SIT MUTUAL FUNDS
BOND FUNDS
SEMI-ANNUAL REPORT
SEPTEMBER 30, 2000
MONEY MARKET FUND
U.S. GOVERNMENT SECURITIES FUND
TAX-FREE INCOME FUND
MINNESOTA TAX-FREE INCOME FUND
BOND FUND
[LOGO] SIT INVESTMENT ASSOCIATES
-------------------------
SIT MUTUAL FUNDS
<PAGE>
SIT MUTUAL FUNDS
BOND FUNDS SEMI-ANNUAL REPORT
TABLE OF CONTENTS
PAGE
----
Chairman's Letter 2
Performance Summary 4
FUND REVIEWS AND PORTFOLIOS OF INVESTMENTS
Money Market Fund 6
U.S. Government Securities Fund 10
Tax-Free Income Fund 16
Minnesota Tax-Free Income Fund 32
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
List of Directors and Officers 63
A Look at Sit Mutual Funds 64
This document must be preceded or accompanied by a Prospectus.
<PAGE>
[PHOTO] SIT MUTUAL FUNDS
SIX MONTHS ENDED SEPTEMBER 30, 2000
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CHAIRMAN'S LETTER
Dear fellow shareholders:
The Federal Reserve raised the federal funds rate by +0.50% to 6.50% on May
16th, 2000. This increase was the Fed's sixth in a series of tightening moves
totaling +1.75% that began on June 30, 1999 in its continued efforts to moderate
strong economic growth. The Fed has kept short-term interest rates unchanged
since mid-May, but has maintained its bias against inflation since early
February. Fed policy has caused money market yields to trend higher. However,
longer-term bond yields have declined as the U.S. Treasury has purchased
longer-maturity bonds to reduce debt, contributing to strongly positive returns
for bond investors year-to-date.
ECONOMIC OVERVIEW
Economic activity has moderated from the torrid pace of the first half of the
year, but figures still suggest solid growth. The first estimate of real GDP
growth for 3Q00 was reported at a +2.7% annualized rate, compared with +5.6% in
2Q00 and +4.8% in 1Q00. Real final sales grew at +2.7% in the third quarter,
compared with +3.9% in the second quarter and +6.7% in the first quarter.
Consumer spending, which accounts for two-thirds of GDP, accelerated to +4.5% in
the third quarter from +3.1% in the second quarter, but was still much less than
the +7.6% rate in 1Q00. The personal savings rate fell to an all time low of
-0.2%, compared to +0.3% last quarter. However, the savings rate is distorted as
it includes taxes paid on capital gains as spending, and does not include the
realized gains as income.
Other sectors of the economy continue to show slowing momentum. Business
investment, particularly spending on technology, remains positive, but has
moderated considerably since the beginning of the year from +21.0% in 1Q00 to
+14.6% in 2Q00 and +6.9% in 3Q00. Third quarter growth was also offset by a
contraction in government spending, which fell -3.6%, led by a -10.1% drop in
federal spending, after swinging from -1.1% in 1Q00 to +4.8% in 2Q00 (with
federal spending rising +17.2%). In addition, residential investment contracted
-9.2%, compared with +1.3% in the second quarter and +3.2% in the first quarter,
reflecting a continued cooling in activity from peak levels earlier in the year.
International trade remained a drag on growth in the third quarter, but export
growth in the third quarter outpaced import growth for the first time since
4Q98. Other economic measures also confirm moderation in economic activity.
September industrial production rose +0.2%, compared with +0.3% in August and
+0.4% in July. In addition, the National Association of Purchasing Management's
(NAPM) composite index remains below the neutral 50 level. We believe that real
GDP should continue at a more sustainable pace of +3.0% to +3.5% into the year
2001.
Producer and consumer price inflation appear under control, but we expect
inflation to trend higher over the next few quarters, primarily due to higher
energy costs and a leveling-off in record-setting productivity growth. Though
consumers are seeing higher gas and electricity bills, prices of goods have been
remarkably unaffected as manufacturers have not been able to pass on higher
energy costs and, instead, are finding other places to cut costs. We believe
inflation will peak at around +3.5% and then begin to abate by spring 2001. The
unemployment rate remains at a record low 3.9%, and we are monitoring labor cost
trends closely. Other inflation indicators, including the GDP deflator, show
that inflation remains contained.
The weak euro and higher energy prices may actually aid the U.S. economy in
achieving a soft landing by slowing corporate profit growth. The euro has
continued to hit new lows in recent weeks, despite joint intervention from
central banks in late September. The U.S. dollar continues to strengthen and is
+8.4% higher on a trade-weighted basis than a year ago. While the weak euro
could make U.S. exports less trade-competitive, a strong U.S. currency is
anti-inflationary and attracts foreign capital.
Much of future fiscal policy depends on the outcome of the November elections.
The presidential race continues to tighten, resulting in the closest race since
1980 and
2
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perhaps 1960. Republicans are likely to lose several seats in the House and
Senate, but retain majorities. The fiscal 2000 federal budget surplus of $237
billion was nearly double last year's $124.4 billion. The ability to sustain
surpluses in the future depends on a return to fiscal discipline, which has
lapsed in the past two years, and a continued healthy economy.
STRATEGY SUMMARY
The Federal Reserve left the federal funds rate unchanged at 6.50% at its
meeting on October 3rd. We believe that the Fed is done tightening and that the
series of six rate hikes made between June 1999 and May 2000 will be sufficient
to achieve the Fed's desired "soft landing" and to keep inflation in check. The
weak euro and higher energy prices are also expected to help moderate growth.
Yields on 30-year Treasury bonds, which rallied earlier in the year sparked by
the Treasury Department's decision to repurchase long-term Treasury debt, have
remained in a narrow range in recent months. Short-to-intermediate maturity
Treasury yields have fallen 20-50 basis points to year-to-date lows as signs of
economic slowing have emerged, causing the yield curve to become less inverted
in recent months. Yield curves for other taxable sectors remain more positively
sloped. Corporate bond yields have been relatively high since January as heavy
issuance and concerns over a slower economy have widened the incremental yields
demanded by investors from that sector. The best-performing sectors in recent
months have included asset-backeds and mortgages, which have benefited from
their high quality, relatively short durations and more than 1.0% yield
advantage over Treasuries. Our taxable bond funds continue to underweight
Treasuries, yet maintain their AAA average quality rating. Portfolio durations
are near those of their respective benchmarks and are positioned to benefit from
a steepening yield curve.
Municipal yields declined to 12-month lows in August, benefiting from lower
issuance this year and from strong demand from direct individual purchasers of
bonds. Municipal indices have provided competitive returns relative to most
taxable bond indices year-to-date. The municipal yield curve remains positively
sloped, although it has flattened in shape since January. Municipals continue to
appear cheaply valued when compared to Treasuries, but look overvalued when
compared to agencies and corporates. As we anticipated, hospital bonds are
providing one of the strongest returns among revenue bond sectors this year,
recouping some of last year's underperformance. Hospitals are seeing some
improvement from operating margin pressures last year, and our focus remains on
issuers that are sole community providers, are financially flexible and have
strong managements. Housing has lagged due to its more stable price
characteristics. Yields offered by lower-rated investment grade municipals
remain attractive, as quality spreads are still wide, and we continue to monitor
credits closely. Municipals in the 8-15 year maturity range continue to offer
the most attractive risk/reward opportunities. We believe municipals are an
attractive complement to other asset classes in the economic environment we
foresee ahead.
We believe our continued focus on high current income and relative stability of
principal value will help provide attractive incremental returns for
shareholders over the longer term. We appreciate your continued interest in the
Sit Mutual Funds and look forward to helping you achieve your long-term
investment goals.
With best wishes,
/s/ Eugene C. Sit
Eugene C. Sit, CFA
Chairman and Chief Investment Officer
3
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SIT MUTUAL FUNDS
SIX MONTHS ENDED SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
PERFORMANCE SUMMARY - BOND FUNDS
The Federal Reserve raised the federal funds rate by +0.50% to 6.50% on May
16, 2000 in its continued efforts to moderate strong economic growth. This
increase was the Fed's sixth in a series of tightening moves totaling +1.75%
that began on June 30, 1999. The Fed has kept short-term interest rates
unchanged since mid-May, but has maintained its bias against "inflation" since
early February. Money market yields continued to trend higher, with 3-month
T-bill yields increasing from 5.86% to 6.22% during the six-month period ended
September 29, 2000.
Treasury bond yields peaked in mid-May, giving back some of the rally that
was initially sparked by the Treasury Department's decision to reduce debt by
purchasing long-term Treasuries. The 30-year Treasury yield has remained in a
relatively narrow range and ended the six month period just +0.04% higher at
5.88%. As signs of slower economic growth have become evident in recent months,
short-to-intermediate maturity Treasury yields have fallen 20-50 basis points to
year-to-date lows, causing the yield curve to become less inverted. Yield curves
for other sectors of the taxable bond market remain more positively sloped.
Intermediate duration sectors outperformed during the period. Mortgages, with
their yield advantage, posted the highest returns, and asset-backeds and
agencies also performed well. Corporate bond yields have remained relatively
high since the beginning of the year as heavy issuance and concerns over a
slower economy have widened the incremental yields demanded by investors from
that sector, causing it to underperform.
Municipal yields declined and the yield curve remains positively sloped. The
yield on the Bond Buyer 40-Bond Index fell -0.15% during the period to 5.82%.
Municipals benefited from lower issuance this year and from strong demand from
direct individual purchasers of bonds. Municipal indices underperformed taxable
indices due to their longer durations and their lower (before tax) income
return. Among revenue bond sectors, hospitals have posted the strongest returns,
recouping some of last year's underperformance, while housing lagged due to its
more stable price characteristics. Municipals continue to appear cheaply valued
when compared to Treasuries, but look overvalued when compared to agencies and
corporates. Yields offered by lower-rated investment grade municipals remain
attractive, however, as quality spreads are still wide. Municipals in the 8-15
year maturity range continue to offer the most attractive risk/reward
opportunities.
<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
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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
-----------------------------------------------------------------------
SIT U.S. GOV'T. SECURITIES FUND SNGVX 06/02/87
-----------------------------------------------------------------------
SIT TAX-FREE INCOME FUND SNTIX 09/29/88
-----------------------------------------------------------------------
SIT MINNESOTA TAX-FREE INCOME FUND SMTFX 12/01/93
-----------------------------------------------------------------------
SIT BOND FUND SIBOX 12/01/93
-----------------------------------------------------------------------
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
</TABLE>
(1) Converted from Sit Investment Reserve Fund to Sit Money Market Fund on
11/1/93.
(2) Period from Fund inception through calendar year-end.
(3) Based on the last 12 monthly distributions of net investment income and
average NAV as of 9/30/00.
(4) Figure represents 7-day compound effective yield. The 7-day simple yield as
of 9/30/00 was 6.14%.
(5) For individuals in the 28%, 31%, 36%, and 39.6% federal tax brackets, the
federal tax equivalent yields are 7.51%, 7.84%, 8.45% and 8.96%,
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 9/30/00 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% 4.44% 6.32%(4)
------------------------------------------------------------------------------------------------------
7.34 1.77 11.50 4.99 8.19 6.52 1.37 5.54 6.21 6.14%
------------------------------------------------------------------------------------------------------
10.42 -0.63 12.86 5.69 9.87 6.29 -4.01 5.37 5.41(5) 5.32
------------------------------------------------------------------------------------------------------
1.60(2) 0.63 11.90 5.89 8.19 6.14 -3.82 5.29 5.71(6) 5.40
------------------------------------------------------------------------------------------------------
0.34(2) -1.31 16.83 4.25 9.44 6.52 -0.34 5.20 6.63 6.53
------------------------------------------------------------------------------------------------------
0.53(2) 4.47 5.98 5.27 5.32 5.01 4.88 4.53
8.17 -1.75 14.41 4.06 7.72 8.49 0.49 6.26
8.73 -1.28 11.65 4.22 6.38 5.84 0.74 4.81
0.54(2) -2.92 18.47 3.63 9.65 8.69 -0.82 7.12
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS FOR THE
PERIODS ENDED SEPTEMBER 30, 2000
TOTAL RETURN --------------------------------------------------
QUARTER SIX MONTHS SINCE
ENDED 9/30/00 ENDED 9/30/00 1 YEAR 5 YEARS 10 YEARS INCEPTION
------------------------------ --------------------------------------------------
<S> <C> <C> <C> <C>
1.56% 3.04% 5.78% 5.22% -- 5.00%
------------------------------------------------------------------------------------------------------
2.19 3.95 6.03 5.91 7.00% 7.56
------------------------------------------------------------------------------------------------------
2.57 3.74 3.65 5.23 6.36 6.63
------------------------------------------------------------------------------------------------------
2.51 3.56 2.93 4.89 -- 5.14
------------------------------------------------------------------------------------------------------
3.00 3.86 5.10 5.77 -- 5.84
------------------------------------------------------------------------------------------------------
1.56 3.06 5.90 5.29 -- 5.18
2.68 4.55 6.21 6.06 7.23 7.56
1.97 3.58 4.82 4.80 6.30 6.40
3.01 4.81 6.99 6.47 -- 6.29
</TABLE>
(6) For Minnesota residents in the 28%, 31%, 36% and 39.6% federal tax brackets,
the double exempt tax equivalent yields are 8.62%, 8.99%, 9.70% and 10.28%,
respectively (Assumes the maximum Minnesota tax bracket of 8.0%).
