Dear Shareholder:
Enclosed is the semi-annual report of the operations of the Integrity Fund of
Funds, Inc., the "Fund," for the six months ended June 30, 2000. The Fund's
portfolio and related financial statements are presented within for your
review.
As we end mid-year, the Fund began the year at $15.80 per share and closed at
$16.34 for a total return of 3.42%. In comparison, the Dow Jones Industrial
Average was down (9.13%), the Standard and Poor's 500 Stock Index down (1.00%),
and the NASDAQ Composite Index down (2.54%).
Factors attributing to the stock markets mid-year decline was the Federal
Reserve's vigilant attack of a strong U.S. economy, raising the fed funds
rate 1.75% to a current level of 6.50%. Strong consumer spending, tight
labor markets, and an increasing CPI (Consumer Price Index) remain key
factors in the Federal Reserve's actions.
Old Economy stocks were the buzz word in the first half of the year while
the technology sector provided disappointment. After reaching a record on
March 10th of 5,048.62, the Nasdaq Composite Index fell 37.30% to 3,164.55 on
May 23rd.
Corporate earnings appear to be the driving force behind the stock market as
the dot-com's craze has begun to wear out, or in some cases fizzled.
Closely watched in the second half of the year will be the Federal Reserve's
actions to slow the economy and the effects it will have on corporate earnings.
Diversification among proven funds remains an important strategy in the Fund's
mid-year success.
Long-term capital appreciation and growth of income remain 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 the 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 AND COMPOSITION
---------------------------
Portfolio Load Types
[pie chart]
Load 90.4%
No-Load 9.6%
The Load Structure reflects the type of sales load typically charged by each
fund in the portfolio. As of 06-30-00, the fund has not paid a sales load to
any fund.
Portfolio Investment Style
[pie chart]
Growth 58.0%
Growth & Income 31.5%
Aggressive Growth 10.5%
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 of Funds
w/o CDSC S&P 500 Index
--------------------------------------------------------------
1/3/1995 $10,000 $10,000
1995 $12,520 $13,411
1996 $14,252 $16,129
1997 $16,340 $21,130
1998 $18,328 $26,765
1999 $21,807 $31,991
6/30/00 $22,552 $31,672
AVERAGE ANNUAL TOTAL RETURNS
For periods ending June 30, 2000
------------------------------------
Since Inception
1 year 5 year 01/03/95
----------------------------------------------
Without CDSC 12.02% 14.58% 15.96%
With CDSC 10.52% N/A N/A
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
---------------
12-31-99 NAV (share value) $15.80
06-30-00 NAV $16.34
Number of Issues 22
Total Net Assets $22,423,059
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS June 30, 2000 (Unaudited)
Name of Issuer
Percentages represent the market value Market
of each investment category to total net assets Quantity Value
------------------------------------------------------------------------------------------
<S> <C> <C>
MUTUAL FUNDS (98.1%)
*AIM Aggressive Growth Fund A ............................... 17,037 $ 1,295,000
AIM Blue Chip Fund A ....................................... 23,524 1,270,054
AIM Charter Fund A ........................................ 99,951 1,868,081
*AIM Constellation Fund A .................................. 22,824 1,006,090
AIM Weingarten A ........................................... 35,913 1,142,026
*AIM Value Fund A .......................................... 43,422 2,112,068
American Growth Fund of America ............................ 41,119 1,390,640
*American Washington Mutual Investors ...................... 54,208 1,524,880
*Davis New York Venture A .................................. 68,489 2,113,559
Dodge & Cox Stock Fund ..................................... 2,308 214,394
Invesco Blue Chip Growth ................................... 23,082 201,510
Janus Fund ................................................. 9,045 410,556
Legg Mason Value Trust ..................................... 7,907 522,824
MFS Capital Opportunities Fund ............................. 54,657 1,239,619
MFS Research A ............................................. 44,593 1,365,451
Massachusetts Investors Growth Stock Fund ................... 26,833 564,827
Massachusetts Investors Trust A ........................... 30,222 632,842
*Putnam Fund for Growth & Income A ......................... 53,799 967,302
*Putnam Vista Fund ......................................... 68,955 1,402,541
Strong Large Cap Growth Fund ............................... 3,888 184,826
Vanguard Index Trust 500 Portfolio ......................... 2,051 275,078
Vanguard Index Trust Growth Portfolio ...................... 7,508 303,153
--------------
TOTAL MUTUAL FUNDS (COST: $16,548,358) ...................... $ 22,007,321
--------------
SHORT-TERM SECURITIES (1.7%)
Federated Money Market Trust #092 (COST: $388,919) ......... 388,919
--------------
TOTAL INVESTMENTS IN SECURITIES (COST: $16,937,277) .......... $ 22,396,240
OTHER ASSETS LESS LIABILITIES ................................ 26,819
--------------
NET ASSETS.................................................... $ 22,423,059
==============
<FN>
*Indicates securitites are segregated by the custodian to cover initial margin
requirements.
