BOND FUNDS ANNUAL REPORT
YEAR ENDED MARCH 31, 1999
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(SM) MUTUAL FUNDS
THE INVESTMENT IS MUTUAL.(SM)
<PAGE>
A LOOK AT THE SIT MUTUAL FUNDS
Sit Mutual Funds are managed by Sit Investment Associates, Inc. Sit
Investment Associates 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 Associates currently manages approximately $7
billion for some of America's largest corporations, foundations and endowments.
Sit Mutual Funds are comprised of thirteen 100% NO-LOAD funds. 100% NO-LOAD
means that Sit Mutual 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.
Other features include:
* Free telephone exchange
* Dollar-cost averaging through an automatic investment plan
* Electronic transfer for purchases and redemptions
* Free check writing privileges on bond funds
* Retirement accounts including IRAs, Keoghs and 401(k) Plans
[GRAPHIC]
SIT FAMILY OF FUNDS
STABILITY: INCOME: GROWTH: HIGH GROWTH:
SAFETY OF PRINCIPAL INCREASED INCOME LONG-TERM CAPITAL LONG-TERM CAPITAL
AND CURRENT INCOME APPRECIATION APPRECIATION
AND INCOME
MONEY MARKET U.S. GOVERNMENT BALANCED MID CAP GROWTH
SECURITIES LARGE CAP GROWTH INTERNATIONAL GROWTH
TAX-FREE INCOME REGIONAL GROWTH SMALL CAP GROWTH
MINNESOTA TAX-FREE SCIENCE AND
INCOME TECHNOLOGY GROWTH
BOND DEVELOPING MARKETS
GROWTH
<PAGE>
SIT MUTUAL FUNDS
BOND FUNDS ANNUAL REPORT
TABLE OF CONTENTS
PAGE
----
Chairman's Letter................................................. 2
Performance Summary............................................... 4
Fund Reviews and Portfolios of Investments
Money Market Fund........................................... 6
U.S. Government Securities Fund............................. 10
Bond Fund................................................... 16
Tax-Free Income Fund........................................ 20
Minnesota Tax-Free Income Fund.............................. 38
Notes to Portfolios of Investments................................ 49
Statements of Assets and Liabilities.............................. 50
Statements of Operations.......................................... 51
Statements of Changes in Net Assets............................... 52
Notes to Financial Statements..................................... 54
Financial Highlights.............................................. 58
Independent Auditors' Report...................................... 63
Results of Shareholder Meeting.................................... 64
Federal Income Tax Information.................................... 66
This document must be preceded or accompanied by a Prospectus.
<PAGE>
SIT MUTUAL FUNDS
CHAIRMAN'S LETTER - YEAR ENDED MARCH 31, 1999
Dear Fellow Shareholders:
After remaining on the sideline during the first half of the year, the
Federal Reserve adopted a more accommodative monetary policy in the fall,
decreasing the federal funds rate three times in quick succession. The Fed
reduced the federal funds rate from 5.50% on September 29th to 4.75% on November
17th, where it has remained ever since. Those moves were in response to
continued weakening in foreign economies, systemic pressures created by the
unwinding of highly-leveraged hedge funds and a global liquidity crisis. These
conditions resulted in a flight to quality, greatly increasing the demand for
U.S. Treasury securities. Many other central banks, however, also reduced
interest rates during this period, and confidence has since been restored to
global financial markets. While the Fed has left rates unchanged since November
and adopted a symmetrical policy bias in early 1999, interest rates have
continued to fall around the world, except in Japan, where they have begun to
rise from extremely low levels. The decline in U.S. bond yields due to autumn's
flight-to-quality has since been retraced.
Economic Overview
The domestic economy continues to exhibit amazing strength. Full year 1998
U.S. real GDP advanced +3.9%, the same as in 1997. This strength has continued
in 1999, with first quarter reported GDP of +4.5%, despite a drag of -2.9% from
net exports. On April 1, the U.S. economy marked its eighth year of expansion
and shows little signs of slowing. In fact, the economy is within ten months of
surpassing the 106-month "guns-and-butter" expansion of 1961-69, and seems
likely to exceed it. Consumer expenditures, the driving force behind this
expansion, are expected to remain robust. The latest consumer confidence reports
have been strong and will be supported by continuing low unemployment, which was
reported at 4.2% for March, a new low in the current cycle.
Inflation remained remarkably restrained during the past year. Through March,
the Consumer Price Index (CPI) increased only +1.5% year over year. The strength
of the U.S. economy, evidence of a pickup in manufacturing prices and obvious
increases in energy prices triggered by production cuts in OPEC and four
non-OPEC countries, have elevated inflation fears once again, however. As with
sectoral economic activity, the picture is mixed, but we have been expecting
since the beginning of 1999 that inflation would be increasing modestly, due
largely to rising energy prices. Our best estimate at this time is that an
increase of $5 per barrel over the average 1998 price of $14.37 per barrel would
add approximately +0.3 percentage points to the 1999 CPI. Offsetting this
expected increase, however, are downward trends in international consumer prices
and deceleration in the rate of growth of domestic average hourly earnings,
despite the low unemployment rate. These factors, combined with the Fed's
resolve to prevent a recurrence of serious inflation, lead us to believe that
U.S. inflationary pressures, while rising in 1999, will be contained.
Month-to-month reports, however, will exhibit volatility, and could temporarily
rattle financial markets.
In the first five months of the current fiscal year, the federal government
ran a deficit of $27.5 billion, which was $28.5 billion lower than a year ago.
With the heavy tax payment months of April, June and December yet to come, we
expect to see a unified budget surplus exceeding $100 billion in fiscal 1999.
The caps set on discretionary spending in the Budget Enforcement Act of 1990,
and subsequently revised in 1993 and 1997, are driving this surplus. Financing
the military action in Kosovo is not likely to seriously cut into this expected
surplus. The advent of large surpluses at many levels of government, however,
raises temptations not even dreamed of as recently as five years ago. We
continue to monitor public sector spending trends most carefully to determine
when accelerating expenditures may alter today's ideal mixture between growth
and inflation.
The Fed has left interest rates unchanged at its last three meetings. In
addition, it adopted a symmetrical policy bias in February. In so doing, the
central bank appears willing to take a wait-and-see attitude, balancing the risk
of an acceleration in inflation against the possibility that weaker economies
abroad will ultimately cause the U.S. economy to stall. It is this seeming
contradiction, that the economy can grow strongly without igniting inflation,
that is causing the Fed
2
<PAGE>
to examine its traditional models of behavior. If this environment of relatively
stable inflation persists, it may lead the Fed to be more reactive than
proactive in its future policy moves. Other central banks, including the
European Central Bank, the Bank of England, and the Bank of Canada, have
continued the precedent begun last fall, reducing rates still further. While
many other parts of the world are also experiencing low inflation, they are not
enjoying the robust growth that the U.S. is, leaving these central banks to try
to prime the pump through more accommodative monetary policy.
Strategy Summary
We expect domestic economic growth to slow somewhat while inflation ticks up
modestly and the Fed keeps policy steady. As a result, we do not expect
long-term interest rates to return below the 5.0% levels experienced last fall
any time soon. A more likely scenario is for interest rates to stabilize near
their current higher levels. In this environment, interest income is anticipated
to be the primary component of portfolios' total return in the months ahead. Our
taxable portfolios are maintaining durations near those of their respective
benchmarks. We will continue to emphasize those securities that provide an
incremental yield advantage. In the municipal market, while supply has decreased
from the record levels of a year ago, it is still heavy relative to demand.
Compared to Treasuries, yield ratios have fallen from the high levels of last
autumn, when long-term municipal bond yields actually exceeded those of
comparable maturity Treasuries, but they are still at historically attractive
levels. The municipal yield curve remains very flat for maturities longer than
fifteen years. While credit spreads have widened slightly, particularly in the
health care sector, they are still at historically narrow levels. As a result,
we are focussing on intermediate maturity higher quality securities for
inclusion in the municipal portfolios.
We appreciate your interest and investment in Sit Mutual Funds, and we look
forward to assisting you in achieving your long-term investment goals.
With best wishes,
/s/ Eugene C. Sit
Eugene C. Sit, CFA
Chairman and Chief Investment Officer
3
<PAGE>
SIT MUTUAL FUNDS
YEAR ENDED MARCH 31, 1999 BOND FUNDS PERFORMANCE SUMMARY
BOND MARKET REVIEW
Extraordinary volatility was exhibited during the past year in domestic
taxable bond markets. While nominal rates have generally fallen over this
period, it has not been a smooth ride. After peaking in the spring of 1998,
Treasury bill and 30-year bond yields fell precipitously, hitting their lows of
3.62% and 4.71%, respectively, in October amidst the global liquidity crisis.
Since then, these rates have been rising for Treasury bill and 30-year bonds,
stabilizing around 4.50% and 5.50%, respectively, at March 31, 1999. The
corporate sector was also volatile, as yield spreads widened during autumn to
levels not seen since 1991. As global financial markets have appeared to
stabilize, the domestic corporate profit picture has improved. Inflation has
remained dormant, and corporate yield spreads have retraced much of their
widening despite continued heavy issuance. The mortgage-backed sector
experienced very high levels of prepayments during most of the year, resulting
in considerable spread widening. As rates have risen during late 1998 and early
1999, prepayments have slowed, and the mortgage-backed sector has also retraced
much of its spread widening. Sector selection was very important in the taxable
market. U.S. Treasury securities and asset-backed securities posted the
strongest returns while lesser-rated corporate and mortgage pass-through
securities lagged.
Municipal bond yields, measured by the Bond Buyer 40-Bond Index, ranged from
a high of 5.44% in April to a low of 4.95% in October and did not exhibit nearly
as much volatility as U.S. Treasury yields. In fact, autumn of this past year
marked one of the rare occasions in history when long-term municipal bond yields
were actually higher than 30-year Treasury bond yields. Unlike the taxable bond
market where credit quality spreads are quite wide, municipal quality spreads
have remained at historically narrow levels, although some spread widening has
occurred in the health care sector. Returns across various sectors of the
municipal market, such as general obligations, stayed within a relatively narrow
range for the past year. The utility and transportation sectors were the
strongest performers, while the housing sector lagged, primarily due to
increased prepayments in single-family mortgages.
<TABLE>
<CAPTION>
1990 1991
---- ----
<S> <C> <C>
SIT MONEY MARKET FUND (1) -- --
SIT U.S. GOV'T. SECURITIES FUND 10.97% 12.87%
SIT BOND FUND -- --
SIT TAX-FREE INCOME FUND 7.29 9.25
SIT MINNESOTA TAX-FREE
INCOME FUND -- --
3-MONTH U.S. TREASURY BILL INDEX -- --
LEHMAN INTER. GOVERNMENT BOND INDEX 9.56 14.11
LEHMAN AGGREGATE BOND INDEX -- --
LEHMAN 5-YEAR MUNICIPAL BOND INDEX 7.70 11.41
<CAPTION>
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 INDEX 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
</TABLE>
(1) Converted from Sit Investment Reserve Fund to Sit Money Market Fund on
11/1/93.
(2) Period from Fund inception through calendar year end.
(3) Based on the last 12 monthly distributions of net investment income and
average NAV as of 3/31/99.
(4) Figure represents 7-day compound effective yield. The 7-day simple yield as
of 3/31/99 was 4.45%.
(5) For individuals in the 28%, 31%, 36%, and 39.6% federal tax brackets, the
federal tax equivalent yields are 6.31%, 6.58%, 7.09% and 7.52%,
respectively (Income subject to state tax, if any).
(6) For Minnesota residents in the 28%, 31%, 36% and 39.6% federal tax brackets,
the double exempt tax equivalent yields are 6.86%, 7.16%, 7.72% and 8.18%,
respectively (Assumes the maximum Minnesota tax bracket of 8.5%).
4
<PAGE>
TOTAL RETURN - CALENDAR YEAR
<TABLE>
<CAPTION>
YIELD
YTD AS OF DISTRIBUTION
1992 1993 1994 1995 1996 1997 1998 1999 3/31/99 RATE(3)
- ------------------------------------------------------------------------------ -----------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -- 0.46%(2) 3.84% 5.58% 5.08% 5.22% 5.17% 1.11% 4.54%(4)
5.43% 7.34 1.77 11.50 4.99 8.19 6.52 0.00 5.25 5.07%
- -- 0.34(2) -1.31 16.83 4.25 9.44 6.52 0.02 5.77 5.34
7.71 10.42 -0.63 12.86 5.69 9.87 6.29 0.50 4.54(5) 4.92
- -- 1.60(2) 0.63 11.90 5.89 8.19 6.14 0.65 4.52(6) 4.87
- -- 0.53(2) 4.47 5.98 5.27 5.32 5.01 1.14
6.93 8.17 -1.75 14.41 4.06 7.72 8.49 -0.27
- -- 0.54(2) -2.92 18.47 3.63 9.65 8.69 -0.50
7.62 8.73 -1.28 11.65 4.22 6.38 5.84 1.04
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS FOR THE
PERIODS ENDED MARCH 31, 1999
TOTAL RETURN -------------------------------------------------
QUARTER SIX MONTHS SINCE
ENDED 3/31/99 ENDED 3/31/99 1 YEAR 5 YEARS 10 YEARS INCEPTION
- ------------------------------ -------------------------------------------------
<S> <C> <C> <C> <C>
1.11% 2.34% 4.99% 5.06% -- 4.89%
0.00 0.93 5.05 6.50 7.85% 7.95
0.02 0.05 5.30 7.32 -- 6.60
0.50 1.04 5.30 7.50 7.55 7.55
0.65 1.51 5.58 7.14 -- 6.52
1.14 2.24 4.84 5.24 -- 5.09
-0.27 -0.03 6.58 6.79 8.20 7.93
-0.50 -0.16 6.49 7.79 -- 6.81
1.04 1.87 5.71 6.10 7.19 6.89
</TABLE>
PERFORMANCE FIGURES ARE HISTORICAL AND DO NOT GUARANTEE FUTURE RESULTS.
INVESTMENT RETURNS AND PRINCIPAL VALUE WILL VARY, AND YOU MAY HAVE A GAIN OR
LOSS WHEN YOU SELL SHARES. AVERAGE ANNUAL TOTAL RETURNS INCLUDE CHANGES IN SHARE
PRICE AS WELL AS REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAINS.
5
<PAGE>
SIT MONEY MARKET FUND REVIEW
YEAR ENDED MARCH 31, 1999
SENIOR PORTFOLIO MANAGERS
MICHAEL C. BRILLEY
PAUL J. JUNGQUIST, CFA
Dear Fellow Shareholders:
The Sit Money Market Fund provided investors with a +4.99% return for the
year ended March 31, 1999, compared to a +4.70% return for the Lipper Analytical
Services Money Market Fund Average. The Fund's performance ranked 63rd of 316
funds in its Lipper peer group category for the twelve-month period.
The Federal Reserve Board decreased the federal funds rate three times in
quick succession during autumn of 1998, reducing it from 5.50% to 4.75%, where
it has remained. Three-month Treasury bill yields traded in a wide range over
the past twelve months. After peaking at 5.23% in late May of 1998, Treasury
bill yields fell to a low of 3.62% during October of 1998. The global liquidity
crunch greatly increased the demand for U.S. Treasury securities, which are
viewed as a safe haven by many of the world's investors. As the global liquidity
crisis abated, three-month Treasury bill yields returned to the 4.50% area,
where they have remained since November. Current yield levels imply that the
market is expecting no policy change by the Fed in the second or third quarter
of 1999. Strong economic growth and signs of commodity price inflation are
offset by lower interest rates around the world and reduced financing needs by
the Treasury. Accordingly, the Fund will try to take advantage of current yield
levels and maintain the average maturity of the portfolio in a range of 20 to 40
days in anticipation of no near-term change in policy by the Fed.
The Fund has produced competitive returns by focusing on credit research and
avoiding the use of risky derivatives. We intend to continue these conservative
policies in the future. As economic activity continues to be strong, we do not
foresee a significant impact on the short-term creditworthiness of top-tier
commercial paper issuers in general. Continued consolidation in the energy and
the financial services sectors may result in some substantially different credit
profiles. Therefore, we will monitor the Fund's permissible credits in these
sectors particularly closely. The Fund continues to diversify its core holdings
and its industry exposure. In the months ahead, we plan to add top-tier credits
in the technology, capital goods 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 short-term debt instruments
which mature in 397 days or less and by maintaining a dollar-weighted portfolio
maturity of 90 days or less.
An investment in the Fund is neither insured nor guaranteed by the U.S.
government and there can be no assurance that the Fund will be able to maintain
a stable net asset value of $1.00 per share.
PORTFOLIO SUMMARY
Net Asset Value 3/31/99: $1.00 Per Share
3/31/98: $1.00 Per Share
Total Net Assets: $61.44 Million
PORTFOLIO STRUCTURE
(% of total net assets)
Allocation By Sector
[BAR CHART]
U.S. Government 13.6
Diversified Finance 13.5
Consumer Loan Finance 13.4
Captive Equipment Finance 11.6
Captive Auto Finance 10.3
Consumer Non-Durables 7.5
Financial Services 5.5
Insurance 4.0
Utilities 4.0
Retail 3.5
Capital Goods 3.4
Energy 3.3
Captive Oil Finance 3.1
Technology/Bus. Equipment 0.8
Other Assets and Liabilities 2.5
6
<PAGE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS* CUMULATIVE TOTAL RETURNS*
----------------------------------------- ------------------------------------------
Money Lipper Money 3-Month Money Lipper Money 3-Month
Market Market U.S. Treasury Market Market U.S. Treasury
Fund Average Bill Index Fund Average Bill Index
----------------------------------------- ------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
3 Months 1.11% 1.05% 1.14% 1.11% 1.05% 1.14%
(not annualized)
1 Year 4.99 4.70 4.84 4.99 4.70 4.84
3 Year 5.11 4.82 5.15 16.11 15.17 16.26
5 Year 5.06 4.86 5.24 28.02 26.75 29.09
Inception 4.89 4.70 5.09 29.48 28.24 30.85
(11/1/93)
</TABLE>
* As of 3/31/99
PERFORMANCE IS HISTORICAL AND ASSUMES REINVESTMENT OF ALL DIVIDENDS AND CAPITAL
GAINS. MONEY FUNDS ARE NEITHER INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT.
THERE IS NO ASSURANCE THAT A FUND WILL MAINTAIN A $1 SHARE VALUE. YIELD
FLUCTUATES. PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. MANAGEMENT
FEES AND ADMINISTRATIVE EXPENSES ARE INCLUDED IN THE FUND'S PERFORMANCE;
HOWEVER, FEES AND EXPENSES ARE NOT INCORPORATED IN THE 3-MONTH U.S. TREASURY
BILL INDEX. THE LIPPER AVERAGES AND INDICES ARE OBTAINED FROM LIPPER ANALYTICAL
SERVICES, INC., A LARGE INDEPENDENT EVALUATOR OF MUTUAL FUNDS.
GROWTH OF $10,000
[PLOT POINTS CHART]
The sum of $10,000 invested at inception (11/1/93) and held until 3/31/99 would
have grown to $12,948 in the Fund or $13,085 in the 3-Month U.S. Treasury Bill
Index assuming reinvestment of all dividends and capital gains.
QUALITY RATINGS
(% of Net Assets)
AS RATED BY MOODY'S, S&P AND FITCH
First Tier Securities
100%
[PIE CHART]
---------------------------
First Tier Securities 100%
Second Tier Securities 0%
---------------------------
7
<PAGE>
SIT MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS - MARCH 31, 1999
- ------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
- ------------------------------------------------------------------------
COMMERCIAL PAPER (83.9%) (2)
CAPITAL GOODS (3.4%)
Deere & Co.:
500,000 4.82 %, 4/12/99 $499,271
1,100,000 4.87 %, 5/27/99 1,091,754
500,000 4.86 %, 6/15/99 494,990
-------------
2,086,015
-------------
CAPTIVE AUTO FINANCE (10.3%)
Chrysler Financial Corp.:
500,000 4.83 %, 4/13/99 499,203
500,000 4.86 %, 4/15/99 499,067
Daimler Chrysler Hldgs.:
650,000 4.94 %, 5/28/99 644,978
500,000 4.87 %, 6/4/99 495,716
Ford Motor Credit Corp.:
400,000 4.87 %, 4/6/99 399,732
400,000 4.88 %, 4/7/99 399,679
1,100,000 4.87 %, 5/5/99 1,094,987
226,000 4.87 %, 5/21/99 224,484
General Motors Acceptance Corp.:
500,000 4.85 %, 4/19/99 498,803
440,000 4.84 %, 4/23/99 438,715
600,000 4.86 %, 5/12/99 596,706
560,000 4.93 %, 5/21/99 556,212
-------------
6,348,282
-------------
CAPTIVE EQUIPMENT FINANCE (11.6%)
Caterpillar Finance, Inc.:
1,000,000 4.87 %, 5/17/99 993,841
1,100,000 4.87 %, 5/18/99 1,093,077
IBM Credit Corp.:
800,000 4.87 %, 6/10/99 792,518
800,000 4.85 %, 6/16/99 791,893
John Deere Capital Corp.:
500,000 4.82 %, 4/14/99 499,139
400,000 4.85 %, 5/12/99 397,809
600,000 4.88 %, 5/19/99 596,144
1,000,000 Xerox Capital Corp., 4.84%, 5/3/99 995,769
1,000,000 Xerox Credit Corp., 4.85%, 5/13/99 994,388
-------------
7,154,578
-------------
CAPTIVE OIL FINANCE (3.1%)
Chevron Oil Finance:
600,000 4.82 %, 4/15/99 598,885
500,000 4.85 %, 4/29/99 498,133
800,000 4.85 %, 5/4/99 796,476
-------------
1,893,494
-------------
- ------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
- ------------------------------------------------------------------------
CONSUMER LOAN FINANCE (13.4%)
American Express Credit Corp.:
300,000 4.86 %, 4/20/99 299,235
725,000 4.85 %, 4/30/99 722,197
875,000 4.86 %, 5/11/99 870,313
375,000 4.86 %, 5/26/99 372,239
450,000 American General Financial,
4.91 %, 5/20/99 447,023
1,000,000 Commercial Credit Corp.,
4.87 %, 4/5/99 999,461
Household Finance Corp.:
700,000 4.86 %, 5/14/99 695,970
925,000 4.85 %, 6/14/99 915,873
650,000 4.86 %, 6/18/99 643,240
Norwest Financial, Inc.:
500,000 4.85 %, 4/26/99 498,333
600,000 4.88 %, 5/10/99 596,867
1,175,000 4.87 %, 5/24/99 1,166,657
-------------
8,227,408
-------------
CONSUMER NON-DURABLES (7.5%)
Coca Cola Co.:
1,500,000 4.81 %, 4/28/99 1,494,656
600,000 4.82 %, 5/25/99 595,698
1,000,000 Coca Cola Enterprises,
4.85 %, 4/12/99 (5) 998,533
500,000 Proctor & Gamble Co., 4.83%, 5/6/99 497,662
1,000,000 Walt Disney Co., 4.78, 4/6/99 999,342
-------------
4,585,891
-------------
DIVERSIFIED FINANCE (13.5%)
Associates First Capital Corp.:
500,000 4.89 %, 4/16/99 499,000
700,000 4.90 %, 6/1/99 694,259
700,000 4.90 %, 6/2/99 694,165
375,000 4.89 %, 6/29/99 370,522
CIT Group Holdings, Inc.:
500,000 4.91 %, 4/8/99 499,528
500,000 4.91 %, 4/9/99 499,461
640,000 4.88 %, 6/7/99 634,259
425,000 4.85 %, 6/17/99 420,637
General Electric Capital Corp.:
600,000 4.88 %, 4/5/99 599,678
500,000 4.86 %, 4/13/99 499,198
400,000 4.90 %, 6/3/99 396,612
600,000 4.87 %, 6/28/99 592,945
8
<PAGE>
- ------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
- ------------------------------------------------------------------------
General Electric Capital Services:
500,000 4.87 %, 4/21/99 498,661
500,000 4.87 %, 4/27/99 498,259
500,000 4.88 %, 5/7/99 497,585
400,000 4.90 %, 6/9/99 396,289
-------------
8,291,058
-------------
ENERGY (3.3%)
Texaco, Inc.:
500,000 4.82 %, 4/1/99 500,000
500,000 4.88 %, 4/9/99 499,460
550,000 4.83 %, 4/23/99 548,390
500,000 4.85 %, 5/26/99 496,333
-------------
2,044,183
-------------
FINANCIAL SERVICES (5.5%)
1,300,000 Citigroup, Inc., 4.89, 4/14/99 1,297,719
Transamerica Finance Corp.:
700,000 4.89 %, 5/4/99 696,888
600,000 4.80 %, 5/17/99 596,351
800,000 4.88 %, 5/25/99 794,204
-------------
3,385,162
-------------
INSURANCE (4.0%)
1,000,000 American Family Financial,
4.84 %, 5/10/99 994,800
American General Corp.:
700,000 4.86 %, 5/6/99 696,733
350,000 4.87 %, 5/11/99 348,122
400,000 4.87 %, 5/20/99 397,376
-------------
2,437,031
-------------
- ------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
- ------------------------------------------------------------------------
RETAIL (3.5%)
Sears Roebuck & Co.:
500,000 4.87 %, 4/22/99 498,597
400,000 4.86 %, 5/3/99 398,293
700,000 4.89 %, 5/14/99 695,962
540,000 4.91 %, 6/11/99 534,835
-------------
2,127,687
-------------
TECHNOLOGY/BUSINESS EQUIPMENT (0.8%)
500,000 IBM Corp., 4.87%, 4/20/99 498,728
-------------
UTILITIES (4.0%)
1,000,000 Ameritech Capital Funding Corp.,
4.85 %, 5/7/99 (5) 995,180
500,000 A T & T Corp., 4.87%, 6/8/99 495,457
1,000,000 SBC Communications,
4.83 %, 4/19/99 (5) 997,590
-------------
2,488,227
-------------
Total commercial paper
(cost: $51,567,744) 51,567,744
-------------
U.S. GOVERNMENT SECURITIES (13.6%) (2)
8,339,000 FNMA Disc. Note, 4.82%, 4/1/99 8,339,000
-------------
(cost: $8,339,000)
Total investments in securities
(cost: $59,906,744) (7) $59,906,744
=============
See accompanying notes to portfolios of investments.
