ANNUAL REPORT
BOND FUNDS
March 31, 1995
SIT
Mutual Fund Group
A FAMILY
OF 100%
NO-LOAD FUNDS
* BOND FUND
* MINNESOTA TAX-FREE
INCOME FUND
* TAX-FREE
INCOME FUND
* U.S. GOVERNMENT
SECURITIES FUND
* MONEY MARKET FUND
A LOOK AT THE SIT MUTUAL FUNDS
The SIT Mutual Fund Group is managed by Sit Investment Associates, Inc. Sit
Investment was founded by Eugene C. Sit in July 1981 and is dedicated to a
single purpose, to be one of the premier investment management firms in the
United States. Sit Investment currently manages more than $3.5 billion for some
of America's largest corporations, foundations and endowments.
The SIT Mutual Fund Group is comprised of eleven 100% no-load funds. 100%
no-load means that the funds have no sales charges on purchases, no deferred
sales charges, no 12b-1 fees, no redemption fees and no exchange fees. Every
dollar you invest goes to work for you.
Some of the other features include:
* Free telephone exchange
* Dollar-cost averaging through automatic investment plan
* Electronic transfer of funds for purchases and redemptions
* Free check-writing privileges on bond funds
* Retirement accounts including IRAs, Keoghs and 401(k) Plans
[GRAPH]
SIT FAMILY OF FUNDS
SIT MUTUAL FUND GROUP
BOND FUNDS ANNUAL REPORT
TABLE OF CONTENTS
Page
Chairman's Letter ............................................... 2
Performance Review .............................................. 4
Fund Reviews and Portfolios of Investments
Bond Fund ................................................. 6
Minnesota Tax-Free Income Fund ............................ 10
Tax-Free Income Fund ...................................... 16
U.S. Government Securities Fund ........................... 26
Money Market Fund ......................................... 30
Notes to Portfolios of Investments .............................. 33
Statements of Assets and Liabilities ............................ 34
Statements of Operations ........................................ 35
Statements of Changes in Net Assets ............................. 36
Notes to Financial Statements ................................... 38
Financial Highlights ............................................ 41
Independent Auditors' Report .................................... 46
Federal Income Tax Information .................................. 47
This document must be preceded or accompanied by a Prospectus.
SIT MUTUAL FUND GROUP
CHAIRMAN'S LETTER - MAY 10, 1995
[PHOTO]
Dear Fellow Shareholders:
The recent slowing of the domestic economy coupled with continued
indications of moderate inflation seem to imply relative stability for interest
rates in the months ahead despite the dollar's recent weakness.
Economic Outlook
Economic growth slowed measurably during the first quarter of 1995 to
an estimated real GDP growth rate of +2.8%, compared with the robust +5.1%
recorded during the fourth quarter of 1994. Higher interest rates during the
past year appear to have finally dampened the growth of personal consumption
expenditures which is the largest component of GDP. Personal consumption
expanded by only +1.4% during the first quarter, down from +5.1% in the previous
quarter. Economic momentum should continue to subside as 1995 unfolds based on
the marked slowdown in residential investment and auto sales, decreases in
durable goods orders and employment growth, and fairly weak retail sales over
the past few months. The risk of recession, however, appears minimal given
strong exports, healthy corporate profits and balance sheet improvements. In
addition, steady consumer income growth should serve as a cushion for future
spending and has actually increased the domestic savings rate. We estimate that
real GDP growth will approximate +3.0% for the second quarter and should finish
1995 within a range of 2 1/2% to 3 1/2% for the calendar year.
One implication of moderate economic growth is a lessened risk of high
inflation, which thus far in 1995 seems to be the case. Significant inflation at
the commodity and producer levels has not yet surfaced despite full capacity
utilization figures, and consumer inflation remains a modest +2.9% as measured
by the year-over-year change in the Consumer Price Index. A potential threat to
price stability over the intermediate term, however, could stem from higher
import prices which is a product of the weak dollar. Overall, we believe the CPI
should generally remain below the 3.5% level in 1995.
The most surprising economic development of the past year was the
depreciation of the dollar against the G-10 currencies. During the past year,
the dollar declined -16% against the Japanese yen and -19% against the German
mark, an apparent indication of foreign dissatisfaction with the U.S. budget and
trade deficit situations and the so-called resolution of the Mexican peso
debacle. Despite the dollar's decline, the Federal Reserve has signalled an
unwillingness to act solely in defense of the currency mainly because our
domestic economy is already slowing. Japanese and German monetary authorities
did reduce their own short-term interest rates, but attempts to support the
dollar have generally been unsuccessful. The dollar remains within its
longer-term historical trading range with the G-10 currencies, albeit at the
lower end. Based on the competitive position of the U.S. in world markets, the
yen and the mark appear to be overvalued.
Recent indicators suggest that the Fed has thus far been successful in
its attempt to engineer a "soft landing" in which economic activity moderates to
a targeted +3.0% level of annual real GDP growth with contained inflation. After
raising the federal funds rate seven times since February 1994, domestic
monetary policy has remained unchanged since the last 50 basis point increases
in both the federal funds and discount rates this January. The Fed now appears
to be assessing the lagged effects of last year's interest rate increases before
making any further moves.
Following weak performance in 1994, fixed income markets performed well
during the first quarter of 1995 amidst mixed economic data, the failure of the
Senate to pass a balanced budget amendment, and the weakness of the dollar. The
yield on the 30-year Treasury bond, which was 7.09% a year ago, peaked at 8.17%
in early November and hs since contracted to 7.43% at March 31, 1995. The yield
on 3-month Treasury bills, which increased steadily from 3.56% on March 31,
1994, appears to have stabilized since December, and as of March 31, 1995, stood
at 5.85%. Substantial purchases of short-term U.S. Treasury securities by
foreign central banks to support the dollar have caused a steepening of the
yield curve in recent months. We expect short-term interest rates in the U.S.
will move moderately higher in the coming months, given the prospects for
continued growth.
On the fiscal policy front, the Republican party recently celebrated
their "First 100 Days," having fulfilled many of the provisions outlined in the
Contract With America, including a potential reduction in the capital gains tax
rate. Continued deficit reduction efforts will depend primarily on the ultimate
passage of spending cuts. We are encouraged that key members of Congress appear
to realize the importance of reducing the budget deficit. As next year's
election draws closer, Congress also appears to be evaluating the present
Medicare system in light of managed care alternatives, a change which may lead
to eventual budget improvement. The fiscal deficit has continued to narrow and
has been reduced by $23 billion so far this fiscal year. The tax reform debate
will continue as we move toward the 1996 election process, although we believe
that there is little probability of material change until after the elections.
While a change in the capital gains tax is possible, relief may be constrained
by near-term fiscal pressures.
FIXED INCOME STRATEGY SUMMARY
Based on our interest rate outlook, taxable and tax-exempt bond yields
should remain within their recent trading ranges. Economic activity and future
indicators of inflation will be the key determinants of future interest rate
levels.
Although taxable fixed income portfolios have been defensively
structured for most of the past year, we have recently extended portfolio
durations (price sensitivity to changes in interest rates) to more
market-neutral positions relative to comparative benchmark indices by increasing
exposure to long maturity U.S. Treasury bonds. Investment emphasis remains on
core positions in short- to intermediate-effective maturity securities that
provide high levels of income and relative price stability, such as GNMA
pass-through securities and VA vendee bonds. Based on our expectations for more
moderate economic activity later in the year, we believe that any increases in
bond yields will present opportunities to extend portfolio durations further.
[LINE GRAPH]
Historical Yield Trends
30-year Bond
Bond Buyer 40 Yield to Maturity
3-Month Bill
Our investment strategy for tax-exempt fixed income portfolios
consists primarily of seeking selected opportunities of value and greater call
protection. We continue to emphasize the hospital/health care sector as well as
the multifamily and single family housing sectors. We believe that proposed
changes at the Federal Housing Administration and at the Federal Department of
Housing and Urban Development will be gradual in nature and that strong housing
programs will not be materially affected.
As fellow shareholders, our goals remain focused on achieving
competitive investment results and helping investors achieve their long-term
investment goals. We are proud of the SIT fixed income funds' investment results
during a year with very volatile bond market returns and of our performance in
meeting our Funds' dual objectives of capital preservation and high income. We
appreciate your continued interest in the SIT Mutual Fund Group.
With best wishes,
/s/ Eugene C. Sit
Eugene C. Sit, CFA
Chairman and Chief Investment Officer
SIT MUTUAL FUND GROUP
PERFORMANCE SUMMARY - BOND FUNDS
BOND MARKET REVIEW
The Federal Reserve raised short term interest rates five more times since March
31, 1994. The federal funds rate is up +250 basis points to 6.00% and the
discount rate is up +225 basis points to 5.25%. The yield on 3-month Treasury
bills increased steadily from 3.56% on March 31, 1994 to 5.68% on December 31,
1994 and remained relatively stable over the first quarter closing at 5.85% on
March 31, 1995 . The yield on the 30-year Treasury bonds continued to move
gradually higher into the fourth quarter of 1994 and, since peaking in November
at 8.17%, has declined to 7.43% on March 31, 1995, a level only somewhat higher
than its yield of 7.09% one year ago.
Municipal bond yields have returned to their levels of last summer. The
yield on the Bond Buyer 40-Bond Index increased only one basis point during the
year to 6.37% on March 31, 1995, after reaching a high of 7.37% in late November
as pressures from tax loss selling, mutual fund redemptions and portfolio
deleveraging compounded the effect of continued Fed tightening. Municipal yield
levels stabilized in March of this year as "crossover" buyers, who found
relative value in tax-exempt bonds in late 1994, returned to taxable bonds.
Despite calendar 1994 being one of the worst years on record for bond
market returns, fixed income markets performed well during the first quarter of
1995. Domestic monetary policy has remained unchanged since the Fed tightening
in late January 1995, however, substantial purchases of short maturity U.S.
Treasury securities, resulting from efforts to support the U.S. dollar, has
caused a temporary steepening in the yield curve. Lack of new issuance in the
taxable bond market has kept the incremental yields offered by corporate and
mortgage securities at historically narrow spreads. Both long taxable and
tax-exempt yields have remained within contained ranges recently.
Although our bond funds' returns lagged relative to their respective
peer group universes during the first quarter of 1995 as long term interest
rates declined, our bond funds continued to provide investors with strong fiscal
year performance results, particularly in this very volatile period of bond
market returns.
<TABLE>
<CAPTION>
TOTAL RETURN - CALENDAR YEAR
YTD Yield as of Distribution
1988 1989 1990 1991 1992 1993 1994 1995 3/31/95 Rate (2)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SIT BOND FUND ---- ---- ---- ---- ---- 0.34%(1) -1.31% 4.25% 7.11% 6.62%
SIT MINNESOTA TAX-FREE
INCOME FUND ---- ---- ---- ---- ---- 1.60(1) 0.63 4.47 5.59(3) 5.70
(NASDAQ Symbol: SMTFX)
SIT TAX-FREE INCOME FUND 2.19%(1) 8.38% 7.29% 9.25% 7.71% 10.42 -0.63 4.35 5.73(4) 5.84
(NASDAQ Symbol: SNTIX)
SIT U.S. GOV'T. SECURITIES FUND
(NASDAQ Symbol: SNGVX) 7.86 11.04 10.97 12.87 5.43 7.34 1.77 2.85 6.89 6.51
SIT MONEY MARKET FUND ---- ---- ---- ---- ---- 0.46(1) 3.84 1.39 5.60
(NASDAQ Symbol: SNIXX)
Lehman Aggregate
Bond Index ---- ---- ---- ---- ---- 0.54 -2.92 5.04
Lehman 5-Year
Municipal Bond Index 0.75 9.07 7.70 11.41 7.62 8.73 -1.28 4.07
Lehman Inter. Government
Bond Index 6.40 12.68 9.56 14.11 6.93 8.17 -1.75 4.16
3-Month U.S.
Treasury Bill 7.10 8.73 8.04 5.72 3.56 3.13 4.47 1.51
SIT Investment Reserve Fund 6.65 8.53 7.59 6.14 3.81 2.34(5)
(Inception date 1/25/85. Converted to SIT Money Market Fund on 11/1/93.)
</TABLE>
<TABLE>
<CAPTION>
QUARTER SIX MONTH AVERAGE ANNUAL TOTAL RETURNS FOR
RETURN ENDED RETURN ENDED THE PERIODS ENDED MARCH 31, 1995
INCEPTION 3/31/95 3/31/95 1 YEAR 3 YEARS 5 YEARS SINCE
INCEPTION
<S> <C> <C> <C> <C> <C> <C> <C>
SIT BOND FUND 12/01/93 4.25% 5.18% 4.51% ---- ---- 2.42%
SIT MINNESOTA TAX-FREE
INCOME FUND 12/01/93 4.47 4.44 7.68 ---- ---- 5.08
SIT TAX-FREE INCOME FUND 09/29/88 4.35 4.18 7.00 6.99% 7.30% 7.50
SIT U.S. GOV'T. SECURITIES
FUND 06/02/87 2.85 3.38 4.47 6.08 8.14 8.43
SIT MONEY MARKET FUND 11/01/93 1.39 2.60 4.57 ---- ---- 4.04
(formerly SIT Investment Reserve Fund)
Lehman Aggregate Bond Index 5.04 5.44 4.99 ---- ---- 1.90
Lehman 5-Year Municipal Bond Index 4.07 3.58 5.71 6.30 7.47 7.34
Lehman Inter. Government Bond Index 4.16 4.05 4.27 6.16 8.18 8.19
3-Month U.S. Treasury Bill 1.51 2.90 5.17 ---- ---- 4.63
</TABLE>
(1) Period from inception through calendar year-end.
(2) Based on the last 12 monthly distributions of net investment income and
average NAV as of 3/31/95.
(3) For Minnesota residents in the 31%, 36% and 39.6% federal tax brackets, the
double exempt tax equivalent yields are 8.85%, 9.55% and 10.11%
respectively. (Assumes the maximum Minnesota tax bracket of 8.5%.)
(4) For individuals in the 31%, 36%, and 39.6% federal tax brackets, the
federal tax equivalent yields are 8.30%, 95% and 9.49% respectively.
(Income subject to stat tax, if any.)
(5) Period January 1, 1993, through October 31, 1993, at which time the Fund
converted to the SIT Money Market Fund.
Please remember that past performance is not a guarantee of future results and
is only one of the factors to consider in choosing a fund.
As with all investments, the share price and return may vary and you may have a
gain or loss at the time of sale.
SIT BOND FUND REVIEW
MARCH 31, 1995
[PHOTO] Michael C. Brilley, Senior Portfolio Manager
Douglas S. Rogers, CFA, Portfolio Manager
For the one year period ended March 31, 1995 the SIT Bond Fund provided
investors with a total rate of return of +4.51%, as compared to a +3.74% average
return for the Lipper Analytical Services Inc. Investment Grade Bond Fund
universe. The Fund's performance ranked 21st of 128 funds in its Lipper peer
group category. As of March 31, 1995, the Fund's 30-day SEC yield was 7.11% and
its 12-month distribution rate was 6.62%.
Over the past year the Fund has maintained a slightly defensive
posture, which proved advantageous. Interest rates continued to climb in the
second, third and fourth quarters of 1994, causing significant declines in bond
prices. During this period the Fund's coupon return was just enough to offset
price depreciation. Fortunately, interest rates reversed this trend in the first
quarter of 1995 and began to decline steadily. As a result of the more positive
outlook for bonds, we became more constructive on the market and lengthened the
Fund's duration (price sensitivity to changes in interest rates) to equal that
of the Lehman Aggregate Bond Index. We do not envision becoming more aggressive
until interest rates increase from their present levels as we expect that the
economy will begin to show more strength later in 1995.
We have gradually reduced our allocation to traditional mortgage pass
through securities and corporate bonds. Their incremental yields relative to
similar maturity U.S. Treasuries remain at historically narrow levels. Thus, we
have continued to purchase high grade asset backed securities and VA vendee
collateralized mortgage obligation (CMO's) that offer greater return potential.
INVESTMENT OBJECTIVE AND STRATEGY
The investment objective of the Fund is to maximize total return, consistent
with preservation of capital. The Fund's "total return" is a combination of
income, changes in principal value and reinvested dividends.
The Fund will pursue its objective by investing in a diversified portfolio of
fixe-income securities which include, but are not limited to, the following:
U.S. government securities; corporate debt securities; corporate commercial
paper; mortgage and other asset-backed securities.
