BOND FUNDS ANNUAL REPORT
YEAR ENDED MARCH 31, 2000
A FAMILY OF 100% NO-LOAD FUNDS
------------------------------
MONEY MARKET FUND
U.S. GOVERNMENT SECURITIES FUND
TAX-FREE INCOME FUND
MINNESOTA TAX-FREE INCOME FUND
BOND FUND
[LOGO]
SIT INVESTMENT ASSOCIATES
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SIT MUTUAL FUNDS
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<PAGE>
SIT MUTUAL FUNDS
BOND FUNDS ANNUAL REPORT
TABLE OF CONTENTS
PAGE
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Chairman's Letter 2
Performance Summary 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 34
Bond Fund 44
Notes to Portfolios of Investments 48
Statements of Assets and Liabilities 49
Statements of Operations 50
Statements of Changes in Net Assets 52
Notes to Financial Statements 54
Financial Hightlights 58
Federal Income Tax Information 63
Results of Shareholder Meeting 64
Independent Auditors' Report 66
List of Directors and Officers 67
A Look at Sit Mutual Funds 68
This document must be preceded or accompanied by a Prospectus.
<PAGE>
[PHOTO] SIT MUTUAL FUNDS
YEAR ENDED MARCH 31, 2000
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CHAIRMAN'S LETTER
Dear fellow shareholders:
The past year has been a difficult one for fixed income investors. With
interest rates rising and the stellar returns of equities, investors have
rapidly moved assets away from the bond market, seeking to participate in the
fabulous returns posted by growth equity stocks through March 31, 2000. Those
investors remaining in the bond market have endured the second-worst performance
(after 1994) on record. After explaining the reasons for this weak performance,
we will provide our reasons for optimism in the coming year.
During the first half of 1999, the effects of the global liquidity crisis
experienced in the last half of 1998 abated, and global economic growth began to
accelerate, fueled by strong demand and low commodity prices. The Federal
Reserve adopted a more restrictive monetary policy during the summer of 1999,
increasing the federal funds rate three times from 4.75% in June to 5.50% by
November. These moves effectively reversed the three easings undertaken by the
Fed in the autumn of 1998 to address the global liquidity crisis. Interest rates
rose steadily throughout 1999. In the first quarter of 2000, after fears of Y2K
economic disruptions proved to be unfounded and domestic growth actually picked
up speed from already strong levels, the Fed resumed its tightening moves,
increasing the federal funds rate to 6.00% by the end of March. Also during the
first quarter, the U.S. Treasury Department announced that it would reduce debt
by buying back longer maturity Treasury securities. Speculation as to the size
and future trend of government purchases of Treasury securities caused yields to
fall and prices to rise for long maturity Treasuries. Concerns about additional
Fed tightening, however, caused shorter duration Treasury securities to continue
to move higher in yield. As a result, the U.S. Treasury yield curve is now
inverted, with the 2-year Treasury yielding 6.48% and the 30-year Treasury
yielding 5.84%, on March 31, 2000. While an inverted yield curve is often a
precursor to a recession, we believe this inversion is the result of the Federal
Reserve's tightening posture, reduced supply from the Treasury Department's
buybacks, and expectations of relatively low long-term rates of inflation,
rather than a sign of near-term recession.
ECONOMIC OVERVIEW
Fourth quarter 1999 real GDP growth was a whopping +7.3% annualized rate, the
sharpest gain since the first quarter of 1984. As a result, full year 1999 GDP
growth was 4.2%. This economic growth reflects the strength of consumer
spending. What is even more remarkable is that the GDP deflator, a measure of
inflation, averaged only +1.4 % for 1999.
Looking forward, we believe personal consumption could grow at a +6.5% rate
in the first quarter, which is even faster than last year. One reason for the
accelerating rate of personal consumption is the so-called "wealth effect,"
which attempts to link increases in net worth (principally influenced by home
and financial asset values) to personal consumption. Over the past three years,
household net worth has accelerated sharply to nearly six times annual personal
income and the personal consumption rate has gone up in concert. Even though we
expect the dominant consumer sector to decelerate somewhat during 2000, only a
very severe and sustained stock market correction would materially impact
spending. Our view is supported by a study that found that it would take up to
five quarters of a sustained 15 to 20 percent decline in stock prices to impact
consumer spending materially. Economic growth will also be fueled by
accelerating government spending as Congress rushes to spend burgeoning budget
surpluses during a critical election year. Altogether, we believe the full year
2000 real GDP growth will exceed +5.0%.
The impressive strength of the economy has raised natural concerns over
inflationary pressures, and the large March Consumer Price Index increase of
0.7% did nothing to diminish those fears. Soaring energy prices were a major
element in the March "headline" CPI of +3.7%, however, the core rate, which
excludes both food and energy, expanded at a tamer +2.4% year-over-year. Also,
OPEC has set a target of $22 - $28 per barrel price range for crude prices by
adjusting supply, which has already lowered energy prices.
Employee compensation continues as another potential inflationary concern in
a fully-employed economy. The latest data for March, however, showing average
hourly earnings increasing at a relatively stable +3.7% rate and the
unemployment rate remaining steady at 4.1% did not flash strong
2
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warning signals. As a result, consumer price inflation is likely to average 3.0%
in 2000, up from 2.2% in 1999. The combination of continued economic strength
and a modest rise in inflation is expected to force the Federal Reserve to
continue raising short term rates until we see a significant slowing in economic
growth. The U.S. dollar exchange rate versus major countries has been relatively
stable, and should remain so.
Forecasts for the size of the federal budget surplus continue to rise.
Estimates project a potential surplus of $201 billion for fiscal year 2000,
which is 63% higher than last year's overage. As a result, the solvency period
extended for both the Social Security trust fund (by 3 years to 2037) and the
Medicare hospital trust fund (by 8 years to 2023). The change in fiscal fortune
has been dramatic in the sense that as recently as 1996, the Administration
predicted that the Medicare fund would run out of money in 2001.
At the current rate of budget surplus growth, the cumulative surplus
estimates become staggering, growing as large as $8 trillion over ten years as
opposed to the Congressional Budget Office's estimate of $1.9 trillion, using
"conservative assumptions." One of the major implications of these very large
numbers is the probability of continued Treasury debt reduction. Politicians
have firmly committed to using the Social Security portion of the surplus, which
could be as high as $2 trillion over ten years, for debt reduction and the size
of the non-Social Security surplus will be so large (assuming continuation of a
favorable economy) that some of those funds may be allocated to debt reduction
as well. One forecast has Treasury debt outstanding by the end of next year
(excluding Fed holdings) at 22% of GDP, down from the peak of 40% seen in 1993
and the lowest since 1981.
STRATEGY SUMMARY
With the inversion of the Treasury yield curve, that market has decoupled
from other fixed income sectors. In fact, even government agency bond yields are
less closely tied to Treasury yields due to a Treasury Department official's
suggestion that governmental support for debt issued by government-sponsored
enterprises (GSEs) might be eliminated. Looking forward, we expect agency debt
securities to remain vulnerable to ongoing discussions regarding their implicit
government guarantees. We expect government support, which is largely symbolic,
to be withdrawn in the next 18 to 24 months and we are currently underweighted
in this sector.
We are much more optimistic on the corporate and asset-backed sectors. The
recent weakness in these sectors is reminiscent of last year's flight to quality
due to Y2K, which provided an opportunity to purchase corporate securities at
relatively high yields. Long-term Treasury yields look particularly unattractive
relative to the year-over-year inflation rate of +3.7%, resulting in real yields
approximating only 2.3%. In fact, we have purchased Treasury Inflation Protected
Securities (TIPS) in our bond portfolios. TIPS earn a small coupon yield (about
4%) and their principal grows at the monthly inflation rate (non-seasonally
adjusted CPI). We have positioned taxable bond portfolios with durations
slightly shorter than their benchmarks, reflecting our expectations for
inflation to approach its peak and for the Fed to continue raising short-term
rates until economic growth slows to a sustainable rate.
In contrast to the Treasury yield curve, the municipal yield curve remains
positively sloped. Municipal bonds continue to appear attractively valued when
compared with other fixed income sectors, particularly on an after-tax basis. We
continue to monitor credits closely, particularly in the health care sector, and
remain focused on municipals in the 8- to 15-year maturity range, which we
believe continue to offer the most attractive risk/reward opportunities.
We appreciate your interest and investment in Sit Mutual Funds, and we look
forward to assisting you in achieving your long-term investment goals.
With best wishes,
/s/ Eugene C. Sit
Eugene C. Sit, CFA
Chairman and Chief Investment Officer
3
<PAGE>
SIT MUTUAL FUNDS
YEAR ENDED MARCH 31, 2000
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PERFORMANCE SUMMARY - BOND FUNDS
Bond yields continued their steadily rising trend that began in the fall of
1998 with the global liquidity crisis caused by the Russian default, a Far
Eastern economic panic, and the near-collapse of the Long Term Capital hedge
fund. These factors caused the yields of 3-month Treasury bills and 30-year
Treasury bonds to reach respective lows of 3.62% and 4.71% in October 1998. The
3-Month Treasury bill yield reached a high of 5.92% in late March 2000, as the
Federal Reserve increased the federal funds rate five times to 6.00% and the
discount rate four times to 5.50% during the past 12 months in an effort to slow
economic growth. Long-term Treasury bond yields also moved higher, but then
peaked in January 2000, with the 30-year Treasury bond yield reaching 6.75%,
following the announcement of the U.S. Treasury Department's intention to buy
back longer-term Treasury debt with funds available from the budget surplus. As
a result, the Treasury yield curve is now inverted, with the 2-year Treasury
note yielding 6.48% and the 30-year Treasury bond yielding 5.84% on March 31,
2000.
With the inversion of the Treasury yield curve, that market has decoupled
from other fixed income sectors. The 91 basis point (0.91%) decline in the
30-year Treasury bond yield since January was much more substantial than the 40
basis point decline in long-term, high (investment) grade corporate bond yields,
contributing to the underperformance of corporates for the year. All other
sector yield curves remain positively sloped, with longer maturity yields
remaining higher than shorter maturity yields. As a result, we believe Treasury
securities are unattractive relative to all other sectors.
Municipal bond yields also moved to higher levels during the year. The Bond
Buyer 40-Bond Index rose from 5.23% on March 31, 1999 to a high of 6.32% in
January, before declining 35 basis points to 5.97% on March 31, 2000. The
relative yield of municipals, when compared to both Treasury securities and
corporate bonds on an historical basis, has remained cheaply valued for much of
the year, particularly on an after-tax basis. With the rise in yields, the
housing sector outperformed, given its stable price characteristics, while
hospital bonds lagged due to increased credit concerns and discount coupon bonds
underperformed as their prices were marked down even more to reflect potential
capital gains taxes. The municipal yield curve remains positively sloped, and we
believe that bonds in the 8- to 15-year maturity range offer the most attractive
risk/reward profile.
<TABLE>
<CAPTION>
1991 1992
-------------------------
<S> <C> <C>
SIT MONEY MARKET FUND (1) -- --
- -----------------------------------------------------------------------
SIT U.S. GOV'T. SECURITIES FUND 12.87% 5.43%
- -----------------------------------------------------------------------
SIT TAX-FREE INCOME FUND 9.25 7.71
- -----------------------------------------------------------------------
SIT MINNESOTA TAX-FREE
INCOME FUND -- --
- -----------------------------------------------------------------------
SIT BOND FUND -- --
- -----------------------------------------------------------------------
3-MONTH U.S. TREASURY BILL -- --
LEHMAN INTER. GOVERNMENT BOND INDEX 14.11 6.93
LEHMAN 5-YEAR MUNICIPAL BOND INDEX 11.41 7.62
LEHMAN AGGREGATE BOND INDEX -- --
</TABLE>
<TABLE>
<CAPTION>
NASDAQ
SYMBOL INCEPTION
------ ---------
<S> <C> <C>
SIT MONEY MARKET FUND SNIXX 11/01/93
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SIT U.S. GOV'T. SECURITIES FUND SNGVX 06/02/87
- -----------------------------------------------------------------------
SIT TAX-FREE INCOME FUND SNTIX 09/29/88
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SIT MINNESOTA TAX-FREE INCOME FUND SMTFX 12/01/93
- -----------------------------------------------------------------------
SIT BOND FUND SIBOX 12/01/93
- -----------------------------------------------------------------------
</TABLE>
3-MONTH U.S. TREASURY BILL 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 3/31/00.
(4) Figure represents 7-day compound effective yield. The 7-day simple yield as
of 3/31/00 was 5.49%.
(5) For individuals in the 28%, 31%, 36%, and 39.6% federal tax brackets, the
federal tax equivalent yields are 7.67%, 8.00%, 8.63% and 9.14%,
respectively (Income subject to state tax, if any).
4
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<TABLE>
<CAPTION>
TOTAL RETURN - CALENDAR YEAR
YIELD
YTD AS OF DISTRIBUTION
1993 1994 1995 1996 1997 1998 1999 2000 3/31/00 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% 4.79% 1.36% 5.64%(4)
- -------------------------------------------------------------------------------------------------------
7.34 1.77 11.50 4.99 8.19 6.52 1.37 1.53 6.76 5.68%
- -------------------------------------------------------------------------------------------------------
10.42 -0.63 12.86 5.69 9.87 6.29 -4.01 1.58 5.52(5) 5.18
- -------------------------------------------------------------------------------------------------------
1.60(2) 0.63 11.90 5.89 8.19 6.14 -3.82 1.68 5.42(6) 5.19
- -------------------------------------------------------------------------------------------------------
0.34(2) -1.31 16.83 4.25 9.44 6.52 -0.34 1.29 7.01 6.07
- -------------------------------------------------------------------------------------------------------
0.53(2) 4.47 5.98 5.27 5.32 5.01 4.88 1.43
8.17 -1.75 14.41 4.06 7.72 8.49 0.49 1.64
8.73 -1.28 11.65 4.22 6.38 5.84 0.74 1.20
0.54(2) -2.92 18.47 3.63 9.65 8.69 -0.82 2.21
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS FOR THE
PERIODS ENDED MARCH 31, 2000
TOTAL RETURN -------------------------------------------------
QUARTER SIX MONTHS SINCE
ENDED 3/31/00 ENDED 3/31/00 1 YEAR 5 YEARS 10 YEARS INCEPTION
------------------------------- -------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1.36% 2.66% 5.05% 5.16% -- 4.91%
- ------------------------------------------------------------------------------------------------------
1.53 2.01 2.92 6.19 7.16% 7.54
- ------------------------------------------------------------------------------------------------------
1.58 -0.09 -2.98 5.41 6.35 6.59
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1.68 -0.61 -2.84 4.95 -- 4.98
- ------------------------------------------------------------------------------------------------------
1.29 1.19 0.93 6.57 -- 5.68
- ------------------------------------------------------------------------------------------------------
1.43 2.75 5.19 5.25 -- 5.10
1.64 1.59 2.41 6.41 7.29 7.49
1.20 1.21 0.89 5.12 6.29 6.36
2.21 2.08 1.87 7.14 -- 6.01
</TABLE>
(6) For Minnesota residents in the 28%, 31%, 36% and 39.6% federal tax brackets,
the double exempt tax equivalent yields are 8.18%, 8.54%, 9.21% and 9.75%,
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
<PAGE>
[PHOTO] SIT MONEY MARKET FUND
YEAR ENDED MARCH 31, 2000
----------------------------------------------------------------------
MICHAEL C. BRILLEY, SENIOR PORTFOLIO MANAGER
PAUL J. JUNGQUIST, CFA, SENIOR PORTFOLIO MANAGER
The Sit Money Market Fund provided investors with a +1.36% return for the
three months ended March 31, 2000, compared to a +1.27% average return for the
Lipper Analytical Services, Money Market Fund universe. The Fund's performance
ranked 71st of 368 funds in its Lipper peer group category for the first quarter
of 2000. For the 1-year, 3-year, 5-year and since inception periods ended March
31st, the Fund's performance ranked 65th of 351, 52nd of 279, 61st of 233 and
41st of 188 funds, respectively, in its Lipper peer group. As of March 31st, the
Fund's 7-day compound yield was 5.64% and its average maturity was 30 days,
compared to 4.54% and 34 days, respectively, at March 31, 1999.
The Federal Reserve Board increased the federal funds rate by 1.25% in five
separate 25 basis point tightenings during the past year to 6.00%, in response
to continued strong growth in the economy, commodity price inflation and
tightness in labor markets. Three-month Treasury Bill yields rose steadily over
the past year, ranging from 4.3% in April to 5.9% in March, finishing at 5.87%
on March 31st. Current yield levels imply that the market is expecting
additional tightening by the Fed in the second quarter of 2000, probably at the
May 16 FOMC meeting and perhaps at a subsequent meeting as well. The Fund has
grown substantially over the past year as Sit equity funds have been investing
short-term cash flows in the Fund. The Fund anticipates maintaining an average
maturity near 30 days over the near term.
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. The Fund
continues to diversify its core holdings and its industry exposure. In the
months ahead, we hope to add top tier credits in the financial services and
consumer non-durable industries to our list of permissible holdings.
INVESTMENT OBJECTIVE AND STRATEGY
The objective of the Fund is to achieve maximum current income to the
extent consistent with the preservation of capital and maintenance of liquidity.
The Fund pursues this objective by investing in short-term debt instruments
which mature in 397 days or less and by maintaining a dollar-weighted portfolio
maturity of 90 days or less.
An investment in the Fund is neither insured nor guaranteed by the U.S.
government and there can be no assurance that the Fund will be able to maintain
a stable net asset value of $1.00 per share.
PORTFOLIO SUMMARY
Net Asset Value 3/31/00: $ 1.00 Per Share
3/31/99: $ 1.00 Per Share
Total Net Assets: $150.9 Million
PORTFOLIO STRUCTURE
(% OF TOTAL NET ASSETS)
[BAR CHART]
Diversified Finance 18.1
Consumer Non-Durables 15.9
Consumer Loan Finance 12.8
Energy 11.1
Utilities 8.6
Captive Equip. Finance 8.2
Captive Auto Finance 7.9
Sectors Under 4.0% 17.4
6
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AVERAGE ANNUAL TOTAL RETURNS*
SIT MONEY 3-MONTH LIPPER
MARKET U.S. TREASURY MONEY
FUND BILL MARKET AVG.
--------- ------------- -----------
3 Month** 1.36% 1.43% 1.27%
1 Year 5.05 5.19 4.72
3 Year 5.11 5.11 4.82
5 Year 5.16 5.25 4.93
Inception 4.91 5.10 4.72
(11/1/93)
CUMULATIVE TOTAL RETURNS*
SIT MONEY 3-MONTH LIPPER
MARKET U.S. TREASURY MONEY
FUND BILL MARKET AVG.
--------- ------------- -----------
1 Year 5.05% 5.19% 4.72%
3 Year 16.12 16.14 15.17
5 Year 28.61 29.13 27.21
Inception 36.02 37.64 34.47
(11/1/93)
*AS OF 3/31/00. **NOT ANNUALIZED.
- --------------------------------------------------------------------------------
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. THE LIPPER AVERAGES AND INDICES ARE OBTAINED FROM LIPPER ANALYTICAL
SERVICES, INC., A LARGE INDEPENDENT EVALUATOR OF MUTUAL FUNDS.
GROWTH OF $10,000
[PLOT POINTS CHART]
The sum of $10,000 invested at inception (11/1/93) and held until 3/31/00 would
have grown to $13,602 in the Fund or $13,764 in the 3-Month U.S. Treasury Bill
assuming reinvestment of all dividends and capital gains.
QUALITY RATINGS
(% OF TOTAL NET ASSETS)
LOWER OF MOODY'S, S&P,
FITCH OR DUFF & PHELPS
RATINGS USED.
[PIE CHART]
First Tier Securities
100%
First Tier Securities 100%
Second Tier Securities 0%
7
<PAGE>
SIT MONEY MARKET FUND
MARCH 31, 2000
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PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
- --------------------------------------------------------------------------------
COMMERCIAL PAPER (103.7%) (2)
AUTO MANUFACTURER (3.6%)
Daimler Chrysler Hldgs.:
1,000,000 5.91 %,4/7/00 $999,025
600,000 5.90 %,4/19/00 598,254
1,300,000 5.96 %,5/4/00 1,292,993
1,100,000 5.97 %,5/9/00 1,093,173
1,500,000 6.02 %,6/2/00 1,484,689
---------------
5,468,134
---------------
AUTOMOBILE RENTAL (3.3%)
Hertz Corp.:
1,000,000 5.90 %,4/5/00 999,351
1,000,000 5.91 %,4/12/00 998,216
1,000,000 5.91 %,4/18/00 997,242
1,000,000 5.99 %,5/22/00 991,642
1,000,000 5.98 %,5/25/00 991,165
---------------
4,977,616
---------------
BANKING (3.6%)
Citicorp:
1,000,000 6.04 %,4/5/00 999,331
1,500,000 5.86 %,4/6/00 1,498,785
1,000,000 5.98 %,4/10/00 998,512
1,000,000 6.03 %,4/27/00 995,674
1,000,000 5.93 %,5/2/00 994,937
---------------
5,487,239
---------------
CAPITAL GOODS (3.6%)
Deere & Co.:
2,000,000 5.91 %,4/17/00 1,994,800
1,000,000 5.91 %,4/26/00 995,944
1,000,000 5.91 %,4/27/00 995,782
1,000,000 5.91 %,4/28/00 995,620
500,000 6.05 %,6/5/00 494,628
---------------
5,476,774
---------------
CAPTIVE AUTO FINANCE (7.9%)
Ford Motor Credit Corp.:
800,000 5.91 %,4/18/00 797,794
1,000,000 5.91 %,4/24/00 996,262
660,000 5.91 %,4/25/00 657,430
1,000,000 5.91 %,4/27/00 995,775
1,000,000 5.94 %,5/8/00 993,957
1,000,000 5.94 %,5/16/00 992,675
General Motors Acceptance Corp.:
850,000 5.87 %,4/5/00 849,452
1,000,000 5.88 %,4/7/00 999,033
500,000 5.91 %,4/19/00 498,543
750,000 5.93 %,4/24/00 747,192
1,000,000 5.96 %,5/10/00 993,630
1,400,000 5.99 %,5/23/00 1,388,070
975,000 Toyota Motor Credit Corp.,
5.89 %,4/4/00 974,526
---------------
11,884,339
---------------
- --------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
- --------------------------------------------------------------------------------
CAPTIVE EQUIPMENT FINANCE (8.2%)
1,500,000 Caterpillar Finance, Inc., 6.11%, 5/25/00 1,486,387
IBM Credit Corp.:
1,000,000 5.96 %,5/9/00 993,772
1,000,000 5.96 %,5/10/00 993,608
1,000,000 5.96 %,5/11/00 993,444
1,000,000 5.96 %,5/15/00 992,789
1,500,000 5.93 %,5/19/00 1,488,280
John Deere Capital Corp.:
1,100,000 5.85 %,4/3/00 1,099,646
800,000 5.96 %,5/1/00 796,073
1,100,000 5.98 %,5/2/00 1,094,411
1,000,000 5.98 %,5/3/00 994,756
1,500,000 6.12 %,5/26/00 1,486,426
---------------
12,419,592
---------------
CONSUMER LOAN FINANCE (12.8%)
American Express Credit Corp.:
1,800,000 5.90 %,4/7/00 1,798,239
1,100,000 5.89 %,4/11/00 1,098,209
1,000,000 5.89 %,4/13/00 998,047
American General Financial:
1,000,000 5.90 %,4/13/00 998,050
1,000,000 5.94 %,4/20/00 996,902
1,000,000 6.08 %,5/2/00 994,799
500,000 5.98 %,5/24/00 495,657
1,000,000 6.13 %,5/26/00 990,726
Household Finance Corp.:
500,000 5.91 %,4/6/00 499,601
1,000,000 5.92 %,5/5/00 994,466
1,500,000 5.93 %,5/17/00 1,488,768
1,000,000 5.95 %,5/25/00 991,195
1,500,000 6.06 %,6/9/00 1,482,827
Norwest Financial, Inc.:
1,300,000 5.92 %,4/11/00 1,297,887
1,300,000 5.99 %,5/8/00 1,292,117
1,000,000 6.11 %,5/23/00 991,261
1,400,000 6.12 %,5/30/00 1,386,119
500,000 6.02 %,6/1/00 494,976
---------------
19,289,846
---------------
CONSUMER NON-DURABLES (15.9%)
Coca Cola Co.:
1,000,000 5.93 %,5/1/00 995,117
1,000,000 5.95 %,5/15/00 992,826
1,000,000 5.95 %,5/22/00 991,670
1,500,000 6.06 %,6/6/00 1,483,555
1,000,000 5.99 %,6/8/00 988,856
Coca Cola Enterprises:
1,000,000 5.87 %,4/14/00 (5) 997,902
8
<PAGE>
- ----------------------------------------------------------------------- [LOGO}
- --------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
- --------------------------------------------------------------------------------
1,500,000 5.91 %,4/26/00 (5) 1,493,896
1,000,000 5.90 %,4/28/00 (5) 995,612
1,000,000 5.96 %,5/11/00 (5) 993,467
1,000,000 5.96 %,5/12/00 (5) 993,303
8,000,000 Gillette Co., 6.20%, 4/3/00 (5) 7,997,244
Procter & Gamble Co.:
1,000,000 5.87 %,4/12/00 998,222
1,000,000 5.87 %,4/14/00 997,898
Walt Disney Co.:
1,000,000 5.83 %,4/10/00 998,560
2,000,000 6.01 %,5/16/00 1,985,125
---------------
23,903,253
---------------
DIVERSIFIED FINANCE (18.1%)
Associates First Capital Corp.:
1,500,000 5.89 %,4/13/00 1,497,085
600,000 6.00 %,5/24/00 594,780
500,000 6.02 %,5/31/00 495,067
1,300,000 6.01 %,6/7/00 1,285,677
1,600,000 6.15 %,6/14/00 1,580,069
Associates First Capital B.V.:
1,300,000 5.90 %,4/12/00 1,297,676
1,000,000 6.08 %,5/17/00 992,308
1,000,000 6.08 %,5/31/00 990,000
1,000,000 6.06 %,6/12/00 988,060
1,200,000 6.09 %,6/13/00 1,185,400
CIT Group Holdings, Inc.:
1,400,000 5.89 %,4/17/00 1,396,366
900,000 6.02 %,6/5/00 890,380
1,000,000 5.92 %,6/6/00 990,471
1,200,000 6.17 %,6/15/00 1,184,800
1,000,000 6.19 %,6/19/00 986,614
General Electric Capital Corp.:
1,000,000 5.86 %,4/3/00 999,679
1,000,000 5.87 %,4/4/00 999,517
500,000 5.91 %,4/11/00 499,189
1,000,000 5.95 %,5/5/00 994,456
1,500,000 5.99 %,5/18/00 1,488,426
500,000 6.01 %,5/30/00 495,149
General Electric Capital Services:
1,000,000 5.88 %,4/6/00 999,194
850,000 5.90 %,4/10/00 848,761
800,000 5.90 %,4/18/00 797,801
500,000 5.96 %,4/25/00 498,040
1,000,000 6.00 %,5/19/00 992,120
500,000 6.01 %,5/30/00 495,149
850,000 6.02 %,6/1/00 841,459
---------------
27,303,693
---------------
- --------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
- --------------------------------------------------------------------------------
ENERGY (11.1%)
1,000,000 Chevron UK Investments,
5.89 %,4/10/00 998,548
Chevron Oil Finance Co.:
1,500,000 6.02 %,4/6/00 1,498,748
2,000,000 5.96 %,4/14/00 1,995,717
1,000,000 5.92 %,4/28/00 995,598
5,924,000 Exxon Corp., 6.20%, 4/3/00 5,921,960
Texaco, Inc.:
800,000 5.87 %,4/20/00 797,543
1,200,000 5.87 %,4/24/00 1,195,538
1,619,000 5.87 %,4/25/00 1,612,718
1,800,000 5.87 %,4/26/00 1,792,725
---------------
16,809,095
---------------
FINANCIAL SERVICES (3.6%)
Transamerica Finance Corp.:
1,000,000 5.86 %,4/5/00 999,352
1,000,000 5.96 %,5/4/00 994,592
1,500,000 5.97 %,5/12/00 1,489,921
2,000,000 6.08 %,6/21/00 1,973,180
---------------
5,457,045
---------------
INSURANCE (2.0%)
1,000,000 American General Corp., 5.89%, 4/20/00 996,934
2,000,000 Liberty Mutual Capital Corp.,
6.03 %,4/3/00 (5) 1,999,331
---------------
2,996,265
---------------
RETAIL (0.7%)
1,000,000 Wal-Mart Stores, Inc., 6.06%, 5/4/00 994,482
---------------
TECHNOLOGY/BUSINESS EQUIPMENT (0.7%)
1,000,000 Lucent Tech., Inc., 6.10%, 6/5/00 989,131
---------------
UTILITIES (8.6%)
AT&T Corp.:
1,000,000 5.97 %,4/4/00 999,504
1,000,000 6.00 %,4/11/00 998,342
2,000,000 5.97 %,4/12/00 1,996,370
1,500,000 5.97 %,4/13/00 1,497,030
BellSouth Telecommunications, Inc.:
1,000,000 5.95 %,4/18/00 997,204
1,200,000 5.88 %,4/19/00 1,196,502
1,000,000 6.00 %,5/1/00 995,042
2,300,000 5.96 %,5/3/00 2,287,924
2,000,000 5.99 %,5/10/00 1,987,152
---------------
12,955,070
---------------
Total investments in securities
(cost: $156,411,574) (7) $156,411,574
===============
See accompanying notes to portfolios of investments on page 48.
