BOND FUNDS
SEMI-ANNUAL REPORT
SEPTEMBER 30, 1998
MONEY MARKET FUND
U.S. GOVERNMENT SECURITIES FUND
TAX-FREE INCOME FUND
MINNESOTA TAX-FREE INCOME FUND
BOND FUND
[LOGO]
SIT MUTUAL FUNDS
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THE INVESTMENT IS MUTUAL(SM)
www.sitfunds.com
<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 NO-LOAD funds. 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.
Sit Mutual Funds offer:
o Free telephone exchange
o Dollar-cost averaging through an automatic investment plan
o Electronic transfer for purchases and redemptions
o Free check writing privileges on bond funds
o Retirement accounts including IRAs and 401(k) plans
SIT FAMILY OF FUNDS
[CHART]
STABILITY: INCOME: GROWTH: HIGH GROWTH:
Safety of principal Increased income Long-term capital Long-term capital
and current income appreciation and appreciation
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
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SIT MUTUAL FUNDS
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THE INVESTMENT IS MUTUAL(SM)
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SIT MUTUAL FUNDS
BOND FUNDS SEMI-ANNUAL REPORT
TABLE OF CONTENTS
PAGE
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Chairman's Letter 2
Performance Review 4
FUND REVIEWS AND PORTFOLIOS OF INVESTMENTS
Money Market Fund 6
U.S. Government Securities Fund 10
Tax-Free Income Fund 16
Minnesota Tax-Free Income Fund 36
Bond Fund 48
Notes to Portfolio of Investments 52
Statements of Assets and Liabilities 53
Statements of Operations 54
Statements of Changes in Net Assets 56
Notes to Financial Statements 58
Financial Hightlights 62
This document must be preceded or accompanied by a Prospectus.
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[PHOTO] SIT MUTUAL FUNDS
SIX MONTHS ENDED SEPTEMBER 30, 1999
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CHAIRMAN'S LETTER
Interest rates continued to rise over the past six months and have been
increasing for nearly a year. In fact, this year's bear market is second only to
the worst bear market in history, that of 1994. When viewing the market
environment, we believe that shareholders should keep in mind that the 1994 bear
market was followed in 1995 by one of the strongest bull markets for bonds. The
rise in bond yields over the past six months was primarily caused by continued
strong economic growth combined with the fear of increasing inflation for the
first time in nearly two years, which prompted the Federal Reserve to raise
short-term interest rates by 0.25% on June 30th and again on August 24th.
ECONOMIC OVERVIEW
Economic growth continues to be strong, and it appears likely that the
current economic expansion will surpass the 106-month record expansion in the
1960s. This year's second quarter annualized GDP growth of +1.9%, combined with
the third quarter annualized GDP surge of +4.8%, extended the current economic
expansion to 102 months. With consumer spending showing few signs of slowing, we
forecast continued strong economic growth through the end of the year with
fourth quarter GDP growth in the +4.0% area. If our forecast is correct, 1999
would be the third consecutive year with domestic economic growth in the +4.0%
range.
Not surprisingly, this sustained period of economic strength has been
accompanied by a modest cyclical increase in inflation. The Consumer Price Index
(CPI) year-over-year percent change reversed its nearly two year declining trend
in December 1998 after three consecutive months at +1.5%. The year-over-year CPI
rose over the past six months from +1.7% in March to +2.6% in September. Over
this period, we also saw commodity prices rise sharply from very low levels as
global economies showed signs of improvement. On the labor front, much of the
inflation pressures from rising salaries has been successfully offset by
productivity gains. We expect the unemployment rate to remain below 5.0% for at
least the next 12 months which should continue to push wages higher.
Consequently, any slowdown in the relatively high rate of productivity gains
could temporarily reduce corporate profit margins and eventually lead to higher
prices. With strong economic growth, tight labor markets, rising commodity
prices, and improving global economies, we forecast modestly higher prices at
the consumer level with the CPI in the +2.5% to +3.0% range. There are two
unknown factors at this point that could lead to a slowing in the inflation
rate. The first is the possible deflationary effect of consumer purchases made
over the internet. The second, is the magnitude and sustainability of the
slowdown in the housing sector due to 30-year mortgage rates rising over 8.0%.
Regarding fiscal policy, the final figures for the fiscal year ended
September 30th revealed a $123 billion budget surplus, the non-Social Security
portion of the budget surplus was $1 billion. Since most politicians don't want
to touch the social security surplus, Congress is struggling to fund its many
spending programs. In fact, Congress failed to complete 13 appropriations bills
on time and continues to pass stop-gap spending bills to keep federal agencies
open. We expect that the current spending caps will most likely be exceeded,
stimulating the economy.
STRATEGY SUMMARY
U.S. Treasury yields have continued to move higher as the Fed announced a
tightening bias at its October 5th meeting, causing investors to fear another
rise in short-term interest rates at its upcoming meeting on November 16th.
Economic data released between now and then will be scrutinized carefully. We
currently believe that it is very likely that the Federal Reserve will raise the
fed funds and discount rates by a quarter percent at its next meeting.
Consequently, we expect interest rates to remain at the higher end of their
recent range, which should help moderate economic activity.
The rise in U.S. Treasury yields over the past six months was outpaced by the
rise in corporate yields. This widening of corporate yield spreads was due to a
record supply of new corporate debt and a lack of investor demand due to Y2K
concerns. Fortunately, our taxable bond portfolios implemented a sector rotation
early in the period which involved
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reducing weightings in corporate, asset-backed and collateralized mortgage
obligation securities and increasing the weighting in U.S. Treasuries. The
sector shift was initially done to avoid expected weakness in most sectors at
year-end that may be caused by Y2K concerns. We believe, however, that investor
anticipation of a repeat of last year's flight-to-quality caused many sectors to
underperform. In fact, we suspect that many investors have now positioned
themselves to be able to purchase securities at attractive levels at year-end
and are hoping for a significant narrowing of yield spreads to occur early next
year. As a result, we believe our portfolios have reaped much of the benefit
that could be obtained from the sector shift implemented in the second quarter;
therefore, our current strategy is to reverse the sector shift in order to beat
the rush of investors with pent-up demand for non-U.S. Treasury securities.
Also, taxable portfolio durations will most likely remain slightly shorter than
their respective benchmarks as the next Fed meeting approaches.
While municipal yields rose less than U.S. Treasury yields in the first
quarter, they have increased much more than U.S. Treasuries over the past six
months and have caught up to the increase in long U.S. Treasury yields. The rise
in municipal bond yields reflects a drop in demand for municipals due to selling
by mutual funds, competition from the large volume of corporate issuance, and
the spate of natural disasters that has reduced property/casualty insurers'
appetite for municipals. As a result, municipal bonds remain cheaply valued and
compare favorably even to corporate bond yields. Municipals appear most
attractive when compared to U.S. Treasury yields, particularly on an after-tax
basis. The pre-tax relative yield ratio (the municipal Bond Buyer 40-Bond Index
yield versus the 30-year maturity U.S. Treasury yield) increased from 92.9% to
97.2% during the period. Our current municipal portfolio strategy focuses on
opportunities to shorten duration and increase coupon income. We find municipals
in the 8- to 15-year maturity range to offer the most attractive risk/reward
opportunities.
For all the fixed income strategies, we continue to focus on securities that
provide high current income and stability of principal in order to achieve
positive incremental returns over longer-term periods. We appreciate your
continued interest in Sit Mutual Funds and look forward to helping you with your
long-term investment goals.
With best wishes,
/s/ Eugene C. Sit
Eugene C. Sit, CFA
Chairman and Chief Investment Officer
3
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SIT MUTUAL FUNDS
SIX MONTHS ENDED SEPTEMBER 30, 1999
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PERFORMANCE SUMMARY - BOND FUNDS
U.S. Treasury bond yields rose significantly over the past six months with
even greater yield increases experienced by corporate and municipal bonds. The
causes for the rise in interest rates included strong economic growth coupled
with increasing inflation for the first time in nearly two years which prompted
the Federal Reserve to raise short-term interest rates twice by +0.25% on June
20th and August 24th.
During the past six months, the 3-month Treasury bill yield increased +0.4%
while the 30-year Treasury bond yield increased +0.4% to yield 4.9% and 6.1%,
respectively, as of September 30th. Within the taxable bond market, corporate
bonds witnessed widening yield spreads during most of the past six months due to
record issuance and reduced investor demand for corporate securities. We believe
that the lack of investor enthusiasm stemmed from anticipated weakness in most
sectors at year-end due to Y2K concerns and a resultant flight to quality
similar to last year. Thus, corporates were the worst performing sector over the
past six months. The rise in interest rates, however, reduced the supply of new
mortgage securities and slowed refinancing activity, increasing investor demand
for mortgages. Consequently, the mortgage sector significantly outperformed for
the period. The best performing taxable sector was the asset-backed sector
largely due to its relatively short duration.
Over the past six months, municipal bonds played "catch up" to the rise in
Treasury yields that occurred earlier in the year. The yield on the Bond Buyer
40-Bond Index, which was relatively stable during the first quarter, increased
+0.7% during the period. Long municipal bonds remain cheaply valued when
compared to Treasuries. The relative (pre-tax) yield ratio increased from 92.9%
to 97.2% during the period, but remains below the 101.3% relative valuation at
the beginning of the year. Municipal bond prices were negatively impacted by a
number of factors in recent months, including competition from the large volume
of corporate issuance and lack of demand from mutual funds as well as insurance
companies.
Municipal bond indices underperformed taxable bond indices during the period.
The housing sector outperformed due to its stable price characteristics and is
one of the few revenue sectors with a positive return year-to-date. After years
of outperformance, the health care sector is now the weakest performing sector -
negatively affected by widening yield spreads and continued credit concerns.
1990 1991
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SIT MONEY MARKET FUND (1) -- --
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SIT U.S. GOV'T. SECURITIES FUND 10.97% 12.87%
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SIT TAX-FREE INCOME FUND 7.29 9.25
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SIT MINNESOTA TAX-FREE
INCOME FUND -- --
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SIT BOND FUND -- --
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3-MONTH U.S. TREASURY BILL INDEX -- --
LEHMAN INTER. GOVERNMENT BOND INDEX 9.56 14.11
LEHMAN 5-YEAR MUNICIPAL BOND INDEX 7.70 11.41
LEHMAN AGGREGATE BOND INDEX -- --
NASDAQ
SYMBOL INCEPTION
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SIT MONEY MARKET FUND SNIXX 11/01/93
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SIT U.S. GOV'T. SECURITIES FUND SNGVX 06/02/87
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SIT TAX-FREE INCOME FUND SNTIX 09/29/88
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SIT MINNESOTA TAX-FREE INCOME FUND SMTFX 12/01/93
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SIT BOND FUND SIBOX 12/01/93
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3-MONTH U.S. TREASURY BILL INDEX 11/01/93
LEHMAN INTER. GOVERNMENT BOND INDEX 05/31/87
LEHMAN 5-YEAR MUNICIPAL BOND INDEX 09/30/88
LEHMAN AGGREGATE BOND INDEX 11/30/93
(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 9/30/99.
(4) Figure represents 7-day compound effective yield. The 7-day simple yield as
of 9/30/99 was 4.86%.
(5) For individuals in the 28%, 31%, 36%, and 39.6% federal tax brackets, the
federal tax equivalent yields are 7.31%, 7.62%, 8.22% and 8.71%,
respectively (Income subject to state tax, if any).
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TOTAL RETURN - CALENDAR YEAR
<TABLE>
<CAPTION>
YIELD
YTD AS OF DISTRIBUTION
1992 1993 1994 1995 1996 1997 1998 1999 9/30/99 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% 3.46% 4.98%(4)
- ------------------------------------------------------------------------------ -----------------------
5.43% 7.34 1.77 11.50 4.99 8.19 6.52 0.89 5.89 5.18%
- ------------------------------------------------------------------------------ -----------------------
7.71 10.42 -0.63 12.86 5.69 9.87 6.29 -2.41 5.26(5) 4.90
- ------------------------------------------------------------------------------ -----------------------
-- 1.60(2) 0.63 11.90 5.89 8.19 6.14 -1.62 5.25(6) 4.83
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-- 0.34(2) -1.31 16.83 4.25 9.44 6.52 -0.24 5.52 5.57
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-- 0.53(2) 4.47 5.98 5.27 5.32 5.01 3.53
6.93 8.17 -1.75 14.41 4.06 7.72 8.49 0.53
7.62 8.73 -1.28 11.65 4.22 6.38 5.84 0.73
-- 0.54(2) -2.92 18.47 3.63 9.65 8.69 -0.70
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS FOR THE
PERIODS ENDED SEPTEMBER 30, 1999
TOTAL RETURN ---------------------------------------------
QUARTER SIX MONTHS SINCE
ENDED 9/30/99 ENDED 9/30/99 1 YEAR 5 YEARS 10 YEARS INCEPTION
- ----------------------------- ---------------------------------------------
<S> <C> <C> <C> <C>
1.19% 2.32% 4.72% 5.15% -- 4.87%
- ----------------------------- ---------------------------------------------
0.85 0.90 1.84 6.47 7.32% 7.69
- ----------------------------- ---------------------------------------------
-1.62 -2.90 -1.89 6.30 6.75 6.91
- ----------------------------- ---------------------------------------------
-1.55 -2.25 -0.77 6.00 -- 5.53
- ----------------------------- ---------------------------------------------
0.40 -0.26 -0.22 7.40 -- 5.97
- ----------------------------- ---------------------------------------------
1.20 2.37 4.67 5.27 -- 5.06
1.01 0.81 0.78 6.92 7.47 7.67
0.94 -0.31 1.55 5.61 6.56 6.54
0.68 -0.21 -0.37 7.84 -- 6.17
</TABLE>
(6) For Minnesota residents in the 28%, 31%, 36% and 39.6% federal tax
brackets, the double exempt tax equivalent yields are 7.93%, 8.27%, 8.92%
and 9.45%, respectively (Assumes the maximum Minnesota tax bracket of
8.0%).
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
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[PHOTO] SIT MONEY MARKET FUND REVIEW
SIX MONTHS ENDED SEPTEMBER 30, 1999
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MICHAEL C. BRILLEY, SENIOR PORTFOLIO MANAGER
PAUL J. JUNGQUIST, CFA, SENIOR PORTFOLIO MANAGER
The Sit Money Market Fund provided investors with a +2.3% return for the six
months ended September 30th, compared to a +2.2% average return for the Lipper
Analytical Services Money Market Fund universe. The Fund's performance ranked
148th of 353 funds in its Lipper peer group category for the third quarter of
1999. For the 1-year, 3-year, 5-year and since inception periods ended September
30th, the Fund's performance ranked 91st of 322 funds, 64th of 270 funds, 54th
of 213 funds and 40th of 187 funds, respectively, in its Lipper peer group. As
of September 30th, the Fund's 7-day compound yield was 4.98% and its average
maturity was 28 days, compared to 4.54% and 34 days, respectively, on March
31st.
The Federal Reserve Board increased the federal funds rate in two 0.25%
increments during the period to 5.25% from 4.75% on March 31st, in response to
continued strong growth in the economy as well as indicators such as increases
in the price of oil signaling that inflation may reignite. Three-month Treasury
bill yields have been volatile over the past six months, ranging from 4.27% in
April to 4.99% in August, finishing at 4.85% on September 30th. Current yield
levels imply that the market is expecting an additional tightening by the Fed in
the fourth quarter, probably at the November 16th FOMC meeting. Concerns about
Y2K may limit the Fed's policy choices as year-end approaches, increasing the
likelihood of tightening in November. Accordingly, the Fund will try to shorten
its average maturity slightly in anticipation of more attractive yields later in
the quarter.
The Fund has produced competitive returns by focusing on credit research,
optimizing average maturity and avoiding the use of risky derivatives. We intend
to continue these conservative policies in the future. As domestic economic
activity continues to be strong and global economic activity appears to be
strengthening, we do not foresee a significant impact on the short-term
creditworthiness of top-tier commercial paper issuers in general. We do not
anticipate that Y2K problems, if any, will be disruptive to these top-tier
commercial paper issuers. We will, however, monitor the Fund's permissible
credits for any signs of Y2K-related credit or liquidity problems. 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 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 9/30/99: $ 1.00 Per Share
3/31/99: $ 1.00 Per Share
Total Net Assets: $54.9 Million
PORTFOLIO STRUCTURE
(% OF TOTAL NET ASSETS)
Diversified Finance 20.3
Consumer Loan Finance 12.7
Utilities 10.3
Captive Auto Finance 10.0
Consumer Non-Durables 9.3
Insurance 6.6
Energy 6.4
Tech./Bus. Equipment 6.0
Captive Equip. Finance 5.1
Financial Services 4.2
Auto Manufacturer 4.2
Retail 3.8
Cash & Other Net Assets 1.1
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AVERAGE ANNUAL TOTAL RETURNS*
SIT MONEY 3-MONTH LIPPER
MARKET U.S. TREASURY MONEY
FUND BILL INDEX MARKET AVG.
--------- ------------- -----------
3 Month** 1.19% 1.20% 1.11%
6 Month** 2.32 2.37 N/A
1 Year 4.72 4.67 4.41
3 Year 5.04 5.06 4.77
5 Year 5.15 5.27 4.95
Inception 4.87 5.06 4.69
(11/1/93)
CUMULATIVE TOTAL RETURNS*
SIT MONEY 3-MONTH LIPPER
MARKET U.S. TREASURY MONEY
FUND BILL INDEX MARKET AVG.
--------- ------------- -----------
1 Year 4.72% 4.67% 4.41%
3 Year 15.91 15.97 15.00
5 Year 28.53 29.29 27.32
Inception 32.49 33.95 31.17
(11/1/93)
* As of 9/30/99. **Not annualized.
GROWTH OF $10,000
[GRAPH]
The sum of $10,000 invested at inception (11/1/93) and held until 9/30/99 would
have grown to $13,249 in the Fund or $13,395 in the 3 Month U.S. Treasury Bill
Index assuming reinvestment of all dividends and capital gains.
QUALITY RATINGS
(% OF TOTAL NET ASSETS)
LOWER OF MOODY'S, S&P,
FITCH OR DUFF & PHELPS
RATINGS USED.
[PIE CHART] First Tier Securities
100%
First Tier Securities 100%
Second Tier Securities 0%
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 $1 SHARE VALUE. YIELD
FLUCTUATES. PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. MANAGEMENT
FEES AND ADMINISTRATIVE EXPENSES ARE INCLUDED IN THE FUND'S PERFORMANCE;
HOWEVER, FEES AND EXPENSES ARE NOT INCORPORATED IN THE 3-MONTH U.S. TREASURY
BILL INDEX. THE LIPPER AVERAGES AND INDICES ARE OBTAINED FROM LIPPER ANALYTICAL
SERVICES, INC., A LARGE INDEPENDENT EVALUATOR OF MUTUAL FUNDS.
7
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SIT MONEY MARKET FUND
SEPTEMBER 30, 1999
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PORTFOLIO OF INVESTMENTS (UNAUDITED)
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QUANTITY($) NAME OF ISSUER MARKET VALUE(1)
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COMMERCIAL PAPER (101.0%) (2)
AUTO MANUFACTURER (4.2%)
Daimler Chrysler Hldgs.:
637,000 5.23 %, 10/18/99 $635,445
600,000 5.35 %, 11/10/99 596,480
700,000 5.38 %, 11/15/99 695,354
375,000 5.38 %, 11/29/99 371,730
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2,299,009
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CAPITAL GOODS (2.1%)
1,139,000 Deere & Co., 5.21%, 10/8/99 1,137,857
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CAPTIVE AUTO FINANCE (10.0%)
Ford Motor Credit Corp.:
750,000 5.31 %, 10/5/99 749,560
500,000 5.31 %, 10/13/99 499,120
700,000 5.35 %, 11/18/99 695,072
350,000 5.33 %, 11/29/99 346,971
General Motors Acceptance Corp.:
850,000 5.24 %, 10/15/99 848,288
570,000 5.35 %, 11/5/99 567,069
850,000 5.84 %, 1/18/00 835,227
1,000,000 Toyota Motor Credit Corp.,
5.32 %, 11/23/99 992,241
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5,533,548
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CAPTIVE EQUIPMENT FINANCE (5.1%)
1,000,000 Caterpillar Finance, Inc., 5.29%, 10/7/99 999,125
800,000 IBM Credit Corp., 5.28%, 10/21/99 797,680
1,000,000 Xerox Credit Corp., 5.31%, 10/22/99 996,920
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2,793,725
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CONSUMER LOAN FINANCE (12.7%)
American Express Credit Corp.:
600,000 5.33 %, 10/28/99 597,620
500,000 5.33 %, 10/29/99 497,943
600,000 5.34 %, 11/5/99 596,914
600,000 5.34 %, 11/22/99 595,415
575,000 American General Financial,
5.20 %, 10/13/99 574,015
Household Finance Corp.:
300,000 5.27 %, 10/20/99 299,175
600,000 5.32 %, 11/4/99 597,019
900,000 5.35 %, 11/16/99 893,928
Norwest Financial, Inc.:
494,000 5.18 %, 10/4/99 493,789
800,000 5.19 %, 10/5/99 799,543
521,000 5.33 %, 10/28/99 518,937
500,000 5.35 %, 11/12/99 496,908
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6,961,206
---------------
CONSUMER NON-DURABLES (9.3%)
Coca Cola Co.:
1,000,000 5.21 %, 10/4/99 999,569
850,000 5.28 %, 11/15/99 844,390
Coca Cola Enterprises:
1,000,000 5.30 %, 10/20/99 (5) 997,229
1,300,000 5.41 %, 11/19/99 (5) 1,290,551
1,000,000 Procter & Gamble Co., 5.31%, 11/1/99 995,479
---------------
5,127,218
---------------
DIVERSIFIED FINANCE (20.3%)
Associates First Capital Corp.:
1,075,000 5.30 %, 10/26/99 1,071,062
1,300,000 5.34 %, 11/9/99 1,292,567
Associates First Capital B.V.:
1,000,000 5.36 %, 11/26/99 991,740
600,000 5.39 %, 12/10/99 593,782
500,000 5.37 %, 12/13/99 494,616
CIT Group Holdings, Inc.:
950,000 5.22 %, 10/19/99 947,549
700,000 5.30 %, 10/27/99 697,346
650,000 5.33 %, 11/24/99 644,852
General Electric Capital Corp.:
350,000 5.24 %, 10/4/99 349,849
1,000,000 5.36 %, 10/29/99 995,870
500,000 5.37 %, 12/9/99 494,911
500,000 5.69 %, 1/19/00 491,169
General Electric Capital Services:
838,000 5.21 %, 10/12/99 836,683
600,000 5.20 %, 10/14/99 598,886
650,000 5.25 %, 10/22/99 648,032
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11,148,914
---------------
ENERGY (6.4%)
2,607,000 BP America, Inc., 5.57%, 10/1/99 2,607,000
900,000 Chevron Oil, 5.31%, 11/8/99 894,994
---------------
3,501,994
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FINANCIAL SERVICES (4.2%)
Transamerica Finance Corp.:
800,000 5.15 %, 10/1/99 800,000
1,500,000 5.29 %, 11/2/99 1,493,040
---------------
2,293,040
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QUANTITY($) NAME OF ISSUER MARKET VALUE(1)
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INSURANCE (6.6%)
1,000,000 American Family Fin'l, 5.22%, 10/25/99 996,567
American General Corp.:
750,000 5.36 %, 11/12/99 745,363
900,000 5.35 %, 11/23/99 892,978
1,000,000 Liberty Mutual Capital Corp.,
5.32 %, 10/18/99 (5) 997,497
---------------
3,632,405
---------------
RETAIL (3.8%)
Sears Roebuck & Co.:
800,000 5.26 %, 10/14/99 798,492
600,000 5.39 %, 11/8/99 596,624
700,000 5.40 %, 11/17/99 695,120
---------------
2,090,236
---------------
TECHNOLOGY/BUSINESS EQUIPMENT (6.0%)
IBM Corp.:
700,000 5.24 %, 10/5/99 699,596
1,000,000 5.22 %, 10/6/99 999,282
600,000 5.22 %, 10/7/99 599,483
1,000,000 Xerox Capital Corp., 5.30%, 10/18/99 997,507
---------------
3,295,868
---------------
UTILITIES (10.3%)
2,500,000 Ameritech Capital Funding Corp.,
5.55 %, 10/1/99 (5) 2,500,000
BellSouth Capital Funding:
1,000,000 5.24 %, 10/1/99 (5) 1,000,000
1,200,000 5.33 %, 11/3/99 (5) 1,194,203
1,000,000 SBC Communications, 5.31%, 10/25/99 996,480
---------------
5,690,683
---------------
Total commercial paper
(cost: $55,505,703) 55,505,703
---------------
Total investments in securities
(cost: $55,505,703) (6) $55,505,703
===============
See accompanying notes to portfolios of investments on page 52.
