# Appendix — Investment Company Institute v. Camp > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386413_0258%3A01 ## Record - **Collection:** Supreme Court brief - **Document type:** Appendix - **Published:** January 1, 1971 - **Citation:** 401 U.S. 617 ## Text (i) IN THE SUPREME COURT OF THE UNITED STATES OCTOBER TERM, 1969 No. 843 INVESTMENT COMPANY INSTITUTE, et al., Petitioners, Vv. WILLIAM B. CAMP, Comptroller of the Currency, and FIRST NATIONAL CITY BANK, Respondents. ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT PR GUNN nn cena cur eebe sadecekesdtcuwancee 1 Proceedings in the District Court for the District of Columbia Civ. Action No. 1083-66 Complaint for declaratory judgment and injunctive and other ___ PERTOCTECUTTCLTRT CELL TT Te ee ee Wastngton O C THIEL PRESS 202 393.0625 (ii) Affidavit of Robert L. Augenblick in support of Plaintiff's Motion for Summary Judgment..................... Affidavit of John R. Haire in Support of Plaintiffs’ Motion raidlcomesce: joc... ret CU ra Pane Cen ea Affidavit of Joseph E. Welch in support of Plaintiffs’ Motion en NI ee Affidavit of Stuart F. Silloway in support of Plaintiffs’ Motion for Summary Judgment..................... Affidavit of Adron P. Trantum in support of Plaintiffs’ Motion for Summary Judgment Affidavit of James F. Fitzpatrick in support of Plaintiffs’ Motion for Summary Judgment..................... Exhibit No. 1 to Fitzpatrick Affidavit ................. Exhibit No. 4 to Fitzpatrick Affidavit ................. Exhibit No. 6 to Fitzpatrick Affidavit ................. Exhibit No. 7 to Fitzpatrick Affidavit ................. Exhibit No. 8 to Fitzpatrick Affidavit ................. | Exhibit No. 9 to Fitzpatrick Affidavit ................. Exhibit No. 10 to Fitzpatrick Affidavit ................. Exhibit No. 12 to Fitzpatrick Affidavit ................. Exhibit No. 13 to Fitzpatrick Affidavit ................. Exhibit No. 14 to Fitzpatrick Affidavit ................. Exhibit No. 15 to Fitzpatrick Affidavit ................. Exhibit No. 16 to Fitzpatrick Affidavit ................. Exhibit No. 17 to Fitzpatrick Affidavit ................. Defendant’s Cross-Motion for Summary J udgment and Opposition to Plaintiffs’ Motion for Summary Judgment Affidavit of William B. Camp in support of Defendant’s Cross- Motion for Summary Judgment..................... Affidavit of Robert I. Hoguet, Jr., in support of Defendant’s Cross-Motion for Summary Judgment ................ Opinion denying Motion by Defendant for Summary Judg- ment and Granting Motion by Plaintiffs for Summary PE 6% SERRE OEE A ORT EN See One OER a (iii) Motion of First National City Bank for Leave to Intervene as a I Sk eae eS at a ee eee bed a 6 be Affidavit of Robert I. Houget in support of First National City Bank’s Motion for Leave to Intervene and Motion SEE Sap bak ceeenenenawesct oS #4 eaves Answer of First National City Bank, Intervenor, to PE GE awed bea ahe baste he ee eed sees ne Oe PE TY GF sive kn wscewees ce we eta We een et Ge as 6 a a kb O08 6 8 0's ee me Notice of Appeal (William B. Camp, Comptroller) ......... Notice of Appeal (First National City Bank) ............. Proceedings in the United States Court of Appeals for the District of Columbia Circuit Nos. 21,661, 21,662 PE. i. 44 nkg tbe b kak O86 06 6s Reed 6S oa ee eae EN SevesebecUGS SEOCEE RE SEDECS Sa Weak Aa Owe Order denying Petition for Rehearing................... Proceedings in the Supreme Court of the United States, October Term 1969 No. 843 Order granting Petition for Writ of Certiorari ............. ee SESS SRR Sa RE zany l DOCKET ENTRIES UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA Civil Action No. 1083-66 Investment Company Institute, by Dorsey Richardson, its President; Investors Diversified Services, Inc; Inves- tors Management Company, Inc.; Hugh W. Long & Company, Inc.; Wellington Management Company; and Wellington Company, Inc. Plaintiffs, v. James J. Saxon, Comptroller of the Currency, Defendant, and First National City Bank, Intervenor. Date Proceedings 1966 April 25 Complaint filed April 25 Complaint and summons issued to U.S. Attor- ney for the District of Columbia April 25 Summons and Complaint issued to Attorney General April 26 Service effected upon U.S. Attorney for the District of Columbia April 27 Service effected upon the Attorney General July 18 Answer of Defendant James J. Saxon ee EERIE LOT July 18 Case calendared Nov. 30 Motion by Plaintiffs for summary judgment Nov. 30 Memorandum in support of motion for sum- mary judgment Nov. 30 Affidavit of Robert L. Augenblick in support of Plaintiffs’ motion for summary judgment Nov. 30 Affidavit of John R. Haire in support of Plain- tiffs’ motion for summary judgment Nov. 30 Affidavit of Joseph E. Welch in support of Plaintiffs’ motion for summary judgment Nov. 30 Affidavit of Stuart F. Silloway in support of Plaintiffs’ motion for summary judgment Nov. 30 Affidavit of Adron P. Trantum in support of Plaintiffs’ motion for summary judgment Nov. 30 Affidavit of James F. Fitzpatrick in support of Plaintiffs’ motion for summary judgment with exhibits 1967 April 4 Cross-motion of Defendant for summary judg- ment and opposition of Plaintiffs’ motion for summary judgment April 4 Affidavit of William B. Camp in support of Defendant’s cross-motion for summary judgment April 4 Affidavit of Robert L. Hoguet, Jr., in support of Defendant’s cross-motion for summary judg- ment June 6 Reply memorandum of Plaintiff June 28 Reply memorandum of Defendant June 28 Supplemental affidavit of James F. Fitzpatrick in support of Plaintiffs’ motion for summary judgment with exhibits June 29 Hearing on Plaintiffs’ motion for summary judgment and Defendant’s cross-motion for summary judgment arts SAT LO ES LOE GEL STE EOD IE BG LEONE LPI LOE EEE LS FALSE DEER EROS PTE Pere es atti ~ Ae GR =? ~ me * = OP Me a a _——a Sept. 27 District Court Opinion denying Defendant's motion for summary judgment and granting Plaintiffs’ motion for summary judgment (McGarraghy, J.) Oct. 10 Defendant’s motion for stay pending appeal Oct. 13 Motion of First National City Bank to intervene as defendant Oct. 13 Affidavit of Robert L. Hoguet, Jr., in support of First National City Bank’s motion to intervene Oct. 23 Plaintiffs’ opposition to motion of First National City Bank to intervene Oct. 24 Plaintiffs’ opposition to motion for stay and to Defendant Saxon’s proposed order Nov. 9 Memorandum granting motion of First National City Bank to intervene and limiting it to the purpose of prosecuting an appeal from the judgment (McGarraghy, J.) Nov. 9 Judgment of the District Court (McGarraghy, J.) Nov. 9 Order staying judgment pending ultimate dis- position of any appeal taken, provided the Comptroller shall not authorize any national banks to commence operation of a managing agency collective investment fund (McGar- aghy, J.) Order granting motion of First National City Bank for leave to intervene as a party defend- ant (McGarraghy, J.) Notice of appeal by Intervenor from judgment of Nov. 9, 1967 Notice of appeal by Defendant from judgment of Nov. 9, 1967 UNITED STATES COURT OF APPEALS FOR THE Jul. 11 Nov. 27 1969 June 21 July 1 Aug. 15 Nov. 6 Nov. 12 Nov. 18 1970 Mar. 23 4 DISTRICT OF COLUMBIA CIRCUIT Nos. 21,661, 21,662 Order consolidating for the purpose of decision the instant case with the National Association of Securities Dealers v. Securities & Exchange Commission Hearing in Court of Appeals Judgment of the Court of Appeals (Per curiam) Opinions of the Court of Appeals (Bazelon, C. J.; Miller, Burger, JJ.) Order denying petition for rehearing Order denying motion for stay of mandate and ordering immediate issuance of mandate (Per curiam) SUPREME COURT OF THE UNITED STATES No. 843 Petition for Writ of Certiorari filed Order staying mandate pending final disposition (Black, J.) Order granting Petition for Writ of Certiorari IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA INVESTMENT COMPANY INSTITUTE By Dorsey Richardson, Its President 61 Broadway New York, New York INVESTORS DIVERSIFIED SERVICES, INC. Investors Building Minneapolis, Minnesota INVESTORS MANAGEMENT COMPANY, INC. Westminster at Parker Elizabeth 3, New Jersey HUGH W. LONG & COMPANY, INC. Westminster at Parker Elizabeth 3, New Jersey WELLINGTON MANAGEMENT COMPANY 1630 Locust Street Philadelphia, Pennsylvania WELLINGTON COMPANY, INC. 1630 Locust Street Philadelphia, Pennsylvania, Plaintiffs v. Civil Action No. JAMES J. SAXON 1083-66 Comptroller of the Currency Office of the Comptroller of the Currency Fifteenth and Pennsylvania Avenue Washington, D.C., Defendant a TSO eye TOS eye AAAs Neat el sh a OTE ee AER i 6 COMPLAINT FOR DECLARATORY JUDGMENT AND INJUNCTIVE AND OTHER RELIEF (Filed April 25, 1966) Plaintiffs, by their attorneys, bring this action against the above-named defendant and allege: Jurisdiction and Venue 1. This is a civil action for a declaratory judgment and injunctive and other relief. It arises under Sections 16, 20, 21 and 32 of the National Banking Act of 1933, as amended, (herein referred to as “the Glass-Steagall Act”), codified in Sections 24, 377, 378 and 78, 12 U.S.C., respectively, as well as under Section 92(a), 12 U.S.C. This Court has juris- diction under the provisions of 12 U.S.C. § 1331; the De- claratory Judgment Act, 28 U.S.C. § 2201-02: the Ad- ministrative Procedure Act, 5 U.S.C. § 1009; and the District of Columbia Code, Sections 11-305 and 11-306. Venue is established under the provisions of Section 1391(b) and 1391(e) (1), 28 U.S.C. There exists between each plaintiff and the defendant an actual controversy, justiciable in character, in respect of which plaintiffs require a deter- mination of their rigts by this Court. The amount in contro- versy exceeds $10,000. Parties 2. Plaintiff Investment Company Institute (herein referred to as the “Institute”) is an unincorporated association, having its principal place of business in the City, County and State of New York. At the time of the commencement of this action, Dorsey Richardson was the President thereof. It is a national association having as its members 174 open- end investment companies, and their 87 investment advisers and 78 principal underwriters. Open-end investment com- panies are commonly referred to, and will herein be referred to, as “mutual funds.” The Institute is suing in a represen- tative capacity for all its members which will be injured ir- reparably by the illegal acts here complained of. The great majority of its mutual fund members is engaged in the ; business of issuing and offering for sale redeemable secu- rities which represent an undivided interest in the portfolio of securities owned by the fund. Each mutual fund mem- ber is registered as an open-end investment company with the Securities and Exchange Commission (herein referred to as the “SEC”’) under the Investment Company Act of 1940 (herein referred to as “the 1940 Act”); and the securities issued by each member fund are registered with the SEC under the Securities Act of 1933 (herein referred to as “the 1933 Act”). Together, the mutual fund members of the Institute have assets of over $36 billion (being about 94% of the assets of all mutual funds in the United States) and have approximately 3.5 million shareholders. Each of the investment adviser members of plaintiff Institute is, pursuant to the contractual arrangements required by Section 15 of the 1940 Act, engaged in the business of regularly furnishing to one or more mutual fund members advice with respect to the desirability of investing in, pur- chasing. or selling securities, or is empowered to determine what securities shall be purchased or sold by such mutual fund. Each of the principal underwriter members of plain- tiff Institute is, pursuant to the contractual arrangements required by Section 15 of the 1940 Act, engaged in the business of purchasing from one or more mutual fund members its securities for distribution or, as agent for such mutual fund, selling or having the right to sell the securities of such fund to a dealer or to the public or both. 3. (a) Plaintiff Investors Diversified Services, Inc., an In- stitute member, is incorporated under the laws of the State of Minnesota and has its office and principal place of busi- ness at Minneapolis, Minnesota. It acts as investment adviser and principal underwriter, pursuant to Section 15 of the 1940 Act, to the following open-end investment companies: Investors Mutual Inc.; Investors Stock Fund, Inc.; Investors Variable Payment Fund, Inc.; and Investors Selective Fund, Inc., all of which are Institute members. There are more than three-quarter million investors in these open-end investment companies residing throughout the United States. a 8 Securities of each of these open-end companies are offered for sale and sold throughout the nation, and a substantial number of such shares are offered for sale and sold in the City and State of New York. (b) Plaintiff Investors Management Company, Inc., is incorporated under the laws of the State of New Jersey and has its office and principal place of business at Elizabeth, New Jersey; pla. «tiff Hugh W. Long & Company, Inc.., is in- Corporated under the laws of the State of Nevada and has its office and principal place of business at Elizabeth, New Jersey. Both are Institute members. Pursuant to Section 1S of the 1940 Act, Investors Management Company, Inc., acts as investment adviser, and Hugh Long & Company acts as principal underwriter, to the following open-end invest- ment companies currently engaged in issuing and selling their shares, all of which are Institute members: Fundamental Investors, Inc.; Diversified Investment Fund, Inc.: and Di- versified Growth Stock Fund, Inc. There are more than 250,000 investors in these open-end investment companies residing throughout the United States. Securities of each of these open-end companies are offered for sale and sold throughout the nation, and a substantial number of such shares are offered for sale and sold in the City and State of New York. (c) Plaintiffs Wellington Management Company and Wel- lington Company, Inc., are both incorporated under the laws of the State of Delaware and have their offices and principal places of business at Philadelphia, Pennsylvania. Both are Institute members. Pursuant to Section 15 of the 1940 Act, Wellington Management, Inc., acts as investment adviser, and Wellington Company, Inc., acts as principal underwriter, to the following open-end investment com- panies currently engaged in issuing and selling their shares, both of which are Institute members: Wellington Fund, Inc., and Windsor Fund, Inc. There are more than 375,000 investors in these open-end investment companies residing throughout the United States. Securities of both of these open-end companies are offered for sale and sold through- 9 out the nation, and a substantial number of such shares are offered for sale and sold in the City and State of New York. 4. Defendant James J. Saxon is the Comptroller of the Currency (herein referred to as the “Comptroller”) and is charged by law with administrative and regulatory authority with respect to national banks. His official residence is Washington, D. C. He is sued in his individual Capacity as a result of certain acts here described which were taken in excess of his statutory authority. 