<PAGE>
Dear Shareholders,
Both the optimists and the pessimists can find comfort in the latest batch of
economic data. For the optimists, the economy's inflation threatening growth
has lost momentum, lessoning one of the biggest concerns in the financial
markets. In April, job-creation downshifted measurably, retail sales fell,
businesses started with higher inventories, and factories cut production.
Wholesale prices fell for the fourth consecutive month, and the consumer price
index edged up 0.1 percent keeping it on track to increase by less than 3
percent again this year.
The pessimists look at the same data and put an entirely different spin on
things. They contend that the slowdown was inevitable from the first
quarter's robust six percent pace. Beneath the surface, growth resurgence
will rise with the tight labor market and a jobless rate hovering at a 24 year
low. Also supporting their views are climbing wages, and an upbeat household
sector as indicated by consumer confidence.
For the time being, the Federal Reserve is siding with the optimists. In the
past, this may have provoked a negative reaction in the financial markets, as
investors would worry that the Central Bank was relaxing its anti-inflation
policy. But Chairman Allan Greenspan and his colleagues have built up
formidable inflation-fighting credentials.
During the first half of the year the Fund utilized a partial hedge. Futures
contracts in U.S. Treasury Bonds were employed. In the first quarter as
interest rates rose this had the effect of minimizing share price erosion. In
the second quarter as interest rates retreated share price increases were
tempered. The overall effect to the Fund in the first six months was a
greater degree of share price stability.
Looking into our crystal ball, we feel that the economy's current slowdown is
more likely to be temporary. That prospect increases the odds of a rate hike
by the Federal Reserve in the coming months. As such, we remain concerned
(and have positioned the portfolio accordingly) that a modest increase in
rates may be needed to prevent unbridled growth.
Diversification remains an important strategy for the Fund. Among our
purchases during the first half of 1997 were bonds issued by housing
authorities, school districts, and utilities.
Over the remaining half of the year, management intends to maintain the
portfolio quality while diversifying throughout the State. Reasonable
tax-exempt income and preservation of capital remain as the chief objectives
of the Fund.
Sincerely,
Robert E. Walstad Monte L. Avery
President Chief Portfolio Strategist
SHAREHOLDER REPORTS REVISED
- ---------------------------
Your fund's annual report is your best source for tracking the progress of
your investment. This report includes several changes that have been made in
an effort to provide additional information to you. In addition, the cover
<PAGE>
letter includes commentary from your fund's portfolio manager on what might be
expected in the coming months. Specifically, your report now includes:
* Terms you'd need to know related to your fund
* A look at your fund's portfolio composition
* The quality and years to maturity of the fund's underlying investments
* A look at your fund's average annual total returns
Terms & Definitions
- -------------------
Average Annual Total Return
A standardized measurement of the return (yield and appreciation) earned
by the fund on an annual basis.
Contingent Deferred Sales Charge (CDSC)
A charge applied at the time of the redemption of which assumes
redemption at the end of the period.
Coupon Rate or Face Rate
The rate of interest annually payable based on the face amount of the
bond; expressed as a percentage.
Duration
A measurement of a security or a portfolio's price volatility based on
maturity, callability and coupon rate. The larger the number, the
greater the price change for a given interest rate change.
Lehman Brother's Municipal Bond Index
An unmanaged list of long-term, fixed-rate, investment-grade, tax-exempt
bonds representative of the municipal bond market. The index does not
take into account brokerage commissions or other costs, may include bonds
different from those in the fund, and may pose different risks than the
fund.
Market Value
Actual (or estimated) price at which a bond trades in the market place.
Maturity
A measure of the term or life of a bond in years. When a bond "matures",
the issuer repays the principal.
Net Asset Value (NAV)
The value of all your fund's assets, minus any liabilities, divided by
the number of outstanding shares, not including any initial or
contingent deferred sales charge.
Quality Ratings
A designation assigned by independent rating companies to give a relative
indication of a bond's credit worthiness. "AAA", "AA" and "A" indicate
highest quality. 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.
