As filed with the Securities and Exchange Commission
on September 30, 1998
File Nos. 33- and 811-
_____________________________________________________________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No._____ [_]
Post-Effective Amendment No.____ [_]
AND
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No._____
(Check appropriate box or boxes.)
INTEGRITY SMALL-CAP FUND OF FUNDS, INC.
-----------------------------
(Exact Name of Registrant as Specified in Charter)
1 North Main, Minot, North Dakota 58703
---------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code:
(701) 852-5292
--------------
Peter A. Quist
Vice President
Integrity Small-Cap Fund of Funds, Inc.
1 North Main
Minot, North Dakota 58703
-------------------------
(Name and Address of Agent for Service)
Approximate Date of Proposed Offering:
As soon as practicable after the effectiveness of
the Registration Statement
____________________
It is proposed that this filing will become effective (check appropriate box):
_____ immediately upon filing pursuant to paragraph (b)
_____ on (date) pursuant to paragraph (b)
_____ 60 days after filing pursuant to paragraph (a)(1)
_____ on (date) pursuant to paragraph (a)(1)
_____ 75 days after filing pursuant to paragraph (a)(2)
_____ on (date) pursuant to paragraph (a)(2) of
Rule 485.
If appropriate, check the following box:
_____ this post-effective amendment designates a new effective
date for a previously filed post-effective amendment.
Calculation of Registration Fee Under the Securities Act of 1933
----------------------------------------------------------------
Proposed Proposed
Title of Maximum Maximum
Securities Amount Offering Aggregate Amount of
Being Being Price Offering Registration
Registered Registered Per Unit Price Fee
--------------------------------------------------------------
Shares, Indefinite* N/A Indefinite* $500
par value
$.0001
* Registrant elects to register an indefinite number of shares pursuant to Rule
24f-2 under the Investment Company Act of 1940, as amended.
_____________________________________________
Registrant hereby amends this Registration Statement on such date or dates as
may be necessary to delay its effective date until Registrant shall file a
further amendment which specifically states that this Registration Statement
shall thereafter be effective in accordance with Section 8(a) of the Securities
Act of 1933 or until the Registration Statement shall become effective on such
date as the Commission, acting pursuant to Section 8(a), may determine.
INTEGRITY SMALL-CAP FUND OF FUNDS, INC.
CROSS REFERENCE SHEET
PURSUANT TO RULE 495(A)
<TABLE>
<CAPTION>
PART A
ITEM
NUMBER PROSPECTUS CAPTION
<S> <C>
1. Cover Page...................................................... Cover Page
2. Synopsis........................................................ FEE AND EXPENSE TABLE
and SYNOPSIS
3. Condensed Financial Information................................. Inapplicable
4. General Description of Registrant............................... GENERAL DESCRIPTION OF
THE FUND
5. Management of the Fund.......................................... MANAGEMENT
5A. Management's Discussion of Fund Performance..................... Inapplicable
6. Capital Stock and Other Securities.............................. SHARES
7. Purchase of Securities Being Offered............................ PURCHASE OF SHARES
8. Redemption or Repurchase........................................ REDEMPTION OF SHARES
9. Pending Legal Proceedings....................................... Inapplicable
<CAPTION>
PART B
ITEM STATEMENT OF ADDITIONAL
NUMBER INFORMATION CAPTION
<S> <C>
10. Cover Page...................................................... Cover Page
11. Table of Contents............................................... TABLE OF CONTENTS
12. General Information and History................................. Inapplicable
13. Investment Objectives and Policies.............................. INVESTMENT RESTRICTIONS
and TEMPORARY
INVESTMENTS
14. Management of the Fund.......................................... MANAGEMENT OF THE FUND
15. Control Persons and Principal Holders of Securities............. CONTROL PERSONS AND
PRINCIPAL HOLDERS
OF SECURITIES
16. Investment Advisory and Other Services.......................... INVESTMENT ADVISORY
AND OTHER SERVICES
17. Brokerage Allocation and Other Practices........................ PORTFOLIO TRANSACTIONS
18. Capital Stock and Other Securities.............................. Included in Prospectus
19. Purchase, Redemption and Pricing of Securities
Being Offered................................................ PURCHASE AND
REDEMPTION OF SHARES
20. Tax Status...................................................... DIVIDENDS AND TAXES
21. Underwriters.................................................... UNDERWRITER
22. Calculation of Performance Data................................. CALCULATION OF
PERFORMANCE DATA
23. Financial Statements............................................ FINANCIAL STATEMENTS
</TABLE>
<TABLE>
<CAPTION>
PART C
ITEM
NUMBER PAGE
<S> <C>
24. Financial Statements and Exhibits.............................. C-1
25. Persons Controlled by or Under Common Control with Registrant.. C-2
26. Number of Holders of Securities................................ C-2
27. Indemnification................................................ C-2
28. Business and Other Connections of Investment Adviser........... C-2
29. Principal Underwriters......................................... C-3
30. Location of Accounts and Records............................... C-3
31. Management Services............................................ C-4
32. Undertakings................................................... C-4
33. Signature Page................................................. C-4
</TABLE>
[LOGO OF INTERGRITY MUTUAL FUNDS APPEARS HERE]
INTEGRITY SMALL-CAP FUND OF FUNDS, INC.
1 North Main . Minot, North Dakota 58703 . (701) 852-5292
P.O. Box 759 Minot, North Dakota 58702
(800) 276-1262 Marketing Fax (701) 838-4902
(800) 601-5593 Transfer Agent Fax (701) 852-2548
PROSPECTUS ________, 1998
Integrity Small-Cap Fund of Funds, Inc. (the "Fund"), is an open-end,
diversified, management investment company. The Fund's objective is long-term
capital appreciation. The Fund seeks to achieve this objective by investing
primarily in a diversified group of other open-end investment companies
("underlying funds") which, in turn, invest principally in equity securities.
Shares of the Fund are offered for sale at net asset value without a sales
charge. A contingent deferred sales charge is assessed on certain redemptions,
however (See CONTINGENT DEFERRED SALES CHARGE.). See PURCHASE OF SHARES for
information about commissions and fees paid to dealers who sell shares and
provide personal services to shareholders. An investor in the Fund will not only
bear a proportionate share of the expenses of the Fund, but will also indirectly
bear a share of similar expenses of the underlying funds.
This Prospectus contains information about the Fund that a prospective
investor should know before investing and should be retained for future
reference. More detailed information concerning the Fund is contained in the
Statement of Additional Information dated _____________, 1998, which has been
filed with the Securities and Exchange Commission and is incorporated into this
Prospectus by reference. A free copy of the Statement of Additional Information
may be obtained by contacting the Fund at the address or telephone number at
the top of the page.
--------------------------------
TABLE OF CONTENTS
--------------------------------
<TABLE>
<S> <C>
Fee and Expense Table............ 2
Synopsis......................... 3
General Description of the Fund.. 4
Risks and Other Considerations... 6
Management....................... 8
Shares........................... 9
Purchase of Shares............... 12
Redemption of Shares............. 15
Performance Data................. 16
Appendix......................... 17
</TABLE>
Mutual fund shares are not deposits or obligations of or guaranteed by any
depository institutions. Shares are not insured by the FDIC, the Federal
Reserve Board or any other agency and are subject to investment risks,
including possible loss of the principal amount invested.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
1
FEE AND EXPENSE TABLE
The purpose of the FEE AND EXPENSE TABLE is to assist the investor in
understanding the various costs and expenses that an investor in the Fund will
bear directly or indirectly. For more complete descriptions of these costs and
expenses, see MANAGEMENT, PURCHASE OF SHARES, and REDEMPTION OF SHARES.
________________________
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases....................................... None
Maximum Sales Load Imposed on Reinvested Dividends............................ None
Maximum Deferred Sales Load (as a percentage of redemption proceeds).......... 1.50%(1)
Redemption Fees............................................................... None
Exchange Fees................................................................. None
ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets)
Management Fees .............................................................. 0.90% (2)
12b-1 Fees.................................................................... None
Other Expenses................................................................ 0.45% (3)
Service Fees ............................................................... 0.25% (4)
Total Fund Operating Expenses ................................................ 1.60%
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE (5) 1 YEAR 3 YEARS
<S> <C> <C>
You would pay the following expenses on a $1,000 investment,
assuming (i) 5% annual return and (ii) redemption at the end
of each time period: $31 $66
You would pay the following expenses on the same investment,
assuming no redemption: $16 $51
__________________________________________
</TABLE>
(1) As more fully explained under CONTINGENT DEFERRED SALES CHARGE, a
charge equal to 1.5% of the redemption proceeds is assessed, with certain
exceptions, against shares which are redeemed within the first five years of
their purchase.
(2) The management fees are higher than those paid by most other
investment companies. An investor in the Fund will not only bear a
proportionate share of the Fund's transactional and operating expenses, but
will also indirectly bear a share of similar expenses of the underlying funds.
(3) "Other Expenses," which are estimated, include transfer agent,
custodian, legal, accounting, and similar fees paid by the Fund.
(4) The Fund pays dealers fees of up to 0.25% of the Fund's net assets
for personal service to shareholders and/or the maintenance of shareholder
accounts.
(5) THE EXAMPLE IS BASED UPON PERCENTAGES IN THE TABLE ABOVE AND SHOULD
NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES
MAY BE GREATER OR LESSER THAN THOSE SHOWN. The Securities and Exchange
Commission requires the use of an assumed 5% annual return. The example assumes
the reinvestment of all dividends and distributions. All dollar figures have
been rounded to the nearest dollar.
2
SYNOPSIS
INVESTMENT OBJECTIVE; PERMITTED INVESTMENTS
The Fund is an open-end, diversified, management investment company. The
Fund's objective is long-term capital appreciation. The Fund seeks to achieve
this objective by investing primarily in a diversified group of underlying
funds which, in turn, invest principally in equity securities. Current income
is a secondary objective of the Fund. There is no assurance that the Fund's
objective will be achieved. See INVESTMENT OBJECTIVE, POLICIES, AND
RESTRICTIONS.
INVESTMENT ADVISER AND UNDERWRITER
ND Money Management, Inc. (the "Investment Adviser"), has been retained
under an Investment Advisory Agreement to act as the Fund's investment adviser.
The Investment Adviser furnishes the Fund with investment advice and, in
general, supervises the management and investment program of the Fund. Under the
Investment Advisory Agreement, the Fund has agreed to pay the Investment Adviser
an annual fee, payable monthly, of 0.90% of the Fund's average daily net assets.
See INVESTMENT ADVISER.
ND Capital, Inc. (the "Underwriter"), is the Fund's principal underwriter.
See PURCHASE OF SHARES.
PURCHASES AND REDEMPTIONS
Shares may be purchased from investment dealers who have sales agreements
with the Underwriter or from the Underwriter at the public offering price, which
is the net asset value next determined after the Fund receives an order. The
minimum initial investment is $1,000 ($100 for the Monthomatic Investment Plan
and $250 for an Individual Retirement Account), and subsequent investments must
be at least $50. See PURCHASE OF SHARES. No sales charge is imposed when
shares are purchased. However, a contingent deferred sales charge is imposed if
certain shares are redeemed within five years after their purchase. See
CONTINGENT DEFERRED SALES CHARGE.
INVESTORS IN THE FUND
The Fund is designed for persons who are seeking long-term capital
appreciation from a portfolio consisting of shares of underlying funds
which invest principally in equity securities. Through an investment in shares
of the Fund, investors receive the benefits of diversification of investment,
professional management, and liquidity. In addition, the Fund offers the
economic advantages of block purchases of securities and relief from
administrative details, such as accounting for distributions and the safekeeping
of securities. The Fund's yield and net asset value will fluctuate.
DIVIDENDS
The Fund distributes any net investment income and net realized capital
gains at least annually. Unless otherwise directed, all dividends and
distributions generally will be reinvested automatically at net asset value in
additional shares of the Fund.
ORGANIZATION; SHARE ATTRIBUTES; MEETINGS
The Fund is organized as a corporation under the laws of the State of North
Dakota and is authorized to issue a total of one billion shares, all of one
class and one series, with a par value of $.0001 per share. Shares are fully
paid and nonassessable when issued, are redeemable and freely transferable, and
have equal voting
3
rights and preferences in all matters, including voting. There are no
subscription, preemptive, or conversion rights. Regular meetings of
shareholders will not be held unless required under the North Dakota Business
Corporation Act or the Investment Company Act of 1940 (the "1940 Act"). Special
meetings of shareholders may be called for any purpose at any time in the
manner prescribed under the North Dakota Business Corporation Act.
RISK FACTORS
An investment in the Fund is subject to a number of different risks, some
of which are described under INVESTMENT OBJECTIVE, POLICIES, AND RESTRICTIONS
and RISKS AND OTHER CONSIDERATIONS and in the APPENDIX. Investing in a
portfolio of underlying funds involves additional expenses and results in tax
consequences which would not occur in a direct investment in mutual funds. In
addition, federal law imposes restrictions on the purchase of underlying funds'
shares by the Fund. As with other mutual funds, there can be no assurance that
the Fund will achieve its objective. Finally, the Fund was organized recently
and has no history of operations.
GENERAL DESCRIPTION OF THE FUND
ORGANIZATION AND CLASSIFICATION
The Fund is an open-end, diversified, management investment company, which
is a type of company commonly known as a "mutual fund." The Fund was
incorporated under the laws of the State of North Dakota on September 10, 1998.
INVESTMENT OBJECTIVE, POLICIES, AND RESTRICTIONS
The Fund's investment objective is long-term capital appreciation. The
Fund seeks to achieve this objective by investing in a diversified group of
approximately sixteen to fifty underlying funds which invest primarily in
common stock or securities convertible into or exchangeable for common stock
(such as convertible preferred stock, convertible debentures, or warrants) and
which seek long-term capital appreciation. Under normal circumstances, the
Fund will invest at least 65% of its total assets in shares of underlying
funds. For temporary defensive purposes, the underlying funds may
also invest in (or enter into repurchase agreements with banks and broker-
dealers with respect to corporate bonds, U.S. Government securities, commercial
paper, certificates of deposit, or other money market instruments.
The Fund may also invest in underlying funds which invest primarily in long
or short-term bonds and other fixed income securities (such as securities
issued, guaranteed, or insured by the U.S. Government, its agencies or
instrumentalities, commercial paper, preferred stock, convertible preferred
stock, or convertible debentures) whenever the Investment Adviser thinks that
such funds offer a potential for capital appreciation. The underlying funds may
invest in both investment-grade and non-investment grade bonds. See RISKS AND
OTHER CONSIDERATIONS and the APPENDIX to this Prospectus.
Although it invests primarily in shares of underlying funds, for temporary
defensive purposes or to accumulate cash for investments or redemptions, the
Fund may hold cash or invest in money market mutual funds or in a variety of
short-term debt securities, including U.S. Treasury bills and other U.S.
Government securities, commercial paper, certificates of deposit, and bankers'
acceptances. Cash held for investments or redemptions may not exceed 35% of the
Fund's total assets. See TEMPORARY INVESTMENTS in the Statement of Additional
Information.
4
The Fund may also purchase and sell stock index futures contracts and
options on stock index futures contracts. For a description of these securities
and the risks associated with them, see FUTURES CONTRACTS and OPTIONS ON
FUTURES CONTRACTS in the APPENDIX. See, also, REGULATORY RESTRICTIONS under
INVESTMENT RESTRICTIONS in the Statement of Additional Information concerning
regulations which restrict or limit the use of futures contracts and options
thereon.
The Fund has adopted certain fundamental investment policies which,
together with the investment objective of the Fund, cannot be changed without
approval by holders of a majority of the outstanding shares. As defined in the
1940 Act, this means the lesser of the vote of (a) 67% of the outstanding
shares of the Fund present at a meeting where more than 50% of the outstanding
shares are present in person or by proxy; or (b) more than 50% of the outstand-
ing shares of the Fund. The Fund has also adopted a number of other investment
policies which are not fundamental and, therefore, may be changed by the Board
of Directors without shareholder approval.
Under its fundamental investment policies, the Fund will invest at least
25% of its total assets in shares of underlying funds. The Fund may not invest
more than 25% of its total assets in the securities of companies in the same
industry or in securities of underlying funds which concentrate (i.e., invest
25% or more of total assets) in any one industry. Nevertheless, through its
investment in underlying funds, the Fund
may invest more than 25% of its assets in one industry. The Fund may borrow
money from a bank for temporary or emergency purposes, but only in amounts not
exceeding the lesser of 10% of its total assets valued at cost or 5% of its
total assets valued at market, and, in any event, only if immediately thereafter
there is an asset coverage of at least 300%. The Fund will not purchase
portfolio securities when outstanding borrowings exceed 5% of the total assets.
Interest paid on borrowed funds will decrease the net earnings of the Fund. The
Fund may mortgage, pledge, or hypothecate its assets in an amount not exceeding
10% of its total assets to secure temporary or emergency borrowing.
Under its non-fundamental investment policies, the Fund may not make short
sales of securities or invest in interests in oil, gas, or other mineral
exploration or development programs, although it may invest in securities of
issuers which invest in or sponsor such programs.
For a more complete description of the Fund's investment policies and
restrictions, see INVESTMENTRESTRICTIONS in the Statement of Additional
Information.
SELECTION OF UNDERLYING FUNDS
The Investment Adviser exercises broad discretion in choosing which
underlying funds to include in the Fund's portfolio. The primary consideration
in the selection process is that a prospective fund advance the Fund's stated
investment objective of achieving long-term capital appreciation. The Fund will
invest at least 65% of its assets in other open-end (diversified and/or
non-diversified) funds which invest primarily in companies with market
capitalizations of less than $2 billion. Within that context, the
Investment Adviser reviews and evaluates a fund's investment objective,
policies, and techniques, past performance, and management. Other criteria
considered in making a determination include fund size, ability, reputation,
and style of the investment adviser, transaction and operating expenses and
fees, portfolio composition and liquidity, and quality and types of shareholder
services provided.
The Fund will not purchase shares of closed-end investment companies or
of investment companies which are not registered with the Securities and
Exchange Commission. In addition, the Fund intends to invest only in underlying
funds which qualify for treatment as a regulated investment company ("RIC")
under
5
the Internal Revenue Code of 1986, as amended. If a fund fails to qualify
as an RIC, it may be subject to federal income tax. No assurance can be given
that an underlying fund will qualify as a RIC. However, the Fund will promptly
dispose of any shares in its portfolio which have been issued by a fund which
has failed to qualify as a RIC. Under normal circumstances, the Fund will invest
in approximately sixteen to fifty underlying funds and may invest up to 25% of
its total assets in any one underlying fund.
The Fund may acquire shares of underlying funds irrespective of whether
such funds impose sales loads of various kinds or have 12b-1 or other
distribution plans or expenses. However, whenever possible, the Fund will
purchase shares pursuant to arrangements which provide for (1) quantity
discounts under which lower front-end loads are available for substantial
minimum purchases; (2) letters of intent, permitting reduced front-end loads by
aggregating intended purchases over time; (3) rights of accumulation, permitting
reduced front-end loads for purchases of additional shares of the underlying
fund; and (4) rights to obtain reduced front-end sales loads by aggregating
purchases of several funds within a family of funds. Because of available
discounts such as the foregoing, it is likely that any sales related charges
paid by the Fund will not exceed 1% of the public offering price (1.01% of the
net amount invested) in most cases.
RISKS AND OTHER CONSIDERATIONS
There are a number of risks and other considerations which a potential
investor in the Fund should consider. Some of these relate to an investment in a
security of any kind, some are peculiar to a fund which invests in other
funds, others concern certain legal requirements applicable to funds
which invest in other funds, and still others relate to what is commonly
referred to as the "Year 2000 problem."
First, an investment in any security involves a certain amount of risk, and
this is true of an investment in the Fund, too. Although the Fund diversifies
its portfolio by investing in a number of underlying funds, which tends
to minimize risk somewhat, it does not eliminate risk altogether.
Second, the underlying funds have their own investment objectives,
policies, practices, and techniques, any one or all of which may subject their
assets to varying degrees of risk. For example, the underlying funds in which
the Fund invests may be authorized to invest up to 100% of their assets in
securities of foreign issuers and engage in foreign currency transactions with
respect to these investments; invest up to 15% of their assets in illiquid
securities; invest in warrants; lend their portfolio securities; sell
securities short; borrow money in amounts up to 33 1/3% of their assets for
leverage purposes; write or purchase call or put options on securities or
financial indexes; concentrate 25% or more of their total assets in one
industry; invest up to 100% of their assets in master demand notes; enter into
futures contracts and options on futures contracts; trade their portfolios
aggressively, which results in higher brokerage commissions and increased
realization of capital gains; invest in start-up and unproven companies; invest
up to 100% of their assets in junk bonds; and engage in any number of other
investment practices and techniques that involve greater risks. The risks
involved in certain of these practices and techniques are described in the
APPENDIX to this Prospectus.
Furthermore, the Fund is independent from any of the underlying funds in
which it invests and has little voice in or control over the investment
practices, policies, or decisions of those funds. If the Fund disagrees with
those practices, policies, or decisions, it may have no choice other than to
liquidate its investment in that fund, which can entail further losses. Also,
the investment advisers of the underlying funds may simultaneously pursue
inconsistent or contradictory courses of action; for example, one fund may be
purchasing securities of the same issuer whose securities are being sold by
another underlying fund, with the result that the Fund would incur an indirect
expense without any corresponding investment or economic benefit.
6
Expenses and tax consequences are other areas in which the Fund differs
from most other funds. An investor who invests directly in a fund may pay
certain transactional expenses (for example, sales commissions or deferred sales
charges), as well as a pro rata share of the fund's operating expenses (such as
management fees, distribution fees, and other expenses). An investor in the
Fund, on the other hand, must not only pay transactional and operating expenses
related to the Fund, but must also pay a portion of similar expenses of the
underlying funds. So, an investor in the Fund will indirectly pay higher
expenses than if the underlying shares were owned directly. Furthermore, because
the Fund invests in other funds, an investor may receive taxable capital gains
distributions to a greater extent than if the underlying funds were owned
directly. See DIVIDENDS AND TAXES.
Rules adopted by the Securities and Exchange Commission allow funds to
elect to make redemptions either in part or wholly in securities from their
portfolios ("in kind" redemptions) instead of in cash under certain
circumstances. If the Fund acquires in kind securities from an underlying fund
which has exercised such an election, the Fund may hold the securities until the
Investment Adviser decides to sell them. Fund assets invested in an underlying
Fund in excess of Rule 18f-1 limitations are illiquid. The Fund will likely
Incur additional expenses in connection with the sale of any securities
acquired as a result of an in kind redemption.
Third, the 1940 Act imposes certain conditions on funds which invest in
other funds. For example, a fund and its affiliated persons may not purchase or
otherwise acquire more than 3% of the total outstanding stock of another fund.
Consequently, the Fund may have to forgo what the Investment Adviser deems to be
an advantageous purchase because of this restriction. The 1940 Act also provides
that an underlying fund is not obligated to redeem any securities in an amount
exceeding 1% of its total outstanding securities during any period of less than
30 days. As a result of this provision, the Investment Adviser may be unable to
liquidate more than 1% of an underlying fund's securities should market or other
considerations indicate the advisability of doing so. Finally, the 1940 Act
requires that the Fund either seek instructions from its shareholders regarding
the voting of proxies with respect to securities of underlying funds it holds
and vote the proxies in accordance with such instructions or vote such shares in
the same proportion as the vote of all other holders of such securities.
YEAR 2000 PROBLEM
The Year 2000 ("Y2K") problem refers to a flaw in the way dates have
traditionally been entered into computer systems. Some computer systems and
software have accepted the entry of two-digit years with the expectation that
the entry "00" refers to the Year 1900, not the Year 2000. This prevents the
computer from properly recognizing dates after the Year 1999. Because computers
routinely use dates to make calculations, the Y2K problem threatens to
invalidate electronic records by hindering the ability of computers to make
accurate, date-based calculations. Y2K compliance indicates that procedures
have been adopted to assure that all dates entered, stored, and reported by
computer systems are valid.
The Fund is currently assessing and testing its computer systems and
software for Y2K compliance. The Fund does not anticipate a material adverse
impact on its business operations or financial condition relating to the Y2K
problem. However, the underlying funds in which the Fund invests may have Y2K-
related compliance issues. The value of an underlying fund could decrease if
its Y2K problem is not addressed in time or if remediation is very expensive.
Also, an underlying fund could invest in companies with Y2K-related compliance
issues, which could have an adverse impact on the value of that fund.
7
MANAGEMENT
BOARD OF DIRECTORS
Responsibility for overall management of the Fund rests with its Board of
Directors.
INVESTMENT ADVISER
ND Money Management, Inc. (the "Investment Adviser"), has been retained
under an Investment Advisory Agreement to act as the Fund's investment adviser
subject to the authority of the Board of Directors. The Investment Adviser is a
wholly-owned subsidiary of ND Holdings, Inc. ("Holdings"), a North Dakota
corporation. The Investment Adviser was incorporated under North Dakota law on
August 19, 1988, and also serves as investment adviser for ND Tax-Free Fund,
Inc., Montana Tax-Free Fund, Inc., South Dakota Tax-Free Fund, Inc., and
Integrity Fund of Funds, Inc. The address of the Investment Adviser is 1 North
Main, Minot, North Dakota 58703.
The Investment Adviser furnishes the Fund with investment advice and, in
general, supervises the management and investment program of the Fund. The
Investment Adviser furnishes at its own expense all necessary administrative
services, office space, equipment, and clerical personnel for managing the
investments and effecting the portfolio transactions of the Fund. In addition,
the Investment Adviser pays the salaries and fees of all officers and directors
of the Fund who are affiliated persons of the Investment Adviser. Under the
Investment Advisory Agreement, the Fund has agreed to pay the Investment
Adviser an annual fee, payable monthly, of 0.90% of the Fund's average daily
net assets.
Harvey Merson, portfolio manager, is primarily responsible for the
day-to-day management of the Fund's portfolio under the supervision and
direction of Robert E. Walstad, president of the Fund. Mr. Merson is registered
as an investment adviser with the State of New Jersey and has been assisting
clients with mutual fund investments for the past fifteen years. Mr. Walstad is
also the president of ND Tax-Free Fund, Inc., Montana Tax-Free Fund, Inc.,
South Dakota Tax-Free Fund, Inc, Integrity Fund of Funds, Inc., and Ranson
Managed Portfolios and supervises and directs the management of their
portfolios, too.
CUSTODIAN, TRANSFER AGENT, AND ACCOUNTING SERVICES AGENT
First Western Bank & Trust, 900 South Broadway, Minot, North Dakota
58701, serves as custodian for the Fund's portfolio securities and cash.
ND Resources, Inc. (the "Transfer Agent"), a wholly-owned subsidiary of ND
Holdings, Inc., 1 North Main, Minot, North Dakota 58703, is the Fund's transfer
agent. The Transfer Agent performs many of the Fund's clerical and
administrative functions, for which it is paid a monthly fee ranging from .16
of 1% of the net asset value of all outstanding Fund shares up to $10 million
down to .09 of 1% for net assets in excess of $50 million. The Transfer Agent
also provides internal accounting and related services for the Fund, for which
it is paid a monthly fee of $2,000 plus 0.05% of the Fund's average daily net
assets on an annual basis for the first $50 million down to 0.01% for net
assets in excess of $500 million.
EXPENSES
The expenses of the Fund are deducted from its total income before
dividends are paid. These expenses include, but are not limited to,
organizational expenses; taxes; interest; brokerage fees and commissions; fees
and expenses of directors and officers of the Fund who are not officers or
directors of the Investment Adviser; Securities and Exchange Commission fees and
state securities laws fees; charges of custodians, transfer and dividend
disbursing agents, and accounting services agents; insurance premiums; outside
auditing and legal expenses; costs of
8
maintenance of the Fund's existence; costs attributable to investor services,
including, without limitation, telephone and personnel expenses; costs of
preparing and printing prospectuses and statements of additional information
for regulatory purposes and for distribution to existing shareholders; costs of
shareholders' reports and meetings of the shareholders of the Fund and of the
officers and Board of Directors of the Fund; and any extraordinary expenses.
PORTFOLIO TRANSACTIONS
The Investment Adviser may consider a number of factors in determining
which brokers to use for the Fund's portfolio transactions. These factors
include, but are not limited to, research services, reasonableness of
commissions, quality of services and execution, and sales of Fund shares. Front-
end sales loads generally consist of a dealer reallowance (which typically
amounts to at least 80% of the charge) and an underwriter's retention. The
Underwriter will usually be designated as the dealer entitled to receive the
dealer reallowance portion of the sales charge on purchases of load fund shares
by the Fund. However, the Underwriter will not retain any dealer reallowance in
excess of 1% of the public offering price on any transaction, nor will it be
designated as the dealer entitled to receive the dealer reallowance portion of
the sales charge where such reallowance would exceed 1% of the public offering
price. In addition, the Underwriter may receive 12b-1 fees and/or service fees
from underlying funds when assisting the Fund in purchasing shares of underlying
funds. For further details, see PORTFOLIO TRANSACTIONS in the Statement of
Additional Information.
SHARES
SHARE ATTRIBUTES
The Fund is authorized to issue a total of one billion shares, all of one
class and one series, with a par value of $.0001 per share. All shares, when
issued, are fully paid and nonassessable and are redeemable and freely
transferable. All shares are common shares and have equal rights and preferences
in all matters, including voting. Cumulative voting, a form of proportional
representation, is permitted in the election of directors. Under cumulative
voting, a shareholder may cumulate votes either by casting for one candidate a
number of votes equal to the number of directors to be elected multiplied by the
number of votes represented by the shares entitled to vote or by distributing
all of those votes on the same principle among any number of candidates. There
are no subscription, preemptive, or conversion rights.
As of the date of this Prospectus, all of the outstanding shares of the
Fund are owned by ND Capital, Inc. (the "Underwriter"), a North Dakota
corporation which is the Fund's principal underwriter. The Underwriter, whose
address is 1 North Main, Minot, North Dakota 58703, is a subsidiary of
Holdings, the Fund's promoter. The Underwriter will be able to control the
Fund until others purchase a number of shares sufficient to constitute a
majority of the Fund's outstanding shares. It is expected that as a result of
the public offering the percentage of the Fund's shares owned by
the Underwriter will decrease to less than 5%.
SHAREHOLDER MEETINGS
It is probable that the Fund will not hold regular meetings of
shareholders. The Fund's Bylaws provide that regular meetings of shareholders
may be held on an annual or other less frequent basis but need not be held
unless required by law. Under the North Dakota Business Corporation Act, if a
regular meeting of shareholders has not been held during the immediately
preceding fifteen months, a shareholder or shareholders holding 5% or more of
the voting power of all shares entitled to vote may demand a regular meeting by
written notice of demand given to the president or secretary of the Fund. Within
thirty days after receipt of the demand, the Board of Directors must cause a
regular meeting of shareholders to be called, or if
9
the Board fails to do so, the shareholder or shareholders making the demand may
call the meeting by giving notice as prescribed by law. All necessary expenses
of the notice and the meeting must be paid by the Fund.
In addition to regular meetings, special meetings of shareholders may be
called for any purpose at any time in the manner prescribed under the North
Dakota Business Corporation Act. Meetings of shareholders will also be held
whenever required in order to comply with the 1940 Act; however, the Fund does
not intend to hold annual shareholder meetings. Shareholders have the right to
remove directors.
Pursuant to the 1940 Act, if an underlying fund submits a matter to its
shareholders for a vote, the Fund will vote the shares of the underlying fund
which it owns in the same proportion as the vote of all other holders of such
shares.
