<PAGE>
SCHEDULE OF INVESTMENTS December 31, 1995
<TABLE>
<CAPTION>
NAME OF ISSUER
Percentages represent the market value RATING
of each investment category to total MOODY'S/S&P COUPON PRINCIPAL
net assets (UNAUDITED) RATE MATURITY AMOUNT MARKET VALUE
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FINANCIAL (7.33%)
ND Municipal Bond Bank A1/NR 6.300% 10/01/15 $ 530,000 $ 566,527
ND Municipal Bond Bank NR/A 7.850 10/01/14 1,300,000 1,495,468
ND Municipal Bond Bank A1/NR 6.250 10/01/14 3,325,000 3,567,791
ND Building Auth. Lease Rev. A/A 5.500 08/15/14 1,300,000 1,294,839
-----------
$ 6,924,625
-----------
HEALTH CARE (23.75%)
Bismarck (St. Vincent Nurs. Home) Hlth. Rev. NR/NR 8.500% 06/01/09 $ 175,000 $ 187,077
Bismarck (Marillac Manor II) Ret. Facs. Rev. NR/NR 8.625 02/01/10 675,000 741,049
Bismarck (Marillac Manor) Ret. Facs. Rev. NR/NR 7.700 02/01/16 250,000 279,247
Burleigh Cty. (St. Vincent Nurs. Home) Rev. NR/NR 7.000 06/01/19 500,000 554,650
Burleigh Cty. (Missouri Slope Ctr.) Rev. Ref. NR/NR 7.000 11/01/07 500,000 528,630
Burleigh Cty. (Missouri Slope Care Fdn.) Rev. Ref. NR/NR 7.250 06/01/12 500,000 531,240
Carrington, Catholic Hlth. Corp. (Ctr.) Rev. A1/A+ 6.250 11/15/15 500,000 533,315
Cass Cty., Catholic Hlth. Corp. (Vil. Naz.) Rev. A1/A+ 6.250 11/15/07 1,000,000 1,050,570
Cass Cty., Catholic Hlth. Corp. (Vil. Naz.) Rev. A1/A+ 6.250 11/15/14 2,545,000 2,732,795
Cass Cty. (St. Lukes Hosp.) Facs. Rev. NR/A+ 7.500 06/01/06 300,000 319,074
Devils Lake (Lake Region Luth. Home) Rev. NR/NR 6.500 10/01/13 250,000 263,480
Devils Lake (Catholic Health Corp.) Rev. A1/A+ 6.250 11/15/07 1,125,000 1,201,320
Dickinson, Cath. Hlth. Corp. (St. Josephs) Rev. A1/A+ 7.200 06/01/14 1,015,000 1,072,439
Dickinson (BHS L/T Care) Hlth. Care Facs. Rev. A1/NR 7.625 02/15/20 1,210,000 1,336,614
Dickinson (BHS L/T Care) Hlth. Care Facs. Rev. A1/NR 7.500 02/15/10 600,000 661,212
Fargo (St. Lukes Hosp.) Facs. Ref. Rev. NR/A+ 6.500 06/01/15 4,000,000 4,343,840
Fargo (Elim Homes) Nursing Home Ref. Rev. NR/NR 8.750 03/01/09 150,000 151,005
Fargo (Elim Homes) Nursing Home Rev. NR/NR 9.000 03/01/19 380,000 382,869
Jamestown (Heritage Center) Cong. Hsg. Rev. NR/NR 8.500 09/01/06 200,000 224,030
Lisbon (Parkside Luth. Home) Nurs. Home Rev. NR/NR 7.500 06/01/12 500,000 527,740
Ward Cty. (St. Joseph's Hosp.) Rev. NR/BBB- 7.500 11/01/15 1,000,000 1,083,530
Ward Cty. (St. Joseph's Hosp.) Rev. NR/BBB- 7.250 11/01/06 1,000,000 1,085,300
Ward Cty. (St. Joseph's Hosp.) Rev. NR/BBB- 7.250 11/01/06 1,000,000 1,085,300
Ward Cty. (St. Joseph's Hosp.) Rev. NR/BBB- 7.500 11/01/15 1,450,000 1,571,118
-----------
$22,447,444
-----------
HOUSING (24.23%)
Grand Forks Hsg. Auth. (Ryan Hse.) Multifam. Ref. Aa/NR 6.300% 03/01/22 $ 500,000 $ 516,620
North Dakota (HFA) Single Family Mortgage Program. Aa/A+ 6.700 07/01/13 405,000 433,836
North Dakota (HFA) Single Family Mortgage Program. Aa/A+ 7.750 07/01/24 840,000 910,535
North Dakota (HFA) Single Family Mortgage Program. Aa/A+ 8.000 07/01/13 295,000 321,751
North Dakota (HFA) Single Family Mortgage Program. Aa/A+ 8.050 01/01/24 930,000 1,013,272
North Dakota (HFA) Single Family Mortgage Program. Aa/A+ 7.850 07/01/01 265,000 285,834
North Dakota (HFA) Single Family Mortgage Program. Aa/A+ 6.800 07/01/25 1,540,000 1,657,964
