UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number | 811-06153 |
| Integrity Managed Portfolios |
| (Exact name of registrant as specified in charter) |
Address of Registrant : | 1 Main Street North |
| Minot, ND 58703 |
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Name and address of agent for service : | Brenda Sem |
| 1 Main Street North |
| Minot, ND 58703 |
Registrant’s telephone number, including area code: (701)852-5292
Date of fiscal year end: July 31, 2003
Date of reporting period: January 31, 2004
Item 1. Reports to Stockholders.
Kansas Municipal Fund
Dear Shareholder:
Enclosed is the semi-annual report of the operations for the Kansas Municipal Fund (the “Fund”) for the six months ended January 30, 2004. The Fund’s portfolio and related financial statements are presented within for your review.
The foundations under the U.S. economy are getting stronger. Massive policy stimulus has worked in an economy that’s in a self-sustaining expansion with businesses shifting away from their retrenchment mindset. This means that growth will no longer be so dependent on consumer spending and housing, even though both of these sectors should remain firm.
The fact that the Federal Reserve is determined to keep interest rates extremely low in the face of strengthening activity boosts the odds that the economy will continue to surprise on the upside in the months ahead. As a result, corporate profits should perform well and deflation fears will eventually be replaced by the realization that the Fed is sowing the seeds for future inflation.
The Fed would very much like to avoid a repeat of 1994. It will be hard to plan a smooth exit strategy from its current stance, but it is trying to be clear in signaling its intentions to the markets. It is slowly altering the policy statement after each FOMC (Federal Open Market Committee) meeting, with the intention of having the markets gradually adjust by the time rates are finally hiked. The Fed has learned from the experience of last May through July when confusing policy signals created tremendous bond volatility.
During the period the Fund utilized defensive positions designed to provide share price stability. U.S. Treasury futures were used to hedge a portion of the portfolio with the results being tempered share price as rates hovered near forty-year lows and stabilized share price as bonds dipped in reaction to periodic riding rates. Risk management is important in this market environment.
An important part of the Fund’s strategy includes searching the primary and secondary markets for high quality double tax-exempt issues. Portfolio quality for the period ended January 30, 2004, was represented as follows: AAA 67.7%, AA 15.4%, A 5.5%, BBB 3.0%, BB 1.1%, and NR 7.3%. High quality current income exempt from federal and state income tax remain the primary objectives of the Fund.
Sincerely,
The Portfolio Management Team
The views expressed are those of Monte Avery, Chief Portfolio Strategist with Integrity Mutual Funds. The views are subject to change at any time in response to changing circumstances in the market and are not intended to predict or guarantee the future performance of any individual security, market sector or the markets generally, or any Integrity Mutual Fund.
Terms & Definitions January 30, 2004 (Unaudited)
Appreciation
The increase in value of an asset.
Average Annual Total Return
A standardized measurement of the return (yield and appreciation) earned by the fund on an annual basis, assuming all distributions are reinvested.
Coupon Rate or Face Rate
The rate of interest payable annually, based on the face amount of the bond; expressed as a percentage.
Depreciation
The decrease in value of an asset.
Lehman Brothers Municipal Bond Index
An unmanaged list of long-term, fixed-rate, investment-grade, tax-exempt bonds representative of the municipal bond market. The index does not take into account brokerage commissions or other costs, may include bonds different from those in the fund, and may pose different risks than the fund.
Market Value
The actual (or estimated) price at which a bond trades in the market place.
Maturity
A measure of the term or life of a bond in years. When a bond “matures,” the issuer repays the principal.
Net Asset Value (NAV)
The value of all your fund’s assets, minus any liabilities, divided by the number of outstanding shares, not including any initial sales charge.
Quality Ratings
A designation assigned by independent rating companies to give a relative indication of a bond’s credit worthiness. “AAA,” “AA,” “A,” and “BBB” indicate investment grade securities. Ratings can range from a high of “AAA” to a low of “D”.
Total Return
Measures both the net investment income and any realized and unrealized appreciation or depreciation of the underlying investments in the fund’s portfolio for the period, assuming the reinvestment of all dividends. It represents the aggregate percentage or dollar value change over the period.
Insert Pie Charts
Portfolio Quality Ratings
(based on Total Long-Term Investments)
AAA | 67.7% |
AA | 15.4% |
A | 5.5% |
BBB | 3.0% |
BB | 1.1% |
NR | 7.3% |
Quality ratings reflect the financial strength of the issuer. They are assigned by independent rating services such as Moody’s Investors Services and Standard & Poor’s. Non-rated bonds have been determined to be of appropriate quality for the portfolio by Integrity Money Management (formerly known as Ranson Capital Corporation), the investment adviser.
These percentages are subject to change.
Average Annual Total Returns
| For periods ending January 30, 2004 | |||
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| Since Inception (November 15, 1990) |
Kansas Municipal Fund | 1 year | 5 year | 10 year | |
Without sales charge | (0.92%) | 2.79% | 3.43% | 5.12% |
With sales charge (4.25%) | (5.14%) | 1.90% | 2.98% | 4.78% |
| For periods ending January 30, 2004 | |||
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| Since Inception (November 15, 1990) |
Lehman Municipal Bond Index | 1 year | 5 year | 10 year | |
| 5.73% | 6.06% | 6.38% | 7.21% |
Performance data quoted above is historical. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance data quoted. The principal value and investment return of an investment will fluctuate so that your shares, when redeemed, may be worth more or less than the original cost. You can obtain performance data current to the most recent month end (available within seven business days of the most recent month end) by calling 1-800-276-1262.
You should consider the fund's investment objectives, risks, and charges and expenses carefully before investing. For this and other important information, please obtain a fund prospectus at no cost from your financial advisor and read it carefully before investing.
The table does not reflect the deduction of taxes that a shareholder would pay on Fund distributions and redemption of Fund shares.
COMPARATIVE INDEX GRAPH (GRAPH APPEARS HERE)
Comparison of change in value of a $10,000 investment in the Kansas Municipal Fund
and the Lehman Brothers Municipal Bond Index
| Kansas Municipal Fund w/o sales charge | Kansas Municipal Fund w/ max sales charge | Lehman Brothers Municipal Bond Index |
| |||
11/15/90 | $10,000 | $ 9,575 | $10,000 |
1991 | $10,524 | $10,077 | $10,724 |
1992 | $11,855 | $11,351 | $12,199 |
1993 | $13,050 | $12,495 | $13,276 |
1994 | $13,168 | $12,609 | $13,525 |
1995 | $13,988 | $13,394 | $14,591 |
1996 | $14,814 | $14,184 | $15,553 |
1997 | $15,933 | $15,256 | $17,150 |
1998 | $16,372 | $15,676 | $18,177 |
1999 | $16,936 | $16,216 | $18,700 |
2000 | $17,222 | $16,490 | $19,507 |
2001 | $18,622 | $17,831 | $21,475 |
2002 | $19,270 | $18,451 | $22,916 |
2003 | $19,127 | $18,314 | $23,740 |
01/30/04 | $19,347 | $18,525 | $25,100 |
Putting Performance into Perspective
Returns are historical and are not a guarantee of future results. The graph comparing your Fund’s performance to a benchmark index provides you with a general sense of how your Fund performed. To put this information in context, it may be helpful to understand the special differences between the two. The Lehman Brothers index is a national index representative of the national municipal bond market, whereas the Fund concentrates its investments in Kansas municipal bonds. Your Fund’s total return for the periods shown appears with and without sales charges and includes Fund expenses and management fees. A securities index measures the performance of a theoretical portfolio. Unlike a fund, the index is unmanaged; there are no expenses that affect the results. In addition, few investors could purchase all of the securities necessary to match the index. And, if they could, they would incur transaction c osts and other expenses. All Fund and benchmark returns include reinvested dividends. The Fund’s share price, yields and total returns will vary, so that shares, when redeemed, may be worth more or less than their original cost.
MANAGEMENT OF THE FUND
The Board of Integrity Managed Portfolios (formerly known as Ranson Managed Portfolios) consists of four Trustees. These same individuals, unless otherwise noted, also serve as Directors or Trustees for all of the funds in the Integrity family of funds, the six series of Integrity Managed Portfolios, and the 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. The remaining Trustee and executive officers are “interested” by virtue of their affiliation with the Investment Adviser and its affiliates.
The Independent Trustees of the Fund, their term of office and length of time served, their principal occupation(s) during the past five years, the number of portfolios overseen in the Fund Complex by each Independent Trustee and other directorships, if any, held outside the Fund Complex, are shown below.
INDEPENDENT TRUSTEES
Name, Address and Age | Position(s) Held with Registrant | Term and Length Served | Principal Occupation(s) During Past 5 Years | Number of Portfolios Overseen In The Fund Complex * | Other Directorships Held Outside The Fund Complex |
Lynn W. Aas | Trustee | Since January 1996 | Retired; Attorney; Director, ND Tax-Free Fund, Inc. (since December 1994), Montana Tax-Free Fund, Inc. (since December 1994), South Dakota Tax-Free Fund, Inc. (since December 1994), Integrity Fund of Funds, Inc. (since August 1994), Integrity Small-Cap Fund of Funds, Inc. (September 1998 to June 2003); Trustee, Integrity Managed Portfolios (since January 1996) and The Integrity Funds (since September 2003); and Director, First Western Bank & Trust (until May 2002). | 16 | None |
Orlin W. Backes | Trustee | Since January 1996 | Attorney, McGee, Hankla, Backes & Dobrovolny, P.C.; Director, ND Tax-Free Fund, Inc. (since April 1995), Montana Tax-Free Fund, Inc. (since April 1995), South Dakota Tax-Free Fund, Inc. (since April 1995), Integrity Fund of Funds, Inc. (since April 1995), Integrity Small-Cap Fund of Funds, Inc. (September 1998 to June 2003); Trustee, Integrity Managed Portfolios (since January 1996) and The Integrity Funds (since May 2003); and Director, First Western Bank & Trust. | 16 | Director, First Western Bank & Trust |
R. James Maxson | Trustee | Since January 1999 | Attorney, Maxson Law Office (since November 2002), Attorney, McGee, Hankla, Backes & Dobrovolny, P.C. (April 2000 to November 2002); Attorney, Farhart, Lian and Maxson, P.C. (March 1976 to March 2000); Director, ND Tax-Free Fund, Inc. (since January 1999), Montana Tax-Free Fund, Inc. (since January 1999), South Dakota Tax-Free Fund, Inc. (since January 1999), Integrity Fund of Funds, Inc. (since January 1999), Integrity Small-Cap Fund of Funds, Inc. (January 1999 to June 2003); and Trustee, Integrity Managed Portfolios (since January 1999) and The Integrity Funds (since May 2003). | 16 | None |
* The Fund Complex consists of the four funds in the Integrity family of funds, the six series of Integrity Managed Portfolios, and the six series of The Integrity Funds.
The Statement of Additional Information contains more information about the Fund’s Trustees and is available at 1 (800) 601-5593 without charge upon request.
The Interested Trustee and executive officers of the Fund, their term of office and length of time served, their principal occupation(s) during the past five years, the number of portfolios overseen in the Fund Complex by each Interested Trustee and executive officer, and other directorships, if any, held outside the Fund Complex, are shown below.
INTERESTED TRUSTEE AND EXECUTIVE OFFICERS
Name, Address and Age | Position(s) Held with Registrant | Term and Length Served | Principal Occupation(s) During Past 5 Years | Number of Portfolios Overseen In The Fund Complex * | Other Directorships Held Outside The Fund Complex |
**Peter A. Quist | Vice President | Since January 1996 | Attorney; Director and Vice President, Integrity Mutual Funds, Inc.; Director, Vice President and Secretary, Integrity Money Management, Inc. (formerly known as ND Money Management, Inc.), ND Capital, Inc., Integrity Fund Services, Inc., (formerly known as ND Resources, Inc.), ND Tax-Free Fund, Inc., Montana Tax-Free Fund, Inc., South Dakota Tax-Free Fund, Inc. (since April 1995), Integrity Fund of Funds, Inc., Integrity Small-Cap Fund of Funds, Inc. (September 1998 to June 2003), Integrity Funds Distributor, Inc. (formerly known as Ranson Capital Corporation) (since January 1996); Vice President and Secretary, Integrity Managed Portfolios (since January 1996) and The Integrity Funds (since May 2003); and Director, ARM Securities Corporation (May 2000 to June 2003). | 4 | None |
**Robert E. Walstad | Trustee, Chairman, President, and Treasurer | Since January 1996 | Director (since September 1987), President (September 1987 to October 2001) (September 2002 to May 2003), Integrity Mutual Funds, Inc.; Director, President and Treasurer, Integrity Money Management, Inc., ND Capital, Inc., Integrity Fund Services, Inc., ND Tax-Free Fund, Inc., Montana Tax-Free Fund, Inc., South Dakota Tax-Free Fund, Inc., Integrity Fund of Funds, Inc., Integrity Small-Cap Fund of Funds, Inc. (September 1998 to June 2003); Trustee, Chairman, President and Treasurer, Integrity Managed Portfolios (since January 1996) and The Integrity Funds (since May 2003).; Director, President (until August 2003), CEO, and Treasurer, Integrity Funds Distributor, Inc.; Director (October 1999 to June 2003), President (October 1999 to October 2001), Magic Internet Services, Inc.; Director (May 2000 to June 2003), President (May 2000 to November 2001) (October 2002 to J une 2003), ARM Securities Corporation; and Director, CEO, Chairman (since January 2002), President (since September 2002), Capital Financial Services, Inc. | 16 | None |
* The Fund Complex consists of the four funds in the Integrity family of funds, the six series of Integrity Managed Portfolios, and the six series of The Integrity Funds.
** Trustees and/or executive officers who are “interested persons” of the Funds as defined in the Investment Company Act of 1940. Messrs. Quist and Walstad are interested persons by virtue of being officers and directors of the Funds’ Investment Adviser and Principal Underwriter.
The Statement of Additional Information contains more information about the Fund’s Trustees and is available at 1 (800) 601-5593 without charge upon request.
INDEPENDENT TRUSTEES
[PHOTO] | [PHOTO] | [PHONE] |
Lynn W. Ass | Orlin W. Backes | R. James Maxson |
INTERESTED TRUSTEE AND EXECUTIVE OFFICERS
[PHOTO] | [PHOTO] |
Peter A. Quist | Robert E. Walstad |
Schedule of Investments January 30, 2004 (Unaudited)
Name of Issuer | Rating Moody’s/S&P | Coupon Rate | Maturity |
| Principal Amount |
| Market Value | ||||||||
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KANSAS MUNICIPAL BONDS (92.2%) |
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*Burlington, KS (Gas & Elec.) Rev. Ref. MBIA | Aaa/AAA | 7.000% | 06/01/31 | $ | 4,915,000 | $ | 5,148,462 | ||||||||
Butler Cty., KS Public Bldg. MBIA | Aaa/NR | 5.550 | 10/01/21 |
| 300,000 |
| 330,096 | ||||||||
Coffeyville, KS Pub. Bldg. (Coffeyville Medl. Center) Rev. | Aaa/AAA | 5.000 | 08/01/22 |
| 250,000 |
| 262,120 | ||||||||
Dodge, KS School District #443 FGIC | Aaa/NR | 5.000 | 09/01/11 |
| 1,000,000 |
| 1,128,880 | ||||||||
Johnson Cty., KS USD #229 | Aa-1/AA | 4.600 | 10/01/05 |
| 500,000 |
| 525,950 | ||||||||
#Johnson Cnty., KS USD #229 (Blue Valley) G.O. | Aa-1/AA | 5.000 | 10/01/18 |
| 2,600,000 |
| 2,804,126 | ||||||||
Johnson Cty., KS USD #231 FSA | Aaa/AAA | 4.000 | 10/01/05 |
| 100,000 |
| 104,221 | ||||||||
Johnson Cty., KS Single Family Mrtge. Rev. | Aa/NR | 7.100 | 05/01/12 |
| 280,000 |
| 290,332 | ||||||||
Kansas City, KS Mrtge. Rev. GNMA | Aaa/NR | 5.900 | 11/01/27 |
| 745,000 |
| 757,896 | ||||||||
*Kansas City, KS Util. Syst. Ref. & Impvt. AMBAC | Aaa/AAA | 6.300 | 09/01/16 |
| 580,000 |
| 582,558 | ||||||||
*Kansas City, KS Util. Syst. Ref. & Impvt. FGIC | Aaa/AAA | 6.375 | 09/01/23 |
| 1,525,000 |
| 1,610,903 | ||||||||
*Kansas City, KS Util. Syst. Ref. & Impvt. FGIC | Aaa/AAA | 6.375 | 09/01/23 |
| 5,830,000 |
| 6,144,762 | ||||||||
Kansas City/Leavenworth Cty./Lenexa, KS Mrtge. Rev. | NR/AAA | 7.850 | 11/01/10 |
| 65,000 |
| 65,325 | ||||||||
*KS Devl. Finance Auth. (Dept. Admin. 7th & Harrison PJ) | Aaa/AAA | 5.750 | 12/01/27 |
| 2,250,000 |
| 2,680,627 | ||||||||
KS Devl. Finance Auth. (Dept. of Admin. Capitol Restoration) Lease Rev. FSA | Aaa/AAA | 5.375 | 10/01/20 |
| 370,000 |
| 402,264 | ||||||||
KS Devl. Finance Auth. (Juvenile Justice) Rev. MBIA | Aaa/AAA | 5.250 | 05/01/13 |
| 570,000 |
| 636,154 | ||||||||
KS Devl. Finance Auth. (Sec. 8) Rev. Ref. MBIA | Aaa/AAA | 6.400 | 01/01/24 |
| 555,000 |
| 565,795 | ||||||||
KS Devl. Finance Auth. (Board of Regents) Univ. Hsg. | Aaa/AAA | 5.000 | 04/01/05 |
| 250,000 |
| 260,737 | ||||||||
KS Devl. Finance Auth. (Water Pollution Control) Rev. | Aa-1/AA+ | 5.250 | 05/01/11 |
| 2,000,000 |
| 2,231,520 | ||||||||
KS Devl. Finance Auth. (KS St. Projects) Rev. MBIA | Aaa/AAA | 5.000 | 10/01/17 |
| 250,000 |
| 269,805 | ||||||||
KS Devl. Finance Auth. (Water Pollution Control) Rev. | Aa-1/AA+ | 5.250 | 11/01/22 |
| 1,000,000 |
| 1,083,280 | ||||||||
KS Devl. Finance Auth. (Water Pollution Control) | Aa-1/AA+ | 5.000 | 11/01/23 |
| 1,000,000 |
| 1,047,470 | ||||||||
*KS Devl. Finance Auth. (Park Apts.) Multifamily Hsg. Rev. | NR/AAA | 6.000 | 12/01/21 |
| 1,975,000 |
| 2,037,588 | ||||||||
KS Devl. Finance Auth. (Oak Ridge Park Apt.) | NR/NR | 6.500 | 02/01/18 |
| 1,385,000 |
| 1,341,746 | ||||||||
KS Devl. Finance Auth. (Oak Ridge Park Apt.) | NR/NR | 6.625 | 08/01/29 |
| 1,875,000 |
| 1,771,762 | ||||||||
KS Devl. Finance Auth. (Indian Ridge Apts.) | NR/NR | 6.000 | 01/01/28 |
| 1,050,000 |
| 922,456 | ||||||||
KS Devl. Finance Auth. (Stormont Vail) Hlth. Care Rev. | Aaa/AAA | 5.800 | 11/15/21 |
| 430,000 |
| 472,708 | ||||||||
KS Devl. Finance Auth. (Sisters of Charity) Hlth. Rev. | Aa/AA | 6.125 | 12/01/20 |
| 1,000,000 |
| 1,092,490 | ||||||||
KS Devl. Finance Auth. (Stormont Vail) Hlth. Care Rev. | Aaa/AAA | 5.375 | 11/15/24 |
| 1,500,000 |
| 1,597,080 | ||||||||
KS Devl. Finance Auth. (Stormont Vail) Hlth. Care Rev. | Aaa/AAA | 5.800 | 11/15/16 |
| 455,000 |
| 498,762 | ||||||||
KS Turnpike Auth. Rev. FSA | Aaa/AAA | 5.000 | 09/01/24 |
| 530,000 |
| 555,366 | ||||||||
KS Turnpike Auth. Rev. FSA | Aaa/AAA | 5.000 | 09/01/25 |
| 750,000 |
| 779,100 | ||||||||
KS Turnpike Auth. Rev. AMBAC | Aaa/AAA | 4.000 | 09/01/15 |
| 500,000 |
| 514,015 | ||||||||
Lawrence, KS (Unlimited Tax) Refunding G.O. | Aa/NR | 5.375 | 09/01/20 |
| 500,000 |
| 545,875 | ||||||||
Lawrence, KS (Memorial Hospital) Rev. | Baa-1/NR | 6.000 | 07/01/09 |
| 2,000,000 |
| 2,039,440 | ||||||||
Lawrence, KS (Memorial Hospital) Rev. | Baa-1/NR | 6.200 | 07/01/14 |
| 1,200,000 |
| 1,256,100 | ||||||||
Lawrence, KS (Memorial Hospital) Rev. | Baa-1/NR | 6.200 | 07/01/19 |
| 1,475,000 |
| 1,522,982 | ||||||||
Lawrence, KS (Memorial Hospital) Rev. ASGUA | NR/AA | 5.750 | 07/01/24 |
| 1,000,000 |
| 1,066,170 | ||||||||
Newton, KS (Newton) Hosp. Rev. | NR/BBB- | 5.700 | 11/15/18 |
| 1,000,000 |
| 1,018,400 | ||||||||
Newton, KS (Newton) Hosp. Rev. ACA | NR/A | 5.750 | 11/15/24 |
| 500,000 |
| 518,750 | ||||||||
Olathe, KS (Luth. Gd. Sam.) Ref. AMBAC | Aaa/AAA | 6.000 | 05/01/19 |
| 900,000 |
| 932,238 | ||||||||
Olathe, KS (Medl. Ctr.) Hlth. Facs. Rev. | Aaa/AAA | 5.500 | 09/01/25 |
| 235,000 |
| 253,271 | ||||||||
Olathe, KS (Medl. Ctr.) Hlth. Facs. Rev. AMBAC | Aaa/AAA | 5.500 | 09/01/30 |
| 500,000 |
| 535,860 | ||||||||
#Olathe, KS Multifamily Hsg. (Bristol Pointe) Rev. Ref. | NR/AAA | 5.700 | 11/01/27 |
| 2,210,000 |
| 2,254,863 | ||||||||
Pratt, KS Elec. Util. Syst. Rev. Ref. & Impvt. AMBAC | Aaa/AAA | 6.600 | 11/01/07 |
| 825,000 |
| 945,533 | ||||||||
Republic Cnty., KS Sales Tax FGIC | Aaa/NR | 5.000 | 06/01/15 |
| 260,000 |
| 278,749 | ||||||||
Republic Cnty., KS Sales Tax FGIC | Aaa/NR | 5.000 | 06/01/16 |
| 275,000 |
| 296,568 | ||||||||
Republic Cnty., KS Sales Tax FGIC | Aaa/NR | 5.000 | 06/01/17 |
| 290,000 |
| 314,464 | ||||||||
Scott Cnty, KS USD #466 FGIC | Aaa/AAA | 5.250 | 09/01/17 |
| 900,000 |
| 981,162 | ||||||||
Sedgwick Cty., KS (Catholic Care Center, Inc.) Hlth. Care | NR/A | 5.800 | 11/15/26 |
| 1,000,000 |
| 1,047,190 | ||||||||
Topeka Public Bldg. Comm. (10th & Jackson Prj.) MBIA | Aaa/AAA | 5.625 | 06/01/26 |
| 1,435,000 |
| 1,570,019 | ||||||||
Topeka Public Bldg. Comm. (10th & Jackson Prj.) MBIA | Aaa/AAA | 5.625 | 06/01/31 |
| 1,200,000 |
| 1,318,416 | ||||||||
University of Kansas Hosp. Auth. AMBAC | Aaa/AAA | 5.700 | 09/01/20 |
| 830,000 |
| 908,825 | ||||||||
University of Kansas Hosp. Auth. AMBAC | Aaa/AAA | 5.550 | 09/01/26 |
| 1,355,000 |
| 1,451,991 | ||||||||
Wichita KS G.O. (Series 772) | Aa/AA | 4.500 | 09/01/17 |
| 815,000 |
| 859,646 | ||||||||
Wichita, KS G.O. (Series 772) | Aa/AA | 4.500 | 09/01/18 |
| 1,375,000 |
| 1,433,713 | ||||||||
Wichita, KS Airport Auth. Facs. Rev. Ref. ASGUA | NR/AA | 7.000 | 03/01/05 |
| 200,000 |
| 202,300 | ||||||||
Wichita, KS (Via Christi Health System) Rev. | NR/A+ | 6.250 | 11/15/24 |
| 1,500,000 |
| 1,642,980 | ||||||||
Wichita, KS (Via Christi Health System) Rev. | NR/A+ | 5.625 | 11/15/31 |
| 1,000,000 |
| 1,051,000 | ||||||||
Wichita, KS Multifamily Hsg. (Northpark II-A) Rev. GNMA | Aaa/NR | 6.125 | 08/20/28 |
| 1,900,000 |
| 1,949,533 | ||||||||
Wichita, KS Multifamily Hsg. (Brentwood Apts.) Rev. | NR/BB | 5.850 | 12/01/25 |
| 1,000,000 |
| 845,000 | ||||||||
Wichita, KS Multifamily Hsg. (Broadmoor Chelsea) Rev. | NR/AAA | 5.650 | 07/01/16 |
| 990,000 |
| 1,010,622 | ||||||||
#Wichita, KS Multifamily Hsg. (Broadmoor Chelsea) Rev. | NR/AAA | 5.700 | 07/01/22 |
| 2,000,000 |
| 2,025,720 | ||||||||
Wichita, KS Multifamily Hsg. (Innes Station Apt. 5) Rev. | NR/NR | 6.250 | 03/01/28 |
| 1,750,000 |
| 1,594,285 | ||||||||
Wichita, KS Public Building Commission (State Office Prj.) | Aaa/AAA | 4.000 | 10/01/14 |
| 1,000,000 |
| 1,036,750 | ||||||||
Wichita, KS Water & Sewer Util. Rev. FGIC | Aaa/AAA | 5.250 | 10/01/18 |
| 1,465,000 |
| 1,597,861 | ||||||||
Wichita, KS Water & Sewer Util. Rev. FGIC | Aaa/AAA | 5.000 | 10/01/28 |
| 500,000 |
| 517,110 | ||||||||
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| TOTAL KANSAS MUNICIPAL BONDS (COST: $74,607,333) | $ | 77,339,742 | ||||||||||||
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| SHORT-TERM SECURITIES (5.7%) |
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| Wells Fargo National Tax-Free Money Market | $ | 2,933,000 | ||||||||||||
Goldman Sachs Financial Square Money Market |
| 1,839,316 | |||||||||||||
TOTAL SHORT-TERM SECURITIES (COST: $4,772,316) | $ | 4,772,316 | |||||||||||||
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TOTAL INVESTMENTS IN SECURITIES (COST: $79,379,649) | $ | 82,112,058 | |||||||||||||
OTHER ASSETS LESS LIABILITIES |
| 1,744,340 | |||||||||||||
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NET ASSETS | $ | 83,856,398 | |||||||||||||
* Indicates bonds are segregated by the custodian to cover when-issued or delayed-delivery purchases.
