As filed with the Securities and Exchange Commission on March 21, 2000
File Nos. 2-14675 and 811-00861
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. [ ]
Post Effective Amendment No. 74 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 74 [X]
(Check appropriate box or boxes)
INVESTORS RESEARCH FUND, INC.
(Exact Name of Registrant as Specified in Charter)
11111 Santa Monica Boulevard
Los Angeles, CA 90025
(Address of Principal Executive Offices, including Zip Code)
Registrant's Telephone Number, including Area Code: (805) 569-3253
Michael Glazer, Esq.
Paul, Hastings, Janofsky & Walker LLP
555 S. Flower Street
Los Angeles, CA 90071
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box)
[X] Immediately upon filing pursuant to paragraph (b)
[ ] On __________ pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] On __________ pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] On __________ 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.
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INVESTORS RESEARCH FUND, INC.
Investors Research Fund, Inc. is a mutual fund that seeks growth of capital
over the long term by investing primarily in domestic equity securities.
AS WITH ALL MUTUAL FUNDS, THE SECURITIES AND EXCHANGE COMMISSION DOES NOT
APPROVE OR DISAPPROVE OF THESE SHARES OR DETERMINE IF THIS PROSPECTUS IS
TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is March 21, 2000
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TABLE OF CONTENTS
An Overview of the Fund...................................................... 3
Performance.................................................................. 4
Fees and Expenses............................................................ 4
Investment Objective and Principal Investment Strategies..................... 5
Principal Risks of Investing in the Fund..................................... 6
Investment Advisor........................................................... 6
Shareholder Information...................................................... 9
Pricing of Fund Shares....................................................... 14
Dividends and Distributions.................................................. 15
Tax Consequences............................................................. 15
Rule 12b-1 Fees.............................................................. 15
Financial Highlights......................................................... 16
2
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AN OVERVIEW OF THE FUND
THE FUND'S INVESTMENT GOAL
The Fund seeks growth of capital over the long term.
THE FUND'S PRINCIPAL INVESTMENT STRATEGIES
The Fund primarily invests in common stocks of large capitalization domestic
companies that combine growth potential with superior financial strength. The
Advisor attempts to outperform the S&P 500 Index on a consistent basis while
minimizing risk. In selecting investments, the Advisor starts with an overall
study of the investment environment and current economic climates referred to as
a "top down" approach with a growth style bias. The Advisor uses fundamental
research and analysis to determine which particular stocks to purchase or sell.
PRINCIPAL RISKS OF INVESTING IN THE FUND
There is the risk that you could lose money on your investment in the Fund. The
following risks could affect the value of your investment:
* The stock market goes down
* Interest rates rise which can result in a decline in the equity market
* Stocks in the Fund's portfolio may not increase their earnings at the
rate anticipated
* There is no guarantee that the Fund will outperformed the S&P 500
Index and may underperformed.
WHO MAY WANT TO INVEST IN THE FUND
The Fund may be appropriate for investors who:
* Are pursuing a long-term goal such as retirement
* Want an equity investment in established, well- known companies
* Are willing to accept higher short-term risk along with higher
potential for long-term growth of capital
The Fund may not be appropriate for investors who:
* Need regular income or stability of principal
* Are pursuing a short-term goal
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PERFORMANCE
Because the Fund's investment advisor, Westcap Investors, LLC , has not
been managing the Fund for a full calendar year, its total return bar chart and
performance table have not been included.
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and
hold shares of the 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)................................... None
Redemption fee*........................................................ None
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......................................................... 1.39%
-----
Total Annual Fund Operating Expenses................................... 2.39%
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* You may pay a redemption fee of 1.00% on the value of shares you have
purchased without paying a sales charge if you sell those shares within one
year of their purchase.
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 also assumes that your investment has a 5% return each year, that
dividends and distributions are reinvested and that the Fund's operating
expenses remain the same. Although your actual costs may be higher or lower,
under the assumptions, your costs would be:
One Year.................. $ 608
Three Years............... $1,093
Five Years................ $1,603
Ten Years................. $2,999
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INVESTMENT OBJECTIVE AND PRINCIPAL INVESTMENT STRATEGIES
The goal of the Fund is to seek growth of capital over the long term.
The Fund invests primarily in common stocks of domestic companies with a
market capitalization in excess of $1 billion.
The process of selecting securities for the Fund starts with an overall
study of the investment environment and current economic situation worldwide.
This is often referred to as a "top down" approach to investing. The Advisor
attempts to forecast the investment and economic environment for the next two to
five years. The Advisor then uses these research findings to formulate a list of
industries and companies that it considers promising investments. The Advisor
divides the economy into sectors that will contribute to growth, sectors that
will restrain growth and those sectors that will be neutral. A further
subdivision is made and a portfolio matrix is developed on the basis of the
industry groups that are expected to outperform the S&P 500 over the coming
twelve to eighteen months and those expected to underperform. Investments are
emphasized in those industries expected to outperform the S&P 500.
The research process involves an analysis of a company's financial and
other market data, meetings with company management as well as consultation with
outside analysts and consultants.
Although not a principal investment strategy, the Fund may invest to a
limited extent in U.S. dollar denominated securities of foreign companies
through the purchase of American Depository Receipts (ADRs).
While portfolio securities are generally acquired for the long term,
position in a security may be reduced or sold when information becomes available
that is deemed to negatively affect the anticipated long- or short-term earnings
outlook or the security is overvalued relative to other companies whose growth
rate and earnings outlook is similar to the security in question.
Under normal market conditions, the Advisor anticipates that the Fund will
have a low rate of portfolio turnover. This should result in the realization and
distribution to shareholders of lower capital gains, which could be considered
tax efficient. This anticipated lack of frequent trading could also lead to
lower transaction costs, which could help to improve the Fund's performance.
Prior to April 1, 1999, the Fund was managed by other investment advisors with
different investment techniques than the Advisor employs. This resulted in the
Fund experiencing high rates of portfolio turnover.
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Under normal market conditions, the Fund will stay fully invested in
stocks. However, the Fund may temporarily depart from its principal investment
strategies by making short-term investments in U.S. Treasury bills or hold cash
in interest-bearing bank accounts in response to adverse market, economic or
political conditions. This may result in the Fund not achieving its investment
objective.
PRINCIPAL RISKS OF INVESTING IN THE FUND
The principal risks of investing in the Fund that may adversely affect the
Fund's net asset value or total return are summarized in "An Overview of the
Fund." These risks are discussed in more detail below.
MANAGEMENT RISK. Management risk means that your investment in the Fund
varies with the success and failure of the Advisor's investment strategies and
the Advisor's research, analysis and determination of portfolio securities. If
the Advisor's investment strategies do not produce the expected results, your
investment could be diminished or even lost.
MARKET RISK. Market risk means that the price of common stock may move up
or down (sometimes rapidly and unpredictably) in response to general market and
economic conditions, investor perception and anticipated events, as well as the
activities of the particular issuer. Market risk may affect a single issuer,
industry, sector of the economy or the market as a whole. Since the Fund invests
in equity securities, its share price may change daily in response to stock
market movements.
FOREIGN SECURITIES RISK. Since the may invest in American Depository
Receipts, which constitute investments in companies in foreign countries.
Investment in foreign countries involve special risks such as currency
fluctuation, economic or financial instability, lack of timely or reliable
financial information, or unstable political developments.
INVESTMENT ADVISOR
Westcap Investors, LLC, the Fund's investment advisor, is located at 11111
Santa Monica Boulevard, Suite 820, Los Angeles, CA 90025. The Advisor has been
providing investment advisory services since 1991. The Advisor supervises the
Fund's investment activities and determines which securities are purchased and
sold by the Fund. The Advisor also furnishes the Fund with office space and
certain administrative services and provides most of the personnel needed by the
Fund. For its services, the Fund pays the Advisor a quarterly management fee
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based upon its average daily net assets at the annual rate of 0.50%. Prior to
April 1, 1999, the Fund was managed by Fox Asset Management, Inc. for the same
annual fee. Fox Asset Management, Inc. used a "value" approach to investing.
PORTFOLIO MANAGER
Glenn C. Weirick, CFA, CIC, President and co-founder of the Advisor, is
responsible for the day-to-day management of the Fund's portfolio. Mr. Weirick
also serves as Chairman of the Advisor's Investment Policy and Equity Policy
Committees. Prior to Westcap, Mr. Weirick served as Chairman of the Equity
Policy Committee, the Director of Investment Research and as Managing Director
of Equities and Convertible Securities at Trust Company of the West. He also was
the Manager of the TCW Convertible Securities Fund from 1987 to 1992.
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SHAREHOLDER INFORMATION
HOW TO BUY SHARES
You may open a Fund account with $500. You may open a retirement plan
account with $250. Once you have opened a Fund account, you can make subsequent
investments in any amount. You may also open a Fund account with $25 and add to
your account each month with $25 or more through the Automatic Investment Plan.
The Fund may waive minimum investment requirements from time to time.
You may purchase shares of the Fund by check or wire. All purchases by
check must be in U.S. dollars. Third party checks and cash will not be accepted.
A charge may be imposed if your check does not clear. The Fund is not required
to issue share certificates. The Fund reserves the right to reject any purchase
in whole or in part.
Shares of the Fund are sold at the public offering price. The public
offering price is the net asset value of a Fund share, plus a front-end sales
charge. The sales charge declines with the size of your purchase, as shown
below:
As a Percentage of As a Percentage of
Your Investment Offering Price Your Investment
- --------------- -------------- ---------------
Less than $25,000 3.75% 3.90%
$25,000 but less than $50,000 3.00% 3.09%
$50,000 but less than $100,000 2.50% 2.56%
$100,000 but less than $250,000 2.00% 2.04%
$250,000 but less than $500,000 1.50% 1.52%
$500,000 but less than $1,000,000 1.00% 1.01%
$1,000,000 or more None* None*
- ----------
* Shareholders who buy $1 million of Fund shares without paying a sales
charge may be charged a redemption of 1.00% on redemptions made within one
year of purchase.
Shares you purchased with reinvested dividends are not subject to sales charge.
WAIVER OF THE SALES CHARGE
Shares of the Fund may be sold at net asset value (without a sales charge)
to: (1) directors, officers and employees of the Fund, the Advisor or its
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affiliates, its shareholder services provider and principal underwriter or their
affiliates, and their immediate families; (2) investment advisors, financial
planners or other intermediaries who place trades for their own accounts or the
accounts of their clients and who charge a management, consulting or other fee
for their services; and (3) persons and their direct family members who are
affiliated with clients of the Advisor and to persons sponsored to the Fund by
the Advisor and to any trust, pension, profit sharing or other benefit plan for
such persons.
REDUCTIONS IN THE SALES CHARGE
There are several ways you can combine multiple purchases to take advantage
of the breakpoints in the sales charge schedule.
WITH OTHER FAMILY MEMBERS. If shares are purchased by you, 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 charge. You must identify
the accounts that you would like linked in order to take advantage of this
privilege. Please contact the Transfer Agent 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 a trustee or
fiduciary account and Individual Retirement Account 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, you
can buy shares over a 13-month period and receive the same sales charge as if
all the shares had been purchased at one time.
BY CHECK
If you are making your first investment in the Fund, simply complete the
Application Form included with this Prospectus and mail it with a check (made
payable to "Investors Research Fund, Inc.") to:
Investors Research Fund, Inc.
ND Resources, Inc.
P.O. Box 759
Minot, ND 58702-0759
If you wish to send your Application Form and check via an overnight
delivery service (such as FedEx), delivery cannot be made to a post office box.
In that case, you should use the following address:
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Investors Research Fund, Inc.
ND Resources, Inc.
1 North Main
Minot, ND 58702-3189
If you are making a subsequent purchase, a stub is attached to the account
statement you will receive after each transaction. Detach the stub from the
statement and mail it together with a check made payable to "Investors Research
Fund, Inc." to the Fund in the envelope provided with your statement or to the
P.O. Box above. You should write your account number on the check.
BY WIRE
If you are making your first investment in the Fund, before you wire funds
you should call the Transfer Agent at (800) 292-6775 between 9:00 a.m. and 4:00
p.m., Eastern time, on a day when the New York Stock Exchange ("NYSE") is open
for trading to advise them that you are making an investment by wire. The
Transfer Agent will ask for your name and the dollar amount you are investing.
You will then receive your account number and an order confirmation number. You
should then complete the Account Application included with this Prospectus.
Include the date and the order confirmation number on the Account Application
and mail the completed Account Application to the address at the top of the
Account Application. Your bank should transmit immediately available funds by
wire in your name to:
Attn: Mutual Fund Services
ND Resources, Inc.
1 North Main
Minot, ND 58703
Investors Research Fund, Inc.
Federal Routing #_________________
DDA # 741100002
Account name (shareholder name)
Shareholder account number __________________
If you are making a subsequent purchase, your bank should wire funds as
indicated above. Before each wire purchase, you should be sure to notify the
Transfer Agent. IT IS ESSENTIAL THAT YOUR BANK INCLUDE COMPLETE INFORMATION
ABOUT YOUR ACCOUNT IN ALL WIRE INSTRUCTIONS. If you have questions about how to
invest by wire, you may call the Transfer Agent. Your bank may charge you a fee
for sending a wire to the Fund.
You may buy and sell shares of the Fund through certain brokers (and their
agents) that have made arrangements with the Fund to sell its shares. When you
place your order with such a broker or its authorized agent, your order is
treated as if you had placed it directly with the Fund's Transfer Agent, and you
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will pay or receive the next price calculated by the Fund. The broker (or agent)
holds your shares in an omnibus account in the broker's (or agent's) name, and
the broker (or agent) maintains your individual ownership records. The Fund may
pay the broker (or its agent) for maintaining these records as well as providing
other shareholder services. The broker (or its agent) may charge you a fee for
handling your order. The broker (or agent) is responsible for processing your
order correctly and promptly, keeping you advised regarding the status of your
individual account, confirming your transactions and ensuring that you receive
copies of the Fund's prospectus.
AUTOMATIC INVESTMENT PLAN
For your convenience, the Fund offers an Automatic Investment Plan. Under
this Plan, you authorize the Fund to withdraw from your personal checking
account each month an amount that you wish to invest, which must be at least
$25. If you wish to enroll in this Plan, complete the appropriate section in the
Account Application. The Fund may terminate or modify this privilege at any
time. You may terminate your participation in the Plan at any time by notifying
the Transfer Agent in writing.
