UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-06153
Integrity Managed Portfolios
(Exact name of registrant as specified in charter)
Address of Registrant : 1 Main Street North
Minot, ND 58703
Name and address of agent for service : Brenda Sem
1 Main Street North
Minot, ND 58703
Registrant’s telephone number, including area code: (701) 852-5292
Date of fiscal year end: July 30
Date of reporting period: July 30, 2004
Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget (“OMB”) control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.
Item 1. Reports to Stockholders.
Kansas Municipal Fund
Dear Shareholder:
Enclosed is the annual report of the operations of the Kansas Municipal Fund (the “Fund”) for the year ended July 30, 2004. The Fund’s portfolio and related financial statements are presented within for your review.
The global recovery, centered in the U.S. and Asia continues to improve as evidenced by the recent Federal Reserve hike in the Federal Funds Rate from a historic low of 1% to 1.25% on June 30th. The increase was widely anticipated as recent economic and labor market conditions have improved. The environment of rising profits, low interest rates, a weak dollar, accelerating domestic retail sales, and strengthening exports bodes well for a further accommodative Federal Reserve.
The Federal Reserve has taken center stage as it prepares to shift away from its stimulative monetary stance to a normalization of fed funds.
Several crucial questions remain unresolved:
What will constitute a neutral fed fund rate?
Will the normalization process be faster or slower than the market is currently discounting?
How much damage will higher rates cause the economy and market?
While no one knows for certain, recent verbiage from the Federal Reserve states: “With underlying inflation still expected to be relatively low, the Committee believes that policy accommodation can be removed at a pace that is likely to be measured. Nonetheless, the Committee will respond to changes in economic prospects as needed to fulfill its obligation to maintain price stability.”
Municipals during the period remained range bound with yields on twenty-year AAA general obligations yielding 4.75% at the beginning of the period and ending the period at 4.77%. While the yields on the twenty-year municipals appear relatively unchanged during the period, they were quite volatile reaching a low of 4.33% and a high of 5.00% (Source Municipal Market Data).
The Fund’s shorter duration of 5 years and higher average overall coupon of 5.32% contributed to relative returns as interest rates increased during the period.
Several of the Fund’s holdings (e.g. Wichita, GO’s 4.50% due 2018, Kansas Turnpike 4.00% due 2015) under-performed the municipal sector hampering relative performance.
Having been undervalued relative to U.S. Treasuries for some time, municipals have started to rebound in recent months as municipal supply has declined. This out-performance should continue as interest rates rise, further dampening municipal supply.
During the period the Fund utilized defensive positions designed to provide share price stability. U.S. Treasury futures were used to hedge a portion of the portfolio, stabilizing the Fund’s share price as Treasury yields advanced during the period and tempering them as Treasury yields declined. The Kansas Municipal Fund began the year at $11.19 per share and ended the period at $10.93 per share for a total return of 1.71% (without sales charge). This compares to the Lehman Brother’s Municipal Bond Index’s return of 5.78% for the period. Risk management is important in this market environment.
An important part of the Fund’s strategy includes searching the primary and secondary markets for high quality double tax-exempt issues. Credit quality for the period ended was: AAA 66%, AA 18%, A 6%, BBB 3%, NR 6% and BB 1%.
Income exempt from federal and state income taxes with preservation of capital remain the primary objectives of the Fund.
If you would like more frequent updates, visit our website at www.integritymf.com for daily prices along with pertinent Fund information.
Sincerely,
The Portfolio Management Team
The views expressed are those of Monte Avery, Chief Portfolio Strategist with Integrity Mutual Funds. The views are subject to change at any time in response to changing circumstances in the market and are not intended to predict or guarantee the future performance of any individual security, market sector or the markets generally, or any Integrity Mutual Fund.
Terms & Definitions July 30, 2004 (Unaudited)
Appreciation
The increase in value of an asset.
Average Annual Total Return
A standardized measurement of the return (yield and appreciation) earned by the fund on an annual basis, assuming all distributions are reinvested.
Coupon Rate or Face Rate
The rate of interest payable annually, based on the face amount of the bond; expressed as a percentage.
Depreciation
The decrease in value of an asset.
Lehman Brothers Municipal Bond Index
An unmanaged list of long-term, fixed-rate, investment-grade, tax-exempt bonds representative of the municipal bond market. The index does not take into account brokerage commissions or other costs, may include bonds different from those in the fund, and may pose different risks than the fund.
Market Value
The actual (or estimated) price at which a bond trades in the market place.
Maturity
A measure of the term or life of a bond in years. When a bond “matures,” the issuer repays the principal.
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 sales charge.
Quality Ratings
A designation assigned by independent rating companies to give a relative indication of a bond’s credit worthiness. “AAA,” “AA,” “A,” and “BBB” indicate investment grade securities. Ratings can range from a high of “AAA” to a low of “D”.
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.
July 30, 2004 (Unaudited)
Insert Pie Charts
PERFORMANCE AND COMPOSITION
PORTFOLIO QUALITY RATINGS
(based on Total Long-Term Investments)
AAA | 65.8% |
AA | 17.6% |
A | 5.8% |
BBB | 3.2% |
NR | 6.5% |
BB | 1.1% |
Quality ratings reflect the financial strength of the issuer. They are assigned by independent rating services such as Moody’s Investors Services and Standard & Poor’s. Non-rated bonds have been determined to be of appropriate quality for the portfolio by Integrity Money Management (formerly known as Ranson Capital Corporation), the investment adviser.
These percentages are subject to change.
PORTFOLIO MARKET SECTORS
(As a % of Net Assets)
HC-Health Care | 23.2% |
H-Housing | 21.0% |
U-Utilities | 13.8% |
O-Other | 12.3% |
G-Government | 9.7% |
W-Water/Sewer | 8.1% |
S-School | 6.1% |
T-Transportation | 5.8% |
Market sectors are breakdowns of the Fund’s portfolio holdings into specific investment classes.
These percentages are subject to change.
July 30, 2004 (Unaudited)
DISCLOSURE OF FUND EXPENSES
These examples are intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.
EXAMPLE 1:
This example assumes that you invest $1,000 in the Fund for the time periods indicated and then either redeem or do not redeem all of your shares at the end of those periods. The example also is based on the Fund’s actual expenses of 0.95% and rate of return for the period of 1.71%. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
| Redemption | No Redemption |
Share Class | A | A |
Annual Expenses | $51.67 | $51.67 |
Account value of an initial investment of $1,000 as of the end of the period would be $973.87.
EXAMPLE 2:
This example assumes that you invest $1,000 in the Fund for the time periods indicated and then either redeem or do not redeem all of your shares at the end of those periods. The example is based on the Fund’s actual operating expenses of 0.95% and also assumes that your investment has a 5.00% return. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
|
Redemption | No Redemption |
Share Class | A | A |
Annual Expenses | $51.82 | $51.82 |
Account value of an initial investment of $1,000 as of the end of the period would be $1,005.38.
Average Annual Total Returns
| For periods ending July 30, 2004 | |||
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| Since Inception (November 15, 1990) |
Kansas Municipal Fund | 1 year | 5 year | 10 year | |
Without sales charge | 1.71% | 2.81% | 3.98% | 4.97% |
With sales charge (4.25%) | (2.64%) | 1.92% | 3.53% | 4.64% |
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| Since Inception (November 15, 1990) |
Lehman Brother’s Municipal Bond Index | 1 year | 5 year | 10 year | |
| 5.78% | 6.07% | 6.38% | 6.94% |
Performance data quoted above is historical. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance data quoted. The principal value and investment return of an investment will fluctuate so that your shares, when redeemed, may be worth more or less than the original cost. You can obtain performance data current to the most recent month end (available within seven business days of the most recent month end) by calling 1-800-276-1262.
You should consider the fund's investment objectives, risks, and charges and expenses carefully before investing. For this and other important information, please obtain a fund prospectus at no cost from your financial advisor and read it carefully before investing.
The table does not reflect the deduction of taxes that a shareholder would pay on Fund distributions and redemption of Fund shares.
July 30, 2004 (Unaudited)
COMPARATIVE INDEX GRAPH (INSERT HERE)
Comparison of change in value of a $10,000 investment in the Kansas Municipal Fund
and the Lehman Brothers Municipal Bond Index
| Kansas Municipal Fund w/o sales charge | Kansas Municipal Fund w/ max sales charge | Lehman Brothers Municipal Bond Index |
| |||
11/15/90 | $10,000 | $ 9,575 | $10,000 |
1991 | $10,524 | $10,077 | $10,724 |
1992 | $11,855 | $11,351 | $12,199 |
1993 | $13,050 | $12,495 | $13,276 |
1994 | $13,168 | $12,609 | $13,525 |
1995 | $13,988 | $13,394 | $14,591 |
1996 | $14,814 | $14,184 | $15,553 |
1997 | $15,933 | $15,256 | $17,150 |
1998 | $16,372 | $15,676 | $18,177 |
1999 | $16,936 | $16,216 | $18,700 |
2000 | $17,222 | $16,490 | $19,507 |
2001 | $18,622 | $17,831 | $21,475 |
2002 | $19,270 | $18,451 | $22,916 |
2003 | $19,127 | $18,314 | $23,740 |
2004 | $19,454 | $18,627 | $25,113 |
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. The Lehman Brothers index is a national index representative of the national municipal bond market, whereas the Fund concentrates its investments in Kansas municipal bonds. Your Fund’s total return for the periods 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 c osts and other expenses. All Fund and benchmark returns include reinvested dividends. The Fund’s share price, yields and total returns will vary, so that shares, when redeemed, may be worth more or less than their original cost.
MANAGEMENT OF THE FUND
The Board of Integrity Managed Portfolios (formerly known as Ranson Managed Portfolios) consists of four Trustees. These same individuals, unless otherwise noted, also serve as Directors or Trustees for all of the funds in the Integrity family of funds, the six series of Integrity Managed Portfolios, and the eight series of The Integrity Funds. Three Trustees (75% of the total) have no affiliation or business connection with the Investment Adviser or any of its affiliates. These are the “independent” Trustees. The remaining Trustee and executive officers are “interested” by virtue of their affiliation with the Investment Adviser and its affiliates.
The Independent Trustees of the Fund, their term of office and length of time served, their principal occupation(s) during the past five years, the number of portfolios overseen in the Fund Complex by each Independent Trustee and other directorships, if any, held outside the Fund Complex, are shown below.
INDEPENDENT TRUSTEES
Name, Address and Age | Position(s) Held with Registrant | Term and Length Served | Principal Occupation(s) During Past 5 Years | Number of Portfolios Overseen In The Fund Complex * | Other Directorships Held Outside The Fund Complex |
Lynn W. Aas | Trustee | Since January 1996 | Retired; Attorney; Director, ND Tax-Free Fund, Inc. (since December 1994), Montana Tax-Free Fund, Inc. (since December 1994), South Dakota Tax-Free Fund, Inc. (April 1995 to June 2004) Integrity Fund of Funds, Inc. (since August 1994), Integrity Small-Cap Fund of Funds, Inc. (September 1998 to June 2003); Trustee, Integrity Managed Portfolios (since January 1996) and The Integrity Funds (since September 2003); and Director, First Western Bank & Trust (until May 2002). | 17 | None |
Orlin W. Backes | Trustee | Since January 1996 | Attorney, McGee, Hankla, Backes & Dobrovolny, P.C.; Director, ND Tax-Free Fund, Inc. (since April 1995), Montana Tax-Free Fund, Inc. (since April 1995), South Dakota Tax-Free Fund, Inc. (April 1995 to June 2004), Integrity Fund of Funds, Inc. (since April 1995), Integrity Small-Cap Fund of Funds, Inc. (September 1998 to June 2003); Trustee, Integrity Managed Portfolios (since January 1996) and The Integrity Funds (since May 2003); and Director, First Western Bank & Trust. | 17 | Director, First Western Bank & Trust |
R. James Maxson Town & Country Center, 1015 S. Broadway Suite 15 Minot, ND 58701 | Trustee | Since January 1999 | Attorney, Maxson Law Office (since November 2002), Attorney, McGee, Hankla, Backes & Dobrovolny, P.C. (April 2000 to November 2002); Attorney, Farhart, Lian and Maxson, P.C. (March 1976 to March 2000); Director, ND Tax-Free Fund, Inc. (since January 1999), Montana Tax-Free Fund, Inc. (since January 1999), South Dakota Tax-Free Fund, Inc. (January 1999 to June 2004), Integrity Fund of Funds, Inc. (since January 1999), Integrity Small-Cap Fund of Funds, Inc. (January 1999 to June 2003); and Trustee, Integrity Managed Portfolios (since January 1999) and The Integrity Funds (since May 2003). | 17 | None |
The Fund Complex consists of the three funds in the Integrity family of funds, the six series of Integrity Managed Portfolios, and the eight series of The Integrity Funds.
Trustees (Directors for Corporate Funds) and officers of the Fund serve until their resignation, removal or retirement.
The Statement of Additional Information contains more information about the Fund’s Trustees and is available without charge upon request, by calling Integrity Funds Distributor, Inc. at 1(800) 601-5593
The Interested Trustees and executive officers of the Fund, their term of office and length of time served, their principal occupation(s) during the past five years, the number of portfolios overseen in the Fund Complex by each Interested Trustee and executive officer, and other directorships, if any, held outside the Fund Complex, are shown below.
INTERESTED TRUSTEES AND EXECUTIVE OFFICERS
Name, Address and Age | Position(s) Held with Registrant | Term and Length Served | Principal Occupation(s) During Past 5 Years | Number of Portfolios Overseen In The Fund Complex * | Other Directorships Held Outside The Fund Complex |
**Robert E. Walstad | Trustee, Chairman, and President | Since January 1996 | Director (since September 1987), President (September 1987 to October 2001) (September 2002 to May 2003), Integrity Mutual Funds, Inc.; Director, President and Treasurer, Integrity Money Management, Inc., ND Capital, Inc., Integrity Fund Services, Inc., ND Tax-Free Fund, Inc., Montana Tax-Free Fund, Inc., South Dakota Tax-Free Fund, Inc. (April 1995 to June 2004), Integrity Fund of Funds, Inc., Integrity Small-Cap Fund of Funds, Inc. (September 1998 to June 2003); Trustee, Chairman, President and Treasurer, Integrity Managed Portfolios (since January 1996) and The Integrity Funds (since May 2003).; Director, President (until August 2003), CEO, and Treasurer, Integrity Funds Distributor, Inc.; Director (October 1999 to June 2003), President (October 1999 to October 2001), Magic Internet Services, Inc.; Director (May 2000 to June 2003), President (May 2000 to November 2001) (October 2002 to June 2003), ARM Securities Corporation; and Director, CEO, Chairma n (since January 2002), President (since September 2002), Capital Financial Services, Inc. | 17 | Director, Capital Financial Services, Inc. |
**Peter A. Quist 1 North Main | Vice President and Secretary | Since January 1996 | Attorney; Director and Vice President, Integrity Mutual Funds, Inc.; Director, Vice President and Secretary, Integrity Money Management, Inc. (formerly known as ND Money Management, Inc.), ND Capital, Inc., Integrity Fund Services, Inc., (formerly known as ND Resources, Inc.), ND Tax-Free Fund, Inc., Montana Tax-Free Fund, Inc., South Dakota Tax-Free Fund, Inc. (April 1995 to June 2004), Integrity Fund of Funds, Inc., Integrity Small-Cap Fund of Funds, Inc. (September 1998 to June 2003), Integrity Funds Distributor, Inc. (formerly known as Ranson Capital Corporation) (since January 1996); Vice President and Secretary, Integrity Managed Portfolios (since January 1996) and The Integrity Funds (since May 2003); and Director, ARM Securities Corporation (May 2000 to June 2003). | 3 | None |
**Brent M. Wheeler 1 Main Street North Minot, ND 58703 33 | Treasurer | Since May 2004 | Fund Accountant (May 1994 to December 1997) Sr. Fund Accountant (December 1997 to June 1998) Fund Accounting Manager (Since June 1998), Integrity Mutual Funds, Inc.; Treasurer (Since May 2004), Integrity Funds, Integrity Managed Portfolios, Integrity Mutual Funds. | None | Minot State University Alumni Association |
* The Fund Complex consists of the three funds in the Integrity family of funds, the six series of Integrity Managed Portfolios, and the eight series of The Integrity Funds.
** Trustees who are “interested persons” of the Funds as defined in the Investment Company Act of 1940. Messrs. Quist, Walstad and Wheeler are interested persons by virtue of being officers and trustees of the Fund’s Investment Adviser and Principal Underwriter.
Trustees (Directors for Corporate Funds) and officers of the Fund serve until their resignation, removal or retirement.
The Statement of Additional Information contains more information about the Fund’s Trustees and is available without charge upon request, by calling Integrity Funds Distributor, Inc. at 1(800) 601-5593
July 30, 2004 (Unaudited)
INDEPENDENT TRUSTEES
[PHOTO] | [PHOTO] | [PHOTO] |
Lynn W. Aas | Orlin W. Backes | R. James Maxson |
Trustee | Trustee | Trustee |
INTERESTED TRUSTEES AND EXECUTIVE OFFICERS
[PHOTO] | [PHOTO] | [PHOTO] |
Robert E. Walstad | Peter A. Quist | Brent M. Wheeler |
Chairman | Vice-President | Treasurer |
President | Secretary |
|
Trustee |
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|
Schedule of Investments July30, 2004
Name of Issuer | Rating (Unaudited) Moody’s/S&P | Coupon Rate | Maturity |
| Principal Amount |
| Market Value |
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KANSAS MUNICIPAL BOND (92.8%) |
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Burlington, KS PCR Gas & Elec. MBIA | Aaa/AAA | 5.300% | 06/01/2031 | $ | 1,000,000 | $ | 1,023,950 |
| |||
Butler Cty., KS Public Bldg. MBIA | Aaa/NR | 5.550 | 10/01/2021 |
| 300,000 |
| 328,854 |
| |||
Coffeyville, KS Pub. Bldg. (Coffeyville Medl. Center) Rev. AMBAC | Aaa/AAA | 5.000 | 08/01/2022 |
| 250,000 |
| 260,115 |
| |||
Dodge, KS School District #443 FGIC | Aaa/NR | 5.000 | 09/01/2011 |
| 1,000,000 |
| 1,101,850 |
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Douglas Cty., KS Sales Tax Ref. AMBAC | Aaa/NR | 5.000 | 08/01/2019 |
| 1,000,000 |
| 1,056,340 |
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#Johnson Cty., KS USD #229 (Blue Valley) G.O. | Aa-1/AA | 5.000 | 10/01/2018 |
| 2,600,000 |
| 2,729,324 |
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Johnson Cty., KS Single Family Mrtge. Rev. | Aa/NR | 7.100 | 05/01/2012 |
| 260,000 |
| 266,682 |
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Kansas City, KS Mrtge. Rev. GNMA | Aaa/NR | 5.900 | 11/01/2027 |
| 560,000 |
| 572,583 |
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*Kansas City, KS Util. Syst. Ref. & Impvt. AMBAC | Aaa/AAA | 6.300 | 09/01/2016 |
| 580,000 |
| 582,546 |
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*Kansas City, KS Util. Syst. Ref. & Impvt. FGIC | Aaa/AAA | 6.375 | 09/01/2023 |
| 1,525,000 |
| 1,564,284 |
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*Kansas City, KS Util. Syst. Ref. & Impvt. FGIC | Aaa/AAA | 6.375 | 09/01/2023 |
| 5,830,000 |
| 5,978,199 |
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KS Department of Transportation Highway Rev. | Aa/AA+ | 5.000 | 09/01/2006 |
| 1,500,000 |
| 1,591,965 |
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*KS Devl. Finance Auth. (Dept. Admin. 7th & Harrison PJ) AMBAC | Aaa/AAA | 5.750 | 12/01/2027 |
| 2,250,000 |
| 2,567,115 |
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KS Devl. Finance Auth. (Dept. of Admin. Capitol Restoration) Lease Rev. FSA | Aaa/AAA | 5.375 | 10/01/2020 |
| 370,000 |
| 400,510 |
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KS Devl. Finance Auth. (Juvenile Justice) Rev. MBIA | Aaa/AAA | 5.250 | 05/01/2013 |
| 570,000 |
| 623,466 |
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KS Devl. Finance Auth. (Sec. 8) Rev. Ref. MBIA | Aaa/AAA | 6.400 | 01/01/2024 |
| 555,000 |
| 564,352 |
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KS Devl. Finance Auth. (Board of Regents) Univ. Hsg. MBIA | Aaa/AAA | 5.000 | 04/01/2005 |
| 250,000 |
| 256,507 |
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KS Devl. Finance Auth. (Water Pollution Control) Rev. | Aaa/AAA | 5.250 | 05/01/2011 |
| 2,000,000 |
| 2,184,280 |
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KS Devl. Finance Auth. (KS St. Projects) Rev. MBIA | Aaa/AAA | 5.000 | 10/01/2017 |
| 250,000 |
| 263,423 |
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KS Devl. Finance Auth. (Water Pollution Control) Rev. | Aaa/AAA | 5.250 | 11/01/2022 |
| 1,000,000 |
| 1,072,840.00 |
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KS Devl. Finance Auth. (Water Pollution Control) | Aaa/AAA | 5.000 | 11/01/2023 |
| 1,000,000 |
| 1,033,140 |
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*KS Devl. Finance Auth. (Park Apts.) Multifamily Hsg. Rev. | NR/AAA | 6.000 | 12/01/2021 |
| 1,975,000 |
| 2,032,157 |
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KS Devl. Finance Auth. (Oak Ridge Park Apt.) | NR/NR | 6.500 | 02/01/2018 |
| 1,345,000 |
| 1,301,637 |
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KS Devl. Finance Auth. (Oak Ridge Park Apt.) | NR/NR | 6.625 | 08/01/2029 |
| 1,000,000 |
| 959,040 |
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KS Devl. Finance Auth. (Indian Ridge Apts.) | NR/NR | 6.000 | 01/01/2028 |
| 1,040,000 |
| 886,486 |
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KS Devl. Finance Auth. (Stormont Vail) Hlth. Care Rev. MBIA | Aaa/AAA | 5.800 | 11/15/2021 |
| 430,000 |
| 470,639 |
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KS Devl. Finance Auth. (Stormont Vail) Hlth. Care Rev. MBIA | Aaa/NR | 1.330 | 11/15/2023 |
| 4,000,000 |
| 4,000,000 |
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KS Devl. Finance Auth. (Sisters of Charity) Hlth. Rev. | Aa/AA | 6.125 | 12/01/2020 |
| 1,000,000 |
| 1,103,200 |
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KS Devl. Finance Auth. (Stormont Vail) Hlth. Care Rev. MBIA | Aaa/AAA | 5.375 | 11/15/2024 |
| 1,500,000 |
| 1,570,560 |
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KS Devl. Finance Auth. (Stormont Vail) Hlth. Care Rev. MBIA | Aaa/AAA | 5.800 | 11/15/2016 |
| 455,000 |
| 489,362 |
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KS Turnpike Auth. Rev. FSA | Aaa/AAA | 5.000 | 09/01/2024 |
| 530,000 |
| 546,541 |
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KS Turnpike Auth. Rev. FSA | Aaa/AAA | 5.000 | 09/01/2025 |
| 750,000 |
| 763,305 |
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KS Turnpike Auth. Rev. AMBAC | Aaa/AAA | 4.000 | 09/01/2015 |
| 500,000 |
| 499,045 |
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Lawrence, KS (Unlimited Tax) Refunding G.O. | Aa/NR | 5.375 | 09/01/2020 |
| 500,000 |
| 541,595 |
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Lawrence, KS (Memorial Hospital) Rev. ASGUA | NR/AA | 5.750 | 07/01/2024 |
| 1,000,000 |
| 1,050,360 |
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Newton, KS (Newton) Hosp. Rev. | NR/BBB- | 5.700 | 11/15/2018 |
| 1,000,000 |
| 1,028,050 |
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Newton, KS (Newton) Hosp. Rev. ACA | NR/A | 5.750 | 11/15/2024 |
| 500,000 |
| 518,065 |
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Olathe, KS (Luth. Gd. Sam.) Ref. AMBAC | Aaa/AAA | 6.000 | 05/01/2019 |
| 900,000 |
| 939,861 |
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Olathe, KS (Medl. Ctr.) Hlth. Facs. Rev. | Aaa/AAA | 5.500 | 09/01/2025 |
| 235,000 |
| 246,604 |
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Olathe, KS (Medl. Ctr.) Hlth. Facs. Rev. AMBAC | Aaa/AAA | 5.500 | 09/01/2030 |
| 500,000 |
| 516,865 |
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#Olathe, KS Multifamily Hsg. (Bristol Pointe) Rev. Ref. FNMA | NR/AAA | 5.700 | 11/01/2027 |
| 2,210,000 |
| 2,248,940 |
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Pratt, KS Elec. Util. Syst. Rev. Ref. & Impvt. AMBAC | Aaa/AAA | 6.600 | 11/01/2007 |
| 825,000 |
| 902,500 |
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Republic Cty., KS Sales Tax FGIC | Aaa/NR | 5.000 | 06/01/2015 |
| 260,000 |
| 280,795 |
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Republic Cty., KS Sales Tax FGIC | Aaa/NR | 5.000 | 06/01/2016 |
| 275,000 |
| 293,782 |
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Republic Cty., KS Sales Tax FGIC | Aaa/NR | 5.000 | 06/01/2017 |
| 290,000 |
| 307,951 |
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Scott Cty, KS USD #466 FGIC | Aaa/AAA | 5.250 | 09/01/2017 |
| 900,000 |
| 983,844 |
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Sedgwick Cty., KS (Catholic Care Center, Inc.) Hlth. Care Rev. | NR/A | 5.800 | 11/15/2026 |
| 1,000,000 |
| 1,046,390 |
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Topeka Public Bldg. Comm. (10th & Jackson Prj.) MBIA | Aaa/AAA | 5.625 | 06/01/2026 |
| 1,435,000 |
| 1,529,036 |
| |||
Topeka Public Bldg. Comm. (10th & Jackson Prj.) MBIA | Aaa/AAA | 5.625 | 06/01/2031 |
| 1,200,000 |
| 1,259,976 |
| |||
University of Kansas Hosp. Auth. AMBAC | Aaa/AAA | 5.700 | 09/01/2020 |
| 830,000 |
| 907,622 |
| |||
University of Kansas Hosp. Auth. AMBAC | Aaa/AAA | 5.550 | 09/01/2026 |
| 1,355,000 |
| 1,412,831 |
| |||
Wamego, KS PCR (Kansas Gas & Electric Project) MBIA | Aaa/AAA | 5.300 | 06/01/2031 |
| 750,000 |
| 760,283 |
| |||
Wichita, KS G.O. (Series 772) | Aa/AA | 4.500 | 09/01/2017 |
| 815,000 |
| 838,513 |
| |||
Wichita, KS G.O. (Series 772) | Aa/AA | 4.500 | 09/01/2018 |
| 1,375,000 |
| 1,405,937 |
| |||
Wichita, KS (Via Christi Health System) Rev. | NR/A+ | 6.250 | 11/15/2024 |
| 1,500,000 |
| 1,632,000 |
| |||
Wichita, KS (Via Christi Health System) Rev. | NR/A+ | 5.625 | 11/15/2031 |
| 1,000,000 |
| 1,030,900 |
| |||
Wichita, KS Multifamily Hsg. (Northpark II-A) Rev. GNMA | Aaa/NR | 6.125 | 08/20/2028 |
| 1,900,000 |
| 1,942,104 |
| |||
Wichita, KS Multifamily Hsg. (Brentwood Apts.) Rev. | NR/BB | 5.850 | 12/01/2025 |
| 1,000,000 |
| 835,000 |
| |||
Wichita, KS Multifamily Hsg. (Broadmoor Chelsea) Rev. FNMA | NR/AAA | 5.650 | 07/01/2016 |
| 990,000 |
| 1,014,750 |
| |||
#Wichita, KS Multifamily Hsg. (Broadmoor Chelsea) Rev. FNMA | NR/AAA | 5.700 | 07/01/2022 |
| 2,000,000 |
| 2,020,800 |
| |||
Wichita, KS Multifamily Hsg. (Innes Station Apt. 5) Rev. | NR/NR | 6.250 | 03/01/2028 |
| 1,750,000 |
| 1,562,365 |
| |||
Wichita, KS Public Building Commission (State Office Prj.) Rev. AMBAC | Aaa/AAA | 4.000 | 10/01/2014 |
| 1,000,000 |
| 1,010,630 |
| |||
Wichita, KS Water & Sewer Util. Rev. FGIC | Aaa/AAA | 5.250 | 10/01/2018 |
| 1,465,000 |
| 1,604,878 |
| |||
Wichita, KS Water & Sewer Util. Rev. FGIC | Aaa/AAA | 5.000 | 10/01/2028 |
| 500,000 |
| 497,820 |
| |||
|
|
|
| ||||||||
TOTAL KANSAS MUNICIPAL BONDS (COST: $71,263,630) |
| $ | 72,815,344 | ||||||||
|
|
|
| ||||||||
SHORT-TERM SECURITIES (5.4%) | Shares |
|
| ||||||||
Wells Fargo National Tax-Free Money Market | 2,724,000 | $ | 2,724,000 | ||||||||
Goldman Sachs Financial Square Money Market | 1,501,218 |
| 1,501,218 | ||||||||
TOTAL SHORT-TERM SECURITIES (COST: $4,225,218) |
| $ | 4,225,218 | ||||||||
|
|
|
| ||||||||
TOTAL INVESTMENTS IN SECURITIES (COST: $75,488,848) |
| $ | 77,040,562 | ||||||||
OTHER ASSETS LESS LIABILITIES |
|
| 1,437,740 | ||||||||
|
|
|
| ||||||||
NET ASSETS |
| $ | 78,478,302 | ||||||||
* Indicates bonds are segregated by the custodian to cover when-issued or delayed-delivery purchases.
# Indicates bonds are segregated by the custodian to cover initial margin requirements.
Footnote: Non-rated (NR) securities have been determined to be of investment grade quality by the Fund’s Manager.
The accompanying notes are an integral part of these financial statements.
Financial Statements July 30, 2004
Statement of Assets and LiabilitiesJuly 30, 2004
| Assets |
|
|
| ||
| Investment in securities, at value (cost: $75,488,848) | $ | 77,040,562 |
| ||
| Accrued interest receivable |
| 1,111,725 |
| ||
| Accrued dividends receivable |
| 3,175 |
| ||
| Variation margin on futures |
| 695,750 |
| ||
| Prepaid expenses |
| 6,489 |
| ||
|
|
|
|
| ||
| Total Assets | $ | 78,857,701 |
| ||
|
|
|
|
| ||
| Liabilities |
|
|
| ||
| Dividends payable | $ | 240,498 |
| ||
| Accrued expenses |
| 70,917 |
| ||
| Payable for fund shares redeemed |
| 53,620 |
| ||
| Disbursements in excess of demand deposit cash |
| 14,364 |
| ||
|
|
|
|
| ||
| Total Liabilities | $ | 379,399 |
| ||
|
|
|
| |||
|
|
|
| |||
Net Assets | $ | 78,478,302 |
| |||
|
|
|
| |||
|
|
|
| |||
Net assets are represented by: |
|
|
| |||
| Paid-in capital | $ | 87,762,095 |
| ||
| Accumulated undistributed net realized gain (loss) on investments and futures |
| (9,779,869) |
| ||
| Accumulated undistributed net investment income |
| 1,302 |
| ||
| Unrealized depreciation on futures |
| (1,056,940) |
| ||
| Unrealized appreciation on investments |
| 1,551,714 |
| ||
| Total amount representing net assets applicable to |
|
|
| ||
| 7,177,877 outstanding shares of no par common |
|
|
| ||
| stock (unlimited shares authorized) | $ | 78,478,302 |
| ||
|
|
|
| |||
Net asset value per share | $ | 10.93 |
| |||
|
|
| ||||
Public offering price (based on sales charge of 4.25%) | $ | 11.42 | ||||
The accompanying notes are an integral part of these financial statements.
Statement of Operations For year ended July 30, 2004
INVESTMENT INCOME |
|
| ||
| Interest | $ | 4,162,957 | |
| Dividends |
| 28,362 | |
| Total Investment Income | $ | 4,191,319 | |
|
|
| ||
EXPENSES |
|
| ||
| Investment advisory fees | $ | 419,499 | |
| Service fees |
| 209,749 | |
| Administrative service fees |
| 69,347 | |
| Transfer agent fees |
| 96,009 | |
| Accounting service fees |
| 62,560 | |
| Custodian fees |
| 11,185 | |
| Transfer agent out-of-pockets |
| 2,599 | |
| Professional fees |
| 3,108 | |
| Trustees fees |
| 5,457 | |
| Insurance expense |
| 2,864 | |
| Reports to shareholders |
| 12,758 | |
| Registration and filing fees |
| 9,841 | |
| Audit fees |
| 13,767 | |
| Legal Fees |
| 6,000 | |
| Total Expenses | $ | 924,743 | |
| Less expenses waived or absorbed by the Fund’s manager |
| (127,695) | |
| Total Net Expenses | $ | 797,048 | |
|
|
| ||
NET INVESTMENT INCOME | $ | 3,394,271 | ||
|
|
| ||
|
|
| ||
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FUTURES |
|
| ||
| Net realized gain (loss) from: |
|
| |
| Investment transactions | $ | (129,478) | |
| Futures transactions |
| (1,242,185) | |
| Net change in unrealized appreciation (depreciation) of: |
|
| |
| Investments |
| 524,085 | |
| Futures |
| (1,056,940) | |
| Net Realized And Unrealized Gain (Loss) On Investments And Futures | $ | (1,904,518) | |
|
|
| ||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | $ | 1,489,753 | ||
The accompanying notes are an integral part of these financial statements.
Financial Statements July 30, 2004
Statement of Changes in Net Assets
For year ended July 30, 2004 and the year ended July 31, 2003
|
| For The Year Ended July 30, 2004 |
| For The Year Ended July 31, 2003 | ||
|
|
|
|
| ||
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS |
|
|
|
| ||
| Net investment income | $ | 3,394,271 | $ | 4,120,111 | |
| Net realized gain (loss) on investment and futures transactions |
| (1,371,663) |
| (1,968,961) | |
| Net change in unrealized appreciation (depreciation) on investments and futures |
| (532,855) |
| (2,837,348) | |
| Net Increase (Decrease) in Net Assets Resulting From Operations | $ | 1,489,753 | $ | (686,198) | |
|
|
|
|
| ||
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS |
|
|
|
| ||
| Dividends from net investment income ($.45 and $.51 per share, respectively) | $ | (3,394,114) | $ | (4,119,390) | |
| Distributions from net realized gain on investment and futures transactions ($.00 and $.00 per share, respectively) |
| 0 |
| 0 | |
| Total Dividends and Distributions | $ | (3,394,114) | $ | (4,119,390) | |
|
|
|
|
| ||
CAPITAL SHARE TRANSACTIONS |
|
|
|
| ||
| Proceeds from sale of shares | $ | 2,722,009 | $ | 5,132,298 | |
| Proceeds from reinvested dividends |
| 2,171,359 |
| 2,616,300 | |
| Cost of shares redeemed |
| (13,361,122) |
| (13,084,279) | |
| Net Increase (Decrease) in Net Assets Resulting From Capital Share Transactions | $ | (8,467,754) | $ | (5,335,681) | |
|
|
|
|
| ||
TOTAL INCREASE (DECREASE) IN NET ASSETS | $ | (10,372,115) | $ | (10,141,269) | ||
|
|
|
|
| ||
NET ASSETS, BEGINNING OF PERIOD |
| 88,850,417 |
| 98,991,686 | ||
|
|
|
|
| ||
NET ASSETS, END OF PERIOD | $ | 78,478,302 | $ | 88,850,417 | ||
The accompanying notes are an integral part of these financial statements.
Notes to Financial Statements July 30, 2004
Note 1. ORGANIZATION
Business operations - The Kansas Municipal Fund (the “Fund”) is an investment portfolio of Integrity Managed Portfolios (the “Trust”) registered under the Investment Company Act of 1940, as amended, as a non-diversified, open-end management investment company. The Trust may offer multiple portfolios; currently six portfolios are offered. Integrity Managed Portfolios is an unincorporated business trust organized under Massachusetts law on August 10, 1990. The Fund had no operations from that date to November 15, 1990, other than matters relating to organization and registration. On November 15, 1990, the Fund commenced its Public Offering of capital shares. The investment objective of the Fund is to provide its shareholders with as high a level of current income exempt from both federal and Kansas income tax as is consistent with preservation of capital. The Fund will seek to achieve this obj ective by investing primarily in a portfolio of Kansas municipal securities.
Shares of the Fund are offered at net asset value plus a maximum sales charge of 4.25% of the offering price.
Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Investment security valuation - Securities for which quotations are not readily available (which will constitute a majority of the securities held by the Fund) are valued using a matrix system at fair value as determined by Integrity Money Management. The matrix system has been developed based on procedures approved by the Board of Trustees which include consideration of the following: yields or prices of municipal bonds of comparable quality, type of issue, coupon, maturity and rating, and indications as to value from dealers and general market conditions. Because the market value of securities can only be established by agreement between parties in a sales transaction, and because of the uncertainty inherent in the valuation process, the fair values as determined may differ from the values that would have been used had a ready market for the securities existed. The Fund follows industry practice and records security transact ions on the trade date.
The Fund concentrates its investments in a single state. This concentration may result in the Fund investing a relatively high percentage of its assets in a limited number of issuers.
When-issued securities – The Fund may purchase securities on a when-issued basis. Payment and delivery may take place after the customary settlement period for that security. The price of the underlying securities and the date when the securities will be delivered and paid for are fixed at the time the transaction is negotiated. The value of the securities purchased on a when-issued basis are identified as such in the Fund’s Schedule of Investments. With respect to purchase commitments, the Fund identifies securities as segregated in its records with a value at least equal to the amount of the commitment. Losses may arise due to changes in the value of the underlying securities or if the counterparty does not perform under the contract’s terms, or if the issuer does not issue the securities due to political, economic, or other factors.
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 and any net realized gain on investments to its shareholders. Therefore, no provision for income taxes is required. Distributions during the year ended July 30, 2004, were characterized as tax-exempt for tax purposes.
|
| July 30, 2004 |
| July 31, 2003 |
Tax-exempt income | $ | 3,394,114 | $ | 4,119,390 |
Ordinary Income |
| 0 |
| 0 |
Long-term Capital Gains |
| 0 |
| 0 |
Total | $ | 3,394,144 | $ | 4,119,390 |
The Fund has unexpired capital loss carryforwards for tax purposes as of July 30, 2004, totaling $9,779,869, which may be used to offset capital gains. The capital loss carryforward amounts will expire in each of the years ended July 31 as shown in the table below.
Year |
| Unexpired Capital Losses |
2005 | $ | 2,222,213 |
2006 | $ | 1,671,432 |
2007 | $ | 0 |
2008 | $ | 531,392 |
2009 | $ | 568,023 |
2010 | $ | 1,444,860 |
2011 | $ | 1,970,032 |
2012 | $ | 1,371,917 |
For the year ended July 30, 2004, the Fund made no permanent reclassifications to reflect tax character. Reclassifications to paid-in capital relate primarily to expiring capital loss carryforwards.