PERFORMANCE FIGURES ARE HISTORICAL AND DO NOT GUARANTEE FUTURE RESULTS.
INVESTMENT RETURNS AND PRINCIPAL VALUE WILL VARY, AND YOU MAY HAVE A GAIN OR
LOSS WHEN YOU SELL SHARES. AVERAGE ANNUAL TOTAL RETURNS INCLUDE CHANGES IN SHARE
PRICE AS WELL AS REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAINS.
5
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[PHOTO] SIT MONEY MARKET FUND
SIX MONTHS ENDED SEPTEMBER 30, 2000
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MICHAEL C. BRILLEY, SENIOR PORTFOLIO MANAGER
PAUL J. JUNGQUIST, CFA, SENIOR PORTFOLIO MANAGER
The Sit Money Market Fund provided investors with a +1.56% return for the
three months ended September 30, 2000, compared to a +1.46% average return for
the Lipper Analytical Services, Money Market Fund universe. The Fund's
performance ranked 70th of 376 funds in its Lipper peer group category for the
third quarter of 2000. For the one year, three year, five year and since
inception periods ended September 30, 2000, the Fund's performance ranked 84th
of 362 funds, 72nd of 289 funds, 65th of 249 funds and 42nd of 185 funds,
respectively, in its Lipper peer group. As of September 30, 2000, the Fund's
7-day compound yield was 6.32% and its average maturity was 27 days, compared to
6.35% and 29 days, respectively, at June 30, 2000.
The Federal Reserve Board held the federal funds rate during the past quarter
at 6.50%, in response to visibly slowing growth in the economy, commodity price
inflation and tightness in labor markets. Three-month Treasury bill yields rose
over the past quarter, ranging from 5.85% on June 30th to 6.32% by late August,
finishing at 6.19% on September 30th. Current yield levels imply that the market
is not expecting additional tightening by the Fed in the fourth quarter of 2000.
Indeed, many investors now feel the Fed is done with its tightening for this
cycle. Given the expected slowdown in the economy, we also believe the Fed is
done tightening. 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 slows from a very strong level, we do not foresee a significant impact
on the short-term creditworthiness of top tier commercial paper issuers in
general. However, certain issuers may experience some liquidity challenges over
the coming months and we will increase our vigilance as market conditions
warrant. 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 9/30/00: $ 1.00 Per Share
3/31/00: $ 1.00 Per Share
Total Net Assets: $152.8 Million
PORTFOLIO STRUCTURE
(% OF TOTAL NET ASSETS)
[BAR CHART]
Diversified Finance 18.6
Consumer Loan Finance 15.6
Energy 10.1
Captive Auto Finance 8.9
Utilities 8.5
Consumer Non-Durables 5.5
Technology/Business Equipment 5.4
Sectors 4.2% and Under 24.9
Cash & Other Net Assets 2.5
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AVERAGE ANNUAL TOTAL RETURNS*
SIT MONEY 3-MONTH LIPPER
MARKET U.S. TREASURY MONEY
FUND BILL MARKET AVG.
--------- ------------- -----------
3 Month** 1.56% 1.56% 1.46%
6 Month** 3.04 3.06 n/a
1 Year 5.78 5.90 5.43
3 Year 5.25 5.27 4.94
5 Year 5.22 5.29 4.95
Inception 5.00 5.18 4.81
(11/1/93)
CUMULATIVE TOTAL RETURNS*
SIT MONEY 3-MONTH LIPPER
MARKET U.S. TREASURY MONEY
FUND BILL MARKET AVG.
--------- ------------- -----------
1 Year 5.78% 5.90% 5.43%
3 Year 16.61 16.65 15.55
5 Year 28.95 29.38 27.34
Inception 40.15 41.85 38.43
(11/1/93)
*AS OF 9/30/00. **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 9/30/00 would
have grown to $14,015 in the Fund or $14,185 in the 3-Month U.S. Treasury Bill
assuming reinvestment of all dividends and capital gains.
QUALITY RATINGS
(% OF TOTAL NET ASSETS)
LOWER OF MOODY'S, S&P,
FITCH OR DUFF & PHELPS
RATINGS USED.
[PIE CHART]
First Tier Securities
100%
First Tier Securities 100%
Second Tier Securities 0%
7
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SIT MONEY MARKET FUND
SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (UNAUDITED)
--------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
--------------------------------------------------------------------------------
COMMERCIAL PAPER (100.4%) (2)
AUTO MANUFACTURER (4.2%)
Daimler Chrysler Hldgs.:
1,500,000 6.58 %,11/1/00 $1,491,280
3,000,000 6.54 %,11/10/00 2,977,894
2,000,000 6.54 %,11/27/00 1,979,184
--------------
6,448,358
--------------
AUTOMOBILE RENTAL (2.6%)
Hertz Corp.:
1,500,000 6.61 %,10/12/00 1,496,740
1,200,000 6.56 %,11/21/00 1,188,803
1,300,000 6.56 %,11/22/00 1,287,655
--------------
3,973,198
--------------
BANKING (4.2%)
Citicorp:
1,500,000 6.53 %,10/3/00 1,499,189
2,000,000 6.55 %,10/18/00 1,993,510
1,000,000 6.54 %,10/23/00 995,854
2,000,000 6.56 %,11/3/00 1,987,741
--------------
6,476,294
--------------
CAPITAL GOODS (3.9%)
John Deere B.V.:
2,996,000 6.56 %,10/26/00 2,981,936
3,000,000 6.56 %,10/27/00 2,985,375
--------------
5,967,311
--------------
CAPTIVE AUTO FINANCE (8.9%)
Ford Motor Credit Corp.:
1,550,000 6.61 %,10/5/00 1,548,596
1,000,000 6.57 %,10/6/00 998,917
1,000,000 6.57 %,10/20/00 996,394
2,000,000 6.54 %,10/24/00 1,991,347
1,000,000 6.57 %,11/17/00 991,400
General Motors Acceptance Corp.:
2,000,000 6.58 %,10/5/00 1,998,190
1,000,000 6.60 %,10/6/00 998,915
1,500,000 6.60 %,10/10/00 1,497,288
1,000,000 6.62 %,10/17/00 996,926
653,000 6.59 %,11/15/00 647,551
1,000,000 6.58 %,11/27/00 989,528
--------------
13,655,052
--------------
CAPTIVE EQUIPMENT FINANCE (4.2%)
2,000,000 IBM Credit Corp.,
6.54 %,10/4/00 1,998,560
John Deere Capital Corp.:
2,000,000 6.59 %,10/11/00 1,995,667
2,000,000 6.59 %,10/12/00 1,996,028
500,000 6.54 %,11/13/00 496,046
--------------
6,486,301
--------------
--------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
--------------------------------------------------------------------------------
CONSUMER LOAN FINANCE (15.6%)
American Express Credit Corp.:
1,000,000 6.54 %,10/3/00 999,460
3,000,000 6.54 %,10/19/00 2,989,724
American General Financial Corp.:
1,000,000 6.55 %,10/10/00 998,200
2,000,000 6.55 %,10/31/00 1,988,840
2,000,000 6.55 %,11/14/00 1,983,800
1,500,000 6.54 %,11/15/00 1,487,599
7,000,000 Household Finance Corp.,
6.65 %,10/2/00 6,997,414
Wells Fargo Financial, Inc.:
1,000,000 6.56 %,11/8/00 992,969
1,500,000 6.56 %,11/9/00 1,489,183
2,000,000 6.59 %,11/17/00 1,982,693
2,000,000 6.57 %,11/30/00 1,978,040
--------------
23,887,922
--------------
CONSUMER NON-DURABLES (5.5%)
1,909,000 Coca Cola Co.,
6.54 %,10/17/00 1,903,168
Coca Cola Enterprises:
3,500,000 6.56 %,11/7/00 (5) 3,476,071
3,000,000 6.55 %,11/20/00 (5) 2,972,503
--------------
8,351,742
--------------
DIVERSIFIED FINANCE (18.6%)
Associates Corp. N.A.:
1,600,000 6.55 %,10/16/00 1,595,392
2,300,000 6.56 %,10/30/00 2,287,580
Associates First Capital B.V.:
1,000,000 6.56 %,10/6/00 998,913
1,000,000 6.65 %,10/16/00 997,093
2,000,000 6.57 %,10/23/00 1,991,707
2,000,000 6.57 %,10/24/00 1,991,347
CIT Group Holdings, Inc.:
1,000,000 6.57 %,10/25/00 995,493
1,000,000 6.57 %,10/26/00 995,313
1,500,000 6.58 %,11/8/00 1,489,454
1,000,000 6.53 %,11/13/00 992,104
1,000,000 6.57 %,12/4/00 988,318
General Electric Capital Corp.:
1,500,000 6.63 %,10/13/00 1,496,463
1,000,000 6.58 %,11/3/00 993,871
2,000,000 6.59 %,11/6/00 1,986,659
1,000,000 6.54 %,11/16/00 991,553
1,200,000 6.55 %,11/22/00 1,188,570
8
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QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
--------------------------------------------------------------------------------
1,000,000 6.55 %,10/10/00 998,200
1,000,000 6.57 %,10/25/00 995,493
1,000,000 6.58 %,10/27/00 995,140
1,500,000 6.58 %,11/3/00 1,490,806
1,015,000 6.54 %,11/15/00 1,006,609
1,000,000 6.54 %,11/16/00 991,553
--------------
28,457,631
--------------
ENERGY (10.1%)
Chevron UK Investment:
2,000,000 6.57 %,10/18/00 1,993,149
2,000,000 6.57 %,10/19/00 1,992,789
2,000,000 6.57 %,10/20/00 1,993,510
2,000,000 Exxon Mobil Australia, 6.53%, 10/2/00 1,999,281
Exxon Project Investment Co.:
1,500,000 6.55 %,11/13/00 1,488,120
1,500,000 6.56 %,11/17/00 1,487,040
Texaco, Inc.:
2,500,000 6.54 %,10/13/00 2,494,159
2,000,000 6.53 %,10/20/00 1,992,800
--------------
15,440,848
--------------
FINANCIAL SERVICES (4.2%)
Transamerica Finance Corp.:
2,300,000 6.54 %,10/24/00 2,290,018
1,000,000 6.68 %,10/26/00 995,255
2,000,000 6.55 %,11/6/00 1,986,680
1,200,000 6.55 %,11/9/00 1,191,360
--------------
6,463,313
--------------
RETAIL (4.2%)
Wal-Mart Stores, Inc.:
1,500,000 6.58 %,10/11/00 1,497,025
1,000,000 6.53 %,11/14/00 991,925
2,000,000 6.53 %,11/21/00 1,981,338
2,000,000 6.55 %,11/28/00 1,978,826
--------------
6,449,114
--------------
TECHNOLOGY/BUSINESS EQUIPMENT (5.4%)
2,300,000 IBM Corp., 6.55%, 11/1/00 2,286,711
Lucent Technologies, Inc.:
4,000,000 6.65 %,10/2/00 3,998,522
2,000,000 6.53 %,10/4/00 1,998,562
--------------
8,283,795
--------------
--------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
--------------------------------------------------------------------------------
UTILITIES (8.5%)
AT&T Corp.:
1,300,000 6.58 %,10/3/00 1,299,296
2,278,000 6.53 %,10/13/00 2,272,661
1,000,000 6.58 %,10/25/00 995,493
2,000,000 6.58 %,11/1/00 1,988,471
BellSouth Telecommunications, Inc.:
2,000,000 6.52 %,10/2/00 1,999,281
2,100,000 6.55 %,10/27/00 2,089,794
2,370,000 6.56 %,11/2/00 2,355,944
--------------
13,000,940
--------------
Total commercial paper
(cost: $153,341,819) 153,341,819
--------------
Total investments in securities
(cost: $153,341,819) (7) $153,341,819
==============
See accompanying notes to portfolios of investments on page 48.