<PAGE>
PERFORMANCE AND COMPOSITION
- ---------------------------
Portfolio Quality Ratings
(based on Total Long-Term Investments
- -------------------------------------
[pie chart]
AAA 29.6%
AA 14.5%
A 30.0%
BBB 2.0%
NR 23.9%
(non-rated)
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 ND Money Management, Inc. the
investment advisor
Portfolio Market Sectors
(as a % of Net Assets)
- ------------------------
Insured 27.1%
Schools 19.6%
Housing 17.4%
Healthcare 5.8%
Real Estate 6.8%
Education 13.0%
Utilities 6.8%
Other 5.5%
Market sectors are breakdowns of the Fund's portfolio holdings into specific
investment classes.
COMPARATIVE INDEX GRAPH
- -----------------------
[line graph]
Comparison of change in value of a $10,000 investment in the
South Dakota Tax-Free Fund and the Lehman Brother's Municipal
Bond Index
South Dakota Tax-Free South Dakota Tax-Free Fund Lehman Bros
Fund w/o CDSC w/ max applicable CDSC Municipal Bond
Index
-------------------------------------------------------------------
4/5/1994 $10,000 $10,000 $10,000
1994 $10,280 $ 9,885 $10,035
1995 $11,459 $11,059 $11,787
1996 $12,212 $11,912 $12,309
6/30/1997 $12,578 $12,378 $12,704
Putting Performance into Perspective
The graph comparing your Fund's performance to a benchmark index provides you
with a general sense of how your Fund performed. To put this information in
context, it may be helpful to understand the special differences between the
two. Your Fund's total return for the period shown appears with and without
sales charges and includes Fund expenses and management fees. A securities
index measures the performance of a theoretical portfolio. Unlike a fund, the
<PAGE>
index is unmanaged; there are no expenses that affect the results. In
addition, few investors could purchase all of the securities necessary to
match the index. And, if they could, they would incur transaction costs and
other expenses.
KEY STATISTICS
- --------------
12-31-96 NAV(share value) $10.50
06-30-97 NAV $10.54
Average Maturity 18.2 years
Average Duration 6.1 years
Number of Issues 35
Total Net Assets $6,876,532
AVERAGE ANNUAL TOTAL RETURNS
- ----------------------------
For periods ending June 30, 1997
- ---------------------------------------------------
1 year 5 year Since Inception
- ---------------------------------------------------
6.75% * NA 7.35% *
*The 1 year And Since Inception returns do not include the effect of the 4.00%
and .54% respective Contingent Deferred Sales Charges. It would have been
2.75% and 6.81% respectively, if it had. Returns are historical and are not
a guarantee of future results. 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.
<PAGE>
<TABLE>
<CAPTION>
Schedule of Investments June 30, 1997
Name of Issuer Rating
Percentages represent the market value ----------- Coupon Principal Market
of each investment category to total net assets (Unaudited) Moody's/S&P Rate Maturity Amount Value
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SOUTH DAKOTA MUNICIPAL BONDS (96.5%)
HEALTH CARE (5.8%)
SD Hlth. & Ed. Fac. Auth. (Huron Regional Ctr.) Rev. NR/BBB- 7.250% 04/01/20 $ 125,000 $ 134,847
*SD Hlth. & Ed. Auth. (Crippled Children's Hosp.) Rev. NR/A+ 7.100 07/01/09 260,000 263,900
-----------
$ 398,747
-----------
HOUSING (17.4%)
SD Hsing. Dev. Auth. Homeownership Mtg. Aa1/AA+ 6.550% 05/01/14 $ 100,000 $ 105,023