# Indicates bonds are segregated by the custodian to cover initial margin requirements.
Footnote: Non-rated (NR) securities have been determined to be of investment grade quality by the Fund’s Manager.
The accompanying notes are an integral part of these financial statements.
Financial Statements January 30, 2004 (Unaudited)
Statement of Assets and Liabilities January 30, 2004
Assets |
|
| ||
| Investment in securities, at value (cost: $79,379,649) | $ | 82,112,058 | |
| Accrued interest receivable |
| 1,257,695 | |
| Accrued dividends receivable |
| 3,314 | |
| Variation margin on futures |
| 838,063 | |
| Prepaid expenses |
| 14,820 | |
| Receivable for fund shares sold |
| 86,124 | |
|
|
| ||
| Total Assets | $ | 84,312,074 | |
|
|
| ||
Liabilities |
|
| ||
| Dividends payable | $ | 279,066 | |
| Accrued expenses |
| 72,788 | |
| Payable for fund shares redeemed |
| 84,166 | |
| Disbursements in excess of demand deposit cash |
| 19,656 | |
|
|
| ||
| Total Liabilities | $ | 455,676 | |
|
|
| ||
|
|
| ||
Net Assets | $ | 83,856,398 | ||
|
|
| ||
|
|
| ||
Net assets are represented by: |
|
| ||
| Paid-in capital | $ | 91,935,272 | |
| Accumulated undistributed net realized gain (loss) on futures |
| (1,286,854) | |
| Accumulated undistributed net realized gain (loss) on investments |
| (8,434,184) | |
| Unrealized depreciation on futures |
| (1,090,245) | |
| Unrealized appreciation on investments |
| 2,732,409 | |
| Total amount representing net assets applicable to |
|
| |
| 7,558,121 outstanding shares of no par common |
|
| |
| stock (unlimited shares authorized) | $ | 83,856,398 | |
|
|
| ||
Net asset value per share | $ | 11.09 | ||
The accompanying notes are an integral part of these financial statements.
Statement of Operations For the six months ended January 30, 2004 (Unaudited)
INVESTMENT INCOME |
|
| ||
| Interest | $ | 2,163,406 | |
| Dividends |
| 14,700 | |
| Total Investment Income | $ | 2,178,106 | |
|
|
| ||
EXPENSES |
|
| ||
| Investment advisory fees | $ | 216,193 | |
| Service fees |
| 108,096 | |
| Administrative service fees |
| 28,686 | |
| Transfer agent fees |
| 48,848 | |
| Accounting service fees |
| 31,795 | |
| Custodian fees |
| 7,186 | |
| Transfer agent out-of-pockets |
| 5,828 | |
| Professional fees |
| 858 | |
| Trustees fees |
| 3,335 | |
| Insurance expense |
| 1,878 | |
| Reports to shareholders |
| 4,602 | |
| Registration and filing fees |
| 4,495 | |
| Audit fees |
| 4,257 | |
| Total Expenses | $ | 466,057 | |
| Less expenses waived or absorbed by the Fund’s manager |
| (55,291) | |
| Total Net Expenses | $ | 410,766 | |
|
|
| ||
NET INVESTMENT INCOME | $ | 1,767,340 | ||
|
|
| ||
|
|
| ||
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FUTURES |
|
| ||
| Net realized gain (loss) from: |
|
| |
| Investment transactions | $ | (27,201) | |
| Futures transactions |
| (1,286,854) | |
| Net change in unrealized appreciation (depreciation) of: |
|
| |
| Investments |
| 1,704,780 | |
| Futures |
| (1,090,245) | |
| Net Realized And Unrealized Gain (Loss) On Investments And Futures | $ | (699,520) | |
|
|
| ||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | $ | 1,067,820 | ||
The accompanying notes are an integral part of these financial statements.
Financial Statements January 30, 2004
Statement of Changes in Net Assets
For the six months ended January 30, 2004 and the year ended July 31, 2003
|
| For The Six Months Ended January 30, 2004 (Unaudited) |
| For The Year Ended July 31, 2003 | ||
|
|
|
|
| ||
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS |
|
|
|
| ||
| Net investment income | $ | 1,767,340 | $ | 4,120,111 | |
| Net realized gain (loss) on investment and futures transactions |
| (1,314,055) |
| (1,968,961) | |
| Net change in unrealized appreciation (depreciation) on investments and futures |
| 614,535 |
| (2,837,348) | |
| Net Increase (Decrease) in Net Assets Resulting From Operations | $ | 1,067,820 | $ | (686,198) | |
|
|
|
|
| ||
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS |
|
|
|
| ||
| Dividends from net investment income ($.23 and $.51 per share, respectively) | $ | (1,767,261) | $ | (4,119,390) | |
| Distributions from net realized gain on investment and futures transactions ($.00 and $.00 per share, respectively) |
| 0 |
| 0 | |
| Total Dividends and Distributions | $ | (1,767,261) | $ | (4,119,390) | |
|
|
|
|
| ||
CAPITAL SHARE TRANSACTIONS |
|
|
|
| ||
| Proceeds from sale of shares | $ | 1,425,876 | $ | 5,132,298 | |
| Proceeds from reinvested dividends |
| 1,119,037 |
| 2,616,300 | |
| Cost of shares redeemed |
| (6,839,491) |
| (13,084,279) | |
| Net Increase (Decrease) in Net Assets Resulting From Capital Share Transactions | $ | (4,294,578) | $ | (5,335,681) | |
|
|
|
|
| ||
TOTAL INCREASE (DECREASE) IN NET ASSETS | $ | (4,994,019) | $ | (10,141,269) | ||
|
|
|
|
| ||
NET ASSETS, BEGINNING OF PERIOD |
| 88,850,417 |
| 98,991,686 | ||
|
|
|
|
| ||
NET ASSETS, END OF PERIOD | $ | 83,856,398 | $ | 88,850,417 | ||
The accompanying notes are an integral part of these financial statements.
Notes to Financial Statements January 30, 2004 (Unaudited)
Note 1. ORGANIZATION
Business operations - The Kansas Municipal Fund (the “Fund”) is an investment portfolio of Integrity Managed Portfolios (the “Trust”) registered under the Investment Company Act of 1940, as amended, as a non-diversified, open-end management investment company. The Trust may offer multiple portfolios; currently six portfolios are offered. Integrity Managed Portfolios is an unincorporated business trust organized under Massachusetts law on August 10, 1990. The Fund had no operations from that date to November 15, 1990, other than matters relating to organization and registration. On November 15, 1990, the Fund commenced its Public Offering of capital shares. The investment objective of the Fund is to provide its shareholders with as high a level of current income exempt from both federal and Kansas income tax as is consistent with preservation of capital. The Fund will seek to achieve this obj ective by investing primarily in a portfolio of Kansas municipal securities. Shares of the Fund are offered at net asset value plus a maximum sales charge of 4.25% of the offering price.
Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Investment security valuation - Securities for which quotations are not readily available (which will constitute a majority of the securities held by the Fund) are valued using a matrix system at fair value as determined by Integrity Money Management. The matrix system has been developed based on procedures approved by the Board of Trustees which include consideration of the following: yields or prices of municipal bonds of comparable quality, type of issue, coupon, maturity and rating, and indications as to value from dealers and general market conditions. Because the market value of securities can only be established by agreement between parties in a sales transaction, and because of the uncertainty inherent in the valuation process, the fair values as determined may differ from the values that would have been used had a ready market for the securities existed. The Fund follows industry practice and records security transac tions 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.
Federal and state income taxes - The Fund’s policy is to comply with the requirements of the Internal Revenue Code that are applicable to regulated investment companies and to distribute all of its net investment income and any net realized gain on investments to its shareholders. Therefore, no provision for income taxes is required. Distributions during the six months ended January 30, 2004, were characterized as tax-exempt for tax purposes.
The Fund has unexpired capital loss carryforwards for tax purposes as of January 30, 2004 totaling $8,407,952, which may be used to offset capital gains. The capital loss carryforward amounts will expire in each of the years ended July 31 as shown in the table below.
Year | Unexpired Capital Losses |
2004 | 0 |
2005 | 2,222,213 |
2006 | 1,671,432 |
2007 | 0 |
2008 | 531,392 |
2009 | 568,023 |
2010 | 1,444,860 |
2011 | 1,970,032 |
Distributions to shareholders - Dividends from net investment income, declared daily and paid monthly, are reinvested in additional shares of the Fund at net asset value or paid in cash. Capital gains, when available, are distributed at least annually.
Premiums and discounts - Premiums and discounts on municipal securities are amortized for financial reporting purposes.
Other - Income and expenses are recorded on the accrual basis. Investment transactions are accounted for on the trade date. Realized gains and losses are reported on the identified cost basis. Distributions to shareholders are recorded by the Fund on the ex-dividend date. Income and capital gain distributions are determined in accordance with federal income tax regulations and may differ from net investment income and realized gains determined in accordance with accounting principles generally accepted in the United States of America. These differences are primarily due to differing treatment for market discount, capital loss carryforwards and losses due to wash sales and futures transactions.
Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications to paid-in capital. Temporary book and tax basis differences will reverse in a subsequent period.
Futures contracts - The Fund may purchase and sell financial futures contracts to hedge against changes in the values of tax-exempt municipal securities the Fund owns or expects to purchase.
A futures contract is an agreement between two parties to buy or sell units of a particular index or a certain amount of U.S. government or municipal securities at a set price on a future date. Upon entering into a futures contract, the Fund is required to deposit with a broker an amount of cash or securities equal to the minimum “initial margin” requirement of the futures exchange on which the contract is traded. Subsequent payments (“variation margin”) are made or received by the Fund, dependent on the fluctuations in the value of the underlying index. Daily fluctuations in value are recorded for financial reporting purposes as unrealized gains or losses by the Fund. When entering into a closing transaction, the Fund will realize, for book purposes, a gain or loss equal to the difference between the value of the futures contracts sold and the futures contracts to buy. Unrealized appreciation (deprecia tion) related to open futures contracts is required to be treated as a realized gain (loss) for Federal income tax purposes.
Securities held in collateralized accounts to cover initial margin requirements on open futures contracts are noted in the Schedule of Investments. The Statement of Assets and Liabilities reflects a receivable or payable for the daily mark to market for variation margin.
Certain risks may arise upon entering into futures contracts. These risks may include changes in the value of the futures contracts that may not directly correlate with changes in the value of the underlying securities.
At January 30, 2004, the Fund had outstanding futures contracts to sell debt securities as follows:
Contracts to Sell | Expiration Date | Number of Future Contracts | Valuation as of January 30, 2004 | Unrealized Appreciation (Depreciation) |
U.S. Treasury Bonds | 03/2004 | 253 | 838,063 | (1,090,245) |
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 January 30, 2004, there were unlimited shares of no par authorized; 7,558,121 and 7,941,182 shares were outstanding at January 30, 2004 and July 31, 2003, respectively.
Transactions in capital shares were as follows:
|
| Shares | ||
| For The |
| ||
| Six Months Ended | For The | ||
| January 30, 2004 | Year Ended | ||
| (Unaudited) | July 31, 2003 | ||
Shares sold | 127,256 | 443,873 | ||
Shares issued on reinvestment of dividends | 99,843 | 226,702 | ||
| Shares redeemed | (610,160) | (1,132,977) | |
Net increase (decrease) | (383,061) | (462,402) | ||
Note 4. INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Integrity Money Management, Inc., the Fund’s investment adviser; Integrity Funds Distributor, Inc., the Fund’s underwriter; and Integrity Fund Services, Inc., the Fund’s transfer, accounting, and administrative services agent, are subsidiaries of Integrity Mutual Funds, Inc., the Fund’s sponsor.
The Fund has engaged Integrity Money Management, Inc. to provide investment advisory and management services to the Fund. The Investment Advisory Agreement provides for fees to be computed at an annual rate of 0.50% of the Fund’s average daily net assets. The Fund has recognized $160,902 of investment advisory fees after partial waiver for the six months ended January 30, 2004. Certain officers and trustees of the Fund are also officers and directors of the investment adviser. The Fund has a payable to Integrity Money Management, Inc. of $24,090 at January 30, 2004, for investment advisory fees.
The Fund pays an annual service fee to Integrity Funds Distributor, Inc., its principal underwriter, for certain expenses incurred in connection with the distribution of the Fund’s shares. The annual fee paid to Integrity Funds Distributor, Inc. is calculated daily and paid monthly by the Fund at the annual rate of 0.25% of the average daily net assets of the Fund. The Fund has recognized $108,096 of service fee expenses for the six months ended January 30, 2004. The Fund has a payable to Integrity Funds Distributor, Inc. of $17,722 at January 30, 2004, for service fees.
Integrity Fund Services, Inc. (the transfer agent) provides shareholder services for a monthly fee equal to an annual rate of 0.16% of the Fund’s first $10 million of net assets, 0.13% of the Fund’s net assets on the next $15 million, 0.11% of the Fund’s net assets on the next $25 million, and 0.10% of the Fund’s net assets in excess of $50 million, with a minimum of $1,500 per month plus reimbursement of out-of-pocket expenses. An additional fee with a minimum $500 per month is charged for each additional share class. The Fund has recognized $48,848 of transfer agency fees and expenses for the six months ended January 30, 2004. The Fund has a payable to Integrity Fund Services, Inc. of $8,172 at January 30, 2004, for transfer agency fees. Integrity Fund Services, Inc. also acts as the Fund’s accounting services agent for a monthly fee equal to the sum of a fixed fee of $2,000, and a variable fee equal to 0.05% of the Fund’s average daily net assets on an annual basis for the Fund’s first $50 million and at a lower rate on the average daily net assets in excess of $50 million, together with reimbursement of out-of-pocket expenses. An additional minimum fee of $500 per month is charged by Integrity Fund Services for each additional share class. The Fund has recognized $31,795 of accounting service fees for the six months ended January 30, 2004. The Fund has a payable to Integrity Fund Services, Inc. of $5,252 at January 30, 2004, for accounting service fees. Integrity Fund Services also acts as administrator for the Fund. The Fund pays to Integrity Fund Services a monthly fee calculated at the rate of 0.10% of average daily net assets with a minimum of $1,500 per month plus out-of-pocket expenses. An additional minimum fee of $500 per month is charged by Integrity Fund Services for each additional share class. The Fund has recognized $28,686 of administr ative service fees for the six months ended January 30, 2004. The Fund has a payable to Integrity Fund Services, Inc. of $7,089 at January 30, 2004, for administrative service fees.
Note 5. INVESTMENT SECURITY TRANSACTIONS
The cost of purchases and proceeds from sales of investment securities (excluding short-term securities) aggregated $5,148,450 and $13,450,530, respectively, for the six months ended January 30, 2004.
Note 6. INVESTMENT IN SECURITIES
At January 30, 2004, the aggregate cost of securities for federal income tax purposes was substantially the same for financial reporting purposes at $74,607,333. The net unrealized appreciation of investments based on the cost was $2,732,409, which is comprised of $3,433,665 aggregate gross unrealized appreciation and $701,256 aggregate gross unrealized depreciation.
Financial Highlights
Selected per share data and ratios for the period indicated
|
| For The Six Months Ended January 30, 2004 (Unaudited) |
| For The Year Ended July 31, 2003 |
| For The Year Ended July 31, 2002 |
| For The Year Ended July 31, 2001 |
| For The Year Ended July 31, 2000 |
| For The Year Ended July 30, 1999 | ||
NET ASSET VALUE, BEGINNING OF PERIOD | $ | 11.19 | $ | 11.78 | $ | 11.92 | $ | 11.58 | $ | 11.98 | $ | 12.15 | ||
|
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| ||
Income from Investment Operations: |
|
|
|
|
|
|
|
|
|
|
|
| ||
| Net investment income | $ | .23 | $ | .51 | $ | .55 | $ | .58 | $ | .59 | $ | .58 | |
| Net realized and unrealized gain (loss) on investment and futures transactions |
| (.10) |
| (.59) |
| (.14) |
| .34 |
| (.40) |
| (.17) | |
| Total Income (Loss) From Investment Operations | $ | .13 | $ | (.08) | $ | .41 | $ | .92 | $ | .19 | $ | .41 | |
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| ||
Less Distributions: |
|
|
|
|
|
|
|
|
|
|
|
| ||
| Dividends from net investment income | $ | (.23) | $ | (.51) | $ | (.55) |
| (.58) | $ | (.59) | $ | (.58) | |
| Distributions from net capital gains |
| .00 |
| .00 |
| .00 |
| .00 |
| .00 |
| .00 | |
| Total Distributions | $ | (.23) | $ | (.51) | $ | (.55) | $ | (.58) | $ | (.59) | $ | (.58) | |
|
|
|
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| ||
NET ASSET VALUE, END OF PERIOD | $ | 11.09 | $ | 11.19 | $ | 11.78 | $ | 11.92 | $ | 11.58 | $ | 11.98 | ||
|
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| ||
Total Return |
| 2.31%(A)(C) |
| (0.75%)(A) |
| 3.48%(A) |
| 8.13%(A) |
| 1.69%(A) |
| 3.44%(A) | ||
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| ||
RATIOS/SUPPLEMENTAL DATA: |
|
|
|
|
|
|
|
|
|
|
|
| ||
| Net assets, end of period (in thousands) | $ | 83,856 | $ | 88,850 | $ | 98,992 | $ | 103,806 | $ | 103,555 | $ | 115,882 | |
| Ratio of net expenses (after expense assumption) to average net assets |
| 0.95%(B)(C) |
| 0.95%(B) |
| 0.95%(B) |
| 0.95%(B) |
| 0.95%(B) |
| 0.95%(B) | |
| Ratio of net investment income to average net assets |
| 4.09%(C) |
| 4.39% |
| 4.61% |
| 4.94% |
| 5.07% |
| 4.80% | |
| Portfolio turnover rate |
| 6.37% |
| 23.78% |
| 5.74% |
| 10.28% |
| 8.21% |
| 13.54% | |
(A) Excludes maximum sales charge of 4.25%.