9
<PAGE>
SIT U.S. GOVERNMENT SECURITIES FUND REVIEW
YEAR ENDED MARCH 31, 1999
SENIOR PORTFOLIO MANAGERS
MICHAEL C. BRILLEY
BRYCE A. DOTY, CFA
Dear Fellow Shareholders:
The U.S. Government Securities Fund provided investors a +5.05% return for
the past 12 months, which was comparable to the +5.29% return of the Lipper U.S.
Government Fund average. The Fund holds a 5-Star Overall rating by
Morningstar(1) out of 1,521 funds in the taxable bond category. Morningstar also
rated the Fund #1 in the Best 5-Year Return category of 115 short-term
government bond funds in their latest Short-Term Government Overview (12/7/98).
The Fund was rated #2 for Morningstar's Highest 5-Year Rating category for its
combined low risk and high return characteristics and #4 in Morningstar's Lowest
5-Year Risk category.
U.S. Treasury yields fell significantly in the past twelve months. While the
yield of the 30-year U.S. Treasury ended March at 5.62%, it was as low as 4.70%
last fall. Declining interest rates provided significant price appreciation for
the Fund's U.S. Treasury holdings, making this the highest returning sector in
the Fund. Falling interest rates fueled a record amount of mortgage refinancing
over the past 12 months. The increased prepayment activity caused yield spreads
to widen in the mortgage and collateralized mortgage obligation (CMO) sectors.
As a result, while the Fund's mortgage and CMO holdings provided higher income
returns, they lagged its U.S. Treasury returns.
Activity last year included combining smaller mortgage pass-through
securities into larger pools that are more liquid and, thus, have higher market
values. The Fund subsequently sold some of the larger pools and reinvested some
of the proceeds into higher-yielding, smaller pools of mortgage pass-through
securities. The Fund has also increased its weighting in CMOs, which provide
more protection from prepayments than traditional pass-through securities.
Looking forward, we believe the days of continued lower and lower domestic
inflation are over. As a result, we do not expect long-term interest rates to
return to their recent sub-5.0 percent levels any time soon. A more likely
scenario is for a modest rise in inflation and more stable interest rates at the
current higher levels. As a result, we intend to keep the Fund's duration near
that of its benchmark and will continue to invest in securities that offer high
levels of interest income.
INVESTMENT OBJECTIVE AND STRATEGY
The objective of the U.S. Government Securities Fund is to provide high
current income and safety of principal, which it seeks to attain by investing
solely in debt obligations issues, 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 including those issued by Government
National Mortgage Association (GNMA), Federal National Mortgage Asociation
(FNMA), and Federal Home Loan Mortgage Corporation (FHLMC).
PORTFOLIO SUMMARY
Net Asset Value 3/31/99: $10.51 Per Share
3/31/98: $10.63 Per Share
Total Net Assets: $159.33 Million
30-Day SEC Yield: 5.25%
12-Month Distribution Rate: 5.07%
Average Maturity: 15.3 Years
Effective Duration: 3.1 Years (2)
(2) 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)
[BAR CHART]
GNMA Pass-Through 40.1
U.S. Treasury 21.6
Collateralized Mortgage Obligations 16.8
FNMA Pass-Through 10.3
FHLMC Pass-Through 6.9
Other Assets and Liabilities 4.3
10
<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. Gov't Bond
Fund Fund Average Index Fund Fund Average Index
-------------------------------------------- ----------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
3 Months 0.00% -1.31% -0.27% 0.00% -1.31% -0.27%
(not annualized)
1 Year 5.05 5.29 6.58 5.05 5.29 6.58
5 Years 6.50 6.59 6.79 37.03 37.58 38.90
10 Years 7.85 7.98 8.20 113.00 115.47 119.86
Inception 7.95 7.58 7.93 147.18 137.66 146.91
(6/2/87)
</TABLE>
* As of 3/31/99
(1) MORNINGSTAR PROPRIETARY RATINGS REFLECT HISTORICAL RISK-ADJUSTED PERFORMANCE
THROUGH 3/31/99. THESE RATINGS ARE SUBJECT TO CHANGE MONTHLY AND ARE CALCULATED
FROM THE FUNDS' 3-, 5-, AND 10-YEAR AVERAGE ANNUAL RETURNS IN EXCESS OF 90-DAY
TREASURY BILL RETURNS WITH APPROPRIATE FEE ADJUSTMENTS AND A RISK FACTOR THAT
REFLECTS FUND PERFORMANCE BELOW 90-DAY TREASURY BILL RETURNS. TEN PERCENT OF THE
FUNDS IN AN INVESTMENT CATEGORY RECEIVE 5 STARS, 22.5% RECEIVE 4, 35% RECEIVE 3,
AND 22.5% RECEIVE 2. IN THE TAXABLE BOND CATEGORY, SIT U.S. GOVERNMENT
SECURITIES FUND RECEIVED A 4-STAR RATING FOR THE 3-YEAR PERIOD OUT OF 1,521
FUNDS AND A 5-STAR RATING FOR THE 5- AND 10-YEAR PERIODS OUT OF 1,048 AND 371
FUNDS, RESPECTIVELY. PERFORMANCE FIGURES ARE HISTORICAL AND DO NOT GUARANTEE
FUTURE RESULTS. INVESTMENT RETURNS AND PRINCIPAL VALUE WILL VARY, AND YOU MAY
HAVE A GAIN OR LOSS WHEN YOU SELL SHARES. AVERAGE ANNUAL TOTAL RETURNS INCLUDE
CHANGES IN SHARE PRICE AS WELL AS REINVESTMENT OF ALL DIVIDENDS AND CAPITAL
GAINS. 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
[PLOT POINTS CHART]
The sum of $10,000 invested at inception (6/2/87) and held until 3/31/99 would
have grown to $24,718 in the Fund or $24,691 in the Lehman Intermediate
Government Bond Index assuming reinvestment of all dividends and capital gains.
ESTIMATED AVERAGE LIFE PROFILE
The Adviser's estimates of the dollar weighted average life of the portfolio's
securities, which may vary from their stated maturities.
[BAR CHART]
YEARS
-----
0-1 10.7%
1-5 61.2%
5-10 23.6%
10-20 4.0%
20+ 0.5%
11
<PAGE>
SIT U.S. GOVERNMENT SECURITIES FUND
PORTFOLIO OF INVESTMENTS - MARCH 31, 1999
- ------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
- ------------------------------------------------------------------------
MORTGAGE PASS-THROUGH SECURITIES (57.3%) (2)
FEDERAL HOME LOAN MORTGAGE CORPORATION (6.9%):
66,188 8.50%, 1/1/17 $69,801
12,113 8.75%, 12/1/01 12,510
587,727 8.75%, 1/1/17 622,192
49,543 9.00%, 10/1/04 52,544
197,906 9.00%, 12/1/05 206,412
35,611 9.00%, 1/1/06 37,135
273,822 9.00%, 5/1 - 7/1/09 290,725
146,014 9.00%, 10/1/13 151,204
1,829,451 9.00%, 5/1 - 11/1/16 1,941,838
1,843,602 9.00%, 1/1 - 10/1/17 1,956,499
487,347 9.00%, 6/1/18 516,973
486,890 9.00%, 10/1/19 515,214
676,369 9.00%, 5/1 - 8/1/21 714,961
565,723 9.25%, 8/1/09 600,589
212,869 9.50%, 10/1/08 226,151
617,658 9.50%, 2/1 - 6/1/10 656,490
203,063 9.50%, 1/1/11 215,760
659,010 9.50%, 6/1 - 10/1/16 699,902
234,588 9.50%, 6/1 - 9/1/17 249,599
108,487 9.50%, 12/1/18 115,313
138,548 9.75%, 12/1/08 148,260
69,377 9.75%, 6/1/17 74,283
317,765 10.25%, 6/1/10 344,120
163,289 10.25%, 2/1/17 176,958
83,363 10.50%, 4/1 - 7/1/04 88,537
1,444 11.00%, 10/1/00 1,521
99,211 11.00%, 12/1/11 109,106
146,783 11.25%, 10/1/09 162,310
-------------
10,956,907
-------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (10.3%):
263,244 8.50%, 8/1/06 273,516
20,989 8.875%, 3/1/17 22,294
548,571 9.00%, 5/1/09 578,912
125,520 9.00%, 4/1/10 132,406
914,770 9.00%, 11/1/16 964,799
1,135,190 9.00%, 1/1 - 12/1/17 1,199,052
979,011 9.00%, 11/1 - 12/15/19 1,056,588
165,217 9.00%, 9/1/20 174,403
289,447 9.00%, 9/1 - 11/1/21 305,779
953,079 9.25%, 7/1/10 1,008,653
140,246 9.25%, 4/1/12 149,538
79,286 9.375%, 5/1/16 84,046
96,956 9.50%, 9/1/08 102,836
198,420 9.50%, 1/1/11 211,749
272,956 9.50%, 5/1/14 292,830
- ------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
- ------------------------------------------------------------------------
371,332 9.50%, 4/1 - 7/1/16 394,606
887,605 9.50%, 11/1 - 12/1/18 949,244
968,750 9.50%, 10/1 - 12/1/19 1,028,363
2,102,682 9.50%, 4/1 - 9/1/20 2,237,029
893,407 9.75%, 1/1/13 976,047
121,121 10.00%, 3/1/11 131,188
71,717 10.00%, 9/1/20 77,147
2,743,839 10.25%, 8/15/13 3,034,493
31,792 10.75%, 11/1/10 34,793
552,357 11.00%, 10/1/06 588,603
40,461 11.00%, 4/1/14 44,562
Municipal (FNMA collateralized):
380,000 Alabama Hsg. Fin. Auth. Multifamily
Series 1999B, 5.70%, 9/1/03 (*) 378,298
-------------
16,431,774
-------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (40.1%) (3):
110,758 7.50%, 3/15/07 115,618
284,607 7.50%, 5/15/16 294,816
24,187 8.00%, 7/15/03 25,311
145,215 8.00%, 10/15/12 150,642
1,734,927 8.00%, 5/15 - 9/15/16 1,802,734
193,904 8.25%, 2/15 - 6/15/02 201,878
507,866 8.25%, 12/15/11 533,879
171,644 8.25%, 1/15/12 178,836
412,701 8.25%, 8/15/15 430,237
70,022 8.50%, 11/15/01 71,641
289,161 8.50%, 12/15/11 303,619
492,229 8.50%, 1/15/12 515,310
101,028 8.50%, 4/15/15 105,070
718,458 8.50%, 9/15/16 753,648
686,050 8.50%, 1/15/17 719,694
127,249 8.75%, 7/15/02 134,206
128,668 8.75%, 5/15/03 135,751
577,674 8.75%, 5/15 - 11/15/06 610,122
214,551 8.75%, 2/15 - 3/15/07 224,481
133,158 8.75%, 11/15/09 139,366
1,099,364 8.75%, 6/15 - 12/15/11 1,150,998
30,934 8.75%, 2/20/17 32,374
106,996 9.00%, 10/15/04 113,002
251,650 9.00%, 4/15/06 265,835
281,837 9.00%, 6/15 - 10/15/07 295,875
711,860 9.00%, 9/15 - 12/15/08 757,653
515,007 9.00%, 2/15 - 11/15/09 545,395
2,193,108 9.00%, 5/15 - 10/15/11 2,313,385
129,057 9.00%, 1/15/12 135,130
48,431 9.00%, 8/15/15 51,378
283,591 9.00%, 9/15 - 12/20/16 299,829
6,808,230 9.00%, 1/15 - 8/20/17 7,289,573
12
<PAGE>
- ------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
- ------------------------------------------------------------------------
7,550,700 9.00%, 12/15/19 8,032,405
146,150 9.00%, 7/20 - 10/20/21 153,567
306,843 9.10%, 5/15/18 326,649
49,505 9.25%, 4/15 - 9/15/01 52,010
130,025 9.25%, 4/15/03 137,321
222,408 9.25%, 3/15/05 235,039
270,370 9.25%, 4/15 - 11/15/10 288,445
279,401 9.25%, 11/15/11 292,837
135,083 9.25%, 4/15/12 141,534
146,581 9.25%, 10/15/16 155,463
955,767 9.25%, 2/20 - 11/20/17 1,008,661
81,090 9.50%, 1/15 - 3/15/05 85,098
152,975 9.50%, 1/15/06 161,823
2,954,703 9.50%, 9/15 - 12/15/09 3,169,105
1,085,760 9.50%, 1/15 - 11/15/10 1,143,257
438,570 9.50%, 1/15 - 3/15/11 459,845
2,573,010 9.50%, 2/15 - 12/15/16 2,746,376
3,994,227 9.50%, 1/15 - 12/20/17 4,299,360
1,409,677 9.50%, 4/15 - 10/20/18 1,504,814
2,277,346 9.50%, 4/15 - 12/15/19 2,439,391
89,879 9.50%, 6/15 - 10/15/20 96,176
335,146 9.50%, 1/15 - 8/15/21 359,337
10,809 9.75%, 5/15 - 10/15/99 10,784
27,485 9.75%, 5/15/01 28,876
118,361 9.75%, 11/15/02 125,240
172,612 9.75%, 7/15 - 12/15/03 182,565
31,369 9.75%, 3/15/04 33,197
257,500 9.75%, 8/15/05 272,625
155,179 9.75%, 2/15/06 168,272
430,403 9.75%, 8/15 - 9/15/09 458,218
1,557,688 9.75%, 8/15 - 12/15/10 1,656,820
635,386 9.75%, 11/15 - 12/15/12 675,991
192,627 9.75%, 4/15/18 206,596
132,057 10.00%, 8/15/02 139,984
143,912 10.00%, 11/15/03 151,557
104,050 10.00%, 5/15/04 110,237
640,446 10.00%, 7/15/05 678,981
115,614 10.00%, 1/15/06 122,497
147,536 10.00%, 11/15/08 157,095
86,893 10.00%, 5/15 - 11/15/09 92,865
329,117 10.00%, 6/15 - 10/15/10 350,410
96,949 10.00%, 1/15/11 103,267
177,764 10.00%, 10/15/15 192,574
6,026 10.00%, 9/15/16 6,525
1,183,804 10.00%, 2/20 - 11/15/19 1,294,244
240,147 10.00%, 1/15 - 12/15/20 260,131
344,722 10.00%, 6/15/21 373,769
16,875 10.25%, 11/15/00 17,065
31,614 10.25%, 2/15 - 4/15/01 33,215
- ------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
- ------------------------------------------------------------------------
95,160 10.25%, 12/15/02 100,880
150,533 10.25%, 5/15 - 8/15/04 159,610
244,233 10.25%, 7/15/05 258,919
133,347 10.25%, 5/15/09 141,673
1,831 10.50%, 9/15/00 1,852
33,936 10.50%, 9/15/01 35,654
54,947 10.50%, 12/15/02 58,248
163,594 10.50%, 6/15/09 182,100
110,538 10.50%, 7/15/10 117,513
156,511 10.50%, 8/15 - 11/15/15 169,695
114,820 10.50%, 3/15 - 12/15/16 124,507
12,866 10.75%, 11/15/00 13,011
39,336 10.75%, 9/15/03 41,701
87,493 10.75%, 9/15/05 92,808
117,401 10.75%, 8/15/06 127,013
28,513 10.75%, 1/15/10 30,327
151,495 10.75%, 7/15 - 8/15/11 161,143
183,796 11.00%, 6/15/04 194,952
470,017 11.00%, 1/15 - 6/15/10 517,166
17,382 11.00%, 7/15/13 18,942
101,858 11.25%, 8/15 - 12/15/00 103,003
9,324 11.25%, 1/15/01 9,796
16,100 11.25%, 5/15/03 17,072
317,380 11.25%, 9/15 - 10/15/05 341,186
481,374 11.25%, 6/15 - 9/15/10 532,366
1,490,658 11.25%, 2/15 - 10/15/11 1,632,115
136,393 11.75%, 5/15 - 7/15/00 137,927
113,201 11.75%, 5/15 - 6/15/04 121,107
20,484 12.75%, 1/15/00 20,701
7,938 13.25%, 10/15/99 7,918
9,214 13.75%, 9/15/99 9,191
Municipal (GNMA collateralized):
304,000 Bernalillo Multifamily Series
1998A, 7.50%, 9/20/20 320,446
Maplewood Multifamily Rev.:
575,000 Series 1998B, 6.75%, 7/20/15 585,764
1,605,000 Series 1998A, 6.75%, 7/20/30 1,605,642
-------------
63,881,347
-------------
Total mortgage pass-through securities 91,270,028
-------------
(cost: $91,214,626)
U.S. GOVERNMENT SECURITIES (21.6%) (2)
U.S. Treasury Notes:
2,500,000 5.875%, 2/15/00 2,520,675
14,300,000 6.13%, 8/15/07 14,971,242
U.S. Treasury Strips:
4,000,000 6.93% effective yield, 11/15/04 2,976,000
See accompanying notes to portfolios of investments.
13
<PAGE>
SIT U.S. GOVERNMENT SECURITIES FUND
PORTFOLIO OF INVESTMENTS - MARCH 31, 1999
- ------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
- ------------------------------------------------------------------------
5,100,000 4.72% effective yield, 5/15/06 3,479,883
7,000,000 5.82% effective yield, 11/15/09 3,817,520
2,000,000 5.80% effective yield, 2/15/09 608,160
6,009,540 U.S. Treasury Infl. Index Bond,
3.875%, 1/15/09 (*) 5,983,218
-------------
Total U.S. government securities 34,356,698
-------------
(cost: $34,980,932)
COLLATERALIZED MORTGAGE OBLIGATIONS (16.8%) (2)
Federal Home Loan Mtg. Corp.:
141,734 1006-C, 9.15%, 10/15/20 150,566
6,500,000 1981-C, 6.50%, 8/15/27 6,418,490
10,000,000 FNMA 1998-46E, 6.00%, 8/18/28 9,765,625
Vendee Mortgage Trust:
1,891,878 Series 1996-2 1B, 6.75%, 9/15/09 1,897,213
7,300,000 Series 1992-2 1F, 7.00%, 2/15/18 7,381,468
1,045,000 Series 1992-1 2K, 7.75%, 5/15/08 1,095,359
-------------
Total collateralized mortgage obligations 26,708,721
-------------
(cost: $26,638,949)
SHORT-TERM SECURITIES (3.2%) (2)
2,500,000 FHLMC Disc. Note, 4.82%, 4/1/99 2,500,000
2,500,000 FNMA Disc. Note, 4.82%, 4/1/99 2,500,000
27,745 Dreyfus Cash Mgmt. Fund, 4.74% 27,745
-------------
Total short-term securities 5,027,745
-------------
(cost: $5,027,745)
Total investments in securities
(cost: $157,862,252) (7) $157,363,192
=============
* U.S. Treasury inflation-protection securities (TIPS) are securities in
which the principal amount is adjusted for inflation and the semiannual
interest payments equal a fixed percentage of the inflation-adjusted
principal amount.
See accompanying notes to portfolios of investments.
14
<PAGE>
This page has been left blank intentionally.
15
<PAGE>
SIT BOND FUND REVIEW
YEAR ENDED MARCH 31, 1999
SENIOR PORTFOLIO MANAGERS
MICHAEL C. BRILLEY
BRYCE A, DOTY, CFA
Dear Fellow Shareholders:
The Sit Bond Fund provided investors a +5.30% return for the past 12 months,
which compares favorably with the +5.15% return of the Lipper Intermediate
Investment Grade Bond Fund average. For the period since its inception on
12/1/93, the Fund's return ranked in the top 20% of its Lipper universe (out of
108 funds).
U.S. Treasury yields fell significantly in the past twelve months. While the
yield of the 30-year U.S. Treasury ended March at 5.62%, it was as low as 4.70%
last fall. Declining interest rates provided significant price appreciation for
the Fund's U.S. Treasury holdings, making this the highest returning sector in
the Fund. Yield spreads widened in the corporate and mortgage-related sectors.
Corporate yield spreads widened due to declining corporate profits. Falling
interest rates fueled a record amount of mortgage refinancing over the past 12
months. The increased prepayment activity caused much of the spread widening in
the mortgage sector and mortgage-related securities. As a result, the Fund's
holdings in the corporate, mortgage, collateralized mortgage obligations, and
asset-backed sectors lagged its U.S. Treasury returns.
Activity in the past 12 months primarily involved reducing the Fund's
weighting in high-coupon seasoned mortgage pass-through securities from a 50%
weighting to a 31% weighting. The Fund's remaining sector weightings were
increased on a proportionate basis. The shift was made because the increased
mortgage prepayment activity of the Fund's pass-through holdings, coupled with
the yield spread widening in other sectors, made these other sectors relatively
more attractive than was the case a year ago.
Looking forward, we believe the days of continued lower and lower domestic
inflation are over. As a result, we do not expect long-term interest rates to
return to their recent sub-5.0 percent levels any time soon. A more likely
scenario is for a modest rise in inflation and more stable interest rates at the
current higher levels. As a result, we intend to keep the Fund's duration near
that of its benchmark and will continue to invest in securities that offer
attractive total return opportunities.
INVESTMENT OBJECTIVE AND STRATEGY
The investment objective of the Fund is to maximize total return,
consistent with preservation of capital. The Fund pursues this objective by
investing in a diversified portfolio of fixed-income securities.
The fund will pursue its objective by investing in a diversified portfolio
or 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.
P0RTFOLIO SUMMARY
Net Asset Value 3/31/99: $ 9.95 Per Share
3/31/98: $10.03 Per Share
Total Net Assets: $11.92 Million
30-Day SEC Yield: 5.77%
12-Month Distribution Rate: 5.34%
Average Maturity: 16.0 Years
Effective Duration: 4.7 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)
[BAR CHART]
Mortgage Pass-Through 30.7
Corporate Bonds & Notes 20.6
U.S. Treasury 15.7
Asset-Backed Securities 14.9
Collateralized Mortgage Obligations 4.8
Closed-End Mutual Funds 4.2
Other Assets and Liabilities and Cash Equivalents 9.1
16
<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 0.02% -0.52% -0.50% 0.02% -0.52% -0.50%
(not annualized)
1 Year 5.30 5.15 6.49 5.30 5.15 6.49
3 Year 7.20 6.85 7.75 23.20 22.00 25.11
5 Year 7.32 6.87 7.79 42.37 39.38 45.52
Inception 6.60 5.95 6.81 40.63 36.12 42.12
(12/1/93)
</TABLE>
* As of 3/31/99
PERFORMANCE FIGURES ARE HISTORICAL AND DO NOT GUARANTEE FUTURE RESULTS.
INVESTMENT RETURNS AND PRINCIPAL VALUE WILL VARY, AND YOU MAY HAVE A GAIN OR
LOSS WHEN YOU SELL SHARES. AVERAGE ANNUAL TOTAL RETURNS INCLUDE CHANGES IN SHARE
PRICE AS WELL AS REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAINS. 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
[PLOT POINTS CHART]
The sum of $10,000 invested at inception (12/1/93) and held until 3/31/99 would
have grown to $14,063 in the Fund or $14,212 in the Lehman Aggregate Bond Index
assuming reinvestment of all dividends and capital gains.
QUALITY RATINGS
(% of Net Assets)
LOWER OF MOODY'S OR S&P USED.