DIVIDENDS AND TAXES
The Fund intends to qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). In
any year in which the Fund qualifies as a regulated investment company and
distributes substantially all of its investment company taxable income (which
includes, among other items, the excess of net short-term capital gains over net
long-term capital losses) and its net capital gains (the excess of net long-term
capital gains over net short-term capital losses), the Fund will not be subject
to federal income tax to the extent it distributes to shareholders such income
and capital gains in the manner required under the Code. Amounts not distributed
on a timely basis in accordance with a calendar year distribution requirement
are subject to a nondeductible 4% excise tax. To prevent imposition of the
excise tax, the Fund must distribute for each calendar year an amount equal to
the sum of (1) at least 98% of its net ordinary income (excluding any capital
gains or losses) for the calendar year, (2) at least 98% of the excess of its
capital gains over capital losses (adjusted for certain ordinary losses)
realized during the one-year period ending October 31 of such year, and (3) all
ordinary income and capital gains for previous years that were not distributed
during such years. A distribution will be treated as paid on December 31 of the
calendar year if it is declared by the Fund in October, November, or December
of that year with a record date in such a month and paid by the Fund during
January of the following calendar year. Such distributions will be taxable to
shareholders in the calendar year in which the distributions are declared,
rather than the calendar year in which the distributions are received. The Fund
intends to distribute its income in accordance with this requirement to prevent
application of the excise tax.
Income received by the Fund from an underlying fund (including dividends
and distributions of short-term capital gains), as well as interest received on
money market instruments and net short-term capital gains received by the Fund
on the sale of underlying funds' shares, will be distributed by the Fund (after
deductions for expenses) and will be taxable to shareholders as ordinary income.
Because the Fund is actively managed and can realize taxable net short-term
capital gains by selling shares of an underlying fund with unrealized portfolio
appreciation, investing in the Fund rather than directly in the underlying funds
may result in increased tax liability to the shareholder, because the Fund must
distribute its gain in accordance with the rules in the Code.
Distributions of net capital gains distributions received by the Fund
from underlying funds, as well as net long-term capital gains realized by the
Fund from the purchase and sale (or redemption) of underlying funds' shares or
other securities held (generally) by the Fund for more than one year, will be
distributed by the Fund and will be taxable to shareholders generally as long-
term capital gains (regardless of the period for which the shareholder has
held shares of the Fund).
For purposes of determining the character of income received by the Fund
when an underlying fund distributes net capital gains to the Fund, the Fund will
treat the distribution as a long-term capital gain, even if
10
it has held shares of the underlying fund for less than one year. However, any
loss incurred by the Fund on the sale of that underlying fund's shares held for
six months or less will be treated as a long-term capital loss to the extent of
the gain distribution.
The tax treatment of distributions from the Fund is the same whether the
distributions are received in additional shares or in cash. Shareholders
receiving distributions in the form of additional shares will have a cost basis
for federal income tax purposes in each share received equal to the net asset
value of a share of the Fund on the reinvestment date.
Gain or loss realized on the sale or exchange of shares in the Fund
will be treated as capital gain or loss, provided that (as is usually the case)
the shares represented a capital asset in the hands of the shareholder. For
corporate shareholders, such gain or loss will be long-term gain or loss if the
shares were held more than one year. For shareholders who are individuals,
estates, or trusts, the gain or loss will be considered long-term if the
shareholder has held the shares for more than one year. If a shareholder who
has received a capital gains distribution from the Fund suffers a loss on the
sale of his shares not more than six months after purchase, the loss will be
treated as long-term capital loss to the extent of the capital gains
distribution received.
The Fund may invest in underlying funds with capital loss carry-forwards.
If such an underlying fund realizes capital gains, it will be able to offset
the gains to the extent of its loss carry-forwards in determining the amount of
capital gains which must be distributed to its shareholders. To the extent that
gains are offset in this manner, distributions to the Fund (and its
shareholders) will not be characterized as capital gain dividends but may be
ordinary income.
Depending on the residence of the shareholder for tax purposes,
distributions also may be subject to state and local taxes, including
withholding taxes. Shareholders should consult their own tax advisers as to the
tax consequences of ownership of shares of the Fund in their particular
circumstances.
The Fund generally will be required to withhold federal income tax at a
rate of 31% ("backup withholding") from dividends paid to shareholders if (a)
the payee fails to furnish the Fund with and to certify the payee's correct
taxpayer identification number or social security number, (b) the Internal
Revenue Service (the "IRS") notifies the Fund that the payee has failed to
report properly certain interest and dividend income to the IRS and to respond
to notices to that effect, or (c) the payee fails to certify that he is not
subject to backup withholding.
The Fund will distribute investment company taxable income and any net
realized capital gains at least annually. All dividends and distributions will
be reinvested automatically at net asset value in additional shares of the Fund
unless the shareholder has notified the Fund in writing of his election to
receive distributions in cash.
A check will be generated on the date on which distributions are
payable for dividends to be received in cash. A shareholder can expect to
receive this check within seven days. If the U.S. Postal Service cannot
deliver the check or if the check remains uncashed for six months, a letter
will be sent to the shareholder. If the shareholder has not cashed the check or
called within a month and if the shareholder has shares in his or her account,
the check will be reinvested in the shareholder's account at the then-current
net asset value. If the shareholder has a zero balance, the shareholder or his
or her broker will be contacted by telephone. If the shareholder has
misplaced or lost the check, a new check will be issued.
If an investor wants distribution checks sent to other parties, he or she
would notify the Transfer Agent of that fact in writing. If checks are to be
sent to the investor's bank, a voided check should be attached (A signature
guarantee is not required.). If checks are payable to a person or an address
other than the person or address under which the shares are registered, a
signature guarantee is required.
11
After each transaction, shareholders will receive a confirmation statement
giving complete details of the transaction. In addition, the statement will show
the details of prior transactions in the account during the calendar year.
Information for federal income tax purposes will be provided after the end of
the calendar year.
NET ASSET VALUE
The net asset value per share is determined by calculating the total value
of the Fund's assets, deducting total liabilities, and dividing the result by
the number of shares outstanding. On each day the New York Stock Exchange is
open for trading, the net asset value is determined as of the close of the
Exchange (normally, 3:00 p.m. Minot, North Dakota, time).
The Fund's assets consist primarily of shares of the underlying funds,
which are valued at their respective net asset values under the 1940 Act. The
underlying funds value securities in their portfolios for which market
quotations are readily available at their current market value (generally the
last reported sale price) and all other securities and assets at fair value
pursuant to methods established in good faith by their boards of directors.
Money market funds with portfolio securities that mature in one year or less may
use the amortized cost or penny-rounding methods to value their securities.
Securities having sixty days or less remaining to maturity generally are valued
At their amortized cost, which approximates market value. Other assets are
Valued at their current market value if market quotations are readily
available, and if not available, at fair value pursuant to methods established
in good faith by the Board of Directors.
PURCHASE OF SHARES
GENERAL INFORMATION
The Fund's principal underwriter is ND Capital, Inc. (the "Underwriter"), 1
North Main, Minot, North Dakota 58703. Shares may be purchased from investment
dealers who have sales agreements with the Underwriter or from the Underwriter
at the public offering price, which is the net asset value next determined after
the Fund receives an order. If you do not have a dealer, the Fund can refer you
to one. The minimum initial investment is $1,000 ($100 for the Monthomatic
Investment Plan and $250 for an Individual Retirement Account), and the minimum
subsequent investment is $50, but such minimum amounts may be changed at any
time in the Fund's discretion. The Fund reserves the right to redeem Fund
accounts that are reduced to a value of less than $1,000 (for any reason other
than fluctuation in the market value of the Fund's portfolio securities).
Should the Fund elect to exercise this right, the investor will be notified
before such redemption is processed that the value of the investor's account is
less than $1,000 and that the investor will have sixty days to increase the
account to at least the $1,000 minimum amount before the account is redeemed.
The Fund receives the entire public offering price of all shares sold.
Orders for the purchase of shares will be confirmed at a price based on the
net asset value next determined after receipt of the order by the Fund. However,
orders received by dealers prior to the determination of net asset value and
received by the Fund prior to the close of its business day will be confirmed at
a price based on the net asset value effective on that day. Dealers are
obligated to transmit orders promptly.
No sales charge is imposed when shares are purchased. However, a contingent
deferred sales charge is imposed if certain shares are redeemed within five
years after their purchase. See CONTINGENT DEFERRED SALES CHARGE. The
Underwriter pays sales commissions to investment dealers and to its salesmen who
sell
12
Fund shares. The Underwriter may also provide additional promotional
incentives to dealers who sell Fund shares. In some instances, these incentives
may be offered only to certain dealers who have sold or may sell significant
amounts of shares. In addition, the Fund pays dealers fees (in an amount not to
exceed 0.25% of net assets) for personal services to shareholders and/or the
maintenance of shareholder accounts.
Front-end sales loads generally consist of a dealer reallowance (which
typically amounts to at least 80% of the charge) and an underwriter's
retention. The Underwriter will usually be designated as the dealer entitled
to receive the dealer reallowance portion of the sales charge on purchases of
load fund shares by the Fund. However, the Underwriter will not retain any
dealer reallowance in excess of 1% of the public offering price of any
transaction, nor will it be designated as the dealer entitled to receive the
dealer reallowance portion of the sales charge where such reallowance would
exceed 1% of the public offering price. In addition, the Underwriter may
receive Rule 12b-1 and/or service fees from underlying funds when assisting
the Fund in purchasing shares of underlying funds.
The Fund reserves the right to withdraw all or any part of the offering
made by this Prospectus and to reject purchase orders. Also, from time to time,
the Fund may temporarily suspend the offering of its shares to new investors.
During the period of such suspension, persons who are already shareholders of
the Fund normally will be permitted to continue to purchase additional shares
and to have dividends reinvested.
In order to facilitate redemptions and to eliminate the need for
safekeeping, the Transfer Agent will not issue certificates for shares unless
requested to do so. A shareholder may obtain a certificate by writing to the
Transfer Agent at the address on the back cover of the Prospectus.
Shareholders should direct their inquiries to the Fund at the address and
telephone number shown on the cover page of the Prospectus or to the investment
dealer from which they received the Prospectus.
Robert E. Walstad and Peter A. Quist, who are directors and the president-
treasurer and vice president-secretary, respectively, of the Fund, are also the
only two directors and officers of the Underwriter. The Underwriter is a wholly-
owned subsidiary of Holdings.
MONTHOMATIC INVESTMENT PLAN
A shareholder may purchase additional Fund shares through an automatic
investment program (minimum initial investment is $100). With the Monthomatic
Investment Plan (the "Monthomatic"), monthly investments (minimum $50) are made
automatically from the shareholder's account at a bank, savings and loan
association, or credit union into the shareholder's Fund account. By enrolling
in the Monthomatic, the shareholder authorizes the Fund and its agents to
either draw checks or initiate Automated Clearing House debits against the
designated account at a bank or other financial institution. Such account must
have check or draft writing privileges. This privilege may be selected by
completing the appropriate section on the Account Application or by contacting
the Underwriter for appropriate forms.
A shareholder may terminate the Monthomatic by sending written notice
to the Transfer Agent at the address shown on the back cover of the Prospectus.
Termination by a shareholder will become effective within 7 days after the
Transfer Agent has received the request. The Fund may immediately terminate a
shareholder's Monthomatic in the event that any item is unpaid by the share-
holder's financial institution. The Fund may terminate or modify this privilege
at any time.
13
RETIREMENT PLANS
The Fund offers shares in connection with tax-deferred retirement plans.
Application forms and additional information about these plans, including
applicable fees, are available from the Fund or the Custodian upon request. The
federal income tax treatment of contributions to retirement plans has been
substantially affected by recently enacted federal tax legislation. Before
investing in the Fund through such a plan, an investor should consult a tax
adviser.
INDIVIDUAL RETIREMENT ACCOUNTS ("IRAS")
Fund shares may be used as a funding medium for an IRA. An Internal Revenue
Service-approved IRA plan is available from the Custodian. The minimum initial
investment for an IRA is $250; the minimum subsequent investment is $50. IRAs
are available to individuals who receive compensation or earned income and their
spouses whether or not they are active participants in a tax-qualified or
government-approved retirement plan. An IRA contribution by an individual or
spouse who participates in a tax-qualified or government-approved retirement
plan may not be deductible depending upon the individual's income. Individuals
also may establish an IRA to receive a rollover contribution of distributions
from another IRA or a qualified plan. Tax advice should be obtained before
planning a rollover.
DEFINED CONTRIBUTION PLAN
Investors who are self-employed may purchase Fund shares for retirement
plans for self-employed persons which are known as Defined Contribution Plans
(formerly Keogh or H.R. 10 Plans). The Custodian offers a prototype Defined
Contribution Plan for Money Purchase or Profit Sharing Plans.
SECTION 401(K) PLAN
The Fund may be used as a vehicle for a cash deferred arrangement designed
to qualify under Section 401(k) of the Code.
SECTION 403(B) PLAN
The Fund may be used as a vehicle for a cash or deferred arrangement
designed to qualify under Section 403(b) of the Code (plan for charitable and
educational entities).
SECTION 457 PLAN
The Fund may be used as a vehicle for a cash or deferred arrangement
designed to qualify under Section 457 of the Code (plan for governmental
entities).
EXCHANGE PRIVILEGE
By contacting the Transfer Agent, a shareholder may exchange some or all of
his or her shares in any of the funds underwritten by ND Capital, Inc., or
Ranson Capital Corporation at net asset value, subject to these conditions:
(1) The length of time of the investment will be carried forward to the Fund.
(2) If you paid a front-end sales charge, no contingent deferred sales charge
will be imposed in the event you redeem any or all of your shares. (3) If the
original fund is subject to a contingent deferred sales charge, the charge will
be carried forward into the Fund and will be applied in the event you redeem
any or all of your shares.
14
Each exchange involves the redemption of fund shares to be exchanged and
the purchase of Fund shares. As a result, any gain or loss on the redemption of
fund shares exchanged is reportable on the shareholder's federal income tax
return. The exchange privilege may be changed or discontinued upon 60 days'
written notice to shareholders and is available only to shareholders in states
where such exchanges may be legally made. A shareholder considering an exchange
should obtain and read the prospectus of the Fund and consider the differences
between it and the fund whose shares he owns before making an exchange.
For further information on how to exercise the exchange privilege, contact
the Transfer Agent.
REDEMPTION OF SHARES
REDEMPTIONS
Any shareholder may require the Fund to redeem shares. When shares are
held for the account of a shareholder by the Fund's Transfer Agent, the
shareholder may redeem them by making a written request with signatures
guaranteed (if required) to the Transfer Agent at the address shown on the back
cover of the Prospectus. When certificates for shares have been issued, they
must be mailed to or deposited with the Transfer Agent, along with a duly
endorsed stock power with signatures guaranteed (if required) and accompanied
by a written request for redemption. Signature guarantees are required for
individual shareholders only if the amount of the redemption proceeds exceeds
$50,000. Signature guarantees must be provided by a commercial bank, trust
company, savings and loan association, or member firm of a national securities
exchange. A notary public may not provide a signature guarantee. Further
documentation may be requested and a signature guarantee is always required
from corporations, custodians (e.g., under the Uniform Transfers/Gifts to
Minors Acts), executors, administrators, trustees, or guardians. The redemption
request and stock power must be signed exactly as the account is registered
including any special capacity of the registered owner.
The redemption price will be the net asset value next determined following
receipt of a properly executed request with any required documents, less any
applicable contingent deferred sales charge, as described below. Payment for
shares redeemed will be made in cash as promptly as practicable but in no event
later than seven days after receipt of a properly executed letter of
instructions accompanied by any outstanding share certificates in proper form
for transfer. When the Fund is requested to redeem shares for which it may not
yet have received good payment (e.g., cash or certified check on a United States
bank), it may delay the mailing of a redemption check until such time as it has
assured itself that good payment has been collected for the purchase of such
shares (which will generally be within 15 calendar days of the purchase date).
Redemption proceeds may be more or less than the amount invested and,
therefore, result in a gain or loss for federal income tax purposes.
In order to eliminate excessive expenses, the Fund reserves the right
to redeem upon not less than 60 days' written notice all shares in an account
(other than an IRA) which has a value of less than $1,000 (for any reason other
than fluctuation in the market value of the Fund's portfolio securities).
However, a shareholder will be allowed to make additional investments prior to
the date fixed for redemption to avoid liquidation of the account.
CONTINGENT DEFERRED SALES CHARGE
A contingent deferred sales charge ("charge") equal to 1.5% of the
redemption proceeds is imposed if a shareholder redeems shares purchased within
the preceding five years, except that if the initial amount of purchase is $1
million or more, the charge is reduced to 1% and only applies during the first
year of purchase.
15
Shares acquired by reinvestment of dividends may be redeemed without charge
even though acquired within five years. In addition, a number of shares having
a value equal to a net increase in the value of all shares purchased by the
shareholder during the preceding five years will be redeemed without charge.
All purchases are considered made on the trade date. In determining whether a
charge is payable on any redemption, the Fund will first redeem shares not
subject to a charge.
The Fund may sell shares without a charge to directors, officers, and
employees (including retirees) of the Fund, Holdings, the Investment Adviser,
and the Underwriter, for themselves or their spouses, children, or parents and
parents of spouses, or to any trust, pension, or profit-sharing, or other
benefit plan for only such persons at net asset value and in any amount. The
Fund may also sell shares without a charge to broker-dealers having sales
agreements with the Underwriter and registered representatives and other
employees of such broker-dealers, including their spouses and children; to
financial institutions having sales agreements with the Underwriter and
employees of such financial institutions, including their spouses and children;
and to any broker-dealer, financial institution, or other qualified firm which
receives no commissions for selling shares to its clients.
The Underwriter receives the entire amount of any charges assessed.
REINSTATEMENT PRIVILEGE
An investor may reinvest up to the amount of his or her redemption
proceeds in new Fund shares free of all sales charges. Anyone using this
privilege a year or more after redeeming shares must file a new account
application and provide proof that he or she was a shareholder of the Fund.
The Fund reserves the right to modify or terminate this privilege at any time.
An investor will receive the net asset value per share as of the date his or
her check arrives at the Fund. If an investor was charged a contingent deferred
sales charge upon redemption, the amount charged will be reinstated as
additional shares upon reinvestment. If an investor redeemed shares in a
retirement plan, he or she should review the plan document for rules and
limitations if reinvesting shares in the same retirement account.
SYSTEMATIC WITHDRAWAL PLAN
A shareholder who owns shares with an aggregate value of $5,000 or more
may establish a Systematic Withdrawal Plan (the "Plan"). Under the Plan, a
shareholder may redeem at net asset value, subject to any applicable contingent
deferred sales charge (see CONTINGENT DEFERRED SALES CHARGE above.), the number
of full and fractional shares that will produce whatever monthly, quarterly,
semiannual, or annual payments (minimum $50 per payment) are selected. No
additional charge is made for this service.
A shareholder who participates in the Monthomatic Investment Plan is
ineligible to participate in the Plan. If payments exceed reinvested dividends
and distributions, a shareholder's shares will be reduced and eventually
depleted. The Plan may be terminated at any time by a shareholder or the Fund.
PERFORMANCE DATA
The Fund may publish certain performance figures in advertisements from
time to time. These performance figures may include yield and total return
figures.
Yield reflects the income per share deemed earned by the Fund's portfolio
investments. Yield is determined by dividing the net investment income per share
deemed earned during the preceding 30-day period by the offering price per share
on the last day of the period and annualizing the result. Yields are
16
calculated according to accounting methods that are standardized for all stock
and bond funds. Because yield calculation methods differ from the methods used
for other accounting purposes, the Fund's yield may not equal its distribution
rate, the income paid to an investor's account, or the income reported in the
Fund's financial statements.
Total return is the percentage change in the value of a hypothetical
investment that has occurred in the indicated time period, taking into account
the imposition of various fees and assuming the reinvestment of all dividends
and distributions. Cumulative total return reflects the Fund's performance over
a stated period of time. Average annual total return reflects the hypothetical
annually compounded return that would have produced the same cumulative total
return if the Fund's performance had been constant over the entire period. In
calculating cumulative and average annual total return, the maximum contingent
deferred sales charge is deducted from the hypothetical investment. Such total
return quotations may be accompanied by quotations which do not reflect
contingent deferred sales charges and will, therefore, be higher.
The Fund may also include in advertisements performance rankings compiled
by independent organizations such as Lipper Analytical Services and
publications which monitor the performance of mutual funds. Performance
information may be quoted numerically or may be represented in a table, graph,
or other illustration.
All performance figures are based on historical results and are not
intended to indicate future performance. A more detailed description of the
foregoing performance figures and their methods of computation is contained in
the Fund's Statement of Additional Information under CALCULATION OF PERFORMANCE
DATA.
APPENDIX
INVESTMENT POLICIES AND PRACTICES OF UNDERLYING FUNDS
CONVERTIBLE SECURITIES
Certain preferred stocks and debt securities that may be held by an
underlying fund have conversion features allowing the holder to convert
securities into another specified security (usually common stock) of the same
issuer at a specified conversion ratio (e.g., two shares of preferred for one
share of common stock) at some specified future date or period. The market value
of convertible securities generally includes a premium that reflects the
conversion right. That premium may be negligible or substantial. To the extent
that any preferred stock or debt security remains unconverted after the
expiration of the conversion period, the market value will fall to the extent
represented by that premium.
FOREIGN INVESTMENTS
The Fund will invest in certain underlying funds which invest all or a
portion of their assets in foreign securities. Investing in securities of non-
U.S. companies, which are generally denominated in foreign currencies, and
utilization of forward foreign currency exchange contracts and other currency
hedging techniques involve certain considerations comprising both opportunity
and risk not typically associated with investing in U.S. dollar-denominated
securities. Risks unique to international investing include: (1) restrictions on
foreign investment and on repatriation of capital; (2) fluctuations in currency
exchange rates; (3) costs of converting foreign currency into U.S. dollars; (4)
price volatility and less liquidity; (5) settlement practices, including delays,
which may differ from those customary in U.S. markets; (6) exposure to political
and economic risks, including the risk of nationalization, expropriation of
assets, and war; (7) possible imposition of
17
foreign taxes and exchange control and currency restrictions; (8) lack of
uniform accounting, auditing, and financial reporting standards; (9) less
governmental supervision of securities markets, brokers, and issuers of
securities; (10) less financial information available to investors; (11) dif-
ficulty in enforcing legal rights outside the U.S.; and (12) higher costs,
including custodial fees. These risks are often heightened for investments in
emerging or developing countries.
FOREIGN CURRENCY TRANSACTIONS
Foreign securities in which the underlying funds invest are subject to
currency risk, i.e., the risk that the U.S. dollar value of these securities may
be affected favorably or unfavorably by changes in foreign currency exchange
rates and exchange control regulations. To manage this risk and facilitate the
purchase and sale of foreign securities, these underlying funds may engage in
foreign currency transactions involving the purchase and sale of forward foreign
currency exchange contracts. Although foreign currency transactions will be used
primarily to protect the underlying funds from adverse currency movements, they
also involve the risk that anticipated currency movements will not be accurately
predicted, and the underlying funds' total return could be adversely affected.
FUTURES CONTRACTS
An underlying fund may enter into futures contracts for the purchase or
sale of debt securities and financial indexes. A futures contract is an
agreement between two parties to buy and sell a security or an index for a set
price on a future date. Futures contracts are traded on designated "contract
markets" which, through their clearing corporations, guarantee performance of
the contracts.
Generally, if market interest rates increase, the value of outstanding debt
securities declines (and vice versa). Entering into a futures contract for the
sale of securities has an effect similar to the actual sale of securities,
although sale of the futures contract might be accomplished more easily and
quickly. For example, if a fund holds long-term U.S. Government securities and
it anticipates a rise in long-term interest rates, it could, in lieu of
disposing of its portfolio securities, enter into futures contracts for the sale
of similar long-term securities. If rates increased and the value of the fund's
portfolio securities declined, the value of the fund's futures contracts would
increase, thereby protecting the fund by preventing the net asset value from
declining as much as it otherwise would have. Similarly, entering into futures
contracts for the purchase of securities has an effect similar to the actual
purchase of the underlying securities but permits the continued holding of
securities other than the underlying securities. For example, if the fund
expects long-term interest rates to decline, it might enter into futures
contracts for the purchase of long-term securities so that it could gain rapid
market exposure that may offset anticipated increases in the cost of securities
it intends to purchase while continuing to hold higher-yield short-term
securities or waiting for the long-term market to stabilize.
A financial index futures contract may be used to hedge an underlying
fund's portfolio with regard to market risk as distinguished from risk relating
to a specific security. A financial index futures contract does not require the
physical delivery of securities but merely provides for profits and losses
resulting from changes in the market value of the contract to be credited or
debited at the close of each trading day to the respective accounts of the
parties to the contract. On the contract's expiration date, a final cash
settlement occurs. Changes in the market value of a particular financial index
futures contract reflect changes in the specified index of securities on which
the future is based.
There are several risks in connection with the use of futures contracts.
In the event of an imperfect correlation between the futures contract and the
portfolio position which is intended to be protected, the desired protection
may not be obtained, and the fund may be exposed to risk of loss. Further,
unanticipated changes in interest rates or stock price movements may result in
a poorer overall performance for the fund than if it had not entered into
the futures contracts.
18
In addition, the market prices of futures contracts may be affected by
certain factors. First, all participants in the futures market are subject to
margin deposit and maintenance requirements. Rather than meeting additional
margin deposit requirements, investors may close futures contracts through
offsetting transactions which could distort the normal relationship between the
securities and futures markets. Second, from the point of view of speculators,
the deposit requirements in the futures market are less onerous than margin
requirements in the securities market. Therefore, increased participation by
speculators in the futures market may also cause temporary price distortions.
Finally, positions in futures contracts may be closed out only on an
exchange or board of trade which provides a secondary market for such futures.
There is no assurance that a liquid secondary market on an exchange or board of
trade will exist for any particular contract or at any particular time.
OPTIONS ON FUTURES CONTRACTS
A fund also may purchase and sell listed put and call options on futures
contracts. An option on a futures contract gives the purchaser the right, in
return for the premium paid, to assume a position in a futures contract (a long
position if the option is a call and a short position if the option is a put) at
a specified exercise price at any time during the option period. When an option
on a futures contract is exercised, delivery of the futures position is
accompanied by cash representing the difference between the current market price
of the futures contract and the exercise price of the option. The fund may
purchase put options on futures contracts in lieu of, and for the same purpose
as, a sale of a futures contract. It also may purchase such put options in order
to hedge a long position in the underlying futures contract in the same manner
as it purchases "protective puts" on securities.
As with options on securities, the holder of an option may terminate a
position by selling an option of the same series. There is no guarantee that
such closing transactions can be effected. The fund is required to deposit
initial margin and maintenance margin with respect to put and call options on
futures contracts written by it pursuant to brokers' requirements similar to
those applicable to futures contracts described above, and, in addition, net
option premiums received will be included as initial margin deposits.
In addition to the risks which apply to all options transactions
(discussed below under "OPTIONS ACTIVITIES") , there are several special
risks relating to options on futures contracts. The ability to establish and
close out positions on such options will be subject to the development and
maintenance of a liquid secondary market. It is not certain that this market
will develop. Compared to the use of futures contracts, the purchase of options
on futures contracts involves less potential risk to the fund, because the
maximum amount at risk is the premium paid for the options (plus transaction
costs). However, there may be circumstances when the use of an option on a
futures contract would result in a loss to the fund when the use of futures
contract would not, such as when there is no movement in the prices of the
underlying securities. Writing an option on a futures contract involves risks
similar to those arising in the sale of futures contracts as described above.
OPTIONS ACTIVITIES
An underlying fund may write (i.e., sell) and purchase put and call
options on securities and securities indexes.
A put option on a security gives the purchaser of the option the right
(but not the obligation) to sell, and the writer of the option the obligation
to buy, the underlying security at a stated price (the "exercise price") at
any time before the option expires. A call option on a security gives the
purchaser the right (but not the obligation) to buy, and the writer the
obligation to sell, the underlying security at the exercise price at any time
before the option expires. The purchase price for a put or call option is the
"premium" paid by the purchaser for the right to sell or buy.
19
Options on indexes are similar to options on securities except that,
rather than the right to take or make delivery of a specific security at a
stated price, an option on an index gives the holder the right to receive,
upon exercise of the option, a defined amount of cash if the closing value of
the index upon which the option is based is greater than, in the case of a
call, or less than, in the case of a put, the exercise price of the option.
Writing Options. The principal reason for writing call or put options is
to obtain, through the receipt of premiums, a greater current return than would
be realized on the underlying securities alone. By writing a call option, a fund
becomes obligated during the term of the option to deliver the securities
underlying the option upon payment of the exercise price if the option is
exercised. By writing a put option, a fund becomes obligated during the term of
the option to purchase the securities underlying the option at the exercise
price if the option is exercised. Options on securities indexes are settled
in cash based on the values of the securities in the underlying index rather
than by delivery of the underlying securities.
Underlying funds receive premiums from writing call or put options, which
they retain whether or not the options are exercised. If call option written
by a fund is exercised, the fund will forgo any gain from an increase in the
market price of the underlying security over the exercise price. If a put
option written by a fund is exercised, the fund will be obligated to purchase
the underlying security for more than its current market price.
Purchasing Options Underlying funds generally will purchase put options
in order to protect portfolio holdings against a substantial decline in the
market value of such holdings. Such protection is provided during the life of
the put, because a fund may sell the underlying security at the put exercise
price regardless of a decline in the underlying security's market price.
Underlying funds generally will purchase call options for the purpose of
hedging against an increase in prices of securities that the funds ultimately
want to buy. Such protection is provided during the life of the call option,
because the fund may buy the underlying security at the call exercise price
regardless of any increase in the underlying security's market price. An
underlying fund's loss exposure in purchasing an option is limited to the sum
of the premium paid and the commission or other transaction expenses
associated with acquiring the option.
A fund's option positions may be closed out only on an exchange which
provides a secondary market for options of the same series, but there can be no
assurance that a liquid secondary market will exist at a given time for any
particular option. In this regard, trading in options on certain securities
(such as U.S. Government securities) is relatively new so that it is impossible
to predict to what extent liquid markets will develop or continue.
HEDGING
An underlying fund may employ many of the investment techniques described
in this APPENDIX not only for investment purposes, but also for hedging
purposes. For example, an underlying fund may purchase or sell put and call
options on common stocks to hedge against movements in individual common stock
prices or purchase and sell stock index futures and related options to hedge
against marketwide movements in common stock prices. Although such hedging
techniques generally tend to minimize the risk of loss that is hedged against,
they also may limit commensurately the potential gain that might have resulted
had the hedging transaction not occurred. Also, the desired protection generally
resulting from hedging transactions may not always be achieved.
JUNK BONDS
Bonds which are rated BB and below by Standard and Poor's and Ba and below
by Moody's (See APPENDIX - DESCRIPTION OF COMMERCIAL PAPER AND BOND RATINGS in
the Statement of Additional Information for a more detailed explanation of bond
ratings.) are commonly known as "junk bonds."
20
Investing in junk bonds involves special risks in addition to the risks
associated with investments in higher rated debt securities. Junk bonds may be
regarded as predominately speculative with respect to the issuer's continuing
ability to meet principal and interest payments.
Junk bonds may be more susceptible to real or perceived adverse economic
and competitive industry conditions than higher grade securities. The prices of
junk bonds have been found to be less sensitive to interest rate changes than
more highly rated investments but more sensitive to adverse economic downturns
or individual corporate developments. A projection of an economic downturn or of
a period of rising interest rates, for example, could cause a decline in junk
bond prices, because the advent of a recession could lessen the ability of a
highly leveraged company to make principal and interest payments on its debt
securities. if the issuer of junk bonds defaults, a fund may incur additional
expenses to seek recovery. In the case of junk bonds structured as zero coupon
or payment-in-kind securities, the market prices of such securities are affected
to a greater extent by interest rate changes and, therefore, tend to be more
volatile than securities which pay interest periodically and in cash.
