Dear Shareholder:
We are pleased to enclose the semi-annual report of the operations of Integrity
Fund of Funds, Inc. for the six months ended June 30, 1998. The Fund's
portfolio and related financial statements are presented within for your review.
Integrity Fund of Funds Inc. began January 1st at $13.27 per share and closed
June 30th at $14.78 per share for a six month return of 11.38%.
To create a perfect environment for equities, this would be it. Strong economic
growth, low interest rates and subdued inflation have created what is called a
"new paradigm." But, in the midsts of all this, the meltdown in Asian and
Japanese economies have dented many U.S. companies' strong earnings.
The bull market's long-term future ultimately rests on interest rates and
continued growth in corporate profits. Asian miseries may have helped put
the brakes on runaway growth in the U.S. economy. In the process this has
restrained the Federal Reserve from raising interest rates. Wall Street
consensus is, however, that corporate earnings increases will return to
double digits as U.S. corporations find ways to grow.
Integrity Fund of Funds, Inc. continues to diversify across a wide range of
proven funds who have weathered many domestic and worldwide crises. This
diversification increases investors' participation in the strongest markets
while at the same time protecting fund appreciation against possible market
volatility.
Long-term capital appreciation and growth of income continues to be the primary
objectives as management monitors the investment industry.
Sincerely,
Monte L. Avery Robert E.Walstad
Chief Portfolio Strategist President
Terms & Definitions
Appreciation
Increase in value of an asset.
Average Annual Total Return
A standardized measurement of the return (appreciation) earned by a fund on an
annual basis.
Consumer Price Index
A commonly used measure of inflation: it does not represent an investment
return.
Contingent Deferred Sales Charge (CDSC)
A charge applied at the time of the redemption which assumes redemption at the
end of the period.
Depreciation
Decrease in value of an asset.
Growth Fund
A type of diversified common stock fund that has capital appreciation as its
primary goal. It invests in companies that reinvest most of their earnings
for expansion, research or development.
Growth & Income Fund
Fund that invests in common stocks for both current income and long-term growth
of capital and income.
Load
A mutual fund whose shares are sold with a sales charge added to the net asset
value.
Market Value
Actual price at which a Fund trades in the market place.
Net Asset Value (NAV)
The value of all your fund's assets, minus any liabilities, divided by the
number of outstanding shares, not including any initial or contingent deferred
sales charge.
No-Load
A mutual fund whose shares are sold without a sales charge added to the net
asset value.
Total Return
Measures both the net investment income and any realized and unrealized
appreciation or depreciation of the underlying investments in the fund's
portfolio for the period, assuming the reinvestment of all dividends. It
represents the aggregate percentage or dollar value change over the period.
PERFORMANCE AND COMPOSITION
- ---------------------------
Portfolio Load Types
- --------------------
[pie chart]
Load 93.7
No-Load 6.3
The Load Structure reflects the type of sales load typically charged by each
fund in the portfolio. As of 6/30/98, the fund has not paid a sales load to
any fund
Portfolio Investment Style
- --------------------------
[pie chart]
Growth & Income 41.0
Growth 39.7
Balanced 10.1
Aggressive Growth 9.2
The Portfolio Investment Style reflects the investment methodology and the
size of the company in which each fund in the portfolio invests.
COMPARATIVE INDEX GRAPH
- -----------------------
[line graph]
Comparison of change in value of a $10,000
investment in the Integrity Fund of Funds and the
S & P 500 Index
Integrity Fund of Funds Integrity Fund of Funds
w/o CDSC w/ CDSC S & P 500 Index
----------------------------------------------------------------
1/3/1995 $10,000 $10,000 $10,000
1995 $12,520 $12,370 $13,411
1996 $14,252 $14,102 $16,129
1997 $16,340 $16,190 $21,113
06/30/98 $18,199 $18,049 $24,688
Putting Performance into Perspective
The graph comparing your Fund's performance to a benchmark index provides you
with a general sense of how your Fund performed. To put this information in
context, it may be helpful to understand the special differences between the
two. Your Fund's total return for the period shown appears with and without
sales charges and includes Fund expenses and management fees. A securities
index measures the performance of a theoretical portfolio. Unlike a fund, the
index is unmanaged; there are no expenses that affect the results. In addition,
few investors could purchase all of the securities necessary to match the
index. And, if they could, they would incur transaction costs and other
expenses.