North Dakota (HFA) Single Family Mortgage Program. Aa/A+ 6.800 07/01/23 2,965,000 3,188,620
North Dakota (HFA) Single Family Mortgage Program. Aa/A+ 7.000 07/01/23 1,345,000 1,467,328
North Dakota (HFA) Single Family Mortgage Program. Aa/A+ 7.250 07/01/10 350,000 379,379
North Dakota (HFA) Single Family Mortgage Program. Aa/A+ 7.300 07/01/24 1,360,000 1,473,356
North Dakota (HFA) Single Family Mortgage Program. Aa/A+ 7.900 07/01/10 175,000 190,591
North Dakota (HFA) Single Family Mortgage Program. Aa/A+ 7.375 07/01/17 580,000 609,441
North Dakota (HFA) Single Family Mortgage Program. Aa/A+ 5.950 07/01/25 3,190,000 3,232,236
North Dakota (HFA) Single Family Mortgage Program. Aa/A+ 6.950 07/01/25 1,995,000 2,172,316
North Dakota (HFA) Finance Program Aa/NR 6.750 01/01/25 3,470,000 3,754,852
North Dakota (HFA) Finance Program Aa/NR 6.300 01/01/15 980,000 1,027,236
North Dakota (HFA) Finance Program Aa/NR 6.250 07/01/15 265,000 274,092
-----------
$22,909,259
-----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
POLLUTION CONTROL (5.48%)
Mercer Cty. (Basin Electric) PCR A/A 7.700% 01/01/19 $2,085,000 $ 2,147,550
Mercer Cty. (Basin Electric) PCR A/A 8.125 01/01/19 1,230,000 1,266,900
Mercer Cty. (Basin Electric) PCR A/A 8.125 01/01/19 180,000 185,400
Mercer Cty. (Basin Electric) PCR A/A 7.000 01/01/19 995,000 1,080,232
Mercer Cty. (Ottertail Power) PCR Ref.(MBIA) Aa/AA- 6.900 02/01/19 450,000 498,105
-----------
$ 5,178,187
-----------
REAL ESTATE (8.41%)
Burleigh Co. (Univ. of Mary) Facs. Rev. NR/NR 5.750% 12/01/11 $1,000,000 $ 983,580
Burleigh Co. (Univ. of Mary) Facs. Rev. NR/NR 5.875 12/01/11 1,000,000 988,950
Fargo (Dome Authority) Sub. Sales Tax. Rev. Baa1/NR 7.250 01/01/09 1,000,000 1,119,160
Fargo, Park District (Golf Course) Rev. NR/NR 7.300 11/01/06 130,000 144,134
Fargo, Park District (Golf Course) Rev. NR/NR 7.350 11/01/07 110,000 122,069
Fargo, Park District (Golf Course) Rev. NR/NR 7.250 11/01/10 190,000 210,360
Grand Forks Regional Airport Authority Rev. A/NR 7.500 10/01/09 225,000 242,705
Grand Forks Regional Airport Authority Rev. A/NR 7.500 10/01/10 240,000 258,886
Jamestown (College) Facility Rev. NR/NR 6.625 10/01/14 800,000 847,376
ND St. Brd of Hgr Ed. (MSU) Student Svcs. Ref. NR/NR 6.750 08/01/05 755,000 816,729
ND St. Brd of Hgr Ed. (MSU) Student Svcs. Ref. NR/NR 5.500 08/01/13 400,000 398,488
University of ND (G.F.) Lease Financing COP A/A- 7.300 09/01/10 1,425,000 1,550,001
Wahpeton (Town Centre. Sqr.) MultiFam. Hsg. Ref. NR/NR 8.500 02/01/14 250,000 263,088
-----------
$ 7,945,526
-----------
INSURED/GUARANTEED (30.44%)
*Bismarck (MedCenter. One) Ref. & Imp. (BIGI) Aaa/AAA 7.500% 05/01/13 $2,500,000 $ 2,790,750
Bismarck (St. Alexius Med. Ctr.) Ref. AMBAC Aaa/AAA 6.900 05/01/06 1,400,000 1,569,456
Central Cass Cty., PSD#17 GO Sch. Bldg. (MBIA) Aaa/AAA 6.500 05/01/13 430,000 472,463
Central Cass Cty., PSD#17 GO Sch. Bldg. (MBIA) Aaa/AAA 6.500 05/01/14 460,000 505,724
Grand Forks (United Hosp.) Facs. Rev. MBIA Aaa/AAA 6.625 12/01/10 830,000 915,141
Grand Forks (United Hosp.) Facs. Rev. MBIA Aaa/AAA 6.500 12/01/06 750,000 827,078
Grand Forks (United Hosp.) Facs. Rev. MBIA Aaa/AAA 6.250 12/01/19 1,000,000 1,077,050
Grand Forks (United Hosp.) Facs. Rev. MBIA Aaa/AAA 6.450 12/01/23 1,525,000 1,674,404
Mercer Cty. (Mont.-Dak. Utilities) PCR (FGIC) Aaa/AAA 6.650 06/01/22 7,000,000 7,696,220