PORTFOLIO SUMMARY
Net Asset Value 3/31/95: $9.48 Per Share
3/31/94: $9.69 Per Share
Total Net Assets: $3.53 Million
30-Day SEC Yield: 7.11%
Average Maturity: 16.4 Years
Modified Adjusted Duration: 4.7 Years (1)
(1) Duration is a measure which reflects estimated price sensitivity to a given
change in interest rates. For example, for an interest rate change of 1.0%, a
portfolio with a duration of 5 years would be expected to experience a price
change of 5%. Duration is based on the Adviser's assumptions regarding future
changes in interest rates and the expected average life of individual securities
held in the portfolio.
PORTFOLIO STRUCTURE
(% of total net assets)
[BAR GRAPH]
Agency Mortgage Pass-Through Securities 41.2
Government & Agency 17.5
Collateralized Mortgage Obligations 15.5
Corporate Bonds & Notes 13.2
Asset-Backed Securities 6.3
Other Assets & Liabilities 6.3
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS* CUMULATIVE TOTAL RETURNS*
Lipper Inter. Lehman Lipper Inter. Lehman
Bond Investment Grade Aggregate Bond Investment Grade Aggregate
Fund Bond Fund Avg. Bond Index Fund Bond Fund Avg. Bond Index
<C> <C> <C> <C> <C> <C> <C>
3 Months 4.25% 4.36% 5.04% 4.25% 4.36% 5.04%
(unannualized)
1 Year 4.51 3.74 4.99 4.51 3.74 4.99
Inception 2.42 1.05 1.90 3.23 1.40 2.53
(12/1/93)
* As of 3/31/95
</TABLE>
Performance is historical and assumes reinvestment of all dividends and capital
gains. Share price and return will vary so that a gain or loss may be realized
when shares are sold. Total return should not be taken as a representation of
future performance. Management fees and administrative expenses are included in
the Fund's performance; however, fees and expenses are not incorporated in the
Lehman Aggregate Bond Index. The Lipper averages and indices are obtained from
Lipper Analytical Services, Inc., a large independent evaluator of mutual funds.
[GRAPH]
GROWTH OF $10,000
SIT BOND FUND
LEHMAN AGGREGATE BOND INDEX
The sum of $10,000 invested at inception (12/1/93) and held until 3/31/95 would
have grown to $10,323 in the Fund or $10,253 in the Lehman Aggregate Bond Index
assuming reinvestment of all dividends and capital gains.
[PIE CHART]
QUALITY RATINGS
(% of total net assets)
LOWER OF MOODY'S OR S&P USED.
Agency Mortgage-Backed Securities & CMO's 56.7%
Government & Agency 17.5
AAA 1.3
AA 5.0
A 7.7
BBB 5.5
Other Assets & Liabilities 6.3
SIT BOND FUND
PORTFOLIO OF INVESTMENTS - MARCH 31, 1995
Quantity Name of Issuer Market Value (1)
U.S. GOVERNMENT SECURITIES (17.5%) (2)
650,000 U.S. Treasury Bond,
7.125%, 02/15/23 $619,729
(cost: $599,695)
ASSET-BACKED SECURITIES (6.3%)
50,000 CIT Group Securitization Corp.,
1993-1 A3, 6.10%, 6/15/18 46,141
100,000 Green Tree Financial Corp.,
1993-3 A7, 6.40%, 10/15/18 85,313
100,000 Green Tree Financial Corp.,
1993-4 A4, 6.60%, 1/1/19 89,750
Total asset-backed securities
(cost: $245,363) 221,204
CORPORATE BONDS & NOTES (13.2%)
125,000 Corestates Capital Corp., 9.625%,
2/15/01 135,938
175,000 Green Tree Financial Corp.,
10.25%, 6/1/02 194,906
125,000 Texas Instruments, Inc., 9.00%,
3/15/01 134,062
Total corporate bonds & notes
(cost: $477,187) 464,906
MORTGAGE PASS-THROUGH SECURITIES (3)(41.2%)
81,093 Federal Home Loan Mortgage
Corp., 10.25%, 9/1/09 85,742
Government National Mortgage
Association:
33,828 8.75%, 11/15/01 35,200
69,729 9.00%, 11/15/08 71,846
15,665 9.00%, 8/15/11 16,258
32,966 9.50%, 3/15/03 34,892
208,093 9.50%, 9/15/10 218,497
112,962 9.50%, 2/15/11 118,614
7,575 9.75%, 8/15/02 8,044
73,170 10.00%, 8/15/02 78,074
67,875 10.25%, 4/15/01 72,738
74,877 10.25%, 4/15/01 80,248
21,678 10.25%, 4/15/12 23,302
18,025 10.25%, 5/15/12 19,467
19,625 10.25%, 5/15/12 21,083
155,112 10.25%, 5/15/12 166,726
20,743 10.25%, 6/15/12 22,291
21,542 10.25%, 6/15/12 23,155
57,583 10.25%, 7/15/12 61,854
22,249 10.25%, 7/15/12 23,920
131,894 10.25%, 8/15/12 141,789
70,590 10.25%, 6/15/13 75,918
52,580 11.25%, 10/15/00 57,322
Total mortgage pass-through securities
(cost: $1,480,604) 1,456,980
COLLATERALIZED MORTGAGE OBLIGATIONS (15.5%)
135,000 FHLMC CMO #1617, 6.25%,
3/15/23 117,323
Vendee Mortgage Trust:
50,000 1993-3 2D, 5.75%, 6/15/13 44,375
50,000 1993 - 2C, 6.25%, 3/15/10 46,781
50,000 1992-1 2B, 7.75%, 9/15/10 49,893
150,000 1992-1 2D, 7.75%, 12/15/14 147,234
75,000 1992-2 2D, 7.00%, 9/15/15 70,500
75,000 1994-3 2D, 7.75%, 5/15/18 72,492
Total collateralized mortgage obligations
(cost: $558,222) 548,598
SHORT-TERM SECURITIES (5.4%)
38,260 Cash Management Fund, 5.85% 38,260
154,000 IBM Credit Corp., 5.92%,
4/4/95 153,924
Total short-term securities
(cost: $192,184) 192,184
Total investments in securities
(cost: $3,553,255) (6) $3,503,601
SIT MINNESOTA TAX-FREE INCOME FUND REVIEW
MARCH 31, 1995
[PHOTO] Michael C. Brilley, Senior Portfolio Manager
Debra A. Sit, CFA, Portfolio Manager
Municipal bond yields declined during the first quarter of 1995 from
their peak in late November 1994, thus returning to roughly the same levels of
last summer. The Fund's per share net asset value increased from $9.79 to $9.96,
and during the last twelve months, has ranged between $9.41 and $10.03. While
the Fund's +4.47% return for first quarter 1995 was the lowest among 36
Minnesota municipal bond funds tracked by Lipper Analytical Services, Inc., the
Fund's 12-month return of +7.68% remains ranked as the highest among the 30
Minnesota funds surveyed over that period. This variation in ranking reflects
the relative price stability of the Fund's investments compared with other
Minnesota bond funds. As of fiscal year end, the Fund's estimated average
duration was 5.5 years compared with approximately 6.5 years during calendar
1994.
The primary change in portfolio structure was an increase in cash
equivalents to 14.1%, resulting from accumulated new cash flow during the most
recent quarter. Fund assets now total $43.9 million, compared with $37.5 million
at calendar year end and $18.1 million one year ago. Other changes included
slight increases in the health care sector from 17.8% to 19.3% and in the
industrial development sector from 11.3% to 13.0%, and a decrease in the housing
sector from 52.5% to 49.3%. In addition, the Fund's holdings of non-rated
securities increased from 21% to approximately 36% during the first fiscal
quarter and remained at 34.7% as of March 31, 1995. We anticipate purchasing
longer term bonds to substantially reduce the Fund's short-term holdings during
the next quarter. We expect to maintain the Fund's quality distribution as
currently structured.
INVESTMENT OBJECTIVE AND STRATEGY
The investment objective of the Fund is to provide a high level of current
income exempt from federal regular income tax and Minnesota regular personal
income tax as is consistent with the preservation of capital.
The Fund will endeavor to invest 100% of its assets in municipal securities, the
income from which is exempt from federal regular income tax and Minnesota
regular personal income tax. The Fund anticipates that substantially all of its
distributions to its shareholders will be exempt as such. For investors subject
to the alternative minimum tax ("AMT"), up to 20% of the Fund's income may be
treated as an item of tax preference that is included in the alternative minimum
taxable income.
PORTFOLIO SUMMARY
Net Asset Value 3/31/95: $9.96 Per Share
3/31/94: $9.79 Per Share
Total Net Assets: $43.88 Million
30-Day SEC Yield: 5.59%
Tax Equivalent Yield: 10.11% (1)
Average Maturity: 17.16 Years
Duration to Estimated
Avg. Life: 5.51 Years (2)
(1) For individuals in the 39.6% Federal and 8.5% MN tax brackets.
(2) Duration is a measure which reflects estimated price sensitivity to a given
change in interest rates. For example, for an interest rate change of 1.0%,
a portfolio with a duration of 5 years would be expected to experience a
price change of 5%. Duration is based on the Adviser's assumptions
regarding future changes in interest rates and the expected average life of
individual securities held in the portfolio.
[BAR GRAPH]
PORTFOLIO STRUCTURE
(% of total net assets)
Single Family Mortgage Revenue 25.8
Multifamily Mortgage Revenue 23.5
Hospital/Health Care Revenue 19.3
Industrial Revenue/Pollution Control 13.0
Municipal Lease Rental 2.7
General Obligation 1.1
Other Revenue Bonds 0.5
Other Assets & Liabilities 14.1
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS* CUMULATIVE TOTAL RETURNS*
MN Tax-Free Lipper Lehman MN Tax-Free Lipper Lehman
Income MN Muni. 5-Year Muni. Income MN Muni. 5-Year Muni.
Fund Bond Fund Avg. Bond Index Fund Bond Fund Avg. Bond Index
<C> <C> <C> <C> <C> <C> <C>
3 Months 4.47% 6.65% 4.07% 4.47% 6.65% 4.07%
(unannualized)
1 Year 7.68 6.06 5.71 7.68 6.06 5.71
Inception 5.08 1.57 3.16 6.82 2.09 4.23
(12/1/93)
* As of 3/31/95
</TABLE>
Performance is historical and assumes reinvestment of all dividends and capital
gains. Share price and return will vary so that a gain or loss may be realized
when shares are sold. Total return should not be taken as a representation of
future performance. Management fees and administrative expenses are included in
the Fund's performance; however, fees and expenses are not incorporated in the
Lehman 5-Year Municipal Bond Index. The Lipper averages and indices are obtained
from Lipper Analytical Services, Inc., a large independent evaluator of mutual
funds.
[LINE GRAPH]
GROWTH OF $10,000
SIT MN TAX-FREE INCOME FUND
LEHMAN 5-YEAR MUNI BOND INDEX
The sum of $10,000 invested at inception (12/1/93) and held until 3/31/95 would
have grown to $10,682 in the Fund or $10,423 in the Lehman 5-Year Municipal Bond
Index assuming reinvestment of all dividends and capital gains.
[PIE CHART]
QUALITY RATINGS
(% of total net assets)
LOWER OF MOODY'S, S&P, FITCH OR DUFF &
PHELPS RATINGS USED.
A 14.7%
AA 17.1
AAA 13.6
BBB 5.8
Other Assets & Liabilities 14.1
Not Rated 34.7
ADVISER'S ASSESSMENT OF NOT-RATED SECURITIES
AA 1.5%
A 2.3
BBB 24.2
BB 6.7
Total 34.7%
SIT MINNESOTA TAX-FREE INCOME FUND
PORTFOLIO OF INVESTMENTS - MARCH 31, 1995
<TABLE>
<CAPTION>
Quantity Name of Issuer Market Value (1)
<S> <C> <C>
MUNICIPAL BONDS (85.9%) (2)
GENERAL OBLIGATION (1.1%)
475,000 Southeastern MN Multi-Co. Hsg. & Redev. Auth. Hsg. Dev. Series 1994 (Lake City G.O.),
6.00%, 8/1/10 $ 468,398
HOSPITAL/HEALTH CARE (19.3%)
500,000 Brooklyn Center Hlth. Care Fac. Rev. Series 1993 (Maranatha Proj.), 7.50%, 12/1/10 513,205
215,000 Fergus Falls Hlth. Care Fac. Auth. Series 1993A (Lake Region Hosp. Corp. Proj.),
6.25%, 9/1/04 210,210
1,685,000 Maplewood Health Care Fac. Rev. (VOA Care Ctrs. Proj.), 7.375%, 10/1/12 1,722,306
Minneapolis Hlth. Care Fac. Rev.:
890,000 Series 1991 (Jones-Harrison Residence Proj.), 8.35%, 9/1/21 954,739
1,000,000 Series 1993 (St. Olaf Res. Proj.), 7.00%, 10/1/18 973,070
1,100,000 New Ulm Hlth. Care Facs. Rev. Series 1994 (Highland Manor Proj.), 7.25%, 6/1/14 1,106,523
Pine River Hlth. Fac. Auth. Rev. Refunding Series 1994
(Lutheran Good Samaritan Proj.):
180,000 6.00%, 8/1/06 183,542
170,000 5.80%, 8/1/05 171,430
230,000 Puerto Rico Industrial, Tourist, Educ., Med. & Env. Ctrl. Fac. Fin. Auth. Hosp.
Rev. 1994 Series A (Ryder Mem. Hosp. Proj.), 5.75%, 5/1/99 226,051
Red Wing Hlth. Care Ctr. Fac. Rev. Refunding (River Region Obligated Group):
125,000 Series 1993A, 6.20%, 9/1/05 125,466
130,000 Series 1993A, 6.30%, 9/1/06 130,482
200,000 Series 1993B, 6.20%, 9/1/05 200,746
Sherburne Co. Nursing Home Fac. Rev. Series 1994 (Guardian Angels Care Ctr. Proj.):
75,000 7.30%, 6/1/07 76,544
80,000 7.35%, 6/1/08 81,643
90,000 7.40%, 6/1/09 92,149
555,000 7.50%, 6/1/14 566,328
140,000 7.75%, 6/1/15 144,041
150,000 7.75%, 6/1/16 155,037
820,000 Wadena Co. Hlth. Care Fac. Rev. Series 1994B, 7.45%, 9/1/15 840,509
8,474,021
INDUSTRIAL /POLLUTION CONTROL (13.0%)
Anoka Industrial Dev. Rev. Series 1994 (Lund Industries, Inc. Proj.):
500,000 6.40%, 9/1/03 (4) 505,145
500,000 6.50%, 9/1/04 (4) 506,275
Baxter Industrial Dev. Rev. Series 1979 (Kmart Corp. Proj.):
90,000 6.75%, 2/1/98 90,095
100,000 6.75%, 2/1/99 100,121
Cloquet Pollution Control Rev. (Potlach Corp. Proj.):
110,000 Series 1978, 6.50%, 6/1/08 109,889
635,000 Series 1979, 6.75%, 6/1/09 634,346
2,025,000 Plymouth Rev. Refunding Series 1992 (Carlson Ctr. Proj.) (LOC First Bank, N.A.),
7.00%, 4/1/12 2,102,213
Richfield Cmty. Dev. Rev. Refunding 1994 (Richfield Shoppes Proj.):
1,390,000 7.50%, 10/1/04 1,446,448
200,000 8.375%, 10/1/05 212,712
5,707,244
MULTIFAMILY MORTGAGE (23.5%)
Burnsville Multifamily Hsg. Rev. Refunding:
500,000 Series 1991 (Atrium Proj.) (Trygg-Hansa ins.), 7.20%, 5/1/11 528,050
960,000 Series 1994 (Bridgeway Apts. Proj.), 7.25%, 2/1/14 975,091
65,000 Eden Prairie Multifamily Hsg. Rev. Refunding Series 1990A
(Welsh Parkway Apts. Ltd. Proj.- FHA insured), 8.00%, 7/1/26 69,567
Hopkins Elderly Hsg. Rev. Refunding (St. Therese Southwest Proj.):
1,600,000 Series 1994A (Asset Gty. insured), 6.25%, 3/1/14 1,601,120
360,000 Series 1994B, 9.00%, 11/1/19 378,475
500,000 Hutchinson Hsg. Facs. Rev. Series 1994 (Prince of Peace Proj.), 7.375%, 10/1/12 512,850
565,000 Minneapolis Multifamily Hsg. Rev. Series 1994
(Findley Place Townhomes Proj) (Section 8), 7.00%, 12/1/16 (4) 584,509
MN HFA Multifamily Hsg. Dev. Rev.:
20,000 Series 1977, 6.25%, 2/1/08 20,319
500,000 Series 1979 (Section 8), 7.00%, 2/1/22 509,250
395,000 Series 1978B, 7.10%, 2/1/21 401,984
25,000 Series 1988A, 7.70%, 8/1/08 26,586
Minnetonka Hsg. Facs. Rev. Series 1994 (Beacon Hill Housing Proj.):
1,000,000 7.50%, 6/1/14 1,022,590
890,000 7.00%, 6/1/04 898,250
525,000 Minnetonka Multifamily Hsg. Rev. Refunding Subordinate Series 1994C
(Brier Creek Proj.), 8.00%, 12/20/16 549,308
325,000 Sandstone Econ. Dev. Auth. Hsg. & Dev. Rev. Series 1994A (Family Apts. Proj.),
8.00%, 1/1/12 337,483
500,000 St. Paul Hsg. & Redev. Multifamily Refunding Series 1992 (Point of St. Paul Proj.)