Distributions to shareholders - Dividends from net investment income, declared daily and paid monthly, are reinvested in additional shares of the Fund at net asset value or paid in cash. Capital gains, when available, are distributed at least annually.
Premiums and discounts - Premiums and discounts on municipal securities are amortized for financial reporting purposes.
Other - Income and expenses are recorded on the accrual basis. Investment transactions are accounted for on the trade date. Realized gains and losses are reported on the identified cost basis. Distributions to shareholders are recorded by the Fund on the ex-dividend date. Income and capital gain distributions are determined in accordance with federal income tax regulations and may differ from net investment income and realized gains determined in accordance with accounting principles generally accepted in the United States of America. These differences are primarily due to differing treatment for market discount, capital loss carryforwards and losses due to wash sales and futures transactions.
Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications to paid-in capital. Temporary book and tax basis differences will reverse in a subsequent period.
Futures contracts - The Fund may purchase and sell financial futures contracts to hedge against changes in the values of tax-exempt municipal 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 or a certain amount of U.S. government or municipal securities 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 (depreciat ion) related to open futures contracts is required to be treated as a realized gain (loss) for Federal income tax purposes.
Securities held in collateralized accounts to cover initial margin requirements on open futures contracts are noted in the Schedule of Investments. The Statement of Assets and Liabilities reflects a receivable or payable for the daily mark to market for variation margin.
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.
At July 30, 2004, the Fund had outstanding futures contracts to sell debt securities as follows:
Contracts to Sell | Expiration Date | Number of Future Contracts | Valuation as of July 30, 2004 | Unrealized Appreciation (Depreciation) |
U.S. Treasury Bonds | 09/2004 | 253 | $695,750 | ($1,056,940) |
Use of estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 July 30, 2004, there were unlimited shares of no par authorized; 7,177,877 and 7,941,182 shares were outstanding at July 30, 2004 and July 31, 2003, respectively.
Transactions in capital shares were as follows:
| Shares | |
| For The Year Ended July 30, 2004 | For The Year Ended July 31, 2003 |
| ||
| ||
Shares sold | 245,359 | 443,873 |
Shares issued on reinvestment of dividends | 195,546 | 226,702 |
Shares redeemed | (1,204,210) | (1,132,977) |
Net increase (decrease) | (763,305) | (462,402) |
Note 4. INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Integrity Money Management, Inc., the Fund’s investment adviser; Integrity Funds Distributor, Inc., the Fund’s underwriter; and Integrity Fund Services, Inc., the Fund’s transfer, accounting, and administrative services agent, are subsidiaries of Integrity Mutual Funds, Inc., the Fund’s sponsor.
The Fund has engaged Integrity 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 0.50% of the Fund’s average daily net assets. The Fund has recognized $291,804 of investment advisory fees after partial waiver for the year ended July 30, 2004. The Fund has a payable to Integrity Money Management, Inc. of $20,043 at July 30, 2004, for investment advisory fees. Certain officers and trustees of the Fund are also officers and directors of the investment adviser.
Under the terms of the advisory agreement, the investment adviser has agreed to pay all the expenses of the Fund (excluding taxes and brokerage fees and commissions, if any) that exceed 1.25% of the Fund’s average daily net assets on an annual basis up to amount of the investment advisor and management fee. The investment adviser and underwriter may also voluntarily waive fees or reimurse expenses not required under the adisory or other contracts from time to time. Accordingly, after fee waivers and expense reimbursements, the Fund’s actual total annual operating expenses were 0.95% for the fiscal year ended July 31, 2003.
The Fund pays an annual service fee to Integrity Funds Distributor, Inc., its principal underwriter, for certain expenses incurred in connection with the distribution of the Fund’s shares. The annual fee paid to Integrity Funds Distributor, Inc. is calculated daily and paid monthly by the Fund at the annual rate of 0.25% of the average daily net assets of the Fund. The Fund has recognized $209,749 of service fee expenses for the year ended July 30, 2004. The Fund has a payable to Integrity Funds Distributor, Inc. of $16,480 at July 30, 2004, for service fees.
Integrity Fund Services, 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 $25 million, and 0.10% of the Fund’s net assets in excess of $50 million, with a minimum of $1,500 per month plus reimbursement of out-of-pocket expenses. An additional fee with a minimum $500 per month is charged for each additional share class. The Fund has recognized $96,009 of transfer agency fees and expenses for the year ended July 30, 2004. The Fund has a payable to Integrity Fund Services, Inc. of $7,675 at July 30, 2004, for transfer agency fees. Integrity Fund Services, 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 t he 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, together with reimbursement of out-of-pocket expenses. An additional minimum fee of $500 per month is charged by Integrity Fund Services for each additional share class. The Fund has recognized $62,560 of accounting service fees for the year ended July 30, 2004. The Fund has a payable to Integrity Fund Services, Inc. of $5,053 at July 30, 2004, for accounting service fees. Integrity Fund Services also acts as administrator for the Fund. The Fund pays to Integrity Fund Services a monthly fee calculated at the rate of 0.10% of average daily net assets with a minimum of $1,500 per month plus out-of-pocket expenses. An additional minimum fee of $500 per month is charged by Integrity Fund Services for each additional share class. The Fund has recognized $69,347 of administrative service fees for th e year ended July 30, 2004. The Fund has a payable to Integrity Fund Services, Inc. of $6,592 at July 30, 2004, for administrative service fees.
Note 5. INVESTMENT SECURITY TRANSACTIONS
The cost of purchases and proceeds from sales of investment securities (excluding short-term securities) aggregated $13,605,730 and $25,052,375, respectively, for the year ended July 30, 2004.
Note 6. INVESTMENT IN SECURITIES
At July 30, 2004, the aggregate cost of securities for federal income tax purposes was substantially the same for financial reporting purposes at $75,488,848. The net unrealized appreciation of investments based on the cost was $1,551,714, which is comprised of $2,288,318 aggregate gross unrealized appreciation and $736,604 aggregate gross unrealized depreciation.
Financial Highlights
Selected per share data and ratios for the period indicated
|
| For The Year Ended July 30, 2004 |
| For The Year Ended July 31, 2003 |
| For The Year Ended July 31, 2002 |
| For The Year Ended July 31, 2001 |
| For The Year Ended July 31, 2000 | ||
NET ASSET VALUE, BEGINNING OF PERIOD | $ | 11.19 | $ | 11.78 | $ | 11.92 | $ | 11.58 | $ | 11.98 | ||
|
|
|
|
|
|
|
|
|
|
| ||
Income from Investment Operations: |
|
|
|
|
|
|
|
|
|
| ||
| Net investment income | $ | .45 | $ | .51 | $ | .55 | $ | .58 | $ | .59 | |
| Net realized and unrealized gain (loss) on investment and futures transactions |
| (.26) |
| (.59) |
| (.14) |
| .34 |
| (.40) | |
| Total Income (Loss) From Investment Operations | $ | .19 | $ | (.08) | $ | .41 | $ | .92 | $ | .19 | |
|
|
|
|
|
|
|
|
|
|
| ||
Less Distributions: |
|
|
|
|
|
|
|
|
|
| ||
| Dividends from net investment income | $ | (.45) | $ | (.51) | $ | (.55) |
| (.58) | $ | (.59) | |
| Distributions from net capital gains |
| .00 |
| .00 |
| .00 |
| .00 |
| .00 | |
| Total Distributions | $ | (.45) | $ | (.51) | $ | (.55) | $ | (.58) | $ | (.59) | |
|
|
|
|
|
|
|
|
|
|
| ||
NET ASSET VALUE, END OF PERIOD | $ | 10.93 | $ | 11.19 | $ | 11.78 | $ | 11.92 | $ | 11.58 | ||
|
|
|
|
|
|
|
|
|
|
| ||
Total Return |
| 1.71%(A) |
| (0.75%)(A) |
| 3.48%(A) |
| 8.13%(A) |
| 1.69%(A) | ||
|
|
|
|
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
|
| ||
RATIOS/SUPPLEMENTAL DATA: |
|
|
|
|
|
|
|
|
|
| ||
| Net assets, end of period (in thousands) | $ | 78,478 | $ | 88,850 | $ | 98,992 | $ | 103,806 | $ | 103,555 | |
| Ratio of net expenses (after expense assumption) to average net assets |
| 0.95%(B) |
| 0.95%(B) |
| 0.95%(B) |
| 0.95%(B) |
| 0.95%(B) | |
| Ratio of net investment income to average net assets |
| 4.05% |
| 4.39% |
| 4.61% |
| 4.94% |
| 5.07% | |
| Portfolio turnover rate |
| 17.29% |
| 23.78% |
| 5.74% |
| 10.28% |
| 8.21% | |
(A) Excludes maximum sales charge of 4.25%.
(B) During the periods indicated above, Integrity Mutual Funds, Inc. or Integrity Money Management, Inc. assumed/waived expenses of $127,695, $52,479, $22,656, $37,939, and $38,581, respectively. If the expenses had not been assumed/waived, the annualized ratios of total expenses to average net assets would have been 1.10%, 1.01%, 0.97%, 0.99%, and 0.99%, respectively.
Total return represents the rate that an investor would have earned or lost on an investment in the Fund assuming reinvestment of all dividends and distributions.
The accompanying notes are an integral part of these financial statements.
Tax Information For The Year Ended July 30, 2004 (Unaudited)
We are required to advise you within 60 days of the Fund’s fiscal year-end regarding the federal tax status of distributions received by shareholders during such fiscal year. The distributions made during the fiscal year by the Fund were earned from the following sources:
|
|
| Dividends and Distributions Per Share | |||||
To Shareholders of Record |
| Payment Date |
| From Net Investment Income |
| From Net Realized Short-Term Gains |
| From Net Realized Long-Term Gains |
August 29, 2003 |
| August 29, 2003 | $ | .038699 |
| - |
| - |
September 30, 2003 |
| September 30, 2003 | $ | .039842 |
| - |
| - |
October 31, 2003 |
| October 31, 2003 | $ | .038513 |
| - |
| - |
November 28, 2003 |
| November 28, 2003 | $ | .035785 |
| - |
| - |
December 31, 2003 |
| December 31, 2003 | $ | .039620 |
| - |
| - |
January 30, 2004 |
| January 30, 2004 | $ | .036752 |
| - |
| - |
February 27, 2004 |
| February 27, 2004 | $ | .033536 |
| - |
| - |
March 31, 2004 |
| March 31, 2004 | $ | .041111 |
| - |
| - |
April 30, 2004 |
| April 30, 2004 | $ | .037802 |
| - |
| - |
May 28, 2004 |
| May 28, 2004 | $ | .035551 |
| - |
| - |
June 30, 2004 |
| June 30, 2004 | $ | .038663 |
| - |
| - |
July 30, 2004 |
| July 30, 2004 | $ | .033310 |
| - |
| - |
Shareholders should consult their tax advisors.
INDEPENDENT AUDITOR’S REPORT
To the Shareholders and Board of Trustees of the Kansas Municipal Fund.
We have audited the accompanying statement of assets and liabilities of the Kansas Municipal Fund (one of the portfolios constituting the Integrity Managed Portfolios), including the schedule of investments as of July 30, 2004, the related statement of operations for the year then ended, the statement of changes in net assets for the years ended July 30, 2004 and July 31, 2003, and the financial highlights for the year ended July 30, 2004 and each of the four years in the period ended July 31, 2003. 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 the standards of the Public Company Accounting Oversight Board (United States). 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 July 30, 2004, 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 the Kansas Municipal Fund of the Integrity Managed Portfolios as of July 30, 2004, the results of its operations, the changes in its net assets, and the financial highlights for each of the fiscal periods presented, in conformity with accounting principles generally accepted in the United States of America.
BRADY, MARTZ & ASSOCIATES, P.C.
Minot, North Dakota USA
September 02, 2004
Kansas Insured Intermediate Fund
Dear Shareholder:
Enclosed is the annual report of the operations of the Kansas Insured Intermediate Fund (the "Fund") for the year ended July 30, 2004. The Fund's portfolio and related financial statements are presented within for your review.
The global recovery, centered in the U.S. and Asia continues to improve as evidenced by the recent Federal Reserve hike in the Federal Funds Rate from a historic low of 1% to 1.25% on June 30th. The increase was widely anticipated as recent economic and labor market conditions have improved. The environment of rising profits, low interest rates, a weak dollar, accelerating domestic retail sales, and strengthening exports bodes well for a further accommodative Federal Reserve.
The Federal Reserve has taken center stage as it prepares to shift away from its stimulative monetary stance to a normalization of fed funds.
Several crucial questions remain unresolved:
What will constitute a neutral fed fund rate?
Will the normalization process be faster or slower than the market is currently discounting?
How much damage will higher rates cause the economy and market?
While no one knows for certain, recent verbiage from the Federal Reserve states: “With underlying inflation still expected to be relatively low, the Committee believes that policy accommodation can be removed at a pace that is likely to be measured. Nonetheless, the Committee will respond to changes in economic prospects as needed to fulfill its obligation to maintain price stability.”
Municipals during the period remained range bound with yields on twenty-year AAA general obligations yielding 4.75% at the beginning of the period and ending the period at 4.77%. While the yields on the twenty-year municipals appear relatively unchanged during the period, they were quite volatile, reaching a low of 4.33% and a high of 5.00% (Source Municipal Market Data).
The Fund’s shorter duration of 4.3 years and higher average overall coupon of 5.14% contributed to relative returns as interest rates increased during the period.
Several of the Fund’s holdings (e.g. Wichita, State Office Project 4.00% due 2014, Kansas Turnpike 4.00% due 2014) under-performed the municipal sector hampering relative performance.
Having been undervalued relative to U.S. Treasuries for some time, municipals have started to rebound in recent months as municipal supply has declined. This out-performance should continue as interest rates rise, further dampening municipal supply.
During the period the Fund utilized defensive positions designed to provide share price stability. U.S. Treasury futures were used to hedge a portion of the portfolio, stabilizing the Fund’s share price as Treasury yields advanced during the period and tempering them as Treasury yields declined. The Kansas Insured Intermediate Fund began the year at $11.60 per share and ended the period at $11.44 per share for a total return of 2.31% (without sales charge). This compares to the Lehman Brothers Municipal Seven-Year Maturity Bond Index’s return of 4.55% for the period. Risk management is important in this market environment.
An important part of the Fund’s strategy includes searching the primary and secondary markets for high quality double tax-exempt issues. Credit quality for the period ended was: AAA 100%.
Income exempt from federal and state income taxes with preservation of capital remain the primary objectives of the Fund.
If you would like more frequent updates, visit our website at www.integritymf.com for daily prices along with pertinent Fund information.
Sincerely,
The Portfolio Management Team
The views expressed are those of Monte Avery, Chief Portfolio Strategist with Integrity Mutual Funds. The views are subject to change at any time in response to changing circumstances in the market and are not intended to predict or guarantee the future performance of any individual security, market sector or the markets generally, or any Integrity Mutual Fund.
Terms & Definitions July 30, 2004 (Unaudited)
Appreciation
The increase in value of an asset.
Average Annual Total Return
A standardized measurement of the return (yield and appreciation) earned by the fund on an annual basis, assuming all distributions are reinvested.
Coupon Rate or Face Rate
The rate of interest payable annually, based on the face amount of the bond; expressed as a percentage.
Depreciation
The decrease in value of an asset.
Lehman Brothers Municipal Bond Index
An unmanaged list of long-term, fixed-rate, investment-grade, tax-exempt bonds representative of the municipal bond market. The index does not take into account brokerage commissions or other costs, may include bonds different from those in the fund, and may pose different risks than the fund.
Market Value
The actual (or estimated) price at which a bond trades in the market place.
Maturity
A measure of the term or life of a bond in years. When a bond “matures,” the issuer repays the principal.
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 sales charge.
Quality Ratings
A designation assigned by independent rating companies to give a relative indication of a bond’s credit worthiness. “AAA,” “AA,” “A,” and “BBB” indicate investment grade securities. Ratings can range from a high of “AAA” to a low of “D”.
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.
July 30, 2004 (Unaudited)
Insert Pie Charts
PERFORMANCE AND COMPOSITION
PORTFOLIO QUALITY RATINGS
(based on Total Long-Term Investments)
AAA | 100% |
Quality ratings reflect the financial strength of the issuer. They are assigned by independent rating services such as Moody’s Investors Services and Standard & Poor’s. Non-rated bonds have been determined to be of appropriate quality for the portfolio by Integrity Money Management (formerly known as Ranson Capital Corporation), the investment adviser.
These percentages are subject to change.
PORTFOLIO MARKET SECTORS
(As a % of Net Assets)
HC-Health Care | 24.8% |
S-School | 22.6% |
H-Housing | 18.3% |
W/S-Water/Sewer | 10.4% |
G-Government | 7.9% |
O-Other | 7.1% |
U-Utilities | 4.7% |
T-Transportation | 4.2% |
Market sectors are breakdowns of the Fund’s portfolio holdings into specific investment classes.
These percentages are subject to change.
July 30, 2004 (Unaudited)
DISCLOSURE OF FUND EXPENSES
These examples are intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.
EXAMPLE 1:
This example assumes that you invest $1,000 in the Fund for the time periods indicated and then either redeem or do not redeem all of your shares at the end of those periods. The example also is based on the Fund’s actual expenses of 0.75% and rate of return for the period of 2.31%. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
| Redemption | No Redemption |
Share Class | A | A |
Annual expenses | $34.88 | $34.88 |
Account value of an initial investment of $1,000 as of the end of the period would be $994.96.
EXAMPLE 2:
This example assumes that you invest $1,000 in the Fund for the time periods indicated and then either redeem or do not redeem all of your shares at the end of those periods. The example is based on the Fund’s actual operating expenses of 0.75% and also assumes that your investment has a 5.00% return. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
| Redemption | No Redemption |
Share Class | A | A |
Annual expenses | $34.98 | $34.98 |
Account value of an initial investment of $1,000 as of the end of the period would be $1,021.13.
July 30, 2004 (Unaudited)
AVERAGE ANNUAL TOTAL RETURNS
| For periods ending July 30, 2004 | |||
|
|
|
| Since Inception (November 23, 1992) |
Kansas Insured Intermediate Fund | 1 year | 5 year | 10 year | |
Without sales charge | 2.31% | 3.30% | 3.95% | 4.30% |
With sales charge (2.75%) | (0.52)% | 2.72% | 3.66% | 4.05% |
| ||||
Lehman Brothers Municipal Seven-Year Maturity Bond Index | 1 year | 5 year | 10 year | Since Inception (November 23, 1992) |
| 4.55% | 5.84% | 2.88% | 5.91% |
Performance data quoted above is historical. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance data quoted. The principal value and investment return of an investment will fluctuate so that your shares, when redeemed, may be worth more or less than the original cost. You can obtain performance data current to the most recent month end (available within seven business days of the most recent month end) by calling 1-800-276-1262.
You should consider the Fund's investment objectives, risks, and charges and expenses carefully before investing. For this and other important information, please obtain a fund prospectus at no cost from your financial advisor and read it carefully before investing.
The table does not reflect the deduction of taxes that a shareholder would pay on Fund distributions and redemption of Fund shares.
July 30, 2004 (Unaudited)
COMPARATIVE INDEX GRAPH (INSERT HERE)
Comparison of change in value of $10,000 investment in the Kansas Insured Intermediate Fund and the Lehman Brothers Municipal Seven-Year Maturity Bond Index
| Kansas Insured Intermediate Fund w/o Sales Charge | Kansas Insured Intermediate Fund w/ Max Sales Charge | Lehman Brothers Municipal Seven-Year Maturity Bond Index |
11/23/1992 | $10,000 | $9,725 | $10,000 |
1993 | $10,829 | $10,531 | $10,694 |
1994 | $11,025 | $10,722 | $10,982 |
1995 | $11,656 | $11,335 | $11,868 |
1996 | $12,326 | $11,987 | $12,471 |
1997 | $12,912 | $12,557 | $13,548 |
1998 | $13,321 | $12,955 | $14,260 |
1999 | $13,815 | $13,435 | $14,729 |
2000 | $14,112 | $13,724 | $15,405 |
2001 | $15,062 | $14,648 | $16,819 |
2002 | $15,682 | $15,251 | $18,018 |
2003 | $15,880 | $15,443 | $18,712 |
2004 | $16,359 | $15,906 | $19,561 |
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. The Lehman Brothers index is a national index representative of the national municipal bond market, whereas the Fund concentrates its investments in Kansas municipal bonds. 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 co sts and other expenses. All Fund and benchmark returns include reinvested dividends. The Fund’s share price, yields and total returns will vary, so that shares, when redeemed, may be worth more or less than their original cost.
July 30, 2004 (Unaudited)
MANAGEMENT OF THE FUND
The Board of Integrity Managed Portfolios (formerly known as Ranson Managed Portfolios) consists of four Trustees. These same individuals, unless otherwise noted, also serve as Directors or Trustees for all of the funds in the Integrity family of funds, the six series of Integrity Managed Portfolios, and the eight series of The Integrity Funds. Three Trustees (75% of the total) have no affiliation or business connection with the Investment Adviser or any of its affiliates. These are the “independent” Trustees. The remaining Trustees and executive officers are “interested” by virtue of their affiliation with the Investment Adviser and its affiliates.
The Independent Trustees of the Fund, their term of office and length of time served, their principal occupation(s) during the past five years, the number of portfolios overseen in the Fund Complex by each Independent Trustee and other directorships, if any, held outside the Fund Complex, are shown below.
INDEPENDENT TRUSTEES
Name, Address and Age | Position(s) Held with Registrant | Term and Length Served | Principal Occupation(s) During Past 5 Years | Number of Portfolios Overseen In The Fund Complex * | Other Directorships Held Outside The Fund Complex |
Lynn W. Aas | Trustee | Since January 1996 | Retired; Attorney; Director, ND Tax-Free Fund, Inc. (since December 1994), Montana Tax-Free Fund, Inc. (since December 1994), South Dakota Tax-Free Fund, Inc. (April 1995 to June 2004) Integrity Fund of Funds, Inc. (since August 1994), Integrity Small-Cap Fund of Funds, Inc. (September 1998 to June 2003); Trustee, Integrity Managed Portfolios (since January 1996) and The Integrity Funds (since September 2003); and Director, First Western Bank & Trust (until May 2002). | 17 | None |
Orlin W. Backes 69 | Trustee | Since January 1996 | Attorney, McGee, Hankla, Backes & Dobrovolny, P.C.; Director, ND Tax-Free Fund, Inc. (since April 1995), Montana Tax-Free Fund, Inc. (since April 1995), South Dakota Tax-Free Fund, Inc. (April 1995 to June 2004), Integrity Fund of Funds, Inc. (since April 1995), Integrity Small-Cap Fund of Funds, Inc. (September 1998 to June 2003); Trustee, Integrity Managed Portfolios (since January 1996) and The Integrity Funds (since May 2003); and Director, First Western Bank & Trust. | 17 | Director, First Western Bank & Trust |
R. James Maxson | Trustee | Since January 1999 | Attorney, Maxson Law Office (since November 2002), Attorney, McGee, Hankla, Backes & Dobrovolny, P.C. (April 2000 to November 2002); Attorney, Farhart, Lian and Maxson, P.C. (March 1976 to March 2000); Director, ND Tax-Free Fund, Inc. (since January 1999), Montana Tax-Free Fund, Inc. (since January 1999), South Dakota Tax-Free Fund, Inc. (January 1999 to June 2004), Integrity Fund of Funds, Inc. (since January 1999), Integrity Small-Cap Fund of Funds, Inc. (January 1999 to June 2003); and Trustee, Integrity Managed Portfolios (since January 1999) and The Integrity Funds (since May 2003). | 17 | None |
* The Fund Complex consists of the three funds in the Integrity family of funds, the six series of Integrity Managed Portfolios, and the eight series of The Integrity Funds.
Trustees (Directors for Corporate Funds) and officers of the Fund serve until their resignation, removal or retirement.
The Statement of Additional Information contains more information about the Fund’s Trustees and is available without charge upon request, by calling Integrity Funds Distributor, Inc. at 1(800) 601-5593
July 30, 2004 (Unaudited)
The Interested Trustees and executive officers of the Fund, their term of office and length of time served, their principal occupation(s) during the past five years, the number of portfolios overseen in the Fund Complex by each Interested Trustee and executive officer, and other directorships, if any, held outside the Fund Complex, are shown below.
INTERESTED TRUSTEES AND EXECUTIVE OFFICERS
Name, Address and Age | Position(s) Held with Registrant | Term and Length Served | Principal Occupation(s) During Past 5 Years | Number of Portfolios Overseen In The Fund Complex * | Other Directorships Held Outside The Fund Complex |
**Robert E. Walstad | Trustee, Chairman, and President | Since January 1996 | Director (since September 1987), President (September 1987 to October 2001) (September 2002 to May 2003), Integrity Mutual Funds, Inc.; Director, President and Treasurer, Integrity Money Management, Inc., ND Capital, Inc., Integrity Fund Services, Inc., ND Tax-Free Fund, Inc., Montana Tax-Free Fund, Inc., South Dakota Tax-Free Fund, Inc. (April 1995 to June 2004), Integrity Fund of Funds, Inc., Integrity Small-Cap Fund of Funds, Inc. (September 1998 to June 2003); Trustee, Chairman, President and Treasurer, Integrity Managed Portfolios (since January 1996) and The Integrity Funds (since May 2003).; Director, President (until August 2003), CEO, and Treasurer, Integrity Funds Distributor, Inc.; Director (October 1999 to June 2003), President (October 1999 to October 2001), Magic Internet Services, Inc.; Director (May 2000 to June 2003), President (May 2000 to November 2001) (October 2002 to June 2003), ARM Securities Corporation; and Director, CEO, Chairma n (since January 2002), President (since September 2002), Capital Financial Services, Inc. | 17 | Director, Capital Financial Services, Inc. |
**Peter A. Quist | Vice President and Secretary | Since January 1996 | Attorney; Director and Vice President, Integrity Mutual Funds, Inc.; Director, Vice President and Secretary, Integrity Money Management, Inc. (formerly known as ND Money Management, Inc.), ND Capital, Inc., Integrity Fund Services, Inc., (formerly known as ND Resources, Inc.), ND Tax-Free Fund, Inc., Montana Tax-Free Fund, Inc., South Dakota Tax-Free Fund, Inc. (April 1995 to June 2004), Integrity Fund of Funds, Inc., Integrity Small-Cap Fund of Funds, Inc. (September 1998 to June 2003), Integrity Funds Distributor, Inc. (formerly known as Ranson Capital Corporation) (since January 1996); Vice President and Secretary, Integrity Managed Portfolios (since January 1996) and The Integrity Funds (since May 2003); and Director, ARM Securities Corporation (May 2000 to June 2003). | 3 | None |
**Brent M. Wheeler 1 Main Street North Minot, ND 58703 33 | Treasurer | Since May 2004 | Fund Accountant (May 1994 to December 1997) Sr. Fund Accountant (December 1997 to June 1998) Fund Accounting Manager (Since June 1998), Integrity Mutual Funds, Inc.; Treasurer (Since May 2004), Integrity Funds, Integrity Managed Portfolios, Integrity Mutual Funds. | None | Minot State University Alumni Association |
* The Fund Complex consists of the three funds in the Integrity family of funds, the six series of Integrity Managed Portfolios, and the eight series of The Integrity Funds.
** Trustees who are “interested persons” of the Funds as defined in the Investment Company Act of 1940. Messrs. Quist, Walstad and Wheeler are interested persons by virtue of being officers and trustees of the Fund’s Investment Adviser and Principal Underwriter.
Trustees (Directors for Corporate Funds) and officers of the Fund serve until their resignation, removal or retirement.
The Statement of Additional Information contains more information about the Fund’s Trustees and is available without charge upon request, by calling Integrity Funds Distributor, Inc. at 1(800) 601-5593
July 30, 2004 (Unaudited)
INDEPENDENT TRUSTEES
[PHOTO] | [PHOTO] | [PHOTO] |
Lynn W. Aas | Orlin W. Backes | R. James Maxson |
Trustee | Trustee | Trustee |
INTERESTED TRUSTEES AND EXECUTIVE OFFICERS
[PHOTO] | [PHOTO] | [PHOTO] |
Robert E. Walstad | Peter A. Quist | Brent M. Wheeler |
Chairman | Vice-President | Treasurer |
President | Secretary |
|
Trustee |
|
|
Schedule of Investments July 30, 2004
Name of Issuer | Rating (Unaudited) Moody’s/S&P | Coupon Rate | Maturity |
| Principal Amount |
| Market Value |
| |||
|
|
|
|
|
|
|
|
| |||
KANSAS MUNICIPAL BOND (92.8%) |
|
|
|
|
|
|
|
| |||
Burlington, KS PCR Gas & Elec. MBIA | Aaa/AAA | 5.300% | 06/01/2031 | $ | 1,000,000 | $ | 1,023,950 |
| |||
Butler Cty., KS Public Bldg. MBIA | Aaa/NR | 5.550 | 10/01/2021 |
| 300,000 |
| 328,854 |
| |||
Coffeyville, KS Pub. Bldg. (Coffeyville Medl. Center) Rev. AMBAC | Aaa/AAA | 5.000 | 08/01/2022 |
| 250,000 |
| 260,115 |
| |||
Dodge, KS School District #443 FGIC | Aaa/NR | 5.000 | 09/01/2011 |
| 1,000,000 |
| 1,101,850 |
| |||
Douglas Cty., KS Sales Tax Ref. AMBAC | Aaa/NR | 5.000 | 08/01/2019 |
| 1,000,000 |
| 1,056,340 |
| |||
#Johnson Cty., KS USD #229 (Blue Valley) G.O. | Aa-1/AA | 5.000 | 10/01/2018 |
| 2,600,000 |
| 2,729,324 |
| |||
Johnson Cty., KS Single Family Mrtge. Rev. | Aa/NR | 7.100 | 05/01/2012 |
| 260,000 |
| 266,682 |
| |||
Kansas City, KS Mrtge. Rev. GNMA | Aaa/NR | 5.900 | 11/01/2027 |
| 560,000 |
| 572,583 |
| |||
*Kansas City, KS Util. Syst. Ref. & Impvt. AMBAC | Aaa/AAA | 6.300 | 09/01/2016 |
| 580,000 |
| 582,546 |
| |||
*Kansas City, KS Util. Syst. Ref. & Impvt. FGIC | Aaa/AAA | 6.375 | 09/01/2023 |
| 1,525,000 |
| 1,564,284 |
| |||
*Kansas City, KS Util. Syst. Ref. & Impvt. FGIC | Aaa/AAA | 6.375 | 09/01/2023 |
| 5,830,000 |
| 5,978,199 |
| |||
KS Department of Transportation Highway Rev. | Aa/AA+ | 5.000 | 09/01/2006 |
| 1,500,000 |
| 1,591,965 |
| |||
*KS Devl. Finance Auth. (Dept. Admin. 7th & Harrison PJ) AMBAC | Aaa/AAA | 5.750 | 12/01/2027 |
| 2,250,000 |
| 2,567,115 |
| |||
KS Devl. Finance Auth. (Dept. of Admin. Capitol Restoration) Lease Rev. FSA | Aaa/AAA | 5.375 | 10/01/2020 |
| 370,000 |
| 400,510 |
| |||
KS Devl. Finance Auth. (Juvenile Justice) Rev. MBIA | Aaa/AAA | 5.250 | 05/01/2013 |
| 570,000 |
| 623,466 |
| |||
KS Devl. Finance Auth. (Sec. 8) Rev. Ref. MBIA | Aaa/AAA | 6.400 | 01/01/2024 |
| 555,000 |
| 564,352 |
| |||
KS Devl. Finance Auth. (Board of Regents) Univ. Hsg. MBIA | Aaa/AAA | 5.000 | 04/01/2005 |
| 250,000 |
| 256,507 |
| |||
KS Devl. Finance Auth. (Water Pollution Control) Rev. | Aaa/AAA | 5.250 | 05/01/2011 |
| 2,000,000 |
| 2,184,280 |
| |||
KS Devl. Finance Auth. (KS St. Projects) Rev. MBIA | Aaa/AAA | 5.000 | 10/01/2017 |
| 250,000 |
| 263,423 |
| |||
KS Devl. Finance Auth. (Water Pollution Control) Rev. | Aaa/AAA | 5.250 | 11/01/2022 |
| 1,000,000 |
| 1,072,840.00 |
| |||
KS Devl. Finance Auth. (Water Pollution Control) | Aaa/AAA | 5.000 | 11/01/2023 |
| 1,000,000 |
| 1,033,140 |
| |||
*KS Devl. Finance Auth. (Park Apts.) Multifamily Hsg. Rev. | NR/AAA | 6.000 | 12/01/2021 |
| 1,975,000 |
| 2,032,157 |
| |||
KS Devl. Finance Auth. (Oak Ridge Park Apt.) | NR/NR | 6.500 | 02/01/2018 |
| 1,345,000 |
| 1,301,637 |
| |||
KS Devl. Finance Auth. (Oak Ridge Park Apt.) | NR/NR | 6.625 | 08/01/2029 |
| 1,000,000 |
| 959,040 |
| |||
KS Devl. Finance Auth. (Indian Ridge Apts.) | NR/NR | 6.000 | 01/01/2028 |
| 1,040,000 |
| 886,486 |
| |||
KS Devl. Finance Auth. (Stormont Vail) Hlth. Care Rev. MBIA | Aaa/AAA | 5.800 | 11/15/2021 |
| 430,000 |
| 470,639 |
| |||
KS Devl. Finance Auth. (Stormont Vail) Hlth. Care Rev. MBIA | Aaa/NR | 1.330 | 11/15/2023 |
| 4,000,000 |
| 4,000,000 |
| |||
KS Devl. Finance Auth. (Sisters of Charity) Hlth. Rev. | Aa/AA | 6.125 | 12/01/2020 |
| 1,000,000 |
| 1,103,200 |
| |||
KS Devl. Finance Auth. (Stormont Vail) Hlth. Care Rev. MBIA | Aaa/AAA | 5.375 | 11/15/2024 |
| 1,500,000 |
| 1,570,560 |
| |||
KS Devl. Finance Auth. (Stormont Vail) Hlth. Care Rev. MBIA | Aaa/AAA | 5.800 | 11/15/2016 |
| 455,000 |
| 489,362 |
| |||
KS Turnpike Auth. Rev. FSA | Aaa/AAA | 5.000 | 09/01/2024 |
| 530,000 |
| 546,541 |
| |||
KS Turnpike Auth. Rev. FSA | Aaa/AAA | 5.000 | 09/01/2025 |
| 750,000 |
| 763,305 |
| |||
KS Turnpike Auth. Rev. AMBAC | Aaa/AAA | 4.000 | 09/01/2015 |
| 500,000 |
| 499,045 |
| |||
Lawrence, KS (Unlimited Tax) Refunding G.O. | Aa/NR | 5.375 | 09/01/2020 |
| 500,000 |
| 541,595 |
| |||
Lawrence, KS (Memorial Hospital) Rev. ASGUA | NR/AA | 5.750 | 07/01/2024 |
| 1,000,000 |
| 1,050,360 |
| |||
Newton, KS (Newton) Hosp. Rev. | NR/BBB- | 5.700 | 11/15/2018 |
| 1,000,000 |
| 1,028,050 |
| |||
Newton, KS (Newton) Hosp. Rev. ACA | NR/A | 5.750 | 11/15/2024 |
| 500,000 |
| 518,065 |
| |||
Olathe, KS (Luth. Gd. Sam.) Ref. AMBAC | Aaa/AAA | 6.000 | 05/01/2019 |
| 900,000 |
| 939,861 |
| |||
Olathe, KS (Medl. Ctr.) Hlth. Facs. Rev. | Aaa/AAA | 5.500 | 09/01/2025 |
| 235,000 |
| 246,604 |
| |||
Olathe, KS (Medl. Ctr.) Hlth. Facs. Rev. AMBAC | Aaa/AAA | 5.500 | 09/01/2030 |
| 500,000 |
| 516,865 |
| |||
#Olathe, KS Multifamily Hsg. (Bristol Pointe) Rev. Ref. FNMA | NR/AAA | 5.700 | 11/01/2027 |
| 2,210,000 |
| 2,248,940 |
| |||
Pratt, KS Elec. Util. Syst. Rev. Ref. & Impvt. AMBAC | Aaa/AAA | 6.600 | 11/01/2007 |
| 825,000 |
| 902,500 |
| |||
Republic Cty., KS Sales Tax FGIC | Aaa/NR | 5.000 | 06/01/2015 |
| 260,000 |
| 280,795 |
| |||
Republic Cty., KS Sales Tax FGIC | Aaa/NR | 5.000 | 06/01/2016 |
| 275,000 |
| 293,782 |
| |||
Republic Cty., KS Sales Tax FGIC | Aaa/NR | 5.000 | 06/01/2017 |
| 290,000 |
| 307,951 |
| |||
Scott Cty, KS USD #466 FGIC | Aaa/AAA | 5.250 | 09/01/2017 |
| 900,000 |
| 983,844 |
| |||
Sedgwick Cty., KS (Catholic Care Center, Inc.) Hlth. Care Rev. | NR/A | 5.800 | 11/15/2026 |
| 1,000,000 |
| 1,046,390 |
| |||
Topeka Public Bldg. Comm. (10th & Jackson Prj.) MBIA | Aaa/AAA | 5.625 | 06/01/2026 |
| 1,435,000 |
| 1,529,036 |
| |||
Topeka Public Bldg. Comm. (10th & Jackson Prj.) MBIA | Aaa/AAA | 5.625 | 06/01/2031 |
| 1,200,000 |
| 1,259,976 |
| |||
University of Kansas Hosp. Auth. AMBAC | Aaa/AAA | 5.700 | 09/01/2020 |
| 830,000 |
| 907,622 |
| |||
University of Kansas Hosp. Auth. AMBAC | Aaa/AAA | 5.550 | 09/01/2026 |
| 1,355,000 |
| 1,412,831 |
| |||
Wamego, KS PCR (Kansas Gas & Electric Project) MBIA | Aaa/AAA | 5.300 | 06/01/2031 |
| 750,000 |
| 760,283 |
| |||
Wichita, KS G.O. (Series 772) | Aa/AA | 4.500 | 09/01/2017 |
| 815,000 |
| 838,513 |
| |||
Wichita, KS G.O. (Series 772) | Aa/AA | 4.500 | 09/01/2018 |
| 1,375,000 |
| 1,405,937 |
| |||
Wichita, KS (Via Christi Health System) Rev. | NR/A+ | 6.250 | 11/15/2024 |
| 1,500,000 |
| 1,632,000 |
| |||
Wichita, KS (Via Christi Health System) Rev. | NR/A+ | 5.625 | 11/15/2031 |
| 1,000,000 |
| 1,030,900 |
| |||
Wichita, KS Multifamily Hsg. (Northpark II-A) Rev. GNMA | Aaa/NR | 6.125 | 08/20/2028 |
| 1,900,000 |
| 1,942,104 |
| |||
Wichita, KS Multifamily Hsg. (Brentwood Apts.) Rev. | NR/BB | 5.850 | 12/01/2025 |
| 1,000,000 |
| 835,000 |
| |||
Wichita, KS Multifamily Hsg. (Broadmoor Chelsea) Rev. FNMA | NR/AAA | 5.650 | 07/01/2016 |
| 990,000 |
| 1,014,750 |
| |||
#Wichita, KS Multifamily Hsg. (Broadmoor Chelsea) Rev. FNMA | NR/AAA | 5.700 | 07/01/2022 |
| 2,000,000 |
| 2,020,800 |
| |||
Wichita, KS Multifamily Hsg. (Innes Station Apt. 5) Rev. | NR/NR | 6.250 | 03/01/2028 |
| 1,750,000 |
| 1,562,365 |
| |||
Wichita, KS Public Building Commission (State Office Prj.) Rev. AMBAC | Aaa/AAA | 4.000 | 10/01/2014 |
| 1,000,000 |
| 1,010,630 |
| |||
Wichita, KS Water & Sewer Util. Rev. FGIC | Aaa/AAA | 5.250 | 10/01/2018 |
| 1,465,000 |
| 1,604,878 |
| |||
Wichita, KS Water & Sewer Util. Rev. FGIC | Aaa/AAA | 5.000 | 10/01/2028 |
| 500,000 |
| 497,820 |
| |||
|
|
|
| ||||||||
TOTAL KANSAS MUNICIPAL BONDS (COST: $71,263,630) |
| $ | 72,815,344 | ||||||||
|
|
|
| ||||||||
SHORT-TERM SECURITIES (5.4%) | Shares |
|
| ||||||||
Wells Fargo National Tax-Free Money Market | 2,724,000 | $ | 2,724,000 | ||||||||
Goldman Sachs Financial Square Money Market | 1,501,218 |
| 1,501,218 | ||||||||
TOTAL SHORT-TERM SECURITIES (COST: $4,225,218) |
| $ | 4,225,218 | ||||||||
|
|
|
| ||||||||
TOTAL INVESTMENTS IN SECURITIES (COST: $75,488,848) |
| $ | 77,040,562 | ||||||||
OTHER ASSETS LESS LIABILITIES |
|
| 1,437,740 | ||||||||
|
|
|
| ||||||||
NET ASSETS |
| $ | 78,478,302 | ||||||||
* Indicates bonds are segregated by the custodian to cover when-issued or delayed-delivery purchases.
