Dear Shareholder:
We are pleased to enclose the semi-annual report of the operations of South
Dakota Tax-Free Fund, Inc. for the six months ended June 30, 1998. The
Fund's portfolio and related financial statements are presented within for
your review.
As we end the first half of 1998, the 30-year Treasury bond descended to a
record low yield of 5.59% spurred by the strength of the U.S. dollar and
weakness in commodity prices. Asian turmoil has helped put the brakes on
runaway growth in the U.S. economy, in the process restraining the Federal
Reserve from tightening credit. At the same time, a worldwide flight to
quality and a muscle-bound dollar have led investors directly into the U.S.
Treasury market.
The strength of the dollar is helping bonds both directly and indirectly.
Dollar-denominated securities are more attractive and at the same time
widening the trade deficit. Cheap foreign goods have helped keep inflation
in check.
On the other hand, it is easy to imagine a sudden jolt of bad news.
Unexpected increases in companies labor costs or fighting in the Middle East
would send inflation higher. The latest Consumer Price Index figures
increased at a 2.7% annual rate over the last six months, up from a 1.9% rate
in the prior six months.
The South Dakota Tax-Free Fund, Inc. began the year at $10.49 and then
closed the six month period at $10.39. The South Dakota Tax-Free Fund, Inc.
utilized a partial hedge in early 1998 to minimize the effects of strong
economic growth. Stability of share price is the primary objective of a
partial hedge.
The Fund continues to invest in high-grade South Dakota tax-exempt bonds.
Issues purchased in the primary and secondary market remains an important
strategy in diversification for the Fund.
Income exempt from federal and South Dakota income taxes with preservation
of capital remain the chief objectives of the Fund.
Sincerely,
Monte L. Avery Robert E.Walstad
Chief Portfolio Strategist President
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.
Consumer Price Index
A commonly used measure of inflation: it does not represent an investment
return.
Coupon Rate or Face Rate
The rate of interest annually payable based on the face amount of the bond;
expressed as a percentage.
Lehman Brothers Municipal Bond Index
An unmanaged list of long-term, fixed-rate, investment-grade, tax-exempt
bonds representative of the municipal bond market. The index does not take
into account brokerage commissions or other costs, may include bonds
different from those in the fund, and may pose different risks than the fund.
Market Value
Actual (or estimated) price at which a bond trades in the market place.
Maturity
A measure of the term or life of a bond in years. When a bond "matures", the
issuer repays the principal.
Net Asset Value (NAV)
The value of all your fund's assets, minus any liabilities, divided by the
number of outstanding shares, not including any initial or contingent
deferred sales charge.
Quality Ratings
A designation assigned by independent rating companies to give a relative
indication of a bonds' credit worthiness. "AAA", "AA" and "A" 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.
PERFORMANCE AND COMPOSITION
- ---------------------------
Portfolio Ratings
(based on Total Long-Term Investments)
- --------------------------------------
[pie chart]
AAA 43.5
AA 11.8
A 16.9
BBB 4.0
NR 23.8
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 ND Money Management, Inc., the
Investment advisor.
Portfolio Market Sectors
(As a % of Net Assets)
- ------------------------
[pie chart]
HC-Health Care 20.0
GO-General Obligation 19.5
H-Housing 18.9
U-Utilities 11.8
I-Industrial 8.5
RE-Real Estate 7.9
S-School 5.0
WS-Water/Sewer 3.6
O-Other 2.8
T-Transportation 2.0
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 $10,000
investment in South Dakota Tax-Free Fund
and Lehman Bros. Municipal Bond Index (Unaudited)
<TABLE>
<CAPTION>
SD Tax-Free Fund SD Tax-Free Fund Lehman Bros
w/o CDS w/ max applicable CDSC Municipal Bond Index
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
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
1997 $12,835 $12,735 $13,442
06/30/98 $13,029 $12,929 $13,803
</TABLE>
Average Annual Total Returns
For periods ending June 30, 1998
--------------------------------
Since Inception
1 year 5 year April 5, 1994
--------------------------------
Without CDSC 3.59% N/A 6.45%
With CDSC (0.35% N/A 6.25%
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. The Lehman Brothers index is a national index representative of the
national municipal bond market whereas the Fund concentrates its investments in
South Dakota municipal bonds. Your Fund's total return for the period shown
appears with and without sales charges and includes Fund expenses and management
fees. A securities index measures the performance of a theoretical portfolio.
