As filed with the Securities and Exchange Commission on January 19, 1999
File Nos. 2-14675 and 811-861
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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. 70 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 70 [X]
(Check appropriate box or boxes)
INVESTORS RESEARCH FUND, INC.
(Exact Name of Registrant as Specified in Charter)
3757 State Street, Suite 204
Santa Barbara, CA 93015
(Address of Principal Executive Offices) (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)
[ ] Immediately upon filing pursuant to paragraph (b)
[ ] On __________ pursuant to paragraph (b)
[X] 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 ___________, 2000
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TABLE OF CONTENTS
An Overview of the Fund ..................................................
Performance ..............................................................
Fees and Expenses ........................................................
Investment Objective and Principal Investment Strategies .................
Principal Risks of Investing in the Fund .................................
Investment Advisor .......................................................
Shareholder Information ..................................................
Pricing of Fund Shares ...................................................
Dividends and Distributions ..............................................
Tax Consequences .........................................................
Rule 12b-1 Fees ..........................................................
Financial Highlights .....................................................
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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 uses 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
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
The following performance information indicates some of the risks of
investing in the Fund. The bar chart shows how the Fund's total return has
varied from year to year. The bar chart does not reflect sales charges that you
may pay to purchase Fund shares. If they were included, the returns would be
less than those shown. The table shows the Fund's average return over time
compared with a broad-based market index. Unlike the bar chart, the table
assumes that the maximum sales charge was paid. This past performance will not
necessarily continue in the future.
CALENDAR YEAR TOTAL RETURNS
[The following is the bar chart]
1990:
1991:
1992:
1993:
1994:
1995:
1996:
1997:
1998:
1999:
[End of bar chart]
During the period shown in the bar chart, the Fund's highest quarterly return
was___% for the quarter ended _______ and the lowest quarterly return was _____%
for the quarter ended
- -------------.
AVERAGE ANNUAL TOTAL RETURNS
AS OF DECEMBER 31, 1999
1 Year* 5 Years 10 Years
------- ------- --------
Investors Research Fund _____% _____% _____%
S&P 500 Index** _____% _____% _____%
- ----------
* On April 1, 1999, Westcap Investors, LLC became investment advisor to the
Fund.
** The S&P 500 Index is an unmanaged index generally representative of the
market for stocks of large sized U.S. companies. The S&P 500 Index does not
take into account fees and expenses that an investor would incur in holding
the securities in the Index.
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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 ....................................................... %
----
Total Annual Fund Operating Expenses ................................. %
====
- ----------
* 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 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 .................. $
Three Years ............... $
Five Years ................ $
Ten Years ................. $
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.
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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 matrixes are 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. Individual equity investment
selections are then made starting with the "outperform" classification.
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 through the purchase of
American Depository Receipts (ADRs).
While portfolio securities are generally acquired for the long term, they
may sold when the Advisor believes that: [to be supplied by amendment]
Under normal market conditions, the Advisor anticipates that the Fund will
have a low rate of portfolio turnover. This means that the Fund has the
potential to be a tax efficient investment. 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.
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 cash equivalents 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.
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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, an
industry, a 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.
YEAR 2000 RISK. As the year 2000 began, the Fund did not experience any
notable problems arising from the inability of computer systems used by the
Advisor and other service providers to properly process and calculate
information related to dates beginning January 1, 2000. This is commonly known
as the "Year 2000 Issue." There can be no assurance that some computer systems
will not malfunction in the future as a result of the Year 2000 Issue. Although
the Advisor does not anticipate that its services or the services of the Fund's
other service providers will be adversely affected as a result of the Year 2000
Issue, it will continue to monitor the situation. If malfunctions related to the
Year 2000 Issue do arise, the Fund and its investments could be adversely
affected, as well as companies in which the Fund invests.
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
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 its
services, the Fund paid Fox Asset Management, Inc. a quarterly management fee
based upon its average daily net assets at the annual rate of 0.50%.
PORTFOLIO MANAGER
Mr. 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. Mr. Weirick has over 40 years of investment management experience.
ADVISOR'S PRIOR INVESTMENT RETURNS
In the past, Westcap has served primarily institutional and high net worth
private clients. It currently has approximately $1.2 billion under management.
On April 1, 1999, Westcap agreed to serve as investment advisor to the Fund.
Prior to that time, Westcap itself had not advised an equity mutual fund,
although several of its members have previously had mutual fund management
experience.
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Westcap has had an excellent performance record since it began operations
on April 1, 1992. A table of gross and net returns of Westcap's composite equity
accounts (Westcap net returns presented below are net of management fees and all
transaction costs in accordance with S.E.C. guidelines) in comparison with the
S&P 500 from April 1, 1992, when Westcap commenced operations, through 12/31/99
follows. In making comparisons with the S&P 500 Index, it must be recognized
that the S&P 500 Index has no brokerage charges, no expenses, and no operational
costs subtracted from its performance results. Also, one cannot make a single
direct investment into the S&P 500 Index.
Annualized Returns
Westcap Equity Annualized Returns
Composite Annualized Returns Westcap Equity
(Gross) S&P 500 Composite
------- ------- ---------
1 year XXX% XXX% XXX%
3 years XXX% XXX% XXX%
5 years XXX% XXX% XXX%
Since 4/92 XXX% XXX% XXX%
Total Return Total Return
Westcap Equity Westcap Equity
Composite Total Return Composite
(Gross) S&P 500 (Net of Fees)
------- ------- -------------
1 year XXX% XXX% XXX%
3 years XXX% XXX% XXX%
5 years XXX% XXX% XXX%
Since 4/92 XXX% XXX% XXX%
Westcap's table above presents its composite performance results from April
1, 1992 through December 31, 1999, in accordance with the Performance
Presentation Standards of the Association for Investment Management and Research
("AIMR"). The accounts in the composite had the same general investment
objective as the Fund and were all similarly managed by Westcap for the period
reported. All results are calculated on a time weighted basis as prescribed by
the AIMR Performance Presentation Standards. Performance figures for the period
April 1, 1992 through December 31, 1992 present the equal weighted results
(computed quarterly). For the 2nd and 3rd quarters of 1992, the dollar weighted
results would be identical to the equal weighted results. For the 4th quarter of
1992, the dollar weighted return (gross) was 9.9% while the equal weighted
return (gross) was 10.3%. From January 1, 1993 through December 31, 1999, the
results are presented on a dollar weighted basis (computed quarterly). All
information set forth above concerning Westcap's performance has been provided
to the Fund by Westcap and has not been independently verified or audited.
Westcap has informed the Fund that the results include all accounts with
investment objectives, policies, strategies, and risks substantially similar to
those of the Fund except that (1) accounts less than $1 million in market value,
(2) accounts subject to material restrictions imposed by the client, and (3)
accounts whose results have been materially affected by significant cash
contributions or withdrawals have been excluded. The equity portion of balanced
accounts (including cash results) are included in Westcap's Equity results from
the 3rd Quarter 1992 to the present. One fully discretionary non-fee paying
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account is also included in Westcap's results beginning with the 2nd Quarter of
1992 through the 4th Quarter of 1993. Net results are after the deduction of
management fees, but gross results are not. Westcap has informed the Fund that
elimination of the accounts of less than $1 million has no significant effect on
the stated performance results because such accounts total less than 2% of the
relevant assets under management. Also, no provision has been made for federal
and state income taxes, if any.
In evaluating the foregoing statistics, it is to be recognized that the
past performance of Westcap's equity accounts does not indicate that the Fund's
future performance will necessarily be the same. Also, it is to be recognized
that private accounts are not subject to certain investment limitations,
diversification requirements, and other restrictions imposed by the Investment
Company Act of 1940 and the Internal Revenue Code. Had such requirements been
applicable, they might have adversely affected the performance results of the
private account composite. Additionally, the performance results set forth above
do not represent the historical performance of any particular client of Westcap
or of the Fund.
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.
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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, its Advisor or its
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
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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:
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 #_________________
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.
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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
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 Fund and the NYSE are
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
this line is busy, you may call (877) 473-8631. 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, if any, 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.
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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. It is not
expected that the Fund would 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.
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 $____. 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 nine
months 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 nine months 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 done by dividing the Fund's assets, minus its liabilities, by the number of
shares outstanding. The Fund's assets are the market value of securities held in
its portfolio, plus any cash and other assets. The Fund's liabilities are fees
and expenses owed by the Fund. 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 NYSE. 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).
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
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.
14
<PAGE>
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. The Board of Directors approves all expenditures pursuant to the Plan
prior to their payment. 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.
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 Thimpson Garcia, independent
auditors. Their report and the Fund's financial statements are included in the
Annual Report, which is available upon request.
15
<PAGE>
INVESTORS RESEARCH FUND, INC.
TRANSFER AGENT
ND Resources, Inc.
1 North Main
Minot, ND 58703
1-800-292-6775
DISTRIBUTOR
First Fund Distributors, Inc.
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
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 fee, by writing to the Public Reference Room of the Commission,
Washington, DC 20549-0102, or
* For a fee, by electronic request at the following e-mail address:
[email protected].
(The Fund's SEC Investment Company Act
file number is 811-00861)
16
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
___________________, 2000
INVESTORS RESEARCH FUND, INC.
3757 STATE STREET, SUITE 204
SANTA BARBARA, CA 93105
(800) 473-8731
This Statement of Additional Information ("SAI") is not a prospectus and it
should be read in conjunction with the Prospectus dated _____________, 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-5
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 prescribed 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, 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.
SHORT-TERM INVESTMENTS. The Fund may invest in U. S. Treasury bills or hold
cash in interest-bearing back accounts. any of the following securities and
instruments:
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:
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.
B-3
<PAGE>
2. Issue any senior securities other than notes to evidence bank borrowing.
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.
In addition, a non-fundamental policy of the Fund provides that it may not
borrow except as a temporary measure for extraordinary or emergency purposes. A
policy not deemed fundamental may be changed without shareholder vote.
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.
B-4
<PAGE>
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.
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
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.
B-5
<PAGE>
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
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
B-6
<PAGE>
the Fund. The Directors, in turn, 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.
Glenn C. Weirick,*+ ( ) President and Director
11111 Santa Monica Boulevard, Los Angeles, CA 90025. President of Westcap
Investors, LLC.
Hugh J. Haferkamp,* (54) Director
11800 Baccarat Lane, NE, Albuquerque, NM 87111-7600. Attorney-at-law in private
practice in the Santa Barbara area; formerly, legal counsel to the Fund for
approximately 19 years.
Michael A. Marshall,* (63) Director and Member of the Executive Committee
2175 Boundary Drive, Santa Barbara, CA 93108. Engaged in real estate and
property management, M-P Marshall & Co.; formerly, Senior Vice-President of
Prudential California Realty.
Richard Chernick, (53) Director
3055 Wilshire Boulevard, Los Angeles, CA 90010-1108. Retired Partner of the Los
Angeles Law Firm of Gibson, Dunn & Crutcher; currently active in arbitration and
mediation of disputes in the Los Angeles area.
Harry P. Gelles, (65) Director and Member of the Executive Committee
1114 State Street, Santa Barbara, CA 93101. Private investment banker; Director
of Goldman Sachs and Dean Witter Reynolds; formerly employed in investment
banking activities with Cruttenden & Company, Irvine, CA, and with Chelsea
Management Company, Los Angeles.
Leonard S. Jarrott, (54) Director and Member of the Executive Committee
3532 Chuparosa Drive, Santa Barbara, CA 93105. Real Estate Investment Advisor
and independent Real Estate Broker in Santa Barbara, CA.
William J. Nasif, (57) Director
1111 Garden Street, Santa Barbara, CA 93101. Certified Public Accountant and
Partner of Nasif, Hicks, Harris & Co., Certified Public Accountants of Santa
Barbara, CA.
B-7
<PAGE>
Mark Schniepp, (45) Director and member of the Executive Committee
944 Randolph Road, Santa Barbara, CA 93111. Director of the Economics Forecast
Project at the University of California, Santa Barbara, CA.
Dan B. Secord, (62) Director
2329 Oak Park Lane, Santa Barbara, CA 93105. In private practice of obstetrics
and gynecology since 1969. Staff, Santa Barbara Cottage Hospital in Santa
Barbara, CA and currently on the Credentials Committee of the medical staff.
Member, Santa Barbara City Council.
Geoff I. Edelstein,* ( ) Senior Vice President, Secretary and Treasurer
11111 Santa Monica Boulevard, Los Angeles, CA 90025. Portfolio Manager at
Westcap Investors, LLC.
Gregory S. Weirick,*+ ( ) Senior Vice-President
11111 Santa Monica Boulevard, Los Angeles, CA 90025. Portfolio Manager at
Westcap Investors, LLC.
Bradley G. Slocum, * ( ) Senior Vice-President
11111 Santa Monica Boulevard, Los Angeles, CA 90025. Portfolio Manager at
Westcap Investors, LLC.
- ----------
* Indicates an "interested person" of the Fund as defined in the 1940 Act.
+ Mr. Glenn C. Weirick and Mr. Gregory S. Weirick are [to be supplied by
amendment].
The Board of Directors has established an Executive Committee whose
function is to take action between the regular meetings of the Board. The
Committee has all of the powers and authority of the full Board in the
management of the business of the Fund except the power to declare dividends and
to adopt, amend or rescind By-laws and except as otherwise required by the 1940
Act.
The Board of Directors has also established an Audit Committee. That
Committee's functions are to supervise and oversee audits by the Fund's
independent accountants, review the auditor's audit plans and procedures and to
review the auditor's recommendations concerning the Fund's accounting records,
procedures and internal controls. Messrs. Nasif and Schniepp currently comprise
the Audit Committee.
B-8
<PAGE>
Set forth below is the total compensation from the Fund received by the
following Directors for the fiscal year ended September 30, 1999:
Aggregate Compensation
Name of Director From Fund*
- ---------------- ----------
Hugh J. Haferkamp $
Michael A. Marshall
Richard Chernick
Harry P. Gelles
Leonard S. Jarrott
William J. Nasif
Mark Schniepp
Dan B. Secord
- ----------
* Compensation to officers and interested Directors of the Fund is paid by
the Advisor.
