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. 69 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 69
INVESTORS RESEARCH FUND, INC.
(Exact Name of Registrant as Specified in Charter)
3757 State Street, Suite 204, Santa Barbara, California 93105
(Address of Principal Executive Offices)
Registrant's Telephone Number: (805) 569-3253
Hugh J. Haferkamp, Esq., 3757 State Street, Suite 204, Santa Barbara, CA 93105
(Name and Address of Agent for Service)
Copies To:
Hugh J. Haferkamp
President
Investors Research Fund, Inc.
11800 Baccarat Lane, N.E.
Albuquerque, NM 87111-7600
Approximate Date of Proposed Public Offering: January 30, 1999
It is proposed that this filing will become effective
[ ] immediately upon filing pursuant to paragraph (b)
[X] on March 1, 1999 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.
Title of Securities Being Registered: Common Stock
PART A - PROSPECTUS
PART B - STATEMENT OF ADDITIONAL INFORMATION
PART B - FINANCIAL STATEMENTS SUPPLEMENT
PART C - OTHER INFORMATION - EXHIBIT LIST - Page 58
END OF FISCAL YEAR: September 30, 1998
1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
FOR INVESTMENT COMPANIES
PART A
PROSPECTUS
INVESTORS RESEARCH FUND, INC.
2
INVESTORS RESEARCH FUND, INC.
PROSPECTUS
MARCH 1, 1999
Like all other mutual fund shares, these securities have not been approved or
disapproved by the Securities and Exchange Commission nor has the Securities
and Exchange Commission passed upon the accuracy or completeness of this
prospectus. Anyone who tells you otherwise is committing a crime.
3
TABLE OF CONTENTS
PAGE
5 OVERVIEW OF THE FUND
6 INVESTMENT OBJECTIVE AND PRINCIPAL STRATEGIES
7 DETERMINING IF THIS FUND
IS RIGHT FOR YOU
7 PRINCIPAL RISKS
8 PAST PERFORMANCE
9 FEES AND EXPENSES OF THE FUND
15 WHO IS RESPONSIBLE FOR YOUR
INVESTORS RESEARCH FUND ACCOUNT
15 HOW WE MANAGE THE FUND
17 ONCE YOU INVEST IN THE FUND
19 PURCHASING AND REDEEMING SHARES OF
INVESTORS RESEARCH FUND
20 MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
20 PLAN OF DISTRIBUTION
21 HOW TO OPEN AN ACCOUNT
25 TAXATION OF INCOME
26 FINANCIAL HIGHLIGHTS
____________________
INVESTORS RESEARCH FUND, INC.
4
OVERVIEW OF THE FUND
INVESTORS RESEARCH FUND, INC. IS A DIVERSIFIED MANAGEMENT INVESTMENT COMPANY
OF THE OPEN-END TYPE, COMMONLY KNOWN AS A MUTUAL FUND. THE FUND'S PRINCIPAL
INVESTMENT OBJECTIVE IS GROWTH OF CAPITAL OVER THE LONG TERM.
IT IS CALLED AN OPEN-END INVESTMENT COMPANY BECAUSE IT CONTINUOUSLY OFFERS
AND SELLS SHARES OF ITS STOCK TO THE PUBLIC AND IT HAS A LEGAL DUTY, UPON
DEMAND OF THE SHAREHOLDER, TO TAKE BACK THE SHARES HELD BY THE SHAREHOLDER
AND PAY THE SHAREHOLDER THE NET ASSET VALUE OF THE SHARES. THIS "OPEN
ENDEDNESS"
CHARACTERIZES A TYPE OF INVESTMENT COMPANY COMMONLY CALLED A MUTUAL FUND, AND
THIS PROSPECTUS DESCRIBES INVESTORS RESEARCH FUND, INC. THE FUND'S INVESTMENT
ADVISER IS FOX ASSET MANAGEMENT, INC.
5
INVESTORS RESEARCH FUND
INVESTMENT OBJECTIVE AND PRINCIPAL STRATEGIES
Investors Research Fund's investment objective is growth of the
shareholder's capital over the long term. The Fund seeks to achieve
that objective primarily by investing in common stock of mid- and large-
capitalization U.S. companies, although occasionally we will invest in
American Depository Receipts. We consider mid-capitalization companies
to be those with capitalizations of $1.4 billion up to $5 billion. We
consider capitalizations above $5 billion to represent large-capitalization
companies.
The portfolio manager of the Fund, Fox Asset Management, Inc., has
a policy which authorizes it to invest up to 20% of a portfolio it manages
in Level 2 sponsored American Depository Receipts ("ADRs"). That authorizes
the Fund to make investments in foreign companies. An ADR is an unguaranteed
negotiable security that represents interests in the shares of the foreign
company, which shares are on deposit in a United States commercial bank.
They are priced in dollars and pay dividends in dollars, although adjustments
are made because of foreign currency exchange rates.
The policy of Fox is to invest only in ADRs of foreign companies which
satisfy U.S. disclosure requirements and reconcile their home market
accounting to the generally accepted accounting principles observed by U.S.
companies and provide audited financial statements based on such principles
on at least an annual basis. The sponsoring banks require that the foreign
companies provide direct disclosure to the bank and make monetary deposits
of dividends directly to the sponsoring bank.
Fox is a value style investment manager which utilizes disciplined
fundamental research to identify low P/E candidate companies that meet
specific cash flow and other quantitative requirements. "Fundamental"
research refers to investigation of factors that we believe determine the
proper price of a stock. They include probable growth of the company, the
dividend payout history and prospects for the future, impact of commercial
interest rates on the company, and the various risks that affect the company.
"P/E" or price/earnings ratio refers to the ratio of the market price for
each share of stock divided by the earnings of the company per each share of
stock. We then add a qualitative assessment of each company's management.
When qualitatively evaluating the management of a company,
we are
trying to assess whether or not the top management has a clear vision
of
where the company should be heading -- and of critical importance -
whether
it has the ability, innovative talent, and determination to reach its goals.
This process allows identification of appropriate candidates for a well-
diversified, low risk portfolio. We look for companies with materially
lower P/E ratios and significantly higher yield from dividends than the market
average.
Cash flow from operations (a primary focus at Fox) defines a company's
ability to maintain and increase its current capacity and efficiency, to
invest in its future (acquisitions or research and development ), to pay
interest and principal on debt, buy back shares, and, perhaps most
importantly, to increase dividends to investors. We assess the potential
6
for increasing dividends as an indication of potential appreciation of stock
price, not just as an income production factor. Companies included in
Fox's
portfolio historically increase cash flow at a solid rate. Both the amount
of cash flow per share and the employment of the cash flow are
critical. Their current cash flow is also high relative to current price
(a low price to cash flow ratio).
DETERMINING IF THIS FUND IS RIGHT FOR YOU
YOU SHOULD CONSIDER INVESTING IN THIS FUND IF:
* You are seeking long-term growth of capital.
* You are more comfortable with established,
well-known companies.
* You are investing for a longer-term horizon.
YOU SHOULD NOT INVEST IN THIS FUND IF:
* You are concerned about the short-term price
swings that can characterize equity investing.
* You prefer a speculative approach to equity
investing.
PRINCIPAL RISKS
If you buy shares of Investors Research Fund, you may lose some or
all of the money that you invest. This section describes what we
think are the principal risks of investing in the Fund.
* MARKET RISK. The market value of shares of common stock can
change rapidly and unpredictably as a result of political or
economic events having little or nothing to do with the issuer.
* COMPANY RISK. The price of a common stock varies with the
success and failure of its issuer. As a result, the success
of the companies in which the Fund invests largely determines
the Fund's performance.
* FOREIGN RISKS. Fox does occasionally invest in American
Depository Receipts, which constitute investments in companies
based in foreign countries. Investments in foreign companies
invoke special risks, such as currency fluctuations, unsettled
economic and political conditions, lower liquidity, and
differences in accounting.
You can find more detailed information about the risks of the Fund's
particular investments in the section called "HOW WE MANAGE THE
FUND."
7
PAST PERFORMANCE
The bar chart and the table below provide an indication of the risks of
investing in Investors Research Fund by showing changes in the Fund's
performance from year to year over a 10-year period and by showing how
the Fund's average annual returns for one, five and ten years compare to
those of the S & P 500, a widely recognized unmanaged index of stock
performance. How the Fund has performed in the past is not necessarily
an indication of how the Fund will perform in the future.
INVESTORS RESEARCH FUND
TOTAL RETURN OVER THE LAST 10 CALENDAR YEAR PERIOD
[bar chart]
<TABLE>
<CAPTION>
TOTAL RETURN BAR CHART
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total Return 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
-1.2% 21.7% -1.8% 42.3% -9.9% 6.6% -3.5% 16.6% 16.3% 21.2% 6.4%
</TABLE>
The chart does not reflect any sales charges. Total return would have
been less if it reflected those charges.
Best Quarter: 7/1/89 - 9/30/89 Increase of 22.9%
Worst Quarter: 1/1/92 - 3/3/92 Decrease of 11.05%
8
INVESTORS RESEARCH FUND AVERAGE ANNUAL TOTAL RETURNS AND THOSE OF THE
STANDARD & POOR'S 500 STOCK INDEX*
Past One Year Past 5 Years Past 10 Years Life of Fund**
IRF 2.45% 10.21% 10.25% 11.07%
SP 500*** 26.67% 21.51% 16.9% 8.14%****
* In this table, the performance figures for Investors Research Fund
do include a deduction for the maximum sales load.
** The Fund commenced operations on March 3, 1959.
*** The S & P 500 Index does not include any sales loads, expense
items or brokerage charges. You cannot invest directly in the
S & P 500 Index.
**** Available only from 1/31/62
FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of Investors Research Fund.
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR INVESTMENT)
MAXIMUM SALES CHARGE (LOAD) IMPOSED ON PURCHASES
(AS A PERCENTAGE OF OFFERING PRICE) 3.75%
MAXIMUM DEFERRED SALES CHARGE (LOAD) (AS A
PERCENTAGE OF INITIAL INVESTMENT) NONE
MAXIMUM SALES CHARGE (LOAD) IMPOSED ON REINVESTED
DIVIDENDS AND OTHER DISTRIBUTIONS (AS A PERCENTAGE
OF THE AMOUNT DISTRIBUTED) NONE
REDEMPTION FEE (AS A PERCENTAGE OF AMOUNT
REDEEMED) NONE
EXCHANGE FEE NOT APPLICABLE
MAXIMUM ACCOUNT FEE THIS TYPE OF CHARGE IS NOT APPLICABLE
EXCEPT ON RETIREMENT ACCOUNTS FOR
WHICH UMB BANK IS CUSTODIAN.
9
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM
FUND ASSETS)
Management Fees 0.50%
Distribution and Service 12b-1 Fees 0.50%
Other Expenses 0.85%
Total Annual Fund Operating Expenses 1.85%
* THERE MAY BE A REDEMPTION CHARGE OF 1% IMPOSED ON SHARES REDEEMED WITHIN
ONE YEAR OF ORIGINAL PURCHASE IF THE SHAREHOLDER PAID NO LOAD BECAUSE HE
WAS A MEMBER OF A QUALIFYING ORGANIZATION.
** ON RETIREMENT ACCOUNTS THERE IS AN ANNUAL MAINTENANCE FEE OF $19 ON
ACCOUNTS FOR WHICH UMB BANK IS CUSTODIAN;
EXAMPLE
This example is intended to help you compare the cost of investing in the
Fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the Fund for the time
periods indicated and then redeem all of your shares at the end of those
periods.
The example below also assumes that your investment has a 5% return each
year and that the Fund's operating expenses remain the same. Although your
actual costs may be higher or lower, based on these assumptions, your costs
would be:
IF YOU REDEEM YOUR SHARES IN... 1 YEAR 3 YEARS 5 YEARS 10 YEARS
$562 $954 $1,370 $2,525
INVESTORS RESEARCH FUND DOES NOT MAKE A REDEMPTION CHARGE IN ANY CASE WHERE A
SALES LOAD WAS PAID.
WHAT WE INVEST IN AND WHY
Investors Research Fund's investment objective is growth of capital. In
keeping with the Fund's investment philosophy, our portfolio manager selects
common stocks that offer the potential for capital growth over the long-term.
The Fund invests primarily in common stock of mid- and large-cap U.S.
companies, but we may also invest in foreign companies which have American
Depository Receipts (ADRs) traded on U.S. markets.
COMMON STOCK
WHAT IT IS. Common stock represents ownership of a company.
WHY WE BUY THEM. Investors Research Fund buys common stock to take an
ownership position in companies with growth potential, and then holds that
position long enough to realize the benefits of growth.
The Fund may also invest in ADRs primarily as a way of providing additional
opportunities to invest in quality overlooked growth companies. Investment in
10
ADRs can also offer the Fund the potential for economic diversification.
RISKS. Factors that influence the value of a share of common stock
are primarily general market and economic conditions, and the financial
condition and performance of the issuer.
* MARKET RISK. The market value of shares of common stock can change
rapidly and unpredictably as a result of political or economic events
having little or nothing to do with the issuer. Also, general changes in
investors' perceptions can cause periodic up-and-down movements in the
general market, which can cause reactionary movements in the individual
stocks without regard to their individual merits.
* COMPANY RISK. The price of a common stock varies with the success and
failures of its issuer. As a result, the success of the companies in
which the Fund invests largely determines the Fund's performance.
* FOREIGN RISKS. Fox does occasionally invest in American Depository
Receipts, which constitute investments in companies based in foreign
countries. Investments in foreign companies invoke special risks, such
as currency fluctuations, unsettled economic and political conditions,
lower liquidity, and differences in accounting.
YOU CAN FIND MORE DETAILED INFORMATION ABOUT THE RISKS OF THE FUND'S
PARTICULAR INVESTMENTS IN THE SECTION CALLED "HOW WE MANAGE THE FUND."
HOW WE SELECT THEM. The Fund's investment philosophy stresses a back-to-
basics fundamental approach: we use extensive research to buy stocks of
growing companies at value prices and hold them for the long-term. Fox
continuously monitors a universe of about 6,000 companies to select 75
to 100 qualifying companies for purchase consideration. Fox then selects
35 to 45 stock issues representing 15 to 20 industries to serve as the Fund's
portfolio. Over the years, Fox Asset Management has developed a list of
characteristics that we believe foster sustainable long-term growth, minimize
risk and enhance the potential for superior long-term returns. While very few
companies have all of these characteristics, we search for companies that
demonstrate several of the characteristics that are listed in the following
chart.
11
WHAT WE LOOK FOR IN A COMPANY
_____________________________________________________________________________
1 ESPECIALLY COMPETENT MANAGEMENT PERSONNEL.
_____________________________________________________________________________
2 HIGH OPERATING CASH FLOW PER SHARE. THESE ARE CASH FLOWS THAT ARISE
FROM NORMAL OPERATIONS, AS OPPOSED TO CASH ARISING FROM SALES OF ASSETS.