The secondary markets on which junk bonds are traded may be less liquid
than the market for higher grade securities. Less liquidity in the secondary
trading markets could adversely affect and cause large fluctuations in the daily
net asset value of a fund's shares. Adverse publicity and investor perceptions,
whether or not based on fundamental analysis, may decrease the values and
liquidity of junk bonds, especially in a thinly traded market.
There may be special tax considerations associated with investing in junk
bonds structured as zero coupon or payment-in-kind securities. A fund records
the interest on these securities as income even though it receives no cash
interest until the security's maturity or payment date. A fund will be required
to distribute all or substantially all such amounts annually and may have to
obtain the cash to do so by selling securities which otherwise would continue to
be held. Shareholders will be taxed on these distributions.
The use of credit ratings as the sole method of evaluating junk bonds can
involve certain risks. For example, credit ratings evaluate the safety of
principal and interest payments, not the market value risk of junk bonds. Also,
credit rating agencies may fail to change credit ratings in a timely fashion to
reflect events since the security was last rated.
ILLIQUID SECURITIES
An underlying fund may invest up to 15% of its net assets in
securities for which there is no readily available market ("illiquid
securities") including repurchase agreements having more than seven days to
maturity. A considerable period of time may elapse between an underlying fund's
decision to dispose of such securities and the time when the fund is able to
dispose of them, during which time the value of the securities (and therefore
the value of the underlying fund's shares held by the Fund) could decline.
INDUSTRY CONCENTRATION
An underlying fund may concentrate its investments within one industry.
Because the scope of investment alternatives within an industry is limited, the
value of the shares of such an underlying fund may be subject to greater market
fluctuation than an investment in a fund which invests in a broader range of
securities.
LEVERAGE THROUGH BORROWING
An underlying fund may borrow up to 33 1/3% of the value of its total
assets on an unsecured basis from banks to increase its holdings of portfolio
securities. Under the 1940 Act, a fund is required to maintain continuous asset
coverage of 300% with respect to such borrowings and to sell (within three
days) sufficient
21
portfolio holdings to restore such coverage if it should decline to less than
300% due to market fluctuations or otherwise, even if disadvantageous from an
investment standpoint. Leveraging will exaggerate the effect of any increase
or decrease in the value of portfolio securities on a fund's net asset value,
and money borrowed will be subject to interest costs (which may include
commitment fees and/or the cost of maintaining minimum average balances) which
may or may not exceed the interest or dividends received from, or appreciation
of, the securities purchased with borrowed funds.
LOANS OF PORTFOLIO SECURITIES
An underlying fund may lend its portfolio securities provided that:
(1) the loan is secured continuously by collateral maintained on a daily
mark-to-market basis in an amount at least equal to the current market
value of the securities loaned; (2) the fund may at any time call the loan and
obtain the return of the securities loaned; (3) the fund will receive any
interest or dividends paid on the loaned securities; and (4) the aggregate
market value of securities loaned will not at any time exceed one-third of the
total assets of the fund. Loans of securities involve a risk that the borrower
may fail to return the securities or may fail to provide additional collateral.
MASTER DEMAND NOTES
Although the Fund itself will not do so, underlying funds (particularly
money market mutual funds) may invest up to 100% of their assets in master
demand notes. Master demand notes are unsecured obligations of U.S. corporations
redeemable upon notice that permit investment by a fund of fluctuating amounts
at varying rates of interest pursuant to direct arrangements between the fund
and the issuing corporation. Because they are direct arrangements between the
fund and the issuing corporation, there is no secondary market for the notes.
However, they are redeemable at face value plus accrued interest at any time.
REPURCHASE AGREEMENTS
Underlying funds, particularly money market funds, may enter into
repurchase agreements with banks and broker-dealers under which they acquire
securities subject to an agreement with the seller to repurchase the securities
at an agreed upon time and price. These agreements are considered under the 1940
Act to be loans by the purchaser collateralized by the underlying securities. If
the seller should default on its obligation to repurchase the securities, the
underlying fund may experience delay or difficulties in exercising its rights to
realize upon the securities held as collateral and might incur a loss if the
value of the securities should decline.
SHORT SALES
An underlying fund may sell securities short. in a short sale, a fund sells
stock which it does not own, making delivery with securities "borrowed" from a
broker. The fund is then obligated to replace the security borrowed by
purchasing it at the market price at the time of replacement. This price may or
may not be less than the price at which the security was sold by the fund. Until
the security is replaced, the fund is required to pay to the lender any
dividends or interest which accrue during the period of the loan. In order to
borrow the security, the fund may also have to pay a premium which would
increase the cost of the security sold. The proceeds of the short sale will be
retained by the broker to the extent necessary to meet margin requirements until
the short position is closed out.
The fund also must deposit in a segregated account an amount of cash or
liquid securities equal to the difference between (a) the market value of the
securities sold short at the time they were sold short and (b) the value of the
collateral deposited with the broker in connection with the short sale
(not including the proceeds from the short sale). While the short position is
open, the fund must maintain daily the segregated
22
account at such a level that (1) the amount deposited in it plus the amount
deposited with the broker as collateral equals the current market value of the
securities sold short and (2) the amount deposited in it plus the amount
deposited with the broker as collateral is not less than the market value of
the securities at the time they were sold short. Depending upon market
conditions, up to 80% of the value of a fund's net assets may be deposited as
collateral for the obligation to replace securities borrowed to effect short
sales and allocated to a segregated account in connection with short sales.
The fund will incur a loss as a result of the short sale if the price of
the security increases between the date of the short sale and the date on which
the fund replaces the borrowed security. The fund will realize a gain if the
security declines in price between those dates. The amount of any gain will be
decreased and the amount of any loss increased by the amount of any premium,
dividends, or interest the fund may be required to pay in connection with a
short sale.
A short sale is "against the box" if at all times when the short position
is open the fund owns an equal amount of the securities or securities
convertible into, or exchangeable without further consideration for, securities
of the same issue as the securities sold short. Such a transaction serves to
defer a gain or loss for federal income tax purposes.
WARRANTS
An underlying fund may invest in warrants, which are options to purchase
equity securities at specific prices valid for a specific period of time. The
prices do not necessarily move parallel to the prices of the underlying
securities. Warrants have no voting rights, receive no dividends, and have no
rights with respect to the assets of the issuer. If a warrant is not exercised
within the specified time period, it will become worthless, and the fund will
lose the purchase price and the right to purchase the underlying security.
23
INTEGRITY SMALL-CAP
FUND OF FUNDS, INC.
1 NORTH MAIN INTEGRITY
MINOT, ND 58703 SMALL-CAP
(701) 852-5292 FUNDS OF FUNDS,
INC.
INVESTMENT ADVISER A mutual fund for investors
ND MONEY MANAGEMENT, INC. seeking long-term capital
1 NORTH MAIN appreciation
MINOT, ND 58703
===========================
PRINCIPAL UNDERWRITER
ND CAPITAL, INC.
1 NORTH MAIN
MINOT, ND 58703 Prospectus
__________, 1998
CUSTODIAN
FIRST WESTERN BANK & TRUST
900 SOUTH BROADWAY [LOGO OF INTEGRITY MUTUAL FUNDS
MINOT, ND 58701 APPEARS HERE]
TRANSFER AGENT
ND RESOURCES, INC.
1 NORTH MAIN MINOT, ND 58703
P.O. BOX 759 MINOT, ND 58702
INDEPENDENT PUBLIC ACCOUNTANT
BRADY, MARTZ & ASSOCIATES, P.C.
24 WEST CENTRAL AVENUE
MINOT, ND 58701
INTEGRITY MUTUAL FUNDS
ACCOUNT APPLICATION INTEGRITY SMALL-CAP FUND OF FUNDS, INC.
Mail To: INTEGRITY SMALL-CAP FUND OF FUNDS, INC.
P.O. BOX 759, MINOT, ND 58702-0759
If you have any questions on this form or any Shareholder Services questions,
phone (800) 601-5593.
_______________________________________________________________________________
1. ACCOUNT REGISTRATION (PLEASE PRINT) - FIRST NAME, MIDDLE INITIAL AND LAST
NAME
____ INDIVIDUAL ____JOINT* *JOINT TENANTS WITH RIGHTS OF SURVIVORSHIP,
UNLESS YOU SPECIFY OTHERWISE.
_________________________________ ___________________________________________
Name Joint Owner's Name
____GIFT OR TRANSFER TO A MINOR (UGMA/UTMA)
______________________as custodian for__________________________under the_______
Custodian's name Minor's name State
Uniform Gifts/Transfers to Minors Act
____TRUST*
______________________as trustee(s) of___________________ _____________________
Trustee's name Name of trust Date of trust
agreement agreement
*Please include copy of first and last page of trust agreement.
____CORPORATION/OTHER ENTITY*
_______________________________________________________________________________
Name of corporation or other entity Type of organization (i.e.,
corporation, non-profit,
partnership, etc.)
*Please attach a copy of the corporate resolution showing the
person(s) authorized to act on this account.
____IRA* *IRA INFORMATION AVAILABLE UPON REQUEST.
____TOD (TRANSFER ON DEATH)** **TRANSFER ON DEATH FORM AVAILABLE UPON REQUEST.
________________________________________________________________________________
2. ADDRESS________________________________ CITY, STATE, ZIP____________________
TELEPHONE NUMBER__________________
________________________________________________________________________________
3. INITIAL INVESTMENT
Check enclosed for $__________________ . Minimum initial investment is $1,000
($100 in Monthomatic Plan); subsequent $50.
Make check payable to: INTEGRITY SMALL CAP FUND OF FUNDS, INC.
________________________________________________________________________________
4. DIVIDENDS CHOOSE HOW YOU WISH TO RECEIVE DIVIDENDS. IF NO BOX IS CHECKED,
OPTION A WILL BE ASSIGNED.
A. ____ All income and capital gains dividends reinvested into my account.
B. ____ All income dividends in cash and capital gains reinvested in my
account. Complete cash dividends section below.
C. ____ All income and capital gains dividends paid to me in cash. Complete
cash dividends section below.
Please send cash dividends to: _______ Account registration address OR
_______Special payee as follows:
Name____________________________________________________________________________
Address________________________ City, State, Zip________________________________
Account number (if applicable)__________________________ Attach voided check if
payable to your bank account (Signature Guarantee not required).
* If payable to person or address other than registration, PLEASE SIGNATURE
GUARANTEE HERE:
________________________________________________
5. SYSTEMATIC INVESTMENT PROGRAM (MONTHOMATIC) COMPLETE THE FOLLOWING IF YOU ARE
ESTABLISHING A SYSTEMATIC INVESTMENT PROGRAM.
I AUTHORIZE THE FUND'S AGENT TO DRAW CHECKS OR INITIATE AUTOMATED CLEARING
HOUSE ("ACH") DEBITS AGAINST THE BANK ACCOUNT PROVIDED BELOW IN THE AMOUNT
OF $______________________ (MINIMUM $50).
PLEASE CHECK ONE: BEGINNING ON THE _____5TH OR THE _____20TH
_____________________ (INDICATE MONTH).
NAME OF DEPOSITOR_______________________ BANK ACCOUNT NUMBER___________________
(AS SHOWN ON BANK RECORDS)
NAME OF BANK____________________________ ADDRESS OF BANK_______________________
(THE ACCOUNT MUST HAVE CHECK OR DRAFT
WRITING PRIVILEGES)
CITY____________________________________ STATE, ZIP_____________________________
AS A CONVENIENCE TO US, WE HEREBY REQUEST AND AUTHORIZE YOU TO HONOR AND CHARGE
TO OUR ACCOUNT (I) CHECKS DRAWN ON OUR ACCOUNT BY INTEGRITY SMALL-CAP FUND OF
FUNDS, INC. AND PAYABLE TO THE ORDER OF THE FUND, AND (II) AUTOMATED CLEARING
HOUSE ("ACH") DEBIT ENTRIES INITIATED BY ANY OF US THROUGH INTEGRITY SMALL-CAP
FUND OF FUNDS, INC., FOR THE ACCOUNT OF THE FUND, PROVIDED IN EITHER CASE THAT
THERE ARE SUFFICIENT COLLECTED FUNDS IN SAID ACCOUNT TO PAY THE SAME UPON
PRESENTATION. WE AGREE THAT YOUR RIGHTS WITH RESPECT TO EACH SUCH CHECK OR ACH
DEBIT SHALL BE THE SAME AS IF EITHER WERE SIGNED PERSONALLY BY EACH OF US. THIS
AUTHORITY IS TO REMAIN IN EFFECT UNTIL REVOKED BY US IN WRITING TO YOU, AND
UNTIL YOU ACTUALLY RECEIVE SUCH NOTICE, WE AGREE THAT YOU SHALL BE FULLY
PROTECTED IN HONORING ANY SUCH CHECKS OR ACH DEBITS. WE FURTHER AGREE THAT IF
ANY CHECK OR ACH DEBIT BE DISHONORED, WHETHER WITH OR WITHOUT CAUSE AND WHETHER
INTENTIONALLY OR INADVERTENTLY, YOU SHALL BE UNDER NO LIABILITY WHATSOEVER.
SIGNATURE(S) OF DEPOSITOR(S):* DATE:___________________ *SIGN EXACTLY AS
SHOWN ON BANK RECORDS
X____________________________________ X________________________________________
SIGNATURE SIGNATURE
PLEASE ATTACH A VOIDED CHECK TO ENSURE CORRECT ENCODING.
================================================================================
6. SYSTEMATIC WITHDRAWAL PLAN (NOTE: ALL DISTRIBUTIONS FROM THE FUND MUST BE
REINVESTED.)
SYSTEMATIC WITHDRAWAL (AVAILABLE ONLY FOR ACCOUNTS OF $5,000 OR MORE) - REDEEM
SUFFICIENT SHARES OR DOLLARS ON THE 1ST OF THE MONTH
AND SEND CHECK TO THE OWNER LISTED ABOVE: _____MONTHLY _____QUARTERLY
_____SEMIANNUALLY _____ ANNUALLY FOR
$____________ OR ___________ SHARES (MINIMUM $50). THE FIRST REDEMPTION IS TO
TAKE PLACE ON THE FIRST OF
___________________________ (INDICATE MONTH).
IF SYSTEMATIC WITHDRAWAL CHECKS ARE PAYABLE TO PERSON OR ADDRESS OTHER THAN AS
REGISTERED ABOVE, MAKE CHECK PAYABLE TO:
NAME____________________________________________________________________________
ADDRESS_________________________ CITY, STATE, ZIP______________________________
ACCOUNT NUMBER (IF APPLICABLE)_________________ ATTACH VOIDED CHECK IF PAYABLE
TO YOUR BANK ACCOUNT (SIGNATURE GUARANTEE NOT REQUIRED)
IF PAYABLE TO PERSON OR ADDRESS OTHER THAN REGISTRATION, PLEASE SIGNATURE
GUARANTEE HERE:
_______________________________________________________________________________
7. YOUR SIGNATURE AND TAX CERTIFICATIONS
SEE ENCLOSED SUBSTITUTE INSTRUCTIONS AND IMPORTANT NOTICE. THE FUND RESERVES
THE RIGHT TO REFUSE TO OPEN AN ACCOUNT WITHOUT EITHER A CERTIFIED TAXPAYER
IDENTIFICATION NUMBER ("TIN") OR A CERTIFICATION OF FOREIGN STATUS. FAILURE TO
PROVIDE THE TAX CERTIFICATIONS IN THIS SECTION MAY RESULT IN BACKUP WITHHOLDING
ON PAYMENTS RELATING TO YOUR ACCOUNT AND/OR IN YOUR INABILITY TO QUALIFY FOR
TREATY WITHHOLDING RATES.
PLEASE FILL IN
____________________________________ OR _______________________________________
SOCIAL SECURITY NUMBER (IN UGMA/UTMA MINOR'S SSN) EMPLOYER
IDENTIFICATION NUMBER
I AM A CITIZEN OF: ____U.S. ____ MY COUNTRY OF RESIDENCE FOR TAX PURPOSES IS:
____U.S. OTHER_____________________________
CHECK ONE OF THE FOLLOWING:
______ THE NUMBER SHOWN ABOVE IS MY CORRECT TIN. I AM NOT SUBJECT TO BACKUP
WITHHOLDING DUE TO UNDERREPORTING OF INTEREST OR DIVIDEND INCOME EITHER
BECAUSE NO NOTIFICATION HAS BEEN RECEIVED FROM THE IRS OR BECAUSE THE
IRS HAS NOTIFIED ME THAT AM NO LONGER SUBJECT TO BACKUP WITHHOLDING. (IF
YOU ARE SUBJECT TO BACKUP WITHHOLDING, PLEASE CROSS OUT THE SECOND
SENTENCE.)
______ AWAITING TIN. A TIN HAS NOT BEEN ISSUED TO ME, BUT I AM IN THE PROCESS
OF APPLYING FOR A TIN FROM EITHER THE APPROPRIATE INTERNAL REVENUE
SERVICE CENTER OR SOCIAL SECURITY ADMINISTRATION OFFICE. I UNDERSTAND
THAT IF I DO NOT PROVIDE A TIN TO THE FUND WITHIN 60 DAYS, THE FUND IS
REQUIRED TO COMMENCE BACKUP WITHHOLDING UNTIL I PROVIDE A CERTIFIED TIN.
I AM NOT SUBJECT TO BACKUP WITHHOLDING DUE TO UNDERREPORTING OF INTEREST
OR DIVIDEND INCOME EITHER BECAUSE NO NOTIFICATION HAS BEEN RECEIVED FROM
THE IRS OR BECAUSE THE IRS HAS NOTIFIED ME THAT I AM NO LONGER SUBJECT
TO BACKUP WITHHOLDING. (IF YOU ARE SUBJECT TO BACKUP WITHHOLDING, PLEASE
CROSS OUT THE THIRD SENTENCE.)
______ EXEMPT RECIPIENT. I AM AN EXEMPT RECIPIENT. THE INSTRUCTIONS GIVE A LIST
OF THE MOST COMMON EXEMPT RECIPIENTS. (YOU
SHOULD STILL PROVIDE A TIN.)
______ EXEMPT FOREIGN PERSON. I AM AN EXEMPT FOREIGN PERSON AS EXPLAINED IN THE
INSTRUCTIONS.
UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT (1) THE INFORMATION PROVIDED ON
THIS APPLICATION IS TRUE, CORRECT, AND COMPLETE, (2) I HAVE
READ THE PROSPECTUS FOR THE FUND IN WHICH I AM INVESTING AND AGREE TO THE TERMS
THEREOF, AND (3) I AM OF LEGAL AGE OR AN EMANCIPATED
MINOR.
DATE______________________________________
THE IRS DOES NOT REQUIRE YOUR CONSENT TO ANY PROVISION OF THIS DOCUMENT OTHER
THAN THE CERTIFICATIONS REQUIRED TO AVOID BACKUP WITHHOLDING.
X___________________________________ X__________________________________________
SIGNATURE SIGNATURE
8. BROKER/DEALER USE ONLY (PLEASE PRINT)
WE HEREBY SUBMIT THIS APPLICATION FOR THE PURCHASE OF SHARES OF INTEGRITY
SMALL-CAP FUND OF FUNDS, INC., INDICATED WITHIN THE TERMS OF OUR SELLING
AGREEMENT WITH ND HOLDINGS, INC., AND WITH THE PROSPECTUS FOR INTEGRITY SMALL-
CAP FUND OF FUNDS, INC. WE AGREE TO NOTIFY DISTRIBUTOR OF ANY PURCHASES MADE
UNDER A LETTER OF INTENT OR RIGHT OF ACCUMULATION.
FIRM NAME___________________________ BRANCH ADDRESS__________________________
REPRESENTATIVE'S NAME_______________ ________________________________________
REPRESENTATIVE'S NUMBER_____________ REPRESENTATIVE'S PHONE NUMBER___________
BRANCH NUMBER____________________
________________________________________________________________________________
9. ADDITIONAL INFORMATION
EACH TIME THERE IS A TRANSACTION IN A SHAREHOLDER ACCOUNT, THE SHAREHOLDER AND
REPRESENTATIVE WILL RECEIVE A CONFIRMATION STATEMENT SHOWING THE CURRENT
TRANSACTION.
ALL CORRESPONDENCE REGARDING SHAREHOLDER ACCOUNTS SHOULD BE ADDRESSED TO ND
RESOURCES, INC., P.O. BOX 759, MINOT, ND 58702. IF YOU HAVE ANY QUESTIONS,
CALL (800) 601-5593.
FUND EXCHANGES ARE ACCEPTABLE WITHIN INTEGRITY MUTUAL FUNDS. THE ACCOUNT
BEING EXCHANGED MUST BEAR THE SAME ACCOUNT REGISTRATION OR MUST BE
ACCOMPANIED BY A SIGNATURE GUARANTEE IF THE ACCOUNT VALUE IS OVER $50,000.
A LETTER OF INSTRUCTION STATING FROM WHAT FUND TO WHAT FUND IS NEEDED TO DO ANY
EXCHANGE AND MUST BE SIGNED BY ALL REGISTERED OWNERS.
PHONE ORDERS: PAYMENT FOR SHARE PURCHASES BY TELEPHONE SHOULD BE RECEIVED WITHIN
THREE BUSINESS DAYS. PAYMENT MUST BE RECEIVED WITHIN 7 DAYS OF THE ORDER OR THE
TRADE MAY BE CANCELED, AND THE DEALER OR BROKER PLACING THE TRADE WILL BE LIABLE
FOR ANY LOSSES. IT IS A DEALER'S OR BROKER'S RESPONSIBILITY TO PROMPTLY FORWARD
PAYMENT AND REGISTRATION INSTRUCTIONS (OR COMPLETED APPLICATIONS) TO THE
TRANSFER AGENT FOR SHARES BEING PURCHASED.
WHEN A CLIENT IS REQUESTING TO CHANGE HIS ACCOUNT REGISTRATION, A LETTER OF
INSTRUCTION SHOULD BE SENT TO THE TRANSFER AGENT. IT SHOULD SPECIFY WHAT CHANGE
IS TO BE MADE AND MUST BE SIGNED BY ALL REGISTERED OWNERS. IF THE ACCOUNT VALUE
IS OVER $50,000, THE SIGNATURES SHOULD BE SIGNATURE GUARANTEED.
PART B
STATEMENT OF ADDITIONAL INFORMATION
__________, 1998
INTEGRITY SMALL-CAP FUND OF FUNDS, INC.
1 NORTH MAIN
MINOT, NORTH DAKOTA 58703
(701) 852-5292
(800) 601-5593 Transfer Agent
(800) 276-1262 Marketing
This Part B Statement of Additional Information is not a prospectus. It
should be read in conjunction with the Prospectus of Integrity Small-Cap Fund
of Funds, Inc. (the "Fund"), dated ____________, 1998. The Prospectus may be
obtained without charge from the Fund.
_______________
TABLE OF CONTENTS
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PAGE
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Investment Restrictions................................................... B-2
Temporary Investments..................................................... B-3
Management of the Fund.................................................... B-4
Control Persons and Principal Holders of Securities....................... B-6
Investment Advisory and Other Services.................................... B-6
Portfolio Transactions.................................................... B-7
Purchase and Redemption of Shares......................................... B-9
Underwriter............................................................... B-9
Calculation of Performance Data........................................... B-10
Appendix--Description of Commercial Paper and Bond Ratings................ B-11
Financial Statements...................................................... F-1
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INVESTMENT RESTRICTIONS
The Fund has adopted certain fundamental investment restrictions which,
together with the Fund's investment objective, cannot be changed without
approval by holders of a majority of its outstanding voting shares. As defined
in the Investment Company Act of 1940 (the "1940 Act"), this means the lesser of
the vote of (a) 67% or more of the outstanding shares of the Fund present at a
meeting where more than 50% of the outstanding shares are present in person or
by proxy; or (b) more than 50% of the outstanding shares of the Fund. The Fund
may not:
(1) Purchase securities of any one issuer if as a result more than 5% of the
Fund's total assets would be invested in such issuer or the Fund would own or
hold more than 10% of the outstanding voting securities of that issuer;
provided, however, that up to 25% of the Fund's total assets may be invested
without regard to this limitation and provided further that this limitation
does not apply to securities issued by the U.S. Government, its agencies or
instrumentalities, nor to securities issued by other open-end investment
companies.
(2) Make loans, except in accordance with its investment objective and
policies.
(3) Purchase or sell commodities or commodity contracts, except that the Fund
may purchase and sell stock index futures contracts and options thereon for
hedging purposes.
(4) Underwrite securities issued by others, except to the extent that the
Fund may be deemed to be an underwriter under the federal securities laws in
connection with the disposition of portfolio securities.
(5) Issue senior securities as defined in the 1940 Act, except as appropriate
to evidence indebtedness which the Fund is permitted to incur, provided that the
Fund's use of stock index futures contracts and options thereon will not be
deemed to constitute senior securities for this purpose.
(6) Borrow money except from a bank and then only for temporary or emergency
purposes and in amounts not exceeding the lesser of 10% of its total assets
valued at cost or 5% of its total assets valued at market, and, in any event,
only if immediately thereafter there is an asset coverage of at least 300%. The
fund will not purchase portfolio securities when outstanding borrowings exceed
5% of its total assets. The Fund may mortgage, pledge, or hypothecate its assets
in an amount not exceeding 10% of its total assets to secure temporary or
emergency borrowing.
(7) Invest in real estate or real estate mortgage loans, although it may
invest in securities which are secured by real estate and securities of issuers
which invest or deal in real estate.
The following investment restrictions are nonfundamental and may be
changed by the vote of the Fund's Board of Directors without shareholder
approval. The Fund may not:
(1) Purchase or retain the securities of any issuer if any of its officers or
directors or of the Investment Adviser owns beneficially more than 1/2 of 1% of
the securities of such issuer and together own more than 5% of the securities of
such issuer.
(2) Invest more than 15% of its net assets in illiquid securities, including
securities which at the time of such investment are not readily marketable and
securities restricted as to disposition under the federal securities laws.
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(3) Invest for the purpose of exercising control or management of another
issuer.
With the exception of the Fund's policy with respect to borrowing, any
policy or restriction which involves a maximum percentage of securities or
assets will not be considered to be violated unless an excess over the
percentage occurs immediately after, and is caused by, an acquisition of
securities or assets of, or borrowing by, the Fund. Changes due to market
action will not cause a violation of a policy or restriction.
REGULATORY RESTRICTIONS
To the extent required to comply with Securities and Exchange Commission
Release No. 10666, when purchasing a futures contract or writing a put option,
the Fund will maintain in a segregated account with its Custodian cash or
liquid high-grade debt securities equal to the value of such contracts. The
amount held by the Custodian is less than the amount held by any futures
commission agent as initial margin and will be marked to market daily.
To the extent required to comply with Commodity Futures Trading Commission
Regulation 4.5 and thereby avoid "commodity pool operator" status, the Fund
will not enter into a futures contract or purchase an option thereon if
immediately thereafter the initial margin deposits for futures contracts held
by the Fund plus premiums paid by it for open options on futures would exceed
5% of the Fund's total assets. The Fund will not engage in transactions in
financial futures contracts or options thereon for speculation, but only to
attempt to hedge against changes in market conditions affecting the values of
securities which the Fund holds or intends to purchase.
TEMPORARY INVESTMENTS
Although it invests primarily in shares of underlying funds, for
temporary defensive purposes or to accumulate cash for investments or
redemptions, the Fund may hold cash or invest in money market mutual funds or in
a variety of short-term debt securities, including U.S. Treasury bills and other
U.S. Government securities, commercial paper, certificates of deposit, and
bankers' acceptances. When the Fund invests for temporary defensive purposes, it
may do so without any percentage limitations. The following information
supplements that in the Prospectus under INVESTMENT OBJECTIVE, POLICIES, AND
RESTRICTIONS.
U.S. GOVERNMENT SECURITIES
The Fund may invest in obligations issued or guaranteed by the U.S.
Government or its agencies or instrumentalities which have remaining maturities
not exceeding one year. Agencies and instrumentalities which issue or guarantee
debt securities and which have been established or sponsored by the U.S.
Government include the Bank for Cooperatives, the Export-Import Bank, the
Federal Farm Credit System, the Federal Home Loan Banks, the Federal Home Loan
Mortgage Corporation, the Federal Intermediate Credit Banks, the Federal Land
Banks, the Federal National Mortgage Association, and the Student Loan Marketing
Association.
BANK OBLIGATIONS
The Fund may invest in obligations of U.S. banks (including certificates
of deposit and bankers' acceptances) having total assets at the time of purchase
in excess of $100 million. Such banks must be members of the Federal Deposit
Insurance Corporation.
A certificate of deposit is an interest-bearing negotiable certificate
issued by a bank against funds deposited in the bank. A bankers' acceptance is a
short-term draft drawn on a commercial bank by a borrower,
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usually in connection with an international commercial transaction. Although
the borrower is liable for payment of the draft, the bank unconditionally
guarantees to pay the draft at its face value on the maturity date.
COMMERCIAL PAPER
Commercial paper represents short-term unsecured promissory notes issued
in bearer form by bank holding companies, corporations, and finance companies.
The commercial paper purchased by the Fund consists of direct obligations of
domestic issuers which, at the time of investment, are (i) rated "P-1" by
Moody's Investors Service, Inc. ("Moody's"), or "A-1" or better by Standard &
Poor's Corporation ("Standard & Poor's"), (ii) issued or guaranteed as to
principal and interest by issuers or guarantors having an existing debt security
rating of "Aa" or better by Moody's or "AA" or better by Standard & Poor's, or
(iii) securities which, if not rated, are, in the opinion of the Fund's
Investment Adviser, of an investment quality comparable to rated commercial
paper in which the Fund may invest.
The rating "P-1" is the highest commercial paper rating assigned by
Moody's, and the ratings "A-1" and "A-1+" are the highest commercial paper
ratings assigned by Standard & Poor's. Debt rated "Aa" or better by
Moody's or "AA" or better by Standard & Poor's is generally regarded as
high-grade, and such ratings indicate that the ability to pay principal
and interest is very strong.
