BOND FUNDS SEMI-ANNUAL REPORT
SEPTEMBER 30, 1997
A FAMILY OF 100% NO-LOAD FUNDS
MONEY MARKET FUND
U.S. GOVERNMENT SECURITIES FUND
BOND FUND
TAX-FREE INCOME FUND
MINNESOTA TAX-FREE INCOME FUND
[LOGO]
SIT MUTUAL FUNDS
<PAGE>
A LOOK AT THE SIT MUTUAL FUNDS
Sit Mutual Funds 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 $5.3 billion for some
of America's largest corporations, foundations and endowments.
Sit Mutual Funds is comprised of eleven 100% NO-LOAD funds. 100%
NO-LOAD means that the funds have no sales charges on purchases, no deferred
sales charges, no 12b-1 fees, no redemption fees and no exchange fees. Every
dollar you invest goes to work for you.
Some of the other features include:
* Free telephone exchange
* Dollar-cost averaging through automatic investment plan
* Electronic transfer of funds for purchases and redemptions
* Free check-writing privileges on bond funds
* Retirement accounts including IRAs, Keoghs and 401(k) Plans
[GRAPH]
SIT FAMILY OF FUNDS
Principal Stability & Current Income
STABILITY: INCOME: GROWTH & INCOME: GROWTH:
Safety of principal Increased income Long-term capital Long-term capital
and current income appreciation and appreciation
income
Growth Potential
* MONEY MARKET * U.S. GOVERNMENT * BALANCED * MID CAP GROWTH
SECURITIES * LARGE CAP GROWTH * INTERNATIONAL
* TAX-FREE INCOME GROWTH
* MINNESOTA * SMALL CAP
TAX-FREE INCOME GROWTH
* BOND * DEVELOPING
MARKETS GROWTH
<PAGE>
SIT MUTUAL FUNDS
BOND FUNDS SEMI-ANNUAL REPORT
TABLE OF CONTENTS
PAGE
Chairman's Letter................................................... 2
Performance Review.................................................. 4
Fund Reviews and Portfolios of Investments
Money Market Fund............................................. 6
U.S. Government Securities Fund............................... 10
Bond Fund..................................................... 14
Tax-Free Income Fund.......................................... 18
Minnesota Tax-Free Income Fund................................ 30
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.
<PAGE>
SIT MUTUAL FUNDS
CHAIRMAN'S LETTER - SEPTEMBER 30, 1997
[PHOTO]
Dear Fellow Shareholders:
Fixed income markets continued their summer rally through the quarter
ended September 30, 1997. Despite strong economic growth in the third quarter,
U.S. bond yields declined further as inflation indicators remained contained and
heightened concerns over foreign markets resulted in a flight to safety that
helped extend a U.S. Treasury-led rally.
Economic Overview
U.S. financial markets were characterized by increased volatility in recent
weeks, caused by market turbulence in Asia that spread around the world. The
U.S. equity and bond markets went their separate ways in October as domestic
equities proved not to be immune from the volatility affecting the markets in
Asia, Europe and Latin America. U.S. Treasury securities, in contrast, were seen
as a safe haven and staged an extended rally, bringing bond yields to their
lowest levels of the year. The factors causing concern for financial markets
have gradually expanded in recent months and remain generally unresolved. They
include the financial turmoil in Southeast Asia that has generated IMF
intervention in some cases, the inability of Japan to extricate itself from a
prolonged economic slump, interest rate hikes in the U.K., Germany and Canada
designed to pre-empt inflation, falling gold prices, and renewed tensions in
Iraq. While temporary stability was restored to markets in Southeast Asia, the
political and economic effects are likely to continue.
Recent results for the domestic economy continue to show solid, balanced
growth with limited evidence of inflation. The first estimate of third quarter
1997 real GDP was +3.5%, compared to +3.3% in the second quarter and +4.9% in
the first quarter. Third quarter growth was paced by strong consumer spending on
durable goods as personal consumption expenditures rose 5.8% year-over-year in
September. Personal income growth, which has slowed since last year, remains
strong, rising at a year-over-year rate of 5.4% in September. GDP growth would
have been even stronger without the deterioration in net exports and a slowdown
in the volatile inventory sector.
Other evidence on the rate of domestic economic growth is more mixed. New
and existing home sales remain strong, spurred by lower interest rates, and home
prices continue to rise. Production sector data, including factory orders and
the Index of Leading Indicators, are also robust. However, corporate debt is now
rising and may be a sign of slower growth ahead. In addition, growth in consumer
installment debt, which has normally been accompanied by a deceleration in
spending, has been slowing. We believe the recent pace of economic activity is
unsustainable and that growth in the fourth quarter and in 1998 will likely be
at a more subdued pace. Our estimate of full-year 1998 real GDP growth is +2.9%,
down from the +3.8% growth we expect in 1997. Furthermore, developments in Asia
are likely to negatively impact domestic net exports and dampen U.S. real GDP
growth by as much as -0.5% next year.
Broad measures of inflation continue to be very favorable. The
year-over-year increase in the Consumer Price Index was +2.2% in September, and
was nearly zero for the Producer Price Index. The GDP deflator, which was
impacted by falling computer prices, rose 1.4 percent in the third quarter, its
lowest rate of increase since second quarter 1964. Tightness in the labor
markets, as indicated by October's remarkably low 4.7% unemployment rate,
continues to be a concern, although the employment cost index remains contained.
Thus far, increases in productivity, which have been alluded to by Federal
Reserve Chairman Alan Greenspan as being understated, seem to have sufficiently
offset upward pricing pressures. Lower import prices, resulting from the fallout
in Asian currencies, should alleviate inflation next year.
Inflation-adjusted or "real" interest rates have risen rapidly during 1997
due mainly to better-than-expected inflation experience. Real rates are at high
levels, reflecting continued skepticism that inflation will remain subdued.
Interestingly, with the developments in Southeast Asia, there is evidence of a
battle between those concerned about excessive inflationary pressures in the
U.S., and those who believe deflation is just around the corner (evidence:
Japan's 1.6% 10-year government bond rate). Until this battle between
reflationists and deflationists is resolved, the level of investor uncertainty
will be rising, accompanied by continued volatility in financial markets.
The Federal Reserve's G-10 trade-weighted U.S. dollar exchange rate, which
had been strengthening since early 1995, peaked in early August 1997 and has
been easing since then. We believe the U.S. dollar will continue to trade at or
just above its recent range and will not impede U.S. trade competitiveness.
External shocks are always possible, and the latest Middle East flare-up is
being monitored carefully.
The federal budget deficit for fiscal year 1997 came in at $22.6 billion,
the lowest level since 1974. This compared to $107.3 billion in 1996 and a peak
of $290 billion in 1992. The
<PAGE>
reduction was largely attributable to faster federal revenue growth versus
spending growth over the past five years. The fiscal 1998 deficit is also
expected to remain low, in the $50 billion range, and some private forecasters
believe a small surplus is possible. In light of this, options for allocating
the potential surplus are being discussed even before it materializes. Proposals
fall into two categories: those that reduce the total national debt, and those
that increase spending or provide tax cuts. We anticipate that, whatever path of
fiscal policy, it will continue to be a positive influence in the overall
economic environment as it affects financial markets. Progress has also been
made in crafting a meaningful tax package that would include the first large
Federal tax cut in sixteen years. More importantly, this reflects a fiscal
policy shift toward stimulus after years of restraint.
Strategy Summary:
The Federal Reserve has left monetary policy unchanged since its last 0.25%
hike on March 25th as subsequent economic reports continue to validate its
no-action stance that incorporates a tightening bias. The economy's ability to
sustain strong growth without any evidence of serious current inflationary
pressure remains the subject of much debate. Chairman Greenspan, in his October
29th address to Congress, shared his view that the robust pace of economic
growth thus far in 1997 is unsustainable. He also implied that the impact of the
financial crisis in Asia, and the resulting stock market correction, will dampen
future U.S. economic growth. While allaying fears of higher rates, however,
Greenspan gave no hint of lower short-term rates and reiterated the Fed's
continued watch on inflation. The current consensus is that there will no change
in Federal Reserve administered rates during the balance of 1997.
Moderate economic growth, accompanied by low inflation, should continue to
provide a favorable environment for U.S. financial markets. Of concern is the
economy operating at close to full capacity, the relatively low unemployment
rate, and tenuous global economic conditions. While inflation appears benign, we
will continue to monitor it closely. Our expectations for the current economic
cycle to continue leads us to forecast slightly higher rates over the next
twelve months.
With the decline in bond yields, taxable bond portfolio durations have
shifted from being longer than their respective benchmarks last spring to
current positions which are slightly shorter than their benchmarks. A more
defensive positioning is anticipated, should long-term Treasury yields reach
6.0%. Likewise, portfolios will be repositioned more opportunistically as bond
yields increase. Lower interest rates brought an increased supply of corporate
debt issuance, causing corporate yield spreads to widen. In addition, selling
pressures and fears of increased refinancing activity caused dealer inventories
to swell and relative yield spreads to widen across all sectors as bond yields
reached new lows. We expect that incremental yield spreads will remain
relatively wide through year-end. Our strategy is to selectively buy securities
where the widening yield spread does not reflect longer-term fundamentals or
credit concerns. We remain focused on niches within each market sector and
continue to emphasize high coupon mortgage pass-through securities with stable
prepayment rates.
Municipal bonds have not kept pace with the continued rally in Treasuries,
thus causing their relative valuations to cheapen. Currently, municipals are at
their cheapest relative levels since one year ago, with the yield ratio of long
municipals to long Treasuries increasing from a low of 82% in May to
approximately 88% in early November. Lower bond yields have resulted in
increased municipal issuance which has contributed to that market's lagging
performance year-to-date. BBB-rated issuers, particularly in the hospital and
transportation sectors, have benefitted from advanced refunding activity. Sector
and security selection continue to be key elements of our investment approach
for our municipal funds. We remain focused on issues in the housing and health
care sectors, despite the fact that relative yield spreads are historically
narrow. In addition to higher yield, we continue to seek securities offering
greater call protection without lengthening the average maturity of the Funds.
As stronger economic activity or inflation could again reverse the market
outlook for interest rates, we believe that our focus on high current income and
stability of principal will help provide positive incremental returns over
longer term periods. We appreciate your continued interest in the Sit Mutual
Funds and look forward to helping you to achieve your long-term investment
goals.
With best wishes,
/s/ Eugene C. Sit
Eugene C. Sit, CFA
Chairman and Chief Investment Officer
<PAGE>
SIT MUTUAL FUNDS
SEPTEMBER 30, 1997 PERFORMANCE SUMMARY - BOND FUNDS
BOND MARKET REVIEW
The Federal Reserve kept monetary policy steady as inflation indicators
remained subdued, with no action since it raised the Federal funds rate by 0.25%
on March 25th. Three-month Treasury bill yields fluctuated around a 0.25% range
during the six month period, decreasing from 5.33% to 5.11%. Longer term bond
yields declined steadily from mid-April through the end of July and, since then,
have fluctuated within a narrow range. The 30-year Treasury bond yield decreased
0.67% to 6.41%, marking a low of 6.30% on July 31st. The 30-year Treasury bond
yield is below its beginning of the year level of 6.64% but remains above its
December 1995 trough of 5.95% and its longer term trough of 5.79% on October 15,
1993.
Lower interest rates brought increased corporate debt issuance, causing
corporate yield spreads to widen. However, the corporate sector remained the
best-performing group for the period, benefitting from its longer duration. The
shorter duration of the asset-backed sector made it the worst performer as its
price return lagged. Mortgages lagged during the most recent quarter but
remained competitive for the six month and year-to-date periods, helped by their
higher income return.
Municipals have not kept pace with the rally in taxable bonds. The yield of
the Bond Buyer 40-Bond Index decreased by only 0.48% during the period from
5.95% to 5.47%, with a low of 5.40% on July 31st. The Bond Buyer Index yield is
below its beginning of the year level of 5.72% and is at its February 1996
trough of 5.47%, and remains just above its October 15, 1993 trough of 5.34%.
Lower bond yields have also resulted in increased municipal issuance, which
contributed to that market's lagging returns relative to Treasuries. BBB-rated
issuers, particularly hospitals and transportation, have benefitted from an
increase in advanced refunding activity. Hospitals continue to outperform as
incremental yield spreads remain narrow. Housing, which has underperformed
during the rally, remains competitive year-to-date.
Security selection remains a strong component of the attractive returns
earned by the Sit Bond Funds over the longer term. These results were achieved
consistent with the Funds' dual objectives of high current income and principal
stability.
TOTAL RETURN - CALENDAR YEAR
1988 1989
---- ----
SIT MONEY MARKET FUND -- --
SIT U.S. GOV'T. SECURITIES FUND 7.86 11.04
SIT BOND FUND -- --
SIT TAX-FREE INCOME FUND 2.19(1) 8.38
SIT MINNESOTA TAX-FREE
INCOME FUND -- --
U.S. TREASURY BILL 7.10 8.73
LEHMAN INTER. GOVERNMENT BOND INDEX 6.40 12.68
LEHMAN AGGREGATE BOND INDEX 7.89 14.53
LEHMAN 5-YEAR MUNICIPAL BOND INDEX 6.39/0.75(1) 9.07
SIT INVESTMENT RESERVE FUND 6.65% 8.53%
(Inception date 1/25/85. Converted to Sit Money Market Fund on 11/1/93.)
NASDAQ
SYMBOL INCEPTION
------ ---------
SIT MONEY MARKET FUND SNIXX 11/01/93
SIT U.S. GOV'T. SECURITIES FUND SNGVX 06/02/87
SIT BOND FUND SIBOX 12/01/93
SIT TAX-FREE INCOME FUND SNTIX 09/29/88
SIT MINNESOTA TAX-FREE INCOME FUND SMTFX 12/01/93
3-MONTH U.S. TREASURY BILL 11/01/93
LEHMAN INTER. GOVERNMENT BOND INDEX 05/31/87
LEHMAN AGGREGATE BOND INDEX 11/30/93
LEHMAN 5-YEAR MUNICIPAL BOND INDEX 09/30/88
(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 9/30/97.
(3) For Minnesota residents in the 31%, 36% and 39.6% federal tax brackets, the
double exempt tax equivalent yields are 8.28%, 8.93% and 9.46%, 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 7.32%, 7.89% and 8.36%, respectively (Income
subject to state tax, if any).
<PAGE>
(wide table continued from above)
<TABLE>
<CAPTION>
YIELD
YTD AS OF DISTRIBUTION
1990 1991 1992 1993 1994 1995 1996 1997 9/30/97 RATE (2)
---- ---- ---- ---- ---- ---- ---- ---- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
-- -- -- 0.46%(1) 3.84% 5.58% 5.08% 3.86% 5.30%(6)
10.97 12.87 5.43 7.34 1.77 11.50 4.99 6.13 5.84 6.17
-- -- -- 0.34(1) -1.31 16.83 4.25 7.18 5.72 6.42
7.29 9.25 7.71 10.42 -0.63 12.86 5.69 6.99 5.05(4) 5.51
-- -- -- 1.60(1) 0.63 11.90 5.89 5.34 5.23(3) 5.44
8.04 5.72 3.56 3.13 4.47 5.98 5.27 3.95
9.56 14.11 6.93 8.17 -1.75 14.41 4.06 5.39
8.96 16.00 7.40 9.75/0.54(1) -2.92 18.47 3.63 6.52
7.70 11.41 7.62 8.73 -1.28 11.65 4.22 4.61
7.59% 6.14% 3.81% 2.34(5)
AVERAGE ANNUAL TOTAL RETURNS FOR THE
TOTAL RETURN PERIODS ENDED SEPTEMBER 30, 1997
------------ --------------------------------
QUARTER ENDED SIX MONTHS SINCE
9/30/97 ENDED 9/30/97 1 YEAR 3 YEARS 5 YEARS INCEPTION
------- ------------- ------ ------- ------- ---------
1.30% 2.61% 5.15% 5.25% -- 4.81%
3.04 6.13 8.39 7.69 6.41 8.28
3.62 7.66 10.56 9.62 -- 6.93
3.13 6.25 9.46 8.41 7.35 7.74
2.34 4.96 7.43 7.66 -- 6.57
1.29 2.61 5.28 5.49 -- 5.12
2.56 5.42 7.83 7.82 5.86 8.08
3.32 7.12 9.71 9.49 -- 6.57
2.13 4.63 6.67 6.61 5.79 7.09
</TABLE>
(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 9/30/97 was 5.17%.
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.
<PAGE>
SIT MONEY MARKET FUND REVIEW
SEPTEMBER 30, 1997
[PHOTO]
MICHAEL C. BRILLEY
SENIOR PORTFOLIO MANAGER
PAUL J. JUNGQUIST, CFA
PORTFOLIO MANAGER
Dear Fellow Shareholders:
The Sit Money Market Fund provided investors with a +2.61% return for the
six months ended September 30, 1997, compared to a +2.49% average return for the
Lipper Analytical Services, Inc. Money Market Fund universe. Within its Lipper
peer group category, the Fund's performance ranked 59th of 310 funds and 55th of
298 funds, respectively, for the three and twelve month periods ended September
30, 1997. As of September 30, 1997, the Fund's 7-day compound yield was 5.30%
and its average maturity was 30 days, compared to 4.74% and 27 days,
respectively, at March 31, 1997.
Three-month Treasury bill rates were somewhat volatile over the past six
months, as considerable uncertainty about the direction of Federal Reserve
policy as well as reduced funding requirements for the U.S. Treasury existed
during the period. In the end, the Fed left the federal funds rate unchanged
during the period, and the three-month Treasury bill rate decreased from 5.33%
at March 31 to 5.11% at September 30. The Fund lengthened its average maturity
during the period to increase its yield by taking advantage of the somewhat
volatile market conditions. Economic growth remains strong despite the rapid
pace of the first half of the year and the recent volatility in global financial
markets, with inflation remaining moderate. Given this data, most market
analysts now expect no change in Fed policy over the near term. We are
continuing to take advantage of current yield levels, and expect to maintain the
average maturity of the portfolio in a range of 25 to 40 days in anticipation of
no short-term change in policy by the Fed.
Despite the recent volatility in global financial markets, we do not
foresee a significant impact on the creditworthiness of top tier commercial
paper issuers. We remain concerned about the relatively high levels of consumer
bankruptcies and debt, however, and will continue to monitor our eligible
consumer finance credits closely. The Fund continues to diversify its core
holdings and its industry exposure. In the months ahead, we plan to add Tier I
credits in the captive finance, 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 9/30/97: $1.00 Per Share
3/31/97: $1.00 Per Share
Total Net Assets: $32.56 Million
PORTFOLIO STRUCTURE
(% of total net assets)
Consumer Loan Finance 19.2
Diversified Finance 16.5
Utilities 11.2
Captive Equipment Finance 10.7
Captive Auto Finance 6.8
Consumer Non-Durables 5.1
Captive Oil Finance 3.4
Technology/Business Equip. 3.4
Retail 3.2
Capital Goods 3.1
Energy 1.4
U.S. Government 1.3
Other Assets & Liabilities 14.7
<PAGE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS* CUMULATIVE TOTAL RETURNS*
----------------------------- -------------------------
Money Lipper Money U.S. Treasury Money Lipper Money U.S. Treasury
Market Market Bill Market Market Bill
Fund Average (3-Month) Fund Average (3-Month)
----- ------------ ------------- ----- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
3 Months 1.30% 1.23% 1.29% 1.30% 1.23% 1.29%
(unannualized)
1 Year 5.15 4.86 5.28 5.15 4.86 5.28
3 Year 5.25 5.02 5.49 16.60 15.86 17.37
Inception 4.81 4.61 5.12 20.19 19.25 21.61
(11/1/93)
</TABLE>
* As of 9/30/97
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]
3-MONTH U.S. TREASURY BILL INDEX
SIT MONEY MARKET FUND
The sum of $10,000 invested at inception (11/1/93) and held until 9/30/97 would
have grown to $12,019 in the Fund or $12,161 in the 3-Month U.S. Treasury Bill
Index assuming reinvestment of all dividends and capital gains.