(FNMA-backed), 6.60%, 10/1/12 513,475
966,042 St. Paul Residual Interest Rev. Series 1995 Convertible Capital Appreciation
Bonds, Zero coupon, 7.23% Effective Yield on Purchase Date, 9/1/11 311,790
1,095,000 Washington Co. Hsg. & Redev. Auth. Multifamily Hsg. Rev. Refunding Series 1994
(White Bear Lake Transitional Hsg. Proj.), 6.625%, 8/1/24 1,085,759
10,326,456
LEASE RENTAL (2.7%)
585,000 Burnsville Solid Waste Rev. Series 1990 (Freeway Transfer Inc. Proj.),
9.00%, 4/1/10 (4) 649,239
500,000 Eden Prairie Hsg. & Redev. Auth. Lease Rev. Series 1992B (City Hall Proj.),
6.25%, 2/1/09 514,905
1,164,144
SINGLE FAMILY MORTGAGE (25.8%)
6,275,148 Brooklyn Center/Columbia Heights/Moorhead/Robbinsdale Econ. Dev. Auth. Residual
Interest Rev. Series 1992B (FNMA backed) Zero Coupon, 7.15% Effective Yield on
Purchase Date, 11/1/14 1,586,232
1,000,000 Dakota County Hsg. & Redev. Auth. Single Family Mtg. Rev. Series 1994A (FNMA-backed),
6.70%, 10/1/09 (4) 1,046,750
795,000 Dakota/Wash./Stearns Cos. Hsg. & Redev. Auth. Single Family Rev. Refunding
Series 1994A (FNMA-backed), 6.50%, 9/1/10 (4) 813,659
Minneapolis CDA & St. Paul HRA Homeownership Mtg. Family Hsg. Prog. Series 1984:
2,420,000 7.875%, 7/1/17 2,508,620
235,000 7.75%, 7/1/06 244,097
160,000 7.50%, 7/1/98 165,304
45,000 Minneapolis Hsg. & Redev. Auth. Single Family Mtg. Rev. Refunding Series 1978,
6.75%, 5/1/09 45,738
205,000 Minneapolis Redev. Mtg. Rev. Series 1987A (Riverplace Proj.) (LOC Bk. of Tokyo),
7.00%, 1/1/07 211,716
35,000 Minneapolis/ St. Paul Hsg. Fin. Bd. Single Family Mtg. Rev. Series 1989A (GNMA backed),
7.65%, 12/1/00 (4) 36,709
MN HFA Res. Mtg. Rev. Series 1985A:
935,000 9.28%, 7/1/05 974,597
115,000 Zero Coupon, 5.60% Effective Yield on Purchase Date, 7/1/95 112,786
MN HFA Single Family Mtg. Rev.:
120,000 Series 1988D, 8.25%, 8/1/20 (4) 124,971
25,000 Series 1989B, 7.05%, 1/1/03 26,117
75,000 Series 1989B, 7.05%, 7/1/03 78,517
320,000 Series 1990C, 7.70%, 7/1/14 337,712
45,000 Series 1991A, 7.05%, 7/1/22 (4) 46,509
600,000 Series 1991A, 7.45%, 7/1/22 (4) 633,804
235,000 Series 1992B-1, 6.75%, 1/1/26 (4) 239,839
140,000 Series 1992G, 6.10%, 1/1/11 141,958
3,800,000 Moorhead Single Family Mtg. Rev. Refunding Series 1992B Zero Coupon, 7.00% Effective
Yield on Purchase Date, 8/1/11 1,186,930
700,000 St. Paul Hsg. & Redev. Auth. Single Family Mtg. Rev. Refunding Series 1995
(FNMA-backed), 6.125%, 3/1/17 704,949
50,000 Vadnais Heights Hsg. Dev. Rev. Series 1979A, 7.50%, 8/1/09 50,458
11,317,972
OTHER BONDS (0.5%)
230,000 Minneapolis Cmty. Dev. Agy. Common Bond Fund Series 1993-5, 6.125%, 12/1/06 (4) 232,424
Total municipal bonds (cost: $37,234,185) 37,690,659
SHORT-TERM SECURITIES (13.4%)
1,425,639 Minnesota Municipal Cash Management Fund, 4.10% 1,425,639
1,545,000 Mendota Heights Multifamily Hsg. Mtg. Rev. Refunding Series 1991A
(Lexington Apts. Proj.)(LOC Sumitomo Bank), Variable Rate Weekly Put Bonds,
4.35%, 4/5/95 1,545,000
1,000,000 Minneapolis MN G.O. Series 1995 Variable Rate Weekly Put Bonds (Arena Acquisition
Project) (LOC Bayerische Vereinsbank, AG), 4.15%, 4/6/95 1,000,000
900,000 Minnesota Higher Education Coordinating Board Revenue Refunding Series 1994A,
Variable Rate Weekly Put Bonds (LOC Norwest Bank), 4.15%, 4/6/95 900,000
1,000,000 University of Minnesota Revenue Series 1985E Variable Rate C.P. (LOC First Bank
Minneapolis), 3.70%, 4/3/95 1,000,000
Total short-term securities (cost: $5,870,639) 5,870,639
Total investments in securities (cost: $43,104,824) (6) $43,561,298
</TABLE>
See accompanying notes to portfolios of investments on page 33.
SIT TAX-FREE INCOME FUND REVIEW
MARCH 31, 1995
[PHOTO] Michael C. Brilley, Senior Portfolio Manager
Debra A. Sit, CFA, Portfolio Manager
Municipal bond yields declined during the first quarter of 1995 from
their peak in late November 1994, thus returning to roughly the same levels of
last summer. The Fund's net per share asset value increased slightly from $9.63
to $9.70 and during the last twelve months, has ranged between $9.25 and $9.83.
While the Fund's +4.35% return for first quarter 1995 ranked nearly last among
223 funds tracked by Lipper Analytical Services, Inc., for the 12 months ended
March 31, 1995, the Fund's return of +7.00% ranked 30th of 193 funds in its
Lipper category. In addition, the Fund experienced much less price variability
than other funds during this volatile period.
Fund assets decreased substantially during the year from $325 million
to $255 million, primarily due to shareholder withdrawals during the summer
months as well as at the end of the 1994 for tax purposes. Major changes in
industry sector weightings included a decrease in industrial
development/pollution control bonds from 16.4% to 12.0% and an increase in
health care from 19.3% to 22.7%. In addition, the recent sale of the San
Joaquin, California Toll Road issue that had some exposure to the Orange County,
California investment pool eliminated the Fund's 5.1% weighting in
transportation.
We took advantage of the recent decline in bond yields to reduce the
Fund's weightings in BBB-rated securities to 33.3% at the end of the fiscal year
from 35.7% one year ago and from 40.2% at calendar year end. The Fund's
weighting in A-rated issues also declined from 44.5% to 37.0% during the year.
Sale proceeds were used to accumulate cash equivalents to a 12.3% portfolio
weighting as of March 31, 1995. Thus, the Fund's 30-day SEC yield declined from
6.34% to 5.73% during the most recent quarter, compared with 6.02% as of March
31, 1994. Likewise, the Fund's duration declined from 6.2 years to 5.4 years
during the most recent quarter and from 6.3 years twelve months ago.
We expect bond yields to continue trading within a contained range in
the near term. Within this environment, we hope to find selective opportunities
to reinvest cash in securities with attractive value and greater call protection
and which meet the Fund's dual objectives of high income and stability of
principal.
INVESTMENT OBJECTIVE AND STRATEGY
The objective of the Fund is to provide a high level of current income that is
exempt from federal income tax, consistent with the preservation of capital, by
investing in investment-grade municipal securities.
Such municipal securities generate interest that is exempt from regular federal
income taxes. Of the municipal securities in which the Fund invests, 100% will
be rated investment grade at time of purchase.
PORTFOLIO SUMMARY
Net Asset Value 3/31/95: $9.70 Per Share
3/31/94: $9.63 Per Share
Total Net Assets: $255.16 Million
30-Day SEC Yield: 5.73%
12 Month Distribution Rate: 5.84%
Tax Equivalent Yield: 9.49% (1)
Average Maturity: 13.54 Years
Duration to Estimated
Avg. Life: 5.40 Years (2)
(1) For individuals in the 39.6% federal tax bracket.
(2) Duration is a measure which reflects estimated price sensitivity to a given
change in interest rates. For example, for an interest rate change of 1.0%,
a portfolio with a duration of 5 years would be expected to experience a
price change of 5%. Duration is based on the Adviser's assumptions
regarding future changes in interest rates and the expected average life of
individual securities held in the portfolio.
[BAR GRAPH]
PORTFOLIO STRUCTURE
(% of total net assets)
Hospital/Health Care Revenue 22.7%
Multifamily Mortgage Revenue 21.2
Single Family Mortgage Revenue 19.2
Industrial Revenue/Pollution Control 12.0
Lease Rental/Municipal Lease 3.9
Other Municipal Bonds 2.7
Public Facilities 2.5
Education/Student Loan 1.7
Utilities 1.2
Escrowed to Maturity/Pre-Refund 0.6
Other Assets & Liabilities 12.3
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS* CUMULATIVE TOTAL RETURNS*
Lipper Lehman Lipper Lehman
Tax-Free General Muni. 5-Year Muni. Tax-Free General Muni. 5-Year Muni.
Income Fund Bond Fund Avg. Bond Index Income Fund Bond Fund Avg. Bond Index
<C> <C> <C> <C> <C> <C> <C>
3 Months 4.35% 6.96% 4.07% 4.35% 6.96% 4.07%
(unannualized)
1 Year 7.00 6.20 5.71 7.00 6.20 5.71
3 Years 6.99 6.95 6.30 22.47 22.34 20.13
5 Years 7.30 7.82 7.47 42.26 45.69 43.34
Inception 7.50 7.89 7.34 60.10 63.80 58.50
(9/29/88)
* As of 3/31/95
</TABLE>
Performance is historical and assumes reinvestment of all dividends and capital
gains. Share price and return will vary so that a gain or loss may be realized
when shares are sold. Total return should not be taken as a representation of
future performance. Management fees and administrative expenses are included in
the Fund's performance; however, fees and expenses are not incorporated in the
Lehman 5-Year Municipal Bond Index. The Lipper averages and indices are obtained
from Lipper Analytical Services, Inc., a large independent evaluator of mutual
funds.
[LINE GRAPH]
GROWTH OF $10,000
SIT LEHMAN 5-YEAR
TAX-FREE MUNI. BOND INDEX
INCOME FUND
The sum of $10,000 invested at inception (9/29/88) and held until 3/31/95 would
have grown to $16,010 in the Fund or $15,850 in the Lehman 5-Year Municipal Bond
Index assuming reinvestment of all dividends and capital gains.
[PIE CHART]
QUALITY RATINGS
(% of total net assets)
LOWER OF MOODY'S, S&P, FITCH OR DUFF & PHELPS RATINGS USED.
AAA 7.1%
AA 9.4
A 37.0
BBB 33.3
BB 0.9
Other Assets & Liabilities 12.3
Total number of holdings: 210
SIT TAX-FREE INCOME FUND
PORTFOLIO OF INVESTMENTS - MARCH 31, 1995
<TABLE>
<CAPTION>
Quantity Name of Issuer Market Value (1)
MUNICIPAL BONDS (87.7%) (2)
ALASKA (1.0%)
<S> <C> <C>
AK Industrial Dev. & Export Auth. Rev. Refunding Revolving Fund Series 1993A:
430,000 5.60%, 4/1/03 $ 432,468
2,005,000 5.95%, 4/1/06 2,033,651
2,466,119
ARIZONA (1.2%)
AZ Hlth. Fac. Auth. Hosp. System Refunding Rev. Series 1991 (Phoenix Mem. Hosp.):
1,105,000 8.00%, 6/1/06 1,153,664
725,000 8.20%, 6/1/21 764,940
1,070,000 Valley HDC Phoenix Hsg. Rev. 1979 (Roosevelt Plaza) (Section 8), 8.00%, 10/1/20 1,093,893
3,012,497
ARKANSAS (2.6%)
Drew Co. Public Fac. Bd. Single Family Mtg. Rev. Refunding:
262,331 Series 1993B, 7.75%, 8/1/11 278,461
482,847 Series 1993-A2 (FNMA backed), 7.90%, 8/1/11 528,983
395,289 Jacksonville Res. Hsg. Fac. Bd. Single Family Mtg. Rev. Refunding Series 1993B,
7.75%, 1/1/11 430,627
421,507 Lonoke Co. Res. Hsg. Fac. Bd. Single Family Mtg. Rev. Refunding 1993B, 7.375%,
4/1/11 455,683
2,100,000 Maumelle HDC First Lien Rev. Refunding 1992 Series A (Section 8), 7.875%, 7/1/09 2,248,323
2,430,000 Saline Co. Res. Hsg. Fac. Bd. Single Family Mtg. Rev. Refunding Series 1992,
7.875%, 3/1/11 2,588,849
6,530,926
CALIFORNIA (4.4%)
1,650,000 Gilroy Unified School Dist. Refunding Certificates of Participation 1994, 5.85%,
7/1/08 1,612,677
2,000,000 Glendale Hosp. Rev. Refunding Series 1994 (Verdugo Hills Hosp.), 8.00%, 1/1/12 2,091,140
5,000 Lancaster/Grand Terrace/Huntington Park HFA Res. Mtg. Rev. Refunding Series 1991A,
7.10%, 1/1/10 5,175
885,000 Los Angeles Home Mtg. Rev. 1983 Zero Coupon, 10.84% Effective Yield on Purchase
Date, 6/1/16 93,598
Los Angeles Co. Certificates of Participation 1993 (Disney Parking Proj.)
Zero Coupon:
900,000 6.50% Effective Yield on Purchase Date, 3/1/06 442,980
4,865,000 6.75% Effective Yield on Purchase Date, 9/1/08 2,009,440
1,000,000 Paramount Unified School Dist. Convertible Capital Appreciation
Certificates of Participation (Land Acquisition Program) 1994 Series B
(FSA insured) Zero Coupon, 6.85% Effective Yield on Purchase Date, 9/1/14 669,240
2,100,000 Riverside Co. Community Fac. Dist. Lakehills 1984 Series 2, 9.90%, 9/1/06 2,207,331
1,550,000 Sacramento Public Television Fac. Rev. 1989 Series A (KVIE inc.) LOC First
Interstate Bank, 7.50%, 7/1/20 1,612,574
810,000 Santa Clara Co. HA Multifamily Mtg. Rev. Series 1983
(FHA insured) (Meadows Proj.) Zero Coupon, 9.78% Effective
Yield on Purchase Date, 3/1/99 570,556
11,314,711
COLORADO (1.8%)
485,000 LaPlata Co. Southwestern CO Single Family Mtg. Participation Rev.
Refunding 1991 Series A, 7.375%, 9/1/11 506,912
505,000 Pueblo Co. Single Family Mtg. Rev. Series 1978, 7.30%, 12/1/09 505,000
790,000 Silverthorne Sales Tax Rev. Series 1992, 7.45%, 4/15/13 836,397
670,000 Thornton Single Family Mtg. Rev. Refunding 1992 Series A, 8.05%, 8/1/09 719,794
645,000 Vail Single Family Mtg. Rev. Refunding Series 1992, 8.125%, 6/1/10 695,104
1,195,000 Westminster Multifamily Hsg. Rev. Refunding Series 1992 (Ironwood at the
Ranch Proj.), 7.45%, 12/1/10 1,234,029
4,497,236
CONNECTICUT (0.7%)
1,645,000 CT HFA Hsg. Mtg. Fin. Prgm. Series 1985A, 7.625%, 11/15/17 1,708,398
DELAWARE (0.4%)
16,825,000 DE EDA Multifamily Rev. 1985 (GNMA collateralized) (Valley Stream Apts. Proj.)
