal bond market, the size of a particular offering, the maturity of
the obligation and the 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.
In order for the Fund's interest income from municipal bonds to be exempt from
Federal income taxation when distributed to its shareholders, the Fund must
comply with certain requirements of the Internal Revenue Code of 1986, as
amended (the "Code"). The Fund's investments in municipal bonds are not
expected to meet these requirements. Accordingly, distributions of interest
income from municipal bonds in the Fund's portfolio will be taxable to
shareholders the same as distributions of interest income from other securities
held by the Fund. See "Taxes."
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
15
<PAGE>
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.
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.
PORTFOLIO TURNOVER. TOTAL RETURN FUND'S portfolio turnover resulted primarily
from changes in asset allocation throughout 1995. With the objective of
maximizing total return, as much as 15% of the Fund's assets were shifted
routinely between different asset classes during the fiscal year 1995. This
resulted in a portfolio turnover rate of 135% for fiscal year ended December 31,
1995 and 124% for the prior fiscal year. A high rate of portfolio turnover
generally leads to increased 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 portfolio turnover rate of the other Funds and for
more information on portfolio turnover rate.
ALTERNATIVE PURCHASE PLANS
Each Fund has two classes of shares, Class A and Class B, which represent
interests in the same portfolio of securities and have identical voting,
dividend, liquidation and other rights and the same terms and conditions, except
that each class (i) is subject to a different sales charge and bears its
separate distribution and certain other class expenses; (ii) has exclusive
voting rights with respect to matters affecting only that class; and (iii) has
different exchange privileges.
CLASS A SHARES. Class A shares are sold with an initial sales charge of up to
6.25% of the amount invested with discounts available for volume purchases.
Class A shares pay a 12b-1 fee at the annual rate of 0.30% of each Fund's
average daily net assets attributable to Class A shares, of which no more than
0.25% may be paid as a service fee and the balance thereof paid as an asset-
based sales charge. The initial sales charge is waived for certain purchases
and a contingent deferred sales charge ("CDSC") may be imposed on such
purchases. See "How to Buy Shares."
CLASS B SHARES. Class B shares are sold without an initial sales charge, but
are generally subject to a CDSC which declines in steps from 4% to 0% during a
six-year period and bear a higher 12b-1 fee than Class A shares. Class B shares
pay a 12b-1 fee at the annual rate of 1.00% of each Fund's average daily net
assets attributable to Class B shares, of which no more than 0.25% may be paid
as a service fee and the balance thereof paid as an asset-based sales charge.
Class B shares automatically convert into Class A shares after eight years. See
"How to Buy Shares."
FACTORS TO CONSIDER IN CHOOSING A CLASS OF SHARES. In deciding which
alternative is most suitable, an investor should consider several factors, as
discussed below.
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<PAGE>
The principal advantages of purchasing Class A shares are the lower overall
expenses, the availability of quantity discounts on volume purchases and certain
account privileges which are not offered to Class B shareholders. If an
investor plans to make a substantial investment, the sales charge on Class A
shares may either be lower due to the reduced sales charges available on volume
purchases of Class A shares or waived for certain eligible purchasers. Because
of the reduced sales charge available on quantity purchases of Class A shares,
it is recommended that investments of $250,000 or more be made in Class A
shares. Investments in excess of $1,000,000 will only be accepted as purchases
of Class A shares. Distributions paid by each Fund with respect to Class A
shares will also generally be greater than those paid with respect to Class B
shares because expenses attributable to Class A shares will generally be lower.
The principal advantage of purchasing Class B shares is that, since no initial
sales charge is paid, all of an investor's money is put to work from the outset.
Furthermore, although any investment in a Fund should only be viewed as a long-
term investment, if a redemption must be made soon after purchase, an investor
will pay a lower sales charge than if Class A shares had been purchased.
Conversely, because Class B shares are subject to higher asset-based sales
charges, long-term Class B shareholders may pay more in asset-based sales
charges than the economic equivalent of the maximum sales charge on Class A
shares. The automatic conversion of Class B shares into Class A shares after
eight years is designed to reduce the probability of this occurring.
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 "FIC" and received in FIC'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
FIC at their Woodbridge offices before the close of its business day, generally
5:00 P.M. (New York City time), will be executed at the public offering price
determined at the close of regular trading on the NYSE on that day. 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 for Class A shares and net asset value for Class B shares. 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
FIC 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.
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<PAGE>
WHEN YOU OPEN A FUND ACCOUNT, YOU MUST SPECIFY WHICH CLASS OF SHARES YOU WISH
TO PURCHASE. If you do not specify which class of shares you wish to purchase,
your order will be processed according to procedures established by FIC. For
more information, see the SAI.
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 for a particular
class of shares through a full exchange of shares of the same class of another
"Eligible Fund," as defined below. Class A share accounts opened through an
exchange of shares from First Investors Cash Management Fund, Inc. or First
Investors Tax-Exempt Money Market Fund, Inc. (collectively, "Money Market
Funds") may be subject to an initial sales charge. You may open a Fund account
with $250 for individual retirement accounts ("IRAs") or, at the Fund's
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 FIC,
directly to First 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. The funds of Executive
Investors Trust ("Executive Investors") are Eligible Funds provided the shares
of any such fund 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.
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 Class A shares of a Fund
at net asset value all the cash distributions or Systematic Withdrawal Plan
payments from the same class of shares of an existing account in another
Eligible Fund. If you 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.
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<PAGE>
CLASS A SHARES. Class A 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 $25,000.............. 6.25% 6.67% 5.13%
$25,000 but under $50,000...... 5.75 6.10 4.72
$50,000 but under $100,000..... 5.50 5.82 4.51
$100,000 but under $250,000.... 4.50 4.71 3.69
$250,000 but under $500,000.... 3.50 3.63 2.87
$500,000 but under $1,000,000.. 2.50 2.56 2.05
</TABLE>
There is no sales charge on transactions of $1 million or more, 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 CDSC of 1.00% will be deducted from the redemption proceeds.
The CDSC will be applied in the same manner as the CDSC on Class B shares. See
"Class B Shares."
CUMULATIVE PURCHASE PRIVILEGE AND LETTERS OF INTENT. You may purchase Class A
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 CLASS A SALES CHARGES. Sales charges on Class A shares do not
apply to: (1) any purchase by an officer, director, trustee or employee (who has
completed the introductory employment period) of Series Fund, the Underwriter,
the Adviser, or their affiliates, by a Representative, or by the spouse, or by
the children and grandchildren under the age of 21 of any such person; (2) any
purchase by a former officer, director, trustee or employee of Series Fund, the
Underwriter, the Adviser, or their affiliates, or by a former FIC
Representative; provided they had acted as such for at least five years and had
retired or otherwise terminated the relationship in good standing; (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.
Additionally, policyholders of participating life insurance policies issued by
First Investors Life Insurance Company ("FIL"), an affiliate of the Adviser and
Underwriter, may elect to invest
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dividends earned on such policies in Class A shares of a Fund at net asset
value, provided the annual dividend is at least $50 and the policyholder has an
existing account with the Fund.
Holders of certain unit trusts ("Unitholders") who have elected to invest the
entire amount of cash distributions from either principal, interest income or
capital gains or any combination thereof ("Unit Distributions") from the
following trusts may invest such Unit Distributions in Class A shares of a Fund
at a reduced sales charge. Unitholders of various series of New York Insured
Municipals-Income Trust sponsored by Van Kampen Merritt Inc. (the "New York
Trust"); Unitholders of various series of the Multistate Tax Exempt Trust
sponsored by Advest Inc.; and Unitholders of various series of the Municipal
Insured National Trust, J.C. Bradford & Co. as agent, may purchase Class A
shares of a Fund with Unit Distributions at an offering price which is the net
asset value per share plus a sales charge of 1.5%. Unitholders of various
series of tax-exempt trusts, other than the New York Trust, sponsored by Van
Kampen Merritt Inc. may purchase Class A shares of a Fund with Unit
Distributions at an offering price which is the net asset value per share plus a
sales charge of 1.0%. Each Fund's initial minimum investment requirement is
waived for purchases of Class A shares with Unit Distributions. Shares of a
Fund purchased by Unitholders may be exchanged for Class A shares of any
Eligible Fund subject to the terms and conditions set forth under "How to
Exchange Shares."
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 on Class B
shares. See "Class B Shares." 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.
CLASS B SHARES. The public offering price of Class B shares of each Fund is
the next determined net asset value, with no initial sales charge imposed. A
CDSC, however, is imposed upon most redemptions of Class B shares at the rates
set forth below:
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<TABLE>
<CAPTION>
CONTINGENT DEFERRED SALES CHARGE
YEAR SINCE PURCHASE AS A PERCENTAGE OF DOLLARS INVESTED
PAYMENT MADE OR REDEMPTION PROCEEDS
------------------- --------------------------------------
<S> <C>
First........................... 4%
Second.......................... 4
Third........................... 3
Fourth.......................... 3
Fifth........................... 2
Sixth........................... 1
Seventh and thereafter.......... 0
</TABLE>
The CDSC will not be imposed on (1) the redemption of Class B shares acquired
as dividends or other distributions, or (2) any increase in the net asset value
of redeemed shares above their initial purchase price (in other words, the CDSC
will be imposed on the lower of net asset value or purchase price). In
determining whether a CDSC is payable on any redemption, it will be assumed that
the redemption is made first of any Class B shares acquired as dividends or
distributions, second of Class B shares that have been held for a sufficient
period of time such that the CDSC no longer is applicable to such shares and
finally of Class B shares held longest during the period of time that a CDSC is
applicable to such shares. This will result in your paying the lowest possible
CDSC.
As an example, assume an investor purchased 100 shares of Class B shares at
$10 per share for a total cost of $1,000 and in the second year after purchase,
the net asset value per share is $12 and, during such time, the investor has
acquired 10 additional Class B shares as dividends. If at such time the
investor makes his or her first redemption of 50 shares (proceeds of $600), 10
shares will not be subject to a CDSC charge because redemptions are first made
of shares acquired through dividend reinvestment. With respect to the remaining
40 shares, the charge is applied only to the original cost of $10 per share and
not to the increase in net asset value of $2 per share. Therefore, $400 of the
$600 redemption proceeds will be charged at a rate of 4.00% (the applicable rate
in the second year after purchase).
For purposes of determining the CDSC on Class B shares, all purchases made
during a calendar month will be deemed to have been made on the first business
day of that month at the average cost of all purchases made during that month.
The holding period of Class B shares acquired through an exchange with another
Eligible Fund will be calculated from the first business day of the month that
the Class B shares were initially acquired in the other Eligible Fund. The
amount of any CDSC will be paid to FIC. The CDSC imposed on the purchase of
Class B shares will be waived under certain circumstances. See "Waivers of CDSC
on Class B Shares" in the SAI.
CONVERSION OF CLASS B SHARES. A shareholder's Class B shares will
automatically convert to Class A shares approximately eight years after the date
of purchase, together with a pro rata portion of all Class B shares representing
dividends and other distributions paid in additional Class B shares. The Class
B shares so converted will no longer be subject to the higher expenses borne by
Class B shares. The conversion will be effected at the relative net asset
values per share of the two classes on the first business day of the month
following the month in which the eighth anniversary of the purchase of the Class
B shares occurs. If a shareholder effects one or more exchanges between Class B
shares of the Eligible Funds during the eight-year period, the holding period
for the shares so exchanged will commence upon the date of the purchase of the
original shares. Because the per
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<PAGE>
share net asset value of the Class A shares may be higher than that of the Class
B shares at the time of conversion, a shareholder may receive fewer Class A
shares than the number of Class B shares converted. See "Determination of Net
Asset Value."
GENERAL. The Underwriter may at times agree to reallow to Dealers up to an
additional 0.25% of the dollar amount of shares of the 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 shares of any Eligible Fund, including the Money Market
Funds. In addition, Class A shares of a Fund may be exchanged at net asset
value for units of any single payment plan ("plan") sponsored by the
Underwriter. SHARES OF A PARTICULAR CLASS MAY BE EXCHANGED ONLY FOR SHARES OF
THE SAME CLASS OF ANOTHER FUND. 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
22
<PAGE>
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/or a class 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 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, Series Fund 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
23
<PAGE>
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 the same class of any other 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 Class A or Class B 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 class of the
same Fund or any other 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.
REPURCHASE THROUGH UNDERWRITER. You may redeem Class A 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 of Class A or Class B shares which has a
net asset value of less than $500. To avoid such redemption, you may, during
such 60-day period, purchase additional Fund shares of the same class so as to
increase your account balance to the required minimum. There will be no CDSC
imposed on such redemptions of Class B shares. 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.
24
<PAGE>
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. Series Fund, 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. Series Fund has the right, at its sole discretion, upon 60 days' notice,
to materially modify or discontinue the telephone exchange and redemption
privilege. During times of drastic economic or market changes, telephone
exchanges or redemptions may be difficult to implement. If you experience
difficulty in making a telephone exchange or redemption, your exchange or
redemption request may be made by regular or express mail, and it will be
implemented at the next determined net asset value, less any applicable CDSC,
following receipt by the Transfer Agent.
MANAGEMENT
BOARD OF TRUSTEES. Series Fund's Board of Trustees, as part of its overall
management responsibility, oversees various organizations responsible for each
Fund's day-to-day management.
ADVISER. First Investors Management Company, Inc. supervises and manages each
Fund's investments, supervises all aspects of each Fund's operations and
determines each Fund's portfolio transactions. The Adviser is a New York
corporation located at 95 Wall Street, New York, NY 10005. The Adviser
presently acts as investment adviser to 14 mutual funds. First Investors
Consolidated Corporation ("FICC") owns all of the voting common stock of the
Adviser and all of the outstanding stock of FIC and the Transfer Agent. Mr.
Glenn O. Head controls FICC and, therefore, controls the Adviser.
As compensation for its services, the Adviser receives an annual fee from each
Fund, which is payable monthly. For the fiscal year ended December 31, 1995,
the advisory fees were 0.75% of average daily net assets, net of waiver, for
each of BLUE CHIP FUND, TOTAL RETURN FUND and SPECIAL SITUATIONS FUND and 0.65%
of average daily assets, net of waiver, for INVESTMENT GRADE 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 has been
25
<PAGE>
responsible for the management of the SPECIAL SITUATIONS FUND since its
inception in 1990 and the equity portion of TOTAL RETURN FUND since 1993. Ms.
Poitra also is responsible for the management of the Blue Chip Fund and
Discovery Fund of First Investors Life Series Fund, the Blue Chip Fund of
Executive Investors Trust and the U.S.A. Mid-Cap Opportunity Fund of First
Investors Series Fund II, Inc. Ms. Poitra joined FIMCO in 1985 as a Senior
Equity Analyst.
Nancy Jones has been Portfolio Manager for INVESTMENT GRADE FUND since its
inception in 1991 and has managed the fixed income corporate securities portion
of TOTAL RETURN FUND since 1992. Ms. Jones joined FIMCO in 1983 as Director of
Research in the High Yield Department. Ms. Jones also is Portfolio Manager for
First Investors Fund For Income, Inc. and the Investment Grade Fund of First
Investors Life Series Fund.
Clark D. Wagner has been primarily responsible for the day-to-day management
of the U.S. Government and mortgaged-backed securities portion of TOTAL RETURN
FUND since October 1995. Mr. Wagner is also Portfolio Manager for all of First
Investors municipal bond funds and for First Investors Government Fund, Inc.,
Target Maturity 2007 Fund, Target Maturity 2010 Fund and Government Fund of
First Investors Life 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 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. Series Fund has entered into an Underwriting Agreement with
First Investors Corporation, 95 Wall Street, New York, NY 10005, as Underwriter.
The Underwriter receives all sales charges in connection with the sale of each
Fund's Class A shares and all CDSCs in connection with each Fund's Class B
shares and may receive other payments under a plan of distribution. See "How to
Buy Shares" and "Distribution Plans."
DISTRIBUTION PLANS
Pursuant to separate distribution plans pertaining to each Fund's Class A and
Class B shares ("Class A Plan" or "Class B Plan," and collectively, "Plans"),
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 Plans, 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 each Class A Plan, each Fund is authorized to pay the Underwriter
a distribution fee at the annual rate of 0.05% that Fund's average daily net
assets attributable to Class A shares and a service fee of 0.25% of that Fund's
average daily net assets attributable to Class A shares. Pursuant to each Class
B Plan, each Fund is authorized to pay the Underwriter a distribution fee at the
annual rate of 0.75% of that Fund's average daily net assets attributable to
Class B shares
26
<PAGE>
and a service fee of 0.25% of that Fund's average daily net assets attributable
to Class B shares. Payments made to the Underwriter under the Plans will
represent compensation for distribution and service activities, not
reimbursement for specific expenses incurred.
Although Class B shares are sold without an initial sales charge, the
Underwriter pays from its own resources a sales commission to FIC
Representatives and a concession equal to 3.5% of the amount invested to Dealers
who sell Class B shares. In addition, the Underwriter will make quarterly
payments of service fees to Representatives commencing after the thirteenth
month following the initial sale of Class B shares. The Underwriter will make
such payments at an annual rate of up to 0.25% of the average net asset value of
Class B shares which are attributable to shareholders for whom the
Representatives are designated as dealer of record.
Each Fund may suspend or modify payments under the Plans at any time, and
payments are subject to the continuation of each Plan, the terms of any dealer
agreements between Dealers and the Underwriter and any applicable limits imposed
by the National Association of Securities Dealers, Inc. Each Fund will not
carry over any fees under the Plans to the next fiscal year. See "Distribution
Plans" in the SAI for a full discussion of the various Plans.
DETERMINATION OF NET ASSET VALUE
The net asset value of each Fund's shares fluctuates and is determined
separately for each class of shares. The per share net asset value of the Class
B shares will generally be lower than that of the Class A shares because of the
higher expenses borne by the Class B shares. The net asset value of shares of a
given class of each 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 Series Fund'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 attributable to that class,
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 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
INVESTMENT GRADE FUND, quarterly by BLUE CHIP FUND and TOTAL RETURN FUND and
annually by SPECIAL SITUATIONS FUND. Unless you direct the Transfer Agent
otherwise, (a) dividends declared on a class of shares of INVESTMENT GRADE FUND
are paid in additional shares of that class at the net asset value generally
determined as of the close of business on the first business day of the
following month, and (b) dividends declared on a class of shares of any other
Fund are paid in additional shares of that class at the net asset value
generally determined as of the close of business on the business day immediately
following the record date of the dividend. If you redeem all of your shares of
INVESTMENT GRADE FUND at any time during a month, you are paid all dividends
declared through the day prior to the date of the redemption, together with the
proceeds of your redemption, less any applicable CDSC. Net investment income
includes interest and dividends, earned discount and other income earned on
portfolio securities less expenses.
27
<PAGE>
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
SPECIAL SITUATIONS FUND and TOTAL RETURN 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 same class 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 in any year if
necessary to avoid a Federal excise tax on certain undistributed income and
capital gain.
Dividends and other distributions paid on both classes of a Fund's shares are
calculated at the same time and in the same manner. Dividends on Class B shares
of a Fund are expected to be lower than those for its Class A shares because of
the higher distribution fees borne by the Class B shares. Dividends on each
class also might be affected differently by the allocation of other class-
specific expenses.
In order to be eligible to receive a dividend or other distribution, you must
own 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 on Class A
shares of a Fund 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 on a class of shares of a Fund will be
paid in additional shares of that class 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 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 SPECIAL
SITUATIONS FUND and TOTAL RETURN FUND, net gains from certain foreign currency
transactions) and net capital gain that is distributed to its shareholders.
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 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
28
<PAGE>
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 the Fund during that year.
Each Fund is required to withhold 31% of all dividends, capital gain
distributions and redemption proceeds payable to you after any applicable CDSC
is deducted (if you are an individual or certain other non-corporate
shareholder) if the Fund is not furnished with your correct taxpayer
identification number, and the same percentage of dividends and such
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 on Class A shares). An exchange of Fund shares for shares of any Eligible
Fund generally will have similar tax consequences. However, special tax rules
apply if you (1) dispose of Class A shares through a redemption or exchange
within 90 days of your purchase and (2) subsequently acquire Class A shares of
the same Fund or 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 Class A 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.
No gain or loss will be recognized to a shareholder as a result of a
conversion of Class B shares into Class A shares.
The foregoing is only a summary of some of the important Federal 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. You therefore are urged to
consult your own tax adviser.
PERFORMANCE INFORMATION
For purposes of advertising, each Fund's performance may be calculated for
each class of its shares based on average annual total return and total return.
Each of these figures reflects past performance and does not necessarily
indicate future results. Average annual total return shows the average annual
percentage change in an assumed $1,000 investment. It reflects the hypothetical
annually compounded return that would have produced the same total return if a
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 (in the case of Class A shares) or the deduction of any applicable CDSC
(in the case of Class B shares) and payment of dividends and other distributions
in additional shares. One, five and ten year periods will be shown unless the
class has been in existence for a shorter period. Total return is computed
using the same calculations as average annual total return. However, the rate
expressed is the percentage change from the initial $1,000 invested to the value
of the investment
29
<PAGE>
at the end of the stated period. Total return calculations assume reinvestment
of dividends and other distributions.
INVESTMENT GRADE FUND also may advertise its yield for each class of shares.
Yield reflects investment income net of expenses over a 30-day (or one-month)
period on a Fund share, expressed as an annualized percentage of the maximum
offering price per share for Class A shares and the net asset value per share
for Class B shares at the end of the period. Yield computations differ from
other accounting methods and therefore may differ from dividends actually paid
or reported net income. INVESTMENT GRADE 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, INVESTMENT GRADE FUND calculates its "actual distribution rate" based
upon net asset value for dissemination to existing shareholders.
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 or CDSC will be greater than if
the maximum sales charge or CDSC were used. Each class of shares of a Fund has
different expenses which will affect its performance. Additional performance
information is contained in Series Fund's Annual Report which may be obtained
without charge by contacting Series Fund at 1-800-423-4026.
GENERAL INFORMATION
ORGANIZATION. Series Fund is a Massachusetts business trust organized on
September 23, 1988. Series Fund is authorized to issue an unlimited number of
shares of beneficial interest, no par value, in such separate and distinct
series and classes of shares as the Board of Trustees shall from time to time
establish. The shares of beneficial interest of Series Fund are presently
divided into five separate and distinct series, each having two classes,
designated Class A shares and Class B shares. Series Fund does not hold annual
shareholder meetings. If requested to do so by the holders of at least 10% of
Series Fund's outstanding shares, Series Fund'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 except as noted
above.
CUSTODIAN. The Bank of New York, 48 Wall Street, New York, NY 10286, is
custodian of the securities and cash of each Fund, except TOTAL RETURN FUND.
Brown Brothers Harriman & Co., 40 Water Street, Boston, MA 02109, is custodian
for TOTAL RETURN FUND and employs foreign sub-custodians to provide custody of
the Fund's foreign assets.
TRANSFER AGENT. Administrative Data Management Corp., 581 Main Street,
Woodbridge, NJ 07095-1198, an affiliate of FIMCO and FIC, 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 Class B shares or
for Class A shares purchased under any retirement account. The Funds, however,
will issue share certificates for Class A shares 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.
30
<PAGE>
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.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES. Ronald J. Davis, 99
Lindley Ave., North Kingstown, RI 02852 owns 26.2% of the Class B shares of
INVESTMENT GRADE FUND and may, therefore, be deemed to control this class of
that Fund under the 1940 Act.
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 each Fund's practice to
mail only one copy of its annual and semi-annual reports to any address at which
more than one shareholder with the same last name has indicated that mail is to
be delivered. Additional copies of the reports will be mailed if requested in
writing or by telephone by any shareholder. Each Fund will ensure that an
additional copy of such reports are sent to any shareholder who subsequently
changes his or her mailing address.
APPENDIX A
DESCRIPTION OF CORPORATE AND MUNICIPAL BOND RATINGS
STANDARD & POOR'S RATINGS GROUP
- -------------------------------
The ratings are based on current information furnished by the issuer or
obtained by S&P from other sources it considers reliable. S&P does not perform
any audit in connection with any rating and may, on occasion, rely on unaudited
financial information. The ratings may be changed, suspended, or withdrawn as a
result of changes in, or unavailability of, such information, or based on other
circumstances.
The ratings are based, in varying degrees, on the following considerations:
1.Likelihood of default-capacity and willingness of the obligor as to the
timely payment of interest and repayment of principal in accordance with the
terms of the obligation;
2. Nature of and provisions of the obligation;
3.Protection afforded by, and relative position of, the obligation in the
event of bankruptcy, reorganization, or other arrangement under the laws of
bankruptcy and other laws affecting creditors' rights.
AAA Debt rated "AAA" has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
31
<PAGE>
A Debt rated "A" has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB Debt rated "BBB" is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
BB, B, CCC, CC, C Debt rated "BB," "B," "CCC," "CC" and "C" is regarded, on
balance, as predominantly speculative with respect to capacity to pay interest
and repay principal. "BB" indicates the least degree of speculation and "C" the
highest. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
BB Debt rated "BB" has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The "BB"
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied "BBB-" rating.
B Debt rated "B" has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The "B" rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied "BB" or "BB-"
rating.
CCC Debt rated "CCC" has a currently identifiable vulnerability to default
and is dependent upon favorable business, financial, and economic conditions to
meet timely payment of interest and repayment of principal. In the event of
adverse business, financial or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The "CCC" rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
"B" or "B-" rating.
CC The rating "CC" typically is applied to debt subordinated to senior debt
that is assigned an actual or implied "CCC" rating.
C The rating "C" typically is applied to debt subordinated to senior debt
which is assigned an actual or implied "CCC-" debt rating. The "C" rating may
be used to cover a situation where a bankruptcy petition has been filed, but
debt service payments are continued.
CI The rating "CI" is reserved for income bonds on which no interest is being
paid.
D Debt rated "D" is in payment default. The "D" rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The "D" rating also will be used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.
32
<PAGE>
PLUS (+) OR MINUS (-): The ratings from "AA" to "CCC" may be modified by the
addition of a plus or minus sign to show relative standing within the major
categories.
MOODY'S INVESTORS SERVICE, INC.
- -------------------------------
AAA Bonds which are rated "Aaa" are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edged." Interest payments are protected by a large or exceptionally
stable margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
AA Bonds which are rated "Aa" are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high-grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities, fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risk appear somewhat greater than the Aaa
securities.
A Bonds which are rated "A" possess many favorable investment attributes and
are to be considered as upper-medium-grade obligations. Factors giving security
to principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment some time in the future.
BAA Bonds which are rated "Baa" are considered as medium-grade obligations
(i.e., they are neither highly protected nor poorly secured). Interest payments
and principal security appear adequate for the present, but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
BA Bonds which are rated "Ba" are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate, and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B Bonds which are rated "B" generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
CAA Bonds which are rated "Caa" are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
CA Bonds which are rated "Ca" represent obligations which are speculative in
a high degree. Such issues are often in default or have other marked
shortcomings.
C Bonds which are rated "C" are the lowest rated class of bonds, and issues
so rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
33
<PAGE>
Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.
34
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TABLE OF CONTENTS
<TABLE>
<S> <C>
Fee Table................................................................. 2
Financial Highlights...................................................... 4
Investment Objectives and Policies........................................ 8
Alternative Purchase Plans................................................ 16
How to Buy Shares......................................................... 17
How to Exchange Shares.................................................... 22
How to Redeem Shares...................................................... 23
Telephone Transactions.................................................... 24
Management................................................................ 25
Distribution Plans........................................................ 26
Determination of Net Asset Value.......................................... 27
Dividends and Other Distributions......................................... 27
Taxes..................................................................... 28
Performance Information................................................... 29
General Information....................................................... 30
Appendix A................................................................ 31
</TABLE>
INVESTMENT ADVISER CUSTODIANS
First Investors Management The Bank of New York
Company, Inc. 48 Wall Street
95 Wall Street New York, NY 10286
New York, NY 10005
Brown Brothers
UNDERWRITER Harriman & Co.
First Investors Corporation 40 Water Street
95 Wall Street Boston, MA 02109
New York, NY 10005
AUDITORS
TRANSFER AGENT Tait, Weller & Baker
Administrative Data Two Penn Center Plaza
Management Corp. Philadelphia, PA 19102-1707
581 Main Street
Woodbridge, NJ 07095-1198 LEGAL COUNSEL
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W.
Washington, D.C. 20036
This Prospectus is intended to constitute an offer by Series Fund only of the
securities of which it is the issuer and is not intended to constitute an offer
by any Fund of the securities of any other Fund whose securities are also
offered by this Prospectus. No Fund intends to make any representation as to
the accuracy or completeness of the disclosure in this Prospectus relating to
any other Fund. No dealer, salesman or any other person has been authorized to
give any information or to make any representations other than those contained
in this Prospectus or the Statement of Additional Information, and if given or
made, such information and representation must not be relied upon as having been
authorized by Series Fund, First Investors Corporation, or any affiliate
thereof. This Prospectus does not constitute an offer to sell or a solicitation
of an offer to buy any of the shares offered hereby in any state to any person
to whom it is unlawful to make such offer in such state.
<PAGE>
First Investors
Series Fund
- ---------------------------
Blue Chip Fund
Investment Grade Fund
Special Situations Fund
Total Return Fund
- ---------------------------
Prospectus
- ----------------------------
April 29, 1996
First Investors Logo
Logo is described as follows: the arabic numeral one separated into seven
vertical segments followed by the words "First Investors."
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. 1793" in a box to the right of
a circle containing the words "MAILED FROM ZIP CODE 17604" appears on the
righthand side.
The following language appears on the lefthand side:
FIRST INVESTORS SERIES FUND
95 WALL STREET
NEW YORK, NY 10005
First Investors Logo (as described above)
A MEMBER OF THE
FIRST INVESTORS
FINANCIAL NETWORK
FISF001
<PAGE>
FIRST INVESTORS SERIES FUND
FIRST INVESTORS BLUE CHIP FUND
FIRST INVESTORS INVESTMENT GRADE FUND
FIRST INVESTORS SPECIAL SITUATIONS FUND
FIRST INVESTORS TOTAL RETURN FUND
95 Wall Street 1-800-423-4026
New York, New York 10005
STATEMENT OF ADDITIONAL INFORMATION
DATED APRIL 29, 1996
This is a Statement of Additional Information ("SAI") for BLUE CHIP FUND,
INVESTMENT GRADE FUND, SPECIAL SITUATIONS FUND and TOTAL RETURN FUND
(individually, "Fund," and collectively, "Funds"), each of which is a separate
series of FIRST INVESTORS SERIES FUND ("Series Fund"). Series Fund is an open-
end diversified management investment company which presently offers five
separate investment series.
BLUE CHIP FUND seeks to provide investors with high total investment return
consistent with the preservation of capital.
INVESTMENT GRADE FUND seeks to generate a maximum level of income
consistent with investment in investment grade debt securities.
SPECIAL SITUATIONS FUND seeks long-term growth of capital.
TOTAL RETURN FUND seeks to provide investors with high long-term total
investment return consistent with moderate investment risk.
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
Series Fund at the address or telephone number noted above.
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
Investment Policies................................................. 3
Hedging and Option Income Strategies................................ 9
Investment Restrictions............................................. 17
Trustees and Officers............................................... 25
Management.......................................................... 27
Underwriter......................................................... 29
Distribution Plans.................................................. 30
Determination of Net Asset Value.................................... 31
Allocation of Portfolio Brokerage................................... 32
Reduced Sales Charges, Additional Exchange and
Redemption Information and Other Services......................... 33
Taxes............................................................... 40
Performance Information............................................. 43
General Information................................................. 48
Appendix A.......................................................... 49
Appendix B.......................................................... 50
Appendix C.......................................................... 52
Financial Statements................................................
</TABLE>
2
<PAGE>
INVESTMENT POLICIES
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.
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.
CONVERTIBLE SECURITIES. Each 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, First Investors Management Company,
Inc. ("Adviser" or "FIMCO"), 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.
LOANS OF PORTFOLIO SECURITIES. BLUE CHIP FUND, INVESTMENT GRADE FUND and
------------------------------
TOTAL RETURN 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 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.
MORTGAGE-BACKED SECURITIES. BLUE CHIP FUND, INVESTMENT GRADE FUND and
--------------------------
TOTAL RETURN 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 a
Fund), like the payments on the underlying loans, represent both principal and
interest. Although the underlying mortgage loans are
3
<PAGE>
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 a 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 a 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. A Fund normally
will not distribute principal payments (whether regular or prepaid) to its
shareholders. Rather, it will invest such payments in additional mortgage-
backed 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.
4
<PAGE>
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 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 and repurchase agreements maturing in more than seven
days. This policy does not include restricted securities eligible for resale
pursuant to Rule 144A under the Securities Act of 1933, as amended ("1933
5
<PAGE>
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 each Fund's limit, as noted above. 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.
RISK FACTORS OF HIGH YIELD SECURITIES. High yield, high risk securities
-------------------------------------
(commonly referred to as "junk bonds"), are subject to certain risks that may
not be present with investments of higher grade securities. These risks also
apply to lower-rated and certain unrated convertible securities.
EFFECT OF INTEREST RATE AND ECONOMIC CHANGES. 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.
6
<PAGE>
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 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.
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 Board of Trustees 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. See "Determination of Net Asset Value."
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
7
<PAGE>
acquisitions. It is not certain whether such proposals, which also could
adversely affect High Yield Securities, will be enacted into law.
SHORT SALES. Although neither Fund intends to do so in the foreseeable
-----------
future, INVESTMENT GRADE FUND and SPECIAL SITUATIONS FUND may borrow securities
for cash sale to others. This type of transaction is commonly known as a "short
sale." These Funds will engage in short sales for hedging purposes only. These
Funds only may make short sales "against the box," which occurs when a 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.
WARRANTS. INVESTMENT GRADE FUND, SPECIAL SITUATIONS FUND and TOTAL RETURN
--------
FUND may purchase warrants, which are instruments that permit a 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. Each 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. INVESTMENT GRADE FUND and TOTAL RETURN FUND may
----------------------
each invest up to 10% of its net assets in securities issued on a when-issued or
delayed delivery basis at the time the purchase is made. The Fund generally
would not pay for such securities or start earning interest on them until they
are issued or received. However, when the 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 the Fund on a when-issued basis
may result in the Fund's incurring a loss or missing an opportunity to make an
alternative investment. When the 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 the 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 the Fund's commitment, the Fund will be required to deposit additional cash
or qualified securities into the account until equal to the value of the 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 the Fund is committed to purchase. Sale of
securities in the segregated account or other securities owned by the Fund and
when-issued securities may cause the realization of a capital gain or loss.
ZERO COUPON AND PAY-IN-KIND SECURITIES. INVESTMENT GRADE FUND and TOTAL
--------------------------------------
RETURN FUND may each invest up to 5% of its net assets in 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
8
<PAGE>
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." These distributions must be made from a
Fund's cash assets or, if necessary, from the proceeds of sales of portfolio
securities. Each Fund will not be able to purchase additional income-producing
securities with cash used to make such distributions, and its current income
ultimately could be reduced as a result.
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 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 82% and 25%, respectively, INVESTMENT GRADE FUND'S
portfolio turnover rate was 17% and 27%, respectively, and SPECIAL SITUATIONS
FUND'S portfolio turnover rate was 53% and 80%, respectively. See the
Prospectus for the portfolio turnover rate of TOTAL RETURN FUND.
HEDGING AND OPTION INCOME STRATEGIES
The Adviser may engage in certain options and futures strategies to hedge
the Funds' portfolios, in other circumstances permitted by the Commodities
Futures Trading Commission ("CFTC") and, for TOTAL RETURN FUND, engage in
certain options strategies to enhance income. The instruments described below
are sometimes referred to collectively as "Hedging Instruments" and are defined
in Appendix B. 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. A 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
9
<PAGE>
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.
INVESTMENT GRADE FUND. Although it does not intend to engage in these
---------------------
strategies in the coming year, INVESTMENT GRADE FUND may buy and sell interest
rate futures contracts and buy and sell call and put options thereon traded on a
U.S. exchange or board of trade. INVESTMENT GRADE FUND also may enter into
closing transactions with respect to such options to terminate an existing
position.
SPECIAL SITUATIONS FUND. Although it does not intend to engage in these
-----------------------
strategies in the coming year, SPECIAL SITUATIONS FUND may enter into forward
currency contracts.
TOTAL RETURN FUND. Although it does not intend to engage in these
-----------------
strategies in the coming year, TOTAL RETURN 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 may also 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. The Fund also may enter into forward
currency contracts.
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, currencies 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, currencies 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,
currencies 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. TOTAL RETURN 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
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<PAGE>
exercise price and the Fund either sells or exercises the option, any profit
eventually realized will be reduced by the premium. TOTAL RETURN 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.
TOTAL RETURN 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 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).
TOTAL RETURN 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 TOTAL RETURN 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
11
<PAGE>
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 a
Fund's use of options that may be modified by the Board without shareholder
vote: (1) options will be purchased or written only when the Adviser believes
that there exists a liquid secondary market in such options; and (2) no 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. A Fund may
----------------------------------------------------
effectively terminate its right or obligation under an option by entering into a
closing transaction. If TOTAL RETURN 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 markets 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.
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<PAGE>
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 TOTAL RETURN 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, the 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.
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. INVESTMENT GRADE FUND and TOTAL RETURN 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 each invests.
TOTAL RETURN FUND may sell stock index futures contracts in anticipation of
a general market or market sector decline that could adversely affect the market
value of the Fund's portfolio. To the extent that a portion of the Fund's
portfolio correlates with a given stock index, the sale of futures contracts on
that index could reduce the risks associated with a market decline and thus
provide an alternative to the liquidation of securities positions. The Fund may
purchase a stock index futures contract if a significant market or market sector
advance is anticipated. Such a purchase would serve as a temporary substitute
for the purchase of individual stocks, which stocks may then be purchased in an
orderly fashion. This strategy may minimize the effect of all or part of an
increase in the market price of securities that the Fund intends to purchase. A
rise in the price of the securities should be partially or wholly offset by
gains in the futures position.
13
<PAGE>
TOTAL RETURN FUND may purchase a call option on a stock index future to
hedge against a market advance in equity securities that the Fund plans to
purchase at a future date. The Fund may write covered call options on stock
index futures as a partial hedge against a decline in the prices of stocks held
in the Fund's portfolio. The Fund also may purchase put options on stock index
futures contracts.
INVESTMENT GRADE FUND and TOTAL RETURN FUND may use interest rate futures
contracts and options thereon to hedge the debt portion of each of its portfolio
against changes in the general level of interest rates. Each 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 the 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. Each
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.
INVESTMENT GRADE FUND and TOTAL RETURN FUND may purchase a call option on
an interest rate futures contract to hedge against a market advance in debt
securities that such Fund plans to acquire at a future date. Each Fund also may
write covered call options on interest rate futures contracts as a partial hedge
against a decline in the price of debt securities held in such Fund's portfolio
or purchase put options on interest rate futures contracts in order to hedge
against a decline in the value of debt securities held in the Fund's portfolio.
INVESTMENT GRADE FUND and TOTAL RETURN FUND will use futures contracts and
options thereon solely in bona fide hedging transactions or under other
circumstances permitted by the CFTC and will not enter into such investments for
which the aggregate initial margin and premiums exceed 5% of each Fund's total
assets. This does not limit a Fund's assets at risk to 5%. Series Fund, on
behalf of each Fund, has represented the foregoing to the CFTC.
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 INVESTMENT GRADE
FUND and TOTAL RETURN FUND that may be modified by the Board without shareholder
vote. Each Fund will not purchase or sell futures contracts or related options
if, immediately thereafter, the sum of the amount of initial margin deposits on
such Fund's existing futures positions and margin and premiums paid for related
options would exceed 5% of the market value of such 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,
INVESTMENT GRADE FUND and TOTAL RETURN FUND may not purchase interest rate
futures contracts if immediately thereafter more than 30% of such Fund's 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, INVESTMENT GRADE FUND and TOTAL RETURN FUND are required to deposit
with their custodian in a segregated account in the name of the futures broker
through which the transaction is effected an amount of cash, U.S. Government
securities or other liquid, high-grade debt instruments generally equal to 3%-5%
of the contract value. This amount is known as "initial margin." When writing
a put or call option on a futures contract, margin also must
14
<PAGE>
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 a 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 INVESTMENT GRADE FUND and TOTAL RETURN FUND of futures
contracts and 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 a 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.
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
15
<PAGE>
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 INVESTMENT GRADE FUND and TOTAL RETURN FUND intend to
purchase or sell futures and 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 a 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 that 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.
INVESTMENT GRADE FUND'S and TOTAL RETURN FUND'S activities in the futures
and related options markets may result in a higher portfolio turnover rate and
additional transaction costs in the form of added brokerage commissions;
however, each Fund also may save on commissions by using futures and related
options as a hedge rather than buying or selling individual securities or
currencies in anticipation or as a result of market movements.
FORWARD CURRENCY CONTRACTS. SPECIAL SITUATIONS FUND and TOTAL RETURN FUND
--------------------------
may use forward currency contracts to protect against uncertainty in the level
of future exchange rates. These Fund will not speculate with forward currency
contracts or foreign currency exchange rates.
SPECIAL SITUATIONS FUND and TOTAL RETURN FUND may enter into forward
currency contracts with respect to specific transactions. For example, when a
Fund enters into a contract for the purchase or sale of a security denominated
in a foreign currency, or when a Fund anticipates the receipt in a foreign
currency of dividend or interest payments on a security that it holds, the Fund
may desire to "lock-in" the U.S. dollar price of the security or the U.S. dollar
equivalent of such payment, as the case may be, by entering into a forward
contract for the purchase or sale, for a fixed amount of U.S. dollars or foreign
currency, of the amount of foreign currency involved in the underlying
transaction. A Fund will thereby be able to protect itself against a possible
loss resulting from an adverse change in the relationship between the currency
exchange rates during the period between the date on which the security is
purchased or sold, or on which the payment is declared, and the date of which
such payments are made or received.
16
<PAGE>
A Fund also may use forward currency contracts in connection with portfolio
positions to lock in the U.S. dollar value of those positions, to increase the
Fund's exposure to foreign currencies that the Adviser believes may rise in
value relative to the U.S. dollar or to shift a Fund's exposure to foreign
currency fluctuations from one country to another. This investment practice
generally is referred to as "cross-hedging" when another foreign currency is
used.
The precise matching of the forward contract amounts and the value of the
securities involved will not generally be possible because the future value of
such securities in foreign currencies will change as a consequence of market
movements in the value of those securities between the date the forward contract
is entered into and the date it matures. Accordingly, it may be necessary for a
Fund to purchase additional foreign currency on the spot (i.e., cash) market and
----
bear the expense of such purchase if the market value of the security is less
than the amount of foreign currency the Fund is obligated to deliver and if a
decision is made to sell the security and make delivery of the foreign currency.
Conversely, it may be necessary to sell on the spot market some of the foreign
currency received upon the sale of the portfolio security if its market value
exceeds the amount of foreign currency a Fund is obligated to deliver. The
projection of short-term currency market movements is extremely difficult, and
the successful execution of a short-term hedging strategy is highly uncertain.
Forward contracts involve the risk that anticipated currency movements will not
be accurately predicted, causing a Fund to sustain losses on these contracts and
transactions costs. A Fund may enter into formal contracts or maintain a net
exposure to such contracts only if the Fund maintains cash, U.S. Government
securities or liquid, high-grade debt securities in a segregated account in an
amount not less than the value of the Fund's total assets committed to the
consummation of the contract, as marked to market daily.
At or before the maturity date of a forward contract requiring a Fund to
sell a currency, the Fund may either sell a portfolio security and use the sale
proceeds to make delivery of the currency or retain the security and offset its
contractual obligation to deliver the currency by purchasing a second contract
pursuant to which the Fund will obtain, on the same maturity date, the same
amount of the currency that it is obligated to deliver. Similarly, a Fund may
close out a forward contract requiring it to purchase a specified currency by
entering into a second contract entitling it to sell the same amount of the same
currency on the maturity date of the first contract. A Fund would realize a
gain or loss as a result of entering into an offsetting forward currency
contract under either circumstance to the extent the exchange rate or rates
between the currencies involved moved between the execution dates of the first
contract and the offsetting contract. There can be no assurance that new
forward contracts or offsets always will be available for a Fund. Forward
currency contracts also involve a risk that the other party to the contract may
fail to deliver currency when due, which could result in substantial losses to a
Fund. The cost to a Fund of engaging in forward currency contracts varies with
factors such as the currencies involved, the length of the contract period and
the market conditions then prevailing. Because forward currency contracts are
usually entered into on a principal basis, no fees or commissions are involved.
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 Series Fund.
As provided in the Investment Company Act of 1940, as amended ("1940 Act"), a
"vote of a majority of the outstanding voting securities of the Fund" means the
affirmative vote of the lesser of (1) more than 50%
17
<PAGE>
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.
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: (1) as to 75% of the Fund's
total assets (taken at current value), more than 5% of such assets would then be
invested in securities of a single issuer, or (2) 25% or more of the Fund's
total assets (taken at current value) would be invested in a single industry.
(5) Purchase more than 10% of the outstanding voting securities of any one
issuer or more than 10% of any class of securities of one issuer (all debt and
all preferred stock of an issuer are each considered a single class for this
purpose).
(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, 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 Series Fund, as principals.
(12) Invest in any securities of any issuer if, to the knowledge of Series
Fund, any officer, director or Trustee of Series Fund or of the Adviser owns
more than 1/2 of 1% of the outstanding
18
<PAGE>
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 the Fund would then have more than
5% of its total assets invested in securities of companies (including
predecessors) less than three years old.
(2) Invest in securities of other registered investment companies, except
by purchases in the open market involving only customary brokerage commissions
and as a result of which not more than 5% of its total assets would be invested
in such securities, or except as part of a merger, consolidation or other
acquisition.
(3) Purchase oil, gas or other mineral leases. 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 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.
Series Fund, on behalf of the Fund, has filed the following undertaking to
comply with requirements of certain states in which shares of the Fund are sold,
which may be changed without shareholder approval: 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.
INVESTMENT GRADE FUND. INVESTMENT GRADE FUND will not:
---------------------
(1) Make short sales of securities "against the box" in excess of 10% of
the Fund's total assets.
19
<PAGE>
(2) Issue senior securities, as defined in the 1940 Act, or borrow money,
except that the Fund may borrow money 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).
(3) Purchase any security (other than obligations of the U.S. Government,
its agencies or instrumentalities) if as a result: (1) as to 75% of the Fund's
total assets (taken at current value), more than 5% of such assets would then be
invested in securities of a single issuer, or (2) 25% or more of the Fund's
total assets (taken at current value) would be invested in a single industry.
(4) Purchase more than 10% of the outstanding voting securities of any one
issuer or more than 10% of any class of securities of one issuer (all debt and
all preferred stock of an issuer are each considered a single class for this
purpose).
(5) 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 all such
borrowings.
(6) Purchase or sell commodities or commodity contracts or real estate or
interests in real estate, although it may purchase and sell securities which are
secured by real estate, securities of companies which invest or deal in real
estate and interests in real estate investment trusts. However, this
restriction will not preclude bona fide hedging transactions, including the
purchase and sale of futures contracts and related options.
(7) 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.
(8) Make investments for the purpose of exercising control or management.
(9) Purchase any securities on margin (although the Fund may obtain such
short-term credit as may be necessary for the purchases and sales of its
portfolio securities).
(10) Make loans to others, except (a) through the purchase of debt
securities in accordance with its investment objective and policies, (b) through
the lending of its portfolio securities, or (c) to the extent a repurchase
agreement is deemed a loan.
(11) Purchase or sell portfolio securities from or to the Adviser or any
director, officer or Trustee thereof or of Series Fund, as principals.
(12) Invest in any securities of any issuer if, to the knowledge of Series
Fund, any officer, director or Trustee of Series Fund 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:
20
<PAGE>
(1) Invest more than 15% of its assets in repurchase agreements maturing in
more than seven days or in other illiquid securities, including securities that
are illiquid by virtue of the absence of a readily available market or legal or
contractual restrictions as to resale. Securities that have legal or
contractual restrictions as to resale but have a readily available market are
not deemed illiquid for purposes of this limitation; the Adviser will monitor
the liquidity of such restricted securities under the supervision of the Board
of Trustees.
(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 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.
(4) Purchase oil, gas or other mineral leases. 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.
(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) Write, purchase or sell options (puts, calls or combinations thereof),
except that the Fund may purchase or write put and call U.S. exchange-traded
options on futures contracts, and may enter into closing transactions with
respect to such options.
Series Fund, 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 (5) above, the Fund
will not borrow, pledge, mortgage or hypothecate in excess of one-third of its
total assets.
(2) 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 and will not
invest more than 5% of its total assets in puts, calls, straddles, spreads or
any combination thereof.
(3) All investors in the Fund shall receive written notification at least
thirty days prior to a change in the Fund's investment objective and that there
shall be no exit fee for those investors who desire to redeem their Fund's
shares based upon receipt of such notification.
SPECIAL SITUATIONS FUND. SPECIAL SITUATIONS FUND will not:
-----------------------
(1) Make short sales of securities "against the box" in excess of 10% of
the Fund's total assets.
21
<PAGE>
(2) Issue senior securities or borrow money, except that the Fund may
borrow money 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).
(3) Purchase any security (other than obligations of the U.S. Government,
its agencies or instrumentalities) if as a result: (i) as to 75% of the Fund's
total assets (taken at current value), more than 5% of such assets would then be
invested in securities of a single issuer, or (ii) 25% or more of the Fund's
total assets (taken at current value) would be invested in a single industry.
(4) Purchase more than 10% of the outstanding voting securities of any one
issuer or more than 10% of any class of securities of one issuer (all debt and
all preferred stock of an issuer are each considered a single class for this
purpose).
(5) 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 all such
borrowings.
(6) Buy or sell commodities or commodity contracts including futures
contracts, or real estate or interests in real estate, although it may purchase
and sell securities which are secured by real estate, securities of companies
which invest or deal in real estate and interests in real estate investment
trusts.
(7) 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.
(8) Make investments for the purpose of exercising control or management.
(9) Purchase any securities on margin.
(10) Make loans, except through repurchase agreements.
(11) Purchase or sell portfolio securities from or to the Adviser or any
director, officer or Trustee thereof or of Series Fund, as principals.
(12) Invest in any securities of any issuer if, to the knowledge of Series
Fund, any officer, director or Trustee of Series Fund 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) Invest more than 15% of its net assets in repurchase agreements
maturing in more than seven days or in other illiquid securities, including
securities that are illiquid by virtue of the absence of a readily available
market or legal or contractual restrictions as to resale. Securities that have
legal or contractual restrictions as to resale but have a readily available
market are not deemed illiquid for purposes of this limitation; the Adviser will
monitor the liquidity of such restricted securities under the supervision of the
Board of Trustees.
22
<PAGE>
(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 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.
(4) Purchase oil, gas or other mineral leases. 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.
(5) Write, purchase or sell options (puts, calls or combinations thereof).
(6) 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).
Series Fund, on behalf of the Fund, has filed the following undertaking to
comply with requirements of certain states in which shares of the Fund are sold,
which may changed without shareholder approval: 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.
TOTAL RETURN FUND. TOTAL RETURN 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.
(2) Issue senior securities.
(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: (i) as to 75% of the Fund's
total assets (taken at current value), more than 5% of such assets would then be
invested in securities of a single issuer, or (ii) 25% or more of the Fund's
total assets (taken at current value) would be invested in a single industry.
(5) Purchase more than 10% of the outstanding voting securities of any one
issuer or more than 10% of any class of securities of one issuer (all debt and
all preferred stock of an issuer are each considered a single class for this
purpose).
23
<PAGE>
(6) Buy or sell real estate or interests in real estate, although it may
purchase and sell securities which are secured by real estate and securities of
companies which invest or deal in real estate, including limited partnership
interests.
(7) 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.
(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 Series Fund, as principals.
(10) Invest in any securities of any issuer if, to the knowledge of Series
Fund, any officer, director or Trustee of Series Fund 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 the Fund would then have more than
5% of its total assets invested in securities of companies (including
predecessors) less than three years old.
(2) Invest in securities of other registered investment companies, except
by purchases in the open market involving only customary brokerage commissions
and as a result of which not more than 5% of its total assets would be invested
in such securities, or except as part of a merger, consolidation or other
acquisition.
(3) Purchase oil, gas or other mineral leases. 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) 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).
(5) 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.
(6) 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
24
<PAGE>
contracts, caps, floors and other derivative instruments, engaging in swap
transactions or investing in securities or other instruments backed by physical
commodities).
(7) 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.
(8) 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.
(9) 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.
(10) 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.
Series Fund, on behalf of the Fund, has filed the following undertaking to
comply with requirements of certain states in which shares of the Fund are sold,
which may be changed without shareholder approval: 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.
TRUSTEES AND OFFICERS
The following table lists the Trustees and executive officers of the Funds,
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).
25
<PAGE>
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, Executive Investors
Trust, 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.