9
<PAGE>
[PHOTO] SIT U.S. GOVERNMENT SECURITIES FUND REVIEW
SIX MONTHS ENDED SEPTEMBER 30, 1999
-----------------------------------------------------------------------
MICHAEL C. BRILLEY, SENIOR PORTFOLIO MANAGER
BRYCE A. DOTY, CFA, SENIOR PORTFOLIO MANAGER
The Sit U.S. Government Securities Fund provided investors with a +0.9%
return for the six months ended September 30th compared to a +0.8% return of the
Lehman Intermediate Government Bond Index. For the twelve months ending
September 30th, the Fund's total return was +1.8% versus +0.8% return for the
Lehman index. The Fund holds a 5-star Overall rating by Morningstar(1) out of
1585 funds in the taxable bond category for the period ended September 30th.
U.S. Treasury yields finally stabilized during the third quarter after rising
significantly in the second quarter. For the past six-month period, prices
declined significantly in the Fund's longer duration collateralized mortgage
obligation and U.S. Treasury holdings. The increase in interest rates, however,
slowed the rate of prepayments in the mortgage pass-through sector, which raised
the yield that the Fund earned on its mortgage holdings. As a result, the
pass-through holdings provided the highest return in the Fund.
Investment activity for the period involved reducing the Fund's weighting in
U.S. Treasury securities and purchasing pass-through securities with higher
yields. As a result of this sector shift, combined with lower mortgage
refinancing activity, the Fund's 30-day SEC yield rose from 5.25% on 3/31/99 to
5.89% on 9/30/99.
We expect interest rates to remain near the higher end of their recent range
as investors assess the likelihood of a third increase in short-term interest
rates by the Federal Reserve. At its October 5th meeting, the Fed held rates
steady, but announced that a tightening bias had been adopted. As a result,
economic data released between now and the next Fed meeting on November 16th
will be scrutinized carefully. We intend to keep the Fund's duration slightly
shorter than that of its benchmark and will continue to invest in securities
that offer high levels of interest income.
- --------------------------------------------------------------------------------
(1)Morningstar proprietary ratings reflect historical risk-adjusted performance
through 9/30/99. These ratings are subject to change monthly and are calculated
from the fund's 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. In the taxable bond category,
Sit U.S. Government Securities Fund received a 5-star rating for the 3-, 5- and
10-year periods out of 1585, 1153 and 374 funds, respectively.
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 9/30/99: $ 10.32 Per Share
3/31/99: $ 10.51 Per Share
Total Net Assets: $161.9 Million
30-day SEC Yield: 5.89%
12-Month Distribution Rate: 5.18%
Average Maturity: 14.4 Years
Effective Duration: 2.8 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)
GNMA Pass-Through 41.9
U.S. Treasury 16.7
FNMA Pass-Through 13.5
FHLMC Pass-Through 13.3
Collateralized Mortgage
Obligations 11.3
Cash & Other Net Assets 3.3
10
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- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS*
SIT
U.S. GOV'T. LEHMAN LIPPER
SECURITIES INTER. GOV'T. U.S. GOV'T.
FUND BOND INDEX FUND AVG.
---------- ------------- -----------
3 Month** 0.85% 1.01% 0.34%
6 Month** 0.90 0.81 N/A
1 Year 1.84 0.78 -2.66
5 Year 6.47 6.92 6.72
10 Year 7.32 7.47 7.09
Inception 7.69 7.67 7.19
(6/2/87)
CUMULATIVE TOTAL RETURNS*
SIT
U.S. GOV'T. LEHMAN LIPPER
SECURITIES INTER. GOV'T. U.S. GOV'T.
FUND BOND INDEX FUND AVG.
---------- ------------- -----------
1 Year 1.84% 0.78% -2.66%
5 Year 36.81 39.74 38.42
10 Year 102.66 105.51 98.38
Inception 149.39 148.92 135.58
(6/2/87)
* As of 9/30/99. **Not annualized.
GROWTH OF $10,000
[GRAPH]
The sum of $10,000 invested at inception (6/2/87) and held until 9/30/99 would
have grown to $24,939 in the Fund or $24,892 in the Lehman Intermediate
Government Bond Index assuming reinvestment of all dividends and capital gains.
ESTIMATED AVERAGE LIFE PROFILE
The Adviser's estimates of
the dollar weighted average
life of the portfolio's
securities, which may vary
from their stated maturities.
0-1 Year 3.7%
1-5 Years 79.9%
5-10 Years 13.0%
10-20 Years 3.4%
PERFORMANCE FIGURES ARE HISTORICAL AND DO NOT GUARANTEE FUTURE RESULTS.
INVESTMENT RETURNS AND PRINCIPAL VALUE WILL VARY, AND YOU MAY HAVE A GAIN OR
LOSS WHEN YOU SELL SHARES. AVERAGE ANNUAL TOTAL RETURNS INCLUDE CHANGES IN SHARE
PRICE AS WELL AS REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAINS. MANAGEMENT
FEES AND ADMINISTRATIVE EXPENSES ARE INCLUDED IN THE FUND'S PERFORMANCE;
HOWEVER, FEES AND EXPENSES ARE NOT INCORPORATED IN THE LEHMAN INTERMEDIATE
GOVERNMENT BOND INDEX. THE LIPPER AVERAGES AND INDICES ARE OBTAINED FROM LIPPER
ANALYTICAL SERVICES, INC., A LARGE INDEPENDENT EVALUATOR OF MUTUAL FUNDS.
11
<PAGE>
SIT U.S. GOVERNMENT SECURITIES FUND
SEPTEMBER 30, 1999
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (UNAUDITED)
- -------------------------------------------------------------
QUANTITY($) NAME OF ISSUER MARKET VALUE(1)
- -------------------------------------------------------------
MORTGAGE PASS-THROUGH SECURITIES (68.7%) (2)
FEDERAL HOME LOAN MORTGAGE CORPORATION (13.3%):
56,374 8.50%, 1/1/17 $58,684
6,946 8.75%, 12/1/01 7,130
420,265 8.75%, 1/1/17 439,236
308,937 9.00%, 4/1/03 318,703
44,561 9.00%, 10/1/04 46,719
171,526 9.00%, 12/1/05 178,641
520,094 9.00%, 1/1 - 2/1/06 541,554
360,259 9.00%, 5/1 - 7/1/09 377,976
109,152 9.00%, 10/1/13 112,618
1,584,929 9.00%, 5/1 - 11/1/16 1,662,678
2,359,222 9.00%, 1/1 - 10/1/17 2,474,598
410,597 9.00%, 6/1/18 430,548
403,050 9.00%, 10/1/19 421,584
543,562 9.00%, 5/1 - 8/1/21 567,616
113,450 9.25%, 7/1/08 117,939
403,256 9.25%, 8/1/09 425,339
417,896 9.25%, 7/1/10 440,826
205,469 9.25%, 3/1/11 213,567
1,561,509 9.25%, 1/1 - 3/1/19 1,642,812
279,128 9.50%, 10/1/08 296,141
421,220 9.50%, 12/1/09 441,754
1,211,308 9.50%, 2/1 - 6/1/10 1,285,554
192,148 9.50%, 1/1/11 203,888
813,583 9.50%, 6/1/11 862,601
917,626 9.50%, 6/1 - 10/1/16 973,341
230,655 9.50%, 6/1 - 9/1/17 245,073
285,581 9.50%, 6/1 - 12/1/18 303,100
101,430 9.50%, 6/1/19 107,547
1,668,495 9.50%, 7/1 - 9/1/20 1,769,196
352,957 9.75%, 12/1/08 376,783
138,372 9.75%, 6/1/11 143,955
68,592 9.75%, 6/1/17 73,265
463,011 9.85%, 5/1/16 495,626
587,996 10.00%, 11/1/10 631,572
270,542 10.25%, 6/1/10 291,980
157,118 10.25%, 2/1/17 169,682
136,593 10.29%, 9/1/16 147,684
58,264 10.50%, 4/1 - 7/1/04 61,615
865,234 10.50%, 5/1/14 938,372
737 11.00%, 10/1/00 774
83,183 11.00%, 12/1/11 91,173
100,515 11.00%, 2/1/14 110,211
99,628 11.00%, 6/1/15 109,206
258,109 11.00%, 2/1/18 283,212
444,315 11.00%, 5/1 - 7/1/19 488,257
121,890 11.25%, 10/1/09 134,331
--------------
21,514,661
--------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (13.5%):
216,851 8.50%, 8/1/06 223,407
20,538 8.875%, 3/1/17 21,546
2,808,322 9.00%, 1/1 - 5/1/09 2,922,458
116,126 9.00%, 4/1/10 121,140
752,086 9.00%, 11/1/16 784,434
1,578,479 9.00%, 1/1 - 12/1/17 1,648,515
1,012,231 9.00%, 9/1 - 12/15/19 1,074,336
246,949 9.00%, 4/1 - 9/1/20 257,596
276,299 9.00%, 9/1 - 11/1/21 288,541
726,749 9.25%, 7/1/10 763,581
99,811 9.25%, 4/1/12 105,612
559,955 9.25%, 10/1 - 12/1/16 588,272
84,120 9.25%, 3/1/17 88,373
77,794 9.375%, 5/1/16 82,061
142,645 9.50%, 1/1/06 150,885
91,980 9.50%, 9/1/08 97,273
170,075 9.50%, 1/1/11 180,917
229,392 9.50%, 5/1/14 245,305
1,263,850 9.50%, 4/1 - 9/1/16 1,338,103
755,969 9.50%, 11/1 - 12/1/18 805,540
986,231 9.50%, 5/1 - 12/1/19 1,043,682
1,785,233 9.50%, 4/1 - 9/1/20 1,892,190
540,942 9.50%, 3/1/21 572,662
786,603 9.75%, 1/1/13 854,935
97,936 10.00%, 3/1/11 105,678
535,412 10.00%, 6/1/14 573,710
587,590 10.00%, 12/1/19 635,079
329,853 10.00%, 2/1/21 353,440
2,456,045 10.25%, 8/15/13 2,706,243
190,538 10.50%, 5/1/09 207,313
30,986 10.75%, 11/1/10 33,797
394,650 11.00%, 10/1/06 418,767
39,464 11.00%, 4/1/14 43,316
229,858 11.00%, 8/1/15 252,079
Municipal (FNMA collateralized):
355,000 Alabama Hsg. Fin. Auth. Multifamily
Series 1999B, 5.70%, 9/1/03 349,455
--------------
21,830,241
--------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (41.9%) (3):
92,306 7.50%, 3/15/07 94,614
280,676 7.50%, 5/15/16 285,285
15,600 8.00%, 7/15/03 16,145
141,514 8.00%, 10/15/12 145,200
1,650,335 8.00%, 5/15 - 9/15/16 1,695,178
138,143 8.25%, 2/15 - 6/15/02 141,995
438,188 8.25%, 12/15/11 455,071
12
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- ------------------------------------------------------------------------
QUANTITY($) NAME OF ISSUER MARKET VALUE(1)
- ------------------------------------------------------------------------
157,780 8.25%, 1/15/12 162,405
379,470 8.25%, 8/15/15 390,737
46,396 8.50%, 11/15/01 47,266
247,004 8.50%, 12/15/11 255,649
458,645 8.50%, 1/15/12 473,656
289,694 8.50%, 4/15/15 298,424
630,124 8.50%, 9/15/16 651,510
557,858 8.50%, 1/15/17 576,708
103,346 8.75%, 7/15/02 108,111
113,512 8.75%, 5/15/03 118,781
502,029 8.75%, 5/15 - 11/15/06 525,737
188,368 8.75%, 2/15 - 3/15/07 195,443
125,406 8.75%, 11/15/09 130,155
1,009,526 8.75%, 6/15 - 12/15/11 1,048,018
30,600 8.75%, 2/20/17 31,541
84,243 9.00%, 10/15/04 88,635
328,048 9.00%, 4/15 - 10/15/06 345,253
262,982 9.00%, 6/15 - 10/15/07 275,034
604,111 9.00%, 9/15 - 12/15/08 632,298
1,118,264 9.00%, 2/15 - 12/15/09 1,167,798
1,028,940 9.00%, 7/15/10 1,074,697
2,653,107 9.00%, 5/15 - 10/15/11 2,794,593
126,332 9.00%, 1/15/12 131,801
47,782 9.00%, 8/15/15 49,891
576,771 9.00%, 6/20 - 12/20/16 596,623
6,238,474 9.00%, 1/15 - 8/20/17 6,576,873
6,064,276 9.00%, 12/15/19 6,343,671
110,744 9.00%, 7/20 - 10/20/21 114,504
303,907 9.10%, 5/15/18 319,011
35,211 9.25%, 4/15 - 9/15/01 36,839
109,236 9.25%, 4/15/03 114,949
194,379 9.25%, 3/15/05 204,658
443,973 9.25%, 11/15/09 463,574
493,930 9.25%, 1/15 - 11/15/10 520,301
272,275 9.25%, 11/15/11 284,326
120,472 9.25%, 4/15/12 125,755
245,037 9.25%, 5/15 - 10/15/16 257,261
705,653 9.25%, 2/20 - 11/20/17 737,140
75,317 9.50%, 1/15 - 3/15/05 78,759
144,276 9.50%, 1/15/06 152,061
4,628,123 9.50%, 6/15 - 12/15/09 4,932,442
1,285,271 9.50%, 1/15 - 11/15/10 1,352,011
422,806 9.50%, 1/15 - 3/15/11 441,697
2,117,242 9.50%, 2/15 - 12/15/16 2,251,507
3,399,409 9.50%, 1/15 - 12/20/17 3,641,053
4,753,924 9.50%, 4/15 - 10/20/18 5,023,265
2,532,564 9.50%, 1/15 - 12/15/19 2,700,575
327,909 9.50%, 1/15 - 10/15/20 349,533
257,608 9.50%, 1/15 - 8/15/21 275,080
18,949 9.75%, 5/15/01 19,825
98,012 9.75%, 11/15/02 103,335
137,460 9.75%, 7/15 - 12/15/03 144,866
21,044 9.75%, 3/15/04 22,186
645,424 9.75%, 6/15 - 8/15/05 680,814
279,953 9.75%, 1/15 - 2/15/06 298,789
369,786 9.75%, 8/15 - 9/15/09 392,153
1,340,916 9.75%, 8/15 - 12/15/10 1,420,897
547,558 9.75%, 11/15 - 12/15/12 580,338
95,490 9.75%, 4/15/18 101,985
110,764 10.00%, 8/15/02 116,978
121,916 10.00%, 11/15/03 127,859
96,502 10.00%, 5/15/04 101,878
753,030 10.00%, 7/15/05 795,408
108,118 10.00%, 1/15/06 114,149
143,568 10.00%, 11/15/08 152,326
59,571 10.00%, 5/15 - 11/15/09 63,485
926,894 10.00%, 6/15 - 11/15/10 983,832
88,418 10.00%, 1/15/11 93,834
175,619 10.00%, 10/15/15 189,651
90,260 10.00%, 3/20 - 9/15/16 96,463
200,759 10.00%, 11/15/17 216,864
204,457 10.00%, 10/15/18 221,002
1,252,538 10.00%, 2/15 - 11/15/19 1,360,271
197,894 10.00%, 1/15 - 12/15/20 213,683
277,755 10.00%, 6/15/21 300,123
8,110 10.25%, 11/15/00 8,166
17,336 10.25%, 2/15 - 4/15/01 18,138
84,711 10.25%, 12/15/02 89,479
120,204 10.25%, 5/15 - 8/15/04 126,975
198,764 10.25%, 7/15/05 209,938
107,357 10.25%, 5/15/09 113,638
1,047 10.50%, 9/15/00 1,054
21,625 10.50%, 9/15/01 22,625
41,726 10.50%, 12/15/02 44,071
159,805 10.50%, 6/15/09 177,184
107,560 10.50%, 7/15/10 113,941
139,647 10.50%, 8/15 - 11/15/15 150,895
113,315 10.50%, 3/15 - 12/15/16 122,457
193,534 10.50%, 11/15/18 209,388
6,392 10.75%, 11/15/00 6,436
35,420 10.75%, 9/15/03 37,418
73,224 10.75%, 9/15/05 77,387
104,280 10.75%, 8/15/06 112,362
25,444 10.75%, 1/15/10 26,962
75,606 10.75%, 7/15 - 8/15/11 81,417
146,765 11.00%, 6/15/04 155,109
See accompanying notes to portfolios of investments on page 52.
13
<PAGE>
SIT U.S. GOVERNMENT SECURITIES FUND
SEPTEMBER 30, 1999
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (UNAUDITED) (CONTINUED)
- -------------------------------------------------------------
QUANTITY($) NAME OF ISSUER MARKET VALUE(1)
- -------------------------------------------------------------
396,096 11.00%, 1/15 - 6/15/10 434,268
17,136 11.00%, 7/15/13 18,611
65,130 11.25%, 8/15 - 12/15/00 65,578
6,732 11.25%, 1/15/01 7,043
14,501 11.25%, 5/15/03 15,323
278,488 11.25%, 9/15 - 10/15/05 299,809
471,096 11.25%, 6/15 - 9/15/10 518,941
1,542,389 11.25%, 2/15 - 10/15/11 1,698,792
76,387 11.75%, 5/15 - 7/15/00 76,912
97,359 11.75%, 5/15 - 6/15/04 103,792
5,297 12.75%, 1/15/00 5,330
776 13.25%, 10/15/99 772
Municipal (GNMA collateralized):
299,000 Bernalillo Multifamily Rev. Series
1998A, 7.50%, 9/20/20 294,318
150,000 Dakota Multifamily Rev. Series
1999A, 6.50%, 12/20/05 147,860
565,000 Maplewood Multifamily Rev.
Series 1998B, 6.75%, 7/20/15 539,106
500,000 Nortex Multifamily Rev. Series
1999T, 6.50%, 3/20/06 489,355
--------------
67,834,941
--------------
Total mortgage pass-through securities 111,179,843
--------------
(cost: $111,799,848)
U.S. GOVERNMENT SECURITIES (16.7%) (2)
U.S. Treasury Inflation Index Bond,
5,257,150 3.38%, 1/15/07 5,018,896
U.S. Treasury Notes:
7,000,000 5.75%, 8/15/03 6,975,500
7,400,000 6.13%, 8/15/07 7,406,068
U.S. Treasury Strips:
2,000,000 6.93% effective yield, 11/15/04 1,473,780
2,100,000 4.72% effective yield, 5/15/06 1,403,367
9,000,000 5.82% effective yield, 11/15/09 4,747,320
--------------
Total U.S. government securities 27,024,931
--------------
(cost: $27,092,019)
COLLATERALIZED MORTGAGE OBLIGATIONS (11.3%) (2)
Federal Home Loan Mtg. Corp.,
110,656 1006-C, 9.15%, 10/15/20 115,948
10,000,000 FNMA 1998-46E, 6.00%, 8/18/28 9,160,800
Vendee Mortgage Trust:
639,329 Series 1996-2 1B, 6.75%, 9/15/09 639,003
7,300,000 Series 1992-2 1F, 7.00%, 2/15/18 7,332,412
1,045,000 Series 1992-1 2K, 7.75%, 5/15/08 1,069,558
--------------
Total collateralized mortgage obligations 18,317,721
--------------
(cost: $18,858,066)
SHORT-TERM SECURITIES (2.9%) (2)
4,500,000 FHLMC Disc. Note, 4.60%, 7/1/99 4,500,000
193,875 Dreyfus Cash Mgmt. Fund, 4.93% 193,875
--------------
Total short-term securities 4,693,875
--------------
(cost: $4,693,875)
Total investments in securities
(cost: $162,443,808) (6) $161,216,370
==============
See accompanying notes to portfolios of investments on page 52.
14
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15
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[PHOTO] SIT TAX-FREE INCOME FUND REVIEW
SIX MONTHS ENDED SEPTEMBER 30, 1999
-----------------------------------------------------------------------
MICHAEL C. BRILLEY, SENIOR PORTFOLIO MANAGER
DEBRA A. SIT, CFA, SENIOR PORTFOLIO MANAGER
Municipal bond yields played "catch up" during the quarter to the rise in
taxable bond yields that occurred earlier in the year. The Fund's price per
share decreased $0.55 during the semi-annual period to $9.84 on September 30th.
The Fund's longer duration holdings, along with its health care holdings,
experienced greater price declines with the rise in interest rates, resulting in
a -2.9% return for the six-month period which compares to -0.3% for the Lehman
5-year Municipal Bond Index. Although its 3-month return of -1.6% ranked #191 of
278 general municipal funds tracked by Lipper Analytical Services, the Fund's
performance over longer-term periods remains very competitive. As of September
30th, the Fund's performance ranked #49 of 263 funds for the one-year period,
#40 of 162 for the 5-year period, #38 of 77 for the 10-year period, and #37 of
74 since its inception.
With the rise in interest rates, the Fund's 30-day SEC yield increased from
4.54% as of March 31st to 5.26% as of September 30th and ranks among the top 10%
of general municipal funds tracked by Lipper. The Fund's 12-month distribution
rate, which typically lags movements in yield, was relatively constant at 4.90%.
Fund assets declined from $895.4 million to $785.7 million during the period,
in part due to anticipated withdrawals for tax payments. Cash decreased from
11.0% to 2.3%. Sales were made across several industry sectors, resulting in
most weightings remaining relatively unchanged. Nonetheless, health care bonds
increased from 23.6% to 24.4% and single family housing bonds increased from
13.8% to 14.8%. The Fund's weighting in transportation issues was eliminated as
its position in a Foothills, CA toll road issue was advance refunded with U.S.
government securities and subsequently upgraded to AAA. The reduction in cash
contributed to increases in the Fund's implied duration from 7.0 years to 7.5
years and in its average maturity from 17.2 years to 17.8 years. Securities
rated A or better decreased from 71.1% to 67.3% while BBB-rated bonds increased
from 29.0% to 32.7%.
Municipal yields have increased to very attractive levels, particularly on an
after-tax basis. We continue to focus on securities that provide high
incremental yield. We believe intermediate maturity bonds, which are currently
yielding only slightly less than longer bonds, are particularly attractive.
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 9/30/99: $ 9.84 Per Share
3/31/99: $ 10.39 Per Share
Total Net Assets: $785.7 Million
30-day SEC Yield: 5.26%
Tax Equivalent Yield: 8.71%(1)
12-Month Distribution Rate: 4.90%
Average Maturity: 17.8 Years
Duration to Estimated Avg. Life: 7.6 Years(2)
Effective Duration: 7.5 Years(2)
(1)For individuals in the 39.6% federal tax bracket.
(2)See next page.
PORTFOLIO STRUCTURE
(% OF TOTAL NET ASSETS)
Multifamily Mortgage Revenue 30.6
Hospital/Health Care Revenue 24.4
Single Family Mortgage Revenue 14.8
Other Revenue Bonds 9.7
Education/Student Loan 5.1
Closed-End Mutual Funds 4.4
Industrial Revenue/Pollution Control 2.9
Escrowed to Maturity/Pre-Refund 2.1
Sectors Under 1.5% 3.7
Cash & Other Net Assets 2.3
16
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AVERAGE ANNUAL TOTAL RETURNS*
SIT LIPPER
TAX-FREE LEHMAN GENERAL
INCOME 5-YEAR MUNI. MUNI. BOND
FUND BOND INDEX FUND AVG.
-------- ------------ ----------
3 Month** -1.62% 0.94% -1.38%
6 Month** -2.90 -0.31 N/A
1 Year -1.89 1.55 -3.07
5 Year 6.30 5.61 5.79
10 Year 6.75 6.56 6.74
Inception 6.91 6.54 6.93
(9/29/88)
CUMULATIVE TOTAL RETURNS*
SIT LIPPER
TAX-FREE LEHMAN GENERAL
INCOME 5-YEAR MUNI. MUNI. BOND
FUND BOND INDEX FUND AVG.
-------- ------------ ----------
1 Year -1.89% 1.55% -3.07%
5 Year 35.72 31.35 32.52
10 Year 92.23 88.72 91.91
Inception 108.57 100.82 109.15
(9/29/88)
*As of 9/30/99. **Not annualized.
- --------------------------------------------------------------------------------
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.
(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
[GRAPH]
The sum of $10,000 invested at inception (9/29/88) and held until 9/30/99 would
have grown to $20,857 in the Fund or $20,082 in the Lehman 5-Year Municipal Bond
Index assuming reinvestment of all dividends and capital gains.