CASH FLOW IS NOT THE SAME AS ACCOUNTING NET INCOME, WHICH CAN BE
INFLUENCED BY METHODS OF INVENTORY VALUATIONS AND DEPRECIATION
TECHNIQUES.
_____________________________________________________________________________
3 CONSISTENT OPERATING CASH FLOW GROWTH.
_____________________________________________________________________________
4 DIVIDEND PAYMENTS MATERIALLY ABOVE THE MARKET AVERAGE FOR THAT TYPE OF
STOCK.
_____________________________________________________________________________
5 CONSISTENT GROWTH IN THE DIVIDENDS PAID ON THE COMPANY'S STOCK.
_____________________________________________________________________________
6 THE ABILITY OF THE COMPANY TO SUSTAIN ITS DIVIDEND PAYOUT RATE.
_____________________________________________________________________________
7 LOW STOCK PRICE RELATIVE TO EARNINGS PER SHARE. THAT IS THE RATIO OF
THE MARKET PRICE FOR EACH SHARE OF STOCK DIVIDED BY THE EARNINGS OF THE
COMPANY PER EACH SHARE OF STOCK. THIS IS KNOWN AS THE P/E RATIO-THE
PRICE/EARNINGS RATIO.
_____________________________________________________________________________
8 HIGH PER SHARE WORKING CAPITAL. WORKING CAPITAL IS A COMPANY'S
INVESTMENT IN SHORT-TERM ASSETS-SUCH AS CASH, MARKETABLE SECURITIES,
INVENTORY, AND ACCOUNTS RECEIVABLE. SUCH ASSETS CAN QUICKLY BE
CONVERTED TO CASH IF MANAGEMENT DESIRES TO DO SO.
_____________________________________________________________________________
9 A LOW DEBT TO EQUITY RATIO. THIS IS THE RELATIONSHIP OF THE TOTAL DEBT
OWED BY THE COMPANY RELATIVE TO THE TOTAL OWNERSHIP INTERESTS OF THE
COMPANY. IT INDICATES HOW MUCH OF THE COMPANY'S FINANCING HAS BEEN
SUPPLIED BY CREDITORS AND HOW MUCH BY THE COMPANY'S OWNERS.
_____________________________________________________________________________
10 A FAVORABLE STOCK PRICE RELATIVE TO THE VALUE OF THE COMPANY'S ASSETS.
_____________________________________________________________________________
12
SHORT-TERM INVESTMENTS
WHAT THEY ARE. Short-term investments are fixed-income securities (such as
U.S. government securities or bonds) that will only be outstanding for one
year or less after Investors Research buys them.
HOW WE PICK THEM. Most of the Fund's short-term investments are U.S.
Treasury bills. The Fund may also hold cash in interest-bearing bank
deposits.
WHY WE BUY THEM. The Fund uses short-term investments to earn interest and
maintain flexibility while we evaluate long-term opportunities and administer
the needs of the Fund. We also may use short-term investments for temporary
defensive purposes; in the event our portfolio manager anticipates a decline
in the stock market, we may reduce our risk by investing up to 60% of the
Fund's assets in short-term securities until market conditions improve.
Short-term investments will not appreciate in value as common stocks do when
the market advances, making it more difficult for the Fund to achieve its
investment objective of growth of capital.
RISKS. Short-term investments do not present a lot of risk; issuers are
generally stable, and the time period between the security's purchase and the
payoff date is relatively short, offering little chance for conditions
affecting those types of investments to seriously deteriorate.
OTHER SECURITIES AND INVESTMENT STRATEGIES
There are other securities which the Fund may invest in, and investment
strategies which the Fund may employ, but they are not principal investment
strategies. These securities and investment strategies are discussed in the
Statement of Additional Information.
ADDITIONAL RISKS FOR THE FUND:
YEAR 2000 AND EURO CONVERSION
Like all financial service providers, the Adviser, Distributor, and third
parties providing investment advisory, administrative, transfer agent,
custodial and other services utilize systems that may be affected by Year 2000
transition issues (many computer software systems in use today cannot
distinguish the year 2000 from the year 1900 because of the way dates are
encoded and calculated) and/or by Euro Conversion issues (accurate pricing
of some of the Company's assets might depend upon accurate valuation of
securities denominated in foreign currencies. On January 1, 1999, eleven
of the fifteen member states of the European Union converted to a common
currency, the "euro").
Difficulties with Year 2000 or Euro Conversion issues could have a negative
impact on handling securities trades, payments of interest and dividends,
pricing and account services. Although, at this time, there can be no
assurance that there will be no adverse impact on the Fund, our Service
Providers have advised the Fund that they have been actively working on
necessary changes to their computer systems to prepare for the Year 2000
and the Euro Conversion and expect that their systems, and those of other
parties they deal with, will be adapted in time for these events.
In addition, there can be no assurance that the companies in which the
Fund invests will not experience difficulties with Year 2000 or Euro
Conversion issues which may negatively affect the market value of those
companies.
13
THE FUND'S Y2K COMPLIANCE
The Fund has upgraded its computer systems in Santa Barbara so that they are
now compliant with the requirements for meeting the Year 2000 demands. We
have been informed by our adviser, our distributor, and our transfer agent
and shareholder servicing agent that they, also, are Year 2000 compliant.
The Fund's other service providers, such as UMB Bank, have assured us that
they will be compliant during early 1999. Under the circumstances, all
facilities directly serving the Fund either are now compliant or will be
compliant by mid-1999.
HOW WE MANAGE RISK
Risks are inherent in all investments. Investing in a mutual fund, even
the most conservative, involves risk, including the risk that you may receive
little or no return on your investment or even that you may lose part or all
of your investment. Investors Research Fund has several strategies to
minimize the risk assumed when we invest.
STRATEGIES WE USE TO MINIMIZE RISK
______________________________________________________________________________
1 WE PURCHASE HIGH-QUALITY GROWTH COMPANIES. Our focus on
high-quality growth companies reduces the likelihood that your
investment will be tied up in a failing company. A high-quality
growth company is one that has achieved a dominant or growing
market share, and is led by first class management.
______________________________________________________________________________
2 WE USE A CONSERVATIVE VALUATION STRATEGY. Once we find companies
that meet our business criteria, we determine how much to pay for
their shares. We follow a price discipline that tells us how
much we can reasonably pay for a stock. While no system can
prevent all losses, this conservative approach helps us avoid
the calamitous losses that occur in bear markets.
______________________________________________________________________________
3 WE HAVE A LONG-TERM VISION. We get to know the managers of the
companies we invest in and understand their goals. We view
temporary setbacks as buying opportunities: when other managers
sell stocks in response to bad news, we evaluate the issuer's
long-term prospects.
______________________________________________________________________________
4 WE DO NOT USE MARKET TIMING. We do not base our decisions to buy
and sell securities on whether we believe the stock market will
rise or fall(known as market timing). However, we can raise the
level of cash in the Fund when stock prices get too high and it
becomes difficult to purchase quality undervalued growth
companies.
______________________________________________________________________________
5 WE MAY MAKE TEMPORARY DEFENSIVE INVESTMENTS. From time to time,
Investors Research Fund may take temporary defensive positions
in response to adverse market, economic or political conditions.
An example would be temporary ownership of U.S. Treasury
instruments.
14
WHO IS RESPONSIBLE FOR YOUR INVESTORS RESEARCH FUND ACCOUNT
A number of entities provide services to Investors Research Fund.
This section shows how the Fund is organized, the entities that perform
these services, and how these entities are compensated. Additional
information on the organization of the Fund is provided in the Fund's
Statement of Additional Information. For information on how to receive
that document, see the back cover of this prospectus.
INVESTMENT ADVISER
Fox Asset Management, Inc.
44 Sycamore Avenue
Little Silver, NJ 07739
* Provides investment advice and management for the Fund's portfolio.
* Assists in administration and record keeping for the Fund.
* Annual Adviser Fee (based on average net assets): 0.50%, paid
quarterly on month end figures.
HOW WE MANAGE THE FUND
OPERATIONS OF THE INVESTMENT ADVISER
Fox Asset Management, Inc. is a New Jersey corporation incorporated in
Its founder and incorporator was J. Peter Skirkanich. Fox is an
investment adviser registered as such with the Securities and Exchange
Commission under the Investment Advisers Act of 1940. Mr. Skirkanich
is the principal shareholder. He also is President of Fox and a
managing director of the company. The senior Portfolio Managers and
key personnel also are shareholders in Fox.
Fox has been the investment adviser of the Fund since June 22, 1998 and
received $34,505 for services to September 30, 1998. For the period from
October 1, 1997 to June 22, 1998, Lakeview Securities Corporation, 333 West
Wacker Drive, Chicago, Illinois, was investment adviser to the Fund and
received $113,452 for those services.
In the past, Fox has provided investment management to institutional clients
and large private investors. They have now expanded their services to include
Investors Research Fund, which is the first equity mutual fund Fox has managed.
Management of the Fund's portfolio is accomplished by Fox's Investment
Committee chaired by Mr. Skirkanich. Other members of the Investment
Committee are James P. O'Mealia, George C. Pierides, John R. Sampson
and Caroline R. Benjamin. Mr. Pierides has been with Fox since 1995. The
others (except Mr. Skirkanich) joined the company in 1998 following
a reorganization designed to eliminate marketing responsibilities
for members of the Investment Committee. All of the persons on the Investment
Committee have had at least 10 years of experience in managing investment
portfolios; some have had more than 18 years of such experience. That
experience has been with such well-known companies as Smith Barney Asset
Management, Republic National Bank, New York Life Insurance, Dreman Value
Management, Atalanta-Sosnoff Capital, and others.
15
TRANSFER AGENT AND SHAREHOLDER RECORDS AND DIVIDEND
DISBURSING AGENT
ND Resources, Inc.
P.O. Box 759
(1 North Main)
Minot, ND 58702-0759
* Maintains records of the shareholders.
* Issues and cancels certificates for Fund shares.
* Supervises dividend payments.
DISTRIBUTOR AND PRINCIPAL UNDERWRITER
ND Capital, Inc.
1 North Main
Minot, ND 58703-3189
* Oversees purchases of shares and promotional activities for the Fund.
* Serves as distributor for the Fund.
CUSTODIAN
UMB Bank
(United Missouri Bank)
928 Grand Avenue
Kansas City, MO 64141
* Holds the assets of the Fund, including corporate shares owned by the Fund.
* Serves as custodian of the shares of the Fund owned by participants in the
Fund's retirement plan programs.
BOARD OF DIRECTORS
The Fund's Board of Directors has general supervisory responsibilities of the
Fund and supervises the duties of the various service providers of the
Fund.
16
ONCE YOU INVEST IN THE FUND
This section describes: how your investment is valued, how you earn
money on your investment, and how the government may tax these earnings.
HOW YOUR SHARES ARE VALUED
Investors are entitled to buy and sell shares on any business day. The share
price of your investment will change from time to time because it will depend
on the total value of the Fund's investments.
Each business day, we determine the value of Fund shares by adding up the
total value of investments plus other assets (such as cash), subtracting
liabilities, and dividing the result by the total number of shares
outstanding. This share figure is known as the net asset value (NAV).
Net asset value for the Fund is determined each day the Fund is open for
business. A business day is defined as any day the New York Stock Exchange
is open for trading. We calculate net asset value daily at 4:15 P.M.
Eastern
Time. However, we do not price the Fund's assets on national holidays when
the New York Stock Exchange is closed.
The net asset value of your shares is published daily in the business section
of most major newspapers.
HOW SECURITIES IN THE PORTFOLIO ARE VALUED
We use current market valuations to value the securities in Investors Research
Fund:
* Securities that trade on an organized exchange are valued at the last
published sales price on the exchange. If no sales are recorded, the
securities are valued at the average of the closing bid and asked prices
on the exchange.
* Over-the-counter securities are valued at the average of closing bid and
asked prices.
* Debt securities maturing in 60 days or less are usually valued at
amortized (gradually reduced) cost.
* Longer-term debt securities may be valued by an independent pricing
service.
* Securities with unavailable market quotations and other assets are valued
at "fair value"-which is determined or directed by the Board of Directors.
If any of the Fund's securities are traded in markets that close at different
times, events affecting portfolio values that occur between the time that
their prices are determined at market close and the time the Fund's shares
are priced will generally not be reflected in the Fund's share price.
HOW WE PAY OUT INCOME
There are two ways you can receive payments from Investors Research Fund:
* DIVIDENDS. Distributions to shareholders of net investment income and
short-term capital gains on investments.
* CAPITAL GAINS. Profits received by the Fund from the sale of securities
held for the long-term period, which are then distributed to
shareholders.
17
Investors Research Fund usually pays dividends once a year. Dividends
are declared and distributed in December and capital gains, if any, are
also distributed in December. Unless you choose otherwise, the Fund
automatically reinvests your dividends and capital gains in additional Fund
shares.
You can request to have your dividends and capital gains paid to you by
check, deposited directly into your bank account, paid to a third party, or
sent to an address other than your address of record.
You will receive a statement each year detailing the amount of all dividends
and capital gains paid to you during the previous year. To ensure that these
distributions are reported properly to the U.S. Treasury, you must certify on
your Application Form (or on a Form W-9) that your Taxpayer Identification
Number (TIN) is correct and you are not subject to backup withholding (which
means that you are paying back taxes for failing to report all interest and
dividends).
If you fail to report a correct Taxpayer I.D. Number, under-reported dividend
or interest income, or are already subject to backup withholding, the Fund is
required by law to withhold a portion of any distributions you may receive and
send it to the U.S. Treasury.
HOW YOUR DIVIDENDS AND CAPITAL GAINS ARE TAXED
* If Investors Research Fund pays dividends, they are taxable to shareholders
as ordinary income. Dividends include both net investment income and
short-term capital gains.
* If Investors Research Fund pays net capital gains, they generally will be
taxed as a long-term capital-gain distribution.
These payments may be taxed at different rates, depending on the length of
time the Fund holds its assets. More information is provided in the
instructions that come with your tax return.
Investment earnings (dividends and capital gains) are taxable in the year
in which they were declared, not paid--whether they are received in cash or
reinvested in shares.
Also, keep in mind that when you sell or exchange shares of the Fund, it may
result in a taxable gain or loss unless you are in a tax deferred retirement
plan.
We recommend that you consult with a tax adviser about any dividends and
capital gains you may receive from Investors Research Fund.
HOW TO PUT YOUR DIVIDENDS AND CAPITAL GAINS TO WORK
You can have all dividends and capital gains automatically invested in
Investors Research Fund. Shares are purchased at the Fund's net asset
value on the dividend payment date. You can withdraw from the program
with 60 days notice.