RETIREMENT PLANS
The Fund offers Individual Retirement Account ("IRA") plans, Profit-Sharing
Plans, Money Purchase Plans, Simplified Employee Pension Plans and 403(b) Plans.
You may obtain information about opening a retirement account by calling (800)
292-6775.
HOW TO SELL SHARES
You may sell (redeem) your Fund shares on any day the New York Stock
Exchange is open for business.
You may redeem your shares by simply sending a written request to the
Transfer Agent. You should give your account number and state whether you want
all or some of your shares redeemed. The letter should be signed by all of the
shareholders whose names appear on the account registration. You should send
your redemption request to:
Investors Research Fund, Inc.
ND Resources, Inc.
P.O. Box 759
Minot, ND 58702-0759
To protect the Fund and its shareholders, a signature guarantee is required
for all written redemption requests of more than $50,000. Signature(s) on the
redemption request must be guaranteed by an "eligible guarantor institution."
These include banks, broker-dealers, credit unions and savings institutions. A
broker-dealer guaranteeing signatures must be a member of a clearing corporation
or maintain net capital of at least $100,000. Credit unions must be authorized
to issue signature guarantees. Signature guarantees will be accepted from any
eligible guarantor institution which participates in a signature guarantee
program. A notary public is not an acceptable guarantor.
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You may redeem all or some of your shares by calling the Transfer Agent at
(800) 292-6775 between the hours of 9:00 a.m. and 4:00 p.m., Eastern time. If
you do not wish to have this option activated for your account, mark the
appropriate section in the Account Application. Redemption proceeds will be
mailed on the next business day to the address that appears on the Transfer
Agent's records. If you have completed the Electronic Wire Privilege of the
Account Application, you may request that redemption proceeds be wired two
banking days after your telephone redemption request to the bank account you
designated on the Account Application. The minimum amount that may be wired is
$1,000. Wire charges,, of $8 will be deducted from your redemption proceeds.
Telephone redemptions cannot be made if you notify the Transfer Agent of a
change of address within 30 days before the redemption request. If you have a
retirement account, you may not redeem shares by telephone.
When you establish telephone privileges, you are authorizing the Fund and
its Transfer Agent to act upon the telephone instructions of the person or
persons you have designated on your Account Application. Before acting on
instructions received by telephone, the Fund and the Transfer Agent will use
reasonable procedures to confirm that the telephone instructions are genuine.
These procedures will include recording the telephone call and asking the caller
for a form of personal identification. If the Fund and the Transfer Agent follow
these reasonable procedures, they will not be liable for any loss, expense, or
cost arising out of any telephone redemption request that is reasonably believed
to be genuine. This includes any fraudulent or unauthorized request. The Fund
may change, modify or terminate these privileges at any time upon at least 60
days' notice to shareholders.
You may have difficulties in making a telephone redemption during periods
of abnormal market activity. If this occurs, you may make your redemption
request in writing.
Payment of your redemption proceeds will be made promptly, but not later
than seven days after the receipt of your written request in proper form as
discussed in this Prospectus. If you made your first investment by wire, payment
of your redemption proceeds for those shares will not be made until one business
day after your completed Account Application is received by the Fund. If you did
not purchase your shares with a certified check or wire, the Fund may delay
payment of your redemption proceeds for up to 15 days from date of purchase or
until your check has cleared, whichever occurs first.
The Fund may redeem the shares in your account if the value of your account
is less than $500 as a result of redemptions you have made. This does not apply
to retirement plan or Uniform Gifts or Transfers to Minors Act accounts. You
will be notified that the value of your account is less than $500 before the
Fund makes an involuntary redemption. You will then have 60 days in which to
make an additional investment to bring the value of your account to at least
$500 before the Fund takes any action.
The Fund has the right to pay redemption proceeds to you in whole or in
part by a distribution of securities from the Fund's portfolio. The Fund does
not expect to do so except in unusual circumstances. If the Fund pays your
redemption proceeds by a distribution of securities, you could incur brokerage
or other charges in converting the securities to cash.
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AUTOMATIC WITHDRAWAL PLAN
As another convenience, you may redeem your Fund shares through the
Automatic Withdrawal Plan. If you elect this method of redemption, the Fund will
send you a check in the minimum amount of $100. You may choose to receive a
check each month or calendar quarter. Your Fund account must have a value of at
least $5,000 in order to participate in this Program. This Program may be
terminated at any time by the Fund. You may also elect to terminate your
participation in this Program at any time by writing to the Transfer Agent.
A withdrawal under the Program involves a redemption of shares and may
result in a gain or loss for federal income tax purposes. In addition, if the
amount withdrawn exceeds the dividends credited to your account, the account
ultimately may be depleted.
REINVESTMENT AFTER REDEMPTION
If you redeem shares in your Fund account, you can reinvest within ninety
days from the date of redemption all or any part of the proceeds in shares of
the Fund, at net asset value, on the date the Transfer Agent receives your
purchase request. Any redemption fee paid will be credited back to your account.
To take advantage of this option, send your reinvestment check along with a
written request to the Transfer agent with ninety days from the date of your
redemption. Include your account number and a statement that you are taking
advantage of the "Reinvestment Privilege." You may use this reinvestment
privilege only once.
PRICING OF FUND SHARES
The price of the Fund's shares is based on the Fund's net asset value. This
is determined by dividing the Fund's assets, minus its liabilities, by the
number of shares outstanding. The Fund's assets are the value of the Fund's
investments at market value, plus any cash and other assets. The number of Fund
shares outstanding is the amount of shares which have been issued to
shareholders. The price you will pay to buy Fund shares or the amount you will
receive when you sell your Fund shares is based on the net asset value next
calculated after your order is received by the Transfer Agent with complete
information and meeting all the requirements discussed in this Prospectus.
The net asset value of the Fund's shares is determined as of the close
of regular trading on the New York Stock Exchange. This is normally 4:00 p.m.,
Eastern time. Fund shares will not be priced on days that the NYSE is closed for
trading (including certain U.S. holidays).
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DIVIDENDS AND DISTRIBUTIONS
The Fund will make distributions of dividends and capital gains, if any, at
least annually, typically in December. The Fund may make another distribution of
any additional undistributed capital gains earned during the 12-month period
ended October 31.
All distributions will be reinvested in Fund shares unless you choose one
of the following options: (1) receive dividends in cash, while reinvesting
capital gain distributions in additional Fund shares; or (2) receive all
dividend and capital gain distributions in cash. If you wish to change your
distribution option, write to the Transfer Agent in advance of the payment date
of the distribution.
TAX CONSEQUENCES
The Fund intends to make distributions of dividends and capital gains.
Dividends are taxable to you as ordinary income. The rate you pay on capital
gain distributions will depend on how long the Fund held the securities that
generated the gains, not on how long you owned your Fund shares. You will be
taxed in the same manner whether you receive your dividends and capital gain
distributions in cash or reinvest them in additional Fund shares.
If you sell your Fund shares, it is considered a taxable event for you.
Depending on the purchase price and the sale price of the shares you sell, you
may have a gain or a loss on the transaction. You are responsible for any tax
liabilities generated by your transaction.
RULE 12b-1 FEES
The Fund has adopted a distribution plan pursuant to Rule 12b-1 under the
Investment Company Act of 1940. This rule allows the Fund to pay distribution
fees for the sale and distribution of its shares and for services provided to
its shareholders. The Plan provides for the payment of a distribution and
service fee at the annual rate of up to 0.50% of the Fund's average daily net
assets. Because these fees are paid out of the Fund's assets on an on-going
basis, over time these fees will increase the cost of your investment in Fund
shares and may cost you more than paying other types of sales charges.
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FINANCIAL HIGHLIGHTS
This table shows the Fund's financial performance for the past five years.
Certain information reflects financial results for a single Fund share. "Total
return" shows how much your investment in the Fund would have increased or
decreased during each period, assuming you had reinvested all dividends and
distributions. This information has been audited by Timpson Garcia, independent
auditors. Their report and the Fund's financial statements are included in the
Annual Report, which is available upon request.
PER SHARE DATA
(for one share outstanding throughout each year)
<TABLE>
<CAPTION>
Years Ended September 30,
-------------------------------------------------------
1999(2) 1998(1) 1997 1996 1995
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 3.32 $ 4.76 $ 4.33 $ 4.10 $ 4.62
------- ------- ------- ------- -------
Income from investment operations:
Net investment income (loss) $ (0.02) $ 0.04 $ 0.09 $ 0.26 $ 0.07
Net realized and unrealized gains
(losses) on securities 0.53 (0.40) 1.11 0.33 0.25
------- ------- ------- ------- -------
Total from investment operations $ 0.51 $ (0.36) $ 1.20 $ 0.59 $ 0.32
------- ------- ------- ------- -------
Less distribution to shareholders:
Dividends from net investment income $ (0.03) $ (0.08) $ (0.28) $ (0.07) $ (0.50)
Distributions from capital gains (0.05) (1.00) (0.49) (0.29) (0.34)
------- ------- ------- ------- -------
Total distributions $ (0.08) $ (1.08) $ (0.77) $ (0.36) $ (0.84)
------- ------- ------- ------- -------
Net asset value, end of year $ 3.75 $ 3.32 $ 4.76 $ 4.33 $ 4.10
Total return (3) 15.46% (9.55)% 30.42% 14.66% 7.74%
======= ======= ======= ======= =======
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of year (in millions) $ 20 $ 24 $ 33 $ 30 $ 32
Ratios to average net assets:
Expenses 2.39% 1.85% 1.77% 1.76% 1.60%
Net investment income (loss) (0.73)% 0.91% 1.94% 6.67% 1.52%
Portfolio turnover rate 114.35% 260.95% 294.81% 669.79% 248.44%
</TABLE>
(1) Fund changed investment advisers on June 22, 1998.
(2) Fund changed investment advisers on April 1, 1999.
(3) Sales loads are not reflected in total return.
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INVESTORS RESEARCH FUND, INC.
11111 SANTA MONICA BOULEVARD
LOS ANGELES, CA 90025
(800) 292-6775
TRANSFER AGENT
ND Resources, Inc.
1 North Main
Minot, ND 58703
1-800-292-6775
DISTRIBUTOR
First Fund Distributors, Inc.
4455 East Camelback Road, Suite 261-E
Phoenix, AZ 85018
INVESTMENT ADVISOR
Westcap Investors, LLC
11111 Santa Monica Boulevard
Los Angeles, CA 90025
For investors who want more information about the Fund, the following documents
are available free upon request:
ANNUAL/SEMI-ANNUAL REPORTS: Additional information about the Fund's investments
is available in the Fund's annual and semi-annual reports to shareholders. In
the Fund's annual report, you will find a discussion of market conditions and
investment strategies that significantly affected the Fund's performance during
its last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI): The SAI provides more detailed
information about the Fund and is incorporated by reference into this
Prospectus.
You can get free copies of reports and the SAI, request other information and
discuss your questions about the Fund by contacting the Fund at:
ND Resources, Inc..
2 North Main
Minot, ND 58703
Telephone: 1-800-292-6775
17
<PAGE>
You can review and copy information including the Fund's reports and SAI at the
Public Reference Room of the Securities and Exchange Commission in Washington,
D.C. You can obtain information on the operation of the Public Reference Room by
calling the Commission at 1-202-942-8090. Reports and other information about
the Fund are available:
* Free of charge from the Commission's EDGAR database on the Commission's
Internet website at http:www.sec.gov, or
* For a duplicating fee, by writing to the Public Reference Room of the
Commission, Washington, DC 20549-0102, or
* For a duplicating fee, by electronic request at the following e-mail
address: [email protected].
(The Fund's SEC Investment Company Act
file number is 811-00861)
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
MARCH 21, 2000
INVESTORS RESEARCH FUND, INC.
11111 SANTA MONICA BOULEVARD
LOS ANGELES, CA 90025
(800) 292-6775
This Statement of Additional Information ("SAI") is not a prospectus and it
should be read in conjunction with the Prospectus dated March 21, 2000, as may
be revised, of the Investors Research Fund, Inc. (the "Fund"). Westcap
Investors, LLC (the "Advisor) is the investment advisor to the Fund. Copies of
the Fund's Prospectus are available at no charge by calling the above number.
TABLE OF CONTENTS
The Fund ................................................................. B-2
Investment Objective and Policies......................................... B-2
Investment Restrictions................................................... B-3
Distributions and Tax Information......................................... B-4
Directors and Executive Officers.......................................... B-6
The Fund's Investment Advisor............................................. B-9
The Fund's Administrator.................................................. B-10
The Fund's Distributor.................................................... B-10
Execution of Portfolio Transactions....................................... B-11
Portfolio Turnover........................................................ B-13
Additional Purchase And Redemption Information............................ B-13
Determination of Share Price.............................................. B-18
Performance Information................................................... B-18
General Information....................................................... B-19
Financial Statements...................................................... B-20
B-1
<PAGE>
THE FUND
The Fund is an open-end management investment company organized as a
Delaware corporation. The Fund is registered with the SEC as a management
investment company. Such a registration does not involve supervision of the
management or policies of the Fund. The Prospectus of the Fund and this SAI omit
certain of the information contained in the Registration Statement filed with
the SEC. Copies of such information may be obtained from the SEC upon payment of
the duplicating fee.
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is to seek growth of capital over the long
term. The Fund is diversified, which under applicable federal law means that as
to 75% of its total assets (1) no more than 5% may be invested in the securities
of a single issuer (other than securities issued or guaranteed by the U. S.
Government or its agencies and instrumentalities), and (2) it may hold no more
than 10% of the outstanding voting securities of a single issuer. The following
discussion supplements the discussion of the Fund's investment objective and
policies as set forth in the Prospectus. There can be no assurance the objective
of the Fund will be attained.
PREFERRED STOCK. The Fund may invest in preferred stock. A preferred stock
is a blend of the characteristics of a bond and common stock. It can offer the
higher yield of a bond and has priority over common stock in equity ownership,
but does not have the seniority of a bond and, unlike common stock, its
participation in the issuer's growth may be limited. Preferred stock has
preference over common stock in the receipt of dividends and in any residual
assets after payment to creditors should the issuer by dissolved. Although the
dividend is set at a fixed annual rate, in some circumstances it can be changed
or omitted by the issuer.
