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As filed with the Securities and Exchange Commission
February 28, 1997
File Nos. 33-85332 and 811-8824
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
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Post-Effective Amendment No. 4 [X]
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AND
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 5
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(Check appropriate box or boxes.)
INTEGRITY FUND OF FUNDS, INC.
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(Exact Name of Registrant as Specified in Charter)
1 North Main, Minot, North Dakota 58703
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code:
(701) 852-5292
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Robert E. Walstad
President
Integrity Fund of Funds, Inc.
1 North Main
Minot, North Dakota 58703
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(Name and Address of Agent for Service)
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It is proposed that this filing will become effective (check appropriate box):
X immediately upon filing pursuant to paragraph (b)
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on (date) pursuant to paragraph (b)
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60 days after filing pursuant to paragraph (a)
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on (date) pursuant to paragraph (a) of Rule 485.
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Registrant has registered an indefinite number of its shares under the
Securities Act of 1933 pursuant to Section 24(f) of the Investment Company Act
of 1940, Registrant's Rule 24f-2 Notice for the fiscal year ended December 31,
1996, was filed on or before February 28, 1997.
Page 1 of 60 pages
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INTEGRITY FUND OF FUNDS, INC.
CROSS REFERENCE SHEET
Pursuant to Rule 495(a)
<TABLE>
<CAPTION>
Part A
Item
Number Prospectus Caption
<C> <S> <C>
1. Cover Page..................................... Cover Page
2. Synopsis....................................... FEE AND EXPENSE TABLE
and SYNOPSIS
3. Condensed Financial Information................ FINANCIAL HIGHLIGHTS
4. General Description of Registrant.............. GENERAL DESCRIPTION OF
THE FUND
5. Management of the Fund......................... MANAGEMENT
5A. Management's Discussion of Fund Performance.... Inapplicable
6. Capital Stock and Other Securities............. SHARES
7. Purchase of Securities Being Offered........... PURCHASE OF SHARES
8. Redemption or Repurchase....................... REDEMPTION OF SHARES
9. Pending Legal Proceedings...................... Inapplicable
Part B
Item Statement of Additional
Number Information Caption
10. Cover Page..................................... Cover Page
11. Table of Contents.............................. TABLE OF CONTENTS
12. General Information and History................ Inapplicable
13. Investment Objectives and Policies............. INVESTMENT RESTRICTIONS
and TEMPORARY
INVESTMENTS
14. Management of the Fund......................... MANAGEMENT OF THE FUND
15. Control Persons and Principal Holders of
Securities..................................... CONTROL PERSONS AND
PRINCIPAL HOLDERS
OF SECURITIES
16. Investment Advisory and Other Services......... INVESTMENT ADVISORY
AND OTHER SERVICES
17. Brokerage Allocation and Other Practices....... PORTFOLIO TRANSACTIONS
18. Capital Stock and Other Securities............. Included in Prospectus
19. Purchase, Redemption and Pricing of Securities
Being Offered................................ PURCHASE AND REDEMPTION
OF SHARES
20. Tax Status..................................... DIVIDENDS AND TAXES
21. Underwriters................................... UNDERWRITER
22. Calculation of Performance Data................ CALCULATION OF
PERFORMANCE DATA
23. Financial Statements........................... FINANCIAL STATEMENTS
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Part C
Item
Number Page
<C> <S> <C>
24. Financial Statements and Exhibits................................. C-1
25. Persons Controlled by or Under Common Control with Registrant..... C-2
26. Number of Holders of Securities................................... C-2
27. Indemnification................................................... C-2
28. Business and Other Connections of Investment Adviser.............. C-2
29. Principal Underwriters............................................ C-3
30. Location of Accounts and Records.................................. C-3
31. Management Services............................................... C-3
32. Undertakings...................................................... C-4
33. Signature Page.................................................... C-4
</TABLE>
<PAGE>
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[LOGO OF INTEGRITY FUND OF FUNDS, INC. APPEARS HERE]
INTEGRITY FUND OF FUNDS, INC.
1 North Main . Minot, North Dakota 58703 . (701) 852-5292
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Prospectus May 1, 1996 (As amended June 25, 1996 and February 28, 1997)
Integrity Fund of Funds, Inc. (the "Fund"), is an open-end, diversified,
management investment company. The Fund's objective is long-term capital
appreciation and growth of income. The Fund seeks to achieve this objective by
investing primarily in a diversified group of other open-end investment
companies ("underlying funds") which, in turn, invest principally in equity
securities. Current income is a secondary objective of the Fund.
Shares of the Fund are offered for sale at net asset value without a sales
charge. A contingent deferred sales charge is assessed on certain redemptions,
however (See Contingent Deferred Sales Charge.). See PURCHASE OF SHARES for
information about commissions and fees paid to dealers who sell shares and
provide personal services to shareholders. An investor in the Fund will not only
bear a proportionate fair of the expenses of the Fund, but will also indirectly
bear a share of similar expenses of the underlying funds.
This Prospectus contains information about the Fund that a prospective
investor should know before investing and should be retained for future
reference. More detailed information concerning the Fund is contained in the
Statement of Additional Information dated May 1, 1996 (as amended June 25, 1996
and February 28, 1997), which has been filed with the Securities and Exchange
Commission and is incorporated into this Prospectus by reference. A free copy of
the Statement of Additional Information may be obtained by contacting the Fund
at the address or telephone number at the top of the page.
<TABLE>
<CAPTION>
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TABLE OF CONTENTS
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<S> <C>
Fee and Expense Table............. 2
Synopsis.......................... 3
Financial Highlights.............. 4
General Description of the Fund... 5
Risks and Other Considerations.... 7
Management........................ 8
Shares............................ 10
Purchase of Shares................ 12
Redemption of Shares.............. 15
Performance Data.................. 16
Appendix.......................... 17
</TABLE>
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
FEE AND EXPENSE TABLE
The purpose of the Fee and Expense Table is to assist the investor in
understanding the various costs and expenses that an investor in the Fund will
bear directly or indirectly. For more complete descriptions of these costs and
expenses, see MANAGEMENT, PURCHASE OF SHARES, and REDEMPTION OF SHARES.
----------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases........................................ None
Maximum Sales Load Imposed on Reinvested Dividends............................. None
Maximum Deferred Sales Load (as a percentage of redemption proceeds)........... 1.50% (1)
Redemption Fees................................................................ None
Exchange Fees.................................................................. None
Annual Fund Operating Expenses (as a percentage of average net assets)
Management Fees................................................................ 0.90% (2)
12b-1 Fees..................................................................... None
Other Expenses................................................................. 0.45% (3)
Service Fees.................................................................. 0.25% (4)
Total Fund Operating Expenses.................................................. 1.60%
</TABLE>
<TABLE>
<CAPTION>
Example (5) 1 Year 3 Years 5 years 10 years
<S> <C> <C> <C> <C>
You would pay the following expenses on a
$1,000 investment, assuming (i) 5% annual
return and (ii) redemption at the end
of each time period: $31.00 $66.00 $102.00 $190.00
You would pay the following expenses on the
same investment, assuming no redemption: $16.00 $51.00 $ 87.00 $190.00
</TABLE>
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(1) As more fully explained under Contingent Deferred Sales Charge, a charge
equal to 1.5% of the redemption proceeds is assessed, with certain exceptions,
against shares which are redeemed within the first five years of their purchase.
(2) The management fees are higher than those paid by most other investment
companies. An investor will bear not only his or her proportionate share of the
Fund's transactional and operating expenses but also similar expenses of the
funds in which the Fund invests.
(3) "Other Expenses," which are estimated, include transfer agent, custodian,
legal, accounting, and similar fees paid by the Fund.
(4) The Fund pays dealers fees up to 0.25% of the Fund's net assets for
personal service to shareholders and/or the maintenance of shareholder accounts.
(5) The example is based upon percentages in the table above and should not be
considered a representation of past or future expenses. Actual expenses may be
greater or lesser than those shown. The Securities and Exchange Commission
requires the use of an assumed 5% annual return. The example assumes the
reinvestment of all dividends and distributions. All dollar figures have been
rounded to the nearest dollar.
2
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SYNOPSIS
Investment Objective; Permitted Investments
The Fund is an open-end, diversified, management investment company. The
Fund's objective is long-term capital appreciation and growth of income. The
Fund seeks to achieve this objective by investing primarily in a diversified
group of underlying funds which, in turn, invest principally in equity
securities. Current income is a secondary objective of the Fund. There is no
assurance that the Fund's objective will be achieved. See Investment Objective,
Policies, and Restrictions.
Investment Adviser and Underwriter
ND Money Management, Inc. (the "Investment Adviser"), has been retained under
an Investment Advisory Agreement to act as the Fund's investment adviser. The
Investment Adviser furnishes the Fund with investment advice and, in general,
supervises the management and investment program of the Fund. Under the
Investment Advisory Agreement, the Fund has agreed to pay the Investment Adviser
an annual fee, payable monthly, of 0.90% of the Fund's average daily net assets.
See Investment Adviser.
ND Capital, Inc. (the "Underwriter"), is the Fund's principal underwriter. See
PURCHASE OF SHARES.
Purchases and Redemptions
Shares may be purchased from investment dealers who have sales agreements with
the Underwriter or from the Underwriter at the public offering price, which is
the net asset value next determined after the Fund receives an order. The
minimum initial investment is $1,000 ($100 for the Monthomatic Investment Plan
and $250 for an Individual Retirement Account), and subsequent investments must
be at least $50. See PURCHASE OF SHARES. No sales charge is imposed when shares
are purchased. However, a contingent deferred sales charge is imposed if certain
shares are redeemed within five years after their purchase. See Contingent
Deferred Sales Charge.
Investors in the Fund
The Fund is designed for persons who are seeking long-term capital
appreciation and growth of income from a portfolio consisting of shares of
underlying funds which invest principally in equity securities. Current income
is a secondary objective of the Fund. Through an investment in shares of the
Fund, investors receive the benefits of diversification of investment,
professional management, and liquidity. In addition, the Fund offers the
economic advantages of block purchases of securities and relief from
administrative details, such as accounting for distributions and the safekeeping
of securities. The Fund's yield and net asset value will fluctuate.
Dividends
The Fund distributes any net investment income and net realized capital gains
at least annually. Unless otherwise directed all dividends and distributions
generally will be reinvested automatically at net asset value in additional
shares of the Fund.
Organization; Share Attributes; Meetings
The Fund is organized as a corporation under the laws of the State of North
Dakota and is authorized to issue a total of one billion shares, all of one
class and one series, with a par value of $.0001 per share. Shares are fully
paid and nonassessable when issued, are redeemable and freely transferable, and
have equal voting rights and preferences in all matters, including voting. There
are no subscription, preemptive, or conversion rights. Regular meetings of
shareholders will not be held unless required under the North Dakota Business
Corporation Act or the Investment Company Act of 1940 (the "1940 Act"). Special
3
<PAGE>
meetings of shareholders may be called for any purpose at any time in the
manner prescribed under the North Dakota Business Corporation Act.
Risk Factors
An investment in the Fund is subject to a number of different risks, some of
which are described under Investment Objective, Policies, and Restrictions and
RISKS AND OTHER CONSIDERATIONS, and in the APPENDIX. Investing in a portfolio of
underlying funds involves additional expenses and results in tax consequences
which would not occur in a direct investment in mutual funds. In addition,
federal law imposes restrictions on the purchase of underlying funds' shares by
the Fund. As with other mutual funds, there can be no assurance that the Fund
will achieve its objective. Finally, the Fund was organized recently and has
only a brief history of operations.
FINANCIAL HIGHLIGHTS
Selected per share data and ratios in the table have been derived from the
financial statements of the Fund which have been audited by Brady, Martz &
Associates, P.C. ("Brady, Martz"), the Fund's independent public accountant. The
Fund's complete, current audited financial statements, including Brady, Martz'
report thereon, are contained in the Statement of Additional Information.
Further information about the Fund's performance is contained in the 1996 Annual
Report to shareholders. Copies of the Statement of Additional Information and
1996 Annual Report may be obtained from the Fund upon request and without
charge.
<TABLE>
<CAPTION>
For the Year Ended For the Year Ended
December 31, 1996 December 31, 1995
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<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD........................ $11.76 $10.00
-----------------------------------------
Income from Investment Operations:.
Net investment income (loss)........................... $ .10 $ .22
Net realized and unrealized gain (loss) on investment
and futures transactions............................... 1.53 2.30
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Total From Investment Operations................... $ 1.63 $ 2.52
-----------------------------------------
Less Distributions:
From net investment income............................. $ (.10) $ (.22)
From net realized gain on investments.................. (.76) (.54)
-----------------------------------------
Total Distributions................................ $ (.86) $ (.76)
NET ASSET VALUE, END OF PERIOD.............................. $12.53 $11.76
=========================================
Total Return................................................ 13.84%(A) 25.20%(A)
Ratios/Supplemental Data:...................................
Net assets, end of period (in thousands)............... $11,406 $4,362
Ratio of net expenses (after expense assumption) to
average net assets..................................... 1.63%(B) 1.59%(B)
Ratio of net investment income to average net
assets................................................ 0.98% 4.00%
Portfolio turnover rate................................ 50.11% 15.30%
</TABLE>
(A) Excludes contingent deferred sales charge of 1.5%.
(B) During the years ended December 31, 1996 and 1995, ND Holdings, Inc.
assumed expenses of $39,760 and $40,714. If the expenses had not been
assumed, the annualized ratio of total expenses to average net assets would
have been 2.08% and 3.60%, respectively.
4
<PAGE>
GENERAL DESCRIPTION OF THE FUND
Organization and Classification
The Fund is an open-end, diversified, management company, which is a type of
company commonly known as a "mutual fund." The Fund was incorporated under the
laws of the State of North Dakota on June 1, 1994.
Investment Objective, Policies, and Restrictions
The Fund's investment objective is long-term capital appreciation and growth
of income. The Fund seeks to achieve this objective by investing in a
diversified group of approximately fifteen to fifty underlying funds which
invest primarily in common stock or securities convertible into or exchangeable
for common stock (such as convertible preferred stock, convertible debentures,
or warrants) and which seek long-term capital appreciation with current income
of secondary importance. Under normal circumstances, the Fund will invest at
least 65% of its total assets in shares of underlying funds. For temporary
defensive purposes, the underlying funds may also invest in (or enter into
repurchase agreements with banks and broker-dealers with respect to) corporate
bonds, U.S. Government securities, commercial paper, certificates of deposit, or
other money market instruments.
The Fund may also invest in underlying funds which invest primarily in long or
short-term bonds and other fixed income securities (such as securities issued,
guaranteed, or insured by the U.S. Government, its agencies or
instrumentalities, commercial paper, preferred stock, convertible preferred
stock, or convertible debentures) whenever the Investment Adviser thinks that
such funds offer a potential for capital appreciation. The underlying funds may
invest in both investment-grade and non-investment grade bonds. See RISKS AND
OTHER CONSIDERATIONS and the APPENDIX to this Prospectus.
Although it invests primarily in shares of underlying funds, for temporary
defensive purposes or to accumulate cash for investments or redemptions, the
Fund may hold cash or invest in money market mutual funds or in a variety of
short-term debt securities, including U.S. Treasury bills and other U.S.
Government securities, commercial paper, certificates of deposit, and bankers'
acceptances. Cash held for investments or redemptions may not exceed 35% of the
Fund's total assets. See TEMPORARY INVESTMENTS in the Statement of Additional
Information.
The Fund may also purchase and sell stock index futures contracts and options
on stock index futures contracts. For a description of these securities and the
risks associated with them, see Futures Contracts and Options on Futures
Contracts in the APPENDIX. See, also, Regulatory Restrictions under
INVESTMENT RESTRICTIONS in the Statement of Additional Information concerning
regulations which restrict or limit the use of futures contracts and options
thereon.
The Fund has adopted certain fundamental investment policies which, together
with the investment objective of the Fund, cannot be changed without approval by
holders of a majority of the outstanding shares. As defined in the 1940 Act,
this means the lesser of the vote of (a) 67% of the outstanding shares of the
Fund present at a meeting where more than 50% of the outstanding shares are
present in person or by proxy; or (b) more than 50% of the outstanding shares of
the Fund. The Fund has also adopted a number of other investment policies which
are not fundamental and, therefore, may be changed by the Board of Directors
without shareholder approval.
Under its fundamental investment policies, the Fund will invest at least 25%
of its total assets in shares of underlying funds. The Fund may not invest more
than 25% of its total assets in the securities of companies in the same industry
or in securities of underlying funds which concentrate (i.e., invest 25% or more
of total assets) in any one industry. Neverthless, through its investment in
underlying funds, the Fund
5
<PAGE>
may invest more than 25% of its assets in one industry. The Fund may borrow
money from a bank for temporary or emergency purposes, but only in amounts not
exceeding the lesser of 10% of its total assets valued at cost or 5% of its
total assets valued at market, and, in any event, only if immediately thereafter
there is an asset coverage of at least 300%. The Fund will not purchase
portfolio securities when outstanding borrowings exceed 5% of the total assets.
Interest paid on borrowed funds will decrease the net earnings of the Fund. The
Fund may mortgage, pledge, or hypothecate its assets in an amount not exceeding
10% of its total assets to secure temporary or emergency borrowing.
Under its non-fundamental investment policies, the Fund may not make short
sales of securities or invest in interests in oil, gas, or other mineral
exploration or development programs, although it may invest in securities of
issuers which invest in or sponsor such programs.
For a more complete description of the Fund's investment policies and
restrictions, see INVESTMENT RESTRICTIONS in the Statement of Additional
Information.
Selection of Underlying Funds
The Investment Adviser exercises broad discretion in choosing which underlying
funds to include in the Fund's portfolio. The primary consideration in the
selection process is that a prospective fund advance the Fund's stated
investment objective of achieving long-term capital appreciation and growth of
income. Within that context, the Investment Adviser reviews and evaluates a
fund's investment objective, policies, and techniques, past performance, and
management. Other criteria considered in making a determination include fund
size, ability, reputation, and style of the investment adviser, transaction and
operating expenses and fees, portfolio composition and liquidity, and quality
and types of shareholder services provided.
Although the Investment Adviser is not required to adhere to any minimum
specifications or quality standards in selecting underlying funds, it is likely
that any funds included in the Fund's portfolio will be sizeable, established
funds. The Fund will not purchase shares of closed-end investment companies or
of investment companies which are not registered with the Securities and
Exchange Commission. In addition, the Fund intends to invest only in underlying
funds wihch qualify for treatment as a regulated investment company ("RIC")
under the Internal Revenue Code of 1986, as amended. If a fund fails to qualify
as a RIC, it may be subject to federal income tax. No assurance can be given
that an underlying fund will qualify as a RIC. However, the fund will promptly
dispose of any shares in its portfolio which have been issued by a fund which
has failed to qualify as a RIC. Under normal circumstances, the Fund will invest
in approximately fifteen to fifty underlying funds and may invest up to 25% of
its total assets in any one underlying fund.
The Fund may acquire shares of underlying funds irrespective of whether such
funds impose sales loads of various kinds or have 12b-1 or other distribution
plans or expenses. However, whenever possible, the Fund will purchase shares
pursuant to arrangements which provide for (1) quantity discounts under which
lower front-end loads are available for substantial minimum purchases; (2)
letters of intent, permitting reduced front-end loads by aggregating intended
purchases over time; (3) rights of accumulation, permitting reduced front-end
loads for purchases of additional shares of the underlying fund; and (4) rights
to obtain reduced front-end sales loads by aggregating purchases of several
funds within a family of funds. Because of available discounts such as the
foregoing, it is likely that any sales related charges paid by the Fund will not
exceed 1% of the public offering price (1.01% of the net amount invested) in
most cases.
6
<PAGE>
RISKS AND OTHER CONSIDERATIONS
There are a number of risks and other considerations which a potential
investor in the Fund should consider. Some of these relate to an investment in a
security of any kind, others are peculiar to a fund which invests in other
funds, and still others concern certain legal requirements applicable to funds
which invest in other funds.
First, an investment in any security involves a certain amount of risk, and
this is true of an investment in the Fund, too. Although the Fund diversifies
its portfolio by investing in several underlying funds, which tends to minimize
risk somewhat, it does not eliminate risk altogether.
Second, the underlying funds have their own investment objectives, policies,
practices, and techniques, any one or all of which may subject their assets to
varying degrees of risk. For example, the underlying funds in which the Fund
invests may be authorized to invest up to 100% of their assets in securities of
foreign issuers and engage in foreign currency transactions with respect to
these investments; invest up to 15% of their assets in restricted or illiquid
securities; invest up to 5% of their assets in warrants; lend their portfolio
securities; sell securities short; borrow money in amounts up to 33 1/3% of
their assets for leverage purposes; write or purchase call or put options on
securities or stock indexes; concentrate more than 25% of their assets in one
industry; invest up to 100% of their assets in master demand notes; enter into
futures contracts and options on futures contracts; trade their portfolios
aggressively, which results in higher brokerage commissions and increased
realization of capital gains; invest in start-up and unproven companies; invest
up to 100% of their assets in junk bonds; and engage in any number of other
investment practices and techniques that involve greater risks. The risks
involved in certain of these practices and techniques are described in the
APPENDIX to this Prospectus.
Furthermore, the Fund is independent from any of the underlying funds in which
it invests and has little voice in or control over the investment practices,
policies, or decisions of those funds. If the Fund disagrees with those
practices, policies, or decisions, it may have no choice other than to liquidate
its investment in that fund, which can entail further losses. Also, the
investment advisers of the underlying funds may simultaneously pursue
inconsistent or contradictory courses of action; for example, one fund may be
purchasing securities of the same issuer whose securities are being sold by
another underlying fund, with the result that the Fund would incur an indirect
expense without any corresponding investment or economic benefit.
Expenses and tax consequences are other areas in which the Fund differs from
most other funds. An investor who invests directly in a fund may pay certain
transactional expenses (for example, sales commissions or deferred sales
charges), as well as a pro rata share of the fund's operating expenses (such as
management fees, distribution fees, and other expenses). An investor in the
Fund, on the other hand, must not only pay transactional and operating expenses
related to the Fund, but must also pay a portion of similar expenses of the
underlying funds. So, an investor in the Fund will indirectly pay higher
expenses than if the underlying shares were owned directly. Furthermore, because
the Fund invests in other funds, an investor may receive taxable capital gains
distributions to a greater extent than if the underlying funds were owned
directly. See Dividends and Taxes.
Rules adopted by the Securities and Exchange Commission allow funds to elect
to make redemptions either in part or wholly in securities from their portfolios
("in kind" redemptions) instead of in cash under certain circumstances. If the
Fund acquires in kind securities from an underlying fund which has exercised
such an election, the Fund may hold the securities until the Investment Adviser
decides to sell them. Fund
7
<PAGE>
assets invested in an underlying fund in excess of Rule 18f-1 limitations are
illiquid. The Fund will likely incur additional expenses in connection with the
sale of any securities acquired as a result of an in kind redemption.
Third, the 1940 Act imposes certain conditions on funds which invest in other
funds. For example, a fund and its affiliated persons may not purchase or
otherwise acquire more than 3% of the total outstanding stock of another fund.
Consequently, the Fund may have to forgo what the Investment Adviser deems to be
an advantageous purchase because of this restriction. The 1940 Act also provides
that an underlying fund is not obligated to redeem any securities in an amount
exceeding 1% of its total outstanding securities during any period of less than
30 days. As a result of this provision, the Investment Adviser may be unable to
liquidate more than 1% of an underlying fund's securities should market or other
considerations indicate the advisability of doing so. Finally, the 1940 Act
requires that the Fund either seek instructions from its shareholders regarding
the voting of proxies with respect to securities of underlying funds it holds
and vote the proxies in accordance with such instructions or vote such shares in
the same proportion as the vote of all other holders of such securities.
MANAGEMENT
Board of Directors
Responsibility for overall management of the Fund rests with its Board of
Directors.
Investment Adviser
ND Money Management, Inc. (the "Investment Adviser"), has been retained under
an Investment Advisory Agreement to act as the Fund's investment adviser subject
to the authority of the Board of Directors. The Investment Adviser is a wholly-
owned subsidiary of ND Holdings, Inc. ("Holdings"), a North Dakota corporation.
The Investment Adviser was incorporated under North Dakota law on August 19,
1988, and also serves as investment adviser for ND Tax-Free Fund, Inc., ND
Insured Income Fund, Inc., Montana Tax-Free Fund, Inc., and South Dakota Tax-
Free Fund, Inc. The address of the Investment Adviser is 1 North Main, Minot,
North Dakota 58703.
The Investment Adviser furnishes the Fund with investment advice and, in
general, supervises the management and investment program of the Fund. The
Investment Adviser furnishes at its own expense all necessary administrative
services, office space, equipment, and clerical personnel for managing the
investments and effecting the portfolio transactions of the Fund. In addition,
the Investment Adviser pays the salaries and fees of all officers and directors
of the Fund who are affiliated persons of the Investment Adviser. Under the
Investment Advisory Agreement, the Fund has agreed to pay the Investment Adviser
an annual fee, payable monthly, of 0.90% of the Fund's average daily net assets.
During the fiscal year ended December 31, 1995 and 1996, the Fund incurred
advisory fees of $18,129 or 0.90%, and $81,395 or 0.90% of the Fund's average
net assets for the fiscal year.
Monte Avery, portfolio manager, is primarily responsible for the day-to-day
management of the Fund's portfolio under the supervision and direction of Robert
E. Walstad, president of the Fund. Mr. Avery has been portfolio manager since
January 1996. Mr. Walstad is also president of NDTax-Free Fund, Inc., NDInsured
Income Fund, Inc., Montana Tax-Free Fund, Inc., and South Dakota Tax-Free Fund,
Inc., and has supervised and directed the management of their portfolios since
they commenced operations.
8
<PAGE>
Custodian,Transfer Agent, and Accounting Services Agent
First Western Bank and Trust, 900 South Broadway, Minot, North Dakota 58701,
serves as Custodian for the Fund's portfolio securities and cash. NDResources,
Inc. ("Resources"), a wholly-owned subsidiary of NDHoldings, Inc., 1 North Main,
Minot, North Dakota 58703, is the Fund's Transfer Agent. As Transfer Agent,
Resources performs many of the Fund's clerical and administrative functions, for
which it is paid a monthly fee ranging from .16 of 1% of the net asset value of
all outstanding Fund shares up to $10 million down to .09 of 1% from $50,000,001
and larger. Resources also provides internal accounting and related services for
the Fund, for which it is paid a monthly fee of $2,000 plus 0.05% of the Fund's
average daily net assets on an annual basis for the first $50 million down to
0.01% for net assets in excess of $500 million.
Expenses
The expenses of the Fund are deducted from its total income before dividends
are paid. These expenses include, but are not limited to, organizational
expenses; taxes; interest; brokerage fees and commissions; fees and expenses of
directors and officers of the Fund who are not officers or directors of the
Investment Adviser; Securities and Exchange Commission fees and state securities
laws fees; charges of custodians and transfer and dividend disbursing agents;
insurance premiums; outside auditing and legal expenses; costs of maintenance of
the Fund's existence; costs attributable to investor services, including,
without limitation, telephone and personnel expenses; costs of preparing and
printing prospectuses and statements of additional information for regulatory
purposes and for distribution to existing shareholders; costs of shareholders'
reports and meetings of the shareholders of the Fund and of the officers and
Board of Directors of the Fund; and any extraordinary expenses.
For the fiscal year ended December 31, 1996, total expenses amounted to 2.08%
of the average net assets on an annualized basis. Net expenses (after expense
assumption by NDHoldings, Inc., the Fund's sponsor) for the same period amounted
to 1.63% of average net assets on an annualized basis. There can be no assurance
that the expense assumption will continue.
Portfolio Transactions
The Investment Adviser may consider a number of factors in determining which
brokers to use for the Fund's portfolio transactions. These factors include, but
are not limited to, research services, reasonableness of commissions, quality of
services and execution, and sales of Fund shares. Front-end sales loads
generally consist of a dealer reallowance (which typically amounts to at least
80% of the charge) and an underwriter's retention. The Underwriter will usually
be designated as the dealer entitled to receive the dealer reallowance portion
of the sales charge on purchases of load fund shares by the Fund. However, the
Underwriter will not retain any dealer reallowance in excess of 1% of the public
offering price on any transaction, nor will it be designated as the dealer
entitled to receive the dealer reallowance portion of the sales charge where
such reallowance would exceed 1% of the public offering price. In addition, the
Underwriter may receive 12b-1 fees and/or service fees from underlying funds
when assisting the Fund in purchasing shares of underlying funds. For further
details, see PORTFOLIO TRANSACTIONS in the Statement of Additional Information.
Although there are no restrictions on portfolio turnover, the portfolio
turnover rate of the Fund is not expected to exceed 100% annually. A 100% annual
turnover rate would occur, for example, if all the investments in the Fund's
portfolio (exclusive of securities with less than one year to maturity) were
replaced once in a period of one year. To the extent that the Fund purchases
shares of load funds, a higher turnover rate would result in correspondingly
higher sales loads paid by the Fund. Trading also may result in the realization
of net short-term capital gains which would not otherwise be realized, and
shareholders are taxed on such gains when distributed by the Fund at ordinary
income tax rates. See Dividends and Taxes. There is no limit on the portfolio
turnover rates of the underlying funds in which the Fund may invest.
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SHARES
Share Attributes
The Fund is authorized to issue a total of one billion shares, all of one
class and one series, with a par value of $.0001 per share. All shares, when
issued, are fully paid and non-assessable and are redeemable and freely
transferable. All shares are common shares and have equal rights and preferences
in all matters, including voting. Cumulative voting, a form of proportional
representation, is permitted in the election of directors. Under cumulative
voting, a shareholder may cumulate votes either by casting for one candidate a
number of votes equal to the number of directors to be elected multiplied by the
number of votes represented by the shares entitled to vote or by distributing
all of those votes on the same principle among any number of candidates. There
are no subscription, preemptive, or conversion rights.
Shareholder Meetings
It is probable that the Fund will not hold regular meetings of shareholders.
The Fund's Bylaws provide that regular meetings of shareholders may be held on
an annual or other less frequent basis but need not be held unless required by
law. Under the North Dakota Business Corporation Act, if a regular meeting of
shareholders has not been held during the immediately preceding fifteen months,
a shareholder or shareholders holding 5% or more of the voting power of all
shares entitled to vote may demand a regular meeting by written notice of demand
given to the president or secretary of the Fund. Within thirty days after
receipt of the demand, the Board of Directors must cause a regular meeting of
shareholders to be called, or if the Board fails to do so, the shareholder or
shareholders making the demand may call the meeting by giving notice as
prescribed by law. All necessary expenses of the notice and the meeting must be
paid by the Fund.
In addition to regular meetings, special meetings of shareholders may be
called for any purpose at any time in the manner prescribed under the North
Dakota Business Corporation Act. Meetings of shareholders will also be held
whenever required in order to comply with the 1940 Act; however, the Fund does
not intend to hold annual shareholder meetings. Shareholders have the right to
remove directors.