Mercer Cty. (NW Public. Service.) PCR Ref. (MBIA) Aaa/AAA 5.850 06/01/23 4,300,000 4,540,671
Morton Cty. (Mont.-Dak. Utilities) PCR (FGIC) Aaa/AAA 6.650 06/01/22 350,000 386,449
ND (HFA) Muliti-family Ref. (FNMA guaranteed) Aaa/AAA 6.200 12/01/20 825,000 842,391
*ND Building. Auth. (St. Bd. Hr. Ed.) (AMBAC) Aaa/AAA 7.400 06/01/10 1,140,000 1,278,442
ND Building Auth. Ref.Lease Rev. (AMBAC) Aaa/AAA 6.000 06/01/10 1,700,000 1,824,695
*North Dakota Student Loan Rev. (AMBAC) Aaa/AAA 7.750 07/01/02 1,060,000 1,145,669
University of ND (G.F.) Hsg. & Aux. Ref. (AMBAC) Aaa/AAA 7.850 04/01/14 340,000 374,500
Valley City, Western Hlth. Care Fac. Rev. (BIGI) Aaa/AAA 7.625 01/01/19 200,000 216,830
Williston Cath. Hlth. Corp. (Mercy Hosp.) (MBIA) Aaa/AAA 7.200 06/01/14 600,000 641,028
-----------
$28,778,961
-----------
TOTAL NORTH DAKOTA MUNICIPAL BONDS (COST:$88,880,596) $94,184,002
SHORT-TERM SECURITIES (.13%)
Goldman Sachs Institutional Liquid Assets Tax-Exempt Diversified Portfolio (Cost: $120,227) $ 120,227
-----------
TOTAL INVESTMENTS IN SECURITIES (COST: $89,000,823) $94,304,229
===========
*Indicates bonds are segregated by the custodian to cover when-issued or delayed-delivery purchases.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
FINANCIAL STATEMENTS December 31, 1995
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995
- -----------------------------------
<S> <C>
ASSETS
Investments in securities, at $ 94,304,229
value (cost:$89,000,823)
Accrued dividends receivable 4,551
Accrued interest receivable 1,621,079
-------------
Total Assets $ 95,929,859
-------------
LIABILITIES
Bank overdraft $ 23,315
Dividends payable 403,120
Accrued expenses 94,108
Payable for fund shares redeemed 28,196
Security Purchases Payable 849,415
-------------
Total Liabilities $ 1,398,154
-------------
NET ASSETS $ 94,531,705
=============
Net asset value per share,
10,402,491 shares outstanding $ 9.09
=============
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS for the year
ended December 31, 1995
- ------------------------------------
<S> <C>
INVESTMENT INCOME
Interest $ 5,905,886
Dividends 58,083
-------------
Total Investment Income $ 5,963,969
-------------
EXPENSES
Investment advisory fees $ 572,789
Distribution fees (12b-1) 238,662
Custodian fees 15,031
Transfer agent fees 103,153
Accounting service fees 4,310
Audit and legal fees 7,910
Directors fees 26,317
Insurance 11,000
Printing and postage 19,115
License, fees, and registrations 7,893
-------------
Total expenses $ 1,006,180
Less expenses waived or absorbed
by the Fund's manager 3,799
-------------
Total Net Expenses $ 1,002,381
-------------
NET INVESTMENT INCOME $ 4,961,588
-------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FUTURES:
Net realized gain (loss) from:
Investment transactions 120,879
Futures transactions (4,228,723)
Net change in unrealized
appreciation (depreciation) of
investments 7,035,220
-------------
Net Realized and Unrealized
Gain (Loss) On Investments $ 2,927,376
-------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $ 7,888,964
=============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
FINANCIAL STATEMENTS December 31, 1995
STATEMENT OF CHANGES IN NET ASSETS
for the year ended December 31, 1995 and year ended December 31, 1994
- ---------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Year Ended For the Year Ended