NANCY W. JONES (52), Vice President. Vice President, First Investors Asset
Management Company, Inc. and First Investors Fund For Income, Inc.; 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 Executive
Investors Trust; 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 Mr. Wagner, Ms. Poitra and Ms.
Jones, hold identical or similar positions with 14 other 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
26
<PAGE>
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 Series Fund
for the fiscal year ended December 31, 1995.
<TABLE>
<CAPTION>
TOTAL
COMPENSATION
PENSION OR FROM FIRST
AGGREGATE RETIREMENT BENEFITS ESTIMATED INVESTORS FAMILY
COMPENSATION ACCRUED AS PART OF ANNUAL BENEFITS OF FUNDS
TRUSTEE FROM FUND* FUND EXPENSES UPON RETIREMENT PAID TO TRUSTEES*
- ------- ------------ ------------------- --------------- -----------------
<S> <C> <C> <C> <C>
James J. Coy $2,400 $-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.** 1,000 -0- -0- 15,500
Rex R. Reed 2,400 -0- -0- 37,200
Herbert Rubinstein 2,400 -0- -0- 37,200
James M. Srygley*** 2,400 -0- -0- 37,200
John T. Sullivan -0- -0- -0- -0-
Robert F. Wentworth 2,400 -0- -0- 37,200
</TABLE>
* Compensation to officers and interested Trustees of Series Fund is paid by
the Adviser. In addition, compensation to non-interested Trustees of Series
Fund 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.
MANAGEMENT
Investment advisory services to each Fund are provided by First 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 Series Fund, 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, FIMCO 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 Series Fund's
Trustees. The Advisory Agreement also provides that FIMCO shall provide
27
<PAGE>
Series Fund with certain executive, administrative and clerical personnel,
office facilities and supplies, conduct the business and details of the
operation of Series Fund and each Fund and assume certain expenses thereof,
other than obligations or liabilities of the Funds. The Advisory Agreement may
be terminated at any time, with respect to a Fund, without penalty by Series
Fund's Trustees or by a majority of the outstanding voting securities of such
Fund, or by FIMCO, 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 Series Fund'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 Series Fund'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:
<TABLE>
<CAPTION>
BLUE CHIP FUND, TOTAL RETURN FUND, SPECIAL SITUATIONS FUND
Annual
Average Daily Net Assets Rate
- ------------------------ ------
<S> <C>
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
INVESTMENT GRADE FUND
Annual
Average Daily Net Assets Rate
- ------------------------ ------
Up to $300 million.......................................... 0.75%
In excess of $300 million up to $500 million................ 0.72
In excess of $500 million up to $750 million................ 0.69
Over $750 million........................................... 0.66
</TABLE>
For the fiscal year ended December 31, 1993, BLUE CHIP FUND, TOTAL
RETURN FUND, SPECIAL SITUATIONS FUND and INVESTMENT GRADE FUND paid $825,779,
$461,927, $308,911 and $291,166, respectively, in advisory fees. For the same
period, the Adviser voluntary waived advisory fees accrued by BLUE CHIP FUND,
TOTAL RETURN FUND, SPECIAL SITUATIONS FUND and INVESTMENT GRADE FUND in the
amounts of $275,260, $153,975, $102,923 and $44,795, respectively.
For the fiscal year ended December 31, 1994, BLUE CHIP FUND,
INVESTMENT GRADE FUND, SPECIAL SITUATIONS FUND and TOTAL RETURN FUND paid
$910,508, $303,734, $560,009 and $411,603, respectively, in advisory fees. For
the same period, the Adviser voluntarily waived advisory fees accrued by BLUE
CHIP FUND, INVESTMENT GRADE FUND, SPECIAL SITUATIONS FUND and TOTAL RETURN FUND
in the amounts of $303,502, $46,728, $186,670 and $137,201, respectively. In
addition, for the same period, the Adviser voluntarily reimbursed INVESTMENT
GRADE FUND the amount of $85,012.
28
<PAGE>
For the fiscal year ended December 31, 1995, BLUE CHIP FUND,
INVESTMENT GRADE FUND, SPECIAL SITUATIONS FUND and TOTAL RETURN FUND paid
$1,112,369, $315,396, $829,137 and $396,040, respectively, in advisory fees.
For the same period, the Adviser voluntarily waived advisory fees accrued by
BLUE CHIP FUND, INVESTMENT GRADE FUND, SPECIAL SITUATIONS FUND and TOTAL RETURN
FUND in the amounts of $370,790, $48,523, $276,379 and $132,013. In addition,
for the same period, the Adviser voluntarily reimbursed INVESTMENT GRADE FUND
the amount of $51,516.
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 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
Series Fund has entered into an Underwriting Agreement ("Underwriting
Agreement") with First Investors Corporation ("Underwriter" or "FIC") 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
Fund has agreed to bear such costs pursuant to a plan of distribution. See
"Distribution Plans." The Underwriting Agreement was approved by Series Fund's
Board of Trustees, including a majority of the Independent Trustees. The
Underwriting Agreement provides that it will continue in effect from year to
year, with respect to a Fund, only so long as such continuance is specifically
approved at least annually by the 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 Series Fund's Independent Trustees, voting in person at a
meeting called for the purpose of voting on such approval. The Underwriting
Agreement will terminate automatically in the event of its assignment.
For the fiscal years ended December 31, 1993, 1994 and 1995, FIC
received underwriting commissions with respect to BLUE CHIP FUND of $1,327,463,
$1,207,688 and $1,356,655, respectively.
29
<PAGE>
For the fiscal years ended December 31, 1993, 1994 and 1995, FIC received
underwriting commissions with respect to INVESTMENT GRADE FUND of $647,412,
$423,503 and $303,161, respectively. For the fiscal years ended December 31,
1993, 1994 and 1995, FIC received underwriting commissions with respect to
SPECIAL SITUATIONS FUND of $1,144,803, $1,494,055 and $1,429,875, respectively.
For the fiscal years ended December 31, 1993, 1994 and 1995, FIC received
underwriting commissions with respect to TOTAL RETURN FUND of $326,514, $261,280
and $155,548, respectively. For the fiscal year ended December 31, 1993, with
respect to INVESTMENT GRADE FUND and SPECIAL SITUATIONS FUND, FIC reallowed an
additional $1,026 and $9,393, respectively, to outside dealers. For the fiscal
year ended December 31, 1994, with respect to BLUE CHIP FUND, SPECIAL SITUATIONS
FUND and TOTAL RETURN FUND, FIC reallowed an additional $52, $40,187 and $257,
respectively, to outside dealers. For the fiscal year ended December 31, 1995,
with respect to BLUE CHIP FUND and SPECIAL SITUATIONS FUND, FIC reallowed an
additional $13,730 and $29,218, respectively, to outside dealers.
DISTRIBUTION PLANS
As stated in the Funds' Prospectus, pursuant to a separate plan of
distribution for each class of shares adopted by Series Fund pursuant to Rule
12b-1 under the 1940 Act ("Class A Plan" and "Class B Plan" and, collectively,
"Plans"), 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.
Each Plan was approved by Series Fund's Board of Trustees, including a
majority of the Independent Trustees, and by a majority of the outstanding
voting securities of the relevant class of each Fund. Each Plan will continue
in effect, with respect to a Fund, from year to year as long as its continuance
is approved annually by either Series Fund's Board of Trustees or by a vote of a
majority of the outstanding voting securities of the relevant class of shares of
that Fund. In either case, to continue, each Plan must be approved by the vote
of a majority of the Independent Trustees of Series Fund. Series Fund's Board
reviews quarterly and annually a written report provided by the Treasurer of the
amounts expended under the applicable Plan and the purposes for which such
expenditures were made. While each Plan is in effect, the selection and
nomination of Series Fund's Independent Trustees will be committed to the
discretion of such Independent Trustees then in office.
Each Plan can be terminated, with respect to a Fund, at any time by a
vote of a majority of Series Fund's Independent Trustees or by a vote of a
majority of the outstanding voting securities of the relevant class of shares of
that Fund. Any change to each Class B Plan that would materially increase the
costs to that class of shares of a Fund or any material change to each Class A
Plan may not be instituted without the approval of the outstanding voting
securities of the relevant class of shares of that Fund. Such changes also
require approval by a majority of Series Fund's Independent Trustees.
In reporting amounts expended under the Plans to the Trustees, FIMCO
will allocate expenses attributable to the sale of each class of a Fund's shares
to such class based on the ratio of sales of such class to the sales of both
classes of shares. The fees paid by one class of a Fund's shares will not be
used to subsidize the sale of any other class of that Fund's shares.
For the fiscal year ended December 31, 1995, BLUE CHIP FUND,
INVESTMENT GRADE FUND, SPECIAL SITUATIONS FUND and TOTAL RETURN FUND paid
$438,127, $144,194, $325,418 and $158,092, respectively,
30
<PAGE>
in fees pursuant to the Class A Plan. The Underwriter incurred the following
Class A Plan-related expenses with respect to each Fund during the fiscal year
ended December 31, 1995:
<TABLE>
<CAPTION>
COMPENSATION COMPENSATION TO
FUND ADVERTISING TO SALES PERSONNEL* UNDERWRITER**
- ------------------------- ----------- ------------------- ---------------
<S> <C> <C> <C>
BLUE CHIP FUND $0 $140,736 $297,391
INVESTMENT GRADE FUND 0 46,715 97,479
SPECIAL SITUATIONS FUND 0 94,135 231,283
TOTAL RETURN FUND 0 51,293 106,799
</TABLE>
* Represents service fees
** Represents distribution fees
For the fiscal year ended December 31, 1995, BLUE CHIP FUND,
INVESTMENT GRADE FUND, SPECIAL SITUATIONS FUND and TOTAL RETURN FUND paid
$22,735, $4,572, $20,788 and $1,076, respectively, in fees pursuant to the Class
B Plan. With respect to the Class B Plan, all amounts were paid to the
Underwriter as 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 market
(including securities listed on exchanges whose primary market is believed to be
OTC) is valued at the mean between the last 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. This service
is furnished by Interactive Data Corporation. 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 direction of Series Fund's officers in a manner specifically
authorized by the Board of Trustees.
With respect INVESTMENT GRADE 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. For
valuation purposes, with respect to SPECIAL SITUATIONS FUND and TOTAL RETURN
FUND, quotations of foreign securities in foreign currencies are converted into
U.S. dollar equivalents using the foreign exchange equivalents in effect.
31
<PAGE>
Series Fund's Board of Trustees may suspend the determination of a
Fund's net asset value per share separately for each class of shares 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 U.S. 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 the Funds 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 commissions paid
by a Fund 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 a Fund directly from an issuer, in
which no commission or discounts are paid. Each Fund 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.
Each 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. Each Fund also may purchase listed securities through the "third
market." When transactions are executed in the OTC market, a Fund seeks to deal
with the primary market makers, but when advantageous it utilizes the services
of brokers.
In effecting portfolio transactions, 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 a Fund 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 in the First Investors Group of 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-dealer participate in these commissions.
The Adviser may combine transaction orders placed on behalf of a Fund
and any other fund in the First Investors Group of Funds, any fund of Executive
Investors Trust 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.
For the fiscal year ended December 31, 1993, BLUE CHIP FUND paid
$155,395 in brokerage commissions. For the fiscal year ended December 31, 1993,
SPECIAL SITUATIONS FUND paid $59,900 in
32
<PAGE>
brokerage commissions. Of that amount, $21,818 was paid in brokerage
commissions to brokers who furnished research services on portfolio transactions
in the amount of $5,807,458. For the fiscal year ended December 31, 1993, TOTAL
RETURN FUND paid $85,921 in brokerage commissions. Of that amount, $14,910 was
paid in brokerage commissions to brokers who furnished research services on
portfolio transactions in the amount of $4,999,354. For the same period,
INVESTMENT GRADE FUND did not pay brokerage commissions.
For the fiscal year ended December 31, 1994, SPECIAL SITUATIONS FUND
paid $96,700 in brokerage commissions. For the fiscal year ended December 31,
1994, BLUE CHIP FUND paid $291,605 in brokerage commissions. Of that amount,
$892 was paid in brokerage commissions to brokers who furnished research
services on portfolio transactions in the amount of $923,452. For the fiscal
year ended December 31, 1994, TOTAL RETURN FUND paid $96,700 in brokerage
commissions. Of that amount, $2,350 was paid in brokerage commissions to
brokers who furnished research services on portfolio transactions in the amount
of $672,269. For the same period, INVESTMENT GRADE FUND did not pay brokerage
commissions.
For the fiscal year ended December 31, 1995, BLUE CHIP FUND paid
$125,137 in brokerage commissions. Of that amount, $74,088 was paid in
brokerage commissions to brokers who furnished research services on portfolio
transactions in the amount of $42,331,633. For the fiscal year ended December
31, 1995, TOTAL RETURN FUND paid $57,607 in brokerage commissions. Of such
amount, $9,712 was paid in brokerage commissions to brokers who furnished
research services on portfolio transactions in the amount of $5,121,579. For
the fiscal year ended December 31, 1995, SPECIAL SITUATIONS FUND paid $146,529
in brokerage commissions. Of such amount $65,187 was paid in brokerage
commissions to brokers who furnished research services on portfolio transactions
in the amount of $25,626,484. For the same period, INVESTMENT GRADE FUND did
not pay brokerage commissions.
REDUCED SALES CHARGES, ADDITIONAL EXCHANGE AND
REDEMPTION INFORMATION AND OTHER SERVICES
REDUCED SALES CHARGES--CLASS A SHARES
Reduced sales charges are applicable to purchases made at one time of
Class A 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 Class A
shares. Class A shares purchased at net asset value, Class A shares of the
Money Market Funds, or shares owned under a Contractual Plan are not eligible
for the purchase of Class A shares of a Fund at a reduced sales charge through a
Letter of Intent or the Cumulative Purchase Privilege.
33
<PAGE>
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 Class A
shares of any one or more of the Funds and of the other Eligible Funds to be
made within a period of thirteen months, provided said shares are currently
being offered to the general public and only in those states where such shares
may be legally sold, and thereby become eligible for the reduced sales charge
applicable to the total amount purchased. A Letter of Intent filed after the
date of investment is considered retroactive to the date of investment for
determination of the thirteen-month period. The Letter of Intent is not a
binding obligation on either the investor or the Fund. During the term of a
Letter of Intent, Administrative Data Management Corp. ("Transfer Agent") will
hold Class A shares representing 5% of each purchase in escrow, which shares
will be released upon completion of the intended investment.
Purchases of Class A 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 Class A shares and the net asset value of all Class B shares of a
Fund and of the other Eligible Funds, including Class B shares of the Money
Market Funds, currently owned, together with the aggregate offering price of
purchases to be made under the Letter of Intent. If all such shares are not so
purchased, a price adjustment is made, depending upon the actual amount invested
within such period, by the redemption of sufficient Class A 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 FIC, Class A
-----------------------------
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 Class A shares and the net asset value of all Class B
shares of a Fund and of the other Eligible Funds, including Class B shares of
the Money Market Funds, previously purchased and then owned, plus the value of
Class A shares being purchased at the current public offering price, amount to
$25,000 or more. Such quantity discounts may be modified or terminated at any
time by the Underwriter.
PURCHASE OF SHARES. When you open a Fund account, you must specify
-------------------
which class of shares you wish to purchase. If not, your order will be
processed as follows: (1) if you are opening an account with a new registration
with First Investors your order will not be processed until the Fund receives
notification of which class of shares to purchase; (2) if you have existing
First Investors accounts solely in either Class A shares or Class B shares with
the identical registration, your investment in the Fund will be made in the same
class of shares as your existing account(s); (3) if you are an existing First
Investors shareholder and own a combination of Class A and Class B shares with
an identical registration, your investment in the Fund will be made in Class B
shares; and (4) if you own in the aggregate at least $250,000 in any combination
of classes, your investment will be made in Class A shares.
34
<PAGE>
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 the
same class of shares of another Eligible Fund. 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
Class A shares into the same class of another 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 Class A shares of a Fund at net asset value through payments from a
Systematic Withdrawal Plan you maintain with any other Eligible Fund. Scheduled
investments may be made on a monthly, quarterly, semi-annual or annual basis.
You may also elect to invest Systematic Withdrawal Plan payments of Class A
shares from a Fund into the same class of another 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 the same class of any other 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. If you own Class
35
<PAGE>
B shares in a non-retirement account, your Plan payments will be subject to the
applicable contingent deferred sales charge ("CDSC"). 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.
Shareholders who own Class B shares in a retirement account may
establish a Plan and elect to receive up to 8% of the value of their account
(calculated as set forth below) each year without incurring any CDSC. Shares
not subject to a CDSC (such as shares representing reinvestment of
distributions) will be redeemed first and will count toward the 8% limitation.
If the shares not subject to a CDSC are insufficient for this purpose, then
shares subject to the lowest CDSC will be redeemed next until the 8% limit is
reached. The 8% figure is calculated on a pro rata basis at the time of the
first payment made pursuant to the Plan and recalculated thereafter on a pro
rata basis at the time of each Plan payment. Therefore, shareholders who have
chosen the Plan based on a percentage of the value of their account of up to 8%
will be able to receive Plan payments without incurring a CDSC. However,
shareholders who have chosen a specific dollar amount (for example, $100 per
month) for their periodic Plan payment should be aware that the amount of that
payment not subject to a CDSC may vary over time depending on the value of their
account. For example, if the value of the account is $15,000 at the time of
payment, the shareholder will receive $100 free of the CDSC (8% of $15,000
divided by 12 monthly payments). However, if at the time of a payment the value
of the account has fallen to $14,000, the shareholder will receive $93.33 free
of any CDSC (8% of $14,000 divided by 12 monthly payments) and $6.67 subject to
the lowest applicable CDSC. This privilege may be revised or terminated at any
time.
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.
CONVERSION OF CLASS B SHARES. Class B Shares of a Fund will
----------------------------
automatically convert to Class A shares of that Fund, based on the relative net
asset values per share of the two classes, as of the close of business on the
first business day of the month in which the eighth anniversary of the initial
purchase of such Class B shares occurs. For these purposes, the date of initial
purchase shall mean (1) the first business day of the month in which such Class
B shares were issued, or (2) for Class B shares obtained through an exchange or
a series of exchanges, the first business day of the month in which the original
Class B shares were issued. For conversion purposes, Class B shares purchased
through the reinvestment
36
<PAGE>
of dividends and other distributions paid in respect of Class B shares will be
held in a separate sub-account. Each time any Class B shares in the
shareholder's regular account (other than those in the sub-account) convert to
Class A shares, a pro rata portion of the Class B shares in the sub-account also
will convert to Class A shares. The portion will be determined by the ratio
that the shareholder's Class B shares converting to Class A shares bears to the
shareholder's total Class B shares not acquired through dividends and other
distributions.
The availability of the conversion feature is subject to the
continuing applicability of a ruling of the Internal Revenue Service ("IRS"), or
an opinion of counsel, that: (1) the dividends and other distributions paid on
Class A and Class B shares will not result in "preferential dividends" under the
Code; and (2) the conversion of shares does not constitute a taxable event. If
the conversion feature ceased to be available, the Class B shares of the Fund
would not be converted and would continue to be subject to the higher ongoing
expenses of the Class B shares beyond eight years from the date of purchase.
FIMCO has no reason to believe that these conditions for the availability of the
conversion feature will not continue to be met.
If Series Fund implements any amendments to its Class A Plan that
would increase materially the costs that may be borne under such Plan by Class A
shareholders, a new target class into which Class B shares will convert will be
established, unless a majority of Class B shareholders, voting separately as a
class, approve the proposal.
WAIVERS OF CDSC ON CLASS B SHARES. The CDSC imposed on Class B shares
---------------------------------
does not apply to: (a) any redemption pursuant to the tax-free return of an
excess contribution to an individual retirement account ("IRA") or other
qualified retirement plan if the Fund is notified at the time of such request;
(b) any redemption of a lump-sum or other distribution from qualified retirement
plans or accounts provided the shareholder has attained the minimum age of 70
1/2 years and has held the Class B shares for a minimum period of three years;
(c) any redemption by advisory accounts managed by the Adviser or any of its
affiliates or for shares held by the Adviser or any of its affiliates; (d) any
redemption by a tax-exempt employee benefit plan if continuance of the
investment would be improper under applicable laws or regulations; (e) any
redemption or transfer of ownership of Class B shares following the death or
disability, as defined in Section 72(m)(7) of the Code, of a shareholder if the
Fund is provided with proof of death or disability and with all documents
required by the Transfer Agent within one year after the death or disability;
and (f) any redemption of shares purchased during the period April 29, 1996
through June 30, 1996 with the proceeds from a redemption of shares of a fund in
another fund group for which no sales charge was paid, other than a money market
fund or shares held in a retirement plan account. For more information on what
specific documents are required, call Shareholder Services at
1-800-423-4026.
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,
37
<PAGE>
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 Class A or Class B
-----------------------------
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 class of the
same Fund or any other Eligible Fund (including the Money Market Funds), at net
asset value, on the date the Transfer Agent receives your purchase request. If
you reinvest the entire proceeds of a redemption of Class B shares for which a
CDSC has been paid, you will be credited for the amount of the CDSC. If you
reinvest less than the entire proceeds, you will be credited with a pro rata
portion of the CDSC. All credits will be paid in Class B shares of the fund
into which the reinvestment is being made. The period you owned the original
Class B shares prior to redemption will be added to the period of time you own
Class B shares acquired through reinvestment for purposes of determining (a) the
applicable CDSC upon a subsequent redemption and (b) the date on which Class B
shares automatically convert to class A shares. If your reinvestment is into a
new account, 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, Series Fund, 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.
38
<PAGE>
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 ("SEP-IRA") 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.
39
<PAGE>
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 SPECIAL SITUATIONS
40
<PAGE>
FUND and TOTAL RETURN FUND, net gains from certain foreign currency
transactions) plus its net interest income excludable from gross income under
section 103(a) of the Code ("Distribution Requirement") and must meet several
additional requirements. For each 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, futures or forward
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, futures or forward contracts (other than those on foreign
currencies), or foreign currencies (or options, futures or forward contract
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
taxed to shareholders 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 a 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 a 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.
Although INVESTMENT GRADE FUND is authorized to hold equity securities, it is
expected that any dividend income received by that Fund will be minimal;
accordingly, very little, if any, of the distributions made by that Fund will be
eligible for the dividends-received deduction.
If shares of a Fund are sold at a loss after being held for six months
or less, the loss 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 SPECIAL SITUATIONS FUND or TOTAL
RETURN 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
41
<PAGE>
these foreign taxes, however, and many foreign countries do not impose taxes on
capital gains in respect of investments by foreign investors.
SPECIAL SITUATIONS FUND and TOTAL RETURN FUND may invest in the stock
of "passive foreign investment companies" ("PFICs"). A PFIC is a foreign
corporation that, in general, meets either of the following tests: (1) at least
75% of its gross income is passive or (2) an average of at least 50% of its
assets produce, or are held for the production of, passive income. Under
certain circumstances, if a Fund holds stock of a PFIC, it will be subject to
Federal income tax on a portion of any "excess distribution" received on the
stock or of any gain on disposition of the stock (collectively "PFIC income"),
plus interest thereon, even if the Fund distributes the PFIC income as a taxable
dividend to its shareholders. The balance of the PFIC income will be included
in the Fund's investment company taxable income and, accordingly, will not be
taxable to it to the extent that income is distributed to its shareholders.
If SPECIAL SITUATIONS FUND or TOTAL RETURN FUND invests in a PFIC and
elects to treat the PFIC as a "qualified electing fund," then in lieu of the
foregoing tax and interest obligation, the Fund would be required to include in
income each year its pro rata share of the qualified electing fund's annual
ordinary earnings and net capital gain (the excess of net long-term capital gain
over net short-term capital loss) -- which probably would have to be distributed
to satisfy the Distribution Requirement and avoid imposition of the Excise Tax -
- - even if those earnings and gain were not received by the Fund. In most
instances it will be very difficult, if not impossible, to make this election
because of certain requirements thereof.
Pursuant to proposed regulations, open-end RICs, such as Series Fund,
would be entitled to elect to "mark-to-market" their stock in certain PFICs.
"Marking-to-market," in this context, means recognizing as gain for each taxable
year the excess, as of the end of that year, of the fair market value of such a
PFIC's stock over the adjusted basis in that stock (including mark-to-market
gain for each prior year for which an election was in effect).
For SPECIAL SITUATIONS FUND and TOTAL RETURN 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. However, income from such a 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.
INVESTMENT GRADE FUND and TOTAL RETURN 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
42
<PAGE>
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, futures, forward 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 and entering into forward 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, futures and forward 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. Income from a Fund's disposition of forward contracts that are not
directly related to its principal business of investing in securities also 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, futures, forward 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.
PERFORMANCE INFORMATION
A Fund may advertise its performance in various ways.
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") over a
number of years ("n") with an Ending Redeemable Value ("ERV") of that
investment, according to the following formula:
T=[ ( ERV / P ) to the 1 divided nth power] - 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
Total return is calculated by finding the average annual change in the
value of an initial $1,000 investment over the period. In calculating the
ending redeemable value for Class A shares, each Fund will deduct the maximum
sales charge of 6.25% (as a percentage of the offering price) from the initial
$1,000
43
<PAGE>
payment and, for Class B shares, the applicable CDSC imposed on a redemption of
Class B shares held for the period is deducted. All dividends and other
distributions are assumed to have been reinvested at net asset value on the
initial investment ("P").
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 (maximum sales charge for Class A shares and applicable CDSC for Class B
shares) for the periods ended December 31, 1995 are set forth in the tables
below:
AVERAGE ANNUAL TOTAL RETURN:/1/
<TABLE>
<CAPTION>
1/12/95/3/ to
One Year Five Years Life of Fund/2/ 12/31/95
---------------- ---------------- ----------------- ----------------
Class A Class B Class A Class B Class A Class B Class A Class B
Shares Shares Shares Shares Shares Shares Shares Shares
------- ------- ------- ------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BLUE CHIP FUND 25.61% N/A 12.27% N/A 10.31% N/A N/A 28.55%
INVESTMENT GRADE FUND 11.89 N/A N/A N/A 8.14 N/A N/A 13.80
SPECIAL SITUATIONS FUND 16.15 N/A 18.93 N/A 18.68 N/A N/A 19.21
TOTAL RETURN FUND 18.85 N/A 8.15 N/A 7.47 N/A N/A 21.54
</TABLE>
TOTAL RETURN:/1/
<TABLE>
<CAPTION>
One Year Five Years Life of Fund/2/ 12/31/95
---------------- ---------------- ----------------- ----------------
Class A Class B Class A Class B Class A Class B Class A Class B
Shares Shares Shares Shares Shares Shares Shares Shares
------- ------- ------- ------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BLUE CHIP FUND 25.61% N/A 78.40% N/A 98.63% N/A N/A 27.48%
INVESTMENT GRADE FUND 11.89 N/A N/A N/A 46.45 N/A N/A 13.31
SPECIAL SITUATIONS FUND 16.15 N/A 137.98 N/A 147.30 N/A N/A 18.51
TOTAL RETURN FUND 18.85 N/A 47.95 N/A 50.65 N/A N/A 20.75
</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 are set forth in the
tables below:
/1/ All return figures reflect the maximum sales charge of 6.25%. Prior to
July 1, 1993 the maximum sales charge was 6.90% and prior to December 29, 1989
the maximum sales charge for BLUE CHIP FUND was 7.25% The figures also assume
the reinvestment of dividends at net asset value. Prior to June 28, 1991, BLUE
CHIP FUND and TOTAL RETURN FUND reinvested dividends at the public offering
price (net asset value plus applicable sales charge). Certain expenses of the
Funds have been waived or reimbursed from inception through December 31, 1995.
Accordingly, return figures are higher than they would have been had such
expenses not been waived or reimbursed.
/2/ The inception dates for the Funds are as follows: BLUE CHIP FUND - January
3, 1989; INVESTMENT GRADE FUND -February 19, 1991; SPECIAL SITUATIONS FUND -
September 18, 1990; and TOTAL RETURN FUND - April 24, 1990.
/3/ Commencement of offering of Class B Shares.
44
<PAGE>
AVERAGE ANNUAL TOTAL RETURN:/1/
<TABLE>
<CAPTION>
One Year Five Years Life of Fund/2/ 12/31/95
---------------- ---------------- ----------------- ----------------
Class A Class B Class A Class B Class A Class B Class A Class B
Shares Shares Shares Shares Shares Shares Shares Shares
------- ------- ------- ------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BLUE CHIP FUND 34.01% N/A 13.74% N/A 11.33% N/A N/A 34.08%
INVESTMENT GRADE FUND 19.40 N/A N/A N/A 9.58 N/A N/A 18.77
SPECIAL SITUATIONS FUND 23.92 N/A 20.48 N/A 20.13 N/A N/A 24.33
TOTAL RETURN FUND 26.83 N/A 9.56 N/A 8.69 N/A N/A 26.74
</TABLE>
TOTAL RETURN:/1/
<TABLE>
<CAPTION>
One Year Five Years Life of Fund/2/ 12/31/95
---------------- ---------------- ----------------- ----------------
Class A Class B Class A Class B Class A Class B Class A Class B
Shares Shares Shares Shares Shares Shares Shares Shares
------- ------- ------- ------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BLUE CHIP FUND 34.01% N/A 90.36% N/A 111.83% N/A N/A 32.76%
INVESTMENT GRADE FUND 19.40 N/A N/A N/A 56.20 N/A N/A 18.08
SPECIAL SITUATIONS FUND 23.92 N/A 153.87 N/A 163.76 N/A N/A 23.42
TOTAL RETURN FUND 26.83 N/A 57.87 N/A 60.63 N/A N/A 25.74
</TABLE>
Yield 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 the Fund outstanding
during the base period and entitled to receive dividends and (B) the per share
maximum public offering price for Class A shares or the net asset value for
Class B shares of the Fund on the last day of the base period. The result is
annualized by compounding on a semi-annual basis to determine the Fund's yield.
For this calculation, interest earned on debt obligations held by the 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
receivables-backed securities such as GNMA Certificates, based on cost).
Dividends on equity securities are accrued daily at their estimated stated
dividend rates.
For the 30 days ended December 31, 1995, the yield for Class A shares
and Class B shares of INVESTMENT GRADE FUND was 5.00% and 4.69%, respectively.
During this period certain expenses of the Fund were waived. Accordingly, yield
is higher than it would have been if such expenses had not been waived.
The distribution rate for INVESTMENT GRADE 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 the Fund's offering price per share at the
end of that period. The distribution rate is also calculated by using the
Fund's net
- --------------------
/1/ All return figures reflect the maximum sales charge of 6.25%. Prior to
July 1, 1993 the maximum sales charge was 6.90% and prior to December 29, 1989
the maximum sales charge for BLUE CHIP FUND was 7.25% The figures also assume
the reinvestment of dividends at net asset value. Prior to June 28, 1991, BLUE
CHIP FUND and TOTAL RETURN FUND reinvested dividends at the public offering
price (net asset value plus applicable sales charge). Certain expenses of the
Funds have been waived or reimbursed from inception through December 31, 1995.
Accordingly, return figures are higher than they would have been had such
expenses not been waived or reimbursed.
/2/ The inception dates for the Funds are as follows: BLUE CHIP FUND - January
3, 1989; INVESTMENT GRADE FUND -February 19, 1991; SPECIAL SITUATIONS FUND -
September 18, 1990; and TOTAL RETURN FUND - April 24, 1990.
/3/ Commencement of offering of Class B Shares.
45
<PAGE>
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 Class A shares of INVESTMENT GRADE FUND calculated
using the offering price and net asset value was 5.81% and 6.20%, respectively.
During this period certain expenses of INVESTMENT GRADE FUND were waived.
Accordingly, the distribution rates are higher than they would have been had
such expenses not been waived. The distribution rate for the period January 12,
1995 through December 31, 1995 for Class B shares of INVESTMENT GRADE FUND
calculated using net asset value was 5.26%.
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 any Fund 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 D.
From time to time, in reports and promotional literature, each Fund
may compare its performance to, or cite the historical performance of, Overnight
Government repurchase agreements, U.S. Treasury bills, notes and bonds,
certificates of deposit, and six-month money market certificates or indices of
broad groups of unmanaged securities considered to be representative of, or
similar to, the 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.
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.
46
<PAGE>
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.
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.
47
<PAGE>
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 the Funds 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 outstanding Class B shares of the Fund listed
below:
<TABLE>
<CAPTION>
Fund % of Shares Shareholder
- ---- ------------ ----------------
<S> <C> <C>
INVESTMENT GRADE FUND 10.8% Mary E. Zaneski
28 Canal Street
Sayreville, NJ 08872-1010
TOTAL RETURN FUND 6.9% Charles J. Meyer
1067 Glasco Trpke.
Saugerties, NY 12477
5.3% Barry B. Brown
16 Hargrove Lane
Willingboro, NJ 08046
</TABLE>
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
48
<PAGE>
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, BLUE CHIP FUND, SPECIAL SITUATIONS FUND and TOTAL RETURN FUND
paid $287,683, $279,308 and $107,047, respectively, in transfer agency fees.
For the fiscal year ended December 31, 1995, INVESTMENT GRADE FUND accrued
$102,330 in transfer agency fees and expenses, of which $46,886 was voluntarily
waived by the Transfer Agent. The Transfer Agent's telephone number is 1-800-
423-4026.
SHAREHOLDER LIABILITY. Series Fund is organized as an entity known as
---------------------
a "Massachusetts business trust." Under Massachusetts law, shareholders of such
a trust may, under certain circumstances, be held personally liable for the
obligations of Series Fund. The Declaration of Trust however, contains an
express disclaimer of shareholder liability for acts or obligations of Series
Fund and requires that notice of such disclaimer be given in each agreement,
obligation, or instrument entered into or executed by Series Fund or the
Trustees. The Fund's Declaration of Trust provides for indemnification out of
the property of the Fund of any shareholder held personally liable for the
obligations of Series Fund. The Declaration of Trust also provides that Series
Fund shall, upon request, assume the defense of any claim made against any
shareholder for any act or obligation of Series Fund and satisfy any judgment
thereon. Thus, the risk of a shareholder's incurring financial loss on account
of shareholder liability is limited to circumstances in which Series Fund itself
would be unable to meet its obligations. The Adviser believes that, in view of
the above, the risk of personal liability to shareholders is immaterial and
extremely remote. The Declaration of Trust further provides that the Trustees
will not be liable for errors of judgment or mistakes of fact or law, but
nothing in the Declaration of Trust protects a Trustee against any liability to
which he would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence, or reckless disregard of the duties involved in the conduct of
his office. Series Fund may have an obligation to indemnify Trustees and
officers with respect to litigation.
TRADING BY PORTFOLIO MANAGERS AND OTHER ACCESS PERSONS. Pursuant to
------------------------------------------------------
Section 17(j) of the 1940 Act and Rule 17j-1 thereunder, the Fund and the
Adviser have adopted Codes of Ethics restricting personal securities trading by
portfolio managers and other access persons of the Fund. Among other things,
such persons: (a) must have all 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.
49
<PAGE>
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.
APPENDIX B
The Fund may use some or all of the following hedging instruments:
OPTIONS ON EQUITY AND DEBT SECURITIES--A call option is a short-term
contract pursuant to which the purchaser of the option, in return for a premium,
has the right to buy the security underlying the option at a specified price at
any time during the term of the option. The writer of the call option, who
receives the premium, has the obligation, upon exercise of the option during the
option term, to deliver the underlying security against payment of the exercise
price. A put option is a similar contract that gives its purchaser, in return
for a premium, the right to sell the underlying security at a specified price
during the option term. The writer of the put option, who receives the premium,
has the obligation, upon exercise of the option during the option term, to buy
the underlying security at the exercise price.
OPTIONS ON STOCK INDEXES--A stock index assigns relative values to the
stocks included in the index and fluctuates with changes in the market values of
those stocks. A stock index option operates in the same way as a more
traditional stock option, except that exercise of a stock index option is
effected with cash payment and does not involve delivery of securities. Thus,
upon exercise 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.
50
<PAGE>
STOCK INDEX FUTURES CONTRACTS--A stock index futures contract is a
bilateral agreement pursuant to which one party agrees to accept, and the other
party agrees to make, delivery of an amount of cash equal to a specified dollar
amount times the difference between the stock index value at the close of
trading of the contract and the price at which the futures contract is
originally struck. No physical delivery of the stocks comprising the index is
made. Generally, contracts are closed out prior to the expiration date of the
contract.
INTEREST RATE FUTURES CONTRACTS--Interest rate futures contracts are
bilateral agreements pursuant to which one party agrees to make, and the other
party agrees to accept, delivery of a specified type of debt security at a
specified future time and at a specified price. Although such futures contracts
by their terms call for actual delivery or acceptance of debt securities, in
most cases the contracts are closed out before the settlement date without the
making or taking of delivery.
OPTIONS ON FUTURES CONTRACTS--Options on futures contracts are similar to
options on securities, except that an option on a futures contract gives the
purchaser the right, in return for the premium, to assume a position in a
futures contract (a long position if the option is a call and a short position
if the option is a put), rather than to purchase or sell a security, at a
specified price at any time during the option term. Upon exercise of the
option, the delivery of the futures position to the holder of the option will be
accompanied by delivery of the accumulated balance that represents the amount by
which the market price of the futures contract exceeds, in the case of a call,
or is less than, in the case of a put, the exercise price of the option on the
future. The writer of an option, upon exercise, will assume a short position in
the case of a call and a long position in the case of a put.
FORWARD CURRENCY CONTRACTS--A forward currency contract involves an
obligation to purchase or sell a specific currency at a specified future date,
which may be any fixed number of days from the contract date agreed upon by the
parties, at a price set at the time the contract is entered into.
51
<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.
<PAGE>
Financial Statements
as of December 31, 1995
-----------------------
<PAGE>
Portfolio of Investments
FIRST INVESTORS BLUE CHIP SERIES
(A Series of First Investors Series Fund)
December 31, 1995
<TABLE>
<CAPTION>
Amount
Invested
For Each
Principal $10,000 of
Amount Security Value Net Assets
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS--94.7%
Basic Industry--4.0%
16,300 Alumax, Inc. $ 499,188 $28
14,900 Dow Chemical Company 1,048,588 60
20,200 Du Pont (E.I.) De Nemours & Company 1,411,475 80
23,700 Freeport McMoran Copper & Gold, Inc. - Class "B" 666,562 38
18,200 IMC Global, Inc. 743,925 42
10,800 James River Corporation of Virginia 260,550 15
10,400 Mead Corporation 543,400 31
16,100 Minnesota Mining & Manufacturing Company 1,066,625 61
12,100 Sigma-Aldrich Corporation 598,950 34
4,100 Temple-Inland, Inc. 180,913 10
- ------------------------------------------------------------------------------------------
7,020,176 399
- ------------------------------------------------------------------------------------------
Capital Goods--7.6%
14,100 Boeing Company 1,105,087 63
8,000 Browning-Ferris Industries, Inc. 236,000 13
16,500 Deere & Company 581,625 33
6,100 Eaton Corporation 327,113 19
8,200 Emerson Electric Company 670,350 38
6,600 Foster Wheeler Corporation 280,500 16
62,700 General Electric Company 4,514,400 256
15,000 Grainger (W.W.), Inc. 993,750 57
18,600 Ingersoll-Rand Company 653,325 37
8,700 Lockheed Martin Corporation 687,300 39
10,400 Loral Corporation 367,900 21
19,200 Raytheon Company 907,200 52
9,600 United Technologies Corporation 910,800 52
16,000 * Varity Corporation 594,000 34
21,100 WMX Technologies, Inc. 630,362 36
- ------------------------------------------------------------------------------------------
13,459,712 766
- ------------------------------------------------------------------------------------------
Consumer Durables--1.7%
18,000 Corning, Inc. 576,000 33
4,000 Fleetwood Enterprises, Inc. 103,000 6
37,500 Ford Motor Company 1,087,500 62
13,350 Goodyear Tire & Rubber Company 605,755 34
19,600 Masco Corporation 614,950 35
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------
2,987,205 170
- ------------------------------------------------------------------------------------------
Consumer Non-Durables--22.3%
32,100 Abbott Laboratories 1,340,175 76
11,200 American Home Products Corporation 1,086,400 62
18,300 Anheuser-Busch Companies, Inc. 1,223,813 70
18,100 Astra AB (ADR) - Class "A" 724,000 41
19,500 Bristol-Myers Squibb Company 1,674,563 95
48,400 Coca-Cola Company 3,593,700 205
16,600 Columbia/HCA Healthcare Corporation 842,450 48
13,900 CPC International, Inc. 953,887 54
14,200 Eastman Kodak Company 951,400 54
22,400 Eli Lilly & Company 1,260,000 73
10,600 General Mills, Inc. 612,150 35
17,000 Gillette Company 886,125 50
26,250 Heinz (H.J.) Company 869,531 49
13,300 Hershey Foods Corporation 864,500 49
24,800 Johnson & Johnson 2,123,500 121
8,300 Kellogg Company 641,175 36
14,000 Kimberly-Clark Corporation 1,158,500 66
47,500 Merck & Company, Inc. 3,123,125 178
33,100 Newell Company 856,463 49
10,800 Nike, Inc. 751,950 43
35,300 PepsiCo, Inc. 1,972,387 112
24,300 Pfizer, Inc. 1,530,900 87
36,300 Philip Morris Companies, Inc. 3,285,150 187
26,400 Procter & Gamble Company 2,191,200 125
14,000 * Ralcorp Holdings, Inc. 339,500 19
14,200 Schering-Plough Corporation 777,450 44
21,300 Teva Pharmaceutical Industries Ltd. (ADR) 987,788 56
10,200 Unilever N.V. 1,435,650 82
10,800 United Healthcare Corporation 707,400 40
5,500 Warner-Lambert Company 534,187 30
- ------------------------------------------------------------------------------------------
39,299,019 2,236
- ------------------------------------------------------------------------------------------
Consumer Services--11.1%
17,100 Brunswick Corporation 410,400 23
5,700 Capital Cities/ABC, Inc. 703,238 40
7,200 * CUC International, Inc. 245,700 14
10,600 * Darden Restaurants, Inc. 125,875 7
18,000 Gap, Inc. 756,000 43
11,500 * HFS, Inc. 940,125 53
17,600 Home Depot, Inc. 842,600 48
10,300 ITT Corporation 545,900 32
10,300 ITT Hartford Group, Inc. 498,263 28
10,300 ITT Industries, Inc. 247,200 14
15,700 * Kroger Company 588,750 33
11,300 Marriott International, Inc. 432,225 25
19,625 Mattel, Inc. 603,468 34
12,900 May Department Stores Company 545,025 31
27,200 McDonald's Corporation 1,227,400 70
7,600 McGraw-Hill Companies, Inc. 662,150 38
15,000 Nordstrom, Inc. 607,500 35
33,300 * Price/Costco, Inc. 507,825 29
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
14,100 Sears, Roebuck and Company 549,900 31
15,500 Talbots, Inc. 445,625 25
27,925 * Tele-Communications, Inc. Liberty Media Group
- Class "A" 750,484 43
42,500 * Tele-Communications, Inc. TCI Group - Class "A" 844,687 48
14,200 Time Warner, Inc. 537,825 31
17,100 US West Media Group 324,900 18
13,300 * Viacom, Inc. - Class "B" 630,088 36
17,400 Vons Companies, Inc. 491,550 28
103,800 Wal-Mart Stores, Inc. 2,322,525 132
13,500 Walgreen Company 403,313 23
20,000 Walt Disney Company 1,180,000 67
36,600 * Woolworth Corporation 475,800 27
- ------------------------------------------------------------------------------------------
19,446,341 1,106
- ------------------------------------------------------------------------------------------
Energy--12.1%
10,200 Aluminum Company of America 539,325 31
18,900 Amoco Corporation 1,358,438 77
9,100 Atlantic Richfield Company 1,007,825 57
16,900 Avery Dennison Corporation 847,113 48
28,200 Baker Hughes, Inc. 687,375 39
27,000 Barrick Gold Corporation 712,125 41
7,100 Burlington Resources, Inc. 278,675 16
25,000 Chevron Corporation 1,312,500 75
26,900 Enron Corporation 1,025,563 58
47,700 Exxon Corporation 3,821,963 217
6,700 Kerr-McGee Corporation 425,450 24
15,200 Mobil Corporation 1,702,400 97
20,300 Morton International, Inc. 728,263 41
13,400 Pacific Enterprises 378,550 22
9,400 Phillips Petroleum Company 320,775 18
20,600 Royal Dutch Petroleum Company 2,907,175 165
11,200 Schlumberger, Ltd. 775,600 45
31,500 Sonat, Inc. 1,122,189 64
9,400 Texaco, Inc. 737,900 42
23,500 Unocal Corporation 684,438 39
- ------------------------------------------------------------------------------------------
21,373,642 1,216
- ------------------------------------------------------------------------------------------
Financial--11.6%
18,100 American Express Company 748,888 43
18,300 American International Group, Inc. 1,692,750 96
18,300 American Re Corporation 748,013 42
39,400 Banc One Corporation 1,487,350 85
17,400 BankAmerica Corporation 1,126,650 64
12,100 Bank of New York Company, Inc. 589,875 33
31,200 Charles Schwab Corporation 627,900 36
11,300 Chase Manhattan Corporation 685,063 39
14,100 Chemical Banking Corporation 828,375 47
7,600 Chubb Corporation 735,300 42
24,200 Citicorp 1,627,450 92
14,500 Dean Witter Discover and Company 681,500 39
16,700 Federal National Mortgage Association 2,072,886 118
12,200 First Union Corporation 678,625 39
5,200 General Re Corporation 806,000 46
81,200 Hibernia Corporation - Class "A" 872,900 50
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
2,700 Marsh & McLennan Companies, Inc. 239,625 14
14,700 Mellon Bank Corporation 790,125 45
18,300 NationsBank Corporation 1,274,137 72
36,700 Norwest Corporation 1,211,100 69
23,400 Salomon, Inc. 830,700 47
- ------------------------------------------------------------------------------------------
20,355,212 1,158
- ------------------------------------------------------------------------------------------
Technology--14.0%
60,900 A T & T Corp. 3,943,275 224
24,000 * Airtouch Communications, Inc. 678,000 39
19,000 * Applied Materials, Inc. 748,125 43
10,800 * Ascend Communications, Inc. 876,150 50
5,000 Autodesk, Inc. 171,250 10
8,400 Automatic Data Processing, Inc. 623,700 35
25,600 * Cisco Systems, Inc. 1,910,400 109
5,600 Computer Associates International, Inc. 318,500 18
44,100 * EMC Corporation 678,036 39
22,200 First Data Corporation 1,484,625 84
20,400 Hewlett-Packard Company 1,708,500 97
30,600 Intel Corporation 1,736,550 99
23,500 International Business Machines Corporation 2,156,125 123
20,000 * LSI Logic Corporation 655,000 37
26,100 MCI Communications Corporation 681,863 39
22,500 * Microsoft Corporation 1,974,375 112
24,700 Motorola, Inc. 1,407,900 80
19,000 * National Semiconductor Corporation 422,750 24
29,550 * Oracle Corporation 1,252,180 72
21,600 * Premenos Technology Corporation 569,700 32
13,400 Sprint Corporation 534,325 30
- ------------------------------------------------------------------------------------------
24,531,329 1,396
- ------------------------------------------------------------------------------------------
Transportation--1.4%
11,800 * AMR Corporation 876,150 50
6,200 Burlington Northern, Inc. 483,600 27
15,600 Union Pacific Corporation 1,029,600 59
- ------------------------------------------------------------------------------------------
2,389,350 136
- ------------------------------------------------------------------------------------------
Utilities--8.9%
20,000 Ameritech Corporation 1,180,000 67
16,600 Bell Atlantic Corporation 1,110,125 63
42,600 BellSouth Corporation 1,853,100 105
23,000 Carolina Power & Light Company 793,500 45
40,000 Cinergy Corporation 1,225,000 70
23,000 Duke Power Company 1,089,625 63
28,200 FPL Group, Inc. 1,307,775 74
35,600 GTE Corporation 1,566,400 89
15,700 NYNEX Corporation 847,800 48
16,000 Pacific Telesis Group 538,000 31
26,000 PacifiCorp 552,500 31
16,300 Peco Energy Company 491,036 28
22,100 SBC Communications, Inc. 1,270,750 72
28,000 Texas Utilities Company 1,151,500 66
17,100 US West, Inc. 611,325 35
</TABLE>
<PAGE>
<TABLE>
- -------------------------------------------------------------------------------------------------------
15,588,436 887
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CONVERTIBLE BONDS--.6%
Consumer Services
1,500M Bell Sports Corporation, 4 1U4%, 11/15/2000 (cost $1,289,084) 1,050,000 60
- -------------------------------------------------------------------------------------------------------
SHORT-TERM CORPORATE NOTES--4.5%
1,200M Dupont (E.I.) DeNemours & Co., 5.7%, 1/9/96 1,198,480 68
1,650M GTE Southwest, Inc., 5.75%, 1/16/96 1,646,047 94
1,500M Idaho Power Company, 5.75%, 1/12/96 1,497,365 85
1,800M Lubrizol Corporation , 5.74%, 1/5/96 1,798,852 103
1,800M Nestle Capital Corporation, 5.67%, 1/3/96 1,799,432 102
- -------------------------------------------------------------------------------------------------------
Total Value of Short-Term Corporate Notes (cost $7,940,176) 7,940,176 452
- -------------------------------------------------------------------------------------------------------
Total Value of Investments (cost $136,898,998) 99.8% 175,440,598 9,982
Other Assets, Less Liabilities .2 312,218 18
- -------------------------------------------------------------------------------------------------------
Net Assets 100.0% $ 175,752,816 10,000
=======================================================================================================
* Non-income producing
</TABLE>
Portfolio of Investments
FIRSTINVESTORS INVESTMENT GRADE SERIES
(A Series of First Investgors Series Fund)
December 31, 1995
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Amount
Invested
For Each
Principal $10,000 of
Amount Security Value Net Assets
<C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------
MUNICIPAL BONDS--100.1%
Alaska--3.0%
$ 200M Anchorage General Obligation 6 1U2%, 7/1/2004 $ 225,000 $ 304
- -------------------------------------------------------------------------------------------------------
Arizona--12.3%
Maricopa County Unified School District General Obligation:
300M #11 (Peoria) 7%, 7/1/2001* 339,375 460
250M #80 (Chandler) 6.6%, 7/1/2006 286,875 387
250M Phoenix Civic Impt. Corp. Mun. Facs. Excise Tax Rev.
6 3U4%, 7/1/2004 284,375 384
</TABLE>
5
<PAGE>
<TABLE>
<C> <S> <C> <C>
- -------------------------------------------------------------------------------------------------------
910,625 1,231
- -------------------------------------------------------------------------------------------------------
Arkansas--3.0%
200M Arkansas St. Fin. Auth. Water Rev. 6.4%, 6/1/2002* 223,750 303
- -------------------------------------------------------------------------------------------------------
California--6.7%
150M Pittsburg Pub. Fing. Auth. Wastewater Rev. 6.8%, 6/1/2001 170,250 230
300M San Diego Pub. Fing. Auth. Sewer Rev. 6%, 5/15/2005 327,750 443
- -------------------------------------------------------------------------------------------------------
498,000 673
- -------------------------------------------------------------------------------------------------------
Illinois--23.5%
250M Chicago General Obligation 6 1U4%, 10/31/2001 271,875 368
250M Chicago Park District 6%, 1/1/2007 269,063 364
200M Chicago Wastewater Transmission Rev. 6 3U4%, 11/15/2000* 225,000 304
200M Cook County High School District General Obligation
250M Northwest Subn. Mun. Jt. Action Water Agy. 6.35%, 5/1/2006 277,812 376
400M Regional Transportation Authority 7 3U4%, 6/1/2003 478,500 647
- -------------------------------------------------------------------------------------------------------
1,735,500 2,347
- -------------------------------------------------------------------------------------------------------
Indiana--2.3%
150M Valparaiso Indpt. Multi-Schools Bldg. Corp. 6 5U8%,
7/1/2002* 170,437 230
- -------------------------------------------------------------------------------------------------------
Kentucky--3.7%
200M Louisville & Jefferson County Met. Sewer District 10%,
5/15/2004 270,250 365
- -------------------------------------------------------------------------------------------------------
Louisiana--2.7%
175M Louisiana General Obligation 7%, 5/1/2001 197,312 267
- -------------------------------------------------------------------------------------------------------
Michigan--10.4%
1,000M Brighton Area School District General Obligation Zero Cpn.