18
PURCHASING AND REDEEMING SHARES OF INVESTORS RESEARCH FUND
SALES CHARGES
AMOUNT OF PURCHASE SALES CHARGE (PERCENTAGE OF SALES CHARGE
OFFERING PRICE) (PERCENTAGE OF NET
AMOUNT INVESTED)
UNDER $25,000 3.75% 3.90%
$25,000 TO LESS THAN $50,000 3.00% 3.09%
$50,000 TO LESS THAN $100,000 2.50% 2.56%
$100,000 TO LESS THAN $250,000 2.00% 2.04%
$250,000 TO LESS THAN $500,000 1.50% 1.52%
$500,000 TO LESS THAN $1,000,000 1.00% 1.01%
$1,000,000 OR MORE 0.00% 0.00%
*You pay no front-end charge on purchases of $1 million or more, but if
you sell those shares within the first year, you may pay a redemption charge
of 1.0%.
As the chart above shows, the sales charge gets smaller as your purchase
amount increases. There are several ways you may combine purchases to
qualify for a lower sales charge.
YOU CAN COMBINE PURCHASES OF SHARES
* WITH OTHER FAMILY MEMBERS. If shares are purchased by yourself, your
spouse and any children under the age of 21, all the shares purchased at
one time may be counted as a single purchase for purposes of the sales
charges. You must identify the accounts that you would like linked in
order to take advantage of this privilege. Please contact ND Resources to
initiate this privilege.
* WITH CERTAIN GROUPS. If you buy shares through a qualifying group
organized for a purpose other than to buy mutual fund shares, the purchases
may be treated as a single purchase.
* THROUGH EMPLOYEE BENEFIT PLANS. If you buy shares through trusteed or
fiduciary accounts and Individual Retirement Accounts (IRAs) of a single
employer, the purchases may be treated as a single purchase.
* UNDER A STATEMENT OF INTENTION. If you enter a Statement of Intention
and agree to buy shares of $25,000 or more over a 13-month period, all of
the shares you buy during that period will be counted as a single purchase.
Before entering a Statement of Intention, please read the terms and
conditions in the Statement of Additional Information. Under a Statement
of Intention, you agree to permit our service provider, ND Resources, Inc.,
to hold Fund shares on a restricted basis to guarantee payment of any
sales charges that may be due if you ultimately invest less than you
agreed to invest over the covered 13-month period.
19
FRONT-END SALES CHARGE WAIVERS
We will not make a sales charge on purchases of shares for:
* Shareholders making purchases with dividends or capital gains that
are automatically reinvested.
* Purchases by directors, officers and employees of Investors Research Fund,
its investment adviser or its affiliates, its shareholder services
provider and principal underwriter or their affiliates, and their
immediate families.
* Wrap accounts offered by securities firms, fee-based investment advisers
or financial planners. Wrap accounts are investment programs offered by
persons who place a client's funds with one or more investment advisers
and charge a fee for their services.
* Persons who are affiliated with clients of Fox Asset Management, Inc. and
persons sponsored to the Fund by Fox. This privilege will also apply to
immediate family members of persons meeting the above stated employee
status requirements and to any trust, pension, profit sharing or other
benefit plan for such persons.
PLAN OF DISTRIBUTION UNDER RULE 12B-1:
On March 30, 1993, the Fund adopted a plan of distribution (which includes
payments for services to shareholders by broker-dealers and for marketing
services) pursuant to the SEC's Rule 12b-1. The plan became effective April
1, 1993. During Fiscal 1998, the Fund expended $55,557 pursuant to this
plan. The plan authorizes the Fund to make certain payments to broker-
dealers who have engaged in the marketing and distribution of the Fund's
shares and who are available to provide services to the Fund's shareholders.
The payments are made quarterly and are based on the value of shares held by
Fund shareholders for whom the registered representative is broker of record.
Until May 13, 1997, all of the payments represented compensation to
underwriters, dealers and sales personnel for services to shareholders of the
Fund. No director or other interested person of the Fund has any direct or
indirect financial interest in the operation of the plan or its related
agreements.
On May 13, 1997, the Board of Directors amended the plan to re-allocate any
portion of the original plan's 25 basis points not required for payments to
broker-dealers to expenditures for distribution. Also, on August 12, 1997,
the Fund's shareholders approved an amendment to the plan increasing the
maximum expenditure under the plan to 50 basis points (minus the amounts
required for service payments pursuant to the original plan). Any
expenditures for distribution have to be approved in advance by the Fund's
directors. Because these fees are paid out of the Fund's assets on an
ongoing basis, over time these fees will increase the cost of your investment.
In fiscal 1998, the Fund paid service fees of $54,557 to various qualifying
brokers under the 12b-1 Plan. An additional $1,000 was paid for advertising.
The Fund does not pay for printing and mailing of prospectuses to persons
other than current shareholders.
The fund believes that the existence of the Plan has enhanced the service
level to Fund shareholders. There are no unreimbursed expenses carried over
to future years.
HOW TO OPEN AN ACCOUNT
You can open an account if you invest at least:
* $500 for a non-retirement plan account.
* $250 for a retirement plan account.
EXCEPTIONS: (1) THE $500 MINIMUM DOES NOT APPLY TO CUSTODIAL ACCOUNTS
ESTABLISHED FOR THE BENEFIT OF MINORS, AND (2) THE $500 MINIMUM DOES NOT APPLY
TO ACCOUNTS ESTABLISHED UNDER A PERIODIC INVESTMENT ACCUMULATION PLAN WHEN THE
INVESTOR AGREES TO INVEST AT LEAST $500 UNDER THE PLAN.
20
THREE WAYS YOU CAN OPEN AN ACCOUNT
______________________________________________________________________________
1 BY MAIL. Fill out the Application Form included in this prospectus
and mail it to our service provider, ND Resources, Inc. Both you
and your dealer must sign the form if you employ a dealer. Include
a check made payable to Investors Research Fund, Inc., or in the case
of a retirement account, the custodian or trustee. All purchases by
check should be in U.S. dollars, and Investors Research Fund will not
accept third-party checks.
______________________________________________________________________________
2 BY DEALER. You may have your dealer order and pay for the shares.
In this case, you must pay your dealer directly. Your dealer will
then order the shares from our distributor, ND Capital, Inc. Please
note that your dealer may charge a service fee or commission for
buying these shares.
______________________________________________________________________________
3 BY WIRE. You may wire federal funds directly to our shareholder
service provider, ND Resources, Inc. Before you wire an initial
investment, you must call ND Resources, Inc., our transfer agent,
to inform them that you will be buying. After the initial wire
purchase is made, you will need to fill out a Plan Adoption
Agreement or Application Form and return it to ND Resources, Inc.
to ensure that the purchase is credited properly, follow these
wire instructions:
______________________________________________________________________________
ATTN: MUTUAL FUND SERVICES
ND RESOURCES, INC.
1 NORTH MAIN
MINOT, ND 58703
INVESTORS RESEARCH FUND, INC.
SHAREHOLDER NAME: ________________________________________
FEDERAL ROUTING NUMBER: __________________________________
SHAREHOLDER ACCOUNT NUMBER: ______________________________
DDA NUMBER: ______________________________________________
Generally, the Fund does not issue share certificates for purchases. You can
receive certificates if you are a shareholder who is not participating in the
Automatic Withdrawals Plan. If you are eligible and wish to receive
certificates, you must make the request at the time of purchase.
21
RETIREMENT PLAN ACCOUNTS
You can invest in Investors Research Fund using any of these types of
retirement plan accounts:
* Deductible IRAs
* Non-deductible IRAs
* Roth IRAs
* Educational IRAs
* Simple IRAs
* Profit-Sharing Plans
* Money-Purchase Plans
* Simplified Employee Pension Plans
* 403(b) Plans
UMB Bank acts as custodian for the retirement plans and the participant is
charged a maintenance fee of $19 each year (per account number). These fees
are automatically deducted from each account, unless you elect to pay the fee
directly. To open a retirement plan account, you must fill out a special
application form. You can request this form by calling ND Resources, Inc.
HOW TO BUY AND SELL (REDEEM) SHARES
Once you have opened an account with Investors Research Fund, you can add to
your initial purchase. This section provides an overview of the types of
transactions you can perform as a shareholder of Investors Research Fund.
This includes how to initiate these transactions, and the charges that you
may incur (if any) when buying or selling shares.
THREE WAYS TO BUY AND SELL SHARES
______________________________________________________________________________
1 BY TELEPHONE. Call 1-800-292-6775. You can speak directly with an
Investors Research Fund representative during our business hours or
use our telephone answering system any time, day or night.
______________________________________________________________________________
2 BY MAIL. Send the request to our service provider, ND Resources, Inc.
Regular Mail Overnight Mail
ND Resources, Inc. ND Resources, Inc.
P.O. Box 759 1 North Main
Minot, ND 58702-0759 Minot, ND 58703-3189
Tel. (800) 292-6775
______________________________________________________________________________
3 BY DEALER. Contact a dealer, who will then make the transaction
through ND Resources, Inc., our Shareholder Services Provider. Please
note that your dealer may charge a service fee or commission for each
transaction.
Normally, the Fund does not issue share certificates for purchases.
Each time you add to or withdraw from your account, you will receive
a statement showing the details of the transaction-along with any
other transactions you made during the current year.
______________________________________________________________________________
22
WHEN YOUR TRANSACTIONS ARE PROCESSED.
The per-share price for purchases or sales made through our Shareholder
Services Provider, ND Resources, Inc., will be determined on the same day at
the asset value calculated that day plus any applicable sales charge if
the
order is received before 4 p.m. Eastern Time. If ND Resources, Inc. requires
additional documents to complete the purchase or sale, the transaction price
will be determined at the close of business on the day all required documents
are received.
For your transaction to be counted on the day you place your order with your
broker-dealer or other financial institution, they must:
* Receive your order before 4 p.m. Eastern Time.
* Promptly transmit the order to ND Resources, Inc.
BUYING MORE SHARES
You can buy more shares at any time by mail through a dealer. There is no
minimum purchase amount after an account has been opened.
When you purchase shares by mail, make a check payable to Investors Research
Fund, Inc. for the amount of purchase (including sales charge, if ap-
plicable) and send the check to our service provider, ND Resources, Inc.
If you have the purchase form from your most recent statement, include it with
the check stating the name of the Fund and the shares you wish to buy. If you
know your account number, include it on the check.
When you buy shares through a dealer, you may be charged a service fee or
commission for performing the transaction.
MAKING AUTOMATIC INVESTMENTS
The Automated Clearing House system is used by most banks for electronic
transfers of money into and out of your bank account--and is regulated by the
Federal Reserve.
An easy way to increase your investments in Investors Research Fund is to
sign up for the Automatic Investment Plan. Under this plan, you arrange
for a set amount of money to be taken from your bank account and invested
in Fund shares. The minimum amount you can invest each month is $25. The
account minimums of $500 for non-retirement accounts and $250 for retirement
accounts will be waived if you meet the minimum requirement within a year.
Purchases can be processed electronically on any day of the month if the
institution that services your bank account is a member of the Automated
Clearing House system. After each automatic investment, you will receive a
transaction confirmation, and the debit should show on your next bank
statement. To sign up for the Automatic Investment Plan, fill out the
appropriate section of the Application Form. You can stop automatic
investments at any time by calling ND Resources.
SELLING SHARES
You may sell back all or part of your shares to Investors Research Fund
(known as a redemption) at any time, at net asset value minus any sales
charges that may be due. You can sell the shares by telephone facsimile, by
mail, or through a dealer.
When you sell shares by mail, indicate the number of shares or dollar amount
you wish to redeem and send the request to our service provider, ND Resources,
Inc. If more than one person owns the shares you wish to sell, all owners
must sign a request.
When you sell shares through a dealer, you may be charged a service fee or
commission for performing the transaction.
23
Redemption proceeds are usually paid to you in cash within seven (7) days
after ND Resources receives your proper sale request. If any of the shares
redeemed were recently purchased, payment to you will be delayed until
your
purchase check has cleared, which may take up to 15 days from the date of
purchase.
WHAT YOU NEED TO KNOW BEFORE YOU SELL YOUR SHARES
* You will always receive cash for sales that total less than $250,000 or
1% of the Fund's net asset value during any 90-day period. Any sales
above the cash limit may be paid in securities and would mean you would
have to pay brokerage fees.
* Ordinarily, you only need a signature guarantee on a share certificate,
stock power, or redemption request for sales of more than $50,000.
However, if you have made any changes to the Application Form since your
account was opened, or if your address of record has changed in the
last 30 days, you may need a signature for all sales.
* If a certificate was issued for the shares you wish to sell, the
certificate must be signed by the owner(s) and sent to ND Resources
along with the redemption
request.
* A sale (redemption) may produce a gain or loss. Gains may be subject to
tax.
SIGNATURE GUARANTEE. A written confirmation from an eligible guarantor
institution, such as a securities broker-dealer or a commercial bank, that
the signature(s) on the account is(are) valid. Unfortunately, no other form
of signature verification can be accepted. Shareholders' signatures may be
guaranteed by municipal and government securities dealers and brokers,
national and registered securities exchanges and associations, savings
associations, and most credit unions as well as banks, trust companies and
securities brokers. The Fund's transfer agent determines the acceptability
of specific guarantor institutions and the form of signature guarantee
presented.
STOCK POWER. A letter signed by the owner of the shares giving ND Resources,
Inc. permission to transfer ownership of the shares to another person or group.
SPECIAL SALE SITUATIONS
* The Securities and Exchange Commission can suspend payment of redemptions
under certain emergency circumstances if the New York Stock Exchange is
closed for reasons other than customary closings and holidays.
* Investors Research Fund may make sales payments in securities if the Fund's
Board of Directors decides that making cash payments would harm the Fund.
SPECIAL NOTE: When you make a sale or withdrawal, a redemption charge may
be imposed if:
* You buy $1 million or more of shares qualifying for waiver of the load and
sell them within one year of purchase or you had the load waived because
you are a member of a qualifying organization.
IF YOU DECIDE TO BUY BACK SHARES YOU SOLD
If you decide to buy back some or all of the shares you sold in this Fund
within nine (9) months of sale and notify us in writing, you can take
advantage of the SUBSEQUENT REPURCHASE PRIVILEGE. With this privilege,
which you can use only once, you will not be charged a sales charge on the
repurchase, and any deferred sales charge you paid on the original sale will
be returned to your account. You must send a letter exercising this privilege
to our service provider, ND Resources, Inc., along with a payment for the
repurchased shares.
24
TAXATION OF INCOME TO SHAREHOLDERS
The Fund intends to make distributions that may be taxed to shareholders
as ordinary income or capital gains. Capital gains may be taxable at
different rates, depending on the length of time the Fund holds its assets.