9
<PAGE>
[PHOTO] SIT U.S. GOVERNMENT SECURITIES FUND
YEAR ENDED MARCH 31, 2000
----------------------------------------------------------------------
MICHAEL C. BRILLEY, SENIOR PORTFOLIO MANAGER
BRYCE A. DOTY, CFA, SENIOR PORTFOLIO MANAGER
The U.S. Government Securities Fund provided investors a +2.92% return for
the past 12 months. The 12-month return for the Lipper U.S. Government Fund
universe average and the Lehman Intermediate Bond Index was +0.8% and +2.4%,
respectively. The Fund holds a 4-Star Overall rating by Morningstar out of 1,680
funds in the taxable bond category. Morningstar also rated the Fund #3 in the
Best 5-Year Return category and #4 in the Highest 5-Year Rating category for its
combined low risk and high return characteristics. Both Morningstar categories,
as of 3/7/00, contained 92 funds.
The U.S. Treasury yield curve inverted over the past 12 months. Specifically,
the yield of 2-year maturity U.S. Treasuries rose 1.51% to 6.48%, while 30-year
maturity U.S. Treasury yields rose only 0.22% to 5.84% on March 31st.
The rise in interest rates 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, mortgage pass-through holdings provided the highest
source of return in the Fund over the past 12 months. Conversely, the rise in
bond yields caused prices to decline in the Fund's longer duration
collateralized mortgage obligation holdings.
Investment activity for the period involved reducing the Fund's weighting in
U.S. Treasury securities and purchasing mortgage 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 March 31,
1999 to 6.76% on March 31, 2000.
The inversion of the Treasury yield curve was accelerated by the U.S.
Treasury Department's decision to purchase long term Treasuries to reduce debt.
As a result, the shift in U.S. Treasury yields has decoupled from yield shifts
in other sectors. As a result, the Fund will continue to underweight U.S.
Treasuries and focus on mortgage pass-through securities and collateralized
mortgage obligations that provide significantly higher yields and relative price
stability. The Fund's duration is slightly shorter than its benchmark,
reflecting our expectations for slightly rising inflation and for the Federal
Reserve to continue raising short-term rates until economic growth slows to a
sustainable rate.
INVESTMENT OBJECTIVE AND STRATEGY
The objective of the U.S. Government Securities Fund is to provide high
current income and safety of principal, which it seeks to attain by investing
solely in debt obligations issues, guaranteed or insured by the U.S. government
or its agencies or its instrumentalities.
Agency mortgage securities and U.S. Treasury securities will be the
principal holdings in the Fund. The mortgage securities that the Fund will
purchase consist of pass-through securities including those issued by Government
National Mortgage Association (GNMA), Federal National Mortgage Asociation
(FNMA), and Federal Home Loan Mortgage Corporation (FHLMC).
PORTFOLIO SUMMARY
Net Asset Value 3/31/00: $ 10.22 Per Share
3/31/99: $ 10.51 Per Share
Total Net Assets: $135.8 Million
30-day SEC Yield: 6.76%
12-Month Distribution Rate: 5.68%
Average Maturity: 15.7 Years
Effective Duration: 3.0 Years(2)
(2) Effective duration is a measure which reflects estimated price sensitivity
to a given change in interest rates. For example, for an interest rate change of
1.0%, a portfolio with a duration of 5 years would be expected to experience a
price change of 5%. Effective duration is based on current interest rates and
the Adviser's assumptions regarding the expected average life of individual
securities held in the portfolio.
PORTFOLIO STRUCTURE
(% OF TOTAL NET ASSETS)
[BAR CHART]
GNMA Pass-Through 41.5
Collateralized Mortgage Obligations 21.3
FHLMC Pass-Through 15.6
FNMA Pass-Through 15.1
U.S. Treasury 5.3
Cash & Other Net Assets 1.2
10
<PAGE>
- ----------------------------------------------------------------------- [LOGO}
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** 1.53% 1.64% 2.49%
1 Year 2.92 2.41 0.75
5 Year 6.19 6.41 6.13
10 Year 7.16 7.29 7.04
Inception 7.54 7.49 7.05
(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 2.92% 2.41% 0.75%
5 Year 35.00 36.43 34.62
10 Year 99.65 102.16 97.53
Inception 154.40 152.87 139.92
(6/2/87)
*AS OF 3/31/00. **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.
GROWTH OF $10,000
[PLOT POINTS CHART]
The sum of $10,000 invested at inception (6/2/87) and held until 3/31/00 would
have grown to $25,440 in the Fund or $25,287 in the Lehman Intermediate
Government Bond Index assuming reinvestment of all dividends and capital gains.
ESTIMATED AVERAGE LIFE PROFILE
The Adviser's estimates of
the dollar weighted average
life of the portfolio's
securities, which may vary
from their stated maturities.
[BAR CHART]
0 - 1 Year 1.2%
1 - 5 Years 80.9%
5 - 10 Years 17.3%
10 - 20 Years 0.0%
20+ Years 0.6%
11
<PAGE>
SIT U.S. GOVERNMENT SECURITIES FUND
MARCH 31, 2000
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
- --------------------------------------------------------------------------------
MORTGAGE PASS-THROUGH SECURITIES (72.2%) (2)
FEDERAL HOME LOAN MORTGAGE CORPORATION (15.6%):
50,159 8.50%, 1/1/17 $51,448
5,041 8.75%, 12/1/01 5,143
406,031 8.75%, 1/1/17 418,086
245,921 9.00%, 4/1/03 252,996
39,374 9.00%, 10/1/04 40,682
148,890 9.00%, 12/1/05 154,551
430,882 9.00%, 1/1- 2/1/06 447,188
335,812 9.00%, 5/1 - 7/1/09 347,128
96,885 9.00%, 10/1/13 99,684
1,350,005 9.00%, 5/1 - 11/1/16 1,395,384
2,222,794 9.00%, 1/1 - 10/1/17 2,297,222
370,676 9.00%, 6/1/18 383,027
375,948 9.00%, 10/1/19 387,407
519,428 9.00%, 5/1 - 8/1/21 533,789
57,567 9.25%, 7/1/08 59,012
344,369 9.25%, 8/1/09 358,261
347,869 9.25%, 7/1/10 361,926
197,823 9.25%, 3/1/11 205,055
1,380,900 9.25%, 1/1-3/1/19 1,431,765
252,764 9.50%, 10/1/08 264,742
380,775 9.50%, 12/1/09 394,148
1,085,547 9.50%, 2/1 - 6/1/10 1,137,250
895,661 9.50%, 1/1 - 6/1/11 936,928
806,292 9.50%, 6/1 - 10/1/16 844,248
225,063 9.50%, 6/1 - 9/1/17 235,997
281,207 9.50%, 10/1-12/1/18 294,623
179,255 9.50%, 6/1 - 11/1/19 187,634
1,149,763 9.50%, 7/1-9/1/20 1,201,884
314,242 9.75%, 12/1/08 331,986
363,433 9.75%, 11/1/09 383,978
125,781 9.75%, 6/1/11 129,470
1,301,870 9.75%, 12/1/16 1,374,645
1,013,726 9.75%, 6/1 - 12/1/17 1,068,113
173,421 9.85%, 5/1/16 183,831
550,128 10.00%, 11/1/10 586,084
238,176 10.25%, 6/1/10 254,960
145,713 10.25%, 2/1/17 156,072
132,144 10.29%, 9/1/16 141,698
32,266 10.50%, 4/1 - 7/1/04 33,982
683,292 10.50%, 5/1/14 735,004
200 11.00%, 10/1/00 209
73,761 11.00%, 12/1/11 80,200
98,254 11.00%, 2/1/14 106,869
69,428 11.00%, 6/1/15 75,491
255,822 11.00%, 2/1/18 278,440
410,077 11.00%, 5/1-7/1/19 446,990
107,912 11.25%, 10/1/09 117,979
------------------
21,213,209
------------------
- --------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
- --------------------------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (15.1%):
187,046 8.50%, 8/1/06 190,954
20,058 8.875%, 3/1/17 20,735
2,491,167 9.00%, 1/1 - 5/1/09 2,557,183
108,942 9.00%, 4/1/10 112,126
555,456 9.00%, 11/1/16 571,620
1,260,579 9.00%, 1/1 - 12/1/17 1,298,338
849,262 9.00%, 9/1 - 12/15/19 888,841
86,115 9.00%, 9/1/20 88,641
268,666 9.00%, 9/1 - 11/1/21 276,719
1,712,006 9.25%, 10/1/09 1,774,271
656,673 9.25%, 7/1/10 680,766
88,439 9.25%, 4/1/12 92,225
550,753 9.25%, 10/1-12/1/16 570,933
82,488 9.25%, 3/1/17 85,509
76,218 9.375%, 5/1/16 79,346
127,391 9.50%, 1/1/06 133,014
88,040 9.50%, 9/1/08 91,913
152,975 9.50%, 1/1/11 160,432
182,526 9.50%, 5/1/14 192,450
1,194,677 9.50%, 4/1 - 9/1/16 1,248,280
676,378 9.50%, 11/1 - 12/1/18 710,642
927,162 9.50%, 5/1 - 12/1/19 968,426
1,415,665 9.50%, 4/1 - 9/1/20 1,480,132
473,791 9.50%, 3/1/21 494,979
706,848 9.75%, 1/1/13 764,279
81,948 10.00%, 3/1/11 87,633
497,497 10.00%, 6/1/14 528,710
501,444 10.00%, 12/1/19 537,518
213,576 10.00%, 2/1/21 226,954
2,237,693 10.25%, 8/15/13 2,443,963
181,063 10.50%, 5/1/09 195,349
30,133 10.75%, 11/1/10 32,604
350,674 11.00%, 10/1/06 370,918
38,408 11.00%, 4/1/14 41,816
205,759 11.00%, 8/1/15 223,837
Municipal (FNMA collateralized):
310,000 Alabama Hsg. Fin. Auth. Multifamily
Series 1999B, 5.70%, 9/1/03 301,360
------------------
20,523,416
------------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (41.5%) (3):
84,370 7.50%, 3/15/07 85,459
276,579 7.50%, 5/15/16 277,650
10,188 8.00%, 7/15/03 10,420
137,599 8.00%, 10/15/12 139,509
1,543,637 8.00%, 5/15 - 9/15/16 1,565,910
98,707 8.25%, 2/15 - 6/15/02 100,307
12
<PAGE>
- ----------------------------------------------------------------------- [LOGO}
- --------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
- --------------------------------------------------------------------------------
428,713 8.25%, 12/15/11 440,130
149,574 8.25%, 1/15/12 152,173
348,677 8.25%, 8/15/15 354,803
30,923 8.50%, 11/15/01 31,397
222,947 8.50%, 12/15/11 228,033
411,419 8.50%, 1/15/12 420,162
268,858 8.50%, 4/15/15 273,751
530,005 8.50%, 9/15/16 541,597
552,563 8.50%, 1/15/17 564,725
78,144 8.75%, 7/15/02 81,190
89,736 8.75%, 5/15/03 93,253
467,823 8.75%, 5/15 - 11/15/06 486,490
166,301 8.75%, 2/15 - 3/15/07 171,342
115,712 8.75%, 11/15/09 119,249
906,432 8.75%, 6/15 - 12/15/11 934,294
30,249 8.75%, 2/20/17 30,795
73,427 9.00%, 10/15/04 77,016
634,144 9.00%, 4/15 - 10/15/06 665,260
208,791 9.00%, 6/15 - 10/15/07 217,526
520,789 9.00%, 9/15 - 12/15/08 538,577
1,005,124 9.00%, 2/15 - 12/15/09 1,042,063
931,767 9.00%, 7/15/10 962,012
2,431,836 9.00%, 5/15 - 10/15/11 2,553,926
98,766 9.00%, 1/15/12 102,706
47,102 9.00%, 8/15/15 48,621
505,707 9.00%, 6/20 - 12/20/16 516,999
5,429,000 9.00%, 1/15 - 8/20/17 5,681,155
2,826,439 9.00%, 12/15/19 2,924,860
94,303 9.00%, 7/20 - 10/20/21 96,382
300,833 9.10%, 5/15/18 311,498
24,464 9.25%, 4/15 - 9/15/01 25,511
87,279 9.25%, 4/15/03 91,561
170,611 9.25%, 3/15/05 179,071
383,586 9.25%, 11/15/09 399,229
454,713 9.25%, 1/15 - 11/15/10 477,726
241,631 9.25%, 11/15/11 251,514
104,947 9.25%, 4/15/12 109,202
351,640 9.25%, 5/15 - 10/15/16 363,154
585,374 9.25%, 2/20 - 11/20/17 601,487
68,176 9.50%, 1/15 - 3/15/05 71,077
123,296 9.50%, 1/15/06 129,527
4,047,765 9.50%, 6/15 - 12/15/09 4,223,243
1,160,875 9.50%, 1/15 - 11/15/10 1,212,621
394,963 9.50%, 1/15 - 3/15/11 411,310
1,076,674 9.50%, 3/20 - 11/20/16 1,121,027
2,504,419 9.50%, 1/15 - 12/20/17 2,626,582
4,451,732 9.50%, 4/15 - 10/20/18 4,609,435
2,198,707 9.50%, 1/15 - 12/15/19 2,294,925
229,948 9.50%, 1/15 - 10/15/20 240,033
- --------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
- --------------------------------------------------------------------------------
236,556 9.50%, 1/15 - 8/15/21 247,239
10,389 9.75%, 5/15/01 10,834
77,485 9.75%, 11/15/02 81,442
113,585 9.75%, 7/15 - 12/15/03 119,342
19,226 9.75%, 3/15/04 20,209
563,891 9.75%, 6/15 - 8/15/05 592,954
245,512 9.75%, 1/15 - 2/15/06 260,532
360,261 9.75%, 8/15 - 9/15/09 380,877
1,140,854 9.75%, 8/15 - 12/15/10 1,205,062
534,097 9.75%, 11/15 - 12/15/12 564,315
35,880 9.75%, 4/15/18 37,681
75,182 10.00%, 8/15/02 79,140
104,187 10.00%, 11/15/03 108,908
88,439 10.00%, 5/15/04 93,086
689,093 10.00%, 7/15/05 725,631
100,112 10.00%, 1/15/06 105,377
139,107 10.00%, 11/15/08 147,148
42,079 10.00%, 5/15 - 11/15/09 44,603
896,229 10.00%, 6/15 - 11/15/10 948,381
74,946 10.00%, 1/15/11 79,280
173,359 10.00%, 10/15/15 184,899
89,210 10.00%, 3/20 - 9/15/16 94,145
198,616 10.00%, 11/15/17 211,891
166,249 10.00%, 10/15/18 177,417
1,068,674 10.00%, 2/15 - 11/15/19 1,146,037
166,363 10.00%, 1/15 - 12/15/20 177,406
224,595 10.00%, 6/15/21 239,622
1,262 10.25%, 11/15/00 1,267
7,963 10.25%, 2/15 - 4/15/01 8,303
62,623 10.25%, 12/15/02 65,937
104,161 10.25%, 5/15 - 8/15/04 109,688
173,340 10.25%, 7/15/05 182,523
104,504 10.25%, 5/15/09 110,288
355 10.50%, 9/15/00 356
12,671 10.50%, 9/15/01 13,214
36,405 10.50%, 12/15/02 38,335
135,803 10.50%, 6/15/09 150,105
95,654 10.50%, 7/15/10 101,011
137,720 10.50%, 8/15 - 11/15/15 148,266
111,725 10.50%, 3/15 - 12/15/16 120,296
178,388 10.50%, 11/15/18 192,259
1,516 10.75%, 11/15/00 1,521
31,232 10.75%, 9/15/03 32,894
68,881 10.75%, 9/15/05 72,577
80,915 10.75%, 8/15/06 86,908
24,837 10.75%, 1/15/10 26,239
73,491 10.75%, 7/15 - 8/15/11 78,888
134,715 11.00%, 6/15/04 141,945
360,672 11.00%, 1/15 - 6/15/10 393,841
See accompanying notes to portfolios of investments on page 48.
13
<PAGE>
SIT U.S. GOVERNMENT SECURITIES FUND
MARCH 31, 2000
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
- --------------------------------------------------------------------------------
16,875 11.00%, 7/15/13 18,256
29,829 11.25%, 8/15 - 12/15/00 29,932
2,183 11.25%, 1/15/01 2,254
5,015 11.25%, 5/15/03 5,284
240,445 11.25%, 9/15 - 10/15/05 258,026
418,089 11.25%, 6/15 - 9/15/10 459,112
1,433,580 11.25%, 2/15 - 11/15/11 1,574,028
21,446 11.75%, 5/15 - 7/15/00 21,520
89,662 11.75%, 5/15 - 6/15/04 95,303
Municipal (GNMA collateralized):
295,000 Bernalillo Multifamily Rev. Series
1998A, 7.50%, 9/20/20 285,982
150,000 Dakota Multifamily Rev. Series
1999A, 6.50%, 12/20/05 145,671
555,000 Maplewood Multifamily Rev.
Series 1998B, 6.75%, 7/20/15 515,978
500,000 Nortex Multifamily Rev. Series
1999T, 6.50%, 3/20/06 482,320
------------------
56,333,260
------------------
Total mortgage pass-through securities 98,069,885
------------------
(cost: $99,405,658)
U.S. GOVERNMENT SECURITIES (5.3%) (2)
U.S. Treasury Inflation Index Bond:
1,064,710 3.38%, 1/15/07 * 1,025,411
512,510 3.88%, 4/15/29 * 508,200
10,500,000 U.S. Treasury Strip, zero coupon,
6.43% effective yield, 11/15/09 5,718,300
------------------
Total U.S. government securities 7,251,911
------------------
(cost: $7,053,027)
COLLATERALIZED MORTGAGE OBLIGATIONS (21.3%) (2)
97,258 Federal Home Loan Mtg. Corp.,
1006-C, 9.15%, 10/15/20 100,997
10,000,000 FNMA 1998-46E, 6.00%, 8/18/28 9,023,200
Vendee Mortgage Trust:
1,045,000 Series 1992-1 2K, 7.75%, 5/15/08 1,054,165
7,300,000 Series 1992-2 1F, 7.00%, 2/15/18 7,206,122
6,775,000 Series 1997-2 E, 7.50%, 5/15/24 6,667,074
5,100,000 Series 1999-1 3B, 6.50%, 2/15/20 4,889,268
------------------
Total collateralized mortgage obligations 28,940,826
------------------
(cost: $29,852,433)
- --------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
- --------------------------------------------------------------------------------
SHORT-TERM SECURITIES (0.9%) (2)
1,000,000 Fed. Home Loan Bank, 6.03%, 4/3/00 999,665
288,848 Dreyfus Cash Mgmt. Fund, 5.22% 288,848
------------------
Total short-term securities 1,288,513
------------------
(cost: $1,288,513)
Total investments in securities
(cost: $137,599,631) (7) $135,551,135
==================
* U.S. Treasury inflation-protection securities (TIPS) are securities in which
the principal amount is adjusted for inflation and the semiannual interest
payments equal a fixed percentage of the inflation-adjusted principal amount.
See accompanying notes to portfolios of investments on page 48.
14
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15
<PAGE>
[PHOTO] SIT TAX-FREE INCOME FUND
YEAR ENDED MARCH 31, 2000
----------------------------------------------------------------------
MICHAEL C. BRILLEY, SENIOR PORTFOLIO MANAGER
DEBRA A. SIT, CFA, SENIOR PORTFOLIO MANAGER
Municipal yields rose during the past 12 months. The Fund provided a return
of +1.58% for the quarter and -2.98% for the fiscal year ended March 31, 2000,
compared to +1.20% and +0.89%, respectively, for the Lehman 5-year Municipal
Index. The Fund's return, which was hurt by greater price declines in longer
duration securities and widening yield spreads in health care bonds, improved
during the most recent quarter as longer-term bond yields reversed their rising
trend. The Fund's 30-day SEC yield increased from 4.54% to 5.52% during the
year.