As of ______________, the Directors and officers of the Fund as a group
owned approximately __% of the Fund's outstanding shares.
THE FUND'S INVESTMENT ADVISOR
As stated in the Prospectus, investment advisory services are provided to
the Fund by Westcap Investors, LLC, the Advisor, pursuant to an Investment
Advisory Agreement (the "Advisory Agreement"). As compensation, the Fund pays
the Advisor a quarterly management fee of 0.125% at the annual rate of 0.50%
based upon average daily net assets as follows: At the end of each quarter, the
net asset value on the last day of each month of that quarter is determined.
Those three numbers are averaged and the result is multiplied by 0.125%. The
maximum annual advisory fee is 0.50% 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 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.
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.
B-9
<PAGE>
received advisory fees of $_____ and $34,315, respectively. For the period April
1 through September 30, 1999, the Advisor received advisory fees of $______.
THE FUND'S ADMINISTRATOR
The Fund has an Administration Agreement with Investment Company
Administration, LLC (the "Administrator") with offices at 2020 e. 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 an 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'S DISTRIBUTOR
First Fund Distributors, Inc. (the "Distributor"), an affiliated of the
Administrator, acts as the Fund's principal underwriter in a continuous public
offering of the Fund's shares. 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, 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 __, 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 $_______. 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.
B-10
<PAGE>
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 the Advisor as Distribution Coordinator as reimbursement of, or in
anticipation of, expenses incurred for distribution related activity.
During the Fund's fiscal year ended September 30, 1999, the Fund paid fees
of $____ pursuant to the Plan, all of which was paid to broker-dealers for
servicing their clients' Fund accounts.
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.
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.
B-11
<PAGE>
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. 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 or mutual funds ("Funds") 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 or Funds.
In such event, the position of the Fund and such client account(s) or Funds 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 or Funds 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 to sell any particular security
at the same time. If one or more of such client accounts or Funds 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 or Funds 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 year ended September 30, 1999, the Fund paid $____ in
brokerage commissions, of which $_____ was paid to firms for research,
statistical or other services provided to the Advisor. For the fiscal years
ended September 30,1998 and 1997, the Fund paid $196,818 and $257,905,
respectively, in brokerage commissions.
B-12
<PAGE>
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 ____% 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.
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 %
$25,000 but less than $50,000
$50,000 but less than $100,000
$100,000 but less than $250,000
$250,000 but less than $500,000
$500,000 but less than $1,000,000
$1,000,000 or more None
B-13
<PAGE>
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.
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
B-14
<PAGE>
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 NYSE 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.
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
B-15
<PAGE>
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
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.
B-16
<PAGE>
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.
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.
B-17
<PAGE>
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.
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.
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.
B-18
<PAGE>
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.
The Fund's average annual total return for periods ending September 30,
1999 are as follows:
One Year %
Five Years %
Ten Years %
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.
____________________________________, 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.
B-19
<PAGE>
On _______, 1999, the following persons owned of record more that 5% 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.
APPENDIX A
COMMERCIAL PAPER RATINGS
MOODY'S INVESTORS SERVICE, INC.
Prime-1--Issuers (or related supporting institutions) rated "Prime-1" have
a superior ability for repayment of senior short-term debt obligations.
"Prime-1" repayment ability will often be evidenced by many of the following
characteristics: leading market positions in well-established industries, high
rates of return on funds employed, conservative capitalization structures with
moderate reliance on debt and ample asset protection, broad margins in earnings
coverage of fixed financial charges and high internal cash generation, and
well-established access to a range of financial markets and assured sources of
alternate liquidity.
Prime-2--Issuers (or related supporting institutions) rated "Prime-2" have
a strong ability for repayment of senior short-term debt obligations. This will
normally be evidenced by many of the characteristics cited above but to a lesser
degree. Earnings trends and coverage ratios, while sound, will be more subject
to variation. Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternative liquidity is maintained.
STANDARD & POOR'S RATINGS GROUP
A-1--This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted with a plus (+) sign designation.
A-2--Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated "A-1".
B-20
<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
(4) Form of Investment Advisory Agreement
(5) 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) Administration Agreement
(b) Transfer Agency Agreement
(9) Opinion of counsel (4)
(10) Not applicable
(11) Not applicable
(12) No undertaking in effect
(13) Rule 12b-1 Plan (2)
(14) Not applicable
(15) Not applicable
- ----------
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 To be filed by amendment.
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.
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.
<PAGE>
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.
With respect to the Investment Advisor, the response to this item is
incorporated by reference to their Form ADV, as amended.
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
Brandes Investment Trust
Fleming Mutual Fund Group
Fremont Mutual Funds
Guinness Flight Investment Funds
Jurika & Voyles Fund Group
Kayne Anderson Mutual Funds
Masters' Select Investment Trust
O'Shaughnessy Funds, Inc.
PIC Investment Trust
Purisima Funds
Rainier Investment Management Mutual Funds
RNC Mutual Fund Group
(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
<PAGE>
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:
(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 has duly caused this amendment to
this Registration Statement to be signed on its behalf by the undersigned,
thereto duly authorized, in the City of Santa Barbara in the State of California
on January 19, 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 January 19, 2000
- ----------------------- Director
Glenn C. Weirick
/s/ Michael A. Marshall Director January 19, 2000
- -----------------------
Michael A. Marshall
/s/ Richard Chernick Director January 19, 2000
- -----------------------
Richard Chernick
/s/ Harry P. Gelles Director January 19, 2000
- -----------------------
Harry P. Gelles
/s/ William J. Nasif Director January 19, 2000
- -----------------------
William J. Nasif
/s/ Geoff I. Edelstein Chief Financial January 19, 2000
- ----------------------- Officer
Geoff I. Edelstein
<PAGE>
EXHIBITS
Number Description
- ------ -----------
99B.4 Advisory Agreement
99B.5 Distribution Agreement
99B.8.A Administration Agreement
99B.8.B Transfer Agency Agreement
March 30, 1999
Westcap Investors, LLC
11111 Santa Monica Blvd., Ste. 820
Los Angeles, California 90025
INVESTMENT ADVISORY AGREEMENT
Investors Research Fund, Inc. (the "Fund") is an open-ended, diversified
management investment company registered under the Investment Company Act of
1940, as amended (the "Act"). The Fund is engaged in the business of investing
and reinvesting its assets in securities of the type, and in accordance with the
limitations, specified in the Prospectus, Application and Statement of
Additional Information dated March 1, 1999, which is part of its effective
Registration Statement filed with the U.S. Securities and Exchange Commission,
all in such manner and to such extent as may from time-to-time be authorized by
the board of directors of the Fund. The Fund hereby retains you as investment
adviser for the consideration and upon the terms and conditions hereinafter set
forth:
1. The Fund employs you to manage the investment and reinvestment
of its assets and, without limiting the generality of the foregoing,
to supervise the investment affairs of the Fund, to make reviews of
its investments, and to effect investment changes whenever such
changes appear to be desirable. In addition, you are to perform all
statistical, research and analysis services necessary to the
performance of you duties as investment adviser. Such services shall
be rendered directly to the Fund.
2. It is understood that you will from time-to-time employ or
associate with yourself such persons as you believe to be particularly
fitted to assist you in the execution of your duties hereunder, the
cost of performance of such duties to be borne and paid by you. You
will provide adequate and suitable office space for the performance of
your duties hereunder. You will provide to the Fund in writing,
promptly following request, such information regarding itself and the
Fund's investments as shall be necessary for the preparation of
periodic reports to the Fund's stockholders and such other documents
1
<PAGE>
INVESTMENT ADVISORY AGREEMENT
Westcap Investors, LLC - Investors Research Fund, Inc.
March 30, 1999
and papers as may be required to comply with applicable laws and the
rules, regulations and other requirements of the Securities and
Exchange Commission or other federal, state or local governmental
agencies. In compliance with Rule 31a-3 under the Act, you agree that
all records which you maintain for the Fund are the property of the
Fund. You agree to permit inspection by officers and directors of the
Fund, upon reasonable notice and at reasonable times, of all records,
books, correspondence, stockholder lists, and other papers and
documents maintained or prepared by you in connection with the Fund's
business and affairs. Furthermore, you agree to maintain, preserve and
make available all such records in accordance and compliance with
Section 31 of the Act, Section 204 of the Investment Advisers Act of
1940 (as amended) and all governmental regulations and requirements,
as applicable to you in your capacity as investment adviser to the
Fund.
3. You will make decisions with respect to all purchases and
sales of securities for or on account of the Fund. To carry out such
decisions, you are hereby authorized, as the Fund's agent and
attorney-in-fact, for the Fund's account, at the Fund's investment
risk, and in the Fund's name, to place orders for the investment and
reinvestment of its assets. In all purchases, sales and other
transactions in securities for the Fund, you are authorized to
exercise full discretion and act for the Fund in the same manner and
with the same force and effect as the officers and directors might or
could do with respect to such purchases, sales or other transactions,
as well as with respect to all other things necessary or incidental to
the futherance or conduct of such purchases, sales or other
transactions. In this regard, however, it is understood that you will
not be making purchases and sales of securities on behalf of the Fund
in the capacity of a broker-dealer. Notwithstanding the foregoing, all
procedures for the making changes in the Fund's portfolio of
securities, including procedures for the placing and confirmation of
orders with brokers and dealers, shall at all times be and remain
subject to the direction and control of the Fund's board of directors
and officers. You will, however, maintain such records and perform
such duties in connection with the Fund's portfolio of securities as
may be reasonably requested by the Fund, and as may be required by
applicable governmental laws and regulations.
4. The Fund shall provide you with all information under its
control which may be reasonably required for the performance of your
duties hereunder, and agrees to advise you promptly of any changes in
the Fund's policies which may affect any of your obligations
hereunder. Except as otherwise specifically provided hereinabove, you
shall have no obligation to provide supervisory or administrative
services in connection with the general business and affairs of the
Fund, it being expressly agreed and understood that the Fund shall
employ other persons to maintain its own books and records, prepare
and file with the Securities and Exchange Commission and applicable
2
<PAGE>
INVESTMENT ADVISORY AGREEMENT
Westcap Investors, LLC - Investors Research Fund, Inc.
March 30, 1999
governmental and quasi-governmental authorities periodic reports and
amendments to the Fund's Registration Statement, prepare notices of
stockholders' meetings, declarations of dividends and other
communications from the Fund to its stockholders, and to operate and
conduct the general business and administrative affairs of the Fund.
If, however, you or your affiliates shall render any such services at
the request of the officers or directors of the Fund, the Fund will
pay to you or such of your affiliates the fully burdened cost of such
personnel for rendering such services to the Fund at such rates as
shall from time-to-time be agreed upon between you and the Fund.
5. You will report to the board of directors of the Fund at each
regularly scheduled meeting thereof all changes in the Fund's
portfolio since the prior report, and will furnish to the Fund from
time-to-time such information as you may believe appropriate
concerning the Fund's portfolio, whether concerning the individual
companies whose securities are included in the Fund's portfolio, the
industries in which they are engaged, or the conditions prevailing in
the economy generally. You will also furnish to the Fund such
statistical and analytical information with respect to securities in
its portfolio as you may believe appropriate concerning the Fund's
portfolio, whether concerning the individual companies whose
securities are included in the Fund's portfolio, the industries in
which they are engaged, or the conditions prevailing in the economy
generally. You will also furnish to the Fund such statistical and
analytical information with respect to the securities in its portfolio
as you may believe appropriate or as the board of directors may
reasonably request. In making purchases and sales of securities, you
will bear in mind the policies set from time-to-time by the board of
directors of the Fund as well as the limitations imposed in the Fund's
Registration Statement, the Act, and the Internal Revenue Code of
1986, as amended, in respect of regulated investment companies.
Westcap will communicate with the Board of Directors of the Fund (the
"Board") on the items set forth below. As the Board becomes
comfortable with the progress and success of Westcap's involvement,
the Board may request less information and/or longer reporting periods
from Westcap. Westcap will provide the following information:
A) Performance of the Fund versus appropriate benchmarks will be communicated
every two weeks. We anticipate that the appropriate benchmarks will include
the S&P 500 Index, the Nasdaq Index, and other comparative data as agreed
upon with the Board.
B) Westcap will provide monthly statements to the Board which will show the
size of the portfolio, the transactions, receipts of dividend and interest,
and performance reporting.
C) Quarterly, Westcap will provide a summary of its views on the economic and
market environment, along with specific comments on portfolio holdings.
3
<PAGE>
INVESTMENT ADVISORY AGREEMENT
Westcap Investors, LLC - Investors Research Fund, Inc.
March 30, 1999
D) Westcap will meet with the Board not less than quarterly to review the
entire scope of its relationship with the Fund--including, but not limited
to marketing, personnel and performance.
E) Westcap encourages members of the Board to call with any questions they may
have concerning any part of the relationship.
6. All expenses and charges incident to the operation of the
Fund, including, but not limited to, (a) payment of the fees payable
to you under Paragraph 7, (b) custody, transfer and dividend
disbursing expenses, (c) directors' fees and officers' compensation,
(d) legal and auditing expenses, (e) clerical, accounting and other
office costs of the Fund, (f) the cost of personnel providing services
to the Fund, as provided in Paragraph 4, (g) costs of printing the
Fund's prospectus and reports to the stockholders, (h) costs of
maintenance of the Fund's corporate existence and qualifications to do
business, (i) interest and bank charges, taxes, brokerage fees and
commissions, (j) costs of stationery and supplies, (k) expenses and
fees relating to registration and filing with the Securities and
Exchange Commission and state regulatory authorities, and (l) such
promotional expenses as may be contemplated by an effective plan
pursuant to Rule 12b-1 under the Act, providing, however, that payment
by the Fund of such promotional expenses shall be in an amount, and in
accordance with the procedures set forth in such plan, and excepting
those expenses to be paid by you as an incidence of the investment
advisory services to be performed by you hereunder, shall be borne and
paid by the Fund either directly or by way of reimbursement to you for
any such expenses you have advanced pursuant to agreement with the
Fund.