Pursuant to the 1940 Act, if an underlying fund submits a matter to its
shareholders for a vote, the Fund will vote the shares of the underlying fund
which it owns in the same proportion as the vote of all other holders of such
shares.
Dividends and Taxes
The Fund intends to qualify as a regulated investment company under Subchapter
M of the Internal Revenue Code of 1986, as amended (the "Code"). In any year in
which the Fund qualifies as a regulated investment company and distributes
substantially all of its investment company taxable income (which includes,
among other items, the excess of net short-term capital gains over net long-term
capital losses) and its net capital gains (the excess of net long-term capital
gains over net short-term capital losses), the Fund will not be subject to
federal income tax to the extent it distributes to shareholders such income and
capital gains in the manner required under the Code. Amounts not distributed on
a timely basis in accordance with a calendar year distribution requirement are
subject to a nondeductible 4% excise tax. To prevent imposition of the excise
tax, the Fund must distribute for each calendar year an amount equal to the sum
of (1) at least 98% of its net ordinary income (excluding any capital gains or
losses) for the calendar year, (2) at least 98% of the excess of its capital
gains over capital losses (adjusted for certain ordinary losses) realized during
the one-year period ending October 31 of such year, and (3) all ordinary
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income and capital gains for previous years that were not distributed during
such years. A distribution will be treated as paid on December 31 of the
calendar year if it is declared by the Fund in October, November, or December of
that year with a record date in such a month and paid by the Fund during January
of the following calendar year. Such distributions will be taxable to
shareholders in the calendar year in which the distributions are declared,
rather than the calendar year in which the distributions are received. The Fund
intends to distribute its income in accordance with this requirement to prevent
application of the excise tax.
Income received by the Fund from an underlying fund (including dividends and
distributions of short-term capital gains), as well as interest received on
money market instruments and net short-term capital gains received by the Fund
on the sale of underlying funds' shares, will be distributed by the Fund (after
deductions for expenses) and will be taxable to shareholders as ordinary income.
Because the Fund is actively managed and can realize taxable net short-term
capital gains by selling shares of an underlying fund with unrealized portfolio
appreciation, investing in the Fund rather than directly in the underlying funds
may result in increased tax liability to the shareholder, because the Fund must
distribute its gain in accordance with the rules in the Code. The Fund's ability
to dispose of shares of underlying funds held less than three months may be
limited by requirements relating to the Fund's qualification as a regulated
investment company for federal income tax purposes.
Distributions of net capital gains (the excess of net long-term capital gains
over net short-term capital losses) received by the Fund from underlying funds,
as well as net long-term capital gains realized by the Fund from the purchase
and sale (or redemption) of underlying funds' shares or other securities held
(generally) by the Fund for more than one year, will be distributed by the Fund
and will be taxable to shareholders as long-term capital gains (even if the
shareholder has held the shares for less than one year). However, if a
shareholder who has received a capital gains distribution suffers a loss on the
sale of his shares not more than six months after purchase, the loss will be
treated as a long-term capital loss to the extent of the capital gains
distribution received. The long-term capital gains, including distributions of
net capital gains, are currently subject to a maximum federal tax rate of 28%
which is less than the maximum rate imposed on other types of taxable income.
Furthermore, capital gains may be advantageous, because, unlike ordinary income,
they may be offset by capital losses.
For purposes of determining the character of income received by the Fund when
an underlying fund distributes net capital gains to the Fund, the Fund will
treat the distribution as a long-term capital gain, even if it has held shares
of the underlying fund for less than one year. However, any loss incurred by the
Fund on the sale of that underlying fund's shares held for six months or less
will be treated as a long-term capital loss to the extent of the gain
distribution.
The tax treatment of distributions from the Fund is the same whether the
distributions are received in additional shares or in cash. Shareholders
receiving distributions in the form of additional shares will have a cost basis
for federal income tax purposes in each share received equal to the net asset
value of a share of the Fund on the reinvestment date.
The Fund may invest in underlying funds with capital loss carry-forwards. If
such an underlying fund realizes capital gains, it will be able to offset the
gains to the extent of its loss carry-forwards in determining the amount of
capital gains which must be distributed to its shareholders. To the extent that
gains are offset in this manner, distributions to the Fund (and its
shareholders) will not be characterized as capital gain dividends but may be
ordinary income.
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Depending on the residence of the shareholder for tax purposes, distributions
also may be subject to state and local taxes, including withholding taxes.
Shareholders should consult their own tax advisers as to the tax consequences of
ownership of shares of the Fund in their particular circumstances.
The Fund generally will be required to withhold federal income tax at a rate
of 31% ("backup withholding") from dividends paid to shareholders if (a) the
payee fails to furnish the Fund with and to certify the payee's correct taxpayer
identification number or social security number, (b) the Internal Revenue
Service (the "IRS") notifies the Fund that the payee has failed to report
properly certain interest and dividend income to the IRS and to respond to
notices to that effect or (c) the payee fails to certify that he is not subject
to backup withholding.
The Fund will distribute investment company taxable income and any net
realized capital gains at least annually. All dividends and distributions will
be reinvested automatically at net asset value in additional shares of the Fund
unless the shareholder has notified the Fund in writing of his election to
receive distributions in cash.
After each transaction, shareholders will receive a confirmation statement
giving complete details of the transaction. In addition, the statement will show
the details of prior transactions in the account during the calendar year.
Information for federal income tax purposes will be provided after the end of
the calendar year.
Net Asset Value
The net asset value per share is determined by calculating the total value of
the Fund's assets, deducting total liabilities, and dividing the result by the
number of shares outstanding. On each day the New York Stock Exchange is open
for trading, the net asset value is determined as of the close of the Exchange
(normally, 3:00 p.m. Minot, North Dakota, time).
The Fund's assets consist primarily of shares of the underlying funds, which
are valued at their respective net asset values under the 1940 Act. The
underlying funds value securities in their portfolios for which market
quotations are readily available at their current market value (generally the
last reported sale price) and all other securities and assets at fair value
pursuant to methods established in good faith by their boards of directors.
Money market funds with portfolio securities that mature in one year or less may
use the amortized cost or penny-rounding methods to value their securities.
Securities having 60 days or less remaining to maturity generally are valued at
their amortized cost, which approximates market value. Other assets are valued
at their current market value if market quotations are readily available and, if
not available, at fair value pursuant to methods established in good faith by
the Board of Directors.
PURCHASE OF SHARES
General Information
The Fund's principal underwriter is ND Capital, Inc. (the "Underwriter"), 1
North Main, Minot, North Dakota 58703. Shares may be purchased from investment
dealers who have sales agreements with the Underwriter or from the Underwriter
at the public offering price, which is the net asset value next determined after
the Fund receives an order. If you do not have a dealer, the Fund can refer you
to one. The minimum initial investment is $1,000 ($100 for the Monthomatic
Investment Plan and $250 for an Individual Retirement Account), and the minimum
subsequent investment is $50, but such minimum amounts may be changed at any
time in the Fund's discretion. The Fund reserves the right to redeem Fund
accounts that are reduced to a value of less than $1,000 (for any reason other
than fluctuation in the
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market value of the Fund's portfolio securities). Should the Fund elect to
exercise this right, the investor will be notified before such redemption is
processed that the value of the investor's account is less than $1,000 and that
the investor will have sixty days to increase the account to at least the $1,000
minimum amount before the account is redeemed. The Fund receives the entire
public offering price of all shares sold.
Orders for the purchase of shares will be confirmed at a price based on the
net asset value next determined after receipt of the order by the Fund. However,
orders received by dealers prior to the determination of net asset value and
received by the Fund prior to the close of its business day will be confirmed at
a price based on the net asset value effective on that day. Dealers are
obligated to transmit orders promptly.
No sales charge is imposed when shares are purchased. However, a contingent
deferred sales charge is imposed if certain shares are redeemed within five
years after their purchase. See Contingent Deferred Sales Charge. The
Underwriter pays sales commissions to investment dealers and to its salesmen who
sell Fund shares. The Underwriter may also provide additional promotional
incentives to dealers who sell Fund shares. In some instances, these incentives
may be offered only to certain dealers who have sold or may sell significant
amounts of shares. In addition, the Fund pays dealers fees (in an amount not to
exceed 0.25% of net assets) for personal services to shareholders and/or the
maintenance of shareholder accounts.
The Fund reserves the right to withdraw all or any part of the offering made
by this Prospectus and to reject purchase orders. Also, from time to time, the
Fund may temporarily suspend the offering of its shares to new investors. During
the period of such suspension, persons who are already shareholders of the Fund
normally will be permitted to continue to purchase additional shares and to have
dividends reinvested.
In order to facilitate redemptions and to eliminate the need for safekeeping,
the Transfer Agent will not issue certificates for shares unless requested to do
so. A shareholder may obtain a certificate by writing to the Transfer Agent at
the address on the back cover of the Prospectus.
Shareholders should direct their inquiries to the Fund at the address and
telephone number shown on the cover page of the Prospectus or to the investment
dealer from which they received the Prospectus.
Robert E. Walstad and Peter A. Quist, who are directors and the president-
treasurer and vice president-secretary, respectively, of the Fund, are also the
only two directors and officers of the Underwriter. The Underwriter is a wholly-
owned subsidiary of Holdings.
Monthomatic Investment Plan
A shareholder may purchase additional Fund shares through an automatic
investment program. With the Monthomatic Investment Plan (the "Plan"), monthly
investments (minimum $50) are made automatically from the shareholder's account
at a bank, savings and loan association, or credit union into the shareholder's
Fund account. By enrolling in the Plan, the shareholder authorizes the Fund and
its agents to either draw checks or initiate Automated Clearing House debits
against the designated account at a bank or other financial institution. Such
account must have check or draft writing privileges. This privilege may be
selected by completing the appropriate section on the Account Application or by
contacting the Underwriter for appropriate forms.
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A shareholder may terminate the Plan by sending written notice to the Transfer
Agent at the address shown on the back cover of the Prospectus. Termination by a
shareholder will become effective within 7 days after the Transfer Agent has
received the request. The Fund may immediately terminate a shareholder's Plan in
the event that any item is unpaid by the shareholder's financial institution.
The Fund may terminate or modify this privilege at any time.
Retirement Plans
The Fund offers shares in connection with tax-deferred retirement plans.
Application forms and additional information about these plans, including
applicable fees, are available from the Fund or the Custodian upon request. The
federal income tax treatment of contributions to retirement plans has been
substantially affected by recently enacted federal tax legislation. Before
investing in the Fund through such a plan, an investor should consult a tax
adviser.
Individual Retirement Accounts ("IRAs")
Fund shares may be used as a funding medium for an IRA. An Internal Revenue
Service-approved IRA plan is available from the Custodian. The minimum initial
investment for an IRA is $250; the minimum subsequent investment is $50. IRAs
are available to individuals who receive compensation or earned income and their
spouses whether or not they are active participants in a tax-qualified or
government-approved retirement plan. An IRA contribution by an individual or
spouse who participates in a tax-qualified or government-approved retirement
plan may not be deductible depending upon the individual's income. Individuals
also may establish an IRA to receive a rollover contribution of distributions
from another IRA or a qualified plan. Tax advice should be obtained before
planning a rollover.
Defined Contribution Plan
Investors who are self-employed may purchase Fund shares for retirement plans
for self-employed persons which are known as Defined Contribution Plans
(formerly Keogh or H.R. 10 Plans). The Custodian offers a prototype Defined
Contribution Plan for Money Purchase or Profit Sharing Plans.
Section 401(k) Plan
The Fund may be used as a vehicle for a cash or deferred arrangement designed
to qualify under Section 401(k) of the Code.
Exchange Privilege
By contacting the Transfer Agent, a shareholder may exchange some or all of
his shares in any of the funds underwritten by ND Capital, Inc., or Ranson
Capital Corporation at net asset value, subject to these conditions: (1) The
length of time of the investment will be carried forward to the Fund. (2) If you
paid a front-end sales charge, no contingent deferred sales charge will be
imposed in the event you redeem any or all of your shares. (3) If the original
fund is subject to a contingent deferred sales charge, the charge will be
carried forward into the Fund and will be applied in the event you redeem any or
all of your shares.
Each exchange involves the redemption of fund shares to be exchanged and the
purchase of Fund shares. As a result, any gain or loss on the redemption of fund
shares exchanged is reportable on the shareholder's federal income tax return.
The exchange privilege may be changed or discontinued upon 60
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days' written notice to shareholders and is available only to shareholders in
states where such exchanges may be legally made. A shareholder considering an
exchange should obtain and read the prospectus of the Fund and consider the
differences between it and the fund whose shares he owns before making an
exchange.
For further information on how to exercise the exchange privilege, contact the
Transfer Agent.
REDEMPTION OF SHARES
Redemptions
Any shareholder may require the Fund to redeem shares. When shares are held
for the account of a shareholder by the Fund's Transfer Agent, the shareholder
may redeem them by making a written request with signatures guaranteed to the
Transfer Agent at the address shown on the back cover of the Prospectus. When
certificates for shares have been issued, they must be mailed to or deposited
with the Transfer Agent, along with a duly endorsed stock power with signatures
guaranteed and accompanied by a written request for redemption. Signatures must
be guaranteed by a commercial bank, trust company, savings and loan association,
or member firm of a national securities exchange. A notary public may not
provide a signature guarantee. If the amount of the redemption proceeds is less
than $50,000, a signature guarantee is not required from individual
shareholders. Further documentation may be requested and a signature guarantee
is always required from corporations, custodians (e.g., under the Uniform
Transfers to Minors Act), executors, administrators, trustees, or guardians.The
redemption request and stock power must be signed exactly as the account is
registered including any special capacity of the registered owner.
The redemption price will be the net asset value next determined following
receipt of a properly executed request with any required documents, less any
applicable contingent deferred sales charge, as described below. Payment for
shares redeemed will be made in cash as promptly as practicable but in no event
later than seven days after receipt of a properly executed letter of
instructions accompanied by any outstanding share certificates in proper form
for transfer. When the Fund is requested to redeem shares for which it may not
yet have received good payment (e.g., cash or certified check on a United States
bank), it may delay the mailing of a redemption check until such time as it has
assured itself that good payment has been collected for the purchase of such
shares (which will generally be within 15 calendar days).
Redemption proceeds may be more or less than the amount invested and,
therefore, result in a gain or loss for federal income tax purposes.
In order to eliminate excessive expenses, the Fund reserves the right to
redeem upon not less than 30 days' written notice all shares in an account
(other than an IRA) which has a value of less than $50. However, a shareholder
will be allowed to make additional investments prior to the date fixed for
redemption to avoid liquidation of the account.
Contingent Deferred Sales Charge
A contingent deferred sales charge ("charge") equal to 1.5% of the redemption
proceeds is imposed if a shareholder redeems shares purchased within the
preceding five years, except that if the initial amount of purchase is $1
million or more, the charge is reduced to 1% and only applies during the first
year of purchase. Shares acquired by reinvestment of dividends may be redeemed
without charge even though acquired within five years. In addition, a number of
shares having a value equal to a net increase in the value of all shares
purchased by the shareholder during the preceding five years will be redeemed
without charge. All purchases are considered made on the last day of the month
of purchase. In determining whether a charge is payable on any redemption, the
Fund will first redeem shares not subject to a charge.
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The Fund may sell shares without a charge to directors, officers, and
employees (including retirees) of the Fund, Holdings, the Investment Adviser,
and the underwriter, for themselves or their spouses, children, or parents and
parents of spouse, or to any trust, pension, or profit-sharing, or other benefit
plan for only such persons at net asset value and in any amount. The Fund may
also sell shares without a contingent deferred sales charge to broker-dealers
having sales agreements with ND Capital, Inc., and registered representatives
and other employees of such broker-dealers, including their spouses and
children; to financial institutions having sales agreements with ND Capital,
Inc., and employees of such financial institutions, including their spouses and
children; and to any broker-dealer, financial institution, or other qualified
firm which receives no commissions for selling shares to its clients.
The Underwriter receives the entire amount of any charges assessed.
Reinstatement Privilege
You may reinvest up to the amount of your redemption proceeds free of all
sales charges. An investor using this privilege a year or more after such
investor redeemed shares of the Fund must file a new account application and
provide proof that such investor was a shareholder of the Fund. The Fund
reserves the right to modify or terminate this privilege at any time. You will
receive the net asset value per share the day your check arrives at the Fund. If
you were charged a contingent deferred sales charge on your redemption, the
amount you were charged will be reinstated as additional shares upon repurchase
in proportion to the reinvestment amount of your redemption proceeds. If you
have redeemed shares in a retirement plan, be sure to review the plan document
you received when you opened your account for rules and limitations if you are
repurchasing shares in the same retirement account.
Systematic Withdrawal Plan
Subject to any applicable contingent deferred sales charge (See Contingent
Deferred Sales Charge above.), a shareholder who owns shares with an aggregate
value of $5,000 or more may establish a Systematic Withdrawal Plan (the "Plan").
Under the Plan, a shareholder may redeem at net asset value the number of full
and fractional shares that will produce whatever monthly, quarterly, semi-
annual, or annual payments (minimum $100 per payment) are selected. No
additional charge is made for this service.
A shareholder who participates in the Monthomatic Investment Plan is
ineligible to participate in the Plan. If payments exceed reinvested dividends
and distributions, a shareholder's shares will be reduced and eventually
depleted. The Plan may be terminated at any time by a shareholder or the Fund.
PERFORMANCE DATA
The Fund may publish certain performance figures in advertisements from time
to time. These performance figures may include yield and total return figures.
Yield reflects the income per share deemed earned by the Fund's portfolio
investments. Yield is determined by dividing the net investment income per share
deemed earned during the preceding 30-day period by the offering price per share
on the last day of the period and annualizing the result. Yields are calculated
according to accounting methods that are standardized for all stock and bond
funds. Because yield calculation methods differ from the methods used for other
accounting purposes, the Fund's yield may not equal its distribution rate, the
income paid to an investor's account, or the income reported in the Fund's
financial statements.
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Total return is the percentage change in the value of a hypothetical
investment that has occurred in the indicated time period, taking into account
the imposition of various fees, except the contingent deferred sales charge, and
assuming the reinvestment of all dividends and distributions. Cumulative total
return reflects the Fund's performance over a stated period of time. Average
annual total return reflects the hypothetical annually compounded return that
would have produced the same cumulative total return if the Fund's performance
had been constant over the entire period.
The Fund may also include in advertisements quarterly performance rankings
compiled by independent organizations such as Lipper Analytical Services and
publications which monitor the performance of mutual funds. Performance
information may be quoted numerically or may be represented in a table, graph,
or other illustration.
All performance figures are based on historical results and are not intended
to indicate future performance. A more detailed description of the foregoing
performance figures and their methods of computation is contained in the Fund's
Statement of Additional Information under CALCULATION OF PERFORMANCE DATA.
APPENDIX
INVESTMENT POLICIES AND PRACTICES OF UNDERLYING FUNDS
Convertible Securities
Certain preferred stocks and debt securities that may be held by an underlying
fund have conversion features allowing the holder to convert securities into
another specified security (usually common stock) of the same issuer at a
specified conversion ratio (e.g., two shares of preferred for one share of
common stock) at some specified future date or period. The market value of
convertible securities generally includes a premium that reflects the conversion
right. That premium may be negligible or substantial. To the extent that any
preferred stock or debt security remains unconverted after the expiration of the
conversion period, the market value will fall to the extent represented by that
premium.
Foreign Investments
The Fund will invest in certain underlying funds which invest all or a portion
of their assets in foreign securities. Investing in securities of non-U.S.
companies, which are generally denominated in foreign currencies, and
utilization of forward foreign currency exchange contracts and other currency
hedging techniques involve certain considerations comprising both opportunity
and risk not typically associated with investing in U.S. dollar-denominated
securities. Risks unique to international investing include: (1) restrictions on
foreign investment and on repatriation of capital; (2) fluctuations in currency
exchange rates; (3) costs of converting foreign currency into U.S. dollars; (4)
price volatility and less liquidity; (5) settlement practices, including delays,
which may differ from those customary in U.S. markets; (6) exposure to political
and economic risks, including the risk of nationalization, expropriation of
assets, and war; (7) possible imposition of foreign taxes and exchange control
and currency restrictions; (8) lack of uniform accounting, auditing, and
financial reporting standards; (9) less governmental supervision of securities
markets, brokers, and issuers of securities; (10) less financial information
available to investors; (11) difficulty in enforcing legal rights outside the
U.S.; and (12) higher costs, including custodial fees. These risks are often
heightened for investments in emerging or developing countries.
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Foreign Currency Transactions
Foreign securities in which the underlying funds invest are subject to
currency risk, i.e., the risk that the U.S. dollar value of these securities may
be affected favorably or unfavorably by changes in foreign currency exchange
rates and exchange control regulations. To manage this risk and facilitate the
purchase and sale of foreign securities, these underlying funds may engage in
foreign currency transactions involving the purchase and sale of forward foreign
currency exchange contracts. Although foreign currency transactions will be used
primarily to protect the underlying funds from adverse currency movements, they
also involve the risk that anticipated currency movements will not be accurately
predicted and the underlying funds' total return could be adversely affected.
Futures Contracts
An underlying fund may enter into futures contracts for the purchase or sale
of debt securities and stock indexes. A futures contract is an agreement between
two parties to buy and sell a security or an index for a set price on a future
date. Futures contracts are traded on designated "contract markets" which,
through their clearing corporations, guarantee performance of the contracts.
Generally, if market interest rates increase, the value of outstanding debt
securities declines (and vice versa). Entering into a futures contract for the
sale of securities has an effect similar to the actual sale of securities,
although sale of the futures contract might be accomplished more easily and
quickly. For example, if a fund holds long-term U.S. Government securities and
it anticipates a rise in long-term interest rates, it could, in lieu of
disposing of its portfolio securities, enter into futures contracts for the sale
of similar long-term securities. If rates increased and the value of the fund's
portfolio securities declined, the value of the fund's futures contracts would
increase, thereby protecting the fund by preventing the net asset value from
declining as much as it otherwise would have. Similarly, entering into futures
contracts for the purchase of securities has an effect similar to the actual
purchase of the underlying securities but permits the continued holding of
securities other than the underlying securities. For example, if the fund
expects long-term interest rates to decline, it might enter into futures
contracts for the purchase of long-term securities so that it could gain rapid
market exposure that may offset anticipated increases in the cost of securities
it intends to purchase while continuing to hold higher-yield short-term
securities or waiting for the long-term market to stabilize.
A stock index futures contract may be used to hedge an underlying fund's
portfolio with regard to market risk as distinguished from risk relating to a
specific security. A stock index futures contract does not require the physical
delivery of securities but merely provides for profits and losses resulting from
changes in the market value of the contract to be credited or debited at the
close of each trading day to the respective accounts of the parties to the
contract. On the contract's expiration date, a final cash settlement occurs.
Changes in the market value of a particular stock index futures contract reflect
changes in the specified index of equity securities on which the future is
based.
There are several risks in connection with the use of futures contracts. In
the event of an imperfect correlation between the futures contract and the
portfolio position which is intended to be protected, the desired protection may
not be obtained, and the fund may be exposed to risk of loss. Further,
unanticipated changes in interest rates or stock price movements may result in a
poorer overall performance for the fund than if it had not entered into futures
contracts on debt securities or stock indexes.
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In addition, the market prices of futures contracts may be affected by certain
factors. First, all participants in the futures market are subject to margin
deposit and maintenance requirements. Rather than meeting additional margin
deposit requirements, investors may close futures contracts through offsetting
transactions which could distort the normal relationship between the securities
and futures markets. Second, from the point of view of speculators, the deposit
requirements in the futures market are less onerous than margin requirements in
the securities market. Therefore, increased participation by speculators in the
futures market may also cause temporary price distortions.
Finally, positions in futures contracts may be closed out only on an exchange
or board of trade which provides a secondary market for such futures. There is
no assurance that a liquid secondary market on an exchange or board of trade
will exist for any particular contract or at any particular time.
Options on Futures Contracts
A fund also may purchase and sell listed put and call options on futures
contracts. An option on a futures contract gives the purchaser the right, in
return for the premium paid, to assume a position in a futures contract (a long
position if the option is a call and a short position if the option is a put) at
a specified exercise price at any time during the option period. When an option
on a futures contract is exercised, delivery of the futures position is
accompanied by cash representing the difference between the current market price
of the futures contract and the exercise price of the option. The fund may
purchase put options on futures contracts in lieu of, and for the same purpose
as, a sale of a futures contract. It also may purchase such put options in order
to hedge a long position in the underlying futures contract in the same manner
as it purchases "protective puts" on securities.
As with options on securities, the holder of an option may terminate a
position by selling an option of the same series. There is no guarantee that
such closing transactions can be effected. The fund is required to deposit
initial margin and maintenance margin with respect to put and call options on
futures contracts written by it pursuant to brokers' requirements similar to
those applicable to futures contracts described above, and, in addition, net
option premiums received will be included as initial margin deposits.
In addition to the risks which apply to all options transactions, there are
several special risks relating to options on futures contracts. The ability to
establish and close out positions on such options will be subject to the
development and maintenance of a liquid secondary market. It is not certain that
this market will develop. Compared to the use of futures contracts, the purchase
of options on futures contracts involves less potential risk to the fund,
because the maximum amount at risk is the premium paid for the options (plus
transaction costs). However, there may be circumstances when the use of an
option on a futures contract would result in a loss to the fund when the use of
futures contract would not, such as when there is no movement in the prices of
the underlying securities. Writing an option on a futures contract involves
risks similar to those arising in the sale of futures contracts as described
above.
Options Activities
An underlying fund may write (i.e., sell) listed call options ("calls") if the
calls are "covered" throughout the life of the option. A call is "covered" if
the fund owns the optioned securities. When a fund writes a call, it receives a
premium and gives the purchaser the right to buy the underlying security at any
time during the call period (usually not more than nine months in the case of
common stock) at a fixed exercise price regardless of market price changes
during the call period. If the call is exercised, the fund will forgo any gain
from an increase in the market price of the underlying security over the
exercise price.
19
<PAGE>
A fund may purchase a call on securities only to effect a "closing purchase
transaction" which is the purchase of a call covering the same underlying
security and having the same exercise price and expiration date as a call
previously written by the fund on which it wishes to terminate its obligation.
If the fund is unable to effect a closing purchase transaction, it will not be
able to sell the underlying security until the call previously written by the
fund expires (or until the call is exercised and the fund delivers the
underlying security).
An underlying fund also may write and purchase put options ("puts"). When a
fund writes a put, it receives a premium and gives the purchaser of the put the
right to sell the underlying security to the fund at the exercise price at any
time during the option period. When a fund purchases a put, it pays a premium in
return for the right to sell the underlying security at the exercise price at
any time during the option period. An underlying fund also may purchase stock
index puts which differ from puts on individual securities in that they are
settled in cash based on the values of the securities in the underlying index
rather than by delivery of the underlying securities. Purchase of a stock index
put is designed to protect against a decline in the value of the portfolio
generally rather than an individual security in the portfolio. If any put is not
exercised or sold, it will become worthless on its expiration date.
A fund's option positions may be closed out only on an exchange which provides
a secondary market for options of the same series, but there can be no assurance
that a liquid secondary market will exist at a given time for any particular
option. In this regard, trading in options on certain securities (such as U.S.
Government securities) is relatively new so that it is impossible to predict to
what extent liquid markets will develop or continue.
The underlying fund's custodian, or a securities depository acting for it,
generally acts as escrow agent for the securities on which the fund has written
puts or calls or for other securities acceptable for such escrow, so that no
margin deposit is required of the fund. Until the underlying securities are
released from escrow, they cannot be sold by the fund.
In the event of a shortage of the underlying securities deliverable on
exercise of an option, the Options Clearing Corporation has the authority to
permit other, generally comparable securities to be delivered in fulfillment of
option exercise obligations. If the Options Clearing Corporation exercises its
discretionary authority to allow such other securities to be delivered, it may
also adjust the exercise prices of the affected options by setting different
prices at which otherwise ineligible securities may be delivered. As an
alternative to permitting such substitute deliveries, the Options Clearing
Corporation may impose special exercise settlement procedures.
Hedging
An underlying fund may employ many of the investment techniques described in
this APPENDIX not only for investment purposes, but also for hedging purposes.
For example, an underlying fund may purchase or sell put and call options on
common stocks to hedge against movements in individual common stock prices or
purchase and sell stock index futures and related options to hedge against
marketwide movements in common stock prices. Although such hedging techniques
generally tend to minimize the risk of loss that is hedged against, they also
may limit commensurately the potential gain that might have resulted had the
hedging transaction not occurred. Also, the desired protection generally
resulting from hedging transactions may not always be achieved.
20
<PAGE>
Junk Bonds
Bonds which are rated BB and below by Standard and Poor's and Ba and below by
Moody's (See APPENDIX - DESCRIPTION OF COMMERCIAL PAPER AND BOND RATINGS in
Statement of Additiona Information for a more detailed explanation of bond
ratings.) are commonly known as "junk bonds." Investing in junk bonds involves
special risks in addition to the risks associated with investments in higher
rated debt securities. Junk bonds may be regarded as predominately speculative
with respect to the issuer's continuing ability to meet principal and interest
payments.
Junk bonds may be more susceptible to real or perceived adverse economic and
competitive industry conditions than higher grade securities. The prices of junk
bonds have been found to be less sensistive to interest rate changes than more
highly rated investments but more sensitive to adverse economic downturns or
individual corporate developments. A projection of an economic downturn or of a
period of rising interest rates, for example, could cause a decline in junk bond
prices, because the advent of a recession could lessen the ability of a highly
leveraged company to make principal and interest payments on its debt
securities. If the issuer of junk bonds defaults, a fund may incur additional
expenses to seek recovery. In the case of junk bonds structured as zero coupon
or payment-in-kind securities, the market prices of such securities are affected
to a greater extent by interest rate changes and, therefore, tend to be more
volatile than securities which pay interest periodically and in cash.
The secondary markets on which junk bonds are traded may be less liquid than
the market for higher grade securities. Less liquidity in the secondary trading
markets could adversely affect and cause large fluctuations in the daily net
asset value of a fund's shares. Adverse publicity and investor perceptions,
whether or not based on fundamental analysis, may decrease the values and
liquidity of junk bonds, especially in a thinly traded market.
There may be special tax considerations associated with investing in junk
bonds structured as zero coupon or payment-in-kind securities. A fund records
the interest on these securities as income even though it receives no cash
interest until the security's maturity or payment date. A fund will be required
to distribute all or substantially all such amounts annually and may have to
obtain the cash to do so by selling securities which otherwise would continue to
be held. Shareholders will be taxed on these distributions.
The use of credit ratings as the sole method of evaluating junk bonds can
involve certain risks. For example, credit ratings evaluate the safety of
principal and interest payments, not the market value risk of junk bonds. Also,
credit rating agencies may fail to change credit ratings in a timely fashion to
reflect events since the security was last rated.