5. The purpose of this action is to secure a declaratory judgment, with appropriate injunctive and other relief, that (i) those provisions of the Comptroller’s Regulation 9, 12 C.F.R. § 9.18, which permit banks to establish and operate collective investment funds composed of monies deposited with the bank as managing agent (such collective investment funds herein referred to as “bank investment funds”) which are functionally identical to mutual funds, and those actions of the Comptroller in approving the application of First Nationai City Bank of New York, a national bank and member of the Federal Reserve System with its office and principal place of business in the City and State of New York (herein referred to as “the Bank”), to operate such a bank investment fund under these regulations, are unlaw- ful inasmuch as they were taken by defendant Comptroller in excess of his Statutory authority and in violation of Sections 16, 20, 21 and 32 of the Glass-Steagall Act which prohibit commercial banks from engaging in the securities business and (ii) that the approval of the Bank’s plan is il- legal and in excess of the Comptroller’s Statutory authority in that such approval permits activity which is prohibited by Section 92(a), 12 U.S.C. Claim For Relief Based Upon Glass-Steagall Act 6. The Glass-Steagall Act, enacted in 1933 and amended in 1935, was enacted in substantial part to separate and divorce commercial banks from the securities business. Section 21 of the Act, a criminal section, prohibits eR ER Ks cata RSS ER eS ea SR See —— 10 commercial banks from engaging in the business of issuing, underwriting, selling or distributing securities, with certain exceptions not relevant here. Section 16 provides that national banks cannot deal in equity securities, except for purchases and sales made solely upon the order and for the account of customers, and that national banks cannot under- write any issue of securities. Section 32 prohibits officers and directors of member banks of the Federal Reserve System from serving in similar capacities with any enterprise primarily engaged in the issue, underwriting, sale or distri- bution of securities. Section 20 provides that no member bank shall be affiliated, as defined in the banking laws, with an organization principally engaged in the issue, flota- tion, underwriting, sale or distribution of securities. The Comptroller’s regulations and action complained of here authorize activity in direct violation of these prohibitions and are thereby in excess of the Comptroller’s statutory authority. 7. Upon information and belief, after one year following the passage of the Glass-Steagall Act, and to date, no bank has operated a bank investment fund. The Glass-Steagall prohibitions have consistently been administered to restrain mutual funds from creating interlocking relationships with commercial banks. 8. Prior to the effective date of the Glass-Steagall Act, plaintiff Investors Management Company, Inc., was a cor- poration organized under the laws of the State of New York and was a wholly-owned subsidiary of Irving Trust Com- pany, a New York state bank and member of the Federal Reserve System. At that time Investors Management Com- pany, Inc., was named Irving Investors Management Company, Inc., and, among other things, served as under- writer and investment adviser for Irving Investors Fund C. Inc., an investment fund operated in a manner virtually identical to the operation of present-day open-end invest- ment companies. In consequence of the passage of the Glass-Steagall Act and rulings of the Federal Reserve Board made pursuant thereto, Irving Trust Company in 1934 divested itself of all of its interest in Irving Investors Management Company, Inc., and in Irving Investors Fund C, Inc. (the name of which was thereupon changed to In- vestors Fund C, Inc.), and thereafter Irving Trust Company had no further connection with the distribution of the shares of that fund or with the management thereof. In 1954, Investors Fund C, Inc., was merged into the aforesaid Fundamental Investors, Inc., and in 1964, plaintiff Investors Management Company, Inc., was reincorporated under the laws of the State of New Jersey. 9. Until 1962, the statutory authority to regulate the fiduciary activities of national banks was vested in the Federal Reserve Board. The Board consistently and dilimes. » administered its authority until 1962 so as to prohibit ax» national or member bank from offering to its customers or to the public shares or participations in collective investment funds solely for investment purposes and not for bona fide fiduciary purposes. 10. In September, 1962 the statutory authority to regu- late the fiduciary activities of national banks was transferred to the Comptroller of the Currency. 76 Stat. 668, 12 U.S.C. § 92(a). Assertedly pursuant to such authority, on February 4, 1963 the Comptroller issued a notice of proposed rule-making concerning the promulgation of revised rules which, in part, were intended to authorize the collective investment of funds contributed to the bank as managing agent solely for investment purposes, and not for bona fide fiduciary purposes. The Comptroller invited national banks and interested parties to submit comments pertaining to the proposed regulation. Plaintiff Institute, on behalf of its members, participated to the full degree permitted and submitted a statement in opposition to the proposed regulations because they permitted banks to enter the mutual fund business, asserting in part that such activity violated the Glass-Steagall Act. Final regulations were adopted by the Comptroller on April 5, 1963; such regula- tions were amended February 5, 1964. Qs Sikes ch NRL IE SI OEY ERECT E a ee eee ey 12 11. These regulations permitted banks to create and operate bank investment funds which are the functional equivalents of the mutual fund members of plaintiff Insti- tute and permitted banks, for the first time, to offer for sale securities in the form of participations in bank invest- ment funds for the purpose of general investment. Under these regulations, a bank can pool the moneys of the investing public in a fund which will be invested in equity and other securities, and can operate and manage such fund. A bank investment fund will offer and issue participations to the investing public representing undivided shares in the collective account; these participations will be sold, distri- buted and underwritten exclusively by a bank and its em- ployees. An investor in a bank investment fund will have the right to redeem his participation—i.e., to draw out his share of the undivided assets in the fund in the form of cash based on net asset value of the participation. In all these particulars, the operation of a bank investment fund authorized by the Comptroller’s regulations is indistinguish- able in all material respects from the operation of the mutual fund members of plaintiff Institute. The activities of a bank and its employees in advising and managing a bank investment fund and in distributing, selling, and under- writing the participations in a bank investment fund are in- distinguishable in all material respects to those of adviser and underwriter members of plaintiff Institute. 12. Pursuant to and under the provisions of such regu- lations, the Comptroller, on May 28, 1965, approved a plan to operate a bank investment fund submitted by the Bank. Such bank investment fund proposed by the Bank was labelled a “Collective Investment Account” (herein referred to as the “Account”’). The Bank’s Account will be operated as a bank investment fund essentially as described in para- graph 11. Under the Bank’s plan as approved by the Comp- troller, the Bank will promote its Account as part of its fiduciary activities, and Bank employees will sell, distribute, and underwrite the participations in the Account to the customers of the Bank and others who desire to invest in the Account. 13 13. The Bank has publicly announced that it intends to register its Account with the SEC as an open-end investment company under the 1940 Act in a manner similar to the registration of the mutual fund members of plaintiff Insti- tute as open-end investment companies. The Bank on April 21, 1966, filed a registration statement with the SEC for the purpose of registering the participations in the Account as securities under the 1933 Act, in a manner similar to the registration of the securities issued by the mutual fund members of plaintiff Institute. The Comptroller has announced that he has encouraged and supported the Bank’s plan to register its Account under the 1940 Act and the securities in the Account under the 1933 Act. 14. Notwithstanding the fact that the Bank, with the approval of the Comptroller, intends to register its Account with the SEC under the 1940 Act as an open-end investment company, the Federal Reserve Board, in a formal ruling, has erroneously held that the arrangement proposed by the Bank to operate a bank investment fund does not violate the prohibitions of Section 32 of the Glass-Steagall Act against interlocking relationships because, in its view, the Account is merely an arm or department of the bank. 30 Fed. Reg. 12836 (1965), adding 12 C.F.R. § 218.111. The said ruling does not refer to the legality of the Bank’s plan under Sections 16 and 20 of the Glass-Steagall Act, and it explicitly states that the Federal Reserve Board “expressed no position with respect to whether” the proposed activity by the Bank, approved under the Comptroller’s regulations here challenged, violates Section 21 of the Glass-Steagall Act. 15. The Bank intends to commence operation of its Ac- count in the near future and commence offering for sale the participations in its Account to customers of the Bank and others. Similarly, other national banks have indicated that they plan to seek approval of plans under the Comp- troller’s regulations here challenged to permit them to operate bank investment funds. The Comptroller has stated — 16 in violation of Sections 16, 20, 21 and 32 of the Glass- Steagall Act; and (2) this Court declare that the Comptroller’s approval of the Bank’s plan to operate a bank investment fund under such regulations is illegal, in excess of his Statutory auth- ority, void, and of no effect inasmuch as it was made pur- suant to regulations which are illegal under Sections 16, 20, 21 and 32 of the Glass-Steagall Act; and (3) this Court declare that the Comptroller’s approval of the Bank’s proposed plan to operate its Account is illegal, in excess of his statutory authority, void, and of no effect, inasmuch as it permits activity which is not permitted by the provisions of Section 92(a), 12 U.S.C.; and (4) this Court order that the Comptroller set aside any portion of Regulation 9 declared illegal pursuant to prayer (1) above and enjoin the Comptroller from authorizing any bank to operate bank investment funds under such regula- tions; and (S) this Court enjoin the Comptroller from continuing in effect any prior approval to any bank, including his ap- proval of the Bank’s plan, which might have heretofore permitted the operation of bank investment funds under such illegal regulations, and to order that he set aside or rescind any such prior approval; and (6) that the Court grant such other and further relief as may be appropriate. /s/ G. Duane Vieth /s/ James F. Fitzpatrick /s/ Charles R. Halpern 1229 Nineteenth St., N.W. Washington, D.C. 20036 Attorneys for Plaintiffs i A a i ae el Sa i a ee ny 17 OF COUNSEL: Robert L. Augenblick, General Counsel Investment Company Institute 61 Broadway New York, New York 10006 Arnold & Porter 1229 Nineteenth Street, N.W. Washington, D.C. 20036 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA [Title Omitted in Printing] ANSWER (Filed July 18, 1966) Defendant, James J. Saxon, Comptroller of the Currency, by his undersigned attorneys, in answer to the complaint herein, admits, denies and alleges as follows: 1. Defendant admits the allegations contained in the first sentence of paragraph | of the complaint. Defendant denies the remaining allegations contained in paragraph | of the complaint, and refers the Court to the text of the various statutes cited in paragraph | of the complaint for the terms thereof. 2 and 3. Defendant alleges that he is without knowledge or information sufficient to form a belief as to the truth of the allegations contained in paragraphs 2 and 3 of the com- plaint, except that defendant denies the allegations that the acts of defendant are illegal and denies that plaintiff Insti- tute or its members will be, are, or have been irreparably or otherwise injured. 4. Defendant denies the allegations contained in paragraph 4 of the complaint, except that he admits that he is the Comptroller of the Currency, that his official residence is a Kane Gh EY Cee a 18 Washington, D.C., and refers the Court to the text of the National Bank Act, 12 U.S.C. 1 et seq., for the statutory authority of the Comptroller of the Currency. 5. Defendant denies the aliegations contained in para- graph 5 of the complaint, except that defendant admits that on May 10, 1965, he gave specific approval under provisions of Section 9.18 (c) (5) of the Comptroller’s regulations, |2 CFR 9.18(c) (5), to the establishment and operation of the Commingled Investment Account proposed by First National City Bank, and the Court is respectfully referred to the text of the Comptroller’s Regulation 9, 12 CFR $9 et. seq., and to the text of the various statutes cited in paragraph 5 of the complaint for the terms thereof. 6. Defendant denies the allegations contained in paragraph 6 of the complaint, except that defendant admits that the Glass-Steagall Act was enacted in 1933 and thereafter amended, and defendant refers the Court to the text of the various Statutory provisions cited in paragraph 6 and to the text of the Comptroller’s regulations for the terms thereof. 7 and 8. Defendant alleges that he is without knowledge or information sufficient to form a belief as to the truth of the allegations contained in paragraphs 7 and 8 of the com- plaint. 9. Defendant neither admits nor denies plaintiffs’ para- phrasing of the Federal Reserve Act, 12 U.S.C. 248(k), as repealed and supplemented, 76 Stat. 668 et. seq., 12 U.S.C. 92a, contained in the first sentence of paragraph 9 of the complaint, but refers the Court to those sections for an exact statement of the terms and provisions thereof. De- fendant alleges that he is without knowledge or information sufficient to form a belief as to the truth of the allegations contained in the last sentence of paragraph 9 of the com- plaint. 