CONVERTIBLE SECURITIES. The Fund may invest in convertible securities
(bonds, notes, debentures, preferred stock and other securities convertible into
common stocks) that may offer higher income than the common stocks into which
they are convertible. The convertible securities in which the Fund may invest
include fixed-income or zero coupon debt securities, which may be converted or
exchanged at a rated or determinable exchange ratio into underlying shares of
common stock. Prior to their conversion, convertible securities may have
characteristics similar to non- convertible debt securities. While convertible
securities generally offer lower yields than non- convertible debt securities of
similar quality, their prices may reflect changes in the value of the underlying
common stock. Convertible securities generally entail less credit risk than the
issuer's common stock.
FOREIGN INVESTMENTS. The Fund may invest in up to 20% of its net assets in
securities of foreign issuers in the form of Level 2 sponsored American
Depositary Receipts ("ADRs"). ADRs are depositary receipts for foreign
securities denominated in U.S. dollars and traded on U.S. securities markets.
These are certificates evidencing ownership of shares of a foreign-based issuer
held in trust by a bank or similar financial institution. Designed for use in
U.S. securities markets, ADRs are alternatives to the purchase of the underlying
B-2
<PAGE>
securities in their national market and currencies. The Advisor has a policy of
investing only in ADRs of foreign companies that satisfy U.S. disclosure
requirements and reconcile their home market accounting to the generally
accepted accounting principles observed by U.S. companies and that 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.
RISKS OF INVESTING IN FOREIGN SECURITIES. Investments in foreign securities
involve certain inherent risks, including the following:
POLITICAL AND ECONOMIC FACTORS. Individual foreign economies of certain
countries may differ favorably or unfavorably from the U.S. economy in such
respects as growth of gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency, and diversification and balance of
payments position. The internal politics of some foreign countries may not be as
stable as those of the United States. Governments in some foreign countries also
continue to participate to a significant degree, through ownership interest or
regulation, in their respective economies. Action by these governments could
include restrictions on foreign investment, nationalization, expropriation of
goods or imposition of taxes, and could have a significant effect on market
prices of securities and payment of interest. The economies of many foreign
countries are heavily dependent upon international trade and are affected by the
trade policies and economic conditions of their trading partners. If these
trading partners enacted protectionist trade legislation, it could have a
significant adverse effect upon the securities markets of such countries.
LEGAL AND REGULATORY MATTERS. Certain foreign countries may have less
supervision of securities markets, brokers and issuers of securities, and less
financial information available to issuers, than is available in the United
States.
TAXES. The interest and dividends payable on some of the Fund's foreign
portfolio securities may be subject to foreign withholding taxes, thus reducing
the net amount of income available for distribution to Fund shareholders.
INVESTMENT RESTRICTIONS
The following policies and investment restrictions have been adopted by the
Fund and (unless otherwise noted) are fundamental and cannot be changed without
the affirmative vote of a majority of the Fund's outstanding voting securities
as defined in the 1940 Act. The Fund may not:
B-3
<PAGE>
1. Purchase any securities on margin or lend money or securities. The Fund
may, however, purchase notes, bonds, certificates of deposit or evidences of
indebtedness of a type commonly distributed by financial institutions.
2. Issue senior securities, borrow money or pledge its assets, except that
the Fund may borrow on an unsecured basis from banks for temporary or emergency
purposes or for the clearance of transactions in amounts not exceeding 33-1/3 %
of its total assets (not including the amount borrowed).
3. Sell any securities short, or distribute or underwrite securities of
others.
4. Purchase the securities of any company which has not been in continuous
operation for three years or more.
5. 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. Own more than 10% of the outstanding voting, or any other class of,
securities of a single issuer.
7. Purchase and sell commodities and commodity contracts, or real estate.
8. Purchase the securities of any other mutual fund.
9. Invest in any companies for the purpose of exercising control or
management.
10. Own the securities of any company in which any officer or director of
the Fund has a substantial financial interest.
11. Trade in securities with directors and officers of the Fund.
12. 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. Issue any shares for any consideration other than cash.
14. Invest 25% or more of its total assets in any one industry or industry
group.
A policy not deemed fundamental may be changed without shareholder vote.
B-4
<PAGE>
If a percentage restriction set forth in the prospectus or in this SAI is
adhered to at the time of investment, a subsequent increase or decrease in a
percentage resulting from a change in the values of assets will not constitute a
violation of that restriction, except with respect to borrowing or the purchase
of restricted or illiquid securities.
DISTRIBUTIONS AND TAX INFORMATION
DISTRIBUTIONS
Dividends from net investment income and distributions from net profits
from the sale of securities are generally made annually. Also, the Fund expects
to distribute any undistributed net investment income on or about December 31 of
each year. Any net capital gains realized through the period ended October 31 of
each year will also be distributed by December 31 of each year.
Each distribution by the Fund is accompanied by a brief explanation of the
form and character of the distribution. In January of each year the Fund will
issue to each shareholder a statement of the federal income tax status of all
distributions.
TAX INFORMATION
The Fund intends to qualify and continue to elect to be treated as a
"regulated investment company" under Subchapter M of the Internal Revenue Code
of 1986 (the "Code"), provided it complies with all applicable requirements
regarding the source of its income, diversification of its assets and timing of
distributions. The Fund's policy is to distribute to its shareholders all of its
investment company taxable income and any net realized capital gains for each
fiscal year in a manner that complies with the distribution requirements of the
Code, so that the Fund will not be subject to any federal income or excise
taxes. To comply with the requirements, the Fund must also distribute (or be
deemed to have distributed) by December 31 of each calendar year (i) at least
98% of its ordinary income for such year, (ii) at least 98% of the excess of its
realized capital gains over its realized capital losses for the 12-month period
ending on October 31 during such year and (iii) any amounts from the prior
calendar year that were not distributed and on which the Fund paid no federal
income tax. If the Fund is unable to meet certain requirements of the Code, it
may be subject to taxation as a corporation.
The Fund's ordinary income generally consists of interest and dividend
income, less expenses. Net realized capital gains for a fiscal period are
computed by taking into account any capital loss carryforward of the Fund.
Distributions of net investment income and net short-term capital gains are
taxable to shareholders as ordinary income. In the case of corporate
shareholders, a portion of the distributions may qualify for the intercorporate
dividends-received deduction to the extent the Fund designate the amount
distributed as a qualifying dividend. This designated amount cannot, however,
exceed the aggregate amount of qualifying dividends received by the Fund for
B-5
<PAGE>
their taxable year. In view of the Fund's investment policy, it is expected that
dividends from domestic corporations will be part of the Fund's gross income and
that, accordingly, part of the distributions by the Fund may be eligible for the
dividends-received deduction for corporate shareholders. However, the portion of
the Fund's gross income attributable to qualifying dividends is largely
dependent on the Fund's investment activities for a particular year and
therefore cannot be predicted with any certainty. The deduction may be reduced
or eliminated if the Fund shares held by a corporate investor are treated as
debt-financed or are held for less than 46 days.
A redemption of Fund shares may result in recognition of a taxable gain or
loss. Any loss realized upon a redemption of shares within six months from the
date of their purchase will be treated as a long-term capital loss to the extent
of any amounts treated as distributions of long-term capital gains during such
six-month period. Any loss realized upon a redemption of Fund shares may be
disallowed under certain wash sale rules to the extent shares of the Fund are
purchased (through reinvestment of distributions or otherwise) within 30 days
before or after the redemption.
Under the Code, the Fund will be required to report to the Internal Revenue
Service ("IRS") all distributions of ordinary income and capital gains as well
as gross proceeds from the redemption or exchange of Fund shares, except in the
case of exempt shareholders, which includes most corporations. Pursuant to the
backup withholding provisions of the Code, distributions of any taxable income
and capital gains and proceeds from the redemption of Fund shares may be subject
to withholding of federal income tax at the rate of 31 percent in the case of
non-exempt shareholders who fail to furnish the Fund with their taxpayer
identification numbers and with required certifications regarding their status
under the federal income tax law. If the withholding provisions are applicable,
any such distributions and proceeds, whether taken in cash or reinvested in
additional shares, will be reduced by the amounts required to be withheld.
Corporate and other exempt shareholders should provide the Fund with their
taxpayer identification numbers or certify their exempt status in order to avoid
possible erroneous application of backup withholding. The Fund reserve the right
to refuse to open an account for any person failing to provide a certified
taxpayer identification number.
The foregoing discussion of U.S. federal income tax law relates solely to
the application of that law to U.S. citizens or residents and U.S. domestic
corporations, partnerships, trusts and estates. Each shareholder who is not a
U.S. person should consider the U.S. and foreign tax consequences of ownership
of shares of the Fund, including the possibility that such a shareholder may be
subject to a U.S. withholding tax at a rate of 30 percent (or at a lower rate
under an applicable income tax treaty) on amounts constituting ordinary income.
In addition, the foregoing discussion of tax law is based on existing
provisions of the Code, existing and proposed regulations thereunder, and
current administrative rulings and court decisions, all of which are subject to
change. Any such charges could affect the validity of this discussion. The
discussion also represents only a general summary of tax law and practice
currently applicable to the Fund and certain shareholders therein, and, as such,
is subject to change. In particular, the consequences of an investment in shares
B-6
<PAGE>
of the Fund under the laws of any state, local or foreign taxing jurisdictions
are not discussed herein. Each prospective investor should consult his or her
own tax advisor to determine the application of the tax law and practice in his
or her own particular circumstances.
DIRECTORS AND EXECUTIVE OFFICERS
The Directors of the Fund are responsible for the overall management of the
Fund, including general supervision and review of the investment activities of
the Fund. The Directors elect the officers of the Fund, who are responsible for
administering the day-to-day operations of the Fund. The current Directors and
officers, their affiliations, dates of birth and principal occupations for the
past five years are set forth below. Unless noted otherwise, each person has
held the position listed for a minimum of five years.
<TABLE>
<CAPTION>
Position Held
Name and Address with the Fund Principal Occupation
- ---------------- ------------- --------------------
<S> <C> <C>
Glenn C. Weirick,*+ (62) President and Director President and Director of Westcap
11111 Santa Monica Boulevard Investors, LLC since 1992.
Los Angeles, CA 90025
Hugh J. Haferkamp,* (72) Director Attorney-at-law in private practice in the
11800 Baccarat Lane, NE Santa Barbara area; formerly, legal counsel
Albuquerque, NM 87111-7600 to the Fund for approximately 20 years
and former President of the Fund.
Michael A. Marshall, (63) Director Engaged in real estate and property
2175 Boundary Drive management, M-P Marshall & Co.;
Santa Barbara, CA 93108 formerly, Senior Vice-President of
Prudential California Realty.
Richard Chernick, (53) Director Retired Partner of the Los Angeles Law
3055 Wilshire Boulevard Firm of Gibson, Dunn & Crutcher;
Los Angeles, CA 90010-1108. currently active in arbitration and mediation
of disputes in the Los Angeles area.
</TABLE>
B-7
<PAGE>
<TABLE>
<CAPTION>
Position Held
Name and Address with the Fund Principal Occupation
- ---------------- ------------- --------------------
<S> <C> <C>
Harry P. Gelles, (66) Director Private investment banker; Vice
1114 State Street President of Goldman Sachs & Co. for
Santa Barbara, CA ten years; formerly, Managing Director of
Dean Witter Reynolds for five years and
was Managing Director of Cruttenden-Roth
& Company for one year.
Leonard S. Jarrott, (54) Director Real Estate Investment Advisor and
3532 Chuparosa Drive independent Real Estate Broker in Santa
Santa Barbara, CA 93105 Barbara, CA.
William J. Nasif, (57) Director Certified Public Accountant and Partner of
1111 Garden Street Nasif, Hicks, Harris & Co., Certified Public
Santa Barbara, CA 93101 Accountants of Santa Barbara, CA.
Mark Schniepp, (45) Director Economist and Director of the Economics
944 Randolph Road Forecast Project at the University of
Santa Barbara, CA 93111 California, Santa Barbara, CA.
Dan B. Secord, (62) Director Physician In private practice of obstetrics
2329 Oak Park Lane and gynecology since 1969. Staff, Santa
Santa Barbara, CA 93105 Barbara Cottage Hospital in Santa Barbara,
CA and currently on the Credentials
Committee of the medical staff. Member,
Santa Barbara City Council.
Geoff I. Edelstein,* (36) Senior Vice President, Managing Director of Westcap Investors,
11111 Santa Monica Boulevard Secretary and Treasurer LLC since 1991.
Los Angeles, CA 90025
</TABLE>
B-8
<PAGE>
<TABLE>
<CAPTION>
Position Held
Name and Address with the Fund Principal Occupation
- ---------------- ------------- --------------------
<S> <C> <C>
Gregory S. Weirick* (34)+ Senior Vice President Treasurer and Managing Director of
11111 Santa Monica Boulevard Westcap Investors, LLC since 1991.
Los Angeles, CA 90025
Bradley G. Slocum, * (42) Senior Vice President Managing Director of Westcap Investors,
11111 Santa Monica Boulevard LLC since 1992.
Los Angeles, CA 90025
</TABLE>
- ----------
* Indicates an "interested person" of the Fund as defined in the 1940 Act.
+ Mr. Glenn C. Weirick and Mr. Gregory S. Weirick are father and son.
The Board of Directors has 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. Chernick, Nasif, Secord and Schniepp currently
comprise the Audit Committee.
The Board of Directors also established a Nominating Committee. The
functions of the Committee are to recommend to the Board candidates for all
directorships and officer positions which are to filled by the shareholders or
to be filled by the Board and to recommend to the Board directors to fill the
seats on Board committees. The current members of the nominating committee are
Messrs. Marshall, Jarrott and Gelles.
Each Director who is not an "interested person" of the Fund receives a fee
of $500 for each regular Board meeting and each committee meeting attended. Set
forth below is the total compensation from the Fund received by the following
Directors for the fiscal year ended September 30, 1999:
B-9
<PAGE>
Aggregate Compensation
Name of Director From Fund*
- ---------------- ----------
Glenn C. Weirick None
Hugh J. Haferkamp $81,285**
Michael A. Marshall $ 4,500
Richard Chernick $ 1,000
Harry P. Gelles $ 4,000
Leonard S. Jarrott $ 3,000
William J. Nasif $ 2,500
Mark Schniepp $ 4,000
Dan B. Secord $ 2,500
- ----------
* Compensation to officers and interested Directors of the Fund, other than
Mr. Hugh J. Haferkamp, is paid by the Advisor. In addition, during the
fiscal year ended September 30, 1999, the Fund paid Mr. William J. Nasif a
consulting fee of $9,500.