MANAGEMENT OF THE FUND
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POSITION(S) HELD PRINCIPAL OCCUPATION(S)
NAME, ADDRESS, AND AGE WITH FUND DURING PAST 5 YEARS /(1)/
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Lynn W. Aas /(2)/ Director Retired; Attorney; Director, ND Holdings, Inc.;
904 NW 27th Director, ND Tax-Free Fund, Inc., ND Insured Income Fund, Inc.,
Minot, North Dakota 58701 Montana Tax-Free Fund, Inc., South Dakota Tax-Free Fund, Inc.,
77 and Integrity Fund of Funds, Inc.; Trustee, Ranson
Managed Portfolios; Director, First Western Bank & Trust
Orlin W. Backes /(3)/ Director Attorney; Director, ND Tax-Free Fund, Inc., ND Insured Income
15 2nd Ave. SW, Suite 305 Fund, Inc., Montana Tax-Free Fund, Inc., South Dakota
Minot, North Dakota 58701 Tax-Free Fund, Inc., and Integrity Fund of Funds, Inc.;
63 Trustee, Ranson Managed Portfolios; Director,
First Western Bank & Trust
Arthur A. Link /(4)/ Director Director, ND Tax-Free Fund, Inc., ND Insured Income Fund, Inc.,
2001 Grimsrud Drive Montana Tax-Free Fund, Inc., South Dakota Tax-Free Fund, Inc.,
Bismarck, North Dakota 58501 and Integrity Fund of Funds, Inc.; Trustee, Ranson Managed
84 Portfolios; Director, Bank Center First
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* Peter A. Quist /(5)/ Director, Vice Director and Vice President, ND Holdings, Inc.;
1 North Main President, and Director, Vice President, and Secretary, ND Money
Minot, North Dakota 58703 Secretary Management, Inc., ND Capital, Inc., ND Resources, Inc.,
64 ND Tax-Free Fund, Inc., ND Insured Income Fund, Inc.,
Montana Tax-Free Fund, Inc., South Dakota Tax-Free Fund, Inc.,
Integrity Fund of Funds, Inc., The Ranson Company, Inc.,
and Ranson Capital Corporation; Vice President and Secretary,
Ranson Managed Portfolios
* Robert E. Walstad /(6)/ Director, Presi- Director and President, ND Holdings, Inc.; Director,
1 North Main dent, and President, and Treasurer, ND Money Management, Inc.,
Minot, North Dakota 58703 Treasurer ND Capital, Inc., ND Resources, Inc., ND Tax-Free
54 Fund, Inc., ND Insured Income Fund, Inc., Montana
Tax-Free Fund, Inc., South Dakota Tax-Free Fund, Inc.,
and Integrity Fund of Funds, Inc.; Trustee, Chairman,
President, and Treasurer, Ranson Managed Portfolios;
Director, President, CEO, and Treasurer, The Ranson
Company, Inc., and Ranson Capital Corporation
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* "Interested person" as defined in the Investment Company Act of 1940
(1) Except as otherwise indicated below, each individual has held the
office(s) shown for the past five years.
Mssrs. Aas, Backes, Link, and Walstad were elected to the board of
trustees of Ranson Managed Portfolios on December 11, 1995, but did not
assume office until January 5, 1996.
Mssrs. Quist and Walstad were elected as directors and officers of the
Ranson Company, Inc., and Ranson Capital Corporation on January 5, 1996.
The Ranson Company, Inc., was dissolved on February 28, 1997.
Mssrs. Link, Quist, and Walstad were elected to the board of directors of
ND Insured Income Fund, Inc. ("NDIIF"), on November 27, 1990. Lyn Aas and
Orlin Backes were elected to the board on December 3, 1994, and March 31,
1995, respectively. Each of the named individuals served on the board
from the time he was first elected until NDIIF ceased operations as an
investment company in 1998.
(2) Mr. Aas resigned as a Director of ND Holdings, Inc., on August 17, 1994.
He was elected to the board of directors of Integrity Fund of Funds, Inc.,
on August 19, 1994, and to the boards of ND Tax-Free Fund, Inc., ND
Insured Income Fund, Inc., Montana Tax-Free Fund, Inc., and South
South Dakota Tax-Free Fund, Inc., on December 3, 1994. He has served on
the Board of Directors of the Fund since its inception.
(3) Mr. Backes was elected to the boards of directors of ND Tax-Free Fund,
Inc., ND Insured Income Fund, Inc., Montana Tax-Free Fund, Inc., South
Dakota Tax-Free Fund, Inc., and Integrity Fund of Funds, Inc., in 1995.
He has served on the Board of Directors of the Fund since its inception.
(4) Mr. Link has served on the boards of directors of ND Tax-Free Fund, Inc.,
ND Insured Income Fund, Inc., Montana Tax-Free Fund, Inc., South Dakota
Tax-Free Fund, Inc., and Integrity Fund of Funds, Inc., since their
inceptions. He has served on the Board of Directors of the Fund since its
inception.
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(5) Mr. Quist has served on the boards of directors of ND Tax-Free Fund, Inc.,
ND Insured Income Fund, Inc., Montana Tax-Free Fund, Inc., Integrity Fund
of Funds, Inc., since their inceptions. He was elected to the board of
South Dakota Tax-Free Fund, Inc., on April 7, 1995. He has served on the
Board of Directors of the Fund and as the vice president and secretary
of each of the funds in the group since their inceptions.
(6) Mr. Walstad has served on the boards of directors of ND Tax-Free Fund,
Inc., ND Insured Income Fund, Inc., Montana Tax-Free Fund, Inc., South
Dakota Tax-Free Fund, Inc., and Integrity Fund of Funds, Inc., since
their inceptions. He has served on the Board of Directors of the Fund
and as the president and treasurer of each of the funds in the group
since their inceptions.
Directors who are not an "interested person" as that term is defined in
the 1940 Act (the "disinterested directors") are paid an annual fee of $10,000
for serving on the boards of all of the funds in the group. Each fund's share
of the $10,000 annual fee is computed as follows: Each fund, including each
series of Ranson Managed Portfolios, pays $500 per disinterested director plus
a pro rata share of its total net assets. Mssrs. Quist and Walstad, the only
directors who are "interested persons," receive no compensation from the funds
for serving as directors or officers.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of the effective date of the Registration Statement, all of the
outstanding shares of Registrant will be owned by ND Capital, Inc. (the
"Underwriter"), a North Dakota corporation which is the Fund's principal
underwriter. The Underwriter is a subsidiary of ND Holdings, Inc., the
promoter of the Fund. The Underwriter's address is 1 North Main, Minot, North
Dakota 58703. The Underwriter will be able to control Registrant until others
purchase a number of shares sufficient to constitute a majority of Registrant's
outstanding shares. It is expected that as a result of the public offering
the percentage of Registrant's shares owned by the Underwriter will decrease
to less than 5%.
INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT ADVISER
ND Money Management, Inc. (the "Investment Adviser"), has been
retained under an Investment Advisory Agreement to act as the Fund's investment
adviser, subject to the authority of the Board of Directors. The Investment
Adviser is a wholly-owned subsidiary of ND Holdings, Inc., a corporation
organized under the laws of the State of North Dakota on September 22, 1987.
The Investment Adviser was incorporated under North Dakota law on August 19,
1988, and also serves as investment adviser for ND Tax-Free Fund, Inc.,
Montana Tax-Free Fund, Inc., South Dakota Tax-Free Fund, Inc., and Integrity
Fund of Funds, Inc. The address of the Investment Adviser is 1 North Main,
Minot, North Dakota 58703.
The Investment Adviser furnishes the Fund with investment advice and, in
general, supervises the management and investment program of the Fund. The
Investment Adviser furnishes at its own expense all necessary administrative
services, office space, equipment, and clerical personnel for servicing the
investments of the Fund and investment advisory facilities and executive and
supervisory personnel for managing the investments and effecting the portfolio
transactions of the Fund. In addition, the Investment Adviser pays the salaries
and fees of all officers and directors of the Fund who are affiliated persons of
the Investment Adviser. All other charges and expenses, as more fully described
in the Prospectus under EXPENSES, are paid by the Fund.
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Under the Investment Advisory Agreement, the Fund has agreed to pay the
Investment Adviser an annual fee, payable monthly, of 0.90% of the Fund's
average daily net assets.
The Investment Advisory Agreement provides that the Investment Adviser
will not be liable for any error of judgment or mistake of law or for any loss
suffered by the Fund in connection with the matters to which the Investment
Advisory Agreement relates, except a loss resulting from willful misfeasance,
bad faith, or gross negligence on the part of the Investment Adviser in the
performance of its duties or by reason of its reckless disregard of its
obligations and duties under the Investment Advisory Agreement.
The Investment Advisory Agreement continues in effect from year to year
as long as its continuation is approved at least annually by a majority of the
directors who are not parties to the Investment Advisory Agreement or interested
persons of any such party except in their capacity as directors of the Fund and
by the shareholders or the Board of Directors. It may be terminated at any time
upon 60 days' written notice by the Fund or by a majority vote of the
outstanding shares and will terminate automatically upon assignment.
Robert E. Walstad and Peter A. Quist, directors and officers of the Fund,
are also directors and officers of the Investment Adviser as indicated under
MANAGEMENT OF THE FUND.
CUSTODIAN, TRANSFER AGENT, AND ACCOUNTING SERVICES AGENT
First Western Bank & Trust, 900 South Broadway, Minot, North Dakota
58701, serves as custodian for the Fund's portfolio securities and cash. ND
Resources, Inc. (the "Transfer Agent"), a wholly-owned subsidiary of ND
Holdings, Inc., 1 North Main, Minot, North Dakota 58703, is the Fund's transfer
agent. The Transfer Agent, performs many of the Fund's clerical and
administrative functions, for which it is paid a monthly fee ranging from .16
of 1% of the net asset value of all outstanding Fund shares up to $10 million
down to .09 of 1% for net assets in excess of $50 million. The Transfer Agent
also provides internal accounting and related services for the Fund, for which
it is paid a monthly fee of $2,000 plus 0.05% of the Fund's average daily net
assets on an annual basis for the first $50 million down to 0.01% for net
assets in excess of $500 million.
ACCOUNTANT AND REPORTS TO SHAREHOLDERS
The Fund's independent public accountant, Brady, Martz & Associates,
P.C., 24 West Central Avenue, Minot, North Dakota 58701, audits and reports on
the Fund's annual financial statements, reviews certain regulatory reports and
the Fund's federal income tax return, and performs other professional
accounting, auditing, tax, and advisory services when engaged to do so by the
Fund. Shareholders will receive annual audited financial statements and
semiannual unaudited financial statements.
PORTFOLIO TRANSACTIONS
Subject to policies established by the Fund's Board of Directors, ND
Money Management, Inc. (the "Investment Adviser"), is responsible for the
execution of the Fund's portfolio transactions. In executing portfolio
transactions, the Investment Adviser seeks to obtain the best net results for
the Fund. With respect to purchases of shares of underlying funds subject to a
front-end sales load at the time of purchase ("load fund shares"), the
Investment Adviser anticipates directing, to the extent possible, substantially
all of the Fund's orders to ND Capital, Inc. (the "Underwriter"). Where the
Underwriter acts as the dealer with respect to purchases of load fund shares, it
retains dealer reallowances on those purchases up to a maximum of 1% of the
public offering price of the shares. The Underwriter is not designated as the
dealer on any sales where such
B-7
reallowance exceeds 1% of the public offering price. In the event the
Underwriter is unable to execute a particular transaction, the Investment
Adviser will direct such order to another broker-dealer.
Where underlying fund shares are purchased through the underwriter,
the Underwriter may also receive Rule 12b-1 (in an amount not to exceed 0.25%
of net assets) or service fees from the underlying funds or their underwriters
or sponsors in accordance with the normal arrangements of those funds. Rule
12b-1 fees and dealer reallowances as described in the preceding paragraph
will be aggregated for determining compliance with Section 17(e)(2) of the
1940 Act.
The Underwriter may retain brokerage commissions on portfolio
transactions of underlying funds held in the Fund's portfolio, including funds
which have a policy of considering sales of their shares in selecting broker-
dealers for the execution of their portfolio transactions. The payment of
brokerage commissions and Rule 12b-1 fees to the Underwriter on such
transactions is not a factor considered by the Investment Adviser in selecting
or retaining an underlying fund for investment.
Under the 1940 Act, a mutual fund must sell its shares at the price
(including sales load, if any) described in its prospectus, and current rules
under the 1940 Act do not permit negotiations of sales loads. The Investment
Adviser takes into account the amount of the applicable sales load, if any, when
it is considering whether or not to purchase shares of an underlying fund. The
Investment Adviser anticipates investing most of the assets of the Fund in funds
that impose no front-end sales load or impose a front-end sales load on the Fund
of no more than 1% of the public offering price. The Investment Adviser, to the
extent possible, seeks to reduce the sales load imposed by purchasing shares
pursuant to (i) letters of intent, permitting purchases over time; (ii) rights
of accumulation, permitting it to obtain reduced sales charges as it purchases
additional shares of an underlying fund; and (iii) rights to obtain reduced
sales charges by aggregating its purchases of several funds within a "family" of
mutual funds. The Investment Adviser also takes advantage of exchange or
conversion privileges offered by any "family" of mutual funds.
A factor in the selection of brokers is the receipt of research,
analysis, advice, and similar services. The extent to which commissions reflect
an element of value for research services cannot be presently determined. To the
extent that research services of value are provided by broker-dealers with or
through whom the Investment Adviser places the Fund's portfolio transactions,
the Investment Adviser may be relieved of expenses that it might otherwise bear.
Any research and other services provided by brokers to the Investment Adviser or
the Fund are considered to be in addition to, and not in lieu of, services
required to be performed by the Investment Adviser under the Investment Advisory
Agreement.
Another important factor in the selection of brokers is the sale of Fund
shares. Where all major factors are equal, the fact that a broker has sold Fund
shares may be considered in placing portfolio transactions. The Fund expects
that purchases and sales of money market instruments will usually be principal
transactions and purchases and sales of other debt securities may be principal
transactions. Thus, the Fund will normally not pay brokerage commissions in
connection with those transactions. Money market instruments are generally
purchased directly from the issuer or from an underwriter or market maker for
the securities, and other debt securities may be purchased in a similar manner.
Purchases from underwriters include an underwriting commission or concession,
and purchases from dealers serving as market makers include the spread between
the bid and asked price. Where transactions are made in the over-the-counter
market, the Fund will deal with the primary market makers unless more favorable
prices are obtainable elsewhere.
Because of the possibility of further regulatory developments affecting
the securities exchanges and brokerage practices generally, the foregoing
practices may be modified.
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Although there are no restrictions on portfolio turnover, the portfolio
turnover rate of the Fund is not expected to exceed 100% annually. A 100%
annual turnover rate would occur, for example, if all the investments in the
Fund's portfolio (exclusive of securities with less than one year to maturity)
were replaced once in a period of one year. To the extent that the Fund
purchases shares of load funds, a higher turnover rate would result in
correspondingly higher sales loads paid by the Fund. Trading also may result in
the realization of net short-term capital gains which would not otherwise be
realized, and shareholders are taxed on such gains when distributed by the Fund
at ordinary income tax rates. See Dividends and Taxes in the Prospectus. There
is no limit on the portfolio turnover rates of the underlying funds in which
the Fund may invest.
PURCHASE AND REDEMPTION OF SHARES
Fund shares are sold at their public offering price, which is the net
asset value next determined after an order and payment are received in proper
form.
The minimum initial investment is $1,000 ($100 for the Monthomatic
Investment Plan and $250 for an Individual Retirement Account), and the
minimum subsequent investment is $50, but such minimum amounts may be changed
at any time.
Upon receipt of a request for redemption, shares will be redeemed by the
Fund at the net asset value next determined following receipt of a properly
executed request with any required documents, less any applicable contingent
deferred sales charge as described in the Prospectus.
The elimination of the contingent deferred sales charge for redemptions
by certain classes of persons as described in the Prospectus is provided because
of anticipated economies in sales and sales related efforts.
The Fund may suspend the right of redemption or delay payment more than
seven days (a) during any period when the New York Stock Exchange is closed for
trading (other than customary weekend and holiday closings), (b) when trading in
the markets the Fund normally utilizes is restricted or an emergency exists as
determined by the Securities and Exchange Commission so that disposal of the
Fund's investments or determination of its net asset value is not reasonably
practicable, or (c) for such other periods as the Securities and Exchange
Commission by order may permit for protection of the Fund's shareholders. The
New York Stock Exchange is currently closed on the following holidays: New
Year's Day, Martin Luther King Day, Presidents' Day, Good Friday, Memorial Day,
the Fourth of July, Labor Day, Thanksgiving, and Christmas. The amount received
by a shareholder upon redemption may be more or less than the amount paid for
such shares depending on the market value of the Fund's portfolio securities at
the time. When the Fund is requested to redeem shares for which it may not have
yet received good payment (e.g., cash or certified check on a United States
bank), it may delay the mailing of a redemption check until such time as it has
assured itself that good payment has been collected for the purchase of such
shares (which will be within 15 calendar days of the purchase date).
UNDERWRITER
ND Capital, Inc. (the "Underwriter"), a subsidiary of ND Holdings, Inc.,
is the principal underwriter of the Fund's shares in a continuous public
offering.
Under the terms of the Distribution Agreement between the Fund and the
Underwriter, the Underwriter has agreed to use its best efforts to solicit
orders for the sale of the Fund's shares and to undertake such advertising and
promotion as it believes is reasonable in connection with such solicitation.
In consideration of
B-9
those services, the Fund had agreed to pay the Underwriter the proceeds from
any contingent deferred sales charges imposed on the redemption of shares.
The Underwriter also may receive dealer reallowances (up to a maximum of
1% of the public offering price) and/or distribution payments and/or service
fees on purchases by the Fund of shares of underlying funds sold with a sales
load and/or which have a distribution plan and/or service fee.
The Underwriter, in turn, pays a sales commission currently equal to
4% of the amount invested (1% on sales of $1 million or more) to dealers who
sell shares (excluding sales to investors exempt from the contingent deferred
sales charge). As a further inducement to the sale of Fund shares and in
recognition of services provided to shareholders, the Underwriter may also pay
service fees to dealers at the annual rate of up to 0.25% of the average net
assets which are attributable to shareholders of the Fund for whom such dealers
are designated as the dealers of record.
The Distribution Agreement must be approved at least annually by the
Fund's Board of Directors and a vote of a majority of the Fund's directors who
are not "interested persons" (as defined in the 1940 Act) of the Fund and who
have no direct or indirect financial interest in the Distribution Agreement (the
"Qualified Directors"), by vote cast in person at a meeting called for the
purpose of voting on such approval. The Distribution Agreement will terminate
automatically in the event of its assignment and is terminable with respect to
the Fund without penalty on 60 days' written notice by vote of a majority of the
Qualified Directors or by vote of a majority (as defined in the 1940 Act) of the
outstanding voting securities of the Fund.
CALCULATION OF PERFORMANCE DATA
The Fund may publish certain performance figures in advertisements from
time to time. These performance figures may include yield and total return
figures.
YIELD
Yield reflects the income per share deemed earned by the Fund's portfolio
investments. Yield is determined by dividing the net investment income per share
deemed earned during the preceding 30-day period by the maximum offering price
per share on the last day of the period and annualizing the result according to
the following formula:
a-b /6/
YIELD = 2 [(--- + 1) - 1]
cd
Where:
a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during the period
that were entitled to receive dividends
d = the maximum offering price per share on the last day of the period
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TOTAL RETURN
Total return is the percentage change in the value of a hypothetical
investment that has occurred in the indicated time period, taking into account
the imposition of various fees, except the contingent deferred sales charge, and
assuming the reinvestment of all dividends and distributions. Cumulative total
return reflects the Fund's performance over a stated period of time and is
computed as follows:
ERV - P = Total Return
-------
P
Where:
ERV = ending redeemable value of a hypothetical $1,000 payment made at
the beginning of the base period, assuming reinvestment of all
dividends and distributions
P = a hypothetical initial payment of $1,000
Average annual total return reflects the hypothetical annually
Compounded return that would have produced the same cumulative total return
if the Fund's performance had been constant over the entire period and is
computed according to the following formula:
P( 1 + T)n = ERV
Where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment made at
the beginning of the base period, assuming reinvestment of all
dividends and distributions
All performance figures are based on historical results and are not
intended to indicate future performance.
APPENDIX--DESCRIPTION OF COMMERCIAL PAPER AND BOND RATINGS
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC. ("MOODY'S"), SHORT-TERM DEBT
RATINGS
Prime-1. Issuers (or supporting institutions) rated Prime-1 ("P-1") have
a superior ability for repayment of senior short-term debt obligations. P-1
repayment ability will often be evidenced by many of the following
characteristics: leading market positions in well-established industries; high
rates of return on funds employed; conservative capitalization structure with
moderate reliance on debt and ample asset protection; broad margins in earnings
coverage of fixed financial charges and high internal cash generation; well-
established access to a range of financial markets and assured sources of
alternate liquidity.
B-11
Prime-2. Issuers (or supporting institutions) rated Prime-2
("P-2") have a strong ability for repayment of senior short-term debt
obligations. This will normally be evidenced by many of the characteristics
cited above but to a lesser degree. Earnings trends and coverage ratios,
while sound, may be more subject to variation. Capitalization characteristics,
while still appropriate, may be more affected by external conditions. Ample
alternate liquidity is maintained.
DESCRIPTION OF STANDARD & POOR'S RATINGS GROUP ("STANDARD & POOR'S") COMMERCIAL
PAPER RATINGS
A. Issues assigned this highest rating are regarded as having the
greatest capacity for timely payment. Issues in this category are delineated
with the numbers 1, 2, and 3 to indicate the relative degree of safety. A-1.
This designation indicates that the degree of safety regarding timely payment
is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus (+) sign designation. A-2. Capacity for
timely payment on issues with this designation is satisfactory. However, the
relative degree of safety is not as high as for issues designated A-1.
DESCRIPTION OF MOODY'S LONG-TERM DEBT RATINGS
Aaa. Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt edged." Interest payments are protected by a large or by an
exceptionally stable margin, and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues; Aa.
Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high-grade
bonds. They are rated lower than the best bonds, because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risk appear somewhat larger than the Aaa securities; A. Bonds
which are rated A possess many favorable investment attributes and are
considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment some time in the future; Baa. Bonds
which are rated Baa are considered as medium-grade obligations (i.e., they are
neither highly protected nor poorly secured). Interest payments and principal
security appear adequate for the present, but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well; Ba. Bonds which are rated Ba are judged to
have speculative elements; their future cannot be considered as well-assured.
Often the protection of interest and principal payments may be very moderate and
thereby not well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class; B. Bonds which are
rated B generally lack characteristics of the desirable investment. Assurance of
interest and principal payments or of maintenance of other terms of the contract
over any long period of time may be small; Caa. Bonds which are rated Caa are of
poor standing. Such issues may be in default or there may be present elements of
danger with respect to principal or interest; Ca. Bonds which are rated Ca
represent obligations which are speculative in a high degree. Such issues are
often in default or have other marked shortcomings; C. Bonds which are rated C
are the lowest rated class of bonds, and issues so rated can be regarded as
having extremely poor prospects of ever attaining any real investment standing.
Note: Moody's applies numerical modifiers 1, 2, and 3 in each generic rating
classification from Aa to B. The modifier 1 indicates that the company ranks in
the higher end of its generic rating category; the modifier 2 indicates a mid-
range ranking; and the modifier 3 indicates that the company ranks in the lower
end of its generic rating category.
B-12
DESCRIPTION OF STANDARD & POOR'S CORPORATE DEBT RATINGS
AAA. Debt rated AAA has the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is extremely strong; AA.
Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the higher rated issues only in small degree; A. Debt rated A
has a strong capacity to pay interest and repay principal although it is
somewhat more susceptible to the adverse effects of changes in circumstances
and economic conditions than debt in higher rated categories; BBB. Debt rated
BBB is regarded as having an adequate capacity to pay interest and repay
principal. Whereas it normally exhibits adequate protection parameters, adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity to pay interest and repay principal for debt in this category
than in higher rated categories; BB, B, CCC, CC, C. Debt rated BB, B, CCC, CC,
and C is regarded, on balance, as predominantly speculative with respect to
capacity to pay interest and repay principal in accordance with the terms of
the obligation. BB indicates the lowest degree of speculation and C the highest
degree of speculation. While such debt will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or
major risk exposures to adverse conditions; BB. Debt rated BB has less
near-term vulnerability to default than other speculative issues. However, it
faces major ongoing uncertainties or exposure of adverse business, financial,
or economic conditions which could lead to inadequate capacity to meet timely
interest and principal payments. The BB rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied BBB- rating;
B. Debt rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The B rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied BB or BB-
rating; CCC. Debt rated CCC has a currently identifiable vulnerability to
default and is dependent upon favorable business, financial, and economic
conditions to meet timely payment of interest and repayment of principal.
In the event of adverse business, financial, or economic conditions, it is not
likely to have the capacity to pay interest and repay principal. The CCC rating
category is also used for debt subordinated to senior debt that is assigned an
actual or implied B or B-rating; CC. The rating CC is typically applied to debt
subordinated to senior debt that is assigned an actual or implied CCC rating;
C. The rating C is typically applied to debt subordinated to senior debt which
is assigned an actual or implied CCC- debt rating. The C rating may be used to
cover a situation where a bankruptcy petition has been filed, but debt service
payments are continued; CI. The rating CI is reserved for income bonds on which
no interest is being paid; D. Debt rated D is in payment default. The D rating
category is used when interest payments or principal payments are not made on
the date due even if the applicable grace period has not expired, unless
Standard & Poor's believes that such payments will be made during such grace
period. The D rating also will be used upon the filing of a bankruptcy petition
if debt service payments are jeopardized.
B-13
INTEGRITY SMALL-CAP FUND
OF FUNDS, INC.
MINOT, NORTH DAKOTA
STATEMENT OF ASSETS AND LIABILITIES
AS OF
SEPTEBMER 28, 1998
AND
REPORT OF INDEPENDENT ACCOUNTANT
F-1
INTEGRITY SMALL-CAP FUND OF FUNDS, INC.
TABLE OF CONTENTS
Pages
-----
REPORT OF INDEPENDEDT ACCOUNTANT 1
FINANCIAL STATEMENT
Statement of Assets and Liabilities 2
Notes to Financial Statement 3
F-2
BRADY MARTZ LOGO
REPORT OF INDEPENDENT ACCOUNTANT
To The Board of Directors
and Shareholders
Integrity Small-Cap Fund of Funds, Inc.
We have audited the accompanying statement of assets and liabilities of
Integrity Small-Cap Fund of Funds, Inc. (the Fund) as of September 28, 1998.
This financial statement is the responsibility of the Fund's management.
Our responsibility is to express an opinion on this financial statement based
on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the statement of assets and
liabilities is free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
statement of assets and liabilities. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statement referred to above presents fairly, in
all material respects, the financial position of Integrity Small-Cap Fund of
Funds, Inc., as of September 28, 1998, in conformity with generally accepted
Accounting principles.
/Brady, Martz & Associates/
BRADY, MARTZ & ASSOCIATES, P.C.
September 29, 1998
F-3
INTEGRITY SMALL-CAP FUND OF FUNDS, INC.
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 28, 1998
ASSETS
CASH $ 100,000
---------
TOTAL ASSETS $ 100,000
---------
---------
LIABILITIES
TOTAL LIABILITIES $ 0
---------
---------
NET ASSETS
Net asset (applicable to 10,000 shares, $.0001 par value,
issued and outstanding; 1,000,000,000 shares authorized) $ 100,000
---------
---------
Net asset value per share $ 10.00
---------
---------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
F-4
INTEGRITY SMALL-CAP FUND OF FUNDS, INC.
NOTES TO STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 28, 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Integrity Small-Cap Fund of Funds, Inc. (the Fund) was incorporated
under the laws of the State of North Dakota and has had no operations
to date other than matter relating to its organization and
registration as a diversified, open-end management investment company
under the Investment Company Act of 1940, as amended, and the sale
and issuance of 10,000 Fund shares to ND Capital, Inc. for $100,000.
The significant accounting policies of the Fund include the following:
Federal income taxes - The Fund intends to qualify as a "regulated
investment company" and as such (and by complying with the
applicable provisions of the Internal Revenue Code of 1986, as
amended) will not be subject to federal income tax on taxable
income (including realized capital gains) that is distributed to
shareholders.
NOTE 2 - INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
ND Money Management, Inc., the Fund's investment adviser, ND Capital,
Inc., the Fund's underwriter, and ND Resources, Inc., the Fund's
transfer agent are subsidiaries of ND Holdings, Inc., the Fund's
sponsor. Certain officers and directors of the Fund are also officers
of the above companies.
ND Holdings, Inc., has agreed to absorb the organization and
registration fees associated with the Fund's initial filing.
The Fund has engaged ND Money Management, Inc. to provide investment
advisory and management services to the Fund. The Investment Advisory
Agreement provides for fees to be computed at an annual rate of .90%
of the Fund's average daily net assets.
ND Capital, Inc. (Capital) is the Fund's principal underwriter. The
Fund will pay Capital service fees computed at an annual rate of .25%
of the Fund's average daily net assets. Capital, in turn, may pay
dealers service fees for personal services to shareholders and/or
maintenance of shareholder accounts.
ND Holdings, Inc. and its subsidiaries (Holdings) also serve as the
Fund's administrator. As such, Holdings will administer the "other
expenses" of the Fund. These expenses include transfer agent,
custodian, legal, accounting and similar fees. Holdings has estimated
the "other expenses" to be charged to the Fund at an annual rate of
.45% of the Fund's average net assets.
F-5
INTEGRITY SMALL-CAP FUND OF FUNDS, INC.
PART C
OTHER INFORMATION
Item 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
Included in Part B of the Registration Statement:
Report of Independent Accountant, dated September 29, 1998
Statement of Assets and Liabilities as of September 28, 1998
Notes to Statement of Assets and Liabilities
Schedules II through VII are omitted because inapplicable.
(b) Exhibits
(1) Articles of Incorporation
(2) Bylaws
(4) Specimen Copy of Share Certificate
(5) Form of Investment Advisory Agreement
(6) (a) Form of Distribution Agreement
(6) (b) Form of Dealer Sales Agreement
(8) Form of Custodian Agreement
(9) (a) Form of Transfer Agency Agreement
(9) (b) Form of Accounting Services Agreement
(10) Opinion of Pringle & Herigstad, P. C.
(11) Consent of Independent Accountant
(13) Form of Purchase Agreement
__________________
C-1
Item 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Not applicable
Item 26. NUMBER OF HOLDERS OF SECURITIES
TITLE OF CLASS NUMBER OF RECORD HOLDERS
Shares, par value 1
$.0001 per share (As of the effective date of
the Registration Statement)
Item 27. INDEMNIFICATION
Section 4 of the Distribution Agreement [Exhibit (6)(a)] provides
for the indemnification of ND Capital, Inc., Registrant's principal under-
writer, against certain losses. Section 12 of the Transfer Agency Agreement
[Exhibit 9] provides for the indemnification of ND Resources, Inc.,
Registrant's transfer agent, against certain losses.
Indemnification of directors, officers, employees, and agents of
Registrant is required under Section 10-19.1-91 of the North Dakota Century
Code. In addition, Registrant has obtained an insurance policy on behalf of
directors and officers against any liability asserted against and incurred by
the person in or arising from that person's official capacity to the extent
permitted by law.
In no event will Registrant indemnify its directors, officers,
employees, or agents against any liability to which such person would otherwise
be subject by reason of his willful misfeasance, bad faith, gross negligence in
the performance of his duties, or by reason of his reckless disregard of the
duties involved in the conduct of his office arising under his agreement with
Registrant.
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers, and controlling persons of
Registrant pursuant to the foregoing provisions, or otherwise, Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by Registrant of expenses incurred or
paid by a director, officer, or controlling person of Registrant in the
successful defense of any action, suit, or proceeding) is asserted by such
director, officer, or controlling person in connection with the securities being
registered, Registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
Anything in the North Dakota Business Corporation Act (Chapters
10-19.1 through 10-23 of the North Dakota Century Code), the Fund's Articles of
Incorporation or Bylaws, or the Investment Advisory, Distribution, or Transfer
Agency Agreements to the contrary notwithstanding, Registrant will comply in all
respects with the provisions of Investment Company Act Release No. 11330
(September 4, 1980) concerning indemnification.
C-2
Item 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
ND Money Management, Inc. (the "Investment Adviser"), is a wholly-
owned subsidiary of ND Holdings, Inc. ("Holdings"), Registrant's promoter. The
Investment Adviser was organized under the laws of the State of North Dakota on
August 19, 1988, and also serves as investment adviser for ND Tax-Free Fund,
Inc. ("NDTFF"), Montana Tax-Free Fund, Inc. ("MTFF"), South Dakota Tax-Free
Fund, Inc. ("SDTFF"), and Integrity Fund of Funds, Inc. ("IFF").