The Fund expects that its distributions will, in the future, consist primarily
of capital gains.
Ordinary Investment Income. The fund has complied with Sub-Chapter M of the
Internal Revenue Code in every year and intends to comply with provisions of
the Federal Internal Revenue Code, and to distribute annually on or about the
last business day of December substantially all of its net ordinary investment
income, if any. This policy will relieve the Fund of income tax liability on
such income under said Code;. The Fund also intends to meet the distribution
requirements imposed by the Code to avoid the imposition of excise tax. The
distribution will be made in additional shares of the Fund unless the
shareholder has notified the transfer agent that he prefers to receive cash.
Capital Gains. If net gains are realized from the sale of assets during any
year, the policy of the Directors is to distribute them. If a distribution is
made, it will be made in additional shares of the Fund unless the shareholder
has notified the transfer agent that he prefers cash, and will be made but
once annually on or about the last business day of December. If these gains
are not distributed, the Fund will pay the Federal Income Tax assessed
thereon, if any, and advise each shareholder of the amount of the tax credit
to which he will then be personally entitled.
Net gain on sale of portfolio securities when realized and distributed,
whether paid in cash or additional shares, is taxable. If the net asset
value of shares were reduced below a shareholder's cost by distribution of
gain realized on sale of securities, such distribution would be a return of
investment though taxable as stated above.
To the extent that a regulated investment company distributes the excess of
its net gain over its net loss, such gain is not taxable to the company, but
is taxable to the shareholder, irrespective of how long the shareholder may
have held his shares. See also "How Your Dividends and Capital Gains Are
Taxed" on page 18.
IF YOUR ACCOUNT FALLS BELOW $500
If your account balance falls below $500 as a result of redemptions, we
may
sell your remaining shares in Investors Research Fund at net asset value.
We will first notify you by mail, giving you at least 60 days notice that an
INVOLUNTARY REDEMPTION may take place. If you can increase your account
balance to above $500 during the notice period, the involuntary redemption
will be canceled.
MAKING AUTOMATIC WITHDRAWALS
If you hold at least $5,000 in your account, you can sell a set dollar amount
each month or quarter. When you participate in this program, known as the
Automatic Withdrawals Plan, you will receive the payment around the 25th day
of the month. Shares will be sold at the net asset value effective on the
15th day of the month (or effective on the closest business day) to make up
the amount of each month's payment. Note that because withdrawals are
considered redemptions, they may produce a gain or loss. If you purchase
additional shares at the same time that you make a withdrawal, you may have
to pay taxes and a sales load. Gains may be subject to tax. To sign up
for the Automatic Withdrawals Plan, fill out the appropriate section of
the Application form.
You may stop automatic withdrawals at any time without charge or penalty by
calling ND Resources.
25
WIRING SALE PROCEEDS TO YOUR BANK ACCOUNT
If you are an investor with a non-retirement account, you can have your sale
proceeds electronically transferred to a commercial bank account. This is
known as an ELECTRONIC WIRE PRIVILEGE. To sign up for this option, simply
fill out the appropriate section of the Application Form. There is a charge
by ND Resources for wire service, and receiving banks may also charge for
this service. Payment by Automated Clearing House will usually arrive at
your bank two banking days after your call. Payment by wire is usually
credited to your bank account on the next business day after you call.
While ND Resources will also accept electronic wire sales by telephone, fax
or dealer, you still need to fill out and submit the information under
the Electronic Wire Privilege section of the Application Form.
TRANSACTIONS BY TELEPHONE
A benefit of investing through Investors Research Fund is that you can use
our telephone system to sell shares. If you do not wish to have this option
activated for your account, mark the box in the appropriate section of the
Application Form.
When you call ND Resources or ND Capital, you can perform a transaction with
Investors Research Fund in two ways:
* Speak directly with a representative during business hours
(8 a.m. to 5:00 P.M. Central Time) at 1-800-292-6775.
IF BUSY, CALL TOLL-FREE 1-877-473-8631.
* Utilizing a telephone, you can use the automated telephone
answering system 24 hours a day, seven days a week.
The Fund will take reasonable precautions to insure the identity of the
caller. However, the Fund will not be liable for unauthorized transactions
if such precautions are taken. Notice will be given if telephone transaction
provisions are revoked.
FINANCIAL HIGHLIGHTS
These tables are designed to show you the financial performance of
Investors Research Fund for the past five years. Some of the
information reflects financial results for a single Fund share. The
total returns represent the rate that an investor would have earned
(or lost) money on an investment in the Fund. It assumes that all
dividends and capital gains have been reinvested.
Timpson Garcia, CPAs, of Oakland, California have audited the
information below for each fiscal year. Timpson Garcia's report,
along with the Fund's financial statements, is included in the annual
report, which is available by request.
INVESTORS RESEARCH FUND
YEAR ENDED SEPTEMBER 30,
1998 1997 1996 1995 1994
NET ASSET VALUE, BEGINNING
OF PERIOD $4.76 $4.33 $4.10 $4.62 $5.18
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME $0.04 $0.09 $0.26 $0.07 $0.06
NET REALIZED AND UNREALIZED GAINS
(LOSSES) ($0.40) $1.11 $0.33 $0.25 ($0.15)
TOTAL FROM INVESTMENT
OPERATIONS ($0.36) $1.20 $0.59 $0.32 ($0.09)
DIVIDENDS AND DISTRIBUTIONS
DIVIDENDS FROM NET INVESTMENT
INCOME ($0.08) ($0.28) ($0.07) ($0.50) ($0.05)
DISTRIBUTIONS FROM REALIZED
GAINS ($1.00) ($0.49) ($0.29) ($0.34) ($0.42)
TOTAL DIVIDENDS AND
DISTRIBUTIONS ($1.08) ($0.77) ($0.36) ($0.84) ($0.47)
26
NET ASSET VALUE, END OF
PERIOD $3.32 $4.76 $4.33 $4.10 $4.62
TOTAL RETURN1 (9.6%) 30.4% 14.7% 7.7% (1.8%)
RATIOS/SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD
(000,000 OMITTED) $24 $33 $30 $32 $36
RATIO OF EXPENSES TO
AVERAGE NET ASSETS 1.85% 1.77% 1.76% 1.60% 1.47%
RATIO OF NET INVESTMENT INCOME
TO AVERAGE NET ASSETS 0.91% 1.94% 6.67% 1.52% 1.39%
PORTFOLIO TURNOVER RATE2,3 260.95% 294.81% 669.79% 248.44% 234.77%
1 ASSUMES A HYPOTHETICAL INITIAL INVESTMENT ON THE BUSINESS DAY BEFORE THE
FIRST DAY OF THE FISCAL PERIOD, WITH ALL DIVIDENDS AND DISTRIBUTIONS
REINVESTED IN ADDITIONAL SHARES ON THE REINVESTMENT DATE, AND REDEMPTION
AT THE NET ASSET VALUE CALCULATED ON THE LAST BUSINESS DAY OF THE FISCAL
PERIOD. SALES CHARGES ARE NOT REFLECTED IN THE TOTAL RETURNS.
2 THE LESSER OF PURCHASES OR SALES OF PORTFOLIO SECURITIES FOR A PERIOD,
DIVIDED BY THE MONTHLY AVERAGE OF THE MARKET VALUE OF PORTFOLIO SECURITIES
OWNED DURING THE PERIOD. SECURITIES WITH A MATURITY OR EXPIRATION DATE AT
THE TIME OF ACQUISITION OF ONE YEAR OR LESS ARE EXCLUDED FROM THE CALCULATION.
3 THE FUND CHANGED INVESTMENT ADVISERS ON JUNE 22, 1998. FUTURE TURNOVER IS
EXPECTED TO BE ON THE ORDER OF 35%. USE OF PORTFOLIO TURNOVER IS NOT A
PRINCIPAL STRATEGY OF THE FUND.
27
Shareholder/Dealer Services
ND Resources, Inc.
1 North Main
Minot, ND 58703
1-800-292-6775
Investment Adviser
Fox Asset Management, Inc.
44 Sycamore Avenue
Little Silver, NJ 07739
1-800-457-2159
Other Fund Documents
For more information about Investors Research
Fund, request a free copy of the STATEMENT OF
ADDITIONAL INFORMATION or the Annual and
Semi-Annual Reports. The Statement of
Additional Information provides more detailed
information about the Fund and its management and
operations. The ANNUAL REPORT discusses the market
conditions and investment strategies that significantly
affected Fund performance during the last year. The
SEMI-ANNUAL REPORT updates information provided
in the Annual Report for the next six months.
Investors Research Fund's Statement of Additional
Information and Annual Report have been filed
with the Securities and Exchange Commission, are
incorporated by reference and are legally a part
of this prospectus.
WHERE YOU CAN GET THESE DOCUMENTS:
* BY TELEPHONE. Call Investors Research Fund
toll-free at 1-800-292-6775, Monday-Friday,
8 a.m. to 5 p.m. Central Time. You may also
call this number for shareholder inquiries.
* FROM THE SEC. The SEC's Public Reference
Room in Washington, DC. For more information
call 1-800-SEC-0330.
Additional copies of this information
can be obtained, for a duplicating fee,
by writing the Public Reference Section
of the SEC, Washington, DC, 20549-6009.
Visit the SEC web site at: http://www.sec.gov
* BY MAIL. Specify the document you are
requesting when writing to us.
ND Resources, Inc.
1 North Main
Minot, ND 58703
Investment Company Act File No. 811-861
DISTRIBUTOR/UNDERWRITER
ND Capital, Inc.
1 North Main
Minot, ND 58703
1-877-473-8631
Dealer
PROSPECTUS
APPLICATION
MARCH 1, 1999
(LOGO)
INVESTORS
RESEARCH
F U N D
INCORPORATED
PLEASE READ AND RETAIN
THIS PROSPECTUS
FOR FUTURE REFERENCE
28
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
FOR INVESTMENT COMPANIES
PART B
STATEMENT OF ADDITIONAL INFORMATION
INVESTORS RESEARCH FUND, INC.
29
STATEMENT OF ADDITIONAL INFORMATION
MARCH 1, 1999
INVESTORS RESEARCH FUND, INC.
3757 STATE STREET, SUITE 204
SANTA BARBARA, CALIFORNIA 93105
(800) 473-8731
TABLE OF CONTENTS
TOPIC PAGE
What Is Investors Research Fund, Inc.? 31
Investment Strategies and Risks 31
Temporary Defensive Positions 31
Portfolio Turnover 31
The Management of the Fund 31
Investment Restrictions 33
Portfolio Transactions 34
Directors Compensation Table 35
Investment Advisory and Other Services
(including Custodian, Auditors, etc.) 35
Determining the Price of Fund Shares 37
Reduction of Sales Charges 37
Brokerage Transactions 38
Risk in Fund Investments 39
Waiver of Sales Load for Certain Investors 39
Distribution of Fund Shares 39
Taxation of the Fund 40
Performance Data 40
This Statement of Additional Information is not a prospectus and should be
read in conjunction with the Prospectus dated March 1, 1999. The
Prospectus may be obtained from the Fund by calling the toll-free number
below.
The Fund's audited financial statements are included in the Annual Report
to Shareholders dated September 30, 1998. The Annual Report and the Semi-
Annual Report dated March 31, 1998 are expressly incorporated herein by
reference. Those reports are available without charge upon request to the
Fund. You can make such a request by writing to the fund or calling toll-
free 1-800-292-6775.
30
WHAT IS INVESTORS RESEARCH FUND, INC.?
Investors Research Fund, Inc. is a diversified management investment company
of the open-end type, commonly known as a mutual fund. It is a corporation
organized in 1959 under the laws of Delaware; it commenced operations on
March 3, 1959.
INVESTMENT STRATEGIES AND RISKS
Our investment adviser, Fox Asset Management, Inc., utilizes the investment
style known as value investing. That style involves identification of stocks
which Fox concludes have been undervalued by the general market. Successful
value investing relies on incisive judgments about a company's management,
its products or services and its markets, and its management's ability to
apply good judgment in carrying out its plans.
All of the foregoing depends on the accumulation of accurate and truthful
information about the company under examination in order to correctly
evaluate that company's prospects and true value. There is always the risk
that the information compiled by Fox may not be accurate and that Fox's
evaluation of the company may be totally different from that of the market.
TEMPORARY DEFENSIVE POSITIONS
Although the Fund believes that reasonably full investment in the market is
the best long-run strategy, on occasion it may utilize defensive investments.
Those investments will almost always be U.S. Treasury instruments or, perhaps
on occasion, an interest bearing bank account.
PORTFOLIO TURNOVER
On January 1, 1994, Lakeview Securities Corporation became the investment
adviser to the Fund. It developed that their management techniques resulted
in substantially greater turnover than the Fund had experienced under prior
advisers. In fact, it had more than doubled the turnover rates we had
previously experienced. On June 22, 1998, the Fund changed advisers and
employed Fox Asset Management as adviser.
Fox has informed the Fund that their portfolio management style calls for
significantly lower turnover of portfolio stocks. Fox has stated that, in
the future, we can expect a portfolio turnover rate of approximately 35%.
That rate, if effected, will significantly reduce portfolio management
expenses by reducing at least the brokerage commissions generated by high
turnover. It should also have a beneficial effect on the taxes payable by
shareholders by securing more long-term capital gains and fewer short-term
capital gains, although, as always, investment performance considerations
will override other factors in the management of the portfolio.
THE MANAGEMENT OF THE FUND
Under Delaware law, the business and affairs of Investors Research Fund are
to be managed by, or under the direction of, the Board of Directors.
OFFICERS AND DIRECTORS OF THE FUND
The names and addresses of the officers and directors of the Fund are set
forth below, together with their principal business affiliations and
occupations for the past five years, mailing address, and number of shares
owned on September 30, 1998:
Hugh J. Haferkamp,* President and Director, is an attorney-at-law in private
practice in the Santa Barbara area. Has been legal counsel to Investors
Research Fund, Inc. for approximately 19 years.
11800 Baccarat Lane, NE, Albuquerque, NM 87111-7600
(1,114 shares) (Age 71)
Michael A. Marshall,* Vice-President, Director and Member of the Executive
Committee**, is a former Senior Vice-President of Prudential California
Realty and is engaged in real estate investment and property management,
M-P Marshall & Co.
23 Princeton Trail, Coto De Caza, CA 92679
(4,531 shares) (Age 63)
31
James A. Corradi,* Secretary-Treasurer, Director and Member of the Executive
Committee,** Retired business executive, former General Manager of Hope Ranch
Park Homes Association, and former Board President of Cook College at Rutgers
University.
5014 Whitney Court, Santa Barbara, CA 93111
(770 shares) (Age 69)
Gertrude B. Calden, Director and Honorary Member of the Executive Committee,
** is Emeritus Director, Foundation for Santa Barbara City College and has
served under three Presidents on the National Advisory Council on Adult
Education.