7. In consideration of the services to be rendered by you, the
Fund agrees to pay to you a quarterly fee equal to 0.125% of the net
assets of the Fund calculated as an average of the net assets of the
Fund as of the close of each month of the Fund's fiscal year; said fee
not to exceed 0.5% annually of the average net assets of the Fund
calculated as at the close of each month of the Fund's fiscal year.
The value of the Fund's assets shall be determined in accordance with
Section 2(a) (41) of the Act as of the last business day of each
month.
8. We shall expect of you, and you will give us the benefit of
your best professional judgment and effort in rendering services to
the Fund. The Fund agrees as an inducement to your undertaking, these
services that neither you, nor your officers, members, employees or
agents, or any affiliates of the foregoing shall be liable for any
mistake of judgment or opinion in connection with the matters to which
this Agreement relates, except for lack of good faith, provided that
nothing herein shall be deemed to protect, or purport to protect, you
against any liability to the Fund or its stockholders to which you
would otherwise be subject by reason of willful misfeasance, bad faith
or negligence in the performance of your obligations and duties
hereunder, or by reason of your reckless disregard of your obligations
and duties hereunder.
4
<PAGE>
INVESTMENT ADVISORY AGREEMENT
Westcap Investors, LLC - Investors Research Fund, Inc.
March 30, 1999
The Fund agrees to indemnify, defend and hold you, and your officers,
members, employees and agents, harmless from and against any and all loss, cost,
damage, liability and expense (including, without limitation, reasonable
attorneys' fees and costs) which you or any of them may suffer, sustain or incur
as a result of (a) the Fund's breach of its representations in Section 9 hereof,
or (b) any matter resulting from or arising out of the operations of the Fund
prior to the date of this Agreement.
9. The Fund hereby continuously represents to you that (a) the
shares of the Fund have been and will continue to be offered and sold
in compliance with all applicable federal and state securities laws,
including without limitation the Act, Securities Act of 1933, as
amended and the Securities Exchange Act of 1934, as amended, (b) the
Fund is, and at all times during the term of this Agreement will be,
an open-end diversified management investment company duly registered
in good standing under all applicable federal and state laws,
including, without limitation, the Act, (c) the Registration Statement
and prospectus to which the shares of the Fund have been and will be
offered and sold do not, and at all times during the term of this
Agreement will not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements make therein not misleading,
provided, however, that this clause (c) shall not apply to statements
in or omissions from such Registration Statement or prospectus made in
reliance upon and in conformity with information furnished to the Fund
in writing by you which is incorporated accurately into such
Registration Statement or prospectus, (d) no litigation or
administrative proceeding or investigation of or before any court or
governmental body is currently pending against the Fund and, to the
best of its knowledge, none is threatened against it, and (e) this
Agreement has been approved by the board of directors of the Fund,
including a majority of the directors who are not interested persons
thereof.
10. This Agreement shall become effective as of March 30, 1999
and shall continue in effect until the first anniversary of such date,
and thereafter for successive twelve-month periods (computed from each
anniversary date), provided that such continuance is specifically
approved at least annually by the board of directors of the Fund or by
vote of a majority of the outstanding voting securities (as defined in
Section 2(a) (42) of the Act) of the Fund, and, in either case, by a
majority of the board of directors who are not parties to this
Agreement or interested persons (as defined in section 2(a) (19) of
the Act) of any such party (other than as an officer or director of
the Fund); provided, further, however, that if the continuation of the
Agreement is not approved, you may continue to render to the Fund the
services described herein in a manner and to the extent permitted by
the Act and the rules and regulations thereunder. This Agreement may
be terminate, without the payment of any penalty, by vote of a
5
<PAGE>
INVESTMENT ADVISORY AGREEMENT
Westcap Investors, LLC - Investors Research Fund, Inc.
March 30, 1999
majority of the outstanding voting securities (as defined in the Act)
of the Fund, or by a vote of a majority of the board of directors on
sixty (60) days' written notice to you, or by you on sixty (60) days'
written notice to the Fund. The Fund hereby agrees to call a meeting
of the stockholders of the Fund to consider and vote upon the approval
of the Agreement within a reasonable time period; and the prepare and
prosecute any amendments to the Registration Statement necessitated by
this Agreement. If, within the one hundred twenty (120) day period
specified in Section 11, this Agreement shall not have been approved
by the holders of the majority of the shares of the Fund, this
Agreement shall terminate and you will be entitled to any fees earned
by you as provided in Paragraph 7.
11. The Fund represents that it has given notice of termination
of its current investment advisory contract. You shall not commence
providing services hereunder, or be entitled to any compensation
hereunder, until the effective date of such termination. It is
recognized that this contract must be approved by the Fund's
shareholders pursuant to Section 15 of the Investment Company Act of
1940 within 120 days after the effective date of such termination to
remain effective. The Fund will proceed promptly to solicit such
approval upon signature of this agreement by you.
12. This Agreement may not be transferred, assigned, sold, or in
any manner hypothecated or pledged by you, and this Agreement shall
terminate automatically in the event of any such transfer, assignment,
sale, hypothecation or a pledge by you. The terms, "transfer",
"assignment" and "sale" as used in this paragraph shall have the
meanings ascribed to them by governing law and interpretations thereof
contained in rules or regulations promulgated by the Securities and
Exchange Commission thereunder. You may assign this Agreement in a
transaction in which you rely bona fide upon Rule 2a-6 under the Act
upon notice to the Fund.
13. In the event this Agreement is terminated for any reason and
no subsequent agreement is entered into between you and the Fund, all
fees and all other monies due to you hereunder shall be prorated as of
the effective date of termination and paid within twenty (20) business
days thereafter. Upon such termination, or within a reasonable time
thereafter, you shall make available to the Fund all books, records,
correspondence, stockholders' lists and other papers and documents
pertaining to the Fund which are in your possession or control. In the
event that the Fund shall request that copies of any relevant records
by delivered to it, the Fund shall pay for the copying of those
records. In this regard, it is understood that it is your present
practice to retain all of your records without any destruction of such
records for the period required by the Act. You agree to notify the
Fund immediately of any change in that policy.
6
<PAGE>
INVESTMENT ADVISORY AGREEMENT
Westcap Investors, LLC - Investors Research Fund, Inc.
March 30, 1999
14. Except to the extent necessary to enable you to perform your
obligations hereunder, nothing herein shall be deemed to limit or
restrict your right, or the right of any of your officers, members or
employees, or any affiliates thereof, to engage in any other business
or to devote time and attention to the management or other aspects of
any other business, whether of a similar or dissimilar nature, or to
render services of any kind to any other corporation, firm,
individual, trust or association.
15. In selecting brokers or dealers to execute purchases and
sales of portfolio securities for the Fund, you shall use your best
efforts to obtain best execution, which includes most favorable net
results and execution of your orders, taking into account all
appropriate factors, including price, dealer spread or commission,
size and difficulty of transaction, and research services provided.
The Fund acknowledges and agrees that you may obtain from
broker-dealers supplemental research, market and statistical
information for use with respect to the Fund in accordance with
Section 28(e) under the Securities Exchange Act of 1934. The term
"research, market and statistical information" includes, without
limitation, advice as to the value of securities, and the availability
of securities or purchasers or sellers of securities, and furnishing
analyses and reports concerning issuers, industries, securities,
economic factors and trends, portfolio strategy and performance of
accounts. The Fund understands that such information will be in
addition to and not in lieu of the services required to be performed
by you under this Agreement and that your expenses will not
necessarily by reduced as a result of the receipt of such information.
The Fund also acknowledges that such information may be useful to you
and your affiliates in providing services to clients other than the
Fund and that not all such information will at all times be used by
you in connection with the Fund. Finally, the Fund acknowledges that
information provided to you and your affiliates by brokers and dealers
through whom other clients of yours effect securities transactions may
be useful to you in providing services to the Fund. The Fund
understands that investment decisions for the Fund may not, at all
times, be made independently from those of other accounts managed by
you and your affiliates. In furtherance of the foregoing, the Fund
agrees that, when the same securities are purchased for or sold by the
fund and any such other accounts you may aggregate such orders, and
you will allocate such purchases and sales in a manner deemed by you
to be fair and equitable to all of the accounts, including the Fund.
16. You make the following representations on both a present and
continuing basis:
A. You currently have a Code of Ethics meeting the requirements of
17CFR ss.270.17j-1. You are currently enforcing that code and will continue to
maintain and enforce the code in accordance with both its letter and spirit.
7
<PAGE>
INVESTMENT ADVISORY AGREEMENT
Westcap Investors, LLC - Investors Research Fund, Inc.
March 30, 1999
B. You will be in compliance with all requirements to have your
record-keeping and administrative systems capable of handling the Year 2000
demands at the time such capability is required; provided, however, that you
make no representation regarding the compliance of any unaffiliated person
providing services to you. Upon meeting such requirements, you will provide
written certification to the Fund that you have the requisite capability in
place.
C. You have competent emergency procedures in place to assure your
continuing competent performance of your services hereunder in the event of an
emergency.
D. You will provide an prompt report to the Fund of any development
which does or might affect your ability to service the Fund in accordance with
this agreement, including any developments which may be covered under Section 9
of the Investment Company Act, as amended, or Rule 206(4)-4 under the Investment
Adviser Act.
5. All notices and communications to be made hereunder shall be
in writing and shall be delivered to the Fund or to you, as the case
may be, by U.S. certified mail, return receipt requested, postage
prepaid, by commercial courier or by personal delivery, in each case
to the address set forth in this Agreement or to such other person or
address as shall be identified by written notice as provided herein.
Any notice or communication sent by mail as aforesaid, shall be deemed
delivered three (3) business days after deposit in the U.S. mail; any
notice sent personally or by commercial courier shall be deemed
delivered upon confirmation of receipt of such address.
6. This Agreement sets forth the entire understanding of the
parties with respect to the subject matter hereof, and may be amended
only by the written consent of both parties. This Agreement shall be
governed by and construed in accordance with the laws of the State of
California; provided, however, that nothing herein shall be construed
in a manner inconsistent with the Act, the Investment Advisers Act, or
any rule or regulation thereunder. If any provision of this Agreement
shall be held or made invalid by a court decision, statute, rule or
otherwise, the remainder shall not be thereby affected.
If the foregoing is satisfactory to you, please indicate your acceptance by
signing below,
Very truly yours,
INVESTORS RESEARCH FUND, INC.
By:
------------------------------------
Title:
ACCEPTED THIS ____ DAY OF MARCH, 1999
WESTCAP INVESTORS, LLC
By:
----------------------------------
Title:
8
DISTRIBUTION AGREEMENT
This Agreement is made this 7th day of December 1999, by and between
INVESTORS RESEARCH FUND, INC., a Delaware Corporation (the "Corporation"), and
FIRST FUND DISTRIBUTORS, INC., a Delaware corporation (the "Distributor").
W I T N E S S E T H:
WHEREAS, the Corporation is registered as an open-end management investment
company under the Investment Company Act of 1940 (the "1940 Act"), with shares
of common stock organized into a single series ( the "series" or "portfolio"),
and it is in the interest of the Corporation to offer the shares of common stock
of the series for sale continuously; and
WHEREAS, the Distributor is registered as a broker-dealer under the
Securities Exchange Act of 1934 (the "1934 Act") and is a member in good
standing of the National Association of Securities Dealers, Inc. (the "NASD");
and
WHEREAS, the Corporation and the Distributor wish to enter into an
agreement with each other with respect to the continuous offering of the shares
of common stock of the Corporation (the "Shares");
NOW, THEREFORE, the parties agree as follows:
1. APPOINTMENT OF DISTRIBUTOR. The Corporation hereby appoints the
Distributor as principal underwriter to sell and to arrange for the sale of
the Shares, on the terms and for the period set forth in this Agreement and
the other relevant documents referred to herein, and the Distributor hereby
accepts such appointment and agrees to act hereunder directly and/or
through the Corporation's transfer agent in the manner set forth in the
Prospectuses (as defined below). It is understood and agreed that the
services of the Distributor hereunder are not exclusive, and the
Distributor may act as principal underwriter for the shares of any other
registered investment company. It is further understood and agreed that the
Corporation may at any time, suspend the sale of its shares.
2. SERVICES AND DUTIES OF THE DISTRIBUTOR.
(a) The Distributor agrees to sell the Shares, as agent for
the Corporation, from time to time during the term of this Agreement upon the
terms described in a Prospectus. As used in this Agreement, the term
"Prospectus" shall mean a prospectus and statement of additional information
included as part of the Corporation's Registration Statement, as such prospectus
and statement of additional information may be amended or supplemented from time
to time, and the term "Registration Statement" shall mean the registration
statement most recently filed from time to time by the Corporation with the
Securities and Exchange Commission ("SEC") and effective under the Securities
Act of 1933 (the "1933 Act") and the 1940 Act, as such registration statement is
amended by any amendments thereto at the time in effect. The Distributor shall
not be obligated to sell any certain number of Shares.
(b) The Distributor shall hold itself available to receive
orders, satisfactory to the Distributor, for the purchase of the Shares and
<PAGE>
shall accept such orders and shall transmit such orders and funds received by it
in payment for such Shares as are so accepted to the Corporation's transfer
agent or custodian, as appropriate, as promptly as practicable. The Distributor
acknowledges and understands that orders may also be received through National
Securities Clearing Corporation. Purchase orders shall be deemed accepted and
shall be effective at the time and in the manner set forth in the series'
Prospectuses. Any order may be rejected by the Corporation or Distributor in its
reasonable discretion. The Distributor shall not make any short sales of Shares.
(c) The offering price of the Shares shall be the net asset
value per share of the Shares, plus applicable sales charge, if any (determined
as set forth in the Prospectuses). The Corporation shall furnish or cause its
agent to furnish the Distributor, with all possible promptness, an advice of
each computation of net asset value and offering price.
(d) The Distributor shall have the right to enter into
selected dealer agreements with securities dealers of its choice ("selected
dealers") for the sale of Shares, and shall use reasonable efforts to enter into
such agreements with the selected dealers who have entered into similar
agreements with the previous distributor of Shares. Shares shall be sold by such
dealers only at the offering price of the Shares as set forth in the
Prospectuses. The Distributor shall offer and sell Shares only through such
selected dealers as are appropriately qualified and members in good standing of
the NASD.