The officers and directors of the Investment Adviser are Robert E.
Walstad and Peter A. Quist. Mssrs. Walstad and Quist are also officers and
directors of Holdings, ND Capital, Inc. ("Capital"), Registrant's principal
underwriter and initial shareholder, ND Resources, Inc. ("Resources"),
Registrant's transfer agent, and accounting services agent, NDTFF, MTTFF,
SDTFF, INFOF, and Registrant. Mr. Walstad is also an officer and a trustee of
Ranson Managed Portfolios ("RMP"), and Mr. Quist is an officer of RMP.
The Investment Adviser, Holdings, Capital, Resources, NDTFF, MTFF,
SDTFF, IFF, RMP, and Registrant have their principal address at 1 North Main,
Minot, North Dakota 58703.
Item 29. PRINCIPAL UNDERWRITERS
(a) Other investment companies for which Registrant's principal
underwriter also acts as principal underwriter, depositor, or investment
adviser: ND Tax-Free Fund, Inc., Montana Tax-Free Fund, Inc., South Dakota
Tax-Free Fund, Inc., and Integrity Fund of Funds, Inc.
(b) Information concerning each director, officer, or partner of the
principal underwriter:
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES POSITIONS AND OFFICES
BUSINESS ADDRESS WITH UNDERWRITER WITH REGISTRANT
------------------------- ----------------------- --------------------------
<S> <C> <C>
Robert E. Walstad President, Treasurer, President, Treasurer,
1 North Main and Director and Director
Minot, North Dakota 58703
Peter A. Quist Vice President, Secretary, Vice President, Secretary,
1 North Main and Director and Director
Minot, North Dakota 58703
</TABLE>
(c) Not applicable
Item 30. LOCATION OF ACCOUNTS AND RECORDS
First Western Bank & Trust, 900 South Broadway, Minot, North Dakota
58701, serves as custodian of Registrant and maintains all records related to
that function. ND Resources, Inc. ("Resources"), serves as transfer agent,
dividend disbursing, administrative, and accounting services agent of
Registrant and maintains all records related to those functions. ND Capital,
Inc. ("Capital"), serves as the principal underwriter of Registrant and
maintains all records related to that function. ND Money Management, Inc.
("Money Management"), serves as Registrant's investment adviser and
C-3
maintains all records related to that function. Registrant maintains all of its
corporate records. The address of Resources, Capital, Money Management, and
Registrant is 1 North Main, Minot, North Dakota 58703.
Item. 31. MANAGEMENT SERVICES
Not applicable
Item 32. UNDERTAKINGS
(a) Registrant undertakes to file a post-effective amendment,
using financial statements which need not be certified, within four to six
months from the effective date of this Registration Statement.
(b) If requested to do so by the holders of at least 10% of
Registrant's outstanding shares, Registrant undertakes to call a meeting of
shareholders for the purpose of voting upon the question of removal of a
director or directors and to assist in communications with other shareholders
in the manner described in Section 16(c) of the Investment Company Act of 1940
SIGNATURES AND POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Minot, State of North Dakota, on the fifteenth day
of September, 1998.
INTEGRITY SMALL-CAP FUND OF FUNDS, INC.
/s/ Robert E. Walstad
By ____________________________
Robert E. Walstad
President
The undersigned each hereby constitutes and appoints Robert E. Walstad
his attorney-in-fact and agent, for him and in his name, place, and stead, in
any and all amendments (including post-effective amendments) to the
Registration Statement for Integrity Small-Cap Fund of Funds, Inc., a
North Dakota corporation, and to file the same with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorney-in-fact
and agent or any of them, or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
C-4
Pursuant to the requirements of the Securities Act of 1933, and the
Investment Company Act of 1940, this Registration Statement and Power of
Attorney have been signed below by the following persons in the capacities
and on the date indicated.
<TABLE>
<S> <C>
/s/ Lynn W. Aas
____________________________________ September 15, 1998
Lynn W. Aas
Director
/s/ Orlin W. Backes
____________________________________ September 15, 1998
Orlin W. Backes
Director
/s/ Arthur A. Link
____________________________________ September 15, 1998
Arthur A. Link
Director
/s/ Peter A. Quist
____________________________________ September 15, 1998
Peter A. Quist
Director, Vice President, and Secretary
/s/ Robert E. Walstad
____________________________________ September 15, 1998
Robert E. Walstad
Director, President, and Treasurer
</TABLE>
C-5
EXHIBIT (1)
SEAL
ARTICLES OF INCOPRORATION - NORTH DAKOTA BUSINESS FOR OFFICE USE ONLY
OR FARMING CORPORATION Validation
NORTH DAKOTA SECRETARY OF STATE
SFN 16812 (6-89)
SEE PAGE 4 FOR FILING AND MAILING INSTRUCTIONS
FILE No. 13905400
We, the undersigned natural persons of the age of eighteen years or more,
Acting as incorporators of a corporation organized under North Dakota Business
Corporation Act, adopt the following Articles of Incorporation for such
Corporation.
Article 1. The name of said Corporation shall be: Integrity Small-Cap
Fund of Funds, Inc.
Article 2. The period of its duration is perpetual.
Article 3. The purpose for which the Corporation is organized are
general business purposes, OR:
To engage in business as a management investment company
registered under the Investment Company Act of 1940.
To do everything necessary, proper, advisable, or
convenient for the accomplishment of the above purpose and
to do every other act and thing incidental thereto.
Article 4. A. Aggregate number of shares the corporation has
Authority to issue
One billion (1,000,000,000) shares, all one class
B. Par value per share authorized by corporation
One-tenth of one mill ($.0001) each
C. If shares are divided into classes, they are identified
as follows:
CLASS NO. OF SHARES PAR VALUE PER SHARE
Article 5. A. Name of Registered Agent
Peter A. Quist
B. Social Security or Federal ID # of Registered Agent
###-##-####
C. Address of Registered Office City State Zip Code
1 North Main Minot ND 58703
D. Address of Executive Office (if different than "C")
E. The articles of incorporation are accompanied by a
signed consent of the registered agent with a filing
fee of $10.
Article 6. Other Provisions by which this corporation shall be
Governed: (if none, insert "none")
No shareholder shall be entitled as a matter of right to
subscribe for a purchase or receive any new or additional
issue of shares or securities convertible into shares,
whether now or hereafter authorized or whether issued for
money, for a consideration other that money, or by way of
dividend.
Any action, other than action requiring shareholder
approval, may be taken by written action signed by the
number of directors that would be required to take the same
action at a meeting of the board of directors at which all
directors were present.
The number of directors of the corporation shall be five,
which number may be changed in accordance with the bylaws
of the corporation. The names of the directors who shall
serve until the first regular meeting of shareholders or
until their successors are elected and qualify are:
Lynn Aas
Orlin W. Backes
Arthur A. Link
Peter A. Quist
Robert E. Walstad
SFN 16812 Page 2
Article 7. A. The name, social security number, and address of each
incorporator:
SOCIAL SECURITY
NAME NUMBER ADDRESS CITY STATE ZIP
Peter A. Quist ###-##-#### 1 North Main Minot, ND 58703
B. SIGNATURES
I (We), the above named incorporator(s), have read the
Foregoing Articles of Incorporation, know the contents,
And believe the statements made therein to be true.
Date September 10, 1998
Signature /Peter A. Quist/
Article 8. FEES:
Filing $30.00
Consent of Registered Agent $10.00
Minimum License Fee $50.00
Additional License Fees
(Equal to $10.00 for every additional
$10,000 in excess of $50,000)
SEE INSTRUCTIONS ON PAGE 4
OFFICE USE ONLY
Certificate No.
Date Filed
9-10/98
Fee Paid
Filed By
CO
16812 Page 3
SEAL
REGISERED AGENT FOR OFFICE USE ONLY
CONSENT TO SERVE ID # 13905400
SECRETARY OF STATE File #
SFN 7974 (9-97) WO # 650977
Filed 9-10/98 By CO
SEE REVERSE SIDE FOR FILING AND MAILING INSTRUCTIONS
1. FILING FEE: $10.00
TYPE OR PRINT LEGIBLY
2. Name of the organization for which the registered agent is to serve
(corporation, limited liability company, limited liability partnership or
real estate investment trust)
Integrity Small-Cap Fund of Funds, Inc.
3. A. Name of registered agent
Peter A. Quist
B. Registered agent is (Check one) C. Federal ID # or social
/X/ An individual North Dakota resident # or registered agent
/ / A corporation ###-##-####
/ / A limited liability company
/ / A limited liability partnership
4. The undersigned, as registered agent, or as authorized to sign on behalf of
the registered agent, consents to act in the capacity of registered agent
until removed or until a resignation is submitted to the Secretary of State
in accordance with North Dakota laws.
/Peter A. Quist/ 9-10-98
----------------------------------------------
Original signature of registered agent Date
State of North Dakota
SECRETARY OF STATE
(SEAL)
CERTIFICATE OF INCORPORATION
OF
INTEGRITY SMALL-CAP FUND OF FUNDS, INC.
The undersigned, as Secretary of State of the State of North Dakota, hereby
certifies that Articles of Incorporation for the incorporation of
INTEGRITY SMALL-CAP FUND OF FUNDS, INC.
Duly signed and verified pursuant to the North Dakota statutes governing a
North Dakota BUSINESS CORPORATION, have been received in this office and are
found to conform to law.
ACCORDINGLY the undersigned, as such Secretary of State, and by virtue of
The authority vested in him by law, hereby issues this Certificate of
Incorporation to
INTEGRITY SMALL-CAP FUND OF FUNDS, INC.
Effective date of incorporation: September 10, 1998
Issued: September 10, 1998
/Alvin A. Jaeger/
Alvin A. Jaeger
Secretary of State
EXHIBIT 2
BYLAWS
OF
INTEGRITY SMALL-CAP FUND OF FUNDS, INC.
Except as otherwise expressly provided in these bylaws or in the articles of
incorporation or as required under any federal laws and rules and regulations
to which the corporation is subject, the management, business, and affairs of
the corporation shall be governed by and conducted in accordance with the
provisions of the North Dakota Business Corporation Act.
ARTICLE I
OFFICES
The corporation shall have offices at such places either within or without
the State of North Dakota as the board of directors may determine.
ARTICLE II
SHAREHOLDERS
Section 1. Regular Meetings. Regular meetings of shareholders may be held
on an annual or other less frequent basis, but need not be held unless required
by law. Regular meetings shall be held on a date and at a time and place,
either within or without the State of North Dakota, as the board of directors
shall determine.
Section 2. Quorum. The holders of one-third of the shares entitled to vote
at a meeting constitute a quorum for the transaction of business.
ARTICLE III
BOARD OF DIRECTORS
Section 1. Number. The business and affairs of the corporation shall be
managed by a board of directors consisting of three or more directors. The
number of directors may be determined either by the vote of a majority of the
entire board or by vote of the shareholders and initially shall be five.
Section 2. Election and Qualifications. The directors of the corporation,
other than the first board of directors named in the articles of incorporation,
shall be elected by the shareholders for indefinite terms that expire at the
next regular meeting of the shareholders. Directors hold office until
successors are elected and have qualified or until their earlier death,
resignation, removal, or disqualification. Vacancies on the board occurring
between meetings of the shareholders may be filled in accordance with the
provisions of the North Dakota Business Corporation Act. Directors need not
be residents of the State of North Dakota or shareholders of the corporation.
Section 3. Regular Meetings. Regular meetings of the board of directors
may be held at such time and place, either within or without the State of North
Dakota, as the board may determine, and no notice shall be required for regular
meetings.
Section 4. Special Meetings. Special meetings of the board of directors
may be called by or at the request of the president or any two directors.
Notice of the date, time, and place of special meetings shall be given to each
director at least forty-eight hours prior to the meeting, unless the notice is
given orally or delivered in person, in which case it shall be given at least
twenty-four hours prior to the meeting.
Section 5. Special Actions. Anything in the second paragraph of Article 6
of the articles of incorporation to the contrary notwithstanding, any action of
the board of directors required in connection with an investment advisory or a
principal underwriting agreement must comply with the provisions of the
Investment Company Act of 1940 and any rules and regulations adopted
thereunder.
ARTICLE IV
OFFICERS
Section 1. Enumeration of Offices. The officers of the corporation shall
be a president, one or more vice presidents (the number thereof to be
determined by the board of directors), a secretary, and a treasurer, each of
whom shall be elected by the board of directors. The board of directors may
also appoint or elect any other officers, assistant officers, and agents that
it may deem necessary. Any two or more offices may be held by the same person.
Section 2. Election and Term of Office. The officers shall be elected by
the board of directors. Unless otherwise provided by the board of directors,
each officer shall hold office until the first meeting of the board of
directors following the next election of directors and until a successor is
elected and has qualified or until the earlier death, resignation, removal, or
disqualification of the officer.
Section 3. Powers and duties. The powers and duties of the several
officers shall be as provided from time to time by resolution or other
directive of the board of directors. In the absence of such provisions, the
respective officers shall have the powers and shall discharge the duties
customarily and usually held and performed by like officers of corporations
similar in organization and business purposes to this corporation.
Section 4. Salaries. The salaries of the officers shall be fixed from time
to time by the board of directors, and no officer shall be prevented from
receiving a salary by reason of the fact that he is also a director of the
corporation.
ARTICLE V
FISCAL YEAR
The fiscal year of the corporation shall be any period of twelve
Consecutive months which the board of directors may designate by resolution
or other directive.
Adopted this 15 day of September, 1998.
IN TESTIMONY WHEREOF, witness my signature hereto this 15 day of September,
1998.
/Peter A. Quist/
Peter A. Quist
Secretary
SEAL
NUMBER SHARES
000
INTEGRITY SMALL-CAP FUND OF FUNDS, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF NORTH DAKOTA
SEE REVERSE SIDE FOR CERTAIN DEFINITIONS.
Cusip No.: ACCOUNT NO.:
SOC. SEC.:
THIS IS TO CERTIFY THAT
is the owner of ************** ****************fully paid and nonassessable
shares of the par value of one-tenth of one mill ($.0001) of INTEGRITY SMALL-
CAP FUND OF FUNDS, INC., transferable on the books of the corporation by the
holder hereof, in person or by duly authorized attorney, upon surrender of this
certificate property endorsed. This certificate and the shares represented
hereby are subject to the Articles of Incorporation and Bylaws of the
corporation as from time to time amended. This certificate is not valid until
countersigned by the Transfer Agent.
WITNESS the signatures of the corporation's duly authorized officers or
facsimiles thereof this day of month year.
Countersigned
By __________________________ ND Resources, Inc.
President Transfer Agent
By __________________________ By ______________________
Secretary Authorized Signature
SEAL
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations.
TEN COM - as tenants in common UGMA/UTMA - Uniform Gifts/Transfers
TEN ENT - as tenants by the entireties to Minors Act
JT TEN - joint tenants with right of UGMA/UTMA - _______ Custodian
survivorship and not as tenants in common (cust)
_________under UGMA/UTMA _______
(Minor) (State)
Additional abbreviations may also be used though not in the above list.
ASSIGNMENT
FOR VALUE RECEIVED, I/We hereby sell, assign, and transfer unto
PLEASE INSERT SOCIAL SECURITY
_________________________________________________________ NUMBER OF ASSIGNEE
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS,
INCLUDING POSTAL ZIP CODE, OF ASSIGNEE.)
_____________________________________________________________________________
______________________________________________________________________ shares
represented by the within certificate and do hereby irrevocably constitute and
appoint
_____________________________________________________________________________
attorney to transfer the said shares on the books of the within-named
corporation or trust with full power of substitution in the premises.
NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME(S)
AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
Dated ____________________________ ________________________________
(Signature of Seller)
Signature(s) Guaranteed: (See note.)
________________________________
(Signature of Co-owner)
* NOTE: For redemptions exceeding $50,000,
signature(s) must be guaranteed by a commercial
bank, trust company, savings and loan association,
or member firm of a national securities exchange.
EXHIBIT 5
INVESTMENT ADVISORY AGREEMENT
September 15, 1998
ND Money Management, Inc.
1 North Main
Minot, North Dakota 58703
Dear Sirs:
Integrity Small-Cap Fund of Funds, Inc. (the "Fund"), a corporation
organized under the laws of the State of North Dakota, herewith confirms its
agreement with ND Money Management, Inc. (the "Adviser"), as follows:
1. Investment Description; Appointment
The Fund desires to employ its capital by investing and reinvesting in
investments of the kind and in accordance with the limitations specified in its
Prospectus and Statement of Additional Information, as from time to time in
effect, and in such a manner and to such extent as may from time to time be
approved by the Board of Directors of the Fund. Copies of the Fund's
Prospectus and Statement of Additional Information have been or will be
submitted to the Adviser. The Fund desires to employ and hereby appoints the
Adviser to act as its investment adviser. The Adviser accepts the compensation
set forth below.
2. Services as Investment Adviser
Subject to the supervision and direction of the Board of Directors of the
Fund, the Adviser will (a) act in conformity with the Investment Company Act of
1940 and the Investment Advisers Act of 1940, as the same may from time to time
be amended, (b) manage the Fund in accordance with the Fund's investment
objective(s) and policies as stated in the Fund's Prospectus and Statement of
Additional Information as from time to time in effect, (c) make investment
decisions for the Fund, and (d) place purchase and sale orders on behalf of the
Fund. In providing those services, the Adviser will provide investment
research and supervision of the Fund's investments and conduct a continual
program of investment, evaluation, and, if appropriate, sale and reinvestment
of the Fund's assets. In addition, the Adviser will furnish the Fund with
whatever statistical information the Fund may reasonably request with respect
to the securities that the Fund may hold or contemplate purchasing.
3. Brokerage
In executing transactions for the Fund and selecting brokers or dealers, the
Adviser will use its best efforts to seek the best overall terms available. In
assessing the best overall terms available for any Fund transaction, the
Adviser will consider all factors it deems relevant including, but not limited
to, breadth of the market in the security, the price of the security, the
financial condition and execution capability of the broker or dealer, and the
reasonableness of any commission for the specific transaction and on a
continuing basis. In selecting brokers or dealers to execute a particular
transaction and in evaluating the best overall terms available, the Adviser may
consider the brokerage and research services (as those terms are defined in
Section 28 (e) of the Securities Exchange Act of 1934) provided to the Fund
and/or other accounts over which the Adviser exercises investment discretion.
The Adviser may utilize ND Capital, Inc., or any other affiliated person of the
Adviser as the broker for the purchase of mutual fund shares and other
securities.
4. Information Provided to the Fund
The Adviser will keep the Fund informed of developments materially affecting
the Fund and will, on its own initiative, furnish the Fund from time to time
with whatever information the Adviser believes is appropriate for this purpose.
5. Standard of Care
The Adviser shall exercise its best judgment in rendering the services
listed in paragraphs 2 and 3 above. The Adviser shall not be liable for any
error of judgment or mistake of law or for any loss suffered by the Fund in
connection with the matters to which this Agreement relates, provided that
nothing herein shall be deemed to protect or purport to protect the Adviser
against any liability to the Fund or to shareholders of the Fund to which the
Adviser would otherwise be subject by reason of willful misfeasance, bad faith,
or gross negligence on its part in the performance of its duties or by reason
of the Adviser's reckless disregard of its obligations and duties under this
Agreement.
6. Independent Contractor
The Adviser shall be deemed to be an independent contractor under this
Agreement and, unless otherwise expressly provided or authorized, shall have no
authority to act for or represent the Fund in any way or otherwise be deemed as
agent of the Fund.
7. Compensation
In consideration of the services rendered pursuant to this Agreement, the
Fund will pay the Adviser on the first business day of each month a fee for the
previous month at the annual rate of .90 of 1.00% of the Fund's average daily
net assets. The fee for the period from the date the Fund's initial
registration statement is declared effective by the Securities and Exchange
Commission to the end of the month during which the initial registration
statement is declared effective shall be prorated according to the proportion
that such period bears to the full monthly period. Upon any termination of
this Agreement before the end of a month, the fee for such part of that month
shall be prorated according to the proportion that such period bears to the
full monthly period and shall be payable upon the date of termination of this
Agreement. For the purpose of determining fees payable to the Adviser, the
value of the Fund's net assets shall be computed at the times and in the manner
specified in the Fund's Prospectus or Statement of Additional Information as
from time to time in effect.
8. Expenses
The Adviser will bear all expenses in connection with the performance of its
services under this Agreement. The Fund will bear certain other expenses to be
incurred in its operation, including: organization expenses; taxes; interest;
brokerage fees and commissions, if any; fees and expenses of directors and
officers of the Fund who are not officers or directors of the Adviser;
Securities and Exchange Commission fees and state securities laws fees; charges
of custodians, transfer and dividend disbursing agents, and accounting services
agents; insurance premiums; outside auditing and legal expenses; costs of
maintenance of the Fund's existence; costs attributable to investor services,
including, without limitation, telephone and personnel expenses; costs of pre-
paring and printing prospectuses and statements of additional information for
regulatory purposes and for distribution to existing shareholders; costs of
shareholders' reports and meetings of the shareholders of the Fund and of the
officers and Board of Directors of the Fund; and any extraordinary expenses.
In addition, the Fund is expected to pay service fees to dealers for providing
personal services to shareholders and/or the maintenance of shareholder
accounts.
9. Services to Other Companies or Accounts
The Fund understands that the Adviser may act in the future as investment
adviser to fiduciary and other managed accounts and as investment adviser to
one or more other investment companies, and the Fund has no objection to the
Adviser so acting, provided that whenever the Fund and one or more other
accounts or investment companies advised by the Adviser have available funds
for investment, investments suitable and appropriate for each will be allocated
in accordance with a formula believed to be equitable to each entity.
Similarly, opportunities to sell securities will be allocated in an equitable
manner. The Fund recognizes that in some cases this procedure may adversely
affect the size of the position that may be acquired or disposed of for the
Fund. In addition, the Fund understands that the persons employed by the
Adviser to assist in the performance of the Adviser's duties hereunder will not
devote their full time to such service, and nothing contained herein shall be
deemed to limit or restrict the right of the Adviser or any affiliate of the
Adviser to engage in and devote time and attention to other businesses or to
render services of whatever kind or nature.
10. Term of Agreement
This Agreement shall continue until September 15, 2000, and thereafter shall
continue automatically for successive annual periods ending on September 15 of
each year, provided such continuance is specifically approved at least annually
by (i) the Board of Directors of the Fund or (ii) a vote of a "majority" (as
defined in the Investment Company Act of 1940) of the Fund's outstanding voting
securities, provided that in either event the continuance is also approved by a
majority of the Board of Directors who are not "interested persons" (as defined
in said Act) of any party to this Agreement, by vote cast in person at a
meeting called for the purpose of voting on such approval. This Agreement is
terminable, without penalty, on 60 days' written notice by the Board of
Directors of the Fund or by vote of holders of a majority of the Fund's shares
or upon 90 days' written notice by the Adviser. This Agreement will also
terminate automatically in the event of its assignment (as defined in said
Act).
11. Limitation of Liability
This Agreement has been executed on behalf of the Fund by the undersigned
officer of the Fund in his capacity as an officer of the Fund. The obligations
of this Agreement shall be binding upon the assets and property of the Fund
only and shall not be binding upon any director, officer, or shareholder of the
Fund individually.
If the foregoing is in accordance with your understanding, kindly indicate
your acceptance hereof by signing and returning the enclosed copy hereof.
Very truly yours,
INTEGRITY SMALL-CAP FUND OF FUNDS, INC.
By: /Robert E. Walstad/
President
Accepted:
ND MONEY MANAGEMENT, INC.
By: /Robert E. Walstad/
Authorized Officer
EXHIBIT 6(A)
DISTRIBUTION AGREEMENT
September 15, 1998
ND Capital, Inc.
1 North Main
Minot, North Dakota 58703
Dear Sirs:
This is to confirm that, in consideration of the agreements hereinafter
contained, the undersigned, Integrity Small-Cap Fund of Funds, Inc. (the
"Fund"), an open-end, diversified, management investment company organized as a
corporation under the laws of the State of North Dakota, has agreed that ND
Capital, Inc. ("Capital"), shall be, for the period of this Agreement, the
principal underwriter of shares issued by the Fund (the "Shares").
1. Services as Underwriter
1.1. Capital will act as principal underwriter for the distribution of
the Shares covered by the registration statement, prospectus, and
statement of additional information then in effect (the
"Registration Statement") under the Securities Act of 1933, as
amended (the "1933 Act"), and the Investment Company Act of 1940,
as amended (the"1940 Act").
1.2. Capital agrees to use its best efforts to solicit orders for the
sale of the Shares at the public offering price, as determined in
accordance with the Registration Statement, and will undertake
such advertising and promotion as it believes is reasonable in
connection with such solicitation.
1.3. All activities by Capital as underwriter of the Shares shall
comply with all applicable laws, rules, and regulations,
including, without limitation, all rules and regulations made or
adopted by the Securities and Exchange Commission (the "SEC") or
by any securities association registered under the Securities
Exchange Act of 1934.
1.4. Capital will provide one or more persons during normal business
hours to respond to telephone questions concerning the Fund.
1.5. Capital acknowledges that, whenever in the judgment of the Fund's
officers such action is warranted for any reason, including,
without limitation, market, economic, or political conditions,
those officers may decline to accept any orders for, or make any
sales of, the Shares until such time as those officers deem it
advisable to accept such orders and to make such sales.
1.6. Capital shall be deemed to be an independent contractor and,
except as specifically provided or authorized herein, shall have
no authority to act for or represent the Fund. Capital will act
only on its own behalf as principal should it choose to enter into
selling agreements with selected dealers or others.
1.7. In consideration of the services rendered pursuant to this
Agreement, the Fund shall pay Capital the proceeds from any
contingent deferred sales charges imposed on the redemption of
Shares. In addition, Capital may receive dealer reallowances (up
to a maximum of 1% of the public offering price) and/or
distribution payments and/or service fees on purchases by the Fund
of mutual funds which are sold with a sales load and/or which have
a distribution plan and/or which pay services fees. ND Holdings,
Inc., shall provide Capital with any funds necessary to defray the
costs of sales commissions paid to dealers who sell Shares and to
reimburse Capital for any costs and expenses it incurs in
discharging its responsibilities under this Agreement.
1.8. Capital will bear all expenses in connection with the performance
of its services and the incurring of distribution expenses under
this Agreement. For purposes of this Agreement, "distribution
expenses" of Capital shall mean all expenses borne by Capital or
by any other person with which Capital has an agreement approved
by the Fund, which expenses represent payment for activities
primarily intended to result in the sale of Shares, including,
but not limited to, the following:
(a) payments made to, and expenses of, persons who provide
support services in connection with the distribution of
Shares, including, but not limited to, office space and
equipment, telephone facilities, answering routine inquiries
regarding the Fund, processing shareholder transactions, and
providing any other shareholder services;
(b) costs relating to the formulation and implementation of
marketing and promotional activities, including, but not
limited to, direct mail promotions and television, radio,
newspaper, magazine, and other mass media advertising;
(c) costs of printing and distributing prospectuses and reports
of the Fund to prospective shareholders of the Fund;
(d) costs involved in preparing, printing, and distributing sales
literature pertaining to the Fund; and
(e) costs involved in obtaining whatever information, analyses,
and reports with respect to marketing and promotional
activities that the Fund may, from time to time, deem
advisable; except that distribution expenses shall not
include any expenditures in connection with services which
Capital, any of its affiliates, or any other person has
agreed to bear without reimbursement.
1.9. Capital shall prepare and deliver reports to the Treasurer of the
Fund and to the Investment Adviser on a regular, at least
quarterly, basis showing the distribution expenses incurred
pursuant to this Agreement and the purposes therefor, as well as
any supplemental reports as the Directors from time to time may
reasonably request.
2. Duties of the Fund
2.1. The Fund agrees at its own expense to execute any and all
documents, to furnish any and all information, and to take any
other actions that may be reasonably necessary in connection with
the qualification of the Shares for sale in those states that
Capital may designate.
2.2. The Fund shall furnish from time to time, for use in connection
with the sale of the Shares, such information reports with respect
to the Fund and its Shares as Capital may reasonably request, all
of which shall be signed by one or more of the Fund's duly
authorized officers; and the Fund warrants that the statements
contained in any such reports, when so signed by one or more of
the Fund's officers, shall be true and correct. The Fund shall
also furnish Capital upon request with: (a) annual audits of the
Fund's books and accounts made by independent public accountants
regularly retained by the Fund, (b) semiannual unaudited
financial statements pertaining to the Fund, (c) quarterly
earnings statements prepared by the Fund, (d) a monthly itemized
list of the securities in the portfolio of the Fund, (e) monthly
balance sheets as soon as practicable after the end of each month,
and (f) from time to time such additional information regarding
the Fund's financial condition as Capital may reasonably request.
2.3. The Fund shall pay to Capital the proceeds from any contingent
deferred sales charge imposed on the redemption of the Shares as
specified in the Registration Statement.
2.4. The Fund shall provide Capital with any funds necessary to defray
the costs of service fees paid to dealers who render personal
service to shareholders and/or the maintenance of shareholder
accounts.
3. Representations and Warranties
The Fund represents to Capital that all registration statements,
prospectuses, and statements of additional information filed by the Fund
with the SEC under the 1933 Act and the 1940 Act with respect to the Shares
of the Fund have been carefully prepared in conformity with the requirements
of the 1933 Act, the 1940 Act, and the rules and regulations of the SEC
thereunder. As used in this Agreement, the terms "registration statement,"
"prospectus," and "statement of additional information" shall mean any
registration statement, prospectus, and statement of additional information
filed by the Fund with the SEC and any amendments and supplements thereto
which at any time shall have been filed with the SEC. The Fund represents
and warrants to Capital that any registration statement, prospectus, and
statement of additional information, when such registration statement
becomes effective, will include all statements required to be contained
therein in conformity with the 1933 Act, the 1940 Act, and the rules and
regulations of the SEC; that all statements of fact contained in any
registration statement, prospectus, or statement of additional information
will be true and correct when such registration statement becomes effective;
and that neither any registration statement nor any prospectus or statement
of additional information when such registration statement becomes effective
will include an untrue statement of material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading to a purchaser of Shares. Capital may,
but shall not be obligated to, propose from time to time such amendment or
amendments to any registration statement and such supplement or supplements
to any prospectus or statement of additional information as, in the light of
future developments, may, in the opinion of Capital's counsel, be necessary
or advisable. If the Fund shall not propose such amendment or amendments
and/or supplement or supplements within fifteen days after receipt by the
Fund of a written request from Capital to do so, Capital may, at its option,
terminate this Agreement. The Fund shall not file any amendment to any
registration statement or supplement to any prospectus or statement of
additional information without giving Capital reasonable notice thereof in
advance; provided, however, that nothing contained in this Agreement shall
in any way limit the Fund's right to file at any time such amendments to any
registration statement and/or supplements to any prospectus or statement of
additional information, of whatever character, as the Fund may deem
advisable, such right being in all respects absolute and unconditional.
