SEMI-ANNUAL REPORT
BOND FUNDS
September 30, 1995
(LOGO) 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 $4.0 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
(CHART)
<TABLE>
<CAPTION>
SIT FAMILY OF FUNDS
Stability: Income: Growth & Income: Growth:
Safety of principal Increased income Long-term capital Long-term capital
and current income appreciation and income appreciation
<S> <C> <C> <C>
Funds:
MONEY MARKET U.S. GOVT. SECURITIES BALANCED GROWTH
TAX-FREE INCOME GROWTH & INCOME INT'L GROWTH
MN TAX-FREE INCOME SMALL CAP GROWTH
BOND DEV MARKETS GROWTH
Principal Stability Growth
& Current Income Potential
</TABLE>
SIT MUTUAL FUND GROUP
BOND FUNDS SEMI-ANNUAL REPORT
TABLE OF CONTENTS
PAGE
Chairman's Letter......................................... 4
Performance Review........................................ 6
Fund Reviews
Bond Fund........................................ 8
Minnesota Tax-Free Income Fund................... 12
Tax-Free Income Fund............................. 18
U.S. Government Securities Fund.................. 28
Money Market Fund................................ 32
Notes to Portfolios of Investments ...................... 37
Statements of Assets and Liabilities .................... 38
Statements of Operations ................................ 39
Statements of Changes in Net Assets ..................... 40
Notes to Financial Statements ........................... 42
Financial Highlights .................................... 45
This document must be preceded or accompanied by a Prospectus.
SIT MUTUAL FUND GROUP
CHAIRMAN'S LETTER - SEPTEMBER 30, 1995
PHOTO EUGENE C. SIT
Dear Fellow Shareholders:
Domestic financial assets performed well during the third quarter ended
September 30, 1995, amid increases in corporate earnings, stable interest rates,
heightened merger and acquisition activity, and generally contained inflation.
ECONOMIC REVIEW
The U.S economy expanded by a healthy +4.2% annual rate during the
third quarter, according to the Commerce Department's preliminary estimate of
real GDP growth. Third quarter growth was fueled by several factors including
increases in inventories, government spending, and net exports. Durable goods
purchases rose considerably, particularly in the auto sector as dealers
discounted aggressively to reduce inventory levels in preparation for the new
model year. Housing activity also increased as home buyers were enticed by
relatively low mortgage rates. Consumer confidence surveys remain satisfactory,
and personal consumption expenditures advanced by an annualized +2.9% during the
third quarter. Looking toward the fourth quarter, economic growth should return
to more moderate levels. Early indications of softening October retail sales
coupled with seemingly high levels of consumer debt may hint of slightly more
restrained personal consumption spending during the final quarter. We are,
therefore, forecasting fourth quarter economic growth of approximately +2.5%,
which results in calendar 1995 growth slightly above +3.0%.
As the presidential campaign season draws near, fiscal policy,
particularly the passage of the federal budget, has taken center stage on
Capitol Hill. Congress recently approved a stopgap measure temporarily allowing
operations to continue through mid November; however, negotiations with the
Administration are intensifying over such budget-balancing issues as Medicare
and Medicaid spending, welfare and educational reform, and a potential reduction
in the capital gains tax rate. The House and Senate recently approved budget
proposals, both of which would reduce the federal deficit sufficiently to
balance the federal budget by 2002. In order to separate himself from the
conservative majority, President Clinton threatened to veto these proposals on
the grounds of being overly harsh on the elderly and the middle class. We expect
that both sides will reach a compromise by November 15th in order to avoid a
federal government shutdown. Once a compromise is reached, decreased federal
government responsibilities will fall squarely on the shoulders of state and
local government. The federal deficit of 1995 was calculated at $165 billion,
which at 2.0% of GDP compares very favorably to the federal deficits of most
developed nations and is the lowest federal deficit on this basis since 1988.
Domestic inflation continues to be well contained. Energy prices have
provided downward pressure on inflation, although increases in agricultural
goods could have a modest impact on price levels at some point. Inflation at the
consumer and producer levels, as measured by the year-over-year changes in the
CPI and PPI, appear firmly in check at +2.5% and +1.8%, respectively.
Broadly contained inflation was not enough, though, to induce the
Federal Reserve to further reduce short rates at its August or September FOMC
meetings. Even though fixed income markets appear to be discounting another
reduction in short-term interest rates prior to year end, the recent strength of
the domestic economy will likely delay any further Fed action until early 1996.
Additional reductions will eventually hinge either on a productive budget
compromise or a marked downturn in the domestic economy.
". . . WE BELIEVE THAT THE IMPACT OF POTENTIAL TAX REFORM ON THE VALUE OF
LONGER-TERM MUNICIPAL BONDS HAS BEEN EXAGGERATED AND THESE BONDS REMAIN CHEAPLY
VALUED, PARTICULARLY ON A TAXABLE EQUIVALENT YIELD BASIS."
STRATEGY SUMMARY
Based on our economic outlook, we expect that longer-term bond yields
should remain within a narrow range between 6 to 7% in the months ahead. We also
acknowledge the possibility that stronger economic growth or an extension of the
budget compromise could postpone further Fed action until early 1996. Thus,
fixed income portfolios remain aggressively postured.
The durations of the taxable bond portfolios (a measurement of price
sensitivity to changes in interest rates) were extended in response to market
weakness in anticipation of the Treasury auction in mid-August. These durations
have been reduced in recent weeks, but they are still longer than related market
benchmarks. Given our expectations for a relatively stable interest rate
environment in the near term, we intend to maintain our emphasis on high-coupon
mortgage pass-through securities with relatively stable prepayment rates,
particularly those backed by government-sponsored mobile home loans. We would
also consider reducing asset-backed holdings if higher-yielding opportunities
present themselves. Portfolios continue to be underweighted in corporate bonds,
since their yield spreads relative to Treasuries remain historically narrow.
Over the near term, we intend to maintain moderate allocations to the government
sector as a means of managing portfolio duration.
The municipal market, particularly longer-maturity bonds,
underperformed the taxable market during the second quarter of 1995. As
investors became increasingly concerned about the possible enactment of a flat
tax, significant assets flowed out of municipal bond funds or shifted toward
shorter-maturity holdings. Although the municipal market has recouped some
ground in recent months, helped by lower issuance volume, we believe that the
impact of potential tax reform on the value of longer-term municipal bonds has
been exaggerated and these bonds remain cheaply valued, particularly on a
taxable equivalent yield basis. The nominal yield on longer-term,
investment-grade municipal bonds, at more than 90% of the yield offered by
comparable maturity Treasury securities, is very attractive on an historical
basis. Thus, we continue to look for opportunities to swap from lower-yielding,
shorter-maturity bonds into higher-yielding securities. We intend to maintain
our emphasis on securities that provide high levels of coupon income, and we
also seek increased call protection.
Even in this relatively stable interest rate environment, our fixed
income investment approach remains focused on finding long-term opportunities of
value. In addition, our intensive credit research process remains an integral
part of our fixed income investment approach. We continue to focus on
shareholders dual objectives of high income and price stability. We greatly
appreciate your interest and support as investors 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
SEPTEMBER 30, 1995 PERFORMANCE SUMMARY - BOND FUNDS
BOND MARKET REVIEW
Short-term yields have remained relatively stable since the Federal
Reserve lowered the Federal Funds rate by 25 basis points to 5.75% on July 6,
1995. Yields on 3-month Treasury bills have declined from 5.85% to around 5.55%
in early July and since late August have moved slightly lower to 5.42% on
September 30, 1995. In recent weeks, long bond yields have returned to the lows
that were set earlier in the summer. Yields on 30-year Treasury bonds decreased
from 7.43% on March 31, 1995 to below 6.50% in mid-June, then rose to a plateau
at almost 7.0% for several weeks before declining to 6.51% on September 30,
1995.
Municipal bonds were much more stable in price as reflected in the
yield of the Bond Buyer 40-Bond Index which declined only 49 basis points from
6.37% to 5.88% during the six month period. Long maturity municipal bonds lagged
taxable bond performance from mid-April through June as investors became
increasingly concerned about tax reform, but have managed to gain back some
ground in recent months, helped by low issuance volume. We believe that the
municipal market has already discounted much of the potential impact of tax
reform and that longer maturity municipal revenue bonds, which are yielding over
90 percent of comparable maturity Treasury bonds, remain attractively valued.
In both taxable and tax-exempt portfolios, we continue to emphasize
securities that provide high income and stable return characteristics as we
anticipate longer term interest rates to remain within a narrow range in the
months ahead.
<TABLE>
<CAPTION>
TOTAL RETURN - CALENDAR YEAR
YIELD
YTD AS OF DISTRIBUTION
1988 1989 1990 1991 1992 1993 1994 1995 9/30/95 RATE (2)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SIT BOND FUND -- -- -- -- -- 0.34%(1) -1.31% 12.47% 6.32% 6.54%
SIT Minnesota TAX-FREE
Income Fund -- -- -- -- -- 1.60(1) 0.63 8.50 5.66(3) 5.73
(NASDAQ Symbol: SMTFX)
SIT TAX-FREE INCOME FUND 2.19%(1) 8.38% 7.29% 9.25% 7.71% 10.42 -0.63 9.19 5.71(4) 5.75
(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 8.31 6.98 6.88
SIT MONEY MARKET FUND -- -- -- -- -- 0.46(1) 3.84 4.19 5.44(6)
(NASDAQ Symbol: SNIXX)
Lehman Aggregate Bond Index 7.89 14.53 8.96 16.00 7.40 9.75/0.54(1) -2.92 13.63
Lehman 5-Year Municipal
Bond Index 6.39/0.75(1) 9.07 7.70 11.41 7.62 8.73 -1.28 9.41
Lehman Inter. Government
Bond Index 6.40 12.68 9.56 14.11 6.93 8.17 -1.75 10.72
3-Month U.S. Treasury Bill 7.10 8.73 8.04 5.72 3.56 3.13 4.47 4.40
SIT Investment Reserve Fund 6.65 8.53 7.59 6.14 3.81 2.34(5)
</TABLE>
(Inception date 1/25/85. Converted to SIT Money Market Fund on 11/1/93.)
<TABLE>
<CAPTION>
TOTAL RETURN
TOTAL RETURN SIX MONTHS AVERAGE ANNUAL TOTAL RETURNS FOR
QUARTER ENDED ENDED THE PERIODS ENDED SEPTEMBER 30, 1995
INCEPTION 9/30/95 9/30/95 1 YEAR 3 YEARS 5 YEARS SINCE INCEPTION
<S> <C> <C> <C> <C> <C> <C> <C>
SIT BOND FUND 12/01/93 1.79% 7.89% 13.47% -- -- 6.06%
SIT MINNESOTA TAX-FREE INCOME FUND 12/01/93 1.80 3.86 8.47 -- -- 5.84
SIT TAX-FREE INCOME FUND 09/29/88 2.24 4.64 9.01 6.84% 7.51% 7.64
SIT U.S. GOV'T. SECURITIES FUND 06/02/87 1.98 5.30 8.86 5.95 8.10 8.57
SIT MONEY MARKET FUND 11/01/93 1.35 2.77 5.44 -- -- 4.45
Lehman Aggregate Bond Index 1.96 8.18 14.06 6.68 9.65 5.82
Lehman 5-Year Municipal Bond Index 2.39 5.13 8.90 6.00 7.81 7.56
Lehman Inter. Government Bond Index 1.55 6.30 10.60 5.46 8.42 8.47
3-Month U.S. Treasury Bill 1.39 2.86 5.82 4.27 4.63 4.92
</TABLE>
(1) Period from Fund inception through calendar year-end.
(2) Based on the last 12 monthly distributions of net investment income and
average NAV as of 9/30/95.
(3) For Minnesota residents in the 31%, 36% and 39.6% federal tax brackets, the
double exempt tax equivalent yields are 8.96%, 9.67% and 10.24%,
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 8.28%, 8.92% and 9.45%, respectively
(Income subject to state tax, if any).
5) Period January 1, 1993, through October 31, 1993, at which time the Fund
converted to the SIT Money Market Fund.
(6) Figure represents 7-day compound effective yield. The 7-day simple yield as
of 9/30/95 was 5.30%.
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
SEPTEMBER 30, 1995
PHOTO MICHAEL C. BRILLEY, SENIOR PORTFOLIO MANAGER
The SIT Bond Fund provided investors with a +7.89% return for the six
months ended September 30, 1995, compared to a +8.18% return for the Lehman
Brothers Aggregate Bond Index. As of September 30, 1995, the Fund's 30-day SEC
yield was 6.32% and the 12-month distribution rate was 6.54%.
Yields on intermediate U.S. Treasury securities fell by approximately 1%
during the six-month period, resulting in meaningful price appreciation for
intermediate and long maturity securities. The Fund s effective maturity was
lengthened as yields rose in July and August to take advantage of those higher
yields. The Fund s allocation to corporate bonds was significantly reduced as
their yield spreads relative to Treasuries continue to narrow to historically
low levels, thereby enabling increased weightings in the asset-backed and
government sectors. The Fund s effective maturity was shortened in early
October, but remains longer than the Lehman Aggregate Bond Index.
