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) |
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Address of Registrant: | 1 Main Street North |
| Minot, ND 58703 |
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Name and Address of Agent for Service: | Brent Wheeler, Mutual Fund Chief Compliance Officer |
| Kevin Flagstad, Investment Adviser Chief Compliance Officer |
| 1 Main Street North |
| Minot, ND 58703 |
Registrant’s telephone number, including area code: | (701) 852-5292 |
Date of fiscal year end: | July 31 |
Date of reporting period: | July 31, 2007 |
Item 1—Reports to Shareholders
Dear Shareholder:
Enclosed is the report of the operations of the Kansas Municipal Fund (the “Fund”) for the year ended July 31, 2007. The Fund’s portfolio and related financial statements are presented within for your review.
The first half of 2007 has proven a tricky period for most bond fund managers and has likely rattled some bond fund investors as well. Entering the year, many expected the Federal Reserve to cut its target for the federal funds rate (the rate banks charge one another for loans), but recently the direction of the bond market remains determined by credit issues and the status of other asset classes.
In recent years, investors’ enthusiasm about the global economy allowed borrowers across the spectrum to enjoy cheap debt. However, the recent turmoil in the sub-prime housing market (loans to less than creditworthy individuals) is beginning to show a credit squeeze may be underway. Recent surveys conducted by the Federal Reserve suggest that banks are tightening lending standards on non-traditional and sub-prime residential loans as well as commercial real estate.
The key to the economy going forward will be consumer spending. If the housing woes spread over the economy, consumer spending could slow and the economy is likely to grow at a subdued pace into early 2008.
The sub-prime fear helped push the yield on the 10-year Treasury bond to 4.77% for the period, higher than the 4.70% at which it began 2007, but below the 5.30% it hit in mid-June.
While rising interest rates can cause bond market valuations to fall, it also enables investors to lock in higher yielding bonds. Short-term fund losses can sting, but they shouldn’t cause investors to lose sight of their long-term goals and objectives.
After spending much of 2007 in positive territory, the average municipal bond fund has posted a small gain through July.
Kansas Municipal Fund shares began the year at $10.62 and ended the period at $10.54 for a total return of 3.06%*. This compares to the Lehman Brothers Municipal Bond Index return of 4.26% for the period.
The Fund’s performance can be attributed to its defensive portfolio, with an average maturity of 16 years and a low average maturity to the first call date of 3.9 years. That, along with an average portfolio coupon of 5.40%, helps relative performance in a rising rate environment.
An important part of the Fund’s strategy includes searching the primary and secondary markets for high quality, double tax-exempt issues. Some issues purchased during the period include: Junction City 5.00% coupon, due 2025; Wichita General Obligation 4.75% coupon, due 2027; and Lawrence Memorial Hospital 5.125% coupon, due 2036. Portfolio quality for the year was as follows: AAA 75.9%, AA 10.6%, and A 13.5%.
Income exempt from federal and Kansas state income taxes with preservation of capital remain the primary objectives of the Fund.
If you would like more frequent updates, please visit our website at www.integrityfunds.com for daily prices along with pertinent Fund information.
Sincerely,
Monte Avery
Senior Portfolio Manager
The views expressed are those of Monte Avery, Senior Portfolio Manager with Integrity Money Management, Inc. 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, the markets generally, or any Integrity Mutual Fund.
*Performance does not include applicable front-end or contingent deferred sales charges (“CDSCs”), which would have reduced the performance.
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 (800) 276-1262.
You should consider the Fund’s investment objectives, risks, charges, and expenses carefully before investing. For this and other important information, please obtain a free Fund prospectus from your financial adviser and read it carefully prior to investing.
Bond prices and, therefore, the value of bond funds decline as interest rates rise. Because the Fund invests in securities of a single state, the Fund is more susceptible to factors adversely impacting the respective state securities than a municipal bond fund that does not concentrate its securities in a single state.
July 31, 2007 (Unaudited)
PROXY VOTING ON FUND PORTFOLIO SECURITIES
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to securities held in the Fund’s portfolio is available, without charge and upon request, by calling (800) 276-1262. A report on Form N-PX of how the Fund voted any such proxies during the most recent 12-month period ended June 30 is available through Integrity’s website at www.integrityfunds.com. The information is also available from the Electronic Data Gathering, Analysis, and Retrieval (“EDGAR”) database on the website of the Securities and Exchange Commission (“SEC”) at www.sec.gov.
QUARTERLY PORTFOLIO SCHEDULE
Within 60 days of the end of its second and fourth fiscal quarters, the Fund provides a complete schedule of portfolio holdings in its semi-annual and annual reports on the Form N-CSR(S). These reports are filed electronically with the SEC and are delivered to the shareholders of the Fund. The Fund also files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms N-Q and N-CSR(S) are available on the SEC’s website at www.sec.gov. The Fund’s Forms N-Q and N-CSR(S) may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling (202) 942-8090. You may also access this information from Integrity’s website at www.integrityfunds.com.
July 31, 2007 (Unaudited)
TERMS AND DEFINITIONS
Appreciation: Increase in the value of an asset
Average Annual Total Return: A standardized measurement of the return (yield and appreciation) earned by a 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 the 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 marketplace
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: The value of all of 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 creditworthiness; “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; represents the aggregate percentage or dollar value change over the period
July 31, 2007 (Unaudited)
COMPOSITION
Portfolio Quality Ratings
(Based on total long-term investments)
| AAA | 75.9% |
| AA | 10.6% |
| A | 13.5% |
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 Ratings Group. Non-rated bonds have been determined to be of appropriate quality for the portfolio by Integrity Money Management, Inc. (the “Investment Adviser” or “Integrity Money Management”), the Fund’s investment adviser.
These percentages are subject to change.
Portfolio Market Sectors
(As a percentage of net assets)
| HC - Health Care | 24.9% |
| S - School | 21.0% |
| H - Housing | 15.0% |
| O - Other | 9.6% |
| W - Water/Sewer | 9.1% |
| T - Transportation | 8.2% |
| G - Government | 7.6% |
| U - Utilities | 4.6% |
Market sectors are breakdowns of the Fund’s portfolio holdings into specific investment classes.
These percentages are subject to change.
July 31, 2007 (Unaudited)
DISCLOSURE OF FUND EXPENSES
The example below is intended to describe the fees and expenses borne by shareholders and the impact of those costs on your investment.
Example
As a shareholder of the Fund, you incur two types of costs:
| • | Transaction costs: including sales charges (loads), redemption fees, and exchange fees |
| • | Ongoing costs: including management fees, distribution (12b-1) fees, and other expenses |
This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from January 31, 2007 to July 31, 2007.
The example illustrates the Fund’s costs in two ways:
Actual Expenses: The section in the table under the heading “Actual” provides information about actual account values and actual expenses. You may use the information in these columns together with the amount you invested to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an account value of $8,600 divided by $1,000 equals 8.6), then multiply the result by the number in the appropriate column for your share class in the column entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes: The section in the table under the heading “Hypothetical (5% return before expenses)” provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the section in the table under the heading “Hypothetical (5% return before expenses)” is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
| Beginning Account Value | Ending Account Value | Expenses Paid During Period* |
Actual | $1,000.00 | $1,013.43 | $5.39 |
Hypothetical (5% return before expenses) | $1,000.00 | $1,019.44 | $5.40 |
*Expenses are equal to the annualized expense ratio of 1.07% multiplied by the average account value over the period, multiplied by 180/360 days. The Fund’s ending account value on the first line of the table is based on its actual total return of 1.34% for the six-month period of January 31, 2007 to July 31, 2007.
July 31, 2007 (Unaudited)
AVERAGE ANNUAL TOTAL RETURNS
| For periods ending July 31, 2007 | ||||||
1 year | 3 year | 5 year | 10 year | Since Inception | |||
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| Without Sales Charge | 3.06% | 2.54% | 1.71% | 2.79% | 4.53% |
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| With Sales Charge (4.25%) | (1.31%) | 1.05% | 0.83% | 2.34% | 4.26% |
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Lehman Brothers Municipal Bond Index | 1 year | 3 year | 5 year | 10 year | Since Inception | ||
| 4.26% | 4.38% | 4.50% | 5.23% | 6.48% | ||
Putting performance into perspective
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 (800) 276-1262.
You should consider the Fund’s investment objectives, risks, charges, and expenses carefully before investing. For this and other important information, please obtain a free Fund prospectus from your financial adviser and read it carefully prior to investing.
The table above does not reflect the deduction of taxes that a shareholder would pay on Fund distributions and redemption of Fund shares.
July 31, 2007 (Unaudited)
COMPARATIVE INDEX GRAPH
Comparison of change in value of a $10,000 investment in the Fund and the Lehman Brothers Municipal Bond Index
Kansas Municipal Fund without Sales Charge | Kansas Municipal Fund with Maximum Sales Charge | Lehman Brothers Municipal Bond Index | |
7/31/1997 | $10,000 | $10,000 | |
1998 | $10,276 | $10,599 | |
1999 | $10,630 | $10,904 | |
2000 | $10,809 | $11,374 | |
2001 | $11,688 | $12,522 | |
2002 | $12,095 | $13,362 | |
2003 | $12,004 | $13,842 | |
2004 | $12,210 | $14,643 | |
2005 | $12,236 | $15,575 | |
2006 | $12,773 | $15,973 | |
2007 | $13,163 | $16,654 |
Putting performance into perspective
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 (800) 276-1262.
You should consider the Fund’s investment objectives, risks, charges, and expenses carefully before investing. For this and other important information, please obtain a free Fund prospectus from your financial adviser and read it carefully prior to investing.
The graph does not reflect the deduction of taxes that a shareholder would pay on Fund distributions and redemptions of Fund shares.
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. If they could, transaction costs and other expenses would be incurred. All Fund and benchmark returns include reinvested dividends.
July 31, 2007 (Unaudited)
MANAGEMENT OF THE FUND
The Board of Integrity Managed Portfolios consists of four Trustees. These same individuals, unless otherwise noted, also serve as Directors or Trustees for the funds in the Integrity family of funds, the six series of Integrity Managed Portfolios and the six 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. Two of the remaining three Trustees and/or 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 COMPLEX1 | OTHER DIRECTORSHIPS HELD OUTSIDE THE FUND COMPLEX |
Jerry M. Stai | Trustee | Indefinite
Since January 2006 | Faculty, Embry-Riddle University (August 2000 to September 2005); Faculty, Park University (August 2005 to December 2005); Non-Profit Specialist, Bremer Bank (since July 2005); Faculty, Minot State University (since August 2000); Director, ND Tax-Free Fund, Inc., Montana Tax-Free Fund, Inc., Integrity Fund of Funds, Inc., (since January 2006); Trustee, The Integrity Funds (since January 2006). | 15 | Marycrest Franciscan Development, Inc. |
Orlin W. Backes | Trustee | Indefinite
Since January 1996 | Attorney, McGee, Hankla, Backes & Dobrovolny, P.C.; Director, South Dakota Tax-Free Fund, Inc. (April 1995 to June 2004), Integrity Small-Cap Fund of Funds, Inc. (September 1998 to June 2003), ND Tax-Free Fund, Inc., Montana Tax-Free Fund, Inc., and Integrity Fund of Funds, Inc., (Since April 2005); Trustee, The Integrity Funds (since May 2003); and Director, First Western Bank & Trust. | 15 | First Western Bank & Trust |
R. James Maxson | Trustee | Indefinite
Since January 1999 | Attorney, Maxson Law Office (since November 2002); Attorney, McGee, Hankla, Backes & Dobrovolny, P.C. (April 2000 to November 2002); Director, South Dakota Tax-Free Fund, Inc. (January 1999 to June 2004), Integrity Small-Cap Fund of Funds, Inc. (January 1999 to June 2003) Integrity Fund of Funds, Inc., ND Tax-Free Fund, Inc. and Montana Tax-Free Fund, Inc. (since January 1999); and Trustee, The Integrity Funds (since May 2003). | 15 | Vincent United Methodist Foundation
Minot Area Development Corporation |
1The Fund Complex consists of the three incorporated funds in the Integrity family of funds, the six series of Integrity Managed Portfolios, and the six series of The Integrity Funds.
Trustees 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 (800) 276-1262.
July 31, 2007 (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 other directorships, if any, held outside the Fund Complex, are shown below.
INTERESTED TRUSTEE
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 COMPLEX1 | OTHER DIRECTORSHIPS HELD OUTSIDE THE FUND COMPLEX |
Robert E. Walstad2,3 | Trustee and Chairman | Indefinite
Since January 1996 | Director (Sept. 1987 to Feb. 2007), President (Sept. 2002 to May 2003), CEO (Sept. 2001 to Feb. 2007), Integrity Mutual Funds, Inc.; Director, President and Treasurer, (Aug. 1988 to Feb. 2007), Integrity Money Management, Inc.; Director, President and Treasurer (Aug. 1988 to Sept. 2004), ND Capital, Inc.; Director, President and Treasurer (May 1989 to Feb. 2007), Integrity Fund Services, Inc.; Director, President, CEO, and Treasurer, (Jan. 1996 to Aug. 2003), Integrity Funds Distributor, Inc.; Director (Oct. 1999 to June 2003) Magic Internet Services, Inc.; Director (May 2000 to June 2003), President (Oct. 2002 to June 2003), ARM Securities Corporation; Director, CEO, Chairman, (Jan. 2002 to Feb. 2007) and President (Sept. 2002 to Dec. 2004), Capital Financial Services, Inc.; Director and President, (April 1994 to June 2004) South Dakota Tax-Free Fund, Inc., (Sept. 1998 to June 2003) Integrity Small-Cap Fund of Funds Inc.; President (May 2003 to Feb. 2007), Integrity Managed Portfolios and (Jan. 2006 to Feb. 2007) The Integrity Funds, (Jan. 1995 to Feb 2007) Integrity Fund of Funds, Inc., (Jan. 1989 to Feb. 2007) ND Tax-Free Fund, Inc., (Aug. 1993 to Feb 2007) Montana Tax-Free Fund, Inc.; Director and Chairman (since Jan. 1995) Integrity Fund of Funds, Inc., (since Jan. 1989) ND Tax-Free Fund, Inc., and (since Aug. 1993) Montana Tax-Free Fund, Inc.; Trustee, Chairman, (since January 2006) and Treasurer (January 2006 to May 2004), Integrity Managed Portfolios and (since May 2003), The Integrity Funds. | 15 | Minot Park Board |
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 COMPLEX1 | OTHER DIRECTORSHIPS HELD OUTSIDE THE FUND COMPLEX |
Mark R.Anderson3 | President | Indefinite
Since July 2007 | Personal Trust Officer (May 1999 to April 2003) Wells Fargo Bank; President and COO (April 2003 to Feb 2007), President, Director and CEO (since Feb. 2007) Integrity Mutual Funds, Inc.; President and Director (since Feb. 2007) Integrity Money Management, Inc., and Integrity Fund Services, Inc.; President and Director (Since August 2003) Integrity Funds Distributor, Inc.; President (Since July 2007) Montana Tax-Free Fund, Inc., Integrity Fund of Funds, Inc., and ND Tax-Free Fund, Inc., Integrity Managed Portfolios and The Integrity Funds; President and Treasurer (since July 2005) BAC Properties, LLC. | N/A | None |
Peter A. Quist2 | Vice President, Secretary | Indefinite
Since January 1996 | Attorney; Director and Vice President, Integrity Mutual Funds, Inc.; Director, Vice President and Secretary, Integrity Money Management, ND Capital, Inc. (August 1988 to September 2004), Integrity Fund Services, Inc., and Integrity Funds Distributor, Inc.; Vice President, Secretary Director, ARM Securities Corporation (May 2000 to June 2003); Director, South Dakota Tax-Free Fund, Inc. (April 1994 to June 2004), Integrity Small-Cap Fund of Funds, Inc. (September 1998 to June 2003), Montana Tax-Free Fund, Inc., Integrity Fund of Funds, Inc., and ND Tax Free Fund, Inc. | 3 | None |
Laura K. Anderson | Treasurer | Indefinite
Since October 2005 | Fund Accountant (until May 2004), Fund Accounting Supervisor (May 2004 to October 2005), Fund Accounting Manager (since October 2005), Manager of Mutual Fund Operations (Since October 2006), Integrity Fund Services, Inc.; Treasurer (since October 2005), The Integrity Funds, ND Tax-Free Fund, Inc., Montana Tax-Free Fund, Inc., and Integrity Fund of Funds, Inc. | N/A | None |
Brent M. Wheeler | Mutual Fund Chief Compliance Officer | Indefinite
Since October 2005 | Fund Accounting Manager (May 1998 to October 2005), Integrity Fund Services, Inc.; Treasurer (May 2004 to October 2005), Mutual Fund Compliance Officer (since October 2005), The Integrity Funds, ND Tax-Free Fund, Inc., Montana Tax-Free Fund, Inc., and Integrity Fund of Funds, Inc. | N/A | None |
1The Fund Complex consists of the three incorporated funds in the Integrity family of funds, the six series of Integrity Managed Portfolios, and the six series of The Integrity Funds.
2Trustees and/or officers who are “interested persons” of the Funds as defined in the Investment Company Act of 1940. Mr. Quist is an interested person by virtue of being an officer and Director of the Fund’s Investment Adviser and Principal Underwriter. Mr. Walstad is an interested person by virtue of being an officer of the Funds and a shareholder of Integrity Mutual Funds, Inc. As indicated above, effective February 1, 2007, Mr. Walstad retired from his roles as, among other things, Director and CEO of Integrity Mutual Funds, Inc., and Director, President and Treasurer of Integrity Money Management. However, a member of his immediate family is a director of Integrity Mutual Funds, Inc.
3At a Fund Board meeting held on July 26, 2007, Interested Director/Trustee, Chairman and Officer Robert E. Walstad resigned as President of the Funds. Subsequently, the Board nominated and appointed Mark R. Anderson as President of the Funds, effective July 26, 2007. Mr. Walstad will remain as Director/Trustee and Chairman of the Funds.
Trustees 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 (800) 276-1262.
Schedule of Investments July 31, 2007
Name of Issuer |
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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 | ||
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KANSAS MUNICIPAL BONDS (97.8%) |
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Burlington, KS PCR (Gas & Elec.) MBIA | Aaa/AAA | 5.300% | 06/01/2031 | $ | 1,000,000 | $ | 1,059,000 | ||
Burlington, KS PCR (Gas & Elec.) MBIA | Aaa/AAA | 4.850 | 06/01/2031 |
| 500,000 |
| 509,985 | ||
Butler Cty., KS Public Bldg. MBIA | Aaa/NR | 5.550 | 10/01/2021 |
| 300,000 |
| 316,302 | ||
Coffeyville, KS Pub. Bldg. (Coffeyville Medl. Center) Rev. AMBAC | Aaa/AAA | 5.000 | 08/01/2022 |
| 250,000 |
| 258,025 | ||
Cowley Cty, KS USD #465 (Winfield) MBIA | Aaa/AAA | 5.250 | 10/01/2014 |
| 390,000 |
| 414,270 | ||
Dodge, KS School District #443 FGIC | Aaa/NR | 5.000 | 09/01/2011 |
| 1,000,000 |
| 1,047,530 | ||
Douglas Cty., KS Sales Tax Ref. AMBAC | Aaa/NR | 5.000 | 08/01/2019 |
| 1,000,000 |
| 1,045,270 | ||
Hutchinson, KS Community College | NR/A- | 5.000 | 10/01/2025 |
| 350,000 |
| 360,199 | ||
Hutchinson, KS Community College | NR/A- | 5.250 | 10/01/2030 |
| 300,000 |
| 313,851 | ||
Hutchinson, KS Community College | NR/A- | 5.250 | 10/01/2033 |
| 450,000 |
| 469,652 | ||
#Johnson Cty., KS USD #229 (Blue Valley) G.O. | Aa-1/AA | 5.000 | 10/01/2018 |
| 2,600,000 |
| 2,684,032 | ||
Johnson Cty., KS USD #231 Gardner-Edgerton FGIC | Aaa/AAA | 5.000 | 10/01/2024 |
| 1,135,000 |
| 1,187,993 | ||
Johnson Cty., KS USD #232 (Desoto) | Aaa/NR | 5.250 | 09/01/2023 |
| 500,000 |
| 536,915 | ||
Junction City, K.S G.O. AMBAC | Aaa/AAA | 5.000 | 09/01/2025 |
| 250,000 |
| 261,992 | ||
Kansas City, KS Mrtge. Rev. GNMA | Aaa/NR | 5.900 | 11/01/2027 |
| 280,000 |
| 282,694 | ||
*Kansas City, KS Util. Syst. Ref. & Impvt. AMBAC | Aaa/AAA | 6.300 | 09/01/2016 |
| 580,000 |
| 581,525 | ||
*KS Devl. Finance Auth. (Dept. Admin. 7th & Harrison PJ) AMBAC | Aaa/AAA | 5.750 | 12/01/2027 |
| 1,250,000 |
| 1,303,100 | ||
KS Devl. Finance Auth. (Dept. of Admin. Capital Restoration) Lease Rev. FSA | Aaa/AAA | 5.375 | 10/01/2020 |
| 370,000 |
| 389,547 | ||
KS Devl. Finance Auth. (Juvenile Justice) Rev. MBIA | Aaa/AAA | 5.250 | 05/01/2013 |
| 570,000 |
| 595,251 | ||
*KS Devl. Finance Auth. (Water Pollution Control) Rev. | Aaa/AAA | 5.250 | 05/01/2011 |
| 630,000 |
| 638,965 | ||
KS Devl. Finance Auth. (KS St. Projects) Rev. MBIA | Aaa/AAA | 5.000 | 10/01/2017 |
| 250,000 |
| 260,012 | ||
KS Devl. Finance Auth. (Water Pollution Control) Rev. | Aaa/AAA | 5.250 | 11/01/2022 |
| 1,000,000 |
| 1,063,950 | ||
KS Devl. Finance Auth. (Water Pollution Control) | Aaa/AAA | 5.000 | 11/01/2023 |
| 1,000,000 |
| 1,046,870 | ||
KS Devl. Finance Auth. | Aaa/AAA | 5.000 | 05/01/2026 |
| 1,335,000 |
| 1,398,626 | ||
KS Devl. Finance Auth. (Dept. Admin.) FGIG | Aaa/AAA | 5.000 | 11/01/2025 |
| 250,000 |
| 262,782 | ||
KS Devl. Finance Auth. (Univ. KS Research Cent.) XLCA | Aaa/AAA | 5.000 | 02/01/2026 |
| 500,000 |
| 521,620 | ||
*KS Devl. Finance Auth. (Park Apts.) Multifamily Hsg. Rev. | NR/AAA | 6.000 | 12/01/2021 |
| 1,975,000 |
| 1,975,652 | ||
KS Devl. Finance Auth. (Stormont Vail) Hlth. Care Rev. MBIA | Aaa/AAA | 5.800 | 11/15/2021 |
| 430,000 |
| 430,099 | ||
KS Devl. Finance Auth. (Sisters of Charity) Hlth. Rev. | Aa/AA | 6.125 | 12/01/2020 |
| 1,000,000 |
| 1,059,370 | ||
KS Devl. Finance Auth. (Stormont Vail) Hlth. Care Rev. MBIA | Aaa/AAA | 5.375 | 11/15/2024 |
| 1,500,000 |
| 1,574,925 | ||
KS Devl. Finance Auth. (Hays Medical Center) | A/NR | 5.000 | 11/15/2022 |
| 500,000 |
| 515,200 | ||
KS Turnpike Auth. Rev. FSA | Aaa/AAA | 5.250 | 09/01/2021 |
| 500,000 |
| 536,060 | ||
KS Turnpike Auth. Rev. FSA | Aaa/AAA | 5.000 | 09/01/2024 |
| 530,000 |
| 551,587 | ||
KS Turnpike Auth. Rev. FSA | Aaa/AAA | 5.000 | 09/01/2025 |
| 750,000 |
| 778,455 | ||
Lawrence, KS (Unlimited Tax) Refunding G.O. | Aa/NR | 5.375 | 09/01/2020 |
| 500,000 |
| 524,435 | ||
Lawrence, KS (Memorial Hospital) Rev. ASGUA | Aa-3/AA | 5.750 | 07/01/2024 |
| 1,000,000 |
| 1,037,240 | ||
Lawrence, KS (Memorial Hospital) Rev. | A-3/NR | 5.125 | 07/01/2026 |
| 500,000 |
| 513,995 | ||
Lawrence, KS (Memorial Hospital) Rev. | A-3/NR | 5.125 | 07/01/2036 |
| 500,000 |
| 511,075 | ||
Neosho County, KS (Sales Tax Rev.) MBIA | Aaa/AAA | 5.000 | 08/15/2008 |
| 195,000 |
| 196,605 | ||
Newton, KS (Newton) Hosp. Rev. ACA | NR/A | 5.750 | 11/15/2024 |
| 500,000 |
| 507,780 | ||
Olathe, KS (Medl. Ctr.) Hlth. Facs. Rev. | Aaa/AAA | 5.500 | 09/01/2025 |
| 235,000 |
| 245,526 | ||
Olathe, KS (Medl. Ctr.) Hlth. Facs. Rev. AMBAC | Aaa/AAA | 5.500 | 09/01/2030 |
| 500,000 |
| 521,510 | ||
#Olathe, KS Multifamily Hsg. (Bristol Pointe) Rev. Ref. FNMA | NR/AAA | 5.700 | 11/01/2027 |
| 2,210,000 |
| 2,232,299 | ||
Olathe, KS Multifamily Hsg. (Bristol Pointe) Rev. Ref. FNMA | NR/AAA | 5.250 | 11/01/2012 |
| 485,000 |
| 489,898 | ||
Reno Cty., KS USD #308 Hutchinson MBIA | Aaa/NR | 4.500 | 09/01/2022 |
| 250,000 |
| 250,490 | ||
Reno Cty., KS USD #308 Hutchinson MBIA | Aaa/NR | 4.500 | 09/01/2023 |
| 500,000 |
| 499,315 | ||
Salina, KS (General Obligation) | Aa-3/NR | 4.625 | 10/01/2027 |
| 200,000 |
| 200,710 | ||
Scott Cty, KS USD #466 FGIC | Aaa/AAA | 5.250 | 09/01/2017 |
| 900,000 |
| 957,069 | ||
Sedgwick Cty., KS (Catholic Care Center, Inc.) Hlth. Care Rev. | NR/A | 5.800 | 11/15/2026 |
| 1,000,000 |
| 1,035,220 | ||
Shawnee Cty., KS G.O. FSA | Aaa/NR | 5.000 | 09/01/2016 |
| 655,000 |
| 694,064 | ||
Topeka, KS G.O. XLCA | Aaa/NR | 5.000 | 08/15/2021 |
| 400,000 |
| 416,972 | ||
Topeka Public Bldg. Comm. (10th & Jackson Prj.) MBIA | Aaa/AAA | 5.625 | 06/01/2026 |
| 1,435,000 |
| 1,482,240 | ||
Topeka Public Bldg. Comm. (10th & Jackson Prj.) MBIA | Aaa/AAA | 5.625 | 06/01/2031 |
| 1,200,000 |
| 1,239,504 | ||
University of Kansas Hosp. Auth. AMBAC | Aaa/AAA | 5.700 | 09/01/2020 |
| 830,000 |
| 861,748 | ||
*University of Kansas Hosp. Auth. AMBAC | Aaa/AAA | 5.550 | 09/01/2026 |
| 1,355,000 |
| 1,400,054 | ||
Wamego, KS PCR (Kansas Gas & Electric Project) MBIA | Aaa/AAA | 5.300 | 06/01/2031 |
| 750,000 |
| 792,885 | ||
Washburn Univ. (Living Learning Ctr.) Bldg. Rev. AMBAC | Aaa/NR | 5.000 | 07/01/2019 |
| 955,000 |
| 1,000,019 | ||
Wichita, KS GO AMBAC | Aaa/AAA | 4.750 | 09/01/2027 |
| 180,000 |
| 182,196 | ||
Wichita, KS (Via Christi Health System) Rev. | NR/A+ | 6.250 | 11/15/2024 |
| 1,500,000 |
| 1,580,055 | ||
Wichita, KS (Via Christi Health System) Rev. | NR/A+ | 5.625 | 11/15/2031 |
| 1,100,000 |
| 1,160,544 | ||
Wichita, KS Multifamily Hsg. (Broadmoor Chelsea) Rev. FNMA | NR/AAA | 5.650 | 07/01/2016 |
| 990,000 |
| 990,178 | ||
#Wichita, KS Multifamily Hsg. (Broadmoor Chelsea) Rev. FNMA | NR/AAA | 5.700 | 07/01/2022 |
| 2,000,000 |
| 2,000,360 | ||
Wichita, KS Water & Sewer Util. Rev. FGIC | Aaa/AAA | 5.250 | 10/01/2018 |
| 1,465,000 |
| 1,555,347 | ||
Wichita, KS Water & Sewer Util. Rev. FGIC | Aaa/AAA | 5.000 | 10/01/2028 |
| 500,000 |
| 521,040 | ||
|
|
|
|
|
|
|
| ||
TOTAL KANSAS MUNICIPAL BONDS (COST: $50,563,796) |
|
|
|
| $ | 51,831,679 | |||
|
|
|
|
|
|
|
| ||
SHORT-TERM SECURITIES (2.4%) |
|
|
|
| Shares |
|
| ||
Wells Fargo Advantage National Tax-Free Money Market (COST: $1,286,836) |
|
| 1,286,836 | $ | 1,286,836 | ||||
|
|
|
|
|
|
|
| ||
TOTAL INVESTMENTS IN SECURITIES (COST: $51,850,632) |
|
|
|
| $ | 53,118,515 | |||
OTHER ASSETS LESS LIABILITIES |
|
|
|
|
|
| (122,986) | ||
|
|
|
|
|
|
|
| ||
NET ASSETS |
|
|
|
|
| $ | 52,995,529 | ||
* Indicates bonds are segregated by the custodian to cover when-issued or delayed-delivery purchases.
As of July 31, 2007, the Fund had one when-issued purchase:
180,000 of Wichita, KS G.O.; 4.750%; 09/01/2027
# Indicates bonds are segregated by the custodian to cover initial margin requirements.
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 31, 2007
Statement of Assets and Liabilities July 31, 2007
ASSETS | ||||
| Investments in securities, at value (cost: $51,850,632) | $ | 53,118,515 | |
| Accrued interest receivable | 710,511 | ||
| Accrued dividends receivable | 2,383 | ||
| Prepaid expenses | 2,501 | ||
|
| Total Assets | $ | 53,833,910 |
| ||||
LIABILITIES | ||||
| Disbursements in excess of demand deposit cash | $ | 10,646 | |
| Dividends payable |
| 177,705 | |
| Payable for fund shares redeemed |
| 144,760 | |
| Security purchases payable |
| 444,961 | |
| Accrued expenses |
| 15,410 | |
| Payable to affiliates |
| 44,899 | |
|
| Total Liabilities | $ | 838,381 |
| ||||
NET ASSETS | $ | 52,995,529 | ||
| ||||
Net assets are represented by: |
| |||
| Paid-in capital | $ | 60,951,240 | |
| Accumulated undistributed net realized gain (loss) on investments and futures |
| (9,223,861) | |
| Accumulated undistributed net investment income (loss) |
| 267 | |
| Unrealized appreciation (depreciation) on investments | 1,267,883 | ||
|
| Total amount representing net assets applicable to 5,029,080 outstanding shares of no par common stock (unlimited shares authorized) | $ | 52,995,529 |
|
|
|
| |
|
| |||
Net Asset Value per share | $ | 10.54 | ||
|
|
| ||
Public offering price (based on sales charge of 4.25%) | $ | 11.01 | ||
The accompanying notes are an integral part of these financial statements.
Financial Statements July 31, 2007
Statement of Operations For the year ended July 31, 2007
INVESTMENT INCOME |
| |||
| Interest | $ | 2,716,062 | |
| Dividends | 31,503 | ||
|
| Total Investment Income | $ | 2,747,565 |
|
| |||
EXPENSES |
| |||
| Investment advisory fees | $ | 283,830 | |
| Distribution (12b-1) fees |
| 141,915 | |
| Administrative service fees |
| 67,217 | |
| Transfer agent fees |
| 103,351 | |
| Accounting service fees |
| 51,706 | |
| Custodian fees |
| 7,089 | |
| Professional fees |
| 30,908 | |
| Trustees fees |
| 4,279 | |
| Insurance expense |
| 2,181 | |
| Reports to shareholders |
| 9,071 | |
| Audit fees |
| 6,917 | |
| Legal fees |
| 927 | |
| License, fees, and registrations |
| 2,137 | |
| Transfer agent out-of-pockets |
| 2,587 | |
|
| Total Expenses | $ | 714,115 |
| Less expenses waived or absorbed by the Fund’s manager | (106,719) | ||
|
| Total Net Expenses | $ | 607,396 |
|
| |||
NET INVESTMENT INCOME (LOSS) | $ | 2,140,169 | ||
|
| |||
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS |
| |||
| Net realized gain (loss) from investment transactions | $ | 85,328 | |
| Net change in unrealized appreciation (depreciation) of investments |
| (486,178) | |
|
| Net Realized and Unrealized Gain (Loss) on Investments | $ | (400,850) |
|
| |||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | $ | 1,739,319 | ||
The accompanying notes are an integral part of these financial statements.