QUALITY RATINGS
(% of Net Assets)
AS RATED BY MOODY'S, S&P AND FITCH
First Tier Securities
100%
[PIE GRAPH]
First Tier Securities 100%
Second Tier Securities 0%
<PAGE>
SIT MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS - SEPTEMBER 30, 1997 (UNAUDITED)
- ---------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
- ---------------------------------------------------------------------------
COMMERCIAL PAPER (84.0%) (2)
CAPITAL GOODS (3.1%)
1,000,000 Deere & Co., 5.50%, 10/15/97 $997,865
-----------
CAPTIVE AUTO FINANCE (6.8%)
Ford Motor Credit Corp.:
609,000 5.56%, 10/14/97 607,793
434,000 5.55%, 10/30/97 432,077
General Motors Acceptance Corp.:
550,000 5.56%, 10/6/97 549,580
215,000 5.56%, 10/9/97 214,737
111,000 5.59%, 10/28/97 110,539
315,000 5.60%, 11/28/97 312,188
-----------
2,226,914
-----------
CAPTIVE EQUIPMENT FINANCE (10.7%)
IBM Credit Corp.:
500,000 5.51%, 10/6/97 499,619
225,000 5.54%, 10/21/97 224,315
375,000 5.53%, 11/5/97 372,998
John Deere Capital Corp.:
460,000 5.55%, 10/17/97 458,878
240,000 5.56%, 10/21/97 239,267
400,000 5.56%,10/27/97 398,411
300,000 Pitney Bowes Credit Corp.,
5.49%, 10/23/97 298,999
1,000,000 Xerox Credit Corp.,
5.30%, 5/13/97 996,518
-----------
3,489,005
-----------
CAPTIVE OIL FINANCE (3.4%)
Chevron Oil Finance:
266,000 5.50%, 10/7/97 265,758
250,000 5.51%, 10/14/97 249,506
607,000 5.49%, 11/4/97 603,876
-----------
1,119,140
-----------
CONSUMER LOAN FINANCE (19.2%)
American Express Credit Corp.:
169,000 5.53%, 10/7/97 168,845
280,000 5.56%, 10/29/97 278,800
300,000 5.55%, 11/13/97 298,029
375,000 5.55%, 11/19/97 372,193
American General Financial:
300,000 5.55%, 10/24/97 298,946
300,000 5.57%, 11/3/97 298,482
525,000 5.55%, 11/6/97 522,107
Beneficial Corp.:
515,000 5.54%, 10/16/97 513,824
350,000 5.56%, 10/20/97 348,984
1,000,000 Commerical Credit Corp.,
5.56%, 11/7/97 $994,337
Household Finance Corp.:
259,000 5.56%, 10/15/97 258,446
335,000 5.55%, 10/20/97 334,028
283,000 5.53%, 11/24/97 280,674
200,000 5.56%, 12/29/97 197,290
Norwest Financial, Inc.:
300,000 5.53%, 10/7/97 299,726
306,000 5.56%, 10/23/97 304,972
250,000 5.56%, 10/29/97 248,929
240,000 5.55%, 11/3/97 238,790
-----------
6,257,402
-----------
CONSUMER NON-DURABLES (5.1%)
Coca Cola Co.:
400,000 5.48%, 10/31/97 398,183
435,000 5.52%, 12/15/97 430,061
Gillette Co.:
339,000 5.50%, 4/25/97 (5) 338,948
500,000 5.48%, 10/9/97 (5) 499,393
-----------
1,666,585
-----------
DIVERSIFIED FINANCE (16.5%)
Associates Corp. N.A.:
250,000 5.55%, 10/15/97 249,466
450,000 5.54%, 11/18/97 446,706
376,000 5.55%, 11/20/97 373,128
CIT Group Holdings, Inc.:
579,000 5.54%, 11/21/97 574,480
432,000 5.54%, 10/8/97 431,540
General Electric Capital Corp.:
400,000 5.56%, 10/28/97 398,350
400,000 5.56%, 11/10/97 397,551
300,000 5.57%, 12/16/97 296,517
General Electric Capital Services:
435,000 5.56%, 10/22/97 433,604
165,000 5.55%, 10/24/97 164,420
500,000 5.56%, 11/17/97 496,403
Transamerica Finance Corp.:
250,000 5.51%, 10/16/97 249,428
480,000 5.52%, 10/23/97 478,393
375,000 5.57%, 11/13/97 372,523
-----------
5,362,509
-----------
ENERGY (1.4%)
453,000 Texaco, Inc.,
5.53%, 10/2/97 452,931
-----------
<PAGE>
- ---------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
- ---------------------------------------------------------------------------
TECHNOLOGY/BUSINESS EQUIPMENT (3.4%)
International Business Machines Corp.:
600,000 5.54%, 10/10/97 $599,178
500,000 5.55%, 11/12/97 496,792
-----------
1,095,970
-----------
RETAIL (3.2%)
Sears Roebuck & Co.:
458,000 5.54%, 10/1/97 458,000
267,000 5.56%, 10/3/97 266,918
330,000 5.58%, 11/10/97 327,972
-----------
1,052,890
-----------
UTILITIES (11.2%)
Ameritech Corp.:
350,000 5.68%, 10/3/97 349,892
400,000 5.53%, 12/2/97 396,232
385,000 5.53%, 12/4/97 381,256
AT&T Corp.:
500,000 5.56%, 11/14/97 496,639
500,000 5.51%, 12/12/97 494,560
BellSouth Telecommunications, Inc.:
500,000 5.51%, 10/10/97 499,315
219,000 5.50%, 10/27/97 218,137
SBC Communications:
485,000 5.53%, 10/31/97 (5) 482,785
325,000 5.56%,12,10/97 (5) 321,537
-----------
3,640,353
-----------
Total commercial paper
(cost: $27,361,564) 27,361,564
-----------
U.S. GOVERNMENT SECURITIES (1.3%)
420,000 Federal National Mtg. Assn.,
5.41%, 11/24/97 416,630
-----------
(cost: $416,630)
Total investments in securities
(cost: $27,778,194) (6) $27,778,194
===========
See accompanying notes to portfolios of investments on page 37.
<PAGE>
SIT U.S. GOVERNMENT SECURITIES FUND REVIEW
SEPTEMBER 30, 1997
MICHAEL C. BRILLEY
SENIOR PORTFOLIO MANAGER
BRYCE A. DOTY, CFA
PORTFOLIO MANAGER
[PHOTO]
Dear Fellow Shareholders:
The Sit U.S. Government Securities Fund provided investors with a +6.13%
return for the six months ended September 30, 1997 compared to a +5.42% return
of the Lehman Intermediate Government Bond Index. For the twelve months ending
September 30, 1997, the Fund's total return was +8.39% versus the +7.83% return
for the Lehman Index. As of September 30, 1997, the Fund's 30-day SEC yield was
5.84% and its 12-month distribution rate was 6.17%, compared to 6.65% and 6.29%,
respectively, at March 31, 1997.
U.S. Treasury yields fell sharply during the past six months providing
significant price appreciation in the Fund's longer duration U.S. Treasury and
CMO holdings. Although the Fund's pass-through holdings are more stable in
price, their high coupons made them the highest income earning securities in the
Fund. While the Fund's strong return was better than its benchmark, the Lehman
Intermediate Government Bond Index, its return lagged that of its Lipper
universe due to its shorter (more conservative) effective duration.
Investment activity during the past six months initially involved investing
net cash flows in Treasury securities and certain government closed-end bond
funds. The shares of the closed-end funds were purchased at a price below the
funds' net asset value, producing a high dividend yield comparable to other
securities held in the Fund. Once yields had fallen substantially, the Fund
shortened its effective duration. The Fund accomplished this by selling longer
duration U.S. Treasuries and purchasing additional seasoned high coupon mortgage
and manufactured home loan securities, which are less price sensitive to changes
in market yield levels.
The decline in interest rates reflected continued favorable inflation
reports and moderate economic growth forecasts. Consequently, investors reduced
expectations that the Federal Reserve would raise short-term interest rates this
year. However, steady economic growth coupled with tightening labor market
conditions should eventually lead to higher inflation. Therefore, we expect the
Federal Reserve to raise short-term interest rates in early 1998 which should
result in modestly higher intermediate and longer term yields. Given this
outlook, we expect to continue the Fund's emphasis on securities that provide
high levels of interest income and are relatively more stable in price.
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 9/30/97: $10.59 Per Share
3/31/97: $10.28 Per Share
Total Net Assets: $88.30 Million
30-Day SEC Yield: 5.84%
12-Month Distribution Rate: 6.17%
Average Maturity: 15.7 Years
Effective Duration: 3.2 Years (1)
(1) Effective 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%. Effective duration is based on current interest rates and
the Adviser's assumptions regarding the expected average life of individual
securities held in the portfolio.
PORTFOLIO STRUCTURE
(% of total net assets)
GNMA Pass-Through 59.1
U.S. Treasury 14.2
Collateralized Mortgage Obligations 13.6
FNMA Pass-Through 5.4
Mutual Funds 3.6
FHLMC Pass-Through 3.0
Cash & Cash Equivalents 1.1
<PAGE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS* CUMULATIVE TOTAL RETURNS*
------------------------------------------- -------------------------------------------
U.S. Gov't. Lipper Lehman Inter. U.S. Gov't. Lipper Lehman Inter.
Securities U.S. Gov't. Gov't. Bond Securities U.S. Gov't. Bond Fund
Fund Fund Average Index Fund Fund Average Index
----- ------------ ------------- ----- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
3 Months 3.04% 3.18% 2.56% 3.04% 3.18% 2.56%
(unannualized)
1 Year 8.39 8.71 7.83 8.39 8.71 7.83
5 Years 6.41 5.74 5.86 36.42 32.18 32.91
10 Years 8.58 8.71 8.38 127.82 118.88 123.56
Inception 8.28 7.63 8.08 127.63 113.84 123.29
(6/2/87)
</TABLE>
* As of 9/30/97
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 9/30/97 would
have grown to $22,763 in the Fund or $22,329 in the Lehman Intermediate
Government Bond Index assuming reinvestment of all dividends and capital gains.
ESTIMATED AVERAGE LIFE PROFILE
[BAR GRAPH]
The Adviser's estimates of the dollar weighted
average life of the portfolio's securities, which may
vary from their stated maturities.
YEARS
-----
0-1 1.1%
1-5 80.5%
5-10 12.8%
10-20 1.9%
20+ 3.7%
<PAGE>
SIT U.S. GOVERNMENT SECURITIES FUND
PORTFOLIO OF INVESTMENTS - SEPTEMBER 30, 1997 (UNAUDITED)
- ----------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
- ----------------------------------------------------------------
MORTGAGE PASS-THROUGH SECURITIES (67.5%) (2)
FEDERAL HOME LOAN MORTGAGE CORPORATION (3.0%):
32,000 8.75%, 12/1/01 $33,027
299,233 9.00%, 12/1/05 312,000
86,042 9.00%, 1/1/06 89,716
605,944 9.00%, 10/1/16 641,871
573,331 9.00%, 6/1/17 607,529
80,093 9.50%, 6/1/16 85,096
175,957 9.50%, 12/1/18 186,809
136,923 9.75%, 6/1/17 146,456
425,514 10.25%, 6/1/10 460,487
30,431 10.50%, 4/1/04 31,982
4,509 11.00%, 10/1/00 4,738
---------
2,599,711
---------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (5.4%):
179,915 9.00%, 4/1/10 190,139
332,981 9.00%, 1/1/17 352,032
75,740 9.00%, 4/1/17 80,024
127,830 9.00%, 9/1/17 135,082
101,115 9.00%, 11/1/19 108,161
198,670 9.00%, 9/1/20 210,117
99,957 9.00%, 9/1/21 106,923
1,655,872 9.00%, 2/1/25 1,757,157
82,150 9.375%, 5/1/16 87,417
329,383 9.50%, 1/1/11 355,013
550,408 9.50%, 5/1/14 593,236
380,921 9.50%, 4/1/20 406,429
60,671 10.00%, 3/1/11 66,378
155,550 10.00%, 9/1/20 168,253
158,380 11.00%, 4/1/14 175,135
---------
4,791,496
---------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (59.1%) (3):
2,629,781 6.50%, 7/20/26 2,702,100
186,568 7.50%, 3/15/07 193,364
417,133 7.50%, 5/15/16 428,922
45,880 8.00%, 7/15/03 48,010
238,424 8.00%, 10/15/12 247,219
1,688,139 8.00%, 5/15 - 6/15/16 1,753,065
116,798 8.25%, 6/15/02 118,769
218,786 8.25%,1/15/12 227,139
611,902 8.25%, 8/15/15 635,912
404,914 8.50%, 12/15/11 422,123
866,532 8.50%, 9/15/16 903,216
811,268 8.50%, 1/15/17 845,594
202,874 8.75%, 7/15/02 214,539
202,147 8.75%, 5/15/03 212,843
741,966 8.75%, 5/15 - 11/15/06 782,088
290,089 8.75%, 2/15 - 3/15/07 302,861
199,791 8.75%, 11/15/09 208,711
617,330 8.75%, 6/15 - 12/15/11 645,210
416,048 8.75%, 8/15/19 437,335
165,640 9.00%, 10/15/04 175,300
348,200 9.00%, 4/15/06 368,544
274,911 9.00%, 10/15/07 288,170
326,992 9.00%, 12/15/08 351,619
149,265 9.00%, 11/15/09 156,657
1,730,670 9.00%, 6/15 - 10/15/11 1,816,183
178,047 9.00%, 1/15/12 186,770
2,824,526 9.00%, 4/20 - 12/20/16 3,034,713
5,132,883 9.00%, 1/15/17 5,507,887
65,876 9.00%, 5/15/18 69,861
574,596 9.00%, 11/15/19 619,628
1,094,946 9.00%, 7/20 - 10/20/21 1,172,504
50,897 9.00%, 10/15/27 55,080
99,292 9.25%, 4/15 - 9/15/01 105,306
335,455 9.25%, 3/15/05 356,212
409,029 9.25%, 11/15/11 430,837
270,271 9.25%, 4/15/12 284,756
44,699 9.50%, 1/15 - 1/20/05 47,473
192,838 9.50%, 1/15/06 205,556
2,514,199 9.50%, 1/15 - 8/15/10 2,708,887
585,679 9.50%, 1/15 - 3/15/11 618,826
895,139 9.50%, 11/20 - 12/15/16 961,747
1,398,700 9.50%, 8/20/17 1,522,002
489,561 9.50%, 5/15 -12/15/18 527,568
117,568 9.50%, 6/15/20 126,548
45,036 9.50%, 1/15/21 49,146
179,017 9.75%, 3/15 -10/15/99 183,182
56,976 9.75%, 5/15/01 60,677
179,278 9.75%, 11/15/02 191,003
145,083 9.75%, 7/15/03 154,467
45,211 9.75%, 3/15/04 48,174
392,491 9.75%, 8/15/05 418,576
215,974 9.75%, 2/15/06 230,883
2,243,878 9.75%, 8/15 - 12/15/10 2,404,409
949,220 9.75%, 11/15 - 12/15/12 1,017,720
207,330 10.00%, 8/15/02 221,308
170,555 10.00%, 5/15/04 181,895
995,764 10.00%, 7/15/05 1,063,134
143,337 10.00%, 1/15/06 152,838
157,984 10.00%, 11/15/08 169,285
130,153 10.00%, 5/15 - 11/15/09 140,012
192,568 10.00%, 6/15 - 7/15/10 206,477
141,593 10.00%, 1/15/11 151,901
32,168 10.00%, 9/15/16 34,969
189,619 10.00%, 2/20/20 204,534
61,648 10.25%, 11/15/00 65,717
82,277 10.25%, 2/15 - 4/15/01 87,702
74,959 10.25%, 8/15/04 80,008
<PAGE>
- ----------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
- ----------------------------------------------------------------
347,746 10.25%, 7/15/05 $371,121
160,778 10.25%, 5/15/09 171,919
2,948,652 10.25%, 3/15 - 8/15/12 3,165,604
1,050,992 10.25%, 2/15- 7/15/13 1,141,097
3,941 10.25%, 9/15/00 4,165
60,303 10.50%, 9/15/01 64,324
95,035 10.50%, 12/15/02 101,425
252,719 10.50%, 6/15/09 281,620
117,920 10.50%, 7/15/10 126,156
326,822 10.50%, 8/15 - 11/15/15 357,056
125,786 10.50%, 3/15 - 12/15/160 137,375
6,626 10.75%, 7/15 - 10/15/98 6,793
32,026 10.75%, 11/15/00 34,157
70,634 10.75%, 9/15/03 75,355
99,322 10.75%, 9/15/05 105,999
56,092 10.75%, 1/15/10 60,120
183,453 10.75%, 7/15 - 8/15/11 196,382
568,140 11.00%, 1/15 - 6/15/10 630,719
18,042 11.00%, 7/15/13 19,830
9,881 11.25%, 4/15 - 5/15/98 10,110
261,605 11.25%, 8/15 - 12/15/00 279,121
32,843 11.25%, 1/15/01 35,031
20,279 11.25%, 5/15/03 21,631
501,074 11.25%, 9/15 - 10/15/05 541,843
706,926 11.25%, 6/15 - 9/15/10 782,890
1,955,050 11.25%, 2/15 - 10/15/11 2,144,976
45,415 11.75%, 1/15/99 47,244
330,491 11.75%, 5/15/00 354,519
174,478 11.75%, 5/15 - 6/15/04 187,778
78,678 12.75%, 1/15/00 83,472
34,827 13.25%, 10/15/99 35,981
51,273 13.75%, 9/15/99 53,241
----------
52,174,725
----------
Total mortgage pass-through securities
(cost: $59,374,163) 59,565,932
----------
U.S. GOVERNMENT SECURITIES (14.2%) (2)
U.S. Treasury Note:
2,000,000 6.00%, 8/15/99 2,005,421
3,000,000 5.875%, 2/15/00 3,000,000
U.S. Treasury Coupon Strip:
4,000,000 6.925% Effective Yield on
Purchase Date, 11/15/04 2,600,120
3,500,000 6.54% Effective Yield on
Purchase Date, 5/15/09 1,686,790
13,000,000 U.S. Treasury Principal Strip, 7.08%
Effective Yield on Purchase Date,
2/15/19 3,265,340
----------
Total U.S. government securities
(cost: $12,084,172) 12,557,731
----------
CLOSED END MUTUAL FUNDS (3.6%) (2)
345,500 American Gov't. Income Fund $1,900,251
200,000 American Gov't. Income Portfolio 1,287,500
----------
Total closed end mutual funds 3,187,751
(cost: $3,008,604) ----------
COLLATERALIZED MORTGAGE OBLIGATIONS (13.6%)(2)
Federal Home Loan Mortgage Corporation,
241,019 1006-C, 9.15%, 10/15/20 256,783
1,000,000 6.50%, 11/15/21 957,350
Vendee Mortgage Trust:
3,000,000 Series 1996-2 1B, 6.75%, 9/15/09 3,013,843
200,000 Series 1996-2 1D, 6.75%, 11/15/15 200,208
2,250,000 Series 1996-2 1E, 6.75%, 5/15/20 2,218,040
4,300,000 Series 1992-2 1F, 7.00%, 2/15/18 4,342,221
1,000,000 Series 1992-1 2K, 7.75%, 5/15/08 1,055,566
----------
Total collateralized mortgage obligations
(cost: $11,789,795) 12,044,011
----------
SHORT-TERM SECURITIES (1.4%)(2)
1,203,484 Government Cash Mgmt Fund, 5.45% 1,203,484
(cost: $1,203,484) ----------
Total investments in securities
(cost: $87,460,218) (6) $88,558,909
===========
See accompanying notes to portfolios of investments on page 37.