Given our expectations for a relatively stable interest rate environment in
the months ahead, we intend to maintain our current emphasis on high coupon
mortgage pass-through securities with relatively stable prepayment rates,
particularly those backed by mobile home loans. We also intend to maintain the
Fund s effective maturity near that of its benchmark as we expect bond yields to
remain within a narrow range in the months ahead.
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 fixed-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 9/30/95: $9.91 Per Share
3/31/95: $9.48 Per Share
Total Net Assets: $5.48 Million
30-Day SEC Yield: 6.32%
Average Maturity: 18.57 Years
Modified Adjusted Duration: 5.18 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 37.6
Government & Agency 29.8
Collateralized Mortgage Obligations 16.2
Asset-Backed Securities 10.4
Corporate Bonds & Notes 2.6
Other Assets & Liabilities 3.4
<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 1.79% 1.73% 1.96% 1.79% 1.73% 1.96%
(unannualized)
1 Year 13.47 12.15 14.06 13.47 12.15 14.06
Inception 6.06 4.82 5.82 11.37 9.01 10.92
(12/1/93)
</TABLE>
* As of 9/30/95
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.
GROWTH OF $10,000
(LINE GRAPH)
LEHMAN AGGREGATE BOND INDEX
SIT BOND FUND
The sum of $10,000 invested at inception (12/1/93) and held until 9/30/95 would
have grown to $11,137 in the Fund or $11,092 in the Lehman Aggregate Bond Index
assuming reinvestment of all dividends and capital gains.
QUALITY RATINGS
(% of total net assets)
(PIE CHART)
LOWER OF MOODY'S OR S&P USED.
Agency Mortgage-Backed Securities & CMO'S 53.8%
Government & Agency 29.8%
AAA 6.9%
AA 3.5%
A 2.6%
Other Assets & Liabilities 3.4%
SIT BOND FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 1995 (UNAUDITED)
Quantity Name of Issuer Market Value(1)
U.S. GOVERNMENT SECURITIES (29.8%)(2)
1,025,000 U.S. Treasury Bond,
7.125%, 02/15/23 $1,086,562
500,000 U.S. Treasury Note,
7.875%, 8/15/01 543,630
Total U.S. Government securities
(cost: $1,529,647) 1,630,192
ASSET-BACKED SECURITIES (10.4%)
150,000 American Housing Trust,
8.25%, 6/25/20 156,000
50,000 CIT Group Securitization Corp.,
1993-1 A3, 6.10%, 6/15/18 49,002
100,000 Green Tree Financial Corp.,
1993-3 A7, 6.40%, 10/15/18 90,940
100,000 Green Tree Financial Corp.,
1993-4 A4, 6.60%, 1/1/19 98,155
75,000 Green Tree Financial Corp.,
1995-5 A6, 7.25%, 9/15/26 74,054
100,000 Security Pacific Corp., 1995-1 A4,
7.65%, 4/10/20 101,674
Total asset-backed securities
(cost: $572,753) 569,825
CORPORATE BONDS & NOTES (2.6%)
125,000 Corestates Capital Corp., 9.625%,
2/15/01 142,656
(cost: $140,413)
MORTGAGE PASS-THROUGH SECURITIES (3)(37.6%)
69,583 Federal Home Loan Mortgage
Corp., 10.25%, 9/1/09 74,908
489,775 Federal National Mortgage
Association, 10.00%, 10/1/19 530,593
Government National Mortgage
Association:
29,938 8.75%, 11/15/01 31,495
67,327 9.00%, 11/15/08 70,663
15,134 9.00%, 8/15/11 15,879
30,210 9.50%, 3/15/03 32,020
193,030 9.50%, 9/15/10 202,982
103,969 9.50%, 2/15/11 109,330
6,568 9.75%, 8/15/02 6,961
70,149 10.00%, 8/15/02 $ 74,474
116,136 10.00%, 4/1/18 124,455
61,009 10.25%, 4/15/01 64,939
70,446 10.25%, 4/15/01 74,993
20,046 10.25%, 4/15/12 21,483
16,986 10.25%, 5/15/12 18,188
19,434 10.25%, 5/15/12 20,824
146,199 10.25%, 5/15/12 156,689
18,818 10.25%, 6/15/12 20,161
19,143 10.25%, 6/15/12 20,510
54,164 10.25%, 7/15/12 58,015
22,010 10.25%, 7/15/12 23,600
115,115 10.25%, 8/15/12 123,337
70,048 10.25%, 6/15/13 75,136
54,762 10.75%, 8/15/98 58,768
46,144 11.25%, 10/15/00 49,968
Total mortgage pass-through securities
(cost: $2,082,579) 2,060,371
COLLATERALIZED MORTGAGE OBLIGATIONS (16.2%)
135,000 FHLMC CMO #1617,
6.25%, 3/15/23 127,175
250,000 FNMA 1994-38, 6.65%, 12/25/23 243,545
Vendee Mortgage Trust:
50,000 1993 - 2C, 6.25%, 3/15/10 48,795
50,000 1992-1 2B, 7.75%, 9/15/10 50,593
125,000 1993-3 2D, 5.75%, 6/15/13 113,511
150,000 1992-1 2D, 7.75%, 12/15/14 153,791
75,000 1992-2 2D, 7.00%, 9/15/15 74,384
75,000 1994-3 2D, 7.75%, 5/15/18 76,892
Total collateralized mortgage obligations
(cost: $867,615) 888,686
SHORT-TERM SECURITIES (2.7%)
147,431 Cash Management Fund, 5.51% 147,431
Total short-term securities
(cost: $147,431)
Total investments in securities
(cost: $5,340,438) (6) $5,439,161
(This page has been left blank intentionally.)
SIT MINNESOTA TAX-FREE INCOME FUND REVIEW
SEPTEMBER 30, 1995
PHOTO MICHAEL C. BRILLEY, SENIOR PORTFOLIO MANAGER
DEBRA A. SIT, CFA, PORTFOLIO MANAGER
The SIT Minnesota Tax-Free Income Fund provided shareholders a total return
of +3.86% for the six month period ended September 30, 1995 which compares to a
return of +5.13% for the Lehman 5-Year Municipal Bond Index. The Fund's net
asset value per share rose $0.10 cents from $9.96 to $10.06 during the period
while its 30-day SEC yield remained relatively stable at around 5.6%. Third
quarter distributions totaled 13.98 cents per share which compares to 14.05
cents during the prior quarter.
Fund assets increased significantly from $43.9 million to $52.3 million
during the six month period. As of September 30, 1995, the Fund was fully
invested in intermediate and longer term bonds, as several purchases were made
to reduce portfolio cash from its 14.1% level at the end of March. The most
significant shifts in industry sector weightings included increases in
multifamily holdings from 23.5% to 30.7% and in general obligation bonds from
1.1% to 3.0%, and a decrease in industrial revenue bonds from 13.0% to 11.8%.
While the Fund's weighting in non-rated securities increased slightly from 34.7%
to 35.9%, the Fund's holdings in securities rated "A" or better by the major
ratings services increased from 45.4% to 55.8%. We estimate the portfolio's
average quality to remain "A rated."
We expect longer term interest rate levels to remain within a narrow range
through the rest of the year, although economic conditions allow room for
further Federal Reserve interest rate reductions. We consider longer maturity
municipal bonds to continue to offer attractive value relative to taxable bonds
despite concerns about tax reform and intend to maintain only a modest level of
short-term holdings. Our investment approach emphasizes finding long term
opportunities of value, and we remain focused on the Fund s dual objectives of
high income and principal stability.
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 9/30/95: $10.06 Per Share
3/31/95: $ 9.96 Per Share
Total Net Assets: $52.33 Million
30-Day SEC Yield: 5.66%
Tax Equivalent Yield: 10.24% (1)
Average Maturity: 18.99 Years
Duration to Estimated Avg. Life: 6.73 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.
PORTFOLIO STRUCTURE
(% of total net assets)
(BAR GRAPH)
Multifamily Mortgage Revenue 30.7
Single Family Mortgage Revenue 25.3
Hospital/Health Care Revenue 19.3
Industrial Revenue/Pollution Control 11.8
Other Revenue Bonds 7.5
General Obligation 3.0
Municipal Lease Rental 2.7
Other Assets & Liabilities -0.3
<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 1.80% 2.08% 2.39% 1.80% 2.08% 2.39%
(unannualized)
1 Year 8.47 8.77 8.90 8.47 8.77 8.90
Inception 5.84 3.26 5.12 10.94 6.06 9.58
(12/1/93)
</TABLE>
* As of 9/30/95
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.
GROWTH OF $10,000
(LINE GRAPH)
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 9/30/95 would
have grown to $11,094 in the Fund or $10,958 in the Lehman 5-Year Municipal Bond
Index assuming reinvestment of all dividends and capital gains.
QUALITY RATINGS
(% of total net assets)
(PIE CHART)
LOWER OF MOODY'S, S&P, FITCH OR DUFF & PHELPS RATINGS USED.
AAA 20.2%
AA 17.4%
A 18.5%
BBB 8.3%
Not Rated 35.9%
ADVISER'S ASSESSMENT OF NOT-RATED SECURITIES
AA 1.3%
A 2.0
BBB 26.9
BB 5.7
Total 35.9%
<TABLE>
<CAPTION>
MINNESOTA TAX-FREE INCOME FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 1995
Quantity Name of Issuer Market Value(1)
<S> <C> <C>
MUNICIPAL BONDS (100.3%)(2)
GENERAL OBLIGATION (3.0%)
600,000 Carver Co. Hsg. & Redev. Auth. Hsg. & Dev. Gross Rev. Ltd.Tax G.O.
(Chanhassen Apts. Proj.), 7.00%, 1/1/25 $ 597,678
475,000 Southeastern MN Multi-Co. Hsg. & Redev. Auth. Hsg. Dev. Series 1994 (Lake City G.O.),
6.00%, 8/1/10 478,995
500,000 Virginia Hsg. & Redev. Auth. Unltd. Tax G.O. Series 1995, 6.25%, 9/1/25 500,695
1,577,368
HOSPITAL/HEALTH CARE (19.3%)
500,000 Brooklyn Center Hlth. Care Fac. Rev. Series 1993 (Maranatha Proj.), 7.50%, 12/1/10 520,110
215,000 Fergus Falls Hlth. Care Fac. Auth. Series 1993A (Lake Region Hosp. Corp. Proj.),
6.25%, 9/1/04 219,399
1,000,000 Mankato Hospital Fac. Rev. Series 1989 First Mtge. (Immanuel- St. Joseph Hosp. Proj.),
7.30%, 8/1/18 1,077,660
1,685,000 Maplewood Health Care Fac. Rev. (VOA Care Ctrs. Proj.), 7.375%, 10/1/12 1,748,626
Minneapolis Hlth. Care Fac. Rev.:
915,000 Series 1991 (Jones-Harrison Residence Proj.), 8.35%, 9/1/21 990,908
1,000,000 Series 1993 (St. Olaf Res. Proj.), 7.00%, 10/1/18 996,580
New Ulm Hlth. Care Fac. Rev. (Highland Manor Proj.):
1,100,000 Series 1994, 7.25%, 6/1/14 1,123,573
570,000 Series 1995A, 7.625%, 6/1/15 574,657
180,000 Pine River Hlth. Fac. Auth. Rev. Refunding Series 1994 (Evangelical Luth. Good Sam. Proj.),
6.00%, 8/1/06 188,908
230,000 Puerto Rico Industrial, Tourist, Educ., Med. & Env. Ctrl. Fac. Fin. Auth. Hosp.
Rev. 1994 Series A (Ryder Mem. Hosp. Proj.), 5.75%, 5/1/99 233,328
Red Wing Hlth. Care Ctr. Fac. Rev. Refunding (River Region Obligated Group):
125,000 Series 1993A, 6.20%, 9/1/05 128,819
130,000 Series 1993A, 6.30%, 9/1/06 133,363
200,000 Series 1993B, 6.20%, 9/1/05 206,110
Sherburne Co. Nursing Home Fac. Rev. Series 1994 (Guardian Angels Care Ctr. Proj.):
75,000 7.30%, 6/1/07 77,516
80,000 7.35%, 6/1/08 82,678
90,000 7.40%, 6/1/09 93,302
555,000 7.50%, 6/1/14 573,459
140,000 7.75%, 6/1/15 145,795
150,000 7.75%, 6/1/16 156,900
820,000 Wadena Co. Hlth. Care Fac. Rev. Series 1994B, 7.45%, 9/1/15 850,315
10,122,006
INDUSTRIAL /POLLUTION CONTROL (11.8%)
Anoka Industrial Dev. Rev. Series 1994 (Lund Industries, Inc. Proj.):
500,000 6.40%, 9/1/03 (4) 512,425
500,000 6.50%, 9/1/04 (4) 514,960
350,000 Apple Valley Industrial Dev. Rev. Series 1992 (Kmart Corp. Proj), 6.50%, 10/1/08 350,252
Baxter Industrial Dev. Rev. Series 1979 (Kmart Corp. Proj.):
90,000 6.75%, 2/1/98 91,447
100,000 6.75%, 2/1/99 101,578
Cloquet Pollution Control Rev. (Potlach Corp. Proj.):
110,000 Series 1978, 6.50%, 6/1/08 110,242
635,000 Series 1979, 6.75%, 6/1/09 636,289
105,000 MN Agricultural & Econ. Dev. Board Small Business Dev. Ln. Prgm. Rev.
