Dear Shareholder:
We are pleased to enclose the semi-annual report of the operations of the
South Dakota Tax-Free Fund, Inc. for the six months ended June 30, 1999.
The Fund's portfolio and related financial statements are presented within for
your review.
As we end the first half of 1999, stabilizing global economies and the U.S.
economy growing at what many economists believe is an unsustainable pace has
lead the Federal Reserve to raise short-term interest rates a quarter of a
percentage point. Strong consumer spending and a tight labor market were the
primary factors for Mr. Greenspan's pre-emptive strike against a rise in
inflation. Typically, a higher fed funds rate - the rate at which banks borrow
from each other overnight - means higher rates for things such as mortgage
loans, credit cards and savings accounts.
Anticipations of a Federal Reserve tightening have seen yields on the benchmark
30-year Treasury bond rise from a January yield of 5.07% to 5.97%.
Tax-free municipal yields have also risen from 5.06% to 5.33% on AAA rated
bonds. This slower rise compared to Treasuries can be attributed to investor
demand for tax-free bonds.
The South Dakota Tax-Free Fund, Inc. began the year at $10.38 and closed the
six month period at $10.14. In anticipation of stronger economic growth, the
South Dakota Tax-Free Fund, Inc. at times during the period utilized a
defensive position in U.S. Treasury futures. Share price was stabilized as
yields on U.S. Treasuries rose throughout the first half of the year.
Stability of share price is the primary objective of a defensive position.
Diversification remains an important strategy of the Fund. Purchases during
the first six months include South Dakota Student Loans, South Dakota Housing,
and South Dakota State Building Authority issues.
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 redemption, assuming redemption at the end
of the period.
Coupon Rate or Face Rate
The rate of interest payable annually, 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 charges.
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
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 39.8
AA 11.7
A 26.3
BBB 4.1
NR 18.1
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 adviser.
Portfolio Market Sectors
(as a % of Net Assets)
- ------------------------
[pie chart]
H-Housing 20.0
HC-Health Care 18.7
I-Industrial 16.5
GO-General Obligation 16.0
S-School 10.5
C/L-C.O.P./Lease 6.9
U-Utilities 5.8
O-Other 3.5
T-Transportation 2.1
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 Brothers Municipal Bond Index
South Dakota Lehman Brothers
Tax-Free Fund Municipal Bond Index
w/o CDSC
- ------------------------------------------------------------------
4/5/1994 $10,000 $10,000
1994 $10,280 $10,034
1995 $11,459 $11,786
1996 $12,212 $12,309
1997 $12,835 $13,442
1998 $13,334 $14,313
6/30/99 $13,343 $14,184
Average Annual Total Returns
- ----------------------------
For periods ending June 30, 1999
--------------------------------
Since Inception
1 year 5 year (April 5, 1994)
------------------------------------------------
Without CDSC 2.41% 5.42% 5.66%
With CDSC (1.50)% N/A N/A
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 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.
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
- --------------
12-31-98 NAV (share value) $10.38
06-30-99 NAV $10.14
Average Maturity 18.3 years
Number of Issues 35
Total Net Assets $7,315,562
<TABLE>
<CAPTION>
Schedule of Investments June 30, 1999 (Unaudited)
Name of Issuer
Percentages represent
the market value of each Rating
investment category to total (Moody's/ Coupon Principal Market
net assets S&P) Rate Maturity Amount Value
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
South Dakota Municipal Bonds (96.6%)
Belle Fourche, SD School Dist. #9-1 G.O. FSA Aaa/NR 5.500% 01/15/18 $100,000 $101,691
Dakota Valley, SD (N. Sioux City)
School Dist. #61-8 G.O. NR/NR 6.000 07/01/12 100,000 100,852
Dakota Valley, SD (N. Sioux City)
School Dist. #61-8 G.O. NR/NR 5.650 07/01/14 200,000 198,796
#Grant Cty., SD (Northwestern Public. Svc.) PCR MBIA Aaa/AAA 5.900 06/01/23 400,000 415,752