12/31/95 12/31/94
------------------ ------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $ 4,961,588 $ 4,692,695
Net realized gain (loss) on investment and futures transactions (4,107,844) 1,173,544
Net unrealized appreciation (depreciation) on investments 7,035,220 (7,832,506)
------------------------------------------
Net Increase (Decrease) in Net Assets Resulting From Operations $ 7,888,964 $ (1,966,267)
------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income $ (4,961,588) $ (4,692,695)
Distributions in excess of net investment income (229,423) (226,026)
Distributions from net realized gain on investment transactions 0 0
------------------------------------------
Total Dividends and Distributions $ (5,191,011) $ (4,918,721)
------------------------------------------
CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares $ 5,471,316 $ 13,739,580
Proceeds from reinvested dividends 3,322,041 3,061,970
Cost of shares redeemed (8,824,914) (3,093,650)
------------------------------------------
Net Increase (Decrease) in Net Assets Resulting From
Capital Share Transactions $ (31,557) $ 13,707,900
------------------------------------------
TOTAL INCREASE IN NET ASSETS $ 2,666,396 $ 6,822,912
NET ASSETS, BEGINNING OF PERIOD 91,865,309 85,042,397
------------------------------------------
NET ASSETS, END OF PERIOD $ 94,531,705 $ 91,865,309
===========================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS December 31, 1995
Note 1. ORGANIZATION
ND Tax-Free Fund, Inc. (the Fund) is registered under the Investment
Company Act of 1940 as a non-diversified, open-end management investment
company. The Fund incorporated under the laws of the State of North
Dakota on October 7, 1988, and commenced operations on January 3, 1989.
The Funds objective is to provide as high a level of current income
exempt from federal and North Dakota income taxes as is consistent with
preservation of capital. The Fund will seek to achieve this by investing
primarily in a portfolio of North Dakota tax exempt securities.
Shares of the Fund are offered with no initial sales charge. Shares may
be subject to a contingent deferred sales charge, if those shares are
redeemed within five years of purchase.
Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INVESTMENT SECURITY VALUATION - Investments in securities traded on
national securities exchanges are valued at the last reported sales
price at the close of each business day. Securities for which market
quotations are not readily available are valued at fair value as
determined in good faith by the portfolio management team. The Fund
follows industry practice and records security transactions on the trade
date.
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 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 payable in cash. Capital gains, when
available, are distributed along with the last income dividend of the
calendar year.
INVESTMENT INCOME - Dividend income is recognized on the ex-dividend
date and interest income is recognized daily on an accrual basis.
Premiums and discounts on securities purchased are amortized using the
effective interest method over the life of the respective securities,
unless callable, in which case they are amortized to the earliest call
date.