5/1/2005* 313,750 425
250M Grand Ledge School District 6.6%, 5/1/2004 288,750 390
150M Morley-Stanwood Cmnty. School 6 1U2%, 5/1/2005 168,563 229
- -------------------------------------------------------------------------------------------------------
771,063 1,044
- -------------------------------------------------------------------------------------------------------
New Jersey--3.1%
200M New Jersey Economic Dev. Auth. Mkt. Transition Fac. Rev. 7%,
7/1/2004 232,250 314
- -------------------------------------------------------------------------------------------------------
New York--10.4%
New York City General Obligati
150M 6 5U8%, 8/1/2002* 171,000 231
250M 8%, 8/1/2005 313,438 424
Niagara Falls Bridge Commission:
100M 6 1U8%, 10/1/2002 111,750 151
150M 6.3%, 10/1/2002* 169,125 229
- -------------------------------------------------------------------------------------------------------
765,313 1,035
- -------------------------------------------------------------------------------------------------------
Ohio--3.1%
200M Columbus City Sch. Dist. General Obligation 6.65%,
12/1/2002* 229,500 311
- -------------------------------------------------------------------------------------------------------
Pennsylvania--3.1%
200M Pennsylvania Intergovernmental Coop. Auth. Special Tax Rev.
</TABLE>
6
<PAGE>
<TABLE>
<C> <S> <C> <C>
7%, 6/15/2004 229,750 311
- -------------------------------------------------------------------------------------------------------
Puerto Rico--1.9%
125M Puerto Rico Electrical Power Auth. Rev. 6 1U2%, 7/1/2005 142,031 192
- -------------------------------------------------------------------------------------------------------
Rhode Island--3.1%
200M Rhode Island Depositors Econ. Protection Corp. 7.1%,
8/1/2001* 230,000 311
- -------------------------------------------------------------------------------------------------------
Texas--4.6%
300M Harris County Toll Road General Obligation 6 1U2%,
8/15/2002* 339,375 459
Washington--3.2%
$ 200M Snohomish & Island Counties School District General
Obligation #401 (Stanwood), 7%, 12/15/2005 $235,000 $317
- -------------------------------------------------------------------------------------------------------
Total Value of Municipal Bonds (cost $7,014,821) 100.1% 7,405,156 10,014
Excess of Liabilities Over Other Assets (.1) (10,215) (14)
- -------------------------------------------------------------------------------------------------------
Net Assets 100.0% $7,394,941 $10,000
=======================================================================================================
* Municipal Bonds which have been prerefunded are shown maturing at the prerefunded
</TABLE>
Portfolio of Investments
FIRSTINVESTORS INVESTMENT GRADE SERIES
(A Series of First Investgors Series Fund)
December 31, 1995
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Amount
Invested
For Each
Principal $10,000 of
Amount Security Value Net Assets
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------
CORPORATE BONDS--86.9%
Aerospace/Defense--4.6%
$ 700M Boeing Co., 6.35%, 2003 $718,756 $140
750M Lockheed Corp., 6 3U4%, 2003 784,501 153
750M Rockwell International Corp., 8 3U8%, 2001 838,442 165
- -------------------------------------------------------------------------------------------------------
2,341,699 458
- -------------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
<TABLE>
<C> <S> <C> <C>
Apparel/Textiles--.6%
250M VF Corp., 9 1U2%, 2001 288,059 56
- -------------------------------------------------------------------------------------------------------
Building Materials--1.3%
600M Masco Corp., 9%, 2001 685,187 134
- -------------------------------------------------------------------------------------------------------
Chemicals--2.1%
250M Arco Chemical Co., 9.9%, 2000 293,743 57
700M Lubrizol Corp., 7 1U4%, 2025 770,027 151
- -------------------------------------------------------------------------------------------------------
1,063,770 208
- -------------------------------------------------------------------------------------------------------
Conglomerates--3.1%
700M Hanson Overseas, B.V., 7 3U8%, 2003 751,630 147
750M Tenneco, Inc., 7 7U8%, 2002 818,960 160
- -------------------------------------------------------------------------------------------------------
1,570,590 307
- -------------------------------------------------------------------------------------------------------
Consumer Non-Durables--1.5%
700M American Home Products Corp., 7.9%, 2005 788,802 154
- -------------------------------------------------------------------------------------------------------
Consumer Products--2.5%
1,250M Mattel, Inc., 6 3U4%, 2000 1,282,650 251
- -------------------------------------------------------------------------------------------------------
Electric & Gas Utilities--12.7%
750M Baltimore Gas & Electric Co., 6 1U2%, 2003 769,550 150
800M Carolina Power & Light Co., 7 3U4%, 2003 820,695 160
600M Commonwealth Edison, 8 1U4%, 2006 684,422 134
1,000M Duke Power Co., 5 7U8%, 2003 978,202 191
800M Kansas Gas & Electric Co., 7.6%, 2003 862,753 169
525M Old Dominion Electric Cooperative, 7.97%, 2002 569,975 112
750M Philadelphia Electric Co., 8%, 2002 818,549 161
925M Southwestern Electric Power Co., 7%, 2007 988,547 194
- -------------------------------------------------------------------------------------------------------
6,492,693 1,271
Energy--1.5%
700M Baroid Corp., 8%, 2003 776,656 152
- -------------------------------------------------------------------------------------------------------
Financial Services--16.4%
925M Banc One Corp., 7 1U4%, 2002 985,389 193
660M BankAmerica Corp., 9 1U2%, 2001 764,201 149
875M Barnett Banks, Inc., 8 1U2%, 1999 942,337 184
700M Chemical Bank, Inc., 7%, 2005 737,655 144
150M Citicorp, 10.15%, 1998 163,304 32
800M Citicorp, 8%, 2003 884,033 174
250M CoreStates Capital Corp., 9 3U8%, 2003 296,183 58
450M First Union Corp., 8 1U8%, 2002 497,867 97
750M Mellon Bank N.A., 6 1U2%, 2005 764,887 149
550M Meridian Bancorp, 7 7U8%, 2002 603,336 118
925M Morgan Guaranty Trust Co., 7 3U8%, 2002 993,287 194
700M NationsBank Corporation., 8 1U8%, 2002 773,500 151
- -------------------------------------------------------------------------------------------------------
8,405,979 1,643
- -------------------------------------------------------------------------------------------------------
Food/Beverage/Tobacco--7.4%
</TABLE>
8
<PAGE>
<TABLE>
<C> <S> <C> <C>
750M Anheuser Busch Company, Inc., 7%, 2005 788,752 154
500M Coca-Cola Enterprises, Inc., 7 7U8%, 2002 549,840 107
700M Hershey Foods Corp., 6.7%, 2005 737,951 144
900M Philip Morris Cos., Inc., 7 1U8%, 2002 944,185 185
650M Universal Corp., 9 1U4%, 2001 743,375 145
- -------------------------------------------------------------------------------------------------------
3,764,103 735
- -------------------------------------------------------------------------------------------------------
Healthcare--1.5%
700M Columbia/HCA Healthcare, 7.69%., 2025 774,749 151
- -------------------------------------------------------------------------------------------------------
Investment/Finance Companies--5.0%
700M Associates Corp. of North America, 7 7U8%, 2001 765,033 149
700M General Electric Capital Corp., 7 7U8%, 2006 801,092 157
700M General Motors Acceptance Corp., 7 1U8%, 1999 728,703 142
250M International Lease Finance Corp., 8 7U8%, 2001 282,050 55
- -------------------------------------------------------------------------------------------------------
2,576,878 503
- -------------------------------------------------------------------------------------------------------
Media/Cable Television--4.8%
700M New York Times Co., Inc., 7 5U8%, 2005 777,259 152
750M PanAmSat Capital Corp., 9 3U4%, 2000 791,250 155
800M Tele-Communications, Inc., 8 1U4%, 2003 870,871 170
- -------------------------------------------------------------------------------------------------------
2,439,380 477
- -------------------------------------------------------------------------------------------------------
Miscellaneous--.5%
250M Alco Standard Corp., 8 7U8%, 2001 283,041 55
- -------------------------------------------------------------------------------------------------------
Oil/Natural Gas--4.3%
750M BP America, Inc., 7 7U8%, 2002 829,797 162
700M Columbia Gas System, Inc., 6.8%, 2005 723,224 141
500M Mobil Corp., 8 5U8%, 2021 637,257 125
- -------------------------------------------------------------------------------------------------------
2,190,278 428
- -------------------------------------------------------------------------------------------------------
Paper/Forest Products--5.1%
500M MacMillan & Bloedel, Ltd., 8 1U2%, 2004 561,272 110
500M S.D. Warren Company, 12%, 2004 552,500 108
650M Stone Container Corp., 10 3U4%, 2002 675,188 132
750M Temple Inland, Inc., 9%, 2001 856,817 167
- -------------------------------------------------------------------------------------------------------
2,645,777 517
- -------------------------------------------------------------------------------------------------------
Retail-General Merchandise--1.5%
750M Penney (J.C.) & Co., 6 1U8%, 2003 752,712 147
Technology--3.0%
750M International Business Machines Corp., 6 3U8%, 2000 768,870 150
725M Xerox Corp., 7.15%, 2004 772,680 151
- -------------------------------------------------------------------------------------------------------
1,541,550 301
- -------------------------------------------------------------------------------------------------------
Telephone--7.5%
500M GTE Corp., 8.85%, 1998 530,528 104
850M MCI Communication Corp., 7 1U2%, 2004 933,660 182
1,000M Pacific Bell Telephone Co., 7%, 2004 1,051,879 206
</TABLE>
9
<PAGE>
<TABLE>
<S> <C> <C> <C>
1,250M Southern Bell Telephone & Telegraph Co., Inc., 8 1U8%,
2017 1,296,739 253
- -------------------------------------------------------------------------------------------------------
3,812,806 745
- -------------------------------------------------------------------------------------------------------
Total Value of Corporate Bonds (cost $41,846,181) 44,477,359 8,693
- -------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS--7.8%
700M Federal Home Loan Mortgage Corp., 7.88%, 2004 715,988 140
3,000M United States Treasury Note, 7 3U4%, 2000 3,259,688 637
- -------------------------------------------------------------------------------------------------------
Total Value of U.S. Government Obligations
(cost $3,900,250) 3,975,676 777
- -------------------------------------------------------------------------------------------------------
SHORT-TERM CORPORATE NOTES--3.0%
850M Gannett Company, 5.85%, 1/8/96 849,034 166
700M Home Depot Inc., 5.7%, 1/5/96 699,556 137
- -------------------------------------------------------------------------------------------------------
Total Value of Short-Term Corporate Notes
(cost $1,548,590) 1,548,590 303
- -------------------------------------------------------------------------------------------------------
Total Value of Investments (cost $47,295,021) 97.7% 50,001,625 9,773
Other Assets, Less Liabilities 2.3 1,161,815 227
- -------------------------------------------------------------------------------------------------------
Net Assets 100.0% $ 51,163,440 10,000
=======================================================================================================
</TABLE>
See notes to financial statements
Portfolio of Investments
FIRST INVESTORS SPECIAL SITUATIONS SERIES
(A Series of First Investors Series Fund)
December 31, 1995
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Amount
Invested
For Each
Principal $10,000 of
Amount Security Value Net Assets
- -------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
COMMON STOCKS--84.8%
Basic Industry--2.0%
10,300 Chesapeake Corporation $ 305,137 $23
67,200 * Interpool, Inc. 1,201,200 93
75,000 * Repap Enterprises, Inc. 332,813 26
22,800 Schulman, Inc. - Class "A" 513,000 39
25,200 * Universal Stainless & Alloy Products, Inc. 267,750 21
- -------------------------------------------------------------------------------------------------------
2,619,900 202
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
Capital Goods--3.0%
28,200 AGCO Corporation 1,438,200 111
41,800 Case Corporation 1,912,350 147
63,400 Owosso Corporation 562,675 43
- -------------------------------------------------------------------------------------------------------
3,913,225 301
- -------------------------------------------------------------------------------------------------------
Consumer Durables--1.1%
25,700 Falcon Products, Inc. 337,313 26
63,800 * National R.V. Holdings, Inc. 741,675 57
9,800 * Wolverine Tube, Inc. 367,500 28
- -------------------------------------------------------------------------------------------------------
1,446,488 111
- -------------------------------------------------------------------------------------------------------
Consumer Non-Durables--1.5%
26,000 Dreyer's Grand Ice Cream, Inc. 864,500 67
45,000 * Ralcorp Holdings, Inc. 1,091,250 84
- -------------------------------------------------------------------------------------------------------
1,955,750 151
- -------------------------------------------------------------------------------------------------------
Consumer Services--20.2%
29,500 Advo, Inc. 767,000 59
37,400 * Barnes & Noble, Inc. 1,084,600 83
79,700 * Bell Sport Corporation 637,600 49
119,300 * Cannondale Corporation 1,893,888 146
67,500 * Cinar Films, Inc. - Class "B" 1,020,937 79
46,500 * CUC International, Inc. 1,586,813 122
50,400 * Discount Auto Parts, Inc. 1,568,700 121
52,000 Equifax, Inc. 1,111,500 86
18,000 * Federated Department Stores, Inc. 495,000 38
54,900 * Franklin Electronic Publishers, Inc. 1,619,550 123
36,000 Gaylord Entertainment Company - Class "A" 999,000 77
63,000 * Home Shopping Network, Inc. 567,000 44
56,900 La Quinta Inns, Inc. 1,557,637 120
43,100 * Meyer (Fred), Inc. 969,750 75
49,700 * Monarch Casino & Resort, Inc. 173,950 13
36,100 * NHP, Inc. 667,850 51
31,400 * REX Stores Corporation 557,350 43
51,500 Rite Aid Corporation 1,763,875 136
14,400 * Studio Plus Hotel, Inc. 370,800 29
22,900 Talbots, Inc. 658,375 52
61,600 * Tele-Communications, TCI Group - Class "A" 1,224,300 94
110,400 * U.S. Office Products Company 2,511,600 193
90,000 * USCI, Inc. 888,750 68
33,000 * Viacom, Inc. - Class "B" 1,563,375 120
- -------------------------------------------------------------------------------------------------------
26,259,200 2,021
- -------------------------------------------------------------------------------------------------------
Energy--.9%
21,600 Snyder Oil Company 261,900 20
7,200 Sonat, Inc. 256,500 20
10,800 * Tejas Gas Corporation 571,050 44
- -------------------------------------------------------------------------------------------------------
1,089,450 84
- -------------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
<TABLE>
<C> <S> <C> <C>
Financial--8.1%
37,100 * American Travellers Corporation 1,043,437 80
65,700 Amvestors Financial Corporation 771,975 59
15,500 Boatmens Bancshares, Inc. 633,563 49
4,400 Commercial Federal Corporation 166,100 13
26,500 First USA, Inc. 1,175,937 91
52,500 Independent Bank Corporation 387,188 30
37,500 Integon Corporation 773,438 60
16,500 Mark Twain Bancshares, Inc. 639,375 49
14,600 Mercantile Bancorporation 671,600 52
70,000 * Penn Treaty American Corporation 1,155,000 89
43,550 Reliance Group Holdings, Inc. 375,618 29
18,468 Southern National Corporation 484,785 37
54,000 Titan Holdings, Inc. 776,250 60
35,900 * WFS Financial, Inc. 700,050 54
64,000 Willis Corroon Group PLC (ADR) 744,000 57
- -------------------------------------------------------------------------------------------------------
10,498,316 809
- -------------------------------------------------------------------------------------------------------
Health Care/Miscellaneous--13.4%
21,600 AHI Healthcare System, Inc. 124,200 10
35,800 * American Medical Response, Inc. 1,163,500 90
14,400 * American Oncology Resources, Inc. 700,200 54
75,500 * Applied Bioscience International, Inc. 509,625 39
30,000 * Arbor Health Care Company 525,000 40
26,000 * Boston Scientific Corporation 1,274,000 98
28,000 Dentsply International, Inc. 1,120,000 86
86,500 * Ethical Holdings PLC (ADR) 778,500 60
38,200 Fisher Scientific International 1,274,925 98
26,000 * Health Care and Retirement Corporation 910,000 70
34,300 * Humana, Inc. 938,962 72
18,000 * InStent, Inc. 270,000 21
31,600 * Living Centers of America, Inc. 1,106,000 85
57,100 * Mid Atlantic Medical Services, Inc. 1,384,675 107
10,800 * Norland Medical System, Inc. 251,100 19
36,400 * Noven Pharmaceuticals, Inc. 409,500 32
21,600 * Orthologic Corporation 313,200 24
30,900 * Pacific Physicians Services, Inc. 556,200 43
32,000 * Pyxis Corporation 468,000 36
18,500 * Rural/Metro Corporation 418,563 32
18,000 * Tecnol Medical Products, Inc. 324,000 25
39,600 Teva Pharmaceutical Industries Ltd. (ADR) 1,836,450 141
74,900 * Vidamed, Inc. 711,550 55
- -------------------------------------------------------------------------------------------------------
17,368,150 1,337
- -------------------------------------------------------------------------------------------------------
Technology--26.8%
30,100 * Adaptec, Inc. 1,234,100 95
19,500 * Altera Corporation 970,125 75
28,800 * Applied Materials, Inc. 1,134,000 87
36,700 * Atmel Corporation 821,162 63
34,500 * BISYS Group, Inc. 1,060,875 82
32,600 * Broadway & Seymour, Inc. 529,750 41
36,000 * Catalyst International, Inc. 414,000 32
14,400 * Cerner Corporation 295,200 23
14,000 * Cisco System, Inc. 1,044,750 80
</TABLE>
12
<PAGE>
<TABLE>
<C> <C> <C>
17,700 Computer Associates International, Inc. 1,006,687 78
36,000 Cornerstone Imaging, Inc. 522,000 40
39,600 * Data Works Corporation 499,950 38
36,000 * Davidson & Associates, Inc. 792,000 61
25,300 * Discreet Logic, Inc. 632,500 49
63,400 * EMC Corporation 974,775 75
19,650 * FileNet Corporation 923,550 71
52,900 * Fulcrum Technologies, Inc. 1,719,250 132
14,400 * HCIA, Inc. 673,200 52
36,000 * IDX Systems Corporation 1,251,000 96
17,000 * Informix Corporation 510,000 39
38,000 * Integrated Micro Products PLC (ADR) 703,000 54
60,700 * Intersolv 781,513 60
13,700 * Lam Research Corporation 626,775 48
46,200 * LSI Logic Corporation 1,513,050 117
28,800 * Mercury Interactive Corporation 525,600 41
32,900 * Metatec Corporation 361,900 28
50,300 * MySoftware Company 641,325 49
84,900 * National Semiconductor Corporation 1,889,025 146
37,200 * Oracle Corporation 1,576,350 121
140,500 * Plasma-Therm, Inc. 351,250 27
55,600 * Premenos Technology Corporation 1,466,450 113
32,100 Reynolds & Reynolds Company 1,247,887 96
46,800 * Saville Systems Ireland (ADR) 666,900 51
28,900 * Softkey International, Inc. 668,313 51
73,700 * Symantec Corporation 1,713,525 132
58,000 * Systems Soft Corporation 652,500 50
38,500 * Tower Semiconductor Ltd. 851,813 66
14,600 * Veritas Software Corporation 554,800 43
35,200 * VLSI Technology, Inc. 638,000 49
13,400 * Xilinx, Inc. 408,700 32
- -------------------------------------------------------------------------------------------------------
34,847,550 2,683
- -------------------------------------------------------------------------------------------------------
Telecommunications--6.9%
16,500 * Ascend Communications, Inc. 1,338,563 103
27,800 * Boston Technology, Inc. 354,450 27
48,600 ECI Telecommunications Limited Designs 1,108,686 86
42,000 Ericsson (L.M.) Telephone Company (ADR) 819,000 64
15,600 Motorola, Inc. 889,200 68
13,700 * NETCOM On-Line Communication Services, Inc. 493,200 38
23,100 Nokia Corporation (ADR) - Class "A" 898,013 69
35,800 * Octel Communications Corporation 1,154,550 89
12,900 * TCSI Corporation 238,650 18
61,500 * Tele-Communications, Inc. Liberty Media Group -
Class "A" 1,652,813 127
- -------------------------------------------------------------------------------------------------------
8,947,125 689
- -------------------------------------------------------------------------------------------------------
Transportation--.9%
7,200 * Celadon Group, Inc. 64,800 5
126,400 * Transportacion Maritima Mexicana S.A. (ADR) 1,058,600 81
- -------------------------------------------------------------------------------------------------------
1,123,400 86
- -------------------------------------------------------------------------------------------------------
Total Value of Common Stocks (cost $90,301,263) 110,068,554 8,474
- -------------------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE>
<TABLE>
<C> <S> <C> <C>
CONVERTIBLE BONDS--.3%
450M Pacific Physicians Services, Inc., 5 1/2%, 2003
(cost $450,000) 435,375 33
- -------------------------------------------------------------------------------------------------------
SHORT-TERM CORPORATE NOTES--14.7%
2,800M B.A.T Capital Corporation, 5.75%, 1/12/96 2,795,080 215
5,300M Cargill Corporation, 5.66%, 1/16/96 5,287,500 407
1,200M Chevron Oil Corporation, 5.76%, 1/18/96 1,196,736 92
600M Ford Motor Credit Company, 5.70%, 1/11/96 599,050 46
500M Lubrizol Corporation, 5.74%, 1/5/96 499,680 39
500M Nestles Capital Corporation, 5.67%, 1/3/96 499,843 39
500M Pacific Bell, 5.65%, 1/22/96 498,352 38
4,850M Snap-On Tools Corporation, 5.90%, 1/5/96 4,846,821 373
2,900M Transamerica Finance Corporation, 5.76%, 1/11/96 2,895,362 223
- -------------------------------------------------------------------------------------------------------
Total Value of Short-Term Corporate Notes
(cost $19,118,424) 19,118,424 1,472
- -------------------------------------------------------------------------------------------------------
Total Value of Investments (cost $109,869,687) 99.8% 129,622,353 9,979
Other Assets, Less Liabilities .2 274,126 21
- -------------------------------------------------------------------------------------------------------
Net Assets 100.0% 129,896,479 10,000
=======================================================================================================
* Non-income producing
</TABLE>
See notes to financial statements
Portfolio of Investments
FIRST INVESTORS TOTAL RETURN SERIES
(A Series of First Investors Series Fund)
December 31, 1995
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Amount
Invested
For Each
Principal $10,000 of
Amount Security Value Net Assets
- -------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
COMMON STOCKS--51.4%
Basic Industry--2.7%
2,600 Dow Chemical Company $182,975 $33
4,800 Du Pont (E.I.) De Nemours & Company 335,400 60
17,600 * Interpool, Inc. 314,600 56
4,100 Minnesota Mining & Manufacturing Company 271,625 49
3,400 Monsanto Company 416,500 74
- -------------------------------------------------------------------------------------------------------
1,521,100 272
- -------------------------------------------------------------------------------------------------------
Capital Goods--3.4%
3,200 Boeing Company 250,800 45
</TABLE>
14
<PAGE>
<TABLE>
<C> <S> <C> <C>
6,300 Deere & Company 222,075 40
2,100 Emerson Electric Company 171,675 31
16,200 General Electric Company 1,166,400 210
2,900 * Varity Corporation 107,663 19
- -------------------------------------------------------------------------------------------------------
1,918,613 345
- -------------------------------------------------------------------------------------------------------
Consumer Durables--1.0%
9,600 Ford Motor Company 278,400 49
3,100 Goodyear Tire & Rubber Company 140,663 25
4,200 Masco Corporation 131,775 24
- -------------------------------------------------------------------------------------------------------
550,838 98
- -------------------------------------------------------------------------------------------------------
Consumer Non-Durables--13.0%
7,900 Abbott Laboratories 329,825 59
2,700 American Home Products Corporation 261,900 47
5,000 Bristol-Myers Squibb Company 429,375 77
12,000 Coca-Cola Company 891,000 160
3,400 Columbia/HCA Healthcare Corporation 172,550 31
10,600 Dreyer's Grand Ice Cream, Inc. 352,450 63
3,300 Eastman Kodak Company 221,100 40
5,800 Eli Lilly & Company 326,250 60
4,200 Gillette Company 218,925 39
6,600 Johnson & Johnson 565,125 101
2,600 Kimberly-Clark Corporation 215,150 40
11,700 Merck & Company, Inc. 769,275 138
12,700 * Mid Atlantic Medical Services, Inc. 307,975 55
7,650 PepsiCo, Inc. 427,443 77
6,200 Pfizer, Inc. 390,600 70
4,100 Philip Morris Companies, Inc. 371,050 67
6,700 Procter & Gamble Company 556,100 100
3,600 Schering-Plough Corporation 197,100 35
1,500 Unilever N.V. 211,125 38
- -------------------------------------------------------------------------------------------------------
7,214,318 1,297
- -------------------------------------------------------------------------------------------------------
Consumer Services--4.7%
8,000 Gap, Inc. 336,000 60
4,400 Home Depot, Inc. 210,650 38
10,100 La Quinta Inns, Inc. 276,487 50
3,200 McDonald's Corporation 144,400 26
18,200 * REX Stores Corporation 323,050 58
8,000 Time Warner, Inc. 303,000 54
3,100 * Viacom, Inc. - Class "B" 146,863 26
17,300 Wal-Mart Stores, Inc. 387,088 69
7,300 Walgreen Company 218,088 39
4,700 Walt Disney Company 277,300 50
- -------------------------------------------------------------------------------------------------------
2,622,926 470
- -------------------------------------------------------------------------------------------------------
Energy--5.9%
5,000 Amoco Corporation 359,375 65
1,500 Atlantic Richfield Company 166,125 30
6,100 Chevron Corporation 320,250 57
11,900 Exxon Corporation 953,487 171
</TABLE>
15
<PAGE>
<TABLE>
<C> <S> <C> <C>
3,800 Mobil Corporation 425,600 76
5,000 Royal Dutch Petroleum Company 705,625 127
2,250 Schlumberger, Ltd. 155,813 28
2,500 Texaco, Inc. 196,250 35
- -------------------------------------------------------------------------------------------------------
3,282,525 589
- -------------------------------------------------------------------------------------------------------
Financial--4.9%
4,800 American Express Company 198,600 36
4,500 American International Group, Inc. 416,250 75
3,400 BankAmerica Corporation 220,150 40
6,000 Citicorp 403,500 72
2,400 Federal National Mortgage Association 297,900 53
5,600 NationsBank Corporation 389,900 70
19,525 Southern National Corporation 512,531 92
9,000 US Bancorp, Inc. 297,000 54
- -------------------------------------------------------------------------------------------------------
2,735,831 492
- -------------------------------------------------------------------------------------------------------
Health Care/Miscellaneous--.7%
8,100 Teva Pharmaceutical Industries Ltd. (ADR) 375,637 67
- -------------------------------------------------------------------------------------------------------
Technology--8.7%
15,100 A T & T Corp. 977,725 176
5,000 * Airtouch Communications, Inc. 141,250 25
4,400 * Cisco Systems, Inc. 328,350 59
4,400 Hewlett-Packard Company 368,500 66
4,400 International Business Machines Corporation 403,700 72
8,000 * LSI Logic Corporation 262,000 47
6,000 MCI Communications Corporation 156,750 28
5,400 * Microsoft Corporation 473,850 85
5,700 Motorola, Inc. 324,900 58
15,700 * National Semiconductor Corporation 349,325 63
14,250 * Oracle Corporation 603,843 109
17,800 * Premenos Technology Corporation 469,475 84
- -------------------------------------------------------------------------------------------------------
4,859,668 872
- -------------------------------------------------------------------------------------------------------
Telecommunications--2.8%
6,000 * Ascend Communications, Inc. 486,750 88
15,200 ECI Telecommunications Limited Designs 346,750 62
11,800 * Octel Communications Corporation 380,550 68
5,900 * Tele-Communications, Inc. Liberty Media Group - Class "A" 158,563 28
5,300 US West Communications Group 189,475 34
- -------------------------------------------------------------------------------------------------------
1,562,088 280
- -------------------------------------------------------------------------------------------------------
Utilities--3.6%
5,500 Ameritech Corporation 324,500 58
4,200 Bell Atlantic Corporation 280,875 50
9,600 BellSouth Corporation 417,600 76
9,400 GTE Corporation 413,600 74
4,000 NYNEX Corporation 216,000 39
6,100 SBC Communications, Inc. 350,750 63
- -------------------------------------------------------------------------------------------------------
2,003,325 360
</TABLE>
16
<PAGE>
<TABLE>
<C> <S> <C> <C>
- -------------------------------------------------------------------------------------------------------
Total Value of Common Stocks (cost $21,915,731) 28,646,869 5,142
- -------------------------------------------------------------------------------------------------------
CORPORATE BONDS--18.5%
Chemicals--1.3%
$ 650M Rexene Corp., 11 3/4%, 2004 690,625 124
- -------------------------------------------------------------------------------------------------------
Electric & Gas Utilities--2.2%
500M Commonwealth Edison, 8 1/4%, 2006 570,352 101
600M Old Dominion Electric Cooperative, 7.97%, 2002 651,400 118
- -------------------------------------------------------------------------------------------------------
1,221,752 219
- -------------------------------------------------------------------------------------------------------
Electric Power--1.3%
673M United Illuminating Corp., 9.76%, 2006 706,617 127
- -------------------------------------------------------------------------------------------------------
Electrical Equipment--1.1%
600M Essex Group, Inc., 10%, 2003 594,000 107
- -------------------------------------------------------------------------------------------------------
Financial Services--2.0%
500M First Union Corp., 8 1/8%, 2002 553,186 99
500M NationsBank Corp., 8 1/8%, 2002 552,500 99
- -------------------------------------------------------------------------------------------------------
1,105,686 198
- -------------------------------------------------------------------------------------------------------
Food/Beverage/Tobacco--1.2%
600M Universal Corp., 9 1/4%, 2001 686,192 123
- -------------------------------------------------------------------------------------------------------
Healthcare--2.4%
600M Healthsouth Rehabilitation Corp., 9 1/2%, 2001 642,000 115
600M Ornda Healthcorp., 11 3/8%, 2004 678,000 122
- -------------------------------------------------------------------------------------------------------
1,320,000 237
- -------------------------------------------------------------------------------------------------------
Media/Cable Television--1.1%
600M Rogers Communication Inc., 10 7/8%, 2004 626,250 112
- -------------------------------------------------------------------------------------------------------
Paper/Forest Products--4.9%
800M Rainy River Forest Products Co., Inc., 10 3/4%, 2001 883,000 158
800M S.D. Warren Company, 12%, 2004 884,000 160
1,000M Stone Container Corp., 9 7/8%, 2001 976,250 175
- -------------------------------------------------------------------------------------------------------
2,743,250 493
- -------------------------------------------------------------------------------------------------------
Retail-Food/Drug--1.0%
600M Penn Traffic Co., Inc., 10.65%, 2004 578,250 104
- -------------------------------------------------------------------------------------------------------
Total Value of Corporate Bonds (cost $9,632,585) 10,272,622 1,844
- -------------------------------------------------------------------------------------------------------
MUNICIPAL BONDS--8.5%
Colorado--3.6%
El Paso County, Colorado School District General Obligation:
1,320M Zero Coupon 2014 442,200 79
1,420M Zero Coupon 2015 449,075 82
1,420M Zero Coupon 2016 418,900 75
1,420M Zero Coupon 2018 369,200 66
</TABLE>
17
<PAGE>
<TABLE>
<C> <S> <C> <C>
1,420M Zero Coupon 2019 346,125 62
- -------------------------------------------------------------------------------------------------------
2,025,500 364
- -------------------------------------------------------------------------------------------------------
New York--4.9%
2,725M New York City General Obligation, 6%, 2025 2,704,563 485
- -------------------------------------------------------------------------------------------------------
Total Value of Municipal Bonds (cost $4,597,911) 4,730,063 849
- -------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS--15.0%
1,000M United States Treasury Notes, 6 7/8%, 2000 1,057,031 190
4,500M United States Treasury Notes, 6 1/4%, 2000 4,652,578 834
2,500M United States Treasury Notes, 6 1/2%, 2005 2,666,406 479
- -------------------------------------------------------------------------------------------------------
Total Value of U.S. Government Obligations
(cost $8,120,938) 8,376,015 1,503
- -------------------------------------------------------------------------------------------------------
SHORT-TERM CORPORATE NOTES--3.4%
1,200M Dresser Industries, 5.72%, 1/30/96 1,184,517 213
700M Lubrizol, 5.73%, 1/24/96 697,436 125
- -------------------------------------------------------------------------------------------------------
Total Value of Short-Term Corporate Notes
(cost $1,881,953) 1,881,953 338
- -------------------------------------------------------------------------------------------------------
Total Value of Investments (cost $46,149,118) 96.8% 53,907,522 9,676
Other Assets, Less Liabilities 3.2 1,804,184 324
- -------------------------------------------------------------------------------------------------------
Net Assets 100.0% 55,711,706 10,000
=======================================================================================================
* Non-income producing
</TABLE>
See notes to financial statements
<TABLE>
<CAPTION>
Statement of Assets and Liabilities
FIRST INVESTORS SERIES FUND
December 31, 1995
- ---------------------------------------------------------------------------------------------------------------
Insured
Intermediate Investment Special Total
Blue Chip Tax Exempt Grade Situations Return
Series Series Series Series Series
- ---------------------------------------- ------------ ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Assets
Investments in securities:
At identified cost 136,898,998 7,014,821 47,295,021 109,869,687 46,149,118
============ ========== =========== ============ ===========
At value (Note 1A) 175,440,598 7,405,156 50,001,625 129,622,353 53,907,522
Cash 330,859 28,926 221,518 355,194 191,372
Receivables:
Investment securities sold -- -- -- 90,000 1,319,304
</TABLE>
18
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Interest and dividends 273,470 107,455 945,631 25,465 388,170
Trust shares sold 706,460 3,695 181,039 647,379 50,217
Other assets 511 -- 64 32 394
------------ ----------- ----------- ------------ -----------
Total Assets 176,751,898 7,545,232 51,349,877 130,740,423 55,856,979
------------ ----------- ----------- ------------ -----------
Liabilities
Payables:
Dividends payable January 15, 1996 451,999 8,278 68,284 264,262 16,556
Trust shares redeemed 316,480 -- 70,371 392,391 39,879
Investment securities purchased -- 139,581 -- -- --
Accrued advisory fee 109,524 2,138 27,316 80,851 34,710
Accrued expenses 121,079 294 20,466 106,440 54,128
------------ ----------- ----------- ------------ -----------
Total Liabilities 999,082 150,291 186,437 843,944 145,273
------------ ----------- ----------- ------------ -----------
Net Assets $175,752,816 $ 7,394,941 $51,163,440 $129,896,479 $55,711,706
============ =========== =========== ============ ===========
Net Assets Consist of:
Capital paid in 136,917,426 7,213,817 48,444,877 110,143,813 47,765,707
Undistributed net investment income 293,790 2,168 36,959 -- 190,956
Accumulated net realized loss on
investment transactions -- (211,379) (25,000) -- (3,361)
Net unrealized appreciation in value
of investments 38,541,600 390,335 2,706,604 19,752,666 7,758,404
------------ ----------- ----------- ------------ -----------
Total 175,752,816 7,394,941 51,163,440 129,896,479 55,711,706
============ =========== =========== ============ ===========
Trust shares outstanding (Note 2):
Class A 9,889,591 1,199,030 4,833,770 6,384,238 4,273,021
Class B 319,466 64,576 112,740 233,987 20,870
Net asset value and redemption
price per share--Class A $17.22 $5.85 $10.34 $19.63 $12.97
====== ===== ====== ====== ======
Maximum offering price per share--Class A
(Net asset value/.9375)* $18.37 $6.24 $11.03 $20.94 $13.83
====== ===== ====== ====== ======
Net asset value and offering price
per share--Class B $17.16 $5.85 $10.35 $19.51 $12.92
====== ===== ====== ====== ======
</TABLE>
*On purchases of $25,000 or more, the sales charge is reduced.
See notes to financial
19
<PAGE>
<TABLE>
<CAPTION>
Statement of Operations
FIRST INVESTORS SERIES FUND
Year Ended December 31, 1995
- ----------------------------------------------------------------------------------------------------------------
Insured
Intermediate Investment Special Total
Blue Chip Tax Exempt Grade Situations Return
Series Series Series Series Series
- ---------------------------------------- ------------ ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Investment Income
Income:
Interest $ 713,848 $360,538 $3,576,142 $1,334,007 $1,889,963
Dividends 3,310,436 -- -- 332,633 566,696
Consent fees -- -- 68,783 -- --
------------ ------------ ----------- ----------- -----------
Total income 4,024,284 360,538 3,644,925 1,666,640 2,456,659
------------ ------------ ----------- ----------- -----------
Expenses (Note 4):
Advisory fee 1,483,159 38,356 363,919 1,105,516 528,053
Shareholder servicing costs 476,636 7,523 135,205 458,571 185,483
Distribution plan expenses--Class A 438,127 18,835 144,194 325,418 158,092
Distribution plan expenses--Class B 22,735 1,143 4,572 20,788 1,076
Reports and notices to shareholders 75,194 701 10,859 82,274 30,332
Professional fees 33,525 8,446 12,507 19,957 19,156
Custodian fees 22,756 1,868 8,699 21,321 24,788
Other expenses 45,217 2,596 15,443 29,535 17,677
------------ ------------ ----------- ----------- -----------
Total expenses 2,597,349 79,468 695,398 2,063,380 964,657
Less: Expenses waived or assumed (370,790) (55,950) (179,800) (276,379) (132,013)
Custodian fees paid indirectly (16,780) -- (8,270) (21,316) --
------------ ------------ ----------- ----------- -----------
Net expenses 2,209,779 23,518 507,328 1,765,685 832,644
------------ ------------ ----------- ----------- -----------
Net investment income (loss) 1,814,505 337,020 3,137,597 (99,045) 1,624,015
------------ ------------ ----------- ----------- -----------
Realized and Unrealized Gain (Loss)
on Investments (Note 3):
Net realized gain (loss) on investments 5,979,563 (12) 67,631 4,776,742 1,809,004
Net unrealized appreciation
of investments 34,678,998 454,526 5,383,848 17,856,965 8,913,490
------------ ------------ ----------- ----------- -----------
Net gain on investments 40,658,561 454,514 5,451,479 22,633,707 10,722,494
------------ ------------ ----------- ----------- -----------
Net Increase in Net Assets Resulting
from Operations $42,473,066 $791,534 $8,589,076 $22,534,662 $12,346,509
============ ============ =========== =========== ===========
</TABLE>
See notes to financial statements
20
<PAGE>
Statement of Changes in Net Assets
FIRST INVESTORS SERIES FUND
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
INSURED INTERMEDIATE
BLUE CHIP SERIES TAX EXEMPT SERIES
- --------------------------------------------------------------------------------------------------------------------------
Year Ended December 31 1995 1994 1995 1994
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Increase (Decrease) in Net Assets from Operations
Net investment income (loss) $ 1,814,505 $ 969,020 $ 337,020 $ 204,046
Net realized gain (loss) on investments 5,979,563 12,824,558 (12) (211,367)
Net unrealized appreciation (depreciation) of investments 34,678,998 (17,486,358) 454,526 (64,191)
------------ ---------- ------------ ------------
Net increase (decrease) in net assets resulting
from operations 42,473,066 (3,692,780) 791,534 (71,512)
------------ ---------- ------------ ------------
Distributions to Shareholders:
From net investment income--Class A (1,794,647) (736,036) (330,471) (203,201)
From net investment income--Class B (28,155) -- (5,226) --
From net realized gain on investments--Class A (5,794,467) (12,824,558) -- --
From net realized gain on investments--Class B (185,096) -- -- --
In excess of realized gain from security
transactions--Class A -- -- -- --
In excess of realized gain from security
transactions--Class B -- -- -- --
------------ ---------- ------------ -----------
Total distributions (7,802,365) (13,560,594) (335,697) (203,201)
Trust Share Transactions (a)
Class A:
Proceeds from shares sold 30,855,778 28,516,378 1,707,243 5,941,925
Value of distributions reinvested 7,124,835 13,336,027 251,295 146,538
Cost of shares redeemed (25,713,861) (18,834,076) (1,080,698) (1,741,446)
------------ ---------- ------------ -----------
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
12,266,752 23,018,329 877,840 4,347,017
------------- ------------ ----------- ----------
Class B:
Proceeds from shares sold 5,044,595 -- 372,887 --
Value of distributions reinvested 211,655 -- 2,826 --
Cost of shares redeemed (134,770) -- (2,000) --
------------- ------------ ----------- ----------
5,121,480 -- 373,713 --
------------- ------------ ----------- ----------
Net increase (decrease) from trust share transactions 17,388,232 23,018,329 1,251,553 4,347,017
------------- ------------ ----------- ----------
Net increase (decrease) in net assets 52,058,933 5,764,955 1,707,390 4,072,304
Net Assets
Beginning of year 123,693,883 117,928,928 5,687,551 1,615,247
------------- ------------ ----------- ----------
End of year+ $175,752,816 $123,693,883 $7,394,941 $5,687,551
============= ============ =========== ==========
+Includes undistributed net investment income of 293,790 302,087 2,168 845
============= ============ =========== ==========
(a)Trust shares issued and redeemed
Class A:
Sold 1,958,324 1,859,807 298,216 1,055,065
Issued for distributions reinvested 408,815 987,102 43,763 26,577
Redeemed (1,667,553) (1,228,162) (189,523) (314,040)
------------- ------------ ----------- ----------
Net increase (decrease) in Class A shares outstanding 699,586 1,618,747 152,456 767,602
============= ============ =========== ==========
Class B:
Sold 315,310 -- 64,431 --
Issued for distributions reinvested 11,994 -- 489 --
Redeemed (7,838) -- (344) --
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
------------- ------------ ----------- ----------
Net increase in Class B shares outstanding 319,466 -- 64,576 --
============= ============ =========== ==========
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets (Continued)
FIRST INVESTORS SERIES FUND
- --------------------------------------------------------------------------------------------------------------------------
INVESTMENT GRADE SPECIAL SITUATION
SERIES SERIES
- --------------------------------------------------------------------------------------------------------------------------
Year Ended December 31 1995 1994 1995 1994
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Increase (Decrease) in Net Assets from Operations
Net investment income (loss) $ 3,137,597 $ 3,018,267 ($99,045) ($191,338)
Net realized gain (loss) on investments 67,631 (77,604) 4,776,742 4,914,240
Net unrealized appreciation (depreciation) of investments 5,383,848 (5,141,298) 17,856,965 (7,165,669)
------------- ------------- ----------- -----------
Net increase (decrease) in net assets resulting
from operations 8,589,076 (2,200,635) 22,534,662 (2,442,767)
------------- ------------- ----------- -----------
Distributions to Shareholders:
From net investment income--Class A (3,128,539) (2,986,294) -- --
From net investment income--Class B (26,151) -- -- --
From net realized gain on investments--Class A -- -- (4,513,641) (4,722,934)
From net realized gain on investments--Class B -- -- (164,734) --
In excess of realized gain from security
transactions--Class A (14,684) -- -- --
In excess of realized gain from security
transactions--Class B (343) -- -- --
------------- ------------- ----------- -----------
Total distributions (3,169,717) (2,986,294) (4,678,375) (4,722,934)
23
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Trust Share Transactions (a)
Class A:
Proceeds from shares sold 7,877,385 11,602,927 33,124,063 44,120,605
Value of distributions reinvested 2,435,394 2,283,004 4,251,850 4,695,874
Cost of shares redeemed (11,876,289) (11,027,449) (19,660,248) (10,892,979)
------------ ------------ ------------ ------------
(1,563,510) 2,858,482 17,715,665 37,923,500
------------ ------------ ------------ ------------
Class B:
Proceeds from shares sold 1,166,562 -- 4,418,828 --
Value of distributions reinvested 18,187 -- 162,263 --
Cost of shares redeemed (56,045) -- (162,649) --
------------ ------------ ------------ ------------
1,128,704 -- 4,418,442 --
------------ ------------ ------------ ------------
Net increase (decrease) from trust share transactions (434,806) 2,858,482 22,134,107 37,923,500
------------ ------------ ------------ ------------
Net increase (decrease) in net assets 4,984,553 (2,328,447) 39,990,394 30,757,799
Net Assets
Beginning of year 46,178,887 48,507,334 89,906,085 59,148,286
------------ ------------ ------------ ------------
End of year+ $51,163,440 $46,178,887 $129,896,479 $89,906,085
============ ============ ============ ============
+Includes undistributed net investment income of 36,959 54,052 -- --
============ ============ ============ ============
(a)Trust shares issued and redeemed
Class A:
Sold 798,381 1,196,162 1,771,857 2,520,975
Issued for distributions reinvested 245,208 238,751 211,325 285,811
Redeemed (1,206,098) (1,136,131) (1,071,368) (620,009)
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
------------- ------------ ------------ ------------
Net increase (decrease) in Class A shares outstanding (162,509) 298,782 911,814 2,186,777
============= ============ ============ ============
Class B:
Sold 116,443 -- 234,052 --
Issued for distributions reinvested 1,794 -- 8,109 --
Redeemed (5,497) -- (8,174) --
------------- ------------ ------------ ------------
Net increase in Class B shares outstanding 112,740 -- 233,987 --
============= ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets (Continued)
FIRST INVESTORS SERIES FUND
- --------------------------------------------------------------------------------------------------------
TOTAL RETURN
SERIES
-----------------------------------
Year Ended December 31 1995 1994
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (Decrease) in Net Assets from Operations
Net investment income (loss) $ 1,624,015 $ 1,050,441
Net realized gain (loss) on investments 1,809,004 1,748,894
Net unrealized appreciation (depreciation) of investments 8,913,490 (4,665,923)
------------ ------------
Net increase (decrease) in net assets resulting
from operations 12,346,509 (1,866,588)
------------ ------------
Distributions to Shareholders:
From net investment income--Class A (1,523,212) (881,057)
From net investment income--Class B (3,901) --
From net realized gain on investments--Class A (1,800,205) (1,748,894)
From net realized gain on investments--Class B (8,799) --
In excess of realized gain from security transactions--Class A (3,345) --
In excess of realized gain from security transactions--Class B (16) --
------------ ------------
Total distributions (3,339,478) (2,629,951)
------------ ------------
Trust Share Transactions (a)
Class A:
Proceeds from shares sold 3,426,577 5,931,145
Value of distributions reinvested 3,303,023 2,614,430
Cost of shares redeemed (10,998,541) (11,511,286)
------------ ------------
</TABLE>
25
<PAGE>
<TABLE>
<S> <C> <C>
(4,268,941) (2,965,711)
------------ ------------
Class B:
Proceeds from shares sold 247,304 --
Value of distributions reinvested 12,704 --
Cost of shares redeemed -- --
------------ ------------
260,008 --
------------ ------------
Net increase (decrease) from trust share transactions (4,008,933) (2,965,711)
------------ ------------
Net increase (decrease) in net assets 4,998,098 (7,462,250)
Net Assets
Beginning of year 50,713,608 58,175,858
------------ ------------
End of year+ $55,711,706 $50,713,608
============ ============
+Includes undistributed net investment income of 190,956 123,612
============ ============
(a)Trust shares issued and redeemed
Class A:
Sold 279,476 509,492
Issued for distributions reinvested 252,244 237,905
Redeemed (913,524) (991,334)
------------ ------------
Net increase (decrease) in Class A shares outstanding (381,804) (243,937)
============ ============
Class B:
Sold 19,916 --
Issued for distributions reinvested 954 --
Redeemed -- --
------------ ------------
Net increase in Class B shares outstanding 20,870 --
============ ============
</TABLE>
See notes to financial statements
Notes to Financial Statements
FIRST INVESTORS SERIES FUND
1. Significant Accounting Policies--The Fund, 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 Fund
operates as a series fund, issuing shares of beneficial interest in the
Blue Chip, Insured Intermediate Tax Exempt, Investment Grade, Special
Situations and Total Return Series and accounts separately for the
assets, liabilities and operations of each Series. The objective of each
Series is as follows:
Blue Chip Series seeks to provide investors with high total investment
return consistent with the preservation of capital.
Insured Intermediate Tax Exempt Series seeks to provide a high level of
26
<PAGE>
interest income which is exempt from federal income tax.
Investment Grade Series seeks to generate a maximum level of income
consistent with investment in investment grade debt securities.
Special Situations Series seeks long-term growth of capital.
Total Return Series seeks to provide investors with high long-term total
investment return consistent with moderate investment risk.
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 may also be priced by a pricing service. The
pricing service uses quotations obtained from investment dealers or
brokers, information with respect to market transactions in comparable
securities and other available information in determining value. Short-term
corporate notes which are purchased at a discount are valued at
amortized cost. Securities for which market quotations are not readily
available and other assets are valued on a consistent basis at fair
value as determined in good faith by or under the supervision of the
Fund's officers in a manner specifically authorized by the trustees of
the Fund.
The municipal bonds in which the Insured Intermediate Tax Exempt Series
invests are traded primarily in the over-the-counter markets. Such
securities are valued daily on the basis of valuations provided by a
pricing service approved by the Board of Trustees. The pricing service
considers security type, rating, market condition and yield data, as
well as market quotations and prices provided by market makers in
determining value. "When Issued Securities" are reflected in the assets
of the Series as of the date the securities are purchased.
The municipal bonds held by the Insured Intermediate Tax Exempt Series
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 Series 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. The Series may invest up to 20% of its assets in
portfolio securities not covered by the insurance feature.
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 each
Series to continue to comply with the special provisions of the Internal
Revenue Code applicable to investment companies and to make sufficient
distributions of income and capital gains (in excess of any available
capital loss carryovers), to relieve it from all, or substantially all,
federal income taxes. At December 31, 1995, the Insured Intermediate Tax
Exempt Series had capital loss carryovers of $211,379, of which $160,056
27
<PAGE>
expires in 2002 and $51,323 expires in 2003.
C. Distributions to Shareholders--Dividends from net investment income
of the Insured Intermediate Tax Exempt Series and the Investment Grade
Series are declared daily and paid monthly. Dividends from net
investment income of the Blue Chip Series and Total Return Series are
declared and paid quarterly and dividends from net investment income of
the Special Situations Series are declared and paid annually.
Distributions from net realized capital gains of all Series are normally
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 net operating
losses, tax-exempt interest, capital loss carryforwards and post October
losses.
D. Expense Allocation--Expenses directly charged or attributable to a
Series are paid from the assets of that Series. General expenses of
First Investors Series Fund are allocated among and charged to the
assets of each Series on a fair and equitable basis, which may be based
on the relative assets of each Series or the nature of the services
performed and relative applicability to each Series.
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. Dividend income is recorded
on the ex-dividend date. Interest income and estimated expenses are
accrued daily. The Series' Custodian, except for the Total Return
Series, has provided credits in the amount of $48,234 against custodian
charges based on the uninvested cash balances of the Series.
2. Capital--Each Series sells two classes of shares, Class A and Class
B, each with a public offering price that reflects different sales
charges and expense levels. Class A shares are sold with an initial
sales charge of up to 6.25% of the amount invested and together with the
Class B shares are subject to 12b-1 fees as described in Note 4. Class B
shares are sold without an initial sales charge, but are generally
subject to a contingent deferred sales charge which declines in steps
from 4% to 0% over a six-year period. Class B shares automatically
convert into Class A shares after eight years. Realized and unrealized
gains or losses, investment income and expenses (other than 12b-1 fees
and certain other class expenses) are allocated daily to each class of
shares based upon the relative proportion of net assets of each class.
The Fund has established an unlimited number of shares of beneficial
interest for both Class A and Class B shares.
3. Security Transactions--For the year ended December 31, 1995,
purchases and sales of securities and long-term U.S. Government
obligations, excluding U.S. Treasury bills and short-term corporate
notes, were as follows:
28
<PAGE>
<TABLE>
<CAPTION>
Long-Term U.S.
Securities Government Obligations
---------------------- ----------------------
Cost of Proceeds Cost of Proceeds
SERIES Purchases of Sales Purchases of Sales
- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C>
BLUE CHIP $50,645,807 $33,628,777 $ -- $ --
INSURED INTERMEDIATE
TAX EXEMPT 4,417,918 2,920,322 -- --
INVESTMENT GRADE 9,712,673 7,876,833 4,466,812 4,332,499
SPECIAL SITUATIONS 81,314,327 70,267,419 -- --
TOTAL RETURN 44,528,856 47,398,508 21,160,001 13,546,797
</TABLE>
At December 31, 1995, aggregate cost and net unrealized appreciation of
securities for federal income tax purposes were as follows:
<TABLE>
<CAPTION>
Gross Gross Net
Aggregate Unrealized Unrealized Unrealized
SERIES Cost Appreciation Depreciation Appreciation
- -------- --------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
BLUE CHIP $136,898,998 $40,615,061 $2,073,461 $38,541,600
INSURED INTERMEDIATE
TAX EXEMPT 7,014,821 391,826 1,491 390,335
INVESTMENT GRADE 47,295,021 2,736,931 30,327 2,706,604
SPECIAL SITUATIONS 109,869,687 24,612,371 4,859,705 19,752,666
TOTAL RETURN 46,152,479 8,287,636 532,593 7,755,043
</TABLE>
4. Advisory Fee and Other Transactions With Affiliates --Certain
officers and trustees of the Fund are officers and directors of its
investment adviser, First Investors Management Company, Inc. ("FIMCO"),
its underwriter, First Investors Corporation ("FIC"), its transfer
agent, Administrative Data Management Corp. ("ADM") and/or First
Financial Savings Bank, S.L.A. ("FFS"), custodian of the Fund's
Individual Retirement Accounts. Officers and trustees of the Fund
received no remuneration from the Fund for serving in such capacities.