Illiquid and Restricted Securities
An underlying fund may invest not more than 15% of its net assets in
securities for which there is no readily available market ("illiquid
securities") including securities the disposition of which would be subject to
legal restrictions (so-called "restricted securities") and repurchase agreements
having more than seven days to maturity. A considerable period of time may
elapse between an underlying fund's decision to dispose of such securities and
the time when the fund is able to dispose of them, during which time the value
of the securities (and therefore the value of the underlying fund's shares held
by the Fund) could decline.
21
<PAGE>
Industry Concentration
An underlying fund may concentrate its investments within one industry.
Because the scope of investment alternatives within an industry is limited, the
value of the shares of such an underlying fund may be subject to greater market
fluctuation than an investment in a fund which invests in a broader range of
securities.
Leverage through Borrowing
An underlying fund may borrow up to 25% of the value of its net assets on an
unsecured basis from banks to increase its holdings of portfolio securities.
Under the 1940 Act, a fund is required to maintain continuous asset coverage of
300% with respect to such borrowings and to sell (within three days) sufficient
portfolio holdings to restore such coverage if it should decline to less than
300% due to market fluctuations or otherwise, even if disadvantageous from an
investment standpoint. Leveraging will exaggerate the effect of any increase or
decrease in the value of portfolio securities on a fund's net asset value, and
money borrowed will be subject to interest costs (which may include commitment
fees and/or the cost of maintaining minimum average balances) which may or may
not exceed the interest and option premiums received from the securities
purchased with borrowed funds.
Loans of Portfolio Securities
An underlying fund may lend its portfolio securities provided that: (1) the
loan is secured continuously by collateral consisting of U.S. Government
securities or cash or cash equivalents maintained on a daily mark-to-market
basis in an amount at least equal to the current market value of the securities
loaned; (2) the fund may at any time call the loan and obtain the return of the
securities loaned; (3) the fund will receive any interest or dividends paid on
the loaned securities; and (4) the aggregate market value of securities loaned
will not at any time exceed one-third of the total assets of the fund. Loans of
securities involve a risk that the borrower may fail to return the securities or
may fail to provide additional collateral.
Master Demand Notes
Although the Fund itself will not do so, underlying funds (particularly money
market mutual funds) may invest up to 100% of their assets in master demand
notes. Master demand notes are unsecured obligations of U.S. corporations
redeemable upon notice that permit investment by a fund of fluctuating amounts
at varying rates of interest pursuant to direct arrangements between the fund
and the issuing corporation. Because they are direct arrangements between the
fund and the issuing corporation, there is no secondary market for the notes.
However, they are redeemable at face value plus accrued interest at any time.
Repurchase Agreements
Underlying funds, particularly money market funds, may enter into repurchase
agreements with banks and broker-dealers under which they acquire securities
subject to an agreement with the seller to repurchase the securities at an
agreed upon time and price. These agreements are considered under the 1940 Act
to be loans by the purchaser collateralized by the underlying securities. If the
seller should default on its obligation to repurchase the securities, the
underlying fund may experience delay or difficulties in exercising its rights to
realize upon the securities held as collateral and might incur a loss if the
value of the securities should decline.
22
<PAGE>
Short Sales
An underlying fund may sell securities short. In a short sale, a fund sells
stock which it does not own, making delivery with securities "borrowed" from a
broker. The fund is then obligated to replace the security borrowed by
purchasing it at the market price at the time of replacement. This price may or
may not be less than the price at which the security was sold by the fund. Until
the security is replaced, the fund is required to pay to the lender any
dividends or interest which accrue during the period of the loan. In order to
borrow the security, the fund may also have to pay a premium which would
increase the cost of the security sold. The proceeds of the short sale will be
retained by the broker to the extent necessary to meet margin requirements until
the short position is closed out.
The fund also must deposit in a segregated account an amount of cash or U.S.
Government securities equal to the difference between (a) the market value of
the securities sold short at the time they were sold short and (b) the value of
the collateral deposited with the broker in connection with the short sale (not
including the proceeds from the short sale). While the short position is open,
the fund must maintain daily the segregated account at such a level that (1) the
amount deposited in it plus the amount deposited with the broker as collateral
equals the current market value of the securities sold short and (2) the amount
deposited in it plus the amount deposited with the broker as collateral is not
less than the market value of the securities at the time they were sold short.
Depending upon market conditions, up to 80% of the value of a fund's net assets
may be deposited as collateral for the obligation to replace securities borrowed
to effect short sales and allocated to a segregated account in connection with
short sales.
The fund will incur a loss as a result of the short sale if the price of the
security increases between the date of the short sale and the date on which the
fund replaces the borrowed security. The fund will realize a gain if the
security declines in price between those dates. The amount of any gain will be
decreased and the amount of any loss increased by the amount of any premium,
dividends, or interest the fund may be required to pay in connection with a
short sale.
A short sale is "against the box" if at all times when the short position is
open the fund owns an equal amount of the securities or securities convertible
into, or exchangeable without further consideration for, securities of the same
issue as the securities sold short. Such a transaction serves to defer a gain or
loss for federal income tax purposes.
Warrants
An underlying fund may invest in warrants, which are options to purchase
equity securities at specific prices valid for a specific period of time. The
prices do not necessarily move parallel to the prices of the underlying
securities. Warrants have no voting rights, receive no dividends, and have no
rights with respect to the assets of the issuer. If a warrant is not exercised
within the specified time period, it will become worthless and the fund will
lose the purchase price and the right to purchase the underlying security.
23
<PAGE>
INTEGRITY
FUND OF FUNDS, INC.
- -------------------
1 North Main
Minot, ND 58703
(701) 852-5292
Investment Adviser
ND Money Management, Inc.
1 North Main
Minot, ND 58703
Principal Underwriter
ND Capital, Inc.
1 North Main
Minot, ND 58703
Custodian
First Western Bank & Trust
900 South Broadway
Minot, ND 58701
Transfer Agent
ND Resources, Inc.
1 North Main
Minot, ND 58703
Independent Accountant
Brady, Martz & Associates, P.C.
24 West Central Avenue
Minot, ND 58701
Legal Counsel
Pringle & Herigstad, P.C.
20 First Street SW
P.O. Box 1000
Minot, ND 58702
INTEGRITY
FUND OF FUNDS,
INC.
A mutual fund for investors seeking long-term capital
appreciation and growth
of income
Prospectus
May 1, 1996
(As amended June 25, 1996
and February 28, 1997)
[LOGO OF INTEGRITY FUND APPEARS HERE]
<PAGE>
INTEGRITY MUTUAL FUNDS
ACCOUNT APPLICATION INTEGRITY FUND OF FUNDS, INC.
Mail To: Integrity Fund of Funds, Inc.
P.O. Box 759, Minot, ND 58702-0759
If you have any questions on this form or any shareholder services questions,
phone 1-800-601-5593.
- --------------------------------------------------------------------------------
1. Account Registration (Please print.) - First Name, Middle Initial, and Last
Name
____ Individual ____ Joint* *Joint tenants with rights of survivorship,
unless you specify otherwise
______________________________________ ________________________________________
Name Joint Owner's Name
____ Gift or transfer to a minor (UGMA/UTMA)
___________________________________ as custodian for____________________________
Custodian's name Minor's name
under the _________
State
Uniform Gifts/Transfers to Minors Act
____ Trust*
___________________________________ as trustee(s) of ___________________________
Trustee's name Name of trust agreement
_________________________
Date of trust agreement
* Please include copy of first and last page of trust agreement.
____ Corporation/other entity*
______________________________________ ________________________________________
Name of corporation or other entity Type of organization (i.e.,
corporation, partnership, etc.)
* Please attach a certified copy of the corporate resolution showing the
person(s) authorized to act on this account.
____ IRA* *IRA information available upon request.
____ TOD (Transfer on Death)* *Transfer on Death form available upon request
Address ______________________________ City, State, Zip _______________________
Telephone Number _____________________
- --------------------------------------------------------------------------------
2. Initial Investment
Check enclosed for $__________________ . Minimum initial investment is $1,000
($100 in Monthomatic Plan); subsequent $50. Make check payable to: Integrity
Fund of Funds, Inc.
- --------------------------------------------------------------------------------
3. Dividends Choose how you wish to receive dividends. If no box is checked,
option A will be assigned.
A. ____ All income and capital gains dividends reinvested into my account.
B. ____ All income dividends in cash and capital gains reinvested in my
account. Complete cash dividends section below.
C. ____ All income and capital gains dividends paid to me in cash.
Complete cash dividends section below.
D. ____ All income and capital gains dividends reinvested in Integrity
Fund of Funds account #_______________________________________
Please send cash dividends to: _________ Account registration address OR
_________ Special payee as follows:
Name ___________________________________________________________________________
Address ______________________________ City, State, Zip ________________________
Account number (if applicable) __________________________ Attach voided check if
payable to your bank account (signature guarantee not required).
* If payable to person or address other than registration, PLEASE signature
guarantee here:
- --------------------------------------------------------------------------------
4. Letter of Intent
I request establishment of a Letter of Intent to purchase shares of Integrity
Fund of Funds, Inc. as described in this prospectus. These shares will be
purchased over a thirteen-month period; the aggregate amount of these purchases
will be at least equal to the amount indicated below:
_____$50,000 _____$100,000 _____$250,000 _____$500,000
_____$1,000,000 _____This is an amended letter of Intent
- --------------------------------------------------------------------------------
5. Rights of Accumulation
If this account qualifies for a reduced sales charge under the Rights of
Accumulation as described in this prospectus, please give the following
information:
Account Number of Related Accounts Relationship to Investor
- -------------------------------------- ----------------------------------------
- -------------------------------------- ----------------------------------------
<PAGE>
6. Systematic Investment Program (Monthomatic) Complete the following if you are
establishing a Systematic Investment Program.
I authorize the Fund's Agent to draw checks or initiate Automated Clearing
House ("ACH") debits against the bank account provided below in the amount of
$________________________ (minimum $50)
Please check one: beginning on the _____5th OR the _____20th
_____________________ (indicate month)
Name of Depositor_______________________ Bank Account Number___________________
(As shown on bank records)
Name of Bank____________________________ Address of Bank_______________________
(The account must have check or draft writing privileges.)
City____________________________________ State, Zip____________________________
As a convenience to us, we hereby request and authorize you to honor and charge
to our account (i) checks drawn on our account by Integrity Fund of Funds, Inc.,
and payable to the order of the Fund, and (ii) Automated Clearing House ("ACH")
debit entries initiated by any of us through Integrity Fund of Funds, Inc., for
the accounts of the Fund, provided in either case that there are sufficient
collected funds in said account to pay the same upon presentation. We agree that
your rights with respect to each such check or ACH debit shall be the same as if
either were signed personally by each of us. This authority is to remain in
effect until revoked by us in writing to you, and until you actually receive
such notice, we agree that you shall be fully protected in honoring any such
checks or ACH debits. We further agree that if any check or ACH debit be
dishonored, whether with or without cause and whether intentionally or
inadvertently, you shall be under no liability whatsoever.
Signature(s) of depositor(s):* Date:___________________
*Sign exactly as shown on bank records
X____________________________________ X_______________________________________
Signature Signature
Please attach a VOIDED check to ensure correct encoding.
- --------------------------------------------------------------------------------
7. Systematic Withdrawal Plan (Note: All distributions from the Fund must be
reinvested.)
Systematic Withdrawal (available only for accounts of $5,000 or more) - Redeem
sufficient shares or dollars on the 1st of the month and send check to the owner
listed above: _____Monthly _____Quarterly _____Semiannually _____Yearly for
$____________ or ___________ shares (minimum $50). The first redemption is to
take place on the first of ___________________________ (Indicate month.)
If systematic withdrawal checks are payable to person or address other than as
registered above, make check payable to:
Name____________________________________________________________________________
Address________________________________ City, State, Zip________________________
Account Number (if applicable)_________________ Attach voided check if payable
to your bank account (signature guarantee not required)
If payable to person or address other than registration, PLEASE signature
guarantee here:
- --------------------------------------------------------------------------------
8. Your Signature and Tax Certifications
See enclosed substitute instructions and important notice. The Fund reserves the
right to refuse to open an account without either a certified taxpayer
identification number ("TIN") or a certification of foreign status. Failure to
provide the tax certifications in this section may result in backup withholding
on payments relating to your account and/or in your inability to qualify for
treaty withholding rates.
_____________________________________ OR _______________________________________
Social Security Number Employer Identification Number
(In UGMA/UTMA Minor's SSN)
I am a citizen of: ____ U.S. ____ My country of residence for tax purposes is:
____ U.S. Other _____________________________
Check one of the following:
______ The number shown above is my correct TIN. I am not subject to backup
withholding due to underreporting of interest or dividend income either
because no notification has been received from the IRS or because the
IRS has notified me that I am no longer subject to backup withholding.
(If you are subject to backup withholding, please cross out the second
sentence.)
______ Awaiting TIN. A TIN has not been issued to me, but I am in the process
of applying for a TIN from either the appropriate Internal Revenue
Service Center or Social Security Administration Office. I understand
that if I do not provide a TIN to the Fund within 60 days, the Fund is
required to commence backup withholding until I provide a certified TIN.
I am not subject to backup withholding due to underreporting of interest
or dividend income either because no notification has been received from
the IRS or because the IRS has notified me that I am no longer subject
to backup withholding. (If you are subject to backup withholding, please
cross out the third sentence.)
______ Exempt Recipient. I am an Exempt Recipient. The instructions give a list
of the most common Exempt Recipients. (You should still provide a TIN.)
______ Exempt Foreign Person. I am an Exempt Foreign Person as explained in the
instructions.
Under the penalties of perjury, I certify that (1) the information provided on
this application is true, correct, and complete, (2) I have read the prospectus
for the Fund in which I am investing and agree to the terms thereof, and (3) I
am of legal age or an emancipated minor.
Date __________________________________________________
The IRS does not require your consent to any provision of this document other
than the certifications required to avoid backup withholding.
X____________________________________ X_______________________________________
Signature Signature
- --------------------------------------------------------------------------------
9. Broker/Dealer Use Only (Please print.)
We hereby submit this application for the purchase of shares of Integrity Fund
of Funds, Inc., indicated within the terms of our selling agreement with ND
Holdings, Inc., and with the prospectus for Integrity Fund of Funds, Inc. We
agree to notify distributor of any purchases made under a letter of intent or
right of accumulation.
Firm Name____________________________ Branch Address___________________________
Representative's Name________________ _________________________________________
Representative's Number______________ Representative's Phone Number____________
<PAGE>
PART B
STATEMENT OF ADDITIONAL INFORMATION
May 1, 1996
(As amended June 25, 1996 and February 28, 1997)
INTEGRITY FUND OF FUNDS, INC.
1 North Main
Minot, North Dakota 58703
(701) 852-5292
This Part B Statement of Additional Information is not a prospectus. It
should be read in conjunction with the Prospectus of Integrity Fund of Funds,
Inc. (the "Fund"), dated May 1, 1996 (as amended June 25, 1996 and February 28,
1997). The Prospectus may be obtained without charge from the Fund.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Investment Restrictions................................................... B-2
Temporary Investments..................................................... B-3
Management of the Fund.................................................... B-5
Control Persons and Principal Holders of Securities....................... B-7
Investment Advisory and Other Services.................................... B-7
Portfolio Transactions.................................................... B-9
Purchase and Redemption of Shares......................................... B-10
Underwriter............................................................... B-10
Calculation of Performance Data........................................... B-11
Appendix--Description of Commercial Paper and Bond Ratings................ B-12
Financial Statements...................................................... F-1
</TABLE>
<PAGE>
INVESTMENT RESTRICTIONS
The Fund has adopted certain fundamental investment restrictions which,
together with the Fund's investment objective, cannot be changed without
approval by holders of a majority of its outstanding voting shares. As defined
in the Investment Company Act of 1940 (the "1940 Act"), this means the lesser of
the vote of (a) 67% or more of the outstanding shares of the Fund present at a
meeting where more than 50% of the outstanding shares are present in person or
by proxy; or (b) more than 50% of the outstanding shares of the Fund. The Fund
may not:
(l) Purchase securities of any one issuer if as a result more than 5% of the
Fund's total assets would be invested in such issuer or the Fund would own or
hold more than 10% of the outstanding voting securities of that issuer;
provided, however, that up to 25% of the Fund's total assets may be invested
without regard to this limitation and provided further that this limitation
does not apply to securities issued by the U.S. Government, its agencies or
instrumentalities, nor to securities issued by other open-end investment
companies.
(2) Make loans, except in accordance with its investment objective and
policies.
(3) Purchase or sell commodities or commodity contracts, except that the Fund
may purchase and sell stock index futures contracts and options thereon for
hedging purposes.
(4) Underwrite securities issued by others, except to the extent that the
Fund may be deemed to be an underwriter under the federal securities laws in
connection with the disposition of portfolio securities.
(5) Issue senior securities as defined in the 1940 Act, except as appropriate
to evidence indebtedness which the Fund is permitted to incur, provided that the
Fund's use of stock index futures contracts and options thereon will not be
deemed to constitute senior securities for this purpose.
(6) Borrow money except from a bank and then only for temporary or emergency
purposes and in amounts not exceeding the lesser of 10% of its total assets
valued at cost or 5% of its total assets valued at market, and, in any event,
only if immediately thereafter there is an asset coverage of at least 300%. The
fund will not purchase portfolio securities when outstanding borrowings exceed
5% of the total assets. The Fund may mortgage, pledge, or hypothecate its assets
in an amount not exceeding 10% of its total assets to secure temporary or
emergency borrowing.
(7) Invest in real estate or real estate mortgage loans, although it may
invest in securities which are secured by real estate and securities of issuers
which invest or deal in real estate.
The following investment restrictions are nonfundamental and may be changed
by the vote of the Fund's Board of Directors without shareholder approval. The
Fund may not:
B-2
<PAGE>
(1) Purchase or retain the securities of any issuer if any of its officers or
directors or of the Investment Adviser owns beneficially more than 1/2 of 1% of
the securities of such issuer and together own more than 5% of the securities of
such issuer.
(2) Invest more than 15% of its net assets in illiquid securities, including
securities which at the time of such investment are not readily marketable and
securities restricted as to disposition under the federal securities laws.
(3) Invest for the purpose of exercising control or management of another
issuer.
With the exception of the Fund's policy with respect to borrowing, any
policy or restriction which involves a maximum percentage of securities or
assets will not be considered to be violated unless an excess over the
percentage occurs immediately after, and is caused by, an acquisition of
securities or assets of, or borrowing by, the Fund. Changes due to market action
will not cause a violation of a policy or restriction.
Regulatory Restrictions
To the extent required to comply with Securities and Exchange Commission
Release No. 10666, when purchasing a futures contract or writing a put option,
the Fund will maintain in a segregated account with its Custodian cash or liquid
high-grade debt securities equal to the value of such contracts. The amount held
by the Custodian is less than the amount held by any futures commission agent as
initial margin and will be marked to market daily.
To the extent required to comply with Commodity Futures Trading Commission
Regulation 4.5 and thereby avoid "commodity pool operator" status, the Fund will
not enter into a futures contract or purchase an option theron if immediately
thereafter the initial margin deposits for futures contracts held by the Fund
plus premiums paid by it for open options on futures would exceed 5% of the
Fund's total assets. The Fund will not engage in transactions in financial
futures contracts or options thereon for speculation, but only to attempt to
hedge against changes in market conditions affecting the values of securities
which the Fund holds or intends to purchase.
TEMPORARY INVESTMENTS
Although it invests primarily in shares of underlying funds, for temporary
defensive purposes or to accumulate cash for investments or redemptions, the
Fund may hold cash or invest in money market mutual funds or in a variety of
short-term debt securities, including U.S. Treasury bills and other U.S.
Government securities, commercial paper, certificates of deposit, and bankers'
acceptances. When the Fund invests for temporary defensive purposes, it may do
so without any percentage limitations. The following information supplements
that in the Prospectus under Investment Objective, Policies, and Restrictions.
B-3
<PAGE>
U.S. Government Securities
The Fund may invest in obligations issued or guaranteed by the U.S.
Government or its agencies or instrumentalities which have remaining maturities
not exceeding one year. Agencies and instrumentalities which issue or guarantee
debt securities and which have been established or sponsored by the U.S.
Government include the Bank for Cooperatives, the Export-Import Bank, the
Federal Farm Credit System, the Federal Home Loan Banks, the Federal Home Loan
Mortgage Corporation, the Federal Intermediate Credit Banks, the Federal Land
Banks, the Federal National Mortgage Association, and the Student Loan Marketing
Association.
Bank Obligations
The Fund may invest in obligations of U.S. banks (including certificates of
deposit and bankers' acceptances) having total assets at the time of purchase in
excess of $100 million. Such banks must be members of the Federal Deposit
Insurance Corporation.
A certificate of deposit is an interest-bearing negotiable certificate issued
by a bank against funds deposited in the bank. A bankers' acceptance is a short-
term draft drawn on a commercial bank by a borrower, usually in connection with
an international commercial transaction. Although the borrower is liable for
payment of the draft, the bank unconditionally guarantees to pay the draft at
its face value on the maturity date.
Commercial Paper
Commercial paper represents short-term unsecured promissory notes issued in
bearer form by bank holding companies, corporations, and finance companies. The
commercial paper purchased by the Fund consists of direct obligations of
domestic issuers which, at the time of investment, are (i) rated "P-1" by
Moody's Investors Service, Inc. ("Moody's"), or "A-1" or better by Standard &
Poor's Corporation ("Standard & Poor's"), (ii) issued or guaranteed as to
principal and interest by issuers or guarantors having an existing debt security
rating of "Aa" or better by Moody's or "AA" or better by Standard & Poor's, or
(iii) securities which, if not rated, are, in the opinion of the Fund's
Investment Adviser, of an investment quality comparable to rated commercial
paper in which the Fund may invest.
The rating "P-1" is the highest commercial paper rating assigned by Moody's,
and the ratings "A-1" and "A-1+" are the highest commercial paper ratings
assigned by Standard & Poor's. Debt rated "Aa" or better by Moody's or "AA" or
better by Standard & Poor's is generally regarded as high-grade, and such
ratings indicate that the ability to pay principal and interest is very strong.
B-4
<PAGE>
MANAGEMENT OF THE FUND
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Position(s) Held Principal Occupation(s)
Name, Address, and Age with Fund During Past 5 Years (1)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Lynn W. Aas/(2)/ Director Retired; Attorney; Director, ND Holdings, Inc.;
904 NW 27th - Director, ND Tax-Free Fund, Inc., ND Insured Income
Minot, North Dakota 58701 Fund, Inc., Montana Tax-Free Fund, Inc., and
75 South Dakota Tax-Free Fund, Inc.; Trustee, Ranson
- ---- Managed Portfolios; Director, First Western
Bank & Trust
Orlin W. Backes/(3)/ Director Attorney; Director, ND Tax-Free Fund, Inc.,
15 2nd Ave. SW, Suite 305 ND Insured Income Fund, Inc., Montana
Minot, North Dakota 58701 Tax-Free Fund, Inc., and South Dakota Tax-Free Fund,
61 Inc.; Trustee, Ranson Managed Portfolios; Director,
- ---- First Western Bank & Trust
Arthur A. Link/(4)/ Director Director, ND Tax-Free Fund, Inc., ND Insured
2001 Grimsrud Drive Income Fund, Inc., Montana Tax-Free Fund, Inc.,
Bismarck, North Dakota 58501 and South Dakota Tax-Free Fund, Inc.,; Trustee, Ranson
82 Managed Portfolios; Director, Bank Center First
- ----
*Peter A. Quist/(5)/ Director Director and Vice President, ND Holdings, Inc.;
1 North Main Vice President Director, Vice President, and Secretary, ND Money
Minot, North Dakota 58703 Secretary Management, Inc., ND Capital, Inc., ND Resources,
62 Inc., ND Tax-Free Fund, Inc., ND Insured Income
- ---- Fund, Inc., Montana Tax-Free Fund, Inc.,
and South Dakota Tax-Free Fund, Inc.; The Ranson
Company,Inc., and Ranson Capital Corporation; Vice
President and Secretary, Ranson Managed Portfolios
*Robert E. Walstad/(6)/ Director Director and President, ND Holdings, Inc.; Director,
1 North Main President President, and Treasurer, ND Money Management,
Minot, North Dakota 58703 Treasurer Inc., ND Capital, Inc., ND Resources, Inc., ND
52 Tax-Free Fund, Inc., ND Insured Income Fund, Inc.,
- ---- Montana Tax-Free Fund, Inc., and South Dakota
Tax-Free Fund, Inc.; Trustee, Chairman, President,
and Treasurer, Ranson Managed Portfolios; Director,
President, CEO, and Treasurer, The Ranson Company,
Inc., and Ranson Capital Corporation
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
* "Interested person" as defined in the Investment Company Act of 1940
(1) Except as otherwise indicated, each individual has held the office(s) shown
for the past five years. Mssrs. Aas, Backes, Link, and Walstad were elected
to the Board of Trustees of Ranson Managed Portfolios at a joint special
meeting of the shareholders of The Kansas Municipal Fund Series, The Kansas
Insured Municipal Fund - Limited Maturity (subsequently renamed "The Kansas
Insured Intermediate Fund") Series, and The Nebraska Municipal Fund Series
of Ranson Managed Portfolios held on December 11, 1995, but did not assume
office until January 5, 1996. Mssrs. Quist and Walstad were elected as
directors and officers of The Ranson Company, Inc., and Ranson Capital
Corporation on January 5, 1996.
(2) Mr. Aas resigned as a director of ND Holdings, Inc., on August 17, 1994. He
was elected to the board of directors of Integrity Fund of Funds, Inc., on
August 19, 1994, and to the boards of NDTax-Free Fund, Inc., ND Insured
Income Fund, Inc., Montana Tax-Free Fund, Inc., South Dakota Tax-Free Fund,
Inc.
B-5
<PAGE>
(3) Mr. Backes was elected to the boards of directors of ND Tax-Free Fund,
Inc., ND Insured Income Fund, Inc., Montana Tax-Free Fund, Inc., South
Dakota Tax-Free Fund, Inc., and the Fund in 1995.
(4) Mr. Link has served on the boards of directors of ND Tax-Free Fund, Inc.,
ND Insured Income Fund, Inc., Montana Tax-Free Fund, Inc., South Dakota
Tax-Free Fund, Inc., and the Fund since their inceptions.
(5) Mr. Quist has served on the boards of directors of ND Tax-Free Fund, Inc.,
ND Insured Income Fund, Inc., Montana Tax-Free Fund, Inc., and the Fund
since their inceptions. He was elected to the board of South Dakota Tax-
Free Fund, Inc., on April 7, 1995, and has served as the vice president and
secretary of each of the aforenamed funds since their inceptions.
(6) Mr. Walstad has served as a director and as the president and treasurer of
ND Tax-Free Fund, Inc., ND Insured Income Fund, Inc., Montana Tax-Free
Fund, Inc., South Dakota Tax-Free Fund, Inc., and the Fund since their
inceptions.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
COMPENSATION TABLE*
- ----------------------------------------------------------------------------------------------------------------
Pension or
Retirement Total Compensation
Aggregate Benefits Accrued Estimated Annual from Fund and Fund
Name of Person, Compensation as Part of Fund Benefits Upon Complex Paid to
Position(s) from Fund Expenses Retirement Directors
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Lynn W. Aas -0- -0- -0- $10,000.00
Director
Orlin W. Backes -0- -0- -0- $ 7,500.00
Director
Arthur A. Link -0- -0- -0- $10,000.00
Director
Peter A. Quist -0- -0- -0- -0-
Director,
Vice President, and
Secretary
Robert E. Walstad -0- -0- -0- -0-
Director, President,
and Treasurer
----------- ------------ ------------- -------------
Totals -0- -0- -0- $27,500.00
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
* Directors who are not an "interested person" as that term is defined in the
1940 Act are paid an annual fee of $10,000 for serving on the boards of the
funds in the complex. Each of the funds, including the four series of Ranson
Managed Portfolios, pays a pro rata share of the fee based upon its
respective assets. Mssrs. Quist and Walstad, who are the only "interested
persons" of the funds, receive no compensation from the funds.
B-6
<PAGE>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of February 18, 1997, no person controlled Registrant, no person owned of
record or was known by Registrant to own of record or beneficially 5 percent or
more of Registrant's outstanding shares.
As of February 18, 1997, directors and officers (including family members)
of the Registrant as a group owned less than 1% of Registrant's outstanding
shares.
INVESTMENT ADVISORY AND OTHER SERVICES
Investment Adviser
ND Money Management, Inc. (the "Investment Adviser"), has been retained
under an Investment Advisory Agreement to act as the Fund's investment adviser,
subject to the authority of the Board of Directors. The Investment Adviser is a
wholly-owned subsidiary of ND Holdings, Inc., a corporation organized under the
laws of the State of North Dakota on September 22, 1987, which is also the
Fund's promoter. The Investment Adviser was incorporated under North Dakota law
on August 19, 1988, and also serves as investment adviser for ND Tax-Free Fund,
Inc., ND Insured Income Fund, Inc., Montana Tax-Free Fund, Inc., and South
Dakota Tax-Free Fund, Inc. The address of the Investment Adviser is 1 North
Main, Minot, North Dakota 58703.
The Investment Adviser furnishes the Fund with investment advice and, in
general, supervises the management and investment program of the Fund. The
Investment Adviser furnishes at its own expense all necessary administrative
services, office space, equipment, and clerical personnel for servicing the
investments of the Fund and investment advisory facilities and executive and
supervisory personnel for managing the investments and effecting the portfolio
transactions of the Fund. In addition, the Investment Adviser pays the salaries
and fees of all officers and directors of the Fund who are affiliated persons of
the Investment Adviser. All other charges and expenses, as more fully described
in the Prospectus under Expenses, are paid by the Fund.
Under the Investment Advisory Agreement, the Fund has agreed to pay the
Investment Adviser an annual fee, payable monthly, of 0.90% of the Fund's
average daily net assets. The Fund incurred $18,129 and $81,395 in advisory fees
for fiscal year 1995 and 1996, respectively.
Certain of the states in which shares of the Fund are expected to be
qualified for sale impose limitations on the expenses of the Fund. If, in any
fiscal year, the total expenses of the Fund (excluding taxes, interest, service
fees, brokerage commissions and other portfolio transaction expenses, other
expenditures which are capitalized in accordance with generally accepted
accounting principles, and extraordinary expenses, but including advisory fees)
exceed the expense limitations applicable to the Fund imposed by the securities
regulations of any state, the Investment Adviser will reimburse the Fund for the
excess. The effective limitation on an annual basis with respect to the Fund is
expected to be 2.5% on the first $30 million of the Fund's net assets, 2.0% on
the next $70 million of such assets, and 1.5% on any excess above $100 million.
The Investment Advisory Agreement provides that the Investment Adviser will
not be liable for any error of judgment or mistake of law or for any loss
suffered by the Fund in connection with the matters to
B-7
<PAGE>
which the Investment Advisory Agreement relates, except a loss resulting from
willful misfeasance, bad faith, or gross negligence on the part of the
Investment Adviser in the performance of its duties or by reason of its reckless
disregard of its obligations and duties under the Investment Advisory Agreement.