</FN>
</TABLE>
The accompanying notes are an integral part of these financial statements.
<TABLE>
<CAPTION>
FINANCIAL STATEMENTS June 30, 2000
STATEMENT OF ASSETS AND LIABILITIES June 30, 2000 (Unaudited)
-------------------------------------------------------------
<S> <C>
ASSETS
Investments in securities, at value
(cost: $16,937,277) ................... $ 22,396,240
Accrued interest receivable ........... 1,732
Accrued dividends receivable .......... 54,741
Prepaid expenses ...................... 3,128
Receivable for fund shares sold ....... 5
-----------------
Total Assets ....................... $ 22,455,846
-----------------
LIABILITIES
Accrued expenses ...................... $ 31,932
Payable for fund shares redeemed ...... 505
Bank overdraft ........................ 350
-----------------
Total Liabilities .................. $ 32,787
-----------------
NET ASSETS ................................. $ 22,423,059
=================
Net assets are represented by:
Capital stock outstanding, at par ..... $ 137
Additional paid-in capital ............ 16,882,086
Accumulated undistributed net
realized gain (loss) on investments .... 81,873
Unrealized appreciation on investments . 5,458,963
----------------
Total amount representing net
assets applicable to 1,372,100
outstanding shares of $.0001 par value
common stock (1,000,000,000
shares authorized) ............... $ 22,423,059
-----------------
Net asset value per share .................. $ 16.34
=================
STATEMENT OF OPERATIONS For the six months ended June 30, 2000 (Unaudited)
--------------------------------------------------------------------------
INVESTMENT INCOME
Interest .............................. $ 20,091
Dividends ............................. 29,896
------------------
Total Investment Income .......... $ 49,987
------------------
EXPENSES
Investment advisory fees .............. $ 100,130
Transfer agent fees ................... 16,006
Accounting service fees ............... 17,519
Service fees .......................... 27,814
Custodian fees ........................ 1,674
Transfer agent out-of-pockets ......... 3,116
Professional fees ..................... 3,543
Directors fees ........................ 1,358
Reports to shareholders ............... 2,040
Insurance expense ..................... 1,033
License, fees, and registrations ...... 4,035
------------------
Total Expenses .................... $ 178,268
Less expenses waived or absorbed
by the Fund's manager ................. (265)
------------------
Total Net Expenses ............... $ 178,003
------------------
NET INVESTMENT INCOME (LOSS) .............. $ (128,016)
------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) from:
Investment transactions .............. $ 142,186
Capital gain distributions ........... 67,703
Net change in unrealized appreciation
(depreciation) of:
Investments .......................... 660,310
------------------
Net realized and unrealized gain
(loss) on investments ........... $ 870,199
------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS ................. $ 742,183
==================
</TABLE>
The accompanying notes are an integral part of these
financial statements.
FINANCIAL STATEMENTS June 30, 2000
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 2000, and the year ended December 31, 1999
<S> <C> <C>
For the Six
Months Ended For the
June 30, 2000 Year Ended
(Unaudited) December 31, 1999
-----------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income (loss) ........................................... $ (128,016) $ 103,802
Net realized gain (loss) on investment and futures transactions ........ 209,889 1,363,878
Net change in unrealized appreciation (depreciation) on investments
and futures ............................................................ 660,310 2,229,033
----------------------------------------------
Net Increase (Decrease) in Net Assets Resulting From
Operations......................................................... $ 742,183 $ 3,696,713
----------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income ($.00 and
$.08 per share, respectively) .............................................. $ 0 $ (103,802)
Distributions from net realized gain on investment and futures
transactions ($.00 and $1.04 per share, respectively) .................. 0 (1,363,878)
----------------------------------------------
Total Dividends and Distributions................................. $ 0 $ (1,467,680)
----------------------------------------------
CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares............................................ $ 1,297,799 $ 2,431,447
Proceeds from reinvested dividends...................................... 0 2,283,807
Cost of shares redeemed................................................. (1,749,768) (4,869,579)
----------------------------------------------
Net Increase (Decrease) in Net Assets Resulting From
Capital Share Transactions........................................ $ (451,969) $ (154,325)
----------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS..................................... $ 290,214 $ 2,074,708