4. Indemnification
4.1. The Fund authorizes Capital and any dealers with whom Capital has
entered into dealer agreements to use any prospectus or statement
of additional information furnished by the Fund from time to time
in connection with the sale of Shares. The Fund agrees to
indemnify, defend, and hold Capital, its several officers and
directors, and any person who controls Capital within the meaning
of Section 15 of the 1933 Act, free and harmless from and against
any and all claims, demands, liabilities, and expenses (including
the cost of investigating or defending such claims, demands, or
liabilities and any counsel fees incurred in connection therewith)
which Capital, its officers and directors, or any such controlling
person may incur under the 1933 Act, the 1940 Act, or common law
or otherwise, arising out of or based upon any untrue statement or
alleged untrue statement of a material fact contained in any
registration statement, any prospectus, or any statement of
additional information, or arising out of or based upon any
omission or alleged omission to state a material fact required to
be stated in any registration statement, any prospectus, or any
statement of additional information, or necessary to make the
statements in any of them not misleading; provided, however, that
the Fund's agreement to indemnify Capital, its officers or
directors, and any such controlling person shall not be deemed to
cover any claims, demands, liabilities, or expenses arising out of
or based upon any statements or representations made by Capital or
its representatives or agents other than such statements and
representations as are contained in any registration statement,
prospectus, or statement of additional information and in such
financial and other statements as are furnished to Capital
pursuant to paragraph 2.2 hereof; and further provided that the
Fund's agreement to indemnify Capital and the Fund's
representations and warranties hereinbefore set forth in paragraph
3 shall not be deemed to cover any liability to the Fund or its
shareholders to which Capital would otherwise be subject by reason
of willful misfeasance, bad faith, or gross negligence in the
performance of its duties, or by reason of Capital's reckless
disregard of its obligations and duties under this Agreement. The
Fund's agreement to indemnify Capital, its officers and directors,
and any such controlling person, as aforesaid, is expressly
conditioned upon the Fund's being notified of any action brought
against Capital, its officers or directors, or any such
controlling person, such notification to be given by letter or by
telegram addressed to the Fund at its principal office in Minot,
North Dakota, and sent to the Fund by the person against whom such
action is brought, within ten days after the summons or other
first legal process shall have been served. The failure so to no-
tify the Fund of any such action shall not relieve the Fund from
any liability that the Fund may have to the person against whom
such action is brought by reason of any such untrue statement or
omission or alleged omission otherwise than on account of the
Fund's indemnity agreement contained in this paragraph 4.1. The
Fund's indemnification agreement contained in this paragraph 4.1
and the Fund's representations and warranties in this Agreement
shall remain operative and in full force and effect regardless of
any investigation made by or on behalf of Capital, its officers
and directors, or any controlling person, and shall survive the
delivery of any Shares. This agreement of indemnity will innure
exclusively to Capital's benefit, to the benefit of its several
officers and directors, and their respective estates, and to the
benefit of the controlling persons and their successors. The Fund
agrees to notify Capital promptly of the commencement of any
litigation or proceedings against the Fund or any of its officers
or directors in connection with the issuance and sale of any
shares.
4.2. Capital agrees to indemnify, defend, and hold the Fund, its
several officers and directors, and any person who controls the
Fund within the meaning of Section 15 of the 1933 Act, free and
harmless from and against any and all claims, demands,
liabilities and expenses (including the costs of investigating or
defending such claims, demands, or liabilities and any counsel
fees incurred in connection therewith) that the Fund, its officers
or directors, or any such controlling person may incur under the
1933 Act, the 1940 Act, or common law or otherwise, but only to
the extent that such liability or expense incurred by the Fund,
its officers or directors, or such controlling person resulting
from such claims or demands shall arise out of or be based upon
(a) any unauthorized sales literature, advertisements,
information, statements, or representations or (b) any untrue or
alleged untrue statement of a material fact contained in
information furnished in writing by Capital to the Fund and used
in the answers to any of the items of the registration statement
or in the corresponding statements made in the prospectus or
statement of additional information, or shall arise out of or be
based upon any omission or alleged omission to
state a material fact in connection with such information
furnished in writing by Capital to the Fund and required to be
stated in such answers or necessary to make such information not
misleading. Capital's agreement to indemnify the Fund, its
officers and directors, and any such controlling person, as
aforesaid, is expressly conditioned upon Capital's being notified
of any action brought against the Fund, its officers or directors,
or any such controlling person, such notification to be given by
letter or telegram addressed to Capital at its principal office in
Minot, North Dakota, and sent to Capital by the person against
whom such action is brought, within ten days after the summons or
other first legal process shall have been served. The failure so
to notify Capital of any such action shall not relieve Capital
from any liability that Capital may have to the Fund, its officers
or directors, or to such controlling person by reason of any such
untrue or alleged untrue statement or omission or alleged omission
otherwise than on account of Capital's indemnity agreement
contained in this paragraph 4.2. Capital agrees to notify the
Fund promptly of the commencement of any litigation or proceedings
against Capital or any of its officers or directors in connection
with the issuance and sale of any Shares.
4.3. In case any action shall be brought against any indemnified party
under paragraph 4.1 or 4.2, and it shall notify the indemnifying
party of the commencement thereof, the indemnifying party shall be
entitled to participate in, and, to the extent that it shall wish
to do so, to assume the defense thereof with counsel satisfactory
to such indemnified party. If the indemnifying party opts to
assume the defense of such action, the indemnifying party will not
be liable to the indemnified party for any legal or other expenses
subsequently incurred by the indemnified party in connection with
the defense thereof other than (a) reasonable costs of
investigation or the furnishing of documents or witnesses and (b)
all reasonable fees and expenses of separate counsel to such
indemnified party if (i) the indemnifying party and the
indemnified party shall have agreed to the retention of such
counsel or (ii) the indemnified party shall have concluded
reasonably that representation of the indemnifying party and the
indemnified party by the same counsel would be inappropriate due
to actual or potential differing interests between them in the
conduct of the defense of such action.
5. Effectiveness of Registration
None of the Shares shall be offered by either Capital or the Fund under
any of the provisions of this Agreement and no orders for the purchase or
sale of the Shares hereunder shall be accepted by the Fund if and so long
as the effectiveness of the registration statement then in effect or any
necessary amendments thereto shall be suspended under any of the provisions
of the 1933 Act or if and so long as a current prospectus as required by
Section 5(b)(2) of the 1933 Act is not on file with the SEC; provided,
however, that nothing contained in this paragraph 5 shall in any way
restrict or have an application to or bearing upon the Fund's obligation to
repurchase Shares from any shareholder in accordance with the provisions of
the Fund's prospectus, statement of additional information, or articles of
incorporation.
6. Notice to Capital
The Fund agrees to advise Capital immediately in writing:
(a) of any request by the SEC for amendments to the registration
statement, prospectus or statement of additional information then
in effect or for additional information;
(b) in the event of the issuance by the SEC of any stop order
suspending the effectiveness of the registration statement,
prospectus, or statement of additional information then in effect
or the initiation of any proceeding for that purpose;
(c) of the happening of any event that makes untrue any statement of a
material fact made in the registration statement, prospectus, or
statement of additional information then in effect or that requires
the making of a change in such registration statement, prospectus,
or statement of additional information in order to make the
statements therein not misleading; and
(d) of all actions of the SEC with respect to any amendment to any
registration statement, prospectus, or statement of additional
information which may from time to time be filed with the SEC.
7. Term of Agreement
This Agreement shall continue until September 15, 2000, and thereafter
shall continue automatically for successive annual periods ending on
September 15 of each year, provided such continuance is specifically
approved at least annually by (a) the Fund's Board of Directors and (b) a
vote of a majority (as defined in the 1940 Act) of the Fund's Directors who
are not interested persons (as defined in the 1940 Act) of the Fund and who
have no direct or indirect financial interest in the operation of the Plan,
in this Agreement, or any agreement related to the Plan (the "Qualified
Directors"), by vote cast in person at a meeting called for the purpose of
voting on such approval. This Agreement is terminable with respect to the
Fund, without penalty, (a) on 60 days' written notice, by vote of a majority
of the Qualified Directors or by vote of a majority (as defined in the 1940
Act) of the outstanding voting securities of the Fund or (b) on 90 days'
written notice by Capital. This Agreement will also terminate automatically
in the event of its assignment (as defined in the 1940 Act).
8. Miscellaneous
8.1. The Fund recognizes that directors, officers, and employees of
Capital may from time to time serve as directors, officers, and
employees of corporations and business trusts (including other
investment companies) and that Capital or its affiliates may enter
into distribution or other agreements with such other corporations
and trusts.
8.2. It is expressly agreed that the obligations of the Fund hereunder
shall not be binding upon any of the directors, shareholders,
nominees, officers, agents, or employees of the Fund, personally,
but bind only the property of the Fund. The execution and
delivery of this Agreement have been authorized by the Directors
and the sole shareholder of the Shares and signed by an authorized
officer of the Fund, acting as such, neither such authorization by
such Directors and shareholder nor such execution and delivery by
such officer shall be deemed to have been made by any of them
individually or to impose any liability on any of them personally,
but shall bind only the property of the Fund.
8.3. This Agreement shall be construed in accordance with the laws of
the State of North Dakota.
8.4. This Agreement may be executed in any number of counterparts, each
of which shall be deemed to be an original; but such counterparts
shall, together, constitute only one instrument.
8.5. This Agreement may not be amended or modified in any manner except
by both parties with the same formality as this Agreement and as
may be permitted or required by the 1940 Act.
8.6. The captions of this Agreement are included for convenience of
reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or
effect.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first set forth herein.
INTEGRITY SMALL-CAP FUND OF FUNDS, INC.
By: /Robert E. Walstad/
Title: President
Date: September 15, 1998
Accepted:
ND CAPITAL, INC.
By: /Robert E. Walstad/
Title: President
Date: September 15, 1998
EXHIBIT 6(B)
DEALER SALES AGREEMENT
To the undersigned Dealer:
Gentlemen:
ND Capital, Inc., the principal underwriter of shares, par value $.0001,
issued by Integrity Small-Cap Fund of Funds, Inc. (the "Fund"), an
open-end, diversified, management investment company registered under the
Investment Company Act of 1940, understands that you are a member in good
standing of the National Association of Securities Dealers, Inc. (the "NASD"),
and that you and any individuals who represent you are properly qualified and
registered, if required, with the Securities and Exchange Commission and with
the state securities administrators of the various states in which Fund shares
are to be offered for sale or sold by you. In consideration of the mutual
promises stated below, you and we hereby agree as follows:
1. Compliance with Prospectus. Offers and sales of shares by you will comply
in all respects with the terms and conditions contained in the then-current
prospectus of the Fund.
2. Purchase Restrictions. You agree to purchase shares solely through us and
only for the purpose of covering purchase orders already received from
customers or for your own bona fide investment. You agree not to purchase
for any other securities dealer unless you have an agreement with such
other dealer or broker to handle clearing arrangements and then only in the
ordinary course of business for such purpose and only if such other dealer
has executed a Dealer Sales Agreement with us. You also agree not to
withhold any customer order so as to profit therefrom.
3. Processing Orders. The procedures relating to the handling of orders shall
be subject to instructions which we will forward from time to time to all
dealers with whom we have entered into a Dealer Sales Agreement. The
minimum initial and subsequent purchase order shall be specified in the
Fund's then-current prospectus. All purchase orders are subject to receipt
of shares by us from the Fund and to acceptance of such orders by us. We
reserve the right in our sole discretion to reject any order.
4. Purchase Orders. We shall accept orders only on the basis of the
then-current offering price. You agree to place orders in respect of
shares immediately upon the receipt of orders from your customers for the
same number of shares. Orders which you receive from your customers shall
be deemed to be placed with us when received by us. Orders which you
receive prior to the close of business, as defined in the prospectus, and
placed with us within the time frame set forth in the prospectus shall be
priced at the offering price next computed after they are received by you.
We will not accept a conditional order from you on any basis. All orders
shall be subject to confirmation by us.
5. Settlement. Unless otherwise agreed, settlement shall be made at the
office of the Fund's transfer agent within five (5) business days after our
acceptance of the order. If payment is not so received or made within ten
(10) business days of our acceptance of the order, we reserve the right to
cancel the sale or, at our option, to sell the shares to the Fund at the
then-prevailing net asset value. In this event, or in the event that you
cancel the trade for any reason, you agree to be responsible for any loss
resulting to the Fund or to us from your failure to make payments as
aforesaid. You shall not be entitled to any gains generated thereby.
6. Dealer Commissions. You shall receive for each sale of shares of the Fund,
except shares sold which are not subject to a contingent deferred sales
charge, a commission in an amount equal to four (4) percent of the offering
price of shares of the Fund sold multiplied by the number of shares of the
Fund sold; provided, however, that if the aggregate offering price of
shares of the Fund sold is one million dollars ($1,000,000) or more, the
commission is reduced to one (1) percent of the offering price multiplied
by the number of shares sold. The amount of the commission is subject to
change by us without notice.
7. Redemptions. Redemptions of shares by the Fund will be effected in the
manner and upon the terms described in the then-current prospectus. We
will, upon your request, assist you in processing orders for redemptions.
If any shares sold to you are redeemed by the Fund or are tendered to the
Fund for redemption within seven (7) business days after the date of our
confirmation to you of your original purchase order therefor, you agree to
pay forthwith to us the full amount of the commission allowed you on the
sale.
8. Suspension of Sales and Amendments to Agreement. We reserve the right in
our discretion without notice to you to suspend sales or withdraw an
offering of shares entirely, to change the offering place as provided in
the prospectus, or, upon notice to you, to amend or cancel this Agreement.
You agree that any order to purchase shares placed by you after notice of
any amendment to this Agreement has been sent to you shall constitute your
agreement to any such amendment.
9. Dealer Status. In every transaction, you shall act as an independent
contractor and not as an agent for the Fund, the Fund's transfer agent, any
other dealer, or us. You agree that neither the Fund, the Fund's transfer
agent, any other dealer, nor we shall be deemed an agent of you. Nothing
herein shall constitute you as a partner of the Fund, the Fund's transfer
agent, any other dealer, or us or render any of us liable for your
obligations.
10. Representations Concerning the Fund. No person is authorized to make any
representations concerning shares of the Fund except those contained in the
then-current prospectus. You shall not sell shares of the Fund pursuant to
this Agreement unless the then-current prospectus is furnished to the
prior purchase to or at the time of purchase. You shall not use any
supplemental sales literature of any kind without our prior written
approval unless it is furnished by us for such purpose. In offering and
selling shares of the Fund, you will rely solely on the representations
contained in the then-current prospectus.
11. Dealer's Representations and Agreements. By accepting this Agreement, you
represent that you: (i) are registered as a broker-dealer under the
Securities Exchange Act of 1934, as amended; (ii) are qualified to act as a
dealer in the states in which the Fund's shares are offered for sale or
sold by you; (iii) are a member in good standing of the NASD; and (iv) will
maintain such registrations, qualifications, and memberships throughout the
term of the Agreement. You agree to abide by the Rules of Fair Practice of
the NASD and all federal and state laws and rules and regulations that are
now or may become applicable to the transactions hereunder. Your expulsion
from the NASD will automatically terminate this Agreement without notice.
Your suspension from the NASD or violation of applicable state and federal
laws and rules and regulations will terminate this Agreement effective upon
our notice to you. You shall not be entitled to any compensation during
any period in which you have been suspended or expelled from membership in
the NASD.
12. Indemnification. You hereby agree to indemnify and to hold harmless the
Fund and us and each person, if any, who controls the Fund or us within the
meaning of Section 15 of the Securities Act of 1933, as amended (the
"Act"), from and against any and all losses, claims, demands, or
liabilities to which the Fund or we may become subject under the Act, or
otherwise, insofar as such losses, claims, demands, or liabilities (or
actions in respect thereof) arise out of or are based upon any unauthorized
use of sales materials by you or your salesmen or upon alleged
misrepresentations or omissions to state material facts in connection with
statements made by you or your salesmen orally or by other means or upon
sales of shares in any state or jurisdiction in which the shares are not
registered or qualified for sale; and you will reimburse the Fund and us
for any legal or other expenses reasonably incurred in connection with the
investigation or defense of any such action or claim. We shall, after
receiving the first summons or other legal process disclosing the nature of
the action being served upon the Fund or us, in any proceeding in respect
of which indemnity may be sought by the Fund or us hereunder, notify you in
writing of the commencement thereof within a reasonable time. In case any
such litigation be brought against the Fund or us, we shall notify you of
the commencement thereof, and you shall be entitled to participate in (and
to the extent you shall wish, to direct) the defense thereof at your
expense, but such defense shall be conducted by counsel in good standing
satisfactory to the Fund and us. If you shall fail to provide such
defense, the Fund or we may defined such action at your cost and expense.
Your obligation under this Section 12 shall survive the termination of this
Agreement.
13. Dealer's Expenses. All expenses incurred in connection with your
activities under this Agreement shall be borne by you.
14. Supervisory Responsibility. By accepting this Agreement, you assume full
responsibility for the registration, qualification, and training of your
representatives in connection with the offer and sale of shares of the
Fund.
15. Prospectuses and Statements of Additional Information. We will supply you
with copies of the prospectus and statement of additional information of
the Fund (including any amendments thereto) in reasonable quantities upon
request. You will provide all customers with a prospectus prior to or at
the time such customer purchases shares. You will provide any customer who
so requests a copy of the statement of additional information on file with
the Securities and Exchange Commission.
16. Assignment. This Agreement may not be assigned by you without our consent.
17. Waiver. No failure, neglect, or forbearance on our part to require strict
performance of this Agreement shall be construed as a waiver of our rights
or remedies hereunder.
18. Termination. Either party may terminate this Agreement at any time upon
giving written notice to the other party.
19. Governing Law. This Agreement shall be construed in accordance with the
laws of the State of North Dakota.
20. Entire Agreement. This Agreement constitutes the entire agreement between
the undersigned and supersedes all prior oral or written agreements between
the parties hereto.
ND CAPITAL, INC.
Date: By:
The undersigned accepts your invitation to become a dealer and agrees to
abide by the foregoing terms and conditions.
Date: By:
Signature and Title:
Dealer Name:
EXHIBIT 8
CUSTODIAN AGREEMENT
AGREEMENT dated as of September 15, 1998, between Integrity Small-Cap Fund
of Funds, Inc. (the "Fund"), a corporation organized under the laws of the
State of North Dakota, having its principal office and place of business at
1 North Main, Minot, North Dakota 58703, and First Western Bank & Trust (the
"Custodian"), a bank organized under the laws of the State of North Dakota
with its principal place of business at 900 South Broadway, Minot,
North Dakota 58701.
WITNESSETH
That for and in consideration of the mutual promises hereinafter set forth,
the Fund and the Custodian agree as follows:
1. Definitions
Whenever used in this Agreement or in any Schedules to this Agreement, the
following words and phrases, unless the context otherwise requires, shall
have the following meanings:
(a) "Authorized Person" shall be deemed to include the President, the Vice
President, the Secretary, and the Treasurer of the Fund or any other
person whether or not any such person is an officer of the Fund, duly
authorized by the Board of Directors of the Fund to give Oral
Instructions and Written Instructions on behalf of the Fund or such
other certification as may be received by the Custodian from time to
time.
(b) "Book-Entry System" shall mean the Federal Reserve/Treasury book-entry
system for United States and federal agency securities, its successor
or successors, and its nominee or nominees.
(c) "Depository" shall mean the Depository Trust Company ("DTC"), a
clearing agency registered with the Securities and Exchange Commission
under Section 17A of the Securities Exchange Act of 1934, as amended,
its successor or successors and its nominee or nominees, in which the
Custodian is hereby specifically authorized to make deposits. The
term "Depository" shall further mean and include any other person to
be named in Written Instructions authorized to act as a depository
under the 1940 Act, its successor or successors, and its nominee or
nominees.
(d) "Money Market Security" shall be deemed to include, without
limitation, debt obligations issued or guaranteed as to interest and
principal by the Government of the United States or agencies or
instrumentalities thereof, commercial paper, bank certificates of
deposit, bankers' acceptances, and short-term corporate obligations,
where the purchase or sale of such securities normally requires
settlement in federal funds on the same day as such purchase or sale,
repurchase and reverse repurchase agreements with respect to any of
the foregoing types of securities, and any other instrument commonly
included in the term "Money Market Security" by commercial usage or
custom.
(e) "Oral Instructions" shall mean verbal instructions actually received
by the Custodian from a person reasonably believed by the Custodian to
be an Authorized Person.
(f) "Prospectus" shall mean any current prospectus and statement of
additional information relating to the registration of the Fund's
Shares under the Securities Act of 1933, as amended, and the 1940 Act.
(g) "Security" or "Securities" shall be deemed to include bonds,
debentures, notes, stocks, shares, evidences of indebtedness, and
other securities and investments from time to time owned by the Fund.
(h) "Shares" refers to the units into which the shareholders' proprietary
interests in the Fund are divided.
(i) "Transfer Agent" shall mean the person who performs the transfer
agent, dividend disbursing agent, and shareholder servicing agent
functions for the Fund.
(j) "Written Instructions" shall mean a written or electronic
communication actually received by the Custodian from an Authorized
Person or from a person reasonably believed by the Custodian to be an
Authorized Person by telex or any other such system whereby the
receiver of such communication is able to verify through codes or
otherwise with a reasonable degree of certainty the authenticity of
the sender of such communication.
(k) The "1940 Act" refers to the Investment Company Act of 1940, and the
Rules and Regulations thereunder, all as amended from time to time.
2. Appointment of Custodian.
(a) The Fund hereby constitutes and appoints the Custodian as custodian of
all the Securities and moneys at the time owned by or in the
possession of the Fund during the period of this Agreement.
(b) The Custodian hereby accepts appointment as such custodian for the
Fund and agrees to perform the duties thereof as hereinafter set
forth.
3. Compensation.
(a) The Fund will compensate the Custodian for its services rendered
under this Agreement in accordance with the fees set forth in the Fee
Schedule annexed hereto as Schedule A and incorporated herein. Such
Fee Schedule does not include postage, for which the Custodian shall
be entitled to bill separately.
(b) Any compensation agreed to hereunder may be adjusted from time to time
by attaching to Schedule A of this Agreement a revised Fee Schedule,
dated and signed by an Authorized Officer of each party hereto.
(c) The Custodian will bill the Fund as soon as practicable after the end
of each calendar month, and said billings will be detailed in
accordance with the Fee Schedule. The Fund will promptly pay to the
Custodian the amount of such billing.
4. Custody of Cash and Securities.
(a) Receipt and Holding of Assets. The Fund will deliver or cause to be
delivered to the Custodian all Securities and moneys owned by it at
any time during the period of this Agreement. The Custodian shall
segregate, keep, and maintain the assets of the Fund separate and
apart, including separate identification of Securities held in the
Book-Entry System. The Custodian will not be responsible for such
Securities and moneys until actually received by it. The Fund shall
instruct the Custodian from time to time in its sole discretion, by
means of Written Instructions, or in connection with the purchase or
sale of Money Market Securities, by means of Oral Instructions or
Written Instructions, as to the manner in which and in what amounts
Securities and moneys of the Fund are to be deposited on behalf of the
Fund in the Book-Entry System or the Depository; provided, however,
that prior to the initial deposit of Securities of the Fund in the
Book-Entry System or the Depository, the Custodian shall have received
Written Instructions specifically approving such deposits by the
Custodian in the Book-Entry System or the Depository.
(b) Accounts and Disbursements. The Custodian shall establish and
maintain a separate account for the Fund and shall credit to the
separate account of the Fund moneys received by it for the account of
the Fund and shall disburse the same only:
(1) in payment for Securities purchased for the Fund as provided in
Section 5 hereof;
(2) in payment of dividends or distributions with respect to the
Shares of the Fund as provided in Section 7 hereof;
(3) in payment of original issue or other taxes with respect to the
Shares of the Fund as provided in Section 8 hereof;
(4) in payment for Shares which have been redeemed by the Fund as
provided in Section 8 hereof;
(5) pursuant to Written Instructions, or with respect to Money Market
Securities, Oral Instructions or Written Instructions, setting
forth the name and address of the person to whom the payment is
to be made, the amount to be paid, and the purpose for which
payment is to be made; or
(6) in payment of fees and in reimbursement of the expenses and
liabilities of the Custodian attributable to the Fund as provided
in Section 11(h) hereof.
(c) Confirmation and Statements. Promptly after the close of business on
each day, the Custodian shall furnish the Fund with confirmations and
a summary of all transfers to or from the account of the Fund during
said day. Where Securities purchased are in a fungible bulk of
Securities registered in the name of the Custodian (or its nominee)
or shown on the Custodian's account on the books of the Depository or
the Book-Entry System, the Custodian shall by book entry or otherwise
identify the quantity of those Securities belonging to the Fund. At
least monthly, the Custodian shall furnish the Fund with a detailed
statement of the Securities and moneys held for the Fund under this
Agreement.
(d) Registration of Securities and Physical Separation. All Securities
held for the Fund which are issued or issuable only in bearer form,
except such Securities as are held in the Book-Entry System, shall be
held by the Custodian in that form; all other Securities held for the
Fund may be registered in the name of the Fund, in the name of any
duly appointed registered nominee of the Custodian as the Custodian
may from time to time determine, or in the name of the Book-Entry
System or the Depository or their successor or successors, or their
nominee or nominees. The Fund reserves the right to instruct the
Custodian as to the method of registration and safekeeping of the
Securities. The Fund agrees to furnish to the Custodian appropriate
instruments to enable the Custodian to hold or deliver in proper form
for transfer, or to register in the name of its registered nominee or
in the name of the Book-Entry System or the Depository, any Securities
which it may hold for the account of the Fund and which may from time
to time be registered in the name of the Fund. The Custodian shall
hold all such Securities specifically allocated to the Fund which are
not held in the Book-Entry System or the Depository in a separate
account for the Fund in the name the Fund physically segregated at all
times from those of any other person or persons.
(e) Collection of Income and Other Matters Affecting Securities. Unless
otherwise instructed to the contrary by Written Instructions, the
Custodian by itself, or through the use of the Book-Entry System or
the Depository with respect to Securities therein deposited, shall
with respect to all Securities held for the Fund in accordance with
this Agreement:
(1) collect all income due or payable;
(2) present for payment and collect the amount payable upon all
Securities which may mature or be called, redeemed, or retired,
or otherwise become payable.
Notwithstanding the foregoing, the Custodian shall have no
responsibility to the Fund for monitoring or ascertaining of any
call, redemption, or retirement date with respect to put bonds
which are owned by the Fund and held by the Custodian or its
nominee. Nor shall the Custodian have any responsibility or
liability to the fund for any loss by the Fund for any missed
payment or other default resulting therefrom unless the Custodian
received timely notification from the Fund specifying the time,
place, and manner for the presentment of such put bond owned by
the Fund and held by the Custodian or its nominee. The Custodian
shall not be responsible and assumes no liability to the Fund for
the accuracy or completeness of any notification the Custodian
shall provide to the Fund with respect to put bonds;
(3) surrender Securities in temporary form for definitive Securities;
(4) execute any necessary declarations or certificates of ownership
under the federal income tax laws or the laws or regulations of
any other taxing authority now or hereafter in effect; and
(5) hold directly, or through the Book-Entry System or the Depository
with respect to Securities therein deposited, for the account of
the Fund all rights and other Securities issued with respect to
any Securities held by the Custodian hereunder for the Fund.
(f) Delivery of Securities and Evidence of Authority. Upon receipt of
Written Instructions and not otherwise, except for Subparagraphs 5, 6,
7, and 8 which may be effected by Oral or Written Instructions, the
Custodian, directly or through the use of the Book-Entry System or the
Depository, shall:
(1) execute and deliver or cause to be executed and delivered to such
persons as may be designated in such Written Instructions,
proxies, consents, authorizations, and any other instruments
whereby the authority of the Fund as owner of any Securities may
be exercised;
(2) deliver or cause to be delivered any Securities held for the Fund
in exchange for other Securities or cash issued or paid in
connection with the liquidation, reorganization, refinancing,
merger, consolidation, or recapitalization of any corporation,
or the exercise of any conversion privilege;
(3) deliver or cause to be delivered any Securities held for the Fund
to any protective committee, reorganization committee, or other
person in connection with the reorganization, refinancing,
merger, consolidation, recapitalization, or sale of assets of any
corporation, and receive and hold under the terms of this
Agreement in the separate account for the Fund such certificates
of deposit, interim receipts, or other instruments or documents
as may be issued to it to evidence such delivery;
(4) make or cause to be made such transfers or exchanges of the
assets specifically allocated to the separate account of the Fund
and take such other steps as shall be stated in said Written
Instructions to be for the purpose of effectuating any duly
authorized plan of liquidation, reorganization, merger,
consolidation, or recapitalization of the Fund;
(5) deliver Securities owned by the Fund upon sale of such Securities
for the account of the Fund pursuant to Section 5;
(6) deliver Securities owned by the Fund upon the receipt of payment
in connection with any repurchase agreement related to such
Securities entered into by the Fund;
(7) deliver Securities owned by the Fund to the issuer thereof or its
agent when such Securities are called, redeemed, retired, or
otherwise become payable; provided, however, that in any such
case the cash or other consideration is to be delivered to the
Custodian. Notwithstanding the foregoing, the Custodian shall
have no responsibility to the Fund for monitoring or ascertaining
of any call, redemption, or retirement date with respect to put
bonds which are owned by the Fund and held by the Custodian or
its nominee. Nor shall the Custodian have any responsibility or
liability to the Fund for any loss by the Fund for any missed
payment or other default resulting therefrom unless the Custodian
received timely notification from the Fund specifying the time,
place, and manner for the presentment of such put bond owned by
the Fund and held by the Custodian or its nominee. The Custodian
shall not be responsible and assume no liability to the Fund for
the accuracy or completeness of any notification the Custodian
may furnish to the Fund with respect to put bonds;
(8) deliver Securities owned by the Fund for delivery in connection
with any loans of securities made by the Fund but only against
receipt of adequate collateral as agreed upon from time to time
by the Custodian and the Fund which may be in any form permitted
under the 1940 Act or any interpretations thereof issued by the
Securities and Exchange Commission or its staff;
(9) deliver Securities owned by the Fund for delivery as security in
connection with any borrowings by the Fund requiring a pledge of
Fund assets, but only against receipt of amounts borrowed;
(10) deliver Securities owned by the Fund upon receipt of instructions
from the Fund for delivery to the Transfer Agent or to the
holders of Shares of the Fund in connection with distributions in
kind, as may be described from time to time in the Fund's
Prospectus, in satisfaction of requests by holders of Shares for
repurchase or redemption; and
(11) deliver Securities owned by the Fund for any other proper
business purpose, but only upon receipt of, in addition to
Written Instructions, a certified copy of a resolution of the
Board of Directors signed by an Authorized Person and certified
by the Secretary of the Fund, specifying the Securities to be
delivered, setting forth the purpose for which such delivery is
to be made, declaring such purpose to be a proper business
purpose, and naming the person or persons to whom delivery of
such Securities shall be made.
(g) Endorsement and Collection of Checks, Etc. The Custodian is hereby
authorized to endorse and collect all checks, drafts, or other orders
for the payment of money received by the Custodian for the account of
the Fund.
5. Purchase and Sale of Investments of the Fund.
(a) Promptly after each purchase of Securities for the Fund, the Fund
shall deliver to the Custodian (i) with respect to each purchase of
Securities which are not Money Market Securities, Written
Instructions, and (ii) with respect to each purchase of Money Market
Securities, either Written Instructions or Oral Instructions, in
either case specifying with respect to each purchase:
(1) the name of the issuer and the title of the Securities;
(2) the number of shares or the principal amount purchased and
accrued interest, if any;
(3) the date of purchase and settlement;
(4) the purchase price per unit;
(5) the total amount payable upon such purchase;
(6) the name of the person from whom or the broker through whom the
purchase was made, if any;
(7) whether or not such purchase is to be settled through the
Book-Entry System or the Depository; and
(8) whether the Securities purchased are to be deposited in the
Book-Entry System or the Depository.
The Custodian shall receive all Securities purchased by or for the
Fund and upon receipt of such Securities shall pay out of the moneys
held for the account of the Fund the total amount payable upon such
purchase, provided that the same conforms to the total amount payable
as set forth in such Written or Oral Instructions.