Unlike a fund, the index is unmanaged; there are no expenses that affect the
results. In addition, few investors could purchase all of the securities
necessary to match the index. And, if they could, they would incur transaction
costs and other expenses. All Fund and benchmark returns include reinvested
dividends. 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.
Key Statistics
- --------------
12-31-97 NAV(share value) $10.49
06-30-98 NAV $10.39
Average Maturity 18.2 years
Number of Issues 38
Total Net Assets $7,439,525
<TABLE>
<CAPTION>
Schedule of Investments June 30, 1998 (Unaudited)
Name of Issuer
Percentages represent the market
value of each investment category
to total net assets Rating Coupon Principal Market
(Moody's/S&P) Rate Maturity Amount Value
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
South Dakota Municipal Bonds (97.2%)
Belle Fourche, SD School Dist. #9-1 G.O. FSA Aaa/NR 5.500% 01/15/18 $ 100,000 $ 102,346
Dakota Valley, SD (N. Sioux City) School Dist. #61-8 G.O NR/NR 6.000 07/01/12 100,000 106,347
Dakota Valley, SD (N. Sioux City) School Dist. #61-8 G.O NR/NR 5.650 07/01/14 200,000 208,916
Deadwood, SD Sewer, Water and Impvt. NR/NR 6.750 11/01/03 250,000 266,903
Grant Cty., SD (Northwestern Public. Svc.) PCR MBIA Aaa/AAA 5.900 06/01/23 400,000 424,488
Hamlin, SD School Dist. #28-3 NR/NR 5.700 10/01/15 120,000 127,189
Hamlin, SD School Dist. #28-3 G.O. NR/NR 6.100 12/15/15 140,000 148,399
Heartland Consumers Power Dist., Elec. Rev. FSA Aaa/AAA 6.000 01/01/09 200,000 217,132
*Heartland Consumers Power Dist., Elec. Rev. FSA Aaa/AAA 6.000 01/01/17 400,000 449,856
Henry, SD School Dist. #14-2 School Blding. G.O. NR/NR 6.450 01/01/12 75,000 80,228
Minnehaha Cty., SD C.O.P.'s Aa-1/NR 6.000 12/01/12 100,000 106,148
Mitchell, SD School Dist. #17-2 NR/A 6.200 01/15/13 60,000 64,678
Newell, SD School Dist. #09-2 NR/NR 6.000 01/01/17 300,000 313,710
Northwestern School Dist. #56-3 NR/A 6.800 01/15/13 100,000 110,014
Pierre, SD Sales Tax Ref. Rev. NR/NR 6.000 10/01/14 200,000 208,304
Rapid City, SD Parking Rev. Baa-1/NR 5.700 12/01/18 150,000 151,488
Rapid City, SD School Dist. #51-4 MBIA Aaa/AAA 6.200 01/01/12 100,000 108,468
SD Conservancy Dist. (State Revolving Fund) Rev. A-1/NR 5.625 08/01/17 200,000 208,694
*SD Hlth. & Educ. Auth. (Crippled Childrens) Rev. NR/A+ 7.100 07/01/09 260,000 263,250
*SD Hlth. & Educ. Auth. (St. Luke's/Midland) Rev. MBIA Aaa/AAA 6.625 07/01/11 250,000 272,755
SD Hlth. & Educ. Auth. (Vocational Educ.) Rev. A-1/NR 6.700 08/01/22 150,000 167,564
SD Hlth. & Educ. Facs. Auth. (Huron Regl. Medl. Ctr.) Rev. NR/BBB 7.250 04/01/20 125,000 139,736
SD Hlth. & Educ. Facs. Auth. (Univ. of Sioux Falls) Rev. NR/NR 7.100 04/01/15 150,000 165,012
SD Hlth. & Educ. Facs. Auth. (Rapid City Regl.) MBIA Aaa/AAA 5.000 09/01/22 400,000 385,200
SD Hlth. & Educ. Facs. Auth. (Rapid City Regl.) Rev. MBIA Aaa/AAA 7.000 09/01/14 45,000 47,488
SD Hlth. & Educ. Facs. Auth. (Rapid City Regl.) Rev. MBIA Aaa/AAA 7.000 09/01/14 45,000 47,488
SD Hsg. Devl. Auth. Homeownership Mrtge. Aa-1/AAA 6.550 05/01/14 100,000 106,741
SD Hsg. Devl. Auth. Homeownership Mrtge. Aa-1/AA+ 6.600 05/01/17 190,000 201,812
SD Hsg. Devl. Auth. Homeownership Mrtge. Aa-1/AAA 6.000 05/01/21 200,000 203,026
SD Hsg. Devl. Auth. Homeownership Mrtge. Aa-1/AAA 6.100 05/01/17 100,000 104,434
SD Hsg. Devl. Auth. Homeownership Mrtge. Aa-1/AAA 5.400 05/01/24 400,000 401,336
SD Hsg. Devl. Auth. Rev. Aa/NR 6.700 04/01/20 370,000 390,598
SD State Lease Rev. FSA Aaa/AAA 6.500 09/01/08 200,000 227,992
*SD Student Loan Finance Corp. Student Loan Notes A/NR 6.550 08/01/20 300,000 322,581
SD Student Loan Program Rev. MBIA Aaa/AAA 7.625 08/01/06 45,000 47,377
Sioux Falls, SD School Dist. #49-5 G.O. Aa/NR 5.500 07/01/20 150,000 152,496
Union Cty., SD G.O. NR/NR 5.500 12/01/17 100,000 98,654