Zero Coupon, 8.10% Effective Yield on Purchase Date, 12/20/27 1,080,333
DISTRICT OF COLUMBIA (0.6%)
1,500,000 District of Columbia HFA Multifamily Hsg. Refunding Rev. Series 1992C (FHA
insured) (Chastleton Dev.), 6.95%, 7/1/27 1,545,105
FLORIDA (2.9%)
495,000 Brevard Co. HFA Single Family Mtg. Rev. Refunding Series 1993 Zero Coupon, 7.38%
Effective Yield on Purchase Date, 5/20/12 143,060
5,910,000 Broward Co. Resource Recovery Rev. Series 1984 (SES Broward Co. LP South Proj.),
7.95%, 12/1/08 6,430,848
715,000 Jacksonville Hlth. Fac. Auth. Industrial Dev. Rev. Refunding Series 1992
(Natl. Benevolent Assn. - Cypress Village Proj.), 7.10%, 12/1/06 722,357
7,296,265
ILLINOIS (13.4%)
6,100,000 Chicago Res. Mtg. Rev. Refunding Series 1992B (MBIA insured) Zero Coupon,
7.30% Effective Yield on Purchase Date, 10/1/09 2,303,543
2,000,000 Collinsville (City of) Madison Co. Industrial Dev. Rev. Refunding
(Drury Inn-Collinsville Proj.) Series 1993, 6.00%, 11/1/04 1,922,420
Edwardsville Elderly Hsg. Corp. 1978 (Section 8):
45,000 7.75%, 6/1/95 45,450
50,000 7.75%, 6/1/97 50,625
60,000 7.75%, 6/1/99 60,600
65,000 7.75%, 6/1/00 65,569
75,000 7.75%, 6/1/02 75,581
85,000 7.75%, 6/1/04 85,545
95,000 7.75%, 6/1/05 95,515
110,000 7.75%, 6/1/07 110,568
1,000,000 IL DFA Econ. Dev. Rev. Refunding Series 1992 (Drury Inn-Schaumberg Proj.) (NWNL),
7.125%, 9/15/12 1,033,170
IL Educ. Fac. Auth. Rev. Series 1992 (Chicago Osteopathic Hlth. Sys.):
595,000 7.00%, 5/15/99 618,163
125,000 7.125%, 5/15/00 128,894
610,000 7.125%, 5/15/01 628,636
3,000,000 IL HDA Elderly Hsg. Rev. Series 1992C (Village Ctr.) (Section 8), 6.85%, 3/1/20 3,060,270
IL HDA Multifamily Hsg. Rev.:
Refunding 1992 Series A (Section 8):
2,150,000 6.65%, 7/1/04 2,227,766
1,495,000 7.00%, 7/1/10 1,565,175
Refunding 1991 Series C (Section 8):
260,000 7.35%, 7/1/11 276,286
100,000 7.40%, 7/1/23 105,531
90,000 1985 Series B (FHA insured) (Section 8), 9.25%, 7/1/28 92,929
1,270,000 IL HDA Res. Mtg. 1987 Series A, 7.00%, 8/1/17 1,304,379
IL Hlth. Fac. Auth. Rev.:
Refunding Series 1993 (Lutheran Social Svcs. IL):
610,000 5.70%, 8/15/00 579,634
475,000 5.80%, 8/15/01 448,842
525,000 6.00%, 8/15/03 491,158
545,000 6.10%, 8/15/04 507,041
860,000 Refunding Series 1993 (Northern IL Med. Ctr. Proj.), 5.75%, 9/1/08 817,525
5,100,000 Refunding Series 1992 (Galesburg Cottage Hosp.) (Asset Guaranty insured),
6.25%, 5/1/11 5,124,123
1,000,000 Refunding Series 1994 (Passavant Memorial Area Hospital Assn.), 5.95%, 10/1/11 921,100
1,000,000 Refunding Series 1994 (Friendship Village Schamburg), 6.25%, 12/1/04 1,009,200
Refunding Series 1994 (St. Elizabeth's Hosp. of Chicago, Inc.):
2,160,000 7.25%, 7/1/05 2,220,955
1,000,000 7.625%, 7/1/10 1,025,240
1,000,000 Refunding Series 1989A (Masonic Med. Ctr.), 7.60%, 10/1/07 1,056,510
1,040,000 Rochelle Water & Sewer Rev. Refunding Series 1992, 7.15%, 5/1/14 1,081,402
580,000 Rock Island Res. Mtg. Rev. Refunding Series 1992, 7.70%, 9/1/08 616,639
1,140,000 Springfield Community Improvement Rev. 1985 (Garden Court Proj. - FHA insured)
(Section 8) (MBIA insured), 10.50%, 4/1/26 1,332,797
2,315,000 Urbana Res. Mtg. Rev. Refunding 1991 Series B Zero Coupon, 7.39% Effective Yield on
Purchase Date, 3/1/07 983,968
34,072,749
INDIANA (7.5%)
1,800,000 Elkhart Co. Hosp. Auth. Rev. Series 1992 (Goshen Hosp. Proj.), 7.25%, 7/1/05 1,878,534
1,095,000 IN Bond Bank Special Prgm. Series 1993B (Gary Sanitary Dist.), 6.15%, 2/1/08 1,081,521
IN Educ. Fac. Auth. Educ. Fac. Rev. Series 1992 (Manchester College Proj.):
515,000 6.45%, 10/1/04 524,502
250,000 6.50%, 10/1/05 252,643
305,000 6.60%, 10/1/06 308,425
350,000 6.75%, 10/1/08 363,664
370,000 6.80%, 10/1/09 375,679
1,000,000 6.85%, 10/1/18 991,920
IN Hlth. Fac. Fin. Auth. Hosp. Rev.:
Series 1991 (Jackson Co. Schneck Mem. Hosp. Proj.):
300,000 7.25%, 2/15/00 310,878
325,000 7.30%, 2/15/01 338,130
1,200,000 7.50%, 2/15/05 1,263,288
Series 1992 (Fayette Mem. Hosp. Proj.):
250,000 7.00%, 10/1/02 259,127
295,000 7.10%, 10/1/03 306,617
315,000 7.20%, 10/1/04 328,863
340,000 7.25%, 10/1/05 353,471
365,000 7.25%, 10/1/06 377,644
390,000 7.30%, 10/1/07 402,928
420,000 7.30%, 10/1/08 431,861
Series 1992 (Floyd Mem. Hosp. Proj.):
460,000 6.75%, 2/15/06 478,294
595,000 6.80%, 2/15/07 617,378
2,000,000 Series 1992 (Mem. Hosp. & Hlth. Care Ctr. Proj.), 7.35%, 3/1/12 2,037,720
260,000 IN HFA Single Family Mtg. Rev. 1985 Series A, 10.20%, 1/1/16 273,309
830,000 IN HFA Home Mtg. Prog. 1990 Series F1 (GNMA collateralized), 7.50%, 1/1/16 883,933
2,750,000 Indianapolis Econ. Dev. Refunding & Imprv. Rev. Series 1992 (Natl. Benevolent
Assn.-Robin Run Village Proj.), 7.25%, 10/1/10 2,781,900
970,000 Marion HC Mtg. Rev. Refunding Series 1994 (Hilltop Towers Project)
(Section 8), 6.90%, 10/1/10 999,381
Valparaiso Waterworks Rev. Series 1992:
300,000 6.70%, 4/1/08 315,249
330,000 6.75%, 4/1/09 346,517
200,000 6.80%, 4/1/12 209,178
19,092,554
IOWA (1.4%)
1,500,000 IA Fin. Auth. Small Business Dev. Refunding Rev. Series 1992
(University Civic Ctr. Court Assn. Proj.), 7.40%, 3/1/17 1,583,970
Polk Co. Hlth. Svcs. Residential Care Fac. Rev. Series 1991:
460,000 7.25%, 2/1/06 479,720
1,500,000 7.50%, 2/1/16 1,571,100
3,634,790
KANSAS (0.9%)
545,000 Geary Co. Single Family Mtg. Rev. 1980 (FGIC insured), 10.75%, 4/1/12 572,348
7,660,000 Kansas City Single Family Mtg. Rev. Series 1982A Zero Coupon, 11.23%
Effective Yield on Purchase Date, 11/1/14 889,862
2,170,000 Olathe & Labette Cos. Mtg. Loan Rev. 1991 Series B (GNMA collateralized)
Zero Coupon, 7.56% Effective Yield on Purchase Date, 2/1/23 283,315
615,000 Sedgwick Co. Mtg. Loan Rev. Series 1987C (GNMA collateralized), 8.625%, 11/1/18 665,645
2,411,170
KENTUCKY (0.6%)
1,500,000 Jefferson Co. First Mtg. Rev. Series 1994 (Christian Church Homes Proj.), 6.00%,
11/15/09 1,389,735
10,000 Louisville Res. Mtg. 1984 Series Zero Coupon, 10.20% Effective Yield on
Purchase Date, 7/1/95 9,746
1,399,481
LOUISIANA (5.5%)
2,187,957 Bossier Public Trust Fin. Auth. Single Family Mtg. Rev. Refunding Series 1992,
8.50%, 11/1/11 2,365,838
730,000 Calcasieu Parish Industrial Dev. Rev. 1975 (Cities Service Co. Proj.), 7.80%,
12/1/05 733,548
610,000 Calcasieu Parish Public Trust Auth. Mtg. Rev. Refunding 1992 Series B, 6.875%,
11/1/12 631,509
5,650,000 Denham Springs/Livingston Hsg. & Mtg. Fin. Auth. Residual Rev. Series 1992C
Zero Coupon, 7.65% Effective Yield on Purchase Date, 7/10/14 1,355,492
4,000,000 Houma-Terrebonne Public Trust Fin. Auth. Residual Rev. Series 1992C Zero Coupon,
7.60% Effective Yield on Purchase Date, 7/10/14 969,160
1,955,000 LA HFA Residual Lien Refunding Mtg. Rev. Series 1992 Zero Coupon,
7.27% Effective Yield on Purchase Date, 9/1/13 1,952,713
465,044 LA PFA Single Family Mtg. Purchase Rev. Series 1992 (Lafayette PTFA Mtg.
Acquisition), 7.50%, 10/1/15 494,560
LA PFA Rev. Multifamily Hsg. Series 1991 (Volunteers of America Natl. Hsg. Corp.)
(Asset Guaranty insured):
1,290,000 7.25%, 11/1/04 1,391,820
3,000,000 7.75%, 11/1/16 3,223,980
1,000,000 Monroe - McKeen Plaza Hsg. Dev. Corp. Multifamily Hsg. Rev. Refunding Series
1994A (Murray Plaza Apts. - Section 8), 6.80%, 2/1/12 1,024,470
14,143,090
MAINE (0.2%)
465,000 ME HA Mtg. Purchase 1987 Series A-2, 7.65%, 11/15/15 481,749
MASSACHUSETTS (3.3%)
MA Hlth. & Educ. Fac. Auth. Rev.:
655,000 Series 1982 (Malden Hosp.) (FHA insured), 9.50%, 8/1/08 657,476
5,000,000 Series 1990B (Goddard Mem. Hosp.), 9.00%, 7/1/15 5,497,450
1,500,000 Series 1994B (Holyoke Hosp.), 6.25%, 7/1/04 1,448,820
910,000 Methuen HA Multifamily Rev. 1985 (FNMA backed) (Appleton Estates), 8.00%, 12/1/07 931,349
8,535,095
MICHIGAN (5.5%)
1,305,000 Detroit Econ. Dev. Corp. Limited Obligation Rev. Refunding Series 1992
(E.H. Associates Ltd. Partnership Proj.), 7.00%, 6/1/12 1,410,862
2,500,000 MI HDA Rental Hsg. Rev. Series 1992A (AMBAC insured), 6.40%, 4/1/05 2,595,325
1,000,000 MI Hosp. Fin. Auth. Rev. Refunding Series 1994A (Pontiac Osteopathic Hosp.),
5.20%, 2/1/00 930,250
Pontiac Hosp. Fin. Auth. Hosp. Rev. Series 1993 (NOMC Obligated Group):
800,000 5.20%, 8/1/97 782,112
840,000 5.40%, 8/1/98 814,078
890,000 5.60%, 8/1/99 856,189
1,300,000 Romulus Econ. Dev. Corp. Ltd. Obligation Rev. Refunding Series 1992 (Romulus HIR Ltd.
Partnership Proj.) (ITT Lyndon), 7.00%, 11/1/15 1,365,533
500,000 Saginaw Hosp. Fin. Auth. Rev. Refunding Series 1989 (Saginaw Gen. Hosp.), 7.625%,
10/1/19 521,920
1,705,000 Tri City Village Hsg. Corp. Mtg. Refunding Multifamily Tri City Apts. Series 1992A
(Section 8)(FNMA backed), 7.75%, 8/15/23 1,829,141
2,750,000 Troy City EDC Econ. Dev. Rev. Refunding Series 1992 (Drury Inn-Troy Proj.)
(Lincoln Natl. Corp.), 6.75%, 10/1/12 2,813,800
13,919,210
MINNESOTA (0.6%)
4,560,480 Moorhead Single Family Mtg. Rev. Refunding Series 1992B (FNMA backed), Zero Coupon,
7.00% Effective Yield on Purchase Date, 8/1/11 1,424,466
MISSISSIPPI (0.7%)
5,750,000 MS Home Corp. Residual Rev. Series 1992-II Zero Coupon, 7.38% Effective
Yield on Purchase Date, 4/15/12 1,715,915
MISSOURI (0.3%)
MO HDC Single Family Mtg. Rev.:
340,000 Series 1985, 9.25%, 4/1/05 356,714
54,000 Series 1984 (FHA insured), 10.00%, 8/1/98 56,233
150,000 MO Hlth. & Educ. Fac. Auth. Hlth. Fac. Rev. Series 1993 (Jefferson Mem.
Hosp. Assn. Proj.), 5.125%, 8/15/02 141,748
90,000 St. Louis Co. Single Family Res. Mtg. Series 1984 (MBIA insured), 9.75%, 4/1/10 92,360
647,055
MONTANA (0.2%)
515,000 Lewis & Clark Co. Pollution Control Rev. Series 1976 (Asarco, Inc. Proj.),
6.75%, 12/1/06 514,516
NEW HAMPSHIRE (1.1%)
NH Higher Educ. & Hlth. Fac. Auth. Series 1991 (St. Joseph's Hosp.):
540,000 7.25%, 1/1/02 571,115
1,875,000 7.375%, 1/1/05 1,944,562
3,505,000 NH HFA Single Family Res. Mtg. 1982 Series A Zero Coupon, 11.75% Effective Yield on
Purchase Date, 1/1/14 415,693
2,931,370
NEW MEXICO (0.4%)
959,000 Hobbs Single Family Mtg. Rev. Refunding Series 1992, 8.75%, 7/1/11 1,034,234
NEW YORK (0.7%)
1,815,000 Niagara Co. Dev. Agency Industrial Dev. Rev. Refunding Series 1993 (Rainbow
Square LTD Proj.), 5.80%, 2/1/02 1,811,769
NORTH CAROLINA (0.1%)
9,860,000 NC HFA Multifamily Hsg. Rev. (FHA insured) 1985 Series C Zero Coupon,
9.97% Effective Yield on Purchase Date, 7/1/27 379,314
NORTH DAKOTA (1.4%)
1,910,000 Oliver Co. Pollution Control Rev. Series 1976 (Sq. Butte Elec. Coop. Proj.),
7.00%, 12/31/10 1,918,328
1,600,000 Ward Co. Hlth. Care Fac. Rev. Series 1994 (St. Joseph Hosp. Proj.), 8.00%, 11/15/04 1,648,416
3,566,744
OHIO (2.5%)
1,060,000 Cleveland Certificate of Participation Motor Vehicle Motorized Equipment Series 1992,
6.50%, 1/1/98 1,093,676
2,655,000 Cleveland Parking Fac. Imprv. Rev. Series 1992, 7.60%, 9/15/03 2,772,988
1,275,000 Franklin Co. Hosp. Fac. Rev. Refunding & Imprv. Series 1993 (Doctors Hosp.),
5.90%, 12/1/06 1,212,971
500,000 Tuscarawas Co. Hosp. Fac. Rev. Series 1993A (Union Hosp. Proj.), 6.375%, 10/1/11 471,555
850,000 Washington Co. Hosp. Fac. Rev. Series 1992 (Marietta Area Hlth. Care Proj.),
7.20%, 9/1/05 881,663
6,432,853
OKLAHOMA (3.0%)
1,840,000 Cleveland Co. Home Loan Auth. Single Family Mtg. Rev. Refunding Series 1991, 8.00%,
8/1/12 1,974,909
Midwest City Mem. Hosp. Auth. Hosp. Rev. Series 1992:
115,000 7.25%, 4/1/06 120,331
365,000 8.75%, 4/1/03 421,772
50,000 10.00%, 4/1/95 50,000
150,000 10.00%, 4/1/96 158,630
325,000 10.00%, 4/1/01 392,291
345,000 10.00%, 4/1/02 423,653
2,000,000 Muskogee Co. HFA Single Family Mtg. Rev. Refunding 1990 Series A (FGIC insured) Zero
Coupon, 7.65% Effective Yield on Purchase Date, 6/1/11 617,800
315,000 Muskogee Co. Industrial Pollution Rev. Series 1987A (Oklahoma G&E Proj.),
7.00%, 3/1/17 327,987
680,000 Payne Co. Home Loan Auth. Single Family Rev. Refunding Series 1993A, 8.625%, 3/1/11 719,603
2,540,000 Tulsa Public Facilities Auth. Recreational Facs. Rev. Series 1985, 6.20%, 11/1/12 2,529,053
7,736,029
PENNSYLVANIA (5.6%)
1,600,000 Erie Higher Educ. Bldg. Auth. Univ. Rev. Refunding Series 1993D (Gannon Univ. Proj.),
5.90%, 6/1/11 1,464,288
2,860,000 McKean Co. Hosp. Auth. Hosp. Rev. Refunding Series 1994 (Bradford Hosp. Proj.),
5.95%, 10/1/08 2,621,362
6,000,000 Montgomery Co. Industrial Dev. Auth. Resource Recovery Rev. Series 1989 (LOC Banque
Paribas), 7.50%, 1/1/12 6,337,680
2,240,000 Montgomery Co. Redev. Auth. Multifamily Hsg. Rev. 1993 Series A (KBF Assoc. L.P.),
6.375%, 7/1/12 2,107,101
Sharon Regional Hlth. Sys. Auth. Hosp. Rev. Refunding (Sharon Regional Hlth.