<PAGE>
SIT BOND FUND REVIEW
SEPTEMBER 30, 1997
[PHOTO]
MICHAEL C. BRILLEY
SENIOR PORTFOLIO MANAGER
BRYCE A, DOTY, CFA
PORTFOLIO MANAGER
Dear Fellow Shareholders:
The Sit Bond Fund provided investors with a +7.66% return for the six
months ended September, 1997 compared to a +7.12% return for the Lehman
Aggregate Bond Index. For the twelve months ending September 30, 1997, the
Fund's total return of +10.56% substantially exceeded the +8.87% average return
for the Lipper Analytical Services Investment Grade Bond Fund universe ranking
it 20th of 191 funds. Also, the Fund's since inception performance ranked it
12th of 102 funds in its Lipper universe. As of September 30, 1997, the Fund's
30-day SEC yield was 5.72% and its 12-month distribution rate was 6.42%,
compared to 6.68% and 6.54%, respectively, at March 31, 1997.
U.S. Treasury yields fell sharply during the past six months providing
significant price appreciation in the Fund's longer duration U.S. Treasury,
asset-backed, and Real Estate Investment Trust (REIT) bond holdings. The average
return for those holdings was more than +10.00% for the past six months, making
them the highest return sectors in the Fund. Although the agency pass-through
sector produced high levels of interest income, it had the weakest total return
due to its relatively shorter duration.
Investment activity during the past six months initially involved
increasing the Fund's holdings of relatively high yielding agency pass-through
and corporate securities. Once yields had fallen substantially, the fund
shortened its effective duration by selling longer maturity Treasuries and
purchasing shorter maturity Treasuries.
The decline in interest rates reflected continued favorable inflation
reports and moderate economic growth forecasts. Consequently, investors reduced
expectations that the Federal Reserve would raise short-term interest rates this
year. However, steady economic growth coupled with tightening labor market
conditions should eventually lead to higher inflation. Therefore, we expect the
Federal Reserve to raise short-term interest rates in early 1998 which should
result in modestly higher intermediate and longer term yields. If bond yields
continue to fall, in the near term, we anticipate shortening the Fund's
effective duration.
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 9/30/97: $10.03 Per Share
3/31/97: $9.62 Per Share
Total Net Assets: $7.14 Million
30-Day SEC Yield: 5.72%
12-Month Distribution Rate: 6.42%
Average Maturity: 17.1 Years
Effective Duration: 4.9 Years (1)
(1) Effective 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%. Effective duration is based on current interest rates and
the Adviser's assumptions regarding the expected average life of individual
securities held in the portfolio.
PORTFOLIO STRUCTURE
(% of total net assets)
Corporate Bonds & Notes 25.8
Agency Pass-Through Securities 24.4
Asset-Backed Securities 15.9
U.S. Treasury 13.3
Collateralized Mortgage Obligations 10.1
Mutual Funds 4.2
Foreign Government 2.5
Trust Preferred Securities 2.1
Cash Equivalents 1.7
<PAGE>
<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
----- ------------ ------------- ----- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
3 Months 3.62% 3.10% 3.32% 3.62% 3.10% 3.32%
(unannualized)
1 Year 10.56 8.87 9.71 10.56 8.87 9.71
3 Year 9.62 8.51 9.49 31.71 27.77 31.27
Inception 6.93 5.79 6.57 29.28 24.08 27.65
(12/1/93)
</TABLE>
* As of 9/30/97
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]
SIT BOND FUND
LEHMAN AGGREGATE BOND INDEX
The sum of $10,000 invested at inception (12/1/93) and held until 9/30/97 would
have grown to $12,928 in the Fund or $12,765 in the Lehman Aggregate Bond Index
assuming reinvestment of all dividends and capital gains.
QUALITY RATINGS
(% of Net Assets)
LOWER OF MOODY'S OR S&P USED.
[PIE GRAPH]
Agency Backed Securities & CMO's 34.5%
U.S. Government 13.3%
AAA 15.8%
AA 0.8%
A 17.2%
BBB 16.7%
Other Assets & Liabilities 1.7%
<PAGE>
SIT BOND FUND
PORTFOLIO OF INVESTMENTS - SEPTEMBER 30, 1997 (UNAUDITED)
- ----------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
- ----------------------------------------------------------------
U.S. GOVERNMENT SECURITIES (13.3%) (2)
U.S. Treasury Notes:
700,000 5.875%, 2/15/00 $700,014
200,000 6.375%, 3/31/01 202,460
200,000 U.S. Treasury Coupon Strip, 7.14% Effective
Yield on Purchase Date, 2/15/19 50,236
--------
Total U.S. government securities 952,710
(cost: $945,011)
FOREIGN GOVERNMENT SECURITIES (2.5%)(2)
175,000 Korea Development Bank, 7.125%,
9/17/01 176,531
--------
Total foreign government securities
(cost: $174,495)
ASSET-BACKED SECURITIES (15.9%) (2)
Advanta Mortgage Loan Trust:
200,000 1995-3 A5, 7.37%, 2/25/27 202,738
250,000 1996-1 A7, 7.07%, 3/25/27 250,142
75,000 Cityscape Home Equity Loan Trust,
1996-3 A8, 7.65%, 9/25/25 77,257
249,998 ContiMortgage Home Equity Loan Trust:
1996-1 A7, 7.00%, 3/15/27 249,832
100,000 EQCC Home Equity Loan Trust,
Series 1996-1, 6.93%, 3/15/27 99,509
100,000 EquiVantage, 1996-3 A3, 7.70%, 9/25/27 104,157
75,000 Green Tree Corp., Series 1995-5,
7.25%, 9/15/26 77,232
75,000 Money Store Home Equity Mortgage,
7.265%, 7/15/38 76,078
---------
Total asset-backed securities 1,136,945
---------
(cost: $1,104,342)
CORPORATE BONDS (25.8%) (2)
50,000 AT&T, 8.625%, 12/01/2031 54,813
250,000 Ford Motor Credit Corp., 9.14%, 12/30/14 278,125
50,000 Ford Motor Corp., 8.875%, 11/15/22 54,688
309,000 Martin Marietta/Lockheed, 7.00%, 03/15/11 307,841
175,000 Price, Inc., 7.50%, 11/05/06 180,906
226,844 Salomon CPI Index Bond, 3.65%, 02/14/02 221,446
300,000 Security Capital Indl. Trust, 8.65%,
05/15/16 332,625
100,000 Summit Properties, Inc., 7.20%, 8/15/07 100,125
75,000 Toys R Us, Inc., 8.25%, 2/1/17 78,094
50,000 Trinet Corp. Realty Trust, 7.70%, 7/15/17 50,250
175,000 Washington Mutual Capital,
8.375%, 6/1/27 182,656
---------
Total corporate bonds 1,841,589
---------
(cost: $1,810,159)
MORTGAGE PASS-THROUGH SECURITIES (24.4%) (2) (3)
Federal Home Loan Mortgage Corp.:
45,032 10.25%, 9/1/09 $48,736
34,857 10.75%, 3/1/11 38,170
Government National Mortgage Association:
16,779 8.75%, 11/15/01 17,663
84,446 9.00%, 10/15/06 89,375
10,180 9.00%, 8/15/11 10,683
34,532 9.00%, 12/15/16 36,573
209,372 9.00%, 01/15/17 220,316
291,016 9.00%, 11/15/19 311,658
40,261 9.00%, 5/15/01 42,647
31,615 9.25%, 3/15/03 33,513
24,454 9.50%, 11/15/05 26,057
132,329 9.50%, 2/15/11 140,429
61,572 9.50%, 8/15/02 65,045
4,914 9.75%, 8/15/02 5,236
38,246 10.00%, 4/15/01 40,795
26,658 10.25%, 4/15/01 28,415
36,697 10.25%, 4/15/12 39,121
11,357 10.25%, 5/15/12 12,165
11,088 10.25%, 5/15/12 11,876
14,764 10.25%, 5/15/12 15,830
77,044 10.25%, 6/15/12 82,515
11,129 10.25%, 6/15/12 11,921
14,694 10.25%, 7/15/12 15,755
34,532 10.25%, 7/15/12 36,993
13,167 10.25%, 8/15/12 14,112
69,785 10.25%, 6/15/13 74,760
46,425 10.25%, 7/15/00 49,788
28,415 10.50%, 8/15/98 30,299
14,073 10.75%, 1/15/01 14,398
49,912 10.75%, 10/15/00 53,233
25,980 11.25%, 7/15/00 27,716
61,620 11.75%, 7/15/01 65,755
26,246 11.75%, 7/15/01 27,935
---------
Total mortgage pass-through securities 1,739,483
---------
(cost: $1,873,137)
COLLATERALIZED MORTGAGE OBLIGATIONS (10.1%) (2)
150,000 Federal Home Loan Mortgage Corp.,
(Remic) Series 1173, 6.50%, 11/15/21 143,603
250,000 Federal National Mortgage Assoc.,
1994-38, 6.65%, 12/25/23 246,507
<PAGE>
- ----------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
- ----------------------------------------------------------------
Vendee Mortgage Trust:
11,094 1992-1 2B, 7.75%, 9/15/10 $11,121
75,000 1996-2 1D, 6.75%, 11/15/15 75,078
100,000 1994-1 2E, 6.50%, 1/15/17 97,878
150,000 1996-2 1E, 6.75%, 5/15/20 147,869
---------
Total collateralized mortgage obligations 722,056
---------
(cost: $556,088)
MUTUAL FUNDS (4.2%) (2)
2,400 American Strategic Income Portfolio (I) 28,050
11,200 American Strategic Income Portfolio (II) 133,000
12,500 American Strategic Income Portfolio (III) 142,187
---------
Total mutual funds 303,237
---------
(cost: $274,616)
TRUST PREFERRED SECURITIES (2.1%) (2)
4,000 Allstate Financing I, 7.95%, 12/1/26 102,250
50,000 Allstate Financing II, 7.83%, 12/1/45 50,750
---------
Total trust preferred securities 153,000
---------
(cost: $149,320)
SHORT-TERM SECURITIES (0.7%) (2)
48,379 Cash Management Fund, 5.45% 48,379
---------
Total short-term securities
(cost: $48,379)
Total investments in securities
(cost: $6,935,547) (6) $7,073,930
==========
See accompanying notes to portfolios of investments on page 37.
<PAGE>
SIT TAX-FREE INCOME FUND REVIEW
SEPTEMBER 30, 1997
[PHOTO]
MICHAEL C. BRILLEY
SENIOR PORTFOLIO MANAGER
DEBRA A. SIT, CFA
PORTFOLIO MANAGER
Dear Fellow Shareholders:
The Fund provided shareholders a total return of +6.25% for the six months
and +9.46% for the year ended September 30, 1997, compared with +4.63% and
+6.67%, respectively, for the Lehman 5-Year Municipal Index. The Fund's
quarterly return of +3.13% ranked #91 of 247 general municipal funds tracked by
Lipper Analytical Services, which provided an average return of +3.03%. The
Fund's returns ranked #39 of 233 funds over the past year, #57 of 181 funds over
the past 3 years, #13 of 110 funds for the past 5 years, and #43 of 76 funds
since inception.
The Fund's price per share increased $0.34 during the six month period to
$10.32, and reached an all time high of $10.34 on July 31st. The Fund's price
has remained within a range of 4.0% year-to-date. Reflecting the continued rally
in bond prices, the Fund's 30-day SEC yield decreased from 5.47% to 5.05% during
the period, while its 12-month distribution rate decreased only slightly from
5.64% to 5.51%.
Fund assets increased from $342.5 million to $435.5 million during the
quarter. Transportation bonds decreased from 6.8% to 2.5% as significant
holdings in an Arapahoe, Colorado toll road issue were advanced refunded and
subsequently sold. Multifamily housing bonds decreased from 34.3% to 29.1% as
new cash flow was primarily invested in other sectors. Single family housing
bonds decreased from 17.3% to 15.7%. Purchases were made in health care, which
increased from 19.6% to 23.7%, and in other revenue bonds, which increased from
4.2% to 7.0%. In addition, the Fund established a 4.0% position in several
closed end municipal bond funds which trade at discounts to their net asset
values. The Fund's weighting in securities rated "A" or better increased from
61.7% to 63.3%. Cash increased from 2.6% to 4.5%.
While the Fund's average maturity remained relatively unchanged at 18.0
years, its duration to estimated average life increased from 7.3 years as of
March 31st to 7.6 years as of September 30th. Likewise, the Fund's implied
duration, which more closely represents the Fund's historical price sensitivity
to changes in interest rates, increased from 4.6 years to 5.1 years. This
lengthening reflects the Fund's continued efforts to increase call protection as
interest rates decline. We intend to continue seeking investment opportunities
that provide a high relative level of current income.
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 9/30/97: $10.32 Per Share
3/31/97: $9.98 Per Share
Total Net Assets: $435.53 Million
30-Day SEC Yield: 5.05%
Tax Equivalent Yield: 8.36% (1)
12-Month Distribution Rate: 5.51%
Average Maturity: 18.0 Years
Duration to Estimated Avg. Life: 7.6 Years (2)
Implied Duration: 5.1 Years (2)
(1) For individuals in the 39.6% federal tax bracket.
(2) See page 19.
PORTFOLIO STRUCTURE
(% of total net assets)
Multifamily Mortgage Revenue 29.1
Hospital/Health Care Revenue 23.7
Single Family Mortgage Revenue 15.7
Other Revenue 7.0
Industrial Revenue/Pollution Control 4.7
Mutual Funds 4.0
Escrowed to Maturity/Pre-Refund 2.7
Transportation 2.5
Municipal Lease Rental 1.5
Education/Student Loan 1.5
Public Facilities 1.0
General Obligation 0.8
Sales Tax Revenue 0.7
Utility 0.6
Cash & Cash Equivalents 4.5
<PAGE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS* CUMULATIVE TOTAL RETURNS*
------------------------------------------- -------------------------------------------
Tax-Free Lipper General Lehman Tax-Free Lipper General Lehman
Income Muni. Bond 5-Year Muni. Income Muni. Bond 5-Year Muni.
Fund Fund Avg. Bond Index Fund Fund Avg. Bond Index
----- ------------ ------------- ----- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
3 Months 3.13% 3.03% 2.13% 3.13% 3.03% 2.13%
(unannualized)
1 Year 9.46 8.59 6.67 9.46 8.59 6.67
3 Years 8.41 8.02 6.61 27.41 26.08 21.16
5 Years 7.35 6.63 5.79 42.54 37.87 32.51
Inception 7.74 7.87 7.09 95.80 97.89 85.40
(9/29/88)
</TABLE>
* As of 9/30/97
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.
(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%,
a portfolio with a duration of 5 years would be expected to experience a price
change of 5%. Estimated average life duration is based on current interest rates
and the Adviser's assumptions regarding the expected average life of individual
securities held in the portfolio. Implied duration is calculated based on
historical price changes of securities held by the Fund. The Adviser believes
that the portfolio's implied duration is a more accurate estimate of price
sensitivity provided interest rates remain within their historical range. If
interest rates exceed the historical range, the estimated average life duration
may be a more accurate estimate of price sensitivity.
GROWTH OF $10,000
[LINE GRAPH]
SIT TAX-FREE INCOME FUND
LEHMAN 5-YEAR MINI BOND INDEX
The sum of $10,000 invested at inception (9/29/88) and held until 9/30/97 would
have grown to $19,580 in the Fund or $18,540 in the Lehman 5-Year Municipal Bond
Index assuming reinvestment of all dividends and capital gains.
QUALITY RATINGS
(% of Net Assets)
LOWER OF MOODY'S, S&P, FITCH OR DUFF & PHELPS RATINGS USED.