Winner, SD School Dist. #59-2 NR/A 6.200 01/15/10 75,000 81,212
------------
SOUTH DAKOTA MUNICIPAL BONDS (COST: $6,876,268) $ 7,230,060
------------
SHORT-TERM SECURITIES (1.3%)
Federated Tax-Free Fund #15 $ 49,488
Federated Intermediate Municipal Trust #78 49,906
------------
TOTAL SHORT-TERM SECURITIES (COST: $99,488) $ 99,394
------------
TOTAL INVESTMENTS IN SECURITIES (COST: $6,975,756) $ 7,329,454
OTHER ASSETS LESS LIABILITIES 110,071
------------
NET ASSETS $ 7,439,525
============
</TABLE>
*Indicates bonds are segregated by the custodian to cover when-issued or
delayed-delivery purchases.
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 June 30,1998
Statement of Assets and Liabilities June 30, 1998 (Unaudited)
- --------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Investments in securities, at value (cost: $6,975,756) $ 7,329,454
Cash 10,000
Accrued dividends receivable 363
Accrued interest receivable 137,485
Prepaid expenses 2,129
-------------
Total Assets $ 7,479,431
-------------
LIABILITIES
Dividends payable $ 31,308
Accrued expenses 8,598
-------------
Total Liabilities $ 39,906
-------------
NET ASSETS $ 7,439,525
=============
Net assets are represented by:
Capital stock outstanding, at par $ 716
Additional paid-in capital 7,249,125
Accumulated undistributed net realized
gain(loss) on investments (164,014)
Unrealized appreciation on investments 353,698
Total amount representing net assets applicable to
715,946 outstanding shares of $.001 par value
common stock (200,000,000 shares authorized) $ 7,439,525
=============
Net asset value per share $ 10.39
=============
Statement of Operations for the six months ended June 30, 1998 (Unaudited)
- -------------------------------------------------------------------------
INVESTMENT INCOME
Interest $ 206,786
Dividends 4,281
-----------
Total Investment Income $ 211,067
-----------
EXPENSES
Investment advisory fees $ 3,307
Distribution fees (12b-1) 18,474
Custodian fees 955
Transfer agent fees 5,942
Accounting service fees 13,891
Professional fees 3,074
Reports to shareholders 525
Directors fees 563
Transfer agent out of pocket 913
License, fees, and registrations 387
Total expenses $ 48,031
-----------
NET INVESTMENT INCOME $ 163,036
-----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FUTURES
Net realized gain (loss) from:
Investment transactions $ 18,427
Futures transactions (46,584)
Net change in unrealized appreciation
(depreciation) of:
Investments (46,849)
Futures 25,790
------------
Net Realized And Unrealized
Gain (Loss) On Investments
and Futures $ (49,216)
------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $ 113,820
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
Financial Statements June 30, 1998
Statement of Changes in Net Assets for the six months ended June 30, 1998
and the year ended December 31, 1997
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
For The Six For The Year
Months Ended Ended December
June 30, 1998 31, 1997
(Unaudited)
----------------------------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
<S> <C> <C>
Net investment income $ 163,036 $ 323,688
Net realized gain (loss) on
investment and futures transactions (28,157) (157,311)
Net unrealized appreciation
(depreciation) on investments
and futures (21,059) 173,630
------------------------------
Net Increase (Decrease) in
Net Assets Resulting From
Operations $ 113,820 $ 340,007
------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income $ (163,036) $ (323,688)
Distributions in excess of net
investment income 0 0
Tax return of capital distributions (18,474) (26,399)
Distributions from net realized
gain on investment transactions 0 0
------------------------------
Total Dividends and Distributions $ (181,510) $ (350,087)
-------------------------------
CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares $ 151,176 $ 988,297
Proceeds from reinvested dividends 113,203 209,007
Cost of shares redeemed (87,518) (253,697)
-------------------------------
Net Increase (Decrease) in
Net Assets Resulting From
Capital Share Transactions $ 176,861 $ 943,607
-------------------------------
TOTAL INCREASE IN NET ASSETS $ 109,171 $ 933,527
NET ASSETS, BEGINNING OF PERIOD 7,330,354 6,396,827
------------------------------
NET ASSETS, END OF PERIOD $ 7,439,525 $ 7,330,354
==============================
</TABLE>
The accompanying notes are an integral part of these financial statements.
Notes to Financial Statements June 30, 1998 (Unaudited)
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 - Securities for which quotations are not
readily available (which will constitute a majority of the securities
held by the Fund) are valued at fair value as determined by ND Money
Management, using methods which include consideration of the following:
yields or prices of municipal bonds of comparable quality, type of issue,
coupon, maturity and rating, indications as to value from dealers and
general market conditions. ND Money Management may employ a matrix system
to determine valuations. 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, 1998, a net capital loss carryforward
totaling $161,648, which may be used to offset capital gains realized
during subsequent years through December 31, 2005.
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 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 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.
Reclassifications - Certain prior year amounts have been reclassified to
conform to the current year presentation.
Note 3. CAPITAL SHARE TRANSACTIONS
As of June 30, 1998, there were 200,000,000 shares of $.001 par value
authorized; 715,945 and 698,991 shares were outstanding at June 30, 1998
and December 31, 1997, respectively. Transactions in capital shares were
as follows:
Shares
---------------------------------
For the Six
Months Ended For The
June 30, 1998 Year Ended
(Unaudited) December 31, 1997
---------------------------------
Shares sold 14,490 94,215
Shares issued on reinvestment
of dividends 10,861 19,917
Shares redeemed (8,397) (24,180)
---------------------------------
Net increase 16,954 89,952
================================
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 $3,307 of
investment advisory fees after partial waiver for the six months ended
June 30, 1998. The Fund has a payable to ND Money Management, Inc. of
$461 at June 30, 1998 for investment advisory fees. Certain officers and
directors of the Fund are also officers and directors of the investment
adviser.
The Fund has adopted a distribution plan (the Plan) pursuant to Rule 12b-1
under the 1940 Act, whereby the Fund shall pay to ND Capital, Inc.
(Capital), its principal underwriter, an annual fee for certain expenses
incurred by Capital in connection with the distribution of the Fund's
shares. The annual fee paid to Capital under the Plan is calculated daily
and paid monthly by the Fund at the annual rate of 0.75% of the average
daily net assets of the Fund. The Fund has recognized $18,474 of 12b-1
fee expenses after partial waiver for the six months ended June 30, 1998.
The Fund has a payable to Capital of $3,208 at June 30, 1998 for 12b-1
fees.
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 $5,942
of transfer agency fees for the six months ended June 30, 1998. 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 $13,891 of
accounting service fees for the six months ended June 30, 1998.
Note 5. INVESTMENT SECURITY TRANSACTIONS
The cost of purchases and proceeds from the sales of investment securities
(excluding short-term securities) aggregated $936,312 and $628,860,
respectively, for the six months ended June 30, 1998.