[PIE CHART]
Government Agency Backed Securities 30.7%
AAA 19.8%
AA 4.7%
A 7.3%
BBB 12.7%
Other Assets & Liabilities 9.1%
U.S. Government 15.7%
17
<PAGE>
SIT BOND FUND
PORTFOLIO OF INVESTMENTS - MARCH 31, 1999
- ------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
- ------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES (15.7%) (2)
U.S. Treasury Strip:
1,400,000 5.61% effective yield, 5/15/04 $1,071,504
850,000 6.02% effective yield, 2/15/19 258,468
700,000 5.82% effective yield, 11/15/09 381,752
150,000 U.S. Treasury Note, 6.125%, 8/15/07 157,041
-------------
Total U.S. government securities 1,868,765
-------------
(cost: $1,858,667)
ASSET-BACKED SECURITIES (14.9%) (2)
Advanta Mortgage Loan Trust:
200,000 1995-3 A5, 7.37%, 2/25/27 202,976
250,000 1996-1 A7, 7.07%, 3/25/27 251,915
75,000 Cityscape Home Equity Loan Trust,
1996-3 A8, 7.65%, 9/25/25 74,299
ContiMortgage Home Equity Loan Trust:
249,998 1996-1 A7, 7.00%, 3/15/27 254,371
75,000 1998-3 A6, 6.08%, 9/15/27 73,782
100,000 EQCC Home Equity Loan Trust,
Series 1996-1, 6.93%, 3/15/27 101,555
100,000 EquiVantage, 1996-3 A3, 7.70%, 9/25/27 102,662
Green Tree Financial Corp.:
200,000 1999-1, A5, 6.11%, 9/1/23 194,687
75,000 1995-5, 7.25%, 9/15/25 77,754
75,000 1997-4, 7.03%, 2/15/29 74,591
300,000 1999-1, A6, 6.37%, 3/1/30 290,625
75,000 Money Store Home Equity Mortgage,
7.265%, 7/15/38 77,371
-------------
Total asset-backed securities 1,776,588
-------------
(cost: $1,758,547)
CORPORATE BONDS & NOTES (20.6%) (2)
150,000 American General Fin., 5.875%, 12/15/05 146,812
150,000 Bank One Texas, 6.25%, 2/15/08 149,250
100,000 Comerica Bank, 7.25%, 6/15/07 105,500
Continental Airlines:
50,000 1999-1B, 6.795%, 8/2/18 49,859
250,000 1999-1A, 6.545%, 2/2/19 248,094
175,000 Countrywide Capital, 8.00%, 12/15/26 178,062
200,000 Franchise Fin. Corp., 8.25%, 10/30/03 202,000
175,000 GM Acceptance Corp., 5.85%, 1/14/09 168,656
100,000 Omega Health Care Inv., 6.95%, 6/15/02 94,875
500,000 Security Cap. Ind. Tr., 8.65%, 05/15/16 513,750
250,000 Service Corp. Int'l., 7.375%, 4/15/04 253,170
- ------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
- ------------------------------------------------------------------------
100,000 Summit Properties, Inc., 7.20%, 8/15/07 95,875
10,000 Toys R Us, Inc., 8.25%, 2/1/17 10,337
50,000 Trinet Corp. Realty Trust, 7.70%, 7/15/17 46,000
175,000 Washington Mutual Cap., 8.375%, 6/1/27 190,750
-------------
Total corporate bonds & notes 2,452,990
-------------
(cost: $2,513,158)
MORTGAGE PASS-THROUGH SECURITIES (30.7%) (2)(3)
Federal Home Loan Mortgage Corp.:
176,366 9.00%, 12/1/17 187,209
30,070 10.25%, 9/1/09 32,564
29,997 10.75%, 3/1/11 32,820
Federal National Mortgage Association:
218,823 9.00%, 12/1/19 230,907
246,475 9.75%, 1/1/13 269,274
223,170 10.25%, 8/15/13 246,810
88,735 11.00%, 11/1/20 97,876
Government National Mortgage Association:
8,740 8.75%, 11/15/01 8,928
57,716 9.00%, 10/15/06 60,963
71,572 9.00%, 9/15/08 75,998
103,270 9.00%, 4/15/09 109,607
58,508 9.00%, 4/15/09 62,101
115,825 9.00%, 4/15/09 122,955
7,552 9.00%, 8/15/11 7,910
150,091 9.00%, 01/15/17 157,495
61,063 9.00%, 8/20/19 64,171
118,536 9.00%, 12/15/19 126,438
55,054 9.00%, 6/20/21 57,846
74,377 9.00%, 12/20/21 78,162
16,293 9.25%, 5/15/01 17,118
61,356 9.25%, 5/15/10 64,260
15,733 9.50%, 3/15/03 16,634
87,412 9.50%, 11/15/05 93,012
81,741 9.50%, 12/15/09 87,988
49,600 9.50%, 2/15/11 52,003
136,392 9.50%, 5/20/16 144,491
227,054 9.50%, 12/15/17 245,779
69,116 9.50%, 9/15/17 74,014
158,719 9.50%, 12/15/19 170,991
9,863 9.50%, 4/15/20 10,558
15,035 9.50%, 9/15/20 16,085
33,857 9.50%, 11/15/21 36,516
2,703 9.75%, 8/15/02 2,860
22,522 10.00%, 8/15/02 23,862
18
<PAGE>
- ------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
- ------------------------------------------------------------------------
44,943 10.00%, 6/15/19 48,525
11,344 10.25%, 4/15/01 11,918
10,786 10.25%, 4/15/01 11,332
8,352 10.50%, 7/15/00 8,446
22,725 10.75%, 1/15/01 23,875
10,240 11.25%, 10/15/00 10,355
23,402 11.75%, 7/15/00 23,665
11,570 11.75%, 7/15/01 12,159
Municipal (GNMA collateralized):
24,000 Bernalillo Multifamily Series 1998A,
7.50%, 9/20/20 25,298
Maplewood Multifamily Revenue:
275,000 Series 1998C-2, 10.00%, 11/1/30 274,901
118,850 Series 1998D, 6.75%, 4/21/99 118,850
-------------
Total mortgage pass-through securities 3,655,529
-------------
(cost: $3,655,525)
COLLATERALIZED MORTGAGE OBLIGATIONS (4.8%) (2)
350,000 Norwest Asset Securities Corp.
Series 1998-19 2A12, 6.75%, 7/25/28 348,009
225,000 Residential Funding Mortgage Sec.
Series 1998-S5 A12, 6.75%, 3/25/28 224,002
-------------
Total collateralized mortgage obligations 572,011
-------------
(cost: $575,737)
CLOSED-END MUTUAL FUNDS (4.2%) (2)
10,000 American Select Portfolio 121,250
12,599 American Strategic Income Portfolio (I) 148,826
9,490 American Strategic Income Portfolio (II) 113,287
10,309 American Strategic Income Portfolio (III) 119,842
-------------
Total closed-end mutual funds 503,205
-------------
(cost: $475,423)
SHORT-TERM SECURITIES (8.2%) (2)
450,000 FNMA Discount Note, 4.82%, 4/1/99 450,000
500,000 GM Acceptance Corp., 4.90%, 4/6/99 499,660
32,916 Dreyfus Gov't Cash Mgmt. Fund, 4.74% 32,916
-------------
Total short term securities 982,576
-------------
(cost: $982,576)
Total investments in securities
(cost: $11,819,633) (7) $11,811,664
=============
See accompanying notes to portfolios of investments.
19
<PAGE>
SIT TAX-FREE INCOME FUND REVIEW
YEAR ENDED MARCH 31, 1999
SENIOR PORTFOLIO MANAGERS
MICHAEL C. BRILLEY
DEBRA A. SIT, CFA
Dear Fellow Shareholders:
Municipal Bond yields were relatively stable over the past 12 months. The Sit
Tax-Free Income Fund provided shareholders a total return of +0.50% for the
quarter and +5.30% for the Fund's past fiscal year. Fund net assets increased by
$90.2 million over the past three months and by $375.8 million over the fiscal
year to a total of $895.4 million at the end of the period. Despite that growth,
sector concentrations remain relatively stable compared with a year ago. Sector
weightings varied by less than 2.5% over that period in all sectors except
Multifamily Mortgage, which decreased by 3.5% to 25.9% of total assets.
During the past 12 months, investment returns among the various sectors in
which the Fund has invested were quite similar with the exception of cash
equivalents, which are typically lower because of lower short-term interest rate
levels, and the Industrial Revenue Sector, which lagged the portfolio's average
return by about -2.5%, and the closed-end mutual fund holdings which exceeded
the portfolio's return by more than +4%. The Fund's investments had an average
implied duration (i.e., duration is a common measure of the portfolio's interest
rate risk) of 6.9 years on 3/31/99 compared with 7.0 years on 12/31/98 and 5.7
years on 3/31/98.
Bond yields have been in a rising trend for the past six months as leverage
has been reduced in bond hedge funds, creating selling pressure in the bond
market; individual investors have continued to prefer equity investments; and
cash flows from foreign investors have decreased. Continued robust economic
growth and rising fuel prices are increasing investor concerns that the Federal
Reserve may need to reverse their bias toward lower interest rates that resulted
in three interest rate cuts during the latter part of 1998.
We will continue to focus on the time-tested philosophy that we employ in the
management of the Fund to deal with this challenging bond market environment. In
summary, we will continue to base our investment decisions on sound fundamental
analysis of higher-yielding, intermediate-duration, investment-grade bonds to
protect the principal value of your investment. We appreciate your continued
support and believe that our approach, which has been successful over many
years, will continue to meet your high expectations.
INVESTMENT OBJECTIVE AND STRATEGY
The objective of the Tax-Free Income Fund is to provide a high level of
current income that is exempt from federal income tax, consistent with
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. The Adviser does not
intend to invest in securities that generate interest income treated as a tax
preference for alternative minimum taxable income purposes.
PORTFOLIO SUMMARY
Net Asset Value 3/31/99: $10.39 Per Share
3/31/98: $10.41 Per Share
Total Net Assets: $895.35 Million
30-Day SEC Yield: 4.54%
Tax Equivalent Yield: 7.52% (1)
12-Month Distribution Rate: 4.92%
Average Maturity: 17.2 Years
Duration to Estimated Avg. Life: 7.0 Years (2)
Implied Duration: 6.9 Years (2)
(1) For individuals in the 39.6% federal tax bracket.
(2) See next page.
PORTFOLIO STRUCTURE
(% of total net assets)
[BAR CHART]
Multifamily Mortgage Revenue 25.9
Hospital/Health Care Revenue 23.6
Single Family Mortgage Revenue 13.8
Other Revenue 7.8
Closed-End Mutual Funds 4.5
Education/Student Loan 4.3
Industrial Revenue/Pollution Control 2.5
Escrowed to Maturity/Pre-Refund 2.0
Transportation 1.4
Public Facilities 1.0
General Obligation 1.0
Municipal Lease Rental 0.6
Utility 0.5
Sales Tax Revenue 0.1
Other Assets and Liabilities 11.0
20
<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 0.50% 0.49% 1.04% 0.50% 0.49% 1.04%
(not annualized)
1 Year 5.30 4.87 5.71 5.30 4.87 5.71
5 Years 7.50 6.82 6.10 43.56 39.07 34.46
10 Years 7.55 7.68 7.19 107.00 109.65 100.18
Inception 7.55 7.65 6.89 114.79 116.86 101.45
(9/29/88)
</TABLE>
* As of 3/31/99
PERFORMANCE FIGURES ARE HISTORICAL AND DO NOT GUARANTEE FUTURE RESULTS.
INVESTMENT RETURNS AND PRINCIPAL VALUE WILL VARY, AND YOU MAY HAVE A GAIN OR
LOSS WHEN YOU SELL SHARES. AVERAGE ANNUAL TOTAL RETURNS INCLUDE CHANGES IN SHARE
PRICE AS WELL AS REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAINS. 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
[PLOT POINTS CHART]
The sum of $10,000 invested at inception (9/29/88) and held until 3/31/99 would
have grown to $21,479 in the Fund or $20,145 in the Lehman 5-Year Municipal Bond
Index assuming reinvestment of all dividends and capital gains.
QUALITY RATINGS
(% of Net Assets)
LOWER OF MOODY'S, S&P, FITCH OR DUFF & PHELPS RATINGS USED.
[PIE CHART]
A 22.9%
AA 15.2%
AAA 21.9%
Other Assets & Liabilities 11.0%
BBB 29.0%
21
<PAGE>
SIT TAX-FREE INCOME FUND
PORTFOLIO OF INVESTMENTS - MARCH 31, 1999
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
MUNICIPAL BONDS (84.5%) (2)
ALABAMA (0.1%)
500,000 Valley Special Care Fac. Fin. Auth. Rev. Series 1997A Lanier Mem. Hosp. Proj. ,
5.50%, 11/1/07 $524,615
------------
ALASKA (1.4%)
Alaska HFC:
7,000,000 Gen. Mtg. Rev. 1997 Series A, Zero Coupon, 6.15% Effective Yield on Purchase Date, 12/1/17 2,392,880
2,150,000 Hsg. Dev. Series 1997A (Multifamily pooled loans), 5.65%, 12/1/20 2,198,568
5,680,000 Mtg. Rev. 1996 Series A, Zero Coupon, 6.45% Effective Yield on Purchase Date, 12/1/27 965,543
2,500,000 Mtg. Series 1997A1, 5.50%, 12/1/17 2,566,800
4,050,000 Series 1998A1, 5.30%, 12/1/17 4,093,942
320,000 AK Industrial Dev. & Export Auth. Rev. Refunding Revolving Fund Series 1993A, 5.60%, 4/1/03 335,619
------------
12,553,352
------------
ARIZONA (0.9%)
Maricopa Co. Industrial Dev. Auth. Multifamily Hsg. Rev.:
3,000,000 Series 1995A, 6.50%, 10/1/25 3,188,970
695,000 Series 1995B, 7.15%, 10/1/25 728,304
2,000,000 Series 1997A (Mercy Bond Prop. AZ-I Proj.), 6.25%, 7/1/27 2,092,980
315,000 Series 1997B (Mercy Bond Prop. AZ-I Proj.), 7.25%, 7/1/17 335,799
450,000 Series 1998A (Pines at Camelback Apts. Proj.)(Asset Guaranty insured), 5.40%, 5/1/18 459,770
1,070,000 Valley HDC Phoenix Hsg. Rev. 1979 (Roosevelt Plaza) (Section 8), 8.00%, 10/1/20 1,084,745
------------
7,890,568
------------
ARKANSAS (0.7%)
Drew Co. Public Fac. Bd. Single Family Mtg. Rev. Refunding:
106,828 Series 1993B, 7.75%, 8/1/11 113,857
226,615 Series 1993-A2 (FNMA backed), 7.90%, 8/1/11 243,793
167,551 Jacksonville Res. Hsg. Fac. Bd. Single Family Mtg. Rev. Refunding Series 1993B, 7.75%, 1/1/11 182,236
162,424 Lonoke Co. Res. Hsg. Fac. Bd. Single Family Mtg. Rev. Refunding 1993B, 7.375%, 4/1/11 175,793
1,865,000 Maumelle HDC First Lien Rev. Refunding 1992 Series A (Section 8), 7.875%, 7/1/09 1,997,378
2,000,000 Pulaski Co. Public Fac. Board Multifamily Mtg. Rev. Refunding Series 1998A (GNMA
collateralized), 5.45%, 12/20/18 2,036,080
1,115,000 Saline Co. Res. Hsg. Fac. Bd. Single Family Mtg. Rev. Refunding Series 1992, 7.875%, 3/1/11 1,189,192
------------
5,938,329
------------
CALIFORNIA (3.5%)
ABAG Fin. Auth. Certificates of Participation
1,500,000 Refunding Series 1997A (American Baptist Homes of the West Proj.), 5.85%, 10/1/27 1,525,890
1,500,000 Series 1999 (Channing House Proj.), 5.375%, 2/15/19 1,480,965
1,000,000 Bell Cmnty. Hsg. Auth. Rev. Series 1995A (Mobilehomes Park Acquisition Proj.), 6.40%, 10/1/15 1,075,780
2,000,000 CA Dept. of Veterans Affairs Home Mtg. Purchase Rev. Series 1999A, 5.10%, 12/1/19 1,994,800
2,250,000 CA Statewide Cmty. Dev. Auth. Apt. Dev. Rev. Refunding Series 1998A4 (Irvine Apts. Proj.)
Mandatory Put 5/15/13, 5.25%, 5/15/25 2,255,490
3,654,000 Camarillo Hsg. Rev. Series 1998A (GNMA collateralized)(Heritage House Proj.), 5.65%, 5/20/33 3,772,682
1,000,000 Chula Vista Redev. Agency Refunding Tax Allocation Senior Series 1994A (Bayfront-Town
Center Redev. Proj.), 7.625%, 9/1/24 1,158,280
Corona Single Family Mtg Rev.:
410,000 Senior Series 1996A, 6.05%, 5/1/27 419,459
800,000 Subordinate Series 1996B, 6.30%, 11/1/28 855,744
Northern Inyo Co. Hosp. Dist. Rev. Series 1998 (ACA insured):
275,000 5.15%, 12/1/15 273,279
290,000 5.20%, 12/1/16 288,057
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
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 2,231,000
18,770,000 Zero Coupon, 6.45% Effective Yield on Purchase Date, 1/1/26 4,408,322
2,000,000 Zero Coupon Convertible Bond, 6.10% Effective Yield on Purchase Date, 1/1/07 1,604,780
5,000,000 Zero Coupon Convertible Bond, 7.10% Effective Yield on Purchase Date, 1/1/11 4,212,200
2,000,000 Glendale Hosp. Rev. Refunding Series 1994 (Verdugo Hills Hosp.), 8.00%, 1/1/12 2,392,080
990,000 Upland Hsg. Auth. Multifamily Rev. 1990 Issue A, 7.85%, 7/1/20 1,017,126
------------
30,965,934
------------
COLORADO (1.7%)
1,000,000 Adams Co. HA Mtg. Rev. Series 1996 (Village of Greenbriar Proj.), 6.75%, 7/1/21 1,077,320
150,000 Aurora Single Family Mtg. Rev. Refunding Series 1993B, 7.50%, 5/1/11 159,007
CO HFA Single Family Program Senior:
2,200,000 Series 1996B-2, 7.45%, 11/1/27 2,462,592
1,000,000 Series 1997B-3, 6.80%, 11/1/28 1,122,810
500,000 Series 1998A-3, 6.50%, 11/1/29 559,460
1,000,000 CO Hlth. Fac. Auth. Hosp. Rev. Series 1998 (Parkview Med. Center, Inc. Proj.), 5.15%, 9/1/13 966,390
1,000,000 CO Hlth. Fac. Auth. Rev. Series 1998B (Natl. Benevolent Assoc. Proj.), 5.25%, 2/1/18 973,110
3,000,000 Highlands Ranch Met. Dist. # 3 G.O. Refunding Series 1998B (ACA insured), 5.25%, 12/1/18 2,967,150
190,000 LaPlata Co. Southwestern CO Single Family Mtg. Participation Rev. Refunding 1991 Series A,
7.375%, 9/1/11 197,756
265,000 Thornton Single Family Mtg. Rev. Refunding 1992 Series A, 8.05%, 8/1/09 281,904
260,000 Vail Single Family Mtg. Rev. Refunding Series 1992, 8.125%, 6/1/10 279,438
Westminster Golf Course Activity Enterprise Rev. Series 1998:
1,500,000 5.55%, 12/1/23 1,502,265
1,025,000 5.40%, 12/1/13 1,026,568
1,195,000 Westminster Multifamily Hsg. Rev. Refunding Series 1992 (Ironwood at the Ranch Proj.),
7.45%, 12/1/10 1,234,710
------------
14,810,480
------------
CONNECTICUT (1.3%)
CT Dev. Auth. First Mtg. Gross Rev. Hlth. Care. Proj. Series 1997 (Church Homes Inc.
Avery Proj.):
640,000 5.70%, 4/1/12 643,878
3,000,000 5.80%, 4/1/21 3,029,460
5,000,000 CT Dev. Auth. Life Care Fac. Rev. Refunding Series 1998 (Seabury Proj.)(Asset Guaranty insured),
5.00%, 9/1/15 4,890,250
1,000,000 CT HFA Hsg. Multifamily Mtg. Series 1995E1, 6.30%, 5/15/17 1,066,590
525,000 CT Resource Recovery Auth. Series 1985A (Bridgeport Resco Proj.), 7.625%, 1/1/09 545,842
2,000,000 Mashantucket Western Pequot Tribe Subordinated Special Rev. Series 1999B, Zero Coupon,
5.05% Effective Yield on Purchase Date, 9/1/09 1,156,280
------------
11,332,300
------------
DELAWARE (0.2%)
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 1,481,777
------------
DISTRICT OF COLUMBIA (0.2%)
1,500,000 District of Columbia HFA Multifamily Hsg. Refunding Rev. Series 1992C (FHA
insured) (Chastleton Dev.), 6.95%, 7/1/27 1,595,835
------------
</TABLE>
See accompanying notes to portfolios of investments.
23
<PAGE>
SIT TAX-FREE INCOME FUND
PORTFOLIO OF INVESTMENTS - MARCH 31, 1999
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
FLORIDA (0.7%)
820,000 Escambia Co. Hlth. Fac. Auth. Rev. Series 1997 (Azalea Trace, Inc. Proj.), 5.60%, 1/1/05 858,761
1,370,000 FL HFC Hsg. Rev. Refunding Series 1998O (Hunters Ridge At Deerwood Apts. Proj.), 5.25%, 12/1/18 1,371,082
1,000,000 Jacksonville Hlth. Fac. Auth. Industrial Dev. Rev. Series 1996A (Natl. Benevolent-Cypress
Village Proj.), 6.25%, 12/1/26 1,055,560
2,895,000 Miami-Dade Co. Special Hsg. Rev. Refunding Series 1998 (Section 8), 5.30%, 10/1/05 2,978,260
------------
6,263,663
------------
GEORGIA (1.1%)
780,000 Cobb Co. HA Multifamily Rev. Refunding Series 1992A (Signature Place Project),
6.875%, 10/1/17 819,242
1,295,000 Dekalb Co. Multifamily Hsg. Rev. Series 1998 (Spring Chase Apts. Proj.)(FNMA backed),
5.25%, 11/1/19 1,310,139
Dekalb Co. Hsg. Auth. Multifamily Hsg. Rev. (Regency Woods I & II):
1,640,000 Senior Series 1996A, 6.375%, 1/1/11 1,741,942
1,340,000 Subordinate Series 1996C, 7.25%, 1/1/26 1,408,809
4,250,000 Fulton Co. Non-Profit Elderly Rev. Series 1998 (Campbell Stone Buckhead Personal Care
Fac. Proj.) (GNMA collateralized), 7.75%, 11/20/39 4,982,317
------------
10,262,449
------------
HAWAII (0.4%)
1,170,000 Hawaii Dept. of Budget and Finance Special Purpose Rev. Series 1998,
(Wilcox Memorial Hosp. Proj.), 5.25%, 7/1/13 1,134,526
1,400,000 Hawaii St. Hsg. Fin. & Dev. Corp. Single Family Mtg. Purchase Series 1997B, 5.45%, 7/1/17 1,436,372
1,220,000 Honolulu Mtg. Rev. Ref. Series 1996A (Hale-Pauahi Proj.)(FHA insured)
(MBIA insured), 6.80%, 7/1/28 1,318,136
------------
3,889,034
------------
IDAHO (0.1%)
1,200,000 ID Hlth. Fac. Auth. Rev. Refunding & Imprv. Series 1998 (Bannock Reg. Med. Ctr. Proj.),
5.25%, 5/1/14 1,207,008
------------
ILLINOIS (7.7%)
2,320,000 Chicago Metropolitan HDC Mtg. Rev. Refunding Series 1992A
(FHA insured) (Section 8), 6.70%, 7/1/12 2,520,030
2,325,000 Chicago Res. Mtg. Rev. Refunding Series 1992B (MBIA insured) Zero Coupon, 7.30% Effective
Yield on Purchase Date, 10/1/09 1,133,554
2,000,000 Collinsville (City of) Madison Co. Industrial Dev. Rev. Refunding (Drury
Inn-Collinsville Proj.) Series 1993, 6.00%, 11/1/04 2,058,920
1,755,000 IL DFA Elderly Hsg. Rev. Refunding Series 1995A (Pontiac Towers Proj.)