QUALITY RATINGS
(% OF TOTAL NET ASSETS)
LOWER OF MOODY'S, S&P,
FITCH OR DUFF & PHELPS
RATINGS USED.
[PIE CHART]
A 25.9%
AA 15.1%
AAA 24.0%
Cash & Other
Net Assets 2.3%
BBB 32.7%
-----------------------------
Total number of holdings: 501
-----------------------------
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PORTFOLIO OF INVESTMENTS (UNAUDITED)
<TABLE>
<CAPTION>
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QUANTITY($) NAME OF ISSUER MARKET VALUE (1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
MUNICIPAL BONDS (93.3%) (2)
ALABAMA (0.1%)
500,000 Valley Special Care Fac. Fin. Auth. Rev. Series 1997A Lanier Mem. Hosp. Proj.,
5.50%, 11/1/07 $495,285
-----------
ALASKA (2.0%)
Alaska HFC:
13,500,000 Gen. Mtg. Rev. 1997 Series A, Zero Coupon, 6.15% Effective Yield on Purchase Date, 12/1/17 4,576,230
2,150,000 Hsg. Dev. Series 1997A (Multifamily pooled loans), 5.65%, 12/1/20 2,095,433
750,000 Mtg. Series 1997A1, 5.50%, 12/1/17 723,240
4,050,000 Series 1998A1, 5.30%, 12/1/17 3,792,541
315,000 AK Industrial Dev. & Export Auth. Rev. Refunding Revolving Fund Series 1993A, 5.60%, 4/1/03 320,802
Palmer Hosp. Rev. Series 1999 (Valley Hosp. Assn. Proj.) (Asset Guaranty insured):
3,400,000 5.00%, 12/1/08 3,338,528
1,100,000 5.35%, 12/1/11 1,081,399
-----------
15,928,173
-----------
ARIZONA (1.0%)
Maricopa Co. Industrial Dev. Auth. Multifamily Hsg. Rev.:
3,000,000 Series 1995A, 6.50%, 10/1/25 3,088,470
695,000 Series 1995B, 7.15%, 10/1/25 706,398
2,000,000 Series 1997A (Mercy Bond Prop. AZ-I Proj.), 6.25%, 7/1/27 2,026,760
310,000 Series 1997B (Mercy Bond Prop. AZ-I Proj.), 7.25%, 7/1/17 314,917
450,000 Series 1998A (Pines at Camelback Apts. Proj.)(Asset Guaranty insured), 5.40%, 5/1/18 431,145
1,070,000 Valley HDC Phoenix Hsg. Rev. 1979 (Roosevelt Plaza) (Section 8), 8.00%, 10/1/20 1,082,337
-----------
7,650,027
-----------
ARKANSAS (0.6%)
Drew Co. Public Fac. Bd. Single Family Mtg. Rev. Refunding:
88,639 Series 1993B, 7.75%, 8/1/11 92,262
205,275 Series 1993-A2 (FNMA backed), 7.90%, 8/1/11 216,069
136,030 Jacksonville Res. Hsg. Fac. Bd. Single Family Mtg. Rev. Refunding Series 1993B, 7.75%, 1/1/11 143,357
145,664 Lonoke Co. Res. Hsg. Fac. Bd. Single Family Mtg. Rev. Refunding 1993B, 7.375%, 4/1/11 152,644
1,805,000 Maumelle HDC First Lien Rev. Refunding 1992 Series A (Section 8), 7.875%, 7/1/09 1,898,030
1,150,000 Pulaski Co. Public Fac. Board Multifamily Mtg. Rev. Refunding Series 1998A
(GNMA collateralized), 5.45%, 12/20/18 1,121,814
995,000 Saline Co. Res. Hsg. Fac. Bd. Single Family Mtg. Rev. Refunding Series 1992, 7.875%, 3/1/11 1,038,521
-----------
4,662,697
-----------
CALIFORNIA (4.1%)
ABAG Fin. Auth. Certificates of Participation
1,500,000 Refunding Series 1997A (American Baptist Homes of the West Proj.), 5.85%, 10/1/27 1,411,710
1,500,000 Series 1999 (Channing House Proj.), 5.375%, 2/15/19 1,370,895
1,000,000 Bell Cmty. Hsg. Auth. Rev. Series 1995A (Mobilehomes Park Acquisition Proj.), 6.40%, 10/1/15 1,034,100
2,000,000 CA Dept. of Veterans Affairs Home Mtg. Purchase Rev. Series 1999A, 5.10%, 12/1/19 1,832,420
4,675,000 CA HFA Home Mtg. Rev. Series 1999F (MBIA insured), Zero Coupon, 5.50% Effective Yield on
Purchase Date, 8/1/17 1,660,326
1,260,000 CA Infrastructure & Econ. Development Bank Rev. Series 1999 (American Center for Wine
Food & the Arts Proj.) (ACA insured), 5.15%, 12/1/07 1,264,914
2,250,000 CA Statewide Cmty. Dev. Auth. Apt. Dev. Rev. Refunding Series 1998A-4 (Irvine Apt.
Cmty. Proj.) Mandatory Put 5/15/13, 5.25%, 5/15/25 2,132,347
1,500,000 CA Statewide Cmty. Dev. Auth. Multifamily Hsg. Rev. Refunding Series 1999I
(Archstone/Seascape Village Apts. Proj.) Mandatory Put 6/1/08, 5.25%, 6/1/29 1,471,260
</TABLE>
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QUANTITY($) NAME OF ISSUER MARKET VALUE (1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1,000,000 Chula Vista Redev. Agency Refunding Tax Allocation Senior Series 1994A (Bayfront-Town
Center Redev. Proj.), 7.625%, 9/1/24 1,110,910
Corona Single Family Mtg Rev.:
410,000 Senior Series 1996A, 6.05%, 5/1/27 408,339
1,200,000 Subordinate Series 1996B, 6.30%, 11/1/28 1,224,012
Northern Inyo Co. Hosp. Dist. Rev. Series 1998 (ACA insured):
275,000 5.15%, 12/1/15 256,713
290,000 5.20%, 12/1/16 269,964
Foothill / Eastern Transportation Corridor Agy. Toll Rd. Rev Series 1995A
Prerefunded Sr. Lien:
5,000,000 Zero Coupon, 6.04% Effective Yield on Purchase Date, 1/1/15 2,140,600
18,770,000 Zero Coupon, 6.45% Effective Yield on Purchase Date, 1/1/26 4,047,563
2,000,000 Zero Coupon Convertible Bond, 6.10% Effective Yield on Purchase Date, 1/1/07 1,616,020
5,000,000 Zero Coupon Convertible Bond, 7.10% Effective Yield on Purchase Date, 1/1/11 4,235,400
2,000,000 Glendale Hosp. Rev. Refunding Series 1994 (Verdugo Hills Hosp.), 8.00%, 1/1/12 2,295,780
San Pablo Redev. Agy. Subordinated Tax Allocation Series 1999A (Tenth Township Proj.):
610,000 5.25%, 12/1/11 588,168
600,000 5.50%, 12/1/14 575,526
990,000 Upland Hsg. Auth. Multifamily Rev. 1990 Issue A, 7.85%, 7/1/20 1,015,948
-----------
31,962,915
-----------
COLORADO (3.0%)
1,000,000 Adams Co. Hsg. Auth. Mtg. Rev. Series 1996 (Village of Greenbriar Proj.), 6.75%, 7/1/21 1,041,390
95,000 Aurora Single Family Mtg. Rev. Refunding Series 1993B, 7.50%, 5/1/11 98,070
2,635,000 Aurora Hsg. Auth. Multifamily Hsg. Rev. Senior Series 1999A (River Falls Proj.), 5.60%, 7/1/19 2,499,113
2,200,000 Central Platte Valley Met. Dist. (Denver Co.) G.O. Series 1999 (ACA insured), 5.15%, 12/1/13 2,098,910
2,060,000 CO E-470 Business Met. Dist. G.O. Series 1999 (ACA insured), 5.00%, 12/1/11 1,987,035
1,250,000 CO Hlth. Fac. Auth. Rev. Series 1995 (Covenant Retirement Communities Proj.), 6.75%, 12/1/15 1,318,787
CO HFA Single Family Program Senior:
2,200,000 Series 1996B-2, 7.45%, 11/1/27 2,429,416
1,000,000 Series 1997B-3, 6.80%, 11/1/28 1,086,180
500,000 Series 1998A-3, 6.50%, 11/1/29 531,675
1,000,000 CO Hlth. Fac. Auth. Hosp. Rev. Series 1998 (Parkview Med. Center, Inc. Proj.), 5.15%, 9/1/13 908,190
1,000,000 CO Hlth. Fac. Auth. Rev. Series 1998B (Natl. Benevolent Assoc. Proj.), 5.25%, 2/1/18 868,080
600,000 Denver Hsg. Corp. Multifamily Rev. Refunding Series 1997A (Section 8), 5.35%, 10/1/12 591,168
Highlands Ranch Met. Dist. # 3 (Douglas Co.) G.O. (ACA insured):
1,395,000 Series 1999, 5.50%, 12/1/11 1,407,862
3,000,000 Refunding Series 1998B, 5.25%, 12/1/18 2,761,500
150,000 LaPlata Co. Southwestern CO Single Family Mtg. Participation Rev. Refunding 1991 Series A,
7.375%, 9/1/11 153,879
255,000 Thornton Single Family Mtg. Rev. Refunding 1992 Series A, 8.05%, 8/1/09 266,434
215,000 Vail Single Family Mtg. Rev. Refunding Series 1992, 8.125%, 6/1/10 227,012
Westminster Golf Course Activity Enterprise Rev. Series 1998:
1,500,000 5.55%, 12/1/23 1,382,070
1,025,000 5.40%, 12/1/13 973,320
1,195,000 Westminster Multifamily Hsg. Rev. Refunding Series 1992 (Ironwood at the Ranch Proj.),
7.45%, 12/1/10 1,217,060
-----------
23,847,151
-----------
CONNECTICUT (0.4%)
CT Dev. Auth. First Mtg. Gross Rev. Hlth. Care Proj. Series 1997
(Church Homes Inc. Avery Proj.):
640,000 5.70%, 4/1/12 602,893
</TABLE>
See accompanying notes to portfolios of investments on page 52.
19
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SEPTEMBER 30, 1999
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PORTFOLIO OF INVESTMENTS (UNAUDITED)
<TABLE>
<CAPTION>
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QUANTITY($) NAME OF ISSUER MARKET VALUE (1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1,000,000 CT HFA Hsg. Multifamily Mtg. Series 1995E1, 6.30%, 5/15/17 1,037,230
2,000,000 Mashantucket Western Pequot Tribe Subordinated Special Rev. Series 1999B, Zero Coupon,
5.05% Effective Yield on Purchase Date, 9/1/09 1,114,780
-----------
2,754,903
-----------
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 1,546,553
-----------
DISTRICT OF COLUMBIA (0.3%)
1,500,000 District of Columbia HFA Multifamily Hsg. Refunding Rev. Series 1992C (FHA
insured) (Chastleton Dev.), 6.95%, 7/1/27 1,567,590
650,000 District of Columbia Rev. Bonds Series 1999 (American Assn. of Homes & Svcs. for the
Aging, Inc. Headquarters Proj.)(ACA insured), 6.20%, 7/1/19 657,494
-----------
2,225,084
-----------
FLORIDA (1.4%)
820,000 Escambia Co. Hlth. Fac. Auth. Rev. Series 1997 (Azalea Trace, Inc. Proj.), 5.60%, 1/1/05 830,586
1,370,000 FL HFC Hsg. Rev. Refunding Series 1998O (Hunters Ridge At Deerwood Apts. Proj.), 5.25%, 12/1/18 1,281,882
Hillsborough Co. Industrial Dev. Auth. Rev. Series 1999A (University Community Hosp. Proj.):
1,250,000 4.90%, 8/15/07 1,193,125
600,000 5.20%, 8/15/10 570,012
1,000,000 Jacksonville Hlth. Fac. Auth. Industrial Dev. Rev. Series 1996A
(Natl. Benevolent-Cypress Village Proj.),
6.25%, 12/1/26 980,680
Lee Co. Industrial Dev. Auth. Hlth. Care Fac. Rev. Series 1999A (ShellPoint Village Proj.):
545,000 5.50%, 11/15/08 539,005
1,200,000 5.50%, 11/15/10 1,166,772
2,895,000 Miami-Dade Co. Special Hsg. Rev. Refunding Series 1998 (Section 8), 5.30%, 10/1/05 2,903,830
Orange Co. Hlth. Fac. Auth. Hlth. Care Fac. Rev. Refunding Series 1999
(Asset Guaranty insured):
595,000 5.00%, 6/1/09 581,148
830,000 5.125%, 6/1/14 773,535
-----------
10,820,575
-----------
GEORGIA (1.7%)
1,000,000 Augusta Hsg. Rehab. Agency Inc. Multifamily Mtg. Rev. Series 1992C
(Bon Air Elderly Apts. Proj.) (Section 8), 7.50%, 3/1/14 1,044,810
Clayton Co. Hsg. Auth. Multifamily Hsg. Rev. Series 1999A (Magnolia Parks Apts. Proj.):
1,180,000 5.90%, 12/1/14 1,142,028
2,765,000 6.125%, 12/1/24 2,623,957
770,000 Cobb Co. HA Multifamily Rev. Refunding Series 1992A (Signature Place Project),
6.875%, 10/1/17 790,074
Dekalb Co. Hsg. Auth. Multifamily Hsg. Rev. (Regency Woods I & II):
1,595,000 Senior Series 1996A, 6.375%, 1/1/11 1,639,564
1,330,000 Subordinate Series 1996C, 7.25%, 1/1/26 1,355,376
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 4,775,300
-----------
13,371,109
-----------
HAWAII (0.5%)
1,170,000 Hawaii Dept. of Budget and Finance Special Purpose Rev. Series 1998,
(Wilcox Memorial Hosp. Proj.), 5.25%, 7/1/13 1,073,101
1,400,000 Hawaii St. Hsg. Fin. & Dev. Corp. Single Family Mtg. Purchase Series 1997B, 5.45%, 7/1/17 1,348,998
</TABLE>
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- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1,215,000 Honolulu Mtg. Rev. Ref. Series 1996A (Hale-Pauahi Proj.)(FHA insured)
(MBIA insured), 6.80%, 7/1/28 1,285,955
-----------
3,708,054
-----------
ILLINOIS (8.2%)
Broadview Village of Cook Co. Tax Increment Rev. Series 1999:
750,000 4.90%, 7/1/06 726,480
1,000,000 5.00%, 7/1/07 965,030
1,085,000 5.05%, 7/1/08 1,043,336
2,190,000 5.10%, 7/1/09 2,098,852
2,265,000 Chicago Metropolitan HDC Mtg. Rev. Refunding Series 1992A
(FHA insured) (Section 8), 6.70%, 7/1/12 2,380,039
1,850,000 Chicago Res. Mtg. Rev. Refunding Series 1992B (MBIA insured) Zero Coupon, 7.30% Effective
Yield on Purchase Date, 10/1/09 933,177
2,000,000 Collinsville (City of) Madison Co. Industrial Dev. Rev. Refunding
(Drury Inn-Collinsville Proj.) Series 1993, 6.00%, 11/1/04 2,009,340
1,705,000 IL DFA Elderly Hsg. Rev. Refunding Series 1995A (Pontiac Towers Proj.)
(Section 8), 6.65%, 10/1/09 1,767,983
IL DFA Refunding & New Money Rev. (Cmty. Rehab. Providers Fac. Acquisition Program):
9,575,000 Series 1997A, 6.00%, 7/1/15 9,069,248
1,000,000 Series 1997A, 6.05%, 7/1/19 966,380
1,200,000 Series 1997C, 5.65%, 7/1/19 1,092,264
4,250,000 Series 1998A, 5.70%, 7/1/19 3,886,625
2,175,000 Series 1998A, 5.50%, 7/1/12 2,027,404
IL Educ. Fac. Auth. Rev.:
6,000,000 Series 1994 (Lewis University Proj.), 6.00%, 10/1/24 5,645,760
1,115,000 Series 1998B (Midwestern University Proj.), 5.50%, 5/15/18 1,022,488
1,000,000 Series 1998 (Augustana College Proj.), 5.00%, 10/1/13 906,170
1,500,000 Series 1998 (Augustana College Proj.), 5.25%, 10/1/18 1,331,475
3,000,000 IL HDA Elderly Hsg. Rev. Series 1992C (Village Ctr.) (Section 8), 6.85%, 3/1/20 3,098,130
IL HDA Multifamily Hsg. Rev.:
Refunding 1992 Series A (Section 8):
2,150,000 6.65%, 7/1/04 2,258,188
1,545,000 7.00%, 7/1/10 1,636,402
Refunding 1991 Series C (Section 8):
260,000 7.35%, 7/1/11 272,631
100,000 7.40%, 7/1/23 104,937
IL Hlth. Fac. Auth. Rev.:
Refunding Series 1993 (Lutheran Social Svcs. IL):
610,000 5.70%, 8/15/00 614,917
475,000 5.80%, 8/15/01 481,351
525,000 6.00%, 8/15/03 538,162
545,000 6.10%, 8/15/04 561,731
1,000,000 Refunding Series 1994 (Passavant Memorial Area Hospital Assn.), 5.95%, 10/1/11 1,024,870
Series 1994-1996 (St. Elizabeth's Hosp. of Chicago, Inc.):
1,000,000 Series 1994 Prerefunded, 7.625%, 7/1/10 1,141,530
700,000 Series 1996, 6.25%, 7/1/10 700,847
1,215,000 Series 1996, 6.25%, 7/1/16 1,207,382
2,500,000 Refunding Series 1998 (Midwest Physician Group Ltd. Proj.), 5.375%, 11/15/08 2,415,900
</TABLE>
See accompanying notes to portfolios of investments on page 52.
21
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SEPTEMBER 30, 1999
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PORTFOLIO OF INVESTMENTS (UNAUDITED)
<TABLE>
<CAPTION>
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QUANTITY($) NAME OF ISSUER MARKET VALUE (1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1,000,000 Refunding Series 1998 (Centegra Hlth. Proj.), 5.25%, 9/1/18 876,810
1,000,000 Refunding Series 1999 (Silver Cross Hosp. & Med. Ctrs.), 5.375%, 8/15/15 914,510
940,000 IL Industrial Control Fin. Auth. Rev. Series 1977
(Commonwealth Edison Co. Proj.), 5.875%, 5/15/07 941,683
2,000,000 Roselle Multifamily Hsg. Rev. Refunding Series 1994A (GNMA collateralized)
(Waterbury Apts.) (FHA insured), 7.00%, 1/1/25 2,129,780
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 5,139,383
330,000 Urbana Res. Mtg. Rev. Refunding 1991 Series B Zero Coupon, 7.39% Effective Yield on
Purchase Date, 3/1/07 194,832
-----------
64,126,027
-----------
INDIANA (6.5%)
Elkhart Co. Hosp. Auth. Rev.:
1,800,000 Series 1992 (Goshen Hosp. Proj.), 7.25%, 7/1/05 1,901,250
4,000,000 Series 1998 (Elkhart General Hosp., Inc. Proj.), 5.25%, 8/15/18 3,588,600
2,165,000 Elkhart HFC Multifamily Mtg. Rev. Series 1996A (Section 8 Assisted
Proj.) (Stratford Commons), 6.00%, 11/1/10 2,196,761
IN Bond Bank Special Prgm.:
2,130,000 Series 1997C (Pittsboro Wastewater Treatment Plant Proj.), 5.70%, 8/1/17 2,087,805
1,500,000 Series 1997B (Hendrick's Co. Redev. Auth.-Pittsboro Proj.)
(LOC Canadian Imperial Bank), 6.20%, 2/1/23 1,532,880
2,850,000 IN DFA Educ. Fac. Rev. Series 1997 (Park Tudor Foundation Proj.), 6.00%, 6/1/22 2,878,871
IN Educ. Fac. Auth. Educ. Fac. Rev. Series 1992 (Manchester College Proj.):
250,000 6.50%, 10/1/05 259,810
305,000 6.60%, 10/1/06 316,831
175,000 6.85%, 10/1/18 181,423
IN Educ. Fac. Auth. Educ. Fac. Rev. Series 1999 (University of Indianapolis Proj.):
500,000 5.20%, 10/1/08 494,835
510,000 5.45%, 10/1/11 501,371
IN Hlth. Fac. Fin. Auth. Hosp. Rev.:
Series 1992 (Fayette Mem. Hosp. Proj.):
250,000 7.00%, 10/1/02 258,188
295,000 7.10%, 10/1/03 306,290
315,000 7.20%, 10/1/04 331,320
340,000 7.25%, 10/1/05 357,598
365,000 7.25%, 10/1/06 383,892
390,000 7.30%, 10/1/07 410,713
420,000 7.30%, 10/1/08 442,306
2,000,000 Series 1992 (Mem. Hosp. & Hlth. Care Ctr. Proj.), 7.35%, 3/1/12 2,090,580
500,000 Refunding Series 1998 (Floyd Mem. Hosp. & Hlth. Svcs. Proj.), 5.40%, 2/15/18 454,415
3,750,000 Refunding Series 1998 (Jackson Co. Schneck Proj.), 5.125%, 2/15/17 3,346,575
Refunding Series 1998 (Marquette Manor Proj.):
620,000 4.75%, 8/15/09 560,263
2,000,000 5.00%, 8/15/18 1,725,040
1,220,000 Series 1998 (Governor Daviess Co. Hosp. Proj.) (Asset Guaranty insured), 5.00%, 1/1/14 1,103,026
1,485,000 Series 1999A (Deaconess Hosp. Obligated Group), 5.75%, 3/1/19 1,437,718
1,000,000 Series 1999D (Charity Obligated Group), 5.50%, 11/15/11 999,930
505,000 IN HFA Home Mtg. Prog. Series 1990F-1 (GNMA collateralized), 7.50%, 1/1/16 522,145
IN HFA Single Family Mtg. Rev. Refunding Series 1992A:
2,725,000 6.60%, 7/1/05 2,795,932
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- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
750,000 6.80%, 1/1/17 774,090
890,000 IN HFA Single Family Mtg. Rev. Series 1997C-2 (GNMA/FNMA collateralized), 5.70%, 7/1/16 888,959
IN Hlth. Fac. Fin. Auth. Rev. Refunding Series 1998 (Greenwood Village South Proj.):
490,000 5.00%, 5/15/03 485,992
140,000 5.15%, 5/15/04 138,862
150,000 5.25%, 5/15/06 147,124
170,000 5.35%, 5/15/08 165,076
2,750,000 Indianapolis Econ. Dev. Refunding & Imprv. Rev. Series 1992 (Natl. Benevolent
Assn.-Robin Run Village Proj.), 7.25%, 10/1/10 2,886,537
Indianapolis Econ. Dev. Rev. (Willowbrook Apts. Proj.):
2,000,000 Senior Series 1996A, 6.50%, 7/1/16 2,053,400
1,335,000 Subordinate Series 1996C, 7.125%, 7/1/26 1,354,291
4,000,000 La Porte Co. Hosp. Auth. Fac. Rev. Refunding Series 1993, 6.00%, 3/1/23 4,005,240
810,000 Marion HC Mtg. Rev. Refunding Series 1994 (Hilltop Towers Proj.)(Section 8), 6.90%, 10/1/10 838,220
2,250,000 St. Joseph Co. Hosp. Auth. Hlth. Fac. Rev. Series 1999
(Madison Center, Inc. Proj.), 5.45%, 2/15/12 2,067,188
2,250,000 St. Joseph Co. Econ. Dev. Rev. Refunding Series 1997
(Madison Center, Inc. Proj.), 5.45%, 2/15/17 2,074,118
-----------
51,345,465
-----------
IOWA (1.2%)
1,330,000 IA Fin. Auth. SF Mtg. Series 1997A, 5.80%, 7/1/16 1,342,183
1,500,000 IA Fin. Auth. Small Business Dev. Refunding Rev. Series 1992 (University Civic Ctr. Court
Assn. Proj.), 7.40%, 3/1/17 1,601,940
IA Fin. Auth. Hlth. Care Fac. Rev. Series 1997 (Natl. Benevolent Assn.- Ramsey Home Proj.):
1,430,000 6.15%, 5/1/17 1,385,170
2,420,000 6.35%, 5/1/27 2,373,536
1,130,000 IA Fin. Auth. Multifamily Hsg. Rev. Refunding Series 1997A (Kingswood Apts. Proj.)