10. Defendant neither admits nor denies plaintiffs’ para- phrasing of the Federal Reserve Act, 12 U.S.C. 248(k), as - =. repealed and supplemented, 76 Stat. 668 et. seq., 12 U.S.C. 92a, contained in the first sentence of paragraph 10 of the complaint, but refers the Court to those sections for an exact statement of the terms and provisions thereof. Defendant denies the remaining allegations contained in paragraph 10 of the complaint, except that he ad- mits that on January 31, 1963, he issued a notice of proposed rule making, published in the Federal Register at 28 F.R. 1111; that plaintiff Institute participated to the full degree permitted in the rule making proceedings and submitted a statement in opposition to the proposed regulations; that regulations were adopted by the Comptroller of the Currency on April 5, 1963, and published in the Federal Register at 28 F.R. 3309: and that the regulations were amended and the amendments published in the Federal Register at 29 F.R. 1719; and the Court is referred to the text of the notice for proposed rule making, the regula- tions as adopted and thereafter amended for the terms thereof and to the statement in opposition submitted by plaintiff Institute for the position asserted therein. 11. Defendant denies the allegations contained in para- graph 11 of the complaint, and refers the Court to the text of the Comptroller’s Regulations 9, 12 CFR § 9 et seq., for the terms thereof. 12. Defendant denies the allegations contained in para- graph 12 of the complaint, except that he admits that on May 10, 1965, the Comptroller of the Currency gave specific approval under the provisions of the Comptroller’s Regulation 9 to the establishment and operation of the Commingled Investment Account proposed by First National City Bank, and the Court is respectfully referred to the con- ditions of the specific approval granted by the Comptroller, the prospectus of the Commingled Investment Account filed with the Comptroller of the Currency by First National City Bank in connection with its request for the approval of such Account by the Comptroller of the Currency, and to appli- cable statutes and regulations for the manner of operation of said Account. PAC ay me ternary en TORO SR BN ati A Cer RCPS RHEE Ne tarp a” TORRY ORIEN Se mL ape Le — 20 13. Defendant alleges that he is without knowledge or information sufficient to form a belief as to the truth of the allegations contained in the first sentence of paragraph 13 of the complaint. Defendant denies the remaining alle- gations contained in paragraph 13 of the complaint, except that he admits that on April 20, 1966, registration state- ments relating to the Commingled Investment Account were filed with the Securities and Exchange Commission and refers the Court to the text of the registration statements for the terms thereof; and that on August 25, 1965, the Office of the Comptroller of the Currency issued a state- ment supporting and approving the plans of First National City Bank to establish a commingled fund for agency ac- counts and refers the Court to the text of such statement. 14. Defendant denies the allegations contained in para- graph 14 of the complaint, except that he admits that the Federal Reserve Board issued a ruling dated September 29, 1965, and published in the Federal Register at 30 F.R. 12836, and the Court is referred to the text of said ruling for the terms thereof. 15. Defendant alleges that he is without knowledge or information sufficient to form a belief as to the truth of the allegations contained in the first two sentences of para- graph 15 of the complaint, except that defendant admits that First National City Bank has commenced the opera- tion of its Commingled Investment Account, and denies the allegations contained in the last sentence of paragraph 15 of the complaint. 16. Defendant denies the allegations contained in para- graph 16 of the complaint, and refers the Court to the text of the various statutes and regulations of the Comptroller of the Currency cited for the terms thereof. 17. Defendant denies the allegations contained in para- graph 17 of the complaint, and refers the Court to the text of the statutes cited for the terms thereof. 18. Defendant denies the allegations contained in para- graph 18 of the complaint, and specifically denies that there ine PERLE LY LY ERENT ES PET TIN NT IRI PLE MRT EEE ge |, Se exists in this action a justiciable case or controversy be- tween plaintiffs and the defendant and further defendant specifically denies that plaintiffs have Standing to maintain this action. 19. Defendant denies the allegations contained in para- graph 19 of the complaint. 20. Defendant denies each and every allegation of the complaint not herein admitted, qualified, or denied. FIRST AFFIRMATIVE DEFENSE Plaintiffs lack standing to maintain this action. SECOND AFFIRMATIVE DEFENSE The Court lacks jurisdiction over the subject matter of this action. THIRD AFFIRMATIVE DEFENSE The complaint fails to allege the existence of a justiciable case or controversy. FOURTH AFFIRMATIVE DEFENSE The complaint fails to state a claim upon which relief can be granted. WHEREFORE, having fully answered, the defendant, the Comptroller of the Currency of the United States, prays: 1. That the relief requested by the plaintiffs be denied and that the complaint be dismissed; and 2. That the defendant be given all such other and further relief as the Court may deem just and proper. Respectfully submitted, John W. Douglas Assistant Attorney General Harland F. Leathers Irwin Goldbloom Attorneys, Department of Justice Washington, D.C. 20530 Attorneys for Defendant ee PISS See eee ete oS — 22 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA [Title Omitted in Printing] PLAINTIFFS’ MOTION FOR SUMMARY JUDGMENT (Filed November 30, 1966) Each of the plaintiffs moves the Court on the Complaint fiied in this case, Plaintiffs’ Statement of Material Facts as to which There is No Genuine Issue, and the Affidavits in support of plaintiffs’ motion for summary judgment filed by Robert L. Augenblick, Joseph E. Welch, Stuart F. Sillo- way, John R. Haire, Adron P. Trantum and James F. Fitz- patrick, for summary judgment under Rule 56 of the Federal Rules of Civil Procedure and for the relief prayed for in the Complaint, on the ground that there is no genuine issue as to any material fact and that plaintiffs are entitled to judgment as a matter of law. /s/ G. Duane Vieth /s/ James F. Fitzpatrick /s/ Charles R. Halpern 1229 — 19th Street, N.W. Washington, D.C. 20036 Attorneys for Plaintiffs Of Counsel: ARNOLD & PORTER 1229 — 19th Street, N.W. Washington, D.C. 20036 23 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA [Titled Omitted in Printing] AFFIDAVIT OF ROBERT L. AUGENBLICK IN SUPPORT OF PLAINTIFFS’ MOTION FOR SUMMARY JUDGMENT (Filed November 30, 1966) STATE OF NEW YORK Ss: COUNTY OF NEW YORK ROBERT L. AUGENBLICK, being first duly sworn, deposes and says as follows: 1. Iam President and General Counsel of the Investment Company Institute (herein referred to as the “Institute’’), a plaintiff in this suit. I submit this affidavit in support of plaintiffs’ motion for summary judgment in this action. 2. The Institute is an unincorporated association, having its principal place of business in the City, County, and State of New York. At the time of the commencement of this action, Dorsey Richardson was the President thereof: on October 6, 1966, affiant became President thereof. The Institute is a national association, having as its members, as of October 1, 1966, 177 open-end management investment companies and their 88 investment advisers and 78 princi- pal underwriters. Together, the open-end management in- vestment companies which are members of the Institute have assets of about $32 billion, representing about 93 per- cent of the assets of all such companies in the United States, and have approximately 4 million shareholders. 3. Open-end management investment companies, as de- fined by the Investment Company Act of 1940, 15 U.S.C. $$ 80a-3—80a-4, are commonly referred to as “mutual funds”. Virtually all mutual funds are engaged in the business of continuously issuing securities which represent an undivided interest in the fund’s assets. Most mutual funds are corpo- — 24 rate in form and the securities issued by them usually con- sist of capital stock. There are, however, a number of mutual funds in a variety of noncorporate forms, and the securities issued by some of them are variously denominated as “beneficial interests,” “participating agreements,” and the like. The proceeds from the sale of the securities issued by the fund are invested in a portfolio of securities of var- ious kinds, in accordance with the stated investment policy of the particular fund. Some funds invest primarily in se- curities offering current income; others concentrate on long- term growth securities; still others specialize in particular industries or classes of securities; and many offer various combinations of objectives. The shareholder in a mutual fund is entitled at any time to redeem his interest, usually at net asset value, or in a few cases upon payment of a modest charge. To facilitate this redemption privilege, as well as to establish a price at which new shares are being offered, the value of a share in a mutual fund is calculated regularly, typically twice daily, on the basis of the market value of the securities held by the fund. This continuous process of redemption would restrict and contract the size of the mutual fund unless it continuously issued and offered new securities for sale. Virtually no shares in mutual funds are traded from one investor to another, and there is no significant trading market for such shares. In almost all cases, shareholders in mutual funds desiring to obtain cash for their shares redeem them with the issuing company. 4. The securities issued by most mutual funds are of- fered to the public at a price which includes a sales com- mission (or sales load). There are, in addition, a significant number of mutual funds whose shares are sold with no sales commission charged. Such funds are frequently called “no-load” mutual funds. The mutual fund members of the Institute include 23 “no-load” funds. 5. The activities of mutual funds are under the control of a board of directors or board of trustees. Directors and trustees are elected annually by the vote of a majority of the fund’s outstanding voting securities. Mutual funds usu- ETI I ae NE NOS FN RS 25 ally contract with an outside investment adviser for in- vestment advice and other management services, and with a principal underwriter for the distribution of the fund’s shares, pursuant to the statutory pattern established by the Investment Company Act of 1940, 15 U.S.C. § 80a-15, et seq. 6. The investment adviser of a mutual fund furnishes ad- vice to the fund with respect to its investment portfolio and the securities it should buy, hold, and sell. In some cases, the adviser itself is empowered to purchase and sell securi- ties for the fund. Typically, the investment adviser also furnishes other supervisory and administrative services to the mutual fund. The investment adviser receives compen- sation for its services, usually in the form of a fee based on the total value of the assets being managed. Plaintiffs, In- vestors Diversified Services, Inc., Investors Management Company, Inc., and Wellington Management Company, all serve as investment advisers to a number of mutual funds, and each of said plaintiffs and all the mutual funds they serve are members of the Institute. 7. The principal underwriter of a mutual fund is engaged in the business of selling and distributing the securities issued by the fund to the investing public through brokers or dealers, or directly through the underwriters’ own salesmen, or both. The principal underwriter either purchases the securities issued by the fund for resale or acts as agent for the fund in distributing the securities. Except in the case of a no-load fund, the principal underwriter receives a fee for its services, usually in the form of a portion of the sales commission included in the selling price of the shares issued by the mutual fund. Plaintiffs, Investors Diversified Ser- vices, Inc., Hugh W. Long & Company, Inc., and Wellington Management Company, all serve as principal underwriters for a number of mutual funds, and all those plaintiffs and the mutual funds they serve are members of the Institute. 8. Each of the 177 mutual fund members of the Insti- tute is registered with the Securities and Exchange Commis- ——_—_—e WE RRESSE RN A AS ST terra ee TIO WER Orig NRE ELNINO ENS —— 26 sion under the Investment Company Act of 1940. The activities of the mutual funds and their relationships with affiliated persons and others are all subject to detailed sup- ervision and regulation under that Act. The investment advisers and principal underwriters for each mutual fund, including the investment advisers and principal underwriters who are plaintiffs herein, perform their services for the mutual funds they serve pursuant to contracts, the terms, execution and continuation of which are subject to the provisions of Section 15 of the Investment Company Act, 15 U.S.C. § 80a-15. 9. The securities issued by each of the mutual fund members of the Institute are registered with the Securities and Exchange Commission pursuant to the Securities Act of 1933. All such securities are offered to the investing public by means of a prospectus which is initially filed with the Securities and Exchange Commission under the Securities Act as part of the registration statement for the securities to which the prospectus relates. See, for example, the following prospectuses for the sale of mutual fund shares: Prospectus dated January 5, 1966 for Investors M utual, Inc., one of the mutual funds for which plaintiff, Investors Diversified Services, Inc., acts as principal underwriter. (Ex- hibit 1).