Sys. Proj.) Series 1993A:
705,000 6.40%, 12/1/00 705,578
255,000 6.50%, 12/1/01 255,377
800,000 6.60%, 12/1/02 801,328
14,292,714
SOUTH CAROLINA (0.6%)
1,500,000 Myrtle Beach PFC Certificates of Participation Series 1992
(Myrtle Beach Convention Ctr. Proj.), 6.75%, 7/1/02 1,531,605
SOUTH DAKOTA (0.8%)
2,000,000 SD HDA Multifamily Hsg. Rev. 1992 Series B (Section 8), 7.00%, 4/1/12 2,090,840
TENNESSEE (0.3%)
830,000 TN HDA Homeownership Program Series 1991 Issue U, 7.35%, 7/1/11 876,546
TEXAS (11.4%)
2,880,000 Baytown HFC Single Family Mtg. Rev. Refunding Series 1992B, 8.50%, 9/1/11 3,160,570
Beaumont Hsg. Auth. Multifamily Mtg. Rev. Series 1993A (Section 8):
1,365,000 6.65%, 11/1/07 1,421,989
650,000 6.75%, 11/1/10 672,659
1,765,000 Bexar Co. HFC Residual Rev. Series 1993 Zero Coupon, 6.50% Effective Yield on
Purchase Date, 3/1/15 485,516
520,000 Brazos Co. HFC Single Family Mtg. Rev. 1985 (MBIA insured) Zero Coupon, 10.55%
Effective Yield on Purchase Date, 9/1/11 93,018
Dallas Housing Corp. Capital Program Revenue Bonds:
1,715,000 Series 1995A (Estell Village Apts.) (Section 8), 7.875%, 12/1/09 1,721,037
1,700,000 Series 1995 (Cedar Glen Apts.) (Section 8), 7.75%, 12/1/09 1,703,604
1,000,000 Dallas HFC Cap. Proj. Refunding 1990 (Section 8), 7.85%, 8/1/13 1,063,390
680,000 Ft. Worth HFC Home Mtg. Rev. Refunding 1991, 8.50%, 10/1/11 740,908
2,000,000 Harris Co. Hlth. Fac. Dev. Corp. Hosp. Rev. Series 1992 (Mem. Hosp. Sys. Proj.),
7.10%, 6/1/04 2,166,040
1,745,000 Lubbock HFC Multifamily Hsg. Rev. Refunding Series 1992A
(Los Colinas, Park Ridge Place & Quail Creek), 7.75%, 1/1/22 1,799,392
Midland Co. Hosp. Dist. Hosp. Rev.:
695,000 Series 1989, 7.00%, 6/1/03 721,813
4,990,000 Series 1992 Zero Coupon, 7.61% Effective Yield on Purchase Date, 6/1/07 2,238,065
Midland HFC Single Family Mtg. Rev. Refunding:
721,861 Series 1992 B-2, 8.15%, 12/1/11 778,635
990,751 Series 1992 A-2, 8.45%, 12/1/11 1,082,395
1,508,899 Series 1992, 9.00%, 9/1/01 1,621,553
2,000,000 Odessa HFC Single Family Mtg. Rev. Refunding Series 1992B Class B-2,
8.125%, 11/1/11 2,194,960
650,000 San Marcos HA Multifamily Mtg. Rev. Series 1993A (FHA insured) (Section 8), 5.80%,
11/1/10 603,986
3,000,000 Southeast TX HFC Residual Rev. Series 1992A Zero Coupon, 7.63% Effective Yield on
Purchase Date, 9/1/17 582,000
950,000 TX HA Single Family Mtg. Refunding Series 1991A, 7.00%, 3/1/05 994,108
6,675,000 TX Dept. Hsg. & Community Affairs Single Family Rev. Refunding Junior Lien Series
1994A Zero Coupon 6.93% Effective Yield on Purchase Date, 3/1/15 1,722,884
Washington Co. Hlth. Fac. Dev. Corp. Rev. Series 1994
(Lutheran Soc. Service of the South):
225,000 6.15%, 8/15/98 223,090
275,000 6.55%, 8/15/01 275,820
290,000 6.70%, 8/15/02 292,146
310,000 6.80%, 8/15/03 312,127
330,000 6.90%, 8/15/04 332,904
835,000 West Central TX HFC Single Family Mtg. Rev. 1985 (MBIA insured) Zero Coupon, 10.56%
Effective Yield on Purchase Date, 9/1/11 149,365
29,153,974
UTAH (0.2%)
105,000 UT HFA Res. Mtg. Series 1984A Zero Coupon, 10.89% Effective Yield on Purchase Date,
7/1/16 10,236
575,000 UT HFA Single Family Mtg. Rev. Senior Series 1988C, 8.25%, 7/1/08 596,988
607,224
WASHINGTON (1.8%)
1,000,000 WA Hlth. Care Fac. Auth. Rev. Series 1989 (Sisters of Providence), 7.875%, 10/1/10 1,079,320
WA HFC Nonprofit Housing Revenue:
2,500,000 Series 1993 (CRISTA Shores Proj.), 6.20%, 7/1/14 2,439,400
1,000,000 Series 1995A (Judson Park Project), 6.90%, 7/1/16 1,000,000
4,518,720
WEST VIRGINIA (1.2%)
185,000 Berkeley, Brooke & Fayette Cos., etc. (21 Municipalities) Single Family Mtg. 1984
Series A, (MBIA insured), 10.125%, 9/1/10 194,383
5,435,000 Huntington Res. Mtg. Rev. Refunding Series 1991 Zero Coupon, 7.37% Effective
Yield on Purchase Date, 9/1/12 1,547,997
2,000,000 Mason Co. Residual Rev. Series 1992C Zero Coupon, 7.58% Effective Yield on
Purchase Date, 7/10/14 494,100
3,000,000 Ohio Co. Residual Rev. Series 1992C Zero Coupon, 7.43% Effective Yield on Purchase
Date, 7/10/14 744,540
2,981,020
WISCONSIN (0.0%)
85,000 WI HEDA Homeownership Rev. 1985 Series I Zero Coupon, 7.99% Effective Yield on
Purchase Date, 12/1/96 73,571
WYOMING (0.9%)
2,350,000 Cheyenne Industrial Dev. First Mtg. Rev. Refunding Series 1992 (Cheyenne Plaza Proj.)
(NWNL), 6.90%, 2/1/00 2,417,281
Total municipal bonds (cost: $222,100,858) 223,879,238
SHORT-TERM SECURITIES (10.7%)
5,000,000 Independence MO Water Utility Rev. Series 1986 (LOC National Westminster) Tax-
Exempt C.P., 3.70%, 4/6/95 5,000,000
3,000,000 Jacksonville FL Elec. Auth. Series D1 Tax-Exempt C.P. (LOC Credit Suisse),
3.70%, 4/3/95 3,000,000
2,000,000 Minneapolis MN G.O. Series 1995 Variable Rate Weekly Put Bonds (Arena Acquisition
Project) (LOC Bayerische Vereinsbank, AG), 4.15%, 4/6/95 2,000,000
3,000,000 Salt River Project AZ Improvement & Power Dist. Tax-Exempt C.P. (LOC Union Bank of
Switzerland et. al.), 3.80%, 4/7/95 3,000,000
4,720,824 Municipal Money Market Fund, 3.85% 4,720,824
9,694,782 Tax-Exempt Cash Management Fund, 3.93% 9,694,782
Total short-term securities (cost: $27,415,606) 27,415,606
Total investments in securities (cost: $249,516,464) (6) $251,294,844
</TABLE>
See accompanying notes to portfolios of investments on page 33.
SIT U.S. GOVERNMENT SECURITIES FUND REVIEW
MARCH 31, 1995
[PHOTO] Michael C. Brilley, Senior Portfolio Manager
Douglas S. Rogers, CFA, Portfolio Manager
The SIT U.S. Government Securities Fund provided investors with a
+4.47% total rate of return for the one year period ended March 31, 1995, as
compared to a +2.95% average return for the Lipper Analytical Services Inc. U.S.
Government Bond Fund universe. The Fund's performance ranked 27th of 151 funds
in its Lipper peer group category. As of March 31, 1995, the Fund's 30-day SEC
yield was 6.89% and its 12-month distribution rate was 6.51%.
The positive relative performance over the past year was attributable
to the Fund's emphasis on stability of market value in an increasing interest
rate environment, and we continue to focus on securities that will generate a
high level of income. Stable prepayment experience from the Fund's significant
position in pass- through securities has provided investors with greater income
than that offered by U.S. Treasury and agency securities of similar effective
maturity. As of March 31, 1995 GNMA mobile home pass-through securities
comprised 65.6% of the Fund's net assets.
We became more constructive on the fixed income market at the end of
the first quarter of 1995 and lengthened the Fund's duration (price sensitivity
to changes in interest rates) to equal that of the Lehman Intermediate
Government Bond Index. We continue to seek unique securities that offer
attractive return potential along with protection of principal. Thus, we
anticipate increasing the Fund's weighting in securities with these favorable
characteristics such as VA vendee loan bonds. VA vendee bonds are comprised of
loans which were previously owned by veterans but do not have refinancing
options. Historically, these loans have displayed a low and stable prepayment
rate which results in high income generation. This feature, along with the full
faith and credit guarantee of the U.S. Government, makes them a suitable
investment, consistent with the dual objectives of the Fund.
INVESTMENT OBJECTIVE AND STRATEGY
The objective of the Fund is to provide high current income and safety of
principal. The Fund invests solely in securities issued, guaranteed or insured
by the U.S. government or its agencies or its instrumentalities.
Agency mortgage securities and U.S. Treasury securities will be the principal
holdings in the Fund. The mortgage securities that the Fund will purchase
consist of pass-through securities (Government National Mortgage Association
(GNMA), Federal National Mortgage Association (FNMA), and Federal Home Loan
Mortgage Corporation (FHLMC)).
PORTFOLIO SUMMARY
Net Asset Value 3/31/95: $10.28 Per Share
3/31/94: $10.50 Per Share
Total Net Assets: $37.45 Million
30-Day SEC Yield: 6.89%
12 Month Distribution Rate: 6.51%
Average Maturity: 15.44 Years
Modified Adjusted Duration: 2.92 Years (1)
(1) Duration is a measure which reflects estimated price sensitivity to a given
change in interest rates. For example, for an interest rate change of 1.0%,
a portfolio with a duration of 5 years would be expected to experience a
price change of 5%. Duration is based on the Adviser's assumptions
regarding future changes in interest rates and the expected average life of
individual securities held in the portfolio.
[BAR GRAPH]
PORTFOLIO STRUCTURE
(% of total net assets)
GNMA Pass-Through Securities 69.0%
U.S. Treasury Bonds 7.6
FHLMC Pass-Through Securities 6.2
FNMA Pass-Through Securities 4.2
Other Assets & Liabilities 6.8
Collateralized Mortgage Obligations 6.2
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS* CUMULATIVE TOTAL RETURNS*
U.S. Gov't Lipper U.S. Gov't. Lehman Inter. U.S. Gov't. Lipper U.S. Gov't. Lehman Inter.
Securities Fund Average Gov't. Bond Index Securities Fund Average Gov't. Bond Index
Fund Fund
<C> <C> <C> <C> <C> <C> <C>
3 Months 2.85% 4.54% 4.16% 2.85% 4.54% 4.16%
(unannualized)
1 Year 4.47 2.95 4.27 4.47 2.95 4.27
3 Years 6.08 5.77 6.16 19.37 18.33 19.63
5 Years 8.14 7.76 8.18 47.89 45.32 48.18
Inception 8.43 7.56 8.19 88.44 77.02 85.35
(6/2/87)
* As of 3/31/95
</TABLE>
Performance is historical and assumes reinvestment of all dividends and capital
gains. Share price and return will vary so that a gain or loss may be realized
when shares are sold. Total return should not be taken as a representation of
future performance. Management fees and administrative expenses are included in
the Fund's performance; however, fees and expenses are not incorporated in the
Lehman Intermediate Government Bond Index. The Lipper averages and indices are
obtained from Lipper Analytical Services, Inc., a large independent evaluator of
mutual funds.
[LINE GRAPH]
GROWTH OF $10,000
SIT U.S. GOV'T. LEHMAN INTER. GOV'T. BOND INDEX
SECURITIES FUND
The sum of $10,000 invested at inception (6/2/87) and held until 3/31/95 would
have grown to $18,844 in the Fund or $18,535 in the Lehman Intermediate
Government Bond Index assuming reinvestment of all divdends and capital gains.
[BAR CHART]
ESTIMATED AVERAGE LIFE PROFILE
The Adviser's estimates of the dollar weighted average life of the portfolio's
securities, which may vary from their stated maturities.