SD Hsing. Dev. Auth. Homeownership Mtg. Aa1/AA+ 6.600 05/01/17 195,000 204,534
SD Hsing. Dev. Auth. Homeownership Mtg. Aa1/AA+ 6.250 05/01/15 200,000 205,148
SD Hsing. Dev. Auth. Rev. A1/A+ 6.700 04/01/20 370,000 384,711
SD Hsing. Dev. Auth. Homeownership Mtg. Aa1/AA+ 6.000 05/01/21 200,000 199,590
SD Hsing. Dev. Auth. Homeownership Mtg. Aa1/AAA 6.100 05/01/17 100,000 100,122
-----------
$ 1,199,128
-----------
REAL ESTATE (6.8%)
Minnehaha Cty., SD C.O.P. Aa1/NR 6.000% 12/01/12 $ 100,000 $ 102,806
Pierre, SD Sales Tax Ref. Rev. NR/NR 6.000 10/01/14 200,000 206,010
SD Hlth. & Ed. Facs. Auth. (Univ. Sioux Falls) Rev. NR/NR 7.100 04/01/15 150,000 161,561
-----------
$ 470,377
-----------
SCHOOLS (19.6%)
Dakota Valley (N. Sioux City) S.D. #61-8 G.O. NR/NR 6.000% 07/01/12 $ 100,000 $ 103,098
Dakota Valley (N. Sioux City) S.D. #61-8 G.O. NR/NR 5.650 07/01/14 200,000 201,302
Hamlin SD S.D. #28-3 G.O. NR/NR 6.100 12/15/15 140,000 145,639
Hamlin SD S.D. #28-3 Capital Outlay C.O.P. NR/NR 5.700 10/01/15 120,000 122,416
Henry, SD S.D. #14-2 G.O. School Building NR/NR 6.450 01/01/12 75,000 77,868
SD (Mitchell) S.D. #17-2 Capital Outlay C.O.P. NR/A 6.200 01/15/13 60,000 62,875
Newell, SD S.D. #09-2 Capital Outlay C.O.P. NR/NR 6.000 01/01/17 300,000 301,716
Sioux Falls, SD S.D. #49-5 G.O. Aa/NR 5.500 07/01/20 150,000 145,857
SD (Winner) S.D. #59-2 Capital Outlay C.O.P. NR/A 6.200 01/15/10 75,000 78,620
SD Northwestern S.D. #56-3 Capital Outlay C.O.P. NR/A 6.800 01/15/13 100,000 107,800
-----------
$ 1,347,191
-----------
STATE EDUCATION (13.0%)
SD Hlth. & Ed. Auth. (Vocational Educ.) Rev. A1/NR 6.700% 08/01/22 $ 150,000 $ 161,697
SD Student Loan Finance Corp. Rev. NR/A+ 6.750 08/01/10 400,000 422,276
SD Student Loan Finance Corp. Rev. A/NR 6.550 08/01/20 300,000 309,855
-----------
$ 893,828
-----------
UTILITIES (6.8%)
Deadwood Sewer, Water & Improvement C.O.P. NR/NR 6.750% 11/01/03 $ 250,000 $ 266,970
SD Conservancy Dist. (St. Revolving Fd.) Rev. A1/NR 5.625 08/01/17 200,000 200,756
-----------
$ 467,726
-----------
INSURED (27.1%)
Grant County (Northwestern Public Svc.) PCR (MBIA) Aaa/AAA 5.900% 06/01/23 $ 400,000 $ 407,684
*Heartland Consumers Power Elec. Rev. (Escrowed) Aaa/AAA 7.000 01/01/16 200,000 226,522
Heartland Consumers Power Elec. Rev. (FSA) Aaa/AAA 6.000 01/01/09 200,000 214,252
Rapid City Area S.D. #51-4 Cap. Outlay (MBIA) Aaa/AAA 6.200 01/01/12 100,000 106,518
SD Hsing. Dev. Auth. Home Ownership Mtg. (MBIA) Aaa/AAA 6.150 05/01/26 250,000 258,930
SD Hlth. & Ed. Facs. Auth. (Rapid City Regl.) Rev. (MBIA) Aaa/AAA 7.000 09/01/14 90,000 96,989
SD Hlth. & Ed. Auth. (St. Luke's/Midland) Rev. (MBIA) Aaa/AAA 6.625 07/01/11 250,000 274,117
SD Student Loan Program Rev. (MBIA) Aaa/AAA 7.625 08/01/06 50,000 53,785
SD State Lease Rev. C.O.P. (CGIC) Aaa/AAA 6.500 09/01/08 200,000 222,692
-----------
$ 1,861,489
-----------
SOUTH DAKOTA MUNICIPAL BONDS (COST: $6,372,448) $ 6,638,486
SHORT-TERM SECURITIES (1.1%)
Goldman Sachs Institutional Liquid Assets Tax-Exempt Diversified Portfolio (Cost: $5,307) $ 5,307
Federated Intermediate Municipal Trust #78 (Cost: $70,908) 72,000
-----------
TOTAL INVESTMENTS IN SECURITIES (COST: $6,448,663) $ 6,715,793
OTHER ASSEST LESS LIABILITIES $ 160,739
-----------
NET ASSETS $ 6,876,532
===========
</TABLE>
*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.