Series 1995A Lot 1 (New Morning Windows Proj.), 6.40%, 8/1/04 (4) $ 105,131
1,965,000 Plymouth Rev. Refunding Series 1992 (Carlson Ctr. Proj.) (LOC First Bank, N.A.),
7.00%, 4/1/12 2,058,180
Richfield Cmty. Dev. Rev. Refunding 1994 (Richfield Shoppes Proj.):
1,390,000 7.50%, 10/1/04 1,470,050
200,000 8.375%, 10/1/05 215,958
6,166,512
MULTIFAMILY MORTGAGE (30.7%)
Austin Hsg. & Redev. Auth. Governmental Hsg. Gross Rev. Series 1995A
(Courtyard Res. Proj.):
220,000 7.00%, 1/1/15 218,816
500,000 7.25%, 1/1/26 496,880
Burnsville Multifamily Hsg. Rev. Refunding:
500,000 Series 1989 (Coventry Ct. Apts. Proj.) (FHA insured), 7.50%, 9/1/17 532,135
425,000 Series 1991 (Atrium Proj.) (Trygg-Hansa ins.), 7.20%, 5/1/11 447,925
960,000 Series 1994 (Bridgeway Apts. Proj.), 7.25%, 2/1/14 987,898
405,000 Chisago City Health Fac. Rev. Refunding Series 1995A (Pleasant Heights Proj.),
7.30%, 7/1/18 404,040
Eden Prairie Multifamily Hsg. Rev. Refunding :
60,000 Series 1990A, (Welsh Parkway Apts. Ltd. Proj.)(FHA insured), 8.00%, 7/1/26 64,856
700,000 Series 1991, (Windslope Apts. Proj.)(Section 8), 7.00%, 11/1/06 744,282
1,500,000 Series 1991, (Windslope Apts. Proj.)(Section 8), 7.10%, 11/1/17 1,573,065
450,000 Series 1995A, (Olympic Ridge Proj.)(GNMA Collateralized)(FHA insured),
6.20%, 1/20/16 448,403
Hopkins Elderly Hsg. Rev. Refunding (St. Therese Southwest Proj.):
1,600,000 Series 1994A (Asset Gty. insured), 6.25%, 3/1/14 1,623,120
360,000 Series 1994B, 9.00%, 11/1/19 383,098
500,000 Hutchinson Hsg. Facs. Rev. Series 1994 (Prince of Peace Proj.), 7.375%, 10/1/12 520,145
565,000 Minneapolis Multifamily Hsg. Rev. Series 1994 (Findley Place Townhomes Proj) (Section 8),
7.00%, 12/1/16 (4) 592,148
MN HFA Multifamily Hsg. Dev. Rev.:
20,000 Series 1977, 6.25%, 2/1/08 20,454
470,000 Series 1978B, 7.10%, 2/1/21 479,400
530,000 Series 1979 (Section 8), 7.00%, 2/1/22 540,372
25,000 Series 1988A, 7.70%, 8/1/08 26,892
Minnetonka Hsg. Fac. Rev. Series 1994 (Beacon Hill Housing Proj.):
890,000 7.00%, 6/1/04 926,508
1,000,000 7.50%, 6/1/14 1,038,520
525,000 Minnetonka Multifamily Hsg. Rev. Refunding Subordinate Series 1994C (Brier Creek Proj.)
8.00%, 12/20/16 556,448
500,000 Monticello Senior Hsg. Rev. Series 1995, (Mississippi Shores Proj.), 7.25%, 7/1/16 502,825
415,000 Mora Multifamily Rev. Refunding Hsg. Alternatives Partnership Series 1995,
6.50%, 6/1/02 416,282
325,000 Sandstone Econ. Dev. Auth. Hsg. & Dev. Rev. Series 1994A (Family Apts. Proj.)
8.00%, 1/1/12 341,946
500,000 St. Paul Hsg. & Redev. Multifamily Refunding Series 1992 (Point of St. Paul Proj.)
(FNMA-backed), 6.60%, 10/1/12 517,115
540,000 St. Paul Port Auth. Commercial Dev. Rev. Refunding Series 1990-1 (Fort Rd.
Med./ Irvine Pk. Proj.), (Asset Gty. Insured), 7.50%, 9/1/02 584,064
1,075,000 Washington Co. Hsg. & Redev. Auth. Multifamily Hsg. Rev. Refunding Series 1994
(White Bear Lake Transitional Hsg. Proj.), 6.625%, 8/1/24 $ 1,081,052
16,068,689
MUNICIPAL LEASE RENTAL (2.7%)
585,000 Burnsville Solid Waste Rev. Series 1990 (Freeway Transfer Inc. Proj.),
9.00%, 4/1/10 (4) 657,803
Duluth Econ. Dev. Auth. Lease Rev. Series 1995A:
105,000 6.30%, 8/1/06 106,386
125,000 6.40%, 8/1/07 126,741
500,000 Eden Prairie Hsg. & Redev. Auth. Lease Rev. Series 1992B
(City Hall Proj.), 6.25%, 2/1/09 522,040
1,412,970
SINGLE FAMILY MORTGAGE (25.3%)
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 1,630,535
Dakota County Hsg. & Redev. Auth. Single Family Mtg. Rev.:
1,000,000 Series 1994A, (FNMA-backed), 6.70%, 10/1/09 (4) 1,049,190
400,000 Series 1995, (FNMA & GNMA-backed), 6.25%, 10/1/09 (4) 406,228
795,000 Dakota/Wash./Stearns Cos. Hsg. & Redev. Auth. Single Family Rev. Refunding
Series 1994A (FNMA-backed), 6.50%, 9/1/10 (4) 824,169
Minneapolis CDA & St. Paul HRA Homeownership Mtg. Family Hsg. Prog. Series 1984:
160,000 7.50%, 7/1/98 167,328
235,000 7.75%, 7/1/06 245,074
2,420,000 7.875%, 7/1/17 2,518,179
40,000 Minneapolis Hsg. & Redev. Auth. Single Family Mtg. Rev. Refunding Series 1978,
6.75%, 5/1/09 40,751
Minneapolis Redev. Mtg. Rev. Series 1987A (Riverplace Proj.) (LOC Bk. of Tokyo):
155,000 7.00%, 1/1/07 161,138
500,000 7.10%, 1/1/20 517,285
35,000 Minneapolis/ St. Paul Hsg. Fin. Bd. Single Family Mtg. Rev. Series 1989A (GNMA backed),
7.65%, 12/1/00 (4) 37,085
MN HFA Single Family Mtg. Rev.:
120,000 Series 1988D, 8.25%, 8/1/20 (4) 127,612
25,000 Series 1989B, 7.05%, 1/1/03 26,889
75,000 Series 1989B, 7.05%, 7/1/03 80,666
25,000 Series 1990A, 7.95%, 7/1/22 (4) 26,553
320,000 Series 1990C, 7.70%, 7/1/14 340,566
45,000 Series 1991A, 7.05%, 7/1/22 (4) 46,697
600,000 Series 1991A, 7.45%, 7/1/22 (4) 635,664
1,810,000 Series 1992B-1, 6.75%, 1/1/26 (4) 1,849,675
140,000 Series 1992G, 6.10%, 1/1/11 142,451
3,800,000 Moorhead Single Family Mtg. Rev. Refunding Series 1992B Zero Coupon, 7.00% Effective
Yield on Purchase Date, 8/1/11 1,272,050
700,000 St. Paul Hsg. & Redev. Auth. Single Family Mtg. Rev. Refunding Series 1995 (FNMA-backed),
6.125%, 3/1/17 715,239
966,042 St. Paul Residual Interest Rev. Series 1995 Convertible Capital Appreciation
Bonds, Zero Coupon, 7.23% Effective Yield on Purchase Date, 9/1/11 316,137
50,000 Vadnais Heights Hsg. Dev. Rev. Series 1979A, 7.50%, 8/1/09 50,594
13,227,755
OTHER REVENUE BONDS (7.5%)
Minneapolis Cmty. Dev. Agy. Common Bond Fund:
230,000 Series 1993-5, 6.125%, 12/1/06 (4) $ 235,256
640,000 Series 1995-1, 6.625%, 12/1/09 (4) 639,910
3,000,000 St. Paul Hsg. & Redev. Sales Tax Rev. Refunding Series 1996 (Civic Center Proj.),
7.10%, 11/1/23 3,061,560
3,936,726
Total municipal bonds (cost: $51,570,892) 52,512,026
SHORT-TERM SECURITIES (4.7%)
1,141,300 Minnesota Municipal Cash Management Fund, 3.92% 1,141,300
1,300,000 Minneapolis MN G.O. Series 1995 (Arena Acquisition Proj.), Variable Rate Weekly
Put Bonds, (LOC Bayerische Vereinsbank, AG), 4.30%, 10/5/95 1,300,000
Total short-term securities (cost: $2,441,300) 2,441,300
Total investments in securities (cost: $54,012,192) (6) $54,953,326
</TABLE>
SIT TAX-FREE INCOME FUND REVIEW
SEPTEMBER 30, 1995
PHOTO MICHAEL C. BRILLEY, SENIOR PORTFOLIO MANAGER
DEBRA A. SIT, CFA, PORTFOLIO MANAGER
The SIT Tax-Free Income Fund provided shareholders a total return of +4.64%
for the six month period ended September 30, 1995 which compares to a return of
+5.13% for the Lehman 5-Year Municipal Bond Index. The Fund's net asset value
per share rose $0.17 cents from $9.70 to $9.87 during the period while its
30-day SEC yield remained relatively stable at around 5.7%. Third quarter
distributions totaled 13.83 cents per share which compares to 13.66 cents during
the prior quarter.
Fund assets increased from $255.2 million as of March 31, 1995 to $262.2
million as of September 30, 1995. Portfolio cash was reduced from 12.3% of Fund
net assets to 4.4% as net purchases were made. The most significant shifts in
industry sector weightings included increases in transportation bonds from 0.0%
to 4.5%, in multifamily housing bonds from 21.2% to 23.8%, and in health care
holdings from 22.7% to 24.1%. All other industry weightings remained relatively
unchanged. The increase in the transportation sector reflected the purchase of a
Baa-rated Colorado toll road issue, which contributed to the Fund's increased
weighting in securities rated below "A" from 34.2% to 40.0%.
We expect longer term interest rate levels to remain within a narrow range
through the rest of the year, although economic conditions allow room for
further Federal Reserve interest rate reductions. We consider longer maturity
municipal bonds to continue to offer attractive value relative to taxable bonds
despite concerns about tax reform and intend to remain fully invested. Our
investment approach emphasizes finding long term opportunities of value, and we
remain focused on the Fund s dual objectives of high income and principal
stability.
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 9/30/95: $9.87 Per Share
3/31/95: $9.70 Per Share
Total Net Assets: $262.23 Million
30-Day SEC Yield: 5.71%
12 Month Distribution Rate: 5.75%
Tax Equivalent Yield: 9.45% (1)
Average Maturity: 14.69 Years
Duration to Estimated Avg. Life: 6.16 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.
PORTFOLIO STRUCTURE
(% of total net assets)
(BAR GRAPH) Hospital/Health Care Revenue 24.1
Multifamily Mortgage Revenue 23.8
Single Family Mortgage Revenue 18.3
Industrial Revenue/Pollution Control 12.0
Transportation 4.5
Other Revenue 4.2
Municipal Lease Rental 3.8
Public Facilities 1.6
Education/Student Loan 1.1
Utilities 0.8
General Obligation 0.8
Escrowed to Maturity/Pre-Refund 0.6
Other Assets & Liabilities 4.4
<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 2.24% 2.35% 2.39% 2.24% 2.35% 2.39%
(unannualized)
1 Year 9.01 9.84 8.90 9.01 9.84 8.90
3 Years 6.84 6.20 6.00 21.95 19.77 19.10
5 Years 7.51 8.39 7.81 43.62 49.63 45.65
Inception 7.64 7.98 7.56 67.52 71.15 66.64
(9/29/88)
</TABLE>
* As of 9/30/95
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.
GROWTH OF $10,000
(LINE GRAPH)
SIT TAX-FREE INCOME FUND
LEHMAN 5-YEAR MUNI. BOND INDEX
The sum of $10,000 invested at inception (9/29/88) and held until 9/30/95 would
have grown to $16,752 in the Fund or $16,664 in the Lehman 5-Year Municipal Bond
Index assuming reinvestment of all dividends and capital gains.
QUALITY RATINGS
(% of total net assets)
(PIE CHART)
LOWER OF MOODY'S, S&P, FITCH OR DUFF & PHELPS RATINGS USED.