FUTURES CONTRACTS AND OPTIONS - The Fund may purchase and sell financial
futures and option 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 US 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.
<PAGE>
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.
The Fund may purchase options on financial futures contracts. Daily
fluctuations in the value of the options are recorded for financial
reporting purposes as unrealized gains or losses by the fund. Upon sale
or expiration of the option, the Fund will realize, for book purposes, a
gain or loss equal to the difference between the cost of the option and
the value on sale or expiration date.
Certain risks may arise upon entering into futures contracts and
options. These risks may include changes in the value of the futures
contracts or options that may not directly correlate with changes in the
value of the underlying securities.
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Note 3. SHARE TRANSACTIONS
As of December 31, 1995, there were 100,000,000 shares of $.001 par
authorized; 10,402,491 and 10,408,547 were outstanding at December 31,
1995 and December 31, 1994, respectively.
Transactions in capital shares were as follows:
<TABLE>
<CAPTION>
Shares Amount
------ --------------
For the Year Ended For the Year Ended For the Year Ended For the Year Ended
Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1995 Dec. 31, 1994
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 605,360 1,478,546 $ 5,471,316 $13,739,580
Shares issued on 368,749 330,011 3,322,041 3,061,970
reinvestment of dividends
Shares redeemed (980,165) (337,033) (8,824,914) (3,093,650)
-------------------------------------------------------------------------------------
Net increase (decrease) (6,056) 1,471,524 $ (31,557) $13,707,900
=====================================================================================
</TABLE>
Note 4. INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
ND Money Management, Inc., the Fund's investment adviser, ND Capital,
Inc., the Fund's underwriter, and ND Resources, Inc., the Fund's
transfer agent, are subsidiaries of ND Holdings, Inc., the Fund's
sponsor.
The Fund has engaged ND Money Management, Inc., to provide investment
advisory and management services to the Fund. The Investment Advisory
Agreement provides for fees to be computed at an annual rate of 0.60% of
the Fund's average daily net assets. The Fund has recognized $572,789 of
investment advisory fees for the year ended December 31, 1995. The Fund
has a payable to ND Money Management, Inc. of $45,139 at December 31,
1995 for investment advisory fees. Certain officers and directors of the
Fund are also officers and directors of the investment adviser.
<PAGE>
The Fund has adopted a distribution plan pursuant to Rule 12b-1 under
the 1940 Act (the Plan), whereby the Fund shall pay at the annual rate
of 0.75% of the average daily net assets of the Fund to ND Capital, Inc.
(Capital), its principal underwriter, for expenses incurred in the
distribution of the Fund's shares. Pursuant to the Plan, Capital is
entitled to reimbursement each month for its actual expenses incurred in
the distribution and promotion of the Fund's shares, including the
printing of prospectuses and reports used for sales purposes, expenses
of preparation and printing of sales literature and other such
distribution related expenses, including any distribution or service
fees paid to securities dealers who have executed a dealer sales
agreement with Capital. Capital will be reimbursed at a rate not to
exceed 0.75% of the average daily net assets of the Fund for the prior
month. The fund has recognized $238,662 of 12b-1 fee expenses for the
period ended December 31, 1995. The Fund has a payable to ND Capital,
Inc. of $18,808 at December 31, 1995 for 12b-1 fees.
ND Resources, Inc., (the transfer agent), provides shareholder services
for a monthly fee equal to an annual rate of .16% of the Fund's first
$10 million of average daily net assets, .13% of the Fund's average
daily net assets on the next $15 million, .11% of the Fund's average
daily net assets on the next $15 million, .10% of the Fund's average
daily net assets on the next $10 million, and 0.09% of the Fund's
average daily net assets in excess of $50 million. The Fund has
recognized $103,153 of transfer agency fees for the year ended December
31, 1995.
Note 5. INVESTMENT SECURITY TRANSACTIONS
The cost of purchases and proceeds from the sales of investment
securities (excluding short-term securities) aggregated $7,521,800 and
$14,606,483, respectively, for the year ended December 31, 1995.
Note 6. INVESTMENT IN SECURITIES
At December 31, 1995, the aggregate cost of securities for federal
income tax purposes was $89,000,823, and the net unrealized appreciation
of investments based on the cost was $5,303,406, which is comprised of
$5,307,354 aggregate gross unrealized appreciation and $3,948 aggregate
gross unrealized depreciation.