# Indicates bonds are segregated by the custodian to cover initial margin requirements.
Footnote: Non-rated (NR) securities have been determined to be of investment grade quality by the Fund’s Manager.
The accompanying notes are an integral part of these financial statements.
Financial Statements July 30, 2004
Statement of Assets and Liabilities July 30, 2004
|
|
| ||
ASSETS |
|
| ||
| Investment in securities, at value (cost: $15,911,458) | $ | 16,622,734 | |
| Receivable for fund shares sold |
| 24,000 | |
| Accrued interest receivable |
| 255,324 | |
| Accrued dividends receivable |
| 170 | |
| Variation margin on futures |
| 148,500 | |
| Prepaid expenses |
| 1,809 | |
|
|
| ||
| Total Assets | $ | 17,052,537 | |
|
|
| ||
LIABILITIES |
|
| ||
| Dividends payable | $ | 53,386 | |
| Accrued expenses |
| 16,040 | |
| Disbursement in excess of demand deposit cash |
| 613 | |
|
|
| ||
| Total Liabilities | $ | 70,039 | |
|
|
| ||
|
|
| ||
NET ASSETS | $ | 16,982,498 | ||
|
|
| ||
|
|
| ||
Net assets are represented by: |
|
| ||
| Paid-in capital | $ | 17,822,929 | |
| Accumulated undistributed net realized gain (loss) on investments and futures |
| (1,327,022) | |
| Unrealized appreciation on investments |
| 711,276 | |
| Unrealized depreciation on futures |
| (224,685) | |
| Total amount representing net assets applicable to 1,484,046 outstanding shares of no par common stock (unlimited shares authorized) | $ | 16,982,498 | |
|
|
| ||
Net asset value per share | $ | 11.44 | ||
Public offering price (based on sales charge of 2.75%) | $ | 11.76 | ||
The accompanying notes are an integral part of these financial statements.
Statement of Operations For the year ended July 30, 2004
|
|
| ||
INVESTMENT INCOME |
|
| ||
| Interest | $ | 783,627 | |
| Dividends |
| 3,865 | |
| Total Investment Income | $ | 787,492 | |
|
|
| ||
EXPENSES |
|
| ||
| Investment advisory fees | $ | 88,932 | |
| Administrative service fees |
| 15,070 | |
| Transfer agent fees |
| 26,149 | |
| Accounting service fees |
| 32,909 | |
| Custodian fees |
| 4,421 | |
| Transfer agent out-of-pockets |
| 950 | |
| Professional fees |
| 2,062 | |
| Trustees fees |
| 2,335 | |
| Reports to shareholders |
| 4,414 | |
| Registration and filing fees |
| 1,882 | |
| Insurance expense |
| 1,232 | |
| Legal fees |
| 1,200 | |
| Audit expense |
| 10,362 | |
| Total Expenses | $ | 191,918 | |
| Less expenses waived or absorbed by the Fund’s manager |
| (58,289) | |
| Total Net Expenses | $ | 133,629 | |
|
|
| ||
NET INVESTMENT INCOME | $ | 653,863 | ||
|
|
| ||
|
|
| ||
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FUTURES |
|
| ||
| Net realized gain (loss) from: |
|
| |
| Investment transactions | $ | 7,796 | |
| Futures transactions |
| (253,351) | |
| Net change in unrealized appreciation (depreciation) of: |
|
| |
| Investments |
| 237,931 | |
| Futures |
| (224,685) | |
| Net Realized And Unrealized Gain (Loss) On Investments And Futures | $ | (232,309) | |
|
|
| ||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | $ | 421,554 | ||
The accompanying notes are an integral part of these financial statements.
Financial Statements July 30, 2004
Statement of Changes in Net Assets
For the year ended July 30, 2004, and the year ended July 31, 2003
|
| For The Year Ended July 30, 2004 |
| For The Year Ended July 31, 2003 | ||
|
|
|
|
| ||
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS |
|
|
|
| ||
| Net investment income | $ | 653,863 | $ | 725,243 | |
| Net realized gain (loss) on investment and futures transactions |
| (245,555) |
| (209,464) | |
| Net change in unrealized appreciation (depreciation) on investments and futures |
| 13,246 |
| (283,738) | |
| Net Increase (Decrease) in Net Assets Resulting From Operations | $ | 421,554 | $ | 232,041 | |
|
|
|
|
| ||
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS |
|
|
|
| ||
| Dividends from net investment income ($.43 and $.46 per share, respectively) | $ | (653,863) | $ | (725,085) | |
| Distributions from net realized gain on investment and futures transactions ($.00 and $.00 per share, respectively) |
| 0 |
| 0 | |
| Total Dividends and Distributions | $ | (653,863) | $ | (725,085) | |
|
|
|
|
| ||
CAPITAL SHARE TRANSACTIONS |
|
|
|
| ||
| Proceeds from sale of shares | $ | 1,575,622 | $ | 1,984,432 | |
| Proceeds from reinvested dividends |
| 364,330 |
| 401,562 | |
| Cost of shares redeemed |
| (3,201,723) |
| (2,049,089) | |
| Net Increase (Decrease) in Net Assets Resulting From Capital Share Transactions | $ | (1,261,771) | $ | 336,905 | |
|
|
|
|
| ||
TOTAL INCREASE (DECREASE) IN NET ASSETS | $ | (1,494,080) | $ | (156,139) | ||
|
|
|
|
| ||
NET ASSETS, BEGINNING OF PERIOD |
| 18,476,578 |
| 18,632,717 | ||
|
|
|
|
| ||
NET ASSETS, END OF PERIOD | $ | 16,982,498 | $ | 18,476,578 | ||
The accompanying notes are an integral part of these financial statements.
Notes to Financial Statements July 30, 2004
Note 1. ORGANIZATION
Business operations - Kansas Insured Intermediate Fund (the “Fund”) is an investment portfolio of Integrity Managed Portfolios (the “Trust”) registered under the Investment Company Act of 1940, as amended, as a non-diversified, open-end management investment company. The Trust may offer multiple portfolios; currently six portfolios are offered. Integrity Managed Portfolios is an unincorporated business trust organized under Massachusetts law on August 10, 1990. The Fund had no operations from that date to November 23, 1992, other than matters relating to organization and registration. On November 23, 1992, the Fund commenced its Public Offering of capital shares. The investment objective of the Fund is to provide its shareholders with as high a level of current income exempt from both federal and Kansas income tax as is consistent with preservation of capital. The Fund will seek to achieve t his objective by investing primarily in a portfolio of Kansas insured securities.
Shares of the Fund are offered at net asset value plus a maximum sales charge of 2.75% of the offering price.
Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Investment security valuation - Securities for which quotations are not readily available (which will constitute a majority of the securities held by the Fund) are valued using a matrix system at fair value as determined by Integrity Money Management. The matrix system has been developed based on procedures approved by the Board of Trustees which include consideration of the following: yields or prices of municipal bonds of comparable quality, type of issue, coupon, maturity and rating, and indications as to value from dealers and general market conditions. Because the market value of securities can only be established by agreement between parties in a sales transaction, and because of the uncertainty inherent in the valuation process, the fair values as determined may differ from the values that would have been used had a ready market for the securities existed. The Fund follows industry practice and records security transact ions on the trade date.
The Fund concentrates its investments in a single state. This concentration may result in the Fund investing a relatively high percentage of its assets in a limited number of issuers.
When-issued securities – The Fund may purchase securities on a when-issued basis. Payment and delivery may take place after the customary settlement period for that security. The price of the underlying securities and the date when the securities will be delivered and paid for are fixed at the time the transaction is negotiated. The value of the securities purchased on a when-issued basis are identified as such in the Fund’s Schedule of Investments. With respect to purchase commitments, the Fund identifies securities as segregated in its records with a value at least equal to the amount of the commitment. Losses may arise due to changes in the value of the underlying securities or if the counterparty does not perform under the contract’s terms, or if the issuer does not issue the securities due to political, economic, or other factors.
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 and any net realized gain on investments to its shareholders. Therefore, no provision for income taxes is required. Distributions during the year ended July 30, 2004, were characterized as tax-exempt for tax purposes.
The tax character of distributions paid was as follows:
|
| July 30, 2004 |
| July 31, 2003 | |
Tax-exempt income | $ | 653,863 | $ | 725,085 | |
Ordinary Income |
| 0 |
| 0 | |
Long-term Capital Gains |
| 0 |
| 0 | |
| Total | $ | 653,863 | $ | 725,085 |
The Fund has unexpired capital loss carryforwards for tax purposes as of July 30, 2004, totaling $1,327,022, which may be used to offset capital gains. The capital loss carryforward amounts will expire in each of the years ended July 31 as shown in the table below.
Year |
| Unexpired Capital Losses |
2005 | $ | 411,602 |
2006 | $ | 125,539 |
2007 | $ | 27,107 |
2008 | $ | 49,698 |
2009 | $ | 78,788 |
2010 | $ | 178,976 |
2011 | $ | 209,757 |
2012 | $ | 245,555 |
For the year ended July 30, 2004, the Fund made no permanent reclassifications to reflect tax character. Reclassifications to paid-in capital relate primarily to expiring capital loss carryforwards.
Distributions to shareholders - Dividends from net investment income, declared daily and payable monthly, are reinvested in additional shares of the Fund at net asset value or paid in cash. Capital gains, when available, are distributed at least annually.
Premiums and discounts - Premiums and discounts on municipal securities are amortized for financial reporting purposes.
Other - Income and expenses are recorded on the accrual basis. Investment transactions are accounted for on the trade date. Realized gains and losses are reported on the identified cost basis. Distributions to shareholders are recorded by the Fund on the ex-dividend date. Income and capital gain distributions are determined in accordance with federal income tax regulations and may differ from net investment income and realized gains determined in accordance with accounting principles generally accepted in the United States of America. These differences are primarily due to differing treatment for market discount, capital loss carryforwards and losses due to wash sales and futures transactions.
Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications to paid-in capital. Temporary book and tax basis differences will reverse in a subsequent period.
Futures contracts - The Fund may purchase and sell financial futures to hedge against changes in the values of tax-exempt municipal 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 or a certain amount of U.S. government or municipal securities 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 (depreciat ion) related to open futures contracts is required to be treated as a realized gain (loss) for federal income tax purposes.
Securities held in collateralized accounts to cover initial margin requirements on open futures contracts are noted in the Schedule of Investments. The Statement of Assets and Liabilities reflects a receivable or payable for the daily mark to market for variation margin.
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.
At July 30, 2004, the Fund had outstanding futures contracts to sell debt securities as follows:
Contracts to Sell | Expiration Date | Number of Futures Contract | Valuation as of July 30, 2004 | Unrealized Appreciation (Depreciation) |
U.S. Treasury Bonds | 09/2004 | 54 | $148,500 | ($224,685) |
Use of estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 July 30, 2004, there were unlimited shares of no par authorized; 1,484,046 and 1,592,377 shares were outstanding at July 30, 2004, and July 31, 2003, respectively.
Transactions in capital shares were as follows:
| Shares | ||
| For The Year Ended July 30, 2004 | For The Year Ended July 31, 2003 | |
| |||
| |||
| |||
Shares sold | 136,212 | 168,397 | |
Shares issued on reinvestment of dividends | 31,418 | 34,099 | |
| Shares redeemed | (275,961) | (174,430) |
Net increase (decrease) | (108,331) | 28,066 | |
Note 4. INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Integrity Money Management, Inc., the Fund’s investment adviser; Integrity Funds Distributor, Inc., the Fund’s underwriter; and Integrity Fund Services, Inc., the Fund’s transfer, accounting, and administrative services agent, are subsidiaries of Integrity Mutual Funds, Inc., the Fund’s sponsor.
The Fund has engaged Integrity 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 0.50% of the Fund’s average daily net assets. The Fund has recognized $30,643 of investment advisory fees after partial waiver for the year ended July 30, 2004. The Fund has a payable to Integrity Money Management, Inc. of $806 at July 30, 2004, for investment advisory fees. Certain officers and trustees of the Fund are also officers and directors of the investment adviser.
Under the terms of the advisory agreement, the investment adviser has agreed to pay the expenses of the Fund (excluding taxes and brokerage fees and commissions, if any) that exceed 0.75% of the Fund’s average daily net assets on an annual basis. The investment adviser may also voluntarily waive fees or reimburse expenses not required under the advisory contract from time to time. Accordingly, after fee waivers and expense reimbursements, the Fund’s actual total annual operating expenses were 0.75% for the fiscal year ended July 30, 2004.
Integrity Fund Services, Inc. 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 $25 million, and 0.10% of the Fund’s net assets in excess of $50 million, with a minimum of $1,500 per month plus reimbursement of out-of-pocket expenses. An additional fee with a minimum of $500 per month is charged for each additional share class. The Fund has recognized $26,149 of transfer agency fees and expenses for the year ended July 30, 2004. The Fund has a payable to Integrity Fund Services, Inc. of $2,099 at July 30, 2004 for transfer agency fees. Integrity Fund Services, 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 aver age 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, together with reimbursement of out-of-pocket expenses. An additional minimum fee of $500 per month is charged by Integrity Fund Services for each additional share class. The Fund has recognized $32,909 of accounting service fees for the year ended July 30, 2004. The Fund has a payable to Integrity Fund Services, Inc. of $2,711 at July 30, 2004, for accounting service fees. Integrity Fund Services also acts as administrator for the Fund. The Fund pays to Integrity Fund Services, Inc. a monthly fee calculated at the rate of 0.10% of average daily net assets with a minimum of $1,500 per month plus out-of-pocket expenses. An additional minimum fee of $500 per month is charged by Integrity Fund Services, Inc. for each additional share class. The Fund has recognized $15,070 of administrative service fees for the year e nded July 30, 2004. The Fund has a payable to Integrity Fund Services, Inc. of $1,500 at July 30, 2004, for administrative service fees.
Note 5. INVESTMENT SECURITY TRANSACTIONS
The cost of purchases and proceeds from the sales of investment securities (excluding short-term securities) aggregated $744,374 and $1,829,906, respectively, for the year ended July 30, 2004.
Note 6. INVESTMENT IN SECURITIES
At July 30, 2004, the aggregate cost of securities for federal income tax purposes was substantially the same for financial reporting purposes at $15,911,458. The net unrealized appreciation of investments based on the cost was $711,276, which is comprised of $738,654 aggregate gross unrealized appreciation and $27,378 aggregate gross unrealized depreciation.
Financial Highlights
Selected per share data and ratios for the period indicated
|
| For The Year Ended July 30, 2004 |
| For The Year Ended July 31, 2003 |
| For The Year Ended July 31, 2002 |
| For The Year Ended July 31, 2001 |
| For The Year Ended July 31, 2000 | |||
NET ASSET VALUE, BEGINNING OF PERIOD | $ | 11.60 | $ | 11.91 | $ | 11.93 | $ | 11.69 | $ | 11.98 | |||
|
|
|
|
|
|
|
|
|
|
| |||
Income from Investment Operations: |
|
|
|
|
|
|
|
|
|
| |||
| Net investment income | $ | .43 | $ | .46 | $ | .50 | $ | .53 | $ | .54 | ||
| Net realized and unrealized gain (loss) on investment and futures transactions |
| (.16) |
| (.31) |
| (.02) |
| .24 |
| (.29) | ||
| Total Income (Loss) From Investment Operations | $ | .27 | $ | .15 | $ | .48 | $ | .77 | $ | .25 | ||
|
|
|
|
|
|
|
|
|
|
| |||
Less Distributions: |
|
|
|
|
|
|
|
|
|
| |||
| Dividends from net investment income | $ | (.43) | $ | (.46) | $ | (.50) | $ | (.53) | $ | (.54) | ||
| Distributions from net capital gains |
| .00 |
| .00 |
| .00 |
| .00 |
| .00 | ||
| Total Distributions | $ | (.43) | $ | (.46) | $ | (.50) | $ | (.53) | $ | (.54) | ||
|
|
|
|
|
|
|
|
|
|
| |||
NET ASSET VALUE, END OF PERIOD | $ | 11.44 | $ | 11.60 | $ | 11.91 | $ | 11.93 | $ | 11.69 | |||
|
|
|
|
|
|
|
|
|
|
| |||
Total Return |
| 2.31%(A) |
| 1.26%(A) |
| 4.12%(A) |
| 6.73%(A) |
| 2.15%(A) | |||
|
|
|
|
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
|
|
|
| |||
RATIOS/SUPPLEMENTAL DATA: |
|
|
|
|
|
|
|
|
|
| |||
| Net assets, end of period (in thousands) | $ | 16,982 | $ | 18,477 | $ | 18,633 | $ | 18,728 | $ | 19,028 | ||
| Ratio of net expenses (after expense assumption) to average net assets |
| 0.75%(B) |
| 0.75%(B) |
| 0.75%(B) |
| 0.75%(B) |
| 0.75%(B) | ||
| Ratio of net investment income to average net assets |
| 3.67% |
| 3.89% |
| 4.20% |
| 4.49% |
| 4.58% | ||
| Portfolio turnover rate |
| 4.39% |
| 26.23% |
| 9.04% |
| 18.49% |
| 11.07% | ||
(A) Excludes maximum sales charge of 2.75%.
(B) During the periods indicated above, Integrity Mutual Funds, Inc. or Integrity Money Management, Inc. assumed/waived expenses of $58,289, $36,281, $30,501, $31,627, and $30,414, respectively. If the expenses had not been assumed/waived, the annualized ratios of total expenses to average net assets would have been 1.08%, 0.94%, 0.91%, 0.92%, and 0.90%, respectively.
Total return represents the rate that an investor would have earned or lost on an investment in the Fund assuming reinvestment of all dividends and distributions.
The accompanying notes are an integral part of these financial statements.
Tax Information For The Year Ended July 30, 2004 (Unaudited)
We are required to advise you within 60 days of the Fund’s fiscal year-end regarding the federal tax status of distributions received by shareholders during such fiscal year. The distributions made during the fiscal year by the Fund were earned from the following sources:
|
|
| Dividends and Distributions Per Share | |||||
To Shareholders of Record |
| Payment Date |
| From Net Investment Income |
| From Net Realized Short-Term Gains |
| From Net Realized Long-Term Gains |
August 29, 2003 |
| August 29, 2003 | $ | .034333 |
| - |
| - |
September 30, 2003 |
| September 30, 2003 | $ | .035213 |
| - |
| - |
October 31, 2003 |
| October 31, 2003 | $ | .035130 |
| - |
| - |
November 28, 2003 |
| November 28, 2003 | $ | .033250 |
| - |
| - |
December 31, 2003 |
| December 31, 2003 | $ | .038206 |
| - |
| - |
January 30, 2004 |
| January 30, 2004 | $ | .035910 |
| - |
| - |
February 27, 2004 |
| February 27, 2004 | $ | .032273 |
| - |
| - |
March 31, 2004 |
| March 31, 2004 | $ | .038208 |
| - |
| - |
April 30, 2004 |
| April 30, 2004 | $ | .035446 |
| - |
| - |
May 28, 2004 |
| May 28, 2004 | $ | .033707 |
| - |
| - |
June 30, 2004 |
| June 30, 2004 | $ | .038547 |
| - |
| - |
July 30, 2004 |
| July 30, 2004 | $ | .035940 |
| - |
| - |
Shareholders should consult their tax advisors.
INDEPENDENT AUDITOR’S REPORT
To the Shareholders and Board of Trustees of the Kansas Insured Intermediate Fund
We have audited the accompanying statement of assets and liabilities of the Kansas Insured Intermediate Fund (one of the portfolios constituting the Integrity Managed Portfolios), including the schedule of investments as of July 30, 2004, the related statement of operations for the year then ended, the statement of changes in net assets for the years ended July 30, 2004 and July 31, 2003, and the financial highlights for the year ended July 30, 2004 and each of the four years in the period ended July 31, 2003. 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 the standards of the Public Company Accounting Oversight Board (United States). 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 July 30, 2004, 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 the Kansas Insured Intermediate Fund of the Integrity Managed Portfolios as of July 30, 2004, the results of its operations, the changes in its net assets, and the financial highlights for each of the fiscal periods presented, in conformity with accounting principles generally accepted in the United States of America.
BRADY, MARTZ & ASSOCIATES, P.C.
Minot, North Dakota USA
September 02, 2004
Maine Municipal Fund
Dear Shareholder:
Enclosed is the annual report of the operations of the Maine Municipal Fund (the “Fund”) for the four month period ended July 30, 2004. The Fund’s portfolio and related financial statements are presented within for your review.
The global recovery, centered in the U.S. and Asia continues to improve as evidenced by the recent Federal Reserve hike in the Federal Funds Rate from a historic low of 1% to 1.25% on June 30th. The increase was widely anticipated as recent economic and labor market conditions have improved. The environment of rising profits, low interest rates, a weak dollar, accelerating domestic retail sales, and strengthening exports bodes well for a further accommodative Federal Reserve.
The Federal Reserve has taken center stage as it prepares to shift away from its stimulative monetary stance to a normalization of fed funds.
Several crucial questions remain unresolved:
What will constitute a neutral fed fund rate?
Will the normalization process be faster or slower than the market is currently discounting?
How much damage will higher rates cause the economy and market?
While no one knows for certain, recent verbiage from the Federal Reserve states: “With underlying inflation still expected to be relatively low, the Committee believes that policy accommodation can be removed at a pace that is likely to be measured. Nonetheless, the Committee will respond to changes in economic prospects as needed to fulfill its obligation to maintain price stability.”
Municipals during the period remained range bound with yields on twenty-year AAA general obligations yielding 4.75% at the beginning of the period and ending the period at 4.77%. While the yields on the twenty-year municipals appear relatively unchanged during the period, they were quite volatile reaching a low of 4.33% and a high of 5.00% (Source Municipal Market Data).
The Fund’s shorter duration of 4.7 years and higher average overall coupon of 5.30% contributed to relative returns as interest rates increased during the period.
Several of the Fund’s holdings (e.g. University of Maine 4.25% due 2034, Scarborough GO’s 4.40% due 2032) under-performed the municipal sector hampering relative performance.
Having been undervalued relative to U.S. Treasuries for some time, municipals have started to rebound in recent months as municipal supply has declined. This out-performance should continue as interest rates rise, further dampening municipal supply.
During the period the Fund utilized defensive positions designed to provide share price stability. U.S. Treasury futures were used to hedge a portion of the portfolio, stabilizing the Fund’s share price as Treasury yields advanced during the period. The Maine Municipal Fund began the four month period at $11.19 per share and ended the period at $11.10 per share for a total return of 0.40% (without sales charge). This compares to the Lehman Brother’s Municipal Bond Index’s return of -1.09% for the period. Risk management is important in this market environment.
An important part of the Fund’s strategy includes searching the primary and secondary markets for high quality double tax-exempt issues. Credit quality for the period ended was: AAA 72%, AA 23%, A 4% and BBB 1%.
Income exempt from federal and state income taxes with preservation of capital remain the primary objectives of the Fund.
If you would like more frequent updates, visit our website at www.integritymf.com for daily prices along with pertinent Fund information.
Sincerely,
The Portfolio Management Team
The views expressed are those of Monte Avery, Chief Portfolio Strategist with Integrity Mutual Funds. The views are subject to change at any time in response to changing circumstances in the market and are not intended to predict or guarantee the future performance of any individual security, market sector or the markets generally, or any Integrity Mutual Fund.
Terms & Definitions July 30, 2004 (Unaudited)
Appreciation
Increase in value of an asset.
Average Annual Total Return
A standardized measurement of the return (yield and appreciation) earned by the fund on an annual basis, assuming all distributions are reinvested.
Coupon Rate or Face Rate
The rate of interest payable annually, based on the face amount of the bond; expressed as a percentage.
Depreciation
Decrease in value of an asset.
Lehman Brothers Municipal Bond Index
An unmanaged list of long-term, fixed-rate, investment-grade, tax-exempt bonds representative of the municipal bond market. The index does not take into account brokerage commissions or other costs, may include bonds different from those in the fund, and may pose different risks than the fund.
Market Value
Actual (or estimated) price at which a bond trades in the market place.
Maturity
A measure of the term or life of a bond in years. When a bond “matures,” the issuer repays the principal.
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 sales charge.
Quality Ratings
A designation assigned by independent rating companies to give a relative indication of a bond’s credit worthiness. “AAA,” “AA,” “A,” and “BBB” indicate investment grade securities. Ratings can range from a high of “AAA” to a low of “D”.
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.
July 30, 2004 (Unaudited)
PERFORMANCE AND COMPOSITION
PORTFOLIO QUALITY RATINGS
(based on Total Long-Term Investments)
AAA | 72.3% |
AA | 23.2% |
A | 4.0% |
BBB | 0.5% |
Quality ratings reflect the financial strength of the issuer. They are assigned by independent rating services such as Moody’s Investors Services and Standard & Poor’s. Non-rated bonds have been determined to be of appropriate quality for the portfolio by Integrity Money Management, the investment adviser.
These percentages are subject to change.
PORTFOLIO MARKET SECTORS
(As a % of Net Assets)
T-Transportation | 22.8% |
G-Government | 20.7% |
O-Other | 18.4% |
I-Industrial | 12.0% |
S-School | 8.2% |
HC-Health Care | 5.5% |
U-Utilities | 4.0% |
H-Housing | 3.4% |
GO-General Obligation | 3.0% |
W/S-Water/Sewer | 2.0% |
Market sectors are breakdowns of the Fund’s portfolio holdings into specific investment classes.
These percentages are subject to change.
July 30, 2004 (Unaudited)
DISCLOSURE OF FUND EXPENSES
These examples are intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.
EXAMPLE 1:
This example assumes that you invest $1,000 in the Fund for the time periods indicated and then either redeem or do not redeem all of your shares at the end of those periods. The example also is based on the Fund’s actual expenses of 0.95% and annualized rate of return for the period of 1.23%. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
| Redemption | No Redemption | |
Share Class | A |
| A |
Annual Expenses | $51.65 |
| $51.65 |
Account value of an initial investment of $1,000 as of the end of the period would be $969.28.
EXAMPLE 2:
This example assumes that you invest $1,000 in the Fund for the time periods indicated and then either redeem or do not redeem all of your shares at the end of those periods. The example is based on the Fund’s actual operating expenses of 0.95% and also assumes that your investment has a 5.00% return. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
| Redemption | No Redemption | |
Share Class | A |
| A |
Annual Expenses | $51.82 |
| $51.82 |
Account value of an initial investment of $1,000 as of the end of the period would be $1,005.38.
July 30, 2004 (Unaudited)
Average Annual Total Returns
| For periods ending July 30, 2004 | |||
|
|
|
| Since Inception (December 5, 1991) |
Maine Municipal Fund | 1 year | 5 year | 10 year | |
Without sales charge | 3.95% | 4.60% | 5.13% | 5.56% |
With sales charge (4.25%) | (0.44)% | 3.70% | 4.68% | 5.20% |
|
|
|
| Since Inception (December 5, 1991) |
Lehman Brothers Municipal Bond Index | 1 year | 5 year | 10 year | |
| 5.78% | 6.07% | 6.38% | 6.63% |
Performance data quoted above is historical. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance data quoted. The principal value and investment return of an investment will fluctuate so that your shares, when redeemed, may be worth more or less than the original cost. You can obtain performance data current to the most recent month end (available within seven business days of the most recent month end) by calling 1-800-276-1262.
You should consider the Fund's investment objectives, risks, and charges and expenses carefully before investing. For this and other important information, please obtain a fund prospectus at no cost from your financial advisor and read it carefully before investing.
The table does not reflect the deduction of taxes that a shareholder would pay on Fund distributions and redemption of Fund shares.
The Fund's performance prior to December 19, 2003, was achieved while the Fund was managed by another investment advisor, who used different investment strategies and techniques, which may produce different investment results than those achieved by the current investment advisor. The Forum Investment Advisors, LLC, served as investment advisor to the Fund until December 19, 2003.
July 30, 2004 (Unaudited)
Comparative Index Graph (insert here)
Comparison of change in value of a $10,000 investment in the Maine Municipal Fund and the Lehman Brothers Municipal Bond Index
| Maine Municipal Fund w/o Sales Charge | Maine Municipal Fund w/ Max Sales Charge | Lehman Brothers Municipal Bond Index |
| |||
12/05/91 | $10,000 | $9,575 | $10,000 |
1992 | $10,907 | $10,448 | $10,954 |
1993 | $11,731 | $11,237 | $11,921 |
1994 | $12,025 | $11,518 | $12,144 |
1995 | $12,948 | $12,402 | $13,101 |
1996 | $13,629 | $13,055 | $13,965 |
1997 | $14,717 | $14,097 | $15,399 |
1998 | $15,429 | $14,779 | $16,321 |
1999 | $15,841 | $15,174 | $16,791 |
2000 | $16,445 | $15,752 | $17,515 |
2001 | $17,750 | $17,002 | $19,283 |
2002 | $18,667 | $17,881 | $20,577 |
2003 | $19,084 | $18,279 | $21,316 |
2004 | $19,838 | $19,002 | $22,549 |
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. The Lehman Brothers index is a national index representative of the national municipal bond market, whereas the Fund concentrates its investments in Maine municipal bonds. Your Fund’s total return for the periods 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. All Fund and benchmark returns include reinvested dividends. The Fund’s share price, yields and total returns will vary, so that shares, when redeemed, may be worth more or less than their original cost.
July 30, 2004 (Unaudited)
MANAGEMENT OF THE FUND
The Board of Integrity Managed Portfolios (formerly known as Ranson Managed Portfolios) consists of four Trustees. These same individuals, unless otherwise noted, also serve as Directors or Trustees for all of the funds in the Integrity family of funds, the six series of Integrity Managed Portfolios, and the eight series of The Integrity Funds. Three Trustees (75% of the total) have no affiliation or business connection with the Investment Adviser or any of its affiliates. These are the “independent” Trustees. The remaining Trustee and executive officers are “interested” by virtue of their affiliation with the Investment Adviser and its affiliates.
The Independent Trustees of the Fund, their term of office and length of time served, their principal occupation(s) during the past five years, the number of portfolios overseen in the Fund Complex by each Independent Trustee and other directorships, if any, held outside the Fund Complex, are shown below.
INDEPENDENT TRUSTEES
Name, Address and Age | Position(s) Held with Registrant | Term and Length Served | Principal Occupation(s) During Past 5 Years | Number of Portfolios Overseen In The Fund Complex * | Other Directorships Held Outside The Fund Complex |
Lynn W. Aas | Trustee | Since January 1996 | Retired; Attorney; Director, ND Tax-Free Fund, Inc. (since December 1994), Montana Tax-Free Fund, Inc. (since December 1994), South Dakota Tax-Free Fund, Inc. (April 1995 to June 2004) Integrity Fund of Funds, Inc. (since August 1994), Integrity Small-Cap Fund of Funds, Inc. (September 1998 to June 2003); Trustee, Integrity Managed Portfolios (since January 1996) and The Integrity Funds (since September 2003); and Director, First Western Bank & Trust (until May 2002). | 17 | None |
Orlin W. Backes 15 2nd Ave., SW – Ste. 305 | Trustee | Since January 1996 | Attorney, McGee, Hankla, Backes & Dobrovolny, P.C.; Director, ND Tax-Free Fund, Inc. (since April 1995), Montana Tax-Free Fund, Inc. (since April 1995), South Dakota Tax-Free Fund, Inc. (April 1995 to June 2004), Integrity Fund of Funds, Inc. (since April 1995), Integrity Small-Cap Fund of Funds, Inc. (September 1998 to June 2003); Trustee, Integrity Managed Portfolios (since January 1996) and The Integrity Funds (since May 2003); and Director, First Western Bank & Trust. | 17 | Director, First Western Bank & Trust |
R. James Maxson Town & Country Center, 1015 S. Broadway Suite 15 | Trustee | Since January 1999 | Attorney, Maxson Law Office (since November 2002), Attorney, McGee, Hankla, Backes & Dobrovolny, P.C. (April 2000 to November 2002); Attorney, Farhart, Lian and Maxson, P.C. (March 1976 to March 2000); Director, ND Tax-Free Fund, Inc. (since January 1999), Montana Tax-Free Fund, Inc. (since January 1999), South Dakota Tax-Free Fund, Inc. (January 1999 to June 2004), Integrity Fund of Funds, Inc. (since January 1999), Integrity Small-Cap Fund of Funds, Inc. (January 1999 to June 2003); and Trustee, Integrity Managed Portfolios (since January 1999) and The Integrity Funds (since May 2003). | 17 | None |
The Fund Complex consists of the three funds in the Integrity family of funds, the six series of Integrity Managed Portfolios, and the eight series of The Integrity Funds.
Trustees (Directors for Corporate Funds) and officers of the Fund serve until their resignation, removal or retirement.
The Statement of Additional Information contains more information about the Fund’s Trustees and is available without charge upon request, by calling Integrity Funds Distributor, Inc. at 1(800) 601-5593
The Interested Trustees and executive officers of the Fund, their term of office and length of time served, their principal occupation(s) during the past five years, the number of portfolios overseen in the Fund Complex by each Interested Trustee and executive officer, and other directorships, if any, held outside the Fund Complex, are shown below.
INTERESTED TRUSTEES AND EXECUTIVE OFFICERS
Name, Address and Age | Position(s) Held with Registrant | Term and Length Served | Principal Occupation(s) During Past 5 Years | Number of Portfolios Overseen In The Fund Complex * | Other Directorships Held Outside The Fund Complex |
**Robert E. Walstad | Trustee, Chairman, and President | Since January 1996 | Director (since September 1987), President (September 1987 to October 2001) (September 2002 to May 2003), Integrity Mutual Funds, Inc.; Director, President and Treasurer, Integrity Money Management, Inc., ND Capital, Inc., Integrity Fund Services, Inc., ND Tax-Free Fund, Inc., Montana Tax-Free Fund, Inc., South Dakota Tax-Free Fund, Inc. (April 1995 to June 2004), Integrity Fund of Funds, Inc., Integrity Small-Cap Fund of Funds, Inc. (September 1998 to June 2003); Trustee, Chairman, President and Treasurer, Integrity Managed Portfolios (since January 1996) and The Integrity Funds (since May 2003).; Director, President (until August 2003), CEO, and Treasurer, Integrity Funds Distributor, Inc.; Director (October 1999 to June 2003), President (October 1999 to October 2001), Magic Internet Services, Inc.; Director (May 2000 to June 2003), President (May 2000 to November 2001) (October 2002 to June 2003), ARM Securities Corporation; and Dir ector, CEO, Chairman (since January 2002), President (since September 2002), Capital Financial Services, Inc. | 17 | Director, Capital Financial Services, Inc. |
**Peter A. Quist | Vice President and Secretary | Since January 1996 | Attorney; Director and Vice President, Integrity Mutual Funds, Inc.; Director, Vice President and Secretary, Integrity Money Management, Inc. (formerly known as ND Money Management, Inc.), ND Capital, Inc., Integrity Fund Services, Inc., (formerly known as ND Resources, Inc.), ND Tax-Free Fund, Inc., Montana Tax-Free Fund, Inc., South Dakota Tax-Free Fund, Inc. (April 1995 to June 2004), Integrity Fund of Funds, Inc., Integrity Small-Cap Fund of Funds, Inc. (September 1998 to June 2003), Integrity Funds Distributor, Inc. (formerly known as Ranson Capital Corporation) (since January 1996); Vice President and Secretary, Integrity Managed Portfolios (since January 1996) and The Integrity Funds (since May 2003); and Director, ARM Securities Corporation (May 2000 to June 2003). | 3 | None |
**Brent M. Wheeler 1 Main Street North Minot, ND 58703 33 | Treasurer | Since May 2004 | Fund Accountant (May 1994 to December 1997) Sr. Fund Accountant (December 1997 to June 1998) Fund Accounting Manager (Since June 1998), Integrity Mutual Funds, Inc.; Treasurer (Since May 2004), Integrity Funds, Integrity Managed Portfolios, Integrity Mutual Funds. | None | Minot State University Alumni Association |
* The Fund Complex consists of the three funds in the Integrity family of funds, the six series of Integrity Managed Portfolios, and the eight series of The Integrity Funds.
** Trustees who are “interested persons” of the Funds as defined in the Investment Company Act of 1940. Messrs. Quist, Walstad and Wheeler are interested persons by virtue of being officers and trustees of the Fund’s Investment Adviser and Principal Underwriter.
Trustees (Directors for Corporate Funds) and officers of the Fund serve until their resignation, removal or retirement.
