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, 1999. The Fund's
portfolio and related financial statements are presented within for your
review.
As we end the first half of 1999, stabilizing global economies and the U.S.
economy growing at what many economists believe is an unsustainable pace has
led the Federal Reserve to raise short term interest rates a quarter of a
percentage point. Strong consumer spending and a tight labor market were the
primary factors for Mr. Greenspan's preemptive strike against a rise in
inflation. Typically, a higher fed funds rate, the rate at which banks borrow
from each other overnight, means higher rates for things such as mortgage
loans, credit cards, and savings accounts.
On the other hand, investor confidence in Wall Street continues to push the
markets to near record highs. Stronger corporate profits in the technology and
blue chip sectors have fueled market advances for the first half of the year.
Integrity Fund of Funds, Inc. began the year at $14.22 per share and closed at
$15.62 per share on June 30, 1999 for a 9.85% return for the first half of
1999. At times during the first half of the year, Integrity Fund of Funds, Inc.
utilized a defensive position in S&P 500 futures to minimize the effects of
market volatility. Share price was stabilized as market concerns of rising
interest rates slowed the stock market and share price was tempered as stronger
corporate profits strengthened the markets.
As we look into the crystal ball for the second half of 1999, a number of
issues remain. Is the Federal Reserve done raising interest rates? Will new
technology advances continue to strengthen corporate profits? Will Y2K come
and go without a hitch? While the answers to these questions remain uncertain,
one thing that is certain is our commitment to investing in proven funds that
have weathered many concerns over the years.
Long-term capital appreciation and growth of income continue to be the primary
objectives of the Fund.
Sincerely,
Monte L. Avery Robert E.Walstad
Chief Portfolio Strategist President
Terms & Definitions
- -------------------
Appreciation
Increase in the 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 redemption, assuming redemption at the end
of the period.
Depreciation
Decrease in the 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 & COMPOSITION
- -------------------------
[pie chart]
Portfolio Load Types
Load 96.4
No-Load 3.6
The Load Structure reflects the type of sales load typically charged by each
fund in the portfolio. As of 06-30-99, the fund has not paid a sales load to
any fund.
Portfolio Investment Style
- --------------------------
[pie chart]
Growth & Income 50.1
Growth 36.0
Aggressive Growth 7.6
Balanced 6.3
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 Integrity
Fund of Funds and the S&P 500 Index
Integrity Fund Integrity Fund
Of Funds 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 $21,130
1998 $18,328 $18,178 $26,765
06/30/99 $20,133 $19,983 $29,888
Average Annual Total Returns
- ----------------------------
For periods ending June 30, 1999
Since Inception
1 year 5 year 01/03/95
- ------------------------------------------------------------------------
Without CDSC 10.63% N/A 16.86%
With CDSC 9.13% N/A 16.67%
Putting Performance into Perspective
Returns are historical and are not a guarantee of future results. 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
- --------------
12-31-98 NAV (share value) $14.22
06-30-99 NAV $15.62
Number of Issues 18
Total Net Assets $22,298,605
<TABLE>
<CAPTION>
Schedule of Investments June 30, 1999 (Unaudited)
Name of Issuer
Percentages represent the market value of each investment category to total net
assets
Quantity Market Value
- ----------------------------------------------------------------------------------------
<S> <C> <C>
MUTUAL FUNDS (96.2%)
*AIM Aggressive Growth Fund A 17,037 $ 876,565
AIM Blue Chip Fund A 46,502 2,114,438
AIM Charter Fund A 99,951 1,705,161
*AIM Constellation Fund A 22,824 757,306
*AIM Value Fund A 47,065 2,166,393
American Balanced Fund 81,801 1,362,798
*American Washington Mutual Investors Fund 54,208 1,939,573
Dodge & Cox Stock Fund 2,308 250,000
Massachusetts Investors Trust A 58,335 1,239,611
MFS Capital Opportunities Fund 54,657 1,076,741
MFS Research Fund A 44,593 1,222,306
Mutual Beacon Fund Cl 1 56,225 848,441
Mutual Qualified Fund Cl 1 63,522 1,180,239
*New York Venture Fund A 68,489 1,979,321
*Putnam Fund for Growth & Income A 53,799 1,206,169
*Putnam Vista Fund 68,955 1,013,635
Vanguard Index Trust Growth Portfolio 7,508 261,937
Vanguard Index Trust 500 Portfolio 2,051 260,068
---------
TOTAL MUTUAL FUNDS (COST: $17,368,887) $21,460,702
----------
SHORT-TERM SECURITIES (3.1%)
Federated Money Market Trust #092 (COST: $699,467) 699,467
--------
TOTAL INVESTMENTS IN SECURITIES (COST: $18,068,354) $22,160,169
OTHER ASSETS LESS LIABILITIES 138,436
----------
NET ASSETS $22,298,605
==========
</TABLE>
*Indicates securitites are segregated by the custodian to cover initial margin
requirements.