(b) Promptly after each sale of Securities of the Fund, the Fund shall
deliver to the Custodian (i) with respect to each sale of Securities
which are not Money Market Securities, Written Instructions, and (ii)
with respect to each sale of Money Market Securities, either Written
or Oral Instructions, in either case specifying with respect to such
sale:
(1) the name of the issuer and the title of the Securities;
(2) the number of shares or principal amount sold and accrued
interest, if any;
(3) the date of sale;
(4) the sale price per unit;
(5) the total amount payable to the Fund upon such sale;
(6) the name of the broker through whom or the person to whom the
sale was made; and
(7) whether or not such sale is to be settled through the Book-Entry
System or the Depository. The Custodian shall deliver or cause
to be delivered the Securities to the broker or other person
designated by the Fund upon receipt of the total amount payable
to the Fund upon such sale, provided that the same conforms to
the total amount payable to the Fund as set forth in such Written
or such Oral Instructions. Subject to the foregoing, the
Custodian may accept payment in such form as shall be
satisfactory to it and may deliver Securities and arrange for
payment in accordance with the customs prevailing among dealers
in Securities.
6. Lending of Securities.
(a) If the Fund is permitted as disclosed in its current Prospectus to
lend Securities, within 24 hours after each loan of Securities, the
Fund shall deliver to the Custodian Written Instructions specifying
with respect to each such loan:
(1) the name of the issuer and the title of the Securities;
(2) the number of shares or the principal amount loaned;
(3) the date of loan and delivery;
(4) the total amount to be delivered to the Custodian including the
amount of cash collateral and the premium, if any, separately
identified;
(5) the name of the broker, dealer, or financial institution to which
the loan was made; and
(6) whether the Securities loaned are to be delivered through the
Book-Entry System or the Depository.
(b) Promptly after each termination of a loan of Securities, the Fund
shall deliver to the Custodian Written Instructions specifying with
respect to each such loan termination and return of Securities:
(1) the name of the issuer and the title of the Securities to be
returned;
(2) the number of shares or the principal amount to be returned;
(3) the date of termination;
(4) the total amount to be delivered by the Custodian (including the
cash collateral for such Securities minus any offsetting credits
as described in said Written Instructions);
(5) the name of the broker, dealer, or financial institution from
which the Securities will be returned; and
(6) whether such return is to be effected through the Book-Entry
System or the Depository.
The Custodian shall receive all Securities returned from the broker,
dealer, or financial institution to which such Securities were loaned and
upon receipt thereof shall pay the total amount payable upon such return of
Securities as set forth in the Written Instructions. Securities returned
to the Custodian shall be held as they were prior to such loan.
7. Payment of Dividends or Distribution.
(a) The Fund shall furnish to the Custodian the resolution of the Board of
Directors of the Fund certified by the Secretary (i) authorizing the
declaration of dividends or distributions on a specified periodic
basis and authorizing the Custodian to rely on Oral or Written
Instructions specifying the date of the declaration of such dividends
or distributions, the date of payment thereof, the record date as of
which shareholders entitled to payment shall be determined, the amount
payable per Share to the shareholders of record as of the record date,
and the total amount payable to the Transfer Agent on the payment
date, or (ii) setting forth the date of declaration of any dividends
or distributions by the Fund, the date of payment thereof, the record
date as of which shareholders entitled to payment shall be determined,
the amount payable per Share to the shareholders of record as of the
record date, and the total amount payable to the Transfer Agent on the
payment date.
(b) Upon the payment date specified in such resolution, Oral Instructions,
or Written Instructions, as the case may be, the Custodian shall pay
out the total amount payable to the Transfer Agent of the Fund.
8. Sale and Redemption of Shares.
(a) Whenever the Fund shall sell any Shares, the Fund shall deliver or
cause to be delivered to the Custodian Written Instructions duly
specifying:
(1) the number of Shares sold, trade date, and price; and
(2) the amount of money to be received by the Custodian for the sale
of such Shares.
(b) Upon receipt of such money from the Transfer Agent, the Custodian
shall credit such money to the Fund.
(c) Upon issuance of any Shares in accordance with the foregoing
provisions of this Section 8, the Custodian shall pay all original
issue or other taxes required to be paid in connection with such
issuance upon the receipt of Written Instructions specifying the
amount to be paid.
(d) Except as provided hereafter, whenever any Shares of the Fund are
redeemed, the Fund shall cause the Transfer Agent to promptly furnish
to the Custodian Written Instructions specifying:
(1) the number of Shares redeemed; and
(2) the amount to be paid for the Shares redeemed.
The Custodian understands that the information contained in such
Written Instructions will be derived from the redemption of Shares
as reported to the Fund by the Transfer Agent.
(e) Upon receipt from the Transfer Agent of advice setting forth the
number of Shares received by the Transfer Agent for redemption and
that such Shares are valid and in good form for redemption, the
Custodian shall make payment to the Transfer Agent of the total amount
specified in Written Instructions issued pursuant to Paragraph (d) of
this Section 8.
9. Indebtedness
(a) The Fund will cause to be delivered to the Custodian by any bank
(excluding the Custodian) from which the Fund borrows money for
temporary administrative or emergency purposes using Securities as
collateral for such borrowings, a notice or undertaking in the form
currently employed by any such bank setting forth the amount which
such bank will loan to the Fund against delivery of a stated amount of
collateral. The Fund shall promptly deliver to the Custodian Written
or Oral Instructions stating with respect to each such borrowing:
(1) the name of the bank;
(2) the amount and terms of the borrowing, which may be set forth by
incorporating by reference an attached promissory note, duly
endorsed by the Fund, or other loan agreement;
(3) the time and date, if known, on which the loan is to be entered
into (the "borrowing date");
(4) the date on which the loan becomes due and payable;
(5) the total amount payable to the Fund on the borrowing date;
(6) the market value of Securities to be delivered as collateral for
such loan, including the name of the issuer, the title and the
number of shares, or the principal amount of any particular
Securities;
(7) whether the Custodian is to deliver such collateral through the
Book-Entry System or the Depository; and
(8) a statement that such loan is in conformance with the 1940 Act
and the Fund's Prospectus.
Upon receipt of the Written or Oral Instructions referred to in
Subparagraph (a) above, the Custodian shall deliver on the borrowing date
the specified collateral and the executed promissory note, if any, against
delivery by the lending bank of the total amount of the loan payable,
provided that the same conforms to the total amount payable as set forth in
the Written or Oral Instructions. The Custodian may, at the option of the
lending bank, keep such collateral in its possession, but such collateral
shall be subject to all rights therein given the lending bank by virtue of
any promissory note or loan agreement. The Custodian shall deliver as
additional collateral in the manner directed by the Fund from time to time
such Securities as may be specified in Written or Oral Instructions to
collateralize further any transaction described in this Section 9. The
Fund shall cause all Securities released from collateral status to be
returned directly to the Custodian, and the Custodian shall receive from
time to time such return of collateral as may be tendered to it. In the
event that the Fund fails to specify in Written or Oral Instructions all of
the information required by this Section 9, the Custodian shall not be
under any obligation to deliver any Securities. Collateral returned to the
Custodian shall be held hereunder as it was prior to being used as
collateral.
10. Persons Having Access to Assets of the Fund.
(a) No Director, Officer, Employee, or Agent of the Fund, and no officer,
director, employee, or agent of the Investment Adviser shall have
physical access to the assets of the Fund held by the Custodian or be
authorized or permitted to withdraw any investments of the Fund, nor
shall the Custodian deliver any assets of the Fund to any such person.
No officer, director, employee, or agent of the Custodian who holds
any similar position with the Fund, or the Investment Adviser, shall
have access to the assets of the Fund.
(b) The individual employees of the Custodian duly authorized by the Board
of Directors of the Custodian to have access to the assets of the Fund
are listed in the certification annexed hereto as Appendix C. The
Custodian shall advise the Fund of any change in the individuals
authorized to have access to the assets of the Fund by written notice
to the Fund accompanied by a certified copy of the authorizing
resolution of the Custodian's Board of Directors approving such
change.
(c) Nothing in this Section 10 shall prohibit any Officer, Employee, or
Agent of the Fund or any officer, director, employee, or agent of the
Investment Adviser from giving Oral Instructions or Written
Instructions to the Custodian so long as it does not result in
delivery of or access to assets of the Fund prohibited by Paragraph
(a) of this Section 10.
11. Concerning the Custodian.
(a) Standard of Conduct. Except as otherwise provided herein, neither the
Custodian nor its nominee shall be liable for any loss or damage,
including reasonable counsel fees, resulting from its action or
omission to act or otherwise, except for any such loss or damage
arising out of its own negligence or willful misconduct. The
Custodian may, with respect to questions of law, apply for and obtain
the advice and opinion of counsel to the Fund at the expense of the
Fund, or of its own counsel, at the expense of the Fund, and shall be
fully protected with respect to anything done or omitted by it in good
faith in conformity with such advice or opinion; provided, however,
that if such reliance involves a potential material loss to the Fund,
the Custodian will advise the Fund of any such actions to be taken in
accordance with advice of counsel to the Custodian. The Custodian
shall be liable to the Fund for any loss or damage resulting from the
use of the Book-Entry System or the Depository arising by reason of
any negligence, misfeasance, or misconduct on the part of the
Custodian or any of its employees or agents.
(b) Limit of Duties. Without limiting the generality of the foregoing,
the Custodian shall be under no duty or obligation to inquire into,
and shall not be liable for:
(1) the validity of the issue of any Securities purchased by the
Fund, the legality of the purchase thereof, or the propriety of
the amount paid therefor;
(2) the legality of the sale of any Securities by the Fund, or the
propriety of the amount for which the same are sold;
(3) the legality of the issue or sale of any Shares, or the
sufficiency of the amount to be received therefor;
(4) the legality of the redemption of any Shares or the propriety of
the amount to be paid therefor;
(5) the legality of the declaration or payment of any dividend or
other distribution of the Fund; or
(6) the legality of any borrowing for temporary or emergency
administrative purposes.
(c) No Liability Until Receipt. The Custodian shall not be liable for, or
considered to be the Custodian of, any money, whether or not
represented by any check, draft, or other instrument for the payment
of money, received by it on behalf of the Fund until the Custodian
actually receives and collects such money directly or by the final
crediting of the account representing the Fund's interest in the
Book-Entry System or the Depository.
(d) Collection Where Payment Refused. The Custodian shall not be under
any duty or obligation to take action to effect collection of any
amount, if the Securities upon which such amount is payable are in
default, or if payment is refused after due demand or presentation,
unless and until (i) it shall be directed to take such action by
Written Instructions and (ii) it shall be assured to its satisfaction
of reimbursement of its costs and expenses in connection with any such
action.
(e) Appointment of Agents and Sub-Custodians. The Custodian may appoint
one or more banking institutions, including but not limited to banking
institutions located in foreign countries, to act as Depository or
Depositories or as Sub-Custodian or as Sub-Custodians of Securities
and moneys at any time owned by the Fund, upon terms and conditions
specified in Written Instructions. The Custodian shall use reasonable
care in selecting a Depository and/or Sub-Custodian located in a
country other that the United States ("Foreign Sub-Custodian") and
shall oversee the maintenance of any Securities or moneys of the Fund
by any Foreign Sub-Custodian.
Any agreement between the Custodian and any Depository or
Sub-Custodian shall impose on such Depository or Sub-Custodian
responsibilities and liabilities similar in nature and scope to those
imposed by this Agreement relating to the function to be performed by
such Depository or Sub-Custodian.
(f) No Duty to Ascertain Authority. The Custodian shall not be under any
duty or obligation to ascertain whether any Securities at any time
delivered to or held by it for the Fund are such as may properly be
held by the Fund under the provisions of the Fund's Prospectus.
(g) Compensation of the Custodian. The Custodian shall be entitled to
receive, and the Fund agrees to pay to the Custodian, such
compensation as may be agreed upon from time to time between the
Custodian and the Fund. The Custodian may charge against any money
specifically allocated to the Fund such compensation and any expenses
incurred by the Custodian in the performance of its duties pursuant to
such agreement with respect to the Fund. Any charges associated with
DTC transactions shall be billed to the Fund at cost. The Custodian
shall also be entitled to charge against any money held by it and
specifically allocated to the Fund the amount of any loss, damage,
liability, or expense incurred with respect to the Fund including
counsel fees, for which it shall be entitled to reimbursement under
the provisions of this Agreement.
The expenses which the Custodian may charge against such account
include, but are not limited to, the expenses of Sub-Custodians and
foreign branches of the Custodian incurred in settling transactions
involving the purchase and sale of Securities of the Fund.
(h) Reliance on Certificates and Instructions. The Custodian shall be
entitled to rely upon any Written Instructions or Oral Instructions
actually received by the Custodian pursuant to the applicable Sections
of this Agreement and reasonably believed by the Custodian to be
genuine and to be given by an Authorized Person. The Fund agrees to
forward to the Custodian Written Instructions from an Authorized
Person confirming such Oral Instructions in such manner so that such
Written Instructions are received by the Custodian, whether by hand
delivery, telex, or otherwise, by the close of business on the same
day that such Oral Instructions are given to the Custodian. The Fund
agrees that the fact that such confirming instruction are not received
by the Custodian shall in no way affect the validity of the
transactions or enforceability of the transactions hereby authorized
by the Fund. The Fund agrees that the Custodian shall incur no
liability to the Fund in acting upon Oral Instructions given to the
Custodian hereunder concerning such transactions, provided that such
instructions reasonably appear to have been received from a duly
Authorized Person.
(i) Inspection of Books and Records. The Custodian shall create and
maintain all records relating to its activities and obligations under
this Agreement in such manner as will meet the obligations of the Fund
under the 1940 Act, with particular attention to Section 31 thereof
and Rule 31a-1 and 31a-2 thereunder, applicable federal and state tax
laws, and any other law or administrative rules or procedures which
may be applicable to the Fund. All such records shall be the property
of the Fund, and it shall at all times during the regular business
hours of the Custodian be open for inspection by duly authorized
Officers, Employees, or Agents of the Fund and employees and agents of
the Securities and Exchange Commission. The Custodian shall, at the
Fund's request, supply the Fund with a tabulation of Securities owned
by the Fund and held by the Custodian.
The Custodian shall take all reasonable action, as the Fund may from
time to time request, to obtain favorable opinions from the Fund's
independent accountant with respect to its activities hereunder in
connection with the preparation of the Fund's Form N-1A and Form N-SAR
or other reports to or requirements of the Securities and Exchange
Commission.
12. Term and Termination
(a) This Agreement shall become effective on the date first set forth
above (the "Effective Date") and shall continue in effect thereafter
as the parties may mutually agree.
(b) Either of the parties hereto may terminate this Agreement by giving to
the other party a notice in writing specifying the date of such
termination, which shall be not less than 60 days after the date of
receipt of such notice. In the event such notice is given by the
Fund, it shall be accompanied by a certified resolution of the Board
of Directors of the Fund, electing to terminate this Agreement and
designating a successor custodian or custodians, which shall be a
person qualified to so act under the 1940 Act. In the event such
notice is given by the Custodian, the Fund shall, on or before the
termination date, deliver to the Custodian a certified resolution of
the Board of Directors of the Fund, designating a successor custodian
or custodians. In the absence of such designation by the Fund, the
Custodian may designate a successor custodian, which shall be a person
qualified to so act under the 1940 Act. If the Fund fails to
designate a successor custodian, the Fund shall upon the date
specified in the notice of termination of this Agreement and upon the
delivery by the Custodian of all Securities (other than Securities
held in the Book-Entry System which cannot be delivered to the Fund)
and moneys then owned by the Fund, be deemed to be its own custodian;
and the Custodian shall thereby be relieved of all duties and
responsibilities pursuant to this Agreement, other than the duty with
respect to Securities held in Book-Entry System which cannot be
delivered to the Fund.
(c) Upon the date set forth in such notice under Paragraph (b) of this
Section 12, this Agreement shall terminate to the extent specified in
such notice, and the Custodian shall upon receipt of a notice of
acceptance by the successor custodian on that date deliver directly to
the successor custodian all Securities and moneys then held by the
Custodian, after deducting all fees, expenses, and other amounts for
the payment or reimbursement of which it shall then be entitled with
respect to the Fund.
13. Miscellaneous.
(a) Annexed hereto as Appendix A is a certification signed the President
and the Secretary of the Fund setting forth the names and the
signatures of the present Authorized Persons. The Fund agrees to
furnish to the Custodian a new certification in similar form in the
event that any such present Authorized Persons ceases to be such an
Authorized person or in the event that other or additional Authorized
Persons are elected or appointed. Until such new certification shall
be received, the Custodian shall be fully protected in acting under
the provisions of this Agreement upon Oral Instructions or signatures
of the present Authorized Persons as set forth in the last delivered
certification.
(b) Annexed hereto as Appendix B is a certification signed by the
President and the Secretary of the Fund setting forth the
names of the present Directors of the Fund who are authorized to give
Oral and Written Instructions to the Custodian. The Fund agrees to
furnish to the Custodian a new certification in similar form in the
event any such present Director ceases to be a Director of the Fund,
ceases to have authority to provide Oral or Written Instructions to
the Custodian, or in the event that other or additional Directors are
elected or appointed who may be authorized to provide Oral or Written
Instructions to the Custodian. Until such new certification shall be
received, the Custodian shall be fully protected in acting under the
provisions of this Agreement upon the signature of the Directors as
set forth in the last delivered certification.
(c) Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Custodian, shall be sufficiently
given if addressed to the Custodian and mailed or delivered to it at
its offices at 900 South Broadway, Minot, North Dakota 58701, or at
such other place as the Custodian may from time to time designate in
writing.
(d) Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Fund, shall be sufficiently given
if addressed to the Fund and mailed or delivered to it at its offices
at 1 North Main, Minot, North Dakota 58703, or at such other place as
the Fund may from time to time designate in writing.
(e) This Agreement may not be amended or modified in any manner, except by
a written agreement executed by both parties with the same formality
as this Agreement, and as may be permitted or required by the 1940
Act.
(f) This Agreement shall extend to and shall be binding upon the parties
hereto, and their respective successors and assigns; provided,
however, that this Agreement shall not be assignable by the Fund
without the written consent of the Custodian, or by the Custodian
without the written consent of the Fund authorized or approved by a
resolution of the Board of Directors of the Fund, and any attempted
assignment without such written consent shall be null and void.
(g) This Agreement shall be construed in accordance with the laws of the
State of North Dakota.
(h) It is expressly agreed to that the obligations of the Fund hereunder
shall not be binding upon any of the Directors, Shareholders,
Nominees, Officers, Agents, or Employees of the Fund, personally, but
bind only the corporate property of the Fund. The execution and
deliver of this Agreement have been authorized by the Directors of the
Fund and signed by an authorized Officer of the Fund, acting as such,
and neither such authorization by such Directors nor such execution
and delivery by such Officer shall be deemed to have been made by any
of them individually or to impose any liability on any of them
personally, but shall bind only the corporate property of the Fund.
(i) The captions of the Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions
hereof or otherwise affect their construction or effect.
(j) This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original, but such counterparts shall,
together, constitute only one instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunder duly authorized as of the day
and year first above written.
INTEGRITY SMALL-CAP FUND OF FUNDS, INC.
By: /Robert E. Walstad/
Robert E. Walstad
President
Attest: /Peter A. Quist
Peter A. Quist
Secretary
Agreed and Accepted By:
FIRST WESTERN BANK & TRUST
By: /Chris Lamoureux/
Chris Lamoureux
Vice President and Trust Department Manager
Attest: /Marcy Smith/
Marcy Smith
APPENDIX A
We, Robert E. Walstad and Peter A. Quist, Directors of the Integrity
Small-Cap Fund of Funds, Inc. (the "Fund"), a corporation organized under the
laws of the State of North Dakota, do hereby certify that the following
individuals have been duly authorized as Authorized Persons to give Oral
Instructions and Written Instructions on behalf of the Fund, and the signatures
set forth opposite their respective names are their true and correct
signatures:
Authorized Persons Signatures
Robert E. Walstad /Robert E. Walstad/
W. Dan Korgel /W. Dan Korgel/
Monte L. Avery /Monte L. Avery/
Mark Anderson /Mark Anderson/
INTEGRITY SMALL-CAP FUND OF FUNDS, INC.
/Robert E. Walstad/
Robert E. Walstad
Director
/Peter A. Quist/
Peter A. Quist
Director
APPENDIX B
We, Robert E. Walstad and Peter A. Quist, Directors of Integrity Small-Cap
Fund of Funds, Inc. (the "Fund"), a corporation organized under the laws of the
State of North Dakota, do hereby certify that the following individuals serve
in the following positions with the Fund and have been duly elected to such
positions and qualified therefor in conformity with the Fund's Bylaws; and the
signatures set forth opposite their names are their true and correct
signatures:
Name Position Signature
Robert E. Walstad President and Director /Robert E. Walstad/
Peter A. Quist Vice President and Director /Peter A. Quist/
INTEGRITY SMALL-CAP FUND OF FUNDS, INC.
/Robert E. Walstad/
Robert E. Walstad
Director
/Peter A. Quist/
Peter A. Quist
Director
APPENDIX C
I, Richard K. Anderson, Vice President and Cashier of First Western Bank &
Trust (the "Custodian"), hereby certify pursuant to Section 10(b) of the
Custodian Agreement, that the following employees have been duly authorized by
the Custodian's Board of Directors to have access to the assets of the
Integrity Small-Cap Fund of Funds, Inc.:
Chris Lamoureux, Vice President and Trust Department Manager; Laurie J.
Johnson, Trust Operations Officer; Dean Zaderaka, Assistant Trust Officer
Signed and dated this 15 day of September, 1998.
/Richard K. Anderson/
Richard K. Anderson
Vice President and Cashier
First Western Bank & Trust
SCHEDULE A
FEE SCHEDULE
CUSTODIAN CHARGES
FIRST WESTERN BANK & TRUST
Montana Tax-Free Fund, Inc., Integrity Fund of Funds, Inc., Integrity
Small-Cap Fund of Funds, Inc., and any other mutual funds for which ND Money
Management, Inc., serves as investment adviser (hereinafter referred to as the
"Funds") shall compensate First Western Bank & Trust (the "Custodian") for
services rendered pursuant to the Custodian Agreements entered into with each
of the Funds as follows:
For the period beginning February 1, 1998, and monthly thereafter, the
Funds shall pay the Custodian a fee at the annual rate of .00015 of combined
net assets of the Funds; provided, however, that the Funds shall pay the
Custodian a minimum monthly fee of five hundred dollars ($500).
By way of example only, if the Funds had combined net assets of ten million
dollars ($10,000,000) on February 1, 1998, the fee for the month would be $500
(.00015 x $10,000,000 = $1,500 / 12 = $125, so the minimum monthly fee of $500
would apply). If the combined net assets of the Funds on February 1 were one
hundred million dollars ($100,000,000), the fee for the month of February would
be $1,250 (.00015 x $100,000,000 / 12 = $1,250).
The Custodian shall compute the fee payable pursuant to the Fee Schedule and
provide each of the Funds with detailed bills showing their proportionate share
of the fee as soon as practicable after the end of each calendar month. The
Funds shall each promptly pay the Custodian their proportionate share of the
fee.
EXHIBIT 9(A)
TRANSFER AGENCY AGREEMENT
AGREEMENT dated as of September 15, 1998, between Integrity Small-Cap Fund
of Funds, Inc. (the "Fund"), a corporation organized under the laws of the
State of North Dakota, having its principal office and place of business at
1 North Main, Minot, North Dakota 58703, and ND Resources, Inc. (the "Transfer
Agent"), a corporation organized under the laws of the State of North Dakota
with its principal place of business at 1 North Main, Minot, North Dakota
58703.
WITNESSETH:
That for and in consideration of the mutual promises hereinafter set forth,
the Fund and the Transfer Agent agree as follows:
1. Definitions.
Whenever used in this Agreement, the following words and phrases, unless
the context otherwise requires, shall have the following meanings:
(a) "Authorized Person" shall be deemed to include the President, the
Vice President, the Secretary, and the Treasurer of the Fund, the
persons listed in Appendix A hereto, and any other person, whether
or not such person is an officer of the Fund, duly authorized to
give Oral Instructions or Written Instructions on behalf of the
Fund as indicated in a certificate furnished to the Transfer Agent
pursuant to Section 5(d) or 5(e) hereof as may be received by the
Transfer Agent from time to time.
(b) "Commission" shall have the meaning given it in the 1940 Act.
(c) "Custodian" refers to the custodian and any sub-custodian of all
securities and other property which the Fund may from time to time
deposit or cause to be deposited or held under the name or account
of such custodian.
(d) "Articles of Incorporation" shall mean the Fund's Articles of
Incorporation as now in effect and as the same may be amended from
time to time.
(e) "Officer" shall mean the President, Vice President, Secretary, and
Treasurer of the parties hereto.
(f) "Oral Instructions" shall mean instructions, other than written
instructions, actually received by the Transfer Agent from a person
reasonably believed by the Transfer Agent to be an Authorized
Person.
(g) "Prospectus" shall mean any current prospectus and statement of
additional information relating to the registration of the Fund's
shares under the Securities Act of 1933, as amended, and the 1940
Act.
(h) "Shares" refers to the units into which the shareholders'
proprietary interests in the Fund are divided.
(i) "Shareholder" means a record owner of Shares.
(j) "Directors" or "Board of Directors" refers to the duly elected
Directors of the Fund.
(k) "Written Instructions" shall mean a written or electronic
communication actually received by the Transfer Agent from an
Authorized Person or from a person reasonably believed by the
Transfer Agent to be an Authorized Person by telex or any other
such system whereby the receiver of such communication is able to
verify through codes or otherwise with a reasonable degree of
certainty the authenticity of the sender of such communications.
(l) The "1940 Act" refers to the Investment Company Act of 1940, and
the Rules and Regulations promulgated thereunder, all as amended
from time to time.
2. Appointment of the Transfer Agent.
The Fund hereby appoints and constitutes the Transfer Agent as transfer
agent for its Shares and as Shareholder servicing agent, and the
Transfer Agent accepts such appointment and agrees to perform the duties
hereinafter set forth.
3. Compensation.
(a) The Fund will compensate the Transfer Agent for the performance of
its obligations hereunder in accordance with the fees set forth in
the written schedule of fees annexed hereto as Schedule A and
incorporated herein.
The Transfer Agent will bill the Fund as soon as practicable after
the end of each calendar month, and said billings will be detailed
in accordance with the Schedule A. The Fund will promptly pay to
the Transfer Agent the amount of such billing.
(b) Any compensation agreed to hereunder may be adjusted from time to
time upon mutual agreement by both parties hereto by attaching to
Schedule A of this Agreement a revised Fee Schedule, dated and
signed by an Officer of each party hereto.
4. Documents.
In connection with the appointment of the Transfer Agent, the Fund
shall, on or before the date this Agreement goes into effect, but in any
case, within a reasonable period of time for the Transfer Agent to
prepare to perform its duties hereunder, furnish the Transfer Agent with
the following documents:
(a) A certified copy of the Fund's Articles of Incorporation, as
amended.
(b) A certified copy of the Fund's Bylaws, as amended.
(c) A copy of the resolution of the Directors authorizing execution
and delivery of this Agreement.
(d) If applicable, a specimen of the certificate for Shares of the Fund
in the form approved by the Directors, with a certificate of the
Secretary of the Fund as to such approval.
(e) All account application forms and other documents relating to
Shareholder accounts or to any plan, program, or service offered by
the Fund.
5. Further Documentation.
The Fund will also furnish from time to time the following documents:
(a) The Fund's Registration Statement and each subsequent amendment to
the Fund's Registration Statement that is filed with the
Commission.
(b) Certificates as to any change in any Officer, Director, or
Investment Adviser of the Fund.
(c) Such other certificates, documents, or opinions as the Transfer
Agent deems to be appropriate or necessary for the proper
performance of its duties hereunder.
6. Representations of the Fund.
The Fund represents to the Transfer Agent that Shares will be issued in
accordance with the terms of the Articles of Incorporation and the
Prospectus and that such Shares shall be validly issued, fully paid, and
nonassessable by the Fund.
In the event that the Directors shall declare a distribution payable in
Shares, the Fund shall deliver to the Transfer Agent written notice of
such declaration signed on behalf of the Fund by an Officer of the Fund,
upon which the Transfer Agent shall be entitled to rely for all
purposes, certifying (i) the number of Shares involved, (ii) that all
appropriate action has been taken, and (iii) that any amendment to the
Articles of Incorporation which may be required has been filed and is
effective. Such notice shall be accompanied by an opinion of counsel
or the Fund relating to the legal adequacy and effect of the
transaction. This provision shall not apply to Shares to be issued in
the normal course of reinvestment of any distributions or dividends in
accordance with the Fund's Prospectus.
7. Duties of the Transfer Agent.
The Transfer Agent shall be responsible for administering and/or
performing transfer agent functions; for acting as service agent in
connection with dividend and distribution functions; and for performing
Shareholder account and administrative agent functions in connection
with the issuance, transfer, and redemption or repurchase (including
coordination with the Custodian) of Shares. The operating standards and
procedures to be followed shall be determined from time to time by
agreement between the Transfer Agent and the Fund and shall be expressed
in a written schedule of duties of the Transfer Agent annexed hereto as
Schedule B and incorporated herein.
8. Recordkeeping and Other Information.
The Transfer Agent shall create and maintain all necessary records in
accordance with all applicable laws, rules and regulations, including,
but not limited to, records required by Section 31(a) of the 1940 Act
and those records pertaining to the various functions performed by it
hereunder which are set forth in Schedule B hereto. All records shall
be available during regular business hours for inspection and use by the
Fund. Where applicable, such records shall be maintained by the
Transfer Agent for the periods and in the places required by Rule 31a-2
under the 1940 Act.
Upon reasonable notice by the Fund, the Transfer Agent shall make
available during regular business hours its facilities and premises
employed in connection with the performance of its duties under this
Agreement for reasonable visitation by the Fund or any person retained
by the Fund.
To the extent required by said Section 31 and the rules and regulations
thereunder, the Transfer Agent agrees that all such records prepared and
maintained by the Transfer Agent relating to the services to be
performed by the Transfer Agent hereunder are the property of the Fund.
The Transfer Agent and the Fund agree that all books, records,
information, and data pertaining to the business of the other party
which are exchanged or received in connection with this Agreement shall
remain confidential and shall not be voluntarily disclosed to any
person, except as may be required by law. In the case of any request or
demands for any inspection of the Shareholder records of the Fund, the
Transfer Agent will endeavor to notify the Fund and to secure
instructions from an authorized Officer of the Fund as to such
inspection.
9. Other Duties.
In addition to the duties expressly set forth in Schedule B to this
Agreement, the Transfer Agent shall perform such other duties and
functions, and shall be paid such amounts therefor, as may from time to
time be agreed upon in writing between the Fund and the Transfer Agent.
Such other duties and functions shall be reflected in a written
amendment to Schedule B, dated and signed by an Officer of each party
hereto.
10. Reliance by Transfer Agent; Instructions.
(a) The Transfer Agent will be protected in acting upon Written or Oral
Instructions, as appropriate, believed to have been executed or
orally communicated by an Authorized Person and will not be held to
have any notice of any change of authority of any person until
receipt of a Written Instruction thereof from the Fund. The
Transfer Agent will also be protected in processing Share
certificates which it reasonably believes to bear the proper manual
or facsimile signatures of the Officers of the Fund and the proper
countersignature of the Transfer Agent.