** Includes salary as President of $24,000 and fees for legal services of
$53,285.
As of the date if this SAI, the Directors and officers of the Fund as a
group owned approximately 4.24% of the Fund's outstanding shares.
THE FUND'S INVESTMENT ADVISOR
Investment advisory services are provided to the Fund by Westcap Investors,
LLC, the Fund's Advisor, pursuant to an Investment Advisory Agreement (the
"Advisory Agreement"). As compensation, the Fund pays the Advisor a quarterly
management fee of 0.125% (0.50% per annum) based upon the Fund's average 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 0.50% based on the foregoing calculated for the one-year period.
The Advisory Agreement will continue in effect for successive annual
periods so long as such continuation is approved at least annually by the vote
of (1) the Board of Directors of the Trust (or a majority of the outstanding
shares of the Fund), and (2) a majority of the Directors who are not "interested
persons" (as defined in the 1940 Act) of any party to the Advisory Agreement, in
each case cast in person at a meeting called for the purpose of voting on such
approval. The Advisory Agreement may be terminated at any time, without penalty,
by either party to the Advisory Agreement upon sixty days' written notice and is
automatically terminated in the event of its "assignment," as defined in the
1940 Act. The Adviser permits its principals and employees to buy and sell
securities for their own accounts in accordance with a policy governing personal
investing by its principals and employees. The policy requires officers, inside
directors and employees to pre-clear all transactions in securities that are not
exempt under the policy. Requests for trading authority will be denied when,
among other reasons, the proposed personal transaction would be contrary to the
provisions of the policy or would be deemed to affect adversely any transaction
then known to be under consideration for or to have been effected on behalf of
any client account, including the Fund.
B-10
<PAGE>
In addition to the pre-clearance requirement described above, all personal
transactions must be reported on a quarterly basis to an designated officer. All
reportable transactions are reviewed for compliance with the policy.
From June 22, 1998 through March 30, 1999, advisory services were provided
by Fox Asset Management, Inc. Prior to June 22, 1998, advisory services were
provided by Lakeview Securities Corporation.
For the fiscal year ended September 30, 1997 and the period October 1
through June 21, 1998, Lakeview Securities Corporation received advisory fees of
$150,169 and $113,452, respectively. For the periods June 22 through September
30, 1998 and October 1, 1998 through March 30, 1999, Fox Asset Management, Inc.
received advisory fees of $34,505 and $75,978, respectively. For the period
April 1 through September 30, 1999, the Advisor received advisory fees of
$37,726.
THE FUND'S ADMINISTRATOR
On December 9, 1999, the Fund entered into an Administration Agreement with
Investment Company Administration, LLC (the "Administrator") with offices at
2020 East Financial Way, Suite 100, Glendora, CA 91741. The Administration
Agreement provides that the Administrator will prepare and coordinate reports
and other materials supplied to the Directors; prepare and/or supervise the
preparation and filing of all securities filings, periodic financial reports,
prospectuses, statements of additional information, marketing materials, tax
returns, shareholder reports and other regulatory reports or filings required of
the Fund; prepare all required notice filings necessary to maintain the Fund's
ability to sell shares in all states where the Fund currently does, or intends
to do business; coordinate the preparation, printing and mailing of all
materials (e.g., Annual Reports) required to be sent to shareholders; coordinate
the preparation and payment of Fund related expenses; monitor and oversee the
activities of the Fund's servicing agents (i.e., transfer agent, custodian, fund
accountants, etc.); review and adjust as necessary the Fund's daily expense
accruals; and perform such additional services as may be agreed upon by the Fund
and the Administrator. For its services, the Fund will pay the Administrator a
fee at the annual rate of 0.10% on the first $200 million of the Fund's average
daily net assets, 0.05% on the next $300 million of the Fund's average daily net
assets and 0.03% on average daily net asset above $500 million, subject to an
annual minimum of $40,000. The Fund did not pay any administration fees during
the fiscal year ended September 30, 1999.
THE FUND'S DISTRIBUTOR
First Fund Distributors, Inc. (the "Distributor"), located at 4455 E.
Camelback Road, Suite 261E, Phoenix, Arizona, 85018, an affiliate of the
Administrator, acts as the Fund's principal underwriter in a continuous public
B-11
<PAGE>
offering of the Fund's shares. The Distributor is engaged on a non-exclusive
basis to assist in the distribution of shares in various jurisdictions. The
Distribution Agreement between the Fund and the Distributor continues in effect
from year to year if approved at least annually by (i) the Board of Directors or
the vote of a majority of the outstanding shares of the Fund (as defined in the
1940 Act) and (ii) a majority of the Directors who are not "interested persons"
of any such party (as defined in the 1940 Act), in each case cast in person at a
meeting called for the purpose of voting on such approval. The Distribution
Agreement may be terminated without penalty by the parties thereto upon sixty
days' written notice, and is automatically terminated in the event of its
assignment as defined in the 1940 Act.
Prior to December 7, 1999, ND Capital, Inc. acted as the Fund's principal
underwriter. For the fiscal years ended September 30, 1998 and 1997, Diversified
Securities, Inc. acted as the Fund's principal underwriter. For the period
October 1, 1998 through September 30, 1999, ND Capital, Inc. received sales
charges on the sale of Fund shares in the amount of $281. For the fiscal years
ended September 30, 1998 and 1997, Diversified Securities, Inc., received sales
charges on the sale of Fund shares in the amount of $4,483 and $2,298,
respectively. None of the sales charges received by either underwriter were paid
by the Fund.
The Fund has adopted a Distribution Plan in accordance with Rule 12b-1 (the
"Plan") under the 1940 Act. The Plan provides that the Fund will pay a fee at an
annual rate of up to 0.50% of the average daily net assets of the Fund. The fee
is paid to broker-dealer who have engaged in the marketing and distributions of
the Fund's shares.
During the Fund's fiscal year ended September 30, 1999, the Fund paid fees
of $51,369 pursuant to the Plan, of which $43,869 was paid to broker-dealers for
servicing their clients' Fund accounts and $7,500 was for miscellaneous
expenses.
EXECUTION OF PORTFOLIO TRANSACTIONS
Pursuant to the Advisory Agreement, the Advisor determines which securities
are to be purchased and sold by the Fund and which broker-dealers are eligible
to execute the Fund's portfolio transactions. Purchases and sales of securities
in the over-the-counter market will generally be executed directly with a
"market-maker" unless, in the opinion of the Advisor, a better price and
execution can otherwise be obtained by using a broker for the transaction.
Purchases of portfolio securities for the Fund also may be made directly
from issuers or from underwriters. Where possible, purchase and sale
transactions will be effected through dealers (including banks) which specialize
in the types of securities which the Fund will be holding, unless better
executions are available elsewhere. Dealers and underwriters usually act as
principal for their own accounts. Purchases from underwriters will include a
concession paid by the issuer to the underwriter and purchases from dealers will
include the spread between the bid and the asked price. If the execution and
price offered by more than one dealer or underwriter are comparable, the order
may be allocated to a dealer or underwriter that has provided research or other
services as discussed below.
B-12
<PAGE>
In placing portfolio transactions, the Advisor will use its reasonable
efforts to choose broker- dealers capable of providing the services necessary to
obtain the most favorable price and execution available. The full range and
quality of services available will be considered in making these determinations,
such as the size of the order, the difficulty of execution, the operational
facilities of the firm involved, the firm's risk in positioning a block of
securities, and other factors. In those instances where it is reasonably
determined that more than one broker-dealer can offer the services needed to
obtain the most favorable price and execution available, consideration may be
given to those broker-dealers which furnish or supply research and statistical
information to the Advisor that it may lawfully and appropriately use in its
investment advisory capacities, as well as provide other services in addition to
execution services. The Advisor considers such information, which is in addition
to and not in lieu of the services required to be performed by it under its
Agreement with the Fund, to be useful in varying degrees, but of indeterminable
value. Portfolio transactions may be placed with broker-dealers who sell shares
of the Fund subject to rules adopted by the National Association of Securities
Dealers, Inc.
While it is the Fund's general policy to seek first to obtain the most
favorable price and execution available in selecting a broker-dealer to execute
portfolio transactions for the Fund, weight is also given to the ability of a
broker-dealer to furnish brokerage and research services to the Fund or to the
Advisor, even if the specific services are not directly useful to the Fund and
may be useful to the Advisor in advising other clients. Research services
include such items as reports on investment environment, industries and
companies, economic analyses and review of business conditions, portfolio
strategy, analytic computer software, account performance services, and various
trading and/or quotation services and equipment. They also include advice as to
the value of securities, availability of securities, availability of buyers and
sellers. In negotiating commissions with a broker or evaluating the spread to be
paid to a dealer, the Fund may therefore pay a higher commission or spread than
would be the case if no weight were given to the furnishing of these
supplemental services, provided that the amount of such commission or spread has
been determined in good faith by the Advisor to be reasonable in relation to the
value of the brokerage and/or research services provided by such broker-dealer.
The standard of reasonableness is to be measured in light of the Advisor's
overall responsibilities to the Fund.
Investment decisions for the Fund are made independently from those of
other client accounts managed or advised by the Advisor. Nevertheless, it is
possible that at times identical securities will be acceptable for both the Fund
and one or more of such client accounts. In such event, the position of the Fund
and such client account(s) in the same issuer may vary and the length of time
that each may choose to hold its investment in the same issuer may likewise
vary. However, to the extent any of these client accounts seeks to acquire the
same security as the Fund at the same time, the Fund may not be able to acquire
as large a portion of such security as it desires, or it may have to pay a
higher price or obtain a lower yield for such security. Similarly, the Fund may
not be able to obtain as high a price for, or as large an execution of, an order
B-13
<PAGE>
to sell any particular security at the same time. If one or more of such client
accounts simultaneously purchases or sells the same security that the Fund is
purchasing or selling, each day's transactions in such security will be
allocated between the Fund and all such client accounts in a manner deemed
equitable by the Advisor, taking into account the respective sizes of the
accounts and the amount being purchased or sold. It is recognized that in some
cases this system could have a detrimental effect on the price or value of the
security insofar as the Fund is concerned. In other cases, however, it is
believed that the ability of the Fund to participate in volume transactions may
produce better executions for the Fund.
The Fund does not effect securities transactions through brokers in
accordance with any formula, nor does it effect securities transactions through
brokers solely for selling shares of the Fund, although the Fund may consider
the sale of shares as a factor in allocating brokerage. However, as stated
above, broker-dealers who execute brokerage transactions may effect purchase of
shares of the Fund for their customers.
For the fiscal years ended September 30, 1999, 1998 and 1997, the Fund paid
$73,535, $196,818 and $257,905, respectively, in brokerage commissions.
PORTFOLIO TURNOVER
Although the Fund generally will not invest for short-term trading
purposes, portfolio securities may be sold without regard to the length of time
they have been held when, in the opinion of the Advisor, investment
considerations warrant such action. Portfolio turnover rate is calculated by
dividing (1) the lesser of purchases or sales of portfolio securities for the
fiscal year by (2) the monthly average of the value of portfolio securities
owned during the fiscal year. A 100% turnover rate would occur if all the
securities in the Fund's portfolio, with the exception of securities whose
maturities at the time of acquisition were one year or less, were sold and
either repurchased or replaced within one year. A high rate of portfolio
turnover (100% or more) generally leads to higher transaction costs and may
result in a greater number of taxable transactions. See "Execution of Portfolio
Transactions." For the fiscal years ended September 30, 1999 and 1998, the Fund
had a portfolio turnover rate of 114.35% and 260.95%, respectively. The Fund
attributes this high rate of portfolio turnover during the last two fiscal years
to the fact that the Fund changed investment advisors during each of these
fiscal years. These changes in investment management resulted in a restructuring
of the Fund's portfolio.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
The information provided below supplements the information contained in the
Fund's Prospectus regarding the purchase and redemption of Fund shares.
B-14
<PAGE>
HOW TO BUY SHARES
The public offering price of Portfolio shares is the net asset value, plus
the applicable sales charge. The Fund receives the net asset value. Shares are
purchased at the public offering price next determined after the Transfer Agent
receives your order in proper form as discussed in the Fund's Prospectus. In
most cases, in order to receive that day's public offering price, the Transfer
Agent must receive your order in proper form before the close of regular trading
on the New York Stock Exchange ("NYSE"), normally 4:00 p.m., Eastern time. If
you buy shares through your investment representative, the representative must
receive your order before the close of regular trading on the NYSE and forward
it promptly to the Transfer Agent to receive that day's public offering price.
DEALER COMMISSIONS
The Distributor pays a portion of the sales charges imposed on purchases of
Fund shares to retail dealers, as follows:
Dealer Commission
as a % of
Your investment offering price
--------------- --------------
Less than $25,000 3.19%
$25,000 but less than $50,000 2.55
$50,000 but less than $100,000 2.12
$100,000 but less than $250,000 1.70
$250,000 but less than $500,000 1.27
$500,000 but less than $1,000,000 0.85
$1,000,000 or more None
REDUCED SALES CHARGES
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, (iii) purchases made by
an organized group of 200 or more persons, and (iv) whether incorporated or not,
if the group has a purpose other than buying shares of mutual funds and has
sponsored the Fund as an investment vehicle for its members. For further
information on group purchase reductions, contact the Advisor or your dealer.
B-15
<PAGE>
STATEMENTS OF INTENTION. Another way to reduce the sales charge is by
signing a Statement of Intention. A Statement is included in the Account
Application 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 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. 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. A Statement does not bind you to buy, nor does it bind
the Advisor to sell, the shares covered by the Statement.
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.
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.
The New York Stock Exchange annually announces the days on which it will
not be open for trading. The most recent announcement indicates that it will not
be open on the following days: New Year's Day, Martin Luther King Jr. Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. However, the NYSE may close on days not
included in that announcement.
B-16
<PAGE>
WAIVER OF SALES CHARGE
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 Advisor and Distributor and broker-dealers who maintain selling agreements
with the Distributor, 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 Distributor 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 the Fund 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. The Distributor 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 the Advisor and to persons sponsored to the Fund by the Advisor.
