As filed with the Securities and Exchange Commission on December 3, 1999

                                                      1933 Act File No. 33-25623
                                                      1940 Act File No. 811-5690

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM N-14

          REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ X ]

                         Pre-Effective Amendment No.              [   ]
                        Post-Effective Amendment No.              [   ]


                        (Check appropriate box or boxes.)

                           FIRST INVESTORS SERIES FUND
               (Exact name of Registrant as Specified in Charter)


                                 95 Wall Street
                            New York, New York 10005
               (Address of Principal Executive Office) (Zip Code)

       Registrant's Telephone Number, including Area Code: (212) 858-8000

                               Ms. Concetta Durso
                          Secretary and Vice President
                      First Investors Fund For Income, Inc.
                                 95 Wall Street
                            New York, New York 10005
                     (Name and Address of Agent for Service)

                                    Copy to:
                              Robert J. Zutz, Esq.
                           Kirkpatrick & Lockhart LLP
                          1800 Massachusetts Avenue, NW
                             Washington, D.C. 20036



  Approximate Date of Proposed Public Offering: as soon as practicable after
  this Registration Statement becomes effective under the Securities Act of
                                    1933.

No filing fee is required because of reliance on Section 24(f) of the
Investment Company Act of 1940, as amended.

REGISTRANT  HEREBY AMENDS THIS  REGISTRATION  STATEMENT ON SUCH DATE OR DATES AS
MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE  REGISTRANT  SHALL FILE A
FURTHER AMENDMENT WHICH  SPECIFICALLY  STATES THAT THIS  REGISTRATION  STATEMENT
SHALL THEREAFTER BECOME EFFFECTIVE IN ACCORDANCE WITH RULE 488 OF THE SECURITIES
ACT OF 1933 OR UNTIL THE  REGISTRATION  STATEMENT SHALL BECOME EFFECTIVE ON SUCH
DATE AS THE COMMISSION, ACTING PURSUANT TO SAID RULE 488, MAY DETERMINE.





                           FIRST INVESTORS SERIES FUND

                       CONTENTS OF REGISTRATION STATEMENT


This registration document is comprised of the following:

            Cover Sheet

            Contents of Registration Statement

            Cross Reference Sheets

            Letter to Shareholders

            Notice of Special Meeting

            Form of Proxy

            Part A - Prospectus/Proxy Statement

            Part B -- Statement of Additional Information

            Part C - Other Information

            Signature Page

            Exhibits





                           FIRST INVESTORS SERIES FUND

                         Form N-14 Cross Reference Sheet


Part A Item No.                               Prospectus/Proxy
AND CAPTION                                   STATEMENT CAPTION
- -----------                                   -----------------

1.    Beginning of Registration Statement     Cover Page
      and Outside Front Cover Page of
      Prospectus

2.    Beginning and Outside Back Cover Page   Table of Contents
      of Prospectus

3.    Synopsis Information and Risk Factors   Synopsis; Principal Risks

4.    Information About the Transaction       Synopsis; Plan of Reorganization

5.    Information About the Registrant        Synopsis; Principal Risks; Plan of
                                              Reorganization; Information  About
                                              the Funds

6.    Information About the Company Being     Synopsis; Principal Risks; Plan of
      Acquired                                Reorganization; Information  About
                                              the Funds

7.    Voting Information                      Voting Information

8.    Interest of Certain Persons and Experts Not Applicable

9.    Additional Information Required for     Not Applicable
      Re-offering by Persons Deemed to be
      Underwriters

Part B Item No.                               Statement of Additional
AND CAPTION                                   INFORMATION CAPTION
- -----------                                   -------------------

10.   Cover Page                              Cover Page

11.   Table of Contents                       Table of Contents

12.   Additional Information About the        Investment  Strategies and  Risks;
      Registrant                              Investment   Policies;  Investment
                                              Restrictions;          Management;
                                              Underwriter; General Information

13.   Additional Information About the        Investment  Strategies and  Risks;
      Company Being Acquired                  Investment   Policies;  Investment
                                              Restrictions;          Management;
                                              Underwriter; General Information





14.   Financial  Statements                   Financial Statements

      PART C
      ------

      Information  required  to be  included  in Part C is set  forth  under the
appropriate item, so numbered, in Part C of this Registration Statement.






                                                January __, 2000


Dear Executive Investors Trust--Blue Chip Fund Shareholder:

      After  careful  consideration,  the  Board of  Trustees  of the  Executive
Investors  Trust--Blue Chip Fund ("Executive Blue Chip Fund") approved a plan to
reorganize  the  Executive  Blue  Chip  Fund  into the  First  Investors  Series
Fund--Blue Chip Fund ("First Investors Blue Chip Fund").  The  reorganization is
subject to the  approval  of the  Executive  Blue Chip  Fund's  shareholders.  A
shareholders'  meeting  has  been  scheduled  for  February  25,  2000 at  which
Executive  Blue Chip Fund  shareholders  of record on _____ will be  eligible to
vote  either  in  person  or by  proxy.  Enclosed  you will find a notice of the
meeting,  a proxy card,  a proxy  statement,  a First  Investors  Blue Chip Fund
prospectus and a postage-paid return envelope.

      YOUR  BOARD  OF  DIRECTORS   RECOMMENDS  THAT  YOU  VOTE  TO  APPROVE  THE
REORGANIZATION.  NO MATTER  HOW  LARGE OR SMALL  YOUR  INVESTMENT,  YOUR VOTE IS
IMPORTANT,  SO PLEASE REVIEW THE PROXY STATEMENT  CAREFULLY.  TO CAST YOUR VOTE,
SIMPLY  MARK,  SIGN AND DATE  THE  ENCLOSED  PROXY  CARD  AND  RETURN  IT IN THE
POSTAGE-PAID  ENVELOPE TODAY.  IF YOU OWN YOUR SHARES JOINTLY,  BOTH OWNERS MUST
SIGN THE CARD.  REMEMBER,  IT CAN BE EXPENSIVE FOR THE FUND - AND ULTIMATELY FOR
YOU AS A SHAREHOLDER - TO REMAIL PROXIES IF NOT ENOUGH RESPONSES ARE RECEIVED TO
CONDUCT THE MEETING.

      While we encourage you to read the enclosed materials  carefully,  we will
attempt to address some possible questions in this letter.

      WHAT IS THE FIRST  INVESTORS BLUE CHIP FUND? The First Investors Blue Chip
Fund is a fund which is  substantially  similar to the Executive Blue Chip Fund.
It is advised by the same portfolio manager, has the same investment objectives,
and follows  similar  investment  policies and  strategies as the Executive Blue
Chip Fund.  However,  the First  Investors  Blue Chip Fund is a larger and older
fund.

      WHAT IS THE EFFECT ON FUND EXPENSES? Executive Blue Chip Fund shareholders
should  benefit from a reduction in fund expenses  following the  reorganization
(taking  into  account the  scheduled  elimination  of fee  waivers).  The Board
determined that the  reorganization  would be in the best interests of the Funds
and their shareholders  based upon, among other factors,  the likelihood that it
would reduce expense ratios for all shareholders over the long term.

      WILL THERE BE ANY TAX CONSEQUENCES?  The reorganization  will be done on a
tax free basis to both the Funds and the  shareholders.  You will receive  First





January __, 2000
Page 2






Investors  Blue  Chip  Fund  shares  that have  exactly  the same  value as your
Executive  Blue Chip Fund  shares  without  owing any taxes as the result of the
reorganization.

      If you have any questions about the proposal,  please feel free to contact
your registered representative, or call us at 1-800-423-4026.

      As always,  we appreciate  your confidence and look forward to serving you
for many years to come.


                                   Sincerely,


                                   -------------------
                                   Glenn O. Head
                                   President

Enclosures






                            EXECUTIVE INVESTORS TRUST
                                 BLUE CHIP FUND

                    95 Wall Street, New York, New York 10005
                                  212-858-8000

                                   -----------
                    NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
                                  -----------

To the Shareholders:

      NOTICE IS HEREBY  GIVEN  that a Special  Meeting  of  Shareholders  of the
Executive Investors Trust, Blue Chip Fund portfolio ("Executive Blue Chip") will
be held on or about  February  25, 2000,  at 10:00 a.m.,  Eastern  time,  at the
offices of Executive  Blue Chip, 95 Wall Street,  New York,  New York 10005 (the
"Meeting"),  and at any adjournment of the Meeting,  if the Meeting is adjourned
for any reason.  The Meeting  will be held for the  purpose of  considering  and
voting on the following matters:

      (1) To approve an Agreement  and Plan of  Reorganization  and  Termination
under which the First Investors  Series Fund, Blue Chip Fund portfolio  ("Series
Blue Chip") would  acquire all of the assets of Executive  Blue Chip in exchange
solely for shares of Series Blue Chip and the  assumption by Series Blue Chip of
all of Executive Blue Chip's liabilities,  followed by the distribution of those
shares  to the  shareholders  of  Executive  Blue  Chip and the  termination  of
Executive  Blue Chip,  all as  described  in the  accompanying  Prospectus/Proxy
Statement; and

      (2) To  transact  such other  business  as may  properly  come  before the
Meeting or any adjournment or adjournments thereof.

      Shareholders  of record at the close of business on December  __, 1999 are
entitled to notice of and to vote at the Meeting.

                                    By Order of the Board of Trustees,

                                    CONCETTA DURSO
                                    Secretary

New York, New York
___________ __, 1999

WHETHER OR NOT YOU ARE ABLE TO ATTEND THE MEETING,  PLEASE MARK,  DATE, SIGN AND
RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED SELF-ADDRESSED  ENVELOPE. IN ORDER
TO AVOID THE ADDITIONAL EXPENSE TO EXECUTIVE BLUE CHIP OF FURTHER  SOLICITATION,
WE ASK YOUR COOPERATION IN MAILING IN YOUR PROXY PROMPTLY.






                           VOTE THIS PROXY CARD TODAY!
                    YOUR PROMPT RESPONSE WILL SAVE YOUR FUND
                      THE EXPENSE OF FURTHER SOLICITATIONS

                               RETURN THE PROXY TO
                                PROXY DEPARTMENT
                      ADMINISTRATIVE DATA MANAGEMENT CORP.
                                 581 MAIN STREET
                        WOODBRIDGE, NEW JERSEY 07095-1198

                                      PROXY

                   EXECUTIVE INVESTORS TRUST - BLUE CHIP FUND


















                          Please detach before mailing
- --------------------------------------------------------------------------------


                   EXECUTIVE INVESTORS TRUST - BLUE CHIP FUND
               Special Meeting of Shareholders, February 25, 2000
           THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES

The undersigned  hereby appoint(s) as proxies Concetta Durso and Tammie Lee each
with power of substitution and hereby authorize(s) each of them to represent and
to vote all the  shares  shown  below,  held of  record  by the  undersigned  on
_________ ___,  2000, at the Special  Meeting of  Shareholders  of the Executive
Investors  Trust  - Blue  Chip  Fund to be held on  February  25,  2000,  or any
adjournment  thereof,  with discretionary power to vote upon such other business
as may properly come before the meeting.

The undersigned hereby acknowledge(s) receipt of the Proxy Statement prepared on
behalf of the Board of  Trustees.  Please date and sign this proxy and return it
in the enclosed postage-paid envelop. Your Board of Trustees recommends that you
vote FOR the proposal in the Proxy  Statement.  Please  indicate your vote by an
"X" in the  appropriate box below. IF YOU SIMPLY SIGN THIS PROXY WITHOUT MARKING
ANY BOX, THIS PROXY SHALL BE DEEMED TO GRANT AUTHORITY TO VOTE FOR THE PROPOSAL.

1.    To  approve  an  Agreement  and  Plan  of  Reorganization  and Termination
between  Executive  Investors Trust - Blue Chip Fund ("Executive Blue Chip") and
First Investors Fund For Income,  Inc. ("Fund For Income") and the  transactions
contemplated thereby,  including the transfer of substantially all the assets of
Executive  Blue Chip to Fund For Income in  exchange  for Class A shares of Fund
For Income,  the  distribution  of such shares to the  shareholders of Executive
Blue Chip in complete liquidation of Executive Blue Chip.


               FOR    / /         AGAINST    / /        ABSTAIN     / /


                             ---------------------------------------------------
                             Signature                                Date

                             ---------------------------------------------------
                             Additional Signature if held jointly      Date







                           BLUE CHIP FUND, A SERIES OF
                           FIRST INVESTORS SERIES FUND
                                 95 WALL STREET
                            NEW YORK, NEW YORK 10005
                                 1-800-423-4026


                           PROSPECTUS/PROXY STATEMENT
                                JANUARY __, 2000



      This Prospectus/Proxy Statement ("Prospectus/Proxy") is being furnished to
shareholders  of the Blue Chip Fund portfolio of the Executive  Investors  Trust
("Executive  Blue Chip") in connection  with the  solicitation of proxies by its
Board of Trustees  ("Board")  for use at a special  meeting of its  shareholders
("Meeting") to be held at the office of Executive Blue Chip, 95 Wall Street, New
York, New York on or about  February 25, 2000, at 10:00 a.m.,  Eastern time, and
at any adjournment of the Meeting, if the Meeting is adjourned for any reason.

      As more fully described in this  Prospectus/Proxy,  the primary purpose of
the  Meeting is to  consider a proposed  reorganization  (the  "Reorganization")
involving  Executive  Blue  Chip and  First  Investors  Series  Fund,  Blue Chip
portfolio ("First Investors Blue Chip") (each a "Fund" and together the "Funds")
and vote on an  Agreement  and Plan of  Reorganization  and  Termination  by and
between  Executive  Blue Chip and First  Investors  Blue Chip.  Pursuant  to the
Agreement,  First  Investors  Blue  Chip  would  acquire  all of the  assets  of
Executive Blue Chip in exchange for Class A shares of First  Investors Blue Chip
and the  assumption by First  Investors  Blue Chip of all of the  liabilities of
Executive  Blue Chip.  Those shares of First  Investors  Blue Chip would then be
distributed to the shareholders of Executive Blue Chip, so that each shareholder
of Executive  Blue Chip would  receive a number of full and  fractional  Class A
shares of First  Investors  Blue Chip having an  aggregate  value  that,  on the
effective date of the Reorganization,  is equal to the aggregate net asset value
of the  shareholder's  shares of  Executive  Blue Chip.  As soon as  practicable
following the distribution of shares, Executive Blue Chip will be terminated.

      Like  Executive  Blue  Chip,  First  Investors  Blue  Chip is an  open-end
diversified  management  investment company.  Also like Executive Blue Chip, the
investment  objective  of  First  Investors  Blue  Chip  is to seek  high  total
investment return consistent with the preservation of capital.

      This   Prospectus/Proxy   sets  forth  concisely   information  about  the
Reorganization,  the  Agreement  and the Funds,  and it should be  retained  for
future reference.  Statements of Additional  Information ("SAI"),  dated January
__, 2000,  relating to First Investors Series Fund and Executive Investors Trust





have been filed with the  Securities  and  Exchange  Commission  ("SEC") and are
incorporated  herein by  reference.  Additional  information  about  the  Funds'
investments  is  available  in the  Funds'  annual  and  semi-annual  reports to
shareholders.  The  Shareholder  Manual  relating  to the  Funds  provides  more
detailed information about the purchase, redemption and sale of Fund shares.

      You can get free copies of reports,  the SAIs and the Shareholder  Manual,
request  other  information  and  discuss  your  questions  about  the  Funds by
contacting the Funds at:

Administrative Data Management Corp.
581 Main Street
Woodbridge, NJ 07095-1198
Telephone:  1-800-423-4026

      You can review and copy  information  about the Funds for a fee (including
proxy materials, the Funds' reports,  Shareholder Manual and SAIs) at the Public
Reference Room of the SEC in Washington, D.C. You can also send your request and
a  duplicating  fee to the  Public  Reference  Room of the SEC,  Washington,  DC
20549-6009.  You can obtain information on the operation of the Public Reference
Room by calling  1-800-SEC-0330.  Text-only  versions of Fund  documents  can be
viewed   online   or   downloaded   from   the   SEC's   Internet   website   at
http://www.sec.gov.

      THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THE
FUND FOR INCOME SHARES OR DETERMINED WHETHER THIS PROSPECTUS/PROXY  STATEMENT IS
ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.



                                       2




                                TABLE OF CONTENTS


                                                                            PAGE
                                                                            ----

I.    Synopsis...........................................................


II.   Principal Risks....................................................


III.  Plan of Reorganization.............................................


IV.   Voting Information.................................................


V.    Information About the Funds........................................


VI.   Other Information..................................................


VII.  Financial Highlights...............................................


Appendix A: Agreement and Plan of Reorganization and Termination......A-1





                                       3



I.    SYNOPSIS
      --------

      Pursuant  to the  Agreement,  First  Investors  Blue Chip will acquire the
assets of Executive Blue Chip in exchange for Class A shares of First  Investors
Blue Chip and the  assumption  by First  Investors  Blue Chip of Executive  Blue
Chip's  liabilities.  Executive  Blue Chip will  distribute  the shares of First
Investors  Blue  Chip to its  shareholders,  and  Executive  Blue  Chip  will be
liquidated. Shareholders of Executive Blue Chip will receive corresponding Class
A shares of First Investors Blue Chip.

      The  Reorganization is designed to be a tax-free  reorganization under the
Internal Revenue Code of 1986, as amended ("Code").  This means that (1) neither
Executive  Blue  Chip nor its  shareholders  will  recognize  gain or loss  with
respect  to  the   Reorganization,   and  (2)  First  Investors  Blue  Chip  and
shareholders of Executive Blue Chip, respectively, will have carryover basis and
holding periods with respect to the assets and shares,  respectively,  that each
will receive pursuant to the Reorganization.

      Executive  Blue  Chip and  First  Investors  Blue  Chip are  substantially
similar.  They  share a  common  Board of  Directors/Trustees  and have the same
investment  objective.  The  primary  service  providers  to the  Funds,  though
different  legal  entities,  are  essentially  identical,  including  the Funds'
investment  adviser and  underwriter.  These entities share the same offices and
staff, and the same research and support services.  At the present time, the two
Funds follow identical investment management styles. The Funds also have similar
procedures  with  respect to purchase  and  redemption  of shares,  and exchange
rights.

      Each Fund's  investment  objective is to seek high total investment return
consistent with the preservation of capital.  Each Fund invests primarily in the
common  stocks of large,  well-established  companies  that are  included in the
Standard and Poor's 500  Composite  Stock Price Index ("S&P 500  Index").  These
stocks are defined by the Funds as "Blue Chip"  stocks.  The Funds select stocks
that they believe will have earnings  growth in excess of the average company in
the S&P 500 Index. While each Fund attempts to diversify its investments so that
its  weightings  in  different  industries  are  similar to those of the S&P 500
Index,  the Funds are not index funds and therefore will not necessarily  mirror
the S&P 500 Index.  Each Fund generally stays fully invested in stocks under all
market conditions.

II.   PRINCIPAL RISKS
      ---------------

      The  principal  risks  of  investing  in  First  Investors  Blue  Chip and
Executive Blue Chip are identical.  While Blue Chip stocks are regarded as among
the  most  conservative  stocks,  like all  stocks  they  fluctuate  in price in
response  to  movements  in the overall  securities  markets,  general  economic
conditions, and changes in interest rates or investor sentiment. Fluctuations in
the prices of Blue Chip  stocks at times can be  substantial.  Accordingly,  the
value of your  investment  in a Fund will go up and down,  which  means that you
could lose money.


                                       4



III.  PLAN OF REORGANIZATION
      ----------------------

      Pursuant  to the  Agreement,  First  Investors  Blue Chip will acquire the
assets of  Executive  Blue  Chip in  exchange  for Class A shares of  beneficial
interest in First Investors Blue Chip and the assumption by First Investors Blue
Chip of Executive Blue Chip's  liabilities.  Executive Blue Chip will distribute
the shares of First Investors Blue Chip to its shareholders,  and Executive Blue
Chip will be  liquidated.  The exchange of Executive  Blue Chip assets for First
Investors  Blue  Chip  shares  will be at their  respective  net  asset  values,
determined  in the  manner  used by each Fund to value its  assets and its share
price.  Thus,  each  Executive Blue Chip  shareholder  will receive PRO RATA the
number of full and fractional First Investors Blue Chip Class A shares having an
aggregate value equal to the value of his or her Executive Blue Chip shares.

      As a condition of the Reorganization, the Funds will receive an opinion of
its counsel,  Kirkpatrick & Lockhart LLP, to the effect that the  Reorganization
will  constitute  a  tax-free  reorganization  within  the  meaning  of  section
368(a)(1)(C) of the Code. This means that (1) no gain or loss will be recognized
to either Fund on the  transfer  of  Executive  Blue Chip's  assets to the First
Investors  Blue Chip,  (2) First  Investors Blue Chip's basis and holding period
for those  assets will be the same as  Executive  Blue Chip's  basis and holding
period  immediately  prior to the  reorganization,  (3) no gain or loss  will be
recognized  to  Executive  Blue  Chip  shareholders  on their  receipt  of First
Investors Blue Chip shares, and (4) Executive Blue Chip shareholders'  basis and
holding  periods  for First  Investors  Blue Chip shares will be the same as the
basis  for  their   Executive  Blue  Chip  shares   immediately   prior  to  the
reorganization.

      Shareholders  of the Funds should consult their tax advisers regarding the
effect,   if  any,  of  the   Reorganization   in  light  of  their   individual
circumstances.  Because the foregoing  discussion only relates to federal income
tax consequences of the  Reorganization,  those shareholders also should consult
their tax  advisers  about  state and local  tax  consequences,  if any,  of the
Reorganization.

      The  Reorganization  will occur as of the close of  business  on March 14,
2000,  or at a later  date when the  conditions  to the  closing  are  satisfied
("Closing Date").

      The  assets of Executive Blue Chip to be acquired by First  Investors Blue
Chip include all cash, cash  equivalents,  securities,  receivables,  claims and
rights of action,  rights to register shares under  applicable  securities laws,
books and records,  deferred and prepaid  expenses  shown as assets on Executive
Blue Chip's books and all other  property  owned by Executive  Blue Chip.  First
Investors Blue Chip will assume from Executive Blue Chip all liabilities, debts,
obligations  and  duties of  Executive  Blue Chip of  whatever  kind or  nature;
provided,  however,  that  Executive  Blue  Chip  will use its best  efforts  to
discharge all of its known debts, liabilities, obligations and duties before the
Closing  Date.  First  Investors  Blue Chip will deliver its shares to Executive
Blue  Chip,   which  will   distribute  the  shares  to  Executive  Blue  Chip's
shareholders. The shares will be distributed by opening accounts on the books of
First Investors Blue Chip in the names of Executive Blue Chip  shareholders  and
by transferring to those accounts the shares previously  credited to the account
of Executive Blue Chip on those books. Fractional shares in First Investors Blue
Chip will be rounded to the third decimal place.


                                       5



      The  value of  Executive  Blue  Chip's net assets to be  acquired by First
Investors  Blue Chip and the net asset value  ("NAV") per share of the shares of
First Investors Blue Chip to be exchanged for those assets will be determined as
of the close of regular  trading on the New York Stock  Exchange  on the Closing
Date ("Valuation Time"), using the valuation procedures described in each Fund's
then-current Prospectus and Statement of Additional Information.  Executive Blue
Chip's  net value  shall be the  value of its  assets  to be  acquired  by First
Investors Blue Chip, less the amount of Executive Blue Chip's liabilities, as of
the Valuation Time.

      Executive Blue Chip offers one class of shares.  First Investors Blue Chip
offers two classes of shares,  designated Class A and Class B shares.  Shares of
Executive Blue Chip and the Class A shares of First Investors Blue Chip are sold
at the public offering  price,  which includes a front-end sales load. The sales
loads on shares  of  Executive  Blue Chip and Class A shares of First  Investors
Blue Chip are different as are the fees adopted pursuant to Rule 12b-1 under the
Investment Company Act of 1940, as amended ("1940 Act"). Class B shares of First
Investors  Blue Chip are sold at NAV,  without any initial  sales load,  but are
subject to a  contingent  deferred  sales  charge  ("CDSC") if they are redeemed
within certain designated time periods.  Class A shareholders of First Investors
Blue  Chip have  identical  rights  as  shareholders  of  Executive  Blue  Chip.
Shareholders of Executive Blue Chip will receive corresponding Class A shares of
First Investors Blue Chip.

      As indicated above, the investment objective and policies of the two Funds
are the same.  Based on its review of the  investment  portfolios  of each Fund,
each Fund's investment adviser believes that all of the assets held by Executive
Blue Chip will be consistent  with the  investment  policies of First  Investors
Blue Chip and thus can be transferred  to and held by First  Investors Blue Chip
if the proposed Reorganization is approved.

      On  or before the  Closing  Date,  Executive  Blue Chip will  declare as a
distribution  substantially  all of its net  investment  income and realized net
capital gain, if any, and distribute  that amount plus any  previously  declared
but unpaid  dividends,  in order to  continue  to  maintain  its tax status as a
regulated investment company.

     Executive Blue Chip and First Investors Blue Chip have each agreed to share
Reorganization  expenses,  in  proportion  to the total net  assets of each Fund
because,  in the opinion of their respective Boards, the reasonable  expectation
of the cost savings and added efficiency to a unified fund will in the long term
accrue as a benefit to the  shareholders of both Funds.  All such expenses to be
assumed  by the  Funds are  customary  and  appropriate  to the  transaction  in
question,  and it is  anticipated  that these fees shall be reasonable in amount
and not out of the ordinary. Such expenses include the fees and disbursements of
attorneys,  printing,  proxy  solicitation,  registration  fees, any state stock
transfer  stamps and taxes required in connection with the transfer of portfolio
securities  from  Executive  Blue Chip to First  Investors  Blue  Chip,  and the
transfer of shares of First  Investors Blue Chip to Executive Blue Chip, and the
expenses of liquidation.


                                       6



      At a meeting  of the Board of the Funds  held on  October  21,  1999,  the
Board, including its directors/trustees who are not "interested persons" as that
term is defined in the 1940 Act ("Independent Directors"), considered the merits
of the  proposed  Reorganization  and voted to approve the  Agreement  (which is
substantially  summarized  herein),  and the distribution to Executive Blue Chip
shareholders of this  Prospectus/Proxy  seeking approval of the  Reorganization.
(This  summary  of the  Agreement,  and any other  discussion  of the  Agreement
contained  herein,  is  subject  to the  terms  and  conditions  of  the  actual
Agreement,  attached hereto as Appendix A.) The Board, including the Independent
Directors, found the proposed Reorganization to be in the best interests of each
respective Fund's shareholders and determined that the combination of the assets
of  Executive  Blue Chip and First  Investors  Blue Chip  would  best  serve the
shareholders  of both Funds.  The  combination  should  result in a reduction of
certain expenses,  lower overall expense ratios (assuming any fee waivers and/or
expense  assumptions are  discontinued)  and, thus, a reduction in the per share
expenses applicable to shareholders, including those of Executive Blue Chip.

      The Board of  Trustees  of  Executive  Blue Chip has  scheduled  a Special
Meeting of its  shareholders  which will be held at the office of Executive Blue
Chip,  95 Wall  Street,  New York,  New York on February 25, 2000 at 10:00 a.m.,
Eastern time, or any adjournment  thereof, to consider and approve or disapprove
the Agreement.

     In approving the Agreement, the Boards of the Funds considered, among other
factors,  the objective and policies of each Fund, the assets and liabilities of
each Fund, the  operations of the business and management of the two Funds,  the
prospects  of each Fund  individually  and  combined,  and the  fairness  to the
respective shareholders of each Fund as a result of the exchange of shares being
done on a net asset value basis.  The Boards have determined that  participation
in the  transaction  is in the best  interests of the Funds and the interests of
existing  shareholders  of the  Funds  will not be  diluted  as a result  of the
transaction.  In connection with their approval of the proposed  Reorganization,
and in making the necessary  determination prior to such approval, the Boards of
the Funds reviewed all pertinent  information and discussed all relevant issues.
In approving the proposed  Reorganization,  the Boards of the Funds specifically
considered the following factors:

     A.     COMMONALITY OF INVESTMENT OBJECTIVES AND POLICIES
            -------------------------------------------------

     The Funds have an identical  investment  objective and identical management
styles.  Both  Funds  seek high  total  investment  return  consistent  with the
preservation of capital.  Both Funds seek to achieve their respective investment
objectives   by   primarily   investing   in  the   common   stocks   of  large,
well-established  companies  that are included in the S&P 500 Index (I.E.,  Blue
Chip stocks).  Each Fund selects stocks it believes will have earnings growth in
excess of the  average  company  in the S&P 500 Index,  and each Fund  generally
stays fully invested in stocks under all market conditions.

     B.     REDUCED EXPENSE RATIO
            ---------------------


                                       7



     The Reorganization  should result in a lower expense ratio not only for the
current shareholders of the Executive Blue Chip, but for all shareholders of the
combined  Fund, for three reasons.  First,  shareholders  of Executive Blue Chip
will be subject to lower 12b-1 fees as a result of the  Reorganization.  Second,
the combined  Fund will have a larger asset base over which to spread other fees
and expenses than the Funds standing alone.  Third, the combination of the Funds
will eliminate  duplicative legal and auditor's fees, printing costs and certain
registration fees.

      C.    TAX CONSIDERATIONS
            ------------------

      The consummation of the proposed Reorganization is contingent upon receipt
of an opinion of counsel  that no gain or loss for federal  income tax  purposes
will be recognized as a result of the proposed transaction.  In contrast, if the
Executive Blue Chip were to liquidate and  shareholders  were to receive the net
asset value of their shares in liquidating distributions,  gain or loss would be
recognized for Federal income tax purposes.

      D.    CONTINUITY OF SALES REPRESENTATIVE SERVICES
            -------------------------------------------

      The  Reorganization  should not result in any change  which would  prevent
existing  sales  representatives  for  substantially  all  Executive  Blue  Chip
shareholders   from  continuing  to  service  the  shareholders   following  the
Reorganization.

      E.    SHAREHOLDER SERVICES
            --------------------

      The First  Investors  group of mutual  funds and the  Executive  Investors
group of mutual  funds  currently  provide  the same range of  services to their
shareholders.  With the  consolidation of the operations of the Funds, the Board
anticipates  that  the  services  provided  to  shareholders  may be  done  more
efficiently.

      The  consummation  of  the  Reorganization  is  subject  to  a  number  of
conditions  set  forth in the  Agreement,  some of which may be waived by either
Fund.  In  addition,  the  Agreement  may be amended in any  mutually  agreeable
manner,  except that no amendment may be made subsequent to the Meeting that has
a material adverse effect on the interests of the shareholders of the Funds.

III.    VOTING INFORMATION
        ------------------

        Proxy  materials will be mailed to  shareholders  of Executive Blue Chip
beginning  on or about  January  __,  2000.  Holders  of  record  of  shares  of
beneficial  interest  ("Shares") of Executive Blue Chip at the close of business
on ________ __, 1999 (the "Record  Date") will be entitled to one vote per Share
on all  business  of the  Meeting  on which  they are  entitled  to vote and any
adjournment or adjournments  thereof. On the Record Date, there were outstanding
and  entitled  to  vote  ____________   Shares  of  Executive  Blue  Chip.  This
solicitation of proxies is made by the Board of Executive Blue Chip on behalf of
the Fund.


                                       8



      The holders of a majority of the Executive Blue Chip's Shares  outstanding
on the Record Date, represented in person or by proxy, must be present to form a
quorum for the  transaction  of  business  at the  Meeting.  In the event that a
quorum is present at the Meeting but  sufficient  votes to approve the  proposed
Reorganization are not received, the persons named as proxies may propose one or
more adjournments of the Meeting to permit further  solicitation of proxies. Any
such  adjournments will require the affirmative vote of a majority of those Fund
Shares represented at the Meeting in person or by proxy. If a quorum is present,
the persons  named as proxies will vote those  proxies that they are entitled to
vote  FOR any such  proposal  in favor of an  adjournment  and will  vote  those
proxies required to be voted AGAINST any such proposal against such adjournment.

      Abstentions  and broker  non-votes  will be counted as Shares  present for
determining whether a quorum is present,  but will not be counted for or against
any adjournment.  Accordingly, abstentions and broker non-votes effectively will
be a vote against  adjournment.  Broker non-votes are Shares held by a broker or
nominee as to which  instructions  have not been  received  from the  beneficial
owners or persons  entitled  to vote,  and the  broker or nominee  does not have
discretionary  voting  power.  Abstentions  and  broker  non-votes  will  not be
counted,  however,  as votes cast for purposes of determining whether sufficient
votes have been received to approve the proposed Reorganization.

      All valid  proxies  received  prior to the  Meeting,  or any  adjournments
thereof,  will be voted at the Meeting.  All proxies will be voted in accordance
with the  instructions  of the  shareholder.  If no instruction is specified the
proxies  will be voted FOR the matters set forth in the  accompanying  Notice of
Special Meeting of Shareholders  and the persons named as proxies will use their
best judgment in connection  with the  transaction of such other business as may
properly come before the Meeting or any adjournments  thereof. A shareholder who
executes a proxy  retains  the right to revoke it at any time  insofar as it has
not been  exercised.  A proxy may be revoked  by the  subsequent  execution  and
submission of a revised proxy,  by written notice of revocation to the secretary
of the Fund, or by voting in person at the Meeting.

      The following persons are known to Executive Blue Chip to own of record or
beneficially more than 5% of its shares as of December 31, 1999 [TO BE ADDED]:

      The trustees and officers of  Executive  Blue Chip,  as a group,  own less
than 1% of the shares of that  Fund,  and the  trustees  and  officers  of First
Investors  Blue Chip, as a group,  own less than 1% of either Class A or Class B
shares of that Fund.

VOTE REQUIRED

      The  favorable  vote of the  holders  of a  majority  of the Shares of the
Executive  Blue Chip present at the Meeting in person or by proxy is required to
approve the proposed Reorganization.

RECOMMENDATION OF THE TRUSTEES


                                       9



      The Board of  Trustees  of  Executive  Blue Chip have  concluded  that the
proposed  Reorganization  may benefit the Fund and its  shareholders.  Thus, the
Trustees recommend voting FOR the proposed Reorganization.

OTHER MATTERS

      The Board is not aware of any  matters to be  presented  for action at the
Meeting  other  than  those  set  forth in this  Prospectus/Proxy.  If any other
business should come before the Meeting,  the persons named in the  accompanying
proxy will vote thereon in accordance with their best judgment.

METHOD AND EXPENSE OF SOLICITATION

      The cost of preparing,  assembling and mailing the proxy materials will be
borne by the Funds in proportion to the total net assets of each Fund determined
as of the Closing Date. In addition to the solicitation of proxies by the use of
the mails,  the  Executive  Blue Chip may, if necessary to obtain the  requisite
representation  of  shareholders,  solicit  proxies by telephone,  telegraph and
personal  interview  by employees of First  Investors  Corporation  or Executive
Investors  Corporation  and  any of  their  affiliates,  or  through  securities
dealers. While there is no current intent to do so, the Trustees have authorized
the  officers  of the  Executive  Blue Chip to retain  the  services  of a proxy
soliciting  firm if the officers  determine that it is appropriate to do so. The
cost of soliciting  proxies,  including  reimbursement to dealers and others who
forward  proxy  material  to  their  clients,  will be  borne  by the  Funds  in
proportion to the total net assets of each Fund as of the Closing Date.

IV.   INFORMATION ABOUT THE FUNDS
      ---------------------------

                              OVERVIEW OF THE FUNDS

             WHAT ARE THE INVESTMENT OBJECTIVES, PRIMARY INVESTMENT
                       STRATEGIES AND RISKS OF THE FUNDS?

      The investment objectives, primary investment strategies and risks of both
Funds are the same. Each Fund seeks high total investment return consistent with
the preservation of capital.

      Each   Fund   primarily   invests   in  the   common   stocks   of  large,
well-established  companies  that are  included in the S&P 500 Index.  Each Fund
selects  stocks  that it  believes  will have  earnings  growth in excess of the
average company in the S&P 500 Index.  While each Fund attempts to diversify its
investments so that its weightings in different  industries are similar to those
of the  S&P  500  Index,  they  are not  index  funds  and  therefore  will  not
necessarily mirror the S&P 500 Index. The Funds generally stay fully invested in
stocks under all market conditions.

      While Blue Chip stocks are regarded as among the most conservative stocks,
like all stocks they  fluctuate in price in response to movements in the overall


                                       10



securities markets,  general economic conditions,  and changes in interest rates
or investor  sentiment.  Fluctuations in the prices of Blue Chip stocks at times
can be substantial.  Accordingly, the value of your investment in the Funds will
go up and down, which means that you could lose money.

      AN  INVESTMENT  IN THE FUNDS IS NOT A BANK  DEPOSIT  AND IS NOT INSURED OR
      GUARANTEED  BY THE  FEDERAL  DEPOSIT  INSURANCE  CORPORATION  OR ANY OTHER
      GOVERNMENT AGENCY.

                          HOW HAVE THE FUNDS PERFORMED?

FIRST INVESTORS BLUE CHIP

      The bar chart and table below show you how the First Investors Blue Chip's
performance  has varied from year to year and in  comparison  with a broad-based
index.  This information  gives you some indication of the risks of investing in
the Fund.

      The Fund has two classes of shares, Class A shares and Class B shares. The
bar chart shows  changes in the  performance  of the Fund's  Class A shares from
year to year  over  the  life of the  Fund.  The  performance  of Class B shares
differs  from the  performance  of Class A shares shown in the bar chart only to
the  extent  that it does not have the same  expenses.  The bar  chart  does not
reflect  sales  charges  that you may pay upon  purchase or  redemption  of Fund
shares.  If they were  included,  the  returns  would be less than those  shown.
[UPDATE]


The chart below contains the following plot points:

1989      15.40%
1990      -3.50%
1991      27.52%
1992       6.56%
1993       7.77%
1994      -3.02%
1995      34.01%
1996      20.55%
1997      26.05%
1998      18.10%


      During the periods shown, the highest quarterly return was _____% (for the
quarter ended _________,  199_) and the lowest quarterly return was ______% (for
the  quarter  ended  _______,  199_).  THE  FUND'S  PAST  PERFORMANCE  DOES  NOT
NECESSARILY INDICATE HOW THE FUND WILL PERFORM IN THE FUTURE.


                                       11



      The following table shows how the average annual total returns for Class A
shares and Class B shares  compare to those of the S&P 500 Index as of  December
31, 1999. This table assumes that the maximum sales charge or CDSC was paid. The
S&P 500 Index is an unmanaged index generally  representative  of the market for
the stocks of large-sized U.S.  companies.  The S&P 500 Index does not take into
account fees and expenses that an investor would incur in holding the securities
in the S&P 500 Index. If it did so, the returns would be lower than those shown.

                                                Inception         Inception
                                                Class A Shares    Class B Shares
                  1 Year*           5 Years*    (1/3/89)          (1/12/95)

Class A Shares
Class B Shares
S&P 500 Index
* The annual returns are based upon calendar years.

EXECUTIVE BLUE CHIP

      The bar chart and  table  below  show you how the  Executive  Blue  Chip's
performance  has varied from year to year and in  comparison  with a broad-based
index.  This information  gives you some indication of the risks of investing in
the Fund.

      The bar chart shows changes in the  performance  of the Fund's shares from
year to year over the life of the Fund.  The bar chart  does not  reflect  sales
charges that you may pay upon  purchase or  redemption  of Fund shares.  If they
were included, the returns would be less than those shown. [UPDATE].


                                       12


1991      27.65%
1992       4.13%
1993       8.13%
1994      -1.21%
1995      36.30%
1996      20.62%
1997      26.58%
1998      17.81%


      During the periods shown, the highest quarterly return was _____% (for the
quarter ended  ___________,  199_),  and the lowest quarterly return was ______%
(for the quarter ended ___________,  199_). THE FUND'S PAST PERFORMANCE DOES NOT
NECESSARILY INDICATE HOW THE FUND WILL PERFORM IN THE FUTURE.

      The  following  table shows how the average  annual total  returns for the
Fund's  shares  compare to those of the S&P 500 Index as of December  31,  1999.
This table assumes that the maximum sales charge was paid.  The S&P 500 Index is
an  unmanaged  index  generally  representative  of the market for the stocks of
large-sized  U.S.  companies.  The S&P 500 Index does not take into account fees
and expenses that an investor  would incur in holding the  securities in the S&P
500 Index. If it did so, the returns would be lower than those shown.

                                                      Inception
                        1 Year*           5 Years*    (5/17/90)

Executive Blue Chip
S&P 500 Index
* The annual returns are based upon calendar years.

         WHAT ARE THE FEES, EXPENSES AND CAPITALIZATION OF THE FUNDS?

      This table describes the fees and expenses that you may pay if you buy and
hold  shares  of the  Funds.  The  shareholder  fees are the same for the  First
Investors Blue Chip and the surviving fund after the  Reorganization  ("Combined
Fund").  THERE  WILL BE NO  SHAREHOLDER  FEES  CHARGED  IN  CONNECTION  WITH THE
REORGANIZATION.



                                       13



                                                  Class A         Class B
                                                  SHARES          SHARES
                                                  ------          ------

SHAREHOLDER  FEES - FIRST  INVESTORS  BLUE CHIP
(fees paid  directly  from your
investment)

Maximum sales charge (load) imposed on purchases
    (as a percentage of offering price)..........  6.25%           None
Maximum deferred sales charge (load)
    (as a percentage of the lower of purchase
    price or redemption price)...................  None*           4%**

*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.
**4% in the first year;  declining to 0% after the sixth year. Class B shares
convert to Class A shares after 8 years.

SHAREHOLDER FEES - EXECUTIVE BLUE CHIP
(fees paid directly from your investment)

Maximum sales charge (load) imposed on purchases
    (as a percentage of offering price)..........  4.75%
Maximum deferred sales charge (load)
    (as a percentage of the lower of purchase
    price or redemption price)...................  None*

*A  contingent  deferred  sales  charge of 1.00%  will be  assessed  on  certain
redemptions of the Fund's shares that are purchased without a sales charge.

                                                  Class A         Class B
                                                  SHARES          SHARES
                                                  ------          ------

SHAREHOLDER FEES - COMBINED FUND
(fees paid directly from your investment)

Maximum sales charge (load) imposed on purchases
    (as a percentage of offering price)..........  6.25%           None
Maximum deferred sales charge (load)
    (as a percentage of the lower of purchase
    price or redemption price)...................  None*                 4%**

*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. **4% in
the first year;  declining to 0% after the sixth year. Class B shares convert to
Class A shares after 8 years.


    The  following  table shows the current fees and  expenses  incurred for the
fiscal year ended  September 30, 1999 with respect to First Investors Blue Chip,
the fiscal year ended December 31, 1999 with respect to Executive Blue Chip, and
PRO FORMA fees and  expenses for the  Combined  Fund after giving  effect to the
Reorganization.


                                       14



ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from Fund assets)




                                 DISTRIBUTION                          TOTAL
                                 AND SERVICE                        ANNUAL FUND
                     MANAGEMENT    (12B-1)           OTHER           OPERATING         FEE       NET
                     FEES(1)      FEES(2)         EXPENSES(3)        EXPENSES(3)     WAIVER   EXPENSES
                     -------      -------          ----------        ----------      ------   --------

                                                                            

First Investors
Blue Chip
     Class A Shares
     Class B Shares.

Executive Blue Chip

Combined Fund
     Class A Shares
     Class B Shares




(1) [fee waiver, if applicable]
(2) Because  each Fund pays Rule 12b-1 fees,  long-term  shareholders  could pay
more  than  the  economic  equivalent  of the  maximum  front-end  sales  charge
permitted by the National Association of Securities Dealers,  Inc. (3) Each Fund
has an expense offset arrangement that may reduce the Fund's custodian fee based
on the amount of cash  maintained by the Fund with its  custodian.  Any such fee
reductions are not reflected under Total Annual Fund Operating Expenses.

EXAMPLE

      This example helps you to compare the costs of investing in Executive Blue
Chip with the cost of  investing  in First  Investors  Blue Chip and the cost of
investing in the Combined Fund assuming the  Reorganization  has been completed.
The example  assumes that (1) you invest  $10,000 in the specified  Fund for the
time periods  indicated;  (2) your investment has a 5% return each year; and (3)
the Fund's operating expenses remain the same. Although your actual costs may be
higher or lower, under these assumptions your costs would be:

                                ONE YEAR   THREE YEARS FIVE YEARS   TEN YEARS
IF YOU REDEEM YOUR SHARES:

FIRST INVESTORS BLUE CHIP
     Class A shares                 $           $           $           $
     Class B shares

EXECUTIVE BLUE CHIP

COMBINED FUND
     Class A shares
     Class B shares

IF YOU DO NOT REDEEM YOUR SHARES:

FIRST INVESTORS BLUE CHIP
     Class A shares                 $           $           $           $
     Class B shares                                                      *

EXECUTIVE BLUE CHIP

COMBINED FUND
     Class A shares
     Class B shares


                                       15



*Assumes conversion to Class A shares eight years after purchase.

CAPITALIZATION

The following  table shows the  capitalization  of First Investors Blue Chip and
Executive  Blue Chip as of ________,  2000,  and on a PRO FORMA  combined  basis
(unaudited)   as  of   _______________,   2000  after   giving   effect  to  the
Reorganization:
                                                                   COMBINED FUND
                                   FIRST       EXECUTIVE BLUE     (PRO FORMA)
                                 INVESTORS          CHIP
                                 BLUE CHIP
Net Assets..................         $                $                $
Net Asset Value Per Share...         $                $                $
Shares Outstanding..........

                               THE FUNDS IN DETAIL

   WHAT ARE THE FUNDS' OBJECTIVES, PRINCIPAL INVESTMENT STRATEGIES, AND RISKS?

OBJECTIVE:  Each Fund seeks high total investment  return  consistent with the
preservation of capital.

PRINCIPAL INVESTMENT  STRATEGIES:  Each Fund invests at least 65% of its total
assets  in  common  stocks  of  large,  well-established  companies  that  are
included in the S&P 500 Index.  The S&P 500 Index  consists  of both U.S.  and
foreign corporations.

      Each Fund uses  fundamental  research to select  stocks of companies  with
strong  balance  sheets,  relatively  consistent  records  of  achievement,  and
potential  earnings  growth  that is greater  than that of the  average  company
included in the S&P 500 Index. The Funds attempt to stay broadly diversified and
sector  neutral  relative  to the S&P 500 Index,  but it may  emphasize  certain
industry  sectors based on economic and market  conditions.  The Funds intend to
remain  relatively fully invested in stocks under all market  conditions  rather
than  attempt  to time the  market by  maintaining  large  cash or fixed  income
securities  positions when market  declines are  anticipated.  The Funds usually
will sell a stock when the reason for  holding it is no longer  valid,  it shows
deteriorating fundamentals, or it falls short of the Funds' expectations.

PRINCIPAL  RISKS:  Any  investment  carries  with it some  level of  risk.  In
general,  the greater the potential  reward of an investment,  the greater the
risk.  The principal  risks of the Funds are the same.  Here are the principal
risks of owning the Funds:

MARKET  RISK:  Because the Funds  primarily  invest in common  stocks,  they are
subject to market  risk.  Stock prices in general may decline over short or even
extended periods not only because of company-specific  developments but also due


                                       16


to an  economic  downturn,  a change in  interest  rates or a change in investor
sentiment,  regardless  of the  success or failure  of an  individual  company's
operations.  Stock  markets  tend to run in  cycles  with  periods  when  prices
generally  go up,  known as  "bull"  markets,  and  periods  when  stock  prices
generally go down,  referred to as "bear"  markets.  While Blue Chip stocks have
historically  been the least risky and most liquid stocks,  like all stocks they
fluctuate  in  value.  Fluctuations  of  Blue  Chip  stocks  can be  sudden  and
substantial.  Accordingly,  the value of your investment in the Funds will go up
and down, which means that you could lose money.

OTHER RISKS: While the Funds generally attempt to remain sector neutral relative
to the S&P 500 Index,  it is not an index  fund.  The Funds may hold  securities
other than those in the S&P 500 Index, may hold fewer securities than the index,
and may have sector or industry  allocations  different from the index,  each of
which could cause the Funds to underperform the index.

ALTERNATIVE  STRATEGIES:  At times the Funds may judge that market,  economic or
political conditions make pursuing the Funds' investment strategies inconsistent
with the best interests of its shareholders.  The Funds then may temporarily use
alternative  strategies  that are mainly designed to limit each Fund's losses by
investing up to 100% of its assets in short-term money market instruments.  If a
Fund does so, it may not achieve its investment objective.

                                 FUND MANAGEMENT

        First Investors  Management  Company,  Inc.  ("FIMCO") is the investment
adviser to the First  Investors  Blue Chip.  Its address is 95 Wall Street,  New
York, NY 10005. It currently serves as investment  adviser to 53 mutual funds or
series  of funds  with  total net  assets of  approximately  $5  billion.  FIMCO
supervises  all  aspects  of the First  Investors  Blue  Chip's  operations  and
determines  the  Fund's  portfolio  transactions.  For  the  fiscal  year  ended
September 30, 1999, FIMCO received advisory fees of ____% of the First Investors
Blue Chip's average daily net assets.

        Executive Investors Management Company, Inc. ("EIMCO") is the investment
adviser  to the  Executive  Blue  Chip.  EIMCO's  address is the same as FIMCO's
address.  EIMCO currently is investment  adviser to three mutual funds or series
of funds with total net assets of  approximately  $40 million.  EIMCO supervises
all aspects of the Executive  Blue Chip's  operations  and determines the Fund's
portfolio  transactions.  For the fiscal year ended  December  31,  1999,  EIMCO
received  advisory fees of ___% of the Executive  Blue Chip's  average daily net
assets.

        FIMCO and EIMCO share the same management,  staff,  offices and research
and support services. They are both wholly owned subsidiaries of First Investors
Consolidated Corporation.

        Following the  Reorganization,  the management fee for the Combined Fund
is expected to be ____% of the Fund's average daily net assets.  FIMCO will have
the  responsibility  of  managing  the  Fund's  combined  assets  following  the
Reorganization.  In addition, the directors and officers of First Investors Blue


                                       17



Chip, its distributor,  administrator and other service providers will serve the
Combined Fund in their current capacities.

        Dennis T.  Fitzpatrick  serves as  Co-Portfolio  Manager of the Funds.
Mr.   Fitzpatrick  has  been  a  member  of  FIMCO's  and  EIMCO's  investment
management  team since  1995.  During  1995,  Mr.  Fitzpatrick  was a Regional
Surety  Manager at United  States  Fidelity & Guaranty  Co. From 1988 to 1995,
he was  Northeast  Surety  Manager at  American  International  Group.  Andrew
Wedeck also serves as  Co-Portfolio  Manager of the Funds.  From April 1999 to
November  1999,  Mr.  Wedeck  was  a  Research  Analyst  at  Cramer  Rosenthal
McGlynn.  From  April 1998 to March  1999,  Mr.  Wedeck  was a personal  money
management  consultant  for  family  members.  From  1995 to March  1998,  Mr.
Wedeck was an Equity  Analyst at Stechler & Company.  It is expected  that Mr.
Fitzpatrick  and  Mr.  Wedeck  will  serve  as  Co-Portfolio  Managers  of the
Combined Fund following the Reorganization.

                            BUYING AND SELLING SHARES

                  HOW AND WHEN DO THE FUNDS PRICE THEIR SHARES?

        The share price  (which is called "net asset  value" or "NAV" per share)
for the Funds is calculated once each day as of 4:00 p.m., Eastern time, on each
day the New York Stock  Exchange  ("NYSE") is open for regular  trading.  In the
event that the NYSE closes  early,  the share price will be determined as of the
time of the closing.

        To  calculate  the NAV,  each  Fund's  assets are  valued  and  totaled,
liabilities are subtracted,  and the balance,  called net assets,  is divided by
the number of shares outstanding. The prices or NAVs of Class A shares and Class
B shares will generally differ because they have different expenses.

        In valuing its assets,  the Funds use the market value of securities for
which market quotations or last sale prices are readily available.  If there are
no readily  available  quotations  or last sale prices for an  investment or the
available  quotations are considered to be  unreliable,  the securities  will be
valued at their fair value as  determined  in good faith  pursuant to procedures
adopted by the Board of the Funds.

                              HOW DO I BUY SHARES?

      In connection with the  Reorganization,  Executive Blue Chip  shareholders
will  receive  Class A shares of First  Investors  Blue  Chip.  With  respect to
purchases of Fund shares separate and apart from the Reorganization, you may buy
shares of First  Investors  Blue  Chip or  Executive  Blue Chip  through a First
Investors registered representative or through a registered representative of an
authorized  broker-dealer  ("Representative").  Investments  in the Funds may be
made in any amount.

        If we receive  your  order in our  Woodbridge,  N.J.  offices in correct
form,  as described  in the  Shareholder  Manual,  prior to the close of regular
trading on the NYSE, your  transaction  will be priced at that day's NAV. If you

                                      18



place your order with your Representative  prior to the close of regular trading
on the NYSE,  your  transaction  will also be priced at that day's NAV  provided
that your  Representative  transmits the order to our  Woodbridge,  NJ office by
5:00 p.m., Eastern time. Orders placed after the close of regular trading on the
NYSE  will be  priced  at the  next  business  day's  NAV.  The  procedures  for
processing  transactions are explained in more detail in our Shareholder  Manual
which is available upon request.

        You can arrange to make systematic investments  electronically from your
bank  account or through  payroll  deduction.  All the various  ways you can buy
shares are explained in the Shareholder  Manual. For further  information on the
procedures  for  buying  shares,  please  contact  your  Representative  or call
Shareholder Services at 1-800-423-4026.

        Each Fund reserves the right to refuse any order to buy shares if a Fund
determines  that  doing so would  be in the best  interests  of the Fund and its
shareholders.

               WHAT ARE THE SALES CHARGES AND EXPENSES FOR SHARES?

        Class A shares of First Investors Blue Chip and shares of Executive Blue
Chip are sold at the public  offering  price which  includes a  front-end  sales
load. The sales charge  declines with the size of your purchase,  as illustrated
below.  THERE  WILL BE NO  SHAREHOLDER  FEES  CHARGED  IN  CONNECTION  WITH  THE
REORGANIZATION.