The Investment Advisory Agreement continues in effect from year to year as
long as its continuation is approved at least annually by a majority of the
directors who are not parties to the Investment Advisory Agreement or interested
persons of any such party except in their capacity as directors of the Fund and
by the shareholders or the Board of Directors. It may be terminated at any time
upon 60 days' written notice by the Fund or by a majority vote of the
outstanding shares and will terminate automatically upon assignment.
Robert E. Walstad and Peter A. Quist, directors and officers of the Fund,
are also directors and officers of the Investment Adviser as indicated under
MANAGEMENT OF THE FUND.
Custodian and Transfer Agent
First Western Bank & Trust, 900 South Broadway, Minot, North Dakota 58701,
serves as Custodian for the Fund's portfolio securities and cash. ND Resources,
Inc., ("Resources"), a wholly-owned subsidiary of ND Holdings, Inc., 1 North
Main, Minot, North Dakota 58703, is the Fund's Transfer Agent. As Transfer
Agent, Resources performs many of the Fund's clerical and administrative
functions, for which it is paid a monthly fee ranging from .16 of 1% of the net
asset value of all outstanding Fund shares up to $10 million down to .09 of 1%
from $50,000,001 and larger.
Accountant and Reports to Shareholders
The Fund's independent public accountant, Brady, Martz & Associates, P.C.,
24 West Central Avenue, Minot, North Dakota 58701, audits and reports on the
Fund's annual financial statements, reviews certain regulatory reports and the
Fund's federal income tax return, and performs other professional accounting,
auditing, tax, and advisory services when engaged to do so by the Fund.
Shareholders will receive annual audited financial statements and semiannual
unaudited financial statements.
PORTFOLIO TRANSACTIONS
Subject to policies established by the Fund's Board of Directors, ND Money
Management, Inc. (the "Investment Adviser"), is responsible for the execution of
the Fund's portfolio transactions. In executing portfolio transactions, the
Investment Adviser seeks to obtain the best net results for the Fund. With
respect to purchases of shares of underlying funds subject to a front-end sales
load at the time of purchase ("load fund shares"), the Investment Adviser
anticipates directing, to the extent possible, substantially all of the Fund's
orders to ND Capital, Inc. (the "Underwriter"). Where the Underwriter acts as
the dealer with respect to purchases of load fund shares, it retains dealer
reallowances on those purchases up to a maximum of 1% of the public offering
price of the shares. The Underwriter is not designated as the dealer on any
sales where such reallowance exceeds 1% of the public offering price. In the
event the Underwriter is unable to execute a particular transaction, the
Investment Adviser will direct such order to another broker-dealer.
The Underwriter may assist in the execution of Fund portfolio transactions
to purchase underlying fund shares or provide personal service to and/or
maintenance of accounts for shareholders of underlying
B-8
<PAGE>
funds for which it may receive Rule 12b-1 (in an amount not to exceed 0.25% of
net assets) or service fees from the underlying funds or their underwriters or
sponsors in accordance with the normal arrangements of those funds. Rule 12b-1
fees and dealer reallowances as described in the preceding paragraph will be
aggregated for determining compliance with Section 17(e)(2) of the 1940 Act.
The Underwriter may retain brokerage commissions on portfolio transactions
of underlying funds held in the Fund's portfolio, including funds which have a
policy of considering sales of their shares in selecting broker-dealers for the
execution of their portfolio transactions. The payment of brokerage commissions
and Rule 12b-1 to the Underwriter on such transactions is not a factor
considered by the Investment Adviser in selecting or retaining an underlying
fund for investment.
Under the 1940 Act, a mutual fund must sell its shares at the price
(including sales load, if any) described in its prospectus, and current rules
under the 1940 Act do not permit negotiations of sales loads. The Investment
Adviser takes into account the amount of the applicable sales load, if any, when
it is considering whether or not to purchase shares of an underlying fund. The
Investment Adviser anticipates investing most of the assets of the Fund in funds
that impose no front-end sales load or impose a front-end sales load on the Fund
of no more than 1% of the public offering price. The Investment Adviser, to the
extent possible, seeks to reduce the sales load imposed by purchasing shares
pursuant to (i) letters of intent, permitting purchases over time; (ii) rights
of accumulation, permitting it to obtain reduced sales charges as it purchases
additional shares of an underlying fund; and (iii) rights to obtain reduced
sales charges by aggregating its purchases of several funds within a "family" of
mutual funds. The Investment Adviser also takes advantage of exchange or
conversion privileges offered by any "family" of mutual funds.
A factor in the selection of brokers is the receipt of research, analysis,
advice, and similar services. The extent to which commissions reflect an element
of value for research services cannot be presently determined. To the extent
that research services of value are provided by broker-dealers with or through
whom the Investment Adviser places the Fund's portfolio transactions, the
Investment Adviser may be relieved of expenses that it might otherwise bear. Any
research and other services provided by brokers to the Investment Adviser or the
Fund are considered to be in addition to, and not in lieu of, services required
to be performed by the Investment Adviser under the Investment Advisory
Agreement.
Another important factor in the selection of brokers is the sale of Fund
shares. Where all major factors are equal, the fact that a broker has sold Fund
shares may be considered in placing portfolio transactions.
The Fund expects that purchases and sales of money market instruments will
usually be principal transactions and purchases and sales of other debt
securities may be principal transactions. Thus, the Fund will normally not pay
brokerage commissions in connection with those transactions. Money market
instruments are generally purchased directly from the issuer or from an
underwriter or market maker for the securities, and other debt securities may be
purchased in a similar manner. Purchases from underwriters include an
underwriting commission or concession, and purchases from dealers serving as
market makers include the spread between the bid and asked price. Where
transactions are made in the over-the-counter market, the Fund will deal with
the primary market makers unless more favorable prices are obtainable elsewhere.
B-9
<PAGE>
Because of the possibility of further regulatory developments affecting the
securities exchanges and brokerage practices generally, the foregoing practices
may be modified.
PURCHASE AND REDEMPTION OF SHARES
Fund shares are sold at their public offering price, which is the net asset
value next determined after an order and payment are received in proper form.
The minimum initial investment is $1,000 ($100 for the Monthomatic Investment
Plan and $250 for an Individual Retirement Account), and the minimum subsequent
investment is $50, but such minimum amounts may be changed at any time.
Upon receipt of a request for redemption, shares will be redeemed by the
Fund at the net asset value next determined following receipt of a properly
executed request with any required documents, less any applicable contingent
deferred sales charge as described in the Prospectus.
The elimination of the contingent deferred sales charge for redemptions by
certain classes of persons as described in the Prospectus is provided because of
anticipated economies in sales and sales related efforts.
The Fund may suspend the right of redemption or delay payment more than
seven days (a) during any period when the New York Stock Exchange is closed for
trading (other than customary weekend and holiday closings), (b) when trading in
the markets the Fund normally utilizes is restricted or an emergency exists as
determined by the Securities and Exchange Commission so that disposal of the
Fund's investments or determination of its net asset value is not reasonably
practicable, or (c) for such other periods as the Securities and Exchange
Commission by order may permit for protection of the Fund's shareholders. The
New York Stock Exchange is currently closed on the following holidays: New
Year's Day, Presidents' Day, Good Friday, Memorial Day, the Fourth of July,
Labor Day, Thanksgiving, and Christmas. The amount received by a shareholder
upon redemption may be more or less than the amount paid for such shares
depending on the market value of the Fund's portfolio securities at the time.
When the Fund is requested to redeem shares for which it may not have yet
received good payment (e.g., cash or certified check on a United States bank),
it may delay the mailing of a redemption check until such time as it has assured
itself that good payment has been collected for the purchase of such shares
(which will be within 15 calendar days of the purchase date).
UNDERWRITER
ND Capital, Inc. (the "Underwriter"), a subsidiary of ND Holdings, Inc.,
the Fund's promoter, is the principal underwriter of the Fund's shares in a
continuous public offering.
Under the terms of the Distribution Agreement between the Fund and the
Underwriter, the Underwriter has agreed to use its best efforts to solicit
orders for the sale of the Fund's shares and to undertake such advertising and
promotion as it believes is reasonable in connection with such solicitation. In
consideration of those services, the Fund had agreed to pay the Underwriter the
proceeds from any contingent deferred sales charges imposed on the redemption of
shares. The Fund paid the underwriter $1,740 and $9,854 in contingent deferred
sales charges for the fiscal year ended December 31, 1995 and 1996,
respectively.
The Underwriter also may receive dealer reallowances (up to a maximum of 1%
of the public offering price) and/or distribution payments and/or service fees
on purchases by the Fund of shares of underlying funds sold with a sales load
and/or which have a distribution plan and/or service fee.
B-10
<PAGE>
The Underwriter, in turn, pays a sales commission currently equal to 4 1/2%
of the amount invested (1% on sales of $1 million or more) to dealers who sell
shares (excluding sales to investors exempt from the contingent deferred sales
charge). As a further inducement to the sale of Fund shares and in recognition
of services provided to shareholders, the Underwriter may also pay service fees
to dealers at the annual rate of up to 0.25% of the average net assets which are
attributable to shareholders of the Fund for whom such dealers are designated as
the dealers of record.
The Distribution Agreement must be approved at least annually by the Fund's
Board of Directors and a vote of a majority of the Fund's directors who are not
"interested persons" (as defined in the 1940 Act) of the Fund and who have no
direct or indirect financial interest in the Distribution Agreement (the
"Qualified Directors"), by vote cast in person at a meeting called for the
purpose of voting on such approval. The Distribution Agreement will terminate
automatically in the event of its assignment and is terminable with respect to
the Fund without penalty on 60 days' written notice by vote of a majority of the
Qualified Directors or by vote of a majority (as defined in the 1940 Act) of the
outstanding voting securities of the Fund.
CALCULATION OF PERFORMANCE DATA
The Fund may publish certain performance figures in advertisements from
time to time. These performance figures may include yield and total return
figures.
Yield
Yield reflects the income per share deemed earned by the Fund's portfolio
investments. Yield is determined by dividing the net investment income per share
deemed earned during the preceding 30-day period by the maximum offering price
per share on the last day of the period and annualizing the result according to
the following formula:
a-b
YIELD = 2[(---+1)/6/ -1]
cd
Where:
a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during the period that
were entitled to receive dividends
d = the maximum offering price per share on the last day of the period
Total Return
Total return is the percentage change in the value of a hypothetical
investment that has occurred in the indicated time period, taking into account
the imposition of various fees, except the contingent deferred sales charge, and
assuming the reinvestment of all dividends and distributions. Cumulative total
return reflects the Fund's performance over a stated period of time and is
computed as follows:
ERV - P = Total Return
-------
P
B-11
<PAGE>
Where:
ERV = ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the base period, assuming reinvestment of all dividends
and distributions
P = a hypothetical initial payment of $1,000
Average annual total return reflects the hypothetical annually compounded
return that would have produced the same cumulative total return if the Fund's
performance had been constant over the entire period and is computed according
to the following formula:
P( 1 + T)/n/ = ERV
Where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment made at
the beginning of the base period, assuming reinvestment of all
dividends and distributions
All performance figures are based on historical results and are not
intended to indicate future performance.
APPENDIX--DESCRIPTION OF COMMERCIAL PAPER AND BOND RATINGS
Description of Moody's Investors Service, Inc. ("Moody's"), Short-Term Debt
Ratings
Prime-1. Issuers (or supporting institutions) rated Prime-1 ("P-1") have a
superior ability for repayment of senior short-term debt obligations. P-1
repayment ability will often be evidenced by many of the following
characteristics: leading market positions in well-established industries; high
rates of return on funds employed; conservative capitalization structure with
moderate reliance on debt and ample asset protection; broad margins in earnings
coverage of fixed financial charges and high internal cash generation; well-
established access to a range of financial markets and assured sources of
alternate liquidity. Prime-2. Issuers (or supporting institutions) rated Prime-
2 ("P-2") have a strong ability for repayment of senior short-term debt
obligations. This will normally be evidenced by many of the characteristics
cited above but to a lesser degree. Earnings trends and coverage ratios, while
sound, may be more subject to variation. Capitalization characteristics, while
still appropriate, may be more affected by external conditions. Ample alternate
liquidity is maintained.
Description of Standard & Poor's Ratings Group ("Standard & Poor's") Commercial
Paper Ratings
A. Issues assigned this highest rating are regarded as having the greatest
capacity for timely payment. Issues in this category are delineated with the
numbers 1, 2, and 3 to indicate the relative degree of
B-12
<PAGE>
safety. A-1. This designation indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted with a plus (+) sign designation. A-2.
Capacity for timely payment on issues with this designation is satisfactory.
However, the relative degree of safety is not as high as for issues designated
A-1.
Description of Moody's Long-Term Debt Ratings
Aaa. Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edged." Interest payments are protected by a large or by an exceptionally
stable margin, and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues; Aa. Bonds which are
rated Aa are judged to be of high quality by all standards. Together with the
Aaa group they comprise what are generally known as high-grade bonds. They are
rated lower than the best bonds, because margins of protection may not be as
large as in Aaa securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make the long-
term risk appear somewhat larger than the Aaa securities; A. Bonds which are
rated A possess many favorable investment attributes and are considered as
upper-medium-grade obligations. Factors giving security to principal and
interest are considered adequate, but elements may be present which suggest a
susceptibility to impairment some time in the future; Baa. Bonds which are
rated Baa are considered as medium-grade obligations (i.e., they are neither
highly protected nor poorly secured). Interest payments and principal security
appear adequate for the present, but certain protective elements may be lacking
or may be characteristically unreliable over any great length of time. Such
bonds lack outstanding investment characteristics and in fact have speculative
characteristics as well; Ba. Bonds which are rated Ba are judged to have
speculative elements; their future cannot be considered as well-assured. Often
the protection of interest and principal payments may be very moderate and
thereby not well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class; B. Bonds which are
rated B generally lack characteristics of the desirable investment. Assurance of
interest and principal payments or of maintenance of other terms of the contract
over any long period of time may be small; Caa. Bonds which are rated Caa are
of poor standing. Such issues may be in default or there may be present elements
of danger with respect to principal or interest; Ca. Bonds which are rated Ca
represent obligations which are speculative in a high degree. Such issues are
often in default or have other marked shortcomings; C. Bonds which are rated C
are the lowest rated class of bonds, and issues so rated can be regarded as
having extremely poor prospects of ever attaining any real investment standing.
Note: Moody's applies numerical modifiers 1, 2, and 3 in each generic rating
classification from Aa to B. The modifier 1 indicates that the company ranks in
the higher end of its generic rating category; the modifier 2 indicates a mid-
range ranking; and the modifier 3 indicates that the company ranks in the lower
end of its generic rating category.
Description of Standard & Poor's Corporate Debt Ratings
AAA. Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong; AA. Debt
rated AA has a very strong capacity to pay interest and repay principal and
differs from the higher rated issues only in small degree; A. Debt rated A has
a strong capacity to pay interest and repay principal although it is somewhat
more susceptible to the adverse effects of changes in circumstances and economic
conditions than debt in higher rated categories; BBB. Debt rated BBB is
regarded as having an adequate capacity to pay interest and repay principal.
Whereas it normally exhibits adequate protection parameters, adverse economic
conditions or changing circumstances
B-13
<PAGE>
are more likely to lead to a weakened capacity to pay interest and repay
principal for debt in this category than in higher rated categories; BB, B, CCC,
CC, C. Debt rated BB, B, CCC, CC, and C is regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and C the highest degree of speculation. While such
debt will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to adverse conditions;
BB. Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure of
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB- rating; B. Debt rated B has a greater
vulnerability to default but currently has the capacity to meet interest
payments and principal repayments. Adverse business, financial, or economic
conditions will likely impair capacity or willingness to pay interest and repay
principal. The B rating category is also used for debt subordinated to senior
debt that is assigned an actual or implied BB or BB- rating; CCC. Debt rated CCC
has a currently identifiable vulnerability to default and is dependent upon
favorable business, financial, and economic conditions to meet timely payment of
interest and repayment of principal. In the event of adverse business,
financial, or economic conditions, it is not likely to have the capacity to pay
interest and repay principal. The CCC rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied B or B-rating;
CC. The rating CC is typically applied to debt subordinated to senior debt that
is assigned an actual or implied CCC rating; C. The rating C is typically
applied to debt subordinated to senior debt which is assigned an actual or
implied CCC- debt rating. The C rating may be used to cover a situation where a
bankruptcy petition has been filed, but debt service payments are continued; CI.
The rating CI is reserved for income bonds on which no interest is being paid;
D. Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless Standard & Poor's believes that
such payments will be made during such grace period. The D rating also will be
used upon the filing of a bankruptcy petition if debt service payments are
jeopardized.
B-14
<PAGE>
[LETTERHEAD OF BRADY MARTZ APPEARS HERE]
INDEPENDENT AUDITOR'S REPORT
To the Shareholders and Board of Directors of
Integrity Fund of Funds, Inc.
We have audited the accompanying statement of assets and liabilities of
Integrity Fund of Funds, Inc. (the Fund), including the schedule of investments,
as of December 31, 1996, the related statement of operations for the year then
ended, the statements of changes in net assets, and the financial highlights for
each of the two years in the period then ended. These financial statements and
financial highlights are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1996, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Integrity Fund of Funds, Inc. as of December 31, 1996, the results of its
operations for the year then ended, the changes in its net assets, and financial
highlights for each of the two years in the period then ended, in conformity
with generally accepted accounting principles.
/s/ Brady, Martz
BRADY, MARTZ & ASSOCIATES, P.C.
February 10, 1997
F-1
<PAGE>
INTEGRITY FUND OF FUNDS, INC.
Schedule of Investments December 31, 1996
Name of Issuer
Percentages represent the market value
of each investment category to total net assets
<TABLE>
<CAPTION>
Quantity Market Value
- --------------------------------------------------------------------------------
MUTUAL FUNDS (103.1%)
<S> <C> <C>
AIM Constellation Fund A............................. 32,891 $ 830,833
AIM Value Fund A..................................... 43,700 1,273,860
American Fundamental Investors Fund.................. 28,908 709,397
American Washington Mutual Investors................. 24,034 589,805
Brandywine Fund...................................... 7,291 245,633
Clipper Fund......................................... 3,620 244,611
Dodge & Cox Stock Fund............................... 7,143 570,106
MFS Research A....................................... 37,125 687,548
MFS Value A.......................................... 30,865 379,641
Massachusetts Inv A.................................. 69,121 999,495
Neuberger & Berman Focus Fund........................ 6,096 187,867
Neuberger & Berman Guardian Fund..................... 10,153 260,234
New York Venture Fund A.............................. 68,489 1,198,551
Putnam Growth & Income Fund A........................ 48,571 875,256
Putnam Vista Fund A.................................. 59,539 622,178
Putnam Voyager Fund A................................ 19,245 310,235
T. Rowe Price Equity-Income.......................... 9,991 225,198
T. Rowe Price New America Growth..................... 5,883 225,726
Templeton Growth Fund................................ 67,709 1,323,037
-----------
TOTAL MUTUAL FUNDS (COST: $11,270,967)....................... $11,759,211
===========
SHORT-TERM SECURITIES (3.2%)
Federated Money Market Trust #092 (COST: $364,888)........... 364,888
-----------
TOTAL INVESTMENTS IN SECURITIES (COST: $11,635,855).......... $12,124,099
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE>
INTEGRITY FUND OF FUNDS, INC.
Financial Statements December 31, 1996
<TABLE>
<CAPTION>
Statement of Assets and Liabilities
December 31, 1996
-----------------------------------------------------
<S> <C>
ASSETS
Investments in securities, at value
(cost:$11,635,855)................... $12,124,099
Accrued dividends receivable......... 274,446
Variation margin on futures.......... 126,350
-----------
Total Assets........................ $12,524,895
-----------
LIABILITIES
Distributions payable................ $ 779,722
Bank overdraft....................... 321,849
Accrued expenses..................... 17,764
-----------
Total Liabilities................... $ 1,119,335
-----------
NET ASSETS.............................. $11,405,560
===========
Net asset value per share, 910,358
shares outstanding................... $ 12.53
===========
<CAPTION>
Statement of Operations
For the year ended December 31, 1996
-----------------------------------------------------
<S> <C>
INVESTMENT INCOME
Dividends............................ $ 231,437
Interest............................. 231
-----------
Total Investment Income............. $ 231,668
-----------
EXPENSES
Investment advisory fees............. $ 81,395
Custodian fees....................... 1,587
Transfer agent fees.................. 14,674
Accounting service fees.............. 28,528
Audit and legal fees................. 3,850
Directors fees....................... 1,035
Service fees......................... 22,610
Insurance............................ 2,957
Printing and postage................. 8,574
License, fees, and registrations..... 17,447
Amortization of organization costs... 1,806
-----------
Total expenses...................... $ 184,463
Less expenses waived or absorbed.....
by the Fund's manager................ 39,760
-----------
Total Net Expenses.................. $ 144,703
-----------
NET INVESTMENT INCOME
(LOSS)............................... $ 86,965
-----------
</TABLE>
F-3
<PAGE>
INTEGRITY FUND OF FUNDS, INC.
Financial Statements December 31, 1996
<TABLE>
<CAPTION>
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
AND FUTURES
<S> <C>
Net realized gain (loss) from:.........
Investment transactions................ $ 753,983
Futures transactions................... (61,227)
Net change in unrealized appreciation
(depreciation) of:
Investments............................ 393,119
Futures................................ (58,271)
------------
Net realized and unrealized gain
(loss) on investments and futures... $ 1,027,604
------------
NET INCREASE (DECREASE)
IN NET ASSETS RESULTING
FROM OPERATIONS.......................... $ 1,114,569
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
INTEGRITY FUND OF FUNDS, INC.
Financial Statements December 31, 1996
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
For the years ended December 31, 1996 and 1995
For the Year Ended For the Year Ended
December 31, 1996 December 31, 1995
---------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
<S> <C> <C>
Net investment income (loss)............................................... $ 86,965 $ 81,145
Net realized gain (loss) on investment and futures transactions............ 692,756 200,660
Net unrealized appreciation (depreciation) on investments and futures...... 334,848 95,125
---------------------------------------
Net Increase (Decrease) in Net Assets Resulting From Operations....... $ 1,114,569 $ 376,930
---------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income....................................... $ (86,965) $ (81,145)
Distributions from net realized gain on investment and
futures transactions....................................................... (692,756) (200,660)
---------------------------------------
Total Dividends and Distributions..................................... $ (779,721) $ (281,805)
---------------------------------------
CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares............................................... $ 7,365,405 $4,439,852
Proceeds from reinvested dividends......................................... 249,907 0
Cost of shares redeemed.................................................... (906,427) (173,150)
---------------------------------------
Net Increase (Decrease) in Net Assets Resulting From
Capital Share Transactions............................................ $ 6,708,885 $4,266,702
---------------------------------------
TOTAL INCREASE IN NET ASSETS................................................. $ 7,043,733 $4,361,827
NET ASSETS, BEGINNING OF PERIOD.............................................. 4,361,827 0
---------------------------------------
NET ASSETS, END OF PERIOD.................................................... $ 11,405,560 $4,361,827
=======================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
INTEGRITY FUND OF FUNDS, INC.
Notes to Financial Statements December 31, 1996
Note 1. ORGANIZATION
Integrity Fund of Funds, Inc. (the Fund) is registered under the
Investment Company Act of 1940 as a diversified, open-end management
investment company. The Fund incorporated under the laws of the State
of North Dakota on June 1, 1994 and commenced operations on January 1,
1995. The Fund's objective is long-term capital appreciation and growth
of income. The Fund seeks to achieve this objective by investing
primarily in a diversified group of other open-end investment companies
which in turn, invest principally in equity securities.
Shares of the Fund are offered for sale at net asset value without a
sales charge. Shares may be subject to a contingent deferred sales
charge, if those shares are redeemed within five years of purchase.
Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Investment security valuation -- Investments in securities for which
market quotations are readily available are valued at the last reported
sales price or net asset value at the close of each business day.
Securities for which market quotations are not readily available are
valued at fair value as determined in good faith by the portfolio
management team. The Fund follows industry practice and records
security transactions on the trade date.
Federal and state income taxes -- The Fund's policy is to comply with
the requirements of the Internal Revenue Code that are applicable to
regulated investment companies, and to distribute all of its net
investment income, including any net realized gain on investments, to
its shareholders. Therefore, no provision for income taxes is required.
Distributions to shareholders -- The Fund will distribute dividends
from net investment income and any net realized capital gains at least
annually. Dividends and distributions are reinvested in additional
shares of the Fund at net asset value or payable in cash.
Dividend income -- Dividend income is recognized on the ex-dividend
date.
Futures contracts -- The Fund may purchase and sell financial futures
contracts to hedge against changes in the values of equity securities
the Fund owns or expects to purchase.
A futures contract is an agreement between two parties to buy or sell
units of a particular index at a set price on a future date. Upon
entering into a futures contract, the Fund is required to deposit with
a broker an amount of cash or securities equal to the minimum "initial
margin" requirement of the futures exchange on which the contract is
traded. Subsequent payments ("variation margin") are made or received
by the Fund, dependent on the fluctuations in the value of the
underlying index. When entering into a closing transaction, the Fund
will realize, for book purposes, a gain or loss equal to the difference
between the value of the futures contracts sold and the futures
contracts to buy. Unrealized appreciation (depreciation) related to
open futures contracts is required to be treated as realized gain
(loss) for Federal income tax purposes.
Certain risks may arise upon entering into futures contracts. These
risks may include changes in the value of the futures contracts that
may not directly correlate with changes in the value of the underlying
securities.
Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
F-6
<PAGE>
Note 3. CAPITAL SHARE TRANSACTIONS
As of December 31, 1996, there were 1,000,000,000 shares of $.0001 par
value authorized; 910,358 and 370,749 shares were outstanding at
December 31, 1996 and December 31, 1995, respectively. Transactions in
capital shares were as follows:
<TABLE>
<CAPTION>
Shares Amount
-------------------------------------- --------------------------------------
For The For The For The For The
Year Ended Year Ended Year Ended Year Ended
December 31, 1996 December 31, 1995 December 31, 1996 December 31, 1995
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold.......................................... 589,294 385,088 $ 7,365,405 $ 4,439,852
Shares issued on reinvestment of dividends........... 21,251 0 249,907 0
Shares redeemed...................................... (70,936) (14,339) (906,427) (173,150)
------------------------------------------------------------------------------
Net increase (decrease).............................. 539,609 370,749 $ 6,708,885 $ 4,266,702
==============================================================================
</TABLE>
Note 4. INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
ND Money Management, Inc., the Fund's investment adviser, ND Capital,
Inc., the Fund's underwriter, and ND Resources, Inc., the Fund's
transfer and accounting services agent, are subsidiaries of ND
Holdings, Inc., the Fund's sponsor.
The Fund has engaged ND Money Management, Inc., to provide investment
advisory and management services to the Fund. The Investment Advisory
Agreement provides for fees to be computed at an annual rate of 0.90%
of the Fund's average daily net assets. The Fund has recognized $81,395
of investment advisory fees for the year ended December 31, 1996. The
Fund has a payable to ND Money Management, Inc. of $9,299 at December
31, 1996 for investment advisory fees. Certain officers and directors
of the Fund are also officers and directors of the investment adviser.
ND Capital, Inc. is the Fund's principal underwriter. The Fund pays ND
Capital service fees computed at an annual rate of 0.25% of the Fund's
average daily net assets. Capital, in turn, pays dealers service fees
for personal service to shareholders and/or the maintenance of
shareholder accounts. The Fund has recognized $22,610 of service fees
for the year ended December 31, 1996. The Fund has a payable to ND
Capital, Inc. of $2,583 at December 31, 1996 for service fees. Certain
officers and directors of the Fund are also officers and directors of
the underwriter.
ND Resources, Inc., (the transfer agent), provides shareholder services
for a monthly fee equal to an annual rate of 0.16% of the Fund's first
$10 million of net assets, 0.13% of the Fund's net assets on the next
$15 million, 0.11% of the Fund's net assets on the next $15 million, 0
.10% of the Fund's net assets on the next $10 million, and 0.09% of the
Fund's net assets in excess of $50 million. The Fund has recognized
$14,674 of transfer agency fees for the year ended December 31, 1996.
ND Resources, Inc. also acts as the Fund's accounting services agent
for a monthly fee equal to the sum of a fixed fee of $2,000, and a
variable fee equal to 0.05% of the Fund's average daily net assets on
an annual basis for the Fund's first $50 million and at a lower rate on
the average daily net assets in excess of $50 million. The Fund has
recognized $28,528 of accounting service fees for the year ended
December 31, 1996.
Note 5. INVESTMENT SECURITY TRANSACTIONS
The cost of purchases and proceeds from the sales of investment
securities (excluding short-term securities) aggregated $10,289,063 and
$4,166,780, respectively, for the year ended December 31, 1996.
Note 6. INVESTMENT IN SECURITIES
At December 31, 1996, the aggregate cost of securities for federal
income tax purposes was $11,635,855, and the net unrealized
appreciation of investments based on the cost was $488,244, which is
comprised of $622,199 aggregate gross unrealized appreciation and
$133,955 aggregate gross unrealized depreciation.
F-7
<PAGE>
INTEGRITY FUND OF FUNDS, INC.
Financial Statements December 31, 1996
Financial Highlights Selected per share data and ratios for the period indicated
<TABLE>
<CAPTION>
For the Year Ended For the Year Ended
December 31, 1996 December 31, 1995
------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD........................ $ 11.76 $ 10.00
------------------------------------------
Income from Investment Operations:
Net investment income (loss)........................... $ .10 $ .22
Net realized and unrealized gain (loss) on investment
and futures transactions............................... 1.53 2.30
------------------------------------------
Total From Investment Operations................... $ 1.63 $ 2.52
------------------------------------------
Less Distributions:
From net investment income............................. $ (.10) $ (.22)
From net realized gain on investments.................. (.76) (.54)
------------------------------------------
Total Distributions................................ $ (.86) $ (.76)
------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 12.53 $ 11.76
==========================================
Total Return 13.84%(A) 25.20%(A)
Ratios/Supplemental Data:...................................
Net assets, end of period (in thousands)............... $ 11,406 $ 4,362
Ratio of net expenses (after expense assumption) to
average net assets..................................... 1.63%(B) 1.59%(B)
Ratio of net investment income to average net assets 0.98% 4.00%
Portfolio turnover rate................................ 50.11% 15.30%
</TABLE>
(A) Excludes contingent deferred sales charge of 1.5%.
(B) During the years ended December 31, 1996 and 1995, ND Holdings, Inc.
assumed expenses of $39,760 and $40,714. If the expenses had not been
assumed, the annualized ratio of total expenses to average net assets would
have been 2.08% and 3.60%, respectively.
F-8
<PAGE>
INTEGRITY FUND OF FUNDS, INC.