(e) The Distributor agrees to permit duly qualified persons
nominated by the Corporation or its Investment Adviser to act as registered
representative of the Distributor, as set forth in the attached schedule,
subject to the approval by the Distributor and the NASD. Such approval will not
be unreasonably withheld.
(f) The Distributor shall provide reports of sales of Shares
to the Corporation at such times as the Corporation may reasonably request.
(g) The Corporation or its agents shall have the right, at
the expense of the Corporation, to inspect the records of the Distributor with
respect to sales of Shares upon request during normal business hours.
(h) Except as otherwise stated in this Agreement or in any
other agreement between the Distributor and any other service provider to the
Corporation, the Distributor shall pay all expenses incurred by it in performing
its services hereunder.
(i) The Distributor understands and agrees that the
Corporation does not intend to issue stock certificates evidencing the Shares to
any shareholder unless requested by such shareholder.
<PAGE>
3. DUTIES OF THE CORPORATION.
(a) MAINTENANCE OF FEDERAL REGISTRATION. The Corporation has
registered and shall, at its expense, take, from time to time, all necessary
action and such steps, including payment of the related filing fees, as may be
necessary to maintain registration of a sufficient number of Shares under the
1933 Act. The Corporation agrees to provide adequate numbers of authorized
Shares under Delaware law for the purpose of the continuing offering of Shares.
The Corporation also agrees to file from time to time such amendments, reports
and other documents as may be necessary in order that there may be no untrue
statement of a material fact in a Registration Statement or Prospectus, or
necessary in order that there may be no omission to state a material fact in the
Registration Statement or Prospectus which omission would make the statements
therein misleading
(b) MAINTENANCE OF "BLUE SKY" QUALIFICATIONS. The
Corporation shall, at its expense, use its best efforts to qualify and maintain
the qualification of an appropriate number of Shares for sale under the
securities laws of such states as the Distributor and the Corporation may agree
upon, and, if necessary or appropriate in connection therewith, to qualify and
maintain the qualification of the Corporation in such states; provided that the
Corporation shall not be required to amend its Articles of Incorporation or
By-Laws to comply with the laws of any state, to maintain an office in any
state, to change the terms of the offering of the Shares in any state from the
terms set forth in Prospectuses, to qualify as a foreign corporation in any
state or to consent to service of process in any state other than with respect
to claims arising out of the offering and sale of the Shares. The Distributor
shall furnish such information and other material relating to its affairs and
activities as may be required by the Corporation in connection with such
qualifications.
(c) COPIES OF REPORTS AND PROSPECTUSES. The Corporation
shall, at its expense, keep the Distributor fully informed with regard to its
affairs and in connection therewith shall furnish to the Distributor copies of
all information, financial statements and other papers which the Distributor may
reasonably request for its use, excluding copies for use in connection with
distributions of shares.
4. CONFORMITY WITH APPLICABLE LAW AND RULES. The Distributor agrees
that in selling Shares hereunder it shall conform in all respects with the laws
of the United States and of any state in which Shares may be offered, and with
applicable rules and regulations of NASD Regulation.
5. INDEPENDENT CONTRACTOR. In performing its duties hereunder, the
Distributor shall be an independent contractor and neither the Distributor, nor
any of its officers, directors, employees, or representatives, is or shall be an
employee of the Corporation in the performance of the Distributor's duties
hereunder. The Distributor shall be responsible for its own conduct and the
employment, control, and conduct of its agents and employees and for injury to
such agents or employees or to others through its agents or employees. The
Distributor assumes full responsibility for its agents and employees under
applicable statutes and agrees to pay all employee taxes thereunder.
<PAGE>
6. INDEMNIFICATION.
(a) INDEMNIFICATION OF CORPORATION . The Distributor shall
indemnify and hold harmless the Corporation and each of its present or former
Directors, officers, employees, representatives and each person, if any, who
controls or previously controlled the Corporation within the meaning of Section
15 of the 1933 Act, against any and all losses, liabilities, damages, claims or
expenses (including the reasonable costs of investigating or defending any
alleged loss, liability, damage, claim or expense and reasonable legal counsel
fees incurred in connection therewith) to which the Corporation or any such
person may become subject under the 1933 Act, under any other statute, at common
law, or otherwise, arising out of the acquisition of any Shares by any person
which (i) may be based upon any willful misfeasance, bad faith, negligence,
gross negligence or reckless disregard of its duties and obligations under this
Agreement by the Distributor or any of the Distributor's directors, officers,
employees or representatives, or (ii) may be based upon any untrue statement or
alleged untrue statement of a material fact contained in a Registration
Statement, Prospectus, shareholder report or other information covering Shares
filed or made public by the Corporation, or any amendment thereof or supplement
thereto, or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, if such statement or omission was made in reliance upon and in
conformity with information furnished to the Corporation by the Distributor. In
no case (i) is the Distributor's indemnity in favor of the Corporation, or any
other person indemnified hereunder, to be deemed to protect the Corporation or
such other indemnified person against any liability to which the Corporation or
such other person would otherwise be subject by reason of willful misfeasance,
bad faith, negligence, or gross negligence in the performance of the
Corporation's or such other person's duties or by reason of reckless disregard
of the Corporation's or such other person's obligations and duties under this
Agreement (as determined by a final judgement on the merits by a court of
competent jurisdiction or, in the absence of such a decision, a reasonable
determination, based upon a review of the facts, that the indemnified person did
not engage in such conduct by a vote of a majority of a quorum of the Directors
who are neither "interested persons" of the Corporation as defined in the 1940
Act nor parties to the proceeding, or an independent legal counsel in a written
opinion) or (ii) is the Distributor to be liable under its indemnity agreement
contained in this paragraph with respect to any claim made against the
Corporation or any other person indemnified unless the Corporation or such other
person, as the case may be, shall have notified the Distributor in writing of
the claim within a reasonable time after the summons or other first written
notification giving information of the nature of the claim shall have been
served upon the Corporation or upon such other person (or after the Corporation
or such other person shall have received notice of such service on any
designated agent). However, failure to notify the Distributor of any such claim
shall not relieve the Distributor from any liability which the Distributor may
have to the Corporation or any other person against whom such action is brought
(i) if any such failure did not result in any prejudice to the Distributor, or
(ii) otherwise than on account of the Distributor's indemnity agreement
contained in this paragraph.
The Distributor shall be entitled to participate, at its own expense,
in the defense, or, if the Distributor so elects, to assume the defense, of any
suit brought to enforce any such claim, but if the Distributor elects to assume
the defense, such defense shall be conducted by legal counsel chosen by the
Distributor and reasonably satisfactory to the Corporation and to the other
persons indemnified as defendant or defendants in the suit. In the event that
the Distributor elects to assume the defense of any such suit and retain such
legal counsel, the Corporation and the other persons indemnified as defendant or
defendants in the suit shall bear the fees and expenses of any additional legal
counsel retained by them. If the Distributor does not elect to assume the
defense of any such suit, the Distributor shall reimburse the Corporation and
the other persons indemnified hereunder as defendant or defendants in such suit
for the reasonable fees and expenses of any legal counsel retained by them. The
Distributor shall promptly notify the Corporation of the commencement of any
litigation or other proceedings against it or any of its officers, employees or
representatives in connection with the issue or sale of any Shares.
<PAGE>
(b) INDEMNIFICATION OF THE DISTRIBUTOR. The Corporation
shall indemnify and hold harmless the Distributor and each of its present or
former directors, officers, employees, representatives and each person, if any,
who controls or previously controlled the Distributor within the meaning of
Section 15 of the 1933 Act, against any and all losses, liabilities, damages,
claims or expenses (including the reasonable costs of investigating or defending
any alleged loss, liability, damage, claim or expense and reasonable legal
counsel fees incurred in connection therewith) to which the Distributor or any
such person may become subject under the 1933 Act, under any other statute, at
common law, or otherwise, arising out of the acquisition of any Shares by any
person which (i) may be based upon any willful misfeasance, bad faith,
negligence, gross negligence or reckless disregard of its duties and obligations
under this Agreement by the Corporation or any of the Corporation's Directors,
officers, employees or representatives, or (ii) may be based upon any untrue
statement or alleged untrue statement of a material fact contained in a
Registration Statement, Prospectus, shareholder report or other information
covering Shares filed or made public by the Corporation, or any amendment
thereof or supplement thereto, or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, unless such statement or omission was made in
reliance upon and in conformity with information furnished to the Corporation by
the Distributor. In no case (i) is the Corporation's indemnity in favor of the
Distributor, or any other person indemnified hereunder, to be deemed to protect
the Distributor or such other indemnified person against any liability to which
the Distributor or other such person would otherwise be subject by reason of
willful misfeasance, bad faith, negligence or gross negligence in the
performance of the Distributor or such other person's duties or by reason of
reckless disregard of the Distributor or such other person's obligations and
duties under this Agreement (as determined by a final judgement on the merits by
a court of competent jurisdiction or, in the absence of such a decision, a
reasonable determination, based upon a review of the facts, that the indemnified
person did not engage in such conduct by a vote of a majority of a quorum of the
Directors who are neither "interested persons" of the Corporation as defined in
the 1940 Act nor parties to the proceeding, or an independent legal counsel in a
written opinion) or (ii) is the Corporation to be liable under its indemnity
agreement contained in this paragraph with respect to any claim made against the
Distributor or other person indemnified unless the Distributor, or such other
person, as the case may be, shall have notified the Corporation in writing of
the claim within a reasonable time after the summons or other first written
notification giving information of the nature of the claim shall have been
served upon the Distributor or upon such other person (or after the Distributor
or such other person shall have received notice of such service on any
designated agent). However, failure to notify the Corporation of any such claim
shall not relieve the Corporation from any liability which the Corporation may
have to the Distributor or any other person against whom such action is brought
otherwise than on account of the Corporation's indemnity agreement contained in
this paragraph.
The Corporation shall be entitled to participate, at its own expense,
in the defense, or, if the Corporation so elects, to assume the defense, of any
suit brought to enforce any such claim, but if the Corporation elects to assume
the defense, such defense shall be conducted by legal counsel chosen by the
Corporation and reasonably satisfactory to the Distributor and to the persons
indemnified as defendant or defendants, in the suit. In the event that the
Corporation elects to assume the defense of any such suit and retain such legal
counsel, the Distributor and the other persons indemnified hereunder as
defendant or defendants in the suit shall bear the fees and expenses of any
additional legal counsel retained by them. If the Corporation does not elect to
assume the defense of any such suit, the Corporation shall reimburse the
Distributor and the other persons indemnified, hereunder as defendant or
defendants in such suit for the reasonable fees and expenses of any legal
counsel retained by them. The Corporation shall promptly notify the Distributor
of the commencement of any litigation or other proceedings against it or any of
its Directors, officers, employees or representatives in connection with the
issue or sale of any Shares.
<PAGE>
7. AUTHORIZED REPRESENTATIONS. The Distributor is not authorized by
the Corporation to give on behalf of the Corporation any information or to make
on behalf of the Corporation any representations in connection with the sale of
Shares other than the information and representations contained in a
Registration Statement or Prospectus filed with the SEC under the 1933 Act and
the 1940 Act, covering Shares, or contained in shareholder reports or other
material that may be prepared by or on behalf of the Corporation for the
Distributor's use. This shall not be construed to prevent the Distributor from
preparing and distributing tombstone ads and sales literature or other material
as it may deem appropriate, subject to the prior approval of an officer or
officers of the Corporation not affiliated with the Distributor. No person other
than the Distributor is authorized to act as principal underwriter (as such term
is defined in the 1940 Act) for the Corporation.
8. TERM OF AGREEMENT. The term of this Agreement shall begin on the
date first above written, and unless sooner terminated as hereinafter provided,
this Agreement shall remain in effect for a period of two years from the date
first above written. Thereafter, this Agreement shall continue in effect from
year to year, subject to the termination provisions and all other terms and
conditions hereof, so long as such continuation shall be specifically approved
at least annually by (i) the Board of Directors or by vote of a majority of the
outstanding voting securities of the Corporation and, (ii) by the vote, cast in
person at a meeting called for the purpose of voting on such approval, of a
majority of the Directors of the Corporation who are not parties to this
Agreement or interested persons of any such party. The Distributor shall furnish
to the Corporation, promptly upon its request, such information as may
reasonably be necessary to evaluate the terms of this Agreement or any
extension, renewal or amendment hereof.
9. AMENDMENT OR ASSIGNMENT OF AGREEMENT. This Agreement constitutes
the entire agreement between the parties. This Agreement may not be amended or
assigned except with the written consent of both parties and as permitted by the
1940 Act, and this Agreement shall automatically and immediately terminate in
the event of its assignment.
<PAGE>
10. TERMINATION OF AGREEMENT. This Agreement may be terminated by
either party hereto, without the payment of any penalty, on not less than 30
days' prior notice in writing to the other party; provided, that in the case of
termination by the Distributor, such action shall have been authorized by the
chief executive officer of the Distributor, and in the case of termination by
the Corporation such action shall have been authorized by resolution of a
majority of the Directors of the Corporation who are not parties to this
Agreement or interested persons of any such party, or by vote of a majority of
the outstanding voting securities of the Corporation.
11. MISCELLANEOUS. The captions in this Agreement are included for
convenience of reference only and in no way define or delineate any of the
provisions hereof or otherwise affect their construction or effect.
This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Nothing herein contained shall be deemed to require the Corporation to
take any action contrary to its Articles of Incorporation or By-Laws, or any
applicable statutory or regulatory requirement to which it is subject or by
which it is bound, or to relieve or deprive the Board of Directors of the
Corporation of responsibility for and control of the conduct of the affairs of
the Corporation.