(GNMA-collateralized), 6.15%, 5/1/32 1,150,385
1,500,000 Ottumwa Hosp. Rev. Refunding Series 1993 (Ottumwa Regional Hlth. Ctr.), 6.00%, 10/1/10 1,463,505
-----------
9,316,719
-----------
KANSAS (0.2%)
90,000 Geary Co. Single Family Mtg. Rev. 1980 (FGIC insured), 10.75%, 4/1/12 91,813
1,360,000 Kansas City Single Family Mtg. Rev. Series 1982A Zero Coupon, 11.23% Effective Yield on
Purchase Date, 11/1/14 243,616
Newton Hosp. Rev. Refunding Series 1998A (Newton Medical Ctr. Proj.):
425,000 5.13%, 11/15/06 415,679
445,000 5.20%, 11/15/07 433,478
250,000 5.25%, 11/15/08 242,842
1,645,000 Olathe & Labette Cos. Mtg. Loan Rev. 1991 Series B (GNMA collateralized) Zero Coupon, 7.56%
Effective Yield on Purchase Date, 2/1/23 268,530
-----------
1,695,958
-----------
KENTUCKY (0.4%)
1,500,000 Jefferson Co. First Mtg. Rev. Series 1994 (Christian Church Homes Proj.), 6.00%, 11/15/09 1,508,505
2,000,000 KY Econ. Dev. Fin. Auth. Hosp. Sys. Rev. Series 1997 (Appalachian Regional Hlthcare. Proj.),
5.85%, 10/1/17 1,821,780
-----------
3,330,285
-----------
LOUISIANA (2.8%)
690,000 Calcasieu Parish Industrial Dev. Rev. 1975 (Cities Service Co. Proj.), 7.80%, 12/1/05 693,471
355,000 Calcasieu Parish Public Trust Auth. Mtg. Rev. Refunding 1992 Series B, 6.875%, 11/1/12 366,243
5,650,000 Denham Springs/Livingston HMFA Residual Rev. Series 1992C Zero Coupon,
</TABLE>
See accompanying notes to portfolios of investments on page 52.
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<TABLE>
<CAPTION>
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- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
7.65% Effective Yield on Purchase Date, 7/10/14 1,911,564
1,415,000 East Baton Rouge MFA Single Family Mtg. Rev. Refunding Seroes 1997C-3
Subordinate Bonds, 5.65%, 10/1/18 1,381,210
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 1,297,600
625,000 LA HFA Residual Lien Refunding Mtg. Rev. Series 1992, 7.375%, 9/1/13 647,931
3,000,000 LA HFA Single Family Mtg. Rev. Series 1999B (GNMA/FNMA collateralized)
(Home Ownership Program Proj.), 5.55%, 12/1/24 2,860,410
156,651 LA PFA Single Family Mtg. Purchase Rev. Series 1992 (Lafayette PTFA Mtg. Acquisition),
7.50%, 10/1/15 164,520
LA PFA Rev. Multifamily Hsg. Rev.:
1,290,000 Series 1991 (VOA Hsg. Corp.) (Asset Guaranty insured), 7.25%, 11/1/04 1,353,997
3,890,000 Series 1991 (VOA Natl. Hsg. Corp.) (Asset Guaranty insured), 7.75%, 11/1/16 4,095,275
LA PFA Single Family Mtg. Rev. Refunding:
1,000,000 Series 1997B (GNMA collateralized), 5.625%, 8/1/17 987,180
3,080,000 Series 1997B (GNMA collateralized), 5.75%, 8/1/31 3,053,050
820,000 Series Sr. Lien 1994A (VOA Willows Affordable Hsg. Corp.), 7.00%, 6/1/24 865,822
900,000 Monroe - McKeen Plaza HDC Multifamily Hsg. Rev. Refunding Series
1994A (Murray Plaza Apts.) (Section 8), 6.80%, 2/1/12 926,091
1,550,000 Orleans Levee Dist. Improvement Serial and Term Receipts Series 1995A (FSA insured),
5.95%, 11/1/14 1,595,291
-----------
22,199,655
-----------
MAINE (0.1%)
1,000,000 South Berwick Educ. Rev. Series 1998 (Berwick Academy Issue), 5.25%, 8/1/13 924,770
-----------
MARYLAND (0.3%)
MD Econ. Dev. Corp. Student Hsg. Rev.:
1,000,000 Series 1999A (Collegiate Hsg. Foundation - Towson Proj.), 5.70%, 6/1/12 976,660
Series 1999A (Collegiate Hsg. Foundation - University Courtyard Proj.):
470,000 5.20%, 6/1/07 465,925
495,000 5.30%, 6/1/08 490,154
575,000 5.60%, 6/1/11 567,307
-----------
2,500,046
-----------
MASSACHUSETTS (1.3%)
1,000,000 MA Dev. Finance Agency Rev. Series 1999 (Eastern Nazarene College Issue), 5.625%, 4/1/19 926,930
MA Hlth. & Educ. Fac. Auth. Rev.:
Series 1998A (Vinfen Corp. Proj.) (ACA insured):
440,000 5.10%, 11/15/11 402,578
310,000 5.20%, 11/15/12 283,244
485,000 5.30%, 11/15/13 443,513
1,365,000 Series 1998B (Cape Cod Hlth. Care Proj.), 5.25%, 11/15/13 1,256,824
1,000,000 Series 1998C (Milford-Whitinsville Regional Hosp. Issue), 5.75%, 7/15/13 941,800
MA Industrial Finance Agency:
750,000 Rev. Refunding Series 1992A (Ogden Haverhill Proj.), 4.95%, 12/1/06 730,103
1,000,000 Rev. Refunding Series 1997A (Chelsea Jewish Nursing Home Proj.)(FHA insured), 6.50%, 8/1/37 1,044,210
1,000,000 Rev. Series 1998A (University Commons Nursing Care Ctr. Proj.)(FHA insured), 6.65%, 8/1/38 1,082,930
700,000 Rev. Series 1998 (Belmont Hill School Issue) 5.15%, 9/1/13 660,625
Rail Connections, Inc. Route 128 Parking Garage Rev. Series 1999A:
250,000 5.00%, 7/1/06 245,490
1,105,000 5.125%, 7/1/07 1,084,149
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1,045,000 5.30%, 7/1/09 1,017,151
-----------
10,119,547
-----------
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 1,336,620
2,085,000 Flint Hosp. Bldg. Auth. Rev. Refunding Series 1998A (Hurley Medical Ctr. Proj.), 5.25%, 7/1/16 1,856,067
Grand Rapids Charter Township Econ. Dev. Corp. Rev. Series 1999
(Porter Hills Obligated Group Cook Cook Valley Estates Proj.):
800,000 5.20%, 7/1/14 739,616
2,500,000 5.35%, 7/1/19 2,267,000
John Tolfree Hlth. System, Mtg. Rev. & Refunding Series 1999:
295,000 5.25%, 9/15/04 288,174
395,000 5.30%, 9/15/05 382,668
665,000 MI Hosp. Fin. Auth. Hosp. Rev. and Refunding Series 1998 (Chelsea Cmty. Hosp.
Proj.), 5.35%, 5/15/13 598,733
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 2,815,710
700,000 MI State Hosp. Fin. Auth. Rev. Series 1997 (Presbyterian Vlgs. of Mich.
Oblig. Group Proj.), 6.375%, 1/1/15 703,066
1,600,000 MI Strategic Fund Ltd. Obligation Rev. Series 1997A (NSF Intl. Proj.)
(LOC First Bank of America), 5.75%, 8/1/19 1,550,224
2,260,000 Southfield Econ. Dev. Corp. Ltd. Obligation Rev. Series 1998A
(Lawrence Tech. Univ. Proj.), 5.25%, 2/1/13 2,093,980
1,640,000 Tri City Village HC Mtg. Refunding Multifamily Tri City Apts. Series 1992A (Section 8)
(FNMA backed), 7.75%, 8/15/23 1,742,549
2,750,000 Troy City EDC Econ. Dev. Rev. Refunding Series 1992 (Drury Inn-Troy Proj.)
(Lincoln Natl. Corp.), 6.75%, 10/1/12 2,907,933
-----------
19,282,340
-----------
MINNESOTA (1.3%)
1,000,000 Carver Co. HRA Multifamily Rev. Series 1997A (Waybury Apts. Proj.), 5.875%, 8/1/27 984,420
1,430,000 Dakota Co. HRA Multifamily Mtg. Rev. Refunding Series 1997A (Park Place
Apts. Proj.)(GNMA Collateralized), 6.875%, 2/20/32 1,526,611
740,000 Hopkins Multifamily Hsg. Rev. Series 1996 (Hopkins Renaissance Proj.)
(Section 8), 6.375%, 4/1/20 764,746
1,240,000 MN HFA Single Family Mtg. Series 1998A, 5.20%, 1/1/17 1,154,328
1,310,122 Moorhead Single Family Mtg. Rev. Refunding Series 1992B, 7.00%, 8/1/11 1,348,561
2,500,000 Plymouth Multifamily Hsg. Dev. Rev. Refunding Series 1996A (GNMA collateralized)
(Fox Forest Apts. Proj.), 8.05%, 6/20/31 2,816,750
1,755,000 South Washington Co. ISD #833, (Cottage Grove) Lease Refunding Series 1998 (Asset
Guaranty insured), 5.25%, 12/1/14 1,703,087
-----------
10,298,503
-----------
MISSISSIPPI (1.3%)
1,400,000 Jones Co. Hosp. Rev. Series 1997 (South Central Regional Med. Ctr. Proj.), 5.50%, 12/1/17 1,289,064
465,000 Lincoln Co. Hosp. Rev. Refunding Series 1998A (Kings Daughter Hosp. Proj.),
5.20%, 4/1/08 462,745
965,000 MS Business Fin. Corp. Hlth. Fac. Rev. Series 1998 (Rush Medical Fdn., Proj.), 5.125%, 7/1/08 905,807
MS Hosp. Equip. and Fac. Auth. Rev. (Rush Medical Fdn. Proj.):
3,045,000 Refunding Series 1997A, 6.00%, 1/1/16 2,896,160
1,500,000 Series 1997B, 6.00%, 1/1/16 1,426,680
6,435,000 MS Home Corp. Residual Rev. Series 1992-II Zero Coupon, 7.38% Effective Yield
on Purchase Date, 4/15/12 2,523,485
</TABLE>
See accompanying notes to portfolios of investments on page 52.
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<S> <C> <C>
415,000 MS Home Corp. Single Family Mtg. Rev. Series 1995G (GNMA collateralized), 6.10%, 6/1/16 423,022
-----------
9,926,963
-----------
MISSOURI (2.2%)
1,000,000 Kansas City Port Hlth. Series 1995A (Riverfront Park Proj.), 5.75%, 10/1/00 1,013,440
1,700,000 MO Dev. Fin. Board Infrastructure Fac. Rev. Series 1999A (AMBAC insured)
(City of Independence - Bolger Square Proj.), 5.15%, 6/1/11 1,664,011
1,140,000 MO Hlth. & Educ. Fac. Auth. Hlth. Fac. Rev. Series 1998 (Lake of the Ozarks Gen. Hosp.,
Inc. Proj.) (Asset Guaranty insured), 5.25%, 2/15/12 1,111,591
MO Hlth. & Educ. Fac. Auth. Educ. Fac. Rev.:
545,000 Series 1998 (Southwest Baptist University Proj.) (ACA insured), 5.40%, 10/1/14 515,423
1,000,000 Series 1999 (Rockhurst Univ.) (Asset Guaranty insured), 5.10%, 10/1/19 906,560
1,000,000 Series 1999 (Park College Proj.), 5.55%, 6/1/09 980,810
1,970,000 MO. HDC Single Family Rev. Series 1997C-1 (GNMA collateralized), 6.55%, 9/1/28 2,072,854
MO Environmental Impt. & Energy Res. Auth. Water Fac. Rev. Refunding Series 1999
(Tri -Co. Water Auth Proj.) (Asset Guaranty insured):
425,000 5.50%, 4/1/06 434,074
400,000 5.50%, 4/1/07 406,880
1,060,000 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 1,114,887
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 3,732,450
30,000 St. Louis Co. Single Family Res. Mtg. Series 1984 (MBIA insured), 6.75%, 4/1/10 31,075
St. Louis Co. Industrial Dev. Auth. Hlth. Care Fac. Rev. Refunding Series 1999
(Nazareth Living Ctr. Proj.):
200,000 5.10%, 8/15/07 190,338
200,000 5.15%, 8/15/08 189,182
St. Louis Industrial Dev. Auth. Tax-Exempt Impt. Rev. Series 1998
(St. Louis Zoo Fdn.)(LOC Nationsbank):
1,000,000 5.10%, 8/15/12 943,810
800,000 5.15%, 8/15/13 748,384
1,000,000 St. Louis Muni Fin. Corp. Leasehold Rev. Refunding Series 1993A. 5.85%, 7/15/09 1,023,030
-----------
17,078,799
-----------
MONTANA (0.2%)
Crow Finance Auth. Tribal Purpose Revenue Series 1997A:
1,000,000 5.70%, 10/1/27 933,440
870,000 5.65%, 10/1/17 826,848
-----------
1,760,288
-----------
NEBRASKA (0.5%)
3,500,000 Scotts Bluff Co. Hosp. Auth. #1 Rev. Series 1998 (Regl. West
Med. Ctr. Proj.), 5.125%, 11/15/12 3,260,390
-----------
NEVADA (1.5%)
NV Hsg. Dev. SF Mtg. Program:
1,525,000 Sr. Series 1995A-1, 6.45%, 10/1/18 1,571,528
3,705,000 Sr. Series 1996D-1, 6.15%, 10/1/17 3,783,583
1,700,000 Sr. Series 1998B-1, 5.25%, 10/1/17 1,596,385
1,050,000 Mezzanine Series 1998B-1, 5.30%, 4/1/16 995,778
800,000 Mezzanine Series 1999A-1, 5.10%, 10/1/17 734,592
1,495,000 Mezzanine Series 1999B-1, 5.15%, 10/1/17 1,381,021
Reno Redev. Agency Subordinate Tax Allocation and Rev. Refunding Series 1995A:
400,000 6.00%, 6/1/08 411,992
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1,000,000 6.125%, 6/1/12 1,017,850
-----------
11,492,729
-----------
NEW HAMPSHIRE (2.0%)
NH Higher Educ. & Hlth. Fac. Auth. Rev.:
620,000 Series 1997 (Catholic Charities Issue), 5.75%, 8/1/12 584,195
6,500,000 Series 1993 (Nashua Memorial Hosp. Proj.), 6.00%, 10/1/23 6,268,080
5,110,000 NH HFA Single Family Res. Mtg. 1982 Series A Zero Coupon, 11.75% Effective Yield on
Purchase Date, 1/1/14 1,614,402
NH Higher Educ. & Hlth. Fac. Auth. Rev.:
1,085,000 Series 1998 (New Hampton School), 5.00%, 10/1/08 1,035,763
2,170,000 Series 1998 (River College Proj.), 5.55%, 1/1/18 2,007,988
5,075,000 Series 1998 (Cheshire Med. Ctr. Proj.), 5.125%, 7/1/18 4,541,871
-----------
16,052,299
-----------
NEW JERSEY (0.5%)
1,225,000 NJ EDA Rev. Refunding Bonds Series 1997A (Harrogate, Inc. Proj.), 5.875%, 12/1/26 1,135,134
NJ EDA First Mtg. Rev. Series 1998C (Fellowship Village Proj.):
410,000 4.95%, 1/1/06 393,272
155,000 5.05%, 1/1/07 148,076
250,000 5.15%, 1/1/08 236,133
335,000 5.20%, 1/1/09 317,014
440,000 5.25%, 1/1/10 412,650
1,050,000 NJ Hlth. Care Fac. Financing Auth. Rev. Refunding Series 1997A (Christian Hlth. Care
Center Proj.), 5.50%, 7/1/18 946,481
-----------
3,588,760
-----------
NEW MEXICO (1.1%)
355,000 Chaves Co. Hosp. Rev. Series 1992 Prerefunded (Eastern NM Med. Ctr. Proj.), 7.25%, 12/1/10 390,138
399,000 Hobbs Single Family Mtg. Rev. Refunding Series 1992, 8.75%, 7/1/11 430,353
865,000 NM Hosp. Equip. Loan Council Equip. & Imprv. Rev. Refunding Series 1996
(Rehoboth McKinley Hosp.), 6.30%, 8/1/10 867,232
945,000 NM MFA Single Family Mtg. Purchase Refunding Senior Series 1992-A2, 6.85%, 7/1/12 976,100
4,000,000 NM MFA Forward Mortgage-Backed Series 1995E (GNMA collateralized), 6.95%, 1/1/26 4,373,240
1,215,000 Sante Fe Educ. Fac. Rev. Series 1998 (St. Johns College Proj.), 5.40%, 3/1/17 1,106,258
525,000 Sante Fe Educ. Fac. Imprv. & Refunding Rev. Series 1997
(College of Sante Fe Proj.), 6.00%, 10/1/13 531,311
-----------
8,674,632
-----------
NEW YORK (0.6%)
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 1,063,402
675,000 Kenmore Hsg. Auth. Tax-Exempt Student Hsg. Rev. Series 1999A
(SUNY Buffalo Student Apts. Proj.) (Asset Guaranty insured), 5.25%, 8/1/10 667,271
Monroe Co. Industrial Dev. Agy. Student Hsg. Rev. Series 1999A
(Collegiate Hsg. Fdn. - Rochester Institute of Technology Proj.):
170,000 4.90%, 4/1/09 160,915
360,000 5.00%, 4/1/10 339,203
500,000 NYC G.O. Series 1990F Escrowed to Maturity (FGIC insured), 6.00%, 8/1/15 507,450
NYC Industrial Dev. Agy. Civic Fac. Rev. Series 1999 (Good Shepherd Services Proj.):
500,000 5.125%, 6/1/04 494,050
1,560,000 5.60%, 6/1/09 1,535,664
-----------
4,767,955
-----------
</TABLE>
See accompanying notes to portfolios of investments on page 52.
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NORTH CAROLINA (0.1%)
1,120,000 NC Muni Power Agency No. 1 Catawba Elec. Rev. Series 1995B, 6.00%, 1/1/20 1,085,459
-----------
OHIO (1.9%)
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 2,834,910
1,000,000 Zero Coupon Convertible, 6.15% Effective Yield on Purchase Date, 12/1/07 955,700
1,000,000 Cleveland-Cuyahoga Port. Auth. Dev. Rev. Series 1999A (Port of Cleveland Bond Fund Capital
Imprv. Proj.), 5.375%, 5/15/19 912,610
1,000,000 Hamilton CO. Hlth. Care Fac. Refunding & Impt. Series 1998A
(Twin Towers Proj.), 5.125%, 10/1/18 888,100
Franklin Co. Hlth. Care Fac. Rev. & Impt.:
1,000,000 Series 1997 (Friendship Village of Dublin Proj.), 5.50%, 11/1/16 935,610
530,000 Series 1998 (Friendship Village of Columbus Proj.), 5.25%, 8/15/12 492,232
300,000 Series 1998 (Friendship Village of Columbus Proj.), 5.25%, 8/15/18 258,366
1,500,000 Franklin Co. Mtg. Rev. Series 1997E (GNMA collateralized)(The Villas of St. Therese Proj.),
5.90%, 6/20/39 1,488,465
1,500,000 Marion Co. Hosp. Imprv. Rev. Refunding Series 1996 (Community Hosp. of Springfield
Proj.), 6.375%, 5/15/11 1,500,345
OH Capital Corp. for Hsg. Mtg. Rev. Refunding (FHA insured)(Section 8):
1,570,000 Series 1995G, 6.35%, 7/1/22 1,630,068
1,535,000 Series 1998E, 5.40%, 2/1/23 1,441,964
1,500,000 OH Water Dev. Auth. Rev. Series 1987A (MBIA insured) (Safe Water Proj.), 5.00%, 12/1/12 1,454,850
-----------
14,793,220
-----------
OKLAHOMA (1.4%)
840,000 Cleveland Co. Home Loan Auth. Single Family Mtg. Rev. Refunding Series 1991, 8.00%, 8/1/12 874,969
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, 6/1/11 855,620
1,000,000 OK Co. Industrial Auth. Hlth. Care Rev. Series 1999 (Natl. Benevolent Assoc. - OK Christian
Home Proj.), 5.50%, 2/1/24 874,090
OK Ind. Auth. Hosp. Rev. Bonds Series 1997A (Deaconess Hlth. Care Proj.):
2,190,000 5.50%, 10/1/12 2,034,203
2,000,000 5.75%, 10/1/17 1,850,160
1,250,000 Oklahoma City Public Property Auth. Rev. Refunding & Impt. Series 1998
(Oklahoma City Golf System) (Asset Guaranty insured), 5.20%, 10/1/18 1,119,275
355,000 Payne Co. Home Loan Auth. Single Family Rev. Refunding Series 1993A, 8.625%, 3/1/11 372,246
2,540,000 Tulsa Public Facilities Auth. Recreational Fac. Rev. Series 1985, 6.20%, 11/1/12 2,657,450
-----------
10,638,013
-----------
OREGON (0.6%)
4,000,000 Cow Creek Band Umpqua Tribe of Indians Rev. Series 1998B (AMBAC insured), 5.10%, 7/1/12 3,835,960
1,070,000 Portland Hsg. Auth. Multifamily Rev. Series 1997A (Civic Apts. Proj.), 5.70%, 1/1/28 1,042,073
-----------
4,878,033
-----------
PENNSYLVANIA (7.3%)
325,000 Butler Co. Hosp. Auth. Hlth. Care Ctr. Rev. Refunding Series 1993
(St. Francis Med. Ctr. Proj.), 5.65%, 5/1/02 327,987
1,190,000 Chester Co. Hlth. & Educ. Fac. Auth. Mtg. Rev. Refunding Series 1998, (Tel Hai
Obligated Group Proj.), 5.00%, 6/1/08 1,134,951
Columbia Co. Hosp. Auth. Hlth. Care Rev. Series 1999 (Bloomsburg Hosp. Obligated Group Proj.):
665,000 5.00%, 6/1/04 645,994
575,000 5.15%, 6/1/07 543,432
1,500,000 5.60%, 6/1/12 1,387,200
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4,100,000 Cumberland Co. Muni Auth. Rev. Series 1996 (Presbyterian Homes Proj.), 6.00%, 12/1/26 4,024,724
1,285,000 Dauphin Co. Gen. Auth. Hlth. Sys. Rev. Series 1999 (Pinnacle Hlth. Sys. Proj.), 5.125%, 8/15/17 1,170,532
Grove City Area Hosp. Auth. Rev. Series 1998 (United Cmty. Hosp. Proj.):
810,000 4.75%, 7/1/06 770,699
2,970,000 5.25%, 7/1/12 2,762,635
Hazleton Hlth. Svc. Auth. Hosp. Rev. :
1,000,000 Series 1997 (Hazleton General Hosp. Proj.), 5.625%, 7/1/17 915,400
2,430,000 Series 1996 (Hazleton - St. Joseph Med. Ctr.), 6.20%, 7/1/26 2,324,465
Horizon Hosp. System Auth. Hosp. Rev. Series 1996 (Horizon Hosp. Sys.):
600,000 5.95%, 5/15/06 613,140
715,000 6.15%, 5/15/08 736,135
710,000 6.25%, 5/15/09 732,408
1,145,000 6.30%, 5/15/11 1,147,908
1,665,000 6.35%, 5/15/16 1,669,229
1,780,000 McKean Co. Hosp. Rev. Refunding Series 1994 (Bradford Hosp. Proj.), 6.10%, 10/1/20 1,681,548
6,595,000 Montgomery Co. Industrial Dev. Auth. Resource Recovery Rev. Series 1989 (LOC Banque
Paribas), 7.50%, 1/1/12 6,898,964
Montgomery Co. Redev. Auth. Multifamily Hsg. Rev. 1993 Series A (KBF Assoc. L.P.):
250,000 6.375%, 7/1/12 251,100
1,500,000 6.40%, 7/1/14 1,504,815
1,320,000 New Wilmington Muni. Auth. College Rev. Series 1998 (Westminister College), 5.05%, 3/1/12 1,214,492
PA Econ. Dev. Fin. Auth. Rev. Series 1998A (Northwestern. Human Services Proj.):
2,445,000 5.25%, 6/1/09 2,345,635
2,560,000 5.30%, 6/1/10 2,438,067
2,685,000 5.35%, 6/1/11 2,540,869
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 4,507,190
4,200,000 5.875%, 11/15/16 4,120,620
1,100,000 5.875%, 11/15/21 1,079,364
1,250,000 Philadelphia Auth. for Industrial Dev. Rev. Refunding Series 1998A (FHA Insured)
(Elmira Jeffries Mem. Home Proj.), 5.30%, 2/1/22 1,140,138
1,265,000 Philadelphia Redevelopment Auth. Multifamily Hsg. Rev. Refunding Series 1998
(FHA insured - Woodstock Mutual Homes Inc. Proj.), 5.45%, 2/1/23 1,197,841
Pittsburgh Urban Redev. Auth. (Center Triangle Tax Increment Fin. District) (LOC PNC Bank):
3,000,000 Series 1995A, 6.00%, 12/1/11 3,085,830
2,100,000 Series 1995B, 6.25%, 3/15/15 2,155,923
-----------
57,069,235
-----------
RHODE ISLAND (1.0%)
2,000,000 RI Hlth. & Educ. Bldg. Corp. Hosp. Fin. Rev. Series 1997 (Steere House Proj.), 5.70%, 7/1/15 1,850,900
500,000 Refunding Series 1998 (Roger Williams Hosp. Proj.), 5.20%, 7/1/09 473,850
Series 1998 (Roger Williams Hosp. Proj.):
1,400,000 5.50%, 7/1/18 1,259,160
500,000 4.70%, 7/1/03 489,505
Series 1999 (St. Joseph's Hlth. Svcs.):
1,770,000 5.40%, 10/1/09 1,673,553
2,250,000 5.75%, 10/1/14 2,097,968
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7,844,936
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</TABLE>
See accompanying notes to portfolios of investments on page 52.