No commissions will be paid to dealers in connection with the sales of
shares at net asset value under this program.
The Fund reserves the right in its sole discretion (i) to suspend the
continued offering of the Fund's shares, (ii) to reject purchase orders in whole
or in part when in the judgment of the Advisor or the Distributor such rejection
is in the best interest of the Fund, and (iii) to reduce or waive the minimum
B-17
<PAGE>
for initial and subsequent investments for certain fiduciary accounts or under
circumstances where certain economies can be achieved in sales of the Fund's
shares.
HOW TO SELL SHARES
You can sell your Fund shares any day the NYSE is open for regular trading.
DELIVERY OF REDEMPTION PROCEEDS
Payments to shareholders for shares of the Fund redeemed directly from the
Fund will be made as promptly as possible but no later than seven days after
receipt by the Fund's Transfer Agent of the written request in proper form, with
the appropriate documentation as stated in the Prospectus, except that the Fund
may suspend the right of redemption or postpone the date of payment during any
period when (a) trading on the NYSE is restricted as determined by the SEC or
the NYSE is closed for other than weekends and holidays; (b) an emergency exists
as determined by the SEC making disposal of portfolio securities or valuation of
net assets of the Fund not reasonably practicable; or (c) for such other period
as the SEC may permit for the protection of the Fund's shareholders. Under
unusual circumstances, the Fund may suspend redemptions, or postpone payment for
more than seven days, but only as authorized by SEC rules.
The value of shares on redemption or repurchase may be more or less than
the investor's cost, depending upon the market value of the Fund's portfolio
securities at the time of redemption or repurchase.
TELEPHONE REDEMPTIONS
Upon receipt of any instructions or inquiries by telephone from a
shareholder or, if held in a joint account, from either party, or from any
person claiming to be the shareholder, the Fund or its agent is authorized,
without notifying the shareholder or joint account parties, to carry out the
instructions or to respond to the inquiries, consistent with the service options
chosen by the shareholder or joint shareholders in his or their latest Account
Application or other written request for services, including purchasing or
redeeming shares of the Fund and depositing and withdrawing monies from the bank
account specified in the Bank Account Registration section of the shareholder's
latest Account Application or as otherwise properly specified to the Fund in
writing.
The Transfer Agent will employ these and other reasonable procedures to
confirm that instructions communicated by telephone are genuine; if it fails to
employ reasonable procedures, the Fund and the Transfer Agent may be liable for
any losses due to unauthorized or fraudulent instructions. If these procedures
are followed, an investor agrees, however, that to the extent permitted by
applicable law, neither the Fund nor its agents will be liable for any loss,
liability, cost or expense arising out of any redemption request, including any
fraudulent or unauthorized request. For information, consult the Transfer Agent.
B-18
<PAGE>
During periods of unusual market changes and shareholder activity, you may
experience delays in contacting the Transfer Agent by telephone. In this event,
you may wish to submit a written redemption request, as described in the
Prospectus. The Telephone Redemption Privilege may be modified or terminated
without notice.
REDEMPTIONS-IN-KIND
The Fund has filed an election under SEC Rule 18f-1 committing to pay in
cash all redemptions by a shareholder of record up to amounts specified by the
rule (in excess of the lesser of (i) $250,000 or (ii) 1% of the Fund's assets).
The Fund has reserved the right to pay the redemption price of its shares in
excess of the amounts specified by the rule, either totally or partially, by a
distribution in kind of portfolio securities (instead of cash). The securities
so distributed would be valued at the same amount as that assigned to them in
calculating the net asset value for the shares being sold. If a shareholder
receives a distribution in kind, the shareholder could incur brokerage or other
charges in converting the securities to cash.
AUTOMATIC INVESTMENT PLAN
As discussed in the Prospectus, the Fund provides an Automatic Investment
Plan for the convenience of investors who wish to purchase shares of the Fund on
a regular basis. All record keeping and custodial costs of the Automatic
Investment Plan are paid by the Fund. The market value of the Fund's shares is
subject to fluctuation, so before undertaking any plan for systematic
investment, the investor should keep in mind that this plan does not assure a
profit nor protect against depreciation in declining markets.
DETERMINATION OF SHARE PRICE
As noted in the Prospectus, the net asset value and offering price of
shares of the Fund will be determined once daily as of the close of public
trading on the NYSE (normally 4:00 p.m., Eastern time) on each day that the NYSE
is open for trading. The Fund does not expect to determine the net asset value
of its shares on any day when the NYSE is not open for trading even if there is
sufficient trading in its portfolio securities on such days to materially affect
the net asset value per share. However, the net asset value of the Fund's shares
may be determined on days the NYSE is closed or at times other than 4:00 p.m. if
the Board of Directors decides it is necessary. It is expected that the NYSE
will be closed on Saturdays and Sundays and for New Year's Day, Martin Luther
King, Jr. Day, President's Day, Good Firday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas.
In valuing the Fund's assets for calculating net asset value, readily
marketable portfolio securities listed on a national securities exchange or on
NASDAQ are valued at the last sale price on the business day as of which such
value is being determined. If there has been no sale on such exchange or on
NASDAQ on such day, the security is valued at the closing bid price on such day.
Readily marketable securities traded only in the over-the-counter market and not
on NASDAQ are valued at the current or last bid price. If no bid is quoted on
such day, the security is valued by such method as the Board of Directors shall
determine in good faith to reflect the security's fair value.
B-19
<PAGE>
The net asset value per share of the Fund is calculated as follows: all
liabilities incurred or accrued are deducted from the valuation of total assets
which includes accrued but undistributed income; the resulting net assets are
divided by the number of shares of the Fund outstanding at the time of the
valuation and the result (adjusted to the nearest cent) is the net asset value
per share.
PERFORMANCE INFORMATION
From time to time, the Fund may state its total return in advertisements
and investor communications. Total return may be stated for any relevant period
as specified in the advertisement or communication. Any statements of total
return will be accompanied by information on the Fund's average annual
compounded rate of return for the most recent one, five and ten year periods, or
shorter periods from inception, through the most recent calendar quarter. The
Fund may also advertise aggregate and average total return information over
different periods of time.
The Fund's total return may be compared to relevant indices, including
Standard & Poor's 500 Composite Stock Index and indices published by Lipper
Analytical Services, Inc. From time to time, evaluations of the Fund's
performance by independent sources may also be used in advertisements and in
information furnished to present or prospective investors in the Fund.
Investors should note that the investment results of the Fund will
fluctuate over time, and any presentation of the Fund's total return for any
period should not be considered as a representation of what an investment may
earn or what an investor's total return may be in any future period.
The Fund's average annual compounded rate of return is determined by
reference to a hypothetical $1,000 investment that includes capital appreciation
and depreciation for the stated period, according to the following formula:
n
P(1+T) = ERV
Where: P = a hypothetical initial purchase order of $1,000 from which the
maximum sales load is deducted
T = average annual total return
n = number of years
ERV = ending redeemable value of the hypothetical $1,000 purchase at
the end of the period.
Aggregate total return is calculated in a similar manner, except that the
results are not annualized. Each calculation assumes that all dividends and
distributions are reinvested at net asset value on the reinvestment dates during
the period.
B-20
<PAGE>
The Fund's average annual total return for the period April1, 1999 through
September 30, 1999 was -0.84%.
All return figures noted above include the maximum sales charge of 3.75%.
GENERAL INFORMATION
Investors in the Fund will be informed of the Fund's progress through
periodic reports. Financial statements certified by independent public
accountants will be submitted to shareholders at least annually.
UMB Bank, located at 928 Grand Avenue, Kansas City, MO 64141 acts as
Custodian of the securities and other assets of the Fund. ND Resources, 1 North
Main, Minot, ND 58702-0759 acts as the Fund's transfer and shareholder service
agent. The Custodian and Transfer Agent do not participate in decisions relating
to the purchase and sale of securities by the Fund.
Ernst & Young LLP, 725 South Figueroa Street, Los Angeles, CA 90071, are
the independent auditors for the Fund.
Paul, Hastings, Janofsky & Walker, LLP, 555 South Flower Street Los
Angeles, CA 90071, are legal counsel to the Fund.
On January 25, 2000, James Howard & Anna Mae Noble Trust, 863 Avenida
Acapulco, San Clemente, CA 93672-2406, owned of record 6.24% of the Fund's
outstanding voting securities:
The Fund was organized as a corporation under the laws of Delaware in 1959.
Shares issued by the Fund have no preemptive, conversion, or subscription
rights. Shareholders have equal and exclusive rights as to dividends and
distributions as declared by the Fund and to the net assets of the Fund upon
liquidation or dissolution. Voting rights are cumulative. While the Fund holds
annual meetings of shareholders, such meetings may be called at any time by the
Directors in their discretion, or upon demand by the holders of 10% or more of
the outstanding shares of the Fund, for the purpose of electing or removing
Directors.
FINANCIAL STATEMENTS
The Fund's annual report to shareholders for its fiscal year ended
September 30, 1999 is a separate document supplied with this SAI and the
financial statements, accompanying notes and report of independent accountants
appearing therein are incorporated by reference in this SAI.
B-21
<PAGE>
INVESTORS RESEARCH FUND, INC.
PART C
ITEM 23. EXHIBITS.
(1) Certificate of Incorporation and Certificate of Amendment (1)
(2) By-Laws (1)
(3) Specimen stock certificate (1)
(4) Form of Investment Advisory Agreement (2)
(5) Form of Distribution Agreement
(6) Not applicable
(7) (a) Custodian Agreement with UMB Bank (1)
(b) Custodian Agreement with UMB Bank re retirement plans (3)
(8) (a) Form of Administration Agreement
(b) Transfer Agency Agreement (4)
(9) Opinion of counsel - (3)
(10) Consent of Auditors - file herewith
(11) Not applicable
(12) No undertaking in effect
(13) Rule 12b-1 Plan (2)
(14) Not applicable
(15) Not applicable
(16) (a) Investors Research Fund's Code of Ethics: file herewith
(b) Advisor's Code of Ethics: file herewith
(c) Principal Underwriter's Code of Ethics: file herewith
(1) Incorporated by reference from Post-Effective Amendment No. 66 to the
Registration Statement on Form N-1A, filed on January 24, 1996.
(2) Incorporated by reference from Post-Effective Amendment No. 68 to the
Registration Statement on Form N-1A, filed on January 27, 1998.
(3) Incorporated by reference from Post-Effective Amendment No. 69 to the
Registration Statement on Form N-1A, filed on January 22, 1999.
(4) Incorporated by reference from Post-Effective Amendment No. 73 to the
Registration Statement on Form N-1A, filed on January 19, 2000
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
As of the date of this Amendment to the Registration Statement, there are
no persons controlled or under common control with the Registrant.
<PAGE>
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.
Westcap Investors, LLC is the sole General Partner of Westcap Investors
Convertible Limited Partnership. The Advisor is also a managing member of
Westcap Investors Series Fund, LLC offered to qualified investors .
ITEM 27. PRINCIPAL UNDERWRITERS.
(a) First Fund Distributors, Inc., the Fund's principal underwriter, acts
as principal underwriter for the following other investment companies:
Advisors Series Trust
Amivest/NFB Funds Trust
Brandes Investment Funds
Builders Fixed Income Fund, Inc.
Dessauer Global Equity Fund
Fleming Mutual Fund Group, Inc.
Fremont Mutual Funds, Inc.
Guinness Flight Investment Funds
Jurika & Voyles Fund Group
Kayne Anderson Mutual Funds
Masters' Select Investment Trust
O'Shaughnessy Funds, Inc.
PIC Investment Trust
Professionally Managed Portfolios
Puget Sound Alternative Investment Series Trust
Rainier Investment Management Mutual Funds
RNC Mutual Fund Group, Inc.
The Purisima Funds
<PAGE>
(b) The following information is furnished with respect to the officers and
directors of First Fund Distributors, Inc.:
Position Position and
Name and Principal with Principal Offices with
Business Address Underwriter Registrant
- ---------------- ----------- ----------
Robert H. Wadsworth President and None
4455 E. Camelback Road Treasurer
Suite 261
Phoenix, AZ 85018
Eric M. Banhazl Vice President None
2020 E. Financial Way
Suite 100
Glendora, CA 91741
Steven J. Paggioli Vice President and None
915 Broadway Secretary
Suite 1605
New York, NY 10010
c. Incorporated by reference from the Statement of Additional Information
filed herewith as Part B.
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS.
The accounts, books and other documents required to be maintained by
Registrant pursuant to Section 31(a) of the Investment Company Act of 1940 and
the rules promulgated thereunder are in the possession the Registrant's
custodian and transfer agent, except those records relating to portfolio
transactions and the basic organizational and Fund documents of the Registrant
(see Subsections (2) (iii). (4), (5), (6), (7), (9), (10) and (11) of Rule
31a-1(b)), which, with respect to portfolio transactions are kept by each Fund's
Advisor at its address set forth in the prospectus and statement of additional
information and with respect to trust documents by its administrator at 915
Broadway, New York, NY 10010 and 2020 E. Financial Way, Ste. 100, Glendora, CA
91741.
ITEM 29. MANAGEMENT SERVICES.
There are no management-related service contracts not discussed in Parts A
and B.
ITEM 30. UNDERTAKINGS
The registrant undertakes:
<PAGE>
(a) To furnish each person to whom a Prospectus is delivered a copy of
Registrant's latest annual report to shareholders, upon request and without
charge.
(b) If requested to do so by the holders of at least 10% of the Fund's
outstanding shares, to call a meeting of shareholders for the purposes of voting
upon the question of removal of a director and assist in communications with
other shareholders.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets the requirements for
effectiveness of the Amendment under Rule 485(b) of the Securities Act of 1933
and that the Registrant has duly caused this Post-Effective Amendment No. 74 to
the Registration Statement on Form N-1A to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Los Angeles in the State
of California on March 20, 2000.
INVESTORS RESEARCH FUND, INC.
By /s/ Glenn C, Weirick
-------------------------------------
Glenn C. Weirick, President
Pursuant to the requirements of the Securities Act of 1933, this amendment to
this Registration Statement has been signed below by the following persons in
the capacities and on the date indicated.
