<PAGE>
SCHEDULE OF INVESTMENTS December 31, 1995
<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 (106.6%)
AIM Constellation Fund A 9,630 $ 216,772
AIM Value Fund A 8,987 240,962
Berger One Hundred Fund 16,603 300,515
Dodge & Cox Stock Fund 7,143 484,529
Founders Growth Fund 27,528 406,602
Janus Fund 8,587 197,852
Mutual Qualified Fund 9,597 285,441
Mutual Beacon Fund 11,257 404,586
Neuberger & Berman Guardian Fund 17,409 400,938
New York Venture Fund A 34,351 498,790
T. Rowe Price New America Growth 9,316 325,240
SAFECO Equity Fund 23,601 361,806
Twentieth Century Ultra Investors Fund 15,297 399,405
Vanguard\PRIMECAP Fund 4,829 126,687
----------
TOTAL MUTUAL FUNDS (COST: $4,555,000) $4,650,125
SHORT-TERM SECURITIES (1.3%)
Federated Money Market Trust #092 (COST: $55,743) 55,743
----------
TOTAL INVESTMENTS IN SECURITIES (COST: $4,610,743) $4,705,868
==========
</TABLE>
<PAGE>
FINANCIAL STATEMENTS December 31, 1995
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES December 31, 1995
- ------------------------------------------------------
<S> <C>
ASSETS
Investments in securities, at value (cost:$4,610,743) $4,705,868
Accrued dividends receivable 174,697
Deferred organization costs 25,719
----------
Total Assets $4,906,284
----------
LIABILITIES
Distributions payable $ 281,805
Bank overdraft 231,153
Accrued expenses 31,499
----------
Total Liabilities $ 544,457
----------
NET ASSETS $4,361,827
==========
Net asset value per share, 370,749 shares outstanding $ 11.76
==========
STATEMENT OF OPERATIONS for the year ended December 31, 1995
- ------------------------------------------------------------
INVESTMENT INCOME
Dividends $ 113,375
----------
Total Investment Income $ 113,375
----------
EXPENSES
Investment advisory fees $ 18,129
Custodian fees 646
Transfer agent fees 3,512
Accounting service fees 1,689
Audit and legal fees 535
Service fees 5,036
Insurance 156
Printing and postage 20,618
License, fees, and registrations 16,017
Amortization of organization costs 6,606
----------
Total expenses $ 72,944
Less expenses waived or absorbed
by the Fund's manager 40,714
----------
Total Net Expenses $ 32,230
----------
NET INVESTMENT INCOME (LOSS) $ 81,145
----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND OPTIONS:
Net realized gain (loss) from:
Investment transactions 209,909
Option transactions (9,249)
Net change in unrealized appreciation (depreciation) of
investments 95,125
----------
Net realized and unrealized gain
(loss) on investments $ 295,785
----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $ 376,930
==========
</TABLE>
<PAGE>
FINANCIAL STATEMENTS December 31, 1995
STATEMENT OF CHANGES IN NET ASSETS for the year ended December 31, 1995
------------------------------------
<TABLE>
<CAPTION>
For the Year Ended
December 31, 1995
------------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS
Net investment income (loss) $ 81,145
Net realized gain (loss) on investment and option transactions 200,660
Net unrealized appreciation (depreciation) on investments 95,125
------------------
Net Increase (Decrease) in Net Assets Resulting From
Operations $ 376,930
------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income $ (81,145)
Distributions from net realized gain on investment and
option transactions (200,660)
------------------
Total Dividends and Distributions $ (281,805)
------------------
CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares $ 4,439,852
Cost of shares redeemed (173,150)
------------------
Net Increase (Decrease) in Net Assets Resulting From
Capital Share Transactions $ 4,266,702
------------------
TOTAL INCREASE IN NET ASSETS $ 4,361,827
NET ASSETS, BEGINNING OF PERIOD $ 0
------------------
NET ASSETS, END OF PERIOD $ 4,361,827
==================
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS December 31, 1995
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.
DEFERRED ORGANIZATION COSTS -- Costs incurred in connection with the
initial registration and public offering of the shares of the Fund
amounted to $32,325. These costs have been paid by ND Holdings, Inc.
(the Fund's sponsor) and may be reimbursed by the Fund. Repayment of
these costs are currently being waived by the Fund's sponsor. These
costs are being amortized over a five year period. If the Manager
redeems any or all of its shares in the Fund representing initial
capital prior to the end of the 60-month amortization period, the
manager will reimburse the Fund for the unamortized balance in the same
proportion as the number of shares redeemed bear to the number of
initial shares outstanding at the time of redemption.
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.
OPTIONS -- The Fund may purchase and sell listed put and call options
on futures contracts to hedge against market fluctuations. Daily
fluctuations in the value of the options are recorded for financial
reporting purposes as unrealized gains or losses by the fund. Upon sale
or expiration of the option, the Fund will realize, for book purposes,
a gain or loss equal to the difference between the cost of the option
and the value on sale or expiration date. Certain risks may arise upon
the purchase of options. These risks may include changes in the value
of the 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
<PAGE>
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Note 3. SHARE TRANSACTIONS
As of December 31, 1995, there were 1,000,000,000 shares of $.0001 par
value authorized; 370,749 shares were outstanding.
