<PAGE>
SCHEDULE OF INVESTMENTS June 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
NAME OF ISSUER
Percentages represent the market value
of each investment category to total
net assets QUANTITY MARKET VALUE
- -----------------------------------------------------------------
<S> <C> <C>
MUTUAL FUNDS (98.1%)
AIM Constellation Fund A 34,745 $ 870,019
AIM Value Fund A 18,485 521,660
American Fundamental Investors Fund 28,907 679,043
American Washington Mutual Investors 20,010 465,039
Berger One Hundred Fund 16,603 319,110
Brandywine Fund 7,290 225,874
Dodge & Cox Stock Fund 7,143 526,246
Founders Growth Fund 27,528 457,806
Mutual Qualified Fund 13,524 425,881
Mutual Beacon Fund 11,257 432,954
Neuberger & Berman Guardian Fund 17,409 417,477
New York Venture Fund A 68,488 1,073,902
Putnam Growth & Income Fund A 14,544 253,954
Putnam Vista Fund A 60,296 645,777
Putnam Voyager Fund A 25,414 433,316
T. Rowe Price New America Growth 11,423 456,711
SAFECO Equity Fund 25,166 426,323
Twentieth Century Ultra Investors Fund 15,297 434,130
Vanguard\PRIMECAP Fund 5,778 163,824
---------------
TOTAL MUTUAL FUNDS (COST: $8,636,411) $9,229,046
SHORT-TERM SECURITIES (1.8%)
Federated Money Market Trust #092
(COST: $164,937) 164,937
---------------
TOTAL INVESTMENTS IN SECURITIES
(COST: $8,801,348) $9,393,983
===============
</TABLE>
<PAGE>
FINANCIAL STATEMENTS June 30, 1996 (Unaudited)
STATEMENT OF ASSETS AND LIABILITIES June 30, 1996 (Unaudited)
- --------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Investments in securities, at $ 9,393,983
value (cost: $8,801,348)
Accrued dividends receivable 4,489
Receivable for fund shares sold 34,988
------------
Total Assets $ 9,433,460
------------
LIABILITIES
Payable for fund shares redeemed $ 5,449
Accrued expenses 15,372
------------
Total Liabilities $ 20,821
------------
NET ASSETS $ 9,412,639
============
Net asset value per share, 731,239
shares outstanding $ 12.87
============
STATEMENT OF OPERATIONS for the six months ended June 30, 1996 (Unaudited)
- --------------------------------------------------------------------------
INVESTMENT INCOME
Dividends $ 40,453
-----------
Total Investment Income $ 40,453
-----------
EXPENSES
Investment advisory fees $ 33,398
Custodian fees 696
Transfer agent fees 6,262
Accounting service fees 13,884
Audit and legal fees 4,620
Service fees 9,227
Insurance 3,534
Printing and postage 3,234
License, fees, and registrations 12,342
Amortization of organization costs 1,806
-----------
Total expenses $ 89,003
Less expenses waived or absorbed
by the Fund's manager 29,629
-----------
Total Net Expenses $ 59,374
-----------
NET INVESTMENT INCOME (LOSS) $ (18,921)
-----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FUTURES
<S> <C>
Net realized gain (loss) from:
Investment transactions $ 55,858
Futures transactions 103,073
Net change in unrealized
appreciation (depreciation) of
investments 497,510
---------
Net realized and unrealized
gain (loss) on investments $ 656,441
---------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $ 637,520
=========
</TABLE>
<PAGE>
FINANCIAL STATEMENTS June 30 1996
STATEMENT OF CHANGES IN NET ASSETS for the six months ended June 30, 1996 and
year ended December 31, 1995
<TABLE>
<CAPTION>
For the Six
Months Ended For the Year
June 30, 1996 Ended
(Unaudited) December 31, 1995
---------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS
Net investment income (loss) $ (18,921) $ 81,145
Net realized gain (loss) on
investment and futures
transactions 158,931 200,660
Net unrealized appreciation
(depreciation) on investments 497,510 95,125
---------------------------------------
Net Increase (Decrease) in Net
Assets Resulting From
Operations $ 637,520 $ 376,930
---------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS
Dividends from net investment
income $ 0 $ (81,145)
Distributions from net realized
gain on investment and
futures transactions 0 (200,660)
---------------------------------------
Total Dividends and
Distributions $ 0 $ (281,805)
---------------------------------------
CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares $4,678,460 $4,439,852
Proceeds from reinvested dividends 249,907
Cost of shares redeemed (515,075) (173,150)
---------------------------------------
Net Increase (Decrease) in Net
Assets Resulting From
Capital Share Transactions $4,413,292 $4,266,702
---------------------------------------
TOTAL INCREASE IN NET ASSETS $5,050,812 $4,361,827
NET ASSETS, BEGINNING OF PERIOD 4,361,827 0
---------------------------------------
NET ASSETS, END OF PERIOD $9,412,639 $4,361,827
=======================================
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS June 30, 1996 (Unaudited)
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 Funds 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 AND OPTIONS - The Fund may purchase and sell
financial futures and option 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
<PAGE>
value of the underlying index. Daily fluctuations in value are recorded
for financial reporting purposes as unrealized gains or losses by the
Fund. 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.