Hamlin, SD School District #28-3 G.O. NR/NR 5.000 12/15/14 105,000 102,184
Hamlin, SD School District #28-3 G.O. NR/NR 5.700 10/01/15 120,000 119,419
#Heartland Consumers Power Dist., Elec. Rev. FSA Aaa/AAA 6.000 01/01/09 200,000 222,368
Henry, SD School Dist. #14-2 School Blding. G.O. NR/NR 6.450 01/01/12 75,000 80,612
Minnehaha Cty., SD C.O.P.'s Aa/NR 6.000 12/01/12 100,000 105,298
Mitchell, SD School Dist. #17-2 C.O.P.'s NR/A 6.200 01/15/13 60,000 64,563
Newell, SD School Dist. #09-2 NR/NR 6.000 01/01/17 300,000 309,540
Northwestern School Dist. #56-3 C.O.P.'s NR/A 6.800 01/15/13 100,000 111,053
Pierre, SD Sales Tax Ref. Rev. NR/NR 6.000 10/01/14 200,000 206,550
Rapid City, SD Parking Rev. Baa-1/NR 5.700 12/01/18 150,000 150,048
Rapid City, SD School Dist. #51-4 MBIA Aaa/AAA 6.200 01/01/12 100,000 107,038
SD (Education Loans, Inc.) Student Loan Rev. Gtd. A/NR 5.600 06/01/20 350,000 343,966
SD Conservancy Dist. (State Revolving Fund) Rev. Aa-3/NR 5.625 08/01/17 200,000 203,632
SD Economic Dev. Fin. Auth. (D.T.S. Inc Project) NR/A 5.500 04/01/19 300,000 293,517
*SD Hlth. & Educ. Auth. (Crippled Childrens) Rev. NR/A+ 7.100 07/01/09 260,000 260,000
*SD Hlth. & Educ. Auth. (St. Luke's/Midland)
Rev. MBIA Aaa/AAA 6.625 07/01/11 250,000 265,580
SD Hlth. & Educ. Auth. (Vocational Educ.) Rev. A-1/A+ 6.700 08/01/22 150,000 164,606
SD Hlth. & Educ. Facs. Auth. (Huron Regl. Medl. Ctr.) NR/BBB 7.250 04/01/20 125,000 136,389
SD Hlth. & Educ. Facs. Auth.
(Univ. of Sioux Falls) Rev. NR/NR 7.100 04/01/15 150,000 162,755
SD Hlth. & Educ. Facs. Auth. (Rapid City Regl. Hosp.) Aaa/AAA 5.000 09/01/22 400,000 381,628
SD Hsg. Devl. Auth. Homeownership Mrtge. Aa-1/AAA 6.550 05/01/14 90,000 95,720
SD Hsg. Devl. Auth. Homeownership Mrtge. Aa-1/AAA 6.600 05/01/17 180,000 190,015
SD Hsg. Devl. Auth. Homeownership Mrtge. Aa-1/AAA 6.000 05/01/21 200,000 205,638
SD Hsg. Devl. Auth. Homeownership Mrtge. Aa-1/AAA 6.100 05/01/17 100,000 105,429
SD Hsg. Devl. Auth. Homeownership Mrtge. Aa-1/AAA 5.400 05/01/24 400,000 397,424
SD Hsg. Devl. Auth. Homeownership Mrtge. Aa-1/AAA 5. 25 05/01/27 100,000 98,147
SD Hsg. Devl. Auth. Rev. Aa/NR 6.700 04/01/20 365,000 368,190
SD State Bldg. Auth. Rev. A-1/A+ 5.125 09/01/19 300,000 291,456
SD State Lease Rev. C.O.P.'s FSA Aaa/AAA 6.500 09/01/08 200,000 226,734
*SD Student Loan Finance Corp. Student Loan Notes A/NR 6.550 08/01/20 300,000 324,738
Sioux Falls, SD School Dist. #49-5 G.O. Aa/NR 5.500 07/01/20 150,000 152,340
----------
SOUTH DAKOTA MUNICIPAL BONDS (COST: $6,861,198) $7,063,667
----------
SHORT-TERM SECURITIES (2.0%)
Federated Tax-Free Fund 15 $15,079
Federated Intermediate Municipal Trust 78 131,543
----------
TOTAL SHORT-TERM SECURITIES (COST: $149,544) $146,622
----------
TOTAL INVESTMENTS IN SECURITIES (COST: $7,010,742) $7,210,289
OTHER ASSETS LESS LIABILITIES 105,273
----------
NET ASSETS $7,315,562
==========
</TABLE>
*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 June 30, 1999
Statement of Assets and Liabilities June 30, 1999 (Unaudited)
- -------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Investments in securities, at value (cost: $7,010,742) $7,210,289
Receivable for fund shares sold 16,708
Accrued dividends receivable 596
Accrued interest receivable 125,913
Prepaid expenses 2,425
----------
Total Assets $7,355,931
----------
LIABILITIES
Dividends payable $32,031
Accrued expenses 8,338
----------
Total Liabilities $40,369
----------
NET ASSETS $7,315,562
==========
Net assets are represented by:
Capital stock outstanding, at par $722
Additional paid-in capital 7,269,211
Accumulated undistributed net realized gain (loss) on investments (153,918)
Unrealized appreciation on investments 199,547
----------
Total amount representing net assets applicable to
721,640 outstanding shares of $.001 par value
common stock (200,000,000 shares authorized) $7,315,562
==========
Net asset value per share $10.14
==========
Statement of Operations for the six months ended June 30, 1999 (Unaudited)
- ---------------------------------------------------------------------------
INVESTMENT INCOME
Interest $207,915