227 East Anapamu Street, Santa Barbara, CA 93101
(23,297 shares) (Age 89)
Richard Chernick, Director, is a Retired Partner of the Los Angeles Law Firm
of Gibson, Dunn & Crutcher, is currently active in arbitration and mediation
of disputes in the Los Angeles area.
3055 Wilshire Boulevard, Seventh Floor, Los Angeles, CA 90010-1108
(10,021 shares) (Age 53)
Fredric J. French, Director, is President of Merrimac Advisors Company, a
private investment manager; formerly President and Senior Portfolio Strategist
of The Arms Companies since November, 1992.
6201 Uptown Boulevard, NE, Albuquerque, NM 87110
(818 shares) (Age 52)
Harry P. Gelles, Director and Member of the Executive Committee,** is a
private investment banker. He previously was employed in investment banking
activities with Cruttenden & Company, Irvine, CA, and with Chelsea Management
Company, Los Angeles. He is currently a director of Chelsea Management.
1114 State Street, Suite 236, Santa Barbara, CA 93101
(3,741 shares) (Age 64)
Leonard S. Jarrott, Director, and Member of the Executive Committee,** is a
Real Estate Investment Advisor and independent Real Estate Broker in Santa
Barbara, CA.
2725 Vernon Road, Santa Barbara, CA 93105
(1,199 shares) (Age 54)
William J. Nasif, Director, is a Certified Public Accountant and Partner of
Nasif, Hicks, Harris & Co., Certified Public Accountants of Santa Barbara, CA.
1111 Garden Street, Santa Barbara, CA 93101 (Age 56)
Mark Schniepp, Director, is Director of the Economics Forecast Project at the
University of California, Santa Barbara, CA.
944 Randolph Road, Santa Barbara, CA 93111 (Age 45)
Dan B. Secord, Director, is in private practice of obstetrics and gynecology
since 1969. Staff, Santa Barbara Cottage Hospital in Santa Barbara, CA and
currently on the Credentials Committee of the medical staff. Member, Santa
Barbara City Council.
2329 Oak Park Lane, Santa Barbara, CA 93105 (Age 62)
Mark L. Sills, Director, is an independent business consultant in private
practice.
3751 Lincolnwood Drive, Santa Barbara, CA 93110
(25,806 shares) (Age 54)
All directors are paid by the Fund except directors employed by the adviser.
*Are "interested persons" as defined in Section 2(a) (19) of the Investment
Company Act of 1940, as amended.
**The Board of Directors has established an Executive Committee whose function
is to take action between the regular meetings of the Board. The Committee
has all of the powers and authority of the full Board in the management of the
business of the Fund except the power to declare dividends and to adopt, amend
or rescind By-Laws.
On September 30, 1998, the officers and directors and their families
collectively owned 71,297 shares of the Fund with a value of approximately
$236,706. The amount of shares owned by the directors and officers as a group
is approximately 1% of Fund shares outstanding.
32
The Board of Directors oversees and controls all operations of the Fund
including: Recommending and monitoring the Investment Adviser; determining
that the investment policies of the Fund are carried out; the employment and
termination of all employees, consultants, agents and service providers; and
declaration of dividends.
The Board of Directors also monitors and controls custodial shareholder record
keeping expenses, audit, accounting and legal fees. Directors fees are set
directly by the Board of Directors. Taxes, postage and regulatory fees of the
Securities and Exchange Commission and state regulatory bodies are determined
unilaterally by government agencies.
The Board of Directors has also established an Audit Committee. That
committee's functions are to supervise and oversee audits by the Fund's
independent accountants, review the auditor's audit plans and procedures,
and to review the auditor's recommendations concerning the Fund's accounting
records, procedures and internal controls. Messrs. Corradi, Nasif and
Schniepp currently comprise the Audit Committee.
OUR CODE OF ETHICS
We allow the directors, officers and employees of Investors
Research Fund and its affiliates to buy and sell securities
for their own personal accounts. However, in order to do
so they must agree to a number of restrictions listed in our
company's Code of Ethics.
INVESTMENT RESTRICTIONS
(WHAT THE FUND MAY NOT DO)
1. May not purchase any securities on margin. May not lend money or
securities. It may, however, purchase notes, bonds, certificates of
deposit or evidences of indebtedness of a type commonly distributed by
financial institutions.
2. May not issue any senior securities other than notes to evidence bank
borrowing.
3. May not sell any securities short, or distribute or underwrite securities
of others.
4. May not purchase the securities of any company which has not been in
continuous operation for three years or more.
5. May not invest more than 5% of the value of its gross assets in
securities of any one issuer, other than those of the U.S. Government.
6. May not own more than 10% of the outstanding voting, or any other class
of, securities of a single issuer.
7. May not purchase and sell commodities and commodity contracts, or real
estate.
8. May not purchase the securities of any other mutual fund.
9. May not invest in any companies for the purpose of exercising control
or management.
10. May not own the securities of any company in which any officer or
director of this Fund has a substantial financial interest.
11. May not trade in securities with directors and officers of this Fund.
12. May not invest in restricted equity securities, commonly known as "letter
stock," warrants, oil, gas and other mineral leases, and illiquid
securities and also may not invest or engage in arbitrage transactions or
in puts, calls, straddles or spreads.
13. The Fund may not issue any shares for any consideration other than cash.
14. May not invest 25% or more of its total assets in any one
industry or industry group.
15. The general policy is that the Fund may not borrow except in an emergency.
None of the restrictions set forth above, except number 15, may be changed
without the approval of the holders of the lesser of (1) 67% of the eligible
votes, if the holders of more than 50% of the eligible votes are represented
or (2) more than 50% of the eligible votes.
In addition to the foregoing restrictions, the Fund is subject to certain
other non-fundamental policies which may be changed without shareholder
approval.
33
PORTFOLIO TRANSACTIONS
Fox Asset Management, Inc. (the "Adviser") makes investment decisions and
arranges for the placement of buy and sell orders and the execution of
portfolio transactions for the Fund, subject to review by the Board of
Directors. In this regard, the Adviser will seek to obtain the most
favorable price and execution for the transaction given the size and risk
involved. In placing executions and paying brokerage commissions, the
Adviser considers the financial responsibility and reputation of the broker
or dealer, the range and quality of the services made available to the Fund
and the professional services rendered, including execution, clearance
procedures, wire service quotations and ability to provide supplemental
performance, statistical and other research information for consideration,
analysis and evaluation by the Adviser's staff. In accordance with this
policy, brokerage transactions may not be executed solely on the basis of
the lowest commission rate available for a particular transaction. Research
services provided to the Adviser by or through brokers who effect portfolio
transactions for the Fund may be used in servicing other accounts managed by
the Adviser and likewise research services provided by brokers used for
transactions of other accounts may be utilized by the Adviser in performing
services for the Fund. Subject to the requirements of best execution, the
placement of orders by securities firms for shares of the Fund may be taken
into account as a factor in the placement of portfolio transactions.
On occasions when the Adviser deems the purchase or sale of a security to be
in the best interests of the Fund as well as other fiduciary accounts, the
Adviser may aggregate the securities to be sold or purchased for the Fund with
those to be sold or purchased for other accounts in order to obtain the best
net price and most favorable execution. In such event, the allocation will be
made by the Adviser or in the manner considered to be most equitable and
consistent with its fiduciary obligations to all such fiduciary accounts,
including the Fund. In some instances, this procedure could adversely affect
the Fund but the Fund deems that any disadvantage in the procedure would be
outweighed by the increased selection available and the increased opportunity
to engage in volume transactions.
The Adviser believes that research from brokers and dealers is desirable,
although not essential, in carrying out its functions, in that such outside
research supplements the efforts of the Adviser by corroborating data and
enabling the Adviser to consider the views, information and analyses of other
research staffs. Such views, information and analyses include such matters as
communicating with persons having special expertise on certain companies,
industries, areas of the economy and/or securities prices, obtaining written
materials on these or other areas which might affect the economy and/or
securities prices, obtaining quotations on securities prices and obtaining
information on the activities of other institutional investors. The Adviser
performs its own research on each security included in, or being
considered
for inclusion in, the Fund's portfolio. As any particular research obtained
by the Adviser may be useful to the Fund, the Board of Directors or its
Committee on Brokerage, in considering the reasonableness of the commissions
paid by the Fund, will not attempt to allocate, or require the Adviser to
allocate, the relative costs or benefits of research.
During the last three fiscal years ended September 30, 1998, 1997 and 1996,
the Fund paid brokerage commissions of $196,818, $257,905 and $424,531,
respectively.
34
DIRECTORS' COMPENSATION SCHEDULE
AGGREGATE TOTAL COMPENSATION
COMPENSATION FROM FUND AND
FROM FUND FUND COMPLEX
PAID TO DIRECTORS *
NAME, POSITION
_____________________________________________________________________________
Hugh J. Haferkamp $2,750 ** $2,750
President, Director
Michael A. Marshall $2,750 $2,750
Vice President, Director
James A. Corradi $2,750 $2,750
Secretary-Treasurer, Director
Gertrude B. Calden $2,750 $2,750
Director
Richard Chernick $1,750 $1,750
Director
Fredric J. French $1,500 $1,500
Director
Harry P. Gelles $2,750 $2,750
Director
Leonard S. Jarrott $2,000 $2,000
Director
William J. Nasif $2,250 $2,250
Director
Mark Schniepp $2,750 $2,750
Director
Dan B. Secord $1,500 $1,500
Director
Mark L. Sills $2,250 $2,250
Director
* The Fund Complex consists solely of Investors Research Fund, Inc.
** Mr. Haferkamp also received $21,600 for his services as President of
the Fund during the fiscal year.
INVESTMENT ADVISORY SERVICES
Fox Asset Management, Inc. serves as investment adviser for the Fund pursuant
to an investment advisory agreement (the "Advisory Agreement") adopted in
accordance with the requirements of the Investment Company Act of 1940.
Pursuant to the Advisory Agreement, the Adviser, subject to the general
supervision of the Fund's Board of Directors, provides management and
investment advice, and furnishes statistical , executive and clerical
personnel, bookkeeping, office space, and equipment necessary to carry
out its investment advisory functions and such corporate managerial duties
as are requested by the Board of Directors of the Fund. The Fund bears all
expenses other than those specifically assumed by the Adviser under the
Advisory Agreement, including preparation of its tax returns, financial
reports to regulatory authorities, dividend determinations and transaction
and accounting matters related to its custodian bank, transfer agency,
custodial and shareholder services, and qualifications of its shares under
federal and state securities laws.
For the Adviser's services, the Fund pays the Adviser a quarterly fee of
0.125% at the annual rate of 0.50% based on average daily net assets, as
follows: At the end of each quarter, the net asset value on the last day of
each month of that quarter is determined. Those three numbers are averaged
and the result is multiplied by 0.125%. The maximum annual advisory fee is
0.5% based on the foregoing calculations for the one-year period.
35
The aggregate advisory fees paid by the Fund to the Advisers for the fiscal
years ended September 30, 1998, 1997 and 1996 were $147,957; $150,169 and
$145,654, respectively.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
There are no persons who qualify as control persons and there are no persons
who own beneficially 5 percent or more of the Fund's outstanding equity
securities.
INVESTMENT ADVISORY AND OTHER SERVICES
(a)The Fund's investment adviser is Fox Asset Management, Inc., a New Jersey
corporation organized in 1985. Its principal office is at 44 Sycamore
Avenue, Little Silver, NJ. The principal shareholder of Fox is J. Peter
Skirkanich, who serves as President and Chief Investment Officer of Fox.
Mr. Skirkanich owns the substantial majority of the shares of Fox Asset
Management, Inc. and qualifies as a controlling person of the adviser.
Fox became adviser to the Fund effective June 22, 1998 and has served
continuously since then. The Fund paid Fox $34,315.39 for its services
between June 22, 1998 and September 30, 1998.
Lakeview Securities Corporation served as the Fund's adviser from January 1,
1994 to June 21, 1998. Lakeview received $113,452 for its services during
fiscal 1997-98, $150,169 during 1996-97, and $145,654 during 1995-96.
Lakeview paid the rent on the Fund's headquarters office during the period it
was adviser. Fox does not make that rent payment. There are no expense
limitations imposed expressly on Fox by the advisory agreement since federal
law has eliminated such limitations by the states.
Fox provides continuous investment management services for the Fund's
portfolio of investments, including the stocks, bonds and cash. Fox is
obligated to have available at all times all qualified personnel, equipment,
office space and supplies, and research services necessary to competently
manage the portfolio of the Fund. The investment services include buy and
sell decisions, industry and sector weightings, liquidations for disbursements,
continuous investment of incoming funds, and performance calculations.
(b)The principal underwriter for the Fund is ND Capital, Inc., 1 North Main,
Minot, ND 58703. ND Capital provides and maintains its own personnel, offices
and any other equipment necessary for its services in marketing and
distribution of Fund shares. ND Capital does not pay any fees, expenses or
costs of the Fund. ND Capital re-allows 3% of the selling price of the
Fund's shares as a commission to dealers.
(c)The Fund has contracted with the Santa Barbara public accounting firm of
Bartlett, Pringle & Wolf for certain accounting functions required for Fund
operations. Their services include semi-monthly trial balances, tracking
of dividends and distributions receivable by the Fund, calculation of
dividend and distributions to be paid by the Fund, and similar activities.
The Fund paid Bartlett, Pringle & Wolf $33,965 in 1997-98; $38,796 in 1996-
97; and $45,305 in 1995-96.
In accordance with the provisions of the Investment Company Act, the Advisory
Agreement will terminate automatically upon assignment and is subject to
cancellation without penalty upon 60 days' written notice by the Fund's Board
of Directors, the vote of the holders of a majority of the Fund's outstanding
shares or the Adviser. The continuance of the Agreement must be approved at
least annually by the Fund's Board of Directors or by the vote of holders of a
majority of the outstanding shares of the Fund. In addition, any new
agreement or the continuation of the existing agreement must be approved
by a majority of directors who are not parties to the agreement or interested
persons of any such party.
The Adviser has adopted a Code of Ethics which regulates the personal
securities transactions of the Adviser's investment personnel and other
employees and affiliates with access to information regarding securities
transactions of the Fund. The Code of Ethics requires investment
personnel to disclose personal securities holdings upon commencement of
employment and all subsequent trading activity to the Adviser's Compliance
Officer. Investment personnel are prohibited from engaging in any
securities transactions, including the purchase of securities in a
private offering, without the prior consent of the Compliance Officer.
Additionally, such personnel are prohibited from purchasing securities in
an initial public offering and are prohibited from trading in any securities
(i) for which the Fund has a pending buy or sell order, (ii) which the
Fund is considering buying or selling, or (iii) which the Fund purchased
or sold within seven calendar days.