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements
Included in Part B of the Registration Statement:
Independent Public Accountant's Report, dated February 10,1997
Statement of Assets and Liabilities as of December 31, 1996
Statement of Operations for the Year Ended December 31, 1996
Statement of Changes in Net Assets for the Year Ended December 31,
1996 and for the Year Ended December 31 1995
Notes to Financial Statements
Financial Highlights
Schedule of Investments
Schedules II through VII are omitted because inapplicable.
(b) Exhibits
(1) Articles of Incorporation *
(2) Bylaws *
(4) Specimen Copy of Share Certificate *
(5) Form of Investment Advisory Agreement *
(6) (a) Form of Distribution Agreement *
(6) (b) Form of Dealer Sales Agreement **
(8) Form of Custodian Agreement *
(9) (a) Form of Transfer Agency Agreement *
(9) (b) Form of Accounting Services Agreement ***
(10) Opinion of Pringle & Herigstad, P. C. *
(11) (a) Consent of Independent Accountant *
(11) (b) Consent of Independent Accountant *
(11) (c) Consent of Independent Accountant
(13) Form of Purchase Agreement *
-----------------------------
* Previously filed as an exhibit to Registrant's Registration Statement on
Form N-1A filed with the Securities and Exchange Commission on October 14,
1994, and incorporated by reference herein.
** Previously filed as an exhibit to Post-effective Amendment No. 1 to
Registrant's Registration Statement on Form N-1A filed with the Securities
and Exchange Commission on May 1, 1995, and incorporated by reference
herein.
*** Previously filed as an exhibit to Post-effective Amendment No. 2 to
Registrant's Registration Statement on Form N-1A filed with the Securities
and Exchange Commission on May 1, 1996, and incorporated by reference
herein.
C-1
<PAGE>
Item 25. Persons Controlled by or Under Common Control with Registrant
Not applicable
Item 26. Number of Holders of Securities
<TABLE>
<S> <C>
Title of Class Number of Record Holders
Shares, par value 1155
$.0001 per share (As of February 18, 1997)
</TABLE>
Item 27. Indemnification
Section 4 of the Distribution Agreement [ Exhibit (6) (a) ] provides
for the indemnification of NDCapital, Inc., Registrant's principal underwriter,
against certain losses. Section 12 of the Transfer Agency Agreement [ Exhibit 9
] provides for the indemnification of NDResources, Inc., Registrant's transfer
agent, against certain losses.
Indemnification of directors, officers, employees, and agents of
Registrant is required under Section 10-19.1-91 of the North Dakota Century
Code. In addition, Registrant has obtained an insurance policy on behalf of
directors and officers against any liability asserted against and incurred by
the person in or arising from that person's official capacity to the extent
permitted by law.
In no event will Registrant indemnify its directors, officers,
employees, or agents against any liability to which such person would otherwise
be subject by reason of his willful misfeasance, bad faith, gross negligence in
the performance of his duties, or by reason of his reckless disregard of the
duties involved in the conduct of his office arising under his agreement with
Registrant.
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers, and controlling persons of
Registrant pursuant to the foregoing provisions, or otherwise, Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by Registrant of expenses incurred or
paid by a director, officer, or controlling person of Registrant in the
successful defense of any action, suit, or proceeding) is asserted by such
director, officer, or controlling person in connection with the securities being
registered, Registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
Anything in the North Dakota Business Corporation Act (Chapters 10-19
through 10-23 of the North Dakota Century Code), the Fund's Articles of
Incorporation or Bylaws, or the Investment Advisory, Distribution, or Transfer
Agency Agreements to the contrary notwithstanding, Registrant will comply in all
respects with the provisions of Investment Company Act Release No. 11330
(September 4, 1980) concerning indemnification.
Item 28. Business and Other Connections of Investment Adviser
ND Money Management, Inc. (the "Investment Adviser"), is a wholly-
owned subsidiary of NDHoldings, Inc. ("Holdings"), Registrant's promoter. The
Investment Adviser was organized under the laws of the State of North Dakota on
August 19, 1988, and also serves as investment adviser for ND
C-2
<PAGE>
Tax-Free Fund, Inc. ("NDTFF"), NDInsured Income Fund, Inc. ("NDIIF"), Montana
Tax-Free Fund, Inc. ("MTFF"), and South Dakota Tax-Free Fund, Inc. ("SDTFF").
The officers and directors of the Investment Adviser are Robert E. Walstad
and Peter A. Quist. Mssrs. Walstad and Quist are also officers and directors of
Holdings, NDCapital, Inc. ("Capital"), Registrant's principal underwriter and
initial shareholder, NDResources, Inc. ("Resources"), Registrant's transfer
agent, NDTFF, NDIIF, MTFF, SDTFF, and Registrant.
Mr. Walstad served as a stockbroker and branch manager of the Minot, North
Dakota, office of Dean Witter Reynolds from September 1977 to October 1987 when
he resigned to organize Holdings. Mr. Quist was Securities Commissioner of the
State of North Dakota from May 6, 1983, to January 31, 1988, when he resigned to
join Holdings as vice president and director.
The Investment Adviser, Registrant, Holdings, Capital, Resources, NDTFF,
NDIIF, MTFF, and SDTFF have their principal address at 1 North Main, Minot,
North Dakota 58703.
Item 29. Principal Underwriters
(a) Other investment companies for which Registrant's principal
underwriter also acts as principal underwriter, depositor, or investment
adviser: NDTax-Free Fund, Inc., ND Insured Income Fund, Inc., Montana Tax-Free
Fund, Inc., and South Dakota Tax-Free Fund, Inc.
(b) Information concerning each director, officer, or partner of the
principal underwriter:
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address with Underwriter with Registrant
-------------------- ----------------------- ------------------------
<S> <C> <C>
Robert E. Walstad President, Treasurer, President, Treasurer,
1 North Main and Director and Director
Minot, North Dakota 58703
Peter A. Quist Vice President, Vice President,
1 North Main Secretary, and Director Secretary and Director
Minot, North Dakota 58703
</TABLE>
(c) Not applicable
Item 30. Location of Accounts and Records
First Western Bank & Trust, 900 South Broadway, Minot, North Dakota
58701, serves as custodian of Registrant and maintains all records related to
that function. NDResources, Inc. ("Resources"), serves as transfer agent,
dividend disbursing, administrative, and accounting services agent of Registrant
and maintains all records related to those functions. NDCapital, Inc.
("Capital"), serves as the principal underwriter of Registrant and maintains all
records related to that function. NDMoney Management, Inc. ("Money Management"),
serves as Registrant's investment adviser and maintains all records related to
that function. Registrant maintains all of its corporate records. The address of
Resources, Capital, Money Management, and Registrant is 1 North Main, Minot,
North Dakota 58703.
Item. 31. Management Services
Not applicable
C-3
<PAGE>
Item 32. Undertakings
If requested to do so by the holders of at least 10% of Registrant's
outstanding shares, Registrant undertakes to call a meeting of shareholders for
the purpose of voting upon the question of removal of a director or directors
and to assist in communications with other shareholders in the manner described
in Section 16(c) of the Investment Company Act of 1940.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, Registrant certifies that it meets all of the requirements
for effectiveness of this Post-effective Amendment No. 4 to Registrant's
Registration Statement on Form N-1A filed with the Securities and Exchange
Commission on October 14, 1994, pursuant to Rule 485(b) under the Securities Act
of 1933 and has duly caused this Post-effective Amendment No. 4 to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Minot,
State of North Dakota, on the 19th day of February, 1997.
INTEGRITY FUND OF FUNDS, INC.
By
-----------------------------------
Robert E. Walstad
President
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, this Post-effective Amendment No. 4 to Registrant's
Registration Statement on Form N-1A has been signed below by the following
persons in the capacities and on the date indicated.
<TABLE>
<S> <C>
- ------------------------------------------ February 19, 1997
Lynn W. Aas
Director
- ------------------------------------------ February 19, 1997
Orlin W. Backes
Director
- ------------------------------------------ February 19, 1997
Arthur A. Link
Director
- ------------------------------------------ February 19, 1997
Peter A. Quist
Director, Vice President, and Secretary
- ------------------------------------------ February 19, 1997
Robert E. Walstad
Director, President, and Treasurer
</TABLE>
C-4
<PAGE>
INTEGRITY FUND OF FUNDS, INC.
Registration Statement on Form N-lA under
the Securities Act of 1933 and the
Investment Company Act of 1940
EXHIBITS
<PAGE>
INDEX TO EXHIBITS
(1) Articles of Incorporation
(2) Bylaws
(4) Specimen Copy of Share Certificate
(5) Form of Investment Advisory Agreement
(6) (a) Form of Distribution Agreement
(6) (b) Form of Dealer Sales Agreement
(8) Form of Custodian Agreement
(9) Form of Transfer Agency Agreement
(10) Opinion of Pringle & Herigstad, P.C.
(11) Consent of Independent Accountant
(13) Form of Purchase Agreement
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 11,635,855
<INVESTMENTS-AT-VALUE> 12,124,099
<RECEIVABLES> 274,446
<ASSETS-OTHER> 126,350
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 12,524,895
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,119,335
<TOTAL-LIABILITIES> 1,119,335
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 910,358
<SHARES-COMMON-PRIOR> 370,749
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 488,224
<NET-ASSETS> 11,405,560
<DIVIDEND-INCOME> 231,437
<INTEREST-INCOME> 231
<OTHER-INCOME> 0
<EXPENSES-NET> 144,703
<NET-INVESTMENT-INCOME> 86,965
<REALIZED-GAINS-CURRENT> 692,756
<APPREC-INCREASE-CURRENT> 334,848
<NET-CHANGE-FROM-OPS> 1,114,569
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 86,965
<DISTRIBUTIONS-OF-GAINS> 692,756
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 589,294
<NUMBER-OF-SHARES-REDEEMED> 70,936
<SHARES-REINVESTED> 21,251
<NET-CHANGE-IN-ASSETS> 7,043,733
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 81,395
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 184,463
<AVERAGE-NET-ASSETS> 8,872,768
<PER-SHARE-NAV-BEGIN> 11.76
<PER-SHARE-NII> .10
<PER-SHARE-GAIN-APPREC> 1.53
<PER-SHARE-DIVIDEND> .10
<PER-SHARE-DISTRIBUTIONS> .76
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.53
<EXPENSE-RATIO> 1.63
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE>
EXHIBIT 99.1
ARTICLES OF INCORPORATION
<PAGE>
EXHIBIT 99.1
SEAL
ARTICLES OF INCORPORATION - NORTH DAKOTA BUSINESS FOR OFFICE USE ONLY
OR FARMING CORPORATION Validation
NORTH DAKOTA SECRETARY OF STATE
SFN 16812 (6-89)
SEE PAGE 4 FOR FILING AND MAILING INSTRUCIONS
FILE No. 1924400
We, the undersigned natural persons of the age of eighteen years or more,
acting as incorporators of a corporation organized under North Dakota Business
Corporation Act, adopt the following Articles of incorporation for such
Corporation:
Article 1. The name of said Corporation shall be: Integrity Fund of
Funds, Inc.
Article 2. The period of its duration is perpetual .
Article 3. The purpose for which the Corporation is organized are general
business purposes, OR:
To engage in business as a management investment company
registered under the Investment Company Act of 1940.
To do everything necessary, proper, advisable, or convenient
for the accomplishment of the above purpose and to do
every other act and thing incidental thereto.
<PAGE>
Article 4.
A. Aggregate number of shares the corporation has authority to
issue
One billion (1,000,000,000) shares, all of one class
B. Par value per share authorized by corporation
One-tenth of one mill ($.0001) each
C. If shares are divided into classes, they are identified as
follows:
CLASS NO.OF SHARES PAR VALUE PER SHARE
Article 5.
A. Name of Registered Agent
Peter A. Quist
B. Social Security or Federal ID # of Registered Agent 574-
10-7438
C. Address of Registered Office City State Zip Code
201 South Broadway Minot ND 58701
D. Address of Executive Office
(if different than "C") City State Zip Code
E. The articles of incorporation are accompanied by a signed consent of the
registered agent with a filing fee of $10.
Article 6. Other provisions by which this corporation shall be
governed: (if none, insert "none")
No shareholder shall be entitled as a matter of right to subscribe for
or purchase or receive any new or additional issue of shares or securities
convertible into shares, whether now or hereafter authorized or whether issued
for money, for a consideration other than money, or by way of dividend.
Any action, other than an action requiring shareholder approval, may
be taken by written action signed by the number of directors that would be
required to take the same action at a meeting of the board of directors at which
all directors were present.
Page 2
<PAGE>
Article 7. A. The name, social security number, and address of each
incorporator:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
SOCIAL SECURITY
NAME NUMBER ADDRESS CITY STATE ZIP
Peter A. Quist ###-##-#### 201 South Broadway, Minot, ND 58507
</TABLE>
B. SIGNATURES
I (We), the above named *incorporator(s), have read the foregoing
Articles of incorporation, know the contents, and believe the statements made
therein to be true.
Dated June 1 1994
Signature
B. FEES:
Filing $30.00
Consent of Registered Agent $10.00
Minimum License Fee $50.00
Additional License Fees
(Equal to $1 0.00 for every additional
$1 0,000 in excess of $50,000)
SEE INSTRUCTIONS ON PAGE 4.
OFFICE USE ONLY
Certificate No.
Date Filed
6 - 1 - 94
Fee Paid
Filed By
4 16812 Page 3
<PAGE>
SEAL
STATEMENT 0F C0NSENT T0 SERVE AS A REGISTERED AGENT
SECRETARY OF STATE FILE NO. 1924400
SFN 7974 (02 -89)
INSTRUCTIONS
This Statement of Consent is to be filed by both Foreign and Domestic
corporations. Print legibly or type. File duplicate originals (two copes both
with original signatures).
SEND TO: Secretary of State
State Capitol
Bismarck, ND 58505 Filing Fee $10.00
IF REGISTERED AGENT 1S AN INDIVIDUAL. COMPLETE THIS SECTION
Name of Registered Agent Date
Peter A. Quist June 1, 1994
For the Corporation of (Use exact corporate name)
Integrity Fund of Funds, Inc.
I accept the appointment to serve in the capacity of registered agent for the
above corporation.
/Peter A. Quist/
Signature of Registered Agent
IF REGISTERED AGENT IS A CORPORATION - COMPLETE THIS SECTION
(The incorporating or authorizing corporation cannot serve as its own agent.)
Person Signing Statement Title Date
Name of Corporate Registered Agent (Use exact corporate name)
To Represent the Corporation of (Use exact corporate name)
On behalf of the corporation named above as Corporate Registered Agent,
I accept this appointment to serve in the capacity of registered agent.
Signed for corporation acting as agent
SECRETARY OF STATE USE ONLY
Filing Date 6 -1 - 94
/Alvin A. Jaeger
Secretary of State
BY: /NB/
RECEIPT NO:
<PAGE>
State of North Dakota
(SEAL)
CERTIFICATE OF INCORPORATION
OF
INTEGRITY FUND OF FUNDS, INC.
The undersigned, as Secretary of State of the State of North Dakota, hereby
certifies that Articles of Incorporation for the incorporation of
INTEGRITY FUND OF FUNDS, INC.
duly signed and verified pursuant to the North Dakota statutes governing a
North Dakota business corporation, have been received in this off ice and are
found to conform to law.
ACCORDINGLY the undersigned, as such Secretary of State, and by virtue of
the authority vested in him by law, hereby issues this Certificate of
Incorporation to
INTEGRITY FUND OF FUNDS, INC.
Dated: June 1, 1994
/Alvin A. Jaeger/
Alvin A. Jaeger
Secretary of State
<PAGE>
EXHIBIT 99.2
BYLAWS
<PAGE>
BYLAWS
OF
INTEGRITY FUND OF FUNDS, INC.
Except as otherwise expressly provided in these bylaws or in the articles of
incorporation or as required under any federal laws and rules and regulations to
which the corporation is subject, the management, business, and affairs of the
corporation shall be governed by and conducted in accordance with the provisions
of the North Dakota Business Corporation Act.
ARTICLE I
OFFICES
The corporation shall have offices at such places either within or
without the State of North Dakota as the board of directors may determine.
ARTICLE II
SHAREHOLDERS
Section 1. Regular Meetings. Regular meetings of shareholders may be held
on an annual or other less frequent basis, but need not be held unless required
by law. Regular meetings shall be held on a date and at a time and place,
either within or without the State of North Dakota, as the board of directors
shall determine.
Section 2. Quorum. The holders of one-third of the shares entitled to vote
at a meeting constitute a quorum for the transaction of business.
ARTICLE III
BOARD OF DIRECTORS
Section 1. Number. The business and affairs of the corporation shall be
managed by a board of directors consisting of three or more directors. The
number of directors may be determined either by the vote of a majority of the
entire board or by vote of the shareholders and initially shall be five.
Section 2. Election and Qualifications. The directors of the corporation,
other than the first board of directors named in the articles of incorporation,
shall be elected by the shareholders for indefinite terms that expire at the
next regular meeting of the shareholders. Directors hold office until
successors are elected and have
<PAGE>
qualified or until their earlier death, resignation, removal, or
disqualification. Directors need not be residents of the State of North Dakota
or shareholders of the corporation.
Section 3. Regular Meetings. Regular meetings of the board of directors may
be held at such time and place, either within or without the State of North
Dakota, as the board may determine, and no notice shall be required for regular
meetings.
Section 4. Special Meetings . Special meetings of the board of directors may
be called by or at the request of the president or any two directors. Notice of
the date, time, and place of special meetings shall be given to each director at
least forty-eight hours prior to the meeting, unless the notice is given orally
or delivered in person, in which case it shall be given at least twenty-four
hours prior to the meeting.
Section 5. Special Actions. Anything in the second paragraph of Article 6
of the articles of incorporation to the contrary notwithstanding, any action of
the board of directors required in connection with an investment advisory or a
principal underwriting agreement must comply with the provisions of the
Investment Company Act of 1940 and any rules and regulations adopted thereunder.
ARTICLE IV
OFFICERS
Section 1. Enumeration of Offices. The officers of the corporation shall be
a president, one or more vice-presidents (the number thereof to be determined by
the board of directors), a secretary, and a treasurer, each of whom shall be
elected by the board of directors. The board of directors may also appoint or
elect any other officers, assistant officers, and agents that it may deem
necessary. Any two or more offices may be held by the same person.
Section 2. Election and Term of Office. The officers shall be elected by
the board of directors. Unless otherwise provided by the board of directors,
each officer shall hold
2
office until the first meeting of the board of directors following the next
election of directors and until a successor is elected and has qualified or
until the earlier death, resignation, removal, or disqualification of the
officer.
Section 3. Powers and duties. The powers and duties of the several officers
shall be as provided from time to time by resolution or other directive of the
board of directors. In the absence of such provisions, the respective officers
shall have the powers and shall discharge the duties customarily and usually
held and performed by like officers of corporations similar in organization and
business purposes to this corporation.
Section 4. Salaries. The salaries of the officers shall be fixed from
time to time by the board of directors,
<PAGE>
and no officer shall be prevented from receiving a salary by reason of the fact
that he is also a director of the corporation.
ARTICLE V
FISCAL YEAR
The fiscal year of the corporation shall be any period of twelve consecutive
months which the board of directors may designate by resolution or other
directive.
Adopted this 19th day of August, 1994.
IN TESTIMONY WHEREOF, witness my signature hereto this 13th day of October,
1994.
/Peter A. Quist/
Peter A. Quist
Secretary
3
<PAGE>
EXHIBIT 99.4
SPECIMEN COPY OF SHARE CERTIFICATE
<PAGE>
SEAL
NUMBER SHARES
000
INTEGRITY FUND OF FUNDS, INC.
Incorporated under the Laws
of North Dakota
Cusip No.
THIS IS TO CERTIFY THAT: ACCOUNT NO.:
SOC. SEC.:
is the owner of *************** **************************fully paid and
non-assessable shares of the par value of one-tenth of one mill ($.0001) of
Integrity Fund of Funds, Inc. transferable on the books of the corporation by
the holder hereof, in person or by attorney, upon surrender of this certificate
property endorsed. This certificate and the shares represented hereby are
subject to the Articles of Incorporation and Bylaws of the corporation as from
time to time amended. This certificate is not valid until countersigned by the
Transfer Agent. In Witness Whereof, the corporation has caused the facsimile
signatures of its proper officer's to be affixed this day of
Countersigned
By ND Resources, Inc.
President Transfer Agent
By By
Secretary Authorized Signature
SEAL
<PAGE>
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written
out in full according to applicable laws or regulations.
TEN IN COM - as tenants in common
TEN BY ENT - as tenants by the entireties
JTWROS - as joint tenants with right of survivorship and not
as tenants in common
UNIF GIFTS/TRANSFERS TO M/A - Uniform Gifts/Transfers to
Minors Act
Additional abbreviations not shown in the above list may be used.
FOR VALUE RECEIVED I/We hereby sell, assign, and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE
shares represented by the within certificate and hereby
irrevocably constitute
and appoint:
(For broker use only)
attorney to transfer said shares upon the books of said Fund
with full power of
substitution in the premises.
Dated
NOTE: The Signature(s) on this assignment must correspond
exactly with the name(s) as indicated on the face of the certificate.
*SIGNATURE(S) GUARANTEED: (Signature of Seller)
(Signature of Co-owner)
NOTE: Signature(s) must be guaranteed by a Commercial Bank,
Trust Company, Savings and Loan Association. or member firm of a National
Securities Exchange.
<PAGE>
EXHIBIT 99.5
FORM OF INVESTMENT ADVISORY AGREEMENT
<PAGE>
INVESTMENT ADVISORY AGREEMENT
August 19, 1994
ND Money Management, Inc.
201 South Broadway
Minot, North Dakota 58701
Dear Sirs:
Integrity Fund of Funds, Inc. (the "Fund"), a corporation organized under
the laws of the State of North Dakota, herewith confirms its agreement with ND
Money Management, Inc. (the "Adviser"), as follows:
1. Investment description: *Appointment
The Fund desires to employ its capital by investing and reinvesting in
investments of the kind and in accordance with the limitations specified in its
Prospectus and Statement of Additional Information, as from time to time in
effect, and in such manner and to such extent as may from time to time be
approved by the Board of Directors of the Fund. Copies of the Fund's Prospectus
and Statement of Additional Information have been or will be submitted to the
Adviser. The Fund desires to employ and hereby appoints the Adviser to act as
its investment adviser. The Adviser accepts the compensation set forth below.
2. Services as Investment Adviser
Subject to the supervision and direction of the Board of Directors of
the Fund, the Adviser will (a) act in conformity with the Investment Company Act
of 1940 and the Investment Advisers Act of 1940, as the same may from time to
time be amended, (b) manage the Fund in accordance with the Fund's investment
objective(s) and policies as stated in the Fund's Prospectus and Statement of
Additional Information as from time to time in effect, (c) make investment
decisions for the Fund, and (d) place purchase and sale orders on behalf of the
Fund. In providing those services, the Adviser will provide investment research
and supervision of the Fund's investments and conduct a continual program of
investment, evaluation, and, if appropriate, sale and reinvestment of the Fund's
assets. In addition, the Adviser will furnish the Fund with whatever
statistical information the Fund may reasonably request with respect to the
securities that the Fund may hold or contemplate purchasing.
3. Brokerage
In executing transactions for the Fund and selecting brokers or
dealers, the Adviser will use its best efforts to seek the best overall terms
available. In assessing the best overall terms available
<PAGE>
for any Fund transaction, the Adviser will consider all factors it deems
relevant including, but not limited to, breadth of the market in the security,
the price of the security, the financial condition and execution capability of
the broker or dealer, and the reasonableness of any commission for the specific
transaction and on a continuing basis. In selecting brokers or dealers to
execute a particular transaction and in evaluating the best overall terms
available, the Adviser may consider the brokerage and research services (as
those terms are defined in Section 28 (e) of the Securities Exchange Act of
1934) provided to the Fund and/or other accounts over which the Adviser
exercises investment discretion. The Adviser may utilize ND Capital, Inc., or
any other affiliated person of the Adviser as the broker for the purchase of
mutual fund shares and other securities.
4. Information Provided to the Fund
The Adviser will keep the Fund informed of developments materially
affecting the Fund and will, on its own initiative, furnish the Fund from time
to time with whatever information the Adviser believes is appropriate for this
purpose.
5. Standard of Care
The Adviser shall exercise its best judgment in rendering the services
listed in paragraphs 2 and 3 above. The Adviser shall not be liable for any
error of judgment or mistake of law or for any loss suffered by the Fund in
connection with the matters to which this Agreement relates, provided that
nothing herein shall be deemed to protect or purport to protect the Adviser
against any liability to the Fund or to shareholders of the Fund to which the
Adviser would otherwise be subject by reason of willful misfeasance, bad faith,
or gross negligence on its part in the performance of its duties or by reason of
the Adviser's reckless disregard of its obligations and duties under this
Agreement.
6. Independent Contractor
The Adviser shall be deemed to be an independent contractor under this
Agreement and, unless otherwise expressly provided or authorized, shall have no
authority to act for or represent the Fund in any way or otherwise be deemed as
agent of the Fund.
7. Compensation
In consideration of the services rendered pursuant to this Agreement,
the Fund will pay the Adviser on the first business day of each month a fee for
the previous month at the annual rate of .90 of 1.00% of the Fund's average
daily net assets. The fee for the period from the date the Fund's initial
registration statement is declared effective by the Securities and Exchange
Commission to the end of the month during which the initial registration
statement is declared effective shall be prorated according to the proportion
that such period bears to the full monthly period. Upon any termination of this
Agreement before the end of a month, the fee for such part of that month shall
be prorated according to the proportion that such period bears to the full
monthly period and shall be payable upon the date of termination of this
Agreement. For the purpose of determining fees payable to the Adviser, the
value of the Fund's net assets shall be computed at the times and in the manner
specified in the Fund's Prospectus or Statement of Additional Information as
from time to time in effect.
2
<PAGE>
8. Expenses
The Adviser will bear all expenses in connection with the performance
of its services under this Agreement. The Fund will bear certain other expenses
to be incurred in its operation, including: organization expenses; taxes;
interest; brokerage fees and commissions, if any; fees and expenses of directors
and officers of the Fund who are not officers or directors of the Adviser;
Securities and Exchange Commission fees and state securities laws fees; charges
of custodians and transfer and dividend disbursing agents; insurance premiums;
outside auditing and legal expenses; costs of maintenance of the Fund's
existence; costs attributable to investor services, including, without
limitation, telephone and personnel expenses; costs of preparing and printing
prospectuses and statements of additional information for regulatory purposes
and for distribution to existing shareholders; costs of shareholders' reports
and meetings of the shareholders of the Fund and of the officers and Board of
Directors of the Fund; and any extraordinary expenses. In addition, the Fund is
expected to pay service fees to dealers for providing personal services to
shareholders and/or the maintenance of shareholder accounts.
9. Services to Other Companies or Accounts
The Fund understands that the Adviser may act in the future as
investment adviser to fiduciary and other managed accounts and as investment
adviser, to one or more other investment companies, and the Fund has no
objection to the Adviser so acting, provided that whenever the Fund and one or
more other accounts or investment companies advised by the Adviser have
available funds for investment, investments suitable and appropriate for each
will be allocated in accordance with a formula believed to be equitable to each
entity. Similarly, opportunities to sell securities will be allocated in an
equitable manner. The Fund recognizes that in some cases this procedure may
adversely affect the size of the position that may be acquired or disposed of
for the Fund. In addition, the Fund understands that the persons employed by
the Adviser to assist in the performance of the Adviser's duties hereunder will
not devote their full time to such service, and nothing contained herein shall
be deemed to limit or restrict the right of the Advisor or any affiliate of the
Adviser to engage in and devote time and attention to other businesses or to
render services of whatever kind or nature.
10. Term of Agreement
This Agreement shall continue until August 19, 1996, and thereafter
shall continue automatically for successive annual periods ending on August 19
of each year, provided such continuance is specifically approved at least
annually by (i) the Board of Directors of the Fund or (ii) a vote of a
"majority" (as defined in the Investment Company Act of 1940) of the Fund's
outstanding voting securities, provided that in either event the continuance is
also approved by a majority of the Board of Directors who are not "interested
persons" (as defined in said Act) of any party to this Agreement, by vote cast
in person at a meeting called for the purpose of voting on such approval. This
Agreement is terminable, without penalty, on 60 days' written notice, by the
Board of Directors of the Fund or by vote of holders of a majority of the Fund's
shares, or upon 90 days' written notice, by the Adviser. This Agreement will
also terminate automatically in the event of its assignment (as defined in said
Act).
3
<PAGE>
11. Limitation of Liability
This Agreement has been executed on behalf of the Fund by the
undersigned officer of the Fund in his capacity as an officer of the Fund. The
obligations of this Agreement shall be binding upon the assets and property of
the Fund only and shall not be binding upon any director, officer, or
shareholder of the Fund individually.
If the foregoing is in accordance with your understanding, kindly indicate
your acceptance hereof by signing and returning the enclosed copy hereof.
Very truly yours,
INTEGRITY FUND OF FUNDS, INC
By /Robert E. Walstad/
President
Accepted:
ND MONEY MANAGEMENT, INC.
By: /Robert E. Walstad/
Authorized Officer
4
<PAGE>
EXHIBIT 99.6A
FORM OF DISTRIBUTION AGREEMENT
<PAGE>
DISTRIBUTION AGREEMENT
August 19, 1994
ND Capital, Inc.
201 South Broadway
Minot, ND 58701
Dear Sirs:
This is to confirm that, in consideration of the agreements hereinafter
contained, the undersigned, Integrity Fund of Funds, Inc. (the "Fund"), an open-
end, diversified, management investment company organized as a corporation under
the laws of the State of North Dakota, has agreed that ND Capital, Inc.
("Capital"), shall be, for the period of this Agreement, the principal
underwriter of shares issued by the Fund (the "Shares").
1. Services as Underwriter
1.1 Capital will act as principal underwriter for the distribution of
the Shares covered by the registration statement, prospectus, and statement of
additional information then in effect (the "Registration Statement") under the
Securities Act of 1933, as amended (the "1933 Act"), and the Investment Company
Act of 1940, as amended (the "1940 Act").
1.2 Capital agrees to use its best efforts to solicit orders for
the sale of the Shares at the public offering price, as determined in accordance
with the Registration Statement, and will undertake such advertising and
promotion as it believes is reasonable in connection with such solicitation.
1.3 All activities by Capital as underwriter of the Shares shall
comply with all applicable laws, rules, and regulations, including, without
limitation, all rules and regulations made or adopted by the Securities and
Exchange Commission (the "SEC") or by any securities association registered
under the Securities Exchange Act of 1934.
1.4 Capital will provide one or more persons during normal
business hours to respond to telephone questions concerning the Fund.
1.5 Capital acknowledges that, whenever in the judgment of the
Fund's officers such action is warranted for any reason, including, without
limitation, market, economic, or political conditions, those officers may
decline to accept any orders for, or make any sales of, the Shares until such
time as those officers deem it advisable to accept such orders and to make such
sales.