12. DEFINITION OF TERMS. Any question of interpretation of any term or
provision of this Agreement having a counterpart in or otherwise derived from a
term or provision of the 1940 Act shall be resolved by reference to such term or
provision of the 1940 Act and to interpretation thereof, if any, by the United
States courts or, in the absence of any controlling decision of any such court,
by rules, regulations or orders of the SEC validly issued pursuant to the 1940
Act. Specifically, the terms "vote of a majority of the outstanding voting
securities", "interested persons," "assignment," and "affiliated person," as
used in Paragraphs 8, 9 and 10 hereof, shall have the meanings assigned to them
by Section 2(a) of the 1940 Act. In addition, where the effect of a requirement
of the 1940 Act reflected in any provision of this Agreement is relaxed by a
rule, regulation or order of the SEC, whether of special or of general
application, such provision shall be deemed to incorporate the effect of such
rule, regulation or order.
13. COMPLIANCE WITH SECURITIES LAWS. The Corporation represents that
it is registered as an open-end management investment company under the 1940
Act, and agrees that it will comply with all the provisions of the 1940 Act and
of the rules and regulations thereunder. The Corporation and the Distributor
each agree to comply with all of the applicable terms and provisions of the 1940
Act, the 1933 Act and, subject to the provisions of Section 4(d), all applicable
"Blue Sky" laws, and of the rules and regulations thereunder. The Distributor
represents that it is duly registered as a broker-dealer under the 1934 Act and
is a member in good standing of the NASD, and agrees to comply with all of the
applicable terms and provisions of the 1934 Act, and of the rules and
regulations thereunder.
<PAGE>
14. NOTICES. Any notice required to be given pursuant to this
Agreement shall be deemed duly given if delivered or mailed by registered or
certified mail, postage prepaid, to the Distributor at 4455 E. Camelback Road.,
Suite 261E, Phoenix, AZ 85018 or to the Corporation at (need address).
15. GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of California without regard to principles
of conflicts of law, subject to the federal and state securities laws referred
to in Section 13 thereof.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their officers designated below on the date first
written above.
INVESTORS RESEARCH FUND, INC.
By /s/ Glenn C. Weirick
-------------------------------------
Glenn C. Weirick, President
FIRST FUND DISTRIBUTORS, INC.
By /s/ Eric M.Banhazl
-------------------------------------
Eric M. Banhazl, Vice Presdient
<PAGE>
WESTCAP INVESTORS/INVESTORS RESEARCH FUND, INC.
MUTUAL FUND ADMINISTRATION AND DISTRIBUTOR TRANSITION PLAN
DISTRIBUTOR SERVICES AND DUTIES PROVIDED BY FIRST FUND DISTRIBUTORS, INC.
(Once the Fund's contract with the previous distributor is terminated, we will
become the fund's distributor.)
MAINTAIN BROKER-DEALER REGISTRATION IN NASDR AND ALL STATE/TERRITORIAL
JURISDICTIONS.
* File FOCUS and other reports with NASDR/SEC.
* File Financial Statements and other forms as required by states.
REGISTRATION OF REPRESENTATIVES
* Register individuals as representatives with NASDR and states through
Central. Registration Depository ("CRD").
* Develop and administer both firm and regulatory element of Continuing
Education Program for Registered Reps.
SUPERVISION
* Conduct compliance meeting--formal annual meeting plus supplemental
meetings, if and as needed.
* Provide updating memos to registered reps through firm element of CEP.
ADVERTISING/SALES LITERATURE
* Review and file all advertising, sales literature and other public
communications with the public with NASDR Advertising Department.
* Review and comment on any "dealer only" or other limited distribution
materials.
* Respond to any comments and negotiate revisions with respect to NASDR
Advertising Department review.
<PAGE>
DISTRIBUTOR SERVICE AND DUTIES (CONTINUED)
PAYMENT PROCESS
* Oversee process by which sales loads and asset-based sales charges are paid
to dealers.
* Liaison with transfer agent, other providers to monitor payment timeliness
and accuracy.
CLIENT MARKETING AND DISTRIBUTION STRATEGY SERVICES
* Review firm background and core business strategies.
* Examine existing core business relationships for strengths and weaknesses.
* Review current marketing and distribution efforts/plans for the firm and
for the Fund(s).
* Compile detailed marketing strategy document with recommendations.
* Assist with establishing supermarket and brokerage participation.
* Plan execution and project management of sales literature development
available.
<PAGE>
WESTCAP INVESTORS/INVESTORS RESEARCH FUND, INC.
BROKER/DEALER FEES:
$5,000* One time usage fee. Broker/Dealer is
registered in all 50 states.
$1,000* Annual maintenance fee (up to 3 reps).$250
per rep thereafter, commencing in year two.
*To be paid by Westcap Investors LLC, the Corporation's Investment Adviser.
ADMINISTRATION AGREEMENT
AGREEMENT is made this 7th day of December, 1999 by and between Investors
Research Fund, Inc., a Delaware Corporation (the ACorporation@), and INVESTMENT
COMPANY ADMINISTRATION, L.L.C., an Arizona Limited Liability Company (the
AAdministrator@).
W I T N E S S E T H
WHEREAS, the Corporation is registered as an open-end management investment
company under the Investment Company Act of 1940 (the A1940 Act), and
WHEREAS, the Corporation wishes to retain the Administrator to provide
certain administrative services in connection with the management of the
operations of the portfolio of the Corporation and the Administrator is willing
to furnish such services:
NOW THEREFORE, in consideration of the premises and mutual covenants herein
contained, it is agreed between the parties hereto as follows:
1. APPOINTMENT. The Corporation hereby appoints the Administrator to
provide certain administrative services, hereinafter enumerated, in connection
with the management of the operations of the Corporation for the period and on
the terms set forth in this Agreement. The Administrator hereby accepts such
appointment and agrees to comply with all relevant provisions of the 1940 Act,
applicable rules and regulations thereunder, and other applicable law; the
Corporation's articles of incorporation, bylaws, prospectuses and statements of
additional information; and the instructions of the Board of Directors of the
Corporation.
2. SERVICES ON A CONTINUING BASIS. The Administrator will perform on a
regular basis (daily, weekly or as otherwise appropriate) all administrative
services required for the operation of the Corporation and its portfolio (other
than those services provided by the Corporation's investment adviser,
distributor, custodian, transfer agent, accounting agent, independent accountant
and legal counsel), including without limitation those services detailed on the
attached Administrative Services list.
The Administrator agrees that all registration statements and similar
materials filed with the Securities and Exchange Commission (the "SEC") in
connection with the Corporation's registration with the SEC, and all proxy
statements and related materials filed with the SEC in connection with meetings
of the shareholders of the Corporation, will be provided to counsel to the
Corporation and an appropriate officer of the Corporation in a reasonable time
before filing and public distribution.
3. RESPONSIBILITY OF THE ADMINISTRATOR. The Administrator shall be under no
obligation to expand its duties beyond those set forth in this agreement except
as may be agreed to by the Administrator in writing. In the performance of its
duties hereunder, the Administrator shall be obligated to exercise reasonable
<PAGE>
care and diligence and to act in good faith and to use its best efforts. Without
limiting the generality of the foregoing or any other provision of this
Agreement, the Administrator shall not be liable for delays or errors or loss of
data occurring by reason of circumstances beyond the Administrator's control.
4. RELIANCE UPON INSTRUCTIONS. The Administrator shall be entitled to rely
upon any instructions, oral or written, actually received by the Administrator
from the Board of Directors of the Corporation and subject to Section 3 hereof,
shall incur no liability to the Corporation or the investment adviser to any
portfolio of the Corporation in acting upon such oral or written instructions,
provided such instructions reasonably appear to have been received from a person
duly authorized by the Board of Directors of the Corporation to give oral or
written instructions on behalf of the Corporation or any portfolio.
5. CONFIDENTIALITY. The Administrator and its employees shall treat
confidentially and shall not provide to any other person all records and other
information relative to the Corporation and each portfolio of the Corporation
and all prior, present or potential shareholders thereof, except after prior
notification to, and approval of release of information in writing by, the
Corporation, which approval shall not be unreasonably withheld where the
Administrator may be exposed to civil or criminal contempt proceedings for
failure to comply, when requested to divulge such information by duly
constituted authorities, or when so requested by the Corporation.
6. EQUIPMENT FAILURES. The Administrator will take reasonable steps to
ensure that its services (and those of its third party suppliers) provided under
this Agreement reflect the available state of the art technology with respect to
Year 2000 compliance. In the event of equipment failures or the occurrence of
events beyond the Administrator's control which render the performance of the
Administrator's functions under this Agreement impossible, the Administrator
shall take reasonable steps to minimize service interruptions and is authorized
to engage the services of third parties to prevent or remedy such service
interruptions.
7. COMPENSATION. Except as otherwise stated in this Agreement, the
Administrator shall pay all expenses incurred by it in performing its services
hereunder. Except as otherwise agreed upon by the Corporation with other service
providers, the Corporation shall bear all other expenses of its operation. The
Administrator agrees that it will coordinate with the management of the
Corporation the nature and level of the expenses to be borne by the Corporation.
As compensation for services rendered by the Administrator during the term of
this Agreement, the Administrator shall receive a fee as defined in Appendix A.
8. INDEMNIFICATION. The Corporation agrees to indemnify and hold harmless
the Administrator from all taxes, filing fees, charges, expenses, assessments,
claims and liabilities (including without limitation, liabilities arising under
the Securities Act of 1933, the Securities Exchange Act of 1934, the 1940 Act,
and any state and foreign securities laws, all as amended from time to time) and
expenses, including (without limitation) reasonable attorneys fees and
disbursements, reasonably arising directly or indirectly from any action or
thing which the Administrator takes or does or omits to take or do at the
request of or in reliance upon the advice of the Board of Directors of the
Corporation, provided that the Administrator will not be indemnified against any
<PAGE>
liability to the Corporation or to its shareholders (or any expenses incident to
such liability) arising out of the Administrator's own willful misfeasance, bad
faith, gross negligence, negligence or reckless disregard of its duties and
obligations under this Agreement. The Administrator agrees to indemnify and hold
harmless the Corporation and each of its Directors from all claims and
liabilities (including without limitation, liabilities under the Securities Act
of 1933, the Securities Exchange Act of 1934, the 1940 Act, and any state and
foreign securities laws, all as amended from time to time) and expenses,
including (without limitation) reasonable attorneys fees and disbursements,
arising directly or indirectly from any action or thing which the Administrator
takes or does or omits to take or do which is in violation of this Agreement or
not in accordance with instructions properly given to the Administrator, or
arising out of the Administrator's own willful misfeasance, bad faith, gross
negligence, negligence or reckless disregard of its duties and obligations under
this Agreement.
9. DURATION AND TERMINATION. This Agreement shall continue until
termination by the Corporation (by resolution of the Board of Directors) or the
Administrator on 60 days written notice to the other party. All notices and
other communications hereunder shall be in writing.
10. AMENDMENTS. This Agreement or any part hereof may be changed or waived
only by an instrument in writing signed by the party against which enforcement
of such change or waiver is sought, provided such amendment is specifically
approved by the Board of Directors of the Corporation.
11. NOTICES. All notices to a party hereunder shall be in
writing and personally delivered, sent by registered or certified mail with
return receipt requested, or communicated by telegram, telex, or facsimile
transmission, to the address of such party set forth on the signature page of
this Agreement, or to such other address of which a party may from time to time
notify the other party.
12. MISCELLANEOUS. This Agreement embodies the entire agreement and
understanding between the parties thereto with respect to the services to be
performed hereunder, and supersedes all prior agreements and understandings,
relating to the subject matter hereof. The captions in this Agreement are
included for convenience of reference only and in no way define or limit any of
the provisions hereof or otherwise affect their construction or effect. This
Agreement shall be deemed to be a contract made in California and governed by
California law (without regard to principles of conflicts of law). If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement will not be affected
thereby. This Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors; provided, however, that this
Agreement may not be assigned by either party without the prior written consent
of the other party.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below on the date first written above.
INVESTORS RESEARCH FUND, INC.
By:/s/ Glenn C. Weirick
-------------------------------------
Name: Glenn C. Weirick
Title: President
Address: 3757 State Street
Santa Barbara, CA 93105
INVESTMENT COMPANY ADMINISTRATION, L.L.C.
By:/s/ Eric M. Banhazl
-------------------------------------
Name: Eric M. Banhazl
Title: Executive Vice President
Address: 2020 E. Financial Way
Glendora, CA 91741
<PAGE>
APPENDIX A
ADMINISTRATION SERVICES FEES:
Basis Points Average Net Assets
------------ ------------------
.10% First $200 million
.05% Next $300 million
.03% Thereafter
Per Fund Annual Minimums
------------------------
$40,000 Per Fund
$15,000 For each additional share class
<PAGE>
WESTCAP INVESTORS/INVESTORS RESEARCH FUND, INC.
MUTUAL FUND ADMINISTRATION AND DISTRIBUTOR TRANSITION PLAN
ADMINISTRATION SERVICES PROVIDED BY INVESTMENT COMPANY ADMINISTRATION, L.L.C.
(ONCE THE FUND'S CONTRACT WITH THE PREVIOUS ADMINISTRATOR IS TERMINATED, WE WILL
BECOME THE FUND'S REGULATORY AND OPERATIONS ADMINISTRATOR.)
RESPONSIBILITY FOR BOARD MEETINGS.
* Supervisory and coordinating the preparation of the agenda.
* Preparing and distributing materials prior to the meetings.
* Preparing minutes of each meeting and maintaining the minute book.
RESPONSIBILITY FOR SHAREHOLDER MEETINGS.
* Determining when meetings are needed as well as those matters to be voted
on.
* Drafting proxy material.
* Supervisory and coordinating printing of proxy material.
* Supervisory and coordinating proxy solicitation.
* Preparing minutes of the meeting.
OVERSEEING AND EVALUATING SERVICE PROVIDERS.
* Acting as liaison with the custodian, transfer agent, fund accounting
agent, auditors, legal counsel and other service providers.
* Acting as liaison with industry associations and reporting services (e.g.
Lipper, Morningstar, CDA, etc.)
MAINTAINING THE REGISTRATION STATEMENT.
* Drafting annual revisions and circulating drafts.
* Preparing and filing amendments and supplements ("stickers").
* Receiving comments from SEC staff.