Their remuneration (together with certain other expenses of the Fund) is
paid by FIMCO or FIC.
The Investment Advisory Agreement provides as compensation to FIMCO for
each Series other than the Insured Intermediate Tax Exempt Series and
the Investment Grade Series, an annual fee, payable monthly, at the rate
of 1% on the first $200 million of each Series' 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 annual fee for the Insured Intermediate Tax Exempt Series
is payable
29
<PAGE>
monthly, at the rate of .60% of the Series' average daily net
assets. The annual fee for the Investment Grade Series is payable
monthly, at the rate of .75% on the first $300 million of the Series'
average daily net assets, .72% on the next $200 million, .69% on the
next $250 million, and .66% on average daily net assets over $750
million. Total advisory fees accrued to FIMCO for the year ended
December 31, 1995, were $3,519,003, of which $843,687 was waived. In
addition, expenses of the Insured Intermediate Tax Exempt and Investment
Grade Series amounting to $11,742 and $51,516, respectively, were
assumed by FIMCO.
Pursuant to certain state regulations, FIMCO has agreed to reimburse
each Series if and to the extent that the Series' aggregate operating
expenses, including advisory fees but generally excluding interest,
taxes, brokerage commissions and extraordinary expenses, exceed any
limitation on expenses applicable to each Series in those states (unless
waivers of such limitations have been obtained). The amount of any such
reimbursement is limited to each Series' 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, FIC, as underwriter, received
$3,281,399 in commissions from the sale of Fund shares after allowing
$53,159 to other dealers. Shareholder servicing costs included $904,483
in transfer agent fees and out of pocket expenses accrued to ADM (of
which $54,409 was waived by ADM) and $358,935 in custodian fees accrued
to FFS (of which $32,875 was waived by FFS).
Pursuant to a Distribution Plan adopted under Rule 12b-1 of the 1940
Act, each Series is authorized to pay FIC a fee equal to .30% of the
average net assets of the Class A shares and 1% of the average net
assets of the Class B shares on an annualized basis each year, payable
monthly. The fee consists of a distribution fee and a service fee. The
service fee is paid for the ongoing servicing of clients who are
shareholders of that Series. Total 12b-1 fees accrued to FIC amounted to
$1,134,980 (of which $18,835 was waived).
Independent Auditor's Report
To the Shareholders and Trustees of
First Investors Series Fund
We have audited the accompanying statement of assets and liabilities,
including the portfolios of investments, of the Blue Chip, Insured
Intermediate Tax Exempt, Investment Grade, Special Situations and Total
Return Series (comprising First Investors Series Fund), 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
indicated thereon. These financial statements and financial highlights
are the responsibility of the Fund'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
30
<PAGE>
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 and brokers. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of the Blue Chip, Insured Intermediate Tax Exempt,
Investment Grade, Special Situations and Total Return Series of First
Investors Series Fund at December 31, 1995, and the results of their
operations, changes in their net assets and financial highlights for
the periods presented, in conformity with generally accepted accounting
principles.
Tait, Weller & Baker
Philadelphia, Pennsylvania
January 31, 1996
31
<PAGE>
FIRST INVESTORS SERIES FUND
Insured Intermediate Tax Exempt Fund
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.......... Alternative Purchase
Plan; 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
14. Management of the Fund....................... Directors or Trustees
and Officers
15. Control Persons and Principal
Holders of Securities.......................
16. Investment Advisory and Other Services....... Management
17. Brokerage Allocation......................... Allocation of Portfolio
Brokerage
18. Capital Stock and Other Securities........... Determination of Net
Asset Value
19. Purchase, Redemption and Pricing
of Securities Being Offered................. Reduced Sales Charges,
Additional Exchange and
Redemption Information
and Other Services;
Determination of Net
Asset Value
<PAGE>
N-1A Item No. Location
- ------------- --------
20. Tax Status................................... Taxes
21. Underwriters................................. Underwriter
22. Performance Data............................. Performance Information
23. Financial Statements......................... Financial Statements;
Report of Independent
Accountants
PART C: OTHER INFORMATION
Information required to be included in Part C is set forth under the appropriate
item so numbered, in Part C hereof.
<PAGE>
FIRST INVESTORS INSURED TAX EXEMPT FUND, INC.
FIRST INVESTORS INSURED INTERMEDIATE
TAX EXEMPT FUND
A SERIES OF FIRST INVESTORS SERIES FUND
95 Wall Street, New York, New York 10005/1-800-423-4026
This is a Prospectus for FIRST INVESTORS INSURED TAX EXEMPT FUND, INC.
("INSURED TAX EXEMPT FUND") and FIRST INVESTORS INSURED INTERMEDIATE TAX EXEMPT
FUND ("INSURED INTERMEDIATE FUND"). INSURED INTERMEDIATE FUND is a separate
Series of FIRST INVESTORS SERIES FUND ("Series Fund"). INSURED TAX EXEMPT FUND
and Series Fund are each an open-end diversified management investment company
(collectively, "Tax Exempt Funds"). INSURED TAX EXEMPT FUND and INSURED
INTERMEDIATE FUND are sometimes referred to herein singularly as "Fund" and
collectively as "Funds." Each Fund sells two classes of shares. Investors may
select Class A or Class B shares, each with a public offering price that
reflects different sales charges and expense levels. See "Alternative Purchase
Plans."
The investment objective of each Fund is to seek 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"). Each Fund invests primarily 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. There can be no assurance that the objective of
either Fund will be realized.
THE FUNDS' 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 NET ASSET VALUE PER SHARE OF EACH FUND. FOR MORE
INFORMATION REGARDING THE FUNDS' INSURANCE COVERAGE, SEE "INSURANCE" ON PAGE 8.
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. First Investors Management Company, Inc. ("FIMCO" or
"Adviser") serves as investment adviser to the Funds and First Investors
Corporation ("FIC" 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
Funds at the address or telephone number indicated above.
An investment in these securities is not a deposit or obligation of, or
guaranteed or endorsed by, any bank and is not federally insured or protected by
the Federal Deposit Insurance Corporation, the Federal Reserve Board or any
other government agency.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is April 29, 1996
<PAGE>
FEE TABLE
The following table is intended to assist investors in understanding the
expenses associated with investing in each class of shares of a Fund. Shares of
either Fund issued prior to January 12, 1995 have been designated as Class A
shares.
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
Class A Class B
Shares Shares
---------- ----------
<S> <C> <C>
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) 6.25% None
Deferred Sales Load
(as a percentage of the lower of original
purchase price or redemption proceeds) None* 4% in the first year;
declining to 0% after
the sixth year
</TABLE>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
<TABLE>
<CAPTION>
Insured Insured
Intermediate Fund Tax Exempt Fund
------------------ ------------------
Class A Class B Class A Class B
Shares+ Shares Shares Shares
--------- ------- -------- --------
<S> <C> <C> <C> <C>
Management Fees/(1)/ 0.40% 0.40%+ 0.69% 0.69%
12b-1 Fees/(2)/ -0- 1.00 0.30 1.00
Other Expenses/(3)/ 0.10 0.10+ 0.16 0.16
Total Fund Operating Expenses/(4)/ 0.50 1.50+ 1.15 1.85
</TABLE>
- ---------------------
* A contingent deferred sales charge of 1.00% will be assessed on certain
redemptions of Class A shares that are purchased without a sales charge.
See "How to Buy Shares."
+ Net of waiver and/or reimbursement.
(1) For the fiscal year ended December 31, 1995, the Adviser waived Management
Fees for INSURED INTERMEDIATE FUND in excess of 0.40%. Absent the waiver,
such fees would have been 0.60%. The Adviser will continue to waive such
fees for a minimum period ending December 31, 1996.
(2) The Underwriter has agreed through December 31, 1996 to cap its right to
claim Class A 12b-1 Fees at the annual rate listed above for INSURED
INTERMEDIATE FUND. Series Fund's Class A Distribution Plan provides for a
12b-1 Fee in the total amount of up to 0.30% on an annual basis.
(3) Other Expenses for INSURED INTERMEDIATE FUND have been restated to reflect
current expenses. For the fiscal year ended December 31, 1995, the Adviser
reimbursed INSURED INTERMEDIATE FUND for certain Other Expenses. Absent
such reimbursement, Other Expenses would have been 0.33% for each class of
shares. The Adviser will reimburse each class of that Fund for Other
Expenses 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 for INSURED INTERMEDIATE FUND would have been 1.23% for
Class A shares and 1.93% for Class B shares.
For more complete descriptions of the various costs and expenses, see
"Investment Objectives and Policies-Insurance," "Alternative Purchase Plans,"
"Management," "Distribution Plans," "How to Buy Shares" and "How to Redeem
Shares." Due to the imposition of 12b-1 fees, it is possible that
<PAGE>
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 Fee Table does not
reflect the costs incurred by those shareholders of INSURED TAX EXEMPT FUND who
purchase their shares through First Investors Contractual Plans.
The Example below is based on Class A and Class B 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>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
-------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
INSURED INTERMEDIATE FUND
Class A.................... $67 $78 $ 89 $121
Class B.................... 55 77 102 152*
INSURED TAX EXEMPT FUND
Class A.................... 73 97 122 194
Class B.................... 59 88 120 199*
</TABLE>
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) no redemption at the end of each time period:
<TABLE>
<CAPTION>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
-------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
INSURED INTERMEDIATE FUND
Class A.................... $67 $78 $ 89 $121
Class B.................... 15 47 82 152*
INSURED TAX EXEMPT FUND
Class A.................... 73 97 122 194
Class B.................... 19 58 100 199*
</TABLE>
* Assumes conversion to Class A shares eight years after purchase.
THE EXPENSES IN THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION BY THE
FUNDS OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES IN FUTURE YEARS MAY BE
GREATER OR LESS THAN THOSE SHOWN.
<PAGE>
FINANCIAL HIGHLIGHTS
The following tables set forth the per share operating performance data for a
share outstanding, total return, ratios to average net assets and other
supplemental data for each year indicated. The tables have been derived from
financial statements which have been examined by Tait, Weller & Baker,
independent certified public accountants, whose reports thereon appear 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 Funds.
INSURED TAX EXEMPT FUND
<TABLE>
<CAPTION>
CLASS A CLASS B
- ----------------------------------------------------------------------------------------------------------------------- ---------
Year Ended December 31
- ---------------------- 1/12/95*
to
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 12/31/95
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
- --------------
Net Asset Value,
Beginning of Year............... $ 9.42 $10.56 $10.32 $10.22 $ 9.92 $10.03 $ 9.91 $ 9.64 $10.14 $ 9.48 $ 9.48
-------- ------ ------ ------ ------ ------ ------ ------ ------ ------ -------
Income from Investment
Operations
Net investment income.......... .52 .56 .60 .65 .69 .70 .71 .72 .72 .75 .44
Net realized and
unrealized gain (loss)
on investments................ .96 (1.15) .40 .15 .30 (.11) .12 .27 (.50) .68 .89
-------- ------ ------ ------ ------ ------ ------ ------ ------ ------ -------
Total from Investment
Operations.................... 1.48 (.59) 1.00 .80 .99 .59 .83 .99 .22 1.43 1.33
-------- ------ ------ ------ ------ ------ ------ ------ ------ ------ -------
Less Distributions from:
Net investment income........... .53 .55 .61 .65 .69 .70 .71 .72 .72 .76 .44
Net realized gains.............. -- -- .15 .05 -- -- -- -- -- .01 --
-------- ------ ------ ------ ------ ------ ------ ------ ------ ------ -------
Total Distributions............ .53 .55 .76 .70 .69 .70 .71 .72 .72 .77 .44
-------- ------ ------ ------ ------ ------ ------ ------ ------ ------ -------
Net Asset Value,
End of Year..................... $ 10.37 $ 9.42 $10.56 $10.32 $10.22 $ 9.92 $10.03 $ 9.91 $ 9.64 $10.14 $ 10.37
======== ====== ====== ====== ====== ====== ====== ====== ====== ====== =======
TOTAL RETURN(%)+................. 16.01 (5.61) 9.88 8.05 10.26 6.13 8.64 10.61 2.33 15.51 14.27
- ------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------
Net Assets, End of Year
(in millions)................... $ 1,373 $1,302 $1,507 $1,363 $1,208 $1,132 $1,079 $ 971 $ 853 $ 730 $ 2
Ratio to Average Net Assets:(%)
Expenses........................ 1.14 1.18 1.15 1.16 1.13 1.14 1.01 1.04 1.13 1.02 1.88(a)
Net Investment Income........... 5.25 5.64 5.69 6.32 6.82 7.03 7.16 7.33 7.39 7.75 4.45(a)
Portfolio Turnover Rate(%)....... 37 57 58 52 34 28 26 43 18 16 37
</TABLE>
- ----------------------
* Date shares first offered
+ Calculated without sales charge
(a) Annualized
<PAGE>
INSURED INTERMEDIATE FUND
<TABLE>
<CAPTION>
CLASS B
CLASS A SHARES SHARES
- ------------------------------------------------------------------------------------------------
1/12/95***
to
1995 1994 1993** 12/31/95
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE DATA
- --------------
Net Asset Value, Beginning of Period.. $ 5.43 $ 5.79 $ 5.79 $ 5.45
------ ------ ------- -----------
Income from Investment Operations
Net investment income................ .30 .24 -- .25
Net realized and unrealized gain (loss)
on investments..................... .42 (.36) -- .41
------ ------ ------- -----------
Total from Investment Operations..... .72 (.12) -- .66
------ ------ ------- -----------
Less Distributions from:
Net Investment Income................ .30 .24 -- .26
------ ------ ------- -----------
Net Asset Value, End of Period........ $ 5.85 $ 5.43 $ 5.79 $ 5.85
====== ====== ======= ===========
TOTAL RETURN+(%)...................... 13.50 (2.05) .00 12.27
- ------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------
Net Assets, End of Period (in
thousands)........................... $7,017 $5,688 $ 1,615 $ 378
Ratio to Average Net Assets:++(%)
Expenses............................. 35 .14 -- 1.35*
Net Investment Income................ 5.29 4.52 .54* 4.44*
Ratio to Average Net Assets Before
Expenses Waived or Assumed:(%)
Expenses............................. 1.22 .96 1.78* 2.22*
Net Investment Income................ 4.42 3.70 (1.24)* 3.54*
Portfolio Turnover Rate(%)............ 47 210 0 47
</TABLE>
+ Calculated without sales charge
++ Net of expenses waived or assumed by the investment adviser
* Annualized
** From November 22, 1993 (commencement of operations) to December 31, 1993
*** Date shares first offered
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
INSURED TAX EXEMPT FUND
The investment objective of INSURED TAX EXEMPT FUND is 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 and is not a Tax Preference Item.
The Fund also may invest up to 20% of its total assets in certificates of
participation, municipal notes, municipal commercial paper and variable rate
demand instruments. See "Municipal Instruments," below.
INSURED INTERMEDIATE FUND
The investment objective of INSURED INTERMEDIATE FUND is 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 Instruments, as defined below, which
are 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. See "Municipal Instruments," below.
GENERAL POLICIES
The Funds differ in the maturities of the securities in their portfolios and,
accordingly, in their degree of risk and level of income. Generally, bonds with
longer maturities are likely to exhibit greater fluctuations in market value and
have the potential for higher levels of income than bonds with shorter
maturities. In order to reduce the effect of bond price declines on a Fund's
net asset value during periods of rising interest rates, each Fund may invest in
shorter maturity securities. Conversely, during periods of falling interest
rates, each Fund may invest in longer maturity securities. There is no limit on
the maturity of any individual security in any Fund's portfolio. See "Debt
Securities-Risk Factors."
INSURED INTERMEDIATE FUND is designed for investors seeking a higher level of
income than is generally available on short-term tax-exempt bonds and money
market securities and who are willing to accept a greater degree of fluctuation
in principal. It is expected that, under normal market conditions, the Fund
will maintain a dollar-weighted average maturity of between three and ten years.
INSURED TAX EXEMPT FUND is designed for investors seeking a higher level of
income than is generally available on short-term and intermediate tax-exempt
bonds and who are willing to accept a potentially high degree of fluctuation in
principal. The Fund generally invests in bonds with maturities of over fifteen
years.
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) certificates of
<PAGE>
participation ("COPs"); (4) municipal notes; (5) municipal commercial paper; and
(6) variable rate demand instruments ("VRDIs").
Each Fund may make loans of portfolio securities and invest in zero coupon
municipal securities. Each 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 a Fund. Each 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. Each 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). INSURED INTERMEDIATE FUND also may acquire detachable
call options relating to municipal bonds and invest in repurchase agreements.
Each Fund may borrow money for temporary or emergency purposes in amounts not
exceeding 5% of its total assets. See "Description of Certain Securities, Other
Investment Policies and Risk Factors," below, and the SAI for more information
regarding these securities.
Although each Fund generally invests in municipal bonds rated Baa or higher by
Moody's Investors Service, Inc. ("Moody's") or BBB or higher by Standard &
Poor's Ratings Group ("S&P"), each 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 a Fund. A description of municipal bond
ratings is contained in Appendix A to the SAI.
Each Fund may invest more than 25% of its total assets in a particular segment
of the municipal bond market, such as hospital revenue bonds, housing agency
bonds, industrial development bonds, airport bonds and university dormitory
bonds, during periods when one or more of these segments offer higher yields
and/or profit potential. This possible concentration of the assets of a 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 a
Fund's investments could increase market risks, but risk of non-payment of
interest when due, or default on the payment of principal, is covered by the
insurance feature of each Fund.
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 either Fund will achieve its investment objective.
DESCRIPTION OF CERTAIN SECURITIES, OTHER INVESTMENT POLICIES AND RISK FACTORS
DEBT SECURITIES--RISK FACTORS. The market value of debt securities is
influenced significantly by changes in the level of interest rates. Generally,
as interest rates rise, the market value of debt
<PAGE>
securities decreases. Conversely, as interest rates fall, the market value of
debt securities increases. Factors which could result in a rise in interest
rates, and a decrease in market value of debt securities, include an increase in
inflation or inflation expectations, an increase in the rate of U.S. economic
growth, an expansion in the Federal budget deficit, or an increase in the price
of commodities such as oil. In addition, the market value of debt securities is
influenced by perceptions of the credit risks associated with such securities.
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 to
the SAI for a description of municipal bond ratings.
INSURANCE. All municipal bonds in each 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 Tax Exempt Funds 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 portfolio of a Fund
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 Funds' municipal bonds as they fall due. The insurance does not guarantee
the market value or yield of the insured municipal bonds or the net asset value
or yield of the shares of a Fund. Investors should note that while all
municipal bonds in which the Funds will invest will be insured, INSURED TAX
EXEMPT FUND and INSURED INTERMEDIATE FUND each may invest up to 20% and 35%,
respectively, of its total assets in portfolio securities not covered by the
insurance feature. Each Tax Exempt Fund has purchased a Mutual Fund Insurance
Policy from AMBAC Indemnity Corporation ("AMBAC"), a Wisconsin stock insurance
company with its principal executive offices in New York City. Under certain
circumstances, each Tax Exempt Fund may obtain such insurance from an insurer
other than AMBAC, provided such insurer has a claims-paying ability rated AAA by
S&P and Aaa by Moody's. Because these insurance premiums are paid by each Fund,
a Fund's yield is reduced by this expense. See "Insurance" in the SAI for a
detailed discussion of the insurance feature.
INVERSE FLOATERS. Each 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. Each Fund may invest up to 10% of its net assets in inverse floaters.
MUNICIPAL INSTRUMENTS
MUNICIPAL BONDS. Municipal bonds are debt obligations that generally are
issued to obtain funds for various public purposes and have a time to maturity,
at issuance, of more than one year. The two principal classifications of
municipal bonds are "general obligation" and "revenue" bonds. General
obligation bonds are secured by the issuer's pledge of its full faith and credit
for the payment of principal and interest. Revenue bonds generally are payable
only from revenues derived from a particular facility or class of facilities or,
in some cases, from the proceeds of a special tax or other specific revenue
source. There are variations in the security of municipal bonds, both within
<PAGE>
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 to the SAI 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 a
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
revenues of the issuer or are refinanced with long-term debt. A description of
commercial paper ratings is contained in Appendix C to the SAI.
MUNICIPAL NOTES. Municipal notes which a 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 a Fund may purchase will be selected if it meets criteria established and
designed by the applicable Tax Exempt Fund's Board of Directors or Trustees
(each, a "Board") to minimize risk to that 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.
<PAGE>
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 applicable Tax Exempt Fund's Board or the Adviser
has determined are liquid under Board-approved guidelines. See the SAI for more
information regarding restricted and illiquid securities.
TAXABLE SECURITIES. Each 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. A 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. A Fund
may invest in highly liquid taxable obligations in order to avoid the necessity
of liquidating portfolio investments to meet redemptions by Fund investors.
Each Fund's temporary investments in taxable securities may consist of: (1)
obligations of the U.S. Government, its agencies or instrumentalities; (2) other
debt securities rated within the highest grade of S&P or Moody's; (3) commercial
paper rated in the highest grade by either of such rating services; and (4)
certificates of deposit and letters of credit. Certificates of deposit are
negotiable certificates issued against funds deposited in a commercial bank or a
savings and loan association for a definite period of time and earning a
specified return.
ALTERNATIVE PURCHASE PLANS
Each Fund has two classes of shares, Class A and Class B, which represent
interests in the same portfolio of securities and have identical voting,
dividend, liquidation and other rights and the same terms and conditions, except
that each class (i) is subject to a different sales charge and bears its
separate distribution and certain other class expenses; (ii) has exclusive
voting rights with respect to matters affecting only that class; and (iii) has
different exchange privileges.
CLASS A SHARES. Class A shares are sold with an initial sales charge of up to
6.25% of the amount invested with discounts available for volume purchases.
Class A shares are subject to a maximum 12b-1 fee at the annual rate of 0.30% of
each Fund's average daily net assets attributable to Class A shares, of which no
more than 0.25% may be paid as a service fee and the balance thereof paid as an
asset-based sales charge. The initial sales charge is waived for certain
purchases and a contingent deferred sales charge ("CDSC") may be imposed on such
purchases. See "How to Buy Shares."
CLASS B SHARES. Class B shares are sold without an initial sales charge, but
are generally subject to a CDSC which declines in steps from 4% to 0% during a
six-year period and bear a higher 12b-1 fee than Class A shares. Class B shares
pay a 12b-1 fee at the annual rate of 1.00% of each Fund's average daily net
assets attributable to Class B shares, of which no more than 0.25% may be paid
as a service fee and the balance thereof paid as an asset-based sales charge.
Class B shares automatically convert into Class A shares after eight years. See
"How to Buy Shares."
FACTORS TO CONSIDER IN CHOOSING A CLASS OF SHARES. In deciding which
alternative is most suitable, an investor should consider several factors, as
discussed below. Regardless of whether an investor purchases Class A or Class B
shares, your Representative, as defined under "How to Buy Shares," receives
compensation for selling shares of a Fund, which may differ for each class.
<PAGE>
The principal advantages of purchasing Class A shares are the lower overall
expenses, the availability of quantity discounts on volume purchases and certain
account privileges which are not offered to Class B shareholders. If an
investor plans to make a substantial investment, the sales charge on Class A
shares may either be lower due to the reduced sales charges available on volume
purchases of Class A shares or waived for certain eligible purchasers. Because
of the reduced sales charge available on quantity purchases of Class A shares,
it is recommended that investments of $250,000 or more be made in Class A
shares. Investments in excess of $1,000,000 must be made in Class A shares.
Distributions paid by each Fund with respect to Class A shares will also
generally be greater than those paid with respect to Class B shares because
expenses attributable to Class A shares will generally be lower.
The principal advantage of purchasing Class B shares is that, since no initial
sales charge is paid, all of an investor's money is put to work from the outset.
Furthermore, although any investment in a Fund should only be viewed as a long-
term investment, if a redemption must be made soon after purchase, an investor
will pay a lower sales charge than if Class A shares had been purchased.
Conversely, because Class B shares are subject to a higher asset-based sales
charge, long-term Class B shareholders may pay more in asset-based sales charges
than the economic equivalent of the maximum sales charge on Class A shares. The
automatic conversion of Class B shares into Class A shares after eight years is
designed to reduce the probability of this occurring.
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 "FIC" and received in FIC'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
FIC at their Woodbridge offices before the close of its business day, generally
5:00 P.M. (New York City time), will be executed at the public offering price
determined at the close of regular trading on the NYSE on that day. 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 for Class A shares and net asset value for Class B shares. 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
FIC 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.
<PAGE>
WHEN YOU OPEN A FUND ACCOUNT, YOU MUST SPECIFY WHICH CLASS OF SHARES YOU WISH
TO PURCHASE. If you do not specify which class of shares you wish to purchase,
your order will be processed according to procedures established by FIC. For
more information, see the SAI.
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 for a particular
class of shares through a full exchange of shares of the same class of another
"Eligible Fund," as defined below. Class A share accounts opened through an
exchange of shares from First Investors Cash Management Fund, Inc. or First
Investors Tax-Exempt Money Market Fund, Inc. (collectively, "Money Market
Funds") may be subject to an initial sales charge. Automatic investment plans
allow you to open an account with as little as $50, provided you invest at least
$600 a year. See "Systematic Investing."
ADDITIONAL PURCHASES. After you make your first investment in a Fund, you may
purchase additional shares of a Fund by mailing a check made payable to FIC,
directly to First 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. The funds of Executive
Investors Trust ("Executive Investors") are Eligible Funds provided the shares
of any such fund 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.
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 Class A shares of a Fund
at net asset value all the cash distributions or Systematic Withdrawal Plan
payments from the same class of shares of an existing account in another
Eligible Fund. If you 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.
CLASS A SHARES. Class A 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:
<PAGE>
<TABLE>
<CAPTION>
SALES CHARGE AS % OF
--------------------- CONCESSION TO
OFFERING NET AMOUNT DEALERS AS % OF
AMOUNT OF INVESTMENT PRICE INVESTED OFFERING PRICE
- ------------------------------- --------------------- ----------- ----------------
<S> <C> <C> <C>
Less than $25,000.............. 6.25% 6.67% 5.13%
$25,000 but under $50,000...... 5.75 6.10 4.72
$50,000 but under $100,000..... 5.50 5.82 4.51
$100,000 but under $250,000.... 4.50 4.71 3.69
$250,000 but under $500,000.... 3.50 3.63 2.87
$500,000 but under $1,000,000.. 2.50 2.56 2.05
</TABLE>
There is no sales charge on transactions of $1 million or more, 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 CDSC of 1.00% will be deducted from the redemption proceeds.
The CDSC will be applied in the same manner as the CDSC on Class B shares. See
"Class B Shares."
CUMULATIVE PURCHASE PRIVILEGE AND LETTERS OF INTENT. You may purchase Class A
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 CLASS A SALES CHARGES. Sales charges on Class A shares do not
apply to: (1) any purchase by an officer, director, trustee or employee (who has
completed the introductory employment period) of the Tax Exempt Funds, the
Underwriter, the Adviser, or their affiliates, by a Representative, or by the
spouse, or by the children and grandchildren under the age of 21 of any such
person; (2) any purchase by a former officer, director, trustee or employee of
the Tax Exempt Funds, 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; and
(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.
Additionally, policyholders of participating life insurance policies issued by
First Investors Life Insurance Company ("FIL"), an affiliate of the Adviser and
Underwriter, may elect to invest dividends earned on such policies in Class A
shares of a Fund at net asset value, provided the annual dividend is at least
$50 and the policyholder has an existing account with the Fund.
Holders of certain unit trusts ("Unitholders") who have elected to invest the
entire amount of cash distributions from either principal, interest income or
capital gains or any combination thereof ("Unit Distributions") from the
following trusts may invest such Unit Distributions in Class A shares of a Fund
at a reduced sales charge. Unitholders of various series of New York Insured
Municipals-Income Trust sponsored by Van Kampen Merritt Inc. (the "New York
Trust"); Unitholders of various series of the Multistate Tax Exempt Trust
sponsored by Advest Inc.; and Unitholders of various
<PAGE>
series of the Municipal Insured National Trust, J.C. Bradford & Co. as agent,
may purchase Class A shares of a Fund with Unit Distributions at an offering
price which is the net asset value per share plus a sales charge of 1.5%.
Unitholders of various series of tax-exempt trusts, other than the New York
Trust, sponsored by Van Kampen Merritt Inc. may purchase Class A shares of a
Fund with Unit Distributions at an offering price which is the net asset value
per share plus a sales charge of 1.0%. Each Fund's initial minimum investment
requirement is waived for purchases of Class A shares with Unit Distributions.
Shares of a Fund purchased by Unitholders may be exchanged for Class A shares of
any Eligible Fund subject to the terms and conditions set forth under "How to
Exchange Shares."
CLASS B SHARES. The public offering price of Class B shares of each Fund is
the next determined net asset value, with no initial sales charge imposed. A
CDSC, however, is imposed upon most redemptions of Class B shares at the rates
set forth below:
<TABLE>
<CAPTION>
CONTINGENT DEFERRED SALES CHARGE
YEAR SINCE PURCHASE AS A PERCENTAGE OF DOLLARS INVESTED
PAYMENT MADE OR REDEMPTION PROCEEDS
-------------------- --------------------------------------
<S> <C>
First................... 4%
Second.................. 4
Third................... 3
Fourth.................. 3
Fifth................... 2
Sixth................... 1
Seventh and thereafter.. 0
</TABLE>
The CDSC will not be imposed on (1) the redemption of Class B shares acquired
as dividends or other distributions, or (2) any increase in the net asset value
of redeemed shares above their initial purchase price (in other words, the CDSC
will be imposed on the lower of net asset value or purchase price). In
determining whether a CDSC is payable on any redemption, it will be assumed that
the redemption is made first of any Class B shares acquired as dividends or
distributions, second of Class B shares that have been held for a sufficient
period of time such that the CDSC no longer is applicable to such shares and
finally of Class B shares held longest during the period of time that a CDSC is
applicable to such shares. This will result in your paying the lowest possible
CDSC.
As an example, assume an investor purchased 100 shares of Class B shares at
$10 per share for a total cost of $1,000 and in the second year after purchase,
the net asset value per share is $12 and, during such time, the investor has
acquired 10 additional Class B shares as dividends. If at such time the
investor makes his or her first redemption of 50 shares (proceeds of $600), 10
shares will not be subject to a CDSC charge because redemptions are first made
of shares acquired through dividend reinvestment. With respect to the remaining
40 shares, the charge is applied only to the original cost of $10 per share and
not to the increase in net asset value of $2 per share. Therefore, $400 of the
$600 redemption proceeds will be charged at a rate of 4.00% (the applicable rate
in the second year after purchase).
For purposes of determining the CDSC on Class B shares, all purchases made
during a calendar month will be deemed to have been made on the first business
day of that month at the average cost of all purchases made during that month.
The holding period of Class B shares acquired through
<PAGE>
an exchange with another Eligible Fund will be calculated from the first
business day of the month that the Class B shares were initially acquired in the
other Eligible Fund. The amount of any CDSC will be paid to FIC. The CDSC
imposed on the purchase of Class B shares will be waived under certain
circumstances. See "Waivers of CDSC on Class B Shares" in the SAI.
CONVERSION OF CLASS B SHARES. A shareholder's Class B shares will
automatically convert to Class A shares approximately eight years after the date
of purchase, together with a pro rata portion of all Class B shares representing
dividends and other distributions paid in additional Class B shares. The Class
B shares so converted will no longer be subject to the higher expenses borne by
Class B shares. The conversion will be effected at the relative net asset
values per share of the two classes on the first business day of the month
following the month in which the eighth anniversary of the purchase of the Class
B shares occurs. If a shareholder effects one or more exchanges between Class B
shares of the Eligible Funds during the eight-year period, the holding period
for the shares so exchanged will commence upon the date of the purchase of the
original shares. Because the per share net asset value of the Class A shares
may be higher than that of the Class B shares at the time of conversion, a
shareholder may receive fewer Class A shares than the number of Class B shares
converted. See "Determination of Net Asset Value."
GENERAL. The Underwriter may at times agree to reallow to Dealers up to an
additional 0.25% of the dollar amount of shares of the 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 shares of any Eligible Fund, including the Money Market
Funds. In addition, Class A shares of a Fund may be exchanged at net asset
value for units of any single payment plan ("plan") sponsored by the
Underwriter. SHARES OF A PARTICULAR CLASS MAY BE EXCHANGED ONLY FOR SHARES OF
THE SAME CLASS OF ANOTHER FUND. 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
<PAGE>
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/or a class 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 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.
<PAGE>
SIGNATURE GUARANTEES. In order to protect you, the Tax Exempt Funds and their
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 the same class of any other 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 Class A or Class B 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 class of the
same Fund or any other 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.
REPURCHASE THROUGH UNDERWRITER. You may redeem Class A 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 of Class A or Class B shares which has a
net asset value of less than $500. To avoid such redemption, you may, during
such 60-day period, purchase additional Fund shares of the same class so as to
increase your account balance to the required minimum. There will be no CDSC
imposed on such redemptions of Class B shares. 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.
<PAGE>
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 Tax Exempt Funds, 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 Tax Exempt Funds have the right, at their sole
discretion, upon 60 days' notice, to materially modify or discontinue the
telephone exchange and redemption privilege. During times of drastic economic
or market changes, telephone exchanges or redemptions may be difficult to
implement. If you experience difficulty in making a telephone exchange or
redemption, your exchange or redemption request may be made by regular or
express mail, and it will be implemented at the next determined net asset value,
less any applicable CDSC, following receipt by the Transfer Agent.
MANAGEMENT
BOARD OF DIRECTORS OR TRUSTEES. Each Tax Exempt Fund's Board, as part of its
overall management responsibility, oversees various organizations responsible
for the applicable Fund's day-to-day management.
ADVISER. First 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 New York corporation
located at 95 Wall Street, New York, NY 10005.
<PAGE>
The Adviser presently acts as investment adviser to 14 mutual funds. First
Investors Consolidated Corporation ("FICC") owns all of the voting common stock
of the Adviser and all of the outstanding stock of FIC and the Transfer Agent.
Mr. Glenn O. Head 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, the advisory fees for INSURED TAX EXEMPT FUND were 0.69% of its average
daily net assets. For the same period, INSURED INTERMEDIATE FUND's advisory
fees, net of waiver, were 0.40%. The SEC staff takes the position that advisory
fees of 0.75% or greater are higher than those paid by most investment
companies.
PORTFOLIO MANAGER. Clark D. Wagner has been Portfolio Manager of the Funds
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 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. Each Tax Exempt Fund has entered into an Underwriting Agreement
with First Investors Corporation, 95 Wall Street, New York, NY 10005, as
Underwriter. The Underwriter receives all sales charges in connection with the
sale of each Fund's Class A shares and all CDSCs in connection with each Fund's
Class B shares and may receive other payments under a plan of distribution. See
"How to Buy Shares" and "Distribution Plans."
DISTRIBUTION PLANS
Pursuant to separate distribution plans pertaining to each Fund's Class A and
Class B shares ("Class A Plan" or "Class B Plan," and collectively, "Plans"),
each Fund may reimburse or compensate, as applicable, 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 Plans, 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 INSURED TAX EXEMPT FUND'S Class A Plan, the Fund's Board of
Directors, in its sole discretion, may periodically allocate the portion of
distribution fees and services fees that may be spent, provided the aggregate of
such fees paid by the Fund may not exceed an annual rate of 0.30% of its average
daily net assets attributable to Class A shares in any one fiscal year. Of that
<PAGE>
amount, no more than 0.25% of the Fund's average daily net assets attributable
to Class A shares may be paid as service fees. Payments made to the Underwriter
will be for reimbursement of specific expenses incurred in connection with
distribution and service activities.
Pursuant to INSURED INTERMEDIATE FUND's Class A Plan, the Fund is authorized
to pay the Underwriter a distribution fee at the annual rate of 0.05% of the
Fund's average daily net assets attributable to Class A shares and a service fee
of 0.25% of the Fund's average daily net assets attributable to Class A shares.
Payments made to the Underwriter will represent compensation for distribution
and service activities, not reimbursement for specific expenses incurred.
Pursuant to each Class B Plan, each Fund is authorized to pay the Underwriter
a distribution fee at the annual rate of 0.75% of that Fund's average daily net
assets attributable to Class B shares and a service fee of 0.25% of the Fund's
average daily net assets attributable to Class B shares. Payments made to the
Underwriter under each Class B Plan will represent compensation for distribution
and service activities, not reimbursement for specific expenses incurred.
Although Class B shares are sold without an initial sales charge, the
Underwriter pays from its own resources a sales commission to FIC
Representatives and a concession equal to 3.5% of the amount invested to Dealers
who sell Class B shares. In addition, the Underwriter will make quarterly
payments of service fees to Representatives commencing after the thirteenth
month following the initial sale of Class B shares. The Underwriter will make
such payments at an annual rate of up to 0.25% of the average net asset value of
Class B shares which are attributable to shareholders for whom the
Representatives are designated as dealer of record.
Each Fund may suspend or modify payments under the Plans at any time, and
payments are subject to the continuation of each Plan, the terms of any dealer
agreements between Dealers and the Underwriter and any applicable limits imposed
by the National Association of Securities Dealers, Inc. Each Fund will not
carry over any fees under the Plans to the next fiscal year. See "Distribution
Plans" in the SAI for a full discussion of the various Plans.
DETERMINATION OF NET ASSET VALUE
The net asset value of each Fund's shares fluctuates and is determined
separately for each class of shares. The per share net asset value of the Class
B shares will generally be lower than that of the Class A shares because of the
higher expenses borne by the Class B shares. The net asset value of shares of a
given class of each 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 applicable Tax Exempt Fund's Board deems
necessary, by dividing the market value of the securities held by such Fund,
plus any cash and other assets, less all liabilities attributable to that class,
by the number of shares of the applicable class outstanding. If there is no
available market value, securities will be valued at their fair value as
determined in good faith pursuant to procedures adopted by the applicable Tax
Exempt Fund's Board. 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.
<PAGE>
DIVIDENDS AND OTHER DISTRIBUTIONS
Dividends from net investment income are generally declared daily and paid
monthly by each Fund. Unless you direct the Transfer Agent otherwise, dividends
declared on a class of shares of a Fund are paid in additional shares of that
class at the net asset value generally determined as of the close of business on
the first business day of the following month. If you redeem all of your shares
of a Fund at any time during a month, you are paid all dividends declared
through the day prior to the date of the redemption, together with the proceeds
of your redemption, less any applicable CDSC. Net investment income includes
interest, earned discount and other income earned on portfolio securities less
expenses.
Each Fund also distributes with its regular dividend at the end of each year
substantially all of its net capital gain (the excess of net long-term capital
gain over net short-term capital loss) and net short-term capital gain, if any,
after deducting any available capital loss carryovers. Unless you direct the
Transfer Agent otherwise, these distributions are paid in additional shares of
the same class of the distributing 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
in any year if necessary to avoid a Federal excise tax on certain undistributed
ordinary (taxable) income and capital gain.
Dividends and other distributions paid on both classes of a Fund's shares are
calculated at the same time and in the same manner. Dividends on Class B shares
of a Fund are expected to be lower than those for its Class A shares because of
the higher distribution fees borne by the Class B shares. Dividends on each
class also might be affected differently by the allocation of other class-
specific expenses.
In order to be eligible to receive a dividend or other distribution, you must
own 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 on Class A
shares of a Fund 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 on a class of shares of a Fund will be
paid in additional shares of that class and not in cash if any of the following
events occurs: (1) the total amount of the distribution is under $5, (2) the
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.
<PAGE>
TAXES
Each Fund has qualified and intends to continue to qualify for treatment as a
regulated investment company under the Internal Revenue Code of 1986, as amended
(the "Code"), so that it will be relieved of Federal income tax on that part of
its investment company taxable income (consisting generally of taxable net
investment income and net short-term capital gain) and net capital gain that is
distributed to its shareholders. In addition, each Fund intends to continue to
qualify to pay "exempt-interest dividends" (as defined below), which requires,
among other things, that at the close of each calendar quarter at least 50% of
the value of its total assets must consist of Municipal Instruments.
Distributions by a Fund of the excess of interest income from Municipal
Instruments over certain amounts disallowed as deductions, which are designated
by the Fund as "exempt-interest dividends," generally may be excluded by you
from gross income. Distributions by a Fund of interest income from taxable
obligations and net short-term capital gain, if any, are taxable to you as
ordinary income to the extent of the Fund's earnings and profits, whether
received in cash or paid in additional Fund shares. Distributions of a Fund's
realized net capital gain, if any, when designated as such, are taxable to you
as long-term capital gains, whether received in cash or paid in additional Fund
shares, regardless of the length of time you have owned your shares. If you
purchase your shares shortly before the record date for a taxable dividend or
capital gain distribution, you will pay full price for the shares and receive
some portion of the price back as a taxable distribution. You will receive a
statement following the end of each calendar year describing the tax status of
distributions paid by your Fund during that year.
Interest on indebtedness incurred or continued to purchase or carry shares of
a Fund will not be deductible for Federal income tax purposes to the extent the
Fund's distributions consist of exempt-interest dividends. Each Fund does 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 each Fund and the value
of its portfolio securities would be affected. In that event, each Fund would
reevaluate its investment objective and policies.
Each Fund is required to withhold 31% of all taxable dividends, capital gain
distributions and redemption proceeds payable to you after any applicable CDSC
is deducted (if you are an individual or certain other non-corporate
shareholder) if the Fund is not furnished with your correct taxpayer
identification number, and the same percentage of dividends and such
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 on Class A shares). An exchange of Fund shares for shares of any other
Eligible Fund generally will have similar tax consequences. However, special
tax rules apply if you (1) dispose of Class A shares through a redemption or
exchange within 90 days of your purchase and (2) subsequently acquire Class A
shares of the same Fund or an Eligible Fund without paying a sales charge due to
the reinvestment privilege or exchange privilege.
<PAGE>
In these cases, any gain on your disposition of the original Class A 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 subsequently acquired. In addition, if you purchase
shares of a Fund 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.
No gain or loss will be recognized to a shareholder as a result of a
conversion of Class B shares into Class A shares.
The foregoing is only a summary of some of the important Federal income tax
considerations generally affecting each 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, a Fund's
distributions may be wholly or partly taxable under state and/or local laws.
You therefore are urged to consult your own tax adviser.
PERFORMANCE INFORMATION
For purposes of advertising, each Fund's performance may be calculated for
each class of its shares based on average annual total return and total return.
Each of these figures reflects past performance and does not necessarily
indicate future results. Average annual total return shows the average annual
percentage change in an assumed $1,000 investment. It reflects the hypothetical
annually compounded return that would have produced the same total return if a
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 (in the case of Class A shares) or the deduction of any applicable CDSC
(in the case of Class B shares) and payment of dividends and other distributions
in additional shares. One, five and ten year periods will be shown unless the
class has been in existence for a shorter period. Total return is computed
using the same calculations as average annual total return. However, the rate
expressed is the percentage change from the initial $1,000 invested to the value
of the investment at the end of the stated period. Total return calculations
assume reinvestment of dividends and other distributions.
Each Fund also may advertise its yield for each class of shares. Yield
reflects investment income net of expenses over a 30-day (or one-month) period
on a Fund share, expressed as an annualized percentage of the maximum offering
price per share for Class A shares and the net asset value per share for Class B
shares at the end of the period. Yield computations differ from other
accounting methods and therefore may differ from dividends actually paid or
reported net income.
Tax-equivalent yields show the taxable yields an investor would have to earn
to equal a 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 a Fund's tax-free yield. 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 question 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.
<PAGE>
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 or CDSC will be greater than if
the maximum sales charge or CDSC were used. Each class of shares of a Fund has
different expenses which will affect its performance. Additional performance
information is contained in the Funds' Annual Reports which may be obtained
without charge by contacting the applicable Fund at 1-800-423-4026.
GENERAL INFORMATION
ORGANIZATION. INSURED TAX EXEMPT FUND was incorporated in the State of
Maryland on September 28, 1976. Series Fund is a Massachusetts business trust
organized on September 23, 1988. Each Fund is authorized to issue shares of
beneficial interest or common stock, as applicable, in such separate and
distinct series and classes of shares as that Tax Exempt Fund's Board shall from
time to time establish. The shares of common stock of INSURED TAX EXEMPT FUND
presently comprise one series and the shares of beneficial interest of Series
Fund are presently divided into five separate and distinct series. Each Tax
Exempt Fund presently has two classes, designated Class A shares and Class B
shares. Each class of a Fund represents interests in the same assets of that
Fund. The Tax Exempt Funds do not hold annual shareholder meetings. If
requested to do so by the holders of at least 10% of a Tax Exempt Fund's
outstanding shares, that Tax Exempt Fund's Board will call a special meeting of
shareholders for any purpose, including the removal of Directors or Trustees.
Each share of each Fund has equal voting rights except as noted.
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 FIMCO and FIC, 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 Class B shares or
for Class A shares purchased under any retirement account. The Funds, however,
will issue share certificates for Class A shares 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 each Fund's practice to
mail only one copy of its annual and semi-annual reports to any address at which
more than one shareholder with the same last name has indicated that mail is to
be delivered. Additional copies of the reports will be mailed if requested in
writing or by telephone by any shareholder. Each Fund will ensure that
<PAGE>
an additional copy of such reports are sent to any shareholder who subsequently
changes his or her mailing address.
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Fee Table........................................................... 2
Financial Highlights................................................ 4
Investment Objectives and Policies.................................. 6
Alternative Purchase Plans.......................................... 10
How to Buy Shares................................................... 11
How to Exchange Shares.............................................. 15
How to Redeem Shares................................................ 16
Telephone Transactions.............................................. 18
Management.......................................................... 18
Distribution Plans.................................................. 19
Determination of Net Asset Value.................................... 20
Dividends and Other Distributions................................... 21
Taxes............................................................... 22
Performance Information............................................. 23
General Information................................................. 24
ADVISER CUSTODIAN
First Investors Management The Bank of New York
Company, Inc. 48 Wall Street
95 Wall Street New York, NY 10286
New York, NY 10005
TRANSFER AGENT
UNDERWRITER Administrative Data
First Investors Corporation Management Corp.
95 Wall Street 581 Main Street
New York, NY 10005 Woodbridge, NJ 07095-1198
LEGAL COUNSEL AUDITORS
Kirkpatrick & Lockhart LLP Tait, Weller & Baker
1800 Massachusetts Avenue, N.W. Two Penn Center Plaza
Washington, D.C. 20036 Philadelphia, PA 19102-1707
This Prospectus is intended to constitute an offer by each Tax Exempt Fund only
of the securities of which it is the issuer and is not intended to constitute an
offer either Fund of the securities of the other Fund whose securities are also
offered by this Prospectus. Neither Fund intends to make any representation as
to the accuracy or completeness of the disclosure in this Prospectus relating to
the other Fund. No dealer, salesman or any other person has been authorized to
give any information or to make any representations other than those contained
in this Prospectus or the Statement of Additional Information, and if given or
made, such information and representation must not be relied upon as having been
authorized by either Tax Exempt Fund, First Investors Corporation, or any
affiliate thereof. This Prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any of the shares offered hereby in any state to
any person to whom it is unlawful to make such offer in such state.
<PAGE>
First Investors
Insured Tax Exempt
Fund, Inc.
- ---------------------------
First Investors
Insured Intermediate
Tax Exempt Fund
A Series of
First Investors Series Fund
- ---------------------------
Prospectus
- ----------------------------
April 29, 1996
First Investors Logo
Logo is described as follows: the arabic numeral one separated into seven
vertical segments followed by the words "First Investors."
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. 1793" in a box to the right of
a circle containing the words "MAILED FROM ZIP CODE 17604" appears on the
righthand side.
The following language appears on the lefthand side:
FIRST INVESTORS INSURED TAX EXEMPT FUND, INC.
FIRST INVESTORS INSURED INTERMEDIATE TAX EXEMPT FUND
a Series of First Investors Series Fund
95 WALL STREET
NEW YORK, NY 10005
First Investors Logo (as described above)
A MEMBER OF THE
FIRST INVESTORS
FINANCIAL NETWORK
FIITE01
<PAGE>
FIRST INVESTORS INSURED TAX EXEMPT FUND, INC.
FIRST INVESTORS INSURED INTERMEDIATE
TAX EXEMPT FUND, A SERIES OF
FIRST INVESTORS SERIES FUND
95 Wall Street 1-800-423-4026
New York, New York 10005
STATEMENT OF ADDITIONAL INFORMATION
DATED APRIL 29, 1996
This is a Statement of Additional Information ("SAI") for FIRST INVESTORS
INSURED TAX EXEMPT FUND, INC. ("Insured Tax Exempt Fund") and FIRST INVESTORS
INSURED INTERMEDIATE TAX EXEMPT FUND ("INSURED INTERMEDIATE FUND"). INSURED
INTERMEDIATE FUND is a separate series of FIRST INVESTORS SERIES FUND ("Series
Fund"). Insured Tax Exempt Fund and Series Fund are each an open-end
diversified management investment company (collectively, "Tax Exempt Funds").
INSURED TAX EXEMPT FUND and INSURED INTERMEDIATE FUND are sometimes referred to
herein singularly as "Fund" and collectively as "Funds." The investment
objective of each Fund is to seek 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"). There
can be no assurance that the objective of any Fund will be realized.
This SAI is not a prospectus. It should be read in conjunction with the
Tax Exempt Funds' Prospectus dated April 29, 1996, which may be obtained free of
cost from the Tax Exempt Funds at the address or telephone number noted above.
TABLE OF CONTENTS
-----------------
Page
----
Investment Policies............................. 2
Hedging and Option Income Strategies............ 6
Insurance....................................... 13
Investment Restrictions......................... 16
Directors or Trustees and Officers.............. 20
Management...................................... 23
Underwriter..................................... 24
Distribution Plans.............................. 25
Determination of Net Asset Value................ 26
Allocation of Portfolio Brokerage............... 27
Reduced Sales Charges, Additional Exchange and
Redemption Information and Other Services..... 27
Taxes........................................... 32
Performance Information......................... 35
General Information............................. 39
Appendix A...................................... 41
Appendix B...................................... 44
Appendix C...................................... 45
Appendix D...................................... 47
Financial Statements 53
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<PAGE>
INVESTMENT POLICIES
BOND MARKET CONCENTRATION. Each Fund may invest more than 25% of its total
-------------------------
assets in a particular segment of the municipal bond market, such as hospital
revenue bonds, housing agency bonds, industrial development bonds, utility bonds
and university bonds, during periods when one or more of these segments offer
higher yields and/or profit potential. As of December 31, 1995, INSURED TAX
EXEMPT FUND had 25.43% of its assets in general obligation bonds and INSURED
INTERMEDIATE FUND had 47.64% of its assets in general obligation bonds.
CERTIFICATES OF PARTICIPATION. The applicable Tax Free Fund's Board of
-----------------------------
Directors or Trustees (each, a "Board") has established guidelines for
determining the liquidity of the COPs in the applicable Tax Free Fund's
portfolio and, subject to review by that Tax Free Fund's Board, has delegated
that responsibility to the Adviser. Pursuant to these guidelines, the Adviser
will consider (1) the frequency of trades and quotes for the security, (2) the
number of dealers willing to purchase or sell the security and the number of
other potential buyers, (3) the willingness of dealers to undertake to make a
market in the security, (4) the nature of the marketplace, namely, the time
needed to dispose of the security, the method of soliciting offers and the
mechanics of transfer, (5) the coverage of the obligation by new issue
insurance, (6) the likelihood that the marketability of the obligation will be
maintained through the time the security is held by a Fund, and (7) for unrated
COPs, the COPs' credit status analyzed by the Adviser according to the factors
reviewed by rating agencies.
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. INSURED INTERMEDIATE FUND may acquire detachable call
options relating to municipal bonds that the Fund 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.
INSURED INTERMEDIATE FUND will consider detachable call options to be illiquid
securities and they will be treated as such for purposes of certain investment
limitation calculations.
HIGH YIELD SECURITIES. Although each Fund may invest up to 5% of its net
---------------------
assets in municipal bonds rated lower than Baa by Moody's Investors Service,
Inc. ("Moody's") or BBB by Standard & Poor's Ratings Group ("S&P"), each Fund
currently does not intend to purchase such municipal bonds. However,
occasionally a Fund may hold in its portfolio a municipal bond that has had its
rating downgraded. In each instance, such bonds will be covered by the
insurance feature and thus considered to be of higher quality than high yield
securities without an insurance feature. See "Insurance" for a detailed
discussion of the insurance feature. 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"). High Yield Securities are subject
to certain risks that may not be present with investments in high grade
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. A strong economic downturn or a substantial period
of rising interest rates could severely affect the market for High Yield
Securities.
