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1.
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Appointment. The Trust hereby appoints the Adviser
to act as investment adviser to the Fund for the periods and on the terms set
forth in this Agreement. The Adviser accepts such appointment and agrees to
furnish the services herein set forth, for the compensation herein provided.
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2.
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Investment Advisory Duties; Authority to Delegate to Sub-Adviser. Subject
to the supervision of the Trustees of the Trust, the Adviser will (a) provide
a program of continuous investment management for the Fund in accordance with
the Fund's investment objectives, policies and limitations as stated in the
Fund's prospectus and Statement of Additional Information included as part of
the Trust's Registration Statement filed with the Securities and Exchange
Commission, as they may be amended from time to time, copies of which shall
be provided to the Adviser by the Trust; (b) make investment decisions for
the Fund; and (c) place orders to purchase and sell securities for the Fund. The
Adviser is authorized, at its own expense, to delegate to a sub-adviser such
of its responsibilities hereunder as may be specified in an agreement with
such sub-adviser, subject to such approvals by the Trustees and shareholders
of the Fund as are required by the 1940 Act. In the event the Adviser does so
delegate to a sub-adviser, the Adviser is further responsible for supervising
the activities and performance of the sub-adviser, for taking reasonable
steps to assure that the sub-adviser complies with the Fund's investment
policies and procedures and with applicable legal requirements, and for
reporting to the Trustees regarding these matters.
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In performing its investment management services to the Fund hereunder, the
Adviser will provide the Fund with ongoing investment guidance and policy
direction, including oral and written research, analysis, advice, statistical
and economic data and judgments regarding individual investments, general
economic conditions and trends and long-range investment policy. Subject to
the Fund's investment objective and policies, the Adviser will determine the
securities, instruments, repurchase agreements, options and other investments
and techniques that the Fund will purchase, sell, enter into or use, and will
provide an ongoing evaluation of the Fund's portfolio. The Adviser will
determine what portion of the Fund's portfolio shall be invested in
securities and other assets, and what portion if any, should be held
uninvested.
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The Adviser further agrees that, in performing its duties hereunder, it will:
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a.
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comply with the 1940 Act and all rules and regulations thereunder, the
Advisers Act, the Internal Revenue Code (the "Code") and all other applicable
federal and state laws and regulations, and with any applicable procedures
adopted by the Trustees;
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b.
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use reasonable efforts to manage the Fund so that it will qualify, and
continue to qualify, as a regulated investment company under Subchapter M of
the Code and regulations issued thereunder;
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c.
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place orders pursuant to its investment determinations for the Fund directly
with the issuer, or with any broker or dealer, in accordance with applicable
policies expressed in the Fund's prospectus and/or Statement of Additional
Information and in accordance with applicable legal requirements;
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d.
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furnish to the Trust, or to the Fund's administrator, Integrity Fund
Services, Inc., ("Administrator") if so directed, whatever statistical
information the Trust or Administrator may reasonably request with respect to
the Fund's assets or contemplated investments. In addition, the Adviser will
keep the Trust and the Trustees informed of developments materially affecting
the Fund's portfolio and shall, on the Adviser's own initiative, furnish to
the Trust from time to time whatever information the Adviser believes
appropriate for this purpose;
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e.
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make available to the Administrator, and the Trust, promptly upon their request,
such copies of its investment records and ledgers with respect to the Fund as
may be required to assist the Administrator and the Trust in their compliance
with applicable laws and regulations. The Adviser will furnish the Trustees
with such periodic and special reports regarding the Fund as they may
reasonably request;
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f.
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immediately notify the Trust in the event that the Adviser or any of its
affiliates: (1) becomes aware that it is subject to a statutory
disqualification that prevents the Adviser from serving as investment adviser
pursuant to this Agreement; or (2) becomes aware that it is the subject of an
administrative proceeding or enforcement action by the Securities and
Exchange Commission ("SEC") or other regulatory authority. The Adviser
further agrees to notify the Trust immediately of any material fact known to
the Adviser respecting or relating to the Adviser that is not contained in
the Trust's Registration Statement regarding the Fund, or any amendment or
supplement thereto, but that is required to be disclosed thereon, and of any
statement contained therein that becomes untrue in any material respect;
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g.