Financial Statements July 31, 2007
Statement of Changes in Net Assets
For the year ended July 31, 2007 and the year ended July 31, 2006
| For The Year Ended | For The Year Ended | ||||||||
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS |
|
|
|
| ||||||
| Net investment income (loss) | $ | 2,140,169 | $ | 2,397,547 | |||||
| Net realized gain (loss) on investment and futures transactions |
| 85,328 |
| 883,835 | |||||
| Net change in unrealized appreciation (depreciation) on investments and futures |
| (486,178) |
| (620,199) | |||||
|
| Net Increase (Decrease) in Net Assets Resulting From Operations | $ | 1,739,319 | $ | 2,661,183 | ||||
| ||||||||||
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS |
|
|
|
| ||||||
| Dividends from net investment income ($.40 and $.41 per share, respectively) | $ | (2,140,064) | $ | (2,397,386) | |||||
| Distributions from net realized gain on investment transactions ($.00 and $.00 per share, respectively) |
| 0 |
| 0 | |||||
|
| Total Dividends and Distributions | $ | (2,140,064) | $ | (2,397,386) | ||||
| ||||||||||
CAPITAL SHARE TRANSACTIONS |
|
|
|
| ||||||
| Proceeds from sale of shares | $ | 1,094,761 | $ | 1,495,672 | |||||
| Proceeds from reinvested dividends |
| 1,368,745 |
| 1,509,351 | |||||
| Cost of shares redeemed |
| (8,160,511) |
| (11,645,304) | |||||
|
| Net Increase (Decrease) in Net Assets Resulting from Capital Share Transactions | $ | (5,697,005) | $ | (8,640,281) | ||||
|
|
|
|
| ||||||
TOTAL INCREASE (DECREASE) IN NET ASSETS | $ | (6,097,750) | $ | (8,376,484) | ||||||
NET ASSETS, BEGINNING OF PERIOD |
| 59,093,279 |
| 67,469,763 | ||||||
NET ASSETS, END OF PERIOD | $ | 52,995,529 | $ | 59,093,279 | ||||||
|
|
|
|
|
|
| ||||
Undistributed Net Investment Income | $ | 267 | $ | 161 | ||||||
The accompanying notes are an integral part of these financial statements.
Notes to Financial Statements July 31, 2007
Note 1: ORGANIZATION
The Fund is an investment portfolio of Integrity Managed Portfolios (the “Trust”) and is registered under the Investment Company Act of 1940, as amended (the “1940 Act”) as a non-diversified, open-end management investment company. The Trust may offer multiple portfolios; currently six portfolios are offered. The Trust 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 state income tax as is consistent with preservation of capital. The Fund will seek to achieve this objective by investing primarily in a portfolio of Kansas municipal securit ies.
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 Fund Services, 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; 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 on th e 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 is 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, 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.
Contingent deferred sales charge - In the case of investments of $1 million or more, a 1.00% CDSC may be assessed on shares redeemed within 12 months of purchase (excluding shares purchased with reinvested dividends and/or distributions).
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. Interest and penalties related to uncertain tax positions, if any, are classified in the Fund’s financial statements as other expense. Distributions during the year ended July 31, 2007, were characterized as tax-exempt for tax purposes.
The tax character of distributions paid was as follows:
|
|
| July 31, 2007 |
| July 31, 2006 |
|
| Tax-exempt income | $ | 2,140,064 | $ | 2,397,386 |
|
| Ordinary income |
| 0 |
| 0 |
|
| Long-term capital gains |
| 0 |
| 0 |
|
| Total | $ | 2,140,064 | $ | 2,397,386 |
|
As of July 31, 2007, the components of accumulated earnings/(deficit) on a tax basis were as follows:
| Undistributed Ordinary Income | Undistributed Long-Term Capital Gains | Accumulated Earnings | Accumulated Capital and Other Losses | Unrealized Appreciation/(Depreciation) | Total Accumulated Earnings/(Deficit) |
|
| $0 | $0 | ($9,223,861) | $1,268,150 | ($7,955,711) |
|
The Fund has unexpired capital loss carryforwards for tax purposes as of July 31, 2007 totaling $9,223,861, 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 following table:
Year |
| Unexpired Capital Losses |
2008 | $ | 531,392 |
2009 | $ | 568,023 |
2010 | $ | 1,444,860 |
2011 | $ | 1,970,032 |
2012 | $ | 1,399,598 |
2013 | $ | 2,680,173 |
2014 | $ | 388,935 |
2015 | $ | 240,848 |
For the year ended July 31, 2007, the Fund did not make any permanent reclassifications to reflect tax character.
Net capital losses incurred after October 31, and within the tax year are deemed to arise on the first business day of the Fund’s next taxable year. For the year ended July 31, 2007, the Fund deferred to August 1, 2007, post-October capital losses, post-October currency losses, and post-October passive foreign company losses of $0.
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 (depreciation) related to o pen 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.
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 31, 2007, there were unlimited shares of no par authorized; 5,029,080 and 5,565,714 shares were outstanding at July 31, 2007 and July 31, 2006, respectively.
Transactions in capital shares were as follows:
| For The Year Ended | For The Year Ended |
Shares sold | 102,578 | 140,843 |
Shares issued on reinvestment of dividends | 128,616 | 142,220 |
Shares redeemed | (767,828) | (1,097,898) |
Net increase (decrease) | (536,634) | (814,835) |
Note 4: INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Integrity Money Management, the Fund’s investment adviser; Integrity Funds Distributor, Inc. (the “Distributor” or “Integrity Funds Distributor”), the Fund’s underwriter; and Integrity Fund Services, Inc. (“Integrity Fund Services”), the Fund’s transfer, accounting, and administrative services agent; are subsidiaries of Integrity Mutual Funds, the Fund’s sponsor.
The Fund has engaged Integrity Money Management 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 $177,111 of investment advisory fees after partial waiver for the year ended July 31, 2007. The Fund has a payable to Integrity Money Management of $13,504 at July 31, 2007 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 Investment Adviser and Management fee. The Investment Adviser and Principal 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 actual total annual operating expenses were 1.07% for the year ended July 31, 2007.
Principal underwriter and shareholder services - Integrity Funds Distributor serves as the principal underwriter for the Fund. The Fund has adopted a distribution plan for each class of shares as allowed by Rule 12b-1 of the 1940 Act. Distribution plans permit the Fund to reimburse its principal underwriter for costs related to selling shares of the Fund and for various other services. These costs, which consist primarily of commissions and service fees to broker-dealers who sell shares of the Fund, are paid by shareholders through expenses called “Distribution Plan expenses.” The Fund currently pays an annual distribution fee of up to 0.25% of the average daily net assets. Distribution Plan expenses are calculated daily and paid monthly. The Fund has recognized $141,915 of distribution fees for the year ended July 31, 2007. The Fund has a payable to Integrity Funds Distributor of $11,559 at July 31, 2007 for distribution fee s.
Integrity Fund Services provides transfer agent services for a variable fee equal to 0.20% 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, with a minimum of $2,000 per month plus reimbursement of out-of-pocket expenses. An additional fee of $500 per month is charged for each additional share class. The Fund has recognized $103,351 of transfer agency fees and expenses for the year ended July 31, 2007. The Fund has a payable to Integrity Fund Services of $9,088 at July 31, 2007 for transfer agency fees. Integrity Fund Services 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 $51,706 of accounting service fees for the year ended July 31, 2007. The Fund has a payable to Integrity Fund Services of $4,347 at July 31, 2007 for accounting service fees. Integrity Fund Services also acts as the Fund’s administrative services agent for a variable fee equal to 0.125% 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, with a minimum of $2,000 per month plus out-of-pocket expenses. An additional fee of $500 per month is charged by Integrity Fund Services for each additional share class. The Fund has recognized $67,217 of administrative services fees for the year ended July 31, 2007. The Fund has a payable to Integrity Fund Service s of $5,700 at July 31, 2007 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 $2,639,293 and $7,342,584, respectively, for the year ended July 31, 2007.
Note 6: INVESTMENT IN SECURITIES
At July 31, 2007, the aggregate cost of securities for federal income tax purposes was substantially the same for financial reporting purposes at $51,850,632. The net unrealized appreciation of investments based on the cost was $1,267,883, which is comprised of $1,337,733 aggregate gross unrealized appreciation and $69,850 aggregate gross unrealized depreciation. Differences between financial reporting-basis and tax-basis unrealized appreciation/depreciation are due to differing treatment of market discount.
Note 7: RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In July 2006, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes,” an interpretation of SFAS 109, “Accounting for Income Taxes” (FIN 48). FIN 48 is effective on the last business day of the semi-annual reporting period for fiscal years beginning after December 15, 2006. FIN 48 established the accounting for uncertain tax positions that have been taken or are expected to be taken in a tax return, including the recognition and measurement of their financial statement effects. Pursuant to FIN 48, the Fund would recognize a tax benefit only if it is “more likely than not” that a particular tax position would be sustained upon examination or audit. To the extent the “more likely than not” standard is satisfied, the benefit associated with a tax position is measured as the largest amount that is greater than 50% likely of being realized upon settlement.
In September 2006, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 157, Fair Value Measurements. This standard defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles and expands disclosures about fair value measurements. SFAS 157 is effective for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The Fund is presently evaluating the impact of adopting SFAS 157.
July 31, 2007
FINANCIAL HIGHLIGHTS
Selected per share data and ratios for the period indicated.
|
| For The Year Ended |
| For The Year Ended |
| For The Year Ended |
| For The Year Ended |
| For The Year Ended | ||
NET ASSET VALUE, BEGINNING OF PERIOD | $ | 10.62 | $ | 10.57 | $ | 10.93 | $ | 11.19 | $ | 11.78 | ||
|
|
|
|
|
|
|
|
|
|
| ||
Income from Investment Operations: |
|
|
|
|
|
|
|
|
|
| ||
| Net investment income | $ | .40 | $ | .41 | $ | .38 | $ | .45 | $ | .51 | |
| Net realized and unrealized gain (loss) on investment and futures transactions |
| (.08) |
| .05 |
| (.36) |
| (.26) |
| (.59) | |
| Total Income (Loss) From Investment Operations | $ | .32 | $ | .46 | $ | .02 | $ | .19 | $ | (.08) | |
|
|
|
|
|
|
|
|
|
|
| ||
Less Distributions: |
|
|
|
|
|
|
|
|
|
| ||
| Dividends from net investment income | $ | (.40) | $ | ( .41) | $ | (.38) | $ | (.45) | $ | (.51) | |
| Distributions from net realized gains |
| .00 |
| .00 |
| .00 |
| .00 |
| .00 | |
| Total Distributions | $ | (.40) | $ | ( .41) | $ | (.38) | $ | (.45) | $ | (.51) | |
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NET ASSET VALUE, END OF PERIOD | $ | 10.54 | $ | 10.62 | $ | 10.57 | $ | 10.93 | $ | 11.19 | ||
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Total Return |
| 3.06%A |
| 4.39%A |
| 0.22%A |
| 1.71%A |
| (0.75%)A | ||
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RATIOS/SUPPLEMENTAL DATA: |
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| Net assets, end of period (in thousands) | $ | 52,996 | $ | 59,093 | $ | 67,470 | $ | 78,478 | $ | 88,850 | |
| Ratio of net expenses (after expense assumption) to average net assets |
| 1.07%B |
| 1.03%B |
| 0.97%B |
| 0.95%B |
| 0.95%B | |
| Ratio of net investment income to average net assets |
| 3.77% |
| 3.82% |
| 3.56% |
| 4.05% |
| 4.39% | |
| Portfolio turnover rate |
| 4.77% |
| 12.31% |
| 44.85% |
| 17.29% |
| 23.78% | |
A Excludes the maximum sales charge of 4.25%.
B During the periods indicated above, Integrity Money Management assumed/waived expenses of $106,719, $79,585, $130,764, $127,695, and $52,479, respectively. If the expenses had not been assumed/waived, the annualized ratio of total expenses to average net assets would have been 1.26%, 1.15%, 1.15%, 1.10%, and 1.01%, 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.
July 31, 2007
TAX INFORMATION
Tax Information For The Year Ended July 31, 2007 (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 31, 2006 |
| August 31, 2006 | $ | .033163 |
| - |
| - |
September 29, 2006 |
| September 29, 2006 | $ | .032169 |
| - |
| - |
October 31, 2006 |
| October 31, 2006 | $ | .034408 |
| - |
| - |
November 30, 2006 |
| November 30, 2006 | $ | .033193 |
| - |
| - |
December 29, 2006 |
| December 29, 2006 | $ | .032148 |
| - |
| - |
January 31, 2007 |
| January 31, 2007 | $ | .034530 |
| - |
| - |
February 28, 2007 |
| February 28, 2007 | $ | .033496 |
| - |
| - |
March 30, 2007 |
| March 30, 2007 | $ | .033500 |
| - |
| - |
April 30, 2007 |
| April 30, 2007 | $ | .033412 |
| - |
| - |
May 31, 2007 |
| May 31, 2007 | $ | .033689 |
| - |
| - |
June 29, 2007 |
| June 29, 2007 | $ | .032598 |
| - |
| - |
July 31, 2007 |
| July 31, 2007 | $ | .034805 |
| - |
| - |
Shareholders should consult their tax advisors.
July 31, 2007
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Trustees of 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 31, 2007, the related statement of operations for the year then ended, the statement of changes in net assets for the years ended July 31, 2007 and July 31, 2006, and the financial highlights for the year ended July 31, 2007, and each of the four years in the period ended July 31, 2006. 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 audits.
We conducted our audits 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 31, 2007 by correspondence with the custodian and brokers. 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 audits provide 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 31, 2007, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.
BRADY, MARTZ & ASSOCIATES, P.C.
Minot, North Dakota USA
September 12, 2007
Dear Shareholder:
Enclosed is the annual report of the Kansas Insured Intermediate Fund (the “Fund”) for the year ended July 31, 2007. The Fund’s portfolio and related financial statements are presented within for your review.
The first half of 2007 has proven a tricky period for most bond fund managers and has likely rattled some bond fund investors as well. Entering the year, many expected the Federal Reserve to cut its target for the federal funds rate (the rate banks charge one another for loans), but recently the direction of the bond market remains determined by credit issues and the status of other asset classes.
In recent years, investors’ enthusiasm about the global economy allowed borrowers across the spectrum to enjoy cheap debt. However, the recent turmoil in the sub-prime housing market (loans to less than creditworthy individuals) is beginning to show a credit squeeze may be underway. Recent surveys conducted by the Federal Reserve suggest that banks are tightening lending standards on non-traditional and sub-prime residential loans as well as commercial real estate.
The key to the economy going forward will be consumer spending. If the housing woes spread over the economy, consumer spending could slow and the economy is likely to grow at a subdued pace into early 2008.
The sub-prime fear helped push the yield on the 10-year Treasury bond to 4.77% for the period, higher than the 4.70% at which it began 2007, but below the 5.30% it hit in mid-June.
While rising interest rates can cause bond market valuations to fall, it also enables investors to lock in higher yielding bonds. Short-term fund losses can sting, but they shouldn’t cause investors to lose sight of their long-term goals and objectives.
After spending much of 2007 in positive territory, the average municipal bond fund has posted a small gain through July.
Kansas Insured Intermediate Fund shares began the year at $10.95 and ended the period at $10.87 for a total return of 3.34%*. This compares to the Lehman Brothers Municipal Seven-Year Maturity Bond Index return of 4.07% for the period.
The Fund’s performance can be attributed to its defensive portfolio, with an average maturity of 7 years and a low average maturity to the first call date of 2.5 years. That, along with an average portfolio coupon of 5.30%, helps relative performance in a rising rate environment.
An important part of the Fund’s strategy includes searching the primary and secondary markets for high quality, double tax-exempt issues. Some issues purchased during the period include: Wichita General Obligation 4.50% coupon, due 2022 and State of Kansas 4.10% coupon, due 2019. Portfolio quality for the year was as follows: AAA 100%.
Income exempt from federal and Kansas 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.integrityfunds.com for daily prices along with pertinent Fund information.
Sincerely,
Monte Avery
Senior Portfolio Manager
The views expressed are those of Monte Avery, Senior Portfolio Manager with Integrity Money Management, Inc. 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, the markets generally, or any Integrity Mutual Fund.
*Performance does not include applicable front-end or contingent deferred sales charges (“CDSCs”), which would have reduced the performance.
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 (800) 276-1262.
You should consider the Fund’s investment objectives, risks, charges, and expenses carefully before investing. For this and other important information, please obtain a free Fund prospectus from your financial adviser and read it carefully prior to investing.
Bond prices and, therefore, the value of bond funds decline as interest rates rise. Because the Fund invests in securities of a single state, the Fund is more susceptible to factors adversely impacting the respective state securities than a municipal bond fund that does not concentrate its securities in a single state.
July 31, 2007 (Unaudited)
PROXY VOTING ON FUND PORTFOLIO SECURITIES
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to securities held in the Fund’s portfolio is available, without charge and upon request, by calling (800) 276-1262. A report on Form N-PX of how the Fund voted any such proxies during the most recent 12-month period ended June 30 is available through Integrity’s website at www.integrityfunds.com. The information is also available from the Electronic Data Gathering, Analysis, and Retrieval (“EDGAR”) database on the website of the Securities and Exchange Commission (“SEC”) at www.sec.gov.
QUARTERLY PORTFOLIO SCHEDULE
Within 60 days of the end of its second and fourth fiscal quarters, the Fund provides a complete schedule of portfolio holdings in its semi-annual and annual reports on the Form N-CSR(S). These reports are filed electronically with the SEC and are delivered to the shareholders of the Fund. The Fund also files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms N-Q and N-CSR(S) are available on the SEC’s website at www.sec.gov. The Fund’s Forms N-Q and N-CSR(S) may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling (202) 942-8090. You may also access this information from Integrity’s website at www.integrityfunds.com.
July 31, 2007 (Unaudited)
TERMS AND DEFINITIONS
Appreciation: Increase in the value of an asset
Average Annual Total Return: A standardized measurement of the return (yield and appreciation) earned by a 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 the 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 marketplace
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: The value of all of 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 creditworthiness; “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; represents the aggregate percentage or dollar value change over the period
July 31, 2007 (Unaudited)
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 Ratings Group. Non-rated bonds have been determined to be of appropriate quality for the portfolio by Integrity Money Management, Inc. (the “Investment Adviser” or “Integrity Money Management”), the Fund’s investment adviser.
These percentages are subject to change.
Portfolio Market Sectors
(As a percentage of net assets)
| HC-Health Care | 25.4% |
| S-School | 23.2% |
| H-Housing | 23.0% |
| W/S-Water/Sewer | 8.4% |
| U-Utilities | 7.2% |
| T-Transportation | 6.1% |
| G-Government | 3.6% |
| O-Other | 3.1% |
Market sectors are breakdowns of the Fund’s portfolio holdings into specific investment classes.
These percentages are subject to change.
July 31, 2007 (Unaudited)
DISCLOSURE OF FUND EXPENSES
The example below is intended to describe the fees and expenses borne by shareholders and the impact of those costs on your investment.
Example
As a shareholder of the Fund, you incur two types of costs:
| • | Transaction costs: including sales charges (loads), redemption fees, and exchange fees |
| • | Ongoing costs: including management fees, distribution (12b-1) fees, and other expenses |
This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from January 31, 2007 to July 31, 2007.
The example illustrates the Fund’s costs in two ways:
Actual Expenses: The section in the table under the heading “Actual” provides information about actual account values and actual expenses. You may use the information in these columns together with the amount you invested to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an account value of $8,600 divided by $1,000 equals 8.6), then multiply the result by the number in the appropriate column for your share class in the column entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes: The section in the table under the heading “Hypothetical (5% return before expenses)” provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the section in the table under the heading “Hypothetical (5% return before expenses)” is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
| Beginning Account Value | Ending Account Value | Expenses Paid During Period* |
Actual | $1,000.00 | $1,015.86 | $3.78 |
Hypothetical (5% return before expenses) | $1,000.00 | $1,021.04 | $3.79 |
*Expenses are equal to the annualized expense ratio of 0.75% multiplied by the average account value over the period, multiplied by 180/360 days. The Fund’s ending account value on the first line of the table is based on its actual total return of 1.59% for the six-month period of January 31, 2007 to July 31, 2007.
July 31, 2007 (Unaudited)
AVERAGE ANNUAL TOTAL RETURNS
| For periods ending July 31, 2007 | ||||||
1 year | 3 year | 5 year | 10 year | Since Inception | |||
|
| Without Sales Charge | 3.34% | 2.20% | 2.03% | 2.99% | 3.87% |
|
| With Sales Charge (2.75%) | 0.50% | 1.26% | 1.46% | 2.70% | 3.67% |
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Lehman Brothers Municipal Seven-Year Maturity Bond Index | 1 year | 3 year | 5 year | 10 year | Since Inception | ||
| 4.07% | 3.39% | 3.71% | 4.78% | 5.39% | ||
Putting performance into perspective
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 (800) 276-1262.
You should consider the Fund’s investment objectives, risks, charges, and expenses carefully before investing. For this and other important information, please obtain a free Fund prospectus from your financial adviser and read it carefully prior to investing.
The table above does not reflect the deduction of taxes that a shareholder would pay on Fund distributions and redemption of Fund shares.
July 31, 2007 (Unaudited)
COMPARATIVE INDEX GRAPH
Comparison of change in value of a $10,000 investment in the Fund and the Lehman Brothers Municipal Seven-Year Maturity Bond Index
Kansas Insured Intermediate Fund without Sales Charge | Kansas Insured Intermediate Fund with Maximum Sales Charge | Lehman Brothers Municipal Seven-Year Maturity Bond Index | |
7/31/1997 | $10,000 | $10,000 | |
1998 | $10,317 | $10,526 | |
1999 | $10,699 | $10,872 | |
2000 | $10,929 | $11,371 | |
2001 | $11,665 | $12,414 | |
2002 | $12,145 | $13,300 | |
2003 | $12,298 | $13,812 | |
2004 | $12,583 | $14,440 | |
2005 | $12,489 | $15,012 | |
2006 | $12,996 | $15,319 | |
2007 | $13,430 | $16,003 |
Putting performance into perspective
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 (800) 276-1262.
You should consider the Fund’s investment objectives, risks, charges, and expenses carefully before investing. For this and other important information, please obtain a free Fund prospectus from your financial adviser and read it carefully prior to investing.
The graph does not reflect the deduction of taxes that a shareholder would pay on Fund distributions and redemptions of Fund shares.
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. If they could, transaction costs and other expenses would be incurred. All Fund and benchmark returns include reinvested dividends.
July 31, 2007 (Unaudited)
MANAGEMENT OF THE FUND
The Board of Integrity Managed Portfolios consists of four Trustees. These same individuals, unless otherwise noted, also serve as Directors or Trustees for the funds in the Integrity family of funds, the six series of Integrity Managed Portfolios and the six 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. Two of the remaining three Trustees and/or 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 COMPLEX1 | OTHER DIRECTORSHIPS HELD OUTSIDE THE FUND COMPLEX |
Jerry M. Stai | Trustee | Indefinite
Since January 2006 | Faculty, Embry-Riddle University (August 2000 to September 2005); Faculty, Park University (August 2005 to December 2005); Non-Profit Specialist, Bremer Bank (since July 2005); Faculty, Minot State University (since August 2000); Director, ND Tax-Free Fund, Inc., Montana Tax-Free Fund, Inc., Integrity Fund of Funds, Inc., (since January 2006); Trustee, The Integrity Funds (since January 2006). | 15 | Marycrest Franciscan Development, Inc. |
Orlin W. Backes | Trustee | Indefinite
Since January 1996 | Attorney, McGee, Hankla, Backes & Dobrovolny, P.C.; Director, South Dakota Tax-Free Fund, Inc. (April 1995 to June 2004), Integrity Small-Cap Fund of Funds, Inc. (September 1998 to June 2003), ND Tax-Free Fund, Inc., Montana Tax-Free Fund, Inc., and Integrity Fund of Funds, Inc., (Since April 2005); Trustee, The Integrity Funds (since May 2003); and Director, First Western Bank & Trust. | 15 | First Western Bank & Trust |
R. James Maxson | Trustee | Indefinite
Since January 1999 | Attorney, Maxson Law Office (since November 2002); Attorney, McGee, Hankla, Backes & Dobrovolny, P.C. (April 2000 to November 2002); Director, South Dakota Tax-Free Fund, Inc. (January 1999 to June 2004), Integrity Small-Cap Fund of Funds, Inc. (January 1999 to June 2003) Integrity Fund of Funds, Inc., ND Tax-Free Fund, Inc. and Montana Tax-Free Fund, Inc. (since January 1999); and Trustee, The Integrity Funds (since May 2003). | 15 | Vincent United Methodist Foundation
Minot Area Development Corporation |
1The Fund Complex consists of the three incorporated funds in the Integrity family of funds, the six series of Integrity Managed Portfolios, and the six series of The Integrity Funds.
Trustees 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 (800) 276-1262.
July 31, 2007 (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 other directorships, if any, held outside the Fund Complex, are shown below.
INTERESTED TRUSTEE
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 COMPLEX1 | OTHER DIRECTORSHIPS HELD OUTSIDE THE FUND COMPLEX |
Robert E. Walstad2,3 | Trustee and Chairman | Indefinite
Since January 1996 | Director (Sept. 1987 to Feb. 2007), President (Sept. 2002 to May 2003), CEO (Sept. 2001 to Feb. 2007), Integrity Mutual Funds, Inc.; Director, President and Treasurer, (Aug. 1988 to Feb. 2007), Integrity Money Management, Inc.; Director, President and Treasurer (Aug. 1988 to Sept. 2004), ND Capital, Inc.; Director, President and Treasurer (May 1989 to Feb. 2007), Integrity Fund Services, Inc.; Director, President, CEO, and Treasurer, (Jan. 1996 to Aug. 2003), Integrity Funds Distributor, Inc.; Director (Oct. 1999 to June 2003) Magic Internet Services, Inc.; Director (May 2000 to June 2003), President (Oct. 2002 to June 2003), ARM Securities Corporation; Director, CEO, Chairman, (Jan. 2002 to Feb. 2007) and President (Sept. 2002 to Dec. 2004), Capital Financial Services, Inc.; Director and President, (April 1994 to June 2004) South Dakota Tax-Free Fund, Inc., (Sept. 1998 to June 2003) Integrity Small-Cap Fund of Funds Inc.; President (May 2003 to Feb. 2007), Integrity Managed Portfolios and (Jan. 2006 to Feb. 2007) The Integrity Funds, (Jan. 1995 to Feb 2007) Integrity Fund of Funds, Inc., (Jan. 1989 to Feb. 2007) ND Tax-Free Fund, Inc., (Aug. 1993 to Feb 2007) Montana Tax-Free Fund, Inc.; Director and Chairman (since Jan. 1995) Integrity Fund of Funds, Inc., (since Jan. 1989) ND Tax-Free Fund, Inc., and (since Aug. 1993) Montana Tax-Free Fund, Inc.; Trustee, Chairman, (since January 2006) and Treasurer (January 2006 to May 2004), Integrity Managed Portfolios and (since May 2003), The Integrity Funds. | 15 | Minot Park Board |
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 COMPLEX1 | OTHER DIRECTORSHIPS HELD OUTSIDE THE FUND COMPLEX |
Mark R.Anderson3 | President | Indefinite
Since July 2007 | Personal Trust Officer (May 1999 to April 2003) Wells Fargo Bank; President and COO (April 2003 to Feb 2007), President, Director and CEO (since Feb. 2007) Integrity Mutual Funds, Inc.; President and Director (since Feb. 2007) Integrity Money Management, Inc., and Integrity Fund Services, Inc.; President and Director (Since August 2003) Integrity Funds Distributor, Inc.; President (Since July 2007) Montana Tax-Free Fund, Inc., Integrity Fund of Funds, Inc., and ND Tax-Free Fund, Inc., Integrity Managed Portfolios and The Integrity Funds; President and Treasurer (since July 2005) BAC Properties, LLC. | N/A | None |
Peter A. Quist2 | Vice President, Secretary | Indefinite
Since January 1996 | Attorney; Director and Vice President, Integrity Mutual Funds, Inc.; Director, Vice President and Secretary, Integrity Money Management, ND Capital, Inc. (August 1988 to September 2004), Integrity Fund Services, Inc., and Integrity Funds Distributor, Inc.; Vice President, Secretary Director, ARM Securities Corporation (May 2000 to June 2003); Director, South Dakota Tax-Free Fund, Inc. (April 1994 to June 2004), Integrity Small-Cap Fund of Funds, Inc. (September 1998 to June 2003), Montana Tax-Free Fund, Inc., Integrity Fund of Funds, Inc., and ND Tax Free Fund, Inc. | 3 | None |
Laura K. Anderson | Treasurer | Indefinite
Since October 2005 | Fund Accountant (until May 2004), Fund Accounting Supervisor (May 2004 to October 2005), Fund Accounting Manager (since October 2005), Manager of Mutual Fund Operations (Since October 2006), Integrity Fund Services, Inc.; Treasurer (since October 2005), The Integrity Funds, ND Tax-Free Fund, Inc., Montana Tax-Free Fund, Inc., and Integrity Fund of Funds, Inc. | N/A | None |
Brent M. Wheeler | Mutual Fund Chief Compliance Officer | Indefinite
Since October 2005 | Fund Accounting Manager (May 1998 to October 2005), Integrity Fund Services, Inc.; Treasurer (May 2004 to October 2005), Mutual Fund Compliance Officer (since October 2005), The Integrity Funds, ND Tax-Free Fund, Inc., Montana Tax-Free Fund, Inc., and Integrity Fund of Funds, Inc. | N/A | None |
1The Fund Complex consists of the three incorporated funds in the Integrity family of funds, the six series of Integrity Managed Portfolios, and the six series of The Integrity Funds.
2Trustees and/or officers who are “interested persons” of the Funds as defined in the Investment Company Act of 1940. Mr. Quist is an interested person by virtue of being an officer and Director of the Fund’s Investment Adviser and Principal Underwriter. Mr. Walstad is an interested person by virtue of being an officer of the Funds and a shareholder of Integrity Mutual Funds, Inc. As indicated above, effective February 1, 2007, Mr. Walstad retired from his roles as, among other things, Director and CEO of Integrity Mutual Funds, Inc., and Director, President and Treasurer of Integrity Money Management. However, a member of his immediate family is a director of Integrity Mutual Funds, Inc.
3At a Fund Board meeting held on July 26, 2007, Interested Director/Trustee, Chairman and Officer Robert E. Walstad resigned as President of the Funds. Subsequently, the Board nominated and appointed Mark R. Anderson as President of the Funds, effective July 26, 2007. Mr. Walstad will remain as Director/Trustee and Chairman of the Funds.
Trustees 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 (800) 276-1262.
Schedule of Investments July 31, 2007
Name of Issuer |
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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 |
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KANSAS MUNICIPAL BONDS (96.9%) |
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Butler Cty., KS (Circle) USD #375 FSA | Aaa/NR | 5.000% | 09/01/2013 | $ | 250,000 | $ | 257,810 |
#Chisholm Creek Util. Auth. (Bel Aire & Park City, KS Pj.) MBIA | Aaa/NR | 5.250 | 09/01/2016 |
| 770,000 |
| 820,289 |
Dodge, KS USD #443 Unltd. General Obligation FSA | Aaa/AAA | 5.750 | 09/01/2013 |
| 100,000 |
| 104,128 |
Johnson Cty., KS Community College Student Commons & Parking AMBAC | Aaa/AAA | 5.000 | 11/15/2019 |
| 235,000 |
| 246,299 |
Johnson Cty., KS USD #232 (Desoto) FSA | Aaa/NR | 5.000 | 09/01/2015 |
| 100,000 |
| 106,744 |
KS Devl. Finance Auth. (Dept. Admin. 7th & Harrison PJ) AMBAC | Aaa/AAA | 5.500 | 12/01/2013 |
| 375,000 |
| 389,539 |
KS Devl. Finance Auth. (Sec. 8) Rev. Ref. MBIA | Aaa/AAA | 6.400 | 01/01/2024 |
| 255,000 |
| 255,000 |
KS Devl. Finance Auth. (Wichita Univ.) AMBAC | Aaa/AAA | 5.900 | 04/01/2015 |
| 305,000 |
| 318,454 |
KS Devl. Finance Auth. (KS St. Projects) Rev. MBIA | Aaa/AAA | 5.000 | 10/01/2017 |
| 250,000 |
| 260,012 |
KS Devl. Finance Auth. (State of KS Projects) MBIA | Aaa/AAA | 4.100 | 05/01/2019 |
| 250,000 |
| 245,012 |
KS Devl. Finance Auth. (Park Apts.) Multifamily Hsg. Rev. FNMA | NR/AAA | 5.700 | 12/01/2009 |
| 275,000 |
| 276,375 |
#KS Devl. Finance Auth. (Stormont Vail) Hlth. Care Rev. MBIA | Aaa/AAA | 5.700 | 11/15/2008 |
| 450,000 |
| 450,081 |
KS Devl. Finance Auth. (Hays Medl. Ctr.) Rev. MBIA | Aaa/NR | 5.200 | 11/15/2008 |
| 375,000 |
| 377,449 |
KS Devl. Finance Auth. (Hays Medl. Ctr.) Rev. MBIA | Aaa/NR | 5.300 | 11/15/2009 |
| 375,000 |
| 377,389 |
KS Devl. Finance Auth. (Hays Medl. Ctr.) Rev. MBIA | Aaa/NR | 5.500 | 11/15/2017 |
| 100,000 |
| 100,759 |
*KS Devl. Finance Auth. (Stormont Vail) Hlth. Care Rev. MBIA | Aaa/AAA | 5.750 | 11/15/2012 |
| 595,000 |
| 633,895 |
Kingman Cty., KS USD #331 FGIC | Aaa/AAA | 5.500 | 10/01/2012 |
| 250,000 |
| 262,910 |
*Mission, KS Multifamily Hsg. (Lamar Place) Rev. FNMA | NR/AAA | 5.000 | 10/01/2014 |
| 605,000 |
| 608,194 |
Mission, KS Multifamily Hsg. (Lamar Place) Rev. FNMA | NR/AAA | 5.180 | 10/01/2023 |
| 445,000 |
| 447,287 |
Morton Cty., KS USD #217 FSA | Aaa/AAA | 4.000 | 09/01/2010 |
| 100,000 |
| 100,236 |
Saline Cty., KS USD #305 (Salina) G.O. Ref. FSA | Aaa/NR | 5.500 | 09/01/2015 |
| 190,000 |
| 200,459 |
Shawnee Cty., KS USD #437 (Auburn-Washburn) G.O. Ref. FSA | Aaa/NR | 5.000 | 09/01/2014 |
| 485,000 |
| 504,507 |
Shawnee, KS Multifamily Hsg. (Thomasbrooks Apts.) Rev. FNMA COL. | NR/AAA | 5.250 | 10/01/2014 |
| 205,000 |
| 207,325 |
*University of Kansas Hosp. Auth. AMBAC | Aaa/AAA | 5.500 | 09/01/2015 |
| 750,000 |
| 773,588 |
Washburn Univ. (Living Learning Ctr.) Bldg. Rev. AMBAC | Aaa/AAA | 5.350 | 07/01/2011 |
| 105,000 |
| 107,746 |
Wellington, KS Utility Rev. AMBAC | Aaa/AAA | 5.000 | 05/01/2012 |
| 250,000 |
| 252,295 |
Wichita, KS GO ambac | Aaa/AAA | 4.500 | 09/01/2022 |
| 150,000 |
| 150,405 |
#Wichita, KS Multifamily Hsg. (Broadmoor Chelsea) Rev. FNMA | NR/AAA | 5.375 | 07/01/2010 |
| 285,000 |
| 285,060 |
*Wichita, KS Multifamily Hsg. (Cimarron Apartments) FNMA | NR/AAA | 5.250 | 10/01/2012 |
| 375,000 |
| 376,762 |
Wichita, KS Water & Sewer Util. Rev. FGIC | Aaa/AAA | 5.250 | 10/01/2014 |
| 75,000 |
| 79,877 |
#Wyandotte Cty., Kansas City, KS Gov't. Util. Syst. Rev. MBIA | Aaa/AAA | 5.125 | 09/01/2013 |
| 500,000 |
| 514,535 |
Wyandotte Cty., KS USD #500 G.O. FSA | Aaa/AAA | 5.250 | 09/01/2013 |
| 250,000 |
| 267,785 |
|
|
|
|
|
|
|
|
TOTAL KANSAS MUNICIPAL BONDS (COST: $10,173,341) |
|
| $ | 10,358,206 | |||
|
|
|
|
|
|
|
|
SHORT-TERM SECURITIES (3.6%) |
| Shares |
|
| |||
Wells Fargo Advantage National Tax-Free Money Market (COST: $382,167) |
| 382,167 | $ | 382,167 | |||
|
|
|
|
|
|
|
|
TOTAL INVESTMENTS IN SECURITIES (COST: $10,555,508) |
|
| $ | 10,740,373 | |||
OTHER ASSETS LESS LIABILITIES |
|
|
|
|
|
| (54,260) |
|
|
|
|
|
|
|
|
NET ASSETS |
|
|
|
|
| $ | 10,686,113 |
* Indicates bonds are segregated by the custodian to cover when-issued or delayed-delivery purchases.