                          First Investors Blue Chip Class A Shares
                          ----------------------------------------

Your investment              SALES CHARGE AS A PERCENTAGE OF
                      offering price        net amount invested

Less than $25,000         6.25%                6.67%
$25,000-$49,999           5.75                 6.10
$50,000-$99,999           5.50                 5.82
$100,000-$249,999         4.50                 4.71
$250,000-$499,999         3.50                 3.63
$500,000-$999,999         2.50                 2.56
$1,000,000 or more           0*                    0*

                           Executive Blue Chip Shares

Your investment              SALES CHARGE AS A PERCENTAGE OF
                      offering price        net amount invested

Less than $100,000        4.75%                    4.99%
$100,000-$249,999         3.90                     4.06
$250,000-$499,999         2.90                     2.99
$500,000-$999,999         2.40                     2.46
$1,000,000 or more           0*                      0*


                                       19



*If you invest  $1,000,000 or more,  you will not pay a front-end  sales charge.
However,  if you make such an  investment  and then sell your  shares  within 24
months of purchase,  you will pay a contingent deferred sales charge ("CDSC") of
1.00%.

      Following the  reorganization,  Executive Blue Chip Fund  shareholders who
receive  First  Investors  Blue Chip Fund  shares  will be  entitled to purchase
additional shares of the First Investors Blue Chip Fund at the same sales charge
(if lower) that they would have paid if they had  remained  shareholders  of the
Executive  Blue Chip Fund.  This right  applies only to purchases of  additional
shares  of the  First  Investors  Blue  Chip  Fund and will  expire if the First
Investors Blue Chip Fund shares are completely liquidated or exchanged.

        Each Fund has adopted a plan pursuant to Rule 12b-1 that allows the Fund
to pay distribution fees for the sale and distribution of its shares.  Each Fund
pays Rule 12b-1 fees for the marketing of fund shares and for services  provided
to  shareholders.  Executive  Blue Chip's plan  provides  for payments at annual
rates  (based on average  daily net assets) of up to .50%.  No more than .25% of
these payments may be for service fees. First Investors Blue Chip's plan provide
for payments at annual  rates (based on average  daily net assets) of up to .30%
on Class A shares.  No more than .25% of these  payments maybe for service fees.
These fees are paid monthly in arrears.  Because these fees are paid out of each
Fund's assets on an on-going basis,  over time these fees will increase the cost
of your  investment  and may cost  you more  than  paying  other  types of sales
charges.

        FOR  ACTUAL  PAST  EXPENSES  OF  EXECUTIVE  BLUE CHIP  SHARES  AND FIRST
INVESTORS BLUE CHIP CLASS A AND CLASS B SHARES,  SEE THE SECTION  ENTITLED "WHAT
ARE  THE  FEES,   EXPENSES   AND   CAPITALIZATION   OF  THE   FUNDS?"   IN  THIS
PROSPECTUS/PROXY STATEMENT.

                              HOW DO I SELL SHARES?

        You may redeem your Fund  shares on any day a Fund is open for  business
        by:

        o  Contacting  your  Representative  who will place  a redemption  order
           for you;

        o  Sending  a  written   redemption   request  to  Administrative   Data
           Management  Corp.,  ("ADM")  at  581  Main  Street,   Woodbridge,  NJ
           07095-1198;

        o  Telephoning    the   Special    Services    Department  of   ADM   at
           1-800-342-6221 (if you have elected to have telephone privileges); or

        o  Instructing us to make an electronic transfer to a predesignated bank
           (if you have completed an application authorizing such transfers).

        Your  redemption  request will be  processed at the price next  computed
after we receive the  request in good order,  as  described  in the  Shareholder
Manual. For all requests, have your account number available.

        Payment of redemption  proceeds generally will be made within 7 days. If
you are redeeming shares which you recently  purchased by check,  payment may be
delayed to verify that your check has cleared.  This may take up to 15 days from
the date of your purchase.  You may not redeem shares by telephone or Electronic
Fund Transfer unless you have owned the shares for at least 15 days.


                                       20



        If your account falls below the minimum  account  balance for any reason
other than  market  fluctuation,  each Fund  reserves  the right to redeem  your
account  without  your  consent or to impose a low  balance  account  fee of $15
annually on 60 days prior  notice.  Each Fund may also  redeem  your  account or
impose a low balance  account fee if you have  established  your account under a
systematic  investment  program and  discontinue the program before you meet the
minimum  account  balance.  You may avoid  redemption  or imposition of a fee by
purchasing  additional  Fund  shares  during  this  60-day  period to bring your
account  balance to the required  minimum.  If you own First Investors Blue Chip
Class B shares, you will not be charged a CDSC on a low balance redemption.

        Each Fund  reserves  the right to make in-kind  redemptions.  This means
that it could  respond to a  redemption  request by  distributing  shares of the
Fund's underlying investments rather than distributing cash.

             CAN I EXCHANGE MY SHARES FOR THE SHARES OF OTHER FUNDS?

        You may exchange shares of First Investors Blue Chip for shares of other
First Investors Funds without paying any additional  sales charge.  You can only
exchange  within  the same class of shares  (I.E.,  Class A to Class A). You may
exchange shares of Executive Blue Chip for shares of other  Executive  Investors
Funds without paying any additional  sales charge.  You may also exchange shares
of Executive Blue Chip for Class A shares of the First  Investors  Funds without
paying any additional  sales charge;  provided that, you held your shares for at
least one year from their date of purchase or  acquired  your shares  through an
exchange  from  Class  A  shares  of  a  First  Investors  Fund.   Consult  your
Representative or call ADM at 1-800-423-4026 for details.

        Each Fund reserves the right to reject any exchange request that appears
to be part of a market  timing  strategy  based upon the  holding  period of the
initial  investment,  the amount of the investment  being  exchanged,  the funds
involved, and the background of the shareholder or dealer involved. Each Fund is
designed  for  long-term  investment  purposes.  It is not intended to provide a
vehicle for short-term market timing.

                                ACCOUNT POLICIES

              WHAT ABOUT DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS?

      Each Fund will declare daily and pay on a monthly basis dividends from net
investment  income.  Any  net  realized  capital  gains  will  be  declared  and
distributed  on an annual  basis,  usually  after the end of each Fund's  fiscal
year. Each 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  Class  A  shares  of  First
Investors Blue Chip and shares of Executive Blue Chip are calculated at the same
time and in the same manner. Dividends on Class B shares of First Investors Blue


                                       21



Chip 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 choose to reinvest all dividends and other  distributions at NAV
in  additional  shares  of the  same  class  of a Fund or  certain  other  First
Investors  Funds, or receive all dividends and other  distributions  in cash. If
you do not select an option when you open your account,  all dividends and other
distributions  will be reinvested  in additional  shares of that Fund. If you do
not cash a distribution  check and do not notify ADM to issue a new check within
12  months,   the   distribution   may  be  reinvested  in  that  Fund.  If  any
correspondence  sent by a Fund is returned  as  "undeliverable,"  dividends  and
other  distributions  automatically will be reinvested in that Fund. No interest
will be paid to you while a distribution remains uninvested.

      A dividend  or other  distribution  paid on a class of shares will only be
paid in additional  shares of the distributing  class if the total amount of the
distribution  is under $5 or the Fund has  received  notice of your death (until
written  alternate  payment  instructions  and  other  necessary  documents  are
provided by your legal representative).

                                WHAT ABOUT TAXES?

        Any dividends or capital gain  distributions  paid by a Fund are taxable
to you unless you hold your shares in an individual  retirement account,  403(b)
account,  401(k) account, or other tax-deferred  account.  Dividends  (including
distributions  of net  short-term  capital gains) are taxable to you as ordinary
income. Capital gain distributions (essentially,  distributions of net long-term
capital gains) by a Fund are taxed to you as long-term capital gains, regardless
of how long you owned your Fund shares. You are taxed in the same manner whether
you receive your  dividends and capital gain  distributions  in cash or reinvest
them in  additional  Fund  shares.  Your sale or exchange of Fund shares will be
considered a taxable  event for you.  Depending  on the  purchase  price and the
sales price of the shares you sell or exchange, you may have a gain or a loss on
the transaction.  You are responsible for any tax liabilities  generated by your
transactions.

HOW DO I OBTAIN A COMPLETE EXPLANATION OF ALL ACCOUNT PRIVILEGES AND POLICIES?

        Each Fund offers a full range of special  privileges,  including special
investment programs for group retirement plans,  systematic investment programs,
automatic  payroll  investment  programs,  telephone  privileges,  check writing
privileges,  and expedited redemptions by wire order or Automated Clearing House
transfer. The full range of privileges, and related policies, are described in a
special  Shareholder  Manual,   which  you  may  obtain  on  request.  For  more
information on the full range of services available,  please contact us directly
at 1-800-423-4026.

VI.     OTHER INFORMATION
        -----------------

        Each Fund is subject to the  information  requirements of the Securities

                                       22



and  Exchange  Act of 1934  and  the  Investment  Company  Act of  1940,  and in
accordance with those  requirements files reports and other information with the
SEC. These reports,  proxy material and other  information  can be inspected and
copied at the Public  Reference Room  maintained by the SEC at 450 Fifth Street,
N.W.,  Washington,  D.C.  20549,  and the Northeast  Regional Office of the SEC,
Seven World Trade Center,  Suite 1300, New York, New York 10048.  Copies of such
materials  can also be  obtained  from the Public  Reference  Branch,  Office of
Consumer Affairs and Information  Services,  Securities and Exchange Commission,
Washington, D.C. 20459, at prescribed rates.

        The Annual Report to  shareholders  of First Investors Blue Chip for the
period ended September 30, 1999, and the  Semi-Annual  Report to shareholders of
Executive  Investors Trust for the period ended June 30, 1999, are included with
this Prospectus/Proxy.


                                       23




V.      FINANCIAL HIGHLIGHTS
        --------------------

        The financial  highlights  table is intended to help you  understand the
Funds'  financial  performance  for the past  five  years.  Certain  information
reflects  financial  results for a single Fund share.  The total  returns in the
tables  represent  the rate that an  investor  would have earned (or lost) on an
investment   in  each  Fund   (assuming   reinvestment   of  all  dividends  and
distributions).  The information has been audited by Tait, Weller & Baker, whose
report,  along with the Funds'  financial  statements,  are included in the SAI,
which is available upon request.

NEED TO UPDATE



FIRST INVESTORS BLUE CHIP
- -------------------------

                 ------------------------------------------------------------------------------------------
                                        PER SHARE DATA
                 ------------------------------------------------------------------------------------------



                         INCOME FROM INVESTMENT OPERATIONS      LESS DISTRIBUTIONS FROM
                         ---------------------------------      -----------------------

                                                  NET
                                                  REALIZED
                         NET ASSET                AND                           NET
                         VALUE        NET         UNREALIZED       TOTAL        INVEST-  NET       TOTAL
                         BEGINNING    INVEST-     GAIN             FROM         INCOME   REALIZED  DISTRI-
                         OF           MENT        (LOSS) ON        INVESTMENT            GAINS     BUTIONS
                         PERIOD       INCOME      INVESTMENTS      OPERATIONS
- ----------------------------------------------------------------------------------------------------------
                                                                              

CLASS A
1/1/95   - 12/31/95     13.46        .19            4.37             4.56        .20       .60        .80
1/1/96   - 12/31/96     17.22        .14            3.39             3.53        .17      1.11       1.28
1/1/97   - 12/31/97     19.47        .09            4.98             5.07        .08      1.62       1.70
1/1/98   - 9/30/98      22.84        .04            (.39)            (.35)       .03        --        .03
10/1/98  - 9/30/99

CLASS B
1/1/96   - 12/31/96     17.16        .06            3.32             3.38        .06      1.11       1.17
1/1/97   - 12/31/97     19.37       (.03)           4.91             4.88         --      1.62       1.62
1/1/98   - 9/30/98      22.63       (.06)           (.42)            (.48)        --        --         --
10/1/98  - 9/30/99




*   Date  Class B shares  first  offered
**  Calculated  without  sales  charges
+   Annualized
++  Net of expenses waived or assumed



                                       24



- -------------------------------------------------------------------------
                       RATIOS/SUPPLEMENTAL DATA
- -------------------------------------------------------------------------

                                             RATIO TO AVERAGE
                               RATIO TO        ASSETS BEFORE
                                AVERAGE       EXPENSES WAIVED OR
                             NET ASSETS ++       ASSUMED
                             -------------    ------------------

                    NET                   NET               NET
NET ASSET           ASSETS              INVEST            INVEST-
  VALUE    TOTAL    END OF               MENT              MENT      PORTFOLIO
 END OF   RETURN**  PERIOD    EXPENSES  INCOME  EXPENSES  INCOME    TURNOVER
PERIOD       (%)    MILLIONS)  (%)       (%)      (%)       (%)     RATE (%)
- --------------------------------------------------------------------------------


  17.22    34.01     170      1.49      1.23     1.74      .98        25
  19.47    20.55     240      1.44       .78     1.67      .55        45
  22.84    26.05     351      1.39       .40     1.64      .15        63
  22.46    (1.55)    368      1.37+      .23+    1.47+     .13+       71


  19.37    19.71      17      2.22        --     2.37     (.16)       45

  22.63    25.19      37      2.09      (.30)    2.34     (.55)       63
  22.15    (2.12)     47      2.07+     (.47)+   2.17+    (.57)+      71


                                       25




EXECUTIVE BLUE CHIP




[UPDATE]

- -----------------------------------------------------------------------------
                                       PER SHARE DATA
                 ------------------------------------------------------------

                                                            LESS
                             INCOME FROM INVESTMENT    DISTRIBUTIONS
                                   OPERATIONS               FROM
                             ----------------------    -------------

                      NET ASSET     NET    NET REALIZED                    NET
                         VALUE  INVEST-  AND UNREALIZED    TOTAL FROM  INVEST-        NET          TOTAL
                     BEGINNING    MENT   GAIN (LOSS) ON    INVESTMENT     MENT   REALIZED        DISTRI-
                     OF PERIOD   INCOME     INVESTMENTS    OPERATIONS   INCOME       GAIN        BUTIONS
- --------------------------------------------------------------------------------------------------------
                                                                            


1/1/95 - 12/31/95        12.75     .30          4.30             4.60    .29          .74          1.03
1/1/96 - 12/31/96        16.32     .22          3.13             3.35    .24         1.07          1.31
1/1/97 - 12/31/97        18.36     .19          4.68             4.87    .19         1.36          1.55
1/1/98 - 12/31/98        21.68     .11          3.74             3.85    .12          .58           .70
1/1/99 - 12/31/99






*  Calculated without sales charges.
+  Net of expenses waived or assumed.






- --------------------------------------------------------------------------------------------------
                                         RATIOS/SUPPLEMENTAL DATA
          ----------------------------------------------------------------------------------------
                                                    RATIO TO AVERAGE NET
                              RATIO TO AVERAGE     ASSETS BEFORE EXPENSES
                                NET ASSETS+           WAIVED OR ASSUMED
                                ----------             ----------------

              TOTAL       NET               NET                    NET          PORTFOLIO
            RETURN*    ASSETS   EXPENSES    INVEST-     EXPENSES   INVESTMENT   TURNOVER
 NET ASSET      (%)    END OF         (%)   INCOME           (%)   INCOME       RATE (%)
     VALUE             PERIOD               (%)
       END               (IN
 OF PERIOD          MILLIONS)
- -----------------------------------------------------------------------------------------
                                                           
     16.32   36.30       1      .50       1.99             2.20      .29         33
     18.36   20.62       2      .75       1.33             2.28     (.20)        50
     21.68   26.58       4      .75        .92             2.03     (.36)       163
     24.83   17.81       5     1.00        .55             1.84     (.29)        96







                                       26


              AGREEMENT AND PLAN OF REORGANIZATION AND TERMINATION


      THIS AGREEMENT AND PLAN OF REORGANIZATION AND TERMINATION ("Agreement") is
made as of ________ __, 1999, between EXECUTIVE INVESTORS TRUST, a Massachusetts
business  trust  ("Target  Trust"),  on behalf of Blue Chip Fund,  a  segregated
portfolio of assets  ("series")  thereof  ("Target  Fund"),  and FIRST INVESTORS
SERIES FUND, also a Massachusetts  business trust ("Acquiring Trust"), on behalf
of Blue  Chip  Fund,  a series  thereof  ("Acquiring  Fund").  (Target  Fund and
Acquiring  Fund are sometimes  referred to herein  individually  as a "Fund" and
collectively  as the "Funds," and Target Trust and Acquiring Trust are sometimes
referred to herein  individually as an "Investment  Company" and collectively as
the "Investment  Companies.")  All  agreements,  representations,  actions,  and
obligations  described  herein made or to be taken or  undertaken by either Fund
are made and shall be taken or  undertaken  by Target  Trust on behalf of Target
Fund and by Acquiring Trust on behalf of Acquiring Fund.

      The Investment  Companies desire to effect a  reorganization  described in
section  368(a)(1)(C) of the Internal Revenue Code of 1986, as amended ("Code"),
and intend  this  Agreement  to be, and adopt it as, a "plan of  reorganization"
within  the  meaning  of the  regulations  under the Code  ("Regulations").  The
reorganization  will involve the transfer of Target  Fund's  assets to Acquiring
Fund in  exchange  solely  for  shares  of  beneficial  interest  ("shares")  in
Acquiring   Fund  and  the   assumption  by  Acquiring  Fund  of  Target  Fund's
liabilities,  followed by the constructive distribution of those shares PRO RATA
to the holders of shares in Target Fund ("Target Shares") in exchange  therefor,
all on the  terms and  conditions  set forth in this  Agreement.  The  foregoing
transactions are referred to herein collectively as the "Reorganization."

      Acquiring  Fund's shares are divided into two classes,  designated Class A
and  Class B shares;  only  Acquiring  Fund's  Class A shares  ("Acquiring  Fund
Shares") are involved in the Reorganization. Target Fund has only a single class
of shares, which are similar to the Acquiring Fund shares.

      In  consideration  of the mutual promises  contained  herein,  the parties
agree as follows:

1.    PLAN OF REORGANIZATION AND TERMINATION
      --------------------------------------

      1.1. Target Fund agrees to assign, sell, convey, transfer, and deliver all
of its assets described in paragraph 1.2 ("Assets") to Acquiring Fund. Acquiring
Fund agrees in exchange therefor --

      (a) to issue and deliver to Target Fund the number of full and  fractional
          (rounded to the third decimal place) Acquiring Fund Shares, determined
          by  dividing  the net value of Target Fund  (computed  as set forth in
          paragraph  2.1) by the net asset value  ("NAV") of an  Acquiring  Fund
          Share (computed as set forth in paragraph 2.2), and

      (b) to assume all of Target Fund's liabilities  described in paragraph 1.3
          ("Liabilities").

Such transactions shall take place at the Closing (as defined in paragraph 3.1).




      1.2.  The  Assets  shall  include,  without  limitation,  all  cash,  cash
equivalents,   securities,   receivables   (including   interest  and  dividends
receivable),  claims and  rights of  action,  rights to  register  shares  under
applicable  securities  laws,  books and records,  deferred and prepaid expenses
shown as assets on Target Fund's books,  and other property owned by Target Fund
at the Effective Time (as defined in paragraph 3.1).

      1.3. The Liabilities  shall include (except as otherwise  provided herein)
all of Target Fund's  liabilities,  debts,  obligations,  and duties of whatever
kind or nature, whether absolute, accrued,  contingent, or otherwise, whether or
not arising in the ordinary course of business,  whether or not  determinable at
the  Effective  Time,  and  whether  or not  specifically  referred  to in  this
Agreement.  Notwithstanding  the  foregoing,  Target Fund agrees to use its best
efforts to discharge all its known Liabilities before the Effective Time.

      1.4.  At or  immediately  before the  Effective  Time,  Target  Fund shall
declare and pay to its  shareholders a dividend and/or other  distribution in an
amount large enough so that it will have distributed  substantially  all (and in
any event not less than 90%) of its investment  company taxable income (computed
without regard to any deduction for dividends paid) and substantially all of its
realized  net capital  gain,  if any,  for its current  taxable year through the
Effective Time.

      1.5.  At the  Effective  Time  (or as  soon  thereafter  as is  reasonably
practicable), Target Fund shall distribute the Acquiring Fund Shares received by
it pursuant to paragraph 1.1 to its shareholders of record, determined as of the
Effective  Time  (each a  "Shareholder"  and  collectively  "Shareholders"),  in
constructive  exchange  for their  Target  Shares.  Such  distribution  shall be
accomplished by Acquiring Trust's transfer agent's opening accounts on Acquiring
Fund's share transfer books in the  Shareholders'  names and  transferring  such
Acquiring Fund Shares thereto. Each Shareholder's account shall be credited with
the  respective  PRO RATA  number of full and  fractional  (rounded to the third
decimal  place)  Acquiring  Fund Shares due that  Shareholder.  All  outstanding
Target Shares,  including any represented by certificates,  shall simultaneously
be canceled on Target  Fund's share  transfer  books.  Acquiring  Fund shall not
issue  certificates  representing the Acquiring Fund Shares issued in connection
with the Reorganization.

      1.6. As soon as reasonably practicable after distribution of the Acquiring
Fund Shares pursuant to paragraph 1.5, but in all events within six months after
the  Effective  Time,  Target Fund shall be terminated  and any further  actions
shall be taken in connection therewith as required by applicable law.

      1.7. Any reporting  responsibility of Target Fund to a public authority is
and shall remain its  responsibility up to and including the date on which it is
terminated.

      1.8. Any transfer  taxes payable on issuance of Acquiring Fund Shares in a
name  other than that of the  registered  holder on Target  Fund's  books of the
Target Shares  constructively  exchanged therefor shall be paid by the person to
whom such  Acquiring  Fund  Shares  are to be  issued,  as a  condition  of such
transfer.

2.    VALUATION
      ---------

      2.1. For purposes of paragraph  1.1(a),  Target  Fund's net value shall be
(a) the value of the Assets  computed as of the close of regular  trading on the
New York Stock Exchange ("NYSE") on the date of the Closing  ("Valuation Time"),
using  the  valuation   procedures  set  forth  in  Target  Fund's  then-current
prospectus and statement of additional information  (collectively "P/SAI"), less
(b) the amount of the Liabilities as of the Valuation Time.



                                       2


      2.2. For purposes of paragraph 1.1(a),  the NAV of an Acquiring Fund Share
shall be computed as of the Valuation Time,  using the valuation  procedures set
forth in Acquiring Fund's then-current P/SAI.

      2.3. All computations  pursuant to paragraphs 2.1 and 2.2 shall be made by
or under the direction of Executive Investors Management Company, Inc. ("EIMCO")
and First Investors Management Company, Inc. ("FIMCO"), respectively.

3.    CLOSING AND EFFECTIVE TIME
      --------------------------

      3.1. The    Reorganization,   together  with  related  acts  necessary  to
consummate the same  ("Closing"),  shall occur at the Funds' principal office on
February __, 2000,  or at such other place and/or on such other date as to which
the parties may agree.  All acts taking place at the Closing  shall be deemed to
take place  simultaneously as of the close of business on the date thereof or at
such  other  time as to which the  parties  may agree  ("Effective  Time").  If,
immediately  before  the  Valuation  Time,  (a) the NYSE is closed to trading or
trading  thereon is restricted or (b) trading or the reporting of trading on the
NYSE or elsewhere is disrupted,  so that accurate  appraisal of the net value of
Target and the NAV of an Acquiring  Fund Share is  impracticable,  the Effective
Time shall be  postponed  until the first  business  day after the day when such
trading  shall  have been  fully  resumed  and such  reporting  shall  have been
restored.

      3.2. Target Trust's fund accounting and pricing agent shall deliver at the
Closing a certificate of an authorized  officer  verifying that the  information
(including  adjusted basis and holding  period,  by lot)  concerning the Assets,
including  all  portfolio  securities,  transferred  by Target Fund to Acquiring
Fund, as reflected on Acquiring Fund's books immediately  following the Closing,
does or will conform to such  information  on Target  Fund's  books  immediately
before the Closing.  Target  Trust's  custodian  shall  deliver at the Closing a
certificate  of an  authorized  officer  stating that (a) the Assets held by the
custodian  will be  transferred  to Acquiring Fund at the Effective Time and (b)
all necessary  taxes in conjunction  with the delivery of the Assets,  including
all applicable  federal and state stock transfer stamps,  if any, have been paid
or provision for payment has been made.

      3.3. Target  Trust shall deliver to Acquiring  Trust at the Closing a list
of the names and  addresses of the  Shareholders  and the number of  outstanding
Target Shares owned by each Shareholder, all as of the Effective Time, certified
by Target Fund's Secretary or Assistant  Secretary.  Acquiring  Trust's transfer
agent shall deliver at the Closing a certificate  as to the opening on Acquiring
Fund's share transfer books of accounts in the  Shareholders'  names.  Acquiring
Trust shall issue and deliver a  confirmation  to Target  Trust  evidencing  the
Acquiring  Fund Shares to be credited  to Target Fund at the  Effective  Time or
provide  evidence  satisfactory  to Target Trust that such Acquiring Fund Shares
have been credited to Target Fund's  account on Acquiring  Fund's books.  At the
Closing,  each party  shall  deliver  to the other  such bills of sale,  checks,
assignments, stock certificates, receipts, or other documents as the other party
or its counsel may reasonably request.

      3.4. Each  Investment  Company shall deliver to the other at the Closing a
certificate  executed in its name by its  President or a Vice  President in form
and substance satisfactory to the recipient and dated the Effective Time, to the
effect that the  representations  and  warranties it made in this  Agreement are
true and  correct at the  Effective  Time  except as they may be affected by the
transactions contemplated by this Agreement.



                                       3


4.    REPRESENTATIONS AND WARRANTIES
      ------------------------------

4.1.  Target represents and warrants as follows:

      4.1.1. Target Trust is a trust  operating  under a written  declaration of
trust,  the  beneficial  interest in which is divided into  transferable  shares
("Business  Trust"),  that is duly organized and validly existing under the laws
of the  Commonwealth  of  Massachusetts;  and a copy of its Amended and Restated
Declaration of Trust ("Target Declaration") is on file with the Secretary of the
Commonwealth of Massachusetts;

      4.1.2. Target  Trust  is  duly  registered  as  an  open-end   management
investment  company under the Investment  Company Act of 1940, as amended ("1940
Act"), and such  registration  will be in full force and effect at the Effective
Time;

      4.1.3. Target  Fund is a duly established and designated  series of Target
Trust;

      4.1.4.  At the Closing, Target Fund will have good and marketable title to
the Assets and full right, power, and authority to sell, assign,  transfer,  and
deliver the Assets free of any liens or other  encumbrances;  and upon  delivery
and payment for the Assets,  Acquiring  Fund will  acquire  good and  marketable
title thereto;

      4.1.5.  Target Fund's  current  P/SAI conform in all material  respects to
the  applicable  requirements  of the  Securities Act of 1933, as amended ("1933
Act"),  and the 1940 Act and the rules  and  regulations  thereunder  and do not
include any untrue  statement  of a material  fact or omit to state any material
fact required to be stated therein or necessary to make the statements  therein,
in light of the circumstances under which they were made, not misleading;

      4.1.6.  Target Fund is not in violation of, and the execution and delivery
of this Agreement and consummation of the transactions  contemplated hereby will
not conflict with or violate,  Massachusetts  law or any provision of the Target
Declaration or Target Trust's By-laws or of any agreement, instrument, lease, or
other  undertaking  to which  Target  Fund is a party or by which it is bound or
result in the acceleration of any obligation,  or the imposition of any penalty,
under any agreement,  judgment,  or decree to which Target Fund is a party or by
which it is bound, except as previously  disclosed in writing to and accepted by
Acquiring Trust;

      4.1.7.  Except as  otherwise  disclosed  in  writing  to and  accepted  by
Acquiring  Trust,  all material  contracts and other  commitments of Target Fund
(other than this Agreement and investment contracts, including options, futures,
and forward  contracts)  will be  terminated,  or provision for discharge of any
liabilities of Target Fund thereunder will be made, at or prior to the Effective
Time,  without  either  Fund's  incurring  any liability or penalty with respect
thereto and without diminishing or releasing any rights Target Fund may have had
with  respect  to actions  taken or  omitted  or to be taken by any other  party
thereto prior to the Closing;

      4.1.8.  Except as  otherwise  disclosed  in  writing  to and  accepted  by
Acquiring Trust, no litigation,  administrative  proceeding, or investigation of
or before  any court or  governmental  body is  presently  pending or (to Target
Trust's  knowledge)  threatened against Target Trust with respect to Target Fund
or any of  its  properties  or  assets  that,  if  adversely  determined,  would
materially  and adversely  affect its financial  condition or the conduct of its
business; and Target Trust knows of no facts that might form the basis for the


                                       4


institution of any such litigation,  proceeding,  or investigation  and is not a
party to or subject to the provisions of any order,  decree,  or judgment of any
court or governmental  body that materially or adversely affects its business or
its ability to consummate the transactions contemplated hereby;

      4.1.9.  The execution,  delivery,  and  performance of this Agreement have
been duly  authorized as of the date hereof by all necessary  action on the part
of Target Trust's board of trustees,  which has made the determinations required
by Rule 17a-8(a)  under the 1940 Act; and,  subject to approval by Target Fund's
shareholders,  this Agreement constitutes a valid and legally binding obligation
of Target Fund, enforceable in accordance with its terms, except as the same may
be limited  by  bankruptcy,  insolvency,  fraudulent  transfer,  reorganization,
moratorium,  and similar laws relating to or affecting  creditors' rights and by
general principles of equity;

      4.1.10. At the Effective  Time, the  performance of this Agreement  shall
have been duly authorized by all necessary action by Target Fund's shareholders;

      4.1.11. No governmental consents,  approvals,  authorizations,  or filings
are required under the 1933 Act, the Securities Exchange Act of 1934, as amended
("1934 Act"), or the 1940 Act for the execution or performance of this Agreement
by Target  Trust,  except for (a) the filing with the  Securities  and  Exchange
Commission  ("SEC") of a registration  statement by Acquiring Trust on Form N-14
relating to the Acquiring Fund Shares issuable hereunder,  and any supplement or
amendment   thereto    ("Registration    Statement"),    including   therein   a
prospectus/proxy   statement  ("Proxy   Statement"),   and  (b)  such  consents,
approvals,  authorizations,  and filings as have been made or received or as may
be required subsequent to the Effective Time;

      4.1.12. On the effective date of the Registration  Statement,  at the time
of the shareholders'  meeting referred to in paragraph 5.2, and at the Effective
Time,  the Proxy  Statement  will (a) comply in all material  respects  with the
applicable  provisions  of the 1933 Act,  the 1934 Act, and the 1940 Act and the
rules and regulations  thereunder and (b) not contain any untrue  statement of a
material fact or omit to state a material fact required to be stated  therein or
necessary to make the statements  therein,  in light of the circumstances  under
which such  statements  were made, not  misleading;  provided that the foregoing
shall not apply to statements in or omissions  from the Proxy  Statement made in
reliance on and in conformity with information  furnished by Acquiring Trust for
use therein;

      4.1.13. The  Liabilities  were  incurred by Target  Fund in the  ordinary
course of its  business  and are  associated  with the Assets;  and there are no
Liabilities  other than  liabilities  disclosed or provided for in its financial
statements  referred to in paragraph  4.1.18 and liabilities  incurred by Target
Fund in the  ordinary  course of its  business  subsequent  to December 31, 1998
[PLEASE CONFIRM DATE],  or otherwise  previously  disclosed to Acquiring  Trust,
none of which has been materially adverse to the business, assets, or results of
Target Fund's operations;

      4.1.14. Target  Fund is a "fund" as defined in section  851(g)(2)  of the
Code;  it  qualified  for  treatment  as a regulated  investment  company  under
Subchapter  M of the Code  ("RIC") for each past taxable year since it commenced
operations and will continue to meet all the requirements for such qualification
for its current taxable year; it has no earnings and profits  accumulated in any
taxable year in which the  provisions  of  Subchapter M did not apply to it; and
the Assets will be invested at all times through the Effective  Time in a manner
that ensures compliance with the foregoing;




                                       5


      4.1.15. Target  Fund  is not  under  the  jurisdiction  of a  court  in a
proceeding  under Title 11 of the United  States Code or similar case within the
meaning of section 368(a)(3)(A) of the Code;

      4.1.16. Not more  than 25% of the  value of Target  Fund's  total  assets
(excluding cash, cash items, and U.S. government  securities) is invested in the
stock and  securities  of any one issuer,  and not more than 50% of the value of
such assets is invested in the stock and securities of five or fewer issuers;

      4.1.17. Target Fund's federal income tax returns, and all applicable state
and local tax returns,  for all taxable  years through and including the taxable
year ended  December 31, 1998 [PLEASE  CONFIRM THAT SUCH RETURN HAS BEEN FILED],
have been timely filed and all taxes payable  pursuant to such returns have been
timely paid; and

      4.1.18. Target Trust's  financial  statements for the year ended December
31, 1998 [PLEASE  CONFIRM  DATE],  to be delivered  to Acquiring  Trust,  fairly
represent  Target Fund's  financial  position as of that date and the results of
its operations and changes in its net assets for the year then ended.

4.2. Acquiring Fund represents and warrants as follows:

      4.2.1.  Acquiring Trust is a  Business Trust  that is duly  organized  and
validly existing under the laws of the Commonwealth of Massachusetts; and a copy
of its  Declaration  of  Trust  ("Acquiring  Declaration")  is on file  with the
Secretary of the Commonwealth of Massachusetts;

      4.2.2.  Acquiring Trust is  duly  registered  as  an  open-end  management
investment  company  under the 1940 Act, and such  registration  will be in full
force and effect at the Effective Time;

      4.2.3.  Acquiring  Fund is a duly  established  and  designated  series of
Acquiring Trust;

      4.2.4.  No consideration other than  Acquiring  Fund Shares (and Acquiring
Fund's  assumption of the Liabilities) will be issued in exchange for the Assets
in the Reorganization;

      4.2.5.  The  Acquiring  Fund Shares to be issued and  delivered  to Target
Fund hereunder  will, at the Effective Time, have been duly authorized and, when
issued and  delivered as provided  herein,  will be duly and validly  issued and
outstanding shares of Acquiring Fund, fully paid and non-assessable;

      4.2.6.  Acquiring Fund's current P/SAI conform in all material respects to
the applicable  requirements  of the 1933 Act and the 1940 Act and the rules and
regulations  thereunder  and do not include any untrue  statement  of a material
fact or omit to state  any  material  fact  required  to be  stated  therein  or
necessary to make the statements  therein,  in light of the circumstances  under
which they were made, not misleading;

      4.2.7.  Acquiring  Fund is not in  violation  of,  and the  execution  and
delivery of this Agreement and  consummation  of the  transactions  contemplated
hereby will not conflict with or violate,  Massachusetts law or any provision of
the Acquiring Declaration of Trust or Acquiring Trust's By-laws or of any




                                       6


provision of any agreement,  instrument,  lease,  or other  undertaking to which
Acquiring Fund is a party or by which it is bound or result in the  acceleration
of any  obligation,  or the  imposition  of any  penalty,  under any  agreement,
judgment,  or decree to which Acquiring Fund is a party or by which it is bound,
except as previously disclosed in writing to and accepted by Target Trust;

      4.2.8.  Except as otherwise disclosed in writing to and accepted by Target
Trust, no litigation,  administrative  proceeding, or investigation of or before
any court or  governmental  body is presently  pending or (to Acquiring  Trust's
knowledge)  threatened against Acquiring Trust with respect to Acquiring Fund or
any of its properties or assets that, if adversely determined,  would materially
and adversely affect Acquiring Fund's financial  condition or the conduct of its
business; and Acquiring Fund knows of no facts that might form the basis for the
institution of any such litigation,  proceeding,  or investigation  and is not a
party to or subject to the provisions of any order,  decree,  or judgment of any
court or governmental  body that materially or adversely affects its business or
its ability to consummate the transactions contemplated hereby;

      4.2.9.  The execution,  delivery,  and  performance of this Agreement have
been duly  authorized as of the date hereof by all necessary  action on the part
of Acquiring  Trust's board of trustees  (together  with Target Trust's board of
trustees,  the  "Boards"),  which has made the  determinations  required by Rule
17a-8(a) under the 1940 Act; and this Agreement  constitutes a valid and legally
binding obligation of Acquiring Fund,  enforceable in accordance with its terms,
except  as the  same  may  be  limited  by  bankruptcy,  insolvency,  fraudulent
transfer, reorganization,  moratorium, and similar laws relating to or affecting
creditors' rights and by general principles of equity;

      4.2.10. No governmental consents,  approvals,  authorizations,  or filings
are required under the 1933 Act, the 1934 Act, or the 1940 Act for the execution
or performance of this Agreement by Acquiring  Trust,  except for (a) the filing
with the SEC of the  Registration  Statement and a  post-effective  amendment to
Acquiring  Trust's  registration  statement on Form N-1A and (b) such  consents,
approvals,  authorizations,  and filings as have been made or received or as may
be required subsequent to the Effective Time;

      4.2.11. On the effective date of the Registration  Statement,  at the time
of the shareholders'  meeting referred to in paragraph 5.2, and at the Effective
Time,  the Proxy  Statement  will (a) comply in all material  respects  with the
applicable  provisions  of the 1933 Act,  the 1934 Act, and the 1940 Act and the
rules and regulations  thereunder and (b) not contain any untrue  statement of a
material fact or omit to state a material fact required to be stated  therein or
necessary to make the statements  therein,  in light of the circumstances  under
which such  statements  were made, not  misleading;  provided that the foregoing
shall not apply to statements in or omissions  from the Proxy  Statement made in
reliance on and in conformity with information furnished by Target Trust for use
therein;

      4.2.12. Acquiring Fund is a "fund" as defined in section 851(g)(2) of the
Code;  it qualified  for  treatment as a RIC for each past taxable year since it
commenced  operations  and will continue to meet all the  requirements  for such
qualification  for its current taxable year;  Acquiring Fund intends to continue
to meet all such  requirements for the next taxable year; and it has no earnings
and  profits  accumulated  in any  taxable  year  in  which  the  provisions  of
Subchapter M of the Code did not apply to it;

      4.2.13. Acquiring   Fund  has no plan or  intention  to  issue  additional
Acquiring Fund Shares following the  Reorganization  except for shares issued in
the  ordinary  course  of its  business  as a series of an  open-end  investment
company;  nor does  Acquiring  Fund  have any plan or  intention  to  redeem  or


                                       7


otherwise  reacquire  any  Acquiring  Fund  Shares  issued  to the  Shareholders
pursuant to the Reorganization,  except to the extent it is required by the 1940
Act to redeem any of its shares  presented for redemption at NAV in the ordinary
course of that business;

      4.2.14. Following  the  Reorganization,  Acquiring  Fund (a) will continue
Target Fund's "historic  business" (within the meaning of section  1.368-1(d)(2)
of the  Regulations),  (b) use a significant  portion of Target Fund's "historic
business   assets"  (within  the  meaning  of  section   1.368-1(d)(3)   of  the
Regulations)  in a business,  (c) has no plan or  intention to sell or otherwise
dispose of any of the  Assets,  except  for  dispositions  made in the  ordinary
course of that business and  dispositions  necessary to maintain its status as a
RIC, and (d) expects to retain  substantially all the Assets in the same form as
it receives them in the Reorganization,  unless and until subsequent  investment
circumstances suggest the desirability of change or it becomes necessary to make
dispositions thereof to maintain such status;

      4.2.15. There  is no plan or intention for Acquiring  Fund to be dissolved
or merged into another  business  trust or a corporation  or any "fund"  thereof
(within  the  meaning  of  section   851(g)(2)  of  the  Code)   following   the
Reorganization;

      4.2.16. Immediately after the Reorganization, (a) not more than 25% of the
value of Acquiring  Fund's total assets  (excluding  cash, cash items,  and U.S.
government  securities)  will be invested in the stock and securities of any one
issuer and (b) not more than 50% of the value of such assets will be invested in
the stock and securities of five or fewer issuers;

      4.2.17. Acquiring  Fund does not directly or  indirectly  own, nor at the
Effective  Time will it  directly  or  indirectly  own,  nor has it  directly or
indirectly  owned, at any time during the past five years,  any shares of Target
Fund;

      4.2.18. Acquiring  Fund's federal income tax returns,  and all applicable
state and local tax returns,  for all taxable  years  through and  including the
taxable  year ended  September  30,  1998,  have been timely filed and all taxes
payable pursuant to such returns have been timely paid; and

      4.2.19. Acquiring   Trust's   financial  statements  for  the  year  ended
September 30, 1999, to be delivered to Target Trust,  fairly represent Acquiring
Fund's financial  position as of that date and the results of its operations and
changes in its net assets for the year then ended.

4.3. Each Fund represents and warrants as follows:

      4.3.1.  The fair market  value of the  Acquiring  Fund Shares  received by
each  Shareholder  will be  approximately  equal to the fair market value of its
Target Shares constructively surrendered in exchange therefor;

      4.3.2.  Its  management  (a)  is  unaware  of any  plan  or  intention  of
Shareholders to redeem,  sell, or otherwise  dispose of (i) any portion of their
Target  Shares  before the  Reorganization  to any person  related  (within  the
meaning of section  1.368-1(e)(3) of the Regulations) to either Fund or (ii) any
portion  of  the   Acquiring   Fund  Shares  to  be  received  by  them  in  the
Reorganization  to any person related  (within such meaning) to Acquiring  Fund;
(b) does not anticipate  dispositions of those Acquiring Fund Shares at the time
of or soon after the  Reorganization  to exceed the usual rate and  frequency of
dispositions of  shares  of  Target  Fund  as a series of an open-end investment


                                       8


company, (c) expects that the percentage of Shareholder interests,  if any, that
will be disposed of as a result of or at the time of the Reorganization  will be
DE  MINIMIS,  and (d) does  not  anticipate  that  there  will be  extraordinary
redemptions of Acquiring Fund Shares immediately following the Reorganization;

      4.3.3.  The Shareholders  will pay their own expenses, if any, incurred in
connection with the Reorganization;

      4.3.4.  Immediately   following   consummation   of  the   Reorganization,
Acquiring  Fund  will hold  substantially  the same  assets  and be  subject  to
substantially  the same  liabilities  that  Target  Fund held or was  subject to
immediately  prior thereto (in addition to the assets and liabilities  Acquiring
Fund then held or was subject  to),  plus any  liabilities  and  expenses of the
parties incurred in connection with the Reorganization;

      4.3.5.  The fair market value of the Assets on a going  concern basis will
equal or exceed the  Liabilities  to be assumed by  Acquiring  Fund and those to
which the Assets are subject;

      4.3.6.  There is no intercompany  indebtedness  between the Funds that was
issued or acquired, or will be settled, at a discount;

      4.3.7.  Pursuant to  the  Reorganization,  Target  Fund  will  transfer to
Acquiring Fund, and Acquiring Fund will acquire, at least 90% of the fair market
value of the net assets,  and at least 70% of the fair market value of the gross
assets,  held by Target  Fund  immediately  before the  Reorganization.  For the
purposes  of this  representation,  any  amounts  used by Target Fund to pay its
Reorganization  expenses and to make redemptions and  distributions  immediately
before  the  Reorganization  (except  (a)  redemptions  not  made as part of the
Reorganization   and  (b)  distributions  made  to  conform  to  its  policy  of
distributing  all or  substantially  all of its  income  and  gains to avoid the
obligation to pay federal income tax and/or the excise tax under section 4982 of
the Code)  will be  included  as assets  held  thereby  immediately  before  the
Reorganization;

      4.3.8.  None of the  compensation  received by any  Shareholder  who is an
employee of or service  provider  to Target Fund will be separate  consideration
for, or allocable to, any of the Target Shares held by such Shareholder; none of
the  Acquiring  Fund Shares  received by any such  Shareholder  will be separate
consideration  for,  or  allocable  to,  any  employment  agreement,  investment
advisory  agreement,  or other service agreement;  and the consideration paid to
any  such  Shareholder  will  be for  services  actually  rendered  and  will be
commensurate  with amounts paid to third parties  bargaining at arm's-length for
similar services;

      4.3.9.  Immediately  after the  Reorganization,  the Shareholders will not
own shares  constituting  "control" (within the meaning of section 304(c) of the
Code) of Acquiring Fund; and

      4.3.10. Neither Fund will be reimbursed for any expenses incurred by it or
on its behalf in connection  with the  Reorganization  unless those expenses are
solely and directly related to the Reorganization (determined in accordance with
the guidelines set forth in Rev. Rul. 73-54,  1973-1 C.B. 187)  ("Reorganization
Expenses").



                                       9


5.    COVENANTS
      ---------

      5.1.  Each Fund  covenants  to  operate  its  respective  business  in the
ordinary  course  between the date hereof and the Closing,  it being  understood
that --

      (a) such  ordinary  course will  include  declaring  and paying  customary
          dividends   and  other   distributions   and  changes  in   operations
          contemplated by each Fund's normal business activities, and

      (b) each Fund will  retain  exclusive  control of the  composition  of its
          portfolio  until the Closing;  provided that (1) Target Fund shall not
          dispose of more than an insignificant portion of its historic business
          assets during such period without  Acquiring  Fund's prior consent and
          (2) if Target  Fund's  shareholders  approve this  Agreement  (and the
          transactions  contemplated  hereby),  then  between  the  date of such
          approval and the Closing,  the Funds shall coordinate their respective
          portfolios  so that the transfer of the Assets to Acquiring  Fund will
          not cause it to fail to be in  compliance  with all of its  investment
          policies and restrictions immediately after the Closing.

      5.2. Target Fund covenants to call a shareholders' meeting to consider and
act on this Agreement and to take all other action  necessary to obtain approval
of the transactions contemplated hereby.

      5.3.  Target Fund covenants that the Acquiring Fund Shares to be delivered
hereunder  are not being  acquired  for the  purpose of making any  distribution
thereof, other than in accordance with the terms hereof.

      5.4.  Target  Fund  covenants  that  it will  assist  Acquiring  Trust  in
obtaining   information  Acquiring  Trust  reasonably  requests  concerning  the
beneficial ownership of Target Shares.

      5.5. Target Fund covenants that its books and records (including all books
and  records  required  to be  maintained  under  the 1940 Act and the rules and
regulations thereunder) will be turned over to Acquiring Trust at the Closing.

      5.6. Each Fund covenants to cooperate in preparing the Proxy  Statement in
compliance with applicable federal and state securities laws.

      5.7.  Each Fund  covenants  that it will,  from time to time,  as and when
requested  by the other Fund,  execute  and deliver or cause to be executed  and
delivered all such assignments and other instruments,  and will take or cause to
be taken such further action,  as the other Fund may deem necessary or desirable
in order to vest in, and confirm to, (a) Acquiring Fund, title to and possession
of all the Assets, and (b) Target Fund, title to and possession of the Acquiring
Fund Shares to be delivered hereunder, and otherwise to carry out the intent and
purpose hereof.

      5.8.  Acquiring Fund covenants to use all reasonable efforts to obtain the
approvals  and  authorizations  required by the 1933 Act, the 1940 Act, and such
state  securities laws it may deem  appropriate to continue its operations after
the Effective Time.

      5.9. Subject to this Agreement, each Fund covenants to take or cause to be
taken  all  actions,  and to do or  cause  to be  done  all  things,  reasonably
necessary,  proper,  or advisable to consummate and effectuate the  transactions
contemplated hereby.




                                       10


6.    CONDITIONS PRECEDENT
      --------------------

      Each Fund's  obligations  hereunder shall be subject to (a) performance by
the other Fund of all its obligations to be performed hereunder at or before the
Effective  Time,  (b) all  representations  and  warranties  of the  other  Fund
contained herein being true and correct in all material  respects as of the date
hereof  and,  except as they may be affected  by the  transactions  contemplated
hereby,  as of the Effective  Time, with the same force and effect as if made at
and as of the Effective Time, and (c) the following further  conditions that, at
or before the Effective Time:

      6.1. This Agreement and the  transactions  contemplated  hereby shall have
been duly  adopted and  approved  by the Boards and shall have been  approved by
Target  Fund's  shareholders  in  accordance  with the  Target  Declaration  and
applicable law.

      6.2.  All  necessary  filings  shall have been made with the SEC and state
securities authorities,  and no order or directive shall have been received that
any other or further  action is  required to permit the parties to carry out the
transactions  contemplated hereby. The Registration  Statement shall have become
effective  under the 1933  Act,  no stop  orders  suspending  the  effectiveness
thereof shall have been issued, and the SEC shall not have issued an unfavorable
report with respect to the  Reorganization  under  section 25(b) of the 1940 Act
nor  instituted  any   proceedings   seeking  to  enjoin   consummation  of  the
transactions  contemplated  hereby  under  section  25(c) of the 1940  Act.  All
consents,   orders,  and  permits  of  federal,   state,  and  local  regulatory
authorities  (including  the  SEC  and  state  securities   authorities)  deemed
necessary by either Investment Company to permit  consummation,  in all material
respects,  of the  transactions  contemplated  hereby shall have been  obtained,
except  where  failure  to obtain  same  would not  involve a risk of a material
adverse  effect on either  Fund's  assets or  properties,  provided  that either
Investment Company may for itself waive any of such conditions.

      6.3. At the Effective Time, no action,  suit, or other proceeding shall be
pending  before  any  court or  governmental  agency  in which it is  sought  to
restrain or prohibit,  or to obtain damages or other relief in connection  with,
the transactions contemplated hereby.

      6.4. Target Trust shall have received an opinion of Kirkpatrick & Lockhart
LLP ("Counsel") substantially to the effect that:

           6.4.1.  Acquiring  Fund is a duly  established  series  of  Acquiring
      Trust, a Business Trust duly organized and validly existing under the laws
      of the  Commonwealth  of  Massachusetts  with  power  under the  Acquiring
      Declaration  to own all its properties and assets and, to the knowledge of
      Counsel, to carry on its business as presently conducted;

           6.4.2.This  Agreement  (a) has been duly  authorized,  executed,  and
      delivered by Acquiring  Trust on behalf of Acquiring Fund and (b) assuming
      due  authorization,  execution,  and delivery of this  Agreement by Target
      Trust on behalf of Target Fund, is a valid and legally binding  obligation
      of  Acquiring  Trust  with  respect  to  Acquiring  Fund,  enforceable  in
      accordance  with  its  terms,  except  as  the  same  may  be  limited  by
      bankruptcy, insolvency, fraudulent transfer,  reorganization,  moratorium,
      and similar laws relating to or affecting creditors' rights and by general
      principles of equity;

           6.4.3.The  Acquiring Fund Shares to be issued and  distributed to the
      Shareholders  under  this  Agreement,   assuming  their  due  delivery  as
      contemplated by this Agreement,  will be duly  authorized,  validly issued
      and outstanding, and fully paid and non-assessable;



                                       11


           6.4.4.The  execution and delivery of this  Agreement did not, and the
      consummation of the transactions  contemplated hereby will not, materially
      violate the  Acquiring  Declaration  or Acquiring  Trust's  By-laws or any
      provision  of any  agreement  (known to Counsel,  without any  independent
      inquiry  or  investigation)  to which  Acquiring  Trust  (with  respect to
      Acquiring Fund) is a party or by which it is bound or (to the knowledge of
      Counsel,  without any independent inquiry or investigation)  result in the
      acceleration  of any obligation,  or the imposition of any penalty,  under
      any agreement,  judgment, or decree to which Acquiring Trust (with respect
      to Acquiring Fund) is a party or by which it is bound, except as set forth
      in such opinion or as  previously  disclosed in writing to and accepted by
      Target Trust;

           6.4.5.To the knowledge of Counsel (without any independent inquiry or
      investigation), no consent, approval, authorization, or order of any court
      or  governmental  authority is required for the  consummation by Acquiring
      Trust on behalf of Acquiring Fund of the transactions contemplated herein,
      except those  obtained  under the 1933 Act, the 1934 Act, and the 1940 Act
      and those that may be required under state securities laws;

           6.4.6.Acquiring  Trust is  registered  with the SEC as an  investment
      company,  and to the  knowledge  of  Counsel  no order has been  issued or
      proceeding instituted to suspend such registration; and

           6.4.7.To the knowledge of Counsel (without any independent inquiry or
      investigation),   (a)  no  litigation,   administrative   proceeding,   or
      investigation  of or before any court or  governmental  body is pending or
      threatened as to Acquiring  Trust (with respect to Acquiring  Fund) or any
      of its  properties or assets  attributable  or allocable to Acquiring Fund
      and (b) Acquiring Trust (with respect to Acquiring Fund) is not a party to
      or subject to the  provisions  of any order,  decree,  or  judgment of any
      court or governmental body that materially and adversely affects Acquiring
      Fund's  business,  except as set  forth in such  opinion  or as  otherwise
      disclosed in writing to and accepted by Target Trust.

In rendering such opinion,  Counsel may (1) rely, as to matters  governed by the
laws  of  the  Commonwealth  of  Massachusetts,   on  an  opinion  of  competent
Massachusetts   counsel,  (2)  make  assumptions   regarding  the  authenticity,
genuineness,   and/or   conformity  of  documents  and  copies  thereof  without
independent  verification  thereof, (3) limit such opinion to applicable federal
and state law, and (4) define the word "knowledge" and related terms to mean the
knowledge of attorneys then with Counsel who have devoted substantive  attention
to matters directly related to this Agreement and the Reorganization.