<PAGE>
Financial Statements June 30, 1997
Statement of Assets and Liabilities June 30, 1997
- -------------------------------------------------
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Investments in securities, at value (cost: $6,448,663) $ 6,715,793
Receivable for fund shares sold 14,000
Accrued dividends receivable 375
Accrued interest receivable 133,670
Variation margin on futures 49,031
-------------
Total Assets $ 6,912,869
-------------
LIABILITIES
Dividends payable $ 29,443
Accrued expenses 6,894
-------------
Total Liabilities $ 36,337
-------------
NET ASSETS $ 6,876,532
=============
Net asset value per share,652,255 shares outstanding $ 10.54
=============
Statement of Operations for the six months ended June 30, 1997
INVESTMENT INCOME
Interest $ 194,061
Dividends 3,674
------------
Total Investment Income $ 197,735
------------
EXPENSES
Investment advisory fees $ 20,033
Distribution fees (12b-1) 25,042
Custodian fees 714
Transfer agent fees 5,370
Accounting service fees 13,670
Audit and legal fees 4,165
Insurance 270
Directors fees 945
Printing and postage 2,964
License, fees, and registrations 912
------------
Total expenses $ 74,085
Less expenses waived or absorbed
by the Fund's manager 35,768
------------
Total Net Expenses $ 38,317
------------
NET INVESTMENT INCOME $ 159,418
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FUTURES
Net realized gain (loss) from:
Investment transactions $ 1,548
Futures transactions 54,043
Net change in unrealized appreciation (depreciation) of:
Investments 32,199
Futures (50,827)
------------
Net Realized And Unrealized Gain (Loss) On Investments
and Futures $ 36,963
------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $ 196,381
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
Financial Statements June 30, 1997
Statement of Changes in Net Assets
For the six months ended June 30, 1997 and year ended December 31, 1996
- -----------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Six Months For the Year
Ended June 30, Ended
1997 Unaudited December 31, 1996
------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
<S> <C> <C>
Net investment income $ 159,418 $ 289,434
Net realized gain (loss) on investment and futures transactions 55,591 105,676
Net unrealized appreciation (depreciation) on investments and futures (18,628) (23,170)
--------------------------------------
Net Increase (Decrease) in Net Assets Resulting From Operations $ 196,381 $ 371,940
--------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income $ (159,418) $ (289,434)
Distributions in excess of net investment income (12,481) (17,384)
Distributions from net realized gain on investment transactions 0 0
--------------------------------------
Total Dividends and Distributions $ (171,899) $ (306,818)
--------------------------------------
CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares $ 500,813 $ 1,387,696
Proceeds from reinvested dividends 104,345 166,205
Cost of shares redeemed (149,935) (385,225)
--------------------------------------
Net Increase (Decrease) in Net Assets Resulting
From Capital Share Transactions $ 455,223 $ 1,168,676
--------------------------------------
TOTAL INCREASE IN NET ASSETS $ 479,705 $ 1,233,798
NET ASSETS, BEGINNING OF PERIOD 6,396,827 5,163,029
--------------------------------------
NET ASSETS, END OF PERIOD $ 6,876,532 $ 6,396,827
======================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
Notes to Financial Statements June 30, 1997
Note 1. ORGANIZATION
South Dakota 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 1, 1993 and commenced operations on April 5, 1994. The
Fund's objective is to provide as high a level of current income exempt from
federal and any future South Dakota income taxes as is consistent with
preservation of capital. The Fund will seek to achieve this by investing
primarily in a portfolio of South 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 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. The Fund has available at June 30, 1997, a net
capital loss carryforward totaling $4,338, which may be used to offset capital
gains realized during subsequent years through December 31,2003.