9
<PAGE>
[PHOTO] SIT U.S. GOVERNMENT SECURITIES FUND
SIX MONTHS ENDED SEPTEMBER 30, 2000
-----------------------------------------------------------------------
MICHAEL C. BRILLEY, SENIOR PORTFOLIO MANAGER
BRYCE A. DOTY, CFA, SENIOR PORTFOLIO MANAGER
The Sit U.S. Government Securities Fund provided investors with a +3.9%
return for the 6 months ended September 30, 2000, compared to a +4.5% return of
the Lehman Intermediate Government Bond Index. For the 12 months ending
September 30, the Fund's total return was +6.0%, versus +6.1% for the Lipper
U.S. Government Fund Average, and +6.2% for the Lehman Index. The Fund holds a
5-star overall rating by Morningstar in the taxable bond category which includes
1,741 funds as of September 30, 2000.
The U.S. Treasury yield curve steepened significantly during the third
quarter after changing very little during the second quarter. Shorter maturity
Treasuries declined 20-40 basis points in yield, while the 30-year Treasury
yield ended the quarter essentially unchanged. This yield curve shift was the
result of the market's perception of a slowing economy and an approaching end to
the Federal Reserve's recent series of interest rate hikes. The Fund's U.S.
Treasury holdings provided the highest returns over the last six months as
Treasury buybacks by the government and investor demand for high quality
securities drove up prices. However, mortgage securities performed as well as
Treasuries during the third quarter.
Investment activity for the period included slightly increasing the portfolio
weighting of collateralized mortgage obligations (CMO's) to obtain high yields
as well as provide protection against potential faster prepayments of the
underlying mortgages. Treasury Inflation Protected Securities (TIPS) were also
purchased during the period to take advantage of monthly spikes in inflation
rates. The principal of these securities increases at the rate of CPI while also
paying a fixed coupon. The TIPS were sold late in the quarter as the monthly
inflation rates declined substantially. As oil prices remain volatile, monthly
inflation will likely fluctuate and we expect future investment opportunities in
TIPS on a periodic basis.
Looking ahead, we expect a slight decrease in short-term rates and little
change in longer-term rates due to a slowing economy and moderate inflation. As
the Federal Reserve contemplates the possibility of lowering short-term rates,
as opposed to the recent series of increases, we expect government securities
that offer high levels of current income, such as mortgage pass-throughs and
CMO's, to provide the most attractive total return opportunities.
INVESTMENT OBJECTIVE AND STRATEGY
The objective of the U.S. Government Securities Fund is to provide high
current income and safety of principal, which it seeks to attain by investing
solely in debt obligations issues, guaranteed or insured by the U.S. government
or its agencies or its instrumentalities.
Agency mortgage securities and U.S. Treasury securities will be the
principal holdings in the Fund. The mortgage securities that the Fund will
purchase consist of pass-through securities including those issued by Government
National Mortgage Association (GNMA), Federal National Mortgage Asociation
(FNMA), and Federal Home Loan Mortgage Corporation (FHLMC).
PORTFOLIO SUMMARY
Net Asset Value 9/30/00: $10.29 Per Share
3/31/00: $10.22 Per Share
Total Net Assets: $139.8 Million
30-day SEC Yield: 6.21%
12-Month Distribution Rate: 6.14%
Average Maturity: 15.5 Years
Effective Duration: 3.4 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 32.0
Collateralized Mortgage Obligations 31.7
FHLMC Pass-Through 14.8
FNMA Pass-Through 13.6
U.S. Treasury 7.3
Cash & Other Net Assets 0.6
10
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AVERAGE ANNUAL TOTAL RETURNS*
SIT
U.S. GOV'T. LEHMAN LIPPER
SECURITIES INTER. GOV'T. U.S. GOV'T.
FUND BOND INDEX FUND AVG.
---------- ------------- -----------
3 Month** 2.19% 2.68% 2.70%
6 Month** 3.95 4.55 n/a
1 Year 6.03 6.21 6.12
5 Year 5.91 6.06 5.38
10 Year 7.00 7.23 7.05
Inception 7.56 7.56 7.09
(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 6.03% 6.21% 6.12%
5 Year 33.26 34.19 29.95
10 Year 96.67 101.03 97.69
Inception 164.44 164.37 149.49
(6/2/87)
*AS OF 9/30/00. **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 9/30/00 would
have grown to $26,444 in the Fund or $26,437 in the Lehman Intermediate
Government Bond Index assuming reinvestment of all dividends and capital gains.
ESTIMATED AVERAGE LIFE PROFILE
The Adviser's estimates of
the dollar weighted average
life of the portfolio's
securities, which may vary
from their stated maturities.
[BAR CHART]
0 - 1 Year 0.6%
1 - 5 Years 86.6%
5 - 10 Years 11.5%
10 - 20 Years 1.3%
20+ Years 0.0%
11
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SIT U.S. GOVERNMENT SECURITIES FUND
SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (UNAUDITED)
--------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
--------------------------------------------------------------------------------
MORTGAGE PASS-THROUGH SECURITIES (60.4%) (2)
FEDERAL HOME LOAN MORTGAGE CORPORATION (14.8%):
45,757 8.50%, 1/1/17 $46,863
2,697 8.75%, 12/1/01 2,707
390,353 8.75%, 1/1/17 402,535
188,041 9.00%, 4/1/03 190,594
33,850 9.00%, 10/1/04 34,209
136,130 9.00%, 12/1/05 141,372
382,505 9.00%, 1/1- 2/1/06 397,234
297,352 9.00%, 5/1 - 7/1/09 305,110
85,616 9.00%, 10/1/13 88,225
1,470,890 9.00%, 5/1 - 11/1/16 1,520,910
2,267,740 9.00%, 1/1 - 10/1/17 2,339,237
588,150 9.00%, 6/1/18 606,950
1,466,555 9.00%, 6/1-10/1/19 1,515,736
476,032 9.00%, 5/1 - 8/1/21 495,790
57,567 9.25%, 7/1/08 58,819
303,600 9.25%, 8/1/09 307,244
326,680 9.25%, 7/1/10 334,145
189,693 9.25%, 3/1/11 193,889
128,236 9.25%, 3/1/17 131,350
1,266,093 9.25%, 1/1-3/1/19 1,314,006
227,262 9.50%, 10/1/08 233,428
952,804 9.50%, 2/1 - 6/1/10 980,901
770,061 9.50%, 1/1 - 6/1/11 801,651
744,194 9.50%, 6/1 - 10/1/16 771,711
216,695 9.50%, 6/1 - 9/1/17 224,631
368,171 9.50%, 10/1-12/1/18 381,694
172,618 9.50%, 6/1 - 11/1/19 179,780
1,082,370 9.50%, 7/1-9/1/20 1,135,424
268,583 9.75%, 12/1/08 280,355
314,722 9.75%, 11/1/09 328,517
119,089 9.75%, 6/1/11 124,309
1,139,088 9.75%, 12/1/16 1,196,073
915,880 9.75%, 6/1 - 12/1/17 963,589
73,720 9.85%, 5/1/16 77,923
511,185 10.00%, 11/1/10 536,607
214,912 10.25%, 6/1/10 227,924
135,520 10.25%, 2/1/17 143,725
128,202 10.29%, 9/1/16 136,379
14,219 10.50%, 4/1 - 7/1/04 14,489
650,684 10.50%, 5/1/14 694,172
70,008 11.00%, 12/1/11 75,803
95,906 11.00%, 2/1/14 103,087
67,288 11.00%, 6/1/15 72,489
133,946 11.00%, 2/1/18 145,988
306,561 11.00%, 5/1-7/1/19 333,896
84,960 11.25%, 10/1/09 92,340
---------------
20,683,810
---------------
--------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
--------------------------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (13.6%):
159,534 8.50%, 8/1/06 163,265
19,561 8.875%, 3/1/17 20,265
2,278,239 9.00%, 1/1 - 5/1/09 2,360,082
103,939 9.00%, 4/1/10 108,021
544,085 9.00%, 11/1/16 565,987
1,351,745 9.00%, 1/1 - 12/1/17 1,406,743
735,348 9.00%, 9/1 - 12/15/19 771,857
63,041 9.00%, 9/1/20 66,173
262,190 9.00%, 9/1 - 11/1/21 272,790
1,537,117 9.25%, 10/1/09 1,584,453
614,552 9.25%, 7/1/10 635,991
70,995 9.25%, 4/1/12 72,730
495,878 9.25%, 10/1-12/1/16 509,774
80,822 9.25%, 3/1/17 83,087
74,553 9.375%, 5/1/16 77,947
105,721 9.50%, 1/1/06 108,206
83,919 9.50%, 9/1/08 87,412
345,627 9.50%, 12/1/09 359,097
136,472 9.50%, 1/1/11 142,573
141,280 9.50%, 5/1/14 147,161
1,103,891 9.50%, 4/1 - 9/1/16 1,157,319
602,777 9.50%, 11/1 - 12/1/18 632,610
812,229 9.50%, 5/1 - 12/1/19 852,675
1,242,338 9.50%, 4/1 - 9/1/20 1,302,798
416,515 9.50%, 3/1/21 437,267
640,301 9.75%, 1/1/13 667,714
72,197 10.00%, 3/1/11 75,883
431,385 10.00%, 6/1/14 452,141
453,284 10.00%, 12/1/19 479,336
204,352 10.00%, 2/1/21 216,210
2,014,804 10.25%, 8/15/13 2,194,878
171,036 10.50%, 5/1/09 181,939
29,230 10.75%, 11/1/10 31,161
273,581 11.00%, 10/1/06 288,874
37,290 11.00%, 4/1/14 40,620
184,032 11.00%, 8/1/15 199,916
Municipal (FNMA collateralized):
265,000 Alabama Hsg. Fin. Auth. Multifamily
Series 1999B, 5.70%, 9/1/03 260,471
---------------
19,015,426
---------------
12
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--------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
--------------------------------------------------------------------------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (32.0%) (3):
72,002 7.50%, 3/15/07 72,786
272,328 7.50%, 5/15/16 274,534
5,327 8.00%, 7/15/03 5,335
133,459 8.00%, 10/15/12 136,107
1,418,761 8.00%, 5/15 - 9/15/16 1,452,848
67,697 8.25%, 2/15 - 6/15/02 67,836
395,076 8.25%, 12/15/11 404,684
131,180 8.25%, 1/15/12 134,471
291,351 8.25%, 8/15/15 299,391
14,098 8.50%, 11/15/01 14,062
190,459 8.50%, 12/15/11 196,636
398,449 8.50%, 1/15/12 411,835
265,018 8.50%, 4/15/15 274,859
524,150 8.50%, 9/15/16 544,238
546,777 8.50%, 1/15/17 568,144
47,936 8.75%, 7/15/02 48,290
75,710 8.75%, 5/15/03 76,533
418,739 8.75%, 5/15 - 11/15/06 431,139
148,427 8.75%, 2/15 - 3/15/07 153,216
106,320 8.75%, 11/15/09 109,888
843,930 8.75%, 6/15 - 12/15/11 876,505
64,528 9.00%, 10/15/04 65,848
855,833 9.00%, 4/15 - 10/15/06 882,708
192,642 9.00%, 6/15 - 10/15/07 200,411
487,307 9.00%, 9/15 - 12/15/08 507,532
837,854 9.00%, 2/15 - 12/15/09 875,051
817,425 9.00%, 7/15/10 854,549
2,183,943 9.00%, 5/15 - 10/15/11 2,287,055
96,302 9.00%, 1/15/12 101,049
46,389 9.00%, 8/15/15 48,722
427,510 9.00%, 6/20 - 12/20/16 446,465
5,031,269 9.00%, 1/15 - 8/20/17 5,275,568
48,974 9.00%, 12/15/19 51,369
82,988 9.00%, 7/20 - 10/20/21 86,365
282,368 9.10%, 5/15/18 290,609
13,743 9.25%, 4/15 - 9/15/01 13,797
68,969 9.25%, 4/15/03 70,468
146,373 9.25%, 3/15/05 151,120
322,157 9.25%, 11/15/09 334,981
390,907 9.25%, 1/15 - 11/15/10 406,086
234,799 9.25%, 11/15/11 243,771
89,479 9.25%, 4/15/12 92,857
346,463 9.25%, 5/15 - 10/15/16 358,150
548,933 9.25%, 2/20 - 11/20/17 561,905
32,499 9.50%, 1/15 - 3/15/05 33,807
114,266 9.50%, 1/15/06 118,818
2,335,176 9.50%, 6/15 - 11/15/09 2,456,159
--------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
--------------------------------------------------------------------------------
1,025,074 9.50%, 1/15 - 11/15/10 1,078,051
365,651 9.50%, 1/15 - 3/15/11 386,448
955,922 9.50%, 3/20 - 11/20/16 1,002,677
900,692 9.50%, 1/15 - 12/20/17 945,620
3,982,829 9.50%, 4/15 - 10/20/18 4,154,009
956,811 9.50%, 1/15 - 12/15/19 1,001,645
203,701 9.50%, 1/15 - 10/15/20 214,044
202,525 9.50%, 1/15 - 8/15/21 212,806
5,925 9.75%, 5/15/01 5,961
61,461 9.75%, 11/15/02 62,893
93,725 9.75%, 7/15 - 12/15/03 96,889
17,286 9.75%, 3/15/04 17,980
469,227 9.75%, 6/15 - 8/15/05 491,104
206,430 9.75%, 1/15 - 2/15/06 217,066
329,271 9.75%, 8/15 - 9/15/09 345,852
1,036,353 9.75%, 8/15 - 12/15/10 1,087,504
508,498 9.75%, 11/15 - 12/15/12 533,869
35,497 9.75%, 4/15/18 37,107
45,625 10.00%, 8/15/02 46,724
80,165 10.00%, 11/15/03 82,892
79,011 10.00%, 5/15/04 82,306
611,432 10.00%, 7/15/05 639,099
91,560 10.00%, 1/15/06 95,909
134,566 10.00%, 11/15/08 142,201
40,213 10.00%, 5/15 - 11/15/09 42,539
794,026 10.00%, 6/15 - 11/15/10 841,220
72,805 10.00%, 1/15/11 77,153
170,977 10.00%, 10/15/15 180,523
46,791 10.00%, 3/20 - 9/15/16 49,084
196,206 10.00%, 11/15/17 207,041
164,090 10.00%, 10/15/18 173,100
969,956 10.00%, 2/15 - 11/15/19 1,018,446
149,684 10.00%, 1/15 - 12/15/20 157,802
223,085 10.00%, 6/15/21 235,081
1,731 10.25%, 2/15/01 1,745
50,458 10.25%, 12/15/02 51,824
79,554 10.25%, 5/15 - 8/15/04 83,325
153,906 10.25%, 7/15/05 162,593
101,423 10.25%, 5/15/09 107,978
8,670 10.50%, 9/15/01 8,752
28,617 10.50%, 12/15/02 29,459
130,048 10.50%, 6/15/09 139,837
68,454 10.50%, 7/15/10 73,707
135,683 10.50%, 8/15 - 11/15/15 146,127
102,532 10.50%, 3/15 - 12/15/16 110,500
141,516 10.50%, 11/15/18 152,472
141 10.75%, 11/15/00 141
26,753 10.75%, 9/15/03 27,999
See accompanying notes to portfolios of investments on page 48.