Dividends 5,206
--------
Total Investment Income $213,121
--------
EXPENSES
Investment advisory fees $23,066
Distribution fees (12b-1) 28,464
Custodian fees 1,458
Transfer agent fees 6,160
Accounting service fees 14,069
Professional fees 2,850
Reports to shareholders 650
Directors fees 921
Transfer agent out of pockets 510
License, fees, and registrations 250
Insurance expense 259
--------
Total Expenses $78,657
Less expenses waived or absorbed
by the Fund's manager (29,358)
--------
Total Net Expenses $49,299
--------
NET INVESTMENT INCOME $163,822
--------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FUTURES
Net realized gain (loss) from:
Investment transactions $11,663
Futures transactions 53,833
Net change in unrealized appreciation (depreciation) of:
Investments (205,745)
Futures (17,802)
--------
Net Realized And Unrealized Gain (Loss)
On Investments and Futures $(158,051)
--------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $5,771
========
</TABLE>
The accompanying notes are an integral part of these financial statements.
Financial Statements June 30, 1999
Statement of Changes in Net Assets for the six months ended
June 30, 1999, and the year ended December 31, 1998
- ------------------------------------------------------------
<TABLE>
<CAPTION>
For the Six Months For the
Ended June 30, 1999 Year Ended
(Unaudited) December 31, 1998
----------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $163,822 $324,950
Net realized gain (loss) on investment
and futures transactions 65,496 (83,556)
Net change in unrealized appreciation (depreciation)
on investments and futures (223,547) 48,337
------------------------------------------------------------
Net Increase (Decrease) in Net Assets
Resulting From Operations $5,771 $289,731
------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment
income ($.22 and $.46 per share, respectively) $(163,822) $(324,950)
Return of capital distributions
($.03 and $.05 per share, respectively) (18,845) (37,238)
Distributions from net realized gain
on investment and futures transactions 0 0
------------------------------------------------------------
Total Dividends and Distributions $(182,667) $(362,188)
------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares $332,929 $1,063,581
Proceeds from reinvested dividends 126,947 230,313
Cost of shares redeemed (715,676) (803,533)
------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting
From Capital Share Transactions $(255,800) $490,361
------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS $(432,696) $417,904
NET ASSETS, BEGINNING OF PERIOD 7,748,258 7,330,354
------------------------------------------------------------
NET ASSETS, END OF PERIOD $7,315,562 $7,748,258
============================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
Notes to Financial Statements June 30, 1999 (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 Stateof
North Dakota on October 1, 1993, and commenced operations on April 5,
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 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 using a matrix system at fair value as
determined by ND Money Management. The matrix system has been developed
based on procedures approved by the Board of Directors 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 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, 1999, a net capital loss carry
forward totaling $201,612, which may be used to offset capital gains
realized during subsequent years through December 31, 2006.
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 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.
Securities held in collateralized accounts to cover initial margin
requirements on open futures contracts are noted in the Schedule of
Investments. The Statement of Assets and Liabilities reflects a
receivable or payable for the daily mark to market for variation margin
Certain risks may arise upon entering into futures contracts. These
risks may include changes in the value of the futures contracts that may
not directly correlate with changes in the value of the underlying
securities.