AAA 8.5%
AA 10.2%
A 36.9%
BBB 40.0%
Other Assets & Liabilities 4.4%
Total number of holdings: 217
<TABLE>
<CAPTION>
SIT TAX-FREE INCOME FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 1995 (UNAUDITED)
Quantity Name of Issuer Market Value(1)
<S> <C> <C>
MUNICIPAL BONDS (95.6%)(2)
ALASKA (0.8%)
AK Industrial Dev. & Export Auth. Rev. Refunding Revolving Fund Series 1993A:
350,000 5.60%, 4/1/03 $ 356,647
1,510,000 5.95%, 4/1/06 1,633,518
1,990,165
ARIZONA (1.8%)
AZ Hlth. Fac. Auth. Hosp. System Refunding Rev. Series 1991 (Phoenix Mem. Hosp.):
1,105,000 8.00%, 6/1/06 1,167,543
1,500,000 8.30%, 6/1/12 1,592,115
770,000 8.20%, 6/1/21 820,335
1,070,000 Valley HDC Phoenix Hsg. Rev. 1979 (Roosevelt Plaza) (Section 8), 8.00%, 10/1/20 1,088,404
4,668,397
ARKANSAS (2.4%)
Drew Co. Public Fac. Bd. Single Family Mtg. Rev. Refunding:
231,473 Series 1993B, 7.75%, 8/1/11 251,239
457,923 Series 1993-A2 (FNMA backed), 7.90%, 8/1/11 505,071
341,777 Jacksonville Res. Hsg. Fac. Bd. Single Family Mtg. Rev. Refunding Series 1993B, 7.75%,
1/1/11 374,594
393,558 Lonoke Co. Res. Hsg. Fac. Bd. Single Family Mtg. Rev. Refunding 1993B, 7.375%, 4/1/11 427,199
2,100,000 Maumelle HDC First Lien Rev. Refunding 1992 Series A (Section 8), 7.875%, 7/1/09 2,270,772
2,290,000 Saline Co. Res. Hsg. Fac. Bd. Single Family Mtg. Rev. Refunding Series 1992, 7.875%,
3/1/11 2,460,193
6,289,068
CALIFORNIA (5.7%)
2,070,000 Escondido Joint Powers Fin. Auth. Lease Rev. Refunding 1995 (Center For The Arts)(AMBAC
insured) Zero Coupon, 6.02% Effective Yield on Purchase Date, 9/1/08 965,738
5,000,000 Foothill / Eastern Transportation Corridor Agy. Toll Rd. Rev Series 1995A Sr. Lien Zero
Coupon Convertible Bond, 7.10% Effective Yield on Purchase Date, 1/1/11 2,791,550
2,000,000 Glendale Hosp. Rev. Refunding Series 1994 (Verdugo Hills Hosp.), 8.00%, 1/1/12 2,185,520
La Canada Unified School Dist., General Obligation (FGIC insured) Zero Coupon:
1,600,000 6.40% Effective Yield on Purchase Date, 8/1/12 576,944
1,680,000 6.45% Effective Yield on Purchase Date, 8/1/13 565,270
575,000 Los Angeles Home Mtg. Rev. 1983 Zero Coupon, 10.84% Effective Yield on Purchase
Date, 6/1/16 67,315
Los Angeles Co. Certificates of Participation 1993 (Disney Parking Proj.) Zero Coupon:
900,000 6.50% Effective Yield on Purchase Date, 3/1/06 441,576
1,000,000 6.49% Effective Yield on Purchase Date, 3/1/07 455,710
4,865,000 6.75% Effective Yield on Purchase Date, 9/1/08 1,999,661
Martinez Unified School Dist. General Obligation Series 1995 (AMBAC insured) Zero Coupon:
1,475,000 6.35% Effective Yield on Purchase Date, 8/1/11 573,760
1,295,000 6.45% Effective Yield on Purchase Date, 8/1/12 465,319
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, 9/1/14 684,840
1,530,000 Sacramento Public Television Fac. Rev. 1989 Series A (KVIE inc.) LOC First
Interstate Bank, 7.50%, 7/1/20 1,629,098
810,000 Santa Clara Co. HA Multifamily Mtg. Rev. Series 1983 (FHA insured) (Meadows Proj.) Zero
Coupon, 9.78% Effective Yield on Purchase Date, 3/1/99 596,946
990,000 Upland Hsg. Auth. Multifamily Rev. 1990 Issue A, 7.85%, 7/1/20 1,029,838
15,029,085
COLORADO (4.8%)
Arapahoe Co. Cap. Improvement Tr. Fund Highway Rev. (E-470 Project) Senior Capital
Appreciation Zero Coupon:
2,000,000 7.08% Effective Yield on Purchase Date, 8/31/04 $ 1,112,040
2,500,000 7.13% Effective Yield on Purchase Date, 8/31/05 1,294,050
17,000,000 7.40% Effective Yield on Purchase Date, 8/31/09 6,490,770
435,000 LaPlata Co. Southwestern CO Single Family Mtg. Participation Rev. Refunding 1991 Series A,
7.375%, 9/1/11 459,473
485,000 Pueblo Co. Single Family Mtg. Rev. Series 1978, 7.30%, 12/1/09 488,778
670,000 Thornton Single Family Mtg. Rev. Refunding 1992 Series A, 8.05%, 8/1/09 725,108
605,000 Vail Single Family Mtg. Rev. Refunding Series 1992, 8.125%, 6/1/10 656,389
1,195,000 Westminster Multifamily Hsg. Rev. Refunding Series 1992 (Ironwood at the Ranch Proj.),
7.45%, 12/1/10 1,245,094
12,471,702
CONNECTICUT (1.0%)
1,000,000 CT Hlth. & Educ. Fac. Auth. Rev. Series 1990C (St. Mary's Hosp.) 7.375%, 7/1/20 1,015,460
1,645,000 CT HFA Hsg. Mtg. Fin. Prgm. Series 1985A, 7.625%, 11/15/17 1,716,771
2,732,231
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 1,079,324
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 1,559,520
FLORIDA (3.2%)
395,000 Brevard Co. HFA Single Family Mtg. Rev. Refunding Series 1993 Zero Coupon, 7.38%
Effective Yield on Purchase Date, 5/20/12 118,338
5,910,000 Broward Co. Resource Recovery Rev. Series 1984 (SES Broward Co. LP South Proj.),
7.95%, 12/1/08 6,612,226
715,000 Jacksonville Hlth. Fac. Auth. Industrial Dev. Rev. Refunding Series 1992 (Natl. Benevolent
Assn. - Cypress Village Proj.), 7.10%, 12/1/06 762,497
1,000,000 Miami Beach First Mortgage Elderly Hsg. Rev. Refunding Series 1995 (Rebecca
Towers North) (Section 8), 6.625%, 1/15/09 1,012,510
8,505,571
GEORGIA (0.3%)
800,000 Cobb Co. Hsg. Auth. Multifamily Rev. Refunding Series 1992A (Signature Place Project),
6.875%, 10/1/17 814,208
ILLINOIS (14.5%)
2,835,000 Chicago Metropolitan Hsg. Development Corp. Mtg. Rev. Refunding Series 1992A
(FHA insured) (Section 8), 6.70%, 7/1/12 2,898,561
6,100,000 Chicago Res. Mtg. Rev. Refunding Series 1992B (MBIA insured) Zero Coupon, 7.30% Effective
Yield on Purchase Date, 10/1/09 2,374,852
2,000,000 Collinsville (City of) Madison Co. Industrial Dev. Rev. Refunding
(Drury Inn-Collinsville Proj.) Series 1993, 6.00%, 11/1/04 2,017,260
Edwardsville Elderly Hsg. Corp. 1978 (Section 8):
50,000 7.75%, 6/1/97 50,168
60,000 7.75%, 6/1/99 60,202
65,000 7.75%, 6/1/00 65,219
75,000 7.75%, 6/1/02 75,253
85,000 7.75%, 6/1/04 $ 85,286
95,000 7.75%, 6/1/05 95,320
110,000 7.75%, 6/1/07 110,370
1,000,000 IL DFA Econ. Dev. Rev. Refunding Series 1992 (Drury Inn-Schaumberg Proj.) (NWNL),
7.125%, 9/15/12 1,051,390
1,440,000 IL DFA Elderly Hsg. Rev. Refunding Series 1995A (Pontiac Towers Proj.)
(Section 8), 6.65%, 10/1/09 1,454,630
IL Educ. Fac. Auth. Rev. Series 1992 (Chicago Osteopathic Hlth. Sys.):
595,000 7.00%, 5/15/99 632,360
125,000 7.125%, 5/15/00 130,853
610,000 7.125%, 5/15/01 634,931
3,000,000 IL HDA Elderly Hsg. Rev. Series 1992C (Village Ctr.) (Section 8), 6.85%, 3/1/20 3,079,230
IL HDA Multifamily Hsg. Rev.:
Refunding 1992 Series A (Section 8):
2,150,000 6.65%, 7/1/04 2,296,630
1,495,000 7.00%, 7/1/10 1,578,810
Refunding 1991 Series C (Section 8):
260,000 7.35%, 7/1/11 278,431
100,000 7.40%, 7/1/23 104,533
1,235,000 IL HDA Res. Mtg. 1987 Series A, 7.00%, 8/1/17 1,272,482
IL Hlth. Fac. Auth. Rev.:
Refunding Series 1993 (Lutheran Social Svcs. IL):
610,000 5.70%, 8/15/00 604,589
475,000 5.80%, 8/15/01 469,390
525,000 6.00%, 8/15/03 516,243
545,000 6.10%, 8/15/04 534,901
5,100,000 Refunding Series 1992 (Galesburg Cottage Hosp.) (Asset Guaranty insured), 6.25%,
5/1/11 5,218,524
1,000,000 Refunding Series 1994 (Passavant Memorial Area Hospital Assn.), 5.95%, 10/1/11 959,190
1,000,000 Refunding Series 1994 (Friendship Village Schamburg), 6.25%, 12/1/04 1,031,470
Refunding Series 1994 (St. Elizabeth's Hosp. of Chicago, Inc.):
2,160,000 7.25%, 7/1/05 2,273,789
1,000,000 7.625%, 7/1/10 1,041,150
1,000,000 Refunding Series 1989A (Masonic Med. Ctr.), 7.60%, 10/1/07 1,072,741
1,040,000 Rochelle Water & Sewer Rev. Refunding Series 1992, 7.15%, 5/1/14 1,107,070
545,000 Rock Island Res. Mtg. Rev. Refunding Series 1992, 7.70%, 9/1/08 583,755
1,140,000 Springfield Community Improvement Rev. 1985 (Garden Court Proj. - FHA insured)
(Section 8) (MBIA insured), 10.50%, 4/1/26 1,313,633
2,065,000 Urbana Res. Mtg. Rev. Refunding 1991 Series B Zero Coupon, 7.39% Effective Yield on
Purchase Date, 3/1/07 890,593
37,963,809
INDIANA (7.1%)
1,800,000 Elkhart Co. Hosp. Auth. Rev. Series 1992 (Goshen Hosp. Proj.), 7.25%, 7/1/05 1,903,554
1,095,000 IN Bond Bank Special Prgm. Series 1993B (Gary Sanitary Dist.), 6.15%, 2/1/08 1,120,634
IN Educ. Fac. Auth. Educ. Fac. Rev. Series 1992 (Manchester College Proj.):
515,000 6.45%, 10/1/04 538,587
250,000 6.50%, 10/1/05 260,805
305,000 6.60%, 10/1/06 320,290
350,000 6.75%, 10/1/08 368,799
370,000 6.80%, 10/1/09 388,519
1,000,000 6.85%, 10/1/18 1,019,470
IN Hlth. Fac. Fin. Auth. Hosp. Rev.:
Series 1991 (Jackson Co. Schneck Mem. Hosp. Proj.):
300,000 7.25%, 2/15/00 $ 317,052
325,000 7.30%, 2/15/01 346,288
1,200,000 7.50%, 2/15/05 1,307,232
Series 1992 (Fayette Mem. Hosp. Proj.):
250,000 7.00%, 10/1/02 256,095
295,000 7.10%, 10/1/03 310,603
315,000 7.20%, 10/1/04 333,365
340,000 7.25%, 10/1/05 358,357
365,000 7.25%, 10/1/06 382,929
390,000 7.30%, 10/1/07 408,580
420,000 7.30%, 10/1/08 437,980
Series 1992 (Floyd Mem. Hosp. Proj.):
460,000 6.75%, 2/15/06 486,284
595,000 6.80%, 2/15/07 627,124
2,000,000 Series 1992 (Mem. Hosp. & Hlth. Care Ctr. Proj.), 7.35%, 3/1/12 2,064,320
260,000 IN HFA Single Family Mtg. Rev. 1985 Series A, 10.20%, 1/1/16 272,009
830,000 IN HFA Home Mtg. Prog. 1990 Series F1 (GNMA collateralized), 7.50%, 1/1/16 891,237
2,750,000 Indianapolis Econ. Dev. Refunding & Imprv. Rev. Series 1992 (Natl. Benevolent
Assn.-Robin Run Village Proj.), 7.25%, 10/1/10 2,821,143
970,000 Marion HC Mtg. Rev. Refunding Series 1994 (Hilltop Towers Project)
(Section 8), 6.90%, 10/1/10 1,008,179
18,549,435
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 1,606,890
Polk Co. Hlth. Svcs. Residential Care Fac. Rev. Series 1991:
460,000 7.25%, 2/1/06 492,154
1,500,000 7.50%, 2/1/16 1,623,885
3,722,929
KANSAS (0.8%)
440,000 Geary Co. Single Family Mtg. Rev. 1980 (FGIC insured), 10.75%, 4/1/12 464,658
6,660,000 Kansas City Single Family Mtg. Rev. Series 1982A Zero Coupon, 11.23% Effective Yield on
Purchase Date, 11/1/14 792,207
2,170,000 Olathe & Labette Cos. Mtg. Loan Rev. 1991 Series B (GNMA collateralized) Zero Coupon,
7.56% Effective Yield on Purchase Date, 2/1/23 295,294
590,000 Sedgwick Co. Mtg. Loan Rev. Series 1987C (GNMA collateralized), 8.625%, 11/1/18 637,879
2,190,038
KENTUCKY (0.6%)
1,500,000 Jefferson Co. First Mtg. Rev. Series 1994 (Christian Church Homes Proj.),
6.00%, 11/15/09 1,485,780
LOUISIANA (5.4%)
2,062,466 Bossier Public Trust Fin. Auth. Single Family Mtg. Rev. Refunding Series 1992,
8.50%, 11/1/11 2,254,626