13
<PAGE>
SIT U.S. GOVERNMENT SECURITIES FUND
SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (UNAUDITED)
--------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
--------------------------------------------------------------------------------
60,920 10.75%, 9/15/05 64,622
74,301 10.75%, 8/15/06 79,286
21,382 10.75%, 1/15/10 22,999
68,534 10.75%, 7/15 - 8/15/11 73,728
121,753 11.00%, 6/15/04 128,493
304,486 11.00%, 1/15 - 6/15/10 331,146
16,599 11.00%, 7/15/13 18,131
3,179 11.25%, 8/15 - 12/15/00 3,162
555 11.25%, 1/15/01 562
4,247 11.25%, 5/15/03 4,418
206,614 11.25%, 9/15 - 10/15/05 218,028
352,722 11.25%, 6/15 - 9/15/10 384,497
1,283,528 11.25%, 2/15 - 11/15/11 1,399,703
66,421 11.75%, 5/15 - 6/15/04 70,994
Municipal (GNMA collateralized):
290,000 Bernalillo Multifamily Rev. Series
1998A, 7.50%, 9/20/20 286,479
75,000 California Comm. Dev. Auth. Rev.
Series 2000, 7.50%, 5/20/04 74,523
150,000 Dakota Multifamily Rev. Series
1999A, 6.50%, 12/20/05 148,505
545,000 Maplewood Multifamily Rev.
Series 1998B, 6.75%, 7/20/15 521,075
500,000 Nortex Multifamily Rev. Series
1999T, 6.50%, 3/20/06 493,585
---------------
44,751,597
---------------
Total mortgage pass-through securities 84,450,833
---------------
(cost: $85,283,819)
U.S. GOVERNMENT SECURITIES (7.3%) (2)
3,000,000 U.S. Treasury Note,
7.875%, 11/15/04 3,210,000
U.S. Treasury Strip, zero coupon:
10,300,000 6.43% effective yield, 11/15/09 5,907,369
3,500,000 6.00% effective yield, 12/15/19 1,144,213
---------------
Total U.S. government securities 10,261,582
---------------
(cost: $10,063,654)
--------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
--------------------------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS (31.7%) (2)
Federal Home Loan Mtg. Corp.:
6,715,182 2106-C, 6.00%, 2/15/27 6,200,002
86,584 1006-C, 9.15%, 10/15/20 89,784
10,000,000 FNMA 1998-46E, 6.00%, 8/18/28 9,133,800
Vendee Mortgage Trust:
3,205,000 Series 2000-3 2B, 7.50%, 4/15/08 3,241,056
1,045,000 Series 1992-1 2K, 7.75%, 5/15/08 1,058,969
5,500,000 Series 2000-3 2D, 7.50%, 11/15/14 5,493,125
7,300,000 Series 1992-2 1F, 7.00%, 2/15/18 7,284,962
6,775,000 Series 1997-2 E, 7.50%, 5/15/24 6,820,935
5,100,000 Series 1999-1 3B, 6.50%, 2/15/20 5,001,723
---------------
Total collateralized mortgage obligations 44,324,356
---------------
(cost: $44,749,513)
SHORT-TERM SECURITIES (0.3%) (2)
376,709 Dreyfus Cash Mgmt. Fund, 6.39% 376,709
---------------
(cost: $376,709)
Total investments in securities
(cost: $140,473,695) (7) $139,413,480
===============
See accompanying notes to portfolios of investments on page 48.
14
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15
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[PHOTO] SIT TAX-FREE INCOME FUND
SIX MONTHS ENDED SEPTEMBER 30, 2000
-----------------------------------------------------------------------
MICHAEL C. BRILLEY, SENIOR PORTFOLIO MANAGER
DEBRA A. SIT, CFA, SENIOR PORTFOLIO MANAGER
Municipal bond prices rose during the six month period after bottoming in
mid-May. The Fund's price per share rose from $9.73 to $9.81 during the period
and ranged from a low of $9.55 in mid-May to a high of $9.87 in early September.
The Fund benefited from declining yields since mid-May and from stabilizing
yields in the health care sector, and provided a return of +3.56% for the six
month period ended September 29, 2000, compared to +3.58% for the Lehman 5-year
Municipal Index. The Fund's 30-day SEC yield rose from 5.42% to 5.71% during the
period and its 12-month distribution rate increased from 5.19% to 5.40%,
contrary to the general declining trend of bond yields.
We continue to look for opportunities to increase the yield in the portfolio,
as incremental credit spreads remain wide. Purchases were made in the hospital
and other revenue sectors, which increased from 21.5% to 24.1% and from 6.0% to
7.7%, respectively. Multifamily housing bonds increased from 37.5% to 39.0%,
despite net sales. Cash decreased from 10.6% to 3.3% as assets declined from
$172.9 million to $163.4 million. Securities rated A or better decreased from
52.1% to 48.6% while non-rated holdings increased from 40.0% to 42.7%. We intend
to keep non-rated holdings around their current weighting to ensure portfolio
liquidity. The Fund's average maturity extended from 16.6 years to 17.3 years
due to the decrease in cash. Nonetheless, the Fund's implied duration, which is
based on historical price changes, increased from 7.1 years to 8.2 years,
reflecting the increased price sensitivity of the Fund's holdings with the rise
in municipal yields during 1999 (following stable yields in 1998) as bonds
became priced to maturity rather than to shorter call dates.
We continue to monitor credits closely, particularly those in the health care
sector, which is seeing some improvement from operating margin pressures last
year. We are maintaining the Fund's health care weighting since underperformance
in that sector, such as during 1999, has typically been followed by a period of
strong outperformance. Our health care focus remains on issuers that are sole
community providers, are financially flexible and have strong managements. We
believe that bonds in the 8 to 15 year maturity range continue to offer the most
attractive risk/reward profile. Municipal bonds have seen continued strength in
recent months, and we believe they are an attractive complement to other asset
classes in the "soft landing" economic environment we foresee ahead.
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 primarily in investment-grade municipal
securities.
Such municipal securities generate interest income that is exempt from both
regular federal income tax and federal alternative minimum tax. During normal
market conditions, the Fund invests 100% of its net assets in such tax-exempt
municipal securities.
PORTFOLIO SUMMARY
Net Asset Value 9/30/00: $9.67 Per Share
3/31/00: $9.57 Per Share
Total Net Assets: $508.8 Million
30-day SEC Yield: 5.41%
Tax Equivalent Yield: 8.96%(1)
12-Month Distribution Rate: 5.32%
Average Maturity: 17.0 Years
Duration to Estimated Avg. Life: 7.5 Years(2)
Implied Duration: 8.2 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 31.3
Hospital/Health Care Revenue 25.3
Other Revenue 11.8
Single Family Mortgage Revenue 11.1
Education/Student Loan 6.0
Closed-End Mutual Funds 5.0
Sectors Under 3.0% 7.9
Cash & Other Net Assets 1.6
16
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AVERAGE ANNUAL TOTAL RETURNS*
SIT LIPPER
TAX-FREE LEHMAN GENERAL
INCOME 5-YEAR MUNI. MUNI. BOND
FUND BOND INDEX FUND AVG.
-------- ------------ ----------
3 Month** 2.57% 1.97% 2.28%
6 Month** 3.74 3.58 n/a
1 Year 3.65 4.82 4.75
5 Year 5.23 4.80 4.77
10 Year 6.36 6.30 6.70
Inception 6.63 6.40 6.77
(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 3.65% 4.82% 4.75%
5 Year 29.04 26.44 26.23
10 Year 85.33 84.15 91.32
Inception 116.18 110.51 119.59
(9/29/88)
*AS OF 9/30/00. **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 9/30/00 would
have grown to $21,618 in the Fund or $21,051 in the Lehman 5-Year Municipal Bond
Index assuming reinvestment of all dividends and capital gains.
QUALITY RATINGS
(% OF TOTAL NET ASSETS)
LOWER OF MOODY'S, S&P,
FITCH OR DUFF & PHELPS
RATINGS USED.