36
CUSTODIAN
The Custodian of the Fund's assets is UMB Bank, 928 Grand Avenue, Kansas
City, MO 64141. The Custodian maintains all of the instruments representing
the investments of the Fund and all cash. The Custodian delivers securities
against payment upon sale and pays for securities against delivery upon
purchase. The Custodian also remits Fund assets in payment of Fund expenses
pursuant to instructions of officers or resolutions of the Board of
Directors.
The Fund has contracted with UMB Bank, 928 Grand Avenue, Kansas City, MO to
serve as custodian of Fund shares held in retirement accounts established
through the Fund. The charges by UMB Bank for its services in this respect
are paid by the shareholder for whose benefit the retirement account was
established. That contract became effective December 14, 1998.
AUDITORS
The Fund's auditors are Timpson-Garcia, CPAs, 1610 Harrison Street, Oakland,
CA 94612. The audit includes examination of annual financial statements
furnished to shareholders and filed with the Securities and Exchange
Commission, consultation on financial accounting and reporting matters, and
meeting with the Audit Committee of the Board of Directors. In addition, the
auditors review federal and state income tax returns and related forms.
SHAREHOLDER SERVICES PROVIDER
The Fund has also contracted with ND Resources, Inc., 1 North Main, Minot, ND
58703 to act as its Shareholder Services Provider. ND Resources will prepare
and maintain the bookkeeping records for shareholder accounts. The contract
for ND Resources' services became effective December 14, 1998. Compensation
for those services is basically on a per account basis.
TRANSFER AND DIVIDEND PAYING AGENT
The Fund's transfer agent and dividend-paying agent is ND Resources, Inc.,
1 North Main, Minot, ND.
DETERMINING THE PRICE OF SHARES
The fund does not price its shares or accept orders for purchases or
redemptions on days when the New York Stock Exchange is closed. Such days
currently can include New Year's Day, Martin Luther King, Jr. Day,
President's Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.
Certain brokers and certain designated intermediaries on their behalf may
accept purchase and redemption orders. The Fund will be deemed to have
received such an order when the broker or the designee has accepted the
order. Customer orders are priced at the net asset value next computed after
such acceptance. Such order may be transmitted to the Fund or its agents
several hours after the time of the acceptance and pricing.
REDUCTION OF SALES CHARGE
There are a number of ways to reduce the sales charge imposed on the purchase
of the Fund's shares, as described below. These reductions are based upon the
fact that there is less sales effort and expense involved in respect to
purchases by affiliated persons and purchases made in large quantities.
Family or Group Purchases. Certain purchases made by or for more than one
person may be considered to constitute a single purchase, including (i)
purchases for family members, including spouses and children under 21, (ii)
purchases by trust or other fiduciary accounts and purchases by Individual
Retirement Accounts for employees of a single employer and
(iii) purchases made by an organized group of 200 or more persons,
(iv) whether incorporated or not, if the group has a purpose
other than buying shares of mutual funds and has sponsored Investors Research
Fund as an investment vehicle for its members. For further information on
group purchase reductions, contact the Adviser or your dealer.
Statements of Intention. Another way to reduce the sales charge is by
signing a Statement of Intention. A Statement is included in the Application
Form included in the Prospectus. Please read it carefully before completing
it.
If you enter into a Statement of Intention you (or any "single purchaser" )
may state that you intend to invest at least $25,000 in the Fund's shares
over a 13-month period. The amount you say you intend to invest may include
shares which you already own, valued at the offering price, at the end of the
period covered by the Statement. A Statement may be backdated up to 90 days
to include purchases made during that period, but the total period covered by
the Statement may not exceed 13 months.
37
Shares having a value of 5% of the amount you state you intend to invest will
be held on a restricted basis to make sure that any additional sales charges
are paid.
No additional sales charge will be payable if you invest the amount you have
indicated. Each purchase under a Statement will be made as if you were
buying at one time the total amount indicated. For example, if you indicate
that you intend to invest $25,000, you will pay a sales charge of 3% on each
purchase.
If you buy additional amounts during the period to qualify for an even lower
sales charge, you will be charged such lower charge. For example, if you
indicate that you intend to invest $25,000 and actually invest $50,000, you
will, by retroactive adjustment, pay a sales charge of 2.5%.
If during the 13-month period you invest less than the amount you have
indicated, you will pay an additional sales charge. For example, if you
state that you intend to invest $25,000 and actually invest only $20,000, you
will, by retroactive adjustment, pay a sales charge of 3.75%. The sales
charge you actually pay will be the same as if you had purchased the shares
in a single purchase.
A Statement does not bind you to buy, nor does it bind the Adviser to sell,
the shares covered by the Statement.
RIGHTS OF ACCUMULATION. Another way to reduce the sales charge is under a
right of accumulation. This means that the larger purchase entitled to a
lower sales charge need not be in dollars invested at one time. The larger
purchases that you (or any "single purchaser") make at any one time can be
determined by adding to the amount of a current purchase the value of Fund
shares (at offering price) already owned by you.
For example, if you owned $100,000 worth (at offering price) of Fund shares
and invest $5,000 in additional shares, the sales charge on that $5,000
investment would be 2%, not 2.5%.
If you claim this right of accumulation, you or your dealer must so notify
the Distributor (or ND Resources, if the investment is mailed to ND
Resources) when the purchase is made. Enough information must be given to
verify that you are entitled to such right.
BROKERAGE TRANSACTIONS
Discretion as to broker selection for purchase and sale of portfolio
securities has been granted to Fox by the Fund. Fox's exercise of that
discretion is subject to review and supervision by the Fund's Board of
Directors. Fox has informed the Fund that its selection of brokers to effect
portfolio transactions is based solely on "best execution" considerations.
Fox aggregates purchases and sales of securities for the Fund with other
clients' purchases and sales for those clients who have not directed Fox to
use specific brokers. Fox contacts several brokers before selecting one or
more to effect the transaction and determines which of the brokers can best
handle that particular order.
Fox is constantly in contact, and doing business, with broker-dealers and is
quite familiar with conditions in that industry and with the securities
markets in general. Consequently, Fox is in an excellent position to
determine what is "best execution" in the market place at any particular
time. Fox may also give consideration to the fact that research information
has been provided to it by certain brokers, but not to weight that service so
as to allow for broker selection on a basis other than best execution.
With respect to "best execution," that term does not necessarily denote the
lowest commission rate available for a particular transaction. In placing
orders and paying commissions, Fox considers the financial responsibility and
reputation of the broker-dealer, the range and quality of the services that
are made available to the Fund by the broker, including execution, clearance
procedures, wire service quotations, and the ability to provide supplemental
performance and support information to Fox's investment personnel. Subject
to the requirement of best execution, the sale of shares of Investors
Research Fund may be taken into account as a factor in placing portfolio
transactions.
38
THE RISK IN FUND INVESTMENTS
Every investment carries some market risk. The Fund's investments in stocks
are subject to changes in their value from a number of factors, such as
changes in general stock and bond market movements and the change in value of
particular stocks or bonds because of an event affecting the issuer. Changes
in interest rates also can affect stock and bond prices. These changes can
affect the value of the Fund's investments and the price per share of the
shares of the Fund. The Fund's net asset value per share will usually
fluctuate with the changes in the market prices of its portfolio shares,
which fluctuation can occur almost daily when the markets are open.
However, a primary objective of Investors Research Fund, in addition to
shareholder return, is the preservation of each shareholder's capital.
Therefore, we maintain a portfolio which usually consists of stocks which
present a substantially lower level of risk than that of the stock market in
general.
Part of the Fund's investment approach is to move some of the portfolio into
Treasury bills ("cash") when it appears that there may be a significant
downward movement in the type of stocks in which the Fund investments.
Although this entails a higher turnover, over time the value of that
approach in pre-serving capital has been proven.
Shares of the Fund are not deposits or obligations of, or guaranteed or
endorsed by, any financial institution, and are not insured by the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
agency. Shares of the Fund involve investment risk, including possible
loss of principal, and they may be worth more or less than their original
cost when redeemed.
WAIVER OF SALES LOAD FOR CERTAIN INVESTORS
Shares are sold at net asset value and without sales commission to the
directors (including retired directors with long service), officers of the
Fund, its Investment Adviser and Principal Underwriter and broker-dealers who
maintain selling agreements with the Underwriter, or the bona fide employees
or sales representatives of any of the foregoing who have acted as such for
not less than 90 days, and to their family members or to any trust, pension,
profit sharing or other benefit plan for such persons, upon written assurance
that the shares are being purchased for investment purposes and will not be
resold except through redemption or repurchase by or on behalf of the Fund.
The Fund has agreed to waive the sales load on shares purchased by investors
who have employed fee based investment advisers to assist them. This waiver
applies to persons who are clients of financial institution trust departments,
fee based financial advisers, and holders of "wrap accounts" established for
the benefit of clients of broker-dealers who have sales agreements or similar
arrangements with the Fund's principal underwriter with respect to sales of
Fund shares. Shares will also be sold at net asset value to registered
management investment companies or separate accounts of insurance companies.
The Board of Directors has also approved a program under which members of
qualified organizations are able to invest at net asset value on the basis
of broker cooperation. The arrangement applies when the following
requirements are met: (1) the individual is a member of an organization
which has at least 200 members, (2) that organization has sponsored Investors
Research Fund, Inc. as an investment vehicle for its members, and (3) the
selling broker has agreed to waive any commission on the transactions of
members of that organization investing in the Fund through that broker.
ND Capital, Inc., the Fund's underwriter, has agreed to waive its usual
underwriting retention for investors meeting the above requirements.
In connection with such shares, the Fund may impose a redemption fee of 1%
on the shares redeemed within one year of original purchase. However, no
such fee will be imposed on shares acquired by reinvestment of distributions
or on shares which would have originally been exempt from a sales charge. In
determining whether a redemption fee is payable, the Fund will first redeem
shares acquired by reinvestment of distributions, secondly, shares held for
over 12 months, and thirdly, shares held the longest during the 12-month
period. Finally, shares will be sold at net asset value to persons who are
affiliated with clients of Fox Asset Management, Inc. and to persons sponsored
to the Fund by Fox.
No commissions will be paid to dealers in connection with the sales of shares
at net asset value under this program.
DISTRIBUTION OF FUND SHARES
ND Capital, Inc. ("the Distributor"), acts as principal underwriter of the
Fund's shares on a continuing basis pursuant to a Distributing Agreement.
Pursuant to the Distributing Agreement, the Distributor pays for all
expenses in connection with the preparation, printing and distribution of
advertising and sales literature for use in offering the Fund's shares to the
public, including reports to shareholders to the extent they are used as
sales literature. The Distributor also pays for the preparation and
printing of prospectuses other than those forwarded to existing
shareholders. The continuance and assignment provisions of the
Distributing Agreement are the same as those of the Advisory Agreement.
39
During the Fund's fiscal years ended September 30, 1998, 1997, and 1996 the
previous Distributor Diversified Securities, Inc. received total sales
charges (which the Fund does not pay) on the sale of Fund shares of $4,483,
$2,298 and $2,945, respectively.
In addition, the Fund has adopted a distribution plan with respect to its
shares pursuant to Rule 12b-1 under the Investment Company Act (the
"Distribution and Service Plan"). Payments under the Distribution
and Service Plan are limited to a maximum annual rate of 0.50% of the
average daily net asset value of the shares.
The Distribution and Service Plan continues annually so long as it is
approved in the manner provided by Rule 12b-1 or unless earlier terminated by
vote of the majority of the Fund's Independent Directors or a majority of the
Fund's outstanding shares. The Distributor is required to furnish quarterly
written reports to the Board of Directors detailing the amounts expended
under the Distribution and Service Plan. The Distribution and
Service Plan
may be amended provided that all such amendments comply with the applicable
requirements then in effect under Rule 12b-1. Presently, Rule 12b-1
requires, among other procedures, that it be continued only if a majority of
the Independent Directors approve continuation at least annually and that
amendments materially increasing the amount to be spent for distribution be
approved by the Independent Directors and the shareholders. As long as the
Distribution and Service Plan is in effect, the Fund must commit the
selection and nomination of candidates for new Independent Directors to the
sole discretion of the existing Independent Directors.
TAXATION OF THE FUND
Investors Research Fund is qualified as a regulated investment company under
subchapter M of the Internal Revenue Code and has elected to be so taxed. As
long as the Fund qualifies as a RIC, essentially all of the income and capital
gains are passed out to the shareholders and the Fund is not taxed on them.
If there were to be a failure of qualification, the Fund itself would be taxed
on the undistributed income and capital gains, creating a form of double
taxation. The Fund intends to continue qualification as a RIC.
PERFORMANCE DATA
The average annual total return (as defined below) with respect to the Fund's
shares for each of the periods indicated below is as follows:
One year ended December 31, 1998 2.45%
Five years ended December 31, 1998 10.21%
Ten years ended December 31, 1998 10.25%
Average annual return measures both the net investment income generated by,
and the effect of any realized or unrealized appreciation or depreciation of,
the underlying investments in the Fund's portfolio. Average annual total
return is calculated in accordance with the standardized method prescribed by
the Securities and Exchange Commission by determining the average annual
compounded rates of return over the periods indicated, that would equate the
initial amount invested to the ending redeemable value, according to the
following formula:
P(1-T)n = ERV
Where: P = hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value at the end of the
period of a hypothetical $1,000 payment made
at the beginning of such period.
This calculation (i) assumes all dividends and distributions are reinvested
at net asset value on the appropriate reinvestment dates and (ii) deducts (a)
the maximum front-end or applicable contingent deferred sales charge from the
hypothetical initial $1,000 investment, and (b) all recurring fees, such as
advisory fees, charged as expenses to al shareholder accounts.
Total return is the cumulative rate of investment growth which assumes that
income dividends and capital gains are reinvested. It is determined by
assuming a hypothetical investment at the net asset value at the beginning of
the period, adding in the reinvestment of all income dividends and capital
gains, calculating the ending value of the investment at the net asset value
as of the end of the specified time period, subtracting the amount of the
original investment. This calculated amount is then expressed as a
percentage by multiplying by 100. Sales loads are not included. The
return would be lower if they were included.
40
The total return (as defined above) for the Fund's shares for each of the
periods indicated below is as follows:
One-year ended December 31. 1998 6.44%
Five years ended December 31, 1998 68.89%
Ten years ended December 31, 1998 126.67%
In advertising and sales literature the Fund may publish various statistics
describing its investment portfolio such as the Fund's average Price to Book
and Price to Earnings ratios, beta, alpha, R-squared, standard deviation,
etc.
