THE INTEGRITY FUNDS
ON BEHALF OF
INTEGRITY VALUE FUND
INVESTMENT ADVISORY AGREEMENT
AGREEMENT, effective commencing on September 3, 2003, between Integrity
Money Management, Inc., (the "Adviser") and The Integrity Funds (the "Trust")
on behalf of Integrity Value Fund (the "Fund").
WHEREAS, the Trust is a Delaware statutory trust of the series type
organized under a Certificate of Trust, and is registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as an open-end, diversified
management investment company, and the Fund is a new series of the Trust;
WHEREAS, the Trust wishes to retain the Adviser to render investment
advisory services to the Fund, and the Adviser is willing to furnish such
services to the Fund;
WHEREAS, the Adviser is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended ("Advisers Act");
NOW THEREFORE, in consideration of the promises and mutual covenants herein
contained, it is agreed between the Trust and the Adviser as follows:
1. 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.
2. 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.
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. 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.
The Adviser further agrees that, in performing its duties hereunder, it
will:
a. 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;
b. 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;
c. 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;
d. furnish to the Trust, or to the Fund's administrator, Integrity Fund
Services, Inc., ("Administrator") if so directed, whatever statistical
information the Trust 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;
e. 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;
f. 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
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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 therein, and of any statement
contained therein that becomes untrue in any material respect;
g. in making investment decisions for the Fund, use no inside information
that may be in its possession or in the possession of any of its affiliates,
nor will the Adviser seek to obtain any such information.
3. 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.
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
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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.
4. 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 1.00% 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.
5. 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.
6. Standard of Care and Limitation of Liability. The Adviser shall
exercise its best judgment in rendering the services provided by it under this
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Agreement. The Adviser shall not be liable 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.
7. 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 Trustees, officers 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.
8. 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).
9. 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
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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.
10. 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.
11. 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."
12. Miscellaneous.
a. 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.
b. 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.
c. 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. Nothing herein shall be construed as constituting the Adviser as an
agent of the Trust or the Fund.
e. The names "The Intergrity 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.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of September 3, 2003.
THE INTEGRITY FUNDS
By: /s/Xxxxxx X. Xxxxxxx
--------------------
President
INTEGRITY MONEY MANAGEMENT, INC.
By: /s/Xxxxxx X. Xxxxxxx
--------------------
President
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