      6.5.   Acquiring   Trust  shall  have   received  an  opinion  of  Counsel
substantially to the effect that:

           6.5.1.Target  Fund is a duly  established  series of Target Trust,  a
      Business Trust duly  organized and validly  existing under the laws of the
      Commonwealth of Massachusetts  with power under the Target  Declaration to
      own all its  properties  and assets and, to the  knowledge of Counsel,  to
      carry on its business as presently conducted;

           6.5.2.This  Agreement  (a) has been duly  authorized,  executed,  and
      delivered  by Target  Trust on behalf of Target Fund and (b)  assuming due
      authorization,  execution,  and  delivery of this  Agreement  by Acquiring
      Trust  on  behalf  of  Acquiring  Fund,  is a valid  and  legally  binding
      obligation of Target  Trust,  enforceable  in  accordance  with its terms,
      except as the same may be limited by  bankruptcy,  insolvency,  fraudulent
      transfer,  reorganization,  moratorium,  and similar  laws  relating to or
      affecting creditors' rights and by general principles of equity;

                                       12


           6.5.3.The  execution and delivery of this  Agreement did not, and the
      consummation of the transactions  contemplated hereby will not, materially
      violate the Target  Declaration or Target Trust's By-laws or any provision
      of any agreement  (known to Counsel,  without any  independent  inquiry or
      investigation)  to which Target  Trust (with  respect to Target Fund) is a
      party or by which it is bound or (to the knowledge of Counsel, without any
      independent  inquiry or  investigation)  result in the acceleration of any
      obligation,  or  the  imposition  of any  penalty,  under  any  agreement,
      judgment, or decree to which Target Trust (with respect to Target Fund) is
      a party or by which it is bound, except as set forth in such opinion or as
      previously disclosed in writing to and accepted by Acquiring Trust;

           6.5.4.To the knowledge of Counsel (without any independent inquiry or
      investigation), no consent, approval, authorization, or order of any court
      or governmental authority is required for the consummation by Target Trust
      on behalf of Target Fund of the transactions  contemplated herein,  except
      those  obtained  under  the 1933 Act,  the 1934 Act,  and the 1940 Act and
      those that may be required under state securities laws;

           6.5.5.Target  Trust  is  registered  with  the  SEC as an  investment
      company,  and to the  knowledge  of  Counsel  no order has been  issued or
      proceeding instituted to suspend such registration; and

           6.5.6.To the knowledge of Counsel (without any independent inquiry or
      investigation),   (a)  no  litigation,   administrative   proceeding,   or
      investigation  of or before any court or  governmental  body is pending or
      threatened  as to Target Trust (with respect to Target Fund) or any of its
      properties  or assets  attributable  or  allocable  to Target Fund and (b)
      Target Trust (with respect to Target Fund) is not a party to or subject to
      the  provisions  of  any  order,  decree,  or  judgment  of any  court  or
      governmental body that materially and adversely affects Target's business,
      except as set forth in such opinion or as  otherwise  disclosed in writing
      to and accepted by Acquiring Trust.

In rendering such opinion,  Counsel may (1) rely, as to matters  governed by the
laws  of  the  Commonwealth  of  Massachusetts,   on  an  opinion  of  competent
Massachusetts   counsel,  (2)  make  assumptions   regarding  the  authenticity,
genuineness,   and/or   conformity  of  documents  and  copies  thereof  without
independent  verification  thereof, (3) limit such opinion to applicable federal
and state law, and (4) define the word "knowledge" and related terms to mean the
knowledge of attorneys then with Counsel who have devoted substantive  attention
to matters directly related to this Agreement and the Reorganization.

      6.6.  Each  Investment  Company shall have received an opinion of Counsel,
addressed  to and in form and  substance  satisfactory  to it, as to the federal
income tax consequences  mentioned below ("Tax  Opinion").  In rendering the Tax
Opinion,  Counsel  may  rely as to  factual  matters,  exclusively  and  without
independent  verification,  on the representations  made in this Agreement which
such  Counsel may treat as  representations  made to it, or in separate  letters
addressed to Counsel, and the certificates  delivered pursuant to paragraph 3.4.
The Tax Opinion shall be  substantially  to the effect that,  based on the facts
and   assumptions   stated  therein  and  conditioned  on  consummation  of  the
Reorganization  in  accordance  with this  Agreement,  for  federal  income  tax
purposes:



                                       13


           6.6.1.Acquiring  Fund's  acquisition of the Assets in exchange solely
      for  Acquiring  Fund  Shares  and  Acquiring  Fund's   assumption  of  the
      Liabilities,  followed by Target Fund's  distribution  of those shares PRO
      RATA to the  Shareholders  constructively  in  exchange  for their  Target
      Shares,  will  qualify as a  reorganization  within the meaning of section
      368(a)(1)(C)   of  the  Code,  and  each  Fund  will  be  "a  party  to  a
      reorganization" within the meaning of section 368(b) of the Code;

           6.6.2.Target  Fund will  recognize no gain or loss on the transfer of
      the Assets to Acquiring Fund in exchange  solely for Acquiring Fund Shares
      and Acquiring  Fund's  assumption of the  Liabilities or on the subsequent
      distribution of those shares to the Shareholders in constructive  exchange
      for their Target Shares;

           6.6.3.  Acquiring  Fund will recognize no gain or loss on its receipt
      of the  Assets in  exchange  solely  for  Acquiring  Fund  Shares  and its
      assumption of the Liabilities;

           6.6.4.Acquiring  Fund's  basis  for the  Assets  will be the  same as
      Target Fund's basis therefor  immediately before the  Reorganization,  and
      Acquiring  Fund's holding period for the Assets will include Target Fund's
      holding period therefor;

           6.6.5.A   Shareholder   will   recognize  no  gain  or  loss  on  the
      constructive  exchange of all its Target Shares solely for Acquiring  Fund
      Shares pursuant to the Reorganization; and

           6.6.6.A  Shareholder's  aggregate basis for the Acquiring Fund Shares
      to be  received  by it in  the  Reorganization  will  be the  same  as the
      aggregate basis for its Target Shares to be constructively  surrendered in
      exchange for those Acquiring Fund Shares, and its holding period for those
      Acquiring  Fund Shares will  include its holding  period for those  Target
      Shares, provided they are held as capital assets by the Shareholder at the
      Effective Time.

Notwithstanding subparagraphs 6.6.2 and 6.6.4, the Tax Opinion may state that no
opinion is expressed as to the effect of the  Reorganization on the Funds or any
Shareholder with respect to any asset as to which any unrealized gain or loss is
required  to be  recognized  for  federal  income tax  purposes  at the end of a
taxable year (or on the termination or transfer  thereof) under a mark-to-market
system of accounting.

      At any time before the Closing, either Investment Company may waive any of
the  foregoing  conditions  (except that set forth in paragraph  6.1) if, in the
judgment of its Board,  such waiver will not have a material  adverse  effect on
its Fund's shareholders' interests.

7.    FINDERS FEES AND EXPENSES
      -------------------------

      7.1. Each  Investment  Company  represents  and warrants to the other that
there are no brokers or finders  entitled to receive any payments in  connection
with the transactions provided for herein.

      7.2.  Except  as  otherwise  provided  herein,  the  total  Reorganization
Expenses will be borne  entirely by the Funds in proportion to their  respective
total net assets as of the close of business on the last  business  day prior to
the Closing.



                                       14


8.    ENTIRE AGREEMENT; NO SURVIVAL
      -----------------------------

      Neither party has made any representation,  warranty,  or covenant not set
forth herein,  and this Agreement  constitutes the entire agreement  between the
parties. The representations,  warranties,  and covenants contained herein or in
any document  delivered  pursuant  hereto or in  connection  herewith  shall not
survive the Closing.

9.    TERMINATION OF AGREEMENT
      ------------------------

      This  Agreement may be terminated at any time at or prior to the Effective
Time, whether before or after approval by Target Fund's shareholders:

      9.1. By either Fund (a) in the event of the other Fund's  material  breach
of any representation, warranty, or covenant contained herein to be performed at
or prior to the Effective  Time, (b) if a condition to its  obligations  has not
been met and it  reasonably  appears that such  condition  will not or cannot be
met, or (c) if the Closing has not occurred on or before February __, 2000; or

      9.2. By the parties' mutual agreement.

In the event of termination  under  paragraphs  9.1(c) or 9.2, there shall be no
liability for damages on the part of either Fund, or the trustees or officers of
either Investment Company, to the other Fund.

10.   AMENDMENT
      ---------

      This  Agreement may be amended,  modified,  or  supplemented  at any time,
notwithstanding  approval thereof by Target Fund's  shareholders,  in any manner
mutually  agreed upon in writing by the parties;  provided that  following  such
approval  no  such  amendment  shall  have  a  material  adverse  effect  on the
Shareholders' interests.

11.   MISCELLANEOUS
      -------------

      11.1. This Agreement shall be governed by and construed in accordance with
the internal laws of the  Commonwealth of  Massachusetts;  provided that, in the
case of any conflict  between  such laws and the federal  securities  laws,  the
latter shall govern.

      11.2.  Nothing  expressed  or  implied  herein  is  intended  or  shall be
construed to confer upon or give any person,  firm,  trust, or corporation other
than the  parties  and their  respective  successors  and  assigns any rights or
remedies under or by reason of this Agreement.

      11.3. The parties  acknowledge that each Investment  Company is a Business
Trust. Notice is hereby given that this instrument is executed on behalf of each
Business  Trust's  trustees  solely in their  capacities  as  trustees,  and not
individually,  and that each Business Trust's  obligations under this instrument
are not binding on or  enforceable  against any of its  trustees,  officers,  or
shareholders  but are only  binding on and  enforceable  against the  respective
Funds'  assets and  property.  Each Fund agrees that, in asserting any rights or
claims under this  Agreement,  it shall look only to the other Fund's assets and
property in  settlement  of such  rights or claims and not to such other  Fund's
shareholders or trustees.



                                       15


      11.4. This Agreement may be executed in one or more  counterparts,  all of
which shall be considered one and the same agreement, and shall become effective
when one or more counterparts have been executed by each Investment  Company and
delivered  to the  other.  The  headings  contained  in this  Agreement  are for
reference  purposes  only  and  shall  not  affect  in any  way the  meaning  or
interpretation of this Agreement.


      IN WITNESS  WHEREOF,  each party has caused this  Agreement to be executed
and  delivered  by its duly  authorized  officers  as of the day and year  first
written above.


ATTEST:                             EXECUTIVE INVESTORS TRUST,
                                      on behalf of its series,
                                       Blue Chip Fund



                                      By:
- ---------------------------               ---------------------------




ATTEST:                             FIRST INVESTORS SERIES FUND,
                                      on behalf of its series,
                                       Blue Chip Fund



                                      By:
- ---------------------------               ---------------------------





FIRST INVESTORS SERIES FUND II, INC.
      GROWTH & INCOME FUND
      MID-CAP OPPORTUNITY FUND
      UTILITIES INCOME FUND
FIRST INVESTORS SERIES FUND
      BLUE CHIP FUND
      SPECIAL SITUATIONS FUND
      TOTAL RETURN FUND
FIRST INVESTORS GLOBAL FUND, INC.

95 Wall Street
New York, New York  10005
1-800-423-4026
                       STATEMENT OF ADDITIONAL INFORMATION
                             DATED JANUARY __, 2000

      This is a Statement of Additional  Information ("SAI") for FIRST INVESTORS
SERIES FUND II, INC.  ("SERIES FUND II"),  FIRST INVESTORS  SERIES FUND ("SERIES
FUND") and FIRST INVESTORS GLOBAL FUND, INC.  ("GLOBAL FUND"),  each an open-end
diversified  management investment company.  SERIES FUND II offers four separate
series, three of which are described in this SAI and each of which has different
investment objectives and policies:  FIRST INVESTORS GROWTH & INCOME FUND, FIRST
INVESTORS  MID-CAP  OPPORTUNITY FUND AND FIRST INVESTORS  UTILITIES INCOME FUND.
SERIES FUND offers five  separate  series,  three of which are described in this
SAI and each of which has different  investment  objectives and policies:  FIRST
INVESTORS BLUE CHIP Fund,  FIRST  INVESTORS  SPECIAL  SITUATIONS  FUND and FIRST
INVESTORS  TOTAL  RETURN  FUND.  GLOBAL FUND offers one series.  (Each series is
referred to as a "Fund").

      This SAI is not a prospectus.  It should be read in  conjunction  with the
Series  Fund  Prospectus/Proxy  Statement  dated  January  __, 2000 which may be
obtained  free of cost from the Funds at the address or  telephone  number noted
above. Information regarding the purchase,  redemption and exchange of your Fund
shares is contained in the  Shareholder  Manual,  a separate  section of the SAI
that  is a  distinct  document  and may  also be  obtained  free  of  charge  by
contacting a Fund at the address or telephone number noted above.

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

Investment Strategies and Risks.............................................
Investment Policies.........................................................
Futures and Options Strategies..............................................
Portfolio Turnover..........................................................
Investment Restrictions.....................................................
Directors/Trustees and Officers.............................................
Management..................................................................
Underwriter.................................................................
Distribution Plans..........................................................
Determination of Net Asset Value............................................
Allocation of Portfolio Brokerage...........................................
Purchase, Redemption and Exchange of Shares.................................
Taxes.......................................................................
Performance Information.....................................................
General Information.........................................................
Financial Statements........................................................
Pro Forma Financial Statements and Schedules................................
Appendix A..................................................................
Appendix B..................................................................
Appendix C..................................................................
Shareholder Manual:  A Guide to your First Investors Mutual Fund Account....






                         INVESTMENT STRATEGIES AND RISKS


GROWTH & INCOME FUND

      The Fund seeks its objective by investing, under normal market conditions,
at least 65% of its total assets in  securities  that provide the  potential for
growth  and  offer  income,  such  as  dividend-paying   stocks  and  securities
convertible  into common  stock.  The portion of the Fund's  assets  invested in
equity  securities  and in debt  securities  may vary  from  time to time due to
changes  in  interest  rates and  economic  and other  factors.  The Fund is not
designed for investors  seeking a steady flow of income  distributions.  Rather,
the Fund's  policy of investing in income  producing  securities  is intended to
provide  investors with a more  consistent  total return than may be achieved by
investing solely in growth stocks.

      The  convertible  debt  securities  in which the Fund may  invest  are not
subject to any limitations as to ratings and may include high, medium, lower and
unrated  securities.  Although the Fund may invest up to 20% of its total assets
in convertible  debt securities  rated below Baa by Moody's  Investors  Service,
Inc.  ("Moody's") or BBB by Standard & Poor's  Ratings Group ("S&P")  (so-called
"junk bonds") (including convertible debt securities that have been downgraded),
or in unrated  convertible  debt  securities  that are of comparable  quality as
determined by First Investors  Management Company,  Inc. ("FIMCO" or "Adviser"),
it does not  anticipate  investing  more than 5% of its total net assets in such
securities in the coming year.  Convertible debt securities rated lower than BBB
by S&P or Baa by Moody's,  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 "Debt  Securities,"  below,  and Appendix A for a
description of convertible debt security ratings.

      The  Fund  may  invest  up to 35% of its  total  assets  in the  following
instruments:  money market  instruments,  including  U.S. bank  certificates  of
deposit, bankers' acceptances,  commercial paper issued by domestic corporations
and repurchase agreements; fixed income securities, including 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  rated at least Baa by Moody's or BBB
by S&P, commonly known as "investment  grade  securities" or unrated  securities
that are of comparable  quality as  determined by the Adviser;  and common stock
and securities  convertible into common stock of companies that are not paying a
dividend if there exists the potential  for growth of capital or future  income.
It is the Fund's policy to attempt to sell,  within a reasonable time period,  a
debt  security  which has been  downgraded  below  investment  grade (other than
convertible  debt  securities,  as  previously  discussed),  provided  that such
disposition is in the best interests of the Fund and its shareholders. See "Debt
Securities,"   below,  and  Appendix  A  for  a  description  of  corporate  and
convertible debt security ratings.

      Because the Fund invests in bonds and convertible debt  securities,  it is
subject to interest rate risk.  The market value of a bond or  convertible  debt
security is affected by changes in interest rates. When interest rates rise, the
market value of a bond declines.  When interest rates decline,  the market value
of a bond increases.  Generally,  the longer a bond's maturity,  the greater its
sensitivity to interest rates. A bond's value can also be affected by changes in
the credit rating of the financial condition of its issuer.


                                       2



      The Fund's  investments  in bonds are also subject to the risk of default.
This risk is greater in the case of its  investments in high yield bonds.  These
bonds generally  provide higher income in an effort to compensate  investors for
their  higher risk of default  (failure to make  required  interest or principal
payments).  High yield bond issuers  include small or  relatively  new companies
lacking the history or capital to merit  investment  grade  status,  former blue
chip companies  downgraded  because of financial  problems,  and companies which
have elected to borrow heavily.

      Generally,  the  prices of equity  securities  could be  affected  by such
factors as a change in a company's  earnings,  fluctuations in interest rates or
changes  in the rate of  economic  growth.  To the  extent  the Fund  invests in
issuers  with small  capitalizations,  the Fund would be subject to greater risk
than may be involved in  investing  in  companies  with larger  capitalizations.
These securities  generally include newer and less seasoned  companies which are
more speculative than securities issued by well-established issuers. Other risks
may  include  less  available  information  about the  issuer,  the absence of a
business history or historical  pattern of performance,  as well as normal risks
which accompany the development of new products, markets or services.

      The Fund  may  invest  up to 20% of its  total  assets  in  securities  of
well-established  foreign companies in developed countries which are traded on a
recognized domestic or foreign securities exchange.  Foreign investments involve
additional  risks,  including  currency  fluctuations,   political  instability,
differences in financial reporting  standards,  and less stringent regulation of
securities  markets.  Although such foreign  securities  may be  denominated  in
foreign  currencies,  the Fund  anticipates  that the  majority  of its  foreign
investments  will  be  in  American  Depository  Receipts  ("ADRs")  and  Global
Depository  Receipts ("GDRs").  While the Fund may invest in both ADRs and GDRs,
it  currently  intends to invest  only in ADRs.  See  "Foreign  Securities"  and
"American Depository Receipts and Global Depository  Receipts," below. While the
Fund may enter into forward currency contracts to protect against uncertainty in
the level of future  exchange  rates,  it does not currently  intend to use this
authority.  In any event,  the Adviser will not attempt to time actively  either
short-term  market  trends or  short-term  currency  trends in any  market.  See
"Futures and Options Strategies."

      The Fund may also borrow  money for  temporary  or  emergency  purposes in
amounts not exceeding 5% of its net assets,  make loans of portfolio  securities
and invest in securities issued on a "when-issued" or delayed delivery basis. In
addition,  in any period of market  weakness or of uncertain  market or economic
conditions,  the Fund may establish a temporary  defensive  position to preserve
capital by having up to 100% of its assets  invested in short-term  fixed income
securities or retained in cash or cash equivalents.

      Additional  restrictions  are set forth in the  "Investment  Restrictions"
section of this SAI.

MID-CAP OPPORTUNITY FUND

      The Fund seeks its  objective of long-term  capital  growth by  investing,
under  normal  market  conditions,  at least 65% of its  total  assets in common
stocks of companies that have a medium market capitalization.  The Fund seeks to
invest in equity  securities that the Adviser believes  demonstrate  outstanding
growth records and potential based on the Adviser's  fundamental analysis of the
company.  The  companies in which the Fund invests will be primarily  those with


                                       3



medium  market  capitalization  (often  known as  "mid-cap").  The Fund  defines
mid-cap  stocks as those  with  market  capitalizations  of less than 90% of the
weighted  market  capitalization  of the  Standard  & Poor's 400  Mid-Cap  Index
(currently  $7.6 billion).  The Fund's  definition of "mid-cap" will change with
market  conditions.  Market  capitalization  is  the  total  market  value  of a
company's  outstanding  common  stock.  Growth  equity  securities  tend to have
above-average  price to earnings  ratios and  less-than-average  current  yields
compared to non-growth  equity  securities.  The payment of dividend income will
not be a primary consideration in the selection of equity investments.

      The Fund's focus on growth stocks  increases  the potential  volatility of
its share price.  Growth  stocks are stocks of  companies  which are expected to
increase their earnings faster than the overall market.  If expectations are not
met,  the prices of these  stocks may  decline  drastically  even if earnings do
increase.  Investments in growth  companies may lack the dividend yield that can
cushion stock prices in market downturns.

      The Fund may invest up to 35% of its total assets in small  capitalization
stocks,  large  capitalization  stocks, U.S. Government  Obligations,  including
mortgage-backed  securities,  and  investment  grade debt  securities or unrated
securities  that  are of  comparable  quality  as  determined  by  the  Adviser,
repurchase  agreements,  investment  grade  securities  convertible  into common
stock,  warrants  to  purchase  common  stock and zero  coupon  and  pay-in-kind
securities.  The Fund may invest up to 15% of its total assets in ADRs. The Fund
may borrow money for temporary or emergency  purposes in an amount not exceeding
5% of its net assets  and  invest in  securities  issued on a  "when-issued"  or
delayed delivery basis. 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 that has been downgraded  below  investment
grade.  No more than 5% of the Fund's net assets  will  remain  invested in such
downgraded  securities.  See "Debt  Securities,"  below,  and  Appendix  A for a
description of corporate bond ratings.

      To a limited degree,  the Fund may invest in foreign  securities.  Foreign
investments involve additional risks, including currency fluctuations, political
instability,  differences in financial reporting  standards,  and less stringent
regulation of securities markets.

      In any  period of  market  weakness  or of  uncertain  market or  economic
conditions,  the Fund may establish a temporary  defensive  position to preserve
capital by having all or part of its assets invested in short-term  fixed income
securities or retained in cash or cash  equivalents,  including U.S.  Government
Obligations,  mortgage-backed securities, bank certificates of deposit, bankers'
acceptances and commercial paper issued by domestic corporations.

      Additional  restrictions  are set forth in the  "Investment  Restrictions"
section of this SAI.

UTILITIES INCOME FUND

      The Fund seeks its objective by investing, under normal market conditions,
at least  65% of its  total  assets  in  equity  and debt  securities  issued by
companies primarily engaged in the public utilities industry.  Equity securities
in which the Fund may invest include common stocks, preferred stocks, securities
convertible  into common  stocks or  preferred  stocks and  warrants to purchase
common or preferred stocks. Debt securities in which the Fund may invest will be
rated at the time of  investment  at least A by Moody's  or S&P or, if  unrated,


                                       4



will be of comparable quality as determined by the Adviser. The Fund's policy is
to attempt to sell,  within a  reasonable  time period,  a debt  security in its
portfolio which has been downgraded  below A, provided that such  disposition is
in the best interests of the Fund and its shareholders.  See "Debt  Securities,"
below,  and Appendix A for a description of corporate bond ratings.  The portion
of the Fund's assets  invested in equity  securities and in debt securities will
vary from time to time due to changes in interest  rates and  economic and other
factors.

      The Fund defines  utilities  companies as those that are primarily engaged
in the ownership or operation of facilities  used to provide  electricity,  gas,
water or telecommunications  (including telephone,  telegraph and satellite, but
not public  broadcasting or cable  television).  For these purposes,  "primarily
engaged" means that (1) more than 50% of the company's assets are devoted to the
ownership or operation of one or more facilities as described above, or (2) more
than 50% of the  company's  operating  revenues are derived from the business or
combination of any of the businesses  described  above.  It should be noted that
based on this  definition,  the Fund may  invest  in  companies  which  are also
involved to a significant degree in non-public utilities activities.

      Utilities  stocks  generally  offer  dividend  yields that exceed those of
industrial  companies  and their prices tend to be less  volatile than stocks of
industrial  companies.  However,  utilities  stocks can still be affected by the
risks of the stock of industrial companies. The Fund has a policy to concentrate
its investments in the securities of companies in the public utilities industry.
Because the Fund concentrates its investments in public utilities companies, the
value of its shares  will be  especially  affected  by factors  peculiar  to the
utilities industry,  and may fluctuate more widely than the value of shares of a
fund that invests in a broader range of industries. See "Utilities Industries."

      The  Fund  may  invest  up to 35% of its  total  assets  in the  following
instruments: debt securities (rated at least A by Moody's or S&P) and common and
preferred  stocks  of  non-utilities  companies;  U.S.  Government  Obligations;
mortgage-backed  securities;  cash; and money market  instruments  consisting of
prime  commercial  paper,  bankers'  acceptances,  certificates  of deposit  and
repurchase  agreements.  The Fund may invest in securities on a "when-issued" or
delayed  delivery  basis and make loans of  portfolio  securities.  The Fund may
invest up to 10% of its  total  assets in ADRs.  The Fund may  borrow  money for
temporary or emergency  purposes in amounts not  exceeding 5% of its net assets.
The Fund also may invest in zero coupon and pay-in-kind securities. In addition,
in any period of market weakness or of uncertain market or economic  conditions,
the Fund may  establish a temporary  defensive  position to preserve  capital by
having up to 100% of its assets invested in short-term  fixed income  securities
or retained in cash or cash equivalents.

      Additional  restrictions  are set forth in the  "Investment  Restrictions"
section of this SAI.

BLUE CHIP FUND

      The Fund seeks its objective by investing, under normal market conditions,
at least 65% of its total assets in common stocks of "Blue Chip"  companies 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


                                       5



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.  It is the Fund's policy
to remain  relatively  fully  invested  in equity  securities  under all  market
conditions  rather than to attempt to time the market by maintaining  large cash
or fixed-income  securities positions when market declines are anticipated.  The
Fund is  appropriate  for investors who are  comfortable  with a fully  invested
stock portfolio.

      The Fund defines Blue Chip companies as those  companies that are included
in the S&P 500.  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  Microsoft  Corp.,  General  Electric Co.,
Pepsico Inc. and Bristol-Myers Squibb Co.

      The Fund  primarily  invests  in  stocks of  growth  companies.  These are
companies  which are expected to increase their earnings faster than the overall
market.  If earnings  expectations  are not met,  the prices of these stocks may
decline  substantially  even if  earnings  do  increase.  Investments  in growth
companies  may lack the dividend  yield that can cushion  stock prices in market
downturns.

      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),  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 or BBB by 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 10% of its total  assets in
ADRs, enter into repurchase agreements and make loans of portfolio securities.

      Additional  restrictions  are set forth in the  "Investment  Restrictions"
section of this SAI.

SPECIAL SITUATIONS FUND

      The Fund seeks its objective by investing, under normal market conditions,
at least 65% of its total  assets in the common  stock of  companies  with small
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  and 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,  including  companies  with  larger  market  capitalization  if the Fund
determines that they present good opportunities for growth.

      The 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


                                       6



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 market  capitalizations (often knows as
"small-cap."   The  Fund   defines   small-cap   stocks  as  those  with  market
capitalizations  of less than 90% of the weighted market  capitalization  of the
Standard & Poor's 600 Small-Cap Index.  The Fund's  definition of small-cap will
change with market  conditions.  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.

      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.
Securities  of these  companies  may have more  potential  for  growth  but also
greater risk than that normally  associated  with larger,  older or better-known
companies.

      Investments in securities of companies  with small market  capitalizations
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 market
capitalizations  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 market  capitalizations  are not as
broadly traded as those of companies with larger market  capitalizations,  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 the Fund's  investments  are expected to be  securities of
U.S.  issuers  that  are  traded  on a  U.S.  securities  exchange,  or  in  the
over-the-counter  ("OTC")  market.  The depth and  liquidity  of the  market for
small-cap stocks may vary from time to time and from security to security.

      The 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


                                       7



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"  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
and enter into repurchase agreements.

      Additional  restrictions  are set forth in the  "Investment  Restrictions"
section of this SAI.

TOTAL RETURN FUND

      The Fund seeks its objective by employing a flexible  investment  strategy
which emphasizes investments in stocks, bonds and money market instruments.  The
percentage  of the  portfolio  that is  allocated  to any one class of assets is
flexible rather than fixed. On a regular basis,  the Fund reviews and determines
whether  to  adjust  its  asset  allocations  based  upon its  views  on  market
conditions,  the relative values of the asset classes and economic  trends.  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 debt
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 rated Baa or better by Moody's or BBB or better by
S&P 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 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 and may invest up to 10% of its net assets in securities  issued on a
when-issued or delayed delivery basis. 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 "High Yield  Securities"  and Appendix A for a description  of corporate and
municipal bond ratings.

      The equity  securities in which the Fund  generally  invests  include both
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 to earnings ratios and less-than-average current yields
as compared to other equity  securities.  Value equity  securities  tend to have
below average price to 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 may
invest  in newer  and less  seasoned  companies  with  small  to  medium  market
capitalizations.  The Fund's  ability  to invest in  unseasoned  companies  with


                                       8



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.

      The Fund may invest up to 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  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" and "American Depository Receipts."

      Additional  restrictions  are set forth in the  "Investment  Restrictions"
section of this SAI.

GLOBAL FUND

      The Fund,  under  normal  market  conditions,  invests  in common  stocks,
preferred  stocks and bonds and other debt  obligations  issued by  companies or
governments of at least three countries, including the United States. Currently,
the  Fund  primarily  is  invested  in  common   stocks.   The  emphasis  is  on
high-quality,  medium  to large  capitalization  companies  with an  established
market throughout the world and the United States, with opportunistic investment
in smaller  companies  and/or emerging  markets.  Investments in foreign markets
involve  special  risks and  considerations  which are in  addition to the usual
risks inherent in domestic investments. See "Foreign Securities," below.

      The Fund may purchase securities traded on any foreign stock exchange. The
Fund may also purchase  ADRs and GDRs.  See  "American  Depository  Receipts and
Global  Depository  Receipts,"  below. The Fund also may invest up to 25% of its
total assets in unlisted securities of foreign issuers; provided,  however, that
no  more  than  10% of the  value  of its net  assets  may be  invested  in such
securities  with a limited  trading  market.  The  investment  standards for the
selection of unlisted  securities  are the same as those used in the purchase of
securities  traded on a stock exchange.  The Fund will invest in debt securities
rated in the three highest  rating  categories  by either  Moody's or S&P or, if
unrated,  determined  to be  of  comparable  quality  by  Wellington  Management
Company,  LLP ("WMC" or the  "Subadviser").  See Appendix A for a description of
such bond ratings.

      The  Fund  may  invest  in  securities  convertible  into  common  stocks,
preferred stocks, warrants and repurchase agreements and may purchase securities
on a when-issued or delayed  delivery basis.  The Fund also may borrow money for
temporary or emergency  purposes in amounts not exceeding 5% of its total assets
and make loans of portfolio  securities.  For temporary defensive purposes,  the
Fund may invest up to 100% of its total  assets in U.S.  Government  obligations
and cash equivalents denominated in U.S. dollars.

      Additional  restrictions  are set forth in the  "Investment  Restrictions"
section of this SAI.


                                       9



                               INVESTMENT POLICIES

      AMERICAN DEPOSITORY RECEIPTS AND GLOBAL DEPOSITORY RECEIPTS. Each Fund may
invest in ADRs and GLOBAL FUND and GROWTH & INCOME FUND may invest in GDRs. ADRs
typically are issued by a U.S.  bank or trust company and evidence  ownership of
the underlying securities of foreign issuers. Generally, ADRs 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  underlying
securities  into which they may be  converted.  ADRs are  subject to many of the
risks  inherent in investing in foreign  securities.  ADRs are not considered by
the Fund to be foreign securities.  ADRs may be purchased through "sponsored" or
"unsponsored"  facilities.  A sponsored  facility is established  jointly by the
issuer of the  underlying  security and a depository,  whereas a depository  may
establish an unsponsored  facility  without  participation  by the issuer of the
depository security.  Holders of unsponsored  depository receipts generally bear
all the costs of such  facilities and the depository of an unsponsored  facility
frequently  is under no  obligation  to  distribute  shareholder  communications
received  from the issuer of the  deposited  security or to pass through  voting
rights to the holders of such receipts of the deposited securities.

      GDRs are issued globally and evidence a similar  ownership  arrangement to
ADRs.  Generally,  GDRs are not denominated in U.S. dollars and are designed for
trading in non-U.S.  securities markets.  Like ADRs, GDRs may not necessarily be
denominated  in the same currency as the underlying  securities  into which they
may be  converted.  As with  ADRs,  the  issuers  of the  securities  underlying
unsponsored GDRs are not obligated to disclose material  information in the U.S.
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  GDRs.  GDRs  also  involve  the risks of other  investments  in  foreign
securities. For purposes of certain investment limitations,  GDRs are considered
to be foreign securities by the Funds.

      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").  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


                                       10



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 Adviser 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.

      DEBT SECURITIES. Each Fund may invest in debt securities. 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
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.
Credit risk is the risk that adverse  changes in economic  conditions can affect
an issuer's  ability to pay principal  and  interest.  GLOBAL FUND may invest in
debt  securities  that, at the time of purchase,  are rated in the three highest
rating  categories  by at least one  nationally  recognized  statistical  rating
organization  rating that  security,  such as S&P and  Moody's,  or, if unrated,
deemed to be of comparable quality by the Subadviser. The Adviser or, for GLOBAL
FUND,  its  Subadviser,  continually  monitor  the  investments  in each  Fund's
portfolio and carefully  evaluates on a case-by-case basis whether to dispose of
or retain a debt security that has been downgraded.

      FOREIGN  GOVERNMENT  OBLIGATIONS.  GLOBAL  FUND and TOTAL  RETURN FUND may
invest in foreign government obligations, which generally consist of obligations
supported by national,  state or  provincial  governments  or similar  political
subdivisions. Investments in foreign government debt obligations involve special
risks.  The issuer of the debt may be unable or  unwilling  to pay  interest  or
repay principal when due in accordance with the terms of such debt, and the Fund
may have limited legal resources in the event of default.  Political conditions,
especially  a  sovereign  entity's  willingness  to meet  the  terms of its debt
obligations, are of considerable significance.

      FOREIGN  SECURITIES.  GLOBAL  FUND may sell a  security  denominated  in a
foreign  currency and retain the  proceeds in that foreign  currency to use at a
future date (to purchase other  securities  denominated in that currency) or the
Fund may buy foreign  currency  outright to purchase  securities  denominated in
that foreign currency at a future date. Investing in foreign securities involves
more risk than investing in securities of U.S. companies.  GLOBAL Fund currently
does not intend to hedge its  foreign  investments  against  the risk of foreign
currency fluctuations.  Accordingly,  changes in the value of foreign currencies
can  significantly  affect the Fund's share price,  irrespective of developments
relating to the issuers of securities  held by the Fund.  In addition,  the Fund
will be affected by changes in exchange control  regulations and fluctuations in
the relative rates of exchange between the currencies of different  nations,  as
well as by economic and political developments.  Other risks involved in foreign
securities  include  the  following:   there  may  be  less  publicly  available
information about foreign  companies  comparable to the reports and ratings that
are published  about companies in the United States;  foreign  companies are not
generally  subject to  uniform  accounting,  auditing  and  financial  reporting
standards and  requirements  comparable to those  applicable to U.S.  companies;


                                       11



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 GLOBAL FUND held in
foreign countries.

      GLOBAL FUND may also invest in the securities of issuers in less developed
foreign   countries.   The  Fund's   investments  in  emerging  markets  include
investments  in  countries  whose  economies or  securities  markets are not yet
highly developed.  Special considerations  associated with these investments (in
addition to the  considerations  regarding  foreign  investments  generally) may
include, among others, greater political uncertainties,  an economy's dependence
on revenues from particular  commodities or on international  aid or development
assistance, currency transfer restrictions, a limited number of potential buyers
for  such  securities  and  delays  and  disruptions  in  securities  settlement
procedures.

      HIGH YIELD SECURITIES-RISK  FACTORS. BLUE CHIP FUND, TOTAL RETURN FUND and
GROWTH & INCOME FUND may invest in high yield,  high risk  securities  (commonly
referred to as "junk bonds") ("High Yield  Securities").  High Yield  Securities
are subject to greater  risks than those that are present  with  investments  of
higher  grade  securities,  as  discussed  below.  These  risks  also  apply  to
lower-rated and certain unrated convertible securities.

            EFFECT OF INTEREST  RATE AND  ECONOMIC  CHANGES.  Debt  obligations,
including convertible debt securities, 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.  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 significant 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 the Fund's net
asset value.  Further,  if the issuer of a security  owned by the Fund defaults,
the Fund might incur additional expenses to seek recovery.

            Generally,  when interest  rates rise,  the value of fixed rate debt
obligations,  including High Yield Securities,  tends to decrease; when interest
rates fall, the value of fixed rate debt  obligations  tends to increase.  If an
issuer of a High  Yield  Security  containing  a  redemption  or call  provision
exercises either provision in a declining  interest rate market,  the Fund would
have to replace  the  security,  which could  result in a  decreased  return for
shareholders.  Conversely, if the 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 the Fund's  portfolio and the Adviser's  careful analysis of
prospective  portfolio  securities helps to minimize the impact of a decrease in
value of a particular security or group of securities in the 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


                                       12



economic  expansion.  At times in the past, the prices of many  lower-rated debt
securities  have 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 the Fund's  ability to sell such  securities at
reasonable  prices in  response  to  changes  in the  economy  or the  financial
markets.  Adverse  publicity and investor  perceptions,  whether or not based on
fundamental analysis,  may also decrease the values and liquidity of lower rated
securities, especially in a thinly traded market.

            CREDIT RATINGS.  The credit ratings issued by credit rating services
may not fully  reflect  the true risks of an  investment.  For  example,  credit
ratings typically  evaluate the safety of principal and interest  payments,  not
market value risk, of High Yield  Securities.  Also,  credit rating agencies may
fail to change on a timely basis a credit rating to reflect  changes in economic
or company conditions that affect a security's market value.

            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 the 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 Directors or Trustees,  as
applicable (hereinafter referred to as the "Board" or "Directors") 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.

      LOANS OF  PORTFOLIO  SECURITIES.  While they have no present  intention of
doing so in the coming year, GROWTH & INCOME FUND, UTILITIES INCOME FUND, GLOBAL
FUND,  BLUE CHIP FUND and TOTAL  RETURN 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 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 a 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.  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.


                                       13



      MONEY   MARKET   INSTRUMENTS.   Each  Fund  may  invest  in  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 are made only with  domestic
institutions with assets in excess of $500 million.

      MORTGAGE-BACKED  SECURITIES.  BLUE CHIP FUND, TOTAL RETURN FUND,  GROWTH &
INCOME FUND,  UTILITIES  INCOME FUND and MID-CAP  OPPORTUNITY 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, generally represent both principal and interest.  Although the
underlying  mortgage loans are for specified  periods of time, such as twenty to
thirty years, the borrowers can, and typically do, repay them sooner.  Thus, the
security holders frequently receive prepayments of principal, in addition to the
principal  which is part of the  regular  monthly  payments.  A borrower is more
likely to prepay a mortgage  which  bears a  relatively  high rate of  interest.
Thus, in times of declining interest rates, some higher yielding mortgages might
be repaid  resulting  in larger cash  payments  to 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 by changing the rates at which homeowners  refinance
mortgages.  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. In the case of GNMA
Certificates,  principal is paid back  monthly by the borrower  over the term of
the loan rather than returned in a lump sum at maturity.  GNMA Certificates that
the Fund purchase 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


                                       14



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.

            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.

      MUNICIPAL  BONDS.  TOTAL  RETURN  FUND  may  invest  in  municipal  bonds.
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.


                                       15



Generally,  the value of municipal bonds varies inversely to changes in interest
rates. See Appendix A for a description of municipal bond ratings. 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.  Each Fund may invest in  preferred  stock.  A preferred
stock  is a  security  which  has 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.  While each Fund has no present intention of doing
so in the coming  year,  it may invest in  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.  Although  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 Funds currently do
not intend to do so. 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  SECURITIES  AND  ILLIQUID  INVESTMENTS.  None of the Funds may
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  Act"),  which the  Fund's  Board or the  Adviser  has
determined under Board-approved guidelines are liquid.


                                       16



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

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

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

      Over-the-counter  ("OTC") options and their underlying collateral are also
considered  illiquid  investments.  UTILITIES  INCOME FUND,  BLUE CHIP FUND, AND
TOTAL RETURN FUND may invest in options  though these Funds have no intention of
investing  in  options  in the coming  year.  The  assets  used as cover for OTC
options  written  by a Fund  would not be  considered  illiquid  unless  the OTC
options are sold to qualified  dealers who agree that a Fund may  repurchase any
OTC option it writes at a maximum  price to be calculated by a formula set forth
in the option  agreement.  The cover for an OTC option  written  subject to this
procedure  would be  considered  illiquid  only to the extent  that the  maximum
repurchase price under the formula exceeds the intrinsic value of the option

      U.S. GOVERNMENT  OBLIGATIONS.  BLUE CHIP FUND, TOTAL RETURN FUND, GROWTH
&  INCOME  FUND  and  UTILITIES  INCOME  FUND may  invest  in U.S.  Government
Obligations.   U.S.  Government   Obligations   include:   (1)  U.S.  Treasury
obligations  (which differ only in their interest rates,  maturities and times
of issuance),  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 FHA,  GNMA,  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 FMHA and the  Small  Business  Administration).  The
range of maturities of U.S. Government  Obligations is usually three months to
thirty years.


                                       17



      UTILITIES  INDUSTRIES.  The  UTILITIES  INCOME FUND  invests  primarily in
utilities companies.  Many utilities companies,  especially electric and gas and
other energy-related utilities companies,  have historically been subject to the
risk of increases in fuel and other operating  costs,  changes in interest rates
on borrowings for capital improvement  programs,  changes in applicable laws and
regulations, and costs and operating constraints associated with compliance with
environmental regulations.

      In recent years, regulatory changes in the United States have increasingly
allowed  utilities  companies to provide  services and  products  outside  their
traditional  geographical  areas and lines of  business,  creating  new areas of
competition with the utilities  industries.  This trend toward  deregulation and
the emergence of new entrants have caused  non-regulated  providers of utilities
services to become a significant part of the utilities  industries.  The Adviser
believes  that the  emergence of  competition  and  deregulation  will result in
certain  utilities  companies  being  able to earn more than  their  traditional
regulated  rates of  return,  while  others  may be forced to defend  their core
business from increased competition and may be less profitable.

      Certain utilities,  especially gas and telephone utilities, have in recent
years been affected by increased  competition,  which could adversely affect the
profitability of such utilities companies.  In addition,  expansion by companies
engaged in telephone  communication  services of their non-regulated  activities
into other businesses  (such as cellular  telephone  services,  data processing,
equipment retailing,  computer services and financial services) has provided the
opportunity  for  increases in earnings and  dividends at faster rates than have
been  allowed  in  traditional  regulated  businesses.   However,  technological
innovations  and other  structural  changes  also  could  adversely  affect  the
profitability of such companies. Although the Adviser seeks to take advantage of
favorable investment opportunities that may arise from these structural changes,
there can be no assurance that the Fund will benefit from any such changes.

      Foreign  utilities  companies  may be more  heavily  regulated  than  U.S.
utilities companies,  which may result in increased costs or otherwise adversely
affect the operations of such  companies.  The  securities of foreign  utilities
companies also have lower dividend  yields than U.S.  utilities  companies.  The
Fund's   investments  in  foreign  issuers  may  include   recently   privatized
enterprises,  in which the Fund's  participation  may be  limited  or  otherwise
affected  by  local  law.  There  can  e  no  assurance  that  governments  with
privatization  programs will continue such programs or that  privatization  will
succeed in such countries.

      Because   securities  issued  by  utilities   companies  are  particularly
sensitive to movement in interest rates, the equity securities of such companies
are more affected by movements in interest rates than are the equity  securities
of other companies.

      Each of these risks could adversely  affect the ability and inclination of
public  utilities  companies  to declare  or pay  dividends  and the  ability of
holders of common  stock,  such as UTILITIES  INCOME FUND,  to realize any value
from the assets of the company upon liquidation or bankruptcy.

      WARRANTS. Each Fund except BLUE CHIP 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.


                                       18



Warrants may be either perpetual or of limited duration. There is a greater risk
that warrants might drop in value at a faster rate than the underlying stock.

      WHEN-ISSUED  SECURITIES.  GROWTH & INCOME FUND,  UTILITIES INCOME FUND AND
TOTAL RETURN FUND may invest up to 10%, and MID-CAP  OPPORTUNITY FUND and GLOBAL
FUND may  invest up to 5%, of each of its net assets in  securities  issued on a
when-issued  or delayed  delivery basis at the time the purchase is made. A Fund
generally  would not pay for such  securities or start earning  interest on them
until  they  are  issued  or  received.  However,  when  a Fund  purchases  debt
obligations on a when-issued basis, it assumes the risks of ownership, including
the  risk of price  fluctuation,  at the  time of  purchase,  not at the time of
receipt.  Failure of the issuer to deliver a security purchased by 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 a Fund  enters  into a
commitment  to purchase  securities  on a when-issued  basis,  it  establishes a
separate account with its custodian consisting of cash or liquid high-grade debt
securities  equal to the  amount of 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 the value of the  account is 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 the sale of the
when-issued  securities  themselves  although this is not  ordinarily  expected.
Securities  purchased on a when-issued basis are subject to the risk that yields
available in the market,  when delivery takes place, may be higher than the rate
to be  received on the  securities  a Fund is  committed  to  purchase.  Sale of
securities in the segregated  account or sale of the when-issued  securities may
cause the realization of a capital gain or loss.

      ZERO  COUPON  AND  PAY-IN-KIND   SECURITIES.   MID-CAP  OPPORTUNITY  FUND,
UTILITIES  INCOME FUND and TOTAL  RETURN FUND may each invest 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 quality. Original issue discount
earned each year on zero coupon  securities  and the  "interest" on  pay-in-kind
securities  must be  accounted  for by the Fund that  holds the  securities  for
purposes of determining  the amount it must  distribute that year to continue to
qualify for tax treatment as a regulated  investment company. See "Taxes." Thus,
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.  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.


                                       19



                         FUTURES AND OPTIONS STRATEGIES

      GLOBAL FUND is the only Fund that currently  anticipates  using  financial
futures or  options as part of its  investment  strategy.  Other  Funds that are
authorized  to purchase and sell futures and option  contracts  but at this time
have no intention of doing so for the coming year include: UTILITIES INCOME FUND
and TOTAL RETURN FUND which may purchase and sell futures  contracts and options
on futures contracts to hedge their portfolios,  and UTILITIES INCOME FUND, BLUE
CHIP  FUND,  and TOTAL  RETURN  FUND  which may  purchase  and sell  options  on
securities and indices to enhance income. Certain special characteristics of and
risks  associated with using these  instruments are discussed below. In addition
to the investment  guidelines  (described below) adopted by each Fund's Board to
govern a Fund's investments in futures and options,  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 and the  Commodities  Futures  Trading  Commission
("CFTC"). In addition, a Fund's ability to use these instruments will be limited
by tax considerations. See "Taxes."

      To the extent that they participate in the options or futures markets, the
Funds will incur investment risks and transaction costs to which the Funds 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 Funds may leave the Funds in a worse
position than if such  strategies  were not used. The Funds 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;  and (4) the possible absence of a liquid
secondary market for any particular instrument at any time.

      FUTURES AND  OPTIONS ON FUTURES  STRATEGIES.  GLOBAL  FUND  expects to use
stock  index  futures  contracts  and  options  thereon  in  anticipation  of  a
significant  market or market  sector  advance.  The  purchase  of a stock index
futures contract affords a hedge against not  participating in such advance at a
time when the Fund is not fully  invested.  Such purchase of a futures  contract
would serve as a temporary  substitute  for the  purchase of  individual  stocks
which may then be purchased in a orderly fashion.  Further,  stock index futures
contracts and options thereon may be purchased to maintain a desired  percentage
of the Fund  invested in stocks in the event of a large cash flow into the Fund,
or to generate additional income from cash held by the Fund. Stock index futures
and options thereon may also be used to adjust country  exposure.  When the Fund
purchases a stock index  futures  contract on foreign  stocks,  an  accompanying
foreign  currency  forward or foreign  currency  futures contract is executed to
provide the same currency  exposure  that would result from directly  owning the
underlying  foreign  stocks.  Failure to obtain  such  currency  exposure  would
constitute a hedge back into U.S.  dollars  with  respect to such index  futures
positions.  The value of the Fund's futures positions shall not exceed 5% of the
total assets in the Fund's portfolio.

      SPECIAL  CHARACTERISTICS  AND RISKS OF FUTURES  TRADING.  No price is paid
upon  entering  into futures  contracts.  Instead,  upon entering into a futures
contract, the Funds are required to deposit with their custodian in a segregated


                                       20



account in the name of the  futures  broker  through  which the  transaction  is
effected  and  amount  of cash,  U.S.  Government  securities  or other  liquid,
high-grade  debt  instruments  generally  equal to 3%-5% or less of the contract
value.  This amount is known as  "initial  margin."  When  writing a call or put
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.  A
Fund is also  obligated to make initial and  variation  margin  payments when it
writes options on futures contracts.

      Holders and  writers of futures  positions  and options  thereon can enter
into offsetting closing transactions, 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 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, currency and interest rate markets, which requires different
skills and  techniques  than  predicting  changes  in the  prices of  individual
securities.  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 underlying  instruments or currencies.  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


                                       21



underlying instruments or currencies,  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 movement in the price of the  instruments  or currencies  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 or currencies 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 or currencies  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 and related options may be closed out only
on the  exchange  or board of trade that  provides a  secondary  market for such
futures  contracts  or related  options.  Although a Fund intends to purchase or
sell futures  contracts  and related  options only on the exchanges or boards of
trade where there appears to be a liquid  secondary  market for such futures and
related  options,  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.

      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 s
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 s 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 securities or currencies being hedged.

      A 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, a 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.

      SPECIAL RISKS RELATED TO FOREIGN  CURRENCY  FUTURES  CONTRACTS AND RELATED
OPTIONS. Buyers and sellers of foreign currency futures contracts are subject to
the same risks that apply to the use of futures generally.  Further,  settlement
of a foreign  currency futures contract may occur within the country issuing the
underlying  currency.  In that case, a Fund must accept or make  delivery of the
underlying foreign currency in accordance with any U.S. or foreign  restrictions
or regulations regarding the maintenance of foreign banking arrangements by U.S.
residents, and may be required to pay any fees, taxes or charges associated with
such delivery that are assessed in the issuing country.


                                       22



      Options  on  foreign  currency  futures   contracts  may  involve  certain
additional  risks.  Trading of such  options is  relatively  new. The ability to
establish and close out positions on such options is subject to the  maintenance
of a liquid secondary  market.  To reduce this risk, a Fund will not purchase or
write options on foreign  currency  futures  contracts  unless and until, in the
Adviser's opinion,  the market for such options has developed  sufficiently that
the risks in  connection  with such  options are not  greater  than the risks in
connection with transactions in the underlying  futures  contracts.  Compared to
the purchase or sale of foreign currency futures contracts, the purchase of call
or put  options  thereon  involves  less  potential  risk to a Fund  because the
maximum  amount at risk is the premium  paid for the options  (plus  transaction
costs).  However,  there may be circumstances when the purchase of a call or put
option on a foreign  currency  futures  contract would result in a loss, such as
when there is no  movement  in the price of the  underlying  currency or futures
contract.

      FUTURES  GUIDELINES.  To  the  extent  that  a Fund  enters  into  futures
contracts  or options  thereon  other than for bona fide  hedging  purposes  (as
defined by the CFTC),  the  aggregate  initial  margin and premiums  required to
establish these positions  (excluding the  in-the-money  amount for options that
are  in-the-money at the time of purchase) will not exceed 5% of the liquidation
value of the Fund's portfolio,  after taking into account unrealized profits and
losses on any  contracts  into which the Fund has entered.  This policy 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.

      COVER FOR FUTURES AND OPTIONS STRATEGIES. No Fund will use leverage in its
futures and options  strategies.  No Fund will write options or purchase or sell
futures contracts unless it owns either (1) an offsetting  ("covered")  position
in  securities,  or other  options or futures  contracts  or (2) cash and liquid
securities  with a  value  sufficient  at  all  times  to  cover  its  potential
obligations.  A Fund will comply  with  guidelines  established  by the SEC with
respect to coverage of such  instruments by mutual funds and, if required,  will
set aside cash and liquid 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 and decrease a Fund's liquidity.

      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 a Fund  wishes to  terminate  its  obligation  to sell
securities under a call option it has written, a 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.

      The value of an option  position  will reflect,  among other  things,  the
current  market price of the  underlying  security or 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 index and general
market  conditions.  For this reason, the successful use of options depends upon


                                       23



the  Adviser's  ability to forecast the direction of price  fluctuations  in the
underlying  securities  or, in the case of 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 a 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 a 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 a Fund.  For  example,
because a Fund must maintain a covered position or segregate assets with respect
to any call option it writes, a 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.

      Index  options are settled  exclusively  in cash.  If a Fund  purchases an
option on an index,  the option is  settled  based on the  closing  value of the
index on the exercise  date.  Thus, a holder of an 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.

      FORWARD  CURRENCY  CONTRACTS  STRATEGIES.  GROWTH & INCOME  FUND,  SPECIAL
SITUATIONS  FUND,  TOTAL  RETURN FUND and GLOBAL  FUND may use forward  currency
contracts to protect against uncertainty in the level of future foreign currency
exchange  rates.  The GLOBAL FUND currently is the only Fund that intends to use
this  authority in the coming year.  The Funds will not  speculate  with forward
currency contracts or foreign currency exchange rates.

      While the Funds  generally  do not attempt to hedge its  foreign  security
holdings against the risk of changes in foreign currency exchange rates, it will


                                       24



use forward currency  contracts to hedge cash positions during the settlement of
transactions and in between 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, a 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 dividend or interest  payment is declared,  and the date on which such
payments are made or received.  When the Fund uses foreign currency contracts in
connection with stock index futures  contracts,  as noted previously it is doing
so to replicate the experience of owning the foreign securities and not to hedge
against foreign currency fluctuations.

      The  precise  matching of the forward  currency  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 the 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 currency  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.  Unless a Fund's
obligations  under a forward  contract are covered with positions in securities,
currencies or other forward contracts, a Fund will enter into a forward contract
only if the Fund maintains  cash or liquid assets in a segregated  account in an
amount  not less  than  the  value of a 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,  a 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 a 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 the Fund will be able to
enter  into new or  offsetting  forward  currency  contracts.  Forward  currency
contracts  also  involve a risk that the other party to the contract may fail to


                                       25



deliver currency or pay for 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.


                               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 (100% or more) generally leads to higher  transaction  costs
and may result in a greater number of taxable  transactions.  See "Allocation of
Portfolio Brokerage."

    For the fiscal year ended  September 30, 1998,  the portfolio  turnover rate
for GROWTH & INCOME FUND, MID-CAP OPPORTUNITY FUND,  UTILITIES INCOME FUND, BLUE
CHIP FUND,  SPECIAL  SITUATIONS FUND, TOTAL RETURN FUND and GLOBAL FUND was 36%,
102%,  83%,  71%,  70%,  111% and 82%,  respectively.  For the fiscal year ended
September  30,  1999,  the  portfolio  turnover  rate for GROWTH & INCOME  FUND,
MID-CAP  OPPORTUNITY  FUND,  UTILITIES  INCOME  FUND,  BLUE CHIP  FUND,  SPECIAL
SITUATIONS  FUND, TOTAL RETURN FUND and GLOBAL FUND was __%, __%, __%, __%, __%,
__% and __%, respectively.


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

      GROWTH & INCOME FUND will not:
      --------------------

      (1) 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 net  assets
(not including the amount borrowed).

      (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.


                                       26



      (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) Concentrate its investments in any particular industry.

      (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 (1) above, provided the Fund maintains asset coverage of at least 300%
for all such borrowings.

      (6) Buy or sell  commodities  or  commodity  contracts,  or real estate or
interests in real estate,  except that the Fund may purchase and sell securities
that 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  loans,  except  loans of  portfolio  securities  and  repurchase
agreements.