730,000 Calcasieu Parish Industrial Dev. Rev. 1975 (Cities Service Co. Proj.), 7.80%, 12/1/05 734,176
590,000 Calcasieu Parish Public Trust Auth. Mtg. Rev. Refunding 1992 Series B, 6.875%, 11/1/12 618,143
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 1,397,584
4,000,000 Houma-Terrebonne Public Trust Fin. Auth. Residual Rev. Series 1992C Zero Coupon, 7.60%
Effective Yield on Purchase Date, 7/10/14 984,760
1,955,000 LA HFA Residual Lien Refunding Mtg. Rev. Series 1992 Zero Coupon, 7.27% Effective Yield
on Purchase Date, 9/1/13 $ 2,095,232
454,962 LA PFA Single Family Mtg. Purchase Rev. Series 1992 (Lafayette PTFA Mtg. Acquisition),
7.50%, 10/1/15 494,598
LA PFA Rev. Multifamily Hsg. Series 1991 (Volunteers of America Natl. Hsg. Corp.) (Asset
Guaranty insured):
1,290,000 7.25%, 11/1/04 1,407,080
3,000,000 7.75%, 11/1/16 3,243,780
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 1,032,770
14,262,749
MAINE (0.2%)
385,000 ME HA Mtg. Purchase 1987 Series A-2, 7.65%, 11/15/15 404,104
MASSACHUSETTS (3.8%)
MA Hlth. & Educ. Fac. Auth. Rev.:
655,000 Series 1982 (Malden Hosp.) (FHA insured), 9.50%, 8/1/08 657,941
4,915,000 Series 1990B (Goddard Mem. Hosp.), 9.00%, 7/1/15 5,469,559
1,000,000 Series 1994B (Holyoke Hosp.), 6.25%, 7/1/04 1,005,890
2,000,000 Series 1994B (Holyoke Hosp.), 6.25%, 7/1/15 1,918,280
905,000 Methuen HA Multifamily Rev. 1985 (FNMA backed) (Appleton Estates), 8.00%, 12/1/07 926,394
9,978,064
MICHIGAN (7.2%)
1,305,000 Detroit Econ. Dev. Corp. Limited Obligation Rev. Refunding Series 1992 (E.H. Associates
Ltd. Partnership Proj.), 7.00%, 6/1/12 1,435,487
2,500,000 MI HDA Rental Hsg. Rev. Series 1992A (AMBAC insured), 6.40%, 4/1/05 2,625,500
1,000,000 MI Hosp. Fin. Auth. Rev. Refunding Series 1994A (Pontiac Osteopathic Hosp.), 5.20%,
2/1/00 976,430
Pontiac Hosp. Fin. Auth. Hosp. Rev. Series 1993 (NOMC Obligated Group):
600,000 5.20%, 8/1/97 596,328
840,000 5.40%, 8/1/98 832,978
200,000 5.60%, 8/1/99 197,880
2,000,000 6.00%, 8/1/07 1,888,120
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 1,390,389
4,000,000 Saginaw Hosp. Fin. Auth. Rev. Refunding Series 1989 (Saginaw Gen. Hosp.), 7.625%,
10/1/ 4,225,560
1,695,000 Tri City Village Hsg. Corp. Mtg. Refunding Multifamily Tri City Apts. Series 1992A (Section 8)
(FNMA backed), 7.75%, 8/15/23 1,846,753
2,750,000 Troy City EDC Econ. Dev. Rev. Refunding Series 1992 (Drury Inn-Troy Proj.)
(Lincoln Natl. Corp.), 6.75%, 10/1/12 2,853,152
18,868,577
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 1,526,621
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 1,728,048
MISSOURI (0.2%)
MO HDC Single Family Mtg. Rev.:
315,000 Series 1985, 9.25%, 4/1/05 332,712
9,000 Series 1984 (FHA insured), 10.00%, 8/1/98 9,170
150,000 MO Hlth. & Educ. Fac. Auth. Hlth. Fac. Rev. Series 1993 (Jefferson Mem. Hosp. Assn. Proj.),
5.125%, 8/15/02 $ 145,634
85,000 St. Louis Co. Single Family Res. Mtg. Series 1984 (MBIA insured), 9.75%, 4/1/10 85,429
572,945
MONTANA (0.2%)
515,000 Lewis & Clark Co. Pollution Control Rev. Series 1976 (Asarco, Inc. Proj.), 6.75%,
12/1/06 513,337
NEVADA (1.1%)
3,000,000 Reno-Sparks Indian Colony Public Fac. Fin. Auth. Sales & Excise Tax Rev.
Series 1995A, 7.50%, 7/1/07 2,994,840
NEW HAMPSHIRE (0.4%)
540,000 NH Higher Educ. & Hlth. Fac. Auth. Series 1991 (St. Joseph's Hosp.), 7.25%, 1/1/02 588,184
3,505,000 NH HFA Single Family Res. Mtg. 1982 Series A Zero Coupon, 11.75% Effective Yield on
Purchase Date, 1/1/14 430,729
1,018,913
NEW JERSEY (0.4%)
900,000 NJ Hsg. & Mtg. Fin. Agy. Rev. Refunding 1992 Series One (Section 8), 6.45%, 11/1/07 943,398
NEW MEXICO (0.4%)
894,000 Hobbs Single Family Mtg. Rev. Refunding Series 1992, 8.75%, 7/1/11 974,004
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 1,833,005
NORTH CAROLINA (0.2%)
9,860,000 NC HFA Multifamily Hsg. Rev. (FHA insured) 1985 Series C Zero Coupon,
9.97% Effective Yield on Purchase Date, 7/1/27 404,654
NORTH DAKOTA (1.3%)
1,865,000 Oliver Co. Pollution Control Rev. Series 1976 (Sq. Butte Elec. Coop. Proj.), 7.00%,
12/31/10 1,873,206
1,600,000 Ward Co. Hlth. Care Fac. Rev. Series 1994 (St. Joseph Hosp. Proj.), 8.00%, 11/15/04 1,670,208
3,543,414
OHIO (2.0%)
1,060,000 Cleveland Certificate of Participation Motor Vehicle Motorized Equipment Series 1992,
6.50%, 1/1/98 1,095,001
2,655,000 Cleveland Parking Fac. Imprv. Rev. Series 1992, 7.60%, 9/15/03 2,780,449
1,275,000 Franklin Co. Hosp. Fac. Rev. Refunding & Imprv. Series 1993 (Doctors Hosp.), 5.90%,
12/1/06 1,272,807
5,148,257
OKLAHOMA (2.9%)
1,770,000 Cleveland Co. Home Loan Auth. Single Family Mtg. Rev. Refunding Series 1991, 8.00%,
8/1/12 1,918,698
Midwest City Mem. Hosp. Auth. Hosp. Rev. Series 1992:
115,000 7.25%, 4/1/06 121,876
365,000 8.75%, 4/1/03 428,342
150,000 10.00%, 4/1/96 155,179
325,000 10.00%, 4/1/01 393,315
345,000 10.00%, 4/1/02 426,175
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, 6/1/11 628,880
340,000 Muskogee Co. Industrial Pollution Rev. Series 1987A (Oklahoma G&E Proj.), 7.00%, 3/1/17355,538
680,000 Payne Co. Home Loan Auth. Single Family Rev. Refunding Series 1993A, 8.625%, 3/1/11 728,586
2,540,000 Tulsa Public Facilities Auth. Recreational Facs. Rev. Series 1985, 6.20%, 11/1/12 2,564,435
7,721,024
PENNSYLVANIA (5.5%)
1,250,000 Beaver Co. Industrial Dev. Auth. Pollution Control Rev. Series 1976 (Cleveland Elec.
Illuminating Corp.) (AMBAC insured), 6.70%, 11/1/06 1,252,887
2,860,000 McKean Co. Hosp. Auth. Hosp. Rev. Refunding Series 1994 (Bradford Hosp. Proj.),
5.95%, 10/1/08 $ 2,804,230
6,000,000 Montgomery Co. Industrial Dev. Auth. Resource Recovery Rev. Series 1989 (LOC Banque
Paribas), 7.50%, 1/1/12 6,456,600
2,240,000 Montgomery Co. Redev. Auth. Multifamily Hsg. Rev. 1993 Series A (KBF Assoc. L.P.),
6.375%, 7/1/12 2,227,165
Sharon Regional Hlth. Sys. Auth. Hosp. Rev. Refunding (Sharon Regional Hlth. Sys. Proj.)
Series 1993A:
705,000 6.40%, 12/1/00 721,229
255,000 6.50%, 12/1/01 263,323
800,000 6.60%, 12/1/02 829,432
14,554,866
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 1,582,800
SOUTH DAKOTA (0.8%)
2,000,000 SD HDA Multifamily Hsg. Rev. 1992 Series B (Section 8), 7.00%, 4/1/12 2,112,600
TENNESSEE (0.9%)
Shelby Co. Hlth., Educ. & Hsg. Fac. Board Multifamily Hsg. Rev. (Eastwood Park Apts. Proj.):
1,000,000 Series 1995 A2, 6.40%, 9/1/25 981,640
425,000 Series 1995C Subordinate, 7.50%, 9/1/25 423,950
830,000 TN HDA Homeownership Program Series 1991 Issue U, 7.35%, 7/1/11 885,925
2,291,515
TEXAS (11.1%)
2,705,000 Baytown HFC Single Family Mtg. Rev. Refunding Series 1992B, 8.50%, 9/1/11 2,990,486
Beaumont Hsg. Auth. Multifamily Mtg. Rev. Series 1993A (Section 8):
1,365,000 6.65%, 11/1/07 1,415,846
650,000 6.75%, 11/1/10 665,736
1,765,000 Bexar Co. HFC Residual Rev. Series 1993 Zero Coupon, 6.50% Effective Yield on Purchase
Date, 3/1/15 519,457
510,000 Brazos Co. HFC Single Family Mtg. Rev. 1985 (MBIA insured) Zero Coupon, 10.55% Effective
Yield on Purchase Date, 9/1/11 95,350
Dallas Housing Corp. Capital Program Revenue Bonds:
1,715,000 Series 1995A (Estell Village Apts.) (Section 8), 7.875%, 12/1/09 1,730,984
1,700,000 Series 1995 (Cedar Glen Apts.) (Section 8), 7.75%, 12/1/09 1,718,258
1,000,000 Dallas HFC Cap. Proj. Refunding 1990 (Section 8), 7.85%, 8/1/13 1,078,470
770,000 Denton Co. Hlth. Fac. Dev. Corp. Series 1995 (Lutheran Soc. Services of the South),
7.25%, 8/15/11 782,050
650,000 Ft. Worth HFC Home Mtg. Rev. Refunding 1991, 8.50%, 10/1/11 712,718
2,000,000 Harris Co. Hlth. Fac. Dev. Corp. Hosp. Rev. Series 1992 (Mem. Hosp. Sys. Proj.),
7.10%, 6/1/04 2,192,560
1,745,000 Lubbock HFC Multifamily Hsg. Rev. Refunding Series 1992A (Los Colinas, Park Ridge Place &
Quail Creek), 7.75%, 1/1/22 1,773,286
4,990,000 Midland Co. Hosp. Dist. Hosp. Rev. Series 1992 Zero Coupon 7.61% Effective Yield on
Purchase Date, 6/1/07 2,463,314
Midland HFC Single Family Mtg. Rev. Refunding:
683,731 Series 1992 B-2, 8.15%, 12/1/11 754,333
910,188 Series 1992 A-2, 8.45%, 12/1/11 1,006,158
1,381,591 Series 1992, 9.00%, 9/1/01 1,509,360
2,000,000 Odessa HFC Single Family Mtg. Rev. Refunding Series 1992B Class B-2, 8.125%, 11/1/11 2,204,461
650,000 San Marcos HA Multifamily Mtg. Rev. Series 1993A (FHA insured) (Section 8), 5.80%,
11/1/10 621,648
Southeast TX HFC Residual Revenue:
1,555,000 Series 1995A Zero Coupon, 6.50% Effective Yield on Purchase Date, 11/1/14 $ 459,704
3,000,000 Series 1992A Zero Coupon, 7.63% Effective Yield on Purchase Date, 9/1/17 591,600
950,000 TX HA Single Family Mtg. Refunding Series 1991A, 7.00%, 3/1/05 1,005,452
6,375,000 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 1,667,381
Washington Co. Hlth. Fac. Dev. Corp. Rev. Series 1994 (Lutheran Soc. Services of the South):
275,000 6.55%, 8/15/01 281,415
290,000 6.70%, 8/15/02 298,477
310,000 6.80%, 8/15/03 320,056
835,000 West Central TX HFC Single Family Mtg. Rev. 1985 (MBIA insured) Zero Coupon, 10.56%
Effective Yield on Purchase Date, 9/1/11 152,496
29,011,056
UTAH (0.2%)
35,000 UT HFA Res. Mtg. Series 1984A Zero Coupon, 10.89% Effective Yield on
Purchase Date, 7/1/16 3,497
530,000 UT HFA Single Family Mtg. Rev. Senior Series 1988C, 8.25%, 7/1/08 558,159
561,656
WASHINGTON (1.7%)
1,000,000 WA Hlth. Care Fac. Auth. Rev. Series 1989 (Sisters of Providence), 7.875%, 10/1/10 1,089,860
WA HFC Nonprofit Housing Revenue:
2,500,000 Series 1993 (CRISTA Shores Proj.), 6.20%, 7/1/14 2,494,200
1,000,000 Series 1995A (Judson Park Project), 6.90%, 7/1/16 1,032,180
4,616,240
WEST VIRGINIA (1.1%)
140,000 Berkeley, Brooke & Fayette Cos., etc. (21 Municipalities) Single Family Mtg. 1984 Series A,
(MBIA insured), 10.125%, 9/1/10 147,456
5,435,000 Huntington Res. Mtg. Rev. Refunding Series 1991 Zero Coupon Escrowed to Maturity,
7.37% Effective Yield on Purchase Date, 9/1/12 1,606,151
2,000,000 Mason Co. Residual Rev. Series 1992C Zero Coupon, 7.58% Effective Yield on Purchase Date,
7/10/14 519,320
3,000,000 Ohio Co. Residual Rev. Series 1992C Zero Coupon, 7.43% Effective Yield on Purchase Date,
7/10/14 747,870
3,020,797
WISCONSIN (0.0%)
70,000 WI HEDA Homeownership Rev. 1985 Series I Zero Coupon, 7.99% Effective Yield on Purchase
Date, 12/1/96 62,683
WYOMING (0.6%)
1,435,000 Cheyenne Industrial Dev. First Mtg. Rev. Refunding Series 1992 (Cheyenne Plaza Proj.)