(Section 8), 6.65%, 10/1/09 1,869,970
IL DFA Refunding & New Money Rev. (Cmty. Rehab. Providers Fac. Acquisition Program):
9,575,000 Series 1997A, 6.00%, 7/1/15 9,862,154
1,000,000 Series 1997A, 6.05%, 7/1/19 1,033,450
1,200,000 Series 1997C, 5.65%, 7/1/19 1,197,012
4,250,000 Series 1998A, 5.70%, 7/1/19 4,223,353
2,175,000 Series 1998A, 5.50%, 7/1/12 2,172,760
IL Educ. Fac. Auth. Rev.:
6,000,000 Series 1994 (Lewis University Proj.), 6.00%, 10/1/24 6,130,620
1,115,000 Series 1998B (Midwestern University Proj.), 5.50%, 5/15/18 1,112,313
1,000,000 Series 1998 (Augustana College Proj.), 5.00%, 10/1/13 978,810
1,500,000 Series 1998 (Augustana College Proj.), 5.25%, 10/1/18 1,455,480
3,000,000 IL HDA Elderly Hsg. Rev. Series 1992C (Village Ctr.) (Section 8), 6.85%, 3/1/20 3,171,870
IL HDA Multifamily Hsg. Rev.:
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Refunding 1992 Series A (Section 8):
2,150,000 6.65%, 7/1/04 2,306,370
1,545,000 7.00%, 7/1/10 1,673,467
Refunding 1991 Series C (Section 8):
260,000 7.35%, 7/1/11 276,099
100,000 7.40%, 7/1/23 106,297
IL Hlth. Fac. Auth. Rev.:
Refunding Series 1993 (Lutheran Social Svcs. IL):
610,000 5.70%, 8/15/00 623,017
475,000 5.80%, 8/15/01 490,338
525,000 6.00%, 8/15/03 552,804
545,000 6.10%, 8/15/04 579,967
1,350,000 Refunding Series 1992 Prerefunded (Mercy Ctr. for Hlth. Care Svcs.), 6.625%, 10/1/12 1,494,734
1,000,000 Refunding Series 1994 (Passavant Memorial Area Hospital Assn.), 5.95%, 10/1/11 1,082,000
Series 1994-1996 (St. Elizabeth's Hosp. of Chicago, Inc.):
1,000,000 Series 1994 Prerefunded, 7.625%, 7/1/10 1,181,060
700,000 Series 1996, 6.25%, 7/1/10 749,168
1,215,000 Series 1996, 6.25%, 7/1/16 1,287,475
5,500,000 Series 1997A (Friendship Village of Schaumburg Proj.), 5.25%, 12/1/18 5,322,735
2,500,000 Refunding Series 1998 (Midwest Physician Group Ltd. Proj.), 5.375%, 11/15/08 2,552,575
1,000,000 Refunding Series 1998 (Centegra Hlth. Proj.), 5.25%, 9/1/18 970,350
970,000 IL Industrial Control Fin. Auth. Rev. Series 1977 (Commonwealth Edison Co. Proj.),
5.875%, 5/15/07 971,785
2,000,000 Roselle Multifamily Hsg. Rev. Refunding Series 1994A (GNMA collateralized)
(Waterbury Apts.) (FHA insured), 7.00%, 1/1/25 2,185,180
5,250,000 Southwestern IL Dev. Auth. Local Govt. Prog. Rev. Series 1998-A (City of East St. Louis
Tax Increment Financing Proj.), 6.00%, 4/1/10 5,235,405
560,000 Urbana Res. Mtg. Rev. Refunding 1991 Series B Zero Coupon, 7.39% Effective Yield on
Purchase Date, 3/1/07 319,150
------------
68,880,272
------------
INDIANA (6.2%)
1,000,000 East Chicago Multi School Bldg. Corp. First Mtg. Series 1996 Prerefunded, 6.50%, 1/15/16 1,155,770
Elkhart Co. Hosp. Auth. Rev.:
1,800,000 Series 1992 (Goshen Hosp. Proj.), 7.25%, 7/1/05 1,947,186
4,000,000 Series 1998 (Elkhart General Hosp., Inc. Proj.), 5.25%, 8/15/18 3,923,480
2,165,000 Elkhart HFC Multifamily Mtg. Rev. Series 1996A (Section 8 Assisted
Proj.) (Stratford Commons), 6.00%, 11/1/10 2,271,431
IN Bond Bank Special Prgm.:
2,130,000 Series 1997C (Pittsboro Wastewater Treatment Plant Proj.), 5.70%, 8/1/17 2,231,495
1,500,000 Series 1997B (Hendrick's Co. Redev. Auth.-Pittsboro Proj.)(LOC Canadian Imperial Bank),
6.20%, 2/1/23 1,629,615
2,850,000 IN DFA Educ. Fac. Rev. Series 1997 (Park Tudor Foundation Proj.), 6.00%, 6/1/22 3,046,622
IN Educ. Fac. Auth. Educ. Fac. Rev. Series 1992 (Manchester College Proj.):
250,000 6.50%, 10/1/05 267,948
305,000 6.60%, 10/1/06 326,844
175,000 6.85%, 10/1/18 187,115
IN Hlth. Fac. Fin. Auth. Hosp. Rev.:
Series 1991 Prerefunded (Jackson Co. Schneck Mem. Hosp. Proj.):
1,200,000 7.50%, 2/15/05 1,339,632
2,000,000 7.50%, 2/15/22 2,232,720
Series 1992 (Fayette Mem. Hosp. Proj.):
250,000 7.00%, 10/1/02 264,855
</TABLE>
See accompanying notes to portfolios of investments.
25
<PAGE>
SIT TAX-FREE INCOME FUND
PORTFOLIO OF INVESTMENTS - MARCH 31, 1999
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
295,000 7.10%, 10/1/03 314,800
315,000 7.20%, 10/1/04 339,138
340,000 7.25%, 10/1/05 366,027
365,000 7.25%, 10/1/06 392,941
390,000 7.30%, 10/1/07 420,467
420,000 7.30%, 10/1/08 452,810
Series 1992 Prerefunded (Floyd Mem. Hosp. Proj.):
460,000 6.75%, 2/15/06 503,833
595,000 6.80%, 2/15/07 652,501
2,000,000 Series 1992 (Mem. Hosp. & Hlth. Care Ctr. Proj.), 7.35%, 3/1/12 2,136,100
1,500,000 Refunding Series 1998 (Floyd Mem. Hosp. & Hlth. Svcs. Proj.), 5.40%, 2/15/18 1,515,885
3,750,000 Refunding Series 1998 (Jackson Co. Schneck Proj.), 5.125%, 2/15/17 3,619,988
Refunding Series 1998 (Marquette Manor Proj.):
620,000 4.75%, 8/15/09 595,888
2,000,000 5.00%, 8/15/18 1,879,340
1,220,000 Series 1998 (Governor Daviess Co. Hosp. Proj.) (Asset Guaranty insured), 5.00%, 1/1/14 1,196,210
1,485,000 Series 1999A (Deaconess Hosp. Obligated Group), 5.75%, 3/1/19 (6) 1,520,982
595,000 IN HFA Home Mtg. Prog. Series 1990F-1 (GNMA collateralized), 7.50%, 1/1/16 624,119
IN Hlth. Fac. Fin. Auth. Rev. Refunding Series 1998 (Greenwood Village South Proj.):
600,000 5.00%, 5/15/03 608,688
140,000 5.15%, 5/15/04 142,222
150,000 5.25%, 5/15/06 151,990
170,000 5.35%, 5/15/08 172,054
900,000 IN HFA Single Family Mtg. Rev. Series 1997C-2 (GNMA/FNMA collateralized), 5.70%, 7/1/16 942,678
2,750,000 Indianapolis Econ. Dev. Refunding & Imprv. Rev. Series 1992 (Natl. Benevolent
Assn.-Robin Run Village Proj.), 7.25%, 10/1/10 2,971,952
Indianapolis Econ. Dev. Rev. (Willowbrook Apts. Proj.):
2,000,000 Senior Series 1996A, 6.50%, 7/1/16 2,128,360
1,340,000 Subordinate Series 1996C, 7.125%, 7/1/26 1,402,096
4,000,000 La Porte Co. Hosp. Auth. Fac. Rev. Refunding Series 1993, 6.00%, 3/1/23 4,124,040
810,000 Marion HC Mtg. Rev. Refunding Series 1994 (Hilltop Towers Project)(Section 8), 6.90%, 10/1/10 861,459
2,250,000 St. Joseph Co. Hosp. Auth. Hlth. Fac. Rev. Series 1999 (Madison Center, Inc. Proj.),
5.45%, 2/15/12 2,219,985
2,250,000 St. Joseph Co. Econ. Dev. Rev. Refunding Series 1997 (Madison Center, Inc. Proj.),
5.45%, 2/15/17 2,222,033
------------
55,303,299
------------
IOWA (1.1%)
1,480,000 IA Fin. Auth. SF Mtg. Series 1997A, 5.80%, 7/1/16 1,551,721
1,500,000 IA Fin. Auth. Small Business Dev. Refunding Rev. Series 1992 (University Civic Ctr. Court
Assn. Proj.), 7.40%, 3/1/17 1,641,765
IA Fin. Auth. Hlth. Care Fac. Rev. Series 1997 (Natl. Benevolent Assn.- Ramsey Home Proj.):
1,430,000 6.15%, 5/1/17 1,494,936
2,420,000 6.35%, 5/1/27 2,558,255
1,130,000 IA Fin. Auth. Multifamily Hsg. Rev. Refunding Series 1997A (Kingswood Apts. Proj.)
(GNMA-collateralized), 6.15%, 5/1/32 1,192,478
1,500,000 Ottumwa Hosp. Rev. Refunding Series 1993 (Ottumwa Regional Hlth. Ctr.), 6.00%, 10/1/10 1,548,540
------------
9,987,695
------------
KANSAS (0.3%)
110,000 Geary Co. Single Family Mtg. Rev. 1980 (FGIC insured), 10.75%, 4/1/12 113,943
2,060,000 Kansas City Single Family Mtg. Rev. Series 1982A Zero Coupon, 11.23% Effective Yield on
Purchase Date, 11/1/14 374,775
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Newton Hosp. Rev. Refunding Series 1998A (Newton Medical Ctr. Proj.):
425,000 5.13%, 11/15/06 435,339
445,000 5.20%, 11/15/07 457,579
250,000 5.25%, 11/15/08 257,699
300,000 5.70%, 11/15/18 299,999
1,915,000 Olathe & Labette Cos. Mtg. Loan Rev. 1991 Series B (GNMA collateralized) Zero Coupon, 7.56%
Effective Yield on Purchase Date, 2/1/23 333,095
------------
2,272,429
------------
KENTUCKY (0.4%)
1,500,000 Jefferson Co. First Mtg. Rev. Series 1994 (Christian Church Homes Proj.), 6.00%, 11/15/09 1,565,985
2,000,000 KY Econ. Dev. Fin. Auth. Hosp. Sys. Rev. Series 1997 (Appalachian Regional Hlthcare. Proj.),
5.85%, 10/1/17 2,040,320
------------
3,606,305
------------
LOUISIANA (2.7%)
690,000 Calcasieu Parish Industrial Dev. Rev. 1975 (Cities Service Co. Proj.), 7.80%, 12/1/05 693,602
400,000 Calcasieu Parish Public Trust Auth. Mtg. Rev. Refunding 1992 Series B, 6.875%, 11/1/12 425,496
5,650,000 Denham Springs/Livingston HMFA Residual Rev. Series 1992C Zero Coupon,
7.65% Effective Yield on Purchase Date, 7/10/14 1,845,685
East Baton Rouge MFA Single Family Mtg. Rev. Refunding:
23,045,000 Series 1997C-1 Senior Bonds, Zero Coupon, 5.85% Effective Yield on Purchase Date, 10/1/30 3,821,783
1,415,000 Series 1997C-3 Subordinate Bonds, 5.65%, 10/1/18 1,453,346
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 1,305,000
850,000 LA HFA Residual Lien Refunding Mtg. Rev. Series 1992, 7.375%, 9/1/13 899,453
181,343 LA PFA Single Family Mtg. Purchase Rev. Series 1992 (Lafayette PTFA Mtg. Acquisition),
7.50%, 10/1/15 193,947
LA PFA Rev. Multifamily Hsg. Rev.:
1,290,000 Series 1991 (VOA Hsg. Corp.) (Asset Guaranty insured), 7.25%, 11/1/04 1,377,617
3,890,000 Series 1991 (VOA Natl. Hsg. Corp.) (Asset Guaranty insured), 7.75%, 11/1/16 4,168,991
LA PFA Single Family Mtg. Rev. Refunding:
1,000,000 Series 1997B (GNMA collateralized), 5.625%, 8/1/17 1,036,800
3,080,000 Series 1997B (GNMA collateralized), 5.75%, 8/1/31 3,186,476
825,000 Series Sr. Lien 1994A (VOA Willows Affordable Hsg. Corp.), 7.00%, 6/1/24 908,597
925,000 Monroe - McKeen Plaza HDC Multifamily Hsg. Rev. Refunding Series
1994A (Murray Plaza Apts.) (Section 8), 6.80%, 2/1/12 979,520
1,550,000 Orleans Levee Dist. Improvement Serial and Term Receipts Series 1995A (FSA insured),
5.95%, 11/1/14 1,695,669
------------
23,991,982
------------
MAINE (0.1%)
1,000,000 South Berwick Educ. Rev. Series 1998 (Berwick Academy Issue), 5.25%, 8/1/13 992,970
------------
MASSACHUSETTS (1.6%)
1,000,000 Boston Industrial Dev. Fin. Auth. Series 1997A (FHA insured-Boston
Alzheimers Center Proj.), 5.90%, 2/1/22 1,054,060
MA Dev. Finance Agency Rev.:
1,240,000 Series 1998 (Regis College Issue Proj.), 5.25%, 10/1/18 1,194,591
2,510,000 Series 1998 (YMCA Of Greater Boston Proj.), 5.35%, 11/1/19 2,463,816
1,000,000 Series 1999 (Eastern Nazarene College Issue), 5.625%, 4/1/19 1,003,900
MA Hlth. & Educ. Fac. Auth. Rev.:
</TABLE>
See accompanying notes to portfolios of investments.
27
<PAGE>
SIT TAX-FREE INCOME FUND
PORTFOLIO OF INVESTMENTS - MARCH 31, 1999
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Series 1998A (Vinfen Corp. Proj.) (ACA insured):
440,000 5.10%, 11/15/11 431,552
310,000 5.20%, 11/15/12 304,054
485,000 5.30%, 11/15/13 477,604
1,365,000 Series 1998B (Cape Cod Hlth. Care Proj.), 5.25%, 11/15/13 1,352,005
1,000,000 Series 1998C (Milford-Whitinsville Regional Hosp. Issue), 5.75%, 7/15/13 1,021,570
1,500,000 Series 1999A (Caritas Christi Obligated Group Issue), 5.70%, 7/1/15 1,512,645
MA Industrial Finance Agency:
750,000 Rev. Refunding Series 1992A (Ogden Haverhill Proj.), 4.95%, 12/1/06 755,183
1,000,000 Rev. Refunding Series 1997A (Chelsea Jewish Nursing Home Proj.)(FHA insured), 6.50%, 8/1/37 1,115,140
1,000,000 Rev. Series 1998A (University Commons Nursing Care Ctr. Proj.)(FHA insured), 6.65%, 8/1/38 1,114,250
700,000 Rev. Series 1998 (Belmont Hill School Issue) 5.15%, 9/1/13 700,000
------------
14,500,370
------------
MICHIGAN (2.5%)
1,305,000 Detroit Econ. Dev. Corp. Limited Obligation Rev. Refunding Series 1992 (E.H. Associates
Ltd. Partnership Proj.), 7.00%, 6/1/12 1,364,312
1,585,000 Flint Hosp. Bldg. Auth. Rev. Refunding Series 1998A (Hurley Medical Ctr. Proj.),
5.25%, 7/1/16 1,508,682
4,260,000 MI HDA Rental Hsg. Rev. Series 1992A, 6.60%, 4/1/12 4,576,518
665,000 MI Hosp. Fin. Auth. Hosp. Rev. and Refunding Series 1998 (Chelsea Cmty. Hosp.
Proj.), 5.35%, 5/15/13 648,874
3,000,000 MI Higher Educ. Fac. Auth. Ltd. Obligation Rev. & Rev. Refunding Series 1998 (Thomas M.
Cooley Law School Proj.) (LOC First of America Bank), 5.35%, 5/1/15 3,035,430
700,000 MI State Hosp. Fin. Auth. Rev. Series 1997 (Presbyterian Vlgs. of Mich. Oblig. Group Proj.),
6.375%, 1/1/15 743,505
1,500,000 MI State Hsg. Dev. Auth. Ltd. Obligation Series 1999 (GNMA collateralized) (Arbor Pointe
Townhomes), 5.30%, 12/20/28 1,499,865
1,600,000 MI Strategic Fund Ltd. Obligation Rev. Series 1997A (NSF Intl. Proj.) (LOC First Bank
of America), 5.75%, 8/1/19 1,670,304
2,260,000 Southfield Econ. Dev. Corp. Ltd. Obligation Rev. Series 1998A (Lawrence Tech. Univ. Proj.),
5.25%, 2/1/13 2,244,474
1,645,000 Tri City Village HC Mtg. Refunding Multifamily Tri City Apts. Series 1992A (Section 8)
(FNMA backed), 7.75%, 8/15/23 1,793,461
2,750,000 Troy City EDC Econ. Dev. Rev. Refunding Series 1992 (Drury Inn-Troy Proj.)
(Lincoln Natl. Corp.), 6.75%, 10/1/12 2,978,608
------------
22,064,033
------------
MINNESOTA (1.2%)
1,000,000 Carver Co. HRA Multifamily Rev. Series 1997A (Waybury Apts. Proj.), 5.875%, 8/1/27 1,031,560
1,430,000 Dakota Co. HRA Multifamily Mtg. Rev. Refunding Series 1997A (Park Place
Apts. Proj.)(GNMA Collateralized), 6.875%, 2/20/32 1,577,433
740,000 Hopkins Multifamily Hsg. Rev. Series 1996 (Hopkins Renaissance Proj.)(Section 8),
6.375%, 4/1/20 792,829
1,250,000 MN HFA Single Family Mtg. Series 1998A, 5.20%, 1/1/17 1,265,838
1,533,197 Moorhead Single Family Mtg. Rev. Refunding Series 1992B, 7.00%, 8/1/11 1,536,585
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
1,755,000 South Washington Co. ISD #833, (Cottage Grove) Lease Refunding Series 1998 (Asset
Guaranty insured), 5.25%, 12/1/14 1,807,317
------------
10,900,112
------------
MISSISSIPPI (1.3%)
1,685,000 Jones Co. Hosp. Rev. Series 1997 (South Central Regional Med. Ctr. Proj.), 5.50%, 12/1/17 1,657,080
500,000 Lincoln Co. Hosp. Rev. Refunding Series 1998A (Kings Daughter Hosp. Proj.),
5.20%, 4/1/08 515,215
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
2,000,000 MS Business Fin. Corp. Hlth. Fac. Rev. Series 1998 (Rush Medical Fdn., Proj.), 5.125%, 7/1/08 1,978,820
MS Hosp. Equip. and Fac. Auth. Rev. (Rush Medical Fdn. Proj.):
3,045,000 Refunding Series 1997A, 6.00%, 1/1/16 3,119,146
1,500,000 Series 1997B, 6.00%, 1/1/16 1,536,525
6,435,000 MS Home Corp. Residual Rev. Series 1992-II Zero Coupon, 7.38% Effective Yield
on Purchase Date, 4/15/12 2,553,858
605,000 MS Home Corp. Single Family Mtg. Rev. Series 1995G (GNMA collateralized), 6.10%, 6/1/16 625,661
------------
11,986,305
------------
MISSOURI (1.8%)
1,000,000 Kansas City Port Hlth. Series 1995A (Riverfront Park Proj.), 5.75%, 10/1/00 1,026,410
MO. Hlth. & Educ. Fac. Auth. Rev.:
545,000 Series 1998 (Southwest Baptist University Proj.) (ACA insured), 5.40%, 10/1/14 557,524
1,000,000 Series 1999 (Rockhurst Univ.) (Asset Guaranty insured), 5.10%, 10/1/19 1,000,140
MO. HDC Single Family Rev. (GNMA collateralized):
2,930,000 Series 1999B-1, 5.30%, 3/1/19 2,965,922
1,970,000 Series 1997C-1, 6.55%, 9/1/28 2,185,262
1,065,000 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 1,151,670
3,265,000 St. Louis Co. Industrial Dev. Auth. Residential Care Fac. Rev. Series 1997A1 (Richmond
Terrace Ctr. Proj.)(GNMA collateralized), 8.00%, 12/20/37 3,869,972
40,000 St. Louis Co. Single Family Res. Mtg. Series 1984 (MBIA insured), 6.75%, 4/1/10 42,686
St. Louis Industrial Dev. Auth. Tax-Exempt Impt. Rev. Series 1998 (St. Louis Zoo Fdn.)(LOC
Nationsbank):
1,000,000 5.10%, 8/15/12 1,010,780
800,000 5.15%, 8/15/13 807,888
1,000,000 St. Louis Muni Fin. Corp. Leasehold Rev. Refunding Series 1993A. 5.85%, 7/15/09 1,053,010
------------
15,671,264
------------
MONTANA (0.2%)
Crow Finance Auth. Tribal Purpose Revenue Series 1997A:
1,000,000 5.70%, 10/1/27 1,029,460
870,000 5.65%, 10/1/17 894,282
------------
1,923,742
------------
NEBRASKA (1.1%)
Madison Co. Hosp. Auth. No. 1 Hosp. Rev. & Refunding Series 1998 (Faith Reg'l. Hlth.
Svcs. Proj.) (Asset Guaranty insured):
1,000,000 5.20%, 7/1/13 1,006,080
4,000,000 5.35%, 7/1/18 4,022,240
4,350,000 Scotts Bluff Co. Hosp. Auth. #1 Rev. Series 1998 (Reg'l West Med. Ctr. Proj.),
5.125%, 11/15/12 4,305,630
------------
9,333,950
------------
NEVADA (0.9%)
NV Hsg. Div. SF Mtg. Program:
1,700,000 Sr. Series 1998B-1, 5.25%, 10/1/17 1,718,411
1,595,000 Sr. Series 1995A-1, 6.45%, 10/1/18 1,707,272
1,050,000 Mezzanine Series 1998B-1, 5.30%, 4/1/16 1,073,730
800,000 Mezzanine Series 1999A-1, 5.10%, 10/1/17 796,024
1,495,000 Mezzanine Series 1999B-1, 5.15%, 10/1/17 1,485,836
Reno Redev. Agency Subordinate Tax Allocation and Rev. Refunding Series 1995A:
400,000 6.00%, 6/1/08 428,256
1,000,000 6.125%, 6/1/12 1,063,910
------------
8,273,439
------------
</TABLE>
See accompanying notes to portfolios of investments.
29
<PAGE>
SIT TAX-FREE INCOME FUND
PORTFOLIO OF INVESTMENTS - MARCH 31, 1999
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
NEW HAMPSHIRE (2.2%)
NH Higher Educ. & Hlth. Fac. Auth. Rev.:
620,000 Series 1997 (Catholic Charities Issue), 5.75%, 8/1/12 625,958
6,500,000 Series 1993 (Nashua Memorial Hosp. Proj.), 6.00%, 10/1/23 6,823,895
2,500,000 Series 1997 (Androscoggin Valley Hosp.Proj.), 5.80%, 11/1/27 2,604,250
5,110,000 NH HFA Single Family Res. Mtg. 1982 Series A Zero Coupon, 11.75% Effective Yield on
Purchase Date, 1/1/14 1,486,090
NH Higher Educ. & Hlth. Fac. Auth. Rev.:
1,085,000 Series 1998 (New Hampton School), 5.00%, 10/1/08 1,076,103
2,170,000 Series 1998 (River College Proj.), 5.55%, 1/1/18 2,167,288
5,075,000 Series 1998 (Cheshire Med. Ctr. Proj.), 5.125%, 7/1/18 4,902,907
------------
19,686,491
------------
NEW JERSEY (0.5%)
NJ EDA Rev. Refunding Bonds Series 1997A (Harrogate, Inc. Proj.):
400,000 5.55%, 12/1/07 416,804
1,225,000 5.875%, 12/1/26 1,245,666
NJ EDA First Mtg. Rev. Series 1998C (Fellowship Village Proj.):
410,000 4.95%, 1/1/06 408,249
155,000 5.05%, 1/1/07 154,487
250,000 5.15%, 1/1/08 248,225
335,000 5.20%, 1/1/09 334,923
440,000 5.25%, 1/1/10 437,752
1,050,000 NJ Hlth. Care Fac. Financing Auth. Rev. Refunding Series 1997A (Christian Hlth. Care
Center Proj.), 5.50%, 7/1/18 1,035,195
------------
4,281,301
------------
NEW MEXICO (1.0%)
355,000 Chaves Co. Hosp. Rev. Series 1992 Prerefunded (Eastern NM Med. Ctr. Proj.), 7.25%, 12/1/10 401,143
454,000 Hobbs Single Family Mtg. Rev. Refunding Series 1992, 8.75%, 7/1/11 500,163
865,000 NM Hosp. Equip. Loan Council Equip. & Imprv. Rev. Refunding Series 1996 (Rehoboth McKinley
Hosp.), 6.30%, 8/1/10 917,506
1,090,000 NM MFA Single Family Mtg. Purchase Refunding Senior Series 1992-A2, 6.85%, 7/1/12 1,153,078
4,000,000 NM MFA Forward Mortgage-Backed Series 1995E (GNMA collateralized), 6.95%, 1/1/26 4,554,000
1,215,000 Sante Fe Educ. Fac. Rev. Series 1998 (St. Johns College Proj.), 5.40%, 3/1/17 1,206,677
525,000 Sante Fe Educ. Fac. Imprv. & Refunding Rev. Series 1997 (College of Sante Fe Proj.),
6.00%, 10/1/13 559,871
------------
9,292,438
------------
NEW YORK (0.5%)
1,045,000 Allegany Co. Industrial Dev. Agency Civic Fac. Rev. Series 1998 (Alfred Univ. Civic Facility
Proj.), (MBIA insured), 5.25%, 8/1/09 1,118,056
1,000,000 NY Dorm Auth. Hosp. Rev. Series 1998 (FHA insured) (St. James Mercy
Hosp. Proj.), 5.25%, 2/1/18 1,010,630
1,385,000 Ulster Co. Industrial Dev. Agency Civic Fac. Rev. Series 1998A (Mid-Hudson Family Hlth.
