
[Federal Register: August 31, 2010 (Volume 75, Number 168)]
[Notices]               
[Page 53355-53357]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr31au10-120]                         

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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 29399; File No. 812-13763]

 
The Integrity Funds, et al.; Notice of Application

August 25, 2010.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of an application under section 6(c) of the Investment 
Company Act of 1940 (the ``Act'') for an exemption from section 15(a) 
of the Act and rule 18f-2 under the Act.

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SUMMARY: Summary of Application: The requested order would permit 
certain registered open-end management investment companies to enter 
into and materially amend subadvisory agreements without shareholder 
approval.

Applicants: The Integrity Funds (``Integrity Funds''), Integrity 
Managed Portfolios (``Managed Portfolios''), Integrity Fund of Funds, 
Inc. (``Fund of Funds''), Viking Mutual Funds (``Viking Funds'') (each, 
a ``Mutual Fund'' and collectively, the ``Mutual Funds''), and Viking 
Fund Management, LLC (the ``Adviser'').

DATES: Filing Dates: The application was filed on March 30, 2010, and 
amended on August 10, 2010.

Hearing or Notification of Hearing: An order granting the application 
will be issued unless the Commission orders a hearing. Interested 
persons may request a hearing by writing to the Commission's Secretary 
and serving applicants with a copy of the request, personally or by 
mail. Hearing requests should be received by the Commission by 5:30 
p.m. on September 20, 2010 and should be accompanied by proof of 
service on applicants, in the form of an affidavit or, for lawyers, a 
certificate of service. Hearing requests should state the nature of the 
writer's interest, the reasons for the request, and the issues 
contested. Persons who wish to be notified of a hearing may request 
notification by writing to the Commission's Secretary.

ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F 
Street, NE., Washington, DC 20549-1090. Applicants, Viking Fund 
Management, LLC, 1 Main Street North, Minot, North Dakota 58703.

FOR FURTHER INFORMATION CONTACT: Keith A. Gregory, Senior Counsel at 
(202) 551-6815, or Mary Kay Frech, Branch Chief, at (202) 551-6821 
(Division of Investment Management, Office of Investment Company 
Regulation).

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application may be obtained via the 
Commission's Web site by searching for the file number, or an applicant 
using the Company name box, at http://www.sec.gov/search/search.htm or 
by calling (202) 551-8090.

Applicants' Representations

    1. Each Mutual Fund is registered under the Act as an open-end 
management investment company. Integrity Funds is organized as a 
Delaware statutory trust and currently offers three series (each, a 
``Fund'' and collectively, the ``Funds''), each with its own distinct 
investment objectives, policies and restrictions. Managed Portfolios is 
organized as a Massachusetts business trust and

[[Page 53356]]

currently offers six Funds, each with its own distinct investment 
objectives, policies and restrictions. Fund of Funds is organized as a 
North Dakota corporation and currently does not operate as a series 
company (included in the term ``Funds''). Viking Funds is organized as 
a Delaware statutory trust and currently offers four Funds, each with 
its own distinct investment objectives, policies and restrictions.\1\
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    \1\ Applicants also request relief with respect to future Funds 
and any other existing or future registered open-end management 
investment company or series thereof that: (a) Is advised by the 
Adviser or any entity controlling, controlled by, or under common 
control with the Adviser (included in the term ``Adviser''); (b) 
uses the manager of managers structure described in the application; 
and (c) complies with the terms and conditions of the application 
(included in the term ``Funds''). The only existing registered open-
end management investment companies that currently intend to rely on 
the requested order are named as applicants. If the name of any Fund 
contains the name of a Subadviser (as defined below), the name of 
the Adviser will precede the name of the Subadviser.
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    2. The Adviser, a North Dakota limited liability company, is 
registered as an investment adviser under the Investment Advisers Act 
of 1940 (``Advisers Act''). The Adviser is a wholly-owned subsidiary of 
Corridor Investors, LLC. The Adviser serves as investment adviser to 
each Fund under an investment advisory agreement (each, an ``Advisory 
Agreement'') that has been approved by the shareholders of each Fund 
and by the board of directors or trustees of the Mutual Funds 
(``Board''), including a majority of the directors or trustees who are 
not ``interested persons,'' as defined in section 2(a)(19) of the Act, 
of a Mutual Fund, the Adviser, or the Subadvisers (``Independent Board 
Members'').\2\
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    \2\ Under a prior order, the Commission granted relief to The 
Integrity Funds and Integrity Money Management, Inc., a wholly owned 
subsidiary of Integrity Mutual Funds, Inc. (``Integrity Mutual 
Funds'') from the provisions of section 15(a) of the Act and rule 
18f-2 under the Act similar to that requested in the Application. 
The Integrity Funds, et al., Investment Company Act Release Nos. 
27144 (Nov. 10, 2005)(notice) and 27180 (Dec. 6, 2005)(order). On 
July 31, 2009, Integrity Mutual Funds generally sold its mutual fund 
services business to Corridor and the Adviser. In 2009, the existing 
shareholders of the Funds approved the Advisory Agreements, the 
existing Subadvisory Agreements and the manager of managers 
structure.
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    3. Under the terms of each Fund's Advisory Agreement, the Adviser 
provides a continuous investment program for the Fund consistent with 
the investment objectives, policies and limitations of the Fund. For 
its services, the Adviser receives a fee from each Fund specified in 
the relevant Advisory Agreement. Under each Advisory Agreement, the 
Adviser may enter into investment subadvisory agreements with one or 
more subadvisers (``Subadvisers'') who have discretionary authority to 
invest all or a portion of the Fund's assets pursuant to a separate 
subadvisory agreement (``Subadvisory Agreement''). The Adviser will 
evaluate, allocate assets to, and oversee Subadvisers, and recommend to 
the Board their hiring, termination and replacement. Each Subadviser is 
or will be an investment adviser registered under the Advisers Act. For 
its services to a Fund, the Adviser pays each Subadviser a monthly fee 
out of the fee paid to the Adviser by the Fund.
    4. Applicants request an order to permit the Adviser, subject to 
Board approval, to enter into and materially amend Subadvisory 
Agreements without obtaining shareholder approval. The requested relief 
will not extend to any Subadviser who is an affiliated person, as 
defined in section 2(a)(3) of the Act, of a Fund or the Adviser (other 
than by reason of serving as a Subadviser to one or more of the Funds) 
(``Affiliated Subadviser'').