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SOUTH CAROLINA (1.4%)
North Charleston Muni. Golf Course Mtg. Rev. Series 1998:
1,580,000 5.00%, 5/1/09 1,490,177
3,000,000 5.50%, 5/1/19 2,700,780
Medical University of SC Hosp. Fac. Rev. Series 1999:
2,200,000 5.50%, 7/1/07 2,203,916
1,740,000 5.50%, 7/1/08 1,733,875
1,575,000 5.50%, 7/1/09 1,559,644
1,390,000 SC Jobs Econ. Dev. Auth. Econ. Dev. & Rev. Refunding Series 1998A
(Westminister Presbyterian Center Inc. Project), 5.25%, 11/15/16 1,223,728
-----------
10,912,120
-----------
SOUTH DAKOTA (1.1%)
2,000,000 SD HDA Multifamily Hsg. Rev. 1992 Series B (Section 8), 7.00%, 4/1/12 2,106,100
SD Hlth. & Educ. Fac. Auth. Rev. Refunding Series 1998 (Prairie Lakes Hlth. Care System):
2,000,000 5.45%, 4/1/13 1,893,520
SD HDA Homeownership Mtg. Series 1998D:
1,150,000 5.20%, 5/1/20 1,061,151
3,965,000 5.25%, 5/1/28 3,595,660
-----------
8,656,431
-----------
TENNESSEE (6.6%)
12,290,000 Industrial Dev. Board of Franklin MF Hsg. Rev. Series 1998A (Franklin Oaks Apt. Proj.)
(FNMA collateralized), 5.20%, 12/15/21 11,189,185
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 1,831,553
5,925,000 Series 1998A (FNMA collateralized) (Crossings of Bellevue), 5.20%, 12/15/21 5,394,298
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 3,607,334
Shelby Co. Hlth., Educ. & Hsg. Fac. Board Multifamily Hsg. Rev.:
1,500,000 (Cameron Hsg. Proj.), Senior Series 1997A, 5.90%, 7/1/18 1,510,890
(CME Memphis Apts. Proj.):
2,000,000 Senior Series 1998A, 5.35%, 1/1/19 1,891,820
8,500,000 Senior Series 1998A, 5.55%, 1/1/29 7,930,500
1,800,000 Subordinate Series 1998C, 6.00%, 1/1/29 1,702,836
(Eastwood Park Apts. Proj.):
1,000,000 Senior Series 1995 A2, 6.40%, 9/1/25 1,014,170
415,000 Subordinate Series 1995C, 7.50%, 9/1/25 418,897
(Raleigh Forest & Sherwood Apts. Proj.):
2,885,000 Senior Series 1996A, 6.60%, 1/1/26 2,945,239
690,000 Subordinate Series 1996C, 7.25%, 1/1/26 698,846
(Raleigh Woods Apts. Proj.):
6,000,000 Series 1997A (GNMA collateralized), 7.75%, 3/20/27 6,696,480
(The Corners Apts. Proj.):
1,055,000 Senior Series 1996A, 6.25%, 1/1/27 1,059,283
335,000 Subordinate Series 1996C, 6.375%, 1/1/27 321,808
1,500,000 TN HDA Mtg. Finance Series 1995B (MBIA insured), 6.20%, 7/1/18 1,534,065
5,500,000 TN HDA Homeownership Program Series 1997 Issue 3B
Zero Coupon, 5.725% Effective Yield on Purchase Date, 7/1/16 2,029,665
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51,776,869
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TEXAS (10.9%)
1,375,000 Baytown HFC Single Family Mtg. Rev. Refunding Series 1992B, 8.50%, 9/1/11 1,491,600
Bell Co. Hlth. Fac. Dev. Corp. Retirement Fac. Rev. Series 1998 (Buckner
Retirement Services, Inc. Obligated Group, Proj.):
1,000,000 5.00%, 11/15/11 927,670
3,235,000 5.25%, 11/15/19 2,857,023
Beaumont HA Multifamily Mtg. Rev. Series 1993A (Section 8):
1,365,000 6.65%, 11/1/07 1,417,102
650,000 6.75%, 11/1/10 672,834
1,765,000 Bexar Co. HFC Residual Rev. Series 1993 Zero Coupon, 6.50% Effective Yield
on Purchase Date, 3/1/15 638,895
1,000,000 Bexar Co. HFC MF Hsg. Rev. Ref. Series 1995 (Windridge Apts. Proj.) (FNMA collateralized),
5.125%, 12/15/21 909,260
195,000 Brazos Co. HFC Single Family Mtg. Rev. 1985 (MBIA insured) Zero Coupon, 10.55% Effective
Yield on Purchase Date, 9/1/11 56,998
1,005,000 Brazos Co. Hlth. Fac. Dev. Corp. Rev. Series 1997A (Franciscan Svcs. Corp.)
(MBIA insured), 5.375%, 1/1/17 949,303
1,740,000 Collin Co. HFC Student Hsg. Rev. Series 1998A (Cmty. Coll. Dist. Fdn. Proj.)
(ACA insured), 5.25%, 6/1/23 1,538,038
545,000 Columbus Cmty. Industrial Dev. Corp. Sales Tax Rev. Series 1998 (Bank Qualified),
5.70%, 11/1/18 519,990
Dallas Hsg. Corp. Capital Program Revenue Bonds:
1,625,000 Series 1995A (Estell Village Apts.) (Section 8), 7.875%, 12/1/09 1,653,974
1,475,000 Series 1995 (Cedar Glen Apts.) (Section 8), 7.75%, 12/1/09 1,500,311
1,000,000 Dallas HFC Cap. Proj. Refunding 1990 (Section 8), 7.85%, 8/1/13 1,031,370
6,848,000 Dallas HFC Multifamily Mtg. Rev. Series 1998A (GNMA collateralized) (Towne
Ctr. Apts. Proj.), 6.75%, 10/20/32 7,286,135
1,000,000 Galveston Special Contract Refunding Rev. Series 1998 (Farmland Industries, Inc. Proj.),
5.50%, 5/1/15 919,020
Harris Co. HFC Multifamily Rev. (Windfern Pointe & Waterford Place Projs.):
2,000,000 Senior Series 1999A, 5.15%, 7/1/09 1,950,480
1,500,000 Senior Series 1999A, 5.90%, 7/1/19 1,444,020
2,300,000 Subordinated Series 1999C, 6.60%, 7/1/29 2,247,031
1,600,000 Harrison Co. Hlth. Fac. Dev. Corp. Rev. Series 1998 (Marshall Regional Med. Ctr. Proj.)
(ACA insured), 5.50%, 1/1/18 1,496,688
1,500,000 Houston HFC Single Family Mtg. Rev. Refunding Series 1996B-1, 8.00%, 6/1/14 1,535,280
1,730,000 Lubbock HFC Multifamily Hsg. Rev. Refunding Series 1992A (Los Colinas, Park Ridge Place &
Quail Creek), 7.75%, 1/1/22 1,777,143
6,000,000 Lufkin Hlth. Sys. Rev. Series 1998 (Memorial Hlth. Sys. Of East Texas), 5.70%, 2/15/28 5,381,280
Midland HFC Single Family Mtg. Rev. Refunding:
382,768 Series 1992 A-2, 8.45%, 12/1/11 411,127
279,428 Series 1992, 9.00%, 9/1/01 286,187
278,313 Series 1992 B2, 8.15%, 12/1/11 292,565
Mesquite Hlth. Fac. Dev. Corp. Retirement Fac. Rev. Series 1996A (Christian Care Ctrs. Proj.):
1,000,000 6.30%, 2/15/12 1,002,490
1,000,000 6.40%, 2/15/16 1,003,120
7,852,000 Nortex Hsg. Fin. Corp. Multifamily Hsg. Rev. Series 1999 (GNMA collateralized)
(Highland Oaks Apts. Proj.), 6.75%, 9/20/32 8,539,678
North Central Hlth. Fac. Dev. Corp. Rev. (C.C. Young Memorial Home Proj.):
1,300,000 Series 1996, 6.30%, 2/15/15 1,301,560
</TABLE>
See accompanying notes to portfolios of investments on page 52.
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1,135,000 Series 1998A, 5.375%, 2/15/14 1,025,643
1,030,958 Odessa HFC Single Family Mtg. Rev. Refunding Series 1992B Class B-2, 8.125%, 11/1/11 1,088,743
650,000 San Marcos HA Multifamily Mtg. Rev. Series 1993A (FHA insured) (Section 8), 5.80%, 11/1/10 648,388
Southeast TX HFC Residual Revenue:
1,555,000 Series 1995A Zero Coupon, 6.50% Effective Yield on Purchase Date, 11/1/14 634,844
3,000,000 Series 1992A Zero Coupon, 7.63% Effective Yield on Purchase Date, 9/1/17 781,410
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 7,515,700
2,000,000 Tarrant Co. HFC Multifamily Hsg. Rev. Series 1998 (Hurst Manor Proj.) (GNMA Collateralized),
6.10%, 2/20/35 2,033,160
TX Dept. Hsg. & Cmnty. Affairs Multifamily Hsg. Rev.:
2,065,000 Senior Series 1996A (Dallas - Ft. Worth Apts. Pool Proj.), 6.50%, 7/1/16 2,122,944
2,500,000 Senior Series 1996A (Dallas - Ft. Worth Apts. Pool Proj.), 6.50%, 7/1/26 2,561,625
955,000 Subordinated Series 1996C (Harbors & Plumtree Apts. Proj.), 7.375%, 7/1/26 964,942
2,820,000 Senior Series 1996A (Harbors & Plumtree Apts. Proj.), 6.45%, 7/1/26 2,880,094
3,200,000 Series 1996A (NHP Foundation - Asmara Apts. Proj.), 6.40%, 1/1/27 3,317,088
4,095,000 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 1,418,385
850,000 Travis Co. HFC Residential Mtg. Rev. Series 1991A (GNMA/FNMA collateralized), 7.05%, 12/1/25 884,867
Victoria Hosp. Rev. Series 1999 (Citizens Med. Ctr. Proj.):
870,000 4.80%, 2/15/06 830,232
1,020,000 5.00%, 2/15/08 965,297
3,460,000 5.40%, 2/15/12 3,234,062
-----------
85,945,596
-----------
UTAH (1.0%)
600,000 Intermountain Power Agency Power Supply Rev. Refunding Series 1986F
(AMBAC insured), 5.00%, 7/1/13 571,266
1,000,000 Provo HA Multifamily Series 1997 (Lookout Point Apts. Proj.)
(GNMA collateralized), 5.80%, 7/20/22 989,920
Salt Lake Co. College Rev. Series 1999 (Westminister College Proj.):
115,000 5.05%, 10/1/10 108,386
120,000 5.15%, 10/1/11 112,640
125,000 5.20%, 10/1/12 116,488
130,000 5.25%, 10/1/13 120,271
140,000 5.30%, 10/1/14 128,937
825,000 5.50%, 10/1/19 763,315
1,615,000 UT HFA Single Family Mtg. 1996 Issue E-1 Senior Bonds, 6.00%, 7/1/16 1,634,251
3,230,000 UT HFA Multifamily Forward Mtg. Refunding Series 1992 (FHA insured), 7.40%, 7/1/24 3,429,291
-----------
7,974,765
-----------
VERMONT (0.1%)
VT Educ. & Hlth. Bldgs. Financing Agency Rev. Series 1998 (Norwich Univ. Proj.):
420,000 5.13%, 7/1/09 403,053
780,000 5.75%, 7/1/13 760,406
-----------
1,163,459
-----------
VIRGINIA (1.7%)
1,000,000 Arlington Co. Industrial Dev. Auth. Multifamily Hsg. Mtg. Rev. Refunding Series 1998A (Woodbury
Park Apts. Proj.) 5.35%, 7/1/18 943,420
430,000 Harrisonburg General Obligation Series 1979 (HUD Credit Support) (Section 8), 6.50%, 2/1/10 430,082
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 2,348,400
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2,000,000 Prince William Co. Ind. Dev. Auth. Multifamily Hsg. Rev. Series 1998A (Melrose
Apts. Proj.), 5.35%, 7/1/23 1,865,040
VA Hsg. Dev. Auth. Commonwealth Mtg. Rev:
750,000 Series 1992A, 7.10%, 1/1/22 771,135
1,510,000 Series 1995D3, 6.05%, 1/1/13 1,541,635
1,555,000 Series 1995D3, 6.05%, 7/1/13 1,587,577
Chesterfield Co. Industrial Dev. Auth. Multifamily Hsg. Mtg. Rev. Series 1999
(Winchester Greens Townhouses Proj.):
750,000 5.20%, 7/1/19 699,090
1,155,000 5.30%, 7/1/24 1,062,473
2,000,000 5.40%, 1/1/31 1,839,220
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13,088,072
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WASHINGTON (3.9%)
Grant Co. Public Hosp. Dist. #1 Rev. Series 1998 (Samaritan Hosp. Proj.)
(Asset Guaranty insured):
1,020,000 5.25%, 9/1/13 961,289
3,000,000 5.25%, 9/1/19 2,689,020
2,500,000 King Co. Hsg. Auth. Pooled Hsg. Refunding Rev. Series 1998A
(Asset Guaranty insured), 5.05%, 7/1/13 2,353,125
3,000,000 Kitsap Co. Consolidated Hsg. Auth. Pooled Hsg. Refunding Rev. Series 1998A,
5.50%, 12/1/18 2,820,480
1,500,000 Quinault Indian Nation Tax-Exempt Impt. & Refunding Rev. Series 1999A
(Quinault Beach Resort Proj.) (ACA Insured), 5.80%, 12/1/15 1,460,010
2,665,000 Snohomish Co. Hsg. Auth. Rev. Series 1999A (Millwood Estates Proj.), 5.40%, 6/1/19 2,504,993
Vancouver (Clark Co.) H.A. Pooled Hsg. Refunding Rev. Series 1998A Senior Bonds:
1,000,000 5.40%, 3/1/18 938,900
3,500,000 5.50%, 3/1/28 3,196,025
1,000,000 WA HFC Nonprofit Housing Revenue Series 1995A (Judson Park Proj.)
(LOC US Bk. Wash.), 6.90%, 7/1/16 1,042,110
1,000,000 WA Higher Educ. Fac. Auth. Rev. Series 1999 (Pacific Lutheran Univ. Proj.)
(Asset Guaranty insured), 5.75%, 11/1/15 990,630
WA Hlth. Care Fac. Auth. Rev.:
2,000,000 Series 1996 (Grays Harbor Hosp. Proj.)(Asset Guaranty insured), 5.70%, 7/1/16 1,959,680
Series 1998:
500,000 (Harrison Memorial Hosp.) (AMBAC insured), 5.00%, 8/15/18 447,050
1,850,000 (Highline Cmmty. Hosp. Proj.)(Asset Guaranty insured), 5.25%, 8/15/17 1,697,098
WA Hsg. Finance Commission Nonprofit Hsg. Rev.:
1,000,000 Series 1997A (Virginia Mason Research Center Proj.)(LOC US Bank), 5.70%, 1/1/24 964,290
1,500,000 Series 1998 (Cmty. Colleges of Spokane Fdn. Proj.)(LOC US Bank), 5.20%, 7/1/18 1,369,005
1,355,000 Series 1998A (WA Odd Fellows Home Proj.) (LOC US Bank), 5.05%, 7/1/18 1,261,600
1,000,000 Refunding Series 1999A (Presbyterian Ministries, Inc.) (ACA insured), 5.45%, 1/1/29 927,080
2,000,000 WA HFC Single Family Program Series 1999-4N (GNMA/FNMA collateralized), 5.55%, 12/1/16 1,938,100
1,000,000 WA Public Power Supply Sys. Nuclear Proj. #3 Rev. Refunding Series 1993C, 5.375%, 7/1/15 956,400
-----------
30,476,885
-----------
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 2,372,898
2,000,000 Mason Co. Residual Rev. Series 1992C Zero Coupon, 7.58% Effective Yield on
Purchase Date, 7/10/14 676,760
3,000,000 Ohio Co. Residual Rev. Series 1992C Zero Coupon, 7.43% Effective Yield on
Purchase Date, 7/10/14 1,019,790
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4,069,448
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</TABLE>
See accompanying notes to portfolios of investments on page 52.
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SEPTEMBER 30, 1999
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WISCONSIN (3.5%)
1,300,000 WI HEDA Hsg. Rev. Series 1992A (Section 8), 6.85%, 11/1/12 1,367,496
WI HEDA Home Ownership Rev.:
5,130,000 Series 1992A, 7.10%, 3/1/23 5,327,762
1,400,000 Series 1997A, 6.00%, 3/1/17 1,408,918
3,195,000 Series 1998A, 5.38%, 9/1/17 3,034,515
1,095,000 Series 1999C, 5.00%, 9/1/17 993,592
2,985,000 Series 1999F, 5.50%, 10/1/17 2,885,749
WI Hlth. & Educ. Fac. Auth. Rev. :
750,000 Series 1996 (Meriter Hosp. Inc.), 6.00%, 12/1/17 740,138
1,750,000 Series 1997 (St. John's Home & Sunrise Care), 5.625%, 12/15/22 1,601,985
1,600,000 Series 1998 (Howard Young Medical Center, Inc. Proj.), 5.00%, 8/15/18 1,389,632
1,675,000 Series 1999 (Divine Savior Hosp. & Nursing Home Proj., Inc.), 5.65%, 6/1/19 1,519,761
Series 1999 (FH Healthcare Dev. Inc. Proj.):
1,505,000 5.25%, 11/15/04 1,491,590
1,020,000 5.625%, 11/15/09 994,979
Series 1999 (Kenosha Hosp. & Med. Ctr., Inc. Proj.):
670,000 5.00%, 5/15/06 650,121
705,000 5.10%, 5/15/07 681,199
740,000 5.15%, 5/15/08 710,282
820,000 5.35%, 5/15/10 783,715
865,000 5.45%, 5/15/11 826,776
1,000,000 Series 1999 (Monroe Clinic Inc., Proj.), 5.125%, 2/15/16 879,100
-----------
27,287,310
-----------
WYOMING (0.6%)
WY CDA Hsg. Rev.:
2,000,000 1995 Series 6, 6.10%, 12/1/25 2,017,700
2,525,000 Series 1992-B, 7.05%, 6/1/33 2,526,136
-----------
4,543,836
-----------
Total municipal bonds (cost: $756,117,886) 732,918,343
-----------
CLOSED-END MUTUAL FUNDS (4.4%) (2)
253,600 American Municipal Term Trust 2001 2,631,100
19,600 American Municipal Term Trust II 2002 203,350
157,800 American Municipal Term Trust III 2003 1,607,587
216,000 Blackrock Insured Municipal Term Trust 2008 3,213,000
662,700 Blackrock Insured Municipal Term Trust 2010 6,709,837
1,146,000 Blackrock Municipal Target Term Trust 2006 11,674,875
338,300 Van Kampen Merritt Municipal Opportunity Trust 4,693,913
324,100 Van Kampen Merritt Strategic Sector Municipal Trust 3,767,663
-----------
Total closed-end mutual funds (cost: $37,464,354) 34,501,325
-----------
SHORT-TERM SECURITIES (0.7%) (2)
3,590,838 Dreyfus Tax-Exempt Cash Management Fund, 3.15% 3,590,838
1,889,087 Northern Institutional Tax-Exempt, 3.06% 1,889,087
-----------
Total short-term securities (cost: $5,479,925) 5,479,925
-----------
Total investments in securities (cost: $799,062,165) (6) $772,899,593
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</TABLE>
See accompanying notes to portfolios of investments on page 52.
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[PHOTO] SIT MINNESOTA TAX-FREE INCOME FUND REVIEW
SIX MONTHS ENDED SEPTEMBER 30, 1999
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MICHAEL C. BRILLEY, SENIOR PORTFOLIO MANAGER
DEBRA A. SIT, CFA, SENIOR PORTFOLIO MANAGER
Municipal bond yields played "catch up" during the quarter to the rise in
taxable bond yields that occurred earlier in the year. The Fund's price per
share decreased $0.49 during the semi-annual period to $10.06 on September 30th.
The Fund's longer duration holdings experienced greater price declines with the
rise in interest rates, resulting in a -2.3% return for the six-month period
which compares to -0.3% for the Lehman 5-year Municipal Index. Although its
3-month return of -1.6% ranked #31 of 46 Minnesota municipal funds tracked by
Lipper Analytical Services, the Fund's performance over longer-term periods
remains very competitive. As of September 30th, the Fund ranked #3 of 45 funds
for the 1-year period, #8 of 28 for the 5-year period, and #1 of 24 since its
inception.
With the rise in interest rates, the Fund's 30-day SEC yield increased from
4.52% as of March 31st to 5.25% as of September 30th and ranks among the top 10%
of Minnesota funds tracked by Lipper. The Fund's 12-month distribution rate,
which typically lags movements in yield, was relatively constant at 4.83%.
Fund assets declined from $271.3 million to $222.4 million during the period
in part due to anticipated withdrawals for tax payments. Thus, cash decreased
from 11.9% to 0.8%. Sales were made across several industry sectors. Resultant
shifts included decreases in single family housing bonds from 11.0% to 9.6% and
in general obligation bonds from 3.4% to 0.9%. Health care bonds increased from
20.2% to 23.2%. Purchases were made in multifamily housing bonds (increased from
34.0% to 45.3%), and in education bonds (increased from 2.5% to 3.5%). The
reduction in cash contributed to increases in the Fund's implied duration from
6.8 years to 7.6 years and in its average maturity from 17.7 years to 20.4
years. In addition, securities rated A or better decreased from 54.5% to 49.8%
while non-rated bonds increased from 37.0% to 43.1%.
Municipal yields have increased to very attractive levels, particularly on an
after-tax basis. We continue to focus on securities that provide high
incremental yield. We believe intermediate maturity bonds, which are currently
yielding only slightly less than longer bonds, are particularly attractive.
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 9/30/99: $ 10.06 Per Share
3/31/99: $ 10.55 Per Share
Total Net Assets: $222.4 Million
30-day SEC Yield: 5.25%
Tax Equivalent Yield: 9.45%(1)
12-Month Distribution Rate: 4.83%
Average Maturity: 20.4 Years
Duration to Estimated Avg. Life: 8.1 Years(2)
Effective Duration: 7.6 Years(2)
(1)For individuals in the 39.6% federal tax and 8.0% MN tax brackets.
(2)See next page.
PORTFOLIO STRUCTURE
(% OF TOTAL NET ASSETS)
Multifamily Mortgage Revenue 45.3
Hospital/Health Care Revenue 23.2
Single Family Mortgage Revenue 9.6
Other Revenue Bonds 5.8
Industrial Revenue/Pollution Control 3.8
Lease 3.5
Education/Student Loan 3.5
Closed-End Mutual Funds 1.9
Sectors Under 1.0% 2.6
Cash & Other Net Assets 0.8
36
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AVERAGE ANNUAL TOTAL RETURNS*
SIT LEHMAN LIPPER
MN TAX-FREE 5-YEAR MUNI. MN MUNI. BOND
INCOME FUND BOND INDEX FUND AVG.