Svcs. Inst., Inc. Proj.), 5.30%, 7/1/16 1,397,742
1,000,000 Westchester Co. Industrial Dev. Agency Civic Fac. Rev. Series 1998A (Lawrence Hosp. Proj.),
5.125%, 1/1/18 975,800
------------
4,502,228
------------
NORTH CAROLINA (0.1%)
1,120,000 NC Muni Power Agency No. 1 Catawba Elec. Rev. Series 1995B, 6.00%, 1/1/20 1,122,307
------------
NORTH DAKOTA (0.4%)
Ward Co. Hlth. Care Fac. Rev. Prerefunded:
1,100,000 Series 1994 Escrowed to Maturity (St. Joseph Hosp.), 8.00%, 11/15/04 1,234,750
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
2,000,000 Series 1994 Prerefunded (St. Joseph Hosp.), 8.875%, 11/15/14 2,503,680
------------
3,738,430
------------
OHIO (1.5%)
Akron Certificates of Participation Series 1996 (Akron Municipal Baseball Stadium Proj.):
3,000,000 Zero Coupon Convertible, 6.50% Effective Yield on Purchase Date, 12/1/16 2,941,050
1,000,000 Zero Coupon Convertible, 6.15% Effective Yield on Purchase Date, 12/1/07 978,600
1,000,000 Hamilton CO. Hlth. Care Fac. Refunding & Impt. Series 1998A (Twin Towers Proj.),
5.125%, 10/1/18 976,510
Franklin Co. Hlth. Care Fac. Rev. & Impt.:
1,000,000 Series 1997 (Friendship Village of Dublin Proj.), 5.50%, 11/1/16 1,003,660
530,000 Series 1998 (Friendship Village of Columbus Proj.), 5.25%, 8/15/12 527,249
300,000 Series 1998 (Friendship Village of Columbus Proj.), 5.25%, 8/15/18 282,423
1,500,000 Franklin Co. Mtg. Rev. Series 1997E (GNMA collateralized)(The Villas of St. Therese Proj.),
5.90%, 6/20/39 1,610,580
OH Capital Corp. for Hsg. Mtg. Rev. Refunding (FHA insured)(Section 8):
1,570,000 Series 1995G, 6.35%, 7/1/22 1,683,558
1,535,000 Series 1998E, 5.40%, 2/1/23 1,536,474
1,500,000 OH Water Dev. Auth. Rev. Series 1987A (MBIA insured) (Safe Water Proj.), 5.00%, 12/1/12 1,500,525
------------
13,040,629
------------
OKLAHOMA (1.6%)
990,000 Cleveland Co. Home Loan Auth. Single Family Mtg. Rev. Refunding Series 1991, 8.00%, 8/1/12 1,047,420
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, 6/1/11 825,220
1,000,000 OK Co. Industrial Auth. Hlth. Care Rev. Series 1999 (Natl. Benevolent Assoc. - OK Christian
Home Proj.), 5.50%, 2/1/24 964,510
OK HFA Single Family Mtg. Rev. (Homeownership Loan Proj.):
5,205,000 Series 1998D-1, Zero Coupon, 5.40 Effective Yield on Purchase Date, 3/1/29 1,041,833
9,000,000 Series 1999A-1, Zero Coupon (GNMA collateralized), 5.50 Effective Yield on Purchase Date, 3/1/29 1,759,950
OK Ind. Auth. Hosp. Rev. Bonds Series 1997A (Deaconess Hlth. Care Proj.):
2,190,000 5.50%, 10/1/12 2,185,861
2,000,000 5.75%, 10/1/17 2,018,980
1,500,000 Oklahoma City Public Property Auth. Rev. Refunding & Impt. Series 1998 (Oklahoma City Golf
System) (Asset Guaranty insured), 5.20%, 10/1/18 1,482,615
385,000 Payne Co. Home Loan Auth. Single Family Rev. Refunding Series 1993A, 8.625%, 3/1/11 411,707
2,540,000 Tulsa Public Facilities Auth. Recreational Fac. Rev. Series 1985, 6.20%, 11/1/12 2,758,338
------------
14,496,434
------------
OREGON (1.3%)
4,000,000 Cow Creek Band Umpqua Tribe of Indians Rev. Series 1998B (AMBAC insured), 5.10%, 7/1/12 4,064,120
2,265,000 OR Hlth. Hsg. Educ. & Cultural Fac. Auth. Rev. Series 1998A (Linfield College Proj.),
5.50%, 10/1/18 2,290,028
4,500,000 OR State Veterans Welfare General Obligation Series 1998-77, 5.30%, 10/1/29 4,563,720
1,070,000 Portland Hsg. Auth. Multifamily Rev. Series 1997A (Civic Apts. Proj.), 5.70%, 1/1/28 1,094,300
------------
12,012,168
------------
PENNSYLVANIA (6.3%)
1,190,000 Chester Co. Hlth. & Educ. Fac. Auth. Mtg. Rev. Refunding Series 1998, (Tel Hai
Obligated Group Proj.), 5.00%, 6/1/08 1,201,079
4,100,000 Cumberland Co. Muni Auth. Rev. Series 1996 (Presbyterian Homes Proj.), 6.00%, 12/1/26 4,260,228
1,285,000 Dauphin Co. Gen. Auth. Hlth. Sys. Rev. Series 1999 (Pinnacle Hlth. Sys. Proj.), 5.125%, 8/15/17 1,282,648
Grove City Area Hosp. Auth. Rev. Series 1998 (United Cmnty. Hosp. Proj.):
810,000 4.75%, 7/1/06 804,451
2,970,000 5.25%, 7/1/12 2,971,485
Hazleton Hlth. Svc. Auth. Hosp. Rev. :
1,000,000 Series 1997 (Hazleton General Hosp. Proj.), 5.625%, 7/1/17 998,210
</TABLE>
See accompanying notes to portfolios of investments.
31
<PAGE>
SIT TAX-FREE INCOME FUND
PORTFOLIO OF INVESTMENTS - MARCH 31, 1999
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
2,430,000 Series 1996 (Hazleton - St. Joseph Med. Ctr.), 6.20%, 7/1/26 2,511,648
Horizon Hosp. System Auth. Hosp. Rev. Series 1996 (Horizon Hosp. Sys.):
600,000 5.95%, 5/15/06 639,720
715,000 6.15%, 5/15/08 776,018
710,000 6.25%, 5/15/09 776,200
1,145,000 6.30%, 5/15/11 1,208,662
1,665,000 6.35%, 5/15/16 1,763,485
1,905,000 McKean Co. Hosp. Rev. Refunding Series 1994 (Bradford Hosp. Proj.), 6.10%, 10/1/20 1,971,523
2,970,000 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 1,126,343
6,000,000 Montgomery Co. Industrial Dev. Auth. Resource Recovery Rev. Series 1989 (LOC Banque
Paribas), 7.50%, 1/1/12 6,331,320
250,000 Montgomery Co. Redev. Auth. Multifamily Hsg. Rev. 1993 Series A (KBF Assoc. L.P.),
6.375%, 7/1/12 261,010
1,320,000 New Wilmington Muni. Auth. College Rev. Series 1998 (Westminister College), 5.05%, 3/1/12 1,299,052
PA Econ. Dev. Fin. Auth. Rev. Series 1998A (Northwestern. Human Services Proj.):
2,445,000 5.25%, 6/1/09 2,490,404
2,560,000 5.30%, 6/1/10 2,598,246
2,685,000 5.35%, 6/1/11 2,716,978
PA Hgr. Educ. Fac. Auth. Hlth. Svcs. Rev. Series 1996A (Allegheny Delaware Valley),
(Obligated Group, Inc.)(MBIA insured):
4,595,000 5.60%, 11/15/10 4,640,445
5,000,000 5.875%, 11/15/16 5,049,000
1,100,000 5.875%, 11/15/21 1,110,780
1,250,000 Philadelphia Auth. for Industrial Dev. Rev. Refunding Series 1998A (FHA Insured)
(Elmira Jeffries Mem. Home Proj.), 5.30%, 2/1/22 1,240,088
1,275,000 Philadelphia Redevelopment Auth. Multifamily Hsg. Rev. Refunding Series 1998
(FHA insured - Woodstock Mutual Homes Inc. Proj.), 5.45%, 2/1/23 1,287,903
Pittsburgh Urban Redev. Auth. (Center Triangle Tax Increment Fin. District) (LOC PNC Bank):
3,000,000 Series 1995A, 6.00%, 12/1/11 3,234,390
2,100,000 Series 1995B, 6.25%, 3/15/15 2,244,942
------------
56,796,258
------------
RHODE ISLAND (1.5%)
RI Hlth. & Educ. Bldg. Corp. Hosp. Fin. Rev.:
2,000,000 Series 1997 (Steere House Proj.), 5.70%, 7/1/15 1,995,600
2,500,000 Series 1997 (South Co. Hosp. Proj.), 6.00%, 11/15/17 2,653,100
500,000 Refunding Series 1998 (Roger Williams Hosp. Proj.), 5.20%, 7/1/09 501,850
Series 1998 (Roger Williams Hosp. Proj.):
1,500,000 5.50%, 7/1/18 1,441,365
500,000 4.70%, 7/1/03 500,195
Series 1999 (St. Joseph's Hlth. Svcs.):
1,770,000 5.40%, 10/1/09 1,773,239
2,250,000 5.75%, 10/1/14 2,247,705
1,925,000 RI HMFC Homeownership Opportunity Series 1998 -27A, 5.20%, 4/1/17 1,924,557
------------
13,037,611
------------
SOUTH CAROLINA (0.8%)
North Charleston Muni. Golf Course Mtg. Rev. Series 1998:
1,580,000 5.00%, 5/1/09 1,571,278
3,000,000 5.50%, 5/1/19 2,928,630
1,180,000 Myrtle Beach PFC Certificates of Participation Series 1992 Prerefunded, Escrowed to Maturity
(Myrtle Beach Convention Ctr. Proj.), 6.75%, 7/1/02 1,240,451
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1,390,000 SC Jobs Econ. Dev. Auth. Econ. Dev. & Rev. Refunding Series 1998A
(Westminister Presbyterian Center Inc. Project), 5.25%, 11/15/16 1,318,707
------------
7,059,066
------------
SOUTH DAKOTA (1.6%)
2,000,000 SD HDA Multifamily Hsg. Rev. 1992 Series B (Section 8), 7.00%, 4/1/12 2,145,240
SD Hlth. & Educ. Fac. Auth. Rev. Refunding Series 1998 (Prairie Lakes Hlth. Care System):
2,000,000 5.45%, 4/1/13 2,026,760
5,500,000 5.65%, 4/1/22 5,440,710
SD HDA Homeownership Mtg. Series 1998D:
1,150,000 5.20%, 5/1/20 1,145,573
3,965,000 5.25%, 5/1/28 3,958,934
------------
14,717,217
------------
TENNESSEE (6.4%)
12,290,000 Industrial Dev. Board of Franklin MF Hsg. Rev. Series 1998A (Franklin Oaks Apt. Proj.)
(FNMA collateralized), 5.20%, 12/15/21 12,159,849
Metro. Govt. of Nashville & Davidson Cos. Industrial Dev. Board Rev. Refunding:
1,725,000 Multifamily Mtg. Rev. 92C (FHA insured) (Picadilly Apts.), 6.95%, 7/1/27 1,857,808
5,925,000 Series 1998A (FNMA collateralized) (Crossings of Bellevue), 5.20%, 12/15/21 5,862,254
3,840,000 Metro. Govt. of Nashville & Davidson Cos. Hlth. & Educ. Series 1998 (Asset Guaranty insured),
(Open Arms Dev. Ctrs. Proj.), 5.00%, 8/1/12 3,856,819
Shelby Co. Hlth., Educ. & Hsg. Fac. Board Multifamily Hsg. Rev.:
1,500,000 (Cameron Hsg. Proj.), Senior Series 1997A, 5.90%, 7/1/18 1,566,705
(CME Memphis Apts. Proj.):
4,000,000 Senior Series 1998A, 5.35%, 1/1/19 3,989,960
8,500,000 Senior Series 1998A, 5.55%, 1/1/29 8,474,585
1,800,000 Subordinate Series 1998C, 6.00%, 1/1/29 1,794,852
(Eastwood Park Apts. Proj.):
1,000,000 Senior Series 1995 A2, 6.40%, 9/1/25 1,046,220
420,000 Subordinate Series 1995C, 7.50%, 9/1/25 436,666
(Raleigh Forest & Sherwood Apts. Proj.):
2,885,000 Senior Series 1996A, 6.60%, 1/1/26 3,041,309
715,000 Subordinate Series 1996C, 7.25%, 1/1/26 746,868
(Raleigh Woods Apts. Proj.):
6,000,000 Series 1997A (GNMA collateralized), 7.75%, 3/20/27 6,909,360
(The Corners Apts. Proj.):
1,055,000 Senior Series 1996A, 6.25%, 1/1/27 1,096,229
370,000 Subordinate Series 1996C, 6.375%, 1/1/27 374,100
1,500,000 TN HDA Mtg. Finance Series 1995B (MBIA insured), 6.20%, 7/1/18 1,595,310
7,500,000 TN HDA Homeownership Program Series 1997 Issue 3B
Zero Coupon, 5.725% Effective Yield on Purchase Date, 7/1/16 2,884,875
------------
57,693,769
------------
TEXAS (8.4%)
1,550,000 Baytown HFC Single Family Mtg. Rev. Refunding Series 1992B, 8.50%, 9/1/11 1,724,452
Bell Co. Hlth. Fac. Dev. Corp. Retirement Fac. Rev. Series 1998 (Buckner Retirement
Services, Inc. Obligated Group, Proj.):
1,000,000 5.00%, 11/15/11 987,060
5,735,000 5.25%, 11/15/19 5,511,278
Beaumont HA Multifamily Mtg. Rev. Series 1993A (Section 8):
1,365,000 6.65%, 11/1/07 1,459,117
650,000 6.75%, 11/1/10 693,154
</TABLE>
See accompanying notes to portfolios of investments.
33
<PAGE>
SIT TAX-FREE INCOME FUND
PORTFOLIO OF INVESTMENTS - MARCH 31, 1999
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1,765,000 Bexar Co. HFC Residual Rev. Series 1993 Zero Coupon, 6.50% Effective Yield
on Purchase Date, 3/1/15 645,002
1,000,000 Bexar Co. HFC MF Hsg. Rev. Ref. Series 1995 (Windridge Apts. Proj.) (FNMA collateralized),
5.125%, 12/15/21 988,020
210,000 Brazos Co. HFC Single Family Mtg. Rev. 1985 (MBIA insured) Zero Coupon, 10.55% Effective
Yield on Purchase Date, 9/1/11 58,313
1,005,000 Brazos Co. Hlth. Fac. Dev. Corp. Rev. Series 1997A (Franciscan Svcs. Corp.) (MBIA insured),
5.375%, 1/1/17 1,029,180
1,740,000 Collin Co. HFC Student Hsg. Rev. Series 1998A (Cmnty. Coll. Dist. Fdn. Proj.), 5.25%, 6/1/23 1,686,599
545,000 Columbus Cmty. Industrial Dev. Corp. Sales Tax Rev. Series 1998 (Bank Qualified),
5.70%, 11/1/18 554,630
Dallas Hsg. Corp. Capital Program Revenue Bonds:
1,625,000 Series 1995A (Estell Village Apts.) (Section 8), 7.875%, 12/1/09 1,681,972
1,475,000 Series 1995 (Cedar Glen Apts.) (Section 8), 7.75%, 12/1/09 1,526,212
1,000,000 Dallas HFC Cap. Proj. Refunding 1990 (Section 8), 7.85%, 8/1/13 1,044,090
6,848,000 Dallas HFC Multifamily Mtg. Rev. Series 1998A (GNMA collateralized) (Towne
Ctr. Apts. Proj.), 6.75%, 10/20/32 7,618,674
2,000,000 Galveston Special Contract Refunding Rev. Series 1998 (Farmland Industries, Inc. Proj.),
5.50%, 5/1/15 1,974,700
330,000 Harris Co. HFC Single Family Mtg. Rev. Series 1983A, 10.125%, 7/15/03 331,172
1,600,000 Harrison Co. Hlth. Fac. Dev. Corp. Rev. Series 1998 (Marshall Regional Med. Ctr. Proj.)
(ACA insured), 5.50%, 1/1/18 1,619,280
1,500,000 Houston HFC Single Family Mtg. Rev. Refunding Series 1996B-1, 8.00%, 6/1/14 1,584,450
1,170,000 Leander ISD (Williamson & Travis Cos.) Unltd. Tax School Bldg & Refunding General Obligation
Series 1998, 5.00%, 8/15/13 1,179,068
1,730,000 Lubbock HFC Multifamily Hsg. Rev. Refunding Series 1992A (Los Colinas, Park Ridge Place &
Quail Creek), 7.75%, 1/1/22 1,806,034
6,000,000 Lufkin Hlth. Sys. Rev. Series 1998 (Memorial Hlth. Sys. Of East Texas), 5.70%, 2/15/28 5,943,360
Midland HFC Single Family Mtg. Rev. Refunding:
430,548 Series 1992 A-2, 8.45%, 12/1/11 469,099
371,335 Series 1992, 9.00%, 9/1/01 386,530
328,224 Series 1992 B2, 8.15%, 12/1/11 356,419
Mesquite Hlth. Fac. Dev. Corp. Retirement Fac. Rev. Series 1996A (Christian Care Ctrs. Proj.):
1,000,000 6.30%, 2/15/12 1,054,430
1,000,000 6.40%, 2/15/16 1,060,090
North Central Hlth. Fac. Dev. Corp. Rev. (C.C. Young Memorial Home Proj.):
1,300,000 Series 1996, 6.30%, 2/15/15 1,375,881
1,135,000 Series 1998A, 5.375%, 2/15/14 1,111,619
1,213,719 Odessa HFC Single Family Mtg. Rev. Refunding Series 1992B Class B-2, 8.125%, 11/1/11 1,322,856
650,000 San Marcos HA Multifamily Mtg. Rev. Series 1993A (FHA insured) (Section 8), 5.80%, 11/1/10 667,186
Southeast TX HFC Residual Revenue:
1,555,000 Series 1995A Zero Coupon, 6.50% Effective Yield on Purchase Date, 11/1/14 639,058
3,000,000 Series 1992A Zero Coupon, 7.63% Effective Yield on Purchase Date, 9/1/17 760,320
8,500,000 Tarrant Co. Hlth. Fac. Dev. Corp. Hosp. Rev. Series 1998 (Adventist Hlth. System/Sunbelt
Obligated Group Proj.), 5.375%, 11/15/20 8,209,725
2,000,000 Tarrant Co. HFC Multifamily Hsg. Rev. Series 1998 (Hurst Manor Proj.) (GNMA Collateralized),
6.10%, 2/20/35 2,131,940
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 1,598,505
2,500,000 Senior Series 1996A (Dallas - Ft. Worth Apts. Pool Proj.), 6.50%, 7/1/26 2,658,600
960,000 Subordinated Series 1996C (Harbors & Plumtree Apts. Proj.), 7.375%, 7/1/26 1,001,309
2,820,000 Senior Series 1996A (Harbors & Plumtree Apts. Proj.), 6.45%, 7/1/26 2,978,399
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
3,200,000 Series 1996A (NHP Foundation - Asmara Apts. Proj.), 6.40%, 1/1/27 3,424,736
4,650,000 TX Dept. Hsg. & Cmnty. Affairs Single Family Rev. Refunding Junior Lien Series 1994A
Zero Coupon, 6.93% Effective Yield on Purchase Date, 3/1/15 1,553,286
880,000 Travis Co. HFC Residential Mtg. Rev. Series 1991A (GNMA/FNMA collateralized), 7.05%, 12/1/25 935,255
------------
75,341,060
------------
UTAH (0.6%)
1,000,000 Davis Co. Solid Waste Mgmt. & Energy Recovery Rev. Series 1993 Prerefunded, 6.125%, 6/15/09 1,102,470
Intermountain Power Agency Power Supply Rev. Refunding:
550,000 Series 1987A (MBIA insured), 5.00%, 7/1/12 550,061
600,000 Series 1986F (AMBAC insured), 5.00%, 7/1/13 600,030
1,000,000 Provo HA Multifamily Series 1997 (Lookout Point Apts. Proj.) (GNMA collateralized),
5.80%, 7/20/22 1,040,830
1,720,000 UT HFA Single Family Mtg. 1996 Issue E-1 Senior Bonds, 6.00%, 7/1/16 1,821,342
------------
5,114,733
------------
VERMONT (0.1%)
VT Educ. & Hlth. Bldgs. Financing Agency Rev. Series 1998 (Norwich Univ. Proj.):
420,000 5.13%, 7/1/09 425,586
780,000 5.75%, 7/1/13 805,381
------------
1,230,967
------------
VIRGINIA (1.9%)
1,000,000 Arlington Co. Industrial Dev. Auth. Multifamily Hsg. Mtg. Rev. Refunding Series 1998A (Woodbury
Park Apts. Proj.) 5.35%, 7/1/18 997,530
430,000 Harrisonburg General Obligation Series 1979 (HUD Credit Support) (Section 8), 6.50%, 2/1/10 437,525
2,500,000 Suffolk Redev. & Hsg. Auth. Multifamily Res. Rental Hsg. Rev. Series 1998 (Brook Ridge,
LLC Proj.) (ACA Insured), 5.25%, 10/1/18 2,493,950
2,000,000 Prince William Co. Ind. Dev. Auth. Multifamily Hsg. Rev. Series 1998A (Melrose
Apts. Proj.), 5.35%, 7/1/23 1,999,820
VA Hsg. Dev. Auth. Commonwealth Mtg. Rev:
750,000 Series 1992A, 7.10%, 1/1/22 774,075
1,510,000 Series 1995D3, 6.05%, 1/1/13 1,605,477
1,555,000 Series 1995D3, 6.05%, 7/1/13 1,653,323
3,500,000 Series 1996H2, 5.20%, 7/1/17 3,531,290
Chesterfield Co. Industrial Dev. Auth. Multifamily Hsg. Mtg. Rev. Series 1999
(Winchester Greens Townhouses Proj.):
750,000 5.20%, 7/1/19 741,607
1,155,000 5.30%, 7/1/24 1,140,643
2,000,000 5.40%, 1/1/31 1,972,900
------------
17,348,140
------------
WASHINGTON (3.2%)
Grant Co. Public Hosp. Dist. #1 Rev. Series 1998 (Samaritan Hosp. Proj.) (Asset Guaranty
insured):
1,020,000 5.25%, 9/1/13 1,033,954
3,000,000 5.25%, 9/1/19 2,973,900
2,500,000 King Co. Hsg. Auth. Pooled Hsg. Refunding Rev. Series 1998A (Asset Guaranty insured),
5.05%, 7/1/13 2,507,125
3,000,000 Kitsap Co. Consolidated Hsg. Auth. Pooled Hsg. Refunding Rev. Series 1998A,
5.50%, 12/1/18 3,013,140
Vancouver (Clark Co.) H.A. Pooled Hsg. Refunding Rev. Series 1998A Senior Bonds :
1,000,000 5.40%, 3/1/18 1,011,230
3,500,000 5.50%, 3/1/28 3,539,130
WA HFC Nonprofit Housing Revenue:
1,000,000 Series 1995A (Judson Park Project)(LOC US Bk. Wash.), 6.90%, 7/1/16 1,058,980
1,390,000 Series 1996A Prerefunded (Presbyterian Ministries) (LOC US Bk. Wash.), 6.85%, 7/1/21 1,629,080
</TABLE>
See accompanying notes to portfolios of investments.
35
<PAGE>
SIT TAX-FREE INCOME FUND
PORTFOLIO OF INVESTMENTS - MARCH 31, 1999
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
WA Hlth. Care Fac. Auth. Rev.:
2,000,000 Series 1996 (Grays Harbor Hosp. Proj.)(Asset Guaranty insured), 5.70%, 7/1/16 2,095,260
Series 1998:
2,500,000 (Harrison Memorial Hosp.) (AMBAC insured), 5.00%, 8/15/18 2,448,225
1,850,000 (Highline Cmmty. Hosp. Proj.)(Asset Guaranty insured), 5.25%, 8/15/17 1,856,179
WA Hsg. Finance Commission Nonprofit Hsg. Rev.:
1,000,000 Series 1997A (Virginia Mason Research Center Proj.)(LOC US Bank), 5.70%, 1/1/24 1,038,180
1,500,000 Series 1998 (Cmty. Colleges of Spokane Fdn. Proj.)(LOC US Bank), 5.20%, 7/1/18 1,476,570
1,355,000 Series 1998A (WA Odd Fellows Home Proj.) (LOC US Bank), 5.05%, 7/1/18 1,333,591
1,000,000 Refunding Series 1999A (Presbyterian Ministries, Inc.) (ACA insured), 5.45%, 1/1/29 992,630
1,000,000 WA Public Power Supply Sys. Nuclear Proj. #3 Rev. Refunding Series 1993C, 5.375%, 7/1/15 1,020,370
------------
29,027,544
------------
WEST VIRGINIA (0.5%)
5,635,000 Huntington Res. Mtg. Rev. Series 1991 Prerefunded, Escrowed to Maturity, Zero Coupon,
7.37% Effective Yield on Purchase Date, 9/1/12 2,439,448
2,000,000 Mason Co. Residual Rev. Series 1992C Zero Coupon, 7.58% Effective Yield on Purchase Date, 7/10/14 671,600
3,000,000 Ohio Co. Residual Rev. Series 1992C Zero Coupon, 7.43% Effective Yield on Purchase Date, 7/10/14 1,012,020
------------
4,123,068
------------
WISCONSIN (2.1%)
1,300,000 WI HEDA Hsg. Rev. Series 1992A (Section 8), 6.85%, 11/1/12 1,392,326
WI HEDA Home Ownership Rev. Auth.:
6,455,000 Series 1992A, 7.10%, 3/1/23 6,839,589
1,400,000 Series 1997A, 6.00%, 3/1/17 1,480,290
2,645,000 Series 1998A, 5.38%, 9/1/17 2,677,534
WI Hlth. & Educ. Fac. Auth. Rev. :
750,000 Series 1996 (Meriter Hosp. Inc.), 6.00%, 12/1/17 790,988
1,750,000 Series 1997 (St. John's Home & Sunrise Care), 5.625%, 12/15/22 1,734,233
1,600,000 Series 1998 (Howard Young Medical Center, Inc. Proj.), 5.00%, 8/15/18 1,516,240
1,675,000 Series 1999 (Divine Savior Hosp. & Nursing Home Proj., Inc.), 5.65%, 6/1/19 (6) 1,662,505
1,000,000 Series 1999 (Monroe Clinic Inc., Proj.), 5.125%, 2/15/16 964,370
------------
19,058,075
------------
WYOMING (0.6%)
WY CDA Hsg. Rev.:
2,000,000 1995 Series 6, 6.10%, 12/1/25 2,112,700
3,175,000 Series 1992-B, 7.05%, 6/1/33 3,243,929
------------
5,356,629
------------
Total municipal bonds (cost: $739,901,980) 756,480,074
------------
CLOSED-END MUTUAL FUNDS (4.5%) (2)
253,600 American Municipal Term Trust 2001 2,837,150
154,400 American Municipal Term Trust III 2003 1,717,700
194,300 Blackrock Insured Municipal Term Trust 2008 3,072,369
678,200 Blackrock Insured Municipal Term Trust 2010 7,884,075
116,300 Blackrock Investment Quality Municipal Trust 1,788,112
1,249,900 Blackrock Municipal Target Term Trust 2006 13,670,781
300,000 Van Kampen Merritt Municipal Opp. 4,968,750
325,000 Van Kampen Merritt Strategic 4,448,438
------------
Total closed-end mutual funds (cost: $39,347,225) 40,387,375
------------
</TABLE>
36
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM SECURITIES (10.2%) (2)
8,500,000 Becker MN PCR CP (NSP #3 Proj.), 2.70%, 4/1/99 8,500,000
20,636,742 Dreyfus Tax-Exempt Cash Management Fund, 2.88% 20,636,742
3,500,000 Intermountain Power Agency Power Supply CP, 3.10%, 4/12/99 3,500,000
8,700,000 Mendota Hts. MN MF Hsg. Rev. Refunding Series 1991A (Lexington Hts. Apts. Proj.)