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in making investment decisions for the Fund, use no inside information that
may be in its possession, nor will the Adviser seek to obtain any such
information.
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3.
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Allocation of Charges and Expenses. Except as otherwise specifically
provided in this section 3, the Adviser shall pay the compensation and
expenses of all its directors, officers and employees who serve as officers
and executive employees of the Trust or Fund (including the Trust's or Fund's
share of payroll taxes), and the Adviser shall make available, without
expense to the Fund, the service of its directors, officers and employees who
may be duly elected officers of the Trust, subject to their individual
consent to serve and to any limitations imposed by law. The Adviser shall
also pay the fees of any sub-adviser.
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The Adviser shall not be required to pay any expenses of the Fund or Trust
other than those specifically allocated to the Adviser in this section 3. In
particular, but without limiting the generality of the foregoing, the Adviser
shall not be responsible, except to the extent of the reasonable compensation
of such of the Trust's or Fund's employees as are officers or employees of
the Adviser whose services may be involved, for any expenses of other series
of the Trust or for the following expenses of the Fund or Trust: organization
and certain offering expenses of the Fund (including out-of-pocket expenses,
but not including the Adviser's overhead and employee costs); fees payable to
the Adviser and to any other Fund advisers or consultants; legal expenses;
auditing and accounting expenses; interest expenses; telephone, telex,
facsimile, postage and other communications expenses; taxes and governmental
fees; fees, dues and expenses incurred by or with respect to the Fund in
connection with membership in investment company trade organizations; cost of
insurance relating to fidelity coverage for the Trust's officers and
employees; fees and expenses of the Fund's Administrator or of any custodian,
subcustodian, transfer agent, fund accounting agent, registrar, or dividend
disbursing agent of the Fund; payments for portfolio pricing or valuation
services to pricing agents, accountants, bankers and other specialists, if
any; expenses of preparing share certificates, if any; other expenses in
connection with the issuance, offering, distribution or sale of securities
issued by the Fund; expenses relating to investor and public relations;
expenses of registering shares of the Fund for sale and of compliance with
applicable state notice filing requirements; freight, insurance and other
charges in connection with the shipment of the Fund's portfolio securities;
brokerage commissions or other costs of acquiring or disposing of any
portfolio securities or other assets of the Fund, or of entering into other
transactions or engaging in any investment practices with respect to the
Fund; expenses of printing and distributing prospectuses, Statements of
Additional Information, reports, notices and dividends to shareholders; costs
of stationery or other office supplies; any litigation expenses; costs of
shareholders' and other meetings; the compensation and all expenses (specifically
including travel expenses relating to the Fund's business) of officers,
Trustees and employees of the Trust who are not interested persons of the
Adviser; and travel expenses (or an appropriate portion thereof) of officers
or Trustees of the Trust who are officers, Trustees or employees of the
Adviser to the extent that such expenses relate to attendance at meetings of
the Board of Trustees of the Trust with respect to matters concerning the
Fund, or any committees thereof or advisers thereto.
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4.