0-1 years 6.8%
1-5 years 83.1
5-10 years 2.5
10-20 years 0.0
20+ years 7.6%
SIT U.S. GOVERNMENT SECURITIES FUND
PORTFOLIO OF INVESTMENTS - MARCH 31, 1995
Quantity Name of Issuer Market Value (1)
MORTGAGE PASS-THROUGH SECURITIES (79.4%) (2)
FEDERAL HOME LOAN MORTGAGE CORPORATION (6.2%):
61,346 8.75%, 12/1/01 $ 61,821
805,845 9.00%, 10/1/16 823,236
741,042 9.00%, 6/1/17 757,131
135,987 9.50%, 6/1/16 140,914
141,802 9.75%, 6/1/17 147,829
13,291 11.00%, 10/1/00 14,193
271,255 11.50%, 10/1/15 293,639
68,070 12.00%, 6/1/00 72,633
2,311,396
FEDERAL NATIONAL MORTGAGE ASSOCIATION (4.2%):
284,924 9.00%, 4/1/10 292,230
297,982 9.00%, 9/1/17 305,677
742,163 9.50%, 4/1/20 772,466
168,287 11.50%, 12/1/00 180,714
19,888 12.25%, 10/1/14 21,635
1,572,722
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION (3) (69.0%):
358,398 8.75%, 5/15/03 372,967
303,645 8.75%, 10/15/06 316,316
427,080 8.75%, 11/15/06 445,095
344,848 8.75%, 2/15/07 355,777
332,008 8.75%, 11/15/09 342,735
404,937 8.75%, 6/15/11 418,285
524,801 8.75%, 12/15/11 541,826
291,496 9.00%, 10/15/04 305,287
555,928 9.00%, 4/15/06 582,157
388,060 9.00%, 10/15/07 402,213
161,226 9.00%, 11/15/09 167,238
531,785 9.00%, 6/15/11 552,722
643,327 9.00%, 9/15/11 667,755
578,146 9.00%, 9/15/11 600,348
355,037 9.00%, 1/15/12 368,543
62,181 9.25%, 4/15/01 65,402
134,696 9.25%, 9/15/01 141,641
643,520 9.25%, 11/15/11 672,151
433,243 9.25%, 4/15/12 452,705
46,386 9.50%, 1/15/05 48,993
13,223 9.50%, 1/20/05 13,759
588,136 9.50%, 1/15/10 617,384
215,643 9.50%, 8/15/10 226,115
402,760 9.50%, 1/15/11 423,120
317,347 9.75%, 11/15/02 337,026
100,128 9.75%, 3/15/04 106,423
719,080 9.75%, 8/15/05 765,030
352,306 9.75%, 2/15/06 376,943
1,563,864 9.75%, 8/15/10 1,662,982
424,211 9.75%, 11/15/10 $451,811
464,437 9.75%, 11/15/12 495,095
431,208 9.75%, 11/15/12 459,483
396,457 9.75%, 11/15/12 422,278
343,545 10.00%, 1/15/06 366,511
316,502 10.00%, 11/15/08 337,930
162,573 10.00%, 5/15/09 173,591
81,340 10.00%, 6/15/10 87,032
282,150 10.00%, 7/15/10 301,461
228,922 10.00%, 1/15/11 244,706
142,480 10.25%, 11/15/00 152,701
145,252 10.25%, 8/15/04 156,057
383,294 10.25%, 1/15/12 411,666
400,276 10.25%, 3/15/12 430,009
304,582 10.25%, 5/15/12 327,106
417,956 10.25%, 6/15/12 449,107
137,013 10.25%, 6/15/12 147,169
133,818 10.25%, 6/15/12 143,718
452,730 10.25%, 7/15/12 486,726
423,293 10.25%, 7/15/12 454,897
158,035 10.25%, 7/15/12 169,889
565,951 10.25%, 8/15/12 608,318
434,525 10.25%, 8/15/12 467,037
431,730 10.25%, 8/15/12 464,016
466,157 10.25%, 2/15/13 501,292
354,762 10.25%, 2/15/13 380,887
80,949 10.25%, 4/15/13 86,980
236,875 10.25%, 7/15/13 254,743
18,073 10.50%, 9/15/00 19,310
137,231 10.50%, 9/15/01 148,124
230,508 10.50%, 7/15/10 248,635
85,327 10.50%, 8/15/15 92,041
97,176 10.50%, 9/15/15 104,935
172,002 10.50%, 11/15/15 185,708
85,284 10.50%, 11/15/15 92,078
84,718 10.50%, 3/15/16 91,550
52,495 10.50%, 9/15/16 58,424
81,361 10.50%, 12/15/16 90,547
20,515 10.75%, 7/15/98 22,185
19,022 10.75%, 10/15/98 20,575
329,537 10.75%, 8/15/11 357,367
52,958 11.00%, 10/15/98 57,003
280,574 11.00%, 1/15/10 307,245
234,768 11.00%, 1/15/10 256,985
236,691 11.00%, 6/15/10 259,089
18,917 11.00%, 7/15/13 20,328
647 11.25%, 5/15/95 647
2,314 11.25%, 8/15/95 2,521
2,614 11.25%, 1/15/96 2,847
92,549 11.25%, 3/15/98 100,857
11,476 11.25%, 5/15/98 12,510
2,148 11.25%, 5/15/98 2,341
68,781 11.25%, 4/15/99 74,972
254,371 11.25%, 8/15/00 277,616
124,677 11.25%, 12/15/00 136,063
62,026 11.25%, 1/15/01 67,577
38,209 11.25%, 5/15/03 41,633
317,214 11.25%, 10/15/11 341,948
15,698 11.75%, 2/15/98 17,216
15,478 11.75%, 9/15/98 16,977
42,190 11.75%, 10/15/98 46,304
22,352 11.75%, 10/15/98 24,520
175,042 11.75%, 5/15/00 192,258
174,190 11.75%, 5/15/04 191,640
38,876 12.75%, 1/15/00 42,562
2,858 14.75%, 4/15/97 3,121
50,666 14.75%, 8/15/97 55,401
25,864,814
Total mortgage pass-through securities
(cost: $29,987,815) 29,748,932
U.S. GOVERNMENT SECURITIES (7.6%)
3,000,000 United States Treasury Bonds,
7.125%, 2/15/23 2,860,290
(cost: $2,875,771)
COLLATERALIZED MORTGAGE OBLIGATIONS (6.2%)
428,092 Federal Home Loan Mortgage
Corporation, 1006-C, 9.15%,
10/15/20 $ 433,722
Vendee Mortgage Trust:
1,000,000 Series 1992-2D, 7.00%,
9/15/15 940,000
1,000,000 Series 1993-2C, 6.25%,
3/15/10 935,625
Total collateralized mortgage obligations
(cost: $2,303,767) 2,309,347
SHORT-TERM SECURITIES (7.3%)
1,000,000 Federal National Mortgage
Association-ADN, 5.97%,
4/5/95 999,336
800,000 Federal Home Loan Mortgage
Corporation-ADN, 5.92%,
4/10/95 798,816
941,995 Government Cash Management
Fund, 6.04% 941,995
Total short-term securities
(cost: $2,740,147) 2,740,147
Total investments in securities
(cost: $37,907,500) (6) $37,658,716
See accompanying notes to portfolios of investments on page 33.
SIT MONEY MARKET FUND REVIEW (FORMERLY INVESTMENT RESERVE FUND)
MARCH 31, 1995
[PHOTO] Michael C. Brilley, Senior Portfolio Manager
Douglas S. Rogers, CFA, Portfolio Manager
The SIT Money Market Fund provided investors with a +4.57% return for
the one year period ended March 31, 1995, as compared to a +4.34% average return
for the Lipper Analytical Services Inc. Money Market Fund universe. The Fund's
perfomance ranked 47th of 248 funds in its Lipper peer group category. As of
March 31, 1995, the Fund's 30-day SEC yield was 5.60% and its 7-day compound
yield was 5.78%.
Three month Treasury bill rates have continued to move upward over the
past year from 3.56% to 5.85%, reflecting Federal Reserve efforts to moderate
domestic economic growth. During the first quarter of 1995, longer term yields
fell, while Treasury bill yields remained relatively constant, supported by
substantial foreign central bank purchases to support the U.S. dollar. We
believe that once this volume of purchasing subsides, yields on short-term
securities are likely to move slightly higher to levels that are more consistent
with Federal Reserve monetary policy. Thus, we anticipate maintaining the Fund's
average maturity at 40 days or less until at least early summer.
We continue to focus on purchasing commercial paper of the highest
quality and rating categories. For the foreseeable future, we are purposely
avoiding purchase of commercial paper issued by securities dealers which are
experiencing diminishing trading profits, insurance companies with potential
asset quality problems and commercial banks with heavy derivative exposure.
INVESTMENT OBJECTIVE AND STRATEGY
The objective of the Fund is to achieve maximum current income to the extent
consistent with the preservation of capital and maintenance of liquidity. The
Fund pursues this objective by investing in a diversified portfolio of high
quality short-term debt instruments. The Fund seeks to maintain a stable net
asset value of $1.00 per share. However, there is no assurance of a constant
share price.
An investment in the Fund is neither insured nor guaranteed by the U.S.
government and there can be no assurance that the Fund will be able to maintain
a stable net asset value of $1.00 per share.
PORTFOLIO SUMMARY
Net Asset Value 3/31/95: $1.00 Per Share
3/31/94: $1.00 Per Share
Total Net Assets: $29.82 Million
[BAR CHART]
PORTFOLIO STRUCTURE
(% of total net assets)
Consumer Loan Finance 19.5%
Diversified Finance 18.2
Captive Equipment Finance 18.0
U.S. Government Securities 12.9
Energy 11.9
Utilities 6.7
Insurance 5.0
Captive Auto Finance 4.7
Other Assets & Liabilities 3.1
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS* CUMULATIVE TOTAL RETURNS*
Money Lipper Money U.S. Treasury Money Lipper Money U.S. Treasury
Market Fund Market Avg. Bill (3-Month) Market Fund Market Avg. Bill (3-Month)
<C> <C> <C> <C> <C> <C> <C>
3 Months 1.39% 1.32% 1.51% 1.39% 1.32% 1.51%
(unannualized)
1 Year 4.57 4.34 5.17 4.57 4.34 5.17
Inception 4.04 3.85 4.63 5.76 5.48 6.61
(11/1/93)
* As of 3/31/95
</TABLE>
Performance is historical and assumes reinvestment of all dividends and capital
gains. Share price and return will vary so that a gain or loss may be realized
when shares are sold. Total return should not be taken as a representation of
future performance. Management fees and administrative expenses are included in
the Fund's performance; however, fees and expenses are not incorporated in the
U.S. Treasury Bill. The Lipper averages and indices are obtained from Lipper
Analytical Services, Inc., a large independent evaluator of mutual funds.
[LINE GRAPH]
GROWTH OF $10,000
3-MONTH U.S. TREASURY INDEX
SIT MONEY MARKET FUND
The sum of $10,000 invested at inception (11/1/93) and held until 3/31/95 would
have grown to $10,576 in the Fund or $10,661 in the 3-Month U.S. Treasury Bill
Index assuming reinvestment of all dividends and capital gains.
[PIE CHART]
QUALITY RATINGS
(% of total net assets)
As rated by Moody's and S&P
A1, P1 100%
First Tier Securities 100%
Second Tier Securities 0
SIT MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS - MARCH 31, 1995
Quantity Name of Issuer Market Value (1)
COMMERCIAL PAPER (84.0%) (2)
CAPTIVE AUTO FINANCE (4.7%)
Ford Motor Credit Corp.:
350,000 6.09%, 4/11/95 $ 349,414
109,000 5.95%, 4/12/95 108,802
500,000 6.20%, 4/17/95 498,649
450,000 6.16%, 4/17/95 448,776
1,405,641
CAPTIVE EQUIPMENT FINANCE (18.0%)
Deere & Company:
339,000 6.00%, 4/26/95 337,602
300,000 6.09%, 5/10/95 298,040
John Deere Capital Corp.:
400,000 6.06%, 5/22/95 396,600
650,000 6.08%, 5/23/95 644,348
IBM Corp.:
206,000 6.01%, 4/3/95 205,932
653,000 6.10%, 4/18/95 651,141
320,000 5.97%, 4/26/95 318,687
500,000 IBM Credit Corp., 6.01%,
4/21/95 498,339
Pitney Bowes Credit Corp.:
800,000 6.11%, 4/20/95 797,450
500,000 6.05%, 5/4/95 497,241
735,000 Xerox Credit Corp.,
6.14%, 6/12/95 726,106
5,371,486
CONSUMER LOAN FINANCE (19.5%)
American Express Credit Corp.:
300,000 6.07%, 5/15/95 297,796
670,000 6.17%, 6/5/95 662,645
200,000 6.13%, 6/19/95 197,349
American General Financial:
1,004,000 6.03%, 4/25/95 1,000,004
200,000 6.06%, 5/19/95 198,400
Beneficial Corp.:
607,000 5.96%, 4/18/95 605,300
264,000 6.06%, 5/2/95 262,636
300,000 6.11%, 5/30/95 297,040
Household Finance Corp.:
350,000 5.99%, 4/24/95 348,674
206,000 6.06%, 5/1/95 204,970
452,000 6.10%, 5/9/95 449,118
Norwest Financial, Inc.:
700,000 6.08%, 4/10/95 698,946
600,000 5.92%, 4/12/95 598,918
5,821,796
DIVERSIFIED FINANCE (18.2%)
Associates Corp. N.A.:
300,000 6.08%, 4/11/95 299,498
520,000 6.08%, 5/1/95 517,391
180,000 6.17%, 5/9/95 178,845
200,000 6.12%, 6/19/95 197,353
CIT Group Holdings, Inc.:
404,000 6.16%, 4/3/95 403,863
450,000 6.08%, 4/13/95 $ 449,097
405,000 6.08%, 5/2/95 402,901
400,000 6.15%, 6/29/95 394,007
General Electric Capital Corp.:
900,000 6.10%, 4/5/95 899,397
536,000 6.01%, 4/7/95 535,464
300,000 6.05%, 4/10/95 299,550
Heller Financial, Inc.:
141,000 6.04%, 4/12/95 140,741
200,000 6.09%, 4/19/95 199,397
350,000 5.99%, 4/24/95 348,674
150,000 6.13%, 6/1/95 148,465
5,414,643
ENERGY (11.9%)
940,000 British Petroleum New Zealand Ltd.,
6.25%, 5/3/95 934,861
Chevron Oil Finance Corp.:
250,000 5.95%, 4/7/95 249,753
361,000 5.96%, 4/12/95 360,344
800,000 6.08%, 4/17/95 797,860
Texaco, Inc.:
700,000 6.04%, 4/28/95 696,860
500,000 6.11%, 5/12/95 496,561
3,536,239
INSURANCE (5.0%)
500,000 American Family Financial Co.,
6.02%, 4/27/95 497,841
1,000,000 Travelers Insurance Co.,
6.02%, 4/13/95 998,007
1,495,848
UTILITIES (6.7%)
Bellsouth Telecommunications, Inc.
894,000 5.98%, 4/4/95 893,558
200,000 5.96%, 4/6/95 199,835
900,000 Southwestern Bell Capital Corp.,
6.22%, 5/8/95 (5) 894,339
1,987,732
Total commercial paper
(cost: $25,033,385) 25,033,385
U.S. GOVERNMENT SECURITIES (12.9%)
Federal National Mortgage
Assoc. - ADN:
3,010,000 5.93%, 4/17/95 3,002,107
850,000 5.94%, 4/18/95 847,632
Total U.S. government securities
(cost: $3,849,739) 3,849,739
Total investments in securities
(cost: $28,883,124) (6) $28,883,124
See accompanying notes to portfolios of investments of page 33.
SIT MUTUAL FUND GROUP
NOTES TO PORTFOLIOS OF INVESTMENTS
(1) Securities are valued by procedures described in note 1 to the financial
statements.
(2) Percentage figures indicate percentage of total net assets.
(3) At March 31, 1995, 65.6% of the U.S. Government Securities Fund's net
assets and 36.8% of the Bond Fund's net assets was invested in GNMA mobile
home pass-through securities.
(4) Securities from which the income is treated as a tax preference that is
included in alternative minimum taxable income for purposes of computing
federal alternative minimum tax (AMT). At March 31, 1995, approximately
12.4% of the Minnesota Tax-Free Income Fund's net assets was invested in
such securities.
(5) Commercial paper sold within terms of a private placement memorandum,
exempt from registration under Section 4(2) of the Securities Act of 1933,
as amended, and may be sold only to dealers in that program or other
"accredited investors." This security has been determined to be liquid
under the guidelines established by the Board of Directors.
(6) At March 31, 1995, the cost of securities for federal income tax purposes
and the aggregate gross unrealized appreciation and depreciation based on
that cost were as follows:
<TABLE>
<CAPTION>
MINNESOTA
TAX-FREE TAX-FREE
BOND INCOME INCOME
FUND FUND FUND
<S> <C> <C> <C>
Cost for federal income tax purposes $3,553,255 $43,104,824 $249,516,464
Unrealized appreciation (depreciation) on investments:
Gross unrealized appreciation $ 30,212 $614,852 $4,254,756
Gross unrealized depreciation (79,866) (158,378) (2,476,376)
Net unrealized appreciation (depreciation) ($49,654) $456,474 $1,778,380
</TABLE>
<TABLE>
<CAPTION>
U.S.
GOVERNMENT MONEY
SECURITIES MARKET
FUND FUND
<S> <C> <C>
Cost for federal income tax purposes $37,907,500 $28,883,124
Unrealized appreciation (depreciation) on investments:
Gross unrealized appreciation $142,263 None
Gross unrealized depreciation (391,047) None
Net unrealized appreciation (depreciation) ($248,784) None
</TABLE>
SIT MUTUAL FUND GROUP
STATEMENTS OF ASSETS & LIABILITIES - MARCH 31, 1995
<TABLE>
<CAPTION>
MINNESOTA U.S.