The Statement of Additional Information contains more information about the Fund’s Trustees and is available without charge upon request, by calling Integrity Funds Distributor, Inc. at 1(800) 601-5593
July 30, 2004 (Unaudited)
INDEPENDENT TRUSTEES
[PHOTO] | [PHOTO] | [PHOTO] |
Lynn W. Aas | Orlin W. Backes | R. James Maxson |
Trustee | Trustee | Trustee |
INTERESTED TRUSTEES AND EXECUTIVE OFFICERS
[PHOTO] | [PHOTO] | [PHOTO] |
Robert E. Walstad | Peter A. Quist | Brent M. Wheeler |
Chairman | Vice-President | Treasurer |
President | Secretary |
|
Trustee |
|
|
Schedule of Investments July 30, 2004
Name of Issuer Percentages represent the market value of each investment category to total net assets | Rating (Unaudited) Moody’s/S&P | Coupon Rate | Maturity |
| Principal Amount |
| Market Value |
| ||||||
|
|
|
|
|
|
|
|
| ||||||
MAINE MUNICIPAL BONDS (56.1%) |
|
|
|
|
|
|
|
| ||||||
Bangor, ME | Aa-3/AA- | 3.600% | 04/01/2005 | $ | 250,000 | $ | 254,332 |
| ||||||
Bangor, ME | Aa-3/AA- | 3.750 | 04/01/2006 |
| 100,000 |
| 102,781 |
| ||||||
Bangor, ME | Aa-3/NR | 5.500 | 09/01/2004 |
| 60,000 |
| 60,260 |
| ||||||
Bar Harbor, ME | A-1/A+ | 6.200 | 06/01/2005 |
| 175,000 |
| 182,171 |
| ||||||
Bar Harbor, ME | A-1/A+ | 6.450 | 06/01/2009 |
| 75,000 |
| 86,761 |
| ||||||
Bath, ME | A/A+ | 7.400 | 12/01/2006 |
| 15,000 |
| 16,790 |
| ||||||
Bath, ME | A/A+ | 7.450 | 12/01/2007 |
| 30,000 |
| 34,764 |
| ||||||
Bath, ME | A/A+ | 7.500 | 12/01/2008 |
| 20,000 |
| 23,919 |
| ||||||
Bath, ME MBIA | Aaa/AAA | 5.625 | 03/01/2009 |
| 25,000 |
| 26,149 |
| ||||||
Brewer, ME | A/A | 6.100 | 01/01/2005 |
| 50,000 |
| 51,125 |
| ||||||
Brewer, ME | A/A | 6.200 | 01/01/2006 |
| 50,000 |
| 51,125 |
| ||||||
Brunswick, ME Tax Increment (BTI Project) | Aa-3/AA | 5.500 | 11/01/2008 |
| 50,000 |
| 52,644 |
| ||||||
Bucksport, ME | NR/BBB+ | 7.150 | 04/01/2007 |
| 25,000 |
| 27,906 |
| ||||||
Cape Elizabeth, ME | Aa/AA | 5.750 | 10/15/2009 |
| 250,000 |
| 257,760 |
| ||||||
Cape Elizabeth, ME | Aa/AA | 5.900 | 10/15/2012 |
| 100,000 |
| 103,139 |
| ||||||
Cape Elizabeth, ME | Aa/AA | 5.900 | 10/15/2014 |
| 25,000 |
| 25,784 |
| ||||||
Ellsworth, ME | A/NR | 7.200 | 07/01/2008 |
| 25,000 |
| 29,181 |
| ||||||
Freeport, ME | Aa-3/AA | 7.250 | 09/01/2004 |
| 250,000 |
| 251,457 |
| ||||||
Freeport, ME | Aa-3/AA | 7.250 | 09/01/2010 |
| 20,000 |
| 24,473 |
| ||||||
Gorham, ME Unlimited Tax G.O. MBIA | Aaa/NR | 4.200 | 02/01/2022 |
| 155,000 |
| 146,083 |
| ||||||
Gorham, ME Unlimited Tax G.O. MBIA | Aaa/NR | 4.300 | 02/01/2023 |
| 155,000 |
| 146,745 |
| ||||||
Gorham, ME Unlimited Tax G.O. MBIA | Aaa/NR | 4.350 | 02/01/2024 |
| 155,000 |
| 145,478 |
| ||||||
Houlton, ME Water District MBIA | Aaa/NR | 4.600 | 05/01/2014 |
| 100,000 |
| 105,209 |
| ||||||
Jay, ME Pollution Control (International Paper Co.) | Baa/BBB | 5.625 | 11/15/2006 |
| 50,000 |
| 50,584 |
| ||||||
Kennebec, ME Regl. Dev. | Baa-1/NR | 5.500 | 08/01/2014 |
| 75,000 |
| 80,422 |
| ||||||
#Kennebec, ME Water District FSA | Aaa/NR | 5.125 | 12/01/2021 |
| 500,000 |
| 527,395 |
| ||||||
Kennebunk, ME Sewer District | A/NR | 7.100 | 01/01/2006 |
| 15,000 |
| 16,089 |
| ||||||
Kittery, ME | A/AA | 5.200 | 01/01/2009 |
| 25,000 |
| 27,096 |
| ||||||
Lewiston, Maine G.O. FSA | Aaa/NR | 5.000 | 04/01/2024 |
| 250,000 |
| 257,300 |
| ||||||
Maine Educ. Ln. Marketing Corp. Student Ln. | Aaa/NR | 6.350 | 05/01/2005 |
| 25,000 |
| 25,140 |
| ||||||
Maine Governmental Facs. Lease Rev. FSA | Aaa/AAA | 5.750 | 10/01/2007 |
| 250,000 |
| 275,475 |
| ||||||
Maine Governmental Facs. Auth Lease MBIA | Aaa/AAA | 5.375 | 10/01/2016 |
| 250,000 |
| 271,752 |
| ||||||
Maine Health & Higher Educ. Facs. Auth. (Bates College) FSA | Aaa/AAA | 5.250 | 07/01/2011 |
| 25,000 |
| 26,937 |
| ||||||
*Maine Health & Higher Educ. Facs. Auth. (Blue Hill Mem. Hosp) FSA | Aaa/AAA | 5.250 | 07/01/2010 |
| 550,000 |
| 596,788 |
| ||||||
Maine Health & Higher Educ. Facs. Auth. FSA | Aaa/AAA | 5.600 | 07/01/2007 |
| 175,000 |
| 178,108 |
| ||||||
Maine Health & Higher Educ. Facs. Auth. (Univ. New England & Cedars Nur) FSA | Aaa/AAA | 5.550 | 07/01/2008 |
| 150,000 |
| 154,046 |
| ||||||
Maine Health & Higher Educ. Facs. Auth. | Aaa/A+ | 6.000 | 10/01/2013 |
| 195,000 |
| 227,659 |
| ||||||
Maine Health & Higher Educ. Facs. Auth. FSA | Aaa/AAA | 5.000 | 11/15/2013 |
| 35,000 |
| 36,621 |
| ||||||
#Maine Health & Higher Edl. Facs. Auth. Rev. FSA | Aaa/AAA | 5.300 | 07/01/2007 |
| 220,000 |
| 225,496 |
| ||||||
Maine Health & Higher Edl. Facs. Auth. Rev. AMBAC | Aaa/AAA | 7.300 | 05/01/2014 |
| 5,000 |
| 5,013 |
| ||||||
Maine Health & Higher Educ. Auth. (Maine Maritime Academy) MBIA | Aaa/NR | 5.000 | 07/01/2025 |
| 340,000 |
| 346,586 |
| ||||||
Maine Finance Auth. Rev. (Electric Rate Stabilization) FSA | Aaa/AAA | 4.500 | 07/01/2008 |
| 25,000 |
| 26,782 |
| ||||||
*Maine Municipal Bond Bank MBIA | Aaa/AAA | 5.625 | 11/01/2016 |
| 1,000,000 |
| 1,125,010 |
| ||||||
Maine Municipal Bond Bank AMBAC | Aaa/AAA | 5.700 | 11/01/2011 |
| 90,000 |
| 98,334 |
| ||||||
Maine Municipal Bond Bank (Sewer & Water) Rev. | Aaa/AAA | 4.900 | 11/01/2024 |
| 100,000 |
| 101,414 |
| ||||||
Maine State (Highway) | Aa/AA | 5.000 | 06/15/2011 |
| 200,000 |
| 220,704 |
| ||||||
*Maine State Hsg. Auth. Mtg. Pur. | Aa-1/AA+ | 4.050 | 11/15/2010 |
| 1,000,000 |
| 1,011,510 |
| ||||||
Maine State Turnpike Auth. MBIA | Aaa/AAA | 4.625 | 07/01/2010 |
| 100,000 |
| 104,911 |
| ||||||
Maine State Turnpike Auth. Rev. FGIC | Aaa/AAA | 5.300 | 07/01/2012 |
| 100,000 |
| 109,225 |
| ||||||
Maine State Turnpike Auth. MBIA | Aaa/AAA | 5.250 | 07/01/2010 |
| 75,000 |
| 82,409 |
| ||||||
*Maine State Turnpike. Auth. Rev. FGIC | Aaa/AAA | 5.750 | 07/01/2028 |
| 750,000 |
| 812,123 |
| ||||||
Maine Vets Homes ME Rev. | NR/BBB | 6.800 | 10/01/2005 |
| 315,000 |
| 326,501 |
| ||||||
Portland, ME | Aa-1/AA | 5.000 | 09/01/2013 |
| 60,000 |
| 64,089 |
| ||||||
Portland, ME | Aa-1/AA | 3.500 | 04/01/2005 |
| 350,000 |
| 356,118 |
| ||||||
#Portland, ME | Aa-1/AA | 5.300 | 06/01/2013 |
| 790,000 |
| 841,619 |
| ||||||
Portland, ME (City Hospital) | Aa-1/AA | 12.600 | 11/01/2005 |
| 50,000 |
| 56,534 |
| ||||||
Portland, ME | Aa-1/AA+ | 7.250 | 12/01/2005 |
| 100,000 |
| 107,471 |
| ||||||
Portland, ME Airport Rev. | Aaa/AAA | 5.000 | 07/01/2032 |
| 750,000 |
| 752,258 |
| ||||||
Scarborough, ME G.O. FIC | Aaa/AAA | 4.250 | 11/01/2014 |
| 435,000 |
| 452,487 |
| ||||||
Scarborough, ME G.O. MBIA | Aaa/AAA | 4.400 | 11/01/2030 |
| 250,000 |
| 224,835 |
| ||||||
Scarborough, ME G.O. MBIA | Aaa/AAA | 4.400 | 11/01/2031 |
| 250,000 |
| 223,878 |
| ||||||
Scarborough, ME G.O. MBIA | Aaa/AAA | 4.400 | 11/01/2032 |
| 480,000 |
| 429,331 |
| ||||||
#Skowhegan, ME Pollution Ctl. Rev. (Scott Paper Co. Prj.) | Aa/AA- | 5.900 | 11/01/2013 |
| 1,465,000 |
| 1,500,160 |
| ||||||
South Portland, ME | Aa-1/NR | 5.800 | 09/01/2008 |
| 150,000 |
| 168,963 |
| ||||||
South Portland, ME | Aa-1/NR | 5.800 | 09/01/2011 |
| 40,000 |
| 46,130 |
| ||||||
University of Maine System Rev. AMBAC | Aaa/AAA | 4.500 | 03/01/2007 |
| 50,000 |
| 52,818 |
| ||||||
University of Maine System Rev. MBIA | Aaa/AAA | 4.250 | 03/01/2025 |
| 950,000 |
| 850,279 |
| ||||||
University of Maine System Rev. MBIA | Aaa/AAA | 4.250 | 03/01/2034 |
| 250,000 |
| 216,370 |
| ||||||
Westbrook, ME | A/A | 6.750 | 11/15/2004 |
| 25,000 |
| 25,453 |
| ||||||
Westbrook, ME G.O. FGIC | Aaa/AAA | 3.750 | 10/15/2005 |
| 45,000 |
| 46,055 |
| ||||||
Westbrook, ME G.O. FGIC | Aaa/AAA | 4.250 | 10/15/2020 |
| 180,000 |
| 175,001 |
| ||||||
Windham, ME | A-1/A | 0.050 | 06/15/2008 |
| 75,000 |
| 66,438 |
| ||||||
Windham, ME General Obligation AMBAC | Aaa/AAA | 4.000 | 11/01/2014 |
| 415,000 |
| 419,059 |
| ||||||
Winslow, ME (Crowe Rope Inds.) MBIA | Aaa/AAA | 5.500 | 03/01/2007 |
| 130,000 |
| 140,097 |
| ||||||
Winthrop, ME | A-3/NR | 5.100 | 08/01/2004 |
| 25,000 |
| 25,000 |
| ||||||
Winthrop, ME | A-3/NR | 5.200 | 08/01/2005 |
| 25,000 |
| 25,912 |
| ||||||
Winthrop, ME | A-3/NR | 5.300 | 08/01/2006 |
| 25,000 |
| 26,586 |
| ||||||
Winthrop, ME | A-3/NR | 5.400 | 08/01/2007 |
| 25,000 |
| 27,152 |
| ||||||
Yarmouth, ME AMBAC | Aaa/NR | 5.250 | 11/15/2009 |
| 250,000 |
| 278,210 |
| ||||||
Yarmouth, ME | Aa-3/AA- | 5.000 | 11/15/2019 |
| 500,000 |
| 531,930 |
| ||||||
York, ME G.O. | NR/AA | 4.000 | 09/01/2010 |
| 75,000 |
| 78,258 |
| ||||||
| Total Maine Municipal Bonds |
|
|
|
|
| $ | 17,761,957 |
| |||||
|
|
|
|
|
|
|
|
| ||||||
GUAM MUNICIPAL BONDS (0.0%) |
|
|
|
|
|
|
|
| ||||||
Guam Hsg. Corp. Single Family Mtg. | NR/AAA | 5.750 | 09/01/2031 |
| 10,000 |
| 10,627 |
| ||||||
| Total Guam Municipal Bonds |
|
|
|
|
| $ | 10,627 |
| |||||
|
|
|
|
|
|
|
|
| ||||||
PUERTO RICO MUNICIPAL BONDS (22.4%) |
|
|
|
|
|
|
|
| ||||||
Puerto Rico Commonwealth Public Improvement | Baa-1/A- | 5.250 | 07/01/2018 |
| 400,000 |
| 436,160 |
| ||||||
Puerto Rico Commonwealth Public Improvement MBIA | Aaa/AAA | 5.500 | 07/01/2021 |
| 750,000 |
| 847,185 |
| ||||||
Puerto Rico Commonwealth Highway and Trans. Rev. MBIA | Aaa/AAA | 5.500 | 07/01/2036 |
| 750,000 |
| 803,190 |
| ||||||
Puerto Rico Commonwealth Highway and Trans. Rev. MBIA | Aaa/AAA | 5.500 | 07/01/2017 |
| 500,000 |
| 573,455 |
| ||||||
Puerto Rico Public Building Auth. Rev. AMDAX | Aaa/AAA | 5.500 | 07/01/2018 |
| 1,000,000 |
| 1,148,940 |
| ||||||
Puerto Rico Public Finance Corp. Commonwealth Appropriations AMBAC | Aaa/AAA | 5.375 | 06/01/2018 |
| 1,960,000 |
| 2,234,733 |
| ||||||
University of Puerto Rico Revs. MBIA | Aaa/AAA | 5.500 | 06/01/2015 |
| 1,000,000 |
| 1,068,240 |
| ||||||
| Total Puerto Rico Municipal Bonds |
|
|
|
|
| $ | 7,111,903 |
| |||||
|
|
|
|
|
|
|
|
| ||||||
VIRGIN ISLANDS MUNICIPAL BONDS (10.4%) |
|
|
|
|
|
|
|
| ||||||
Virgin Islands Hsg. Finance Auth. Single Family Rev. GNMA COLL | NR/AAA | 6.000 | 03/01/2007 |
| 55,000 |
| 57,449 |
| ||||||
Virgin Islands Public Finance Auth. Rev. | Aaa/AAA | 7.300 | 10/01/2018 |
| 1,080,000 |
| 1,403,492 |
| ||||||
Virgin Islands Public Finance Auth. Rev. RADIAN - IBCC | NR/AA | 5.500 | 10/01/2022 |
| 720,000 |
| 772,171 |
| ||||||
Virgin Islands Water & Power Auth. Elec. Syst. Rev. ACA/MBIA | Aaa/AAA | 5.300 | 07/01/2021 |
| 1,000,000 |
| 1,071,240 |
| ||||||
| Total Virgin Islands Municipal Bonds |
|
|
|
|
| $ | 3,304,352 |
| |||||
|
|
|
|
| ||||||||||
| TOTAL MUNICIPAL BONDS (COST: $27,398,741) |
| $ | 28,188,839 | ||||||||||
|
|
|
|
| ||||||||||
| SHORT-TERM SECURITIES (6.8%) | Shares |
|
| ||||||||||
| Wells Fargo National Tax-Free Money Market | 1,082,000 | $ | 1,082,000 | ||||||||||
| Goldman Sachs Financial Square Money Market | 1,082,000 |
| 1,082,000 | ||||||||||
| TOTAL SHORT-TERM SECURITIES (COST:$2,164,000) |
| $ | 2,164,000 | ||||||||||
|
|
|
|
| ||||||||||
| TOTAL INVESTMENTS IN SECURITIES (COST: $29,562,741) |
| $ | 30,352,839 | ||||||||||
| OTHER ASSETS LESS LIABILITIES |
|
| 1,330,082 | ||||||||||
|
|
|
|
| ||||||||||
| NET ASSETS |
| $ | 31,682,921 | ||||||||||
*Indicates bonds are segregated by the custodian to cover when-issued or delayed-delivery purchases.
#Indicates bonds are segregated by the custodian to cover initial margin requirements.
FOOTNOTE: Non-rated (NR) securities have been determined to be of investment grade quality by the Fund’s Manager.
The accompanying notes are an integral part of these financial statements.
Financial Statements July 30, 2004
Statement of Assets and Liabilities July 30, 2004
ASSETS |
|
| ||
| Investment in securities, at value (cost: $29,562,741) | $ | 30,352,839 | |
| Cash |
| 871,080 | |
| Accrued interest receivable |
| 298,437 | |
| Accrued dividends receivable |
| 925 | |
| Variation margin on futures |
| 275,000 | |
| Prepaid expenses |
| 5,847 | |
| Receivable due from broker |
| 3 | |
|
|
| ||
| Total Assets | $ | 31,804,131 | |
|
|
| ||
LIABILITIES |
|
| ||
| Dividends payable | $ | 89,527 | |
| Accrued expenses |
| 31,683 | |
|
|
| ||
| Total Liabilities | $ | 121,210 | |
|
|
| ||
|
|
| ||
NET ASSETS | $ | 31,682,921 | ||
|
|
| ||
|
|
| ||
Net assets are represented by: |
|
| ||
| Paid-in capital | $ | 30,286,104 | |
| Accumulated undistributed net realized gain (loss) on investments and futures |
| 1,019,631 | |
| Accumulated undistributed net investment income |
| 3,171 | |
| Unrealized appreciation on investments |
| 790,098 | |
| Unrealized depreciation of futures |
| (416,083) | |
| Total amount representing net assets applicable to 2,855,243 outstanding shares of no par common stock (unlimited shares authorized) | $ | 31,682,921 | |
|
|
| ||
Net asset value per share | $ | 11.10 | ||
|
|
| ||
Public offering price (based on sales charge of 4.25%) | $ | 11.59 | ||
The accompanying notes are an integral part of these financial statements.
Statement of Operations For the four month period ended July 30, 2004
INVESTMENT INCOME |
|
| ||
| Interest | $ | 473,642 | |
| Dividends |
| 2,718 | |
| Total Investment Income | $ | 476,360 | |
|
|
| ||
EXPENSES |
|
| ||
| Investment advisory fees | $ | 53,463 | |
| Service fees |
| 26,731 | |
| Administrative service fees |
| 10,693 | |
| Transfer agent fees |
| 14,429 | |
| Transfer agent out-of-pockets |
| 700 | |
| Accounting service fees |
| 13,346 | |
| Reports to shareholders |
| 1,733 | |
| Custodian fees |
| 2,000 | |
| Professional fees |
| 333 | |
| Trustees fees |
| 848 | |
| Registration and filing fees |
| 617 | |
| Insurance expense |
| 670 | |
| Legal fees |
| 2,400 | |
| Audit fees |
| 2,667 | |
| Total Expenses | $ | 130,630 | |
| Less expenses waived or absorbed by the Fund’s manager |
| (29,051) | |
| Total Net Expenses | $ | 101,579 | |
|
|
| ||
NET INVESTMENT INCOME | $ | 374,781 | ||
|
|
| ||
|
|
| ||
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FUTURES |
|
| ||
| Net realized gain (loss) from: |
|
| |
| Investment transactions | $ | 143,951 | |
| Futures transactions |
| 905,155 | |
| Net change in unrealized appreciation (depreciation) of: |
|
| |
| Investments |
| (917,861) | |
| Futures |
| (416,083) | |
| Net Realized And Unrealized Gain (Loss) On Investments And Futures | $ | (284,838) | |
|
|
| ||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | $ | 89,943 | ||
The accompanying notes are an integral part of these financial statements.
Financial Statements July 30, 2004
Statement of Changes in Net Assets
For the four month period ended July 30, 2004 and the year ended March 31, 2004
|
| For the Four Month Period Ended July 30, 2004 |
| For the Year Ended March 31, 2004 | ||
|
|
|
|
| ||
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS |
|
|
|
| ||
| Net investment income | $ | 374,781 | $ | 1,217,578 | |
| Net realized gain (loss) on investment and futures transactions |
| 1,049,106 |
| 104,884 | |
| Net change in unrealized appreciation (depreciation) on investments and futures |
| (1,333,944) |
| (398,074) | |
| Net Increase (Decrease) in Net Assets Resulting From Operations | $ | 89,943 | $ | 924,388 | |
|
|
|
|
| ||
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS |
|
|
|
| ||
| Dividends from net investment income ($.13 and $.39 per share, respectively) | $ | (373,109) | $ | (1,214,076) | |
| Distributions from net realized gain on investment and futures transactions ($.00 and $.06 per share, respectively) |
| 0 |
| (175,866) | |
| Total Dividends and Distributions | $ | (373,109) | $ | (1,389,942) | |
|
|
|
|
| ||
CAPITAL SHARE TRANSACTIONS |
|
|
|
| ||
| Proceeds from sale of shares | $ | 1,230,201 | $ | 2,736,665 | |
| Proceeds from reinvested dividends |
| 204,246 |
| 732,655 | |
| Cost of shares redeemed |
| (2,737,885) |
| (7,581,455) | |
| Net Increase (Decrease) in Net Assets Resulting From Capital Share Transactions | $ | (1,303,438) | $ | (4,112,135) | |
|
|
|
|
| ||
TOTAL INCREASE (DECREASE) IN NET ASSETS | $ | (1,586,604) | $ | (4,577,689) | ||
|
|
|
|
| ||
NET ASSETS, BEGINNING OF PERIOD |
| 33,269,525 |
| 37,847,214 | ||
|
|
|
|
| ||
NET ASSETS, END OF PERIOD | $ | 31,682,921 | $ | 33,269,525 | ||
The accompanying notes are an integral part of these financial statements.
Notes to Financial Statements July 30, 2004
Note 1. ORGANIZATION
Business operations - The Maine Municipal Fund (the “Fund”) is an investment portfolio of Integrity Managed Portfolios (the “Trust”) registered under the Investment Company Act of 1940, as amended, as a non-diversified, open-end management investment company. The Trust may offer multiple portfolios; currently six portfolios are offered. Integrity Managed Portfolios is an unincorporated business trust organized under Massachusetts law on August 10, 1990. The investment objective of the Fund is to provide its shareholders with as high a level of current income exempt from both federal and Maine income tax as is consistent with preservation of capital. The Fund will seek to achieve this objective by investing primarily in a portfolio of Maine municipal securities.
On December 19, 2003, the Maine Municipal Fund became a series of Integrity Managed Portfolios. Prior to this the Fund was part of the Forum Funds and was named the Maine TaxSaver Bond Fund. The Maine TaxSaver Bond Fund commenced operations on December 5, 1991. The Forum Funds is a Delaware business trust that is registered as an open-end management investment company under the Investment Company Act of 1940, as amended.
Shares of the Fund are offered at net asset value plus a maximum sales charge of 4.25% of the offering price.
Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Investment security valuation - Securities for which quotations are not readily available (which will constitute a majority of the securities held by the Fund) are valued using a matrix system at fair value as determined by Integrity Money Management. The matrix system has been developed based on procedures approved by the Board of Trustees which include consideration of the following: yields or prices of municipal bonds of comparable quality, type of issue, coupon, maturity and rating, and indications as to value from dealers and general market conditions. Because the market value of securities can only be established by agreement between parties in a sales transaction, and because of the uncertainty inherent in the valuation process, the fair values as determined may differ from the values that would have been used had a ready market for the securities existed. The Fund follows in dustry practice and records security transactions on the trade date.
The Fund concentrates its investments in a single state. This concentration may result in the Fund investing a relatively high percentage of its assets in a limited number of issuers.
When-issued securities – The Fund may purchase securities on a when-issued basis. Payment and delivery may take place after the customary settlement period for that security. The price of the underlying securities and the date when the securities will be delivered and paid for are fixed at the time the transaction is negotiated. The value of the securities purchased on a when-issued basis are identified as such in the Fund’s Schedule of Investments. With respect to purchase commitments, the fund identifies securities as segregated in its records with a value at least equal to the amount of the commitment. Losses may arise due to changes in the value of the underlying securities or if the counterparty does not perform under the contract’s terms, or if the issuer does not issue the securities due to political, economic, or other factors.
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 and any net realized gain on investments to its shareholders. Therefore, no provision for income taxes is required. Distributions during the four month period ended July 30, 2004, were characterized tax-exempt for tax purposes.
The tax character of distributions paid was as follows:
|
| July 30, 2004 |
| March 31, 2004 |
Tax-exempt income | $ | 373,109 | $ | 1,214,076 |
Ordinary Income |
| 0 |
| 5,159 |
Long-term Capital Gains |
| 0 |
| 170,707 |
Total | $ | 373,109 | $ | 1,389,942 |
For the four month period ended July 30, 2004, the Fund made no permanent reclassifications to reflect tax character.
As of March 31, 2004 (fiscal year end of the Fund prior to the conversion to the Integrity Funds) the Fund did not have any unexpired capital loss carryforwards, which may be used to offset capital gains.
Distributions to shareholders - Dividends from net investment income, declared daily and paid monthly, are reinvested in additional shares of the Fund at net asset value or paid in cash. Capital gains, when available, are distributed at least annually.
Premiums and discounts - Premiums and discounts on municipal securities are amortized for financial reporting purposes.
Other - Income and expenses are recorded on the accrual basis. Investment transactions are accounted for on the trade date. Realized gains and losses are reported on the identified cost basis. Distributions to shareholders are recorded by the Fund on the ex-dividend date. Income and capital gain distributions are determined in accordance with federal income tax regulations and may differ from net investment income and realized gains determined in accordance with accounting principles generally accepted in the United States of America. These differences are primarily due to differing treatment for market discount, capital loss carryforwards and losses due to wash sales and futures transactions.
Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications to paid-in capital. Temporary book and tax basis differences will reverse in a subsequent period.
Futures contracts - The Fund may purchase and sell financial futures contracts to hedge against changes in the values of tax-exempt municipal 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 or a certain amount of U.S. government or municipal securities 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.&nb sp; Unrealized appreciation (depreciation) related to open futures contracts is required to be treated as a realized gain (loss) for Federal income tax purposes.
Securities held in collateralized accounts to cover initial margin requirements on open futures contracts are noted in the Schedule of Investments. The Statement of Assets and Liabilities reflects a receivable or payable for the daily mark to market for variation margin.
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.
At July 30, 2004, the Fund had outstanding futures contracts to sell debt securities as follows:
Contracts to Sell | Expiration Date | Number of Futures Contracts | Valuation as of July 30, 2004 | Unrealized Appreciation (Depreciation) |
U.S. Treasury Bonds | 09/2004 | 100 | $275,000 | ($416,083) |
Use of estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 July 30, 2004, there were unlimited shares of no par authorized; 2,855,243 and 2,972,081 shares were outstanding at July 30, 2004 and March 31, 2004, respectively.
Transactions in capital shares were as follows:
| Shares | |
| For The Four Month Period Ended July 30, 2004 | For The Year Ended March 31, 2004 |
| ||
| ||
Shares sold | 110,712 | 240,419 |
Shares issued on reinvestment of dividends | 18,349 | 64,725 |
Shares redeemed | (245,899) | (668,937) |
Net increase (decrease) | (116,838) | (363,793) |
Note 4. ACQUISITION OF FUND
The Forum Funds held a special meeting of shareholders of the Maine TaxSaver Bond Fund and the New Hampshire TaxSaver Bond Fund (the “Funds”), at [the offices of Forum Financial Group, LLC, Two Portland Square, Portland, ME 04101], on December 15, 2003, at 10:00 a.m., Eastern Time, as adjourned from time to time (the “Meeting”), for the purposes listed: to approve a new investment advisory agreement with Integrity Money Management, Inc.; and to consider and act upon any other business as may properly come before the Meeting. After careful consideration, the Trustees of the Forum Funds unanimously approved each of the proposals and recommended that shareholders vote “FOR” the proposals. The Forum Funds Board of Trustees fixed the close of business on October 27, 2003 as the record date for determining shareholders entitled to notice of and to vote at the Meeting . Each share of a Fund was entitled to one vote for each dollar invested with respect to each proposal. The Investment Advisory Agreement of the Maine Municipal Fund and New Hampshire Municipal Fund were approved by the shareholders on December 15, 2003. The reorganization was accomplished by a tax-free exchange of 3,005,440 shares of Maine Tax Saver Fund for 3,005,440 shares of Maine Municipal Fund on December 19, 2003. Maine TaxSaver Bond Fund net assets of $34,037,885 before and after conversion on December 19, 2003, including $2,020,864 of unrealized appreciation, were reorganized into the Maine Municipal Fund.
Note 5. INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Integrity Money Management, Inc., the Fund’s investment adviser; Integrity Funds Distributor, Inc., the Fund’s underwriter; and Integrity Fund Services, Inc., the Fund’s transfer, accounting and administrative services agent, are subsidiaries of Integrity Mutual Funds, Inc.
The Fund has engaged Integrity 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 0.50% of the Fund’s average daily net assets. The Fund has recognized $24,412 of investment advisory fees after partial waiver for the four month period ended July 30, 2004. The Fund has a payable to Integrity Money Management, Inc. of $5,611 at July 30, 2004, for investment advisory fees. Certain officers and trustees of the Fund are also officers and directors of the investment adviser.
Under the terms of the advisory agreement, the investment adviser has agreed to pay all the expenses of the Fund (excluding taxes and brokerage fees and commissions, if any) that exceed 1.25% of the Fund’s average daily net assets on an annual basis up to the amount of the management and investment advisory fee payable by the Fund to the adviser. In addition, the investment adviser has agreed to waive fees and reimburse certain expenses (excluding taxes, interest, portfolio transaction expenses and extraordinary expenses) that exceed 0.95% of the Fund’s average daily net assets on an annual basis through December 20, 2004.
The Fund pays an annual service fee to Integrity Funds Distributor, Inc., its principal underwriter, for certain expenses incurred by Integrity Funds Distributor, Inc. in connection with the distribution of the Fund’s shares. The annual fee paid to Integrity Funds Distributor, Inc. is calculated daily and paid monthly by the Fund at the annual rate of 0.25% of the average daily net assets of the Fund. The Fund has recognized $26,731 of service fee expenses for the four month period ended July 30, 2004. The Fund has a payable to Integrity Funds Distributor, Inc. of $6,634 at July 30, 2004, for service fees.
Integrity Fund Services, Inc. provides shareholder services for a fee that varies according to the size of the Fund and is reimbursed for out-of-pocket expenses. An additional fee with a minimum $500 per month is charged for each additional share class. The Fund has recognized $14,429 of transfer agency fees and expenses for the four month period ended July 30, 2004. The Fund has a payable to Integrity Fund Services, Inc. of $3,585 at July 30, 2004, for transfer agency fees. Integrity Fund Services, 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, together with reimbursement of out-of-pocket expenses. An additional minimum fee of $500 per month is charged by Integrity Fund Services for each additional share class. The Fund has recognized $13,346 of accounting service fees for the four month period ended July 30, 2004. The Fund has a payable to Integrity Fund Services, Inc. of $3,327 at July 30, 2004, for accounting service fees. Integrity Fund Services also acts as administrator for the Fund. The Fund pays to Integrity Fund Services a monthly fee calculated at the rate of 0.10% of average daily net assets with a minimum of $1,500 per month plus out-of-pocket expenses. An additional minimum fee of $500 per month is charged by Integrity Fund Services for each additional share class. The Fund has recognized $10,693 of administrative service fees for the four month period ended July 30, 2004. The Fund has a payable to Integrity Fund Services, Inc. of $2,653 at July 30, 2004, for administrative service fees.
Note 6. INVESTMENT SECURITY TRANSACTIONS
The cost of purchases and proceeds from sales of investment securities (excluding short-term securities) aggregated $583,173 and $3,697,921, respectively, for the four month period ended July 30, 2004.
Note 7. INVESTMENT IN SECURITIES
At July 30, 2004, the aggregate cost of securities for federal income tax purposes was substantially the same for financial reporting purposes at $29,562,741. The net unrealized appreciation of investments based on the cost was $790,098, which is comprised of $1,259,879 aggregate gross unrealized appreciation and $469,781 aggregate gross unrealized depreciation.
Financial Highlights
Selected per share data and ratios for the period indicated
|
| For The Four Month Period Ended July 30, 2004 |
| For The Year Ended March 31, 2004 |
| For The Year Ended March 31, 2003 |
| For The Year Ended March 31, 2002 |
| For The Year Ended March 31, 2001 |
| For The Year Ended March 31, 2000 | ||
NET ASSET VALUE, BEGINNING OF PERIOD | $ | 11.19 | $ | 11.35 | $ | 10.97 | $ | 11.06 | $ | 10.62 | $ | 11.07 | ||
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Income from Investment Operations: |
|
|
|
|
|
|
|
|
|
|
|
| ||
| Net investment income | $ | .13 | $ | .39 | $ | .39 | $ | .42 | $ | .46 | $ | .48 | |
| Net realized and unrealized gain (loss) on investment and futures transactions |
| (.09) |
| (.10) |
| .38 |
| (.09) |
| .44 |
| (.44) | |
| Total Income (Loss) From Investment Operations | $ | .04 | $ | .29 | $ | .77 | $ | .33 | $ | .90 | $ | .04 | |
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Less Distributions: |
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| Dividends from net investment income | $ | (.13) | $ | (.39) | $ | (.39) | $ | (.42) | $ | (.46) | $ | (.48) | |
| Distributions from net capital gains |
| .00 |
| (.06) |
| .00 |
| .00 |
| .00 |
| (.01) | |
| Total Distributions | $ | (.13) | $ | (.45) | $ | (.39) | $ | (.42) | $ | (.46) | $ | (.49) | |
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NET ASSET VALUE, END OF PERIOD | $ | 11.10 | $ | 11.19 | $ | 11.35 | $ | 10.97 | $ | 11.06 | $ | 10.62 | ||
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Total Return |
| 1.23%(A)(C) |
| 2.56%(A) |
| 7.16%(A) |
| 3.06%(A) |
| 8.69%(A) |
| 0.43%(A) | ||
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RATIOS/SUPPLEMENTAL DATA: |
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| Net assets, end of period (in thousands) | $ | 31,683 | $ | 33,270 | $ | 37,847 | $ | 38,033 | $ | 33,422 | $ | 31,938 | |
| Ratio of net expenses (after expense assumption) to average net assets |
| 0.95%(B)(C) |
| 0.95%(B) |
| 0.95%(B) |
| 0.95%(B) |
| 0.84%(B) |
| 0.60%(B) | |
| Ratio of net investment income to average net assets |
| 3.49%(C) |
| 3.44% |
| 3.49% |
| 3.82% |
| 4.28% |
| 4.50% | |
| Portfolio turnover rate |
| 1.92% |
| 34.40% |
| 26.00% |
| 13.00% |
| 19.00% |
| 23.00% | |
(A) Excludes maximum sales charge of 4.25%.
(B) During the period since March 31, 2004, Integrity Mutual Funds, Inc. assumed/waived expenses of $29,051. If the expenses had not been assumed/waived, the annualized ratio of total expenses to average net assets would have been 1.22%. For the period 4/1/2003 through 12/19/2003, Forum Administrative Services assumed/waived expenses of $64,658. For the period from 12/20/2003 through 3/31/2004, Integrity Money Management, Inc. assumed/waived expenses of $22,736. If the expenses had not been assumed/waived, the annualized ratio of total expenses to average net assets for the year would have been 1.20%. In prior years, Forum Administrative Services, Forum Investment Advisors, Forum Shareholder Services, and Forum Accounting Services assumed/waived expenses of $104,969 (2003), $133,718 (2002), $169,656 (2001), and $230,659 (2000). If the expenses had not been assumed/waived, the annualized ratio of total e xpenses to average net assets would have been 1.22%, 1.32%, 1.37%, and 1.31%, respectively.
(C) Ratio is annualized.
Total return represents the rate that an investor would have earned or lost on an investment in the Fund assuming reinvestment of all dividends and distributions.
The accompanying notes are an integral part of these financial statements.
TAX INFORMATION | ||||||||
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For The Four Month Period Ended July 30, 2004 (Unaudited) | ||||||||
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We are required to advise you within 60 days of the Fund’s fiscal year-end regarding the federal tax status of distributions received by shareholders during such fiscal year. The distributions made during the fiscal year by the Fund were earned from the following sources: | ||||||||
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| Dividends and Distributions Per Share | ||||
To Shareholders of Record |
| Payment Date |
| From Net Investment Income |
| From Net Realized Short-Term Gains |
| From Net Realized Long-Term Gains |
April 29, 2004 |
| April 30, 2004 | $ | .033217 |
| - |
| - |
May 27, 2004 |
| May 28, 2004 | $ | .030565 |
| - |
| - |
June 29, 2004 |
| June 30, 2004 | $ | .034498 |
| - |
| - |
July 29, 2004 |
| July 30, 2004 | $ | .031254 |
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Shareholders should consult their tax advisors. | ||||||||
INDEPENDENT AUDITOR’S REPORT
To the Shareholders and Board of Trustees of Maine Municipal Fund
We have audited the accompanying statement of assets and liabilities of Maine Municipal Fund (one of the portfolios constituting Integrity Managed Portfolios), including the schedule of investments as of July 30, 2004, the related statement of operations for the four month period then ended, the statement of changes in net assets, and the financial highlights for the four month period then ended and the year ended March 31, 2004. 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. The statement of changes in net assets for the year ended March 31, 2003, and the financial highlights for each of the four years in the period ended March 31, 2003, were audited by other auditors whose report dated May 16, 2003 expressed an unqualified opinion on those statements.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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 July 30, 2004, 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 the Maine Municipal Fund of the Integrity Managed Portfolios as of July 30, 2004, the results of its operations for the four month period then ended, the changes in its net assets, and the financial highlights for the four month period then ended and the year ended March 31, 2004, in conformity with accounting principles generally accepted in the United States of America.
BRADY, MARTZ & ASSOCIATES, P.C.
Minot, North Dakota USA
September 02, 2004
Nebraska Municipal Fund
Dear Shareholder:
Enclosed is the annual report of the operations of the Nebraska Municipal Fund (the “Fund”) for the year ended July 30, 2004. The Fund’s portfolio and related financial statements are presented within for your review.
The global recovery, centered in the U.S. and Asia continues to improve as evidenced by the recent Federal Reserve hike in the Federal Funds Rate from a historic low of 1% to 1.25% on June 30th. The increase was widely anticipated as recent economic and labor market conditions have improved. The environment of rising profits, low interest rates, a weak dollar, accelerating domestic retail sales, and strengthening exports bodes well for a further accommodative Federal Reserve.
The Federal Reserve has taken center stage as it prepares to shift away from its stimulative monetary stance to a normalization of fed funds.