Key Statistics
- --------------
12-31-97 NAV(share value) $13.27
06-30-98 NAV $14.78
Number of Issues 18
Total Net Assets $21,688,974
Average Annual Total Returns
For periods ending June 30, 1998
Since Inception
1 year 5 year 01/03/95
- --------------------------------------------------------------------------
Without CDSC 17.82% N/A 18.71%
With CDSC 16.32% N/A 18.43%
<TABLE>
<CAPTION>
Schedule of Investments June 30, 1998
Name of Issuer
Percentages represent the market value of each investment
category to total net assets Quantity Market Value
- ------------------------------------------ ------------------------------------
<S> <C> <C>
MUTUAL FUNDS (98.8%)
American Balanced Fund 81,801 $1,331,714
*American Washington Mutual Investors 48,131 1,631,164
*AIM Constellation Fund A 22,824 679,704
*AIM Aggressive Growth Fund A 17,037 854,247
*AIM Value Fund A 35,884 1,379,729
AIM Charter Fund A 99,951 1,397,312
*Dodge & Cox Balanced Fund 12,014 833,660
Hudson Capital Appreciation Fund 68,621 1,128,133
MFS Research A 77,073 1,945,331
Capital Opportunities Fund 85,522 1,414,534
Massachusetts Inv A 98,443 1,978,713
Mutual Qualified Fund Cl 1 63,522 1,246,302
Mutual Beacon C1 1 56,225 872,055
Neuberger & Berman Guardian Fund 17,823 518,647
*New York Venture Fund A 68,489 1,689,614
*Putnam Fund for Growth & Income A 53,799 1,141,610
*Putnam Vista Fund 68,955 957,093
*Putnam Voyager Fund 19,245 428,210
-----------
TOTAL MUTUAL FUNDS (COST: $18,359,637) $21,427,772
SHORT-TERM SECURITIES (1.4%)
Federated Money Market Trust #092 (COST: $306,776) 306,776
-----------
TOTAL INVESTMENTS IN SECURITIES (COST: $18,666,413) $21,734,548
OTHER ASSETS LESS LIABILITIES (45,574)
-----------
NET ASSETS $21,688,974
===========
</TABLE>
*Indicates Funds are segregated by the custodian.
The accompanying notes are an integral part of these financial statements.
Financial Statements June 30, 1998
Statement of Assets and Liabilities June 30, 1998 (Unaudited)
- -------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Investments in securities, at value (cost:$18,666,413) $21,734,548
Prepaid expenses 3,389
Accrued dividends receivable 15,195
-----------
Total Assets $21,753,132
LIABILITIES
Bank overdraft $28,998
Accrued expenses 35,160
-------
Total Liabilities $64,158
-------
NET ASSETS $21,688,974
===========
Net assets are represented by:
Capital stock outstanding, at par $147
Additional paid-in capital 18,371,095
Accumulated undistributed net realized gain(loss) on investments 249,597
Unrealized appreciation on investments 3,068,135
----------
Total amount representing net assets applicable to
1,467,232 outstanding shares of $.0001 par value
common stock (1,000,000,000 shares authorized) $21,688,974
===========
Net asset value per share $14.78
===========
Statement of Operations for the six months ended June 30, 1998
INVESTMENT INCOME
Dividends $91,967
-------
Total Investment Income $91,967
-------
EXPENSES
Investment advisory fees $93,477
Custodian fees 1,522
Transfer agent fees 15,132
Transfer agent out of pockets 1,920
Accounting service fees 17,087
Professional fees 2,925
Directors fees 1,203
Service fees 23,988
Reports to shareholders 723
License, fees, and registrations 8,204
-------
Total expenses $ 166,181
-------
NET INVESTMENT INCOME (LOSS) $(74,214)
---------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain (loss) from:
Investment transactions $323,811
Net change in unrealized appreciation (depreciation) of:
Investments 1,952,454
----------
Net realized and unrealized gain
(loss) on investments $2,276,265
----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $2,202,051
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
Financial Statements June 30, 1998
Statement of Changes in Net Assets
for the six months ended June 30, 1998 and December 31, 1997
- ------------------------------------------------------------
<TABLE>
<CAPTI0N>
For the Six Months Ended For the Year Ended
June 30, 1998(Unaudited) December 31,1997
------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income (loss) $(74,214) $268,232
Net realized gain (loss) on investment and futures transactions 323,811 1,172,065
Net unrealized appreciation (depreciation) on investments 1,952,454 685,708
------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting From Operations $2,202,051 $2,126,005
------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income $0 $(268,232)
Distributions from net realized gain on investments 0 (1,172,065)
------------------------------------------------
Total Dividends and Distributions $0 $(1,440,297)
------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares $2,655,305 $6,594,170
Proceeds from reinvested dividends 1,345,191 725,283
Cost of shares redeemed (1,958,027) (1,966,267)
------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting From
Capital Share Transactions $2,042,469 $5,353,186
------------------------------------------------
TOTAL INCREASE IN NET ASSETS $4,244,520 $6,038,894
NET ASSETS, BEGINNING OF PERIOD 17,444,454 11,405,560
------------------------------------------------
NET ASSETS, END OF PERIOD $21,688,974 $17,444,454
================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
Notes to Financial Statements June 30, 1998 (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 Fund's 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 paid in cash.
Dividend income -- Dividend income is recognized on the
ex-dividend date.
Futures contracts -- The Fund may purchase and sell financial
futures 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 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.
Unrealized appreciation (depreciation) related to open futures
contracts is required to be treated as realized gain (loss) for
Federal income tax purposes.
Certain risks may arise upon entering into futures contracts.