The rise in yields also caused the Fund's implied duration to extend from 6.9
years to 7.7 years as some of the bonds in the portfolio became priced to
maturity rather than to shorter call dates. Longer maturity holdings were sold
to contain the Fund's duration extension and the Fund's average maturity was
unchanged at 17.2 years. Although we expect the Federal Reserve to continue to
raise rates, we intend to maintain the Fund's current duration positioning in
anticipation of lower rates later this year.
Fund assets declined from $895.4 million to $582.5 million during the past 12
months due to anticipated shareholder withdrawals for tax payments, tax loss
selling in December and a significant distribution in-kind to a major group of
shareholders into a separately managed fund. Nonetheless, most sector weightings
ended the year little changed. Multifamily housing bonds increased from 25.9% to
30.5% and other revenue bonds increased from 7.8% to 11.1%. Single family
housing bonds decreased from 13.8% to 12.1% and continue to gradually be reduced
as the Fund avoids securities subject to the alternative minimum tax (AMT).
Holdings in transportation bonds were advance refunded earlier in the year and
sold at relatively low yields. Securities rated A or better decreased from 71.0%
to 60.6%, in part, as the Fund has sought to retain its positions in higher
(i.e., 6.25% to 7.25%) yielding securities and, in part, as cash (held primarily
for anticipated shareholder tax payments) decreased from 11.0% to 4.3%. Due to
recent ratings actions in the multifamily sector, the Fund held 1.1% in
securities rated less than BBB. We are monitoring these credits closely, as well
as those in the health care sector, which was subject to operating margin
pressure last year. We intend to maintain the Fund's weighting in health care
bonds as underperformance in that sector has historically been followed by a
period of strong outperformance. Our focus remains on issuers that are sole
community providers, are financially flexible and have strong managements.
Municipal bonds remain very attractively valued, particularly on an after-tax
basis. Intermediate maturity bonds are currently yielding only slightly less
than longer bonds, and we believe that bonds in the 8 to 15 year maturity range
offer the most attractive risk/reward profile.
INVESTMENT OBJECTIVE AND STRATEGY
The objective of the Tax-Free Income Fund is to provide a high level of
current income that is exempt from federal income tax, consistent with
preservation of capital, by investing in investment-grade municipal securities.
Such municipal securities generate interest that is exempt from regular
federal income taxes. Of the municipal securities in which the Fund invests,
100% will be rated investment grade at time of purchase. The Adviser does not
intend to invest in securities that generate interest income treated as a tax
preference for alternative minimum taxable income purposes.
PORTFOLIO SUMMARY
Net Asset Value 3/31/00: $ 9.57 Per Share
3/31/99: $ 10.39 Per Share
Total Net Assets: $582.5 Million
30-day SEC Yield: 5.52%
Tax Equivalent Yield: 9.14%(1)
12-Month Distribution Rate: 5.18%
Average Maturity: 17.2 Years
Duration to Estimated Avg. Life: 7.5 Years(2)
Effective Duration: 7.7 Years(2)
(1)For individuals in the 39.6% federal tax bracket.
(2) See next page.
PORTFOLIO STRUCTURE
(% OF TOTAL NET ASSETS)
[BAR CHART]
Multifamily Mortgage Revenue 30.5
Hospital/Health Care Revenue 24.5
Single Family Mortgage Revenue 12.1
Other Revenue Bonds 11.1
Education/Student Loan 5.5
Closed-End Mutual Funds 4.4
Sectors Under 3.0% 7.6
Cash & Other Net Assets 4.3
16
<PAGE>
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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** 1.58% 1.20% 2.80%
1 Year -2.98 0.89 -2.40
5 Year 5.41 5.12 4.96
10 Year 6.35 6.29 6.51
Inception 6.59 6.36 6.73
(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 -2.98% 0.89% -2.40%
5 Year 30.16 28.34 27.36
10 Year 85.17 83.96 87.92
Inception 108.38 103.25 111.61
(9/29/88)
*AS OF 3/31/00. **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 MUNI. BOND
INDEX. THE LIPPER AVERAGES AND INDICES ARE OBTAINED FROM LIPPER ANALYTICAL
SERVICES, INC., A LARGE INDEPENDENT EVALUATOR OF MUTUAL FUNDS.
(2) Duration is a measure which reflects estimated price sensitivity to a given
change in interest rates. For example, for an interest rate change of 1%, a
portfolio with a duration of 5 years would be expected to experience a price
change of 5%. Estimated average life duration is based on current interest rates
and the Adviser's assumptions regarding the expected average life of individual
securities held in the portfolio. Implied duration is calculated based on
historical price changes of securities held by the Fund. The Adviser believes
that the portfolio's implied duration is a more accurate estimate of price
sensitivity provided interest rates remain within their historical range. If
interest rates exceed the historical range, the estimated average life duration
may be a more accurate estimate of price sensitivity.
GROWTH OF $10,000
[PLOT POINTS CHART]
The sum of $10,000 invested at inception (9/29/88) and held until 3/31/00 would
have grown to $20,838 in the Fund or $20,325 in the Lehman 5-Year Municipal Bond
Index assuming reinvestment of all dividends and capital gains.
QUALITY RATINGS
(% OF TOTAL NET ASSETS)
LOWER OF MOODY'S, S&P,
FITCH OR DUFF & PHELPS
RATINGS USED.
[PIE CHART]
A 24.1%
AA 14.5%
AAA 17.7%
Cash & Other Net Assets 4.3%
Less than BBB 1.0%
BBB 38.4%
Total number of holdings: 420
17
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SIT TAX-FREE INCOME FUND
MARCH 31, 2000
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
MUNICIPAL BONDS (91.3%) (2)
ALABAMA (0.1%)
500,000 Valley Special Care Fac. Fin. Auth. Rev. Series 1997A Lanier Mem. Hosp. Proj., 5.50%, 11/1/07 $477,710
-------------
ALASKA (2.5%)
Alaska HFC:
12,505,000 Gen. Mtg. Rev. 1997 Series A, Zero Coupon, 6.15% Effective Yield on Purchase Date, 12/1/17 4,296,343
1,990,000 Hsg. Dev. Series 1997A (Multifamily pooled loans), 5.65%, 12/1/20 1,961,682
425,000 Mtg. Series 1997A1, 5.50%, 12/1/17 402,007
3,750,000 Series 1998A1, 5.30%, 12/1/17 3,613,950
310,000 AK Industrial Dev. & Export Auth. Rev. Refunding Revolving Fund Series 1993A, 5.60%, 4/1/03 313,661
Palmer Hosp. Rev. Series 1999 (Valley Hosp. Assn. Proj.) (Asset Guaranty insured):
3,150,000 5.00%, 12/1/08 3,050,775
1,100,000 5.35%, 12/1/11 1,075,107
-------------
14,713,525
-------------
ARIZONA (1.1%)
Maricopa Co. Industrial Dev. Auth. Multifamily Hsg. Rev.:
2,780,000 Series 1995A, 6.50%, 10/1/25 2,806,215
685,000 Series 1995B, 7.15%, 10/1/25 679,445
775,000 Series 1997A (Mercy Bond Prop. AZ-I Proj.), 6.25%, 7/1/27 750,309
305,000 Series 1997B (Mercy Bond Prop. AZ-I Proj.), 7.25%, 7/1/17 297,637
450,000 Series 1998A (Pines at Camelback Apts. Proj.)(Asset Guaranty insured), 5.40%, 5/1/18 416,687
500,000 Maricopa Co. Industrial Dev. Auth. Educ. Rev. Series 2000A (Arizona Charter Schools Proj. I),
6.50%, 7/1/12 501,190
1,070,000 Valley HDC Phoenix Hsg. Rev. 1979 (Roosevelt Plaza) (Section 8), 8.00%, 10/1/20 1,080,486
-------------
6,531,969
-------------
ARKANSAS (0.5%)
187,281 Drew Co. Public Fac. Bd. Single Family Mtg. Rev. Refunding Series 1993-A2 (FNMA backed),
7.90%, 8/1/11 194,418
128,085 Jacksonville Res. Hsg. Fac. Bd. Single Family Mtg. Rev. Refunding Series 1993B, 7.75%, 1/1/11 133,262
131,816 Lonoke Co. Res. Hsg. Fac. Bd. Single Family Mtg. Rev. Refunding 1993B, 7.375%, 4/1/11 136,267
1,615,000 Maumelle HDC First Lien Rev. Refunding 1992 Series A (Section 8), 7.875%, 7/1/09 1,679,552
865,000 Saline Co. Res. Hsg. Fac. Bd. Single Family Mtg. Rev. Refunding Series 1992, 7.875%, 3/1/11 892,715
-------------
3,036,214
-------------
CALIFORNIA (3.4%)
ABAG Fin. Auth. Certificates of Participation:
1,390,000 Refunding Series 1997A (American Baptist Homes of the West Proj.), 5.85%, 10/1/27 1,166,627
1,390,000 Series 1999 (Channing House Proj.), 5.375%, 2/15/19 1,174,536
1,000,000 Bell Cmty. Hsg. Auth. Rev. Series 1995A (Mobilehomes Park Acquisition Proj.), 6.40%, 10/1/15 1,020,850
1,850,000 CA Dept. of Veterans Affairs Home Mtg. Purchase Rev. Series 1999A, 5.10%, 12/1/19 1,655,177
4,330,000 CA HFA Home Mtg. Rev. Series 1999F (MBIA insured), Zero Coupon, 5.50% Effective Yield on
Purchase Date, 8/1/17 1,618,121
2,085,000 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 1,960,442
1,390,000 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 1,345,089
1,000,000 Chula Vista Redev. Agency Refunding Tax Allocation Senior Series 1994A (Bayfront-Town
Center Redev. Proj.), 7.625%, 9/1/24 1,092,540
1,200,000 Corona Single Family Mtg Rev. Subordinate Series 1996B, 6.30%, 11/1/28 1,204,644
Northern Inyo Co. Hosp. Dist. Rev. Series 1998 (ACA insured):
</TABLE>
18
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<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
275,000 5.15%, 12/1/15 247,060
290,000 5.20%, 12/1/16 259,828
17,385,000 Foothill / Eastern Transportation Corridor Agy. Toll Rd. Rev Series 1995A Prerefunded Sr. Lien,
Zero Coupon, 6.45% Effective Yield on Purchase Date, 1/1/26 3,860,687
1,850,000 Glendale Hosp. Rev. Refunding Series 1994 (Verdugo Hills Hosp.), 8.00%, 1/1/12 2,080,140
Ridgecrest Refunding Certificates of Participation Series 1999 (Ridgecrest Civic Center Proj.):
275,000 5.55%, 3/1/09 270,702
290,000 5.65%, 3/1/10 286,224
350,000 6.00%, 3/1/14 347,697
-------------
19,590,364
-------------
COLORADO (3.3%)
2,440,000 Aurora Hsg. Auth. Multifamily Hsg. Rev. Senior Series 1999A (River Falls Proj.), 5.60%, 7/1/19 2,222,913
2,040,000 Central Platte Valley Met. Dist. (Denver Co.) G.O. Series 1999 (ACA insured), 5.15%, 12/1/13 1,915,499
1,910,000 CO E-470 Business Met. Dist. G.O. Series 1999 (ACA insured), 5.00%, 12/1/11 1,784,685
1,250,000 CO Hlth. Fac. Auth. Rev. Series 1995 (Covenant Retirement Communities Proj.), 6.75%, 12/1/15 1,280,600
CO HFA Single Family Program Senior:
1,670,000 Series 1996B-2, 7.45%, 11/1/27 1,807,875
930,000 Series 1997B-3, 6.80%, 11/1/28 995,453
500,000 Series 1998A-3, 6.50%, 11/1/29 521,365
1,000,000 CO Hlth. Fac. Auth. Hosp. Rev. Series 1998 (Parkview Med. Center, Inc. Proj.), 5.15%, 9/1/13 857,090
1,400,000 CO Hlth. Fac. Auth. Rev. Series 1998B (Natl. Benevolent Assoc. Proj.), 5.25%, 2/1/18 1,121,512
600,000 Denver Hsg. Corp. Multifamily Rev. Refunding Series 1997A (Section 8), 5.35%, 10/1/12 579,846
2,780,000 Highlands Ranch Met. District #3 (Douglas Co.) (ACA insured) Refunding Series 1998B,
5.25%, 12/1/18 2,507,115
240,000 Thornton Single Family Mtg. Rev. Refunding 1992 Series A, 8.05%, 8/1/09 248,196
195,000 Vail Single Family Mtg. Rev. Refunding Series 1992, 8.125%, 6/1/10 207,490
Westminster Golf Course Activity Enterprise Rev. Series 1998:
1,390,000 5.55%, 12/1/23 1,214,485
1,025,000 5.40%, 12/1/13 957,945
1,195,000 Westminster Multifamily Hsg. Rev. Refunding Series 1992 (Ironwood at the Ranch Proj.),
7.45%, 12/1/10 1,211,551
-------------
19,433,620
-------------
CONNECTICUT (0.4%)
640,000 CT Dev. Auth. First Mtg. Gross Rev. Hlth. Care Proj. Series 1997 (Church Homes, Inc. Avery
Proj.), 5.70%, 4/1/12 572,000
675,000 CT HFA Hsg. Multifamily Mtg. Series 1995E1, 6.30%, 5/15/17 689,283
1,850,000 Mashantucket Western Pequot Tribe Subordinated Special Rev. Series 1999B, Zero Coupon,
5.05% Effective Yield on Purchase Date, 9/1/09 1,048,673
-------------
2,309,956
-------------
DISTRICT OF COLUMBIA (0.4%)
1,390,000 District of Columbia HFA Multifamily Hsg. Refunding Rev. Series 1992C (FHA
insured) (Chastleton Dev.), 6.95%, 7/1/27 1,437,663
650,000 District of Columbia Rev. Bonds Series 1999 (American Assn. of Homes & Svcs. for the
Aging, Inc. Headquarters Proj.)(ACA insured), 6.20%, 7/1/19 647,055
-------------
2,084,718
-------------
FLORIDA (1.1%)
820,000 Escambia Co. Hlth. Fac. Auth. Rev. Series 1997 (Azalea Trace, Inc. Proj.), 5.60%, 1/1/05 799,935
1,370,000 FL HFC Hsg. Rev. Refunding Series 1998O (Hunters Ridge At Deerwood Apts. Proj.), 5.25%, 12/1/18 1,232,712
Hillsborough Co. Industrial Dev. Auth. Rev. Series 1999A (University Community Hosp. Proj.):
1,250,000 4.90%, 8/15/07 1,153,237
600,000 5.20%, 8/15/10 539,874
</TABLE>
See accompanying notes to portfolios of investments on page 48.
19
<PAGE>
SIT TAX-FREE INCOME FUND
MARCH 31, 2000
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
1,000,000 Jacksonville Hlth. Fac. Auth. Industrial Dev. Rev. Series 1996A (Natl. Benevolent-Cypress
Village Proj.), 6.25%, 12/1/26 879,940
Lee Co. Industrial Dev. Auth. Hlth. Care Fac. Rev. Series 1999A (ShellPoint Village Proj.):
545,000 5.50%, 11/15/08 503,313
1,200,000 5.50%, 11/15/10 1,072,620
-------------
6,181,631
-------------
GEORGIA (2.5%)
Clayton Co. Hsg. Auth. Multifamily Hsg. Rev. Series 1999A (Magnolia Parks Apts. Proj.):
1,180,000 5.90%, 12/1/14 1,095,689
2,560,000 6.125%, 12/1/24 2,320,512
760,000 Cobb Co. HA Multifamily Rev. Refunding Series 1992A (Signature Place Project), 6.875%, 10/1/17 772,441
Conyers Hsg. Auth. Rev. Senior Lien Series 1999A (RHA/Affordable Hsg., Inc. Proj.)
(QBE insured), Mandatory Put 10/1/09:
1,000,000 5.60%, 10/1/39 968,540
1,530,000 5.95%, 10/1/39 1,522,335
Dekalb Co. Hsg. Auth. Multifamily Hsg. Rev. (Regency Woods I & II):
1,430,000 Senior Series 1996A, 6.375%, 1/1/11 1,449,434
1,320,000 Subordinate Series 1996C, 7.25%, 1/1/26 1,304,622
3,935,000 Fulton Co. Non-Profit Elderly Rev. Series 1998 (Campbell Stone Buckhead Personal Care
Fac. Proj.) (GNMA collateralized), 7.75%, 11/20/39 4,283,877
Royston Hosp. Auth. Rev. Refunding Series 1999 (Ty Cobb Healthcare Sys., Inc. Proj.):
325,000 6.00%, 7/1/04 318,656
335,000 6.125%, 7/1/09 320,059
-------------
14,356,165
-------------
HAWAII (0.6%)
1,170,000 Hawaii Dept. of Budget and Finance Special Purpose Rev. Series 1998,
(Wilcox Memorial Hosp. Proj.), 5.25%, 7/1/13 997,168
1,400,000 Hawaii St. Hsg. Fin. & Dev. Corp. Single Family Mtg. Purchase Series 1997B, 5.45%, 7/1/17 1,319,248
1,210,000 Honolulu Mtg. Rev. Ref. Series 1996A (Hale-Pauahi Proj.)(FHA insured)
(MBIA insured), 6.80%, 7/1/28 1,264,292
-------------
3,580,708
-------------
ILLINOIS (8.6%)
Broadview Village of Cook Co. Tax Increment Rev. Series 1999:
750,000 4.90%, 7/1/06 715,725
1,000,000 5.00%, 7/1/07 948,570
1,085,000 5.05%, 7/1/08 1,023,307
2,030,000 5.10%, 7/1/09 1,904,282
1,430,000 Chicago Res. Mtg. Rev. Refunding Series 1992B (MBIA insured) Zero Coupon, 7.30% Effective
Yield on Purchase Date, 10/1/09 746,560
1,600,000 Collinsville (City of) Madison Co. Industrial Dev. Rev. Refunding (Drury Inn-Collinsville
Proj.) Series 1993, 6.00%, 11/1/04 1,585,360
1,535,000 IL DFA Elderly Hsg. Rev. Refunding Series 1995A (Pontiac Towers Proj.)
(Section 8), 6.65%, 10/1/09 1,573,943
IL DFA Refunding & New Money Rev. (Cmty. Rehab. Providers Fac. Acquisition Program):
8,870,000 Series 1997A, 6.00%, 7/1/15 7,851,990
1,000,000 Series 1997A, 6.05%, 7/1/19 882,490
1,200,000 Series 1997C, 5.65%, 7/1/19 1,007,712
3,935,000 Series 1998A, 5.70%, 7/1/19 3,324,760
</TABLE>
20
<PAGE>
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<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
2,015,000 Series 1998A, 5.50%, 7/1/12 1,780,212
IL Educ. Fac. Auth. Rev.:
5,555,000 Series 1994 (Lewis University Proj.), 6.00%, 10/1/24 5,159,206
1,115,000 Series 1998B (Midwestern University Proj.), 5.50%, 5/15/18 1,013,736
1,000,000 Series 1998 (Augustana College Proj.), 5.00%, 10/1/13 898,950
1,390,000 Series 1998 (Augustana College Proj.), 5.25%, 10/1/18 1,241,631
2,780,000 IL HDA Elderly Hsg. Rev. Series 1992C (Village Ctr.) (Section 8), 6.85%, 3/1/20 2,841,243
IL HDA Multifamily Hsg. Rev.:
Refunding 1991 Series C (Section 8):
260,000 7.35%, 7/1/11 269,953
100,000 7.40%, 7/1/23 103,786
IL Hlth. Fac. Auth. Rev.:
Refunding Series 1993 (Lutheran Social Svcs. IL):
610,000 5.70%, 8/15/00 610,878
475,000 5.80%, 8/15/01 476,335
525,000 6.00%, 8/15/03 526,685
545,000 6.10%, 8/15/04 546,564
1,000,000 Refunding Series 1994 (Passavant Memorial Area Hospital Assn.), 5.95%, 10/1/11 1,017,600
Series 1994-1996 (St. Elizabeth's Hosp. of Chicago, Inc.):
700,000 Series 1996, 6.25%, 7/1/10 712,089
1,215,000 Series 1996, 6.25%, 7/1/16 1,191,806
2,135,000 Refunding Series 1998 (Midwest Physician Group Ltd. Proj.), 5.375%, 11/15/08 1,978,184
1,000,000 Refunding Series 1998 (Centegra Hlth. Proj.), 5.25%, 9/1/18 844,080
1,000,000 Refunding Series 1999 (Silver Cross Hosp. & Med. Ctrs.), 5.375%, 8/15/15 884,480
1,850,000 Roselle Multifamily Hsg. Rev. Refunding Series 1994A (GNMA collateralized)
(Waterbury Apts.) (FHA insured), 7.00%, 1/1/25 1,944,517
4,865,000 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 4,731,261
175,000 Urbana Res. Mtg. Rev. Refunding 1991 Series B Zero Coupon, 7.39% Effective Yield on
Purchase Date, 3/1/07 107,076
-------------
50,444,971
-------------
INDIANA (6.7%)
Elkhart Co. Hosp. Auth. Rev.:
1,665,000 Series 1992 (Goshen Hosp. Proj.), 7.25%, 7/1/05 1,725,772
3,705,000 Series 1998 (Elkhart General Hosp., Inc. Proj.), 5.25%, 8/15/18 3,230,130
2,005,000 Elkhart HFC Multifamily Mtg. Rev. Series 1996A (Section 8 Assisted
Proj.) (Stratford Commons), 6.00%, 11/1/10 2,003,316
IN Bond Bank Special Prgm.:
1,975,000 Series 1997C (Pittsboro Wastewater Treatment Plant Proj.), 5.70%, 8/1/17 1,938,186
1,390,000 Series 1997B (Hendrick's Co. Redev. Auth.-Pittsboro Proj.)(LOC Canadian Imperial Bank),
6.20%, 2/1/23 1,400,745
2,175,000 IN DFA Educ. Fac. Rev. Series 1997 (Park Tudor Foundation Proj.), 6.00%, 6/1/22 2,183,918
IN Educ. Fac. Auth. Educ. Fac. Rev. Series 1992 (Manchester College Proj.):
250,000 6.50%, 10/1/05 256,745
305,000 6.60%, 10/1/06 313,598
175,000 6.85%, 10/1/18 179,380
IN Hlth. Fac. Fin. Auth. Hosp. Rev.:
Series 1992 (Fayette Mem. Hosp. Proj.):
250,000 7.00%, 10/1/02 255,215
295,000 7.10%, 10/1/03 299,912
</TABLE>
See accompanying notes to portfolios of investments on page 48.
21
<PAGE>
SIT TAX-FREE INCOME FUND
MARCH 31, 2000
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
315,000 7.20%, 10/1/04 323,978
390,000 7.30%, 10/1/07 401,852
420,000 7.30%, 10/1/08 432,764
1,850,000 Series 1992 (Mem. Hosp. & Hlth. Care Ctr. Proj.), 7.35%, 3/1/12 1,894,826
500,000 Refunding Series 1998 (Floyd Mem. Hosp. & Hlth. Svcs. Proj.), 5.40%, 2/15/18 445,515
3,475,000 Refunding Series 1998 (Jackson Co. Schneck Proj.), 5.125%, 2/15/17 2,781,182
1,850,000 Refunding Series 1998 (Marquette Manor Proj.), 5.00%, 8/15/18 1,547,784
1,220,000 Series 1998 (Governor Daviess Co. Hosp. Proj.) (Asset Guaranty insured), 5.00%, 1/1/14 1,117,447
1,485,000 Series 1999A (Deaconess Hosp. Obligated Group), 5.75%, 3/1/19 1,352,627
1,000,000 Series 1999D (Charity Obligated Group), 5.50%, 11/15/11 992,310
465,000 IN HFA Home Mtg. Prog. Series 1990F-1 (GNMA collateralized), 7.50%, 1/1/16 477,560
750,000 IN HFA Single Family Mtg. Rev. Refunding Series 1992A, 6.80%, 1/1/17 766,770
IN Hlth. Fac. Fin. Auth. Rev. Refunding Series 1998 (Greenwood Village South Proj.):
490,000 5.00%, 5/15/03 478,426
140,000 5.15%, 5/15/04 135,684
150,000 5.25%, 5/15/06 142,826
170,000 5.35%, 5/15/08 158,825
2,545,000 Indianapolis Econ. Dev. Refunding & Imprv. Rev. Series 1992 (Natl. Benevolent
Assn.-Robin Run Village Proj.), 7.25%, 10/1/10 2,605,545
Indianapolis Econ. Dev. Rev. (Willowbrook Apts. Proj.):
1,850,000 Senior Series 1996A, 6.50%, 7/1/16 1,822,435
1,325,000 Subordinate Series 1996C, 7.125%, 7/1/26 1,319,342
3,705,000 La Porte Co. Hosp. Auth. Fac. Rev. Refunding Series 1993, 6.00%, 3/1/23 3,207,456
760,000 Marion HC Mtg. Rev. Refunding Series 1994 (Hilltop Towers Proj.)(Section 8), 6.90%, 10/1/10 777,548
2,085,000 St. Joseph Co. Hosp. Auth. Hlth. Fac. Rev. Series 1999 (Madison Center, Inc. Proj.),
5.45%, 2/15/12 1,828,649
-------------
38,798,268
-------------
IOWA (1.3%)
1,390,000 IA Fin. Auth. Small Business Dev. Refunding Rev. Series 1992 (University Civic Ctr. Court
Assn. Proj.), 7.40%, 3/1/17 1,464,629
IA Fin. Auth. Hlth. Care Fac. Rev. Series 1997 (Natl. Benevolent Assn.- Ramsey Home Proj.):
1,430,000 6.15%, 5/1/17 1,270,169
2,240,000 6.35%, 5/1/27 1,972,298
1,130,000 IA Fin. Auth. Multifamily Hsg. Rev. Refunding Series 1997A (Kingswood Apts. Proj.)