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Compensation. As compensation for the services provided and expenses
assumed by the Adviser under this Agreement, the Trust will arrange for the
Fund to pay the Adviser at the end of each calendar month an advisory fee
computed daily at an annual rate equal to 50 basis points (0.50%) of the
Fund's average daily net assets. The "average daily net assets" of the Fund
shall mean the average of the values placed on the Fund's net assets as of
4:00 p.m. (Eastern time) on each day on which the net asset value of the Fund
is determined consistent with the provisions of Rule 22c-1 under the
1940 Act or, if the Fund lawfully determines the value of its net assets as
of some other time on each business day, as of such other time. The value of
net assets of the Fund shall always be determined pursuant to the applicable
provisions of the Declaration of Trust and the Registration Statement. If,
pursuant to such provisions, the determination of net asset value is
suspended for any particular business day, then for the purposes of this
section 4, the value of the net assets of the Fund as last determined shall
be deemed to be the value of its net assets as of the close of the New York
Stock Exchange, or as of such other time as the value of the net assets of
the Fund's portfolio may lawfully be determined, on that day. If the
determination of the net asset value of the shares of the Fund has been so
suspended for a period including any month end when the Adviser's
compensation is payable pursuant to this section, then the Adviser's
compensation payable at the end of such month shall be computed on the basis
of the value of the net assets of the Fund as last determined (whether during
or prior to such month). If the Fund determines the value of the net assets
of its portfolio more than once on any day, then the last such determination
thereof on that day shall be deemed to be the sole determination thereof on
that day for the purposes of this section 4.
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5.
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Books and Records. The Adviser agrees to maintain such books and
records with respect to its services to the Fund as are required by Section
31 under the 1940 Act, and rules adopted thereunder, and by other applicable
legal provisions, and to preserve such records for the periods and in the
manner required by that Section, and those rules and legal provisions. The
Adviser also agrees that records it maintains and preserves pursuant to Rules
31a-1 and Rule 31a-2 under the 1940 Act and otherwise in connection with its
services hereunder are the property of the Trust and will be surrendered
promptly to the Trust upon its request. And the Adviser further agrees that
it will furnish to regulatory authorities having the requisite authority any
information or reports in connection with its services hereunder which may be
requested in order to determine whether the operations of the Fund are being
conducted in accordance with applicable laws and regulations.
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6.
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Standard of Care and Limitation of Liability. The Adviser shall
exercise its best judgment in rendering the services provided by it under
this Agreement. The Adviser shall not be liable to the Adviser, the Trust,
the Fund or to any holder of the Fund's shares, for any error of judgment or
mistake of law or for any loss suffered by the Fund or the holders of the
Fund's shares in connection with the matters to which this Agreement relates,
provided that nothing in this Agreement shall be deemed to protect or purport
to protect the Adviser against any liability to the Trust, the Fund or to
holders of the Fund's shares 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. As used in this
Section 6, the term "Adviser" shall include any officers, directors,
employees or other affiliates of the Adviser performing services with respect
to the Fund.
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7.
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Services Not Exclusive. It is understood that the services of the
Adviser are not exclusive, and that nothing in this Agreement shall prevent
the Adviser from providing similar services to other investment companies or
to other series of investment companies, including the Trust (whether or not
their investment objectives and policies are similar to those of the Fund) or
from engaging in other activities, provided such other services and
activities do not, during the term of this Agreement, interfere in a material
manner with the Adviser's ability to meet its obligations to the Fund
hereunder. When the Adviser recommends the purchase or sale of a security for
other investment companies and other clients, and at the same time the
Adviser recommends the purchase or sale of the same security for the Fund, it
is understood that in light of its fiduciary duty to the Fund, such
transactions will be executed on a basis that is fair and equitable to the
Fund. In connection with purchases or sales of portfolio securities for the
account of the Fund, neither the Adviser nor any of its directors or officers
(or persons acting in similar capacities) or employees shall act as a
principal or agent or receive any commission. If the Adviser provides any
advice to its clients concerning the shares of the Fund, the Adviser shall
act solely as investment counsel for such clients and not in any way on
behalf of the Trust or the Fund.
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8.
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Duration and Termination. This Agreement shall continue until
September 2, 2005, and thereafter shall continue automatically for successive
annual periods, provided such continuance is specifically approved at least
annually by (i) the Trustees or (ii) a vote of a "majority" (as defined in
the 0000 Xxx) of the Fund's outstanding voting securities (as defined in the
1940 Act), provided that in either event the continuance is also approved by
a majority of the Trustees who are not parties to this Agreement or
"interested persons" (as defined in the 0000 Xxx) of any party to this
Agreement, by vote cast in person at a meeting called for the purpose of
voting on such approval. Notwithstanding the foregoing, this Agreement may be
terminated: (a) at any time without penalty by the Fund upon the vote of a
majority of the Trustees or by vote of the majority of the Fund's outstanding
voting securities, upon sixty (60) days' written notice to the adviser or (b)
by the Adviser at any time without penalty, upon sixty (60) days' written
notice to the Trust. This Agreement will also terminate automatically in the
event of its assignment (as defined in the 1940 Act).