TAX-FREE TAX-FREE GOVERNMENT MONEY
BOND INCOME INCOME SECURITIES MARKET
ASSETS FUND FUND FUND FUND FUND
<S> <C> <C> <C> <C> <C>
Investments in securities, at
identified cost................... $3,553,255 $43,104,824 $249,516,464 $37,907,500 $28,883,124
Investments in securities, at
market value - see
accompanying schedules for
detail............................ $3,503,601 $43,561,298 $251,294,844 $37,658,716 $28,883,124
Cash in bank on demand
deposit........................... 35 ------ 1 255 139
Accrued interest
receivable........................ 31,105 745,690 3,981,724 294,330 ------
Receivable for investment
securities sold................... 557 ------ 14,741 18,831 ------
Receivable for Fund shares
sold.............................. 440 22,501 1,506,994 33,020 997,826
Total assets.................... 3,535,738 44,329,489 256,798,304 38,005,152 29,881,089
LIABILITIES
Payable for investment securities
purchased......................... ------ 204,250 1,000,000 ------ ------
Payable for Fund shares
redeemed.......................... ------ 167,137 117,604 505,500 40,047
Cash portion of dividends
payable to shareholders........... 367 47,182 351,941 20,710 6,598
Accrued investment management
and advisory services fee......... 2,372 29,427 171,722 25,013 12,372
Total liabilities............... 2,739 447,996 1,641,267 551,223 59,017
Net assets applicable to
outstanding capital stock......... $3,532,999 $43,881,493 $255,157,037 $37,453,929 $29,822,072
Capital stock
Par............................... $0.001 $0.001 $0.001 $0.001 $0.001
Authorized shares................. 10,000,000,000 10,000,000,000 10,000,000,000 10,000,000,000 10,000,000,000
Outstanding shares................ 372,863 4,405,441 26,295,050 3,641,826 29,825,073
Net asset value per share of
outstanding capital stock......... $9.48 $9.96 $9.70 $10.28 $1.00
</TABLE>
See accompanying notes to financial statements on pages 38-45.
SIT MUTUAL FUND GROUP
STATEMENTS OF OPERATIONS - YEAR ENDED MARCH 31, 1995
<TABLE>
<CAPTION>
MINNESOTA U.S.
TAX-FREE TAX-FREE GOVERNMENT MONEY
BOND INCOME INCOME SECURITIES MARKET
FUND FUND FUND FUND FUND
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
INCOME:
Interest............................... $247,837 $2,096,248 $18,181,916 $2,667,478 $1,091,006
Total income....................... 247,837 2,096,248 18,181,916 2,667,478 1,091,006
EXPENSES (NOTE 3):
Investment management and
advisory services fee.............. 26,701 256,587 2,195,496 366,490 169,942
Less fees and expenses absorbed
by investment adviser........... ---- ---- (24,991) (73,460) (63,828)
Total net expenses................. 26,701 256,587 2,170,505 293,030 106,114
Net investment income.............. 221,136 1,839,661 16,011,411 2,374,448 984,892
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS :
Net realized loss (note 2)............. (117,419) (419,772) (3,519,873) (631,212) ----
Net change in unrealized
appreciation (depreciation)........ 47,225 979,887 5,481,190 (150,786) ----
Net gain (loss) on investments..... (70,194) 560,115 1,961,317 (781,998) ----
Net increase in net assets resulting
from operations......................... $150,942 $2,399,776 $17,972,728 $1,592,450 $984,892
</TABLE>
See accompanying notes to financial statements on pages 38-45.
SIT MUTUAL FUND GROUP
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
BOND MINNESOTA TAX-FREE
FUND INCOME FUND
PERIOD PERIOD
ENDED ENDED
YEAR ENDED MARCH 31, YEAR ENDED MARCH 31,
MARCH 31, 1994* MARCH 31, 1994*
1995 (NOTE 1) 1995 (NOTE 1)
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income ............................. $ 221,136 $ 59,041 $ 1,839,661 $ 246,347
Net realized gain (loss) on investments............ (117,419) (20,368) (419,772) (26,302)
Net change in unrealized appreciation
(depreciation) of investments..................... 47,225 (96,879) 979,887 (523,413)
Net increase (decrease) in net assets resulting from
operations...................................... 150,942 (58,206) 2,399,776 (303,368)
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income.............................. (221,136) (59,041) (1,839,661) (246,347)
Net realized gains on investments.................. ---- ---- ---- ----
Total distributions............................... (221,136) (59,041) (1,839,661) (246,347)
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold.......................... 304,160 3,988,307 37,614,894 21,980,078
Reinvested distributions........................... 212,345 57,798 1,475,259 207,847
Payments for shares redeemed....................... (315,970) (526,300) (13,873,710) (3,533,375)
Increase (decrease) in net assets from
capital share transactions...................... 200,535 3,519,805 25,216,443 18,654,550
Total increase (decrease) in net assets......... 130,341 3,402,558 25,776,558 18,104,835
NET ASSETS
Beginning of period................................ 3,402,658 100 18,104,935 100
End of period...................................... $3,532,999 $3,402,658 $43,881,493 $18,104,935
NET ASSETS CONSIST OF:
Capital (par value and paid-in surplus)............ $3,720,440 $3,519,905 $43,871,093 $18,654,650
Undistributed (distributions in excess of) net
investment income................................. ---- ---- ---- ----
Accumulated net realized gain (loss) from
security transactions ............................ (137,787) (20,368) (446,074) (26,302)
Unrealized appreciation (depreciation)
on investments.................................... (49,654) (96,879) 456,474 (523,413)
$3,532,999 $3,402,658 $43,881,493 $18,104,935
CAPITAL TRANSACTIONS IN SHARES:
Sold............................................... 32,543 397,999 3,830,816 2,177,903
Reinvested distributions........................... 22,594 5,834 150,326 20,754
Redeemed........................................... (33,547) (52,570) (1,425,007) (349,361)
Net increase (decrease)............................... 21,590 351,263 2,556,135 1,849,296
* Period from December 1, 1993 (commencement of operations) to March 31, 1994.
** Formerly Investment Reserve Fund
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS (TABLE CONTINUED)
<TABLE>
<CAPTION>
TAX-FREE U.S. GOVERNMENT MONEY MARKET
INCOME FUND SECURITIES FUND FUND
NINE MONTHS NINE MONTHS NINE MONTHS
ENDED ENDED ENDED
YEAR ENDED MARCH 31, YEAR ENDED MARCH 31, YEAR ENDED MARCH 31,
MARCH 31, 1994 MARCH 31, 1994 MARCH 31, 1994**
1995 (NOTE 1) 1995 (NOTE 1) 1995 (NOTE 1)
<C> <C> <C> <C> <C> <C>
$ 16,011,411 $ 15,032,414 $ 2,374,448 $ 1,630,275 $ 984,892 $ 264,945
(3,519,873) 2,614,895 (631,212) 127,685 ---- 621
5,481,190 (12,671,484) (150,786) (751,026) ---- 4,724
17,972,728 4,975,825 1,592,450 1,006,934 984,892 270,290
(16,000,200) (15,032,414) (2,384,177) (1,690,774) (985,117) (264,945)
(560,435) (3,031,287) ---- (127,467) ---- (2,862)
(16,560,635) (18,063,701) (2,384,177) (1,818,241) (985,117) (267,807)
129,607,190 179,643,583 16,243,728 19,358,027 77,036,008 46,982,265
12,481,182 14,507,914 2,180,030 1,681,532 935,224 232,463
(213,034,707) (195,349,143) (18,861,210) (13,083,196) (66,012,623) (40,222,147)
(70,946,335) (1,197,646) (437,452) 7,956,363 11,958,609 6,992,581
(69,534,242) (14,285,522) (1,229,179) 7,145,056 11,958,384 6,995,064
324,691,279 338,976,801 38,683,108 31,538,052 17,863,688 10,868,624
$255,157,037 $324,691,279 $37,453,929 $38,683,108 $29,822,072 $17,863,688
$256,896,612 $327,842,947 $38,333,925 $38,771,377 $29,822,072 $17,863,463
(54) (11,265) ---- 9,729 ---- 225
(3,517,901) 562,407 (631,212) ---- ---- ----
1,778,380 (3,702,810) (248,784) (97,998) ---- ----
$255,157,037 $324,691,279 $37,453,929 $38,683,108 $29,822,072 $17,863,688
13,463,623 17,809,726 1,582,314 1,815,421 77,036,009 46,982,776
1,298,812 1,442,476 211,762 157,986 935,322 232,420
(22,177,813) (19,362,612) (1,836,057) (1,229,364) (66,012,623) (40,222,794)
(7,415,378) (110,410) (41,981) 744,043 11,958,708 6,992,402
</TABLE>
* Period from December 1, 1993 (commencement of operations) to March 31, 1994.
** Formerly Investment Reserve Fund
See accompanying notes to financial statements on pages 38-45.
SIT MUTUAL FUND GROUP
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The SIT Mutual Funds (the Funds) are 100% no-load funds, and are
registered under the Investment Company Act of 1940 (as amended) as
diversified (except Minnesota Tax-Free Income Fund which is
non-diversified), open-end management investment companies, or series
thereof. The SIT Bond Fund, SIT Minnesota Tax-Free Income Fund, and the
SIT Tax-Free Income Fund are series funds of SIT Mutual Funds II, Inc.
This report covers the bond funds within the SIT Mutual Fund Group.
On November 1, 1993 the Investment Reserve Fund's name was changed to
Money Market Fund, and the Fund's investment objective was amended to
comply with Rule 2a-7 of the Investment Company Act of 1940 governing
money market funds. To effect this change the Fund declared a stock
split in the ratio of 9.98 to 1. The Minnesota Tax-Free Income Fund and
Bond Fund commenced operations on December 1, 1993. The only
transactions for these Funds prior to this date was the sale of 10
shares for $100 in each of these funds to Sit Investment Associates,
Inc. on November 30, 1993. Effective February 11, 1994 the U.S
Government Securities, Tax-Free Income, and Money Market Funds changed
their respective fiscal year ends from June 30 to March 31.
Significant accounting policies followed by the Funds are summarized
below:
INVESTMENTS IN SECURITIES
Securities maturing more than 60 days from the valuation date, with the
exception of those in Money Market Fund, are valued at the market price
or approximate market value based on current interest rates; those
securities with maturities of less than 60 days when acquired, or which
subsequently are within 60 days of maturity, are valued at amortized
cost, which approximates market value. When market quotations are not
readily available, securities are valued at fair value based on
procedures appoved by the Board of Directors. Such fair values are
determined using prices quoted by independent brokers or pricing
services. Pursuant to Rule 2a-7 of the Investment Company Act of 1940,
all securities in the Money Market Fund are valued at amortized cost,
which approximates market value, in order to maintain a constant net
asset value of $1 per share.
Security transactions are accounted for on the date the securities are
purchased or sold. Securities gains and losses are calculated on the
identified-cost basis. Interest, including level-yield amortization of
long-term bond premium and discount, is recorded on the accrual basis.
Delivery and payment for securities which have been purchased by the
Funds on a forward commitment or when-issued basis can take place a
month or more after the transaction date. During this period, such
securities are subject to market fluctuations and each Fund maintains,
in a segregated account with its custodian, assets with a market value
equal to the amount of its purchase commitments.
The Minnesota Tax-Free Income Fund concentrates its investments in
Minnesota, and therefore may have more credit risk related to the
economic conditions in the state of Minnesota than a portfolio with
broader geographical diversification.
FEDERAL TAXES
The Funds' policy is to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income to shareholders. Therefore, no
income tax provision is required. Also, in order to avoid the payment
of any federal excise taxes, the Funds will distribute substantially
all of their net investment income and net realized gains on a calendar
year basis.
Net investment income and net realized gains may differ for financial
statement and tax purposes. The character of distributions made during
the year for net investment income or net realized gains may also
differ from its ultimate characterization for tax purposes. Also, due
to the timing of dividend distributions, the fiscal year in which
amounts are distributed may differ from the year that the income or
realized gains (losses) are recorded by the portfolios.
For federal income tax purposes the Bond Fund, Minnesota Tax-Free
Income Fund, Tax-Free Income Fund, and U.S. Government Securities Fund
has a capital loss carryover of $137,787, $446,074, $3,517,901, and
$631,212, respectively, at March 31, 1995 which, if not offset by
subsequent capital gains, will begin to expire in 2003 and 2004. It is
unlikely the Board of Directors will authorize a distribution of any
net realized gains until the available capital loss carryover is offset
or expires.
DISTRIBUTIONS
Distributions to shareholders are recorded as of the close of business
on the record date. Such distributions are payable in cash or
reinvested in additional shares of the Funds' capital stock.
Distributions from net investment income are declared daily and paid
monthly for the Funds. Distributions from net realized gains, if any,
will be made annually for each of the Funds.
NOTE 2 - INVESTMENT SECURITY TRANSACTIONS
Purchases of and proceeds from sales and maturities of investment
securities, other than short-term securities, for the year ended March
31, 1995, were as follows:
<TABLE>
<CAPTION>
Purchases Proceeds
<S> <C> <C>
Bond Fund $ 1,408,255 $ 1,304,921
Minnesota Tax-Free Income Fund 28,788,686 10,222,566
Tax-Free Income Fund 34,521,363 130,507,572
U.S. Government Securities Fund 13,473,888 15,750,643
</TABLE>
For Money Market Fund during the year ended March 31, 1995, purchases
of and proceeds from sales and maturities of investment securities
aggregated $254,662,628 and $244,242,708, respectively.
NOTE 3 - EXPENSES
INVESTMENT ADVISER
The Funds each have entered into an investment management agreement
with Sit Investment Associates, Inc. (SIA), under which SIA manages the
Fund's assets and provides research, statistical and advisory services,
and pays related office rental, executive expenses and executive
salaries. As part of its unified management fee, SIA is obligated to
pay all of the Funds' operating expenses (excluding extraordinary
expenses, stock transfer taxes, interest, brokerage commissions, and
other transaction charges relating to investing activities). The fee
for investment management and advisory services is based on the average
daily net assets of the Funds at the annual rate of:
Average
Daily
Net Assets
Bond Fund .80%
Minnesota Tax-Free Income Fund .80%
Tax-Free Income Fund .80%
First Over
$50 Million $50 Million
U.S. Government Securities Fund 1.00% .80%
Money Market Fund .80% .60%
For the period April 1, 1994 through December 31, 1995 the Adviser has
voluntarily agreed to limit the flat monthly fee (and, thereby, all
Fund expenses, except extraordinary expenses, interest, brokerage
commissions and other transaction charges not payable by the Adviser)
paid by the Tax-Free Income Fund to an annual rate of .70% of the
Fund's average daily net assets in excess of $250 million. After
December 31, 1995, this voluntary fee waiver may be discontinued by the
Adviser in its sole discretion.
For the period April 1, 1994 through December 31, 1995 the Adviser has
voluntarily agreed to limit the flat monthly fee (and, thereby, all
Fund expenses, except extraordinary expenses, interest, brokerage
commissions and other transaction charges not payable by the Adviser)
paid by the U.S. Government Securities Fund and Money Market Fund to an
annual rate of .80% and .50%, respectively of each Fund's average daily
net assets. After December 31, 1995, this voluntary fee waiver may be
discontinued by the Adviser in its sole discretion.
TRANSACTIONS WITH AFFILIATES
The investment adviser, affiliates of the investment adviser, directors
and officers of the Funds as a whole owned the following shares as of
March 31, 1995
<TABLE>
<CAPTION>
% Shares
Shares Outstanding
<S> <C> <C>
Bond Fund 91,452 24.53
Minnesota Tax-Free Income Fund 262,999 5.97
Tax-Free Income Fund 1,463,805 5.57
U.S. Government Securities Fund 539,775 14.82
Money Market Fund 2,332,799 7.82
</TABLE>
NOTE 4 - FINANCIAL HIGHLIGHTS
Per share data for a share of capital stock outstanding during the
period and selected supplemental and ratio information for each
period(s), are indicated as follows:
SIT BOND FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
PERIOD FROM
DECEMBER 1,
YEAR ENDED 1993 (1) TO
MARCH 31, MARCH 31,
1995 1994
<S> <C> <C>
NET ASSET VALUE:
Beginning of period $9.69 $10.00
OPERATIONS:
Net investment income .62 .19
Net realized and unrealized
losses on investments (.21) (.31)
Total from operations .41 (.12)
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (.62) (.19)
NET ASSET VALUE:
End of period $9.48 $9.69
Total investment return (2) 4.51% -1.22%
Net assets at end of period (000's omitted) $3,533 $3,403
RATIOS:
Expenses to average net assets 0.80% 0.80% (3)
Net investment income to average net assets 6.63% 6.24% (3)
Portfolio turnover rate (excluding short-term securities) 41.25% 43.49%
</TABLE>
(1) Commencement of operations.
(2) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value.
(3) Adjusted to an annual rate.