As of July 31, 2007, the Fund had one when-issued purchase:
150,000 of Wichita KS G.O.; 4.500%; due 09/01/2022
# Indicates bonds are segregated by the custodian to cover initial margin requirements.
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 31, 2007
Statement of Assets and Liabilities July 31, 2007
ASSETS | ||||
| Investments in securities, at value (cost: $10,555,508) | $ | 10,740,373 | |
| Cash | 158 | ||
| Accrued interest receivable | 159,551 | ||
| Accrued dividends receivable | 955 | ||
| Prepaid expenses | 1,194 | ||
| Receivable from manager | 2,268 | ||
|
| Total Assets | $ | 10,904,499 |
| ||||
LIABILITIES | ||||
| Dividends payable | $ | 37,568 | |
| Security purchases payable |
| 148,850 | |
| Payable for fund shares redeemed |
| 14,083 | |
| Accrued expenses |
| 11,079 | |
| Payable to affiliates |
| 6,806 | |
|
| Total Liabilities | $ | 218,386 |
| ||||
NET ASSETS | $ | 10,686,113 | ||
| ||||
Net assets are represented by: |
| |||
| Paid-in capital | $ | 11,865,970 | |
| Accumulated undistributed net realized gain (loss) on investments and futures |
| (1,364,823) | |
| Accumulated undistributed net investment income (loss) |
| 101 | |
| Unrealized appreciation (depreciation) on investments | 184,865 | ||
|
| Total amount representing net assets applicable to 982,925 outstanding shares of no par common stock (unlimited shares authorized) | $ | 10,686,113 |
|
|
|
| |
|
| |||
Net Asset Value per share | $ | 10.87 | ||
|
|
| ||
Public offering price (based on sales charge of 2.75%) | $ | 11.18 | ||
The accompanying notes are an integral part of these financial statements.
Financial Statements July 31, 2007
Statement of Operations For the year ended July 31, 2007
INVESTMENT INCOME |
| |||
| Interest | $ | 551,940 | |
| Dividends | 11,784 | ||
|
| Total Investment Income | $ | 563,724 |
|
| |||
EXPENSES |
| |||
| Investment advisory fees | $ | 59,095 | |
| Administrative service fees |
| 23,017 | |
| Transfer agent fees |
| 23,622 | |
| Accounting service fees |
| 29,910 | |
| Custodian fees |
| 2,385 | |
| Professional fees |
| 10,441 | |
| Trustees fees |
| 2,081 | |
| Insurance expense |
| 437 | |
| Reports to shareholders |
| 3,446 | |
| Audit fees |
| 9,606 | |
| License, fees, and registrations |
| 1,633 | |
| Other fees |
| 217 | |
|
| Total Expenses | $ | 165,890 |
| Less expenses waived or absorbed by the Fund’s manager | (77,248) | ||
|
| Total Net Expenses | $ | 88,642 |
|
| |||
NET INVESTMENT INCOME (LOSS) | $ | 475,082 | ||
|
| |||
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS |
| |||
| Net realized gain (loss) from investment transactions | $ | 24,918 | |
| Net change in unrealized appreciation (depreciation) of investments |
| (96,950) | |
|
| Net Realized and Unrealized Gain (Loss) on Investments | $ | (72,032) |
|
| |||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | $ | 403,050 | ||
The accompanying notes are an integral part of these financial statements.
Financial Statements July 31, 2007
Statement of Changes in Net Assets
For the year ended July 31, 2007 and the year ended July 31, 2006
| For The Year Ended | For The Year Ended | ||||
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS |
|
|
|
| ||
| Net investment income (loss) | $ | 475,082 | $ | 506,642 | |
| Net realized gain (loss) on investment and futures transactions |
| 24,918 |
| 387,021 | |
| Net change in unrealized appreciation (depreciation) on investments and futures |
| (96,950) |
| (385,763) | |
|
| Net Increase (Decrease) in Net Assets Resulting From Operations | $ | 403,050 | $ | 507,900 |
| ||||||
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS |
|
|
|
| ||
| Dividends from net investment income ($.44 and $.43 per share, respectively) | $ | (474,981) | $ | (506,639) | |
| Distributions from net realized gain on investment transactions ($.00 and $.00 per share, respectively) |
| 0 |
| 0 | |
|
| Total Dividends and Distributions | $ | (474,981) | $ | (506,639) |
| ||||||
CAPITAL SHARE TRANSACTIONS |
|
|
|
| ||
| Proceeds from sale of shares | $ | 868,389 | $ | 680,818 | |
| Proceeds from reinvested dividends |
| 313,886 |
| 305,774 | |
| Cost of shares redeemed |
| (2,842,925) |
| (3,049,064) | |
|
| Net Increase (Decrease) in Net Assets Resulting from Capital Share Transactions | $ | (1,660,650) | $ | (2,062,472) |
|
|
|
|
| ||
TOTAL INCREASE (DECREASE) IN NET ASSETS | $ | (1,732,581) | $ | (2,061,211) | ||
NET ASSETS, BEGINNING OF PERIOD |
| 12,418,694 |
| 14,479,905 | ||
NET ASSETS, END OF PERIOD | $ | 10,686,113 | $ | 12,418,694 | ||
|
|
|
|
|
|
|
Undistributed Net Investment Income | $ | 101 | $ | 0 | ||
The accompanying notes are an integral part of these financial statements.
Notes to Financial Statements July 31, 2007
Note 1: ORGANIZATION
The Fund is an investment portfolio of Integrity Managed Portfolios (the “Trust”) and is registered under the Investment Company Act of 1940, as amended (the “1940 Act”) as a non-diversified, open-end management investment company. The Trust may offer multiple portfolios; currently six portfolios are offered. The Trust 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 state income tax as is consistent with preservation of capital. The Fund will seek to achieve this 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 Fund Services, 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; 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 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 is 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, 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. Interest and penalties related to uncertain tax positions, if any, are classified in the Fund’s financial statements as other expense. Distributions during the year ended July 31, 2007, were characterized as tax-exempt for tax purposes.
The tax character of distributions paid was as follows:
|
|
| July 31, 2007 |
| July 31, 2006 |
|
| Tax-exempt income | $ | 474,981 | $ | 506,639 |
|
| Ordinary income |
| 0 |
| 0 |
|
| Long-term capital gains |
| 0 |
| 0 |
|
| Total | $ | 474,981 | $ | 506,639 |
|
As of July 31, 2007, the components of accumulated earnings/(deficit) on a tax basis were as follows:
| Undistributed Ordinary Income | Undistributed Long-Term Capital Gains | Accumulated Earnings | Accumulated Capital and Other Losses | Unrealized Appreciation/(Depreciation) | Total Accumulated Earnings/(Deficit) |
|
| $0 | $0 | ($1,364,823) | $184,966 | ($1,179,857) |
|
The Fund has unexpired capital loss carryforwards for tax purposes as of July 31, 2007 totaling $1,364,823, 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 following table:
Year | Unexpired Capital Losses |
2008 | $49,698 |
2009 | $78,788 |
2010 | $178,976 |
2011 | $209,757 |
2012 | $303,542 |
2013 | $544,062 |
For the year ended July 31, 2007, the Fund made $2,182 in permanent reclassifications to reflect tax character. Reclassifications to paid-in capital relate primarily to expiring capital loss carryforwards.
Net capital losses incurred after October 31, and within the tax year are deemed to arise on the first business day of the Fund’s next taxable year. For the year ended July 31, 2007, the Fund deferred to August 1, 2007, post-October capital losses, post-October currency losses, and post-October passive foreign company losses of $0.
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 (depreciation) related to op en 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.
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 31, 2007, there were unlimited shares of no par authorized; 982,925 and 1,134,356 shares were outstanding at July 31, 2007 and July 31, 2006, respectively.
Transactions in capital shares were as follows:
| For The Year Ended | For The Year Ended |
Shares sold | 79,386 | 62,142 |
Shares issued on reinvestment of dividends | 28,663 | 27,989 |
Shares redeemed | (259,480) | (279,142) |
Net increase (decrease) | (151,431) | (189,011) |
Note 4: INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Integrity Money Management, the Fund’s investment adviser; Integrity Funds Distributor, Inc. (the “Distributor” or “Integrity Funds Distributor”), the Fund’s underwriter; and Integrity Fund Services, Inc. (“Integrity Fund Services”), the Fund’s transfer, accounting, and administrative services agent; are subsidiaries of Integrity Mutual Funds, the Fund’s sponsor.
The Fund has engaged Integrity Money Management 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 year ended July 31, 2007. 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 contracts from time to time. Accordingly, after fee waivers and expense reimbursements, the Fund’s actual total annual operating expenses were 0.75% for the year ended July 31, 2007.
Integrity Fund Services provides transfer agent services for a variable fee equal to 0.20% 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, with a minimum of $2,000 per month plus reimbursement of out-of-pocket expenses. An additional fee of $500 per month is charged for each additional share class. The Fund has recognized $23,622 of transfer agency fees and expenses for the year ended July 31, 2007. The Fund has a payable to Integrity Fund Services of $2,067 at July 31, 2007 for transfer agency fees. Integrity Fund Services 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 ne t assets in excess of $50 million, together with reimbursement of out-of-pocket expenses. An additional fee of $500 per month is charged by Integrity Fund Services for each additional share class. The Fund has recognized $29,910 of accounting service fees for the year ended July 31, 2007. The Fund has a payable to Integrity Fund Services of $2,526 at July 31, 2007 for accounting service fees. Integrity Fund Services also acts as the Fund’s administrative services agent for a variable fee equal to 0.125% 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, with a minimum of $2,000 per month plus out-of-pocket expenses. An additional fee of $500 per month is charged by Integrity Fund Services for each additional share class. The Fund has recognized $23,017 of administrative services fees for the year ended July 31, 2007. The Fund has a payable to Integrity Fund Services of $2,067 at July 31, 2007 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 $1,039,602 and $2,469,061, respectively, for the year ended July 31, 2007.
Note 6: INVESTMENT IN SECURITIES
At July 31, 2007, the aggregate cost of securities for federal income tax purposes was substantially the same for financial reporting purposes at $10,555,508. The net unrealized appreciation of investments based on the cost was $184,865, which is comprised of $189,957 aggregate gross unrealized appreciation and $5,092 aggregate gross unrealized depreciation. Differences between financial reporting-basis and tax-basis unrealized appreciation/depreciation are due to differing treatment of market discount.
Note 7: RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In July 2006, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes,” an interpretation of SFAS 109, “Accounting for Income Taxes” (FIN 48). FIN 48 is effective on the last business day of the semi-annual reporting period for fiscal years beginning after December 15, 2006. FIN 48 established the accounting for uncertain tax positions that have been taken or are expected to be taken in a tax return, including the recognition and measurement of their financial statement effects. Pursuant to FIN 48, the Fund would recognize a tax benefit only if it is “more likely than not” that a particular tax position would be sustained upon examination or audit. To the extent the “more likely than not” standard is satisfied, the benefit associated with a tax position is measured as the largest amount that is greater than 50% likely o f being realized upon settlement.
In September 2006, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 157, Fair Value Measurements. This standard defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles and expands disclosures about fair value measurements. SFAS 157 is effective for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The Fund is presently evaluating the impact of adopting SFAS 157.
July 31, 2007
FINANCIAL HIGHLIGHTS
Selected per share data and ratios for the period indicated.
|
| For The Year Ended |
| For The Year Ended |
| For The Year Ended |
| For The Year Ended |
| For The Year Ended | ||
NET ASSET VALUE, BEGINNING OF PERIOD | $ | 10.95 | $ | 10.94 | $ | 11.44 | $ | 11.60 | $ | 11.91 | ||
|
|
|
|
|
|
|
|
|
|
| ||
Income from Investment Operations: |
|
|
|
|
|
|
|
|
|
| ||
| Net investment income | $ | .44 | $ | .43 | $ | .42 | $ | .43 | $ | .46 | |
| Net realized and unrealized gain (loss) on investment and futures transactions |
| (.08) |
| .01 |
| (.50) |
| (.16) |
| (.31) | |
| Total Income (Loss) From Investment Operations | $ | .36 | $ | .44 | $ | (.08) | $ | .27 | $ | .15 | |
|
|
|
|
|
|
|
|
|
|
| ||
Less Distributions: |
|
|
|
|
|
|
|
|
|
| ||
| Dividends from net investment income | $ | (.44) | $ | (.43) | $ | (.42) | $ | (.43) | $ | (.46) | |
| Distributions from net realized gains |
| .00 |
| .00 |
| .00 |
| .00 |
| .00 | |
| Total Distributions | $ | (.44) | $ | (.43) | $ | (.42) | $ | (.43) | $ | (.46) | |
|
|
|
|
|
|
|
|
|
|
| ||
NET ASSET VALUE, END OF PERIOD | $ | 10.87 | $ | 10.95 | $ | 10.94 | $ | 11.44 | $ | 11.60 | ||
|
|
|
|
|
|
|
|
|
|
| ||
Total Return |
| 3.34%A |
| 4.06%A |
| (0.75%)A |
| 2.31%A |
| 1.26%A | ||
|
|
|
|
|
|
|
|
|
|
| ||
RATIOS/SUPPLEMENTAL DATA: |
|
|
|
|
|
|
|
|
|
| ||
| Net assets, end of period (in thousands) | $ | 10,686 | $ | 12,419 | $ | 14,480 | $ | 16,982 | $ | 18,477 | |
| 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 |
| 4.02% |
| 3.89% |
| 3.71% |
| 3.67% |
| 3.89% | |
| Portfolio turnover rate |
| 9.18% |
| 4.15% |
| 1.81% |
| 4.39% |
| 26.23% | |
AExcludes the maximum sales charge of 2.75%.
B During the periods indicated above, Integrity Money Management assumed/waived expenses of $77,248, $62,295, $57,567, $58,289, and $36,281, respectively. If the expenses had not been assumed/waived, the annualized ratio of total expenses to average net assets would have been 1.40%, 1.23%, 1.10%, 1.08%, and 0.94%, 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.
July 31, 2007
TAX INFORMATION
Tax Information For The Year Ended July 31, 2007 (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 31, 2006 |
| August 31, 2006 | $ | .036428 |
| - |
| - |
September 29, 2006 |
| September 29, 2006 | $ | .035136 |
| - |
| - |
October 31, 2006 |
| October 31, 2006 | $ | .037518 |
| - |
| - |
November 30, 2006 |
| November 30, 2006 | $ | .036465 |
| - |
| - |
December 29, 2006 |
| December 29, 2006 | $ | .035398 |
| - |
| - |
January 31, 2007 |
| January 31, 2007 | $ | .037750 |
| - |
| - |
February 28, 2007 |
| February 28, 2007 | $ | .036412 |
| - |
| - |
March 30, 2007 |
| March 30, 2007 | $ | .036853 |
| - |
| - |
April 30, 2007 |
| April 30, 2007 | $ | .037268 |
| - |
| - |
May 31, 2007 |
| May 31, 2007 | $ | .037364 |
| - |
| - |
June 29, 2007 |
| June 29, 2007 | $ | .035904 |
| - |
| - |
July 31, 2007 |
| July 31, 2007 | $ | .038270 |
| - |
| - |
Shareholders should consult their tax advisors.
July 31, 2007
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Trustees of 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 31, 2007, the related statement of operations for the year then ended, the statement of changes in net assets for the years ended July 31, 2007 and July 31, 2006, and the financial highlights for the year ended July 31, 2007, and each of the four years in the period ended July 31, 2006. 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 audits.
We conducted our audits 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 31, 2007 by correspondence with the custodian and brokers. 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 audits provide 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 31, 2007, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.
BRADY, MARTZ & ASSOCIATES, P.C.
Minot, North Dakota USA
September 12, 2007
Dear Shareholder:
Enclosed is the annual report of the Maine Municipal Fund (the “Fund”) for the year ended July 31, 2007. The Fund’s portfolio and related financial statements are presented within for your review.
The first half of 2007 has proven a tricky period for most bond fund managers and has likely rattled some bond fund investors as well. Entering the year, many expected the Federal Reserve to cut its target for the federal funds rate (the rate banks charge one another for loans), but recently the direction of the bond market remains determined by credit issues and the status of other asset classes.
In recent years, investors’ enthusiasm about the global economy allowed borrowers across the spectrum to enjoy cheap debt. However, the recent turmoil in the sub-prime housing market (loans to less than creditworthy individuals) is beginning to show a credit squeeze may be underway. Recent surveys conducted by the Federal Reserve suggest that banks are tightening lending standards on non-traditional and sub-prime residential loans as well as commercial real estate.
The key to the economy going forward will be consumer spending. If the housing woes spread over the economy, consumer spending could slow and the economy is likely to grow at a subdued pace into early 2008.
The sub-prime fear helped push the yield on the 10-year Treasury bond to 4.77% for the period, higher than the 4.70% at which it began 2007, but below the 5.30% it hit in mid-June.
While rising interest rates can cause bond market valuations to fall, it also enables investors to lock in higher yielding bonds. Short-term fund losses can sting, but they shouldn’t cause investors to lose sight of their long-term goals and objectives.
After spending much of 2007 in positive territory, the average municipal bond fund has posted a small gain through July.
Maine Municipal Fund shares began the year at $10.52 and ended the period at $10.45 for a total return of 2.89%*. This compares to the Lehman Brothers Municipal Bond Index return of 4.26% for the period
The Fund’s performance can be attributed to its defensive portfolio, with an average maturity of 14 years and a low average maturity to the first call date of 5 years. That, along with an average portfolio coupon of 5.25%, helps relative performance in a rising rate environment.
An important part of the Fund’s strategy includes searching the primary and secondary markets for high quality, double tax-exempt issues. Some issues purchased during the period include: Maine Turnpike 5.00% coupon, due 2033; Maine University Systems 5.00% coupon, due 2023; and Lewiston General Obligation 4.50% coupon, due 2025. Portfolio quality for the year was as follows: AAA 80.2%, AA 16.7%, A 2.6% and BBB 0.5%.
Income exempt from federal and Maine 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.integrityfunds.com for daily prices along with pertinent Fund information.
Sincerely,
Monte Avery
Senior Portfolio Manager
The views expressed are those of Monte Avery, Senior Portfolio Manager with Integrity Money Management Inc. 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, the markets generally, or any Integrity Mutual Fund.
*Performance does not include applicable front-end or contingent deferred sales charges (“CDSCs”), which would have reduced the performance.
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 (800) 276-1262.
You should consider the Fund’s investment objectives, risks, charges, and expenses carefully before investing. For this and other important information, please obtain a free Fund prospectus from your financial adviser and read it carefully prior to investing.
Bond prices and, therefore, the value of bond funds decline as interest rates rise. Because the Fund invests in securities of a single state, the Fund is more susceptible to factors adversely impacting the respective state securities than a municipal bond fund that does not concentrate its securities in a single state.
July 31, 2007 (Unaudited)
PROXY VOTING ON FUND PORTFOLIO SECURITIES
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to securities held in the Fund’s portfolio is available, without charge and upon request, by calling (800) 276-1262. A report on Form N-PX of how the Fund voted any such proxies during the most recent 12-month period ended June 30 is available through Integrity’s website at www.integrityfunds.com. The information is also available from the Electronic Data Gathering, Analysis, and Retrieval (“EDGAR”) database on the website of the Securities and Exchange Commission (“SEC”) at www.sec.gov.
QUARTERLY PORTFOLIO SCHEDULE
Within 60 days of the end of its second and fourth fiscal quarters, the Fund provides a complete schedule of portfolio holdings in its semi-annual and annual reports on the Form N-CSR(S). These reports are filed electronically with the SEC and are delivered to the shareholders of the Fund. The Fund also files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms N-Q and N-CSR(S) are available on the SEC’s website at www.sec.gov. The Fund’s Forms N-Q and N-CSR(S) may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling (202) 942-8090. You may also access this information from Integrity’s website at www.integrityfunds.com.
July 31, 2007 (Unaudited)
TERMS AND DEFINITIONS
Appreciation: Increase in the value of an asset
Average Annual Total Return: A standardized measurement of the return (yield and appreciation) earned by a 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 the 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 marketplace
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: The value of all of 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 creditworthiness; “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; represents the aggregate percentage or dollar value change over the period
July 31, 2007 (Unaudited)
COMPOSITION
Portfolio Quality Ratings
(Based on total long-term investments)
| AAA | 80.2% |
| AA | 16.7% |
| A | 2.6% |
| 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 Ratings Group. Non-rated bonds have been determined to be of appropriate quality for the portfolio by Integrity Money Management, Inc. (the “Investment Adviser” or “Integrity Money Management”), the Fund’s investment adviser.
These percentages are subject to change.
Portfolio Market Sectors
(As a percentage of net assets)
| T-Transportation | 36.4% |
| I-Industrial | 19.8% |
| G-Government | 15.2% |
| O-Other | 8.4% |
| H-Health | 6.9% |
| S-School | 5.3% |
| U-Utilities | 4.3% |
| W/S-Water/Sewer | 3.7% |
Market sectors are breakdowns of the Fund’s portfolio holdings into specific investment classes.
These percentages are subject to change.
July 31, 2007 (Unaudited)
DISCLOSURE OF FUND EXPENSES
The example below is intended to describe the fees and expenses borne by shareholders and the impact of those costs on your investment.
Example
As a shareholder of the Fund, you incur two types of costs:
| • | Transaction costs: including sales charges (loads), redemption fees, and exchange fees |
| • | Ongoing costs: including management fees, distribution (12b-1) fees, and other expenses |
This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from January 31, 2007 to July 31, 2007.
The example illustrates the Fund’s costs in two ways:
Actual Expenses: The section in the table under the heading “Actual” provides information about actual account values and actual expenses. You may use the information in these columns together with the amount you invested to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an account value of $8,600 divided by $1,000 equals 8.6), then multiply the result by the number in the appropriate column for your share class in the column entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes: The section in the table under the heading “Hypothetical (5% return before expenses)” provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the section in the table under the heading “Hypothetical (5% return before expenses)” is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
| Beginning Account Value | Ending Account Value | Expenses Paid During Period* |
Actual | $1,000.00 | $1,011.01 | $5.38 |
Hypothetical (5% return before expenses) | $1,000.00 | $1,019.44 | $5.40 |
*Expenses are equal to the annualized expense ratio of 1.07% multiplied by the average account value over the period, multiplied by 180/360 days. The Fund’s ending account value on the first line of the table is based on its actual total return of 1.10% for the six-month period of January 31, 2007 to July 31, 2007.
July 31, 2007 (Unaudited)
AVERAGE ANNUAL TOTAL RETURNS
| For periods ending July 31, 2007 | ||||||
1 year | 3 year | 5 year | 10 year | Since Inception | |||
|
| Without Sales Charge | 2.89% | 2.07% | 2.47% | 3.67% | 4.88% |
|
| With Sales Charge (4.25%) | (1.51%) | 0.61% | 1.59% | 3.22% | 4.59% |
|
|
|
|
|
|
|
|
Lehman Brothers Municipal Bond Index | 1 year | 3 year | 5 year | 10 year | Since Inception | ||
| 4.26% | 4.38% | 4.50% | 5.23% | 6.20% | ||
Putting performance into perspective
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 (800) 276-1262.
You should consider the Fund’s investment objectives, risks, charges, and expenses carefully before investing. For this and other important information, please obtain a free Fund prospectus from your financial adviser and read it carefully prior to investing.
The table above 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 adviser that used different investment strategies and techniques, which may have produced different investment results than those achieved by the current investment adviser. Forum Investment Advisors, LLC served as investment adviser to the Fund until December 19, 2003.
July 31, 2007 (Unaudited)
COMPARATIVE INDEX GRAPH
Comparison of change in value of a $10,000 investment in the Fund and the Lehman Brothers Municipal Bond Index
Maine Municipal Fund without Sales Charge | Maine Municipal Fund with Maximum Sales Charge | Lehman Brothers Municipal Bond Index | |
7/31/1997 | $10,000 | $10,000 | |
1998 | $10,484 | $10,599 | |
1999 | $10,764 | $10,904 | |
2000 | $11,175 | $11,374 | |
2001 | $12,061 | $12,522 | |
2002 | $12,684 | $13,362 | |
2003 | $12,967 | $13,842 | |
2004 | $13,479 | $14,643 | |
2005 | $13,380 | $15,575 | |
2006 | $13,931 | $15,973 | |
2007 | $14,333 | $16,654 |
Putting performance into perspective
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 (800) 276-1262.
You should consider the Fund’s investment objectives, risks, charges, and expenses carefully before investing. For this and other important information, please obtain a free Fund prospectus from your financial adviser and read it carefully prior to investing.
The graph does not reflect the deduction of taxes that a shareholder would pay on Fund distributions and redemptions of Fund shares.
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 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. If they could, transaction costs and other expenses would be incurred. All Fund and benchmark returns include reinvested dividends.
July 31, 2007 (Unaudited)
MANAGEMENT OF THE FUND
The Board of Integrity Managed Portfolios consists of four Trustees. These same individuals, unless otherwise noted, also serve as Directors or Trustees for the funds in the Integrity family of funds, the six series of Integrity Managed Portfolios and the six 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. Two of the remaining three Trustees and/or 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 COMPLEX1 | OTHER DIRECTORSHIPS HELD OUTSIDE THE FUND COMPLEX |
Jerry M. Stai | Trustee | Indefinite
Since January 2006 | Faculty, Embry-Riddle University (August 2000 to September 2005); Faculty, Park University (August 2005 to December 2005); Non-Profit Specialist, Bremer Bank (since July 2005); Faculty, Minot State University (since August 2000); Director, ND Tax-Free Fund, Inc., Montana Tax-Free Fund, Inc., Integrity Fund of Funds, Inc., (since January 2006); Trustee, The Integrity Funds (since January 2006). | 15 | Marycrest Franciscan Development, Inc. |
Orlin W. Backes | Trustee | Indefinite
Since January 1996 | Attorney, McGee, Hankla, Backes & Dobrovolny, P.C.; Director, South Dakota Tax-Free Fund, Inc. (April 1995 to June 2004), Integrity Small-Cap Fund of Funds, Inc. (September 1998 to June 2003), ND Tax-Free Fund, Inc., Montana Tax-Free Fund, Inc., and Integrity Fund of Funds, Inc., (Since April 2005); Trustee, The Integrity Funds (since May 2003); and Director, First Western Bank & Trust. | 15 | First Western Bank & Trust |
R. James Maxson | Trustee | Indefinite
Since January 1999 | Attorney, Maxson Law Office (since November 2002); Attorney, McGee, Hankla, Backes & Dobrovolny, P.C. (April 2000 to November 2002); Director, South Dakota Tax-Free Fund, Inc. (January 1999 to June 2004), Integrity Small-Cap Fund of Funds, Inc. (January 1999 to June 2003) Integrity Fund of Funds, Inc., ND Tax-Free Fund, Inc. and Montana Tax-Free Fund, Inc. (since January 1999); and Trustee, The Integrity Funds (since May 2003). | 15 | Vincent United Methodist Foundation
Minot Area Development Corporation |
1The Fund Complex consists of the three incorporated funds in the Integrity family of funds, the six series of Integrity Managed Portfolios, and the six series of The Integrity Funds.
Trustees 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 (800) 276-1262.
July 31, 2007 (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 other directorships, if any, held outside the Fund Complex, are shown below.
INTERESTED TRUSTEE
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 COMPLEX1 | OTHER DIRECTORSHIPS HELD OUTSIDE THE FUND COMPLEX |
Robert E. Walstad2,3 | Trustee and Chairman | Indefinite
Since January 1996 | Director (Sept. 1987 to Feb. 2007), President (Sept. 2002 to May 2003), CEO (Sept. 2001 to Feb. 2007), Integrity Mutual Funds, Inc.; Director, President and Treasurer, (Aug. 1988 to Feb. 2007), Integrity Money Management, Inc.; Director, President and Treasurer (Aug. 1988 to Sept. 2004), ND Capital, Inc.; Director, President and Treasurer (May 1989 to Feb. 2007), Integrity Fund Services, Inc.; Director, President, CEO, and Treasurer, (Jan. 1996 to Aug. 2003), Integrity Funds Distributor, Inc.; Director (Oct. 1999 to June 2003) Magic Internet Services, Inc.; Director (May 2000 to June 2003), President (Oct. 2002 to June 2003), ARM Securities Corporation; Director, CEO, Chairman, (Jan. 2002 to Feb. 2007) and President (Sept. 2002 to Dec. 2004), Capital Financial Services, Inc.; Director and President, (April 1994 to June 2004) South Dakota Tax-Free Fund, Inc., (Sept. 1998 to June 2003) Integrity Small-Cap Fund of Funds Inc.; President (May 2003 to Feb. 2007), Integrity Managed Portfolios and (Jan. 2006 to Feb. 2007) The Integrity Funds, (Jan. 1995 to Feb 2007) Integrity Fund of Funds, Inc., (Jan. 1989 to Feb. 2007) ND Tax-Free Fund, Inc., (Aug. 1993 to Feb 2007) Montana Tax-Free Fund, Inc.; Director and Chairman (since Jan. 1995) Integrity Fund of Funds, Inc., (since Jan. 1989) ND Tax-Free Fund, Inc., and (since Aug. 1993) Montana Tax-Free Fund, Inc.; Trustee, Chairman, (since January 2006) and Treasurer (January 2006 to May 2004), Integrity Managed Portfolios and (since May 2003), The Integrity Funds. | 15 | Minot Park Board |
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 COMPLEX1 | OTHER DIRECTORSHIPS HELD OUTSIDE THE FUND COMPLEX |
Mark R.Anderson3 | President | Indefinite
Since July 2007 | Personal Trust Officer (May 1999 to April 2003) Wells Fargo Bank; President and COO (April 2003 to Feb 2007), President, Director and CEO (since Feb. 2007) Integrity Mutual Funds, Inc.; President and Director (since Feb. 2007) Integrity Money Management, Inc., and Integrity Fund Services, Inc.; President and Director (Since August 2003) Integrity Funds Distributor, Inc.; President (Since July 2007) Montana Tax-Free Fund, Inc., Integrity Fund of Funds, Inc., and ND Tax-Free Fund, Inc., Integrity Managed Portfolios and The Integrity Funds; President and Treasurer (since July 2005) BAC Properties, LLC. | N/A | None |
Peter A. Quist2 | Vice President, Secretary | Indefinite
Since January 1996 | Attorney; Director and Vice President, Integrity Mutual Funds, Inc.; Director, Vice President and Secretary, Integrity Money Management, ND Capital, Inc. (August 1988 to September 2004), Integrity Fund Services, Inc., and Integrity Funds Distributor, Inc.; Vice President, Secretary Director, ARM Securities Corporation (May 2000 to June 2003); Director, South Dakota Tax-Free Fund, Inc. (April 1994 to June 2004), Integrity Small-Cap Fund of Funds, Inc. (September 1998 to June 2003), Montana Tax-Free Fund, Inc., Integrity Fund of Funds, Inc., and ND Tax Free Fund, Inc. | 3 | None |
Laura K. Anderson | Treasurer | Indefinite
Since October 2005 | Fund Accountant (until May 2004), Fund Accounting Supervisor (May 2004 to October 2005), Fund Accounting Manager (since October 2005), Manager of Mutual Fund Operations (Since October 2006), Integrity Fund Services, Inc.; Treasurer (since October 2005), The Integrity Funds, ND Tax-Free Fund, Inc., Montana Tax-Free Fund, Inc., and Integrity Fund of Funds, Inc. | N/A | None |
Brent M. Wheeler | Mutual Fund Chief Compliance Officer | Indefinite
Since October 2005 | Fund Accounting Manager (May 1998 to October 2005), Integrity Fund Services, Inc.; Treasurer (May 2004 to October 2005), Mutual Fund Compliance Officer (since October 2005), The Integrity Funds, ND Tax-Free Fund, Inc., Montana Tax-Free Fund, Inc., and Integrity Fund of Funds, Inc. | N/A | None |
1The Fund Complex consists of the three incorporated funds in the Integrity family of funds, the six series of Integrity Managed Portfolios, and the six series of The Integrity Funds.