° Prospectus dated April 1, 1966 for Fundamental Investors. Inc., one of the mutual funds for which plaintiff, Hugh W. Long & Company, Inc., acts as principal underwriter. (Exhibit 2). Prospectus dated April 1, 1966, supplemented November 1, 1966, for Wellington Fund, Inc., one of the mutual funds for which plaintiff, Wellington Management Company, acts as principal underwriter. (Exhibit 3). “This Exhibit and all other Exhibits herein referred to are annexed to the Affidavit of James F. Fitzpatrick, filed in support of plaintiffs’ motion for summary judgment in this action. aE a Di RR A A a ek ke ae a ta etal i ae Reso a 27 10. Since the passage of the Investment Company Act of 1940, the mutual fund business has enjoyed a period of substantial growth and active competition. During that period, the number of mutual fund members of the Insti- tute has grown from 68 to 177, as of October 1, 1966; the number of shareholder accounts in mutual funds has grown from about 296,000 to 7,500,000; and the total investment by the public in such funds has grown from approximately $448,000,000 to $32,000,000,000. A broad variety of in- vestment plans are available to the investing public, and the many mutual funds operating throughout the country are in vigorous competition. As of October 1, 1966, it is esti- mated that at least 1 million or about 25 percent, of the estimated 4 million mutual fund shareholders had holdings of $10,000 or more. 11. Prior to 1962, the statutory authority to regulate the fiduciary activities of national banks was vested in the Federal Reserve Board. Under its regulations and rulings, national banks were not permitted to operate a commingled fund as a general investment median. In September 1962, authority to regulate fiduciary activities was shifted to the Comptroller of the Currency, 76 Stat. 668, 12 U.S.C. § 92a. Shortly thereafter, the Comptroller issued a notice of pro- posed rule-making, concerning the promulgation of regula- tions which would permit banks to maintain collective investment funds as investment media and to offer shares in such funds to the public. In response to the Comptrol- ler’s invitation, the Institute submitted a statement opposing these regulations. On April 5, 1963, the Comptroller issued revised Regulation 9 effecting the proposed change. The regulation was amended by the Comptroller on January 31, 1964. 12 C.F.R. $9.18. 12. On May 10, 1965, the Comptroller approved the plan submitted by First National City Bank of New York (“First National City”) for the establishment and operation of a collective investment fund, called the Commingled In- vestment Account, under Regulation 9. On August 25, >... ; RRMA DTS MIRA EONS WAL ER A os ny wR SIN ee anes Ey here — 28 1965, the Comptroller issued a statement that Regulation 9 would be amended to provide general authorization for other banks to establish funds similar to the fund created by First National City. At the time of the approval of First National City’s plan, and to date, no state bank sub- ject to the laws of the state of New York has Operated a collective investment fund as a general investment medium. 13. On April 20, 1966, First National City registered its Commingled Investment Account with the Securities and Exchange Commission pursuant to the Investment Company Act as an open-end management investment company. On the same date, First National City filed a registration state- ment with the Securities and Exchange Commission pursu- ant to the Securities Act of 1933 for the purpose of regis- tering the securities to be issued by its Commingled Investment Account. The registration statement concerning those securities became effective on June 14, 1966. Since then First National City has offered and sold to the invest- ing public the securities issued by the Commingled Invest- ment Account by means of the prospectus for First National City’s Commingled Investment Account, dated June 14, 1966. (Exhibit 12). 14. By his promulgation of Regulation 9 and his ap- proval of the plan submitted by First National City for its Commingled Investment Account, the Comptroller has authorized national banks to enter the securities business in direct unlawfui competition with the mutual fund members of the Institute and in direct unlawful competition with their investment advisers and principal underwriters. 15. The Glass-Steagall Act of 1933 contained a number of provisions designed to separate commercial banking from the securities business, Ch. 89, 48 Stat. 162 (1933). The Federal Reserve Board has statutory authority to administer Section 32 of the Glass-Steagall Act, 48 Stat. 194 (1933), as amended, 49 Stat. 709 (1935), 12 U.S.C. § 78 (1964), which prohibits an officer, director, or employee of a na- tional bank or other bank which is a member of the Federal 29 Reserve System from serving in a similar capacity in a com- pany primarily engaged, among other things, in issuing stocks, bonds, or similar securities. The Federal Reserve Board has ruled on a number of occasions that mutual funds are primarily engaged in issuing securities within the meaning of Section 32 of the Glass-Steagall Act. Accord- ingly, the Board has on several occasions rejected requests by the Institute and by some mutual funds that bank of- ficers or directors be permitted to serve on the board of directors of mutual funds. 16. The Bank-sponsored collective investment funds, which are permitted under Comptroller’s Regulation 9, are virtually identical in function and structure to mutual funds. The SEC has recognized this and has insisted that all bank mutual funds must be registered under the Investment Com- pany Act and that all participations in such funds must be registered as securities under the Securities Act of 1933. The Comptroller has sanctioned and encouraged such funds and such securities to be so registered with the Securities and Exchange Commission. 17. The collective investment funds authorized by Re- gulation 9, and exemplified by First National City’s Com- mingled Investment Account, are identical to existing mutual funds in the following respects, among others: they are registered as open-end management investment compa- nies with the Securities and Exchange Commission under the Investment Company Act; participations in them are registered as securities under the Securities Act of 1933; they are in the business of continuously issuing such securi- ties; the proceeds of the sale of such securities are brought together and invested in the portfolio of securities owned by the fund. 18. The rights acquired by an investor in a_bank- sponsored collective investment fund such as First National City’s Commingled Investment Account are identical to the rights of an investor in a mutual fund in the following re- spects: the investor has an undivided interest in the fund’s ~ gap wer we — rae to i v0. reas ' ecquired Mrough investment of $10,000. . $8,739 $7,874 $7,994 $9,375 $10,542 $11,563 $11,392 $11,081 $10,461 $10,687 $11,906 $12,833 VALUE OF SHARES received Garogiens leontete) 7S 161 «215 646 1,200 1,485 = 2,084 2,191 2,272 2,405 2,821 3,398 TOTAL VALUE . . . . $8,814 $8,035 $8,209 $10,021 $11,642 $13,049 $13,476 $13,272 $12,733 $13,092 $14,727 $16,231 Initial net asset value is the amount received by the fund after deducting from the cost of the investment the sales comm sion as described in the prospectus. No adjustment has been made for any income taxes payable by stockholders on reinvested capital gains distributions. The dollar amounts of capital gains distributions reinvested in additional shares were: 1940—$74; 1941—$93: 1942—$51; 198 oe Pays A os Nae ita a a AR, Sat A Be UR le 53 This period was one of generally rising common stock prices. The results a pnarennsand shown should not be considered as a representation of the dividend income atta or capital gain or loss which may be realized from an investment made in $18,936 the fund today. : lve ee ces ee es ee a P Frcs $759 $793 $880 $914 $923 $909 $961 $982 $1,023 $1,080 $1,148 $1,232 rc = ts Value of Reinvested Capital Goins Distributions $13,484 umulative Value of ital Gains Distributions rinvested in Shores ) j Value of 1 j | Original Shores $22,553 } ' | | 1! 1] | | | | | | | | | | M6 $12,391 $14,976 $16,702 $16,759 $15,734 $17,885 $18,731 $18,404 $21,300 $18,315 $20,890 $22,476 $22,553 683 3,708 4727 5658 6,053 5882 6,992 7,906 7,970 9,659 9,242 11,092 12,615 13,484 829 $16,099 $19,703 $22,360 $22,812 $21,616 $24,877 $26,637 $26,374 $30,959 $27,557 $31,982 $35,091 $36,037 —$402; 1944—$368; 1945—$276; 1946—$623; 1947—$163; 1948—$204; 1949—$84; 1950—$141; 1951—$358; 1952—- $256; 1953—$183; 1954—$245; 195S—$387; 1956—$382; 1957—$194; 1958—$310; 1959—$582; 1960—$203; 1961— $435; 1962—$936; 1963—$554; 1964—$680; 1965—$826. Total $9,010. If capital gains distributions had not been re- invested, total dividends from investment income for the period would have been $14,500, total capital gains distribution $6,856, and total value of investment $22,553 at September 30, 1965 s om t ILLUSTRATION OF AN ASSUMED INVESTMENT OF $10,000 IN INVESTORS MUTUAL, INC with bath Dividends from Investment Income and Capital Gains Distributions Reinvested in Shares The table below covers the period from April 16, 1940 (inceptior of the fund) to September y | 1965. This period was one of generally rising common stock prices. The results shown should ny | be considered as a representation of the dividend income or capital gain or loss which may be x alized from an investment made in the fund today. } NUMBER OF SHARES COST OF SHARES VALUE OF SHARES (To nearer full shore ome! trot [eat ‘a : ome | he ye tare | ment” | Rem ment , yo By Invest | "through | including Instnty of Capital | Sub-Total | ment we Sian | of Capital ment Reinvest- — Acquired Gains of Income | Value 4 lg Income | Reinvest | income Distribu Dividends Acquired | pistribu- | Dividers a ted | oy! tions (cumula- trons (cumua Annual income (cumula- tive) (cumula tive) Dividends tive) tive) The total cost figure represents the initial cost of $10,000, which includes a sales commission of 8% as described ®t Prospectus, plus the cumulative amount of income dividends reinvested without sales charge. The dollar amounts of a ins distributions, reinvested in shares, also without sales commission were: 1940--$74; 1941—$100; 1942—$38: i 74; 1944—$451; 1945—$349; 1946—$814; 1947—$222; 1948—$288; 1949$125: 19S0—$219; 1951—$583; % $436; 1953—-$325; 1954—$454; 1955—$745; 1956—$761; 1957—$403; 1958—$669; 1959—$1,303; 1960—$470; | $1,042; 1962—$2,319; 1963—$1,422; 1964—$1,803; 1965—$2,268. Total—$18,177. No adjustment has been made for any income taxes payable by shareholders on capital gains distributions and incom dends reinvested in shares. ‘ “Fiscal Years ended December 31, 1940-45; Fiscal Years ended September 30, 1945-1965. ** Adjusted for 2-for-1 stock split 4/26/56. Ba laa Ne RE ee eR EL ee aeant unet gina eae > $110,000 _ 100,000 95,000 ILLUSTRATION OF AN ASSUMED INVESTMENT OF $10,000 IN INVESTORS MUTUAL, INC. , 90,000 with beth Dividends from | In and Capital Geins Distributions come Reinvested in Shores 4 P The chart below covers the period from April 16, 1940 (inception { 90,000 of the fund) to September 30, 1965. This period was one of generally rising common stock prices. The results shown should not be con- _ — sidered as a representation of the dividend income or capital gain an or loss which may be realized from an investment made in the fund : ers today. | 65,000 _, 60,000 . 55,000 cost VALUE . 50,000 ‘ c Valve of Shores Purchased . 45,000 Cost of Shores Purchased r through Reinvested 4 ; Fsroigh hacome <> ” Income Dividends i | Dividend Reinvestment | _ 48,000 S = Valve of Initio! Investment Cost of Shores } Purchased with > « Volue of Copita!l Goins | . 35,000 Initiel Investment Distributions Reinvested | in Shores _ 30,000 | Cost of Initial | . .. 25,000 Investment ; | t April 16, 1940 ; | ail _, 20,000 $10,000 uidddy WL AL i ee iT | | | Initial HA sme . ? H r .~ 10,000 | |p| Net 5,000 } Asset s 4 ¢ | Volve . : ’ 7 $9,200 1940 "41 ‘42 "43 44 "45 ‘46 '47 "48 ‘49 "SO ‘ST ‘52 'S3 'S4 ‘SS ‘56 'S7 'S8 ‘59 ‘60 ‘61 ‘62 ‘63 ‘64 ‘6S Fiscal Years Ended December 31, 1940-1944; September 30, 1945-1965 Initial net asset value is the amount received by the fund after deducting from the cost of the investment the sales commis- sion of 8% as described in the prospectus. Income dividends and capital gains distributions were assumed to have been reinvested in additional shares at net asset value. There is no sales commission charged for such reinvestment. No adjustment has been made for any income taxes payable by shareholders on capital gains distributions and income divi- dends reinvested in shares. NOTE: See table on preceding page for dollar amounts represented by this chart. 5s 7 — $135,900 “7 130,000 ILLUSTRATION OF A CONTINUOUS INVESTMENT PROGRAM + 125,000 IN INVESTORS MUTUAL, INC. a 120,000 in terms of en Assumed initial Investment of $1,000 and Subsequent invest- ments of $100 Per Month with both Dividends from Investment ae 115,000 Income end Capite! Gains Distributi Rei d in Sheres 4 110,600 The chart below covers the period from April 16, 1940 (inception of the fund) to September 30, 1965. This period was one of generally 105,000 rising common stock prices. The results shown should not be con- sidered as a representation of the dividend income or capital gain _ =— or loss which may be realized from an investment made in the fund al 95,000 today. A program of the type illustrated does not assure a profit or Protect against depreciation in declining markets. “ 90,000 4 85,000 4 80,000 - 75,000 — 70,000 cost VALUE Cost of Shores Purchosed Volue of Shores Purchased E = 65,000 through Income investment policies recited in its registration stat. ment, and the investment of its funds in cera} specified types of companies. areas pave 2 Investors Diversified Services, Inc. acts as the underwriter and investment manager for Investors Mutual, Inc., Investors Selective Fund, Inc., Investors Stock Fund, Inc., and Investors Variable Payment Fund, Inc. (these open-end, diversified investment companies being included in what is frequently re- ferred to as the “Investors Group”). The shareholders of these companies (each of which differs from the others as to investment policies and purposes) have the privilege of transferring without sales charge their investments in shares of one or more of the companies into investments in shares of any of the other com- panies at respective net asset values. In the case of Investors Selective Fund, Inc., there are certain re- strictions regarding transfers from that Fund as ex- plained in the prospectus of that Company. This privilege is not an option or right to purchase such securities but is a privilege permitted under the present policy of each of these companies. This pol- icy may be discontinued, cancelled or changed by any of the respective companies at any time. The privilege of transferring investments will be extend} by the present managements of the respective com} panies in the absence of objection by regulatory. authorities and provided shares of the respecte’ companies are available and may lawfully be sos} sued in the jurisdiction in which any shareholic wishing to exercise this privilege resides, or until &} privilege, in the opinion of the managements of respective companies, imposes an unwarranted af unreasonable burden or hardship on the respects companies. The transfer of investment is effected by author specified company. For federal income tax purpox of the shareholder redemption of the shares bey transferred is ordinarily the equivalent of a of the shares. The company receiving the transfer: investment will deliver a current prospectus and receiving a signed receipt therefor will issue its at asset value. Custodianship of Assets 59 13 Portfolio securities and cash of the Company are deposited, under a custodian agreement, with the Bank of Delaware, of Wilmington, Delaware. This institution maintains custody of all securities and Offering Price of Shares cash of the Company so deposited but otherwise performs no managerial or policy-making functions for the Company. 