(LOC Norwest), 3.00%, 11/1/31 8,700,000
19,542,177 Northern Institutional Tax-Exempt, 2.70% 19,542,177
14,000,000 Regents of the Univ. of MN G.O. Weekly Variable Rate Series 1999A, 3.00%, 1/1/34 14,000,000
8,950,000 St. Cloud MN Hlth. Care Fac. Rev. Series 1997A (LOC Rabobank Nederland), 2.95%, 7/1/27 8,950,000
3,000,000 Southwest TX Hgr. Ed. Auth. Series 1999B Variable Rate Note (Southern Methodist Univ.)
(LOC-Landesbank Hessen), 3.00%, 10/1/29 3,000,000
4,400,000 Southern MN Muni Power Agency (Power Supply Sys.) CP, 2.70%, 4/6/99 4,400,000
------------
Total short-term securities (cost: $91,228,919) 91,228,919
------------
Total investments in securities (cost: $870,478,124) (7) $888,096,368
============
</TABLE>
See accompanying notes to portfolios of investments.
37
<PAGE>
SIT MINNESOTA TAX-FREE INCOME FUND REVIEW
YEAR ENDED MARCH 31, 1999
SENIOR PORTFOLIO MANAGERS
MICHAEL C. BRILLEY
DEBRA A. SIT, CFA
Dear Fellow Shareholders:
Municipal Bond yields were relatively stable over the past 12 months. The Sit
Minnesota Tax-Free Income Fund provided shareholders a total return of +0.65%
for the quarter and +5.58% for the Fund's past fiscal year. Fund net assets
increased by $39.8 million over the past three months and by $127.6 million over
the fiscal year to a total of $271.3 million at the end of the period. Lipper
Analytical Services awarded the Fund a performance certificate indicating that
the Fund had earned the highest return among 27 Minnesota municipal debt bond
funds for the 5-year period ending December 31, 1998.
During the past 12 months, investment returns among the various sectors in
which the Fund was invested were quite similar with the exception of cash
equivalents, which are typically lower because of lower short-term interest rate
levels, and the closed-end mutual fund holdings, which exceeded the portfolio's
average return by more than +3.5%. The Fund's investments had an average implied
duration (i.e., duration is a common measure of the portfolio's interest rate
risk) of 6.8 years on 3/31/99 compared with 7.4 years on 12/31/98 and 5.0 years
on 3/31/98.
Bond yields have been in a rising trend for the past six months as leverage
has been reduced in bond hedge funds, creating selling pressure in the bond
market; individual investors have continued to prefer equity investments; and
cash flows from foreign investors have decreased. Continued robust economic
growth and rising fuel prices are increasing investor concerns that the Federal
Reserve may need to reverse their bias toward lower interest rates that resulted
in three interest rate cuts during the latter part of 1998.
We will continue to focus on the time-tested philosophy that we employ in the
management of the Fund's portfolio to deal with this challenging bond market
environment. In summary, we will continue to base our investment decisions on
sound fundamental analysis of higher-yielding, intermediate-duration,
investment-grade bonds to protect the principal value of your investment. We
appreciate your continued support and believe that our approach, which has been
successful over many years, will continue to meet your high expectations.
INVESTMENT OBJECTIVE AND STRATEGY
The investment objective of the Minnesota Tax-Free Income 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 alternative minimum taxable income.
PORTFOLIO SUMMARY
Net Asset Value 3/31/99: $10.55 Per Share
3/31/98: $10.49 Per Share
Total Net Assets: $271.27 Million
30-Day SEC Yield: 4.52%
Tax Equivalent Yield: 8.18% (1)
12-Month Distribution Rate: 4.87%
Average Maturity: 17.7 Years
Duration to Estimated Avg. Life: 7.1 Years (2)
Implied Duration: 6.8 Years (2)
(1) For individuals in the 39.6% Federal and 8.5% MN tax brackets.
(2) See next page.
PORTFOLIO STRUCTURE
(% of total net assets)
[BAR CHART]
Multifamily Mortgage Revenue 34.0
Hospital/Health Care Revenue 20.2
Single Family Mortgage Revenue 11.0
Other Revenue Bonds 4.8
Industrial Revenue/Pollution Control 4.1
Lease 3.6
General Obligation 3.4
Education/Student Loan 2.5
Closed-End Mutual Funds 2.1
Escrowed to Maturity/Pre-Refund 1.6
Public Facilities 0.7
Utility 0.1
Other Assets and Liabilities 11.9
38
<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 0.65% 0.51% 1.04% 0.65% 0.51% 1.04%
(not annualized)
1 Year 5.58 5.06 5.71 5.58 5.06 5.71
3 Year 6.96 6.42 5.84 22.36 20.53 18.55
5 Year 7.14 6.51 6.10 41.15 37.08 34.46
Inception 6.52 5.36 5.43 40.02 32.14 32.58
(12/1/93)
</TABLE>
* As of 3/31/99
PERFORMANCE FIGURES ARE HISTORICAL AND DO NOT GUARANTEE FUTURE RESULTS.
INVESTMENT RETURNS AND PRINCIPAL VALUE WILL VARY, AND YOU MAY HAVE A GAIN OR
LOSS WHEN YOU SELL SHARES. AVERAGE ANNUAL TOTAL RETURNS INCLUDE CHANGES IN SHARE
PRICE AS WELL AS REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAINS. 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
[PLOT POINTS CHART]
The sum of $10,000 invested at inception (12/1/93) and held until 3/31/99 would
have grown to $14,002 in the Fund or $13,258 in the Lehman 5-Year Municipal Bond
Index assuming reinvestment of all dividends and capital gains.
QUALITY RATINGS
(% of Net Assets)
LOWER OF MOODY'S, S&P, FITCH OR DUFF & PHELPS RATINGS USED.
[PIE CHART]
A 8.4%
AA 16.9%
AAA 17.3%
Other Assets & Liabilities 11.9%
Not Rated 37.0%
BBB 8.5%
ASSESSMENT OF
NON-RATED SECURITIES
--------------------
AAA 1.1%
AA 0.2
A 2.8
BBB 21.6
BB 10.5
B 0.8
----- -----
Total 37.0%
39
<PAGE>
SIT MINNESOTA TAX-FREE INCOME FUND
PORTFOLIO OF INVESTMENTS - MARCH 31, 1999
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
MUNICIPAL BONDS (86.0%) (2)
EDUCATION/STUDENT LOAN (2.5%)
Minnesota Higher Educ. Fac. Auth. Rev. :
Series 1996-4I (Hamline Univ.):
1,000,000 6.00%, 10/1/12 $1,052,970
585,000 6.00%, 10/1/16 610,442
2,600,000 Series 1998-4T (College of St. Benedict), 5.35%, 3/1/20 2,584,010
410,000 Series 1998-4L (St. John's University), 5.25%, 10/1/11 427,987
701,000 Lease Financing Series 1998-4V (Gustavus Adolphus College) Energy Impts., 4.90%, 2/15/09 702,767
Series 1999-4Y (Augsburg College):
700,000 5.05%, 10/1/13 690,102
500,000 5.20%, 10/1/16 494,230
275,000 Series 1999-4Z (Northwestern College of Chiropractic), 5.20%, 10/1/13 275,688
------------
6,838,196
------------
ESCROWED TO MATURITY/PREREFUNDED (1.6%)
Anoka Industrial Dev. Rev. Series 1994 (Lund Industries Inc. Proj.):
500,000 6.50%, 9/1/04 (4) 557,995
100,000 6.40%, 9/1/03 (4) 109,739
Sherburne Co. Nursing Home Fac. Rev. Series 1994 (Guardian Angels Care Ctr. Proj.):
75,000 7.30%, 6/1/07 85,880
80,000 7.35%, 6/1/08 91,789
90,000 7.40%, 6/1/09 103,469
555,000 7.50%, 6/1/14 640,620
140,000 7.75%, 6/1/15 163,209
150,000 7.75%, 6/1/16 174,867
1,100,000 St. Paul Hsg. & Redev. Sales Tax Series 1993 (Civic Center Proj.), 5.45%, 11/1/13 1,173,975
1,100,000 University of Minnesota Rev. Series 1986A, 6.00%, 2/1/11 1,110,450
------------
4,211,993
------------
GENERAL OBLIGATION (3.4%)
580,000 Carver Co. Hsg. & Redev. Auth. Hsg. & Dev. Gross Rev. Ltd.Tax G.O.
(Chanhassen Apts. Proj.), 7.00%, 1/1/25 618,152
1,600,000 Chaska Independent School Dist. No. 112 G.O. Refunding Series 1998A, 5.00%, 2/1/15 1,610,544
1,025,000 Elk River Independent School Dist. No. 728 G.O. Series 1997A, 5.375%, 2/1/17 1,058,979
500,000 Goodhue (City of) G.O. Gas Utility Series 1996, 6.75%, 1/1/26 535,320
1,040,000 Maple Grove G.O. Improvement Series 1996A, 5.20%, 2/1/13 1,074,778
1,000,000 Rochester ISD No. 535 G.O. Series 1996A, 5.25%, 2/1/14 1,032,940
2,150,000 St. Paul ISD No. 625 G.O. Series 1997A, 5.125%, 2/1/15 2,181,756
1,000,000 Todd, Morrison & Stearns Cos. ISD No. 2753, G.O. Series 1996, 5.00%, 4/1/17 1,002,570
------------
9,115,039
------------
HOSPITAL/HEALTH CARE (20.2%)
1,000,000 Albert Lea Hsg. & Hlth. Care Fac. Rev. Refunding Series 1996 (St. Johns Lutheran Home Proj.),
7.00%, 11/1/19 1,057,540
700,000 Bemidji Hosp. Fac. Rev. Refunding Series 1996 (North Country Hlth. Proj.), 5.625%, 9/1/21 717,703
1,030,000 Bloomington Hsg. & Redev. Auth. Senior Hsg. Rev. Bonds Series 1998 (Summerhouse Proj.),
5.875%, 11/1/11 1,025,684
</TABLE>
40
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Brooklyn Center Hlth. Care Fac. Rev. Series 1993 (Maranatha Proj.):
50,000 6.75%, 12/1/05 53,047
500,000 7.50%, 12/1/10 535,425
670,000 Cambridge Hsg. & Hlth. Care Fac. Rev. Series 1998C (Grandview West Proj.), 5.25%, 10/1/08 661,632
1,290,000 Cokato Sr. Hsg. Rev. Series 1996 (Cokato Charitable Trust Proj.), 7.00%, 12/1/19 1,318,793
1,600,000 Columbia Heights Multifamily & Health Care Fac. Rev. Series 1998 (Crest View Corp. Proj.),
5.75%, 9/1/11 1,617,696
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 1,027,550
500,000 Duluth Econ. Dev. Auth. Hlth. Care Fac. Rev. Series 1998A (BSM Properties Inc. Proj.),
5.875%, 12/1/28 496,480
715,000 Eden Prairie Hlth. Care Fac. Rev. Bonds Series 1998 (Castle Ridge Care Proj.),
5.70%, 7/1/18 704,661
140,000 Edina Hlth. Care Fac. Rev. Series 1995 (Volunteers of America Care Proj.),
7.875%, 3/1/19 143,690
Elk River Rev. Series 1998 (Care Choice Member Proj.):
1,500,000 5.60%, 8/1/13 1,470,225
1,595,000 5.70%, 8/1/18 1,552,079
325,000 5.75%, 8/1/23 312,432
215,000 Fergus Falls Hlth. Care Fac. Auth. Rev. Refunding Series 1993A
(Lake Region Hosp. Corp. Proj.), 6.25%, 9/1/04 231,989
650,000 Fergus Falls Hlth. Care Fac. Auth. Series 1995 (LRHC Long-Term Care Fac. Proj.),
6.40%, 12/1/15 697,248
Hastings Hlth. Care Fac. Rev. Series 1998 (Augustana Home of Hastings Proj.):
115,000 5.10%, 11/1/09 115,350
120,000 5.20%, 11/1/10 120,415
135,000 5.40%, 11/1/12 135,432
140,000 5.50%, 11/1/13 140,654
60,000 5.60%, 11/1/18 59,504
1,095,000 5.75%, 11/1/23 1,084,981
1,455,000 5.875% 11/1/28 1,435,823
565,000 Hastings Hlth. Care Fac. Rev. Series 1998 (Regina Med. Ctr.)(ACA insured), 5.25%, 9/15/18 555,525
1,540,000 Hibbing Hlth. Care Fac. Rev. Series 1995A (St. Francis Hlth. Svcs. Proj.),
7.35%, 11/1/15 1,623,730
665,000 Hopkins Hlth. Care Fac. Rev. Series 1999 (Augustana Chapel View Homes, Inc. Proj.),
6.00%, 3/1/14 663,663
750,000 Mankato Hlth. Care Fac. Rev. Series 1996A (Lutheran Home Proj.), 6.75%, 10/1/16 777,855
1,685,000 Maplewood Hlth. Care Fac. Rev. (VOA Care Ctrs. Proj.), 7.375%, 10/1/12 1,817,677
1,000,000 Minneapolis Hlth. Care Fac. Rev. Series 1993 (St. Olaf Res. Proj.), 7.00%,10/1/18 1,043,030
1,885,000 Minneapolis Hsg. & Hlth. Care Fac. Rev. Series 1997 (Augustana Chapel View Homes Proj.),
6.70%, 6/1/22 1,966,319
1,000,000 Minneapolis Hlth. Care Fac. Rev. Series 1998A (Benchmark Hlth. Care Proj.), 6.625%, 12/1/28 962,910
Minneapolis Rev. Series 1998A (Walker Methodist Senior Services Obligated Group):
905,000 5.10%, 11/15/07 902,140
1,110,000 5.10%, 11/15/08 1,102,030
</TABLE>
See accompanying notes to portfolios of investments.
41
<PAGE>
SIT MINNESOTA TAX-FREE INCOME FUND
PORTFOLIO OF INVESTMENTS - MARCH 31, 1999
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
530,000 5.50%, 11/15/12 524,461
2,100,000 5.875%, 11/15/18 2,100,714
350,000 Minneapolis Skilled Nursing & Assisted Living Rev. Series 1998B (Catholic Eldercare Assisted),
7.25%, 5/1/24 357,346
2,025,000 MN Agr. & Econ. Dev. Board Hlth. Care Sys. Rev. Series 1997A (Fairview Hosp. Proj.)
(MBIA insured), 5.50%, 11/15/17 2,121,147
MN Agr. & Econ. Dev. Board Hlth. Care Rev. Series 1999 (Benedictine Care Centers Proj.):
115,000 5.45%, 2/1/09 116,203
120,000 5.45%, 8/1/09 120,839
120,000 5.50%, 2/1/10 120,877
125,000 5.50%, 8/1/10 125,534
130,000 5.55%, 2/1/11 130,582
130,000 5.55%, 8/1/11 130,034
135,000 5.60%, 2/1/12 135,046
2,355,000 5.90%, 2/1/19 2,354,976
500,000 5.75%, 2/1/29 482,690
750,000 Monticello/Big Lake Cmty. Hosp. Dist. Gross Rev. Series 1998 (Asset Guaranty insured),
5.75%, 12/1/19 790,298
4,020,000 New Hope Hsg. & Hlth. Care Fac. Rev. Series 1999 ( MN Masonic Home North Ridge Proj.),
5.75%, 3/1/15 4,029,728
Olmstead Co. Hlth. Care Fac. Rev. Series 1998 (Olmsted Medical Ctr. Proj.):
650,000 5.45%, 7/1/13 638,638
1,125,000 5.55%, 7/1/19 1,080,765
Red Wing Hlth. Care Ctr. Fac. Rev. Refunding (River Region Obligated Group):
125,000 Series 1993A, 6.20%, 9/1/05 133,628
130,000 Series 1993A, 6.30%, 9/1/06 139,216
200,000 Series 1993B, 6.20%, 9/1/05 213,804
2,500,000 Shakopee - St. Francis Regional Medical Center Tax-Exempt Loan, 5.633%, 7/1/13 2,510,225
300,000 Spring Park Hlth. Care Fac. Rev. Series 1991 (Twin Birch Hlth. Care Ctr. Proj.), 8.25%, 8/1/11 319,209
St. Paul Hsg. & Redev. Auth. Hlth. Care Rev. Series 1998 (Regions Hosp. Proj.):
500,000 5.00%, 5/15/10 498,665
1,540,000 5.20%, 5/15/13 1,530,621
2,850,000 5.25%, 5/15/18 2,736,855
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 1,013,338
820,000 Wadena Co. Hlth. Care Fac. Rev. Series 1994B, 7.45%, 9/1/15 885,354
1,350,000 Zumbrota Hlth. Care Fac. Rev. Series 1998A (Zumbrota Cmty. Fdn.), 5.80%, 12/1/18 1,318,181
------------
54,789,886
------------
INDUSTRIAL /POLLUTION CONTROL (4.1%)
1,075,000 Bass Brook Pollution Control Rev. Series 1992 (Minnesota Power & Light Corp. Proj.),
6.00%, 7/1/22 1,123,504
1,000,000 Blaine Industrial Dev. Rev. Refunding Series 1998 (Consolidated Freightways
Corp. Proj.), 5.15%, 1/1/04 996,760
510,000 Duluth Commercial Dev. Rev. Refunding Series 1995A (Radisson Hotel Proj.), 7.00%, 12/1/00 503,003
MN Agricultural & Econ. Dev. Board Small Business Dev. Loan Program Rev.:
105,000 Series 1995A Lot 1 (New Morning Windows, Inc.), 6.40%, 8/1/04 (4) 109,052
</TABLE>
42
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
500,000 Series 1997C Lot 3 (DynaGraphics), 6.20%, 8/1/09 (4) 519,655
400,000 Series 1998A Lot 1 (Formative Engineering Corp.), 5.75%, 8/1/18 (4) 403,412
1,525,000 Series 1998B Lot 2 (Merrill Corp.), 5.50%, 8/1/10 (4) 1,542,416
Medina Industrial Dev. Rev. Refunding Series 1998 (Temroc Metals, Inc. Proj.):
210,000 5.10%, 10/1/05 (4) 210,298
705,000 5.25%, 10/1/08 (4) 688,785
400,000 5.60%, 10/1/12 (4) 392,544
1,000,000 Minneapolis Commercial Dev. Rev. Refunding Series 1997 (Holiday Inn Metrodome Proj.),
6.00%, 12/1/01 1,015,880
Owatonna Industrial Dev. Rev. Series 1997:
280,000 7.25%, 5/1/14 (4) 290,830
505,000 7.375%, 5/1/17 (4) 524,564
200,000 Richfield Cmty. Dev. Rev. Refunding 1994 (Richfield Shoppes Proj.), 8.375%, 10/1/05 219,118
275,000 Sauk Centre Industrial Dev. Rev. Series 1998 (Seluemed LLP Proj.)(LOC US Bank), 5.75%, 4/1/18 (4) 275,344
500,000 St. Paul Hsg. & Redev. Auth. District Cooling Rev. Series 1998J, 5.35%, 3/1/18 506,660
St. Paul Port Authority Hotel Fac. Senior Rev. Series 1996A (Radisson Kellogg Project):
705,000 7.00%, 8/1/01 717,119
1,065,000 8.05%, 8/1/21 1,136,249
------------
11,175,193
------------
MULTIFAMILY MORTGAGE (34.0%)
200,000 Andover Elderly Hsg. Rev. Series 1997 (Presbyterian Homes of Andover, Inc. Proj.),
5.35%, 12/1/08 201,708
1,520,000 Apple Valley Multifamily Hsg. Rev. Refunding Series 1998A (Mtg. Loan/Apple Valley
Villa Proj.) (GNMA collateralized), 5.25%, 8/1/18 1,532,160
500,000 Aurora Hsg. & Redev. Auth. Multifamily Rev. (Irongate Apts. Proj.) (Section 8),
6.10%, 10/1/19 523,100
Austin Hsg. & Redev. Auth. Governmental Hsg. Gross Rev. Series 1995A (Courtyard Res. Proj.):
220,000 7.00%, 1/1/15 235,708
500,000 7.25%, 1/1/26 538,315
2,500,000 Bloomington Multifamily Hsg. Rev. Refunding Series 1998A (Hampshire Apts. Proj.),
6.20%, 12/1/31 2,468,700
960,000 Burnsville Multifamily Hsg. Rev. Refunding Series 1994 (Bridgeway Apts. Proj.), 7.25%, 2/1/14 1,008,336
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 1,502,582
650,000 Rev. Refunding Series 1997A (Waybury Apts. Proj.), 5.875%, 8/1/27 670,514
2,630,000 Series 1998 (GNMA collateralized)(Jonathan Acres Proj.), 5.30%, 4/20/33 2,658,509
400,000 Subordinate Rev. Refunding Series 1997C (Waybury Apts. Proj.), 8.00%, 8/1/27 408,380
500,000 Chaska Multifamily Hsg. Rev. Series 1999 (West Suburban Hsg. Partners Proj.), 5.375%, 9/1/14 (4) 497,900
405,000 Chisago City Hlth. Fac. Rev. Refunding Series 1995A (Pleasant Heights Proj.),
7.30%, 7/1/18 437,870
Coon Rapids Multifamily Hsg. Rev.:
280,000 Refunding Series 1997 (GNMA collateralized) (Pine Point Apts.), 6.125%, 5/1/32 298,752
700,000 Refunding Series 1997A (Margaret Place Apts. Proj.), 6.50%, 5/1/25 716,072
</TABLE>
See accompanying notes to portfolios of investments.