      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.  Securities that have
legal or  contractual  restrictions  as to resale  but have a readily  available
market and  securities  eligible  for resale under Rule 144A under the 1933 Act,
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 Directors.

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

      (3) Purchase any securities on margin.

      (4) Purchase or sell  portfolio  securities  from or to the Adviser or any
director or officer thereof or of SERIES FUND II, as principals.

      MID-CAP OPPORTUNITY FUND will not:
      ------------------------

      (1) 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 net  assets
(not including the amount borrowed).

      (2) Purchase any security (other than obligations of the U.S.  Government,
its agencies or  instrumentalities)  if as a result: (a) as to 75% of the Fund's
total assets more than 5% of such assets would then be invested in securities of
a single issuer, or (b) 25% or more of the Fund's total assets would be invested
in a single industry.


                                       27



      (3) 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) Pledge,  mortgage or  hypothecate  any of its assets,  except that the
Fund may  pledge  its  assets  to  secure  borrowings  made in  accordance  with
paragraph (1) above, provided the Fund maintains asset coverage of at least 300%
for all such borrowings.

      (5) 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.

      (6) 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.

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

      (8) Purchase any securities on margin.

      (9) Make loans, except through repurchase agreements.

      (10) Purchase or sell portfolio  securities  from or to the Adviser or any
director or officer thereof or of SERIES FUND II, as principals.

      (11) Invest in any  securities  of any issuer if, to the  knowledge of the
Fund, any officer or director of SERIES FUND II or of the Adviser owns more than
1/2 of 1% of the  outstanding  securities  of such issuer,  and such officers or
directors 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. 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 and  securities  eligible for resale under Rule 144A under the Securities
Act of  1933,  as  amended,  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 Directors.

      (2) Write, purchase or sell options (puts, calls or combinations thereof).

      UTILITIES INCOME FUND will not:
      ---------------------

      (1) 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 net  assets
(not including the amount borrowed).


                                       28



      (2)  Purchase any security (other than obligations of the U.S. Government,
its agencies or  instrumentalities) if as a result as 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)  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)  Concentrate its investments in any particular  industry,  except that
the Fund may  concentrate  its  investments  in  securities  of companies in the
public utilities industry.

      (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 (1) above, provided the Fund maintains asset coverage of at least 300%
for all such borrowings.

      (6)  Buy or sell commodities  or  commodity  contracts,  or real estate or
interests  in real  estate,  except that the Fund may  purchase and sell futures
contracts,  options on futures  contracts,  securities  that 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, except the Fund may make deposits
of margin in connection with futures contracts and options.

      (10) Make loans,  except  loans of  portfolio  securities  and  repurchase
agreements.

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

      (12) Invest in any  securities  of any issuer if, to the  knowledge of the
Fund, any officer or director of SERIES FUND II or of the Adviser owns more than
1/2 of 1% of the  outstanding  securities  of such issuer,  and such officers or
directors 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. 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 and  securities  eligible  for resale under Rule 144A under the 1933 Act,
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 Directors.

      (2) Make short sales of securities, except short sales "against the box."


                                       29



      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  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 restriction is not fundamental and may be changed
without shareholder approval.  The investment restriction provides that the Fund
will not:


                                       30



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

      SPECIAL SITUATIONS FUND will not:
      -----------------------

      (1)  Make short sales of securities  "against the box" in excess of 10% of
the Fund's total assets.

      (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.


                                       31



      (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.

      (2)  Write,  purchase   or   sell   options   (puts, calls or combinations
           thereof).

      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).

      (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.


                                       32



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

      (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  for
non-bona fide hedging  purposes if immediately  thereafter the aggregate  margin
deposits on all  outstanding  futures  contracts  positions held by the Fund and
premiums paid on  outstanding  options on futures  contracts,  after taking into
account  unrealized  profits and losses,  would exceed 5% of the market value of
the total assets of the Fund, or enter into any futures  contracts or options on
futures  contracts  if the  aggregate  amount of the  Fund's  commitments  under
outstanding  futures contracts positions and options on future contracts written
by the Fund would exceed the market value of the total assets of the Fund.

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

      (5)  Purchase securities  on margin,  except that the Fund may obtain such
short-term  credits as are  necessary  for the  clearance of  transactions,  and
provided  that  margin  payments  and other  deposits  made in  connection  with


                                       33



transactions in options, futures contracts,  swaps, forward contracts, and other
derivative  instruments shall not be deemed to constitute  purchasing securities
on margin.

      GLOBAL FUND will not:
      -----------

      (1)  Borrow  money,  except from banks and only for temporary or emergency
purposes  and then in amounts not in excess of 5% of its total  assets  taken at
cost or value, whichever is the lesser.

      (2)  Make   loans   to   other   persons,  except that the Fund's Board of
Directors may, on the request of broker-dealers or other institutional investors
that 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 total assets. The purchase of a portion of
an issue of publicly distributed debt securities is not considered the making of
a loan. This  restriction is not intended to prohibit the Fund from investing in
repurchase agreements.

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

      (4)  Invest more than 15% of the value of its total assets in warrants.

      (5)  Invest  more  than 25% of the value of its total assets in securities
of foreign issuers, other than American Depository Receipts, that are not listed
on a recognized U.S. or foreign securities exchange,  including no more than 10%
of the value of its assets in securities with a limited trading market.

      (6)  Invest 25% or more of the value of its total  assets in a  particular
industry  at one time.  The Fund,  however,  is not limited in the amount of its
total assets that may be invested in any particular country.

      (7)  Underwrite securities of other issuers, except to the extent that the
purchase and sale of restricted securities may be deemed to be underwriting.

      (8)  Purchase or sell real  estate, commodities  or  commodity  contracts.
However,  the Fund may purchase interests in real estate investment trusts whose
securities are registered under the 1933 Act and are readily marketable, and may
purchase  or  sell  options  on  securities,   securities  indices  and  foreign
currencies,  stock index  futures,  interest  rate futures and foreign  currency
futures, as well as options on such futures contracts.

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

      (10) Purchase   any  securities  on margin or sell any  securities  short,
except to make margin  deposits in connection  with the use of options,  futures
contracts and options on futures contracts.


                                       34



      (11)  Purchase  or  retain  securities  of any  issuer if any  officer  or
Director of the Fund or the Adviser owns beneficially more than 1/2 of 1% of the
securities  of such issuer and,  together  such  officers and Directors own more
than 5% of the securities of such issuer.

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

      (13)  Buy or sell puts, calls, straddles or spreads, except  with  respect
to options on  securities,  securities  indices  and  foreign  currencies  or on
futures contracts.

      (14)  Issue senior securities.

      (15)  Invest more than 5% of the value of  its total assets  in securities
of issuers that have been in business for less than three years.

      (16)  Invest in securities of other domestic investment  companies, except
in connection with a merger of another investment company, although the Fund may
purchase the securities of foreign investment  companies or investment trusts in
the open market where no  commissions  or profits  accrue to a sponsor or dealer
other than customary broker's  commission,  provided such securities do not have
an  aggregate  value (at cost) of more than 10% of the value of the Fund's total
net assets.  Investment in securities of other investment  companies may cause a
duplication of management and/or advisory fees.

      The  following  investment  restrictions  are not  fundamental  and may be
changed without prior shareholder approval.  These restrictions provide that the
Fund may 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)   Pledge, mortgage or  hypothecate  any of its 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 all such borrowings.


                         DIRECTORS/TRUSTEES AND OFFICERS

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

GLENN O.  HEAD*+  (74),  President  and  Director.  Chairman  of the  Board  and
Director,   Administrative  Data  Management  Corp.  ("ADM"),  FIMCO,  Executive
Investors Management Company,  Inc. ("EIMCO"),  First Investors Asset Management


                                       35



Company,  Inc.  ("FIAMCO"),   First  Investors  Corporation  ("FIC"),  Executive
Investors  Corporation  ("EIC")  and First  Investors  Consolidated  Corporation
("FICC").

KATHRYN  S.  HEAD*+  (43),  Director,  581 Main  Street,  Woodbridge,  NJ 07095.
President and Director,  FICC, ADM and FIMCO;  Vice  President,  Chief Financial
Officer and Director,  FIC and EIC; President,  EIMCO;  Chairman,  President and
Director, First Financial Savings Bank, S.L.A.

LARRY R. LAVOIE* (52), Director.  Assistant Secretary,  ADM, EIC, EIMCO, FIAMCO,
FICC and FIMCO; President, FIAMCO; Secretary and General Counsel, FIC.

REX R. REED** (77),  Director,  259 Governors  Drive,  Kiawah Island,  SC 29455.
Retired; formerly Senior Vice President, American Telephone & Telegraph Company.

HERBERT  RUBINSTEIN**  (78),  Director,   695  Charolais  Circle,   Edwards,  CO
81632-1136.  Retired; formerly President,  Belvac International Industries, Ltd.
and President, Central Dental Supply.

NANCY SCHAENEN** (68), Director, 56 Midwood Terrace, Madison, NJ 07940. Trustee,
Drew University and DePauw University.

JAMES  M.  SRYGLEY**  (67),  Director,  39  Hampton  Road,  Chatham,  NJ  07982.
Principal, Hampton Properties, Inc. (property investment company).

JOHN T. SULLIVAN*  (67),  Director and Chairman of the Board;  Director,  FIMCO,
FIC, FICC and ADM; Of Counsel, Hawkins, Delafield & Wood, Attorneys.

ROBERT F. WENTWORTH** (70), Director,  217 Upland Downs Road, Manchester Center,
VT 05255.  Retired;  formerly  financial  and planning  executive  with American
Telephone & Telegraph Company.

JOSEPH I. BENEDEK (42),  Treasurer and Principal  Accounting  Officer,  581 Main
Street, Woodbridge, NJ 07095. Treasurer, FIMCO and EIMCO.

CONCETTA DURSO (64), Vice President and Secretary. Vice President,  FIMCO, EIMCO
and ADM; Assistant Vice President and Assistant Secretary, FIC and EIC.

PATRICIA D. POITRA (43), Vice President. Vice President,  First Investors Series
Fund, First Investors U.S.  Government Plus Fund and Executive  Investors Trust;
Director of Equities, FIMCO.

CLARK  D.  WAGNER  (40),  Vice  President.   Vice  President,   First  Investors
Multi-State  Insured Tax Free Fund,  Executive  Investors Trust, First Investors
Series Fund,  First  Investors  New York  Insured Tax Free Fund,  Inc. and First
Investors Government Fund, Inc.; Chief Investment Officer, FIMCO.

These  Directors may be deemed to be  "interested  persons," as defined in the
1940 Act.
** These Directors are members of the Board's Audit Committee.
+  Mr. Glenn O. Head and Ms. Kathryn S. Head are father and daughter.

      The Directors and officers, as a group, owned less than 1% of either Class
A or Class B shares of each Fund.


                                       36



      All of the officers and  Directors,  except for Ms. Poitra and Mr. Wagner,
hold  identical  or  similar  positions  with the  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.

      The following table lists  compensation paid to the Directors of each Fund
for the fiscal year ended September 30, 1999.



                                                                                              TOTAL
                                                                                              COMPENSATION
                                                                                              FROM FIRST
                             AGGREGATE             AGGREGATE             AGGREGATE            INVESTORS
                             COMPENSATION          COMPENSATION          COMPENSATION         FAMILY OF
                             FROM                  FROM                  FROM                 FUNDS PAID TO
                             SERIES FUND II*       SERIES FUND*++        GLOBAL FUND*         DIRECTOR+++
                                                                                  


James J. Coy**               $0                    $0                    $0                   $?
Roger L. Grayson***          $0                    $0                    $0                   -0-
Glenn O. Head                $0                    $0                    $0                   -0-
Kathryn S. Head              $0                    $0                    $0                   -0-
Larry R. Lavoie+             $0                    $0                    $0                   -0-
Rex R. Reed                  $0                    $0                    $0                   $
Herbert Rubinstein           $0                    $                     $0                   $
Nancy Schaenen               $0                    $                     $0                   $
James M. Srygley             $0                    $                     $0                   $
John T. Sullivan             $0                    $0                    $0                   -0-
Robert F. Wentworth          $0                    $0                    $0                   $



- --------
* Compensation  to officers and  interested  Directors of the Funds is paid by
the Adviser.
** On March 27,  1997,  Mr. Coy  resigned as a Director of the Funds.  Mr. Coy
    currently serves as an emeritus   Director.
*** On August 20, 1998, Mr. Grayson resigned as a Director of the Funds.
+ On September  17, 1998,  Mr. Lavoie was elected by the Board of Directors to
serve as a Director.
++ Does not include  compensation with respect to the Insured Intermediate Tax
Exempt Fund.
+++ The First  Investors  Family of Funds  consist of 15  separate  registered
investment companies.


                                   MANAGEMENT

      ADVISER.  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


                                     37



by each Fund's Board,  including a majority of the Directors who are not parties
to the Funds' Advisory Agreement or "interested persons" (as defined in the 1940
Act) of any such party ("Independent Directors"),  in person at a meeting called
for such purpose and by a majority of the public shareholders of each 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 Directors.  The
Advisory Agreement also provides that FIMCO shall provide the Funds with certain
executive,   administrative  and  clerical  personnel,   office  facilities  and
supplies,  conduct the  business  and details of the  operation of each Fund and
assume certain  expenses  thereof,  other than obligations or liabilities of the
Funds.  An Advisory  Agreement may be terminated at any time,  with respect to a
Fund,  without  penalty by the  Directors  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 Directors
or by a majority of the  outstanding  voting  securities  of such Fund,  and, in
either  case,  by a vote of a majority of the  Independent  Directors  voting in
person at a meeting called for the purpose of voting on such approval.

      Under the Advisory  Agreements,  each Fund is obligated to pay the Adviser
an annual fee, paid monthly, according to the following schedules:

                            MID-CAP OPPORTUNITY FUND
                                                                  Annual
AVERAGE DAILY NET ASSETS                                           RATE
- ------------------------                                          ------
Up to $200 million..........................................       1.00%
In excess of $200 million up to $500 million................       0.75
In excess of $500 million up to $750 million................       0.72
In excess of $750 million up to $1.0 billion................       0.69
Over $1.0 billion...........................................       0.66

                   GROWTH & INCOME FUND, UTILITIES INCOME 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

                                   GLOBAL FUND
                                                                  Annual
AVERAGE DAILY NET ASSETS                                           RATE
- ------------------------                                          ------
Up to $250 million..........................................       1.00%
In excess of $250 million up to $500 million................       0.97
In excess of $500 million up to $750 million................       0.94
Over $750 million...........................................       0.91


                                     38



           BLUE CHIP FUND, TOTAL RETURN FUND, SPECIAL SITUATIONS FUND

                                                                  Annual
AVERAGE DAILY NET ASSETS                                           RATE
- ------------------------                                          ------
Up to $200 million..........................................        1.00%
In excess of $200 million up to $500 million................        0.75
In excess of $500 million up to $750 million................        0.72
In excess of $750 million up to $1.0 billion................        0.69
Over $1.0 billion...........................................        0.66

      The following tables reflect the advisory fees paid,  advisory fees waived
and  expenses  reimbursed  with  respect to each Fund for the fiscal years ended
October 31, 1997, December 31, 1997, September 30, 1998 and September
30, 1999.


                              FISCAL YEAR ENDED 10/31/97
                              --------------------------
                              ADVISORY      ADVISORY
                                FEES           FEES        EXPENSES
                                PAID         WAIVED       REIMBURSED
                                ----         ------       ----------
MID-CAP OPPORTUNITY FUND       $86,930       $28,977         $38,900
GROWTH & INCOME FUND           561,048       125,042          17,942
UTILITIES INCOME FUND          601,030       169,147         137,128



                              FISCAL YEAR ENDED 12/31/97
                              ---------------------------
                              ADVISORY       ADVISORY
                                FEES          FEES         EXPENSES
                                PAID         WAIVED       REIMBURSED
                                ----         ------       ----------
BLUE CHIP FUND                $2,451,280      $817,093       $-0-
SPECIAL SITUATIONS FUND        1,411,573       470,525        -0-
TOTAL RETURN FUND                474,344       158,115        -0-
GLOBAL FUND                    2,883,822           -0-        -0-



                              FISCAL YEAR ENDED 9/30/98
                              -------------------------
                              ADVISORY         ADVISORY
                                FEES             FEES      EXPENSES
                                PAID            WAIVED    REIMBURSED
                                ----            ------    ----------
MID-CAP OPPORTUNITY FUND        $243,554       $81,184       $35,000
GROWTH & INCOME FUND          $1,931,302            $0            $0
UTILITIES INCOME FUND           $886,819            $0            $0
BLUE CHIP FUND                $2,447,114      $375,000            $0
SPECIAL SITUATIONS FUND       $1,215,398      $375,000            $0
TOTAL RETURN FUND               $422,293      $140,764            $0
GLOBAL FUND                   $2,298,343            $0            $0

                              FISCAL YEAR ENDED 9/30/99
                              -------------------------
                              ADVISORY         ADVISORY
                                FEES             FEES      EXPENSES
                                PAID            WAIVED    REIMBURSED
                                ----            ------    ----------

MID-CAP OPPORTUNITY FUND               $             $            $0
GROWTH & INCOME FUND                   $            $0            $0
UTILITIES INCOME FUND                  $            $0            $0
BLUE CHIP FUND                         $            $0            $0
SPECIAL SITUATIONS FUND                $            $0            $0
TOTAL RETURN FUND                      $             $            $0
GLOBAL FUND                            $            $0            $0


                                       39



      The  Adviser  has  an  Investment   Committee   composed  of  Dennis  T.
Fitzpatrick,  George V.  Ganter, Michael Deneka, David Hanover, Glenn O. Head,
Kathryn S. Head, Nancy W. Jones,  Michael O'Keefe,  Patricia D. Poitra,  Clark
D. Wagner,  and Matthew Wright.  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.

      First  Investors  Consolidated  Corporation  ("FICC")  owns  all  of the
voting common stock of the Adviser and all of the  outstanding  stock of First
Investors  Corporation  and the  Funds'  transfer  agent.  Mr.  Glenn O.  Head
controls FICC and, therefore, controls the Adviser.

      Prior to January  1,  1998,  Wellington  Management  Company,  LLP was the
subadviser to GROWTH & INCOME FUND.  For the fiscal year ended October 31, 1997,
the Adviser paid Wellington Management Company, LLP fees of $489,484.

      SUBADVISER.  Wellington  Management Company,  LLP has been retained by the
Adviser  and GLOBAL  FUND as the  investment  subadviser  to GLOBAL FUND under a
subadvisory  agreement  dated  June  13,  1994  ("Subadvisory  Agreement").  The
Subadvisory  Agreement  was  approved  by the  Board of  Directors  of the Fund,
including a majority of Independent  Directors in person at a meeting called for
such purpose and by a majority of the shareholders of the GLOBAL FUND.

      The Subadvisory  Agreement  provides that it will continue for a period of
more than two years from the date of execution only so long as such  continuance
is approved annually by either GLOBAL FUND's Board of Directors or a majority of
the outstanding  voting securities of the Fund and, in either case, by a vote of
a majority of the Independent Directors voting in person at a meeting called for
the purpose of voting on such approval.  The Subadvisory Agreement provides that
it will  terminate  automatically  if  assigned or upon the  termination  of the
Advisory Agreement, and that it may be terminated at any time without penalty by
GLOBAL  FUND's  Board of  Directors  or a vote of a majority of the  outstanding
voting  securities of the Fund or by the Subadvisor  upon not more than 60 days'
nor less than 30 days' written notice.  The Subadvisory  Agreement provides that
WMC will not be liable for any error of judgment or for any loss suffered by the
Fund in connection with the matters to which the Subadvisory  Agreement relates,
except a loss  resulting  from a breach of  fiduciary  duty with  respect to the
receipt of compensation or from willful misfeasance, bad faith, gross negligence
or reckless disregard of its obligations and duties.

      Under the Subadvisory Agreement,  the Adviser will pay to the Subadviser a
fee at an annual rate of 0.400% of the  average  daily net assets of GLOBAL FUND
up to and  including  $50  million;  0.275% of the  average  daily net assets in
excess of $50 million up to and including  $150  million,  0.225% of the average
daily net assets in excess of $150 million up to and including $500 million; and
0.200% of the average daily net assets in excess of $500 million.  This fee will
be computed  daily and paid  monthly.  For the fiscal  years ended  December 31,
1997, September 30, 1998 and September 30, 1999, the Adviser paid the Subadviser
fees of $786,373, $623,514 and $_______, respectively

      Each Fund bears all expenses of its operations other than those assumed 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.


                                       40



                                   UNDERWRITER

      SERIES  FUND  II,  SERIES  FUND  AND  GLOBAL  FUND  have  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.  The  Underwriting  Agreement  was
approved  by  each  Fund's  Board,  including  a  majority  of  the  Independent
Directors.  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 or by a vote of a majority
of the  outstanding  voting  securities of such Fund,  and in either case by the
vote of a majority of the Independent  Directors,  voting in person at a meeting
called for the purpose of voting on such approval.  The  Underwriting  Agreement
will terminate automatically in the event of its assignment.

      For the fiscal year ended  October 31,  1997,  FIC  received  underwriting
commissions with respect to GROWTH & INCOME FUND,  MID-CAP  OPPORTUNITY FUND and
UTILITIES INCOME FUND of $2,689,581,  $365,416 and $586,037,  respectively.  For
the same period,  FIC allowed to unaffiliated  dealers an additional $8,575 with
respect to GROWTH & INCOME FUND, $1,353 with respect to MID-CAP OPPORTUNITY FUND
and $770 with respect to UTILITIES INCOME FUND.

      For the fiscal year ended  December  31, 1997,  FIC received  underwriting
commissions  with  respect to BLUE CHIP FUND,  SPECIAL  SITUATIONS  FUND,  TOTAL
RETURN FUND AND GLOBAL FUND of $3,445,078,  $1,787,009, $372,980 and $1,410,014,
respectively.  or the same  period,  FIC  allowed  to  unaffiliated  dealers  an
additional  $22,793  with  respect to BLUE CHIP FUND,  $19,149  with  respect to
SPECIAL  SITUATIONS  FUND,  $0 with respect to TOTAL RETURN FUND and $5,856 with
respect to GLOBAL FUND.

      For the fiscal year ended  September 30, 1998,  FIC received  underwriting
commissions  with respect to GROWTH & INCOME  FUND,  MID-CAP  OPPORTUNITY  FUND,
UTILITIES  INCOME FUND, BLUE CHIP FUND,  SPECIAL  SITUATIONS  FUND, TOTAL RETURN
FUND AND GLOBAL FUND of $3,063,270, $583,003, $766,650, $2,563,743,  $1,334,822,
$398,189,  and  $814,076,  respectively.  For the same  period,  FIC  allowed to
unaffiliated dealers an additional $12,781 with respect to GROWTH & INCOME FUND,
$3,970  with  respect  to  MID-CAP  OPPORTUNITY  FUND,  $1,729  with  respect to
UTILITIES  INCOME  FUND,  $10,859  with  respect to BLUE CHIP FUND,  $8,944 with
respect to SPECIAL  SITUATIONS  FUND, $472 with respect to TOTAL RETURN FUND and
$2,883 with respect to GLOBAL FUND.

      For the fiscal year ended  September 30, 1999,  FIC received  underwriting
commissions  with respect to GROWTH & INCOME  FUND,  MID-CAP  OPPORTUNITY  FUND,
UTILITIES  INCOME FUND, BLUE CHIP FUND,  SPECIAL  SITUATIONS  FUND, TOTAL RETURN
FUND AND GLOBAL FUND of $______,  $_______,  $_______,  $________,  $__________,
$_________,  and  $_______,  respectively.  For the same period,  FIC allowed to
unaffiliated dealers an additional $______ with respect to GROWTH & INCOME FUND,
$_____  with  respect  to  MID-CAP  OPPORTUNITY  FUND,  $_____  with  respect to
UTILITIES  INCOME  FUND,  $______  with  respect to BLUE CHIP FUND,  $_____ with
respect to SPECIAL  SITUATIONS  FUND, $___ with respect to TOTAL RETURN FUND and
$_____ with respect to GLOBAL FUND.


                                       41



                               DISTRIBUTION PLANS

      As  stated  in the  Funds'  Prospectus,  pursuant  to a  separate  plan of
distribution for each class of shares adopted by SERIES FUND II, SERIES FUND AND
GLOBAL 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 Class A Plan is a compensation plan exempt for the Global Fund Class A Plan
which is a reimbursement plan. Each Class B Plan is a compensation plan.

      Each Plan was approved by each Fund's  Board,  including a majority of the
Independent Directors, and by a majority of the outstanding voting securities of
the relevant class of each Fund.  Each Plan will continue in effect from year to
year, with respect to a Fund, as long as its continuance is approved annually by
either the Board or by a vote of a majority of the outstanding voting securities
of the relevant class of shares of such Fund. In either case, to continue,  each
Plan must be approved by the vote of a majority  of the  Independent  Directors.
The 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 Independent  Directors will be committed to the discretion
of such Independent Directors then in office.

      Each Plan can be  terminated  at any time by a vote of a  majority  of the
applicable  Fund's  Independent  Directors  or by a vote  of a  majority  of the
outstanding  voting securities of the relevant class of shares of such Fund. Any
change to any Plan that  would  materially  increase  the costs to that class of
shares  of  such  Fund  may  not  be  instituted  without  the  approval  of the
outstanding voting securities of the class of shares of such Fund as well as any
class of shares  that  converts  into that  class.  Such  changes  also  require
approval by a majority of the applicable Fund's Independent Directors.

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

      In reporting  amounts  expended under the Plans to the  Directors,  in the
event tht the expenses are not related solely to one class,  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  September  30,  1999,  GROWTH & INCOME  FUND,
MID-CAP  OPPORTUNITY  FUND,  UTILITIES  INCOME  FUND,  BLUE CHIP  FUND,  SPECIAL
SITUATIONS  FUND,  TOTAL  RETURN  FUND AND GLOBAL FUND paid  $_______,  $______,
$_______,  $_______,  $_______,  $_______ and $________,  respectively,  in fees
pursuant to the Class A Plan. For the same period, the Underwriter  incurred the
following Class A Plan-related expenses with respect to each Fund:


                                       42



                       COMPENSATION TO     COMPENSATION TO      COMPENSATION TO
FUND                    UNDERWRITER           DEALERS            SALES PERSONNEL

GROWTH & INCOME FUND             $                   $                       $
MID-CAP OPPORTUNITY FUND
UTILITIES INCOME FUND
BLUE CHIP FUND
SPECIAL SITUATIONS FUND
TOTAL RETURN FUND
GLOBAL FUND


      For the fiscal  year  ended  September  30,  1999,  GROWTH & INCOME  FUND,
MID-CAP  OPPORTUNITY  FUND,  UTILITIES  INCOME  FUND,  BLUE CHIP  FUND,  SPECIAL
SITUATIONS  FUND,  TOTAL  RETURN  FUND AND GLOBAL FUND paid  $_______,  $______,
$_______,  $_______,  $_______,  $______  and  $______,  respectively,  in  fees
pursuant to the Class B Plan. For the same period, the Underwriter  incurred the
following Class B Plan-related expenses with respect to each Fund:

                       COMPENSATION TO     COMPENSATION TO      COMPENSATION TO
FUND                    UNDERWRITER           DEALERS            SALES PERSONNEL

GROWTH & INCOME FUND             $                   $                       $
MID-CAP OPPORTUNITY FUND
UTILITIES INCOME FUND
BLUE CHIP FUND
SPECIAL SITUATIONS FUND
TOTAL RETURN FUND
GLOBAL FUND


DEALER  CONCESSIONS.  With respect to Class A shares of each Fund, the Fund will
reallow a portion of the sales load to the  dealers  selling the shares as shown
in the following table:

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

                        DETERMINATION OF NET ASSET VALUE

      Except as provided  herein,  a security listed or traded on an exchange or
the  Nasdaq  Stock  Market is valued at its last sale price on the  exchange  or
market  where the  security is  principally  traded,  and lacking any sales on a
particular  day,  the security is valued at the mean between the closing bid and
asked  prices.   Securities  traded  in  the  over-the-counter   market  ("OTC")
(including securities listed on exchanges whose primary market is believed to be
OTC) are valued at the mean  between  the last bid and asked  prices  based upon
quotes  furnished by market makers for such  securities.  Securities may also be
priced by pricing  services.  Pricing  services  use  quotations  obtained  from


                                       43



investment  dealers or brokers for the particular  securities  being  evaluated,
information  with respect to market  transactions  in comparable  securities and
other  available  information in determining  value.  Short-term debt securities
that  mature in 60 days or less are valued at  amortized  cost.  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  particular  Fund's  officers  in  a  manner   specifically
authorized by the Board.

      With respect to each 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 or by the pricing  service.
For valuation  purposes,  where applicable,  quotations of foreign securities in
foreign  currencies are converted into U.S. dollar equivalents using the foreign
exchange equivalents in effect.

      Each  Fund's  Board 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.

      EMERGENCY  PRICING  PROCEDURES.  In the  event  that the  Funds  must halt
operations  during any day that they would  normally  be required to price under
Rule 22c-1 under the 1940 Act due to an emergency  ("Emergency Closed Day"), the
Funds will apply the following procedures:

      1. The Funds  will  make  every  reasonable  effort  to  segregate  orders
received  on the  Emergency  Closed  Day and give them the price that they would
have  received  but for the  closing.  The  Emergency  Closed  Day price will be
calculated  as soon as  practicable  after  operations  have resumed and will be
applied equally to sales, redemptions and repurchases that were in fact received
in the mail or otherwise on the Emergency Closed Day.

      2. For  purposes  of  paragraph  1, an order  will be  deemed to have been
received by the Funds on an Emergency  Closed Day, even if neither the Funds nor
the Transfer  Agent is able to perform the  mechanical  processing of pricing on
that day, under the following circumstances:

            (a) In the  case  of a mail  order  the  order  will  be  considered
received by a Fund when the postal  service has delivered it to FIC's offices in
Woodbridge,  New Jersey prior to the close of regular trading on the NYSE, or at
such other time as may be prescribed in its prospectus; and

            (b) In the case of a wire order,  including a Fund/SERV  order,  the
order will be  considered  received  when it is  received  in good form by a FIC
branch office or an authorized  dealer prior to the close of regular  trading on
the NYSE, or such other time as may be prescribed in its prospectus.

      3. If the Funds are unable to segregate  orders  received on the Emergency
Closed Day from those  received on the next day the Funds are open for business,
the Funds may give all orders the next price calculated after operations resume.


                                       44



      4.  Notwithstanding  the foregoing,  on business days in which the NYSE is
not open for  regular  trading,  the  Funds  may  determine  not to price  their
portfolio  securities  if such prices would lead to a distortion  of the NAV for
the Funds and their shareholders.


                        ALLOCATION OF PORTFOLIO BROKERAGE

      The Adviser may  purchase or sell  portfolio  securities  on behalf of the
Fund in agency or  principal  transactions.  In  agency  transactions,  the Fund
generally  pays  brokerage  commissions.  In  principal  transactions,  the Fund
generally does not pay commissions,  however the price paid for the security may
include an undisclosed  dealer  commission or "mark-up" or selling  concessions.
The  Adviser  normally  purchases  fixed-income  securities  on a net basis from
primary market makers acting as principals for the  securities.  The Adviser may
purchase certain money market instruments directly from an issuer without paying
commissions or discounts. The Adviser may also purchase securities traded in the
OTC market.  As a general  practice,  OTC securities are usually  purchased from
market makers  without  paying  commissions,  although the price of the security
usually will include undisclosed compensation.  However, when it is advantageous
to the Fund the Adviser may utilize a broker to purchase OTC  securities and pay
a commission.

      In purchasing and selling portfolio  securities on behalf of the Fund, the
Adviser  will  seek to  obtain  best  execution.  The Fund may pay more than the
lowest  available  commission  in return for  brokerage  and research  services.
Research and other services may include  information as to the  availability  of
securities for purchase or sale,  statistical or factual information or opinions
pertaining  to  securities,  reports and analysis  concerning  issuers and their
creditworthiness,  and  Lipper's  Directors'  Analytical  Data  concerning  Fund
performance and fees. The Adviser generally uses the research and other services
to service all the funds in the First Investors Family of Funds, rather than the
particular  Funds whose  commissions may pay for research or other services.  In
other words, a Fund's  brokerage may be used to pay for a research  service that
is used in managing  another Fund within the First  Investors  Fund Family.  The
Lipper's Directors' Analytical Data is used by the Adviser and the Fund Board to
analyze a fund's performance relative to other comparable funds.

      In  selecting  the   broker-dealers   to  execute  the  Fund's   portfolio
transactions,  the  Adviser  may  consider  such  factors  as the  price  of the
security, the rate of the commission,  the size and difficulty of the order, the
trading  characteristics of the security  involved,  the difficulty in executing
the order, the research and other services provided,  the expertise,  reputation
and reliability of the broker-dealer, access to new offerings, and other factors
bearing upon the quality of the execution.  The Adviser does not place portfolio
orders with an affiliated broker, or allocate brokerage  commission  business to
any  broker-dealer  for  distributing  fund shares.  Moreover,  no broker-dealer
affiliated with the Adviser  participates in commissions  generated by portfolio
orders placed on behalf of the Fund.

      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 accordance with written procedures  approved by the Board of
Directors.


                                       45



      The following tables reflect the total commissions paid,  commissions paid
to  brokers  who  furnished  research  services  and  the  amount  of  portfolio
transactions for which  commissions were paid to brokers for research  services,
with respect to each Fund for the fiscal years ended October 31, 1997,  December
31, 1997, September 30, 1998 and September 30, 1999.

                              FISCAL YEAR ENDED 10/31/97
                              --------------------------
                                                               TRANSACTIONS
                                                                FOR WHICH
                                               COMMISSIONS     COMMISSIONS
                                  TOTAL         PAID FOR        PAID FOR
                               COMMISSIONS      RESEARCH        RESEARCH
                                  PAID          SERVICES        SERVICES
                                  ----          -------         ---------
MID-CAP OPPORTUNITY FUND         $111,995         $17,242         $6,861,292
GROWTH & INCOME FUND              146,190          46,196         50,452,086
UTILITIES INCOME FUND             277,318          13,624          6,820,235


                              FISCAL YEAR ENDED 12/31/97
                              --------------------------

                                                               TRANSACTIONS
                                                                FOR WHICH
                                               COMMISSIONS     COMMISSIONS
                                 TOTAL          PAID FOR        PAID FOR
                              COMMISSIONS       RESEARCH        RESEARCH
                                 PAID           SERVICES        SERVICES
                                 ----           --------        --------
BLUE CHIP FUND                   $497,747        $270,364       $198,146,829
SPECIAL SITUATIONS FUND           285,203         126,202         51,723,575
TOTAL RETURN FUND                 101,918          41,817         24,738,675
GLOBAL FUND                       940,540          44,537         45,620,259


                              FISCAL YEAR ENDED 9/30/98
                              -------------------------

                                                               TRANSACTIONS
                                                                FOR WHICH
                                               COMMISSIONS     COMMISSIONS
                                 TOTAL          PAID FOR        PAID FOR
                              COMMISSIONS       RESEARCH        RESEARCH
                                 PAID           SERVICES        SERVICES
                                 ----           --------        --------
MID-CAP OPPORTUNITY FUND          $89,618         $12,996         $5,787,100
GROWTH & INCOME FUND             $257,106         $30,162        $23,988,319
UTILITIES INCOME FUND            $245,565         $31,740        $23,906,565
BLUE CHIP FUND                   $699,323         $55,969        $52,726,903
SPECIAL SITUATIONS FUND          $249,971         $26,598        $11,528,675
TOTAL RETURN FUND                $108,028         $23,685        $20,827,238
GLOBAL FUND                    $1,169,770         $25,798        $24,747,557



                              FISCAL YEAR ENDED 9/30/99
                              -------------------------

                                                               TRANSACTIONS
                                                                FOR WHICH
                                               COMMISSIONS     COMMISSIONS
                                 TOTAL          PAID FOR        PAID FOR
                              COMMISSIONS       RESEARCH        RESEARCH
                                 PAID           SERVICES        SERVICES
                                 ----           --------        --------
MID-CAP OPPORTUNITY FUND
GROWTH & INCOME FUND
UTILITIES INCOME FUND
BLUE CHIP FUND
SPECIAL SITUATIONS FUND
TOTAL RETURN FUND
GLOBAL FUND


                                       46



                   PURCHASE, REDEMPTION AND EXCHANGE OF SHARES

      Information regarding the purchase, redemption and exchange of Fund shares
is contained in the Shareholder  Manual, a separate section of the SAI that is a
distinct document and may be obtained free of charge by contacting your Fund.

      REDEMPTIONS-IN-KIND.  If each Fund's Board should  determine that it would
be detrimental to the best interests of the remaining  shareholders of a Fund to
make payment wholly or partly in cash,  the Fund may pay redemption  proceeds in
whole or in part by a distribution  in kind of securities  from the portfolio of
the Fund. In this connection,  Series Fund II has elected to be governed by Rule
18f-1 under the 1940 Act.  Pursuant to Rule 18f-1 Series Fund II is obligated to
redeem shares solely in cash up to the lesser of $250,000 or 1% of the net asset
value of the Fund during any 90-day period for any one shareholder. With respect
to all Funds,  if shares are redeemed in kind,  the redeeming  shareholder  will
likely incur  brokerage  costs in converting the assets into cash. The method of
valuing portfolio  securities for this purpose is described under "Determination
of Net Asset Value."


                                      TAXES

      In order to continue to qualify for  treatment  as a regulated  investment
company ("RIC") under the Internal  Revenue Code of 1986, as amended,  a Fund --
each Fund being  treated as a separate  corporation  for these  purposes -- 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 net gains from certain foreign currency
transactions)  ("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) 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 (3) 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.  If a Fund failed to qualify as a RIC for any taxable year, it would
be taxed on the full amount of its taxable  income for that year  without  being
able  to  deduct  the  distributions  it  makes  to  its  shareholders  and  the
shareholders would treat all those distributions, including distributions of net
capital  gain (the  excess of net  long-term  capital  gain over net  short-term
capital  loss),  as dividends  (that is,  ordinary  income) to the extent of the
Fund's earnings and profits.

      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.


                                       47



      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 the Fund
from U.S. corporations.  However,  dividends received by a corporate shareholder
and  deducted  by it pursuant to the  dividends-received  deduction  are subject
indirectly to the alternative minimum tax.

      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.

      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.

      Dividends  and  interest  received  by  GROWTH  &  INCOME  FUND,   SPECIAL
SITUATIONS FUND,  GLOBAL FUND and TOTAL RETURN FUND, and gains realized by these
Funds,  may be subject to income,  withholding or other taxes imposed by foreign
countries  and U.S.  possessions  ("foreign  taxes") that would reduce the yield
and/or total return on its securities. Tax conventions between certain countries
and the United States may reduce or eliminate foreign taxes,  however,  and many
foreign countries do not impose taxes on capital gains in respect of investments
by foreign investors.  If more than 50% of the value of a Fund's total assets at
the close of any taxable year consists of securities of foreign corporations, it
will be eligible to, and may, file an election with the Internal Revenue Service
that would enable its  shareholders,  in effect, to benefit from any foreign tax
credit or  deduction  available  with  respect to any foreign  taxes paid by it.
Pursuant to any such election,  a Fund would treat those taxes as dividends paid
to its  shareholders  and each  shareholder  (1) would be required to include in
gross  income,  and  treat  as  paid  by  the  shareholder,   the  shareholder's
proportionate share of those taxes, (2) would be required to treat that share of
those taxes and of any  dividend  paid by the Fund that  represents  income from
foreign or U.S.  possessions  sources as the shareholder's own income from those
sources, and (3) could either deduct the taxes deemed paid by the shareholder in
computing  taxable income or,  alternatively,  use the foregoing  information in
calculating  the tax credit against the  shareholder's  Federal income tax. Each
Fund that makes this election will report to its shareholders shortly after each
taxable  year their  respective  shares of its income from sources  within,  and
taxes paid to, foreign countries and U.S.  possessions.  Individuals who have no
more than $300 ($600 for married persons filing  jointly) of creditable  foreign
taxes included on Form 1099 and all of whose foreign source income is "qualified
passive income" may elect each year to be exempt from the extremely  complicated
foreign  tax credit  limitation  and will be able to claim a foreign  tax credit
without having to file the detailed Form 1116 that otherwise is required.

      GROWTH & INCOME FUND,  SPECIAL  SITUATIONS  FUND,  TOTAL RETURN AND GLOBAL
FUND may each  invest in the stock of  "passive  foreign  investment  companies"
("PFICs").  A PFIC is a foreign  corporation - other than a "controlled  foreign
corporation"  (i.e.,  a foreign  corporation  in which,  on any day  during  its
taxable  year,  more  than 50% of the total  voting  power of all  voting  stock
therein or the total value of all stock therein is owned, directly,  indirectly,
or  constructively,  by  "U.S.  shareholders,"  defined  as  U.S.  persons  that
individually own, directly, indirectly, or constructively,  at least 10% of that
voting power) as to which a Fund is a U.S.  shareholder that, in general,  meets
either of the following  tests:  (1) at least 75% of its gross income is passive


                                       48



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 it
distributes that income to its shareholders.

      If a Fund  invests in a PFIC and elects to treat the PFIC as a  "qualified
electing  fund"  ("QEF"),  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 QEF's  annual  ordinary  earnings and net capital gain - which
probably would have to be  distributed  by the Fund to satisfy the  Distribution
Requirement and avoid  imposition of the Excise Tax - even if those earnings and
gain were not  distributed  to the Fund by the QEF. In most instances it will be
very  difficult,  if not  impossible,  to make this election  because of certain
requirements thereof.

      Each  Fund  may  elect  to   "mark-to-market"   its  stock  in  any  PFIC.
"Marking-to-market,"  in this context,  means  including in ordinary income each
taxable  year the excess,  if any, of the fair market  value of the PFIC's stock
over a Fund's adjusted basis in that stock as of the end of that year.  Pursuant
to the election, a Fund also may deduct (as an ordinary,  not capital, loss) the
excess,  if any, of its adjusted  basis in PFIC stock over the fair market value
thereof  as of the  taxable  year-end,  but  only  to  the  extent  of  any  net
mark-to-market  gains with respect to that stock  included by the Fund for prior
taxable  years.  A Fund's  adjusted  basis in each PFIC's  stock  subject to the
election  would be  adjusted  to  reflect  the  amounts of income  included  and
deductions  taken  thereunder  (and  under  regulations  proposed  in 1992  that
provided a similar election with respect to the stock of certain PFICs).

      GLOBAL  FUND'S use of hedging  strategies,  such as selling  (writing) and
purchasing  options and futures  contracts  and entering  into forward  currency
contracts, involve complex rules that will determine for income tax purposes the
character and timing of recognition of the gains and losses the Fund realizes in
connection  therewith.  Gains from the disposition of foreign currencies (except
certain gains that may be excluded by future  regulations),  futures and options
thereon,  and forward currency  contracts derived by GLOBAL FUND with respect to
its business of investing in securities or foreign  currencies,  will qualify as
permissible income under the Income Requirement.

      MID-CAP  OPPORTUNITY FUND, TOTAL RETURN FUND and UTILITIES INCOME FUND may
acquire zero coupon or other securities issued with original issue discount.  As
a holder of those  securities,  each such Fund must  include  in its  income the
portion of the original issue discount that accrues on the securities during the
taxable year, even if the Fund 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, 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.


                                       49



      If a Fund has an "appreciated financial position" - generally, an interest
(including an interest  through an option,  futures or forward contract or short
sale) with respect to any stock, debt instrument (other than "straight debt") or
partnership interest the fair market value of which exceeds its adjusted basis -
and  enters  into a  "constructive  sale" of the same or  substantially  similar
property,  the Fund will be treated as having made an actual sale thereof,  with
the result  that gain will be  recognized  at that  time.  A  constructive  sale
generally consists of a short sale, an offsetting notional principal contract or
futures or forward  contract  entered  into by a Fund or a related  person  with
respect to the same or  substantially  similar  property.  In  addition,  if the
appreciated  financial  position  is  itself  a short  sale or such a  contract,
acquisition of the underlying property or substantially similar property will be
deemed a constructive sale.

                             PERFORMANCE INFORMATION

      A Fund may  advertise  its top holdings from time to time. A Fund may also
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  information will
fluctuate over time and return information for any given past period will not be
an indication or representation of future rates of return. 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 period  ended  September  30,  1999 are set forth in the tables
below:


                                       50






AVERAGE ANNUAL TOTAL RETURN: (1, 2)
                                      ONE YEAR                    FIVE YEARS                   LIFE OF FUND
                                      --------                    ----------                   ------------
                                                                                    

                                 Class A   Class B          Class A     Class B           Class A     Class B
                                 SHARES    SHARES(3)        SHARES      SHARES(3)         SHARES      SHARES(3)
                                 ------    ------           ------      ------            ------      ------
MID-CAP OPPORTUNITY FUND
UTILITIES INCOME FUND
GROWTH & INCOME FUND
BLUE CHIP FUND
SPECIAL SITUATIONS FUND
TOTAL RETURN FUND
GLOBAL FUND





      TOTAL RETURN: (1, 2)

                                                                                    

                                 Class A   Class B          Class A     Class B           Class A     Class B
                                 SHARES    SHARES(3)        SHARES      SHARES(3)         SHARES      SHARES(3)
                                 ------    ------           ------      ------            ------      ------
MID-CAP OPPORTUNITY FUND
UTILITIES INCOME FUND
GROWTH & INCOME FUND
BLUE CHIP FUND
SPECIAL SITUATIONS FUND
TOTAL RETURN FUND
GLOBAL FUND


1 All Class A total return figures assume the maximum  front-end sales charge of
6.25% and  dividends  reinvested  at net asset  value.  All Class B total return
figures assume the maximum  applicable  CDSC. Prior to July 1, 1993, the maximum
front-end  sales  charge was 6.90%.  Prior to  December  29,  1989,  the maximum
front-end sales charge was 7.25% for BLUE CHIP FUND and 8.50% for GLOBAL FUND.
2 Certain expenses of the Funds have been waived from commencement of operations
through  September 30, 1999.  Accordingly,  return  figures are higher than they
would have been had such expenses not been waived.
3 The  commencement date for the offering of Class B shares is January 12, 1995.


      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 period ended  September 30, 1999 are set forth in the
tables below:


                                       51






      AVERAGE ANNUAL TOTAL RETURN: (1)
                                     ONE YEAR                    FIVE YEARS                   LIFE OF FUND
                                     --------                    ----------                   ------------
                                                                                    

                                 Class A   Class B          Class A     Class B           Class A     Class B
                                 SHARES    SHARES(2)        SHARES      SHARES(2)         SHARES      SHARES(2)
                                 ------    ------           ------      ------            ------      ------
MID-CAP OPPORTUNITY FUND
UTILITIES INCOME FUND
GROWTH & INCOME FUND
BLUE CHIP FUND
SPECIAL SITUATIONS FUND
TOTAL RETURN FUND
GLOBAL FUND





      TOTAL RETURN: (1)

                                     ONE YEAR                    FIVE YEARS                   LIFE OF FUND
                                     --------                    ----------                   ------------
                                                                                    
                                 Class A   Class B          Class A     Class B           Class A     Class B
                                 SHARES    SHARES(2)        SHARES      SHARES(2)         SHARES      SHARES(2)
                                 ------    ------           ------      ------            ------      ------
MID-CAP OPPORTUNITY FUND
UTILITIES INCOME FUND
GROWTH & INCOME FUND
BLUE CHIP FUND
SPECIAL SITUATIONS FUND
TOTAL RETURN FUND
GLOBAL FUND


1 Certain expenses of the Funds have been waived from commencement of operations
through  September 30, 1999.  Accordingly,  return  figures are higher than they
would have been had such expenses not been waived.
2 The  commencement  date for the offering of Class B shares is January 12, 1995


      Each Fund may include in advertisements and sales literature, information,
examples and  statistics to  illustrate  the effect of  compounding  income at a
fixed rate of return to  demonstrate  the growth of an investment  over a stated
period  of time  resulting  from the  payment  of  dividends  and  capital  gain
distributions in additional shares. These examples may also include hypothetical
returns comparing taxable versus  tax-deferred  growth which would pertain to an
IRA, section 403(b)(7) Custodial Account or other qualified  retirement program.
The  examples  used  will  be  for  illustrative   purposes  only  and  are  not
representations  by the Funds of past or future  yield or  return.  Examples  of
typical graphs and charts depicting such historical performance, compounding and
hypothetical returns are included in Appendix C.

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


                                       52



      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 funds'  three-,  five-,  and ten-year  average annual
      returns (when  available) and a risk factor that reflects fund performance
      relative to three-month Treasury bill monthly returns.  Fund's returns are
      adjusted  for  fees  and  sales  loads.  Ten  percent  of the  funds in an
      investment  category  receive five stars,  22.5%  receive four stars,  35%
      receive three stars,  22.5% receive two stars,  and the bottom 10% receive
      one star.

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

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

            THE WALL STREET JOURNAL,  a daily newspaper  publication which lists
      the yields and current market values on money market  instruments,  public
      corporate debt  obligations,  public  obligations of the U.S. Treasury and
      agencies  of the  U.S.  Government  as well as  common  stocks,  preferred
      stocks, convertible preferred stocks, options and commodities; in addition
      to  indices  prepared  by  the  research  departments  of  such  financial
      organizations as Lehman Bros.,  Merrill Lynch,  Pierce,  Fenner and Smith,
      Inc.,  Credit Suisse First Boston,  Salomon Smith Barney,  Morgan  Stanley
      Dean Witter & Co.,  Goldman,  Sachs & Co.,  Donaldson,  Lufkin & Jenrette,
      Value Line,  Datastream  International,  HBSC James Capel, Warburg Dillion
      Read, 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.

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


                                       53



            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 Credit  Suisse  First  Boston  High Yield  Index is  designed to
      measure the performance of the high yield bond market.

            The Lehman  Brothers  Aggregate  Index is an  unmanaged  index which
      generally  covers  the U.S.  investment  grade  fixed  rate  bond  market,
      including   government   and   corporate   securities,   agency   mortgage
      pass-through securities, and asset-backed securities.

            The Lehman  Brothers  Corporate  Bond Index  includes  all  publicly
      issued, fixed rate,  nonconvertible  investment grade  dollar-denominated,
      corporate debt which have at least one year to maturity and an outstanding
      par value of at least $100 million.

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

            The Morgan  Stanley  All  Country  World Free Index is  designed  to
      measure the  performance  of stock markets in the United  States,  Europe,
      Canada,  Australia,  New Zealand and the developed and emerging markets of
      Eastern Europe,  Latin America,  Asia and the Far East. The index consists
      of  approximately  60% of the aggregate  market value of the covered stock
      exchanges and is  calculated to exclude  companies and share classes which
      cannot be freely purchased by foreigners.

            The  Morgan   Stanley   World  Index  is  designed  to  measure  the
      performance  of  stock  markets  in the  United  States,  Europe,  Canada,
      Australia,   New  Zealand  and  the  Far  East.   The  index  consists  of
      approximately  60% of the  aggregate  market  value of the  covered  stock
      exchanges.

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

            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.

            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    Salomon    Brothers    Government    Index    is   a   market
      capitalization-weighted index that consists of debt issued by the U.S.
      Treasury and U.S. Government sponsored agencies.

            The    Salomon    Brothers    Mortgage    Index    is    a    market
      capitalization-weighted  index that  consists of all agency  pass-throughs
      and FHA and GNMA project notes.


                                       54



            The   Standard   &  Poor's  400   Midcap   Index  is  an   unmanaged
      capitalization-weighted index that is generally representative of the U.S.
      market for medium cap stocks.

            The  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    Standard    &    Poor's    Smallcap    600    Index    is   a
      capitalization-weighted  index that measures the  performance  of selected
      U.S. stocks with a small market capitalization.

            The     Standard    &    Poor's     Utilities     Index    is    a
      capitalization-weighted  index of 37  stocks  designed  to  measure  the
      performance  of the  utilities  sector of the S&P 500  Index.  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

      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 lest 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.

       GLOBAL FUND was  incorporated  in the state of Maryland on March 9, 1981.
GLOBAL FUND'S authorized  capital stock consists of 100 million shares of common
stock,  all of one  series,  with a par value  per  share of $1.00.  The Fund is
authorized to issue shares of common stock in such separate and distinct  series
and classes of shares as the Fund's Board of  Directors  shall from time to time
establish. The shares of common stock of the Fund are presently divided into two
classes,  designated  Class A shares and Class B shares.  Each class of the Fund
represents  interests  in the same  assets of the  Fund.  The Fund does not hold
annual  shareholder  meetings.  If requested to do so by the holders of at least
10% of the Fund's outstanding  shares, the Fund's Board of Directors will call a
special  meeting of  shareholders  for any  purpose,  including  the  removal of
Directors. Each share of the Fund has equal voting rights except as noted above.


                                       55



      SERIES  FUND II is a  Maryland  corporation  organized  on April 1,  1992.
SERIES FUND II is authorized to issue 400 million shares of common stock, $0.001
par value,  in such separate and distinct series and classes of shares as SERIES
FUND II'S Board of Directors  shall from time to time  establish.  The shares of
common  stock of SERIES FUND II are  presently  divided  into four  separate and
distinct series, each having two classes,  designated Class A shares and Class B
shares.  Each class of a Fund  represents  interests  in the same assets of that
Fund. SERIES FUND II does not hold annual shareholder  meetings. If requested to
do so by the holders of at least 10% of a Fund's  outstanding  shares, the Board
of  Directors  will call a special  meeting  of  shareholders  for any  purpose,
including  the removal of  Directors.  Each share of each Fund has equal  voting
rights  except  as  noted  above.  Prior  to  December  31,  1997,  the  Mid-Cap
Opportunity  Fund was  known as  U.S.A.  Mid-Cap  Opportunity  Fund and prior to
February 15, 1996 it was known as Made in the U.S.A. Fund.

      CUSTODIAN.  The Bank of New York, 48 Wall Street,  New York, NY 10286,  is
custodian of the securities  and cash of each Fund,  except for the Global Fund,
and employs  foreign  sub-custodians  to provide  custody of foreign  assets for
SPECIAL SITUATIONS FUND and TOTAL RETURN FUND. Brown Brothers Harriman & Co., 40
Water Street,  Boston,  MA 02109, is custodian of the securities and cash of the
GLOBAL FUND and employs foreign  subcustodians  to provide custody of the GLOBAL
FUND'S foreign assets.