[PIE CHART]
A 24.5%
AA 15.7%
AAA 17.7%
Other Assets and Liabilities 1.6%
Less than BBB 1.7%
BBB 38.8%
17
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PORTFOLIO OF INVESTMENTS (UNAUDITED)
<TABLE>
<CAPTION>
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QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
MUNICIPAL BONDS (93.5%) (2)
ALABAMA (0.1%)
500,000 Valley Special Care Fac. Fin. Auth. Rev. Series 1997A Lanier Mem. Hosp. Proj., 5.50%, 11/1/07 $481,910
--------------
ALASKA (2.8%)
Alaska HFC:
12,505,000 Gen. Mtg. Rev. 1997 Series A, Zero Coupon, 6.15% Effective Yield on Purchase Date, 12/1/17 4,445,277
1,990,000 Hsg. Dev. Series 1997A (Multifamily pooled loans), 5.65%, 12/1/20 1,943,036
405,000 Mtg. Series 1997A1, 5.50%, 12/1/17 391,437
3,565,000 Series 1998A1, 5.30%, 12/1/17 3,460,688
270,000 AK Industrial Dev. & Export Auth. Rev. Refunding Revolving Fund Series 1993A, 5.60%, 4/1/03 274,150
Palmer Hosp. Rev. Series 1999 (Valley Hosp. Assn. Proj.) (Asset Guaranty insured):
3,150,000 5.00%, 12/1/08 3,126,847
600,000 5.35%, 12/1/11 601,446
--------------
14,242,881
--------------
ARIZONA (1.0%)
Maricopa Co. Industrial Dev. Auth. Multifamily Hsg. Rev.:
2,780,000 Series 1995A, 6.50%, 10/1/25 2,812,665
685,000 Series 1995B, 7.15%, 10/1/25 683,411
500,000 Maricopa Co. Industrial Dev. Auth. Educ. Rev. Series 2000A (Arizona Charter Schools Proj. I),
6.50%, 7/1/12 511,490
1,070,000 Valley HDC Phoenix Hsg. Rev. 1979 (Roosevelt Plaza) (Section 8), 8.00%, 10/1/20 1,080,861
--------------
5,088,427
--------------
ARKANSAS (0.5%)
180,150 Drew Co. Public Fac. Bd. Single Family Mtg. Rev. Refunding Series 1993-A2 (FNMA backed),
7.90%, 8/1/11 187,207
121,064 Jacksonville Res. Hsg. Fac. Bd. Single Family Mtg. Rev. Refunding Series 1993B, 7.75%, 1/1/11 125,985
111,096 Lonoke Co. Res. Hsg. Fac. Bd. Single Family Mtg. Rev. Refunding 1993B, 7.375%, 4/1/11 115,002
1,560,000 Maumelle HDC First Lien Rev. Refunding 1992 Series A (Section 8), 7.875%, 7/1/09 1,617,158
785,000 Saline Co. Res. Hsg. Fac. Bd. Single Family Mtg. Rev. Refunding Series 1992, 7.875%, 3/1/11 809,869
--------------
2,855,221
--------------
CALIFORNIA (2.4%)
1,000,000 Bell Cmty. Hsg. Auth. Rev. Series 1995A (Mobilehomes Park Acquisition Proj.), 6.40%, 10/1/15 1,022,600
4,330,000 CA HFA Home Mtg. Rev. Series 1999F (MBIA insured), Zero Coupon, 5.50% Effective Yield on
Purchase Date, 8/1/17 1,722,431
1,000,000 Chula Vista Redev. Agency Refunding Tax Allocation Senior Series 1994A (Bayfront-Town
Center Redev. Proj.), 7.625%, 9/1/24 1,101,700
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 3,983,599
Glendale Hosp. Rev. Refunding Series 1994 (Verdugo Hills Hosp. Proj.)(Industrial Indemnity insured):
1,700,000 7.75%, 1/1/09 1,726,860
1,850,000 8.00%, 1/1/12 1,879,359
Ridgecrest Refunding Certificates of Participation Series 1999 (Ridgecrest Civic Center Proj.):
275,000 5.55%, 3/1/09 279,870
290,000 5.65%, 3/1/10 296,876
350,000 6.00%, 3/1/14 358,425
--------------
12,371,720
--------------
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<CAPTION>
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QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
COLORADO (3.3%)
2,440,000 Aurora Hsg. Auth. Multifamily Hsg. Rev. Senior Series 1999A (River Falls Proj.), 5.60%, 7/1/19 2,223,352
2,040,000 Central Platte Valley Met. Dist. (Denver Co.) G.O. Series 1999 (ACA insured), 5.15%, 12/1/13 1,962,827
1,910,000 CO E-470 Business Met. Dist. G.O. Series 1999 (ACA insured), 5.00%, 12/1/11 1,838,642
1,250,000 CO Hlth. Fac. Auth. Rev. Series 1995 (Covenant Retirement Cmty. Proj.), 6.75%, 12/1/15 1,280,463
CO HFA Single Family Program Senior:
1,540,000 Series 1996B-2, 7.45%, 11/1/27 1,639,130
860,000 Series 1997B-3, 6.80%, 11/1/28 942,551
1,000,000 CO Hlth. Fac. Auth. Hosp. Rev. Series 1998 (Parkview Med. Ctr., Inc. Proj.), 5.15%, 9/1/13 883,210
CO Hlth. Fac. Auth. Rev. (Natl. Benevolent Assoc. Proj.):
165,000 Series 2000, 6.05%, 3/1/07 165,652
1,400,000 Series 1998B, 5.25%, 2/1/18 1,164,632
600,000 Denver Hsg. Corp. Multifamily Rev. Refunding Series 1997A (Section 8), 5.35%, 10/1/12 582,936
2,780,000 Highlands Ranch Met. District #3 (Douglas Co.) (ACA insured) Refunding Series 1998B, 5.25%, 12/1/18 2,556,710
215,000 Thornton Single Family Mtg. Rev. Refunding 1992 Series A, 8.05%, 8/1/09 221,972
175,000 Vail Single Family Mtg. Rev. Refunding Series 1992, 8.125%, 6/1/10 187,376
1,195,000 Westminster Multifamily Hsg. Rev. Refunding Series 1992 (Ironwood at the Ranch Proj.),
7.45%, 12/1/10 1,205,002
--------------
16,854,455
--------------
CONNECTICUT (0.3%)
620,000 CT HFA Hsg. Multifamily Mtg. Series 1995E1, 6.30%, 5/15/17 636,120
1,850,000 Mashantucket Western Pequot Tribe Subordinated Special Rev. Series 1999B, Zero Coupon,
5.05% Effective Yield on Purchase Date, 9/1/09 1,108,853
--------------
1,744,973
--------------
DISTRICT OF COLUMBIA (0.3%)
1,390,000 District of Columbia HFA Multifamily Hsg. Refunding Rev. Series 1992C (FHA
insured) (Chastleton Dev.), 6.95%, 7/1/27 1,435,050
--------------
FLORIDA (0.9%)
820,000 Escambia Co. Hlth. Fac. Auth. Rev. Series 1997 (Azalea Trace, Inc. Proj.), 5.60%, 1/1/05 803,551
1,370,000 FL HFC Hsg. Rev. Refunding Series 1998O (Hunters Ridge At Deerwood Apts. Proj.), 5.25%, 12/1/18 1,240,247
Jacksonville Hlth. Fac. Auth. Industrial Dev. Rev. (Natl. Benevolent-Cypress Village Proj.):
1,000,000 Series 1996A, 6.25%, 12/1/26 881,220
160,000 Series 2000, 6.05%, 3/1/07 159,453
Lee Co. Industrial Dev. Auth. Hlth. Care Fac. Rev. Series 1999A (ShellPoint Village Proj.):
545,000 5.50%, 11/15/08 519,549
1,200,000 5.50%, 11/15/10 1,113,636
--------------
4,717,656
--------------
GEORGIA (2.2%)
680,000 Clayton Co. Hsg. Auth. Multifamily Hsg. Rev. Series 1999A (Magnolia Parks Apts. Proj.),
5.90%, 12/1/14 630,054
750,000 Cobb Co. HA Multifamily Rev. Refunding Series 1992A (Signature Place Project), 6.875%, 10/1/17 762,413
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%, 10/1/39 974,510
1,530,000 5.95%, 10/1/39 1,527,889
</TABLE>
See accompanying notes to portfolios of investments on page 48.
19
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SEPTEMBER 30, 2000
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PORTFOLIO OF INVESTMENTS (UNAUDITED)
<TABLE>
<CAPTION>
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QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Dekalb Co. Hsg. Auth. Multifamily Hsg. Rev. (Regency Woods I & II):
1,385,000 Senior Series 1996A, 6.375%, 1/1/11 1,406,897
1,320,000 Subordinate Series 1996C, 7.25%, 1/1/26 1,312,225
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 4,250,430
Royston Hosp. Auth. Rev. Refunding Series 1999 (Ty Cobb Healthcare Sys., Inc. Proj.):
280,000 6.00%, 7/1/04 278,006
200,000 6.125%, 7/1/09 193,514
--------------
11,335,938
--------------
HAWAII (0.4%)
1,170,000 Hawaii Dept. of Budget and Finance Special Purpose Rev. Series 1998,
(Wilcox Memorial Hosp. Proj.), 5.25%, 7/1/13 1,006,071
1,205,000 Honolulu Mtg. Rev. Ref. Series 1996A (Hale-Pauahi Proj.)(FHA insured)
(MBIA insured), 6.80%, 7/1/28 1,258,983
--------------
2,265,054
--------------
ILLINOIS (10.2%)
Broadview Village of Cook Co. Tax Increment Rev. Series 1999:
750,000 4.90%, 7/1/06 723,833
1,000,000 5.00%, 7/1/07 959,490
1,085,000 5.05%, 7/1/08 1,035,307
2,030,000 5.10%, 7/1/09 1,929,312
1,160,000 Chicago Res. Mtg. Rev. Refunding Series 1992B (MBIA insured) Zero Coupon, 7.30% Effective
Yield on Purchase Date, 10/1/09 626,435
1,600,000 Collinsville (City of) Madison Co. Industrial Dev. Rev. Refunding (Drury Inn-Collinsville Proj.)
Series 1993, 6.00%, 11/1/04 1,590,144
1,485,000 IL DFA Elderly Hsg. Rev. Refunding Series 1995A (Pontiac Towers Proj.)
(Section 8), 6.65%, 10/1/09 1,522,986
IL DFA Refunding & New Money Rev. (Cmty. Rehab. Providers Fac. Acquisition Program):
1,690,000 Series 1997A, 5.80%, 7/1/08 1,661,304
7,575,000 Series 1997A, 6.00%, 7/1/15 6,968,849
1,000,000 Series 1997A, 6.05%, 7/1/19 894,790
1,200,000 Series 1997C, 5.65%, 7/1/19 1,009,524
3,935,000 Series 1998A, 5.70%, 7/1/19 3,436,672
1,960,000 Series 1998A, 5.50%, 7/1/12 1,794,831
IL Educ. Fac. Auth. Rev.:
5,555,000 Series 1994 (Lewis Univ. Proj.), 6.00%, 10/1/24 5,168,816
1,115,000 Series 1998B (Midwestern Univ. Proj.), 5.50%, 5/15/18 1,022,979
1,000,000 Series 1998 (Augustana College Proj.), 5.00%, 10/1/13 923,340
1,390,000 Series 1998 (Augustana College Proj.), 5.25%, 10/1/18 1,253,530
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%, 7/1/11 268,198
100,000 7.40%, 7/1/23 103,127
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QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
IL Hlth. Fac. Auth. Rev.:
Refunding Series 1993 (Lutheran Social Svcs. IL):
475,000 5.80%, 8/15/01 476,330
525,000 6.00%, 8/15/03 527,966
545,000 6.10%, 8/15/04 548,537
1,000,000 Refunding Series 1994 (Passavant Memorial Area Hospital Assn.), 5.95%, 10/1/11 1,032,000
Series 1994-1996 (St. Elizabeth's Hosp. of Chicago, Inc.):
300,000 Series 1996, 6.25%, 7/1/10 305,679
1,015,000 Series 1996, 6.25%, 7/1/16 998,912
2,135,000 Refunding Series 1998 (Midwest Physician Group Ltd. Proj.), 5.375%, 11/15/08 1,991,400
1,000,000 Refunding Series 1998 (Centegra Hlth. Proj.), 5.25%, 9/1/18 851,810
955,000 Refunding Series 1999 (Silver Cross Hosp. & Med. Ctrs.), 5.375%, 8/15/15 872,135
Series 2000 (Riverside Hlth. Sys. Proj.):
300,000 6.00%, 11/15/03 305,352
250,000 6.10%, 11/15/04 255,915
1,600,000 IL Industrial Pollution Control Financing Auth. Rev. Series 1979 (Olin Corp. Proj.), 6.875%, 3/1/04 1,611,856
1,850,000 Roselle Multifamily Hsg. Rev. Refunding Series 1994A (GNMA collateralized)
(Waterbury Apts.) (FHA insured), 7.00%, 1/1/25 1,943,702
4,695,000 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 4,634,904
85,000 Urbana Res. Mtg. Rev. Refunding 1991 Series B Zero Coupon, 7.39% Effective Yield on
Purchase Date, 3/1/07 53,867
--------------
52,145,075
--------------
INDIANA (7.1%)
Elkhart Co. Hosp. Auth. Rev.:
1,440,000 Series 1992 (Goshen Hosp. Proj.), 7.25%, 7/1/05 1,482,984
3,705,000 Series 1998 (Elkhart General Hosp., Inc. Proj.), 5.25%, 8/15/18 3,265,624
2,005,000 Elkhart HFC Multifamily Mtg. Rev. Series 1996A (Section 8 Assisted
Proj.) (Stratford Commons), 6.00%, 11/1/10 2,009,712
IN Bond Bank Special Prgm.:
1,975,000 Series 1997C (Pittsboro Wastewater Treatment Plant Proj.), 5.70%, 8/1/17 1,951,695
1,390,000 Series 1997B (Hendrick's Co. Redev. Auth.-Pittsboro Proj.)(LOC Canadian Imperial Bank),
6.20%, 2/1/23 1,413,547
2,175,000 IN DFA Educ. Fac. Rev. Series 1997 (Park Tudor Fdn. Proj.), 6.00%, 6/1/22 2,208,560
IN Educ. Fac. Auth. Educ. Fac. Rev. Series 1992 (Manchester College Proj.):
250,000 6.50%, 10/1/05 259,423
305,000 6.60%, 10/1/06 316,794
IN Hlth. Fac. Fin. Auth. Hosp. Rev.:
Series 1992 (Fayette Mem. Hosp. Proj.):
250,000 7.00%, 10/1/02 254,290
295,000 7.10%, 10/1/03 298,602
315,000 7.20%, 10/1/04 322,166
390,000 7.30%, 10/1/07 399,539
420,000 7.30%, 10/1/08 430,273
500,000 Refunding Series 1998 (Floyd Mem. Hosp. & Hlth. Svcs. Proj.), 5.40%, 2/15/18 450,595
3,475,000 Refunding Series 1998 (Jackson Co. Schneck Proj.), 5.125%, 2/15/17 2,825,105
1,850,000 Refunding Series 1998 (Marquette Manor Proj.), 5.00%, 8/15/18 1,565,914
1,220,000 Series 1998 (Governor Daviess Co. Hosp. Proj.) (Asset Guaranty insured), 5.00%, 1/1/14 1,141,200
</TABLE>
See accompanying notes to portfolios of investments on page 48.