Use of Estimates - The preparation of financial statements in conformity
with 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, 1999, there were 200,000,000 shares of $.001 par value
authorized; 721,640 and 746,382 shares were outstanding at June 30,
1999, and December 31, 1998, respectively. Transactions in capital
shares were as follows:
Shares
----------------------------------------------------
For the Six Months For the
Ended June 30, 1999 Year Ended
(Unaudited) December 31, 1998
----------------------------------------------------
Shares sold 32,275 102,248
Shares issued on
reinvestment of dividends 12,275 22,109
Shares redeemed (69,292) (76,966)
---------------------------------------------------
Net increase (decrease) (24,742) 47,391
===================================================
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 $3,328
of investment advisory fees after partial waiver for the six months
ended June 30, 1999. The Fund has a payable to ND Money Management, Inc.
of $65 at June 30, 1999 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 $18,845
of 12b-1 fee expenses after partial waiver for the six months ended June
30, 1999. The Fund has a payable to Capital of $3,112 at June 30, 1999
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
$6,160 of transfer agency fees for the six months ended June 30, The
Fund has a payable to ND Resources, Inc. of $1,053 at June 30, 1999 for
transfer agency fees. 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 $14,069 of accounting service fees
for the six months ended June 30, 1999. The Fund has a payable to ND
Resources, Inc. of $2,465 at June 30, 1999 for accounting service fees.
Note 5.INVESTMENT SECURITY TRANSACTIONS
The cost of purchases and proceeds from the sales of investment
securities (excluding short-term securities) aggregated $1,354,195 and
$1,182,624, respectively, for the six months ended June 30, 1999.
Note 6.INVESTMENT IN SECURITIES
At June 30, 1999, the aggregate cost of securities for federal income
tax purposes was $7,010,742 and the net unrealized appreciation of
investments based on the cost was $199,547, which is comprised of
$241,577 aggregate gross unrealized appreciation and $42,030 aggregate
gross unrealized depreciation.
Financial Highlights Selected per share data and ratios for the period indicated
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the For The
Six Months For The For The For The For The Period Since
Ended June Year Year Year Year Inception
30, 1999 Ended Ended Ended Ended (April 5,1994)
Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Through Dec
(Unaudited) 1998 1997 1996 199531, 1994
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.38 $10.49 $10.50 $10.39 $9.86 $10.00
-----------------------------------------------------------------------------------
Income from Investment Operations:
Net investment income $.22 $.46 $.53 $.52 $.55 $.39
Net realized and unrealized gain (loss) on
investment and futures transactions (.21) (.06) .03 .14 .55 (.11)
-----------------------------------------------------------------------------------
Total Income (Loss) From
Investment Operations $.01 $.40 $.56 $.66 $1.10 $.28
------------------------------------------------------------------------- ---------
Less Distributions:
Dividends from net investment income $(.22) $(.46) $(.53) $(.52) $(.55) $(.39)
Return of capital distributions (.03) (.05) (.04) (.03) (.02) (.02)
Distributions from net realized gain .00 .00 .00 .00 .00 (.01)
----------------------------------------------------------------------------------
Total Distributions $(.25) $(.51) $(.57) $(.55) $(.57) $(.42)
----------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $10.14 $10.38 $10.49 $10.50 $10.39 $9.86
==================================================================================
Total Return .14%(A)(B) 3.88%(A) 5.10%(A) 6.58%(A) 11.47%(A) 3.72%(A)
Ratios/Supplemental Data:
Net assets, end of period (in thousands) $7,316 $7,748 $7,330 $6,397 $5,163 $2,890
Ratio of net expenses (after expense
assumption) to average net assets 1.30%(B)(C) 1.30%(c) 1.17%(C) 0.93%(C) 0.61%(C) 0.46%(B)(C)
Ratio of net investment income
to average net Assets 4.32%(B) 4.36% 4.70% 5.01% 5.35% 5.62%(B)
Portfolio turnover rate 16.11% 15.75% 3.35% 2.47% 0.66% 31.32%
</TABLE>
(A) Excludes contingent deferred sales charge of 4%.
(B) Ratio is annualized.
(C) During the periods indicated above, ND Holdings, Inc. assumed/waived
expenses of $29,358, $55,713, $68,538, $54,598, $37,053, and $24,509,
respectively. If the expenses had not been assumed/waived, the
annualized ratio of total expenses to average net assets would have
been 2.08%, 2.05%, 2.16%, 1.88%, 1.51% and 2.15%, respectively.
The accompanying notes are an integral part of these financial statements.