/s/ Glenn C. Weirick President and March 20, 2000
- -------------------------- Director
Glenn C. Weirick
Director March 20, 2000
- --------------------------
Hugh J. Haferkamp
/s/ Michael A. Marshall Director March 20, 2000
- -------------------------
Michael A. Marshall
Director March 20, 2000
- --------------------------
Richard Chernick
/s/ Harry P. Gelles Director March 20, 2000
- --------------------------
Harry P. Gelles
/s/ Leonard S. Jarrott Director March 20, 2000
- --------------------------
Leonard S. Jarrott
/s/ William J. Nasif Director March 20, 2000
- --------------------------
William J. Nasif
Director March 20, 2000
- --------------------------
Mark Schniepp
/s/ Dan B. Secord Director March 20, 2000
- --------------------------
Dan B. Secord
/s/ Geoff I. Edelstein Chief Financial March 20, 2000
- -------------------------- Officer
Geoff I. Edelstein
<PAGE>
EXHIBITS
Number Description
- ------ -----------
99B.10 Consent of auditors
99B.16(a) Investor Research Fund's Code of Ethics
99B.16(b) Westcap Investors' Code of Ethics
99B.16(c) First Fund Distributors' Code of Ethics
CONSENT OF INDEPENDENT AUDITORS
To the Shareholders and
Board of Directors
Investors Research Fund, Inc.
With reference to the Registration Statement (Form N-1A) of Investors Research
Fund, Inc. filed under the Securities Act of 1933 as amended, we hereby consent
to the use of our report dated November 19, 1999, appearing in the prospectus
which is a part of such Registration Statement.
TIMPSON GARCIA
Oakland, California
March 20, 2000
As Adopted 3/29/94
A CODE OF ETHICS APPLICABLE TO PERSONS
AFFILIATED WITH INVESTORS RESEARCH FUND, INC.
RESPECTING TRANSACTIONS IN SECURITIES
OF INTEREST TO THE FUND
A. GENERAL STATEMENT OF CONDUCT RELATIVE TO CERTAIN SECURITIES TRANSACTIONS
It is the purpose of the persons associated with Investors Research
Fund, Inc. (the Fund) to carry on their activities with the primary
objective of benefiting the shareholders of the Fund. To that end, the
Fund's portfolio and property transactions must be carried out exclusively
with the objective of benefitting the shareholders and without potentially
interfering activities of persons affiliated with the Fund. This Code of
Ethics has been adopted by the Fund to clarify, confirm and codify critical
legal and ethical obligations of persons affiliated with the Fund with
respect to both the Fund's portfolio and property transactions and their
personal investment activities. It also identifies certain legal
requirements imposed upon persons affiliated with mutual funds by federal
law, including the obligation to periodically file certain reports with the
Fund.
B. UNLAWFUL ACTIONS.
1. It is a Violation Of law for any affiliate person of Investors
Research Fund, Inc. to knowingly sell any security or other property
to the Fund, to knowingly purchase any security or other property from
the Fund, or to borrow money or other property from the Fund, unless
the person has an order from the Securities and Exchange Commission
expressly authorizing the specific transaction. Other exceptions to
this rule are the purchase and sale of shares issued by the Fund
itself and the purchase and sale of merchandise by the Fund from or to
a company in the ordinary course of business
2. It is a violation of law for any affiliate person of Investors
Research Fund, Inc. to engage in any of the following acts, practices
or course of business in connection with the direct or indirect
purchase by the person of a security which is then held by the Fund or
in Connection with the direct or indirect sale by the person of any
security which is to be acquired by the Fund:
(a) To employ any device, scheme, or artifice to defraud Investors
Research Fund;
(b) To make to Investors Research Fund any untrue statement of a
material fact or to omit to state to the Fund a material fact
necessary in order to make the statement made, in light of the
circumstances under which they are made, not misleading;
(c) To engage in any act, practice, or course of business which
operates or would operate as a fraud or deceit upon Investors
Research Fund; and
(d) To engage in any manipulative practice with respect to the Fund.
C. UNETHICAL PRACTICES.
1. The Board of Directors of the Fund recognizes that it is good business
practice not only to act in accordance with laws applicable to Fund
personnel, but also to avoid any appearance of impropriety in
conducting the affairs of the Fund. Therefore, the Board declares that
it is an unethical practice for any affiliate person of the Fund to
knowingly trade in any security currently held by the Fund or any
security to be acquired by the Fund (as defined in this Code of
Ethics) within the 15-day period before the security is sold by the
Fund or the 15-day period before the security is acquired by the Fund
or a decision is made by the Fund not to acquire such security.
<PAGE>
2. The Board of Directors also recognizes that it is important that
persons affiliated with the Fund maintain the confidential nature of
portfolio sales and acquisitions which are being contemplated by the
Fund. Therefore, the Board declares that it is an unethical Practice
for affiliate persons of the Fund to disclose to non-access persons
possible specific portfolio transactions which are known to be under
active consideration by the Fund during the period in which they are
under individual consideration.
3. The Board of Directors also declares that it is an unethical practice
for affiliate persons of the Fund to cause or to knowingly allow
trading in securities as described in paragraph C(l) above by any
account in which such affiliate person has, or by reason of such
transaction acquires, any direct or indirect beneficial ownership in
the security.
4. The Board Of Directors is of the view that the officers and directors
of the Fund have a duty to the Fund shareholders to make reasonable
efforts to prevent violations of the legal obligations set forth in
Part B of this Code of Ethics by all persons affiliated with the Fund.
Therefore, the Board of Directors of the Fund declares that it is an
unethical practice for it to employ an investment adviser which has
not adopted the Code of Ethics required of an adviser by 17 CFR
Section 270.17j-l(b)(1) or an adviser which, having adopted such code,
does not make reasonable efforts to enforce its Code of Ethics.
D. REPORTS REQUIRED TO BE MADE TO INVESTORS RESEARCH FUND, INC..
1. SECURITIES TRANSACTIONS REPORTS.
(a) Every access person of the Fund (as defined in this Code of
Ethics) must report to the Fund (through the Securities Transaction
Report) the information described below with respect to any
transaction in any security affected during a calendar quarter in
which such access person has, or by reason of such transaction
acquired any direct or indirect beneficial interest in the security.
(b) Every Securities Transaction Report by an access person required
as above must be made not later than ten (10) calendar days after the
end of the calendar quarter in which the transaction to which the
report relates was effected-
(c) Every Securities Transaction Report shall contain the following
information:
(i) The date of the transaction, the title of the security and
the number of shares, and the principal amount of each security
involved;
(ii) The nature of the transaction (that is, purchase or sale 'or
any other type of acquisition or disposition);
(iii) The price at which the transaction was affected; and
(iv). The name of the broker, dealer, bank, or other entity with
or through whom the transaction was effected,
(d) If he or she wishes to do so, the person making a Securities
Transaction Report may insert a statement in such report to the affect
that the report shall not be construed as an admission by the person
making the report that be or she has any direct or indirect beneficial
ownership in the security to which the report relates.
3. 1/2 OF 1% OWNERSHIP POSITION REPORT. Every access person shall report
immediately to the Fund's Compliance Officer the name of any publicly
owned company (or any company anticipating a public offering of an
equity security) and the total number of such company's shares
beneficially owned by him if such ownership is more than 1/2 of 1% of
the total outstanding shares of such company.
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4. EXCEPTIONS TO THE GENERAL REPORTING REQUIREMENT.
(a) No Person is required to make a securities Transaction Report:
(i) With respect to transactions effected for any account over
which he or she does not have any direct or indirect
influence or control;
(ii) If he or she has a legal relationship to the Fund solely as
a director of the fund and would otherwise be required to
make such a report solely by reason of being a director of
the Fund, except where such director knew or, in the
ordinary course of fulfilling his official duties as a
director of the Fund, should have known that, during the
15-day period immediately preceding or after the date of the
transaction in a security by the director, such security was
held or was purchased or sold by the Fund or such purchase
or sale by the Fund is being or was considered by either the
Fund or its investment adviser.
E. DEFINITION. Note: Some of the statutory or regulation definitions set out
below have been modified slightly in the interest of easier understanding.
1. FUND. The term "Fund" has reference to Investors Research Fund, Inc.
2. ACCESS PERSONS. The term "access person" means any director (including
an independent director), officer, or advisory person of the Fund.
3. ADVISORY PERSON. The term "advisory person" means:
(a) Any employee of the Fund or of any company in a control relationship to the
Fund, e.g., Lakeview Securities Corporation, who, in connection with his regular
functions or duties, makes, participates in, or obtains information regarding,
the purchase or sale of a SECURITY (as defined below) by the Fund, or whose
functions relate to the making of any recommendation with respect to such
purchases or sales; and
(b) any natural person in a control relationship to the Fund who obtains
information concerning recommendations made to such Fund with regard to the
purchase or sale of a security.
4. Affiliated Person. The term, as applied with respect to Investors Research
Fund, Inc., means:
(a) Any officer, director, or employee of the Fund;
(b) Any investment adviser of the Fund or any member of an advisory board of the
Fund.
(c) Any person directly or indirectly controlling, controlled by, or under
common control with, the Fund,
(d) Any person directly or indirectly owning, controlling, or holding with power
to vote, 5 per centum or more of the outstanding voting securities of the Fund;
and
(e) Any company 5 per centum or more of whose outstanding voting securities are
directly or indirectly owned, controlled, or hold with power to vote, by the
Fund;
5. Beneficial Interest. The term "beneficial interests shall be interpreted in
the same manner as it would be in determining whether a person is subject to the
provisions of Section 16 of the Securities Exchange Act of 1934 and the rules
and regulations thereunder, except that the determination of direct or indirect
beneficial interest will apply to all securities which an access person has or
acquires.
Generally, a person is regarded as having a beneficial interest in those
securities held in his or her name, the name of his or her spouse, the names of
his or her minor children who reside with him or her, and any other relatives
(parents, adult children, brothers, sisters, etc.) whose investments he or she
directs or controls, whether the person lives with him/her or not. A person may
also be regarded as having a beneficial interest in securities held in the name
of another person (individual, partner, corporation, trust, custodian, or other
<PAGE>
entity) if, by reason of any contract, understanding or relationship, he or she
obtains or may obtain therefrom benefits substantially equivalent to those of
ownership. A person does not derive a beneficial interest by virtue of serving
as a trustee or executor or administrator unless he or she or a member of his or
her immediate family, has a vested interest in the income or corpus of the trust
or estate.
6. CONTROL. The term "control" if shall have the same meaning as set forth in
Section 2 (a) (9) of the 1940 Act. That section provides as follows:
"Control" means the power to exercise a controlling influence over the
management or policies of a company, unless such power is solely the result of
an official position with such company.
Any person who owns beneficially, either directly or through one or more
controlled companies, more than 25 per centum of the voting securities of a
company shall be presumed to control such company. Any person who does not :so
own more than 25 per centum of the voting securities of any company shall be
presumed not to control such company. A natural person shall be presumed not to
be a controlled person within the meaning of this title. Any such presumption
may be rebutted by evidence, but, except as hereinafter provided, shall continue
until a determination to the contrary made by the Securities and Exchange
Commission by order, either of its own motion or on application by an interested
person.
7. PURCHASE OR- SALE OF A SECURITY. The term "purchase or sale of a security"
includes, INTER ALIA, the writing of an option to purchase or sell a security or
financial futures contract.
8. SECURITY. The term "security" shall have the same meaning as set forth in
Section 2 (a) (36) of the 1940 Act, except that it shall not include securities
issued by the Government of the United States, bankers' acceptances, bank.
certificates of deposit, commercial paper, short term debt securities which are
"government securities" within the meaning of Section 2(a)(16) of the 1940 Act,
and shares of registered open-end investment companies. . "Security" is defined
in Section 2(a)(36) as follows-
"Security" means any note, stock, treasury stock, bond, debenture, evidence of
- -indebtedness, certificate of interest or participation in any profit-sharing
agreement, collateral-trust certificate, preorganization certificate or
subscription, transferable share, investment contract, voting-trust certificate,
fractional undivided interest in oil, gas, or other mineral rights, any put,
call, straddle, option, or privilege on any security (including a certificate of
deposit) or on any group or index of securities (including any interest therein
or based on the value thereof), or any put,' call, straddle, option, or
privilege entered into on a national securities exchange relating to foreign
currency, or, in general, any interest or instrument commonly known as a
"security," or any certificate of interest or participation in, temporary or
interim certificate for, guarantee of, or warrant or right to subscribe to or
purchase, any of the foregoing.
9. SECURITY HELD OR TO BE ACQUIRED. The phrase "security hold or to be acquired"
by the Fund means any security which, within the most recent fifteen (15)
calendar days:
(a) Is or has been hold by the Fund; or
(b) is being considered or has been considered by the Fund or its investment
adviser for purchase by the Fund. A security is "being considered for
purchase or sale" when a definite focus as to whether to purchase or sell
an identified security has been developed and, with respect to the person
making a recommendation to purchase or sell, when such person seriously
considers making such a recommendation.
F. DUTIES OF COMPLIANCE OFFICER AND SANCTIONS FOR CODE VIOLATIONS
1. It shall be the responsibility of the Fund's Compliance Officer to receive
and maintain all reports submitted by access persons and to use reasonable
diligence and institute procedures reasonably necessary to monitor the adequacy
of such reports and to otherwise prevent or detect violations of this Code. Upon
discovering a material violation of this Code involving any access person, it
shall be the responsibility of the Fund's Compliance Officer to report such
violation to the Board of Directors of the Fund. The Board of Directors of the
Fund may impose such sanctions against the access person determined to have
violated this Code as such Board deems appropriate, including INTER ALIA, a
letter of censure or suspension or termination of the employment, officership or
directorship of the violator with the Fund. No director may vote in connection
with a determination of whether he has committed a violation of this Code or in
connection with the imposition of any sanction against himself.
<PAGE>
2. It shall be the responsibility of the Fund's Compliance Officer to
periodically, but not I ass often than annually, Procure -- certification by a
responsible officer of the . Fund's investment adviser that
(a) Such adviser has adopted a code of ethics as required by 17 CFR Section
270.17j-l(b)(1);
(b) Such code of ethics remains in effect or has been replaced by another; and
(c) Such adviser enforces compliance by its employees with its adopted code of
ethics. The Compliance Officer shall procure and retain a copy of each such
code of ethics adopted by the Fund's investment adviser.