The accompanying notes are an integral part of these financial statements.
Financial Statements June 30, 1999
Statement of Assets and Liabilities June 30, 1999 (Unaudited)
- ------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Investments in securities, at value (cost: $18,068,354) $22,160,169
Variation margin 159,332
Cash 15,386
Accrued dividends receivable 10,910
Prepaid expenses 2,880
---------
Total Assets $22,348,677
----------
LIABILITIES
Accrued expenses $50,072
------
Total Liabilities $50,072
------
NET ASSETS $22,298,605
==========
Net assets are represented by:
Capital stock outstanding, at par $ 143
Additional paid-in capital 17,738,275
Accumulated undistributed net realized gain (loss) on investments 468,372
Unrealized appreciation on investments 4,091,815
----------
Total amount representing net assets applicable to
1,427,953 outstanding shares of $.0001 par value
common stock (1,000,000,000 shares authorized) $22,298,605
==========
Net asset value per share $15.62
==========
Statement of Operations For the six months ended June 30, 1999 (Unaudited)
INVESTMENT INCOME
Dividends $92,878
------
Total Investment Income $92,878
------
EXPENSES
Investment advisory fees $94,806
Custodian fees 1,569
Transfer agent fees 15,271
Transfer agent out of pockets 1,687
Accounting service fees 17,482
Professional fees 2,327
Directors fees 1,215
Service fees 26,335
Reports to shareholders 1,272
Insurance expense 771
License, fees, and registrations 7,758
--------
Total Expenses $170,493
Less expenses waived or absorbed
by the Fund's manager (2,151)
Total Net Expenses $168,342
--------
NET INVESTMENT INCOME (LOSS) $(75,464)
----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FUTURES
Net realized gain (loss) from:
Investment transactions $585,659
Capital gain distributions 75,487
Futures transactions (117,311)
Net change in unrealized appreciation (depreciation) of:
Investments 1,522,195
----------
Net realized and unrealized gain
(loss) on investments $2,066,030
----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $1,990,566
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
Financial Statements June 30, 1999
Statement of Changes in Net Assets
For the six months ended June 30, 1999, and the year ended December 31, 1998
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Six
Months Ended For the
June 30, 1999 Year Ended
(Unaudited) December 31, 1998
-------------------------------------------
<S <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income (loss) $ (75,464) $ (72,757)
Net realized gain (loss) on investment and futures transactions 543,835 937,710
Net change in unrealized appreciation (depreciation) on investments
and futures 1,522,195 1,453,939
-----------------------------------------
Net Increase (Decrease) in Net Assets Resulting From Operations $1,990,566 $2,318,892
-----------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income ($.00 and $.00 per share, respectively) $ 0 $ 0
Distributions from net realized gain on investment and futures
transactions ($.00 and $.66 per share, respectively) 0 (937,710)
-----------------------------------------
Total Dividends and Distributions $ 0 $(937,710)
-----------------------------------------
CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares $1,615,516 $4,418,795
Proceeds from reinvested dividends 894,221 1,345,191
Cost of shares redeemed (2,259,835) (4,531,485)
-----------------------------------------
Net Increase (Decrease) in Net Assets Resulting From Capital
Share Transactions $ 249,902 $1,232,501
----------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS $2,240,468 $2,613,683
NET ASSETS, BEGINNING OF PERIOD 20,058,137 17,444,454
----------------------------------------
NET ASSETS, END OF PERIOD $22,298,605 $20,058,137
========================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
Notes to Financial Statements June 30, 1999 (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
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, 1999, there were 1,000,000,000 shares of $.0001 par value
authorized; 1,427,953 and 1,410,128 shares were outstanding at June 30, 1999