Municipal obligations that are high yield securities rated below investment
grade ("Municipal High Yield Securities") are deemed by Moody's and S&P to be
predominantly speculative with respect to the
-2-
<PAGE>
issuer's capacity to pay interest and repay principal and may involve major risk
exposure to adverse conditions. "Municipal High Yield Securities," unless
otherwise noted, include unrated securities deemed to be rated below investment
grade by the Funds' investment adviser, First Investors Management Company, Inc.
("Adviser" or "FIMCO"). Ratings of Municipal High Yield Securities represent
the rating agencies' opinions regarding their quality, are not a guarantee of
quality and may be reduced after a Fund has acquired the security. Credit
ratings attempt to evaluate the safety of principal and interest payments and do
not evaluate the risks of fluctuations in market value. Also, rating agencies
may fail to make timely changes in credit ratings in response to subsequent
events, so that an issuer's current financial condition may be better or worse
than the rating indicates.
Municipal High Yield Securities generally offer a higher current yield than
higher grade issues. However, Municipal High Yield Securities involve higher
risks, in that they are especially subject to adverse changes in the general
economic conditions, in economic conditions of an issuer's geographic area and
in the industries or activities in which the issuer is engaged. Municipal High
Yield Securities are also especially sensitive to changes in the financial
condition of the issuer and to price fluctuations in response to changes in
interest rates. Accordingly, the yield on lower rated Municipal High Yield
Securities will fluctuate over time. During periods of economic downturn or
rising interest rates, municipal issuers may experience financial stress which
could adversely affect their ability to make payments of principal and interest
and increase the possibility of default.
In addition, Municipal High Yield Securities are frequently traded only in
markets where the number of potential purchasers and sellers, if any, is
limited. This factor may limit a Fund's ability to acquire such securities and
to sell such securities at their fair value in response to changes in the
economy or the financial markets, especially for unrated Municipal High Yield
Securities. Although unrated Municipal High Yield Securities are not
necessarily of lower quality than rated Municipal High Yield Securities, the
market for rated Municipal High Yield Securities generally is broader than that
for unrated Municipal High Yield Securities. Adverse publicity and investor
perceptions, whether or not based on fundamental analysis, may also decrease the
values and liquidity of Municipal High Yield Securities, especially in a thinly
traded market.
LOANS OF PORTFOLIO SECURITIES. Each Fund may loan securities to qualified
-----------------------------
broker-dealers or other institutional investors provided: the borrower pledges
to a Fund and agrees to maintain at all times with that Fund cash 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 a Fund, that
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. Such loans may be terminated by a Fund at any time and that 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 a Fund. The
borrower must add to the collateral whenever the market value of the securities
rises above the level of such collateral. A 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. The primary objective of such
loaning function is to supplement a Fund's income through investment of the cash
collateral in short-term interest bearing obligations. INSURED INTERMEDIATE
FUND has a non-fundamental policy that the aggregate value of portfolio
securities it can lend will not exceed 10% of its net assets and INSURED TAX
EXEMPT FUND may not make such loans in excess of 10% of its total assets.
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
-3-
<PAGE>
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 the 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. INSURED INTERMEDIATE 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 the 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. The 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, the Fund might incur a loss if the value of the collateral
securing the repurchase agreement declines, and might incur disposition costs in
connection with liquidating the collateral. In addition, if bankruptcy or
similar proceedings are commenced with respect to the seller of the security,
realization upon the collateral by the Fund may be delayed or limited. INSURED
INTERMEDIATE FUND may not enter into a repurchase agreement with more than seven
days to maturity if, as a result, more than 15% of the Fund's net assets would
be invested in such repurchase agreements and other illiquid investments.
RESTRICTED AND ILLIQUID SECURITIES. Neither 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 detachable call options and
repurchase agreements maturing in more than seven days. 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 each Tax Exempt
Fund's Board or the Adviser has determined under Board-approved guidelines are
liquid. As a result of an undertaking to a certain state securities commission,
INSURED INTERMEDIATE FUND will not invest more than 10% of its total assets in
restricted securities, excluding Rule 144A securities.
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
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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 the Fund might be unable to dispose of such
securities promptly or at reasonable prices.
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.
WHEN-ISSUED SECURITIES. Each Fund may invest up to 25% of its net assets
----------------------
in securities issued on a when-issued or delayed delivery 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 a Fund. The
purchase price to be paid by a Fund and the interest rate on the instruments to
be purchased are both selected when the Fund agrees to purchase the securities
on a "when-issued" basis. 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 such Fund 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, U.S.
Government securities or other liquid high-grade debt securities equal to the
amount of the 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 the Fund's commitment, the Fund will be required to deposit additional cash
or qualified securities into the account until equal to the value of the Fund's
commitment. When the securities to be purchased are issued, a 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
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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.
ZERO COUPON SECURITIES. Each Fund may invest in zero coupon municipal
----------------------
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.
Original issue discount earned on zero coupon securities must be included in a
Fund's income. Thus, to continue to qualify for tax treatment as a regulated
investment company, a Fund may be required to distribute as a dividend an amount
that is greater than the total amount of cash it actually receives. These
distributions must be made from a Fund's cash assets or, if necessary, from the
proceeds of sales of portfolio securities. A Fund will not be able to purchase
additional income-producing securities with cash used to make such
distributions, and its current income ultimately could be reduced as a result.
The market prices of zero coupon 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.
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 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, INSURED TAX
EXEMPT FUND's portfolio turnover rate was 57% and 37%, respectively. For the
fiscal years ended December 31, 1994 and 1995, INSURED INTERMEDIATE FUND'S
portfolio turnover rate was 210% and 47%, respectively.
HEDGING AND OPTION INCOME STRATEGIES
The Adviser may engage in certain options and futures strategies to hedge
each Fund's portfolio, in other circumstances permitted by the Commodities
Futures Trading Commission ("CFTC") and 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 each Tax Exempt Fund's Board 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."
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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 a Fund may leave the Fund in a worse position than if such
strategies were not used. A 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.
Although each Fund may engage in the strategies listed below, INSURED
INTERMEDIATE FUND does not intend to do so in the coming year and INSURED TAX
EXEMPT FUND will only engage in transactions involving futures contracts and
options thereon.
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. No Fund will 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. Each 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 a Fund
either sells or exercises the option, any profit eventually realized will be
reduced by the premium. Each 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 a 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.
Each 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
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be exercised if the market value of the underlying security increases to a level
greater than the exercise price, a 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
a 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 will be obligated to sell the security at less than its
market value. A 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 a Fund, to the extent described under "Investment Policies--
Restricted and Illiquid Securities" and therefore subject to each Fund's
limitation on investments in illiquid securities. In addition, a 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).
Each 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. A 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, a 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.
Each 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
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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, each
------------------
Tax Exempt Fund's Board has adopted non-fundamental investment guidelines to
govern a Fund's use of options that may be modified by each Board without
shareholder vote: (1) options will be purchased or written only when the
Adviser believes that there exists a liquid secondary market in such options;
and (2) a 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. Each Fund may
----------------------------------------------------
effectively terminate its right or obligation under an option by entering into a
closing transaction. If a 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 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 each Fund intends 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
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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, the 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 a Fund's ability to sell a portfolio security or make an investment
at a time when such a sale or investment might be advantageous.
Stock index options are settled exclusively in cash. If a 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. Each 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 it invests.
Each Fund may use financial futures contracts and options thereon to hedge
the debt portion of its portfolio against changes in the general level of
interest rates. A Fund may purchase a financial 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 the 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 a financial 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.
Each 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. A 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.
Each Fund will use futures contracts and options thereon solely in bona
fide hedging transactions or under other circumstances permitted by the CFTC and
will not enter into such investments for which the aggregate initial margin and
premiums exceed 5% of such Fund's total assets. This does not limit a Fund's
assets at risk to 5%. Each Fund has represented the foregoing to the CFTC.
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FUTURES GUIDELINES. In view of the risks involved in using futures
------------------
strategies described below, each Tax Exempt Fund's Board of Directors or
Trustees has adopted non-fundamental investment guidelines to govern the use of
such investments by the Fund that may be modified by each Board without
shareholder vote. A Fund will not purchase or sell futures contracts or related
options if, immediately thereafter, the sum of the amount of initial margin
deposits on such Fund's existing futures positions and 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 financial 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, a Fund is required to deposit with its custodian in a segregated
account in the name of the futures broker through which the transaction is
effected an amount of cash, U.S. Government securities or other liquid, high-
grade debt instruments generally equal to 3%-5% of the contract value. This
amount is known as "initial margin." When writing a put or call option on a
futures contract, margin also must be deposited in accordance with applicable
exchange rules. Initial margin on futures contracts is in the nature of a
performance bond or good-faith deposit that is returned to a 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 the 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.
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<PAGE>
Successful use by a Fund of futures contracts and 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 the 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.
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 each Fund intends to purchase or sell futures and
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 a 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.
Each Fund's activities in the futures and related options markets may
result in a higher portfolio turnover rate and additional transaction costs in
the form of added brokerage commissions; however, the Fund also may save on
commissions by using futures and related options as a hedge rather than buying
or selling individual securities or currencies in anticipation or as a result of
market movements.
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INSURANCE
The municipal bonds in each 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 original issuance (a "New Issue Insurance Policy"). An insured
municipal bond in a 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.
Each Tax Free Fund has purchased a Mutual Fund Insurance Policy ("Policy")
from AMBAC Indemnity Corporation ("AMBAC Indemnity"), a Wisconsin stock
insurance company, with its principal executive offices in New York City. The
Policy guarantees the payment of principal and interest on municipal bonds
purchased by a 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 a Fund. AMBAC Indemnity furnished each 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 a 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 a 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 a 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 a Fund. AMBAC Indemnity has
reserved the right at any time, upon 90 days' prior written notice to a Fund, to
refuse to insure any additional municipal bonds purchased by a Fund, on or after
the effective date of such notice. If AMBAC Indemnity so notifies a 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 a 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 a 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.
-13-
<PAGE>
The Policy does not guarantee the market value or yield of the insured
municipal bonds or the net asset value or yield of a Fund's shares. The Policy
will be effective only as to insured municipal bonds owned by a Fund. In the
event of a sale by a 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 a 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 a Fund in respect of such municipal bond. It is the intention of
each Fund, however, 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 insured securities which are not in default.
While a defaulted bond is held by a 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 Funds' method of valuing securities in default
and securities which have a significant risk of default.
Each Tax Free Fund may purchase a Secondary Market Insurance Policy from an
independent insurance company having a claims-paying ability rated AAA by S&P
and Aaa by Moody's which insures a particular bond for the remainder of its term
at a premium rate fixed at the time such bond is purchased by a 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. Each Fund may also purchase municipal bonds
which are already insured under a Secondary Market Insurance Policy. A
Secondary Market Insurance Policy could enable a 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 a Fund in determining
the net capital gain or loss realized by a Fund upon the sale of the bond.
In addition to the contract of insurance relating to each Tax Exempt Fund,
there is a contract of insurance between AMBAC Indemnity and Executive Investors
Trust, between AMBAC Indemnity and First Investors Multi-State Insured Tax Fund
and between AMBAC Indemnity and First Investors New York Insured Tax Free 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
-14-
<PAGE>
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 each 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.
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
-15-
<PAGE>
(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.
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. 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 Fund's assets will not cause a violation of the following
investment restrictions so long as percentage restrictions are observed by such
Fund at the time it purchases any security.
INSURED INTERMEDIATE FUND INSURED INTERMEDIATE FUND will not:
- -------------------------
(1) Issue senior securities.
(2) Purchase any security (other than obligations of the U.S. Government,
its agencies or instrumentalities) if as a result, with respect to 75% of the
Fund's total assets more than 5% of such assets would then be invested in
securities of a single issuer.
(3) With respect to 75% of its total assets, purchase more than 10% of the
outstanding voting securities of any one issuer or more than 10% of any class of
securities of one issuer (all debt and all preferred stock of an issuer are each
considered a single class for this purpose).
(4) Buy or sell real estate or interests in oil, gas or mineral
exploration, or senior securities (as defined in the 1940 Act); provided,
however, the Fund may invest in Municipal Instruments secured by real estate or
interests in real estate.
(5) 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.
(6) Make loans, except loans of portfolio securities and repurchase
agreements.
(7) 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 exceeds 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.
-16-
<PAGE>
The following investment restrictions are not fundamental and may be
changed without shareholder approval. The Fund will not:
(1) Invest more than 15% of its net assets in repurchase agreements
maturing in more than seven days or in other illiquid securities, including
securities that are illiquid by virtue of the absence of a readily available
market or legal or contractual restrictions as to resale.
(2) Invest more than 5% of its total assets in securities of companies
(including predecessors) which have been in operation for less than three years.
(3) 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.
(4) Make investments for the purpose of exercising control or management.
(5) Purchase or sell portfolio securities from or to the Adviser or any
trustee, director or officer thereof or of Series Fund, as principals.
(6) Invest in any securities of any issuer if, to the knowledge of the
Fund, any officer, trustee or director of Series Fund or of the Adviser owns
more than 1/2 of 1% of the outstanding securities of such issuer, and such
officers, trustees or directors who own more than 1/2 of 1% own in the aggregate
more than 5% of the outstanding securities of such issuer.
(7) 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 contracts, caps, floors and other
derivative instruments, engaging in swap transactions or investing in securities
or other instruments backed by physical commodities).
(8) 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.
(9) Pledge assets, except that the Fund may pledge its assets to secure
borrowings made in accordance with fundamental investment restriction (7) 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.
(10) 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
-17-
<PAGE>
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.
(11) 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 Series Fund, on behalf of the INSURED INTERMEDIATE 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. The Fund will not invest more than 10% of its total assets in
restricted securities, excluding Rule 144A Securities.
2. The Fund will not purchase puts, calls, straddles, spreads or any
combination thereof, if by reason thereof, the value of its aggregate investment
in such securities will exceed 5% of its total assets.
3. The Fund will not purchase or sell real estate limited partnership
interests.
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.
(2) Make loans (the purchase of a portion of an issue of publicly
distributed debt securities is not considered the making of a loan). In
addition, the Insured Tax Exempt Fund's Board of Directors may on the request of
broker-dealers or other institutional investors, which it deems qualified,
authorize the Fund to lend securities for the purpose of covering short
positions of the borrower, but only when the borrower pledges cash collateral to
the Fund and agrees to maintain such collateral so that it amounts at all times
to at least 100% of the value of the securities. Such security loans will not
be made if as a result the aggregate of such loans exceed 10% of the value of
the Fund's gross assets.
(3) Invest more than 5% of the value of its gross assets, at the time of
purchase, in securities of any one issuer (except obligations of the U.S.
Government).
(4) Purchase securities in an amount to exceed 5% of its gross assets, of
unseasoned issuers, including their predecessors, which have been in operation
less than three years.
-18-
<PAGE>
(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) Issue senior securities.
(7) 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.
(8) 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.
(9) Purchase or sell real estate, but this shall not prevent the Fund from
investing in municipal bonds or other obligations secured by real estate or
interests therein.
(10) Invest in oil, gas or other mineral exploration or development
programs.
(11) Purchase or retain the securities of any issuer, if, to the Fund's
knowledge, those officers and directors of the Adviser, who individually own
beneficially more than 1/2 of 1% of the outstanding securities of such issuer
together own beneficially more than 5% of such outstanding securities.
(12) Purchase securities which would not enable the Fund to qualify as a
regulated investment company qualified to pay exempt-interest dividends under
the Internal Revenue Code of 1986, as amended.
The Fund has adopted the following non-fundamental investment restrictions
which may be changed without shareholder approval. These 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 Directors, or the
Fund's investment adviser acting pursuant to authority delegated by the
Directors, 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 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
-19-
<PAGE>
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.
(7) Invest in real estate limited partnership interests or in interests in
real estate investment trusts that are not readily marketable.
The Fund has also filed the following undertaking to comply with
requirements of certain states 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 custodian can be found, the Fund will submit
to shareholders for their approval or disapproval, the matter of possible
liquidation of the Fund.
DIRECTORS OR TRUSTEES AND OFFICERS
The following table lists the Directors or Trustees and executive officers
of the Tax Exempt Funds, 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 Director or 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), Director or Trustee, 90 Buell Lane, East Hampton, NY 11937.
Retired; formerly Senior Vice President, James Talcott, Inc. (financial
institution).
ROGER L. GRAYSON* (39), Director or Trustee. Director, FIC and FICC; President
and Director, First Investors Resources, Inc.; Commodities Portfolio Manager.
-20-
<PAGE>
KATHRYN S. HEAD*+ (40), Director or 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), Director or Trustee, 1381 Fairway Oaks, Kiawah Island, SC
29455. Retired; formerly Senior Vice President, American Telephone & Telegraph
Company.
HERBERT RUBINSTEIN (74), Director or Trustee, 145 Elm Drive, Roslyn, NY 11576.
Retired; formerly President, Belvac International Industries, Ltd. and
President, Central Dental Supply.
JAMES M. SRYGLEY (63), Director or Trustee, 33 Hampton Road, Chatham, NJ 07982.
Principal, Hampton Properties, Inc. (property investment company).
JOHN T. SULLIVAN* (64), Director or Trustee and Chairman of the Board; Director,
FIMCO, FIC, FICC and ADM; Of Counsel, Hawkins, Delafield & Wood, Attorneys.
ROBERT F. WENTWORTH (66), Director or 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, Executive Investors
Trust, First Investors Multi-State Insured Tax Free Fund, First Investors New
York Insured Tax Free Fund, Inc. and First Investors Government Fund, Inc.
- -------------------------------
* These Directors or 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 Directors or Trustees, except for Mr. Wagner, hold
identical or similar positions with 13 other 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.
-21-
<PAGE>
The following table lists compensation paid to the Directors of Insured Tax
Exempt Fund for the fiscal year ended December 31, 1995.
<TABLE>
<CAPTION>
PENSION OR ESTIMATED TOTAL COMPENSATION
AGGREGATE RETIREMENT BENEFITS ANNUAL BENEFITS FROM FIRST INVESTORS
COMPENSATION ACCRUED AS PART OF UPON RETIREMENT FAMILY OF FUNDS PAID
DIRECTOR FROM FUND* FUND EXPENSES TO DIRECTORS*
- -------- ------------ ------------------- --------------- --------------------
<S> <C> <C> <C> <C>
James J. Coy $4,200 $-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.** 1,750 -0- -0- 15,500
Rex R. Reed 4,200 -0- -0- 37,200
Herbert Rubinstein 4,200 -0- -0- 37,200
James M. Srygley*** 4,200 -0- -0- 37,200
John T. Sullivan -0- -0- -0- -0-
Robert F. Wentworth 4,200 -0- -0- 37,200
The following table lists compensation paid to the Trustees of Series Fund
for the fiscal year ended December 31, 1995.
PENSION OR ESTIMATED TOTAL COMPENSATION
AGGREGATE RETIREMENT BENEFITS ANNUAL BENEFITS FROM FIRST INVESTORS
COMPENSATION ACCRUED AS PART OF UPON FAMILY OF FUNDS PAID
TRUSTEE FROM FUND* FUND EXPENSES RETIREMENT TO TRUSTEES*
- -------- ------------ ------------------- --------------- --------------------
James J. Coy $2,400 $-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.** 1,000 -0- -0- 15,500
Rex R. Reed 2,400 -0- -0- 37,200
Herbert Rubinstein 2,400 -0- -0- 37,200
James M. Srygley*** 2,400 -0- -0- 37,200
John T. Sullivan -0- -0- -0- -0-
Robert F. Wentworth 2,400 -0- -0- 37,200
</TABLE>
_________________
* Compensation to officers and interested Directors or Trustees of the Tax
Exempt Funds is paid by the Adviser. In addition, compensation to non-
interested Directors or Trustees of the Tax Exempt Funds 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.
-22-
<PAGE>
MANAGEMENT
Investment advisory services to each Fund are provided by First
Investors Management Company, Inc. pursuant to separate Investment Advisory
Agreements (each, an "Advisory Agreement") dated June 13, 1994. Each Advisory
Agreement was approved by the Board of Directors or Trustees of the applicable
Tax Exempt Fund, including a majority of the Directors or Trustees who are not
parties to such Fund's Advisory Agreement or "interested persons" (as defined in
the 1940 Act) of any such party ("Independent Directors or Trustees"), in person
at a meeting called for such purpose and by a majority of the public
shareholders of the applicable Fund.
Pursuant to each Advisory Agreement, FIMCO 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
applicable Tax Exempt Fund's Directors or Trustees. Each Advisory Agreement
also provides that FIMCO shall provide the applicable Fund with certain
executive, administrative and clerical personnel, office facilities and
supplies, conduct the business and details of the operation of such Fund and
assume certain expenses thereof, other than obligations or liabilities of such
Fund. Each Advisory Agreement may be terminated, with respect to a Fund, at any
time without penalty by the applicable Tax Exempt Fund's Directors or Trustees
or by a majority of the outstanding voting securities of such Fund, or by FIMCO,
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). Each 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 applicable Tax Exempt Fund's Directors or
Trustees or by a majority of the outstanding voting securities of such Fund,
and, in either case, by a vote of a majority of that Tax Exempt Fund's
Independent Directors or Trustees voting in person at a meeting called for the
purpose of voting on such approval.
Under Series Fund's Advisory Agreement, INSURED INTERMEDIATE FUND pays
the Adviser an annual fee, paid monthly of 0.60% of its average daily net
assets. Under INSURED TAX EXEMPT FUND's Advisory Agreement, it pays the Adviser
an annual fee, paid monthly, according to the following schedule:
Annual
Average Daily Net Assets Rate
- ---------------------------------------------- -------
Up to $250 million............................ 0.75%
In excess of $250 million up to $500 million.. 0.72
In excess of $500 million up to $750 million.. 0.69
Over $750 million............................. 0.66
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 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.
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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.
For the fiscal years ended December 31, 1993, 1994 and 1995, INSURED
TAX EXEMPT FUND paid $10,024,983, $9,654,489 and $9,356,534, respectively, in
advisory fees. For the fiscal period November 22, 1993 (commencement of
operations) through December 31, 1993, INSURED INTERMEDIATE FUND accrued $485 in
advisory fees, all of which were voluntarily waived by the Adviser. For the
fiscal year ended December 31, 1994, INSURED INTERMEDIATE FUND paid $6,294 in
advisory fees. For the same period, the Adviser voluntarily waived $20,794 in
advisory fees accrued by the INSURED INTERMEDIATE FUND. In addition, the
Adviser voluntarily reimbursed the INSURED INTERMEDIATE FUND $7,923 in expenses.
For the fiscal year ended December 31, 1995, INSURED INTERMEDIATE FUND paid
$22,374 in advisory fees. For the same period, the Adviser voluntarily waived
$15,982 in advisory fees accrued by the INSURED INTERMEDIATE FUND. In addition,
the Adviser voluntarily reimbursed the INSURED INTERMEDIATE FUND $11,742 in
expenses.
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
Each Tax Exempt Fund has entered into an Underwriting Agreement
("Underwriting Agreement") with First Investors Corporation ("Underwriter" or
"FIC") which requires the Underwriter to use its best efforts to sell shares of
the Funds. Pursuant to each Underwriting Agreement, the Underwriter shall bear
all fees and expenses incident to the registration and qualification of the
applicable Fund's 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 Fund's
shares, unless a Fund has agreed to bear such costs pursuant to a plan of
distribution. See "Distribution Plans." Each Underwriting Agreement was
approved by the applicable Tax Exempt Fund's Board of Directors or Trustees,
including a majority of the Independent Directors or Trustees. Each
Underwriting Agreement provides that it will continue in effect, with respect to
a Fund, from year to year only so long as such continuance is specifically
approved at least annually by the applicable Tax Exempt Fund's Board of
Directors or Trustees or by a vote of a majority of the outstanding voting
securities of that Fund, and in either case by the vote of a majority of such
Tax Exempt Fund's Disinterested Directors or Trustees, voting in person at a
meeting called for the purpose of voting on such approval. Each Underwriting
Agreement will terminate automatically in the event of its assignment.
For the fiscal years ended December 31, 1993, 1994 and 1995, FIC
received underwriting commissions with respect to INSURED TAX EXEMPT FUND of
$2,547,432, $1,033,292 and $698,289, respectively. For the same periods, FIC
reallowed an additional $495,968, $173,429 and $87,383, respectively, to
unaffiliated dealers. For the fiscal period November 22, 1993 (commencement of
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operations) through December 31, 1993 and the fiscal years ended December 31,
1994 and 1995, FIC received underwriting commissions with respect to INSURED
INTERMEDIATE FUND of $37,954, $72,466 and $36,160, respectively. For the same
periods, FIC reallowed an additional $4,254, $28,882 and $10,211, respectively,
to unaffiliated dealers.
DISTRIBUTION PLANS
As stated in the Funds' Prospectus, pursuant to a separate plan of
distribution for each class of shares adopted by each Tax Exempt Fund pursuant
to Rule 12b-1 under the 1940 Act ("Class A Plan" and "Class B Plan" and,
collectively, "Plans"), each Fund may reimburse or compensate, as applicable,
the Underwriter for certain expenses incurred in the distribution of that Fund's
shares and the servicing or maintenance of existing Fund shareholder accounts.
Each Plan was approved by the applicable Tax Exempt Fund's Board of
Directors or Trustees, including a majority of the Independent Directors or
Trustees, and by a majority of the outstanding voting securities of the relevant
class of each Fund. Each 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
applicable Tax Exempt Fund's Board of Directors or Trustees or by a vote of a
majority of the outstanding voting securities of the relevant class of shares of
that Fund. In either case, to continue, each Plan must be approved by the vote
of a majority of the Independent Directors or Trustees of the applicable Tax
Exempt Fund. Each Tax Exempt Fund's Board reviews quarterly and annually a
written report provided by the Treasurer of the amounts expended under the
applicable Plan and the purposes for which such expenditures were made. While
each Plan is in effect, the selection and nomination of the applicable Tax
Exempt Fund's Independent Directors or Trustees will be committed to the
discretion of such Independent Directors or Trustees then in office.
Each Plan can be terminated, with respect to a Fund, at any time by a
vote of a majority of the applicable Tax Exempt Fund's Independent Directors or
Trustees or by a vote of a majority of the outstanding voting securities of the
relevant class of shares of that Fund. Any change to each Class B Plan that
would materially increase the costs to that class of shares of a Fund or any
material change to each Class A Plan may not be instituted without the approval
of the outstanding voting securities of the relevant class of shares of that
Fund. Such changes also require approval by a majority of the applicable Tax
Exempt Fund's Independent Directors or Trustees.
In reporting amounts expended under the Plans to the Directors or
Trustees, FIMCO will allocate expenses attributable to the sale of each class of
a Fund's shares to such class based on the ratio of sales of such class to the
sales of both classes of shares. The fees paid by one class of a Fund's shares
will not be used to subsidize the sale of any other class of that Fund's shares.
For the fiscal year ended December 31, 1995, INSURED TAX EXEMPT FUND
paid $3,936,480 in 12b-1 fees pursuant to its Class A Plan. For the fiscal year
ended December 31, 1995, INSURED INTERMEDIATE FUND accrued $18,835 in 12b-1 fees
pursuant to its Class A Plan, all of which were waived by the Underwriter. For
the same period, the Underwriter incurred the following Class A Plan-related
expenses with respect to INSURED TAX EXEMPT FUND:
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Payments to Sales Payments to the
Advertising Personnel* Underwriter**
----------- --------------- ---------------
$0 $531,156 $3,936,480
* Represents service fees
** Represents distribution fees.
For the fiscal year ended December 31, 1995, INSURED TAX EXEMPT FUND
paid $9,876 in 12b-1 fees pursuant to its Class B Plan. For the fiscal year
ended December 31, 1995, INSURED INTERMEDIATE FUND paid $1,143 in 12b-1 fees
pursuant to its Class B Plan. With respect to the Class B Plans, all amounts
were paid to the Underwriter as distribution fees.
DETERMINATION OF NET ASSET VALUE
The municipal instruments in which each Fund invests are traded
primarily in the over-the-counter markets. Such securities are valued daily at
their fair value on the basis of valuations provided by a pricing service
approved by the applicable Tax Exempt Fund's Board. The pricing service uses a
computerized matrix system, which includes considerations of security type,
rating, market condition and yield data, as well as market quotations and prices
provided by market makers.
With respect to each Fund, "when-issued securities" are reflected in
the assets of a 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.
The Funds intend 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 applicable Tax Exempt Fund's Board 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 applicable Tax Exempt Fund's
Board ascribing a good faith value to the insurance or guarantee on any
municipal bond which is in, or is in significant risk of, default equal to the
difference between the insured or guaranteed security's market value and the
then-prevailing market rate for other, similar non-defaulting municipal bonds.
Each Tax Exempt Fund's Board 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
Securities and Exchange Commission ("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 U.S. 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.
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<PAGE>
ALLOCATION OF PORTFOLIO BROKERAGE
Each Fund expects that purchases and sales of portfolio securities
generally will be 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 commissions paid by the Fund
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.
At times the Adviser may engage in agency transactions and, in
effecting the purchase and sale of portfolio securities for the account of each
Fund, will seek 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) at a higher rate of commission if reasonable in relation to brokerage and
research services provided to the Fund 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, 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 in the First Investors Group of Funds; however, not all such
services will be used by the Adviser in connection with the Funds. 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
and any other fund in the First Investors Group of Funds, any series of
Executive Investors Trust 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 the
Fund bears to the aggregate size of the transaction orders simultaneously made
by other participants in the transaction. Each Tax Exempt Fund's Board of
Directors or Trustees has authorized and directed the Adviser to use dealer
concessions available in fixed-price underwritings of municipal bonds to pay for
research services which are beneficial in the management of each Fund's
portfolio.
INSURED TAX EXEMPT FUND paid no brokerage commissions for the fiscal
years December 31, 1993, 1994 and 1995. INSURED INTERMEDIATE FUND paid no
brokerage commissions for the period November 22, 1993 (commencement of
operations) through December 31, 1993 and for the fiscal years ended December
31, 1994 and 1995. With the approval of INSURED TAX EXEMPT FUND'S Board of
Directors, $65,007 of principal transactions were used to acquire research and
other services which benefitted the Fund.
REDUCED SALES CHARGES, ADDITIONAL EXCHANGE AND
REDEMPTION INFORMATION AND OTHER SERVICES
REDUCED SALES CHARGES--CLASS A SHARES
Reduced sales charges are applicable to purchases made at one time of
Class A 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
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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 Class A
shares. Class A shares purchased at net asset value, Class A shares of the
Money Market Funds, or shares owned under a Contractual Plan are not eligible
for the purchase of Class A 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 Class A
shares of any one or more of the Funds and of the other Eligible Funds to be
made within a period of thirteen months, provided said shares are currently
being offered to the general public and only in those states where such shares
may be legally sold, and thereby become eligible for the reduced sales charge
applicable to the total amount purchased. A Letter of Intent filed after the
date of investment is considered retroactive to the date of investment for
determination of the thirteen-month period. The Letter of Intent is not a
binding obligation on either the investor or the Fund. During the term of a
Letter of Intent, Administrative Data Management Corp. ("Transfer Agent") will
hold Class A shares representing 5% of each purchase in escrow, which shares
will be released upon completion of the intended investment.
Purchases of Class A 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 Class A shares and the net asset value of all Class B shares of a
Fund and of the other Eligible Funds, including Class B shares of the Money
Market Funds, currently owned, together with the aggregate offering price of
purchases to be made under the Letter of Intent. If all such shares are not so
purchased, a price adjustment is made, depending upon the actual amount invested
within such period, by the redemption of sufficient Class A 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 FIC, Class A
-----------------------------
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 Class A shares and the net asset value of all Class B
shares of a Fund and of the other Eligible Funds, including Class B shares of
the Money Market Funds, previously purchased and then owned, plus the value of
Class A shares being purchased at the current public offering
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<PAGE>
price, amount to $25,000 or more. Such quantity discounts may be modified or
terminated at any time by the Underwriter.
PURCHASE OF SHARES. When you open a Fund account, you must specify
-------------------
which class of shares you wish to purchase. If not, your order will be
processed as follows: (1) if you are opening an account with a new registration
with First Investors your order will not be processed until the Fund receives
notification of which class of shares to purchase; (2) if you have existing
First Investors accounts solely in either Class A shares or Class B shares with
the identical registration, your investment in the Fund will be made in the same
class of shares as your existing account(s); (3) if you are an existing First
Investors shareholder and own a combination of Class A and Class B shares with
an identical registration, your investment in the Fund will be made in Class B
shares; and (4) if you own in the aggregate at least $250,000 in any combination
of classes, your investment will be made in Class A shares.
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 the
same class of shares of another Eligible Fund. 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
Class A shares into the same class of another 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 Class A shares of a Fund at net asset value through payments from a
Systematic Withdrawal Plan you maintain with any other Eligible Fund. Scheduled
investments may be made on a monthly, quarterly, semi-annual or annual basis.
You may also elect to invest Systematic Withdrawal Plan payments of Class A
shares from a Fund into the same class of another Eligible Fund, including the
Money Market Funds. If your
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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 the same class of any other 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. If you own Class B shares in a non-
retirement account, your Plan payments will be subject to the applicable
contingent deferred sales charge ("CDSC"). 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.
CONVERSION OF CLASS B SHARES. Class B Shares of a Fund will
----------------------------
automatically convert to Class A shares of that Fund, based on the relative net
asset values per share of the two classes, as of the close of business on the
first business day of the month in which the eighth anniversary of the initial
purchase of such Class B shares occurs. For these purposes, the date of initial
purchase shall mean (1) the first business day of the month in which such Class
B shares were issued, or (2) for Class B shares obtained through an exchange or
a series of exchanges, the first business day of the month in which the original
Class B shares were issued. For conversion purposes, Class B shares purchased
through the reinvestment of dividends and other distributions paid in respect of
Class B shares will be held in a separate sub-account. Each time any Class B
shares in the shareholder's regular account (other than those in the sub-
account) convert to Class A shares, a pro rata portion of the Class B shares in
the sub-account also will convert to Class A shares. The portion will be
determined by the ratio that the shareholder's Class B
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<PAGE>
shares converting to Class A shares bears to the shareholder's total Class B
shares not acquired through dividends and other distributions.
The availability of the conversion feature is subject to the
continuing applicability of a ruling of the Internal Revenue Service ("IRS"), or
an opinion of counsel, that: (1) the dividends and other distributions paid on
Class A and Class B shares will not result in "preferential dividends" under the
Code; and (2) the conversion of shares does not constitute a taxable event. If
the conversion feature ceased to be available, the Class B shares of the Fund
would not be converted and would continue to be subject to the higher ongoing
expenses of the Class B shares beyond eight years from the date of purchase.
FIMCO has no reason to believe that these conditions for the availability of the
conversion feature will not continue to be met.
If either Tax Exempt Fund implements any amendments to its Class A
Plan that would increase materially the costs that may be borne under such Plan
by Class A shareholders, a new target class into which Class B shares will
convert will be established, unless a majority of Class B shareholders, voting
separately as a class, approve the proposal.
WAIVERS OF CDSC ON CLASS B SHARES. The CDSC imposed on Class B shares
---------------------------------
does not apply to: (a) any redemption pursuant to the tax-free return of an
excess contribution to an individual retirement account ("IRA") or other
qualified retirement plan if the Fund is notified at the time of such request;
(b) any redemption of a lump-sum or other distribution from qualified retirement
plans or accounts provided the shareholder has attained the minimum age of 70
1/2 years and has held the Class B shares for a minimum period of three years;
(c) any redemption by advisory accounts managed by the Adviser or any of its
affiliates or for shares held by the Adviser or any of its affiliates; (d) any
redemption by a tax-exempt employee benefit plan if continuance of the
investment would be improper under applicable laws or regulations; (e) any
redemption or transfer of ownership of Class B shares following the death or
disability, as defined in Section 72(m)(7) of the Code, of a shareholder if the
Fund is provided with proof of death or disability and with all documents
required by the Transfer Agent within one year after the death or disability;
and (f) any redemption of shares purchased during the period April 29, 1996
through June 30, 1996 with the proceeds from a redemption of shares of a fund in
another fund group for which no sales charge was paid, other than a money market
fund or shares held in a retirement plan account. For more information on what
specific documents are required, call Shareholder Services at 1-800-423-4026.
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
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<PAGE>
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.
REINVESTMENT AFTER REDEMPTION. If you redeem Class A or Class B
-----------------------------
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 class of the
same Fund or any other Eligible Fund (including the Money Market Funds), at net
asset value, on the date the Transfer Agent receives your purchase request. If
you reinvest the entire proceeds of a redemption of Class B shares for which a
CDSC has been paid, you will be credited for the amount of the CDSC. If you
reinvest less than the entire proceeds, you will be credited with a pro rata
portion of the CDSC. All credits will be paid in Class B shares of the fund
into which the reinvestment is being made. The period you owned the original
Class B shares prior to redemption will be added to the period of time you own
Class B shares acquired through reinvestment for purposes of determining (a) the
applicable CDSC upon a subsequent redemption and (b) the date on which Class B
shares automatically convert to class A shares. If your reinvestment is into a
new account, 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 Tax Exempt Funds, 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.
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 the sum of its investment
company taxable income (consisting generally of taxable net investment income
and net short-term capital gain) plus its net interest income excludable from
gross income under section 103(a) of the Code ("Distribution
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<PAGE>
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 other income (including gains from options or futures) derived
with respect to its business of investing in securities ("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, options or futures that were
held for less than three months ("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 (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 paid by a 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); each Fund intends to continue
to satisfy this requirement. The aggregate dividends excludable from a Fund
shareholder's gross income may not exceed the Fund's net tax-exempt income. The
shareholders' treatment of dividends from a 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.
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 by shareholders for the year in which that December 31 falls.
Each Fund will be subject to a nondeductible 4% excise tax to the
extent it fails to distribute by the end of any calendar year substantially all
of its ordinary (taxable) 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.
If shares of a 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 a Fund receiving interest on such bonds, a
proportionate part of the exempt-interest 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 any Fund because,
for users of certain of these facilities, the interest on such bonds is not
exempt from Federal income tax. For these purposes,
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<PAGE>
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 the 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 Prospectuses; they
are only included in the calculation of whether a recipient's income exceeds the
established amounts.
Each Fund may acquire zero coupon municipal securities issued with
original issue discount. As a holder of those securities, a Fund must take into
account 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. Because each Fund annually must distribute substantially all of its net
tax-exempt income, including any original issue discount on Municipal
Instruments, to satisfy the Distribution Requirement, a 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 (the excess of net long-term capital gain over net short-term
capital loss). In addition, any such gains may be realized on the disposition
of securities held for less than three months. Because of the Short-Short
Limitation, any such gains would reduce the Fund's ability to sell other
securities or options or futures held for less than three months that it might
wish to sell in the ordinary course of its portfolio management.
Each 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 a 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, a Fund may
elect to include market discount in its gross income currently, for each taxable
year to which it is attributable.
If a 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 a 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.
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
and futures contracts derived by a Fund with respect to its business of
investing in securities will qualify as
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<PAGE>
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 beyond the time when it
otherwise would be advantageous to do so, in order for the Fund to continue to
qualify as a RIC.
PERFORMANCE INFORMATION
A Fund may advertise its performance in various ways.
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") 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
Total return is calculated by finding the average annual change in the
value of an initial $1,000 investment over the period. In calculating the
ending redeemable value for Class A shares, each Fund will deduct the maximum
sales charge of 6.25% (as a percentage of the offering price) from the initial
$1,000 payment and, for Class B shares, the applicable CDSC imposed on a
redemption of Class B shares held for the period is deducted. All dividends and
other distributions are assumed to have been reinvested at net asset value on
the initial investment ("P").
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.
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<PAGE>
Average annual return and total return computed at the public offering
price (maximum sales charge for Class A shares and applicable CDSC for Class B
shares) for the periods ended December 31, 1995 are set forth in the tables
below:
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN/1/
Insured Intermediate Fund/2/ Insured Tax Exempt Fund/2/
---------------------------- --------------------------
Class A Shares Class B Shares Class A Shares Class B Shares
--------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C>
One Year 6.45% N/A 8.74% N/A
Five Years N/A N/A 6.09 N/A
Ten Years N/A N/A 7.32 N/A
Life of Fund/3/ 1.95 N/A N/A N/A
1/12/95/4/ to 12/31/95 N/A 8.00% N/A 9.99%
</TABLE>
<TABLE>
<CAPTION>
TOTAL RETURN/1/
Insured Intermediate Fund/2/ Insured Tax Exempt Fund/2/
---------------------------- --------------------------
Class A Shares Class B Shares Class A Shares Class B Shares
--------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C>
One Year 6.45% N/A 8.74% N/A
Five Years N/A N/A 34.41 N/A
Ten Years N/A N/A 102.62 N/A
Life of Fund/3/ 4.16 N/A N/A N/A
1/12/95/4/ to 12/31/95 N/A 7.73% N/A 9.64%
</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 total return and total return
computed at net asset value for the periods ended December 31, 1995 are set
forth in the tables below:
AVERAGE ANNUAL TOTAL RETURN/1/
<TABLE>
<CAPTION>
Insured Intermediate Fund/2/ Insured Tax Exempt Fund/2/
---------------------------- --------------------------
Class A Shares Class B Shares Class A Shares Class B Shares
--------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C>
One Year 13.50% N/A 16.01% N/A
Five Years N/A N/A 7.47 N/A
Ten Years N/A N/A 8.01 N/A
Life of Fund/3/ 5.16 N/A N/A N/A
1/12/95/4/ to 12/31/95 N/A 12.71% N/A 14.79%
</TABLE>
- --------------------
/1/ All return figures reflect the current maximum sales charge of 6.25%.
Prior to July 1, 1993, the maximum sales charge for INSURED TAX EXEMPT FUND was
6.90%. Prior to December 29, 1989, the maximum sales charge for INSURED TAX
EXEMPT FUND was 7.25%. Prior to January 12, 1995, the maximum sales charge for
INSURED INTERMEDIATE FUND was 3.50%.
/2/ Certain expenses of the Tax Exempt Funds have been waived from commencement
of operations through December 31, 1995. Accordingly, return figures are higher
than they would have been had such expenses not been waived.
/3/ INSURED INTERMEDIATE FUND commenced operations on November 22, 1993.
/4/ Commencement of offering of Class B shares.
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<PAGE>
TOTAL RETURN/1/
<TABLE>
<CAPTION>
Insured Intermediate Fund/2/ Insured Tax Exempt Fund/2/
---------------------------- --------------------------
Class A Shares Class B Shares Class A Shares Class B Shares
--------------- --------------- --------------- ---------------------------
<S> <C> <C> <C> <C>
One Year 13.50 N/A 16.01 N/A
Five Years N/A N/A 43.36 N/A
Ten Years N/A N/A 116.09 N/A
Life of Fund/3/ 11.18 N/A N/A N/A
1/12/95/4/ to 12/31/95 N/A 12.27% N/A 14.27%
</TABLE>
Yield 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 the
Fund outstanding during the base period and entitled to receive dividends and
(B) the per share maximum public offering price for Class A shares or the net
asset value for Class B shares of the Fund on the last day of the base
period. The result is annualized by compounding on a semi-annual basis to
determine the Fund's yield. For this calculation, interest earned on debt
obligations held by the 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 receivables-backed securities such as GNMA
Certificates, based on cost). Dividends on equity securities are accrued
daily at their estimated stated dividend rates.
Each 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 a Fund's tax-exempt yield by a factor designed to show the
approximate yield that a taxable investment would have to earn to produce an
after-tax yield equal to the Fund's tax-exempt yield.
The yield and tax-equivalent yield for INSURED TAX EXEMPT FUND Class A
shares for the thirty day period ended December 31, 1995 (assuming a Federal
tax rate of 36%) was 4.56% and 7.13%, respectively. The yield and tax-
equivalent yield for INSURED TAX EXEMPT FUND Class B shares for the same
period (assuming a Federal Tax rate of 36%) was 4.19% and 6.55%,
respectively. The yield and tax-equivalent yield (assuming the same tax rate)
for INSURED INTERMEDIATE FUND Class A shares for the thirty days ended
December 31, 1995 was 4.54% and 7.09%, respectively. The yield and tax-
equivalent yield for INSURED INTERMEDIATE FUND Class B shares for the same
period (assuming a Federal Tax rate of 36%) was 3.90% and 6.09%,
respectively. The maximum Federal tax rate during this period was 39.6%.
During this period, certain expenses of INSURED INTERMEDIATE FUND have been
waived or
- ----------------------
/1/ All return figures reflect the current maximum sales charge of 6.25%.
Prior to July 1, 1993, the maximum sales charge for INSURED TAX EXEMPT FUND was
6.90%. Prior to December 29, 1989, the maximum sales charge for INSURED TAX
EXEMPT FUND was 7.25%. Prior to January 12, 1995, the maximum sales charge for
INSURED INTERMEDIATE FUND was 3.50%.
/2/ Certain expenses of the Tax Exempt Funds have been waived from
commencement of operations through December 31, 1995. Accordingly, return
figures are higher than they would have been had such expenses not been waived.
/3/ INSURED INTERMEDIATE FUND commenced operations on November 22, 1993.
/4/ Commencement of offering of Class B shares.
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<PAGE>
reimbursed. Accordingly yield and tax-equivalent yield figures are higher than
they would have been had such expenses not been waived or reimbursed.
The distribution rate for each 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 Class A shares of INSURED INTERMEDIATE
FUND and INSURED TAX EXEMPT FUND calculated using the offering price was
4.81% and 4.75%, respectively. The distribution rate for the twelve-month
period ended December 31, 1995 for Class A shares of INSURED INTERMEDIATE
FUND and INSURED TAX EXEMPT FUND calculated at net asset value was 5.13% and
5.07%, respectively. The distribution rate for the period January 12, 1995
through December 31, 1995 for Class B shares of INSURED INTERMEDIATE FUND and
INSURED TAX EXEMPT FUND calculated using net asset value was 4.55% and 4.23%,
respectively. During this period certain expenses of INSURED INTERMEDIATE
FUND were waived. Accordingly, the distribution rates are higher than they
would have been had such expenses not been waived.
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 Fund of past or future yield
or return. Examples of typical graphs and charts depicting such historical
performance, compounding and hypothetical returns are included in Appendix D.
A Fund may include in advertisements and sales literature, information,
examples and statistics that illustrate the effect of taxable versus tax-free
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 gains distributions in additional shares. The examples
used will be for illustrative purposes only and are not representations by
any Fund of past or future yield or return.
From time to time, in reports and promotional literature, a Fund may
compare its performance to, or cite the historical performance of, U.S.
Treasury bills, notes and bonds, or indices of broad groups of unmanaged
securities considered to be representative of, or similar to, that 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.
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
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<PAGE>
from one star (lowest) to five stars (highest). Morningstar ratings are
calculating from the funds' three-, five-, and ten-year average annual returns
(when available) and a risk factor that reflects the fund performance relative
to three-month Treasury bill monthly returns Funds'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.
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.
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.
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.
TRANSFER AGENT. Administrative Data Management Corp., 581 Main Street,
Woodbridge, NJ 07095-1198, an affiliate of FIMCO and FIC, acts as transfer agent
for each Fund and as redemption agent for regular redemptions. The fees charged
to a 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 a Fund by the Transfer Agent are assumed by the
Underwriter. The Transfer Agent reserves the right to change the fees on prior
notice to the Fund. Upon request from shareholders, the Transfer Agent will
provide an account history. For account histories covering the most
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<PAGE>
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, INSURED TAX EXEMPT FUND paid $842,095 in transfer agency
fees. For the fiscal year ended December 31, 1995, INSURED INTERMEDIATE FUND
accrued $7,523 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. Series Fund is organized as an entity known as a
"Massachusetts business trust." Under Massachusetts law, shareholders of such a
trust may, under certain circumstances, be held personally liable for the
obligations of the Series Fund. The Declaration of Trust however, contains an
express disclaimer of shareholder liability for acts or obligations of the
Series Fund and requires that notice of such disclaimer be given in each
agreement, obligation, or instrument entered into or executed by the Series
Fund or the Trustees. The Declaration of Trust provides for indemnification out
of the property of the Fund of any shareholder held personally liable for the
obligations of the Series Fund. The Declaration of Trust also provides that the
Series Fund shall, upon request, assume the defense of any claim made against
any shareholder for any act or obligation of the Series Fund and satisfy any
judgment thereon. Thus, the risk of a shareholder's incurring financial loss on
account of shareholder liability is limited to circumstances in which the
Series Fund itself would be unable to meet its obligations. The Adviser
believes that, in view of the above, the risk of personal liability to
shareholders is immaterial and extremely remote. The Declaration of Trust
further provides that the Trustees will not be liable for errors of judgment or
mistakes of fact or law, but nothing in the Declaration of Trust protects a
Trustee against any liability to which he would otherwise be subject by reason
of willful misfeasance, bad faith, gross negligence, or reckless disregard of
the duties involved in the conduct of his office. The Series Fund may have an
obligation to indemnify Trustees and officers with respect to litigation.
5% SHAREHOLDERS. As of April 1, 1996, John W. Roberts, 1316 Indian
---------------
Mound W, Bloomfield Hills, MI 48301, beneficially owned 6.2% of the
outstanding Class A shares of INSURED INTERMEDIATE FUND.
As of April 1, 1996, the following beneficially owned more than 5% of
the outstanding Class B shares of the Fund listed below:
Fund % of Shares Shareholder
---- ----------- -----------
INSURED INTERMEDIATE FUND 19.7% Alice E. Heimbold
103 Atlantic Avenue
Spring Lake, NJ 07762-1116
14.6% Alexander J. Rota
363 Van Wick Lake Road
Fishkill, NY 12524
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<PAGE>
% of Shares Shareholder
----------- -----------
10.0% Mitchell Brodkin
Cedarbrook Hill
Apt. 109A
Vyncote, PA 19095
9.8% William A. Bloomhall
932 Mariner Point
760 Sextant Drive
Sanibel, FL 33957
9.7% Shirley M. Pusko
8129 W. 87th Street
Hickory Hills, IL 60457
7.3% James J. Rahner
424 Darby Road
Havertown, PA 19082
INSURED TAX EXEMPT FUND 12.6% David M. Watkins
5353 N. Federal Hwy, #404
Fort Lauderdale, FL 33308
8.3% Sally M. Topp
111 Elsworth Avenue
New Haven, CT 06511-4241
5.0% Mellie O. Walker
2000 English Cedar Circle
Virginia Beach, VA 23451
TRADING BY PORTFOLIO MANAGERS AND OTHER ACCESS PERSONS. Pursuant to
------------------------------------------------------
Section 17(j) of the 1940 Act and Rule 17j-1 thereunder, each Fund and the
Adviser have adopted Codes of Ethics restricting personal securities trading by
portfolio managers and other access persons of the Fund. Among other things,
such persons: (a) must have all 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 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
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<PAGE>
withdrawn as a result of changes in, or unavailability of, such information,
or based on other circumstances.
The ratings are based, in varying degrees, on the following
considerations:
1. Likelihood of default-capacity and willingness of the obligor
as to the timely payment of interest and repayment of
principal in accordance with the terms of the obligation;
2. Nature of and provisions of the obligation;
3. Protection afforded by, and relative position of, the
obligation in the event of bankruptcy, reorganization, or
other arrangement under the laws of bankruptcy and other laws
affecting creditors' rights.
AAA Debt rated "AAA" has the highest rating assigned by S&P.
Capacity to pay interest and repay principal is extremely strong.
AA Debt rated "AA" has a very strong capacity to pay interest
and repay principal and differs from the higher rated issues only in small
degree.
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.
-42-
<PAGE>
CCC Debt rated "CCC" has a currently identifiable vulnerability to
default and is dependent upon favorable business, financial, and economic
conditions to meet timely payment of interest and repayment of principal. In the
event of adverse business, financial or economic conditions, it is not likely to
have the capacity to pay interest and repay principal. The "CCC" rating category
is also used for debt subordinated to senior debt that is assigned an actual or
implied "B" or "B-" rating.
CC The rating "CC" typically is applied to debt subordinated to
senior debt that is assigned an actual or implied "CCC" rating.
C The rating "C" typically is applied to debt subordinated to senior
debt which is assigned an actual or implied "CCC-" debt rating. The "C"
rating may be used to cover a situation where a bankruptcy petition has been
filed, but debt service payments are continued.
CI The rating "CI" is reserved for income bonds on which no interest
is being paid.
D Debt rated "D" is in payment default. The "D" rating category is
used when interest payments or principal payments are not made on the date due
even if the applicable grace period has not expired, unless S&P believes that
such payments will be made during such grace period. The "D" rating also will
be used upon the filing of a bankruptcy petition if debt service payments are
jeopardized.
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 onsidered 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" Bond 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
-43-
<PAGE>
any great length of time. Such bonds lack outstanding investment characteristics
and in fact have speculative characteristics as well.
Ba Bonds which are rated "Ba" are judged to have speculative elements;
their future cannot be considered as well-assured. Often the protection of
interest and principal payments may be very moderate, and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B Bonds which are rated "B" generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
Caa Bonds which are rated "Caa" are of poor standing. Such issues may
be in default or there may be present elements of danger with respect to
principal or interest.