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 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 - 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
<PAGE>
margin") are made or received by the Fund, dependent on the fluctuations in
the value of the underlying index. Daily fluctuations in value are recorded
for financial reporting purposes as unrealized gains or losses by the fund.
When entering into a closing transaction, the Fund will realize, for book
purposes, a gain or loss equal to the difference between the value of the
futures contracts sold and the futures contracts to buy. Unrealized
appreciation (depreciation) related to open futures contracts is required to
be treated as realized gain (loss) for Federal income tax purposes.
Certain risks may arise upon entering into futures contracts. These
risks may include changes in the value of the futures contracts that may not
directly correlate with changes in the value of the underlying securities.
Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Note 3. CAPITAL SHARE TRANSACTIONS
As of June 30, 1997, there were 200,000,000 shares of $.001 par value
authorized; 652,255 and 609,039 shares were outstanding at June 30, 1997 and
December 31, 199, respectively. Transactions in capital shares were as
follows:
Shares
----------------------------------------
For The Six Months For The Year
Ended Ended
June 30, 1997 December 31,1996
----------------------------------------
Shares sold 47,549 133,378
Shares issued on reinvestment
of dividends 9,911 16,005
Shares redeemed (14,244) (37,361)
----------------------------------------
Net increase 43,216 112,022
========================================
Note 4. INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
ND Money Management, Inc., the Fund's investment adviser, ND Capital, Inc.,
the Fund's underwriter, and ND Resources, Inc., the Fund's transfer and
accounting services agent, are subsidiaries of ND Holdings, Inc., the Fund's
sponsor.
The Fund has engaged ND Money Management, Inc., to provide investment advisory
and management services to the Fund. The Investment Advisory Agreement
provides for fees to be computed at an annual rate of 0.60% of the Fund's
average daily net assets. The Fund has recognized $20,033 of investment
advisory fees for the six months ended June 30, 1997. The Fund has a payable
to ND Money Management, Inc. of $3,440 at June 30, 1997 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 (the Plan), pursuant to Rule 12b-1
under the 1940 Act, 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 $25,042 of 12b-1 fee expenses after
partial waiver for the six months ended June 30, 1997. The Fund has a payable
to Capital of $2,150 at June 30, 1997 for 12b-1 fees. In addition, the Fund
has engaged Capital as agent for the purchase of certain investment
securities. For the six months ended June 30, 1997 commissions earned by
Capital totaled $125 and are included in the cost basis of the securities
acquired.
ND Resources, Inc., (the transfer agent), provides shareholder services for a
monthly fee equal to an annual rate of 0.16% of the Fund's first $10 million
of net assets, 0.13% of the Fund's net assets on the next $15 million, 0.11%
of the Fund's net assets on the next $15 million, 0.10% of the Fund's net
assets on the next $10 million, and 0.09% of the Fund's net assets in excess
of $50 million. The Fund has recognized $5,370 of transfer agency fees for
the six months ended June 30, 1997. ND Resources, Inc. also acts as the
Fund's accounting services agent for a monthly fee equal to the sum of a fixed
fee of $2,000, and a variable fee equal to 0.05% of the Fund's average daily
net assets on an annual basis for the Fund's first $50 million and at a lower
rate on the average daily net assets in excess of $50 million. The Fund has
recognized $13,670 of accounting service fees for the six months ended June
30, 1997.
Note 5. INVESTMENT SECURITY TRANSACTIONS
The cost of purchases and proceeds from the sales of investment securities
(excluding short-term securities) aggregated $465,482 and $0, respectively,
for the six months ended June 30, 1997.