<PAGE>
FINANCIAL HIGHLIGHTS Selected per share data and ratios for the year indicated
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Year Ended December 31,
1995 1994 1993 1992 1991 1990
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 8.83 $ 9.52 $ 9.49 $ 9.47 $ 9.36 $ 9.49
------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income $ .47 $ .48 $ .52 $ .59 $ .61 $ .63
Net realized and unrealized gain
(loss) on investments and
futures transactions .28 (.67) .05 .04 .11 (.13)
------------------------------------------------------------------------
Total Income(Loss) From
Investment Operations $ .75 $ (.19) $ .57 $ .63 $ .72 $ .50
------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income $ (.47) $ (.48) $ (.52) $ (.59) $ (.61) $ (.63)
Distributions in excess of net
investment income (.02) (.02) (.02) (.02) .00 .00
------------------------------------------------------------------------
Total Distributions $ (.49) $ (.50) $ (.54) $ (.61) $ (.61) $ (.63)
------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 9.09 $ 8.83 $ 9.52 $ 9.49 $ 9.47 $ 9.36
========================================================================
TOTAL RETURN 8.68%(A) (2.07)%(A) 5.94%(A) 6.62%(A) 7.86%(A) 7.96%(A)
Ratios/Supplemental Data:
Net assets, end of period (in
thousands) $94,532 $91,865 $85,042 $61,429 $31,243 $14,793
Ratio of net expenses (after expense
assumption) to average net assets 1.05%(B) 1.06%(B) 1.01%(B) 0.95%(B) 0.72%(B) 0.49%(B)
Ratio of net investment income to
average net assets 5.20% 5.19% 5.39% 5.91% 6.26% 6.68%
Portfolio turnover rate 8.02% 5.55% 18.59% 17.35% 14.11% 57.96%
</TABLE>
(A) Excludes contingent deferred sales charge of 4%.
(B) During the period indicated above, ND Holdings, Inc. assumed expenses of
$3,799, $31,115, $30,707, $66,030, $111,171, and $93,006, respectively. If
the expenses had not been assumed, the annualized ratios of total expenses
to average net assets would have been 1.05%, 1.10%, 1.05%, 1.08%, 1.18%, and
1.38%, respectively.
[GRAPH APPEARS HERE]
Comparison of change in value of $10,000 investment in
ND Tax-Free Fund, Inc. and Lehman Municipal Bond Index (Unaudited)
- -----------------------------------------------------------------
ND Tax-Free Fund Lehman Municipal Bond Index
- -----------------------------------------------------------------
1/3/1989 $10,000 $10,000
- -----------------------------------------------------------------
1990 $10,291 $11,196
- -----------------------------------------------------------------
1991 $11,109 $12,004
- -----------------------------------------------------------------
1992 $12,008 $13,630
- -----------------------------------------------------------------
1993 $12,718 $16,023
- -----------------------------------------------------------------
1994 $13,529 $17,239
- -----------------------------------------------------------------
1995 $13,262 $15,672
- -----------------------------------------------------------------
1996 $14,413 $19,320
- -----------------------------------------------------------------
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Shareholders and Board of Directors of
ND Tax Free Fund, Inc.
We have audited the accompanying statement of assets and liabilities of ND Tax
Free Fund, Inc. (the Fund), including the schedule of investments, as of
December 31, 1995, the related statement of operations for the year then ended,
the statement of changes in net assets, and the financial highlights for each of
the two years in the period then ended. These financial statements and
financial highlights are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audit. The statement of changes in net assets
for the year ended December 31, 1993, and the financial highlights for each of
the four years in the period then ended, were audited by other auditors whose
report dated January 20, 1994, expressed an unqualified opinion on those
statements.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
Our procedures included confirmation of securities owned as of December 31,
1995, by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of ND Tax
Free Fund, Inc. as of December 31, 1995, the results of its operations for the
year then ended, the changes in its net assets, and the financial highlights for
each of the two years in the period then ended, in conformity with generally
accepted accounting principles.
BRADY, MARTZ & ASSOCIATES, P.C.
February 12, 1996
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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