(GNMA-collateralized), 6.15%, 5/1/32 1,131,480
300,000 Keokuk Hosp. Fac. Rev. Refunding Series 1998B (Keokuk Area Hosp. Proj.), 5.40%, 12/01/15 275,289
1,390,000 Ottumwa Hosp. Rev. Refunding Series 1993 (Ottumwa Regional Hlth. Ctr.), 6.00%, 10/1/10 1,300,095
-------------
7,413,960
-------------
KANSAS (0.2%)
40,000 Geary Co. Single Family Mtg. Rev. 1980 (FGIC insured), 10.75%, 4/1/12 40,425
1,010,000 Kansas City Single Family Mtg. Rev. Series 1982A Zero Coupon, 11.23% Effective Yield on
Purchase Date, 11/1/14 200,504
Newton Hosp. Rev. Refunding Series 1998A (Newton Medical Ctr. Proj.):
425,000 5.13%, 11/15/06 401,454
250,000 5.25%, 11/15/08 231,937
1,295,000 Olathe & Labette Cos. Mtg. Loan Rev. 1991 Series B (GNMA collateralized) Zero Coupon, 7.56%
Effective Yield on Purchase Date, 2/1/23 244,820
-------------
1,119,140
-------------
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KENTUCKY (0.2%)
1,850,000 KY Econ. Dev. Fin. Auth. Hosp. Sys. Rev. Series 1997 (Appalachian Regional Hlthcare. Proj.),
5.85%, 10/1/17 1,441,169
-------------
LOUISIANA (1.5%)
680,000 Calcasieu Parish Industrial Dev. Rev. 1975 (Cities Service Co. Proj.), 7.80%, 12/1/05 682,890
5,235,000 Denham Springs/Livingston HMFA Residual Rev. Series 1992C Zero Coupon,
7.65% Effective Yield on Purchase Date, 7/10/14 1,835,077
1,415,000 East Baton Rouge Single Family Mtg. Rev. Refunding Series 1997C-3 Subordinate Bonds,
5.65%, 10/1/18 1,346,457
3,705,000 Houma-Terrebonne Public Trust Fin. Auth. Residual Rev. Series 1992C Zero Coupon, 7.60%
Effective Yield on Purchase Date, 7/10/14 1,286,376
495,000 LA HFA Residual Lien Refunding Mtg. Rev. Series 1992, 7.375%, 9/1/13 507,929
1,780,000 LA HFA Single Family Mtg. Rev. Series 1999B (GNMA/FNMA collateralized) (Home Ownership
Program Proj.), 5.55%, 12/1/24 1,706,771
130,483 LA PFA Single Family Mtg. Rev. Series 1992 (Lafayette PTFA Mtg. Acquisition), 7.50%, 10/1/15 135,438
1,290,000 LA PFA Rev. Multifamily Hsg. Rev. Series 1991 (VOA Hsg. Corp.) (Asset Guaranty insured),
7.25%, 11/1/04 1,341,381
-------------
8,842,319
-------------
MAINE (0.2%)
1,000,000 South Berwick Educ. Rev. Series 1998 (Berwick Academy Issue), 5.25%, 8/1/13 913,720
-------------
MARYLAND (0.2%)
MD Econ. Dev. Corp. Student Hsg. Rev.:
1,000,000 Series 1999A (Collegiate Hsg. Foundation - Towson Proj.), 5.70%, 6/1/12 972,410
470,000 Series 1999A (Collegiate Hsg. Foundation - University Courtyard Proj.), 5.20%, 6/1/07 454,415
-------------
1,426,825
-------------
MASSACHUSETTS (1.0%)
1,000,000 MA Dev. Finance Agency Rev. Series 1999 (Eastern Nazarene College Issue), 5.625%, 4/1/19 895,290
MA Hlth. & Educ. Fac. Auth. Rev.:
Series 1998A (Vinfen Corp. Proj.) (ACA insured):
440,000 5.10%, 11/15/11 402,072
310,000 5.20%, 11/15/12 282,860
485,000 5.30%, 11/15/13 441,961
1,365,000 Series 1998B (Cape Cod Hlth. Care Proj.), 5.25%, 11/15/13 1,174,091
1,000,000 Series 1998C (Milford-Whitinsville Regional Hosp. Issue), 5.75%, 7/15/13 875,220
700,000 MA Industrial Finance Agency Rev. Series 1998 (Belmont Hill School Issues), 5.15%, 9/1/13 660,625
Rail Connections, Inc. Route 128 Parking Garage Rev. Series 1999A:
250,000 5.00%, 7/1/06 240,375
1,105,000 5.125%, 7/1/07 1,064,734
-------------
6,037,228
-------------
MICHIGAN (2.8%)
1,305,000 Detroit Econ. Dev. Corp. Limited Obligation Rev. Refunding Series 1992 (E.H. Associates
Ltd. Partnership Proj.), 7.00%, 6/1/12 1,305,209
1,930,000 Flint Hosp. Bldg. Auth. Rev. Refunding Series 1998A (Hurley Medical Ctr. Proj.), 5.25%, 7/1/16 1,561,235
Grand Rapids Charter Township Econ. Dev. Corp. Rev. Series 1999 (Porter Hills Obligated Group
Cook Valley Estates Proj.):
800,000 5.20%, 7/1/14 734,168
2,315,000 5.35%, 7/1/19 2,039,515
</TABLE>
See accompanying notes to portfolios of investments on page 48.
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John Tolfree Hlth. System, Mtg. Rev. & Refunding Series 1999:
295,000 5.25%, 9/15/04 282,315
395,000 5.30%, 9/15/05 373,974
665,000 MI Hosp. Fin. Auth. Hosp. Rev. and Refunding Series 1998 (Chelsea Cmty. Hosp.
Proj.), 5.35%, 5/15/13 567,917
2,780,000 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 2,637,553
700,000 MI State Hosp. Fin. Auth. Rev. Series 1997 (Presbyterian Vlgs. of Mich. Oblig. Group Proj.),
6.375%, 1/1/15 651,854
1,480,000 MI Strategic Fund Ltd. Obligation Rev. Series 1997A (NSF Intl. Proj.) (LOC First Bank of
America), 5.75%, 8/1/19 1,437,864
2,095,000 Southfield Econ. Dev. Corp. Ltd. Obligation Rev. Series 1998A (Lawrence Tech. Univ. Proj.),
5.25%, 2/1/13 1,901,443
2,545,000 Troy City EDC Econ. Dev. Rev. Refunding Series 1992 (Drury Inn-Troy Proj.)
(Lincoln Natl. Corp.), 6.75%, 10/1/12 2,641,608
-------------
16,134,655
-------------
MINNESOTA (1.9%)
3,410,000 Dakota Co. HRA Multifamily Mtg. Rev. Refunding Series 1997A (Park Place
Apts. Proj.)(GNMA Collateralized), 6.875%, 2/20/32 3,601,335
740,000 Hopkins Multifamily Hsg. Rev. Series 1996 (Hopkins Renaissance Proj.)(Section 8), 6.375%, 4/1/20 753,934
1,235,000 MN HFA Single Family Mtg. Series 1998A, 5.20%, 1/1/17 1,169,323
1,213,111 Moorhead Single Family Mtg. Rev. Refunding Series 1992B, 7.00%, 8/1/11 1,247,855
2,315,000 Plymouth Multifamily Hsg. Dev. Rev. Refunding Series 1996A (GNMA collateralized)
(Fox Forest Apts. Proj.), 8.05%, 6/20/31 2,570,229
1,625,000 South Washington Co. ISD #833, (Cottage Grove) Lease Refunding Series 1998 (Asset
Guaranty insured), 5.25%, 12/1/14 1,595,555
-------------
10,938,231
-------------
MISSISSIPPI (0.9%)
750,000 Jones Co. Hosp. Rev. Series 1997 (South Central Regional Med. Ctr. Proj.), 5.50%, 12/1/17 633,180
465,000 Lincoln Co. Hosp. Rev. Refunding Series 1998A (Kings Daughter Hosp. Proj.), 5.20%, 4/1/08 457,653
965,000 MS Business Fin. Corp. Hlth. Fac. Rev. Series 1998 (Rush Medical Fdn., Proj.), 5.125%, 7/1/08 874,830
MS Hosp. Equip. and Fac. Auth. Rev. (Rush Medical Fdn. Proj.):
1,795,000 Refunding Series 1997A, 6.00%, 1/1/16 1,580,731
1,390,000 Series 1997B, 6.00%, 1/1/16 1,224,076
305,000 MS Home Corp. Single Family Mtg. Rev. Series 1995G (GNMA collateralized), 6.10%, 6/1/16 308,520
-------------
5,078,990
-------------
MISSOURI (1.8%)
1,000,000 Kansas City Port Hlth. Series 1995A (Riverfront Park Proj.), 5.75%, 10/1/00 1,005,690
MO Hlth. & Educ. Fac. Auth. Educ. Fac. Rev.:
545,000 Series 1998 (Southwest Baptist University Proj.) (ACA insured), 5.40%, 10/1/14 515,238
1,000,000 Series 1999 (Rockhurst Univ.) (Asset Guaranty insured), 5.10%, 10/1/19 918,020
1,000,000 Series 1999 (Park College Proj.), 5.55%, 6/1/09 973,610
1,825,000 MO. HDC Single Family Rev. Series 1997C-1 (GNMA collateralized), 6.55%, 9/1/28 1,917,108
MO Environmental Impt. & Energy Res. Auth. Water Fac. Rev. Refunding Series 1999
(Tri -Co. Water Auth Proj.) (Asset Guaranty insured):
425,000 5.50%, 4/1/06 431,498
400,000 5.50%, 4/1/07 405,796
1,055,000 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 1,093,877
30,000 St. Louis Co. Single Family Res. Mtg. Series 1984 (MBIA insured), 6.75%, 4/1/10 30,592
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St. Louis Co. Industrial Dev. Auth. Hlth. Care Fac. Rev. Refunding Series 1999 (Nazareth
Living Ctr. Proj.):
200,000 5.10%, 8/15/07 184,230
200,000 5.15%, 8/15/08 181,906
St. Louis Industrial Dev. Auth. Tax-Exempt Impt. Rev. Series 1998 (St. Louis Zoo Fdn.)(LOC
Nationsbank):
1,000,000 5.10%, 8/15/12 935,550
800,000 5.15%, 8/15/13 747,088
1,000,000 St. Louis Muni Fin. Corp. Leasehold Rev. Refunding Series 1993A. 5.85%, 7/15/09 1,023,600
-------------
10,363,803
-------------
MONTANA (0.2%)
1,000,000 Crow Finance Auth. Tribal Purpose Revenue Series 1997A, 5.70%, 10/1/27 918,890
-------------
NEBRASKA (0.1%)
750,000 Scotts Bluff Co. Hosp. Auth. #1 Rev. Series 1998 (Regl. West Med. Ctr. Proj.), 5.125%,
11/15/12 680,685
-------------
NEVADA (1.3%)
NV Hsg. Dev. SF Mtg. Program:
1,470,000 Sr. Series 1995A-1, 6.45%, 10/1/18 1,497,283
1,575,000 Sr. Series 1998B-1, 5.25%, 10/1/17 1,448,087
1,045,000 Mezzanine Series 1998B-1, 5.30%, 4/1/16 971,442
800,000 Mezzanine Series 1999A-1, 5.10%, 10/1/17 718,648
1,495,000 Mezzanine Series 1999B-1, 5.15%, 10/1/17 1,350,972
Reno Redev. Agency Subordinate Tax Allocation and Rev. Refunding Series 1995A:
400,000 6.00%, 6/1/08 408,612
1,000,000 6.125%, 6/1/12 1,011,560
-------------
7,406,604
-------------
NEW HAMPSHIRE (2.4%)
NH Higher Educ. & Hlth. Fac. Auth. Rev.:
620,000 Series 1997 (Catholic Charities Issue), 5.75%, 8/1/12 553,077
6,020,000 Series 1993 (Nashua Memorial Hosp. Proj.), 6.00%, 10/1/23 5,524,735
4,730,000 NH HFA Single Family Res. Mtg. 1982 Series A Zero Coupon, 11.75% Effective Yield on
Purchase Date, 1/1/14 1,519,796
NH Higher Educ. & Hlth. Fac. Auth. Rev.:
1,020,000 Series 1998 (New Hampton School), 5.00%, 10/1/08 962,574
2,010,000 Series 1998 (River College Proj.), 5.55%, 1/1/18 1,831,271
4,700,000 Series 1998 (Cheshire Med. Ctr. Proj.), 5.125%, 7/1/18 4,028,135
-------------
14,419,588
-------------
NEW JERSEY (0.6%)
1,225,000 NJ EDA Rev. Refunding Bonds Series 1997A (Harrogate, Inc. Proj.), 5.875%, 12/1/26 1,043,173
NJ EDA First Mtg. Rev. Series 1998C (Fellowship Village Proj.):
410,000 4.95%, 1/1/06 383,416
155,000 5.05%, 1/1/07 143,660
250,000 5.15%, 1/1/08 228,298
335,000 5.20%, 1/1/09 304,080
440,000 5.25%, 1/1/10 394,143
1,050,000 NJ Hlth. Care Fac. Financing Auth. Rev. Refunding Series 1997A (Christian Hlth. Care
Center Proj.), 5.50%, 7/1/18 871,532
-------------
3,368,302
-------------
</TABLE>
See accompanying notes to portfolios of investments on page 48.
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NEW MEXICO (1.1%)
359,000 Hobbs Single Family Mtg. Rev. Refunding Series 1992, 8.75%, 7/1/11 381,710
1,110,000 NM Hosp. Equip. Loan Council Equip. & Imprv. Rev. Refunding Series 1996 (Rehoboth
McKinley Hosp.), 6.30%, 8/1/10 1,063,202
3,705,000 NM MFA Forward Mortgage-Backed Series 1995E (GNMA collateralized), 6.95%, 1/1/26 4,011,366
1,215,000 Sante Fe Educ. Fac. Rev. Series 1998 (St. Johns College Proj.), 5.40%, 3/1/17 1,085,870
-------------
6,542,148
-------------
NEW YORK (0.4%)
Monroe Co. Industrial Dev. Agy. Student Hsg. Rev. Series 1999A (Collegiate Hsg. Fdn. -
Rochester Institute of Technology Proj.):
170,000 4.90%, 4/1/09 158,282
360,000 5.00%, 4/1/10 335,786
NYC Industrial Dev. Agy. Civic Fac. Rev. Series 1999 (Good Shepherd Services Proj.):
500,000 5.125%, 6/1/04 487,445
1,445,000 5.60%, 6/1/09 1,412,314
-------------
2,393,827
-------------
OHIO (2.1%)
Akron Certificates of Participation Series 1996 (Akron Municipal Baseball Stadium Proj.):
2,780,000 Zero Coupon Convertible, 6.50% Effective Yield on Purchase Date, 12/1/16 2,526,798
1,000,000 Zero Coupon Convertible, 6.15% Effective Yield on Purchase Date, 12/1/07 938,970
1,000,000 Cleveland-Cuyahoga Port. Auth. Dev. Rev. Series 1999A (Port of Cleveland Bond Fund Capital
Imprv. Proj.), 5.375%, 5/15/19 852,970
1,000,000 Hamilton CO. Hlth. Care Fac. Refunding & Impt. Series 1998A (Twin Towers Proj.), 5.125%, 10/1/18 859,020
Franklin Co. Hlth. Care Fac. Rev. & Impt.:
530,000 Series 1998 (Friendship Village of Columbus Proj.), 5.25%, 8/15/12 462,451
300,000 Series 1998 (Friendship Village of Columbus Proj.), 5.25%, 8/15/18 236,127
1,000,000 Franklin Co. Mtg. Rev. Series 1997E (GNMA collateralized)(The Villas of St. Therese Proj.),
5.90%, 6/20/39 979,400
1,390,000 Marion Co. Hosp. Impt. Rev. Refunding Series 1996 (Cmty. Hosp. of Springfield Proj.),
6.375%, 5/15/11 1,326,060
OH Capital Corp. for Hsg. Mtg. Rev. Refunding (FHA insured)(Section 8):
1,455,000 Series 1995G, 6.35%, 7/1/22 1,487,839
1,420,000 Series 1998E, 5.40%, 2/1/23 1,288,522
1,100,000 OH Water Dev. Auth. Rev. Series 1987A (MBIA insured) (Safe Water Proj.), 5.00%, 12/1/12 1,071,730
-------------
12,029,887
-------------
OKLAHOMA (1.6%)
1,850,000 Muskogee Co. HFA Single Family Mtg. Rev. Refunding 1990 Series A (FGIC insured) Zero
Coupon, 7.65% Effective Yield on Purchase Date, 6/1/11 820,938
1,000,000 OK Co. Industrial Auth. Hlth. Care Rev. Series 1999 (Natl. Benevolent Assoc. - OK Christian
Home Proj.), 5.50%, 2/1/24 792,780
OK Ind. Auth. Hosp. Rev. Bonds Series 1997A (Deaconess Hlth. Care Proj.):
2,030,000 5.50%, 10/1/12 1,775,235
1,850,000 5.75%, 10/1/17 1,558,755
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 1,143,075
320,000 Payne Co. Home Loan Auth. Single Family Rev. Refunding Series 1993A, 8.625%, 3/1/11 331,917
2,355,000 Tulsa Public Facilities Auth. Recreational Fac. Rev. Series 1985, 6.20%, 11/1/12 2,418,420
550,000 Tulsa Public Fac. Auth. Solid Waste Steam & Electric Rev. Series 1985 (Ogden Martin Systems of
Tulsa, Inc. Proj.) (AMBAC insured), 6.70%, 5/1/01 551,007
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9,392,127
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OREGON (0.8%)
3,705,000 Cow Creek Band Umpqua Tribe of Indians Rev. Series 1998B (AMBAC insured), 5.10%, 7/1/12 3,564,914
1,070,000 Portland Hsg. Auth. Multifamily Rev. Series 1997A (Civic Apts. Proj.), 5.70%, 1/1/28 1,003,467
-------------
4,568,381
-------------
PENNSYLVANIA (7.1%)
325,000 Butler Co. Hosp. Auth. Hlth. Care Ctr. Rev. Refunding Series 1993 (St. Francis Med. Ctr.
