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Fund Advisor Buying Internet Service Provider

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ND Holdings, the fund management and distribution company based in Minot, N.D., has agreed to purchase a 50 percent stake in Magic Internet Services, an Internet service provider also headquartered in Minot. A new subsidiary called Magic Internet will be created to sell low-cost Internet services directly to individuals as well as other fund groups.

Although both parties declined to discuss specific details of the purchase arrangement, the deal will include cash and shares of publicly traded ND Holdings, said Joe Uhrmacher, Magic's co-owner. Uhrmacher and Steve Murphy, the other co-owner, will remain stockholders. Uhrmacher will spend the next two years working full time for the new company.

The deal allows the fund advisor, with $380 million under management in two predominantly fixed-income fund groups, to expand its menu of product offerings. ND Holdings, in addition to managing fund assets through two of its subsidiaries, has, for the past 18 months, been marketing the firm's proprietary transfer agency, fund accounting and back-office administration systems to other, mostly small, mutual fund groups through another subsidiary, ND Resources.

The addition of Internet service connections will allow for broader service offerings to clients, said Robert Walstad, president and founder of ND Holdings. The firm plans to make low-cost Internet services available to both broker/dealers of and investors in its two fund groups as well as to its fund administration clients. Services will run the gamut from account access to reporting to affording access to the EDGAR database.

The capital infusion from ND Holdings will allow Magic Internet Services, which is four years old, to expand beyond its Mid-western client base and to sell its Internet services through a new channel.

"We want to stretch our arms across the nation to provide a reliable source to the Internet for fund companies," said Uhrmacher of Magic. Magic promotes itself as "the" low cost Internet service provider. It offers a choice of six levels of online services, web design, custom programming and even domain name registration. Although prices vary by services, Magic's standard service is $14.95 per month. Magic currently provides Internet service to 3,400 clients.

ND Holdings chose to purchase a stake in an Internet service provider rather than hire a vendor or form an alliance in order to maintain control of the Internet service, said Walstad.

ND Holdings anticipates announcing the availability of direct online Internet access soon. Once it does, it hopes to convince fund investors that receiving statements online is quicker and saves money. ND Holdings also is considering offering an online mutual fund trading capability that will allow investors to buy and sell various mutual funds on the Internet, including its own two fund groups which are already offered online through Jack White.

ND Holdings was created 12 years ago and is the parent holding company for a handful of firms. Its money management arm, which introduced its first fund in early 1989, manages three single-state municipal funds in North Dakota, South Dakota and Montana. It also manages one equity fund of funds, the $21 million Integrity Fund of Funds which invests in other growth mutual funds including MFS, AIM, American Funds and Mutual Series.

ND Holdings also manages four single-state muni funds under the Ranson Managed Portfolios name through its Ranson Capital Management investment advisory and broker/dealer subsidiary. Three of the four Ranson funds were purchased by ND Holdings in January 1996 for $6.2 million. The fourth fund, The Oklahoma Municipal Fund, was created in September 1996.

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