2Trustees and/or officers who are “interested persons” of the Funds as defined in the Investment Company Act of 1940. Mr. Quist is an interested person by virtue of being an officer and Director of the Fund’s Investment Adviser and Principal Underwriter. Mr. Walstad is an interested person by virtue of being an officer of the Funds and a shareholder of Integrity Mutual Funds, Inc. As indicated above, effective February 1, 2007, Mr. Walstad retired from his roles as, among other things, Director and CEO of Integrity Mutual Funds, Inc., and Director, President and Treasurer of Integrity Money Management. However, a member of his immediate family is a director of Integrity Mutual Funds, Inc.
3At a Fund Board meeting held on July 26, 2007, Interested Director/Trustee, Chairman and Officer Robert E. Walstad resigned as President of the Funds. Subsequently, the Board nominated and appointed Mark R. Anderson as President of the Funds, effective July 26, 2007. Mr. Walstad will remain as Director/Trustee and Chairman of the Funds.
Trustees 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 (800) 276-1262.
Schedule of Investments July 31, 2007
Name of Issuer |
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|
| ||
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 | ||
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| ||
MAINE MUNICIPAL BONDS (73.1%) |
|
|
|
|
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|
| ||
Bar Harbor, ME | A-1/NR | 6.450% | 06/01/2009 | $ | 75,000 | $ | 78,646 | ||
Bath, ME | A-3/NR | 7.450 | 12/01/2007 |
| 30,000 |
| 30,410 | ||
Bath, ME | A-3/NR | 7.500 | 12/01/2008 |
| 20,000 |
| 20,994 | ||
Brewer, ME | A/A | 4.600 | 11/01/2017 |
| 210,000 |
| 217,705 | ||
Ellsworth, ME | A/NR | 7.200 | 07/01/2008 |
| 25,000 |
| 25,760 | ||
Freeport, ME | Aa-3/AA | 7.250 | 09/01/2010 |
| 20,000 |
| 21,987 | ||
Gorham, ME Unlimited Tax G.O. MBIA | Aaa/NR | 4.300 | 02/01/2023 |
| 155,000 |
| 154,825 | ||
Gorham, ME Unlimited Tax G.O. MBIA | Aaa/NR | 4.350 | 02/01/2024 |
| 155,000 |
| 155,036 | ||
Houlton, ME Water District MBIA | Aaa/NR | 4.600 | 05/01/2014 |
| 100,000 |
| 102,210 | ||
Kennebec, ME Regl. Dev. | Baa-1/NR | 5.500 | 08/01/2014 |
| 75,000 |
| 78,773 | ||
#Kennebec, ME Water District FSA | Aaa/NR | 5.125 | 12/01/2021 |
| 500,000 |
| 511,015 | ||
Kittery, ME | A-1/AA | 5.200 | 01/01/2009 |
| 25,000 |
| 25,500 | ||
Lewiston, ME G.O. FSA | Aaa/NR | 4.500 | 01/15/2025 |
| 200,000 |
| 200,016 | ||
Lewiston, ME G.O. FSA | Aaa/NR | 5.000 | 04/01/2022 |
| 500,000 |
| 521,345 | ||
Lewiston, ME G.O. FSA | Aaa/NR | 5.000 | 04/01/2024 |
| 250,000 |
| 262,150 | ||
Maine Finance Auth. Rev. (Electric Rate Stabilization) FSA | Aaa/AAA | 4.500 | 07/01/2008 |
| 25,000 |
| 25,173 | ||
Maine Governmental Facs. Auth Lease MBIA | Aaa/AAA | 5.375 | 10/01/2016 |
| 250,000 |
| 264,862 | ||
Maine Governmental Facs. Lease Rev FSA | Aaa/AAA | 5.750 | 10/01/2007 |
| 250,000 |
| 251,120 | ||
Maine Health & Higher Educ. (University Systems) MBIA | Aaa/NR | 5.000 | 07/01/2023 |
| 200,000 |
| 210,636 | ||
Maine Health & Higher Educ. Auth. (Maine Maritime Academy) MBIA | Aaa/NR | 5.000 | 07/01/2025 |
| 340,000 |
| 352,723 | ||
Maine Health & Higher Educ. Facs. Auth. | Aaa/NR | 6.000 | 10/01/2013 |
| 195,000 |
| 213,365 | ||
Maine Health & Higher Educ. Facs. Auth. (Bates College) FSA | Aaa/AAA | 5.250 | 07/01/2011 |
| 25,000 |
| 25,258 | ||
*Maine Health & Higher Educ. Facs. Auth. (Blue Hill Mem. Hosp) FSA | Aaa/AAA | 5.250 | 07/01/2010 |
| 550,000 |
| 560,164 | ||
Maine Health & Higher Educ. Facs. Auth. Rev. AMBAC | Aaa/AAA | 7.300 | 05/01/2014 |
| 5,000 |
| 5,000 | ||
*Maine Municipal Bond Bank MBIA | Aaa/AAA | 5.625 | 11/01/2016 |
| 1,000,000 |
| 1,059,830 | ||
Maine Municipal Bond Bank (Sewer & Water) Rev. | Aaa/AAA | 4.900 | 11/01/2024 |
| 100,000 |
| 104,029 | ||
Maine State (Highway) | Aa-3/AA | 5.000 | 06/15/2011 |
| 200,000 |
| 208,220 | ||
Maine State Turnpike Auth. | Aaa/AAA | 5.000 | 07/01/2033 |
| 450,000 |
| 467,316 | ||
Maine State Turnpike Auth. MBIA | Aaa/AAA | 4.625 | 07/01/2010 |
| 100,000 |
| 101,446 | ||
Maine State Turnpike Auth. MBIA | Aaa/AAA | 5.250 | 07/01/2010 |
| 75,000 |
| 77,125 | ||
*Maine State Turnpike Auth. Rev. FGIC | Aaa/AAA | 5.750 | 07/01/2028 |
| 750,000 |
| 797,813 | ||
Portland, ME | Aa-1/AA | 5.000 | 09/01/2013 |
| 60,000 |
| 62,639 | ||
Portland, ME Airport Rev. FSA | Aaa/AAA | 5.000 | 07/01/2032 |
| 500,000 |
| 512,925 | ||
Scarborough, ME G.O. MBIA | Aaa/AAA | 4.400 | 11/01/2031 |
| 250,000 |
| 243,345 | ||
Scarborough, ME G.O. MBIA | Aaa/AAA | 4.400 | 11/01/2032 |
| 480,000 |
| 465,542 | ||
#Skowhegan, ME Pollution Ctl. Rev. (Scott Paper Co. Prj.) | Aa-3/AA- | 5.900 | 11/01/2013 |
| 1,465,000 |
| 1,465,000 | ||
South Portland, ME | Aa-1/NR | 5.800 | 09/01/2008 |
| 150,000 |
| 153,449 | ||
South Portland, ME | Aa-1/NR | 5.800 | 09/01/2011 |
| 40,000 |
| 43,148 | ||
University of Maine System Rev. AMBAC | Aaa/AAA | 5.000 | 03/01/2024 |
| 100,000 |
| 102,303 | ||
University of Maine System Rev. MBIA | NR/AAA | 4.750 | 03/01/2037 |
| 550,000 |
| 552,530 | ||
Westbrook, ME G.O. FGIC | Aaa/AAA | 4.250 | 10/15/2020 |
| 180,000 |
| 180,317 | ||
Windham, ME G.O. AMBAC | Aaa/AAA | 4.000 | 11/01/2014 |
| 415,000 |
| 415,473 | ||
Winthrop, ME | A-3/NR | 5.400 | 08/01/2007 |
| 25,000 |
| 25,000 | ||
Yarmouth, ME | Aa-3/AA- | 5.000 | 11/15/2019 |
| 500,000 |
| 526,140 | ||
Yarmouth, ME AMBAC | Aaa/NR | 5.250 | 11/15/2009 |
| 250,000 |
| 257,938 | ||
York, ME G.O. | NR/AA | 4.000 | 09/01/2010 |
| 75,000 |
| 75,817 | ||
|
|
|
|
|
|
|
| ||
TOTAL MAINE MUNICIPAL BONDS |
|
|
|
|
| $ | 12,212,018 | ||
|
|
|
|
|
|
|
| ||
GUAM MUNICIPAL BONDS (0.1%) |
|
|
|
|
|
|
| ||
Guam Hsg. Corp. Single Family Mtg. | NR/AAA | 5.750 | 09/01/2031 |
| 10,000 | $ | 10,609 | ||
|
|
|
|
|
|
|
| ||
PUERTO RICO MUNICIPAL BONDS (16.3%) |
|
|
|
|
|
| |||
Puerto Rico Commonwealth Highway and Trans. Rev. MBIA | Aaa/AAA | 5.500 | 07/01/2036 |
| 750,000 | $ | 830,925 | ||
Puerto Rico Public Finance Corp. Commonwealth Appropriations AMBAC | Aaa/AAA | 5.375 | 06/01/2018 |
| 1,710,000 |
| 1,886,455 | ||
TOTAL PUERTO RICO MUNICIPAL BONDS |
|
|
|
|
| $ | 2,717,380 | ||
|
|
|
|
|
|
|
| ||
VIRGIN ISLANDS MUNICIPAL BONDS (3.1%) |
|
|
|
|
|
| |||
Virgin Islands Water & Power Auth. Elec. Syst. Rev. ACA/MBIA | Aaa/AAA | 5.300 | 07/01/2021 |
| 500,000 | $ | 512,235 | ||
|
|
|
|
|
|
|
| ||
TOTAL MUNICIPAL BONDS (COST: $15,108,759) |
|
|
|
| $ | 15,452,242 | |||
|
|
|
|
|
|
|
| ||
SHORT-TERM SECURITIES (10.0%) |
|
|
|
| Shares |
|
| ||
Wells Fargo Advantage National Tax-Free Money Market (COST: $1,674,193) |
| 1,674,193 | $ | 1,674,193 | |||||
|
|
|
|
|
|
|
| ||
TOTAL INVESTMENTS IN SECURITIES (COST: $16,782,952) |
|
|
| $ | 17,126,435 | ||||
OTHER ASSETS LESS LIABILITIES |
|
|
|
|
|
| (419,884) | ||
|
|
|
|
|
|
|
| ||
NET ASSETS |
|
|
|
|
| $ | 16,706,551 | ||
*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.
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 31, 2007
Statement of Assets and Liabilities July 31, 2007
ASSETS | ||||
| Investments in securities, at value (cost: $16,782,952) | $ | 17,126,435 | |
| Cash | 5 | ||
| Accrued interest receivable | 153,099 | ||
| Accrued dividends receivable | 3,103 | ||
| Prepaid expenses | 3,474 | ||
|
| Total Assets | $ | 17,286,116 |
| ||||
LIABILITIES | ||||
| Dividends payable | $ | 50,673 | |
| Security purchases payable |
| 504,612 | |
| Accrued expenses |
| 11,371 | |
| Payable to affiliates |
| 12,909 | |
|
| Total Liabilities | $ | 579,565 |
| ||||
NET ASSETS | $ | 16,706,551 | ||
| ||||
Net assets are represented by: |
| |||
| Paid-in capital | $ | 17,039,062 | |
| Accumulated undistributed net realized gain (loss) on investments and futures |
| (696,084) | |
| Accumulated undistributed net investment income (loss) |
| 20,090 | |
| Unrealized appreciation (depreciation) on investments | 343,483 | ||
|
| Total amount representing net assets applicable to 1,598,291 outstanding shares of no par common stock (unlimited shares authorized) | $ | 16,706,551 |
|
|
|
| |
|
| |||
Net Asset Value per share | $ | 10.45 | ||
|
|
| ||
Public offering price (based on sales charge of 4.25%) | $ | 10.91 | ||
The accompanying notes are an integral part of these financial statements.
Financial Statements July 31, 2007
Statement of Operations For the year ended July 31, 2007
INVESTMENT INCOME |
| |||
| Interest | $ | 799,119 | |
| Dividends | 21,387 | ||
|
| Total Investment Income | $ | 820,506 |
|
| |||
EXPENSES |
| |||
| Investment advisory fees | $ | 88,732 | |
| Distribution (12b-1) fees |
| 44,366 | |
| Administrative service fees |
| 23,132 | |
| Transfer agent fees |
| 33,839 | |
| Accounting service fees |
| 32,873 | |
| Custodian fees |
| 2,484 | |
| Professional fees |
| 13,264 | |
| Trustees fees |
| 2,372 | |
| Audit fees |
| 7,728 | |
| License, fees, and registrations |
| 3,696 | |
| Transfer agent out-of-pockets |
| 969 | |
| Legal fees |
| 694 | |
| Other fees |
| 595 | |
|
| Total Expenses | $ | 254,744 |
| Less expenses waived or absorbed by the Fund’s manager | (64,859) | ||
|
| Total Net Expenses | $ | 189,885 |
|
| |||
NET INVESTMENT INCOME (LOSS) | $ | 630,621 | ||
|
| |||
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS |
| |||
| Net realized gain (loss) from investment transactions | $ | 33,318 | |
| Net change in unrealized appreciation (depreciation) of investments |
| (131,902) | |
|
| Net Realized and Unrealized Gain (Loss) on Investments | $ | (98,584) |
|
| |||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | $ | 532,037 | ||
The accompanying notes are an integral part of these financial statements.
Financial Statements July 31, 2007
Statement of Changes in Net Assets
For the year ended July 31, 2007 and the year ended July 31, 2006
| For The Year Ended | For The Year Ended | |||||||
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS |
|
|
|
| |||||
| Net investment income (loss) | $ | 630,621 | $ | 718,442 | ||||
| Net realized gain (loss) on investment and futures transactions |
| 33,318 |
| 633,405 | ||||
| Net change in unrealized appreciation (depreciation) on investments and futures |
| (131,902) |
| (547,466) | ||||
|
| Net Increase (Decrease) in Net Assets Resulting From Operations | $ | 532,037 | $ | 804,381 | |||
| |||||||||
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS |
|
|
|
| |||||
| Dividends from net investment income ($.37 and $.35 per share, respectively) | $ | (624,718) | $ | (712,764) | ||||
| Distributions from net realized gain on investment transactions ($.00 and $.00 per share, respectively) |
| 0 |
| 0 | ||||
|
| Total Dividends and Distributions | $ | (624,718) | $ | (712,764) | |||
| |||||||||
CAPITAL SHARE TRANSACTIONS |
|
|
|
| |||||
| Proceeds from sale of shares | $ | 611,753 | $ | 783,051 | ||||
| Proceeds from reinvested dividends |
| 360,742 |
| 407,076 | ||||
| Cost of shares redeemed |
| (2,901,433) |
| (7,528,806) | ||||
|
| Net Increase (Decrease) in Net Assets Resulting from Capital Share Transactions | $ | (1,928,938) | $ | (6,338,679) | |||
|
|
|
|
| |||||
TOTAL INCREASE (DECREASE) IN NET ASSETS | $ | (2,021,619) | $ | (6,247,062) | |||||
NET ASSETS, BEGINNING OF PERIOD |
| 18,728,170 |
| 24,975,232 | |||||
NET ASSETS, END OF PERIOD | $ | 16,706,551 | $ | 18,728,170 | |||||
|
|
|
|
|
|
| |||
Undistributed Net Investment Income | $ | 20,090 | $ | 14,187 | |||||
The accompanying notes are an integral part of these financial statements.
Notes to Financial Statements July 31, 2007
Note 1: ORGANIZATION
The Fund is an investment portfolio of Integrity Managed Portfolios (the “Trust”) and is registered under the Investment Company Act of 1940, as amended (the “1940 Act”) as a non-diversified, open-end management investment company. The Trust may offer multiple portfolios; currently six portfolios are offered. The Trust 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 state 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 Fund became a series of the Trust. Prior to this date, 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.
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 Fund Services, 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; 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 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 is 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, 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.
Contingent deferred sales charge - In the case of investments of $1 million or more, a 1.00% CDSC may be assessed on shares redeemed within 12 months of purchase (excluding shares purchased with reinvested dividends and/or distributions).
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. Interest and penalties related to uncertain tax positions, if any, are classified in the Fund’s financial statements as other expense. Distributions during the year ended July 31, 2007, were characterized as tax-exempt for tax purposes.
The tax character of distributions paid was as follows:
|
|
| July 31, 2007 |
| July 31, 2006 |
|
| Tax-exempt income | $ | 624,718 | $ | 712,764 |
|
| Ordinary income |
| 0 |
| 0 |
|
| Long-term capital gains |
| 0 |
| 0 |
|
| Total | $ | 624,718 | $ | 712,764 |
|
As of July 31, 2007, the components of accumulated earnings/(deficit) on a tax basis were as follows:
| Undistributed Ordinary Income | Undistributed Long-Term Capital Gains | Accumulated Earnings | Accumulated Capital and Other Losses | Unrealized Appreciation/(Depreciation) | Total Accumulated Earnings/(Deficit) |
|
| $0 | $0 | ($696,084) | $363,573 | ($332,511) |
|
The Fund has unexpired capital loss carryforwards for tax purposes as of July 31, 2007 totaling $696,084, 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 following table:
Year |
| Unexpired Capital Losses |
2013 | $ | 696,084 |
For the year ended July 31, 2007, the Fund did not make any permanent reclassifications to reflect tax character.
Net capital losses incurred after October 31, and within the tax year are deemed to arise on the first business day of the Fund’s next taxable year. For the year ended July 31, 2007, the Fund deferred to August 1, 2007, post-October capital losses, post-October currency losses, and post-October passive foreign company losses of $0.
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 (depreciation) related to op en 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.
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 31, 2007, there were unlimited shares of no par authorized; 1,598,291 and 1,780,772 shares were outstanding at July 31, 2007 and July 31, 2006, respectively.
Transactions in capital shares were as follows:
| For The Year Ended | For The Year Ended |
Shares sold | 58,003 | 75,280 |
Shares issued on reinvestment of dividends | 34,165 | 39,039 |
Shares redeemed | (274,649) | (723,762) |
Net increase (decrease) | (182,481) | (609,443) |
Note 4: INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Integrity Money Management, the Fund’s investment adviser; Integrity Funds Distributor, Inc. (the “Distributor” or “Integrity Funds Distributor”), the Fund’s underwriter; and Integrity Fund Services, Inc. (“Integrity Fund Services”), the Fund’s transfer, accounting, and administrative services agent; are subsidiaries of Integrity Mutual Funds, the Fund’s sponsor.
The Fund has engaged Integrity Money Management 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 $23,873 of investment advisory fees after partial waiver for the year ended July 31, 2007. The Fund has a payable to Integrity Money Management of $1,366 at July 31, 2007 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 1.25% of the Fund’s average daily net assets on an annual basis up to the amount of the Investment Adviser and Management fee payable by the Fund to the Investment Adviser. Accordingly, after fee waivers and expense reimbursements, the Fund’s actual total annual operating expenses were 1.07% for the year ended July 31, 2007.
Principal underwriter and shareholder services - Integrity Funds Distributor serves as the principal underwriter for the Fund. The Fund has adopted a distribution plan for each class of shares as allowed by Rule 12b-1 of the 1940 Act. Distribution plans permit the Fund to reimburse its principal underwriter for costs related to selling shares of the Fund and for various other services. These costs, which consist primarily of commissions and service fees to broker-dealers who sell shares of the Fund, are paid by shareholders through expenses called “Distribution Plan expenses.” The Fund currently pays an annual distribution fee of up to 0.25% of the average daily net assets of the class. Distribution Plan expenses are calculated daily and paid monthly. The Fund has recognized $44,366 of distribution fees for the year ended July 31, 2007. The Fund has a payable to Integrity Funds Distributor of $3,586 at July 31, 2007 for distri bution fees.
Integrity Fund Services provides transfer agent services for a variable fee equal to 0.20% 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, with a minimum of $2,000 per month plus reimbursement of out-of-pocket expenses. An additional fee of $500 per month is charged for each additional share class. The Fund has recognized $33,839 of transfer agency fees and expenses for the year ended July 31, 2007. The Fund has a payable to Integrity Fund Services of $2,869 at July 31, 2007 for transfer agency fees. Integrity Fund Services 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 ne t 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 $32,873 of accounting service fees for the year ended July 31, 2007. The Fund has a payable to Integrity Fund Services of $2,784 at July 31, 2007 for accounting service fees. Integrity Fund Services also acts as the Fund’s administrative services agent for a variable fee equal to 0.125% 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, with a minimum of $2,000 per month plus out-of-pocket expenses. An additional fee of $500 per month is charged by Integrity Fund Services for each additional share class. The Fund has recognized $23,132 of administrative services fees for the year ended July 31, 2007. The Fund has a payable to Integrity Fund Services of $2,067 at July 31, 2007 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 $1,448,496 and $3,791,622, respectively, for the year ended July 31, 2007.
Note 6: INVESTMENT IN SECURITIES
At July 31, 2007, the aggregate cost of securities for federal income tax purposes was substantially the same for financial reporting purposes at $16,782,952. The net unrealized appreciation of investments based on the cost was $343,483, which is comprised of $418,122 aggregate gross unrealized appreciation and $74,639 aggregate gross unrealized depreciation. Differences between financial reporting-basis and tax-basis unrealized appreciation/depreciation are due to differing treatment of market discount.
Note 7: RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In July 2006, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes,” an interpretation of SFAS 109, “Accounting for Income Taxes” (FIN 48). FIN 48 is effective on the last business day of the semi-annual reporting period for fiscal years beginning after December 15, 2006. FIN 48 established the accounting for uncertain tax positions that have been taken or are expected to be taken in a tax return, including the recognition and measurement of their financial statement effects. Pursuant to FIN 48, the Fund would recognize a tax benefit only if it is “more likely than not” that a particular tax position would be sustained upon examination or audit. To the extent the “more likely than not” standard is satisfied, the benefit associated with a tax position is measured as the largest amount that is greater than 50% likely o f being realized upon settlement.
In September 2006, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 157, Fair Value Measurements. This standard defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles and expands disclosures about fair value measurements. SFAS 157 is effective for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The Fund is presently evaluating the impact of adopting SFAS 157.
July 31, 2007
FINANCIAL HIGHLIGHTS
Selected per share data and ratios for the period indicated.
|
| For The Year Ended July 31, 2007 |
| For The Year Ended July 31, 2006 |
| For The Year Ended July 29, 2005 |
| For The Four Month Period Ended July 30, 2004 |
| For The Year Ended March 31, 2004 |
| For The Year Ended March 31, 2003 | ||
NET ASSET VALUE, BEGINNING OF PERIOD | $ | 10.52 | $ | 10.45 | $ | 11.10 | $ | 11.19 | $ | 11.35 | $ | 10.97 | ||
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Income from Investment Operations: |
|
|
|
|
|
|
|
|
|
|
|
| ||
| Net investment income | $ | .37 | $ | .35 | $ | .35 | $ | .13 | $ | .39 | $ | .39 | |
| Net realized and unrealized gain (loss) on investment and futures transactions |
| (.07) |
| .07 |
| (.43) |
| (.09) |
| (.10) |
| .38 | |
| Total Income (Loss) From Investment Operations | $ | .30 | $ | .42 | $ | (.08) | $ | .04 | $ | .29 | $ | .77 | |
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Less Distributions: |
|
|
|
|
|
|
|
|
|
|
|
| ||
| Dividends from net investment income | $ | (.37) | $ | (.35) | $ | (.35) | $ | (.13) | $ | (.39) | $ | (.39) | |
| Distributions from net capital gains |
| .00 |
| .00 |
| (.22) |
| .00 |
| (.06) |
| .00 | |
| Total Distributions | $ | (.37) | $ | (.35) | $ | (.57) | $ | (.13) | $ | (.45) | $ | (.39) | |
|
|
|
|
|
|
|
|
|
|
|
|
| ||
NET ASSET VALUE, END OF PERIOD | $ | 10.45 | $ | 10.52 | $ | 10.45 | $ | 11.10 | $ | 11.19 | $ | 11.35 | ||
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Total Return |
| 2.89%A |
| 4.12%A |
| (0.74%)A |
| 1.23%A,C |
| 2.56%A |
| 7.16%A | ||
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RATIOS/SUPPLEMENTAL DATA: |
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| Net assets, end of period (in thousands) | $ | 16,707 | $ | 18,728 | $ | 24,975 | $ | 31,683 | $ | 33,270 | $ | 37,847 | |
| Ratio of net expenses (after expense assumption) to average net assets |
| 1.07%B |
| 1.02%B |
| 0.97%B |
| 0.95%B,C |
| 0.95%B |
| 0.95%B | |
| Ratio of net investment income to average net assets |
| 3.52% |
| 3.35% |
| 3.24% |
| 3.49%C |
| 3.44% |
| 3.49% | |
| Portfolio turnover rate |
| 8.50% |
| 1.60% |
| 4.87% |
| 1.92% |
| 34.40% |
| 26.00% | |
A Excludes the maximum sales charge of 4.25%.
B During the periods since March 31, 2004, Integrity Money Management assumed/waived expenses of $64,859, $58,447, $86,089, and $29,051. If the expenses had not been assumed/waived, the annualized ratio of total expenses to average net assets would have been 1.44%, 1.30%, 1.27%, and 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 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. If the expenses had not been assumed/waived, the annualized ratio of total expenses to average net assets would have b een 1.22%.
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.
July 31, 2007
TAX INFORMATION
Tax Information For The Year Ended July 31, 2007 (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 31, 2006 |
| August 31, 2006 | $ | .030529 |
| - |
| - |
September 29, 2006 |
| September 29, 2006 | $ | .029588 |
| - |
| - |
October 31, 2006 |
| October 31, 2006 | $ | .031994 |
| - |
| - |
November 30, 2006 |
| November 30, 2006 | $ | .031246 |
| - |
| - |
December 29, 2006 |
| December 29, 2006 | $ | .030296 |
| - |
| - |
January 31, 2007 |
| January 31, 2007 | $ | .032563 |
| - |
| - |
February 28, 2007 |
| February 28, 2007 | $ | .031455 |
| - |
| - |
March 30, 2007 |
| March 30, 2007 | $ | .030631 |
| - |
| - |
April 30, 2007 |
| April 30, 2007 | $ | .030661 |
| - |
| - |
May 31, 2007 |
| May 31, 2007 | $ | .030904 |
| - |
| - |
June 29, 2007 |
| June 29, 2007 | $ | .030162 |
| - |
| - |
July 31, 2007 |
| July 31, 2007 | $ | .031686 |
| - |
| - |
Shareholders should consult their tax advisors.
July 31, 2007
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Trustees of Maine Municipal Fund
We have audited the accompanying statement of assets and liabilities of the Maine Municipal Fund (one of the portfolios constituting the Integrity Managed Portfolios), including the schedule of investments as of July 31, 2007, the related statement of operations for the year then ended, the statement of changes in net assets for the years ended July 31, 2007 and July 31, 2006, and the financial highlights for the years ended July 31, 2007,July 31, 2006, and July 29, 2005, the four month period ended July 30, 2004, 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 audits. The financial highlights for the year ended March 31, 2003 was audited by other auditors whose report dated May 16, 2003 expressed an unqualified opinion on the respective hi ghlights.
We conducted our audits 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 31, 2007 by correspondence with the custodian and brokers. 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 audits provide 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 31, 2007, the results of its operations for the year then ended, the changes in its net assets for the years ended July 31, 2007 and July 31, 2006, and the financial highlights for the years ended July 31, 2007,July 31, 2006, July 29, 2005, the four month period ended July 30, 2004, 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 12, 2007
Dear Shareholder:
Enclosed is the annual report of the Nebraska Municipal Fund (the “Fund”) for the year ended July 31, 2007. The Fund’s portfolio and related financial statements are presented within for your review.
The first half of 2007 has proven a tricky period for most bond fund managers and has likely rattled some bond fund investors as well. Entering the year, many expected the Federal Reserve to cut its target for the federal funds rate (the rate banks charge one another for loans), but recently the direction of the bond market remains determined by credit issues and the status of other asset classes.
In recent years, investors’ enthusiasm about the global economy allowed borrowers across the spectrum to enjoy cheap debt. However, the recent turmoil in the sub-prime housing market (loans to less than creditworthy individuals) is beginning to show a credit squeeze may be underway. Recent surveys conducted by the Federal Reserve suggest that banks are tightening lending standards on non-traditional and sub-prime residential loans as well as commercial real estate.
The key to the economy going forward will be consumer spending. If the housing woes spread over the economy, consumer spending could slow and the economy is likely to grow at a subdued pace into early 2008.
The sub-prime fear helped push the yield on the 10-year Treasury bond to 4.77% for the period, higher than the 4.70% at which it began 2007, but below the 5.30% it hit in mid-June.
While rising interest rates can cause bond market valuations to fall, it also enables investors to lock in higher yielding bonds. Short-term fund losses can sting, but they shouldn’t cause investors to lose sight of their long-term goals and objectives.
After spending much of 2007 in positive territory, the average municipal bond fund has posted a small gain through July.
Nebraska Municipal Fund shares began the year at $10.20 and ended the period at $10.13 for a total return of 3.16%*. This compares to the Lehman Brothers Municipal Bond Index return of 4.26% for the period.
The Fund’s performance can be attributed to its defensive portfolio, with an average maturity of 15 years and a low average maturity to the first call date of 4.5 years. That, along with an average portfolio coupon of 5.22%, helps relative performance in a rising rate environment.
An important part of the Fund’s strategy includes searching the primary and secondary markets for high quality, double tax-exempt issues. Some issues purchased during the period include: University of Nebraska Omaha 5.00% coupon, due 2032; Bryan LGH Medical Center 4.75% coupon, due 2021; and University of Nebraska 5.00% coupon, due 2020. Portfolio quality for the year was as follows: AAA 55.1%, AA 32.8%, A 5.1%, BBB 2.5% and NR 4.5%.
Income exempt from federal and Nebraska 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.integrityfunds.com for daily prices along with pertinent Fund information.
Sincerely,
Monte Avery
Senior Portfolio Manager
The views expressed are those of Monte Avery, Senior Portfolio Manager with Integrity Money Management, Inc. 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, the markets generally, or any Integrity Mutual Fund.
*Performance does not include applicable front-end or contingent deferred sales charges (“CDSCs”), which would have reduced the performance.
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 (800) 276-1262.
You should consider the Fund’s investment objectives, risks, charges, and expenses carefully before investing. For this and other important information, please obtain a free Fund prospectus from your financial adviser and read it carefully prior to investing.
Bond prices and, therefore, the value of bond funds decline as interest rates rise. Because the Fund invests in securities of a single state, the Fund is more susceptible to factors adversely impacting the respective state securities than a municipal bond fund that does not concentrate its securities in a single state.
July 31, 2007 (Unaudited)
PROXY VOTING ON FUND PORTFOLIO SECURITIES
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to securities held in the Fund’s portfolio is available, without charge and upon request, by calling (800) 276-1262. A report on Form N-PX of how the Fund voted any such proxies during the most recent 12-month period ended June 30 is available through Integrity’s website at www.integrityfunds.com. The information is also available from the Electronic Data Gathering, Analysis, and Retrieval (“EDGAR”) database on the website of the Securities and Exchange Commission (“SEC”) at www.sec.gov.
QUARTERLY PORTFOLIO SCHEDULE
Within 60 days of the end of its second and fourth fiscal quarters, the Fund provides a complete schedule of portfolio holdings in its semi-annual and annual reports on the Form N-CSR(S). These reports are filed electronically with the SEC and are delivered to the shareholders of the Fund. The Fund also files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms N-Q and N-CSR(S) are available on the SEC’s website at www.sec.gov. The Fund’s Forms N-Q and N-CSR(S) may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling (202) 942-8090. You may also access this information from Integrity’s website at www.integrityfunds.com.
July 31, 2007 (Unaudited)
TERMS AND DEFINITIONS
Appreciation: Increase in the value of an asset
Average Annual Total Return: A standardized measurement of the return (yield and appreciation) earned by a 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 the 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 marketplace
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: The value of all of 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 creditworthiness; “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; represents the aggregate percentage or dollar value change over the period
July 31, 2007 (Unaudited)
COMPOSITION
Portfolio Quality Ratings
(Based on total long-term investments)
| AAA | 55.1% |
| AA | 32.8% |
| A | 5.1% |
| BBB | 2.5% |
| NR | 4.5% |
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 Ratings Group. Non-rated bonds have been determined to be of appropriate quality for the portfolio by Integrity Money Management, Inc. (the “Investment Adviser” or “Integrity Money Management”), the Fund’s investment adviser.
These percentages are subject to change.
Portfolio Market Sectors
(As a percentage of net assets)
| S-School | 34.0% |
| H-Health | 20.7% |
| U-Utilities | 14.8% |
| I-Industrial | 11.5% |
| T-Transportation | 7.3% |
| W/S-Water/Sewer | 6.3% |
| O-Other | 5.4% |
Market sectors are breakdowns of the Fund’s portfolio holdings into specific investment classes.
These percentages are subject to change.
July 31, 2007 (Unaudited)
DISCLOSURE OF FUND EXPENSES
The example below is intended to describe the fees and expenses borne by shareholders and the impact of those costs on your investment.
Example
As a shareholder of the Fund, you incur two types of costs:
| • | Transaction costs: including sales charges (loads), redemption fees, and exchange fees |
| • | Ongoing costs: including management fees, distribution (12b-1) fees, and other expenses |
This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from January 31, 2007 to July 31, 2007.
The example illustrates the Fund’s costs in two ways:
Actual Expenses: The section in the table under the heading “Actual” provides information about actual account values and actual expenses. You may use the information in these columns together with the amount you invested to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an account value of $8,600 divided by $1,000 equals 8.6), then multiply the result by the number in the appropriate column for your share class in the column entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes: The section in the table under the heading “Hypothetical (5% return before expenses)” provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the section in the table under the heading “Hypothetical (5% return before expenses)” is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
| Beginning Account Value | Ending Account Value | Expenses Paid During Period* |
Actual | $1,000.00 | $1,012.21 | $5.38 |
Hypothetical (5% return before expenses) | $1,000.00 | $1,019.44 | $5.40 |
*Expenses are equal to the annualized expense ratio of 1.07% multiplied by the average account value over the period, multiplied by 180/360 days. The Fund’s ending account value on the first line of the table is based on its actual total return of 1.22% for the six-month period of January 31, 2007 to July 31, 2007.