Proj.), 5.65%, 5/1/02 324,106
1,190,000 Chester Co. Hlth. & Educ. Fac. Auth. Mtg. Rev. Refunding Series 1998, (Tel Hai
Obligated Group Proj.), 5.00%, 6/1/08 1,089,742
Columbia Co. Hosp. Auth. Hlth. Care Rev. Series 1999 (Bloomsburg Hosp. Obligated Group Proj.):
665,000 5.00%, 6/1/04 633,831
575,000 5.15%, 6/1/07 528,310
1,390,000 5.60%, 6/1/12 1,218,446
3,795,000 Cumberland Co. Muni Auth. Rev. Series 1996 (Presbyterian Homes Proj.), 6.00%, 12/1/26 3,263,928
1,285,000 Dauphin Co. Gen. Auth. Hlth. Sys. Rev. Series 1999 (Pinnacle Hlth. Sys. Proj.), 5.125%, 8/15/17 1,186,775
Grove City Area Hosp. Auth. Rev. Series 1998 (United Cmty. Hosp. Proj.):
810,000 4.75%, 7/1/06 751,340
2,750,000 5.25%, 7/1/12 2,403,940
Hazleton Hlth. Svc. Auth. Hosp. Rev. :
1,000,000 Series 1997 (Hazleton General Hosp. Proj.), 5.625%, 7/1/17 825,530
2,250,000 Series 1996 (Hazleton - St. Joseph Med. Ctr.), 6.20%, 7/1/26 1,919,542
Horizon Hosp. System Auth. Hosp. Rev. Series 1996 (Horizon Hosp. Sys.):
600,000 5.95%, 5/15/06 593,634
715,000 6.15%, 5/15/08 707,085
710,000 6.25%, 5/15/09 702,034
1,145,000 6.30%, 5/15/11 1,094,276
1,540,000 6.35%, 5/15/16 1,411,364
1,650,000 McKean Co. Hosp. Rev. Refunding Series 1994 (Bradford Hosp. Proj.), 6.10%, 10/1/20 1,412,384
Montgomery Co. Redev. Auth. Multifamily Hsg. Rev. 1993 Series A (KBF Assoc. L.P.):
250,000 6.375%, 7/1/12 247,150
1,390,000 6.40%, 7/1/14 1,369,428
1,320,000 New Wilmington Muni. Auth. College Rev. Series 1998 (Westminister College), 5.05%, 3/1/12 1,191,300
PA Econ. Dev. Fin. Auth. Rev. Series 1998A (Northwestern. Human Services Proj.):
2,265,000 5.25%, 6/1/09 2,077,707
2,370,000 5.30%, 6/1/10 2,145,490
2,485,000 5.35%, 6/1/11 2,221,764
PA Hgr. Educ. Fac. Auth. Hlth. Svcs. Rev. Series 1996A (Allegheny Delaware Valley),
(Obligated Group, Inc.)(MBIA insured):
3,890,000 5.875%, 11/15/16 3,904,043
1,100,000 5.875%, 11/15/21 1,092,729
1,250,000 Philadelphia Auth. for Industrial Dev. Rev. Refunding Series 1998A (FHA Insured)
(Elmira Jeffries Mem. Home Proj.), 5.30%, 2/1/22 1,103,225
1,260,000 Philadelphia Redevelopment Auth. Multifamily Hsg. Rev. Refunding Series 1998
(FHA insured - Woodstock Mutual Homes Inc. Proj.), 5.45%, 2/1/23 1,156,768
Pittsburgh Urban Redev. Auth. (Center Triangle Tax Increment Fin. District) (LOC PNC Bank):
2,780,000 Series 1995A, 6.00%, 12/1/11 2,813,165
1,740,000 Series 1995B, 6.25%, 3/15/15 1,760,584
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41,149,620
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</TABLE>
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<S> <C>
RHODE ISLAND (1.1%)
1,850,000 RI Hlth. & Educ. Bldg. Corp. Hosp. Fin. Rev. Series 1997 (Steere House Proj.), 5.70%, 7/1/15 1,597,716
500,000 Refunding Series 1998 (Roger Williams Hosp. Proj.), 5.20%, 7/1/09 452,735
1,400,000 Series 1998 (Roger Williams Hosp. Proj.), 5.50%, 7/1/18 1,147,300
Series 1999 (St. Joseph's Hlth. Svcs.):
1,640,000 5.40%, 10/1/09 1,483,905
2,085,000 5.75%, 10/1/14 1,811,427
-------------
6,493,083
-------------
SOUTH CAROLINA (0.8%)
North Charleston Muni. Golf Course Mtg. Rev. Series 1998:
1,465,000 5.00%, 5/1/09 1,363,476
2,780,000 5.50%, 5/1/19 2,445,205
1,390,000 SC Jobs Econ. Dev. Auth. Econ. Dev. & Rev. Refunding Series 1998A
(Westminister Presbyterian Center Inc. Project), 5.25%, 11/15/16 1,125,539
-------------
4,934,220
-------------
SOUTH DAKOTA (1.0%)
1,850,000 SD Hlth. & Educ. Fac. Auth. Rev. Refunding Series 1998 (Prairie Lakes Hlth. Care
System), 5.45%, 4/1/13 1,654,936
SD HDA Homeownership Mtg. Series 1998D:
1,150,000 5.20%, 5/1/20 1,065,372
3,670,000 5.25%, 5/1/28 3,325,864
-------------
6,046,172
-------------
TENNESSEE (5.1%)
1,600,000 Metro. Govt. of Nashville & Davidson Cos. Industrial Dev. Board Rev. Refunding,
Multifamily Mtg. Rev. 92C (FHA insured) (Picadilly Apts.), 6.95%, 7/1/27 1,680,656
3,555,000 Metro. Govt. of Nashville & Davidson Cos. Hlth. & Educ. Series 1998 (Asset Guaranty insured),
(Open Arms Dev. Ctrs. Proj.), 5.00%, 8/1/12 3,306,612
Shelby Co. Hlth., Educ. & Hsg. Fac. Board Multifamily Hsg. Rev.:
1,390,000 (Cameron Hsg. Proj.), Senior Series 1997A, 5.90%, 7/1/18 1,330,035
(CME Memphis Apts. Proj.):
1,850,000 Senior Series 1998A, 5.35%, 1/1/19 1,678,801
7,875,000 Senior Series 1998A, 5.55%, 1/1/29 7,056,000
1,660,000 Subordinate Series 1998C, 6.00%, 1/1/29 1,496,905
(Eastwood Park Apts. Proj.):
1,000,000 Senior Series 1995 A2, 6.40%, 9/1/25 994,960
415,000 Subordinate Series 1995C, 7.50%, 9/1/25 403,957
(Raleigh Forest & Sherwood Apts. Proj.):
2,670,000 Senior Series 1996A, 6.60%, 1/1/26 2,692,161
645,000 Subordinate Series 1996C, 7.25%, 1/1/26 635,293
(Raleigh Woods Apts. Proj.):
5,555,000 Series 1997A (GNMA collateralized), 7.75%, 3/20/27 6,118,055
(The Corners Apts. Proj.):
1,055,000 Senior Series 1996A, 6.25%, 1/1/27 1,037,382
335,000 Subordinate Series 1996C, 6.375%, 1/1/27 309,034
3,205,000 TN HDA Homeownership Program Series 1997 Issue 3B Zero Coupon,
5.725% Effective Yield on Purchase Date, 7/1/16 1,193,927
-------------
29,933,778
-------------
</TABLE>
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<CAPTION>
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QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
TEXAS (11.8%)
1,195,000 Baytown HFC Single Family Mtg. Rev. Refunding Series 1992B, 8.50%, 9/1/11 1,274,886
Bell Co. Hlth. Fac. Dev. Corp. Retirement Fac. Rev. Series 1998 (Buckner Retirement Services,
Inc. Obligated Group, Proj.):
1,000,000 5.00%, 11/15/11 909,300
2,995,000 5.25%, 11/15/19 2,501,574
Beaumont HA Multifamily Mtg. Rev. Series 1993A (Section 8):
1,365,000 6.65%, 11/1/07 1,393,269
650,000 6.75%, 11/1/10 661,674
1,635,000 Bexar Co. HFC Residual Rev. Series 1993 Zero Coupon, 6.50% Effective Yield
on Purchase Date, 3/1/15 594,372
1,000,000 Bexar Co. HFC MF Hsg. Rev. Ref. Series 1995 (Windridge Apts. Proj.) (FNMA collateralized),
5.125%, 12/15/21 876,910
1,005,000 Brazos Co. Hlth. Fac. Dev. Corp. Rev. Series 1997A (Franciscan Svcs. Corp.) (MBIA insured),
5.375%, 1/1/17 964,720
1,610,000 Collin Co. HFC Student Hsg. Rev. Series 1998A (Cmty. Coll. Dist. Fdn. Proj.)(ACA insured),
5.25%, 6/1/23 1,398,253
545,000 Columbus Cmty. Industrial Dev. Corp. Sales Tax Rev. Series 1998 (Bank Qualified), 5.70%,
11/1/18 505,629
Dallas Hsg. Corp. Capital Program Revenue Bonds:
1,410,000 Series 1995A (Estell Village Apts.) (Section 8), 7.875%, 12/1/09 1,423,353
1,385,000 Series 1995 (Cedar Glen Apts.) (Section 8), 7.75%, 12/1/09 1,397,313
1,000,000 Dallas HFC Cap. Proj. Refunding 1990 (Section 8), 7.85%, 8/1/13 1,023,430
6,343,000 Dallas HFC Multifamily Mtg. Rev. Series 1998A (GNMA collateralized) (Towne
Ctr. Apts. Proj.), 6.75%, 10/20/32 6,633,827
1,000,000 Galveston Special Contract Refunding Rev. Series 1998 (Farmland Industries, Inc. Proj.),
5.50%, 5/1/15 887,120
Harris Co. HFC Multifamily Rev. (Windfern Pointe & Waterford Place Projs.):
1,850,000 Senior Series 1999A, 5.15%, 7/1/09 1,776,185
1,390,000 Senior Series 1999A, 5.90%, 7/1/19 1,304,779
2,130,000 Subordinated Series 1999C, 6.60%, 7/1/29 2,004,160
1,480,000 Harrison Co. Hlth. Fac. Dev. Corp. Rev. Series 1998 (Marshall Regional Med. Ctr. Proj.)
(ACA insured), 5.50%, 1/1/18 1,326,731
600,000 Houston HFC Single Family Mtg. Rev. Refunding Series 1996B-1, 8.00%, 6/1/14 625,086
1,575,000 Lubbock HFC Multifamily Hsg. Rev. Refunding Series 1992A (Los Colinas, Park Ridge Place &
Quail Creek), 7.75%, 1/1/22 1,598,342
1,850,000 Lufkin Hlth. Sys. Rev. Series 1998 (Memorial Hlth. Sys. Of East Texas), 5.70%, 2/15/28 1,439,041
Midland HFC Single Family Mtg. Rev. Refunding:
354,309 Series 1992 A-2, 8.45%, 12/1/11 386,586
185,313 Series 1992, 9.00%, 9/1/01 188,209
245,861 Series 1992 B2, 8.15%, 12/1/11 254,921
Mesquite Hlth. Fac. Dev. Corp. Retirement Fac. Rev. Series 1996A (Christian Care Ctrs. Proj.):
1,000,000 6.30%, 2/15/12 958,830
1,000,000 6.40%, 2/15/16 935,230
500,000 6.40%, 2/15/20 458,755
7,272,000 Nortex Hsg. Fin. Corp. Multifamily Hsg. Rev. Series 1999 (GNMA collateralized) (Highland
Oaks Apts. Proj.), 6.75%, 9/20/32 7,753,625
1,135,000 North Central Hlth. Fac. Dev. Corp. Rev. Series 1998A (C.C. Young Memorial Home Proj.),
5.375%, 2/15/14 947,600
951,751 Odessa HFC Single Family Mtg. Rev. Refunding Series 1992B Class B-2, 8.125%, 11/1/11 991,163
Panhandle Regional HFC Multifamily Hsg.:
</TABLE>
See accompanying notes to portfolios of investments on page 48.
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MARCH 31, 2000
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<TABLE>
<CAPTION>
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QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
475,000 Senior Series 2000A, 6.25%, 3/1/10 477,408
250,000 Subordianate Series 2000C, 8.125%, 3/1/31 251,298
650,000 San Marcos HA Multifamily Mtg. Rev. Series 1993A (FHA insured) (Section 8), 5.80%, 11/1/10 636,896
7,875,000 Tarrant Co. Hlth. Fac. Dev. Corp. Hosp. Rev. Series 1998 (Adventist Hlth. System/Sunbelt
Obligated Group Proj.), 5.375%, 11/15/20 6,555,938
TX Dept. Hsg. & Cmnty. Affairs Multifamily Hsg. Rev.:
1,915,000 Senior Series 1996A (Dallas - Ft. Worth Apts. Pool Proj.), 6.50%, 7/1/16 1,942,787
2,315,000 Senior Series 1996A (Dallas - Ft. Worth Apts. Pool Proj.), 6.50%, 7/1/26 2,335,256
945,000 Subordinated Series 1996C (Harbors & Plumtree Apts. Proj.), 7.375%, 7/1/26 930,305
2,610,000 Senior Series 1996A (Harbors & Plumtree Apts. Proj.), 6.45%, 7/1/26 2,631,219
2,965,000 Series 1996A (NHP Foundation - Asmara Apts. Proj.), 6.40%, 1/1/27 3,012,232
Victoria Hosp. Rev. Series 1999 (Citizens Med. Ctr. Proj.):
870,000 4.80%, 2/15/06 810,057
1,020,000 5.00%, 2/15/08 930,209
3,205,000 5.40%, 2/15/12 2,821,041
-------------
68,729,519
-------------
UTAH (0.3%)
600,000 Intermountain Power Agency Power Supply Rev. Refunding Series 1986F (AMBAC insured), 5.00%, 7/1/13 573,072
Salt Lake Co. College Rev. Series 1999 (Westminister College Proj.):
120,000 5.15%, 10/1/11 111,764
125,000 5.20%, 10/1/12 115,651
130,000 5.25%, 10/1/13 119,597
825,000 5.50%, 10/1/19 739,571
-------------
1,659,655
-------------
VERMONT (0.1%)
420,000 VT Educ. & Hlth. Bldgs. Financing Agency Rev. Series 1998 (Norwich Univ. Proj.), 5.13%, 7/1/09 397,727
-------------
VIRGINIA (1.1%)
2,315,000 Suffolk Redev. & Hsg. Auth. Multifamily Res. Rental Hsg. Rev. Series 1998 (Brook Ridge,
LLC Proj.) (ACA Insured), 5.25%, 10/1/18 2,089,056
1,850,000 Prince William Co. Ind. Dev. Auth. Multifamily Hsg. Rev. Series 1998A (Melrose
Apts. Proj.), 5.35%, 7/1/23 1,670,125
Chesterfield Co. Industrial Dev. Auth. Multifamily Hsg. Mtg. Rev. Series 1999
(Winchester Greens Townhouses Proj.):
1,155,000 5.30%, 7/1/24 1,028,008
1,850,000 5.40%, 1/1/31 1,652,253
-------------
6,439,442
-------------
WASHINGTON (4.9%)
Grant Co. Public Hosp. Dist. #1 Rev. Series 1998 (Samaritan Hosp. Proj.) (Asset Guaranty
insured):
1,020,000 5.25%, 9/1/13 969,959
2,780,000 5.25%, 9/1/19 2,510,173
2,315,000 King Co. Hsg. Auth. Pooled Hsg. Refunding Rev. Series 1998A (Asset Guaranty insured),
5.05%, 7/1/13 2,137,625
2,780,000 Kitsap Co. Consolidated Hsg. Auth. Pooled Hsg. Refunding Rev. Series 1998A, 5.50%, 12/1/18 2,554,764
2,640,000 Quinault Indian Nation Tax-Exempt Impt. & Refunding Rev. Series 1999A (Quinault Beach
Resort Proj.) (ACA Insured), 5.80%, 12/1/15 2,532,816
2,470,000 Snohomish Co. Hsg. Auth. Rev. Series 1999A (Millwood Estates Proj.), 5.40%, 6/1/19 2,278,032
Vancouver (Clark Co.) H.A. Pooled Hsg. Refunding Rev. Series 1998A Senior Bonds :
1,000,000 5.40%, 3/1/18 918,170
3,240,000 5.50%, 3/1/28 2,877,995
</TABLE>
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<S> <C>
1,000,000 WA HFC Nonprofit Housing Revenue Series 1995A (Judson Park Proj.)(LOC US Bk. Wash.),
6.90%, 7/1/16 1,030,040
WA Hlth. Care Fac. Auth. Rev.:
1,850,000 Series 1996 (Grays Harbor Hosp. Proj.)(Asset Guaranty insured), 5.70%, 7/1/16 1,818,680
Series 1998:
500,000 (Harrison Memorial Hosp.) (AMBAC insured), 5.00%, 8/15/18 449,900
1,715,000 (Highline Cmmty. Hosp. Proj.)(Asset Guaranty insured), 5.25%, 8/15/17 1,572,072
WA Hsg. Finance Commission Nonprofit Hsg. Rev.:
1,000,000 Series 1997A (Virginia Mason Research Center Proj.)(LOC US Bank), 5.70%, 1/1/24 929,030
1,390,000 Series 1998 (Cmty. Colleges of Spokane Fdn. Proj.)(LOC US Bank), 5.20%, 7/1/18 1,226,772
1,355,000 Series 1998A (WA Odd Fellows Home Proj.) (LOC US Bank), 5.05%, 7/1/18 1,198,172
1,000,000 Refunding Series 1999A (Presbyterian Ministries, Inc.) (ACA insured), 5.45%, 1/1/29 866,350
1,850,000 WA HFC Single Family Program Series 1999-4N (GNMA/FNMA collateralized), 5.55%, 12/1/16 1,792,391
1,000,000 WA Public Power Supply Sys. Nuclear Proj. #3 Rev. Refunding Series 1993C, 5.375%, 7/1/15 966,100
-------------
28,629,041
-------------
WEST VIRGINIA (0.6%)
5,220,000 Huntington Res. Mtg. Rev. Series 1991 Prerefunded, Escrowed to Maturity, Zero Coupon,
7.37% Effective Yield on Purchase Date, 9/1/12 2,167,709
1,850,000 Mason Co. Residual Rev. Series 1992C Zero Coupon, 7.58% Effective Yield on Purchase Date,
7/10/14 643,134
2,780,000 Ohio Co. Residual Rev. Series 1992C Zero Coupon, 7.43% Effective Yield on Purchase Date,
7/10/14 970,887
-------------
3,781,730
-------------
WISCONSIN (3.6%)
WI HEDA Home Ownership Rev.:
3,990,000 Series 1992A, 7.10%, 3/1/23 4,101,760
2,960,000 Series 1998A, 5.38%, 9/1/17 2,816,854
1,095,000 Series 1999C, 5.00%, 9/1/17 1,004,203
2,765,000 Series 1999F, 5.50%, 10/1/17 2,671,626
WI Hlth. & Educ. Fac. Auth. Rev. :
750,000 Series 1996 (Meriter Hosp. Inc.), 6.00%, 12/1/17 729,255
1,620,000 Series 1997 (St. John's Home & Sunrise Care), 5.625%, 12/15/22 1,362,679
1,550,000 Series 1999 (Divine Savior Hosp. & Nursing Home Proj., Inc.), 5.65%, 6/1/19 1,262,739
Series 1999 (FH Healthcare Dev. Inc. Proj.):
1,395,000 5.25%, 11/15/04 1,347,765
1,020,000 5.625%, 11/15/09 948,600
Series 1999 (Kenosha Hosp. & Med. Ctr., Inc. Proj.):
670,000 5.00%, 5/15/06 640,667
705,000 5.10%, 5/15/07 671,668
740,000 5.15%, 5/15/08 700,521
820,000 5.35%, 5/15/10 774,826
865,000 5.45%, 5/15/11 814,942
1,000,000 Series 1999 (Monroe Clinic Inc., Proj.), 5.125%, 2/15/16 842,250
-------------
20,690,355
-------------
Total municipal bonds (cost: $566,579,541) 531,854,640
-------------
</TABLE>
See accompanying notes to portfolios of investments on page 48.
31
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MARCH 31, 2000
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PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
CLOSED-END MUTUAL FUNDS (4.4%) (2)
82,500 American Municipal Income Portfolio 979,687
163,900 American Municipal Term Trust 2001 1,720,950
13,300 American Municipal Term Trust II 2002 139,650
147,000 American Municipal Term Trust III 2003 1,488,375
272,300 Blackrock Insured Municipal Term Trust 2008 3,778,162
277,100 Blackrock Insured Municipal Term Trust 2010 2,667,087
653,700 Blackrock Municipal Target Term Trust 2006 6,291,862
2,500 Dreyfus Municipal Income Fund 18,437
23,000 Dreyfus Strategic Municipals Fund 184,000
14,000 Duff & Phelps Utilities Income Fund 182,875
46,000 Morgan Stanley Dean Witter Muni Income Opportunities II 333,500
7,200 Morgan Stanley Dean Witter Muni Income Opportunities III 55,350
313,300 Van Kampen Merritt Municipal Opportunity Trust 4,151,225
303,400 Van Kampen Merritt Strategic Sector Municipal Trust 3,394,288
-------------
Total closed-end mutual funds (cost: $28,539,507) 25,385,448
-------------
SHORT-TERM SECURITIES (2.2%) (2)
8,862,654 Dreyfus Tax-Exempt Cash Management Fund, 3.50% 8,862,654
3,955,772 Northern Institutional Tax-Exempt, 3.53% 3,955,772
-------------
Total short-term securities (cost: $12,818,426) 12,818,426
-------------
Total investments in securities (cost: $607,937,474) (7) $570,058,514
=============
</TABLE>
See accompanying notes to portfolios of investments on page 48.
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33
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[PHOTO] SIT MINNESOTA TAX-FREE INCOME FUND
YEAR ENDED MARCH 31, 2000
----------------------------------------------------------------------
MICHAEL C. BRILLEY, SENIOR PORTFOLIO MANAGER
DEBRA A. SIT, CFA, SENIOR PORTFOLIO MANAGER
Municipal yields rose during the past 12 months. The Fund provided a return
of +1.68% for the quarter and -2.84% for the fiscal year ended March 31, 2000,
compared to +1.20% and +0.89%, respectively, for the Lehman 5-year Municipal
Index. The Fund's return, which was hurt by greater price declines in longer
duration securities and widening yield spreads in health care bonds, improved
during the most recent quarter as longer-term bond yields reversed their rising
trend. The Fund's 30-day SEC yield rose from 4.52% to 5.42% during the year.
The rise in yields also caused the Fund's implied duration to extend from 6.8
years to 7.1 years as some of the bonds in the portfolio became priced to
maturity rather than to shorter call dates. Longer maturity holdings were sold
to keep the Fund's duration from extending further, causing the Fund's average
maturity to decrease from 17.7 years to 16.6 years. Although we expect the
Federal Reserve to continue to raise rates, we intend to maintain the Fund's
current duration positioning in anticipation of lower rates later this year.
Fund assets declined from $271.3 million to $172.9 million during the past 12
months due to anticipated withdrawals for tax payments, tax loss selling in
December and a significant exchange by a major group of shareholders into a
separately managed fund. Nonetheless, most sector weightings ended the year
little changed. Cash was 10.6% on March 31, 2000 as a result of recent inflows,
compared with 11.9% held one year ago, in part, for anticipated shareholder tax
payments. Multifamily housing bonds increased from 34.0% to 37.5%, while single
family housing bonds decreased from 11.0% to 9.5%. Securities rated A or better
decreased from 54.5% to 52.1% as non-rated holdings increased from 37.0% to
40.0%. The Fund has sought to retain its positions in higher (i.e., 6.50% to
7.50%) yielding securities while preserving liquidity as well. Thus, non-rated
holdings will likely remain around their current weighting. We continue to
monitor credits closely, particularly those in the health care sector, which was
subject to operating margin pressure last year. We intend to maintain the Fund's
weighting in health care bonds as underperformance in that sector has
historically been followed by a period of strong outperformance. Our focus
remains on issuers that are sole-community providers, are financially flexible
and have strong managements.
Municipal bonds remain very attractively valued, particularly on an after-tax
basis. Intermediate maturity bonds are currently yielding only slightly less
than longer bonds, and we believe that bonds in the 8 to 15 year maturity range
offer the most attractive risk/reward profile.
INVESTMENT OBJECTIVE AND STRATEGY
The investment objective of the Minnesota Tax-Free Income Fund is to
provide a high level of current income exempt from federal regular income tax
and Minnesota regular personal income tax as is consistent with the preservation
of capital.
The Fund will endeavor to invest 100% of its assets in municipal
securities, the income from which is exempt from federal regular income tax and
Minnesota regular personal income tax. The Fund anticipates that substantially
all of its distributions to its shareholders will be exempt as such. For
investors subject to the alternative minimum tax ("AMT"), up to 20% of the
Fund's income may be alternative minimum taxable income.
PORTFOLIO SUMMARY
Net Asset Value 3/31/00: $ 9.73 Per Share
3/31/99: $ 10.55 Per Share
Total Net Assets: $172.9 Million
30-day SEC Yield: 5.42%
Tax Equivalent Yield: 9.75%(1)
12-Month Distribution Rate: 5.19%
Average Maturity: 16.6 Years
Duration to Estimated Avg. Life: 7.0 Years(2)
Effective Duration: 7.1 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)
[BAR CHART]
Multifamily Mortgage Revenue 37.5
Hospital/Health Care Revenue 21.5
Single Family Mortgage Revenue 9.5
Other Revenue Bonds 6.0
Industrial Revenue/Pollution Control 4.2
Education/Student Loan 3.5
Sectors Under 3.0% 7.2
Cash & Other Net Assets 10.6
34
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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** 1.68% 1.20% 2.57%
1 Year -2.84 0.89 -2.26
3 Year 3.81 4.71 4.04
5 Year 4.95 5.12 4.67
Inception 4.98 4.70 4.17
(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 -2.84% 0.89% -2.26%
3 Year 11.89 14.80 12.61
5 Year 27.35 28.34 25.63
Inception 36.04 33.76 29.54
(12/1/93)
*AS OF 3/31/00. **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
[PLOT POINTS CHART]
The sum of $10,000 invested at inception (12/1/93) and held until 3/31/00 would
have grown to $13,604 in the Fund or $13,376 in the Lehman 5-Year Municipal Bond
Index assuming reinvestment of all dividends and capital gains.
QUALITY RATINGS
(% OF TOTAL NET ASSETS)
LOWER OF MOODY'S,
S&P, FITCH OR DUFF &
PHELPS RATINGS USED.
[PIE CHART]
A 11.1% ASSESSMENT OF
AA 13.8% NON-RATED
AAA 16.6% SECURITIES
Cash & Other Net Assets 10.6%
Not Rated 40.0% AAA 0.4
BBB 7.9% AA 0.3
A 2.3
BBB 23.3
BB 12.6
B 1.1
----------
TOTAL 40.0
35
<PAGE>
SIT MINNESOTA TAX-FREE INCOME FUND
MARCH 31, 2000
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
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QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
MUNICIPAL BONDS (87.3%) (2)
EDUCATION/STUDENT LOAN (3.5%)
Minnesota Higher Educ. Fac. Auth. Rev. :
750,000 Series 1997-4L (St. John's University), 5.35%, 10/1/17 $716,535
2,600,000 Series 1998-4T (College of St. Benedict), 5.35%, 3/1/20 2,360,098
458,000 Lease Rev. Series 1999-5A (Concordia University), 5.25%, 4/25/14 420,755
Series 1999-4Y (Augsburg College):
700,000 5.05%, 10/1/13 636,769
500,000 5.20%, 10/1/16 454,570
275,000 Series 1999-4Z (Northwestern College of Chiropractic), 5.20%, 10/1/13 256,094
St. Paul Hsg. & Redev. Auth. Lease Rev.:
1,000,000 Series 1999 (ACORN Dual Language Academy Proj.), 6.30%, 11/1/17 955,990
175,000 Series 2000A (New Spirit Schools Proj.), 9.00%, 12/1/02 176,748
165,000 Winona Port. Auth. Lease Rev. Series 1999A (Bluffview Montessori School Proj.), 8.00%, 12/1/24 168,529
-------------
6,146,088
-------------
ESCROWED TO MATURITY/PREREFUNDED (1.0%)
100,000 Anoka Industrial Dev. Rev. Series 1994 (Lund Industries Inc. Proj.), 6.40%, 9/1/03 (4) 104,514
75,000 Minneapolis Multifamily Hsg. Rev. Series 1991 (Trinity Hsg. Proj.)
(Section 8), 7.875%, 2/1/06 78,539
485,000 St. Paul Port Authority Hotel Fac. Senior Rev. Series 1996A (Radisson Kellogg Proj.),
7.00%, 8/1/01 494,268
1,100,000 University of Minnesota Rev. Series 1986A, 6.00%, 2/1/11 1,103,443
-------------
1,780,764
-------------
GENERAL OBLIGATION (0.9%)
570,000 Carver Co. Hsg. & Redev. Auth. Hsg. & Dev. Gross Rev. Ltd.Tax G.O.