Ca Bonds which are rated "Ca" represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings.
C Bonds which are rated "C" are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
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.
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:
-44-
<PAGE>
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.
APPENDIX C
DESCRIPTION OF COMMERCIAL PAPER RATINGS
STANDARD & POOR'S RATINGS GROUP
-------------------------------
S&P's 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 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.
-45-
<PAGE>
- Well-established access to a range of financial markets and
assured sources of alternate liquidity.
-46-
<PAGE>
APPENDIX D
[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.
<PAGE>
FINANCIAL STATEMENTS
as of December 31, 1995
-47-
<PAGE>
Portfolio of Investments
FIRST INVESTORS INSURED INTERMEDIATE TAX EXEMPT SERIES
(A Series of First Investors Series Fund)
December 31, 1995
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Amount
Invested
For Each
Principal $10,000 of
Amount Security Value Net Assets
- ---------- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MUNICIPAL BONDS--100.1%
Alaska--3.0%
$ 200M Anchorage General Obligation 6 1U2%, 7/1/2004 $ 225,000 $ 304
- ---------- ------------------------------------------------------------------------------------------------
Arizona--12.3%
Maricopa County
Unified School District General Obligation:
300M #11 (Peoria) 7%, 7/1/2001* 339,375 460
250M #80 (Chandler) 6.6%, 7/1/2006 286,875 387
250M Phoenix Civic Impt. Corp. Mun. Facs. Excise Tax Rev. 6 3U4%, 7/1/2004 284,375 384
- ---------- ------------------------------------------------------------------------------------------------
910,625 1,231
- ---------- ------------------------------------------------------------------------------------------------
Arkansas--3.0%
200M Arkansas St. Fin. Auth. Water Rev. 6.4%, 6/1/2002* 223,750 303
- ---------- ------------------------------------------------------------------------------------------------
California--6.7%
150M Pittsburg Pub. Fing. Auth. Wastewater Rev. 6.8%, 6/1/2001 170,250 230
300M San Diego Pub. Fing. Auth. Sewer Rev. 6%, 5/15/2005 327,750 443
- ---------- ------------------------------------------------------------------------------------------------
498,000 673
- ---------- ------------------------------------------------------------------------------------------------
Illinois--23.5%
250M Chicago General Obligation 6 1U4%, 10/31/2001 271,875 368
250M Chicago Park District 6%, 1/1/2007 269,063 364
200M Chicago Wastewater Transmission Rev. 6 3U4%, 11/15/2000* 225,000 304
200M Cook County High School District General Obligation
250M Northwest Subn. Mun. Jt. Action Water Agy. 6.35%, 5/1/2006 277,812 376
400M Regional Transportation Authority 7 3U4%, 6/1/2003 478,500 647
- ---------- ------------------------------------------------------------------------------------------------
1,735,500 2,347
- ---------- ------------------------------------------------------------------------------------------------
Indiana--2.3%
150M Valparaiso Indpt. Multi-Schools Bldg. Corp. 6 5U8%, 7/1/2002* 170,437 230
- ---------- ------------------------------------------------------------------------------------------------
</TABLE>
1
<PAGE>
<TABLE>
<S> <C> <C> <C>
Kentucky--3.7%
200M Louisville & Jefferson County Met. Sewer District 10%, 5/15/2004 270,250 365
- ---------- ------------------------------------------------------------------------------------------------
Louisiana--2.7%
175M Louisiana General Obligation 7%, 5/1/2001 197,312 267
- ---------- ------------------------------------------------------------------------------------------------
Michigan--10.4%
1,000M Brighton Area School District General Obligation Zero Cpn. 5/1/2005* 313,750 425
250M Grand Ledge School District 6.6%, 5/1/2004 288,750 390
150M Morley-Stanwood Cmnty. School 6 1U2%, 5/1/2005 168,563 229
- ---------- ------------------------------------------------------------------------------------------------
771,063 1,044
- ---------- ------------------------------------------------------------------------------------------------
New Jersey--3.1%
200M New Jersey Economic Dev. Auth. Mkt. Transition Fac. Rev. 7%, 7/1/2004 232,250 314
- ---------- ------------------------------------------------------------------------------------------------
New York--10.4%
New York City General Obligati
150M 6 5U8%, 8/1/2002* 171,000 231
250M 8%, 8/1/2005 313,438 424
Niagara Falls Bridge Commission:
100M 6 1U8%, 10/1/2002 111,750 151
150M 6.3%, 10/1/2002* 169,125 229
- ---------- ------------------------------------------------------------------------------------------------
765,313 1,035
- ---------- ------------------------------------------------------------------------------------------------
Ohio--3.1%
200M Columbus City Sch. Dist. General Obligation 6.65%, 12/1/2002* 229,500 311
- ---------- ------------------------------------------------------------------------------------------------
Pennsylvania--3.1%
200M Pennsylvania Intergovernmental Coop. Auth. Special Tax Rev.
7%, 6/15/2004 229,750 311
- ---------- ------------------------------------------------------------------------------------------------
Puerto Rico--1.9%
125M Puerto Rico Electrical Power Auth. Rev. 6 1U2%, 7/1/2005 142,031 192
- ---------- ------------------------------------------------------------------------------------------------
Rhode Island--3.1%
200M Rhode Island Depositors Econ. Protection Corp. 7.1%, 8/1/2001* 230,000 311
- ---------- ------------------------------------------------------------------------------------------------
Texas--4.6%
300M Harris County Toll Road General Obligation 6 1U2%, 8/15/2002* 339,375 459
Washington--3.2%
$ 200M Snohomish & Island Counties School District General Obligation
#401 (Stanwood), 7%, 12/15/2005 $ 235,000 $ 317
- ---------- ------------------------------------------------------------------------------------------------
Total Value of Municipal Bonds (cost $7,014,821) 100.1% 7,405,156 10,014
Excess of Liabilities Over Other Assets (.1) (10,215) (4)
- ---------- --------------------------------------------------------------------------------------------------
Net Assets 100.0% $7,394,941 $10,000
- ---------- --------------------------------------------------------------------------------------------------
</TABLE>
* Municipal Bonds which have been prerefunded are shown maturing at the
prerefunded
2
<PAGE>
Statement of Assets and Liabilities
FIRST INVESTORS SERIES FUND
December 31, 1995
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Insured
Intermediate Investment Special Total
Blue Chip Tax Exempt Grade Situations Return
Series Series Series Series Series
- ---------------------------------------------------- ------------ ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Assets
Investments in securities:
At identified cost 136,898,998 7,014,821 47,295,021 109,869,687 46,149,118
============ ========== =========== ============ ===========
At value (Note 1A) 175,440,598 7,405,156 50,001,625 129,622,353 53,907,522
Cash 330,859 28,926 221,518 355,194 191,372
Receivables:
Investment securities sold -- -- -- 90,000 1,319,304
Interest and dividends 273,470 107,455 945,631 25,465 388,170
Trust shares sold 706,460 3,695 181,039 647,379 50,217
Other assets 511 -- 64 32 394
------------ ---------- ----------- ------------ -----------
Total Assets 176,751,898 7,545,232 51,349,877 130,740,423 55,856,979
------------ ---------- ----------- ------------ -----------
Liabilities
Payables:
Dividends payable January 15, 1996 451,999 8,278 68,284 264,262 16,556
Trust shares redeemed 316,480 -- 70,371 392,391 39,879
Investment securities purchased -- 139,581 -- -- --
Accrued advisory fee 109,524 2,138 27,316 80,851 34,710
Accrued expenses 121,079 294 20,466 106,440 54,128
------------ ---------- ----------- ------------ -----------
Total Liabilities 999,082 150,291 186,437 843,944 145,273
------------ ---------- ----------- ------------ -----------
Net Assets $175,752,816 $7,394,941 $51,163,440 $129,896,479 $55,711,706
============ ========== =========== ============ ===========
Net Assets Consist of:
Capital paid in 136,917,426 7,213,817 48,444,877 110,143,813 47,765,707
Undistributed net investment income 293,790 2,168 36,959 -- 190,956
Accumulated net realized loss on
investment transactions -- (211,379) (25,000) -- (3,361)
Net unrealized appreciation in value
of investments 38,541,600 390,335 2,706,604 19,752,666 7,758,404
------------ ---------- ----------- ------------ -----------
Total 175,752,816 7,394,941 51,163,440 129,896,479 55,711,706
============ ========== =========== ============ ===========
Trust shares outstanding (Note 2):
Class A 9,889,591 1,199,030 4,833,770 6,384,238 4,273,021
Class B 319,466 64,576 112,740 233,987 20,870
Net asset value and redemption
price per share--Class A $17.22 $5.85 $10.34 $19.63 $12.97
============ ========== =========== ============ ===========
</TABLE>
3
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Maximum offering price per share--Class A
(Net asset value/.9375)* $18.37 $6.24 $11.03 $20.94 $13.83
============ ========== =========== ============ ===========
Net asset value and offering price
per share--Class B $17.16 $5.85 $10.35 $19.51 $12.92
============ ========== =========== ============ ===========
</TABLE>
*On purchases of $25,000 or more, the sales charge is reduced.
See notes to financial
Statement of Operations
FIRST INVESTORS SERIES FUND
Year Ended December 31, 1995
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Insured
Intermediate Investment Special Total
Blue Chip Tax Exempt Grade Situations Return
Series Series Series Series Series
- ------------------------------------------ ---------- ------------ ----------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Investment Income
Income:
Interest $ 713,848 $360,538 $3,576,142 $ 1,334,007 $ 1,889,963
Dividends 3,310,436 -- -- 332,633 566,696
Consent fees -- -- 68,783 -- --
----------- -------- ---------- ----------- -----------
Total income 4,024,284 360,538 3,644,925 1,666,640 2,456,659
----------- -------- ---------- ----------- -----------
Expenses (Note 4):
Advisory fee 1,483,159 38,356 363,919 1,105,516 528,053
Shareholder servicing costs 476,636 7,523 135,205 458,571 185,483
Distribution plan expenses--Class A 438,127 18,835 144,194 325,418 158,092
Distribution plan expenses--Class B 22,735 1,143 4,572 20,788 1,076
Reports and notices to shareholders 75,194 701 10,859 82,274 30,332
Professional fees 33,525 8,446 12,507 19,957 19,156
Custodian fees 22,756 1,868 8,699 21,321 24,788
Other expenses 45,217 2,596 15,443 29,535 17,677
----------- -------- ---------- ----------- -----------
Total expenses 2,597,349 79,468 695,398 2,063,380 964,657
Less: Expenses waived or assumed (370,790) (55,950) (179,800) (276,379) (132,013)
Custodian fees paid indirectly (16,780) -- (8,270) (21,316) --
----------- -------- ---------- ----------- -----------
Net expenses 2,209,779 23,518 507,328 1,765,685 832,644
----------- -------- ---------- ----------- -----------
Net investment income (loss) 1,814,505 337,020 3,137,597 (99,045) 1,624,015
----------- -------- ---------- ----------- -----------
Realized and Unrealized Gain (Loss)
</TABLE>
4
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
on Investments (Note 3):
Net realized gain (loss) on investments 5,979,563 (12) 67,631 4,776,742 1,809,004
Net unrealized appreciation
of investments 34,678,998 454,526 5,383,848 17,856,965 8,913,490
----------- -------- ---------- ----------- -----------
Net gain on investments 40,658,561 454,514 5,451,479 22,633,707 10,722,494
----------- -------- ---------- ----------- -----------
Net Increase in Net Assets Resulting
from Operations $42,473,066 $791,534 $8,589,076 $22,534,662 $12,346,509
=========== ======== ========== =========== ===========
</TABLE>
See notes to financial statements
Statement of Changes in Net Assets
FIRST INVESTORS SERIES FUND
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
INSURED INTERMEDIATE
BLUE CHIP SERIES TAX EXEMPT SERIES
---------------------------- --------------------------
Year Ended December 31 1995 1994 1995 1994
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Increase (Decrease) in Net Assets from Operations
Net investment income (loss) $ 1,814,505 $ 969,020 $ 337,020 $ 204,046
Net realized gain (loss) on investments 5,979,563 12,824,558 (12) (211,367)
Net unrealized appreciation (depreciation) of investments 34,678,998 (17,486,358) 454,526 (64,191)
------------ ------------ ------------ ---------
Net increase (decrease) in net assets resulting
from operations 42,473,066 (3,692,780) 791,534 (71,512)
------------ ------------ ------------ ---------
Distributions to Shareholders:
From net investment income--Class A (1,794,647) (736,036) (330,471) (203,201)
From net investment income--Class B (28,155) -- (5,226) --
From net realized gain on investments--Class A (5,794,467) (12,824,558) -- --
From net realized gain on investments--Class B (185,096) -- -- --
In excess of realized gain from security
</TABLE>
5
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
transactions--Class A -- -- -- --
In excess of realized gain from security
transactions--Class B -- -- -- --
------------ ------------ ------------ ----------
Total distributions (7,802,365) (13,560,594) (335,697) (203,201)
------------ ------------ ------------ ----------
Trust Share Transactions (a)
Class A:
Proceeds from shares sold 30,855,778 28,516,378 1,707,243 5,941,925
Value of distributions reinvested 7,124,835 13,336,027 251,295 146,538
Cost of shares redeemed (25,713,861) (18,834,076) (1,080,698) (1,741,446)
------------ ------------ ------------ ----------
12,266,752 23,018,329 877,840 4,347,017
------------ ------------ ------------ ----------
Class B:
Proceeds from shares sold 5,044,595 -- 372,887 --
Value of distributions reinvested 211,655 -- 2,826 --
Cost of shares redeemed (134,770) -- (2,000) --
------------ ------------ ------------ ----------
5,121,480 -- 373,713 --
------------ ------------ ------------ ----------
Net increase (decrease) from trust share transactions 17,388,232 23,018,329 1,251,553 4,347,017
------------ ------------ ------------ ----------
Net increase (decrease) in net assets 52,058,933 5,764,955 1,707,390 4,072,304
Net Assets
Beginning of year 123,693,883 117,928,928 5,687,551 1,615,247
------------ ------------ ------------ ----------
End of year+ $175,752,816 $123,693,883 $ 7,394,941 $5,687,551
============ ============ ============ ==========
+Includes undistributed net investment income of 293,790 302,087 2,168 845
============ ============ ============ ==========
</TABLE>
6
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
(a)Trust shares issued and redeemed
Class A:
Sold 1,958,324 1,859,807 298,216 1,055,065
Issued for distributions reinvested 408,815 987,102 43,763 26,577
Redeemed (1,667,553) (1,228,162) (189,523) (314,040)
------------ ------------ ------------ ----------
Net increase (decrease) in Class A shares outstanding 699,586 1,618,747 152,456 767,602
============ ============ ============ ==========
Class B:
Sold 315,310 -- 64,431 --
Issued for distributions reinvested 11,994 -- 489 --
Redeemed (7,838) -- (344) --
------------ ------------ ------------ ----------
Net increase in Class B shares outstanding 319,466 -- 64,576 --
============ ============ ============ ==========
</TABLE>
Statement of Changes in Net Assets (Continued)
FIRST INVESTORS SERIES FUND
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
INVESTMENT GRADE SPECIAL SITUATION
SERIES SERIES
--------------------------- -------------------------
Year Ended December 31 1995 1994 1995 1994
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Increase (Decrease) in Net Assets from Operations
Net investment income (loss) $ 3,137,597 $ 3,018,267 ($99,045) ($191,338)
Net realized gain (loss) on investments 67,631 (77,604) 4,776,742 4,914,240
Net unrealized appreciation (depreciation) of investments 5,383,848 (5,141,298) 17,856,965 (7,165,669)
------------ ------------ ------------ ------------
Net increase (decrease) in net assets resulting
from operations 8,589,076 (2,200,635) 22,534,662 (2,442,767)
------------ ------------ ------------ ------------
</TABLE>
7
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Distributions to Shareholders:
From net investment income--Class A (3,128,539) (2,986,294) -- --
From net investment income--Class B (26,151) -- -- --
From net realized gain on investments--Class A -- -- (4,513,641) (4,722,934)
From net realized gain on investments--Class B -- -- (164,734) --
In excess of realized gain from security
transactions--Class A (14,684) -- -- --
In excess of realized gain from security
transactions--Class B (343) -- -- --
------------ ------------ ------------ ------------
Total distributions (3,169,717) (2,986,294) (4,678,375) (4,722,934)
------------ ------------ ------------ ------------
Trust Share Transactions (a)
Class A:
Proceeds from shares sold 7,877,385 11,602,927 33,124,063 44,120,605
Value of distributions reinvested 2,435,394 2,283,004 4,251,850 4,695,874
Cost of shares redeemed (11,876,289) (11,027,449) (19,660,248) (10,892,979)
------------ ------------ ------------ ------------
(1,563,510) 2,858,482 17,715,665 37,923,500
------------ ------------ ------------ ------------
Class B:
Proceeds from shares sold 1,166,562 -- 4,418,828 --
Value of distributions reinvested 18,187 -- 162,263 --
Cost of shares redeemed (56,045) -- (162,649) --
------------ ------------ ------------ ------------
1,128,704 -- 4,418,442 --
------------ ------------ ------------ ------------
Net increase (decrease) from trust share transactions (434,806) 2,858,482 22,134,107 37,923,500
------------ ------------ ------------ ------------
Net increase (decrease) in net assets 4,984,553 (2,328,447) 39,990,394 30,757,799
</TABLE>
8
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Net Assets
Beginning of year 46,178,887 48,507,334 89,906,085 59,148,286
------------ ------------ ------------ ------------
End of year+ $ 51,163,440 $ 46,178,887 $129,896,479 $ 89,906,085
============ ============ ============ ============
+Includes undistributed net investment income of 36,959 54,052 -- --
============ ============ ============ ============
(a)Trust shares issued and redeemed
Class A:
Sold 798,381 1,196,162 1,771,857 2,520,975
Issued for distributions reinvested 245,208 238,751 211,325 285,811
Redeemed (1,206,098) (1,136,131) (1,071,368) (620,009)
------------ ------------ ------------ ------------
Net increase (decrease) in Class A shares outstanding (162,509) 298,782 911,814 2,186,777
============ ============ ============ ============
Class B:
Sold 116,443 -- 234,052 --
Issued for distributions reinvested 1,794 -- 8,109 --
Redeemed (5,497) -- (8,174) --
------------ ------------ ------------ ------------
Net increase in Class B shares outstanding 112,740 -- 233,987 --
============ ============ ============ ============
</TABLE>
Statement of Changes in Net Assets (Continued)
FIRST INVESTORS SERIES FUND
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN
SERIES
------------------------------
Year Ended December 31 1995 1994
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (Decrease) in Net Assets from Operations
Net investment income (loss) $ 1,624,015 $ 1,050,441
Net realized gain (loss) on investments 1,809,004 1,748,894
</TABLE>
9
<PAGE>
<TABLE>
<S> <C> <C>
Net unrealized appreciation (depreciation) of investments 8,913,490 (4,665,923)
------------ ------------
Net increase (decrease) in net assets resulting
from operations 12,346,509 (1,866,588)
------------ ------------
Distributions to Shareholders:
From net investment income--Class A (1,523,212) (881,057)
From net investment income--Class B (3,901) --
From net realized gain on investments--Class A (1,800,205) (1,748,894)
From net realized gain on investments--Class B (8,799) --
In excess of realized gain from security transactions--Class A (3,345) --
In excess of realized gain from security transactions--Class B (16) --
------------ ------------
Total distributions (3,339,478) (2,629,951)
------------ ------------
Trust Share Transactions (a)
Class A:
Proceeds from shares sold 3,426,577 5,931,145
Value of distributions reinvested 3,303,023 2,614,430
Cost of shares redeemed (10,998,541) (11,511,286)
------------ ------------
(4,268,941) (2,965,711)
------------ ------------
Class B:
Proceeds from shares sold 247,304 --
Value of distributions reinvested 12,704 --
Cost of shares redeemed -- --
------------ ------------
260,008 --
------------ ------------
Net increase (decrease) from trust share transactions (4,008,933) (2,965,711)
------------ ------------
Net increase (decrease) in net assets 4,998,098 (7,462,250)
Net Assets
Beginning of year 50,713,608 58,175,858
------------ ------------
End of year+ $ 55,711,706 $ 50,713,608
============ ============
+Includes undistributed net investment income of 190,956 123,612
============ ============
(a)Trust shares issued and redeemed
Class A:
Sold 279,476 509,492
Issued for distributions reinvested 252,244 237,905
Redeemed (913,524) (991,334)
------------ ------------
Net increase (decrease) in Class A shares outstanding (381,804) (243,937)
============ ============
Class B:
Sold 19,916 --
Issued for distributions reinvested 954 --
Redeemed -- --
------------ ------------
Net increase in Class B shares outstanding 20,870 --
============ ============
</TABLE>
See notes to financial statements
10
<PAGE>
Notes to Financial Statements
FIRST INVESTORS SERIES FUND
1. Significant Accounting Policies--The Fund, 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 Fund
operates as a series fund, issuing shares of beneficial interest in the
Blue Chip, Insured Intermediate Tax Exempt, Investment Grade, Special
Situations and Total Return Series and accounts separately for the
assets, liabilities and operations of each Series. The objective of each
Series is as follows:
Blue Chip Series seeks to provide investors with high total investment
return consistent with the preservation of capital.
Insured Intermediate Tax Exempt Series seeks to provide a high level of
interest income which is exempt from federal income tax.
Investment Grade Series seeks to generate a maximum level of income
consistent with investment in investment grade debt securities.
Special Situations Series seeks long-term growth of capital.
Total Return Series seeks to provide investors with high long-term total
investment return consistent with moderate investment risk.
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
may also be priced by a pricing service. The pricing service uses quotations
obtained from investment dealers or brokers, information with respect to market
transactions in comparable securities and other available information in
determining value. Short-term corporate notes which are purchased at a discount
are valued at amortized cost. Securities for which market quotations are not
readily available and other assets are valued on a consistent basis at fair
value as determined in good faith by or under the supervision of the Fund's
officers in a manner specifically authorized by the trustees of the Fund.
The municipal bonds in which the Insured Intermediate Tax Exempt Series
invests are traded primarily in the over-the-counter markets. Such
securities are valued daily on the basis of valuations provided by a
pricing service approved by the Board of Trustees. The pricing service
considers security type, rating, market condition and yield data, as
11
<PAGE>
well as market quotations and prices provided by market makers in
determining value. "When Issued Securities" are reflected in the assets
of the Series as of the date the securities are purchased.
The municipal bonds held by the Insured Intermediate Tax Exempt Series
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 Series 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. The Series may invest up to 20% of its assets in
portfolio securities not covered by the insurance feature.
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 each
Series to continue to comply with the special provisions of the Internal
Revenue Code applicable to investment companies and to make sufficient
distributions of income and capital gains (in excess of any available
capital loss carryovers), to relieve it from all, or substantially all,
federal income taxes. At December 31, 1995, the Insured Intermediate Tax
Exempt Series had capital loss carryovers of $211,379, of which $160,056
expires in 2002 and $51,323 expires in 2003.
C. Distributions to Shareholders--Dividends from net investment income
of the Insured Intermediate Tax Exempt Series and the Investment Grade
Series are declared daily and paid monthly. Dividends from net
investment income of the Blue Chip Series and Total Return Series are
declared and paid quarterly and dividends from net investment income of
the Special Situations Series are declared and paid annually.
Distributions from net realized capital gains of all Series are normally
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 net operating
losses, tax-exempt interest, capital loss carryforwards and post October
losses.
D. Expense Allocation--Expenses directly charged or attributable to a
Series are paid from the assets of that Series. General expenses of
First Investors Series Fund are allocated among and charged to the
assets of each Series on a fair and equitable basis, which may be based
on the relative assets of each Series or the nature of the services
performed and relative applicability to each Series.
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. Dividend income is recorded
on the ex-dividend date. Interest income and estimated expenses are
accrued daily. The Series' Custodian, except for the Total Return
Series, has provided credits in the amount of $48,234 against custodian
charges based on the uninvested cash balances of the Series.
2. Capital--Each Series sells two classes of shares, Class A and Class
B, each with a public offering price that reflects different sales
charges and expense levels. Class A shares are sold with an initial
12
<PAGE>
sales charge of up to 6.25% of the amount invested and together with the
Class B shares are subject to 12b-1 fees as described in Note 4. Class B
shares are sold without an initial sales charge, but are generally
subject to a contingent deferred sales charge which declines in steps
from 4% to 0% over a six-year period. Class B shares automatically
convert into Class A shares after eight years. Realized and unrealized
gains or losses, investment income and expenses (other than 12b-1 fees
and certain other class expenses) are allocated daily to each class of
shares based upon the relative proportion of net assets of each class.
The Fund has established an unlimited number of shares of beneficial
interest for both Class A and Class B shares.
3. Security Transactions--For the year ended December 31, 1995,
purchases and sales of securities and long-term U.S. Government
obligations, excluding U.S. Treasury bills and short-term corporate
notes, were as follows:
<TABLE>
<CAPTION>
Long-Term U.S.
Securities Government Obligations
----------------------- -----------------------
Cost of Proceeds Cost of Proceeds
SERIES Purchases of Sales Purchases of Sales
- ------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
BLUE CHIP $50,645,807 $33,628,777 $ -- $ --
INSURED INTERMEDIATE
TAX EXEMPT 4,417,918 2,920,322 -- --
INVESTMENT GRADE 9,712,673 7,876,833 4,466,812 4,332,499
SPECIAL SITUATIONS 81,314,327 70,267,419 -- --
TOTAL RETURN 44,528,856 47,398,508 21,160,001 13,546,797
</TABLE>
At December 31, 1995, aggregate cost and net unrealized appreciation of
securities for federal income tax purposes were as follows:
<TABLE>
<CAPTION>
Gross Gross Net
Aggregate Unrealized Unrealized Unrealized
SERIES Cost Appreciation Depreciation Appreciation
- ------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
BLUE CHIP $136,898,998 $40,615,061 $2,073,461 $38,541,600
INSURED INTERMEDIATE
TAX EXEMPT 7,014,821 391,826 1,491 390,335
INVESTMENT GRADE 47,295,021 2,736,931 30,327 2,706,604
SPECIAL SITUATIONS 109,869,687 24,612,371 4,859,705 19,752,666
TOTAL RETURN 46,152,479 8,287,636 532,593 7,755,043
</TABLE>
13
<PAGE>
4. Advisory Fee and Other Transactions With Affiliates --Certain
officers and trustees of the Fund are officers and directors of its
investment adviser, First Investors Management Company, Inc. ("FIMCO"),
its underwriter, First Investors Corporation ("FIC"), its transfer
agent, Administrative Data Management Corp. ("ADM") and/or First
Financial Savings Bank, S.L.A. ("FFS"), custodian of the Fund's
Individual Retirement Accounts. Officers and trustees of the Fund
received no remuneration from the Fund for serving in such capacities.
Their remuneration (together with certain other expenses of the Fund) is
paid by FIMCO or FIC.
The Investment Advisory Agreement provides as compensation to FIMCO for
each Series other than the Insured Intermediate Tax Exempt Series and
the Investment Grade Series, an annual fee, payable monthly, at the rate
of 1% on the first $200 million of each Series' 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 annual fee for the Insured Intermediate Tax Exempt Series
is payable monthly, at the rate of .60% of the Series' average daily net
assets. The annual fee for the Investment Grade Series is payable
monthly, at the rate of .75% on the first $300 million of the Series'
average daily net assets, .72% on the next $200 million, .69% on the
next $250 million, and .66% on average daily net assets over $750
million. Total advisory fees accrued to FIMCO for the year ended
December 31, 1995, were $3,519,003, of which $843,687 was waived. In
addition, expenses of the Insured Intermediate Tax Exempt and Investment
Grade Series amounting to $11,742 and $51,516, respectively, were
assumed by FIMCO.
Pursuant to certain state regulations, FIMCO has agreed to reimburse
each Series if and to the extent that the Series' aggregate operating
expenses, including advisory fees but generally excluding interest,
taxes, brokerage commissions and extraordinary expenses, exceed any
limitation on expenses applicable to each Series in those states (unless
waivers of such limitations have been obtained). The amount of any such
reimbursement is limited to each Series' 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, FIC, as underwriter, received
$3,281,399 in commissions from the sale of Fund shares after allowing
$53,159 to other dealers. Shareholder servicing costs included $904,483
in transfer agent fees and out of pocket expenses accrued to ADM (of
which $54,409 was waived by ADM) and $358,935 in custodian fees accrued
to FFS (of which $32,875 was waived by FFS).
Pursuant to a Distribution Plan adopted under Rule 12b-1 of the 1940
Act, each Series is authorized to pay FIC a fee equal to .30% of the
average net assets of the Class A shares and 1% of the average net
assets of the Class B shares on an annualized basis each year, payable
monthly. The fee consists of a distribution fee and a service fee. The
service fee is paid for the ongoing servicing of clients who are
shareholders of that Series. Total 12b-1 fees accrued to FIC amounted to
$1,134,980 (of which $18,835 was waived).
14
<PAGE>
Independent Auditor's Report
To the Shareholders and Trustees of
First Investors Series Fund
We have audited the accompanying statement of assets and liabilities,
including the portfolios of investments, of the Blue Chip, Insured
Intermediate Tax Exempt, Investment Grade, Special Situations and Total
Return Series (comprising First Investors Series Fund), 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
indicated thereon. These financial statements and financial highlights
are the responsibility of the Fund'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 and brokers. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of the Blue Chip, Insured Intermediate Tax Exempt,
Investment Grade, Special Situations and Total Return Series of First
Investors Series Fund at December 31, 1995, and the results of their
operations, changes in their net assets and financial highlights for
the periods presented, in conformity with generally accepted accounting
principles.
Tait, Weller & Baker
Philadelphia, Pennsylvania
January 31, 1996
15
<PAGE>
Portfolio of Investments
FIRST INVESTORS INSURED TAX EXEMPT FUND, INC.
December 31, 1995
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Amount
Invested
For Each
Principal $10,000 of
Amount Security Value Net Assets
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MUNICIPAL BONDS--99.6%
Alaska--.4%
$ 8,000 M North Slope Boro, Alaska General Obligation Zero Coupon 6/30/2005 $ 4,970,000 $ 36
- -----------------------------------------------------------------------------------------------------------------------------------
Arizona--1.4%
8,550 M Arizona State Municipal Financing Program Ctfs. of Partn. 7.7% 8/1/2010 10,473,750 76
7,000 M Mesa, Arizona Utility System Revenue 7 1U8% 7/1/2011 8,575,000 63
- -----------------------------------------------------------------------------------------------------------------------------------
19,048,750 139
- -----------------------------------------------------------------------------------------------------------------------------------
California--3.6%
2,865 M California Public Capital Improv. Fin. Auth. 8.1% 3/1/2018 3,108,525 23
4,220 M Long Beach Finance Authority 6% 11/1/2017 4,615,625 34
10,000 M San Francisco City & County Redev. Agcy. 6 3U4% 7/1/2025 11,125,000 81
San Jose Redevelopment Agency Tax Allocation:
5,000 M 6% 8/1/2015 5,475,000 40
12,700 M 5% 8/1/2020 12,065,000 88
5,000 M Santa Clara County Financing Authority 7 3U4% 11/15/2010 6,356,250 46
5,720 M South Orange Cnty. Public Financing Authority 6 1U2% 8/15/2010 6,463,600 47
- -----------------------------------------------------------------------------------------------------------------------------------
49,209,000 359
- -----------------------------------------------------------------------------------------------------------------------------------
Colorado--.1%
1,850 M Aurora Municipal Building Corp. 9.2% 12/1/1997* 2,041,937 15
- -----------------------------------------------------------------------------------------------------------------------------------
Connecticut--1.8%
Connecticut Special Tax Obligation Revenue:
13,500 M 6 1U2% 10/1/2011 15,440,625 112
9,000 M 6 1U8% 9/1/2012 10,035,000 73
- -----------------------------------------------------------------------------------------------------------------------------------
25,475,625 185
- -----------------------------------------------------------------------------------------------------------------------------------
Delaware--.6%
7,000 M Delaware State Econ. Dev. Auth. Rev. Pollution Control 7.15% 7/1/2018 7,822,500 57
- -----------------------------------------------------------------------------------------------------------------------------------
District of Columbia--3.0%
Washington D.C. General Obligation:
10,530 M Series "C" 8% 6/1/1998* 11,596,162 84
5,800 M Series "A" 6 1U2% 6/1/2009 6,401,750 47
8,875 M Series "A" 6% 6/1/2011 9,374,219 68
13,255 M Series "E" 6% 6/1/2012 13,718,925 100
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1
<PAGE>
<TABLE>
<S> <C> <C> <C>
41,091,056 299
- -----------------------------------------------------------------------------------------------------------------------------------
Florida--4.5%
13,865 M Dade County Guaranteed Entitlement Rev. Zero Coupon 2/1/2011 6,065,937 44
2,255 M Dade County Spec. Oblig. (Miami Beach Conv. Ctr.) 8 5U8% 12/1/2008 2,497,412 18
Escambia County Utilities Authority:
5,485 M 6 1U4% 1/1/2012 6,156,913 45
5,360 M 6 1U4% 1/1/2013 6,009,900 44
1,070 M Florida Hsg. Fin. Agy. Residential Mtge. Rev. (Series 2) 8% 12/15/2016 1,117,487 8
5,000 M Florida State Turnpike
Authority Revenue 5% 7/1/2019 4,831,250 35
Orange County Health Facilities:
8,410 M Mercy Medical 7 7U8% 12/1/2025 8,946,138 65
7,725 M Sarasota, Lee Memorial, Venice 7 7U8% 12/1/2025 8,217,469 60
1,750 M Palm Beach County Solid Waste Authority 8 3U8% 7/1/2010 1,909,687 14
3,000 M Plant City Utility System 6% 10/1/2015 3,277,500 24
Sunrise Utilities System Revenue:
1,500 M 10 1U4% 10/1/2000* 1,882,500 13
1,500 M 10 3U4% 10/1/2000* 1,914,375 14
5,975 M Tampa Utilities Tax & Spl. Rev. 8 1U8% 10/1/1997* 6,505,281 47
1,395 M West Coast Regional Water Supply Auth. 10.4% 10/1/2010* 2,033,213 15
- -----------------------------------------------------------------------------------------------------------------------------------
61,365,062 446
- -----------------------------------------------------------------------------------------------------------------------------------
Georgia--7.1%
3,960 M Cherokee County Water & Sewer Auth. Revenue 5.2% 8/1/2025 3,935,250 29
5,815 M Fulton County Water & Sewer Revenue 6 3U8% 1/1/2014 6,650,906 48
Georgia Municipal Electric Authority Power Revenue:
2,000 M 8 3U8% 1/1/1997* 2,117,640 15
14,000 M 8 1U8% 1/1/1998* 15,260,000 111
5,000 M 6 1U4% 1/1/2012 5,575,000 41
Metropolitan Atlanta Rapid Transit Authority:
20,500 M 6 1U4% 7/1/2011 23,011,250 167
7,500 M 6 3U4% 7/1/2013 8,390,625 61
28,165 M 6 1U4% 7/1/2020 32,319,338 235
- -----------------------------------------------------------------------------------------------------------------------------------
97,260,009 707
- -----------------------------------------------------------------------------------------------------------------------------------
Hawaii--1.4%
Hawaii State General Obligation:
5,500 M 6% 10/1/2009 6,084,375 44
6,000 M 6% 10/1/2010 6,652,500 49
6,000 M Honolulu General Obligation 5 3U4% 4/1/2012 6,337,500 46
- -----------------------------------------------------------------------------------------------------------------------------------
19,074,375 139
- -----------------------------------------------------------------------------------------------------------------------------------
Illinois--10.8%
27,200 M Chicago Board of Education Lease Certificates 6% 1/1/2020 29,546,000 215
16,660 M Chicago General Obligation 6 1U8% 1/1/2016 17,513,825 128
Chicago O'Hare International Airport Revenue:
13,090 M 6 3U8% 1/1/2012 14,219,013 104
10,000 M 6 3U8% 1/1/2015 10,775,000 78
Chicago Public Building Commission Building Revenue:
3,340 M 7 3U4% 1/1/1999* 3,732,450 27
3,500 M 8 3U4% 1/1/2007 3,738,000 27
2,500 M Des Plaines Hosp. Facs. (Holy Family Hosp.) 9 1U4% 1/1/2014 2,568,000 19
2,800 M Hazel Crest Hosp. Facs. Rev. (South Sub. Proj.) 9 1U8% 7/1/1997* 3,059,000 22
</TABLE>
2
<PAGE>
<TABLE>
<S> <C> <C> <C>
16,750 M Illinois Development Finance Auth. Poll. Control Rev. 6 3U4% 3/1/2015 18,529,687 135
Illinois Development Finance Authority Rev. (Rockford School 205):
3,400 M 6.55% 2/1/2009 3,795,250 28
5,000 M 6.6% 2/1/2010 5,631,250 41
3,000 6.65% 2/1/2011 3,412,500 25
Illinois Health Facilities Authority Revenue:
4,300 M Bromenn Healthcare Project 8% 8/15/1998* 4,789,125 35
1,500 M Grant Hospital 7 1U2% 12/1/1996* 1,580,085 11
1,765 M Mercy Hospital & Medical Center 9 1U2% 1/1/2015 1,837,700 13
1,000 M Methodist Medical Center 9 5U8% 10/1/2010 1,033,410 8
2,600 M SSM Health Care Project Series "B" 8% 6/1/1998* 2,876,250 21
4,000 M University of Chicago Hospital 8.1% 8/1/1997* 4,325,000 31
1,750 M Lansing Sales Tax Rfdg. 7.7% 12/1/1998*
4,000 M Regional Transportation Authority 7 3U4% 6/1/2019 5,285,000 38
Will County School District General Obligation:
3,600 M 7% 12/1/2007 4,270,500 31
2,080 M 7.05% 12/1/2008 2,477,800 18
1,175 M 7.1% 12/1/2009 1,404,125 10
- -----------------------------------------------------------------------------------------------------------------------------------
148,321,782 1,079
- -----------------------------------------------------------------------------------------------------------------------------------
Indiana--1.5%
4,070 M Delaware Cnty. Hosp. Auth. (Ball Memorial Hosp.) 6 5U8% 8/1/2006 4,466,825 32
4,205 M Indiana Housing Fin. Auth. Single-Family Mtge. Rev. 7.6% 1/1/2016 4,483,581 33
2,000 M Indiana State Edl. Facs. Auth. (Butler University) 8% 11/1/1998* 2,237,500 16
Indianapolis Public Improvement Bond Bank:
5,035 M 6 1U2% 1/1/2012 5,695,844 41
2,500 M 6 1U2% 1/1/2013 2,825,000 21
1,000 M Muncie Certificates of Participation 8.1% 2/1/1998* 1,088,750 8
- -----------------------------------------------------------------------------------------------------------------------------------
20,797,500 151
- -----------------------------------------------------------------------------------------------------------------------------------
Louisiana--4.9%
1,030 M Bossier Cty. Public Imp. Sales & Use Tax Rev. 9 1U4% 11/1/1997* 1,138,150 8
2,000 M Calcasieu Parish Mem. Hosp. (Lake Charles Hosp.) 8.4% 12/1/1997* 2,195,000 16
3,000 M Greater New Orleans Expressway 7.8% 11/1/1996* 3,186,090 23
Louisiana Public Facilities Authority Hospital Revenue:
1,325 M Daughters of Charity 9 3U4% 2/1/1996* 1,357,264 10
2,350 M Touro Infirmary 8% 6/1/1998* 2,596,750 19
2,400 M Womens Hospital Foundation 8 1U8% 10/1/1998* 2,685,000 20
Louisiana Public Facilities Hlth. & Ed. Cap. Fac.:
5,845 M CP Program 7.9% 12/1/2015 6,473,337 47
1,750 M Our Lady of the Lake 8.2% 12/1/1998* 1,968,750 14
Louisiana State General Obligation:
8,050 M 6.1% 5/1/2010 8,633,625 63
14,555 M 6% 5/1/2012 15,464,687 113
14,000 M 6% 5/1/2014 14,752,500 107
15,000 M New Orleans Regl. Transit Auth. Sales Tax Rev. Zero Cpn. 12/1/2021 3,487,500 25
3,000 M Regional Transportation Authority Revenue 8% 12/1/2013 3,345,000 24
- -----------------------------------------------------------------------------------------------------------------------------------
67,283,653 489
- -----------------------------------------------------------------------------------------------------------------------------------
Maryland--.4%
5,000 M Maryland Indl. Dev. Auth. 5.928% 8/26/2022 5,393,750 39
- -----------------------------------------------------------------------------------------------------------------------------------
Massachusetts--5.5%
</TABLE>
3
<PAGE>
<TABLE>
<S> <C> <C> <C>
4,750 M Boston General Obligation 7 3U8% 2/1/2000* 5,379,375 39
2,300 M Mass. Bay Transportation
Authority Ctfs. of Partn. 7.65% 8/1/2000* 2,670,875 19
Mass. Bay Transportation Authority Gen. Sys. Rev.:
9,080 M 5.8% 3/1/2012 9,579,400 70
11,175 M 5.8% 3/1/2013 11,845,500 86
10,000 M 5 7U8% 3/1/2015 10,612,500 77
Mass. Health & Educational Facilities Authority:
2,300 M Berkshire Health Systems 7.6% 10/1/1998* 2,550,125 19
1,500 M Carney Hospital 7 3U4% 7/1/2000* 1,740,000 13
1,540 M Mass. Housing Finance Agency 7.7% 6/1/2017 1,634,325 12
20,550 M Massachusetts State General Obligation 6% 8/1/2009 22,656,375 165
5,000 M Mass. State Water Resource Authority 6 1U4% 12/1/2012 5,637,500 41
1,000 M Palmer General Obligation 7.3% 3/1/2000* 1,133,750 8
- -----------------------------------------------------------------------------------------------------------------------------------
75,439,725 549
- -----------------------------------------------------------------------------------------------------------------------------------
Michigan--3.5%
5,000 M Detroit Sewer Disposal System Revenue 5% 7/1/2025 4,762,500 35
2,000 M Detroit Water Supply System Revenue 5.55% 7/1/2012 2,065,000 15
10,000 M Michigan State General Obligation 6 1U4% 11/1/2012 11,275,000 82
Michigan State Housing Development Authority Single-Family Mtge. Rev.:
4,685 M 7 1U2% 6/1/2015 4,948,531 36
2,500 M 7.3% 12/1/2016 2,628,125 19
2,135 M 7.7% 12/1/2016 2,255,094 17
4,500 M Monroe Cnty. Econ. Dev. Corp. (Detroit Edison Co.) 6.95% 9/1/2022 5,563,125 40
15,010 M Wayne Charter Cnty. Airport Rev. 5 1U4% 12/1/2021 14,615,988 106
- -----------------------------------------------------------------------------------------------------------------------------------
48,113,363 350
- -----------------------------------------------------------------------------------------------------------------------------------
Minnesota--.2%
1,315 M Eden Prairie Multi-Family Housing 8% 7/1/2026 1,405,406 10
1,240 M St. Paul Hsg. & Red. Auth. (Como-Lake Proj.) 7 1U2% 3/1/2026 (Defaulted) (Note 1A) 1,240,000 9
- -----------------------------------------------------------------------------------------------------------------------------------
2,645,406 19
- -----------------------------------------------------------------------------------------------------------------------------------
Mississippi--.5%
4,475 M Mississippi Hosp. Equip. & Facs. Auth. Rev. (Baptist Med. Ctr.) 7.6% 5/1/2000* 5,146,250 37
1,545 M Mississippi Hsg. Fin. Corp. Single-Family Mtge. Pur. Rev. 7.8% 10/15/2016 1,608,731 12
- -----------------------------------------------------------------------------------------------------------------------------------
6,754,981 49
- -----------------------------------------------------------------------------------------------------------------------------------
Missouri--2.4%
3,640 M Kansas City School District Bldg. Cap. Improvement 7.9% 2/1/1998* 3,994,900 29
Missouri State Health & Educational Facilities Authority:
BJC Health System Series "A":
6,840 M 6 3U4% 5/15/2010 7,985,700 58
10,175 M 6 3U4% 5/15/2011 11,993,781 87
10,000 M Lester Cox Zero Cpn. 9/1/2016 3,225,000 24
5,245 M SSM Health Care 6 1U4% 6/1/2007 5,690,825 41
- -----------------------------------------------------------------------------------------------------------------------------------
32,890,206 239
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE>
<TABLE>
<S> <C> <C> <C>
Nevada--.2%
1,640 M Nevada Housing Div. Single-Family Prog. 7.6% 10/1/2018 1,740,450 13
1,195 M Reno Hosp. Rev. (St. Mary's Hospital) 7 3U4% 7/1/2000* 1,366,781 10
- -----------------------------------------------------------------------------------------------------------------------------------
3,107,231 23
- -----------------------------------------------------------------------------------------------------------------------------------
New Jersey--2.8%
7,120 M Camden County Municipal Utilities Sewer Rev. 8 1U4% 12/1/2017 7,796,400 57
11,185 M New Jersey Economic Development Auth. Market Trans. Fac. Rev. 5 7U8% 7/1/2011 11,814,156 86
New Jersey Housing & Mortgage Financing Revenue:
5,380 M 7 1U2% 4/1/2015 5,675,900 41
8,400 M 7 3U8% 10/1/2017 8,862,000 65
4,195 M 8.1% 10/1/2017 4,457,188 32
- -----------------------------------------------------------------------------------------------------------------------------------
38,605,644 281
- -----------------------------------------------------------------------------------------------------------------------------------
New Mexico--.4%
1,000 M Farmington Power Rev. Gen. Dev. 9 7U8% 1/1/2005* 1,375,000 10
New Mexico Mortgage Finance Authority, Single-Family Mortgage:
3,075 M 8% 1/1/2017 3,217,219 23
1,195 M 8 5U8% 7/1/2017 1,248,775 9
- -----------------------------------------------------------------------------------------------------------------------------------
5,840,994 42
- -----------------------------------------------------------------------------------------------------------------------------------
New York--6.3%
Metropolitan Transit Authority, Transit Facilities:
10,000 M 8% 7/1/1998* 11,125,000 81
3,500 M 7 1U2% 7/1/2000* 3,937,500 28
New York City General Obligation:
10,000 M Series "A" 8 3U4% 11/1/1997* 10,987,500 80
5,000 M Series "B" 7 3U4% 8/1/1998* 5,443,750 40
3,850 M Series "A" 8% 8/1/1998* 4,268,687 31
4,500 M New York State Dorm. Auth. Revs. City Univ. System 7 1U2% 7/1/2000* 5,186,250 38
New York State Dorm. Auth. Revs. State Univ. Educ. System:
2,780 M 7 1U4% 5/15/2000* 3,165,725 23
11,300 M 7 3U8% 5/15/2014 12,656,000 92
5,000 M New York State General Obligation 6% 6/15/2011 5,318,750 39
New York State Med. Care Facs. Fin. Agcy. Rev.:
2,025 M Hosp. & Nursing 7.35% 2/15/2029 2,232,563 16
10,500 M St. Luke's Hosp. 7.45% 2/15/2000* 11,970,000 87
4,000 M New York State Urban Dev. Corp. 7 1U2% 1/1/2000* 4,555,000 33
5,840 M Suffolk Cnty., N.Y. Indl. Dev. Agcy. Southwest Sewer Sys. 6% 2/1/2008 6,453,200 47
- -----------------------------------------------------------------------------------------------------------------------------------
87,299,925 635
- -----------------------------------------------------------------------------------------------------------------------------------
North Carolina--2.0%
North Carolina Municipal Power Agency (Catawba):
8,950 M 6% 1/1/2010 9,755,500 71
8,945 M 6% 1/1/2011 9,738,869 71
8,900 M 5% 1/1/2018 8,555,125 62
- -----------------------------------------------------------------------------------------------------------------------------------
28,049,494 204
- -----------------------------------------------------------------------------------------------------------------------------------
North Dakota--.7%
</TABLE>
5
<PAGE>
<TABLE>
<S> <C> <C> <C>
8,000 M Mercer County Poll. Ctrl. Rev. (Basin Elec. Pwr. Coop.) 7.2% 6/30/2013 9,800,000 71
- -----------------------------------------------------------------------------------------------------------------------------------
Ohio--.8%
1,145 M Cuyahoga Cnty. Hosp. Rev. (Richmond Hts. Gen. Hosp.) 10% 12/1/2011 1,145,000 9
8,350 M Lucas Cnty. Hospital (Toledo Hosp.) 5% 11/15/2022 7,838,562 57
1,435 M Ohio State Air Quality Dev. Auth. (Ohio Power Co.) 7.4% 8/1/2009 1,551,594 11
- -----------------------------------------------------------------------------------------------------------------------------------
10,535,156 77
- -----------------------------------------------------------------------------------------------------------------------------------
Oklahoma--4.4%
4,000 M Central Oklahoma Transp. & Pkg. Rev. 8% 7/1/2006 4,159,160 30
Grand River Dam Authority Revenue:
9,000 M 5 3U4% 6/1/2008 9,686,250 71
5,100 M 5 1U2% 6/1/2010 5,361,375 39
13,660 M 6 1U4% 6/1/2011 15,555,325 113
20,895 M 5 1U2% 6/1/2013 21,887,513 159
1,495 M Muskogee County Home Fin. Auth. Single-Family Mtge. 7.6% 12/1/2010 1,569,750 12
1,420 M Tulsa County Home Fin. Auth. Single-Family Mtge. 7.35% 11/1/2010 1,533,600 11
- -----------------------------------------------------------------------------------------------------------------------------------
59,752,973 435
- -----------------------------------------------------------------------------------------------------------------------------------
Oregon--1.2%
11,000 M Oregon Health Sciences Univ. Rev. 5 1U4% 7/1/2025 10,793,750 79
6,100 M Oregon State Dept. Administrative Svcs. Certs. of Part. 5 3U8% 11/1/2016 6,054,250 44
- -----------------------------------------------------------------------------------------------------------------------------------
16,848,000 123
- -----------------------------------------------------------------------------------------------------------------------------------
Pennsylvania--4.5%
6,500 M Allegheny County Hospital Develop. Auth. Rev. (Magee-Womens) Zero Cpn. 10/1/2017 1,974,375 14
1,225 M Allegheny County Rev. Fin. Auth. Mtge. Single-Family Mtge. 8% 6/1/2017 1,280,125 9
6,500 M Pennsylvania State Certificates of Participation 5% 7/1/2015 6,166,875 45
5,000 M Pennsylvania State General Obligation 6 3U4% 11/15/2013 5,606,250 41
11,200 M Pennsylvania State Ind. Dev. Auth. 5 1U2% 1/1/2014 11,326,000 82
5,000 M Pennsylvania State Turnpike Commission Turnpike Revenue 5 1U2% 12/1/2012 5,087,500 37
Philadelphia Water & Wastewater Revenue:
5,000 M 5% 6/15/2017 4,762,500 35
5,000 M 5% 6/15/2018 4,756,250 35
9,050 M Pittsburgh Water & Sewer Authority 6 1U2% 9/1/2013 10,384,875 76
1,000 M Sewickely Valley Hosp. Auth. (Sewickely Vy. Hosp.) 7 1U2% 10/1/1999* 1,128,750 8
Westmoreland County Municipal Authority Municipal Services Revenue:
10,800 M Zero Coupon 8/15/2018 3,091,500 22
8,880 M Zero Coupon 8/15/2019 2,408,700 18
5,880 M Zero Coupon 8/15/2020 1,506,750 11
5,880 M Zero Coupon 8/15/2021 1,425,900 10
5,000 M Zero Coupon 8/15/2022 1,150,000 8
- -----------------------------------------------------------------------------------------------------------------------------------
62,056,350 451
- -----------------------------------------------------------------------------------------------------------------------------------
Puerto Rico--1.3%
18,730 M Puerto Rico General Obligations 5% 7/1/2021 17,980,800 131
- -----------------------------------------------------------------------------------------------------------------------------------
Rhode Island--.5%
1,000 M Rhode Island Health & Ed. Bldg. Corp. (Roger Williams Hosp.)