3. It shall be the responsibility of the Fund's Compliance Officer to identify
all access persons of the Fund who are under a duty to make reports to the Fund
pursuant to this Code of Ethics and to inform all such persons of such duty.
G. RECORD RETENTION,
The Fund shall-maintain records in the manner and to the extent set forth below,
which records may be maintained on microfilm under the conditions described in
Rule 3la-2(f)(1) under 1940 Act, and shall be available for examination by
representatives of the Securities and Exchange Commission:
1. RETENTION OF COPY OF THIS CODE. A copy of this Code and any amendments
thereof shall be preserved in an easily accessible place;
2. RECORD OF VIOLATIONS. A record of any violation of this Code and of any
action taken as a result of such violation shall be preserved in an easily
accessible place for a period of not less than five (5) years following the end
of the fiscal year in which the violation occurs;
3. COPY OF REPORTS. A Copy of each report made by an access person pursuant to
this Code and reports from the Fund's investment adviser must be preserved for a
period of not less than five (5) years from the end of the fiscal year in which
such report is made, the first two (2) years in an easily accessible place;
4. LIST OF ACCESS PERSONS. A list of all persons who are, or within the past
five (5) years of business have been, required to make reports pursuant to 17
CFR Section 270.J-1 under the 1940 Act and/or this Code shall be maintained in
an easily accessible place; and
5. SITES OF RECORDS TO BE KEPT. All such records and/or documents required to be
maintained pursuant to this Code and/or 17 CFR Section 270.17J-I(d) shall be
kept at the offices of the Fund in California.
H. CONFIDENTIALITY.
All reports and other records required to be filed or maintained under this Code
shall be treated as confidential.
I. INTERPRETATTON OF PROVISIONS.
The Board of Directors of the Fund may, from time to time, adopt such
interpretations of this Code as such Board deems appropriate.
J. AMENDMNTS TO CODE OF ETHICS.
Any amendment to this Code shall be effective thirty (30) calendar days after
written notice of such amendment shall have been received by the Secretary of
the Fund, unless the Board expressly determines that such amendment shall become
of effective on an earlier date.
<PAGE>
As Revised 6/06/95
D.2. QUARTERLY NEGATIVE TRANSACTIONS REPORT. In the Event that an access person
is not required to file a Securities Transaction Report with respect to a
particular fiscal quarter of the Fund, he or she shall , no later than ten (10)
calendar day following the close of that fiscal quarter, file with the Fund a
report certifying that he or she has not effected any securities transaction
which was required to be reported to the Fund under either this Code or under
S.E.C. Regulation 270.17j.
WESTCAP INVESTORS CODE OF ETHICS
VIII. COMPLIANCE
A. CONFLICTS OF INTEREST
All employees must avoid situations where their personal interests conflict
with, or even appear to conflict with, the interests of WESTCAP or its clients.
Because WESTCAP's business is heavily dependent upon trust and confidence, the
appearance of a conflict of interest may be just as damaging as a real conflict.
All employees should periodically review their actions and objectively attempt
to determine how they would appear to a disinterested observer.
Although it is sometimes difficult to determine when an actual or potential
conflict of interest does exist, the following paragraphs contain several
guidelines for proper conduct. In addition, a separate section deals with
conflicts in the area of personal securities transactions. However, the
effectiveness of WESTCAP's policies in the conflicts area depend on the judgment
and integrity of its employees rather than on any set of written rules.
Accordingly, employees must be sensitive to the principles involved and to the
purposes of the policy in addition to the specific guidelines and examples set
forth below.
If an employee engages in any activity or transaction which might cause a
conflict between personal and WESTCAP interests, information about that
potential conflict must be disclosed in advance to Geoff Edelstein.
If an employee is uncertain as to whether a real or apparent conflict exists in
any particular situation, the employee should consult Geoff Edelstein
immediately.
1. GIFTS, PAYMENTS, AND PREFERENTIAL TREATMENT
a. GIFTS RECEIVED BY EMPLOYEES
No employee should solicit, receive, or participate in any arrangement leading
to a "gift" (as defined below) to the employee, relatives, or friends or any
business in which any of them have a substantial interest, in consideration of
past, present or prospective business conducted with WESTCAP. To avoid even the
suggestion of any impropriety, each employee must decline any gifts that would
raise even the slightest doubt of improper influence. As a general rule, no
gifts of significant value from present or prospective clients, providers of
goods or services of others with which WESTCAP has dealings should be accepted.
Any offer of an improper gift should be immediately reported to Geoff Edelstein.
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The term "gift" includes, but is not limited to, substantial favors; money;
credit; special discounts on goods or services; free services; loans of goods or
money; excessive entertainment food or beverages; or anything else of value.
Credit arrangements are also covered below under paragraph C.8., "Personal
Financial Responsibility." Gifts to an employee's immediate family are included
in this policy. The receipt of cash gifts by employees is absolutely prohibited.
Some potentially appropriate exceptions to the general policy would be:
(a) Gifts of nominal value (not in excess of $50) given at Christmas, other
holidays, or special occasions which represent expressions of friendship;
(b) Reasonable entertainment at lunch, dinner, or business meetings with
present or prospective clients and providers of goods and services where the
cost would be properly chargeable as a business expense;
(c) Unsolicited advertising or promotional material (e.g., pens, calendars,
etc.) of a value not exceeding $50;
(d) Awards given by charitable, educational, civic, or religious
organizations for meritorious contributions or service;
(e) Gifts or bequests based upon family relationships.
If the circumstances surrounding a gift are such that rejection or return of the
gift would cause embarrassment or potentially damage friendly relations between
a third party and WESTCAP, the employee should report the gift and its estimated
dollar value in writing to Geoff Edelstein. A written report on non-returnable
gifts, including their estimated value and disposition, should be forwarded to
Geoff Edelstein.
WESTCAP senior management may from time to time prescribe other reporting
procedures.
Any questions concerning the propriety of accepting a particular gift should be
directed to Geoffrey Edelstein.
b. GIFTS AND ENTERTAINMENT PROVIDED BY EMPLOYEES
Gifts or favors of nominal value (not to exceed $50 per person) are acceptable
to the extent that they are appropriate and suitable under the circumstances,
meet the standards of ethical business conduct, and involve no element of
concealment. Gifts given to clients, potential clients or others with whom
WESTCAP has or may have dealings should be approved in advance by Geoffrey
Edelstein.
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Entertainment that is reasonable and appropriate for the circumstances is an
accepted practice to the extent that it is both necessary and incidental to the
performance of WESTCAP's business. Lavish entertainment is neither deductible
for tax purposes nor in good taste.
c. POLITICAL CONTRIBUTIONS
It is the policy of WESTCAP to comply fully with federal and state elections
campaign laws. No employee shall make any direct or indirect contribution of
funds or other property of WESTCAP's in connection with the election of a
candidate. For these purposes, use of corporate facilities and equipment for
political activities is considered a contribution. Employees are, of course,
free to make personal contributions to parties or candidates of their choice.
2. OUTSIDE ACTIVITIES
a. OUTSIDE EMPLOYMENT
Each employee is expected to devote his or her full time and ability to
WESTCAP's interests during regular working hours and such additional time as may
be properly required. WESTCAP discourages employees from holding outside
employment, including consulting. If for compelling reasons, outside employment
must be sought, prior approval must be obtained from Glenn Weirick.
An employee may not engage in outside employment that (a) interferes, competes,
or conflicts with the interests of WESTCAP, (b) encroaches on normal working
time or otherwise impairs performance, (c) implies WESTCAP's sponsorship or
support of an outside organization, or (d) reflects directly or indirectly
adversely on WESTCAP. Employees must abstain from negotiating, approving or
voting on any transaction between WESTCAP and any outside organization with
which they are affiliated, whether as a representative of WESTCAP or the outside
organization.
Any other outside activity or venture that is not covered by the foregoing, but
that may raise questions, should be cleared with Glenn Weirick.
Employees should also not serve as directors, trustees or in similar capacities
with respect to any institution, without the prior approval of Glenn Weirick.
Approval may be withdrawn if senior management concludes that withdrawal is in
WESTCAP's interest.
b. COMPENSATION, CONSULTING FEES, AND HONORARIUMS
Each employee who has received proper approval to serve in an outside
organization or to engage in other outside employment, is permitted to retain
all compensation paid for such service unless otherwise provided by the terms of
the approval. The amount of the compensation must be reported to Glenn Weirick.
Honorariums received by an employee for publications, public speaking
appearances, instructing courses at educational institutions, etc., may be
retained by the employee. Any questions concerning the permissible retention of
compensation should be directed to Glenn Weirick.
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c. PARTICIPATION IN PUBLIC AFFAIRS
WESTCAP encourages its employees to support community activities and political
processes. Normally, voluntary efforts take place outside of regular business
hours. If voluntary efforts require corporate time, prior approval should be
obtained from Glenn Weirick. Employees who wish to accept an appointive office,
or run for elective office, must first obtain approval from Glenn Weirick.
Employees who obtain approval to seek an elective office must campaign for such
office on their own time and may not use WESTCAP property or services for such
purposes without proper reimbursement to WESTCAP.
In all cases, employees participating in political activities do so as
individuals and not representatives of WESTCAP. To prevent any interpretation of
sponsorship or endorsement by WESTCAP, neither the WESTCAP name nor its address
should be used in material mailed or funds collected, nor except as necessary
biographical information, should WESTCAP be identified in any advertisements or
literature.
d. SERVING AS TREASURER OF CLUBS, CHURCHES, LODGES, ETC.
Employees may act as treasurers of clubs, churches, lodges, or similar
organizations. However, funds belonging to such organizations must be kept in
separate accounts and not commingled in any way with the employee's personal
funds or WESTCAP's funds.
e. FIDUCIARY APPOINTMENTS
An employee may not accept appointments as executor, trustee, guardian,
conservator or other fiduciary, or any appointment as consultant in connection
with fiduciary matter, whether or not it is related to the business of WESTCAP,
without the prior approval of Glenn Weirick. This policy does not apply to
appointments involving estates of members of the family of an employee.
f. PARTICIPATION IN THE SECURITIES BUSINESS
Corporate policy prohibits outside employment as a securities broker, agent, or
representative.
g. PERSONAL SECURITIES TRANSACTIONS AND INSIDE INFORMATION
Personal securities transactions and the use of inside information are covered
below in a separate section.
h. PERSONAL FINANCIAL RESPONSIBILITY
It is important that employees properly manage their personal finances,
particularly in matters of credit. Imprudent personal financial management may
affect job performance and lead to more serious consequences for employees in
positions of trust. In particular, employees are not permitted to borrow from
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clients, or from providers of goods or services with whom WESTCAP deals, except
those who engage in lending in the usual course of their business and then only
on terms offered to others in similar circumstances, without special treatment
as to interest rates, repayment terms, security, and other provisions. This
prohibition does not preclude borrowing from individuals related to an employee
by blood or marriage.
i. TAKING ADVANTAGE OF A BUSINESS OPPORTUNITY THAT RIGHTFULLY BELONGS TO
WESTCAP.
Employees must not take for their own advantage an opportunity that rightfully
belongs to WESTCAP. Whenever WESTCAP has been actively soliciting a business
opportunity, or the opportunity has been offered to it, or WESTCAP's funds,
facilities, or personnel have been used in pursuing the opportunity, that
opportunity rightfully belongs to WESTCAP and not to employees who may be in a
position to divert the opportunity for their own benefit.
Examples of improperly taking advantage of a corporate opportunity include:
(a) Selling information to which an employee has access because of his/her
position;
(b) Acquiring any real or personal property interest or right when WESTCAP
is known to be interested in the property in question;
(c) Receiving a commission or fee on a transaction which would otherwise
accrue to WESTCAP; and
(d) Diverting business or personnel from WESTCAP.
j. CORPORATE PROPERTY OR SERVICES
Employees are not permitted to act as principal for either themselves or their
immediate families in the supply of goods, properties or services to WESTCAP.
Purchase or acceptance of corporate property or use of the services of other
employees for a personal purpose are also prohibited. This would include the use
of inside counsel for personal legal advice (absent approval from Geoff
Edelstein) or use of outside counsel for personal legal advice at WESTCAP's
expense.
k. EXPRESSION OF PERSONAL OPINIONS AS A CORPORATE EMPLOYEE
It is inappropriate for employees to use official corporate stationary for
either personal correspondence or other non-job related purposes.
l. GIVING ADVICE TO CLIENTS
(a) Legal Advice- WESTCAP cannot practice law or provide legal advice.
Employees should avoid statements that might be interpreted as legal advice.
Questions in this area should be referred to Geoff Edelstein.
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(b) Tax or Investment Advice- Employees should avoid giving clients advice
on tax matters, or in the preparation of tax returns, or in investment
decisions, except as may be appropriate in the performance of an official
fiduciary or advisory responsibility, or as otherwise required in the ordinary
course of the employee's duties.
B. REPORTING MISCONDUCT
One area where personal instincts may conflict with ethical obligations concerns
reporting the misconduct or dishonesty of others. Most people are uncomfortable
with situations which may require them to report the misconduct of a fellow
employee. However, dishonesty or serious misconduct on the job may adversely
affect WESTCAP as a whole and all who work for WESTCAP. In some cases, failure
to report misconduct or dishonest behavior can make you an accessory to a crime
and thus liable to criminal prosecution.
As an employee you are expected to promptly report acts of dishonesty or serious
misconduct performed by others, either to Geoff Edelstein or Glenn Weirick. Even
if you are uncertain whether misconduct has occurred, you should seek guidance
from one of these individuals.
C. CONFIDENTIALITY
All information relating to past, current and prospective clients is highly
confidential and is not to be discussed with anyone outside the organization
under any circumstance. Violation of this policy will be considered grounds for
termination of employment.
One of the most sensitive and difficult areas in WESTCAP's daily business
activities involves information regarding investment plans or programs and
possible or actual securities transactions by WESTCAP. Consequently, all
employees will be required to sign and adhere to a Confidentiality Agreement in
substantially the form attached hereto as Exhibit A.
D. MATERIAL NON-PUBLIC INFORMATION AND PERSONAL SECURITIES TRANSACTIONS
1. BACKGROUND
a. GENERAL
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WESTCAP is committed to the highest standards of ethics, as well as to full
compliance with applicable law. This section implements that commitment with
respect to "inside information" and personal securities transactions.
b. INSIDE INFORMATION
The professionals and staff of WESTCAP occasionally come into possession of
materials, non- public information (sometimes called "inside information").