1.6 Capital shall be deemed to be an independent contractor and,
except as specifically provided or authorized herein, shall have no authority to
act for or represent the Fund. Capital will act only on its own behalf as
principal should it choose to enter into selling agreements with selected
dealers or others.
<PAGE>
1.7 In consideration of the services rendered pursuant to this
Agreement, the Fund shall pay Capital the proceeds from any contingent deferred
sales charges imposed on the redemption of Shares. In addition, Capital may
receive dealer reallowances (up to a maximum of 1% of the public offering price)
and/or distribution payments and/or service fees on purchases by the Fund of
mutual funds which are sold with a sales load and/or which have a distribution
plan and/or which pay service fees. ND Holdings, Inc., shall provide Capital
with any funds necessary to defray the costs of sales commissions paid to
dealers who sell Shares and to reimburse Capital for any costs and expenses it
incurs in discharging its responsibilities under this Agreement.
1.8 Capital will bear all expenses in connection with the performance of
its services and the incurring of distribution expenses under this Agreement.
For purposes of this Agreement, "distribution expenses" of Capital shall mean
all expenses borne by Capital or by any other person with which Capital has an
agreement approved by the Fund, which expenses represent payment for activities
primarily intended to result in the sale of Shares, including, but not limited
to, the following:
(a) payments made to, and expenses of, persons who provide support
services in connection with the distribution of Shares, including, but not
limited to, office space and equipment, telephone facilities, answering routine
inquiries regarding the Fund, processing shareholder transactions, and providing
any other shareholder services;
(b) costs relating to the formulation and implementation of marketing
and promotional activities, including, but not limited to, direct mail
promotions and television, radio, newspaper, magazine, and other mass media
advertising;
(c) costs of printing and distributing prospectuses and reports of
the Fund to prospective shareholders of the Fund;
(d) costs involved in preparing, punting, and distributing sales
literature pertaining to the Fund; and
(e) costs involved in obtaining whatever information, analyses, and
reports with respect to marketing and promotional activities that the Fund may,
from time to time, deem advisable; except that distribution expenses shall not
include any expenditures in connection with services which Capital, any of its
affiliates, or any other person has agreed to bear without reimbursement.
1.9 Capital shall prepare and deliver reports to the Treasurer of the Fund
and to the Investment Adviser on a regular, at least quarterly, basis, showing
the distribution expenses incurred pursuant to this Agreement and the purposes
therefor, as well as any supplemental reports as the Directors, from time to
time, may reasonably request.
2. Duties of the Fund
2.1 The Fund agrees at its own expense to execute any and all
documents, to furnish any and all information, and to take any other actions
that may be reasonably necessary in connection with the qualification of the
Shares for sale in those states that Capital may designate.
2
<PAGE>
2.2 The Fund shall furnish from time to time, for use in connection
with the sale of the Shares, such information reports with respect to the Fund
and its Shares as Capital may reasonably request, all of which shall be signed
by one or more of the Fund's duly authorized officers; and the Fund warrants
that the statements contained in any such reports, when so signed by one or more
of the Fund's officers, shall be true and correct. The Fund shall also furnish
Capital upon request with: (a) annual audits of the Fund's books and accounts
made by independent public accountants regularly retained by the Fund, (b) semi-
annual unaudited financial statements pertaining to the Fund, (c) quarterly
earnings statements prepared by the Fund, (d) a monthly itemized list of the
securities in the portfolio of the Fund, (e) monthly balance sheets as soon as
practicable after the end of each month, and (f) from time to time such
additional information regarding the Fund's financial condition as Capital may
reasonably request.
2.3 The Fund shall pay to Capital the proceeds from any contingent
deferred sales charge imposed on the redemption of the Shares as specified in
the Registration Statement.
2.4 The Fund shall provide Capital with any funds necessary to defray
the costs of service fees paid to dealers who render personal service to
shareholders and/or the maintenance of shareholder accounts.
3. Representations and Warranties
The Fund represents to Capital that all registration statements,
prospectuses, and statements of additional information filed by the Fund with
the SEC under the 1933 Act and the 1940 Act with respect to the Shares of the
Fund have been carefully prepared in conformity with the requirements of the
1933 Act, the 1940 Act, and the rules and regulations of the SEC thereunder. As
used in this Agreement, the terms *6 *4 registration statement," "prospectus,"
and "statement of additional information" shall mean any registration statement,
prospectus, and statement of additional information filed by the Fund with the
SEC and any amendments and supplements thereto which at any time shall have been
filed with the SEC. The Fund represents and warrants to Capital that any
registration statement, prospectus, and statement of additional information,
when such registration statement becomes effective, will include all statements
required to be contained therein in conformity with the 1933 Act, the 1940 Act,
and the rules and regulations of the SEC; that all statements of fact contained
in any registration statement, prospectus, or statement of additional
information will be true and correct when such registration statement becomes
effective; and that neither any registration statement nor any prospectus or
statement of additional information when such registration statement becomes
effective will include an untrue statement of material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading to a purchaser of Shares. Capital may, but shall not be
obligated to, propose from time to time such amendment or amendments to any
registration statement and such supplement or supplements to any prospectus or
statement of additional information as, in the light of future developments,
may, in the opinion of Capital's counsel, be necessary or advisable. If the Fund
shall not propose such amendment or amendments and/or supplement or supplements
within fifteen days after receipt by the Fund of a written request from Capital
to do so, Capital may, at its option, terminate this Agreement. The Fund shall
not file any amendment to any registration statement or supplement to any
prospectus or statement of additional information without giving Capital
reasonable notice thereof in advance; provided, however, that nothing contained
in this Agreement shall in any way limit the Fund's right to file at any time
such amendments to any registration statement and/or supplements to any
prospectus or statement of additional information, of whatever character, as the
Fund may deem advisable, such right being in all respects absolute and
unconditional.
3
<PAGE>
4. Indemnification
4.1 The Fund authorizes Capital and any dealers with whom Capital has
entered into dealer agreements to use any prospectus or statement of additional
information furnished by the Fund from time to time in connection with the sale
of Shares. The Fund agrees to indemnify, defend, and hold Capital, its several
officers and directors, and any person who controls Capital within the meaning
of Section 15 of the 1933 Act, free and harmless from and against any and all
claims, demands, liabilities, and expenses (including the cost of investigating
or defending such claims, demands, or liabilities and any counsel fees incurred
in connection therewith) which Capital, its officers and directors, or any such
controlling person may incur under the 1933 Act, the 1940 Act, or common law or
otherwise, arising out of or based upon any untrue statement or alleged untrue
statement of a material fact contained in any registration statement, any
prospectus, or any statement of additional information, or arising out of or
based upon any omission or alleged omission to state a material fact required to
be stated in any registration statement, any prospectus, or any statement of
additional information, or necessary to make the statements in any of them not
misleading; provided, however, that the Fund's agreement to indemnify Capital,
its officers or directors, and any such controlling person shall not be deemed
to cover any claims, demands, liabilities, or expenses arising out of or based
upon any statements or representations made by Capital or its representatives or
agents other than such statements and representations as are contained in any
registration statement, prospectus, or statement of additional information and
in such financial and other statements as are furnished to Capital pursuant to
paragraph 2.2 hereof; and further provided that the Fund's agreement to
indemnify Capital and the Fund's representations and warranties hereinbefore set
forth in paragraph 3 shall not be deemed to cover any liability to the Fund or
its shareholders to which Capital would otherwise be subject by reason of
willful misfeasance, bad faith, or gross negligence in the performance of its
duties, or by reason of Capital's reckless disregard of its obligations and
duties under this Agreement. The Fund's agreement to indemnify Capital, its
officers and directors, and any such controlling person, as aforesaid, is
expressly conditioned upon the Fund's being notified of any action brought
against Capital, its officers or directors, or any such controlling person, such
notification to be given by letter or by telegram addressed to the Fund at its
principal office in Minot, North Dakota, and sent to the Fund by the person
against whom such action is brought, within ten days after the summons or either
first legal process shall have been served. The failure so to notify the Fund of
any such action shall not relieve the Fund from any liability that the Fund may
have to the person against whom such action is brought by reason of any such
untrue statement or omission or alleged omission otherwise than on account of
the Fund's indemnity agreement contained in this paragraph 4. 1. The Fund's
indemnification agreement contained in this paragraph 4.1 and the Fund's
representations and warranties in this Agreement shall remain operative and in
full force and effect regardless of any investigation made by or on behalf of
Capital, its officers and directors, or any controlling person, and shall
survive the delivery of any Shares. This agreement of indemnity will inure
exclusively to Capital's benefit, to the benefit of its several officers and
directors, and their respective estates, and to the benefit of the controlling
persons and their successors. The Fund agrees to notify Capital promptly of the
commencement of any litigation or proceedings against the Fund or any of its
officers or directors in connection with the issuance and sale of any Shares.
4.2 Capital agrees to indemnify, defend, and hold the Fund, its
several officers and directors, and any person who controls the Fund within the
meaning of Section 15 of the 1933 Act, free and harmless from and against any
and all claims, demands, liabilities, and expenses (including the costs of
investigating or defending such claims, demands, or liabilities and any counsel
fees incurred in connection therewith) that the Fund, its officers or directors,
or any such controlling person may incur under the 1933 Act, the 1940 Act, or
common law or otherwise, but only to the extent that such liability or expense
incurred by the Fund,
4
<PAGE>
its officers or directors, or such controlling person resulting from such claims
or demands shall arise out of or be based upon (a) any unauthorized sales
literature, advertisements, information, statements, or representations or (b)
any untrue or alleged untrue statement of a material fact contained in
information furnished in writing by Capital to the Fund and used in the answers
to any of the items of the registration statement or in the corresponding
statements made in the prospectus or statement of additional information, or
shall arise out of or be based upon any omission or alleged omission to state a
material fact in connection with such information furnished in writing by
Capital to the Fund and required to be stated in such answers or necessary to
make such information not misleading. Capital's agreement to indemnify the Fund,
its officers and directors, and any such controlling person, as aforesaid, is
expressly conditioned upon Capital's being notified of any action brought
against the Fund, its officers or directors, or any such controlling person,
such notification to be given by letter or telegram addressed to Capital at its
principal office in Minot, North Dakota, and sent to Capital by the person
against whom such action is brought, within ten days after the summons or other
first legal process shall have been served. The failure so to notify Capital of
any such action shall not relieve Capital from any liability that Capital may
have to the Fund, its officers or directors, or to such controlling person by
reason of any such untrue or alleged untrue statement or omission or alleged
omission otherwise than on account of Capital's indemnity agreement contained in
this paragraph 4.2. Capital agrees to notify the Fund promptly of the
commencement of any litigation or proceedings against Capital or any of its
officers or directors in connection with the issuance and sale of any Shares.
4.3 In case any action shall be brought against any indemnified
party under paragraph 4.1 or 4.2, and it shall notify the indemnifying party of
the commencement thereof, the indemnifying party shall be entitled to
participate in, and, to the extent that it shall wish to do so, to assume the
defense thereof with counsel satisfactory to such indemnified party. If the
indemnifying party opts to assume the defense of such action, the indemnifying
party will not be liable to the indemnified party for any legal or other
expenses subsequently incurred by the indemnified party in connection with the
defense thereof other than (a) reasonable costs of investigation or the
furnishing of documents or witnesses and (b) all reasonable fees and expenses of
separate counsel to such indemnified party if (i) the indemnifying party and the
indemnified party shall have agreed to the retention of such counsel or (ii) the
indemnified party shall have concluded reasonably that representation of the
indemnifying party and the indemnified party by the same counsel would be
inappropriate due to actual or potential differing interests between them in the
conduct of the defense of such action.
5. Effectiveness of Registration
None of the Shares shall be offered by either Capital or the Fund
under any of the provisions of this Agreement and no orders for the purchase or
sale of the Shares hereunder shall be accepted by the Fund if and so long as the
effectiveness of the registration statement then in effect or any necessary
amendments thereto shall be suspended under any of the provisions of the 1933
Act or if and so long as a current prospectus as required by Section 5(b)(2) of
the 1933 Act is not on file with the SEC: provided, however, that nothing
contained in this paragraph 5 shall in any way restrict or have an application
to or bearing upon the Fund's obligation to repurchase Shares from any
shareholder in accordance with the provisions of the Fund's prospectus,
statement of additional information, or articles of incorporation.
6. Notice to Capital
The Fund agrees to advise Capital immediately in writing:
5
<PAGE>
(b) in the event of the issuance by the SEC of any stop order
suspending the effectiveness of the registration statement, prospectus, or
statement of additional information then in effect or the initiation of any
proceeding for that purpose;
(c) of the happening of any event that makes untrue any statement of
a material fact made in the registration statement, prospectus, or statement of
additional information then in effect or that requires the making of a change in
such registration statement, prospectus, or statement of additional information
in order to make the statements therein not misleading; and
(d) of all actions of the SEC with respect to any amendment to any
registration statement, prospectus, or statement of additional information which
may from time to time be filed with the SEC.
7. Term of Agreement
This Agreement shall continue until August 19, 1996, and thereafter
shall continue automatically for successive annual periods ending on August 19th
of each year, provided such continuance is specifically approved at least
annually by (a) the Fund's Board of Directors and (b) a vote of a majority (as
defined in the 1940 Act) of the Fund's Directors who are not interested persons
(as defined in the 1940 Act) of the Fund and who have no direct or indirect
financial interest in the operation of the Plan, in this Agreement, or any
agreement related to the Plan (the "Qualified Directors"), by vote cast in
person at a meeting called for the purpose of voting on such approval. This
Agreement is terminable with respect to the Fund, without penalty, (a) on 60
days' written notice, by vote of a majority of the Qualified Directors or by
vote of a majority (as defined in the 1940 Act) of the outstanding voting
securities of the Fund or (b) on 90 days' written notice by Capital. This
Agreement will also terminate automatically in the event of its assignment (as
defined in the 1940 Act).
8. Miscellaneous
8.1 The Fund recognizes that directors, officers, and employees of
Capital may from time to time serve as directors, officers, and employees of
corporations and business trusts (including other investment companies) and that
Capital or its affiliates may enter into distribution or other agreements with
such other corporations and trusts.
8.2 It is expressly agreed that the obligations of the Fund hereunder
shall not be binding upon any of the directors, shareholders, nominees,
officers, agents, or employees of the Fund, personally, but bind only the
property of the Fund. The execution and delivery of this Agreement have been
authorized by the Directors and the sole shareholder of the Shares and signed by
an authorized officer of the Fund, acting as such, and neither such
authorization by such Directors and shareholder nor such execution and delivery
by such officer shall be deemed to have been made by any of them individually or
to impose any liability on any of them personally, but shall bind only the
property of the Fund.
8.3 This Agreement shall be construed in accordance with the laws of the
State of North Dakota.
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8.4 This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original; but such counterparts shall, together,
constitute only one instrument.
8.5 This Agreement may not be amended or modified in any manner except by
both parties with the same formality as this Agreement and as may be permitted
or required by the 1940 Act.
8.6 The captions of this Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first set forth herein.
INTEGRITY FUND OF FUNDS, INC.
By: /Robert E. Walstad/
Title: President
Date: August 19, 1994
Accepted:
ND CAPITOL, INC
By: /Robert E. Walstad/
Title: President
Date: August 19, 1994
7
<PAGE>
EXHIBIT 99.6B
FORM OF DEALER SALES AGREEMENT
<PAGE>
DEALER SALES AGREEMENT
To the undersigned Dealer:
Gentlemen:
ND Capital, Inc., the principal underwriter of shares, par value $.0001,
issued by Integrity Fund of Funds, Inc. (the "Fund"), an open-end, diversified,
management investment company registered under the Investment Company Act of
1940, understands that you are a member in good standing of the National
Association of Securities Dealers, Inc. (the "NASD"), and that you and any
individuals who represent you are properly qualified and registered, if
required, with the Securities and Exchange Commission and with the state
securities administrators of the various states in which Fund shares are to be
offered for sale or sold by you. In consideration of the mutual promises stated
below, you and we hereby agree as follows:
1. Compliance with Prospectus . Offers and sales of shares by you will comply
in all respects with the terms and conditions contained in the then-current
prospectus of the Fund.
2. Purchase Restrictions. You agree to purchase shares solely through us
and only for the purpose of covering purchase orders already received from
customers or for your own bona fide investment. You agree not to purchase for
any other securities dealer unless you have an agreement with such other dealer
or broker to handle clearing arrangements and then only in the ordinary course
of business for such purpose and only if such other dealer has executed a Dealer
Sales Agreement with us. You also agree not to withhold any customer order so
as to profit therefrom.
3. Processing Orders. The procedures relating to the handling of orders shall
be subject to instructions which we will forward from time to time to all
dealers with whom we have entered into a Dealer Sales Agreement. The minimum
initial and subsequent purchase order shall be specified in the Fund's then-
current prospectus. All purchase orders are subject to receipt of shares by us
from the Fund and to acceptance of such orders by us. We reserve the right in
our sole discretion to reject any order.
4. Purchase Orders. We shall accept orders only on the basis of the then-
current offering price. You agree to place orders in respect of shares
immediately upon the receipt of orders from your customers for the same number
of shares. Orders which you receive from your customers shall be deemed to be
placed with us when received by us. Orders which you receive prior to the close
of business, as defined in the prospectus, and placed with us within the time
frame set forth in the prospectus shall be priced at the offering price next
computed after they are received by you. We will not accept a conditional order
from you on any basis. All orders shall be subject to confirmation by us.
5. Settlement. Unless otherwise agreed, settlement shall be made at the
office of the Fund's transfer agent within five (5) business days after our
acceptance of the order. If payment is not so received or made within ten (10)
business days of our acceptance of the order, we reserve the right to cancel the
sale or, at our option, to sell the shares to the Fund at the then-prevailing
net asset value. In this event, or in the event that
<PAGE>
you cancel the trade for any reason, you agree to be responsible for any loss
resulting to the Fund or to us from your failure to make payments as aforesaid.
You shall not be entitled to any gains generated thereby.
6. Dealer Commissions. You shall receive for each sale of shares of the Fund,
except shares sold which are not subject to a contingent deferred sales charge,
a commission in an amount equal to four and one-half (4-1/2) percent of the
offering price of shares of the Fund sold multiplied by the number of shares of
the Fund sold; provided, however, that if the aggregate offering price of shares
of the Fund sold is one million dollars ($ 1,000,000) or more, the commission is
reduced to one (1) percent of the offering price multiplied by the number of
shares sold. The amount of the commission is subject to change by us without
notice.
7. Redemptions. Redemptions of shares by the Fund will be effected in the
manner and upon the terms described in the then-current prospectus. We will,
upon your request, assist you in processing orders for redemptions. If any
shares sold to you are redeemed by the Fund or are tendered to the Fund for
redemption within seven (7) business days after the date of our confirmation to
you of your original purchase order therefor, you agree to pay forthwith to us
the full amount of the commission allowed you on the sale.
8. Suspension of Sales and Amendments to Agreement. We reserve the right in
our discretion without notice to you to suspend sales or withdraw an offering of
shares entirely, to change the offering place as provided in the prospectus, or,
upon notice to you, to amend or cancel this Agreement. You agree that any order
to purchase shares placed by you after notice of any amendment to this Agreement
has been sent to you shall constitute your agreement to any such amendment.
9. Dealer Status. In every transaction, you shall act as an independent
contractor and not as an agent for the Fund, the Fund's transfer agent, any
other dealer, or us. You agree that neither the Fund, the Fund's transfer
agent, any other dealer, nor we shall be deemed an agent of you. Nothing herein
shall constitute you as a partner of the Fund, the Fund's transfer agent, any
other dealer, or us or render any of us liable for your obligations.
10. Representations Concerning the Fund. No person is authorized to make any
representations concerning shares of the Fund except those contained in the
then-current prospectus. You shall not sell shares of the Fund pursuant to this
Agreement unless the then-current prospectus is furnished to the purchaser prior
to or at the time of purchase. You shall not use any supplemental sales
literature of any kind without our prior written approval unless it is furnished
by us for such purpose. In offering and selling shares of the Fund, you will
rely solely on the representations contained in the then-current prospectus.
11. Dealer's Representations and Agreements. By accepting this Agreement, you
represent that you: (i) are registered as a broker-dealer under the Securities
Exchange Act of 1934, as amended; (ii) are qualified to act as a dealer in the
states in which the Fund's shares are offered for sale or sold by you; (iii) are
a member in good standing of the NASD; and (iv) will maintain such
registrations, qualifications, and memberships throughout the term of this
Agreement. You agree to abide by the Rules of Fair Practice of the NASD and all
federal and state laws and rules and regulations that are now or may become
applicable to the transactions hereunder. Your expulsion from the NASD will
automatically terminate this Agreement without notice. Your suspension from the
NASD or violation of applicable state and federal laws and rules and regulations
will terminate this Agreement effective upon our notice to you. You shall not
be entitled to any compensation during any period in which you have been
suspended or expelled from membership in the NASD.
2
<PAGE>
12. Indemnification. You hereby agree to indemnify and to hold harmless the
Fund and us and each person, if any, who controls the Fund or us within the
meaning of Section 15 of the Securities Act of 1933, as amended (the "Act"),
from and against any and all losses, claims, demands, or liabilities to which
the Fund or we may become subject under the Act, or otherwise, insofar as such
losses, claims, demands, or liabilities (or actions in respect thereof) arise
out of or are based upon any unauthorized use of sales materials by you or your
salesmen or upon alleged misrepresentations or omission to state material facts
in connection with statements made by you or your salesmen orally or by other
means or upon sales of shares in any state or jurisdiction in which the shares
are not registered or qualified for sale; and you will reimburse the Fund and us
for any legal or other expenses reasonably incurred in connection with the
investigation or defense of any such action or claim. We shall, after receiving
the first summons or other legal process disclosing the nature of the action
being served upon the Fund or us, in any proceeding in respect of which
indemnity may be sought by the Fund or us hereunder, notify you in writing of
the commencement thereof within a reasonable time. In case any such litigation
be brought against the Fund or us, we shall notify you of the commencement
thereof, and you shall be entitled to participate in (and to the extent you
shall wish, to direct) the defense thereof at your expense, but such defense
shall be conducted by counsel in good standing satisfactory to the Fund and us.
If you shall fail to provide such defense, the Fund or we may defend such action
at your cost and expense. Your obligation under this Section 12 shall survive
the termination of this Agreement.
Dealer's Expenses. All expenses incurred in connection with your activities
under this Agreement shall be borne by you.
Supervisory Responsibility. By accepting this Agreement, you assume full
responsibility for the registration, qualification, and training of your
representatives in connection with the offer and sale of shares of the Fund.
15. Prospectuses and Statements of Additional Information. We will supply you
with copies of the prospectus and statement of additional information of the
Fund (including any amendments thereto) in reasonable quantities upon request.
You will provide all customers with a prospectus prior to or at the time such
customer purchases shares. You will provide any customer who so requests a copy
of the statement of additional information on file with the Securities and
Exchange Commission.
16. Assignment. This Agreement may not be assigned by you without our consent.
17. Waiver. No failure, neglect, or forbearance on our part to require strict
performance of this Agreement shall be construed as a waiver of our rights or
remedies hereunder.
18. Termination. Either party may terminate this Agreement at any time upon
giving written notice to the other party.
19. Governing Law. This Agreement shall be construed in accordance with the
laws of the State of North Dakota.
3
<PAGE>
20. Entire Agreement. This Agreement constitutes the entire agreement between
the undersigned and supersedes all prior oral or written agreements between the
parties hereto.
ND CAPITAL, INC.
Date By
The undersigned accepts your invitation to become a dealer and agrees to
abide by the foregoing terms and conditions.
Date By
Signature and Title
Dealer Name
4
<PAGE>
EXHIBIT 99.8
FORM OF CUSTODIAN AGREEMENT
<PAGE>
CUSTODIAN AGREEMENT
AGREEMENT dated as of October 12, 1994, between Integrity Fund of Funds,
Inc. (the "Fund"), a corporation organized under the laws of the State of North
Dakota, having its principal office and place of business at 201 South Broadway,
Minot, North Dakota 58701, and First Western Bank & Trust (the "Custodian"), a
bank organized under the laws of the State of North Dakota with its principal
place of business at 900 South Broadway, Minot, North Dakota 58701.
WITNESSETH
That for and in consideration of the mutual promises hereinafter set forth,
the Fund and the Custodian agree as follows:
1. Definitions.
Whenever used in this Agreement or in any Schedules to this
Agreement, the following words and phrases, unless the context
otherwise requires, shall have the following meanings:
(a) "Authorized Person" shall be deemed to include the
President, the Vice President, the Secretary, and the Treasurer of the Fund or
any other person, whether or not any such person is. an officer of the Fund,
duly authorized by the Board of Directors of the Fund to give Oral Instructions
and Written Instructions on behalf of the Fund or such other certification as
may be received by the Custodian from time to time.
(b) "Book-Entry System" shall mean the Federal Reserve/ Treasury
book-entry system for United States and federal agency securities, its successor
or successors, and its nominee or nominees.
(c) "Depository" shall mean The Depository Trust Company
("DTC*"), a clearing agency registered with the Securities and Exchange
Commission under Section 17A of the Securities Exchange Act of 1934, as amended,
its successor or successors and its nominee or nominees, in which the Custodian
is hereby specifically authorized to make deposits. The term "Depository" shall
further mean and include any other person to be named in Written Instructions
authorized to act as a depository under the 1940 Act, its successor or
successors, and its nominee or nominees.
(d) "Money Market Security" shall be deemed to include, without
limitation, debt obligations issued or guaranteed as to interest and principal
by the Government of the United States or agencies or instrumentalities thereof,
commercial paper, bank certificates of deposit, bankers' acceptances, and short-
term corporate obligations, where the purchase or sale of such securities
normally requires settlement in federal funds on the same day as such purchase
or sale, repurchase and reverse repurchase agreements with respect to any of the
foregoing types of securities, and any other instrument commonly included in the
term "Money Market Security" by commercial usage or custom.
"Oral Instructions" shall mean verbal instructions actually received by the
custodian from a person reasonably believed by the Custodian to be an Authorized
Person.
(f) "Prospectus" shall mean any current prospectus and statement
of additional information relating to the registration of the Fund's Shares
under the Securities Act of 1933, as amended, and the 1940 Act.
(g) "Security" or "Securities" shall be deemed to include bonds,
debentures, notes, stocks, shares, evidences of indebtedness, and other
securities and investments from time to time owned by the Fund.
<PAGE>
(h) "Shares" refers to the units into which the shareholders'
proprietary interests in the Fund are divided.
(i) "Transfer Agent" shall mean the person who performs the
transfer agent, dividend disbursing agent, and shareholder servicing agent
functions for the Fund.
(j) "Written Instructions" shall mean a written or electronic
communication actually received by the Custodian from an Authorized Person or
from a person reasonably believed by the Custodian to be an Authorized Person by
telex or any other such system whereby the receiver of such communication is
able to verify through codes or otherwise with a reasonable degree of certainty
the authenticity of the sender of such communication.
(k) The "1940 Act" refers to the Investment Company Act of 1940, and
the Rules and Regulations thereunder, all as amended from time to
time.
2. Appointment of Custodian.
(a) The Fund hereby constitutes and appoints the Custodian as
custodian of all the Securities and moneys at the time owned by or in the
possession of the Fund during the period of this Agreement.
(b) The Custodian hereby accepts appointment as such custodian for
the Fund and agrees to perform the duties thereof as hereinafter set forth.
3. Compensation.
(a) The Fund will compensate the Custodian for its services rendered
under this Agreement in accordance with the fees set forth in the Fee Schedule
annexed hereto as Schedule A and incorporated herein. Such Fee Schedule does
not include postage, for which the Custodian shall be entitled to bill
separately.
(b) Any compensation agreed to hereunder may be adjusted from time to
time by attaching to Schedule A of this Agreement a revised Fee Schedule, dated
and signed by an Authorized Officer of each party hereto.
(c) The Custodian will bill the Fund as soon as practicable after the
end of each calendar month, and said billings will be detailed in accordance
with the Fee Schedule. The Fund will promptly pay to the Custodian the amount
of such billing.
4. Custody of Cash and Securities.
(a) Receipt and Holding of Assets. The Fund will deliver or cause to
be delivered to the Custodian all Securities and moneys owned by it at any time
during the period of this Agreement. The Custodian shall segregate, keep, and
maintain the assets of the Fund separate and apart, including separate
identification of Securities held in the Book-Entry System. The Custodian will
not be responsible for such Securities and moneys until actually received by it.
The Fund shall instruct the Custodian from time to time in its sole discretion,
by means of Written Instructions, or in connection with the purchase or sale of
Money Market Securities, by means of Oral Instructions or Written Instructions,
as to the manner in which and in what amounts Securities and moneys of the Fund
are to be deposited on behalf of the Fund in the Book-Entry System or the
Depository; provided, however, that prior to the initial deposit of Securities
of the Fund in the Book-Entry System or the Depository, the Custodian shall have
2
<PAGE>
received Written Instructions specifically approving such deposits by the
Custodian in the Book-Entry System or the Depository.
(b) Accounts and Disbursements. The Custodian shall establish and maintain a
separate account for the Fund and shall credit to the separate account of the
Fund moneys received by it for the account of the Fund and shall disburse the
same only:
(1) in payment for Securities purchased for the Fund as provided in
Section 5 hereof;
(2) in payment of dividends or distributions with respect to the
Shares of the Fund as provided in Section 7 hereof;
(3) in payment of original issue or other taxes with respect to the
Shares of the Fund as provided in Section 8 hereof;
(4) in payment for Shares which have been redeemed by the Fund as
provided in Section 8 hereof;
(5) pursuant to Written Instructions, or with respect to Money Market
Securities, Oral Instructions or Written Instructions, setting forth the name
and address of the person to whom the payment is to be made, the amount to be
paid, and the purpose for which payment is to be made; or
(6) in payment of fees and in reimbursement of the expenses and
liabilities of the Custodian attributable to the Fund as provided in Section
11(h) hereof.
(c) Confirmation and Statement . Promptly after the close of business on each
day, the Custodian shall furnish the Fund with confirmations and a summary of
all transfers to or from the account of the Fund during said day. Where
securities purchased are in a fungible bulk of securities registered in the name
of the Custodian (or its nominee) or shown on the Custodian's account on the
books of the Depository or the Book-Entry System, the Custodian shall by book
entry or otherwise identify the quantity of those securities belonging to the
Fund. At least monthly, the Custodian shall furnish the Fund with a detailed
statement of the Securities and moneys held for the Fund under this Agreement.