(B) During the periods indicated above, Integrity Mutual Funds, Inc. or Integrity Money Management, Inc. assumed/waived expenses of $55,291, $52,479, $22,656, $37,939, $38,581, and $23,429, respectively. If the expenses had not been assumed/waived, the annualized ratios of total expenses to average net assets would have been 1.08%, 1.01%, 0.97%, 0.99%, 0.99%, and 0.97%, respectively.
(C) Ratio is annualized.
Total return represents the rate that an investor would have earned or lost on an investment in the Fund assuming reinvestment of all dividends and distributions.
The accompanying notes are an integral part of these financial statements.
Kansas Insured Intermediate Fund
Dear Shareholder:
Enclosed is the semi-annual report of the operations for the Kansas Insured Intermediate Fund (the "Fund") for the six months ended January 30, 2004. The Fund's portfolio and related financial statements are presented within for your review.
The foundations under the U.S. economy are getting stronger. Massive policy stimulus has worked in an economy that’s in a self-sustaining expansion with businesses shifting away from their retrenchment mindset. This means that growth will no longer be so dependent on consumer spending and housing, even though both of these sectors should remain firm.
The fact that the Federal Reserve is determined to keep interest rates extremely low in the face of strengthening activity boosts the odds that the economy will continue to surprise on the upside in the months ahead. As a result, corporate profits should perform well and deflation fears will eventually be replaced by the realization that the Fed is sowing the seeds for future inflation.
The Fed would very much like to avoid a repeat of 1994. It will be hard to plan a smooth exit strategy from its current stance, but it is trying to be clear in signaling its intentions to the markets. It is slowly altering the policy statement after each FOMC (Federal Open Market Committee) meeting, with the intention of having the markets gradually adjust by the time rates are finally hiked. The Fed has learned from the experience of last May through July when confusing policy signals created tremendous bond volatility.
During the period the Fund utilized defensive positions designed to provide share price stability. U.S. Treasury futures were used to hedge a portion of the portfolio with the results being tempered share price as rates hovered near forty-year lows and stabilized share price as bonds dipped in reaction to periodic rising rates. Risk management is important in this market environment.
An important part of the Fund's strategy includes searching the primary and secondary markets for high quality double tax-exempt issues. Diversification remains an important strategy of the Fund as reflected in the 41 issues in the portfolio. Income exempt from Federal and Kansas income taxes with preservation of capital remain the primary objectives of the Fund.
Sincerely,
The Portfolio Management Team
The views expressed are those of Monte Avery, Chief Portfolio Strategist with Integrity Mutual Funds. The views are subject to change at any time in response to changing circumstances in the market and are not intended to predict or guarantee the future performance of any individual security, market sector or the markets generally, or any Integrity Mutual Fund.
Terms & Definitions January 30, 2004 (Unaudited)
Appreciation
The increase in value of an asset.
Average Annual Total Return
A standardized measurement of the return (yield and appreciation) earned by the fund on an annual basis, assuming all distributions are reinvested.
Coupon Rate or Face Rate
The rate of interest payable annually, based on the face amount of the bond; expressed as a percentage.
Depreciation
The decrease in value of an asset.
Lehman Brothers Municipal Bond Index
An unmanaged list of long-term, fixed-rate, investment-grade, tax-exempt bonds representative of the municipal bond market. The index does not take into account brokerage commissions or other costs, may include bonds different from those in the fund, and may pose different risks than the fund.
Market Value
The actual (or estimated) price at which a bond trades in the market place.
Maturity
A measure of the term or life of a bond in years. When a bond “matures,” the issuer repays the principal.
Net Asset Value (NAV)
The value of all your fund’s assets, minus any liabilities, divided by the number of outstanding shares, not including any initial sales charge.
Quality Ratings
A designation assigned by independent rating companies to give a relative indication of a bond’s credit worthiness. “AAA,” “AA,” “A,” and “BBB” indicate investment grade securities. Ratings can range from a high of “AAA” to a low of “D”.
Total Return
Measures both the net investment income and any realized and unrealized appreciation or depreciation of the underlying investments in the fund’s portfolio for the period, assuming the reinvestment of all dividends. It represents the aggregate percentage or dollar value change over the period.
Insert Pie Charts
Portfolio Quality Ratings
(based on Total Long-Term Investments)
AAA 100%
Quality ratings reflect the financial strength of the issuer. They are assigned by independent rating services such as Moody’s Investors Services and Standard & Poor’s. Non-rated bonds have been determined to be of appropriate quality for the portfolio by Integrity Money Management (formerly known as Ranson Capital Corporation), the investment adviser.
These percentages are subject to change.
Average Annual Total Returns
| For periods ending January 30, 2004 | |||
|
|
|
|
|
Kansas Insured Intermediate Fund |
|
|
| Since Inception (November 23, 1992) |
| 1 year | 5 year | 10 year | |
Without sales charge | 3.21% | 3.35% | 3.50% | 4.47% |
With sales charge (2.75%) | 0.37% | 2.78% | 3.21% | 4.21% |
| For periods ending January 30, 2004 | |||
|
|
|
|
|
Lehman Municipal Seven-YearMaturity Bond Index | 1 year | 5 year | 10 year | Since Inception (November 23, 1992) |
| 5.70 % | 6.07% | 6.06% | 6.28% |
Performance data quoted above is historical. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance data quoted. The principal value and investment return of an investment will fluctuate so that your shares, when redeemed, may be worth more or less than the original cost. You can obtain performance data current to the most recent month end (available within seven business days of the most recent month end) by calling 1-800-276-1262.
You should consider the Fund's investment objectives, risks, and charges and expenses carefully before investing. For this and other important information, please obtain a fund prospectus at no cost from your financial advisor and read it carefully before investing.
The table does not reflect the deduction of taxes that a shareholder would pay on Fund distributions and redemption of Fund shares.
COMPARATIVE INDEX GRAPH (GRAPH APPEARS HERE)
Comparison of change in value of $10,000 investment in the Kansas Insured Intermediate Fund
and the Lehman Brothers Municipal Seven-Year Maturity Bond Index
| Kansas Insured Intermediate Fund w/o Sales Charge | Kansas Insured Intermediate Fund w/ Max Sales Charge | Lehman Brothers Municipal Seven-Year Maturity Bond Index |
11/23/92 | $10,000 | $ 9,725 | $10,000 |
1993 | $10,829 | $10,531 | $10,694 |
1994 | $11,025 | $10,722 | $10,982 |
1995 | $11,656 | $11,335 | $11,868 |
1996 | $12,326 | $11,987 | $12,471 |
1997 | $12,912 | $12,557 | $13,548 |
1998 | $13,321 | $12,955 | $14,260 |
1999 | $13,815 | $13,435 | $14,729 |
2000 | $14,112 | $13,724 | $15,405 |
2001 | $15,062 | $14,648 | $16,819 |
2002 | $15,682 | $15,251 | $18,018 |
2003 | $15,880 | $15,443 | $18,712 |
01/30/2004 | $16,311 | $15,859 | $19,778 |
Putting Performance into Perspective
Returns are historical and are not a guarantee of future results. The graph comparing your Fund’s performance to a benchmark index provides you with a general sense of how your Fund performed. To put this information in context, it may be helpful to understand the special differences between the two. The Lehman Brothers index is a national index representative of the national municipal bond market, whereas the Fund concentrates its investments in Kansas municipal bonds. Your Fund’s total return for the period shown appears with and without sales charges and includes Fund expenses and management fees. A securities index measures the performance of a theoretical portfolio. Unlike a fund, the index is unmanaged; there are no expenses that affect the results. In addition, few investors could purchase all of the securities necessary to match the index. And, if they could, they would incur transaction c osts and other expenses. All Fund and benchmark returns include reinvested dividends. The Fund’s share price, yields and total returns will vary, so that shares, when redeemed, may be worth more or less than their original cost.
MANAGEMENT OF THE FUND
The Board of Integrity Managed Portfolios (formerly known as Ranson managed portfolios) consists of four Trustees. These same individuals, unless otherwise noted, also serve as Directors or Trustees for all of the funds in the Integrity family of funds, the six series of Integrity Managed Portfolios (formerly known as Ranson Capital Corporation), 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. The remaining Trustee and executive officers are “interested” by virtue of their affiliation with the Investment Adviser and its affiliates.
The Independent Trustees of the Fund, their term of office and length of time served, their principal occupation(s) during the past five years, the number of portfolios overseen in the Fund Complex by each Independent Trustee and other directorships, if any, held outside the Fund Complex, are shown below.
INDEPENDENT TRUSTEES
Name, Address and Age | Position(s) Held with Registrant | Term and Length Served | Principal Occupation(s) During Past 5 Years | Number of Portfolios Overseen In The Fund Complex * | Other Directorships Held Outside The Fund Complex |
Lynn W. Aas | Trustee | Since January 1996 | Retired; Attorney; Director, ND Tax-Free Fund, Inc. (since December 1994), Montana Tax-Free Fund, Inc. (since December 1994), South Dakota Tax-Free Fund, Inc. (since December 1994), Integrity Fund of Funds, Inc. (since August 1994), Integrity Small-Cap Fund of Funds, Inc. (September 1998 to June 2003); Trustee, Integrity Managed Portfolios (since January 1996) and The Integrity Funds (since September 2003); and Director, First Western Bank & Trust (until May 2002). | 16 | None |
Orlin W. Backes | Trustee | Since January 1996 | Attorney, McGee, Hankla, Backes & Dobrovolny, P.C.; Director, ND Tax-Free Fund, Inc. (since April 1995), Montana Tax-Free Fund, Inc. (since April 1995), South Dakota Tax-Free Fund, Inc. (since April 1995), Integrity Fund of Funds, Inc. (since April 1995), Integrity Small-Cap Fund of Funds, Inc. (September 1998 to June 2003); Trustee, Integrity Managed Portfolios (since January 1996) and The Integrity Funds (since May 2003); and Director, First Western Bank & Trust. | 16 | Director, First Western Bank & Trust |
R. James Maxson | Trustee | Since January 1999 | Attorney, Maxson Law Office (since November 2002), Attorney, McGee, Hankla, Backes & Dobrovolny, P.C. (April 2000 to November 2002); Attorney, Farhart, Lian and Maxson, P.C. (March 1976 to March 2000); Director, ND Tax-Free Fund, Inc. (since January 1999), Montana Tax-Free Fund, Inc. (since January 1999), South Dakota Tax-Free Fund, Inc. (since January 1999), Integrity Fund of Funds, Inc. (since January 1999), Integrity Small-Cap Fund of Funds, Inc. (January 1999 to June 2003); and Trustee, Integrity Managed Portfolios (since January 1999) and The Integrity Funds (since May 2003). | 16 | None |
* The Fund Complex consists of the four funds in the Integrity family of funds, the six series of Integrity Managed Portfolios, and the six series of The Integrity Funds.
The Statement of Additional Information contains more information about the Fund’s Trustees and is available at 1 (800) 601-5593 without charge upon request.
The Interested Trustee and executive officers of the Fund, their term of office and length of time served, their principal occupation(s) during the past five years, the number of portfolios overseen in the Fund Complex by each Interested Trustee and executive officer, and other directorships, if any, held outside the Fund Complex, are shown below.
INTERESTED TRUSTEE AND EXECUTIVE OFFICERS
Name, Address and Age | Position(s) Held with Registrant | Term and Length Served | Principal Occupation(s) During Past 5 Years | Number of Portfolios Overseen In The Fund Complex * | Other Directorships Held Outside The Fund Complex |
**Peter A. Quist | Vice President | Since January 1996 | Attorney; Director and Vice President, Integrity Mutual Funds, Inc.; Director, Vice President and Secretary, Integrity Money Management, Inc. (formerly known as ND Money Management, Inc.), ND Capital, Inc., Integrity Fund Services, Inc., (formerly known as ND Resources, Inc.), ND Tax-Free Fund, Inc., Montana Tax-Free Fund, Inc., South Dakota Tax-Free Fund, Inc. (since April 1995), Integrity Fund of Funds, Inc., Integrity Small-Cap Fund of Funds, Inc. (September 1998 to June 2003), Integrity Funds Distributor, Inc. (formerly known as Ranson Capital Corporation) (since January 1996); Vice President and Secretary, Integrity Managed Portfolios (since January 1996) and The Integrity Funds (since May 2003); and Director, ARM Securities Corporation (May 2000 to June 2003). | 4 | None |
**Robert E. Walstad | Trustee, Chairman, President, and Treasurer | Since January 1996 | Director (since September 1987), President (September 1987 to October 2001) (September 2002 to May 2003), Integrity Mutual Funds, Inc.; Director, President and Treasurer, Integrity Money Management, Inc., ND Capital, Inc., Integrity Fund Services, Inc., ND Tax-Free Fund, Inc., Montana Tax-Free Fund, Inc., South Dakota Tax-Free Fund, Inc., Integrity Fund of Funds, Inc., Integrity Small-Cap Fund of Funds, Inc. (September 1998 to June 2003); Trustee, Chairman, President and Treasurer, Integrity Managed Portfolios (since January 1996) and The Integrity Funds (since May 2003).; Director, President (until August 2003), CEO, and Treasurer, Integrity Funds Distributor, Inc.; Director (October 1999 to June 2003), President (October 1999 to October 2001), Magic Internet Services, Inc.; Director (May 2000 to June 2003), President (May 2000 to November 2001) (October 2002 to June 2003), ARM Securities Corporation; and Director, CEO, Chairman (since January 2002), President (since September 2002), Capital Financial Services, Inc. | 16 | None |
__________________________
* The Fund Complex consists of the four funds in the Integrity family of funds, the six series of Integrity Managed Portfolios, and the six series of The Integrity Funds.
** Trustees and/or executive officers who are “interested persons” of the Funds as defined in the Investment Company Act of 1940. Messrs. Quist and Walstad are interested persons by virtue of being officers and directors of the Funds’ Investment Adviser and Principal Underwriter.
The Statement of Additional Information contains more information about the Fund’s Trustees and is available at 1 (800) 601-5593 without charge upon request.
INDEPENDENT TRUSTEES
[PHOTO] | [PHOTO] | [PHONE] |
Lynn W. Ass | Orlin W. Backes | R. James Maxson |
INTERESTED TRUSTEE AND EXECUTIVE OFFICERS
[PHOTO] | [PHOTO] |
Peter A. Quist | Robert E. Walstad |
Schedule of Investments January 30, 2004 (Unaudited)
Name of Issuer |
| Rating Moody’s/S&P | Coupon Rate | Maturity |
| Principal Amount |
| Market Value | |
|
|
|
|
|
|
|
|
| |
KANSAS MUNICIPAL BONDS (96.4%) |
|
|
|
|
|
|
|
| |
Butler Cty., KS (Circle) USD #375 FSA |
| Aaa/NR | 5.000% | 09/01/13 | $ | 500,000 | $ | 548,385 | |
#Chisholm Creek Util. Auth. (Bel Aire & Park City, KS Pj.) MBIA |
| Aaa/NR | 5.250 | 09/01/16 |
| 770,000 |
| 864,825 | |
Derby, KS Water System Rev. AMBAC |
| Aaa/NR | 4.250 | 10/01/14 |
| 135,000 |
| 140,436 | |
Derby, KS Water System Rev. AMBAC |
| Aaa/NR | 4.400 | 10/01/15 |
| 185,000 |
| 193,029 | |
Derby, KS Water System Rev. AMBAC |
| Aaa/NR | 4.500 | 10/01/16 |
| 195,000 |
| 203,024 | |
Derby, KS Water System Rev. AMBAC |
| Aaa/NR | 4.750 | 10/01/17 |
| 155,000 |
| 162,631 | |
Dodge, KS USD #443 Unltd. General Obligation FSA |
| Aaa/AAA | 5.750 | 09/01/13 |
| 100,000 |
| 117,074 | |
Johnson Cty, KS Community College Student Commons & Parking AMBAC |
| Aaa/AAA | 5.000 | 11/15/19 |
| 235,000 |
| 250,928 | |
Johnson Cty., KS USD #232 (Desoto) G.O. MBIA |
| Aaa/AAA | 5.200 | 09/01/10 |
| 480,000 |
| 528,235 | |
Kingman Cty., KS USD #331 FGIC |
| Aaa/AAA | 5.500 | 10/01/12 |
| 250,000 |
| 293,522 | |
KS Devl. Finance Auth (Wichita Univ.) AMBAC |
| Aaa/AAA | 5.900 | 04/01/15 |
| 305,000 |
| 350,238 | |
KS Devl. Finance Auth. (Dept. Admin. 7th & Harrison PJ) AMBAC |
| Aaa/AAA | 5.500 | 12/01/13 |
| 375,000 |
| 437,869 | |
KS Devl. Finance Auth. (Hays Medl. Ctr.) Rev. MBIA |
| Aaa/NR | 5.200 | 11/15/08 |
| 375,000 |
| 415,875 | |
KS Devl. Finance Auth. (Hays Medl. Ctr.) Rev. MBIA |
| Aaa/NR | 5.300 | 11/15/09 |
| 375,000 |
| 415,215 | |
KS Devl. Finance Auth. (KS St. Projects) Rev. MBIA |
| Aaa/AAA | 5.000 | 10/01/17 |
| 250,000 |
| 269,805 | |
KS Devl. Finance Auth. (Park Apts.) Multifamily Hsg.Rev. FNMA |
| NR/AAA | 5.700 | 12/01/09 |
| 325,000 |
| 338,855 | |
#KS Devl. Finance Auth. (Stormont Vail) Hlth. Care Rev. MBIA |
| Aaa/AAA | 5.700 | 11/15/08 |
| 450,000 |
| 493,735 | |
KS Devl. Finance Auth. (Stormont Vail) Hlth. Care Rev. MBIA |
| Aaa/AAA | 5.600 | 11/15/07 |
| 100,000 |
| 110,916 | |
*KS Devl. Finance Auth. (Stormont Vail) Hlth. Care Rev. MBIA |
| Aaa/AAA | 5.750 | 11/15/12 |
| 845,000 |
| 978,594 | |
KS Devl. Finance Auth. Pooled Ref. Lease Rev. MBIA |
| Aaa/AAA | 5.500 | 10/01/05 |
| 250,000 |
| 257,465 | |
KS State Turnpike Auth. Rev. FGIC |
| Aaa/AAA | 5.450 | 09/01/10 |
| 200,000 |
| 207,336 | |
#KS Turnpike Auth. Refunding Rev. AMBAC |
| Aaa/AAA | 4.000 | 09/01/14 |
| 250,000 |
| 261,310 | |
Larned, KS (Cath. Hlth. Corp.) Hlth. Facs. Rev. MBIA |
| Aaa/AAA | 5.400 | 11/15/04 |
| 155,000 |
| 160,977 | |
*Mission, KS Multifamily Hsg. (Lamar Place) Rev. FNMA |
| NR/AAA | 5.000 | 10/01/14 |
| 605,000 |
| 616,985 | |
Mission, KS Multifamily Hsg. (Lamar Place) Rev. FNMA |
| NR/AAA | 5.180 | 10/01/23 |
| 445,000 |
| 446,050 | |
Olathe, KS (Medl. Ctr.) Hlth. Facs. Rev. AMBAC |
| Aaa/AAA | 5.125 | 09/01/12 |
| 500,000 |
| 526,205 | |
Olathe, KS Multifamily Hsg. (Bristol Pointe) Rev. Ref. FNMA |
| NR/AAA | 5.250 | 11/01/12 |
| 485,000 |
| 500,840 | |
Saline Cty., KS USD #305 (Salina) G.O. Ref. FSA |
| Aaa/NR | 5.500 | 09/01/15 |
| 250,000 |
| 283,865 | |
*Sedgwick Cty., KS USD #259 FSA |
| Aaa/AAA | 4.375 | 10/01/15 |
| 600,000 |
| 636,192 | |
Shawnee Cty., KS USD #437 (Auburn-Washburn) G.O. Ref. FSA |
| Aaa/NR | 5.000 | 09/01/14 |
| 485,000 |
| 535,076 | |
Shawnee, KS Multifamily Hsg. (Thomasbrooks Apts.) Rev. FNMA COL. |
| NR/AAA | 5.250 | 10/01/14 |
| 500,000 |
| 508,120 | |
*University of Kansas Hosp. Auth. AMBAC |
| Aaa/AAA | 5.500 | 09/01/15 |
| 1,000,000 |
| 1,118,040 | |
Washburn Univ. (Living Learning Ctr) Bld. Rev. AMBAC |
| Aaa/AAA | 5.350 | 07/01/11 |
| 105,000 |
| 118,109 | |
Wellington, KS Utility Rev. AMBAC |
| Aaa/AAA | 5.000 | 05/01/12 |
| 250,000 |
| 263,378 | |
#Wichita, KS G.O. (Series 772) FGIC |
| Aaa/AAA | 4.100 | 09/01/14 |
| 905,000 |
| 935,146 | |
#Wichita, KS Multifamily Hsg. (Broadmoor Chelsea) Rev. FNMA |
| NR/AAA | 5.375 | 07/01/10 |
| 625,000 |
| 636,419 | |
*Wichita, KS Multifamily Hsg. (Cimarron Apartments) FNMA |
| Aa/AAA | 5.250 | 10/01/12 |
| 565,000 |
| 582,679 | |
Wichita, KS Public Building Commission (State Office Prj.) Rev. AMBAC |
| Aaa/AAA | 4.000 | 10/01/14 |
| 250,000 |
| 259,188 | |
Wichita, KS Water & Sewer Util. Rev. FGIC |
| Aaa/AAA | 5.250 | 10/01/14 |
| 325,000 |
| 373,773 | |
Wyandotte Cty, Kansas City, KS Gov't Util. Syst. Rev. MBIA |
| Aaa/AAA | 5.125 | 09/01/13 |
| 500,000 |
| 552,510 | |
Wyandotte Cty., KS USD #500 G.O. FSA |
| Aaa/AAA | 5.250 | 09/01/13 |
| 250,000 |
| 285,728 | |
|
|
|
| ||||||
| TOTAL KANSAS MUNICIPAL BONDS (COST: $16,146,432) | $ | 17,178,582 | ||||||
|
|
|
| ||||||
| SHORT-TERM SECURITIES (1.3%) |
|
| ||||||
| Wells Fargo National Tax-Free Money Market (Cost: $233,342) | $ | 233,342 | ||||||
|
|
| |||||||
TOTAL INVESTMENTS IN SECURITIES (COST: $16,379,774) | $ | 17,411,924 | |||||||
OTHER ASSETS LESS LIABILITIES |
| 410,074 | |||||||
|
|
| |||||||
NET ASSETS | $ | 17,821,998 | |||||||
* Indicates bonds are segregated by the custodian to cover when-issued or delayed-delivery purchases.