Applicants' Legal Analysis

    1. Section 15(a) of the Act provides, in relevant part, that it is 
unlawful for any person to act as an investment adviser to a registered 
investment company except pursuant to a written contract that has been 
approved by the vote of a majority of the company's outstanding voting 
securities. Rule 18f-2 under the Act provides that each series or class 
of stock in a series company affected by a matter must approve such 
matter if the Act requires shareholder approval.
    2. Section 6(c) of the Act provides that the Commission may exempt 
any person, security, or transaction or any class or classes of 
persons, securities, or transactions from any provision of the Act, or 
from any rule thereunder, if and to the extent that such exemption is 
necessary or appropriate in the public interest and consistent with the 
protection of investors and the purposes fairly intended by the policy 
and provisions of the Act. Applicants believe that the requested relief 
meets this standard for the reasons discussed below.
    3. Applicants state that the shareholders rely on the Adviser's 
experience to select one or more Subadvisers best suited to achieve the 
Fund's investment objectives. Applicants assert that, from the 
perspective of the investor, the role of the Subadvisers is 
substantially equivalent to that of the individual portfolio managers 
employed by traditional investment company advisory firms. Applicants 
contend that requiring shareholder approval of Subadvisory Agreements 
would impose costs and unnecessary delays on the Funds and may preclude 
the Adviser and the Board from acting promptly when a change in 
Subadvisers would benefit a Fund. Applicants note that each Advisory 
Agreement and any Subadvisory Agreement with an Affiliated Subadviser 
will remain subject to the shareholder approval requirements of section 
15(a) and rule 18f-2 under the Act.

Applicants' Conditions

    Applicants agree that any order granting the requested relief shall 
be subject to the following conditions:
    1. Before a Fund may rely on the order requested in the 
application, the operation of the Fund in the manner described in the 
application will be approved by a majority of the Fund's outstanding 
voting securities, as defined in the Act, or in the case of a Fund 
whose public shareholders purchase shares on the basis of a prospectus 
containing the disclosure contemplated by condition 2 below, by the 
initial shareholder(s) before offering shares of that Fund to the 
public.
    2. Each Fund that relies on the requested order will disclose in 
its prospectus the existence, substance, and effect of any order 
granted pursuant to the application. In addition, each Fund will hold 
itself out to the public as employing the manager of managers structure 
described in the application. The prospectus will prominently disclose 
that the Adviser has the ultimate responsibility (subject to oversight 
by the Board) to oversee the Subadvisers and to recommend their hiring, 
termination and replacement.
    3. At all times, at least a majority of the Board will be 
Independent Board Members, and the nomination of new or additional 
Independent Board Members will be placed within the discretion of the 
then-existing Independent Board Members.
    4. The Adviser will not enter into a Subadvisory Agreement with any 
Affiliated Subadviser without that agreement, including the 
compensation to be paid thereunder, being approved by the shareholders 
of the applicable Fund.
    5. When a Subadviser change is proposed for a Fund with an 
Affiliated Subadviser, the Board, including a majority of the 
Independent Board Members, will make a separate finding, reflected in 
the Board minutes, that the change is in the best interests of the Fund 
and its shareholders and does not involve a conflict of interest from 
which the Adviser or the Affiliated Subadviser derives an inappropriate 
advantage.

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    6. Within 90 days of the hiring of any new Subadviser, shareholders 
of the affected Fund will be furnished all information about the new 
Subadviser that would be included in a proxy statement. To meet this 
condition, each affected Fund will provide shareholders with an 
information statement meeting the requirements of Regulation 14C, 
Schedule 14C and Item 22 of Schedule 14A under the 1934 Act.
    7. The Adviser will provide general management services to each 
Fund, including overall supervisory responsibility for the general 
management and investment of each Fund's assets, and, subject to the 
review and approval by the Board, will: (i) Set each Fund's overall 
investment strategies; (ii) evaluate, select and recommend Subadvisers 
to manage all or part of each Fund's assets; (iii) when appropriate, 
allocate and reallocate each applicable Fund's assets among multiple 
Subadvisers; (iv) monitor and evaluate the performance of Subadvisers; 
and (v) implement procedures reasonably designed to ensure that the 
Subadvisers comply with each Fund's investment objective, policies and 
restrictions.
    8. No Board Member or officer of a Mutual Fund, or director or 
officer of the Adviser will own directly or indirectly (other than 
through a pooled investment vehicle that is not controlled by such 
person), any interest in a Subadviser except for: (i) Ownership of 
interests in the Adviser or any entity that controls, is controlled by, 
or under common control with the Adviser; or (ii) ownership of less 
than 1% of the outstanding securities of any class of equity or debt of 
a publicly-traded company that is either a Subadviser or an entity that 
controls, is controlled by, or is under common control with a 
Subadviser.
    9. In the event that the Commission adopts a rule under the Act 
providing substantially similar relief to that in the order requested 
in the application, the requested order will expire on the effective 
date of that rule.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-21625 Filed 8-30-10; 8:45 am]
BILLING CODE 8010-01-P