(d) Registration of Securities and Physical Separation. All Securities held for
the Fund which are issued or issuable only in bearer form, except such
Securities as are held in the Book-Entry System, shall be held by the Custodian
in that form; all other Securities held for the Fund may be registered in the
name of the Fund, in the name of any duly appointed registered nominee of the
Custodian as the Custodian may from time to time determine, or in the name of
the Book-Entry System or the Depository or their successor or successors, or
their nominee or nominees. The Fund reserves the light to instruct the Custodian
as to the method of registration and safekeeping of the Securities. The Fund
agrees to furnish to the Custodian appropriate instruments to enable the
Custodian to hold or deliver in proper form for transfer, or to register in the
name of its registered nominee or in the name of the Book-Entry System or the
Depository, any Securities which it may hold for the account of the Fund and
which may from time to time be registered in the name of the Fund. The Custodian
shall hold all such Securities specifically allocated to the Fund which are not
held in the Book-Entry System or the Depository in a separate account for the
Fund in the name the Fund physically segregated at all times from those of any
other person or persons.
(e) Collection of Income and Other Matters Affecting Securities. Unless
otherwise instructed to the contrary by Written Instructions, the Custodian by
itself, or through the use of the Book-Entry System or the Depository with
respect to Securities therein deposited, shall with respect to all Securities
held for the Fund in accordance with this Agreement:
(1) collect all income due or payable;
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<PAGE>
(2) present for payment and collect the amount payable upon all
securities which may mature or be called, redeemed, or retired, or otherwise
become payable.
Notwithstanding the foregoing, the Custodian shall have no
responsibility to the Fund for monitoring or ascertaining of any call,
redemption, or retirement date with respect to put bonds which are owned by the
Fund and held by the Custodian or its nominee. Nor shall the Custodian have any
responsibility or liability to the Fund for any loss by the Fund for any missed
payment or other default resulting therefrom unless the Custodian received
timely notification from the Fund specifying the time, place, and manner for the
presentment of such put bond owned by the Fund and held by the Custodian or its
nominee. The Custodian shall not be responsible and assumes no liability to the
Fund for the accuracy or completeness of any notification the Custodian shall
provide to the Fund with respect to put bonds;
(3) surrender Securities in temporary form for definitive Securities;
(4) execute any necessary declarations or certificates of ownership
under the federal income tax laws or the laws or regulations of
any other taxing authority now or hereafter
in effect; and
(5) hold directly, or through the Book-Entry System or the Depository
with respect to Securities therein deposited, for the account of the Fund all
rights and other Securities issued with respect to any Securities held by the
Custodian hereunder for the Fund.
(f) Delivery of Securities and Evidence of Authority . Upon receipt of Written
Instructions and not otherwise, except for Subparagraphs 5, 6, 7, and 8 which
may be effected by Oral or Written Instructions, the Custodian, directly or
through the use of the Book-Entry System or the Depository, shall:
(1) execute and deliver or cause to be executed and delivered to such
persons as may be designated in such Written Instructions, proxies, consents,
authorizations, and any other instruments whereby the authority of the Fund as
owner of any Securities may be exercised;
(2) deliver or cause to be delivered any Securities held for the Fund
in exchange for other Securities or cash issued or paid in connection with the
liquidation, reorganization, refinancing, merger, consolidation, or
recapitalization of any corporation, or the exercise of any conversion
privilege;
(3) deliver or cause to be delivered any Securities held for the Fund
to any protective committee, reorganization committee, or other person in
connection with the reorganization, refinancing, merger, consolidation,
recapitalization, or sale of assets of any corporation, and receive and hold
under the terms of this Agreement in the separate account for the Fund such
certificates of deposit, interim receipts, or other instruments or documents as
may be issued to it to evidence such delivery;
(4) make or cause to be made such transfers or exchanges of the
assets specifically allocated to the separate account of the Fund and take such
other steps as shall be stated in said Written Instructions to be for the
purpose of effectuating any duly authorized plan of liquidation, reorganization,
merger, consolidation, or recapitalization of the Fund;
(5) deliver Securities owned by the Fund upon sale of such Securities
for the account of the Fund pursuant to Section 5;
(6) deliver Securities owned by the Fund upon the receipt of payment
in connection with any repurchase agreement related to such securities entered
into by the Fund;
4
<PAGE>
(7) deliver Securities owned by the Fund to the issuer thereof or its
agent when such Securities are called, redeemed, retired, or otherwise become
payable; provided, however, that in any such case the cash or other
consideration is to be delivered to the Custodian. Notwithstanding the
foregoing, the Custodian shall have no responsibility to the Fund for monitoring
or ascertaining of any call, redemption, or retirement date with respect to put
bonds which are owned by the Fund and held by the Custodian or its nominee. Nor
shall the Custodian have any responsibility or liability to the Fund for any
loss by the Fund for any missed payment or other default resulting therefrom
unless the Custodian received timely notification from the Fund specifying the
time, place, and manner for the presentment of such put bond owned by the Fund
and held by the Custodian or its nominee. The Custodian shall not be
responsible and assumes no liability to the Fund for the accuracy or
completeness of any notification the Custodian may furnish to the Fund with
respect to put bonds;
(8) deliver Securities owned by the Fund for delivery in connection
with any loans of securities made by the Fund but only against receipt of
adequate collateral as agreed upon from time to time by the Custodian and the
Fund which may be in any form permitted under the 1940 Act or any
interpretations thereof issued by the Securities and Exchange Commission or its
staff;
(9) deliver Securities owned by the Fund for delivery as security in
connection with any borrowings by the Fund requiring a pledge of Fund assets,
but only against receipt of amounts borrowed;
(10) deliver Securities owned by the Fund upon receipt of instructions
from the Fund for delivery to the Transfer Agent or to the holders of Shares of
the Fund in connection with distributions in kind, as may be described from time
to time in the Fund's Prospectus, in satisfaction of requests by holders of
Shares for repurchase or redemption; and
(11) deliver Securities owned by the Fund for any other proper
business purpose, but only upon receipt of, in addition to Written Instructions,
a certified copy of a resolution of the Board of Directors signed by an
Authorized Person and certified by the Secretary of the Fund, specifying the
Securities to be delivered, setting forth the purpose for which such delivery is
to be made, declaring such purpose to be a proper business purpose, and naming
the person or persons to whom delivery of such Securities shall be made.
(g) Endorsement and Collection of Check Etc. The Custodian is hereby
authorized to endorse and collect all checks, drafts, or other orders for the
payment of money received by the Custodian for the account of the Fund.
5. Purchase and Sale of Investments of the Fund.
(a) Promptly after each purchase of Securities for the Fund, the Fund
shall deliver to the Custodian (i) with respect to each purchase of Securities
which are not Money Market Securities, Written Instructions, and (ii) with
respect to each purchase of Money Market Securities, either Written Instructions
or Oral Instructions, in either case specifying with respect to each purchase:
(1) the name of the issuer and the title of the Securities;
(2) the number of shares or the principal amount purchased and
accrued interest, if any;
5
<PAGE>
(3) the date of purchase and settlement;
(4) the purchase price per unit;
(5) the total amount payable upon such purchase;
(6) the name of the person from whom or the broker through whom the
purchase was made, if any;
(7) whether or not such purchase is to be settled through the Book-
Entry System or the Depository; and
(8) whether the Securities purchased are to be deposited in the Book-
Entry System or the Depository.
The Custodian shall receive all Securities purchased by or for the
Fund and upon receipt of such Securities shall pay out of the moneys held
for the account of the Fund the total amount payable upon such purchase,
provided that the same conforms to the total amount payable as set forth in
such Written or Oral Instructions.
(b) Promptly after each sale of Securities of the Fund, the Fund
shall deliver to the Custodian (i) with respect to each sale of Securities which
are not Money Market Securities, Written Instructions, and (ii) with respect to
each sale of Money Market Securities, either Written or Oral Instructions, in
either case specifying with respect to such sale:
(1) the name of the issuer and the title of the Securities;
(2) the number of shares or principal amount sold and accrued
interest, if any;
(3) the date of sale;
(4) the sale price per unit;
(5) the total amount payable to the Fund upon such sale;
(6) the name of the broker through whom or the person to whom the
sale was made; and
(7) whether or not such sale is to be settled through the Book-Entry
System or the Depository. The Custodian shall deliver or cause to be delivered
the Securities to the broker or other person designated by the Fund upon receipt
of the total amount payable to the Fund upon such sale, provided that the same
conforms to the total amount payable to the Fund as set forth in such Written or
such Oral Instructions. Subject to the foregoing, the Custodian may accept
payment in such form as shall be satisfactory to it and may deliver Securities
and arrange for payment in accordance with the customs prevailing among
dealers in Securities.
6. Lending of Securities.
If the Fund is permitted as disclosed in its current Prospectus to
lend Securities, within 24 hours after each loan of Securities, the Fund shall
deliver to the Custodian Written Instructions specifying with respect to each
such loan:
(1) the name of the issuer and the title of the Securities;
(2) the number of shares or the principal amount loaned;
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<PAGE>
(3) the date of loan and delivery;
(4) the total amount to be delivered to the Custodian including the
amount of cash collateral and the premium, if any, separately identified;
(5) the name of the broker, dealer, or financial institution to which
the loan was made; and
(6) whether the Securities loaned are to be delivered through the
Book-Entry System or the Depository.
(b) Promptly after each termination of a loan of Securities, the Fund
shall deliver to the Custodian Written Instructions specifying with respect to
each such loan termination and return of Securities:
(1) the name of the issuer and the title of the Securities to be
returned;
(2) the number of shares or the principal amount to be returned;
(3) the date of termination;
(4) the total amount to be delivered by the Custodian (including the
cash collateral for such Securities minus any offsetting credits as described in
said Written Instructions);
(5) the name of the broker, dealer, or financial institution from
which the Securities will be returned; and
(6) whether such return is to be effected through the Book-Entry
System or the Depository.
The Custodian shall receive all Securities returned from the broker,
dealer, or financial institution to which such Securities were loaned and upon
receipt thereof shall pay the total amount payable upon such return of
Securities as set forth in the Written Instructions. Securities returned to the
Custodian shall be held as they were prior to such loan.
7. Payment of Dividends or Distribution.
(a) The Fund shall furnish to the Custodian the resolution of the
Board of Directors of the Fund certified by the Secretary (i) authorizing the
declaration of dividends or distributions on a specified periodic basis and
authorizing the Custodian to rely on Oral or Written Instructions specifying the
date of the declaration of such dividends or distributions, the date of payment
thereof, the record date as of which shareholders entitled to payment shall be
determined, the amount payable per share to the shareholders of record as of the
record date, and the total amount payable to the Transfer Agent on the payment
date, or (ii) setting forth the date of declaration of any dividends or
distributions by the Fund, the date of payment thereof, the record date as of
which shareholders entitled to payment shall be determined, the amount payable
per share to the shareholders of record as of the record date, and the total
amount payable to the Transfer Agent on the payment date.
(b) Upon the payment date specified in such resolution, Oral
Instructions, or Written Instructions, as the case may be, the Custodian shall
pay out the total amount payable to the Transfer Agent of the Fund.
7
<PAGE>
8. Sale and Redemption of Shares.
(a) Whenever the Fund shall sell any Shares, the Fund shall deliver or
cause to be delivered to the Custodian Written Instructions duly specifying:
(1) the number of Shares sold, trade date, and price; and
(2) the amount of money to be received by the Custodian for the sale of
such Shares.
(b) Upon receipt of such money from the Transfer Agent, the Custodian
shall credit such money to the Fund.
(c) Upon issuance of any Shares in accordance with the foregoing
provisions of this
Section 8, the Custodian shall pay all original issue or other taxes
required to be paid in connection with such issuance upon the receipt of Written
Instructions specifying the amount to be paid.
(d) Except as provided hereafter, whenever any Shares of the Fund are
redeemed, the Fund shall cause the Transfer Agent to promptly furnish to the
Custodian Written Instructions specifying:
(1) the number of Shares redeemed; and
(2) the amount to be paid for the Shares redeemed.
The Custodian understands that the information contained in such Written
Instructions will be derived from the redemption of Shares as reported to the
Fund by the Transfer Agent.
(e) Upon receipt from the Transfer Agent of advice setting forth the
number of Shares received by the Transfer Agent for redemption and that such
Shares are valid and in good form for redemption, the Custodian shall make
payment to the Transfer Agent of the total amount specified in Written
Instructions issued pursuant to Paragraph (d) of this Section 8.
9. Indebtedness.
(a) The Fund will cause to be delivered to the Custodian by any bank
(excluding the Custodian) from which the Fund borrows money for temporary
administrative or emergency purposes using Securities as collateral for such
borrowings, a notice or undertaking in the form currently employed by any such
bank setting forth the amount which such bank will loan to the Fund against
delivery of a stated amount of collateral. The Fund shall promptly deliver to
the Custodian Written or Oral Instructions stating with respect to each such
borrowing:
(1) the name of the bank;
(2) the amount and terms of the borrowing, which may be set forth by
incorporating by reference an attached promissory note, duly endorsed by the
Fund, or other loan agreement;
(3) the time and date, if known, on which the loan is to be entered into
(the "borrowing date");
(4) the date on which the loan becomes due and payable;
(5) the total amount payable to the Fund on the borrowing date;
(6) the market value of Securities to be delivered as collateral for such
loan, includ-
8
<PAGE>
ing the name of the issuer, the title and the number of shares, or the principal
amount of any particular Securities;
(7) whether the Custodian is to deliver such collateral through the
Book-Entry System or the Depository; and
(8) a statement that such loan is in conformance with the 1940 Act
and the Fund's Prospectus.
Upon receipt of the Written or Oral Instructions referred to in
Subparagraph (a) above, the Custodian shall deliver on the borrowing date the
specified collateral and the executed promissory note, if any, against delivery
by the lending bank of the total amount of the loan payable, provided that the
same conforms to the total amount payable as set forth in the Written or Oral
Instructions. The Custodian may, at the option of the lending bank, keep such
collateral in its possession, but such collateral shall be subject to all rights
therein given the lending bank by virtue of any promissory note or loan
agreement. The Custodian shall deliver as additional collateral in the manner
directed by the Fund from time to time such Securities as may be specified in
Written or Oral Instructions to collateralize further any transaction described
in this Section 9. The Fund shall cause all Securities released from collateral
status to be returned directly to the Custodian, and the Custodian shall receive
from time to time such return of collateral as may be tendered to it. In the
event that the Fund fails to specify in Written or Oral Instructions all of the
information required by this Section 9, the Custodian shall not be under any
obligation to deliver any Securities. Collateral returned to the Custodian shall
be held hereunder as it was prior to being used as collateral.
10. Persons Having Access to Assets of the Fund.
No Director, Officer, Employee, or Agent of the Fund, and no officer,
director, employee, or agent of the Investment Adviser shall have physical
access to the assets of the Fund held by the Custodian or be authorized or
permitted to withdraw any investments of the Fund, nor shall the Custodian
deliver any assets of the Fund to any such person. No officer, director,
employee, or agent of the Custodian who holds any similar position with the
Fund, or the Investment Adviser, shall have access to the assets of the Fund.
The individual employees of the Custodian duly authorized by the Board of
Directors of the Custodian to have access to the assets of the Fund are listed
in the certification annexed hereto as Appendix C. The Custodian shall advise
the Fund of any change in the individuals authorized to have access to the
assets of the Fund by written notice to the Fund accompanied by a certified copy
of the authorizing resolution of the Custodian's Board of Directors approving
such change.
Nothing in this Section 10 shall prohibit any Officer, Employee, or Agent
of the Fund or any officer, director, employee, or agent of the Investment
Adviser from giving Oral Instructions or Written Instructions to the Custodian
so long as it does not result in delivery of or access to assets of the Fund
prohibited by Paragraph (a) of this Section 10.
11. Concerning the Custodian.
Standard of Conduct. Except as otherwise provided herein, neither the
Custodian nor its nominee shall be liable for any loss or damage, including
reasonable counsel fees, resulting from its action or omission to act or
otherwise, except for any such loss or damage arising out of its own negligence
or willful misconduct. The Custodian may, with respect to questions of law,
apply for and obtain the advice and opinion of counsel to the Fund at the
expense of the Fund, or of its own counsel, at the expense of the Fund, and
shall be fully protected with respect to anything done or omitted by it in good
faith in conformity with such advice or opinion; provided, however, that if such
reliance involves a potential material loss
9
<PAGE>
to the Fund, the Custodian will advise the Fund of any such actions to he taken
in accordance with advice of counsel to the Custodian. The Custodian shall be
liable to the Fund for any loss or damage resulting from the use of the Book-
Entry System or the Depository arising by reason of any negligence, misfeasance,
or misconduct on the part of the Custodian or any of its employees or agents.
(b) Limit of Duties. Without limiting the generality of the foregoing, the
Custodian shall be under no duty or obligation to inquire into, and shall not be
liable for:
(1) the validity of the issue of any Securities purchased by the
Fund, the legality of the purchase thereof, or the propriety of the amount paid
therefor;
(2) the legality of the sale of any Securities by the Fund, or the
propriety of the amount for which the same are sold;
(3) the legality of the issue or sale of any Shares, or the
sufficiency of the amount to be received therefor;
(4) the legality of the redemption of any Shares, or the propriety of
the amount to be paid therefor;
(5) the legality of the declaration or payment of any dividend or
other distribution of the Fund; or
(6) the legality of any borrowing for temporary or emergency
administrative purposes.
(c) No Liability Until Receipt. The Custodian shall not be liable for, or
considered to be the Custodian of, any money, whether or not represented by any
check, draft, or other instrument for the payment of money, received by it on
behalf of the Fund until the Custodian actually receives and collects such money
directly or by the final crediting of the account representing the Fund's
interest in the Book-Entry System or the Depository.
(d) Collection Where Payment Refused. The Custodian shall not be under any duty
or obligation to take action to effect collection of any amount, if the
Securities upon which such amount is payable are in default, or if payment is
refused after due demand or presentation, unless and until (i) it shall be
directed to take such action by Written Instructions and (ii) it shall be
assured to its satisfaction of reimbursement of its costs and expenses in
connection with any such action.
(e) Appointment of Agents and Sub-Custodians. The Custodian may appoint one or
more banking institutions, including but not limited to banking institutions
located in foreign countries, to act as Depository or Depositories or as Sub-
Custodian or as Sub-Custodians of Securities and moneys at any time owned by the
Fund, upon terms and conditions specified in Written Instructions. The Custodian
shall use reasonable care in selecting a Depository and/or Sub-Custodian located
in a country other than the United States ("Foreign Sub-Custodian") and shall
oversee the maintenance of any Securities or moneys of the Fund by any Foreign
Sub-Custodian.
Any agreement between the Custodian and any Depository or Sub-Custodian
shall impose on such Depository or Sub-Custodian responsibilities and
liabilities similar in nature and scope to those imposed by this Agreement
relating to the function to be performed by such Depository or Sub-Custodian.
(f) No Duty to Ascertain Authority. The Custodian shall not be under any duty
or obligation to ascertain whether any Securities at any time delivered to or
held by it for the Fund are such as may properly be held by the Fund under the
provisions of the Fund's Prospectus.
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<PAGE>
(g) Compensation of the Custodian. The Custodian shall be entitled to receive,
and the Fund agrees to pay to the Custodian, such compensation as may be agreed
upon from time to time between the Custodian and the Fund. Tile Custodian may
charge against any money specifically allocated to the Fund such compensation
and any expenses incurred by the Custodian in the performance of its duties
pursuant to such agreement with respect to the Fund. Any charges associated
with *DTC transactions shall be billed to the Fund at cost. The Custodian shall
also be entitled to charge against any money held by it and specifically
allocated to the Fund the amount of any loss, damage, liability, or expense
incurred with respect to the Fund including counsel fees, for which it shall be
entitled to reimbursement under the provisions of this Agreement.
The expenses which the Custodian may charge against such account include,
but are not limited to, the expenses of Sub-Custodians and foreign branches
of the Custodian incurred in settling transactions involving the purchase
and sale of Securities of the Fund.
(h) Reliance on Certificates and Instructions. The Custodian shall be
entitled to rely upon any Written Instructions or Oral Instructions actually
received by the Custodian pursuant to the applicable Sections of this Agreement
and reasonably believed by the Custodian to be genuine and to be given by an
Authorized Person. The Fund agrees to forward to the Custodian Written
Instructions from an Authorized Person confirming such Oral Instructions in such
manner so that such Written Instructions are received by the Custodian, whether
by hand delivery, telex, or otherwise, by the close of business on the same day
that such Oral Instructions are given to the Custodian. The Fund agrees that
the fact that such confirming instructions are not received by the Custodian
shall in no way affect the validity of the transactions or enforceability of the
transactions hereby authorized by the Fund. The Fund agrees that the Custodian
shall incur no liability to the Fund in acting upon Oral Instructions given to
the Custodian hereunder concerning such transactions, provided that such
instructions reasonably appear to have been received from a duly Authorized
Person.
(i) Inspection of Books and Records. The Custodian shall create and
maintain all records relating to its activities and obligations under this
Agreement in such manner as will meet the obligations of the Fund under the 1940
Act, with particular attention to Section 31 thereof and Rule 3la-1 and 3la-2
thereunder, applicable federal and state tax laws, and any other law or
administrative rules or procedures which may be applicable to the Fund. All
such records shall be the property of the Fund, and it shall at all times during
the regular business hours of the Custodian be open for inspection by duly
authorized Officers, Employees, or Agents of the Fund and employees and agents
of the Securities and Exchange Commission. The Custodian shall, at the Fund's
request, supply the Fund with a tabulation of Securities owned by the Fund and
held by the Custodian.
The Custodian shall take all reasonable action, as the Fund may from time
to time request, to obtain favorable opinions from the Fund's independent
accountant with respect to its activities hereunder in connection with the
preparation of the Fund's Form N-IA and Form N-SAR or other reports to or
requirements of the Securities and Exchange Commission.
12. Term and Termination.
(a) This Agreement shall become effective on the date first set forth
above (the "Effective Date") and shall continue in effect thereafter as the
parties may mutually agree.
(b) Either of the parties hereto may terminate this Agreement by giving to
the other party a notice in writing specifying the date of such termination,
which shall be not less than 60 days after the date of receipt of such notice.
In the event such notice is given by the Fund, it shall be accompanied by a
certified resolution of the Board of Directors of the Fund, electing to
terminate this Agreement and designating a successor custodian or custodians,
which shall
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<PAGE>
be a person qualified to so act under the 1940 Act. In the event such
notice is given by the Custodian, the Fund shall, on or before the termination
date, deliver to the Custodian a certified resolution of the Board of Directors
of the Fund, designating a successor custodian or custodians. In the absence of
such designation by the Fund, the Custodian may designate a successor custodian,
which shall be a person qualified to so act under the 1940 Act. If the Fund
fails to designate a successor custodian, the Fund shall upon the date specified
in the notice of termination of this Agreement and upon the delivery by the
Custodian of all Securities (other than Securities held in the Book-Entry System
which cannot be delivered to the Fund) and moneys then owned by the Fund, be
deemed to be its own custodian; and the Custodian shall thereby be relieved of
all duties and responsibilities pursuant to this Agreement, other than the duty
with respect to Securities held in Book-Entry System which cannot be delivered
to the Fund.
(c) Upon the date set forth in such notice under Paragraph (b) of
this Section 12, this Agreement shall terminate to the extent specified in such
notice, and the Custodian shall upon receipt of a notice of acceptance by the
successor custodian on that date deliver directly to the successor custodian all
Securities and moneys then held by the Custodian, after deducting all fees,
expenses, and other amounts for the payment or reimbursement of which it shall
then be entitled with respect to the Fund.
13. Miscellaneous.
(a) Annexed hereto as Appendix A is a certification signed the
President and the Secretary of the Fund setting forth the names and the
signatures of the present Authorized Persons. The Fund agrees to furnish to the
Custodian a new certification in similar form ill the event that any such
present Authorized Person ceases to be such an Authorized Person or in the event
that other or additional Authorized Persons are elected or appointed. Until
such new certification shall be received, the Custodian shall be fully protected
in acting under the provisions of this Agreement upon Oral Instructions or
signatures of the present Authorized Persons as set forth in the last delivered
certification.
(b) Annexed hereto as Appendix B is a certification signed the
President and the Secretary present of the Fund setting forth the names of the
present Directors of the Fund who are authorized to give Oral and Written
Instructions to the Custodian. The Fund agrees to furnish to the Custodian a
new certification in similar form in the event any such present Director ceases
to be a Director of the Fund, ceases to have authority to provide Oral or
Written Instructions to the Custodian, or in the event that other or additional
Directors are elected or appointed who may be authorized to provide Oral or
Written Instructions to the Custodian. Until such new certification shall be
received, the Custodian shall be fully protected in acting under the provisions
of this Agreement upon the signature of the Directors as set forth in the last
delivered certification.
(c) Any notice or other instrument in writing, authorized or required
by this Agreement to be given to the Custodian, shall be sufficiently given if
addressed to the Custodian and mailed or delivered to it at its offices at 20
First Street SW, Minot, North Dakota 58701, or at such other place as the
Custodian may from time to time designate in writing.
(d) Any notice or other instrument in writing, authorized or required
by this Agreement to be given to the Fund, shall be sufficiently given if
addressed to the Fund and mailed or delivered to it at its offices at 201 South
Broadway, Minot, North Dakota 58701, or at such other place as the Fund may from
time to time designate in writing.
(e) This Agreement may not be amended or modified in any manner,
except by a written agreement executed by both parties with the same formality
as this Agreement, and as may be permitted or required by the 1940 Act.
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<PAGE>
(f) This Agreement shall extend to and shall be binding upon the parties
hereto, and their respective successors and assigns; provided, however, that
this Agreement shall not be assignable by the Fund without the written consent
of the Custodian, or by the Custodian without the written consent of the Fund
authorized or approved by a resolution of the Board of Directors of the Fund,
and any attempted assignment without such written consent shall be null and
void.
(g) This agreement shall be construed in accordance with the laws of the State
of North Dakota.
(h) It is expressly agreed to that the obligations of the Fund hereunder shall
not be binding upon any of the Directors, Shareholders, Nominees, Officers,
Agents, or Employees of the Fund, personally, but bind only the corporate
property of the Fund. The execution and 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,
but shall bind only the corporate property of the Fund.
(i) The captions of the Agreement are included for convenience of reference
only and in no way define or delimit any of the provisions hereof or otherwise
affect their construction or effect.
(j) This Agreement may be executed in any number of counterparts, each of which
shall be deemed to be an original, but such counterparts shall, together,
constitute only one instrument.
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<PAGE>
IN WITNESS WHEREOF, the parries hereto have caused this Agreement to be
executed by their respective officers thereunder duly authorized as of the day
and year first above written.
INTEGRITY FUND OF FUNDS, INC.
By /Robert E. Walstad/
Date 12 October 1994
Attest: /Eloise K. Kleven/
Agreed and Accepted by:
FIRST WESTERN BANK & TRUST
By /signature/
Date: October 13, 1994
Attest: /Mary Smith/
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APPENDIX A
We, Robert E. Walstad and Peter A. Quist, Directors of Integrity Fund of
Funds, Inc. (the "Fund"), a corporation organized under the laws of the State of
North Dakota, do hereby certify that the following individuals have been duly
authorized as Authorized Persons to give Oral Instructions and Written
Instructions on behalf of the Fund, and the signatures set forth opposite their
respective names are their true and correct signatures:
Signature
Robert E. Walstad /Robert E. Walstad/
W. Dan Korgel /W. Dan Korgel/
/Robert E. Walstad/
Robert E. Walstad
Director
/Peter A. Quist/
Peter A. Quist
Director
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<PAGE>
APPENDIX B
We, Robert E. Walstad and Peter A. Quist, Directors of Integrity Fund of
Funds, Inc. (the "Fund"), a corporation organized under the laws of the State of
North Dakota, do hereby certify that the following individuals serve in the
following positions with the Fund and have been duly elected to such positions
and qualified therefor in conformity with the Fund's Bylaws; and the signatures
set forth opposite their names are their true and correct signatures:
Name Position Signature
Robert E. Walstad President and /Robert E. Walstad/
Director
Peter A. Quist Vice President and /Peter A. Quist/
Director
/Robert E. Walstad/
Robert E. Walstad
Director
/Peter A. Quist/
Peter A. Quist
Director
16
<PAGE>
APPENDIX C
1, Richard K. Anderson, Vice President and Cashier of First Western Bank &
Trust (the "Custodian"), hereby certify pursuant to Section 10(b) of the
Custodian Agreement, that the following employees have been duly authorized by
the Custodian's Board of Directors to have access to the assets of Integrity
Fund of Funds, Inc.:
Richard H. Rolfstad, Vice President and Trust Department Manager;
Marjorie A. Parizek, Trust Operations Officer; Eloise R. Kleven,
Retirement Benefits Officer; Chris Lamoureux, Assistant Trust Officer
Signed and dated this 13 day of October 1994.
/Richard K. Anderson/
Richard K. Anderson
Vice President and Cashier
First Western Bank & Trust
17
<PAGE>
SCHEDULE A
FEE SCHEDULE
CUSTODIAN CHARGES
FIRST WESTERN BANK & TRUST
Montana Tax-Free Fund, Inc., Integrity Fund of Funds, Inc., and any other
mutual funds for which ND Money Management, Inc., serves as investment adviser
(hereinafter referred to as the "Funds") shall compensate First Western Bank &
Trust (the "Custodian") for services rendered pursuant to the Custodian
Agreements entered into with each of the Funds as follows:
For the period beginning November 1, 1994, and ending November 30, 1994,
and monthly thereafter, the Funds shall pay the Custodian a fee at the annual
rate of .00015 of the first one hundred million dollars ($100,000,000) of
combined net assets of the Funds and .00010 of any combined net assets in excess
of one hundred million dollars ($ 100,000,000); provided, however, that the
Funds shall pay the Custodian a minimum monthly fee of five hundred dollars
($500).
By way of example only, if the Funds had combined net assets of ten million
dollars ($10,000,000) on November 30, 1994, the fee for the month of November
would be $500 (.00015 x $ 10,000,000=$1,500 / 12=$125, so the minimum monthly
fee of $500 would apply). If the combined net assets of the Funds on November
30 were one hundred million dollars ($ 100,000,000), the fee for the month of
November would be $1,250 (.00015 x $100,000,000 / 12=$1,250). If the combined
net assets of the Funds on November 30 were one hundred fifty million dollars
($150,000,000), the fee for the month of November would be $1,666.67 (.00015 x
$100,000,000=$15,000 + .00010 x $50,000,000=$5,000 = $20,000 / 12=$1,666.67).
The Custodian shall compute the fee payable pursuant to the Fee Schedule
and provide each of the Funds with detailed bills showing their proportionate
share of the fee as soon as practicable after the end of each calendar month.
The Funds shall each promptly pay the Custodian their proportionate share of the
fee.
18
<PAGE>
EXHIBIT 99.9
FORM OF TRANSFER AGENCY AGREEMENT
<PAGE>
TRANSFER AGENCY AGREEMENT
AGREEMENT dated as of August 19, 1994, between Integrity Fund of Funds, Inc.
(the "Fund"), a corporation organized under the laws of the State of North
Dakota, having its principal office and place of business at 201 South Broadway,
Minot, North Dakota 58701, 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 201 South Broadway, Minot, North Dakota 58701.