# Indicates bonds are segregated by the custodian to cover initial margin requirements.
Footnote: Non-rated (NR) securities have been determined to be of investment grade quality by the Fund’s Manager.
The accompanying notes are an integral part of these financial statements.
Financial Statements January 30, 2004
Statement of Assets and Liabilities January 30, 2004 (Unaudited)
Assets |
|
| ||
| Investment in securities, at value (cost: $16,379,774) | $ | 17,411,924 | |
| Cash |
| 2,594 | |
| Accrued interest receivable |
| 284,225 | |
| Accrued dividends receivable |
| 94 | |
| Variation margin on futures |
| 185,500 | |
| Prepaid expenses |
| 3,696 | |
|
|
| ||
| Total Assets | $ | 17,888,033 | |
|
|
| ||
Liabilities |
|
| ||
| Dividends payable | $ | 55,483 | |
| Accrued expenses |
| 10,552 | |
|
|
| ||
| Total Liabilities | $ | 66,035 | |
|
|
| ||
|
|
| ||
Net Assets | $ | 17,821,998 | ||
|
|
| ||
|
|
| ||
Net assets are represented by: |
|
| ||
| Paid-in capital | $ | 18,393,825 | |
| Accumulated undistributed net realized gain (loss) on investments |
| (1,100,288) | |
| Accumulated undistributed net realized gain (loss) on futures |
| (262,626) | |
| Unrealized appreciation on investments |
| 1,032,150 | |
| Unrealized depreciation on futures |
| (241,063) | |
| Total amount representing net assets applicable to |
|
| |
| 1,533,291 outstanding shares of no par common |
|
| |
| stock (unlimited shares authorized) | $ | 17,821,998 | |
|
|
| ||
Net asset value per share | $ | 11.62 | ||
|
|
| ||
The accompanying notes are an integral part of these financial statements.
Statement of Operations For the six months ended January 30, 2004 (Unaudited)
INVESTMENT INCOME |
|
| ||
| Interest | $ | 399,094 | |
| Dividends |
| 2,408 | |
| Total Investment Income | $ | 401,502 | |
|
|
| ||
EXPENSES |
|
| ||
| Investment advisory fees | $ | 45,626 | |
| Administrative service fees |
| 6,071 | |
| Transfer agent fees |
| 13,389 | |
| Accounting service fees |
| 16,578 | |
| Custodian fees |
| 2,853 | |
| Transfer agent out-of-pockets |
| 920 | |
| Professional fees |
| 250 | |
| Trustees fees |
| 1,293 | |
| Reports to shareholders |
| 1,314 | |
| Registration and filing fees |
| 925 | |
| Insurance expense |
| 706 | |
| Audit expense |
| 3,384 | |
| Total Expenses | $ | 93,309 | |
| Less expenses waived or absorbed by the Fund’s manager |
| (24,638) | |
| Total Net Expenses | $ | 68,671 | |
|
|
| ||
NET INVESTMENT INCOME | $ | 332,831 | ||
|
|
| ||
|
|
| ||
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FUTURES |
|
| ||
| Net realized gain (loss) from: |
|
| |
| Investment transactions | $ | (18,821) | |
| Futures transactions |
| (262,626) | |
| Net change in unrealized appreciation (depreciation) of: |
|
| |
| Investments |
| 558,805 | |
| Futures |
| (241,063) | |
| Net Realized And Unrealized Gain (Loss) On Investments And Futures | $ | 36,295 | |
|
|
| ||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | $ | 369,126 | ||
The accompanying notes are an integral part of these financial statements.
Financial Statements January 30, 2004
Statement of Changes in Net Assets
For the six months ended January 30, 2004, and the year ended July 31, 2003
|
| For The Six Months Ended January 30, 2004 (Unaudited) |
| For The Year Ended July 31, 2003 | ||
|
|
|
|
| ||
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS |
|
|
|
| ||
| Net investment income | $ | 332,831 | $ | 725,243 | |
| Net realized gain (loss) on investment and futures transactions |
| (281,447) |
| (209,464) | |
| Net change in unrealized appreciation (depreciation) on investments and futures |
| 317,742 |
| (283,738) | |
| Net Increase (Decrease) in Net Assets Resulting From Operations | $ | 369,126 | $ | 232,041 | |
|
|
|
|
| ||
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS |
|
|
|
| ||
| Dividends from net investment income ($.21 and $.46 per share, respectively) | $ | (332,831) | $ | (725,085) | |
| Distributions from net realized gain on investment and futures transactions ($.00 and $.00 per share, respectively) |
| 0 |
| 0 | |
| Total Dividends and Distributions | $ | (332,831) | $ | (725,085) | |
|
|
|
|
| ||
CAPITAL SHARE TRANSACTIONS |
|
|
|
| ||
| Proceeds from sale of shares | $ | 675,414 | $ | 1,984,432 | |
| Proceeds from reinvested dividends |
| 182,640 |
| 401,562 | |
| Cost of shares redeemed |
| (1,548,929) |
| (2,049,089) | |
| Net Increase (Decrease) in Net Assets Resulting From Capital Share Transactions | $ | (690,875) | $ | 336,905 | |
|
|
|
|
| ||
TOTAL INCREASE (DECREASE) IN NET ASSETS | $ | (654,580) | $ | (156,139) | ||
|
|
|
|
| ||
NET ASSETS, BEGINNING OF PERIOD |
| 18,476,578 |
| 18,632,717 | ||
|
|
|
|
| ||
NET ASSETS, END OF PERIOD | $ | 17,821,998 | $ | 18,476,578 | ||
The accompanying notes are an integral part of these financial statements.
Notes to Financial Statements January 30, 2004 (Unaudited)
Note 1. ORGANIZATION
Business operations -The Kansas Insured Intermediate Fund (the “Fund”) is an investment portfolio of Integrity Managed Portfolios (the “Trust”) registered under the Investment Company Act of 1940, as amended, as a non-diversified, open-end management investment company. The Trust may offer multiple portfolios; currently six portfolios are offered. Integrity Managed Portfolios is an unincorporated business trust organized under Massachusetts law on August 10, 1990. The Fund had no operations from that date to November 23, 1992, other than matters relating to organization and registration. On November 23, 1992, the Fund commenced its Public Offering of capital shares. The investment objective of the Fund is to provide its shareholders with as high a level of current income exempt from both federal and Kansas income tax as is consistent with preservation of capital. The Fund will seek to achieve thi s objective by investing primarily in a portfolio of Kansas insured securities. Shares of the Fund are offered at net asset value plus a maximum sales charge of 2.75% of the offering price.
Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Investment security valuation - Securities for which quotations are not readily available (which will constitute a majority of the securities held by the Fund) are valued using a matrix system at fair value as determined by Integrity Money Management. The matrix system has been developed based on procedures approved by the Board of Trustees which include consideration of the following: yields or prices of municipal bonds of comparable quality, type of issue, coupon, maturity and rating, and indications as to value from dealers and general market conditions. Because the market value of securities can only be established by agreement between parties in a sales transaction, and because of the uncertainty inherent in the valuation process, the fair values as determined may differ from the values that would have been used had a ready market for the securities existed. The Fund follows industry practice and records security transa ctions 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.
Federal and state income taxes - The Fund’s policy is to comply with the requirements of the Internal Revenue Code that are applicable to regulated investment companies and to distribute all of its net investment income and any net realized gain on investments to its shareholders. Therefore, no provision for income taxes is required. Distributions during the six months ended January 30, 2004, were characterized as tax-exempt for tax purposes.
The Fund has unexpired capital loss carryforwards for tax purposes as of January 30, 2004, totaling $1,081,467, which may be used to offset capital gains. The capital loss carryforward amounts will expire in each of the years ended July 31 as shown in the table below.
Year | Unexpired Capital Losses |
2004 | 0 |
2005 | 411,602 |
2006 | 125,539 |
2007 | 27,107 |
2008 | 49,698 |
2009 | 78,788 |
2010 | 178,976 |
2011 | 209,757 |
Distributions to shareholders - Dividends from net investment income, declared daily and payable monthly, are reinvested in additional shares of the Fund at net asset value or paid in cash. Capital gains, when available, are distributed at least annually.
Premiums and discounts - Premiums and discounts on municipal securities are amortized for financial reporting purposes.
Other - Income and expenses are recorded on the accrual basis. Investment transactions are accounted for on the trade date. Realized gains and losses are reported on the identified cost basis. Distributions to shareholders are recorded by the Fund on the ex-dividend date. Income and capital gain distributions are determined in accordance with federal income tax regulations and may differ from net investment income and realized gains determined in accordance with accounting principles generally accepted in the United States of America. These differences are primarily due to differing treatment for market discount, capital loss carryforwards and losses due to wash sales and futures transactions.
Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications to paid-in capital. Temporary book and tax basis differences will reverse in a subsequent period.
Futures contracts - The Fund may purchase and sell financial futures to hedge against changes in the values of tax-exempt municipal securities the Fund owns or expects to purchase.
A futures contract is an agreement between two parties to buy or sell units of a particular index or a certain amount of U.S. government or municipal securities at a set price on a future date. Upon entering into a futures contract, the Fund is required to deposit with a broker an amount of cash or securities equal to the minimum “initial margin” requirement of the futures exchange on which the contract is traded. Subsequent payments (“variation margin”) are made or received by the Fund, dependent on the fluctuations in the value of the underlying index. Daily fluctuations in value are recorded for financial reporting purposes as unrealized gains or losses by the Fund. When entering into a closing transaction, the Fund will realize, for book purposes, a gain or loss equal to the difference between the value of the futures contracts sold and the futures contracts to buy. Unrealized ap preciation (depreciation) related to open futures contracts is required to be treated as a realized gain (loss) for federal income tax purposes.
Securities held in collateralized accounts to cover initial margin requirements on open futures contracts are noted in the Schedule of Investments. The Statement of Assets and Liabilities reflects a receivable or payable for the daily mark to market for variation margin.
Certain risks may arise upon entering into futures contracts. These risks may include changes in the value of the futures contracts that may not directly correlate with changes in the value of the underlying securities.
At January 30, 2004, the Fund had outstanding futures contracts to sell debt securities as follows:
Contracts to Sell | Expiration Date | Number of Futures Contract | Valuation as of January 30, 2004 | Unrealized Appreciation (Depreciation) |
U.S. Treasury Bonds | 03/2004 | 56 | $185,500.00 | ($241,063) |
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 January 30, 2004, there were unlimited shares of no par authorized; 1,533,291 and 1,592,377 shares were outstanding at January 30, 2004, and July 31, 2003, respectively.
Transactions in capital shares were as follows:
|
| Shares | ||||
| For The Six Months Ended January 30, 2004 (Unaudited) |
| ||||
| For The Year Ended July 31, 2003 | |||||
| ||||||
| ||||||
Shares sold | 57,968 | 168,397 | ||||
Shares issued on reinvestment of dividends | 15,677 | 34,099 | ||||
| Shares redeemed | (132,731) | (174,430) | |||
Net increase (decrease) | (59,086) | 28,066 | ||||
Note 4. INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Integrity Money Management, Inc., the Fund’s investment adviser; Integrity Funds Distributor, Inc., the Fund’s underwriter; and Integrity Fund Services, Inc., the Fund’s transfer, accounting, and administrative services agent, are subsidiaries of Integrity Mutual Funds, Inc., the Fund’s sponsor.
The Fund has engaged Integrity Money Management, Inc. to provide investment advisory and management services to the Fund. The Investment Advisory Agreement provides for fees to be computed at an annual rate of 0.50% of the Fund’s average daily net assets. The Fund has recognized $20,988 of investment advisory fees after partial waiver for the six months ended January 30, 2004. Certain officers and trustees of the Fund are also officers and directors of the investment adviser. The Fund has a payable to Integrity Money Management, Inc. of $2,992 at January 30, 2004, for investment advisory fees.
Integrity Fund Services, Inc. (the transfer agent) provides shareholder services for a monthly fee equal to an annual rate of 0.16% of the Fund’s first $10 million of net assets, 0.13% of the Fund’s net assets on the next $15 million, 0.11% of the Fund’s net assets on the next $25 million, and 0.10% of the Fund’s net assets in excess of $50 million, with a minimum of $1,500 per month plus reimbursement of out-of-pocket expenses. An additional fee with a minimum of $500 per month is charged for each additional share class. The Fund has recognized $13,389 of transfer agency fees and expenses for the six months ended January 30, 2004. The Fund has a payable to Integrity Fund Services, Inc. of $2,208 at January 30, 2004 for transfer agency fees. Integrity Fund Services, Inc. also acts as the Fund’s accounting services agent for a monthly fee equal to the sum of a fixed fee of $2,000 and a variable fee equal to 0 .05% of the Fund’s average daily net assets on an annual basis for the Fund’s first $50 million and at a lower rate on the average daily net assets in excess of $50 million, together with reimbursement of out-of-pocket expenses. An additional minimum fee of $500 per month is charged by Integrity Fund Services for each additional share class. The Fund has recognized $16,578 of accounting service fees for the six months ended January 30, 2004. The Fund has a payable to Integrity Fund Services, Inc. of $2,753 at January 30, 2004, for accounting service fees. Integrity Fund Services also acts as administrator for the Fund. The Fund pays to Integrity Fund Services a monthly fee calculated at the rate of 0.10% of average daily net assets with a minimum of $1,500 per month plus out-of-pocket expenses. An additional minimum fee of $500 per month is charged by Integrity Fund Services for each additional share class. The Fund has recognized $6,071 of administ rative service fees for the six months ended January 30, 2004. The Fund has a payable to Integrity Fund Services, Inc. of $1,510 at January 30, 2004, for administrative service fees.
Note 5. INVESTMENT SECURITY TRANSACTIONS
The cost of purchases and proceeds from the sales of investment securities (excluding short-term securities) aggregated $639,798 and $1,143,289, respectively, for the six months ended January 30, 2004.
Note 6. INVESTMENT IN SECURITIES
At January 30, 2004, the aggregate cost of securities for federal income tax purposes was substantially the same for financial reporting purposes at $16,379,774. The net unrealized appreciation of investments based on the cost was $1,032,150, which is comprised of $1,037,893 aggregate gross unrealized appreciation and $5,743 aggregate gross unrealized depreciation.
Financial Highlights
Selected per share data and ratios for the period indicated
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| For The Six Months Ended January 30, 2004 (Unaudited) |
| For The Year Ended July 31, 2003 |
| For The Year Ended July 31, 2002 |
| For The Year Ended July 31, 2001 |
| For The Year Ended July 31, 2000 |
| For The Year Ended July 30, 1999 | |||
NET ASSET VALUE, BEGINNING OF PERIOD | $ | 11.60 | $ | 11.91 | $ | 11.93 | $ | 11.69 | $ | 11.98 | $ | 12.07 | |||
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Income from Investment Operations: |
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| Net investment income | $ | .21 | $ | .46 | $ | .50 | $ | .53 | $ | .54 | $ | .53 | ||
| Net realized and unrealized gain (loss) on investment and futures transactions |
| .02 |
| (.31) |
| (.02) |
| .24 |
| (.29) |
| (.09) | ||
| Total Income (Loss) From Investment Operations | $ | .23 | $ | .15 | $ | .48 | $ | .77 | $ | .25 | $ | .44 | ||
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Less Distributions: |
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| Dividends from net investment income | $ | (.21) | $ | (.46) | $ | (.50) | $ | (.53) | $ | (.54) | $ | (.53) | ||
| Distributions from net capital gains |
| .00 |
| .00 |
| .00 |
| .00 |
| .00 |
| .00 | ||
| Total Distributions | $ | (.21) | $ | (.46) | $ | (.50) | $ | (.53) | $ | (.54) | $ | (.53) | ||
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NET ASSET VALUE, END OF PERIOD | $ | 11.62 | $ | 11.60 | $ | 11.91 | $ | 11.93 | $ | 11.69 | $ | 11.98 | |||
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Total Return |
| 4.02%(A)(C) |
| 1.26%(A) |
| 4.12%(A) |
| 6.73%(A) |
| 2.15%(A) |
| 3.70%(A) | |||
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RATIOS/SUPPLEMENTAL DATA: |
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| Net assets, end of period (in thousands) | $ | 17,822 | $ | 18,477 | $ | 18,633 | $ | 18,728 | $ | 19,028 | $ | 21,333 | ||
| Ratio of net expenses (after expense assumption) to average net assets |
| 0.75%(B)(C) |
| 0.75%(B) |
| 0.75%(B) |
| 0.75%(B) |
| 0.75%(B) |
| 0.75%(B) | ||
| Ratio of net investment income to average net assets |
| 3.64%(C) |
| 3.89% |
| 4.20% |
| 4.49% |
| 4.58% |
| 4.39% | ||
| Portfolio turnover rate |
| 3.68% |
| 26.23% |
| 9.04% |
| 18.49% |
| 11.07% |
| 16.34% | ||
(A) Excludes maximum sales charge of 2.75%.
(B) During the periods indicated above, Integrity Mutual Funds, Inc. or Integrity Money Management, Inc. assumed/waived expenses of $24,638, $36,281, $30,501, $31,627, $30,414, and $29,229, respectively. If the expenses had not been assumed/waived, the annualized ratios of total expenses to average net assets would have been 1.01%, 0.94%, 0.91%, 0.92%, 0.90%, and 0.89%, respectively.
(C) Ratio is annualized.
Total return represents the rate that an investor would have earned or lost on an investment in the Fund assuming reinvestment of all dividends and distributions.
The accompanying notes are an integral part of these financial statements.
Nebraska Municipal Fund
Dear Shareholder:
Enclosed is the semi-annual report of the operations of the Nebraska Municipal Fund (the “Fund”) for the six months ended January 30, 2004. The Fund’s portfolio and related financial statements are presented within for your review.
The foundations under the U.S. economy are getting stronger. Massive policy stimulus has worked in an economy that’s in a self-sustaining expansion with businesses shifting away from their retrenchment mindset. This means that growth will no longer be so dependent on consumer spending and housing, even though both of these sectors should remain firm.
The fact that the Federal Reserve is determined to keep interest rates extremely low in the face of strengthening activity boosts the odds that the economy will continue to surprise on the upside in the months ahead. As a result, corporate profits should perform well and deflation fears will eventually be replaced by the realization that the Fed is sowing the seeds for future inflation.
The Fed would very much like to avoid a repeat of 1994. It will be hard to plan a smooth exit strategy from its current stance, but it is trying to be clear in signaling its intentions to the markets. It is slowly altering the policy statement after each FOMC (Federal Open Market Committee) meeting, with the intention of having the markets gradually adjust by the time rates are finally hiked. The Fed has learned from the experience of last May through July when confusing policy signals created tremendous bond volatility.
During the period the Fund utilized defensive positions designed to provide share price stability. U.S. Treasury futures were used to hedge a portion of the portfolio with the results being tempered share price as rates hovered near forty-year lows and stabilized share price as bonds dipped in reaction to periodic rising rates. Risk management is important in this market environment.
An important part of the Fund’s strategy includes searching the primary and secondary markets for high quality double tax-exempt issues. Portfolio quality for the six months ended January 30, 2004, were represented as follows: AAA 62.4%, AA 22.9%, A 6.3%, BBB 2.0%, and NR 6.4%. High quality current income exempt from federal and Nebraska income tax remain the primary objectives of the Fund.
Sincerely,
The Portfolio Management Team
The views expressed are those of Monte Avery, Chief Portfolio Strategist with Integrity Mutual Funds. The views are subject to change at any time in response to changing circumstances in the market and are not intended to predict or guarantee the future performance of any individual security, market sector or the markets generally, or any Integrity Mutual Fund.
Terms & Definitions January 30, 2004 (Unaudited)
Appreciation
The increase in value of an asset.
Average Annual Total Return
A standardized measurement of the return (yield and appreciation) earned by the fund on an annual basis, assuming all distributions are reinvested.
Coupon Rate or Face Rate
The rate of interest annually payable based on the face amount of the bond; expressed as a percentage.
Depreciation
The decrease in value of an asset.
Lehman Brothers Municipal Bond Index
An unmanaged list of long-term, fixed-rate, investment-grade, tax-exempt bonds representative of the municipal bond market. The index does not take into account brokerage commissions or other costs, may include bonds different from those in the fund, and may pose different risks than the fund.
Market Value
The actual (or estimated) price at which a bond trades in the market place.
Maturity
A measure of the term or life of a bond in years. When a bond “matures”, the issuer repays the principal.
Net Asset Value (NAV)
The value of all your fund’s assets, minus any liabilities, divided by the number of outstanding shares, not including any initial sales charge.
Quality Ratings
A designation assigned by independent rating companies to give a relative indication of a bond’s credit worthiness. “AAA”, “AA”, “A” and “BBB” indicate investment grade securities. Ratings can range from a high of “AAA” to a low of “D”.