NET ASSETS, BEGINNING OF PERIOD............................................. 22,132,845 20,058,137
----------------------------------------------
NET ASSETS, END OF PERIOD................................................... $ 22,423,059 $ 22,132,845
================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
NOTES TO FINANCIAL STATEMENTS June 30, 2000 (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, 2000, there were 1,000,000,000 shares of $.0001 par value
authorized; 1,372,100 and 1,400,763 shares were outstanding at June 30, 2000,
and December 31, 1999, respectively. Transactions in capital shares were as
follows:
<TABLE>
<CAPTION>
SHARES
------
For The Six
Months Ended For The Year
June 30, 2000 Ended
(Unaudited) December 31, 1999
------------------------------------------------
<S> <C> <C>
Shares sold ................................. 80,119 162,092
Shares issued on reinvestment of dividends... 0 151,506
Shares redeemed.............................. (108,782) (322,963)
------------------------------------------------
Net increase (decrease) ..................... (28,663) (9,365)
================================================
</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 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 $100,130 of investment advisory fees for
the six months ended June 30, 2000. The Fund has a payable to ND Money
Management, Inc. of $16,890 at June 30, 2000 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 $27,549 of service fees, after partial
waiver, for the six months ended June 30, 2000. The Fund has a payable to
Capital of $4,689 at June 30, 2000 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 $16,006 of transfer agency fees for
the six months ended June 30, 2000. The Fund has a payable to ND Resources,
Inc. of $2,587 at June 30, 2000 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 $17,520 of accounting service
fees for the six months ended June 30, 2000. The Fund has a payable to ND
Resources, Inc. of $2,894 at June 30, 2000 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 $3,074,021 and $2,651,309,
respectively, for the six months ended June 30, 2000.
Note 6. INVESTMENT IN SECURITIES
At June 30, 2000, the aggregate cost of securities for federal income tax
purposes was $16,937,277, and the net unrealized appreciation of investments
based on the cost was $5,458,963, which is comprised of $5,665,389 aggregate
gross unrealized appreciation and $206,426 aggregate gross unrealized
depreciation.
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS Selected per share data and ratios for the period indicated
--------------------------------------------------------------------------------
For The Six For The Year For The Year For The Year For The Year For The Year
Months Ended Ended Ended Ended Ended Ended
June 30, 2000 December 31, December 31, December 31, December 31, December 31,
(Unaudited) 1999 1998 1997 1996 1995
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD ........................ $ 15.80 $ 14.22 $ 13.27 $ 12.53 $ 11.76 $ 10.00
-------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss). $ (.09) $ .08 $ (.03) $ .21 $ .10 $ .22
Net realized and unrealized gain (loss)
on investment and futures
transactions................. .63 2.62 1.64 1.63 1.53 2.30
-------------------------------------------------------------------------------------------
Total Income (Loss) From
Investment Operations .... $ .54 $ 2.70 $ 1.61 $ 1.84 $ 1.63 $ 2.52
-------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
From net investment income .. $ .00 $ (.08) $ .00 $ (.21) $ (.10) $ (.22)
Distributions from net
realized gains ............. .00 (1.04) (.66) (.89) (.76) (.54)
-------------------------------------------------------------------------------------------
Total Distributions ..... $ .00 $ (1.12) $ (.66) $ (1.10) $ (.86) $ (.76)
-------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD ........................... $ 16.34 $ 15.80 $ 14.22 $ 13.27 $ 12.53 $ 11.76
===========================================================================================
Total Return ..................... 6.84%(A)(C) 18.98%(A) 12.17%(A) 14.65%(A) 13.84%(A) 25.20%(A)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands) .................. $ 22,423 $ 22,133 $ 20,058 $ 17,444 $ 11,406 $ 4,362
Ratio of net expenses (after
expense assumption) to
average net assets .......... 1.60%(B)(C) 1.58%(B) 1.60%(B) 1.62%(B) 1.63%(B) 1.59%(B)
Ratio of net investment income
to average net assets ....... (1.15)%(C) .49% (.36)% 1.73% .98% 4.00%
Portfolio turnover rate ..... 12.31% 19.49% 32.28% 31.99% 50.11% 15.30%
<FN>
(A) Excludes contingent deferred sales charge of 1.5%.
(B) During the periods indicated above, ND Holdings, Inc. assumed/waived
expenses of $265, $3,205, $2,151, $7,031, $24,114, and $39,760. If the
expenses had not been assumed/waived, the annualized ratio of total
expenses to average net assets would have been 1.60%, 1.60%, 1.62%,
1.64%, 1.78%, and 2.08%, respectively.
(C) Ratio is annualized.
</FN>
</TABLE>
The accompanying notes are an integral part of these financial statements.