</TABLE>
6
<PAGE>
<TABLE>
<S> <C> <C> <C>
11 3U8% 7/1/1996* 1,037,040 8
Rhode Island Housing & Mortgage Finance Corp.:
1,000 M 8 3U8% 10/1/2013 1,051,250 8
1,500 M 8 3U8% 10/1/2016 1,576,875 11
2,500 M 8 3U8% 4/1/2019 2,628,125 19
- -----------------------------------------------------------------------------------------------------------------------------------
6,293,290 46
- -----------------------------------------------------------------------------------------------------------------------------------
South Dakota--.4%
4,485 M South Dakota Health & Edl. Facs. Auth. (McKennan Hosp.) 7 5U8% 7/1/2014 5,045,625 37
- -----------------------------------------------------------------------------------------------------------------------------------
Texas--12.7%
Austin, Texas Utilities System Revenue:
Capital Appreciation:
30,465 M Zero Coupon 5/15/2018 8,872,931 64
29,410 M Zero Coupon 5/15/2019 8,087,750 59
5,120 M Series "A" 7.8% 11/15/1998* 5,715,200 42
4,280 M Series "B" 7.8% 11/15/2012 4,772,200 35
2,000 M 8 5U8% 11/15/2002* 2,452,500 18
1,000 M 8 5U8% 11/15/2002* 1,226,250 9
16,000 M 6% 11/15/2013 17,520,000 127
5,000 M Bexar County, Texas Health Facs. (Baptist Memorial) 6 3U4% 8/15/2019 5,568,750 41
10,000 M Brazos River Auth., Houston Light & Power Proj. 8.1% 5/1/2019 10,950,000 80
Brownsville Utility Systems Revenue:
3,490 M 6 1U4% 9/1/2011 3,908,800 28
5,000 M 5 1U4% 9/1/2020 4,793,750 35
9,215 M Coastal Water Auth. Water Conveyance System 8 1U8% 12/15/1997* 9,917,644 72
Harris County Toll Road Senior Lien:
3,355 M Series "B" 6 5U8% 8/15/1997* 3,560,494 26
8,375 M Series "A" 6 1U2% 8/15/2002* 9,474,219 69
11,065 M Series "A" 6 1U2% 8/15/2012 12,697,087 92
7,305 M Series "A" 6 1U2% 8/15/2013 8,327,700 61
Houston Water Conveyance System Certificates of Participation:
2,250 M 6 1U4% 12/15/2012 2,517,187 18
4,705 M 6 1U4% 12/15/2013 5,193,144 38
4,350 M 6 1U4% 12/15/2014 4,844,813 35
5,860 M 6 1U4% 12/15/2015 6,548,550 48
2,750 M Kerrville Electric System Rev. 8 3U8% 11/1/1997* 3,011,250 22
4,720 M North Cent. Texas Hlth. Fac. Dev. Corp. (Presbyt. "A" & "B") 8 7U8% 12/1/1997* 5,227,400 38
1,500 M Northeast Hospital Auth. Rev. (Northeast Med. Ctr. Hosp.) 8 1U8% 7/1/1998* 1,668,750 12
Rio Grande Valley Hlth. Fac. Dev. Corp. (Valley Baptist Med. Ctr.):
3,910 M 8% 8/1/1998* 4,349,875 32
5,300 M 6.4% 8/1/2012 5,697,500 41
1,500 M Sabine River Auth. Poll. Control (Texas Util. Co. Proj.) 7 3U4% 4/1/2016 1,539,840 11
San Antonio Electric & Gas Revenue:
3,000 M 8% 2/1/1998* 3,288,750 24
1,850 M 10 1U2% 2/1/1998* 2,118,250 15
1,800 M Texas Health Facs. Dev. Corp. (Fort Worth Med. Ctr.) 8 1U8% 6/1/1998* 1,998,000 15
5,000 M Texas Public Fin. Auth. 6.2% 2/1/2005 5,518,750 40
2,700 M Texas Public Ppty. Fin. Corp. Rev. (Mental Health & Retardation) 7 7U8% 1/1/1998* 2,899,125 21
- -----------------------------------------------------------------------------------------------------------------------------------
174,266,459 1,268
- -----------------------------------------------------------------------------------------------------------------------------------
Utah--1.1%
</TABLE>
7
<PAGE>
<TABLE>
<S> <C> <C> <C>
Intermountain Power Agency (Utah Power Supply):
4,000 M Series C, 8 3U8% 7/1/1997* 4,330,000 31
2,500 M Series D, 8 3U8% 7/1/2012 2,706,250 20
2,000 M Provo, Utah Electric System Revenue 10 3U8% 9/15/2015 3,000,000 22
Salt Lake County Water Conservancy District Revenue:
3,800 M Zero Cpn. 10/1/2011 1,638,750 12
3,800 M Zero Cpn. 10/1/2012 1,553,250 11
3,760 M Zero Cpn. 10/1/2013 1,447,600 11
- -----------------------------------------------------------------------------------------------------------------------------------
14,675,850 107
- -----------------------------------------------------------------------------------------------------------------------------------
Virginia--.9%
11,000 M Hanover County Indl. Dev. Auth. (Mem. Regl. Med. Ctr. Proj.) 6 3U8% 8/15/2018 12,567,500 91
- -----------------------------------------------------------------------------------------------------------------------------------
Washington--2.4%
2,710 M Benton County Public Utilties District #001 11 5U8% 11/1/1997* 3,065,688 22
5,000 M Tacoma Electric System Revenue 8% 1/1/1998* 5,468,750 40
Washington Public Power Supply System:
5,000 M Project No. 2 - 7 3U8% 7/1/2000* 5,712,500 42
4,960 M Project No. 2 - 7 3U8% 7/1/2001* 5,704,000 41
934 M Project Nos. 4 & 5 - 8 1U2% 7/1/2017 (Defaulted) (Note 1A) 934,080 7
5,000 M Washington State General Obligation 6.4% 6/1/2017 5,700,000 41
2,500 M Washington State Hlth. & Educ. Facs. (Mason Med. Ctr.) 8% 7/1/2015 2,690,625 20
3,900 M Washington State Hsg. Fin. Comm. Single-Family Mtge. 7.7% 7/1/2016 4,129,125 30
- -----------------------------------------------------------------------------------------------------------------------------------
33,404,768 243
- -----------------------------------------------------------------------------------------------------------------------------------
West Virginia--1.0%
1,050 M West Virginia State Hosp. Fin. Auth. (Monongalia Hosp.) 8 1U2% 7/1/1997* 1,118,250 8
13,885 M West Virginia Water Development Authority 5% 11/1/2018 12,965,119 94
- -----------------------------------------------------------------------------------------------------------------------------------
14,083,369 102
- -----------------------------------------------------------------------------------------------------------------------------------
Wisconsin--2.4%
5,000 M Superior, Wisconsin Ltd. Oblig. Rev. (Midwest Energy) 6.9% 8/1/2021 6,043,750 44
Wisconsin Housing & Economic Development Authority:
1,435 M 7 1U2% 9/1/2017 1,495,988 11
4,145 M 7.6% 9/1/2017 4,378,156 32
14,840 M 7 3U4% 9/1/2017 15,730,400 115
1,545 M Wisconsin Municipal Insurance Comm. Rev. 8.7% 4/1/2007 1,658,944 12
Wisconsin State Health & Educational Facilities Authority Revenue:
2,000 M Hospital Sisters Services Inc. 7 5U8% 11/15/1998* 2,225,000 16
1,500 M Novus Health Group 8% 12/1/1998* 1,683,750 12
- -----------------------------------------------------------------------------------------------------------------------------------
33,215,988 242
- -----------------------------------------------------------------------------------------------------------------------------------
Total Value of Municipal Bonds (cost $1,244,526,025) 1,368,428,096 9,955
- -----------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM TAX EXEMPT INVESTMENTS--1.1%
Michigan--.9%
13,000 M Michigan State Underground Storage Tank Fin. Auth. Floating Rate Note 5.15%** 13,000,000 94
- -----------------------------------------------------------------------------------------------------------------------------------
New York--.1%
2,000 M New York City General Obligation Floating Rate Note 5%** 2,000,000 14
</TABLE>
8
<PAGE>
<TABLE>
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
Tennessee--.1%
1,000 M Hamilton Cnty, Tenn. Ind'l Dev. Rev. Floating Rate Note 5.3%** 1,000,000 7
- -----------------------------------------------------------------------------------------------------------------------------------
Total Value of Short-Term Tax Exempt Investments (cost $16,000,000) 16,000,000 115
- -----------------------------------------------------------------------------------------------------------------------------------
Total Value of Municipal Investments
(cost $1,260,526,025) 100.7% 1,384,428,096 10,070
Excess of Liabilities Over Other Assets (.7) (9,656,916) (70)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Assets 100.0% $1,374,771,180 $10,000
============== =======
</TABLE>
* Municipal Bonds which have been prerefunded are shown maturing at the
prerefunded call date.
** Interest rates on Floating Rate Notes are determined and reset at least
weekly by the issuer. Interest rate shown is the rate in effect at December
31, 1995.
See notes to financial statements
Statement of Assets and Liabilities
FIRST INVESTORS INSURED TAX EXEMPT FUND, INC.
December 31, 1995
<TABLE>
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Assets
Investments in securities, at value (identified cost $1,260,526,025)
(Note 1A) $1,384,428,096
Cash 132,381
Receivables:
Interest $ 24,233,847
Investment securities sold 5,319,292
Capital shares sold 574,692 30,127,831
--------------
Other assets 81,733
--------------
Total Assets 1,414,770,041
Liabilities
Payables:
Investment securities purchased 36,154,107
Capital shares redeemed 1,334,164
Dividend payable January 10, 1996 1,257,076
Accrued advisory fee 788,845
Accrued expenses 464,669
--------------
Total Liabilities 39,998,861
Net Assets (Note 4):
Class A (132,331,251 shares outstanding) 1,372,751,820
Class B (194,664 shares outstanding) 2,019,360 $1,374,771,180
-------------- ==============
Net Assets Consist of:
Capital paid in $1,264,512,987
</TABLE>
9
<PAGE>
<TABLE>
<S> <C>
Undistributed net investment income 232,483
Accumulated net realized loss on investment transactions (13,876,361)
Net unrealized appreciation in value of investments 123,902,071
--------------
Total $1,374,771,180
==============
Net asset value and redemption price per share--Class A $10.37
======
Maximum offering price per share--Class A ($10.37/.9375)* $11.06
======
Net asset value and offering price per share--Class B $10.37
======
</TABLE>
* On purchases of $25,000 or more, the sales charge is reduced.
See notes to financial statements
Statement of Operations
FIRST INVESTORS INSURED TAX EXEMPT FUND, INC.
Year Ended December 31, 1995
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Income
Interest income $ 86,308,137
Expenses (Notes 1 and 3):
Advisory fee $ 9,356,534
Distribution plan expenses-Class A 3,936,480
Distribution plan expenses-Class B 9,876
Shareholder servicing costs 1,037,407
Bond insurance premiums 322,978
Reports and notices to shareholders 127,623
Custodian fees 119,117
Professional fees 87,258
Other expenses 421,114
------------
Total expenses 15,418,387
Less: Custodian fees paid indirectly 53,091
------------
Net expenses 15,365,296
------------
Net investment income 70,942,841
Realized and Unrealized Gain (Loss) on Investments (Note 2):
Net realized gain on investments 8,136,087
Net unrealized appreciation of investments 122,110,841
------------
Net gain on investments 130,246,928
</TABLE>
10
<PAGE>
<TABLE>
<S> <C>
------------
Net Increase in Net Assets Resulting from Operations $201,189,769
============
</TABLE>
See notes to financial statements
FIRST INVESTORS INSURED TAX EXEMPT FUND, INC.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Year Ended December 31 1995 1994
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (Decrease) in Net Assets from Operations
Net investment income $ 70,942,841 $ 78,721,451
Net realized gain (loss) on investments 8,136,087 (21,856,239)
Net unrealized appreciation (depreciation) of investments 122,110,841 (141,170,233)
-------------- --------------
Net increase (decrease) in net assets resulting from operations 201,189,769 (84,305,021)
-------------- --------------
Dividends to Shareholders from:
Net investment income--Class A (71,159,718) (78,422,877)
Net investment income--Class B (44,535) --
-------------- --------------
Total dividends (71,204,253) (78,422,877)
-------------- --------------
Capital Share Transactions (a)
Class A:
Proceeds from shares sold 68,618,192 98,224,276
Value of dividends reinvested 55,351,361 61,033,013
Cost of shares redeemed (182,664,583) (202,387,164)
-------------- --------------
(58,695,030) (43,129,875)
-------------- --------------
Class B:
Proceeds from shares sold 2,088,764 --
Value of dividends reinvested 34,823 --
Cost of shares redeemed (179,527) --
-------------- --------------
1,944,060 --
-------------- --------------
Net decrease from capital share transactions (56,750,970) (43,129,875)
-------------- --------------
Net increase (decrease) in net assets 73,234,546 (205,857,773)
Net Assets
Beginning of year 1,301,536,634 1,507,394,407
-------------- --------------
End of year (including undistributed net investment income of
$232,483 and $493,895, respectively) $1,374,771,180 $1,301,536,634
============== ==============
</TABLE>
11
<PAGE>
<TABLE>
<S> <C> <C>
(a)Capital shares issued and redeemed
Class A:
Sold 6,907,266 9,853,687
Issued for dividends reinvested 5,532,051 6,238,112
Redeemed (18,333,002) (20,662,077)
-------------- --------------
Net decrease in Class A shares outstanding (5,893,685) (4,570,278)
============== ==============
Class B:
Sold 209,525 --
Issued for dividends reinvested 3,441 --
Redeemed (18,302) --
-------------- --------------
Net increase in Class B shares outstanding 194,664 --
============== ==============
</TABLE>
See notes to financial statements
Notes to Financial Statements
FIRST INVESTORS INSURED TAX EXEMPT FUND, INC.
1. Significant Accounting Policies-The Fund is registered under the
Investment Company Act of 1940 (the "1940 Act") as a diversified, open-
end management investment company. The investment objective of the Fund
is to seek to provide a high level of interest income which is exempt
from federal income tax.
A. Security Valuation-The Municipal Bonds in which the Fund invests are
traded primarily in the over-the-counter markets. Such securities are
valued daily at their fair value on the basis of valuations provided by
a pricing service approved by the Board of Directors. The pricing
service considers security type, rating, market condition and yield
data, as well as market quotations and prices provided by market makers.
"When Issued Securities" are reflected in the assets of the Fund as of
the date the securities are purchased.
The Fund's Municipal Bonds 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-It is the policy of the Fund to continue to
qualify as a regulated investment company, which can distribute exempt-
interest dividends, by complying with the provisions available to
certain investment companies, as defined in the Internal Revenue Code,
and to make distributions of income and net realized capital gains (in
excess of any available capital loss carryovers), sufficient to relieve
it from all, or substantially all, federal income taxes. At December
31, 1995, the Fund had a capital loss carryover of $13,869,892 expiring
in the year 2002.
C. Distributions to Shareholders-Dividends from net investment income
12
<PAGE>
are declared daily and paid monthly. Distributions from net realized
capital gains are normally 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.
D. Security Transactions and Investment Income-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 is earned from settlement date and recorded on the accrual basis.
Estimated expenses are accrued daily. The Fund's Custodian has provided
credits in the amount of $53,091 against custodian charges based on the
uninvested cash balances of the Fund.
2. Securities Transactions-For the year ended December 31, 1995,
purchases and sales of investment securities, other than United States
Government obligations and short-term notes, aggregated $494,660,447 and
$562,561,301, respectively.
At December 31, 1995, the cost of investments for federal income tax
purposes was $1,260,532,495. Accumulated net unrealized appreciation on
investments was $123,895,601, consisting of $123,904,051 gross
unrealized appreciation and $8,450 gross unrealized depreciation.
3. Advisory Fee and Other Transactions With Affiliates-Certain officers
and directors of the Fund are officers and directors of its investment
adviser, First Investors Management Company, Inc. ("FIMCO"), its
underwriter, First Investors Corporation ("FIC") and/or its transfer
agent, Administrative Data Management Corp. ("ADM"). Officers and
directors of the Fund received no remuneration from the Fund for serving
in such capacity. Their remuneration (together with certain other
expenses of the Fund) is paid by FIMCO or FIC.
The Investment Advisory Agreement provides as compensation to FIMCO an
annual fee, payable monthly, at the rate of .75% of the first $250
million of the Fund's average daily net assets, declining by .03% on
each $250 million thereafter, down to .66% on average daily net assets
over $750 million.
Pursuant to certain state regulations, FIMCO has agreed to reimburse the
Fund if and to the extent that the Fund's aggregate operating expenses,
including the advisory fee but generally excluding interest, bond
insurance premiums, 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 amount of 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, FIC, as underwriter, received
$698,289 in commissions, after allowing $87,383 to other dealers.
Shareholder servicing costs included $842,095 in transfer agent fees
paid to ADM.
13
<PAGE>
Pursuant to a Distribution Plan adopted under Rule 12b-1 of the 1940
Act, the Fund is authorized to pay FIC a fee equal to .30% of the
average net assets of the Class A shares and 1% of the average net
assets of the Class B shares on an annualized basis each year, payable
monthly. The fee consists of a distribution fee and a service fee. The
service fee is paid for the ongoing servicing of clients who are
shareholders of the Fund.
4. Capital-The Fund sells two classes of shares, Class A and Class B,
each with a public offering price that reflects different sales charges
and expense levels. Class A shares are sold with an initial sales charge
of up to 6.25% of the amount invested and together with the Class B
shares are subject to 12b-1 fees as described in Note 3. Class B shares
are sold without an initial sales charge, but are generally subject to a
contingent deferred sales charge which declines in steps from 4% to 0%
over a six-year period. Class B shares automatically convert into Class
A shares after eight years. Realized and unrealized gains or losses,
investment income and expenses (other than 12b-1 fees and certain other
class expenses) are allocated daily to each class of shares based upon
the relative proportion of net assets of each class. Of the 500,000,000
shares originally authorized, the Fund has designated 300,000,000 shares
as Class A and 200,000,000 shares as Class B.
14
<PAGE>
Independent Auditor's Report
To the Shareholders and Board of Directors of
First Investors Insured Tax Exempt Fund, Inc.
We have audited the accompanying statement of assets and liabilities of
First Investors Insured Tax Exempt Fund, Inc., including the portfolio
of investments, as of December 31, 1995, and the related statement of
operations for the year then ended, the statement of changes in net
assets for each of the two years in the period then ended and financial
highlights for each of the years presented. These financial statements
and financial highlights are the responsibility of the Fund'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 and brokers. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of First Investors Insured Tax Exempt Fund, Inc. at
December 31, 1995, and the results of its operations, changes in its net
assets and financial highlights for each of the respective years
presented, in conformity with generally accepted accounting principles.
Tait, Weller & Baker
Philadelphia, Pennsylvania
January 31, 1996
15
<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)/2,3,6,7,12/ Specimen Certificates
(5)a. Investment Advisory Agreement between Registrant and First
Investors Management Company, Inc.
(6) Underwriting Agreement between Registrant and First Investors
Corporation
(7) Not Applicable
(8)a. Custodian Agreement between Registrant and Irving Trust Company
b. Supplement to Custodian Agreement between Registrant and The
Bank of New York
c. Custodian Agreement between Registrant and Brown Brothers
Harriman & Co.
(9) Administration Agreement between Registrant, First Investors
Management Company, Inc., First Investors Corporation and
Administrative Data Management Corp.
(10)/11/ Opinion of counsel
(11)a. Consent of Independent Accountants
b. Powers of Attorney
(12) Not Applicable
(13)/1,3,4,5,10/ Undertakings of the Underwriter
<PAGE>
(14)a./8/ First Investors Profit Sharing/Money Purchase Pension
Retirement Plan for Sole Proprietorships, Partnerships, and
Corporations
b./9/ First Investors Individual Retirement Account
c./4/ First Investors 403(b) Custodial Account
d./9/ First Investors SEP-IRA and SARSEP-IRA
(15)a. Amended and Restated Class A Distribution Plan
b. Class B Distribution Plan
(16) Performance Calculations
(17) Financial Data Schedule (filed as Exhibit 27 for electronic
filing purposes)
(18) 18f-3 Plan
- -------------------
1 Incorporated by reference from Registrant's Registration Statement (File
No. 33-25623) filed on November 18, 1988.
2 Incorporated by reference from Post-Effective Amendment No. 1 to
Registrant's Registration Statement (File No. 33-25623) filed on June
29, 1989.
3 Incorporated by reference from Post-Effective Amendment No. 4 to
Registrant's Registration Statement (File No.
33-25623) filed on June 15, 1990.
4 Incorporated by reference from Post-Effective Amendment
No. 5 to Registrant's Registration Statement (File No.
33-25623) filed on September 5, 1990.
5 Incorporated by reference from Post-Effective Amendment No. 6 to
Registrant's Registration Statement (File No.33-25623) filed on October
15, 1990.
6 Incorporated by reference from Post-Effective Amendment No. 8 to
Registrant's Registration Statement (File No.33-25623) filed on February
7, 1991.
7 Incorporated by reference from Post-Effective Amendment No. 9 to
Registrant's Registration Statement (File No.33-25623) filed on April
18, 1991.
8 Incorporated by reference from Post-Effective Amendment No. 10 to
Registrant's Registration Statement (File No.33-25623) filed on April
15, 1991.
9 Incorporated by reference from Post-Effective Amendment No. 11 to
Registrant's Registration Statement (File No.33-25623) filed on April
29, 1993.
10 Incorporated by reference from Post-Effective Amendment No.12 to
Registrants Registration Statement (File No. 33-25623) filed on August
30, 1993.
<PAGE>
11 Incorporated by reference from Registrant's Rule 24f-2 Notice for its
fiscal year ending December 31, 1995 filed on February 27, 1996.
12 Incorporated by reference from Post-Effective Amendment No. 15 to
Registrant's Registration Statement (File No. 33-25623) filed on April
29, 1994.
Item 25. Persons Controlled by or under common control with Registrant
There are no persons controlled by or under common control with the
Registrant.
Item 26. Number of Holders of Securities
Number of
Record Holders as of
Title of Class February 9, 1996
- -------------- -----------------------------
Class A Class B
Blue Chip Fund 24,847 946
Total Return Fund 8,830 61
Special Situations Fund 26,535 1,115
Investment Grade Fund 4,682 109
Insured Intermediate Tax Exempt Fund 342 20
Item 27. Indemnification
Article XI, Section 1 of Registrant's Declaration of Trust provides as
follows:
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.
Article XI, Section 2 of Registrant's Declaration of Trust provides as
follows:
Section 2.
(a) Subject to the exceptions and limitations contained in Section (b) below:
<PAGE>
(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 expenses reasonably incurred or
paid by him in connection with any claim, action, suit or proceeding 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 other, 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
(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 or 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.
<PAGE>
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 the law.
(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 a reason to believe that such Covered Person
will be found entitled to indemnification under this Section 2.
The general effect of this Indemnification 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.
The Registrant's Investment Advisory Agreement provides as follows:
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.
The Registrant's Underwriting Agreement provides as follows:
The Underwriter agrees to use its best efforts in effecting the sale and
public distribution of the shares of the Fund through dealers and to perform its
duties in redeeming and repurchasing the shares of the
<PAGE>
Fund, but nothing contained in this Agreement shall make the Underwriter or any
of its officers and 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 Agreement provided that nothing herein contained 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, or 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 they may have under the Securities
Act of 1933 or the Investment Company Act of 1940.
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 provisions, 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
First Investors Management Company, Inc., the Registrant's Investment
Adviser, also serves as investment adviser to:
First Investors Cash Management Fund, Inc.
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 Life Series Fund
First Investors Multi-State Insured Tax Free Fund
First Investors New York Insured Tax Free Fund, Inc.
First Investors Series Fund II, Inc.
First Investors Special Bond Fund, Inc.
First Investors Tax-Exempt Money Market Fund, Inc.
First Investors U.S. Government Plus Fund
Affiliations of the officers and directors of the Investment Adviser are
set forth in Part B, Statement of Additional Information, under "Directors or
Trustees and Officers."
<PAGE>
Item 29. Principal Underwriters
(a) First Investors Corporation, Underwriter of the Registrant, is also
underwriter for:
First Investors Cash Management Fund, Inc.
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 Tax-Exempt Money Market Fund, Inc.
First Investors U.S. Government Plus Fund
First Investors Series Fund II, Inc.
(b) The following persons are the officers and directors of the Underwriter:
<TABLE>
<CAPTION>
Position and Position and
Name and Principal Office with First Office with
Business Address Investors Corporation Registrant
- ----------------------- --------------------- -----------------
<S> <C> <C>
Glenn O. Head Chairman President
95 Wall Street and Director and Trustee
New York, NY 10005
Marvin M. Hecker President None
95 Wall Street
New York, NY 10005
John T. Sullivan Director Chairman of the
95 Wall Street Board of Trustees
New York, NY 10005
Roger L. Grayson Director Trustee
95 Wall Street
New York, NY 10005
Joseph I. Benedek Treasurer Treasurer
581 Main Street
Woodbridge, NJ 07095
</TABLE>
<PAGE>
<TABLE>
Position and Position and
Name and Principal Office with First Office with
Business Address Investors Corporation Registrant
- ----------------------- --------------------- -----------------
<S> <C> <C>
Robert Murphy Comptroller None
581 Main Street
Woodbridge, NJ 07095
Lawrence A. Fauci Senior Vice President None
95 Wall Street and Director
New York, NY 10005
Kathryn S. Head Vice President, Trustee
581 Main Street Chief Financial
Woodbridge, NJ 07095 Officer and Director
Louis Rinaldi Senior Vice None
581 Main Street President
Woodbridge, NJ 07095
Frederick Miller Vice President None
581 Main Street
Woodbridge, NJ 07095
Howard M. Factor Vice President None
95 Wall Street
New York, NY 10005
Larry R. Lavoie Secretary and None
95 Wall Street General Counsel
New York, NY 10005
Matthew Smith Vice President None
581 Main Street
Woodbridge, NJ 07095
Jeremiah J. Lyons Director None
56 Weston Avenue
Chatham, NJ 07928
Anne Condon Vice President None
581 Main Street
Woodbridge, NJ 07095
Jane W. Kruzan Director None
15 Norwood Avenue
</TABLE>
Summit, NJ 07901
(c) Not applicable
<PAGE>
Item 30. Location of Accounts and Records
Physical possession of the books, accounts and records of the
Registrant are held by First Investors Management Company, Inc. and its
affiliated companies, First 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 Custodians, The Bank of New York, 48
Wall Street, New York, NY 10286, and Brown Brothers Harriman & Co., 40 Water
Street, Boston, MA 02109.
Item 31. Management Services
Inapplicable
Item 32. Undertakings
The Registrant undertakes to carry out all indemnification provisions
of its Declaration of Trust, Advisory Agreement and Underwriting Agreement in
accordance with Investment Company Act Release No. 11330 (September 4, 1980) and
successor releases.
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to trustees, officers and controlling persons of
the Registrant pursuant to the provisions under Item 27 herein, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a trustee, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such trustee, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
The Registrant hereby undertakes to furnish a copy of its latest
annual report to shareholders, upon request and without charge, to each person
to whom a prospectus is delivered.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant represents that this Amendment
meets all the requirements for effectiveness pursuant to Rule 485(b) under the
Securities Act of 1933, and has duly caused this Post-Effective Amendment to
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York, State of New York, on the
17th day of April, 1996.
FIRST INVESTORS SERIES FUND
(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
- --------------------- Officer and Trustee
Glenn O. Head
/s/Joseph I. Benedek Principal Financial April 17, 1996
- --------------------- and Accounting Officer
Joseph I. Benedek
* Trustee April 17, 1996
- ---------------------
Kathryn S. Head
* Trustee April 17, 1996
- ---------------------
James J. Coy
* Trustee April 17, 1996
- ---------------------
Roger L. Grayson
* Trustee April 17, 1996
- ---------------------
Herbert Rubinstein
<PAGE>
* 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>
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.B8.3 Custodian Agreement
99.B9 Administration Agreement
99.B11.1 Consent of accountants
99.B11.2 Powers of Attorney
99.B15.1 Class A Distribution Plan
99.B15.2 Class B Distribution Plan
99.B16 Performance Calculations
99.B18 18f-3 Plan
27.011 FDS-Blue Chip Fund Class A
27.012 FDS-Blue Chip Fund Class B
27.021 FDS-Total Return Fund Class A
27.022 FDS-Total Return Fund Class B
27.031 FDS-Special Situations Fund Class A
27.032 FDS-Special Situations Fund Class B
27.041 FDS-Investment Grade Fund Class A
27.042 FDS-Investment Grade Fund Class B
27.051 FDS-Intermediate Tax Exempt Fund Class A
27.052 FDS-Intermediate Tax Exempt Fund Class B
<PAGE>
EX-99.B1
AMENDED AND RESTATED DECLARATION OF TRUST
DECLARATION OF TRUST, made September 19, 1988 and amended January 18, 1990
and 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 "First Investors Series Fund."
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 First Investors Series Fund;
(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
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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
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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).
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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
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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
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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.
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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 of
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
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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
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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
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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.
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(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
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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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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 Trust Estate 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 nonrecurring items as
may arise, including
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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 the investment
adviser (and all without further action by the
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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, if
required by the provisions of the Investment Company Act of 1940 or applicable
law.
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
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By-Laws of the Trust, if any, or any registration of the Trust with the
Commission or any state, as the Trustees may 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 Shareholders' 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) or
any other entity permitted by the provisions of the Investment Company Act of
1940 or the rules and regulations promulgated under the Investment Company Act
of 1940.
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
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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, 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
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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 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
SECURITIES
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.
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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 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
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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 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.
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INDEMNIFICATION
Section 2.
(a) Subject to the exceptions and limitations contained in Section (b)
below:
(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 other,
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
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to have acted in good faith in the reasonable belief that his action was in
the best interest of the Trust; or
(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,
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other than Trustees and officers, and other persons may be entitled by contract
or otherwise under law.
(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,
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its corporate or other general successor) shall be entitled out of the trust
estate to be held harmless from and indemnified against 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.
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<PAGE>
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 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
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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, 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 of each class of shares affected by the matter or, if
applicable, to a Majority Shareholder Vote of the Trust, and in accordance with
all applicable law, may sell and convey the assets of the Trust or assets
belonging to any affected class of shares 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
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outstanding obligations, taxes and other liabilities, accrued or contingent,
belonging to the Trust or belonging to any affected class of shares 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 Trustees
shall distribute the remaining proceeds ratably among the holders of the shares
of any affected class of shares then outstanding.
(c) Subject to a Majority Shareholder Vote of each class of shares affected
by the matter, or if applicable, to a Majority Shareholder Vote of the Trust 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, belonging to the Trust or to any affected class of shares of the
Trust, the Trustees shall distribute the remaining assets ratably among the
holders of the shares of any affected class of shares then outstanding.
(d) Upon completion of the distribution of the remaining proceeds or the
remaining assets as provided in subsections (b) and (c), the Trust or any
affected class of shares 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.
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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 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.
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<PAGE>
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 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 02109.
FISCAL YEAR
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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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<PAGE>
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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EX-99.B2
BY-LAWS
FIRST INVESTORS SERIES FUND
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 or
by delivering such notice to him at least two days before the
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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. Except to the extent othewise specifically
provided by applicable law, 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. The 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 securities 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 connection 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 disbursements 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 instructions 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:
"FIRST INVESTORS SERIES FUND"
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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
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 or Article XI (other than changes which add
further provisions not inconsistent with the terms thereof) shall be approved by
vote of a majority of the outstanding shares of the Trust entitled to vote.
ARTICLE XI
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.
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<PAGE>
ARTICLE XII
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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EX-99.B5
FIRST INVESTORS SERIES FUND
INVESTMENT ADVISORY AGREEMENT
This Agreement is made as of June 13, 1994, by and between FIRST INVESTORS
SERIES FUND, a Massachusetts business trust ("Company"), and FIRST 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.
1
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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.
2
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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
3
<PAGE>
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
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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 "First
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 First 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," "interestedperson," 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 delimitany 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.
FIRST INVESTORS SERIES FUND
Attest:
/s/C. Durso By: /s/Glenn O. Head
- --------------------------------- ----------------------------
C. Durso, Secretary Glenn O. Head, President
FIRST INVESTORS MANAGEMENT
Attest: COMPANY, INC.
/s/Carol R. Lerner By: /s/Kathryn S. Head
- -------------------------------- -----------------------------
Carol R. Lerner, Secretary Kathryn S. Head, President
6
<PAGE>
FIRST INVESTORS SERIES FUND
INVESTMENT ADVISORY AGREEMENT
SCHEDULE A
Compensation pursuant to Paragraph 6 of this First Investors Series Fund
Investment Advisory Agreement shall be calculated in accordance with the
following schedules:
Blue Chip Series
Special Situations Series
Total Return Series
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%
Investment Grade Series
Advisory Fee as %
Average Daily of Average Daily
Net Assets Net Assets
------------------ --------------------
Up to $300 million 0.75%
In excess of $300 million to $500 million 0.72%
In excess of $500 million to $750 million 0.69%
Over $750 million 0.66%
Insured Intermediate Tax Exempt Series
Advisory Fee as %
Average Daily of Average Daily
Net Assets Net Assets
------------------- ---------------------
All Assets 0.60%
Dated: June 13, 1994
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EX-99.B6
UNDERWRITING AGREEMENT
BETWEEN
FIRST INVESTORS SERIES FUND
AND
FIRST INVESTORS CORPORATION
This AGREEMENT entered into the 17th day of March, 1994, by and between
FIRST INVESTORS SERIES FUND, a Massachusetts business trust, with an office
located at 95 Wall Street, New York, New York 10005 (the "Fund"), on behalf of
each of its separate designated Series (singularly and collectively, "Series"),
and FIRST INVESTORS CORPORATION, a New York 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 ByLaws 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.
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<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.
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<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 Agreement,
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 Registration Statement is amended from time to time, and the terms
"Prospectus" 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.
FIRST INVESTORS SERIES FUND
By: /s/ Glenn O. Head
--------------------------------------------
Glenn O. Head
President
ATTEST:
/s/ C. Durso
- ----------------------------------
Concetta Durso
Secretary
FIRST INVESTORS CORPORATION
By: /s/ Michael S. Miller
--------------------------------------------
Michael S. Miller
Chief Executive Officer
ATTEST:
/s/ Carol R. Lerner
- ----------------------------------
Carol R. Lerner
Assistant Secretary
- 5 -
<PAGE>
EX-99.B8.1
CUSTODIAN AGREEMENT
BETWEEN
IRVING TRUST COMPANY
AND
FIRST INVESTORS FUND
CUSTODIAN AGREEMENT, made this 3rd day of January, 1989, between FIRST
INVESTORS FUND, a business trust organized and existing under the laws of the
Commonwealth of Massachusetts, having its office and place of business at 120
Wall Street, New York, New York 10005 (hereinafter called the "Fund"), on behalf
of each of its separate designated Series presently existing and hereafter
created (the "Series"), 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 Fund hereby constitutes and appoints the Custodian as custodian of
all the securities and monies at any time owned by the Fund, on behalf of each
Series, 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 each of
the Series all monies received by it for the account of such Series, and shall
disburse the same only:
(a) In payment for securities purchased, as provided in Article III
hereof;
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(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 Fund, 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, 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;
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
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 market 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
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 its
Board of Trustees, 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 Fund, 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 stareholders 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.
VI
SALE AND REDEMPTION OF CAPITAL STOCK OF THE FUND
5
<PAGE>
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 or 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
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.
6
<PAGE>
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 stock dividend;
(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;
(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
7
<PAGE>
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
its 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 Fund. 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
settling transactions involving the purchase and sale of securities of the Fund.
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 Fund 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
8
<PAGE>
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 Custodian. 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 Fund, it shall be accompanied by a copy
of a resolution of the Board of Trustees of the Fund, certified by the Secretary
or any Assistant Secretary, 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 Fund 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 by the Fund, 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 Fund fails to designate a successor custodian, the
Fund shall, upon the date specified in the notice of termination of this
Agreement and upon the delivery by the Custodian of all securities and monies
then owned by the Fund 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
9
<PAGE>
of acceptance by the successor custodian, on that date deliver directly to the
successor custodian all securities and monies then owned by the Fund 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 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 to 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 "Fund" shall, when appropriate, mean each Series
of the Fund.
4. Annexed hereto as Appendix A, is a certificate signed by two of the
present officers of the Fund under its corporate seal, setting forth the names
and the signatures of the present officers of the Fund. The Fund agrees to
notify the Custodian promptly if any such present officer ceases to be an
officer of the Fund, 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 Fund, duly authorized by the Board of Trustees to execute any
certificate, instruction, notice or other instrument or to deliver oral
instructions on behalf of the Fund.
6. Annexed hereto as Appendix B is a certificate signed by two of the
present officers of the Fund under its corporate seal, setting forth the names
and signatures of the present authorized
10
<PAGE>
persons. The Fund 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 as 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 Fund shall be sufficiently given if addressed
to the Fund 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 Fund 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 Fund.
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 funds 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 Fund without the written consent
of the Custodian and shall not be assignable by the Custodian without the
written consent of the Fund, 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
11
<PAGE>
Agreement against the individual and separate assets of any shareholder of the
Fund.
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 Fund, which
was filed with the Commonwealth of Massachusetts on September 23, 1988, it is
understood and agreed that no shareholder shall be subject to any personal
liability whatsoever under this Ageement and the Custodian shall look solely to
the Fund property for satisfaction of claims of any nature arising in connection
with the affairs of the Fund.
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.
FIRST INVESTORS FUND
By: /s/ Andrew J. Donohue
----------------------------------------
Andrew J. Donohue, President
ATTEST:
/s/ C. Durso
- -------------------------------
Concetta Durso, Secretary
IRVING TRUST COMPANY
By: /s/ Edward J. Bredehoft, Jr.
----------------------------------------
Edward J. Bredehoft, Jr.
Vice President
ATTEST:
/s/ Maria Fernandes
- -------------------------------
Maria Fernandes
12
<PAGE>
Assistant Vice President
13
<PAGE>
APPENDIX A
I, Andrew J. Donohue, President and I, Concetta Durso, Secretary of First
Investors Fund, a Massachusetts business trust (the "Fund"), do hereby certify
that:
The following individuals serve in the following positions with the Fund
and each individual has been duly elected or appointed to each such position and
qualified therefor in conformity with the Fund's Declaration of Trust and
By-Laws and the signatures set forth opposite their respective names are true
and correct signatures:
NAME POSITION SIGNATURE
Andrew J. Donohue President /s/ Andrew J. Donohue
--------------------------------
David D. Grayson Vice President /s/ David D. Grayson
--------------------------------
Glenn O Head. Vice President /s/ Glenn O. Head
--------------------------------
Concetta Durso Secretary /s/ C. Durso
--------------------------------
Joseph I. Benedek Treasurer /s/ Joseph I. Benedek
--------------------------------
Carol Lerner Assistant Secretary /s/ Carol Lerner
--------------------------------
I, Andrew J. Donohue, in my official capacity as President of First Investors
Fund, hereby certify that Concetta Durso is currently the duly elected and
appointed Secretary of First Investors Fund 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/ Andrew J. Donohue
--------------------------------------
Andrew J. Donohue, President
Dated: January 3, 1989
I, Concetta Durso, Secretary of First Investors Fund 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: January 3, 1989
14
<PAGE>
APPENDIX B
I, Andrew J. Donohue, President, and I, Concetta Durso, Secretary of First
Investors Fund, a Massachusetts business trust (the "Fund"), 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 Fund, and the signatures set forth opposite their respective names are
their true and correct signatures:
NAME SIGNATURE
Andrew J. Donohue /s/ Andrew J. Donohue
---------------------------------
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
---------------------------------
Jay G. Baris /s/ Jay G. Baris
---------------------------------
Robert J. Grosso /s/ Robert J. Grosso
---------------------------------
Carol Lerner /s/ Carol Lerner
---------------------------------
Mariarosa Cartolano /s/ Mariarosa Cartolano
---------------------------------
Nanette A. King /s/ Nanette A. King
---------------------------------
Diane Hinman /s/ Diane Hinman
---------------------------------
Mary T. Kohn /s/ Mary T. Kohn
---------------------------------
15
<PAGE>
I, Andrew J. Donohue, in my official capacity as President of First Investors
Fund, hereby certify that Concetta Durso is currently the duly elected and
appointed Secretary of First Investors Fund 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 Fund and the
signatures set forth opposite their names are true and correct signatures.
/s/ Andrew J. Donohue
---------------------------------
Andrew J. Donohue, President
Dated: January 3, 1989
I, Concetta Durso, Secretary of First Investors Fund, 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 Fund and the signatures set forth opposite their names are true and
correct signatures.
/s/ C. Durso
---------------------------------
Concetta Durso, Secretay
Dated: January 3, 1989
16
<PAGE>
EX-99.B8.2
SUPPLEMENT
TO
CUSTODIAN AGREEMENT
This Supplement is added to and forms a part of the Custodian Agreement
between First Investors Series Fund* (the "Fund") and The Bank of New York, as
successor-in-interest to Irving Trust Company (the "Custodian") dated January 3,
1989 (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.
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
- 1 -
<PAGE>
name of the bank, (c) the amount and terms of the borrowing, which may 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 officer'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
- 2 -
<PAGE>
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 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.
First Investors Series Fund*
By: /s/ C. Durso
---------------------------------------------
Title: Vice President & Secretary
*All series except First Investors
Total Return Series
ATTEST:
/s/Susan I. Grant
- ----------------------------
THE BANK OF NEW YORK
By: /s/ S. Grunston
---------------------------------------------
Title: Vice President
ATTEST:
/s/ Octavio Cabrero
- ----------------------------
- 3 -
<PAGE>
EX-99.B8.3
CUSTODIAN AGREEMENT
AGREEMENT made this 8th day of March, 1990, between First Investors Series
Fund on behalf of Total Return Series (such series is hereafter referred to as
(the "Fund") and Brown Brothers Harriman & Co. (the "Custodian").
WITNESSETH: That in consideration of the mutual covenants and
agreements herein contained, the parties hereto agree as follows:
1. The Fund hereby employs and appoints the Custodian as a custodian for
the term and subject to the provisions of this Agreement. The Custodian shall
not be under any duty or obligation to require the Fund to deliver to it any
securities or funds owned by the Fund and shall have no responsibility or
liability for or on account of securities or funds not so delivered. The Fund
will deposit with the Custodian copies of the Certificate of Incorporation and
By-Laws (or comparable documents) of the Fund and all amendments thereto, and
copies of such votes and other proceedings of the Fund as may be necessary for
or convenient to the Custodian in the performance of its duties.
2. Except for securities and funds held by subcustodians appointed
pursuant to the provisions of Section 3 hereof, the Custodian shall have and
perform the following powers and duties:
A. Safekeeping - To keep safely the securities of the Fund that have been
delivered to the Custodian and from time to time to receive delivery of
securities for safekeeping.
B. Manner of Holding Securities - To hold securities of the Fund (1) by
physical possession of the share certificates or other instruments representing
such securities in registered or bearer form, or (2) in book-entry form by a
Securities System (as said term is defined in Section 2T).
C. Registered Name; Nominee - To hold registered securities of the Fund
(1) in the name or any nominee name of the Custodian or the Fund, or in the name
or any nominee name of any agent appointed pursuant to Section 5E, or (2) in
street certificate form, so-called, and in any case with or without any
indication of fiduciary capacity.
D. Purchases - Upon receipt of proper instructions, and insofar as funds
are available for the purpose, to pay for and receive securities purchased for
the account of the Fund, payment being made only upon receipt of the securities
(1) by the Custodian, or (2) by a clearing corporation of a national securities
exchange of which the Custodian is a member, or (3) by
1
<PAGE>
a Securities System. However, (i) in the case of repurchase agreements entered
into by the Fund, the Custodian (as well as a Subcustodian or an Agent, as
defined in Section 2G) may release funds to a Securities System prior to the
receipt of advice from the Securities System that the securities underlying such
repurchase agreement have been transferred by book entry into the Account (as
defined in Section 2T) of the Custodian (or such Subcustodian or Agent)
maintained with such Securities System, and (ii) in the case of time deposits,
call account deposits, currency deposits, and other deposits pursuant to
Sections 2K, 2L and 2M, the Custodian may make payment therefore without
receiving an instrument evidencing said deposit.
E. Exchanges - Upon receipt of proper instructions, to exchange securities
held by it for the account of the Fund for other securities in connection with
any reorganization, recapitalization, split-up of shares, change of par value,
conversion or other event, and to deposit any such securities in accordance with
the terms of any reorganization or protective plan. Without such instructions,
the Custodian may surrender securities in temporary form for definitive
securities, may surrender securities for transfer into a name or nominee name as
permitted in Section 2C, and may surrender securities for a different number of
certificates or instruments representing the same number of shares or same
principal amount of indebtedness, provided the securities to be issued are to be
delivered to the Custodian.
F. Sales of Securities - Upon receipt of proper instructions, to make
delivery of securities which have been sold for the account of the Fund, but
only against payment therefor (1) in cash, by a certified check, bank cashier's
check, bank credit, or bank wire transfer, or (2) by credit to the account of
the Custodian with a clearing corporation of a national securities exchange of
which the Custodian is a member, or (3) by credit to the account of the
Custodian or an Agent of the Custodian with a Securities System.
G. Depositary Receipts - Upon receipt of proper instructions, to instruct
a subcustodian appointed pursuant to Section 3 hereof (a "Subcustodian") or an
agent of the Custodian appointed pursuant to Section 5E hereof (an "Agent") to
surrender securities to the depositary used by an issuer of American Depositary
Receipts or International Depositary Receipts (hereinafter collectively referred
to as "ADRs") for such securities against a written receipt therefor adequately
describing such securities and written evidence satisfactory to the Subcustodian
or Agent that the depositary has acknowledged receipt of instructions to issue
with respect to such securities ADRs in the name of the Custodian, or a nominee
of the Custodian, for delivery to the Custodian in Boston, Massachusetts, or at
such other place as the Custodian may from time to time designate.
Upon receipt of proper instructions, to surrender ADRs to
2
<PAGE>
the issuer thereof against a written receipt therefor adequately describing the
ADRs surrendered and written evidence satisfactory to the Custodian that the
issuer of the ADRs has acknowledged receipt of instructions to cause its
depositary to deliver the securities underlying such ADRs to a Subcustodian or
an Agent.
H. Exercise of Rights; Tender Offers - Upon receipt of proper
instructions, to deliver to the issuer or trustee thereof, or to the agent of
either, warrants, puts, calls, rights or similar securities for the purpose of
being exercised or sold, provided that the new securities and cash, if any,
acquired by such action are to be delivered to the Custodian, and, upon receipt
of proper instructions, to deposit securities upon invitations for tenders of
securities, provided that the consideration is to be paid or delivered or the
tendered securities are to be returned to the Custodian.
I. Stock Dividends, Rights, Etc. - To receive and collect all stock
dividends, rights and other items of like nature; and to deal with the same
pursuant to proper instructions relative thereto.
J. Borrowings - Upon receipt of proper instructions, to deliver securities
of the Fund to lenders or their agents as collateral for borrowings effected by
the Fund, provided that such borrowed money is payable to or upon the
Custodian's order as Custodian for the Fund.
K. Demand Deposit Bank Accounts - To open and operate an account or
accounts in the name of the Fund on the Custodian's books subject only to draft
or order by the Custodian. All funds received by the Custodian from or for the
account of the Fund shall be deposited in said account(s). The responsibilities
of the Custodian to the Fund for deposits accepted on the Custodian's books
shall be that of a U. S. bank for a similar deposit.
If and when authorized by proper instructions, the Custodian may open and
operate an additional account(s) in such other banks or trust companies as may
be designated by the Fund in such instructions (any such bank or trust company
so designated by the Fund being referred to hereafter as a "Banking
Institution"), provided that such account(s) shall be in the name of the
Custodian for account of the Fund and subject only to the Custodian's draft or
order. Such accounts may be opened with Banking Institutions in the United
States and in other countries and may be denominated in either U.S. Dollars or
other currencies as the Fund may determine. All such deposits shall be deemed to
be portfolio securities of the Fund and accordingly the responsibility of the
Custodian therefore shall be the same as and no greater than the Custodian's
responsibility in respect of other portfolio securities of the Fund.
L. Interest Bearing Call or Time Deposits - To place interest
3
<PAGE>
bearing fixed term and call deposits with such banks and in such amounts as the
Fund may authorize pursuant to proper instructions. Such deposits may be placed
with the Custodian or with Subcustodians or other Banking Institutions as the
Fund may determine. Deposits may be denominated in U. S.Dollars or other
currencies and need not be evidenced by the issuance or delivery of a
certificate to the Custodian, provided that the Custodian shall include in its
records with respect to the assets of the Fund, appropriate notation as to the
amount and currency of each such deposit, the accepting Banking Institution, and
other appropriate details. Such deposits, other than those placed with the
Custodian, shall be deemed portfolio securities of the Fund and the
responsibilities of the Custodian therefor shall be the same as those for demand
deposit bank accounts placed with other banks, as described in Section K of this
agreement. The responsibility of the Custodian for such deposits accepted on the
Custodian's books shall be that of a U. S. bank for a similar deposit.
M. Foreign Exchange Transactions - Pursuant to proper instructions, to
enter into foreign exchange contracts, to purchase and sell foreign currencies
for spot and future delivery on behalf and for the account of the Fund. Such
transactions may be undertaken by the Custodian with such Banking Institutions,
including the Custodian and Subcustodian(s) as principals, as approved and
authorized by the Fund. Foreign exchange contracts, other than those executed
with the Custodian, shall be deemed to be portfolio securities of the Fund and
the responsibilities of the Custodian therefore shall be the same as those for
demand deposit bank accounts placed with other banks as described in Section K
of this agreement.
N. Stock Loans - Upon receipt of proper instructions, to deliver
securities of the Fund, in connection with loans of securities by the Fund, to
the borrower thereof prior to receipt of the collateral, if any, for such
borrowings.
O. Collections - To collect, receive and deposit in said account or
accounts all income and other payments with respect to the securities held
hereunder, and to execute ownership and other certificates and affidavits for
all federal and state tax purposes in connection with receipt of income or other
payments with respect to securities of the Fund or in connection with transfer
of securities, and pursuant to proper instructions to take such other actions
with respect to collection or receipt of funds or transfer of securities which
involve an investment decision.
P. Dividends, Distributions and Redemptions - Upon receipt of proper
instructions from the Fund, or upon receipt of instructions from the Fund's
shareholder servicing agent or agent with comparable duties (the "Shareholder
Servicing Agent") (given by such person or persons and in such manner on behalf
of the Shareholder Servicing Agent as the Fund shall have authorized), the
4
<PAGE>
Custodian shall release funds or securities to the Shareholder Servicing Agent
or otherwise apply funds or securities, insofar as available, for the payment of
dividends or other distributions to Fund shareholders. Upon receipt of proper
instructions from the Fund, or upon receipt of instructions from the Shareholder
Servicing Agent (given by such person or persons and in such manner on behalf of
the Shareholder Servicing Agent as the Fund shall have authorized), the
Custodian shall release funds or securities, insofar as available, to the
Shareholder Servicing Agent or as such Agent shall otherwise instruct for
payment to Fund shareholders who have delivered to such Agent a request for
repurchase or redemption of their shares of capital stock of the Fund.
Q. Proxies, Notices, Etc. - Promptly to deliver or mail to the Fund all
forms of proxies and all notices of meetings and any other notices or
announcements affecting or relating to securities owned by the Fund that are
received by the Custodian, and upon receipt of proper instructions, to execute
and deliver or cause its nominee to execute and deliver such proxies or other
authorizations as may be required. Neither the Custodian nor its nominee shall
vote upon any of such securities or execute any proxy to vote thereon or give
any consent or take any other action with respect thereto (except as otherwise
herein provided) unless ordered to do so by proper instructions.
R. Bills - Upon receipt of proper instructions, to pay or cause to be
paid, insofar as funds are available for the purpose, bills, statements, or
other obligations of the Fund.
S. Nondiscretionary Details - Without the necessity of express
authorization from the Fund, (1) to attend to all nondiscretionary details in
connection with the sale, exchange, substitution, purchase, transfer or other
dealings with securities, funds or other property of the Fund held by the
Custodian except as otherwise directed from time to time by the Directors of the
Fund, and (2) to make payments to itself or others for minor expenses of
handling securities or other similar items relating to the Custodian's duties
under this Agreement, provided that all such payments shall be accounted for to
the Fund.