Several crucial questions remain unresolved:
What will constitute a neutral fed fund rate?
Will the normalization process be faster or slower than the market is currently discounting?
How much damage will higher rates cause the economy and market?
While no one knows for certain, recent verbiage from the Federal Reserve states: “With underlying inflation still expected to be relatively low, the Committee believes that policy accommodation can be removed at a pace that is likely to be measured. Nonetheless, the Committee will respond to changes in economic prospects as needed to fulfill its obligation to maintain price stability.”
Municipals during the period remained range bound with yields on twenty-year AAA general obligations yielding 4.75% at the beginning of the period and ending the period at 4.77%. While the yields on the twenty-year municipals appear relatively unchanged during the period, they were quite volatile reaching a low of 4.33% and a high of 5.00% (Source Municipal Market Data).
The Fund’s shorter duration of 5.3 years and higher average overall coupon of 5.68% contributed to relative returns as interest rates increased during the period.
Several of the Fund’s holdings (e.g. Lincoln Electric 5.00% due 2021, Omaha GO’s 5.00% due 2022) under-performed the municipal sector hampering relative performance.
Having been undervalued relative to U.S. Treasuries for some time, municipals have started to rebound in recent months as municipal supply has declined. This out-performance should continue as interest rates rise, further dampening municipal supply.
During the period the Fund utilized defensive positions designed to provide share price stability. U.S. Treasury futures were used to hedge a portion of the portfolio, stabilizing the Fund’s share price as Treasury yields advanced during the period and tempering them as Treasury yields declined. The Nebraska Municipal Fund began the year at $10.62 per share and ended the period at $10.55 per share for a total return of 3.59% (without sales charge). This compares to the Lehman Brothers Municipal Bond Index’s return of 5.78% for the period. Risk management is important in this market environment.
An important part of the Fund’s strategy includes searching the primary and secondary markets for high quality double tax-exempt issues. Credit quality for the period ended was AAA 61%, AA 25%, A 6%, BBB 2% and NR 6%.
Income exempt from federal and state income taxes with preservation of capital remain the primary objectives of the Fund.
If you would like more frequent updates, visit our website at www.integritymf.com for daily prices along with pertinent Fund information.
Sincerely,
The Portfolio Management Team
The views expressed are those of Monte Avery, Chief Portfolio Strategist with Integrity Mutual Funds. The views are subject to change at any time in response to changing circumstances in the market and are not intended to predict or guarantee the future performance of any individual security, market sector or the markets generally, or any Integrity Mutual Fund.
Terms & Definitions July 30, 2004 (Unaudited)
Appreciation
The increase in value of an asset.
Average Annual Total Return
A standardized measurement of the return (yield and appreciation) earned by the fund on an annual basis, assuming all distributions are reinvested.
Coupon Rate or Face Rate
The rate of interest annually payable based on the face amount of the bond; expressed as a percentage.
Depreciation
The decrease in value of an asset.
Lehman Brothers Municipal Bond Index
An unmanaged list of long-term, fixed-rate, investment-grade, tax-exempt bonds representative of the municipal bond market. The index does not take into account brokerage commissions or other costs, may include bonds different from those in the fund, and may pose different risks than the fund.
Market Value
The actual (or estimated) price at which a bond trades in the market place.
Maturity
A measure of the term or life of a bond in years. When a bond “matures”, the issuer repays the principal.
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 sales charge.
Quality Ratings
A designation assigned by independent rating companies to give a relative indication of a bond’s credit worthiness. “AAA”, “AA”, “A” and “BBB” indicate investment grade securities. Ratings can range from a high of “AAA” to a low of “D”.
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.
July 30, 2004 (Unaudited)
Insert Pie Charts
PERFORMANCE AND COMPOSITION
PORTFOLIO QUALITY RATINGS
(based on Total Long-Term Investments)
AAA | 61.2% |
AA | 25.3% |
A | 5.6% |
BBB | 2.1% |
NR | 5.8% |
Quality ratings reflect the financial strength of the issuer. They are assigned by independent rating services such as Moody’s Investors Services and Standard & Poor’s. Non-rated bonds have been determined to be of appropriate quality for the portfolio by Integrity Money Management (formerly known as Ranson Capital Corporation), the investment adviser.
These percentages are subject to change.
PORTFOLIO MARKET SECTORS
(As a % of Net Assets)
S-School | 35.9% |
HC-Health Care | 19.1% |
H-Housing | 12.4% |
U-Utilities | 9.4% |
I-Industrial | 7.9% |
O-Other | 7.6% |
W/S-Water/Sewer | 5.4% |
C/L-COP/Lease | 2.3% |
Market sectors are breakdowns of the Fund’s portfolio holdings into specific investment classes.
These percentages are subject to change.
July 30, 2004 (Unaudited)
DISCLOSURE OF FUND EXPENSES
These examples are intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.
EXAMPLE 1:
This example assumes that you invest $1,000 in the Fund for the time periods indicated and then either redeem or do not redeem all of your shares at the end of those periods. The example also is based on the Fund’s actual expenses of 0.95% and rate of return for the period of 3.59%. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
| Redemption | No Redemption |
Share Class | A | A |
Annual Expenses | $51.76 | $51.76 |
Account value of an initial investment of $1,000 as of the end of the period would be $991.87.
EXAMPLE 2:
This example assumes that you invest $1,000 in the Fund for the time periods indicated and then either redeem or do not redeem all of your shares at the end of those periods. The example is based on the Fund’s actual operating expenses of 0.95% and also assumes that your investment has a 5.00% return. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
| Redemption | No Redemption |
Share Class | A | A |
Annual Expenses | $51.82 | $51.82 |
Account value of an initial investment of $1,000 on A shares as of the end of the period would be $1,005.38.
July 30, 2004 (Unaudited)
AVERAGE ANNUAL TOTAL RETURNS
| For periods ending July 30, 2004 | |||
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| Since Inception (November 17, 1993) |
Nebraska Municipal Fund | 1 year | 5 year | 10 year | |
Without sales charge | 3.59% | 3.77% | 4.70% | 4.16% |
With sales charge (4.25%) | (0.80%) | 2.87% | 4.24% | 3.73% |
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| Since Inception (November 17, 1993) |
Lehman Brothers Municipal Bond Index | 1 year | 5 year | 10 year | |
| 5.78% | 6.07% | 6.38% | 5.84% |
Performance data quoted above is historical. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance data quoted. The principal value and investment return of an investment will fluctuate so that your shares, when redeemed, may be worth more or less than the original cost. You can obtain performance data current to the most recent month end (available within seven business days of the most recent month end) by calling 1-800-276-1262.
You should consider the Fund's investment objectives, risks, and charges and expenses carefully before investing. For this and other important information, please obtain a fund prospectus at no cost from your financial advisor and read it carefully before investing.
The table does not reflect the deduction of taxes that a shareholder would pay on Fund distributions and redemptions of Fund shares.
July 30, 2004 (Unaudited)
COMPARATIVE INDEX GRAPH (INSERT HERE)
Comparison of change in value of a $10,000 investment in the Nebraska Municipal Fund and the Lehman Brothers Municipal Bond Index
| Nebraska Municipal Fund w/o Sales Charge | Nebraska Municipal Fund w/ Max Sales Charge | Lehman Brothers Municipal Bond Index |
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| |||
11/17/93 | $10,000 | $9,575 | $10,000 | |
1994 | $9,773 | $9,357 | $9,892 | |
1995 | $10,471 | $10,026 | $10,672 | |
1996 | $11,071 | $10,600 | $11,376 | |
1997 | $11,909 | $11,402 | $12,544 | |
1998 | $12,380 | $11,853 | $13,295 | |
1999 | $12,853 | $12,306 | $13,677 | |
2000 | $13,146 | $12,588 | $14,268 | |
2001 | $14,463 | $13,848 | $15,707 | |
2002 | $15,051 | $14,411 | $16,761 | |
2003 | $14,929 | $14,295 | $17,364 | |
2004 | $15,465 | $14,807 | $18,368 | |
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. The Lehman Brothers index is a national index representative of the national municipal bond market, whereas the Fund concentrates its investments in Nebraska municipal bonds. 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. All Fund and benchmark returns include reinvested dividends. The Fund’s share price, yields, and total returns will vary, so that shares, when redeemed, may be worth more or less than their original cost.
July 30, 2004 (Unaudited)
MANAGEMENT OF THE FUND
The Board of Integrity Managed Portfolios (formerly known as Ranson Managed Portfolios) consists of four Trustees. These same individuals, unless otherwise noted, also serve as directors or trustees for all of the funds in the Integrity family of funds, the six series of Integrity Managed Portfolios, and the eight series of The Integrity Funds. Three Trustees (75% of the total) have no affiliation or business connection with the Investment Adviser or any of its affiliates. These are the “independent” Trustees. The remaining three Trustees/Officers are “interested” by virtue of their affiliation with the Investment Adviser and its affiliates.
The Independent Trustees of the Fund, their term of office and length of time served, their principal occupation(s) during the past five years, the number of portfolios overseen in the Fund Complex by each Independent Trustee and other directorships, if any, held outside the Fund Complex, are shown below.
INDEPENDENT TRUSTEES
Name, Address | Position(s) Held with Registrant | Term and Length Served | Principal Occupation(s) During Past 5 Years | Number of Portfolios Overseen In The Fund Complex * | Other Directorships Held Outside The Fund Complex |
Lynn W. Aas | Trustee | Since January 1996 | Retired; Attorney; Director, ND Tax-Free Fund, Inc. (since December 1994), Montana Tax-Free Fund, Inc. (since December 1994), South Dakota Tax-Free Fund, Inc. (April 1995 to June 2004) Integrity Fund of Funds, Inc. (since August 1994), Integrity Small-Cap Fund of Funds, Inc. (September 1998 to June 2003); Trustee, Integrity Managed Portfolios (since January 1996) and The Integrity Funds (since September 2003); and Director, First Western Bank & Trust (until May 2002). | 17 | None |
Orlin W. Backes | Trustee | Since January 1996 | Attorney, McGee, Hankla, Backes & Dobrovolny, P.C.; Director, ND Tax-Free Fund, Inc. (since April 1995), Montana Tax-Free Fund, Inc. (since April 1995), South Dakota Tax-Free Fund, Inc. (April 1995 to June 2004), Integrity Fund of Funds, Inc. (since April 1995), Integrity Small-Cap Fund of Funds, Inc. (September 1998 to June 2003); Trustee, Integrity Managed Portfolios (since January 1996) and The Integrity Funds (since May 2003); and Director, First Western Bank & Trust. | 17 | Director, First Western Bank & Trust |
R. James Maxson | Trustee | Since January 1999 | Attorney, Maxson Law Office (since November 2002), Attorney, McGee, Hankla, Backes & Dobrovolny, P.C. (April 2000 to November 2002); Attorney, Farhart, Lian and Maxson, P.C. (March 1976 to March 2000); Director, ND Tax-Free Fund, Inc. (since January 1999), Montana Tax-Free Fund, Inc. (since January 1999), South Dakota Tax-Free Fund, Inc. (January 1999 to June 2004), Integrity Fund of Funds, Inc. (since January 1999), Integrity Small-Cap Fund of Funds, Inc. (January 1999 to June 2003); and Trustee, Integrity Managed Portfolios (since January 1999) and The Integrity Funds (since May 2003). | 17 | None |
The Fund Complex consists of the three funds in the Integrity family of funds, the six series of Integrity Managed Portfolios, and the eight series of The Integrity Funds.
Trustees (Directors for Corporate Funds) and officers of the Fund serve until their resignation, removal or retirement.
The Statement of Additional Information contains more information about the Fund’s Trustees and is available without charge upon request, by calling Integrity Funds Distributor, Inc. at 1(800) 601-5593.
The Interested Trustees and executive officers of the Fund, their term of office and length of time served, their principal occupation(s) during the past five years, the number of portfolios overseen in the Fund Complex by each Interested Trustee and other directorships, if any, held outside the Fund Complex, are shown below.
INTERESTED TRUSTEES AND EXECUTIVE OFFICERS
Name, Address and Age | Position(s) Held with Registrant | Term and Length Served | Principal Occupation(s) During Past 5 Years | Number of Portfolios Overseen In The Fund Complex * | Other Directorships Held Outside The Fund Complex |
**Robert E. Walstad | Trustee, Chairman, and President | Since January 1996 | Director (since September 1987), President (September 1987 to October 2001) (September 2002 to May 2003), Integrity Mutual Funds, Inc.; Director, President and Treasurer, Integrity Money Management, Inc., ND Capital, Inc., Integrity Fund Services, Inc., ND Tax-Free Fund, Inc., Montana Tax-Free Fund, Inc., South Dakota Tax-Free Fund, Inc. (April 1995 to June 2004), Integrity Fund of Funds, Inc., Integrity Small-Cap Fund of Funds, Inc. (September 1998 to June 2003); Trustee, Chairman, President and Treasurer, Integrity Managed Portfolios (since January 1996) and The Integrity Funds (since May 2003).; Director, President (until August 2003), CEO, and Treasurer, Integrity Funds Distributor, Inc.; Director (October 1999 to June 2003), President (October 1999 to October 2001), Magic Internet Services, Inc.; Director (May 2000 to June 2003), President (May 2000 to November 2001 ) (October 2002 to June 2003), ARM Securities Corporation; and Director, CEO, Chairman (since January 2002), President (since September 2002), Capital Financial Services, Inc. | 17 | Director, Capital Financial Services, Inc. |
**Peter A. Quist | Vice President and Secretary | Since January 1996 | Attorney; Director and Vice President, Integrity Mutual Funds, Inc.; Director, Vice President and Secretary, Integrity Money Management, Inc. (formerly known as ND Money Management, Inc.), ND Capital, Inc., Integrity Fund Services, Inc., (formerly known as ND Resources, Inc.), ND Tax-Free Fund, Inc., Montana Tax-Free Fund, Inc., South Dakota Tax-Free Fund, Inc. (April 1995 to June 2004), Integrity Fund of Funds, Inc., Integrity Small-Cap Fund of Funds, Inc. (September 1998 to June 2003), Integrity Funds Distributor, Inc. (formerly known as Ranson Capital Corporation) (since January 1996); Vice President and Secretary, Integrity Managed Portfolios (since January 1996) and The Integrity Funds (since May 2003); and Director, ARM Securities Corporation (May 2000 to June 2003). | 3 | None |
**Brent M. Wheeler 1 Main Street North Minot, ND 58703 33 | Treasurer | Since May 2004 | Fund Accountant (May 1994 to December 1997) Sr. Fund Accountant (December 1997 to June 1998) Fund Accounting Manager (Since June 1998), Integrity Mutual Funds, Inc.; Treasurer (Since May 2004), Integrity Funds, Integrity Managed Portfolios, Integrity Mutual Funds. | None | Minot State University Alumni Association |
* The Fund Complex consists of the three funds in the Integrity family of funds, the six series of Integrity Managed Portfolios, and the eight series of The Integrity Funds.
** Trustees who are “interested persons” of the Funds as defined in the Investment Company Act of 1940. Messrs. Quist, Walstad and Wheeler are interested persons by virtue of being officers and Trustees of the Fund’s Investment Adviser and Principal Underwriter.
Trustees (Directors for Corporate Funds) and officers of the Fund serve until their resignation, removal or retirement.
The Statement of Additional Information contains more information about the Fund’s Trustees and is available without charge upon request, by calling Integrity Funds Distributor, Inc. at 1(800) 601-5593.
July 30, 2004 (Unaudited)
INDEPENDENT TRUSTEES
[PHOTO] | [PHOTO] | [PHOTO] |
Lynn W. Aas | Orlin W. Backes | R. James Maxson |
Trustee | Trustee | Trustee |
INTERESTED TRUSTEES AND EXECUTIVE OFFICERS
[PHOTO] | [PHOTO] | [PHOTO] |
Robert E. Walstad | Peter A. Quist | Brent M. Wheeler |
Chairman | Vice-President | Treasurer |
President | Secretary |
|
Trustee |
|
|
Schedule of Investments July 30, 2004
Name of Issuer | Rating (Unaudited) Moody’s/S&P | Coupon Rate | Maturity |
| Principal Amount |
| Market Value |
|
|
|
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|
|
|
NEBRASKA MUNICIPAL BONDS (97.7%) |
|
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|
|
Adams Cty., NE Hosp. Auth. #001 (Mary Lanning Memorial Hosp.) ASGUA | NR/AA | 5.300% | 12/15/2018 | $ | 250,000 | $ | 262,360 |
Cass Cty, NE School Dist. #056 (Conestoga Public Schools) | NR/NR | 6.150 | 12/15/2020 |
| 250,000 |
| 256,075 |
Columbus Community Hospital Platte Cty, NE Asset Guaranty | NR/AA | 5.650 | 05/01/2012 |
| 100,000 |
| 109,312 |
Columbus Community Hospital Platte Cty, NE Asset Guaranty | NR/AA | 6.150 | 05/01/2030 |
| 250,000 |
| 270,445 |
*Dakota Cty., NE SD #011 (South Sioux City Community Schools) G.O. MBIA | Aaa/AAA | 6.100 | 06/15/2020 |
| 1,000,000 |
| 1,062,180 |
Dawson Cty., NE School Dist. #20 (Gothenburg) G.O. MBIA | Aaa/AAA | 5.350 | 12/15/2026 |
| 500,000 |
| 523,785 |
Dawson Cty., NE SID #001 (IBP, Inc. Proj.) Ref. G.O. | Baa-3/BBB | 5.650 | 02/01/2022 |
| 700,000 |
| 707,000 |
*Dodge Cty., NE SD #001 (Fremont Public Schools) FSA | Aaa/NR | 5.500 | 12/15/2020 |
| 1,000,000 |
| 1,096,320 |
Douglas Cty., NE (Catholic Health Corp.) Rev. MBIA | Aaa/AAA | 5.375 | 11/15/2015 |
| 275,000 |
| 295,647 |
Douglas Cty., NE (Catholic Health Corp.) Rev. MBIA | Aaa/AAA | 5.500 | 11/15/2021 |
| 340,000 |
| 363,671 |
Douglas Cty., NE Hosp. Auth. #001 (Alegent Hlth.) Rev. AMBAC | Aaa/AAA | 5.250 | 09/01/2021 |
| 250,000 |
| 263,657 |
Douglas Cty., NE Hosp. Auth. #002 (Archbishop Bergan) Rev. MBIA | Aaa/AAA | 6.000 | 11/15/2015 |
| 125,000 |
| 129,290 |
Douglas Cty., NE Hosp. Auth. #002 (Nebraska Medical Center) | A/NR | 5.000 | 11/15/2016 |
| 250,000 |
| 259,147 |
Douglas Cty., NE School Dist. #001 | Aa/AAA | 5.625 | 12/15/2019 |
| 250,000 |
| 266,537 |
#Douglas Cty., NE School Dist. #010 (Elkhorn) G.O. FSA | Aaa/AAA | 5.500 | 12/15/2020 |
| 750,000 |
| 806,145 |
Douglas Cty., NE SD #010 (Elkhorn Public Schools) | NR/A+ | 5.050 | 12/15/2022 |
| 150,000 |
| 155,571 |
Douglas Cty., NE SID #240 (LeBea) Ref. G.O. | NR/NR | 5.900 | 10/15/2016 |
| 100,000 |
| 100,250 |
Douglas Cty., NE SID #392 (Cinnamon Creek) G.O. | NR/NR | 5.750 | 08/15/2017 |
| 200,000 |
| 200,000 |
Douglas Cty., NE SID #397 (Linden Estates II) | NR/NR | 5.600 | 07/15/2018 |
| 265,000 |
| 265,000 |
Douglas Cty., NE SID #397 (Linden Estates II) | NR/NR | 5.600 | 07/15/2019 |
| 280,000 |
| 287,196 |
Douglas Cty., NE SID #397 (Linden Estates II) | NR/NR | 5.600 | 04/01/2023 |
| 500,000 |
| 501,280 |
Fremont, NE Combined Utilities Rev. MBIA | Aaa/AAA | 5.000 | 10/15/2021 |
| 500,000 |
| 521,820 |
Grand Island, NE Sewer Syst. Rev. | A/NR | 6.000 | 04/01/2014 |
| 550,000 |
| 560,835 |
Great Plains Regional Med. Cntr. North Platte Hosp. Rev. Asset Guaranty | NR/AA | 5.450 | 11/15/2022 |
| 750,000 |
| 795,128 |
Kearney Cty., NE Highway Allocation Fund AMBAC | Aaa/NR | 5.350 | 06/15/2021 |
| 100,000 |
| 107,494 |
Lancaster Cty, NE School District #0160 (Norris Schools) G.O. FSA | Aaa/NR | 5.000 | 12/15/2025 |
| 250,000 |
| 251,087 |
#Lancaster Cty., NE (Bryan Memorial Hospital) Rev. MBIA | Aaa/AAA | 5.375 | 06/01/2019 |
| 1,400,000 |
| 1,495,368 |
Lancaster Cty., NE School Dist. #1 (Lincoln Public Schools) | Aa/AAA | 5.250 | 01/15/2021 |
| 500,000 |
| 532,590 |
Lancaster Cty., NE School Dist. #1 (Lincoln Public Schools) G.O. | Aa/AAA | 5.250 | 01/15/2022 |
| 500,000 |
| 533,650 |
#Lancaster Cty., NE School Dist. #145 (Waverly Public Schools) AMBAC | Aaa/AAA | 5.500 | 12/01/2020 |
| 1,240,000 |
| 1,331,562 |
Lincoln Cty., NE School Dist. #005 (Sutherland Public Schools) FSA | Aaa/NR | 5.000 | 12/15/2020 |
| 225,000 |
| 237,321 |
Lincoln, NE Elec. Syst. Rev. | Aa/AA | 5.000 | 09/01/2021 |
| 1,000,000 |
| 1,041,180 |
Lincoln, NE Water Rev. | Aa/AA+ | 5.000 | 08/15/2022 |
| 575,000 |
| 600,547 |
Lincoln/Lancaster Cty., NE Public Bldg. Community Rev. | Aa/AA+ | 5.800 | 10/15/2018 |
| 475,000 |
| 520,263 |
#Lincoln/Lancaster Cty., NE Public Bldg. Community Rev. | Aa/AA+ | 5.875 | 10/15/2023 |
| 850,000 |
| 947,512 |
Madison Cty., NE Hosp. Auth. #001 (Faith Regl. Hlth. Svcs.) Rev. ASGUA | NR/AA | 5.350 | 07/01/2018 |
| 250,000 |
| 261,635 |
NE Educ. Finance Auth. (Creighton Univ.) Rev. AMBAC | Aaa/AAA | 5.950 | 01/01/2011 |
| 300,000 |
| 318,633 |
NE Educ. Finance Auth. (Wesleyan Univ.) Rev. Radian Insured | NR/AA | 5.500 | 04/01/2027 |
| 1,000,000 |
| 1,041,380 |
NE Hgr. Educ. Loan Program Junior Subord. Rev. MBIA | Aaa/AAA | 6.400 | 06/01/2013 |
| 275,000 |
| 295,554 |
NE Hgr. Educ. Loan Program B Rev. MBIA | Aaa/AAA | 6.000 | 06/01/2028 |
| 100,000 |
| 102,853 |
NE Hgr. Educ. Loan Program Junior Subord. Term MBIA | Aaa/AAA | 6.450 | 06/01/2018 |
| 400,000 |
| 436,156 |
NE Hgr. Educ. Loan Program Senior Subord. Term MBIA | Aaa/AAA | 6.250 | 06/01/2018 |
| 800,000 |
| 866,672 |
*NE Hgr. Educ. Loan Program Student Loan MBIA | Aaa/AAA | 5.875 | 06/01/2014 |
| 1,180,000 |
| 1,217,677 |
NE Invmt. Finance Auth. (Catholic Hlth. Initiatives) Rev. | Aa/AA | 5.125 | 12/01/2017 |
| 200,000 |
| 208,400 |
NE Invmt. Finance Auth. (Childrens Healthcare Svcs) Facs. Rev. | Aaa/AAA | 5.500 | 08/15/2017 |
| 410,000 |
| 445,317 |
#NE Invmt. Finance Auth. (Childrens Healthcare Svcs.) Rev. AMBAC | Aaa/AAA | 5.500 | 08/15/2027 |
| 1,000,000 |
| 1,033,850 |
NE Invmt. Finance Auth. (Great Plains Regl. Medl. Ctr.) ASGUA | NR/AA | 5.450 | 11/15/2017 |
| 400,000 |
| 425,568 |
NE Invmt. Finance Auth. (Muirfield Greens) Multifamily Rev. FHA | Aa/NR | 6.800 | 12/01/2015 |
| 280,000 |
| 288,210 |
NE Invmt. Finance Auth. (Muirfield Greens) Multifamily Rev. FHA | Aa/NR | 6.850 | 12/01/2025 |
| 525,000 |
| 541,060 |
NE Invmt. Finance Auth. (Waterbrook) Multifamily Rev. | Aaa/AAA | 5.600 | 04/01/2007 |
| 165,000 |
| 168,963 |
NE Invmt. Finance Auth. Multifamily Hsg. Rev. FNMA | NR/AAA | 6.200 | 06/01/2028 |
| 495,000 |
| 509,563 |
NE Invmt. Finance Auth. Multifamily Hsg. Rev. GNMA | NR/AAA | 6.000 | 06/01/2017 |
| 430,000 |
| 439,486 |
NE Invmt. Finance Auth. Multifamily Hsg. Rev. GNMA | NR/AAA | 6.100 | 06/01/2029 |
| 500,000 |
| 519,375 |
*NE Invmt. Finance Auth. Single Family Hsg. Rev. | NR/AAA | 6.600 | 09/01/2020 |
| 125,000 |
| 127,140 |
*NE Invmt. Finance Auth. Single Family Hsg. Rev. | NR/AAA | 6.300 | 09/01/2028 |
| 645,000 |
| 666,904 |
NE Invmt. Finance Auth. Single Family Hsg. Rev. Coll. | NR/AAA | 6.300 | 03/01/2017 |
| 35,000 |
| 35,351 |
NE Invmt. Finance Auth. Single Family Hsg. Rev. FHA/GNMA | NR/AAA | 6.500 | 09/01/2018 |
| 275,000 |
| 282,997 |
NE Invmt. Finance Auth. Single Family Hsg. Rev. FNMA/GNMA | NR/AAA | 6.400 | 09/01/2026 |
| 180,000 |
| 184,792 |
NE Invmt. Finance Auth. Single Family Hsg. Rev. GNMA | NR/AAA | 6.200 | 09/01/2017 |
| 150,000 |
| 155,391 |
NE Invmt. Finance Auth. Single Family Hsg. Rev. GNMA | NR/AAA | 6.250 | 03/01/2021 |
| 175,000 |
| 180,346 |
NE Invmt. Finance Auth. Single Family Hsg. Rev. GNMA/FNMA | NR/AAA | 6.250 | 09/01/2028 |
| 80,000 |
| 82,212 |
NE Invmt. Finance Auth. Single Family Hsg. Rev. GNMA/FNMA | NR/AAA | 6.300 | 09/01/2030 |
| 90,000 |
| 92,604 |
NE Invmt. Finance Auth. Single Family Hsg. Rev. VA/FNMA | NR/AAA | 7.300 | 09/01/2026 |
| 30,000 |
| 30,370 |
Omaha, NE (Riverfront Project) Special Obligation | Aa/AA | 5.500 | 02/01/2029 |
| 1,000,000 |
| 1,052,350 |
Omaha, NE Parking Facs. Corp. (Omaha Park 4\5) Lease Rev. | Aa-1/AA+ | 5.700 | 09/15/2015 |
| 750,000 |
| 797,415 |
Omaha, NE Public Power Dist. Elec. Syst. Rev. | Aa/AA | 5.200 | 02/01/2022 |
| 500,000 |
| 531,125 |
Omaha, NE Public Power Dist. Elec. Syst. Rev. | NR/AA | 6.000 | 02/01/2015 |
| 330,000 |
| 377,751 |
Omaha, NE Public Power Dist. Elec. Syst. Rev. | Aa/NR | 6.200 | 02/01/2017 |
| 650,000 |
| 778,063 |
Omaha, NE Various Purpose | Aaa/AAA | 5.000 | 05/01/2022 |
| 250,000 |
| 262,715 |
Sarpy Cty, NE School Dist. #046 FSA | Aaa/AAA | 5.000 | 12/15/2022 |
| 200,000 |
| 208,984 |
Sarpy Cty., NE SID #052 (Prairie Corners) G.O. | NR/NR | 6.000 | 10/01/2017 |
| 240,000 |
| 240,600 |
Sarpy Cty., NE SID #142 (Fairview) G.O. Ref. | NR/NR | 5.850 | 08/15/2017 |
| 100,000 |
| 100,250 |
Univ. of NE (U. of NE - Lincoln Student Fees) Rev. | Aa/AA- | 5.125 | 07/01/2032 |
| 250,000 |
| 253,545 |
Univ. of NE Board of Regents Lincoln Parking | Aa/AA- | 5.800 | 06/01/2020 |
| 620,000 |
| 656,059 |
|
|
|
| ||||
TOTAL NEBRASKA MUNICIPAL BONDS (COST: $32,137,133) |
| $ | 33,874,541 | ||||
|
|
|
| ||||
SHORT-TERM SECURITIES (1.3%) | Shares |
|
| ||||
Wells Fargo National Tax-Free Money Market | 438,896 | $ | 438,896 | ||||
TOTAL SHORT-TERM SECURITIES (COST: $438,896) |
| $ | 438,896 | ||||
|
|
|
| ||||
TOTAL INVESTMENTS IN SECURITIES (COST: $32,576,029) |
| $ | 34,313,437 | ||||
OTHER ASSETS LESS LIABILITIES |
|
| 368,212 | ||||
|
|
|
| ||||
NET ASSETS. |
| $ | 34,681,649 | ||||
* Indicates bonds are segregated by the custodian to cover when-issued or delayed-delivery purchases.
At July 30, 2004, the Fund had one when-issued purchase: 250,000 of Lancaster Cty, NE School District #0160 (Norris Schools).
# Indicates bonds are segregated by the custodian to cover initial margin requirements.
Footnote: Non-rated securities have been determined to be of investment grade quality by the Fund’s Manager.
The accompanying notes are an integral part of these financial statements.
Financial Statements July 30, 2004
Statement of Assets and Liabilities July 30, 2004
Assets |
|
| ||
| Investment in securities, at value (cost: $32,576,029) | $ | 34,313,437 | |
| Accrued interest receivable |
| 472,572 | |
| Accrued dividends receivable |
| 232 | |
| Variation margin on futures |
| 299,750 | |
| Prepaid expenses |
| 2,811 | |
|
|
| ||
| Total Assets | $ | 35,088,802 | |
|
|
| ||
Liabilities |
|
| ||
| Dividends payable | $ | 121,927 | |
| Security purchases payable |
| 251,645 | |
| Accrued expenses |
| 31,955 | |
| Disbursements in excess of demand deposit cash |
| 1,626 | |
|
|
| ||
| Total Liabilities | $ | 407,153 | |
|
|
| ||
|
|
| ||
Net Assets | $ | 34,681,649 | ||
|
|
| ||
Net assets are represented by: |
|
| ||
| Paid-in capital | $ | 36,551,199 | |
| Accumulated undistributed net realized gain (loss) on investments |
| (3,175,304) | |
| Accumulated undistributed net investment income |
| 21,712 | |
| Unrealized appreciation on investments |
| 1,737,408 | |
| Unrealized depreciation on futures |
| (453,366) | |
| Total amount representing net assets applicable to 3,287,726 outstanding shares of no par common stock (unlimited shares authorized) | $ | 34,681,649 | |
|
|
| ||
Net asset value per share | $ | 10.55 | ||
Public offering price (based on sales charge of 4.25%) | $ | 11.02 | ||
The accompanying notes are an integral part of these financial statements.
Statement of Operations For the year ended July 30, 2004
INVESTMENT INCOME |
|
| ||
| Interest | $ | 1,861,547 | |
| Dividends |
| 7,451 | |
| Total Investment Income | $ | 1,868,998 | |
|
|
| ||
EXPENSES |
|
| ||
| Investment advisory fees | $ | 181,852 | |
| Distribution (12b-1) fees |
| 90,926 | |
| Transfer agent fees |
| 47,853 | |
| Accounting service fees |
| 42,185 | |
| Administrative service fees |
| 30,223 | |
| Custodian fees |
| 7,546 | |
| Registration and filing fees |
| 10,024 | |
| Reports to shareholders |
| 5,255 | |
| Audit fees |
| 9,170 | |
| Insurance expense |
| 3,609 | |
| Trustees fees |
| 3,196 | |
| Professional fees |
| 4,252 | |
| Transfer agent out-of-pockets |
| 468 | |
| Legal fees |
| 2,600 | |
| Total Expenses | $ | 439,159 | |
| Less expenses waived or absorbed by the Fund’s manager |
| (93,640) | |
| Total Net Expenses | $ | 345,519 | |
|
|
| ||
NET INVESTMENT INCOME | $ | 1,523,479 | ||
|
|
| ||
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FUTURES |
|
| ||
| Net realized gain (loss) from: |
|
| |
| Investment transactions | $ | (7,477) | |
| Futures transactions |
| (503,990) | |
| Net change in unrealized appreciation (depreciation) of: |
|
| |
| Investments |
| 712,758 | |
| Futures |
| (453,366) | |
| Net Realized And Unrealized Gain (Loss) On Investments And Futures | $ | (252,075) | |
|
|
| ||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | $ | 1,271,404 | ||
The accompanying notes are an integral part of these financial statements.
Financial Statements July 30, 2004
Statement of Changes in Net Assets
For the year ended July 30, 2004, and the year ended July 31, 2003
|
| For The Year Ended July 30, 2004 |
| For The Year Ended July 31, 2003 | ||
|
|
|
|
| ||
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS |
|
|
|
| ||
| Net investment income | $ | 1,523,479 | $ | 1,610,565 | |
| Net realized gain (loss) on investment and futures transactions |
| (511,467) |
| (697,168) | |
| Net change in unrealized appreciation (depreciation) on investments and futures |
| 259,392 |
| (1,230,391) | |
| Net Increase (Decrease) in Net Assets Resulting From Operations | $ | 1,271,404 | $ | (316,994) | |
|
|
|
|
| ||
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS |
|
|
|
| ||
| Dividends from net investment income ($.45 and $.47 per share, respectively) | $ | (1,519,666) | $ | (1,606,903) | |
| Distributions from net realized gain on investment and futures transactions ($.00 and $.00 per share, respectively) |
| 0 |
| 0 | |
| Total Dividends and Distributions | $ | (1,519,666) | $ | (1,606,903) | |
|
|
|
|
| ||
CAPITAL SHARE TRANSACTIONS |
|
|
|
| ||
| Proceeds from sale of shares | $ | 4,178,723 | $ | 6,195,967 | |
| Proceeds from reinvested dividends |
| 992,068 |
| 1,101,994 | |
| Cost of shares redeemed |
| (6,958,487) |
| (5,929,093) | |
| Net Increase (Decrease) in Net Assets Resulting From Capital Share Transactions | $ | (1,787,696) | $ | 1,368,868 | |
|
|
|
|
| ||
TOTAL INCREASE (DECREASE) IN NET ASSETS | $ | (2,035,958) | $ | (555,029) | ||
|
|
|
|
| ||
NET ASSETS, BEGINNING OF PERIOD |
| 36,717,607 |
| 37,272,636 | ||
|
|
|
|
| ||
NET ASSETS, END OF PERIOD | $ | 34,681,649 | $ | 36,717,607 | ||
The accompanying notes are an integral part of these financial statements.
Notes to Financial Statements July 30, 2004
Note 1. ORGANIZATION
Business operations - The Nebraska Municipal Fund (the “Fund”) is an investment portfolio of Integrity Managed Portfolios (the “Trust”) registered under the Investment Company Act of 1940, as amended, as a non-diversified, open-end management investment company. The Trust may offer multiple portfolios; currently six portfolios are offered. IntegrityManaged Portfolios is an unincorporated business trust organized under Massachusetts law on August 10, 1990. The Fund had no operations from that date to November 17, 1993, other than matters relating to organization and registration. On November 17, 1993, the Fund commenced its Public Offering of capital shares. The investment objective of the Fund is to provide its shareholders with as high a level of current income exempt from both federal and Nebraska income taxes as is consistent with preservation of capital. The Fund will seek to achieve thi s objective by investing primarily in a portfolio of Nebraska municipal securities.
Shares of the Fund are offered at net asset value plus a maximum sales charge of 4.25% of the offering price and a distribution fee of up to 0.25% on an annual basis.
Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Investment security valuation - Securities for which quotations are not readily available (which will constitute a majority of the securities held by the Fund) are valued using a matrix system at fair value as determined by Integrity Money Management. The matrix system has been developed based on procedures approved by the Board of Trustees which include consideration of the following: yields or prices of municipal bonds of comparable quality, type of issue, coupon, maturity and rating, and indications as to value from dealers and general market conditions. Because the market value of securities can only be established by agreement between parties in a sales transaction, and because of the uncertainty inherent in the valuation process, the fair values as determined may differ from the values that would have been used had a ready market for the securities existed. The Fund follows industry practice and records security transactions o n the trade date.
The Fund concentrates its investments in a single state. This concentration may result in the Fund investing a relatively high percentage of its assets in a limited number of issuers.
When-issued securities – The Fund may purchase securities on a when-issued basis. Payment and delivery may take place after the customary settlement period for that security. The price of the underlying securities and the date when the securities will be delivered and paid for are fixed at the time the transaction is negotiated. The value of the securities purchased on a when-issued basis are identified as such in the Fund’s Schedule of Investments. With respect to purchase commitments, the Fund identifies securities as segregated in its records with a value at least equal to the amount of the commitment. Losses may arise due to changes in the value of the underlying securities or if the counterparty does not perform under the contract’s terms, or if the issuer does not issue the securities due to political, economic, or other factors.
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 and any net realized gain on investments to its shareholders. Therefore, no provision for income taxes is required. Distributions during the year ended July 30, 2004, were characterized as tax-exempt for tax purposes.
The tax character of distributions paid was as follows:
|
| July 30, 2004 |
| July 31, 2003 |
Tax-exempt income | $ | 1,519,666 | $ | 1,606,903 |
Ordinary Income |
| 0 |
| 0 |
Long-term Capital Gains |
| 0 |
| 0 |
Total | $ | 1,519,666 | $ | 1,606,903 |
The Fund has unexpired capital loss carryforwards for tax purposes as of July 30, 2004, totaling $3,175,304, which may be used to offset capital gains. The capital loss carryforward amounts will expire in each of the years ended July 31 as shown in the table below.
| Year |
| Unexpired Capital Losses |
2005 | $ | 616,730 |
2006 | $ | 383,905 |
2007 | $ | 0 |
2008 | $ | 199,861 |
2009 | $ | 158,911 |
2010 | $ | 591,993 |
2011 | $ | 713,949 |
2012 | $ | 509,955 |
For the year ended July 30, 2004, the Fund made $415,126 in permanent reclassifications to reflect tax character. Reclassifications to paid-in capital relate primarily to expiring capital loss carryforwards.
Distributions to shareholders - Dividends from net investment income, declared daily and payable monthly, are reinvested in additional shares of the Fund at net asset value or paid in cash. Capital gains, when available, are distributed at least annually.