[PIE GRAPH]
AAA 14.7%
AA 10.9%
A 33.2%
BBB 36.7%
Other Assets & Liabilities 4.5%
<PAGE>
SIT TAX-FREE INCOME FUND
PORTFOLIO OF INVESTMENTS - SEPTEMBER 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
- --------------------------------------------------------------------------------------------------------------------------
MUNICIPAL BONDS (91.7%) (2)
ALASKA (0.8%)
Alaska HFC:
<S> <C> <C>
7,000,000 Gen. Mtg. Rev. 1997 Series A, Zero Coupon, 6.15% Effective Yield on Purchase Date, 12/1/17 $2,127,090
5,680,000 Mtg. Rev. 1996 Series A, Zero Coupon, 6.45% Effective Yield on Purchase Date, 12/1/27 881,934
345,000 AK Industrial Dev. & Export Auth. Rev. Refunding Revolving Fund Series 1993A,5.60%, 4/1/03 358,041
----------
3,367,065
----------
ARIZONA (2.8%)
AZ Hlth. Fac. Auth. Hosp. System Refunding Rev. Series 1991 (Phoenix Mem. Hosp.):
1,120,000 8.00%, 6/1/06 1,224,966
1,500,000 8.125%, 6/1/12 1,640,820
770,000 8.20%, 6/1/21 844,267
Maricopa Co. Industrial Dev. Auth. Multifamily Hsg. Rev.:
3,000,000 Series 1995A, 6.50%, 10/1/25 3,116,160
565,000 Series 1995B, 7.15%, 10/1/25 575,492
1,400,000 Senior Series 1996A (Advantage Pt. Arrowood Village), 6.50%, 7/1/16 1,471,708
2,000,000 Series 1997A (Mercy Bond Prop. AZ-I Proj.), 6.25%, 7/1/27 2,034,580
325,000 Series 1997B (Mercy Bond Prop. AZ-I Proj.), 7.25%, 1/1/17 331,474
1,070,000 Valley HDC Phoenix Hsg. Rev. 1979 (Roosevelt Plaza) (Section 8), 8.00%, 10/1/20 1,093,658
----------
12,333,125
----------
ARKANSAS (1.2%)
Drew Co. Public Fac. Bd. Single Family Mtg. Rev. Refunding:
167,574 Series 1993B, 7.75%, 8/1/11 179,043
339,448 Series 1993-A2 (FNMA backed), 7.90%, 8/1/11 365,664
256,322 Jacksonville Res. Hsg. Fac. Bd. Single Family Mtg. Rev. Refunding Series 1993B,7.75%, 1/1/11 277,120
229,266 Lonoke Co. Res. Hsg. Fac. Bd. Single Family Mtg. Rev. Refunding 1993B, 7.375%, 4/1/11 247,302
2,025,000 Maumelle HDC First Lien Rev. Refunding 1992 Series A (Section 8), 7.875%, 7/1/09 2,177,199
1,665,000 Saline Co. Res. Hsg. Fac. Bd. Single Family Mtg. Rev. Refunding Series 1992, 7.875%, 3/1/11 1,779,719
----------
5,026,047
----------
CALIFORNIA (4.5%)
1,200,000 Bell Cmnty. Hsg. Auth. Rev. Series 1995A (Mobilehomes Park Acquisition Proj.), 6.40%, 10/1/15 1,250,364
1,000,000 Chula Vista Redev. Agency Refunding Tax Allocation Senior Series 1994A (Bayfront-Town
Center Redev. Proj.), 7.625%, 9/1/24 1,153,490
Corona Single Family Mtg Rev.:
1,200,000 Senior Series 1996A, 6.05%, 5/1/27 1,244,088
800,000 Subordinate Series 1996B, 6.30%, 11/1/28 831,000
Foothill / Eastern Transportation Corridor Agy. Toll Rd. Rev Series 1995A Sr. Lien:
5,000,000 Zero Coupon, 6.04% Effective Yield on Purchase Date, 1/1/15 1,880,250
18,770,000 Zero Coupon, 6.45% Effective Yield on Purchase Date, 1/1/26 3,773,145
2,000,000 Zero Coupon Convertible Bond, 6.10% Effective Yield on Purchase Date, 1/1/07 1,423,720
5,000,000 Zero Coupon Convertible Bond, 7.10% Effective Yield on Purchase Date, 1/1/11 3,668,500
2,000,000 Glendale Hosp. Rev. Refunding Series 1994 (Verdugo Hills Hosp.), 8.00%, 1/1/12 2,394,400
15,000 Sacramento Public Television Fac. Rev. 1989 Series A (KVIE inc.) (LOC Wells Fargo & Co.),
7.50%, 7/1/20 15,518
1,000,000 San Bernardino Assoc. Communities Fin. Auth. Certificates of Participation Series 1997A
(Granada Cmty. Hosp. Proj.), 6.25%, 5/1/09 1,050,450
990,000 Upland Hsg. Auth. Multifamily Rev. 1990 Issue A, 7.85%, 7/1/20 1,024,541
----------
19,709,466
----------
COLORADO (3.1%)
Adams Co. HA Mtg. Rev. :
1,000,000 Series 1996 (Village of Greenbriar Proj.), 6.75%, 7/1/21 1,053,810
1,375,000 Series 1997 (Aztec Villa Apts. Proj.), 5.80%, 12/1/22 1,379,634
<PAGE>
- --------------------------------------------------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
- --------------------------------------------------------------------------------------------------------------------------
Arapahoe Co. Cap. Improvement Tr. Fund Highway Rev. (E-470 Project) Senior Capital
9,500,000 Appreciation Prerefunded Zero Coupon, 5.99% Effective Yield on Purchase Date, 8/31/11 $4,341,500
820,000 Aurora Single Family Mtg. Rev. Refunding Series 1993B, 7.50%, 5/1/11 859,647
CO HFA Single Family Program Senior:
2,200,000 Series 1996B-2, 7.45%, 11/1/27 2,505,558
1,000,000 Series 1997B-3, 6.80%, 11/1/28 1,110,120
290,000 LaPlata Co. Southwestern CO Single Family Mtg. Participation Rev. Refunding 1991 Series A,
7.375%, 9/1/11 304,990
395,000 Thornton Single Family Mtg. Rev. Refunding 1992 Series A, 8.05%, 8/1/09 422,476
390,000 Vail Single Family Mtg. Rev. Refunding Series 1992, 8.125%, 6/1/10 421,840
1,195,000 Westminster Multifamily Hsg. Rev. Refunding Series 1992 (Ironwood at the Ranch Proj.),
7.45%, 12/1/10 1,243,206
----------
13,642,781
----------
CONNECTICUT (3.2%)
CT Dev. Auth. First Mtg. Gross Rev. Hlth. Care. Proj. Series 1997 (Church Homes Inc. Avery Proj.):
640,000 5.70%, 4/1/12 644,294
3,000,000 5.80%, 4/1/21 3,012,480
1,000,000 CT Hlth. & Educ. Fac. Auth. Rev. Series 1990C (St. Mary's Hosp.) Prerefunded, 7.375%, 7/1/20 1,100,570
5,000,000 CT HFA Hsg. Mtg. Fin. Prgm. Series 1996A3, 5.95%, 5/15/17 5,134,300
525,000 CT Resource Recovery Auth. Series 1985A (Bridgeport Resco Proj.), 7.625%, 1/1/09 546,788
3,500,000 Mashantucket (Western) Pequot Tribe Subordinated Special Rev., Series 1997B 5.75%, 9/1/18 3,502,800
----------
13,941,232
----------
DELAWARE (0.3%)
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 1,315,714
----------
DISTRICT OF COLUMBIA (0.4%)
1,500,000 District of Columbia HFA Multifamily Hsg. Refunding Rev. Series 1992C (FHA
insured) (Chastleton Dev.), 6.95%, 7/1/27 1,572,045
----------
GEORGIA (0.9%)
800,000 Cobb Co. HA Multifamily Rev. Refunding Series 1992A (Signature Place Project),6.875%, 10/1/17 833,064
Dekalb Co. Hsg. Auth. Multifamily Hsg. Rev. (Regency Woods I & II):
1,700,000 Senior Series 1996A, 6.375%, 1/1/11 1,765,246
1,365,000 Subordinate Series 1996C, 7.25%, 1/1/26 1,384,479
----------
3,982,789
----------
HAWAII (0.3%)
1,240,000 Honolulu Mtg. Rev. Ref. Series 1996A (Hale-Pauahi Proj.)(FHA insured)
(MBIA insured), 6.80%, 7/1/28 1,318,553
----------
ILLINOIS (10.5%)
2,560,000 Chicago Metropolitan HDC Mtg. Rev. Refunding Series 1992A
(FHA insured) (Section 8), 6.70%, 7/1/12 2,703,002
3,590,000 Chicago Res. Mtg. Rev. Refunding Series 1992B (MBIA insured) Zero Coupon, 7.30% Effective
Yield on Purchase Date, 10/1/09 1,573,784
2,000,000 Collinsville (City of) Madison Co. Industrial Dev. Rev. Refunding (Drury Inn-Collinsville Proj.)
Series 1993, 6.00%, 11/1/04 2,077,040
1,790,000 IL DFA Elderly Hsg. Rev. Refunding Series 1995A (Pontiac Towers Proj.)
(Section 8), 6.65%, 10/1/09 1,885,139
IL DFA Refunding & New Money Rev. Series 1997A (Cmty. Rehab. Providers Fac. Acquisition Program):
1,000,000 5.70%, 7/1/07 1,034,380
8,575,000 6.00%, 7/1/15 8,748,044
1,250,000 IL Educ. Fac. Auth. Rev. Series 1997 (Augustana College)(Connie Lee insured), 5.875%, 10/1/17 1,283,763
3,000,000 IL HDA Elderly Hsg. Rev. Series 1992C (Village Ctr.) (Section 8), 6.85%, 3/1/20 3,143,400
</TABLE>
See accompanying notes to portfolios of investments on page 37.
<PAGE>
SIT TAX-FREE INCOME FUND
PORTFOLIO OF INVESTMENTS - SEPTEMBER 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
IL HDA Multifamily Hsg. Rev.:
Refunding 1992 Series A (Section 8):
2,150,000 6.65%, 7/1/04 $2,280,527
1,545,000 7.00%, 7/1/10 1,647,743
Refunding 1991 Series C (Section 8):
260,000 7.35%, 7/1/11 274,511
100,000 7.40%, 7/1/23 104,882
IL Hlth. Fac. Auth. Rev.:
Refunding Series 1993 (Lutheran Social Svcs. IL):
610,000 5.70%, 8/15/00 619,797
475,000 5.80%, 8/15/01 484,685
525,000 6.00%, 8/15/03 540,372
545,000 6.10%, 8/15/04 563,470
1,000,000 7.625%, 7/1/10 1,114,890
1,350,000 Refunding Series 1992 (Mercy Ctr. for Hlth. Care Svcs.), 6.625%, 10/1/12 1,428,449
5,740,000 Refunding Series 1992 (Galesburg Cottage Hosp.) (Asset Guaranty insured), 6.25%, 5/1/11 6,088,016
1,000,000 Refunding Series 1994 (Passavant Memorial Area Hospital Assn.), 5.95%, 10/1/11 1,040,560
1,000,000 Refunding Series 1994 (Friendship Village Schamburg), 6.25%, 12/1/04 1,061,160
Series 1996 (St. Elizabeth's Hosp. of Chicago, Inc.):
700,000 6.25%, 7/1/10 724,353
1,215,000 6.25%, 7/1/16 1,253,248
2,000,000 Roselle Multifamily Hsg. Rev. Refunding Series 1994A (GNMA collateralized)
(Waterbury Apts.) (FHA insured), 7.00%, 1/1/25 2,151,820
1,140,000 Springfield Community Improvement Rev. 1985 (Garden Court Proj. - FHA insured)
(Section 8) (MBIA insured), 10.50%, 4/1/26 1,247,559
1,110,000 Urbana Res. Mtg. Rev. Refunding 1991 Series B Zero Coupon,
7.39% Effective Yield on Purchase Date, 3/1/07 567,010
----------
45,641,604
----------
INDIANA (9.3%)
2,000,000 East Allen Woodlan School Bldg. First Mtg. Series 1997 (AMBAC insured), 5.50%, 1/15/17 1,999,820
1,000,000 East Chicago Multi School Bldg. Corp. First Mtg. Series 1996, 6.50%, 1/15/16 1,076,250
1,800,000 Elkhart Co. Hosp. Auth. Rev. Series 1992 (Goshen Hosp. Proj.), 7.25%, 7/1/05 1,954,080
2,165,000 Elkhart HFC Multifamily Mtg. Rev. Series 1996A (Section 8 Assisted
Proj.) (Stratford Commons), 6.00%, 11/1/10 2,217,696
IN Bond Bank Special Prgm.:
1,095,000 Series 1993B (Gary Sanitary Dist.), 6.15%, 2/1/08 1,178,100
2,130,000 Series 1997C (Pittsboro Wastewater Treatment Plant Proj.), 5.70%, 8/1/17 2,153,579
1,500,000 Series 1997B (Hendrick's Co. Redev. Auth.-Pittsboro Proj.)(LOC Canadian Imperial Bank),
6.20%, 2/1/23 1,583,670
2,850,000 IN DFA Educ. Fac. Rev. Series 1997 (Park Tudor Foundation Proj.), 6.00%, 6/1/22 2,956,334
IN Educ. Fac. Auth. Educ. Fac. Rev. Series 1992 (Manchester College Proj.):
250,000 6.50%, 10/1/05 266,768
305,000 6.60%, 10/1/06 326,088
1,000,000 6.85%, 10/1/18 1,069,060
IN Hlth. Fac. Fin. Auth. Hosp. Rev.:
Series 1991 (Jackson Co. Schneck Mem. Hosp. Proj.):
1,200,000 7.50%, 2/15/05 1,311,312
2,000,000 7.50%, 2/15/22 2,166,340
Series 1992 (Fayette Mem. Hosp. Proj.):
250,000 7.00%, 10/1/02 265,300
295,000 7.10%, 10/1/03 316,506
315,000 7.20%, 10/1/04 341,205
340,000 7.25%, 10/1/05 369,964
<PAGE>
- --------------------------------------------------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
- --------------------------------------------------------------------------------------------------------------------------
365,000 7.25%, 10/1/06 $ 396,332
390,000 7.30%, 10/1/07 424,320
420,000 7.30%, 10/1/08 456,960
Series 1992 (Floyd Mem. Hosp. Proj.):
460,000 6.75%, 2/15/06 496,023
595,000 6.80%, 2/15/07 639,833
2,000,000 Series 1992 (Mem. Hosp. & Hlth. Care Ctr. Proj.), 7.35%, 3/1/12 2,166,560
830,000 IN HFA Home Mtg. Prog. 1990 Series F1 (GNMA collateralized), 7.50%, 1/1/16 877,352
900,000 IN HFA Single Family Mtg. Rev. Series 1997C-2 (GNMA/FNMA collateralized), 5.70%, 7/1/16 914,202
2,750,000 Indianapolis Econ. Dev. Refunding & Imprv. Rev. Series 1992 (Natl. Benevolent
Assn.-Robin Run Village Proj.), 7.25%, 10/1/10 2,986,059
Indianapolis Econ. Dev. Rev. (Willowbrook Apts. Proj.):
2,000,000 Senior Series 1996A, 6.50%, 7/1/16 2,076,560
1,360,000 Subordinate Series 1996C, 7.125%, 7/1/26 1,398,352
4,000,000 La Porte Co. Hosp. Auth. Fac. Rev. Refunding Series 1993, 6.00%, 3/1/23 4,052,280
895,000 Marion HC Mtg. Rev. Refunding Series 1994 (Hilltop Towers Project) (Section 8), 6.90%, 10/1/10 944,386
4,120,000 New Castle Econ. Dev. Rev. Series 1988C Escrowed to Maturity Zero Coupon, 6.20% Effective
Yield on Purchase Date, 3/1/18 1,297,306
----------
40,678,597
----------
IOWA (2.8%)
1,500,000 IA Fin. Auth. SF Mtg. Series 1997A, 5.80%, 7/1/16 1,532,190
1,500,000 IA Fin. Auth. Small Business Dev. Refunding Rev. Series 1992 (University Civic Ctr. Court
Assn. Proj.), 7.40%, 3/1/17 1,648,755
IA Fin. Auth. Hlth. Fac. Rev. Series 1997 (Natl. Benevolent Assn.- Ramsey Home Proj.):
1,430,000 6.15%, 5/1/17 1,480,622
2,420,000 6.35%, 5/1/27 2,549,809
1,130,000 IA Fin. Auth. Multifamily Hsg. Rev. Refunding Series 1997A (Kingswood Apts. Proj.)
(GNMA-collateralized), 6.15%, 5/1/32 1,163,923
1,500,000 Ottumwa Hosp. Rev. Refunding Series 1993 (Ottumwa Regional Hlth. Ctr.), 6.00%, 10/1/10 1,530,525
Polk Co. Hlth. Svcs. Residential Care Fac. Rev. Series 1991:
460,000 7.25%, 2/1/06 500,682
1,500,000 7.50%, 2/1/16 1,646,025
----------
12,052,531
----------
KANSAS (0.3%)
275,000 Geary Co. Single Family Mtg. Rev. 1980 (FGIC insured), 10.75%, 4/1/12 285,087
3,755,000 Kansas City Single Family Mtg. Rev. Series 1982A Zero Coupon, 11.23% Effective Yield on
Purchase Date, 11/1/14 602,601
2,170,000 Olathe & Labette Cos. Mtg. Loan Rev. 1991 Series B (GNMA collateralized) Zero Coupon, 7.56%
Effective Yield on Purchase Date, 2/1/23 354,969
----------
1,242,657
----------
KENTUCKY (0.9%)
1,500,000 Jefferson Co. First Mtg. Rev. Series 1994 (Christian Church Homes Proj.), 6.00%, 11/15/09 1,543,485
1,200,000 KY DFA Hosp. Rev. Series 1989 (Sisters of Charity of Nazareth Hlth. Corp.) (BIG insured),
6.25%, 11/1/19 1,244,700
1,000,000 Pike Co. Mtg. Rev. Refunding Series 1997 ) (Phelps Regional Hlth. Proj.)(GNMA collateralized)
5.65%, 9/20/27 999,980
----------
3,788,165
----------
LOUISIANA (4.2%)
715,000 Calcasieu Parish Industrial Dev. Rev. 1975 (Cities Service Co. Proj.), 7.80%, 12/1/05 718,246
485,000 Calcasieu Parish Public Trust Auth. Mtg. Rev. Refunding 1992 Series B, 6.875%, 11/1/12 514,391
5,650,000 Denham Springs/Livingston HMFA Residual Rev. Series 1992C Zero Coupon,
7.65% Effective Yield on Purchase Date, 7/10/14 1,653,868
</TABLE>
See accompanying notes to portfolios of investments on page 37.
<PAGE>
SIT TAX-FREE INCOME FUND
PORTFOLIO OF INVESTMENTS - SEPTEMBER 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
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 $1,190,520
1,390,000 LA HFA Residual Lien Refunding Mtg. Rev. Series 1992, 7.375%, 9/1/13 1,461,543
317,123 LA PFA Single Family Mtg. Purchase Rev. Series 1992 (Lafayette PTFA Mtg. Acquisition),
7.50%, 10/1/15 340,520
LA PFA Rev. Multifamily Hsg. Rev.:
1,290,000 Series 1991 (VOA Hsg. Corp.) (Asset Guaranty insured), 7.25%, 11/1/04 1,395,651
3,000,000 Series 1991 (VOA Natl. Hsg. Corp.) (Asset Guaranty insured), 7.75%, 11/1/16 3,214,350
LA PFA Single Family Mtg. Rev. Refunding:
1,000,000 Series 1997B (GNMA collateralized), 5.625%, 8/1/17 1,006,360
3,080,000 Series 1997B (GNMA collateralized), 5.75%, 8/1/31 3,098,110
830,000 Series Sr. Lien 1994A (VOA Willows Affordable Hsg. Corp.), 7.00%, 6/1/24 895,769
1,000,000 Monroe - McKeen Plaza HDC Multifamily Hsg. Rev. Refunding Series
1994A (Murray Plaza Apts.) (Section 8), 6.80%, 2/1/12 1,045,770
1,550,000 Orleans Levee Dist. Improvement Serial and Term Receipts Series 1995A (FSA insured),
5.95%, 11/1/14 1,657,462
----------
18,192,560
----------
MAINE (0.0%)
190,000 ME HA Mtg. Purchase 1987 Series A-2, 7.65%, 11/15/15 194,137
----------
MASSACHUSETTS (0.3%)
1,000,000 Boston Industrial Dev. Fin. Auth. Series 1997A (FHA insured-Boston
Alzheimers Center Proj.), 5.90%, 2/1/22 1,026,530
MA Hlth. & Educ. Fac. Auth. Rev.:
100,000 Series 1982 (Malden Hosp.) (FHA insured), 9.50%, 8/1/08 100,343
----------
1,126,873
----------
MICHIGAN (4.2%)
1,305,000 Detroit Econ. Dev. Corp. Limited Obligation Rev. Refunding Series 1992 (E.H. Associates
Ltd. Partnership Proj.), 7.00%, 6/1/12 1,390,908
4,500,000 MI HDA Rental Hsg. Rev. Series 1992A, 6.60%, 4/1/12 4,735,935
700,000 MI State Hosp. Fin. Auth. Rev. Series 1997 (Presbyterian Vlgs. of Mich. Oblig. Group Proj.),
6.375%, 1/1/15 726,397
1,000,000 MI Strategic Fund Ltd. Obligation Rev. Series 1997A (NSF Intl. Proj.) (LOC First Bank of America),
5.75%, 8/1/19 1,018,090
1,300,000 Romulus Econ. Dev. Corp. Ltd. Obligation Rev. Refunding Series 1992 Escrowed to
Maturity (Romulus HIR Ltd. Partnership Proj.) (ITT Lyndon), 7.00%, 11/1/15 1,412,788
4,000,000 Saginaw Hosp. Fin. Auth. Rev. Refunding Series 1989 (Saginaw Gen. Hosp.), 7.625%, 10/1/19 4,227,680
1,660,000 Tri City Village HC Mtg. Refunding Multifamily Tri City Apts. Series 1992A (Section 8)
(FNMA backed), 7.75%, 8/15/23 1,809,832
2,750,000 Troy City EDC Econ. Dev. Rev. Refunding Series 1992 (Drury Inn-Troy Proj.)