      AUDITS AND REPORTS.  The accounts of the Funds are audited twice a year by
Tait, Weller & Baker,  independent  certified public accountants,  8 Penn Center
Plaza,  Philadelphia,   PA,  19103-2108.   Shareholders  of  each  Fund  receive
semi-annual and annual reports,  including audited financial  statements,  and a
list of securities owned.

      LEGAL COUNSEL.  Kirkpatrick & Lockhart LLP, 1800  Massachusetts  Avenue,
N.W., Washington, D.C. 20036 serves as counsel to the Funds.

      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;  $.75 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;
$1.00 for each  Systematic  Withdrawal  Plan check;  $4.00 for each  shareholder
services call; $20.00 for each item of correspondence; 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


                                       56



reserves the right to change the fees on prior notice to the Funds. Upon request
from  shareholders,  the  Transfer  Agent will provide an account  history.  For
account  histories  covering  the most  recent  three year  period,  there is no
charge.  The Transfer Agent charges a $5.00  administrative fee for each account
history  covering  the  period  1983  through  1994 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.  Efforts to locate a shareholder  will be conducted in accordance  with
SEC rules and regulations  prior to forfeiture of funds to the appropriate state
treasury.  The  Transfer  Agent may deduct the costs of its  efforts to locate a
shareholder from the shareholder's account. These costs may include a percentage
of the  account  if a search  company  charges  such a fee in  exchange  for its
location  services.  The  Transfer  Agent is not  responsible  for any fees that
states  and/or their  representatives  may charge for  processing  the return of
funds to  investors  whose  funds  have been  escheated.  The  Transfer  Agent's
telephone number is 1-800-423-4026.

      5% SHAREHOLDERS.   As of December 31, 1999 . . [UPDATE]
      ----------------


      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 the 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 the Fund shall,  upon
request,  assume the defense of any claim made against any  shareholder  for any
act or obligation of the Fund and satisfy any judgment  thereon.  Thus, the risk
of a shareholder's  incurring financial loss on account of shareholder liability
is limited to circumstances in which the Fund itself would be unable to meet its
obligations.  The  Adviser  believes  that,  in view of the  above,  the risk of
personal  liability to  shareholders  is immaterial  and extremely  remote.  The
Declaration  of Trust further  provides that the Trustees will not be liable for
errors of judgment or mistakes of fact or law, but nothing in the Declaration of
Trust  protects a Trustee  against any liability to which he would  otherwise be
subject  by reason of  willful  misfeasance,  bad faith,  gross  negligence,  or
reckless  disregard of the duties involved in the conduct of his office.  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  Funds  and the
Adviser have adopted Codes of Ethics restricting  personal securities trading by
portfolio  managers and other access  persons of the Funds.  Among other things,
such persons,  except the Director or Trustees of the Funds, as applicable:  (a)
must have all non-exempt trades pre-cleared;  (b) are restricted from short-term
trading; (c) must provide duplicate statements and transactions confirmations to
a compliance  officer;  and (d) are  prohibited  from  purchasing  securities of
initial public offerings.


                                       57



                              FINANCIAL STATEMENTS
                            AS OF SEPTEMBER 30, 1999


Registrants  incorporate  by reference  the financial  statements  and report of
independent  auditors  contained in the annual reports to  shareholders  for the
fiscal year ended September 30, 1999 electronically filed with the Commission on
____________, 1999 (Accession Number: ____________________).





PRO FORMA FINANCIAL STATEMENTS AND SCHEDULES





                                   APPENDIX A
                        DESCRIPTION OF CORPORATE BOND AND
                          CONVERTIBLE SECURITY RATINGS

STANDARD & POOR'S
- -----------------

      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.

      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.


                                       58



      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.

      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.


                                       59



      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.

      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.


                                       60



                                   APPENDIX B
                     DESCRIPTION OF COMMERCIAL PAPER RATINGS

STANDARD & POOR'S
- -----------------

      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.
      -     Well-established  access  to a  range  of  financial  markets  and
assured sources of alternate liquidity.


                                       61



                                  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.  This assumes a hypothetical investment of $10,000.

       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. this assumes  monthly installment with  a constant  hypothetical
return rate of 8%.

       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







                                       48




    [The following table is represented as a 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 difference of
$331,215.

               25 years old ..............   573,443
               35 years old ..............   242,228
               45 years old ..............   103,320

     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.









                                       49



    [The following table is represented as a chart in the printed document.]

The following  chart  illustrates  the  historical  performance of the Dow Jones
Industrial Average from 1928 through 1996.

                   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
                   1996 ..................  6,000.00

     The  performance of the Dow Jones  Industrial  Average is not indicative of
the performance of any particular investment. It does not take into account fees
and expenses  associated with purchasing mutual fund shares.  Individuals cannot
invest  directly  in any  index.  Please  note  that past  performance  does not
guarantee future results.


                                       50



    [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
                   1996 .......................  20.16135


                   1996 .......................  100.00
                   1997 .......................  103.00
                   1998 .......................  106.00
                   1999 .......................  109.00
                   2000 .......................  113.00
                   2001 .......................  116.00
                   2002 .......................  119.00
                   2003 .......................  123.00
                   2004 .......................  127.00
                   2005 .......................  130.00
                   2006 .......................  134.00
                   2007 .......................  138.00
                   2008 .......................  143.00
                   2009 .......................  147.00
                   2010 .......................  151.00
                   2011 .......................  156.00
                   2012 .......................  160.00
                   2013 .......................  165.00
                   2014 .......................  170.00
                   2015 .......................  175.00
                   2016 .......................  181.00
                   2017 .......................  186.00
                   2018 .......................  192.00
                   2019 .......................  197.00
                   2020 .......................  203.00
                   2021 .......................  209.00
                   2022 .......................  216.00
                   2023 .......................  222.00
                   2024 .......................  229.00
                   2025 .......................  236.00
                   2026 .......................  243.00

Inflation erodes your buying power.  $100 in 1966, could purchase five times the
goods and service as in 1996 ($100 vs. $20).* Projecting  inflation at 3%, goods
and services costing $100 today will cost $243 in the year 2026.

* Source: Consumer Price Index, U.S. Bureau of Labor Statistics.



                                       51



    [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 1996*

                               Total           Number of       Percentage of
                             Number of         Positive           Positive
   Rolling Period             Periods           Periods           Periods
   --------------             -------           -------           -------
     1-Year                      71                51                72%
     5-Year                      67                60                90%
     10-Year                     62                60                97%
     15-Year                     57                57               100%
     20-Year                     52                52               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. **

                    Compound Annual Return from 1982 -- 1996*

                    Inflation .....................   3.55
                    U.S. Treasury Bills ...........   6.50
                    Large Company Stocks ..........  16.79


The following chart  illustrates  for the period shown that long-term  corporate
bonds have outpaced U.S. Treasury Bills and inflation.

                    Compound Annual Return from 1982 -- 1996*

                    Inflation .....................   3.55
                    U.S. Treasury Bills ...........   6.50
                    Long-Term Corp. bonds .........  13.66


*    Source: Used with permission. (c)1997 Ibbotson Associates, Inc. All rights
     reserved.  [Certain  provisions of this work were derived from  copyrighted
     works of Roger G. Ibbotson and Rex Sinquefield.]

**   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,  returns of U.S. Treasury bills historically have
     not outpaced inflation by as great a margin as stocks.


                                       52


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

                           28.0%        31.0%       36.0%       39.6%
  your tax-free yield
          3.00%             4.17%        4.35%       4.69%       4.97%
          3.50%             4.86%        5.07%       5.47%       5.79%
          4.00%             5.56%        5.80%       6.25%       6.62%
          4.50%             6.25%        6.52%       7.03%       7.45%
          5.00%             6.94%        7.25%       7.81%       8.25%
          5.50%             7.64%        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.








                                   53


    [The following table is represented as a graph in the printed document.]


The  following  graph  illustrates  how income has affected the gains from stock
investments since 1965.


          S&P 500 Dividends Reinvested            S&P 500 Principal Only

12/31/64                        10,000                            10,000
12/31/65                        11,269                            10,906
12/31/66                        10,115                             9,478
12/31/67                        12,550                            11,383
12/31/68                        13,948                            12,255
12/31/69                        12,795                            10,863
12/31/70                        13,299                            10,873
12/31/71                        15,200                            12,046
12/31/72                        18,088                            13,929
12/31/73                        15,431                            11,510
12/31/74                        11,346                             8,090
12/31/75                        15,570                            10,642
12/31/76                        19,296                            12,680
12/31/77                        17,915                            11,221
12/31/78                        19,092                            11,340
12/31/79                        22,645                            12,736
12/31/80                        30,004                            16,019
12/31/81                        28,528                            14,460
12/31/82                        34,674                            16,595
12/31/83                        42,496                            19,461
12/31/84                        45,161                            19,733
12/31/85                        59,489                            24,930
12/31/86                        70,594                            28,575
12/31/87                        74,301                            29,154
12/31/88                        86,641                            32,769
12/31/89                       114,093                            41,699
12/31/90                       110,549                            38,964
12/31/91                       144,230                            49,214
12/31/92                       155,218                            51,411
12/31/93                       170,863                            55,039
12/31/94                       173,120                            54,191
12/31/95                       238,175                            72,676
12/31/96                       292,863                            87,403
11/30/97                       383,977                           112,732


Source:  First  Investors  Management  Company,  Inc.  Standard  &  Poor's  is a
registered  trademark.  The S&P 500 is an unmanaged index  comprising 500 common
stocks spread  across a variety of  industries.  The total  returns  represented
above  compare the impact of  reinvestment  of dividends  and  illustrates  past
performance of the index.  The performance of any index is not indicative of the
performance  of a  particular  investment  and does not take  into  account  the
effects of inflation or the fees and expenses  associated with purchasing mutual
fund shares. Individuals cannot invest directly in any index. Mutual fund shares
will fluctuate in value,  therefore,  the value of your original  investment and
your return may vary.  Moreover,  past  performance  is no  guarantee  of future
results.




                                       54



FIRST INVESTORS LOGO


Shareholder Manual


A Guide to Your
First Investors
Mutual Fund Account


as of March 8, 1999





INTRODUCTION

Investing in mutual funds doesn't have to be complicated.  In addition to a wide
variety of mutual funds,  First  Investors  offers  personalized  service.  Your
registered  representative  is available to answer your  questions  and help you
process  your  transactions.  In the  event you wish to  process  a  transaction
directly,  the material provided in this  easy-to-follow  guide tells you how to
contact us and explains our policies and procedures.  Please note that there are
special rules for money market funds. Please read this manual completely to gain
a  better  understanding  of  how  shares  are  bought,  sold,  exchanged,   and
transferred.  In addition,  the manual  provides you with a  description  of the
services we offer to  simplify  investing.  The  services,  privileges  and fees
referenced in this manual are subject to change. You should call our Shareholder
Services Department at 1 (800) 423-4026 before initiating any transaction.  This
manual  must be  preceded  or  accompanied  by a  First  Investors  mutual  fund
prospectus. For more complete information on any First Investors Fund, including
charges and expenses,  refer to the  prospectus.  Read the prospectus  carefully
before you invest or send money.



                              Principal Underwriter
                           First Investors Corporation
                                 95 Wall Street
                               New York, NY 10005
                                 Transfer Agent
                               Administrative Data
                                Management Corp.
                                 581 Main Street
                              Woodbridge, NJ 07095
                                 1-800-423-4026




TABLE OF CONTENTS

HOW TO BUY SHARES

To Open An Account .........................................................  5
To Open a Retirement Account ...............................................  6
Minimum Initial Investment .................................................  6
Additional Investments .....................................................  6
Acceptable Forms of Payment ................................................  6
Share Classes ..............................................................  6
Share Class Specification ..................................................  7
Class A Shares .............................................................  7
Sales Charge Waivers & REductions on Class A Shares ........................  7
Class B Shares .............................................................  9
How To Pay ................................................................. 10
Wire Transfers ............................................................. 11
Distribution Cross-Investment .............................................. 12

HOW TO SELL SHARES
REDEMPTION OPTIONS ......................................................... 13
Written Redemptions ........................................................ 13
Telephone Redemptions ...................................................... 13
Electronic Funds Transfer .................................................. 13
Systematic Withdrawal Plans ................................................ 14
Expedited Wire Redemptions ................................................. 14

HOW TO EXCHANGE SHARES
Exchange Methods ........................................................... 15
Exchange Conditions ........................................................ 16
Exchanging Funds With.
Automatic Investments or
Systematic Withdrawals ..................................................... 16


WHEN AND HOW ARE FUND SHARES PRICED? ....................................... 17

HOW ARE PURCHASE, REDEMPTION, AND EXCHANGE ORDERS PROCESSED AND PRICED? .... 17
Purchases .................................................................. 17
Redemptions ................................................................ 18
Exchanges .................................................................. 18
Orders Placed Via First Investors Registered Representatives ............... 18
Special Rules for Money Market Funds ....................................... 19

SPECIAL RULES FOR MONEY MARKET ACCOUNTS .................................... 18

RIGHT TO REJECT PURCHASE OR EXCHANGE ORDERS ................................ 19

SIGNATURE GUARANTEE ARE REQUIRED............................................ 19

TELEPHONE SERVICES TELEPHONE EXCHANGES AND REDEMPTIONS ..................... 20
Security MEasures .......................................................... 20
Eligibility ................................................................ 20

NON-RETIREMENT ACCOUNTS .................................................... 20

RETIREMENT ACCOUNTS ........................................................ 20

Shareholder Services ....................................................... 21

OTHER SERVICES ............................................................. 22
Reinvestment Privilege ..................................................... 22
Certificate Shares ......................................................... 22
Money Market Fund Draft Checks ............................................. 22
Return Mail ................................................................ 23
Transferring Shares ........................................................ 23

ACCOUNT STATEMENTS
Transaction Confirmation Statements ........................................ 24
Master Account Statements .................................................. 24
Annual and Semi-Annual Reports ............................................. 24

DIVIDENDS AND DISTRIBUTIONS
Dividends and Distributions ................................................ 25
Buying a Dividend .......................................................... 25

TAX FORMS .................................................................. 26


                                       4



HOW TO BUY SHARES

First Investors offers a wide variety of mutual funds to meet your financial
needs ("FI Funds"). Your First Investors registered representative will review
your financial objectives and risk tolerance, explain our product line and
services, and help you select the right investments. Call our Shareholder
Services Department at 1 (800) 423-4026 for the number of the First Investors
office near you or visit us on-line at www.firstinvestors.com

o TO OPEN AN ACCOUNT
Before investing, you must establish an account with your broker/dealer. At
First Investors Corporation ("FI") you do this by completing and signing a
Master Account Agreement ("MAA"). After you determine the fund(s) you want to
purchase, deliver your completed MAA and your check, made payable to First
Investors Corporation, to your registered representative. New client accounts
must be established through your registered representative. You need to tell us
how you want your shares registered when you open a new Fund account. Please
keep the following information in mind:

- -JOINT ACCOUNTS. For any account with two or more owners, all owners must sign
requests to process transactions. Telephone privileges allow any one of the
owners to process transactions independently.

- -GIFTS AND TRANSFERS TO MINORS. Custodial accounts for a minor may be
established under your state's Uniform Gifts/Transfers to Minors Act. Custodial
accounts are registered under the minor's social security number.

TRUSTS. A trust account may be opened only if you have a valid written trust
document.

- -TRANSFER ON DEATH (TOD). TOD registrations, available on all FI Funds in all
states, allow individual and joint account owners to name one or more
beneficiaries. The ownership of the account automatically passes to the named
beneficiaries in the event of the death of all account owners.

- -DIVIDENDS AND CAPITAL GAINS. Fund distributions will be automatically
reinvested in your account unless you request otherwise.





_______________________________________________________________________________
SOME REGISTRATIONS REQUIRE ADDITIONAL PAPERWORK.
_______________________________________________________________________________
TYPE OF ACCOUNT          ADDITIONAL DOCUMENTS REQUIRED

Corporations
Partnership
& Trusts                 First Investors Certificate of Authority

Transfer On Death        First Investors TOD Registration Request Form
(TOD)

Estates                  Original or Certified Copy of Death Certificate
                         Certified Copy of Letters Testamentary/Administration
                         First Investors Executor's Certification &
                         Indemnification Form

Conservatorships         Copy of court document appointing Conservator/Guardian
& Guardianships
_______________________________________________________________________________


                                       5


oTO OPEN A RETIREMENT ACCOUNT

Fund shares may be purchased for your  retirement  account by completing the MAA
and  the  appropriate  retirement  plan  application.   First  Investors  offers
retirement  plans for both  individuals  and  employers  as follows:

INDIVIDUAL RETIREMENT ACCOUNTS
including Roth, Traditional, and Rollover IRAs.

SIMPLE IRAS offered by employers.

SEP-IRAS (SIMPLIFIED EMPLOYEE PENSION PLANS) for small business owners or people
with income from self-employment, including SARSEP IRAs.

403(B)(7) accounts for employees of eligible tax-exempt organizations such as
schools, hospitals and charitable organizations.

401(K) plans for employers.

MONEY PURCHASE PENSION & PROFIT SHARING plans for sole proprietors.

For more information about these plans call your registered representative or
our Shareholder Services Department at 1 (800) 423-4026.

oMINIMUM INITIAL INVESTMENT

You can  open a  non-retirement  account  with a check  made  payable  to  First
Investors Corporation for as little as $1,000. The minimum is waived if you open
an account through one of our Automatic  Investment  Programs (see "How to Pay")
or through a full exchange from another FI Fund. You can open a First  Investors
Traditional  IRA or  Roth  IRA  with as  little  as $500  (except  for the  Cash
Management Fund which requires a $1,000  investment).  Other retirement accounts
may  have  lower  initial  investment  requirements  at the  Fund's  discretion.

oADDITIONAL INVESTMENTS

Once you have established an account, you can add to it through your registered
representative or by sending us a check directly. There is no minimum
requirement on additional purchases into existing fund accounts. Remember to
include your FI Fund account number on your check made payable to First
Investors Corporation. Mail checks to: First Investors Corporation Attn: Dept.
Cp 581 Main Street Woodbridge, NJ 07095-1198

oACCEPTABLE FORMS OF PAYMENT

The following forms of payment are acceptable:

- -checks made payable to First Investors Corporation
- -Money Line electronic funds transfers
- -federal funds wire transfers

For your protection,  never give your registered  representative cash or a check
made payable to your registered representative.

We do not accept:
- -Third party checks

- -Traveler's checks

- -Checks drawn on non-US banks

- -Money orders

- -Cash

oSHARE CLASSES

All FI Funds are available in Class A and Class B shares. Direct purchases into
Class B share money market accounts are not accepted. Class B money market fund
shares may only be acquired through an exchange from another Class B share
account or through Class B share dividend cross-reinvestment.

Each class of shares has its own cost structure. As a result, different classes



                                       6




of shares in the same fund generally have different prices. Class A shares have
a front-end sales charge. Class B shares have a contingent deferred sales charge
("CDSC"). While both classes have a Rule 12b-1 fee, the fee on Class B shares is
generally higher. The principal advantages of Class A shares are that they have
lower overall expenses, the availability of quantity discounts on sales charges,
and certain account privileges that are not offered on Class B shares. The
principal advantage of Class B shares is that all your money is put to work from
the outset. Your registered representative can help you decide which class of
shares is best for you.

oSHARE CLASS SPECIFICATION

It's very important to specify which class of shares you wish to purchase when
you open a new account. All First Investors account applications have a place to
designate your preference. If you do not specify which class of shares you want
to purchase, Class A shares will automatically be purchased.

oCLASS A SHARES

When you buy Class A shares, you pay the offering price - the net asset value of
the fund plus a front-end sales charge. The front-end sales charge declines with
larger investments.


_______________________________________________________________________________
    CLASS A SALES CHARGES
_______________________________________________________________________________
                             AS A % OF              AS A % OF
YOUR INVESTMENT              OFFERING PRICE         INVESTMENT
up to $24,999                6.25%                  6.67%
$25,000 - $49,999            5.75%                  6.10%
$50,000 - $99,999            5.50%                  5.82%
$100,000 - $249,999          4.50%                  4.71%
$250,000 - $499,999          3.50%                  3.63%
$500,000 - $999,999          2.50%                  2.56%

Investments of $1 million or more will only be made in Class A shares at the
Fund's net asset value.

Generally, you should consider purchasing Class A shares if you plan to invest
$250,000 or more either initially or over time.
_______________________________________________________________________________
_______________________________________________________________________________

oSALES CHARGE WAIVERS & REDUCTIONS ON CLASS A SHARES

If you qualify for one of the sales  charge  reductions  or waivers,  it is very
important  to let us know at the time you place  your  order.  Include a written
statement with your check  explaining  which  privilege  applies.  If you do not
include this  statement we cannot  guarantee that you will receive the reduction
or waiver.

CLASS A SHARES MAY BE PURCHASED WITHOUT A SALES CHARGE:

1: By an officer, trustee, director, or employee of the Fund, the Fund's adviser
or subadviser, First Investors Corporation, or any affiliates of First Investors
Corporation.

2: By a former officer, trustee, director, or employee of the Fund,
First Investors Corporation,  or their affiliates provided the person worked for
the company for at least 5 years and retired or  terminated  employment  in good
standing.


                                       7




3: By a FI registered representative or an authorized dealer, or by his/her
spouse, child (under age 21) or grandchild (under age 21).

4: When fund  distributions are reinvested in Class A shares.

5: When Systematic Withdrawal  Plan payments are  reinvested in Class A shares.

6: When qualified retirement plan loan repayments are reinvested in Class A
shares.

7: With the liquidation proceeds from a First Investors Life Variable Annuity
Fund A, C, or D contract within one year of the contract's maturity date.

8:When dividends (at least $50 a year) from a First Investors Life Insurance
Company policy are invested into an EXISTING account.

9: When a group qualified plan (401(k) plans, money purchase pension plans,
profit sharing plans and 403(b) plans that are subject to Title I of ERISA) is
reinvesting redemption proceeds from another fund on which a sales charge or
CDSC was paid.

10: With distribution proceeds from a First Investors group qualified plan
account into an IRA.

11: By participant directed group qualified plans with 100 or more eligible
employees or $1,000,000 or more in assets.

12: In amounts of $1 million or more.

13: By individuals under a Letter of Intent or Cumulative Purchase Privilege of
$1 million or more.

FOR ITEMS 9 THROUGH 13 ABOVE: A CDSC OF 1.00% WILL BE
DEDUCTED IF SHARES ARE REDEEMED WITHIN 2 YEARS OF PURCHASE.

SALES CHARGES ON CLASS A SHARES MAY BE REDUCED FOR:

1: Participant directed group qualified retirement plans with 99 or fewer
eligible employees. The initial sales charge is reduced to 3.00% of the offering
price.

2: Certain unit trust holders ("unitholders") who elect to invest the entire
amount of principal, interest, and/or capital gains distributions from their
unit investment trusts in Class A shares. Unitholders of various series of New
York Insured Municipals-Income Trust sponsored by Van Kampen Merrit, Inc.,
unitholders of various series of the Multistate Tax Exempt trust sponsored by
Advest Inc., and unitholders of various series of the Insured Municipal Insured
National Trust, J.C. Bradford & Co. as agent, may buy Class A shares of a FI
Fund with unit trust distributions at the net asset value plus a sales charge of
1.5%. Unitholders of various tax-exempt trusts, other than the New York Trust,
sponsored by Van Kampen Merritt Inc. may buy Class A shares of a FI Fund at the
net asset value plus a sales charge of 1.0%.

Unitholders may make additional purchases, other than those made by unit trust
distributions, at the Fund's regular offering price.

CUMULATIVE PURCHASE PRIVILEGE The Cumulative Purchase Privilege lets you add the
value of all your existing FI Fund accounts (Class A and Class B shares) to the
amount of your next Class A share investment to reach sales charge discount
breakpoints. For example, if the combined value of your existing FI Fund
accounts is $25,000, your next purchase will be eligible for a sales charge
discount at the $25,000 level. Cumulative Purchase discounts are applied to
purchases as indicated in the first column of the Class A Sales Charge table.

All your accounts registered with the same social security number will be linked
together under the Cumulative Purchase Privilege. In addition, your spouse's
accounts and custodial accounts held for minor children residing at your home
can also be linked to your accounts upon request.

                                       8


- -Conservator accounts are linked to the social security number of the ward, not
the conservator.

- -Sole proprietorship accounts are linked to personal/family accounts only if the
account is registered with a social security number, not an employer
identification number ("EIN").

- -Testamentary trusts and living trusts may be linked to other accounts
registered under the same trust EIN, but not to the personal accounts of the
trustee(s).

- -Estate accounts may only be linked to other accounts registered under the same
EIN of the estate or social security number of the decedent.

- -Church and religious organizations may link accounts to others registered with
the same EIN but not to the personal accounts of any member.

LETTER OF INTENT

A Letter of Intent ("LOI") lets you purchase at a discounted sales charge level
even though you do not yet have sufficient investments to qualify for that
discount level. An LOI is a commitment by you to invest a specified dollar
amount during a 13-month period. The amount you agree to invest determines the
sales charge you pay. Under an LOI, you can reduce the initial sales charge on
Class A share purchases based on the total amount you agree to invest in both
Class A and Class B shares during the 13 month period. Purchases made up to 90
days before the date of the LOI may be included.

Your LOI can be amended in two ways. First, you may file an amended LOI to raise
or lower the LOI amount during the 13 month period. Second, your LOI will be
automatically amended if you invest more than your LOI amount during the
13-month period and qualify for an additional sales charge reduction.

By purchasing under an LOI, you acknowledge and agree to the following:

- -You authorize First Investors to reserve 5% of your total intended investment
in shares held in escrow in your name until the LOI is completed.

- -First Investors is authorized to sell any or all of the escrow shares to
satisfy any additional sales charges owed in the event you do not fulfill the
LOI.

- -Although you may exchange all your shares, you may not sell the reserve shares
held in escrow until you fulfill the LOI or pay the higher sales charge.

oCLASS B SHARES

Class B shares are sold without an initial sales charge, putting all your money
to work for you immediately. If you redeem Class B shares within 6 years of
purchase, a CDSC will be imposed. The CDSC declines from 4% to 0% over a 6-year
period, as shown in the chart below. Class B share money market fund shares are
not sold directly. They can only be acquired through an exchange from another
Class B fund account. Class B shares, and the dividend and distribution shares
they earn, automatically convert to Class A shares after 8 years, reducing
future annual expenses.

Generally, you should consider purchasing Class B shares if you intend to invest
less than $250,000 and you would rather pay higher ongoing expenses than an
initial sales charge.


                             CLASS B SALES CHARGES

        THE CDSC DECLINES OVER TIME AS SHOWN IN THE TABLE BELOW:
     ________________________________________________________________
        Year   1      2      3      4       5      6      7+
     ________________________________________________________________
        CDSC   4%     4%     3%     3%      2%     1%     0%
     ________________________________________________________________


                                       9



If shares redeemed are subject to a CDSC, the CDSC will be based on the lesser
of the original purchase price or redemption price. There is no CDSC on shares
acquired through dividend and capital gains reinvestment. We call these "free
shares."

Anytime you sell shares, your shares will be redeemed in the following manner to
ensure that you pay the lowest possible CDSC:

FIRST-Class B shares representing dividends and capital gains that are not
subject to a CDSC.

SECOND-Class B shares held more than six years which are not subject to a CDSC.

THIRD-Class B shares held longest which will result in the lowest CDSC.

For purposes of calculating the CDSC, all purchases made during the calendar
month are deemed to have been made on the first business day of the month at the
average cost of the shares purchased during that period.

SALES CHARGE WAIVERS ON CLASS B SHARES

The CDSC on Class B shares does not apply to:

1: Appreciation on redeemed shares above their original purchase price.

2: Redemptions due to death or disability (as defined in section 72(m)(7) of the
Internal Revenue Code) requested within one year of death. Additional
documentation is required.

3: Distributions from employee benefit plans due to termination or plan
transfer.

4: Redemptions to remove an excess contribution from an IRA or qualified
retirement plan.

5: Distributions upon reaching required minimum age 70 1/2 provided you have
held the shares for at least three years.

6: Annual redemptions of up to 8% of your account's value redeemed by a
Systematic Withdrawal Plan. Free shares not subject to a CDSC will be redeemed
first and will count towards the 8% limit.

7: Shares redeemed from advisory accounts managed by or held by the Fund's
investment advisor or any of its affiliates.

8: Tax-free returns of excess contributions from employee benefit plans.

9: Redemptions of non-retirement shares purchased with proceeds from the sale of
shares of another fund group between April 29, 1996 and June 30, 1996 that did
not pay a sales charge (other than money market fund accounts or retirement plan
accounts).

10: Redemptions by the Fund when the account falls below the minimum.

11:  Redemptions  to pay  account  fees.

Include a written statement with your redemption request explaining which
exemption applies. If you do not include this statement we cannot guarantee that
you will receive the waiver.

oHOW TO PAY

You can invest using one or more of the
following options:

- -CHECK:
You can buy shares by writing a check payable to
First Investors Corporation. If you are opening a new fund account, your check
must meet the fund minimum. When making purchases to an existing account,
remember to include your fund account number on your check.

- -AUTOMATIC INVESTMENT PROGRAMS:

We offer several automatic investment programs to simplify
investing.

- -MONEY LINE:

With our Money Line program, you can open an account with as little as $50 a
month or $600 each year in a FI Fund account by transferring funds
electronically from your bank account. You can invest up to $10,000 a month
through Money Line.


                                       10




Money Line allows you to select the payment  amount and  frequency  that is best
for you. You can make automatic investments  bi-weekly,  semi-monthly,  monthly,
quarterly,  semi-annually,  or annually.  The date you select as your Money Line
investment date is the date on which shares will be purchased. THE PROCEEDS MUST
BE  AVAILABLE IN YOUR BANK  ACCOUNT TWO  BUSINESS  DAYS PRIOR TO THE  INVESTMENT
DATE.



HOW TO APPLY:

1: Complete the Electronic Funds Transfer ("EFT") section of the application to
provide complete bank information and authorize EFT fund share purchases. Attach
a voided check. A signature guarantee of all shareholders and bank account
owners is required.

PLEASE ALLOW AT LEAST 10 BUSINESS DAYS FOR INITIAL PROCESSING.

2: Complete the Money Line section of the application to specify the amount,
frequency and date of the investment.

3: Submit the paperwork to your registered representative or send it to:
ADMINISTRATIVE DATA MANAGEMENT CORP., ATTN: CONTROL DEPT., 581 MAIN STREET,
WOODBRIDGE, NJ 07095-1198.

HOW TO CHANGE:

Provided you have telephone privileges, you may call Shareholder Services at 1
(800) 423-4026 to:

- -Increase the payment up to $999.99.

- -Decrease the payment.

- -Discontinue the service.

To change investment amounts, reallocate or cancel Money Line, you must notify
us at least 3 business days prior to the investment date.

You must send a signature guaranteed written request to Administrative Data
Management Corp. to:

- -Increase the payment to $1,000 or more.

- -Change bank information.

A medallion signature guarantee (see Signature Guarantee Policy) is required to
increase a Money Line payment to $2,500 or more. Changing banks or bank account
numbers requires 10 days notice. Money Line service will be suspended upon
notification that all account owners are deceased.

AUTOMATIC PAYROLL INVESTMENT: With our Automatic Payroll Investment service
("API") you can systematically purchase shares by salary reduction. To
participate, your employer must offer direct deposit and permit you to
electronically transfer a portion of your salary. Contact your company payroll
department to authorize the salary reductions. If not available, you may
consider our Money Line program.

Shares purchased through API are bought at the offering price on the day the
electronic transfer is received by the Fund.

HOW TO APPLY:

1: Complete an API Application.

2: Complete an API Authorization Form.

3: Submit the paperwork to your registered representative or send it to:
ADMINISTRATIVE DATA MANAGEMENT CORP., ATTN: CONTROL DEPT., 581 MAIN STREET,
WOODBRIDGE, NJ 07095-1198.

oWire Transfers:

You may purchase shares via a federal funds wire transfer from your bank account
into your EXISTING First Investors account. Federal fund wire transfer proceeds
are not subject to a holding period and are available to you immediately upon
receipt, as long as we have been notified properly.

YOU MUST CALL US AT 1 (800)  423-4026 TO ADVISE US OF AN INCOMING  FEDERAL FUNDS
WIRE and provide us with the federal  funds wire transfer  confirmation  number,
the amount of the wire,  and the fund account number to receive same day credit.

                                       11




There are special rules for money market fund accounts. To wire federal funds to
an existing First Investors account (other than money markets), instruct your
bank to wire your investment to: FIRST FINANCIAL SAVINGS BANK, S.L.A. ABA #
221272604 ACCOUNT # 0306142 YOUR NAME YOUR FIRST INVESTORS FUND ACCOUNT#

oDISTRIBUTION CROSS-INVESTMENT:

You can invest the dividends and capital gains from one fund account, excluding
the money market funds, into another fund account in the same class of shares.
The shares will be purchased at the net asset value on the day after the record
date of the distribution.

- -You must invest at least $50 a month or $600 a year into a NEW account.

- -A signature guarantee is required if the ownership on both accounts is not
identical.

You may establish a Distribution Cross-Investment service by contacting your
registered representative or calling Shareholder Services at 1 (800) 423-4026.

oSYSTEMATIC WITHDRAWAL PLAN PAYMENT INVESTMENTS:

You can invest Systematic Withdrawal Plan payments (see How to Sell Shares) from
one fund account in shares of another fund account.

- -Payments are invested without a sales charge.

- -A signature guarantee is required if the ownership on both accounts is not
identical.

- -Both accounts must be in the same class of shares.

- -You must invest at least $600 a year if into a new  account.

- -You can invest on a monthly, quarterly, semi-annual, or annual basis.

Redemptions are suspended upon notification that all account owners are
deceased. Service will recommence upon receipt of written alternative payment
instructions and other required documents from the decedent's legal
representative.

HOW TO SELL SHARES

You can sell your shares on any day the New York Stock Exchange is open for
regular trading. In the mutual fund industry, a sale is referred to as a
"redemption." Redemption proceeds are generally mailed within three days. If the
shares being redeemed were purchased by check, payment may be delayed to verify
that the check has been honored, which may take up to 15 days from the date of
purchase. Shareholders may not redeem shares by telephone or electronic funds
transfer unless the shares have been owned for at least 15 days.

Redemptions of shares are not subject to the 15 day verification period if the
shares were purchased via:

- -Automatic  Payroll  Investment

- -FIC registered representative payroll checks -First Investors Life Insurance
Company checks


- -Federal funds wire payments

                                       12



oREDEMPTION OPTIONS

For trusts, estates, attorneys-in-fact, corporations, partnerships, and other
entities, additional documents are required to redeem shares. Call Shareholder
Services at 1 (800) 423-4026 for more information.

WRITTEN REDEMPTIONS

You can write a letter of instruction or contact your First Investors registered
representative for a liquidation request form. A written liquidation request in
good order 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 to
redeem;

4: Share certificates (if they were issued to you);

5: Original signatures of all owners exactly as your account is registered;

6:  Signature guarantees, if required (see Signature Guarantee Policy).

Written redemption requests should be mailed to:

ADMINISTRATIVE DATA MANAGEMENT CORP.
581 MAIN STREET
WOODBRIDGE, NJ 07095-1198

TELEPHONE REDEMPTIONS

You, or any person we believe is authorized to act on your behalf, may redeem
shares which have been owned for at least 15 days by calling our Special
Services Department at 1 (800) 342-6221 from 9:00 a.m. to 5:00 p.m., EST,
provided:

- -Telephone privileges are available for your account registration (see Telephone
Privileges);

- -You have telephone privileges (see Telephone Privileges);

- -You do not hold share certificates (issued shares);

- -The redemption check is made payable to the registered owner(s) or
pre-designated bank;

- -The redemption check is mailed to your address of record;

- -Your address of record has not changed within the past 60 days;

- -The redemption amount is $50,000 or less; AND

- -The redemption  amount,  combined with the amount of all telephone  redemptions
made within the previous 30 days does not exceed $100,000.

ELECTRONIC FUNDS TRANSFER

The Electronic Funds Transfer ("EFT") service allows you to redeem shares and
electronically transfer proceeds to your bank account.

YOU MUST ENROLL IN THE ELECTRONIC FUNDS TRANSFER SERVICE AND PROVIDE COMPLETE
BANK ACCOUNT INFORMATION BEFORE USING THE PRIVILEGE. Signature guarantees of all
shareholders and all bank account owners are required. Please allow at least 10
business days for initial processing. We will send any proceeds during the
processing period to your address of record. Call your registered representative
or Shareholder Services at 1 (800) 423-4026 for an application.

You may call Shareholder Services or send written instructions to Administrative
Data Management Corp. to request an EFT redemption of shares which are held at
least 15 days. Each EFT redemption:

1: Must be electronically transferred to your pre-designated bank account;

2: Must be at least $500;

3: Cannot exceed $50,000;

4: Cannot exceed $100,000 when added to the total amount of all EFT
redemptions made within the previous 30 days.


                                       13



If your redemption does not qualify for an EFT redemption, you may request to
have the redemption proceeds mailed to you.

The Electronic Funds Transfer service may also be used to purchase shares (see
Money Line) and transfer systematic withdrawal payments (see Systematic
Withdrawal Plans) and dividend distributions (see Other Services) to your bank
account.

SYSTEMATIC WITHDRAWAL PLANS

Our Systematic Withdrawal Plan allows you to redeem a specific dollar amount or
percentage from your account on a regular basis. Your payments can be mailed to
you or a pre-authorized payee by check, transferred to your bank account
electronically (if you have enrolled in the EFT service) or invested in shares
of another FI fund in the same class of shares through our Systematic Withdrawal
Plan Payment investment service (see How to Buy Shares).

You can receive payments on a monthly, quarterly, semi-annual, or annual basis.
Your account must have a value of at least $5,000 in non-certificated shares
("unissued shares"). The $5,000 minimum account balance is waived for required
minimum distributions from retirement plan accounts. The minimum Systematic
Withdrawal Plan payment is $25 (waived for Required Minimum Distributions on
retirement accounts or FIL premium payments).

Once you establish the Systematic Withdrawal Plan, you should not make
additional investments into this account (except money market funds). Buying
shares during the same period as you are selling shares is not advantageous to
you because of sales charges.

If you own Class B shares, you may establish a Systematic Withdrawal Plan and
redeem up to 8% of the value of your account annually without a CDSC.

If you own Class B shares of a retirement account and you are receiving your
Required Minimum Distribution through a Systematic Withdrawal Plan, up to 8% of
the value of your account may be redeemed annually without a CDSC. However, if
your Required Minimum Distribution exceeds the 8% limit, the applicable CDSC
will be charged if the additional shares were held less than 3 years and you
have not reached age 70-1/2.

To establish a Systematic Withdrawal Plan, complete the appropriate section of
the account application or contact your registered representative or call
Shareholder Services at 1 (800) 423-4026.

oEXPEDITED WIRE  REDEMPTIONS  (MONEY MARKET FUNDS ONLY)

Enroll in our Expedited Redemption service to wire proceeds from your FI money
market account to your bank account. Call Shareholder Services at 1 (800)
423-4026 for an application or to discuss specific requirements.

- -Each wire under $5,000 is subject to a $10 fee.

- -Six wires of $5,000 or more are  permitted  without  charge  each  month.  Each
additional wire is $10.00.

- -Wires must be directed to your pre-authorized bank account.



                                       14




HOW TO EXCHANGE SHARES

The exchange privilege gives you the flexibility to change investments as your
goals change without incurring a sales charge. Since an exchange is a redemption
and a purchase, it creates a gain or loss which is reportable for tax purposes.
You should consult your tax advisor before requesting an exchange. Read the
prospectus of the FI Fund you are purchasing carefully. Review the differences
in objectives, policies, risk, privileges and restrictions.



______________________________________________________________________________
EXCHANGE METHODS
_______________________________________________________________________________

METHOD                       STEPS TO FOLLOW
                          

Through Your FI
Registered Representative    Call your registered representative.
___________________________________________________________________________________
By Phone                     Call Special Services from 9:00 a.m. to 5:00 p.m., EST
(800) 342-6221               Orders  received after the close of the New York Stock
Exchange, usually 4:00       p.m., est, are processed the following business day.

                             1.You must have telephone privileges
                            (see Telephone Transactions)

                             2.Certificate shares cannot be exchanged by phone.

                             3.For trusts, estates, attorneys-in-fact, corporations,
                             partnerships, and other entities, additional documents
                             are required.
____________________________________________________________________________________
By Mail to:                  1.Send us written instructions signed by all account
ADM                          exactly as the account is registered.
owners                       2. Include your fund account number.
ATTN: EXCHANGE DEPT.         3. Indicate either the dollar amount, number of shares
581 MAIN STREET              or percent of the account you want to exchange.
WOODBRIDGE, NJ 07095-119     4. Specify the existing account number or the name of
                             the new Fund you are exchanging into.

                             5. Include any outstanding share certificates for the
                             shares you want to exchange.

                             6. For trusts, estates, attorneys-in-fact, corporations,
                             partnerships, and other entities, additional documents
                             are required. Call Shareholder Services at 1 (800)
                             423-4026.
____________________________________________________________________________________




                                       15




oEXCHANGE CONDITIONS

1: You may only exchange  shares within the same Class.

2: Exchanges can only be made into identically owned accounts.

3: Partial  exchanges  into a new fund account must meet the new fund's  minimum
initial investment.

4: The fund you are  exchanging  into must be eligible for sale in your state.

5: If your request  does not clearly  indicate the amount to be exchanged or the
accounts involved, no shares will be exchanged.

6: Amounts  exchanged from a non-money market fund to a money market fund may be
exchanged  back at net asset  value.  Dividends  earned  from money  market fund
shares will be subject to a sales charge.

7: If you are exchanging from a money market fund to a fund with a sales charge,
there will be a sales charge on any shares that were not previously subject to a
sales  charge.  Your  request  must  be  in  writing  and  include  a  statement
acknowledging  that a sales charge will be paid. If you exchange  Class B shares
of a fund for  shares  of a Class B money  market  fund,  the  CDSC  will not be
imposed and the holding period used to calculate the CDSC will carry over to the
acquired shares.

8: FI Funds reserve the right to reject any exchange  order which in the opinion
of the Fund is part of a market timing  strategy.  In the event that an exchange
is rejected,  neither the  redemption nor the purchase side of the exchange will
be processed.

oEXCHANGING  FUNDS WITH AUTOMATIC  INVESTMENTS  OR  SYSTEMATIC  WITHDRAWALS

Let us know if you want to continue automatic investments into the original fund
or the fund you are exchanging into ("receiving fund") or if you want to change
the amount or allocation into both. Also inform us if you wish to continue,
terminate, or change a preauthorized systematic withdrawal. Without specific
instructions, we will amend account privileges as outlined below:

________________________________________________________________________________
                    EXCHANGE          EXCHANGE          EXCHANGE A
                    ALL SHARES TO     ALL SHARES TO     PORTION OF
                    ONE FUND          MULTIPLE          SHARES TO ONE OR
                                      FUNDS             MULTIPLE FUNDS
________________________________________________________________________________
MONEY LINE          ML moves to       ML stays with     ML stays with
(ML)                Receiving Fund    Original Fund     Original Fund


AUTOMATIC PAYROLL   API moves to      API Stays with    API stays with
INVESTMENT (API)    Receiving Fund    Original Fund     Original Fund


SYSTEMATIC          SWP moves to      SWP               SWP stays
WITHDRAWALS         Receiving Fund    Canceled          with Original Fund (SWP)
________________________________________________________________________________



                                       16




WHEN AND HOW ARE FUND SHARES PRICED?

Each FI Fund prices its shares each day that the New York Stock Exchange
("NYSE") is open for trading. The share price is calculated as of the close of
trading on the NYSE (generally 4:00 p.m., EST) except for shares of the money
market funds which are priced as of 12:00 noon. These days are referred to as
"Trading Days" in this Manual.

Each Fund calculates the net asset value of each class of its shares separately
by taking the total value of class assets, subtracting class expenses, and
dividing the difference by the total number of shares in the class. The price
that you will pay for a share is the NAV plus any applicable front-end sales
charge. You receive the NAV price if you redeem or exchange your shares, less
any applicable CDSC.

Fund prices are on our website (www.firstinvestors.com) the next day. The prices
for our larger funds are also reported in many newspapers, including The Wall
Street Journal and The New York Times. Special pricing procedures are employed
during emergencies. For a description of these procedures you can request, free
of charge, a copy of a Statement of Additional Information.

HOW ARE PURCHASE, REDEMPTION, AND EXCHANGE ORDERS PROCESSED AND PRICED?

The processing and price for a purchase, redemption or exchange depends upon how
your order is placed.  As indicated  below,  special rules apply to money market
transactions.

oPURCHASES

Purchases that are made by written application or order are processed when they
are received in "good order" by our Woodbridge, NJ office. To be in good order,
all required paperwork must be completed and payment received. If your order is
received prior to the close of trading on the NYSE, it will receive that day's
price (except in the case of the money market funds which are discussed below).
This procedure applies whether your purchase order is given to your registered
representative or mailed directly by you to our Woodbridge, NJ office.

As described previously in "How to Buy Shares," certain types of purchases can
only be placed by written application. For example, purchases in connection with
the opening of retirement accounts may only be made by written application.
Furthermore, rollovers of retirement accounts will be processed only when we
have received both written application and the proceeds of the rollover. Thus,
for example, if it takes 30 days for another fund group to send us the proceeds
of a retirement account, your purchase of First Investors funds will not occur
until we receive the proceeds.

Some types of purchases may be phoned or electronically transmitted to us by
your broker/dealer. If you give your order to a First Investors registered



                                       17



representative before the close of trading on the NYSE and the order is phoned
to our Woodbridge, NJ office prior to 5:00 p.m., EST, your shares will be
purchased at that day's price (except money market funds which are discussed
below). If you are buying a First Investors Fund through a broker-dealer other
than First Investors, other requirements may apply. Consult with your
broker-dealer about its requirements. Payment is due within three business days
of placing an order by phone or electronic means or the trade may be cancelled.
(In such event, you will be liable for any loss resulting from the
cancellation.) To avoid cancellation of your orders, you may arrange to open a
money market account and use it to pay for subsequent purchases.

Purchases made pursuant to our Automatic Investment Programs are processed as
follows:

- -Money Line purchases are processed on the dates you select on your application.

- -Automatic Payroll Investment Service purchases are processed on the dates that
we receive funds from your employer.

oREDEMPTIONS

As described previously in "How To Sell Shares", certain redemption orders may
only be made by written instructions or application. Unless you have declined
Telephone Privileges, most redemptions can be made by phone by you or your
registered representative.

Written redemption orders will be processed when received in good order in our
Woodbridge, NJ office. Phone redemption orders will be processed when received
in our Woodbridge, NJ office.

If your redemption order is received prior to the close of trading on the NYSE,
you will receive that day's price (except in the case of money market funds
which are discussed below). If you are redeeming through a broker-dealer other
than First Investors, other requirements may apply. Consult with your
broker-dealer about its requirements.

oEXCHANGES

Exchanges can generally be made by written instructions or, unless you have
declined Telephone Privileges, by phone by you or your registered
representative. Exchange orders are processed when we receive them in good order
in our Woodbridge, NJ office.

Exchange orders received prior to the close of trading on the NYSE will be
processed at that day's prices (except in the case of exchanges into or out of
money market funds which are discussed below).


oORDERS PLACED VIA FIRST INVESTORS REGISTERED REPRESENTATIVES

All orders placed through a First Investors registered representative must be
reviewed and approved by a principal officer of the branch office before being
mailed or transmitted to the Woodbridge, NJ office.

oORDERS PLACED VIA DEALERS

It is the responsibility of the Dealer to forward or transmit orders to the Fund
promptly and accurately. A fund will not be liable for any change in the price
per share due to the failure of the Dealer to place the order in a timely
fashion. Any such disputes must be settled between you and the Dealer.



                                       18



oSPECIAL RULES FOR MONEY MARKET FUNDS

A money market fund share purchase will not be made until we receive the funds
for the purchase. The funds for the purchase will not be deemed to have been
received until the morning of the next Trading Day following the Trading Day on
which your purchase check is received in our Woodbridge, NJ office. If a check
is received in our Woodbridge, NJ office after the close of regular trading on
the NYSE, the funds for the purchase will not be deemed to have been received
until the morning of the second following Trading Day.

If you make your purchase by wire transfer prior to 12:00 p.m., EST, and you
have previously advised us that the wire is on the way, the funds for the
purchase will be deemed to have been received on that same day. You must call
beforehand and give us your name, account number, the amount of the wire, and a
federal reference number documenting the transfer. If we fail to receive such
advance notification, the funds for your purchase will not be deemed to have
been received until the morning of the next Trading Day following receipt of the
federal wire and your account information. To wire funds to an existing First
Investors money market account, instruct your bank to wire your investment, as
applicable, to: CASH MANAGEMENT FUND BANK OF NEW YORK ABA #021000018 ACCOUNT
8900005696 YOUR NAME YOUR FIRST INVESTORS ACCOUNT # TAX-EXEMPT MONEY MARKET FUND
BANK OF NEW YORK ABA #021000018 ACCOUNT 8900023198 YOUR NAME YOUR FIRST
INVESTORS ACCOUNT #

Purchases by Money Line and Automatic Payroll Investment are processed in the
same manner as those in other Funds.

Requests for redemptions or exchanges out of or into our money market funds must
be received in writing or by phone prior to 12:00 p.m.,  EST, on a Trading  Day,
to be processed the same day. Redemption or exchange orders received after 12:00
p.m.,  EST,  but  before  the close of  regular  trading  on the  NYSE,  will be
processed on the morning of the following Trading Day.

RIGHT TO REJECT PURCHASE OR EXCHANGE ORDERS

A fund reserves the right to reject or restrict any specific purchase request if
the fund determines that doing so is in the best interest of the fund and its
shareholders. Investments in a fund are designed for long-term purposes and are
not intended to provide a vehicle for short-term market timing. The funds also
reserve the right to reject any exchange that in the funds' opinion is part of a
market timing strategy. In the event that a fund rejects an exchange request,
neither the redemption nor the purchase side of the exchange will be processed.

SIGNATURE GUARANTEE POLICY

A signature guarantee protects you from the risk of a
fraudulent signature and is generally required for non-standard and large dollar
transactions.  A signature  guarantee may be obtained from your First  Investors
registered  representative or eligible guarantor  institutions  including banks,
savings associations, credit unions and brokerage firms which are members of the
Securities  Transfer  Agents  Medallion  Program  ("STAMP"),  the New York Stock
Exchange Medallion  Signature Program ("MSP"),  or the Stock Exchanges Medallion
Program  ("SEMP").  Please  note  that a  notary  public  stamp  or  seal is not
acceptable. The words "Signature Guaranteed" must appear beside the signature of
the guarantor.

- -SIGNATURE GUARANTEES ARE REQUIRED:

1: For redemptions over $50,000.

2: For redemption checks made payable to any person(s) other than the registered
shareholder(s) or a major financial institution for the benefit of the
registered shareholder(s).

3: For redemption checks mailed to an address other than the address of record
(unless the check is mailed to a financial institution on your behalf).

4: For redemptions when the address of record has changed within 60 days of the
request.

5: When a stock certificate is mailed to an address other than the address of
record or to the dealer on the account.

6: When shares are transferred to a new registration.

7: When issued shares are redeemed.

8: To establish any EFT service.



                                       19




9: For requests to change the address of record to a P.O. box or a "c/o" street
address.

10: If multiple account owners of one account give inconsistent instructions.

11: When a transaction requires additional legal documentation.

12: When the authority of a representative of a corporation, partnership, trust,
or other entity has not been satisfactorily established.

13: When an address on an account which was coded "Do Not Mail" to suppress
check and dividend mailings due to a previously unknown address is updated.

14: Any other instance whereby a fund or its transfer agent deems it necessary
as a matter of prudence.

TELEPHONE SERVICES TELEPHONE EXCHANGES AND REDEMPTIONS 1 (800) 342-6221

You automatically receive telephone privileges when you open a First Investors
individual, joint, or custodial account unless you decline the option on your
account application or send the Fund written instructions. For trusts, estates,
attorneys-in-fact, corporations, partnerships, and other entities, additional
documents are required. Call Shareholder Services at 1 (800) 423-4026 for
assistance.

Telephone privileges allow you to exchange or redeem shares and authorize other
transactions by calling Special Services at 1 (800) 342-6221 from 9:00 a.m. to
5:00 p.m., EST, on any day the NYSE is open. Your First Investors registered
representative may also use telephone privileges to execute your transactions.

oSECURITY MEASURES

For your protection, the following security measures are taken:

1: Telephone requests are recorded to verify accuracy.

2: Some or all of the following information is obtained:

- -Account number

- -Address

- -Social security number

- -Other information as deemed necessary

3: A written confirmation of each transaction is mailed to you.

We will not be liable for following  instructions
if we reasonably  believe the instructions are genuine based on our verification
procedures.

oELIGIBILITY

NON-RETIREMENT  ACCOUNTS:

You can exchange or redeem shares of any non-retirement account by phone. Shares
must be owned for 15 days for telephone redemption. Telephone exchanges and
redemptions are not available on guardianship and conservatorship accounts.

RETIREMENT  ACCOUNTS:

You can exchange between shares of any participant directed IRA, 403(b) or
401(k) Simplifier plan where First Financial Savings Bank, S.L.A. is Custodian.
You may also exchange shares from an individually registered non-retirement
account to an IRA account registered to the same owner (provided an IRA
application is on file). Telephone exchanges are permitted on 401(k) Flexible
plans, money purchase pension plans and profit sharing plans if a First
Investors Qualified Retirement Plan Application is on file with the fund.
Contact your First Investors registered representative or call Shareholder
Services at 1 (800) 423-4026 to obtain a Qualified Retirement Plan Application.
Telephone redemptions are not permitted on First Investors retirement accounts.



                                       20



SHAREHOLDER SERVICES:
1 (800) 423-4026

PROVIDED YOU HAVE NOT DECLINED TELEPHONE PRIVILEGES, CALL US TO UPDATE OR
CORRECT:

- -Your address or phone number.

- -Your birth date (important for retirement distributions).

- -Your distribution option to reinvest or pay in cash (non-retirement accounts
only) or initiate cross reinvestment of dividends.