Total Return
Measures both the net investment income and any realized and unrealized appreciation or depreciation of the underlying investments in the fund’s portfolio for the period, assuming the reinvestment of all dividends. It represents the aggregate percentage or dollar value change over the period.
Insert Pie Charts
Portfolio Quality Ratings
(based on Total Long-Term Investments)
AAA | 62.4% |
AA | 22.9% |
A | 6.3% |
BBB | 2.0% |
NR | 6.4% |
Quality ratings reflect the financial strength of the issuer. They are assigned by independent rating services such as Moody’s Investors Services and Standard & Poor’s. Non-rated bonds have been determined to be of appropriate quality for the portfolio by Integrity Money Management (formerly known as Ranson Capital Corporation), the investment adviser.
These percentages are subject to change.
Average Annual Total Returns
| For periods ending January 30, 2004 | |||
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| Since Inception (November 17, 1993) |
Nebraska Municipal Fund | 1 year | 5 year | 10 year | |
Without sales charge | 1.69% | 3.39% | 4.01% | 4.26% |
With sales charge (4.25%) | (2.67)% | 2.50% | 3.56% | 3.81% |
| For periods ending January 30, 2004 | |||
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| Since Inception (November 17, 1993) |
Lehman Municipal Bond Index | 1 year | 5 year | 10 year | |
| 5.73% | 6.06% | 6.38% | 6.13% |
Performance data quoted above is historical. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance data quoted. The principal value and investment return of an investment will fluctuate so that your shares, when redeemed, may be worth more or less than the original cost. You can obtain performance data current to the most recent month end (available within seven business days of the most recent month end) by calling 1-800-276-1262.
You should consider the Fund's investment objectives, risks, and charges and expenses carefully before investing. For this and other important information, please obtain a fund prospectus at no cost from your financial advisor and read it carefully before investing.
The table does not reflect the deduction of taxes that a shareholder would pay on Fund distributions and redemptions of Fund shares.
COMPARATIVE INDEX GRAPH (GRAPH APPEARS HERE)
Comparison of change in value of a $10,000 investment in the Nebraska Municipal Fund
and the Lehman Brothers Municipal Bond Index
| Nebraska Municipal Fund w/o Sales Charge | Nebraska Municipal Fund w/ max Sales Charge | Lehman Brothers Municipal Bond Index |
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11/17/93 | $10,000 | $ 9,575 | $10,000 | ||
1994 | $ 9,773 | $ 9,357 | $ 9,892 | ||
1995 | $10,471 | $10,026 | $10,672 | ||
1996 | $11,071 | $10,600 | $11,376 | ||
1997 | $11,909 | $11,402 | $12,544 | ||
1998 | $12,380 | $11,853 | $13,295 | ||
1999 | $12,853 | $12,306 | $13,677 | ||
2000 | $13,146 | $12,588 | $14,268 | ||
2001 | $14,463 | $13,848 | $15,707 | ||
2002 | $15,051 | $14,411 | $16,761 | ||
2003 | $14,929 | $14,295 | $17,364 | ||
01/30/04 | $15,302 | $14,652 | $18,359 | ||
Putting Performance into Perspective
Returns are historical and are not a guarantee of future results. The graph comparing your Fund’s performance to a benchmark index provides you with a general sense of how your Fund performed. To put this information in context, it may be helpful to understand the special differences between the two. The Lehman Brothers index is a national index representative of the national municipal bond market, whereas the Fund concentrates its investments in Nebraska municipal bonds. Your Fund’s total return for the period shown appears with and without sales charges and includes Fund expenses and management fees. A securities index measures the performance of a theoretical portfolio. Unlike a fund, the index is unmanaged; there are no expenses that affect the results. In addition, few investors could purchase all of the securities necessary to match the index. And, if they could, they would incur transactio n costs and other expenses. All Fund and benchmark returns include reinvested dividends. The Fund’s share price, yields, and total returns will vary, so that shares, when redeemed, may be worth more or less than their original cost.
MANAGEMENT OF THE FUND
The Board of Integrity Managed Portfolios (formerly known as Ranson Managed Portfolios) consists of four Trustees. These same individuals, unless otherwise noted, also serve as Directors or Trustees for all of the funds in the Integrity family of funds, the six series of Integrity Managed Portfolios, and the 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. The remaining Trustee and executive officers are “interested” by virtue of their affiliation with the Investment Adviser and its affiliates.
The Independent Trustees of the Fund, their term of office and length of time served, their principal occupation(s) during the past five years, the number of portfolios overseen in the Fund Complex by each Independent Trustee and other directorships, if any, held outside the Fund Complex, are shown below.
INDEPENDENT TRUSTEES
Name, Address and Age | Position(s) Held with Registrant | Term and Length Served | Principal Occupation(s) During Past 5 Years | Number of Portfolios Overseen In The Fund Complex * | Other Directorships Held Outside The Fund Complex |
Lynn W. Aas | Trustee |
Since January 1996 | Retired; Attorney; Director, ND Tax-Free Fund, Inc. (since December 1994), Montana Tax-Free Fund, Inc. (since December 1994), South Dakota Tax-Free Fund, Inc. (since December 1994), Integrity Fund of Funds, Inc. (since August 1994), Integrity Small-Cap Fund of Funds, Inc. (September 1998 to June 2003); Trustee, Integrity Managed Portfolios (since January 1996) and The Integrity Funds (since September 2003); and Director, First Western Bank & Trust (until May 2002). | 16 | None |
Orlin W. Backes | Trustee |
Since January 1996 | Attorney, McGee, Hankla, Backes & Dobrovolny, P.C.; Director, ND Tax-Free Fund, Inc. (since April 1995), Montana Tax-Free Fund, Inc. (since April 1995), South Dakota Tax-Free Fund, Inc. (since April 1995), Integrity Fund of Funds, Inc. (since April 1995), Integrity Small-Cap Fund of Funds, Inc. (September 1998 to June 2003); Trustee, Integrity Managed Portfolios (since January 1996) and The Integrity Funds (since May 2003); and Director, First Western Bank & Trust. | 16 | Director, First Western Bank & Trust |
R. James Maxson | Trustee |
Since January 1999 | Attorney, Maxson Law Office (since November 2002), Attorney, McGee, Hankla, Backes & Dobrovolny, P.C. (April 2000 to November 2002); Attorney, Farhart, Lian and Maxson, P.C. (March 1976 to March 2000); Director, ND Tax-Free Fund, Inc. (since January 1999), Montana Tax-Free Fund, Inc. (since January 1999), South Dakota Tax-Free Fund, Inc. (since January 1999), Integrity Fund of Funds, Inc. (since January 1999), Integrity Small-Cap Fund of Funds, Inc. (January 1999 to June 2003); and Trustee, Integrity Managed Portfolios (since January 1999) and The Integrity Funds (since May 2003). | 16 | None |
* The Fund Complex consists of the four funds in the Integrity family of funds, the six series of Integrity Managed Portfolios, and the six series of The Integrity Funds.
The Statement of Additional Information contains more information about the Fund’s Trustees and is available at 1 (800) 601-5593 without charge upon request.
The Interested Trustee and executive officers of the Fund, their term of office and length of time served, their principal occupation(s) during the past five years, the number of portfolios overseen in the Fund Complex by each Interested Trustee and executive officer, and other directorships, if any, held outside the Fund Complex, are shown below.
INTERESTED TRUSTEE AND EXECUTIVE OFFICERS
Name, Address and Age | Position(s) Held with Registrant | Term and Length Served | Principal Occupation(s) During Past 5 Years | Number of Portfolios Overseen In The Fund Complex * | Other Directorships Held Outside The Fund Complex |
**Peter A. Quist | Vice President |
Since January 1996 | Attorney; Director and Vice President, Integrity Mutual Funds, Inc.; Director, Vice President and Secretary, Integrity Money Management, Inc. (formerly known as ND Money Management, Inc.), ND Capital, Inc., Integrity Fund Services, Inc., (formerly known as ND Resources, Inc.), ND Tax-Free Fund, Inc., Montana Tax-Free Fund, Inc., South Dakota Tax-Free Fund, Inc. (since April 1995), Integrity Fund of Funds, Inc., Integrity Small-Cap Fund of Funds, Inc. (September 1998 to June 2003), Integrity Funds Distributor, Inc. (formerly known as Ranson Capital Corporation) (since January 1996); Vice President and Secretary, Integrity Managed Portfolios (since January 1996) and The Integrity Funds (since May 2003); and Director, ARM Securities Corporation (May 2000 to June 2003). | 4 | None |
**Robert E. Walstad | Trustee, Chairman, President, and Treasurer |
Since January 1996 | Director (since September 1987), President (September 1987 to October 2001) (September 2002 to May 2003), Integrity Mutual Funds, Inc.; Director, President and Treasurer, Integrity Money Management, Inc., ND Capital, Inc., Integrity Fund Services, Inc., ND Tax-Free Fund, Inc., Montana Tax-Free Fund, Inc., South Dakota Tax-Free Fund, Inc., Integrity Fund of Funds, Inc., Integrity Small-Cap Fund of Funds, Inc. (September 1998 to June 2003); Trustee, Chairman, President and Treasurer, Integrity Managed Portfolios (since January 1996) and The Integrity Funds (since May 2003).; Director, President (until August 2003), CEO, and Treasurer, Integrity Funds Distributor, Inc.; Director (October 1999 to June 2003), President (October 1999 to October 2001), Magic Internet Services, Inc.; Director (May 2000 to June 2003), President (May 2000 to November 2001) (October 2002 to June 2003), ARM Securities Corporation; and Director, CEO, Chairman (since January 2002), President (since September 2002), Capital Financial Services, Inc. | 16 | None |
* The Fund Complex consists of the four funds in the Integrity family of funds, the six series of Integrity Managed Portfolios, and the six series of The Integrity Funds.
** Trustees and/or executive officers who are “interested persons” of the Funds as defined in the Investment Company Act of 1940. Messrs. Quist and Walstad are interested persons by virtue of being officers and directors of the Funds’ Investment Adviser and Principal Underwriter.
The Statement of Additional Information contains more information about the Fund’s Trustees and is available at 1 (800) 601-5593 without charge upon request.
INDEPENDENT TRUSTEES
[PHOTO] | [PHOTO] | [PHONE] |
Lynn W. Ass | Orlin W. Backes | R. James Maxson |
INTERESTED TRUSTEE AND EXECUTIVE OFFICERS
[PHOTO] | [PHOTO] |
Peter A. Quist | Robert E. Walstad |
Schedule of Investments January 30, 2004 (Unaudited)
Name of Issuer |
| Rating Moody’s/S&P | Coupon Rate | Maturity |
| Principal Amount |
| Market Value | |||
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NEBRASKA MUNICIPAL BONDS (94.6%) |
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Adams Cty., NE Hosp. Auth. #001 (Mary Lanning Memorial Hosp.) ASGUA | NR/AA | 5.300% | 12/15/18 | $ | 250,000 | $ | 268,653 | ||||
Cass Cty, NE School Dist. #056 (Conestoga Public Schools) | NR/NR | 6.150 | 12/15/20 |
| 250,000 |
| 259,333 | ||||
Columbus Community Hospital Platte Cty, NE Asset Guaranty | NR/AA | 5.650 | 05/01/12 |
| 100,000 |
| 111,174 | ||||
Columbus Community Hospital Platte Cty, NE Asset Guaranty | NR/AA | 6.150 | 05/01/30 |
| 250,000 |
| 280,007 | ||||
*Dakota Cty., NE SD #011 (South Sioux City Community Schools) G.O. MBIA | Aaa/AAA | 6.100 | 06/15/20 |
| 1,000,000 |
| 1,086,480 | ||||
Dawson Cty., NE SID #001 (IBP, Inc. Proj.) Ref. G.O. | Baa-3/BBB | 5.650 | 02/01/22 |
| 700,000 |
| 686,812 | ||||
Dawson Cty., NE School Dist. #20 (Gothenburg) G.O. MBIA | Aaa/AAA | 5.350 | 12/15/26 |
| 500,000 |
| 535,775 | ||||
*Dodge Cty., NE SD #001 (Fremont Public Schools) FSA | Aaa/NR | 5.500 | 12/15/20 |
| 1,000,000 |
| 1,097,270 | ||||
Douglas Cty., NE Hosp. Auth. #001 (Alegent Hlth.) Rev. AMBAC | Aaa/AAA | 5.250 | 09/01/21 |
| 250,000 |
| 268,060 | ||||
Douglas Cty., NE Hosp. Auth. #002 (Archbishop Bergan) Rev. MBIA | Aaa/AAA | 6.000 | 11/15/15 |
| 125,000 |
| 131,938 | ||||
Douglas Cty., NE (Catholic Health Corp.) Rev. MBIA | Aaa/AAA | 5.375 | 11/15/15 |
| 275,000 |
| 298,144 | ||||
Douglas Cty., NE (Catholic Health Corp.) Rev. MBIA | Aaa/AAA | 5.500 | 11/15/21 |
| 340,000 |
| 364,453 | ||||
Douglas Cty., NE Hosp. Auth. #002 (Nebraska Medical Center) | A/NR | 5.000 | 11/15/16 |
| 250,000 |
| 262,755 | ||||
Douglas Cty., NE SID #392 (Cinnamon Creek) G.O. | NR/NR | 5.750 | 08/15/17 |
| 200,000 |
| 200,000 | ||||
Douglas Cty., NE SID #240 (LeBea) Ref. G.O. | NR/NR | 5.900 | 10/15/16 |
| 100,000 |
| 101,630 | ||||
Douglas Cty., NE SID #397 (Linden Estates II) | NR/NR | 5.600 | 07/15/18 |
| 265,000 |
| 269,142 | ||||
Douglas Cty., NE SID #397 (Linden Estates II) | NR/NR | 5.600 | 07/15/19 |
| 280,000 |
| 285,253 | ||||
Douglas Cty., NE SID #397 (Linden Estates II) | NR/NR | 5.600 | 04/01/23 |
| 500,000 |
| 504,840 | ||||
Douglas Cty., NE School Dist. #001 | Aa/AAA | 5.625 | 12/15/19 |
| 250,000 |
| 264,533 | ||||
#Douglas Cty., NE School Dist. #010 (Elkhorn) G.O. FSA | Aaa/AAA | 5.500 | 12/15/20 |
| 750,000 |
| 795,825 | ||||
Douglas Cty., NE SD #010 (Elkhorn Public Schools) | NR/A+ | 5.050 | 12/15/22 |
| 150,000 |
| 155,762 | ||||
Fremont, NE Combined Utilities Rev. MBIA | Aaa/AAA | 5.000 | 10/15/21 |
| 500,000 |
| 530,280 | ||||
Grand Island, NE Sewer Syst. Rev. | A/NR | 6.000 | 04/01/14 |
| 550,000 |
| 574,684 | ||||
Great Plains Regional Med. Cntr. North Platte Hosp. Rev. Asset Guaranty | NR/AA | 5.450 | 11/15/22 |
| 750,000 |
| 808,657 | ||||
Kearney Cty., NE Highway Allocation Fund AMBAC | Aaa/NR | 5.350 | 06/15/21 |
| 100,000 |
| 107,384 | ||||
Lancaster Cty., NE (Lincoln Medl. Educ. Foundn.) Rev. | NR/NR | 5.700 | 02/01/11 |
| 100,000 |
| 101,204 | ||||
Lancaster Cty., NE (Lincoln Medl. Educ. Foundn.) Rev. | NR/NR | 5.800 | 02/01/12 |
| 175,000 |
| 177,000 | ||||
#Lancaster Cty., NE (Bryan Memorial Hospital) Rev. MBIA | Aaa/AAA | 5.375 | 06/01/19 |
| 1,400,000 |
| 1,529,346 | ||||
Lancaster Cty., NE School Dist. #1 (Lincoln Public Schools) | Aa/AAA | 5.250 | 01/15/21 |
| 500,000 |
| 540,615 | ||||
Lancaster Cty., NE School Dist. #1 (Lincoln Public Schools) G.O. | Aa/AAA | 5.250 | 01/15/22 |
| 500,000 |
| 544,095 | ||||
#Lancaster Cty., NE School Dist. #145 (Waverly Public Schools) AMBAC | Aaa/AAA | 5.500 | 12/01/20 |
| 1,240,000 |
| 1,335,195 | ||||
Lincoln Cty., NE School Dist. #005 (Sutherland Public Schools) FSA | Aaa/NR | 5.000 | 12/15/20 |
| 225,000 |
| 240,653 | ||||
Lincoln/Lancaster Cty., NE Public Bldg. Community Rev | Aa/AA+ | 5.800 | 10/15/18 |
| 475,000 |
| 525,668 | ||||
#Lincoln/Lancaster Cty., NE Public Bldg. Community Rev. | Aa/AA+ | 5.875 | 10/15/23 |
| 850,000 |
| 931,396 | ||||
Lincoln, NE Various Purpose GO. | Aaa/AAA | 4.125 | 06/15/23 |
| 250,000 |
| 238,108 | ||||
Lincoln, NE Water Rev. | Aa/AA+ | 5.000 | 08/15/22 |
| 575,000 |
| 605,831 | ||||
Madison Cty., NE Hosp. Auth. #001 (Faith Regl. Hlth. Svcs.) Rev. ASGUA | NR/AA | 5.350 | 07/01/18 |
| 250,000 |
| 266,772 | ||||
NE Hgr. Educ. Loan Program Senior Subord. Term MBIA | Aaa/AAA | 6.250 | 06/01/18 |
| 800,000 |
| 886,920 | ||||
NE Hgr. Educ. Loan Program Junior Subord. Rev. MBIA | Aaa/AAA | 6.400 | 06/01/13 |
| 285,000 |
| 317,518 | ||||
NE Hgr. Educ. Loan Program Junior Subord. Term MBIA | Aaa/AAA | 6.450 | 06/01/18 |
| 400,000 |
| 446,740 | ||||
*NE Hgr. Educ. Loan Program Student Loan MBIA | Aaa/AAA | 5.875 | 06/01/14 |
| 1,220,000 |
| 1,257,661 | ||||
NE Hgr. Educ. Loan Program B Rev. MBIA | Aaa/AAA | 6.000 | 06/01/28 |
| 100,000 |
| 104,167 | ||||
NE Educ. Finance Auth. (Creighton Univ.) Rev. AMBAC | Aaa/AAA | 5.950 | 01/01/11 |
| 300,000 |
| 325,212 | ||||
NE Educ. Finance Auth. (Wesleyan Univ.) Rev. Radian Insured | NR/AA | 5.500 | 04/01/27 |
| 1,000,000 |
| 1,070,560 | ||||
NE Invmt. Finance Auth. (Muirfield Greens) Multifamily Rev. FHA | Aa/NR | 6.800 | 12/01/15 |
| 290,000 |
| 297,668 | ||||
NE Invmt. Finance Auth. (Muirfield Greens) Multifamily Rev. FHA | Aa/NR | 6.850 | 12/01/25 |
| 525,000 |
| 538,078 | ||||
NE Invmt. Finance Auth. (Catholic Hlth. Initiatives) Rev. | Aa/AA | 5.125 | 12/01/17 |
| 200,000 |
| 207,884 | ||||
NE Invmt. Finance Auth. Single Family Hsg. Rev. Coll. | NR/AAA | 6.300 | 03/01/17 |
| 55,000 |
| 56,611 | ||||
*NE Invmt. Finance Auth. Single Family Hsg. Rev. | NR/AAA | 6.600 | 09/01/20 |
| 200,000 |
| 205,130 | ||||
NE Invmt. Finance Auth. Single Family Hsg. Rev. VA/FNMA | NR/AAA | 7.300 | 09/01/26 |
| 70,000 |
| 71,018 | ||||
NE Invmt. Finance Auth. Single Family Hsg. Rev. FHA/GNMA | NR/AAA | 6.500 | 09/01/18 |
| 305,000 |
| 316,746 | ||||
NE Invmt. Finance Auth. Single Family Hsg. Rev. FNMA/GNMA | NR/AAA | 6.400 | 09/01/26 |
| 195,000 |
| 200,696 | ||||
NE Invmt. Finance Auth. Single Family Hsg. Rev. GNMA/FNMA | NR/AAA | 6.250 | 09/01/28 |
| 105,000 |
| 108,318 | ||||
NE Invmt. Finance Auth. Single Family Hsg. Rev. GNMA | NR/AAA | 6.200 | 09/01/17 |
| 190,000 |
| 200,298 | ||||
NE Invmt. Finance Auth. Single Family Hsg. Rev. GNMA | NR/AAA | 6.250 | 03/01/21 |
| 225,000 |
| 235,285 | ||||
*NE Invmt. Finance Auth. Single Family Hsg. Rev. | NR/AAA | 6.300 | 09/01/28 |
| 810,000 |
| 840,764 | ||||
NE Invmt. Finance Auth. Single Family Hsg. Rev. GNMA/FNMA | NR/AAA | 6.300 | 09/01/30 |
| 130,000 |
| 136,412 | ||||
NE Invmt. Finance Auth. (Childrens Healthcare Svcs) Facs. Rev. | Aaa/AAA | 5.500 | 08/15/17 |
| 410,000 |
| 445,928 | ||||
#NE Invmt. Finance Auth. (Childrens Healthcare Svcs.) Rev. AMBAC | Aaa/AAA | 5.500 | 08/15/27 |
| 1,000,000 |
| 1,074,700 | ||||
NE Invmt. Finance Auth. Multifamily Hsg. Rev. FNMA | NR/AAA | 6.200 | 06/01/28 |
| 495,000 |
| 508,746 | ||||
NE Invmt. Finance Auth. Multifamily Hsg. Rev. GNMA | NR/AAA | 6.000 | 06/01/17 |
| 450,000 |
| 461,880 | ||||
NE Invmt. Finance Auth. Multifamily Hsg. Rev. GNMA | NR/AAA | 6.100 | 06/01/29 |
| 500,000 |
| 516,060 | ||||
NE Invmt. Finance Auth. (Waterbrook) Multifamily Rev. | Aaa/AAA | 5.600 | 04/01/07 |
| 165,000 |
| 175,176 | ||||
NE Public Power Dist. AMBAC | Aaa/AAA | 5.000 | 01/01/35 |
| 250,000 |
| 258,412 | ||||
NE Invmt. Finance Auth. (Great Plains Regl. Medl. Ctr.) Rev. ASGUA | NR/AA | 6.500 | 05/15/14 |
| 300,000 |
| 310,860 | ||||
NE Invmt. Finance Auth. (Great Plains Regl. Medl. Ctr.) ASGUA | NR/AA | 5.450 | 11/15/17 |
| 400,000 |
| 427,724 | ||||
Omaha, NE Various Purpose | Aaa/AAA | 5.000 | 05/01/22 |
| 250,000 |
| 264,862 | ||||
Omaha, NE Parking Facs. Corp. (Omaha Park 4\5) Lease Rev. | Aa-1/AA+ | 5.700 | 09/15/15 |
| 750,000 |
| 813,682 | ||||
Omaha, NE Public Power Dist. Elec. Syst. Rev. | Aa/AA | 5.200 | 02/01/22 |
| 500,000 |
| 530,130 | ||||
Omaha, NE Public Power Dist. Elec. Syst. Rev. | NR/AA | 6.000 | 02/01/15 |
| 330,000 |
| 391,017 | ||||
Omaha, NE Public Power Dist. Elec. Syst. Rev. | Aa/NR | 6.200 | 02/01/17 |
| 650,000 |
| 804,329 | ||||
Omaha, NE (Riverfront Project) Special Obligation | Aa/AA | 5.500 | 02/01/29 |
| 1,000,000 |
| 1,093,060 | ||||
Platte Cty., NE School Dist. #001 (Columbus) G.O. Bank Qualified | A/NR | 5.000 | 12/15/19 |
| 250,000 |
| 257,902 | ||||
Sarpy Cty., NE SID #052 (Prairie Corners) G.O. | NR/NR | 6.000 | 10/01/17 |
| 240,000 |
| 241,200 | ||||
Sarpy Cty., NE SID #142 (Fairview) G.O. Ref. | NR/NR | 5.850 | 08/15/17 |
| 100,000 |
| 100,500 | ||||
Sarpy Cty, NE School Dist. #046 FSA | Aaa/AAA | 5.000 | 12/15/22 |
| 200,000 |
| 209,202 | ||||
Univ. of NE Board of Regents Lincoln Parking | Aa/AA- | 5.800 | 06/01/20 |
| 620,000 |
| 670,629 | ||||
Univ. of NE (U. of NE - Lincoln Student Fees) Rev. | Aa/AA- | 5.125 | 07/01/32 |
| 250,000 |
| 262,330 | ||||
|
|
|
|
|
|
| |||||
TOTAL NEBRASKA MUNICIPAL BONDS (COST: $32,721,612) | $ | 34,926,742 | |||||||||
|
|
|
|
|
|
|
|
| |||
| SHORT-TERM SECURITIES (3.4%) |
|
| ||||||||
| Wells Fargo National Tax-Free Money Market | $ | 1,267,000 | ||||||||
Goldman Sachs Financial Square Tax-Free Money Market |
| 2,061 | |||||||||
TOTAL SHORT-TERM SECURITIES (COST: $1,269,061) | $ | 1,269,061 | |||||||||
|
|
| |||||||||
TOTAL INVESTMENTS IN SECURITIES (COST: $33,990,673) | $ | ||||||||||
OTHER ASSETS LESS LIABILITIES |
| 714,627 | |||||||||
|
|
| |||||||||
NET ASSETS | $ | 36,910,430 | |||||||||
* Indicates bonds are segregated by the custodian to cover when-issued or delayed-delivery purchases.