21
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PORTFOLIO OF INVESTMENTS (UNAUDITED)
<TABLE>
<CAPTION>
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QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
1,485,000 Series 1999A (Deaconess Hosp. Obligated Group), 5.75%, 3/1/19 1,341,965
1,000,000 Series 1999D (Charity Obligated Group), 5.50%, 11/15/11 1,021,650
750,000 IN HFA Single Family Mtg. Rev. Refunding Series 1992A, 6.80%, 1/1/17 766,283
IN Hlth. Fac. Fin. Auth. Rev. Refunding Series 1998 (Greenwood Village South Proj.):
375,000 5.00%, 5/15/03 367,973
140,000 5.15%, 5/15/04 136,414
150,000 5.25%, 5/15/06 143,723
170,000 5.35%, 5/15/08 160,018
2,545,000 Indianapolis Econ. Dev. Refunding & Imprv. Rev. Series 1992 (Natl. Benevolent
Assn.-Robin Run Village Proj.), 7.25%, 10/1/10 2,591,216
Indianapolis Econ. Dev. Rev. (Willowbrook Apts. Proj.):
1,600,000 Senior Series 1996A, 6.50%, 7/1/16 1,549,312
1,315,000 Subordinate Series 1996C, 7.125%, 7/1/26 1,301,797
3,705,000 La Porte Co. Hosp. Auth. Fac. Rev. Refunding Series 1993, 6.00%, 3/1/23 3,378,071
760,000 Marion HC Mtg. Rev. Refunding Series 1994 (Hilltop Towers Proj.)(Section 8), 6.90%, 10/1/10 778,103
2,085,000 St. Joseph Co. Hosp. Auth. Hlth. Fac. Rev. Series 1999 (Madison Center, Inc. Proj.),
5.45%, 2/15/12 1,827,482
--------------
35,960,030
--------------
IOWA (1.4%)
1,390,000 IA Fin. Auth. Small Business Dev. Refunding Rev. Series 1992 (University Civic Ctr. Court
Assn. Proj.), 7.40%, 3/1/17 1,456,317
IA Fin. Auth. Hlth. Care Fac. Rev. Series 1997 (Natl. Benevolent Assn.- Ramsey Home Proj.):
1,430,000 6.15%, 5/1/17 1,269,411
2,240,000 6.35%, 5/1/27 1,968,019
1,130,000 IA Fin. Auth. Multifamily Hsg. Rev. Refunding Series 1997A (Kingswood Apts. Proj.)
(GNMA-collateralized), 6.15%, 5/1/32 1,136,656
1,290,000 Ottumwa Hosp. Rev. Refunding Series 1993 (Ottumwa Regional Hlth. Ctr.), 6.00%, 10/1/10 1,235,330
--------------
7,065,733
--------------
KANSAS (0.2%)
20,000 Geary Co. Single Family Mtg. Rev. 1980 (FGIC insured), 10.75%, 4/1/12 20,007
760,000 Kansas City Single Family Mtg. Rev. Series 1982A Zero Coupon, 11.23% Effective Yield on
Purchase Date, 11/1/14 160,443
Newton Hosp. Rev. Refunding Series 1998A (Newton Medical Ctr. Proj.):
425,000 5.13%, 11/15/06 402,070
250,000 5.25%, 11/15/08 232,129
1,140,000 Olathe & Labette Cos. Mtg. Loan Rev. 1991 Series B (GNMA collateralized) Zero Coupon, 7.56%
Effective Yield on Purchase Date, 2/1/23 225,845
--------------
1,040,494
--------------
LOUISIANA (1.2%)
680,000 Calcasieu Parish Industrial Dev. Rev. 1975 (Cities Service Co. Proj.), 7.80%, 12/1/05 682,591
5,235,000 Denham Springs/Livingston HMFA Residual Rev. Series 1992C Zero Coupon,
7.65% Effective Yield on Purchase Date, 7/10/14 1,900,200
1,415,000 East Baton Rouge Single Family Mtg. Rev. Refunding Series 1997C-3 Subordinate Bonds, 5.65%, 10/1/18 1,357,919
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 1,336,838
</TABLE>
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<CAPTION>
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QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
355,000 LA HFA Residual Lien Refunding Mtg. Rev. Series 1992, 7.375%, 9/1/13 363,573
110,975 LA PFA Single Family Mtg. Rev. Series 1992 (Lafayette PTFA Mtg. Acquisition), 7.50%, 10/1/15 115,072
280,000 New Orleans HDC First Lien Rev. Refunding Series 1996A (Tivoli Place Apts. Proj.) (Section 8),
6.40%, 12/1/04 283,332
--------------
6,039,525
--------------
MAINE (0.2%)
1,000,000 South Berwick Educ. Rev. Series 1998 (Berwick Academy Issue), 5.25%, 8/1/13 933,430
--------------
MARYLAND (0.1%)
470,000 MD Econ. Dev. Corp. Student Hsg. Rev. Series 1999A (Collegiate Hsg. Fdn. -
University Courtyard Proj.), 5.20%, 6/1/07 461,662
--------------
MASSACHUSETTS (1.3%)
1,000,000 MA Dev. Finance Agency Rev. Series 1999 (Eastern Nazarene College Issue), 5.625%, 4/1/19 905,100
MA Hlth. & Educ. Fac. Auth. Rev.:
Series 1998A (Vinfen Corp. Proj.) (ACA insured):
440,000 5.10%, 11/15/11 416,077
310,000 5.20%, 11/15/12 293,164
1,365,000 Series 1998B (Cape Cod Hlth. Care Proj.), 5.25%, 11/15/13 1,195,576
1,000,000 Series 1998C (Milford-Whitinsville Regional Hosp. Issue), 5.75%, 7/15/13 871,640
1,815,000 MA HFA Hsg. Projs. Rev. Series 1993A, 6.375%, 4/1/21 1,840,083
Rail Connections, Inc. Route 128 Parking Garage Rev. Series 1999A:
250,000 5.00%, 7/1/06 245,693
1,105,000 5.125%, 7/1/07 1,088,204
--------------
6,855,537
--------------
MICHIGAN (2.3%)
1,335,000 Flint Hosp. Bldg. Auth. Rev. Refunding Series 1998A (Hurley Medical Ctr. Proj.), 5.25%, 7/1/16 1,092,778
John Tolfree Hlth. System, Mtg. Rev. & Refunding Series 1999:
295,000 5.25%, 9/15/04 283,654
395,000 5.30%, 9/15/05 375,815
665,000 MI Hosp. Fin. Auth. Hosp. Rev. and Refunding Series 1998 (Chelsea Cmty. Hosp.
Proj.), 5.35%, 5/15/13 567,464
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 2,680,059
700,000 MI State Hosp. Fin. Auth. Rev. Series 1997 (Presbyterian Vlgs. of Mich. Oblig. Group Proj.),
6.375%, 1/1/15 646,611
1,480,000 MI Strategic Fund Ltd. Obligation Rev. Series 1997A (NSF Intl. Proj.) (LOC First Bank of America),
5.75%, 8/1/19 1,454,825
2,095,000 Southfield Econ. Dev. Corp. Ltd. Obligation Rev. Series 1998A (Lawrence Tech. Univ. Proj.),
5.25%, 2/1/13 1,938,545
2,545,000 Troy City EDC Econ. Dev. Rev. Refunding Series 1992 (Drury Inn-Troy Proj.)
(Lincoln Natl. Corp.), 6.75%, 10/1/12 2,653,722
--------------
11,693,473
--------------
MINNESOTA (2.1%)
3,410,000 Dakota Co. HRA Multifamily Mtg. Rev. Refunding Series 1997A (Park Place
Apts. Proj.)(GNMA Collateralized), 6.875%, 2/20/32 3,641,300
740,000 Hopkins Multifamily Hsg. Rev. Series 1996 (Hopkins Renaissance Proj.)(Section 8), 6.375%, 4/1/20 755,806
1,220,000 MN HFA Single Family Mtg. Series 1998A, 5.20%, 1/1/17 1,161,501
1,066,445 Moorhead Single Family Mtg. Rev. Refunding Series 1992B, 7.00%, 8/1/11 1,097,724
</TABLE>
See accompanying notes to portfolios of investments on page 48.
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<S> <C>
2,315,000 Plymouth Multifamily Hsg. Dev. Rev. Refunding Series 1996A (GNMA collateralized)
(Fox Forest Apts. Proj.), 8.05%, 6/20/31 2,563,816
1,625,000 South Washington Co. ISD #833, (Cottage Grove) Lease Refunding Series 1998 (Asset
Guaranty insured), 5.25%, 12/1/14 1,605,695
--------------
10,825,842
--------------
MISSISSIPPI (0.1%)
445,000 Lincoln Co. Hosp. Rev. Refunding Series 1998A (Kings Daughter Hosp. Proj.), 5.20%, 4/1/08 443,727
175,000 MS Home Corp. Single Family Mtg. Rev. Series 1995G (GNMA collateralized), 6.10%, 6/1/16 176,041
--------------
619,768
--------------
MISSOURI (1.4%)
1,000,000 Kansas City Port Hlth. Series 1995A (Riverfront Park Proj.), 5.75%, 10/1/00 1,000,040
1,450,000 MO Dev. Finance Board Infrastructure Fac. Rev. Series 2000A (Eastland Ctr. Proj. Phase 1),
5.75%, 4/1/09 1,488,222
MO Hlth. & Educ. Fac. Auth. Educ. Fac. Rev.:
1,000,000 Series 1999 (Rockhurst Univ.) (Asset Guaranty insured), 5.10%, 10/1/19 928,060
930,000 Series 1999 (Park College Proj.), 5.55%, 6/1/09 927,015
150,000 MO Environmental Impt. & Energy Res. Auth. Water Fac. Rev. Refunding Series 1999 (Tri -Co. Water
Auth Proj.) (Asset Guaranty insured), 5.50%, 4/1/07 154,793
1,050,000 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 1,088,252
25,000 St. Louis Co. Single Family Res. Mtg. Series 1984 (MBIA insured), 6.75%, 4/1/10 25,745
St. Louis Co. Industrial Dev. Auth. Hlth. Care Fac. Rev. Refunding Series 1999 (Nazareth Living
Ctr. Proj.):
200,000 5.10%, 8/15/07 185,490
200,000 5.15%, 8/15/08 183,184
1,000,000 St. Louis Industrial Dev. Auth. Tax-Exempt Impt. Rev. Series 1998 (St. Louis Zoo Fdn.)(LOC
Nationsbank), 5.10%, 8/15/12 983,860
--------------
6,964,661
--------------
MONTANA (0.2%)
1,000,000 Crow Finance Auth. Tribal Purpose Revenue Series 1997A, 5.70%, 10/1/27 924,900
--------------
NEVADA (1.5%)
NV Hsg. Dev. SF Mtg. Program:
1,455,000 Sr. Series 1995A-1, 6.45%, 10/1/18 1,484,347
1,565,000 Sr. Series 1998B-1, 5.25%, 10/1/17 1,485,686
1,030,000 Mezzanine Series 1998B-1, 5.30%, 4/1/16 996,597
800,000 Mezzanine Series 1999A-1, 5.10%, 10/1/17 723,120
1,495,000 Mezzanine Series 1999B-1, 5.15%, 10/1/17 1,359,224
Reno Redev. Agency Subordinate Tax Allocation and Rev. Refunding Series 1995A:
400,000 6.00%, 6/1/08 401,720
1,000,000 6.125%, 6/1/12 999,480
--------------
7,450,174
--------------
NEW HAMPSHIRE (2.9%)
NH Higher Educ. & Hlth. Fac. Auth. Rev.:
620,000 Series 1997 (Catholic Charities Issue), 5.75%, 8/1/12 552,290
5,720,000 Series 1993 (Nashua Mem. Hosp. Proj.), 6.00%, 10/1/23 5,472,896
4,930,000 NH HFA Single Family Res. Mtg. 1982 Series A Zero Coupon, 11.75% Effective Yield on
Purchase Date, 1/1/14 1,660,572
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NH Higher Educ. & Hlth. Fac. Auth. Rev.:
1,020,000 Series 1998 (New Hampton School), 5.00%, 10/1/08 985,402
2,010,000 Series 1998 (River College Proj.), 5.55%, 1/1/18 1,845,421
4,700,000 Series 1998 (Cheshire Med. Ctr. Proj.), 5.125%, 7/1/18 4,096,191
--------------
14,612,772
--------------
NEW JERSEY (0.4%)
1,225,000 NJ EDA Rev. Refunding Bonds Series 1997A (Harrogate, Inc. Proj.), 5.875%, 12/1/26 1,034,819
1,050,000 NJ Hlth. Care Fac. Financing Auth. Rev. Refunding Series 1997A (Christian Hlth. Care
Ctr. Proj.), 5.50%, 7/1/18 889,308
--------------
1,924,127
--------------
NEW MEXICO (1.1%)
334,000 Hobbs Single Family Mtg. Rev. Refunding Series 1992, 8.75%, 7/1/11 362,600
1,110,000 NM Hosp. Equip. Loan Council Equip. & Imprv. Rev. Refunding Series 1996 (Rehoboth McKinley Hosp.),
6.30%, 8/1/10 1,059,062
3,705,000 NM MFA Forward Mortgage-Backed Series 1995E (GNMA collateralized), 6.95%, 1/1/26 4,046,749
--------------
5,468,411
--------------
NEW YORK (0.1%)
Monroe Co. Industrial Dev. Agy. Student Hsg. Rev. Series 1999A (Collegiate Hsg. Fdn. - Rochester
Institute of Technology Proj.):
170,000 4.90%, 4/1/09 163,413
360,000 5.00%, 4/1/10 346,810
--------------
510,223
--------------
OHIO (1.6%)
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 2,722,093
1,000,000 Zero Coupon Convertible, 6.15% Effective Yield on Purchase Date, 12/1/07 976,820
925,000 Cleveland-Cuyahoga Port. Auth. Dev. Rev. Series 1999A (Port of Cleveland Bond Fund Capital
Imprv. Proj.), 5.375%, 5/15/19 818,015
1,000,000 Hamilton CO. Hlth. Care Fac. Refunding & Impt. Series 1998A (Twin Towers Proj.), 5.125%, 10/1/18 883,370
430,000 Franklin Co. Hlth. Care Fac. Rev. & Impt. Series 1998 (Friendship Village of Columbus Proj.),
5.25%, 8/15/12 380,804
1,000,000 Franklin Co. Hlth. Care Fac. Rev. Refunding Series 1997 (Friendship Village of Dublin Proj.),
5.50%, 11/1/16 859,940
1,420,000 OH Capital Corp. for Hsg. Mtg. Rev. Refunding (FHA insured)(Section 8), Series 1998E, 5.40%,
2/1/23 1,315,786
--------------
7,956,828
--------------
OKLAHOMA (2.1%)
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, 6/1/11 851,019
1,000,000 OK Co. Industrial Auth. Hlth. Care Rev. Series 1999 (Natl. Benevolent Assoc. - OK Christian
Home Proj.), 5.50%, 2/1/24 792,090
OK Ind. Auth. Hosp. Rev. Bonds Series 1997A (Deaconess Hlth. Care Proj.):
2,030,000 5.50%, 10/1/12 1,773,469
1,850,000 5.75%, 10/1/17 1,565,285
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 1,167,400
</TABLE>
See accompanying notes to portfolios of investments on page 48.