14 (a) Shares of the Company are offered at their public offering price at the close of business [as defined in sub-section (j)] on the day upon which the application and payment are received at the prin- cipal place of business of the Company. If these are not received prior to the close of business, the shares are issued at the public offering price as of the close of business on the next succeeding full business day. If the day upon which the application and payment are received at the principal place of business of the Company is not a full business day, the price of the shares is computed as of the close of business on the next succeeding full business day. (b) The asset value is computed as of the close of trading on the New York Stock Exchange in ac- cordance with sound accounting practice and in the manner authorized by the Board of Directors, as follows: Securities listed on national securities ex- changes are valued on the basis of the closing sale each day, or if no sale is made, at the mean of the closing bid and asked prices of such securities. Secur- ities not listed or traded on a national securities ex- change, but for which market quotations are readily available, are valued at market value as defined in the Certificate of Incorporation. Securities having no current market price are valued at fair value as de- termined in good faith by the Board of Directors. Dividends declared but not received are accrued on the ex-date of such dividends. Interest on bonds not traded “flat” is accrued daily. All cash and receivables and current payables are carried at their face value. The investment advisory and services fee, which com- prises the entire management and operating expense of the Company, is accrued daily. No taxes are accrued on unrealized appreciation since the Com- pany has elected to meet the requirements of Sections 851-855 of the federal Internal Revenue Code and intends to distribute to stockholders any capital gains realized. See section 22(g). From the total value of the assets are deducted the total outstanding liabilities (exclusive of capital stock and surplus accounts) in- cluding all reserves and estimated accrued expenses. The resulting net worth is divided by the number of shares outstanding to determine the asset value per share of capital stock. —_— = ILI PPE LEN RF OBIS EIS EINE NEL AL IOS ELE OILS ILE GEL NAIIIG (c) Computation of the public offering price of shares of capital stock of the Company is illustrated below: Net assets at September 30, 1965 as per Statement of Net Assets (Page 24) . . $2,940,769,421 Divided by number of shares out- standing September 30, 1965 239,926,645 Asset value of a share of capital stock . $12.257 Plus 8% * of public offering price . 1.063 Public offering price caceeanieeii ($12.257 ~ 92] . . » oe *Sales Charges are graduated as follows: Per Cont of Public Amount of Application Offering Price Teens. es Oe $15,000 to $19,999 1” $20,000 to $24,999 $25,000 to $49,999 $50,000 to $99,999 . $100,000 to $199,999 2% $200,000 to $399,999 . . . . .. 2 $400,000 to $699,999 1% yo a ee es | (d) The above graduated sales charges will apply investment of the same shareholder (and to the extent that such shares are still registered in his name) is $15,000 or more; for example, if a shareholder had previously purchased and still held shares for which he had paid $10,000 and made a subsequent purchase of $6,000, the sales charge applicable to this latter pur- chase would be 742%. If such shareholder after his initial purchase (shares still held by him) had made an application for an additional $11,000, bringing his aggregate investment to $21,000, the sales charge on the latter purchase would be 7%. Shares held in the name of the spouse of the purchaser or in the name of a child of the purchaser under 21 years of age will be treated for purposes of this section as being registered in the name of the purchaser. Re- invested dividends and reinvested capital gains distri- butions (see sections 7 and 9) are included in deter- mining the aggregate amount invested, although no sales charge is made for such reinvestment. (e) The foregoing paragraph is applicable to a trustee or other fiduciary purchasing securities for a single trust estate or single fiduciary account (includ- ing a pension, profit-sharing, or other employee ben- efit trust created pursuant to a plan qualified under Section 401 of the Internal Revenue Code). (f) Since Investors Diversified Services, Inc. is also the principal distributor for shares of Investors Stock Fund, Inc., Investors Selective Fund, Inc., In- vestors Variable Payment Fund, Inc. and Investors Inter-Continental Fund, Inc., the graduated scale of sales charges applicable in the manner stated above will apply to purchases by any of the persons enumer- ated in (d) or (e), above, of shares representing a combination of the five Funds or an addition to the aggregate holdings in those companies. For ex- ample, if an investor had purchased and still held shares of Investors Stock Fund, Inc. for which he paid $15,000, and he made a purchase of shares of Inves- tors Mutual, Inc. in an amount of $6,000, the rate of sales charge applicable on this latter purchase would be 7%, as shown in the foregoing table. There is a different graduated scale of sales charges with re- spect to Investors Selective Fund, Inc. (g) In addition, the reduced sales charges reflect- ed under sub-section (c) are also applicable to the aggregate amount of purchases made by any of the persons enumerated above within a thirteen months period pursuant to a written statement of intention provided by the principal distributor, which includes provisions for a price adjustment depending upon the actual amount purchased within such period, pro- vided that the purchases aggregate not less than $50,000 and the investor still owns the shares at the end of the period. This is not an option, warrant or right to purchase additional shares and there is no penalty upon either party if the intention is not fulfilled. As an example of how this reduced sales charge See ee eee ee with his application for $10,000, a written statement of ie. 60 his intention to invest a total of $50,000 at varioy times during the next succeeding thirteen months. Oy his initial investment of $10,000 he would pay ; sales charge of 8%. Thereafter he invects an ad ditional $10,000, bringing his total holdings $20,000. On the latter investment he would pay th sales charge applicable to holdings of $20,000, 7%. This method would continue on his other purchases during the period according to the sched- ule in sub-section (c), and with the last investment for the period he would receive an adjustment on his total purchases (still held by him) of $50,000 for the difference between the respective sales charges paid and the 4% sales charge applicable on th $50,000 aggregate investment. In other words, he would receive the same benefit of the 4% sales charge as though he had made the $50,000 inves ment in a single purchase. Further, should it develop that his aggregate purchases during the period exceed the $50,000 originally specified by an amount suff- cient to qualify for an additional quantity discount (for example, should his actual purchases equal $100,000), he would receive the same benefit as though he had specified the larger amount in his original statement of intention. (h) Officers, directors, employees and sales repre- sentatives of the distributor or of the Company (and any trust, pension, profit-sharing or other benefit plan for such persons) may be permitted to purchase shares of the Company at net asset value, provided that such purchases are made upon the written assurance of the purchaser that the purchase is made for investment purposes and that shares so acquired will not be resold except through regular redemption by the Company. (i) The bylaws of the Company provide that dur- ing any period in which the sale of shares issued by the Company shall be discontinued, the Board of Directors, in arriving at asset value for redemption purposes, may deduct from the value of the assets an amount equal to the brokerage commissions, trans- fer taxes and charges, if any, which would be pay- able on the sale of all securities in the portfolio of the Company if they were then being sold. The pur- pose of this provision is to distribute these charges over all outstanding shares if redemptions continue when no further sales are being made. (j) A “full business day” is defined as a day with respect to which the New York Stock Exchange is open for business, and with respect to which th actual time of closing of such Exchange is that time which shall have been scheduled for such closing i advance of the opening of such Exchange. The “close ‘of business” is defined as the time of closing of th New York Stock Exchange. re — 61 Distribution of Shares Since the inception of the Company, its shares we been distributed exclusively by Investors Diver- fed Services, Inc. (IDS), of Minneapolis, Minne- ta, pursuant to distribution agreements, the most cent of which is dated April 6, 1963 and reexecuted » October 31, 1963. Applications for shares of the ompany are solicited by representatives of the dis- ibutor and submitted to the Company for acceptance r rejection. IDS receives, in full payment for its services as stributor of the shares of Capital Stock of the Com- any, a fee equal to the difference between the nount received with each application and the asset alue of the shares sold pursuant to such application, termined as stated in section 14 which also gives ¢ present rate of the distribution fee. IDS received Redemption of Shares during the fiscal year ended September 30, 1965, distribution fees amounting to $20,276,818, out of which it allowed commissions of $13,990,881 to its sales representatives and paid other expenses inci- dental to and in connection with the distribution and sale of the Company's Capital Stock. During the period of the distribution agreement IDS will pay certain expenses in connection with the issuance and sale of the Company's securities, as spe- cified by the agreement. The agreement provides that it shall continue in effect from year to year after April 6, 1963 provided such continuance is approved an- nually by the Board of Directors of the Company or by a vote of the majority of the outstanding shares of the Company. The agreement may be terminated by either party upon sixty days’ written notice. (a) By express provision in the Company’s ertificate of Incorporation, the registered holder of pares of the Company has the right to require the ‘company to redeem his shares. The redemption is complished by delivering to the Company at its rincipal place of business the stock certificate and a ritten request for redemption in form satisfactory ) the Board of Directors. There is no redemption harge. Redemption of all or any part of shares for hich a certificate has not been issued may be effected y a written request signed by the registered owner nd directed to the Company. (b) The redemption value of shares will be the sset value calculated as of the close of business (as fined in section 14(j) ) on the day of receipt of the urendered stock certificate or request at the Com- aay's principal place of business. If the day of sur- ender of the certificate or request is not a full busi- ess day, then the asset value for the purposes of redemption will be calculated as of the close of busi- ess on the next succeeding full business day. The method of calculating the asset value of shares sshown in section 14(b). For a change in the nthod of calculating redemption value if the sale i shares of the Company is discontinued, see section 4(i). The market value of securities in the Com- aay’s portfolio is subject to daily fluctuations, and asset value will fluctuate accordingly. The amount shareholder will receive on redemption of his shares uy be more or less than the price paid therefor, ee aie aio Hs aE ae eT depending upon the market value of the portfolio securities at the time of redemption. The Company presently pays the redemption value in cash as soon as the amount is determined. Payment may not be deferred for a period exceeding seven days except during a period of emergency. (c) During any period of emergency, the Board of Directors, in its discretion, may suspend the compu- tation of asset value for the purpose of issuing or redeeming its shares, may suspend the acceptance of payments from the holders or owners of any of its securities for the acquisition of additional shares of the Company, and may suspend the obligation of the Company to redeem stock. A period of emergency is defined to be: (1) A period during which the New York Stock Exchange is closed for other than customary week- end or holiday closings, or during which trading on the New York Stock Exchange is restricted; (2) A period during which disposal by the Com- pany of securities owned by it is not reasonably prac- ticable or during which it is not reasonably practicable for the Company fairly to determine the value of its net assets; or (3) Such other periods as the Securities and Ex- change Commission, pursuant to the provisions of the Investment Company Act of 1940, may by order declare as an emergency period or periods. etn ee a ar ea tw i 6 a , + 7 Systematic Pay-out Options The Company makes available to its share- holders, without additional charge, periodic withdrawal Or pay-out options designed to meet the differing ob- jectives of shareholders. The cost of administering them is, pursuant to contract, borne by Investors Di- versified Services, Inc. (IDS), the Fund's investment manager and distributor. These pay-out options con- template the liquidation of the shareholder's holdings of Fund shares, and amounts received during the pay- Out period will represent a combination of principal and ificome. Dividends and capital gains distributions made to the Fund's shareholders must be reinvested at met asset value in additional shares of the Fund by investors who select a systematic pay-out plan. Option |. Variable pay-out over a stated number of years by monthly, quarterly, or annual redemptions of shares—for the shareholder who desires to spread the pay-out of his