Premiums and discounts - Premiums and discounts on municipal securities are amortized for financial reporting purposes.
Other - Income and expenses are recorded on the accrual basis. Investment transactions are accounted for on the trade date. Realized gains and losses are reported on the identified cost basis. Distributions to shareholders are recorded by the Fund on the ex-dividend date. Income and capital gain distributions are determined in accordance with federal income tax regulations and may differ from net investment income and realized gains determined in accordance with accounting principles generally accepted in the United States of America. These differences are primarily due to differing treatment for market discount, capital loss carryforwards and losses due to wash sales and futures transactions.
Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications to paid-in capital. Temporary book and tax basis differences will reverse in a subsequent period.
Futures contracts - The Fund may purchase and sell financial futures contracts to hedge against changes in the values of tax-exempt municipal 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 or a certain amount of U.S. government or municipal securities 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 (depreciat ion) related to open futures contracts is required to be treated as a realized gain (loss) for Federal income tax purposes.
Securities held in collateralized accounts to cover initial margin requirements on open futures contracts are noted in the Schedule of Investments. The Statement of Assets and Liabilities reflects a receivable or payable for the daily mark to market for variation margin.
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.
At July 30, 2004, the Fund had outstanding futures contracts to sell debt securities as follows:
Contracts to Sell | Expiration Date | Number of Futures Contract | Valuation as of July 30, 2004 | Unrealized Appreciation (Depreciation) |
U.S. Treasury Bonds | 09/2004 | 109 | $299,750 | ($453,366) |
Use of estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 July 30, 2004, there were unlimited shares of no par authorized; 3,287,726 and 3,458,937 shares were outstanding at July 30, 2004 and July 31, 2003, respectively.
Transactions in capital shares were as follows:
| Shares | |
| For The Year Ended July 30, 2004 | For The Year Ended July 31, 2003 |
Shares sold | 391,870 | 564,203 |
Shares issued on reinvestment of dividends | 93,245 | 100,043 |
Shares redeemed | (656,326) | (541,499) |
Net increase (decrease) | (171,211) | 122,747 |
Note 4. INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Integrity Money Management, Inc., the Fund’s investment adviser; Integrity Funds Distributor, Inc., the Fund’s underwriter; and Integrity Fund Services, Inc., the Fund’s transfer, accounting, and administrative services agent, are subsidiaries of Integrity Mutual Funds, Inc., the Fund’s sponsor.
The Fund has engaged Integrity 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 0.50% of the Fund’s average daily net assets. The Fund has recognized $88,212 of investment advisory fees after partial waiver for the year ended July 30, 2004. The Fund has a payable to Integrity Money Management, Inc. of $3,677 at July 30, 2004, for investment advisory fees. Certain officers and trustees of the Fund are also officers and directors of the investment adviser.
Under the terms of the advisory contract, the investment adviser has agreed to pay the expenses of the Fund (excluding taxes and brokerage fees and commissions, if any) that exceed 1.25% of the Fund’s average daily net assets on an annual basis up to the amount of the investment advisory and management fee. The investment adviser and underwriter may also voluntarily waive fees or reimburse expenses not required by the advisory or other agreements from time to time. Accordingly, after fee waivers and expense reimbursements, the Fund’s actual total annual operating expenses were 0.95% for the fiscal year ended July 30, 2004.
The Fund pays an annual service fee to Integrity Funds Distributor, Inc., its principal underwriter, for certain expenses incurred in connection with the distribution of the Fund’s shares. The annual fee paid to Integrity Funds Distributor, Inc. under the Plan is calculated daily and paid monthly by the Fund at the annual rate of 0.25% of the average daily net assets of the Fund. The Fund has recognized $90,926 of service fee expenses for the year ended July 30, 2004. The Fund has a payable to Integrity Funds Distributor, Inc., of $7,229 at July 30, 2004, for service fees.
Integrity Fund Services, 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 $25 million, and 0.10% of the Fund’s net assets in excess of $50 million, with a minimum of $1,500 per month plus reimbursement of out-of-pocket expenses. An additional fee with a minimum of $500 per month is charged for each additional share class. The Fund has recognized $47,853 of transfer agency fees and expenses for the year ended July 30, 2004. The Fund has a payable to Integrity Fund Services, Inc. of $3,848 at July 30, 2004 for transfer agency fees. Integrity Fund Services, 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, together with reimbursement of out-of-pocket expenses. An additional minimum fee of $500 per month is charged by Integrity Fund Services for each additional share class. The Fund has recognized $42,185 of accounting service fees for the year ended July 30, 2004. The Fund has a payable to Integrity Fund Services, Inc. of $3,446 at July 30, 2004, for accounting service fees. Integrity Fund Services also acts as administrator for the Fund. The Fund pays to Integrity Fund Services, Inc. a monthly fee calculated at the rate of 0.10% of average daily net assets with a minimum of $1,500 per month plus out-of-pocket expenses. An additional minimum fee of $500 per month is charged by Integrity Fund Services for each addition al share class. The Fund has recognized $30,223 of administrative service fees for the year ended July 30, 2004. The Fund has a payable to Integrity Fund Services, Inc. of $2,892 at July 30, 2004, for administrative service fees.
Note 5. INVESTMENT SECURITY TRANSACTIONS
The cost of purchases and proceeds from the sales of investment securities (excluding short-term securities) aggregated $3,106,920 and $4,785,326, respectively, for the year ended July 30, 2004.
Note 6. INVESTMENT IN SECURITIES
At July 30, 2004, the aggregate cost of securities for federal income tax purposes was substantially the same for financial reporting purposes at $32,576,029. The net unrealized appreciation of investments based on the cost was $1,737,408, which is comprised of $1,758,344 aggregate gross unrealized appreciation and $20,936 aggregate gross unrealized depreciation.
Financial Highlights
Selected per share data and ratios for the period indicated
|
| For The Year Ended July 30, 2004 |
| For The Year Ended July 31, 2003 |
| For The Year Ended July 31, 2002 |
| For The Year Ended July 31, 2001 |
| For The Year Ended July 31, 2000 | ||
NET ASSET VALUE, BEGINNING OF PERIOD | $ | 10.62 | $ | 11.17 | $ | 11.23 | $ | 10.71 | $ | 11.01 | ||
|
|
|
|
|
|
|
|
|
|
| ||
Income from Investment Operations: |
|
|
|
|
|
|
|
|
|
| ||
| Net investment income | $ | .45 | $ | .47 | $ | .51 | $ | .53 | $ | .54 | |
| Net realized and unrealized gain (loss) on investment and futures transactions |
| (.07) |
| (.55) |
| (.06) |
| .52 |
| (.30) | |
| Total Income (Loss) From Investment Operations | $ | .38 | $ | (.08) | $ | .45 | $ | 1.05 | $ | .24 | |
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Less Distributions: |
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| Dividends from net investment income | $ | (.45) | $ | (.47) | $ | (.51) | $ | (.53) | $ | (.54) | |
| Distributions from net capital gains |
| .00 |
| .00 |
| .00 |
| .00 |
| .00 | |
| Total Distributions | $ | (.45) | $ | (.47) | $ | (.51) | $ | (.53) | $ | (.54) | |
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NET ASSET VALUE, END OF PERIOD | $ | 10.55 | $ | 10.62 | $ | 11.17 | $ | 11.23 | $ | 10.71 | ||
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Total Return |
| 3.59%(A) |
| (0.81)%(A) |
| 4.06%(A) |
| 10.02%(A) |
| 2.28%(A) | ||
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RATIOS/SUPPLEMENTAL DATA: |
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| ||
| Net assets, end of period (in thousands) | $ | 34,682 | $ | 36,718 | $ | 37,273 | $ | 38,558 | $ | 38,171 | |
| Ratio of net expenses (after expense assumption) to average net assets |
| 0.95%(B) |
| 0.92%(B) |
| 0.82%(B) |
| 0.78%(B) |
| 0.75%(B) | |
| Ratio of net investment income to average net assets |
| 4.18% |
| 4.24% |
| 4.52% |
| 4.82% |
| 5.02% | |
| Portfolio turnover rate |
| 8.95% |
| 9.48% |
| 13.08% |
| 16.89% |
| 11.42% | |
(A) Excludes maximum sales charge of 4.25%.
(B) During the periods indicated above, Integrity Mutual Funds, Inc. or Integrity Money Management assumed/waived expenses of $93,640, $62,679, $99,292, $113,493, and $124,718, respectively. If the expenses had not been assumed/waived, the annualized ratios of total expenses to average net assets would have been 1.21%, 1.08%, 1.08%, 1.08%, and 1.07%, respectively.
Total return represents the rate that an investor would have earned or lost on an investment in the Fund assuming reinvestment of all dividends and distributions.
The accompanying notes are an integral part of these financial statements.
Tax Information For The Year Ended July 30, 2004 (Unaudited)
We are required to advise you within 60 days of the Fund’s fiscal year-end regarding the federal tax status of distributions received by shareholders during such fiscal year. The distributions made during the fiscal year by the Fund were earned from the following sources:
|
|
| Dividends and Distributions Per Share | |||||
To Shareholders of Record |
| Payment Date |
| From Net Investment Income |
| From Net Realized Short-Term Gains |
| From Net Realized Long-Term Gains |
August 29, 2003 |
| August 29, 2003 | $ | .036679 |
| - |
| - |
September 30, 2003 |
| September 30, 2003 | $ | .039811 |
| - |
| - |
October 31, 2003 |
| October 31, 2003 | $ | .038731 |
| - |
| - |
November 28, 2003 |
| November 28, 2003 | $ | .033020 |
| - |
| - |
December 31, 2003 |
| December 31, 2003 | $ | .039790 |
| - |
| - |
January 30, 2004 |
| January 30, 2004 | $ | .035910 |
| - |
| - |
February 27, 2004 |
| February 27, 2004 | $ | .032564 |
| - |
| - |
March 31, 2004 |
| March 31, 2004 | $ | .039474 |
| - |
| - |
April 30, 2004 |
| April 30, 2004 | $ | .036733 |
| - |
| - |
May 28, 2004 |
| May 28, 2004 | $ | .034807 |
| - |
| - |
June 30, 2004 |
| June 30, 2004 | $ | .040406 |
| - |
| - |
July 30, 2004 |
| July 30, 2004 | $ | .037134 |
| - |
| - |
Shareholders should consult their tax advisors.
INDEPENDENT AUDITOR’S REPORT
To the Shareholders and Board of Trustees of the Nebraska Municipal Fund
We have audited the accompanying statement of assets and liabilities of the Nebraska Municipal Fund (one of the portfolios constituting the Integrity Managed Portfolios), including the schedule of investments as of July 30, 2004, the related statement of operations for the year then ended, the statement of changes in net assets for the years ended July 30, 2004 and July 31, 2003, and the financial highlights for the year ended July 30, 2004 and each of the four years in the period ended July 31, 2003. 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 the standards of the Public Company Accounting Oversight Board (United States). 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 July 30, 2004, 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 the Nebraska Municipal Fund of the Integrity Managed Portfolios as of July 30, 2004, the results of its operations, the changes in its net assets, and the financial highlights for each of the fiscal periods presented, in conformity with accounting principles generally accepted in the United States of America.
BRADY, MARTZ & ASSOCIATES, P.C.
Minot, North Dakota USA
September 02, 2004
New Hampshire Municipal Fund
Dear Shareholders:
Enclosed is the annual report of the operations of the New Hampshire Municipal Fund (the “Fund”) for the four month period ended July 30, 2004. The Fund’s portfolio and related financial statements are presented within for your review.
The global recovery, centered in the U.S. and Asia continues to improve as evidenced by the recent Federal Reserve hike in the Federal Funds Rate from a historic low of 1% to 1.25% on June 30th. The increase was widely anticipated as recent economic and labor market conditions have improved. The environment of rising profits, low interest rates, a weak dollar, accelerating domestic retail sales, and strengthening exports bodes well for a further accommodative Federal Reserve.
The Federal Reserve has taken center stage as it prepares to shift away from its stimulative monetary stance to a normalization of fed funds.
Several crucial questions remain unresolved:
What will constitute a neutral fed fund rate?
Will the normalization process be faster or slower than the market is currently discounting?
How much damage will higher rates cause the economy and market?
While no one knows for certain, recent verbiage from the Federal Reserve states: “With underlying inflation still expected to be relatively low, the Committee believes that policy accommodation can be removed at a pace that is likely to be measured. Nonetheless, the Committee will respond to changes in economic prospects as needed to fulfill its obligation to maintain price stability.”
Municipals during the period remained range bound with yields on twenty-year AAA general obligations yielding 4.75% at the beginning of the period and ending the period at 4.77%. While the yields on the twenty-year municipals appear relatively unchanged during the period, they were quite volatile reaching a low of 4.33% and a high of 5.00% (Source Municipal Market Data).
The Fund’s shorter duration of 4.6 years and higher average overall coupon of 5.53% contributed to relative returns as interest rates increased during the period.
Several of the Fund’s holdings (e.g. Dartmouth College 5.125% due 2028, New Hampshire State GO’s 5.00% due 2013) under-performed the municipal sector hampering relative performance.
Having been undervalued relative to U.S. Treasuries for some time, municipals have started to rebound in recent months as municipal supply has declined. This out-performance should continue as interest rates rise, further dampening municipal supply.
During the period the Fund utilized defensive positions designed to provide share price stability. U.S. Treasury futures were used to hedge a portion of the portfolio, stabilizing the Fund’s share price as Treasury yields advanced during the period and tempering them as Treasury yields declined. The New Hampshire Municipal Fund began the four month period at $10.73 per share and ended the period at $10.82 per share for a total return of 1.90% (without sales charge). This compares to the Lehman Brothers Municipal Bond Index’s return of -1.09% for the period. Risk management is important in this market environment.
An important part of the Fund’s strategy includes searching the primary and secondary markets for high quality double tax-exempt issues. Credit quality for the period ended was: AAA 62%, AA 21% and A 17%.
Income exempt from federal income taxes and New Hampshire state interest and dividends tax with preservation of capital remain the primary objectives of the Fund.
If you would like more frequent updates, visit our website at www.integritymf.com for daily prices along with pertinent Fund information.
Sincerely,
The Portfolio Management Team
The views expressed are those of Monte Avery, Chief Portfolio Strategist with Integrity Mutual Funds. The views are subject to change at any time in response to changing circumstances in the market and are not intended to predict or guarantee the future performance of any individual security, market sector or the markets generally, or any Integrity Mutual Fund.
Terms & Definitions July 30, 2004 (Unaudited)
Appreciation
Increase in value of an asset.
Average Annual Total Return
A standardized measurement of the return (yield and appreciation) earned by the fund on an annual basis, assuming all distributions are reinvested.
Coupon Rate or Face Rate
The rate of interest payable annually, based on the face amount of the bond; expressed as a percentage.
Depreciation
Decrease in value of an asset.
Lehman Brothers Municipal Bond Index
An unmanaged list of long-term, fixed-rate, investment-grade, tax-exempt bonds representative of the municipal bond market. The index does not take into account brokerage commissions or other costs, may include bonds different from those in the fund, and may pose different risks than the fund.
Market Value
Actual (or estimated) price at which a bond trades in the market place.
Maturity
A measure of the term or life of a bond in years. When a bond “matures,” the issuer repays the principal.
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 sales charge.
Quality Ratings
A designation assigned by independent rating companies to give a relative indication of a bond’s credit worthiness. “AAA,” “AA,” “A,” and “BBB” indicate investment grade securities. Ratings can range from a high of “AAA” to a low of “D”.
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.
July 30, 2004 (Unaudited)
PERFORMANCE AND COMPOSITION
PORTFOLIO QUALITY RATINGS
(based on Total Long-Term Investments)
AAA | 61.8% |
AA | 21.0% |
A | 17.2% |
Quality ratings reflect the financial strength of the issuer. They are assigned by independent rating services such as Moody’s Investors Services and Standard & Poor’s. Non-rated bonds have been determined to be of appropriate quality for the portfolio by Integrity Money Management, Inc., the investment adviser.
These percentages are subject to change.
PORTFOLIO MARKET SECTORS
(As a % of Net Assets)
T-Transportation | 26.5% |
S-School | 20.4% |
I-Industrial | 17.2% |
HC-Health Care | 13.8% |
H-Housing | 8.0% |
O-Other | 4.7% |
W/S-Water/Sewer | 3.2% |
G-Government | 3.1% |
GO-General Obligation | 3.1% |
Market sectors are breakdowns of the Fund’s portfolio holdings into specific investment classes.
These percentages are subject to change.
July 30, 2004 (Unaudited)
DISCLOSURE OF FUND EXPENSES
These examples are intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.
EXAMPLE 1:
This example assumes that you invest $1,000 in the Fund for the time periods indicated and then either redeem or do not redeem all of your shares at the end of those periods. The example also is based on the Fund’s actual expenses of 0.95% and annualized rate of return for the period of 5.69%. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
| Redemption | No Redemption |
Share Class | A | A |
Annual Expenses | $51.86 | $51.86 |
Account value of an initial investment of $1,000 as of the end of the period would be $1,011.98.
EXAMPLE 2:
This example assumes that you invest $1,000 in the Fund for the time periods indicated and then either redeem or do not redeem all of your shares at the end of those periods. The example is based on the Fund’s actual operating expenses of 0.95% and also assumes that your investment has a 5.00% return. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
| Redemption | No Redemption |
Share Class | A | A |
Annual Expenses | $51.82 | $51.82 |
Account value of an initial investment of $1,000 as of the end of the period would be $1,005.38.
July 30, 2004 (Unaudited)
Average Annual Total Returns
| For periods ending July 30, 2004 | |||
|
|
|
| Since Inception (December 31, 1992) |
New Hampshire Municipal Fund | 1 Year | 5 Year | 10 Year | |
Without sales charge | 4.74% | 4.63% | 5.19% | 5.24% |
With sales charge (4.25%) | 0.32% | 3.72% | 4.73% | 4.85% |
|
| |||
|
|
|
| Since Inception (December 31, 1992) |
Lehman Brothers Municipal Bond Index | 1 Year | 5 Year | 10 Year | |
| 5.78% | 6.07% | 6.38% | 6.30% |
Performance data quoted above is historical. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance data quoted. The principal value and investment return of an investment will fluctuate so that your shares, when redeemed, may be worth more or less than the original cost. You can obtain performance data current to the most recent month end (available within seven business days of the most recent month end) by calling 1-800-276-1262.
You should consider the Fund's investment objectives, risks, and charges and expenses carefully before investing. For this and other important information, please obtain a fund prospectus at no cost from your financial advisor and read it carefully before investing.
The table does not reflect the deduction of taxes that a shareholder would pay on Fund distributions and redemption of Fund shares.
The Fund's performance prior to December 19, 2003, was achieved while the Fund was managed by another investment advisor, who used different investment strategies and techniques, which may produce different investment results than those achieved by the current investment advisor. The Forum Investment Advisors, LLC, served as investment advisor to the Fund until December 19, 2003.
July 30, 2004 (Unaudited)
COMPARATIVE INDEX GRAPH(insert here)
Comparison of change in value of a $10,000 investment in the New Hampshire Municipal Fund and the Lehman Brothers Municipal Bond Index
| New Hampshire Municipal Fund w/o Sales Charge | New Hampshire Municipal Fund w/ Max Sales Charge | Lehman Brothers Municipal Bond Index |
12/31/92 | $10,000 | $9,575 | $10,000 |
1993 | $10,599 | $10,152 | $10,724 |
1994 | $10,895 | $10,436 | $10,925 |
1995 | $11,695 | $11,202 | $11,786 |
1996 | $12,287 | $11,770 | $12,563 |
1997 | $13,328 | $12,766 | $13,854 |
1998 | $14,034 | $13,442 | $14,683 |
1999 | $14,409 | $13,801 | $15,106 |
2000 | $14,919 | $14,290 | $15,757 |
2001 | $16,017 | $15,342 | $17,348 |
2002 | $16,852 | $16,142 | $18,512 |
2003 | $17,247 | $16,520 | $19,177 |
2004 | $18,064 | $17,302 | $20,286 |
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. The Lehman Brothers index is a national index representative of the national municipal bond market, whereas the Fund concentrates its investments in New Hampshire municipal bonds. Your Fund’s total return for the periods 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. All Fund and benchmark returns include reinvested dividends. The Fund’s share price, yields and total returns will vary, so that shares, when redeemed, may be worth more or less than their original cost.
July 30, 2004 (Unaudited)
MANAGEMENT OF THE FUND
The Board of Integrity Managed Portfolios (formerly known as Ranson Managed Portfolios) consists of four Trustees. These same individuals, unless otherwise noted, also serve as directors or trustees for all of the funds in the Integrity family of funds, the six series of Integrity Managed Portfolios, and the eight series of The Integrity Funds. Three Trustees (75% of the total) have no affiliation or business connection with the Investment Adviser or any of its affiliates. These are the “independent” Trustees. The remaining Trustees and executive officers are “interested” by virtue of their affiliation with the Investment Adviser and its affiliates.
The Independent Trustees of the Fund, their term of office and length of time served, their principal occupation(s) during the past five years, the number of portfolios overseen in the Fund Complex by each Independent Trustee and other directorships, if any, held outside the Fund Complex, are shown below.
INDEPENDENT TRUSTEES
Name, Address and Age | Position(s) Held with Trust | Term and Length Served | Principal Occupation(s) During Past 5 Years | Number of Portfolios Overseen In The Fund Complex * | Other Directorships Held Outside The Fund Complex |
Lynn W. Aas | Trustee | Since January 1996 | Retired; Attorney; Director, ND Tax-Free Fund, Inc. (since December 1994), Montana Tax-Free Fund, Inc. (since December 1994), South Dakota Tax-Free Fund, Inc. (April 1995 to June 2004) Integrity Fund of Funds, Inc. (since August 1994), Integrity Small-Cap Fund of Funds, Inc. (September 1998 to June 2003); Trustee, Integrity Managed Portfolios (since January 1996) and The Integrity Funds (since September 2003); and Director, First Western Bank & Trust (until May 2002). | 17 | None |
Orlin W. Backes | Trustee | Since January 1996 | Attorney, McGee, Hankla, Backes & Dobrovolny, P.C.; Director, ND Tax-Free Fund, Inc. (since April 1995), Montana Tax-Free Fund, Inc. (since April 1995), South Dakota Tax-Free Fund, Inc. (April 1995 to June 2004), Integrity Fund of Funds, Inc. (since April 1995), Integrity Small-Cap Fund of Funds, Inc. (September 1998 to June 2003); Trustee, Integrity Managed Portfolios (since January 1996) and The Integrity Funds (since May 2003); and Director, First Western Bank & Trust. | 17 | Director, First Western Bank & Trust |
R. James Maxson | Trustee | Since January 1999 | Attorney, Maxson Law Office (since November 2002), Attorney, McGee, Hankla, Backes & Dobrovolny, P.C. (April 2000 to November 2002); Attorney, Farhart, Lian and Maxson, P.C. (March 1976 to March 2000); Director, ND Tax-Free Fund, Inc. (since January 1999), Montana Tax-Free Fund, Inc. (since January 1999), South Dakota Tax-Free Fund, Inc. (January 1999 to June 2004), Integrity Fund of Funds, Inc. (since January 1999), Integrity Small-Cap Fund of Funds, Inc. (January 1999 to June 2003); and Trustee, Integrity Managed Portfolios (since January 1999) and The Integrity Funds (since May 2003). | 17 | None |
*The Fund Complex consists of the three funds in the Integrity family of funds, the six series of Integrity Managed Portfolios, and the eight series of The Integrity Funds.
Trustees (Directors for Corporate Funds) and officers of the Fund serve until their resignation, removal or retirement.
The Statement of Additional Information contains more information about the Fund’s Trustees and is available without charge upon request by calling Integrity Funds Distributor, Inc. at 1 (800) 276-1262.
The Interested Trustees and executive officers of the Fund, their term of office and length of time served, their principal occupation(s) during the past five years, the number of portfolios overseen in the Fund Complex by each Interested Trustee and executive officer, and other directorships, if any, held outside the Fund Complex, are shown below.
INTERESTED TRUSTEES AND EXECUTIVE OFFICERS
Name, Address and Age | Position(s) Held with Registrant | Term and Length Served | Principal Occupation(s) During Past 5 Years | Number of Portfolios Overseen In The Fund Complex * | Other Directorships Held Outside The Fund Complex |
**Robert E. Walstad | Trustee, Chairman, and President | Since January 1996 | Director (since September 1987), President (September 1987 to October 2001) (September 2002 to May 2003), Integrity Mutual Funds, Inc.; Director, President and Treasurer, Integrity Money Management, Inc., ND Capital, Inc., Integrity Fund Services, Inc., ND Tax-Free Fund, Inc., Montana Tax-Free Fund, Inc., South Dakota Tax-Free Fund, Inc. (April 1995 to June 2004), Integrity Fund of Funds, Inc., Integrity Small-Cap Fund of Funds, Inc. (September 1998 to June 2003); Trustee, Chairman, President and Treasurer, Integrity Managed Portfolios (since January 1996) and The Integrity Funds (since May 2003).; Director, President (until August 2003), CEO, and Treasurer, Integrity Funds Distributor, Inc.; Director (October 1999 to June 2003), President (October 1999 to October 2001), Magic Internet Services, Inc.; Director (May 2000 to June 2003), President (May 2000 to November 2001) (October 2002 to June 2003), ARM Securities Corporation; and Dir ector, CEO, Chairman (since January 2002), President (since September 2002), Capital Financial Services, Inc. | 17 | Director, Capital Financial Services, Inc. |
**Peter A. Quist | Vice President and Secretary | Since January 1996 | Attorney; Director and Vice President, Integrity Mutual Funds, Inc.; Director, Vice President and Secretary, Integrity Money Management, Inc. (formerly known as ND Money Management, Inc.), ND Capital, Inc., Integrity Fund Services, Inc., (formerly known as ND Resources, Inc.), ND Tax-Free Fund, Inc., Montana Tax-Free Fund, Inc., South Dakota Tax-Free Fund, Inc. (April 1995 to June 2004), Integrity Fund of Funds, Inc., Integrity Small-Cap Fund of Funds, Inc. (September 1998 to June 2003), Integrity Funds Distributor, Inc. (formerly known as Ranson Capital Corporation) (since January 1996); Vice President and Secretary, Integrity Managed Portfolios (since January 1996) and The Integrity Funds (since May 2003); and Director, ARM Securities Corporation (May 2000 to June 2003). | 3 | None |
**Brent M. Wheeler 1 Main Street North Minot, ND 58703 33 | Treasurer | Since May 2004 | Fund Accountant (May 1994 to December 1997) Sr. Fund Accountant (December 1997 to June 1998) Fund Accounting Manager (Since June 1998), Integrity Mutual Funds, Inc.; Treasurer (Since May 2004), Integrity Funds, Integrity Managed Portfolios, Integrity Mutual Funds. | None | Minot State University Alumni Association |
* The Fund Complex consists of the three funds in the Integrity family of funds, the six series of Integrity Managed Portfolios, and the eight series of The Integrity Funds.
** Trustees who are “interested persons” of the Funds as defined in the Investment Company Act of 1940. Messrs. Quist, Walstad and Wheeler are interested persons by virtue of being officers and trustees of the Fund’s Investment Adviser and Principal Underwriter.
Trustees (Directors for Corporate Funds) and officers of the Fund serve until their resignation, removal or retirement.
The Statement of Additional Information contains more information about the Fund’s Trustees and is available without charge upon request by calling Integrity Funds Distributor, Inc. at 1 (800) 276-1262.
July 30, 2004 (Unaudited)
INDEPENDENT TRUSTEES
[PHOTO] | [PHOTO] | [PHOTO] |
Lynn W. Aas | Orlin W. Backes | R. James Maxson |
Trustee | Trustee | Trustee |
INTERESTED TRUSTEES AND EXECUTIVE OFFICERS
[PHOTO] | [PHOTO] | [PHOTO] |
Robert E. Walstad | Peter A. Quist | Brent M. Wheeler |
Chairman | Vice-President | Treasurer |
President | Secretary |
|
Trustee |
|
|
Schedule of Investments July 30, 2004
Name of Issuer Percentages represent the market value of each investment category to total net assets | Rating (Unaudited) Moody’s/S&P | Coupon Rate | Maturity |
| Principal Amount |
| Market Value | |
|
|
|
|
|
|
|
| |
NEW HAMPSHIRE MUNICIPAL BONDS (91.5%) |
|
|
|
|
|
|
| |
#Belknap Cnty., NH G.O. MBIA | Aaa/AAA | 5.200% | 06/15/13 | $ | 225,000 | $ | 245,968 | |
Colebrook, NH School District MBIA | Aaa/NR | 4.000 | 07/15/08 |
| 60,000 |
| 63,261 | |
Concord, NH G.O. FGIC | Aaa/AAA | 6.050 | 10/15/08 |
| 50,000 |
| 52,214 | |
Concord, NH School District FSA | Aaa/AAA | 5.000 | 10/15/10 |
| 100,000 |
| 104,798 | |
Derry, NH FSA | Aaa/NR | 4.800 | 02/01/18 |
| 115,000 |
| 120,030 | |
Exeter, NH G.O. | A-1/NR | 6.250 | 01/15/07 |
| 140,000 |
| 140,210 | |
Exeter, NH | A-1/NR | 5.100 | 06/15/05 |
| 50,000 |
| 51,621 | |
Exeter, NH G.O. | A-1/NR | 5.300 | 06/15/08 |
| 25,000 |
| 27,388 | |
Franlin, NH G.O. MBIA | Aaa/AAA | 5.200 | 10/01/07 |
| 50,000 |
| 51,465 | |
Gorham, NH G.O. FSA | Aaa/NR | 4.800 | 04/01/13 |
| 60,000 |
| 63,190 | |
Gorham, NH G.O. FSA | Aaa/NR | 4.850 | 04/01/14 |
| 65,000 |
| 69,031 | |
Hudson, NH G.O. | Aa-3/NR | 5.250 | 03/15/28 |
| 110,000 |
| 112,994 | |
Hudson, NH School District Lot B | Aa-3/NR | 7.300 | 12/15/06 |
| 25,000 |
| 27,918 | |
Hudson, NH School District Lot B | Aa-3/NR | 7.300 | 12/15/08 |
| 20,000 |
| 23,720 | |
Keene, NH G.O. | Aa-3/NR | 5.150 | 10/15/11 |
| 45,000 |
| 49,260 | |
Londonderry, NH | Aa-3/NR | 5.400 | 01/15/14 |
| 50,000 |
| 53,547 | |
Manchester, NH Public Improvement G.O. | Aa/NR | 4.500 | 06/01/09 |
| 30,000 |
| 31,698 | |
Manchester, NH Public Improvement | Aa/NR | 5.500 | 06/01/19 |
| 200,000 |
| 220,090 | |
#Manchester, NH Airport Rev. MBIA | Aaa/AAA | 5.000 | 01/01/09 |
| 225,000 |
| 240,215 | |
Manchester, NH School Facs. Rev. MBIA | Aaa/AAA | 5.250 | 06/01/09 |
| 250,000 |
| 277,083 | |
Manchester, NH Water Rev. FGIC | Aaa/AAA | 5.000 | 12/01/28 |
| 250,000 |
| 253,453 | |
Mascenic, NH Regional School District #1 Lot C AMBAC | Aaa/AAA | 7.200 | 12/15/07 |
| 15,000 |
| 17,266 | |
Nashua, NH (Prerefunded) FGIC | Aaa/AAA | 5.250 | 11/01/09 |
| 15,000 |
| 16,201 | |
Nashua, NH (Unrefunded) FGIC | Aaa/AAA | 5.250 | 11/01/09 |
| 20,000 |
| 21,413 | |
New Hampshire Hlth. & Educ. Facs. Auth. (Univ. Sys. of NH) AMBAC | Aaa/AAA | 5.500 | 07/01/13 |
| 285,000 |
| 316,182 | |
New Hampshire Hlth. & Educ. Facs. Auth. (Exeter) | A/A+ | 5.100 | 10/01/10 |
| 200,000 |
| 210,692 | |
New Hampshire Hlth. & Educ. Facs. Auth. (Exeter) | A/A+ | 5.200 | 10/01/11 |
| 60,000 |
| 63,704 | |
New Hampshire Hlth. & Educ. Facs. Auth. (Exeter) | A/A+ | 5.500 | 10/01/15 |
| 120,000 |
| 126,740 | |
New Hampshire Hlth. & Educ. Facs. Auth. (Exeter) | A/A+ | 5.625 | 10/01/16 |
| 20,000 |
| 21,394 | |
New Hampshire Hgr. Educ. & Hlth. Facs. (Concord Hospital) AMBAC | Aaa/AAA | 5.400 | 10/01/06 |
| 50,000 |
| 53,461 | |
New Hampshire Hgr. Educ. & Hlth. Facs. (Dartmouth College) Rev. | Aaa/AAA | 5.700 | 06/01/27 |
| 100,000 |
| 109,031 | |
*New Hampshire Hgr. Educ. & Hlth. Facs. (Kendal At Hanover) | NR/A+ | 5.800 | 10/01/12 |
| 445,000 |
| 445,668 | |
New Hampshire Hgr. Educ. & Hlth. Fac. (Dartmouth College) Rev. | Aaa/AAA | 5.125 | 06/01/28 |
| 260,000 |
| 268,255 | |
New Hampshire Hgr. Educ. & Hlth. Facs. (Wentworth-Douglass) MBIA | Aaa/AAA | 5.400 | 01/01/07 |
| 175,000 |
| 178,938 | |
New Hampshire Muni Bond Bank | Aa/AA | 5.150 | 11/01/08 |
| 50,000 |
| 52,029 | |
New Hampshire Muni Bond Bank (Pinkerton Academy) AMBAC | Aaa/AAA | 5.250 | 06/01/07 |
| 5,000 |
| 5,119 | |
New Hampshire Muni Bond Bank | Aa/AA | 5.800 | 08/15/08 |
| 85,000 |
| 86,870 | |
New Hampshire State | Aa/AA | 6.000 | 09/01/05 |
| 10,000 |
| 10,133 | |
New Hampshire State G.O. | Aa/AA | 4.000 | 10/01/05 |
| 200,000 |
| 205,774 | |
New Hampshire State Capital Improvement G.O. | Aa/AA | 5.000 | 04/15/13 |
| 250,000 |
| 271,845 | |
New Hampshire State Hsg. Finance Auth. | A/NR | 4.850 | 01/01/05 |
| 125,000 |
| 126,091 | |
New Hampshire State Hsg. Finance Auth. | A/NR | 4.950 | 01/01/06 |
| 90,000 |
| 92,513 | |
#New Hampshire State Hsg. Finance Auth. | Aa/A+ | 5.600 | 01/01/06 |
| 305,000 |
| 309,066 | |
New Hampshire State Hsg. Finance Auth. | Aa-3/A+ | 5.250 | 01/01/07 |
| 25,000 |
| 25,462 | |
New Hampshire State Hsg. Finance Auth. | Aa/NR | 5.900 | 01/01/07 |
| 25,000 |
| 25,203 | |
New Hampshire State Hsg. Finance Auth. | Aa/NR | 6.000 | 01/01/08 |
| 15,000 |
| 15,151 | |
New Hampshire State Hsg. Finance Auth. | Aa/NR | 6.000 | 07/01/08 |
| 30,000 |
| 30,373 | |
*New Hampshire State Turnpike Sys. Rev. | Aaa/AAA | 6.750 | 11/01/11 |
| 1,175,000 |
| 1,315,001 | |
Oyster River, NH Coop School District Lot A | Aa/NR | 5.750 | 06/15/07 |
| 50,000 |
| 51,742 | |
Oyster River, NH Coop School District Lot A | Aa/NR | 5.850 | 06/15/08 |
| 100,000 |
| 103,448 | |
#Stratham, NH School District AMBAC | Aaa/AAA | 5.100 | 01/15/08 |
| 400,000 |
| 432,896 | |
| Total New Hampshire Municipal Bonds |
|
|
|
|
| $ | 7,286,815 |
|
|
|
|
|
|
|
| |
GUAM MUNICIPAL BONDS (0.1%) |
|
|
|
|
|
|
| |
Guam Hsg. Corp. Single Family Mtg. | NR/AAA | 5.750 | 09/01/31 |
| 10,000 |
| 10,627 | |
| Total Guam Municipal Bonds |
|
|
|
|
| $ | 10,627 |
|
|
|
|
|
|
|
| |
PUERTO RICO MUNICIPAL BONDS (3.5%) |
|
|
|
|
|
|
| |
Puerto Rico Commonwealth Public Improvement MBIA | Aaa/AAA | 5.500 | 07/01/21 |
| 250,000 |
| 282,395 | |
| Total Puerto Rico Municipal Bonds |
|
|
|
|
| $ | 282,395 |
|
|
|
| |||||
TOTAL MUNICIPAL BONDS (COST: $7,377,538) |
| $ | 7,579,837 | |||||
|
|
|
| |||||
SHORT-TERM SECURITIES (3.5%) | Shares |
|
| |||||
Goldman Sachs Financial Square Tax-Free Money Market | 28,697 | $ | 28,697 | |||||
Wells Fargo National Tax-Free Money Market | 251,000 |
| 251,000 | |||||
TOTAL SHORT-TERM SECURITIES (COST: $279,697) |
| $ | 279,697 | |||||
|
|
|
| |||||
TOTAL INVESTMENTS IN SECURITIES (COST: $7,657,235) |
| $ | 7,859,534 | |||||
OTHER ASSETS LESS LIABILITIES |
|
| 102,196 | |||||
|
|
|
| |||||
NET ASSETS |
| $ | 7,961,730 | |||||
* Indicates bonds are segregated by the custodian to cover when-issued or delayed-delivery purchases.
# Indicates bonds are segregated by the custodian to cover initial margin requirements.
FOOTNOTE: Non-rated (NR) securities have been determined to be of investment grade quality by the Fund’s Manager.
The accompanying notes are an integral part of these financial statements.
Financial Statements July 30, 2004
Statement of Assets and Liabilities July 30, 2004
ASSETS |
|
| |||
| Investment in securities, at value (cost: $7,657,235) | $ | |||
| Variation margin on futures |
| 68,750 | ||
| Accrued interest receivable |
| 79,087 | ||
| Accrued dividends receivable |
| 182 | ||
| Receivable from manager |
| 2,576 | ||
| Prepaid expenses |
| 1,675 | ||
|
|
| |||
| Total Assets | $ | 8,011,804 | ||
|
|
| |||
LIABILITIES |
|
| |||
| Dividends payable | $ | 21,755 | ||
| Accrued expenses |
| 13,924 | ||
| Disbursement in excess of demand deposit cash |
| 14,395 | ||
|
|
| |||
| Total Liabilities | $ | 50,074 | ||
|
|
| |||
|
|
| |||
NET ASSETS | $ | 7,961,730 | |||
|
|
| |||
|
|
| |||
Net assets are represented by: |
|
| |||
| Paid-in capital | $ | 7,686,112 | ||
| Accumulated undistributed net realized gain (loss) on investments and futures |
| 113,807 | ||
| Accumulated undistributed net investment income |
| 722 | ||
| Unrealized appreciation on investments |
| 202,299 | ||
| Unrealized depreciation on futures |
| (41,210) | ||
| Total amount representing net assets applicable to 736,134 outstanding shares of no par common stock (unlimited shares authorized) | $ | 7,961,730 | ||
|
|
|
| ||
Net asset value per share | $ | 10.82 | |||
|
|
|
| ||
Public offering price (based on sales charge of 4.25%) | $ | 11.30 | |||
The accompanying notes are an integral part of these financial statements.