(Lincoln Natl. Corp.), 6.75%, 10/1/12 2,950,228
----------
18,271,858
----------
MINNESOTA (1.8%)
1,000,000 Carver Co. HRA Multifamily Rev. Series 1997A (Waybury Apts. Proj.), 5.875%, 8/1/27 1,006,270
1,430,000 Dakota Co. HRA Multifamily Mtg. Rev. Refunding Series 1997A
(Park Place Apts. Proj.)(GNMA Collateralized), 6.875%, 2/20/32 1,547,803
740,000 Hopkins Multifamily Hsg. Rev. Series 1996 (Hopkins Renaissance Proj.)(Section 8), 6.375%, 4/1/20 774,721
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 1,771,610
2,500,000 Plymouth Multifamily Hsg. Dev. Rev. Refunding Series 1996A (GNMA collateralized)
(Fox Forest Apts. Proj.), 8.05%, 6/20/31 2,888,550
----------
7,988,954
----------
<PAGE>
- --------------------------------------------------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
- --------------------------------------------------------------------------------------------------------------------------
MISSISSIPPI (1.0%)
Mississippi Hosp. Equip. and Fac. Auth. Rev. (Rush Medical Fdn. Proj.):
1,000,000 Refunding Series 1997A, 6.00%, 1/1/16 $1,003,540
1,000,000 Series 1997B, 6.00%, 1/1/16 1,003,540
6,435,000 MS Home Corp. Residual Rev. Series 1992-II Zero Coupon, 7.38% Effective Yield on Purchase
Date, 4/15/12 2,344,077
----------
4,351,157
----------
MISSOURI (0.3%)
1,085,000 St. Louis Co. Industrial Dev. Auth. Hsg. Rev. Refunding Series 1995 (South Point Apts. and
Hunter's Ridge Apts. Proj.), 7.875%, 1/1/25 1,168,925
60,000 St. Louis Co. Single Family Res. Mtg. Series 1984 (MBIA insured), 9.75%, 4/1/10 62,996
----------
1,231,921
----------
NEVADA (1.6%)
500,000 Humboldt General Hosp. Dist. Series 1993, 6.125%, 6/1/13 512,385
1,645,000 NV Hsg. Div. SF Program Sr. Series 1995A1, 6.45%, 10/1/18 1,723,499
Reno Redev. Agency Subordinate Tax Allocation and Rev. Refunding Series 1995A:
400,000 6.00%, 6/1/08 421,316
1,000,000 6.125%, 6/1/12 1,039,260
3,000,000 Reno-Sparks Indian Colony Public Fac. Fin. Auth. Sales & Excise Tax Rev.
Series 1995A, 7.50%, 7/1/07 3,117,960
----------
6,814,420
----------
NEW HAMPSHIRE (2.5%)
NH Higher Educ. & Hlth. Fac. Auth. Rev.:
540,000 Series 1991 (St. Joseph's Hosp.), 7.25%, 1/1/02 577,660
620,000 Series 1997 (Catholic Charities Issue), 5.75%, 8/1/12 620,211
6,500,000 Series 1993 (Nashua Memorial Hosp. Proj.), 6.00%, 10/1/23 6,636,435
2,500,000 Series 1997 (Androscoggin Valley Hosp.Proj.), 5.80%, 11/1/27 2,541,150
3,480,000 NH HFA Single Family Res. Mtg. 1982 Series A Zero Coupon, 11.75% Effective Yield on
Purchase Date, 1/1/14 700,524
----------
11,075,980
----------
NEW JERSEY (0.4%)
NJ EDA Rev. Refunding Bonds Series 1997A (Harrogate, Inc. Proj.):
400,000 5.55%, 12/1/07 408,760
1,225,000 5.875%, 12/1/26 1,239,651
----------
1,648,411
----------
NEW MEXICO (0.7%)
375,000 Chaves Co. Hosp. Rev. Series 1992 (Eastern NM Med. Ctr. Proj.), 7.25%, 12/1/10 406,279
664,000 Hobbs Single Family Mtg. Rev. Refunding Series 1992, 8.75%, 7/1/11 742,989
1,310,000 New Mexico MFA Single Family Mtg. Purchase Refunding Senior Series 1992-A2, 6.85%, 7/1/12 1,382,063
525,000 Sante Fe Educ. Fac. Imprv. & Refunding Rev. Series 1997 (College of Sante Fe Proj.), 6.00%, 10/1/13 542,136
----------
3,073,467
----------
NEW YORK (1.1%)
1,300,000 Lockport HDC Mtg. Rev. Refunding Series 1997A (Urban Park Tower Apts. Section 8 Proj.),
6.00%, 10/1/18 1,307,735
3,310,000 New York City HDC Multifamily Hsg. Rev. Series 1993B (FHA insured)
(Section 8), 5.85%, 5/1/26 3,370,606
----------
4,678,341
----------
NORTH DAKOTA (1.7%)
1,835,000 Oliver Co. Pollution Control Rev. Series 1976 (Sq. Butte Elec. Coop. Proj.), 7.00%, 12/31/10
1,846,395 Ward Co. Hlth. Care Fac. Rev.:
1,370,000 Series 1994 (St. Joseph Hosp.), 8.00%, 11/15/04 1,493,122
2,000,000 Series 1994 (St. Joseph Hosp.), 8.875%, 11/15/14 2,279,900
</TABLE>
<PAGE>
SIT TAX-FREE INCOME FUND
PORTFOLIO OF INVESTMENTS - SEPTEMBER 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1,600,000 Series 1991A (St. Joseph Hosp.), 7.50%, 11/1/15 $1,668,800
----------
7,288,217
----------
OHIO (1.4%)
Akron Certificates of Participation Series 1996 (Akron Municipal Baseball Stadium Proj.):
3,000,000 Zero Coupon Convertible, 6.504% Effective Yield on Purchase Date, 12/1/16 2,511,060
1,000,000 Zero Coupon Convertible, 6.15% Effective Yield on Purchase Date, 12/1/07 841,740
1,000,000 Franklin Co. Hlth. Care Fac. Rev. Refunding Series 1997 (Friendship Village of Dublin Proj.), 5.50%,
11/1/16 980,050
1,570,000 OH Capital Corp. Hsg. Mtg. Rev. Refunding Series 1995G (FHA insured)(Section 8)
(MBIA insured), 6.35%, 7/1/22 1,645,375
----------
5,978,225
----------
OKLAHOMA (2.5%)
1,360,000 Cleveland Co. Home Loan Auth. Single Family Mtg. Rev. Refunding Series 1991, 8.00%, 8/1/12 1,452,725
Midwest City Mem. Hosp. Auth. Hosp. Rev. Series 1992:
115,000 7.25%, 4/1/06 Prerefunded 130,248
365,000 8.75%, 4/1/03 Prerefunded 435,171
325,000 10.00%, 4/1/01 Escrowed to Maturity 383,546
345,000 10.00%, 4/1/02 Escrowed to Maturity 421,880
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, 6/1/11 734,880
OK Ind. Auth. Hosp. Rev. Bonds Series 1997A (Deaconess Hlth. Care Proj.):
2,000,000 5.50%, 10/1/12 1,963,960
2,000,000 5.75%, 10/1/17 1,980,080
515,000 Payne Co. Home Loan Auth. Single Family Rev. Refunding Series 1993A, 8.625%, 3/1/11 552,554
2,540,000 Tulsa Public Facilities Auth. Recreational Fac. Rev. Series 1985, 6.20%, 11/1/12 2,656,332
----------
10,711,376
----------
PENNSYLVANIA (4.9%)
1,000,000 Alleghany Cnty. Hosp. Dev., 5.875%, 4/1/11 1,008,400
2,875,000 Cumberland Co. Muni Auth. Rev. Series 1996 (Presbyterian Homes Proj.), 6.00%, 12/1/26 2,923,358
1,000,000 Hazleton Svcs. Auth. Hosp. Rev. Series 1997 (Hazleton General Hosp. Proj.), 5.625%, 7/1/17 991,660
Horizon Hosp. System Auth. Hosp. Rev. Series 1996 (Horizon Hosp. Sys.):
600,000 5.95%, 5/15/06 622,470
715,000 6.15%, 5/15/08 750,793
710,000 6.25%, 5/15/09 744,783
1,145,000 6.30%, 5/15/11 1,188,922
3,580,000 Mercer Co. Industrial Dev. Auth. Rev. Refunding Series 1991 (FHA insured) (Hillcrest Nursing
Industrial Ctr. Proj.) Zero Coupon, 6.85% Effective Yield on Purchase Date, 1/15/13 1,224,861
6,000,000 Montgomery Co. Industrial Dev. Auth. Resource Recovery Rev. Series 1989 (LOC Banque
Paribas), 7.50%, 1/1/12 6,588,420
250,000 Montgomery Co. Redev. Auth. Multifamily Hsg. Rev. 1993 Series A (KBF Assoc. L.P.),
6.375%, 7/1/12 257,275
Pittsburgh Urban Redev. Auth. (Center Triangle Tax Increment Fin. District) (LOC PNC Bank):
3,000,000 Series 1995A, 6.00%, 12/1/11 3,076,230
2,100,000 Series 1995B, 6.25%, 3/15/15 2,169,489
----------
21,546,661
----------
RHODE ISLAND (0.8%
RI Hlth. & Educ. Bldg. Corp. Hosp. Fin. Rev.:
1,000,000 Series 1997 (Steere House Proj.), 5.70%, 7/1/15 980,010
2,500,000 Series 1997 (South Co. Hosp. Proj.), 6.00%, 11/15/17 2,558,225
----------
3,538,235
----------
SOUTH CAROLINA (0.3%)
1,395,000 Myrtle Beach PFC Certificates of Participation Series 1992 (Myrtle Beach Convention Ctr. Proj.),
6.75%, 7/1/02 1,508,623
----------
<PAGE>
- --------------------------------------------------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
- --------------------------------------------------------------------------------------------------------------------------
SOUTH DAKOTA (0.5%)
2,000,000 SD HDA Multifamily Hsg. Rev. 1992 Series B (Section 8), 7.00%, 4/1/12 $2,139,620
----------
TENNESSEE (4.7%)
Metro. Govt. of Nashville & Davidson Cos. TN Industrial Dev. Board Rev. Refunding:
1,725,000 Multifamily Mtg. Rev. 92C (FHA insured) (Picadilly Apts.), 6.95%, 7/1/27 1,838,384
Shelby Co. Hlth., Educ. & Hsg. Fac. Board Multifamily Hsg. Rev.:
(Eastwood Park Apts. Proj.):
1,000,000 Senior Series 1995 A2, 6.40%, 9/1/25 1,028,760
425,000 Subordinate Series 1995C, 7.50%, 9/1/25 435,706
(Raleigh Forest & Sherwood Apts. Proj.):
2,885,000 Senior Series 1996A, 6.60%, 1/1/26 2,984,504
795,000 Subordinate Series 1996C, 7.25%, 1/1/26 818,619
(Raleigh Woods Apts. Proj.):
6,000,000 Series 1997A (GNMA collateralized), 7.75%, 3/20/27 6,862,560
(The Corners Apts. Proj.)
1,055,000 Senior Series 1996A, 6.25%, 1/1/27 1,072,777
400,000 Subordinate Series 1996C, 6.375%, 1/1/27 393,956
1,500,000 TN HDA Mtg. Finance Series 1995B (MBIA insured), 6.20%, 7/1/18 1,567,920
TN HDA Homeownership Program:
830,000 Series 1991 Issue U, 7.35%, 7/1/11 878,040
7,500,000 Series 1997 Issue 3B Zero coupon, 5.725% Effective Yield on Purchase Date, 7/1/16 2,645,025
----------
20,526,251
----------
TEXAS (10.7%)
2,005,000 Baytown HFC Single Family Mtg. Rev. Refunding Series 1992B, 8.50%, 9/1/11 2,270,001
Beaumont HA Multifamily Mtg. Rev. Series 1993A (Section 8):
1,365,000 6.65%, 11/1/07 1,439,065
650,000 6.75%, 11/1/10 680,017
1,765,000 Bexar Co. HFC Residual Rev. Series 1993 Zero Coupon, 6.50% Effective Yield on PurchaseDate, 3/1/15 596,217
240,000 Brazos Co. HFC Single Family Mtg. Rev. 1985 (MBIA insured) Zero Coupon, 10.55% Effective
Yield on Purchase Date, 9/1/11 58,406
1,800,000 Cleveland Ind. School Dist. Public Fac. Corp. Lease Rev. Series 1996, 6.10%, 2/15/11 1,899,396
Dallas Hsg. Corp. Capital Program Revenue Bonds:
1,715,000 Series 1995A (Estell Village Apts.) (Section 8), 7.875%, 12/1/09 1,776,654
1,630,000 Series 1995 (Cedar Glen Apts.) (Section 8), 7.75%, 12/1/09 1,687,017
1,000,000 Dallas HFC Cap. Proj. Refunding 1990 (Section 8), 7.85%, 8/1/13 1,059,270
480,000 Harris Co. HFC Single Family Mtg. Rev. Series 1983A, 10.125%, 7/15/03 481,358
1,500,000 Houston HFC Single Family Mtg. Rev. Refunding Series 1996B-1, 8.00%, 6/1/14 1,635,315
1,750,000 Lubbock HFC Multifamily Hsg. Rev. Refunding Series 1992A (Los Colinas, Park Ridge Place &
Quail Creek), 7.75%, 1/1/22 1,812,423
Midland Co. Hosp. Dist. Hosp. Rev. Series 1992 Zero Coupon:
7,350,000 7.61% Effective Yield Purchase Date, 6/1/07 4,333,193
4,000,000 6.50% Effective Yield Purchase Date, 6/1/11 1,780,440
Midland HFC Single Family Mtg. Rev. Refunding:
453,929 Series 1992 B-2, 8.15%, 12/1/11 488,790
645,671 Series 1992 A-2, 8.45%, 12/1/11 698,287
770,288 Series 1992, 9.00%, 9/1/01 813,725
Mesquite Hlth. Fac. Dev. Corp. Retirement Fac. Rev. Series 1996A (Christian Care Ctrs. Proj.):
1,000,000 6.30%, 2/15/12 1,042,290
1,000,000 6.40%, 2/15/16 1,048,860
North Central Hlth. Fac. Dev. Corp. Rev. Series 1996 (C.C. Young Memorial Home Proj.):
495,000 5.90%, 2/15/04 512,751
155,000 6.10%, 2/15/06 162,221
1,300,000 6.30%, 2/15/15 1,354,145
See accompanying notes to portfolios of investments on page 37.
</TABLE>
<PAGE>
SIT TAX-FREE INCOME FUND
PORTFOLIO OF INVESTMENTS - SEPTEMBER 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1,666,765 Odessa HFC Single Family Mtg. Rev. Refunding Series 1992B Class B-2, 8.125%, 11/1/11 $1,804,323
755,000 Richardson Hosp. Auth. Hosp. Refunding Rev. Series 1993 (Richardson Med. Ctr.), 6.75%, 12/1/23 802,074
650,000 San Marcos HA Multifamily Mtg. Rev. Series 1993A (FHA insured) (Section 8),
5.80%,11/1/10 654,524
Southeast TX HFC Residual Revenue:
1,555,000 Series 1995A Zero Coupon, 6.50% Effective Yield on Purchase Date, 11/1/14 578,818
3,000,000 Series 1992A Zero Coupon, 7.63% Effective Yield on Purchase Date, 9/1/17 691,860
925,000 TX HA Single Family Mtg. Refunding Series 1991A, 7.00%, 3/1/05 978,141
TX Dept. Hsg. & Cmnty. Affairs Single Family Rev. Refunding Junior Lien Series 1994A
3,080,000 Zero Coupon 6.93% Effective Yield on Purchase Date, 3/1/15 965,426
TX Dept. Hsg. & Cmnty. Affairs Multifamily Hsg. Rev.:
1,500,000 Senior Series 1996A (Dallas - Ft. Worth Apts. Pool Proj.), 6.50%, 7/1/16 1,571,955
2,500,000 Senior Series 1996A (Dallas - Ft. Worth Apts. Pool Proj.), 6.50%, 7/1/26 2,611,825
1,060,000 Subordinated Series 1996C (Harbors & Plumtree Apts. Proj.), 7.375%, 7/1/26 1,088,715
2,820,000 Senior Series 1996A (Harbors & Plumtree Apts. Proj.), 6.45%, 7/1/26 2,925,947
3,050,000 Series 1996A (NHP Foundation - Asmara Apts. Proj.), 6.40%, 1/1/27 3,232,756
1,060,000 Travis Co. HFC Residential Mtg. Rev. Series 1991A (GNMA/FNMA collateralized)7.05%, 12/1/25 1,131,762
----------
46,667,967
----------
UTAH (0.9%)
1,000,000 Davis Co. Solid Waste Mgmt. & Energy Recovery Rev. Refunding Series 1993,
6.125%, 6/15/09 1,037,340
1,000,000 Provo HA Multifamily Series 1997 (Lookout Point Apts. Proj.) (GNMA collateralized),
5.80%, 7/20/22 1,012,700
1,850,000 Utah HFA Single Family Mtg. 1996 Issue E-1 Senior Bonds, 6.00%, 7/1/16 1,898,544
----------
3,948,584
----------
WASHINGTON (1.9%)
WA HFC Nonprofit Housing Revenue:
2,500,000 Series 1993 (CRISTA Shores Proj.)(LOC US Bk. Wash.), 6.20%, 7/1/14 2,572,400
1,000,000 Series 1995A (Judson Park Project)(LOC US Bk. Wash.), 6.90%, 7/1/16 1,049,940
1,390,000 Series 1996A (Presbyterian Ministries) (LOC US Bk. Wash.), 6.85%, 7/1/21 1,437,899
2,000,000 WA Hlth. Care Fac. Auth. Rev. Series 1996 (Grays Harbor Hosp. Proj.)