In reports or other communications to shareholders and in advertising
material, the Fund may compare its performance to recognized averages and
indices of performance such as the Consumer Price Index, the Dow Jones
Industrial Average, the Standard & Poor's 500 Stock Index and to the
performance of mutual fund indexes as reported by Lipper Analytical Services,
Inc. ("Lipper") or CDA Investment Technologies, Ind. ("CDA"), two widely
recognized independent mutual fund reporting services. Lipper and CDA
performance calculations include reinvestment of all capital gain and income
dividends for the periods covered by the calculations. The Consumer Price
Index is generally considered to be a measure of inflation. The Dow Jones
Industrial Average and the Standard & Poor's 500 Stock Index are unmanaged
indices of common stocks which are considered to be generally representative
of the United States stock market. The market prices and yields of these
stocks will fluctuate.
The Fund may also use evaluations of the Fund published by nationally
recognized ranking services and by financial publications. Any given
performance comparison should not be considered representative of the Fund's
performance for any future period.
41
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
FOR INVESTMENT COMPANIES
PART B
FINANCIAL REPORTS
SEPTEMBER 30, 1998
INVESTORS RESEARCH FUND, INC.
42
Item 22 - Financial Statements
(a) Statements and Schedules - Specified by Regulation S-X
Page
1. Independent Auditor's Report 44
2. Statement of Assets and Liabilities as of September 30, 1998 45
3. Statement of Operations - including Realized and Unrealized
Capital Gains or (Losses) on Investments for the Fiscal Year Ended
September 30, 1998 46
4. Statements of Changes in Net Assets for the Two Fiscal Years Ended
September 30, 1997 and 1998 47
5. Notes to Financial Statements 48
6. Securities in the Fund - Schedule of Investments in Securities of
Unaffiliated Issuers 52
7. Selected Per Share Data and Ratios (Financial Highlights) 55
8. Statements of Operations for the Fiscal Years Ended September 30,
1997 and 1998 56
43
INDEPENDENT AUDITOR'S REPORT
To the Shareholders and
Board of Directors
Investors Research Fund, Inc.
We have audited the accompanying statement of assets and liabilities of
INVESTORS RESEARCH FUND, INC., including the securities in the Fund, as of
September 30, 1998, and the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two years in
the period then ended, and the financial highlights for each of the five
years in the period then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements and financial highlights. Our procedures
included confirmation of securities owned as of September 30, 1998, by
correspondence with the custodian. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
INVESTORS RESEARCH FUND, INC. as of September 30, 1998, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each
of the five years in the period then ended, in conformity with generally
accepted accounting principles.
TIMPSON GARCIA
Oakland, California
October 16, 1998
44
INVESTORS RESEARCH FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1998
A S S E T S
Investments in securities, at market
(cost $26,957,568) (Note 1) $ 23,597,725
Cash 240,210
Receivables - dividends from common stocks 22,713
- interest 2,451
Other assets 22,102
$ 23,885,201
L I A B I L I T I E S
Accrued expenses (Note 2) 82,210
Net assets at September 30, 1998 $ 23,802,991
Net assets value per share on 7,166,640
shares outstanding (Note 3) $3.321
Maximum offering price per share
(100/96.25 of $3.321) $3.450
See Notes to Financial Statements.
45
INVESTORS RESEARCH FUND, INC.
STATEMENT OF OPERATIONS
Year Ended September 30, 1998
Investment income:
Dividends $ 720,775
Interest 102,194
Other 770
Total investment income $ 823,739
Expenses:
Investment advisory fee (Note 2) $ 147,957
Legal, accounting and auditing 78,225
Transfer agent fee 48,099
12b-1:
Service fees $ 54,557
Distribution fees 1,000 55,557
Custodian fee 14,903
Consulting fees 20,363
Salaries - officer 21,600
Salaries - other 31,415
Directors' fees 25,750
Office 25,218
Insurance 24,607
Taxes 16,283
Registration fees 14,830
Notices to investors 12,004
Board meeting 7,312
Edgar filing 5,189
Miscellaneous 2,100
Total expenses 551,412
Net investment income $ 272,327
Realized and unrealized gain on investments:
Net realized gain $ 1,928,784
Change in unrealized (depreciation) of
Investments during the year (4,740,347)
Net (loss) on investments (2,811,563)
Net decrease in net assets
resulting from operations $ (2,539,236)
See Notes to Financial Statements.
46
INVESTORS RESEARCH FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
Years Ended September 30, 1998 and 1997
1998 1997
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income $ 272,327 $ 612,711
Net realized gain on investments 1,928,784 7,324,197
Net change in unrealized appreciation
(depreciation) of investments (4,740,347) 473,705
Net increase (decrease) in net assets
resulting from operations $ (2,539,236) $ 8,410,613
Distributions paid to shareholders:
From net investment income $ (525,264) $ (1,994,015)
From net realized gain on investments (6,713,944) (2,914,330)
Total distributions to shareholders $ (7,239,208) $ (4,908,345)
Fund share transactions:
Proceeds from sale of Fund shares $ 334,851 $ 405,679
Proceeds from reinvestment of
distributions from net Investment
income and net realized gain on investments 6,434,548 4,383,443
Cost of shares redeemed from shareholders (6,559,652) (5,361,830)
Net increase (decrease) in net assets due
to fund share transactions $ 209,747 $ (572,708)
Total increase (decrease)
in net assets $ (9,568,697) $ 2,929,560
NET ASSETS:
Beginning of year 33,371,688 30,442,128
End of year $ 23,802,991 $ 33,371,688
NET ASSETS CONSIST OF:
Fund shares at par $ 7,166,640 $ 7,013,271
Paid in capital 19,476,058 19,419,681
Undistributed net investment income 519,631 772,567
Undistributed net realized gain
on sale of investment securities 505 4,785,665
Unrealized appreciation (depreciation)
of investment securities (3,359,843) 1,380,504
$ 23,802,991 $ 33,371,688
See Notes to Financial Statements.
47
INVESTORS RESEARCH FUND, INC.
NOTES TO FINANCIAL STATEMENTS
Note 1. Significant Accounting Policies
Investors Research Fund is registered under the Investment Company Act of
1940, as amended, as a diversified, open-end management investment company.
The Fund is incorporated in the State of Delaware.
Management uses estimates and assumptions in preparing these financial
statements in accordance with generally accepted accounting principles.
Those estimates and assumptions affect the reported amounts of assets,
liabilities, revenues and expenses.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of their financial statements. The
policies are in conformity with generally accepted accounting principles for
investment companies.
Security valuations:
A security listed or traded on an exchange is valued at its last sales price
on the exchange where the security is principally traded. Each security
reported on the NASDAQ National Market System is valued at the last sales
price on the valuation date. Short-term obligations (U.S. Treasury Bills)
are valued at amortized cost which approximates market value.
Security transactions and related investment income:
Security transactions are accounted for on the date the securities are
purchased or sold (trade date). Realized gains or losses on security
transactions are computed on the basis of specific identification of the
securities sold. Interest income is recorded as earned from settlement date
and is recorded on the accrual basis. Dividend income is recorded on the ex-
dividend date.
Distributions to shareholders:
Dividends to shareholders are recorded on the ex-dividend date. Net
investment income and net realized gains from security transactions are
generally distributed at December 31 of each calendar year. See Note 5.
Income taxes:
The Fund's policy is to comply with the requirements of the Internal Revenue
Code that are applicable to regulated investment companies and to distribute
all its taxable income to its shareholders. Therefore, no provision for
federal income taxes is recorded in the financial statements.
Note 2. Affiliated Party Transactions
Investment advisory fee:
Lakeview Securities Corporation and its sub-adviser, Merrimac Advisors
Company:
The Fund had entered into an investment advisory agreement with Lakeview
Securities Corporation (Adviser). Under the terms of the investment advisory
agreement, the Fund pays an advisory fee to the Adviser at the annual rate of
one-half of one percent (0.5%) of the Fund's average daily net assets,
payable quarterly. This agreement requires the Adviser to reduce its fees
or, if necessary, make payments to the Fund to the extent required to satisfy
any expense limitations imposed by the securities laws or regulations
thereunder of any state in which the Fund's shares are qualified for sale.
There were no excess expenses absorbed by the Adviser during the year.
48
Mr. Robert P. Moseson was a director of the Fund and Mr. Fredric J. French is
a director of the Fund. Mr. Moseson is President and a Director of Lakeview
Securities Corporation. Mr. French was President of the Arms Companies
Division of Lakeview Securities Corporation until March 25, 1997 when, due to
a reorganization, Mr. French resigned from the Arms Companies and was
employed by Merrimac Advisors Company (a New Mexico corporation) of which he
is the sole shareholder. Merrimac Advisors Company provided investment
advisory services to the Fund under a Sub-Advisory Agreement with Lakeview
Securities Corporation dated January 20, 1997, and ratified by the Fund's
shareholders on March 25, 1997. The Fund did not directly compensate
Merrimac Advisors Company.
The Fund did not directly compensate directors affiliated with the Adviser
(Lakeview Securities Corporation) or the Sub-Adviser (Merrimac Advisors
Company).
The Fund terminated the advisory agreement with Lakeview Securities
Corporation and its sub-adviser, Merrimac Advisors Company effective June 21,
1998 Mr. Robert P. Moseson did not run for re-election to the Board of
Directors.
Fox Asset Management, Inc.:
The Fund entered into an investment advisory agreement with Fox Asset
Management, Inc. (Fox) in February 1998, with an effective date of June 22,
1998. Under the terms of the agreement, in consideration of the advisory
services to be rendered by Fox, the Fund will pay Fox a quarterly fee equal
to 0.125% of the net assets of the Fund calculated as an average of the net
assets of the Fund as of the close of each month of the Fund's fiscal year;
said fee not to exceed 0.5% annually of the average net assets of the Fund
calculated as at the close of each month of the Fund's fiscal year.
Mr. Van Whisnand, representing Fox Asset Management was elected to the Board
of Directors at the annual shareholders meeting of April 22, 1998. The fund
does not directly compensate directors affiliated with the investment
advisers. Effective September 15, 1998, Mr. Whisnand resigned as a director
of the Fund due to his termination of employment with Fox Asset Management.
Legal fees:
Mr. Hugh J. Haferkamp is a member of the Board of Directors and President of
the Fund. Mr. Haferkamp is legal counsel to the Fund and has been paid legal
fees in addition to drawing a salary as the Fund's President and receiving
director's fees for attending Board meetings.
Computer consulting fees:
Mr. Mark Sills is a member of the Board of Directors of the Fund. Mr. Sills
is the Fund's computer consultant and has received compensation for computer
consulting and for director's fees for attending Board meetings.
Recap of fees:
Payable at
Total September 30,
Expense 1998
Lakeview Securities - investment
advisory fees $ 113,452 $ 0
Fox Asset Management, Inc. -
investment advisory fees 34,505 31,222
Mr. Hugh J. Haferkamp - legal fees 14,408 2,000
Mr. Mark Sills - consulting fees
and computer 8,600 0
49
NOTES TO FINANCIAL STATEMENTS
Note 3. Capital Stock (Fund Shares)
At September 30, 1998, there were 20,000,000 shares of $1.00 par value
capital stock authorized. Transactions in Fund shares for the years ended
September 30, 1998 and 1997 were as follows:
1998 1997
Shares sold 86,333 95,506
Shares issued to shareholders in reinvestment
of net investment income and net realized gains 1,768,705 1,111,421
Shares redeemed (1,701,669) (1,226,107)
Net increase (decrease) 153,369 (19,180)
Balance:
Beginning of year 7,013,271 7,032,451
End of year 7,166,640 7,013,271
Note 4. Appreciation (Depreciation) of Investments
At September 30, 1998, the net unrealized (depreciation) for stocks was as
follows:
Aggregate gross unrealized appreciation
for all investments in which there is an
excess of value over tax cost $ 872,058
Aggregate gross unrealized (depreciation)
for all investments in which there is an
excess of tax cost over value (4,231,901)
Net unrealized (depreciation) - stocks $ (3,359,843)
The cost basis used above is the same as that used for financial statement
purposes.
Note 5. Distribution of Income
The Fund's Board of Directors declared dividends on November 6, 1997. The
exact amount of the distributions were determined on December 30, 1997 and
consisted of the following per share: $0.078 aggregating $525,264 from net
investment income, $0.988 aggregating $6,653,337 from short-term investment
transactions, and $0.009 aggregating $60,607 from long-term investment
transactions were declared.
The distributions were paid on December 31, 1997 to shareholders of record on
December 29, 1997. These distributions represent net investment income and
net realized short-term gains for the calendar year ended December 31, 1997
and net realized long-term gains for the year November 1, 1996 through
October 31, 1997.
50
Note 6. Primary Difference Between Net Investment Income and Realized Gains
per Financial
Statements and Actual Distributions to Shareholders
The primary difference between net investment income and realized gains per
financial statements and actual distributions to shareholders is due to the
fact that the financial statements are reported on the October 1 through
September 30 fiscal year and the distributions are based on the calendar year
for net investment income and short term net realized gain on investments
(ordinary income) and on the November 1 through October 31 fiscal year for
long-term net realized gain on investments (capital gains). The distribution
periods follow income tax laws and regulations.
Note 7. Lease Commitments
Under a lease expiring April 14, 2000, the Fund is committed to pay minimum
lease payments of $678 per month for the rent for its present office space.
The minimum monthly rent is subject to consumer price index adjustments each
April 1 for the duration of the lease. In addition to the minimum monthly
payments, the lease requires monthly payments of increases in building
operating expenses effective January 1, 1998. Building operating expenses
are adjusted annually each January 1 by the lessor.
Future minimum annual lease commitments are as follows:
Years ending September 30:
1999 $ 8,136
2000 4,407
Total $ 12,543
From October 1, 1997 to June 21, 1998 the rent was indirectly paid by the
Fund's investment adviser (Lakeview Securities Corporation) by decreasing the
amount due to the investment adviser. Effective June 22, 1998, the Fund has
recorded the payment as an expense. Rental expense of $2,218 is included in
office expenses.
Note 8. Purchases and Sales of Securities
Purchases and sales of securities (other than United States Government
Obligations) from unaffiliated issuers aggregated $67,655,056 and
$74,018,431, respectively. Purchases and sales, including redemptions, of
U.S. Treasury Bills totaled $7,405,264 and $7,405,264, respectively.
51
INVESTORS RESEARCH FUND, INC.