July 31, 2007 (Unaudited)
AVERAGE ANNUAL TOTAL RETURNS
| For periods ending July 31, 2007 | ||||||
1 year | 3 year | 5 year | 10 year | Since Inception | |||
|
| Without Sales Charge | 3.16% | 2.60% | 2.11% | 3.44% | 3.81% |
|
| With Sales Charge (4.25%) | (1.20%) | 1.12% | 1.22% | 2.99% | 3.49% |
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Lehman Brothers Municipal Bond Index | 1 year | 3 year | 5 year | 10 year | Since Inception | ||
| 4.26% | 4.38% | 4.50% | 5.23% | 5.52% | ||
Putting performance into perspective
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 (800) 276-1262.
You should consider the Fund’s investment objectives, risks, charges, and expenses carefully before investing. For this and other important information, please obtain a free Fund prospectus from your financial adviser and read it carefully prior to investing.
The table above does not reflect the deduction of taxes that a shareholder would pay on Fund distributions and redemption of Fund shares.
July 31, 2007 (Unaudited)
COMPARATIVE INDEX GRAPH
Comparison of change in value of a $10,000 investment in the Fund and the Lehman Brothers Municipal Bond Index
Nebraska Municipal Fund without Sales Charge | Nebraska Municipal Fund with Maximum Sales Charge | Lehman Brothers Municipal Bond Index | |
07/31/1997 | $10,000 | $10,000 | |
1998 | $10,396 | $10,599 | |
1999 | $10,793 | $10,904 | |
2000 | $11,039 | $11,374 | |
2001 | $12,145 | $12,522 | |
2002 | $12,639 | $13,362 | |
2003 | $12,537 | $13,842 | |
2004 | $12,986 | $14,643 | |
2005 | $12,962 | $15,575 | |
2006 | $13,597 | $15,973 | |
2007 | $14,028 | $16,654 |
Putting performance into perspective
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 (800) 276-1262.
You should consider the Fund’s investment objectives, risks, charges, and expenses carefully before investing. For this and other important information, please obtain a free Fund prospectus from your financial adviser and read it carefully prior to investing.
The graph does not reflect the deduction of taxes that a shareholder would pay on Fund distributions and redemptions of Fund shares.
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. If they could, transaction costs and other expenses would be incurred. All Fund and benchmark returns include reinvested dividends.
July 31, 2007 (Unaudited)
MANAGEMENT OF THE FUND
The Board of Integrity Managed Portfolios consists of four Trustees. These same individuals, unless otherwise noted, also serve as Directors or Trustees for the funds in the Integrity family of funds, the six series of Integrity Managed Portfolios and the six 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. Two of the remaining three Trustees and/or 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 COMPLEX1 | OTHER DIRECTORSHIPS HELD OUTSIDE THE FUND COMPLEX |
Jerry M. Stai | Trustee | Indefinite
Since January 2006 | Faculty, Embry-Riddle University (August 2000 to September 2005); Faculty, Park University (August 2005 to December 2005); Non-Profit Specialist, Bremer Bank (since July 2005); Faculty, Minot State University (since August 2000); Director, ND Tax-Free Fund, Inc., Montana Tax-Free Fund, Inc., Integrity Fund of Funds, Inc., (since January 2006); Trustee, The Integrity Funds (since January 2006). | 15 | Marycrest Franciscan Development, Inc. |
Orlin W. Backes | Trustee | Indefinite
Since January 1996 | Attorney, McGee, Hankla, Backes & Dobrovolny, P.C.; Director, South Dakota Tax-Free Fund, Inc. (April 1995 to June 2004), Integrity Small-Cap Fund of Funds, Inc. (September 1998 to June 2003), ND Tax-Free Fund, Inc., Montana Tax-Free Fund, Inc., and Integrity Fund of Funds, Inc., (Since April 2005); Trustee, The Integrity Funds (since May 2003); and Director, First Western Bank & Trust. | 15 | First Western Bank & Trust |
R. James Maxson | Trustee | Indefinite
Since January 1999 | Attorney, Maxson Law Office (since November 2002); Attorney, McGee, Hankla, Backes & Dobrovolny, P.C. (April 2000 to November 2002); Director, South Dakota Tax-Free Fund, Inc. (January 1999 to June 2004), Integrity Small-Cap Fund of Funds, Inc. (January 1999 to June 2003) Integrity Fund of Funds, Inc., ND Tax-Free Fund, Inc. and Montana Tax-Free Fund, Inc. (since January 1999); and Trustee, The Integrity Funds (since May 2003). | 15 | Vincent United Methodist Foundation
Minot Area Development Corporation |
1The Fund Complex consists of the three incorporated funds in the Integrity family of funds, the six series of Integrity Managed Portfolios, and the six series of The Integrity Funds.
Trustees 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 (800) 276-1262.
July 31, 2007 (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 other directorships, if any, held outside the Fund Complex, are shown below.
INTERESTED TRUSTEE
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 COMPLEX1 | OTHER DIRECTORSHIPS HELD OUTSIDE THE FUND COMPLEX |
Robert E. Walstad2,3 | Trustee and Chairman | Indefinite
Since January 1996 | Director (Sept. 1987 to Feb. 2007), President (Sept. 2002 to May 2003), CEO (Sept. 2001 to Feb. 2007), Integrity Mutual Funds, Inc.; Director, President and Treasurer, (Aug. 1988 to Feb. 2007), Integrity Money Management, Inc.; Director, President and Treasurer (Aug. 1988 to Sept. 2004), ND Capital, Inc.; Director, President and Treasurer (May 1989 to Feb. 2007), Integrity Fund Services, Inc.; Director, President, CEO, and Treasurer, (Jan. 1996 to Aug. 2003), Integrity Funds Distributor, Inc.; Director (Oct. 1999 to June 2003) Magic Internet Services, Inc.; Director (May 2000 to June 2003), President (Oct. 2002 to June 2003), ARM Securities Corporation; Director, CEO, Chairman, (Jan. 2002 to Feb. 2007) and President (Sept. 2002 to Dec. 2004), Capital Financial Services, Inc.; Director and President, (April 1994 to June 2004) South Dakota Tax-Free Fund, Inc., (Sept. 1998 to June 2003) Integrity Small-Cap Fund of Funds Inc.; President (May 2003 to Feb. 2007), Integrity Managed Portfolios and (Jan. 2006 to Feb. 2007) The Integrity Funds, (Jan. 1995 to Feb 2007) Integrity Fund of Funds, Inc., (Jan. 1989 to Feb. 2007) ND Tax-Free Fund, Inc., (Aug. 1993 to Feb 2007) Montana Tax-Free Fund, Inc.; Director and Chairman (since Jan. 1995) Integrity Fund of Funds, Inc., (since Jan. 1989) ND Tax-Free Fund, Inc., and (since Aug. 1993) Montana Tax-Free Fund, Inc.; Trustee, Chairman, (since January 2006) and Treasurer (January 2006 to May 2004), Integrity Managed Portfolios and (since May 2003), The Integrity Funds. | 15 | Minot Park Board |
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 COMPLEX1 | OTHER DIRECTORSHIPS HELD OUTSIDE THE FUND COMPLEX |
Mark R.Anderson3 | President | Indefinite
Since July 2007 | Personal Trust Officer (May 1999 to April 2003) Wells Fargo Bank; President and COO (April 2003 to Feb 2007), President, Director and CEO (since Feb. 2007) Integrity Mutual Funds, Inc.; President and Director (since Feb. 2007) Integrity Money Management, Inc., and Integrity Fund Services, Inc.; President and Director (Since August 2003) Integrity Funds Distributor, Inc.; President (Since July 2007) Montana Tax-Free Fund, Inc., Integrity Fund of Funds, Inc., and ND Tax-Free Fund, Inc., Integrity Managed Portfolios and The Integrity Funds; President and Treasurer (since July 2005) BAC Properties, LLC. | N/A | None |
Peter A. Quist2 | Vice President, Secretary | Indefinite
Since January 1996 | Attorney; Director and Vice President, Integrity Mutual Funds, Inc.; Director, Vice President and Secretary, Integrity Money Management, ND Capital, Inc. (August 1988 to September 2004), Integrity Fund Services, Inc., and Integrity Funds Distributor, Inc.; Vice President, Secretary Director, ARM Securities Corporation (May 2000 to June 2003); Director, South Dakota Tax-Free Fund, Inc. (April 1994 to June 2004), Integrity Small-Cap Fund of Funds, Inc. (September 1998 to June 2003), Montana Tax-Free Fund, Inc., Integrity Fund of Funds, Inc., and ND Tax Free Fund, Inc. | 3 | None |
Laura K. Anderson | Treasurer | Indefinite
Since October 2005 | Fund Accountant (until May 2004), Fund Accounting Supervisor (May 2004 to October 2005), Fund Accounting Manager (since October 2005), Manager of Mutual Fund Operations (Since October 2006), Integrity Fund Services, Inc.; Treasurer (since October 2005), The Integrity Funds, ND Tax-Free Fund, Inc., Montana Tax-Free Fund, Inc., and Integrity Fund of Funds, Inc. | N/A | None |
Brent M. Wheeler | Mutual Fund Chief Compliance Officer | Indefinite
Since October 2005 | Fund Accounting Manager (May 1998 to October 2005), Integrity Fund Services, Inc.; Treasurer (May 2004 to October 2005), Mutual Fund Compliance Officer (since October 2005), The Integrity Funds, ND Tax-Free Fund, Inc., Montana Tax-Free Fund, Inc., and Integrity Fund of Funds, Inc. | N/A | None |
1The Fund Complex consists of the three incorporated funds in the Integrity family of funds, the six series of Integrity Managed Portfolios, and the six series of The Integrity Funds.
2Trustees and/or officers who are “interested persons” of the Funds as defined in the Investment Company Act of 1940. Mr. Quist is an interested person by virtue of being an officer and Director of the Fund’s Investment Adviser and Principal Underwriter. Mr. Walstad is an interested person by virtue of being an officer of the Funds and a shareholder of Integrity Mutual Funds, Inc. As indicated above, effective February 1, 2007, Mr. Walstad retired from his roles as, among other things, Director and CEO of Integrity Mutual Funds, Inc., and Director, President and Treasurer of Integrity Money Management. However, a member of his immediate family is a director of Integrity Mutual Funds, Inc.
3At a Fund Board meeting held on July 26, 2007, Interested Director/Trustee, Chairman and Officer Robert E. Walstad resigned as President of the Funds. Subsequently, the Board nominated and appointed Mark R. Anderson as President of the Funds, effective July 26, 2007. Mr. Walstad will remain as Director/Trustee and Chairman of the Funds.
Trustees 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 (800) 276-1262.
Schedule of Investments July 31, 2007
Name of Issuer |
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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 | ||
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NEBRASKA MUNICIPAL BONDS (97.8%) |
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|
|
| ||
|
|
|
|
|
|
|
| ||
Adams Cty., NE Hosp. Auth. #001 (Mary Lanning Memorial Hosp.) ASGUA | NR/AA | 5.300% | 12/15/2018 | $ | 250,000 | $ | 254,930 | ||
Dawson Cty., NE School Dist. #20 (Gothenburg) G.O. FSA | Aaa/AAA | 4.500 | 12/15/2025 |
| 405,000 |
| 405,348 | ||
Dawson Cty., NE SID #001 (IBP, Inc. Proj.) Ref. G.O. | Baa/BBB- | 5.650 | 02/01/2022 |
| 700,000 |
| 700,000 | ||
*Dodge Cty., NE SD #001 (Fremont Public Schools) FSA | Aaa/NR | 5.500 | 12/15/2020 |
| 1,000,000 |
| 1,058,890 | ||
Douglas Cty., NE (Catholic Health Corp.) Rev. MBIA | Aaa/AAA | 5.500 | 11/15/2021 |
| 340,000 |
| 343,373 | ||
Douglas Cty., NE (Catholic Health Corp.) Rev. MBIA | Aaa/AAA | 5.375 | 11/15/2015 |
| 45,000 |
| 45,225 | ||
Douglas Cty., NE (Catholic Health Corp.) Rev. MBIA | Aaa/AAA | 5.375 | 11/15/2015 |
| 225,000 |
| 226,125 | ||
Douglas Cty., NE G.O. | Aa-1/AA+ | 4.750 | 12/01/2025 |
| 250,000 |
| 254,680 | ||
Douglas Cty., NE Hosp. Auth. #001 (Alegent Hlth - Immanuel Med. Ctr.) Rev. AMBAC | Aaa/AAA | 5.250 | 09/01/2021 |
| 250,000 |
| 255,745 | ||
Douglas Cty., NE Hosp. Auth. #002 (Nebraska Medical Center) | A-1/NR | 5.000 | 11/15/2016 |
| 250,000 |
| 261,175 | ||
Douglas Cty., NE SD #010 (Elkhorn Pub. Schools) G.O. FSA Insured | NR/AAA | 4.500 | 12/15/2023 |
| 250,000 |
| 249,200 | ||
Douglas Cty., NE SD #010 (Elkhorn Public Schools) | NR/A+ | 5.050 | 12/15/2022 |
| 150,000 |
| 151,497 | ||
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 |
| 280,000 | ||
Douglas Cty., NE SID #397 (Linden Estates II) | NR/NR | 5.600 | 04/01/2023 |
| 500,000 |
| 500,000 | ||
Fremont, NE Combined Utilities Rev. MBIA | Aaa/AAA | 5.000 | 10/15/2021 |
| 500,000 |
| 518,790 | ||
Hall Cty., NE School Dist. #2 Grand Island FSA | Aaa/AAA | 5.000 | 12/15/2023 |
| 500,000 |
| 524,770 | ||
Kearney Cty., NE Highway Allocation Fund AMBAC | Aaa/NR | 5.350 | 06/15/2021 |
| 100,000 |
| 100,068 | ||
Lancaster Cty, NE School District #0160 (Norris Schools) G.O. FSA | Aaa/NR | 5.000 | 12/15/2025 |
| 250,000 |
| 255,132 | ||
Lancaster Cty., NE Hosp. Auth. #1 (BryanLGH Medical Center Project) | A-1/NR | 4.750 | 06/01/2021 |
| 1,000,000 |
| 1,007,710 | ||
Lancaster Cty., NE School Dist. #1 (Lincoln Public Schools) | Aa-1/AAA | 5.250 | 01/15/2021 |
| 500,000 |
| 523,440 | ||
Lancaster Cty., NE School Dist. #1 (Lincoln Public Schools) G.O. | Aa-1/AAA | 5.250 | 01/15/2022 |
| 500,000 |
| 529,025 | ||
Lincoln Cty., NE School Dist. #55 (Sutherland Public Schools) FSA | Aaa/NR | 5.000 | 12/15/2020 |
| 225,000 |
| 225,106 | ||
Lincoln, NE Elec. Syst. Rev. | Aa/AA | 5.000 | 09/01/2021 |
| 1,000,000 |
| 1,037,940 | ||
Lincoln, NE San. Swr. Rev. MBIA | Aaa/AAA | 4.500 | 06/15/2029 |
| 500,000 |
| 491,265 | ||
Lincoln, NE Water Rev. | Aa/AA- | 5.000 | 08/15/2022 |
| 575,000 |
| 599,087 | ||
Madison Cty., NE Hosp. Auth. #001 (Faith Regl. Hlth. Svcs.) Rev. ASGUA | NR/AA | 5.350 | 07/01/2018 |
| 250,000 |
| 255,980 | ||
Metropolitan Community College South Omaha Bldg. Proj. AMBAC | Aaa/AAA | 4.500 | 03/01/2026 |
| 1,000,000 |
| 1,003,160 | ||
NE Educ. Finance Auth. (Wesleyan Univ.) Rev. Radian Insured | NR/AA | 5.500 | 04/01/2027 |
| 1,000,000 |
| 1,048,750 | ||
NE Hgr. Educ. Loan Program B Rev. MBIA | Aaa/AAA | 6.000 | 06/01/2028 |
| 100,000 |
| 100,481 | ||
NE Hgr. Educ. Loan Program Junior Subord. Rev. MBIA | Aaa/AAA | 6.400 | 06/01/2013 |
| 185,000 |
| 192,230 | ||
NE Hgr. Educ. Loan Program Junior Subord. Term MBIA | Aaa/AAA | 6.450 | 06/01/2018 |
| 400,000 |
| 416,404 | ||
NE Hgr. Educ. Loan Program Senior Subord. Term MBIA | Aaa/AAA | 6.250 | 06/01/2018 |
| 800,000 |
| 833,800 | ||
*NE Hgr. Educ. Loan Program Student Loan MBIA | Aaa/AAA | 5.875 | 06/01/2014 |
| 880,000 |
| 884,224 | ||
NE Invmt. Finance Auth. (Catholic Hlth. Initiatives) Rev. | NR/AA | 5.125 | 12/01/2017 |
| 200,000 |
| 203,218 | ||
NE Invmt. Finance Auth. (Childrens Healthcare Svcs.) Facs. Rev. | Aaa/AAA | 5.500 | 08/15/2017 |
| 410,000 |
| 423,862 | ||
#NE Invmt. Finance Auth. (Childrens Healthcare Svcs.) Rev. AMBAC | Aaa/AAA | 5.500 | 08/15/2027 |
| 1,000,000 |
| 1,034,250 | ||
NE Invmt. Finance Auth. (Great Plains Regional Medical Center) ASGUA | NR/AA | 5.450 | 11/15/2017 |
| 400,000 |
| 407,664 | ||
NE Invmt. Finance Auth. (Great Plains Regional Medical Center) Rev. Asset Guaranty | NR/AA | 5.450 | 11/15/2022 |
| 750,000 |
| 792,915 | ||
NE Invmt. Finance Auth. Multifamily Hsg. Rev. FNMA | NR/AAA | 6.200 | 06/01/2028 |
| 135,000 |
| 136,357 | ||
*NE Invmt. Finance Auth. Single Family Hsg. Rev. | NR/AAA | 6.300 | 09/01/2028 |
| 165,000 |
| 167,543 | ||
NE Invmt. Finance Auth. Single Family Hsg. Rev. GNMA | NR/AAA | 6.200 | 09/01/2017 |
| 35,000 |
| 35,539 | ||
NE Invmt. Finance Auth. Single Family Hsg. Rev. GNMA | NR/AAA | 6.250 | 03/01/2021 |
| 35,000 |
| 35,540 | ||
NE Invmt. Finance Auth. Single Family Hsg. Rev. GNMA/FNMA | NR/AAA | 6.250 | 09/01/2028 |
| 10,000 |
| 10,133 | ||
Omaha Convention Hotel Corp (Convention Ctr. Rev.) | Aaa/AAA | 4.250 | 02/01/2026 |
| 500,000 |
| 474,170 | ||
Omaha Convention Hotel Corp. (Convention Ctr. Rev.) | Aaa/AAA | 4.375 | 02/01/2035 |
| 500,000 |
| 467,375 | ||
Omaha, NE (Riverfront Project) Special Obligation | Aa-1/AA | 5.500 | 02/01/2029 |
| 1,000,000 |
| 1,069,790 | ||
Omaha, NE Public Power Dist. (Electric Rev) AMBAC | Aaa/AAA | 4.750 | 02/01/2025 |
| 250,000 |
| 256,920 | ||
Omaha, NE Public Power Dist. (Electric Rev) AMBAC | Aaa/AAA | 4.300 | 02/01/2031 |
| 100,000 |
| 93,468 | ||
Omaha, NE Public Power Dist. Elec. Syst. Rev. | Aa/AA | 5.200 | 02/01/2022 |
| 500,000 |
| 519,325 | ||
Omaha, NE Public Power Dist. Elec. Syst. Rev. | Aa/NR | 6.200 | 02/01/2017 |
| 650,000 |
| 735,995 | ||
Omaha, NE Public Power Electric Rev. | Aa/AA | 5.000 | 02/01/2034 |
| 1,000,000 |
| 1,034,170 | ||
Omaha, NE Various Purpose | Aaa/AAA | 5.000 | 05/01/2022 |
| 250,000 |
| 261,015 | ||
Omaha, NE Various Purpose | Aaa/AAA | 4.250 | 10/15/2026 |
| 500,000 |
| 484,375 | ||
Papillion, NE G.O. MBIA | Aaa/AAA | 4.350 | 12/15/2027 |
| 250,000 |
| 241,220 | ||
Platte Cty., NE G.O. FSA | Aaa/AAA | 4.750 | 12/15/2014 |
| 500,000 |
| 502,625 | ||
Platte Cty., NE Hosp. Auth. No. 1 (Columbus Community Hospital Proj.) Hosp. Rev. Asset Guaranty | NR/AA | 5.650 | 05/01/2012 |
| 100,000 |
| 104,110 | ||
Platte Cty., NE Hosp. Auth. No. 1 (Columbus Community Hospital Proj.) Hosp. Rev. Asset Guaranty | NR/AA | 6.150 | 05/01/2030 |
| 250,000 |
| 264,812 | ||
Sarpy Cty., NE School Dist. #046 FSA | Aaa/AAA | 5.000 | 12/15/2022 |
| 200,000 |
| 201,990 | ||
Saunders Cty., NE G.O. FSA | Aaa/AAA | 5.000 | 11/01/2030 |
| 250,000 |
| 255,627 | ||
Saunders Cty., NE G.O. MBIA | Aaa/AAA | 4.250 | 12/15/2021 |
| 515,000 |
| 501,059 | ||
Univ. Nebraska Board of Regents Univ. NE Omaha Student Facs. | Aa/AA- | 5.000 | 05/15/2032 |
| 250,000 |
| 259,400 | ||
Univ. of NE (U. of NE - Lincoln Student Fees) Rev. | Aa/AA- | 5.125 | 07/01/2032 |
| 250,000 |
| 258,803 | ||
University of NE Fac. Corp. Deferred Maintenance AMBAC | Aaa/AAA | 5.000 | 07/15/2020 |
| 500,000 |
| 528,905 | ||
|
|
|
|
|
|
|
| ||
TOTAL NEBRASKA MUNICIPAL BONDS (COST: $27,188,082) |
|
|
| $ | 27,760,725 | ||||
|
|
|
|
|
|
|
| ||
SHORT-TERM SECURITIES (1.3%) |
|
|
|
| Shares |
|
| ||
Wells Fargo Advantage National Tax-Free Money Market (COST: $382,585) |
| 382,585 | $ | 382,585 | |||||
|
|
|
|
|
|
|
| ||
TOTAL INVESTMENTS IN SECURITIES (COST: $27,570,667) |
|
|
| $ | 28,143,310 | ||||
OTHER ASSETS LESS LIABILITIES |
|
|
|
|
|
| 237,527 | ||
|
|
|
|
|
|
|
| ||
NET ASSETS |
|
|
|
|
| $ | 28,380,837 | ||
* 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.
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 31, 2007
Statement of Assets and Liabilities July 31, 2007
ASSETS | ||||
| Investments in securities, at value (cost: $27,570,667) | $ | 28,143,310 | |
| Accrued interest receivable | 382,980 | ||
| Accrued dividends receivable | 1,821 | ||
| Receivable for fund shares sold | 5,000 | ||
| Prepaid expenses | 2,123 | ||
|
| Total Assets | $ | 28,535,234 |
| ||||
LIABILITIES | ||||
| Dividends payable | $ | 94,230 | |
| Payable for fund shares redeemed |
| 24,857 | |
| Accrued expenses |
| 12,523 | |
| Payable to affiliates |
| 22,787 | |
|
| Total Liabilities | $ | 154,397 |
| ||||
NET ASSETS | $ | 28,380,837 | ||
| ||||
Net assets are represented by: |
| |||
| Paid-in capital | $ | 30,987,291 | |
| Accumulated undistributed net realized gain (loss) on investments and futures |
| (3,207,965) | |
| Accumulated undistributed net investment income (loss) |
| 28,868 | |
| Unrealized appreciation (depreciation) on investments | 572,643 | ||
|
| Total amount representing net assets applicable to 2,801,059 outstanding shares of no par common stock (unlimited shares authorized) | $ | 28,380,837 |
|
|
|
| |
|
| |||
Net Asset Value per share | $ | 10.13 | ||
|
|
| ||
Public offering price (based on sales charge of 4.25%) | $ | 10.58 | ||
The accompanying notes are an integral part of these financial statements.
Financial Statements July 31, 2007
Statement of Operations For the year ended July 31, 2007
INVESTMENT INCOME |
| |||
| Interest | $ | 1,400,257 | |
| Dividends | 54,304 | ||
|
| Total Investment Income | $ | 1,454,561 |
|
| |||
EXPENSES |
| |||
| Investment advisory fees | $ | 148,665 | |
| Distribution (12b-1) fees |
| 74,332 | |
| Administrative service fees |
| 35,905 | |
| Transfer agent fees |
| 56,238 | |
| Accounting service fees |
| 38,866 | |
| Custodian fees |
| 4,974 | |
| Professional fees |
| 18,520 | |
| Trustees fees |
| 2,958 | |
| Reports to shareholders |
| 5,362 | |
| Audit fees |
| 8,621 | |
| License, fees, and registrations |
| 2,201 | |
| Transfer agent out-of-pockets |
| 1,670 | |
| Other fees |
| 954 | |
|
| Total Expenses | $ | 399,266 |
| Less expenses waived or absorbed by the Fund’s manager | (81,123) | ||
|
| Total Net Expenses | $ | 318,143 |
|
| |||
NET INVESTMENT INCOME (LOSS) | $ | 1,136,418 | ||
|
| |||
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS |
| |||
| Net realized gain (loss) from investment transactions | $ | 101,063 | |
| Net change in unrealized appreciation (depreciation) of investments | (289,997) | ||
|
| Net Realized and Unrealized Gain (Loss) on Investments | $ | (188,934) |
|
| |||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | $ | 947,484 | ||
The accompanying notes are an integral part of these financial statements.
Financial Statements July 31, 2007
Statement of Changes in Net Assets
For the year ended July 31, 2007 and the year ended July 31, 2006
| For The Year Ended | For The Year Ended | ||||
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS |
|
|
|
| ||
| Net investment income (loss) | $ | 1,136,418 | $ | 1,242,166 | |
| Net realized gain (loss) on investment and futures transactions |
| 101,063 |
| 887,612 | |
| Net change in unrealized appreciation (depreciation) on investments and futures |
| (289,997) |
| (609,436) | |
|
| Net Increase (Decrease) in Net Assets Resulting From Operations | $ | 947,484 | $ | 1,520,342 |
| ||||||
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS |
|
|
|
| ||
| Dividends from net investment income ($.39 and $.40 per share, respectively) | $ | (1,132,417) | $ | (1,238,147) | |
| Distributions from net realized gain on investment transactions ($.00 and $.00 per share, respectively) |
| 0 |
| 0 | |
|
| Total Dividends and Distributions | $ | (1,132,417) | $ | (1,238,147) |
| ||||||
CAPITAL SHARE TRANSACTIONS |
|
|
|
| ||
| Proceeds from sale of shares | $ | 697,160 | $ | 1,505,567 | |
| Proceeds from reinvested dividends |
| 755,442 |
| 826,643 | |
| Cost of shares redeemed |
| (3,629,141) |
| (4,359,905) | |
|
| Net Increase (Decrease) in Net Assets Resulting from Capital Share Transactions | $ | (2,176,539) | $ | (2,027,695) |
|
|
|
|
| ||
TOTAL INCREASE (DECREASE) IN NET ASSETS | $ | (2,361,472) | $ | (1,745,500) | ||
NET ASSETS, BEGINNING OF PERIOD |
| 30,742,309 |
| 32,487,809 | ||
NET ASSETS, END OF PERIOD | $ | 28,380,837 | $ | 30,742,309 | ||
|
|
|
|
|
|
|
Undistributed Net Investment Income | $ | 28,868 | $ | 27,787 | ||
The accompanying notes are an integral part of these financial statements.
Notes to Financial Statements July 31, 2007
Note 1: ORGANIZATION
The Fund is an investment portfolio of Integrity Managed Portfolios (the “Trust”) and is registered under the Investment Company Act of 1940, as amended (the “1940 Act”) as a non-diversified, open-end management investment company. The Trust may offer multiple portfolios; currently six portfolios are offered. The Trust 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 state income tax as is consistent with preservation of capital. The Fund will seek to achieve this objective by investing primarily in a portfolio of Nebraska municipal secu rities.
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 Fund Services, 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; 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 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 is 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, 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.
Contingent deferred sales charge - In the case of investments of $1 million or more, a 1.00% CDSC may be assessed on shares redeemed within 12 months of purchase (excluding shares purchased with reinvested dividends and/or distributions).
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. Interest and penalties related to uncertain tax positions, if any, are classified in the Fund’s financial statements as other expense. Distributions during the year ended July 31, 2007, were characterized as tax-exempt for tax purposes.
The tax character of distributions paid was as follows:
|
|
| July 31, 2007 |
| July 31, 2006 |
| Tax-exempt income | $ | 1,132,417 | $ | 1,238,147 |
| Ordinary income |
| 0 |
| 0 |
| Long-term capital gains |
| 0 |
| 0 |
| Total | $ | 1,132,417 | $ | 1,238,147 |
As of July 31, 2007, the components of accumulated earnings/(deficit) on a tax basis were as follows:
| Undistributed Ordinary Income | Undistributed Long-Term Capital Gains | Accumulated Earnings | Accumulated Capital and Other Losses | Unrealized Appreciation/(Depreciation) | Total Accumulated Earnings/(Deficit) |
|
| $0 | $0 | ($3,207,965) | $601,511 | ($2,606,454) |
|
The Fund has unexpired capital loss carryforwards for tax purposes as of July 31, 2007 totaling $3,207,965, 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 following table:
Year |
| Unexpired Capital Losses |
2008 | $ | 40,628 |
2009 | $ | 158,911 |
2010 | $ | 591,993 |
2011 | $ | 713,949 |
2012 | $ | 579,276 |
2013 | $ | 1,123,208 |
For the year ended July 31, 2007, the Fund did not make any permanent reclassifications to reflect tax character.
Net capital losses incurred after October 31, and within the tax year are deemed to arise on the first business day of the Fund’s next taxable year. For the year ended July 31, 2007, the Fund deferred to August 1, 2007, post-October capital losses, post-October currency losses, and post-October passive foreign company losses of $0.
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 (depreciation) related to op en 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.
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 31, 2007, there were unlimited shares of no par authorized; 2,801,059 and 3,013,698 shares were outstanding at July 31, 2007 and July 31, 2006, respectively.
Transactions in capital shares were as follows:
| For The Year Ended | For The Year Ended |
Shares sold | 68,577 | 148,688 |
Shares issued on reinvestment of dividends | 73,768 | 81,633 |
Shares redeemed | (354,984) | (430,272) |
Net increase (decrease) | (212,639) | (199,951) |
Note 4: INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Integrity Money Management, the Fund’s investment adviser; Integrity Funds Distributor, Inc. (the “Distributor” or “Integrity Funds Distributor”), the Fund’s underwriter; and Integrity Fund Services, Inc. (“Integrity Fund Services”), the Fund’s transfer, accounting, and administrative services agent; are subsidiaries of Integrity Mutual Funds, the Fund’s sponsor.
The Fund has engaged Integrity Money Management 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 $67,542 of investment advisory fees after partial waiver for the year ended July 31, 2007. The Fund has a payable to Integrity Money Management of $4,910 at July 31, 2007 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 1.25% of the Fund’s average daily net assets on an annual basis up to the amount of the Investment Adviser and Management fee. The Investment Adviser and Principal 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 actual total annual operating expenses were 1.07% for the year ended July 31, 2007.
Principal underwriter and shareholder services - Integrity Funds Distributor serves as the principal underwriter for the Fund. The Fund has adopted a distribution plan for each class of shares as allowed by Rule 12b-1 of the 1940 Act. Distribution plans permit the Fund to reimburse its principal underwriter for costs related to selling shares of the Fund and for various other services. These costs, which consist primarily of commissions and service fees to broker-dealers who sell shares of the Fund, are paid by shareholders through expenses called “Distribution Plan expenses.” The Fund currently pays an annual distribution fee of up to 0.25% of the average daily net assets. Distribution Plan expenses are calculated daily and paid monthly. The Fund has recognized $74,332 of distribution fees for the year ended July 31, 2007. The Fund has a payable to Integrity Funds Distributor of $6,113 at July 31, 2007 for distribution fees.
Integrity Fund Services provides transfer agent services for a variable fee equal to 0.20% 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, with a minimum of $2,000 per month plus reimbursement of out-of-pocket expenses. An additional fee of $500 per month is charged for each additional share class. The Fund has recognized $56,238 of transfer agency fees and expenses for the year ended July 31, 2007. The Fund has a payable to Integrity Fund Services of $4,891 at July 31, 2007 for transfer agency fees. Integrity Fund Services 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 ne t assets in excess of $50 million, together with reimbursement of out-of-pocket expenses. An additional fee of $500 per month is charged by Integrity Fund Services for each additional share class. The Fund has recognized $38,866 of accounting service fees for the year ended July 31, 2007. The Fund has a payable to Integrity Fund Services of $3,289 at July 31, 2007 for accounting service fees. Integrity Fund Services also acts as the Fund’s administrative services agent for a variable fee equal to 0.125% 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, with a minimum of $2,000 per month plus out-of-pocket expenses. An additional fee of $500 per month is charged by Integrity Fund Services for each additional share class. The Fund has recognized $35,905 of administrative services fees for the year ended July 31, 2007. The Fund has a payable to Integrity Fund Services of $3,05 7 at July 31, 2007 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 $4,899,518 and $5,757,712, respectively, for the year ended July 31, 2007.
Note 6: INVESTMENT IN SECURITIES
At July 31, 2007, the aggregate cost of securities for federal income tax purposes was substantially the same for financial reporting purposes at $27,570,667. The net unrealized appreciation of investments based on the cost was $572,643, which is comprised of $686,544 aggregate gross unrealized appreciation and $113,901 aggregate gross unrealized depreciation. Differences between financial reporting-basis and tax-basis unrealized appreciation/depreciation are due to differing treatment of market discount.