holdings over a fixed number of years on a basis that will tend to be reasonably responsive to changes in the purchasing power of the dollar. This option provides a method of periodic (month- ly, quarterly, or annual) redemption of shareholdings, including shares, if any, created by reinvestment of dividends and realized capital gains during the pay- out period, over the number of years specified by the owner. It is designed to produce payments to the shareholder from period to period which will vary with the performance of the Fund (i.e., will vary with changes in the market value of the securities in the Fund portfolio). Obviously, it is impossible to give any assurances of the extent, if any, to which these variations will match changes in the purchasing power of the dollar. Under this option all shares will be re- deemed and the shareholder's investment entirely liquidated by the end of the specified number of years. The number of years and the payment frequency will be those specified by the shareholder at the time he elects the option. The number of shares redeemed to make each payment will be calculated by dividing the total shares then available (including such shares, if any, as have been added from time to time through re- investment of dividends and realized capital gains dur- ing the pay-out period) by an appropriate variable pay- ment factor. The only purpose served by the variable payment factor is to determine the number of shares to be redeemed. The dollar amount of cach payment will depend both on number of shares redeemed and asset value per share at the time payment is made. Option 2. Variable pay-out by monthly, quarterly, or annual redemptions of a stated number of shares each period until all shares are redeemed. The payment fre- quency and number of shares will be specified by the shareholder in his request for pay-out option > length of time over which payments will be mak depend upon the total number of shares owned, ing such shares, if any, as have been added from to time through reinvestment of dividends and capital gains during the pay-out period. Option 3. Pay-out by monthly, quarterly, or an, redemptions of shares to provide a specified & amount each period until all shares are redeen The payment frequency and dollar amount of & payment will be specified by the shareholder » request for pay-out option. To elect one of the options, the shareholder make written request on or before the date he » payments to begin. The option elected will remar effect unless subsequently changed at the requ the shareholder. While there is no minimum a amount requirement for opening a systematic pa plan, a limitation on the availability of these om is that each payment under Option 3 shall be nos than $50 and that the initial payment (and th payment after a request for change would be effective) under either Option | or Option 2 shw not less than $50. These pay-out options have ¥ designed to meet the needs of most shareholder are in a form that IDS can handle expeditious) at reasonable cost. If a shareholder wishes av pay-out method or methods the procedure set « section 16 will be followed, with the shareholder > ing a separate written request for each redempalj To meet situations presently unforeseen, the Com reserves the right to alter or discontinue any sx atic pay-out plan elected by any shareholder ax discontinue the availability of any such plans ¢ future. The purchase of shares in a mutual | either occasionally or pursuant to a systematic i ment plan, at the same time as a systematic pe plan is in effect with respect to the same or am © fund would normally be disadvantageous to © vestor because he would be paying a sales load amount being invested at the same time as he ® be withdrawing money on which he had alread) a sales load. Mutual funds distributed by IDS wi accept applications for fund shares made pursuit a systematic investment plan while a systematc out plan is in effect with respect to any o funds. However, isolated or occasional investmem a non-regular basis may be accepted. Attention s called to the fact that if withdrawals by an under a systematic pay-out plan are in excess 0 rent dividend income from his shares, he will ™ and may ultimately exhaust his principal. 63 ] Remuneration and Fees Investors Diversified Services, Inc. (IDS) pays counsel and professional consultants employed by it or reimburses the Company for the entire remunera- provided they are reasonable in amount. tion of all directors and officers of the Company. The agreement requires that IDS, among other During the fiscal year ended September 30, 1965, things, provide the Company with investment re- IDS received $10,438,087 as fees under the invest- search and advice and make specific investment rec- ment advisory and services agreement with the Com- ommendations, subject to the direction and control pany as described below. of the Board of Directors, the i IDS has acted as investment adviser of the Com- and the officers of the Company. It will remain in pany since the Company's inception. On October 15, effect until September 30, 1966, and may continue 1964 the present investment advisory and services from year to year thereafter, provided such continu- agreement was approved by stockholders of the Com- ance after September 30, 1966 is specifically approved pany and entered into on that date. The present agree- at least annually (1) by vote of the Directors of the ment provides for a graduated scale of fees equal on Company and by vote of a majority of the directors an annual basis to 50% on the first $350 million of who are not parties to such agreement or affiliated average net assets, 47% on the next $300 million, persons of any such party or (2) by vote of a majority 44% on the next $250 million, .41% on the next of the outstanding voting securities of the Company. $250 million, 38% on the next $250 million, 35% Such a majority vote is defined in the Investment on the next $250 million, .32% on the next $250 Company Act of 1940 as 67% or more of the voting million and .30°% on all assets in excess of $1.9 securities present at a stockholders’ meeting, if more billion. The agreement also provides for a flat reduc- than 50% of such outstanding shares are present or tion of $170,000 a year ($14,166.67 monthly) from represented by proxy, or more than 50% of the out- the fees computed in accordance with that scale. standing voting securities, whichever is less. The The advisory and services fee is payable monthly agreement also provides that it may be terminated but is calculated daily on the basis of net assets at without penalty by either party on 60 days’ written the close of business each day. notice, provided that such termination on the part of The agreement provides that all expenses of the the Company is approved either by the Board of Company will be absorbed by IDS except (a) the Directors or by a vote of a majority of the outstanding fee under the agreement, (b) contractual expenses Voting securities of the Company as defined above, relating to the sale and distribution of the Company's nd that it will terminate automatically in the event ~ shares, (c) certain taxes, and (d) broker's fees on the Of its “assignment” by IDS as defined in such Act. purchase and sale of assets. In addition, the agree- Reference is also made to section 15 for a state- ment provides that IDS shall pay or reimburse the ment as to sales charges received by IDS, as distrib- Company for legal fees and expenses of outside utors of shares of the Company. 19 Officers and Directors The directors and executive officers of the Company are listed below, together with information which includes their principal occupations during the past five years. Harold K. Bradford* 1000 Roanoke Building Chairman of the Board, President and Director, Investors Mutual, Inc., Investors Minneapolis, Minn. Selective Fund, Inc., Investors Variable Payment Fund, Inc., Investors Stock Chairman of the Board of Fund, Inc. and Investors Inter-Continental Fund, Inc. (formerly Ltd.). Directors and President Retired; Mr. Clark served as President of Investors Diversified Services, Inc. W. Grady Clark from July, 1960 to February, 1963 and thereafter as Chairman of the Board of I ae that Company until he retired at the end of 1964. He is a Director of Investors Nvestors Building eda : : ; : Mi ie, Mina Diversified Services, Inc., Investors Syndicate of America, Inc., Investors Syndi- a oli F cate Life Insurance and Annuity Company, Investors Mutual, Inc., Investors Director Selective Fund, Inc., Investors Stock Fund, Inc., Investors Variable Payment Fund, Inc. and Investors Inter-Continental Fund, Inc. *Member of Executive Committee — 64 President Emeritus, The Citadel, the Military College of South Carolina. Directo: Gen. Mark W. Clark Investors Mutual, Inc., Investors Selective Fund, Inc., Investors Stock Fund, Ine. U. S. A., Retired Investors Variable Payment Fund, Inc., Consolidated Foods Corp. and Dayco Cor. Charleston, S. C. Pee carn rior to his retirement from active duty with the Army, General Ch, p mending ne other things, Chief of Staff of the Army Ground Forces and on John C. Cornelius* Retired executive vice president of and now senior consultant to the advertising Bank Building ‘rm of Batten, Barton, Durstine & Osborn Mr. Cornelius is a Director of jy Minneapolis, Minn. vestors Mutual, Inc., Investors Selective Fund, Inc., Investors Stock Fund, Ine. Di Investors Variable Payment Fund, Inc., Investors Inter-Continental Fund, In Rexall Drug & Chemical Company, Red Owl Stores, Inc. and Doughboy Industri« Lewis L " Retired as Vice President of Cargill, Inc. in 1964; now a Director, member ¢! 1104 Roanoke Bidg. Executive Committee and Consultant to Chicago Great Western Railway. Dine. Minneapolis, Minn. tor, Investors Mutual, Inc., Investors Stock Fund, Inc., and Investors Selectin Director Fund, Inc. Randall F. Fullmer Partner in the law firm of Burgess, Fullmer, Parker & Steck, Cleveland, Ohic 1140 Terminal T, Mr. Fullmer, a Director of Investors Mutual, Inc., Investors Selective Fund, Ine, e wer Investors Stock Fund, Inc. and Investors Variable Payment Fund, Inc., is also a Cleveland, Ohio Director of the Bulkley Building Company, Director of and Counsel for Duplex Director Manufacturing and Foundry Company. Laurence M. Gould Geologist. President Emeritus, Carleton College. Mr. Gould is a Director of In Tucson, Ariz. vestors Mutual, Inc., Investors Selective Fund, Inc., Investors Stock Fund, Ine Director and Investors Variable Payment Fund, Inc. Frederick L. Hovde . Purdue Universi President, Purdue University. Mr. Hovde is a Director of Investors Mutual, Inc, Lafa a Investors Selective Fund, Inc., Investors Stock Fund, Inc., Investors Variable yette, : Payment Fund, Inc., General Electric Company and Inland Steel Company. 5 ; Partner in law firm of Nixon, Mudge, Rose, Guthrie & Alexander, New York, Richard M. Nixon N. Y., 1963 to present. From January 1, 1961 to January 1, 1963 Counsel to law 20 Broad Street firm of Adams, Duque & Hazeltine, Los Angeles, California. Vice President of New York, N. Y. United States from 1953 to 1961. Mr. Nixon is a Director of Investors Mutual, Director Inc., Investors Selective Fund, Inc., Investors Stock Fund, Inc., Investors Vari- able Payment Fund, Inc., and Harsco Corporation. Robert C. Reed 339 E. Foster Place Personal investments. Director of Investors Mutual, Inc., Investors Selective Fund. Lake Forest, Ill. Inc., Investors Stock Fund, Inc. and Investors Variable Payment Fund, Inc. Services, Inc., Investors Syndicate “ Insurance and Annuity Company. 800 Investors Building Mr. Silloway was President of the investment banking firm of Harriman, Ripley . is, Mina. & Co., Inc. until September, 1963 and then a partner of Brooks, Harvey & Co. Minneapolis, , mortgage bankers, until July, 1964 when he became President of Investors Diver Director sified Services, Inc. Director, Investors Mutual, Inc., Investors Stock Fund, Inc. Investors Selective Fund, Inc., and Investors Variable Payment Fund, Inc. * Member of Executive Committee George E. MacKinnon 1000 Roanoke Building General Counsel and Vice President George A. Mahon Buildi Minneapolis, Minn. Vice President Norman B, Waag Investors Building Minneapolis, Minn. Vice President Robert S. Ersted 1000 Roanoke Building Minneapolis, Minn. 65 Lawyer in Minneapolis since 1929; Assistant Counsel Investors Syndicate 1929- 1942; Minnesota State Representative 1934-1942; U. S. Navy 1942-1946; Member of Congress 1947-1948; U. S. District Attorney—Minnesota 1953-1958; Special Assistant to U. S. Attorney General 1960; General Counsel and Vice-President of Investors Mutual, Inc., Investors Selective Fund, Inc., Investors Stock Fund, Inc., Investors Variable Payment Fund, Inc. ana Investors Inter-Continental Fund, Inc. (formerly Ltd.) 1961 to date. Vice President, Investors Diversified Services, Inc., Investors Syndicate of Amer- ica, Inc., Investors Mutual, Inc., Investors Selective Fund, Inc., Investors Stock Fund, Inc., Investors Variable Payment Fund, Inc., and Investors Inter-Conti- nental Fund, Inc. Vice President, Investors Diversified Services, Inc., Investors Syndicate of Amer- ica, Inc., Investors Mutual, Inc., Investors Selective Fund, Inc., Investors Stock Fund, Inc., Investors Variable Payment Fund, Inc. and Investors Inter-Conti- nental Fund, Inc. Director, Investors Syndicate of America, Inc. and Investors Syndicate Life Insurance and Annuity Company. Mr. Ersted became Secretary and Treasurer of Investors Mutual, Inc., Investors Selective Fund, Inc., Investors Stock Fund, Inc., Investors Variable Payment Fund, Inc., Investors Inter-Continental Fund, Inc. (formerly Ltd.) in June 1962. During the preceding five years he was a practicing lawyer in Minneapolis. I\ Certain Information Concerning Investors Diversified Services, Inc. >Y investors Diversified Services, Inc. (IDS), the the incumbent IDS officer occupying the position of prestment adviser and distributor for the Company, Vice President-Sales of IDS without ample advance as outstanding 4,395,905 shares of Class A Com- notice to the President of the Company and the fullest pon Stock and 11,490,800 shares of Class B Com- consultation with him regarding the change and as pon Stock, both classes having equal per-share voting to the suitability of the proposed replacement, and ights. Alleghany Corporation (Alleghany), 350 Park they will not promote and they will use their best avenue, New York, N. Y. owns beneficially 495,815 efforts to avoid any change being made with respect hares of Class A Common Stock and 6,295,360 to the present policies of IDS involving the sale of hares of Class B Common Stock, constituting shares of the Company, or the use of the IDS sales 275% of the outstanding voting stock of IDS, and force in connection with or in relation to such sales pving it control