# Indicates bonds are segregated by the custodian to cover initial margin requirements.
Footnote: Non-rated 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 January 30, 2004 (Unaudited)
Statement of Assets and Liabilities January 30, 2004
Assets |
|
| ||
| Investment in securities, at value (cost: $33,990,673) | $ | 36,195,803 | |
| Accrued interest receivable |
| 481,065 | |
| Accrued dividends receivable |
| 719 | |
| Variation margin on futures |
| 367,688 | |
| Receivable for fund shares sold |
| 11,467 | |
| Prepaid expenses |
| 11,671 | |
|
|
| ||
| Total Assets | $ | 37,068,413 | |
|
|
| ||
Liabilities |
|
| ||
| Dividends payable | $ | 125,795 | |
| Accrued expenses |
| 31,278 | |
| Payable for fund shares redeemed |
| 456 | |
| Disbursements in excess of demand deposit cash |
| 454 | |
|
|
| ||
| Total Liabilities | $ | 157,983 | |
|
|
| ||
|
|
| ||
Net Assets | $ | 36,910,430 | ||
|
|
| ||
Net assets are represented by: |
|
| ||
| Paid-in capital | $ | 38,800,314 | |
| Accumulated undistributed net realized gain (loss) on investments |
| (3,082,190) | |
| Accumulated undistributed net realized gain (loss) on futures |
| (534,495) | |
| Unrealized appreciation on investments |
| 2,205,130 | |
| Unrealized depreciation on futures |
| (478,329) | |
| Total amount representing net assets applicable to |
|
| |
| 3,463,174 outstanding shares of no par common |
|
| |
| stock (unlimited shares authorized) | $ | 36,910,430 | |
|
|
| ||
Net asset value per share | $ | 10.66 | ||
The accompanying notes are an integral part of these financial statements.
Statement of Operations For the six months ended January 30, 2004 (Unaudited)
INVESTMENT INCOME |
|
| ||
| Interest | $ | 944,791 | |
| Dividends |
| 4,198 | |
| Total Investment Income | $ | 948,989 | |
|
|
| ||
EXPENSES |
|
| ||
| Investment advisory fees | $ | 92,347 | |
| Service fees |
| 46,173 | |
| Transfer agent fees |
| 24,162 | |
| Accounting service fees |
| 21,235 | |
| Administrative service fees |
| 12,322 | |
| Custodian fees |
| 3,773 | |
| Registration and filing fees |
| 2,989 | |
| Reports to shareholders |
| 2,628 | |
| Audit fees |
| 2,349 | |
| Insurance expense |
| 1,922 | |
| Trustees fees |
| 1,841 | |
| Professional fees |
| 1,111 | |
| Transfer agent out-of-pockets |
| 1,051 | |
| Total Expenses | $ | 213,903 | |
| Less expenses waived or absorbed by the Fund’s manager |
| (38,445) | |
| Total Net Expenses | $ | 175,458 | |
|
|
| ||
NET INVESTMENT INCOME | $ | 773,531 | ||
|
|
| ||
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FUTURES |
|
| ||
| Net realized gain (loss) from: |
|
| |
| Investment transactions | $ | (23,016) | |
| Futures transactions |
| (534,495) | |
| Net change in unrealized appreciation (depreciation) of: |
|
| |
| Investments |
| 1,180,480 | |
| Futures |
| (478,329) | |
| Net Realized And Unrealized Gain (Loss) On Investments And Futures | $ | 144,640 | |
|
|
| ||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | $ | 918,171 | ||
The accompanying notes are an integral part of these financial statements.
Financial Statements January 30, 2004
Statement of Changes in Net Assets
For the six months ended January 30, 2004 and the year ended July 31, 2003
|
| For The Six Months Ended January 30, 2004 (Unaudited) |
| For The Year Ended July 31, 2003 | ||
|
|
|
|
| ||
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS |
|
|
|
| ||
| Net investment income | $ | 773,531 | $ | 1,610,565 | |
| Net realized gain (loss) on investment and futures transactions |
| (557,511) |
| (697,168) | |
| Net change in unrealized appreciation (depreciation) on investments and futures |
| 702,151 |
| (1,230,391) | |
| Net Increase (Decrease) in Net Assets Resulting From Operations | $ | 918,171 | $ | (316,994) | |
|
|
|
|
| ||
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS |
|
|
|
| ||
| Dividends from net investment income ($.22 and $.47 per share, respectively) | $ | (771,641) | $ | (1,606,903) | |
| Distributions from net realized gain on investment and futures transactions ($.00 and $.00 per share, respectively) |
| 0 |
| 0 | |
| Total Dividends and Distributions | $ | (771,641) | $ | (1,606,903) | |
|
|
|
|
| ||
CAPITAL SHARE TRANSACTIONS |
|
|
|
| ||
| Proceeds from sale of shares | $ | 2,419,389 | $ | 6,195,967 | |
| Proceeds from reinvested dividends |
| 507,289 |
| 1,101,994 | |
| Cost of shares redeemed |
| (2,880,385) |
| (5,929,093) | |
| Net Increase (Decrease) in Net Assets Resulting From Capital Share Transactions | $ | 46,293 | $ | 1,368,868 | |
|
|
|
|
| ||
TOTAL INCREASE (DECREASE) IN NET ASSETS | $ | 192,823 | $ | (555,029) | ||
|
|
|
|
| ||
NET ASSETS, BEGINNING OF PERIOD |
| 36,717,607 |
| 37,272,636 | ||
|
|
|
|
| ||
NET ASSETS, END OF PERIOD | $ | 36,910,430 | $ | 36,717,607 | ||
The accompanying notes are an integral part of these financial statements.
Notes to Financial Statements January 30, 2004 (Unaudited)
Note 1. ORGANIZATION
Business operations - The Nebraska Municipal Fund (the “Fund”) is an investment portfolio of Integrity Managed Portfolios (the “Trust”) registered under the Investment Company Act of 1940, as amended, as a non-diversified, open-end management investment company. The Trust may offer multiple portfolios; currently six portfolios are offered. IntegrityManaged Portfolios is an unincorporated business trust organized under Massachusetts law on August 10, 1990. The Fund had no operations from that date to November 17, 1993, other than matters relating to organization and registration. On November 17, 1993, the Fund commenced its Public Offering of capital shares. The investment objective of the Fund is to provide its shareholders with as high a level of current income exempt from both federal and Nebraska income taxes as is consistent with preservation of capital. The Fund wil l seek to achieve this objective by investing primarily in a portfolio of Nebraska municipal securities. Shares of the Fund are offered at net asset value plus a maximum sales charge of 4.25% of the offering price.
Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Investment security valuation - Securities for which quotations are not readily available (which will constitute a majority of the securities held by the Fund) are valued using a matrix system at fair value as determined by Integrity Money Management. The matrix system has been developed based on procedures approved by the Board of Trustees which include consideration of the following: yields or prices of municipal bonds of comparable quality, type of issue, coupon, maturity and rating, and indications as to value from dealers and general market conditions. Because the market value of securities can only be established by agreement between parties in a sales transaction, and because of the uncertainty inherent in the valuation process, the fair values as determined may differ from the values that would have been used had a ready market for the securities existed. The Fund follows industry practice and records security transaction s 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.
Federal and state income taxes - The Fund’s policy is to comply with the requirements of the Internal Revenue Code that are applicable to regulated investment companies and to distribute all of its net investment income and any net realized gain on investments to its shareholders. Therefore, no provision for income taxes is required. Distributions during the six months ended January 30, 2004, were characterized as tax-exempt for tax purposes.
The Fund has unexpired capital loss carryforwards for tax purposes as of January 30, 2004 totaling $3,080,475, which may be used to offset capital gains. The capital loss carryforward amounts will expire in each of the years ended July 31 as shown in the table below.
Year | Unexpired Capital Losses |
2004 | 415,126 |
2005 | 616,730 |
2006 | 383,905 |
2007 | 0 |
2008 | 199,861 |
2009 | 158,911 |
2010 | 591,993 |
2011 | 713,949 |
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 a ppreciation (depreciation) related to open futures contracts is required to be treated as a realized gain (loss) for Federal income tax purposes.
Securities held in collateralized accounts to cover initial margin requirements on open futures contracts are noted in the Schedule of Investments. The Statement of Assets and Liabilities reflects a receivable or payable for the daily mark to market for variation margin.
Certain risks may arise upon entering into futures contracts. These risks may include changes in the value of the futures contracts that may not directly correlate with changes in the value of the underlying securities.
At January 30, 2004, the Fund had outstanding futures contracts to sell debt securities as follows:
Contracts to Sell | Expiration Date | Number of Futures Contract | Valuation as of January 30, 2004 | Unrealized Appreciation (Depreciation) |
U.S. Treasury Bonds | 03/2004 | 111 | $367,688 | ($478,329) |
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 January 30, 2004, there were unlimited shares of no par authorized; 3,463,174 and 3,458,937 shares were outstanding at January 30, 2004 and July 31, 2003, respectively.
Transactions in capital shares were as follows:
| Shares | |
| For The Six Months Ended January 30, 2004 (Unaudited) | For The Year Ended July 31, 2003 |
Shares sold | 225,355 | 564,203 |
Shares issued on reinvestment of dividends | 47,352 | 100,043 |
Shares redeemed | (268,470) | (541,499) |
Net increase (decrease) | 4,237 | 122,747 |
Note 4. INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Integrity Money Management, Inc., the Fund’s investment adviser; Integrity Funds Distributor, Inc., the Fund’s underwriter; and Integrity Fund Services, Inc., the Fund’s transfer, accounting, and administrative services agent, are subsidiaries of Integrity Mutual Funds, Inc., the Fund’s sponsor.
The Fund has engaged Integrity Money Management, Inc. to provide investment advisory and management services to the Fund. The Investment Advisory Agreement provides for fees to be computed at an annual rate of 0.50% of the Fund’s average daily net assets. The Fund has recognized $53,902 of investment advisory fees after partial waiver for the six months ended January 30, 2004. Certain officers and trustees of the Fund are also officers and directors of the investment adviser. The Fund has a payable to Integrity Money Management, Inc. of $8,067 at January 30, 2004, for investment advisory fees.
The Fund pays an annual service fee to Integrity Funds Distributor, Inc., its principal underwriter, for certain expenses incurred in connection with the distribution of the Fund’s shares. The annual fee paid to Integrity Funds Distributor, Inc. under the Plan is calculated daily and paid monthly by the Fund at the annual rate of 0.25% of the average daily net assets of the Fund. The Fund has recognized $46,173 of service fee expenses for the six months ended January 30, 2004. The Fund has a payable to Integrity Funds Distributor, Inc., of $7,751 at January 30, 2004, for service fees.
Integrity Fund Services, Inc. (the transfer agent) provides shareholder services for a monthly fee equal to an annual rate of 0.16% of the Fund’s first $10 million of net assets, 0.13% of the Fund’s net assets on the next $15 million, 0.11% of the Fund’s net assets on the next $25 million, and 0.10% of the Fund’s net assets in excess of $50 million, with a minimum of $1,500 per month plus reimbursement of out-of-pocket expenses. An additional fee with a minimum of $500 per month is charged for each additional share class. The Fund has recognized $24,162 of transfer agency fees and expenses for the six months ended January 30, 2004. The Fund has a payable to Integrity Fund Services, Inc. of $4,077 at January 30, 2004 for transfer agency fees. Integrity Fund Services, Inc. also acts as the Fund’s accounting services agent for a monthly fee equal to the sum of a fixed fee of $2,000 and a variable fee equal to 0.05% of the Fund’s average daily net assets on an annual basis for the Fund’s first $50 million and at a lower rate on the average daily net assets in excess of $50 million, together with reimbursement of out-of-pocket expenses. An additional minimum fee of $500 per month is charged by Integrity Fund Services for each additional share class. The Fund has recognized $21,235 of accounting service fees for the six months ended January 30, 2004. The Fund has a payable to Integrity Fund Services, Inc. of $3,550 at January 30, 2004, for accounting service fees. Integrity Fund Services also acts as administrator for the Fund. The Fund pays to Integrity Fund Services a monthly fee calculated at the rate of 0.10% of average daily net assets with a minimum of $1,500 per month plus out-of-pocket expenses. An additional minimum fee of $500 per month is charged by Integrity Fund Services for each additional share class. The Fund has recognized $12,322 of admini strative service fees for the six months ended January 30, 2004. The Fund has a payable to Integrity Fund Services, Inc. of $3,100 at January 30, 2004, for administrative service fees.
Note 5. INVESTMENT SECURITY TRANSACTIONS
The cost of purchases and proceeds from the sales of investment securities (excluding short-term securities) aggregated $1,504,523 and $2,587,405, respectively, for the six months ended January 30, 2004.
Note 6. INVESTMENT IN SECURITIES
At January 30, 2004, the aggregate cost of securities for federal income tax purposes was substantially the same for financial reporting purposes at $33,990,673. The net unrealized appreciation of investments based on the cost was $2,205,130, which is comprised of $2,223,509 aggregate gross unrealized appreciation and $18,379 aggregate gross unrealized depreciation.
Financial Highlights
Selected per share data and ratios for the period indicated
|
| For The Six Months Ended January 30, 2004 (Unaudited) |
| For The Year Ended July 31, 2003 |
| For The Year Ended July 31, 2002 |
| For The Year Ended July 31, 2001 |
| For The Year Ended July 31, 2000 |
| For The Year Ended July 30, 1999 | ||
NET ASSET VALUE, BEGINNING OF PERIOD | $ | 10.62 | $ | 11.17 | $ | 11.23 | $ | 10.71 | $ | 11.01 | $ | 11.13 | ||
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Income from Investment Operations: |
|
|
|
|
|
|
|
|
|
|
|
| ||
| Net investment income | $ | .22 | $ | .47 | $ | .51 | $ | .53 | $ | .54 | $ | .54 | |
| Net realized and unrealized gain (loss) on investment and futures transactions |
| .04 |
| (.55) |
| (.06) |
| .52 |
| (.30) |
| (.12) | |
| Total Income (Loss) From Investment Operations | $ | .26 | $ | (.08) | $ | .45 | $ | 1.05 | $ | .24 | $ | .42 | |
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Less Distributions: |
|
|
|
|
|
|
|
|
|
|
|
| ||
| Dividends from net investment income | $ | (.22) | $ | (.47) | $ | (.51) | $ | (.53) | $ | (.54) | $ | (.54) | |
| Distributions from net capital gains |
| .00 |
| .00 |
| .00 |
| .00 |
| .00 |
| .00 | |
| Total Distributions | $ | (.22) | $ | (.47) | $ | (.51) | $ | (.53) | $ | (.54) | $ | (.54) | |
|
|
|
|
|
|
|
|
|
|
|
|
| ||
NET ASSET VALUE, END OF PERIOD | $ | 10.66 | $ | 10.62 | $ | 11.17 | $ | 11.23 | $ | 10.71 | $ | 11.01 | ||
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Total Return |
| 4.99%(A)(C) |
| (0.81)%(A) |
| 4.06%(A) |
| 10.02%(A) |
| 2.28%(A) |
| 3.82%(A) | ||
|
|
|
|
|
|
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
|
|
|
| ||
RATIOS/SUPPLEMENTAL DATA: |
|
|
|
|
|
|
|
|
|
|
|
| ||
| Net assets, end of period (in thousands) | $ | 36,910 | $ | 36,718 | $ | 37,273 | $ | 38,558 | $ | 38,171 | $ | 41,943 | |
| Ratio of net expenses (after expense assumption) to average net assets |
| 0.95%(B)(C) |
| 0.92%(B) |
| 0.82%(B) |
| 0.78%(B) |
| 0.75%(B) |
| 0.70%(B) | |
| Ratio of net investment income to average net assets |
| 4.19%(C) |
| 4.24% |
| 4.52% |
| 4.82% |
| 5.02% |
| 4.83% | |
| Portfolio turnover rate |
| 4.28% |
| 9.48% |
| 13.08% |
| 16.89% |
| 11.42% |
| 12.58% | |
(A) Excludes maximum sales charge of 4.25%.
(B) During the periods indicated above, Integrity Mutual Funds, Inc. or Integrity Money Management assumed/waived expenses of $38,445, $62,679, $99,292, $113,493, $124,718, and $119,949, respectively. If the expenses had not been assumed/waived, the annualized ratios of total expenses to average net assets would have been 1.16%, 1.08%, 1.08%, 1.08%, 1.07%, and 1.10%, respectively.
(C) Ratio is annualized.
Total return represents the rate that an investor would have earned or lost on an investment in the Fund assuming reinvestment of all dividends and distributions.
The accompanying notes are an integral part of these financial statements.
Oklahoma Municipal Fund
Dear Shareholder:
Enclosed is the semi-annual report of the operations for the Oklahoma Municipal Fund (the “Fund”) for the six months ended January 30, 2004. The Fund’s portfolio and related financial statements are presented within for your review.
The foundations under the U.S. economy are getting stronger. Massive policy stimulus has worked in an economy that’s in a self-sustaining expansion with businesses shifting away from their retrenchment mindset. This means that growth will no longer be so dependent on consumer spending and housing, even though both of these sectors should remain firm.
The fact that the Federal Reserve is determined to keep interest rates extremely low in the face of strengthening activity boosts the odds that the economy will continue to surprise on the upside in the months ahead. As a result, corporate profits should perform well and deflation fears will eventually be replaced by the realization that the Fed is sowing the seeds for future inflation.
The Fed would very much like to avoid a repeat of 1994. It will be hard to plan a smooth exit strategy from its current stance, but it is trying to be clear in signaling its intentions to the markets. It is slowly altering the policy statement after each FOMC (Federal Open Market Committee) meeting, with the intention of having the markets gradually adjust by the time rates are finally hiked. The Fed has learned from the experience of last May through July when confusing policy signals created tremendous bond volatility.
During the period the Fund utilized defensive positions designed to provide share price stability. U.S. Treasury futures were used to hedge a portion of the portfolio with the results being tempered share price as rates hovered near forty-year lows and stabilized share price as bonds dipped in reaction to periodic rising rates. Risk management is important in this market environment.
An important part of the Fund’s strategy includes searching the primary and secondary markets for high quality double tax-exempt issues. Portfolio quality for the period ended January 30, 2004, were represented as follows: AAA 63.8%, AA 15.0%, A 9.1%, BBB 5.1%, B1/B- 3.2% and NR 3.8%. High quality current income exempt from federal and Oklahoma income tax remain the primary objectives of the Fund.
Sincerely,
The Portfolio Management Team
The views expressed are those of Monte Avery, Chief Portfolio Strategist with Integrity Mutual Funds. The views are subject to change at any time in response to changing circumstances in the market and are not intended to predict or guarantee the future performance of any individual security, market sector or the markets generally, or any Integrity Mutual Fund.
Terms & Definitions January 30, 2004 (Unaudited)
Appreciation
The increase in value of an asset.
Average Annual Total Return
A standardized measurement of the return (yield and appreciation) earned by the fund on an annual basis, assuming all distributions are reinvested.