Statement of Operations For the four month period ended July 30, 2004
INVESTMENT INCOME |
|
| ||
| Interest | $ | 108,747 | |
| Dividends |
| 1,025 | |
| Total Investment Income | $ | 109,772 | |
|
|
|
| |
EXPENSES |
|
| ||
| Investment advisory fees | $ | 13,455 | |
| Service fees |
| 6,728 | |
| Transfer agent fees |
| 7,027 | |
| Administrative service fees |
| 6,000 | |
| Accounting service fees |
| 9,346 | |
| Custodian fees |
| 1,950 | |
| Transfer agent out-of-pockets |
| 667 | |
| Professional fees |
| 690 | |
| Trustees fees |
| 587 | |
| Insurance expense |
| 167 | |
| Reports to shareholders |
| 933 | |
| Registration and filing fees |
| 374 | |
| Legal fees |
| 600 | |
| Audit fees |
| 896 | |
| Total Expenses | $ | 49,420 | |
| Less expenses waived or absorbed by the Fund’s manager |
| (23,856) | |
| Total Net Expenses | $ | 25,564 | |
|
|
| ||
NET INVESTMENT INCOME | $ | 84,208 | ||
|
|
| ||
|
|
| ||
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FUTURES |
|
| ||
| Net realized gain (loss) from: |
|
| |
| Investment transactions | $ | (7,216) | |
| Futures transactions |
| 236,620 | |
| Net change in unrealized appreciation (depreciation) of: |
|
| |
| Investments |
| (122,537) | |
| Futures |
| (41,210) | |
| Net Realized And Unrealized Gain (Loss) On Investments And Futures | $ | 65,657 | |
|
|
| ||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | $ | 149,865 | ||
|
|
| ||
The accompanying notes are an integral part of these financial statements.
Financial Statements July 30, 2004
Statement of Changes in Net Assets
For the four month period ended July 30, 2004 and the year ended March 31, 2004
|
| For The Four Month Period Ended July 30, 2004 |
| For The Year Ended March 31, 2004 | ||
|
|
|
|
| ||
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS |
|
|
|
| ||
| Net investment income | $ | 84,208 | $ | 316,952 | |
| Net realized gain (loss) on investment and futures transactions |
| 229,404 |
| (113,238) | |
| Net change in unrealized appreciation (depreciation) on investments and futures |
| (163,747) |
| (38,036) | |
| Net Increase (Decrease) in Net Assets Resulting From Operations | $ | 149,865 | $ | 165,678 | |
|
|
|
|
| ||
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS |
|
|
|
| ||
| Dividends from net investment income ($.11 and $.37 per share, respectively) | $ | (84,065) | $ | (316,847) | |
| Distributions from net realized gain on investment and futures transactions ($.00 and $.00 per share) |
| 0 |
| 0 | |
| Total Dividends and Distributions | $ | (84,065) | $ | (316,847) | |
|
|
|
|
| ||
CAPITAL SHARE TRANSACTIONS |
|
|
|
| ||
| Proceeds from sale of shares | $ | 521,823 | $ | 1,562,031 | |
| Proceeds from reinvested dividends |
| 60,281 |
| 172,055 | |
| Cost of shares redeemed |
| (861,357) |
| (3,605,347) | |
| Net Increase (Decrease) in Net Assets Resulting From Capital Share Transactions | $ | (279,253) | $ | (1,871,261) | |
|
|
|
|
| ||
TOTAL INCREASE (DECREASE) IN NET ASSETS | $ | (213,453) | $ | (2,022,430) | ||
|
|
|
|
| ||
NET ASSETS, BEGINNING OF PERIOD |
| 8,175,183 |
| 10,197,613 | ||
|
|
|
|
| ||
NET ASSETS, END OF PERIOD | $ | 7,961,730 | $ | 8,175,183 | ||
The accompanying notes are an integral part of these financial statements.
Notes to Financial Statements July 30, 2004
Note 1. ORGANIZATION
Business operations – The New Hampshire Municipal Fund (the “Fund”) is an investment portfolio of Integrity Managed Portfolios (the “Trust”) registered under the Investment Company Act of 1940, as amended, as a non-diversified, open-end management investment company. The Trust may offer multiple portfolios; currently six portfolios are offered. Integrity Managed Portfolios is an unincorporated business trust organized under Massachusetts law on August 10, 1990. The investment objective of the Fund is to provide its shareholders with as high a level of current income exempt from both federal and New Hampshire income tax as is consistent with preservation of capital. The Fund will seek to achieve this objective by investing primarily in a portfolio of New Hampshire municipal securities.
On December 19, 2003, the New Hampshire Municipal Fund became a series of the Integrity Managed Portfolios. Prior to this the Fund was part of the Forum Funds and was named the New Hampshire TaxSaver Bond Fund. The New Hampshire TaxSaver Bond Fund commenced operations on December 31, 1992. The Forum Funds is a Delaware business trust that is registered as an open-end management investment company under the Investment Company Act of 1940, as amended.
Shares of the Fund are offered at net asset value plus a maximum sales charge of 4.25% of the offering price.
Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Investment security valuation – Securities for which quotations are not readily available (which will constitute a majority of the securities held by the Fund) are valued using a matrix system at fair value as determined by Integrity Money Management, Inc. The matrix system has been developed based on procedures approved by the Board of Trustees which include consideration of the following: yields or prices of municipal bonds of comparable quality, type of issue, coupon, maturity and rating, and indications as to value from dealers and general market conditions. Because the market value of securities can only be established by agreement between parties in a sales transaction, and because of the uncertainty inherent in the valuation process, the fair values as determined may differ from the values that would have been used had a ready market for the securities existed. The Fund follows industry pr actice and records security transactions on the trade date.
The Fund concentrates its investments in a single state. This concentration may result in the Fund investing a relatively high percentage of its assets in a limited number of issuers.
When-issued securities – The Fund may purchase securities on a when-issued basis. Payment and delivery may take place after the customary settlement period for that security. The price of the underlying securities and the date when the securities will be delivered and paid for are fixed at the time the transaction is negotiated. The value of the securities purchased on a when-issued basis are identified as such in the Fund’s Schedule of Investments. With respect to purchase commitments, the Fund identifies securities as segregated in its records with a value at least equal to the amount of the commitment. Losses may arise due to changes in the value of the underlying securities or if the counterparty does not perform under the contract’s terms, or if the issuer does not issue the securities due to political, economic, or other factors.
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 and any net realized gain on investments to its shareholders. Therefore, no provision for income taxes is required. Distributions during the four month period ended July 30, 2004, were characterized tax-exempt for tax purposes.
The tax character of distributions paid was as follows:
|
| July 30, 2004 |
| March 31, 2004 |
Tax-exempt income | $ | 84,065 | $ | 316,847 |
Ordinary Income |
| 0 |
| 0 |
Long-term Capital Gains |
| 0 |
| 0 |
Total | $ | 84,065 | $ | 316,847 |
For the four month period ended July 30, 2004, the Fund made no permanent reclassifications to reflect tax character.
As of March 31, 2004 (fiscal year end of the Fund prior to the conversion to the Integrity Funds) the Fund did not have any unexpired capital loss carryforwards, which may be used to offset capital gains.
Distributions to shareholders – Dividends from net investment income, declared daily and paid monthly, are reinvested in additional shares of the Fund at net asset value or paid in cash. Capital gains, when available, are distributed at least annually.
Premiums and discounts - Premiums and discounts on municipal securities are amortized for financial reporting purposes.
Other – Income and expenses are recorded on the accrual basis. Investment transactions are accounted for on the trade date. Realized gains and losses are reported on the identified cost basis. Distributions to shareholders are recorded by the Fund on the ex-dividend date. Income and capital gain distributions are determined in accordance with federal income tax regulations and may differ from net investment income and realized gains determined in accordance with accounting principles generally accepted in the United States of America. These differences are primarily due to differing treatment for market discount, capital loss carryforwards and losses due to wash sales and futures transactions.
Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications to paid-in capital. Temporary book and tax basis differences will reverse in a subsequent period.
Futures contracts – The Fund may purchase and sell financial futures contracts to hedge against changes in the values of tax-exempt municipal 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 or a certain amount of U.S. government or municipal securities 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 appr eciation (depreciation) related to open futures contracts is required to be treated as a realized gain (loss) for Federal income tax purposes.
Securities held in collateralized accounts to cover initial margin requirements on open futures contracts are noted in the Schedule of Investments. The Statement of Assets and Liabilities reflects a receivable or payable for the daily mark to market for variation margin.
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.
At July 30, 2004, the Fund had outstanding futures contracts to sell debt securities as follows:
Contracts to Sell | Expiration Date | Number of Futures Contracts | Valuation as of July 30, 2004 | Unrealized Appreciation (Depreciation) |
U.S. Treasury Bonds | 09/2004 | 25 | $68,750 | ($41,210) |
Use of estimates – The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 July 30, 2004, there were unlimited shares of no par authorized; 736,134 and 762,026 shares were outstanding at July 30, 2004 and March 31, 2004, respectively.
Transactions in capital shares were as follows:
| Shares | |
| For The Four Month Period Ended July 30, 2004 | For The Year Ended March 31, 2004 |
| ||
Shares sold | 48,247 | 143,280 |
Shares issued on reinvestment of dividends | 5,590 | 15,878 |
Shares redeemed | (79,729) | (334,649) |
Net increase (decrease) | (25,892) | (175,491) |
Note 4. ACQUISITION OF FUND
The Forum Funds held a special meeting of shareholders of the MaineTaxSaver Bond Fund and the New Hampshire TaxSaver Bond Fund (the “Funds”), at [the offices of Forum Financial Group, LLC, Two Portland Square, Portland, Maine 04101] on December 15, 2003, at 10:00 a.m., Eastern Time, as adjourned from time to time (the “Meeting”), for the purposes listed: to approve a new investment advisory agreement with Integrity Money Management, Inc.; and to consider and act upon any other business as may properly come before the Meeting. After careful consideration, the Trustees of the Forum Funds unanimously approved each of the proposals and recommended that shareholders vote “FOR” the proposals. The Forum Funds Board of Trustees fixed the close of business on October 27, 2003 as the record date for determining shareholders entitled to notice of and to vote at the Meeting. Each share of a Fund was entitled to one vote for each dollar invested with respect to each proposal. The Investment Advisory Agreement of the Maine Municipal Fund and New Hampshire Municipal Fund were approved by the shareholders on December 15, 2003. The reorganization was accomplished by a tax-free exchange of 764,471 shares of New Hampshire TaxSaver Fund for 764,471 shares of New Hampshire Municipal Fund on December 19, 2003. New Hampshire TaxSaver Bond Fund net assets of $8,275,885 before and after conversion on December 19, 2003, including $326,830 of unrealized appreciation, were reorganized into the New Hampshire Municipal Fund.
Note 5. INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Integrity Money Management, Inc., the Fund’s investment adviser; Integrity Funds Distributor, Inc., the Fund’s underwriter; and Integrity Fund Services, Inc., the Fund’s transfer, accounting, and administrative services agent, are subsidiaries of Integrity Mutual Funds, Inc.
The Fund has engaged Integrity 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 0.50% of the Fund’s average daily net assets. All investment advisory fees were waived for the four month period ended July 30, 2004. Certain officers and trustees of the Fund are also officers and directors of the investment adviser.
Under the terms of the advisory agreement, the investment adviser has agreed to pay all the expenses of the Fund (excluding taxes and brokerage fees and commissions, if any) that exceed 1.25% of the Fund’s average daily net assets on an annual basis up to the amount of the management and investment advisory fee payable by the Fund to the advisor. In addition, the investment adviser has agreed to waive fees and pay certain expenses of the Fund (excluding taxes, interest, portfolio transaction expenses, and extraordinary expenses) that exceed 0.95% of the Fund’s average daily net assets on an annual basis through December 20, 2004.
The Fund pays an annual service fee to Integrity Funds Distributor, Inc., its principal underwriter, for certain expenses incurred in connection with the distribution of the Fund’s shares. The annual fee paid to Integrity Funds Distributor, Inc. is calculated daily and paid monthly by the Fund at the annual rate of 0.25% of the average daily net assets of the Fund. The Fund has recognized $6,728 of service fee expenses for the four month period ended July 30, 2004. The Fund has a payable to Integrity Funds Distributor, Inc. of $1,642 at July 30, 2004, for service fees.
Integrity Fund Services, Inc. provides shareholder services for a fee that varies according to the size of the Fund and is reimbursed for out-of-pocket expenses. An additional fee with a minimum of $500 per month is charged for each additional share class. The Fund has recognized $7,027 of transfer agent fees and expenses for the four month period ended July 30, 2004. The Fund has a payable to Integrity Fund Services, Inc. of $1,500 at July 30, 2004 for transfer agent fees. Integrity Fund Services, 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, together with reimbursement of out-of-pocket expenses. An additional minimum fee of $500 per month is charged by Integrity Fund Services, Inc. for each additional share class. The Fund has recognized $9,346 of accounting service fees for the four month period ended July 30, 2004. The Fund has a payable to Integrity Fund Services, Inc. of $2,328 at July 30, 2004, for accounting service fees. Integrity Fund Services also acts as administrator for the Fund. The Fund pays to Integrity Fund Services a monthly fee calculated at the rate of 0.10% of average daily net assets with a minimum of $1,500 per month plus out-of-pocket expenses. An additional minimum fee of $500 per month is charged by Integrity Fund Services, Inc. for each additional share class. The Fund has recognized $6,000 of administrative service fees for the four month period ended July 30, 2004. The Fund has a payable to Integrity Fund Services, Inc. of $1,500 at July 30, 2004, for administrative service fees.
Note 6. INVESTMENT SECURITY TRANSACTIONS
The cost of purchases and proceeds from sales of investment securities (excluding short-term securities) aggregated $780,107 and $751,280, respectively, for the four month period ended July 30, 2004.
Note 7. INVESTMENT IN SECURITIES
At July 30, 2004, the aggregate cost of securities for federal income tax purposes was substantially the same for financial reporting purposes at $7,657,235. The net unrealized appreciation of investments based on the cost was $202,299, which is comprised of $220,082 aggregate gross unrealized appreciation and $17,783 aggregate gross unrealized depreciation.
Financial Highlights
Selected per share data and ratios for the period indicated
|
| For The Four Month Period Ended July 30, 2004 |
| For The Year Ended March 31, 2004 |
| For The Year Ended March 31, 2003 |
| For The Year Ended March 31, 2002 |
| For The Year Ended March 31, 2001 |
| For The Year Ended March 31, 2000 | ||
NET ASSET VALUE, BEGINNING OF PERIOD | $ | 10.73 | $ | 10.88 | $ | 10.65 | $ | 10.74 | $ | 10.33 | $ | 10.80 | ||
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Income from Investment Operations: |
|
|
|
|
|
|
|
|
|
|
|
| ||
| Net investment income | $ | .11 | $ | .37 | $ | .40 | $ | .42 | $ | .44 | $ | .47 | |
| Net realized and unrealized gain (loss) on investment and futures transactions |
| .09 |
| (.15) |
| .30 |
| (.09) |
| .41 |
| (.47) | |
| Total Income (Loss) From Investment Operations | $ | .20 | $ | .22 | $ | .70 | $ | .33 | $ | .85 | $ | .00 | |
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Less Distributions: |
|
|
|
|
|
|
|
|
|
|
|
| ||
| Dividends from net investment income | $ | (.11) | $ | (.37) | $ | (.40) | $ | (.42) | $ | (.44) | $ | (.47) | |
| Distributions from net capital gains |
| .00 |
| .00 |
| (.07) |
| .00 |
| .00 |
| .00 | |
| Total Distributions | $ | (.11) | $ | (.37) | $ | (.47) | $ | (.42) | $ | (.44) | $ | (.47) | |
|
|
|
|
|
|
|
|
|
|
|
|
| ||
NET ASSET VALUE, END OF PERIOD | $ | 10.82 | $ | 10.73 | $ | 10.88 | $ | 10.65 | $ | 10.74 | $ | 10.33 | ||
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Total Return |
| 5.69%(A)(C) |
| 2.06%(A) |
| 6.65%(A) |
| 3.11%(A) |
| 8.41%(A) |
| 0.03%(A) | ||
|
|
|
|
|
|
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
|
|
|
| ||
RATIOS/SUPPLEMENTAL DATA: |
|
|
|
|
|
|
|
|
|
|
|
| ||
| Net assets, end of period (in thousands) | $ | 7,962 | $ | 8,175 | $ | 10,198 | $ | 11,843 | $ | 12,626 | $ | 11,644 | |
| Ratio of net expenses (after expense assumption) to average net assets |
| 0.95%(B)(C) |
| 0.95%(B) |
| 0.95%(B) |
| 0.95%(B) |
| 0.84%(B) |
| 0.60%(B) | |
| Ratio of net investment income to average net assets |
| 3.12%(C) |
| 3.44% |
| 3.71% |
| 3.88% |
| 4.18% |
| 4.46% | |
| Portfolio turnover rate |
| 10.02% |
| 41.53% |
| 20.00% |
| 21.00% |
| 24.00% |
| 19.00% | |
(A) Excludes maximum sales charge of 4.25%.
(B) During the period since March 31, 2004, Integrity Money Management, Inc. assumed/waived expenses of $23,856. If the expenses had not been assumed/waived, the annualized ratio of total expenses to average net assets would have been 1.84%. For the period 4/1/03 through 12/19/03, Forum Administrative Services and Forum Investment Advisors assumed/waived expenses of $62,210. For the period from 12/20/03 through 3/31/04, Integrity Money Management, Inc. assumed/waived expenses of $21,859. If the expenses had not been assumed/waived, the annualized ratio of total expenses to average net assets for the year would have been 1.86%. In prior years, Forum Administrative Services, Forum Investment Advisors, Forum Shareholder Services, and Forum Accounting Services assumed/waived expenses of $106,577 (2003), $ 112,886 (2002), $116,491 (2001), and $143,659 (2000). If the expenses had not been assumed/waived, the annualized ratio of total expenses to average net assets would have been 2.03%, 1.86%, 1.82%, and 1.59%, respectively.
(C) Ratio is annualized.
Total return represents the rate that an investor would have earned or lost on an investment in the Fund assuming reinvestment of all dividends and distributions.
The accompanying notes are an integral part of these financial statements.
TAX INFORMATION
For The Four Month Period Ended July 30, 2004 (Unaudited)
We are required to advise you within 60 days of the Fund’s fiscal year-end regarding the federal tax status of distributions received by shareholders during such fiscal year. The distributions made during the fiscal year by the Fund were earned from the following sources:
|
|
|
| Dividends and Distributions Per Share | ||||
To Shareholders of Record |
| Payment Date |
| From Net Investment Income |
| From Net Realized Short-Term Gains |
| From Net Realized Long-Term Gains |
April 29, 2004 |
| April 30, 2004 | $ | .026630 |
| - |
| - |
May 27, 2004 |
| May 28, 2004 | $ | .024058 |
| - |
| - |
June 29, 2004 |
| June 30, 2004 | $ | .032332 |
| - |
| - |
July 29, 2004 |
| July 30, 2004 | $ | .029986 |
| - |
| - |
Shareholders should consult their tax advisors.
INDEPENDENT AUDITOR’S REPORT
To the Shareholders and Board of Trustees of New Hampshire Municipal Fund
We have audited the accompanying statement of assets and liabilities of New Hampshire Municipal Fund (one of the portfolios constituting Integrity Managed Portfolios), including the schedule of investments as of July 30, 2004, the related statement of operations for the four month period then ended, the statement of changes in net assets, and the financial highlights for the four month period then ended and the year ended March 31, 2004. 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. The statement of changes in net assets for the year ended March 31, 2003, and the financial highlights for each of the four years in the period ended March 31, 2003, were audited by other auditors whose report dated May 16, 2003 expressed an unqualified opinion o n those statements.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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 July 30, 2004, 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 the New Hampshire Municipal Fund of the Integrity Managed Portfolios as of July 30, 2004, the results of its operations for the four month period then ended, the changes in its net assets, and the financial highlights for the four month period then ended and the year ended March 31, 2004, in conformity with accounting principles generally accepted in the United States of America.
BRADY, MARTZ & ASSOCIATES, P.C.
Minot, North Dakota USA
September 02, 2004
Oklahoma Municipal Fund
Dear Shareholder:
Enclosed is the annual report of the operations of the Oklahoma Municipal Fund (the “Fund”) for the year ended July 30, 2004. The Fund’s portfolio and related financial statements are presented within for your review.
The global recovery, centered in the U.S. and Asia continues to improve as evidenced by the recent Federal Reserve hike in the Federal Funds Rate from a historic low of 1% to 1.25% on June 30th. The increase was widely anticipated as recent economic and labor market conditions have improved. The environment of rising profits, low interest rates, a weak dollar, accelerating domestic retail sales, and strengthening exports bodes well for a further accommodative Federal Reserve.
The Federal Reserve has taken center stage as it prepares to shift away from its stimulative monetary stance to a normalization of fed funds.
Several crucial questions remain unresolved:
What will constitute a neutral fed fund rate?
Will the normalization process be faster or slower than the market is currently discounting?
How much damage will higher rates cause the economy and market?
While no one knows for certain, recent verbiage from the Federal Reserve states: “With underlying inflation still expected to be relatively low, the Committee believes that policy accommodation can be removed at a pace that is likely to be measured. Nonetheless, the Committee will respond to changes in economic prospects as needed to fulfill its obligation to maintain price stability.”
Municipals during the period remained range bound with yields on twenty-year AAA general obligations yielding 4.75% at the beginning of the period and ending the period at 4.77%. While the yields on the twenty-year municipals appear relatively unchanged during the period, they were quite volatile reaching a low of 4.33% and a high of 5.00% (Source Municipal Market Data).
The Fund’s shorter duration of 5 years and higher average overall coupon of 5.25% contributed to relative returns as interest rates increased during the period.
Several of the Fund’s holdings (e.g. East Central University, 4.55% due 2033, Northeast State University, 4.25% due 2023) under-performed the municipal sector hampering relative performance. Helping the Fund during the period was its position in Hillcrest Medical Center as it agreed to sell its operations to Ardent Health Sciences.
Having been undervalued relative to U.S. Treasuries for some time, municipals have started to rebound in recent months as municipal supply has declined. This out-performance should continue as interest rates rise, further dampening municipal supply.
During the period the Fund utilized defensive positions designed to provide share price stability. U.S. Treasury futures were used to hedge a portion of the portfolio, stabilizing the Fund’s share price as Treasury yields advanced during the period and tempering them as Treasury yields declined. The Oklahoma Municipal Fund began the year at $11.09 per share and ended the period at $11.07 per share for a total return of 3.67% (without sales charge). This compares to the Lehman Brothers Municipal Bond Index’s return of 5.78% for the period. Risk management is important in this market environment.
An important part of the Fund’s strategy includes searching the primary and secondary markets for high quality double tax-exempt issues. Credit quality for the period ended was AAA 66%, AA 14%, A 9%, BBB 5%, B- 3%, and NR 3%.
Income exempt from federal and state income taxes with preservation of capital remain the primary objectives of the Fund.
If you would like more frequent updates, visit our website at www.integritymf.com for daily prices along with pertinent Fund information.
Sincerely,
The Portfolio Management Team
The views expressed are those of Monte Avery, Chief Portfolio Strategist with Integrity Mutual Funds. The views are subject to change at any time in response to changing circumstances in the market and are not intended to predict or guarantee the future performance of any individual security, market sector or the markets generally, or any Integrity Mutual Fund.
Terms & Definitions July 30, 2004 (Unaudited)
Appreciation
The increase in value of an asset.
Average Annual Total Return
A standardized measurement of the return (yield and appreciation) earned by the fund on an annual basis, assuming all distributions are reinvested.
Coupon Rate or Face Rate
The rate of interest payable annually, based on the face amount of the bond; expressed as a percentage.
Depreciation
The decrease in value of an asset.
Lehman Brothers Municipal Bond Index
An unmanaged list of long-term, fixed-rate, investment-grade, tax-exempt bonds representative of the municipal bond market. The index does not take into account brokerage commissions or other costs, may include bonds different from those in the fund, and may pose different risks than the fund.
Market Value
The actual (or estimated) price at which a bond trades in the market place.
Maturity
A measure of the term or life of a bond in years. When a bond “matures,” the issuer repays the principal.
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 sales charge.
Quality Ratings
A designation assigned by independent rating companies to give a relative indication of a bond’s credit worthiness. “AAA,” “AA,” “A,” and “BBB” indicate investment grade securities. Ratings can range from a high of “AAA” to a low of “D”.
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.
July 30, 2004 (Unaudited)
Insert Pie Charts
PERFORMANCE AND COMPOSITION
PORTFOLIO QUALITY RATINGS
(based on Total Long-Term Investments)
AAA | 66.3% |
AA | 14.0% |
A | 9.1% |
BBB | 4.7% |
B1/B- | 2.8% |
NR | 3.1% |
Quality ratings reflect the financial strength of the issuer. They are assigned by independent rating services such as Moody’s Investors Services and Standard & Poor’s. Non-rated bonds have been determined to be of appropriate quality for the portfolio by Integrity Money Management (formerly known as Ranson Capital Corporation), the investment adviser.
These percentages are subject to change.
PORTFOLIO MARKET SECTORS
(As a % of Net Assets)
S-School | 37.8% |
U-Utilities | 14.8% |
HC-Health Care | 9.8% |
T-Transportation | 9.8% |
O-Other | 9.8% |
W/S-Water/Sewer | 8.0% |
G-Government | 7.6% |
I-Industrial | 2.4% |
Market sectors are breakdowns of the Fund’s portfolio holdings into specific investment classes.
These percentages are subject to change.
July 30, 2004 (Unaudited)
DISCLOSURE OF FUND EXPENSES
These examples are intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.
EXAMPLE 1:
This example assumes that you invest $1,000 in the Fund for the time periods indicated and then either redeem or do not redeem all of your shares at the end of those periods. The example also is based on the Fund’s actual expenses of 0.93% and rate of return for the period of 3.67%. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
| Redemption | No Redemption |
Share Class | A | A |
Annual expenses | $51.57 | $51.57 |
Account value of an initial investment of $1,000 as of the end of the period would be $992.64.
EXAMPLE 2:
This example assumes that you invest $1,000 in the Fund for the time periods indicated and then either redeem or do not redeem all of your shares at the end of those periods. The example is based on the Fund’s actual operating expenses of 0.93% and also assumes that your investment has a 5.00% return. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
| Redemption | No Redemption |
Share Class | A | A |
Annual expenses | $51.63 | $51.63 |
Account value of an initial investment of $1,000 as of the end of the period would be $1,005.38.
July 30, 2004 (Unaudited)
AVERAGE ANNUAL TOTAL RETURNS
| For periods ending July 30, 2004 | |||
|
|
|
| Since Inception (September 25, 1996) |
Oklahoma Municipal Fund | 1 Year | 5 Year | 10 Year | |
Without sales charge | 3.67% | 3.75% | N/A | 4.40% |
With sales charge (4.25%) | (0.72)% | 2.84% | N/A | 3.82% |
|
| |||
|
|
|
| Since Inception (September 25, 1996) |
Lehman Brothers Municipal Bond Index | 1 Year | 5 Year | 10 Year | |
| 5.78% | 6.07% | N/A | 6.30% |
Performance data quoted above is historical. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance data quoted. The principal value and investment return of an investment will fluctuate so that your shares, when redeemed, may be worth more or less than the original cost. You can obtain performance data current to the most recent month end (available within seven business days of the most recent month end) by calling 1-800-276-1262.
You should consider the Fund's investment objectives, risks, and charges and expenses carefully before investing. For this and other important information, please obtain a fund prospectus at no cost from your financial advisor and read it carefully before investing.
The table does not reflect the deduction of taxes that a shareholder would pay on Fund distributions and redemption of Fund shares.
July 30, 2004 (Unaudited)
COMPARATIVE INDEX GRAPH (INSERT HERE)
Comparison of change in value of a $10,000 investment in the Oklahoma Municipal Fund and the Lehman Brothers Municipal Bond Index
| Oklahoma Municipal Fund w/o Sales Charge | Oklahoma Municipal Fund w/ Max Sales Charge | Lehman Brothers Municipal Bond Index |
09/25/1996 | $10,000 | $9,575 | $10,000 |
1997 | $10,779 | $10,321 | $11,029 |
1998 | $11,186 | $10,711 | $11,689 |
1999 | $11,662 | $11,166 | $12,026 |
2000 | $11,648 | $11,153 | $12,545 |
2001 | $12,787 | $12,243 | $13,811 |
2002 | $13,484 | $12,911 | $14,737 |
2003 | $13,522 | $12,947 | $15,267 |
2004 | $14,017 | $13,422 | $16,150 |
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. The Lehman Brothers index is a national index representative of the national municipal bond market, whereas the Fund concentrates its investments in Oklahoma municipal bonds. 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. All Fund and benchmark returns include reinvested dividends. The Fund’s share price, yields, and total returns will vary, so that shares, when redeemed, may be worth more or less than their original cost.
July 30, 2004 (Unaudited)
MANAGEMENT OF THE FUND
The Board of Integrity Managed Portfolios (formerly known as Ranson Managed Portfolios) consists of four Trustees. These same individuals, unless otherwise noted, also serve as Directors or Trustees for all of the funds in the Integrity family of funds, the six series of Integrity Managed Portfolios, and the eight series of The Integrity Funds. Three Trustees (75% of the total) have no affiliation or business connection with the Investment Adviser or any of its affiliates. These are the “independent” Trustees. The remaining Trustee and executive officers are “interested” by virtue of their affiliation with the Investment Adviser and its affiliates.
The Independent Trustees of the Fund, their term of office and length of time served, their principal occupation(s) during the past five years, the number of portfolios overseen in the Fund Complex by each Independent Trustee and other directorships, if any, held outside the Fund Complex, are shown below.
INDEPENDENT TRUSTEES
Name, Address and Age | Position(s) Held with Registrant | Term and Length Served | Principal Occupation(s) During Past 5 Years | Number of Portfolios Overseen In The Fund Complex * | Other Directorships Held Outside The Fund Complex |
Lynn W. Aas | Trustee | Since January 1996 | Retired; Attorney; Director, ND Tax-Free Fund, Inc. (since December 1994), Montana Tax-Free Fund, Inc. (since December 1994), South Dakota Tax-Free Fund, Inc. (April 1995 to June 2004) Integrity Fund of Funds, Inc. (since August 1994), Integrity Small-Cap Fund of Funds, Inc. (September 1998 to June 2003); Trustee, Integrity Managed Portfolios (since January 1996) and The Integrity Funds (since September 2003); and Director, First Western Bank & Trust (until May 2002). | 17 | None |
Orlin W. Backes 15 2nd Ave., SW – Ste. 305 | Trustee | Since January 1996 | Attorney, McGee, Hankla, Backes & Dobrovolny, P.C.; Director, ND Tax-Free Fund, Inc. (since April 1995), Montana Tax-Free Fund, Inc. (since April 1995), South Dakota Tax-Free Fund, Inc. (April 1995 to June 2004), Integrity Fund of Funds, Inc. (since April 1995), Integrity Small-Cap Fund of Funds, Inc. (September 1998 to June 2003); Trustee, Integrity Managed Portfolios (since January 1996) and The Integrity Funds (since May 2003); and Director, First Western Bank & Trust. | 17 | Director, First Western Bank & Trust |
R. James Maxson Town & Country Center, 1015 S. Broadway Suite 15 | Trustee | Since January 1999 | Attorney, Maxson Law Office (since November 2002), Attorney, McGee, Hankla, Backes & Dobrovolny, P.C. (April 2000 to November 2002); Attorney, Farhart, Lian and Maxson, P.C. (March 1976 to March 2000); Director, ND Tax-Free Fund, Inc. (since January 1999), Montana Tax-Free Fund, Inc. (since January 1999), South Dakota Tax-Free Fund, Inc. ( January 1999 to June 2004), Integrity Fund of Funds, Inc. (since January 1999), Integrity Small-Cap Fund of Funds, Inc. (January 1999 to June 2003); and Trustee, Integrity Managed Portfolios (since January 1999) and The Integrity Funds (since May 2003). | 17 | None |
* The Fund Complex consists of the three funds in the Integrity family of funds, the six series of Integrity Managed Portfolios, and the eight series of The Integrity Funds.
Trustees (Directors for Corporate Funds) and officers of the Fund serve until their resignation, removal or retirement.
The Statement of Additional Information contains more information about the Fund’s Trustees and is available without charge upon request, by calling Integrity Funds Distributor, Inc. at 1(800) 601-5593
July 30, 2004 (Unaudited)
The Interested Trustee and executive officers of the Fund, their term of office and length of time served, their principal occupation(s) during the past five years, the number of portfolios overseen in the Fund Complex by each Interested Trustee and executive officer, and other directorships, if any, held outside the Fund Complex, are shown below.
INTERESTED TRUSTEE AND EXECUTIVE OFFICERS
Name, Address and Age | Position(s) Held with Registrant | Term and Length Served | Principal Occupation(s) During Past 5 Years | Number of Portfolios Overseen In The Fund Complex * | Other Directorships Held Outside The Fund Complex |
**Robert E. Walstad | Trustee, Chairman, and President | Since January 1996 | Director (since September 1987), President (September 1987 to October 2001) (September 2002 to May 2003), Integrity Mutual Funds, Inc.; Director, President and Treasurer, Integrity Money Management, Inc., ND Capital, Inc., Integrity Fund Services, Inc., ND Tax-Free Fund, Inc., Montana Tax-Free Fund, Inc., South Dakota Tax-Free Fund, Inc. (April 1995 to June 2004), Integrity Fund of Funds, Inc., Integrity Small-Cap Fund of Funds, Inc. (September 1998 to June 2003); Trustee, Chairman, President and Treasurer, Integrity Managed Portfolios (since January 1996) and The Integrity Funds (since May 2003).; Director, President (until August 2003), CEO, and Treasurer, Integrity Funds Distributor, Inc.; Director (October 1999 to June 2003), President (October 1999 to October 2001), Magic Internet Services, Inc.; Director (May 2000 to June 2003), President (May 2000 to November 2001) (October 2002 to June 2003), ARM Securities Corporation; and Director, CEO, Chairma n (since January 2002), President (since September 2002), Capital Financial Services, Inc. | 17 | Director, Capital Financial Services, Inc.
|
**Peter A. Quist 1 North Main Minot, ND 58703 | Vice President and Secretary | Since January 1996 | Attorney; Director and Vice President, Integrity Mutual Funds, Inc.; Director, Vice President and Secretary, Integrity Money Management, Inc. (formerly known as ND Money Management, Inc.), ND Capital, Inc., Integrity Fund Services, Inc., (formerly known as ND Resources, Inc.), ND Tax-Free Fund, Inc., Montana Tax-Free Fund, Inc., South Dakota Tax-Free Fund, Inc. (April 1995 to June 2004), Integrity Fund of Funds, Inc., Integrity Small-Cap Fund of Funds, Inc. (September 1998 to June 2003), Integrity Funds Distributor, Inc. (formerly known as Ranson Capital Corporation) (since January 1996); Vice President and Secretary, Integrity Managed Portfolios (since January 1996) and The Integrity Funds (since May 2003); and Director, ARM Securities Corporation (May 2000 to June 2003). | 3 | None |
**Brent M. Wheeler | Treasurer | Since May 2004 | Fund Accountant (May 1994 to December 1997) Sr. Fund Accountant (December 1997 to June 1998) Fund Accounting Manager (Since June 1998), Integrity Mutual Funds, Inc.; Treasurer (Since May 2004), Integrity Funds, Integrity Managed Portfolios, Integrity Mutual Funds. |
| Minot State University Alumni Association |
* The Fund Complex consists of the three funds in the Integrity family of funds, the six series of Integrity Managed Portfolios, and the eight series of The Integrity Funds.
** Trustees who are “interested persons” of the Funds as defined in the Investment Company Act of 1940. Messrs. Quist, Walstad and Wheeler are interested persons by virtue of being officers and trustees of the Fund’s Investment Adviser and Principal Underwriter.
Trustees (Directors for Corporate Funds) and officers of the Fund serve until their resignation, removal or retirement.
The Statement of Additional Information contains more information about the Fund’s Trustees and is available without charge upon request, by calling Integrity Funds Distributor, Inc. at 1(800) 601-5593.