(Chanhassen Apts. Proj.), 7.00%, 1/1/25 575,671
1,000,000 St. Paul ISD No. 625 G.O. Series 1997A, 5.125%, 2/1/15 970,220
-------------
1,545,891
-------------
HOSPITAL/HEALTH CARE (21.5%)
700,000 Bemidji Hosp. Fac. Rev. Refunding Series 1996 (North Country Hlth. Proj.), 5.625%, 9/1/21 637,182
Brooklyn Center Hlth. Care Fac. Rev. Series 1993 (Maranatha Proj.):
50,000 6.75%, 12/1/05 50,052
500,000 7.50%, 12/1/10 507,130
620,000 Cambridge Hsg. & Hlth. Care Fac. Rev. Series 1998C (Grandview West Proj.), 5.25%, 10/1/08 569,234
625,000 Clearwater Co. Hlth. Care Fac. Gross Rev. Series 1999, 5.90%, 11/1/15 537,800
1,290,000 Cokato Sr. Hsg. Rev. Series 1996 (Cokato Charitable Trust Proj.), 7.00%, 12/1/19 1,258,937
1,510,000 Columbia Heights Multifamily & Health Care Fac. Rev. Series 1998 (Crest View Corp. Proj.),
5.75%, 9/1/11 1,391,601
1,000,000 Cuyuna Range Hosp. Dist. Hlth. Fac. Gross Rev. Series 1999A, 6.00%, 6/1/19 853,600
1,000,000 Dakota Co. Hsg. & Redev. Auth. Hlth. Care Fac. Rev. Refunding Series 1997 (South Suburban
Medical Ctr. Proj.), 6.75%, 8/1/17 953,340
715,000 Eden Prairie Hlth. Care Fac. Rev. Bonds Series 1998 (Castle Ridge Care Proj.), 5.70%, 7/1/18 590,847
140,000 Edina Hlth. Care Fac. Rev. Series 1995 (Volunteers of America Care Proj.), 7.875%, 3/1/19 141,049
</TABLE>
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<S> <C>
Elk River Rev. Series 1998 (Care Choice Member Proj.):
1,500,000 5.60%, 8/1/13 1,302,690
1,400,000 5.70%, 8/1/18 1,157,604
325,000 5.75%, 8/1/23 264,872
215,000 Fergus Falls Hlth. Care Fac. Auth. Rev. Refunding Series 1993A
(Lake Region Hosp. Corp. Proj.), 6.25%, 9/1/04 218,051
650,000 Fergus Falls Hlth. Care Fac. Auth. Series 1995 (LRHC Long-Term Care Fac. Proj.), 6.40%, 12/1/15 622,388
Hastings Hlth. Care Fac. Rev. Series 1998 (Augustana Home of Hastings Proj.):
115,000 5.10%, 11/1/09 103,338
120,000 5.20%, 11/1/10 106,913
135,000 5.40%, 11/1/12 118,587
140,000 5.50%, 11/1/13 122,654
60,000 5.60%, 11/1/18 48,897
1,095,000 5.75%, 11/1/23 886,994
1,455,000 5.875% 11/1/28 1,186,029
565,000 Hastings Hlth. Care Fac. Rev. Series 1998 (Regina Med. Ctr.)(ACA insured), 5.25%, 9/15/18 499,663
635,000 Hopkins Hlth. Care Fac. Rev. Series 1999 (Augustana Chapel View Homes, Inc. Proj.),
6.00%, 3/1/14 568,922
1,685,000 Maplewood Hlth. Care Fac. Rev. (VOA Care Ctrs. Proj.), 7.375%, 10/1/12 1,711,758
Marshall Medical Center Gross Rev. Series 1999 (Weiner Memorial Medical Center Proj.):
305,000 5.65%, 11/1/13 267,293
320,000 5.70%, 11/1/14 279,059
1,000,000 5.80%, 11/1/19 834,460
1,045,000 Minneapolis Hlth. Care Fac. Rev. Series 1993 (St. Olaf Res. Proj.), 7.00%,10/1/18 1,002,636
1,000,000 Minneapolis Hlth. Care Fac. Rev. Series 1998A (Benchmark Hlth. Care Proj.), 6.625%, 12/1/28 849,060
1,210,000 Minneapolis Hlth. Care Fac. Rev. Series 1999 (Shelter Care Foundation Proj.), 6.00%, 4/1/10 1,115,838
1,500,000 Minneapolis Pooled Rev. Series 1999 (CareChoice Member Proj.), 5.625%, 4/1/14 1,311,135
Minneapolis Rev. Series 1998A (Walker Methodist Senior Services Obligated Group):
905,000 5.10%, 11/15/07 822,817
1,110,000 5.10%, 11/15/08 990,853
140,000 5.50%, 11/15/12 119,690
1,600,000 5.875%, 11/15/18 1,337,664
MN Agr. & Econ. Dev. Board Hlth. Care Rev. Series 1999 (Benedictine Care Centers Proj.):
115,000 5.45%, 2/1/09 105,506
120,000 5.45%, 8/1/09 109,267
120,000 5.50%, 2/1/10 108,668
125,000 5.50%, 8/1/10 112,266
130,000 5.55%, 2/1/11 116,273
130,000 5.55%, 8/1/11 115,331
135,000 5.60%, 2/1/12 119,410
2,355,000 5.90%, 2/1/19 2,002,009
495,000 5.75%, 2/1/29 395,941
1,000,000 New Hope Hsg. & Hlth. Care Fac. Rev. Series 1999 ( MN Masonic Home North Ridge Proj.),
5.75%, 3/1/15 856,810
</TABLE>
See accompanying notes to portfolios of investments on page 48.
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MARCH 31, 2000
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<S> <C>
Olmstead Co. Hlth. Care Fac. Rev. Series 1998 (Olmsted Medical Ctr. Proj.):
650,000 5.45%, 7/1/13 559,754
1,125,000 5.55%, 7/1/19 911,273
Red Wing Hlth. Care Ctr. Fac. Rev. Refunding (River Region Obligated Group):
125,000 Series 1993A, 6.20%, 9/1/05 125,961
130,000 Series 1993A, 6.30%, 9/1/06 131,295
200,000 Series 1993B, 6.20%, 9/1/05 201,538
St. Paul Hsg. & Redev. Auth. Hlth. Care Rev. Series 1998 (Regions Hosp. Proj.):
500,000 5.00%, 5/15/10 443,365
1,540,000 5.20%, 5/15/13 1,328,558
2,850,000 5.25%, 5/15/18 2,305,679
960,000 St. Paul Hsg. & Redev. Auth. Nursing Home Dev. Rev. Refunding Series 1996C
(Franciscan Hlth. Cmmty. Proj., St. Mary's Home), 7.00%, 7/1/21 918,048
820,000 Wadena Co. Hlth. Care Fac. Rev. Series 1994B, 7.45%, 9/1/15 838,745
-------------
37,146,334
-------------
INDUSTRIAL /POLLUTION CONTROL (4.2%)
1,000,000 Anoka Co. Solid Waste Disp. Rev. Series 1987A (Natl. Rural Util. Proj.), 6.95%, 12/1/08 (4) 1,028,750
265,000 Duluth Commercial Dev. Rev. Refunding Series 1995A (Radisson Hotel Proj.), 7.00%, 12/1/00 255,184
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) 106,278
500,000 Series 1997C Lot 3 (DynaGraphics), 6.20%, 8/1/09 (4) 502,420
400,000 Series 1998A Lot 1 (Formative Engineering Corp.), 5.75%, 8/1/18 (4) 369,700
Medina Industrial Dev. Rev. Refunding Series 1998 (Temroc Metals, Inc. Proj.):
210,000 5.10%, 10/1/05 (4) 199,372
705,000 5.25%, 10/1/08 (4) 653,570
400,000 5.60%, 10/1/12 (4) 367,108
1,000,000 Minneapolis Commercial Dev. Rev. Refunding Series 1997 (Holiday Inn Metrodome Proj.),
6.00%, 12/1/01 1,000,970
Owatonna Industrial Dev. Rev. Series 1997:
280,000 7.25%, 5/1/14 (4) 277,712
505,000 7.375%, 5/1/17 (4) 500,652
200,000 Richfield Cmty. Dev. Rev. Refunding 1994 (Richfield Shoppes Proj.), 8.375%, 10/1/05 210,214
275,000 Sauk Centre Industrial Dev. Rev. Series 1998 (Seluemed LLP Proj.)(LOC US Bank), 5.75%, 4/1/18 (4) 251,669
500,000 St. Paul Hsg. & Redev. Auth. District Cooling Rev. Series 1998J, 5.35%, 3/1/18 465,315
1,070,000 St. Paul Port Authority Hotel Fac. Rev. Series 1999-2 (Radisson
Kellogg Proj.), 6.375%, 8/1/03 1,064,757
-------------
7,253,671
-------------
MULTIFAMILY MORTGAGE (37.5%)
200,000 Andover Elderly Hsg. Rev. Series 1997 (Presbyterian Homes of Andover, Inc. Proj.),
5.35%, 12/1/08 188,332
1,520,000 Apple Valley Multifamily Hsg. Rev. Refunding Series 1998A (Mtg. Loan/Apple Valley
Villa Proj.) (GNMA collateralized), 5.25%, 8/1/18 1,389,417
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<S> <C>
500,000 Aurora Hsg. & Redev. Auth. Multifamily Rev. (Irongate Apts. Proj.) (Section 8), 6.10%, 10/1/19 490,510
500,000 Austin Hsg. & Redev. Auth. Governmental Hsg. Gross Rev. Series 1995A (Courtyard Res. Proj.),
7.25%, 1/1/26 509,695
1,000,000 Bloomington Multifamily Hsg. Rev. Refunding Series 1998A (Hampshire Apts. Proj.),
6.20%, 12/1/31 888,170
960,000 Burnsville Multifamily Hsg. Rev. Refunding Series 1994 (Bridgeway Apts. Proj.), 7.25%, 2/1/14 966,010
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 1,405,411
650,000 Rev. Refunding Series 1997A (Waybury Apts. Proj.), 5.875%, 8/1/27 620,639
2,630,000 Series 1998 (GNMA collateralized)(Jonathan Acres Proj.), 5.30%, 4/20/33 2,308,824
400,000 Subordinate Rev. Refunding Series 1997C (Waybury Apts. Proj.), 8.00%, 8/1/27 382,480
495,000 Chaska Multifamily Hsg. Rev. Series 1999 (West Suburban Hsg. Partners Proj.), 5.375%, 9/1/14 (4) 458,865
405,000 Chisago City Hlth. Fac. Rev. Refunding Series 1995A (Pleasant Heights Proj.),
7.30%, 7/1/18 410,152
700,000 Coon Rapids Multifamily Hsg. Rev. Refunding Series 1997A (Margaret Place Apts. Proj.),
6.50%, 5/1/25 665,175
Coon Rapids Senior Hsg. Rev. Refunding Series 1998 (Epiphany Sr. Citizens Hsg. Corp. Proj.):
115,000 5.30%, 11/1/07 106,017
115,000 5.40%, 11/1/08 105,171
170,000 5.50%, 11/1/10 151,463
545,000 5.80%, 11/1/18 463,980
235,000 Dakota Co. Hsg. & Redev. Auth. Multifamily Hsg. Rev. Refunding (Walnut Trails Apts. Proj.),
Series 1995C Subordinate, 9.00%, 1/20/15 (4) 234,375
1,000,000 Dakota Co. Hsg. & Redev. Auth. Multifamily Hsg. Rev.
Series 1999 (View Pointe Apts. Proj.), 6.125%, 11/1/17 919,300
Eden Prairie Multifamily Hsg. Rev. Refunding :
55,000 Series 1990A (Welsh Parkway Apts. Ltd. Proj.)(FHA insured), 8.00%, 7/1/26 56,802
700,000 Series 1991 (Windslope Apts. Proj.)(Section 8), 7.00%, 11/1/06 728,623
1,500,000 Series 1991 (Windslope Apts. Proj.)(Section 8), 7.10%, 11/1/17 1,550,445
300,000 Series 1997A (Preserve Place Proj.) (GNMA collateralized), 5.50%, 1/20/18 283,071
1,035,000 Series 1997A (Preserve Place Proj.) (GNMA collateralized), 5.60%, 7/20/28 953,815
Grand Rapids Hsg. & Redev. Auth. (Lakeshore Place and Forest Park West Apts. Proj.):
95,000 Series 1999B, 5.00%, 10/1/09 89,641
500,000 Series 1999A, 5.20%, 10/1/19 449,610
1,660,000 Series 1999A, 5.30%, 10/1/29 1,462,875
110,000 Series 1999B, 5.70%, 10/1/29 96,694
275,000 Harmony Multifamily Hsg. Rev. Refunding Series 1997A (Zedakah Fdn. Proj.) (Section 8),
5.80%, 9/1/13 268,975
545,000 Hopkins Subordinate Multifamily Hsg. Rev. Refunding Series 1996C (Auburn Apts. Proj.),
8.00%, 6/20/31 550,107
Hopkins Multifamily Hsg. Rev. Series 1996 (Hopkins Renaissance Proj.) (Section 8):
100,000 5.85%, 4/1/09 100,569
450,000 6.25%, 4/1/15 456,489
</TABLE>
See accompanying notes to portfolios of investments on page 48.
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MARCH 31, 2000
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500,000 Hutchinson Hsg. Fac. Rev. Series 1994 (Prince of Peace Proj.), 7.375%, 10/1/12 506,365
3,795,000 Little Canada Multifamily Hsg. Rev. Series 1997A (Hsg. Alt. Dev. Co. Proj.), 6.10%, 12/1/17 3,509,123
1,650,000 Maplewood Multifamily Hsg. Rev. Series 1998 (Park Edge Apts. Proj.), 6.50%, 5/1/29 (4) 1,546,017
Maplewood Multifamily Refunding Rev. (Village on Woodlyn Proj.):
1,605,000 Series 1999A (GNMA collateralized), 6.75%, 7/20/30 (4) 1,651,368
100,000 Subordinate Series 1999C-1, 8.00%, 11/1/30 (4) 99,536
275,000 Subordinate Series 1999C-2, 8.00%, 11/1/30 (4) 273,724
Minneapolis Multifamily Hsg. Rev.:
355,000 Series 1996 (Belmont Apts.), 7.25%, 11/1/16 351,596
Series 1994 (Findley Place Townhomes Proj.) (Section 8):
50,000 6.00%, 12/1/05 (4) 48,275
1,115,000 7.00%, 12/1/16 (4) 1,032,423
1,550,000 Series 1996A (Nicollet Towers) (Section 8), 6.00%, 12/01/19 1,525,262
4,190,000 Series 1998A (University Village) (GNMA collateralized), 5.30%, 8/1/23 3,751,433
3,220,000 Series 1998 (Riverside Plaza Proj.) (GNMA collateralized), 5.10%, 12/20/18 (4) 2,886,408
MN HFA Rental Hsg. Rev.:
175,000 Series 1993C, 6.15%, 2/1/14 175,245
115,000 Series 1993E, 6.00%, 2/1/14 115,613
4,005,000 Series 1998A, 5.375%, 8/1/28 3,595,569
815,000 Minnetonka Hsg. Fac. Rev. Series 1994 (Beacon Hill Housing Proj.), 7.00%, 6/1/04 826,312
495,000 Minnetonka Multifamily Hsg. Rev. Refunding Subordinate Series 1994C (Brier Creek Proj.),
8.00%, 12/20/16 505,959
Minnetonka Multifamily Hsg. Rev. Refunding Series 1999A (GNMA collateralized) (Archer
Heights Apts. Proj.):
540,000 5.10%, 7/20/13 (4) 507,627
975,000 5.20%, 1/20/18 (4) 887,309
210,000 Mora Multifamily Rev. Refunding Hsg. Alternatives Partnership Series 1995, 6.50%, 6/1/02 209,183
New Ulm Multifamily Rev. Series 1999 (HADC Ridgeway Proj.):
95,000 5.35%, 12/1/08 89,603
100,000 5.40%, 12/1/09 94,308
105,000 5.50%, 12/1/10 98,692
110,000 5.60%, 12/1/11 102,918
650,000 6.125%, 12/1/19 593,866
Plymouth Multifamily Hsg. Rev. Refunding Series 1996A (Fox Forest Apts. Proj.) (GNMA
collateralized):
750,000 Series 1996A, 8.05%, 6/20/31 832,688
685,000 Series 1996C, 8.00%, 6/20/31 691,418
960,000 Robbinsdale Multifamily Hsg. Rev. Series 1996A (Copperfield Hill Proj.), 7.20%, 12/1/16 931,824
Roseville Hsg. Fac. Rev. Refunding Bonds Series 1998 (College Properties Inc. Proj.):
2,820,000 5.60%, 10/1/13 2,444,376
400,000 5.625%, 10/1/18 328,200
325,000 Sandstone Econ. Dev. Auth. Hsg. & Dev. Rev. Series 1994A (Family Apts. Proj.), 8.00%, 1/1/12 339,004
1,500,000 St. Anthony Hsg. Dev. Rev. Refunding (Autumn Woods Proj.) (Asset Gty. insured), 6.875%, 7/1/22 1,561,695
500,000 St. Cloud Hsg. & Redev. Auth. Hsg. Rev. Refunding Series 1998 (Northway Manor Apts. Section 8
Assisted Proj.), 5.15%, 12/1/14 467,215
</TABLE>
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<S> <C>
St. Cloud Hsg. & Redev. Auth. Multifamily Hsg. Rev.:
1,050,000 Series 1993 (Germain Towers Proj.) (Section 8), 5.90%, 9/1/20 1,016,096
Series 1999A (Parkview Terrace Apts. Proj.) (Section 8):
249,000 5.00%, 6/1/09 235,479
929,000 5.50%, 6/1/18 847,304
St. Louis Park Multifamily Hsg. Rev. Refunding:
650,000 Series 1995 (FHA insured) (Knollwood Cmty. Hsg. Proj.), 6.15%, 12/1/16 659,445
500,000 Series 1998A (Park Ridge Apts. Proj.) (GNMA collateralized), 5.25%, 11/1/20 448,905
St. Paul Hsg. & Redev. Auth. Multifamily Refunding Rev.:
500,000 Series 1992 (Point of St. Paul Proj.)(FNMA backed), 6.60%, 10/1/12 516,840
200,000 Series 1995 (Sun Cliffe Apts. Proj.)(GNMA collateralized), 5.875%, 7/1/15 198,094
1,148,944 Series 1998 (Superior Street Cottages Proj.), Lyngblomsten, Inc., 6.00%, 3/15/24 1,031,005
St. Paul Port Authority Multifamily Hsg. Refunding (Jackson Towers Apts. Proj.):
3,400,000 Senior Series 1998-1A (GNMA collateralized), 6.95%, 4/20/33 3,674,924
408,000 Subordinate Series 1998-1B, 8.00%, 4/20/33 383,369
2,000,000 Virginia Hsg. & Redev. Auth. Governmental Hsg. Rev. Refunding Series 1998A
(Laurentian Manor Proj.), 5.75%, 5/1/32 1,801,220
990,000 Washington Co. Hsg. & Redev. Auth. Multifamily Hsg. Rev. Refunding Series 1994
(White Bear Lake Transitional Hsg. Proj.), 6.625%, 8/1/24 1,008,543
755,000 Washington Co. Hsg. & Redev. Auth. Governmental Hsg. Rev. Refunding Series 1999A (Briar Pond
Apts. Proj.) (GNMA collateralized), 5.50%, 2/20/14 693,928
-------------
64,807,008
-------------
MUNICIPAL LEASE (2.0%)
585,000 Burnsville Solid Waste Rev. Series 1990 (Freeway Transfer Inc. Proj.), 9.00%, 4/1/10 (4) 603,661
125,000 Hennepin Co. Hsg. & Redev. Auth. Rev. Series 1993A (Community Provider Program), 5.70%, 8/1/13 125,176
655,000 Hibbing Econ. Dev. Auth. Public Proj. Rev. Series 1997 (Hibbing Lease Obligations Proj.),
6.10%, 2/1/08 661,851
100,000 Rice Co. Certificates of Participation Series 1996A, 5.85%, 12/1/14 101,722
400,000 St. Cloud Certificates of Participation Series 1997, 5.90%, 12/1/17 392,400
1,649,427 St. Paul Lease Series 1998 (City Hall Annex Building), 5.71%, 10/1/18 1,583,615
-------------
3,468,425
-------------
PUBLIC FACILITIES (1.0%)
480,000 Eagan Ice Arena Gross Rev. Series 1998B, 5.50%, 4/1/19 435,830
1,245,000 St. Paul Recreational Fac. Gross Rev. Series 1996D, 5.875%, 6/1/18 1,261,247
-------------
1,697,077
-------------
SINGLE FAMILY MORTGAGE (9.5%)
Dakota County Hsg. & Redev. Auth. Single Family Mtg. Rev.:
430,000 Series 1994A (FNMA backed), 6.70%, 10/1/09 (4) 439,043
380,000 Series 1995 (FNMA & GNMA backed), 6.25%, 10/1/09 (4) 383,853
210,000 Dakota/Wash./Stearns Cos. Hsg. & Redev. Auth. Single Family Rev. Refunding
Series 1994A (FNMA backed), 6.50%, 9/1/10 (4) 213,482
820,000 Minneapolis Redev. Mtg. Rev. Series 1987A (Riverplace Proj.) (LOC Bk. of Tokyo),
7.10%, 1/1/20 821,099
</TABLE>
See accompanying notes to portfolios of investments on page 48.
41
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MARCH 31, 2000
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
<TABLE>
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<S> <C>
2,100,000 Minneapolis Residual Interest Mtg. Rev. Series 1995 Convertible Capital Appreciation Bonds,
Zero Coupon, 7.00% Effective Yield on Purchase Date, 10/1/12 923,538
460,000 Minneapolis Single Family Mtg. Rev. Series 1995V (FNMA & GNMA backed), 6.25%, 4/1/22 463,280
5,000 Minneapolis/ St. Paul Hsg. Fin. Bd. Single Family Mtg. Rev. Series 1989A (GNMA backed),
7.65%, 12/1/00 (4) 5,033
MN HFA Single Family Mtg. Rev.:
165,000 Series 1991A, 7.05%, 7/1/22 (4) 167,477
1,050,000 Series 1991A, 7.45%, 7/1/22 (4) 1,074,097
1,515,000 Series 1992B-1, 6.75%, 1/1/26 (4) 1,539,937
385,000 Series 1992E, 6.85%, 1/1/24 (4) 392,881
955,000 Series 1992F, 6.75%, 7/1/12 (4) 966,298
1,020,000 Series 1994F, 6.30%, 7/1/25 1,041,032
40,000 Series 1994G, 5.875%, 7/1/15 (4) 40,540
65,000 Series 1994K, 5.90%, 1/1/07 67,172
410,000 Series 1994L, 6.70%, 7/1/20 (4) 423,612
1,870,000 Series 1997D, 5.85%, 7/1/19, (4) 1,863,810
2,450,000 Series 1998C, 5.25%, 1/1/17 2,334,335
800,000 Series 1998F-1, 5.45%, 1/1/17 797,840
850,000 Series 1999B, 5.25%, 1/1/20 798,226
1,010,818 Moorhead Single Family Mtg. Rev. Refunding Series 1992B, 7.00%, 8/1/11 1,039,768
225,000 St. Paul Hsg. & Redev. Auth. Single Family Mtg. Rev. Refunding Series 1995 (FNMA backed),
6.00%, 9/1/10 233,746
966,042 St. Paul Residual Interest Rev. Series 1995 Convertible Capital Appreciation
Bonds, Zero Coupon, 7.23% Effective Yield on Purchase Date, 9/1/11 439,192
-------------
16,469,291
-------------
UTILITY (0.2%)
400,000 Southern MN Muni. Power Agy. Pwr. Supply Sys. Rev. Refunding Series 1986A, 5.00%, 1/1/16 360,704
-------------
OTHER REVENUE BONDS (6.0%)
Columbia Heights Commercial Dev. Refunding Rev. Series 1999 (Columbia Park Properties -
Medical Clinic Proj.):
150,000 5.00%, 12/1/06 139,782
235,000 5.10%, 12/1/07 217,232
250,000 5.15%, 12/1/08 232,550
1,750,000 5.60%, 12/1/15 1,471,207
600,000 Commissioner of Iron Range Resources and Rehabilitation Gross Rev.