Coupon Rate or Face Rate
The rate of interest payable annually, based on the face amount of the bond; expressed as a percentage.
Depreciation
The decrease in value of an asset.
Lehman Brothers Municipal Bond Index
An unmanaged list of long-term, fixed-rate, investment-grade, tax-exempt bonds representative of the municipal bond market. The index does not take into account brokerage commissions or other costs, may include bonds different from those in the fund, and may pose different risks than the fund.
Market Value
The actual (or estimated) price at which a bond trades in the market place.
Maturity
A measure of the term or life of a bond in years. When a bond “matures,” the issuer repays the principal.
Net Asset Value (NAV)
The value of all your fund’s assets, minus any liabilities, divided by the number of outstanding shares, not including any initial sales charge.
Quality Ratings
A designation assigned by independent rating companies to give a relative indication of a bond’s credit worthiness. “AAA,” “AA,” “A,” and “BBB” indicate investment grade securities. Ratings can range from a high of “AAA” to a low of “D”.
Total Return
Measures both the net investment income and any realized and unrealized appreciation or depreciation of the underlying investments in the fund’s portfolio for the period, assuming the reinvestment of all dividends. It represents the aggregate percentage or dollar value change over the period.
Insert Pie Charts
PERFORMANCE
Portfolio Quality Ratings
(based on Total Long-Term Investments)
AAA | 63.8% |
AA | 15.0% |
A | 9.1% |
BBB | 5.1% |
B1/B- | 3.2% |
NR | 3.8% |
Quality ratings reflect the financial strength of the issuer. They are assigned by independent rating services such as Moody’s Investors Services and Standard & Poor’s. Non-rated bonds have been determined to be of appropriate quality for the portfolio by Integrity Money Management (formerly known as Ranson Capital Corporation), the investment adviser.
These percentages are subject to change.
AVERAGE ANNUAL TOTAL RETURNS
| For periods ending January 30, 2004 | |||
|
|
|
| Since Inception (September 25, 1996) |
Oklahoma Municipal Fund | 1 Year | 5 Year | 10 Year | |
Without sales charge | 2.94% | 3.57% | N/A | 4.65% |
With sales charge (4.25%) | (1.40)% | 2.67% | N/A | 4.04% |
| For periods ending January 30, 2004 | |||
|
|
|
| Since Inception (September 25, 1996) |
Lehman Brothers Municipal Bond Index | 1 Year | 5 Year | 10 Year | |
| 5.73% | 6.06% | N/A | 6.73% |
Performance data quoted above is historical. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance data quoted. The principal value and investment return of an investment will fluctuate so that your shares, when redeemed, may be worth more or less than the original cost. You can obtain performance data current to the most recent month end (available within seven business days of the most recent month end) by calling 1-800-276-1262.
You should consider the Fund's investment objectives, risks, and charges and expenses carefully before investing. For this and other important information, please obtain a fund prospectus at no cost from your financial advisor and read it carefully before investing.
The table does not reflect the deduction of taxes that a shareholder would pay on Fund distributions and redemption of Fund shares.
COMPARATIVE INDEX GRAPH (GRAPH APPEARS HERE)
Comparison of change in value of a $10,000 investment in the Oklahoma Municipal Fund
and the Lehman Brothers Municipal Bond Index
| Oklahoma Municipal Fund w/o sales charge | Oklahoma Municipal Fund w/ max sales charge | Lehman Brothers Municipal Bond Index | |
09/25/1996 | $10,000 | $9,575 | $10,000 | |
1997 | $10,779 | $10,321 | $11,029 | |
1998 | $11,186 | $10,711 | $11,689 | |
1999 | $11,662 | $11,166 | $12,026 | |
2000 | $11,648 | $11,153 | $12,545 | |
2001 | $12,787 | $12,243 | $13,811 | |
2002 | $13,484 | $12,911 | $14,737 | |
2003 | $13,522 | $12,947 | $15,267 | |
1/30/2004 | $13,970 | $13,376 | $16,142 | |
Putting Performance into Perspective
Returns are historical and are not a guarantee of future results. The graph comparing your Fund’s performance to a benchmark index provides you with a general sense of how your Fund performed. To put this information in context, it may be helpful to understand the special differences between the two. The Lehman Brothers index is a national index representative of the national municipal bond market, whereas the Fund concentrates its investments in Oklahoma municipal bonds. Your Fund’s total return for the period shown appears with and without sales charges and includes Fund expenses and management fees. A securities index measures the performance of a theoretical portfolio. Unlike a fund, the index is unmanaged; there are no expenses that affect the results. In addition, few investors could purchase all of the securities necessary to match the index. And, if they could, they would incur transac tion costs and other expenses. All Fund and benchmark returns include reinvested dividends. The Fund’s share price, yields, and total returns will vary, so that shares, when redeemed, may be worth more or less than their original cost.
MANAGEMENT OF THE FUND
The Board of Integrity Managed Portfolios (formerly known as Ranson Managed Portfolios) consists of four Trustees. These same individuals, unless otherwise noted, also serve as Directors or Trustees for all of the funds in the Integrity family of funds, the six series of Integrity Managed Portfolios, and the 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. The remaining Trustee and executive officers are “interested” by virtue of their affiliation with the Investment Adviser and its affiliates.
The Independent Trustees of the Fund, their term of office and length of time served, their principal occupation(s) during the past five years, the number of portfolios overseen in the Fund Complex by each Independent Trustee and other directorships, if any, held outside the Fund Complex, are shown below.
INDEPENDENT TRUSTEES
Name, Address and Age | Position(s) Held with Registrant | Term and Length Served | Principal Occupation(s) During Past 5 Years | Number of Portfolios Overseen In The Fund Complex * | Other Directorships Held Outside The Fund Complex |
Lynn W. Aas | Trustee | Since January 1996 | Retired; Attorney; Director, ND Tax-Free Fund, Inc. (since December 1994), Montana Tax-Free Fund, Inc. (since December 1994), South Dakota Tax-Free Fund, Inc. (since December 1994), Integrity Fund of Funds, Inc. (since August 1994), Integrity Small-Cap Fund of Funds, Inc. (September 1998 to June 2003); Trustee, Integrity Managed Portfolios (since January 1996) and The Integrity Funds (since September 2003); and Director, First Western Bank & Trust (until May 2002). | 16 | None |
Orlin W. Backes | Trustee | Since January 1996 | Attorney, McGee, Hankla, Backes & Dobrovolny, P.C.; Director, ND Tax-Free Fund, Inc. (since April 1995), Montana Tax-Free Fund, Inc. (since April 1995), South Dakota Tax-Free Fund, Inc. (since April 1995), Integrity Fund of Funds, Inc. (since April 1995), Integrity Small-Cap Fund of Funds, Inc. (September 1998 to June 2003); Trustee, Integrity Managed Portfolios (since January 1996) and The Integrity Funds (since May 2003); and Director, First Western Bank & Trust. | 16 | Director, First Western Bank & Trust |
R. James Maxson | Trustee | Since January 1999 | Attorney, Maxson Law Office (since November 2002), Attorney, McGee, Hankla, Backes & Dobrovolny, P.C. (April 2000 to November 2002); Attorney, Farhart, Lian and Maxson, P.C. (March 1976 to March 2000); Director, ND Tax-Free Fund, Inc. (since January 1999), Montana Tax-Free Fund, Inc. (since January 1999), South Dakota Tax-Free Fund, Inc. (since January 1999), Integrity Fund of Funds, Inc. (since January 1999), Integrity Small-Cap Fund of Funds, Inc. (January 1999 to June 2003); and Trustee, Integrity Managed Portfolios (since January 1999) and The Integrity Funds (since May 2003). | 16 | None |
* The Fund Complex consists of the four funds in the Integrity family of funds, the six series of Integrity Managed Portfolios, and the six series of The Integrity Funds.
The Statement of Additional Information contains more information about the Fund’s Trustees and is available at 1 (800) 601-5593 without charge upon request.
The Interested Trustee and executive officers of the Fund, their term of office and length of time served, their principal occupation(s) during the past five years, the number of portfolios overseen in the Fund Complex by each Interested Trustee and executive officer, and other directorships, if any, held outside the Fund Complex, are shown below.
INTERESTED TRUSTEE AND EXECUTIVE OFFICERS
Name, Address and Age | Position(s) Held with Registrant | Term and Length Served | Principal Occupation(s) During Past 5 Years | Number of Portfolios Overseen In The Fund Complex * | Other Directorships Held Outside The Fund Complex |
**Peter A. Quist | Vice President | Since January 1996 | Attorney; Director and Vice President, Integrity Mutual Funds, Inc.; Director, Vice President and Secretary, Integrity Money Management, Inc. (formerly known as ND Money Management, Inc.), ND Capital, Inc., Integrity Fund Services, Inc., (formerly known as ND Resources, Inc.), ND Tax-Free Fund, Inc., Montana Tax-Free Fund, Inc., South Dakota Tax-Free Fund, Inc. (since April 1995), Integrity Fund of Funds, Inc., Integrity Small-Cap Fund of Funds, Inc. (September 1998 to June 2003), Integrity Funds Distributor, Inc. (formerly known as Ranson Capital Corporation) (since January 1996); Vice President and Secretary, Integrity Managed Portfolios (since January 1996) and The Integrity Funds (since May 2003); and Director, ARM Securities Corporation (May 2000 to June 2003). | 4 | None |
**Robert E. Walstad | Trustee, Chairman, President, and Treasurer | Since January 1996 | Director (since September 1987), President (September 1987 to October 2001) (September 2002 to May 2003), Integrity Mutual Funds, Inc.; Director, President and Treasurer, Integrity Money Management, Inc., ND Capital, Inc., Integrity Fund Services, Inc., ND Tax-Free Fund, Inc., Montana Tax-Free Fund, Inc., South Dakota Tax-Free Fund, Inc., Integrity Fund of Funds, Inc., Integrity Small-Cap Fund of Funds, Inc. (September 1998 to June 2003); Trustee, Chairman, President and Treasurer, Integrity Managed Portfolios (since January 1996) and The Integrity Funds (since May 2003).; Director, President (until August 2003), CEO, and Treasurer, Integrity Funds Distributor, Inc.; Director (October 1999 to June 2003), President (October 1999 to October 2001), Magic Internet Services, Inc.; Director (May 2000 to June 2003), President (May 2000 to November 2001) (October 2002 to June 2003), ARM Securities Corporation; and Director, CEO, Chairman (since January 2002), President (since September 2002), Capital Financial Services, Inc. | 16 | None |
* The Fund Complex consists of the four funds in the Integrity family of funds, the six series of Integrity Managed Portfolios, and the six series of The Integrity Funds.
** Trustees and/or executive officers who are “interested persons” of the Funds as defined in the Investment Company Act of 1940. Messrs. Quist and Walstad are interested persons by virtue of being officers and directors of the Fund’s Investment Adviser and Principal Underwriter.
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.
INDEPENDENT TRUSTEES
[PHOTO] | [PHOTO] | [PHONE] |
Lynn W. Ass | Orlin W. Backes | R. James Maxson |
INTERESTED TRUSTEE AND EXECUTIVE OFFICERS
[PHOTO] | [PHOTO] |
Peter A. Quist | Robert E. Walstad |
Schedule of Investments January 30, 2004 (Unaudited)
Name of Issuer | Rating Moody’s/S&P | Coupon Rate | Maturity |
| Principal Amount |
| Market Value | ||
OKLAHOMA MUNICIPAL BONDS (94.4%) |
|
|
|
|
|
|
| ||
Broken Arrow, OK Unlimited GO FSA | Aaa/AAA | 4.000% | 08/01/18 | $ | 250,000 | $ | 248,902 | ||
Claremore, OK Student Hsg. Rev. (Rogers University) ACA | NR/A | 5.750 | 09/01/34 |
| 500,000 |
| 517,620 | ||
Edmond Economic Dev. Auth., OK Student Housing Rev. | Baa-3/NR | 5.375 | 12/01/19 |
| 200,000 |
| 188,548 | ||
#Edmond Economic Dev. Auth., OK Student Housing Rev. | Baa-3/NR | 5.500 | 12/01/28 |
| 865,000 |
| 771,390 | ||
Edmond Public Works Auth. AMBAC | Aaa/AAA | 4.850 | 01/01/24 |
| 155,000 |
| 159,844 | ||
Edmond Public Works Sales Tax & Utility Rev. AMBAC | Aaa/AAA | 4.750 | 07/01/23 |
| 200,000 |
| 205,980 | ||
Garfield Cty., Criminal Justice Auth. (Enid, OK) Rev. MBIA | Aaa/NR | 4.500 | 04/01/18 |
| 250,000 |
| 261,102 | ||
Grand River Dam Auth., OK FSA | Aaa/AAA | 5.000 | 06/01/12 |
| 500,000 |
| 567,180 | ||
*Grand River Dam Auth., OK Rev. AMBAC | Aaa/AAA | 6.250 | 06/01/11 |
| 210,000 |
| 256,093 | ||
Grand River Dam Auth., OK Rev. Ref. AMBAC | Aaa/AAA | 5.500 | 06/01/13 |
| 700,000 |
| 823,837 | ||
Jackson Cty, OK Sales Tax Rev. AMBAC | Aaa/AAA | 5.000 | 10/01/22 |
| 500,000 |
| 526,975 | ||
Mannford Public Works Auth. | NR/BBB+ | 6.000 | 04/01/27 |
| 300,000 |
| 315,735 | ||
Mannford Public Works Auth. | NR/BBB+ | 5.900 | 04/01/32 |
| 250,000 |
| 260,765 | ||
McAlester, OK Public Works Auth. FSA | Aaa/NR | 5.100 | 02/01/30 |
| 100,000 |
| 104,938 | ||
Midwest City, OK Capital Impvt. MBIA | Aaa/AAA | 5.375 | 09/01/24 |
| 500,000 |
| 541,675 | ||
Norman, OK (Regl. Hospital) Auth. Asset Guaranty | NR/AA | 5.250 | 09/01/16 |
| 180,000 |
| 194,405 | ||
OK Agric. & Mech. Colleges (OK St. Univ.) Athletic Facs. AMBAC | Aaa/NR | 5.000 | 08/01/24 |
| 300,000 |
| 312,462 | ||
*OK Board of Regents (Oklahoma City Community College) Student Rev. AMBAC | Aaa/AAA | 5.550 | 07/01/22 |
| 750,000 |
| 823,140 | ||
OK Board of Regents (Univ. of Central OK Parking) Rev. AMBAC | Aaa/NR | 4.125 | 06/01/23 |
| 250,000 |
| 237,547 | ||
OK Board of Regents (Univ. of Central OK) AMBAC | Aaa/AAA | 5.600 | 08/01/20 |
| 150,000 |
| 164,242 | ||
OK Board of Regents (Univ. of Central OK) AMBAC | Aaa/AAA | 5.700 | 08/01/25 |
| 390,000 |
| 432,424 | ||
OK Board of Regents (Univ. of OK) Athletic Fac. Rev. MBIA | Aaa/NR | 5.250 | 06/01/26 |
| 500,000 |
| 533,070 | ||
OK Capital Impvt. Auth. (Dept. of Corrections) Rev. AMBAC | Aaa/AAA | 5.000 | 05/01/18 |
| 500,000 |
| 532,015 | ||
OK Capital Impvt. Auth. (State Fac.) Rev. MBIA | Aaa/AAA | 5.500 | 09/01/19 |
| 100,000 |
| 109,279 | ||
OK Capital Impvt. Auth. (State Highway) Rev. MBIA | Aaa/AAA | 5.000 | 06/01/14 |
| 250,000 |
| 283,812 | ||
OK Capital Impvt. Auth. (State Office Building) Rev. | A-1/NR | 5.500 | 10/01/16 |
| 105,000 |
| 114,100 | ||
OK Colleges Brd. of Regents (East Central Univ.) AMBAC | Aaa/NR | 4.350 | 08/01/22 |
| 115,000 |
| 113,628 | ||
OK Colleges Brd. of Regents (East Central Univ.) AMBAC | Aaa/NR | 4.400 | 08/01/23 |
| 115,000 |
| 113,515 | ||
OK Colleges Brd. of Regents (East Central Univ.) AMBAC | Aaa/NR | 4.550 | 08/01/33 |
| 750,000 |
| 737,033 | ||
OK Colleges Brd. of Regents (NE State Univ. Ctr.) Rev. FSA | Aaa/AAA | 5.100 | 03/01/16 |
| 140,000 |
| 149,388 | ||
OK Colleges Brd. of Regents (NE State Univ. Ctr.) Rev. FSA | Aaa/AAA | 5.150 | 03/01/21 |
| 100,000 |
| 106,498 | ||
OK Devl. Finance Auth. (Comanche County Hosp.) | NR/BBB- | 5.625 | 07/01/09 |
| 105,000 |
| 108,152 | ||
OK Devl. Finance Auth. (DHS Lease Rev.) Series 2000A MBIA | Aaa/NR | 5.600 | 03/01/15 |
| 280,000 |
| 311,643 | ||
#OK Devl. Finance Auth. (Hillcrest Healthcare Syst.) Rev. Ref. | B1/B- | 5.625 | 08/15/19 |
| 1,000,000 |
| 792,500 | ||
OK Devl. Finance Auth. (Hillcrest Healthcare Syst.) Rev. Ref. | B1/B- | 5.625 | 08/15/29 |
| 295,000 |
| 224,938 | ||
OK Devl. Finance Auth. (Integris Baptist Medical Center) AMBAC | Aaa/AAA | 5.600 | 06/01/20 |
| 250,000 |
| 273,635 | ||
OK Devl. Finance Auth. (Langston Univ. Stadium) | NR/AA | 5.000 | 07/01/27 |
| 250,000 |
| 260,068 | ||
OK Devl. Finance Auth. (OK State Sys. Higher Ed.) AMBAC | Aaa/AAA | 4.900 | 12/01/22 |
| 200,000 |
| 209,854 | ||
*OK Devl. Finance Auth. (Oklahoma City Univ.) Rev. Ref. AMBAC | Aaa/AAA | 5.125 | 06/01/17 |
| 555,000 |
| 596,375 | ||
OK Devl. Finance Auth. (Seminole State College) | NR/AA | 5.125 | 12/01/27 |
| 150,000 |
| 158,127 | ||
OK Devl. Finance Auth. (Southern Nazarene Univ.) Rev. | NR/NR | 6.200 | 11/01/07 |
| 100,000 |
| 102,859 | ||
OK Devl. Finance Auth. (Southern Nazarene Univ.) Rev. | NR/NR | 6.500 | 11/01/13 |
| 75,000 |
| 78,092 | ||
OK Devl. Finance Auth. (Southern Nazarene Univ.) Rev. | NR/NR | 5.750 | 03/01/13 |
| 400,000 |
| 422,508 | ||
#OK Devl. Finance Auth. (Southern Nazarene Univ.) Rev. | NR/NR | 6.000 | 03/01/18 |
| 600,000 |
| 631,152 | ||
OK Devl. Finance Auth. (St. Ann's Retirement Village) Rev. MBIA | Aaa/NR | 5.000 | 12/01/28 |
| 500,000 |
| 518,615 | ||
OK Devl. Finance Auth. (St. John Health Syst.) Rev. Ref. | Aa-3/AA | 5.750 | 02/15/25 |
| 500,000 |
| 539,135 | ||
OK Devl. Finance Auth. (St. John Health Syst.) Rev. Ref. | Aa-3/AA | 6.000 | 02/15/29 |
| 400,000 |
| 440,128 | ||
*OK Devl. Finance Auth. (Tulsa Vo Tech Dist. Prj.) Public Facs. Rev. AMBAC | Aaa/AAA | 5.100 | 08/01/15 |
| 750,000 |
| 768,405 | ||
OK Devl. Finance Auth. OK Dept. of Corrections (McLoud Fac.) FGIC | Aaa/AAA | 4.600 | 04/01/22 |
| 250,000 |
| 257,085 | ||
OK Devl. Finance Auth. OK Dept. of Corrections (McLoud Fac.) FGIC | Aaa/AAA | 4.650 | 04/01/23 |
| 250,000 |
| 255,843 | ||
OK Housing Finance Agency Single Family Homeownership | Aaa/NR | 5.250 | 09/01/21 |
| 175,000 |
| 176,727 | ||
*OK Housing Finance Agency Single Family Homeownership GNMA | Aaa/NR | 5.375 | 03/01/20 |
| 150,000 |
| 155,874 | ||
OK Housing Finance Agency Single Family Homeownership GNMA/FNMA | Aaa/NR | 5.850 | 09/01/20 |
| 95,000 |
| 99,779 | ||
OK State G.O. (OK Building Commission) FGIC | Aaa/AAA | 5.000 | 07/15/18 |
| 1,600,000 |
| 1,745,504 | ||
OK State Indl. Auth. Lease (OK Cty. Parking Fac.) Rev. MBIA | Aaa/AAA | 4.350 | 07/01/19 |
| 190,000 |
| 196,359 | ||
OK State Indl. Auth. Lease (OK Cty. Parking Fac.) Rev. MBIA | Aaa/AAA | 4.400 | 07/01/20 |
| 200,000 |
| 204,928 | ||
OK State Indl. Finance Auth. G.O. | Aa-3/NR | 5.000 | 04/01/13 |
| 150,000 |
| 153,642 | ||
*OK State Indl. Finance Auth. G.O. | Aa-3/NR | 6.050 | 02/01/15 |
| 285,000 |
| 304,477 | ||
OK State Municipal Power Auth. Rev. MBIA | Aaa/AAA | 5.750 | 01/01/24 |
| 1,155,000 |
| 1,360,948 | ||
OK State Student Loan Auth. | A/NR | 6.350 | 09/01/25 |
| 280,000 |
| 310,923 | ||
*OK State Student Loan Auth. | Aaa/AAA | 5.625 | 06/01/31 |
| 685,000 |
| 721,887 | ||
OK State Student Loan Auth. MBIA | Aaa/AAA | 5.300 | 12/01/32 |
| 450,000 |
| 466,528 | ||
OK State Turnpike Auth. FGIC | Aaa/AAA | 5.250 | 01/01/12 |
| 225,000 |
| 249,532 | ||
OK State Water (Loan Program) Rev. | NR/AA+ | 5.400 | 09/01/15 |
| 105,000 |
| 115,743 | ||
*OK State Water (Loan Program) Rev. | NR/AA+ | 5.100 | 09/01/16 |
| 415,000 |
| 448,607 | ||
OK State Water Resources Board Rev. | NR/AA+ | 5.050 | 10/01/22 |
| 200,000 |
| 211,908 | ||
OK State Water Resources Board Rev. | NR/AA+ | 5.125 | 10/01/27 |
| 500,000 |
| 525,340 | ||
OK State Water Resources Board Rev. | NR/AA+ | 4.625 | 10/01/18 |
| 435,000 |
| 460,121 | ||
OK State Water Resources Loan Rev. | NR/AA+ | 5.100 | 10/01/27 |
| 500,000 |
| 527,970 | ||
#Okmulgee Public Works Auth. Capital Improvement Rev. MBIA | Aaa/AAA | 5.125 | 08/01/30 |
| 750,000 |
| 793,508 | ||
Okmulgee Public Works Auth. Capital Improvement Rev. MBIA | Aaa/AAA | 4.800 | 10/01/27 |
| 500,000 |
| 516,120 | ||
Rural Enterprises, OK Inc. OK Gov’t. Fin. (Cleveland Cty. Hlth.) MBIA | Aaa/NR | 5.000 | 11/01/21 |
| 250,000 |
| 264,125 | ||
Rural Enterprises, OK Inc. Okmulgee Student Housing Proj. ACA | NR/A | 5.750 | 12/01/30 |
| 250,000 |
| 261,233 | ||
Rural Enterprises, OK Inc. Okmulgee Student Housing Proj., Series A ACA | NR/A | 5.700 | 12/01/25 |
| 220,000 |
| 229,502 | ||
Rural Enterprises, OK Inc. Okmulgee Student Housing Proj., Series A ALA | NR/A | 5.625 | 12/01/20 |
| 140,000 |
| 148,768 | ||
Rural Enterprises, OK Inc. Student Hsg. (Connors College) ACA | NR/A | 5.650 | 11/01/31 |
| 100,000 |
| 103,528 | ||
Rural Enterprises, OK Inc. Student Hsg. (Connors College) ACA | NR/A | 5.550 | 11/01/21 |
| 250,000 |
| 262,413 | ||
Rural Enterprises, OK Inc. USAOF Student Housing ACA | NR/A | 5.550 | 11/01/21 |
| 250,000 |
| 262,413 | ||
Rural Enterprises, OK Inc. USAOF Student Housing ACA | NR/A | 5.650 | 11/01/31 |
| 250,000 |
| 258,820 | ||
Sapulpa Municipal Authority Utility Rev. FSA | Aaa/AAA | 5.125 | 01/01/32 |
| 250,000 |
| 264,683 | ||
Texas Cty., OK Dev. Auth. (OPSU Student Hsg.) ACA | NR/A | 5.250 | 11/01/23 |
| 250,000 |
| 254,530 | ||
Tulsa Cty, Indl. Auth. Recreation Facs. | NR/AA | 4.700 | 09/01/24 |
| 500,000 |
| 503,505 | ||
University of OK Board of Regents (Multi Facs.) Rev. MBIA | Aaa/NR | 4.750 | 06/01/29 |
| 250,000 |
| 253,515 | ||
University of OK Board of Regents (Research Fac.) Rev. | Aaa/NR | 4.800 | 03/01/28 |
| 670,000 |
| 689,330 | ||
University of OK Board of Regents Student Hsg. Rev. FGIC | Aaa/NR | 5.000 | 11/01/27 |
| 1,000,000 |
| 1,045,680 | ||
|
|
| |||||||
TOTAL OKLAHOMA MUNICIPAL BONDS (COST: $31,168,878) | $ | 32,204,726 | |||||||
|
|
| |||||||
SHORT-TERM SECURITIES (3.0%) |
|
| |||||||
Wells Fargo National Tax-Free Money Market (COST: $1,025,218) | $ | 1,025,218 | |||||||
|
|
| |||||||
TOTAL INVESTMENTS IN SECURITIES (COST: $32,194,096) | $ | 33,229,944 | |||||||
OTHER ASSETS LESS LIABILITIES |
| 873,014 | |||||||
|
|
| |||||||
NET ASSETS | $ | 34,102,958 | |||||||
* Indicates bonds are segregated by the custodian to cover when-issued or delayed delivery purchases.