(NWNL), 6.90%, 2/1/00 1,482,728
Total municipal bonds (cost: $244,669,604) 250,784,157
SHORT-TERM SECURITIES (3.0%)
1,000,000 Mendota Heights Multifamily Hsg. Lexington Hts. Apts. 91A Variable Rate Weekly
Put Bonds (LOC Sumitomo Bank), 3.85%, 10/3/95 1,000,000
3,445,013 Tax-Exempt Cash Management Fund, 4.11% 3,445,013
3,368,009 Tax-Exempt Cash Management Fund, 3.96% 3,368,009
Total short-term securities (cost: $7,813,022) 7,813,022
Total investments in securities (cost: $252,482,626) (6) $258,597,179
</TABLE>
SIT U.S. GOVERNMENT SECURITIES FUND REVIEW
SEPTEMBER 30, 1995
PHOTO MICHAEL C. BRILLEY, SENIOR PORTFOLIO MANAGER
The SIT U.S. Government Securities Fund provided investors with a +5.30%
return for the six months ended September 30, 1995, compared to a +6.30% return
for the Lehman Brothers Intermediate Government Index. As of September 30, 1995,
the Fund's 30-day SEC yield was 6.98% and the 12-month distribution rate was
6.88%.
The Fund has continued to focus on securities that provide a high level of
income and relative price stability. Yields on intermediate U.S. Treasury
securities fell by approximately 1% during the six-month period, resulting in
meaningful price appreciation for intermediate and long maturity securities. Our
holdings in U.S Treasury securities, over the last six months, were increased
from 7.6% to 16.0% of the portfolio. The Fund s effective maturity was
lengthened as yields rose in July and August to take advantage of those higher
yields. The Fund s long Treasury position continued to appreciate during the
last several months as long term bond yields continued to decline to new lows.
Given our expectation for a relatively stable interest rate environment in
the months ahead, we intend to maintain our current emphasis on high coupon
mortgage pass-through securities with relatively stable prepayment rates,
particularly those backed by mobile home loans. We continue to seek unique
securities that offer attractive income returns potential along with stability
of principal.
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 9/30/95: $10.46 Per Share
3/31/95: $10.28 Per Share
Total Net Assets: $44.55 Million
30-Day SEC Yield: 6.98%
12 Month Distribution Rate: 6.88%
Average Maturity: 16.60 Years
Modified Adjusted Duration: 3.26 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)
GNMA Pass-Through Securities 62.7
U.S. Treasury Bonds 16.0
Collateralized Mortgage Obligations 7.7
FNMA Pass-Through Securities 7.5
FHLMC Pass-Through Securities 4.8
Other Assets & Liabilities 1.3
<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 Fund Average Gov't. Bond Index Securities Fund Fund Average Gov't. Bond Index
<S> <C> <C> <C> <C> <C> <C>
3 Months 1.98% 1.74% 1.55% 1.98% 1.74% 1.55%
(unannualized)
1 Year 8.86 12.74 10.60 8.86 12.74 10.60
3 Years 5.95 5.59 5.46 18.92 17.71 17.28
5 Years 8.10 8.58 8.42 47.58 50.93 49.81
Inception 8.57 8.05 8.47 98.43 90.74 97.02
(6/2/87)
</TABLE>
* As of 9/30/95
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.
GROWTH OF $10,000
(LINE GRAPH)
SIT U.S. GOV'T.SECURITIES FUND
LEHMAN INTER. GOV'T. BOND INDEX
The sum of $10,000 invested at inception (6/2/87) and held until 9/30/95 would
have grown to $19,843 in the Fund or $19,702 in the Lehman Intermediate
Government Bond Index assuming reinvestment of all dividends and capital
gains.The Adviser's estimates of the dollar weighted average life of the
portfolio's securities, which may vary from their stated maturities.
ESTIMATED AVERAGE LIFE PROFILE
(BAR GRAPH)
Years
0-1 1.3%
1-5 78.1%
5-10 8.7%
10-20 11.9%
The Adviser's estimates of the dollar-weighted average life of the
portfolio's securities, which may vary from their stated maturities.
SIT U.S. GOVERNMENT SECURITIES FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 1995 (UNAUDITED)
Quantity Name of Issuer Market Value(1)
MORTGAGE PASS-THROUGH SECURITIES (75.0%)(2)
FEDERAL HOME LOAN MORTGAGE
CORPORATION (7.5%):
57,394 8.75%, 12/1/01 $ 59,186
775,725 9.00%, 10/1/16 803,652
734,158 9.00%, 6/1/17 760,786
135,110 9.50%, 6/1/16 141,408
140,895 9.75%, 6/1/17 149,245
691,237 10.25%, 6/1/10 744,083
11,307 11.00%, 10/1/00 11,968
286,216 11.50%, 8/1/14 316,596
268,897 11.50%, 10/1/15 295,752
46,776 12.00%, 6/1/00 49,614
3,332,290
FEDERAL NATIONAL MORTGAGE
ASSOCIATION (4.8%):
255,610 9.00%, 4/1/10 266,482
257,895 9.00%, 9/1/17 268,923
737,522 9.50%, 4/1/20 778,175
616,815 10.00%, 9/1/20 672,699
138,890 11.50%, 12/1/00 148,982
19,647 12.25%, 10/1/14 21,674
2,156,935
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION (3) (62.7%):
459,782 8.50%, 12/15/11 477,866
329,805 8.75%, 5/15/03 347,018
674,794 8.75%, 10/15 - 11/15/06 711,096
322,819 8.75%, 2/15/07 336,826
313,352 8.75%, 11/15/09 327,209
865,732 8.75%, 6/15 - 12/15/11 904,363
264,131 9.00%, 10/15/04 279,546
509,225 9.00%, 4/15/06 538,883
360,210 9.00%, 10/15/07 377,277
159,117 9.00%, 11/15/09 166,833
1,675,999 9.00%, 6/15 - 9/15/11 1,759,882
351,383 9.00%, 1/15/12 368,770
750,207 9.00%, 9/1/20 784,904
176,334 9.25%, 4/15 - 9/15/01 186,532
580,924 9.25%, 11/15/11 610,441
379,339 9.25%, 4/15/12 398,739
55,666 9.50%, 1/15 - 1/20/05 58,723
752,879 9.50%, 1/15 - 8/15/10 791,275
955,718 9.50%, 1/15 - 3/15/11 1,005,143
303,288 9.75%, 11/15/02 321,541
93,420 9.75%, 3/15/04 99,110
662,484 9.75%, 8/15/05 703,426
334,219 9.75%, 2/15/06 $ 356,772
1,832,302 9.75%, 8/15 - 11/15/10 1,954,100
1,400,936 9.75%, 11/15 - 12/15/12 1,497,033
325,233 10.00%, 5/14/04 345,233
300,187 10.00%, 1/15/06 318,592
279,662 10.00%, 11/15/08 298,324
160,545 10.00%, 5/15/09 171,324
332,712 10.00%, 6/15 - 7/15/10 355,296
195,545 10.00%, 1/15/11 208,782
848,163 10.00%, 1/20 - 3/20/16 909,826
529,209 10.00%, 2/20/20 568,413
130,690 10.25%, 11/15/00 139,120
135,848 10.25%, 8/15/04 144,918
3,996,435 10.25%, 1/15 - 8/15/12 4,282,098
1,056,075 10.25%, 2/15 - 7/15/13 1,131,768
16,770 10.50%, 9/15/00 17,761
165,865 10.50%, 12/15/02 177,533
117,380 10.50%, 9/15/01 125,540
227,748 10.50%, 7/15/10 244,504
410,098 10.50%, 8/15 - 11/15/15 448,343
212,118 10.50%, 3/15 - 12/15/16 231,938
24,034 10.75%, 7/15 - 10/15/98 25,779
290,649 10.75%, 7/15 - 8/15/11 313,529
741,777 11.00%, 1/15 - 6/15/10 821,068
18,762 11.00%, 7/15/13 20,383
403 11.25%, 1/15/96 437
11,059 11.25%, 5/15/98 11,973
350,729 11.25%, 8/15 - 12/15/00 380,179
58,346 11.25%, 1/15/01 63,153
36,817 11.25%, 5/15/03 39,855
313,471 11.25%, 10/15/11 335,521
44,439 11.75%, 2/15 - 10/15/98 48,425
152,501 11.75%, 5/15/00 166,374
150,324 11.75%, 5/15/04 164,216
35,960 12.75%, 1/15/00 39,228
2,265 14.75%, 4/15/97 2,471
27,915,212
Total mortgage pass-through securities
(cost: $33,485,606) 33,404,437
U.S. GOVERNMENT SECURITIES (16.0%)
5,000,000 United States Treasury Bonds,
7.125%, 2/15/23 5,300,300
1,700,000 United States Treasury Notes,
7.75%, 2/15/01 1,831,155
Total U.S. government Securities 7,131,455
(cost: $6,754,742)
COLLATERALIZED MORTGAGE OBLIGATIONS (7.7%)
389,602 Federal Home Loan Mortgage
Corporation,
1006-C, 9.15%, 10/15/20 405,705
1,000,000 Vendee Mortgage Trust:
Series 1992-1
2-K, 7.75%, 5/15/08 1,043,020
1,000,000 Series 1992-2D, 7.00%,
9/15/15 991,790
1,000,000 Series 1993-2C, 6.25%,
3/15/10 975,900
Total collateralized mortgage obligations
(cost: $3,286,554) 3,416,415
SHORT-TERM SECURITIES (0.6%)
265,724 Government Cash Management
Fund, 6.05% 265,724
Total short-term securities
(cost: $265,724)
Total investments in securities
(cost: $43,792,626) (6) $44,218,031
SIT MONEY MARKET FUND REVIEW
SEPTEMBER 30, 1995
PHOTO MICHAEL C. BRILLEY, SENIOR PORTFOLIO MANAGER
PAUL J. JUNGQUIST, PORTFOLIO MANAGER
The SIT Money Market Fund provided investors with a +2.77% return for the
six months ended September 30, 1995, compared to a +2.67% average return for the
Lipper Analytical Services, Inc. Money Market Fund universe. As of September 30,
1995, the Fund's 7-day compound yield was 5.44% and its average maturity was 42
days, compared to 5.78% and 26 days, respectively, at March 31, 1995.