Various state and federal laws, regulations and court decisions, as well as
general ethical and moral standards, impose certain duties with respect to the
use of such information. The violation of those duties could subject both
WESTCAP and the individuals involved to serious civil and criminal penalties and
the resulting damage to reputation.
Moreover, within an organization or affiliated group of organizations,
courts may attribute one employee's knowledge of inside information to any other
employee or group that later trades in the affected security, even if there had
been no communication of actual knowledge. Thus, by buying or selling a
particular security in the normal course of business, WESTCAP personnel other
than those with actual knowledge of inside information could inadvertently
subject WESTCAP to liability.
c. PERSONAL SECURITIES TRANSACTIONS
Laws and ethical standards also impose on WESTCAP and its employees duties
to avoid conflicts of interest between personal investment transactions and
transactions in the portfolios under management. In view of the sensitivity of
this issue, it is important to avoid even the appearance of impropriety. The
following reduce the possibilities for such conflicts and appearances, while at
the same time preserving reasonable flexibility and privacy in personal
securities transactions.
2. DEFINITIONS
The following terms are defined for purposes of Section VIII.D.:
a. "Approving Officers" means the officers designated from time to time by
Glenn Weirick to approve personal securities transactions.
b. "Beneficial Interest" is in security includes any direct or indirect
interest that gives the holder the power to vote, dispose of or direct the
voting or disposition of the security. A person may have a Beneficial Interest
in (i) securities the person has the right to acquire (through exercise of an
option, conversion right or warrant), (ii) securities held by a trust of which
the person is a fiduciary or a beneficiary, (iii) securities directly or
indirectly held by, or for the account of, a spouse, minor children and
relatives who share the same residence, and (iv) securities held by, or for the
account of, another person if a contractual or other arrangement gives
ownership-like benefits to the person subject to this Statement of Policy.
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c. "Compliance Officer" means Geoffrey Edelstein, who has been appointed to
oversee the implementation of the Inside Information aspects of this Statement
of Policy.
d. "Inside Information" means information that has not been disclosed to
the public and that would be important to a reasonable investor in deciding
whether to buy, sell, or hold a security. Attached as Exhibit B, is a list of
various types of information that are, or could be, material, depending on the
circumstances.
e. "Securities" means any type of investment normally handled by
stockbrokers, including traded options, but does not include commodity contracts
or direct obligations of the U.S. government.
4. PROCEDURE
a. INSIDE INFORMATION
i.) EVALUATION OF INFORMATION
When someone at WESTCAP receives oral or written information that he or she
believes may constitute Inside Information, he or she will immediately refer the
matter to the Compliance Officer and will not disclose the information to anyone
else within or outside WESTCAP. The Compliance Officer will, with the assistance
of counsel as required, determine whether the information is in fact material,
non-public and of a nature requiring restrictions on use and dissemination. If
it is not, no restrictions will be imposed.
ii.) HANDLING OF INSIDE INFORMATION
If the information is judged by the Compliance Officer to require restrictions
on its use and dissemination, he shall immediately place a restriction the
affected securities.
iii.) PERSONAL TRANSACTIONS
A person in possession of Inside Information may not purchase or sell, directly
or indirectly, the affected Securities for his or her own account, or for any
other account in which he or she has a direct or indirect Beneficial Interest
until the information ceases to be material and non-public.
iv.) LIFTING RESTRICTIONS
Once the Inside Information becomes public, or is judged to be no longer
material, the Compliance Officer may lift the trading and information
restrictions.
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v.) QUESTIONS
Questions concerning the Inside Information aspects of this Statement of Policy
should be referred to the Compliance Officer.
b. PERSONAL SECURITIES TRANSACTIONS
i.) RESTRICTIONS
No director, officer, employee or principal shareholder (one who owns at least
10% of WESTCAP) may purchase or sell, directly or indirectly, for his or her own
account or any account in which he or she may have a Beneficial Interest:
(a) Any security that to his or her actual knowledge WESTCAP is buying
or selling for its customers, until one day after such buying or selling is
completed or canceled, or
(b) Any security that to his or her actual knowledge is under active
consideration for purchase or sale by WESTCAP for its customers, whether through
written or oral investment recommendations.
In addition, no officer or employee may purchase or sell directly or indirectly,
for his or her own account or any account in which he or she may have a
Beneficial Interest, any security that is subject to a firm- wide restriction.
Compliance Officer may authorize exceptions to this policy pursuant to paragraph
4 below.
ii.) PUBLIC OFFERINGS
In order to avoid being accused of using WESTCAP's position as a major
securities institution in order to enhance personal portfolios, officers and
employees of WESTCAP and principal shareholders of WESTCAP may not purchase any
equity or equity-related Securities offered in a registered public offering
until the offering is completed.
iii.) CLEARANCE
All personal transactions of officers and employees of WESTCAP must be approved
in advance by an Approving Officer which shall be effective on the date granted.
If the transaction is not executed on that date, approval must again be granted
on the date the officer or employee wishes to transact. Of course, no officer
may approve his own personal transaction but must obtain approval from another
Approving Officer. The Compliance Officer will retain a written record of the
approval.
iv.) APPROVALS
The Approving Officer will normally approve transactions where (a) WESTCAP is
neither buying or selling nor considering for purchase or sale the securities
involved in the proposed personal transaction, (b) the securities involved are
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not subject to a firm wide restriction, and (c) the personal securities
transition does not involve short term trading (purchasing and selling the same
securities within 30 days) of securities that are held by clients of Westcap
over which Westcap has discretion. Under appropriate circumstances, Compliance
Officer may authorize a personal transaction involving a security subject to
actual or prospective purchase or sale for WESTCAP customers, where the personal
transaction would be very unlikely to affect a highly institutional market,
where the WESTCAP officer or employee is not in possession of Inside
Information, or for other reasons sufficient to satisfy the Approving Officer
that the transaction does not represent a conflict of interest, involve the
misuse of Inside Information or convey the appearance of impropriety.
v.) MINIMUM HOLDING PERIOD
In order to avoid the appearance of a conflict of interest, employees or
officers who purchase securities which are held in Westcap client accounts must
hold such securities for a minimum of 30 days prior to sale.
vi.) EXEMPTIONS
Securities and transactions which are exempted from paragraphs (i) (ii) (iii)
and (iv):
(a) Personal purchases or sales where the WESTCAP officer, employee
or principal shareholder has no direct or indirect influence or
control, or WESTCAP transactions that are non-volitional on the
part of WESTCAP's accounts.
(b) Purchases that are part of an automatic dividend reinvestment
plan.
(c) Purchases effected upon the exercise of rights issued by the
issuer pro rata to all holders of a class of its securities, to
the extent such rights were acquired from such issuer, and sales
of such rights so acquired.
(d) U.S. Government Securities.
(e) Open-end mutual fund shares (including money market funds).
(f) Any equity securities transactions of 500 shares or less, if the
issuer has a market capitalization greater than $1 Billion.
vii.) QUARTERLY REPORTS
All personal transactions (other than those exempted by paragraph (vi) (a)-(e)
above) of officers and employees must be reported quarterly to Compliance
Officer.
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viii.) ANNUAL REPORTS
All holdings of securities (other than those set forth in paragraphs (vi)
(a)-(e) above) of officers and employees must be reported to the Compliance
Officer within 10 days commencement of employment with Westcap, and annually
thereafter.
ix.) REVIEW OF REPORTS
The quarterly and annual reports set forth above will be reviewed thoroughly by
the Compliance Officer in order to detect conflict of interest and abusive
practices. If material violations of this Personal Securities Transactions
policy are detected, immediate action will be taken and could result in
dismissal and such will be reported to the Board of Directors of any mutual fund
which Westcap advises.
The effectiveness of this policy depends primarily upon the judgment and
integrity of the members of WESTCAP, rather than upon any set of written rules
and policies. Further, no one can hope to anticipate every circumstance which
could give rise to a possible conflict of interest. WESTCAP believes that the
above guidelines and rules will provide a reference which will be useful to
officers and employees in formulating and carrying out their own personal
investment policies. Any apparent conflict of interest not covered herein should
be reviewed with Compliance Officer.
E. CONTACTS WITH MEDIA AND OTHER OUTSIDE PARTIES
Employees are occasionally contacted by representatives of newspapers, journals,
television or radio to comment on current events generally or on matters
affecting WESTCAP more directly. In either case, it is possible that a well
meaning employee who does not have all of the relevant facts might inadvertently
say something that would be damaging to the employee, WESTCAP or WESTCAP's
clients.
Those inquiries which pertain to WESTCAP in general, (e.g., corporate policy and
procedures, overall investment policy and procedures, personnel, regulatory or
legal matters) should be referred to Glenn Weirick, or in his absence, Geoff
Edelstein.
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F. CODE OF ETHICS AND STANDARDS OF PROFESSIONAL CONDUCT
WESTCAP has adopted the Code of Ethics and Standards of Professional Conduct of
the Association for Investment Management and Research, a copy of which is
attached hereto as Exhibit D ("The Code and Standards"). WESTCAP is aware of
potential conflicts of interest that may arise in any investment counseling or
money management organization. Although no guidelines can adequately cover every
situation that might arise, The Code and Standards should minimize or eliminate
potential conflicts of interest and, in turn, will contribute to our goal of
placing the interests of WESTCAP's clients first. All employees are expected to
be familiar with the requirements of the Code and Standards and to adhere
strictly to them in their professional practice.
CODE OF ETHICS
This Code of Ethics (the "Code") has been adopted by Investment Company
Administration L.L.C ("ICALLC") and First Fund Distributors, Inc. ("FFD") in
accordance with Rule 17j-1 under the Investment Company Act of 1940 (the "1940
Act").
I. LEGAL REQUIREMENT
Rule 17j-1 makes it unlawful for certain persons, in connection with the
purchase or sale by such person of a security held or to be acquired by a Fund:
(1) To employ any device, scheme, or artifice to defraud the Fund;
(2) To make to the Fund any untrue statement of a material fact or omit to
state to the Fund a material fact necessary in order to make the statements
made, in light of the circumstances under which they are made, not misleading;
(3) To engage in any act, practice, or course of business which operates or
would operate as a fraud or deceit upon the Fund; or
(4) To engage in any manipulative practice with respect to the Fund.
II. DEFINITIONS
(a) "Fund" means any investment company registered under the 1940 Act, or
any series or class of shares of such an investment company, which has a
contractual relationship with ICALLC or FFD.
(b) "Access person" means any employee of ICALLC or FFD who, in connection
with his regular functions or duties, obtains information that a security is
held or to be acquired by a Fund.
(c) A security is "held or to be acquired" if within the most recent 15
days it (i) is or has been held by a Fund, or (ii) is being or has been
considered by the Fund or its investment adviser for purchase by a Fund. A
purchase or sale includes the writing of an option to purchase or sell.
(d) A security is "being considered for purchase or sale" when a
recommendation to purchase or sell a security has been made and communicated.
(e) "Beneficial ownership" shall be interpreted in the same manner as it
would be in determining whether a person is subject to the provisions of Section
16 of the Securities Exchange Act of 1934 and the rules and regulations
thereunder, except that the determination of direct or indirect beneficial
ownership shall apply to all securities which an access person has or acquires.
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(f) "Control" shall have the same meaning as that set forth in Section
2(a)(9) of the 1940 Act.
(g) "Security" shall have the meaning set forth in Section 2(a)(36) of the
1940 Act, except that it shall not include securities issued by the Government
of the United States, bankers' acceptances, bank certificates of deposit,
commercial paper and shares of registered open-end investment companies.
III. EXEMPTED TRANSACTIONS
The prohibitions of Section IV of this Code shall not apply to:
(a) Purchases or sales effected in any account over which the access person
has no direct or indirect influence or control.
(b) Purchases or sales of securities which are not eligible for purchase or
sale by a Fund.
(c) Purchases or sales which are non-volitional on the part of either the
access person or the Fund.
(d) Purchases which are part of an automatic dividend reinvestment plan.
(e) Purchases effected upon the exercise of rights issued by an issuer pro
rata to all holders of a class of its securities, to the extent such rights were
acquired from such issuer, and sales of such rights so acquired.
IV. PROHIBITED PURCHASES AND SALES
(a) No access person shall knowingly purchase or sell, directly or
indirectly, any security held or to be acquired by a Fund until the first
business day after such Fund completes all of its intended trades in such
security.
(b) In order to avoid making a prohibited purchase or sale of a security,
no access person shall purchase or sell any security, except as indicated below,
without obtaining advance written clearance of such transaction from a person
designated by ICALLC and FFD to grant such advance clearance.
(c) Advance clearance is not required for the purchase or sale of 500
shares or less (during a rolling 30 day period) of an equity security which (i)
is listed on the New York Stock Exchange or the NASDAQ National Market System;
or (ii) has a market capitalization of $1 billion or more at the time of
purchase or sale.
(d) No access person may purchase a security in an initial public offering
without the prior written approval of the President or the Compliance Officer of
FFD.
(e) No access person shall engage in any act, practice or course of conduct
that would violate the provisions of Rule 17j-1 as set forth in Section I above.
V. REPORTING
Every access person shall report to the Compliance Officer of ICALLC or FFD
the information described in this below with respect to transactions in any
security in which such access person has, or by reason of such transaction
acquires, any direct or indirect beneficial ownership in the security; provided,
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however, that an access person shall not be required to make a report with
respect to transactions effected for any account over which such person does not
have any direct or indirect influence.
Every report shall be made not later than 10 days after the end of the
calendar quarter in which the transaction to which the report relates was
effected, and shall contain the following information:
(i) The date of the transaction, the title and the number of shares, and
the principal amount of each security involved;
(ii) The nature of the transaction (i.e., purchase, sale, or any other type
of acquisition or disposition);
(iii) The price at which the transaction was effected; and
(iv) The name of the broker, dealer, or bank with or through whom the
transaction was effected.
VI. SANCTIONS
Upon discovering a violation of this Code, ICAC or FFD may impose such
sanctions as it deems appropriate, including, inter alia, a letter of censure,
suspension, or termination of the employment of the violator, and/or a
disgorging of any profits made by the violator.