Series 1996 (Giants Ridge Rec. Area Proj.), 7.25%, 10/1/11 622,866
Minneapolis Cmty. Dev. Agy. Ltd. Tax Common Bond Fund:
100,000 Series 1993-5 (Winslow Printing), 6.125%, 12/1/06 (4) 99,596
170,000 Series 1997-1 (Halper Corrugated Box Mfg. Co.), 5.90%, 6/1/07 (4) 174,434
640,000 Series 1995-1 (Microtron, Inc.), 6.625%, 12/1/09 (4) 669,837
1,310,000 Series 1995-1 (Microtron, Inc.), 7.25%, 12/1/15 (4) 1,379,640
</TABLE>
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<S> <C>
500,000 Series 1999-1A (Discount Steel), 5.25%, 6/1/19 (4) 454,935
1,250,000 Minneapolis Public Hsg. Auth. Series 1997 (General Credit Energy Savings Proj.), 6.00%, 7/1/08 1,235,487
200,000 Renville Gross Rev. Golf Course Bond Series 1997, 6.50%, 2/1/19 197,204
300,000 Scott Co. Hsg. & Redev. Auth. Ltd. Special Benefits Tax Series 1997B (River City Centre Proj.),
(AMBAC insured), 5.45%, 2/1/20 293,223
2,745,000 St. Paul Hsg. & Redev. Sales Tax Rev. Refunding Series 1996 (FSA insured)
(Civic Center Proj.), 7.10%, 11/1/23 3,163,146
-------------
10,351,139
-------------
Total municipal bonds (cost: $161,013,132) 151,026,392
-------------
CLOSED-END MUTUAL FUNDS (2.1%) (2)
171,900 Minnesota Municipal Term Trust 2001 1,708,256
103,500 Minnesota Municipal Term Trust II 2003 989,719
72,200 Voyageur Minnesota Municipal Income Fund II 897,988
-------------
Total Closed-End Mutual Funds (cost: $4,028,785) 3,595,963
-------------
SHORT-TERM SECURITIES (9.9%) (2)
7,256,131 Federated Minnesota Municipal Cash Fund, 3.64% 7,256,131
8,000,000 Hennepin Co. G.O. Series 1997C, variable rate, 12/1/10 8,000,000
1,900,000 St. Cloud Hlth. Care Fac Rev. Series 1997A (St. Cloud Hosp. Proj.)
(LOC - Rabobank Nederland), variable rate, 7/1/27 1,900,000
-------------
17,156,131
-------------
Total Short-Term Securities (cost: $17,156,131)
Total investments in securities (cost: $182,198,048) (7) $171,778,486
=============
</TABLE>
See accompanying notes to portfolios of investments on page 48.
43
<PAGE>
[PHOTO] SIT BOND FUND
YEAR ENDED MARCH 31, 2000
----------------------------------------------------------------------
MICHAEL C. BRILLEY, SENIOR PORTFOLIO MANAGER
BRYCE A. DOTY, CFA, SENIOR PORTFOLIO MANAGER
The Sit Bond Fund provided investors a +0.9% return for the past 12 months.
The 12-month return for the Lipper Intermediate Investment Grade Bond Fund
universe average and the Lehman Aggregate Bond Index was +1.0% and 1.9%,
respectively. For the period since its inception, the Fund's return ranked in
the top 25% of its Lipper universe (out of 102 funds).
The U.S. Treasury yield curve inverted over the past 12 months. Specifically,
the yield of 2-year maturity U.S. Treasuries rose 1.51% to 6.48%, while 30-year
maturity U.S. Treasury yields rose only 0.22% to 5.84% on March 31st.
The rise in interest rates 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, mortgage pass-through holdings provided the highest
source of return in the Fund over the past 12 months. Conversely, the rise in
bond yields caused prices to decline in the Fund's longer duration
collateralized mortgage obligation, corporate, and asset-backed holdings.
Activity in the Fund involved two significant sector shifts over the past 12
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. The Fund, then, reversed its sector shift by selectively purchasing
corporate and asset-backed securities in order to beat the anticipated rush of
pent-up demand in these sectors.
The inversion of the Treasury yield curve was accelerated by the U.S.
Department's decision to purchase long-term Treasuries to reduce debt. As a
result, the shift in U.S. Treasury yields has decoupled from yield shifts in
other sectors, which we think provides an opportunity for the Fund. More simply
put, investment-grade corporate and asset-backed securities, which are currently
yielding 7.50% to 8.25%, respectively, look attractively valued relative to
long-term Treasury securities yielding less than 6.00%. The Fund's duration is
slightly shorter than its benchmark, reflecting our expectations for slightly
rising inflation and for the Federal Reserve to continue raising short-term
rates until economic growth slows to a sustainable rate.
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 3/31/00: $ 9.43 Per Share
3/31/99: $ 9.95 Per Share
Total Net Assets: $12.2 Million
30-day SEC Yield: 7.01%
12-Month Distribution Rate: 6.07%
Average Maturity: 16.9 Years
Effective Duration: 4.7 Years(1)
(1) Effective duration is a measure which reflects estimated price sensitivity
to a given change in interest rates. For example, for an interest rate change of
1.0%, a portfolio with a duration of 5 years would be expected to experience a
price change of 5%. Effective duration is based on current interest rates and
the Adviser's assumptions regarding the expected average life of individual
securities held in the portfolio.
PORTFOLIO STRUCTURE
(% OF TOTAL NET ASSETS)
Corporate Bonds & Notes 34.2
Mortgage Pass Through 24.5
Asset-Backed Securities 16.5
U.S. Treasury 11.1
Closed-End Mutual Funds 4.4
Collateralized Mortgage Obligations 4.1
Federal Agency 2.2
Cash & Other Net Assets 3.0
44
<PAGE>
- ----------------------------------------------------------------------- [LOGO}
AVERAGE ANNUAL TOTAL RETURNS*
LIPPER INTER.
SIT LEHMAN INVESTMENT
BOND AGGREGATE GRADE BOND
FUND BOND INDEX FUND AVG.
------ ---------- -------------
3 Month** 1.29% 2.21% 1.78%
1 Year 0.93 1.87 0.99
3 Year 5.73 6.70 5.73
5 Year 6.57 7.14 6.27
Inception 5.68 6.01 5.18
(12/1/93)
CUMULATIVE TOTAL RETURNS*
LIPPER INTER.
SIT LEHMAN INVESTMENT
BOND AGGREGATE GRADE BOND
FUND BOND INDEX FUND AVG.
------ ---------- -------------
1 Year 0.93% 1.87% 0.99%
3 Year 18.19 21.49 18.18
5 Year 37.49 41.20 35.51
Inception 41.93 44.78 37.73
(12/1/93)
*AS OF 3/31/00. **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
[PLOT POINTS CHART]
The sum of $10,000 invested at inception (12/1/93) and held until 3/31/00 would
have grown to $14,193 in the Fund or $14,478 in the Lehman Aggregate Bond Index
assuming reinvestment of all dividends and capital gains.
QUALITY RATINGS
(% OF TOTAL NET ASSETS)
LOWER OF MOODY'S
OR S&P RATING USED.
[PIE CHART]
Cash & Other Net Assets 3.0%
U.S. Government 11.1%
Government Agency Backed Securities 26.7%
AAA 20.8%
AA 2.1%
A 18.5%
BBB 17.8%
45
<PAGE>
SIT BOND FUND
MARCH 31, 2000
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
Quantity ($) Name of Issuer Market Value(1)
- --------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES (11.1%) (2)
1,300,000 U.S. Treasury Strip, zero coupon,
6.43% effective yield, 11/15/09 $707,980
U.S.Treasury Inflation Index Bond:
532,355 3.375%, 1/15/07 * 512,706
128,128 3.875%, 4/15/29 * 127,050
-------------
Total U.S. government securities 1,347,736
-------------
(cost: $1,316,985)
ASSET-BACKED SECURITIES (16.5%) (2)
Advanta Mortgage Loan Trust:
200,000 1995-3 A5, 7.37%, 2/25/27 197,982
250,000 1996-1 A7, 7.07%, 3/25/27 243,530
200,000 Conseco Home Equity Loan
Series 1999-F A3, 6.97%, 10/15/30 197,482
500,000 Conseco Mfg. Housing Series
2000-1 A5, 8.06%, 5/1/31 516,050
249,998 ContiMortgage Home Equity Loan Trust
Series 1996-1 A7, 7.00%, 3/15/27 240,573
100,000 EQCC Home Equity Loan Trust
Series 1996-1 A5, 6.93%, 3/15/27 94,771
Green Tree Financial Corp.:
75,000 1995-5 A6, 7.25%, 9/15/26 73,838
75,000 1997-4 A6, 7.03%, 2/15/29 73,125
200,000 1999-1 A5, 6.11%, 9/1/23 178,400
125,000 1999-E A3, 7.18%, 6/15/15 124,670
75,000 Money Store Home Equity Mortgage,
7.265%, 7/15/38 73,626
-------------
Total asset-backed securities 2,014,047
-------------
(cost: $2,033,596)
COLLATERALIZED MORTGAGE OBLIGATIONS (4.1%) (2)
175,563 PNC Mortgage Securities Corp.
Series 1998-6 4A, 6.75%, 8/25/13 169,796
350,000 Norwest Asset Securities Corp.
Series 1998-19 2A12, 6.75%, 7/25/28 329,423
-------------
Total collateralized mortgage obligations 499,219
-------------
(cost: $521,758)
CORPORATE BONDS & NOTES (34.2%) (2)
300,000 Allstate Finance, 7.83%, 12/1/45 261,000
- --------------------------------------------------------------------------------
Quantity ($) Name of Issuer Market Value(1)
- --------------------------------------------------------------------------------
American Airlines:
75,000 1999-1 A2, 7.024%, 10/15/09 73,406
75,000 1999-1 B, 7.324%, 10/15/09 74,173
250,000 Bank America, 8.25%, 4/15/27 241,562
Bradley Operating LP:
50,000 7.00%, 11/15/04 47,000
150,000 8.875%, 3/15/06 151,500
100,000 Burlington North Santa Fe,
Series 1999-2, 7.57%, 1/2/21 99,614
200,000 CIT Group, Inc., 7.125%, 10/15/04 197,750
Continental Airlines:
141,962 1997-1A, 7.461%, 4/1/15 138,419
99,721 1999-1B, 6.795%, 8/2/18 92,591
97,389 1999-1A, 6.545%, 2/2/19 89,255
100,000 First Hawaiian Cap., 8.343%, 7/1/27 94,625
First Industrial LP:
250,000 7.00%, 12/1/06 236,875
150,000 7.15%, 5/15/27 146,812
200,000 Ford Motor Credit Corp., 5.75%, 2/23/04 188,000
200,000 Franchise Fin. Corp., 8.25%, 10/30/03 198,500
200,000 Household Fin. Corp., 7.875%, 3/1/07 203,000
125,000 May Department Stores, 9.875%, 6/15/21 132,812
600,000 Pentair, Inc., 7.85%, 10/15/09 597,750
11,000 Ryder System, Inc., 8.75%, 3/15/17 11,014
400,000 Security Capital Group, 7.75%, 11/15/03 390,000
50,000 Union Carbide Corp., 8.75%, 8/1/22 50,500
316,079 Union Tank Car Co., 6.57%, 1/2/14 294,374
150,000 Whirlpool Corp., 9.00%, 3/1/03 154,687
-------------
Total corporate bonds & notes 4,165,219
-------------
(cost: $4,235,925)
FEDERAL AGENCY (2.2%) (2)
600,000 FNMA, zero coupon, 7.23% eff. yield, 6/1/17 180,474
300,000 Resolution Funding Corp., zero coupon,
6.75% effective yield, 10/15/19 86,094
-------------
Total federal agency 266,568
-------------
(cost: $259,424)
MORTGAGE PASS-THROUGH SECURITIES (24.5%) (2)(3)
Federal Home Loan Mortgage Corporation:
172,528 9.00%, 12/1/17 178,347
23,830 10.25%, 9/1/09 25,509
28,237 10.75%, 3/1/11 30,543
46
<PAGE>
- ----------------------------------------------------------------------- [LOGO}
- --------------------------------------------------------------------------------
Quantity ($) Name of Issuer Market Value(1)
- --------------------------------------------------------------------------------
Federal National Mortgage Association:
213,197 9.00%, 12/1/19 219,476
195,006 9.75%, 1/1/13 210,851
182,002 10.25%, 8/15/13 198,779
66,188 11.00%, 11/1/20 72,115
Government National Mortgage Association:
4,688 8.75%, 11/15/01 4,752
42,308 9.00%, 10/15/06 44,381
51,632 9.00%, 9/15/08 53,315
78,989 9.00%, 4/15/09 81,550
52,980 9.00%, 4/15/09 54,702
96,676 9.00%, 4/15/09 99,822
5,542 9.00%, 8/15/11 5,764
121,280 9.00%, 01/15/17 128,254
41,353 9.00%, 8/20/19 42,266
88,663 9.00%, 12/15/19 91,754
36,879 9.00%, 6/20/21 37,692
47,956 9.00%, 12/20/21 49,015
7,077 9.25%, 5/15/01 7,380
45,719 9.25%, 5/15/10 47,559
8,492 9.50%, 3/15/03 8,915
63,355 9.50%, 11/15/05 66,285
60,367 9.50%, 12/15/09 63,203
43,815 9.50%, 2/15/11 45,626
99,518 9.50%, 5/20/16 102,773
161,392 9.50%, 12/15/17 169,917
56,133 9.50%, 5/20/18 57,958
201,841 9.50%, 7/20/18 208,409
106,486 9.50%, 7/20/18 109,949
68,440 9.50%, 9/20/18 70,662
125,006 9.50%, 12/15/19 130,996
9,464 9.50%, 4/15/20 9,880
14,512 9.50%, 9/15/20 15,145
24,355 9.50%, 11/15/21 25,597
1,821 9.75%, 8/15/02 1,914
15,699 10.00%, 8/15/02 16,523
44,208 10.00%, 6/15/19 46,994
3,804 10.25%, 4/15/01 3,967
2,640 10.25%, 4/15/01 2,753
2,231 10.50%, 7/15/00 2,239
8,013 10.75%, 1/15/01 8,276
3,213 11.25%, 10/15/00 3,224
- --------------------------------------------------------------------------------
Quantity ($) Name of Issuer Market Value(1)
- --------------------------------------------------------------------------------
1,945 11.75%, 7/15/00 1,952
5,473 11.75%, 7/15/01 5,709
Municipal (GNMA collateralized):
90,000 Aurora, CO, Multifamily Series 1999A
6.75%, 7/1/01 89,491
24,000 Bernalillo Multifamily Series 1998A,
7.50%, 9/20/20 23,266
-------------
Total mortgage pass-through securities 2,975,449
-------------
(cost: $3,031,428)
CLOSED-END MUTUAL FUNDS (4.4%) (2)
7,788 American Select Portfolio 86,642
10,145 American Strategic Income Portfolio (I) 109,059
23,394 American Strategic Income Portfolio (II) 255,872
7,672 American Strategic Income Portfolio (III) 79,597
-------------
Total closed-end mutual funds 531,170
-------------
(cost: $556,819)
SHORT-TERM SECURITIES (1.8%) (2)
5,967 Dreyfus Gov't Cash Mgmt. Fund, 5.22% 5,967
200,000 Fed. Home Loan Bank, 6.03%, 4/3/00 199,933
9,000 Sit Money Market Fund, 5.64% (6) 9,000
-------------
Total short-term securities 214,900
-------------
(cost: $214,900)
Total investments in securities
(cost: $12,170,835) (7) $12,014,308
=============
* U.S. Treasury inflation-protection securities (TIPS) are securities in which
the principal amount is adjusted for inflation and the semiannual interest
payments equal a fixed percentage of the inflation-adjusted principal amount.
See accompanying notes to portfolios of investments on page 48.
47
<PAGE>
SIT MUTUAL FUNDS
MARCH 31, 2000
- --------------------------------------------------------------------------------
NOTES TO PORTFOLIOS OF INVESTMENTS
(1) Securities are valued by procedures described in note 1 to the financial
statements.
(2) Percentage figures indicate percentage of total net assets.
(3) At March 31, 2000, 19.1% of net assets in the U.S. Government Securities
Fund and 3.3% of net assets in the Bond Fund was invested in GNMA mobile
home pass-through securities.
(4) Securities the income from which is treated as a tax preference that is
included in alternative minimum taxable income for purposes of computing
federal alternative minimum tax (AMT). At March 31, 2000, approximately
14.4% 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) This security represents an investment in an affiliated party. See note
3 to the accompanying financial statements.
(7) At March 31, 2000 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 ................. $156,411,574 $ 138,013,393 $ 12,219,879
============ ============= =============
Unrealized appreciation (depreciation) on investments:
Gross unrealized appreciation ................. -- $ 403,296 $ 87,844
Gross unrealized depreciation ................. -- (2,865,554) (293,415)
------------ ------------- -------------
Net unrealized appreciation (depreciation) ........... -- ($ 2,462,258) ($ 205,571)
============ ============= =============
</TABLE>
<TABLE>
<CAPTION>
MINNESOTA
TAX-FREE TAX-FREE
INCOME INCOME
FUND FUND
------------- -------------
<S> <C> <C>
Cost for federal income tax purposes $ 607,960,344 $ 182,199,099
============= =============
Unrealized appreciation (depreciation) on investments:
Gross unrealized appreciation $ 2,664,710 $ 772,795
Gross unrealized depreciation (40,566,540) (11,193,408)
------------- -------------
Net unrealized appreciation (depreciation) ($ 37,901,830) ($ 10,420,613)
============= =============
</TABLE>
48
<PAGE>
SIT MUTUAL FUNDS
MARCH 31, 2000
- --------------------------------------------------------------------------[LOGO]
STATEMENTS OF ASSETS AND LIABILITIES
<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 ............. $156,411,574 $137,599,631 $ 12,170,835 $607,937,474 $182,198,047
============ ============ ============ ============ ============
Investments in securities, at
market value - see
accompanying schedules for
detail ...................... $156,411,574 $135,551,135 $ 12,014,308 $570,058,514 $171,778,486
Cash in bank on demand
deposit ..................... 2,181,029 1,745 2,495 3,000 --
Accrued interest
receivable .................. -- 1,030,906 156,860 9,321,070 3,009,249
Receivable for investment
securities sold ............. -- -- -- 3,915,047 114,336
Receivable for principal
paydowns .................... -- 128,475 -- -- --
Other
receivables ................. -- -- -- -- 1,760
Receivable for Fund shares
sold ........................ 1,426,060 50,528 36 856,534 581,427
------------ ------------ ------------ ------------ ------------
Total assets .......... 160,018,663 136,762,789 12,173,699 584,154,165 175,485,258
------------ ------------ ------------ ------------ ------------
LIABILITIES
Payable for investment securities
purchased ................... -- -- -- -- 1,052,302
Payable for Fund shares
redeemed .................... 8,663,841 781,956 684 884,745 1,275,078
Cash portion of dividends
payable to shareholders ..... 388,889 44,301 2,457 353,784 140,771
Other
payables .................... -- 2,880 482 8,721 --
Accrued investment management
and advisory services fee ... 68,943 93,080 8,097 358,131 111,728
------------ ------------ ------------ ------------ ------------
Total liabilities ..... 9,121,673 922,217 11,720 1,605,381 2,579,879
------------ ------------ ------------ ------------ ------------
Net assets applicable to
outstanding capital stock ... $150,896,990 $135,840,572 $ 12,161,979 $582,548,784 $172,905,379
============ ============ ============ ============ ============
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 .......... 150,900,014 13,287,932 1,289,296 60,873,928 17,773,508
============ ============ ============ ============ ============
Net asset value per share of
outstanding capital stock ... $ 1.00 $ 10.22 $ 9.43 $ 9.57 $ 9.73
============ ============ ============ ============ ============
</TABLE>
See accompanying notes to financial statements on pages 54 - 57.
49
<PAGE>
SIT MUTUAL FUNDS
MARCH 31, 2000
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
<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 ............................... $ 4,880,350 $ 10,099,954 $ 857,710 $ 43,820,808 $ 13,277,280
------------ ------------ ------------ ------------ ------------
Total income ..................... 4,880,350 10,099,954 857,710 43,820,808 13,277,280
------------ ------------ ------------ ------------ ------------
EXPENSES (NOTE 3):
Investment management and
advisory services fee ............... 626,375 1,351,579 100,078 5,996,691 1,784,041
Less fees and expenses absorbed
by investment adviser ............ (187,726) (100,000) -- (749,173) --
------------ ------------ ------------ ------------ ------------
Total net expenses .................. 438,649 1,251,579 100,078 5,247,519 1,784,041
------------ ------------ ------------ ------------ ------------
Net investment income ............... 4,441,701 8,848,375 757,632 38,573,289 11,493,239
------------ ------------ ------------ ------------ ------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS :
Net realized gain (loss) (note 2) ...... -- (2,997,944) (502,006) (10,666,334) (3,798,169)
Net change in unrealized appreciation
or (depreciation) on investments .... -- (1,549,436) (148,558) (55,497,204) (15,569,670)
------------ ------------ ------------ ------------ ------------
Net gain (loss) on investments ...... -- (4,547,380) (650,564) (66,163,538) (19,367,839)
------------ ------------ ------------ ------------ ------------
Net increase (decrease) in net assets resulting
from operations ........................... $ 4,441,701 $ 4,300,995 $ 107,068 ($27,590,249) ($ 7,874,600)
============ ============ ============ ============ ============
</TABLE>
See accompanying notes to financial statements on pages 54 - 57.
50
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This page has been left blank intentionally.
51
<PAGE>
SIT MUTUAL FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
MONEY MARKET U.S. GOVERNMENT
FUND SECURITIES FUND
------------------------------ ------------------------------
Year ended Year ended Year ended Year ended
March 31, March 31, March 31, March 31,
2000 1999 2000 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Operations:
Net investment income ........................... $ 4,441,701 $ 2,054,939 $ 8,848,375 $ 6,473,904
Net realized gain (loss) on investments ......... -- -- (2,997,944) 847,820
Net change in unrealized appreciation
(depreciation) of investments ................. -- -- (1,549,436) (1,417,691)
------------- ------------- ------------- -------------
Net increase (decrease) in net assets resulting
from operations ............................ 4,441,701 2,054,939 4,300,995 5,904,033
------------- ------------- ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ........................... (4,441,701) (2,054,939) (8,848,375) (6,473,904)
Net realized gains on investments ............... -- -- -- (1,378,000)
------------- ------------- ------------- -------------
Total distributions ........................... (4,441,701) (2,054,939) (8,848,375) (7,851,904)
------------- ------------- ------------- -------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold ....................... 698,628,894 521,895,983 54,553,405 98,796,377
Reinvested distributions ........................ 2,721,406 1,723,536 8,278,649 7,221,219
Payments for shares redeemed .................... (611,894,877) (505,288,726) (81,774,329) (48,607,714)
------------- ------------- ------------- -------------
Increase (decrease) in net assets from
capital share transactions .................. 89,455,423 18,330,793 (18,942,275) 57,409,882
------------- ------------- ------------- -------------
Total increase (decrease) in net assets ..... 89,455,423 18,330,793 (23,489,655) 55,462,011
NET ASSETS
Beginning of period ............................. 61,441,567 43,110,774 159,330,227 103,868,216
------------- ------------- ------------- -------------
End of period ................................... $ 150,896,990 $ 61,441,567 $ 135,840,572 $ 159,330,227
============= ============= ============= =============
NET ASSETS CONSIST OF:
Capital (par value and paid-in surplus) ......... $ 150,896,990 $ 61,441,567 $ 141,184,699 $ 160,126,974
Undistributed (distributions in excess of) net
investment income ............................. -- -- 1,166 --
Accumulated net realized gain (loss) from
security transactions ......................... -- -- (3,296,797) (297,687)
Unrealized appreciation (depreciation)
on investments ................................ -- -- (2,048,496) (499,060)
------------- ------------- ------------- -------------
$ 150,896,990 $ 61,441,567 $ 135,840,572 $ 159,330,227
============= ============= ============= =============
CAPITAL TRANSACTIONS IN SHARES:
Sold ............................................ 698,628,899 521,895,983 5,270,957 9,272,214
Reinvested distributions ........................ 2,721,406 1,723,536 803,761 677,811
Redeemed ........................................ (611,894,877) (505,288,726) (7,943,500) (4,561,161)
------------- ------------- ------------- -------------
Net increase (decrease) ............................. 89,455,428 18,330,793 (1,868,782) 5,388,864
============= ============= ============= =============
</TABLE>
52
<PAGE>
- --------------------------------------------------------------------------[LOGO]
<TABLE>
<CAPTION>
BOND TAX-FREE MINNESOTA TAX-FREE
FUND INCOME FUND INCOME FUND
------------------------------ ------------------------------ ------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
MARCH 31, MARCH 31, MARCH 31, MARCH 31, MARCH 31, MARCH 31,
2000 1999 2000 1999 2000 1999
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
$ 757,632 $ 603,052 $ 38,573,289 $ 33,637,426 $ 11,493,239 $ 9,666,218
(502,006) 92,909 (10,666,334) 1,808,557 (3,798,169) 56,447
(148,558) (123,900) (55,497,204) (2,343,717) (15,569,670) 642,985
------------- ------------- ------------- ------------- ------------- -------------
107,068 572,061 (27,590,249) 33,102,266 (7,874,600) 10,365,650
------------- ------------- ------------- ------------- ------------- -------------
(757,632) (603,052) (38,573,289) (33,644,852) (11,493,239) (9,675,296)
(28,000) (76,000) -- (3,365,000) -- --
------------- ------------- ------------- ------------- ------------- -------------
(785,632) (679,052) (38,573,289) (37,009,852) (11,493,239) (9,675,296)
------------- ------------- ------------- ------------- ------------- -------------
3,453,526 3,764,226 311,825,160 615,154,811 163,224,819 214,887,144
756,779 648,528 32,918,780 30,867,685 9,619,454 8,025,552
(3,289,443) (3,092,333) (591,384,797) (266,340,384) (251,845,830) (95,961,945)
------------- ------------- ------------- ------------- ------------- -------------
920,862 1,320,421 (246,640,857) 379,682,112 (79,001,557) 126,950,751
------------- ------------- ------------- ------------- ------------- -------------
242,298 1,213,430 (312,804,395) 375,774,526 (98,369,396) 127,641,105
11,919,681 10,706,251 895,353,179 519,578,653 271,274,775 143,633,670
------------- ------------- ------------- ------------- ------------- -------------
$ 12,161,979 $ 11,919,681 $ 582,548,784 $ 895,353,179 $ 172,905,379 $ 271,274,775
============= ============= ============= ============= ============= =============
$ 12,846,918 $ 11,926,056 $ 631,163,204 $ 877,802,089 $ 187,158,887 $ 266,160,444
(1,172) -- 8,043 -- -- --
(527,240) 1,594 (10,743,503) (67,154) (3,833,947) (35,778)
(156,527) (7,969) (37,878,960) 17,618,244 (10,419,561) 5,150,109
------------- ------------- ------------- ------------- ------------- -------------
$ 12,161,979 $ 11,919,681 $ 582,548,784 $ 895,353,179 $ 172,905,379 $ 271,274,775
============= ============= ============= ============= ============= =============
356,714 373,409 31,463,068 58,814,075 16,157,253 20,329,590
78,917 64,250 3,343,625 2,951,347 956,782 759,723
(344,744) (306,375) (60,141,854) (25,488,804) (25,049,828) (9,077,623)
------------- ------------- ------------- ------------- ------------- -------------
90,887 131,284 (25,335,161) 36,276,618 (7,935,794) 12,011,690
============= ============= ============= ============= ============= =============
</TABLE>
53
<PAGE>
SIT MUTUAL FUNDS
MARCH 31, 2000
- --------------------------------------------------------------------------------
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:
FUND INVESTMENT OBJECTIVE
---- --------------------
Money Market Maximum current income with the preservation of capital
and maintenance of liquidity.