* Supervisory and coordinating printing of final prospectuses and statements
of additional information.
* Preparing and filing registration fee payments (Rule 24f-2).
* Filing semi-annual reports on Form N-SAR.
<PAGE>
WESTCAP INVESTORS/INVESTORS RESEARCH FUND, INC.
MUTUAL FUND ADMINISTRATION AND DISTRIBUTOR TRANSITION PLAN
ADMINISTRATION SERVICES (CONTINUED)
MAINTAINING STATE REGISTRATIONS.
* Monitoring status of registration in each state.
* Increasing amounts registered as needed.
* Filing renewals as needed.
* Filing copies of registration statement amendments, reports, sales
literature and other documents.
* Filing sales reports.
PREPARING SHAREHOLDER REPORTS.
* Drafting reports and circulating drafts.
* Supervisory and coordinating printing and distribution.
* Filing copies with SEC.
MONITORING COMPLIANCE.
* Reviewing 1940 Act, IRS, state and voluntary investment restrictions with
portfolio managers.
* Preparing checklists for use by portfolio managers.
* Preparing compliance reports for management and the Board.
* Monitoring the adequacy of the fidelity bond and D&O insurance.
* Monitoring the Transfer Agent's "escheatment" reporting
* Monitoring the Fund's retirement plans currency.
* PREPARING BUDGETS AND CONTROLLING EXPENSES.
* Establishing budgets each year for the accounting services agent.
* Comparing budgeted expenses to actual during the year and revising budgets
as needed.
* Reviewing bills as received and approving for payment by the custodian.
* Monitoring commercial bank accounts, if any, maintained on behalf of the
Fund and ensuring that any interest is payable to the Fund.
HANDLING SEC INSPECTIONS.
* Gathering data as requested by the SEC staff.
* Responding to staff questions during the course of the examination.
* Responding to SEC correspondence resulting from inspections.
TRANSFER AGENCY AND REGISTRAR AGREEMENT
AGREEMENT dated as of this 5th day of October, 1998, between Investors
Research Fund, Inc. (the "Fund"), a corporation organized under the laws of the
State of Delaware, having its principal office and place of business at 3757
State Street, Suite 204, Santa Barbara, California 93105, and ND Resources, Inc.
(the "Transfer Agent"), a corporation organized under the laws of the State of
North Dakota with its principal place of business at 1 North Main, Minot, North
Dakota 58703.
WITNESSETH:
That for and in consideration of the mutual covenants and promises
hereinafter set forth, the Fund and the Transfer Agent agree as follows:
1. DEFINITIONS.
Whenever used in this Agreement, the following words and phrases,
unless the context otherwise requires, shall have the following meanings:
(a) "Authorized Person" shall be deemed to include the President, the Vice
President, the Secretary, and the Treasurer of the Fund, the persons listed
in Appendix A hereto, and any other person, whether or not such person is
an officer of the Fund, duly authorized to give Oral Instructions or
Written Instructions on behalf of the Fund, as indicated in a certificate
furnished to the Transfer Agent, pursuant to Sections 4(f) and 5(b) hereof,
as may be received by the Transfer Agent from time to time.
(b) "Commission" shall have the meaning given it in the 1940 Act.
(c) "Custodian" refers to any custodian or sub-custodian of all securities
and other property which the Fund may, from time to time, deposit or cause
to be deposited or held under the name or account of such a custodian
pursuant to a Custodian Agreement.
(d) "Articles of Incorporation" shall mean the Articles of Incorporation,
Declaration of Trust, Partnership Agreement or similar organizational
document, as the case may be, of the Fund as the same may be amended from
time to time.
(e) "Officer" shall mean the President, Vice President, Secretary, and
Treasurer of the parties hereto.
(f) "Oral Instructions" shall mean instructions, other than Written
Instructions, actually received by the Transfer Agent from a person
reasonably believed by the Transfer Agent to be an Authorized Person.
1
<PAGE>
(g) "Prospectus" shall mean the most recently dated Fund Prospectus and
Statement of Additional Information relating to the registration of the
Fund's Shares under the Securities Act of 1933 and the 1940 Act, as
amended.
(h) "Shares" refers collectively to such shares of capital stock,
beneficial interest or limited partnership interests, as the case may be,
of the Fund, as may be issued from time to time, and if the Fund is a
closed-end or a series fund, as such terms are used in the 1940 Act, any
other classes or series of capital stock, share of beneficial interest, or
limited partnership interests that may be issued from time to time.
(i) "Shareholder" shall mean a holder of shares of capital stock,
beneficial interest or any other class or series, and also refers to
partners of limited partnerships.
(j) "Directors" or "Board of Directors" shall mean the Board of Directors,
Board of Trustees or, if the Fund is a limited partnership, the General
Partner(s) of the Fund, as the case may be.
(k) "Written Instructions" shall mean a written or electronic communication
actually received by the Transfer Agent from an Authorized Person, or from
a person reasonably believed by the Transfer Agent to be an Authorized
Person, by U.S. Mail, facsimile, or any other such system whereby the
receiver of such communication is able to verify through codes or otherwise
with a reasonable degree of certainty the authenticity of the sender of
such communications.
(1) "1940 Act" shall mean the Investment Company Act of 1940, and the Rules
and Regulations promulgated thereunder, all as amended from time to time.
(m) "Fund" shall mean the entity executing this Agreement, and if it is a
series fund, as such term is used in the 1940 Act, such term shall mean
each series of the Fund hereafter created, except that appropriate
documentation with respect to each series must be presented to the Transfer
Agent before this Agreement shall become effective with respect to each
such series.
2. APPOINTMENT OF THE TRANSFER AGENT.
The Fund hereby appoints and constitutes the Transfer Agent as
transfer agent, registrar and dividend disbursing agent for Shares of the
Fund and as shareholder servicing agent for the Fund and as plan agent
under the Fund's Dividend Reinvestment Plan. The Transfer Agent accepts
such appointments and agrees to perform the duties hereinafter set forth.
3. COMPENSATION.
(a) The Fund will compensate the Transfer Agent for the performance of its
obligations hereunder in accordance with the fees set forth in the written
schedule of fees annexed hereto as Schedule A and incorporated herein. The
Transfer Agent will bill the Fund as soon as practicable after the end of
2
<PAGE>
each calendar month, and said billings will be detailed in accordance with
the Schedule A. The Fund will promptly pay to the Transfer Agent the amount
of such billing.
In addition, the Fund agrees to pay, and will be billed separately
for, reasonable out-of-pocket expenses incurred by the Transfer Agent in
the performance of its duties hereunder. Out-of-pocket expenses shall
include, but shall not be limited to, the items specified in the written
schedule of out-of-pocket charges annexed hereto as Schedule C and
incorporated herein; which charges shall be those imposed by outside
providers. Unspecified out-of-pocket expenses shall be limited to those
out-of-pocket expenses reasonably incurred by the Transfer Agent in the
performance of its obligations hereunder. Reimbursement by the Fund for
expenses incurred by the Transfer Agent in any month shall be made as soon
as practicable but no later than thirty- (30) days after the receipt of an
itemized bill from the Transfer Agent.
(b) Any compensation agreed to hereunder may be adjusted from time to time
upon mutual agreement by both parties hereto by attaching to Schedule A of
this Agreement a revised Fee Schedule, dated and signed by an Officer of
each party hereto.
4. DOCUMENTS.
In connection with the appointment of the Transfer Agent, the Fund
shall, on or before the date this Agreement goes into effect, but in any
case, within a reasonable period of time for the Transfer Agent to prepare
to perform its duties hereunder, furnish the Transfer Agent with the
following documents:
(a) A certified copy of the Fund's Articles of Incorporation, as amended;
(b) A certified copy of the Fund's Bylaws, as amended;
(c) A copy of the resolution of the Directors authorizing the execution and
delivery of this Agreement;
(d) If applicable, specimens of certificates for Shares of the Fund in the
form mutually approved by the Directors and the Transfer Agent, with a
certificate of the Secretary of the Fund as to such approval;
(e) All account application forms and other documents relating to
Shareholder accounts, or to any plan, program, or service offered by the
Fund;
(f) A signature card bearing the signatures of any person authorized to
sign Written Instructions or is authorized to give Oral Instructions to the
Transfer Agent on behalf of the Fund;
3
<PAGE>
(g) A certified list of Shareholders of the Fund with the name, address,
and taxpayer identification number of each Shareholder, and the number of
Shares of the Fund held by each, certificate numbers and denominations (if
any certificates have been issued), lists of any accounts against which
stop transfer orders have been placed, together with the reasons therefore,
and the number of Shares redeemed by the Fund; and
(h) An opinion of counsel for the Fund with respect to the validity of the
Shares and the status of such Shares under the Securities Act of 1933, as
amended.
5. FURTHER DOCUMENTATION.
The Fund will also furnish the Transfer Agent with copies of the
following documents promptly after the same become available:
(a) The Fund's Registration Statement and each subsequent amendment to the
Fund's Registration Statement that is filed with the Commission;
(b) A certified copy of each resolution of the Board of Directors, or other
authorization, designating Authorized Persons;
(c) Such other certificates, documents, or opinions as the Transfer Agent
deems to be appropriate or necessary for the proper performance of its
duties hereunder; and
(d) Each resolution of the Board of Directors authorizing the issuance of
Shares.
6. REPRESENTATIONS.
The Fund represents to the Transfer Agent that all outstanding Shares
are validly issued, fully paid and non-assessable. When Shares are
hereafter issued in accordance with the terms of the Fund's Articles of
Incorporation and its Prospectus, such Shares shall be validly issued,
fully paid and non-assessable. The Transfer Agent represents that it is and
will continue to be registered as a transfer agent under the Securities
Exchange Act of 1934.
7. DISTRIBUTIONS PAYABLE IN SHARES.
In the event that the Directors shall declare a distribution payable
in Shares, the Fund shall deliver to the Transfer Agent written notice of
such declaration, signed on behalf of the Fund by an Officer of the Fund,
upon which the Transfer Agent shall be entitled to rely for all purposes,
certifying (i) the number of Shares involved, (ii) that all appropriate
action has been taken, and (iii) that any amendment to the Articles of
Incorporation, which may be required, has been filed and is effective. Such
notice shall be accompanied by an opinion of counsel for the Fund relating
to the legal adequacy and effect of the transaction. This provision shall
not apply to Shares to be issued in the normal course of reinvestment of
any distributions or dividends in accordance with the Fund's Prospectus.
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<PAGE>
8. DUTIES OF THE TRANSFER AGENT.
The Transfer Agent shall be responsible for administering and/or
performing transfer agent functions; for acting as service agent in
connection with dividend and distribution functions, and as plan agent
under the Fund's Dividend Reinvestment Plan; and for performing Shareholder
account and administrative agent functions in connection with the issuance,
transfer, and redemption or repurchase (including coordination with the
Custodian) of Shares in accordance with the terms of the Prospectus and
applicable law. The operating standards and procedures to be followed shall
be determined, from time to time, by agreement between the Transfer Agent
and the Fund, and shall be expressed in a written schedule of duties of the
Transfer Agent annexed hereto as Schedule B and incorporated herein. In
addition, the Fund shall deliver to the Transfer Agent all notices issued
by the Fund with respect to the Shares in accordance with, and pursuant to,
the Articles of Incorporation and By-laws of the Fund, or as required by
law, and shall perform such other specific duties as are set forth in the
Articles of Incorporation, including the giving of notice of any special or
annual meetings of shareholders, and any other notices required thereby.
9. RECORDKEEPING AND OTHER INFORMATION.
(a) The Transfer Agent shall create and maintain all necessary records, in
accordance with all applicable laws, rules and regulations, including
records required by Section 31(a) of the 1940 Act and those records
pertaining to the various functions performed by it hereunder, which are
set forth in Schedule B hereto. All records shall be available during
regular business hours for inspection and use by the Fund. Where
applicable, such records shall be maintained by the Transfer Agent for the
periods and in the places required by Rule 3la-2 under the 1940 Act.
(b) Upon reasonable notice by the Fund, the Transfer Agent shall make
available, during regular business hours, its facilities and premises,
employed in connection with the performance of its duties under this
Agreement, for reasonable visitation by the Fund, or any person retained by
the Fund, as may be necessary for the Fund to evaluate the quality of the
services performed by the Transfer Agent pursuant hereto.
(c) The Transfer Agent and the Fund agree that the records kept by the
Transfer Agent, in compliance with the federal securities and applicable
tax laws, remain the property of the Fund and, upon the termination of this
Agreement, the Transfer Agent shall, at the Fund's expense, provide such
records to the Fund, or such successor transfer agent as the Fund
designates in writing to the Transfer Agent.
(d) The Transfer Agent and the Fund agree that all books, records,
information, and data pertaining to the business of the other party, which
are exchanged or received in connection with this Agreement, shall remain
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<PAGE>
confidential and shall not be voluntarily disclosed to any person, except
as may be required by law. In the case of any requests or demands for any
inspection of the Shareholder records of the Fund, the Transfer Agent will
endeavor to notify the Fund and to secure instructions from an authorized
Officer of the Fund as to such inspection.
10. OTHER DUTIES.
In addition to the duties expressly set forth in Schedule B to this
Agreement, the Transfer Agent shall perform such other duties and
functions, and shall be paid such amounts therefor, as may from time to
time be agreed upon in writing between the Fund and the Transfer Agent. The
compensation for such other duties and functions shall be reflected in a
written amendment to Schedule A and the duties and functions shall be
reflected in an amendment to Schedule B, both dated and signed by
authorized persons of the parties hereto.
11. RELIANCE BY TRANSFER AGENT; INSTRUCTIONS.
(a) The Transfer Agent will be protected in acting upon Written or Oral
Instructions, as appropriate, believed to have been executed or orally
communicated by an Authorized Person, and will not be held to have any
notice of any change of authority of any person until receipt of a Written
Instruction thereof from the Fund. The Transfer Agent will also be
protected in processing Share certificates which it reasonably believes to
bear the proper manual or facsimile signatures of the Officers of the Fund
and the proper countersignature of the Transfer Agent.