(Asset Guaranty insured), 5.70%, 7/1/16 2,023,860
1,250,000 WA Public Power Supply Rev. Refunding Series 1993B (Nuclear Project #1), 5.70%, 7/1/10 1,287,900
----------
8,371,999
----------
WEST VIRGINIA (0.8%)
5,435,000 Huntington Res. Mtg. Rev. Refunding Series 1991 Escrowed to Maturity, Zero Coupon,
7.37% Effective Yield on Purchase Date, 9/1/12 2,179,326
2,000,000 Mason Co. Residual Rev. Series 1992C Zero Coupon,
7.58% Effective Yield on Purchase Date,7/10/14 601,920
3,000,000 Ohio Co. Residual Rev. Series 1992C Zero Coupon,
7.43% Effective Yield on Purchase Date,7/10/14 907,020
----------
3,688,266
----------
WISCONSIN (0.7%)
1,300,000 WI HEDA Hsg. Rev. Series 1992A (Section 8), 6.85%, 11/1/12 1,370,577
WI Hlth. & Educ. Fac. Auth. Rev. :
750,000 Series 1996 (Meriter Hospital Inc.), 6.00%, 12/1/17 767,085
1,000,000 Refunding Series 1997 (Cmmty. Memorial Hospital Proj.) 6.00%, 4/1/18 1,016,650
----------
3,154,312
----------
WYOMING (0.5%)
2,000,000 WY CDA Hsg. Rev. 1995 Series 6, 6.10%, 12/1/25 2,070,279
----------
Total municipal bonds (cost: $383,547,095) 399,399,065
-----------
<PAGE>
- --------------------------------------------------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
- --------------------------------------------------------------------------------------------------------------------------
CLOSED-END MUTUAL FUNDS (4.0%) (2)
48,700 American Municipal Income Portfolio $645,275
86,500 American Municipal Term Trust 946,094
443,700 Blackrock Insured Municipal Term Trust 2010 4,769,775
38,000 Blackrock Investment Quality Municipal Trust 515,375
460,600 Blackrock Municipal Target Term Trust 2006 5,009,025
99,000 Van Kampen Merritt Municipal Trust 1,553,063
126,800 Van Kampen Merritt Municipal Opportunity Trust 1,917,850
145,900 Van Kampen Merritt Strategic Sector Municipal Trust 1,887,581
----------
17,244,038
----------
Total closed-end mutual funds (cost: $17,274,400)
SHORT-TERM SECURITIES (4.9%) (2)
1,000,000 Becker PCR NSP Sherburne Co. Generating Stn. Series 1993B, 3.75%, 10/8/97 1,000,000
3,000,000 Beaver Cnty. PA PCR Rev. Refunding Series 1990C, (Beaver Valley Proj.),
(LOC Barclays Bk, NY), 3.75%, 10/10/97 3,000,000
Salt River, AZ Project Agricultural Impt. & Pwr. Dist.:
3,000,000 3.55%, 10/3/97 3,000,000
4,500,000 3.50%, 10/8/97 4,500,000
3,500,000 Sarasota Co. FL Public Hosp. Dist. Series 1996A (Memorial Hosp. Proj.),
(LOC SunTrust Bank) 3.65%, 10/1/97 3,500,000
6,104,899 Tax-Exempt Cash Management Fund, 3.76% 6,104,899
76,140 Tax-Exempt Cash Management Fund, 3.64% 76,140
----------
Total short-term securities (cost: $21,181,039) 21,181,039
-----------
Total investments in securities (cost: $422,002,534) (6) 437,824,142
===========
</TABLE>
See accompanying notes to portfolios of investments on page 37.
<PAGE>
SIT MINNESOTA TAX-FREE INCOME FUND REVIEW
SEPTEMBER 30, 1997
[PHOTO]
MICHAEL C. BRILLEY
SENIOR PORTFOLIO MANAGER
DEBRA A. SIT, CFA
PORTFOLIO MANAGER
Dear Fellow Shareholders:
The Fund provided shareholders a total return of +4.96% for the six months
and +7.43% for the year ended September 30, 1997, compared with +4.63% and
+6.67%, respectively, for the Lehman 5-Year Municipal Index. The Fund's
quarterly return of +2.34% ranked #37 of 45 Minnesota municipal funds tracked by
Lipper Analytical Services, which provided an average return of +2.71%. The
Fund's returns ranked #30 of 45 funds over the past year, #15 of 30 funds over
the past 3 years, and #1 of 25 funds since inception.
The Fund's price per share increased $0.22 during the six month period to
$10.36, and reached an all time high of $10.41 on July 31st. The Fund's holdings
in non-rated securities contributed to its relatively stable price per share,
which has remained within a 3.0% range year-to-date. Despite the continued
decline in bond yields, the Fund has not benefitted from the increase in
advanced refunding activity in recent months. The Fund continues to generate a
high income return, however. The Fund's 30-day SEC yield decreased from 5.54% to
5.23% during the period, while its 12-month distribution rate decreased only
slightly from 5.59% to 5.44%.
Fund assets increased from $94.0 million to $116.0 million during the
period. The most significant shifts in industry weightings included a decrease
in multifamily housing bonds from 40.0% to 38.2%, and increases in health care
from 12.2% to 14.1% and in cash from 5.1% to 6.3%. The Fund established initial
positions in two closed end Minnesota municipal bond funds which are trading at
discounts to their net asset values. Fund weightings in securities rated "A" or
better remained at approximately 60% and in non-rated holdings increased from
33.1% to 35.9%.
While the Fund's average maturity remained relatively unchanged at 18.9
years, its duration to estimated average life increased from 7.2 years as of
March 31st to 7.5 years as of September 30th. Likewise, the Fund's implied
duration, which more closely represents the Fund's historical price sensitivity
to changes in interest rates, increased from 4.1 years to 4.7 years. This
lengthening reflects the Fund's continued efforts to increase call protection as
interest rates decline. We intend to continue seeking investment opportunities
that provide a high relative level of current income.
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 9/30/97: $10.36 Per Share
3/31/97: $10.14 Per Share
Total Net Assets: $115.95 Million
30-Day SEC Yield: 5.23%
Tax Equivalent Yield: 9.46% (1)
12-Month Distribution Rate: 5.44%
Average Maturity: 18.9 Years
Duration to Estimated Avg. Life: 7.5 Years (2)
Implied Duration: 4.7 Years (2)
(1) For individuals in the 39.6% Federal and 8.5% MN tax brackets.
(2) See page 29.
PORTFOLIO STRUCTURE
(% of total net assets)
[BAR CHART]
Multifamily Mortgage Revenue 38.2
Single Family Mortgage Revenue 17.4
Hospital/Health Care Revenue 14.1
Other Revenue Bonds 8.4
Industrial Revenue/Pollution Control 8.2
Municipal Lease Rental 3.0
Public Facilities 1.8
Education/Student Loan 1.4
General Obligation 1.0
Mutual Funds 0.2
Cash & Cash Equivalents 6.3
<PAGE>
<TABLE>
<CAPTION>
Average Annual Total Returns* Cumulative Total Returns*
----------------------------------------- -----------------------------------------
MN Tax-Free Lipper MN Lehman MN Tax-Free Lipper MN Lehman
Income Muni. Bond 5-Year Muni. Income Muni. Bond 5-Year Muni.
Fund Fund Avg. Bond Index Fund Fund Avg. Bond Index
----------------------------------------- -----------------------------------------
<S> <C> <C> <C> <C> <C> <C>
3 Months 2.34% 2.71% 2.13% 2.34% 2.71% 2.13%
(unannualized)
1 Year 7.43 7.79 6.67 7.43 7.79 6.67
3 Year 7.66 7.47 6.61 24.77 24.14 21.16
Inception 6.57 5.15 5.31 27.62 21.26 21.91
(12/1/93)
</TABLE>
*As of 9/30/97
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.
(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%, a
portfolio with a duration of 5 years would be expected to experience a price
change of 5%. Estimated average life duration is based on current interest rates
and the Adviser's assumptions regarding the expected average life of individual
securities held in the portfolio. Implied duration is calculated based on
historical price changes of securities held by the Fund. The Adviser believes
that the portfolio's implied duration is a more accurate estimate of price
sensitivity provided interest rates remain within their historical range. If
interest rates exceed the historical range, the estimated average life duration
may be a more accurate estimate of price sensitivity.
GROWTH OF $10,000
[PLOT POINTS 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 9/30/97 would
have grown to $12,762 in the Fund or $12,191 in the Lehman 5-Year Municipal Bond
Index assuming reinvestment of all dividends and capital gains.
QUALITY RATINGS
(% of Net Assets)
LOWER OF MOODY'S, S&P, FITCH OR DUFF & PHELPS RATINGS USED.
[PIE CHART]
A 15.0%
AA 19.8%
AAA 18.5%
Other Assets & Liabilities 6.3%
Not Rated 35.9%
BBB 4.5%
ADVISER'S ASSESSMENT OF NOT-RATED SECURITIES
AAA 0.1%
AA 0.6
A 1.6
BBB 23.5
BB 9.3
B 0.8
----
Total 35.9%
<PAGE>
SIT MINNESOTA TAX-FREE INCOME FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE(1)
- ------------------------------------------------------------------------------------------------------------------------------------
MUNICIPAL BONDS (93.5%) (2)
EDUCATION/STUDENT LOAN (1.4%)
<S> <C> <C>
Minnesota Higher Education Fac. Auth. Rev. Series 1996-4I (Hamline Univ.):
1,000,000 6.00%, 10/1/12 $ 1,036,560
585,000 6.00%, 10/1/16 601,368
------------
1,637,928
------------
GENERAL OBLIGATION (1.0%)
600,000 Carver Co. Hsg. & Redev. Auth. Hsg. & Dev. Gross Rev. Ltd.Tax G.O.
(Chanhassen Apts. Proj.), 7.00%, 1/1/25 629,442
500,000 Goodhue (City of) G.O. Gas Utility Series 1996, 6.75%, 1/1/26 531,990
------------
1,161,432
------------
HOSPITAL/HEALTH CARE (14.1%)
1,000,000 Albert Lea Hsg. & Hlth Care Fac. Rev. Refunding Series 1996 (St Johns Lutheran Home Proj.),
7.00%, 11/1/19 1,030,840
Brooklyn Center Hlth. Care Fac. Rev. Series 1993 (Maranatha Proj.):
50,000 6.75%, 12/1/05 52,784
500,000 7.50%, 12/1/10 537,545
1,290,000 Cokato Sr. Hsg. Rev. Series 1996 (Cokato Charitable Trust Proj.), 7.00%, 12/1/19 1,305,003
1,000,000 Dakota Co. Hsg. & Redev. Auth. Hlth. Care Fac. Rev. Refunding Series 1997 (South Suburban
Medical Ctr. Proj.), 6.75%, 8/1/17 1,002,810
140,000 Edina Hlth. Care Fac. Rev. Series 1995 (VOA Care Ctrs. Proj.), 7.875%, 3/1/19 146,644
215,000 Fergus Falls Hlth. Care Fac. Auth. Rev. Refunding Series 1993A
(Lake Region Hosp. Corp. Proj.), 6.25%, 9/1/04 227,584
650,000 Fergus Falls Hlth. Care Fac. Auth. Series 1995 (LRHC Long-Term Care Fac. Proj.),6.40%, 12/1/15 686,537
1,540,000 Hibbing Hlth. Care Fac. Rev. Series 1995A (St. Francis Hlth. Svcs. Proj.), 7.35%, 11/1/15 1,597,365
750,000 Mankato Hlth. Care Fac. Rev. Series 1996A (Lutheran Home Proj.), 6.75%, 10/1/16 768,060
1,685,000 Maplewood Hlth. Care Fac. Rev. (VOA Care Ctrs. Proj.), 7.375%, 10/1/12 1,817,963
1,000,000 Minneapolis Hlth. Care Fac. Rev. Series 1993 (St. Olaf Res. Proj.), 7.00%,10/1/18 1,039,590
1,885,000 Minneapolis Hsg. & Hlth. Care Fac. Rev. Series 1997 (Augustana Chapel View Homes Proj.),6.70%, 6/1/22 1,907,356
180,000 Puerto Rico Industrial, Tourist, Educ., Med. & Env. Ctrl. Fac. Fin. Auth. Hosp.
Rev. 1994 Series A (Ryder Mem. Hosp. Proj.), 5.75%, 5/1/99 183,040
Red Wing Hlth. Care Ctr. Fac. Rev. Refunding (River Region Obligated Group):
125,000 Series 1993A, 6.20%, 9/1/05 134,151
130,000 Series 1993A, 6.30%, 9/1/06 139,483
200,000 Series 1993B, 6.20%, 9/1/05 214,642
130,000 Riverview Hosp. Association (Crookston) First Mtg. Gross Rev. Series 1974, 6.625%, 3/1/05 133,654
Sherburne Co. Nursing Home Fac. Rev. Series 1994 (Guardian Angels Care Ctr. Proj.):
75,000 7.30%, 6/1/07 79,774
80,000 7.35%, 6/1/08 85,083
90,000 7.40%, 6/1/09 95,962
555,000 7.50%, 6/1/14 590,093
140,000 7.75%, 6/1/15 150,104
150,000 7.75%, 6/1/16 161,077
300,000 Spring Park Hlth. Care Fac. Rev. Series 1991 (Twin Birch Hlth. Care Ctr. Proj.), 8.25%, 8/1/11 323,190
95,000 St. Paul Hsg. & Redev. Auth. Comm. Dev. Rev. Refunding Series 1992
(Beverly Enterprises Proj.), 7.75%, 11/1/02 96,263
960,000 St. Paul Hsg. & Redev. Auth. Nursing Home Dev. Rev. Refunding Series 1996C
(Franciscan Hlth. Cmmty. Proj., St. Mary's Home), 7.00%, 7/1/21 981,062
820,000 Wadena Co. Hlth. Care Fac. Rev. Series 1994B, 7.45%, 9/1/15 876,391
------------
16,364,050
------------
INDUSTRIAL /POLLUTION CONTROL (8.2%)
500,000 Anoka Industrial Dev. Rev. Series 1994 (Lund Industries Inc. Proj.), 6.50%, 9/1/04 (4) 527,575
250,000 Bass Brook Pollution Control Rev. Series 1992 (Minnesota Power & Light Corp. Proj.), 6.00%, 7/1/22 256,577
955,000 Duluth Commercial Dev. Rev. Refunding Series 1995A (Radisson Hotel Proj.), 7.00%, 12/1/00 965,457
<PAGE>
- ------------------------------------------------------------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE(1)
- ------------------------------------------------------------------------------------------------------------------------------------
MN Agricultural & Econ. Dev. Board Small Business Dev. Ln. Prgm. Rev.:
105,000 Series 1995A Lot 1, (New Morning Windows, Inc.), 6.40%, 8/1/04 (4) $ 108,955
1,000,000 Series 1990B Lot 1 (May Printing Co.), 8.375%, 8/1/10 (4) 1,039,210
500,000 Series 1997C Lot 3, (DynaGraphics), 6.20%, 8/1/09 (4) 510,825
1,000,000 Minneapolis Commercial Dev. Rev. Refunding Series 1997 (Holiday Inn Metrodome Proj.),
6.00%, 12/1/01 1,008,210
Owatonna Industrial Dev. Rev. Series 1997:
280,000 7.25%, 5/1/14 288,506
505,000 7.375%, 5/1/17 520,397
3,045,000 Plymouth Rev. Refunding Series 1992 (Carlson Ctr. Proj.) (LOC First Bank, N.A.),
7.00%, 4/1/12 3,177,366
200,000 Richfield Cmty. Dev. Rev. Refunding 1994 (Richfield Shoppes Proj.), 8.375% 10/1/05 220,100
910,000 St. Paul Port Authority Hotel Fac. Senior Rev. Series 1996A (Radisson Kellogg Project),7.00%, 8/1/01 929,165
-----------
9,552,343
-----------
MULTIFAMILY MORTGAGE (38.2%)
500,000 Aurora Hsg. & Redev. Auth. Multifamily Rev. (Irongate Apts. Proj.) (Section 8),6.10%, 10/1/19 512,485
Austin Hsg. & Redev. Auth. Governmental Hsg. Gross Rev. Series 1995A
(Courtyard Res. Proj.):
220,000 7.00%, 1/1/15 224,970
500,000 7.25%, 1/1/26 508,595
Burnsville Multifamily Hsg. Rev. Refunding:
425,000 Series 1991 (Atrium Proj.) (Trygg-Hansa insured), 7.20%, 5/1/11 438,591
960,000 Series 1994 (Bridgeway Apts. Proj.), 7.25%, 2/1/14 996,758
Carver Co. Hsg. & Redev. Auth. Multifamily Hsg.:
1,440,000 Gross Rev. & Ltd. Tax Refunding Series 1997A (Lake Grace Apts. Proj.), 6.00%, 7/1/28 1,456,790
650,000 Rev. Refunding Series 1997A (Waybury Apts. Proj.) 5.875%, 8/1/27 654,076
400,000 Subordinate Rev. Refunding Series 1997C (Waybury Apts. Proj.), 8.00%, 8/1/27 400,840
405,000 Chisago City Hlth. Fac. Rev. Refunding Series 1995A (Pleasant Heights Proj.), 7.30%, 7/1/18 424,468
Coon Rapids Multifamily Hsg. Rev.:
280,000 Refunding Series 1997 (GNMA collateralized) (Pine Point Apts.), 6.125%, 5/1/32 289,495
700,000 Refunding Series 1997A (Margaret Place Apts. Proj.), 6.50%, 5/1/25 700,840
3,000,000 Dakota Co. Hsg. & Redev. Auth. Multifamily Hsg. Rev. Refunding Series 1997A,
(Park Place Apts. Proj.) (GNMA collateralized) 6.875%, 2/20/32 3,247,140
Dakota Co. Hsg. & Redev. Auth. Multifamily Hsg. Rev. Refunding
(Walnut Trails Apts. Proj.):
1,700,000 Series 1995A (GNMA collateralized), 7.90%, 1/20/31 (4) 1,923,159
260,000 Series 1995C Subordinate, 9.00%, 1/20/15 (4) 263,024
1,490,000 Eagan Multifamily Rental Hsg. Refunding Rev. Series 1996 (Wescott Apts. Proj.)
(FHA insured), 6.00%, 12/1/27 1,525,149
Eden Prairie Multifamily Hsg. Rev. Refunding :
60,000 Series 1990A (Welsh Parkway Apts. Ltd. Proj.)(FHA insured), 8.00%, 7/1/26 64,039
450,000 Series 1995A (Olympic Ridge Proj.) (GNMA collateralized) 6.20%, 1/20/16 471,240
700,000 Series 1991 (Windslope Apts. Proj.)(Section 8), 7.00%, 11/1/06 746,214
1,500,000 Series 1991 (Windslope Apts. Proj.)(Section 8), 7.10%, 11/1/17 1,579,095
Harmony Multifamily Hsg. Rev. Refunding Series 1997A (Zedakah Fdn. Proj.) (Section 8):
280,000 5.75%, 9/1/12 282,388
275,000 5.80%, 9/1/13 277,340
Hopkins Elderly Hsg. Rev. Refunding (St. Therese Southwest Proj.):
1,600,000 Series 1994A (Asset Gty. insured), 6.25%, 3/1/14 1,645,184
360,000 Series 1994B, 9.00%, 11/1/19 384,088
1,015,000 Hopkins Hsg. Fac. Rev. Refunding Series 1995 (Augustana Chapel View Homes Proj.),7.00%, 12/1/15 1,035,503
570,000 Hopkins Subordinate Multifamily Hsg. Rev. Refunding Series 1996C(Auburn Apts. Proj.), 8.00%, 6/20/31 594,909
450,000 Hopkins Multifamily Hsg. Rev. Series 1996 (Hopkins Renaissance Proj.),6.25%, 4/1/15 471,060
See accompanying notes to portfolios of investments on page 37.