Three-month Treasury bill rates decreased in line with the Federal Reserve s
25 basis point reduction in the federal funds rate over the past six months,
decreasing from 5.88% at March 31 to 5.42% at September 30. In anticipation of
this move by the Fed, we lengthened the portfolio during June to an average
maturity near 40 days to take advantage of the higher yields then available. If
economic growth and inflation trends continue to be favorable and a budget
compromise is reached, it is likely the Fed will lower the federal funds rate
again before year-end. We are continuing to take advantage of current yield
levels, maintaining the average maturity of the portfolio in a range of 35 to 45
days in anticipation of this further easing by the Fed.
While economic activity has slowed somewhat, we do not foresee a significant
impact on the creditworthiness of top tier commercial paper issuers. The Fund
continues to diversify its core holdings and its industry exposure of
permissible credits. In the months ahead, we plan to add high quality
instruments in the retail, capital goods, technology and consumer non-durable
industries.
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 9/30/95: $1.00 Per Share
3/31/95: $1.00 Per Share
Total Net Assets: $21.74 Million
PORTFOLIO STRUCTURE
(% of total net assets)
(BAR CHART)
Consumer Loan Finance 21.7
Diversified Finance 15.9
Captive Equipment Finance 14.6
Utilities 14.2
Insurance 9.3
Energy 9.0
Captive Auto Finance 8.9
Technology/Business Equip. Services 5.0
Other Assets & Liabilities 1.4
<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)
<S> <C> <C> <C> <C> <C> <C>
3 Months 1.35% 1.30% 1.39% 1.35% 1.30% 1.39%
(unannualized)
1 Year 5.44 5.25 5.82 5.44 5.25 5.82
Inception 4.45 4.27 4.92 8.69 8.33 9.64
(11/1/93)
</TABLE>
* As of 9/30/95
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.
GROWTH OF $10,000
(LINE GRAPH)
SIT MONEY MARKET FUND
3-MONTH U.S.TREASURY BILL INDEX
The sum of $10,000 invested at inception (11/1/93) and held until 9/30/95 would
have grown to $10,869 in the Fund or $10,964 in the 3-Month U.S. Treasury Bill
Index assuming reinvestment of all dividends and capital gains.
QUALITY RATINGS
(% of total net assets)
(PIE CHART)
As rated by Moody's, S&P and Fitch
First Tier Securities 100%
First Tier Securities 100%
Second Tier Securities 0%
SIT MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 1995 (UNAUDITED)
Quantity Name of Issuer Market Value(1)
COMMERCIAL PAPER (100.5%)(2)
CAPITAL GOODS & CONSUMER SERVICES (1.9%)
407,000 General Electric Co., 5.70%,
12/1/95 $ 403,110
CAPTIVE AUTO FINANCE (8.9%)
Ford Motor Credit Corp.:
270,000 5.75%, 10/16/95 269,362
280,000 5.75%, 10/27/95 278,853
405,000 5.70%, 11/30/95 401,193
General Motors Acceptance Corp.:
497,000 5.78%, 11/21/95 492,987
500,000 5.79%, 11/22/95 495,876
1,938,271
CAPTIVE EQUIPMENT FINANCE (14.6%)
IBM Credit Corp:
400,000 5.75%, 10/30/95 398,170
325,000 5.75%, 11/20/95 322,441
325,000 5.75%, 12/6/95 321,622
John Deere Capital Corp.:
200,000 5.75%, 10/2/95 199,968
250,000 5.74%, 10/6/95 249,802
150,000 5.72%, 11/8/95 149,102
250,000 5.75%, 11/14/95 248,268
232,000 5.76%, 12/4/95 229,657
Pitney Bowes Credit Corp.:
312,000 5.73%, 10/24/95 310,876
188,000 5.75%, 10/24/95 187,319
550,000 5.70%, 11/3/95 547,167
3,164,392
CONSUMER LOAN FINANCE (21.7%)
American Express Credit Corp.:
194,000 5.73%, 10/12/95 193,662
261,000 5.77%, 11/2/95 259,673
300,000 5.76%, 11/10/95 298,100
300,000 5.81%, 12/14/95 296,485
American General Financial:
117,000 5.71%, 10/26/95 116,542
200,000 5.74%, 10/26/95 199,214
200,000 5.75%, 11/10/95 198,738
400,000 5.79%, 12/21/95 394,888
133,000 5.70%, 12/22/95 131,297
Beneficial Corp.:
325,000 5.76%, 10/23/95 323,872
159,000 5.77%, 11/15/95 157,869
366,000 5.73%, 11/27/95 $ 362,720
250,000 5.72%, 11/28/95 247,724
Household Finance Corp.:
500,000 5.78%, 11/24/95 495,702
300,000 5.73%, 12/22/95 296,139
Norwest Financial, Inc.:
175,000 5.73%, 10/31/95 174,176
566,000 5.77%, 11/16/95 561,885
4,708,686
DIVERSIFIED FINANCE (15.9%)
Associates Corp. N.A.:
260,000 5.73%, 10/4/95 259,878
282,000 5.76%, 10/19/95 281,192
150,000 5.77%, 10/25/95 149,432
139,000 5.96%, 10/25/95 138,472
220,000 5.72%, 12/7/95 217,687
CIT Group Holdings, Inc.:
500,000 5.73%, 12/11/95 494,428
310,000 5.75%, 12/26/95 305,801
General Electric Capital Corp.:
400,000 5.76%, 11/1/95 398,044
225,000 5.65%, 11/6/95 223,751
Heller Financial, Inc.:
395,000 5.79%, 10/13/95 394,243
600,000 5.80%, 12/27/95 591,706
3,454,634
ENERGY (9.0%)
Chevron Oil Finance Corp.:
275,000 5.75%, 10/5/95 274,825
240,000 5.82%, 10/12/95 239,574
250,000 5.83%, 10/18/95 249,314
168,000 5.69%, 11/8/95 166,998
Texaco, Inc.:
780,000 5.76%, 10/3/95 779,751
250,000 5.74%, 10/6/95 249,802
1,960,264
INSURANCE (9.3%)
American Family Financial:
250,000 5.78%, 10/17/95 249,361
225,000 5.78%, 10/18/95 224,389
502,000 5.78%, 10/31/95 499,595
Transamerica Finance Corp.:
325,000 5.73%, 11/7/95 323,103
350,000 5.76%, 11/13/95 347,642
390,000 5.73%, 11/17/95 387,128
2,031,218
TECHNOLOGY/BUSINESS EQUIPMENT &
SERVICES (5.0%)
IBM Corp.:
220,000 5.76%, 10/11/95 $ 219,650
360,000 5.75%, 10/20/95 358,923
300,000 5.74%, 10/23/95 298,962
215,000 5.75%, 10/27/95 214,120
1,091,655
UTILITIES (14.2%)
A T & T Corp.:
500,000 5.71%, 10/24/95 498,205
500,000 5.70%, 12/5/95 494,917
Ameritech Corp.:
700,000 5.73%, 11/9/95 (5) 695,715
350,000 5.71%, 1/19/96 (5) 344,011
Southwestern Bell Capital Corp.,
450,000 5.74%, 10/10/95 (5) 449,361
400,000 5.71%, 12/8/95 (5) 395,746
218,000 5.80%, 1/29/96 (5) 213,880
3,091,835
Total investments in securities
(cost: $21,844,065) (6) $21,844,065
(This page has been left blank intentionally.)
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 September 30, 1995, 55.9% of the U.S. Government Securities Fund and
23.0% of the Bond Fund 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 September 30, 1995, approximately
15.8% of the Minnesota Tax-Free Income Fund 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 September 30, 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 $5,340,438 $54,012,192 $252,482,626
Unrealized appreciation (depreciation) on investments:
Gross unrealized appreciation $ 135,932 $ 1,048,953 $ 7,064,276
Gross unrealized depreciation (37,210) (107,819) (949,723)
Net unrealized appreciation (depreciation) $ 98,722 $ 941,134 $ 6,114,553
U.S.
GOVERNMENT MONEY
SECURITIES MARKET
FUND FUND
Cost for federal income tax purposes $43,792,626 $21,844,065
Unrealized appreciation (depreciation) on investments:
Gross unrealized appreciation $ 645,365 None
Gross unrealized depreciation (219,960) None
Net unrealized appreciation (depreciation) $ 425,405 None
</TABLE>
<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>
ASSETS
Investments in securities, at
identified cost................... $5,340,438 $54,012,192 $252,482,626 $43,792,626 $21,844,065
Investments in securities, at
market value - see
accompanying schedules for
detail............................ $5,439,160 $54,953,326 $258,597,179 $44,218,031 $21,844,065
Cash in bank on demand
deposit........................... ------ ------ 1 1 512
Accrued interest
receivable........................ 41,281 916,578 4,224,579 367,255 ------
Receivable for investment
securities sold................... 1,459 ------ 14,741 30,396 ------
Receivable for Fund shares
sold.............................. ------ 107,000 36,259 7,512 10,373
Total assets.................... 5,481,900 55,976,904 262,872,759 44,623,195 21,854,950
LIABILITIES
Payable for investment securities
purchased......................... ------ 3,537,730 ------ ------ ------
Payable for Fund shares
redeemed.......................... ------ 10,441 112,864 5,412 97,945
Cash portion of dividends
payable to shareholders........... 2,643 62,060 354,219 37,071 9,618
Accrued investment management
and advisory services fee......... 3,538 34,303 172,516 29,112 9,348
Total liabilities............... 6,181 3,644,534 639,599 71,595 116,911
Net assets applicable to
outstanding capital stock......... $5,475,719 $52,332,370 $262,233,160 $44,551,600 $21,738,039
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................ 552,772 5,199,664 26,574,834 4,259,854 21,741,039
Net asset value per share of
outstanding capital stock......... $9.91 $10.06 $9.87 $10.46 $1.00
</TABLE>
See accompanying notes to financial statements on pages 42-49.
<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............................... $158,465 $1,576,109 $ 8,163,603 $1,571,264 $711,806
Total income....................... 158,465 1,576,109 8,163,603 1,571,264 711,806
EXPENSES (NOTE 3):
Investment management and
advisory services fee.............. 17,631 196,673 1,016,537 203,806 95,038
Less fees and expenses absorbed
by investment adviser........... ---- ---- (2,179) (40,761) (35,639)
Total net expenses................. 17,631 196,673 1,014,358 163,045 59,399
Net investment income.............. 140,834 1,379,436 7,149,245 1,408,219 652,407
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS :
Net realized gain (loss) (note 2)...... 41,560 (1,926) (39,224) (18,875) ----
Net change in unrealized appreciation.. 148,376 484,660 4,336,173 674,189 ----
Net gain on investments............ 189,936 482,734 4,296,949 655,314 ----
Net increase in net assets resulting from
operations.............................. $330,770 $1,862,170 $11,446,194 $2,063,533 $652,407
</TABLE>
See accompanying notes to financial statements on pages 42-49.