Note 7: RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In July 2006, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes,” an interpretation of SFAS 109, “Accounting for Income Taxes” (FIN 48). FIN 48 is effective on the last business day of the semi-annual reporting period for fiscal years beginning after December 15, 2006. FIN 48 established the accounting for uncertain tax positions that have been taken or are expected to be taken in a tax return, including the recognition and measurement of their financial statement effects. Pursuant to FIN 48, the Fund would recognize a tax benefit only if it is “more likely than not” that a particular tax position would be sustained upon examination or audit. To the extent the “more likely than not” standard is satisfied, the benefit associated with a tax position is measured as the largest amount that is greater than 50% likely o f being realized upon settlement.
In September 2006, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 157, Fair Value Measurements. This standard defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles and expands disclosures about fair value measurements. SFAS 157 is effective for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The Fund is presently evaluating the impact of adopting SFAS 157.
July 31, 2007
FINANCIAL HIGHLIGHTS
Selected per share data and ratios for the period indicated.
|
| For The Year Ended |
| For The Year Ended |
| For The Year Ended |
| For The Year Ended |
| For The Year Ended | ||
NET ASSET VALUE, BEGINNING OF PERIOD | $ | 10.20 | $ | 10.11 | $ | 10.55 | $ | 10.62 | $ | 11.17 | ||
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Income from Investment Operations: |
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| Net investment income | $ | .39 | $ | .40 | $ | .42 | $ | .45 | $ | .47 | |
| Net realized and unrealized gain (loss) on investment and futures transactions |
| (.07) |
| .09 |
| (.44) |
| (.07) |
| (.55) | |
| Total Income (Loss) From Investment Operations | $ | .32 | $ | .49 | $ | (.02) | $ | .38 | $ | (.08) | |
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Less Distributions: |
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| Dividends from net investment income | $ | (.39) | $ | (.40) | $ | (.42) | $ | (.45) | $ | (.47) | |
| Distributions from net realized gains |
| .00 |
| .00 |
| .00 |
| .00 |
| .00 | |
| Total Distributions | $ | (.39) | $ | (.40) | $ | (.42) | $ | (.45) | $ | (.47) | |
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NET ASSET VALUE, END OF PERIOD | $ | 10.13 | $ | 10.20 | $ | 10.11 | $ | 10.55 | $ | 10.62 | ||
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Total Return |
| 3.16%A |
| 4.90%A |
| (0.18%)A |
| 3.59%A |
| (0.81%)A | ||
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RATIOS/SUPPLEMENTAL DATA: |
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| Net assets, end of period (in thousands) | $ | 28,381 | $ | 30,742 | $ | 32,488 | $ | 34,682 | $ | 36,718 | |
| Ratio of net expenses (after expense assumption) to average net assets |
| 1.07%B |
| 1.03%B |
| 0.98%B |
| 0.95%B |
| 0.92%B | |
| Ratio of net investment income to average net assets |
| 3.81% |
| 3.89% |
| 4.07% |
| 4.18% |
| 4.24% | |
| Portfolio turnover rate |
| 17.42% |
| 14.63% |
| 4.36% |
| 8.95% |
| 9.48% | |
A Excludes the maximum sales charge of 4.25%.
B During the periods indicated above, Integrity Money Management assumed/waived expenses of $81,123, $66,312, $84,449, $93,640, and $62,679, respectively. If the expenses had not been assumed/waived, the annualized ratio of total expenses to average net assets would have been 1.34%, 1.24%, 1.22%, 1.21%, and 1.08%, 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.
July 31, 2007
TAX INFORMATION
Tax Information For The Year Ended July 31, 2007 (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 31, 2006 |
| August 31, 2006 | $ | .033367 |
| - |
| - |
September 29, 2006 |
| September 29, 2006 | $ | .032062 |
| - |
| - |
October 31, 2006 |
| October 31, 2006 | $ | .033463 |
| - |
| - |
November 30, 2006 |
| November 30, 2006 | $ | .032265 |
| - |
| - |
December 29, 2006 |
| December 29, 2006 | $ | .030943 |
| - |
| - |
January 31, 2007 |
| January 31, 2007 | $ | .033601 |
| - |
| - |
February 28, 2007 |
| February 28, 2007 | $ | .032370 |
| - |
| - |
March 30, 2007 |
| March 30, 2007 | $ | .031866 |
| - |
| - |
April 30, 2007 |
| April 30, 2007 | $ | .032452 |
| - |
| - |
May 31, 2007 |
| May 31, 2007 | $ | .032691 |
| - |
| - |
June 29, 2007 |
| June 29, 2007 | $ | .031177 |
| - |
| - |
July 31, 2007 |
| July 31, 2007 | $ | .033500 |
| - |
| - |
Shareholders should consult their tax advisors.
July 31, 2007
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Trustees of 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 31, 2007, the related statement of operations for the year then ended, the statement of changes in net assets for the years ended July 31, 2007 and July 31, 2006, and the financial highlights for the year ended July 31, 2007, and each of the four years in the period ended July 31, 2006. 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 audits.
We conducted our audits 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 31, 2007 by correspondence with the custodian and brokers. 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 audits provide 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 31, 2007, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.
BRADY, MARTZ & ASSOCIATES, P.C.
Minot, North Dakota USA
September 12, 2007
Dear Shareholder:
Enclosed is the annual report of the New Hampshire Municipal Fund (the “Fund”) for the year ended July 31, 2007. The Fund’s portfolio and related financial statements are presented within for your review.
The first half of 2007 has proven a tricky period for most bond fund managers and has likely rattled some bond fund investors as well. Entering the year, many expected the Federal Reserve to cut its target for the federal funds rate (the rate banks charge one another for loans), but recently the direction of the bond market remains determined by credit issues and the status of other asset classes.
In recent years, investors’ enthusiasm about the global economy allowed borrowers across the spectrum to enjoy cheap debt. However, the recent turmoil in the sub-prime housing market (loans to less than creditworthy individuals) is beginning to show a credit squeeze may be underway. Recent surveys conducted by the Federal Reserve suggest that banks are tightening lending standards on non-traditional and sub-prime residential loans as well as commercial real estate.
The key to the economy going forward will be consumer spending. If the housing woes spread over the economy, consumer spending could slow and the economy is likely to grow at a subdued pace into early 2008.
The sub-prime fear helped push the yield on the 10-year Treasury bond to 4.77% for the period, higher than the 4.70% at which it began 2007, but below the 5.30% it hit in mid-June.
While rising interest rates can cause bond market valuations to fall, it also enables investors to lock in higher yielding bonds. Short-term fund losses can sting, but they shouldn’t cause investors to lose sight of their long-term goals and objectives.
After spending much of 2007 in positive territory, the average municipal bond fund has posted a small gain through July.
New Hampshire Municipal Fund shares began the year at $10.25 and ended the period at $10.24 for a total return of 3.02%*. This compares to the Lehman Brothers Municipal Bond Index return of 4.26% for the period.
The Fund’s performance can be attributed to its defensive portfolio, with an average maturity of 8 years and a low average maturity to the first call date of 4 years. That, along with an average portfolio coupon of 4.81%, helps relative performance in a rising rate environment.
An important part of the Fund’s strategy includes searching the primary and secondary markets for high quality, double tax-exempt issues. Some issues purchased during the period include: Merrimack County 4.25% coupon, due 2019; and Merrimack County 4.50% coupon, due 2027. Portfolio quality for the year was as follows: AAA 64.9%, AA 19.2% and A 15.9%.
Income exempt from federal income taxes and New Hampshire state interest and dividend taxes with preservation of capital remain the primary objectives of the Fund.
If you would like more frequent updates, visit our website at www.integrityfunds.com for daily prices along with pertinent Fund information.
Sincerely,
Monte Avery
Senior Portfolio Manager
The views expressed are those of Monte Avery, Senior Portfolio Manager with Integrity Money Management, Inc.. 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, the markets generally, or any Integrity Mutual Fund.
*Performance does not include applicable front-end or contingent deferred sales charges (“CDSCs”), which would have reduced the performance.
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 (800) 276-1262.
You should consider the Fund’s investment objectives, risks, charges, and expenses carefully before investing. For this and other important information, please obtain a free Fund prospectus from your financial adviser and read it carefully prior to investing.
Bond prices and, therefore, the value of bond funds decline as interest rates rise. Because the Fund invests in securities of a single state, the Fund is more susceptible to factors adversely impacting the respective state securities than a municipal bond fund that does not concentrate its securities in a single state.
July 31, 2007 (Unaudited)
PROXY VOTING ON FUND PORTFOLIO SECURITIES
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to securities held in the Fund’s portfolio is available, without charge and upon request, by calling (800) 276-1262. A report on Form N-PX of how the Fund voted any such proxies during the most recent 12-month period ended June 30 is available through Integrity’s website at www.integrityfunds.com. The information is also available from the Electronic Data Gathering, Analysis, and Retrieval (“EDGAR”) database on the website of the Securities and Exchange Commission (“SEC”) at www.sec.gov.
QUARTERLY PORTFOLIO SCHEDULE
Within 60 days of the end of its second and fourth fiscal quarters, the Fund provides a complete schedule of portfolio holdings in its semi-annual and annual reports on the Form N-CSR(S). These reports are filed electronically with the SEC and are delivered to the shareholders of the Fund. The Fund also files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms N-Q and N-CSR(S) are available on the SEC’s website at www.sec.gov. The Fund’s Forms N-Q and N-CSR(S) may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling (202) 942-8090. You may also access this information from Integrity’s website at www.integrityfunds.com.
July 31, 2007 (Unaudited)
TERMS AND DEFINITIONS
Appreciation: Increase in the value of an asset
Average Annual Total Return: A standardized measurement of the return (yield and appreciation) earned by a 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 the 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 marketplace
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: The value of all of 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 creditworthiness; “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; represents the aggregate percentage or dollar value change over the period
July 31, 2007 (Unaudited)
COMPOSITION
Portfolio Quality Ratings
(Based on total long-term investments)
| AAA | 64.9% |
| AA | 19.2% |
| A | 15.9% |
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 Ratings Group. Non-rated bonds have been determined to be of appropriate quality for the portfolio by Integrity Money Management, Inc. (the “Investment Adviser” or “Integrity Money Management”), the Fund’s investment adviser.
These percentages are subject to change.
Portfolio Market Sectors
(As a percentage of net assets)
| T-Transportation | 35.4% |
| S-School | 18.2% |
| GO-General Obligation | 12.9% |
| O-Other | 12.6% |
| H-Health | 10.9% |
| I-Industrial | 10.0% |
Market sectors are breakdowns of the Fund’s portfolio holdings into specific investment classes.
These percentages are subject to change.
July 31, 2007 (Unaudited)
DISCLOSURE OF FUND EXPENSES
The example below is intended to describe the fees and expenses borne by shareholders and the impact of those costs on your investment.
Example
As a shareholder of the Fund, you incur two types of costs:
| • | Transaction costs: including sales charges (loads), redemption fees, and exchange fees |
| • | Ongoing costs: including management fees, distribution (12b-1) fees, and other expenses |
This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from January 31, 2007 to July 31, 2007.
The example illustrates the Fund’s costs in two ways:
Actual Expenses: The section in the table under the heading “Actual” provides information about actual account values and actual expenses. You may use the information in these columns together with the amount you invested to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an account value of $8,600 divided by $1,000 equals 8.6), then multiply the result by the number in the appropriate column for your share class in the column entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes: The section in the table under the heading “Hypothetical (5% return before expenses)” provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the section in the table under the heading “Hypothetical (5% return before expenses)” is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
| Beginning Account Value | Ending Account Value | Expenses Paid During Period* |
Actual | $1,000.00 | $1,011.25 | $5.38 |
Hypothetical (5% return before expenses) | $1,000.00 | $1,019.44 | $5.40 |
*Expenses are equal to the annualized expense ratio of 1.07% multiplied by the average account value over the period, multiplied by 180/360 days. The Fund’s ending account value on the first line of the table is based on its actual total return of 1.13% for the six-month period of January 31, 2007 to July 31, 2007.
July 31, 2007 (Unaudited)
AVERAGE ANNUAL TOTAL RETURNS
| For periods ending July 31, 2007 | ||||||
1 year | 3 year | 5 year | 10 year | Since Inception | |||
|
| Without Sales Charge | 3.02% | 1.63% | 2.38% | 3.59% | 4.48% |
|
| With Sales Charge (4.25%) | (1.31%) | 0.17% | 1.50% | 3.14% | 4.17% |
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Lehman Brothers Municipal Bond Index | 1 year | 3 year | 5 year | 10 year | Since Inception | ||
| 4.26% | 4.38% | 4.50% | 5.23% | 5.90% | ||
Putting performance into perspective
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 (800) 276-1262.
You should consider the Fund’s investment objectives, risks, charges, and expenses carefully before investing. For this and other important information, please obtain a free Fund prospectus from your financial adviser and read it carefully prior to investing.
The table above 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 adviser that used different investment strategies and techniques, which may have produced different investment results than those achieved by the current investment adviser. Forum Investment Advisors, LLC served as investment adviser to the Fund until December 19, 2003.
July 31, 2007 (Unaudited)
COMPARATIVE INDEX GRAPH
Comparison of change in value of a $10,000 investment in the Fund and the Lehman Brothers Municipal Bond Index
New Hampshire Municipal Fund without Sales Charge | New Hampshire Municipal Fund with Maximum Sales Charge | Lehman Brothers Municipal Bond Index | |
7/31/1997 | $10,000 | $10,000 | |
1998 | $10,529 | $10,599 | |
1999 | $10,811 | $10,904 | |
2000 | $11,194 | $11,374 | |
2001 | $12,017 | $12,522 | |
2002 | $12,644 | $13,362 | |
2003 | $12,940 | $13,842 | |
2004 | $13,553 | $14,643 | |
2005 | $13,309 | $15,575 | |
2006 | $13,808 | $15,973 | |
2007 | $14,226 | $16,654 |
Putting performance into perspective
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 (800) 276-1262.
You should consider the Fund’s investment objectives, risks, charges, and expenses carefully before investing. For this and other important information, please obtain a free Fund prospectus from your financial adviser and read it carefully prior to investing.
The graph does not reflect the deduction of taxes that a shareholder would pay on Fund distributions and redemptions of Fund shares.
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 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. If they could, transaction costs and other expenses would be incurred. All Fund and benchmark returns include reinvested dividends.
July 31, 2007 (Unaudited)
MANAGEMENT OF THE FUND
The Board of Integrity Managed Portfolios consists of four Trustees. These same individuals, unless otherwise noted, also serve as Directors or Trustees for the funds in the Integrity family of funds, the six series of Integrity Managed Portfolios and the six 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. Two of the remaining three Trustees and/or 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 COMPLEX1 | OTHER DIRECTORSHIPS HELD OUTSIDE THE FUND COMPLEX |
Jerry M. Stai | Trustee | Indefinite
Since January 2006 | Faculty, Embry-Riddle University (August 2000 to September 2005); Faculty, Park University (August 2005 to December 2005); Non-Profit Specialist, Bremer Bank (since July 2005); Faculty, Minot State University (since August 2000); Director, ND Tax-Free Fund, Inc., Montana Tax-Free Fund, Inc., Integrity Fund of Funds, Inc., (since January 2006); Trustee, The Integrity Funds (since January 2006). | 15 | Marycrest Franciscan Development, Inc. |
Orlin W. Backes | Trustee | Indefinite
Since January 1996 | Attorney, McGee, Hankla, Backes & Dobrovolny, P.C.; Director, South Dakota Tax-Free Fund, Inc. (April 1995 to June 2004), Integrity Small-Cap Fund of Funds, Inc. (September 1998 to June 2003), ND Tax-Free Fund, Inc., Montana Tax-Free Fund, Inc., and Integrity Fund of Funds, Inc., (Since April 2005); Trustee, The Integrity Funds (since May 2003); and Director, First Western Bank & Trust. | 15 | First Western Bank & Trust |
R. James Maxson | Trustee | Indefinite
Since January 1999 | Attorney, Maxson Law Office (since November 2002); Attorney, McGee, Hankla, Backes & Dobrovolny, P.C. (April 2000 to November 2002); Director, South Dakota Tax-Free Fund, Inc. (January 1999 to June 2004), Integrity Small-Cap Fund of Funds, Inc. (January 1999 to June 2003) Integrity Fund of Funds, Inc., ND Tax-Free Fund, Inc. and Montana Tax-Free Fund, Inc. (since January 1999); and Trustee, The Integrity Funds (since May 2003). | 15 | Vincent United Methodist Foundation
Minot Area Development Corporation |
1The Fund Complex consists of the three incorporated funds in the Integrity family of funds, the six series of Integrity Managed Portfolios, and the six series of The Integrity Funds.
Trustees 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 (800) 276-1262.
July 31, 2007 (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 other directorships, if any, held outside the Fund Complex, are shown below.
INTERESTED TRUSTEE
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 COMPLEX1 | OTHER DIRECTORSHIPS HELD OUTSIDE THE FUND COMPLEX |
Robert E. Walstad2,3 | Trustee and Chairman | Indefinite
Since January 1996 | Director (Sept. 1987 to Feb. 2007), President (Sept. 2002 to May 2003), CEO (Sept. 2001 to Feb. 2007), Integrity Mutual Funds, Inc.; Director, President and Treasurer, (Aug. 1988 to Feb. 2007), Integrity Money Management, Inc.; Director, President and Treasurer (Aug. 1988 to Sept. 2004), ND Capital, Inc.; Director, President and Treasurer (May 1989 to Feb. 2007), Integrity Fund Services, Inc.; Director, President, CEO, and Treasurer, (Jan. 1996 to Aug. 2003), Integrity Funds Distributor, Inc.; Director (Oct. 1999 to June 2003) Magic Internet Services, Inc.; Director (May 2000 to June 2003), President (Oct. 2002 to June 2003), ARM Securities Corporation; Director, CEO, Chairman, (Jan. 2002 to Feb. 2007) and President (Sept. 2002 to Dec. 2004), Capital Financial Services, Inc.; Director and President, (April 1994 to June 2004) South Dakota Tax-Free Fund, Inc., (Sept. 1998 to June 2003) Integrity Small-Cap Fund of Funds Inc.; President (May 2003 to Feb. 2007), Integrity Managed Portfolios and (Jan. 2006 to Feb. 2007) The Integrity Funds, (Jan. 1995 to Feb 2007) Integrity Fund of Funds, Inc., (Jan. 1989 to Feb. 2007) ND Tax-Free Fund, Inc., (Aug. 1993 to Feb 2007) Montana Tax-Free Fund, Inc.; Director and Chairman (since Jan. 1995) Integrity Fund of Funds, Inc., (since Jan. 1989) ND Tax-Free Fund, Inc., and (since Aug. 1993) Montana Tax-Free Fund, Inc.; Trustee, Chairman, (since January 2006) and Treasurer (January 2006 to May 2004), Integrity Managed Portfolios and (since May 2003), The Integrity Funds. | 15 | Minot Park Board |
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 COMPLEX1 | OTHER DIRECTORSHIPS HELD OUTSIDE THE FUND COMPLEX |
Mark R.Anderson3 | President | Indefinite
Since July 2007 | Personal Trust Officer (May 1999 to April 2003) Wells Fargo Bank; President and COO (April 2003 to Feb 2007), President, Director and CEO (since Feb. 2007) Integrity Mutual Funds, Inc.; President and Director (since Feb. 2007) Integrity Money Management, Inc., and Integrity Fund Services, Inc.; President and Director (Since August 2003) Integrity Funds Distributor, Inc.; President (Since July 2007) Montana Tax-Free Fund, Inc., Integrity Fund of Funds, Inc., and ND Tax-Free Fund, Inc., Integrity Managed Portfolios and The Integrity Funds; President and Treasurer (since July 2005) BAC Properties, LLC. | N/A | None |
Peter A. Quist2 | Vice President, Secretary | Indefinite
Since January 1996 | Attorney; Director and Vice President, Integrity Mutual Funds, Inc.; Director, Vice President and Secretary, Integrity Money Management, ND Capital, Inc. (August 1988 to September 2004), Integrity Fund Services, Inc., and Integrity Funds Distributor, Inc.; Vice President, Secretary Director, ARM Securities Corporation (May 2000 to June 2003); Director, South Dakota Tax-Free Fund, Inc. (April 1994 to June 2004), Integrity Small-Cap Fund of Funds, Inc. (September 1998 to June 2003), Montana Tax-Free Fund, Inc., Integrity Fund of Funds, Inc., and ND Tax Free Fund, Inc. | 3 | None |
Laura K. Anderson | Treasurer | Indefinite
Since October 2005 | Fund Accountant (until May 2004), Fund Accounting Supervisor (May 2004 to October 2005), Fund Accounting Manager (since October 2005), Manager of Mutual Fund Operations (Since October 2006), Integrity Fund Services, Inc.; Treasurer (since October 2005), The Integrity Funds, ND Tax-Free Fund, Inc., Montana Tax-Free Fund, Inc., and Integrity Fund of Funds, Inc. | N/A | None |
Brent M. Wheeler | Mutual Fund Chief Compliance Officer | Indefinite
Since October 2005 | Fund Accounting Manager (May 1998 to October 2005), Integrity Fund Services, Inc.; Treasurer (May 2004 to October 2005), Mutual Fund Compliance Officer (since October 2005), The Integrity Funds, ND Tax-Free Fund, Inc., Montana Tax-Free Fund, Inc., and Integrity Fund of Funds, Inc. | N/A | None |
1The Fund Complex consists of the three incorporated funds in the Integrity family of funds, the six series of Integrity Managed Portfolios, and the six series of The Integrity Funds.
2Trustees and/or officers who are “interested persons” of the Funds as defined in the Investment Company Act of 1940. Mr. Quist is an interested person by virtue of being an officer and Director of the Fund’s Investment Adviser and Principal Underwriter. Mr. Walstad is an interested person by virtue of being an officer of the Funds and a shareholder of Integrity Mutual Funds, Inc. As indicated above, effective February 1, 2007, Mr. Walstad retired from his roles as, among other things, Director and CEO of Integrity Mutual Funds, Inc., and Director, President and Treasurer of Integrity Money Management. However, a member of his immediate family is a director of Integrity Mutual Funds, Inc.
3At a Fund Board meeting held on July 26, 2007, Interested Director/Trustee, Chairman and Officer Robert E. Walstad resigned as President of the Funds. Subsequently, the Board nominated and appointed Mark R. Anderson as President of the Funds, effective July 26, 2007. Mr. Walstad will remain as Director/Trustee and Chairman of the Funds.
Trustees 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 (800) 276-1262.
Schedule of Investments July 31, 2007
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 (90.5%) |
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
| ||||
#Belknap Cty., NH G.O. MBIA | Aaa/AAA | 5.200% | 06/15/2013 | $ | 225,000 | $ | 229,563 | ||||
Colebrook, NH School District MBIA | Aaa/NR | 4.000 | 07/15/2008 |
| 60,000 |
| 60,178 | ||||
Concord, NH G.O. | Aa/AA | 4.600 | 10/15/2014 |
| 100,000 |
| 103,429 | ||||
Derry, NH FSA | Aaa/NR | 4.800 | 02/01/2018 |
| 115,000 |
| 119,633 | ||||
Exeter, NH G.O. | A-1/NR | 5.300 | 06/15/2008 |
| 25,000 |
| 25,316 | ||||
Franlin, NH G.O. MBIA | Aaa/AAA | 5.200 | 10/01/2007 |
| 50,000 |
| 50,000 | ||||
Gorham, NH G.O. FSA | Aaa/NR | 4.850 | 04/01/2014 |
| 65,000 |
| 66,706 | ||||
#Hampton, NH G.O. XLCA | Aaa/NR | 4.000 | 12/15/2020 |
| 200,000 |
| 194,112 | ||||
Hillsborough, NH G.O. XLCA | Aaa/AAA | 4.000 | 11/01/2020 |
| 100,000 |
| 97,308 | ||||
Hillsborough, NH G.O. XLCA | Aaa/AAA | 4.000 | 11/01/2021 |
| 100,000 |
| 96,874 | ||||
Hudson, NH G.O. | Aa-3/NR | 5.250 | 03/15/2028 |
| 110,000 |
| 112,363 | ||||
Hudson, NH School District Lot B | Aa-3/NR | 7.300 | 12/15/2008 |
| 20,000 |
| 20,949 | ||||
Keene, NH G.O. | A-1/NR | 5.150 | 10/15/2011 |
| 45,000 |
| 46,103 | ||||
#Manchester, NH Airport Rev. MBIA | Aaa/AAA | 5.000 | 01/01/2009 |
| 225,000 |
| 228,722 | ||||
*Manchester, NH School Facs. Rev. MBIA | Aaa/AAA | 5.250 | 06/01/2009 |
| 250,000 |
| 257,213 | ||||
Merrimack Cty., NH G.O. FSA | NR/AAA | 4.250 | 12/01/2019 |
| 100,000 |
| 100,243 | ||||
Merrimack Cty., NH G.O. FSA | NR/AAA | 4.500 | 12/01/2027 |
| 100,000 |
| 99,773 | ||||
Nashua, NH G.O. | Aa/AA+ | 5.250 | 09/15/2017 |
| 100,000 |
| 105,711 | ||||
New Hampshire Hlth & Ed Southern NH University ACA | NR/A | 4.000 | 01/01/2008 |
| 220,000 |
| 220,887 | ||||
New Hampshire Hlth. & Educ. Facs. Auth. (Exeter) | A/A+ | 5.100 | 10/01/2010 |
| 100,000 |
| 102,587 | ||||
New Hampshire Hlth. & Educ. Facs. Auth. (Exeter) | A/A+ | 5.200 | 10/01/2011 |
| 60,000 |
| 62,156 | ||||
New Hampshire Hlth. & Educ. Facs. Auth. (Exeter) | A/A+ | 5.500 | 10/01/2015 |
| 120,000 |
| 126,257 | ||||
New Hampshire Hlth. & Educ. Facs. Auth. (Exeter) | A/A+ | 5.625 | 10/01/2016 |
| 20,000 |
| 21,294 | ||||
#New Hampshire Hlth. & Educ. Facs. Auth. (Univ. Sys. of NH) AMBAC | Aaa/AAA | 5.500 | 07/01/2013 |
| 40,000 |
| 42,604 | ||||
New Hampshire Hlth. & Educ. Facs. Auth. (Univ. Sys. of NH) AMBAC | Aaa/AAA | 5.500 | 07/01/2013 |
| 95,000 |
| 100,934 | ||||
New Hampshire Muni Bond Bank FSA | Aaa/AAA | 4.400 | 08/15/2016 |
| 100,000 |
| 101,344 | ||||
*New Hampshire State Capital Improvement G.O. | Aa/AA | 5.000 | 04/15/2013 |
| 250,000 |
| 262,517 | ||||
New Hampshire State Hsg. Finance Auth. | Aa/NR | 6.000 | 07/01/2008 |
| 25,000 |
| 25,250 | ||||
Oyster River, NH Coop School District Lot A | Aa/NR | 5.850 | 06/15/2008 |
| 100,000 |
| 100,021 | ||||
Portsmouth, NH G.O. MBIA | Aaa/AAA | 4.000 | 08/01/2017 |
| 100,000 |
| 98,701 | ||||
Portsmouth, NH G.O. MBIA | Aaa/AAA | 4.000 | 08/01/2019 |
| 100,000 |
| 97,852 | ||||
*Rochester, NH G.O. MBIA | Aaa/NR | 4.750 | 07/15/2020 |
| 300,000 |
| 312,135 | ||||
#Stratham, NH School District AMBAC | Aaa/AAA | 5.100 | 01/15/2008 |
| 100,000 |
| 101,064 | ||||
|
|
|
|
|
|
| |||||
TOTAL NEW HAMPSHIRE MUNICIPAL BONDS |
|
|
|
| $ | 3,789,799 | |||||
|
|
|
|
|
|
|
| ||||
GUAM MUNICIPAL BONDS (0.3%) |
|
|
|
|
|
|
| ||||
Guam Hsg. Corp. Single Family Mtg. | NR/AAA | 5.750 | 09/01/2031 |
| 10,000 | $ | 10,609 | ||||
|
|
|
|
|
|
|
| ||||
TOTAL MUNICIPAL BONDS (COST: $3,815,158) |
|
|
|
| $ | 3,800,408 | |||||
|
|
|
|
|
|
|
| ||||
SHORT-TERM SECURITIES (8.9%) |
|
|
|
| Shares |
|
| ||||
Wells Fargo Advantage National Tax-Free Money Market (Cost: $370,692) |
| 370,692 | $ | 370,692 | |||||||
|
|
|
|
|
|
|
| ||||
TOTAL INVESTMENTS IN SECURITIES (COST: $4,185,850) |
|
|
| $ | 4,171,100 | ||||||
OTHER ASSETS MINUS LIABILITIES |
|
|
|
|
|
| 17,366 | ||||
|
|
|
|
|
|
|
| ||||
NET ASSETS |
|
|
|
|
| $ | 4,188,466 | ||||
*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.
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 31, 2007
Statement of Assets and Liabilities July 31, 2007
ASSETS | ||||
| Investments in securities, at value (cost: $4,185,850) | $ | 4,171,100 | |
| Accrued interest receivable | 38,791 | ||
| Accrued dividends receivable | 1,006 | ||
| Receivable from manager | 5,215 | ||
| Prepaid expenses | 868 | ||
|
| Total Assets | $ | 4,216,980 |
| ||||
LIABILITIES | ||||
| Dividends payable | $ | 10,884 | |
| Accrued expenses |
| 10,296 | |
| Payable to affiliates |
| 7,334 | |
|
| Total Liabilities | $ | 28,514 |
| ||||
NET ASSETS | $ | 4,188,466 | ||
| ||||
Net assets are represented by: |
| |||
| Paid-in capital | $ | 4,348,974 | |
| Accumulated undistributed net realized gain (loss) on investments and futures |
| (147,534) | |
| Accumulated undistributed net investment income (loss) |
| 1,776 | |
| Unrealized appreciation (depreciation) on investments | (14,750) | ||
|
| Total amount representing net assets applicable to 408,879 outstanding shares of no par common stock (unlimited shares authorized) | $ | 4,188,466 |
|
|
|
| |
|
| |||
Net Asset Value per share | $ | 10.24 | ||
|
|
| ||
Public offering price (based on sales charge of 4.25%) | $ | 10.69 | ||
The accompanying notes are an integral part of these financial statements.
Financial Statements July 31, 2007
Statement of Operations For the year ended July 31, 2007
INVESTMENT INCOME |
| |||
| Interest | $ | 190,906 | |
| Dividends | 9,181 | ||
|
| Total Investment Income | $ | 200,087 |
|
| |||
EXPENSES |
| |||
| Investment advisory fees | $ | 24,048 | |
| Distribution (12b-1) fees |
| 12,024 | |
| Administrative service fees |
| 23,017 | |
| Transfer agent fees |
| 23,017 | |
| Accounting service fees |
| 26,405 | |
| Custodian fees |
| 1,692 | |
| Professional fees |
| 7,497 | |
| Trustees fees |
| 1,741 | |
| Insurance expense |
| 198 | |
| Reports to shareholders |
| 1,948 | |
| Audit fees |
| 9,292 | |
| Other fees |
| 128 | |
|
| Total Expenses | $ | 131,007 |
| Less expenses waived or absorbed by the Fund’s manager | (79,544) | ||
|
| Total Net Expenses | $ | 51,463 |
|
| |||
NET INVESTMENT INCOME (LOSS) | $ | 148,624 | ||
|
| |||
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS |
| |||
| Net realized gain (loss) from investment transactions | $ | 6,631 | |
| Net change in unrealized appreciation (depreciation) of investments |
| (792) | |
|
| Net Realized and Unrealized Gain (Loss) on Investments | $ | 5,839 |
|
| |||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | $ | 154,463 | ||
The accompanying notes are an integral part of these financial statements.
Financial Statements July 31, 2007
Statement of Changes in Net Assets
For the year ended July 31, 2007 and the year ended July 31, 2006
| For The Year Ended | For The Year Ended | ||||||
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS |
|
|
|
| ||||
| Net investment income (loss) | $ | 148,624 | $ | 185,220 | |||
| Net realized gain (loss) on investment and futures transactions |
| 6,631 |
| 195,409 | |||
| Net change in unrealized appreciation (depreciation) on investments and futures |
| (792) |
| (172,988) | |||
|
| Net Increase (Decrease) in Net Assets Resulting From Operations | $ | 154,463 | $ | 207,641 | ||
| ||||||||
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS |
|
|
|
| ||||
| Dividends from net investment income ($.32 and $.33 per share, respectively) | $ | (148,272) | $ | (184,875) | |||
| Distributions from net realized gain on investment transactions ($.00 and $.00 per share, respectively) |
| 0 |
| 0 | |||
|
| Total Dividends and Distributions | $ | (148,272) | $ | (184,875) | ||
| ||||||||
CAPITAL SHARE TRANSACTIONS |
|
|
|
| ||||
| Proceeds from sale of shares | $ | 24,360 | $ | 298,121 | |||
| Proceeds from reinvested dividends |
| 77,717 |
| 105,044 | |||
| Cost of shares redeemed |
| (1,236,445) |
| (1,472,571) | |||
|
| Net Increase (Decrease) in Net Assets Resulting from Capital Share Transactions | $ | (1,134,368) | $ | (1,069,406) | ||
|
|
|
|
| ||||
TOTAL INCREASE (DECREASE) IN NET ASSETS | $ | (1,128,177) | $ | (1,046,640) | ||||
NET ASSETS, BEGINNING OF PERIOD |
| 5,316,643 |
| 6,363,283 | ||||
NET ASSETS, END OF PERIOD | $ | 4,188,466 | $ | 5,316,643 | ||||
|
|
|
|
|
|
| ||
Undistributed Net Investment Income | $ | 1,776 | $ | 1,424 | ||||
The accompanying notes are an integral part of these financial statements.
Notes to Financial Statements July 31, 2007
Note 1: ORGANIZATION
The Fund is an investment portfolio of Integrity Managed Portfolios (the “Trust”) and is registered under the Investment Company Act of 1940, as amended (the “1940 Act”) as a non-diversified, open-end management investment company. The Trust may offer multiple portfolios; currently six portfolios are offered. The Trust 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 income tax and New Hampshire state interest and dividend 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 Fund became a series of the Trust. Prior to this date, 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.
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 Fund Services, 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; 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 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 is 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, 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.