- -The amount of your Money Line or Automatic Payroll Investment payment.

- -The allocation of your Money Line or Automatic Payroll Investment  payment.

- -The amount of your Systematic Withdrawal payment.

TO REQUEST:

- -A duplicate copy of a statement or tax form.

- -A history of your account (the fee can be debited from your non-retirement
account).

- -A share certificate to be mailed to your address of record.

- -A stop payment on a dividend, redemption or money market check.

- -Suspension (up to six months) or cancellation of Money Line.

- -Cancellation of your Systematic Withdrawal Plan.

- -Cancellation of cross-reinvestment of dividends.

- -Money market fund draft checks.



                                       21



OTHER SERVICES

oREINVESTMENT PRIVILEGE

If you sell some or all of your Class A or Class B shares, you may be entitled
to reinvest all or a portion of the proceeds in the same class of shares of a FI
fund within six months of the redemption without a sales charge.

If you reinvest proceeds into a new fund account, you must meet the fund's
minimum initial investment requirement.

If you reinvest all the proceeds from a Class B share redemption, you will be
credited, in additional shares, for the full amount of the CDSC. If you reinvest
a portion of a Class B share redemption, you will be credited with a pro-rated
percentage of the CDSC.

The reinstatement privilege does not apply to automated purchases, automated
redemptions, or reinvestments in Class B shares of less than $1,000. Please
notify us if you qualify for this privilege. For more information, call
Shareholder Services at 1 (800) 423-4026.

oCERTIFICATE  SHARES

Every time you make a purchase of Class A shares, we will credit shares to your
fund account. We do not issue shares certificates unless you specifically
request them. Certificates are not issued on any Class B shares or on Class A
money market funds.

Having us credit shares on your behalf eliminates the expense of replacing lost,
stolen, or destroyed certificates. If a certificate is lost, stolen, or damaged,
you will be charged a replacement fee of the greater of 2% of the current value
of the certificated shares or $25.

In addition, certificated shares cannot be redeemed or exchanged until they are
returned with your transaction request. The share certificate must be properly
endorsed and signature guaranteed.

oMoney Market Fund Draft Checks

Free draft check writing privileges are available when you open a First
Investors Cash Management Fund or a First Investors Tax Exempt Money Market Fund
account. Checks may be written for a minimum of $500. Draft checks are not
available for Class B share accounts, retirement accounts, guardianships and
conservatorships. Complete the Money Market Fund Check Redemption section of the
account application to apply for draft checks. To order additional checks, call
Shareholder Services at 1 (800) 423-4026.

Additional documentation is required to establish check writing privileges for
trusts, corporations, partnerships and other entities. Call Shareholder Services
at 1 (800) 423-4026 for further information.

_______________________________________________________________________________
FEE TABLE

Call Shareholder Services at 1 (800) 423-4026 or send your request to FIC, Attn:
Correspondence Dept., 581 Main Street, Woodbridge N.J. 07095-1198 to request a
copy of the following records:

ACCOUNT HISTORY STATEMENTS                   CANCELLED CHECKS

1974 - 1982*   $10 per year fee              There is a $10 fee for a copy of a
1983 - present $5 total fee for all years    cancelled dividend, liquidation, or
Current &                                    investment check requested. There
Two Prior Years       Free                   cancelled money market draft check.

                                             DUPLICATE TAX FORMS

                                             Current Year     Free
                                             Prior Year(s)    $7.50 per tax form
                                                              per year
* ACCOUNT HISTORIES ARE NOT AVAILABLE
  PRIOR TO 1974.




                                       22



oRETURN MAIL

If mail is returned to the fund marked undeliverable by the U.S. Postal Service
after two consecutive mailings, and the fund is unable to obtain a current
shareholder address, the account status will be changed to "Do Not Mail" to
discontinue future mailings and prevent unauthorized persons from obtaining
account information.

You can remove the "Do Not Mail" status on your account by submitting written
instructions including your current address signed by all shareholders with a
signature guarantee (see Signature Guarantee Policy). Additional requirements
may apply for certain accounts. Call Shareholder Services at 1 (800) 423-4026
for more information.

Returned dividend checks and other distributions will be reinvested in the fund
when an account's status has been changed to "Do Not Mail". No interest will be
paid on outstanding checks prior to reinvestment. All future dividends and other
distributions will be reinvested in additional shares until new instructions are
provided. If you cannot be located within a period of time mandated by your
state of residence your fund shares may be turned over to your state (in other
words forfeited).

Prior to turning over assets to your state, the fund will seek to obtain a
current shareholder address in accordance with Securities and Exchange
Commission rules. A search company may be employed to locate a current address.
The fund may deduct the costs associated with the search from your account.

oTRANSFERRING  SHARES

A transfer is a change of share ownership from one customer to another. Unlike
an exchange, transfers occur within the same fund. You can transfer your shares
at any time.

To transfer shares, submit a letter of instruction including:

- -Your account number.

- -Dollar amount, percentage, or number of shares to be transferred.

- -Existing account number receiving the shares (IF ANY).

- -The name(s), registration, and taxpayer identification number of the customer
receiving the shares.

- -The signature of each account owner requesting the transfer with signature
guarantee(s).

In addition, we will request that the transferee complete a Master Account
Agreement to establish a brokerage account with First Investors Corporation and
validate his or her social security number to avoid back-up withholding. If the
transferee declines to complete an MAA, all transactions in the account must be
on an unsolicited basis and the account will be so coded.

Depending upon your account registration, additional documentation may be
required to transfer shares. Transfers due to the death or disability of a
shareholder also require additional documentation. Please call our Shareholder
Services Department at 1 (800) 423-4026 for specific transfer requirements
before initiating a request.

A transfer is a change of ownership and may trigger a taxable event. You should
consult your tax advisor before initiating a transfer.




                                       23




ACCOUNT STATEMENTS

oTRANSACTION CONFIRMATION STATEMENTS

You will receive a confirmation  statement  immediately after most transactions.
These include:

- -shareorder purchases

- -check investments

- -redemptions

- -exchanges

- -transfers

- -systematic withdrawals

Money Line and Automatic Payroll Investment purchases are not confirmed for each
transaction. They will appear on your next regularly scheduled monthly or
quarterly statement (see Dividend Schedule under "Dividends and Distributions").

A separate confirmation statement is generated for each fund account you own. It
provides:

- -Your fund account number

- -The date of the transaction

- -A description of the transaction (PURCHASE, REDEMPTION, ETC.)

- -The number of shares bought or sold for the transaction

- -The dollar amount of the transaction

- -The dollar amount of the dividend payment (IF APPLICABLE)

- -The total share balance in the account

- -The dollar amount of any dividends or capital gains paid

- -The number of shares held by you, held for you (INCLUDING ESCROW SHARES), and
the total number of shares you own.

The confirmation statement also provides a perforated Investment Stub with your
preprinted name, registration, and fund account number for future investments.

oMASTER ACCOUNT STATEMENTS

If First Investors Corporation is your broker, you will receive a Master Account
Statement for all your identically owned First Investors fund accounts on at
least a quarterly basis. The Master Account Statement will also include a recap
of any First Investors Life Insurance and Executive Investors Trust accounts you
may own. Joint accounts registered under your taxpayer identification number
will appear on a separate Master Account Statement but may be mailed in the same
envelope upon request.

The Master Account Statement provides the following information for each First
Investors fund you own:

- -fund name
- -fund's  current market value

- -total  distributions  paid  year-to-date
- -total  number of shares owned

oANNUAL AND SEMI-ANNUAL REPORTS

You will also receive an Annual and a Semi-Annual Report. These financial
reports show the assets, liabilities, revenues, expenses, and earnings of the
fund as well as a detailed accounting of all portfolio holdings. You will
receive one report per household.




                                       24



DIVIDENDS AND DISTRIBUTIONS

oDIVIDENDS AND DISTRIBUTIONS

For funds that declare daily dividends,  you start earning  dividends on the day
your purchase is made. For FI money market funds, you start earning dividends on
the day federal  funds are  credited  to your fund  account.  The funds  declare
dividends  from net investment  income and  distribute  the accrued  earnings to
shareholders as noted below:

________________________________________________________________________________
DIVIDEND PAYMENT SCHEDULE
________________________________________________________________________________
MONTHLY:                         QUARTERLY:             ANNUALLY (IF ANY):
Cash Management Fund             Blue Chip Fund         Global Fund
Fund for Income                  Growth & Income Fund   Special Situations Fund
Government Fund                  Total Return Fund      Mid-Cap Opportunity Fund
Insured Intermediate Tax-Exempt  Utilities Income Fund
Insured Tax Exempt Fund
Investment Grade Fund
High Yield Fund
Multi-State Insured Tax Free Fund
New York Insured Tax Free Fund
Tax-Exempt Money Market Fund
________________________________________________________________________________

Capital gains distributions, if any, are paid annually, usually near the end of
the fund's fiscal year. On occasion, more than one capital gains distribution
may be paid during one year. Dividend and capital gains distributions are
automatically reinvested to purchase additional fund shares unless otherwise
instructed. Dividend payments of less than $5.00 are automatically reinvested to
purchase additional fund shares.

oBUYING A DIVIDEND

If you buy shares shortly before the record date of the dividend, the entire
dividend you receive may be taxable even though a part of the distribution is
actually a return of your purchase price. This is called "buying a dividend."

There is no advantage to buying a dividend because a fund's net asset value per
share is reduced by the amount of the dividend.




                                       25






TAX FORMS

TAX FORM                         DESCRIPTION                                            MAILED BY
                                                                                 
_________________________________________________________________________________________________
1099-DIV       Consolidated report lists all taxable dividend and capital gains        January 31
               distributions for all of the  shareholder's accounts.  Also includes
               foreign taxes paid and any federal income tax withheld  due to backup
               withholding.
_________________________________________________________________________________________________
1099-B         Lists proceeds from all redemptions  including systematic               January
               31 withdrawals and exchanges.  A separate form is issued for each
               fund account.  Includes amount of federal income tax withheld due
               to backup withholding.
_________________________________________________________________________________________________
1099-R         Lists taxable distributions from a retirement account. A separate       January 31
               form is issued for each fund account. Includes federal
               income tax withheld due to IRS withholding requirements.
_________________________________________________________________________________________________
5498           Provided to shareholders who made an annual IRA                         May 31
               contribution or rollover purchase. Also provides the account's
               fair market value as of the last business day of the previous year.
               A separate form is issued for each fund account.
_________________________________________________________________________________________________
1042-S         Provided to non-resident  alien shareholders to report the amount       March 15
                of fund  dividends  paid and the amount of federal taxes
               withheld. A separate form is issued for each fund account.
_________________________________________________________________________________________________
Cost Basis     Uses the "average cost-single category" method to show the cost         January 31
Statement      basis of any shares sold or exchanged.  Information is provided
               to assist  shareholders in calculating capital gains or losses. A
               separate statement, included with Form 1099-B, is issued for each
               fund account.  This statement is not reported to the IRS and does
               not include money market funds or retirement accounts.
_________________________________________________________________________________________________
Tax Savings    Consolidated report lists all amounts not subject to federal,           January 31
Report for     state and local income tax for all the shareholder's accounts.
Non-Taxable    Also includes any amounts subject to alternative minimum tax.
Income
_________________________________________________________________________________________________
Tax Savings    Provides the percentage of income paid by each fund that may            January 31
Summary        be exempt from state income tax.
_________________________________________________________________________________________________



THE OUTLOOK

Today's  strategies for tomorrow's  goals are brought into focus in the OUTLOOK,
the  quarterly  newsletter  for  clients of First  Investors  Corporation.  This
informative  tool  discusses the products and services we offer to help you take
advantage  of current  market  conditions  and tax law  changes.  The  OUTLOOK'S
straight  forward approach and timely articles make it a valuable  resource.  As
always,  your  registered  representative  is  available  to  provide  you  with
additional  information and assistance.  Material  contained in this publication
should not be considered legal, financial, or other professional advice.

                                       26





                              Principal Underwriter
                           First Investors Corporation
                                 95 Wall Street
                               New York, NY 10005
                                 Transfer Agent
                               Administrative Data
                                Management Corp.
                                 581 Main Street
                              Woodbridge, NJ 07095
                                 1-800-423-4026






                                       62




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

                       STATEMENT OF ADDITIONAL INFORMATION
                             DATED JANUARY __, 2000

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

    This SAI is not a  prospectus.  It  should be read in  conjunction  with the
Funds'  Prospectus/Proxy  Statement dated January __, 2000 which may be obtained
free of cost from the Trust at the  address or  telephone  number  noted  above.
Information regarding the purchase,  redemption,  sale and exchange of your Fund
shares is contained in the  Shareholder  Manual,  a separate  section of the SAI
that  is a  distinct  document  and may  also be  obtained  free  of  charge  by
contacting your Fund at the address or telephone number noted above.

                                TABLE OF CONTENTS


                                                                            PAGE

Investment Strategies and Risks..............................................2
Investment Policies..........................................................5
Futures and Options Strategies..............................................16
Portfolio Turnover..........................................................22
Investment Restrictions.....................................................22
Trustees And Officers.......................................................27
Management..................................................................29
Underwriter.................................................................30
Distribution Plans..........................................................31
Determination of Net Asset Value............................................32
Allocation of Portfolio Brokerage...........................................33
Purchase, Redemption and Exchange of Shares.................................35
Taxes.......................................................................35
Performance Information.....................................................38
General Information.........................................................43
Pro Forma Financial Statements and Schedules................................45
Shareholder Manual: A Guide to your First Investors Mutual Fund Account.....46
Appendix A .................................................................47
Appendix B .................................................................48
Appendix C .................................................................49
Financial Statements........................................................53







                         INVESTMENT STRATEGIES AND RISKS

BLUE CHIP FUND

      The Fund seeks its objective by investing, under normal market conditions,
at least 65% of its total assets in common stocks of "Blue Chip"  companies that
the Fund's investment  adviser,  Executive Investors  Management  Company,  Inc.
("EIMCO" or "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.  It is the
Fund's policy to remain relatively fully invested in equity securities under all
market conditions rather than to attempt to time the market by maintaining large
cash or fixed-income  securities positions when market declines are anticipated.
The Fund is appropriate for investors who are comfortable  with a fully invested
stock portfolio.

      The Fund defines Blue Chip companies as those  companies that are included
in the S&P 500.  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  Microsoft  Corp.,  General  Electric Co.,
Pepsico Inc. and Bristol-Myers Squibb Co.

      The Fund  primarily  invests  in  stocks of  growth  companies.  These are
companies  which are expected to increase their earnings faster than the overall
market.  If earnings  expectations  are not met,  the prices of these stocks may
decline  substantially  even if  earnings  do  increase.  Investments  in growth
companies  may lack the dividend  yield that can cushion  stock prices in market
downturns.

      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),  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") (commonly referred
to as "high  yield  bonds"  or "junk  bonds").  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 10% of its  total  assets  in ADRs,  enter  into
repurchase agreements and make loans of portfolio securities.

      Additional  restrictions  are set forth in the  "Investment  Restrictions"
section of this SAI.

HIGH YIELD FUND

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


                                       2


preferred stocks and  dividend-paying  common stocks that have yields comparable
to those of high yielding debt  securities;  any of the foregoing  securities of
companies that are financially  troubled, in default or undergoing bankruptcy or
reorganization ("Deep Discount Securities"); and any securities convertible into
any  of  the  foregoing.   See  "High  Yield   Securities"  and  "Deep  Discount
Securities," below.

      The Fund may invest in debt securities  issued by foreign  governments and
companies  and  in  foreign  currencies  for  the  purpose  of  purchasing  such
securities. However, the Fund may not invest more than 5% of its total assets in
debt securities issued by foreign governments and companies that are denominated
in foreign currencies.  The Fund may invest up to 5% of its total assets in debt
securities of issuers  located in emerging market  countries.  The Fund also may
borrow money for temporary or emergency  purposes in amounts not exceeding 5% of
its total assets,  invest up to 10% of its net assets in securities  issued on a
when-issued  or delayed  delivery  basis,  invest up to 15% of its net assets in
restricted securities (which may not be publicly marketable), and invest in zero
coupon  and  pay-in-kind  securities.  In  addition,  the Fund may make loans of
portfolio securities.

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

      In any  period of  market  weakness  or of  uncertain  market or  economic
conditions,  the Fund may establish a temporary  defensive  position to preserve
capital by having all or part of its assets invested in 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.

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

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

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


                                       3


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

      The Fund seeks to achieve its secondary objective to the extent consistent
with its primary objective. There can be no assurance that the Fund will be able
to achieve its  investment  objectives.  The Fund's net asset  value  fluctuates
based mainly upon changes in the value of its portfolio securities.

      Additional  restrictions  are set forth in the  "Investment  Restrictions"
section of this SAI.

INSURED TAX EXEMPT FUND

    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  various  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.
While the Fund does not intend to buy any  instruments  whose interest income is
subject to  Federal  income tax or is a Tax  Preference  Item,  up to 20% of the
Fund's  net assets may be  invested  in  securities,  the  interest  of which is
subject to Federal income tax, including the AMT. 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  (collectively
with municipal bonds,  "Municipal  Instruments").  The Fund generally invests in
bonds with maturities of over fifteen years.
See "Municipal Instruments," below.

    While the Fund  diversifies its assets among municipal  issuers in different
states,  municipalities  and  territories,  from time to time it 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,  airport bonds or
electric utility bonds. Such a possible  concentration of the assets of the Fund
could result in the Fund being invested in securities  which are related in such
a way that  economic,  business,  political  or other  developments  which would
affect one security would probably  likewise affect the other securities  within
that particular segment of the bond market.

    The Fund may make loans of  portfolio  securities  and invest in zero coupon
municipal  securities.  The  Fund  may  invest  up to 25% of its net  assets  in
securities on a "when  issued"  basis,  which  involves an  arrangement  whereby
delivery  of, and payment  for,  the  instruments  occur up to 45 days after the
agreement  to  purchase  the  instruments  is made by a Fund.  The Fund also may
invest up to 20% of its assets,  on a temporary  basis,  in high  quality  fixed
income  obligations,  the  interest  on which is subject to Federal and state or
local  income  taxes.  In  addition,  the Fund 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).  The Fund may borrow  money for  temporary or
emergency  purposes  in  amounts  not  exceeding  5% of its  total  assets.  See
"Investment Policies," below.

    Although the Fund generally  invests in municipal  bonds rated Baa or higher
by  Moody's  or BBB or  higher by S&P,  the Fund may  invest up to 5% of its net
assets in lower rated municipal bonds or in unrated municipal bonds deemed to be
of comparable quality by the Adviser. See "Debt Securities," below.  However, in

                                       4


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.

    There can be no  assurances  that future  national,  regional or  state-wide
economic  developments  will not adversely  affect the market value of Municipal
Securities held by the Fund or the ability of particular obligors to make timely
payments of debt service on (or lease payments  relating to) those  obligations.
There is also the risk that  some or all of the  interest  income  that the Fund
receives  might become  taxable or be  determined  to be taxable by the Internal
Revenue Service,  applicable state tax authorities,  or a judicial body. See the
discussion on "Taxes." In addition, there can be no assurances that future court
decisions or legislative  actions will not affect the ability of the issuer of a
Municipal Security to repay its obligations.

    Additional  restrictions  are set  forth  in the  "Investment  Restrictions"
section of this SAI.

                               INVESTMENT POLICIES

    AMERICAN DEPOSITORY  RECEIPTS.  American Depository Receipts ("ADRs") may be
purchased through "sponsored" or "unsponsored"  facilities. A sponsored facility
is  established  jointly  by  the  issuer  of  the  underlying  security  and  a
depository,  whereas a depository may establish an unsponsored  facility without
participation by the issuer of the depository  security.  Holders of unsponsored
depository  receipts  generally  bear all the costs of such  facilities  and the
depository  of an  unsponsored  facility  frequently  is under no  obligation to
distribute shareholder  communications received from the issuer of the deposited
security or to pass through voting rights to the holders of such receipts of the
deposited securities.  ADRs are not necessarily denominated in the same currency
as the underlying securities to which they may be connected.  Generally, ADRs in
registered form are designed for use in the U.S.  securities  market and ADRs in
bearer form are designed for use outside the United States.

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

    BOND MARKET CONCENTRATION.  INSURED TAX EXEMPT FUND may invest more than 25%
of its total assets in a particular segment of the bond market, such as hospital
revenue bonds, housing agency bonds, industrial development bonds, airport bonds
and university dormitory bonds. Such concentration may occur in periods when one
or more of these segments offer higher yields and/or profit potential.  The Fund
has no fixed policy as to concentrating its investments in a particular  segment
of the bond market, because bonds are selected for investment based on appraisal
of their individual value and income. This possible  concentration of the assets
of the Fund may  result  in the Fund  being  invested  in  securities  which are
related in such a way that economic,  business,  political developments or other
changes which would affect one security would probably likewise affect the other
securities within that particular segment of the bond market. Such concentration
of the Fund's  investments  could increase market risks, but risk of non-payment
of interest  when due,  or default of  principal,  are covered by the  insurance
obtained by the Fund.


                                       5


    CERTIFICATES  OF  DEPOSIT.  Each  Fund may  invest in bank  certificates  of
deposit ("CDs").  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.  BLUE CHIP FUND and HIGH  YIELD  FUND may invest in
convertible  securities.  While no  securities  investment is without some risk,
investments  in  convertible  securities  generally  entail  less  risk than the
issuer's common stock, although the extent to which such risk is reduced depends
in large measure upon the degree to which the  convertible  security sells above
its value as a fixed  income  security.  The Adviser will decide to invest based
upon a fundamental  analysis of the long-term  attractiveness  of the issuer and
the underlying  common stock, the evaluation of the relative  attractiveness  of
the current price of the  underlying  common stock and the judgment of the value
of the convertible security relative to the common stock at current prices.

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

    FOREIGN  GOVERNMENT  OBLIGATIONS.  HIGH  YIELD  FUND may  invest in  foreign
government  obligations,  which  generally  consist of obligations  supported by
national,  state or provincial  governments or similar  political  subdivisions.
Investments in foreign  government debt  obligations  involve special risks. The
issuer of the debt may be unable or unwilling to pay interest or repay principal
when due in  accordance  with  the  terms  of such  debt,  and the Fund may have
limited  legal  resources  in  the  event  of  default.   Political  conditions,
especially  a  sovereign  entity's  willingness  to meet  the  terms of its debt
obligations, are of considerable significance.

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


                                       6


political or social  instability or diplomatic  developments  which could affect
assets of the HIGH YIELD FUND held in foreign countries.

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

            EFFECT OF INTEREST RATE AND ECONOMIC CHANGES. Debt obligations rated
lower than Baa by Moody's or BBB by S&P,  commonly  referred to as "junk bonds,"
are  speculative  and generally  involved a higher risk or loss of principal and
income than  higher-rated  debt securities.  The prices of High Yield Securities
tend  to  be  less   sensitive  to  interest  rate  changes  than   higher-rated
investments, but may be more sensitive to adverse economic changes or individual
corporate  developments.  Periods of economic  uncertainty and changes generally
result in  increased  volatility  in the market  prices and yields of High Yield
Securities  and thus in the  Fund's  net asset  value.  A  significant  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 higher incidence of default. This would affect the value of
such securities and thus the Fund's net asset value. Further, if the issuer of a
security owned by the Fund defaults,  it might incur additional expenses to seek
recovery.

            Generally,  when interest  rates rise,  the value of fixed rate debt
obligations,  including High Yield Securities,  tends to decrease; when interest
rates fall, the value of fixed rate debt  obligations  tends to increase.  If an
issuer of a High  Yield  Security  containing  a  redemption  or call  provision
exercised either provision in a declining  interest rate market,  the fund would
have to replace  the  security,  which could  result in a  decreased  return for
shareholders. Conversely, if the Fund experience 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 the Fund's  portfolio and the Adviser's  careful analysis of
prospective  portfolio  securities helps to minimize the impact of a decrease in
value of a particular security or group of securities in the 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 the Fund's ability to sell such securities at fair value
in  response  to  changes  in the  economy  or the  financial  markets.  Adverse
publicity  and  investor  perceptions,  whether  or  not  based  on  fundamental
analysis,  may also decrease the values and liquidity of lower rated securities,
especially in a thinly traded market.

            CREDIT RATINGS.  The credit ratings issued by credit rating services
may not fully  reflect  the true risks of an  investment.  For  example,  credit
ratings typically  evaluate the safety of principal and interest  payments,  not
market value risk, of High Yield  Securities.  Also,  credit rating agencies may
fail to change on a timely basis a credit rating to reflect  changes in economic
or company conditions that affect a security's market value. The Fund may invest
in securities rated as low as D by S&P or C by Moody's or, if unrated, deemed to
be of comparable  quality by the Adviser.  Debt  obligations  with these ratings
either have defaulted or are in great danger of defaulting and are considered to
be highly speculative.  The Adviser continually  monitors the investments in the


                                       7


Fund's  portfolio and carefully  evaluates  whether to dispose of or retain High
Yield  Securities  whose  credit  ratings  have  changed.  See  Appendix A for a
description of corporate bond ratings.

            LIQUIDITY AND  VALUATION.  Lower-rated  bonds are  typically  traded
among a  smaller  number of  broker-dealers  than in a broad  secondary  market.
Purchasers  of High  Yield  Securities  tend  to be  institutions,  rather  than
individuals,  which is a factor that further  limits the second  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 the Fund to value or sell High Yield  Securities will
be adversely  affected to the extent that such  securities  are thinly traded or
illiquid.  During such periods, there may be less reliable objective information
available and thus the responsibility of the Trust's Board of Trustees ("Board")
to value High Yield  Securities  become 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.

    INSURANCE.  The municipal bonds in INSURED TAX EXEMPT FUND'S  portfolio will
be insured as to their scheduled  payments of principal and interest at the time
of  purchase  either  (1) under a Mutual  Fund  Insurance  Policy  written by an
independent insurance company; (2) under an insurance policy obtained subsequent
to a municipal bond's original issue (a "Secondary Market Insurance Policy"); or
(3) under an  insurance  policy  obtained by the issuer or  underwriter  of such
municipal  bond at the  time  of  original  issuance  (a  "New  Issue  Insurance
Policy").  An insured  municipal bond in the Fund's portfolio  typically will be
covered by only one of the three policies.  For instance, if a municipal bond is
already covered by a New Issue Insurance  Policy or a Secondary Market Insurance
Policy,  then that  security will not be  additionally  insured under the Mutual
Fund Insurance Policy.

    The Trust has purchased a Mutual Fund Insurance Policy ("Policy") from AMBAC
Assurance Corporation  ("AMBAC"),  a Wisconsin stock insurance company, with its
principal  executive offices in New York City. The Policy guarantees the payment
of principal  and interest on  municipal  bonds  purchased by the Fund which are
eligible  for  insurance  under the Policy.  Municipal  bonds are  eligible  for
insurance  if they are  approved by AMBAC  prior to their  purchase by the Fund.
AMBAC  furnished the Fund with an approved  list of municipal  bonds at the time
the Policy was issued and  subsequently  provides  amended and modified lists of
this type at periodic intervals.  AMBAC may withdraw particular  securities from
the approved list and may limit the  aggregate  amount of each issue or category
of  municipal  bonds  therein,  in each case by notice to the Fund  prior to the
entry by the Fund of an order to  purchase  a  specific  amount of a  particular
security  otherwise  eligible for insurance under the Policy.  The approved list
merely  identifies  issuers  whose issues may be eligible for insurance and does
not constitute approval of, or a commitment by, AMBAC to insure such securities.
In determining  eligibility  for insurance,  AMBAC has applied its own standards
which correspond  generally to the standard it normally uses in establishing the
insurability  of new issues of municipal bonds and which are not necessarily the
criteria which would be used in regard to the purchase of municipal bonds by the
Fund. The Policy does not insure:  (1) obligations of, or securities  guaranteed
by, the United States of America or any agency or instrumentality  thereof;  (2)
municipal  bonds which were insured as to payment of  principal  and interest at
the time of their issuance;  (3) municipal bonds purchased by the Fund at a time
when they were  ineligible for insurance;  (4) municipal bonds which are insured
by insurers other than AMBAC;  and (5) municipal bonds which are no longer owned
by the Fund.  AMBAC has  reserved  the  right at any time,  upon 90 days'  prior
written notice to the Fund, to refuse to insure any additional  municipal  bonds
purchased by the Fund, on or after the effective  date of such notice.  If AMBAC
so  notifies  the Fund,  the Fund will  attempt  to replace  AMBAC with  another


                                       8


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

    The  Policy  does not  guarantee  the market  value or yield of the  insured
municipal bonds or the net asset value or yield of the Fund's shares. The Policy
will be effective only as to insured  municipal  bonds owned by the Fund. In the
event of a sale by the Fund of a municipal  bond insured  under the Policy,  the
insurance  terminates  as to such  municipal  bond on the  date of  sale.  If an
insured  municipal bond in default is sold by the Fund, AMBAC is liable only for
those payments of interest and principal which are then due and owing and, after
making  such  payments,  AMBAC will have no further  obligations  to the Fund in
respect of such  municipal  bond. It is the intention of the Fund,  however,  to
retain any insured  securities  which are in default or in  significant  risk of
default and to place a value on the defaulted  securities  equal to the value of
similar insured  securities which are not in default.  While a defaulted bond is
held by the Fund,  the Fund continues to pay the insurance  premium  thereon but
also  collects  interest  payments  from the  insurer  and  retains the right to
collect the full amount of principal  from the insurer when the  municipal  bond
comes  due.  See  "Determination  of  Net  Asset  Value"  for  a  more  complete
description of the Fund's method of valuing securities in default and securities
which have a significant risk of default.

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

    In addition to the  contract of insurance  relating to the Fund,  there is a
contract of insurance between AMBAC and First Investors  Multi-State Insured Tax
Free Fund,  between  AMBAC and First  Investors  Series Fund,  between AMBAC and
First Investors New York Insured Tax Free Fund, Inc. and between AMBAC and First
Investors  Insured  Tax  Exempt  Fund,  Inc.  Otherwise,  neither  AMBAC  or any
affiliate thereof, has any material business  relationship,  direct or indirect,
with the Funds.

    AMBAC 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  $3,289,594,353
(unaudited) and statutory capital of  $1,920,300,000  (unaudited) as of December


                                       9


31,  1998.  Statutory  capital  consists of AMBAC's  policyholders'  surplus and
statutory  contingency  reserve.  S&P,  Moody's  and Fitch have each  assigned a
triple-A claims-paying ability rating to AMBAC.

    AMBAC has obtained a private letter ruling from the Internal Revenue Service
("IRS") to the  effect  that the  insuring  of an  obligation  by AMBAC will not
affect the  treatment  for  Federal  income tax  purposes  of  interest  on such
obligation and that insurance  proceeds  representing  maturing interest paid by
AMBAC 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. Investors should understand that a private letter ruling may not be cited
as  precedent  by  persons  other  than the  taxpayer  to whom it is  addressed;
nevertheless,  those  rulings  may be  viewed  as  generally  indicative  of the
Internal Revenue  Service's views on the proper  interpretation  of the Code and
the regulations thereunder.

    AMBAC makes no representation  regarding the municipal bonds included in the
investment  portfolio  of the  Fund or the  advisability  of  investing  in such
municipal bonds and makes no representation  regarding,  nor has it participated
in the preparation of, the Prospectus and this SAI.

    The  information  relating to AMBAC  contained  above has been  furnished by
AMBAC. 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.

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

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

    MONEY MARKET  INSTRUMENTS.  Investments by each Fund 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
Appendix A for a description of commercial paper ratings.



                                       10


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

      RISKS  OF  MORTGAGE-BACKED  SECURITIES.   Investments  in  mortgage-backed
securities   entail   market,   prepayment   and  extension   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.  Prepayment generally increases when interest rates decline.  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.  As a  result,  mortgage-backed
securities  may have less potential for capital  appreciation  during periods of
declining interest rates as compared with other U.S. Government  securities with
comparable  stated  maturities.  Conversely,  rising  interest  rates  may cause
prepayment  rates to occur at a slower than expected rate.  This may effectively
lengthen the life of a security,  which is known as extension risk.  Longer term
securities  generally  fluctuate  more widely in response to changes in interest
rates than shorter term securities.  Changes 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.

        GNMA CERTIFICATES.  Government  National Mortgage  Association  ("GNMA")
certificates  ("GNMA  Certificates")  are  mortgage-backed   securities,   which
evidence an undivided  interest in a pool of mortgage loans.  GNMA  Certificates
differ from bonds in that  principal is paid back  monthly by the borrower  over
the term of the loan  rather  than  returned  in a lump  sum at  maturity.  GNMA
Certificates  that the Fund  purchases  are the  "modified  pass-through"  type.
"Modified  pass-through" GNMA Certificates entitle the holder to receive a share
of all interest and principal payments paid and owed on the mortgage pool net of
fees paid to the "issuer" and GNMA,  regardless  of whether or not the mortgagor
actually makes the payment.

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

        LIFE OF GNMA  CERTIFICATES.  The average life of a GNMA  Certificate  is
likely to be substantially less than the original maturity of the mortgage pools
underlying the  securities.  Prepayments of principal by mortgagors and mortgage
foreclosures  will usually result in the return of the greater part of principal
investment  long before maturity of the mortgages in the pool. The Fund normally
will not  distribute  principal  payments  (whether  regular or  prepaid) to its
shareholders.   Rather,   it   will   invest   such   payments   in   additional
mortgage-related  securities of the types described above.  Interest received by


                                       11


the Fund will, however,  be distributed to shareholders.  Foreclosures impose no
risk to principal investment because of the GNMA guarantee.  As prepayment rates
of the  individual  mortgage  pools vary  widely,  it is not possible to predict
accurately the average life of a particular issue of GNMA Certificates.

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

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

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

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

    MUNICIPAL  INSTRUMENTS-INSURED  TAX  EXEMPT  FUND.  As  used  in  this  SAI,
"Municipal Instruments" include the following:  (1) municipal bonds; (2) private
activity  bonds  or  industrial   development   bonds,   (3)   certificates   of
participation ("COPS"), (4) municipal commercial paper; (5) municipal notes; and
(6)  variable  rate  demand  instruments  (`VRDIs").  Generally,  the  value  of
Municipal Instruments varies inversely with changes in interest rates.

      MUNICIPAL  BONDS.  Municipal bonds are debt obligations that generally are
issued to obtain funds for various public  purposes and have a time to maturity,
at  issuance,  of more  than one  year.  The two  principal  classifications  of
municipal bonds are "general obligation" and "revenue" bonds. General obligation
bonds are  secured by the  issuer's  pledge of its full faith and credit for the
payment of principal and interest. Revenue bonds generally are payable only from
revenues  derived from a particular  facility or class of facilities or, in some
cases,  from the  proceeds of a special tax or other  specific  revenue  source.
There  are  variations  in the  security  of  municipal  bonds,  both  within  a
particular  classification  and between  classifications,  depending on numerous
factors.  The yields on municipal  bonds depend on, among other things,  general
money market  conditions,  condition  of the  municipal  bond market,  size of a
particular  offering,  the maturity of the  obligation and rating of the issuer.
Generally,  the value of municipal bonds varies inversely to changes in interest
rates. See Appendix B 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

                                       12


bonds and are not backed by the taxing power of the issuing agency or authority.
See "Taxes" 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.

        The Board has  established  guidelines for  determining the liquidity of
COPs in the Fund's  portfolio  and,  subject to its review,  has delegated  that
responsibility to the Adviser. Under these guidelines, the Adviser will consider
(1) the  frequency  of trades  and quotes  for the  security,  (2) the number of
dealers  willing  to  purchase  or sell the  security  and the  number  of other
potential  buyers,  (3) the willingness of dealers to undertake to make a market
in the security,  (4) the nature of the marketplace,  namely, the time needed to
dispose of the security,  the method of  soliciting  offers and the mechanics of
transfer,  (5) the coverage of the  obligation by new issue  insurance,  (6) the
likelihood that the  marketability of the obligation will be maintained  through
the time the security is held by the Fund,  and (7) for unrated COPs,  the COPs'
credit  status  analyzed by the  Adviser  according  to the factors  reviewed by
rating agencies.

      MUNICIPAL COMMERCIAL PAPER. Issues of municipal commercial paper which the
Fund may  purchase  are rated  P-1 by  Moody's  or A-1 by S&P or have  insurance
through the issuer or an independent  insurance  company and include  unsecured,
short-term,  negotiable  promissory notes.  Municipal commercial paper is issued
usually to meet temporary capital needs of the issuer or to serve as a source of
temporary  construction  financing.  These  obligations  are paid  from  general
revenues of the issuer or are refinanced  with long-term  debt. A description of
commercial paper ratings is contained in Appendix A.

      MUNICIPAL  NOTES.  Municipal  notes  which the Fund may  purchase  will be
principally  tax  anticipation   notes,   bond   anticipation   notes,   revenue
anticipation  notes and project  notes.  The  obligations  are sold by an issuer
prior to the occurrence of another revenue producing event to bridge a financial
gap for such issuer.  Municipal  notes are usually  general  obligations  of the
issuing  municipality.  Project  notes are issued by housing  agencies,  but are
guaranteed  by the U.S.  Department  of Housing  and Urban  Development  and are
secured by the full faith and credit of the United States.  Such municipal notes
must be rated  MIG-1 by Moody's  or SP-1 by S&P or have  insurance  through  the
issuer or an  independent  insurance  company.  A description  of municipal note
ratings is contained in Appendix B.

      VARIABLE RATE DEMAND  INSTRUMENTS.  VRDIs are Municipal  Instruments,  the
interest  on which is  adjusted  periodically,  which allow the holder to demand
payment of all unpaid  principal plus accrued  interest from the issuer.  A VRDI
that the Fund may purchase will be selected if it meets criteria established and
designed by the Board to minimize risk to the Fund. In addition,  a VRDI must be
rated MIG-1 by Moody's or SP-1 by S&P or insured by the issuer or an independent
insurance company. There is a recognized after-market for VRDIs.

    PREFERRED STOCK.  Each Fund may invest in 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.



                                       13


    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  SECURITIES  AND ILLIQUID  INVESTMENTS.  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  Act"),  which the Board or the  Adviser  has  determined  under
Board-approved guidelines are liquid.

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

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


                                       14


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.

    Over-the-counter  ("OTC") options and their  underlying  collateral are also
considered  illiquid  investments.  INSURED  TAX  EXEMPT  FUND may not invest in
options. While BLUE CHIP FUND and HIGH YIELD FUND have no intention of investing
in options in the coming  year,  if any such Fund did,  the assets used as cover
for OTC options written by the Fund would not be considered  illiquid unless the
OTC options are sold to qualified dealers who agree that the Fund may repurchase
any OTC option it writes at a maximum  price to be  calculated  by a formula set
forth in the option  agreement.  The cover for an OTC option written  subject to
this procedure would be considered  illiquid only to the extent that the maximum
repurchase price under the formula exceeds the intrinsic value of the option

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

    WHEN-ISSUED SECURITIES. HIGH YIELD FUND and INSURED TAX EXEMPT FUND may each
invest up to 10% and 25%,  respectively,  of its net assets in securities issued
on a when-issued  or delayed  delivery basis at the time the purchase is made. A
Fund generally  would not pay for such  securities or start earning  interest on
them until they are issued or  received.  However,  when a Fund  purchases  debt
obligations on a when-issued basis, it assumes the risks of ownership, including
the  risk of price  fluctuation,  at the  time of  purchase,  not at the time of
receipt.  Failure of the issuer to deliver a security  purchased  by a Fund on a
when-issued  basis may  result in that  Fund's  incurring  a loss or  missing an
opportunity  to  make  an  alternative  investment.  When a Fund  enters  into a
commitment  to purchase  securities  on a when-issued  basis,  it  establishes a
separate  account on its books and records or with its  custodian  consisting of
cash or liquid  high-grade  debt  securities  equal to the amount of that Fund's
commitment,  which are  valued at their  fair  market  value.  If on any day the
market  value of this  segregated  account  falls  below  the  value of a Fund's
commitment,  that Fund will be required to deposit  additional cash or qualified
securities into the account until equal to the value of that Fund's  commitment.
When the  securities  to be  purchased  are  issued,  the Fund  will pay for the
securities  from  available  cash,  the  sale of  securities  in the  segregated
account,  sales  of  other  securities  and,  if  necessary,  from  sale  of the
when-issued  securities  themselves  although this is not  ordinarily  expected.
Securities  purchased on a when-issued basis are subject to the risk that yields
available in the market,  when delivery takes place, may be higher than the rate
to be  received on the  securities  a Fund is  committed  to  purchase.  Sale of
securities in the segregated  account or sale of the when-issued  securities may
cause the realization of a capital gain or loss.

    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




                                       15


value, which discount varies depending on the time remaining until cash payments
begin,  prevailing  interest rates,  liquidity of the security and the perceived
credit quality of the issuer. Pay-in-kind securities are those that pay interest
through the issuance of additional securities.  The market prices of zero coupon
and  pay-in-kind  securities  generally  are more  volatile  than the  prices of
securities that pay interest  periodically and in cash and are likely to respond
to changes in  interest  rates to a greater  degree  than do other types of debt
securities having similar maturities and credit quality. Original issue discount
earned  each year on zero coupon  securities  (including  zero coupon  Municipal
Securities)  and the "interest" on pay-in-kind  securities must be accounted for
by a Fund that holds the securities  for purposes of  determining  the amount it
must  distribute  that  year to  continue  to  qualify  for tax  treatment  as a
regulated  investment  company and, for HIGH YIELD FUND, to avoid certain excise
tax on  undistributed  income.  Thus, 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.
HIGH  YIELD  FUND and  INSURED  TAX  EXEMPT  FUND  will not be able to  purchase
additional   income-producing   securities   with   cash   used  to  make   such
distributions, and their current income ultimately could be reduced as a result.

                         FUTURES AND OPTIONS STRATEGIES

    Although they do not intend to engage in such strategies in the coming year,
BLUE CHIP FUND has the legal authority to engage in certain options  strategies,
and HIGH YIELD FUND AND  INSURED  TAX EXEMPT  FUND have the legal  authority  to
engage in certain  futures  strategies,  to hedge their  portfolios and in other
circumstances  permitted by the Commodities Futures Trading Commission ("CFTC").
In addition, INSURED TAX EXEMPT FUND may engage in certain options strategies to
enhance   income.   To  hedge   their   portfolios,   BLUE  CHIP  FUND  may  buy
exchange-traded  put and call  options on stock  indices and enter into  closing
transactions with respect to such options,  and HIGH YIELD FUND may buy and sell
interest rate futures  contracts traded on a board of trade.  INSURED TAX EXEMPT
FUND may sell  covered  listed put and call  options and buy call and put on its
portfolio  securities  and may enter into closing  transactions  with respect to
such options. The Fund also may buy and sell financial futures contracts and buy
and sell call and put  options  thereon  traded on a U.S.  exchange  or board of
trade and enter into closing transactions with respect to such options.

    Certain special  characteristics  of, and risks associated with, using these
instruments  and strategies  are discussed  below.  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 and the CFTC. The  discussion of these  strategies
does not imply  that the Funds will use them to hedge  against  risks or for any
other purpose.

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

    COVER FOR HEDGING AND OPTION INCOME STRATEGIES. No Fund will use leverage in
its  hedging  and  option  income  strategies.  Each Fund will not enter  into a


                                       16


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  and/or  liquid
assets 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 assets in a segregated account with
its custodian in the prescribed  amount.  Securities or other options or futures
positions used for cover and assets held in a segregated  account cannot be sold
or closed out while the hedging or option income strategy is outstanding  unless
they are replaced with similar assets. As a result,  there is a possibility that
the use of cover or segregation  involving a large percentage of a Fund's assets
could  impede  portfolio  management  or the Fund's  ability to meet  redemption
requests or other current obligations.

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

    INSURED TAX EXEMPT FUND may write  covered  call  options on  securities  to
increase  income in the form of premiums  received  from the  purchasers  of the
options.  Because it can be expected that a call option will be exercised if the
market value of the  underlying  security  increases to a level greater than the
exercise price, the Fund will write covered call options on securities generally
when  the  Adviser  believes  that  the  premium  received  by  the  Fund,  plus
anticipated  appreciation  in the market price of the underlying  security up to
the exercise price of the option, will be greater than the total appreciation in
the  price  of the  security.  The  strategy  may be  used  to  provide  limited
protection  against a decrease in the market  price of the security in an amount
equal to the premium  received for writing the call option less any  transaction
costs.  Thus,  if the market price of the  underlying  security held by the Fund
declines,  the amount of such  decline  will be offset  wholly or in part by the
amount of the premium received by the Fund. If, however, there is an increase in
the market price of the  underlying  security and the option is  exercised,  the
Fund 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 OTC  options  written  by the Fund,  to the
extent described under "Investment  Policies--Restricted Securities and Illiquid
Investments"  and therefore  subject to the Fund's  limitation on investments in
illiquid securities. In addition, the Fund could lose the ability to participate
in an increase in the value of such  securities  above the exercise price of the
call option  because  such an increase  would likely be offset by an increase in
the cost of closing  out the call option (or could be negated if the buyer chose
to exercise the call option at an exercise price below the  securities'  current
market value).

    INSURED  TAX  EXEMPT  FUND may write put  options.  A put  option  gives the
purchaser  of the  option  the  right  to  sell,  and the  writer  (seller)  the
obligation  to buy, the  underlying  security at the  exercise  price during the
option period. So long as the obligation of the writer continues, the writer may
be assigned an exercise  notice by the  broker-dealer  through which such option
was sold, requiring it to make payment of the exercise price against delivery of

                                       17


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

    Currently,  many options on equity securities are  exchange-traded,  whereas
options  on  debt   securities   are   primarily   traded  on  the  OTC  market.
Exchange-traded  options  in the U.S.  are  issued  by a  clearing  organization
affiliated  with the  exchange on which the option is listed  which,  in effect,
guarantees completion of every exchange-traded option transaction.  In contrast,
OTC options are contracts between a Fund and the opposite party with no clearing
organization guarantee.  Thus, when a Fund purchases an OTC option, it relies on
the dealer from which it has  purchased  the OTC option to make or take delivery
of the securities  underlying  the option.  Failure by the dealer to do so would
result  in the loss of the  premium  paid by the Fund as well as the loss of the
expected benefit of the transaction.

    SPECIAL  CHARACTERISTICS  AND RISKS OF OPTIONS  TRADING.  BLUE CHIP FUND and
INSURED  TAX EXEMPT FUND may  effectively  terminate  their right or  obligation
under an option by entering into a closing transaction. If either Fund wishes to
terminate its  obligation to sell  securities  under a put or call option it has
written, the Fund may purchase a put or call option of the same series (that is,
an 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

                                       18


fluctuations in the underlying  securities market or, in the case of stock index
options, fluctuations in the market sector represented by the index selected.

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

    A  position  in an  exchange-listed  option  may be  closed  out  only on an
exchange that provides a secondary market for identical options.  The ability to
establish and close out positions on the exchanges is subject to the maintenance
of a liquid  secondary  market.  Although  BLUE CHIP FUND and INSURED TAX EXEMPT
FUND intend to purchase  or write only those  exchange-traded  options for which
there  appears to be a liquid  secondary  market,  there is no assurance  that a
liquid secondary  market will exist for any particular  option at any particular
time. Closing transactions may be effected with respect to options traded in the
OTC markets  (currently the primary markets for options on debt securities) only
by  negotiating  directly  with the other  party to the option  contract or in a
secondary  market for the  option if such  market  exists.  Although a Fund will
enter into OTC options only with dealers that agree to enter into,  and that are
expected to be capable of entering into, closing transactions with a Fund, there
is no  assurance  that the Fund  will be able to  liquidate  an OTC  option at a
favorable  price at any time prior to expiration.  In the event of insolvency of
the  opposite  party,  a  Fund  may  be  unable  to  liquidate  an  OTC  option.
Accordingly,  it may not be possible to effect closing transactions with respect
to certain  options,  with the result that a Fund would have to  exercise  those
options that it has  purchased  in order to realize any profit.  With respect to
options written by a Fund, the inability to enter into a closing transaction may
result in material losses to the Fund. For example, because a Fund must maintain
a covered position with respect to any call option it writes,  that Fund may not
sell the  underlying  assets  used to cover an option  during  the  period it is
obligated  under the option.  This  requirement may impair the Fund's ability to
sell a portfolio  security or make an  investment  at a time when such a sale or
investment might be advantageous.

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

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

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

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

                                       19


position. A Fund may sell an interest rate futures contract in order to continue
to receive the income from a debt security,  while  endeavoring to avoid part or
all of the decline in the market value of that security that would  accompany an
increase in interest rates.

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

    HIGH YIELD FUND and INSURED TAX EXEMPT FUND will use futures  contracts and,
for  INSURED  TAX  EXEMPT  FUND,  options  thereon  solely in bona fide  hedging
transactions or under other circumstances  permitted by the CFTC and INSURED TAX
EXEMPT FUND will not enter into such investments for which the aggregate initial
margin and premiums  exceed 5% of that Fund's total assets.  This does not limit
that Fund's assets at risk to 5%. The Fund has  represented the foregoing to the
CFTC.

    FUTURES GUIDELINES.  To the extent that a Fund enters into futures contracts
or options thereon other than for bona fide hedging  purposes (as defined by the
CFTC), (1) the aggregate initial margin and premiums required to establish these
positions  (excluding the in-the-money  amount for options that are in-the-money
at the time of  purchase)  will not  exceed 5% of the  liquidation  value of the
Fund's portfolio, after taking into account unrealized profits and losses on any
contracts  into which the Fund has entered.  This policy does not limit a Fund's
assets at risk to 5%.  The value of all  futures  sold will not exceed the total
market  value of a Fund's  portfolio.  In  addition,  each Fund may not purchase
interest rate futures  contracts if immediately  thereafter more than 30% of its
total assets would be so invested.

    SPECIAL  CHARACTERISTICS AND RISKS OF FUTURES TRADING. No price is paid upon
entering into futures contracts. Instead, upon entering into a futures contract,
HIGH YIELD FUND and INSURED TAX EXEMPT FUND are  required to deposit  with their
custodian  in a  segregated  account in the name of the 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.
INSURED TAX EXEMPT FUND is also  obligated to make initial and variation  margin
payments when it writes options on futures contracts.

    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.



                                       20


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

    Successful  use by HIGH YIELD FUND and  INSURED  TAX EXEMPT  FUND of futures
contracts and, for INSURED TAX EXEMPT FUND,  related  options,  will depend upon
the  Adviser's  ability to predict  movements  in the  direction  of the overall
securities  and interest  rate  markets,  which  requires  different  skills and
techniques  than  predicting  changes  in the prices of  individual  securities.
Moreover,  futures  contracts  relate  not to the  current  price  level  of the
underlying instrument but to the anticipated levels at some point in the future.
There is, in addition,  the risk that the  movements in the price of the futures
contract or related  option will not  correlate  with the movements in prices of
the securities being hedged.  In addition,  if a Fund has insufficient  cash, it
may have to sell  assets  from its  portfolio  to meet  daily  variation  margin
requirements.  Any such  sale of assets  may or may not be made at  prices  that
reflect  the rising  market.  Consequently,  a Fund may need to sell assets at a
time  when such  sales are  disadvantageous  to that  Fund.  If the price of the
futures  contract or related  option moves more than the price of the underlying
securities,  a Fund  will  experience  either  a loss or a gain  on the  futures
contract  or  related  option,  that  may or may  not be  completely  offset  by
movements in the price of the securities that are the subject of the hedge.

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

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

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

    Purchasers of options on futures contracts pay a premium in cash at the time
of  purchase.  This  amount and the  transaction  costs are all that is at risk.
Sellers of options on a futures contract,  however, must post initial margin and


                                       21


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

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

                               PORTFOLIO TURNOVER

    Although  each  Fund  generally  will  not  invest  for  short-term  trading
purposes,  portfolio securities may be sold 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 (100% or more) generally leads to transaction costs and may result in a
greater number of taxable transactions. See "Allocation of Portfolio Brokerage."

    For the fiscal year ended December 31, 1998, the portfolio turnover rate for
BLUE CHIP FUND,  HIGH YIELD FUND and INSURED  TAX EXEMPT  FUND was 96%,  41% and
172%,  respectively.  For the fiscal year ended December 31, 1999, the portfolio
turnover  rate for BLUE CHIP FUND,  HIGH YIELD FUND and  INSURED TAX EXEMPT FUND
was __%, __% and __%, respectively.

                             INVESTMENT RESTRICTIONS

    The  investment  restrictions  set  forth  below  have been  adopted  by the
respective Fund and, unless identified as non-fundamental  policies,  may not be
changed  without the affirmative  vote of a majority of the  outstanding  voting
securities of that Fund,  voting separately from any other Fund of the Trust. As
provided in the Investment Company Act of 1940, as amended ("1940 Act"), a "vote
of a  majority  of the  outstanding  voting  securities  of the Fund"  means the
affirmative vote of the lesser of (1) more than 50% of the outstanding shares of
the Fund or (2) 67% or more of the shares of the Fund  present at a meeting,  if
more than 50% of the outstanding shares are represented at the meeting in person
or by proxy. Except with respect to borrowing, changes in values of a particular
Fund's  assets  will  not  cause  a  violation  of  the   following   investment
restrictions so long as percentage restrictions are observed by that Fund at the
time it purchases any security.

    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.



                                       22


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

    (4) Invest more than 25% of the Fund's total assets (taken at current value)
in the  obligations  of one or more  issuers  having  their  principal  business
activities in the same industry.

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

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

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

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

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

    (10) Purchase any securities on margin.

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

    (12)  Invest in any  securities  of any issuer if, to the  knowledge  of the
Fund, any officer,  director or Trustee of the Trust or of the Adviser owns more
than 1/2 of 1% of the outstanding  securities of such issuer, and such officers,
directors or Trustees who own more than 1/2 of 1% own in the aggregate more than
5% of the outstanding securities of such issuer.

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

    (1) 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.

    (2) 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.



                                       23



    HIGH YIELD FUND.  HIGH YIELD FUND will not:

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

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

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

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

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

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

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

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

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

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

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



                                       24


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

    (13)  Invest  more than 25% of the  Fund's  total  assets  (taken at current
value) in the obligations of one or more issuers having their principal business
activities in the same industry.

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

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

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

    (17) Issue senior securities.

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

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

    The following  investment  restriction is not fundamental and may be changed
without shareholder approval:

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

    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) Issue senior securities.