(b) At any time, the Transfer Agent may apply to any Authorized Person of
the Fund for Written Instructions, and may seek advice from legal counsel
for the Fund, or its own legal counsel, with respect to any matter arising
in connection with this Agreement, and it shall not be liable for any
action taken or not taken or suffered by it in good faith in accordance
with such Written Instructions or in accordance with the opinion of counsel
for the Fund. Written Instructions requested by the Transfer Agent will be
provided by the Fund within a reasonable period of time. In addition, the
Transfer Agent, its officers, agents, or employees, shall accept Oral
Instructions or Written Instructions given to them by any person
representing or acting on behalf of the Fund, only if said representative
is known by the Transfer Agent, or its officers, agents, or employees, to
be an Authorized Person. The Fund agrees that all Oral Instructions shall
be followed within one business day by confirming Written Instructions, and
that the Fund's failure to so confirm shall not impair in any respect the
Transfer Agent's right to rely on Oral Instructions. The Transfer Agent
shall have no duty or obligation to inquire into, nor shall the Transfer
Agent be responsible for, the legality of any act done by it upon the
request or direction of an Authorized Person.
(c) Notwithstanding any of the foregoing provisions of this Agreement, the
Transfer Agent shall be under no duty or obligation to inquire into, and
shall not be liable for:
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<PAGE>
i the legality of the issuance or sale of any Shares;
ii the legality of the redemption of any Shares, or the propriety of the
amount to be paid therefor, so long as redemption is in accordance
with provisions of the Prospectus;
iii the legality of the declaration of any dividend by the Directors, or
the legality of the issuance of any Shares in payment of any dividend;
or
iv the legality of any recapitalization or readjustment of the Shares.
12. ACTS OF GOD, ETC.
Neither the Transfer Agent nor the Fund will be liable or responsible
for delays or errors by reason of circumstances beyond its reasonable
control, including acts of civil or military authority, national
emergencies, fire, mechanical breakdown beyond its control, flood or
catastrophe, acts of God, insurrection, war, riots, or failure beyond its
control of transportation, communication, or power supply.
13. DUTY OF CARE AND INDEMNIFICATION.
The Fund and the Transfer Agent will indemnify each other against, and
hold the other party harmless from, any and all losses, claims, damages,
liabilities, or expenses (including reasonable counsel fees and expenses)
resulting from any claim, demand, action, or suit, not resulting from the
willful misfeasance, bad faith or negligence of the other party, and
arising out of, or in connection with, the duties and responsibilities
described hereunder. In addition, the Fund will indemnify the Transfer
Agent against, and hold it harmless from, any and all losses, claims,
damages, liabilities, or expenses (including reasonable counsel fees and
expenses) resulting from any claim, demand, action, or suit as a result of:
(a) any action taken in accordance with Written or Oral Instructions, or
any other instructions, or Share certificates reasonably believed by
the Transfer Agent to be genuine and to be signed, countersigned, or
executed, or orally communicated, by an Authorized Person;
(b) any action taken in accordance with written or oral advice reasonably
believed by the Transfer Agent to have been given by counsel for the
Fund; or
(c) any action taken as a result of any error or omission in any record
(including, but not limited to, magnetic tapes, computer printouts,
hard copies, and microfilm copies) delivered, or caused to be
delivered, by the Fund to the Transfer Agent, in connection with this
Agreement.
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<PAGE>
In any case in which the Fund or the Transfer Agent may be asked to
indemnify or hold the other party harmless, the requesting party will
provide the other party with all pertinent facts concerning the situation
in question and will use reasonable care to identify and provide notice of
any situation which presents, or appears likely to present, a claim for
indemnification. Each party shall have the option to defend the other party
against any claim which may be the subject of this indemnification, and in
the event that a party so elects, such defense shall be conducted by
counsel chosen by the party making such election; and such counsel shall be
satisfactory to the other party, and thereupon such electing party shall
take over complete defense of the claim, and the requesting party shall
sustain no further legal or other expenses in such situation for which it
seeks indemnification under this Section 13. Neither party will confess any
claim or make any compromise in any case in which the other party will be
asked to provide indemnification, except with the other party's prior
written consent. The obligations of the parties hereto under this Section
shall survive the termination of this Agreement.
14. CONSEQUENTIAL DAMAGES.
In no event and under no circumstances shall either party under this
Agreement be liable to the other party for indirect loss of profits, or
other consequential damages under any provision of this Agreement or for
any act or failure to act hereunder.
15. TERM AND TERMINATION.
(a) This Agreement shall become effective on the date first set forth above
(the "Effective Date") and shall continue in effect for three (3) years,
and then for successive annual periods thereafter, as the parties may
mutually agree; provided, that either party hereto may terminate this
Agreement by giving to the other party a notice in writing specifying the
date of such termination, which shall be not less than 60 days after the
date of receipt of such notice.
(b) In the event such notice is given by the Fund, it shall be accompanied
by a resolution of the Board of Directors of the Fund, certified by the
Secretary, electing to terminate this Agreement, and designating a
successor transfer agent or transfer agents. Upon such termination, and at
the expense of the Fund (unless termination is as a result of the bad faith
or negligence of the Transfer Agent), the Transfer Agent will deliver to
such successor a certified list of Shareholders of the Fund (with names,
addresses, and taxpayer identification numbers), an historical record of
the account of each Shareholder and the status thereof, and all other
relevant books, records, correspondence, and other data established or
maintained by the Transfer Agent under this Agreement in the form
reasonably acceptable to the Fund, and will cooperate in the transfer of
such duties and responsibilities, including provisions for assistance from
the Transfer Agent's personnel in the establishment of books, records, and
other data by such successor or successors.
8
<PAGE>
16. CONFIDENTIALITY.
Both parties hereto agree that any non-public information obtained
hereunder, concerning the other party, is confidential and may not be
disclosed to any other person without the consent of the other party,
except as may be required by applicable law or at the request of the
Commission or other governmental agency.
17. AMENDMENT.
This Agreement may not be amended or modified in any manner, except by
a written agreement executed by both parties.
18. SUBCONTRACTING.
Except as otherwise provided below, neither this Agreement nor any
rights or obligations hereunder, may be assigned by either party without
the express written consent of the other party. The Transfer Agent may
subcontract, in whole or in part, for the performance of its obligations
and duties hereunder, subject to the approval of the Fund, which approval
shall not be unreasonably withheld by the Fund, with any person or entity,
including, but not limited to, any affiliate or subsidiary; provided,
however, that (a) the Transfer Agent shall remain fully responsible to the
Fund for the acts and omissions of any agent or subcontractor as it is for
its own acts and omissions, and (b) to the extent that the Transfer Agent
subcontracts any functions or activities required to be performed by a
registered transfer agent, the subcontracting party shall be a duly
registered transfer agent with the appropriate regulatory agency as
required under Section 17A of the Securities Exchange Act of 1934 and the
rules and regulations thereunder, as amended.
19. SECURITY.
The Transfer Agent represents and warrants that, to the best of its
knowledge, the various procedures and systems which the Transfer Agent has
implemented, or will implement, with regard to safeguarding from loss or
damage attributable to fire, theft, or any other cause (including provision
for 24 hours-a-day restricted access) of the Fund's records and other data
and the Transfer Agent's records, data, equipment facilities, and other
property used in the performance of its obligations hereunder, are
adequate, and that it will make such changes therein, from time to time, as
in its judgment are required for the secure performance of its obligations
hereunder. The parties shall review such systems and procedures on a
periodic basis.
20. MISCELLANEOUS.
(a) Any notice or other instrument authorized or required by this
Agreement to be given in writing to the Fund or the Transfer Agent
shall be sufficiently given if addressed to that party and received by
it at its office set forth below, or at such other place as it may
from time to time designate in writing.
9
<PAGE>
To the Fund:
Investors Research Fund, Inc.
Attn: Hugh J. Haferkamp, President
3757 State Street, Suite 204
Santa Barbara, CA 93105
To the Transfer Agent:
ND Resources, Inc.
Attn: Mark R. Anderson, Shareholder Services Manager
1 North Main
Minot, ND 58703
(b) Successors. This Agreement shall extend to and shall be binding upon
the parties hereto, and their respective successors and assigns;
provided, however, that this Agreement shall not be assignable by the
Fund without the written consent of the other party.
(c) Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original; but
such counterparts shall, together, constitute only one instrument.
(d) Captions. The captions of this Agreement are included for convenience
of reference only, and in no way define or delimit any of the
provisions hereof, or otherwise affect their construction or effect.
(e) Use of Transfer Agent's Name. The Fund shall not use the name of the
Transfer Agent in any Prospectus, Statement of Additional Information,
Shareholders' report, sales literature, or other material relating to
the Fund for other than internal use, in a manner not approved prior
thereto; provided, that the Transfer Agent shall approve all
reasonable uses of its name which merely refer in accurate terms to
its appointment hereunder or which are required by the Commission or a
state securities administrator.
(f) Use of the Fund's Name. The Transfer Agent shall not use the name of
the Fund, or material relating to the Fund, on any documents or forms,
for other than internal use, in a manner not approved prior thereto in
writing; provided, that the Fund shall approve all reasonable uses of
its name which merely refer in accurate terms to the appointment of
the Transfer Agent or which are required by the Commission or a state
securities administrator.
(g) Independent Contractors. The parties agree that they are independent
contractors and not partners or co-venturers.
(h) Entire Agreement; Severability. This Agreement, and the Schedules
attached hereto, constitute the entire agreement of the parties
hereto, relating to the matters covered hereby, and supersede any
previous agreements. If any provision is held to be illegal,
unenforceable or invalid for any reason, the remaining provisions
shall not be affected or impaired thereby.
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<PAGE>
21. LIABILITY OF DIRECTORS, OFFICERS, AND SHAREHOLDERS.
The execution and delivery of this Agreement have been authorized by
the Directors of the Fund and signed by an authorized Officer of the Fund,
acting as such, and neither such authorization by such Directors nor such
execution and delivery by such Officer shall be deemed to have been made by
any of them individually or to impose any liability on any of them
personally, and the obligations of this Agreement are not binding upon any
of the Directors or Shareholders of the Fund, but bind only the property of
the Fund.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their respective corporate officers thereunder duly authorized as of the day
and year first above written.
INVESTORS RESEARCH FUND, INC.
By: Hugh J. Haferkamp /s/ Hugh J. Haferkamp
--------------------------------
Signature
Title: President
--------------------------------
Date:
Agreed and Accepted by:
ND RESOURCES, INC.
By: Robert E. Walstad /s/ Robert E. Walstad
--------------------------------
Signature
Title: President
--------------------------------
Date:
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<PAGE>
APPENDIX A
We, Hugh J. Haferkamp, President, and Michael A. Marshall, Secretary, of
Investors Research Fund, Inc. (the "Fund"), a corporation organized under the
laws of the State of Delaware, do hereby certify that the following individuals
have been duty authorized as Authorized Persons to give Oral Instructions and
Written Instructions on behalf of the Fund, and the signatures set forth
opposite their respective names are their true and correct signatures:
Name(s): Signature(s):
Name of Authorized Person
Names of Authorized Person
Hugh J. Haferkamp
President
Michael A. Marshal
Secretary
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<PAGE>
SCHEDULE A
FEE SCHEDULE
TRANSFER AGENT CHARGES
ND RESOURCES, INC.
Transfer Agency Fee Schedule
(Per portfolio)
PER MONTH MINIMUM(1) $2,125.00 per month
EQUITY FUNDS $16.25 per account(2) per year on first
15,000 Accounts; and $15.25 per account, per year thereafter
FIXED INCOME FUNDS $17.25 per account, per year
EDGAR FORMATTING (for filings which are
not included under Section F of Exhibit
1 to Schedule B):
Word processing conversion to EDGAR $10.00 per page
Desk top Publishing
(Quark Xpress/Pagemaker)
Conversion to EDGAR $25.00 per page
Rush Charge(3) $10.00 per page
TOTAL PAGES
PER FILING SETUP FEE
---------- ---------
1-50 $200.00
51-100 300.00
101-150 400.00
151-200 500.00
101-250 600.00
251-300 700.00
301-350 800.00
351-400 900.00
400+ 950.00
SPECIAL SERVICES $75.00 per hour
OUT-OF-POCKET EXPENSES Passed through to Fund at cost
- ----------
(1) The Fund will pay a monthly minimum charge of $2,125 until such time as the
account-based charges exceed the monthly minimum. At that point, the
account-based charges will supersede the $2,125 monthly minimum.
(2) Per-account charges are calculated on open accounts. Open accounts include
any account with a current share balance and/or beginning-of-year balance.
(3) Rush charges will be applied to all EDGAR formatting which is not received
by the Transfer Agent at least 2 business days prior to filing date.
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<PAGE>
SCHEDULE B
DUTIES OF THE TRANSFER AGENT (See
Exhibit I for Summary of Services.)
1. SHAREHOLDER INFORMATION.
The Transfer Agent shall maintain a record of the number of Shares
held by each holder of record which shall include his address and taxpayer
identification number and which shall indicate whether such Shares are held
in certificated or uncertificated form.
2. SHAREHOLDER SERVICES.
The Transfer Agent will investigate all Shareholder inquiries relating
to Shareholder accounts and will answer all correspondence from
Shareholders and others relating to its duties hereunder and such other
correspondence as may from time to time be mutually agreed upon between the
Transfer Agent and the Fund. The Transfer Agent shall keep records of
Shareholder correspondence and replies thereto and of the lapse of time
between the receipt of such correspondence and the mailing of such replies.
3. STATE REGISTRATION REPORTS.
The Transfer Agent shall furnish, on a state-by-state basis, sales
reports and such periodic and special reports as the Fund may reasonably
request, and such other information, including Shareholder lists and
statistical information concerning accounts, as may be agreed upon from
time to time between the Fund and the Transfer Agent.
4. MAILING COMMUNICATIONS TO SHAREHOLDERS; PROXY MATERIALS.
The Transfer Agent will address and mail to Shareholders of the Fund
all reports to Shareholders, dividend and distribution notices, and proxy
material for the Fund's meetings of Shareholders.