SECURITIES IN THE FUND
September 30, 1998
Number of
Shares or Quoted
Principal Market
Amount Common Stocks Value
AUTO & AUTO PARTS ( 4.81%)
18,000 Dana Corp. $ 671,625
15,700 Genuine Parts Co. 471,981
BANKING (6.88%)
2,500 Citicorp 232,500
10,000 First Union Corp. 511,875
10,000 Keycorp 288,750
12,000 Union Planters Corp 603,000
CHEMICAL (9.20%)
10,000 Air Prod & Chemical 297,500
12,000 Du Pont 675,000
26,600 Hercules Inc 799,663
15,000 Rohm & Haas Co. 417,187
COMPUTER/PERIPHERAL (14.47%)
10,000 3COM * 300,625
15,000 Applied Materials * 378,750
12,000 Computer Associates 444,000
15,000 Hewlett Packard 794,062
12,000 Intel Corp. 1,029,000
20,000 KLA-Tencor * 497,500
DRUGS (4.76%)
15,000 Amgen * 1,133,437
ELECTRONICS (8.80%)
18,000 AMP Inc. 643,500
10,000 Raychem Corp. 243,750
5,500 Raytheon Co Cl A 284,969
16,000 TRW 710,000
5,600 Thomas & Betts Corp. 213,150
(continued)
See Notes to Financial Statements.
3
52
Number of
Shares or Quoted
Principal Market
Amount Common Stocks Value
ENERGY/OIL (4.23%)
11,300 Kerr McGee Corp. $ 514,150
6,500 Mobil Corp. 493,594
ENERGY/NON-OIL (1.23%)
5,000 Columbia Energy Group 293,125
ENERGY/OILFIELD SERVICES (2.64%)
20,000 Baker Hughes Inc. 420,000
10,000 Tidewater Inc. 207,500
FOOD (5.72%)
20,600 ConAgra 554,913
7,800 General Mills 546,000
12,500 Universal Foods Corp. 260,938
FOOD WHOLESALERS/RETAILERS (3.38%)
25,000 American Stores 804,688
HOUSEHOLD PRODUCTS (2.33%)
13,700 Kimberly-Clark 554,850
INDUSTRIAL PRODUCTS (6.35%)
10,000 Ingersoll-Rand 379,375
20,000 Kennametal 538,750
20,000 Parker-Hannifin 593,750
INSURANCE (3.56%)
10,000 Everest Reinsurance 372,500
10,000 Hartford Fin Grp. 474,375
METALS (1.49%)
5,000 ALCOA 355,000
PAPER-PACKAGING/CONTAINERS (2.25%)
20,000 Crown Cork & Seal 535,000
RETAIL (1.89%)
10,000 J C Penney 449,375
(Continued)
See Notes to Financial Statements.
4
53
Number of
Shares or Quoted
Principal Market
Amount Common Stocks Value
RUBBER PRODUCTS/TIRES (2.16%)
10,000 Goodyear $ 515,000
TELECOMMUNICATIONS (9.56%)
9,100 Frontier Corp 249,112
30,000 Hong Kong Tele ADR 573,750
15,000 SBC Communications 665,625
15,000 U S West Communic Grp 787,500
TRANSPORTATION (3.43%)
10,000 CNF Transportation 291,250
12,500 CSX 525,781
Total common stock (99.14%)
(cost $26,957,568) $ 23,597,725
Add: Excess of cash and other assets
Over payables (0.86%) 205,266
Net assets (100.0%) $ 23,802,991
* Non-income producing.
See Notes to Financial Statements.
54
INVESTORS RESEARCH FUND, INC.
FINANCIAL HIGHLIGHTS
Years Ended September 30,
Per Share Data 1998 1997 1996 1995 1994
(for one share outstanding
throughout each year) (2) (1)
Net asset value, beginning of
year $4.76 $4.33 $4.10 $4.62 $5.18
Income from investment operations:
Net investment income $0.04 $0.09 $0.26 $0.07 $0.06
Net realized and unrealized
gains (losses) on securities (0.40) 1.11 0.33 0.25 (0.15)
Total from investment
operations $(0.36) $1.20 $0.59 $0.32 $(0.09)
Less distribution to shareholders:
Dividends from net
investment income $(0.08) $(0.28) $(0.07) $(0.50) $(0.05)
Distributions from capital
gains (1.00) (0.49) (0.29) (0.34) (0.42)
Total distributions $(1.08) $(0.77) $(0.36) $0.84) $(0.47)
Net asset value,
end of year $3.32 $4.76 $4.33 $4.10 $4.62
Total return (3) (9.6)% 30.4% 14.7% 7.7% (1.8)%
Ratios and Supplemental Data
Net assets, end of year
(in millions) $24 $33 $30 $32 $36
Ratios to average net assets:
Expenses 1.85% 1.77% 1.76% 1.60% 1.47%
Net investment income 0.91% 1.94% 6.67% 1.52% 1.39%
Portfolio turnover rate 260.95% 294.81% 669.79% 248.44% 34.77%
Average commission paid
per share for portfolio
transactions $0.0538 $0.0582 $0.0339 (4) (4)
(1) Fund changed investment advisers on January 1, 1994.
(2) Fund changed investment advisers on June 22, 1998.
(3) Sales loads are not reflected in total return.
(4) Information not available.
55
INVESTORS RESEARCH FUND, INC.
STATEMENT OF OPERATIONS
Years Ended September 30, 1998 and 1997
1998 1997
Investment income:
Dividends $ 720,775 $ 837,342
Interest 102,194 323,107
Other 770 12,158
Total investment income $ 823,739 $ 1,172,607
Expenses:
Investment advisory fee $ 147,957 $ 150,169
Legal, accounting and auditing 78,225 108,007
Transfer agent's fee 48,099 46,123
12b-1: service fees 54,557 56,327
distribution fees 1,000 20,184
Custodian's fee 14,903 17,389
Consulting fees 20,363 0
Salaries officer 21,600 14,363
Salaries other 31,415 29,905
Insurance 24,607 25,806
Taxes 16,283 15,887
Notices to investors 12,004 38,078
Directors' fees 25,750 16,250
Registration fees 14,830 18,873
Miscellaneous 2,100 2,535
Office 25,218 0
Board meetings 7,312 0
Edgar filing 5,189 0
Total expenses $ 551,412 $ 559,896
Net investment income $ 272,327 $ 612,711
Realized and unrealized gain on investments:
Net realized gain $ 1,928,784 $ 7,324,197
Net increase (decrease) in unrealized appreciation
of investments during the year (4,740,347) 473,705
Net gain (loss) on investments $ (2,811,563) $ 7,797,902
Net increase (decrease) in net assets
resulting from operations $ (2,539,236) $ 8,410,613
56
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
FOR INVESTMENT COMPANIES
PART C
OTHER INFORMATION
INVESTORS RESEARCH FUND, INC.
57
PART C: Other Information
Item 23 Exhibits
(a) The charter presently in effect is the same as that originally filed
except that Article IV has been amended to authorize up to 20,000,000 shares
and a new Article XVI has been added to modify director's liability pursuant
to Section 102(b)(7) of the Delaware General Corporation Law. The charter
and the referenced amendments were previously filed as EX-99.B1.
(b) The bylaws presently in effect are the same as those originally filed
except that Article III, Section 1 was amended in February, 1988 to authorize
the Board of Directors to fix the location of the annual meeting and Article
III, Section 2 was amended concurrently to change the date of the annual
meeting to the last Tuesday in March. See also Item 25 below re an Amendment
to Article IV of the bylaws. The bylaws and the referenced amendments were
previously filed as EX-99.B2.
(c) Not applicable.
(d) An investment advisory contract has been made with Fox Asset Management,
Inc. The contract became effective on June 22, 1998 and Fox is now acting as
the Fund's investment adviser. A copy of the investment advisory contract
was previously filed as EX-99.B5.
(e) The underwriting contract between the Fund and Diversified Securities,
Inc. was terminated effective November 30, 1998. Effective December 1, 1998,
ND Capital, Inc. became the Fund's principal underwriter. A copy of the
underwriting contract was previously filed as EX-99.B6.
(f) Not applicable.
(g) The Fund's custodial agreement is with the UMB Bank, formerly known as
United Missouri Bank, Kansas City, Missouri. A copy of that custodial
agreement was filed as EX-99.B8.
(h) Effective December 12, 1998, UMB Bank became custodian of retirement plan
assets on retirement plans established through the Fund. A copy of the
custodial agreement was previously filed as EX-99.B8.
(i) Counsel's opinion and consent were previously filed as EX-99.B10.
(j) The consent of the independent accountant is attached hereto. (See
Appendix).
(k) Financial Statements Included in the Registration Statement -
But Omitted From the Statement of Additional Information - None
(l) Not applicable.
(m) The Fund adopted a plan pursuant to Rule 12b-1 during fiscal 1993.
Copies of the effective documents were previously filed as EX-99.B15. The
Plan was amended twice during fiscal 1997. The amendments to the Plan and
the Dealer and Broker Servicing Agreement were previously filed as EX-99.B15.
(n) See Part C Appendix.
(o) Not applicable.
58
Item 24 Persons Controlled By or Under Common Control With Registrant
A. Persons controlled by Investors Research Fund, Inc.:
None
B. Persons under common control with the Fund:
None
Item 25 Indemnification
A. The Fund was incorporated under the laws of the State of Delaware.
Therefore, Section 145 of the Delaware Corporation law would be applicable
with respect to indemnification of the officers, directors, employees and
agents of the Fund.
B. On July 13, 1982, the Fund amended its bylaws to provide for
indemnification of certain officers, directors and other parties with
respect to certain types of liabilities, claims and expenses. The
amendment to Article IV is set forth at page A-6 of the Appendix to Post-
Effective Amendment No. 53. This bylaw will be implemented in accordance
with the requirements of the Securities and Exchange Commission release
Number IC-11330, September 2, 1980.
C. The Fund has purchased a policy of directors and officers liability
insurance in accordance with the authorization set forth in subparagraph
(e) of Article IV, Section 16 of the bylaws.
Item 26 Business and Other Connections of Investment Adviser
A. Prior to becoming employed by Fox, Mr. James P. O'Mealia was President of
Sunnymeath Asset Management, Inc, a company which managed equity and fixed
income investment partnerships.
B. Prior to becoming employed by Fox, Mr. John R. Sampson served as a
consultant employed by Pharos Management Company, One Exchange Place,
Jersey City, NJ. He also served as a principal in the investment
management firm of Principia Partners, LLC, Harborside Financial Center,
Jersey City, NJ.
C. Prior to becoming employed by Fox, Ms. Caroline R. Benjamin was employed
as a Portfolio Manager and Analyst by Smith Barney Asset Management, 388
Greenwich Street, New York, NY.
Item 27 Principal Underwriters
A. The Fund's principal underwriter, ND Capital, Inc., currently serves as
the principal underwriter for the ND Tax-Free Fund, Inc.; the Montana Tax-
Free Fund, Inc.; the South Dakota Tax-Free Fund, Inc.; and the Integrity
Fund of Funds, Inc.
B. Name and Principal Positions and Offices Offices with
Business Address with Underwriter Registrant
Robert E. Walstad President and Treasurer None
1 North Main
Minot, ND 58703
Peter Quist Vice President and Secretary None
1 North Main
Minot, ND 58703
C. During 1998, the Fund's former underwriter, Diversified Securities, Inc.,
received $4,483 in net underwriting commissions in connection with the
sale of the Fund's shares and $14,514 in brokerage commissions in
connection with the Fund's portfolio transactions. ND Capital, Inc. did
not receive any such payments in 1998.
59
Item 28 Location of Accounts and Records
Records required by 17 C.F.R. Chap. 230.31a-1(b)
A. Current Operating Accounts and Records of the Fund.
(1) At Investors Research Fund Headquarters, 3757 State Street, Suite
204, Santa Barbara, CA 93105. Also, some of these records are stored
at U-Haul Storage, 4101 State Street, Santa Barbara, CA 93110.
(a) Records required by subparagraphs (4), (5), (6), (9), (10) and
(11)
(2) At Bartlett, Pringle & Wolf, Certified Public Accountants, 1123
Chapala Street, Santa Barbara, CA 93101
(a) Records required by subparagraphs (1), (2) and (8) except those
maintained by UMB Bank and ND Resources, Inc. (see infra)
(3) At UMB Bank, 928 Grand Avenue, Kansas City, MO 64141
(a) Records required by subparagraph (1) relating to receipts and
deliveries of portfolio securities and receipts and disbursements
of cash.
(b) Records required by subparagraph (2) relating to portfolio
securities in transfer and in physical possession.
(c)Records required by subparagraph (2) relating to each broker-
dealer, bank or other person effecting portfolio transactions.
(4) At ND Resources, Inc., 1 North Main, Minot, ND 58703
(a) Records required by subparagraph (1) relating to receipts and
deliveries of Fund shares.
(b) Records required by subparagraph (2) relating to Fund shares in
transfer and in physical possession.
(c) Records required by subparagraph (2) relating to accounts for each
shareholder of the Fund.
(5) At Fox Asset Management, Inc, 44 Sycamore Avenue, Little Silver, NJ
07739
(a) All records required by subparagraphs (9) and (10) relating to
allocations of orders for the purchase and sale of portfolio
securities and the persons authorizing the purchase or sale of
portfolio securities.
B. Records of the Fund retained on a Temporary basis.
(1) All records are retained at their current records location for two
years.
C. Records of the Fund retained on a Permanent basis.
(1) At Investors Research Fund Headquarters, 3757 State Street, Suite 204,
Santa Barbara, CA 93105 and U-Haul Storage, 4101 State Street, Santa
Barbara, 93110
(a) All records requiring permanent retention except those listed
below.
(2) At Data Retrieval Services, 7201 East 64th Court, Kansas City, MO
64133.
(a) All records which were maintained on a current basis by DST
Systems, Inc. are stored at this location permanently.
60
(3) At Bank of America, Records Storage Center Livermore Depot, 6933
Preston Avenue, Livermore, CA 94550
(a) Records required by subparagraph (12) relating to receipts and
deliveries of portfolio securities.
(b) Records required by subparagraph (2) relating to portfolio
securities in transfer and in physical possession.
(c) Records required by subparagraph (2) relating to each broker-
dealer, bank or other person effecting portfolio transactions.
Item 29 Management Services
None
Item 30 Undertakings
Not applicable.
61
Undertakings
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned Registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic infor-
mation, documents, and reports as may be prescribed by any rule or regulation
of the Commission heretofore or hereafter duly adopted pursuant to authority
conferred in that section.
Pursuant to 17 CFR 230.484 and with respect to the indemnification
provisions described in Item 25 on page 59 of this registration statement,
insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment of expenses incurred or paid
by a director, officer or controlling person of the 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, the registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question 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.
Signature
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it meets all of the requirements for effectiveness of this
Registration Statement pursuant to rule 485(b) under the Securities Act of 1933
and has duly caused this Post-Effective Amendment No. 69 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Santa Barbara and State of California on the 5th of
March, 1999.
INVESTORS RESEARCH FUND, INC.
/s/
By: ____________________________________
Hugh J. Haferkamp
President
62
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
FOR INVESTMENT COMPANIES
PART C
APPENDIX
INVESTORS RESEARCH, INC.
63
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