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



                                       25


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

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

    (6) Invest more than 25% of the Fund's total assets (taken at current value)
in the  obligations  of one or more  issuers  having  their  principal  business
activities in the same industry.

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

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

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

    (11)  Invest in any  securities  of any issuer if, to the  knowledge  of the
Fund, any officer,  director or Trustee of the Trust or of the Adviser owns more
than 1/2 of 1% of the outstanding  securities of such issuer, and such officers,
directors or Trustees who own more than 1/2 of 1% own in the aggregate more than
5% of the outstanding securities of such issuer.

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

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

    (2) Purchase or sell  physical  commodities  unless  acquired as a result of
ownership of securities  (but this  restriction  shall not prevent the Fund from
purchasing  or  selling  options,  futures  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 other than
for bona fide hedging purposes (as defined by the CFTC) if the aggregate initial
margin and premiums required to establish these positions  (excluding the amount
by which options are  "in-the-money"  at the time of purchase) may not exceed 5%
of the  liquidation  value of the Fund's  portfolio,  after  taking into account
unrealized  profits and unrealized  losses on any contracts the Fund has entered
into.



                                       26


    (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.

                              TRUSTEES AND OFFICERS

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

JAMES J. COY (85).  Emeritus  Trustee,  90 Buell Lane,  East Hampton,  NY 11937.
Retired;  formerly  Senior  Vice  President,   James  Talcott,  Inc.  (financial
institution).

GLENN O. HEAD*+ (74), President and Trustee. Chairman of the Board and Director,
Administrative  Data  Management  Corp.  ("ADM"),   FIMCO,  Executive  Investors
Management Company,  Inc.  ("EIMCO"),  First Investors Asset Management Company,
Inc.  ("FIAMCO"),  First  Investors  Corporation  ("FIC"),  Executive  Investors
Corporation ("EIC") and First Investors Consolidated Corporation ("FICC").

KATHRYN  S.  HEAD*+  (44),  Trustee,  581 Main  Street,  Woodbridge,  NJ  07095.
President and Director,  FICC, ADM and FIMCO;  Vice President and Director,  FIC
and EIC;  President  EIMCO;  Chairman,  President and Director,  First Financial
Savings Bank, S.L.A.

LARRY R. LAVOIE* (52), Trustee.  Assistant  Secretary,  ADM, EIC, EIMCO, FIAMCO,
FICC and FIMCO; President, FIAMCO; Secretary and General Counsel, FIC.

REX R. REED** (77),  Trustee,  259 Governors  Drive,  Kiawah  Island,  SC 29455.
Retired; formerly Senior Vice President, American Telephone & Telegraph Company.

HERBERT   RUBINSTEIN**  (78),  Trustee,   695  Charolais  Circle,   Edwards,  CO
81632-1136.  Retired; formerly President,  Belvac International Industries, Ltd.
and President, Central Dental Supply.

NANCY SCHAENEN** (68), Trustee, 56 Midwood Terrace,  Madison, NJ 07940. Trustee,
Drew University and DePauw University.

JAMES M. SRYGLEY** (67), Trustee, 39 Hampton Road, Chatham, NJ 07982. Principal,
Hampton Properties, Inc. (property investment company).

JOHN T. SULLIVAN* (67), Trustee and Chairman of the Board; Director, FIMCO, FIC,
FICC and ADM; Of Counsel, Hawkins, Delafield & Wood, Attorneys.

ROBERT F. WENTWORTH** (70), Trustee,  217 Upland Downs Road,  Manchester Center,
VT 05255.  Retired;  formerly  financial  and planning  executive  with American
Telephone & Telegraph Company.



                                       27


JOSEPH I. BENEDEK (42),  Treasurer and Principal  Accounting  Officer,  581 Main
Street, Woodbridge, NJ 07095. Treasurer, FIMCO and EIMCO.

CONCETTA DURSO (64), Vice President and Secretary. Vice President,  FIMCO, EIMCO
and ADM; Assistant Vice President and Assistant Secretary, FIC and EIC.

CLARK D. WAGNER (40), Vice President.  Vice  President,  First Investors  Series
Fund, First Investors Insured Tax Exempt Fund, Inc., First Investors Multi-State
Insured Tax Free Fund,  First  Investors  New York Insured Tax Free Fund,  Inc.,
Executive  Investors  Trust and First Investors  Government  Fund,  Inc.;  Chief
Investment Officer, FIMCO.

GEORGE V. GANTER (46),  Vice President.  Vice  President,  First Investors Asset
Management Company,  Inc., First Investors High Yield, Inc., and First Investors
Special Bond Fund; Portfolio Manager, FIMCO.

PATRICIA D. POITRA (43),  Vice President.  Vice President,  First Investors U.S.
Government Plus Fund,  First Investors  Series Fund II, Inc. and First Investors
Series Fund; Director of Equities, FIMCO.


* These  Trustees  may be deemed to be  "interested  persons," as defined in the
1940 Act.
** These Trustees are members of the Board's Audit Committee.
+  Mr. Glenn O. Head and Ms. Kathryn S. Head are father and daughter.

    The Trustees and officers,  as a group,  owned less than 1% of shares of any
Fund.

    All of the officers and Trustees,  except for Ms. Poitra and Messrs.  Ganter
and  Wagner,  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
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.



                                       28



    The following table lists compensation paid to the Trustees of the Trust for
the fiscal year ended December 31, 1999.

                                       TOTAL
                                       COMPENSATION
                                       FROM FIRST
                      AGGREGATE        INVESTORS FAMILY
                      COMPENSATION     OF FUNDS PAID TO
 TRUSTEE              FROM TRUST*      TRUSTEE++
 -------              ------------     ----------------

James J. Coy**          $-0-                 $-0-

Roger L. Grayson***     $-0-                 $-0-

Glenn O. Head           $-0-                 $-0-

Kathryn S. Head         $-0-                 $-0-

Larry R. Lavoie+        $-0-                 $-0-

Rex R. Reed                $                    $

Herbert Rubinstein         $                    $

James M. Srygley           $                    $

John T. Sullivan        $-0-                 $-0-

Robert F. Wentworth        $                    $

Nancy Schaenen             $                    $

- ----------------------
* Compensation  to officers and interested  Trustees of the Trust is paid by the
Adviser.
** On March 27,  1997,  Mr. Coy  resigned  as a Trustee  of the  Trust.  Mr. Coy
currently serves as an Emeritus Trustee. Mr. Coy is paid by the Adviser.
*** On August 20, 1998, Mr. Grayson resigned as a Trustee of the Trust.
+ On  September  17,  1998,  Mr.  Lavoie  was  elected  by the Board to serve as
Trustee.
++ The  First  Investors  Family of Funds  consists  of 15  separate  registered
investment companies.

                                   MANAGEMENT

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

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


                                       29



such  Fund,  and,  in  either  case,  by a vote  of a  majority  of the  Trust's
Independent  Trustees  voting in person at a meeting  called for the  purpose of
voting on such approval.

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

                                                                        Annual
Average Daily Net Assets                                                 Rate
- ------------------------                                                ------

Up to $200 million...................................................   1.00%
In excess of $200 million up to $500 million.........................   0.75
In excess of $500 million up to $750 million.........................   0.72
In excess of $750 million up to $1.0 billion.........................   0.69
Over $1.0 billion....................................................   0.66


    For the fiscal  years ended  December  31,  1997,  1998 and 1999,  BLUE CHIP
FUND'S advisory fees were $29,330, $43,487 and $_______,  respectively.  Of such
amounts,   the  Adviser   voluntarily  waived  $21,997,   $25,229  and  $______,
respectively.  For the fiscal  years ended  December  31,  1997,  1998 and 1999,
INSURED TAX EXEMPT FUND'S  advisory fees were  $156,479,  $167,864 and $_______,
respectively. Of such amounts, the Adviser voluntarily waived $117,359, $120,222
and $_______,  respectively.  For the fiscal years ended December 31, 1997, 1998
and 1999, HIGH YIELD FUND'S advisory fees were $180,560,  $195,205 and $_______,
respectively.  Of such amounts, the Adviser voluntarily waived $90,280,  $97,603
and $______,  respectively.  For the fiscal year ended  December  31, 1998,  the
Adviser  voluntarily  assumed expenses for BLUE CHIP FUND and INSURED TAX EXEMPT
FUND in the amounts of $10,161 and  $21,698,  respectively.  For the fiscal year
ended December 31, 1999, the Adviser  voluntarily assumed expenses for BLUE CHIP
FUND and  INSURED  TAX  EXEMPT  FUND in the  amounts  of  $______  and  $______,
respectively.

     The Adviser has an Investment  Committee composed of Dennis T. Fitzpatrick,
George V. Ganter, Michael Deneka, David Hanover, Glenn O. Head, Kathryn S. Head,
Nancy W. Jones, Michael O'Keefe, Patricia D. Poitra, Clark D. Wagner and Matthew
Wright.  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.

     First  Investors   Consolidated   Corporation  ("FICC")  owns  all  of  the
outstanding  stock of the  Adviser,  Executive  Investors  Corporation,  and the
Funds' transfer agent. Mr. Glenn O. Head controls FICC and, therefore,  controls
the Adviser.

                                   UNDERWRITER

    The  Trust  has  entered  into  an  Underwriting  Agreement   ("Underwriting
Agreement") with Executive Investors Corporation  ("Underwriter" or "EIC") which
requires  the  Underwriter  to use its best efforts to sell shares of the Funds.
The  Underwriting  Agreement  was  approved  by the Trust's  Board,  including a
majority of the Independent Trustees.  The Underwriting  Agreement provides that


                                       30


it will  continue in effect from year to year,  with respect to a Fund,  only so
long as such  continuance  is  specifically  approved  at least  annually by the
Trust's Board or by a vote of a majority of the outstanding voting securities of
such  Fund,  and in  either  case  by the  vote  of a  majority  of the  Trust's
Independent  Trustees,  voting in person at a meeting  called for the purpose of
voting on such approval. The Underwriting Agreement will terminate automatically
in the event of its assignment.

    For the  fiscal  year  ended  December  31,  1997,  BLUE  CHIP FUND paid EIC
underwriting  commissions  of $3,324.  For the same  period,  EIC  reallowed  an
additional  $10,933 to  unaffiliated  dealers and $2,518 to FIC.  For the fiscal
year ended December 31, 1998, BLUE CHIP FUND paid EIC  underwriting  commissions
of  $4,954.  For the  same  period,  EIC  reallowed  an  additional  $27,753  to
unaffiliated  dealers and $4,526 to FIC. For the fiscal year ended  December 31,
1999, BLUE CHIP FUND paid EIC underwriting  commissions of $______. For the same
period, EIC reallowed an additional  $______ to unaffiliated  dealers and $_____
to FIC.

    For the  fiscal  year  ended  December  31,  1997,  HIGH YIELD FUND paid EIC
underwriting  commissions  of $17,493.  For the same  period,  EIC  reallowed an
additional  $122,540 to  unaffiliated  dealers and $5,239 to FIC. For the fiscal
year ended December 31, 1998, HIGH YIELD FUND paid EIC underwriting  commissions
of  $14,639.  For the same  period,  EIC  reallowed  an  additional  $108,983 to
unaffiliated  dealers and $5,172 to FIC. For the fiscal year ended  December 31,
1999, HIGH YIELD FUND paid EIC underwriting commissions of $______. For the same
period, EIC reallowed an additional $_______ to unaffiliated  dealers and $_____
to FIC.

    For the fiscal year ended  December 31,  1997,  INSURED TAX EXEMPT FUND paid
EIC underwriting  commissions of $6,680.  For the same period,  EIC reallowed an
additional  $28,463 to  unaffiliated  dealers and $5,596 to FIC.  For the fiscal
year ended  December  31,  1998,  INSURED TAX EXEMPT FUND paid EIC  underwriting
commissions of $9,625.  For the same period, EIC reallowed an additional $76,513
to  unaffiliated  dealers and $1,494 to FIC. For the fiscal year ended  December
31, 1999,  INSURED TAX EXEMPT FUND paid EIC underwriting  commissions of $_____.
For the same period, EIC reallowed an additional $______ to unaffiliated dealers
and $_____ to FIC.

                               DISTRIBUTION PLANS

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

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



                                       31



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

    For the fiscal year ended December 31, 1999,  BLUE CHIP FUND paid $______ in
fees  pursuant  to the Plan.  For the same  period,  the  Underwriter  waived an
additional  $_____ in fees  pursuant  to the Plan.  For the  fiscal  year  ended
December  31, 1999,  HIGH YIELD FUND paid $______ in fees  pursuant to the Plan.
For the same  period,  the  Underwriter  waived an  additional  $______  in fees
pursuant to the Plan. For the fiscal year ended  December 31, 1999,  INSURED TAX
EXEMPT FUND paid $______ in fees pursuant to the Plan. For the same period,  the
Underwriter  waived an additional  $______ in fees pursuant to the Plan. For the
fiscal year ended  December 31, 1999,  the  Underwriter  incurred the  following
Plan-related expenses with respect to each Fund:


                       Compensation to    Compensation to    Compensation to
Fund                    Underwriter          Dealers         Sales Personnel
- ----                   ---------------    ---------------    ---------------

BLUE CHIP FUND                 $               $0                  $
HIGH YIELD FUND                $               $0                  $
INSURED TAX EXEMPT FUND        $               $0                  $

DEALER CONCESSIONS. With respect to shares of each Fund, the Fund will reallow a
portion  of the sales  load to the  dealers  selling  the shares as shown in the
following table:

                                       SALES CHARGES AS % OF    CONCESSION TO
                                      OFFERING    NET AMOUNT   DEALERS AS % OF
AMOUNT OF INVESTMENT                    PRICE      INVESTED     OFFERING PRICE
- --------------------                    -----      --------     --------------
Less than $100,000..................    4.75%        4.99            4.27%
$100,000 but under $250,000.........    3.90         4.06            3.51
$250,000 but under $500,000.........    2.90         2.99            2.61
$500,000 but under $1,000,000.......    2.40         2.46            2.16

                        DETERMINATION OF NET ASSET VALUE

    Except as provided herein, a security listed or traded on an exchange or the
Nasdaq  Stock  Market is valued at its last sale price on the exchange or market
where the security is principally  traded, and lacking any sales on a particular
day,  the  security  is valued at the mean  between  the  closing  bid and asked
prices.  Securities  traded in the OTC market  (including  securities  listed on
exchanges  whose  primary  market is  believed to be OTC) are valued at the mean
between the last bid and asked  prices  prior to the time when assets are valued
based upon quotes  furnished by market makers for such  securities.  However,  a
Fund may determine the value of debt securities  based upon prices  furnished by
an outside pricing  service.  The pricing services are provided to the BLUE CHIP
FUND and HIGH YIELD FUND by Interactive  Data Corporation and to the INSURED TAX
EXEMPT FUND by Muller Data  Corporation.  The pricing  services  use  quotations
obtained from investment dealers or brokers for the particular  securities being
evaluated,  information  with  respect  to  market  transactions  in  comparable
securities and consider security type, rating, market condition,  yield data and
other  available  information in determining  value.  Short-term debt securities
that  mature in 60 days or less are valued at  amortized  cost.  Securities  for
which market quotations are not readily available are valued on at fair value as
determined in good faith by or under the supervision of the Trust's  officers in
a manner specifically authorized by the Board of the Trust.

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



                                       32


    INSURED TAX EXEMPT FUND may retain any  insured  municipal  bond which is 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 such case,  it is the Fund's  policy to value the defaulted  bond daily
based upon the value of a  comparable  bond which is insured and not in default.
In selecting a comparable  bond, the Fund will consider  security type,  rating,
market condition and yield.

    The 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 SEC or the NYSE is closed
for other than weekend and holiday closings,  (2) during which an emergency,  as
defined by rules of the SEC in respect to the United States market,  exists as a
result of which  disposal by a Fund of securities  owned by it is not reasonably
practicable for the Fund fairly to determine the value of its net assets, or (3)
for such other period as the SEC has by order permitted.

      EMERGENCY  PRICING  PROCEDURES.  In the  event  that the  Funds  must halt
operations  during any day that they would  normally  be required to price under
Rule 22c-1 under the 1940 Act due to an emergency  ("Emergency Closed Day"), the
Funds will apply the following procedures:

      1. The Funds  will  make  every  reasonable  effort  to  segregate  orders
received  on the  Emergency  Closed  Day and give them the price that they would
have  received  but for the  closing.  The  Emergency  Closed  Day price will be
calculated  as soon as  practicable  after  operations  have resumed and will be
applied equally to sales, redemptions and repurchases that were in fact received
in the mail or otherwise on the Emergency Closed Day.

      2. For  purposes  of  paragraph  1, an order  will be  deemed to have been
received by the Funds on an Emergency  Closed Day, even if neither the Funds nor
the Transfer  Agent is able to perform the  mechanical  processing of pricing on
that day, under the following circumstances:

            (a) In the  case  of a mail  order  the  order  will  be  considered
received by a Fund when the postal service has delivered it to FIC's  Woodbridge
offices prior to the close of regular trading on the NYSE; and

            (b) In the case of a wire order,  including a Fund/SERV  order,  the
order will be  considered  received  when it is  received  in good form by a FIC
branch office or an authorized  dealer prior to the close of regular  trading on
the NYSE.

      3. If the Funds are unable to segregate  orders  received on the Emergency
Closed Day from those  received on the next day the Funds are open for business,
the Funds may give all orders the next price calculated after operations resume.

      4.  Notwithstanding  the foregoing,  on business days in which the NYSE is
not open for  regular  trading,  the  Funds  may  determine  not to price  their
portfolio  securities  if such prices would lead to a distortion of the NAV, for
the Funds and their shareholders.


                        ALLOCATION OF PORTFOLIO BROKERAGE

    The Adviser may purchase or sell portfolio  securities on behalf of the Fund
in agency or principal transactions. In agency transactions,  the Fund generally
pays brokerage commissions.  In principal transactions,  the Fund generally does
not pay  commissions,  however  the price paid for the  security  may include an
undisclosed dealer commission or "mark-up" or selling  concessions.  The Adviser
normally  purchases  fixed-income  securities on a net basis from primary market
makers acting as principals for the securities. The Adviser may purchase certain


                                       33


money market  instruments  directly from an issuer without paying commissions or
discounts. The Adviser may also purchase securities traded in the OTC market. As
a general  practice,  OTC  securities  are usually  purchased from market makers
without  paying  commissions,  although the price of the  security  usually will
include undisclosed  compensation.  However, when it is advantageous to the Fund
the  Adviser  may  utilize  a  broker  to  purchase  OTC  securities  and  pay a
commission.

    In purchasing  and selling  portfolio  securities on behalf of the Fund, the
Adviser  will  seek to  obtain  best  execution.  The Fund may pay more than the
lowest  available  commission  in return for  brokerage  and research  services.
Additionally,  upon  instruction  by the  Board,  the  Adviser  may  use  dealer
concessions  available  in  fixed-priced  underwritings  to pay for research and
other  services.  Research and other services may include  information as to the
availability  of  securities  for  purchase  or  sale,  statistical  or  factual
information  or  opinions   pertaining  to  securities,   reports  and  analysis
concerning  issuers  and  their   creditworthiness,   and  Lipper's   Directors'
Analytical Data concerning Fund performance and fees. The Adviser generally uses
the research and other services to service all the funds in the First  Investors
Family of Funds,  rather than the particular Funds whose commissions may pay for
research or other  services.  In other words, a Fund's  brokerage may be used to
pay for a research  service  that is used in  managing  another  Fund within the
First Investor Fund Family. The Lipper's  Directors'  Analytical Data is used by
the Adviser and the Fund Board to analyze a fund's performance relative to other
comparable funds.

    In   selecting   the   broker-dealers   to  execute  the  Fund's   portfolio
transactions,  the  Adviser  may  consider  such  factors  as the  price  of the
security, the rate of the commission,  the size and difficulty of the order, the
trading  characteristics of the security  involved,  the difficulty in executing
the order, the research and other services provided,  the expertise,  reputation
and reliability of the broker-dealer, access to new offerings, and other factors
bearing upon the quality of the execution.  The Adviser does not place portfolio
orders with an affiliated broker, or allocate brokerage  commission  business to
any  broker-dealer  for  distributing  fund shares.  Moreover,  no broker-dealer
affiliated with the Adviser  participates in commissions  generated by portfolio
orders placed on behalf of the Fund.

    The Adviser may combine transaction orders placed on behalf of a Fund, other
funds in the First  Investors  Group of Funds and First Investors Life Insurance
Company,  affiliates  of the Funds,  for the  purpose of  negotiating  brokerage
commissions  or  obtaining  a  more  favorable   transaction  price;  and  where
appropriate,  securities  purchased or sold may be allocated in accordance  with
written  procedures  approved by the Board. The Trust's Board has authorized and
directed  the  Adviser  to  use  dealer  concessions  available  in  fixed-price
underwritings  of  municipal  bonds  to pay  for  research  services  which  are
beneficial in the management of INSURED TAX EXEMPT FUND'S portfolio.

    For the fiscal year ended  December 31, 1997,  BLUE CHIP FUND paid $4,661 in
brokerage  commissions.  Of that amount $2,648 was paid to brokers who furnished
research services on portfolio transactions in the amount of $1,981,834. For the
fiscal  year ended  December  31,  1997,  HIGH YIELD FUND paid $72 in  brokerage
commissions.,  all of which was paid to brokers who furnished  research services
on portfolio  transactions  in the amount of $18,214.  For the fiscal year ended
December 31, 1997, INSURED TAX EXEMPT FUND did not pay brokerage commissions.

    For the fiscal year ended  December 31, 1998,  BLUE CHIP FUND paid $9,840 in
brokerage  commissions.  Of that amount  $594 was paid to brokers who  furnished
research services on portfolio  transactions in the amount of $598,897.  For the
fiscal year ended December 31, 1998, HIGH YIELD FUND and INSURED TAX EXEMPT FUND
did not pay brokerage commissions.

    For the fiscal year ended  December 31, 1999,  BLUE CHIP FUND paid $_____ in
brokerage  commissions.  Of that amount $____ was paid to brokers who  furnished


                                       34


research services on portfolio  transactions in the amount of $_______.  For the
fiscal year ended December 31, 1999, HIGH YIELD FUND and INSURED TAX EXEMPT FUND
did not pay brokerage commissions [PLEASE CONFIRM].

                   PURCHASE, REDEMPTION AND EXCHANGE OF SHARES

    Information  regarding the purchase,  redemption and exchange of Fund shares
is contained in the Shareholder  Manual, a separate section of the SAI that is a
distinct document and may be obtained free of charge by contacting your Fund.

    REDEMPTIONS-IN  KIND.  If the  Board  should  determine  that  it  would  be
detrimental  to the best  interests of the remaining  shareholders  of a Fund to
make payment wholly or partly in cash,  the Fund may pay redemption  proceeds in
whole or in part by a distribution  in kind of securities  from the portfolio of
the Fund. If shares are redeemed in kind, the redeeming  shareholder will likely
incur  brokerage costs in converting the assets into cash. The method of valuing
portfolio  securities for this purpose is described under  "Determination of Net
Asset Value."

                                      TAXES

GENERAL

    In order to  continue  to qualify for  treatment  as a regulated  investment
company  ("RIC")  under the  Internal  Revenue  Code of 1986,  as  amended  (the
"Code"),  a Fund - each Fund being treated as a separate  corporation  for these
purposes - must  distribute to its  shareholders  for each taxable year at least
90% of the sum of its investment company taxable income (consisting generally of
net investment income, net short-term capital gain and, for HIGH YIELD FUND, net
gains from certain foreign currency  transactions)  plus, in the case of INSURED
TAX EXEMPT FUND,  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, for HIGH YIELD FUND,  foreign
currencies,  or other income (including gains from options or futures contracts)
derived with respect to its  business of  investing in  securities  or, for HIGH
YIELD FUND, those currencies  ("Income  Requirement");  (2) 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 (3) at the close of each
quarter of the Fund's  taxable year, not more than 25% of the value of its total
assets may be invested in securities (other than U.S.  Government  securities or
the securities of other RICs) of any one issuer.

    Dividends and other distributions declared by a Fund in October, November or
December of any year and payable to  shareholders  of record on a date in any of
those  months  are  deemed  to have been  paid by the Fund and  received  by the
shareholders  on December 31 of that year if the  distributions  are paid by the
Fund during the following  January.  Accordingly,  those  distributions  will be
reported,  or in the  case of  exempt-interest  dividends  (see  below)  paid to
shareholders of INSURED TAX EXEMPT FUND,  will be taxed to shareholders  for the
year in which that December 31 falls.

    A portion of the dividends from BLUE CHIP FUND's investment  company taxable
income  may  be  eligible  for  the  dividends-received   deduction  allowed  to
corporations.  The  eligible  portion  may not  exceed the  aggregate  dividends
received by the Fund from U.S.  corporations.  However,  dividends received by a
corporate  shareholder  and  deducted by it  pursuant to the  dividends-received


                                       35


deduction  are subject  indirectly  to the Federal  alternative  minimum tax. No
dividends  paid by INSURED TAX EXEMPT FUND or HIGH YIELD FUND are expected to be
eligible for this deduction.

    If shares of a Fund are sold at a loss  after  being  held for six months or
less, the loss will be treated as long-term, instead of short-term, capital loss
to the extent of any capital gain distributions received on those shares.

    Each 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  (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.

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

    HIGH YIELD FUND and INSURED TAX EXEMPT FUND may acquire zero coupon or other
securities issued with original issue discount. As a holder of those securities,
each such Fund must account for the portion of the original  issue discount that
accrues on the securities  during the taxable year, even if the Fund receives no
corresponding payment on them during the year.  Similarly,  HIGH YIELD 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 and net tax-exempt  interest,  including any
original issue discount and other non-cash  income,  to satisfy the Distribution
Requirement  and HIGH  YIELD FUND must do so to avoid  imposition  of the Excise
Tax, 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. Each 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 use of hedging  strategies,  such as writing  (selling)  and  purchasing
options and futures  contracts,  involves  complex rules that will determine for
income tax purposes the amount, character and timing of recognition of the gains
and losses a Fund will realize in connection  therewith.  Gains from options and
futures  derived  by a  Fund  with  respect  to its  business  of  investing  in
securities will qualify as permissible income under the Income Requirement.

    If a Fund has an "appreciated  financial position" - generally,  an interest
(including an interest through an option, futures or short sale) with respect to
any stock, debt instrument (other than "straight debt") or partnership  interest
the fair market  value of which  exceeds its  adjusted  basis-and  enters into a
"constructive sale" of the same or substantially similar property, the Fund will
be treated as having made an actual sale thereof, with the result that gain will
be recognized at that time. A constructive  sale  generally  consists of a short
sale, an offsetting notional principal contract or futures contract entered into
by a Fund or a related person with respect to the same or substantially  similar
property.  In addition,  if the appreciated financial position is itself a short
sale or such a contract, acquisition of the underlying property or substantially
similar property will be deemed a constructive sale.



                                       36


INSURED TAX EXEMPT FUND

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

    If shares of INSURED TAX EXEMPT FUND are sold at a loss after being held for
six  months  or  less,  the  loss  will  be  disallowed  to  the  extent  of any
exempt-interest  dividends received on those shares, and any portion of the loss
not disallowed will be treated as described above.

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

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

    INSURED TAX EXEMPT FUND may invest in  municipal  bonds that are  purchased,
generally not on their original issue, with market discount (that is, at a price
less  than the  principal  amount of the bond or, in the case of a bond that was
issued with original issue  discount,  a price less than the amount of the issue
price plus accrued original issue discount) ("municipal market discount bonds").
Gain on the  disposition of a municipal  market discount bond (other than a bond
with a fixed  maturity  date within one year from its  issuance),  generally  is
treated as ordinary (taxable) income, rather than capital gain, to the extent of
the bond's accrued market discount at the time of  disposition.  Market discount
on such a bond generally is accrued ratably,  on a daily basis,  over the period
from the  acquisition  date to the date of  maturity.  In lieu of  treating  the
disposition  gain as above, the Fund may elect to include market discount in its
gross income currently, for each taxable year to which it is attributable.

    If INSURED TAX EXEMPT FUND invests in any instruments  that generate taxable
income under the circumstances described in the Prospectus, distributions of the
interest  earned thereon will be taxable to the Fund's  shareholders as ordinary
income to the extent of its earnings and profits. Moreover, if the Fund realizes
capital gain as a result of market transactions,  any distributions of that 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.



                                       37


                             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 4.75% (as a percentage of the offering  price) from the initial $1,000
payment.  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.



                                       38



    Average annual return and total return computed at the public offering price
for the periods ended December 31, 1999 are set forth in the tables below:

      AVERAGE ANNUAL TOTAL RETURN:*

                              One Year   Five Years   Ten Years   Life of Fund**
                              --------   ----------   ---------   --------------
BLUE CHIP FUND                   %           %                        %
HIGH YIELD FUND
INSURED TAX EXEMPT FUND

      TOTAL RETURN:*

                              One Year   Five Years   Ten Years   Life of Fund**
                              --------   ----------   ---------   --------------

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


- -------------------------
*  All return  figures  reflect the current  maximum  sales  charge of 4.75% and
   dividends  reinvested  at net asset  value.  Prior to October 28,  1988,  the
   maximum  sales  charge for HIGH YIELD FUND was 4.00% and its  dividends  were
   reinvested  at the public  offering  price (net asset  value plus  applicable
   sales charge).  Certain  expenses of the Funds have been waived or reimbursed
   from  commencement  of  operations  through  December 31, 1999.  Accordingly,
   return  figures  are higher than they would have been had such  expenses  not
   been waived or reimbursed.

** The  inception  dates for the Funds are as follows:  BLUE CHIP FUND - May 17,
   1990;  HIGH YIELD FUND - March 24,  1987;  and INSURED TAX EXEMPT FUND - July
   26, 1990.


    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, 1999 is set forth in the tables
below:

      AVERAGE ANNUAL TOTAL RETURN:*

                              One Year   Five Years   Ten Years   Life of Fund**
                              --------   ----------   ---------   --------------

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

      TOTAL RETURN:*

                              One Year   Five Years   Ten Years   Life of Fund**
                              --------   ----------   ---------   --------------

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

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

*  Certain   expenses  of  the  Funds  have  been  waived  or  reimbursed   from
   commencement of operations  through  December 31, 1999.  Accordingly,  return
   figures  are  higher  than they would  have been had such  expenses  not been
   waived or reimbursed.

** The  inception  dates for the Funds are as follows:  BLUE CHIP FUND - May 17,
   1990;  HIGH YIELD FUND - March 24,  1987;  and INSURED TAX EXEMPT FUND - July
   26, 1990.



                                       39


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

    INSURED TAX-EXEMPT FUND's tax-equivalent yield during the base period may be
presented in one or more stated tax brackets. Tax-equivalent yield is calculated
by  adjusting  the  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.

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

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


    For the 30 days ended December 31, 1999, the yield and tax-equivalent  yield
(assuming  a Federal  tax rate of 28%) for INSURED TAX EXEMPT FUND was ____% and
____%, respectively. The maximum Federal tax rate for this period was 39.6%. For
the 30 days ended  December 31,  1999,  the yield for HIGH YIELD FUND was ____%.
Some of the Funds'  expenses  were  waived or  reimbursed  during  this  period.
Accordingly,  yields are higher than they would have been had such  expenses not
been waived or reimbursed.

    The  distribution  rate for HIGH YIELD FUND and  INSURED  TAX EXEMPT FUND is
presented for a  twelve-month  period.  It is calculated by adding the dividends
for the last twelve months and dividing the sum by a Fund's  offering  price per
share at the end of that period.  The  distribution  rate is also  calculated by
using a Fund's net asset value.  Distribution  rate  calculations do not include
capital  gain  distributions,  if  any,  paid.  The  distribution  rate  for the
twelve-month  period  ended  December 31, 1999 for shares of HIGH YIELD FUND and
INSURED TAX EXEMPT FUND calculated using the offering price was ____% and ____%,
respectively. The distribution rate for the same period for shares of HIGH YIELD
FUND and INSURED TAX EXEMPT FUND calculated  using the net asset value was ____%
and _____%, respectively.  During this period certain expenses of the Funds were
waived or reimbursed.  Accordingly,  the distribution rates are higher than they
would have been had such expenses not been waived or reimbursed.

    Each Fund may include in advertisements  and sales literature,  information,
examples and  statistics to  illustrate  the effect of  compounding  income at a
fixed rate of return to  demonstrate  the growth of an investment  over a stated
period  of time  resulting  from the  payment  of  dividends  and  capital  gain
distributions in additional shares. These examples may also include hypothetical
returns comparing taxable versus  tax-deferred  growth which would pertain to an
IRA, section 403(b)(7) Custodial Account or other qualified  retirement program.
The  examples  used  will  be  for  illustrative   purposes  only  and  are  not
representations  by the Funds of past or future  yield or  return.  Examples  of
typical graphs and charts  depicting such historical  performances,  compounding
and hypothetical returns are included in Appendix C.



                                       40


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

    Lipper  Analytical   Services,   Inc.   ("Lipper")  is  a  widely-recognized
    independent  service that  monitors and ranks the  performance  of regulated
    investment   companies.   The  Lipper  performance   analysis  includes  the
    reinvestment of capital gain distributions and income dividends but does not
    take sales  charges  into  consideration.  The method of  calculating  total
    return  data on indices  utilizes  actual  dividends  on  ex-dividend  dates
    accumulated for the quarter and reinvested at quarter end.

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

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

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

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

    Merrill  Lynch,  Pierce,  Fenner & Smith,  Inc.,  "Taxable Bond  Indices," a
    monthly corporate government index publication which lists principal, coupon
    and total return on over 100  different  taxable bond indices  which Merrill
    Lynch tracks. They also list the par weighted characteristics of each Index.

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

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



                                       41


    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.

    Credit  Suisse  First  Boston  High Yield  Index is  designed to measure the
    performance of the high yield bond market.

    Lehman Brothers Aggregate Index is an unmanaged index which generally covers
    the U.S. investment grade fixed rate bond market,  including  government and
    corporate   securities,   agency  mortgage  pass-through   securities,   and
    asset-backed securities.

    Lehman  Brothers  Corporate Bond Index includes all publicly  issued,  fixed
    rate,  non-convertible  investment grade dollar-denominated,  corporate debt
    which have at least one year to maturity and an outstanding  par value of at
    least $100 million.

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

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

    Morgan  Stanley  All  Country  World Free Index is  designed  to measure the
    performance  of  stock  markets  in  the  United  States,   Europe,  Canada,
    Australia,  New Zealand and the  developed  and emerging  markets of Eastern
    Europe,  Latin  America,  Asia  and the Far  East.  The  index  consists  of
    approximately  60% of the  aggregate  market  value  of  the  covered  stock
    exchanges  and is  calculated  to exclude  companies and share classes which
    cannot be freely purchased by foreigners.

    Morgan  Stanley World Index is designed to measure the  performance of stock
    markets in the United States, Europe, Canada, Australia, New Zealand and the
    Far East. The index consists of  approximately  60% of the aggregate  market
    value of the covered stock exchanges.

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

    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.

    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.

    Salomon Brothers Government Index is a market  capitalization-weighted index
    that  consists  of debt  issued  by the U.S.  Treasury  and U.S.  Government
    sponsored agencies.

    Salomon Brothers  Mortgage Index is a market  capitalization-weighted  index
    that consists of all agency pass-throughs and FHA and GNMA project notes.

    Standard & Poor's 400 Midcap Index is an  unmanaged  capitalization-weighted
    index that is  generally  representative  of the U.S.  market for medium cap
    stocks.



                                       42


    Standard & Poor's Smallcap 600 Index is a capitalization-weighted index that
    measures  the  performance  of  selected  U.S.  stocks  with a small  market
    capitalization.

    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.

    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

    ORGANIZATION.  The Trust is a  Massachusetts  business  trust  organized  on
October 28, 1986. The Trust is authorized to issue an unlimited number of shares
of beneficial  interest,  no par value, in such separate and distinct series and
classes of shares as the Board shall from time to time establish.  The shares of
beneficial  interest of the Trust are presently  divided into three separate and
distinct series,  each having one class,  designated  Class A shares.  The Trust
does not hold annual shareholder  meetings. If requested to do so by the holders
of at least 10% of the Trust's outstanding shares, the Trust's Board will call a
special  meeting of  shareholders  for any  purpose,  including  the  removal of
Trustees.  Each share of each fund has equal voting rights. Each share of a Fund
is entitled to participate  equally in dividends and other distributions and the
proceeds of any liquidation.

    CUSTODIAN.  The Bank of New York,  48 Wall Street,  New York,  NY 10286,  is
custodian of the securities and cash of each Fund.

    AUDITS AND REPORTS.  The  accounts of each Fund are audited  twice a year by
Tait, Weller & Baker,  independent  certified public accountants,  8 Penn Center
Plaza,  Philadelphia,  PA, 19103.  Shareholders of each Fund receive semi-annual
and  annual  reports,  including  audited  financial  statements,  and a list of
securities owned.

    LEGAL COUNSEL.  Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue, N.W.,
Washington, D.C. 20036 serves as counsel to the Funds.

    TRANSFER  AGENT.  Administrative  Data  Management  Corp.,  581 Main Street,
Woodbridge, NJ 07095-1198, an affiliate of EIMCO and EIC, 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;  $.75 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;
$4.00  for  each   shareholder   services   call;   $20.00   for  each  item  of
correspondence;  and $1.00 per account per report  required by any  governmental
authority.  Additional  fees  charged  to the  Funds by the  Transfer  Agent are
assumed by the Underwriter.  The Transfer Agent reserves the right to change the
fees on prior notice to the Funds. Upon request from shareholders,  the Transfer
Agent will provide an account history.  For account histories  covering the most
recent three year period, there is no charge. The Transfer Agent charges a $5.00
administrative  fee for each  account  history  covering the period 1983 through
1994 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


                                       43


Agent will cease  sending any further  materials  to the  shareholder  until the
Transfer  Agent  is  provided  with a  correct  address.  Efforts  to  locate  a
shareholder will be conducted in accordance with SEC rules and regulations prior
to escheatment of funds to the appropriate  state  treasury.  The Transfer Agent
may  deduct  the  costs  of  its  efforts  to  locate  a  shareholder  from  the
shareholder's  account. These costs may include a percentage of the account if a
search  company  charges such a fee in exchange for its location  services.  The
Transfer  Agent  is not  responsible  for any  fees  that  states  and/or  their
representatives may charge for processing the return of funds to investors whose
funds  have  been  escheated.   The  Transfer   Agent's   telephone   number  is
1-800-423-4026.

    5%  SHAREHOLDERS.  As of December 31, 1999, the following owned of record or
beneficially  5% or more of the  outstanding  shares of each of the Funds listed
below [UPDATE]:

Fund                        % of Shares    Shareholder
- ----                        -----------    -----------




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

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



                                       44


                              FINANCIAL STATEMENTS
                               AS OF JUNE 30, 1999

    Registrant  incorporates by reference the financial statements and report of
independent auditors contained in the Semi-Annual Report to shareholders for the
six-month  period ended June 30, 1999  electronically  filed with the Securities
and   Exchange    Commission   on    _________,    1999    (Accession    Number:
______________________).


































                                       45






PR0 FORMA FINANCIAL STATEMENTS AND SCHEDULES

































                                       46



                                   APPENDIX A
                     DESCRIPTION OF COMMERCIAL PAPER RATINGS

STANDARD & POOR'S RATINGS GROUP

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

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

MOODY'S INVESTORS SERVICE, INC.

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

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

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


                                       47




                                   APPENDIX B
                      DESCRIPTION OF MUNICIPAL NOTE RATINGS

STANDARD & POOR'S RATINGS GROUP

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

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

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

    Note rating symbols are as follows:

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

MOODY'S INVESTORS SERVICE, INC.

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

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




                                       48



                                   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.  This assumes a hypothetical investment of $10,000.

       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. this assumes  monthly installment with  a constant  hypothetical
return rate of 8%.

       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







                                       49




    [The following table is represented as a 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 difference of
$331,215.

               25 years old ..............   573,443
               35 years old ..............   242,228
               45 years old ..............   103,320

     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.









                                       50



    [The following table is represented as a chart in the printed document.]

The following  chart  illustrates  the  historical  performance of the Dow Jones
Industrial Average from 1928 through 1996.

                   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
                   1996 ..................  6,000.00

     The  performance of the Dow Jones  Industrial  Average is not indicative of
the performance of any particular investment. It does not take into account fees
and expenses  associated with purchasing mutual fund shares.  Individuals cannot
invest  directly  in any  index.  Please  note  that past  performance  does not
guarantee future results.


                                       51



    [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
                   1996 .......................  20.16135


                   1996 .......................  100.00
                   1997 .......................  103.00
                   1998 .......................  106.00
                   1999 .......................  109.00
                   2000 .......................  113.00
                   2001 .......................  116.00
                   2002 .......................  119.00
                   2003 .......................  123.00
                   2004 .......................  127.00
                   2005 .......................  130.00
                   2006 .......................  134.00
                   2007 .......................  138.00
                   2008 .......................  143.00
                   2009 .......................  147.00
                   2010 .......................  151.00
                   2011 .......................  156.00
                   2012 .......................  160.00
                   2013 .......................  165.00
                   2014 .......................  170.00
                   2015 .......................  175.00
                   2016 .......................  181.00
                   2017 .......................  186.00
                   2018 .......................  192.00
                   2019 .......................  197.00
                   2020 .......................  203.00
                   2021 .......................  209.00
                   2022 .......................  216.00
                   2023 .......................  222.00
                   2024 .......................  229.00
                   2025 .......................  236.00
                   2026 .......................  243.00

Inflation erodes your buying power.  $100 in 1966, could purchase five times the
goods and service as in 1996 ($100 vs. $20).* Projecting  inflation at 3%, goods
and services costing $100 today will cost $243 in the year 2026.

* Source: Consumer Price Index, U.S. Bureau of Labor Statistics.



                                       52



    [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 1996*

                               Total           Number of       Percentage of
                             Number of         Positive           Positive
   Rolling Period             Periods           Periods           Periods
   --------------             -------           -------           -------
     1-Year                      71                51                72%
     5-Year                      67                60                90%
     10-Year                     62                60                97%
     15-Year                     57                57               100%
     20-Year                     52                52               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. **

                    Compound Annual Return from 1982 -- 1996*

                    Inflation .....................   3.55
                    U.S. Treasury Bills ...........   6.50
                    Large Company Stocks ..........  16.79


The following chart  illustrates  for the period shown that long-term  corporate
bonds have outpaced U.S. Treasury Bills and inflation.

                    Compound Annual Return from 1982 -- 1996*

                    Inflation .....................   3.55
                    U.S. Treasury Bills ...........   6.50
                    Long-Term Corp. bonds .........  13.66


*    Source: Used with permission. (c)1997 Ibbotson Associates, Inc. All rights
     reserved.  [Certain  provisions of this work were derived from  copyrighted
     works of Roger G. Ibbotson and Rex Sinquefield.]

**   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,  returns of U.S. Treasury bills historically have
     not outpaced inflation by as great a margin as stocks.


                                       53


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

                           28.0%        31.0%       36.0%       39.6%
  your tax-free yield
          3.00%             4.17%        4.35%       4.69%       4.97%
          3.50%             4.86%        5.07%       5.47%       5.79%
          4.00%             5.56%        5.80%       6.25%       6.62%
          4.50%             6.25%        6.52%       7.03%       7.45%
          5.00%             6.94%        7.25%       7.81%       8.25%
          5.50%             7.64%        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.








                                   54


    [The following table is represented as a graph in the printed document.]


The  following  graph  illustrates  how income has affected the gains from stock
investments since 1965.


          S&P 500 Dividends Reinvested            S&P 500 Principal Only

12/31/64                        10,000                            10,000
12/31/65                        11,269                            10,906
12/31/66                        10,115                             9,478
12/31/67                        12,550                            11,383
12/31/68                        13,948                            12,255
12/31/69                        12,795                            10,863
12/31/70                        13,299                            10,873
12/31/71                        15,200                            12,046
12/31/72                        18,088                            13,929
12/31/73                        15,431                            11,510
12/31/74                        11,346                             8,090
12/31/75                        15,570                            10,642
12/31/76                        19,296                            12,680
12/31/77                        17,915                            11,221
12/31/78                        19,092                            11,340
12/31/79                        22,645                            12,736
12/31/80                        30,004                            16,019
12/31/81                        28,528                            14,460
12/31/82                        34,674                            16,595
12/31/83                        42,496                            19,461
12/31/84                        45,161                            19,733
12/31/85                        59,489                            24,930
12/31/86                        70,594                            28,575
12/31/87                        74,301                            29,154
12/31/88                        86,641                            32,769
12/31/89                       114,093                            41,699
12/31/90                       110,549                            38,964
12/31/91                       144,230                            49,214
12/31/92                       155,218                            51,411
12/31/93                       170,863                            55,039
12/31/94                       173,120                            54,191
12/31/95                       238,175                            72,676
12/31/96                       292,863                            87,403
11/30/97                       383,977                           112,732


Source:  First  Investors  Management  Company,  Inc.  Standard  &  Poor's  is a
registered  trademark.  The S&P 500 is an unmanaged index  comprising 500 common
stocks spread  across a variety of  industries.  The total  returns  represented
above  compare the impact of  reinvestment  of dividends  and  illustrates  past
performance of the index.  The performance of any index is not indicative of the
performance  of a  particular  investment  and does not take  into  account  the
effects of inflation or the fees and expenses  associated with purchasing mutual
fund shares. Individuals cannot invest directly in any index. Mutual fund shares
will fluctuate in value,  therefore,  the value of your original  investment and
your return may vary.  Moreover,  past  performance  is no  guarantee  of future
results.




                                       55



FIRST INVESTORS LOGO


Shareholder Manual


A Guide to Your
First Investors
Mutual Fund Account


as of March 8, 1999





INTRODUCTION

Investing in mutual funds doesn't have to be complicated.  In addition to a wide
variety of mutual funds,  First  Investors  offers  personalized  service.  Your
registered  representative  is available to answer your  questions  and help you
process  your  transactions.  In the  event you wish to  process  a  transaction
directly,  the material provided in this  easy-to-follow  guide tells you how to
contact us and explains our policies and procedures.  Please note that there are
special rules for money market funds. Please read this manual completely to gain
a  better  understanding  of  how  shares  are  bought,  sold,  exchanged,   and
transferred.  In addition,  the manual  provides you with a  description  of the
services we offer to  simplify  investing.  The  services,  privileges  and fees
referenced in this manual are subject to change. You should call our Shareholder
Services Department at 1 (800) 423-4026 before initiating any transaction.  This
manual  must be  preceded  or  accompanied  by a  First  Investors  mutual  fund
prospectus. For more complete information on any First Investors Fund, including
charges and expenses,  refer to the  prospectus.  Read the prospectus  carefully
before you invest or send money.



                              Principal Underwriter
                           First Investors Corporation
                                 95 Wall Street
                               New York, NY 10005
                                 Transfer Agent
                               Administrative Data
                                Management Corp.
                                 581 Main Street
                              Woodbridge, NJ 07095
                                 1-800-423-4026




TABLE OF CONTENTS

HOW TO BUY SHARES

To Open An Account .........................................................  5
To Open a Retirement Account ...............................................  6
Minimum Initial Investment .................................................  6
Additional Investments .....................................................  6
Acceptable Forms of Payment ................................................  6
Share Classes ..............................................................  6
Share Class Specification ..................................................  7
Class A Shares .............................................................  7
Sales Charge Waivers & REductions on Class A Shares ........................  7
Class B Shares .............................................................  9
How To Pay ................................................................. 10
Wire Transfers ............................................................. 11
Distribution Cross-Investment .............................................. 12

HOW TO SELL SHARES
REDEMPTION OPTIONS ......................................................... 13
Written Redemptions ........................................................ 13
Telephone Redemptions ...................................................... 13
Electronic Funds Transfer .................................................. 13
Systematic Withdrawal Plans ................................................ 14
Expedited Wire Redemptions ................................................. 14

HOW TO EXCHANGE SHARES
Exchange Methods ........................................................... 15
Exchange Conditions ........................................................ 16
Exchanging Funds With.
Automatic Investments or
Systematic Withdrawals ..................................................... 16


WHEN AND HOW ARE FUND SHARES PRICED? ....................................... 17

HOW ARE PURCHASE, REDEMPTION, AND EXCHANGE ORDERS PROCESSED AND PRICED? .... 17
Purchases .................................................................. 17
Redemptions ................................................................ 18
Exchanges .................................................................. 18
Orders Placed Via First Investors Registered Representatives ............... 18
Special Rules for Money Market Funds ....................................... 19

SPECIAL RULES FOR MONEY MARKET ACCOUNTS .................................... 18

RIGHT TO REJECT PURCHASE OR EXCHANGE ORDERS ................................ 19

SIGNATURE GUARANTEE ARE REQUIRED............................................ 19

TELEPHONE SERVICES TELEPHONE EXCHANGES AND REDEMPTIONS ..................... 20
Security MEasures .......................................................... 20
Eligibility ................................................................ 20

NON-RETIREMENT ACCOUNTS .................................................... 20

RETIREMENT ACCOUNTS ........................................................ 20

Shareholder Services ....................................................... 21

OTHER SERVICES ............................................................. 22
Reinvestment Privilege ..................................................... 22
Certificate Shares ......................................................... 22
Money Market Fund Draft Checks ............................................. 22
Return Mail ................................................................ 23
Transferring Shares ........................................................ 23

ACCOUNT STATEMENTS
Transaction Confirmation Statements ........................................ 24
Master Account Statements .................................................. 24
Annual and Semi-Annual Reports ............................................. 24

DIVIDENDS AND DISTRIBUTIONS
Dividends and Distributions ................................................ 25
Buying a Dividend .......................................................... 25

TAX FORMS .................................................................. 26


                                       4



HOW TO BUY SHARES

First Investors offers a wide variety of mutual funds to meet your financial
needs ("FI Funds"). Your First Investors registered representative will review
your financial objectives and risk tolerance, explain our product line and
services, and help you select the right investments. Call our Shareholder
Services Department at 1 (800) 423-4026 for the number of the First Investors
office near you or visit us on-line at www.firstinvestors.com

o TO OPEN AN ACCOUNT
Before investing, you must establish an account with your broker/dealer. At
First Investors Corporation ("FI") you do this by completing and signing a
Master Account Agreement ("MAA"). After you determine the fund(s) you want to
purchase, deliver your completed MAA and your check, made payable to First
Investors Corporation, to your registered representative. New client accounts
must be established through your registered representative. You need to tell us
how you want your shares registered when you open a new Fund account. Please
keep the following information in mind:

- -JOINT ACCOUNTS. For any account with two or more owners, all owners must sign
requests to process transactions. Telephone privileges allow any one of the
owners to process transactions independently.

- -GIFTS AND TRANSFERS TO MINORS. Custodial accounts for a minor may be
established under your state's Uniform Gifts/Transfers to Minors Act. Custodial
accounts are registered under the minor's social security number.

TRUSTS. A trust account may be opened only if you have a valid written trust
document.

- -TRANSFER ON DEATH (TOD). TOD registrations, available on all FI Funds in all
states, allow individual and joint account owners to name one or more
beneficiaries. The ownership of the account automatically passes to the named
beneficiaries in the event of the death of all account owners.

- -DIVIDENDS AND CAPITAL GAINS. Fund distributions will be automatically
reinvested in your account unless you request otherwise.





_______________________________________________________________________________
SOME REGISTRATIONS REQUIRE ADDITIONAL PAPERWORK.
_______________________________________________________________________________
TYPE OF ACCOUNT          ADDITIONAL DOCUMENTS REQUIRED

Corporations
Partnership
& Trusts                 First Investors Certificate of Authority

Transfer On Death        First Investors TOD Registration Request Form
(TOD)

Estates                  Original or Certified Copy of Death Certificate
                         Certified Copy of Letters Testamentary/Administration
                         First Investors Executor's Certification &
                         Indemnification Form

Conservatorships         Copy of court document appointing Conservator/Guardian
& Guardianships
_______________________________________________________________________________


                                       5


oTO OPEN A RETIREMENT ACCOUNT

Fund shares may be purchased for your  retirement  account by completing the MAA
and  the  appropriate  retirement  plan  application.   First  Investors  offers
retirement  plans for both  individuals  and  employers  as follows:

INDIVIDUAL RETIREMENT ACCOUNTS
including Roth, Traditional, and Rollover IRAs.

SIMPLE IRAS offered by employers.

SEP-IRAS (SIMPLIFIED EMPLOYEE PENSION PLANS) for small business owners or people
with income from self-employment, including SARSEP IRAs.

403(B)(7) accounts for employees of eligible tax-exempt organizations such as
schools, hospitals and charitable organizations.

401(K) plans for employers.

MONEY PURCHASE PENSION & PROFIT SHARING plans for sole proprietors.

For more information about these plans call your registered representative or
our Shareholder Services Department at 1 (800) 423-4026.

oMINIMUM INITIAL INVESTMENT

You can  open a  non-retirement  account  with a check  made  payable  to  First
Investors Corporation for as little as $1,000. The minimum is waived if you open
an account through one of our Automatic  Investment  Programs (see "How to Pay")
or through a full exchange from another FI Fund. You can open a First  Investors
Traditional  IRA or  Roth  IRA  with as  little  as $500  (except  for the  Cash
Management Fund which requires a $1,000  investment).  Other retirement accounts
may  have  lower  initial  investment  requirements  at the  Fund's  discretion.

oADDITIONAL INVESTMENTS

Once you have established an account, you can add to it through your registered
representative or by sending us a check directly. There is no minimum
requirement on additional purchases into existing fund accounts. Remember to
include your FI Fund account number on your check made payable to First
Investors Corporation. Mail checks to: First Investors Corporation Attn: Dept.
Cp 581 Main Street Woodbridge, NJ 07095-1198

oACCEPTABLE FORMS OF PAYMENT

The following forms of payment are acceptable:

- -checks made payable to First Investors Corporation
- -Money Line electronic funds transfers
- -federal funds wire transfers

For your protection,  never give your registered  representative cash or a check
made payable to your registered representative.

We do not accept:
- -Third party checks

- -Traveler's checks

- -Checks drawn on non-US banks

- -Money orders

- -Cash

oSHARE CLASSES

All FI Funds are available in Class A and Class B shares. Direct purchases into
Class B share money market accounts are not accepted. Class B money market fund
shares may only be acquired through an exchange from another Class B share
account or through Class B share dividend cross-reinvestment.