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9.
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Amendments. No provision of this Agreement may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed
by the party against which enforcement of the change, waiver, discharge or
termination is sought, and no amendment of this Agreement shall be effective
until approved by an affirmative vote of (i) a majority of the outstanding
voting securities of the Fund, and (ii) a majority of the Trustees, including
a majority of Trustees who are not interested persons of any party to this
Agreement, cast in person at a meeting called for the purpose of voting on
such approval, if such approval is required by applicable law.
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10.
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Proxies. Unless the Trust gives written instructions to the contrary,
the Adviser shall vote all proxies solicited by or with respect to the
issuers of securities in which assets of the Fund may be invested. The
Adviser shall use its best good faith judgment to vote such proxies in a
manner which best serves the interests of the Fund's shareholders.
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11.
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Name Reservation. The Trust acknowledges and agrees that the Adviser
has property rights relating to the use of the term "Integrity" and has
permitted the use of such term by the Trust and the Fund. The Trust agrees
that, unless otherwise authorized by the Adviser: (i) it will use the term
"Integrity" only as a component of the name of the Fund and for no other
purposes; (ii) it will not purport to grant to any third party any rights in
such name; (iii) at the request of the Adviser, the Trust will take such
action as may be required to provide its consent to use of the term by the
Adviser, or any affiliate of the Adviser to whom the Adviser shall have
granted the right to such use; and (iv) the Adviser may use or grant to
others the right to use the term, or any abbreviation thereof, as all or a
portion of a corporate or business name or for any commercial purpose,
including a grant of such right to any other investment company. Upon
termination of this Agreement, the Trust shall, upon request of the Adviser,
cease to use the term "Integrity" as part of the name of the Fund, or in
connection with the Trust or any series of the Trust. In the event of any
such request by the Adviser that use of the term "Integrity" shall cease, the
Trust shall cause its officers, directors and shareholders to take any and
all such actions which the Adviser may request to effect such request and to
reconvey to the Adviser any and all rights to the term "Integrity."
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12.
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Miscellaneous.
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a.
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This Agreement shall be governed by the laws of the State of North Dakota,
provided that nothing herein shall be construed in a manner inconsistent with
the 1940 Act, the Advisers Act, or rules or orders of the SEC thereunder.
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b.
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The captions of this Agreement are included for convenience only and in no
way define or limit any of the provisions hereof or otherwise affect their
construction or effect.
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c.
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If any provision of this Agreement shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement shall
not be affected hereby and, to this extent, the provisions of this Agreement
shall be deemed to be severable.
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d.
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Nothing herein shall be construed as constituting the Adviser as an agent of
the Trust or the Fund.
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e.
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The names "The Integrity Funds" and "Trustees of The Integrity Funds" refer
respectively to the Trust created and the Trustees, as trustees but not
individually or personally, acting from time to time under a Declaration of
Trust and Certificate of Trust dated February 9, 1998, to which reference is
hereby made and a copy of such Certificate of Trust is on file at the office
of the Secretary of State of the State of Delaware and elsewhere as required
by law, and to any and all amendments thereto so filed or hereafter filed. The
obligations of "The Integrity Funds" entered into in the name or on behalf
thereof, or in the name or on behalf of any series or class of shares of the
Trust, by any of the Trustees, representatives or agents are made not
individually, but in such capacities, and are not binding upon any of the
Trustees, shareholders or representatives of the Trust personally, but bind
only the assets of the Trust, and all persons dealing with any series or
class of shares of the Trust must look solely to the assets of the Trust
belonging to such series or class for the enforcement of any claims against
the Trust.
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