T. Deposit of Fund Assets in Securities Systems - The Custodian may
deposit and/or maintain securities owned by the Fund in (i) The Depository Trust
Company, (ii) any book-entry system as provided in Subpart O of Treasury
Circular No. 300, 31 CFR 306, Subpart B of 31 CFR Part 350, or the book-entry
regulations of federal agencies substantially in the form of Subpart O, or (iii)
any other domestic clearing agency registered with the Securities and Exchange
Commission under Section 17A of the Securities Exchange Act of 1934 which acts
as a securities depository and whose use the Fund has previously approved in
writing (each of the foregoing being referred to in this Agreement as a
"Securities System"). Utilization of a Securities System shall be in
5
<PAGE>
accordance with applicable Federal Reserve Board and Securities and Exchange
Commission rules and regulations, if any, and subject to the following
provisions:
1. The Custodian may deposit and/or maintain Fund securities, either
directly or through one or more Agents appointed by the Custodian (provided that
any such agent shall be qualified to act as a custodian of the Fund pursuant to
the Investment Company Act of 1940 and the rules and regulations thereunder), in
a Securities System provided that such securities are represented in an account
("Account") of the Custodian or such Agent in the Securities System which shall
not include any assets of the Custodian or Agent other than assets held as a
fiduciary, custodian, or otherwise for customers;
2. The records of the Custodian with respect to securities of the Fund
which are maintained in a Securities System shall identify by book-entry those
securities belonging to the Fund;
3. The Custodian shall pay for securities purchased for the account of the
Fund upon (i) receipt of advice from the Securities System that such securities
have been transferred to the Account, and (ii) the making of an entry on the
records of the Custodian to reflect such payment and transfer for the account of
the Fund. The Custodian shall Transfer securities sold for the account of the
Fund upon (i) receipt of advice from the Securities System that payment for such
securities has been transferred to the Account, and (ii) the making of an entry
on the records of the Custodian to reflect such transfer and payment for the
account of the Fund. Copies of all advices from the Securities System of
transfers of securities for the account of the Fund shall identify the Fund, be
maintained for the Fund by the Custodian or an Agent as referred to above, and
be provided to the Fund at its request. The Custodian shall furnish the Fund
confirmation of each transfer to or from the account of the Fund in the form of
a written advice or notice and shall furnish to the Fund copies of daily
transaction sheets reflecting each day's transactions in the Securities System
for the account of the Fund on the next business day;
4. The Custodian shall provide the Fund with any report obtained by the
Custodian or any Agent as referred to above on the Securities System's
accounting system, internal accounting control and procedures for safeguarding
securities deposited in the Securities System; and the Custodian and such Agents
shall send to the Fund such reports on their own systems of internal accounting
control as the Fund may reasonably request from time to time.
5. At the written request of the Fund, the Custodian will terminate the
use of any such Securities System on behalf of the Fund as promptly as
practicable.
U. Other Transfers - To deliver securities, funds and other
6
<PAGE>
property of the Fund to a Subcustodian or another custodian of the Fund; and,
upon receipt of proper instructions, to make such other disposition of
securities, funds or other property of the Fund in a manner other than or for
purposes other than as enumerated elsewhere in this Agreement, provided that the
instructions relating to such disposition shall include a statement of the
purpose for which the delivery is to be made, the amount of securities to be
delivered and the name of the person or persons to whom delivery is to be made.
V. Investment Limitations - In performing its duties generally, and more
particularly in connection with the purchase, sale and exchange of securities
made by or for the Fund, the Custodian may assume unless and until notified in
writing to the contrary that proper instructions received by it are not in
conflict with or in any way contrary to any provisions of the Fund's Certificate
of Incorporation or By-Laws (or comparable documents) or votes or proceedings of
the shareholders or Directors of the Fund. The Custodian shall in no event be
liable to the Fund and shall be indemnified by the Fund for any violation of any
investment limitations to which the Fund is subject or other limitations with
respect to the Fund's powers to make expenditures, encumber securities, borrow
or take similar actions affecting its portfolio.
W. Proper Instructions - Proper instructions shall mean a tested telex
from the Fund or a written request, direction, instruction or certification
signed or initialled on behalf of the Fund by one or more person or persons as
the Board of Directors of the Fund shall have from time to time authorized,
provided, however, that no such instructions directing the delivery of
securities or the payment of funds to an authorized signatory of the Fund shall
be signed by such person. Those persons authorized to give proper instructions
may be identified by the Board of Directors by name, title or position and will
include at least one officer empowered by the Board to name other individuals
who are authorized to give proper instructions on behalf of the Fund. Telephonic
or other oral instructions given by any one of the above persons will be
considered proper instructions if the Custodian reasonably believes them to have
been given by a person authorized to give such instructions with respect to the
transaction involved. Oral instructions will be confirmed by tested telex or in
writing in the manner set forth above but the lack of such confirmation shall in
no way affect any action taken by the Custodian in reliance upon such oral
instructions. Proper instructions may relate to specific transactions or to
types or classes of transactions, and may be in the form of standing
instructions.
Proper instructions may include communications effected directly between
electro-mechanical or electronic devices or systems, in addition to tested
telex, provided that the Fund and the Custodian agree to the use of such device
or system,
7
<PAGE>
3. Securities, funds and other property of the Fund may be held by
subcustodians appointed pursuant to the provisions of this Section 3 (a
"Subcustodian"). The Custodian may, at any time and from time to time, appoint
any bank or trust company (meeting the requirements of a custodian or a foreign
custodian under the Investment Company Act of 1940 and the rules and regulations
thereunder) to act as a Subcustodian for the Fund, provided that the Fund shall
have approved in writing (1) any such bank or trust company and the subcustodian
agreement to be entered into between such bank or trust company and the
Custodian, and (2) the Subcustodian's offices or branches at which the
Subcustodian is authorized to hold securities, cash and other property of the
Fund. Upon such approval by the Fund, the Custodian is authorized on behalf of
the Fund to notify each Subcustodian of its appointment as such. The Custodiain
may, at any time in its discretion, remove any bank or trust company that has
been appointed as a Subcustodian.
Those Subcustodian, their offices or branches which the Fund has approved
to date are set forth on Appendix A hereto. Such Appendix shall be amended from
time to time as Subcustodians, branches or offices are changed, added or
deleted. The Fund shall be responsible for informing the Custodian sufficiently
in advance of a proposed investment which is to be held at a location not listed
on Appendix A, in order that there shall be sufficient time for the Fund to give
the approval required by the preceding paragraph and for the Custodian to put
the appropriate arrangements in place with such Subcustodian pursuant to such
subcustodian agreement.
If the fund shall have invested in a security to be held in a location
before the foregoing procedures have been completed, such security shall be held
by such agent as the Custodian may appoint unless and until the Fund shall
instruct the Custodian to move the security into the possession of the Custodian
or a Subcustodian. In any event, the Custodian shall be liable to the Fund for
the actions of such agent if and only to the extent the Custodian shall have
recovered from such agent for any damages caused the Fund by such agent.
With respect to the securities and funds held by a Subcustodian, either
directly or indirectly, including demand and interest bearing deposits,
currencies or other deposits and foreign exchange contracts as referred to in
Sections 2K, 2L or 2M, the Custodian shall be liable to the Fund if and only to
the extent that such Subcustodian is liable to the Custodian and the Custodian
recovers under the applicable subcustodian agreement. The Custodian shall
nevertheless be liable to the Fund for its own negligence in transmitting any
instructions received by it from the Fund and for its own negligence in
connection with the delivery of any securities or funds held by it to any such
Subcustodian.
8
<PAGE>
In the event that any Subcustodian appointed pursuant to the provisions of
this Section 3 fails to perform any of its obligations under the terms and
conditions of the applicable subcustodian agreement, the Custodian shall use its
best efforts to cause such Subcustodian to perform such obligations. In the
event that the Custodian is unable to cause such Subcustodian to perform fully
its obligations thereunder, the Custodian shall forthwith upon the Fund's
request terminate such Subcustodian and, if necessary or desirable, appoint
another subcustodian in accordance with the provisions of this Section 3. At the
election of the Fund, it shall have the right to enforce, to the extent
permitted by the subcustodian agreement and applicable law, the Custodian's
rights against any such Subcustodian for loss or damage caused the Fund by such
Subcustodian.
At the written request of the Fund, the Custodian will terminate any
subcustodian appointed pursuant to the provisions of this Section 3 in
accordance with the termination provisions under the applicable subcustodian
agreement. The Custodian will not amend any subcustodian agreement or agree to
change or permit any changes thereunder except upon the prior written approval
of the Fund.
In the event the Custodian makes any payment to a Subcustodian under the
indemnification provisions of any subcustodian agreement, no more than thirty
days after written notice to the Fund of the Custodian's intention to make such
payment, the Fund will reimburse the Custodian the amount of such payment except
in respect of any negligence or misconduct of the Custodian.
4. The Custodian may assist generally in the preparation of reports to
Fund shareholders and others, audits of accounts, and other ministerial matters
of like nature.
5. A. The Custodian shall not be liable for any action taken or omitted in
reliance upon proper instructions believed by it to be geniune or upon any other
written notice, request, direction, instruction, certificate or other instrument
believed by it to be genuine and signed by the proper party or parties.
The Secretary or Assistant Secretary of the Fund shall certify to the
Custodian the names, signatures and scope of authority of all persons authorized
to given proper instructions or any other such notice, request, direction,
instruction, certificate or instrument on behalf of the Fund, the names and
signatures of the officers of the Fund, the name and address of the Shareholder
Servicing Agent, and any resolutions, votes, instructions or directions of the
Fund's Board of Directors or shareholders. Such certificate may be accepted and
relied upon by the Custodian as conclusive in full force and effect until
receipt of a similar certificate to the contrary.
9
<PAGE>
So long as and to the extent that it is in the exercise of reasonable
care, the Custodian shall not be responsible for the title, validity or
genuineness of any property or evidence of title thereto received by it or
delivered by it pursuant to this Agreement.
The Custodian shall be entitled, at the expense of the Fund, to receive
and act upon advice of counsel (who may be counsel for the Fund) on all matters,
and the Custodian shall be without liability for any action reasonably taken or
omitted pursuant to such advice.
B. With respect to the portfoliio securities, cash and other property of
the Fund held by a Securities System, the Custodian shall be liable to the Fund
only for any loss or damage to the Fund resulting from use of the Securities
System if caused by any negligence, misfeasance or misconduct of the Custodian
or any of its agents or of any of its or their employees or from any failure of
the Custodian or any such agent to enforce effectively such rights as it may
have against the Securities System.
C. Except as may otherwise be set forth in this Agreement with respect to
particular matters, the Custodian shall be held only to the exercise of
reasonable care and diligence in carrying out the provisions of this Agreement,
provided that the Custodian shall not thereby be required to take any action
which is in contravention of any applicable law. The Fund agrees to indemnify
and hold harmless the Custodian and its nominees from all claims and liabilities
(including counsel fees) incurred or assessed against it or its nominees in
connection with the performance of this Agreement, except such as may arise from
its or its nominee's breach of the relevant standard of conduct set forth in
this Agreement. Without limiting the foregoing indemnification obligation of the
Fund, the Fund agrees to indemnify the Custodian and its nominees against any
liability the Custodian or such nominee may incur by reason of taxes assessed to
the Custodian or such nominee or other costs, liability or expense incurred by
the Custodian or such nominee resulting directly or indirectly from the fact
that portfolio securities or other property of the Fund is registered in the
name of the Custodian or such nominee.
It is also understood that the Custodian shall not be liable for any loss
involving any securities, currencies, deposits or other property of the Fund,
whether maintained by it, a Subcustodian, an agent of the Custodian or a
Subcustodian, a Securities System, or a Banking Institution, or a loss arising
from a foreign currency transaction or contract, resulting from a Sovereign
Risk. A "Sovereign Risk" shall mean nationalization, expropriation, devaluation,
revaluation, confiscation, seizure, cancellation, destruction or similar action
by any governmental authority, de facto or de jure; or enactment, promulgation,
imposition or enforcement by any such governmental authority of
10
<PAGE>
currency restrictions, exchange controls, taxes, levies or other charges
affecting the Fund's property; or acts of war, terrorism, insurrection or
revolution; or any other similar act or event beyond the Custodian's control.
D. The Custodian shall be entitled to receive reimbursement from the Fund
on demand, in the manner provided in Section 6, for its cash disbursements,
expenses and charges (including the fees and expenses of any Subcustodian or any
Agent) in connection with this Agreement, but excluding salaries and usual
overhead expenses.
E. The Custodian may at any time or times in its discretion appoint (and
may at any time remove) any other bank or trust company as its agent (an
"Agent") to carry out such of the provisions of this Agreement as the Custodian
may from time to time direct, provided, however, that the appointment of such
Agent (other than an Agent appointment pursuant to the third paragraph of
Section 3) shall not relieve the Custodian of any of its responsibilities under
this agreement.
F. Upon request, the Fund shall deliver to the Custodian such proxies,
powers of attorney or other instruments as may be reasonable and necessary or
desirable in connection with the performance by the Custodian or any
Subcustodian of their respective obligations under this Agreement or any
applicable subcustodian agreement.
6. The fund shall pay the Custodian a custody fee based on such fee
schedule as may from time to time be agreed upon in writing by the Custodian and
the Fund. Such fee, together with all amounts for which the Custodian is to be
reimbursed in accordance with Section 5D, shall be billed to the Fund in such a
manner as to permit payment either by a direct cash payment to the Custodian or
by placing Fund portfolio transactions with the Custodian resulting in an
agreed-upon amount of commissions being paid to the Custodian within an
agreed-upon period of time.
7. This Agreement shall continue in full force and effect until terminated
by either party by an instrument in writing delivered or mailed, postage
prepaid, to the other party, such termination to take effect no sooner than
sixty (60) days after the date of such delivery or mailing. In the event of
termination the Custodian shall be entitled to receive prior to delivery of the
securities, funds and other property held by it all accrued fees and
unreimbursed expenses the payment of which is contemplated by Sections 5D and 6,
upon receipt by the Fund of a statement setting forth such fees and expenses.
In the event of the appointment of a successor custodian, it is agreed
that the funds and securities owned by the Fund and held by the Custodian or any
Subcustodian shall be delivered to the successor custodian, and the Custodian
agrees to cooperate with the
11
<PAGE>
Fund in execution of documents and performance of other actions necessary or
desirable in order to substitute the successor custodian for the Custodian under
this Agreement.
8. This Agreement constitutes the entire understanding and agreement of
the parties hereto with respect to the subject matter hereof. No provision of
this Agreement may be amended or terminated except by a statement in writing
signed by the party against which enforcement of the amendment or termination is
sought.
In connection with the operation of this Agreement, the Custodian and the
Fund may agree in writing from time to time on such provisions interpretative of
or in addition to the provisions of this Agreement as may in their joint opinion
be consistent with the general tenor of this Agreement. No interpretative or
additional provisions made as provided in the preceding sentence shall be deemed
to be an amendment of this Agreement.
9. This instrument is executed and delivered in The Commonwealth of
Massachusetts and shall be governed by and construed according to the laws of
said Commonwealth.
10. Notices and other writing delivered or mailed postage prepaid to the
Fund addressed to the Fund at 120 Wall Street, New York, New York 10005,
Attention: Secretary, or to such other address as the Fund may have designated
to the Custodian in writing, or to the Custodian at 40 Water Street, Boston,
Massachusetts 02109, Attention: Manager, Securities Department, or to such other
address as the Custodian may have designated to the Fund in writing, shall be
deemed to have been properly delivered or given hereunder to the respective
addressee.
11. This Agreement shall be binding on and shall inure to the benefit of
the Fund and the Custodian and their respective successors and assigns, provided
that neither party hereto may assign this Agreement or any of its rights or
obligations hereunder without the prior written consent of the other party.
12. The Custodian understands and agrees that the Fund is a Series of a
Massachusetts Business Trust and that the Custodian shall look solely to the
assets of the Fund for satisfaction of any liabilities or other obligations and
not to the assets of any shareholder, officer, trustee or employee of the Fund.
13. This Agreement may be executed in any number of counteparts, each of
which shall be deemed an original. This Agreement shall become effective when
one or more counterparts have been signed and delivered by each of the parties.
12
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed in its name and behalf on the day and year first above written.
FIRST INVESTORS SERIES FUND BROWN BROTHERS HARRIMAN &
ON BEHALF OF TOTAL RETURN SERIES CO.
By /s/ David D. Grayson /s/ Douglas A. Donohue
------------------------------- ---------------------------------
David D. rayson, President
13
<PAGE>
EX-99.B9
ADMINISTRATION AGREEMENT
This Agreement, dated as of the 3rd of January, 1989, made by and between
FIRST INVESTORS FUND, a business trust duly organized and existing under the
laws of the Commonwealth of Massachusetts (the "Fund"), on behalf of its
separate, designated series presently existing or hereafter created (the
"Series"); FIRST INVESTORS MANAGEMENT COMPANY, INC. (FIMCO), a corporation duly
organized and existing under the laws of the State of New York; FIRST INVESTORS
CORPORATION (FIC), a corporation duly organized and existing under the laws of
the State of New York; ADMINISTRATIVE DATA MANAGEMENT CORP. (ADM), a corporation
duly organized and existing under the laws of the State of New York.
WITNESSETH THAT:
WHEREAS, FIMCO and FIC are the Co-Underwriters of the shares
of the Series; and
WHEREAS, ADM has agreed to act as transfer agent of the Fund, as its
dividend disbursing agent, and as administrator of the Dividend Reinvestment,
Share Accumulation and Systematic Withdrawal Accounts of the Fund, and ADM also
agreed to act for the Fund 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 premises and mutual covenants
contained herein, the parties hereto, intending to be legally bound, do hereby
agree as follows:
THE TRANSFER AGENCY
Section 1. The Fund hereby appoints ADM as its 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 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, and the
number of shares and fractions from time to time owned by them for which no
Share Certificates are outstanding. Each Shareholder or Planholder
-1-
<PAGE>
whether he holds one or more Share Certificates or owns Shares held under one or
more Plans, or whether he holds or owns Shares by both methods, 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, (if any), shall
credit the Unissued Share Certificate Account with the Shares and fractions to
the respective Planholders. Likewise, whenever ADM has occasion to surrender for
redemption Shares and fractions owned by Planholders, it shall be unnecessary to
issue Share Certificates for redemption purposes. The Fund authorizes ADM in
such cases to process the transactions by appropriate entries in its stock
transfer records, and debiting of the Unissued Share Certificate Account and the
record of issued Shares outstanding. Whenever Planholders are entitled to the
issuance of Share Certificates for Shares held under Plans, the Fund 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 a corporation. It will countersign for issuance or
reissuance of Share Certificates representing original issue or reissued
treasury Shares as directed by the Written Instructions of the Fund, and will
transfer Share Certificates registered in the name of Shareholders from one
Shareholder to another in the usual manner. ADM may rely conclusively and act
without further investigation upon any list, instruction, certification,
authorization, Share Certificate or other instrument or paper believed by it in
good faith to be genuine and unaltered, and to have been signed, countersigned,
or executed by a duly authorized person or persons, or upon the instructions of
any Officer of the Fund, or upon the advice of counsel for the Fund or for ADM.
ADM may record any transfer of Share Certificates which is believed by it in
good faith to have been duly authorized or may refuse to record any transfer of
Share Certificates if in good faith ADM in its capacity as transfer agent deems
such refusal necessary in order to avoid any liability either to the Fund or
ADM. The Fund agrees to indemnify and hold harmless ADM from and against any and
all losses, costs, claims and liability which it may suffer or incur by reason
of so relying or acting or refusing to act in good faith.
THE DIVIDEND DISBURSEMENT AGENCY
Section 5. Upon declaration of each dividend and each capital gains
distribution by the Board of Trustees of the Fund, on behalf of the Series, the
Fund shall notify ADM of the date of such
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<PAGE>
declaration, the amount payable per share, the record date for determining the
Shareholders entitled to payment, the payment date, and the reinvestment date,
the price for which is to be used to purchase Shares for reinvestment.
Section 6. On or before each payment date, the Fund will transfer, or
cause the Custodian to transfer, to ADM in its capacity as dividend disbursing
agent, the total amount of the dividend or distribution currently payable and
ADM in such capacity will on the designated payment date mail distribution
checks to the Shareholders for the proper amounts payable to them except as
follows:
(a) Dividends and capital gains distributions directed to be reinvested
under Plans will be transferred to ADM in its capacity as administrator for
application as provided in Section 11.
ADMINISTRATION OF THE PLANS
Section 7. The Fund, FIMCO and FIC hereby appoint 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 provided 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 from time to time owned by them for which no Share Certificates
are outstanding.
Section 8. FIMCO, FIC and the Fund will from time to time keep ADM fully
informed of the names of all Planholders who are entitled to purchase Shares at
reduced offering prices and of the respective prices which are applicable to
each of such Planholders. ADM may conclusively rely on such information in
placing orders for Shares on behalf of Planholders.
Section 9. It will be the practice of ADM to process payments by
planholders received by its mutual funds department in acceptable form until the
time of the closing of the New York Stock Exchange on each day on which said
exchange is open since the same time on the prior business day in which said
exchange was open, and to obtain from FIMCO, FIC or the Fund a quotation (on
which it may conclusively rely) as of the close of the 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 invested as
between commissions of dealers, shares of FIMCO, or FIC and net asset value to
be deposited with the Custodian. ADM while the public offering price so quoted
is still in effect, will, as agent for sundry Planholders, place an order with
FIMCO or FIC for the proper number of Shares and fractions, will advise FIMCO or
FIC of the breakdown of the total purchase
-3-
<PAGE>
price as between discount of dealers, shares of FIMCO or FIC and net asset value
and will confirm said figures to FIMCO or FIC in writing.
Section 10. ADM will thereupon set aside the commissions of dealers, and
share of FIMCO and FIC and will pay over the balance available (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's
account of FIMCO or FIC for its share. The proper number of Shares and fractions
will then be issued and credited to the Unissued Certificate Account, and the
Shares and fractions purchased for each Planholder will be credited to his
separate account. ADM will thereupon mail to each Planholder a confirmation of
the purchase, with copies to the Fund and the proper dealers, if the Fund so
requests. Such confirmation will show the prior and new share balance, the
Shares held under the Plans and Shares (if any) for which Stock 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 Fund and ADM.
Section 11. As and when the Fund, on behalf of the Series, declares
dividends or capital gains distributions, it will promptly quote to ADM the net
asset value per share of such Series at the close of business in the
reinvestment date, whereupon as soon as it can calculate the total of such
dividend or distributions it will receive for reinvestment, ADM will advise the
Fund of the amount which will be available for reinvestment on the payment date
and the number of Shares and fractions to be issued. Upon receipt of the amount
of the dividends or distributions to be reinvested under Plans, ADM will pay
over such amount to the Custodian for deposit in the Principal Account under the
Custodian Agreement, whereupon the Shares and fractions 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 so
purchased 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 Fund, showing the prior and new share balance.
Section 12. Whenever a Shareholder shall deposit Shares represented by
Share Certificates in an investment plan or 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 stock accounts and to credit
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<PAGE>
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 purchased with the reinvested dividends and
distributions, and the Shares redeemed to provide the withdrawal payments.
Confirmations will be mailed to the Planholders reflecting each transaction,
with copies to the Fund.
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 Fund that it has Shares for redemption, stating the number of
Shares and fractions to be redeemed. The Fund will then quote to ADM the
applicable net asset value of redemption price, whereupon ADM will furnish the
Fund 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. The 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 Fund 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 prospectus
of the Fund, are observed. 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 Fund, does not conflict with or violate any requirements of its Declaration
of Trust, ByLaws or prospectus, or any rule, regulation or requirement of any
regulatory body.
Section 16. ADM in acting for Planholders, or in any other capacity set
forth in this Agreement, shall incur no liability for any actions taken or
omitted in good faith, nor shall ADM 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
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<PAGE>
taxes assessed against it in its corporate capacity out of its compensation
hereunder.
MISCELLANEOUS
Section 17. In addition to the services as transfer agent, dividend
disbursing agent and administrator as above set forth, ADM will perform other
services for the Fund as agreed from time to time, including but not limited to
preparation of Federal 1099 forms, mailing of quarterly and semi-annual reports
of the Fund, preparation of one annual list of Shareholders, and preparing
notices of Shareholders meeting, proxies and proxy statements.
Section 18. The Fund, FIMCO and FIC agree 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
Fund, FIMCO FIC and ADM. Said payments and reimbursements shall be allocated
between the Fund, FIMCO and FIC as they may agree.
Section 19. ADM may from time to time in its sole discretion delegate some
or all of its duties hereunto to any affiliate(s) 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
either of them, as the context may indicate.
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 observance on which ADM is 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 New York Stock Exchange and
the Bank are open.
Section 21. All terms used 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:
Fund: The term "Fund" shall, where appropriate, mean each Series of the
Fund.
Plan: The term Plan shall include such Dividend Reinvestment Accounts,
Share Accumulation Accounts, Systematic Withdrawal Plans and other types of
plans or accounts in form acceptable to ADM, which the Fund may from time to
time adopt and make available to its Shareholders, including plans or accounts
adopted for pension and profit sharing plans established by self-employed
individuals, partnerships, individuals, corporations and
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<PAGE>
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. Such termination shall only be
effective with respect to the rights, obligations and duties as between the non-
terminating parties. In case such notice of termination is given by either ADM
or the Fund, the Board of Trustees of the Fund 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 and 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 two or more counterparts,
each of which when so executed shall be deemed to be an 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 Fund without the written
consent of the Fund, authorized or approved by a resolution of its Board of
Trustees.
Section 25. This Agreement shall be governed by the laws of the State of
New York.
Section 26. Notwithstanding any provision of law to the contrary, FIMCO,
FIC and ADM hereby severally waive any right to enforce this Agreement against
the individual and separate assets of any shareholder of the Series.
Section 27. In accordance with the Declaration of Trust creating the Fund,
which was filed with the Commonwealth of Massachusetts on September 23, 1988, 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 Fund shall be subject to any personal liability whatsoever under
this Agreement, except for that arising from his bad faith, willful misconduct,
gross negligence, or reckless disregard of his duties or for his failure to act
in good faith and in the reasonable belief that his action was in the best
interest of the Fund and ADM shall look solely to the Fund property for
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<PAGE>
satisfaction of claims of any nature arising in connection with the affairs of
the Fund.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their duly authorized officers and their corporate seals hereunto duly
affixed and attested, as of the day and the year first above written.
ATTEST: FIRST INVESTORS FUND
/s/ C. Durso BY: /s/ Andrew J. Donohue
- ------------------------------ ------------------------------------
C. Durso, Vice President and Andrew J. Donohue, President
Secretary
ATTEST: FIRST INVESTORS MANAGEMENT COMPANY,
INC.
/s/ Andrew J. Donohue BY: /s/ David D. Grayson
- ------------------------------ ------------------------------------
Andrew J. Donohue, Secretary David D. Grayson, President
and General Counsel
ATTEST: FIRST INVESTORS CORPORATION
/s/ Andrew J. Donohue BY: /s/ David D. Grayson
- ------------------------------ ------------------------------------
Andrew J. Donohue, Secretary David D. Grayson, President
and General Counsel
ATTEST: ADMINISTRATIVE DATA MANAGEMENT CORP.
/s/ Andrew J. Donohue BY: /s/ David D. Grayson
- ------------------------------ ------------------------------------
Andrew J. Donohue, Secretary David D. Grayson, President
and General Counsel
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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.
<TABLE>
<S> <C>
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*
</TABLE>
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>
EXHIBIT 99.B11.1
Consent of Independent Certified Public Accountants
First Investors Series Fund
95 Wall Street
New York, New York 10005
We consent to the use in Post-Effective Amendment No. 20 to the
Registration Statement on Form N-1A (File No. 33-25623) of our report dated
January 31, 1996 relating to the December 31, 1995 financial statements of First
Investors Series Fund, which are included in said Registration Statement.
/s/Tait, Weller & Baker
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
April 16, 1996
<PAGE>
EX-99.B11.2
First Investors Series Fund
Power of Attorney
KNOW ALL MEN BY THESE PRESENTS that the undersigned officer and/or trustee
of First Investors Series Fund 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>
First Investors Series Fund
Power of Attorney
KNOW ALL MEN BY THESE PRESENTS that the undersigned officer and/or trustee
of First Investors Series Fund 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>
First Investors Series Fund
Power of Attorney
KNOW ALL MEN BY THESE PRESENTS that the undersigned officer and/or trustee
of First Investors Series Fund 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>
First Investors Series Fund
Power of Attorney
KNOW ALL MEN BY THESE PRESENTS that the undersigned officer and/or trustee
of First Investors Series Fund 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>
First Investors Series Fund
Power of Attorney
KNOW ALL MEN BY THESE PRESENTS that the undersigned officer and/or trustee
of First Investors Series Fund 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>
First Investors Series Fund
Power of Attorney
KNOW ALL MEN BY THESE PRESENTS that the undersigned officer and/or trustee
of First Investors Series Fund 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>
First Investors Series Fund
Power of Attorney
KNOW ALL MEN BY THESE PRESENTS that the undersigned officer and/or trustee
of First Investors Series Fund 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>
First Investors Series Fund
Power of Attorney
KNOW ALL MEN BY THESE PRESENTS that the undersigned officer and/or trustee
of First Investors Series Fund 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>
First Investors Series Fund
Power of Attorney
KNOW ALL MEN BY THESE PRESENTS that the undersigned officer and/or trustee
of First Investors Series Fund 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>
EX-99.B15.1
AMENDED AND RESTATED
CLASS A DISTRIBUTION PLAN
OF
FIRST INVESTORS SERIES FUND
WHEREAS, FIRST INVESTORS SERIES FUND (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>
EX-99.B15.2
CLASS B DISTRIBUTION PLAN
OF
FIRST INVESTORS SERIES FUND
WHEREAS, FIRST INVESTORS SERIES FUND (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 B shares of the Fund and the servicing
or maintenance of such Class B 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 B shares and the servicing or
maintenance of its Class B shareholder accounts.
NOW, THEREFORE, in consideration of the foregoing, the Fund hereby
adopts the following distribution plan in accordance with Rule 12b-1 (the "Class
B Plan"):
1. Payment of the Fee. Pursuant to one or more Underwriting Agreements
which the Fund can enter into from time to time and this Class B Plan, each
Series shall pay as compensation for the Underwriter's services an annualized
Rule 12b-1 fee of an aggregate of 1% of each Series' average daily net assets
attributable to Class B shares (referred to herein as the "Class B 12b-1 fee").
The Class B 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 this Class B Plan in paragraph 5(a). The Class B 12b-1 fee shall consist of a
distribution fee and a service fee, in the following proportions: (a) the
distribution fee shall be at the rate of 0.75% of the average daily net assets
attributable to Class B shares, and (b) the service fee shall be at the rate of
0.25% of the average daily net assets attributable to Class B shares. The Class
B 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
B shares of such Series in a particular year.
- 1 -
<PAGE>
2. Expenses Different from Annual Rate. To the extent that the Class B
12b-1 fee paid by each Series in a particular year exceeds actual expenses
attributable to Class B Shares incurred by an Underwriter in that year, the
Underwriter may realize a profit in that year. If the expenses attributable to
Class B Shares incurred by an Underwriter in a particular year are greater than
the Class B 12b-1 fee, the Underwriter may incur a loss in that year and may not
recover from such Series such excess of expenses attributable to Class B Shares
over the Class B 12b-1 fee unless actual expenses attributable to Class B shares
incurred in a subsequent year in which the Class B Plan remained in effect were
less than the Class B 12b-1 fee paid under the Class B Plan in that year.
3. Distribution and Service Fees. "Distribution" fees are fees paid for
the distribution of the Series' Class B 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 B
shareholders to the extent that such material is used in connection with the
sales of the Series' Class B shares, and general overhead of an Underwriter.
"Service" fees are fees paid for services related to the maintenance and
servicing of existing Class B 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 B 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
B Plan. The Board of Trustees will promptly review the Treasurer's report.
5. Approval of Plan. The Class B 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 B Plan or
in any agreements related to the Class B Plan (the "Independent Trustees") cast
in person at a meeting called for the purpose of voting on such Class B Plan and
(b) the outstanding Class B 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 B 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 B 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 B Plan.
- 2 -
<PAGE>
7. Amendments. Any amendment to increase materially the cost to any
Series of the Fund under the Class B Plan may not be instituted without the
approval of the outstanding Class B 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).
8. Nomination of Trustees. While the Class B 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 B Plan shall remain in effect with respect to any
Series for one year from the date of its approval by the Class B shareholders of
such Series and may continue thereafter only if the Class B Plan is approved at
least annually by either the Board of Trustees or by a vote of a majority of the
outstanding Class B 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 B 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 B 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 B 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 B 12b-1 fee will not be an
operating expense of the Series. However, while it is expected that the payments
under the Class B 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 B 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 B Plan will be an expense for accounting purposes.
Dated: September 22, 1994
- 3 -
<PAGE>
EX-99.B16
Distribution yields for First 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 First Investors Series Fund (Class A shares) as of December 31, 1995.
<TABLE>
<CAPTION>
Distribution
a b Yield
- - -----
<S> <C> <C> <C>
Insured Intermediate
Tax Exempt Series $.300 $5.85 5.13%
Investment Grade Series $.641 $10.34 6.20%
</TABLE>
<PAGE>
Distribution yields for First 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 First Investors Series Fund (Class A shares) as of December 31, 1955.
<TABLE>
<CAPTION>
Distribution
a b Yield
- - -----
<S> <C> <C> <C>
Insured Intermediate
Tax Exempt Series $.300 $6.24 4.81%
Investment Grade Series $.641 $11.03 5.81%
</TABLE>
<PAGE>
Yields for First 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 First
Investors Investment Grade Series (Class A shares) as of December 31, 1995.
<TABLE>
<CAPTION>
a b c d e Yield
- - - - - -----
<C> <C> <C> <C> <C> <C>
$261,739 $43,792 4,794,562 $11.03 $.00 5.00%
</TABLE>
<PAGE>
Yields for First 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 First
Investors Investment Grade Series (Class B shares) as of December 31, 1995.
<TABLE>
<CAPTION>
a b c d e Yield
- - - - - -----
<C> <C> <C> <C> <C> <C>
$5,837 $1,585 106,050 $10.35 $.00 4.69%
</TABLE>
<PAGE>
SEC Standardized Total Returns
Average Annual Total Return and Total Return for First Investors Funds are
calculated using the following standardized formula:
Average Annual
Total Return = ((ERV/P) ) - 1
Total Return = ((ERV - P)/P)
WHERE: ERV = Ending redeemable value of a hypothetical S1,000
investment made at the beginning of 1, 5, or 10 year
periods (or fractional period there of.)
P = a hypothetical initial investment of S1,000
N = number of years
The following table lists the information used to calculate the standardized
average annual total return and total return for First Investors Series Fund
(Class B shares) as of December 31, 1995.
<TABLE>
<CAPTION>
AVE. ANNUAL TOTAL
ERV P N TOTAL RETURN RETURN
--- - - ------------ ------
<S> <C> <C> <C> <C> <C>
Blue Chip Series
----------------
1 year: $1,256.10 $1,000.00 1.00 25.61% 25.61%
5 years: $1,784.00 $1,000.00 5.00 12.275 78.40%
Life of Fund: $1,986.30 $1,000.00 6.99 10.31% 98.63%
Insured Intermediate Series
- ---------------------------
1 year: $1,064.50 $1,000.00 1.00 6.45% 6.45%
Life of Fund: 1,041.60 $1,000.00 2.09 1.95% 4.16%
Investment Grade Series
-----------------------
1 year: $1,118.90 $1,000.00 1.00 11.89% 11.89%
Life of Fund: $1,464.50 $1,000.00 4.87 8.14% 46.45%
Special Situations Series
-------------------------
1 year: $1,161.50 $1,000.00 1.00 16.15% 16.15%
5 years: $2,379.80 $1,000.00 5.00 18.93% 137.98%
Life of Fund: $2,473.00 $1,000.00 5.29 18.68% 147.30%
Total Return Series
-------------------
1 year: $1,188.50 $1,000.00 1.00 18.85% 18.85%
5 years: $1,479.50 $1,000.00 5.00 8.15% 47.95%
Life of Fund: $1,506.50 $1,000.00 5.69 7.47% 50.65%
</TABLE>
<PAGE>
SEC Standardized Total Returns
Average Annual Total Return and Total Return for First Investors Funds are
calculated using the following standardized formula:
Average Annual
Total Return = ((ERV/P) ) - 1
Total Return = ((ERV - P)/P)
WHERE: ERV = Ending redeemable value of a hypothetical S1,000
investment made at the beginning of 1, 5, or 10 year
periods (or fractional period there of.)
P = a hypothetical initial investment of S1,000
U = number of years
The following table lists the information used to calculate the standardized
average annual total return and total return for First Investors Series Fund
(Class B shares) as of December 31, 1995.
<TABLE>
<CAPTION>
TOTAL
ERV P N RETURN
--- - - ------
<S> <C> <C> <C> <C>
Blue Chip Series
----------------
1/12/95 to 12/31/95: $1,274.80 $1,000.00 .97 27.48%
Insured Intermediate Series
- ---------------------------
1/12/95 to 12/31/95: $1,077.30 $1,000.00 .97 7.73%
Investment Grade Series
-----------------------
1/12/95 to 12/31/95: $1,133.10 $1,000.00 .97 13.31%
Special Situations Series
-------------------------
1/12/95 to 12/31/95: $1,185.10 $1,000.00 .97 18.51%
Total Return Series
-------------------
1/12/95 to 12/31/95: $1,207.50 $1,000.00 .97 20.75%
</TABLE>
<PAGE>
NAV Only Total Returns - Class A Shares
Average Annual Total Return and Total Return for First Investors Funds are
calculated using the following standardized formula:
Average Annual
Total Return = ((ERV/P) ) - 1
Total Return = ((ERV - P)/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 First Investors Series Fund (Class A shares)
as of December 31 1995.
<TABLE>
<CAPTION>
AVE. ANNUAL TOTAL
ERV P N TOTAL RETURN RETURN
--- - - ------------ ------
<S> <C> <C> <C> <C> <C>
Blue Chip Series
----------------
1 year: $1,340.10 $1,000.00 1.00 34.01% 34.01%
5 years: $1,903.60 $1,000.00 5.00 13.74% 90.36%
Life of Fund: $2,118.30 $1,000.00 6.99 11.33% 111.83%
Insured Intermediate Series
- ---------------------------
1 year: $1,135.00 $1,000.00 1.00 13.50% 13.50%
Life of Fund: $1,111.80 $1,000.00 2.09 5.16% 11.18%
Investment Grade Series
-----------------------
1 year: $1,194.00 $1,000.00 1.00 19.40% 19.40%
Life of Fund: $1,562.00 $1,000.00 4.87 9.58% 56.20%
Special Situations Series
-------------------------
1 year: $1,239.20 $1,000.00 1.00 23.92% 23.92%
5 years: $2,538.70 $1,000.00 5.00 20.48% 153.87%
Life of Fund: $2,637.60 $1,000.00 5.29 20.13% 163.76%
Total Return Series
-------------------
1 year: $1,268.30 $1,000.00 1.00 26.83% 26.83%
5 years: $1,578.70 $1,000.00 5.00 9.56% 57.87%
Life of Fund: $1,606.30 $1,000.00 5.69 8.69% 60.63%
</TABLE>
<PAGE>
NAV Only Total Returns - Class 8 Shares
Average Annual Total Return and Total Return for First Investors Funds are
calculated using the following standardized formula:
Average Annual
Total Return = ((ERV/P) ) - 1
Total Return = ((ERV - P)/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 First Investors Series Fund (Class A shares)
as of December 31 1995.
<TABLE>
<CAPTION>
TOTAL
ERV P N RETURN
--- - - ------
<S> <C> <C> <C> <C>
Blue Chip Series
----------------
1/12/95 to 12/31/95: $1,327.60 $1,000.00 .97 32.76%
Insured Intermediate Series
- ---------------------------
1/12/95 to 12/31/95: $1,122.70 $1,000.00 .97 12.27%
Investment Grade Series
-----------------------
1/12/95 to 12/31/95: $1,180.80 $1,000.00 .97 18.08%
Special Situation Series
------------------------
1/12/95 to 12/31/95: $1,234.20 $1,000.00 .97 23.42%
Total Reutrn Series
-------------------
1/12/95 to 12/31/95: $1,257.40 $1,000,00 .97 25.74%
</TABLE>
<PAGE>
Yields for First 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 First
Investors Insured Intermediate Tax Exempt Series (Class A shares) as of December
31 1995.
<TABLE>
<CAPTION>
*Tax
Equivalent
a b c d e Yield Yield
- - - - - ----- -----
<C> <C> <C> <C> <C> <C> <C>
$29,948 $1,969 1,195,043 $6.24 $.OO 4.54% 7.09%
</TABLE>
*Tax Equivalent Yields are computed assuming a maximum federal tax rate of 36%.
<PAGE>
Yields for First 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 First
Investors Insured Intermediate Tax Exempt Series (Class B shares) as of December
31 1995.
<TABLE>
<CAPTION>
*Tax
Equivalent
a b c d e Yield Yield
- - - - - ----- -----
<C> <C> <C> <C> <C> <C> <C>
$1,523 $384 60,309 $5.85 $.OO 3.90% 6.09%
</TABLE>
*Tax Equivalent Yields are computed assuming a maximum federal tax rate of 36%.
<PAGE>
Distribution yields for First 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 First Investors Series Fund (Class B shares) as of December 31, 1995.
<TABLE>
<CAPTION>
Distribution
a b Yield
- - -----
<S> <C> <C> <C>
Insured Intermediate
Tax Exempt Series $.266 $5.85 4.55%
Investment Grade Series $.545 $10.35 5.26%
</TABLE>
<PAGE>
NAV OnLy Total Returns - Class B Shares
Average Annual Total Return and Total Return for First Investors Funds are
calculated using the following standardized formula:
Average Annual
Total Return = ((ERV / P)) - 1
Total Return = ((ERV - P) / 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 First Investors Series Fund (Class B shares)
as of December 31 1995.
<TABLE>
<CAPTION>
AVE. ANNUAL TOTAL
ERV P N TOTAL RETURN RETURN
--- - - ------------ ------
<S> <C> <C> <C> <C> <C>
Blue Chip Series
----------------
Life of Fund: $1,327.60 $1,000.00 .97 34.08% 32.76%
Insured Intermediate Series
- ---------------------------
Life of Fund: $1,122.70 $1,000.00 .97 12.71% 12.27%
Investment Grade Series
-----------------------
Life of Fund: $1,180.80 $1,000.00 .97 18.77% 18.08%
Special Situations Series
-------------------------
Life of Fund: $1,234.20 $1,000.00 .97 24.33% 23.42%
Total Return Series
-------------------
Life of Fund: $1,257.40 $1,000.00 .97 26.74% 25.74%
</TABLE>
<PAGE>
SEC Standardized Total Returns
Average Annual Total Return and Total Return for First Investors Funds are
calculated using the following standardized formula:
Average Annual
Total Return = ((ERV/P)) - 1
Total Return = ((ERV - P)/P)
WHERE: ERV = Ending redeemable value of a hypothetical S1,000
investment made at the beginning of 1, 5, or 10 year
periods (or fractional period there of.)
P = a hypothetical initial investment of S1,000
N = number of years
The following table lists the information used to calculate the standardized
average annual total return and total return for First Investors Series Fund
(Class B shares) as of December 31, 1995.
<TABLE>
<CAPTION>
AVE. ANNUAL TOTAL
ERV P N TOTAL RETURN RETURN
--- - - ------------ ------
<S> <C> <C> <C> <C> <C>
Blue Chip Series
----------------
Life of Fund: $1,274.80 $1,000.00 .97 28.55% 27.48%
Insured Intermediate Series
- ---------------------------
Life of Fund: 1,077.30 $1,000.00 .97 8.00% 7.73%
Investment Grade Series
-----------------------
Life of Fund: $1,133.10 $1,000.00 .97 13.80% 13.31%
Special Situations Series
-------------------------
Life of Fund: $1,185.10 $1,000.00 .97 19.21% 18.51%
Total Return Series
-------------------
Life of Fund: $1,207.50 $1,000.00 .97 21.54% 20.75%
</TABLE>
<PAGE>
EX-99.B18
FIRST INVESTORS CASH MANAGEMENT FUND, INC.
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 TAX-EXEMPT MONEY MARKET FUND, INC.
Plan Pursuant to Rule 18f-3
Each of the above-referenced funds (each a "Fund" and, collectively, the
"Funds") hereby adopt this Plan pursuant to Rule 18f-3 under the Investment
Company Act of 1940, as amended (the "1940 Act"), to address the differing
requirements and preferences of potential investors.
A. CLASSES OFFERED. The Funds offer the following classes of shares:
1. Class A. Class A shares of each Fund, other than First Investors Cash
Management Fund, Inc. and First Investors Tax-Exempt Money Market Fund, Inc.
(the "Money Market Funds") are sold with an initial sales charge of up to 6.25%
of the amount invested, which is waived for certain purchases. Class A shares of
the Money Market Funds are sold at net asset value, with no sales charge. The
minimum initial investment is $1,000, which is likewise waived for certain
purchases. However, the initial minimum investment for IRA accounts is $250 and
the initial minimum investment for shareholders who invest under a systematic
investment plan is $50. Purchases of Class A shares which aggregate at least $1
million are sold at net asset value. However, if such shares are redeemed within
24 months of purchase, they are subject to a contingent deferred sales charge
("CDSC") of 1.00%. Pursuant to a plan of distribution adopted pursuant to Rule
12b-1 under the 1940 Act ("12b-1 Plan"), Class A shares are subject to a 12b-1
fee in an amount up to an annual rate of 0.30% of each Fund's average daily net
assets attributable to Class A shares, of which no more than 0.25% may be paid
as a service fee and the balance thereof paid as an asset-based sales charge.
These 12b-1 fees are paid to First Investors Corporation ("FIC") as compensation
for distribution- related expenses or shareholder services.
2. Class B. Class B shares are sold without an initial sales charge, but
are generally subject to a CDSC which declines in steps from 4% to 0% during a
six-year period. At the time of redemption, the CDSC will be imposed on the
lower of net asset value or the purchase price. The CDSC is waived for certain
purchases. Class B shares automatically convert into Class A shares after eight
<PAGE>
years on the basis of their relative net asset values. The minimum initial
investment is the same as that for Class A shares. Pursuant to a 12b-1 Plan,
Class B shares pay a 12b-1 fee in an amount up to an annual rate of 1.00% of
each Fund's average daily net assets attributable to Class B shares, of which no
more than 0.25% may be paid as a service fee and the balance thereof up to 0.75%
paid as an asset-based sales charge. These 12b-1 fees are paid to FIC as
compensation for distribution-related expenses or shareholder services.
B. EXPENSES. The expenses of the Funds that cannot be attributed to any one Fund
generally are allocated to each Fund based on the relative net assets of the
Funds. Certain expenses that may be attributable to a particular Fund, but not a
particular Class, are allocated based on the relative daily net assets of each
Class. Finally, certain expenses may be attributable to a particular Class of
shares of a Fund ("Class Expenses"). Class Expenses are charged directly to the
net assets of the particular Class and, thus, are borne on a pro rata basis by
the outstanding shares of that Class.
Examples of Class Expenses may include, but are not limited to, (1) 12b-1
fees, (2) transfer agent fees identified as being attributable to a specific
Class, (3) stationery, printing, postage, and delivery expenses related to
preparing and distributing materials such as shareholder reports, prospectuses,
and proxy statements to current shareholders of a Class, (4) Blue Sky
registration fees incurred by a Class, (5) Securities and Exchange Commission
registration fees incurred by a Class, (6) expenses of administrative and
personnel services as required to support the shareholders of a Class; (7)
trustees' or directors' fees or expenses incurred as a result of issues relating
to one Class, (8) accounting expenses relating solely to one Class, (9)
auditors' fees, litigation expenses, and legal fees and expenses relating to a
Class, and (10) expenses incurred in connection with shareholders meetings as a
result of issues relating to one Class.
C. CLASS DIFFERENCES. Other than the differences as a result of the Class A and
Class B 12b-1 Plans and certain shareholder purchase privileges available to
Class A shareholders (as discussed in the prospectus for each Fund), there are
no material differences in the services offered to each Class. This Rule 18f-3
Plan is qualified and subject to the terms of the then current prospectus for
the applicable Fund; provided, however, that none of the terms set forth in any
such prospectus shall be inconsistent with the terms of the Classes set forth in
this Plan. The prospectus for each Fund contains additional information about
the Classes.
D. EXCHANGE FEATURE. Exchanges are not permitted between the Classes. However,
each Class offers exchange privileges within that Class. These exchange
privileges may be modified or terminated by a Fund.
Dated: September 25, 1995
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 011
<NAME> BLUE CHIP SERIES CLASS A
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-1-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 136899
<INVESTMENTS-AT-VALUE> 175441
<RECEIVABLES> 980
<ASSETS-OTHER> 331
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 176752
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 999
<TOTAL-LIABILITIES> 999
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 131796
<SHARES-COMMON-STOCK> 9890
<SHARES-COMMON-PRIOR> 9190
<ACCUMULATED-NII-CURRENT> 311
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 76
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 38089
<NET-ASSETS> 170272
<DIVIDEND-INCOME> 3261
<INTEREST-INCOME> 704
<OTHER-INCOME> 0
<EXPENSES-NET> (2162)
<NET-INVESTMENT-INCOME> 1803
<REALIZED-GAINS-CURRENT> 5871
<APPREC-INCREASE-CURRENT> 34226
<NET-CHANGE-FROM-OPS> 41900
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1795)
<DISTRIBUTIONS-OF-GAINS> (5794)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1958
<NUMBER-OF-SHARES-REDEEMED> 1667
<SHARES-REINVESTED> 409
<NET-CHANGE-IN-ASSETS> 46578
<ACCUMULATED-NII-PRIOR> 302
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1460
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2519
<AVERAGE-NET-ASSETS> 146042
<PER-SHARE-NAV-BEGIN> 13.46
<PER-SHARE-NII> .19
<PER-SHARE-GAIN-APPREC> 4.37
<PER-SHARE-DIVIDEND> .20
<PER-SHARE-DISTRIBUTIONS> .60
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 17.22
<EXPENSE-RATIO> 1.49
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 012
<NAME> BLUE CHIP SERIES CLASS B
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-1-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 136899
<INVESTMENTS-AT-VALUE> 175441
<RECEIVABLES> 980
<ASSETS-OTHER> 331
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 176752
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 999
<TOTAL-LIABILITIES> 999
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 5121
<SHARES-COMMON-STOCK> 319
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> (17)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (76)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 453
<NET-ASSETS> 5481
<DIVIDEND-INCOME> 49
<INTEREST-INCOME> 10
<OTHER-INCOME> 0
<EXPENSES-NET> (48)
<NET-INVESTMENT-INCOME> 11
<REALIZED-GAINS-CURRENT> 109
<APPREC-INCREASE-CURRENT> 453
<NET-CHANGE-FROM-OPS> 573
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (28)
<DISTRIBUTIONS-OF-GAINS> (185)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 315
<NUMBER-OF-SHARES-REDEEMED> 8
<SHARES-REINVESTED> 12
<NET-CHANGE-IN-ASSETS> 5481
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 23
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 62
<AVERAGE-NET-ASSETS> 2273
<PER-SHARE-NAV-BEGIN> 13.51
<PER-SHARE-NII> .10
<PER-SHARE-GAIN-APPREC> 4.31
<PER-SHARE-DIVIDEND> .16
<PER-SHARE-DISTRIBUTIONS> .60
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 17.16
<EXPENSE-RATIO> 2.2
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 021
<NAME> TOTAL RETURN SERIES CLASS A
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-1-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 46149
<INVESTMENTS-AT-VALUE> 53907
<RECEIVABLES> 1758
<ASSETS-OTHER> 192
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 55857
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 145
<TOTAL-LIABILITIES> 145
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 47506
<SHARES-COMMON-STOCK> 4273
<SHARES-COMMON-PRIOR> 4655
<ACCUMULATED-NII-CURRENT> 192
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (2)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 7746
<NET-ASSETS> 55442
<DIVIDEND-INCOME> 566
<INTEREST-INCOME> 1886
<OTHER-INCOME> 0
<EXPENSES-NET> (830)
<NET-INVESTMENT-INCOME> 1622
<REALIZED-GAINS-CURRENT> 1802
<APPREC-INCREASE-CURRENT> 8901
<NET-CHANGE-FROM-OPS> 12325
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1523)
<DISTRIBUTIONS-OF-GAINS> (1800)
<DISTRIBUTIONS-OTHER> (3)
<NUMBER-OF-SHARES-SOLD> 279
<NUMBER-OF-SHARES-REDEEMED> 913
<SHARES-REINVESTED> 252
<NET-CHANGE-IN-ASSETS> 4728
<ACCUMULATED-NII-PRIOR> 124
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 527
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 962
<AVERAGE-NET-ASSETS> 52697
<PER-SHARE-NAV-BEGIN> 10.89
<PER-SHARE-NII> .39
<PER-SHARE-GAIN-APPREC> 2.50
<PER-SHARE-DIVIDEND> .37
<PER-SHARE-DISTRIBUTIONS> .44
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.97
<EXPENSE-RATIO> 1.58
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 022
<NAME> TOTAL RETURN SERIES CLASS B
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-1-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 46149
<INVESTMENTS-AT-VALUE> 53907
<RECEIVABLES> 1758
<ASSETS-OTHER> 192
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 55857
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 145
<TOTAL-LIABILITIES> 145
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 260
<SHARES-COMMON-STOCK> 21
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> (1)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 12
<NET-ASSETS> 270
<DIVIDEND-INCOME> 1
<INTEREST-INCOME> 4
<OTHER-INCOME> 0
<EXPENSES-NET> (3)
<NET-INVESTMENT-INCOME> 2
<REALIZED-GAINS-CURRENT> 7
<APPREC-INCREASE-CURRENT> 12
<NET-CHANGE-FROM-OPS> 21
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (4)
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