(b) At any time the Transfer Agent may apply to any Authorized Person
of the Fund for Written Instructions and may seek advice from legal
counsel for the Fund, or its own legal counsel, with respect to any
matter arising in connection with this Agreement, and it shall not
be liable for any action taken or not taken or suffered by it in
good faith in accordance with such Written Instructions or in
accordance with the opinion of counsel for the Fund or for the
Transfer Agent; provided, however, that if such reliance involves
a potential material loss to the Fund, the Transfer Agent will
advise the Fund of any such action(s) to be taken in accordance
with the opinion of counsel to the Transfer Agent. Written
Instructions requested by the Transfer Agent will be provided by
the Fund within a reasonable period of time. In addition, the
Transfer Agent, its officers, agents, or employees, shall accept
Oral Instructions or Written Instructions given to them by any
person representing or acting on behalf of the Fund only if said
representative is known by the Transfer Agent, or its officers,
agents, or employees, to be an Authorized Person. The Transfer
Agent shall have no duty or obligation to inquire into, nor shall
the Transfer Agent be responsible for, the legality of any act done
by it upon the request or direction of an Authorized Person.
(c) Notwithstanding any of the foregoing provisions of this Agreement,
the Transfer Agent shall be under no duty or obligation to inquire
into, and shall not be liable for:
(1) the legality of the issuance or sale of any Shares or the
sufficiency of the amount to be received therefor;
(2) the legality of the redemption of any Shares, or the propriety
of the amount to be paid therefor;
(3) the legality of the declaration of any dividend by the
Directors, or the legality of the issuance of any Shares in
payment of any dividend; or
(4) the legality of any recapitalization or readjustment of the
Shares.
11. Acts of God., Etc.
Neither the Transfer Agent nor the Fund will be liable or responsible
for delays or errors by reason of circumstances beyond its reasonable
control, including acts of civil or military authority, national
emergencies, fire, mechanical breakdown beyond its control, flood or
catastrophe, acts of God, insurrection, war, riots, or failure beyond
its control of transportation, communication, or power supply.
12. Duty of Care and Indemnification.
The Fund and the Transfer Agent will indemnify each other against and
hold the other party harmless from any and all losses, claims, damages,
liabilities, or expenses (including reasonable counsel fees and
expenses) resulting from any claim, demand, action, or suit not
resulting from the bad faith or negligence of the other party, and
arising out of, or in connection with, the duties and responsibilities
described hereunder. In addition, the Fund will indemnify the Transfer
Agent against and hold it harmless from any and all losses, claims,
damages, liabilities, or expenses (including reasonable counsel fees and
expenses) resulting from any claim demand, action, or suit as a result
of:
(a) any action taken in accordance with Written or Oral Instructions,
or any other instructions, or Share certificates reasonably
believed by the Transfer Agent to be genuine and to be signed,
countersigned or executed, or orally communicated by an Authorized
Person;
(b) any action taken in accordance with written or oral advice
reasonably believed by the Transfer Agent to have been given by
counsel for the Fund or its own counsel;
(c) any action taken as a result of any error or omission in any record
(including but not limited to magnetic tapes, computer printouts,
hard copies, and microfilm copies) delivered or caused to be
delivered by the Fund to the Transfer Agent in connection with this
Agreement.
In any case in which the Fund or the Transfer Agent may be asked to
indemnify or hold the other party harmless, the requesting party will
provide the other party with all pertinent facts concerning the
situation in question and will use reasonable care to identify and
provide notice of any situation which presents or appears likely to
present a claim for indemnification. Each party shall have the option
to defend the other party against any claim which may be the subject of
this indemnification, and in the event that a party so elects, such
defense shall be conducted by counsel chosen by the party making such
election; and such counsel shall be satisfactory to the other party, and
thereupon such electing party shall take over complete defense of the
claim, and the requesting party shall sustain no further legal or other
expenses in such situation for which it seeks indemnification under this
Section 12. Neither party will confess any claim or make any compromise
in any case in which the other party will be asked to provide
indemnification, except with the other party's prior written consent.
The obligations of the parties hereto under this Section shall survive
the termination of this Agreement.
13. Term and Termination.
This Agreement shall become effective on the date first set forth above
(the "Effective Date") and shall continue in effect from year to year
thereafter as the parties may mutually agree; provided, that either
party hereto may terminate this Agreement by giving to the other party
a notice in writing specifying the date of such termination, which shall
be not less than 60 days after the date of receipt of such notice. In
the event such notice is given by the Fund, it shall be accompanied by a
resolution of the Board of Directors of the Fund, certified by the
Secretary, electing to terminate this Agreement and designating a
successor transfer agent or transfer agents. Upon such termination and
at the expense of the Fund, the Transfer Agent will deliver to such
successor a certified list of Shareholders of the Fund (with names,
addresses, and taxpayer identification or Social Security numbers), an
historical record of the account of each Shareholder and the status
thereof, and all other relevant books, records, correspondence, and
other data established or maintained by the Transfer Agent under this
Agreement in the form reasonably acceptable to the Fund, and will
cooperate in the transfer of such duties and responsibilities, including
provisions for assistance from the Transfer Agent's personnel in the
establishment of books, records, and other data by such successor or
successors.
14. Amendment.
This Agreement may not be amended or modified in any manner except by a
written agreement executed by both parties.
15. Subcontracting.
Except as otherwise provided below, neither this Agreement nor any
rights or obligations hereunder may be assigned by either party without
the express written consent of the other party. The Transfer Agent may,
in its sole discretion and without further approval from the Fund,
subcontract, in whole or in part, for the performance of its obligations
and duties hereunder with any person or entity including, but not
limited to, any affiliate or subsidiary; provided, however, that (a) the
Transfer Agent shall remain fully responsible to the Fund for the acts
and omissions of any agent or subcontractor as it is for its own acts
and omissions, and (b) to the extent that the Transfer Agent
subcontracts any functions or activities required or performed by a
registered transfer agent, the subcontracting party shall be a duly
registered transfer agent with the appropriate regulatory agency as
required under Section 17A of the Securities Exchange Act of 1934 and
the rules and regulations thereunder, as amended.
16. Use of Transfer Agent's Name.
The Fund shall not use the name of the Transfer Agent in any Prospectus,
Statement of Additional Information, Shareholders' report, sales
literature, or other material relating to the Fund for other than
internal use, in a manner not approved prior thereto; provided, that the
Transfer Agent shall approve all reasonable uses of its name which
merely refer in accurate terms to its appointment hereunder or which are
required by the Commission or a state securities administrator.
17. Use of the Fund's Name.
The Transfer Agent shall not use the name of the Fund or material
relating to the Fund on any documents or forms for other than internal
use in a manner not approved prior thereto in writing; provided, that
the Fund shall approve all reasonable uses of its name which merely
refer in accurate terms to the appointment of the Transfer Agent or
which are required by the Commission or a state securities
administrator.
18. Security.
The Transfer Agent represents and warrants that, to the best of its
knowledge, the various procedures and systems which the Transfer Agent
has implemented or will implement with regard to safeguarding from loss
or damage attributable to fire, theft, or any other cause (including
provision for 24 hours-a-day restricted access) of the Fund's records
and other data and the Transfer Agent's records, data, equipment,
facilities, and other property used in the performance of its
obligations hereunder are adequate and that it will make such changes
therein from time to time as in its judgment are required for the secure
performance of its obligations hereunder. The parties shall review
such systems and procedures on a periodic basis.
19. Miscellaneous.
(a) Any notice or other instrument authorized or required by this
Agreement to be given in writing to the Fund or the Transfer Agent
shall be sufficiently given if addressed to that party and received
by it at its office set forth below or at such other place as it
may from time to time designate in writing.
To the Fund:
Integrity Small-Cap Fund of Funds, Inc.
1 North Main
Minot, ND 58703
To the Transfer Agent:
ND Resources, Inc.
1 North Main
Minot, ND 58703
(b) This Agreement shall extend to and shall be binding upon the
parties hereto, and their respective successors and assigns;
provided, however, that this Agreement shall not be assignable by
the Fund without the written consent of the other party.
(c) This Agreement shall be construed in accordance with the laws of
the State of North Dakota.
(d) This Agreement may be executed in any number of counterparts, each
of which shall be deemed to be an original; but such counterparts
shall, together, constitute only one instrument.
(e) The captions of this Agreement are included for convenience of
reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect.
20. Liability of Directors, Officers, and Shareholders.
The execution and delivery of this Agreement have been authorized by the
Directors of the Fund and signed by an authorized Officer of the Fund,
acting as such, and neither such authorization by such Directors nor
such execution and delivery by such Officer shall be deemed to have been
made by any of them individually or to impose any liability on any of
them personally, and the obligations of this Agreement are not binding
upon any of the Directors or Shareholders of the Fund, but bind only the
property of the Fund.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective corporate officers thereunder duly authorized as
of the day and year first above written.
INTEGRITY SMALL-CAP FUND OF FUNDS, INC.
By: /Robert E. Walstad/
Date: September 15, 1998
Agreed and Accepted by:
ND RESOURCES, INC.
By: /Robert E. Walstad/
Date: September 15, 1998
APPENDIX A
We, Robert E. Walstad and Peter A. Quist, President and Secretary,
respectively, of Integrity Small-Cap Fund of Funds, Inc. (the "Fund"), a
corporation organized under the laws of the State of North Dakota, do hereby
certify that the following individuals have been duly authorized as Authorized
Persons to give Oral Instructions and Written Instructions on behalf of the
Fund, and the signatures set forth opposite their respective names are their
true and correct signatures:
NAME SIGNATURE
Robert E. Walstad /Robert E. Walstad/
W. Dan Korgel /W. Dan Korgel/
/Robert E. Walstad/
Robert E. Walstad
/Peter A. Quist/
Peter A. Quist
SCHEDULE A*
FEE SCHEDULE
TRANSFER AGENT CHARGES
ND RESOURCES, INC.
FUND SIZE PERCENTAGE
(NET ASSET VALUE) OF 1%
$ 0 TO $10,000,000 0.16
10,000,001 TO $25,000,000 0.13
25,000,001 TO $40,000,000 0.11
40,000,001 TO $50,000,000 0.10
50,000,001 AND LARGER 0.09
*Amounts due under the above Fee Schedule are payable monthly and shall be
calculated as follows: The net asset value of all outstanding Fund shares
within each category (e.g., $0 to $10,000,000 is one category, $10,000,001 to
$25,000,000 is another, etc.) shall be multiplied by the percentage of 1%
applicable to such category and the product thereof divided by 12. The same
procedure shall be followed for each category in which the Fund has net asset
values. The amounts derived by multiplying the net asset value of each
category by the applicable percentages shall then be added together to
determine the amount payable for that month. By way of example only, if the
Fund had net assets of $10,500,000 for the month in question, the computation
would be as follows:
$10,000,000 x .0016 / 12 = $1,333.33
500,000 x 00.13 / 12 = $ 54.17
$1,387.50
SCHEDULE B
DUTIES OF THE TRANSFER AGENT
(See Exhibit 1 for Summary of Services.)
1. Shareholder Information.
The Transfer Agent shall maintain a record of the number of Shares held by
each holder of record which shall include his address and taxpayer
identification number and which shall indicate whether such shares are held
in certificated or uncertificated form.
2. Shareholder Services.
The Transfer Agent will investigate all Shareholder inquiries relating to
Shareholder accounts and will answer all correspondence from Shareholders
and others relating to its duties hereunder and such other correspondence
as may from time to time be mutually agreed upon between the Transfer Agent
and the Fund. The Transfer Agent shall keep records of Shareholder
correspondence and replies thereto and of the lapse of time between the
receipt of such correspondence and the mailing of such replies.
3. State Registration Reports.
The Transfer Agent shall furnish on a state-by-state basis sales reports
and such periodic and special reports as the Fund may reasonablY request
and such other information, including Shareholder lists and statistical
information concerning accounts, as may be agreed upon from time to time
between the Fund and the Transfer Agent.
4. Mailing Communications to Shareholders; Proxy Materials.
The Transfer Agent will address and mail to Shareholders of the Fund all
reports to Shareholders, dividend and distribution notices, and proxy
material for the Fund's meetings of Shareholders. In connection with
meetings of Shareholders, the Transfer Agent will report on proxies voted
prior to meetings, act as inspector of election at meetings, if so
requested by the Fund, and certify Shares voted at meetings.
5. Sales of Shares.
(a) Processing of Investment Checks or Other Investments. Upon receipt of
any check or other instrument drawn or endorsed to it as agent for, or
identified as being for the account of the Fund for the purchase of
Shares, the Transfer Agent shall stamp the check with the date of
receipt, shall forthwith process the same for collection, and shall
record the number of Shares sold, the trade date, the price per Share,
and the amount of money to be delivered to the Custodian of the Fund
for the sale of such Shares.
(b) Issuance of Shares. Upon receipt of notification that the Custodian
has received the amount of money specified in the immediately
preceding paragraph, the Transfer Agent shall issue to and hold in the
account of the purchaser/Shareholder, or if no account is specified
therein, in a new account established in the name of the purchaser,
the number of Shares such purchaser is entitled to receive, as
determined in accordance with applicable federal law or regulation.
(c) Statements. On a quarterly basis, the Transfer Agent shall send to
the purchaser/Shareholder a statement of purchases which will show the
new Share balance, the Shares held under a particular plan, if any,
for withdrawing investments, the amount invested and the price paid
for the newly purchased Shares, or will be in such other form of
statement as the Fund and the Transfer Agent may agree from time to
time.
(d) Suspension of Sale of Shares. The Transfer Agent shall not be
required to issue any Shares where it has received a Written
Instruction from the Fund or written notice from any appropriate
federal or state authority that the sale of the Shares of the Fund has
been suspended or discontinued, and the Transfer Agent shall be
entitled to rely upon such Written Instructions or written
notification.
(e) Taxes in Connection with Issuance of Shares. Upon the issuance of any
Shares in accordance with the foregoing provisions of the Section, the
Transfer Agent shall not be responsible for the payment of any
original issue or other taxes required to be paid in connection with
such issuance.
(f) Returned Checks. In the event that any check or other order for the
payment of money is returned unpaid for any reason, the Transfer Agent
will:
(1) give prompt notice of such return to the Fund or its designee;
(2) place a stop transfer order against all Shares issued as a result
of such check or order; and
(3) take such action as the Transfer Agent may from time to time deem
appropriate.
6. Redemptions.
(a) Requirements for Transfer or Redemption of Shares. The Transfer Agent
shall process all requests from Shareholders to transfer or redeem
Shares in accordance with the procedures set forth in the Prospectus
and all determinations of the number of Shares required to be redeemed
to fund designated monthly payments, automatic payments, or any other
such distribution or withdrawal plan.
The Transfer Agent will transfer or redeem Shares upon receipt of
Written Instructions and Share certificates, if any, properly endorsed
for transfer or redemption, accompanied by such documents as the
Transfer Agent reasonably may deem necessary to evidence the authority
of the person making such transfer or redemption, and meeting
satisfactory evidence of the payment of stock transfer taxes, if any.
Except to the extent inconsistent with the procedures set forth in the
Prospectus, the Transfer Agent reserves the right to refuse to
transfer or redeem Shares until it is satisfied that the endorsement
on the instructions is valid and genuine, and for that purpose it will
require a guarantee of signature by a member firm of a national
securities exchange, by any national bank or trust company, or by any
member bank of the Federal Reserve system. The Transfer Agent also
reserves the right to refuse to transfer or redeem Shares until it is
satisfied that the requested transfer or redemption is legally
authorized, and it shall incur no liability for the refusal, in good
faith, to make transfers or redemptions which the Transfer Agent, in
its good judgment, deems improper or unauthorized, or until it is
reasonably satisfied that there is no basis to any claims adverse to
such transfer or redemption.
The Transfer Agent may, in effecting transactions, rely upon the
provisions of the Uniform Act for the Simplification of Fiduciary
Security Transfers or the provisions of Article 8 of the Uniform
Commercial Code, as the same may be amended from time to time in the
State of North Dakota, which in the opinion of legal counsel for the
Fund or of its own legal counsel protect it in not requiring certain
documents in connection with the transfer or redemption of Shares.
The Fund may authorize the Transfer Agent to waive the signature
guarantee in certain cases by Written Instructions.
For the purpose of the redemption of Shares which have been purchased
within 15 days of a redemption request, the Transfer Agent may refuse
to redeem such Shares until the Transfer Agent has received fed funds
for the purchase of such Shares.
(b) Notice to Custodian and Fund. When Shares are redeemed, the Transfer
Agent shall, upon receipt of the instructions and documents in proper
form, deliver to the Custodian and the Fund a notification setting
forth the number of Shares to be redeemed. Such redemptions shall be
reflected on appropriate accounts maintained by the Transfer Agent
reflecting outstanding Shares and Shares attributed to individual
accounts and, if applicable, any individual withdrawal or distribution
plan.
(c) Payment of Redemption Proceeds. The Transfer Agent shall, upon
receipt of the moneys paid to it by the Custodian for the redemption
of Shares, pay to the Shareholder, or his authorized agent or legal
representative, such moneys as are received from the Custodian, all in
accordance with the redemption procedures described in the Prospectus;
provided, however, that the Transfer Agent shall pay the proceeds of
any redemption of Shares purchased within 15 days of a redemption
request to the Transfer Agent upon a determination that good funds
have been collected for the purchase of such Shares. The Fund shall
indemnify the Transfer Agent for any payment of redemption proceeds or
refusal to make such payment if the payment or refusal to pay is in
accordance with this Section.
The Transfer agent shall not process or effect any redemptions
pursuant to a plan of distribution or redemption or in accordance with
any other Shareholder request upon the receipt by the Transfer Agent
of notification of the suspension of the determination of the Fund net
asset value.
7. Dividends.
(a) Notice to Transfer Agent and Custodian. Upon the declaration of each
dividend and each capital gains distribution by the Board of Directors
of the Fund with respect to Shares, the Fund shall furnish to the
Transfer Agent a copy of a resolution of its Board of Directors
certified by the Secretary setting forth with respect to the Shares
the Date of the declaration of such dividend or distribution, the
ex-dividend date, the date of payment thereof, the record date as of
which Shareholders entitled to payment shall be determined, the amount
payable per Share to the Shareholders of record as of that date, the
total amount payable to the Transfer Agent on the payment date, and
whether such dividend or distribution is to be paid in Shares at net
asset value.
On or before the payment date specified in such resolution of the
Board of Directors, the Fund will cause the Custodian of the Fund to
pay to the Transfer Agent sufficient cash to make payment to the
Shareholders of record as of such payment date.
(b) Payment of Dividends by the Transfer Agent. The Transfer Agent will,
on the designated monthly payment date, automatically reinvest all
dividends in additional Shares at net asset value (determined on such
date) and mail to each Shareholder on a quarterly basis at his address
of record, or such other address as the Shareholder may have
designated, a statement showing the number of full and fractional
Shares (rounded to three decimal places) then currently owned by the
Shareholder and the net asset value of the Shares so credited to the
Shareholder's account; provided, however, that if the Transfer Agent
has on file a direction by the Shareholder to pay income dividends or
capital gains dividends, or both, in cash, such dividends shall be
paid in accordance with such instructions; and provided further, that
in the event of the return of two consecutive dividend checks as
undeliverable, the Transfer Agent shall change such Shareholder
account to a reinvestment account if so provided in the Prospectus.
(c) Insufficient Funds for Payments. If the Transfer Agent does not
receive sufficient cash from the Custodian to make total dividend
and/or distribution payments to all Shareholders of the Fund as of the
record date, the Transfer Agent will, upon notifying the Fund,
withhold payment to all Shareholders of record as of the record date
until such sufficient cash is provided to the Transfer Agent.
(d) Information Returns. It is understood that the Transfer Agent shall
file such appropriate information returns concerning the payment of
dividends, return of capital, and capital gain distributions with the
proper federal, state, and local authorities as are required by law to
be filed and shall be responsible for the withholding of taxes, if
any, due on such dividends or distributions to Shareholders when
required to withhold taxes under applicable law.
Exhibit 1 to Schedule B
SUMMARY OF SERVICES
The services to be performed by the Transfer Agent shall be as follows:
A. DAILY RECORDS
Maintain daily on disc the following information with respect to each
Shareholder account as received:
(1) Name and Address (Zip Code)
(2) Balance of Shares held by Transfer Agent
(3) State of residence code
(4) Beneficial owner code: (i.e., male, female, joint tenant, etc.)
(5) Dividend code (reinvestment, cash)
(6) Number of Shares held in certificate form
B. OTHER DAILY ACTIVITY
(1) Answer written inquires relating to Shareholder accounts (Matter
relating to portfolio management, distribution of Shares, and other
management policy questions will be referred to the Fund.).
(2) Furnish a Statement of Additional Information to any Shareholder who
requests (in writing or by telephone) such statement from the
Transfer Agent.
(3) Examine and process Share purchase applications in accordance with
the Prospectus.
(4) Furnish Forms W-9 to all Shareholders whose initial subscriptions
for Shares did not include taxpayer identification numbers.
(5) Process additional payments into established Shareholder accounts
in accordance with the Prospectus.
(6) Upon receipt of proper instructions and all required documentation,
process requests for redemption of Shares.
(7) Identify redemption requests made with respect to accounts in which
Shares have been purchased within an agreed-upon period of time for
determining whether good funds have been collected with respect to
such purchase and process as agreed by the Transfer Agent and the
Fund in accordance with written procedures set forth in the Fund's
Prospectus.
(8) Examine and process all transfers of Shares, ensuring that all
transfer requirements and legal documents have been supplied.
(9) Issue and mail replacement checks.
C. REPORTS PROVIDED TO THE FUND
The Transfer Agency will furnish the following reports to the Fund:
(1) Daily financial totals
(2) Blue Sky reports
(3) Monthly Form N-SAR information (sales/redemptions)
(4) Monthly report of outstanding Shares
(5) Monthly analysis of accounts by beneficial owner code
(6) Monthly analysis of accounts by Share range
(7) Analysis of sales by state; provide a "warning system" that informs
the Fund when sales of Shares in certain states are within a
specified percentage of the Shares registered in the state.
D. DIVIDEND ACTIVITY
(1) Calculate and process Share dividends and distributions as
instructed by the Fund.
(2) Compute, prepare, and mail all necessary reports to Shareholders,
federal, and/or state authorities as requested by the Fund.
E. MEETINGS OF SHAREHOLDERS
(1) Cause to be mailed proxy and related material for all meetings of
Shareholders. Tabulate returned proxies (Proxies must be adaptable
to mechanical equipment of the Transfer Agent or its agents.) and
supply daily reports when sufficient proxies have been received.
Costs incurred in providing this service will be an out-of-pocket
expense of the Transfer Agent.
(2) Prepare and submit to the Fund an Affidavit of Mailing.
(3) At the time of the meeting, furnish a certified list of
Shareholders, hard copy, microfile, or microfiche and, if requested
by the Fund, Inspectors of Election.
F. PERIODIC ACTIVITIES
Cause to be mailed reports, Prospectuses, and any other enclosures
requested by the Fund (Material must be adaptable to mechanical
equipment of Transfer Agent or its agents.).
EXHIBIT 9(B)
ACCOUNTING SERVICES AGREEMENT
AGREEMENT dated as of this 15th day of September, 1998, by and between
Integrity Small-Cap Fund of Funds, Inc. (the "Fund"), a North Dakota
Corporation, and ND Resources, Inc. ("Resources"), a North Dakota corporation.
In consideration of the mutual covenants hereinafter contained, it is hereby
agreed by and between the parties hereto as follows:
1. The Fund hereby appoints Resources to provide accounting services for
the benefit of the Fund and its shareholders. Such services may
include, but are not limited to, bond interest and amortization
accruals, daily fee accruals, security valuation, calculation of daily
net asset value, calculation of a daily dividend rate, and preparation
of semiannual and annual reports.
Resources accepts such appointment and agrees during such period to
render such services and to assume the obligations herein set forth for
the compensation herein provided. Resources shall for all purposes
herein provided be deemed to be an independent contractor and, unless
otherwise expressly provided or authorized, shall have no authority to
act for or represent the Fund in any way or otherwise be deemed an agent
of the Fund. Resources, by separate agreement with the Fund, may also
service the Fund in other capacities. In carrying out its duties and
responsibilities hereunder, Resources may contract with various firms to
provide certain of the accounting services described herein. Such firms
shall at all times be deemed to be independent contractors retained by
Resources and not the Fund. Resources and not the Fund will be
responsible for the payment of compensation to such firms for such
services.
2. For the services and facilities described in Section 1, the Fund will
pay to Resources at the end of each calendar month an accounting service
fee equal to the sum of (i) $2,000 per month and (ii) 0.05% of the
Fund's average daily net assets on an annual basis for the Fund's first
$50 million of average daily net assets, 0.04% of the Fund's average
daily net assets on an annual basis for the Fund's next $50 million of
average daily net assets, 0.03% of the Fund's average daily net assets
on an annual basis for the Fund's next $100 million of average daily net
assets, 0.02% of the Fund's average daily net assets on an annual basis
for the Fund's next $300 million of average daily net assets, and 0.01%
of the Fund's average daily net assets on an annual basis for the Fund's
average daily net assets in excess of $500 million, together with
reimbursement of Resources' out-of-pocket expenses. For the month
and year in which this Agreement becomes effective or terminates, there
shall be an appropriate proration on the basis of the number of days
that the Agreement is in effect during such month and year,
respectively. The services of Resources to the Fund under this
Agreement are not to be deemed exclusive, and Resources shall be free to
render similar services or other services to others.
The net asset value for each share of the Fund shall be calculated in
accordance with the provisions of the Fund's current prospectus. On
each day when net asset value is not calculated, the net asset value of
a share of the Fund shall be deemed to be the net asset value of such a
share as of the close of business on the last day on which such
calculation was made for the purpose of the foregoing computation.
3. The Fund shall assume and pay all charges and expenses of its operations
not specifically assumed or otherwise to be provided by Resources under
this Agreement.
4. This Agreement may be terminated at any time without the payment of any
penalty by the Fund or by Resources on sixty (60) days written notice to
the other party. Termination of this Agreement shall not affect the
right of Resources to receive payments on any unpaid balance of the
compensation described in Section 2 hereof earned prior to such
termination. This Agreement may not be amended to increase the amount
to be paid to Resources for services hereunder without the vote of the
Board of Directors of the Fund. All material amendments to this
Agreement must in any event be approved by vote of the Board of
Directors of the Fund.
5. If any provisions of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder shall not be
thereby affected.
6. Any notice under this Agreement shall be in writing, addressed and
delivered or mailed, postage prepaid, to the other party at such address
as such other party may designate for the receipt of such notice.
7. All parties hereto are expressly put on notice of the Fund's Agreement
and Article of Incorporation and all amendments thereto, all of which
are on file with the Secretary of the State of North Dakota.
This Agreement has been executed by and on behalf of the Fund by its
representatives as such representatives and not individually, and the
obligations of the Fund hereunder are not binding upon any of the
directors, officers, or shareholders of the Fund individually but are
binding upon only the assets and property of the Fund.
8. This Agreement shall be construed in accordance with the laws of the
State of North Dakota.
IN WITNESS WHEREOF, the Fund and Resources have caused this Agreement to be
executed as of the day and year first above written.
INTEGRITY SMALL-CAP FUND OF FUNDS, INC.
By: /Robert E. Walstad/
Robert E. Walstad
President
Agreed and Accepted By:
ND RESOURCES, INC.
By: /Robert E. Walstad/
Robert E. Walstad
President
EXHIBIT 10
PRINGLE & HERIGSTAD, P.C. LOGO
LAW OFFICES OF
PRINGLE & HERIGSTAD, P.C.
ROGER O. HERIGSTAD FIRST AMERICAN BANK WEST BUILDING REED A. SODERSTROM
MARK F. PURDY 20 SW 1 STREET MARK R. HAYS
JAN M. SEBBY POST OFFICE BOX 1000 THOMAS A. WENTZ, JR.
DONALD A. NEGAARD MINOT, NORTH DAKOTA 58702 DONALD T. CAMPBELL
JOHN J. PETRIK (701) 852-0381 MICHAEL A. BOSH
CAROL K. LARSON (701) 857-1361
DAVID J. HOGUE
RETIRED
THOMAS A. WENTZ
September 25, 1998
Integrity Small-Cap Fund of Funds, Inc.
1 North Main
Minot, ND 58703
We have acted as special counsel to Integrity Small-Cap Fund of Funds, Inc.
(the "Company"), a corporation organized under the laws of the State of North
Dakota, in connection with the preparation and filing of a registration
statement on Form N-1A (the "Registration Statement") and a Notification of
Registration on Form N-8A covering the offer and sale of an indefinite number
of shares of said Company (all of said shares being of one class and having a
par value of one tenth of one mill ($.0001)).
We have examined copies of the Articles of Incorporation, the Certificate of
Incorporation, the Bylaws, the Registration Statement, all votes of the
Company's Board of Directors ("Board") at its initial meeting held on
September 15, 1998, consents of the Board, and other records and documents that
we have deemed necessary for the purpose of rendering this opinion. We have
also examined such other documents, papers, statutes, and authorities as we
have deemed necessary to form a basis for the opinion hereinafter expressed.
In our examination of said material, we have assumed the genuineness of all
signatures and the conformity to original documents of all copies submitted to
us. As to various questions of fact material to our opinion, we have relied
upon statements and certificates of officers and representatives of the Company
and others.
Based upon the foregoing, we are of the opinion that the shares, when duly
sold, issued, and paid for in accordance with the terms of the Prospectus and
the Statement of Additional Information included as a part of the Registration
Statement, will be validly and legally issued and will be fully paid and
non-assessable shares of Integrity Small-Cap Fund of Funds, Inc.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement, to the reference to us in the Prospectus included as a
part of the Registration Statement, and to the filing of this opinion as an
exhibit to any application made by or on behalf of the
Integrity Small-Cap Fund of Funds, Inc.
September 25, 1998
Page 2
Company or any distributor or dealer in connection with the registration or
qualification of the Company, or the shares under the securities laws of any
state or other jurisdiction.
PRINGLE & HERIGSTAD, P.C.
/Thomas A. Wentz, Jr./
Thomas A. Wentz, Jr.
kak
EXHIBIT (11)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANT
We hereby consent to the use in the Statement of Additional Information
constituting part of the registration statement on Form N-1A (the
"Registration Statement") of our report dated September 29, 1998, relating to
the financial statement of Integrity Small-Cap Fund of Funds, Inc., which
appears in such Statement of Additional Information. We also consent to the
reference to us under the heading "Accountant and Reports to Shareholders" in
such Statement of Additional Information and to the reference to us on the
back cover of the prospectus.
/s/ Brady, Martz
BRADY, MARTZ & ASSOCIATES, P.C.
Minot, North Dakota
September 29, 1998
EXHIBIT 13
PURCHASE AGREEMENT
Integrity Small-Cap Fund of Funds, Inc. (the "Fund"), a corporation
organized under the laws of the State of North Dakota which proposes to
register under the Investment Company Act of 1940, and ND Capital, Inc.
("Capital"), a corporation organized under the laws of the State of North
Dakota which proposes to act as the Fund's principal underwriter, hereby
agree as follows:
1. The Fund offers Capital and Capital hereby purchases 10,000 shares of
the Fund, par value $.0001 (the "Shares"), for $10.00 per Share for the
aggregate purchase price of $100,000.
Capital represents and warrants to the Fund that the Shares are being acquired
for investment purposes without any present intention of redeeming or reselling
them.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement this 15
day of September, 1998.
ND CAPITAL, INC.
By: /Robert E. Walstad/
Robert E. Walstad
President
ATTEST:
/Peter A. Quist/
Peter A. Quist
Secretary
INTEGRITY SMALL-CAP FUND OF FUNDS, INC.
By: /Robert E. Walstad/
Robert E. Walstad
President
ATTEST:
/Peter A. Quist/
Peter A. Quist
Secretary