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<S> <C>
305,000 Payne Co. Home Loan Auth. Single Family Rev. Refunding Series 1993A, 8.625%, 3/1/11 315,974
1,500,000 Tulsa Industrial Auth. Educ. Fac. Rev. Refunding Series 1999B (Holland Hall School Proj.),
5.00%, 12/1/14 1,376,835
2,355,000 Tulsa Public Facilities Auth. Recreational Fac. Rev. Series 1985, 6.20%, 11/1/12 2,454,711
550,000 Tulsa Public Fac. Auth. Solid Waste Steam & Electric Rev. Series 1985 (Ogden Martin Systems of
Tulsa, Inc. Proj.) (AMBAC insured), 6.70%, 5/1/01 550,979
--------------
10,847,762
--------------
OREGON (0.7%)
3,705,000 Cow Creek Band Umpqua Tribe of Indians Rev. Series 1998B (AMBAC insured), 5.10%, 7/1/12 3,661,503
--------------
PENNSYLVANIA (6.7%)
325,000 Butler Co. Hosp. Auth. Hlth. Care Ctr. Rev. Refunding Series 1993 (St. Francis Med. Ctr. Proj.),
5.65%, 5/1/02 320,626
1,190,000 Chester Co. Hlth. & Educ. Fac. Auth. Mtg. Rev. Refunding Series 1998, (Tel Hai
Obligated Group Proj.), 5.00%, 6/1/08 1,100,595
Columbia Co. Hosp. Auth. Hlth. Care Rev. Series 1999 (Bloomsburg Hosp. Obligated Group Proj.):
665,000 5.00%, 6/1/04 637,323
575,000 5.15%, 6/1/07 531,174
1,390,000 5.60%, 6/1/12 1,229,983
2,095,000 Cumberland Co. Muni Auth. Rev. Series 1996 (Presbyterian Homes Proj.), 6.00%, 12/1/26 1,946,485
1,285,000 Dauphin Co. Gen. Auth. Hlth. Sys. Rev. Series 1999 (Pinnacle Hlth. Sys. Proj.), 5.125%, 8/15/17 1,200,203
Grove City Area Hosp. Auth. Rev. Series 1998 (United Cmty. Hosp. Proj.):
810,000 4.75%, 7/1/06 736,152
2,750,000 5.25%, 7/1/12 2,347,290
Hazleton Hlth. Svc. Auth. Hosp. Rev. :
1,000,000 Series 1997 (Hazleton General Hosp. Proj.), 5.625%, 7/1/17 850,590
2,250,000 Series 1996 (Hazleton - St. Joseph Med. Ctr.), 6.20%, 7/1/26 1,971,157
Horizon Hosp. System Auth. Hosp. Rev. Series 1996 (Horizon Hosp. Sys.):
600,000 5.95%, 5/15/06 597,210
715,000 6.15%, 5/15/08 712,919
710,000 6.25%, 5/15/09 707,927
1,145,000 6.30%, 5/15/11 1,091,254
1,550,000 McKean Co. Hosp. Rev. Refunding Series 1994 (Bradford Hosp. Proj.), 6.10%, 10/1/20 1,317,082
Montgomery Co. Redev. Auth. Multifamily Hsg. Rev. 1993 Series A (KBF Assoc. L.P.):
250,000 6.375%, 7/1/12 248,848
1,390,000 6.40%, 7/1/14 1,379,797
1,320,000 New Wilmington Muni. Auth. College Rev. Series 1998 (Westminister College), 5.05%, 3/1/12 1,224,749
PA Econ. Dev. Fin. Auth. Rev. Series 1998A (Northwestern. Human Services Proj.):
2,265,000 5.25%, 6/1/09 2,093,766
2,370,000 5.30%, 6/1/10 2,164,094
2,485,000 5.35%, 6/1/11 2,245,570
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 3,941,076
1,100,000 5.875%, 11/15/21 1,095,303
1,250,000 Philadelphia Auth. for Industrial Dev. Rev. Refunding Series 1998A (FHA Insured)
(Elmira Jeffries Mem. Home Proj.), 5.30%, 2/1/22 1,133,925
1,255,000 Philadelphia Redevelopment Auth. Multifamily Hsg. Rev. Refunding Series 1998
(FHA insured - Woodstock Mutual Homes Inc. Proj.), 5.45%, 2/1/23 1,182,323
--------------
34,007,421
--------------
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RHODE ISLAND (1.5%)
1,000,000 RI Econ. Dev. Corp. Rev. Sr. Note Obligation Series 2000 (Providence Place Mall Proj.)
(Asset Guaranty insured), 5.75%, 7/1/10 1,031,540
1,850,000 RI Hlth. & Educ. Bldg. Corp. Hosp. Fin. Rev. Series 1997 (Steere House Proj.), 5.70%, 7/1/15 1,594,034
500,000 Refunding Series 1998 (Roger Williams Hosp. Proj.), 5.20%, 7/1/09 443,295
1,400,000 Series 1998 (Roger Williams Hosp. Proj.), 5.50%, 7/1/18 1,135,736
Series 1999 (St. Joseph's Hlth. Svcs.):
1,640,000 5.40%, 10/1/09 1,495,188
2,085,000 5.75%, 10/1/14 1,802,816
--------------
7,502,609
--------------
SOUTH CAROLINA (1.0%)
North Charleston Muni. Golf Course Mtg. Rev. Series 1998:
1,465,000 5.00%, 5/1/09 1,397,947
2,780,000 5.50%, 5/1/19 2,526,937
1,390,000 SC Jobs Econ. Dev. Auth. Econ. Dev. & Rev. Refunding Series 1998A
(Westminister Presbyterian Ctr. Inc. Project), 5.25%, 11/15/16 1,131,432
--------------
5,056,316
--------------
SOUTH DAKOTA (1.2%)
1,850,000 SD Hlth. & Educ. Fac. Auth. Rev. Refunding Series 1998 (Prairie Lakes Hlth. Care
Sys.), 5.45%, 4/1/13 1,700,280
SD HDA Homeownership Mtg. Series 1998D:
1,150,000 5.20%, 5/1/20 1,060,438
3,670,000 5.25%, 5/1/28 3,309,936
--------------
6,070,654
--------------
TENNESSEE (5.9%)
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 1,675,168
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 3,413,511
Shelby Co. Hlth., Educ. & Hsg. Fac. Board Multifamily Hsg. Rev.:
1,390,000 (Cameron Hsg. Proj.), Senior Series 1997A, 5.90%, 7/1/18 1,343,880
(CME Memphis Apts. Proj.):
1,850,000 Senior Series 1998A, 5.35%, 1/1/19 1,640,562
7,875,000 Senior Series 1998A, 5.55%, 1/1/29 6,902,831
1,650,000 Subordinate Series 1998C, 6.00%, 1/1/29 1,455,135
(Eastwood Park Apts. Proj.):
1,000,000 Senior Series 1995 A2, 6.40%, 9/1/25 955,680
410,000 Subordinate Series 1995C, 7.50%, 9/1/25 387,122
(Raleigh Forest & Sherwood Apts. Proj.):
2,670,000 Senior Series 1996A, 6.60%, 1/1/26 2,698,729
635,000 Subordinate Series 1996C, 7.25%, 1/1/26 629,088
(Raleigh Woods Apts. Proj.):
5,555,000 Series 1997A (GNMA collateralized), 7.75%, 3/20/27 6,118,999
(The Corners Apts. Proj.):
1,055,000 Senior Series 1996A, 6.25%, 1/1/27 1,044,134
300,000 Subordinate Series 1996C, 6.375%, 1/1/27 278,586
3,205,000 TN HDA Homeownership Program Series 1997 Issue 3B Zero Coupon,
5.725% Effective Yield on Purchase Date, 7/1/16 1,280,237
--------------
29,823,662
--------------
</TABLE>
See accompanying notes to portfolios of investments on page 48.
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TEXAS (13.0%)
1,020,000 Baytown HFC Single Family Mtg. Rev. Refunding Series 1992B, 8.50%, 9/1/11 1,134,607
Bell Co. Hlth. Fac. Dev. Corp. Retirement Fac. Rev. Series 1998 (Buckner Retirement Services, Inc.
Obligated Group, Proj.):
1,000,000 5.00%, 11/15/11 918,830
2,995,000 5.25%, 11/15/19 2,550,392
Beaumont HA Multifamily Mtg. Rev. Series 1993A (Section 8):
1,365,000 6.65%, 11/1/07 1,394,962
650,000 6.75%, 11/1/10 662,584
1,635,000 Bexar Co. HFC Residual Rev. Series 1993 Zero Coupon, 6.50% Effective Yield
on Purchase Date, 3/1/15 673,865
1,000,000 Bexar Co. HFC MF Hsg. Rev. Ref. Series 1995 (Windridge Apts. Proj.) (FNMA collateralized),
5.125%, 12/15/21 895,690
1,610,000 Collin Co. HFC Student Hsg. Rev. Series 1998A (Cmty. Coll. Dist. Fdn. Proj.)(ACA insured),
5.25%, 6/1/23 1,412,550
545,000 Columbus Cmty. Industrial Dev. Corp. Sales Tax Rev. Series 1998 (Bank Qualified), 5.70%, 11/1/18 521,282
Dallas Hsg. Corp. Capital Program Revenue Bonds:
1,410,000 Series 1995A (Estell Village Apts.) (Section 8), 7.875%, 12/1/09 1,440,738
1,385,000 Series 1995 (Cedar Glen Apts.) (Section 8), 7.75%, 12/1/09 1,414,902
1,000,000 Dallas HFC Cap. Proj. Refunding 1990 (Section 8), 7.85%, 8/1/13 1,020,800
6,343,000 Dallas HFC Multifamily Mtg. Rev. Series 1998A (GNMA collateralized) (Towne
Ctr. Apts. Proj.), 6.75%, 10/20/32 6,654,695
1,000,000 Galveston Special Contract Refunding Rev. Series 1998 (Farmland Industries, Inc. Proj.),
5.50%, 5/1/15 879,980
Harris Co. HFC Multifamily Rev. (Windfern Pointe & Waterford Place Projs.):
1,850,000 Senior Series 1999A, 5.15%, 7/1/09 1,764,512
315,000 Senior Series 1999A, 5.90%, 7/1/19 289,220
2,130,000 Subordinated Series 1999C, 6.60%, 7/1/29 2,009,783
1,480,000 Harrison Co. Hlth. Fac. Dev. Corp. Rev. Series 1998 (Marshall Regional Med. Ctr. Proj.)