U.S. Government High current income and safety of principal.
Securities
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- High level of current income that is exempt from
Free Income federal regular income tax and Minnesota regular
personal income tax, consistent with the preservation
of capital.
Significant accounting policies followed by the Funds are summarized below:
INVESTMENTS IN SECURITIES
Securities maturing more than 60 days from the valuation date, with the
exception of those in Money Market Fund, are valued at the market price
supplied by an independent pricing vendor based on current interest rates;
those securities with maturities of less than 60 days when acquired, or
which subsequently are within 60 days of maturity, are valued at amortized
cost, which approximates market value. When market quotations are not
readily available, securities are valued at fair value based on procedures
determined in good faith by the Boards of Directors. Pursuant to Rule 2a-7
of the Investment Company Act of 1940, all securities in the Money Market
Fund are valued at amortized cost, which approximates market value, in
order to maintain a constant net asset value of $1 per share.
Security transactions are accounted for on the date the securities are
purchased or sold. Gains and losses are calculated on the identified-cost
basis. Interest, including level-yield amortization of long-term bond
premium and discount, is recorded on the accrual basis.
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.
54
<PAGE>
- --------------------------------------------------------------------------[LOGO]
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.
Undistributed net investment income and accumulated net realized gains
(losses) from the Statement of Changes in Net Assets have been increased
(decreased) by current permanent book-to-tax differences resulting in
reclassification of additional paid-in capital as follows:
Undistributed Accumulated Additional
net investment net realized paid-in
income gains (losses) capital
------ -------------- ---------
Tax-Free Income 8,043 (10,015) 1,972
U.S. Government Securities 1,166 (1,166) --
Bond (1,172) 1,172 --
For federal income tax purposes the Minnesota Tax-Free Income, Tax-Free
Income, Bond , and U.S. Government Securities Income Funds have capital
loss carryovers of $3,832,896, $10,720,633, $478,130, and $2,883,035,
respectively at March 31, 2000, which, if not offset by subsequent capital
gains, will begin to expire in the years 2004 - 2008. It is unlikely the
Board of Directors will authorize a distribution of any net realized gains
until the available capital loss carryover is offset or expires.
DISTRIBUTIONS
Distributions to shareholders are recorded as of the close of business on
the record date. Such distributions are payable in cash or reinvested in
additional shares of the Funds' capital stock. Distributions from net
investment income are declared daily and paid monthly for the Funds.
Distributions from net realized gains, if any, will be made annually for
each of the Funds.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported results. Actual results could
differ from those estimates.
55
<PAGE>
SIT MUTUAL FUNDS YEAR
ENDED MARCH 31, 2000
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE 2 - INVESTMENT SECURITY TRANSACTIONS
Purchases of and proceeds from sales and maturities of investment
securities, other than short-term securities, for the period ended March
31, 2000, were as follows:
Purchases ($) Proceeds ($)
------------- ------------
U.S. Government Securities Fund 147,208,186 159,189,665
Bond Fund 15,930,566 14,348,285
Tax-Free Income Fund 164,417,087 374,353,918
Minnesota Tax-Free Income Fund 39,722,247 122,740,595
For Money Market Fund during the period ended March 31, 2000 purchases of
and proceeds from sales and maturities of investment securities aggregated
$3,395,788,992 and $3,304,160,241, respectively.
NOTE 3 - EXPENSES
INVESTMENT ADVISER
The Funds each have entered into an investment management agreement with
Sit Investment Associates Inc. (SIA), under which SIA manages the Funds'
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%
56
<PAGE>
- --------------------------------------------------------------------------[LOGO]
For the period April 1, 1995, through December 31, 2000, 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, 2000, this
voluntary fee waiver may be discontinued by the Adviser in its sole
discretion.
For the period April 1, 1995, through December 31, 2000, 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, 2000, this voluntary fee waiver may be discontinued by the
Adviser in its sole discretion.
As of March 31, 2000, the Bond Fund had invested $9,000 in the Sit Money
Market Fund. The terms of such transactions were identical to those of
non-related entities except that, to avoid duplicate investment advisory
fees, SIA remits to each Fund an amount equal to all fees otherwise due to
them under their investment management agreement for the assets invested in
the Sit Money Market Fund.
TRANSACTIONS WITH AFFILIATES
The investment adviser, affiliates of the investment adviser, directors and
officers of the Funds as a whole owned the following shares as of March 31,
2000:
% Shares
Shares Outstanding
------ -----------
Money Market Fund 84,056,359 55.7
U.S. Government Securities Fund 398,616 3.0
Bond Fund 124,148 9.6
Tax-Free Income Fund 1,737,536 2.9
Minnesota Tax-Free Income Fund 774,346 4.4
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 on
pages 58 through 62.
57
<PAGE>
SIT MONEY MARKET FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Years Ended March 31,
------------------------------------------------------------------------------
2000 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 0.05 0.05 0.05 0.05 0.05
- ------------------------------------------------------------------------------------------------------------------------------------
Total from operations 0.05 0.05 0.05 0.05 0.05
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (0.05) (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) 5.05% 4.99% 5.29% 5.04% 5.44%
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000's omitted) $150,897 $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 5.05% (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) Total Fund expenses are contractually limited to .80% of average daily net
assets for the first $50 million in Fund net assets and .60% of average
daily net assets for Fund net assets exceeding $50 million. However, during
the periods ended March 31, 2000, 1999, 1998, 1997, and 1996, the
investment adviser voluntarily absorbed $187,726, $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 .71%, .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 4.84%, 4.54%, 4.82%, 4.63%, and 5.05%,
respectively.
58
<PAGE>
SIT U.S. GOVERNMENT SECURITIES FUND
- --------------------------------------------------------------------------[LOGO]
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Years Ended March 31,
------------------------------------------------------------------------------
2000 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 .59 .54 .63 .65 .70
Net realized and unrealized gains
(losses) on investments (.29) (.01) .35 (.19) .19
- ------------------------------------------------------------------------------------------------------------------------------------
Total from operations .30 .53 .98 .46 .89
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (.59) (.54) (.63) (.65) (.70)
From realized gains -- (.11) -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (.59) (.65) (.63) (.65) (.70)
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE:
End of period $10.22 $10.51 $10.63 $10.28 $10.47
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return (1) 2.92% 5.05% 9.70% 4.55% 8.87%
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000's omitted) $135,841 $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 5.66% (2) 5.06% (2) 5.93% (2) 6.30% (2) 6.72% (2)
Portfolio turnover rate (excluding short-term securities) 98.17% 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) Total Fund expenses are contractually limited to 1.00% of average daily net
assets for the first $50 million in Fund net assets and .80% of average
daily net assets exceeding $50 million. However, during the periods ended
March 31, 2000, 1999, 1998, 1997, and 1996, the investment adviser
voluntarily absorbed $100,000, $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 5.60%,
4.99%, 5.82%, 6.13%, and 6.52%, respectively.
59
<PAGE>
SIT TAX-FREE INCOME FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Years Ended March 31,
---------------------------------------------------------------------------
2000 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 .51 .51 .54 .56 .56
Net realized and unrealized gains
(losses) on investments (.82) .03 .50 .10 .18
- ---------------------------------------------------------------------------------------------------------------------------------
Total from operations (.31) .54 1.04 .66 .74
- ---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (.51) (.51) (.54) (.56) (.56)
From realized gains ---- (.05) (.07) ----
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (.51) (.56) (.61) (.56) (.56)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE:
End of period $9.57 $10.39 $10.41 $9.98 $9.88
- ---------------------------------------------------------------------------------------------------------------------------------
Total investment return (1) (2.98%) 5.30% 10.69% 6.82% 7.73%
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000's omitted) $582,549 $895,353 $519,579 $342,540 $279,769
RATIOS:
Expenses to average daily net assets 0.70% (2) 0.71% (2) 0.76% (2) 0.79% (2) 0.80%
Net investment income to average daily net assets 5.15% (2) 4.90% (2) 5.29% (2) 5.63% (2) 5.65%
Portfolio turnover rate (excluding short-term securities) 24.72% 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) Total Fund expenses are contractually limited to .80% of average daily net
assets. However, during the periods ended March 31, 2000, 1999, 1998, 1997,
and 1996, the investment adviser voluntarily absorbed $749,173, 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
5.05%, 4.81%, 5.25%, 5.62%, and 5.65%, respectively.
60
<PAGE>
SIT MINNESOTA TAX-FREE INCOME FUND
- --------------------------------------------------------------------------[LOGO]
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Years Ended March 31,
---------------------------------------------------------------------------
2000 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 .52 .51 .55 .57 .57
Net realized and unrealized gains
(losses) on investments (.82) .06 .35 .05 .13
- ---------------------------------------------------------------------------------------------------------------------------------
Total from operations (.30) .57 .90 .62 .70
- ---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (.52) (.51) (.55) (.57) (.57)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE:
End of period $9.73 $10.55 $10.49 $10.14 $10.09
- ---------------------------------------------------------------------------------------------------------------------------------
Total investment return (1) (2.84%) 5.58% 9.07% 6.26% 7.12%
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000's omitted) $172,905 $271,275 $143,634 $93,976 $62,980
RATIOS:
Expenses to average daily net assets 0.80% 0.80% 0.80% 0.80% 0.80%
Net investment income to average daily net assets 5.16% 4.83% 5.32% 5.56% 5.62%
Portfolio turnover rate (excluding short-term securities) 18.50% 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.
61
<PAGE>
SIT BOND FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Years Ended March 31,
----------------------------------------------------------------------------
2000 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 .58 .54 .63 .64 .64
Net realized and unrealized gains
(losses) on investments (.50) (.02) .43 (.14) .35
- ----------------------------------------------------------------------------------------------------------------------------------
Total from operations .08 .52 1.06 .50 .99
- ----------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (.58) (.54) (.63) (.64) (.64)
From realized gains (.02) (.06) (.02) (.07) ---
- ----------------------------------------------------------------------------------------------------------------------------------
Total distributions (.60) (.60) (.65) (.71) (.64)
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE:
End of period $9.43 $9.95 $10.03 $9.62 $9.83
- ----------------------------------------------------------------------------------------------------------------------------------
Total investment return (1) 0.93% 5.30% 11.22% 5.21% 10.57%
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000's omitted) $12,162 $11,920 $10,706 $6,403 $5,222
RATIOS:
Expenses to average daily net assets 0.80% 0.80% 0.80% 0.80% 0.80%
Net investment income to average daily net assets 6.06% 5.34% 6.31% 6.52% 6.49%
Portfolio turnover rate (excluding short-term securities) 131.67% 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.
62
<PAGE>
SIT MUTUAL FUNDS
- --------------------------------------------------------------------------[LOGO]
FEDERAL INCOME TAX INFORMATION
We are required by Federal tax regulations to provide shareholders with certain
information regarding dividend distributions on an annual fiscal year basis. The
figures are for informational purposes only and should not be used for reporting
to federal or state revenue agencies. All necessary tax information will be
mailed in January each year.
LONG-TERM
ORDINARY CAPITAL
FUND AND PAYABLE DATE INCOME (a) GAIN (b)
- ---------------------------- ------------- -------------
Money Market Fund
April 30, 1999 $0.00370 $ --
May 31, 1999 0.00338 --
June 30, 1999 0.00406 --
July 31, 1999 0.00368 --
August 31, 1999 0.00417 --
September 30, 1999 0.00401 --
October 31, 1999 0.00390 --
November 30, 1999 0.00444 --
December 31, 1999 0.00449 --
January 31, 2000 0.00449 --
February 29, 2000 0.00436 --
March 31, 2000 0.00465 --
------------- -------------
$0.04933 (c) $0.00000
============= =============
Bond Fund
April 30, 1999 $0.04840 $ --
May 31, 1999 0.04298 --
June 30, 1999 0.05389 --
July 31, 1999 0.04580 --
August 31, 1999 0.04873 --
September 30, 1999 0.04360 --
October 31, 1999 0.04239 --
November 30, 1999 0.05355 --
December 7, 1999 0.00000 0.02062
December 31, 1999 0.05430 --
January 31, 2000 0.04746 --
February 29, 2000 0.05055 --
March 31, 2000 0.05262 --
------------- -------------
$0.58427 (c) $0.02062
============= =============
Minnesota Tax-Free Income Fund
April 30, 1999 0.04050 --
May 31, 1999 0.03933 --
June 30, 1999 0.04648 --
July 31, 1999 0.04150 --
August 31, 1999 0.04497 --
September 30, 1999 0.04355 --
October 31, 1999 0.04143 --
November 30, 1999 0.04542 --
December 31, 1999 0.04824 --
January 31, 2000 0.04422 --
February 29, 2000 0.04247 --
March 31, 2000 0.04413 --
------------- -------------
$0.52224 (d) $0.00000
============= =============
LONG-TERM
ORDINARY CAPITAL
FUND AND PAYABLE DATE INCOME (a) GAIN (b)
---------------------------------- -------------- -------------
U.S. Government Securities Fund
April 30, 1999 $0.04367 $ --
May 31, 1999 0.04232 --
June 30, 1999 0.05880 --
July 31, 1999 0.04310 --
August 31, 1999 0.04696 --
September 30, 1999 0.04748 --
October 31, 1999 0.04245 --
November 30, 1999 0.05403 --
December 31, 1999 0.05225 --
January 31, 2000 0.04951 --
February 29, 2000 0.05216 --
March 31, 2000 0.05343 --
-------------- -------------
$0.58616 (c)(e) $0.00000
============== =============
Tax-Free Income Fund
April 30, 1999 $0.04105 $ --
May 31, 1999 0.03924 --
June 30, 1999 0.04564 --
July 31, 1999 0.04135 --
August 31, 1999 0.04406 --
September 30, 1999 0.04170 --
October 31, 1999 0.04067 --
November 30, 1999 0.04454 --
December 31, 1999 0.04389 --
January 31, 2000 0.04372 --
February 29, 2000 0.04107 --
March 31, 2000 0.04365 --
-------------- -------------
$0.51058 (d)(e) $0.00000
============== =============
- ----------------------------------
(a) Includes distributions of short-term gains, if any, which are taxable as
ordinary income.
(b) Taxable as long-term gain (20%).
(c) Taxable as dividend income and does not qualify for deduction by
corporations.
(d) 100% of dividends were derived from interest on tax-exempt securities. This
portion of exempt-interest dividends is exempt from federal taxes and
should not be included in shareholders' gross income. Exempt-interest
dividends may be subject to state and local taxes. Each shareholder should
consult a tax adviser about reporting this income for state and local tax
purposes.
(e) A De Minimis portion of these dividends represents a distribution from
long-term capital gains.
63
<PAGE>
SIT MUTUAL FUNDS
- --------------------------------------------------------------------------------
RESULTS OF SHAREHOLDER MEETING
The annual meeting of the shareholders of the Funds was held on October 26,
1999. Directors elected by the shareholders at the meeting were as follows:
Eugene C. Sit, Peter L. Mitchelson, William E. Frenzel, John E. Hulse, Sidney L.
Jones, and Donald W. Phillips for all Funds and Michael C. Brilley for the Sit
Bond Funds only.
The matters voted on by the shareholders of record as of August 25, 1999 and the
results of the shareholders' vote at the October 26, 1999 meeting were as
follows:
1. Election of Directors:
<TABLE>
<CAPTION>
For Withheld
--- --------
<S> <C> <C>
Eugene C. Sit
U.S. Government Securities 7,942,278 46,800
Money Market 50,549,200 138,529
Tax-Free Income 47,843,299 406,167
MN Tax-Free Income 14,695,955 68,166
Bond 983,959 1,127
William E. Frenzel
U.S. Government Securities 7,923,090 65,988
Money Market 50,453,644 234,085
Tax-Free Income 47,769,840 479,626
MN Tax-Free Income 14,693,288 70,833
Bond 983,959 1,127
John E. Hulse
U.S. Government Securities 7,938,497 50,581
Money Market 50,549,200 138,529
Tax-Free Income 47,797,621 461,845
MN Tax-Free Income 14,693,012 71,109
Bond 983,959 1,127
Sidney L. Jones
U.S. Government Securities 7,937,809 51,269
Money Market 50,548,084 139,645
Tax-Free Income 47,824,024 425,442
MN Tax-Free Income 14,694,797 69,324
Bond 983,959 1,127
64
<PAGE>
For Withheld
--- --------
Peter L. Mitchelson
U.S. Government Securities 7,937,331 51,747
Money Market 50,549,200 138,529
Tax-Free Income 47,832,998 416,469
MN Tax-Free Income 14,695,617 68,504
Bond 983,959 1,127
Donald W. Phillips
U.S. Government Securities 7,941,726 47,352
Money Market 50,549,200 138,529
Tax-Free Income 47,797,787 451,679
MN Tax-Free Income 14,695,617 68,504
Bond 983,959 1,127
Michael C. Brilley
U.S. Government Securities 7,936,077 53,001
Money Market 50,549,200 138,529
Tax-Free Income 47,809,132 440,334
MN Tax-Free Income 14,694,558 69,563
Bond 983,959 1,127
</TABLE>
2. Ratification of KPMG LLP as independent auditors for the Funds:
<TABLE>
<CAPTION>
For Against Abstain
--- ------- -------
<S> <C> <C> <C>
U.S. Government Securities 7,912,744 21,200 55,134
Money Market 50,351,799 0 335,930
Tax-Free Income 47,602,709 291,933 354,824
MN Tax-Free Income 14,628,623 27,193 108,305
Bond 982,679 0 2,407
</TABLE>
65
<PAGE>
SIT MUTUAL FUNDS
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Sit Money Market Fund, Inc.
Sit U.S. Government Securities Fund, Inc.
Sit Mutual Funds II, Inc.:
We have audited the accompanying statements of assets and liabilities,
including the schedules of portfolios of investments, of Sit Money Market Fund,
Inc., Sit U.S. Government Securities Fund, Inc., Sit Bond Fund (a series of Sit
Mutual Funds II, Inc.), Sit Tax-Free Income Fund (a series of Sit Mutual Funds
II, Inc.), and Sit Minnesota Tax-Free Income Fund (a series of Sit Mutual Funds
II, Inc.), as of March 31, 2000; the related statements of operations for the
year then ended; the statements of changes in net assets for each of the years
in the two-year period then ended; and the financial highlights as presented in
note 4 to the financial statements. These financial statements and the financial
highlights are the responsibility of the Funds' management. Our responsibility
is to express an opinion on these financial statements and the financial
highlights based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform our audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of March 31, 2000, by correspondence with the custodian and
brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of Sit
Money Market Fund, Sit U.S. Government Securities Fund, Sit Bond Fund, Sit
Tax-Free Income Fund, and Sit Minnesota Tax-Free Income Fund as of March 31,
2000 and the results of their operations, the changes in their net assets, and
their financial highlights for the periods stated in the first paragraph above,
in conformity with accounting principles generally accepted in the United States
of America.
KPMG LLP
Minneapolis, Minnesota
May 12, 2000
66
<PAGE>
- --------------------------------------------------------------------------[LOGO]
<TABLE>
<CAPTION>
<S> <C>
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
Bond Funds Officers:
Eugene C. Sit, CFA Chairman
Peter L. Mitchelson, CFA Vice Chairman
Mary K. Stern, CFA President
Michael C. Brilley Senior Vice President
Debra A. Sit, CFA Vice President - Investments, Assistant Treasurer
Bryce A. Doty, CFA(1) Vice President - Investments
Paul J. Jungquist, CFA(2) Vice President - Investments
Michael P. Eckert Vice President
Michael J. Radmer Secretary
Paul E. Rasmussen Vice President & Treasurer
Carla J. Rose Assistant Secretary
</TABLE>
(1) Bond and U.S. Government Securities Funds only.
(2) Money Market Fund only.
67
<PAGE>
[LOGO]--------------------------------------------------------------------------
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 $10
billion for some of America's largest corporations, foundations and endowments.
Sit Mutual Funds are comprised of thirteen 100% NO-LOAD funds. 100% NO-LOAD
means that Sit Mutual Funds have no sales charges on purchases, no deferred
sales charges, no 12b-1 fees, no redemption fees and no exchange fees. Every
dollar you invest goes to work for you.
Other features include:
* Free telephone exchange
* Dollar-cost averaging through an automatic investment plan
* Electronic transfer for purchases and redemptions
* Free check writing privileges on bond funds
* Retirement accounts including IRAs, Keoghs and 401(k) Plans
[GRAPHIC]
SIT FAMILY OF FUNDS
STABILITY: INCOME: GROWTH: HIGH GROWTH:
SAFETY OF PRINCIPAL INCREASED INCOME LONG-TERM CAPITAL LONG-TERM CAPITAL
AND CURRENT INCOME APPRECIATION APPRECIATION
AND INCOME
MONEY MARKET U.S. GOVERNMENT BALANCED MID CAP GROWTH
SECURITIES LARGE CAP GROWTH INTERNATIONAL GROWTH
TAX-FREE INCOME REGIONAL GROWTH SMALL CAP GROWTH
MINNESOTA TAX-FREE SCIENCE AND
INCOME TECHNOLOGY GROWTH
BOND DEVELOPING MARKETS
GROWTH
<PAGE>
ANNUAL REPORT
BOND FUNDS
YEAR ENDED MARCH 31, 2000
INVESTMENT ADVISER
SIT INVESTMENT ASSOCIATES, INC.
4600 NORWEST CENTER
MINNEAPOLIS, MN 55402
612-334-5888 (METRO AREA)
800-332-5580
DISTRIBUTOR
SIA SECURITIES CORP.
4600 NORWEST CENTER
MINNEAPOLIS, MN 55402
612-334-5888 (METRO AREA)
800-332-5580
CUSTODIAN
THE NORTHERN TRUST COMPANY
50 SOUTH LASALLE STREET
CHICAGO, IL 60675
TRANSFER AGENT AND
DISBURSING AGENT
PFPC INC.
P.O. BOX 5166
WESTBORO, MA 01581-5166
AUDITORS
KPMG LLP
4200 NORWEST CENTER
MINNEAPOLIS,MN 55402
LEGAL COUNSEL
DORSEY & WHITNEY LLP
220 SOUTH SIXTH STREET
MINNEAPOLIS, MN 55402
MEMBER OF
================
100% NO-LOAD
MUTUAL FUND
COUNCIL
================