These risks may include changes in the value of the futures
contracts 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, 1998, there were 1,000,000,000 shares of $.0001 par
value authorized; 1,467,232 and 1,315,072 shares were outstanding
at June 30, 1998 and December 31, 1997, respectively. Transactions
in capital shares were as follows:
Shares
-----------------------------------------------------
For The Six Months Ended For The Year Ended
June 30, 1998 December 31, 1997
(Unaudited)
-----------------------------------------------------
Shares sold 187,844 491,026
Shares issued on
reinvestment of dividends 101,371 57,884
Shares redeemed (137,055) (144,196)
-------------------------- -----------------------
Net increase 152,160 404,714
=====================================================
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 and accounting services 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 $93,477 of investment advisory fees for the six
months ended June 30, 1998. The Fund has a payable to ND Money
Management, Inc. of $16,641 at June 30, 1998 for investment
advisory fees. Certain officers and directors of the Fund are also
officers and directors of the investment adviser.
ND Capital, Inc. ("Capital") is the Fund's principal underwriter.
The Fund pays 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 $23,987 of service fees for the six months ended June
30, 1998. The Fund has a payable to Capital of $4,391 at June
30, 1998 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,.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 $15,132 of transfer agency fees
for the six months ended June 30, 1998. 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 $17,087 of accounting service fees for the six months
ended June 30, 1998.
Note 5. INVESTMENT SECURITY TRANSACTIONS
The cost of purchases and proceeds from the sales of investment
securities (excluding short-term securities) aggregated $6,358,895
and $4,893,521, respectively, for the six months ended June 30,
1998.
Note 6. INVESTMENT IN SECURITIES
At June 30, 1998, the aggregate cost of securities for federal
income tax purposes was $18,666,413, and the net unrealized
appreciation of investments based on the cost was $3,068,135,
which is comprised of $3,193,479 aggregate gross unrealized
appreciation and $125,344 aggregate gross unrealized depreciation.
Financial Highlights Selected per share data and ratios for the period indicated
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION.
For The Six Months For The Year Ended For The Year Ended For The Year Ended
Ended June 30,1998 December 31, 1997 December 31, 1996 December 31, 1995
(Unaudited)
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 13.27 $ 12.53 $ 11.76 $ 10.00
---------------------------------------------------------------------------------------------
Income from Investment Operations:
Net investment income (loss) $ (.05) $ .21 $ .10 $ .22
Net realized and unrealized
gain (loss) on investment
and futures transactions 1.56 1.63 1.53 2.30
---------------------------------------------------------------------------------------------
Total Income(Loss) From
Investment Operations $ 1.51 $ 1.84 $ 1.63 $ 2.52
---------------------------------------------------------------------------------------------
Less Distributions:
From net investment income $ .00 $ (.21) $ (.10) $ (.22)
From net realized gain on investments .00 (.89) (.76) (.54)
---------------------------------------------------------------------------------------------
Total Distributions $ .00 $ (1.10) $ (.86) $ (.76)
---------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 14.78 $ 13.27 $ 12.53 $ 11.76
=============================================================================================
Total Return 22.76%(A)(C) 14.65%(A) 13.84%(A) 25.20%(A)
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) $21,68 $17,444 $11,406 $ 4,362
Ratio of net expenses
(after expense assumption)to
average net assets 1.62%(C) 1.62%(B) 1.63%(B) 1.59%(B)
Ratio of net investment income
to average net assets (.72%)(C) 1.73% .98% 4.00%
Portfolio turnover rate 24.04% 31.99% 50.11% 15.30%
</TABLE
(A) Excludes contingent deferred sales charge of 1.5%.
(B) During the periods indicated above, ND Holdings, Inc. assumed expenses of
$24,114, $39,760 and $40,714. If the expenses had not been assumed, the
annualized ratio of total expenses to average net assets would have been 1.78%,
2.08% and 3.60%, respectively.
(C) Ratio is annualized.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 18,666,413
<INVESTMENTS-AT-VALUE> 21,734,548
<RECEIVABLES> 15,195
<ASSETS-OTHER> 3,389
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 21,753,132
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 64,158
<TOTAL-LIABILITIES> 64,158
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 18,371,242
<SHARES-COMMON-STOCK> 1,467,232
<SHARES-COMMON-PRIOR> 1,315,072
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 249,597
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3,068,135
<NET-ASSETS> 21,688,974
<DIVIDEND-INCOME> 91,967
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 166,181
<NET-INVESTMENT-INCOME> (74,214)
<REALIZED-GAINS-CURRENT> 323,811
<APPREC-INCREASE-CURRENT> 1,952,454
<NET-CHANGE-FROM-OPS> 2,202,051
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 187,844
<NUMBER-OF-SHARES-REDEEMED> (137,055)
<SHARES-REINVESTED> 101,371
<NET-CHANGE-IN-ASSETS> 4,244,520
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 93,477
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 166,181
<AVERAGE-NET-ASSETS> 20,499,900
<PER-SHARE-NAV-BEGIN> 13.27
<PER-SHARE-NII> (.05)
<PER-SHARE-GAIN-APPREC> 1.56
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.78
<EXPENSE-RATIO> 1.62<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Ratio was annualized.
</FN>
</TABLE>