July 30, 2004 (Unaudited)
INDEPENDENT TRUSTEES
[PHOTO] | [PHOTO] | [PHOTO] |
Lynn W. Aas | Orlin W. Backes | R. James Maxson |
Trustee | Trustee | Trustee |
INTERESTED TRUSTEES AND EXECUTIVE OFFICERS
[PHOTO] | [PHOTO] | [PHOTO] |
Robert E. Walstad | Peter A. Quist | Brent M. Wheeler |
Chairman | Vice-President | Treasurer |
President | Secretary |
|
Trustee |
|
|
Schedule of Investments July 30, 2004
Name of Issuer | Rating (Unaudited) Moody’s/S&P | Coupon Rate | Maturity |
| Principal Amount |
| Market Value | |
|
|
|
|
|
|
|
|
|
OKLAHOMA MUNICIPAL BONDS (96.7%) |
|
|
|
|
|
|
|
|
Broken Arrow, OK Unlimited GO FSA | Aaa/AAA | 4.000% | 08/01/2018 | $ | 250,000 | $ | 241,315 |
|
Claremore Public Works Auth. Capital Improvement Rev. FSA | Aaa/AAA | 5.250 | 06/01/2027 |
| 500,000 |
| 517,505 |
|
Claremore, OK Student Hsg. Rev. (Rogers University) ACA | NR/A | 5.750 | 09/01/2034 |
| 500,000 |
| 502,110 |
|
Edmond Economic Dev. Auth., OK Student Housing Rev. | Baa-3/NR | 5.375 | 12/01/2019 |
| 200,000 |
| 183,304 |
|
#Edmond Economic Dev. Auth., OK Student Housing Rev. | Baa-3/NR | 5.500 | 12/01/2028 |
| 865,000 |
| 769,417 |
|
Edmond Public Works Auth. AMBAC | Aaa/AAA | 4.850 | 01/01/2024 |
| 155,000 |
| 157,632 |
|
Edmond Public Works Sales Tax & Utility Rev. AMBAC | Aaa/AAA | 4.750 | 07/01/2023 |
| 200,000 |
| 203,432 |
|
Garfield Cty., Criminal Justice Auth. (Enid, OK) Rev. MBIA | Aaa/NR | 4.500 | 04/01/2018 |
| 250,000 |
| 255,412 |
|
Grand River Dam Auth., OK FSA | Aaa/AAA | 5.000 | 06/01/2012 |
| 500,000 |
| 554,500 |
|
*Grand River Dam Auth., OK Rev. AMBAC | Aaa/AAA | 6.250 | 06/01/2011 |
| 210,000 |
| 249,087 |
|
Grand River Dam Auth., OK Rev. Ref. AMBAC | Aaa/AAA | 5.500 | 06/01/2013 |
| 700,000 |
| 797,755 |
|
Jackson Cty, OK Sales Tax Rev. AMBAC | Aaa/AAA | 5.000 | 10/01/2022 |
| 500,000 |
| 522,200 |
|
Jenks Aquarium Auth. Rev. MBIA | Aaa/AAA | 5.250 | 07/01/2029 |
| 500,000 |
| 515,795 |
|
Mannford Public Works Auth. | NR/BBB+ | 6.000 | 04/01/2027 |
| 300,000 |
| 307,605 |
|
Mannford Public Works Auth. | NR/BBB+ | 5.900 | 04/01/2032 |
| 250,000 |
| 254,847 |
|
McAlester, OK Public Works Auth. FSA | Aaa/NR | 5.100 | 02/01/2030 |
| 100,000 |
| 100,891 |
|
Midwest City, OK Capital Impvt. MBIA | Aaa/AAA | 5.375 | 09/01/2024 |
| 500,000 |
| 532,985 |
|
Norman, OK (Regl. Hospital) Auth. Asset Guaranty | NR/AA | 5.250 | 09/01/2016 |
| 180,000 |
| 192,397 |
|
OK Agric. & Mech. Colleges (OK St. Univ.) Athletic Facs. AMBAC | Aaa/NR | 5.000 | 08/01/2024 |
| 300,000 |
| 307,653 |
|
*OK Board of Regents (Oklahoma City Community College) Student Rev. AMBAC | Aaa/AAA | 5.550 | 07/01/2022 |
| 750,000 |
| 809,272 |
|
OK Board of Regents (Univ. of Central OK Parking) Rev. AMBAC | Aaa/NR | 4.125 | 06/01/2023 |
| 250,000 |
| 228,482 |
|
OK Board of Regents (Univ. of Central OK) AMBAC | Aaa/AAA | 5.600 | 08/01/2020 |
| 150,000 |
| 164,883 |
|
OK Board of Regents (Univ. of Central OK) AMBAC | Aaa/AAA | 5.700 | 08/01/2025 |
| 390,000 |
| 428,590 |
|
OK Board of Regents (University of Oklahoma) Athletic Fac. Rev. MBIA | Aaa/NR | 5.250 | 06/01/2026 |
| 500,000 |
| 515,630 |
|
OK Capital Impvt. Auth. (Dept. of Corrections) Rev. AMBAC | Aaa/AAA | 5.000 | 05/01/2018 |
| 500,000 |
| 521,725 |
|
OK Capital Impvt. Auth. (State Fac.) Rev. MBIA | Aaa/AAA | 5.500 | 09/01/2019 |
| 100,000 |
| 110,624 |
|
OK Capital Impvt. Auth. (State Highway) Rev. MBIA | Aaa/AAA | 5.000 | 06/01/2014 |
| 250,000 |
| 268,178 |
|
OK Capital Impvt. Auth. (State Office Building) Rev. | A-1/NR | 5.500 | 10/01/2016 |
| 105,000 |
| 113,121 |
|
OK Colleges Board of Regents (East Central Univ.) AMBAC | Aaa/NR | 4.350 | 08/01/2022 |
| 115,000 |
| 109,873 |
|
OK Colleges Board of Regents (East Central Univ.) AMBAC | Aaa/NR | 4.400 | 08/01/2023 |
| 115,000 |
| 109,580 |
|
OK Colleges Board of Regents (East Central Univ.) AMBAC | Aaa/NR | 4.550 | 08/01/2033 |
| 250,000 |
| 228,062 |
|
OK Colleges Board of Regents (NE St. Univ.) Rev. FGIC | Aaa/AAA | 4.250 | 04/01/2023 |
| 150,000 |
| 139,363 |
|
OK Colleges Board of Regents (NE State Univ. Ctr.) Rev. FSA | Aaa/AAA | 5.100 | 03/01/2016 |
| 140,000 |
| 151,110 |
|
OK Colleges Board of Regents (NE State Univ. Ctr.) Rev. FSA | Aaa/AAA | 5.150 | 03/01/2021 |
| 100,000 |
| 105,058 |
|
OK Devl. Finance Auth. (Comanche County Hosp.) | NR/BBB- | 5.625 | 07/01/2009 |
| 105,000 |
| 110,131 |
|
OK Devl. Finance Auth. (DHS Lease Rev.) Series 2000A MBIA | Aaa/NR | 5.600 | 03/01/2015 |
| 280,000 |
| 304,968 |
|
#OK Devl. Finance Auth. (Hillcrest Healthcare Syst.) Rev. Ref. | B1/B- | 5.625 | 08/15/2019 |
| 1,000,000 |
| 962,500 |
|
OK Devl. Finance Auth. (Integris Baptist Medical Center) AMBAC | Aaa/AAA | 5.600 | 06/01/2020 |
| 250,000 |
| 270,535 |
|
OK Devl. Finance Auth. (Langston Univ. Stadium) | NR/AA | 5.000 | 07/01/2027 |
| 250,000 |
| 252,505 |
|
OK Devl. Finance Auth. (Lease Rev.) Law Enforcement MBIA | Aaa/AAA | 5.100 | 06/01/2027 |
| 120,000 |
| 122,275 |
|
OK Devl. Finance Auth. (OK State Syst. Higher Ed.) AMBAC | Aaa/AAA | 4.900 | 12/01/2022 |
| 200,000 |
| 206,104 |
|
*OK Devl. Finance Auth. (Oklahoma City Univ.) Rev. Ref. AMBAC | Aaa/AAA | 5.125 | 06/01/2017 |
| 555,000 |
| 590,354 |
|
OK Devl. Finance Auth. (Seminole State College) | NR/AA | 5.125 | 12/01/2027 |
| 150,000 |
| 153,210 |
|
OK Devl. Finance Auth. (Southern Nazarene Univ.) Rev. | NR/NR | 5.750 | 03/01/2013 |
| 400,000 |
| 420,596 |
|
#OK Devl. Finance Auth. (Southern Nazarene Univ.) Rev. | NR/NR | 6.000 | 03/01/2018 |
| 600,000 |
| 632,694 |
|
OK Devl. Finance Auth. (St. Ann’s Retirement Village) Rev. MBIA | Aaa/NR | 5.000 | 12/01/2028 |
| 500,000 |
| 501,950 |
|
OK Devl. Finance Auth. (St. John Health Syst.) Rev. Ref. | Aa-3/AA | 5.750 | 02/15/2025 |
| 500,000 |
| 534,315 |
|
OK Devl. Finance Auth. (St. John Health Syst.) Rev. Ref. | Aa-3/AA | 6.000 | 02/15/2029 |
| 400,000 |
| 433,976 |
|
OK Devl. Finance Auth. (St. John Health) MBIA | Aaa/AAA | 5.750 | 02/15/2025 |
| 200,000 |
| 213,988 |
|
*OK Devl. Finance Auth. (Tulsa Vo Tech Dist. Prj.) Public Facs. Rev. AMBAC | Aaa/AAA | 5.100 | 08/01/2015 |
| 750,000 |
| 750,000 |
|
OK Devl. Finance Auth. OK Dept. of Corrections (McLoud Fac.) FGIC | Aaa/AAA | 4.600 | 04/01/2022 |
| 250,000 |
| 249,977 |
|
OK Devl. Finance Auth. OK Dept. of Corrections (McLoud Fac.) FGIC | Aaa/AAA | 4.650 | 04/01/2023 |
| 250,000 |
| 248,433 |
|
OK Housing Finance Agency Single Family Homeownership | Aaa/NR | 5.250 | 09/01/2021 |
| 155,000 |
| 155,279 |
|
*OK Housing Finance Agency Single Family Homeownership GNMA | Aaa/NR | 5.375 | 03/01/2020 |
| 120,000 |
| 122,773 |
|
OK Housing Finance Agency Single Family Homeownership GNMA/FNMA | Aaa/NR | 5.850 | 09/01/2020 |
| 75,000 |
| 77,962 |
|
OK State G.O. (OK Building Commission) FGIC | Aaa/AAA | 5.000 | 07/15/2018 |
| 1,600,000 |
| 1,732,832 |
|
OK State Indl. Auth. Lease (OK Cty. Parking Fac.) Rev. MBIA | Aaa/AAA | 4.350 | 07/01/2019 |
| 190,000 |
| 188,429 |
|
OK State Indl. Auth. Lease (OK Cty. Parking Fac.) Rev. MBIA | Aaa/AAA | 4.400 | 07/01/2020 |
| 200,000 |
| 198,088 |
|
*OK State Indl. Finance Auth. G.O. | Aa-3/NR | 6.050 | 02/01/2015 |
| 285,000 |
| 305,001 |
|
OK State Municipal Power Auth. Rev. MBIA | Aaa/AAA | 5.750 | 01/01/2024 |
| 1,595,000 |
| 1,843,326 |
|
OK State Student Loan Auth. | A/NR | 6.350 | 09/01/2025 |
| 280,000 |
| 303,442 |
|
*OK State Student Loan Auth. | Aaa/AAA | 5.625 | 06/01/2031 |
| 685,000 |
| 710,201 |
|
OK State Student Loan Auth. MBIA | Aaa/AAA | 5.300 | 12/01/2032 |
| 450,000 |
| 457,155 |
|
OK State Turnpike Auth. FGIC | Aaa/AAA | 5.250 | 01/01/2012 |
| 225,000 |
| 245,086 |
|
OK State Turnpike Auth. Rev. FGIC | Aaa/AAA | 5.000 | 01/01/2028 |
| 120,000 |
| 121,907 |
|
OK State Water (Loan Program) Rev. | NR/AA+ | 5.400 | 09/01/2015 |
| 105,000 |
| 113,447 |
|
*OK State Water (Loan Program) Rev. | NR/AA+ | 5.100 | 09/01/2016 |
| 415,000 |
| 444,527 |
|
OK State Water Resources Board Rev. | NR/AA+ | 5.050 | 10/01/2022 |
| 200,000 |
| 210,160 |
|
OK State Water Resources Board Rev. | NR/AA+ | 5.125 | 10/01/2027 |
| 500,000 |
| 509,475 |
|
OK State Water Resources Board Rev. | NR/AA+ | 4.625 | 10/01/2018 |
| 435,000 |
| 449,929 |
|
OK State Water Resources Board Rev. | NR/AA+ | 4.350 | 10/01/2023 |
| 200,000 |
| 187,634 |
|
OK State Water Resources Loan Rev. | NR/AA+ | 5.100 | 10/01/2027 |
| 500,000 |
| 511,930 |
|
Oklahoma City, OK Water Utility Trust (Water & Sewer) Rev. FGIC | Aaa/AAA | 5.000 | 07/01/2029 |
| 400,000 |
| 396,900 |
|
#Okmulgee Public Works Auth. Capital Improvement Rev. MBIA | Aaa/AAA | 5.125 | 08/01/2030 |
| 750,000 |
| 762,458 |
|
Okmulgee Public Works Auth. Capital Improvement Rev. MBIA | Aaa/AAA | 4.800 | 10/01/2027 |
| 500,000 |
| 497,500 |
|
Rural Enterprises, OK Inc. Okmulgee Student Housing Proj., Series A ALA | NR/A | 5.625 | 12/01/2020 |
| 140,000 |
| 142,663 |
|
Rural Enterprises, OK Inc. OK Govt. Fin. (Cleveland Cty. Hlth.) MBIA | Aaa/NR | 5.000 | 11/01/2021 |
| 250,000 |
| 261,718 |
|
Rural Enterprises, OK Inc. Okmulgee Student Housing Proj. ACA | NR/A | 5.750 | 12/01/2030 |
| 250,000 |
| 249,715 |
|
Rural Enterprises, OK Inc. Okmulgee Student Housing Proj., Series A ACA | NR/A | 5.700 | 12/01/2025 |
| 220,000 |
| 221,604 |
|
Rural Enterprises, OK Inc. Student Hsg. (Connors College) ACA | NR/A | 5.550 | 11/01/2021 |
| 250,000 |
| 252,745 |
|
Rural Enterprises, OK Inc. Student Hsg. (Connors College) ACA | NR/A | 5.650 | 11/01/2031 |
| 375,000 |
| 374,400 |
|
Rural Enterprises, OK Inc. USAOF Student Housing ACA | NR/A | 5.550 | 11/01/2021 |
| 250,000 |
| 252,745 |
|
Rural Enterprises, OK Inc. USAOF Student Housing ACA | NR/A | 5.650 | 11/01/2031 |
| 250,000 |
| 249,600 |
|
Sapulpa Municipal Authority Utility Rev. FSA | Aaa/AAA | 5.125 | 01/01/2032 |
| 250,000 |
| 253,983 |
|
Texas Cty., OK Dev. Auth. (OPSU Student Hsg.) ACA | NR/A | 5.250 | 11/01/2023 |
| 250,000 |
| 248,700 |
|
Tulsa Cty, Indl. Auth. Recreation Facs. | NR/AA | 4.700 | 09/01/2024 |
| 500,000 |
| 486,250 |
|
Tulsa, OK Airport Improvement Rev. FGIC | Aaa/AAA | 4.150 | 06/01/2016 |
| 450,000 |
| 426,956 |
|
University of OK Board of Regents (Multi Facs.) Rev. MBIA | Aaa/NR | 4.750 | 06/01/2029 |
| 250,000 |
| 243,783 |
|
University of OK Board of Regents (Research Fac.) Rev. | Aaa/NR | 4.800 | 03/01/2028 |
| 670,000 |
| 666,416 |
|
University of OK Board of Regents Student Hsg. Rev. FGIC | Aaa/NR | 5.000 | 11/01/2027 |
| 1,000,000 |
| 1,013,420 |
|
University of OK Student Hsg. (Cameron Univ.) Rev. AMBAC | Aaa/AAA | 5.500 | 07/01/2023 |
| 250,000 |
| 270,235 |
|
|
|
|
|
| ||||
TOTAL OKLAHOMA MUNICIPAL BONDS (COST: $33,701,509) |
| $ | 34,288,278 |
| ||||
|
|
|
|
| ||||
SHORT-TERM SECURITIES (1.4%) | Shares |
|
|
| ||||
Wells Fargo National Tax-Free Money Market | 489,259 | $ | 489,259 |
| ||||
TOTAL SHORT-TERM SECURITIES (COST: $489,259) |
| $ | 489,259 |
| ||||
|
|
|
|
| ||||
TOTAL INVESTMENTS IN SECURITIES (COST: $34,190,768) |
| $ | 34,777,537 |
| ||||
OTHER ASSETS LESS LIABILITIES |
|
| 694,335 |
| ||||
|
|
|
|
| ||||
NET ASSETS |
| $ | 35,471,872 |
| ||||
* Indicates bonds are segregated by the custodian to cover when-issued or delayed delivery purchases.
# Indicates bonds are segregated by the custodian to cover initial margin requirements.
Footnote: Non-rated (NR) investments have been determined to be of investment grade quality by the Fund’s Manager.
The accompanying notes are an integral part of these financial statements.
Financial Statements July 30, 2004
Statement of Assets and Liabilities July 30, 2004
Assets |
|
| ||
| Investment in securities, at value (cost: $34,190,768) | $ | 34,777,537 | |
| Cash |
| 3,613 | |
| Accrued interest receivable |
| 492,566 | |
| Accrued dividends receivable |
| 367 | |
| Receivable for fund shares sold |
| 32,586 | |
| Prepaid expenses |
| 3,411 | |
| Variation margin on futures |
| 308,000 | |
| Total Assets | $ | 35,618,080 | |
|
|
| ||
Liabilities |
|
| ||
| Dividends payable |
| 112,256 | |
| Accrued expenses |
| 33,952 | |
| Total Liabilities | $ | 146,208 | |
|
|
| ||
Net Assets | $ | 35,471,872 | ||
|
|
| ||
|
|
| ||
Net assets are represented by: |
|
| ||
| Paid-in capital | $ | 37,046,125 | |
| Accumulated undistributed net realized gain (loss) on investments |
| (1,696,060) | |
| Accumulated undistributed net investment income |
| 1,051 | |
| Unrealized appreciation on investments |
| 586,769 | |
| Unrealized depreciation on futures |
| (466,013) | |
| Total amount representing net assets applicable to 3,204,147 outstanding shares of no par common stock (unlimited shares authorized) | $ | 35,471,872 | |
|
|
| ||
Net asset value per share | $ | 11.07 | ||
Public offering price (based on sales charge of 4.25%) | $ | 11.56 | ||
The accompanying notes are an integral part of these financial statements.
Statement of Operations For the year ended July 30, 2004
INVESTMENT INCOME |
|
| ||
| Interest | $ | 1,601,565 | |
| Dividends |
| 7,971 | |
| Total Investment Income | $ | 1,609,536 | |
|
|
| ||
EXPENSES |
|
| ||
| Investment advisory fees | $ | 170,729 | |
| Distribution (12b-1) fees |
| 85,364 | |
| Transfer agent fees |
| 45,572 | |
| Administrative service fees |
| 28,783 | |
| Accounting service fees |
| 41,073 | |
| Custodian fees |
| 7,378 | |
| Registration and filing fees |
| 1,484 | |
| Transfer agent out-of-pocket expenses |
| 1,086 | |
| Trustees fees |
| 3,055 | |
| Reports to shareholders |
| 3,654 | |
| Professional fees |
| 2,417 | |
| Insurance expense |
| 3,395 | |
| Audit fees |
| 10,260 | |
| Legal fees |
| 2,600 | |
| Total Expenses | $ | 406,850 | |
| Less expenses waived or absorbed by the Fund’s manager |
| (87,525) | |
| Total Net Expenses | $ | 319,325 | |
|
|
| ||
NET INVESTMENT INCOME | $ | 1,290,211 | ||
|
|
| ||
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FUTURES |
|
| ||
| Net realized gain (loss) from: |
|
| |
| Investment transactions | $ | (152,657) | |
| Futures transactions |
| (447,254) | |
| Net change in unrealized appreciation (depreciation) of: |
|
| |
| Investments |
| 952,469 | |
| Futures |
| (466,013) | |
| Net Realized And Unrealized Gain (Loss) On Investments And Futures | $ | (113,455) | |
|
|
| ||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | $ | 1,176,756 | ||
The accompanying notes are an integral part of these financial statements.
Financial Statements July 30, 2004
Statement of Changes in Net Assets
For the year ended July 30, 2004, and the year ended July 31, 2003
|
| For The Year Ended July 30, 2004 |
| For The Year Ended July 31, 2003 | ||
|
|
|
|
| ||
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS |
|
|
|
| ||
| Net investment income | $ | 1,290,211 | $ | 1,119,788 | |
| Net realized gain (loss) on investment and futures transactions |
| (599,911) |
| (412,186) | |
| Net change in unrealized appreciation (depreciation) on investments and futures |
| 486,456 |
| (814,038) | |
| Net Increase (Decrease) in Net Assets Resulting From Operations | $ | 1,176,756 | $ | (106,436) | |
|
|
|
|
| ||
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS |
|
|
|
| ||
| Dividends from net investment income ($.42 and $.49 per share, respectively) | $ | (1,289,393) | $ | (1,119,540) | |
| Distributions from net realized gain on investment and futures transactions ($.00 and $.00 per share, respectively) |
| 0 |
| 0 | |
| Total Dividends and Distributions | $ | (1,289,393) | $ | (1,119,540) | |
|
|
|
|
| ||
CAPITAL SHARE TRANSACTIONS |
|
|
|
| ||
| Proceeds from sale of shares | $ | 7,303,088 | $ | 13,613,884 | |
| Proceeds from reinvested dividends |
| 642,804 |
| 548,817 | |
| Cost of shares redeemed |
| (4,160,176) |
| (3,132,668) | |
| Net Increase (Decrease) in Net Assets Resulting From Capital Share Transactions | $ | 3,785,716 | $ | 11,030,033 | |
|
|
|
|
| ||
TOTAL INCREASE (DECREASE) IN NET ASSETS | $ | 3,673,079 | $ | 9,804,057 | ||
|
|
|
|
| ||
NET ASSETS, BEGINNING OF PERIOD |
| 31,798,793 |
| 21,994,736 | ||
|
|
|
|
| ||
NET ASSETS, END OF PERIOD | $ | 35,471,872 | $ | 31,798,793 | ||
The accompanying notes are an integral part of these financial statements.
Notes to Financial Statements July 30, 2004
Note 1. ORGANIZATION
Business operations - Oklahoma Municipal Fund (the “Fund”) is an investment portfolio of Integrity Managed Portfolios (the “Trust”), registered under the Investment Company Act of 1940, as amended, as a non-diversified, open-end management investment company. The Trust may offer multiple portfolios; currently six portfolios are offered. Integrity Managed Portfolios is an unincorporated business trust organized under Massachusetts law on August 10, 1990. The Fund had no operations from that date to September 25, 1996, other than matters relating to organization and registration. On September 25, 1996, the Fund commenced its Public Offering of capital shares. The investment objective of the Fund is to provide its shareholders with as high a level of current income exempt from both federal income tax and, to a certain extent, Oklahoma income tax, as is consistent with preservation of capital. Up to 2 0% of the Fund’s total assets may be invested in Oklahoma municipal securities which are subject to Oklahoma state income taxes. The Fund will seek to achieve this objective by investing primarily in a portfolio of Oklahoma municipal securities.
Shares of the Fund are offered at net asset value plus a maximum sales charge of 4.25% of the offering price and a distribution fee of up to 0.25% on an annual basis.
Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Investment security valuation - Securities for which quotations are not readily available (which will constitute a majority of the securities held by the Fund) are valued using a matrix system at fair value as determined by Integrity Money Management, Inc. The matrix system has been developed based on procedures approved by the Board of Trustees which include consideration of the following: yields or prices of municipal bonds of comparable quality, type of issue, coupon, maturity and rating, and indications as to value from dealers and general market conditions. Because the market value of securities can only be established by agreement between parties in a sales transaction, and because of the uncertainty inherent in the valuation process, the fair values as determined may differ from the values that would have been used had a ready market for the securities existed. The Fund follows industry practice and records security transacti ons on the trade date.
The Fund concentrates its investments in a single state. This concentration may result in the Fund investing a relatively high percentage of its assets in a limited number of issuers.
When-issued securities – The Fund may purchase securities on a when-issued basis. Payment and delivery may take place after the customary settlement period for that security. The price of the underlying securities and the date when the securities will be delivered and paid for are fixed at the time the transaction is negotiated. The value of the securities purchased on a when-issued basis are identified as such in the Fund’s Schedule of Investments. With respect to purchase commitments, the Fund identifies securities as segregated in its records with a value at least equal to the amount of the commitment. Losses may arise due to changes in the value of the underlying securities or if the counterparty does not perform under the contract’s terms, or if the issuer does not issue the securities due to political, economic, or other factors.
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 and any net realized gain on investments to its shareholders. Therefore, no provision for income taxes is required. Distributions during the year ended July 30, 2004, were characterized as tax-exempt for tax purposes.
The tax character of distributions paid was as follows:
|
| July 30, 2004 |
| July 31, 2003 |
Tax-exempt income | $ | 1,289,393 | $ | 1,119,540 |
Ordinary Income |
| 0 |
| 0 |
Long-term Capital Gains |
| 0 |
| 0 |
Total | $ | 1,289,393 | $ | 1,119,540 |
The Fund has unexpired capital loss carryforwards for tax purposes as of July 30, 2004, totaling $1,696,061, which may be used to offset capital gains. The capital loss carryforward amounts will expire in each of the years ended July 31 as shown in the table below.
Year |
| Unexpired Capital Losses |
2005 | $ | 0 |
2006 | $ | 0 |
2007 | $ | 0 |
2008 | $ | 185,891 |
2009 | $ | 83,784 |
2010 | $ | 414,246 |
2011 | $ | 412,304 |
2012 | $ | 599,836 |
For the year ended July 30, 2004, the Fund made no permanent reclassifications to reflect tax character. Reclassifications to paid-in capital relate primarily to expiring capital loss carryforwards.
Distributions to shareholders - Dividends from net investment income, declared daily and payable monthly, are reinvested in additional shares of the Fund at net asset value or paid in cash. Capital gains, when available, are distributed at least annually.
Premiums and discounts - Premiums and discounts on municipal securities are amortized for financial reporting purposes.
Other - Income and expenses are recorded on the accrual basis. Investment transactions are accounted for on the trade date. Realized gains and losses are reported on the identified cost basis. Distributions to shareholders are recorded by the Fund on the ex-dividend date. Income and capital gain distributions are determined in accordance with federal income tax regulations and may differ from net investment income and realized gains determined in accordance with accounting principles generally accepted in the United States of America. These differences are primarily due to differing treatment for market discount, capital loss carryforwards and losses due to wash sales and futures transactions.
Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications to paid-in capital. Temporary book and tax basis differences will reverse in a subsequent period.
Futures contracts - The Fund may purchase and sell financial futures contracts to hedge against changes in the values of tax-exempt municipal 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 or a certain amount of U.S. government or municipal securities 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 (depreciat ion) related to open futures contracts is required to be treated as realized gain (loss) for Federal income tax purposes.
Securities held in collateralized accounts to cover initial margin requirements on open futures contracts are noted in the Schedule of Investments. The Statement of Assets and Liabilities reflects a receivable or payable for the daily mark to market for variation margin.
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.
At July 30, 2004, the Fund had outstanding futures contracts to sell debt securities as follows:
Contracts to Sell | Expiration Date | Number of Futures Contracts | Valuation as of July 30, 2004 | Unrealized Appreciation (Depreciation) |
U.S. Treasury Bonds | 09/2004 | 112 | $308,000 | ($466,013) |
Use of estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 July 30, 2004, there were unlimited shares of no par authorized; on July 30, 2004, and July 31, 2003, there were 3,204,147 and 2,868,263 shares outstanding, respectively.
Transactions in capital shares were as follows:
| Shares | |
| For The Year Ended July 30, 2004 | For The Year Ended July 31, 2003 |
| ||
| ||
| ||
Shares sold | 653,032 | 1,188,900 |
Shares issued on reinvestment of dividends | 57,584 | 47,918 |
Shares redeemed | (374,732) | (275,016) |
Net increase (decrease) | 335,884 | 961,802 |
Note 4. INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Integrity Money Management, Inc., the Fund’s investment adviser; Integrity Funds Distributor, Inc., the Fund’s underwriter; and Integrity Fund Services, Inc., the Fund’s transfer, accounting, and administrative services agent, are subsidiaries of Integrity Mutual Funds, Inc., the Fund’s sponsor.
The Fund has engaged Integrity 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 0.50% of the Fund’s average daily net assets. The Fund has recognized $83,204 of investment advisory fees after partial waiver for the year ended July 30, 2004. The Fund has a payable to Integrity Money Management, Inc. of $4,950 at July 30, 2004, for investment advisory fees. Certain officers and trustees of the Fund are also officers and directors of the investment adviser.
Under the terms of the advisory agreement, the investment adviser has agreed to pay all expenses of the Fund (excluding taxes and brokerage fees and commissions, if any) that exceed 1.25% of the Fund’s average daily net assets on an annual basis up to the amount of the investment advisory and management fee. The investment adviser and underwriter may also voluntarily waive fees or reimburse expenses not required under the advisory or other contracts from time to time. Accordingly, after fee waivers and expense reimbursements, the Fund’s total annual operating expenses were 0.93% for the fiscal year ended July 30, 2004.
The Fund pays an annual service fee to Integrity Funds Distributor, Inc., its principal underwriter, for certain expenses incurred in connection with the distribution of the Fund’s shares. The annual fee paid to Integrity Funds Distributor, Inc. under the Plan is calculated daily and paid monthly by the Fund at the annual rate of 0.25% of the average daily net assets of the Fund. The Fund has recognized $85,365 of service fee expenses for the year ended July 30, 2004. The Fund has a payable to Integrity Funds Distributor, Inc. of $7,384 at July 30, 2004, for service fees.
Integrity Fund Services, Inc. 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 $25 million, and 0.10% of the Fund’s net assets in excess of $50 million, with a minimum of $1,500 per month plus reimbursement of out-of-pocket expenses. An additional fee with a minimum of $500 per month is charged for each additional share class. The Fund has recognized $45,572 of transfer agent fees and expenses for the year ended July 30, 2004. The Fund has a payable to Integrity Fund Services, Inc. of $3,916 at July 30, 2004 for transfer agent fees. Integrity Fund Services, 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 avera ge 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, together with reimbursement of out-of-pocket expenses. An additional minimum fee of $500 per month is charged by Integrity Fund Services, Inc. for each additional share class. The Fund has recognized $41,073 of accounting service fees for the year ended July 30, 2004. The Fund has a payable to Integrity Fund Services, Inc. of $3,477 at July 30, 2004, for accounting service fees. Integrity Fund Services, Inc. also acts as administrator for the Fund. The Fund pays to Integrity Fund Services, Inc. a monthly fee calculated at the rate of 0.10% of average daily net assets with a minimum of $1,500 per month plus out-of-pocket expenses. An additional minimum fee of $500 per month is charged by Integrity Fund Services, Inc. for each additional share class. The Fund has recognized $28,783 of administrative service fees for the year ended July 30, 2004. The Fund has a payable to Integrity Fund Services, Inc. of $2,954 at July 30, 2004, for administrative service fees
Note 5. INVESTMENT SECURITY TRANSACTIONS
The cost of purchases and proceeds from the sales of investment securities (excluding short-term securities) aggregated $6,004,813 and $3,485,402, respectively, for the year ended July 30, 2004.
Note 6. INVESTMENT IN SECURITIES
At July 30, 2004, the aggregate cost of securities for federal income tax purposes was substantially the same for financial reporting purposes at $34,190,768. The net unrealized appreciation of investments based on the cost was $586,769, which is comprised of $924,627 aggregate gross unrealized appreciation and $337,858 aggregate gross unrealized depreciation.
Financial Highlights
Selected per share data and ratios for the period indicated
|
|
| For The Year Ended July 30, 2004 |
| For The Year Ended July 31, 2003 |
| For The Year Ended July 31, 2002 |
| For The Year Ended July 31, 2001 |
| For The Year Ended July 31, 2000 | |||
| NET ASSET VALUE, BEGINNING OF PERIOD | $ | 11.09 | $ | 11.54 | $ | 11.47 | $ | 10.99 | $ | 11.61 | |||
|
|
|
|
|
|
|
|
|
|
|
| |||
| Income from Investment Operations: |
|
|
|
|
|
|
|
|
|
| |||
| Net investment income | $ | .42 | $ | .49 | $ | .55 | $ | .57 | $ | .57 | |||
| Net realized and unrealized gain (loss) on investment and futures transactions |
| (.02) |
| (.45) |
| .07 |
| .48 |
| (.59) | |||
| Total Income (Loss) From Investment Operations | $ | .40 | $ | .04 | $ | .62 | $ | 1.05 | $ | (.02) | |||
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| Less Distributions: |
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| Dividends from net investment income | $ | (.42) | $ | (.49) | $ | (.55) | $ | (.57) | $ | (.57) | |||
| Distributions from net capital gains |
| .00 |
| .00 |
| .00 |
| .00 |
| (.03) | |||
| Total Distributions | $ | (.42) | $ | (.49) | $ | (.55) | $ | (.57) | $ | (.60) | |||
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| NET ASSET VALUE, END OF PERIOD | $ | 11.07 | $ | 11.09 | $ | 11.54 | $ | 11.47 | $ | 10.99 | |||
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| Total Return |
| 3.67%(A) |
| 0.28%(A) |
| 5.46%(A) |
| 9.78%(A) |
| (0.12%)(A) | |||
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| RATIOS/SUPPLEMENTAL DATA: |
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| Net assets, end of period (in thousands) | $ | 35,472 | $ | 31,799 | $ | 21,995 | $ | 18,131 | $ | 15,862 | |||
| Ratio of net expenses (after expense assumption) to average net assets |
| 0.93%(B) |
| 0.65%(B) |
| 0.51%(B) |
| 0.43%(B) |
| 0.44%(B) | |||
| Ratio of net investment income to average net assets |
| 3.77% |
| 4.21% |
| 4.69% |
| 5.06% |
| 5.08% | |||
| Portfolio turnover rate |
| 10.70% |
| 9.39% |
| 15.77% |
| 12.24% |
| 20.89% | |||
(A) Excludes maximum sales charge of 4.25%.
(B) During the periods indicated above, Integrity Mutual Funds, Inc. or Integrity Money Management, Inc. assumed/waived expenses of $87,525, $124,432, $137,514, $133,456, and $127,129, respectively. If the expenses had not been assumed/waived, the annualized ratio of total expenses to average net assets would have been 1.19%, 1.11%, 1.19%, 1.23%, and 1.22%, respectively.
Total return represents the rate that an investor would have earned or lost on an investment in the Fund assuming reinvestment of all dividends and distributions.
The accompanying notes are an integral part of these financial statements.
Tax Information For The Year Ended July 30, 2004 (Unaudited)
We are required to advise you within 60 days of the Fund’s fiscal year-end regarding the federal tax status of distributions received by shareholders during such fiscal year. The distributions made during the fiscal year by the Fund were earned from the following sources:
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|
| Dividends and Distributions Per Share | |||||
To Shareholders of Record |
| Payment Date |
| From Net Investment Income |
| From Net Realized Short-Term Gains |
| From Net Realized Long-Term Gains |
August 29, 2003 |
| August 29, 2003 | $ | .036810 |
| - |
| - |
September 30, 2003 |
| September 30, 2003 | $ | .037553 |
| - |
| - |
October 31, 2003 |
| October 31, 2003 | $ | .035278 |
| - |
| - |
November 28, 2003 |
| November 28, 2003 | $ | .033073 |
| - |
| - |
December 31, 2003 |
| December 31, 2003 | $ | .037928 |
| - |
| - |
January 30, 2004 |
| January 30, 2004 | $ | .034707 |
| - |
| - |
February 27, 2004 |
| February 27, 2004 | $ | .030896 |
| - |
| - |
March 31, 2004 |
| March 31, 2004 | $ | .037296 |
| - |
| - |
April 30, 2004 |
| April 30, 2004 | $ | .033631 |
| - |
| - |
May 28, 2004 |
| May 28, 2004 | $ | .032771 |
| - |
| - |
June 30, 2004 |
| June 30, 2004 | $ | .037736 |
| - |
| - |
July 30, 2004 |
| July 30, 2004 | $ | .035104 |
| - |
| - |
Shareholders should consult their tax advisors.
INDEPENDENT AUDITOR’S REPORT
To the Shareholders and Board of Trustees of the Oklahoma Municipal Fund
We have audited the accompanying statement of assets and liabilities of the Oklahoma Municipal Fund (one of the portfolios constituting the Integrity Managed Portfolios), including the schedule of investments as of July 30, 2004, the related statement of operations for the year then ended, the statement of changes in net assets for the years ended July 30, 2004 and July 31, 2003, and the financial highlights for the year ended July 30, 2004 and each of the four years in the period ended July 31, 2003. 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 the standards of the Public Company Accounting Oversight Board (United States). 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 July 30, 2004, 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 the Oklahoma Municipal Fund of the Integrity Managed Portfolios as of July 30, 2004, the results of its operations, the changes in its net assets, and the financial highlights for each of the fiscal periods presented, in conformity with accounting principles generally accepted in the United States of America.
BRADY, MARTZ & ASSOCIATES, P.C.
Minot, North Dakota USA
September 02, 2004
Item 2. Code of Ethics.
(a) The registrant has adopted a code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions (the “Code”).
(b) For purposes of this Item, the term “code of ethics” means written standards that are reasonably designed to deter wrongdoing and to promote:
(1) Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;
(2) Full, fair, accurate, timely, and understandable disclosure in reports and documents that a registrant files with, or submits to, the Commission and in other public communications made by the registrant;
(3) Compliance with applicable governmental laws, rules, and regulations;
(4) The prompt internal reporting of violations of the code to an appropriate person or persons identified in the code; and
(5) Accountability for adherence to the code.
(c) There were no amendments to the Code during the period covered by the report.
(d) The registrant did not grant any waivers, including implicit waivers, from any provisions of the Code to the PFO and PEO during the period covered by this report.
(f) The registrant must:
See item 11(a)(1) regarding the filing of the Code of Ethics for Principal Executive and Principal Financial Officers of The Integrity Funds and Integrity Mutual Funds, Inc.
Item 3. Audit Committee Financial Expert.
The Trust’s Board of Trustees has determined that Lynn Aas is an audit committee financial expert, as defined in Item 3 of Form N-CSR. Lynn Aas is independent for purposes of Item 3 of Form N-CSR.
Item 4. Principal Accountant Fees and Services.
(a) Audit fees include the amounts related to the professional services rendered by the principal accountant for the audit of the registrant’s annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years.
Audit Fees
2003 $22,490.00
2004 $42,280.00*
*These audit fees include the short year audit fee for the Maine Municipal Fund and the New Hampshire Municipal Fund for the four month period ending July 30, 2004, and the audit fees for the year ended March 31, 2004.
(b) Audit-related fees include amounts related to the services provided by the principal accountant related to the performance of the audit of the registrant’s financial statements.
Audit-Related Fees
2003 $3,840.00
2004 $5,800.00
(c) Tax fees include amounts related to the preparation and review registrant’s tax returns.
Tax Fees
2003 $3,500.00
2004 $7,000.00
(d) All Other Fees.
None
(e) (1) The registrant’s audit committee has adopted policies and procedures that require the audit committee to pre-approve all audit and non-audit services provided to the registrant by the principal accountant.
(2) All of the services described in paragraphs (b) through (d) of item 4 were approved by the audit committee.
(f) All services performed on the engagement to audit the registrant’s financial statements for the most recent fiscal year end were performed by the principal accountant’s full-time, permanent employee.
(g) None
(h) The registrant’s independent auditor did not provide any non-audit services to the registrant’s investment adviser or any entity controlling, controlled by or controlled with the registrant’s investment adviser that provides ongoing services to the registrant.
Items 5. Audit Committee of Listed Registrants.
Not applicable
Items 6. Schedule of Investments.
The Schedule of Investments is filed under Item 1 of this form.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable
Item 8. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not applicable
Item 9. Submission of Matters to a Vote of Security Holders.
There have been no material changes to the procedures by which shareholders may recommend nominees to the registrant’s board of directors in the last fiscal half-year.
Item 10. Controls and Procedures.
(a) Based on their evaluation of the registrant’s disclosure controls and procedures as of a date within 90 days of the filing date of this Form N-CSR (the “Report”), the registrant’s principal executive officer and principal financial officer believe that the disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended) are effectively designed to ensure that information required to be disclosed by the registrant in the Report is recorded, processed, summarized and reported by the filing date, including ensuring that information required to be disclosed in the Report is accumulated and communicated to the registrant’s principal executive officer and principal financial officer who are making certifications in the Report, as appropriate, to allow timely decisions regarding required disclosure.
(b) There were no changes in the registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) that occurred during the registrant's most recent fiscal half-year that have materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting.
Item 11. Exhibits.
(a)(1) Code of Ethics pursuant to Item 2 of Form N-CSR is filed and attached hereto.
(a)(2) Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 is filed and attached hereto.
(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 is filed and attached hereto.
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Integrity Managed Portfolios
BY: Robert E. Wastad
ROBERT E. WALSTAD
PRESIDENT
Date: September 24, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Integrity Managed Portfolios
BY: Robert E. Wastad
ROBERT E. WALSTAD
PRESIDENT
Date: September 24, 2004
BY: Brent Wheeler
BRENT WHEELER
TREASURER
Date: September 24, 2004