5. SALES OF SHARES.
(a) Processing of Investment Checks or Other Investments. Upon receipt of
any check or other instrument drawn or endorsed to it as agent for, or
identified as being for, the account of the Fund for the purchase of
Shares, the Transfer Agent shall forthwith process the check for
collection, and shall record the number of Shares sold, the trade date, the
price per Share, and the amount of money to be delivered to the Custodian
of the Fund for the sale of such Shares.
(b) Issuance of Shares. Upon receipt of notification that the Custodian has
received the amount of money specified in the immediately preceding
paragraph, the Transfer Agent shall issue to and hold in the account of the
purchaser/Shareholder, or if no account is specified therein, in a new
15
<PAGE>
account established in the name of the purchaser, the number of Shares such
purchaser is entitled to receive, as determined in accordance with
applicable federal law or regulation.
(c) Statements. On a quarterly basis, the Transfer Agent shall send to the
purchaser/Shareholder a statement of account which will show the new Share
balance, the Shares held under a particular plan, if any, for withdrawing
investments, the amount invested and the price paid for the newly purchased
Shares, or will be in such other form of statement as the Fund and the
Transfer Agent may agree from time to time.
(d) Suspension of Sale of Shares. The Transfer Agent shall not be required
to issue any Shares where it has received a Written Instruction from the
Fund or written notice from any appropriate federal or state authority that
the sale of the Shares of the Fund has been suspended or discontinued, and
the Transfer Agent shall be entitled to rely upon such Written Instructions
or written notification.
(e) Taxes in Connection with Issuance of Shares. Upon the issuance of any
Shares, in accordance with the foregoing provisions of this Section, the
Transfer Agent shall not be responsible for the payment of any original
issue or other taxes required to be paid in connection with such issuance.
(f) Returned Checks. In the event that any check or other order for the
payment of money is returned unpaid for any reason, the Transfer Agent
will:
(1) give prompt notice of such return to the Fund or its designee;
(2) place a stop transfer order against all Shares issued as a result
of such check or order; and
(3) take such actions as the Transfer Agent may from time to time
deem appropriate.
6. REDEMPTIONS.
(a) Requirements for Transfer or Redemption of Shares. The Transfer Agent
shall process all requests from Shareholders to transfer or redeem Shares
in accordance with the procedures set forth in the Prospectus and all
determinations of the number of Shares required to be redeemed to fund
designated monthly payments, automatic payments, or any other such
distribution or withdrawal plan.
The Transfer Agent will transfer or redeem Shares upon receipt of Written
Instructions and Share certificates, if any, properly endorsed for transfer
or redemption, accompanied by such documents as the Transfer Agent
reasonably may deem necessary to evidence the authority of the person
making such transfer or redemption, and bearing satisfactory evidence of
the payment of stock transfer taxes, if any.
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<PAGE>
Except to the extent inconsistent with the procedures set forth in the
Prospectus, the Transfer Agent reserves the right to refuse to transfer or
redeem Shares until it is satisfied that the endorsement on the
instructions is valid and genuine, and for that purpose it will require a
guarantee of signature by a member firm of a national securities exchange,
by any national bank or trust company, or by any member bank of the Federal
Reserve system. The Transfer Agent also reserves the right to refuse to
transfer or redeem Shares until it is satisfied that the requested transfer
or redemption is legally authorized, and it shall incur no liability for
the refusal, in good faith, to make transfers or redemptions which the
Transfer Agent, in its good judgment, deems improper or unauthorized, or
until it is reasonably satisfied that there is no basis to any claims
adverse to such transfer or redemption.
The Transfer Agent may, in effecting transactions, rely upon the
provisions of the Uniform Act for the Simplification of Fiduciary Security
Transfers or the provisions of Article 8 of the Uniform Commercial Code, as
the same may be amended from time to time in the State of North Dakota,
which in the opinion of legal counsel for the Fund or of its own legal
counsel protect it in not requiring certain documents in connection with
the transfer or redemption of Shares. The Fund may authorize the Transfer
Agent to waive the signature guarantee in certain cases by Written
Instructions.
For the purpose of the redemption of Shares which have been purchased
within 30 days of a redemption request, the Transfer Agent may refuse to
redeem such Shares until the Transfer Agent has received fed funds for the
purchase of such Shares.
(b) Notice to Custodian and Fund. When Shares are redeemed, the Transfer
Agent shall, upon receipt of the instructions and documents in proper form,
deliver to the Custodian and the Fund a notification setting forth the
dollar amount to be redeemed. Such redemptions shall be reflected on
appropriate accounts maintained by the Transfer Agent reflecting
outstanding Shares and Shares attributed to individual accounts and, if
applicable, any individual withdrawal or distribution plan.
(c) Payment of Redemption Proceeds. The Transfer Agent shall, upon receipt
of the moneys paid to it by the Custodian for the redemption of Shares, pay
to the Shareholder, or his authorized agent or legal representative, such
moneys as are received from the Custodian, all in accordance with the
redemption procedures described in the Prospectus; provided, however, that
the Transfer Agent shall pay the proceeds of any redemption of Shares
purchased within 30 days of a redemption request to the Transfer Agent,
upon a determination that good funds have been collected for the purchase
of such Shares. The Fund shall indemnify the Transfer Agent for any payment
of redemption proceeds or refusal to make such payment if the payment or
refusal to' pay is in accordance with this Section.
The Transfer Agent shall not process or effect any redemptions
pursuant to a plan of distribution or redemption or in accordance with any
other Shareholder request upon the receipt by the Transfer Agent of
notification of the suspension of the determination of the Fund net asset
value.
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<PAGE>
7. DIVIDENDS.
(a) Notice to Transfer Agent and Custodian. Upon the declaration of each
dividend and each capital gains distribution by the Board of Directors of
the Fund, with respect to Shares, the Fund shall furnish to the Transfer
Agent a copy of a resolution of its Board of Directors, certified by the
Secretary, setting forth, with respect to the Shares, the date of the
declaration of such dividend or distribution, the ex-dividend date, the
date of payment thereof, the record date as of which Shareholders entitled
to payment shall be determined, the amount payable per Share to the
Shareholders of record as of that date, the total amount payable to the
Transfer Agent on the payment date, and whether such dividend or
distribution is to be paid in Shares at net asset value.
On or before the payment date specified in such resolution of the
Board of Directors, the Fund will cause the Custodian of the Fund to pay to
the Transfer Agent sufficient cash to make payment to the Shareholders of
record as of such payment date.
(b) Payment of Dividends by the Transfer Agent. The Transfer Agent will, on
the designated payment date, automatically reinvest all dividends in
additional Shares at net asset value (determined on such date) and mail to
each Shareholder, on a quarterly basis, at his address of record, or such
other address as the Shareholder may have designated, a statement showing
the number of full and fractional Shares (rounded to three decimal places)
then currently owned by the Shareholder, and the net asset value of the
Shares so credited to the Shareholder's account; provided, however, that if
the Transfer Agent has on file a direction by the Shareholder to pay income
dividends or capital gains dividends, or both, in cash, such dividends
shall be paid in accordance with such instructions; and provided further,
that in the event of the return of two consecutive dividend checks as
undeliverable, Transfer Agent shall consider the account to be abandoned
property, and shall initiate measures to locate lost shareholder(s), in
accordance with Rules 17Ad- 1 7 and 17a-24 under the Securities Exchange
Act of 1934.
(c) Insufficient Funds for Payments. If the Transfer Agent does not receive
sufficient cash from the Custodian to make total dividend and/or
distribution payments to all Shareholders of the Fund, as of the record
date, the Transfer Agent will, upon notifying the Fund, withhold payment to
all Shareholders of record, as of the record date, until such sufficient
cash is provided to the Transfer Agent.
(d) Information Returns. It is understood that the Transfer Agent shall
file such appropriate information returns concerning the payment of
dividends, return of capital, and capital gain distributions with the
proper federal, state, and local authorities as are required by law to be
filed and shall be responsible for the withholding of taxes, if any, due on
such dividends or distributions to Shareholders when required to withhold
taxes under applicable law.
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<PAGE>
8. SHARE CERTIFICATES.
(a) At the expense of the Fund, it shall supply the Transfer Agent or its
agent with an adequate supply of blank share certificates to meet the
Transfer Agent's or its agent's requirements therefor. Such Share
certificates shall be properly signed by facsimile. The Fund agrees
that, notwithstanding the death, resignation, or removal of any
officer of the Fund whose signature appears on such certificates, the
Transfer Agent or its agent may continue to countersign certificates
which bear such signatures until otherwise directed by Written
Instructions.
(b) The Transfer Agent or its agent shall issue replacement Share
certificates in lieu of certificates which have been lost, stolen or
destroyed, upon receipt by the Transfer Agent or its agent of properly
executed affidavits and lost certificate bonds, in form satisfactory
to the Transfer Agent or its agent, with the Fund and the Transfer
Agent or its agent as obligee under the bond.
(c) The Transfer Agent or its agent shall also maintain a record of each
certificate issued, the number of Shares represented thereby and the
holder of record. With respect to Shares held in open accounts or
uncertificated form, i.e., no certificate being issued with respect
thereof, including their names, addresses and taxpayer identification.
The Transfer Agent or its agent shall further maintain a stop transfer
record on lost and/or replaced certificates.
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Exhibit I to Schedule B
SUMMARY OF SERVICES
The services to be performed by the Transfer Agent shall be as follows:
A. DAILY RECORDS
Maintain daily the following information, with respect to each Shareholder
account, as received:
* Name and Address
* State of residence code
* Taxpayer identification number
* Beneficial owner code (i.e., custodian, joint tenant, etc.)
* Balance of Shares held by Transfer Agent
* Number of Shares held in certificate form
* Dividend payment code
B. OTHER DAILY ACTIVITY
* Answer oral and written inquiries relating to Shareholder accounts
(Matters relating to portfolio management, distribution of Shares, and
other management policy questions will be forwarded to the Fund.).
* Open new accounts and maintain records of exchanges between accounts.
* Process dividends and disbursements into established Shareholder
accounts in accordance with Written Instructions from the Transfer
Agent.
* Examine and process Share purchase applications in accordance with the
Prospectus.
* Furnish Forms W-9 to all Shareholders whose initial subscriptions for
Shares did not include a taxpayer identification number.
* Process additional payments into established Shareholder accounts in
accordance with the Prospectus.
* Upon receipt of proper instructions and all required documentation,
process requests for redemption of Shares.
* Identify redemption requests made with respect to accounts in which
Shares have been purchased within an agreed-upon period of time for
determining whether good funds have been collected with respect to
such purchase and process as agreed by the Transfer Agent and the
Fund, in accordance with written procedures set forth in the Fund's
Prospectus.
* Examine and process all transfers of Shares, ensuring that all
transfer requirements and legal documents have been supplied.
* Issue and mail replacement checks.
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* Maintain a toll-free telephone number (at the Fund's expense) for use
by the Fund's Shareholders, with the provision for the recording of
such calls.
C. DIVIDEND ACTIVITY
* Calculate and process dividends and distributions, as instructed by
the Fund.
* Compute, prepare, and mail all necessary reports to Shareholders,
federal, and/or state authorities, as requested by the Fund.
D. REPORTS PROVIDED TO THE FUND
Provide monthly reports to the Fund, including:
* Fund financial statements (e.g., Balance Sheet and Income Statement)
* Blue sky reports
* Monthly Form N-SAR information (sales/redemptions)
* Monthly report of outstanding Shares
* Monthly analysis of accounts by beneficial owner code
* Monthly analysis of accounts by Share range
* Analysis of sales by state
E. MEETINGS OF SHAREHOLDERS
* Cause to be mailed, proxy, and related material, for all meetings of
Shareholders. Tabulate returned proxies (Proxies must be adaptable to
mechanical equipment of the Transfer Agent or its agents.) and supply
daily reports when sufficient proxies have been received. Costs
incurred in providing this service will be billed to the Fund as an
out-of-pocket expense of the Transfer Agent.
* Prepare and submit to the Fund an Affidavit of Mailing.
* At the time of the meeting, furnish a certified list of Shareholders.
F. PERIODIC ACTIVITIES
* Cause to be mailed reports, Prospectuses, and any other enclosures
requested by the Fund (Material must be adaptable to mechanical
equipment of Transfer Agent or its agents.)
* EDGAR formatting and filing with the Commission of the Fund's
Semi-Annual Report, Annual Report, Form N-SAR, Form N I -A, and Proxy
Statement (once annually for each report listed above, except Form
N-SAR, which shall be formatted and filed twice annually).
* Maintain Fund/SERV and related networking levels.
* Provide ACH transaction capabilities.
* Commission determinations and processing.
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SCHEDULE C
OUT-OF-POCKET EXPENSES
The Fund shall reimburse the Transfer Agent monthly for applicable
out-of-pocket expenses, including, but not limited to, the following items:
1. Abandoned Property Monitoring and Reporting
2. Conversion/deconversion charges
3. Courier services
4. Daily & Distribution advice mailings
5. Duplicating services
6. Federal Reserve charges for check clearance
7. Microfiche/microfilm production
8. NSCC charges levied by NSCC for those expenses incurred by the Fund
9. Postage (bulk, pre-sort, ZIP+4, bar-coding, first class) and postage
insurance
10. Printing costs, including certificates, envelopes, checks and
stationery
11. Outside services required for proxy solicitations, mailings and
tabulations
12. Record retention, retrieval and destruction costs, including, but not
limited to, exit fees charged by third party record keeping vendors
13. Shipping, Certified and Overnight mail, and insurance
14. Telephone and telecommunication costs, including all lease,
maintenance and line costs
15. Terminals, communications lines, printers and other equipment and any
expenses incurred in connection with such terminals and lines
16. Third party audit reviews, not ordered by the Transfer Agent
17. Wire charges
18. Year-end form production and mailings
19. Such other miscellaneous expenses reasonably incurred by the Transfer
Agent in performing its duties and responsibilities under this
Agreement.
The Fund will promptly reimburse the Transfer Agent for any other
unscheduled expenses incurred by the Transfer Agent, whenever such expenses are
not otherwise properly borne by the Transfer Agent as part of its duties and
obligations under the Agreement.
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