<PAGE>
SIT MINNESOTA TAX-FREE INCOME FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 1997 (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE(1)
- ------------------------------------------------------------------------------------------------------------------------------------
500,000 Hutchinson Hsg. Fac. Rev. Series 1994 (Prince of Peace Proj.), 7.375%, 10/1/12 $ 521,450
800,000 Little Canada Multifamily Hsg. Rev. Series 1997A (Cedars Lakeside Proj.)
(GNMA collateralized), 5.90%, 8/1/20 818,520
Minneapolis Multifamily Hsg. Rev.:
75,000 Series 1991 (Trinity Hsg. Proj.) (Section 8), 7.875%, 2/1/06 78,697
355,000 Series 1996 (Belmont Apts.), 7.25%, 11/1/16 359,278
565,000 Series 1994 (Findley Place Townhomes Proj) (Section 8), 7.00%, 12/1/16 (4) 610,364
2,000,000 Series 1996A (Nicollet Towers) (Section 8), 6.00%, 12/01/19 2,030,720
645,000 Series 1996 (Belmont Apts.), 7.625%, 11/1/27 650,212
350,000 Minneapolis/ St. Paul Hsg. Fin. Board Multifamily Rev. Series 1988 (Riverside Place Proj.),
(FHA insured) (GNMA collateralized), 8.20%, 12/20/18 (4) 364,182
MN HFA Multifamily Hsg. Dev. Rev.:
40,000 Series 1977, 6.25%, 2/1/08 40,555
120,000 Series 1977, 6.375%, 2/1/20 121,636
25,000 Series 1988A, 7.70%, 8/1/08 25,669
MN HFA Rental Hsg. Rev. Refunding:
175,000 Series 1993C, 6.15%, 2/1/14 177,042
135,000 Series 1993E, 6.00%, 2/1/14 138,806
Minnetonka Hsg. Fac. Rev. Series 1994 (Beacon Hill Housing Proj.):
890,000 7.00%, 6/1/04 925,360
1,000,000 7.50%, 6/1/14 1,062,360
520,000 Minnetonka Multifamily Hsg. Rev. Refunding Subordinate Series 1994C (Brier Creek Proj.),8.00%, 12/20/16 550,108
Minnetonka Senior Hsg. Rev. Series 1997 (Westridge Senior Hsg. Proj.):
285,000 6.75%, 9/1/17 286,149
500,000 7.00%, 9/1/27 501,995
500,000 Monticello Senior Hsg. Rev. Series 1995 (Mississippi Shores Proj.), 7.25%, 7/1/16 507,920
330,000 Mora Multifamily Rev. Refunding Hsg. Alternatives Partnership Series 1995, 6.50%, 6/1/02 333,392
Plymouth Multifamily Hsg. Rev. Refunding Series 1996A (Fox Forest Apts. Proj.), (GNMA collateralized):
750,000 Series 1996A, 8.05%, 6/20/31 866,565
710,000 Series 1996C, 8.00%, 6/20/31 741,027
2,500,000 Puerto Rico Housing Finance Corp. Rev. Multifamily Mtg. Portfolio Series 1990 A-I, 7.50%, 10/1/15 2,639,225
960,000 Robbinsdale Multifamily Hsg. Rev. Series 1996A (Copperfield Hill Proj.), 7.20%, 12/1/16 969,389
325,000 Sandstone Econ. Dev. Auth. Hsg. & Dev. Rev. Series 1994A (Family Apts. Proj.),8.00%, 1/1/12 342,735
1,250,000 Spring Lake Park Sr. Hsg. Rev. Series 1996 (Noah's Ark Affordable Hsg. Inc.), 7.25%, 9/1/16 1,264,263
1,500,000 St. Anthony Hsg. Dev. Rev. Refunding (Autumn Woods Proj.) (Asset Gty. insured), 6.875%, 7/1/22 1,587,150
650,000 St. Louis Park Multifamily Hsg. Rev. Refunding Series 1995 (Knollwood Cmty. Hsg. Proj.) (FHA insured),
6.15%, 12/1/16 671,262
500,000 St. Paul Hsg. & Redev. Auth. Multifamily Hsg. Refunding Series 1992 (Point of St. Paul Proj.)
(FNMA backed), 6.60%, 10/1/12 526,570
200,000 St. Paul Hsg. & Redev. Auth. Multifamily Hsg. Refunding Series 1995 (Sun Cliffe Apts. Proj.)
(GNMA collateralized), 5.875%, 7/1/15 204,382
1,035,000 Washington Co. Hsg. & Redev. Auth. Multifamily Hsg. Rev. Refunding Series 1994
(White Bear Lake Transitional Hsg. Proj.), 6.625%, 8/1/24 1,083,811
1,385,000 White Bear Lake Multifamily Hsg. Rev. Refunding Series 1996A (Lake Sq. Partners Proj.)
(FHA insured), 6.10%,2/1/26 1,428,337
770,000 Willmar Hsg. & Redev. Auth. Multifamily Rev. Series 1993 (Highland Apts)
(Section 8), 5.85%, 6/1/19 774,397
-----------
44,320,968
-----------
LEASE (3.0%)
1,015,000 Beltrami Co. Hsg. & Redev. Auth. Lease Rev., 6.25%, 2/1/16 1,049,226
585,000 Burnsville Solid Waste Rev. Series 1990 (Freeway Transfer Inc. Proj.), 9.00%, 4/1/10 (4) 645,021
500,000 Goodhue Co. Econ. Dev. Auth. Courts Building Proj. Lease Rev. Series 1997A, 5.75%, 2/1/13 504,565
<PAGE>
- ------------------------------------------------------------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE(1)
- ------------------------------------------------------------------------------------------------------------------------------------
Hibbing Econ. Dev. Auth. Public Proj. Rev. Series 1997 (Hibbing Lease Obligations Proj.):
655,000 6.10%, 2/1/08 $ 682,366
535,000 6.40%, 2/1/12 547,653
100,000 Rice Co. Certificates of Participation Series 1996A, 5.85%, 12/1/14 102,775
-----------
3,531,606
-----------
SINGLE FAMILY MORTGAGE (17.4%)
317,948 Brooklyn Center/Columbia Heights/Moorhead/Robbinsdale Econ. Dev. Auth. Residual Interest
Rev. Series 1992B (FNMA backed), 7.15%, 11/1/14 330,809
Dakota County Hsg. & Redev. Auth. Single Family Mtg. Rev.:
960,000 Series 1994A (FNMA backed), 6.70%, 10/1/09 (4) 1,018,675
400,000 Series 1995 (FNMA & GNMA backed), 6.25%, 10/1/09 (4) 417,760
615,000 Dakota/Wash./Stearns Cos. Hsg. & Redev. Auth. Single Family Rev. Refunding
Series 1994A (FNMA backed), 6.50%, 9/1/10 (4) 646,666
Minneapolis Redev. Mtg. Rev. Series 1987A (Riverplace Proj.) (LOC Bk. of Tokyo):
25,000 7.00%, 1/1/07 25,575
500,000 7.10%, 1/1/20 511,270
2,100,000 Minneapolis Residual Interest Mtg. Rev. Series 1995 Convertible Capital Appreciation Bonds,
7.00% Effective Yield on Purchase Date, 10/1/12 809,109
655,000 Minneapolis Single Family Mtg. Rev. Series 1995V (FNMA & GNMA backed), 6.25%, 4/1/22 677,637
Minneapolis/ St. Paul Hsg. Fin. Bd. Single Family Mtg. Rev.:
30,000 Series 1989A (GNMA backed), 7.65%, 12/1/00 (4) 31,203
900,000 Series 1994 (FNMA backed), 7.25%, 5/1/12 (4) 946,458
MN HFA Single Family Mtg. Rev.:
120,000 Series 1988D, 8.25%, 8/1/20 (4) 124,847
15,000 Series 1989B, 7.05%, 1/1/03 15,721
50,000 Series 1989B, 7.05%, 7/1/03 52,404
45,000 Series 1990A, 7.95%, 7/1/22 (4) 47,625
275,000 Series 1990C, 7.70%, 7/1/14 289,759
240,000 Series 1991A, 7.05%, 7/1/22 (4) 250,632
595,000 Series 1991A, 7.45%, 7/1/22 (4) 627,178
1,735,000 Series 1992B-1, 6.75%, 1/1/26 (4) 1,819,755
995,000 Series 1994F, 6.30%, 7/1/25 1,038,422
90,000 Series 1994K, 5.90%, 1/1/07 92,306
520,000 Series 1994L, 6.70%, 7/1/20 (4) 549,593
2,830,000 Series 1995M, 5.875%, 1/1/17 2,903,552
800,000 Series 1996D, 6.00%, 1/1/16 823,992
280,000 Series 1997D, 5.85%, 7/1/19, (4) 284,122
2,500,000 Series 1997E, 5.90%, 7/1/29 (4) 2,536,700
710,000 Series 1997K, 5.75%, 1/1/26 (4) 712,336
3,800,000 Moorhead Single Family Mtg. Rev. Refunding Series 1992B Zero Coupon, 7.00% Effective
Yield on Purchase Date, 8/1/11 1,476,186
670,000 St. Paul Hsg. & Redev. Auth. Single Family Mtg. Rev. Refunding Series 1995 (FNMA backed),
6.125%, 3/1/17 695,735
966,042 St. Paul Residual Interest Rev. Series 1995 Convertible Capital Appreciation
Bonds, Zero Coupon, 7.23% Effective Yield on Purchase Date, 9/1/11 372,100
-----------
20,128,127
-----------
OTHER REVENUE BONDS (8.4%)
1,500,000 Commissioner of Iron Range Resources and Rehabilitation Gross Rev.
Series 1996 (Giants Ridge Rec. Area Proj.), 7.25%, 10/1/11 1,548,165
Minneapolis Cmty. Dev. Agy. Ltd. Tax Common Bond Fund:
100,000 Series 1993-5 (Winslow Printing), 6.125%, 12/1/06 (4) 103,232
170,000 Series 1997-1 (Halper Corrugated Box Mfg. Co.), 5.90%, 6/1/07 (4) 179,734
640,000 Series 1995-1 (Microtron, Inc.), 6.625%, 12/1/09 (4) 681,178
See accompanying notes to portfolios of investments on page 37.
<PAGE>
SIT MINNESOTA TAX-FREE INCOME FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 1997 (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE(1)
- ------------------------------------------------------------------------------------------------------------------------------------
1,310,000 Series 1995-1 (Microtron, Inc.), 7.25%, 12/1/15 (4) $ 1,424,953
750,000 Series 1997-2 (Ambassador Press), 6.20%, 6/1/17 (4) 782,663
200,000 Renville Gross Rev. Golf Course Bond Series 1997, 6.50%, 2/1/19 201,510
2,870,000 St. Paul Hsg. & Redev. Sales Tax Rev. Refunding Series 1996 (FSA insured)
(Civic Center Proj.), 7.10%, 11/1/23 3,491,872
1,245,000 St. Paul Recreational Fac. Gross Rev. Series 1996D 5.875%, 6/1/18 1,281,927
------------
9,695,234
------------
PUBLIC FACILITIES (1.8%)
2,000,000 Minneapolis Public Hsg. Auth. Series 1997 (General Credit Energy Savings Proj.), 6.00%, 7/1/08 2,034,660
------------
Total municipal bonds (cost: $105,026,400) 108,426,348
------------
CLOSED-END MUTUAL FUNDS (0.2%) (2)
13,100 Minnesota Muni Term Trust 2001 142,462
13,000 Minnesota Muni Term Trust II 2003 138,125
------------
280,587
------------
Total closed-end mutual funds (cost: $278,422)
SHORT-TERM SECURITIES (5.0%) (2)
631,557 Minnesota Municipal Cash Fund, 3.31% 631,557
3,200,000 Southern MN Power Agy. Series B (LOC Credit Suisse) 3.60%, 10/3/97 3,200,000
1,000,000 Becker MN PCR, 3.75%, 10/8/97 1,000,000
1,000,000 St. Paul Hsg. & Redev. Auth. Dist. Cooling Rev. Series 1995G, Weekly
Variable Rate Putable (LOC Credit Local de France), 3.90%, 12/1/12 1,000,000
------------
Total short-term securities (cost: $5,831,557) 5,831,557
------------
Total investments in securities (cost: $111,136,379) (6) $114,538,492
============
</TABLE>
<PAGE>
SIT MUTUAL FUNDS
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, 1997, 42.1% of net assets in the U.S. Government
Securities Fund and 17.7% of net assets in the Bond Fund was invested in
GNMA mobile home pass-through securities.
(4) Securities the income from which 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, 1997, approximately
16.5% of net assets in 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, 1997, 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>
U.S.
MONEY GOVERNMENT
MARKET SECURITIES BOND
FUND FUND FUND
------------ ------------ ----------
<S> <C> <C> <C>
Cost for federal income tax purposes $ 27,778,194 $ 87,460,218 $6,935,547
============ ============ ==========
Unrealized appreciation (depreciation) on
investments:
Gross unrealized appreciation -- $ 1,274,798 $ 154,845
Gross unrealized depreciation -- (176,107) (16,462)
------------ ------------ ----------
Net unrealized appreciation (depreciation) -- $ 1,098,691 $ 138,383
============ ============ ==========
MINNESOTA
TAX-FREE TAX-FREE
INCOME INCOME
FUND FUND
------------ ------------
Cost for federal income tax purposes $422,002,534 $111,136,379
============ ============
Unrealized appreciation (depreciation) on
investments:
Gross unrealized appreciation $ 15,902,001 $ 3,416,965
Gross unrealized depreciation (80,394) (14,852)
------------ ------------
Net unrealized appreciation (depreciation) $ 15,821,607 $ 3,402,113
============ ============
</TABLE>
<PAGE>
SIT MUTUAL FUNDS
STATEMENTS OF ASSETS & LIABILITIES - SEPTEMBER 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
U.S. MINNESOTA
MONEY GOVERNMENT TAX-FREE TAX-FREE
MARKET SECURITIES BOND INCOME INCOME
FUND FUND FUND FUND FUND
----------- ----------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments in securities, at
identified cost........................ $27,778,194 $87,460,219 $6,935,547 $422,002,534 $111,136,379
=========== =========== ========== ============ ============
Investments in securities, at
market value - see
accompanying schedules for
detail................................. $27,778,194 $88,558,910 $7,073,930 $437,824,141 $114,538,492
Cash in bank on demand
deposit................................ 185,611 1 207 62,112 --
Accrued interest
receivable............................. -- 567,684 74,156 6,559,403 2,116,198
Receivable for principal
paydowns............................... -- 26,292 1,204 -- --
Receivable for investment
securities sold........................ -- -- -- -- 1,000,000
Other
receivables............................ -- -- 252 10,481 1,958
Receivable for Fund shares
sold................................... 4,936,129 86,539 2,798 1,617,728 165,409
----------- ----------- ---------- ------------ ------------
Total assets................... 32,899,934 89,239,426 7,152,547 446,073,865 117,822,057
----------- ----------- ---------- ------------ ------------
LIABILITIES
Payable for investment securities
purchased - when issued (note 1)....... -- 570,498 -- 8,516,225 710,000
Payable for investment securities
purchased.............................. -- 191,646 -- 740,703 3,516
Payable for Fund shares
redeemed............................... 313,797 69,878 -- 553,441 959,360
Cash portion of dividends
payable to shareholders................ 9,399 51,955 6,321 467,389 125,228
Other
payables............................... 316 3,285 -- 317 --
Accrued investment management
and advisory services fee.............. 12,877 55,844 4,691 262,070 76,353
----------- ----------- ---------- ------------ ------------
Total liabilities.............. 336,389 943,106 11,012 10,540,145 1,874,457
----------- ----------- ---------- ------------ ------------
Net assets applicable to
outstanding capital stock.............. $32,563,545 $88,296,320 $7,141,535 $435,533,720 $115,947,600
=========== =========== ========== ============ ============
Capital stock
Par.................................... $0.001 $0.01 $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..................... 32,566,878 8,334,271 711,766 42,209,966 11,190,426
=========== =========== ========== ============ ============
Net asset value per share of
outstanding capital stock.............. $1.00 $10.59 $10.03 $10.32 $10.36
=========== =========== ========== ============ ============
</TABLE>
See accompanying notes to financial statements on pages 42-49.
<PAGE>
SIT MUTUAL FUNDS
STATEMENTS OF OPERATIONS - SIX MONTHS ENDED SEPTEMBER 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
U.S. MINNESOTA
MONEY GOVERNMENT TAX-FREE TAX-FREE
MARKET SECURITIES BOND INCOME INCOME
FUND FUND FUND FUND FUND
----------- ----------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
INCOME:
Interest........................... $833,983 $2,679,007 $247,082 $11,703,168 $3,277,438
----------- ----------- ---------- ------------ ------------
Total income.................. 833,983 2,679,007 247,082 11,703,168 3,277,438
----------- ----------- ---------- ------------ ------------
EXPENSES (NOTE 3):
Investment management and
advisory services fee............ 119,296 366,509 27,352 1,509,718 421,139
Less fees and expenses absorbed
by investment adviser......... (44,736) (50,137) -- (63,372) --
----------- ----------- ---------- ------------ ------------
Total net expenses............... 74,560 316,372 27,352 1,446,346 421,139
----------- ----------- ---------- ------------ ------------
Net investment income............ 759,423 2,362,635 219,730 10,256,822 2,856,299
----------- ----------- ---------- ------------ ------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net realized gain (loss) (note 2).. -- 259,818 31,860 3,230,371 (1,685)
Net change in unrealized appreciation
or depreciation on investments... -- 2,088,523 251,864 9,366,257 2,204,639
----------- ----------- ---------- ------------ ------------
Net gain (loss) on investments..... -- 2,348,341 283,724 12,596,628 2,202,954
----------- ----------- ---------- ------------ ------------
Net increase in net assets resulting from
operations......................... $ 759,423 $ 4,710,976 $ 503,454 $ 22,853,450 $ 5,059,253
=========== =========== ========== ============ ============
</TABLE>
See accompanying notes to financial statements on pages 42-49.