43
<PAGE>
SIT MINNESOTA TAX-FREE INCOME FUND
PORTFOLIO OF INVESTMENTS - MARCH 31, 1999
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Coon Rapids Senior Hsg. Rev. Refunding Series 1998 (Epiphany Sr. Citizens Hsg. Corp. Proj.):
115,000 5.30%, 11/1/07 115,039
115,000 5.40%, 11/1/08 115,354
170,000 5.50%, 11/1/10 169,718
545,000 5.80%, 11/1/18 535,860
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 3,309,300
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) 1,935,909
245,000 Series 1995C Subordinate, 9.00%, 1/20/15 (4) 256,848
1,000,000 Dakota Co. Hsg. & Redev. Auth. Multifamily Hsg. Rev. Series 1999 (View Pointe Apts. Proj.),
6.125%, 11/1/17 (6) 1,000,000
1,460,000 Eagan Multifamily Rental Hsg. Refunding Rev. Series 1996 (Wescott Apts. Proj.) (FHA insured),
6.00%, 12/1/27 1,528,094
Eden Prairie Multifamily Hsg. Rev. Refunding :
55,000 Series 1990A (Welsh Parkway Apts. Ltd. Proj.)(FHA insured), 8.00%, 7/1/26 58,333
700,000 Series 1991 (Windslope Apts. Proj.)(Section 8), 7.00%, 11/1/06 740,215
1,500,000 Series 1991 (Windslope Apts. Proj.)(Section 8), 7.10%, 11/1/17 1,573,410
450,000 Series 1995A (Olympic Ridge Proj.) (GNMA collateralized), 6.20%, 1/20/16 481,095
300,000 Series 1997A (Preserve Place Proj.) (GNMA collateralized), 5.50%, 1/20/18 308,343
1,035,000 Series 1997A (Preserve Place Proj.) (GNMA collateralized), 5.60%, 7/20/28 1,063,628
Grand Rapids Hsg. & Redev. Auth. (Lakeshore Place and Forest Park West Apts. Proj.):
100,000 Series 1999B, 5.00%, 10/1/09 100,000
500,000 Series 1999A, 5.20%, 10/1/19 500,000
1,660,000 Series 1999A, 5.30%, 10/1/29 1,660,000
110,000 Series 1999B, 5.70%, 10/1/29 110,000
Harmony Multifamily Hsg. Rev. Refunding Series 1997A (Zedakah Fdn. Proj.) (Section 8):
300,000 5.40%, 9/1/08 312,021
280,000 5.75%, 9/1/12 291,794
275,000 5.80%, 9/1/13 286,555
3,500,000 Hopkins Elderly Hsg. Rev. Refunding (St. Therese Southwest Proj.),
Series 1997 (GNMA collateralized), 5.70%, 11/20/32 3,623,970
1,015,000 Hopkins Hsg. Fac. Rev. Refunding Series 1995 (Augustana Chapel View Homes Proj.), 7.00%, 12/1/15 1,069,343
555,000 Hopkins Subordinate Multifamily Hsg. Rev. Refunding Series 1996C (Auburn Apts. Proj.),
8.00%, 6/20/31 587,129
450,000 Hopkins Multifamily Hsg. Rev. Series 1996 (Hopkins Renaissance Proj.), 6.25%, 4/1/15 479,974
500,000 Hutchinson Hsg. Fac. Rev. Series 1994 (Prince of Peace Proj.), 7.375%, 10/1/12 523,955
Little Canada Multifamily Hsg. Rev.:
800,000 Refunding Series 1997A (GNMA collateralized)(Cedars Lakeside Proj.), 5.90%, 8/1/20 843,248
3,410,000 Series 1997A (Hsg. Alt. Dev. Co. Proj.), 6.10%, 12/1/17 3,450,818
1,000,000 Series 1997A (Hsg. Alt. Dev. Proj.), 6.25%, 12/1/27 1,011,890
1,650,000 Maplewood Multifamily Hsg. Rev. Series 1998 (Park Edge Apts. Proj.), 6.50%, 5/1/29 (4) 1,675,921
Maplewood Multifamily Refunding Rev. (Village on Woodlyn Proj.):
1,605,000 Series 1999A (GNMA collateralized), 6.75%, 7/20/30 (4) (6) 1,723,850
100,000 Subordinate Series 1998C-1, 8.00%, 11/1/30 (4) 100,072
375,000 Subordinate Series 1999C-1, 8.00%, 11/1/30 (4) (6) 375,000
</TABLE>
44
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Minneapolis Multifamily Hsg. Rev.:
75,000 Series 1991 (Trinity Hsg. Proj.) (Section 8), 7.875%, 2/1/06 78,384
355,000 Series 1996 (Belmont Apts.), 7.25%, 11/1/16 370,400
565,000 Series 1994 (Findley Place Townhomes Proj) (Section 8), 7.00%, 12/1/16 (4) 567,011
2,000,000 Series 1996A (Nicollet Towers) (Section 8), 6.00%, 12/01/19 2,090,800
4,190,000 Series 1998A (University Village) (GNMA collateralized), 5.30%, 8/1/23 4,246,733
645,000 Series 1996 (Belmont Apts.), 7.625%, 11/1/27 673,664
3,220,000 Series 1998 (Riverside Plaza Proj.) (GNMA collateralized), 5.10%, 12/20/18 (4) 3,227,084
MN HFA Rental Hsg. Rev.:
175,000 Series 1993C, 6.15%, 2/1/14 177,097
135,000 Series 1993E, 6.00%, 2/1/14 141,272
220,000 Series 1995D (MBIA insured), 6.00%, 2/1/22 231,044
4,005,000 Series 1998A, 5.375%, 8/1/28 4,077,891
Minnetonka Hsg. Fac. Rev. Series 1994 (Beacon Hill Housing Proj.):
890,000 7.00%, 6/1/04 933,361
1,000,000 7.50%, 6/1/14 1,074,870
505,000 Minnetonka Multifamily Hsg. Rev. Refunding Subordinate Series 1994C (Brier Creek Proj.),
8.00%, 12/20/16 538,643
550,000 Minnetonka Multifamily Hsg. Rev. Series 1985 (Cedar Hills East)(FHA insured), 7.50%, 12/1/17 572,957
Minnetonka Senior Hsg. Rev. Series 1997 (Westridge Senior Hsg. Proj.):
285,000 6.75%, 9/1/17 291,444
650,000 7.00%, 9/1/27 671,522
500,000 Monticello Senior Hsg. Rev. Series 1995 (Mississippi Shores Proj.), 7.25%, 7/1/16 510,170
1,000,000 Moorhead Multifamily Hsg. Fac. Rev. Series 1994B (Fairmont Proj.) Zero Coupon,
6.00% Effective Yield on Purchase Date, 10/1/17 330,620
270,000 Mora Multifamily Rev. Refunding Hsg. Alternatives Partnership Series 1995, 6.50%, 6/1/02 273,966
New Ulm Multifamily Rev. Series 1999 (HADC Ridgeway Proj.):
95,000 5.35%, 12/1/08 94,244
100,000 5.40%, 12/1/09 99,512
105,000 5.50%, 12/1/10 104,456
110,000 5.60%, 12/1/11 109,399
650,000 6.125%, 12/1/19 645,418
Plymouth Multifamily Hsg. Rev. Refunding Series 1996A (Fox Forest Apts. Proj.) (GNMA
collateralized):
750,000 Series 1996A, 8.05%, 6/20/31 866,565
695,000 Series 1996C, 8.00%, 6/20/31 735,234
960,000 Robbinsdale Multifamily Hsg. Rev. Series 1996A (Copperfield Hill Proj.),
7.20%, 12/1/16 986,755
Roseville Hsg. Fac. Rev. Refunding Bonds Series 1998 (College Properties Inc. Proj.),
2,820,000 5.60%, 10/1/13 2,761,147
400,000 5.625%, 10/1/18 390,068
325,000 Sandstone Econ. Dev. Auth. Hsg. & Dev. Rev. Series 1994A (Family Apts. Proj.),
8.00%, 1/1/12 322,975
1,250,000 Spring Lake Park Sr. Hsg. Rev. Series 1996 (Noah's Ark Affordable Hsg. Inc.), 7.25%, 9/1/16 1,270,588
1,500,000 St. Anthony Hsg. Dev. Rev. Refunding (Autumn Woods Proj.) (Asset Gty. insured), 6.875%, 7/1/22 1,605,060
</TABLE>
See accompanying notes to portfolios of investments.
45
<PAGE>
SIT MINNESOTA TAX-FREE INCOME FUND
PORTFOLIO OF INVESTMENTS - MARCH 31, 1999
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
500,000 St. Cloud Hsg. & Redev. Auth. Hsg. Rev. Refunding Series 1998 (Northway Manor Apts. Section 8
Assisted Proj.), 5.15%, 12/1/14 506,240
St. Cloud Hsg. & Redev. Auth. Multifamily Hsg. Rev.:
1,050,000 Series 1993 (Germain Towers Proj.) (Section 8), 5.90%, 9/1/20 1,089,039
Series 1999A (Parkview Terrace Apts. Proj.) (Section 8):
249,000 5.00%, 6/1/09 249,179
929,000 5.50%, 6/1/18 930,013
St. Louis Park Multifamily Hsg. Rev. Refunding:
650,000 Series 1995 (FHA insured) (Knollwood Cmty. Hsg. Proj.), 6.15%, 12/1/16 692,588
500,000 Series 1998A (Park Ridge Apts. Proj.) (GNMA collateralized), 5.25%, 11/1/20 496,150
St. Paul Hsg. & Redev. Auth. Multifamily Refunding Rev.:
500,000 Series 1992 (Point of St. Paul Proj.)(FNMA backed), 6.60%, 10/1/12 532,315
200,000 Series 1995 (Sun Cliffe Apts. Proj.)(GNMA collateralized), 5.875%, 7/1/15 209,518
1,170,000 Series 1998 (Superior Street Cottages Proj.), Lyngblomsten, Inc., 6.00%, 3/15/24 1,176,938
St. Paul Port Authority Multifamily Hsg. Refunding (Jackson Towers Apts. Proj.):
3,420,000 Senior Series 1998-1A (GNMA collateralized), 6.95%, 4/20/33 3,914,498
408,000 Subordinate Series 1998-1B, 8.00%, 4/20/33 412,737
2,000,000 Virginia Hsg. & Redev. Auth. Governmental Hsg. Rev. Refunding Series 1998A
(Laurentian Manor Proj.), 5.75%, 5/1/32 2,015,180
1,015,000 Washington Co. Hsg. & Redev. Auth. Multifamily Hsg. Rev. Refunding Series 1994
(White Bear Lake Transitional Hsg. Proj.), 6.625%, 8/1/24 1,076,773
1,385,000 White Bear Lake Multifamily Hsg. Rev. Refunding Series 1996A (Lake Sq. Partners Proj.)
(FHA insured), 6.10%, 2/1/26 1,468,945
770,000 Willmar Hsg. & Redev. Auth. Multifamily Rev. Series 1993 (Highland Apts)
(Section 8), 5.85%, 6/1/19 790,852
------------
92,246,611
------------
MUNICIPAL LEASE (3.6%)
1,015,000 Beltrami Co. Hsg. & Redev. Auth. Lease Rev., 6.25%, 2/1/16 1,063,273
585,000 Burnsville Solid Waste Rev. Series 1990 (Freeway Transfer Inc. Proj.), 9.00%, 4/1/10 (4) 623,967
250,000 Goodhue Co. Econ. Dev. Auth. Courts Building Proj. Lease Rev. Series 1997A, 5.75%, 2/1/13 260,135
125,000 Hennepin Co. Hsg. & Redev. Auth. Rev. Series 1993A (Community Provider Program), 5.70%, 8/1/13 128,557
Hibbing Econ. Dev. Auth. Public Proj. Rev. Series 1997 (Hibbing Lease Obligations Proj.):
655,000 6.10%, 2/1/08 696,029
535,000 6.40%, 2/1/12 554,110
2,000,000 Minneapolis Special School Dist. #1, Certificates of Participation Series 1998B, 5.125%, 2/1/16 2,022,480
100,000 Rice Co. Certificates of Participation Series 1996A, 5.85%, 12/1/14 106,595
2,215,000 South Washington Co. (Cottage Grove) ISD No. 833 Certificates of Participation
Series 1999, 5.59%, 1/15/14 2,259,787
400,000 St. Cloud Certificates of Participation Series 1997, 5.90%, 12/1/17 405,036
1,700,000 St. Paul Lease Series 1998 (City Hall Annex Building), 5.71%, 10/1/18 1,721,012
------------
9,840,981
------------
PUBLIC FACILITIES (0.7%)
480,000 Eagan Ice Arena Gross Rev. Series 1998B, 5.50%, 4/1/19 483,653
1,245,000 St. Paul Recreational Fac. Gross Rev. Series 1996D, 5.875%, 6/1/18 1,311,371
------------
1,795,024
------------
</TABLE>
46
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SINGLE FAMILY MORTGAGE (11.0%)
Dakota County Hsg. & Redev. Auth. Single Family Mtg. Rev.:
590,000 Series 1994A (FNMA backed), 6.70%, 10/1/09 (4) 628,940
380,000 Series 1995 (FNMA & GNMA backed), 6.25%, 10/1/09 (4) 402,785
355,000 Dakota/Wash./Stearns Cos. Hsg. & Redev. Auth. Single Family Rev. Refunding
Series 1994A (FNMA backed), 6.50%, 9/1/10 (4) 376,950
910,000 Minneapolis Redev. Mtg. Rev. Series 1987A (Riverplace Proj.) (LOC Bk. of Tokyo),
7.10%, 1/1/20 918,690
2,100,000 Minneapolis Residual Interest Mtg. Rev. Series 1995 Convertible Capital Appreciation Bonds,
Zero Coupon, 7.00% Effective Yield on Purchase Date, 10/1/12 905,751
540,000 Minneapolis Single Family Mtg. Rev. Series 1995V (FNMA & GNMA backed), 6.25%, 4/1/22 571,714
Minneapolis/ St. Paul Hsg. Fin. Bd. Single Family Mtg. Rev.:
15,000 Series 1989A (GNMA backed), 7.65%, 12/1/00 (4) 15,336
545,000 Series 1994 (FNMA backed), 7.25%, 5/1/12 (4) 577,983
2,000,000 MN HFA Single Family Hsg. Dev. Rev. Series 1997I, 5.50%, 1/1/17 2,058,240
MN HFA Single Family Mtg. Rev.:
120,000 Series 1988D, 8.25%, 8/1/20 (4) 122,612
15,000 Series 1989B, 7.05%, 1/1/03 15,370
45,000 Series 1989B, 7.05%, 7/1/03 46,110
940,000 Series 1989D, 7.35%, 7/1/16 960,943
235,000 Series 1991A, 7.05%, 7/1/22 (4) 244,644
2,710,000 Series 1991A, 7.45%, 7/1/22 (4) 2,829,348
1,620,000 Series 1992B-1, 6.75%, 1/1/26 (4) 1,710,639
1,000,000 Series 1992F, 6.75%, 7/1/12 (4) 1,049,000
995,000 Series 1994F, 6.30%, 7/1/25 1,060,809
50,000 Series 1994G, 5.875%, 7/1/15 (4) 51,816
85,000 Series 1994K, 5.90%, 1/1/07 88,441
495,000 Series 1994L, 6.70%, 7/1/20 (4) 526,274
2,830,000 Series 1995M, 5.875%, 1/1/17 2,978,830
685,000 Series 1996D, 6.00%, 1/1/16 721,100
1,915,000 Series 1997D, 5.85%, 7/1/19, (4) 1,958,336
2,280,000 Series 1997E, 5.90%, 7/1/29 (4) 2,380,616
710,000 Series 1997K, 5.75%, 1/1/26 (4) 738,940
1,250,000 Series 1998B, 5.50%, 7/1/24 (4) 1,261,375
2,450,000 Series 1998C, 5.25%, 1/1/17 2,476,901
1,277,528 Moorhead Single Family Mtg. Rev. Refunding Series 1992B, 7.00%, 8/1/11 1,280,351
St. Paul Hsg. & Redev. Auth. Single Family Mtg. Rev. Refunding Series 1995 (FNMA backed):
330,000 6.00%, 9/1/10 347,592
95,000 6.125%, 3/1/17 96,552
966,042 St. Paul Residual Interest Rev. Series 1995 Convertible Capital Appreciation
Bonds, Zero Coupon, 7.23% Effective Yield on Purchase Date, 9/1/11 413,302
------------
29,816,290
------------
UTILITY (0.1%)
400,000 Southern MN Muni. Power Agy. Pwr. Supply Sys. Rev. Refunding Series 1986A, 5.00%, 1/1/16 399,976
------------
</TABLE>
See accompanying notes to portfolios of investments.
47
<PAGE>
SIT MINNESOTA TAX-FREE INCOME FUND
PORTFOLIO OF INVESTMENTS - MARCH 31, 1999
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OTHER REVENUE BONDS (4.8%)
Columbia Heights Commercial Dev. Refunding Rev. Series 1999 (Columbia Park Properties -
Medical Clinic Proj.):
150,000 5.00%, 12/1/06 150,520
235,000 5.10%, 12/1/07 236,668
250,000 5.15%, 12/1/08 250,982
1,750,000 5.60%, 12/1/15 1,749,842
1,375,000 Commissioner of Iron Range Resources and Rehabilitation Gross Rev.
Series 1996 (Giants Ridge Rec. Area Proj.), 7.25%, 10/1/11 1,436,298
Minneapolis Cmty. Dev. Agy. Ltd. Tax Common Bond Fund:
100,000 Series 1993-5 (Winslow Printing), 6.125%, 12/1/06 (4) 103,269
170,000 Series 1997-1 (Halper Corrugated Box Mfg. Co.), 5.90%, 6/1/07 (4) 184,387
640,000 Series 1995-1 (Microtron, Inc.), 6.625%, 12/1/09 (4) 694,893
1,310,000 Series 1995-1 (Microtron, Inc.), 7.25%, 12/1/15 (4) 1,444,039
750,000 Series 1997-2 (Ambassador Press), 6.20%, 6/1/17 (4) 803,497
2,000,000 Minneapolis Public Hsg. Auth. Series 1997 (General Credit Energy Savings Proj.), 6.00%, 7/1/08 2,073,020
200,000 Renville Gross Rev. Golf Course Bond Series 1997, 6.50%, 2/1/19 207,558
300,000 Scott Co. Hsg. & Redev. Auth. Ltd. Special Benefits Tax Series 1997B (River City Centre Proj.),
(AMBAC insured), 5.45%, 2/1/20 309,306
2,790,000 St. Paul Hsg. & Redev. Sales Tax Rev. Refunding Series 1996 (FSA insured)
(Civic Center Proj.), 7.10%, 11/1/23 3,470,955
------------
13,115,234
------------
Total municipal bonds (cost: $228,377,127) 233,344,423
------------
CLOSED-END MUTUAL FUNDS (2.1%) (2)
171,900 Minnesota Municipal Term Trust 2002 1,912,388
103,600 Minnesota Municipal Term Trust II 2003 1,120,175
143,800 Voyageur Minnesota Municipal Income Fund II 2,165,988
27,000 Voyageur Minnesota Municipal Income Fund III 379,688
------------
Total closed-end mutual funds (cost: $5,395,426) 5,578,239
------------
SHORT-TERM SECURITIES (11.8%) (2)
13,862,917 Federated Minnesota Municipal Cash Fund, 2.88% 13,862,917
1,000,000 MN Higher Educ. Fac. Auth. Rev. Series 3-Z (Macalester College), 3.00%, 3/1/24 1,000,000
2,000,000 Minneapolis Convention Ctr. Series 1997B (LOC Norwest Bank), 3.00%, 12/1/17 2,000,000
4,150,000 Olmstead Co. (Human Svcs. Campus Infrastructure) (LOC Toronto
Dominion Bank), 2.95%, 8/1/05 4,150,000
10,000,000 Regents of the Univ. of MN G.O. Rev. Weekly Variable Rate Putable Series 1999A, 3.00%, 1/1/34 10,000,000
1,000,000 St. Cloud MN Hlth. Care Fac. Rev. Series 1997A (LOC Rabobank Nederland), 2.95%, 7/1/27 1,000,000
------------
Total short-term securities (cost: $32,012,917) 32,012,917
------------
Total investments in securities (cost: $265,785,470) (7) $270,935,579
============
</TABLE>
See accompanying notes to portfolios of investments.
48
<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 March 31, 1999, 18.4% of net assets in the U.S. Government Securities
Fund and 5.1% 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 March 31, 1999, approximately
12.8% 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 March 31, 1999, the total cost of investments purchased on a when-issued
or forward-commitment basis was $3,190,554, and $3,098,850 for the Tax-Free
Income Fund, and the Minnesota Tax-Free Income Fund, respectively.
(7) At March 31, 1999 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 $ 59,906,744 $ 157,987,271 $ 11,844,801
============= ============= =============
Unrealized appreciation (depreciation) on
investments:
Gross unrealized appreciation -- $ 687,489 $ 96,794
Gross unrealized depreciation -- (1,311,568) (129,931)
------------- ------------- -------------
Net unrealized appreciation (depreciation) -- $ (624,079) $ (33,137)
============= ============= =============
<CAPTION>
MINNESOTA
TAX-FREE TAX-FREE
INCOME INCOME
FUND FUND
------------- -------------
Cost for federal income tax purposes $ 870,478,124 $ 265,785,470
============= =============
Unrealized appreciation (depreciation) on
investments:
Gross unrealized appreciation $ 20,386,087 $ 5,736,540
Gross unrealized depreciation (2,767,843) (586,431)
------------- -------------
Net unrealized appreciation (depreciation) $ 17,618,244 $ 5,150,109
============= =============
</TABLE>
49
<PAGE>
SIT MUTUAL FUNDS
STATEMENTS OF ASSETS & LIABILITIES - MARCH 31, 1999
<TABLE>
<CAPTION>
U.S. MINNESOTA
MONEY GOVERNMENT TAX-FREE TAX-FREE
MARKET SECURITIES BOND INCOME INCOME
ASSETS FUND FUND FUND FUND FUND
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Investments in securities, at
identified cost ................. $ 59,906,744 $157,862,252 $ 11,819,633 $870,478,124 $265,785,470
============ ============ ============ ============ ============
Investments in securities, at
market value - see
accompanying schedules for
detail .......................... $ 59,906,744 $157,363,192 $ 11,811,664 $888,096,368 $270,935,579
Cash in bank on demand
deposit ......................... 5,179,447 168,529 510 -- --
Accrued interest
receivable ...................... -- 1,034,963 120,418 12,211,190 3,898,085
Receivable for investment
securities sold ................. -- -- -- -- --
Other
receivables ..................... -- -- 16 467 --
Receivable for Fund shares
sold ............................ 2,210,491 1,120,645 463 1,515,006 321,821
------------ ------------ ------------ ------------ ------------
Total assets ........... 67,296,682 159,687,329 11,933,071 901,823,031 275,155,485
------------ ------------ ------------ ------------ ------------
LIABILITIES
Disbursements in excess of
cash balances ................... -- -- -- 3,797 12,904
Payable for investment securities
purchased - when issued (note 1) -- -- -- 3,190,554 3,098,850
Payable for investment securities
purchased ....................... -- -- -- 766,184 151,979
Payable for Fund shares
redeemed ........................ 5,786,952 190,663 720 1,425,673 241,306
Cash portion of dividends
payable to shareholders ......... 44,815 52,585 4,675 568,987 191,725
Other
payables ........................ 565 8,003 -- -- 5,595
Accrued investment management
and advisory services fee ....... 22,783 105,851 7,995 514,657 178,351
------------ ------------ ------------ ------------ ------------
Total liabilities ...... 5,855,115 357,102 13,390 6,469,852 3,880,710
------------ ------------ ------------ ------------ ------------
Net assets applicable to
outstanding capital stock ....... $ 61,441,567 $159,330,227 $ 11,919,681 $895,353,179 $271,274,775
============ ============ ============ ============ ============
Capital Stock Par ............... $ 0.001 $ 0.01 $ 0.001 $ 0.001 $ 0.001
Authorized shares (000's) ....... 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000
Outstanding shares .............. 61,444,586 15,156,714 1,198,409 86,209,089 25,709,302
============ ============ ============ ============ ============
Net asset value per share of
outstanding capital stock ....... $ 1.00 $ 10.51 $ 9.95 $ 10.39 $ 10.55
============ ============ ============ ============ ============
</TABLE>
See accompanying notes to financial statements.
50
<PAGE>
SIT MUTUAL FUNDS
STATEMENTS OF OPERATIONS - YEAR ENDED MARCH 31, 1999
<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 ............................... $ 2,267,154 $ 7,495,747 $ 693,447 $ 38,501,473 $ 11,263,897
------------ ------------ ------------ ------------ ------------
Total income .................... 2,267,154 7,495,747 693,447 38,501,473 11,263,897
------------ ------------ ------------ ------------ ------------
EXPENSES (NOTE 3):
Investment management and
advisory services fee .............. 338,767 1,121,843 90,395 5,485,395 1,597,679
Less fees and expenses absorbed
by investment adviser ........... (126,552) (100,000) -- (621,348) --
------------ ------------ ------------ ------------ ------------
Total net expenses ................. 212,215 1,021,843 90,395 4,864,047 1,597,679
------------ ------------ ------------ ------------ ------------
Net investment income .............. 2,054,939 6,473,904 603,052 33,637,426 9,666,218
------------ ------------ ------------ ------------ ------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS :
Net realized gain (loss) (note 2) ...... -- 847,820 92,909 1,808,557 56,447
Net change in unrealized appreciation
or (depreciation) on investments ... -- (1,417,691) (123,900) (2,343,717) 642,985
------------ ------------ ------------ ------------ ------------
Net gain (loss) on investments ..... -- (569,871) (30,991) (535,160) 699,432
------------ ------------ ------------ ------------ ------------
Net increase in net assets resulting
from operations ............................ $ 2,054,939 $ 5,904,033 $ 572,061 $ 33,102,266 $ 10,365,650
============ ============ ============ ============ ============
</TABLE>
See accompanying notes to financial statements.