SIT MUTUAL FUND GROUP
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
BOND MINNESOTA TAX-FREE TAX-FREE
FUND INCOME FUND INCOME FUND
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED ENDED ENDED
SEPTEMBER 30, YEAR ENDED SEPTEMBER 30, YEAR ENDED SEPTEMBER 30,
1995 MARCH 31, 1995 MARCH 31, 1995
(UNAUDITED) 1995 (UNAUDITED) 1995 (UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income $ 140,834 $ 221,136 $ 1,379,436 $ 1,839,661 $ 7,149,245
Net realized gain (loss) on investments 41,560 (117,419) (1,926) (419,772) (39,224)
Net change in unrealized appreciation
(depreciation) of investments 148,376 47,225 484,660 979,887 4,336,173
Net increase in net assets resulting from
operations 330,770 150,942 1,862,170 2,399,776 11,446,194
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (140,834) (221,136) (1,379,436) (1,839,661) (7,149,191)
Net realized gains on investments -- -- -- -- --
Total distributions (140,834) (221,136) (1,379,436) (1,839,661) (7,149,191)
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 1,733,738 304,160 13,949,859 37,614,894 53,200,573
Reinvested distributions 130,072 212,345 1,059,054 1,475,259 5,242,679
Payments for shares redeemed (111,026) (315,970) (7,040,770) (13,873,710) (55,664,132)
Increase (decrease) in net assets from
capital share transactions 1,752,784 200,535 7,968,143 25,216,443 2,779,120
Total increase (decrease) in net assets 1,942,720 130,341 8,450,877 25,776,558 7,076,123
NET ASSETS
Beginning of period 3,532,999 3,402,658 43,881,493 18,104,935 255,157,037
End of period $ 5,475,719 $ 3,532,999 $ 52,332,370 $ 43,881,493 $ 262,233,160
NET ASSETS CONSIST OF:
Capital (par value and paid-in surplus) $ 5,473,224 $ 3,720,440 $ 51,839,236 $ 43,871,093 $ 259,675,732
Undistributed (distributions in excess of) net
investment income -- -- -- -- --
Accumulated net realized loss from
security transactions (96,227) (137,787) (448,000) (446,074) (3,557,125)
Unrealized appreciation (depreciation)
on investments 98,722 (49,654) 941,134 456,474 6,114,553
$ 5,475,719 $ 3,532,999 $ 52,332,370 $ 43,881,493 $ 262,233,160
CAPITAL TRANSACTIONS IN SHARES:
Sold 177,943 32,543 1,390,547 3,830,816 5,430,182
Reinvested distributions 13,247 22,594 105,538 150,326 534,458
Redeemed (11,281) (33,547) (701,862) (1,425,007) (5,684,856)
Net increase (decrease) 179,909 21,590 794,223 2,556,135 279,784
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS (TABLE CONTINUED)
<TABLE>
<CAPTION>
U.S. GOVERNMENT MONEY MARKET
SECURITIES FUND FUND
TAX-FREE SIX MONTHS SIX MONTHS
INCOME FUND ENDED ENDED
YEAR ENDED SEPTEMBER 30, YEAR ENDED SEPTEMBER 30, YEAR ENDED
MARCH 31, 1995 MARCH 31, 1995 MARCH 31,
1995 (UNAUDITED) 1995 (UNAUDITED) 1995
OPERATIONS:
<S> <C> <C> <C> <C> <C>
Net investment income $ 16,011,411 $ 1,408,219 $ 2,374,448 $ 652,407 $ 984,892
Net realized gain (loss) on investments (3,519,873) (18,875) (631,212) -- --
Net change in unrealized appreciation
(depreciation) of investments 5,481,190 674,189 (150,786) -- --
Net increase in net assets resulting from
operations 17,972,728 2,063,533 1,592,450 652,407 984,892
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (16,000,200) (1,408,219) (2,384,177) (652,407) (985,117)
Net realized gains on investments (560,435) -- -- -- --
Total distributions (16,560,635) (1,408,219) (2,384,177) (652,407) (985,117)
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 129,607,190 16,735,945 16,243,728 47,209,823 77,036,008
Reinvested distributions 12,481,182 1,257,501 2,180,030 614,927 935,224
Payments for shares redeemed (213,034,707) (11,551,089) (18,861,210) (55,908,783) (66,012,623)
Increase (decrease) in net assets from
capital share transactions (70,946,335) 6,442,357 (437,452) (8,084,033) 11,958,609
Total increase (decrease) in net assets (69,534,242) 7,097,671 (1,229,179) (8,084,033) 11,958,384
NET ASSETS
Beginning of period 324,691,279 37,453,929 38,683,108 29,822,072 17,863,688
End of period $ 255,157,037 $ 44,551,600 $ 37,453,929 $ 21,738,039 $ 29,822,072
NET ASSETS CONSIST OF:
Capital (par value and paid-in surplus) $ 256,896,612 $ 44,776,282 $ 38,333,925 $ 21,738,039 $ 29,822,072
Undistributed (distributions in excess of) net
investment income (54) -- -- -- --
Accumulated net realized loss from
security transactions (3,517,901) (650,087) (631,212) -- --
Unrealized appreciation (depreciation)
on investments 1,778,380 425,405 (248,784) -- --
$ 255,157,037 $ 44,551,600 $ 37,453,929 $ 21,738,039 $ 29,822,072
CAPITAL TRANSACTIONS IN SHARES:
Sold 13,463,623 1,606,798 1,582,314 47,209,823 77,036,009
Reinvested distributions 1,298,812 120,758 211,762 614,927 935,322
Redeemed (22,177,813) (1,109,528) (1,836,057) (55,908,783) (66,012,623)
Net increase (decrease) (7,415,378) 618,028 (41,981) (8,084,033) 11,958,708
</TABLE>
See accompanying notes to financial statements on pages 42-49.
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.
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
determined in good faith 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 nd discount, is recorded on the accrual basis.
Delivery and payment for securities which have been purchased by the
Minnesota Tax-Free Income, Tax-Free Income, and U.S. Government Securities
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.
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 six months ended
September 30, 1995, were as follows:
Purchases Proceeds
Bond Fund $ 3,401,032 $ 1,594,808
Minnesota Tax-Free Income Fund 15,761,637 1,489,900
Tax-Free Income Fund 40,512,540 17,610,606
U.S. Government Securities Fund 12,197,108 3,644,487
For Money Market Fund during the six months ended September 30, 1995,
purchases of and proceeds from sales and maturities of investment
securities aggregated $103,589,731 and $111,339,990, 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. SIA also
is obligated to pay all of Bond, Minnesota Tax-Free Income, Tax Free
Income, U.S. Government Securities, and Money Market Funds 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, 1996, 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 and .60% of the Fund s average daily
net assets in excess of $500 million. After December 31, 1996, this
voluntary fee waiver may be discontinued by the Adviser in its sole
discretion.
For the period April 1, 1994, through December 31, 1996, 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 the Fund s average daily net assets. After
December 31, 1996, 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 September
30, 1995:
% Shares
Shares Outstanding
Bond Fund 134,059 24.25
Minnesota Tax-Free Income Fund 256,104 4.93
Tax-Free Income Fund 1,287,707 4.85
U.S. Government Securities Fund 527,712 12.39
Money Market Fund 4,447,399 20.46
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:
<TABLE>
<CAPTION>
SIT BOND FUND
FINANCIAL HIGHLIGHTS Six Months Period from
Ended December 1,
September 30, Year Ended 1993 (1) to
1995 March 31, March 31,
(Unaudited) 1995 1994
<S> <C> <C> <C>
NET ASSET VALUE:
Beginning of period $ 9.48 $ 9.69 $ 10.00
OPERATIONS:
Net investment income .31 .62 .19
Net realized and unrealized
gains (losses) on investments .43 (.21) (.31)
Total from operations .74 .41 (.12)
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (.31) (.62) (.19)
NET ASSET VALUE:
End of period $ 9.91 $ 9.48 $ 9.69
Total investment return (2) 7.89% 4.51% -1.22%
Net assets at end of period (000's omitted) $ 5,476 $ 3,533 $ 3,403
RATIOS:
Expenses to average daily net assets 0.80%(3) 0.80% 0.80%(3)
Net investment income to average daily net assets 6.38%(3) 6.63% 6.24%(3)
Portfolio turnover rate (excluding short-term securities) 38.06% 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.
<TABLE>
<CAPTION>
SIT MINNESOTA TAX-FREE INCOME FUND
FINANCIAL HIGHLIGHTS
Six Months Period from
Ended December 1,
September 30, Year Ended 1993 (1) to
1995 March 31, March 31,
(Unaudited) 1995 1994
<S> <C> <C> <C>
NET ASSET VALUE:
Beginning of period $9.96 $9.79 $10.00
OPERATIONS:
Net investment income .28 .56 .17
Net realized and unrealized gains
(losses) on investments .10 .17 (.21)
Total from operations .38 .73 (.04)
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (.28) (.56) (.17)
NET ASSET VALUE:
End of period $10.06 $9.96 $9.79
Total investment return (2) 3.86% 7.68% -0.80%
Net assets at end of period (000's omitted) $52,332 $43,881 $18,105
RATIOS:
Expenses to average daily net assets 0.80%(3) 0.80% 0.80%(3)
Net investment income to average daily net assets 5.61%(3) 5.72% 5.23%(3)
Portfolio turnover rate (excluding short-term securities) 3.21% 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.
<TABLE>
<CAPTION>
SIT TAX-FREE INCOME FUND
FINANCIAL HIGHLIGHTS
Six Months
Ended Nine Months
September 30, Year Ended Ended
1995 March 31, March 31, Years Ended June 30,
(Unaudited) 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE:
Beginning of period $9.70 $9.63 $10.02 $9.74 $9.59 $9.61
OPERATIONS:
Net investment income .27 .56 .43 .60 .69 .74
Net realized and unrealized gains
(losses) on investments .17 .09 (.30) .32 .15 (.02)
Total from operations .44 .65 .13 .92 .84 .72
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (.27) (.56) (.43) (.60) (.69) (.74)
From realized gains ---- (.02) (.09) (.04) ---- ----
Total distributions (.27) (.58) (.52) (.64) (.69) (.74)
NET ASSET VALUE:
End of period $9.87 $9.70 $9.63 $10.02 $9.74 $9.59
Total investment return (1) 4.64% 7.00% 1.19% 9.81% 9.09% 7.76%
Net assets at end of period
(000's omitted) $262,233 $255,157 $324,691 $338,977 $192,808 $86,997
RATIOS:
Expenses to average daily net assets 0.80%(2) 0.79%(2) 0.77%(2) 0.80% 0.80% 0.80%
Net investment income to average daily
net assets 5.62%(2) 5.84%(2) 5.68%(2) 6.17% 7.02% 7.62%
Portfolio turnover rate (excluding short-term
securities) 7.44% 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) Percentages for the periods ended September 30, 1995, and March 31, 1994,
are adjusted to an annual rate. Total Fund expenses are contractually
limited to .80% of average daily net assets. However, during the periods
ended September 30, 1995, and March 31, 1995 and 1994, the investment
adviser voluntarily absorbed $2,179, $24,991 and $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
periods ended Sepember 30, 1995, and March 31, 1995 and 1994, and the ratio
of net investment income to average daily net assets would have been 5.62%,
5.83%, and 5.65%, respectively.
<TABLE>
<CAPTION>
SIT U.S. GOVERNMENT SECURITIES FUND
FINANCIAL HIGHLIGHTS
Six Months
Ended Nine Months
September 30,Year Ended Ended
1995 March 31, March 31, Years Ended June 30,
(Unaudited) 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE:
Beginning of period $10.28 $10.50 $10.73 $10.81 $10.54 $10.31
OPERATIONS:
Net investment income .36 .67 .47 .71 .77 .79
Net realized and unrealized gains
(losses) on investments .18 (.22) (.18) .07 .44 .23
Total from operations .54 .45 .29 .78 1.21 1.02
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (.36) (.67) (.47) (.71) (.77) (.79)
From realized gains ---- ---- (.05) (.15) (.17) ----
Total Distributions (.36) (.67) (.52) (.86) (.94) (.79)
NET ASSET VALUE:
End of period $10.46 $10.28 $10.50 $10.73 $10.81 $10.54
Total investment return (1) 5.30% 4.47% 2.70% 7.50% 11.87% 10.19%
Net assets at end of period
(000's omitted) $44,552 $37,454 $38,683 $31,538 $35,353 $30,153
RATIOS:
Expenses to average daily net assets 0.80%(3) 0.80%(3) 0.86%(3) 0.89%(2) 0.80%(2) 0.90%(2)
Net investment income to average daily
net assets 6.90%(3) 6.48%(3) 5.79%(3) 6.60%(2) 7.28%(2) 7.60%(2)
Portfolio turnover rate (excluding short-term
securities) 9.34% 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) Percentages for the periods ended September 30, 1995, and March 31, 1994,
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 exceeding $50 million.
However, during the periods ended September 30, 1995, and March 31, 1995
and 1994, the investment adviser voluntarily absorbed $40,761, $73,460 and
$39,324 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 each of these periods, and the ratio of net
investment income to average daily net assets would have been 6.70%, 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>
MONEY MARKET FUND SIT INVESTMENT RESERVE FUND
Six Months Period From Period From
Ended November 1, July 1,
September 30, Year Ended 1993 to 1993 to
1995 March 31, March 31, October 31, Years Ended June 30,
(Unaudited) 1995 1994 1993 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE:
Beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
OPERATIONS:
Net investment income 0.03 0.04 0.01 0.01 0.03 0.05 0.07
Net realized and unrealized gains
(losses) on investments ---- ---- ---- ---- ---- ---- ----
Total from operations 0.03 0.04 0.01 0.01 0.03 0.05 0.07
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (0.03) (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 $1.00
Total investment return (1) 2.77% 4.57% 1.14% 0.92% 3.02% 5.03% 7.14%
Net assets at end of period
(000's omitted) $21,738 $29,822 $17,864 $12,626 $10,869 $16,234 $7,729
RATIOS:
Expenses to average daily
net assets 0.50%(3) 0.50%(3) 0.50%(3) 0.72%(3) 0.80%(2) 0.80%(2) 0.86%(2)
Net investment income to average
daily net assets 5.50%(3) 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 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) Percentages for the periods ended September 30, 1995, March 31, 1994, and
October 31, 1993, 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
September 30, 1995, March 31, 1995 and 1994, and October 31, 1993, the
investment adviser voluntarily absorbed $35,639, $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
5.20%, 4.33%, 2.46%, and 2.59%, respectively.
(This page has been left blank intentionally.)
Directors:
Eugene C. Sit, CFA
Peter L. Mitchelson, CFA
Michael C. Brilley
John E. Hulse
Sidney L. Jones
Donald W. Phillips
William E. Frenzel
Director Emeritus:
Melvin C. Bahle
Officers: (1)
Eugene C. Sit, CFA Chairman
Peter L. Mitchelson, CFA Vice Chairman
Mary K. Stern President
Debra A. Sit, CFA Vice President - Investments,
Assistant Treasurer
Paul E. Rasmussen Vice President & Treasurer
Michael P. Eckert Vice President - Group Manager
Randy C. Henze, CFA Vice President - Group Manager
Michael J. Radmer Secretary
Parnell M. Kingsley Assistant Secretary
Carla J. Rose Assistant Secretary
(1) Effective October 24, 1995
SEMI-ANNUAL REPORT
BOND FUNDS
September 30, 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 P.L.L.P.
220 South Sixth Street
Minneapolis, MN 55402
MEMBER OF
100% NO-LOAD
MUTUAL FUND
COUNCIL