WITNESSETH:
That for and in consideration of the mutual promises hereinafter set forth,
the Fund and the Transfer Agent agree as follows:
1. Definitions.
Whenever used in this Agreement, the following words and phrases, unless
the context otherwise requires, shall have the following meanings:
(a) "Authorized Person" shall be deemed to include the President, the
Vice President, the Secretary, and the Treasurer of the Fund, the persons listed
in Appendix A hereto, and any other person, whether or not such person is an
officer of the Fund, duly authorized to give Oral Instructions or Written
Instructions on behalf of the Fund as indicated in a certificate furnished to
the Transfer Agent pursuant to Section 5(d) or 5(e) hereof as may be received by
the Transfer Agent from time to time.
(b) "Commission" shall have the meaning given it in the 1940 Act.
(c) "Custodian" refers to the custodian and any sub-custodian of all
securities and other property which the Fund may from time to
time deposit or cause to be deposited or held under the name or
account of such custodian.
"Articles of Incorporation" shall mean the Fund's Articles of
Incorporation as now in effect and as the same may be amended from time to time.
(e) "Officer" shall mean the President, Vice President, Secretary,
and Treasurer of the parties hereto.
(f) "Oral Instructions" shall mean instructions, other than written
instructions, actually received by the Transfer Agent from a
person reasonably believed by the Transfer Agent to be an
Authorized Person.
(g) "Prospectus" shall mean any current prospectus and statement of
additional information relating to the registration of the Fund's shares under
the Securities Act of 1933, as amended, and the 1940 Act.
(h) "Shares" refers to the units into which the shareholders'
proprietary interests in the Fund are divided.
<PAGE>
(i) "Shareholder" means a record owner of Shares;
(j) "Directors" or "Board of Directors" refers to the duly elected
Directors of the Fund.
(k) "Written Instructions" shall mean a written or electronic
communication actually received by the Transfer Agent from an Authorized Person
or from a person reasonably believed by the Transfer Agent to be an Authorized
Person by telex or any other such system whereby the receiver of such
communication is able to verify through codes or otherwise with a reasonable
degree of certainty the authenticity of the sender of such communications.
(1) The "1940 Act" refers to the Investment Company Act of 1940, and
the Rules and Regulations promulgated thereunder, all as amended from time to
time.
2. Appointment of the Transfer Agent.
The Fund hereby appoints and constitutes the Transfer Agent as
transfer agent for its Shares and as Shareholder servicing agent, and the
Transfer Agent accepts such appointment and agrees to perform the duties
hereinafter set forth.
3. Compensation.
(a) The Fund will compensate the Transfer Agent for the performance
of its obligations hereunder in accordance with the fees set forth in the
written schedule of fees annexed hereto as Schedule A and incorporated herein.
The Transfer Agent will bill the Fund as soon as practicable after
the end of each calendar month, and said billings will be detailed in accordance
with the Schedule A. The Fund will promptly pay to the Transfer Agent the amount
of such billing.
(b) Any compensation agreed to, hereunder may be adjusted from time
to time upon mutual agreement by both parties hereto by attaching to Schedule A
of this Agreement a revised Fee Schedule, dated and signed by an Officer of each
party hereto.
4. Documents.
In connection with the appointment of the Transfer Agent, the Fund
shall, on or before the date this Agreement goes into effect, but in any case,
within a reasonable period of time for the Transfer Agent to prepare to perform
its duties hereunder, furnish the Transfer Agent with the following documents:
(a) A certified copy of the Fund's Articles of Incorporation, as
amended.
(b) A certified copy of the Fund's Bylaws, as amended.
(c) A copy of the resolution of the Directors authorizing execution
and delivery of this Agreement.
2
<PAGE>
(d) If applicable, a specimen of the certificate for Shares of the
Fund in the form approved by the Directors, with a certificate of the Secretary
of the Fund as to such approval.
(e) All account application forms and other documents relating to
Shareholder accounts or to any plan, program, or service offered
by the Fund.
5. Further Documentation.
The Fund will also furnish from time to time the following
documents:
(a) The Fund's Registration Statement and each subsequent amendment
to the Fund's Registration Statement that is filed with the Commission.
(b) Certificates as to any change in any Officer, Director, or
Investment Adviser of the Fund.
(c) Such other certificates, documents, or opinions as the Transfer
Agent deems to be appropriate or necessary for the proper performance of its
duties hereunder.
6. Representations of the Fund.
The Fund represents to the Transfer Agent that Shares will be issued in
accordance with the terms of the Articles of Incorporation and the Prospectus
and that such Shares shall be validly issued, fully paid, and non-assessable by
the Fund.
In the event that the Directors shall declare a distribution payable in
Shares, the Fund shall deliver to the Transfer Agent written notice of such
declaration signed on behalf of the Fund by an Officer of the Fund, upon which
the Transfer Agent shall be entitled to rely for all purposes, certifying (i)
the number of Shares involved, (ii) that all appropriate action has been taken,
and (iii) that any amendment to the Articles of Incorporation which may be
required has been filed and is effective. Such notice shall be accompanied by an
opinion of counsel 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.
7. Duties of the Transfer Agent.
The Transfer Agent shall be responsible for administering and/or
performing transfer agent functions; for acting as service agent in connection
with dividend and distribution functions; and for performing Shareholder account
and administrative agent functions in connection with the issuance, transfer,
and redemption or repurchase (including coordination with the Custodian) of
Shares. The operating standards and procedures to be followed shall be
determined from time to time by agreement between the Transfer Agent and the
Fund and shall be expressed in a written schedule of duties of the Transfer
Agent annexed hereto as Schedule B and incorporated herein.
3
<PAGE>
8. Recordkeeping and Other Information.
The Transfer Agent shall create and maintain all necessary
records in accordance with all applicable laws, rules and regulations,
including, but not limited to, records required by Section 3 1 (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.
Upon reasonable notice by the Fund, the Transfer Agent shall make
available during regular business hours its facilities and premises employed in
connection with the performance of its duties under this Agreement for
reasonable visitation by the Fund or any person retained by the Fund.
To the extent required by said Section 31 and the rules and
regulations thereunder, the Transfer Agent agrees that all such records prepared
and maintained by the Transfer Agent relating to the services to be performed by
the Transfer Agent hereunder are the property of the Fund.
The Transfer Agent and the Fund agree that all books, records,
information, and data pertaining to the business of the other party which are
exchanged or received in connection with this Agreement shall remain
confidential and shall not be voluntarily disclosed to any person, except as may
be required by law. In the case of any 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.
9. Other Duties.
In addition to the duties expressly set forth in Schedule B to this
Agreement, the Transfer Agent shall perform such other duties and functions, and
shall be paid such amounts therefor, as may from time to time be agreed upon in
writing between the Fund and the Transfer Agent. Such other duties and functions
shall be reflected in a written amendment to Schedule B, dated and signed by an
Officer of each party hereto.
10. Reliance by Transfer Agent; Instructions.
(a) The Transfer Agent will be protected in acting upon Written
or Oral Instructions, as appropriate, believed to have been executed or orally
communicated by an Authorized Person and will not be held to have any notice of
any change of authority of any person until receipt of a Written Instruction
thereof from the Fund. The Transfer Agent will also be protected in processing
Share certificates which it reasonably believes to bear the proper manual or
facsimile signatures of the Officers of the Fund and the proper countersignature
of the Transfer Agent.
4
<PAGE>
(b) At any time the Transfer Agent may apply to any Authorized Person
of the Fund for Written Instructions and may seek advice from legal counsel for
the Fund, or its own legal counsel, with respect to any matter arising in
connection with this Agreement, and it shall not be liable for any action taken
or not taken or suffered by it in good faith in accordance with such Written
Instructions or in accordance with the opinion of counsel for the Fund or for
the Transfer Agent; provided, however, that if such reliance involves a
potential material loss to the Fund, the Transfer Agent will advise the Fund of
any such *action(s) to be taken in accordance with the opinion of counsel to the
Transfer Agent. Written Instructions requested by the Transfer Agent will be
provided by the Fund within a reasonable period of time. In addition, the
Transfer Agent, its officers, agents, or employees, shall accept Oral
Instructions or Written Instructions given to them by any person representing or
acting on behalf of the Fund only if said representative is known by the
Transfer Agent, or its officers, agents, or employees, to be an Authorized
Person. The Transfer Agent shall have no duty or obligation to inquire into,
nor shall the Transfer Agent be responsible for, the legality of any act done by
it upon the request or direction of an Authorized Person.
(c) Notwithstanding any of the foregoing provisions of this
Agreement, the Transfer Agent shall be under no duty or obligation to inquire
into, and shall not be liable for:
(1) the legality of the issuance or sale of any Shares or the
sufficiency of the amount to be received therefor;
(2) the legality of the redemption of any Shares, or the
propriety of the amount to be paid therefor;
(3) the legality of the declaration of any dividend by the
Directors, or the legality of the issuance of any Shares in
payment of any dividend; or
(4) the legality of any recapitalization or readjustment of the
Shares.
11. Acts of God. Etc.
Neither the 'Transfer Agent nor the Fund will be liable or responsible for
delays or errors by reason of circumstances beyond its reasonable control,
including acts of civil or military authority, national emergencies, fire,
mechanical breakdown beyond its control, flood or catastrophe, acts of God,
insurrection, war, riots, or failure beyond its control of transportation,
communication, or power supply.
12. Duty of Care and Indemnification.
The Fund and the Transfer Agent will indemnify each other against and
hold the other party harmless from any and all losses, claims, damages,
liabilities, or expenses (including reasonable counsel fees and expenses)
resulting from any claim, demand, action, or suit not resulting from the bad
faith or negligence of the other party, and arising out of, or in connection
with, the duties and responsibilities described hereunder. In addition, the Fund
will indemnify the Transfer Agent against and hold it harmless from any and all
losses, claims, damages, liabilities, or expenses (including reasonable counsel
fees and expenses) resulting from any claim demand, action, or suit as a result
of:
5
<PAGE>
(1) 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;
(2) any action taken in accordance with written or oral advice
reasonably believed by the Transfer Agent to have been given by
counsel for the Fund or its own counselor
(3) any action taken as a result of any error or omission in any
record (including but not limited to magnetic tapes, computer
printouts, hard copies, and microfilm copies) delivered or caused
to be delivered by the Fund to the Transfer Agent in connection
with this Agreement.
In any case in which the Fund or the Transfer Agent may be asked to
indemnify or hold the other party harmless, the requesting party will provide
the other party with all pertinent facts concerning the situation in question
and will use reasonable care to identify and provide notice of any situation
which presents or appears likely to present a claim for indemnification. Each
party shall have the option to defend the other party against any claim which
may be the subject of this indemnification, and in the event that a party so
elects, such defense shall be conducted by counsel chosen by the party making
such election; and such counsel shall be satisfactory to the other party, and
thereupon such electing party shall take over complete defense of the claim, and
the requesting party shall sustain no further legal or other expenses in such
situation for which it seeks indemnification under this Section 12. Neither
party will confess any claim or make any compromise in any case in which the
other party will be asked to provide indemnification, except with the other
party's prior written consent. The obligations of the parties hereto under this
Section shall survive the termination of this Agreement.
13. Term and Termination.
This Agreement shall become effective on the date first set forth
above (the "Effective Date") and shall continue in effect from year to year
thereafter as the parties may mutually agree; provided, that either party hereto
may terminate this Agreement by giving to the other party a notice in writing
specifying the date of such termination, which shall be not less than 60 days
after the date of receipt of such notice. In the event such notice is given by
the Fund, it shall be accompanied by a resolution of the Board of Directors of
the Fund, certified by the Secretary, electing to terminate this Agreement and
designating a successor transfer agent or transfer agents. Upon such
termination and at the expense of the Fund, the Transfer Agent will deliver to
such successor a certified list of Shareholders of the Fund (with names,
addresses, and taxpayer identification or Social Security numbers), an
historical record of the account of each Shareholder and the status thereof, and
all other relevant books, records, correspondence, and other data established or
maintained by the Transfer Agent under this Agreement in the form reasonably
acceptable to the Fund, and will cooperate in the transfer of such duties and
responsibilities, including provisions for assistance from the Transfer Agent's
personnel in the establishment of books, records, and other data by such
successor or successors.
6
<PAGE>
14. Amendment.
This Agreement may not be amended or modified in any manner except by a written
agreement executed by both parties.
15. Subcontracting.
Except as otherwise provided below, neither this Agreement nor any rights or
obligations hereunder may be assigned by either party without the express
written consent of the other party. The Transfer Agent may, in its sole
discretion and without further approval from the Fund, subcontract, in whole or
in part, for the performance of its obligations and duties hereunder with any
person or entity including, but not limited to, any affiliate or subsidiary;
provided, however, that (a) the Transfer Agent shall remain fully responsible to
the Fund for the acts and omissions of any agent or subcontractor as it is for
its own acts and omissions, and (b) to the extent that the Transfer Agent
subcontracts any functions or activities required or performed by a registered
transfer agent, the subcontracting party shall be a duly registered transfer
agent with the appropriate regulatory agency as required under Section 17A of
the Securities Exchange Act of 1934 and the rules and regulations thereunder, as
amended.
16. Use of Transfer Agent's Name.
The Fund shall not use the name of the Transfer Agent in any Prospectus,
Statement of Additional Information, Shareholders' report, sales literature, or
other material relating to the Fund for other than internal use, in a manner not
approved prior thereto; provided, that the Transfer Agent shall approve all
reasonable uses of its name which merely refer in accurate terms to its
appointment hereunder or which are required by the Commission or a state
securities administrator.
17.Use of the Fund's Name.
The Transfer Agent shall not use the name of the Fund or material relating to
the Fund on any documents or forms for other than internal use in a manner not
approved prior thereto in writing; provided, that the Fund shall approve all
reasonable uses of its name which merely refer in accurate terms to the
appointment of the Transfer Agent or which are required by the Commission or a
state securities administrator.
18.Security.
The Transfer Agent represents and warrants that, to the best of its knowledge,
the various procedures and systems which the Transfer Agent has implemented or
will implement with regard to safeguarding from loss or damage attributable to
fire, theft, or any other cause (including provision for 24 hours-a-day
restricted access) of the Fund's records and other data and the Transfer Agent's
records, data, equipment, facilities, and other property used in the performance
of its obligations hereunder are adequate and that it will make such changes
therein from time to time as in its judgment are required for the secure
performance of its obligations hereunder. The parties shall review such systems
and procedures on a periodic basis.
7
<PAGE>
19. Miscellaneous.
(a) Any notice or other instrument authorized or required by this
Agreement to be given in writing to the Fund or the Transfer Agent shall be
sufficiently given if addressed to that party and received by it at its office
set forth below or at such other place as it may from time to time designate in
writing.
To the Fund:
Integrity Fund of Funds, Inc.
201 South Broadway
Minot, ND 58701
To the Transfer Agent:
ND Resources, Inc.
201 South Broadway
Minot, ND 58701
(b) This Agreement shall extend to and shall be binding upon the
parties hereto, and their respective successors and assigns; provided, however,
that this Agreement shall not be assignable by the Fund without the written
consent of the other party.
(c) This Agreement shall be construed in accordance with the laws of
the State of North Dakota,
(d) This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original; but such counterparts shall,
together, constitute only one instrument.
(e) The captions of this Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect.
8
<PAGE>
20. Liability of Directors, Officers. and Shareholders.
The execution and delivery of this Agreement have been authorized by the
Directors of the Fund and signed by an authorized Officer of the Fund, acting as
such, and neither such authorization by such Directors nor such execution and
delivery by such Officer shall be deemed to have been made by any of them
individually or to impose any liability on any of them personally, and the
obligations of this Agreement are not binding upon any of the Directors or
Shareholders of the Fund, but bind only the property of the Fund.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective corporate officers thereunder duly authorized as of
the day and year first above written.
INTEGRITY FUND OF FUNDS, INC.
By /Robert E. Walstad/
Date: August 19, 1994
Agreed and Accepted by:
ND RESOURCES, INC.
By: /Robert E. Walstad/
Date: August 19, 1994
9
<PAGE>
APPENDIX A
We, Robert E. Walstad and Peter A. Quist, President and Secretary,
respectively, of Integrity Fund of Funds, Inc. (the "Fund"), a corporation
organized under the laws of the State of North Dakota, do hereby certify that
the following individuals have been duly authorized as Authorized Persons to
give Oral Instructions and Written Instructions on behalf of the Fund, and the
signatures set forth opposite their respective names are their true and correct
signatures:
Name Signature
Robert E. Walstad /Robert E. Walstad/
W. Dan Korgel /W. Dan Korgel
/Robert E. Walstad/
Robert E. Walstad
/Peter A. Quist/
Peter A. Quist
10
<PAGE>
SCHEDULE A*
FEE SCHEDULE
TRANSFER AGENT CHARGES
ND RESOURCES, INC.
PERCENTAGE
FUND SIZE (NET ASSET VALUE) OF 1%
$ 0 TO $10,000,000 .16
10,000,001 TO 25,000,000 .13
25,000,001 TO 40,000,000 .11
40,000,001 TO 50,000,000 .10
50,000,001 AND LARGER .09
*Amounts due under the above Fee Schedule are payable monthly and shall be
calculated as follows: The net asset value of all outstanding Fund shares within
each category (e. g., $0 to $10,000,000 is one category, $10,000,001 to
$25,000,000 is another, etc.) shall be multiplied by the percentage of 1%
applicable to such category and the product thereof divided by 12. The same
procedure shall be followed for each category in which the Fund has net asset
values. The amounts derived by multiplying the net asset value of each category
by the applicable percentages shall then be added together to determine the
amount payable for that month. By way of example only, if the Fund had net
assets of $10,500,000 for the month in question, the computation would be as
follows:
$10,000,000 x.0016 / 12= $1,333.33
500,000 x .0013 / 12= 54.17
$1,387.50
11
<PAGE>
SCHEDULE B
DUTIES OF THE TRANSFER AGENT
(See Exhibit 1 for Summary of Services.)
1. Shareholder Information.
The Transfer Agent shall maintain a record of the number of Shares held by each
holder of record which shall include his address and taxpayer identification
number and which shall indicate whether such Shares are held in certificated or
uncertificated form.
2. Shareholder Services.
The Transfer Agent will investigate all Shareholder inquiries relating to
Shareholder accounts and will answer all correspondence from Shareholders and
others relating to its duties hereunder and such other correspondence as may
from time to time be mutually agreed upon between the Transfer Agent and the
Fund. The Transfer Agent shall keep records of Shareholder correspondence and
replies thereto and of the lapse of time between the receipt of such
correspondence and the mailing of such replies.
3. State Registration Reports.
The Transfer Agent shall furnish on a state-by-state basis sales reports
and such periodic and special reports as the Fund may reasonably request and
such other information, including Shareholder lists and statistical information
concerning accounts, as may be agreed upon from time to time between the Fund
and the Transfer Agent.
4. Mailing Communications to Shareholders, Proxy Materials.
The Transfer Agent will address and mail to Shareholders of the Fund all
reports to Shareholders, dividend and distribution notices, and proxy material
for the Fund's meetings of Shareholders. In connection with meetings of
Shareholders, the Transfer Agent will report on proxies voted prior to meetings,
act as inspector of election at meetings, if so requested by the Fund, and
certify Shares voted at meetings.
5. Sales of Shares.
(a) Processing of Investment Checks or Other Investments. Upon
receipt of any check or other instrument drawn or endorsed to it as agent for,
or identified as being for the account of the Fund for the purchase of Shares,
the Transfer Agent shall stamp the check with the date of receipt, shall
forthwith process the same for collection, and shall record the number of Shares
sold, the trade date, the price per Share, and the amount of money to be
delivered to the Custodian of the Fund for the sale of such Shares.
12
<PAGE>
(b) Issuance of Shares. Upon receipt of notification that the
Custodian has received the amount of money specified in the immediately
preceding paragraph, the Transfer Agent shall issue to and hold in the account
of the purchaser/Shareholder, or if no account is specified therein, in a new
account established in the name of the purchaser, the number of Shares such
purchaser is entitled to receive, as determined in accordance with applicable
federal law or regulation.
(c) Statements. On a quarterly basis, the Transfer Agent shall
send to the purchaser/Shareholder a statement of purchases which will show the
new Share balance, the Shares held under a particular plan, if any, for
withdrawing investments, the amount invested and the price paid for the newly
purchased Shares, or will be in such other form of statement as the Fund and the
Transfer Agent may agree from time to time.
(d) Suspension of Sale of Shares. The Transfer Agent shall not
be required to issue any Shares where it has received a Written Instruction from
the Fund or written notice from any appropriate federal or state authority that
the sale of the Shares of the Fund has been suspended or discontinued, and the
Transfer Agent shall be entitled to rely upon such Written Instructions or
written notification.
(e) Taxes in Connection with Issuance of Shares. Upon the
issuance of any Shares in accordance with the foregoing provisions of 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 beating satisfactory evidence of the payment of
stock transfer taxes, if any.
Except to the extent inconsistent with the procedures set forth in the
Prospectus, the Transfer Agent reserves the fight to refuse to transfer or
redeem Shares until it is satisfied that the endorse-
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<PAGE>
ment on the instructions is valid and genuine, and for that purpose it will
require a guarantee of signature by a member firm of a national securities
exchange, by any national bank or trust company, or by any member bank of the
Federal Reserve system. The Transfer Agent also reserves the right to refuse to
transfer or redeem Shares until it is satisfied that the requested transfer or
redemption is legally authorized, and it shall incur no liability for the
refusal, in good faith, to make transfers or redemptions which the Transfer
Agent, in its good judgment, deems improper or unauthorized, or until it is
reasonably satisfied that there is no basis to any claims adverse to such
transfer or redemption.
The Transfer Agent may, in effecting transactions, rely upon the
provisions of the Uniform Act for the Simplification of Fiduciary Security
Transfers or the provisions of Article 8 of the Uniform Commercial Code, as the
same may be amended from time to time in the State of North Dakota, which in the
opinion of legal counsel for the Fund or of its own legal counsel protect it in
not requiring certain documents in connection with the transfer or redemption of
Shares. The Fund may authorize the Transfer Agent to waive the signature
guarantee in certain cases by Written Instructions.
For the purpose of the redemption of Shares which have been purchased
within 15 days of a redemption request, the Transfer Agent may *refuse to redeem
such Shares until the Transfer Agent has received fed funds for the purchase of
such Shares.
(b) Notice to Custodian and Fund. When Shares are redeemed, the
Transfer Agent shall, upon receipt of the instructions and documents in proper
form, deliver to the Custodian and the Fund a notification setting forth the
number of Shares to be redeemed. Such redemptions shall be reflected on
appropriate accounts maintained by the Transfer- Agent reflecting outstanding
Shares and Shares attributed to individual accounts and, if applicable, any
individual withdrawal or distribution plan.
(c) Payment of Redemption Proceeds. The Transfer Agent shall,
upon receipt of the moneys paid to it by the Custodian for the redemption of
Shares, pay to the Shareholder, or his authorized agent or legal representative,
such moneys as are received from the Custodian, all in accordance with the
redemption procedures described in the Prospectus; provided, however, that the
Transfer Agent shall pay the proceeds of any redemption of Shares purchased
within 15 days of a redemption request to the Transfer Agent upon a
determination that good funds have been collected for the purchase of such
Shares. The Fund shall indemnify the Transfer Agent for any payment of
redemption proceeds or refusal to make such payment if the payment or refusal to
pay is in accordance with this Section.
The Transfer Agent shall not process or effect any redemptions
pursuant to a plan of distribution or redemption or in accordance with any other
Shareholder request upon the receipt by the Transfer Agent of notification of
the suspension of the determination of the Fund net asset value.
7. Dividends.
(a) Notice to Transfer Agent and Custodian. Upon the
declaration of each dividend and each capital gains distribution by the Board of
Directors of the Fund with respect to Shares, the Fund shall furnish to the
Transfer Agent a copy of a resolution of its Board of Directors certified by the
Secretary setting forth with respect to the Shares the date of the declaration
of such dividend or distribution, the ex-dividend date, the date of payment
thereof, the record date as of which
14
<PAGE>
Shareholders entitled to payment shall be determined, the amount payable per
Share to the Shareholders of record as of that date, the total amount payable to
the Transfer Agent on the payment date, and whether such dividend or
distribution is to be paid in Shares at net asset value.
On or before the payment date specified in such resolution of the Board of
Directors, the Fund will cause the Custodian of the Fund to pay to the Transfer
Agent sufficient cash to make payment to the Shareholders of record as of such
payment date.
(b) Payment of Dividends by the Transfer Agent. The Transfer Agent will, on the
designated monthly payment date, automatically reinvest all dividends in
additional Shares at net asset value (determined on such date) and mall 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 change such
Shareholder account to a reinvestment account if so provided in the Prospectus.
(c) Insufficient Funds for Payments. If the Transfer Agent does not receive
sufficient cash from the Custodian to make total dividend and/or distribution
payments to all Shareholders of the Fund as of the record date, the Transfer
Agent will, upon notifying the Fund, withhold payment to all Shareholders of
record as of the record date until such sufficient cash is provided to the
Transfer Agent.
(d) Information Returns. It is understood that the Transfer Agent shall file
such appropriate information returns concerning the payment of dividends, return
of capital, and capital gain distributions with the proper federal, state, and
local authorities as are required by law to be filed and shall be responsible
for the withholding of taxes, if any, due on such dividends or distributions to
Shareholders when required to withhold taxes under applicable law.
15
<PAGE>
Exhibit 1
to
Schedule B
SUMMARY OF SERVICES
The services to be performed by the Transfer Agent shall be as follows:
A. DAILY RECORDS
Maintain daily on disc the following information with respect to each
Shareholder account as received:
Name and Address (Zip Code)
Balance of Shares held by Transfer Agent
State of residence code
Beneficial owner code: i.e., male, female, joint tenant,
etc.
Dividend code (reinvestment)
Number of Shares held in certificate form
B. OTHER DAILY ACTIVITY
Answer written inquiries relating to Shareholder accounts
(Matters relating to portfolio management, distribution of Shares, and other
management policy questions will be referred to the Fund.).
Furnish a Statement of Additional Information to any Shareholder
who requests (in writing or by telephone) such statement 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 taxpayer identification numbers.
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.
16
<PAGE>
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.
C. REPORTS PROVIDED TO THE FUND
Furnish the following reports to the Fund:
Daily financial totals
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; provide a "warning system" that
informs the Fund when sales of Shares in certain states are within a specified
percentage of the Shares registered in the state
D. DIVIDEND ACTIVITY
Calculate and process Share 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.
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 an out-of-pocket expense of the Transfer Agent.
17
<PAGE>
Prepare and submit to the Fund an Affidavit of Mailing. At the time of
the meeting, furnish a certified list of Shareholders, hard copy,
microfilm, or microfiche and, if requested by the Fund, Inspectors of
Election.
F. PERIODIC ACTIVITIES
Cause to be mailed reports, Prospectuses, and any other
enclosures requested by the Fund (Material must be adaptable to
mechanical equipment of Transfer Agent or its agents.)
18
<PAGE>
EXHIBIT 99.10
OPINION OF PRINGLE & HERIGSTAD, P. C.
<PAGE>
[LETTER HEAD APPEARS HERE]
October 12, 1994
INTEGRITY FUND OF FUNDS, INC.
201 SOUTH BROADWAY
MINOT, ND 58701
We have acted as special counsel to Integrity Fund of Funds, Inc. (the
"Company"), a corporation organized under the laws of the State of North Dakota,
in connection with the preparation and filing of a registration statement on
Form N-1A (the "Registration Statement") and a Notification of Registration on
Form N-8A covering the offer and sale of an indefinite number of shares of said
Company (all of said shares being of one class and having a par value of one
tenth of one mill ($.0001)).
We have examined copies of the Articles of Incorporation, the
Certificate of Incorporation, the Bylaws, the Registration Statement, all votes
of the Company's Board of Directors ("Board") at its initial meeting held on
August 19, 1994, consents of the Board, and other records and documents that we
have deemed necessary for the purpose of rendering this opinion. We have also
examined such other documents, papers, statutes, and authorities as we have
deemed necessary to form a basis for the opinion hereinafter expressed.
In our examination of said material, we have assumed the genuineness
of all signatures and the conformity to original documents of all copies
submitted to us. As to various questions of fact material to our opinion, we
have relied upon statements and certificates of officers and representatives of
the Company and others.
Based upon the foregoing, we are of the opinion that the shares, when
duly sold, issued, and paid for in accordance with the terms of the Prospectus
and the Statement of Additional Information included as a part of the
Registration Statement, will be validly and legally issued and will be fully
paid and non-assessable shares of Integrity Fund of Funds, Inc.
<PAGE>
Integrity Fund of Funds, Inc.
October 12, 1994
Page 2
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement, to the reference to us in the Prospectus included as a
part of the Registration Statement, and to the filing of this opinion as an
exhibit to any application made by or on behalf of the Company or any
distributor or dealer in connection with the registration or qualification of
the *Company, or the shares under the securities laws of any state or other
jurisdiction.
Thomas A. Wentz
kak
<PAGE>
EXHIBIT 99.11
CONSENT OF INDEPENDENT ACCOUNTANT
<PAGE>
[LETTERHEAD OF BRADY MARTZ]
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-effective Amendment No. 4 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated
February 10, 1997, relating to the financial statements and selected per share
data and ratios of Integrity Fund of Funds, Inc., which appears in such
Statement of Additional Information and to the incorporation by reference of our
report into the Prospectus which constitutes part of the Registration Statement.
We also consent to the reference to us under the heading "Accountant and Reports
to Shareholders" in such Statement of Additional Information and to the
reference to us under the heading "Financial Highlights" in the Prospectus and
on the back cover of the Prospectus.
/s/ Brady, Martz
BRADY, MARTZ & ASSOCIATES, P.C.
February 21, 1997
<PAGE>
EXHIBIT 99.13
FORM OF PURCHASE AGREEMENT
<PAGE>
PURCHASE AGREEMENT
Integrity Fund of Funds, Inc. (the "Fund"), a corporation organized under
the laws of the State of North Dakota which proposes to register under the
Investment Company Act of 1940, and ND Capital, Inc. ("Capital"), a corporation
organized under the laws of the State of North Dakota which proposes to act as
the Fund's principal underwriter, hereby agree as follows:
1. The Fund offers Capital and Capital hereby purchases 10,000 shares of
the Fund, par value $.0001 (the "Shares"), for $10 per Share for the aggregate
purchase price of $100,000.
2. Capital represents and warrants to the Fund that the Shares are being
acquired for investment purposes without any present intention of redeeming or
reselling them.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement this
19th day of August, 1994.
ND CAPITAL, INC.
By /Robert E. Walstad/
Robert E. Walstad
President
ATTEST:
/Peter A. Quist/
Peter A. Quist
Secretary
INTEGRITY FUND OF FUNDS, INC.
by /Robert E. Walstad/
Robert E. Walstad
President
ATTEST:
/Peter A. Quist/
Peter A. Quist
Secretary