Contingent deferred sales charge - In the case of investments of $1 million or more, a 1.00% CDSC may be assessed on shares redeemed within 12 months of purchase (excluding shares purchased with reinvested dividends and/or distributions).
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. Interest and penalties related to uncertain tax positions, if any, are classified in the Fund’s financial statements as other expense. Distributions during the year ended July 31, 2007, were characterized as tax-exempt for tax purposes.
The tax character of distributions paid was as follows:
|
|
| July 31, 2007 |
| July 31, 2006 |
|
| Tax-exempt income | $ | 148,272 | $ | 184,875 |
|
| Ordinary income |
| 0 |
| 0 |
|
| Long-term capital gains |
| 0 |
| 0 |
|
| Total | $ | 148,272 | $ | 184,875 |
|
As of July 31, 2007, the components of accumulated earnings/(deficit) on a tax basis were as follows:
| Undistributed Ordinary Income | Undistributed Long-Term Capital Gains | Accumulated Earnings | Accumulated Capital and Other Losses | Unrealized Appreciation/(Depreciation) | Total Accumulated Earnings/(Deficit) |
|
| $0 | $0 | ($147,534) | ($12,974) | ($160,508) |
|
The Fund has unexpired capital loss carryforwards for tax purposes as of July 31, 2007 totaling $147,534, 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 following table:
Year |
| Unexpired Capital Losses |
2013 | $ | 147,534 |
For the year ended July 31, 2007, the Fund did not make any permanent reclassifications to reflect tax character.
Net capital losses incurred after October 31, and within the tax year are deemed to arise on the first business day of the Fund’s next taxable year. For the year ended July 31, 2007, the Fund deferred to August 1, 2007, post-October capital losses, post-October currency losses, and post-October passive foreign company losses of $0.
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 (depreciation) related to op en 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.
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 31, 2007, there were unlimited shares of no par authorized; 408,879 and 518,796 shares were outstanding at July 31, 2007 and July 31, 2006, respectively.
Transactions in capital shares were as follows:
| For The Year Ended | For The Year Ended |
Shares sold | 2,358 | 29,452 |
Shares issued on reinvestment of dividends | 7,535 | 10,337 |
Shares redeemed | (119,810) | (144,925) |
Net increase (decrease) | (109,917) | (105,136) |
Note 4: INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Integrity Money Management, the Fund’s investment adviser; Integrity Funds Distributor, Inc. (the “Distributor” or “Integrity Funds Distributor”), the Fund’s underwriter; and Integrity Fund Services, Inc. (“Integrity Fund Services”), the Fund’s transfer, accounting, and administrative services agent; are subsidiaries of Integrity Mutual Funds, the Fund’s sponsor.
The Fund has engaged Integrity Money Management 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 year ended July 31, 2007. 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 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 Investment Adviser. Accordingly, after fee waivers and expense reimbursements, the Fund’s actual total annual operating expenses were 1.07% for the year ended July 31, 2007.
Principal underwriter and shareholder services - Integrity Funds Distributor serves as the principal underwriter for the Fund. The Fund has adopted a distribution plan for each class of shares as allowed by Rule 12b-1 of the 1940 Act. Distribution plans permit the Fund to reimburse its principal underwriter for costs related to selling shares of the Fund and for various other services. These costs, which consist primarily of commissions and service fees to broker-dealers who sell shares of the Fund, are paid by shareholders through expenses called “Distribution Plan expenses.” The Fund currently pays an annual distribution fee of up to 0.25% of the average daily net assets of the class. Distribution Plan expenses are calculated daily and paid monthly. The Fund has recognized $12,024 of distribution fees for the year ended July 31, 2007. The Fund has a payable to Integrity Funds Distributor of $900 at July 31, 2007 for distribu tion fees.
Integrity Fund Services provides transfer agent services for a variable fee equal to 0.20% 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, with a minimum of $2,000 per month plus reimbursement of out-of-pocket expenses. An additional fee of $500 per month is charged for each additional share class. The Fund has recognized $23,017 of transfer agency fees and expenses for the year ended July 31, 2007. The Fund has a payable to Integrity Fund Services of $2,067 at July 31, 2007 for transfer agency fees. Integrity Fund Services 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 ne t 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 $26,405 of accounting service fees for the year ended July 31, 2007. The Fund has a payable to Integrity Fund Services of $2,247 at July 31, 2007 for accounting service fees. Integrity Fund Services also acts as the Fund’s administrative services agent for a variable fee equal to 0.125% 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, with a minimum of $2,000 per month plus out-of-pocket expenses. An additional fee of $500 per month is charged by Integrity Fund Services for each additional share class. The Fund has recognized $23,017 of administrative services fees for the year ended July 31, 2007. The Fund has a payable to Integrity Fund Services of $2,067 at July 31, 2007 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 $536,208 and $1,801,246, respectively, for the year ended July 31, 2007.
Note 6: INVESTMENT IN SECURITIES
At July 31, 2007, the aggregate cost of securities for federal income tax purposes was substantially the same for financial reporting purposes at $4,185,850. The net unrealized depreciation of investments based on the cost was $14,750, which is comprised of $26,961 aggregate gross unrealized appreciation and $41,711 aggregate gross unrealized depreciation. Differences between financial reporting-basis and tax-basis unrealized appreciation/depreciation are due to differing treatment of market discount.
Note 7: RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In July 2006, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes,” an interpretation of SFAS 109, “Accounting for Income Taxes” (FIN 48). FIN 48 is effective on the last business day of the semi-annual reporting period for fiscal years beginning after December 15, 2006. FIN 48 established the accounting for uncertain tax positions that have been taken or are expected to be taken in a tax return, including the recognition and measurement of their financial statement effects. Pursuant to FIN 48, the Fund would recognize a tax benefit only if it is “more likely than not” that a particular tax position would be sustained upon examination or audit. To the extent the “more likely than not” standard is satisfied, the benefit associated with a tax position is measured as the largest amount that is greater than 50% likely o f being realized upon settlement.
In September 2006, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 157, Fair Value Measurements. This standard defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles and expands disclosures about fair value measurements. SFAS 157 is effective for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The Fund is presently evaluating the impact of adopting SFAS 157.
July 31, 2007
FINANCIAL HIGHLIGHTS
Selected per share data and ratios for the period indicated.
|
| For The Year Ended |
| For The Year Ended July 31, 2006 |
| For The Year Ended July 29, 2005 |
| For The Four Month Period Ended July 30, 2004 |
| For The Year Ended March 31, 2004 |
| For The Year Ended March 31, 2003 | ||
NET ASSET VALUE, BEGINNING OF PERIOD | $ | 10.25 | $ | 10.20 | $ | 10.82 | $ | 10.73 | $ | 10.88 | $ | 10.65 | ||
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Income from Investment Operations: |
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| Net investment income | $ | .32 | $ | .33 | $ | .33 | $ | .11 | $ | .37 | $ | .40 | |
| Net realized and unrealized gain (loss) on investment and futures transactions |
| (.01) |
| .05 |
| (.52) |
| .09 |
| (.15) |
| .30 | |
| Total Income (Loss) From Investment Operations | $ | .31 | $ | .38 | $ | (.19) | $ | .20 | $ | .22 | $ | .70 | |
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Less Distributions: |
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| Dividends from net investment income | $ | (.32) | $ | (.33) | $ | (.33) | $ | (.11) | $ | (.37) | $ | (.40) | |
| Distributions from net capital gains |
| .00 |
| .00 |
| (.10) |
| .00 |
| .00 |
| (.07) | |
| Total Distributions | $ | (.32) | $ | (.33) | $ | (.43) | $ | (.11) | $ | (.37) | $ | (.47) | |
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NET ASSET VALUE, END OF PERIOD | $ | 10.24 | $ | 10.25 | $ | 10.20 | $ | 10.82 | $ | 10.73 | $ | 10.88 | ||
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Total Return |
| 3.02%A |
| 3.76%A |
| (1.81%)A |
| 5.69%A,C |
| 2.06%A |
| 6.65%A | ||
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RATIOS/SUPPLEMENTAL DATA: |
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| Net assets, end of period (in thousands) | $ | 4,188 | $ | 5,317 | $ | 6,363 | $ | 7,962 | $ | 8,175 | $ | 10,198 | |
| Ratio of net expenses (after expense assumption) to average net assets |
| 1.07%B |
| 1.03%B |
| 0.98%B |
| 0.95%B,C |
| 0.95%B |
| 0.95%B | |
| Ratio of net investment income to average net assets |
| 3.08% |
| 3.19% |
| 3.14% |
| 3.12%C |
| 3.44% |
| 3.71% | |
| Portfolio turnover rate |
| 11.83% |
| 8.10% |
| 17.94% |
| 10.02% |
| 41.53% |
| 20.00% | |
A Excludes the maximum sales charge of 4.25%.
B During the periods since March 31, 2004, Integrity Money Management assumed/waived expenses of $79,544, $69,311, $64,102, and $23,856, respectively. If the expenses had not been assumed/waived, the annualized ratio of total expenses to average net assets would have been 2.72%, 2.22%, 1.80%, and 1.84%, respectively. 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 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%. For the year ended 3/31/03, Forum Administrative Services, Forum Investment Advisors, Forum Shareholder Services, and Forum Accounting Services assumed/waived expenses of $106,577. If the expenses had not been assumed/waived, the annualized ra tio to average net assets would have been 2.03%.
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.
July 31, 2007
TAX INFORMATION
Tax Information For The Year Ended July 31, 2007 (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 31, 2006 |
| August 31, 2006 | $ | .027499 |
| - |
| - |
September 29, 2006 |
| September 29, 2006 | $ | .026599 |
| - |
| - |
October 31, 2006 |
| October 31, 2006 | $ | .028330 |
| - |
| - |
November 30, 2006 |
| November 30, 2006 | $ | .026869 |
| - |
| - |
December 29, 2006 |
| December 29, 2006 | $ | .026063 |
| - |
| - |
January 31, 2007 |
| January 31, 2007 | $ | .026783 |
| - |
| - |
February 28, 2007 |
| February 28, 2007 | $ | .025805 |
| - |
| - |
March 30, 2007 |
| March 30, 2007 | $ | .026124 |
| - |
| - |
April 30, 2007 |
| April 30, 2007 | $ | .026309 |
| - |
| - |
May 31, 2007 |
| May 31, 2007 | $ | .025884 |
| - |
| - |
June 29, 2007 |
| June 29, 2007 | $ | .024578 |
| - |
| - |
July 31, 2007 |
| July 31, 2007 | $ | .026598 |
| - |
| - |
Shareholders should consult their tax advisors.
July 31, 2007
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Trustees of New Hampshire Municipal Fund
We have audited the accompanying statement of assets and liabilities of the New Hampshire Municipal Fund (one of the portfolios constituting the Integrity Managed Portfolios), including the schedule of investments as of July 31, 2007, the related statement of operations for the year then ended, the statement of changes in net assets for the years ended July 31, 2007 and July 31, 2006, and the financial highlights for the years ended July 31, 2007, July 31, 2006, and July 29, 2005, the four month period ended July 30, 2004, 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 audits. The financial highlights for the year ended March 31, 2003 was audited by other auditors whose report dated May 16, 2003 expressed an unqualified opinion on the resp ective highlights.
We conducted our audits 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 31, 2007 by correspondence with the custodian and brokers. 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 audits provide 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 31, 2007, the results of its operations for the year then ended, the changes in its net assets for the years ended July 31, 2007 and July 31, 2006, and the financial highlights for the years ended July 31, 2007,July 31, 2006, July 29, 2005, the four month period ended July 30, 2004, 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 12, 2007
Dear Shareholder:
Enclosed is the annual report of the Oklahoma Municipal Fund (the “Fund”) for the year ended July 31, 2007. The Fund’s portfolio and related financial statements are presented within for your review.
The first half of 2007 has proven a tricky period for most bond fund managers and has likely rattled some bond fund investors as well. Entering the year, many expected the Federal Reserve to cut its target for the federal funds rate (the rate banks charge one another for loans), but recently the direction of the bond market remains determined by credit issues and the status of other asset classes.
In recent years, investors’ enthusiasm about the global economy allowed borrowers across the spectrum to enjoy cheap debt. However, the recent turmoil in the sub-prime housing market (loans to less than creditworthy individuals) is beginning to show a credit squeeze may be underway. Recent surveys conducted by the Federal Reserve suggest that banks are tightening lending standards on non-traditional and sub-prime residential loans as well as commercial real estate.
The key to the economy going forward will be consumer spending. If the housing woes spread over the economy, consumer spending could slow and the economy is likely to grow at a subdued pace into early 2008.
The sub-prime fear helped push the yield on the 10-year Treasury bond to 4.77% for the period, higher than the 4.70% at which it began 2007, but below the 5.30% it hit in mid-June.
While rising interest rates can cause bond market valuations to fall, it also enables investors to lock in higher yielding bonds. Short-term fund losses can sting, but they shouldn’t cause investors to lose sight of their long-term goals and objectives.
After spending much of 2007 in positive territory, the average municipal bond fund has posted a small gain through July.
Oklahoma Municipal Fund shares began the year at $11.08 and ended the period at $11.03 for a total return of 3.10%*. This compares to the Lehman Brothers Municipal Bond Index return of 4.26% for the period.
The Fund’s performance can be attributed to its defensive portfolio, with an average maturity of 18 years and a low average maturity to the first call date of 6.3 years. That, along with an average portfolio coupon of 5.01%, helps relative performance in a rising rate environment.
An important part of the Fund’s strategy includes searching the primary and secondary markets for high quality, double tax-exempt issues. Some issues purchased during the period include: Oklahoma City Airport 5.00% coupon, due 2021; St John Health System 5.00% coupon, due 2037; and Claremore Public Works 5.25% coupon, due 2027. Portfolio quality for the year was as follows: AAA 75.1%, AA 12.7%, A 6.2%, BBB 3.8% and NR 2.2%.
Income exempt from federal and Oklahoma 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.integrityfunds.com for daily prices along with pertinent Fund information.
Sincerely,
Monte Avery
Senior Portfolio Manager
The views expressed are those of Monte Avery, Senior Portfolio Manager with Integrity Money Management, Inc. 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, the markets generally, or any Integrity Mutual Fund.
*Performance does not include applicable front-end or contingent deferred sales charges (“CDSCs”), which would have reduced the performance.
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 (800) 276-1262.
You should consider the Fund’s investment objectives, risks, charges, and expenses carefully before investing. For this and other important information, please obtain a free Fund prospectus from your financial adviser and read it carefully prior to investing.
Bond prices and, therefore, the value of bond funds decline as interest rates rise. Because the Fund invests in securities of a single state, the Fund is more susceptible to factors adversely impacting the respective state securities than a municipal bond fund that does not concentrate its securities in a single state.
July 31, 2007 (Unaudited)
PROXY VOTING ON FUND PORTFOLIO SECURITIES
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to securities held in the Fund’s portfolio is available, without charge and upon request, by calling (800) 276-1262. A report on Form N-PX of how the Fund voted any such proxies during the most recent 12-month period ended June 30 is available through Integrity’s website at www.integrityfunds.com. The information is also available from the Electronic Data Gathering, Analysis, and Retrieval (“EDGAR”) database on the website of the Securities and Exchange Commission (“SEC”) at www.sec.gov.
QUARTERLY PORTFOLIO SCHEDULE
Within 60 days of the end of its second and fourth fiscal quarters, the Fund provides a complete schedule of portfolio holdings in its semi-annual and annual reports on the Form N-CSR(S). These reports are filed electronically with the SEC and are delivered to the shareholders of the Fund. The Fund also files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms N-Q and N-CSR(S) are available on the SEC’s website at www.sec.gov. The Fund’s Forms N-Q and N-CSR(S) may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling (202) 942-8090. You may also access this information from Integrity’s website at www.integrityfunds.com.
July 31, 2007 (Unaudited)
TERMS AND DEFINITIONS
Appreciation: Increase in the value of an asset
Average Annual Total Return: A standardized measurement of the return (yield and appreciation) earned by a 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 the 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 marketplace
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: The value of all of 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 creditworthiness; “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; represents the aggregate percentage or dollar value change over the period
July 31, 2007 (Unaudited)
COMPOSITION
Portfolio Quality Ratings
(Based on total long-term investments)
| AAA | 75.1% |
| AA | 12.7% |
| A | 6.2% |
| BBB | 3.8% |
| NR | 2.2% |
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 Ratings Group. Non-rated bonds have been determined to be of appropriate quality for the portfolio by Integrity Money Management, Inc. (the “Investment Adviser” or “Integrity Money Management”), the Fund’s investment adviser.
These percentages are subject to change.
Portfolio Market Sectors
(As a percentage of net assets)
| S-School | 30.7% |
| U-Utilities | 22.2% |
| T-Transportation | 20.4% |
| O-Other | 9.2% |
| H-Health | 7.8% |
| W/S-Water/Sewer | 5.8% |
| G-Government | 3.9% |
Market sectors are breakdowns of the Fund’s portfolio holdings into specific investment classes.
These percentages are subject to change.
July 31, 2007 (Unaudited)
DISCLOSURE OF FUND EXPENSES
The example below is intended to describe the fees and expenses borne by shareholders and the impact of those costs on your investment.
Example
As a shareholder of the Fund, you incur two types of costs:
| • | Transaction costs: including sales charges (loads), redemption fees, and exchange fees |
| • | Ongoing costs: including management fees, distribution (12b-1) fees, and other expenses |
This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from January 31, 2007 to July 31, 2007.
The example illustrates the Fund’s costs in two ways:
Actual Expenses: The section in the table under the heading “Actual” provides information about actual account values and actual expenses. You may use the information in these columns together with the amount you invested to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an account value of $8,600 divided by $1,000 equals 8.6), then multiply the result by the number in the appropriate column for your share class in the column entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes: The section in the table under the heading “Hypothetical (5% return before expenses)” provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the section in the table under the heading “Hypothetical (5% return before expenses)” is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
| Beginning Account Value | Ending Account Value | Expenses Paid During Period* |
Actual | $1,000.00 | $1,009.48 | $5.38 |
Hypothetical (5% return before expenses) | $1,000.00 | $1,019.44 | $5.40 |
*Expenses are equal to the annualized expense ratio of 1.07% multiplied by the average account value over the period, multiplied by 180/360 days. The Fund’s ending account value on the first line of the table is based on its actual total return of 0.95% for the six-month period of January 31, 2007 to July 31, 2007.
July 31, 2007 (Unaudited)
AVERAGE ANNUAL TOTAL RETURNS
| For periods ending July 31, 2007 | ||||||
1 year | 3 year | 5 year | 10 year | Since Inception | |||
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| Without Sales Charge | 3.10% | 3.50% | 2.88% | 3.73% | 4.15% |
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| With Sales Charge (4.25%) | (1.27%) | 2.02% | 2.00% | 3.27% | 3.73% |
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Lehman Brothers Municipal Bond Index | 1 year | 3 year | 5 year | 10 year | Since Inception | ||
| 4.26% | 4.38% | 4.50% | 5.23% | 5.76% | ||
Putting performance into perspective
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 (800) 276-1262.
You should consider the Fund’s investment objectives, risks, charges, and expenses carefully before investing. For this and other important information, please obtain a free Fund prospectus from your financial adviser and read it carefully prior to investing.
The table above does not reflect the deduction of taxes that a shareholder would pay on Fund distributions and redemption of Fund shares.
July 31, 2007 (Unaudited)
COMPARATIVE INDEX GRAPH
Comparison of change in value of a $10,000 investment in the Fund and the Lehman Brothers Municipal Bond Index
Oklahoma Municipal Fund without Sales Charge | Oklahoma Municipal Fund with Maximum Sales Charge | Lehman Brothers Municipal Bond Index | |
7/31/1997 | $10,000 | $10,000 | |
1998 | $10,378 | $10,599 | |
1999 | $10,819 | $10,904 | |
2000 | $10,806 | $11,374 | |
2001 | $11,862 | $12,522 | |
2002 | $12,509 | $13,362 | |
2003 | $12,544 | $13,842 | |
2004 | $13,004 | $14,643 | |
2005 | $13,397 | $15,575 | |
2006 | $13,985 | $15,973 | |
2007 | $14,418 | $16,654 |
Putting performance into perspective
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 (800) 276-1262.
You should consider the Fund’s investment objectives, risks, charges, and expenses carefully before investing. For this and other important information, please obtain a free Fund prospectus from your financial adviser and read it carefully prior to investing.
The graph does not reflect the deduction of taxes that a shareholder would pay on Fund distributions and redemptions of Fund shares.
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. If they could, transaction costs and other expenses would be incurred. All Fund and benchmark returns include reinvested dividends.
July 31, 2007 (Unaudited)
MANAGEMENT OF THE FUND
The Board of Integrity Managed Portfolios consists of four Trustees. These same individuals, unless otherwise noted, also serve as Directors or Trustees for the funds in the Integrity family of funds, the six series of Integrity Managed Portfolios and the six 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. Two of the remaining three Trustees and/or 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 COMPLEX1 | OTHER DIRECTORSHIPS HELD OUTSIDE THE FUND COMPLEX |
Jerry M. Stai | Trustee | Indefinite
Since January 2006 | Faculty, Embry-Riddle University (August 2000 to September 2005); Faculty, Park University (August 2005 to December 2005); Non-Profit Specialist, Bremer Bank (since July 2005); Faculty, Minot State University (since August 2000); Director, ND Tax-Free Fund, Inc., Montana Tax-Free Fund, Inc., Integrity Fund of Funds, Inc., (since January 2006); Trustee, The Integrity Funds (since January 2006). | 15 | Marycrest Franciscan Development, Inc. |
Orlin W. Backes | Trustee | Indefinite
Since January 1996 | Attorney, McGee, Hankla, Backes & Dobrovolny, P.C.; Director, South Dakota Tax-Free Fund, Inc. (April 1995 to June 2004), Integrity Small-Cap Fund of Funds, Inc. (September 1998 to June 2003), ND Tax-Free Fund, Inc., Montana Tax-Free Fund, Inc., and Integrity Fund of Funds, Inc., (Since April 2005); Trustee, The Integrity Funds (since May 2003); and Director, First Western Bank & Trust. | 15 | First Western Bank & Trust |
R. James Maxson | Trustee | Indefinite
Since January 1999 | Attorney, Maxson Law Office (since November 2002); Attorney, McGee, Hankla, Backes & Dobrovolny, P.C. (April 2000 to November 2002); Director, South Dakota Tax-Free Fund, Inc. (January 1999 to June 2004), Integrity Small-Cap Fund of Funds, Inc. (January 1999 to June 2003) Integrity Fund of Funds, Inc., ND Tax-Free Fund, Inc. and Montana Tax-Free Fund, Inc. (since January 1999); and Trustee, The Integrity Funds (since May 2003). | 15 | Vincent United Methodist Foundation
Minot Area Development Corporation |
1The Fund Complex consists of the three incorporated funds in the Integrity family of funds, the six series of Integrity Managed Portfolios, and the six series of The Integrity Funds.
Trustees 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 (800) 276-1262.
July 31, 2007 (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 other directorships, if any, held outside the Fund Complex, are shown below.
INTERESTED TRUSTEE
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 COMPLEX1 | OTHER DIRECTORSHIPS HELD OUTSIDE THE FUND COMPLEX |
Robert E. Walstad2,3 | Trustee and Chairman | Indefinite
Since January 1996 | Director (Sept. 1987 to Feb. 2007), President (Sept. 2002 to May 2003), CEO (Sept. 2001 to Feb. 2007), Integrity Mutual Funds, Inc.; Director, President and Treasurer, (Aug. 1988 to Feb. 2007), Integrity Money Management, Inc.; Director, President and Treasurer (Aug. 1988 to Sept. 2004), ND Capital, Inc.; Director, President and Treasurer (May 1989 to Feb. 2007), Integrity Fund Services, Inc.; Director, President, CEO, and Treasurer, (Jan. 1996 to Aug. 2003), Integrity Funds Distributor, Inc.; Director (Oct. 1999 to June 2003) Magic Internet Services, Inc.; Director (May 2000 to June 2003), President (Oct. 2002 to June 2003), ARM Securities Corporation; Director, CEO, Chairman, (Jan. 2002 to Feb. 2007) and President (Sept. 2002 to Dec. 2004), Capital Financial Services, Inc.; Director and President, (April 1994 to June 2004) South Dakota Tax-Free Fund, Inc., (Sept. 1998 to June 2003) Integrity Small-Cap Fund of Funds Inc.; President (May 2003 to Feb. 2007), Integrity Managed Portfolios and (Jan. 2006 to Feb. 2007) The Integrity Funds, (Jan. 1995 to Feb 2007) Integrity Fund of Funds, Inc., (Jan. 1989 to Feb. 2007) ND Tax-Free Fund, Inc., (Aug. 1993 to Feb 2007) Montana Tax-Free Fund, Inc.; Director and Chairman (since Jan. 1995) Integrity Fund of Funds, Inc., (since Jan. 1989) ND Tax-Free Fund, Inc., and (since Aug. 1993) Montana Tax-Free Fund, Inc.; Trustee, Chairman, (since January 2006) and Treasurer (January 2006 to May 2004), Integrity Managed Portfolios and (since May 2003), The Integrity Funds. | 15 | Minot Park Board |
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 COMPLEX1 | OTHER DIRECTORSHIPS HELD OUTSIDE THE FUND COMPLEX |
Mark R.Anderson3 | President | Indefinite
Since July 2007 | Personal Trust Officer (May 1999 to April 2003) Wells Fargo Bank; President and COO (April 2003 to Feb 2007), President, Director and CEO (since Feb. 2007) Integrity Mutual Funds, Inc.; President and Director (since Feb. 2007) Integrity Money Management, Inc., and Integrity Fund Services, Inc.; President and Director (Since August 2003) Integrity Funds Distributor, Inc.; President (Since July 2007) Montana Tax-Free Fund, Inc., Integrity Fund of Funds, Inc., and ND Tax-Free Fund, Inc., Integrity Managed Portfolios and The Integrity Funds; President and Treasurer (since July 2005) BAC Properties, LLC. | N/A | None |
Peter A. Quist2 | Vice President, Secretary | Indefinite
Since January 1996 | Attorney; Director and Vice President, Integrity Mutual Funds, Inc.; Director, Vice President and Secretary, Integrity Money Management, ND Capital, Inc. (August 1988 to September 2004), Integrity Fund Services, Inc., and Integrity Funds Distributor, Inc.; Vice President, Secretary Director, ARM Securities Corporation (May 2000 to June 2003); Director, South Dakota Tax-Free Fund, Inc. (April 1994 to June 2004), Integrity Small-Cap Fund of Funds, Inc. (September 1998 to June 2003), Montana Tax-Free Fund, Inc., Integrity Fund of Funds, Inc., and ND Tax Free Fund, Inc. | 3 | None |
Laura K. Anderson | Treasurer | Indefinite
Since October 2005 | Fund Accountant (until May 2004), Fund Accounting Supervisor (May 2004 to October 2005), Fund Accounting Manager (since October 2005), Manager of Mutual Fund Operations (Since October 2006), Integrity Fund Services, Inc.; Treasurer (since October 2005), The Integrity Funds, ND Tax-Free Fund, Inc., Montana Tax-Free Fund, Inc., and Integrity Fund of Funds, Inc. | N/A | None |
Brent M. Wheeler | Mutual Fund Chief Compliance Officer | Indefinite
Since October 2005 | Fund Accounting Manager (May 1998 to October 2005), Integrity Fund Services, Inc.; Treasurer (May 2004 to October 2005), Mutual Fund Compliance Officer (since October 2005), The Integrity Funds, ND Tax-Free Fund, Inc., Montana Tax-Free Fund, Inc., and Integrity Fund of Funds, Inc. | N/A | None |
1The Fund Complex consists of the three incorporated funds in the Integrity family of funds, the six series of Integrity Managed Portfolios, and the six series of The Integrity Funds.
2Trustees and/or officers who are “interested persons” of the Funds as defined in the Investment Company Act of 1940. Mr. Quist is an interested person by virtue of being an officer and Director of the Fund’s Investment Adviser and Principal Underwriter. Mr. Walstad is an interested person by virtue of being an officer of the Funds and a shareholder of Integrity Mutual Funds, Inc. As indicated above, effective February 1, 2007, Mr. Walstad retired from his roles as, among other things, Director and CEO of Integrity Mutual Funds, Inc., and Director, President and Treasurer of Integrity Money Management. However, a member of his immediate family is a director of Integrity Mutual Funds, Inc.
3At a Fund Board meeting held on July 26, 2007, Interested Director/Trustee, Chairman and Officer Robert E. Walstad resigned as President of the Funds. Subsequently, the Board nominated and appointed Mark R. Anderson as President of the Funds, effective July 26, 2007. Mr. Walstad will remain as Director/Trustee and Chairman of the Funds.
Trustees 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 (800) 276-1262.