51
<PAGE>
SIT MUTUAL FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
MONEY MARKET U.S. GOVERNMENT
FUND SECURITIES FUND
------------------------------ ------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
MARCH 31, MARCH 31, MARCH 31, MARCH 31,
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income ........................... $ 2,054,939 $ 1,688,668 $ 6,473,904 $ 5,181,705
Net realized gain (loss) on investments ......... -- -- 847,820 751,953
Net change in unrealized appreciation
(depreciation) of investments ................ -- -- (1,417,691) 1,908,463
------------- ------------- ------------- -------------
Net increase in net assets resulting from
operations ................................ 2,054,939 1,688,668 5,904,033 7,842,121
------------- ------------- ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ........................... (2,054,939) (1,688,687) (6,473,904) (5,181,705)
Net realized gains on investments ............... -- -- (1,378,000) --
------------- ------------- ------------- -------------
Total distributions .......................... (2,054,939) (1,688,687) (7,851,904) (5,181,705)
------------- ------------- ------------- -------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold ....................... 521,895,983 421,731,957 98,796,377 54,323,377
Reinvested distributions ........................ 1,723,536 1,490,762 7,221,219 4,543,928
Payments for shares redeemed .................... (505,288,726) (412,780,024) (48,607,714) (31,053,376)
------------- ------------- ------------- -------------
Increase (decrease) in net assets from
capital share transactions ................ 18,330,793 10,442,695 57,409,882 27,813,929
------------- ------------- ------------- -------------
Total increase (decrease) in net assets ... 18,330,793 10,442,676 55,462,011 30,474,345
NET ASSETS
Beginning of period ............................. 43,110,774 32,668,098 103,868,216 73,393,871
------------- ------------- ------------- -------------
End of period ................................... $ 61,441,567 $ 43,110,774 $ 159,330,227 $ 103,868,216
============= ============= ============= =============
NET ASSETS CONSIST OF:
Capital (par value and paid-in surplus) ......... $ 61,441,567 $ 43,110,774 $ 160,126,974 $ 102,717,092
Undistributed (distributions in excess of) net
investment income ............................ -- -- -- --
Accumulated net realized gain (loss) from
security transactions ........................ -- -- (297,687) 232,493
Unrealized appreciation (depreciation)
on investments ............................... -- -- (499,060) 918,631
------------- ------------- ------------- -------------
$ 61,441,567 $ 43,110,774 $ 159,330,227 $ 103,868,216
============= ============= ============= =============
CAPITAL TRANSACTIONS IN SHARES:
Sold ............................................ 521,895,983 421,731,641 9,272,214 5,135,153
Reinvested distributions ........................ 1,723,536 1,490,762 677,811 429,944
Redeemed ........................................ (505,288,726) (412,779,708) (4,561,161) (2,935,530)
------------- ------------- ------------- -------------
Net increase (decrease) .............................. 18,330,793 10,442,695 5,388,864 2,629,567
============= ============= ============= =============
</TABLE>
52
<PAGE>
<TABLE>
<CAPTION>
BOND TAX-FREE MINNESOTA TAX-FREE
FUND INCOME FUND INCOME FUND
- ------------------------------ ------------------------------ ------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
MARCH 31, MARCH 31, MARCH 31, MARCH 31, MARCH 31, MARCH 31,
1999 1998 1999 1998 1999 1998
- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
$ 603,052 $ 496,143 $ 33,637,426 $ 22,280,624 $ 9,666,218 $ 6,165,702
92,909 49,321 1,808,557 5,643,332 56,447 378,832
(123,900) 229,412 (2,343,717) 13,506,608 642,985 3,309,650
- ------------- ------------- ------------- ------------- ------------- -------------
572,061 774,876 33,102,266 41,430,564 10,365,650 9,854,184
- ------------- ------------- ------------- ------------- ------------- -------------
(603,052) (496,143) (33,644,852) (22,265,772) (9,675,296) (6,147,546)
(76,000) (15,500) (3,365,000) (2,923,000) -- --
- ------------- ------------- ------------- ------------- ------------- -------------
(679,052) (511,643) (37,009,852) (25,188,772) (9,675,296) (6,147,546)
- ------------- ------------- ------------- ------------- ------------- -------------
3,764,226 5,732,530 615,154,811 289,918,088 214,887,144 95,953,859
648,528 444,858 30,867,685 19,434,042 8,025,552 5,000,624
(3,092,333) (2,137,832) (266,340,384) (148,555,475) (95,961,945) (55,003,355)
- ------------- ------------- ------------- ------------- ------------- -------------
1,320,421 4,039,556 379,682,112 160,796,655 126,950,751 45,951,128
- ------------- ------------- ------------- ------------- ------------- -------------
1,213,430 4,302,789 375,774,526 177,038,447 127,641,105 49,657,766
10,706,251 6,403,462 519,578,653 342,540,206 143,633,670 93,975,904
- ------------- ------------- ------------- ------------- ------------- -------------
$ 11,919,681 $ 10,706,251 $ 895,353,179 $ 519,578,653 $ 271,274,775 $ 143,633,670
============= ============= ============= ============= ============= =============
$ 11,926,056 $ 10,605,635 $ 877,802,089 $ 498,119,977 $ 266,160,444 $ 139,209,693
-- -- -- 7,426 -- 9,078
1,594 (15,315) (67,154) 1,489,289 (35,778) (92,225)
(7,969) 115,931 17,618,244 19,961,961 5,150,109 4,507,124
- ------------- ------------- ------------- ------------- ------------- -------------
$ 11,919,681 $ 10,706,251 $ 895,353,179 $ 519,578,653 $ 271,274,775 $ 143,633,670
============= ============= ============= ============= ============= =============
373,409 571,626 58,814,075 28,152,545 20,329,590 9,257,296
64,250 44,515 2,951,347 1,884,655 759,723 481,164
(306,375) (214,721) (25,488,804) (14,443,246) (9,077,623) (5,306,337)
- ------------- ------------- ------------- ------------- ------------- -------------
131,284 401,420 36,276,618 15,593,954 12,011,690 4,432,123
============= ============= ============= ============= ============= =============
</TABLE>
See accompanying notes to financial statements.
53
<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. 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, and Tax-Free Income Funds on a forward
commitment or when-issued basis can take place two weeks 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 greater than the amount of its
purchase commitments. As of March 31, 1999, the Minnesota Tax-Free
Income, and Tax-Free Income Funds had entered into when-issued or
forward commitments of $3,098,850 and $3,190,554, respectively.
54
<PAGE>
The Minnesota Tax-Free Income Fund concentrates its investments in
Minnesota, and therefore may have more credit risk related to the
economic conditions in the state of Minnesota than a portfolio with
broader geographical diversification.
FEDERAL TAXES
The Funds' policy is to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income to shareholders. Therefore, no
income tax provision is required. Also, in order to avoid the payment
of any federal excise taxes, the Funds will distribute substantially
all of their net investment income and net realized gains on a calendar
year basis.
Net investment income and net realized gains may differ for financial
statement and tax purposes. The character of distributions made during
the year for net investment income or net realized gains may also
differ from its ultimate characterization for tax purposes.
For federal income tax purposes the Minnesota Tax-Free Income Fund has
a capital loss carryover of $35,778 at March 31, 1999, which, if not
offset by subsequent capital gains, will begin to expire in 2004. It is
unlikely the Board of Directors will authorize a distribution of any
net realized gains until the available capital loss carryover is offset
or expires.
DISTRIBUTIONS
Distributions to shareholders are recorded as of the close of business
on the record date. Such distributions are payable in cash or
reinvested in additional shares of the Funds' capital stock.
Distributions from net investment income are declared daily and paid
monthly for the Funds. Distributions from net realized gains, if any,
will be made annually for each of the Funds.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported results. Actual
results could differ from those estimates.
(2) INVESTMENT SECURITY TRANSACTIONS
Purchases of and proceeds from sales and maturities of investment
securities, other than short-term securities, for the period ended
March 31, 1999, were as follows:
Purchases ($) Proceeds ($)
------------- ------------
U.S. Government Securities Fund 160,026,000 160,812,786
Bond Fund 10,090,567 9,681,657
Tax-Free Income Fund 421,242,806 91,780,194
Minnesota Tax-Free Income Fund 149,000,026 26,227,148
For Money Market Fund during the period ended March 31, 1999 purchases
of and proceeds from sales and maturities of investment securities
aggregated $1,890,812,415 and $1,884,069,000, respectively.
55
<PAGE>
(3) EXPENSES
INVESTMENT ADVISER
The Funds each have entered into an investment management agreement
with Sit Investment Associates Inc. (SIA), under which SIA manages the
Fund's assets and provides research, statistical and advisory services,
and pays related office rental, executive expenses and executive
salaries. SIA also is obligated to pay all of 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, 1999, 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, 1999, this voluntary fee waiver may be discontinued by the
Adviser in its sole discretion.
For the period April 1, 1995, through December 31, 1999, 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, 1999, this voluntary fee waiver may be
discontinued by the Adviser in its sole discretion.
Transactions with affiliates
The investment adviser, affiliates of the investment adviser, directors
and officers of the Funds as a whole owned the following shares as of
March 31, 1999:
% Shares
Shares Outstanding
------ -----------
Money Market Fund 17,634,810 28.7
U.S. Government Securities Fund 422,447 2.8
Bond Fund 81,902 6.8
Tax-Free Income Fund 1,786,710 2.1
Minnesota Tax-Free Income Fund 787,488 3.1
56
<PAGE>
(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:
57
<PAGE>
SIT MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Years Ended March 31,
-----------------------------------------------------------------------------
1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
<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 0.05 0.05 0.05 0.05 0.04
- ---------------------------------------------------------------------------------------------------------------------------------
Total from operations 0.05 0.05 0.05 0.05 0.04
- ---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (0.05) (0.05) (0.05) (0.05) (0.04)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE:
End of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ---------------------------------------------------------------------------------------------------------------------------------
Total investment return (1) 4.99% 5.29% 5.04% 5.44% 4.57%
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000's omitted) $61,442 $43,111 $32,668 $21,260 $29,822
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 4.84%(2) 5.12%(2) 4.93%(2) 5.35%(2) 4.63%(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) Total Fund expenses are contractually limited to .80% of average daily net
assets for the first $50 million in Fund net assets and .60% of average
daily net assets for Fund net assets exceeding $50 million. However, during
the periods ended March 31, 1999, 1998, 1997, 1996, and 1995, the
investment adviser voluntarily absorbed $126,552, $98,857, $78,042,
$66,862, and $63,828, 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 4.54%, 4.82%, 4.63%, 5.05%, and 4.33%, respectively.
58
<PAGE>
SIT U.S. GOVERNMENT SECURITIES FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Years Ended March 31,
-----------------------------------------------------------------------------
1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE:
Beginning of period $ 10.63 $ 10.28 $ 10.47 $ 10.28 $ 10.50
- ------------------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income .54 .63 .65 .70 .67
Net realized and unrealized gains
(losses) on investments (.01) .35 (.19) .19 (.22)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from operations .53 .98 .46 .89 .45
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (.54) (.63) (.65) (.70) (.67)
From realized gains (.11) -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (.65) (.63) (.65) (.70) (.67)
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE:
End of period $ 10.51 $ 10.63 $ 10.28 $ 10.47 $ 10.28
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return (1) 5.05% 9.70% 4.55% 8.87% 4.47%
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000's omitted) $159,330 $103,868 $ 73,394 $ 52,450 $ 37,454
RATIOS:
Expenses to average daily net assets 0.80%(2) 0.80%(2) 0.80%(2) 0.80%(2) 0.80%(2)
Net investment income to average daily net assets 5.06%(2) 5.93%(2) 6.30%(2) 6.72%(2) 6.48%(2)
Portfolio turnover rate (excluding short-term securities) 86.16% 50.67% 85.21% 51.37% 38.51%
</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) 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
March 31, 1999, 1998, 1997, 1996, and 1995, the investment adviser
voluntarily absorbed $100,000, $100,000, $99,999, $88,625, and $73,460 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 .87%, .91%, .97%, 1.00%, and 1.00% for these periods and the
ratio of net investment income to average daily net assets would have been
4.99%, 5.82%, 6.13%, 6.52%, and 6.28%, respectively.
59
<PAGE>
SIT BOND FUNDS
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Years Ended March 31,
-----------------------------------------------------------------------
1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE:
Beginning of period $ 10.03 $ 9.62 $ 9.83 $ 9.48 $ 9.69
- ------------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income .54 .63 .64 .64 .62
Net realized and unrealized gains
(losses) on investments (.02) .43 (.14) .35 (.21)
- ------------------------------------------------------------------------------------------------------------------------------
Total from operations .52 1.06 .50 .99 .41
- ------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (.54) (.63) (.64) (.64) (.62)
From realized gains (.06) (.02) (.07) -- --
- ------------------------------------------------------------------------------------------------------------------------------
Total distributions (.60) (.65) (.71) (.64) (.62)
- ------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE:
End of period $ 9.95 $ 10.03 $ 9.62 $ 9.83 $ 9.48
- ------------------------------------------------------------------------------------------------------------------------------
Total investment return (1) 5.30% 11.22% 5.21% 10.57% 4.51%
- ------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000's omitted) $11,920 $10,706 $ 6,403 $ 5,222 $ 3,533
RATIOS:
Expenses to average daily net assets 0.80% 0.80% 0.80% 0.80% 0.80%
Net investment income to average daily net assets 5.34% 6.31% 6.52% 6.49% 6.63%
Portfolio turnover rate (excluding short-term securities) 89.29% 76.15% 128.06% 159.45% 41.25%
</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.
60
<PAGE>
SIT TAX-FREE INCOME FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Years Ended March 31,
------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE:
Beginning of period $ 10.41 $ 9.98 $ 9.88 $ 9.70 $ 9.63
- ------------------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income .51 .54 .56 .56 .56
Net realized and unrealized gains
(losses) on investments .03 .50 .10 .18 .09
- ------------------------------------------------------------------------------------------------------------------------------------
Total from operations .54 1.04 .66 .74 .65
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (.51) (.54) (.56) (.56) (.56)
From realized gains (.05) (.07) -- -- (.02)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.56) (.61) (.56) (.56) (.58)
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE:
End of period $ 10.39 $ 10.41 $ 9.98 $ 9.88 $ 9.70
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return (1) 5.30% 10.69% 6.82% 7.73% 7.00%
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000's omitted) $895,353 $519,579 $342,540 $279,769 $255,157
RATIOS:
Expenses to average daily net assets 0.71%(2) 0.76%(2) 0.79%(2) 0.80% 0.79%(2)
Net investment income to average daily net assets 4.90%(2) 5.29%(2) 5.63%(2) 5.65% 5.84%(2)
Portfolio turnover rate (excluding short-term securities) 14.27% 21.40% 25.34% 25.50% 13.13%
</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) Total Fund expenses are contractually limited to .80% of average daily net
assets. However, during the periods ended March 31, 1999, 1998, 1997, 1996,
and 1995, the investment adviser voluntarily absorbed $621,348, $171,504,
$46,819, $15,540, and $24,991 in expenses that were otherwise payable by
the Fund. Had the Fund incurred these expenses, the ratio of expenses to
average daily net assets would have been .80% for these periods, and the
ratio of net investment income to average daily net assets would have been
4.81%, 5.25%, 5.62%, 5.65%, and 5.83%, respectively.
61
<PAGE>
SIT MINNESOTA TAX-FREE INCOME FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Years Ended March 31,
-------------------------------------------------------------------
1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE:
Beginning of period $ 10.49 $ 10.14 $ 10.09 $ 9.96 $ 9.79
- -------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income .51 .55 .57 .57 .56
Net realized and unrealized gains
(losses) on investments .06 .35 .05 .13 .17
- -------------------------------------------------------------------------------------------------------------------------
Total from operations .57 .90 .62 .70 .73
- -------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (.51) (.55) (.57) (.57) (.56)
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE:
End of period $ 10.55 $ 10.49 $ 10.14 $ 10.09 $ 9.96
- -------------------------------------------------------------------------------------------------------------------------
Total investment return (1) 5.58% 9.07% 6.26% 7.12% 7.68%
- -------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000's omitted) $271,275 $143,634 $ 93,976 $ 62,980 $ 43,881
RATIOS:
Expenses to average daily net assets 0.80% 0.80% 0.80% 0.80% 0.80%
Net investment income to average daily net assets 4.83% 5.32% 5.56% 5.62% 5.72%
Portfolio turnover rate (excluding short-term securities) 13.67% 17.58% 17.16% 15.85% 34.20%
</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.
62
<PAGE>
SIT MUTUAL FUNDS
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Sit Money Market Fund, Inc.
Sit U.S. Government Securities Fund, Inc.
Sit Mutual Funds II, Inc.:
We have audited the accompanying statements of assets and liabilities,
including the schedules of portfolios of investments, of Sit Money Market Fund,
Inc., Sit U.S. Government Securities Fund, Inc., Sit Bond Fund (a series of Sit
Mutual Funds II, Inc.), Sit Tax-Free Income Fund (a series of Sit Mutual Funds
II, Inc.), and Sit Minnesota Tax-Free Income Fund (a series of Sit Mutual Funds
II, Inc.), as of March 31, 1999; the related statements of operations for the
year then ended; the statements of changes in net assets for each of the years
in the two-year period then ended; and the financial highlights as presented in
note 4 to the financial statements. These financial statements and the financial
highlights are the responsibility of the Funds' management. Our responsibility
is to express an opinion on these financial statements and the financial
highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform our audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Investment securities held in custody are confirmed to us by the
custodian. As to securities purchased and sold but not received or delivered, we
request confirmations from brokers and where replies are not received, we carry
out other appropriate auditing procedures. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of Sit
Money Market Fund, Sit U.S. Government Securities Fund, Sit Bond Fund, Sit
Tax-Free Income Fund, and Sit Minnesota Tax-Free Income Fund as of March 31,
1999 and the results of their operations, the changes in their net assets, and
their financial highlights for the periods stated in the first paragraph above,
in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
May 7, 1999
63
<PAGE>
SIT MUTUAL FUNDS
RESULTS OF SHAREHOLDERS MEETING
The annual meeting of the shareholders of the Funds was held on October 27,
1998. Directors elected by the shareholders at the meeting were as follows:
Eugene C. Sit, Peter L. Mitchelson, William E. Frenzel, John E. Hulse, Sidney L.
Jones, and Donald W. Phillips for all Funds and Michael C. Brilley for the Sit
Bond Funds only.
The matters voted on by the shareholders of record as of August 28, 1998 and the
results of the shareholders' vote at the October 27, 1998 meeting were as
follows:
1. Election of Directors:
For Withheld
--- --------
Eugene C. Sit
U.S. Government Securities 6,873,708 24,090
Money Market 26,128,992 4,702
Tax-Free Income 36,143,999 189,587
MN Tax-Free Income 9,603,984 16,735
Bond 860,136 20,877
William E. Frenzel
U.S. Government Securities 6,720,559 177,239
Money Market 26,128,992 4,702
Tax-Free Income 36,120,991 212,595
MN Tax-Free Income 9,597,075 23,644
Bond 860,136 20,877
John E. Hulse
U.S. Government Securities 6,855,034 42,764
Money Market 26,082,443 51,251
Tax-Free Income 36,066,969 266,617
MN Tax-Free Income 9,600,293 20,426
Bond 860,136 20,877
Sidney L. Jones
U.S. Government Securities 6,721,961 175,837
Money Market 26,128,992 4,702
Tax-Free Income 36,110,885 222,701
MN Tax-Free Income 6,622,814 49,597
Bond 860,136 20,877
Peter L. Mitchelson
U.S. Government Securities 6,864,314 33,484
Money Market 26,128,992 4,702
Tax-Free Income 36,136,087 197,499
MN Tax-Free Income 6,647,332 25,079
Bond 860,136 20,877
64
<PAGE>
For Withheld
--- --------
Donald W. Phillips
U.S. Government Securities 6,721,720 176,078
Money Market 26,128,992 4,702
Tax-Free Income 36,084,897 248,689
MN Tax-Free Income 9,594,545 26,174
Bond 860,136 20,877
Michael C. Brilley
U.S. Government Securities 6,858,482 39,316
Money Market 26,128,992 4,702
Tax-Free Income 36,088,966 244,620
MN Tax-Free Income 9,603,984 16,735
Bond 860,136 20,877
2. Ratification of KPMG Peat Marwick LLP as independent auditors for the
Funds:
For Against Abstain
--- ------- -------
U.S. Government Securities 6,826,342 29,658 41,796
Money Market 25,996,350 113,330 24,013
Tax-Free Income 35,903,113 128,585 301,886
MN Tax-Free Income 9,556,517 17,679 46,521
Bond 879,527 1,485 000
3. Amendment of the Sit Large Cap Growth Fund, Sit Mid Cap Growth Fund, Sit
U.S. Government Securities Fund, and the Sit International Growth Fund's
fundamental investment restrictions to eliminate the restrictions on
investing in securities of investment companies.
For Against Abstain
--- ------- -------
Large Cap Growth 1,227,595 23,778 17,516
Mid Cap Growth 11,877,175 323,696 200,456
U.S. Government Securities 5,248,572 347,985 201,296
International Growth 2,424,429 45,534 50,026
65
<PAGE>
SIT MUTUAL FUNDS
FEDERAL INCOME TAX INFORMATION
We are required by Federal tax regulations to provide shareholders with certain
information regarding dividend distributions on an annual basis. The figures are
for informational purposes only and should not be used for reporting to federal
or state revenue agencies. All necessary tax information will be mailed in
January each year.
<TABLE>
<CAPTION>
LONG-TERM LONG-TERM
ORDINARY CAPITAL ORDINARY CAPITAL
FUND AND PAYABLE DATE INCOME (a) GAIN (b) FUND AND PAYABLE DATE INCOME (a) GAIN (b)
- --------------------- ----------- ---------- -------------------------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Money Market Fund U.S. Government Securities Fund
April 30, 1998 $0.00427 $ ---- April 30, 1998 $0.04557 $ ----
May 31, 1998 0.00410 ---- May 31, 1998 0.04465 ----
June 30, 1998 0.00442 ---- June 30, 1998 0.04994 ----
July 31, 1998 0.00436 ---- July 31, 1998 0.04723 ----
August 31, 1998 0.00421 ---- August 31, 1998 0.04439 ----
September 30, 1998 0.00430 ---- September 30, 1998 0.04648 ----
October 31, 1998 0.00412 ---- October 31, 1998 0.04264 ----
November 30, 1998 0.00407 ---- November 30, 1998 0.04725 ----
December 31, 1998 0.00395 ---- December 8, 1998 0.03586 0.07179
January 31, 1999 0.00376 ---- December 31, 1998 0.04264 ----
February 28, 1999 0.00335 ---- January 31, 1999 0.03763 ----
March 31, 1999 0.00393 ---- February 28, 1999 0.04131 ----
----------- -----------
$0.04884 (c) $0.00000 March 31, 1999 0.05055 ----
=========== =========== ----------- -----------
$0.57613 (c) $0.07179
=========== ===========
Bond Fund Tax-Free Income Fund
April 30, 1998 $0.04418 $ ---- April 30, 1998 $0.04365 $ ----
May 31, 1998 0.03743 ---- May 31, 1998 0.04176 ----
June 30, 1998 0.04409 ---- June 30, 1998 0.04562 ----
July 31, 1998 0.04826 ---- July 31, 1998 0.04475 ----
August 31, 1998 0.04681 ---- August 31, 1998 0.04407 ----
September 30, 1998 0.04831 ---- September 30, 1998 0.04265 ----
October 31, 1998 0.04345 ---- October 31, 1998 0.04167 ----
November 30, 1998 0.04714 ---- November 30, 1998 0.04340 ----
December 8, 1998 0.05222 0.01284 December 8, 1998 0.00104 0.04552
December 31, 1998 0.04653 ---- December 31, 1998 0.04444 ----
January 31, 1999 0.03766 ---- January 31, 1999 0.04060 ----
February 28, 1999 0.04389 ---- February 28, 1999 0.03875 ----
March 31, 1999 0.05013 ---- March 31, 1999 0.04323 ----
----------- ----------- ----------- -----------
$0.59010 (c) $0.0128 $0.51563 (d) $0.04552
=========== =========== =========== ===========
Minnesota Tax-Free Income Fund
----------------------------------------
(a) Includes distributions of short-term gains, if any, which
April 30, 1998 0.04418 ---- are taxable as ordinary income.
May 31, 1998 0.04185 ----
June 30, 1998 0.04549 ---- (b) Taxable as long-term gain (20%).
July 31, 1998 0.04486 ----
August 31, 1998 0.04463 ---- (c) Taxable as dividend income and does not qualify for
September 30, 1998 0.04346 ---- deduction by corporations.
October 31, 1998 0.04249 ----
November 30, 1998 0.04175 ---- (d) 100% of dividends were derived from interest on
December 31, 1998 0.04673 ---- tax-exempt securities. This portion of exempt-interest
January 31, 1999 0.03743 ---- dividends is exempt from federal taxes and should not be
February 28, 1999 0.03747 ---- included in shareholders' gross income. Exempt-interest
March 31, 1999 0.04363 ---- dividends may be subject to state and local taxes. Each
----------- ----------- shareholder should consult a tax adviser about reporting
$0.51395 (d) $0.00000 this income for state and local tax purposes.
=========== ===========
</TABLE>
66
<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
Mary K. Stern, CFA President
Michael C. Brilley Senior Vice President
Roger J. Sit Senior Vice President
Paul E. Rasmussen Vice President & Treasurer
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
Michael P. Eckert Vice President
Michael J. Radmer Secretary
Carla J. Rose Assistant Secretary
(1) Bond and U.S. Government Securities Funds only.
(2) Money Market Fund only.
<PAGE>
ANNUAL REPORT
BOND FUNDS
YEAR ENDED MARCH 31, 1999
INVESTMENT ADVISER
SIT INVESTMENT ASSOCIATES, INC.
4600 NORWEST CENTER
MINNEAPOLIS, MN 55402
612-334-5888 (METRO AREA)
800-332-5580
DISTRIBUTOR
SIA SECURITIES CORP.
4600 NORWEST CENTER
MINNEAPOLIS, MN 55402
612-334-5888 (METRO AREA)
800-332-5580
CUSTODIAN
THE NORTHERN TRUST COMPANY
50 SOUTH LASALLE STREET
CHICAGO, IL 60675
TRANSFER AGENT AND
DISBURSING AGENT
FIRST DATA INVESTOR SERVICES
P.O. BOX 5166
WESTBORO, MA 01581-5166
AUDITORS
KPMG PEAT MARWICK LLP
4200 NORWEST CENTER
MINNEAPOLIS,MN 55402
LEGAL COUNSEL
DORSEY & WHITNEY LLP
220 SOUTH SIXTH STREET
MINNEAPOLIS, MN 55402
MEMBER OF
================
100% NO-LOAD
MUTUAL FUND
COUNCIL
================