of IDS within the meaning of the ‘ and which will affect the offering or sale of shares investment Company Act of 1940. Allan P. Kirby, of the Company, or in the present operating policies 1? DeHart Street, Morristown, N. J. owns beneficially of the Investment Department of IDS as they relate 4,084,813 shares (approximately 40.52%) of the to the Company, without ample advance notice to putstanding Common Stock of Alleghany. Mr. Kirby and the fullest consultation with the President of the nd certain associates have stated to the Company Company. The President of the Company has stated hat they will not promote and that they will use that in such event he would in turn consult with the heir best efforts to avoid any change being made in Board of Directors. ; See of Officers and Directors On December 15, 1961, the directors of the Insofar as indemnification for liabilities arising un- Company passed a resolution providing for the in- der the Securities Act of 1933 may be permitted to emnification by the Company, to the extent per- directors or officers of the Company pursuant to the nitted by law, of past and present officers and di- above resolution, or otherwise, the Company has been eclors against expense incurred by them in connection advised that in the opinion of the Securities and Ex- vith the defense of any legal action in which they are change Commission such indemnification is against nade parties by reason of their office. In the opinion public policy as expressed in the Act and is, therefore, { counsel for the Company, concurred in by counsel unenforceable. In the event that a claim for indem- ot IDS, such expense if payable by the Company nification against such liabilities (other than the pay- nay be recoverable by the Company from IDS. ment by the Company of expenses incurred or paid by a director or officer of the Company in the suc- cessful defense of any action, suit or proceeding) is asserted by such director or officer in connection with the securities registered, the Company will, unless in the opinion of its counsel the matter has been settled 66 by controlling precedent, submit to a court of a. propriate jurisdiction the question whether such in- demnification by it is against public policy as er. pressed in the Act and will be governed by the fina adjudication of such issue. (a) Shares of stock issued by the Company are all of one class, designated Capital Stock, with a par value of $.50 per share. All shares are fully paid, non-assessable and transferable, with equal rights to earnings, dividends and assets. All shares have equal voting rights. Shares may be issued as full or fractional shares. Each fractional share has the same rights, including voting rights, which are pro- vided for a full share but in the proportion which a fractional share bears to a full share. The shares have cumulative voting rights when voting upon the election of directors. (b) Annual and semi-annual financial reports of the Company are mailed to each shareholder. The Company's financial statements as of the close of each fiscal year (September 30th) are examined by a firm of independent certified public accountants. The accounting firm of Peat, Marwick, Mitchell & Co., Minneapolis, Minnesota, has for a number of years been selected for this purpose. (c) The Board of Directors of the Company, at its discretion, may require the payment of a fee not exceeding $1.00 for each new stock certificate issued by the Company as a result of transfers or assign- ments, or as the result of lost, stolen, mutilated or destroyed certificates, or in connection with any spe- cial service by request, by a shareholder requiring the issuance of a new certificate, in addition to the payment of any lost instrument bond premiums, and federal or state taxes required to be paid in connection therewith. (d) Investors Mutual, Inc. was incorporated on January 18, 1940 under the laws of the State of Nevada. Its principal offices are located in Minne- apolis, Minnesota. Its charter provides for perpetual existence. (e) As of September 30, 1965, officers and di- rectors of the Company, as a group, owned less than 1% of the outstanding Capital Stock of the Company. (f) The Company operates as a mutual diversified investment fund of the open-end type and has reg- istered as such under the federal Investment Company Act of 1940. This registration does not involve super- isi of management or investment practices or (g) In order to minimize federal income taxes, th management of the Company intends to conduct is business and Investors Diversified Services, Inc., its investment manager, intends to make recommends. tions and approvals as to investments, so that the Company may meet the requirements of Section 851-855 of the federal Internal Revenue Code. The Company has met such requirements for the pas fiscal year. (h) Investors Diversified Services, Inc. (IDS) acs as principal underwriter and investment adviser for Investors Mutual, Inc., Investors Stock Fund, Inc, Investors Selective Fund, Inc., and Investors Variable Payment Fund, Inc., open-end investment companies Investors Syndicate of America, Inc., a subsidiary IDS, issues face-amount certificates. IDS is the sok underwriter (distributor) for Investors Accumulatios Plan (IAP) which offers long term investment pre- grams in the form of periodic payment Plan Cent. icates for the accumulation of shares of Investor Stock Fund, Inc. Other subsidiaries include Investor Syndicate Title & Guaranty Company, an issuer of in- stallment and fully paid participation certificates in the state of New York, Investors Syndicate Life Insurance and Annuity Company, IDS Securities Corp.. |: member of the Pacific Coast Stock Exchange), and Investors Accumulation Plan, Inc., sponsor of IAP (i) Keogh Act. For those self-employed individuas who wish to purchase shares of the Fund in con junction with the Self-Employed Individuals Ta Retirement Act of 1962 (the Keogh Act) there s available from the distributor a Custodial Accoun! Agreement and a sample Profit-Sharing Plan. The Custodial Account Agreement provides that Investor Diversified Services, Inc. (which is also the distrib utor) furnishes custodial services as required by such Act. For such services it will receive a service fe of $10.00 for each calendar year or portion thereo! payable by the Employer named in the Custodid Account Agreement. The amount of the service fe may change from time to time as a result of negotie- tions between Employer and Custodian. For further details, including the right to appoint a success custodian, see the Custodial Account Agreement an Plan. 67 Prat, Marwick, MircuHe ct & Co. CERTIFIED PUBLIC ACCOUNTANTS ACCOUNTANTS’® REPORT The Board of Directors and the Shareholders of Investors Mutual, Inc.: We have examined the statement of net assets and capital stock and surplus, and the schedule of investments in securities of Investors Mutual, Inc. as of September 30, 1965 and the related statements of income, realized gain on investments, unrealized appreciation of investments, and surplus for the three years then ended. Our examination was made in accordance with generally accepted auditing standards, and accordingly included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. We secured direct confirmation of the securities owned at September 30, 1965 from the custodian depositary. In our opinion, such financial statements and schedule present fairly the financial position of Investors Mutual, Inc. at September 30, 1965 and the results of its operations for the three years then ended, in conformity with generally accepted accounting principles applied on a consistent basis. PEAT, MARWICK, MITCHELL & CO. Minneapolis, Minnesota October 22, 1965 —_— Se eR ey ee ee RE CTT ISTE Fes A NT EP bi bn) aad pos 68 INVESTORS MUTUAL, INC. September 30, 1965 Statement of Net Assets and Capital Stock and Surplus — Assets Investment in securities—at market value— Schedule |: Total—representing value of net assets applicable to outstanding capital stock Net asset valve per shore of outstanding capital stock Cost Common stocks: Affiliated company . . . . . . .$ 6,437,254 $ 6,435,000 ... Lit eee 1,841 ,006,260 Preferred stocks ee 190,735,688 194,008,566 SER ie ee a gs eR: ge > -e 785,292,680 787,206,437 Short-term notes . ae 66,434,630 66,434,630 a eas lll 2,895,090,893 Cash in banks: On demand deposit . : 5,616,349 Time deposits and interest thereon 29,697,091 Receivable for investment securities sold 152,687 Dividends and accrued interest receivable . 15,670,655 Total assets . Liabilities (note 1) Payable for investment securities purchased $ 2,843,466 Payable for sales charges . eee 1,723,567 Accrued investment advisory and services fee. 891,221 Total liabilities . oe Sree cae Net assets applicable to shares of outstanding capital stock Capitol stock and surplus Capital stock—authorized 350,000,000 shares of $.50 par value per share; outstanding 239,926,645 shares $ 119,963,322 Surplus, per Statement D: Paid-in surplus 2,128,560,891 Undistributed net income . ee ee 1,544,158 Undistributed net realized gain on investments (deficit) (395,525) Total capital stock and surplus — $2,249,672,846 Unrealized appreciation of investments, per Statement C 691,096,575 $2,946, 227,675 5,458,284 $2,940, 769,42! $2,940, 769,42! $ 12.257 See accompanying notes to financial statements. MUTUAL, INC. 69 STATEMENT B Net income. Net reolized gain on investments, per Statement C . increase in unrealized appreciation of investments for the year, per Statement C Three yeors ended September 30, 1965 1965 1964 1963 income Cash dividends on stocks: On investments in affiliates 8 286,000 $ 286,000 $ 240,160 Other . 66,593,518 61,102,653 55,808,336 Interest . 40,735,267 30,987,347 24,293,534 Other income (note 2) . 35,554 625,529 12,707 Total income . 5 107,650,339 S 93,001,529 $ 80,354,737 Expenses (note 2) Investment advisory and services fee . $ 10,438,087 $ 10,431,136 $ 9,472,155 Custodian fee i ae 4 _ 181,375 Dividend checks and shareholders’ notices and reports _ - 122,969 Postage . —_ 158,676 Directors’ fees . — —_ 49,350 Audit fees — — 14,880 Other expenses . _ a 80 Total expenses . . $ 10,438,087 $ 10,431,136 $ 9,999,485 Percentage of total expenses to total income . ee: 9.7% 11.2% 12.4% - $97,212,252 . $ 67,227,940 $ 82,570,393 $ 70,355,252 $ $0,715,497 $ 37,625,137 - $ 6,402,016 $ 169,286,979 $ 244,457,679 Se accompanying notes to financial statements. years _ . WARE PAT RAR RIT epee tet em aS dP OOS earn tree aryapc eee 70 Three years ended September 30, 1965 1965 1964 196) Realized gain on sales of investments STATEMENT OF REALIZED GAIN ON INVESTMENTS Proceeds from sales of investments: Securities of affiliates . 2 2 2. 2. . .g§ — $s — $s U.S. Government obligations . . . . |. 3,447,500 5,362,500 f Short-termnotess . . . ......, 538,196,102 371,$23,770 we Other securities. 2. 2. 2). . . . . . (246,584,628 166,553,959 _ Wis Total proceeds from sales of investments $ 788,228,230 $ $43,440,229 $4735 Cost of investments sold: Securities Of affiliates . 2 2... . . .g$ = $s — $s U.S. Government obligations . . . . . 3,447,500 5,362,500 3 WEN Pe ey g 538,196,224 371,524,343 267 aes 6 ek et wt 198,052,516 115,837,889 165,52 Total cost of investments sold . . . . § 739,696,240 $ 492,724,732 $ 436.29 Realized gain (loss) on sales of investments: Securities of affiliates 2. 2. 2. 2 2. . (gg) ~ $s — $ U.S. Government obligations . . . . . — _ cmerttemmnom . ww kk kkk (122) ($73) OU ss Se a es a 48,532,112 ___ 50,716,070 MANS Total realized gain on sales of investments . S$ 48,531,990 s 50,715,497 S 37,68 Reolized gain on exchanges of investments Value of investments acquired through exchanges. $ 37,113,078 $ 2,920,168 $ 94 Cost of investments released through exchanges. 18,417,128 ___ 2,920,168 9 Ab Realized gain on exchanges of investments . $ 18,695,950 s — s_ Net realized gain on investments (note3). . . . . . § 67,227,940 $50,715,497 $ 376 Appreciation at beginning of the year. . . . . . . § 684,694,559 $ 515,407,580 Appreciation at end of the year eos Ti ea 691,096,575 684,694,559 Increose for the yeor (mote!) . . . . . . . |, $ 6,402,016 $ 169,286,979 STATEMENT OF UNREALIZED APPRECIATION OF INVESTMENT See accompanying notes to financial statements. a ELIT RI LO RS oe A a i be had 71 STATEMENT D Three years ended September 30, 1965 1965 1964 1963 PAID-IN SURPLUS Balonce at beginning of the yeor . . $1,827,486,185 $1,567,434,783 $1,360,652,262 Addition Proceeds of sales 34,499,678, 30,253,304 and 25,469,412 shares of capital stock, respectively (note 2), less $.50 a share credited to capital stock 409,525,818 348,094,343 272,261,590 Total . $2,237,012,003 $1,915,529,126 $1,632,913,852 Deduction Redemption value of 9,107,757, 7,705,298 and 6,222,595 shares of capital stock, respectively, less $.50 a share charged to capital stock : 108,451,112 88,042,941 65,479,069 Bolonce at end of the year . . $2,128,560,891 $1,827,486, 185 $1,567,434,783 UNDISTRIBUTED NET INCOME Bolonce at beginning of the year . S$ 1,349,849 $ 1,155,071 $ 1,626,696 Net income for the year, per Stotement 8. : 97,212,252 82,570,393 70,355,252 Total . $ 98,562,101 $ 83,725,464 $ 71,981,948 Dwidends paid in cash (note 4). - 97,017,943 be 82,375,615 70,826,877 Balonce at end of the year (note 1) . § 1,544,158 $ 1,349,849 $s 1,155,071 Net realized gain on investments prior to beginning of the yeor. . . Distributions to shareholders prior t beginning of the year . . Balance ot beginning of the yeor Net realized gain on investments for the yeor, per Statement C ae Dividends paid in cash (note 4). Bolonce at end of the yeor . - $ 310,299,396 310,559,823 (260,427) ‘ 67,227,940 . $ 66,967,513 . 67,363,038 _$ (395,$25) UNDISTRIBUTED NET REALIZED GAIN ON INVESTMENTS (DEFICIT) $ 259,583,899 $ 221,958,762 259,880,870 222,168,318 $ (296,971) $ (209,556) $0,715,497 37,625,137 $ 50,418,526 $ 37,415,581 $0,678,953 37,712,552 $ (260,427) $s (296,971) See accompanying notes to financial statements. RAL EOE ERE TENG ATMEL Aes PRP ELF EO INVESTORS MUTUAL, INC. Notes to Financial Statements 72 1. Income Taxes: Since the Company met the requirements of sections 851-855 of the Internal Revenue Code for the three years ended Sep- tember 30, 1965 and intends to continue to meet such require- ments and to distribute taxable income to shareholders in amounts which will avoid or minimize income taxes, no provi- sion is made for income taxes on undistributed net income or unrealized appreciation of investments. 