Note 6. INVESTMENT IN SECURITIES
At June 30, 1997, the aggregate cost of securities for federal income tax
purposes was $6,448,663 and the net unrealized appreciation of investments
based on the cost was $267,130, which is comprised of $267,130 aggregate
gross unrealized appreciation and $0 aggregate gross unrealized depreciation.
<PAGE>
Financial Highlights Selected per share data and ratios for the period indicated
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For The Period
Since Inception
For The Six Months For The Year For The Year (April 5, 1994)
Ended Ended Ended Through
June 30, 1997 December 31, December 31, December 31,
(Unaudited) 1996 1995 1994
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.50 $ 10.39 $ 9.86 $ 10.00
-------------------------------------------------------------------
Income from Investment Operations:
Net investment income $ .25 $ .52 $ .55 $ .39
Net realized and unrealized gain
(loss) on investment and futures
transactions .06 .14 .55 (.11)
-------------------------------------------------------------------
Total From Investment Operations $ .31 $ .66 $ 1.10 $ .28
-------------------------------------------------------------------
Less Distributions:
Dividends from net investment income $ (.25) $ (.52) $ (.55) $ (.39)
Distributions in excess of net
investment income (.02) (.03) (.02) (.02)
From net realized gain on
investment transactions .00 .00 .00 (.01)
-------------------------------------------------------------------
Total Distributions $ (.27) $ (.55) $ (.57) $ (.42)
-------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.54 $ 10.50 $ 10.39 $ 9.86
===================================================================
Total Return 5.98%(A)(B) 6.58%(A) 11.47%(A) 3.72%(A)(B)
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) $ 6,877 $ 6,397 $ 5,163 $ 2,890
Ratio of net expenses (after
expense assumption) to average
net assets 1.14%(B)(C) 0.93%(C) 0.61%(C) 0.46%(B)(C)
Ratio of net investment income
to average net assets 4.78%(B) 5.01% 5.35% 5.62%(B)
Portfolio turnover rate 0.00%(B) 2.47% 0.66% 31.32%
</TABLE>
(A) Excludes contingent deferred sales charge of 4%.
(B) Ratio was annualized.
(C) During the periods indicated above ND Holdings, Inc. assumed expenses
of $35,768, $54,598, $37,053, and $24,509, respectively. If the
expenses had not been assumed, the annualized ratio of total
expenses to average net assets would have been 2.22%, 1.88%, 1.51% and
2.15%, respectively.
<TABLE> <S> <C>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 6,448,663
<INVESTMENTS-AT-VALUE> 6,715,793
<RECEIVABLES> 148,045
<ASSETS-OTHER> 49,031
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 6,912,869
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 36,337
<TOTAL-LIABILITIES> 37,337
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 652,255
<SHARES-COMMON-PRIOR> 609,039
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 51,253
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 267,130
<NET-ASSETS> 6,876,532
<DIVIDEND-INCOME> 3,674
<INTEREST-INCOME> 194,061
<OTHER-INCOME> 0
<EXPENSES-NET> (38,317)
<NET-INVESTMENT-INCOME> 159,418
<REALIZED-GAINS-CURRENT> 55,591
<APPREC-INCREASE-CURRENT> (18,628)
<NET-CHANGE-FROM-OPS> 196,381
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (159,418)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> (12,481)
<NUMBER-OF-SHARES-SOLD> 47,549
<NUMBER-OF-SHARES-REDEEMED> 14,244
<SHARES-REINVESTED> 9,911
<NET-CHANGE-IN-ASSETS> 479,705
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 20,033
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 76,227
<AVERAGE-NET-ASSETS> 6,667,107
<PER-SHARE-NAV-BEGIN> 10.50
<PER-SHARE-NII> .25
<PER-SHARE-GAIN-APPREC> .06
<PER-SHARE-DIVIDEND> (.25)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> (.02)
<PER-SHARE-NAV-END> 10.54
<EXPENSE-RATIO> 1.14<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Ratio of net expenses to average net assets, annualized.
</FN>
</TABLE>