Schedule of Investments July 31, 2007
Name of Issuer |
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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 | |||
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OKLAHOMA MUNICIPAL BONDS (97.3%) |
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Alva, OK Hosp. Auth. (Sales Tax Rev) Radian (Xcel) | Aa-3/AA | 5.250% | 06/01/2025 | $ | 250,000 | $ | 261,852 | |||
City of Tulsa, OK MBIA | Aaa/AAA | 4.250 | 03/01/2025 |
| 1,000,000 |
| 953,240 | |||
Claremore Public Works Auth. Capital Improvement Rev. FSA | Aaa/AAA | 5.250 | 06/01/2027 |
| 750,000 |
| 805,035 | |||
Claremore, OK Student Hsg. Rev. (Rogers University) ACA | NR/A | 5.750 | 09/01/2034 |
| 500,000 |
| 523,520 | |||
Cleveland Cty. OK School District # 029 | Aa-3/NR | 2.750 | 03/01/2008 |
| 350,000 |
| 347,018 | |||
Drumright, OK Utility Sys. Rev. Assured Guaranty Ins. | NR/AAA | 4.750 | 02/01/2036 |
| 950,000 |
| 975,232 | |||
Durant, OK Community Fac. Auth. Sales Tax Rev. XLCA | Aaa/AAA | 5.500 | 11/01/2019 |
| 500,000 |
| 540,875 | |||
Edmond Economic Dev. Auth., OK Student Housing Rev. | Baa-3/NR | 5.375 | 12/01/2019 |
| 200,000 |
| 201,672 | |||
#Edmond Economic Dev. Auth., OK Student Housing Rev. | Baa-3/NR | 5.500 | 12/01/2028 |
| 865,000 |
| 872,275 | |||
Edmond Public Works Auth. AMBAC | Aaa/AAA | 4.850 | 01/01/2024 |
| 155,000 |
| 159,672 | |||
Edmond Public Works Auth. AMBAC | Aaa/AAA | 4.750 | 07/01/2024 |
| 250,000 |
| 255,843 | |||
Edmond Public Works Sales Tax & Utility Rev. AMBAC | Aaa/AAA | 4.750 | 07/01/2023 |
| 200,000 |
| 204,790 | |||
Garfield Cty., Criminal Justice Auth. (Enid, OK) Rev. MBIA | Aaa/NR | 4.500 | 04/01/2018 |
| 250,000 |
| 254,440 | |||
Grand River Dam Auth., OK FSA | Aaa/AAA | 5.000 | 06/01/2012 |
| 250,000 |
| 262,180 | |||
*Grand River Dam Auth., OK Rev. AMBAC | Aaa/AAA | 6.250 | 06/01/2011 |
| 210,000 |
| 226,727 | |||
Grand River Dam Auth., OK Rev. Ref. AMBAC | Aaa/AAA | 5.500 | 06/01/2013 |
| 700,000 |
| 757,379 | |||
Jackson Cty., OK Sales Tax Rev. AMBAC | Aaa/AAA | 5.000 | 10/01/2022 |
| 500,000 |
| 511,155 | |||
Jenks Aquarium Auth. Rev. MBIA | Aaa/AAA | 5.250 | 07/01/2029 |
| 500,000 |
| 532,895 | |||
Jenks, OK General Obligation FSA | Aaa/AAA | 4.200 | 02/01/2014 |
| 400,000 |
| 406,140 | |||
Jenks, OK General Obligation FSA | Aaa/AAA | 5.000 | 02/01/2025 |
| 250,000 |
| 272,010 | |||
Mannford Public Works Auth. | NR/BBB+ | 6.000 | 04/01/2027 |
| 300,000 |
| 319,761 | |||
Mannford Public Works Auth. | NR/BBB+ | 5.900 | 04/01/2032 |
| 250,000 |
| 265,327 | |||
McAlester, OK Public Works Auth. FSA | Aaa/NR | 5.100 | 02/01/2030 |
| 100,000 |
| 105,314 | |||
McClain Cty., OK Econ. Dev. Auth. Ed. Lease Rev. (Purcell Schools) Assured GTY | Aa-1/AAA | 4.250 | 09/01/2020 |
| 585,000 |
| 576,746 | |||
Midwest City, OK Capital Impvt. MBIA | Aaa/AAA | 5.375 | 09/01/2024 |
| 500,000 |
| 529,250 | |||
Norman, OK (Regl. Hospital) Auth. Asset Guaranty | Aa-3/AA | 5.250 | 09/01/2016 |
| 180,000 |
| 188,728 | |||
Norman, OK Utilities Auth. Utility Rev. FGIC | Aaa/NR | 4.000 | 11/01/2022 |
| 265,000 |
| 251,458 | |||
OK Agric. & Mech. Colleges (OK St. Univ.) Athletic Facs. AMBAC | Aaa/NR | 5.000 | 08/01/2024 |
| 300,000 |
| 303,207 | |||
OK Board of Regents (Univ. of Central OK) AMBAC | Aaa/AAA | 5.600 | 08/01/2020 |
| 150,000 |
| 160,002 | |||
OK Board of Regents (Univ. of Central OK) AMBAC | Aaa/AAA | 5.700 | 08/01/2025 |
| 390,000 |
| 416,181 | |||
OK Board of Regents (Univ. of OK) FGIC | Aaa/AAA | 4.125 | 07/01/2026 |
| 500,000 |
| 472,105 | |||
OK Capital Impvt. Auth. (Higher Ed. Project) AMBAC | Aaa/AAA | 5.000 | 07/01/2024 |
| 250,000 |
| 261,173 | |||
OK Capital Impvt. Auth. (Higher Ed. Project) Rev. AMBAC | Aaa/AAA | 5.000 | 07/01/2022 |
| 500,000 |
| 525,420 | |||
OK Capital Impvt. Auth. (Higher Ed. Project) Rev. AMBAC | Aaa/AAA | 5.000 | 07/01/2030 |
| 2,000,000 |
| 2,083,920 | |||
OK Capital Impvt. Auth. (OK St. Bureau of Investigation) FSA | Aaa/AAA | 4.375 | 07/01/2022 |
| 100,000 |
| 98,988 | |||
OK Capital Impvt. Auth. (OK St. Bureau of Investigation) FSA | Aaa/AAA | 4.375 | 07/01/2023 |
| 100,000 |
| 98,941 | |||
OK Capital Impvt. Auth. (OK St. Bureau of Investigation) FSA | Aaa/AAA | 4.500 | 07/01/2024 |
| 200,000 |
| 199,328 | |||
OK Capital Impvt. Auth. (State Highway) Rev. MBIA | Aaa/AAA | 5.000 | 06/01/2014 |
| 250,000 |
| 263,373 | |||
OK Capital Impvt. Auth. (Supreme Court Proj.) CIFG | Aaa/AAA | 4.500 | 07/01/2024 |
| 500,000 |
| 498,320 | |||
OK Capital Impvt. Auth. (Supreme Court Proj.) CIFG | Aaa/AAA | 4.500 | 07/01/2026 |
| 500,000 |
| 493,810 | |||
OK Colleges Board of Regents (NE State Univ. Ctr.) Rev. FSA | Aaa/AAA | 5.100 | 03/01/2016 |
| 140,000 |
| 141,404 | |||
OK Colleges Board of Regents (NE State Univ. Ctr.) Rev. FSA | Aaa/AAA | 5.150 | 03/01/2021 |
| 100,000 |
| 100,989 | |||
OK Devl. Finance Auth. (Comanche County Hosp.) | NR/BBB- | 5.625 | 07/01/2009 |
| 105,000 |
| 107,057 | |||
OK Devl. Finance Auth. (DHS Lease Rev.) Series 2000A MBIA | Aaa/NR | 5.600 | 03/01/2015 |
| 280,000 |
| 285,583 | |||
OK Devl. Finance Auth. (Integris Baptist Medical Center) AMBAC | Aaa/AAA | 5.600 | 06/01/2020 |
| 250,000 |
| 265,940 | |||
OK Devl. Finance Auth. (Langston Univ. Stadium) | NR/AA | 5.000 | 07/01/2027 |
| 250,000 |
| 260,867 | |||
OK Devl. Finance Auth. (Lease Rev.) Law Enforcement MBIA | Aaa/AAA | 5.100 | 06/01/2027 |
| 120,000 |
| 124,495 | |||
OK Devl. Finance Auth. (OK State Syst. Higher Ed.) AMBAC | Aaa/AAA | 4.900 | 12/01/2022 |
| 200,000 |
| 206,584 | |||
OK Devl. Finance Auth. (Seminole State College) | NR/AA | 5.125 | 12/01/2027 |
| 150,000 |
| 157,223 | |||
OK Devl. Finance Auth. (Southern Nazarene Univ.) Rev. | NR/NR | 5.750 | 03/01/2013 |
| 400,000 |
| 413,264 | |||
#OK Devl. Finance Auth. (Southern Nazarene Univ.) Rev. | NR/NR | 6.000 | 03/01/2018 |
| 600,000 |
| 620,790 | |||
OK Devl. Finance Auth. (St. Ann's Retirement Village) Rev. MBIA | Aaa/NR | 5.000 | 12/01/2028 |
| 500,000 |
| 513,140 | |||
OK Devl. Finance Auth. (St. John Health Sys) | Aa-3/AA- | 5.000 | 02/15/2037 |
| 1,000,000 |
| 1,012,310 | |||
OK Devl. Finance Auth. (St. John Health Syst.) MBIA | Aaa/AAA | 5.750 | 02/15/2025 |
| 50,000 |
| 51,922 | |||
OK Devl. Finance Auth. (St. John Health Syst.) MBIA | Aaa/AAA | 5.750 | 02/15/2025 |
| 150,000 |
| 155,332 | |||
OK Devl. Finance Auth. (St. John Health Syst.) Rev. Ref. - Prerefunded | Aa-3/AA- | 5.750 | 02/15/2025 |
| 375,000 |
| 389,580 | |||
OK Devl. Finance Auth. (St. John Health Syst.) Rev. Ref. - Prerefunded | Aa-3/AA- | 6.000 | 02/15/2029 |
| 300,000 |
| 312,777 | |||
OK Devl. Finance Auth. (St. John Health Syst.) Rev. Ref. - Unrefunded | Aa-3/AA- | 5.750 | 02/15/2025 |
| 125,000 |
| 129,860 | |||
OK Devl. Finance Auth. (St. John Health Syst.) Rev. Ref. - Unrefunded | Aa-3/AA- | 6.000 | 02/15/2029 |
| 100,000 |
| 104,259 | |||
OK Devl. Finance Auth. OK Dept. of Corrections (McLoud Fac.) FGIC | Aaa/AAA | 4.600 | 04/01/2022 |
| 250,000 |
| 253,135 | |||
OK Devl. Finance Auth. OK Dept. of Corrections (McLoud Fac.) FGIC | Aaa/AAA | 4.650 | 04/01/2023 |
| 250,000 |
| 253,882 | |||
OK Devl. Finance Auth. OK State Higher Ed (Master Lease) FSA | Aaa/AAA | 4.500 | 06/01/2026 |
| 250,000 |
| 248,205 | |||
OK Housing Finance Agency Single Family Homeownership | Aaa/NR | 5.250 | 09/01/2021 |
| 120,000 |
| 121,612 | |||
*OK Housing Finance Agency Single Family Homeownership GNMA | Aaa/NR | 5.375 | 03/01/2020 |
| 75,000 |
| 75,613 | |||
OK Housing Finance Agency Single Family Homeownership GNMA/FNMA | Aaa/NR | 5.850 | 09/01/2020 |
| 50,000 |
| 50,776 | |||
OK Municipal Power Auth. Power Supply Rev. FGIC | Aaa/AAA | 4.250 | 01/01/2037 |
| 500,000 |
| 461,325 | |||
OK Municipal Power Auth. Power Supply Rev. FGIC | Aaa/AAA | 4.500 | 01/01/2047 |
| 1,350,000 |
| 1,292,382 | |||
OK Municipal Power Auth. Rev. MBIA | Aaa/AAA | 5.750 | 01/01/2024 |
| 2,230,000 |
| 2,493,430 | |||
#OK State G.O. (OK Building Commission) FGIC | Aaa/AAA | 5.000 | 07/15/2018 |
| 1,400,000 |
| 1,474,046 | |||
*OK State Student Loan Auth. | Aaa/AAA | 5.625 | 06/01/2031 |
| 685,000 |
| 718,243 | |||
OK State Student Loan Auth. | A/NR | 6.350 | 09/01/2025 |
| 280,000 |
| 296,388 | |||
OK State Student Loan Auth. MBIA | Aaa/AAA | 5.300 | 12/01/2032 |
| 450,000 |
| 462,289 | |||
OK State Turnpike Auth. FGIC | Aaa/AAA | 5.000 | 01/01/2023 |
| 165,000 |
| 168,298 | |||
OK State Turnpike Auth. Rev. FGIC | Aaa/AAA | 5.250 | 01/01/2028 |
| 430,000 |
| 441,632 | |||
OK State Turnpike Auth. Rev. FGIC | Aaa/AAA | 5.000 | 01/01/2028 |
| 120,000 |
| 122,582 | |||
OK State Turnpike Auth. Rev. MBIA-IBC | Aaa/AAA | 4.750 | 01/01/2024 |
| 140,000 |
| 142,768 | |||
OK State Water (Loan Program) Rev. | NR/AAA | 5.400 | 09/01/2015 |
| 105,000 |
| 106,562 | |||
*OK State Water (Loan Program) Rev. | NR/AAA | 5.100 | 09/01/2016 |
| 415,000 |
| 424,756 | |||
OK State Water Resources Board Rev. | NR/AAA | 5.050 | 10/01/2022 |
| 200,000 |
| 211,260 | |||
OK State Water Resources Board Rev. | NR/AAA | 5.125 | 10/01/2027 |
| 500,000 |
| 529,395 | |||
OK State Water Resources Board Rev. | NR/AAA | 4.625 | 10/01/2018 |
| 435,000 |
| 442,404 | |||
OK State Water Resources Loan Rev. | NR/AAA | 5.100 | 10/01/2027 |
| 500,000 |
| 528,340 | |||
OK Transportation Auth. Turnpike Sys. Rev. - Prerefunded AMBAC | Aaa/AAA | 5.000 | 01/01/2021 |
| 10,000 |
| 10,456 | |||
OK Transportation Auth. Turnpike Sys. Rev. - Unrefunded AMBAC | Aaa/AAA | 5.000 | 01/01/2021 |
| 90,000 |
| 93,030 | |||
OK Water Resources Board Rev. AMBAC | Aaa/AAA | 4.750 | 04/01/2024 |
| 100,000 |
| 102,372 | |||
Oklahoma City Airport Trust Jr. Lien Refunding Series B AMBAC | Aaa/AAA | 5.000 | 07/01/2021 |
| 250,000 |
| 264,290 | |||
Oklahoma City Airport Trust Jr. Lien Refunding Series B. AMBAC | Aaa/AAA | 5.000 | 07/01/2019 |
| 250,000 |
| 265,328 | |||
Oklahoma City, OK MBIA | Aaa/AAA | 4.250 | 03/01/2022 |
| 110,000 |
| 107,520 | |||
Oklahoma City, OK Public Auth. (OKC Fairgrounds Fac.) FGIC | Aaa/AAA | 5.500 | 10/01/2019 |
| 250,000 |
| 272,285 | |||
Oklahoma City, OK Unlimited GO | Aa-1/AA+ | 4.250 | 03/01/2025 |
| 500,000 |
| 475,460 | |||
Oklahoma City, OK Water Utility Trust (Water & Sewer) Rev. FGIC | Aaa/AAA | 5.000 | 07/01/2029 |
| 425,000 |
| 442,187 | |||
#Okmulgee Public Works Auth. Capital Improvement Rev. MBIA | Aaa/AAA | 5.125 | 08/01/2030 |
| 750,000 |
| 781,928 | |||
Okmulgee Public Works Auth. Capital Improvement Rev. MBIA | Aaa/AAA | 4.800 | 10/01/2027 |
| 500,000 |
| 514,050 | |||
Rural Enterprises, OK Inc. OK Govt. Fin. (Cleveland Cty. Hlth.) MBIA | Aaa/NR | 5.000 | 11/01/2021 |
| 250,000 |
| 260,490 | |||
Rural Enterprises, OK Inc. Okmulgee Student Housing Proj. ACA | NR/A | 5.750 | 12/01/2030 |
| 250,000 |
| 263,044 | |||
Rural Enterprises, OK Inc. Okmulgee Student Housing Proj. Series A ACA | NR/A | 5.700 | 12/01/2025 |
| 220,000 |
| 231,140 | |||
Rural Enterprises, OK Inc. Okmulgee Student Housing Proj. Series A ALA | NR/A | 5.625 | 12/01/2020 |
| 140,000 |
| 147,036 | |||
Rural Enterprises, OK Inc. Student Hsg. (Connors College) ACA | NR/A | 5.550 | 11/01/2021 |
| 250,000 |
| 263,150 | |||
Rural Enterprises, OK Inc. Student Hsg. (Connors College) ACA | NR/A | 5.650 | 11/01/2031 |
| 375,000 |
| 395,111 | |||
Rural Enterprises, OK Inc. USAOF Student Housing ACA | NR/A | 5.550 | 11/01/2021 |
| 250,000 |
| 263,250 | |||
Rural Enterprises, OK Inc. USAOF Student Housing ACA | NR/A | 5.650 | 11/01/2031 |
| 250,000 |
| 263,508 | |||
Sapulpa Municipal Authority Utility Rev. FSA | Aaa/AAA | 5.125 | 01/01/2032 |
| 250,000 |
| 260,825 | |||
Texas Cty., OK Dev. Auth. (OPSU Student Hsg.) ACA | NR/A | 5.250 | 11/01/2023 |
| 250,000 |
| 259,812 | |||
Tulsa Cty, OK Indl. Auth. Recreation Facs. | NR/AA- | 4.700 | 09/01/2024 |
| 500,000 |
| 507,740 | |||
Tulsa Metropolitan Util. Auth. Utility Revs XLCA | Aaa/AAA | 4.250 | 05/01/2026 |
| 650,000 |
| 623,552 | |||
Tulsa Metropolitan Util. Auth. Utility Revs XLCA | Aaa/AAA | 4.500 | 05/01/2027 |
| 910,000 |
| 902,292 | |||
Tulsa, OK General Obligation | Aa/AA | 4.500 | 03/01/2023 |
| 700,000 |
| 704,683 | |||
Tulsa, OK General Obligation | Aa/AA | 4.500 | 03/01/2026 |
| 1,035,000 |
| 1,037,815 | |||
Tulsa, Oklahoma Unlimited GO MBIA | Aaa/AAA | 4.250 | 03/01/2024 |
| 500,000 |
| 481,425 | |||
University of OK Board of Regents (Multi Facs.) Rev. MBIA | Aaa/NR | 4.750 | 06/01/2029 |
| 250,000 |
| 254,313 | |||
University of OK Board of Regents (Research Fac.) Rev. | Aaa/NR | 4.800 | 03/01/2028 |
| 670,000 |
| 684,666 | |||
University of OK Board of Regents Student Hsg. Rev. FGIC | Aaa/NR | 5.000 | 11/01/2027 |
| 1,000,000 |
| 1,039,180 | |||
University of OK Student Hsg. (Cameron Univ.) Rev. AMBAC | Aaa/AAA | 5.500 | 07/01/2023 |
| 250,000 |
| 270,777 | |||
|
|
|
|
|
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|
| |||
TOTAL OKLAHOMA MUNICIPAL BONDS (COST: $45,921,277) |
|
|
| $ | 46,550,716 | |||||
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|
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|
| |||
SHORT-TERM SECURITIES (1.8%) |
|
|
|
| Shares |
|
| |||
Wells Fargo Advantage National Tax-Free Money Market (COST: $838,984) |
| 838,984 | $ | 838,984 | ||||||
|
|
|
|
|
|
|
| |||
TOTAL INVESTMENTS IN SECURITIES (COST: $46,760,261) |
|
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| $ | 47,389,700 | |||||
OTHER ASSETS LESS LIABILITIES |
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|
|
| 457,674 | |||
|
|
|
|
|
|
|
| |||
NET ASSETS |
|
|
|
|
| $ | 47,847,374 | |||
* 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.
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 31, 2007
Statement of Assets and Liabilities July 31, 2007
ASSETS | ||||
| Investments in securities, at value (cost: $46,760,261) | $ | 47,389,700 | |
| Accrued interest receivable | 614,627 | ||
| Accrued dividends receivable | 1,690 | ||
| Receivable for fund shares sold | 39,500 | ||
| Prepaid expenses | 2,561 | ||
|
| Total Assets | $ | 48,048,078 |
| ||||
LIABILITIES | ||||
| Dividends payable | $ | 148,317 | |
| Accrued expenses |
| 13,438 | |
| Payable to affiliates |
| 38,949 | |
|
| Total Liabilities | $ | 200,704 |
| ||||
NET ASSETS | $ | 47,847,374 | ||
| ||||
Net assets are represented by: |
| |||
| Paid-in capital | $ | 49,678,550 | |
| Accumulated undistributed net realized gain (loss) on investments and futures |
| (2,464,763) | |
| Accumulated undistributed net investment income (loss) |
| 4,148 | |
| Unrealized appreciation (depreciation) on investments | 629,439 | ||
|
| Total amount representing net assets applicable to 4,337,842 outstanding shares of no par common stock (unlimited shares authorized) | $ | 47,847,374 |
|
|
|
| |
|
| |||
Net Asset Value per share | $ | 11.03 | ||
|
|
| ||
Public offering price (based on sales charge of 4.25%) | $ | 11.52 | ||
The accompanying notes are an integral part of these financial statements.
Financial Statements July 31, 2007
Statement of Operations For the year ended July 31, 2007
INVESTMENT INCOME |
| |||
| Interest | $ | 2,100,614 | |
| Dividends | 47,125 | ||
|
| Total Investment Income | $ | 2,147,739 |
|
| |||
EXPENSES |
| |||
| Investment advisory fees | $ | 234,590 | |
| Distribution (12b-1) fees |
| 117,295 | |
| Administrative service fees |
| 56,737 | |
| Transfer agent fees |
| 88,416 | |
| Accounting service fees |
| 47,422 | |
| Custodian fees |
| 6,919 | |
| Professional fees |
| 25,514 | |
| Trustees fees |
| 3,779 | |
| Insurance expense |
| 1,440 | |
| Reports to shareholders |
| 5,640 | |
| Audit fees |
| 8,519 | |
| Legal fees |
| 1,961 | |
| License, fees, and registrations |
| 2,244 | |
| Transfer agent out-of-pockets |
| 506 | |
|
| Total Expenses | $ | 600,982 |
| Less expenses waived or absorbed by the Fund’s manager | (98,960) | ||
|
| Total Net Expenses | $ | 502,022 |
|
| |||
NET INVESTMENT INCOME (LOSS) | $ | 1,645,717 | ||
|
| |||
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS |
| |||
| Net realized gain (loss) from investment transactions | $ | 17,886 | |
| Net change in unrealized appreciation (depreciation) of investments |
| (348,424) | |
|
| Net Realized and Unrealized Gain (Loss) on Investments | $ | (330,538) |
|
| |||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | $ | 1,315,179 | ||
The accompanying notes are an integral part of these financial statements.
Financial Statements July 31, 2007
Statement of Changes in Net Assets
For the year ended July 31, 2007 and the year ended July 31, 2006
| For The Year Ended | For The Year Ended | ||||||||
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS |
|
|
|
| ||||||
| Net investment income (loss) | $ | 1,645,717 | $ | 1,355,659 | |||||
| Net realized gain (loss) on investment and futures transactions |
| 17,886 |
| 789,653 | |||||
| Net change in unrealized appreciation (depreciation) on investments and futures |
| (348,424) |
| (476,388) | |||||
|
| Net Increase (Decrease) in Net Assets Resulting From Operations | $ | 1,315,179 | $ | 1,668,924 | ||||
| ||||||||||
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS |
|
|
|
| ||||||
| Dividends from net investment income ($.39 and $.39 per share, respectively) | $ | (1,644,054) | $ | (1,354,904) | |||||
| Distributions from net realized gain on investment transactions ($.00 and $.00 per share, respectively) |
| 0 |
| 0 | |||||
|
| Total Dividends and Distributions | $ | (1,644,054) | $ | (1,354,904) | ||||
| ||||||||||
CAPITAL SHARE TRANSACTIONS |
|
|
|
| ||||||
| Proceeds from sale of shares | $ | 14,210,933 | $ | 15,763,169 | |||||
| Proceeds from reinvested dividends |
| 703,589 |
| 576,842 | |||||
| Cost of shares redeemed |
| (10,301,303) |
| (7,978,446) | |||||
|
| Net Increase (Decrease) in Net Assets Resulting from Capital Share Transactions | $ | 4,613,219 | $ | 8,361,565 | ||||
|
|
|
|
| ||||||
TOTAL INCREASE (DECREASE) IN NET ASSETS | $ | 4,284,344 | $ | 8,675,585 | ||||||
NET ASSETS, BEGINNING OF PERIOD |
| 43,563,030 |
| 34,887,445 | ||||||
NET ASSETS, END OF PERIOD | $ | 47,847,374 | $ | 43,563,030 | ||||||
|
|
|
|
|
|
| ||||
Undistributed Net Investment Income | $ | 4,148 | $ | 2,484 | ||||||
The accompanying notes are an integral part of these financial statements.
Notes to Financial Statements July 31, 2007
Note 1: ORGANIZATION
The Fund is an investment portfolio of Integrity Managed Portfolios (the “Trust”) and is registered under the Investment Company Act of 1940, as amended (the “1940 Act”) as a non-diversified, open-end management investment company. The Trust may offer multiple portfolios; currently six portfolios are offered. The Trust 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 state income tax, as is consistent with preservation of capital. Up to 20% of the Fund’s total assets may be invested in Oklahoma mu nicipal 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.
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 Fund Services, 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; 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 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.
Repurchase agreements - In connection with transactions with repurchase agreements, it is the Fund’s policy that its custodian take possession of the underlying collateral securities, the fair value of which exceeds the principal amount of the repurchase transaction, including accrued interest, at all times. If the seller defaults, and the fair value of the collateral declines, realization of the collateral by the Fund may be delayed or limited.
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 is 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, 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.
Contingent deferred sales charge - In the case of investments of $1 million or more, a 1.00% CDSC may be assessed on shares redeemed within 12 months of purchase (excluding shares purchased with reinvested dividends and/or distributions).
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. Interest and penalties related to uncertain tax positions, if any, are classified in the Fund’s financial statements as other expense. Distributions during the year ended July 31, 2007, were characterized as tax-exempt for tax purposes.
The tax character of distributions paid was as follows:
|
|
| July 31, 2007 |
| July 31, 2006 |
|
| Tax-exempt income | $ | 1,644,054 | $ | 1,354,904 |
|
| Ordinary income |
| 0 |
| 0 |
|
| Long-term capital gains |
| 0 |
| 0 |
|
| Total | $ | 1,644,054 | $ | 1,354,904 |
|
As of July 31, 2007, the components of accumulated earnings/(deficit) on a tax basis were as follows:
| Undistributed Ordinary Income | Undistributed Long-Term Capital Gains | Accumulated Earnings | Accumulated Capital and Other Losses | Unrealized Appreciation/(Depreciation) | Total Accumulated Earnings/(Deficit) |
|
| $0 | $0 | ($2,464,763) | $633,586 | ($1,831,177) |
|
The Fund has unexpired capital loss carryforwards for tax purposes as of July 31, 2007 totaling $2,464,763, 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 following table:
Year |
| Unexpired Capital Losses |
2010 | $ | 357,483 |
2011 | $ | 412,304 |
2012 | $ | 547,833 |
2013 | $ | 1,147,143 |
For the year ended July 31, 2007, the Fund did not make any permanent reclassifications to reflect tax character.
Net capital losses incurred after October 31, and within the tax year are deemed to arise on the first business day of the Fund’s next taxable year. For the year ended July 31, 2007, the Fund deferred to August 1, 2007, post-October capital losses, post-October currency losses, and post-October passive foreign company losses of $0.
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 (depreciation) related to op en 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.
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 31, 2007, there were unlimited shares of no par authorized; 4,337,842 and 3,932,533 shares were outstanding at July 31, 2007 and July 31, 2006, respectively.
Transactions in capital shares were as follows:
| For The Year Ended | For The Year Ended |
Shares sold | 1,272,549 | 1,433,102 |
Shares issued on reinvestment of dividends | 63,077 | 52,488 |
Shares redeemed | (930,317) | (725,822) |
Net increase (decrease) | 405,309 | 759,768 |
Note 4: INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Integrity Money Management, the Fund’s investment adviser; Integrity Funds Distributor, Inc. (the “Distributor” or “Integrity Funds Distributor”), the Fund’s underwriter; and Integrity Fund Services, Inc. (“Integrity Fund Services”), the Fund’s transfer, accounting, and administrative services agent; are subsidiaries of Integrity Mutual Funds, the Fund’s sponsor.
The Fund has engaged Integrity Money Management 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 $135,630 of investment advisory fees after partial waiver for the year ended July 31, 2007. The Fund has a payable to Integrity Money Management of $10,451 at July 31, 2007 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 1.25% of the Fund’s average daily net assets on an annual basis up to the amount of the Investment Adviser and Management fee. The Investment Adviser and Principal 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 actual total annual operating expenses were 1.07% for the year ended July 31, 2007.
Principal underwriter and shareholder services - Integrity Funds Distributor serves as the principal underwriter for the Fund. The Fund has adopted a distribution plan for each class of shares as allowed by Rule 12b-1 of the 1940 Act. Distribution plans permit the Fund to reimburse its principal underwriter for costs related to selling shares of the Fund and for various other services. These costs, which consist primarily of commissions and service fees to broker-dealers who sell shares of the Fund, are paid by shareholders through expenses called “Distribution Plan expenses.” The Fund currently pays an annual distribution fee of up to 0.25% of the average daily net assets. Distribution Plan expenses are calculated daily and paid monthly. The Fund has recognized $117,295 of distribution fees for the year ended July 31, 2007. The Fund has a payable to Integrity Funds Distributor of $10,418 at July 31, 2007 for distribution fees .
Integrity Fund Services provides transfer agent services for a variable fee equal to 0.20% 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, with a minimum of $2,000 per month plus reimbursement of out-of-pocket expenses. An additional fee of $500 per month is charged for each additional share class. The Fund has recognized $88,416 of transfer agency fees and expenses for the year ended July 31, 2007. The Fund has a payable to Integrity Fund Services of $8,334 at July 31, 2007 for transfer agency fees. Integrity Fund Services 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 ne t 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 $47,422 of accounting service fees for the year ended July 31, 2007. The Fund has a payable to Integrity Fund Services of $4,150 at July 31, 2007 for accounting service fees. Integrity Integrity Fund Services also acts as the Fund’s administrative services agent for a variable fee equal to 0.125% 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, with a minimum of $2,000 per month plus out-of-pocket expenses. An additional fee of $500 per month is charged by Integrity Fund Services for each additional share class. The Fund has recognized $56,737 of administrative services fees for the year ended July 31, 2007. The Fund has a payable to Integrity Fund Services of $5,209 at July 31, 2007 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 $10,394,063 and $5,427,422, respectively, for the year ended July 31, 2007.
Note 6: INVESTMENT IN SECURITIES
At July 31, 2007, the aggregate cost of securities for federal income tax purposes was substantially the same for financial reporting purposes at $46,760,261. The net unrealized appreciation of investments based on the cost was $629,439, which is comprised of $971,805 aggregate gross unrealized appreciation and $342,366 aggregate gross unrealized depreciation. Differences between financial reporting-basis and tax-basis unrealized appreciation/depreciation are due to differing treatment of market discount.
Note 7: RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In July 2006, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes,” an interpretation of SFAS 109, “Accounting for Income Taxes” (FIN 48). FIN 48 is effective on the last business day of the semi-annual reporting period for fiscal years beginning after December 15, 2006. FIN 48 established the accounting for uncertain tax positions that have been taken or are expected to be taken in a tax return, including the recognition and measurement of their financial statement effects. Pursuant to FIN 48, the Fund would recognize a tax benefit only if it is “more likely than not” that a particular tax position would be sustained upon examination or audit. To the extent the “more likely than not” standard is satisfied, the benefit associated with a tax position is measured as the largest amount that is greater than 50% likely o f being realized upon settlement.
In September 2006, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 157, Fair Value Measurements. This standard defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles and expands disclosures about fair value measurements. SFAS 157 is effective for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The Fund is presently evaluating the impact of adopting SFAS 157.
July 31, 2007
FINANCIAL HIGHLIGHTS
Selected per share data and ratios for the period indicated.
|
| For The Year Ended |
| For The Year Ended |
| For The Year Ended |
| For The Year Ended |
| For The Year Ended | ||
NET ASSET VALUE, BEGINNING OF PERIOD | $ | 11.08 | $ | 11.00 | $ | 11.07 | $ | 11.09 | $ | 11.54 | ||
|
|
|
|
|
|
|
|
|
|
| ||
Income from Investment Operations: |
|
|
|
|
|
|
|
|
|
| ||
| Net investment income | $ | .39 | $ | .39 | $ | .40 | $ | .42 | $ | .49 | |
| Net realized and unrealized gain (loss) on investment and futures transactions |
| (.05) |
| .08 |
| (.07) |
| (.02) |
| (.45) | |
| Total Income (Loss) From Investment Operations | $ | .34 | $ | .47 | $ | .33 | $ | .40 | $ | .04 | |
|
|
|
|
|
|
|
|
|
|
| ||
Less Distributions: |
|
|
|
|
|
|
|
|
|
| ||
| Dividends from net investment income | $ | (.39) | $ | (.39) | $ | (.40) | $ | (.42) | $ | (.49) | |
| Distributions from net realized gains |
| .00 |
| .00 |
| .00 |
| .00 |
| .00 | |
| Total Distributions | $ | (.39) | $ | (.39) | $ | (.40) | $ | (.42) | $ | (.49) | |
|
|
|
|
|
|
|
|
|
|
| ||
NET ASSET VALUE, END OF PERIOD | $ | 11.03 | $ | 11.08 | $ | 11.00 | $ | 11.07 | $ | 11.09 | ||
|
|
|
|
|
|
|
|
|
|
| ||
Total Return |
| 3.10%A |
| 4.39%A |
| 3.02%A |
| 3.67%A |
| 0.28%A | ||
|
|
|
|
|
|
|
|
|
|
| ||
RATIOS/SUPPLEMENTAL DATA: |
|
|
|
|
|
|
|
|
|
| ||
| Net assets, end of period (in thousands) | $ | 47,847 | $ | 43,563 | $ | 34,887 | $ | 35,472 | $ | 31,799 | |
| Ratio of net expenses (after expense assumption) to average net assets |
| 1.07%B |
| 1.03%B |
| 0.98%B |
| 0.93%B |
| 0.65%B | |
| Ratio of net investment income to average net assets |
| 3.50% |
| 3.55% |
| 3.60% |
| 3.77% |
| 4.21% | |
| Portfolio turnover rate |
| 11.97% |
| 4.65% |
| 8.69% |
| 10.70% |
| 9.39% | |
A Excludes maximum sales charge of 4.25%.
B During the periods indicated above, Integrity Money Management assumed/waived expenses of $98,960, $60,854, $81,636, $87,525, and $124,432, respectively. If the expenses had not been assumed/waived, the annualized ratio of total expenses to average net assets would have been 1.28%, 1.19%, 1.20%, 1.19%, and 1.11%, 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.
July 31, 2007
TAX INFORMATION
Tax Information For The Year Ended July 31, 2007 (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 31, 2006 |
| August 31, 2006 | $ | .032757 |
| - |
| - |
September 29, 2006 |
| September 29, 2006 | $ | .031734 |
| - |
| - |
October 31, 2006 |
| October 31, 2006 | $ | .033849 |
| - |
| - |
November 30, 2006 |
| November 30, 2006 | $ | .032833 |
| - |
| - |
December 29, 2006 |
| December 29, 2006 | $ | .031632 |
| - |
| - |
January 31, 2007 |
| January 31, 2007 | $ | .033720 |
| - |
| - |
February 28, 2007 |
| February 28, 2007 | $ | .032352 |
| - |
| - |
March 30, 2007 |
| March 30, 2007 | $ | .032451 |
| - |
| - |
April 30, 2007 |
| April 30, 2007 | $ | .032317 |
| - |
| - |
May 31, 2007 |
| May 31, 2007 | $ | .032754 |
| - |
| - |
June 29, 2007 |
| June 29, 2007 | $ | .031591 |
| - |
| - |
July 31, 2007 |
| July 31, 2007 | $ | .033689 |
| - |
| - |
Shareholders should consult their tax advisors.
July 31, 2007
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Trustees of 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 31, 2007, the related statement of operations for the year then ended, the statement of changes in net assets for the years ended July 31, 2007 and July 31, 2006, and the financial highlights for the year ended July 31, 2007, and each of the four years in the period ended July 31, 2006. 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 audits.
We conducted our audits 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 31, 2007 by correspondence with the custodian and brokers. 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 audits provide 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 31, 2007, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.
BRADY, MARTZ & ASSOCIATES, P.C.
Minot, North Dakota USA
September 12, 2007
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 promote: | |
|
| |
| (1) | Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; |
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|
|
| (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 |
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|
|
| (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. | |
|
| |
(e) | Not applicable. | |
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(f) | See Item 12(a) regarding the filing of the Code of Ethics for the Principal Executive and Principal Financial Officers of the investment companies within the Integrity Mutual Funds, Inc. complex. | |
Item 3—Audit Committee Financial Expert
The Trust's Board of Trustees has determined that Jerry Stai is an audit committee financial expert, as defined in paragraph (a)(2) of Item 3 of Form N-CSR. Mr. Stai 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. | ||
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| Audit Fees | |
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| 2006 | $38,600 |
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| 2007 | $39,900 |
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(b) | Audit-related fees are fees principally paid for professional services rendered for due diligence and technical accounting consulting and research. | ||
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| Audit-Related Fees | |
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| 2006 | $4,800 |
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| 2007 | $4,800 |
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(c) | Tax fees include amounts related to the preparation and review of the registrant’s tax returns. | ||
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| Tax Fees | |
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| 2006 | $6,600 |
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| 2007 | $7,200 |
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(d) | All Other Fees. | ||
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| None. | |
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(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. | |
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| (2) | 0% of the services described in paragraphs (b) through (d) of Item 4 were not pre-approved by the audit committee. All of the services described in paragraphs (b) through (d) of Item 4 were approved by the audit committee. | |
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(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 employees. | ||
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(g) | None. | ||
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(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. | ||
Item 5—Audit Committee of Listed Registrants
Not applicable
Item 6—Schedule of Investments
The Schedule of Investments is included in Item 1 of this Form N-CSR.
Item 7—Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies
Not applicable
Item 8—Portfolio Managers of Closed-End Management Investment Company and Affiliated Purchasers
Not applicable
Item 9—Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers
Not applicable
Item 10—Submissions 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 11—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. |
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(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 12—Exhibits
(a) | (1) | The registrant’s Code of Ethics filed pursuant to Item 2 of the N-CSR is attached hereto. |
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| (2) | Certification pursuant to Section 30a-2(a) of the Sarbanes-Oxley Act of 2002 is filed and attached hereto. |
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(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.
By: | /s/ Mark R. Anderson |
| Mark R. Anderson |
| President, Integrity Managed Portfolios |
Date: September 27, 2007
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.
By: | /s/ Laura K. Anderson |
| Laura K. Anderson |
| Treasurer, Integrity Managed Portfolios |
Date: September 27, 2007