Transactions in capital shares were as follows:
<TABLE>
<CAPTION>
Shares Amount
------ ------
For the year ended For the year ended
December 31, 1995 December 31, 1995
---------------------------------------------
<S> <C> <C>
Shares sold 385,088 $4,439,852
Shares redeemed (14,339) (173,150)
---------------------------------------------
Net increase 370,749 $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. As of December 31, 1995, ND Capital, Inc., owns 10,000 shares
of the Fund.
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 $18,129
of investment advisory fees for the year ended December 31, 1995. The
Fund has a payable to ND Money Management, Inc. of $3,202 at December
31, 1995 for investment 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 $5,036 of service fees
for the year ended December 31, 1995. The Fund has a payable to ND
Capital, Inc. of $889 at December 31, 1995 for service fees. Certain
officers and directors of the Fund are also officers and directors of
the underwriter.
Note 5. INVESTMENT SECURITY TRANSACTIONS
The cost of purchases and proceeds from the sales of investment
securities (excluding short-term securities) aggregated $4,825,000 and
$304,876, respectively, for the year ended December 31, 1995.
Note 6. INVESTMENT IN SECURITIES
At December 31, 1995, the aggregate cost of securities for federal
income tax purposes was $4,610,743, and the net unrealized appreciation
of investments based on the cost was $95,125, which is comprised of
$107,628 aggregate gross unrealized appreciation and $12,503 aggregate
gross unrealized depreciation.
<PAGE>
FINANCIAL HIGHLIGHTS Selected per share data and ratios for the period indicated
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Year Ended
December 31, 1995
------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
------------------
Income from Investment Operations:
Net investment income (loss) $ .22
Net realized and unrealized gain (loss) on investment
and option transactions 2.30
------------------
Total From Investment Operations $ 2.52
------------------
Less Distributions:
From net investment income $ (.22)
From net realized gain on investments (.54)
------------------
Total Distributions $ (.76)
------------------
NET ASSET VALUE, END OF PERIOD $ 11.76
==================
Total Return 25.20% (A)
Ratios/Supplemental Data:
Net assets, end of period (in thousands) $ 4,362
Ratio of net expenses (after expense assumption) to
average net assets 1.59% (B)
Ratio of net investment income to average net assets 4.00%
Portfolio turnover rate 15.30%
</TABLE>
(A) Excludes contingent deferred sales charge of 1.5%.
(B) During the year ended December 31, 1995, ND Holdings, Inc. assumed expenses
of $40,714. If the expenses had not been assumed, the annualized ratio of
total expenses to average net assets would have been 3.60%.
[GRAPH APPEARS HERE]
Comparison of change in value of $10,000 investment in
Integrity Fund of Funds, Inc. and S & P 500 Index (Unaudited)
- -------------------------------------------------------------------------------
Integrity Fund of Funds Integrity Fund of Funds
without CDSC with CDSC S & P 500 Index
- -------------------------------------------------------------------------------
1995 $10,000 $10,000 $10,000
- -------------------------------------------------------------------------------
1996 $12,520 $12,370 $13,411
- -------------------------------------------------------------------------------
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Shareholders and Board of Directors of
Integrity Fund of Fund, Inc.
We have audited the accompanying statement of assets and liabilities of
Integrity Fund of Fund, Inc. (the Fund), including the schedule of investments,
as of December 31, 1995, the related statement of operations, the statement of
changes in net assets, and the financial highlights for the year then ended.
These financial statements and financial highlights are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of December 31, 1995, by
correspondence with the custodian. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Integrity Fund of Fund, Inc. as of December 31, 1995, the results of its
operations, the changes in its net assets, and the financial highlights for the
year then ended, in conformity with generally accepted accounting principles.
BRADY, MARTZ & ASSOCIATES, P.C.
February 12, 1996
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 4610743
<INVESTMENTS-AT-VALUE> 4705868
<RECEIVABLES> 174697
<ASSETS-OTHER> 25719
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 4906284
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 544457
<TOTAL-LIABILITIES> 544457
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 370749
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 95125
<NET-ASSETS> 4361827
<DIVIDEND-INCOME> 113375
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 32230
<NET-INVESTMENT-INCOME> 81145
<REALIZED-GAINS-CURRENT> 200660
<APPREC-INCREASE-CURRENT> 95125
<NET-CHANGE-FROM-OPS> 376930
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 81145
<DISTRIBUTIONS-OF-GAINS> 200660
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<NUMBER-OF-SHARES-SOLD> 385088
<NUMBER-OF-SHARES-REDEEMED> 14339
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 4361827
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
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<GROSS-ADVISORY-FEES> 18129
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 72944
<AVERAGE-NET-ASSETS> 2026184
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> .22
<PER-SHARE-GAIN-APPREC> 2.30
<PER-SHARE-DIVIDEND> .22
<PER-SHARE-DISTRIBUTIONS> .54
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<PER-SHARE-NAV-END> 11.76
<EXPENSE-RATIO> 1.59
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