----------- ------------ -------------
3 Month** -1.55% 0.94% -1.31%
6 Month** -2.25 -0.31 N/A
1 Year -0.77 1.55 -2.22
3 Year 4.84 4.97 4.34
5 Year 6.00 5.61 5.62
Inception 5.53 4.90 4.33
(12/1/93)
CUMULATIVE TOTAL RETURNS*
SIT LEHMAN LIPPER
MN TAX-FREE 5-YEAR MUNI. MN MUNI. BOND
INCOME FUND BOND INDEX FUND AVG.
----------- ------------ -------------
1 Year -0.77% 1.55% -2.22%
3 Year 15.22 15.65 13.59
5 Year 33.81 31.35 31.47
Inception 36.87 32.17 28.04
(12/1/93)
* As of 9/30/99. **Not annualized.
- --------------------------------------------------------------------------------
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
[GRAPH]
The sum of $10,000 invested at inception (12/1/93) and held until 9/30/99 would
have grown to $13,687 in the Fund or $13,217 in the Lehman 5-Year Municipal Bond
Index assuming reinvestment of all dividends and capital gains.
QUALITY RATINGS
(% OF TOTAL NET ASSETS)
LOWER OF MOODY'S,
S&P, FITCH OR DUFF &
PHELPS RATINGS USED.
[PIE CHART]
A 11.1%
AA 13.8%
AAA 24.1%
Cash & Other
Net Assets 0.8%
Not Rated 43.1%
BBB 7.1%
ASSESSMENT OF
NON-RATED
SECURITIES
--------------
AAA 0.0
AA 0.3
A 2.9
BBB 27.0
BB 11.9
B 1.0
--------------
TOTAL 43.1
--------------
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SEPTEMBER 30, 1999
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PORTFOLIO OF INVESTMENTS (UNAUDITED)
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<CAPTION>
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QUANTITY($) NAME OF ISSUER MARKET VALUE (1)
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MUNICIPAL BONDS (97.3%) (2)
EDUCATION/STUDENT LOAN (3.5%)
Minnesota Higher Educ. Fac. Auth. Rev.:
Series 1996-4I (Hamline Univ.):
1,000,000 6.00%, 10/1/12 $1,002,260
585,000 6.00%, 10/1/16 578,249
750,000 Series 1997-4L (St. John's University), 5.35%, 10/1/17 707,798
2,600,000 Series 1998-4T (College of St. Benedict), 5.35%, 3/1/20 2,392,104
410,000 Series 1998-4L (St. John's University), 5.25%, 10/1/11 410,262
458,000 Lease Rev. Series 1999-5A (Concordia University), 5.25%, 4/25/14 425,766
Series 1999-4Y (Augsburg College):
700,000 5.05%, 10/1/13 642,572
500,000 5.20%, 10/1/16 459,330
275,000 Series 1999-4Z (Northwestern College of Chiropractic), 5.20%, 10/1/13 259,187
1,000,000 St. Paul Hsg. & Redev. Auth. Lease Rev. Series 1999 (ACORN Dual Language
Academy Proj.), 6.30%, 11/1/17 954,330
------------
7,831,858
------------
ESCROWED TO MATURITY/PREREFUNDED (0.6%)
100,000 Anoka Industrial Dev. Rev. Series 1994 (Lund Industries Inc. Proj.):
6.40%, 9/1/03 (4) 106,520
1,100,000 University of Minnesota Rev. Series 1986A, 6.00%, 2/1/11 1,102,090
------------
1,208,610
------------
GENERAL OBLIGATION (0.9%)
580,000 Carver Co. Hsg. & Redev. Auth. Hsg. & Dev. Gross Rev. Ltd.Tax G.O.
(Chanhassen Apts. Proj.), 7.00%, 1/1/25 598,589
500,000 Goodhue (City of) G.O. Gas Utility Series 1996, 6.75%, 1/1/26 514,470
1,000,000 St. Paul ISD No. 625 G.O. Series 1997A, 5.125%, 2/1/15 956,520
------------
2,069,579
------------
HOSPITAL/HEALTH CARE (23.2%)
1,000,000 Albert Lea Hsg. & Hlth. Care Fac. Rev. Refunding Series 1996
(St. Johns Lutheran Home Proj.), 7.00%, 11/1/19 1,022,610
700,000 Bemidji Hosp. Fac. Rev. Refunding Series 1996 (North Country Hlth. Proj.), 5.625%, 9/1/21 669,004
1,030,000 Bloomington Hsg. & Redev. Auth. Senior Hsg. Rev. Bonds Series 1998 (Summerhouse Proj.),
5.875%, 11/1/11 976,440
Brooklyn Center Hlth. Care Fac. Rev. Series 1993 (Maranatha Proj.):
50,000 6.75%, 12/1/05 51,373
500,000 7.50%, 12/1/10 520,235
670,000 Cambridge Hsg. & Hlth. Care Fac. Rev. Series 1998C (Grandview West Proj.), 5.25%, 10/1/08 635,435
625,000 Clearwater Co. Hlth. Care Fac. Gross Rev. Series 1999, 5.90%, 11/1/15 589,069
1,290,000 Cokato Sr. Hsg. Rev. Series 1996 (Cokato Charitable Trust Proj.), 7.00%, 12/1/19 1,290,374
1,555,000 Columbia Heights Multifamily & Health Care Fac. Rev. Series 1998
(Crest View Corp. Proj.), 5.75%, 9/1/11 1,500,357
1,000,000 Cuyuna Range Hosp. Dist. Hlth. Fac. Gross Rev. Series 1999A, 6.00%, 6/1/19 929,040
</TABLE>
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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 1,007,420
715,000 Eden Prairie Hlth. Care Fac. Rev. Bonds Series 1998 (Castle Ridge Care Proj.),
5.70%, 7/1/18 654,161
140,000 Edina Hlth. Care Fac. Rev. Series 1995 (Volunteers of America Care Proj.),
7.875%, 3/1/19 142,110
Elk River Rev. Series 1998 (Care Choice Member Proj.):
1,500,000 5.60%, 8/1/13 1,392,735
1,595,000 5.70%, 8/1/18 1,454,146
325,000 5.75%, 8/1/23 291,297
215,000 Fergus Falls Hlth. Care Fac. Auth. Rev. Refunding Series 1993A
(Lake Region Hosp. Corp. Proj.), 6.25%, 9/1/04 224,402
650,000 Fergus Falls Hlth. Care Fac. Auth. Series 1995 (LRHC Long-Term Care Fac. Proj.),
6.40%, 12/1/15 668,642
Hastings Hlth. Care Fac. Rev. Series 1998 (Augustana Home of Hastings Proj.):
115,000 5.10%, 11/1/09 108,945
120,000 5.20%, 11/1/10 113,275
135,000 5.40%, 11/1/12 126,765
140,000 5.50%, 11/1/13 131,487
60,000 5.60%, 11/1/18 54,935
1,095,000 5.75%, 11/1/23 990,734
1,455,000 5.875% 11/1/28 1,317,517
565,000 Hastings Hlth. Care Fac. Rev. Series 1998 (Regina Med. Ctr.)(ACA insured), 5.25%, 9/15/18 514,410
1,540,000 Hibbing Hlth. Care Fac. Rev. Series 1995A (St. Francis Hlth. Svcs. Proj.),
7.35%, 11/1/15 1,586,770
665,000 Hopkins Hlth. Care Fac. Rev. Series 1999 (Augustana Chapel View Homes, Inc. Proj.),
6.00%, 3/1/14 628,206
750,000 Mankato Hlth. Care Fac. Rev. Series 1996A (Lutheran Home Proj.), 6.75%, 10/1/16 751,860
1,685,000 Maplewood Hlth. Care Fac. Rev. (VOA Care Ctrs. Proj.), 7.375%, 10/1/12 1,760,539
Marshall Medical Center Gross Rev. Series 1999 (Weiner Memorial Medical Center Proj.):
305,000 5.65%, 11/1/13 284,464
320,000 5.70%, 11/1/14 298,042
1,000,000 5.80%, 11/1/19 925,200
1,045,000 Minneapolis Hlth. Care Fac. Rev. Series 1993 (St. Olaf Res. Proj.), 7.00%,10/1/18 1,056,903
1,000,000 Minneapolis Hlth. Care Fac. Rev. Series 1998A (Benchmark Hlth.
Care Proj.), 6.625%, 12/1/28 896,820
1,250,000 Minneapolis Hlth. Care Fac. Rev. Series 1999 (Shelter Care
Foundation Proj.), 6.00%, 4/1/10 1,196,550
Minneapolis Pooled Rev. Series 1999 (CareChoice Member Projs.):
200,000 5.30%, 4/1/07 189,002
390,000 5.50%, 4/1/09 372,859
1,500,000 5.625%, 4/1/14 1,411,440
Minneapolis Rev. Series 1998A (Walker Methodist Senior Services Obligated Group):
905,000 5.10%, 11/15/07 858,736
</TABLE>
See accompanying notes to portfolios of investments on page 52.
39
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SEPTEMBER 30, 1999
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (UNAUDITED)
<TABLE>
<CAPTION>
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- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1,110,000 5.10%, 11/15/08 1,043,844
140,000 5.50%, 11/15/12 131,394
1,600,000 5.875%, 11/15/18 1,491,280
350,000 Minneapolis Skilled Nursing & Assisted Living Rev. Series 1998B
(Catholic Eldercare Assisted), 7.25%, 5/1/24 354,648
MN Agr. & Econ. Dev. Board Hlth. Care Rev. Series 1999
(Benedictine Care Centers Proj.):
115,000 5.45%, 2/1/09 109,957
120,000 5.45%, 8/1/09 114,113
120,000 5.50%, 2/1/10 113,911
125,000 5.50%, 8/1/10 118,026
130,000 5.55%, 2/1/11 122,524
130,000 5.55%, 8/1/11 121,897
135,000 5.60%, 2/1/12 126,471
2,355,000 5.90%, 2/1/19 2,198,275
495,000 5.75%, 2/1/29 440,689
750,000 Monticello/Big Lake Cmty. Hosp. Dist. Gross Rev. Series 1998
(Asset Guaranty insured), 5.75%, 12/1/19 735,900
4,020,000 New Hope Hsg. & Hlth. Care Fac. Rev. Series 1999 ( MN Masonic Home North Ridge Proj.),
5.75%, 3/1/15 3,765,655
Olmstead Co. Hlth. Care Fac. Rev. Series 1998 (Olmsted Medical Ctr. Proj.):
650,000 5.45%, 7/1/13 595,179
1,125,000 5.55%, 7/1/19 992,250
Red Wing Hlth. Care Ctr. Fac. Rev. Refunding (River Region Obligated Group):
125,000 Series 1993A, 6.20%, 9/1/05 129,586
130,000 Series 1993A, 6.30%, 9/1/06 135,087
200,000 Series 1993B, 6.20%, 9/1/05 207,338
2,500,000 Shakopee - St. Francis Regional Medical Center Tax-Exempt Loan, 5.633%, 7/1/13 2,350,025
300,000 Spring Park Hlth. Care Fac. Rev. Series 1991 (Twin Birch Hlth.
Care Ctr. Proj.), 8.25%, 8/1/11 313,446
St. Paul Hsg. & Redev. Auth. Hlth. Care Rev. Series 1998 (Regions Hosp. Proj.):
500,000 5.00%, 5/15/10 468,755
1,540,000 5.20%, 5/15/13 1,418,094
2,850,000 5.25%, 5/15/18 2,558,958
960,000 St. Paul Hsg. & Redev. Auth. Nursing Home Dev. Rev. Refunding Series 1996C
(Franciscan Hlth. Cmmty. Proj., St. Mary's Home), 7.00%, 7/1/21 979,469
820,000 Wadena Co. Hlth. Care Fac. Rev. Series 1994B, 7.45%, 9/1/15 862,796
------------
51,593,876
------------
INDUSTRIAL /POLLUTION CONTROL (3.8%)
510,000 Duluth Commercial Dev. Rev. Refunding Series 1995A
(Radisson Hotel Proj.), 7.00%, 12/1/00 479,737
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) 106,955
500,000 Series 1997C Lot 3 (DynaGraphics), 6.20%, 8/1/09 (4) 503,345
400,000 Series 1998A Lot 1 (Formative Engineering Corp.), 5.75%, 8/1/18 (4) 376,524
1,525,000 Series 1998B Lot 2 (Merrill Corp.), 5.50%, 8/1/10 (4) 1,469,444
</TABLE>
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- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Medina Industrial Dev. Rev. Refunding Series 1998 (Temroc Metals, Inc. Proj.):
210,000 5.10%, 10/1/05 (4) 203,007
705,000 5.25%, 10/1/08 (4) 671,689
400,000 5.60%, 10/1/12 (4) 379,780
1,000,000 Minneapolis Commercial Dev. Rev. Refunding Series 1997 (Holiday Inn Metrodome Proj.),
6.00%, 12/1/01 1,003,950 Owatonna Industrial
Dev. Rev. Series 1997:
280,000 7.25%, 5/1/14 (4) 281,705
505,000 7.375%, 5/1/17 (4) 508,176
200,000 Richfield Cmty. Dev. Rev. Refunding 1994 (Richfield Shoppes Proj.), 8.375%, 10/1/05 213,564
275,000 Sauk Centre Industrial Dev. Rev. Series 1998 (Seluemed LLP Proj.)
(LOC US Bank), 5.75%, 4/1/18 (4) 254,793
500,000 St. Paul Hsg. & Redev. Auth. District Cooling Rev. Series 1998J, 5.35%, 3/1/18 464,460
St. Paul Port Authority Hotel Fac. Senior Rev. Series 1996A (Radisson Kellogg Project):
485,000 7.00%, 8/1/01 487,299
1,065,000 8.05%, 8/1/21 1,096,705
------------
8,501,133
------------
MULTIFAMILY MORTGAGE (45.3%)
200,000 Andover Elderly Hsg. Rev. Series 1997 (Presbyterian Homes of Andover, Inc. Proj.),
5.35%, 12/1/08 194,898
1,520,000 Apple Valley Multifamily Hsg. Rev. Refunding Series 1998A (Mtg. Loan/Apple Valley
Villa Proj.) (GNMA collateralized), 5.25%, 8/1/18 1,436,476
500,000 Aurora Hsg. & Redev. Auth. Multifamily Rev. (Irongate Apts. Proj.) (Section 8),
6.10%, 10/1/19 505,515
Austin Hsg. & Redev. Auth. Governmental Hsg. Gross Rev. Series 1995A
(Courtyard Res. Proj.):
220,000 7.00%, 1/1/15 228,188
500,000 7.25%, 1/1/26 521,645
2,500,000 Bloomington Multifamily Hsg. Rev. Refunding Series 1998A (Hampshire Apts. Proj.),
6.20%, 12/1/31 2,317,000
960,000 Burnsville Multifamily Hsg. Rev. Refunding Series 1994 (Bridgeway
Apts. Proj.), 7.25%, 2/1/14 979,517
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 1,450,411
650,000 Rev. Refunding Series 1997A (Waybury Apts. Proj.), 5.875%, 8/1/27 639,873
2,630,000 Series 1998 (GNMA collateralized)(Jonathan Acres Proj.), 5.30%, 4/20/33 2,393,353
400,000 Subordinate Rev. Refunding Series 1997C (Waybury Apts. Proj.), 8.00%, 8/1/27 392,504
495,000 Chaska Multifamily Hsg. Rev. Series 1999 (West Suburban Hsg.
Partners Proj.), 5.375%, 9/1/14 (4) 470,606
405,000 Chisago City Hlth. Fac. Rev. Refunding Series 1995A (Pleasant Heights Proj.),
7.30%, 7/1/18 422,678
Coon Rapids Multifamily Hsg. Rev.:
280,000 Refunding Series 1997 (GNMA collateralized) (Pine Point Apts.), 6.125%, 5/1/32 288,053
700,000 Refunding Series 1997A (Margaret Place Apts. Proj.), 6.50%, 5/1/25 685,433
Coon Rapids Senior Hsg. Rev. Refunding Series 1998 (Epiphany Sr. Citizens
Hsg. Corp. Proj.):
115,000 5.30%, 11/1/07 109,570
</TABLE>
See accompanying notes to portfolios of investments on page 52.
41
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SIT MINNESOTA TAX-FREE INCOME FUND
SEPTEMBER 30, 1999
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (UNAUDITED)
<TABLE>
<CAPTION>
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QUANTITY($) NAME OF ISSUER MARKET VALUE (1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
115,000 5.40%, 11/1/08 109,418
170,000 5.50%, 11/1/10 159,423
545,000 5.80%, 11/1/18 507,760
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 3,202,680
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) 1,881,832
240,000 Series 1995C Subordinate, 9.00%, 1/20/15 (4) 243,478
Dakota Co. Hsg. & Redev. Auth. Multifamily Hsg. Rev.:
1,000,000 Series 1999 (View Pointe Apts. Proj.), 6.125%, 11/1/17 950,700
Series 1999 (Dakota Station Proj.) (GNMA collateralized):
1,500,000 5.65%, 1/20/24 1,465,005
1,650,000 5.75%, 1/20/41 1,609,195
4,440,000 Series 1999A (GNMA collateralized)(River Heights Assisted
Living Proj.), 6.375%, 6/20/40 4,716,257
1,450,000 Eagan Multifamily Rental Hsg. Refunding Rev. Series 1996 (Wescott Apts. Proj.)
(FHA insured), 6.00%, 12/1/27 1,468,516
Eden Prairie Multifamily Hsg. Rev. Refunding :
55,000 Series 1990A (Welsh Parkway Apts. Ltd. Proj.)(FHA insured), 8.00%, 7/1/26 57,390
700,000 Series 1991 (Windslope Apts. Proj.)(Section 8), 7.00%, 11/1/06 735,721
1,500,000 Series 1991 (Windslope Apts. Proj.)(Section 8), 7.10%, 11/1/17 1,562,820
450,000 Series 1995A (Olympic Ridge Proj.) (GNMA collateralized), 6.20%, 1/20/16 465,277
300,000 Series 1997A (Preserve Place Proj.) (GNMA collateralized), 5.50%, 1/20/18 292,542
1,035,000 Series 1997A (Preserve Place Proj.) (GNMA collateralized), 5.60%, 7/20/28 989,377
1,750,000 Golden Valley Rev. Bonds Series 1999A (Covenant Retirement
Communities, Inc. Proj.), 5.50%, 12/1/25 1,590,137
Grand Rapids Hsg. & Redev. Auth. (Lakeshore Place and Forest Park West Apts. Proj.):
100,000 Series 1999B, 5.00%, 10/1/09 96,490
500,000 Series 1999A, 5.20%, 10/1/19 465,875
1,660,000 Series 1999A, 5.30%, 10/1/29 1,516,344
110,000 Series 1999B, 5.70%, 10/1/29 103,116
Harmony Multifamily Hsg. Rev. Refunding Series 1997A (Zedakah Fdn. Proj.) (Section 8):
300,000 5.40%, 9/1/08 299,691
280,000 5.75%, 9/1/12 281,456
275,000 5.80%, 9/1/13 276,427
3,500,000 Hopkins Elderly Hsg. Rev. Refunding (St. Therese Southwest Proj.),
Series 1997 (GNMA collateralized), 5.70%, 11/20/32 3,489,360
1,015,000 Hopkins Hsg. Fac. Rev. Refunding Series 1995 (Augustana Chapel View
Homes Proj.), 7.00%, 12/1/15 1,039,979
550,000 Hopkins Subordinate Multifamily Hsg. Rev. Refunding Series 1996C
(Auburn Apts. Proj.), 8.00%, 6/20/31 563,744
450,000 Hopkins Multifamily Hsg. Rev. Series 1996 (Hopkins Renaissance Proj.), 6.25%, 4/1/15 462,978
500,000 Hutchinson Hsg. Fac. Rev. Series 1994 (Prince of Peace Proj.), 7.375%, 10/1/12 512,020
Little Canada Multifamily Hsg. Rev.:
800,000 Refunding Series 1997A (GNMA collateralized)(Cedars Lakeside Proj.), 5.90%, 8/1/20 801,064
3,855,000 Series 1997A (Hsg. Alt. Dev. Co. Proj.), 6.10%, 12/1/17 3,747,523
1,650,000 Maplewood Multifamily Hsg. Rev. Series 1998 (Park Edge Apts. Proj.), 6.50%, 5/1/29 (4) 1,593,240
</TABLE>
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- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Maplewood Multifamily Refunding Rev. (Village on Woodlyn Proj.):
1,605,000 Series 1999A (GNMA collateralized), 6.75%, 7/20/30 (4) 1,673,501
100,000 Subordinate Series 1999C-1, 8.00%, 11/1/30 (4) 101,389
275,000 Subordinate Series 1999C-2, 8.00%, 11/1/30 (4) 278,820
Minneapolis Multifamily Hsg. Rev.:
75,000 Series 1991 (Trinity Hsg. Proj.) (Section 8), 7.875%, 2/1/06 77,432
355,000 Series 1996 (Belmont Apts.), 7.25%, 11/1/16 358,490
565,000 Series 1994 (Findley Place Townhomes Proj) (Section 8), 7.00%, 12/1/16 (4) 535,292
2,000,000 Series 1996A (Nicollet Towers) (Section 8), 6.00%, 12/01/19 2,019,460
4,190,000 Series 1998A (University Village) (GNMA collateralized), 5.30%, 8/1/23 3,895,359
645,000 Series 1996 (Belmont Apts.), 7.625%, 11/1/27 652,295
3,220,000 Series 1998 (Riverside Plaza Proj.) (GNMA collateralized), 5.10%, 12/20/18 (4) 2,967,584
MN HFA Rental Hsg. Rev.:
175,000 Series 1993C, 6.15%, 2/1/14 176,160
115,000 Series 1993E, 6.00%, 2/1/14 117,253
220,000 Series 1995D (MBIA insured), 6.00%, 2/1/22 224,156
4,005,000 Series 1998A, 5.375%, 8/1/28 3,741,151
Minnetonka Hsg. Fac. Rev. Series 1994 (Beacon Hill Housing Proj.):
890,000 7.00%, 6/1/04 910,434
1,000,000 7.50%, 6/1/14 1,042,330
500,000 Minnetonka Multifamily Hsg. Rev. Refunding Subordinate Series 1994C (Brier Creek Proj.),
8.00%, 12/20/16 518,440
Minnetonka Multifamily Hsg. Rev. Refunding Series 1999A (GNMA collateralized)
(Archer Heights Apts. Proj.):
540,000 5.10%, 7/20/13 (4) 517,239
975,000 5.20%, 1/20/18 (4) 911,557
Minnetonka Senior Hsg. Rev. Series 1997 (Westridge Senior Hsg. Proj.):
285,000 6.75%, 9/1/17 282,643
650,000 7.00%, 9/1/27 654,017
500,000 Monticello Senior Hsg. Rev. Series 1995 (Mississippi Shores Proj.), 7.25%, 7/1/16 502,880
210,000 Mora Multifamily Rev. Refunding Hsg. Alternatives Partnership Series 1995, 6.50%, 6/1/02 210,229
New Ulm Multifamily Rev. Series 1999 (HADC Ridgeway Proj.):
95,000 5.35%, 12/1/08 90,582
100,000 5.40%, 12/1/09 96,060
105,000 5.50%, 12/1/10 100,596
110,000 5.60%, 12/1/11 105,131
650,000 6.125%, 12/1/19 611,982
Plymouth Multifamily Hsg. Rev. Refunding Series 1996A (Fox Forest Apts. Proj.)
(GNMA collateralized):
750,000 Series 1996A, 8.05%, 6/20/31 845,025
690,000 Series 1996C, 8.00%, 6/20/31 707,243
960,000 Robbinsdale Multifamily Hsg. Rev. Series 1996A (Copperfield Hill Proj.),
7.20%, 12/1/16 953,328
Roseville Hsg. Fac. Rev. Refunding Bonds Series 1998 (College Properties Inc. Proj.),
2,820,000 5.60%, 10/1/13 2,609,713
</TABLE>
See accompanying notes to portfolios of investments on page 52.
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SIT MINNESOTA TAX-FREE INCOME FUND
SEPTEMBER 30, 1999
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (UNAUDITED)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
QUANTITY($) NAME OF ISSUER MARKET VALUE (1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
400,000 5.625%, 10/1/18 362,524
325,000 Sandstone Econ. Dev. Auth. Hsg. & Dev. Rev. Series 1994A (Family Apts. Proj.),
8.00%, 1/1/12 344,318
2,650,000 Scott Co. Hsg. Redev. Auth. Rev. Series 1999A (Highview Commons Proj.)