SIT MINNESOTA TAX-FREE INCOME FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
PERIOD FROM
DECEMBER 1,
YEAR ENDED 1993 (1) TO
MARCH 31, MARCH 31,
1995 1994
<S> <C> <C>
NET ASSET VALUE:
Beginning of period $9.79 $10.00
OPERATIONS:
Net investment income .56 .17
Net realized and unrealized gains
(losses) on investments .17 (.21)
Total from operations .73 (.04)
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (.56) (.17)
NET ASSET VALUE:
End of period $9.96 $9.79
Total investment return (2) 7.68% -0.80%
Net assets at end of period (000's omitted) $43,881 $18,105
RATIOS:
Expenses to average net assets 0.80% 0.80% (3)
Net investment income to average net assets 5.72% 5.23% (3)
Portfolio turnover rate (excluding short-term securities) 34.20% 12.23%
</TABLE>
(1) Commencement of operations.
(2) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value.
(3) Adjusted to an annual rate.
SIT TAX-FREE INCOME FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
MARCH 31, MARCH 31, YEARS ENDED JUNE 30,
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE:
Beginning of period $9.63 $10.02 $9.74 $9.59 $9.61
OPERATIONS:
Net investment income .56 .43 .60 .69 .74
Net realized and unrealized gains
(losses) on investments .09 (.30) .32 .15 (.02)
Total from operations .65 .13 .92 .84 .72
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (.56) (.43) (.60) (.69) (.74)
From realized gains (.02) (.09) (.04) ---- ----
Total distributions (.58) (.52) (.64) (.69) (.74)
NET ASSET VALUE:
End of period $9.70 $9.63 $10.02 $9.74 $9.59
Total investment return (1) 7.00% 1.19% 9.81% 9.09% 7.76%
Net assets at end of period (000's omitted) $255,157 $324,691 $338,977 $192,808 $86,997
RATIOS:
Expenses to average net assets 0.79% (3) 0.77% (2) 0.80% 0.80% 0.80%
Net investment income to average net assets 5.84% (3) 5.68% (2) 6.17% 7.02% 7.62%
Portfolio turnover rate
(excluding short-term securities) 13.13% 47.56% 58.29% 80.27% 74.48%
</TABLE>
(1) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value.
(2) Adjusted to an annual rate. Total Fund expenses are contractually limited
to .80% of average daily net assets. However, during the period ended March
31, 1994 the investment adviser voluntarily absorbed $77,029 in expenses
that were otherwise payable by the Fund. Had the Fund incurred these
expenses, the ratio of expenses to average daily net assets would have been
.80% for the period ended March 31, 1994 and the ratio of net investment
income to average daily net assets would have been 5.65%.
(3) Total Fund expenses are contractually limited to .80% of average daily net
assets. However, during the year ended March 31, 1995 the investment
adviser voluntarily absorbed $24,991 in expenses that were otherwise
payable by the Fund. Had the Fund incurred these expenses, the ratio of
expenses to average daily net assets would have been .80% for the year
ended March 31, 1995 and the ratio of net investment income to average
daily net assets would have been 5.83%.
SIT U.S. GOVERNMENT SECURITIES FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
MARCH 31, MARCH 31, YEARS ENDED JUNE 30,
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE:
Beginning of period $10.50 $10.73 $10.81 $10.54 $10.31
OPERATIONS:
Net investment income .67 .47 .71 .77 .79
Net realized and unrealized gains
(losses) on investments (.22) (.18) .07 .44 .23
Total from operations .45 .29 .78 1.21 1.02
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (.67) (.47) (.71) (.77) (.79)
From realized gains ---- (.05) (.15) (.17) ----
Total Distributions (.67) (.52) (.86) (.94) (.79)
NET ASSET VALUE:
End of period $10.28 $10.50 $10.73 $10.81 $10.54
Total investment return (1) 4.47% 2.70% 7.50% 11.87% 10.19%
Net assets at end of period (000's omitted) $37,454 $38,683 $31,538 $35,353 $30,153
RATIOS:
Expenses to average net assets 0.80% (3) 0.86% (3) 0.89% (2) 0.80% (2) 0.90%(2)
Net investment income to average net assets 6.48% (3) 5.79% (3) 6.60% (2) 7.28% (2) 7.60%(2)
Portfolio turnover rate
(excluding short-term securities) 38.51% 73.87% 76.66% 133.86% 118.27%
</TABLE>
(1) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value.
(2) Prior to January 1, 1993, total Fund expenses were contractually limited to
1.25% of average daily net assets for the first $30 million of Fund net
assets and 1.00% of average daily net assets exceeding $30 million of Fund
net assets. However, during the years ended June 30, 1993, 1992, and 1991,
the investment adviser voluntarily absorbed an additional $72,628,
$134,559, and $67,810 of expenses that were otherwise payable by the Fund.
Had the Fund incurred these expenses, the ratio of expenses to average
daily net assets would have been 1.11%, 1.21%, and 1.25%, respectively for
these periods, and the ratio of net investment income to average daily net
assets would have been 6.38%, 6.87%, and 7.25%, respectively.
(3) 1994 percentages are adjusted to an annual rate. Total Fund expenses are
contractually limited to 1.00% of average daily net assets for the first
$50 million in Fund net assets and .80% of average daily net assets for
Fund net assets exceeding $50 million. However, during the periods ended
March 31, 1995 and 1994, the investment adviser voluntarily absorbed
$73,460 and $39,324, respectively, of expenses that were otherwise payable
by the Fund. Had the Fund incurred these expenses, the ratio of expenses to
average daily net assets would have been 1.00% for the periods ended March
31, 1995 and 1994, and the ratio of net investment income to average daily
net assets would have been 6.28% and 5.65%, respectively.
SIT MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
As of November 1, 1993, the Fund's name was changed to Sit Money Market Fund,
Inc. from Sit Investment Reserve Fund, Inc. Effective on this date, the Fund's
primary investment policy was amended to comply with Rule 2a-7 of the Investment
Company Act of 1940 governing money market funds. The Fund's investment
objective, however, remains the achievement of maximum current income to the
extent consistent with the preservation of capital and maintenance of liquidity.
Per share amounts prior to November 1, 1993 have been restated to reflect the
9.98 to 1 stock split.
<TABLE>
<CAPTION>
SIT MONEY MARKET FUND SIT INVESTMENT RESERVE FUND
Period From Period From
November 1, July 1,
Year Ended 1993 to 1993 to
March 31, March 31, October 31, Years Ended June 30,
1995 1994 1993 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE:
Beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
OPERATIONS:
Net investment income 0.04 0.01 0.01 0.03 0.05 0.07
Total from operations 0.04 0.01 0.01 0.03 0.05 0.07
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (0.04) (0.01) (0.01) (0.03) (0.05) (0.07)
NET ASSET VALUE:
End of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Total investment return (1) 4.57% 1.14% 0.92% 3.02% 5.03% 7.14%
Net assets at end of period (000's omitted) $29,822 $17,864 $12,626 $10,869 $16,234 $7,729
RATIOS:
Expenses to average net assets 0.50% (3) 0.50% (3) 0.72% (3) 0.80% (2) 0.80% (2) 0.86%(2)
Net investment income to average net assets 4.63% (3) 2.76% (3) 2.67% (3) 2.98% (2) 4.74% (2) 6.87%(2)
</TABLE>
(1) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions
at net asset value.
(2) Prior to January 1, 1993, total Fund expenses were contractually limited to
1.00% of average daily net assets for the first $30 million of Fund net
assets. Subsequent to January 1, 1993 total Fund expenses are contractually
limited to .80% of the first $50 million of Fund net assets. However,
during the years ended June 30, 1993, 1992 and 1991, the investment adviser
voluntarily absorbed $16,480, $20,635 and $8,824 of expenses that were
otherwise payable by the Fund. Had the Fund incurred these expenses, the
ratio of expenses to average daily net assets would have been 0.91% for the
year ended June 30, 1993 and 1.00% for the years ended June 30, 1992 and
1991 and the ratio of net investment income to average daily net assets
would have been 2.87%, 4.54% and 6.73%, respectively.
(3) 1994 and 1993 percentages are adjusted to an annual rate. Total Fund
expenses are contractually limited to .80% of average daily net assets for
the first $50 million in Fund net assets and .60% of average daily net
assets for Fund net assets exceeding $50 million. However, during the
periods ended March 31, 1995, March 31, 1994, and October 31, 1993, the
investment adviser voluntarily absorbed $63,828, $17,565, and $3,224,
respectively, in expenses that were otherwise payable by the Fund. Had the
Fund incurred these expenses, the ratio of expenses to average daily net
assets would have been .80% for each of these periods and the ratio of net
investment income to average daily net assets would have been 4.33%, 2.46%,
and 2.59%, respectively.
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
SIT Mutual Funds II, Inc.
SIT U.S. Government Securities Fund, Inc.
SIT Money Market Fund, Inc.:
We have audited the accompanying statements of assets and liabilities,
including the schedules of portfolios of investments in securities, of SIT Bond
Fund (a series of SIT Mutual Funds II, Inc.), SIT Minnesota Tax-Free Income Fund
(a series of SIT Mutual Funds II, Inc.), SIT Tax-Free Income Fund (a series of
SIT Mutual Funds II, Inc.), SIT U.S. Government Securities Fund, Inc., and SIT
Money Market Fund, Inc. as of March 31, 1995; the related statements of
operations for the year ended March 31, 1995; the statements of changes in net
assets for the year ended March 31, 1995 and for the nine month period ended
March 31, 1994 (period from December 1, 1993, commencement of operations to
March 31, 1994 for SIT Bond Fund and SIT Minnesota Tax-Free Income Fund); and
the financial highlights for the year ended March 31, 1995 and for the nine
month period ended March 31, 1994 (period from December 1, 1993, commencement of
operations to March 31, 1994 for SIT Bond Fund and SIT Minnesota Tax-Free Income
Fund) and each of the years in the three-year period ended June 30, 1993 for SIT
Tax-Free Income Fund, SIT U.S. Government Securities Fund, Inc. and SIT Money
Market Fund, Inc. These financial statements and the financial highlights are
the responsibility of the Funds' management. Our responsibility is to express an
opinion on these financial statements and the financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted accounting
standards. Those standards require that we plan and perform our 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. Investment securities held in custody are confirmed to us by the
custodian. As to securities purchased and sold but not received or delivered, we
request confirmations from brokers and where replies are not received, we carry
out other appropriate auditing procedures. 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 provide a reasonable basis for our opinion.
In our opinion, the financial statements and the financial highlights
referred to above present fairly, in all material respects, the financial
position of SIT Bond Fund, SIT Minnesota Tax-Free Income Fund, SIT Tax-Free
Income Fund, SIT U.S. Government Securities Fund, Inc. and SIT Money Market Fund
as of March 31, 1995 and the results of their operations, the changes in their
net assets, and the financial highlights for the periods stated in the first
paragraph above, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
May 5, 1995
SIT MUTUAL FUND GROUP
FEDERAL INCOME TAX INFORMATION
We are required by Federal tax regulations to provide shareholders with
certain information regarding dividend distributions on an annual fiscal year
basis. The figures are for informational purposes only and should not be used
for reporting to federal or state revenue agencies. All necessary tax
information will be mailed in January each year.
<TABLE>
<CAPTION>
LONG-TERM LONG-TERM
ORDINARY CAPITAL ORDINARY CAPITAL
FUND AND PAYABLE DATE INCOME (A) GAIN (B) FUND AND PAYABLE DATE INCOME (A) GAIN (B)
<S> <C> <C> <C> <C>
U.S. Government Securities Fund Tax-Free Income Fund
April 30, 1994 $0.05111 $---- April 30, 1994 $0.04517 $----
May 31, 1994 0.05246 ---- May 31, 1994 0.04905 ----
June 30, 1994 0.05441 ---- June 30, 1994 0.04573 ----
July 31, 1994 0.03917 ---- July 31, 1994 0.04435 ----
August 31, 1994 0.05976 ---- August 31, 1994 0.05023 ----
September 30, 1994 0.06144 ---- September 30, 1994 0.04569 ----
October 31, 1994 0.05537 ---- October 31, 1994 0.04744 ----
November 30, 1994 0.05827 ---- November 30, 1994 0.04769 ----
December 31, 1994 0.05894 ---- December 31, 1994 0.05700 0.01078
January 31, 1995 0.06018 ---- January 31, 1995 0.05004 ----
February 28, 1995 0.05978 ---- February 28, 1995 0.04284 ----
March 31, 1995 0.05889 ---- March 31, 1995 0.04607 ----
$0.66978 (c) $0.00000 $0.57130 (d) $0.01078
Money Market Fund Minnesota Tax-Free Income Fund
April 30, 1994 0.00247 $---- April 30, 1994 $0.04463 $----
May 31, 1994 0.00307 ---- May 31, 1994 0.04916 ----
June 30, 1994 0.00317 ---- June 30, 1994 0.04282 ----
July 31, 1994 0.00312 ---- July 31, 1994 0.04224 ----
August 31, 1994 0.00363 ---- August 31, 1994 0.04766 ----
September 30, 1994 0.00352 ---- September 30, 1994 0.04658 ----
October 31, 1994 0.00376 ---- October 31, 1994 0.04978 ----
November 30, 1994 0.00381 ---- November 30, 1994 0.04799 ----
December 31, 1994 0.00437 ---- December 31, 1994 0.04735 ----
January 31, 1995 0.00481 ---- January 31, 1995 0.05094 ----
February 28, 1995 0.00426 ---- February 28, 1995 0.04295 ----
March 31, 1995 0.00473 ---- March 31, 1995 0.04713 ----
$0.04472 (c) $0.00000 $0.55923 (e) $0.00000
Bond Fund
April 30, 1994 $0.05125 $----
May 31, 1994 0.05618 ----
June 30, 1994 0.04927 ----
July 31, 1994 0.04346 ----
August 31, 1994 0.05562 ----
September 30, 1994 0.05322 ----
October 31, 1994 0.04653 ----
November 30, 1994 0.05403 ----
December 31, 1994 0.05161 ----
January 31, 1995 0.05281 ----
February 28, 1995 0.05308 ----
March 31, 1995 0.05509 ----
$0.62215 (c) $0.00000
(a) Includes distributions of short-term gains, if any, which are taxable as
ordinary income.
(b) Taxable as long-term gain.
(c) Taxable as dividend income and does not qualify for deduction by
corporations.
(d) Includes $0.01025 of short-term capital gains taxable as ordinary income,
100% of the remaining $0.56105 were derived from interest on tax-exempt
securities. This portion of exempt-interest dividends is exempt from
federal taxes and should not be included in shareholders' gross income.
Exempt-interest dividends may be subject to state and local taxes. Each
shareholder should consult a tax adviser about reporting this income for
state and local tax purposes.
(e) 100% of dividends were derived from interest on tax-exempt securities. This
portion of exempt-interest dividends is exempt from federal taxes and
should not be included in shareholders' gross income. Exempt-interest
dividends may be subject to state and local taxes. Each shareholder should
consult a tax adviser about reporting this income for state and local tax
purposes.
Directors:
Eugene C. Sit, CFA
Peter L. Mitchelson, CFA
Michael C. Brilley
Melvin C. Bahle
Sidney L. Jones
Donald W. Phillips
William E. Frenzel
Officers:
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Eugene C. Sit, CFA Chairman
Peter L. Mitchelson, CFA Vice Chairman
Michael C. Brilley Senior Vice President
Mary K. Stern President
Douglas S. Rogers, CFA (1) Vice President - Investments
Debra A. Sit, CFA (2) Vice President - Investments, Assistant Treasurer
Paul E. Rasmussen Vice President & Treasurer
Michael P. Eckert Vice President
Michael J. Radmer Secretary
Parnell M. Kingsley Assistant Secretary
Carla J. Rose Assistant Secretary
</TABLE>
(1) Bond, U.S. Government Securities and Money Market Funds only.
(2) Assistant Treasurer of all Funds, Vice President - Investments of the
Tax-Free Income and Minnesota Tax-Free Income Funds only.
ANNUAL REPORT
BOND FUNDS
March 31, 1995
INVESTMENT ADVISER
Sit Investment Associates, Inc.
4600 Norwest Center
Minneapolis, MN 55402
612-334-5888 (Metro Area)
800-332-5580
DISTRIBUTOR
SIA Securities Corp.
4600 Norwest Center
Minneapolis, MN 55402
612-334-5888 (Metro Area)
800-332-5580
CUSTODIAN, TRANSFER AGENT
AND DISBURSING AGENT
Norwest Bank Minnesota, N.A.
733 Marquette Avenue, Fourth Floor
Minneapolis, MN 55479
612-667-9678 (Metro Area)
800-626-4836
AUDITORS
KPMG Peat Marwick LLP
4200 Norwest Center
Minneapolis, MN 55402
LEGAL COUNSEL
Dorsey & Whitney
220 South Sixth Street
Minneapolis, MN 55402