Each class of shares has its own cost structure. As a result, different classes



                                       6




of shares in the same fund generally have different prices. Class A shares have
a front-end sales charge. Class B shares have a contingent deferred sales charge
("CDSC"). While both classes have a Rule 12b-1 fee, the fee on Class B shares is
generally higher. The principal advantages of Class A shares are that they have
lower overall expenses, the availability of quantity discounts on sales charges,
and certain account privileges that are not offered on Class B shares. The
principal advantage of Class B shares is that all your money is put to work from
the outset. Your registered representative can help you decide which class of
shares is best for you.

oSHARE CLASS SPECIFICATION

It's very important to specify which class of shares you wish to purchase when
you open a new account. All First Investors account applications have a place to
designate your preference. If you do not specify which class of shares you want
to purchase, Class A shares will automatically be purchased.

oCLASS A SHARES

When you buy Class A shares, you pay the offering price - the net asset value of
the fund plus a front-end sales charge. The front-end sales charge declines with
larger investments.


_______________________________________________________________________________
    CLASS A SALES CHARGES
_______________________________________________________________________________
                             AS A % OF              AS A % OF
YOUR INVESTMENT              OFFERING PRICE         INVESTMENT
up to $24,999                6.25%                  6.67%
$25,000 - $49,999            5.75%                  6.10%
$50,000 - $99,999            5.50%                  5.82%
$100,000 - $249,999          4.50%                  4.71%
$250,000 - $499,999          3.50%                  3.63%
$500,000 - $999,999          2.50%                  2.56%

Investments of $1 million or more will only be made in Class A shares at the
Fund's net asset value.

Generally, you should consider purchasing Class A shares if you plan to invest
$250,000 or more either initially or over time.
_______________________________________________________________________________
_______________________________________________________________________________

oSALES CHARGE WAIVERS & REDUCTIONS ON CLASS A SHARES

If you qualify for one of the sales  charge  reductions  or waivers,  it is very
important  to let us know at the time you place  your  order.  Include a written
statement with your check  explaining  which  privilege  applies.  If you do not
include this  statement we cannot  guarantee that you will receive the reduction
or waiver.

CLASS A SHARES MAY BE PURCHASED WITHOUT A SALES CHARGE:

1: By an officer, trustee, director, or employee of the Fund, the Fund's adviser
or subadviser, First Investors Corporation, or any affiliates of First Investors
Corporation.

2: By a former officer, trustee, director, or employee of the Fund,
First Investors Corporation,  or their affiliates provided the person worked for
the company for at least 5 years and retired or  terminated  employment  in good
standing.


                                       7




3: By a FI registered representative or an authorized dealer, or by his/her
spouse, child (under age 21) or grandchild (under age 21).

4: When fund  distributions are reinvested in Class A shares.

5: When Systematic Withdrawal  Plan payments are  reinvested in Class A shares.

6: When qualified retirement plan loan repayments are reinvested in Class A
shares.

7: With the liquidation proceeds from a First Investors Life Variable Annuity
Fund A, C, or D contract within one year of the contract's maturity date.

8:When dividends (at least $50 a year) from a First Investors Life Insurance
Company policy are invested into an EXISTING account.

9: When a group qualified plan (401(k) plans, money purchase pension plans,
profit sharing plans and 403(b) plans that are subject to Title I of ERISA) is
reinvesting redemption proceeds from another fund on which a sales charge or
CDSC was paid.

10: With distribution proceeds from a First Investors group qualified plan
account into an IRA.

11: By participant directed group qualified plans with 100 or more eligible
employees or $1,000,000 or more in assets.

12: In amounts of $1 million or more.

13: By individuals under a Letter of Intent or Cumulative Purchase Privilege of
$1 million or more.

FOR ITEMS 9 THROUGH 13 ABOVE: A CDSC OF 1.00% WILL BE
DEDUCTED IF SHARES ARE REDEEMED WITHIN 2 YEARS OF PURCHASE.

SALES CHARGES ON CLASS A SHARES MAY BE REDUCED FOR:

1: Participant directed group qualified retirement plans with 99 or fewer
eligible employees. The initial sales charge is reduced to 3.00% of the offering
price.

2: Certain unit trust holders ("unitholders") who elect to invest the entire
amount of principal, interest, and/or capital gains distributions from their
unit investment trusts in Class A shares. Unitholders of various series of New
York Insured Municipals-Income Trust sponsored by Van Kampen Merrit, Inc.,
unitholders of various series of the Multistate Tax Exempt trust sponsored by
Advest Inc., and unitholders of various series of the Insured Municipal Insured
National Trust, J.C. Bradford & Co. as agent, may buy Class A shares of a FI
Fund with unit trust distributions at the net asset value plus a sales charge of
1.5%. Unitholders of various tax-exempt trusts, other than the New York Trust,
sponsored by Van Kampen Merritt Inc. may buy Class A shares of a FI Fund at the
net asset value plus a sales charge of 1.0%.

Unitholders may make additional purchases, other than those made by unit trust
distributions, at the Fund's regular offering price.

CUMULATIVE PURCHASE PRIVILEGE The Cumulative Purchase Privilege lets you add the
value of all your existing FI Fund accounts (Class A and Class B shares) to the
amount of your next Class A share investment to reach sales charge discount
breakpoints. For example, if the combined value of your existing FI Fund
accounts is $25,000, your next purchase will be eligible for a sales charge
discount at the $25,000 level. Cumulative Purchase discounts are applied to
purchases as indicated in the first column of the Class A Sales Charge table.

All your accounts registered with the same social security number will be linked
together under the Cumulative Purchase Privilege. In addition, your spouse's
accounts and custodial accounts held for minor children residing at your home
can also be linked to your accounts upon request.

                                       8


- -Conservator accounts are linked to the social security number of the ward, not
the conservator.

- -Sole proprietorship accounts are linked to personal/family accounts only if the
account is registered with a social security number, not an employer
identification number ("EIN").

- -Testamentary trusts and living trusts may be linked to other accounts
registered under the same trust EIN, but not to the personal accounts of the
trustee(s).

- -Estate accounts may only be linked to other accounts registered under the same
EIN of the estate or social security number of the decedent.

- -Church and religious organizations may link accounts to others registered with
the same EIN but not to the personal accounts of any member.

LETTER OF INTENT

A Letter of Intent ("LOI") lets you purchase at a discounted sales charge level
even though you do not yet have sufficient investments to qualify for that
discount level. An LOI is a commitment by you to invest a specified dollar
amount during a 13-month period. The amount you agree to invest determines the
sales charge you pay. Under an LOI, you can reduce the initial sales charge on
Class A share purchases based on the total amount you agree to invest in both
Class A and Class B shares during the 13 month period. Purchases made up to 90
days before the date of the LOI may be included.

Your LOI can be amended in two ways. First, you may file an amended LOI to raise
or lower the LOI amount during the 13 month period. Second, your LOI will be
automatically amended if you invest more than your LOI amount during the
13-month period and qualify for an additional sales charge reduction.

By purchasing under an LOI, you acknowledge and agree to the following:

- -You authorize First Investors to reserve 5% of your total intended investment
in shares held in escrow in your name until the LOI is completed.

- -First Investors is authorized to sell any or all of the escrow shares to
satisfy any additional sales charges owed in the event you do not fulfill the
LOI.

- -Although you may exchange all your shares, you may not sell the reserve shares
held in escrow until you fulfill the LOI or pay the higher sales charge.

oCLASS B SHARES

Class B shares are sold without an initial sales charge, putting all your money
to work for you immediately. If you redeem Class B shares within 6 years of
purchase, a CDSC will be imposed. The CDSC declines from 4% to 0% over a 6-year
period, as shown in the chart below. Class B share money market fund shares are
not sold directly. They can only be acquired through an exchange from another
Class B fund account. Class B shares, and the dividend and distribution shares
they earn, automatically convert to Class A shares after 8 years, reducing
future annual expenses.

Generally, you should consider purchasing Class B shares if you intend to invest
less than $250,000 and you would rather pay higher ongoing expenses than an
initial sales charge.


                             CLASS B SALES CHARGES

        THE CDSC DECLINES OVER TIME AS SHOWN IN THE TABLE BELOW:
     ________________________________________________________________
        Year   1      2      3      4       5      6      7+
     ________________________________________________________________
        CDSC   4%     4%     3%     3%      2%     1%     0%
     ________________________________________________________________


                                       9



If shares redeemed are subject to a CDSC, the CDSC will be based on the lesser
of the original purchase price or redemption price. There is no CDSC on shares
acquired through dividend and capital gains reinvestment. We call these "free
shares."

Anytime you sell shares, your shares will be redeemed in the following manner to
ensure that you pay the lowest possible CDSC:

FIRST-Class B shares representing dividends and capital gains that are not
subject to a CDSC.

SECOND-Class B shares held more than six years which are not subject to a CDSC.

THIRD-Class B shares held longest which will result in the lowest CDSC.

For purposes of calculating the CDSC, all purchases made during the calendar
month are deemed to have been made on the first business day of the month at the
average cost of the shares purchased during that period.

SALES CHARGE WAIVERS ON CLASS B SHARES

The CDSC on Class B shares does not apply to:

1: Appreciation on redeemed shares above their original purchase price.

2: Redemptions due to death or disability (as defined in section 72(m)(7) of the
Internal Revenue Code) requested within one year of death. Additional
documentation is required.

3: Distributions from employee benefit plans due to termination or plan
transfer.

4: Redemptions to remove an excess contribution from an IRA or qualified
retirement plan.

5: Distributions upon reaching required minimum age 70 1/2 provided you have
held the shares for at least three years.

6: Annual redemptions of up to 8% of your account's value redeemed by a
Systematic Withdrawal Plan. Free shares not subject to a CDSC will be redeemed
first and will count towards the 8% limit.

7: Shares redeemed from advisory accounts managed by or held by the Fund's
investment advisor or any of its affiliates.

8: Tax-free returns of excess contributions from employee benefit plans.

9: Redemptions of non-retirement shares purchased with proceeds from the sale of
shares of another fund group between April 29, 1996 and June 30, 1996 that did
not pay a sales charge (other than money market fund accounts or retirement plan
accounts).

10: Redemptions by the Fund when the account falls below the minimum.

11:  Redemptions  to pay  account  fees.

Include a written statement with your redemption request explaining which
exemption applies. If you do not include this statement we cannot guarantee that
you will receive the waiver.

oHOW TO PAY

You can invest using one or more of the
following options:

- -CHECK:
You can buy shares by writing a check payable to
First Investors Corporation. If you are opening a new fund account, your check
must meet the fund minimum. When making purchases to an existing account,
remember to include your fund account number on your check.

- -AUTOMATIC INVESTMENT PROGRAMS:

We offer several automatic investment programs to simplify
investing.

- -MONEY LINE:

With our Money Line program, you can open an account with as little as $50 a
month or $600 each year in a FI Fund account by transferring funds
electronically from your bank account. You can invest up to $10,000 a month
through Money Line.


                                       10




Money Line allows you to select the payment  amount and  frequency  that is best
for you. You can make automatic investments  bi-weekly,  semi-monthly,  monthly,
quarterly,  semi-annually,  or annually.  The date you select as your Money Line
investment date is the date on which shares will be purchased. THE PROCEEDS MUST
BE  AVAILABLE IN YOUR BANK  ACCOUNT TWO  BUSINESS  DAYS PRIOR TO THE  INVESTMENT
DATE.



HOW TO APPLY:

1: Complete the Electronic Funds Transfer ("EFT") section of the application to
provide complete bank information and authorize EFT fund share purchases. Attach
a voided check. A signature guarantee of all shareholders and bank account
owners is required.

PLEASE ALLOW AT LEAST 10 BUSINESS DAYS FOR INITIAL PROCESSING.

2: Complete the Money Line section of the application to specify the amount,
frequency and date of the investment.

3: Submit the paperwork to your registered representative or send it to:
ADMINISTRATIVE DATA MANAGEMENT CORP., ATTN: CONTROL DEPT., 581 MAIN STREET,
WOODBRIDGE, NJ 07095-1198.

HOW TO CHANGE:

Provided you have telephone privileges, you may call Shareholder Services at 1
(800) 423-4026 to:

- -Increase the payment up to $999.99.

- -Decrease the payment.

- -Discontinue the service.

To change investment amounts, reallocate or cancel Money Line, you must notify
us at least 3 business days prior to the investment date.

You must send a signature guaranteed written request to Administrative Data
Management Corp. to:

- -Increase the payment to $1,000 or more.

- -Change bank information.

A medallion signature guarantee (see Signature Guarantee Policy) is required to
increase a Money Line payment to $2,500 or more. Changing banks or bank account
numbers requires 10 days notice. Money Line service will be suspended upon
notification that all account owners are deceased.

AUTOMATIC PAYROLL INVESTMENT: With our Automatic Payroll Investment service
("API") you can systematically purchase shares by salary reduction. To
participate, your employer must offer direct deposit and permit you to
electronically transfer a portion of your salary. Contact your company payroll
department to authorize the salary reductions. If not available, you may
consider our Money Line program.

Shares purchased through API are bought at the offering price on the day the
electronic transfer is received by the Fund.

HOW TO APPLY:

1: Complete an API Application.

2: Complete an API Authorization Form.

3: Submit the paperwork to your registered representative or send it to:
ADMINISTRATIVE DATA MANAGEMENT CORP., ATTN: CONTROL DEPT., 581 MAIN STREET,
WOODBRIDGE, NJ 07095-1198.

oWire Transfers:

You may purchase shares via a federal funds wire transfer from your bank account
into your EXISTING First Investors account. Federal fund wire transfer proceeds
are not subject to a holding period and are available to you immediately upon
receipt, as long as we have been notified properly.

YOU MUST CALL US AT 1 (800)  423-4026 TO ADVISE US OF AN INCOMING  FEDERAL FUNDS
WIRE and provide us with the federal  funds wire transfer  confirmation  number,
the amount of the wire,  and the fund account number to receive same day credit.

                                       11




There are special rules for money market fund accounts. To wire federal funds to
an existing First Investors account (other than money markets), instruct your
bank to wire your investment to: FIRST FINANCIAL SAVINGS BANK, S.L.A. ABA #
221272604 ACCOUNT # 0306142 YOUR NAME YOUR FIRST INVESTORS FUND ACCOUNT#

oDISTRIBUTION CROSS-INVESTMENT:

You can invest the dividends and capital gains from one fund account, excluding
the money market funds, into another fund account in the same class of shares.
The shares will be purchased at the net asset value on the day after the record
date of the distribution.

- -You must invest at least $50 a month or $600 a year into a NEW account.

- -A signature guarantee is required if the ownership on both accounts is not
identical.

You may establish a Distribution Cross-Investment service by contacting your
registered representative or calling Shareholder Services at 1 (800) 423-4026.

oSYSTEMATIC WITHDRAWAL PLAN PAYMENT INVESTMENTS:

You can invest Systematic Withdrawal Plan payments (see How to Sell Shares) from
one fund account in shares of another fund account.

- -Payments are invested without a sales charge.

- -A signature guarantee is required if the ownership on both accounts is not
identical.

- -Both accounts must be in the same class of shares.

- -You must invest at least $600 a year if into a new  account.

- -You can invest on a monthly, quarterly, semi-annual, or annual basis.

Redemptions are suspended upon notification that all account owners are
deceased. Service will recommence upon receipt of written alternative payment
instructions and other required documents from the decedent's legal
representative.

HOW TO SELL SHARES

You can sell your shares on any day the New York Stock Exchange is open for
regular trading. In the mutual fund industry, a sale is referred to as a
"redemption." Redemption proceeds are generally mailed within three days. If the
shares being redeemed were purchased by check, payment may be delayed to verify
that the check has been honored, which may take up to 15 days from the date of
purchase. Shareholders may not redeem shares by telephone or electronic funds
transfer unless the shares have been owned for at least 15 days.

Redemptions of shares are not subject to the 15 day verification period if the
shares were purchased via:

- -Automatic  Payroll  Investment

- -FIC registered representative payroll checks -First Investors Life Insurance
Company checks


- -Federal funds wire payments

                                       12



oREDEMPTION OPTIONS

For trusts, estates, attorneys-in-fact, corporations, partnerships, and other
entities, additional documents are required to redeem shares. Call Shareholder
Services at 1 (800) 423-4026 for more information.

WRITTEN REDEMPTIONS

You can write a letter of instruction or contact your First Investors registered
representative for a liquidation request form. A written liquidation request in
good order 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 to
redeem;

4: Share certificates (if they were issued to you);

5: Original signatures of all owners exactly as your account is registered;

6:  Signature guarantees, if required (see Signature Guarantee Policy).

Written redemption requests should be mailed to:

ADMINISTRATIVE DATA MANAGEMENT CORP.
581 MAIN STREET
WOODBRIDGE, NJ 07095-1198

TELEPHONE REDEMPTIONS

You, or any person we believe is authorized to act on your behalf, may redeem
shares which have been owned for at least 15 days by calling our Special
Services Department at 1 (800) 342-6221 from 9:00 a.m. to 5:00 p.m., EST,
provided:

- -Telephone privileges are available for your account registration (see Telephone
Privileges);

- -You have telephone privileges (see Telephone Privileges);

- -You do not hold share certificates (issued shares);

- -The redemption check is made payable to the registered owner(s) or
pre-designated bank;

- -The redemption check is mailed to your address of record;

- -Your address of record has not changed within the past 60 days;

- -The redemption amount is $50,000 or less; AND

- -The redemption  amount,  combined with the amount of all telephone  redemptions
made within the previous 30 days does not exceed $100,000.

ELECTRONIC FUNDS TRANSFER

The Electronic Funds Transfer ("EFT") service allows you to redeem shares and
electronically transfer proceeds to your bank account.

YOU MUST ENROLL IN THE ELECTRONIC FUNDS TRANSFER SERVICE AND PROVIDE COMPLETE
BANK ACCOUNT INFORMATION BEFORE USING THE PRIVILEGE. Signature guarantees of all
shareholders and all bank account owners are required. Please allow at least 10
business days for initial processing. We will send any proceeds during the
processing period to your address of record. Call your registered representative
or Shareholder Services at 1 (800) 423-4026 for an application.

You may call Shareholder Services or send written instructions to Administrative
Data Management Corp. to request an EFT redemption of shares which are held at
least 15 days. Each EFT redemption:

1: Must be electronically transferred to your pre-designated bank account;

2: Must be at least $500;

3: Cannot exceed $50,000;

4: Cannot exceed $100,000 when added to the total amount of all EFT
redemptions made within the previous 30 days.


                                       13



If your redemption does not qualify for an EFT redemption, you may request to
have the redemption proceeds mailed to you.

The Electronic Funds Transfer service may also be used to purchase shares (see
Money Line) and transfer systematic withdrawal payments (see Systematic
Withdrawal Plans) and dividend distributions (see Other Services) to your bank
account.

SYSTEMATIC WITHDRAWAL PLANS

Our Systematic Withdrawal Plan allows you to redeem a specific dollar amount or
percentage from your account on a regular basis. Your payments can be mailed to
you or a pre-authorized payee by check, transferred to your bank account
electronically (if you have enrolled in the EFT service) or invested in shares
of another FI fund in the same class of shares through our Systematic Withdrawal
Plan Payment investment service (see How to Buy Shares).

You can receive payments on a monthly, quarterly, semi-annual, or annual basis.
Your account must have a value of at least $5,000 in non-certificated shares
("unissued shares"). The $5,000 minimum account balance is waived for required
minimum distributions from retirement plan accounts. The minimum Systematic
Withdrawal Plan payment is $25 (waived for Required Minimum Distributions on
retirement accounts or FIL premium payments).

Once you establish the Systematic Withdrawal Plan, you should not make
additional investments into this account (except money market funds). Buying
shares during the same period as you are selling shares is not advantageous to
you because of sales charges.

If you own Class B shares, you may establish a Systematic Withdrawal Plan and
redeem up to 8% of the value of your account annually without a CDSC.

If you own Class B shares of a retirement account and you are receiving your
Required Minimum Distribution through a Systematic Withdrawal Plan, up to 8% of
the value of your account may be redeemed annually without a CDSC. However, if
your Required Minimum Distribution exceeds the 8% limit, the applicable CDSC
will be charged if the additional shares were held less than 3 years and you
have not reached age 70-1/2.

To establish a Systematic Withdrawal Plan, complete the appropriate section of
the account application or contact your registered representative or call
Shareholder Services at 1 (800) 423-4026.

oEXPEDITED WIRE  REDEMPTIONS  (MONEY MARKET FUNDS ONLY)

Enroll in our Expedited Redemption service to wire proceeds from your FI money
market account to your bank account. Call Shareholder Services at 1 (800)
423-4026 for an application or to discuss specific requirements.

- -Each wire under $5,000 is subject to a $10 fee.

- -Six wires of $5,000 or more are  permitted  without  charge  each  month.  Each
additional wire is $10.00.

- -Wires must be directed to your pre-authorized bank account.



                                       14




HOW TO EXCHANGE SHARES

The exchange privilege gives you the flexibility to change investments as your
goals change without incurring a sales charge. Since an exchange is a redemption
and a purchase, it creates a gain or loss which is reportable for tax purposes.
You should consult your tax advisor before requesting an exchange. Read the
prospectus of the FI Fund you are purchasing carefully. Review the differences
in objectives, policies, risk, privileges and restrictions.



______________________________________________________________________________
EXCHANGE METHODS
_______________________________________________________________________________

METHOD                       STEPS TO FOLLOW
                          

Through Your FI
Registered Representative    Call your registered representative.
___________________________________________________________________________________
By Phone                     Call Special Services from 9:00 a.m. to 5:00 p.m., EST
(800) 342-6221               Orders  received after the close of the New York Stock
Exchange, usually 4:00       p.m., est, are processed the following business day.

                             1.You must have telephone privileges
                            (see Telephone Transactions)

                             2.Certificate shares cannot be exchanged by phone.

                             3.For trusts, estates, attorneys-in-fact, corporations,
                             partnerships, and other entities, additional documents
                             are required.
____________________________________________________________________________________
By Mail to:                  1.Send us written instructions signed by all account
ADM                          exactly as the account is registered.
owners                       2. Include your fund account number.
ATTN: EXCHANGE DEPT.         3. Indicate either the dollar amount, number of shares
581 MAIN STREET              or percent of the account you want to exchange.
WOODBRIDGE, NJ 07095-119     4. Specify the existing account number or the name of
                             the new Fund you are exchanging into.

                             5. Include any outstanding share certificates for the
                             shares you want to exchange.

                             6. For trusts, estates, attorneys-in-fact, corporations,
                             partnerships, and other entities, additional documents
                             are required. Call Shareholder Services at 1 (800)
                             423-4026.
____________________________________________________________________________________




                                       15




oEXCHANGE CONDITIONS

1: You may only exchange  shares within the same Class.

2: Exchanges can only be made into identically owned accounts.

3: Partial  exchanges  into a new fund account must meet the new fund's  minimum
initial investment.

4: The fund you are  exchanging  into must be eligible for sale in your state.

5: If your request  does not clearly  indicate the amount to be exchanged or the
accounts involved, no shares will be exchanged.

6: Amounts  exchanged from a non-money market fund to a money market fund may be
exchanged  back at net asset  value.  Dividends  earned  from money  market fund
shares will be subject to a sales charge.

7: If you are exchanging from a money market fund to a fund with a sales charge,
there will be a sales charge on any shares that were not previously subject to a
sales  charge.  Your  request  must  be  in  writing  and  include  a  statement
acknowledging  that a sales charge will be paid. If you exchange  Class B shares
of a fund for  shares  of a Class B money  market  fund,  the  CDSC  will not be
imposed and the holding period used to calculate the CDSC will carry over to the
acquired shares.

8: FI Funds reserve the right to reject any exchange  order which in the opinion
of the Fund is part of a market timing  strategy.  In the event that an exchange
is rejected,  neither the  redemption nor the purchase side of the exchange will
be processed.

oEXCHANGING  FUNDS WITH AUTOMATIC  INVESTMENTS  OR  SYSTEMATIC  WITHDRAWALS

Let us know if you want to continue automatic investments into the original fund
or the fund you are exchanging into ("receiving fund") or if you want to change
the amount or allocation into both. Also inform us if you wish to continue,
terminate, or change a preauthorized systematic withdrawal. Without specific
instructions, we will amend account privileges as outlined below:

________________________________________________________________________________
                    EXCHANGE          EXCHANGE          EXCHANGE A
                    ALL SHARES TO     ALL SHARES TO     PORTION OF
                    ONE FUND          MULTIPLE          SHARES TO ONE OR
                                      FUNDS             MULTIPLE FUNDS
________________________________________________________________________________
MONEY LINE          ML moves to       ML stays with     ML stays with
(ML)                Receiving Fund    Original Fund     Original Fund


AUTOMATIC PAYROLL   API moves to      API Stays with    API stays with
INVESTMENT (API)    Receiving Fund    Original Fund     Original Fund


SYSTEMATIC          SWP moves to      SWP               SWP stays
WITHDRAWALS         Receiving Fund    Canceled          with Original Fund (SWP)
________________________________________________________________________________



                                       16




WHEN AND HOW ARE FUND SHARES PRICED?

Each FI Fund prices its shares each day that the New York Stock Exchange
("NYSE") is open for trading. The share price is calculated as of the close of
trading on the NYSE (generally 4:00 p.m., EST) except for shares of the money
market funds which are priced as of 12:00 noon. These days are referred to as
"Trading Days" in this Manual.

Each Fund calculates the net asset value of each class of its shares separately
by taking the total value of class assets, subtracting class expenses, and
dividing the difference by the total number of shares in the class. The price
that you will pay for a share is the NAV plus any applicable front-end sales
charge. You receive the NAV price if you redeem or exchange your shares, less
any applicable CDSC.

Fund prices are on our website (www.firstinvestors.com) the next day. The prices
for our larger funds are also reported in many newspapers, including The Wall
Street Journal and The New York Times. Special pricing procedures are employed
during emergencies. For a description of these procedures you can request, free
of charge, a copy of a Statement of Additional Information.

HOW ARE PURCHASE, REDEMPTION, AND EXCHANGE ORDERS PROCESSED AND PRICED?

The processing and price for a purchase, redemption or exchange depends upon how
your order is placed.  As indicated  below,  special rules apply to money market
transactions.

oPURCHASES

Purchases that are made by written application or order are processed when they
are received in "good order" by our Woodbridge, NJ office. To be in good order,
all required paperwork must be completed and payment received. If your order is
received prior to the close of trading on the NYSE, it will receive that day's
price (except in the case of the money market funds which are discussed below).
This procedure applies whether your purchase order is given to your registered
representative or mailed directly by you to our Woodbridge, NJ office.

As described previously in "How to Buy Shares," certain types of purchases can
only be placed by written application. For example, purchases in connection with
the opening of retirement accounts may only be made by written application.
Furthermore, rollovers of retirement accounts will be processed only when we
have received both written application and the proceeds of the rollover. Thus,
for example, if it takes 30 days for another fund group to send us the proceeds
of a retirement account, your purchase of First Investors funds will not occur
until we receive the proceeds.

Some types of purchases may be phoned or electronically transmitted to us by
your broker/dealer. If you give your order to a First Investors registered



                                       17



representative before the close of trading on the NYSE and the order is phoned
to our Woodbridge, NJ office prior to 5:00 p.m., EST, your shares will be
purchased at that day's price (except money market funds which are discussed
below). If you are buying a First Investors Fund through a broker-dealer other
than First Investors, other requirements may apply. Consult with your
broker-dealer about its requirements. Payment is due within three business days
of placing an order by phone or electronic means or the trade may be cancelled.
(In such event, you will be liable for any loss resulting from the
cancellation.) To avoid cancellation of your orders, you may arrange to open a
money market account and use it to pay for subsequent purchases.

Purchases made pursuant to our Automatic Investment Programs are processed as
follows:

- -Money Line purchases are processed on the dates you select on your application.

- -Automatic Payroll Investment Service purchases are processed on the dates that
we receive funds from your employer.

oREDEMPTIONS

As described previously in "How To Sell Shares", certain redemption orders may
only be made by written instructions or application. Unless you have declined
Telephone Privileges, most redemptions can be made by phone by you or your
registered representative.

Written redemption orders will be processed when received in good order in our
Woodbridge, NJ office. Phone redemption orders will be processed when received
in our Woodbridge, NJ office.

If your redemption order is received prior to the close of trading on the NYSE,
you will receive that day's price (except in the case of money market funds
which are discussed below). If you are redeeming through a broker-dealer other
than First Investors, other requirements may apply. Consult with your
broker-dealer about its requirements.

oEXCHANGES

Exchanges can generally be made by written instructions or, unless you have
declined Telephone Privileges, by phone by you or your registered
representative. Exchange orders are processed when we receive them in good order
in our Woodbridge, NJ office.

Exchange orders received prior to the close of trading on the NYSE will be
processed at that day's prices (except in the case of exchanges into or out of
money market funds which are discussed below).


oORDERS PLACED VIA FIRST INVESTORS REGISTERED REPRESENTATIVES

All orders placed through a First Investors registered representative must be
reviewed and approved by a principal officer of the branch office before being
mailed or transmitted to the Woodbridge, NJ office.

oORDERS PLACED VIA DEALERS

It is the responsibility of the Dealer to forward or transmit orders to the Fund
promptly and accurately. A fund will not be liable for any change in the price
per share due to the failure of the Dealer to place the order in a timely
fashion. Any such disputes must be settled between you and the Dealer.



                                       18



oSPECIAL RULES FOR MONEY MARKET FUNDS

A money market fund share purchase will not be made until we receive the funds
for the purchase. The funds for the purchase will not be deemed to have been
received until the morning of the next Trading Day following the Trading Day on
which your purchase check is received in our Woodbridge, NJ office. If a check
is received in our Woodbridge, NJ office after the close of regular trading on
the NYSE, the funds for the purchase will not be deemed to have been received
until the morning of the second following Trading Day.

If you make your purchase by wire transfer prior to 12:00 p.m., EST, and you
have previously advised us that the wire is on the way, the funds for the
purchase will be deemed to have been received on that same day. You must call
beforehand and give us your name, account number, the amount of the wire, and a
federal reference number documenting the transfer. If we fail to receive such
advance notification, the funds for your purchase will not be deemed to have
been received until the morning of the next Trading Day following receipt of the
federal wire and your account information. To wire funds to an existing First
Investors money market account, instruct your bank to wire your investment, as
applicable, to: CASH MANAGEMENT FUND BANK OF NEW YORK ABA #021000018 ACCOUNT
8900005696 YOUR NAME YOUR FIRST INVESTORS ACCOUNT # TAX-EXEMPT MONEY MARKET FUND
BANK OF NEW YORK ABA #021000018 ACCOUNT 8900023198 YOUR NAME YOUR FIRST
INVESTORS ACCOUNT #

Purchases by Money Line and Automatic Payroll Investment are processed in the
same manner as those in other Funds.

Requests for redemptions or exchanges out of or into our money market funds must
be received in writing or by phone prior to 12:00 p.m.,  EST, on a Trading  Day,
to be processed the same day. Redemption or exchange orders received after 12:00
p.m.,  EST,  but  before  the close of  regular  trading  on the  NYSE,  will be
processed on the morning of the following Trading Day.

RIGHT TO REJECT PURCHASE OR EXCHANGE ORDERS

A fund reserves the right to reject or restrict any specific purchase request if
the fund determines that doing so is in the best interest of the fund and its
shareholders. Investments in a fund are designed for long-term purposes and are
not intended to provide a vehicle for short-term market timing. The funds also
reserve the right to reject any exchange that in the funds' opinion is part of a
market timing strategy. In the event that a fund rejects an exchange request,
neither the redemption nor the purchase side of the exchange will be processed.

SIGNATURE GUARANTEE POLICY

A signature guarantee protects you from the risk of a
fraudulent signature and is generally required for non-standard and large dollar
transactions.  A signature  guarantee may be obtained from your First  Investors
registered  representative or eligible guarantor  institutions  including banks,
savings associations, credit unions and brokerage firms which are members of the
Securities  Transfer  Agents  Medallion  Program  ("STAMP"),  the New York Stock
Exchange Medallion  Signature Program ("MSP"),  or the Stock Exchanges Medallion
Program  ("SEMP").  Please  note  that a  notary  public  stamp  or  seal is not
acceptable. The words "Signature Guaranteed" must appear beside the signature of
the guarantor.

- -SIGNATURE GUARANTEES ARE REQUIRED:

1: For redemptions over $50,000.

2: For redemption checks made payable to any person(s) other than the registered
shareholder(s) or a major financial institution for the benefit of the
registered shareholder(s).

3: For redemption checks mailed to an address other than the address of record
(unless the check is mailed to a financial institution on your behalf).

4: For redemptions when the address of record has changed within 60 days of the
request.

5: When a stock certificate is mailed to an address other than the address of
record or to the dealer on the account.

6: When shares are transferred to a new registration.

7: When issued shares are redeemed.

8: To establish any EFT service.



                                       19




9: For requests to change the address of record to a P.O. box or a "c/o" street
address.

10: If multiple account owners of one account give inconsistent instructions.

11: When a transaction requires additional legal documentation.

12: When the authority of a representative of a corporation, partnership, trust,
or other entity has not been satisfactorily established.

13: When an address on an account which was coded "Do Not Mail" to suppress
check and dividend mailings due to a previously unknown address is updated.

14: Any other instance whereby a fund or its transfer agent deems it necessary
as a matter of prudence.

TELEPHONE SERVICES TELEPHONE EXCHANGES AND REDEMPTIONS 1 (800) 342-6221

You automatically receive telephone privileges when you open a First Investors
individual, joint, or custodial account unless you decline the option on your
account application or send the Fund written instructions. For trusts, estates,
attorneys-in-fact, corporations, partnerships, and other entities, additional
documents are required. Call Shareholder Services at 1 (800) 423-4026 for
assistance.

Telephone privileges allow you to exchange or redeem shares and authorize other
transactions by calling Special Services at 1 (800) 342-6221 from 9:00 a.m. to
5:00 p.m., EST, on any day the NYSE is open. Your First Investors registered
representative may also use telephone privileges to execute your transactions.

oSECURITY MEASURES

For your protection, the following security measures are taken:

1: Telephone requests are recorded to verify accuracy.

2: Some or all of the following information is obtained:

- -Account number

- -Address

- -Social security number

- -Other information as deemed necessary

3: A written confirmation of each transaction is mailed to you.

We will not be liable for following  instructions
if we reasonably  believe the instructions are genuine based on our verification
procedures.

oELIGIBILITY

NON-RETIREMENT  ACCOUNTS:

You can exchange or redeem shares of any non-retirement account by phone. Shares
must be owned for 15 days for telephone redemption. Telephone exchanges and
redemptions are not available on guardianship and conservatorship accounts.

RETIREMENT  ACCOUNTS:

You can exchange between shares of any participant directed IRA, 403(b) or
401(k) Simplifier plan where First Financial Savings Bank, S.L.A. is Custodian.
You may also exchange shares from an individually registered non-retirement
account to an IRA account registered to the same owner (provided an IRA
application is on file). Telephone exchanges are permitted on 401(k) Flexible
plans, money purchase pension plans and profit sharing plans if a First
Investors Qualified Retirement Plan Application is on file with the fund.
Contact your First Investors registered representative or call Shareholder
Services at 1 (800) 423-4026 to obtain a Qualified Retirement Plan Application.
Telephone redemptions are not permitted on First Investors retirement accounts.



                                       20



SHAREHOLDER SERVICES:
1 (800) 423-4026

PROVIDED YOU HAVE NOT DECLINED TELEPHONE PRIVILEGES, CALL US TO UPDATE OR
CORRECT:

- -Your address or phone number.

- -Your birth date (important for retirement distributions).

- -Your distribution option to reinvest or pay in cash (non-retirement accounts
only) or initiate cross reinvestment of dividends.

- -The amount of your Money Line or Automatic Payroll Investment payment.

- -The allocation of your Money Line or Automatic Payroll Investment  payment.

- -The amount of your Systematic Withdrawal payment.

TO REQUEST:

- -A duplicate copy of a statement or tax form.

- -A history of your account (the fee can be debited from your non-retirement
account).

- -A share certificate to be mailed to your address of record.

- -A stop payment on a dividend, redemption or money market check.

- -Suspension (up to six months) or cancellation of Money Line.

- -Cancellation of your Systematic Withdrawal Plan.

- -Cancellation of cross-reinvestment of dividends.

- -Money market fund draft checks.



                                       21



OTHER SERVICES

oREINVESTMENT PRIVILEGE

If you sell some or all of your Class A or Class B shares, you may be entitled
to reinvest all or a portion of the proceeds in the same class of shares of a FI
fund within six months of the redemption without a sales charge.

If you reinvest proceeds into a new fund account, you must meet the fund's
minimum initial investment requirement.

If you reinvest all the proceeds from a Class B share redemption, you will be
credited, in additional shares, for the full amount of the CDSC. If you reinvest
a portion of a Class B share redemption, you will be credited with a pro-rated
percentage of the CDSC.

The reinstatement privilege does not apply to automated purchases, automated
redemptions, or reinvestments in Class B shares of less than $1,000. Please
notify us if you qualify for this privilege. For more information, call
Shareholder Services at 1 (800) 423-4026.

oCERTIFICATE  SHARES

Every time you make a purchase of Class A shares, we will credit shares to your
fund account. We do not issue shares certificates unless you specifically
request them. Certificates are not issued on any Class B shares or on Class A
money market funds.

Having us credit shares on your behalf eliminates the expense of replacing lost,
stolen, or destroyed certificates. If a certificate is lost, stolen, or damaged,
you will be charged a replacement fee of the greater of 2% of the current value
of the certificated shares or $25.

In addition, certificated shares cannot be redeemed or exchanged until they are
returned with your transaction request. The share certificate must be properly
endorsed and signature guaranteed.

oMoney Market Fund Draft Checks

Free draft check writing privileges are available when you open a First
Investors Cash Management Fund or a First Investors Tax Exempt Money Market Fund
account. Checks may be written for a minimum of $500. Draft checks are not
available for Class B share accounts, retirement accounts, guardianships and
conservatorships. Complete the Money Market Fund Check Redemption section of the
account application to apply for draft checks. To order additional checks, call
Shareholder Services at 1 (800) 423-4026.

Additional documentation is required to establish check writing privileges for
trusts, corporations, partnerships and other entities. Call Shareholder Services
at 1 (800) 423-4026 for further information.

_______________________________________________________________________________
FEE TABLE

Call Shareholder Services at 1 (800) 423-4026 or send your request to FIC, Attn:
Correspondence Dept., 581 Main Street, Woodbridge N.J. 07095-1198 to request a
copy of the following records:

ACCOUNT HISTORY STATEMENTS                   CANCELLED CHECKS

1974 - 1982*   $10 per year fee              There is a $10 fee for a copy of a
1983 - present $5 total fee for all years    cancelled dividend, liquidation, or
Current &                                    investment check requested. There
Two Prior Years       Free                   cancelled money market draft check.

                                             DUPLICATE TAX FORMS

                                             Current Year     Free
                                             Prior Year(s)    $7.50 per tax form
                                                              per year
* ACCOUNT HISTORIES ARE NOT AVAILABLE
  PRIOR TO 1974.




                                       22



oRETURN MAIL

If mail is returned to the fund marked undeliverable by the U.S. Postal Service
after two consecutive mailings, and the fund is unable to obtain a current
shareholder address, the account status will be changed to "Do Not Mail" to
discontinue future mailings and prevent unauthorized persons from obtaining
account information.

You can remove the "Do Not Mail" status on your account by submitting written
instructions including your current address signed by all shareholders with a
signature guarantee (see Signature Guarantee Policy). Additional requirements
may apply for certain accounts. Call Shareholder Services at 1 (800) 423-4026
for more information.

Returned dividend checks and other distributions will be reinvested in the fund
when an account's status has been changed to "Do Not Mail". No interest will be
paid on outstanding checks prior to reinvestment. All future dividends and other
distributions will be reinvested in additional shares until new instructions are
provided. If you cannot be located within a period of time mandated by your
state of residence your fund shares may be turned over to your state (in other
words forfeited).

Prior to turning over assets to your state, the fund will seek to obtain a
current shareholder address in accordance with Securities and Exchange
Commission rules. A search company may be employed to locate a current address.
The fund may deduct the costs associated with the search from your account.

oTRANSFERRING  SHARES

A transfer is a change of share ownership from one customer to another. Unlike
an exchange, transfers occur within the same fund. You can transfer your shares
at any time.

To transfer shares, submit a letter of instruction including:

- -Your account number.

- -Dollar amount, percentage, or number of shares to be transferred.

- -Existing account number receiving the shares (IF ANY).

- -The name(s), registration, and taxpayer identification number of the customer
receiving the shares.

- -The signature of each account owner requesting the transfer with signature
guarantee(s).

In addition, we will request that the transferee complete a Master Account
Agreement to establish a brokerage account with First Investors Corporation and
validate his or her social security number to avoid back-up withholding. If the
transferee declines to complete an MAA, all transactions in the account must be
on an unsolicited basis and the account will be so coded.

Depending upon your account registration, additional documentation may be
required to transfer shares. Transfers due to the death or disability of a
shareholder also require additional documentation. Please call our Shareholder
Services Department at 1 (800) 423-4026 for specific transfer requirements
before initiating a request.

A transfer is a change of ownership and may trigger a taxable event. You should
consult your tax advisor before initiating a transfer.




                                       23




ACCOUNT STATEMENTS

oTRANSACTION CONFIRMATION STATEMENTS

You will receive a confirmation  statement  immediately after most transactions.
These include:

- -shareorder purchases

- -check investments

- -redemptions

- -exchanges

- -transfers

- -systematic withdrawals

Money Line and Automatic Payroll Investment purchases are not confirmed for each
transaction. They will appear on your next regularly scheduled monthly or
quarterly statement (see Dividend Schedule under "Dividends and Distributions").

A separate confirmation statement is generated for each fund account you own. It
provides:

- -Your fund account number

- -The date of the transaction

- -A description of the transaction (PURCHASE, REDEMPTION, ETC.)

- -The number of shares bought or sold for the transaction

- -The dollar amount of the transaction

- -The dollar amount of the dividend payment (IF APPLICABLE)

- -The total share balance in the account

- -The dollar amount of any dividends or capital gains paid

- -The number of shares held by you, held for you (INCLUDING ESCROW SHARES), and
the total number of shares you own.

The confirmation statement also provides a perforated Investment Stub with your
preprinted name, registration, and fund account number for future investments.

oMASTER ACCOUNT STATEMENTS

If First Investors Corporation is your broker, you will receive a Master Account
Statement for all your identically owned First Investors fund accounts on at
least a quarterly basis. The Master Account Statement will also include a recap
of any First Investors Life Insurance and Executive Investors Trust accounts you
may own. Joint accounts registered under your taxpayer identification number
will appear on a separate Master Account Statement but may be mailed in the same
envelope upon request.

The Master Account Statement provides the following information for each First
Investors fund you own:

- -fund name
- -fund's  current market value

- -total  distributions  paid  year-to-date
- -total  number of shares owned

oANNUAL AND SEMI-ANNUAL REPORTS

You will also receive an Annual and a Semi-Annual Report. These financial
reports show the assets, liabilities, revenues, expenses, and earnings of the
fund as well as a detailed accounting of all portfolio holdings. You will
receive one report per household.




                                       24



DIVIDENDS AND DISTRIBUTIONS

oDIVIDENDS AND DISTRIBUTIONS

For funds that declare daily dividends,  you start earning  dividends on the day
your purchase is made. For FI money market funds, you start earning dividends on
the day federal  funds are  credited  to your fund  account.  The funds  declare
dividends  from net investment  income and  distribute  the accrued  earnings to
shareholders as noted below:

________________________________________________________________________________
DIVIDEND PAYMENT SCHEDULE
________________________________________________________________________________
MONTHLY:                         QUARTERLY:             ANNUALLY (IF ANY):
Cash Management Fund             Blue Chip Fund         Global Fund
Fund for Income                  Growth & Income Fund   Special Situations Fund
Government Fund                  Total Return Fund      Mid-Cap Opportunity Fund
Insured Intermediate Tax-Exempt  Utilities Income Fund
Insured Tax Exempt Fund
Investment Grade Fund
High Yield Fund
Multi-State Insured Tax Free Fund
New York Insured Tax Free Fund
Tax-Exempt Money Market Fund
________________________________________________________________________________

Capital gains distributions, if any, are paid annually, usually near the end of
the fund's fiscal year. On occasion, more than one capital gains distribution
may be paid during one year. Dividend and capital gains distributions are
automatically reinvested to purchase additional fund shares unless otherwise
instructed. Dividend payments of less than $5.00 are automatically reinvested to
purchase additional fund shares.

oBUYING A DIVIDEND

If you buy shares shortly before the record date of the dividend, the entire
dividend you receive may be taxable even though a part of the distribution is
actually a return of your purchase price. This is called "buying a dividend."

There is no advantage to buying a dividend because a fund's net asset value per
share is reduced by the amount of the dividend.




                                       25






TAX FORMS

TAX FORM                         DESCRIPTION                                            MAILED BY
                                                                                 
_________________________________________________________________________________________________
1099-DIV       Consolidated report lists all taxable dividend and capital gains        January 31
               distributions for all of the  shareholder's accounts.  Also includes
               foreign taxes paid and any federal income tax withheld  due to backup
               withholding.
_________________________________________________________________________________________________
1099-B         Lists proceeds from all redemptions  including systematic               January
               31 withdrawals and exchanges.  A separate form is issued for each
               fund account.  Includes amount of federal income tax withheld due
               to backup withholding.
_________________________________________________________________________________________________
1099-R         Lists taxable distributions from a retirement account. A separate       January 31
               form is issued for each fund account. Includes federal
               income tax withheld due to IRS withholding requirements.
_________________________________________________________________________________________________
5498           Provided to shareholders who made an annual IRA                         May 31
               contribution or rollover purchase. Also provides the account's
               fair market value as of the last business day of the previous year.
               A separate form is issued for each fund account.
_________________________________________________________________________________________________
1042-S         Provided to non-resident  alien shareholders to report the amount       March 15
                of fund  dividends  paid and the amount of federal taxes
               withheld. A separate form is issued for each fund account.
_________________________________________________________________________________________________
Cost Basis     Uses the "average cost-single category" method to show the cost         January 31
Statement      basis of any shares sold or exchanged.  Information is provided
               to assist  shareholders in calculating capital gains or losses. A
               separate statement, included with Form 1099-B, is issued for each
               fund account.  This statement is not reported to the IRS and does
               not include money market funds or retirement accounts.
_________________________________________________________________________________________________
Tax Savings    Consolidated report lists all amounts not subject to federal,           January 31
Report for     state and local income tax for all the shareholder's accounts.
Non-Taxable    Also includes any amounts subject to alternative minimum tax.
Income
_________________________________________________________________________________________________
Tax Savings    Provides the percentage of income paid by each fund that may            January 31
Summary        be exempt from state income tax.
_________________________________________________________________________________________________



THE OUTLOOK

Today's  strategies for tomorrow's  goals are brought into focus in the OUTLOOK,
the  quarterly  newsletter  for  clients of First  Investors  Corporation.  This
informative  tool  discusses the products and services we offer to help you take
advantage  of current  market  conditions  and tax law  changes.  The  OUTLOOK'S
straight  forward approach and timely articles make it a valuable  resource.  As
always,  your  registered  representative  is  available  to  provide  you  with
additional  information and assistance.  Material  contained in this publication
should not be considered legal, financial, or other professional advice.

                                       26





                              Principal Underwriter
                           First Investors Corporation
                                 95 Wall Street
                               New York, NY 10005
                                 Transfer Agent
                               Administrative Data
                                Management Corp.
                                 581 Main Street
                              Woodbridge, NJ 07095
                                 1-800-423-4026








                                       27




                            PART C. OTHER INFORMATION
                            -------------------------


Item 15.   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:

                  (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.  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 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

Item 16.   Exhibits
           --------

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

       (ii) Supplemental Declaration of Trust(2)

     (2)    By-laws(1)

     (3)    Voting trust agreement - none.

     (4)    Agreement and Plan of  Reorganization  and  Termination is attached
       hereto as Appendix A to the Prospectus/Proxy Statement.

     (5)    Shareholders'  rights are contained in (a) Articles  III,  VIII, X,
       XI and  XII of  Registrant's  Amended and Restated  Declaration  of Trust
       dated  September  19, 1988, as amended  September  22, 1994,  previously
       filed as Exhibit 99.B1 to Registrant's  Registration Statement,  and (b)
       Articles III and V of Registrant's By-laws,  previously filed as Exhibit
       99.B2 to Registrant's Registration Statement.





     (6)      Investment  Advisory   Agreement  between   Registrant  and  First
       Investors Management Company, Inc.(1)

     (7)      Underwriting  Agreement between  Registrant  and  First  Investors
       Corporation.(1)

     (8)      Bonus, profit sharing or pension plans - none

     (9)(i)   Custodian  Agreement  between  Registrant  and  Irving  Trust
              Company(1)

       (ii)   Supplement to Custodian  Agreement between Registrant and The
              Bank of New York(1)

     (10)(i)  Amended and Restated Class A Distribution Plan(1)

         (ii) Class B Distribution Plan1

     (11)     Opinion and Consent of  Counsel   regarding   the   legality  of
        securities being registered - to be filed

     (12)     Opinion and Consent of Counsel  regarding certain tax matters - to
        be filed

     (13)(i)  Administration Agreement between Registrant,  First Investors
              Management Company, Inc., First Investors Corporation and
              Administrative Data Management Corp.1

     (ii)     Schedule A to Administration Agreement(2)

     (14)     Consent of independent public accountants - to be filed

     (15)     Financial statements omitted from Part B - none

     (16)     Powers of Attorney(1)

     (17)     Additional exhibits -- none

- ---------
1    Incorporated  by  reference  from  Post-Effective  Amendment  No.  20  to
     Registrant's  Registration  Statement (File No.  33-25623) filed on April
     23, 1996.
2    Incorporated  by  reference  from  Post-Effective  Amendment  No.  22  to
     Registrant's  Registration Statement (File No. 33-25623) filed on May 15,
     1997.





Item 17.   Undertakings
           ------------

        (1)The   undersigned    Registrant   agrees   that   prior to any public
re-offering of the securities registered through the use of the prospectus which
is a part of this Registration Statement by any person or party who is deemed to
be an  underwriter  within the meaning of Rule 145(c) of the  Securities  Act of
1933, the re-offering  prospectus will contain the information called for by the
applicable  registration  form for  re-offering  by  persons  who may be  deemed
underwriters,  in addition to the  information  called for by the other items of
the applicable form.

        (2)The undersigned Registrant agrees that every prospectus that is filed
under paragraph (1) above will be filed as a part of an amendment to the
Registration Statement and will not be used until the amendment is effective,
and that, in determining any liability under the Securities Act of 1933, each
post-effective amendment shall be deemed to be a new Registration Statement
for the securities offered therein, and the offering of the securities at
that time shall be deemed to be the initial bona fide offering of them.





                                   SIGNATURES

      Pursuant to the  requirements  of the  Securities Act of 1933, as amended,
the Registrant has duly caused 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 23rd day of November, 1999.


                                       FIRST INVESTORS SERIES FUND


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


      Pursuant to the  requirements  of the  Securities Act of 1933, as amended,
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            November 23, 1999
- -----------------------------  Officer and Trustee
Glenn O. Head


/s/ Joseph I. Benedek          Principal Financial            November 23, 1999
- -----------------------------  and Accounting Officer
Joseph I. Benedek

             *                 Trustee                        November 23, 1999
- -----------------------------
Kathryn S. Head

/s/ Larry R. Lavoie            Trustee                        November 23, 1999
- -----------------------------
Larry R. Lavoie

             *                 Trustee                        November 23, 1999
- -----------------------------
Herbert Rubinstein

             *                 Trustee                        November 23, 1999
- -----------------------------
Nancy Schaenen

             *                 Trustee                        November 23, 1999
- -----------------------------
James M. Srygley





            *                 Trustee                         November 23, 1999
- -----------------------------
John T. Sullivan


             *                 Trustee                        November 23, 1999
- -----------------------------
Rex R. Reed

             *                 Trustee                        November 23, 1999
- -----------------------------
Robert F. Wentworth





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





                                INDEX TO EXHIBITS
Exhibit
Number           Description                                            Page
- ------           -----------                                            ----

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

(1)(ii)      Supplemental Declaration of Trust(2)

(2)          By-laws(1)

(3)          Voting trust agreement - none.

(4)          Agreement   and   Plan   of   Reorganization and Termination is
             attached  hereto as Appendix A to the Prospectus/Proxy Statement.

(5)          Shareholders' rights are contained in (a) Articles III, VIII, X, XI
    and XII of Registrant's Amended and  Restated Declaration of Trust dated
    September 19, 1988, as amended September 22, 1994, previously filed as
    Exhibit 99.B1 to Registrant's  Registration Statement, and (b) Articles III
    and V of Registrant's By-laws, previously filed as Exhibit 99.B2 to
    Registrant's Registration Statement.

(6)          Investment   Advisory   Agreement   between   Registrant  and First
             Investors Management Company, Inc.(1)

(7)          Underwriting  Agreement  between  Registrant  and  First  Investors
    Corporation.(1)

(8)          Bonus, profit sharing or pension plans - none

(9)(i)       Custodian  Agreement  between  Registrant  and  Irving  Trust
             Company(1)

(9)(ii)      Supplement to Custodian  Agreement between Registrant and The
             Bank of New York(1)

(10)(i)      Amended and Restated Class A Distribution Plan(1)

(10)(ii)     Class B Distribution Plan(1)

(11)         Opinion  and  Consent  of  Counsel   regarding   the   legality  of
    securities being registered - to be filed

(12)         Opinion and Consent of Counsel  regarding  certain tax matters - to
    be filed





(13)(i)      Administration   Agreement  between  Registrant,   First  Investors
             Management Company, Inc., First Investors Corporation and
             Administrative Data Management Corp.(1)

(13(ii)      Schedule A to Administration Agreement(2)

(14)         Consent of independent public accountants - to be filed

(15)         Financial statements omitted from Part B - none

(16)         Powers of Attorney(1)

(17)         Additional exhibits -- none

- --------
1    Incorporated  by  reference  from  Post-Effective  Amendment  No.  20  to
     Registrant's  Registration  Statement (File No.  33-25623) filed on April
     23, 1996.
2    Incorporated  by  reference  from  Post-Effective  Amendment  No.  22  to
     Registrant's  Registration Statement (File No. 33-25623) filed on May 15,
     1997.