(GNMA collateralized), 6.20%, 1/20/41 2,698,151
1,250,000 Spring Lake Park Sr. Hsg. Rev. Series 1996 (Noah's Ark Affordable
Hsg. Inc.), 7.25%, 9/1/16 1,252,488
1,500,000 St. Anthony Hsg. Dev. Rev. Refunding (Autumn Woods Proj.) (Asset Gty.
insured), 6.875%, 7/1/22 1,575,720
500,000 St. Cloud Hsg. & Redev. Auth. Hsg. Rev. Refunding Series 1998 (Northway Manor
Apts. Section 8
Assisted Proj.), 5.15%, 12/1/14 479,630
St. Cloud Hsg. & Redev. Auth. Multifamily Hsg. Rev.:
1,050,000 Series 1993 (Germain Towers Proj.) (Section 8), 5.90%, 9/1/20 1,055,135
Series 1999A (Parkview Terrace Apts. Proj.) (Section 8):
249,000 5.00%, 6/1/09 240,646
929,000 5.50%, 6/1/18 880,162
St. Louis Park Multifamily Hsg. Rev. Refunding:
650,000 Series 1995 (FHA insured) (Knollwood Cmty. Hsg. Proj.), 6.15%, 12/1/16 669,689
500,000 Series 1998A (Park Ridge Apts. Proj.) (GNMA collateralized), 5.25%, 11/1/20 462,185
St. Paul Hsg. & Redev. Auth. Multifamily Refunding Rev.:
500,000 Series 1992 (Point of St. Paul Proj.)(FNMA backed), 6.60%, 10/1/12 522,440
200,000 Series 1995 (Sun Cliffe Apts. Proj.)(GNMA collateralized), 5.875%, 7/1/15 201,604
1,170,000 Series 1998 (Superior Street Cottages Proj.), Lyngblomsten, Inc., 6.00%, 3/15/24 1,118,052
St. Paul Port Authority Multifamily Hsg. Refunding (Jackson Towers Apts. Proj.):
3,410,000 Senior Series 1998-1A (GNMA collateralized), 6.95%, 4/20/33 3,761,162
408,000 Subordinate Series 1998-1B, 8.00%, 4/20/33 393,736
2,000,000 Virginia Hsg. & Redev. Auth. Governmental Hsg. Rev. Refunding Series 1998A
(Laurentian Manor Proj.), 5.75%, 5/1/32 1,912,200
990,000 Washington Co. Hsg. & Redev. Auth. Multifamily Hsg. Rev. Refunding Series 1994
(White Bear Lake Transitional Hsg. Proj.), 6.625%, 8/1/24 1,020,264
755,000 Washington Co. Hsg. & Redev. Auth. Governmental Hsg. Rev. Refunding
Series 1999A (Briar Pond Apts. Proj.) (GNMA collateralized), 5.50%, 2/20/14 725,578
1,385,000 White Bear Lake Multifamily Hsg. Rev. Refunding Series 1996A (Lake Sq. Partners Proj.)
(FHA insured), 6.10%, 2/1/26 1,416,495
770,000 Willmar Hsg. & Redev. Auth. Multifamily Rev. Series 1993 (Highland Apts)
(Section 8), 5.85%, 6/1/19 767,251
------------
100,639,756
------------
MUNICIPAL LEASE (3.5%)
585,000 Burnsville Solid Waste Rev. Series 1990 (Freeway Transfer Inc. Proj.), 9.00%, 4/1/10 (4) 612,132
250,000 Goodhue Co. Econ. Dev. Auth. Courts Building Proj. Lease Rev. Series 1997A, 5.75%, 2/1/13 248,140
125,000 Hennepin Co. Hsg. & Redev. Auth. Rev. Series 1993A (Community Provider Program),
5.70%, 8/1/13 126,187
655,000 Hibbing Econ. Dev. Auth. Public Proj. Rev. Series 1997 (Hibbing Lease
Obligations Proj.), 6.10%, 2/1/08 665,447
2,000,000 Minneapolis Special School Dist. #1, Certificates of Participation Series 1998B,
5.125%, 2/1/16 1,876,820
100,000 Rice Co. Certificates of Participation Series 1996A, 5.85%, 12/1/14 101,121
</TABLE>
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QUANTITY($) NAME OF ISSUER MARKET VALUE (1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
2,161,638 South Washington Co. (Cottage Grove) ISD No. 833 Certificates of Participation
Series 1999, 5.59%, 1/15/14 2,142,357
400,000 St. Cloud Certificates of Participation Series 1997, 5.90%, 12/1/17 395,136
1,673,342 St. Paul Lease Series 1998 (City Hall Annex Building), 5.71%, 10/1/18 1,646,869
------------
7,814,209
------------
PUBLIC FACILITIES (0.8%)
480,000 Eagan Ice Arena Gross Rev. Series 1998B, 5.50%, 4/1/19 450,010
1,245,000 St. Paul Recreational Fac. Gross Rev. Series 1996D, 5.875%, 6/1/18 1,261,658
------------
1,711,668
------------
SINGLE FAMILY MORTGAGE (9.6%)
Dakota County Hsg. & Redev. Auth. Single Family Mtg. Rev.:
485,000 Series 1994A (FNMA backed), 6.70%, 10/1/09 (4) 500,588
380,000 Series 1995 (FNMA & GNMA backed), 6.25%, 10/1/09 (4) 388,200
260,000 Dakota/Wash./Stearns Cos. Hsg. & Redev. Auth. Single Family Rev. Refunding
Series 1994A (FNMA backed), 6.50%, 9/1/10 (4) 267,103
875,000 Minneapolis Redev. Mtg. Rev. Series 1987A (Riverplace Proj.) (LOC Bk. of Tokyo),
7.10%, 1/1/20 876,601
2,100,000 Minneapolis Residual Interest Mtg. Rev. Series 1995 Convertible Capital
Appreciation Bonds, Zero Coupon, 7.00% Effective Yield on Purchase Date, 10/1/12 907,158
515,000 Minneapolis Single Family Mtg. Rev. Series 1995V (FNMA & GNMA backed), 6.25%, 4/1/22 524,723
Minneapolis/ St. Paul Hsg. Fin. Bd. Single Family Mtg. Rev.:
10,000 Series 1989A (GNMA backed), 7.65%, 12/1/00 (4) 10,136
70,000 Series 1994 (FNMA backed), 7.25%, 5/1/12 (4) 72,118
MN HFA Single Family Mtg. Rev.:
175,000 Series 1991A, 7.05%, 7/1/22 (4) 179,041
1,690,000 Series 1991A, 7.45%, 7/1/22 (4) 1,743,489
1,575,000 Series 1992B-1, 6.75%, 1/1/26 (4) 1,615,966
400,000 Series 1992E, 6.85%, 1/1/24 (4) 412,000
1,000,000 Series 1992F, 6.75%, 7/1/12 (4) 1,020,410
220,000 Series 1994C, 5.65%, 7/1/25 (4) 208,839
1,020,000 Series 1994F, 6.30%, 7/1/25 1,052,783
50,000 Series 1994G, 5.875%, 7/1/15 (4) 50,377
75,000 Series 1994K, 5.90%, 1/1/07 75,968
435,000 Series 1994L, 6.70%, 7/1/20 (4) 447,437
2,805,000 Series 1995M, 5.875%, 1/1/17 2,845,672
665,000 Series 1996D, 6.00%, 1/1/16 671,384
1,870,000 Series 1997D, 5.85%, 7/1/19, (4) 1,890,439
2,450,000 Series 1998C, 5.25%, 1/1/17 2,293,935
800,000 Series 1998F-1, 5.45%, 1/1/17 767,128
850,000 Series 1999B, 5.25%, 1/1/20 784,176
1,091,652 Moorhead Single Family Mtg. Rev. Refunding Series 1992B, 7.00%, 8/1/11 1,123,682
290,000 St. Paul Hsg. & Redev. Auth. Single Family Mtg. Rev. Refunding Series 1995
(FNMA backed), 6.00%, 9/1/10 294,138
</TABLE>
See accompanying notes to portfolios of investments on page 52.
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SIT MINNESOTA TAX-FREE INCOME FUND
SEPTEMBER 30, 1999
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (UNAUDITED)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
QUANTITY($) NAME OF ISSUER MARKET VALUE (1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
966,042 St. Paul Residual Interest Rev. Series 1995 Convertible Capital Appreciation
Bonds, Zero Coupon, 7.23% Effective Yield on Purchase Date, 9/1/11 408,645
------------
21,432,136
------------
UTILITY (0.3%)
400,000 Southern MN Muni. Power Agy. Pwr. Supply Sys. Rev. Refunding Series 1986A, 5.00%, 1/1/16 365,788
315,000 Western MN Muni. Power Agy. Rev. Refunding Series 1987A, 5.50%, 1/1/15 312,723
------------
678,511
------------
OTHER REVENUE BONDS (5.8%)
Columbia Heights Commercial Dev. Refunding Rev. Series 1999 (Columbia Park Properties -
Medical Clinic Proj.):
150,000 5.00%, 12/1/06 144,271
235,000 5.10%, 12/1/07 225,074
250,000 5.15%, 12/1/08 241,007
1,750,000 5.60%, 12/1/15 1,635,112
1,375,000 Commissioner of Iron Range Resources and Rehabilitation Gross Rev.
Series 1996 (Giants Ridge Rec. Area Proj.), 7.25%, 10/1/11 1,438,690
Minneapolis Cmty. Dev. Agy. Ltd. Tax Common Bond Fund:
100,000 Series 1993-5 (Winslow Printing), 6.125%, 12/1/06 (4) 101,069
170,000 Series 1997-1 (Halper Corrugated Box Mfg. Co.), 5.90%, 6/1/07 (4) 176,540
640,000 Series 1995-1 (Microtron, Inc.), 6.625%, 12/1/09 (4) 665,645
1,310,000 Series 1995-1 (Microtron, Inc.), 7.25%, 12/1/15 (4) 1,383,583
750,000 Series 1997-2 (Ambassador Press), 6.20%, 6/1/17 (4) 765,547
500,000 Series 1999-1A (Discount Steel), 5.25%, 6/1/19 (4) 455,920
2,000,000 Minneapolis Public Hsg. Auth. Series 1997 (General Credit Energy
Savings Proj.), 6.00%, 7/1/08 2,006,520
200,000 Renville Gross Rev. Golf Course Bond Series 1997, 6.50%, 2/1/19 201,430
300,000 Scott Co. Hsg. & Redev. Auth. Ltd. Special Benefits Tax Series 1997B
(River City Centre Proj.), (AMBAC insured), 5.45%, 2/1/20 292,068
2,790,000 St. Paul Hsg. & Redev. Sales Tax Rev. Refunding Series 1996 (FSA insured)
(Civic Center Proj.), 7.10%, 11/1/23 3,218,209
------------
12,950,685
------------
Total municipal bonds (cost: $222,407,414) 216,432,021
------------
CLOSED-END MUTUAL FUNDS (1.9%) (2)
171,900 Minnesota Municipal Term Trust 2001 1,729,744
103,500 Minnesota Municipal Term Trust II 2003 1,035,000
108,400 Voyageur Minnesota Municipal Income Fund II 1,483,725
------------
Total Closed-End Mutual Funds (cost: $4,538,326) 4,248,469
------------
SHORT-TERM SECURITIES (0.4%) (2)
871,122 Federated Minnesota Municipal Cash Fund, 3.17% 871,122
------------
(cost: $871,122)
Total investments in securities (cost: $227,816,862) (6) $221,551,612
------------
</TABLE>
See accompanying notes to portfolios of investments on page 52.
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[PHOTO] SIT BOND FUND REVIEW
SIX MONTHS ENDED SEPTEMBER 30, 1999
-----------------------------------------------------------------------
MICHAEL C. BRILLEY, SENIOR PORTFOLIO MANAGER
BRYCE A. DOTY, CFA, SENIOR PORTFOLIO MANAGER
The Sit Bond Fund provided investors with a -0.3% return for the six months
ended September 1999, compared to a -0.2% return for the Lehman Aggregate Bond
Index. The Fund's average annual total return since inception of +6.0% trailed
the +6.2% return of the Lehman Aggregate Bond Index and exceeded the +5.3%
return of the Lipper Intermediate Investment Grade Bond Fund Average.
U.S. Treasury yields finally stabilized during the third quarter after rising
significantly in the second quarter. For the past six-month period, prices
declined significantly in the Fund's longer duration collateralized mortgage
obligation, corporate, and U.S. Treasury holdings. The increase in interest
rates, however, slowed the rate of prepayments in the mortgage pass-through
sector, which raised the yield that the Fund earned on its mortgage holdings. As
a result, the pass-through holdings provided the highest return in the Fund.
Activity in the Fund involved two significant sector shifts over the past six
months. Early in the period, the Fund reduced corporates along with a smaller
reduction in asset- and mortgage-backed securities. This more conservative
positioning was due to expected weakness in most sectors because of Y2K concerns
and expectations of a flight to quality similar to last year. September marked
the end of five months of weakness for most sectors. We believe that investor
anticipation of illiquidity at year-end caused many sectors to underperform
prematurely. As a result, we believe the Fund has reaped the majority of the
benefits that could be obtained from the sector shift implemented in the second
quarter. Therefore, the Fund has begun to reverse the sector shift by
selectively purchasing corporate and asset-backed securities in order to beat
the rush of investors with pent-up demand for these sectors.
We expect interest rates to remain near the higher end of their recent range
as investors assess the likelihood of a third increase in short-term interest
rates by the Federal Reserve. At its October 5th meeting, the Fed held rates
steady, but announced that a tightening bias had been adopted. As a result,
economic data released between now and the next Fed meeting on November 16th
will be scrutinized carefully. We intend to keep the Fund's duration slightly
shorter than 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.
PORTFOLIO SUMMARY
Net Asset Value 9/30/99: $ 9.64 Per Share
3/31/99: $ 9.95 Per Share
Total Net Assets: $13.4 Million
30-day SEC Yield: 5.52%
12-Month Distribution Rate: 5.57%
Average Maturity: 15.5 Years
Effective Duration: 4.9 Years(1)
(1) Effective duration is a measure which reflects estimated price sensitivity
to a given change in interest rates. For example, for an interest rate change of
1.0%, a portfolio with a duration of 5 years would be expected to experience a
price change of 5%. Effective duration is based on current interest rates and
the Adviser's assumptions regarding the expected average life of individual
securities held in the portfolio.
PORTFOLIO STRUCTURE
(% OF TOTAL NET ASSETS)
U.S. Treasury 36.8
Mortgage Pass Through 25.6
Corporate Bonds & Notes 14.3
Asset-Backed Securities 11.3
Closed-End Mutual Funds 4.2
Collateralized Mortgage Obligations 4.0
Federal Agency 0.8
Cash & Other Net Assets 3.0
48
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AVERAGE ANNUAL TOTAL RETURNS*
LIPPER INTER.
SIT LEHMAN INVESTMENT
BOND AGGREGATE GRADE BOND
FUND BOND INDEX FUND AVG.
---- ---------- -------------
3 Month** 0.40% 0.68% 0.49%
6 Month** -0.26 -0.21 N/A
1 Year -0.22 -0.37 -1.01
3 Year 6.25 6.82 5.87
5 Year 7.40 7.84 6.90
Inception 5.97 6.17 5.33
(12/1/93)
CUMULATIVE TOTAL RETURNS*
LIPPER INTER.
SIT LEHMAN INVESTMENT
BOND AGGREGATE GRADE BOND
FUND BOND INDEX FUND AVG.
---- ---------- -------------
1 Year -0.22% -0.37% -1.01%
3 Year 19.95 21.89 18.66
5 Year 42.90 45.85 39.58
Inception 40.26 41.83 35.36
(12/1/93)
* As of 9/30/99. **Not annualized.
- --------------------------------------------------------------------------------
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
[GRAPH]
The sum of $10,000 invested at inception (12/1/93) and held until 9/30/99 would
have grown to $14,026 in the Fund or $14,183 in the Lehman Aggregate Bond Index
assuming reinvestment of all dividends and capital gains.
QUALITY RATINGS
(% OF TOTAL NET ASSETS)
LOWER OF MOODY'S
OR S&P RATING USED.
[PIE CHART]
Government
Agency Backed
Securities 26.4%
U.S. Government 36.8%
AAA 13.3%
AA 1.4%
A 9.4%
BBB 9.7%
Cash & Other
Net Assets 3.0%
49
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<CAPTION>
SIT BOND FUND
PORTFOLIO OF INVESTMENTS - SEPTEMBER 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------------------------
QUANTITY($) NAME OF ISSUER MARKET VALUE(1)
- --------------------------------------------------------------------------------------------------
<S> <C>
FEDERAL AGENCY (0.8%) (2)
100,000 Tennessee Valley Auth.,
Series 1989-G, 8.625%, 11/15/29 $105,875
------------------
(cost: $106,150)
U.S. GOVERNMENT SECURITIES (36.8%) (2)
U.S. Treasury Note:
1,150,000 5.75%, 8/15/03 1,145,975
550,000 6.125%, 8/15/07 550,451
1,000,000 U.S. Treasury Bond, 6.125%, 8/15/29 1,009,590
U.S. Treasury Strip:
1,400,000 5.61% Effective Yield, 5/15/04 1,066,198
1,650,000 5.95% Effective Yield, 11/15/09 870,342
289,143 U.S.Treasury Inflation Index Bond,
3.375%, 1/15/07 276,039
------------------
Total U.S. government securities 4,918,595
------------------
(cost: $4,954,005)
ASSET-BACKED SECURITIES (11.3%) (2)
Advanta Mortgage Loan Trust:
200,000 1995-3 A5, 7.37%, 2/25/27 199,792
250,000 1996-1 A7, 7.07%, 3/25/27 245,375
200,000 Conseco Finance Home Equity
Series 1999-F A3, 6.97%, 10/15/30 200,000
249,998 ContiMortgage Home Equity Loan Trust
Series 1996-1 A7, 7.00%, 3/15/27 242,788
100,000 EQCC Home Equity Loan Trust
Series 1996-1, 6.93%, 3/15/27 96,890
Green Tree Financial Corp.:
200,000 1999-1, A5, 6.11%, 9/1/23 175,404
75,000 1995-5, 7.25%, 9/15/25 74,655
75,000 1997-4, 7.03%, 2/15/29 74,692
125,000 1999-E A3, 7.18%, 8/30/30 125,547
75,000 Money Store Home Equity Mortgage,
7.265%, 7/15/38 75,204
------------------
Total asset-backed securities 1,510,347
------------------
(cost: $1,533,962)
CORPORATE BONDS & NOTES (14.3%) (2)
American Airlines:
75,000 1999-1 A2, 7.024%, 10/15/09 75,000
75,000 1999-1 B, 7.324%, 10/15/09 75,000
100,000 Burlington North Santa Fe,
Series 1999-2, 7.57%, 1/2/21 99,800
200,000 CIT Group, Inc., 7.125%, 10/15/04 200,536
Continental Airlines:
100,000 1999-1B, 6.795%, 8/2/18 91,845
99,957 1999-1A, 6.545%, 2/2/19 92,345
150,000 First Industrial LP, 7.15%, 5/15/27 147,375
200,000 Ford Motor Credit Corp., 5.75%, 2/23/04 191,490
200,000 Franchise Fin. Corp., 8.25%, 10/30/03 199,500
125,000 Ryder System, Inc., 8.75%, 3/15/17 128,438
250,000 Service Corp. Int'l., 7.375%, 4/15/04 242,812
10,000 Toys R Us, Inc., 8.25%, 2/1/17 10,063
50,000 Union Carbide Corp., 8.75%, 8/1/22 52,813
325,000 Union Tank Car Co., 6.57%, 1/2/14 310,151
------------------
Total corporate bonds & notes 1,917,168
------------------
(cost: $1,968,029)
MORTGAGE PASS-THROUGH SECURITIES (25.6%) (2)(3)
Federal Home Loan Mortgage Corp.:
174,419 9.00%, 12/1/17 182,997
25,324 10.25%, 9/1/09 27,331
29,091 10.75%, 3/1/11 31,721
Federal National Mortgage Association:
216,080 9.00%, 12/1/19 225,475
217,009 9.75%, 1/1/13 235,861
199,762 10.25%, 8/15/13 220,112
80,209 11.00%, 11/1/20 88,146
Government National Mortgage Association:
6,895 8.75%, 11/15/01 7,014
49,904 9.00%, 10/15/06 52,515
56,685 9.00%, 9/15/08 59,216
100,026 9.00%, 4/15/09 104,477
55,807 9.00%, 4/15/09 58,292
106,072 9.00%, 4/15/09 110,803
6,719 9.00%, 8/15/11 7,010
131,737 9.00%, 01/15/17 139,764
51,019 9.00%, 8/20/19 52,756
99,316 9.00%, 12/15/19 104,070
44,211 9.00%, 6/20/21 45,712
55,251 9.00%, 12/20/21 57,131
9,395 9.25%, 5/15/01 9,829
47,551 9.25%, 5/15/10 49,614
14,062 9.50%, 3/15/03 14,813
</TABLE>
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QUANTITY($) NAME OF ISSUER MARKET VALUE(1)
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
74,645 9.50%, 11/15/05 77,561
68,421 9.50%, 12/15/09 73,272
47,497 9.50%, 2/15/11 49,616
100,990 9.50%, 5/20/16 106,533
57,196 9.50%, 9/15/17 60,994
184,137 9.50%, 12/15/17 198,264
67,285 9.50%, 5/20/18 70,961
247,309 9.50%, 7/20/18 260,837
107,435 9.50%, 7/20/18 113,301
69,072 9.50%, 9/20/18 72,835
136,459 9.50%, 12/15/19 146,265
9,664 9.50%, 4/15/20 10,304
14,777 9.50%, 9/15/20 15,746
27,494 9.50%, 11/15/21 29,520
2,363 9.75%, 8/15/02 2,491
18,378 10.00%, 8/15/02 19,401
44,585 10.00%, 6/15/19 47,987
5,504 10.25%, 4/15/01 5,758
3,803 10.25%, 4/15/01 3,979
5,396 10.50%, 7/15/00 5,433
14,691 10.75%, 1/15/01 15,371
7,061 11.25%, 10/15/00 7,110
9,873 11.75%, 7/15/00 9,940
8,168 11.75%, 7/15/01 8,548
Municipal (GNMA collateralized):
100,000 Aurora, CO, Multifamily Series 1999A
6.75%, 7/1/01 100,074
24,000 Bernalillo Multifamily Series 1998A,
7.50%, 9/20/20 23,624
------------------
Total mortgage pass-through securities 3,420,384
------------------
(cost: $3,446,852)
COLLATERALIZED MORTGAGE OBLIGATIONS (4.0%) (2)
217,215 PNC Mortgage Securities Corp.
Series 1998-6 4A, 6.75%, 8/25/13 214,552
350,000 Norwest Asset Securities Corp.
Series 1998-19 2A12, 6.75%, 7/25/28 324,128
------------------
Total collateralized mortgage obligations 538,680
------------------
(cost: $562,404)
CLOSED-END MUTUAL FUNDS (4.2%) (2)
10,000 American Select Portfolio 118,125
12,599 American Strategic Income Portfolio (I) 141,739
16,390 American Strategic Income Portfolio (II) 187,461
10,309 American Strategic Income Portfolio (III) 114,043
------------------
Total closed-end mutual funds 561,368
------------------
(cost: $556,706)
SHORT-TERM SECURITIES (7.9%) (2)
500,000 American Express, 5.40%, 10/5/99 499,700
400,000 General Electric Cap. Corp., 5.31%, 10/4/99 399,823
157,629 Dreyfus Gov't Cash Mgmt. Fund, 4.93% 157,629
------------------
Total short term securities 1,057,152
------------------
(cost: $1,057,152)
Total investments in securities
(cost: $14,185,260) (6) $14,029,569
==================
</TABLE>
See accompanying notes to portfolios of investments on page 52.
51
<PAGE>
SIT MUTUAL FUNDS
SEPTEMBER 30, 1999
- --------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS (UNAUDITED)
(1) Securities are valued by procedures described in note 1 to the
financial statements.
(2) Percentage figures indicate percentage of total net assets.
(3) At September 30, 1999, 17.7% of net assets in the U.S. Government
Securities Fund and 3.6% of net assets in the Bond Fund was invested
in GNMA mobile home pass-through securities.
(4) Securities the income from which is treated as a tax preference that
is included in alternative minimum taxable income for purposes of
computing federal alternative minimum tax (AMT). At September 30,
1999, approximately 13.0% of net assets in the Minnesota Tax-Free
Income Fund was invested in such securities.
(5) Commercial paper sold within terms of a private placement
memorandum, exempt from registration under Section 4(2) of the
Securities Act of 1933, as amended, and may be sold only to dealers
in that program or other "accredited investors." This security has
been determined to be liquid under the guidelines established by the
Board of Directors.