<PAGE>
SIT MUTUAL FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
MONEY MARKET U.S. GOVERNMENT BOND
FUND SECURITIES FUND FUND
---------------------------- -------------------------- --------------------------
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED ENDED ENDED
SEPTEMBER 30, YEAR ENDED SEPTEMBER 30, YEAR ENDED SEPTEMBER 30, YEAR ENDED
1997 MARCH 31, 1997 MARCH 31, 1997 MARCH 31,
(UNAUDITED) 1997 (UNAUDITED) 1997 (UNAUDITED) 1997
------------- ------------- ------------ ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income .................... $ 759,423 $ 1,279,586 $ 2,362,635 $ 3,649,108 $ 219,730 $ 356,091
Net realized gain (loss) on investments .. -- -- 259,818 (354,419) 31,860 (26,666)
Net change in unrealized appreciation
(depreciation) of investments ......... -- -- 2,088,523 (903,875) 251,864 (64,569)
------------- ------------- ------------ ------------ ----------- -------------
Net increase in net assets resulting
from operations ..................... 759,423 1,279,586 4,710,976 2,390,814 503,454 264,856
------------- ------------- ------------ ------------ ----------- -------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income .................... (759,439) (1,279,586) (2,362,635) (3,649,108) (219,730) (356,091)
Net realized gains on investments ........ -- -- -- -- -- (38,869)
------------- ------------- ------------ ------------ ----------- -------------
Total distributions ................... (759,439) (1,279,586) (2,362,635) (3,649,108) (219,730) (394,960)
------------- ------------- ------------ ------------ ----------- -------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold ................ 198,512,982 248,117,061 20,859,974 37,499,822 1,170,625 1,935,754
Reinvested distributions ................. 662,134 1,094,430 2,085,141 3,183,829 186,127 327,137
Payments for shares redeemed ............. (199,279,653) (237,803,699) (10,391,007) (18,481,485) (902,403) (951,712)
------------- ------------- ------------ ------------ ----------- -------------
Increase (decrease) in net assets
from capital share transactions ..... (104,537) 11,407,792 12,554,108 22,202,166 454,349 1,311,179
------------- ------------- ------------ ------------ ----------- -------------
Total increase (decrease) in net
assets ............................ (104,553) 11,407,792 14,902,449 20,943,872 738,073 1,181,075
NET ASSETS
Beginning of period ...................... 32,668,098 21,260,306 73,393,871 52,449,999 6,403,462 5,222,387
------------- ------------- ------------ ------------ ----------- -------------
End of period ............................ $ 32,563,545 $ 32,668,098 $ 88,296,320 $ 73,393,871 $ 7,141,535 $ 6,403,462
============= ============= ============ ============ =========== =============
NET ASSETS CONSIST OF:
Capital (par value and paid-in surplus) .. $ 32,563,545 $ 32,668,098 $ 87,457,271 $ 74,903,163 $ 7,020,428 $ 6,566,079
Undistributed (distributions in excess
of) net investment income ............. -- -- -- -- -- --
Accumulated net realized gain (loss)
from security transactions ............ -- -- (259,642) (519,460) (17,276) (49,136)
Unrealized appreciation (depreciation)
on investments ........................ -- -- 1,098,691 (989,832) 138,383 (113,481)
------------- ------------- ------------ ------------ ----------- -------------
$ 32,563,545 $ 32,668,098 $ 88,296,320 $ 73,393,871 $ 7,141,535 $ 6,403,462
============= ============= ============ ============ =========== =============
CAPITAL TRANSACTIONS IN SHARES:
Sold ..................................... 198,512,982 248,117,061 1,991,447 3,598,212 119,158 198,683
Reinvested distributions ................. 662,134 1,094,430 198,892 306,370 18,823 33,549
Redeemed ................................. (199,279,336) (237,803,699) (994,351) (1,777,514) (91,920) (97,629)
------------- ------------- ------------ ------------ ----------- -------------
Net increase (decrease) .................... (104,220) 11,407,792 1,195,988 2,127,068 46,061 134,603
============= ============= ============ ============ =========== =============
[WIDE TABLE CONTINUED FROM ABOVE]
TAX-FREE MINNESOTA TAX-FREE
INCOME FUND INCOME FUND
---------------------------- ----------------------------
SIX MONTHS SIX MONTHS
ENDED ENDED
SEPTEMBER 30, YEAR ENDED SEPTEMBER 30, YEAR ENDED
1997 MARCH 31, 1997 MARCH 31,
(UNAUDITED) 1997 (UNAUDITED) 1997
------------- ------------- ------------- ------------
OPERATIONS:
Net investment income .................... $ 10,256,822 $ 16,668,893 $ 2,856,299 $ 4,095,554
Net realized gain (loss) on investments .. 3,230,371 1,239,489 (1,685) (54,294)
Net change in unrealized appreciation
(depreciation) of investments ......... 9,366,257 1,148,455 2,204,639 225,585
------------- ------------- ------------- ------------
Net increase in net assets resulting
from operations ..................... 22,853,450 19,056,837 5,059,253 4,266,845
------------- ------------- ------------- ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income .................... (10,249,396) (16,676,319) (2,847,221) (4,095,554)
Net realized gains on investments ........ -- -- -- --
------------- ------------- ------------- ------------
Total distributions ................... (10,249,396) (16,676,319) (2,847,221) (4,095,554)
------------- ------------- ------------- ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold ................ 129,502,778 155,421,758 46,154,827 53,475,364
Reinvested distributions ................. 7,744,673 12,524,280 2,279,139 3,198,228
Payments for shares redeemed ............. (56,857,991) (107,554,950) (28,674,302) (25,849,251)
------------- ------------- ------------- ------------
Increase (decrease) in net assets
from capital share transactions ..... 80,389,460 60,391,088 19,759,664 30,824,341
------------- ------------- ------------- ------------
Total increase (decrease) in net
assets ............................ 92,993,514 62,771,606 21,971,696 30,995,632
NET ASSETS
Beginning of period ...................... 342,540,206 279,768,600 93,975,904 62,980,272
------------- ------------- ------------- ------------
End of period ............................ $ 435,533,720 $ 342,540,206 $ 115,947,600 $ 93,975,904
============= ============= ============= ============
NET ASSETS CONSIST OF:
Capital (par value and paid-in surplus) .. $ 417,712,782 $ 337,323,322 $ 113,018,229 $ 93,258,565
Undistributed (distributions in excess
of) net investment income ............. -- (7,426) -- (9,078)
Accumulated net realized gain (loss)
from security transactions ............ 1,999,328 (1,231,043) (472,742) (471,057)
Unrealized appreciation (depreciation)
on investments ........................ 15,821,610 6,455,353 3,402,113 1,197,474
------------- ------------- ------------- ------------
$ 435,533,720 $ 342,540,206 $ 115,947,600 $ 93,975,904
============= ============= ============= ============
CAPITAL TRANSACTIONS IN SHARES:
Sold ..................................... 12,723,772 15,592,536 4,494,799 5,256,072
Reinvested distributions ................. 759,807 1,256,626 221,326 314,798
Redeemed ................................. (5,612,130) (10,828,540) (2,791,188) (2,547,449)
------------- ------------- ------------- ------------
Net increase (decrease) .................... 7,871,449 6,020,622 1,924,937 3,023,421
============= ============= ============= ============
</TABLE>
See accompanying notes to financial statements on pages 42-49.
<PAGE>
SIT MUTUAL FUNDS
NOTES TO FINANCIAL STATEMENTS
(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 of the Sit Mutual Funds. The
investment objective for each Fund is as follows:
FUND INVESTMENT OBJECTIVE
---- --------------------
Money Market Maximum current income with the
preservation of capital and maintenance
of liquidity.
U.S. Government Securities High current income and safety of
principal.
Bond Maximize total return, consistent with
the preservation of capital.
Tax-Free Income High level of current income that is
exempt from federal income tax,
consistent with the preservation of
capital.
Minnesota Tax-Free Income High level of current income that is
exempt from federal regular income tax
and Minnesota regular personal income
tax, consistent with the preservation of
capital.
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
supplied by an independent pricing vendor 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 Boards 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. Gains and losses are calculated on the
identified-cost basis. Interest, including level-yield amortization of
long-term bond premium and discount, is recorded on the accrual basis.
Delivery and payment for securities which have been purchased by the
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 may increase or
decrease in value prior to delivery, and each Fund maintains, in a
segregated account with its custodian, assets with a market value equal
to the amount of its purchase commitments. As of September 30, 1997,
the Minnesota Tax-Free Income, Tax-Free Income, and U.S. Government
Securities Funds had entered into when-issued or forward commitments of
$710,000, $8,516,225, and $570,498, respectively.
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.
<PAGE>
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 U.S. Government Securities, Bond,
Tax-Free Income, and Minnesota Tax-Free Income Fund has a capital loss
carryover of $453,176, $31,553, $1,233,011, and $468,224, respectively,
at March 31, 1997 which, if not offset by subsequent capital gains,
will begin to expire in 2003. 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.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported results. Actual
results could differ from those estimates.
(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, 1997, were as follows:
Purchases Proceeds
--------- --------
U.S. Government Securities Fund 34,619,998 19,675,710
Bond Fund 2,965,487 2,260,249
Tax-Free Income Fund 104,814,195 35,837,872
Minnesota Tax-Free Income Fund 24,670,441 6,352,692
For Money Market Fund during the six months ended September 30, 1997,
purchases of and proceeds from sales and maturities of investment
securities aggregated $520,348,050 and $525,103,038 respectively.
(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
Funds' assets and provides research, statistical and advisory services,
and pays related office rental,
<PAGE>
executive expenses and executive salaries. SIA also is obligated to pay
all of Money Market, U.S. Government Securities, Bond, Tax-Free Income,
and Minnesota Tax Free Income 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%
Tax-Free Income Fund .80%
Minnesota Tax-Free Income Fund .80%
First Over
$50 Million $50 Million
----------- -----------
Money Market Fund .80% .60%
U.S. Government Securities Fund 1.00% .80%
For the period April 1, 1995, through December 31, 1997, 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, 1997, this voluntary fee waiver may be discontinued by the
Adviser in its sole discretion.
For the period April 1, 1995, through December 31, 1997, 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, 1997, 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, 1997:
% Shares
Shares Outstanding
------ -----------
Money Market Fund 5,101,321 15.66
U.S. Government Securities Fund 515,791 6.19
Bond Fund 72,993 10.26
Tax-Free Income Fund 1,478,362 3.50
Minnesota Tax-Free Income Fund 418,267 3.73
(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:
<PAGE>
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>
Six Months Period From
Ended November 1,
September 30, Years Ended March 31, 1993 to
1997 ---------------------------------------- March 31,
(Unaudited) 1997 1996 1995 1994
==================================================================================================================================
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE:
Beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ----------------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income 0.03 0.05 0.05 0.04 0.01
- ----------------------------------------------------------------------------------------------------------------------------------
Total from operations 0.03 0.05 0.05 0.04 0.01
- ----------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (0.03) (0.05) (0.05) (0.04) (0.01)
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE:
End of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Total investment return (1) 2.61% 5.04% 5.44% 4.57 1.14%
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000's omitted) $ 32,564 $ 32,668 $ 21,260 $ 29,822 $ 17,864
- ----------------------------------------------------------------------------------------------------------------------------------
RATIOS:
Expenses to average daily net assets 0.50%(2) 0.50%(2) 0.50%(2) 0.50%(2) 0.50%(2)
Net investment income to average daily net assets 5.10%(2) 4.93%(2) 5.35%(2) 4.63%(2) 2.76%(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) Percentages for the periods ended September 30, 1997 and March 31, 1994
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, 1997, and March 31, 1997, 1996, 1995 and 1994, the
investment adviser voluntarily absorbed $44,736, $78,042, $66,862,
$63,828, $17, 565, respectively, in expenses that were otherwise
payable by the Fund. Had the Fund incurred these expenses, the ratio of
expenses to average daily net assets would have been .80% for each of
these periods and the ratio of net investment income to average daily
net assets would have been 4.80%, 4.63%, 5.05%, 4.33%, 2.46%,
respectively.
<PAGE>
SIT U.S. GOVERNMENT SECURITIES FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Six Months
Ended Nine Months
September 30, Years Ended March 31, Ended
1997 ---------------------------------------- March 31,
(Unaudited) 1997 1996 1995 1994
===================================================================================================================================
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE:
Beginning of period $ 10.28 $ 10.47 $ 10.28 $ 10.50 $ 10.73
- -----------------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income .31 .65 .70 .67 .47
Net realized and unrealized gains
(losses) on investments .31 (.19) .19 (.22) (.18)
- -----------------------------------------------------------------------------------------------------------------------------------
Total from operations .62 .46 .89 .45 .29
- -----------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (.31) (.65) (.70) (.67) (.47)
From realized gains -- -- -- -- (.05)
- -----------------------------------------------------------------------------------------------------------------------------------
Total Distributions (.31) (.65) (.70) (.67) (.52)
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE:
End of period $ 10.59 $ 10.28 $ 10.47 $ 10.28 $ 10.50
- -----------------------------------------------------------------------------------------------------------------------------------
Total investment return (1) 6.13% 4.55% 8.87% 4.47% 2.70%
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000's omitted) $ 88,296 $ 73,393 $ 52,450 $ 37,454 $ 38,683
RATIOS:
Expenses to average daily net assets 0.80%(2) 0.80%(2) 0.80%(2) 0.80%(2) 0.86%(2)
Net investment income to average daily net assets 5.97%(2) 6.30%(2) 6.72%(2) 6.48%(2) 5.79%(2)
Portfolio turnover rate (excluding short-term securities) 25.31% 85.21% 51.37% 38.51% 73.87%
</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, 1997 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, 1997 and March 31, 1997, 1996, 1995 and 1994, the
investment adviser voluntarily absorbed $50,137, $99,999, $88,625,
$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 .93% and .97% for the periods
ended September 30 and March 31, 1997, respectively and 1.00% for the
periods ended March 31, 1996, 1995, and 1994 and the ratio of net
investment income to average daily net assets would have been 5.84%,
6.13%, 6.52%, 6.28%, and 5.65%, respectively.
<PAGE>
SIT BOND FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Six Months Period From
Ended December 1,
September 30, Years Ended March 31, 1993 (1) to
1997 ---------------------------------- March 31,
(Unaudited) 1997 1996 1995 1994
===============================================================================================================================
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE:
Beginning of period $ 9.62 $ 9.83 $ 9.48 $ 9.69 $ 10.00
- -------------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income .32 .64 .64 .62 .19
Net realized and unrealized
gains (losses) on investments .41 (.14) .35 (.21) (.31)
- -------------------------------------------------------------------------------------------------------------------------------
Total from operations .73 .50 .99 .41 (.12)
- -------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (.32) (.64) (.64) (.62) (.19)
From realized gains -- (.07) -- -- --
- -------------------------------------------------------------------------------------------------------------------------------
Total distributions (.32) (.71) (.64) (.62) (.19)
- -------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE:
End of period $ 10.03 $ 9.62 $ 9.83 $ 9.48 $ 9.69
- -------------------------------------------------------------------------------------------------------------------------------
Total investment return (2) 7.66% 5.21% 10.57% 4.51% (1.22%)
- -------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000's omitted) $ 7,142 $ 6,403 $ 5,222 $ 3,533 $ 3,403
RATIOS:
Expenses to average daily net assets 0.80%(3) 0.80% 0.80% 0.80% 0.80%(3)
Net investment income to average daily net assets 6.42%(3) 6.52% 6.49% 6.63% 6.24%(3)
Portfolio turnover rate (excluding short-term securities) 34.47% 128.06% 159.45% 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.
<PAGE>
SIT TAX-FREE INCOME FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Six Months
Ended Nine Months
September 30, Years Ended March 31, Ended
1997 -------------------------------------- March 31,
(Unaudited) 1997 1996 1995 1994
===================================================================================================================================
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE:
Beginning of period $ 9.98 $ 9.88 $ 9.70 $ 9.63 $ 10.02
- -----------------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income .28 .56 .56 .56 .43
Net realized and unrealized gains
(losses) on investments .34 .10 .18 .09 (.30)
- -----------------------------------------------------------------------------------------------------------------------------------
Total from operations .62 .66 .74 .65 .13
- -----------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (.28) (.56) (.56) (.56) (.43)
From realized gains -- -- -- (.02) (.09)
- -----------------------------------------------------------------------------------------------------------------------------------
Total distributions (.28) (.56) (.56) (.58) (.52)
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE:
End of period $ 10.32 $ 9.98 $ 9.88 $ 9.70 $ 9.63
- -----------------------------------------------------------------------------------------------------------------------------------
Total investment return (1) 6.25% 6.82% 7.73% 7.00% 1.19%
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000's omitted) $435,534 $342,540 $279,769 $255,157 $324,691
RATIOS:
Expenses to average daily net assets 0.77%(2) 0.79%(2) 0.80%(2) 0.79%(2) 0.77%(2)
Net investment income to average daily net assets 5.43%(2) 5.63%(2) 5.65%(2) 5.84%(2) 5.68%(2)
Portfolio turnover rate (excluding short-term securities) 9.98% 25.34% 25.50% 13.13% 47.56%
</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, 1997 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, 1997 and March 31, 1997, 1996,
1995 and 1994, the investment adviser voluntarily absorbed $63,372,
$46,819, $15,540, $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 the
periods ended September 30, 1997, and March 31, 1997, 1996, 1995 and
1994, and the ratio of net investment income to average daily net
assets would have been 5.39%, 5.61%, 5.65%, 5.83% and 5.65%,
respectively.
<PAGE>
SIT MINNESOTA TAX-FREE INCOME FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Six Months Period From
Ended December 1,
September 30, Years Ended March 31, 1993 (1) to
1997 ------------------------------------ March 31,
(Unaudited) 1997 1996 1995 1994
===================================================================================================================================
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE:
Beginning of period $ 10.14 $ 10.09 $ 9.96 $ 9.79 $ 10.00
- -----------------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income .31 .57 .57 .56 .17
Net realized and unrealized gains
(losses) on investments .22 .05 .13 .17 (.21)
- -----------------------------------------------------------------------------------------------------------------------------------
Total from operations .53 .62 .70 .73 (.04)
- -----------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (.31) (.57) (.57) (.56) (.17)
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE:
End of period $ 10.36 $ 10.14 $ 10.09 $ 9.96 $ 9.79
- -----------------------------------------------------------------------------------------------------------------------------------
Total investment return (2) 4.96% 6.26% 7.12% 7.68% (0.80%)
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000's omitted) $ 115,948 $ 93,976 $ 62,980 $ 43,881 $ 18,105
RATIOS:
Expenses to average daily net assets 0.80%(3) 0.80% 0.80% 0.80% 0.80(3)
Net investment income to average daily net assets 5.42%(3) 5.56% 5.62% 5.72% 5.23(3)
Portfolio turnover rate (excluding short-term securities) 6.36% 17.16% 15.85% 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.
<PAGE>
[LOGO]
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:
Eugene C. Sit, CFA Chairman
Peter L. Mitchelson, CFA Vice Chairman
Michael C. Brilley Senior Vice President
Mary K. Stern President
Debra A. Sit, CFA Vice President - Investments,
Assistant Treasurer
Bryce A. Doty, CFA (1) Vice President - Investments
Paul J. Jungquist, CFA (2) Vice President - Investments
Paul E. Rasmussen Vice President & Treasurer
Michael P. Eckert Vice President - Group Manager
Michael J. Radmer Secretary
Carla J. Rose Assistant Secretary
(1) Bond, Balanced and U.S. Government Securities Funds only.
(2) Money Market Fund only.