# Indicates bonds are segregated by the custodian to cover initial margin requirements.
Footnote: Non-rated (NR) investments have been determined to be of investment grade quality by the Fund’s Manager.
The accompanying notes are an integral part of these financial statements.
Financial Statements January 30, 2004
Statement of Assets and Liabilities January 30, 2004 (Unaudited)
Assets |
|
| ||
| Investment in securities, at value (cost: $32,194,096) | $ | 33,229,944 | |
| Cash |
| 4,919 | |
| Accrued interest receivable |
| 467,555 | |
| Accrued dividends receivable |
| 680 | |
| Receivable for fund shares sold |
| 190,500 | |
| Prepaid expenses |
| 6,885 | |
| Variation margin on futures |
| 337,875 | |
| Total Assets | $ | 34,238,358 | |
|
|
| ||
Liabilities |
|
| ||
| Dividends payable |
| 104,956 | |
| Accrued expenses |
| 30,444 | |
| Total Liabilities | $ | 135,400 | |
|
|
| ||
Net Assets | $ | 34,102,958 | ||
|
|
| ||
|
|
| ||
Net assets are represented by: |
|
| ||
| Paid-in capital | $ | 35,128,475 | |
| Accumulated undistributed net realized gain (loss) on investments |
| (1,145,298) | |
| Accumulated undistributed net realized gain (loss) on futures |
| (476,989) | |
| Unrealized appreciation on investments |
| 1,035,848 | |
| Unrealized depreciation on futures |
| (439,078) | |
| Total amount representing net assets applicable to |
|
| |
| 3,034,888 outstanding shares of no par common |
|
| |
| stock (unlimited shares authorized) | $ | 34,102,958 | |
|
|
| ||
Net asset value per share | $ | 11.24 | ||
The accompanying notes are an integral part of these financial statements.
Statement of Operations For the six months ended January 30, 2004 (Unaudited)
INVESTMENT INCOME |
|
| ||
| Interest | $ | 782,471 | |
| Dividends |
| 3,372 | |
| Total Investment Income | $ | 785,843 | |
|
|
| ||
EXPENSES |
|
| ||
| Investment advisory fees | $ | 82,666 | |
| Audit fees |
| 3,163 | |
| Service fees |
| 41,333 | |
| Transfer agent fees |
| 22,198 | |
| Administrative service fees |
| 11,170 | |
| Accounting service fees |
| 20,267 | |
| Custodian fees |
| 2,783 | |
| Registration and filing fees |
| 742 | |
| Transfer agent out-of-pocket expenses |
| 459 | |
| Trustees fees |
| 1,716 | |
| Reports to shareholders |
| 1,454 | |
| Professional fees |
| 332 | |
| Insurance expense |
| 1,604 | |
| Total Expenses | $ | 189,887 | |
| Less expenses waived or absorbed by the Fund’s manager |
| (37,882) | |
| Total Net Expenses | $ | 152,005 | |
|
|
| ||
NET INVESTMENT INCOME | $ | 633,838 | ||
|
|
| ||
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FUTURES |
|
| ||
| Net realized gain (loss) from: |
|
| |
| Investment transactions | $ | (49,798) | |
| Futures transactions |
| (476,989) | |
| Net change in unrealized appreciation (depreciation) of: |
|
| |
| Investments |
| 1,401,548 | |
| Futures |
| (439,078) | |
| Net Realized And Unrealized Gain (Loss) On Investments And Futures | $ | 435,683 | |
|
|
| ||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | $ | 1,069,521 | ||
The accompanying notes are an integral part of these financial statements.
Financial Statements January 30, 2004
Statement of Changes in Net Assets
For the six months ended January 30, 2004, and the year ended July 31, 2003
|
| For The Six Months Ended January 30, 2004 (Unaudited) |
| For The Year Ended July 31, 2003 | ||
|
|
|
|
| ||
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS |
|
|
|
| ||
| Net investment income | $ | 633,838 | $ | 1,119,788 | |
| Net realized gain (loss) on investment and futures transactions |
| (526,787) |
| (412,186) | |
| Net change in unrealized appreciation (depreciation) on investments and futures |
| 962,470 |
| (814,038) | |
| Net Increase (Decrease) in Net Assets Resulting From Operations | $ | 1,069,521 | $ | (106,436) | |
|
|
|
|
| ||
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS |
|
|
|
| ||
| Dividends from net investment income ($0.22 and $0.49 per share, respectively) | $ | (633,422) | $ | (1,119,540) | |
| Distributions from net realized gain on investment and futures transactions ($.00 and $.00 per share, respectively) |
| 0 |
| 0 | |
| Total Dividends and Distributions | $ | (633,422) | $ | (1,119,540) | |
|
|
|
|
| ||
CAPITAL SHARE TRANSACTIONS |
|
|
|
| ||
| Proceeds from sale of shares | $ | 3,434,880 | $ | 13,613,884 | |
| Proceeds from reinvested dividends |
| 319,000 |
| 548,817 | |
| Cost of shares redeemed |
| (1,885,814) |
| (3,132,668) | |
| Net Increase (Decrease) in Net Assets Resulting From Capital Share Transactions | $ | 1,868,066 | $ | 11,030,033 | |
|
|
|
|
| ||
TOTAL INCREASE (DECREASE) IN NET ASSETS | $ | 2,304,165 | $ | 9,804,057 | ||
|
|
|
|
| ||
NET ASSETS, BEGINNING OF PERIOD |
| 31,798,793 |
| 21,994,736 | ||
|
|
|
|
| ||
NET ASSETS, END OF PERIOD | $ | 34,102,958 | $ | 31,798,793 | ||
The accompanying notes are an integral part of these financial statements.
Notes to Financial Statements January 30, 2004 (Unaudited)
Note 1. ORGANIZATION
Business operations - Oklahoma Municipal Fund (the “Fund”) is an investment portfolio of Integrity Managed Portfolios (the “Trust”), registered under the Investment Company Act of 1940, as amended, as a non-diversified, open-end management investment company. The Trust may offer multiple portfolios; currently six portfolios are offered. Integrity Managed Portfolios is an unincorporated business trust organized under Massachusetts law on August 10, 1990. The Fund had no operations from that date to September 25, 1996, other than matters relating to organization and registration. On September 25, 1996, the Fund commenced its Public Offering of capital shares. The investment objective of the Fund is to provide its shareholders with as high a level of current income exempt from both federal income tax and, to a certain extent, Oklahoma income tax, as is consistent with preservation of capital. Up to 20% of the Fund’s total assets may be invested in Oklahoma municipal securities which are subject to Oklahoma state income taxes. The Fund will seek to achieve this objective by investing primarily in a portfolio of Oklahoma municipal securities. Shares of the Fund are offered at net asset value plus a maximum sales charge of 4.25% of the offering price.
Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Investment security valuation - Securities for which quotations are not readily available (which will constitute a majority of the securities held by the Fund) are valued using a matrix system at fair value as determined by Integrity Money Management, Inc. The matrix system has been developed based on procedures approved by the Board of Trustees which include consideration of the following: yields or prices of municipal bonds of comparable quality, type of issue, coupon, maturity and rating, and indications as to value from dealers and general market conditions. Because the market value of securities can only be established by agreement between parties in a sales transaction, and because of the uncertainty inherent in the valuation process, the fair values as determined may differ from the values that would have been used had a ready market for the securities existed. The Fund follows industry practice and records security tran sactions 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.
Federal and state income taxes - The Fund’s policy is to comply with the requirements of the Internal Revenue Code that are applicable to regulated investment companies and to distribute all of its net investment income and any net realized gain on investments to its shareholders. Therefore, no provision for income taxes is required. Distributions during the six months ended January 30, 2004, were characterized as tax-exempt for tax purposes.
The Fund has unexpired capital loss carryforwards for tax purposes as of January 30, 2004, totaling $1,096,225, which may be used to offset capital gains. The capital loss carryforward amounts will expire in each of the years ended July 31 as shown in the table below.
Year | Unexpired Capital Losses |
2004 | 0 |
2005 | 0 |
2006 | 0 |
2007 | 0 |
2008 | 185,891 |
2009 | 83,784 |
2010 | 414,246 |
2011 | 412,304 |
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 (depr eciation) related to open futures contracts is required to be treated as realized gain (loss) for Federal income tax purposes.
Securities held in collateralized accounts to cover initial margin requirements on open futures contracts are noted in the Schedule of Investments. The Statement of Assets and Liabilities reflects a receivable or payable for the daily mark to market for variation margin.
Certain risks may arise upon entering into futures contracts. These risks may include changes in the value of the futures contracts that may not directly correlate with changes in the value of the underlying securities.
At January 30, 2004, the Fund had outstanding futures contracts to sell debt securities as follows:
Contracts to Sell | Expiration Date | Number of Futures Contracts | Valuation as of January 30, 2004 | Unrealized Appreciation (Depreciation) |
U.S. Treasury Bonds | 03/2004 | 102 | $337,875 | ($439,079) |
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 January 30, 2004, there were unlimited shares of no par authorized; on January 30, 2004 and July 31, 2003, there were 3,034,888 and 2,868,263 shares outstanding, respectively.
Transactions in capital shares were as follows:
| Shares | |
| For The Six Months Ended January 30, 2004 (Unaudited) | For The Year Ended July 31, 2003 |
| ||
| ||
| ||
Shares sold | 306,665 | 1,188,900 |
Shares issued on reinvestment of dividends | 28,488 | 47,918 |
Shares redeemed | (168,528) | (275,016) |
Net increase (decrease) | 166,625 | 961,802 |
Note 4. INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Integrity Money Management, Inc., the Fund’s investment adviser; Integrity Funds Distributor, Inc., the Fund’s underwriter; and Integrity Fund Services, Inc., the Fund’s transfer, accounting, and administrative services agent, are subsidiaries of Integrity Mutual Funds, Inc., the Fund’s sponsor.
The Fund has engaged Integrity Money Management, Inc. to provide investment advisory and management services to the Fund. The Investment Advisory Agreement provides for fees to be computed at an annual rate of 0.50% of the Fund’s average daily net assets. The Fund has recognized $44,784 of investment advisory fees after partial waiver for the six months ended January 30, 2004. Certain officers and trustees of the Fund are also officers and directors of the investment adviser. The Fund has a payable to Integrity Money Management, Inc. of $7,936 at January 30, 2004, for investment advisory fees.
The Fund pays an annual service fee to Integrity Funds Distributor, Inc., its principal underwriter, for certain expenses incurred in connection with the distribution of the Fund’s shares. The annual fee paid to Integrity Funds Distributor, Inc. under the Plan is calculated daily and paid monthly by the Fund at the annual rate of 0.25% of the average daily net assets of the Fund. The Fund has recognized $41,333 of service fee expenses for the six months ended January 30, 2004. The Fund has a payable to Integrity Funds Distributor, Inc., of $7,150 at January 30, 2004, for service fees.
Integrity Fund Services, Inc. provides shareholder services for a monthly fee equal to an annual rate of 0.16% of the Fund’s first $10 million of net assets, 0.13% of the Fund’s net assets on the next $15 million, 0.11% of the Fund’s net assets on the next $25 million, and 0.10% of the Fund’s net assets in excess of $50 million, with a minimum of $1,500 per month plus reimbursement of out-of-pocket expenses. An additional fee with a minimum of $500 per month is charged for each additional share class. The Fund has recognized $22,198 of transfer agent fees and expenses for the six months ended January 30, 2004. The Fund has a payable to Integrity Fund Services, Inc. of $3,813 at January 30, 2004 for transfer agent fees. Integrity Fund Services, Inc. also acts as the Fund’s accounting services agent for a monthly fee equal to the sum of a fixed fee of $2,000, and a variable fee equal to 0.05% of the F und’s average daily net assets on an annual basis for the Fund’s first $50 million and at a lower rate on the average daily net assets in excess of $50 million, together with reimbursement of out-of-pocket expenses. An additional minimum fee of $500 per month is charged by Integrity Fund Services, Inc. for each additional share class. The Fund has recognized $20,267 of accounting service fees for the six months ended January 30, 2004. The Fund has a payable to Integrity Fund Services, Inc. of $3,430 at January 30, 2004, for accounting service fees. Integrity Fund Services also acts as administrator for the Fund. The Fund pays to Integrity Fund Services a monthly fee calculated at the rate of 0.10% of average daily net assets with a minimum of $1,500 per month plus out-of-pocket expenses. An additional minimum fee of $500 per month is charged by Integrity Fund Services, Inc. for each additional share class. The Fund has recognized $11,170 of administrative service fees for the six months ended January 30, 2004. The Fund has a payable to Integrity Fund Services, Inc. of $2,860 at January 30, 2004, for administrative service fees.
Note 5. INVESTMENT SECURITY TRANSACTIONS
The cost of purchases and proceeds from the sales of investment securities (excluding short-term securities) aggregated $2,262,363 and $2,404,151, respectively, for the six months ended January 30, 2004.
Note 6. INVESTMENT IN SECURITIES
At January 30, 2004, the aggregate cost of securities for federal income tax purposes was substantially the same for financial reporting purposes at $32,194,096. The net unrealized appreciation of investments based on the cost was $1,035,848, which is comprised of $1,442,941 aggregate gross unrealized appreciation and $407,093 aggregate gross unrealized depreciation.
Financial Highlights
Selected per share data and ratios for the period indicated
|
|
| For The Six Months Ended January 30, 2004 (Unaudited) |
| For The Year Ended July 31, 2003 |
| For The Year Ended July 31, 2002 |
| For The Year Ended July 31, 2001 |
| For The Year Ended July 31, 2000 |
| For The Year Ended July 30, 1999 | |||
| NET ASSET VALUE, BEGINNING OF PERIOD | $ | 11.09 | $ | 11.54 | $ | 11.47 | $ | 10.99 | $ | 11.61 | $ | 11.68 | |||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
| Income from Investment Operations: |
|
|
|
|
|
|
|
|
|
|
|
| |||
| Net investment income | $ | .22 | $ | .49 | $ | .55 | $ | .57 | $ | .57 | $ | .56 | |||
| Net realized and unrealized gain (loss) on investment and futures transactions |
| .15 |
| (.45) |
| .07 |
| .48 |
| (.59) |
| (.07) | |||
| Total Income (Loss) From Investment Operations | $ | .37 | $ | .04 | $ | .62 | $ | 1.05 | $ | (.02) | $ | .49 | |||
|
|
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|
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|
| |||
| Less Distributions: |
|
|
|
|
|
|
|
|
|
|
|
| |||
| Dividends from net investment income | $ | (.22) | $ | (.49) | $ | (.55) | $ | (.57) | $ | (.57) | $ | (.56) | |||
| Distributions from net capital gains |
| .00 |
| .00 |
| .00 |
| .00 |
| (.03) |
| .00 | |||
| Total Distributions | $ | (.22) | $ | (.49) | $ | (.55) | $ | (.57) | $ | (.60) | $ | (.56) | |||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
| NET ASSET VALUE, END OF PERIOD | $ | 11.24 | $ | 11.09 | $ | 11.54 | $ | 11.47 | $ | 10.99 | $ | 11.61 | |||
|
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|
| |||
| Total Return |
| 6.63%(A)(C) |
| 0.28%(A) |
| 5.46%(A) |
| 9.78%(A) |
| (0.12%)(A) |
| 4.25%(A) | |||
|
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| |||
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| |||
| RATIOS/SUPPLEMENTAL DATA: |
|
|
|
|
|
|
|
|
|
|
|
| |||
| Net assets, end of period (in thousands) | $ | 34,103 | $ | 31,799 | $ | 21,995 | $ | 18,131 | $ | 15,862 | $ | 16,135 | |||
| Ratio of net expenses (after expense assumption) to average net assets |
| 0.92%(B)(C) |
| 0.65%(B) |
| 0.51%(B) |
| 0.43%(B) |
| 0.44%(B) |
| 0.36%(B) | |||
| Ratio of net investment income to average net assets |
| 3.83%(C) |
| 4.21% |
| 4.69% |
| 5.06% |
| 5.08% |
| 4.74% | |||
| Portfolio turnover rate |
| 7.15% |
| 9.39% |
| 15.77% |
| 12.24% |
| 20.89% |
| 32.09% | |||
(A) Excludes maximum sales charge of 4.25%.
(B) During the periods indicated above, Integrity Mutual Funds, Inc. or Integrity Money Management, Inc. assumed/waived expenses of $37,882, $124,432, $137,514, $133,456, $127,129, and $133,089, respectively. If the expenses had not been assumed/waived, the annualized ratio of total expenses to average net assets would have been 1.15%, 1.11%, 1.19%, 1.23%, 1.22%, and 1.23%, respectively.
(C) Ratio is annualized.
Total return represents the rate that an investor would have earned or lost on an investment in the Fund assuming reinvestment of all dividends and distributions.
The accompanying notes are an integral part of these financial statements.
Item 2. Code of Ethics.
Item not applicable to semi-annual report.
Item 3. Audit Committee Financial Expert.
Item not applicable to semi-annual report.
Item 4. Principal Accountant Fees and Services.
Item not applicable to semi-annual report.
Items 5. Not applicable
Items 6. Reserved
Item 7. Not applicable
Item 8. Reserved
Item 9. Controls and Procedures.
(a) Disclosure Controls and Procedures. The Principal Executive and Financial Officers concluded that the Registrant's Disclosure Controls and Procedures are effective based on their evaluation of the Disclosure Controls and Procedures as of a date within 90 days of the filing date of this report.
(b) Internal Controls. There were no significant changes in Registrant's internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Item 10. Exhibits.
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| |
INTEGRITY MANAGED PORTFOLIOS | |
| |
BY: /s/ ROBERT E. WALSTAD | |
| ROBERT E. WALSTAD |
| CHIEF EXECUTIVE OFFICER |
| |
Date: March 26, 2004 | |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| |
INTEGRITY MANAGED PORTFOLIOS | |
| |
BY: /s/ ROBERT E. WALSTAD | |
| ROBERT E. WALSTAD |
| CHIEF EXECUTIVE OFFICER |
| |
Date: March 26, 2004 | |