Certain risks may arise upon entering into futures contracts and
options. These risks may include changes in the value of the futures
contracts or options 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.
Note 3. CAPITAL SHARE TRANSACTIONS
As of June 30, 1996, there were 1,000,000,000 shares of $.0001 par
value authorized; 731,239 and 370,749 shares were outstanding at June
30, 1996 and December 31, 1995, respectively. Transactions in capital
shares were as follows:
<TABLE>
<CAPTION>
Shares Amount
------ ------
For The Six For The Six
Months For The Year Months For The Year
Ended Ended Ended Ended
June 30, 1996 December 31, 1995 June 30, 1996 December 31, 1995
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 379,719 385,088 4,678,460 $4,439,852
Shares issued on reinvestment
of dividends 21,251 0 249,907 0
Shares redeemed (40,480) (14,339) (515,075) (173,150)
-----------------------------------------------------------------------------------------
Net increase 360,490 370,749 4,413,292 $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 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
$33,398 of investment advisory fees for the six months ended June 30,
1996. The Fund has a payable to ND Money Management, Inc. of $6,537
at June 30, 1996 for investment
<PAGE>
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 $9,277 of service fees
for the six months ended June 30, 1996. The Fund has a payable to ND
Capital, Inc. of $1,816 at June 30, 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
$6,262 of transfer agency fees for the six months ended June 30, 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 $13,884 of accounting service fees for the six months ended
June 30, 1996.
Note 5. INVESTMENT SECURITY TRANSACTIONS
The cost of purchases and proceeds from the sales of investment
securities (excluding short-term securities) aggregated $4,616,411 and
$574,272, respectively, for the six months ended June 30, 1996.
Note 6. INVESTMENT IN SECURITIES
At June 30, 1996, the aggregate cost of securities for federal income
tax purposes was $8,801,348, and the net unrealized appreciation of
investments based on the cost was $592,635, which is comprised of
$617,453 aggregate gross unrealized appreciation and $24,818 aggregate
gross unrealized depreciation.
<PAGE>
FINANCIAL HIGHLIGHTS Selected per share data and ratios for the period indicated
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For The Six Months For The Year
Ended June 30, 1996 Ended
(Unaudited) December 31, 1995
------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $11.76 $10.00
------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) $(.03) $ .22
Net realized and unrealized gain
(loss) on investment and futures transactions 1.14 2.30
------------------------------------------------------
Total From Investment Operations $ 1.11 2.52
------------------------------------------------------
LESS DISTRIBUTIONS:
From net investment income $ .00 $ (.22)
From net realized gain on investments .00 (.54)
------------------------------------------------------
Total Distributions .00 $ (.76)
------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $12.87 $11.76
======================================================
Total Return 18.88%(A)(C) 25.20%(A)
Ratios/Supplemental Data:
Net assets, end of period (in thousands) $9,413 $4,362
Ratio of net expenses (after expense
assumption) to average net assets 1.62%(B)(C) 1.59%(B)
Ratio of net investment income to
average net assets (0.52)%(C) 4.00%
Portfolio turnover rate 7.89% 15.30%
</TABLE>
(A) Excludes contingent deferred sales charge of 1.5%.
(B) During the six months ended June 30, 1996 and the year ended December 31,
1995, ND Holdings, Inc. assumed expenses of $29,629 and $40,714. If the
expenses had not been assumed, the annualized ratio of total expenses to
average net assets would have been 2.42% and 3.60%.
(C) Ratio was annualized.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 8801348
<INVESTMENTS-AT-VALUE> 9393983
<RECEIVABLES> 39477
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 9433460
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 20821
<TOTAL-LIABILITIES> 20821
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 731239
<SHARES-COMMON-PRIOR> 370749
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 158931
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 592635
<NET-ASSETS> 9412639
<DIVIDEND-INCOME> 40453
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 59374
<NET-INVESTMENT-INCOME> (18921)
<REALIZED-GAINS-CURRENT> 158931
<APPREC-INCREASE-CURRENT> 497510
<NET-CHANGE-FROM-OPS> 637520
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 379719
<NUMBER-OF-SHARES-REDEEMED> 40480
<SHARES-REINVESTED> 21251
<NET-CHANGE-IN-ASSETS> 5050812
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 33398
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 89003
<AVERAGE-NET-ASSETS> 7332396
<PER-SHARE-NAV-BEGIN> 11.76
<PER-SHARE-NII> (.03)
<PER-SHARE-GAIN-APPREC> 1.14
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.87
<EXPENSE-RATIO> 18.88<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Ratio of net expenses to average net assets, annualized.
</FN>
</TABLE>