and December 31, 1998, respectively. Transactions in capital shares were as
follows:
Shares
--------------------------------------
For The Six
Months Ended For the Year
June 30, 1999 Ended
(Unaudited) December 31, 1999
--------------------------------------
Shares sold 109,408 317,592
Shares issued on reinvestment
of dividends 62,885 101,370
Shares redeemed (154,468) (323,906)
--------------------------------------
Net increase (decrease) 17,825 95,056
======================================
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 .90% of the Fund's average daily
net assets. The Fund has recognized $94,806 of investment advisory fees for the
six months ended June 30, 1999. The Fund has a payable to ND Money Management,
Inc. of $17,193 at June 30, 1999 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 .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 $24,184 of service fees, after partial
waiver, for the six months ended June 30, 1999. The Fund has a payable to
Capital of $4,620 at June 30, 1999 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 $15,271 of transfer agency fees for the six
months ended June 30, 1999. The Fund has a payable to ND Resources, Inc. of
$2,718 at June 30, 1999 for transfer agency fees. 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 $17,482 of accounting service fees for the six months
ended June 30, 1999. The Fund has a payable to ND Resources, Inc. of $3,092 at
June 30 1999 for accounting service fees.
Note 5. INVESTMENT SECURITY TRANSACTIONS
The cost of purchases and proceeds from the sales of investment securities
(excluding short-term securities) aggregated $2,750,000 and $4,110,659,
respectively, for the six months ended June 30, 1999.
Note 6. INVESTMENT IN SECURITIES
At June 30, 1999, the aggregate cost of securities for federal income tax
purposes was $18,068,354, and the net unrealized appreciation of investments
based on the cost was $4,091,815, which is comprised of $4,130,486 aggregate
gross unrealized appreciation and $38,671 aggregate gross unrealized
depreciation.
Financial Highlights
Selected per share data and ratios for the period indicated
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the For the For the For the For the
Six Months Year Year Year Year
Ended June Ended Ended Ended Ended
30, 1999 December December December December
(Unaudited) 31, 1998 31, 1997 31, 1996 31, 1995
--------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 14.22 $ 13.27 $ 12.53 $ 11.76 $ 10.00
--------------------------------------------------------------
Income from Investment Operations:
Net investment income (loss) $ (.05) $ (.03) $ .21 $ .10 $ .22
Net realized and unrealized gain (loss)
on investment and futures transactions 1.45 1.64 1.63 1.53 2.30
--------------------------------------------------------------
Total Income (Loss) From Investment Operations $ 1.40 $ 1.61 $ 1.84 $ 1.63 $ 2.52
--------------------------------------------------------------
Less Distributions:
From net investment income $ .00 $ .00 $ (.21) $ (.10) $ (.22)
Distributions from net realized gains .00 (.66) (.89) (.76) (.54)
--------------------------------------------------------------
Total Distributions $ .00 $ (.66) $ (1.10) $ (.86) $ (.76)
--------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 15.62 $ 14.22 $ 13.27 $ 12.53 $ 11.76
==============================================================
Total Return 19.70%(A)(C) 12.17%(A) 14.65%(A) 13.84%(A) 25.20%(A)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $ 22,299 $ 20,058 $ 17,444 $ 11,406 $ 4,362
Ratio of net expenses (after expense
assumption) to average net assets 1.60%(B)(C) 1.60%(B) 1.62%(B) 1.63%(B) 1.59%(B)
Ratio of net investment income to
average net assets (.72)%(C) (.36)% 1.73% .98% 4.00%
Portfolio turnover rate 14.02% 32.28% 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/waived
expenses of $2,151, $7,031, $24,114, $39,760 and $40,714. If the
expenses had not been assumed/waived, the annualized ratio of total
expenses to average net assets would have been 1.62%, 1.64%, 1.78%, 2.08%
and 3.60%, respectively.
(C) Ratio is annualized.
The accompanying notes are an integral part of these financial statements.