(6) At September 30, 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 $55,505,703 $ 162,443,808 $ 14,185,260
=========== ============= =============
Unrealized appreciation (depreciation) on investments:
Gross unrealized appreciation -- $ 440,845 $ 50,510
Gross unrealized depreciation -- (1,668,283) (206,201)
----------- ------------- -------------
Net unrealized appreciation (depreciation) -- $ (1,227,438) $ (155,691)
=========== ============= =============
</TABLE>
<TABLE>
<CAPTION>
MINNESOTA
TAX-FREE TAX-FREE
INCOME INCOME
FUND FUND
------------- -------------
<S> <C> <C>
Cost for federal income tax purposes $ 799,062,165 $ 227,816,862
============= =============
Unrealized appreciation (depreciation) on investments:
Gross unrealized appreciation $ 6,700,683 $ 1,646,570
Gross unrealized depreciation (32,863,255) (7,911,820)
------------- -------------
Net unrealized appreciation (depreciation) $ (26,162,572) $ (6,265,250)
============= =============
</TABLE>
52
<PAGE>
SIT MUTUAL FUNDS
SEPTEMBER 30, 1999 [LOGO]
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES (UNAUDITED)
<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 ............ $ 55,505,703 $162,443,808 $ 14,185,260 $799,062,165 $227,816,862
============ ============ ============ ============ ============
Investments in securities, at
market value - see
accompanying schedules for
detail ..................... $ 55,505,703 $161,216,370 $ 14,029,569 $772,899,593 $221,551,612
Cash in bank on demand
deposit .................... 67,080 7,274 212,912 10,971 --
Accrued interest
receivable ................. -- 1,191,256 93,648 12,106,823 4,000,363
Receivable for investment
securities sold ............ -- -- -- 3,134,783 --
Other
receivables ................ -- 274,138 912 -- 47,724
Receivable for Fund shares
sold ....................... 478,868 45,892 4,310 396,067 487,420
------------ ------------ ------------ ------------ ------------
Total assets ..... 56,051,651 162,734,930 14,341,351 788,548,237 226,087,119
------------ ------------ ------------ ------------ ------------
LIABILITIES
Disbursements in excess of
cash balances .............. -- -- -- -- 26,949
Payable for investment securities
purchased .................. -- 450,214 954,606 -- 2,732,288
Payable for Fund shares
redeemed ................... 1,012,379 211,928 -- 1,943,084 676,921
Cash portion of dividends
payable to shareholders .... 64,209 41,498 531 476,292 149,279
Other
payables ................... -- -- -- 6,425 --
Accrued investment management
and advisory services fee .. 26,071 106,687 8,401 455,124 149,455
------------ ------------ ------------ ------------ ------------
Total liabilities 1,102,659 810,327 963,538 2,880,925 3,734,892
------------ ------------ ------------ ------------ ------------
Net assets applicable to
outstanding capital stock .. $ 54,948,992 $161,924,603 $ 13,377,813 $785,667,312 $222,352,227
============ ============ ============ ============ ============
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 ......... 54,952,061 15,683,120 1,388,299 79,834,477 22,108,546
============ ============ ============ ============ ============
Net asset value per share of
outstanding capital stock .. $ 1.00 $ 10.32 $ 9.64 $ 9.84 $ 10.06
============ ============ ============ ============ ============
</TABLE>
See accompanying notes to financial statements on pages 58-61.
53
<PAGE>
SIT MUTUAL FUNDS
SEPTEMBER 30, 1999
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
U.S. MINNESOTA
MONEY GOVERNMENT TAX-FREE TAX-FREE
MARKET SECURITIES BOND INCOME INCOME
FUND FUND FUND FUND FUND
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
INCOME:
Interest ............................ $ 1,670,770 $ 5,067,898 $ 405,798 $ 23,590,816 $ 7,244,857
------------ ------------ ------------ ------------ ------------
Total income .............. 1,670,770 5,067,898 405,798 23,590,816 7,244,857
------------ ------------ ------------ ------------ ------------
EXPENSES (NOTE 3):
Investment management and
advisory services fee .......... 249,516 702,746 49,833 3,333,284 1,011,050
Less fees and expenses absorbed
by investment adviser ..... (83,364) (50,137) -- (457,294) --
------------ ------------ ------------ ------------ ------------
Total net expenses ............. 166,152 652,609 49,833 2,875,991 1,011,050
------------ ------------ ------------ ------------ ------------
Net investment income .......... 1,504,618 4,415,289 355,965 20,714,825 6,233,807
------------ ------------ ------------ ------------ ------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS :
Net realized gain (loss) (note 2) ... -- (2,199,681) (250,208) (625,080) (514,475)
Net change in unrealized appreciation
or (depreciation) on investments -- (728,379) (147,722) (43,780,816) (11,415,359)
------------ ------------ ------------ ------------ ------------
Net gain (loss) on investments . -- (2,928,060) (397,930) (44,405,896) (11,929,834)
------------ ------------ ------------ ------------ ------------
Net increase (decrease) in net assets resulting
from operations .......................... $ 1,504,618 $ 1,487,229 ($ 41,965) ($23,691,071) ($ 5,696,027)
============ ============ ============ ============ ============
</TABLE>
See accompanying notes to financial statements on pages 58-61.
54
<PAGE>
[LOGO]
- --------------------------------------------------------------------------------
This page has been left blank intentionally.
55
<PAGE>
SIT MUTUAL FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
MONEY MARKET U.S. GOVERNMENT
FUND SECURITIES FUND
------------------------------- ----------------------------------
SIX MONTHS SIX MONTHS
ENDED ENDED
SEPTEMBER 30, YEAR ENDED SEPTEMBER 30, YEAR ENDED
1999 MARCH 31, 1999 MARCH 31,
(UNAUDITED) 1999 (UNAUDITED) 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income ........................ $ 1,504,618 $ 2,054,939 $ 4,415,289 $ 6,473,904
Net realized gain (loss) on investments ...... -- -- (2,199,681) 847,820
Net change in unrealized appreciation
(depreciation) of investments ............. -- -- (728,379) (1,417,691)
------------- ------------- ------------- -------------
Net increase in net assets resulting from
operations ............................. 1,504,618 2,054,939 1,487,229 5,904,033
------------- ------------- ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ........................ (1,504,618) (2,054,939) (4,415,289) (6,473,904)
Net realized gains on investments ............ -- -- -- (1,378,000)
------------- ------------- ------------- -------------
Total distributions ....................... (1,504,618) (2,054,939) (4,415,289) (7,851,904)
------------- ------------- ------------- -------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold .................... 359,035,738 521,895,983 36,387,208 98,796,377
Reinvested distributions ..................... 913,882 1,723,536 4,152,570 7,221,219
Payments for shares redeemed ................. (366,442,195) (505,288,726) (35,017,342) (48,607,714)
------------- ------------- ------------- -------------
Increase (decrease) in net assets from
capital share transactions ............. (6,492,575) 18,330,793 5,522,436 57,409,882
------------- ------------- ------------- -------------
Total increase (decrease) in net assets (6,492,575) 18,330,793 2,594,376 55,462,011
NET ASSETS
Beginning of period .......................... 61,441,567 43,110,774 159,330,227 103,868,216
------------- ------------- ------------- -------------
End of period ................................ $ 54,948,992 $ 61,441,567 $ 161,924,603 $ 159,330,227
============= ============= ============= =============
NET ASSETS CONSIST OF:
Capital (par value and paid-in surplus) ...... $ 54,948,987 $ 61,441,567 $ 165,649,410 $ 160,126,974
Undistributed (distributions in excess of) net
investment income ......................... -- -- -- --
Accumulated net realized gain (loss) from
security transactions ..................... -- -- (2,497,368) (297,687)
Unrealized appreciation (depreciation)
on investments ............................ -- -- (1,227,439) (499,060)
------------- ------------- ------------- -------------
$ 54,948,987 $ 61,441,567 $ 161,924,603 $ 159,330,227
============= ============= ============= =============
CAPITAL TRANSACTIONS IN SHARES:
Sold ......................................... 359,035,783 521,895,983 3,495,641 9,272,214
Reinvested distributions ..................... 913,882 1,723,536 400,372 677,811
Redeemed ..................................... (366,442,190) (505,288,726) (3,369,607) (4,561,161)
------------- ------------- ------------- -------------
Net increase (decrease) ........................... (6,492,525) 18,330,793 526,406 5,388,864
============= ============= ============= =============
</TABLE>
56
<PAGE>
[LOGO]
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BOND TAX-FREE MINNESOTA TAX-FREE
FUND INCOME FUND INCOME FUND
- ------------------------------- ------------------------------- -------------------------------
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED ENDED ENDED
SEPTEMBER 30, YEAR ENDED SEPTEMBER 30, YEAR ENDED SEPTEMBER 30, YEAR ENDED
1999 MARCH 31, 1999 MARCH 31, 1999 MARCH 31,
(UNAUDITED) 1999 (UNAUDITED) 1999 (UNAUDITED) 1999
- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
$ 355,965 $ 603,052 $ 20,714,825 $ 33,637,426 $ 6,233,807 $ 9,666,218
(250,208) 92,909 (625,080) 1,808,557 (514,475) 56,447
(147,722) (123,900) (43,780,816) (2,343,717) (11,415,359) 642,985
- ------------- ------------- ------------- ------------- ------------- -------------
(41,965) 572,061 (23,691,071) 33,102,266 (5,696,027) 10,365,650
- ------------- ------------- ------------- ------------- ------------- -------------
(355,965) (603,052) (20,714,825) (33,644,852) (6,233,807) (9,675,296)
-- (76,000) -- (3,365,000) -- --
- ------------- ------------- ------------- ------------- ------------- -------------
(355,965) (679,052) (20,714,825) (37,009,852) (6,233,807) (9,675,296)
- ------------- ------------- ------------- ------------- ------------- -------------
2,229,975 3,764,226 183,864,011 615,154,811 83,654,066 214,887,144
345,641 648,528 17,834,706 30,867,685 5,378,575 8,025,552
(719,554) (3,092,333) (266,978,688) (266,340,384) (126,025,355) (95,961,945)
- ------------- ------------- ------------- ------------- ------------- -------------
1,856,062 1,320,421 (65,279,971) 379,682,112 (36,992,714) 126,950,751
- ------------- ------------- ------------- ------------- ------------- -------------
1,458,132 1,213,430 (109,685,867) 375,774,526 (48,922,548) 127,641,105
11,919,681 10,706,251 895,353,179 519,578,653 271,274,775 143,633,670
- ------------- ------------- ------------- ------------- ------------- -------------
$ 13,377,813 $ 11,919,681 $ 785,667,312 $ 895,353,179 $ 222,352,227 $ 271,274,775
============= ============= ============= ============= ============= =============
$ 13,782,118 $ 11,926,056 $ 812,522,118 $ 877,802,089 $ 229,167,730 $ 266,160,444
-- -- -- -- -- --
(248,614) 1,594 (692,234) (67,154) (550,253) (35,778)
(155,691) (7,969) (26,162,572) 17,618,244 (6,265,250) 5,150,109
- ------------- ------------- ------------- ------------- ------------- -------------
$ 13,377,813 $ 11,919,681 $ 785,667,312 $ 895,353,179 $ 222,352,227 $ 271,274,775
============= ============= ============= ============= ============= =============
227,529 373,409 18,078,074 58,814,075 8,025,352 20,329,590
35,505 64,250 1,765,578 2,951,347 521,387 759,723
(73,144) (306,375) (26,218,264) (25,488,804) (12,147,495) (9,077,623)
- ------------- ------------- ------------- ------------- ------------- -------------
189,890 131,284 (6,374,612) 36,276,618 (3,600,756) 12,011,690
============= ============= ============= ============= ============= =============
</TABLE>
See accompanying notes to financial statements on pages 58-61.
57
<PAGE>
SIT MUTUAL FUNDS
SIX MONTHS ENDED SEPTEMBER 30, 1999
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Sit Mutual Funds (the Funds) are 100% no-load funds, and are registered
under the Investment Company Act of 1940 (as amended) as diversified (except
Minnesota Tax-Free Income Fund which is non-diversified), open-end management
investment companies, or series thereof. The Sit Bond Fund, Sit Minnesota
Tax-Free Income Fund, and the Sit Tax-Free Income Fund are series funds of Sit
Mutual Funds II, Inc. This report covers the bond funds of the Sit Mutual Funds.
The investment objective for each Fund is as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
FUND INVESTMENT OBJECTIVE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
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.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
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.
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.
Delivery and payment for securities which have been purchased by the Minnesota
Tax-Free Income, Tax-Free Income, and U.S. Government Securities Funds on a
forward commitment or when-issued basis can take place a month or more after the
transaction date. During this period, such securities are subject to market
fluctuations and may increase or decrease in value prior to delivery, and each
Fund maintains, in a segregated account with its custodian, assets with a market
value equal to the amount of its purchase commitments. As of September 30, 1999,
the Minnesota Tax-Free Income, and Tax-Free Income Funds had entered into
when-issued or forward commitments of $2,732,288 and $656,948, respectively.
58
<PAGE>
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- --------------------------------------------------------------------------------
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 $35,778 at March 31, 1999, which, if not offset by subsequent
capital gains, will begin to expire in 2004. It is unlikely the Board of
Directors will authorize a distribution of any net realized gains until the
available capital loss carryover is offset or expires.
DISTRIBUTIONS
Distributions to shareholders are recorded as of the close of business on the
record date. Such distributions are payable in cash or reinvested in additional
shares of the Funds' capital stock. Distributions from net investment income are
declared daily and paid monthly for the Funds. Distributions from net realized
gains, if any, will be made annually for each of the Funds.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make certain estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported results. Actual results could differ from those
estimates.
NOTE 2 - INVESTMENT SECURITY TRANSACTIONS
Purchases of and proceeds from sales and maturities of investment securities,
other than short-term securities, for the period ended September 30, 1999, were
as follows:
Purchases ($) Proceeds ($)
------------- ------------
U.S. Government Securities Fund 110,477,424 102,546,202
Bond Fund 9,183,659 6,653,818
Tax-Free Income Fund 146,228,780 166,937,219
Minnesota Tax-Free Income Fund 36,063,527 60,390,564
For Money Market Fund during the period ended September 30, 1999 purchases of
and proceeds from sales and maturities of investment securities aggregated
$1,101,733,824 and $1,094,259,000, respectively.
59
<PAGE>
SIT MUTUAL FUNDS
SIX MONTHS ENDED SEPTEMBER 30, 1999
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 3 - EXPENSES
INVESTMENT ADVISER
The Funds each have entered into an investment management agreement with Sit
Investment Associates Inc. (SIA), under which SIA manages the Fund's assets and
provides research, statistical and advisory services, and pays related office
rental, executive expenses and executive salaries. SIA also is obligated to pay
all of 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.
60
<PAGE>
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- --------------------------------------------------------------------------------
TRANSACTIONS WITH AFFILIATES
The investment adviser, affiliates of the investment adviser, directors and
officers of the Funds as a whole owned the following shares as of September 30,
1999:
% Shares
Shares Outstanding
------ -----------
Money Market Fund 13,737,178 25.0
U.S. Government Securities Fund 455,455 2.9
Bond Fund 152,415 11.0
Tax-Free Income Fund 1,731,127 2.2
Minnesota Tax-Free Income Fund 874,827 4.0
NOTE 4 - FINANCIAL HIGHLIGHTS
Per share data for a share of capital stock outstanding during the period and
selected supplemental and ratio information for each period(s), are indicated as
follows:
61
<PAGE>
SIT MONEY MARKET FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Six months
ended
September 30, Years Ended March 31,
1999 --------------------------------------------------------
(Unaudited) 1999 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<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 0.02 0.05 0.05 0.05 0.05
- ------------------------------------------------------------------------------------------------------------------------------------
Total from operations 0.02 0.05 0.05 0.05 0.05
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (0.02) (0.05) (0.05) (0.05) (0.05)
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE:
End of period $1.00 $1.00 $1.00 $1.00 $1.00
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return (1) 2.32% 4.99% 5.29% 5.04% 5.44%
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000's omitted) $54,949 $61,442 $43,111 $32,668 $21,260
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 4.53% (2) 4.84% (2) 5.12% (2) 4.93% (2) 5.35% (2)
</TABLE>
- --------------
(1) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value.
(2) Percentages for the period ended September 30, 1999 are adjusted to an
annual rate. Total Fund expenses are contractually limited to .80% of
average daily net assets for the first $50 million in Fund net assets and
.60% of average daily net assets for Fund net assets exceeding $50
million. However, during the periods ended September 30, 1999 and March
31, 1999, 1998, 1997, and 1996, the investment adviser voluntarily
absorbed $83,364 $126,552, $98,857, $78,042, and $66,862, 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 .75%, .80%, .80%, .80%, and .80% for each of these periods and
the ratio of net investment income to average daily net assets would have
been 4.28%, 4.54%, 4.82%, 4.63%, and 5.05%, respectively.
62
<PAGE>
SIT U.S. GOVERNMENT SECURITIES FUND [LOGO]
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Six months
ended
September 30, Years Ended March 31,
1999 -------------------------------------------------------
(Unaudited) 1999 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE:
Beginning of period $10.51 $10.63 $10.28 $10.47 $10.28
- ------------------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income .28 .54 .63 .65 .70
Net realized and unrealized gains
(losses) on investments (.19) (.01) .35 (.19) .19
- ------------------------------------------------------------------------------------------------------------------------------------
Total from operations .09 .53 .98 .46 .89
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (.28) (.54) (.63) (.65) (.70)
From realized gains -- (.11) -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (.28) (.65) (.63) (.65) (.70)
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE:
End of period $10.32 $10.51 $10.63 $10.28 $10.47
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return (1) 0.90% 5.05% 9.70% 4.55% 8.87%
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000's omitted) $161,925 $159,330 $103,868 $73,394 $52,450
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 5.41% (2) 5.06% (2) 5.93% (2) 6.30% (2) 6.72% (2)
Portfolio turnover rate (excluding short-term securities) 66.46% 86.16% 50.67% 85.21% 51.37%
</TABLE>
- --------------
(1) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value.
(2) Percentages for the period ended September 30, 1999 are adjusted to an
annual rate. Total Fund expenses are contractually limited to 1.00% of
average daily net assets for the first $50 million in Fund net assets and
.80% of average daily net assets exceeding $50 million. However, during
the periods ended September 30, 1999 and March 31, 1999, 1998, 1997, and
1996, the investment adviser voluntarily absorbed $50,137, $100,000,
$100,000, $99,999, and $88,625 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 .86%, .87%, .91%, .97%, and 1.00%
for these periods and the ratio of net investment income to average daily
net assets would have been 5.35%, 4.99%, 5.82%, 6.13%, and 6.52%,
respectively.
63
<PAGE>
SIT TAX-FREE INCOME FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Six months
ended
September 30, Years Ended March 31,
1999 -----------------------------------------------------
(Unaudited) 1999 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE:
Beginning of period $10.39 $10.41 $9.98 $9.88 $9.70
- ------------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income .25 .51 .54 .56 .56
Net realized and unrealized gains
(losses) on investments (.55) .03 .50 .10 .18
- ------------------------------------------------------------------------------------------------------------------------------
Total from operations (.30) .54 1.04 .66 .74
- ------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (.25) (.51) (.54) (.56) (.56)
From realized gains -- (.05) (.07) -- --
- ------------------------------------------------------------------------------------------------------------------------------
Total distributions (.25) (.56) (.61) (.56) (.56)
- ------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE:
End of period $9.84 $10.39 $10.41 $9.98 $9.88
- ------------------------------------------------------------------------------------------------------------------------------
Total investment return (1) (2.90%) 5.30% 10.69% 6.82% 7.73%
- ------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000's omitted) $785,667 $895,353 $519,579 $342,540 $279,769
RATIOS:
Expenses to average daily net assets 0.69% (2) 0.71% (2) 0.76% (2) 0.79% (2) 0.80% (2)
Net investment income to average daily net assets 4.95% (2) 4.90% (2) 5.29% (2) 5.63% (2) 5.65% (2)
Portfolio turnover rate (excluding short-term securities) 21.15% 14.27% 21.40% 25.34% 25.50%
</TABLE>
- --------------
(1) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value.
(2) Percentages for the period ended September 30, 1999 are adjusted to an
annual rate. Total Fund expenses are contractually limited to .80% of
average daily net assets. However, during the periods ended September 30,
1999 and March 31, 1999, 1998, 1997, and 1996, the investment adviser
voluntarily absorbed $457,294, $621,348, $171,504, $46,819, and $15,540,
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 4.84%, 4.81%, 5.25%, 5.62%,
and 5.65%, respectively.
64
<PAGE>
SIT MINNESOTA TAX-FREE INCOME FUND [LOGO]
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Six months
ended
September 30, Years Ended March 31,
1999 --------------------------------------------
(Unaudited) 1999 1998 1997 1996
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE:
Beginning of period $10.55 $10.49 $10.14 $10.09 $9.96
- -------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income .26 .51 .55 .57 .57
Net realized and unrealized gains
(losses) on investments (.49) .06 .35 .05 .13
- -------------------------------------------------------------------------------------------------------------------
Total from operations (.23) .57 .90 .62 .70
- -------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (.26) (.51) (.55) (.57) (.57)
- -------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE:
End of period $10.06 $10.55 $10.49 $10.14 $10.09
- -------------------------------------------------------------------------------------------------------------------
Total investment return (1) (2.25%) 5.58% 9.07% 6.26% 7.12%
- -------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000's omitted) $222,352 $271,275 $143,634 $93,976 $62,980
RATIOS:
Expenses to average daily net assets 0.80% (2) 0.80% 0.80% 0.80% 0.80%
Net investment income to average daily net assets 4.91% (2) 4.83% 5.32% 5.56% 5.62%
Portfolio turnover rate (excluding short-term securities) 14.85% 13.67% 17.58% 17.16% 15.85%
</TABLE>
- --------------
(1) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value.
(2) Adjusted to an annual rate.
65
<PAGE>
SIT BOND FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Six months
ended
September 30, Years Ended March 31,
1999 ---------------------------------------
(Unaudited) 1999 1998 1997 1996
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE:
Beginning of period $9.95 $10.03 $9.62 $9.83 $9.48
- --------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income .28 .54 .63 .64 .64
Net realized and unrealized gains
(losses) on investments (.31) (.02) .43 (.14) .35
- --------------------------------------------------------------------------------------------------------------
Total from operations (.03) .52 1.06 .50 .99
- --------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (.28) (.54) (.63) (.64) (.64)
From realized gains -- (.06) (.02) (.07) --
- --------------------------------------------------------------------------------------------------------------
Total distributions (.28) (.60) (.65) (.71) (.64)
- --------------------------------------------------------------------------------------------------------------
NET ASSET VALUE:
End of period $9.64 $9.95 $10.03 $9.62 $9.83
- --------------------------------------------------------------------------------------------------------------
Total investment return (1) (0.26%) 5.30% 11.22% 5.21% 10.57%
- --------------------------------------------------------------------------------------------------------------
Net assets at end of period (000's omitted) $13,378 $11,920 $10,706 $6,403 $5,222
RATIOS:
Expenses to average daily net assets 0.80% (2) 0.80% 0.80% 0.80% 0.80%
Net investment income to average daily net assets 5.71% (2) 5.34% 6.31% 6.52% 6.49%
Portfolio turnover rate (excluding short-term securities) 66.21% 89.29% 76.15% 128.06% 159.45%
</TABLE>
- --------------
(1) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value.
(2) Adjusted to an annual rate.
66
<PAGE>
[LOGO]
- --------------------------------------------------------------------------------
This page has been left blank intentionally.
67
<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
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
Paul E. Rasmussen Vice President & Treasurer
Michael P. Eckert Vice President
Michael J. Radmer Secretary
Carla J. Rose Assistant Secretary
(1) Bond Fund and U.S. Government Securities Fund only.
(2) Money Market Fund only.
68
<PAGE>
SEMI-ANNUAL REPORT BOND FUNDS
SIX-MONTHS ENDED SEPTEMBER 30, 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 NORTHER 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
INVESTMENT SUB-ADVISOR
(DEVELOPING MARKETS GROWTH FUND AND
INTERNATIONAL GROWTH FUND)
SIT/KIM INTERNATIONAL INVESTMENT ASSOCIATES, INC.
4600 NORWEST CENTER
MINNEAPOLIS, MN 55402
612-334-5888 (METRO AREA)
800-332-5580
[LOGO]
SIT MUTUAL FUNDS
----------------
THE INVESTMENT IS MUTUAL(SM)