2. Investment Advisory and Services Fee and Sales Charges: Under the agreement in effect prior to April 6, 1963 the investment advisory and services fee payable to Investors Diver- sified Services, Inc. (IDS) was a quarterly fee of % of 1% of the value of the net assets of the Company. On April 6, 1963 (retroactive to January 22, 1963) a new ag was entered into whereunder a reduced scale of fees on a graduated basis was made effective and IDS agreed to assume certain recurring expenses which were borne by the Company under the previous agreement. However, under the terms of a stipulation of settle- ment of then pending stockholders’ derivative lawsuits, a por- tion of the fee reduction and the agreement by IDS to assume the additional expenses was not to become effective until final court approval of the settlement was obtained. Meanwhile, the amounts involved were deposited in escrow each month and invested in interest bearing securities. On July 2, 1964, the final court approval of the settlements having been obtained, the total amount then in escrow, $946,873, was received by the Company. A portion of this amount, $505,783, was applicable to the period January 22, 1963 to September 30, 1963, and this amount plus interest earned on the escrow deposit, $22,241, is included in “other income" for the year ended September 30, 1964, while the balance, $418,849, offset all expenses other than the investment advisory and services fee for the year ended September 30, 1964. If the April 6, 1963 agreement had been in effect for the full year ended September 30, 1963 net income of the Company would have been increased by $1,105,171 (in- cluding the $505,783 referred to above). On October 15, 1964, a new agreement became effective which provides for a revised graduated scale of fees. If this agreement had been in effect dur- ing the year ended September 30, 1964, the investment advisory and services fee would have been $9,236,000. The present agree- ment and fee scale are further described in this Prospectus under the heading “Remuneration and Fees”. Sales charges by IDS for its services as distributor of the shares of capital stock of Investors Mutual, Inc. during the years ended September 30, 1965, 1964 and 1963 aggregated $20,276,818, $16,634,666 and $12,506,777, respectively. Sales charges are not an expense of the Company. They are deducted from and are not included in the proceeds of sales of capital i stock as shown in the accompanying statement of paid-in sur. Plus. From such charges IDS pays commissions to Salesmen, Salaries and other sales expenses. 3. Cost of Securities Acquired and Basis of Determining Realized Gains: The cost of securities acquired during the periods was a follows: United States Short-term Government Notes Other Year ended September 30: 1965 $3,447,500 $544,323,382 $470,145.08 1964 5,362,500 340,398,115 — 420,546,37) 1963 3,000,000 302,399,840 — 322,852,3) Net realized gains were determined on the basis of identified costs for stocks and on the basis of first-in, first-out costs fo bonds. Net realized gains on stocks and bonds determined o the basis of average costs for the years ended September 1965, 1964 and 1963 would have been $67,298,528, $50,221,519 and $36,996,878, respectively. 4. Dividends to Shareholders: The amounts per share of dividends paid during the period were as follows: From net From realized Payable to shareholders undistributed — gain on of record on income _ investments Year ended September 30, 1965: December 31, 1964 $0.0975 March 25, 1965 105 June 24, 1965 Al September 29, 1965 .11625 $0.2875 Total $0.42875 $0287 Year ended September 30, 1964: ay December 31, 1963 $0.0925 March 25, 1964 .095 June 25, 1964 105 September 24, 1964 -11375 $0.24125 Total $0.40625 $0.24125 Year ended September 30, 1963: December 31, 1962 $0.0925 March 28, 1963 .095 June 27, 1963 .1025 September 26, 1963 10 $0.20 Total $0.39 $0.20 73 SCHEDULE | MUTUAL, INC. in Securities, September 30, 1965 PERCENTAGE STOCKS Ge tones - MARKET MARKET NAME OF ISSUER AND TITLE OF ISSUE cost VALUE (o) VALUE 128,300 re a ee ee ae ee $ 3,407,498 $ 2,822,600 I% 135,000 Lockheed Aircraft Corp. .......+5-2-58685 4,269,981 8,015,625 .28 93,500 North American Aviation, Inc... . .....++- 4,282,782 5,025,625 17 $ 11,960,261 $ 15,863,850 55% Agricultural Machinery 213,000 International Harvester Co... 2. 2 6 ee ee es $ 6,058,726 $ 8,147,250 28% ‘Automotive 618,000 4 oe a ee S$ 24,306,801 $ 34,530,750 1.19% 1,224,000 ee ee ee ee ee __ 86,131,280 128,520,000 4.44 $ 110,438,081 $ 163,050,750 5.63% Bonks 57,400 Bask of Colformia, M.A... 2 ce ee te rte $ 2,008,200 $ 3,271,800 WN% 303,100 Marine Midiend Comp. 6 2 we tt ht th er ee 3,638,522 9,812,863 MM 88,800 National Bank of Detroit. . . 2 1 6 6 ee eee 4,370,258 5,827,500 .20 97,700 National City Bank of Cleveland... .. 1... 5. 2,544,735 5,568,900 19 175,300 Northwest Bancorporation .. 6. 6 6 ee ee ee 3,363,402 ___ 8,282,925 29 $15,925,117 $32,763,988 1.13% building Materials 200,000 J do a ee ae ee $ 4,717,570 $ 12,000,000 M% 220,000 46s 6-508 6 0 8 BR 0.80.8 6,424,099 4,152,500 14 225,000 ea a ae eee ae 5,907,378 3,937,500 14 200,000 oo ee ee ee ee 9,771,762 11,400,000 39 Sree eee 10,674,026 8,312,500 ey $ 37,494,835 $ 39,802,500 1.37% Business Equipment 244,800 Addressograph-Multigraph Corp. .. 2.2... - $ 5,746,782 $ 13,953,600 8% 173,100 International Business Machines Corp... .... . 53,852,481 88,713,750 3.07 $59,599,263 S 102,667,350 “3.55% Chemicals 372,300 PTO, we he es $ 16,988,584 $ 18,149,625 63% 2,500 duPont (E. I.) deNemours & Co... 2... 2 2 we 4,996,617 5,411,250 19 25,000 | ee 4,728,169 . 9,000,000 | 302,800 SS ae esa Sc ae ene ae 12,014,580 25,359,500 87 400,000 SEEGERS 5 5 A 8 ee 8 8 8 8 8 8 8 8 24,436,083 26,700,000 92 $ 63,164,033 $ 84,620,375 2.92% Containers— Metal and Glass 200,000 = Owens-Illinois, Inc... =... ee ee $8,244,839 $__ 11,600,000 40% PORE RO BONE Tis Wen —— - aetiaatiie PORE LTA OTL EIR CERRINA RENO Ir aN tigy Epa a SCHEDULE INVESTORS MUTUAL, INC. (continued) investments in Securities, Continued 74 —— COMMON STOCKS (Continued) ‘ae MARKET map SHARES NAME OF ISSUER AND TITLE OF ISSUE cost VALUE (a) Valu Drugs 214,000 American Home Products Corp... . 2... 2... $ 1,077,724 $ 16,879,250 y 225,000 wane Gomes On, 0... ck ee 3,879,689 ___ 13,978,125 a $4,957,413 $ 30,857,375 1 Electrical Equipment and Appliances 320,000 ce en $ 11,642,206 $ 17,800,000 bl 409,100 CRA cc tt 30,101,900 47,864,700 16s 430,900 Westinghouse Electric Corp... . 2 2 2... 14,676,689 24,184,263 & 200,000 PPE ie) is Kis Woe woo we ee ____ 3,488,073 8,600,000 W S$ 59,908,868 S 98,448,963 14 Electronics 200,000 International Telephone & Telegraph Corp... . . . $ 8,443,207 $ 11,000,000 Ww Finance Companies 217,900 UO, gb kk tt tht ck hee s 7,734,775 $ 13,182,950 ” 300,000 C.LT. Financial Corp... 5.11 et 12,155,658 9,412,500 2 240,000 Commercial CreditCo........., "Ae Sh ac 10,688,323 8,400,000 yn 160,000 Household Finance Corp... . . . . . . ee ___ 5,958,897 10,680,000 Yr $ 36,537,353 $ 41,675,450 1a Foods and Beverages 350,000 SS era ee $ 8,077,764 $ 15,750,000 % 377,000 California Packing Corp.............. 2,064,811 10,367,500 ” 240,000 EIN 65 kw de hk ee : 6,891,840 8,410,000 » 130,000(e) Continental BakingCo.. .........~,.,.., 6,437,254 6,435,000 2 167,000 General Foods Corp... ........, er 7,515,362 13,902,750 a 212,000 vepttete eee 11,062,665 16,430,000 ” 400,000 Se LOR OOS hoes be ena we Ge ___ 14,532,642 14,900,000 $} S$ 56,582,338 S$ 86,215,250 1” Non-Ferrous Metals 185,000 The International Nickel Co. of Canada, Ltd. aD Dee $ 17,020,000 wv 615,91%b,c) Kaiser (Henry J.) & Co. (Warrants) . . . on 106,499 $05,908 0: 100,000 Phelps Dodge Corp... 2... 6,800,419 7,262,500 33 $14,286,101 $ 24,788,408 fee $ 9,340,852 $ 13,054,800 ase 10,479,610 19,593,750 a 7,297,171 17,142,975 #8 16,447,739 27,564,863 * 8,677,739 14,267,500 a” 26,232,045 32,967,000 14 6,709,317 22,534,800 .78 33,723,123 43,120,000 149 10,199,697 21,505,450 a, 59,116,918 78,500,000 2.71 ____ 22,813,050 _ 65,983,125 2.28 $_ 211,037,261 $ 356,204,263 12.05 _ INVESTORS MUTUAL, INC, Investments in Securities, Continued COMMON STOCKS (Continued) MARKET SHARES NAME OF ISSUER AND TITLE OF ISSUE cost VALUE (co) VALUE Poper 235,000 Container Corp. of America. . . 2 2 2 2. ee ee $ 4,442,442 $ 7,990,000 28% 170,000 a a ee a ee 7,268,116 8,861,250 0 $ 11,710,558 $ 16,851,250 58 % Roilroads 278,200 Denver & Rio Grande Western R.R.Co.. . . . . . $ 4,872,281 $ 5,668,325 20% 80,400 Norfolk & Western Ry.Co.. 2... 6... 1 eee 6,716,402 9,899,250 34 200,000 co 8,838,700 9,875,000 34 150,000 GU EEE WEG Ce ee 4,749,464 6,431,250 .23 384,800 EL & a 0 6 Ge 8 ke ee 7,915,467 15,969,200 55 160,000 Sg ek ke Ne ee ee ee 7,135,118 9,060,000 3 115,000 Union PacificR.R.Co.. 6 ee 3,223,035 __ 4,729,375 S % S$ 43,450,467 $ 61,632,400 2.13% Retail Trade 277,400 Associated Dry Goods Corp. .. 2... pe ees S$ 6,368,416 $ 16,089,200 56% 268,000 Federated Dept. Stores, Inc... . 1.65.6 + es eee 4,689,621 17,255,500 62 225,000 Great Atlantic & Pacific TeaCo.. . . 2... ss 9,246,482 6,521,875 29 130,000 ES ook a a ee ek 8 ee ee 4,473,782 6,532,500 23 275,000 oo Re Le ee 10,474,957 9,693,750 33 210,000 a a 6 6 ee 8 8g ee ee 9,663,387 14,122,500 49 250,000 Safeway Stores,Inc. ...... : ets 6,308,391 8,156,250 28 181,300 Sears, Roebuck &Co.. 1... 1.1 ee ___ 12,000,026 __11,625,863 oe $ 63,225,062 S$ 92,597,438 3.20% Rubber 214,000 Firestone Tire & RubberCo. .... . . -S$ 5,168,495 $ 9,416,000 33° 448,000 Goodyear Tire& RubberCo.........0066. ___ 8,695,699 _ 22,064,000 .16 S_13,864,194 S__ 31,480,000 1.09% Steel 385,600 I, i'n bye ko ee Re a a $ 21,598,041 $ 26,124,400 .W% 450,000 ee te eee 14,542,528 16,931,250 58 275,000 IN 6 6a SR Oe 10,888,049 12,650,000 (44 175,800 a 6s ek ew eek ew Bek 9,668,578 8,636,175 30 $56,697,196 $64,341,825 2.22% Textiles and Apparel M1000 Burlington Industries. 2 2 =... 2... . $ 10,153,876 $ 13,171,125 45% Utilities —Noatural Gas 380,000 Arkansas Louisiana GasCo.. . . . 2... .... $ 3,990,000 $ 15,960,000 55% 360,000 pe SS 10,001,713 10,845,000 38 189,000 Yo 3,786,003 11,812,500 41 331,300 oe re ere 6,968,286 6,592,050 .23 412,700 Panhandle Eastern Pipe Line Co... . . . 2... . 9,875,935 15,992,125 a 211,000 Peoples Gas, Light & Coke Co... ........ 5,456,988 9,811,500 34 438,900 Transcontinental Gas Pipe Line Corp. .. . .... ___ 6,874,640 10,533,600 6 $ 46,953,565 $ 81,546,775 2.82% —_— LPT IMI AEE ING ON REYNE MN BIB PLL ILA | RATT NANCE ION CIS LE OPE CD RAN 76 INVESTORS MUTUAL, INC. (continued) Investments in Securities, Continued COMMON STOCKS (Continved) MARKET SHARES NAME OF ISSUER AND TITLE OF ISSUE cost VALUE (ce) Utilities— Power and Light 170,000 American Electric PowerCo. . 2 2 2. 2 2. 2... S$ 3,562,009 $ 7,310,000 335 210,000 Central & South West Corp... 2 2 2 2 sk, $,888,720 10,080,000 8 300,000 Cleveland Electric Illuminating Co... 2 2 2... i. 7,442,313 13,012,500 4s 250,000 Columbus & Southern Ohio Electric Co. 2 =... i. 4,773,730 10,718,750 ” 240,000 Consolidated Edison Co. of N.Y..Inmc . . . . . . . 10,981,010 10,560,000 220,500 ee eg ww ek 2,766,004 10,032,750 8 243,900 Houston Lighting & PowerCo. . . . _ . 9,477,496 13,353,525 ae 200,000 Kansas Gas & Electric Co... ss i 3,553,593 7,400,000 »* 226,000 Long Island Lighting Co... . . _ . 3,837,908 7,514,500 x» 250,000 Middle South Utilities. Inc. 2 2. . | 9,702,606 13,437,800 2 300,000 Montana PowerCo.. . . . . . . . 3471.26 11,700,000 ry 192,600 New York State Electric & Gas Corp. 3,930,629 8,715,180 Ww 400,000 Niagara Mohawk PowerCo. 2. | 11,303,933 10,850,000 ” 287,500 Northern States Power Co. (Minn.). . _ . 4,989,411 10,637,800 ” 453,900 Oklahoma Gas & Electric Co... . $,999,111 13,276,575 4s 250,000 Public Service Electric @GasCo. =. ss dist 6,862,176 10,000,000 s 200,000 ae 4,056,032 13,980,000 * 225,000 Texas Utilities Co. 3,886,725 14,596,875 % 250,000 Toledo E@son Co... . . . 2... .. 4,489,197 9,593,750 2 160,000 Virginia Electric & Power Co. : 1,134,803 7,$20,000 » $ 112,108,640 $_ 214,259,375 740% Utilities — Other 377,000 American Telephone & Telegraph Co S 20,268,815 $ 25,447,500 aa 320,000 American Water Works Co... . | 1,634,217 6,000,000 ad 943,500 General Telephone and Electronics Corp 16,316,444 41,749,875 1“ 538,219.47 $73,197,375 28% Not Classified 210,100 Cotumbia Broadcasting Systems, Inc S$ 4,958,860 S$ 801,375 115,600 Gasman Kedah Co... 2... 2. 1,091,075 11,646,700 174,000 General American Transportation Corp. 4,522,953 6,699,000 400,000 Dh. 6k & Ss 44 ew E46 ao 8 6,035,841 15,580,000 180,000 North American Car Corp... . . . . 765,309 4,200,000 ET SU OG Ak ae 4 ob aks SA ae 43,136,552 44,420,850 S$ 60,510,590 S$ 90,657,925 Total common stocks. 2 2 2 ok, $1,161,531,320 $1,847,441,260 SUMMARY—COMMON STOCKS Affiliated company (notee). kk, S$ 6,437,254 $ 6,435,000 SE SRS 68s Wh Oe ek eae ke 1,155,094, 066 1,841,006, 260 CE Cec cahes beh kaw 8 $1,161,531,320 $1,847,441, 260 adel Pa pATIN ME OT NPR A ERNE PNAS LG RET MARE I SENT 77 nantes NAME OF ISSUER AND TITLE OF ISSUE cost equxd) ‘Talcott (James), Inc. 64% Cum... —~ 480,000 Consumer Credit 10.0001) sagen Cath Cup. $.50% Cum., ees SF. s 250,000 OG WX) = Amencan Credit Corp., 64% Cum. > ee $20,000 02 000) American Credit Corp., 6%% . . 1, $00,000 OS am American Investment Co., 54° Cum. Prior . 670,000 02 67ND) Continental Commercial Corp., 64% Cum... . 666,720 02 ) = Florida Power Corp., 44% Cum. . 1,000,000 1,000,000 03 15,000 Georgia Power Co., 4.92% Cum. . . 1,537,500 1,545,000 OS 9,073) Green Mountain Power Corp., 5% Cum. Class A 907,300 920,910 03 10,000(%>) = Indianapolis Power & Light Co., 4.60% Cum. 1,000,000 990,000 03 10,0000) Kansas Power & Light Co. 44% Cum. . 1,000,000 910,000 03 9,800 Kentucky Utilities Co. 44% Cum. . . 989,800 967,750 03 8,000 Long Island Lighting Co., 5% Cum. Series B 800,000 824,000 A) 6,000 Louisiana Power & Light Co., 4.96% Cum. . 601,200 615,000 OQ? 10,000 Louisiana Power & Light Co., 5.16% Cum. . 985,973 1,042,500 Os 10,100 Montana-Dakota Utilities Co., 4.50% Cum. . 964,082 939,300 03 11,300 Montana-Dakota Utilities Co., 4.70% Cum. . 1,100,798 1,118,700 Os 16,300 Narragansett Electric Co., 4.64% Cum. 833,338 815,000 3 7,500 New England Power Co., 4.60% Cum. . 743,003 735,000 03 $,075 New Orleans Public Service, Inc., 44% Cum. ‘ $42,271 $04,963 a2 6,340 Northern Indiana Public Service Co., 44% Cum. 582,534 564,260 02 10,000 Northern States Power Co., (Minn.) $4.16 Cum. . 987,705 912,500 03 9,100(>) Northwestern Public Service Co., 54% Cum. . . 910,000 937,300 xh} 10,000(b) Orange & Rockland Utilities, Inc., 4.75% Cum. Series B 1,000,000 1,000,000 03 7,684 Otter Tail Power Co. $4.40Cum. . . . ‘ 760,788 722,296 3 73,850 Pacific Gas & Elecinc Co.. 8% Cum Redeemable Ist 1,956,759 1,947,794 o 16,150 cute Gest teacitn Os. 5% Cum. Redeemable 1s Series A . 466,482 429,994 01 6,508 Potomac Edison Co., 4.70% Cum. B are 683,653 644,292 Oo 20,000 Potomac Electric Power Co., $2.46 Cum., Series of 1958 1,000,000 1,025,000 03 7,305 Public Service Co. of New Hampshire, 3.35% Cum. . 533,135 $29,103 22 15,000 Public Service Co., of New again, 4. Div. Series Cum. . rer . 1,500,000 1,410,000 0S 5,000 Rochester [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386413_0258%3A01. Public record. Not legal advice.