Note 6. INVESTMENT IN SECURITIES
At June 30, 1998, the aggregate cost of securities for federal income
tax purposes was $6,975,756 and the net unrealized appreciation of
investments based on the cost was $353,698, which is comprised of $356,287
aggregate gross unrealized appreciation and $2,589 aggregate gross
unrealized depreciation.
Financial Highlights Selected per share data and ratios for the period indicated
- --------------------------------------------------------------------------------
<TABLE>
<CAPTI0N>
For The Period
Since Inception
For The Six For The Year For The Year For The Year (April 5, 1994)
Months Ended Ended Dec. 31 Ended Dec.31, Ended Dec. 31, Through Dec. 31
June 30, 1998, 1997 1996 1995, 1994
(Unaudited)
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 10.49 $ 10.50 $ 10.39 $ 9.86 $ 10.00
Income from Investment Operations:
Net investment income $ .23 $ .53 $ .52 $ .55 $ .39
Net realized and unrealized
gain (loss) on investment
and futures transactions (.07) .03 .14 .55 (.11)
----------------------------------------------------------------------------------------
Total Income (Loss) From
Investment Operations $ .16 $ .56 $ .66 $ 1.10 $ .28
----------------------------------------------------------------------------------------
Less Distributions:
Dividends from net
investment income $ (.23) $ (.53) $ (.52) $ (.55) $ (.39)
Distributions in excess of
net investment income .00 .00 .00 .00 .00
Tax return of capital
distributions (.03) (.04) (.03) (.02) (.02)
From net realized gain on
investment transactions .00 .00 .00 .00 (.01)
---------------------------------------------------------------------------------------
Total Distributions $ (.26) $ (.57) $ (.55) $ (.57) $ (.42)
---------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $10.39 $ 10.49 $ 10.50 $ 10.39 $ 9.86
=======================================================================================
Total Return 3.02%(A)(B) 5.10%(A) 6.58%(A) 11.47%(A) 3.72%(A)
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) $ 7,440 $ 7,330 $ 6,397 $ 5,163 $ 2,890
Ratio of net expenses
(after expense assumption)
to average net assets 1.30%(B) 1.17%(C) 0.93%(C) 0.61%(C) 0.46%(B)
Ratio of net investment
income to average net assets 4.42%(B) 4.70% 5.01% 5.35% 5.62%(B)
Portfolio turnover rate 8.80% 3.35% 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
$68,538, $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 2.16%, 1.88%, 1.51% and 2.15%, respectively.
The accompanying notes are an integral part of these financial statements.
<TABLE> <S> <C>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 6,975,756
<INVESTMENTS-AT-VALUE> 7,329,454
<RECEIVABLES> 137,848
<ASSETS-OTHER> 12,129
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 7,479,431
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 39,906
<TOTAL-LIABILITIES> 39,906
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 7,249,841
<SHARES-COMMON-STOCK> 715,945
<SHARES-COMMON-PRIOR> 698,991
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (164,014)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 353,698
<NET-ASSETS> 7,439,525
<DIVIDEND-INCOME> 4,281
<INTEREST-INCOME> 206,786
<OTHER-INCOME> 0
<EXPENSES-NET> 48,031
<NET-INVESTMENT-INCOME> 163,036
<REALIZED-GAINS-CURRENT> (28,157)
<APPREC-INCREASE-CURRENT> (21,059)
<NET-CHANGE-FROM-OPS> 113,820
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (163,036)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> (18,474)
<NUMBER-OF-SHARES-SOLD> 14,490
<NUMBER-OF-SHARES-REDEEMED> (8,397)
<SHARES-REINVESTED> 10,861
<NET-CHANGE-IN-ASSETS> 109,171
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,307
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 48,031
<AVERAGE-NET-ASSETS> 7,380,509
<PER-SHARE-NAV-BEGIN> 10.49
<PER-SHARE-NII> .23
<PER-SHARE-GAIN-APPREC> (.07)
<PER-SHARE-DIVIDEND> (.23)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> (.03)
<PER-SHARE-NAV-END> 10.39
<EXPENSE-RATIO> 1.30<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Ratio was annualized.
</FN>
</TABLE>