(ACA insured), 5.50%, 1/1/18 1,368,068
525,000 Houston HFC Single Family Mtg. Rev. Refunding Series 1996B-1, 8.00%, 6/1/14 566,927
1,575,000 Lubbock HFC Multifamily Hsg. Rev. Refunding Series 1992A (Los Colinas, Park Ridge Place &
Quail Creek), 7.75%, 1/1/22 1,599,633
Lufkin Hlth. Sys. Rev. Series 1998 (Memorial Hlth. Sys. Of East Texas):
750,000 5.00%, 2/15/08 664,163
1,850,000 5.70%, 2/15/28 1,426,609
Midland HFC Single Family Mtg. Rev. Refunding:
329,375 Series 1992 A-2, 8.45%, 12/1/11 358,643
126,009 Series 1992, 9.00%, 9/1/01 127,371
213,188 Series 1992 B2, 8.15%, 12/1/11 221,375
Mesquite Hlth. Fac. Dev. Corp. Retirement Fac. Rev. (Christian Care Ctr. Proj.):
Series 1996A:
1,000,000 6.30%, 2/15/12 939,280
1,000,000 6.40%, 2/15/16 914,530
500,000 6.40%, 2/15/20 447,260
1,000,000 Series 2000A, 7.00%, 2/15/10 994,070
7,272,000 Nortex Hsg. Fin. Corp. Multifamily Hsg. Rev. Series 1999 (GNMA collateralized) (Highland Oaks Apts.
Proj.), 6.75%, 9/20/32 7,779,949
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1,135,000 North Central Hlth. Fac. Dev. Corp. Rev. Series 1998A (C.C. Young Memorial Home Proj.),
5.375%, 2/15/14 948,588
844,721 Odessa HFC Single Family Mtg. Rev. Refunding Series 1992B Class B-2, 8.125%, 11/1/11 880,858
Panhandle Regional HFC Multifamily Hsg.:
475,000 Senior Series 2000A, 6.25%, 3/1/10 478,667
250,000 Subordianate Series 2000C, 8.125%, 3/1/31 251,543
650,000 San Marcos HA Multifamily Mtg. Rev. Series 1993A (FHA insured) (Section 8), 5.80%, 11/1/10 639,743
7,875,000 Tarrant Co. Hlth. Fac. Dev. Corp. Hosp. Rev. Series 1998 (Adventist Hlth. Sys./Sunbelt
Obligated Group Proj.), 5.375%, 11/15/20 6,694,144
Tarrant Co. Hlth. Fac. Dev. Corp. Hosp. Rev. Series 2000 (Adventist Hlth. Sys. Proj.):
440,000 5.60%, 11/15/02 439,793
460,000 5.70%, 11/15/03 460,097
490,000 5.75%, 11/15/04 489,608
515,000 5.80%, 11/15/05 514,058
TX Dept. Hsg. & Cmnty. Affairs Multifamily Hsg. Rev.:
945,000 Subordinated Series 1996C (Harbors & Plumtree Apts. Proj.), 7.375%, 7/1/26 935,701
2,610,000 Senior Series 1996A (Harbors & Plumtree Apts. Proj.), 6.45%, 7/1/26 2,638,188
2,965,000 Series 1996A (NHP Foundation - Asmara Apts. Proj.), 6.40%, 1/1/27 3,000,610
Victoria Hosp. Rev. Series 1999 (Citizens Med. Ctr. Proj.):
870,000 4.80%, 2/15/06 816,582
1,020,000 5.00%, 2/15/08 936,870
3,205,000 5.40%, 2/15/12 2,852,995
--------------
66,025,315
--------------
UTAH (0.4%)
600,000 Intermountain Power Agency Power Supply Rev. Refunding Series 1986F (AMBAC insured), 5.00%, 7/1/13 581,256
Salt Lake Co. College Rev. Series 1999 (Westminister College Proj.):
120,000 5.15%, 10/1/11 114,395
125,000 5.20%, 10/1/12 118,330
130,000 5.25%, 10/1/13 122,175
825,000 5.50%, 10/1/19 764,503
570,000 Weber-Box Elder Conservation District Water Rev. Series 2000A, 6.50%, 11/1/19 569,954
--------------
2,270,613
--------------
VERMONT (0.1%)
420,000 VT Educ. & Hlth. Bldgs. Financing Agency Rev. Series 1998 (Norwich Univ. Proj.), 5.13%, 7/1/09 404,758
--------------
VIRGINIA (1.3%)
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 2,130,217
1,850,000 Prince William Co. Ind. Dev. Auth. Multifamily Hsg. Rev. Series 1998A (Melrose
Apts. Proj.), 5.35%, 7/1/23 1,678,191
Chesterfield Co. Industrial Dev. Auth. Multifamily Hsg. Mtg. Rev. Series 1999
(Winchester Greens Townhouses Proj.):
1,155,000 5.30%, 7/1/24 1,038,414
1,850,000 5.40%, 1/1/31 1,669,644
--------------
6,516,466
--------------
</TABLE>
See accompanying notes to portfolios of investments on page 48.
29
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SIT TAX-FREE INCOME FUND
SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (UNAUDITED)
<TABLE>
<CAPTION>
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QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
WASHINGTON (5.5%)
Grant Co. Public Hosp. Dist. #1 Rev. Series 1998 (Samaritan Hosp. Proj.) (Asset Guaranty insured):
400,000 5.25%, 9/1/13 389,736
2,780,000 5.25%, 9/1/19 2,554,737
2,315,000 King Co. Hsg. Auth. Pooled Hsg. Refunding Rev. Series 1998A (Asset Guaranty insured), 5.05%, 7/1/13 2,187,721
2,780,000 Kitsap Co. Consolidated Hsg. Auth. Pooled Hsg. Refunding Rev. Series 1998A, 5.50%, 12/1/18 2,577,922
2,640,000 Quinault Indian Nation Tax-Exempt Impt. & Refunding Rev. Series 1999A (Quinault Beach Resort Proj.)
(ACA Insured), 5.80%, 12/1/15 2,577,379
2,470,000 Snohomish Co. Hsg. Auth. Rev. Series 1999A (Millwood Estates Proj.), 5.40%, 6/1/19 2,278,624
Vancouver (Clark Co.) H.A. Pooled Hsg. Refunding Rev. Series 1998A Senior Bonds :
1,000,000 5.40%, 3/1/18 926,490
3,240,000 5.50%, 3/1/28 2,907,349
1,000,000 WA HFC Nonprofit Housing Revenue Series 1995A (Judson Park Proj.)(LOC US Bk. Wash.), 6.90%, 7/1/16 1,027,920
WA Hlth. Care Fac. Auth. Rev.:
1,850,000 Series 1996 (Grays Harbor Cmty. Hosp. Proj.)(Asset Guaranty insured), 5.70%, 7/1/16 1,843,340
Series 1998:
500,000 (Harrison Memorial Hosp.) (AMBAC insured), 5.00%, 8/15/18 454,265
1,715,000 (Highline Cmty. Hosp. Proj.)(Asset Guaranty insured), 5.25%, 8/15/17 1,608,944
1,515,000 Series 2000 (Grays Harbor Cmty. Hosp. Proj.) (Asset Guaranty insured), 5.85%, 7/1/12 1,573,434
WA Hsg. Finance Commission Nonprofit Hsg. Rev.:
1,000,000 Series 1997A (Virginia Mason Research Center Proj.)(LOC US Bank), 5.70%, 1/1/24 960,120
1,390,000 Series 1998 (Cmty. Colleges of Spokane Fdn. Proj.)(LOC US Bank), 5.20%, 7/1/18 1,275,659
1,355,000 Series 1998A (WA Odd Fellows Home Proj.) (LOC US Bank), 5.05%, 7/1/18 1,205,923
1,000,000 Refunding Series 1999A (Presbyterian Ministries, Inc.) (ACA insured), 5.45%, 1/1/29 877,660
1,000,000 WA Public Power Supply Sys. Nuclear Proj. #3 Rev. Refunding Series 1993C, 5.375%, 7/1/15 983,420
--------------
28,210,643
--------------
WEST VIRGINIA (0.8%)
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 2,204,093
1,850,000 Mason Co. Residual Rev. Series 1992C Zero Coupon, 7.58% Effective Yield on Purchase Date, 7/10/14 678,303
2,780,000 Ohio Co. Residual Rev. Series 1992C Zero Coupon, 7.43% Effective Yield on Purchase Date, 7/10/14 1,008,111
--------------
3,890,507
--------------
WISCONSIN (3.7%)
WI HEDA Home Ownership Rev.:
3,545,000 Series 1992A, 7.10%, 3/1/23 3,638,482
2,960,000 Series 1998A, 5.38%, 9/1/17 2,837,693
1,095,000 Series 1999C, 5.00%, 9/1/17 1,013,543
905,000 Series 1999F, 5.50%, 10/1/17 885,452
WI Hlth. & Educ. Fac. Auth. Rev. :
750,000 Series 1996 (Meriter Hosp. Inc.), 6.00%, 12/1/17 734,985
1,620,000 Series 1997 (St. John's Home & Sunrise Care), 5.625%, 12/15/22 1,362,631
1,550,000 Series 1999 (Divine Savior Hosp. & Nursing Home Proj., Inc.), 5.65%, 6/1/19 1,254,865
</TABLE>
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------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Series 1999 (FH Healthcare Dev. Inc. Proj.):
1,395,000 5.25%, 11/15/04 1,354,168
1,020,000 5.625%, 11/15/09 955,250
Series 1999 (Kenosha Hosp. & Med. Ctr., Inc. Proj.):
670,000 5.00%, 5/15/06 651,722
705,000 5.10%, 5/15/07 683,765
740,000 5.15%, 5/15/08 714,522
820,000 5.35%, 5/15/10 791,366
865,000 5.45%, 5/15/11 833,073
1,000,000 Series 1999 (Monroe Clinic Inc., Proj.), 5.125%, 2/15/16 860,510
--------------
18,572,027
--------------
Total municipal bonds (cost: $500,502,420) 475,706,206
--------------
CLOSED-END MUTUAL FUNDS (4.9%) (2)
40,000 American Municipal Income Portfolio 485,000
123,400 American Municipal Term Trust 2001 1,280,275
149,100 American Municipal Term Trust III 2003 1,574,869
358,200 Blackrock Insured Municipal Term Trust 2008 5,216,288
537,900 Blackrock Municipal Target Term Trust 2006 5,244,525
16,000 Dreyfus Strategic Municipals Fund 137,000
40,000 Duff & Phelps Utilities Income Fund 508,400
29,900 Morgan Stanley Dean Witter Muni Income Opportunities II 224,250
44,700 Nuveen Performance Plus Municipal Fund 547,575
40,700 Nuveen Premium Income Municipal Fund 493,488
42,700 Seligman Select Municipal Fund 427,000
42,300 Van Kampen Advantage Municipal Income Trust 557,831
11,000 Van Kampen Trust 160,188
340,700 Van Kampen Merritt Municipal Opportunity Trust 4,812,387
300,000 Van Kampen Merritt Strategic Sector Municipal Trust 3,468,750
--------------
Total closed-end mutual funds (cost: $26,787,661) 25,137,826
--------------
SHORT-TERM SECURITIES (0.5%) (2)
1,723,436 Dreyfus Tax-Exempt Cash Management Fund, 4.03% 1,723,436
668,993 Northern Institutional Tax-Exempt, 3.99% 668,993
--------------
Total short-term securities (cost: $2,392,429) 2,392,429
--------------
Total investments in securities (cost: $529,682,510) (7) $503,236,461
==============
</TABLE>
See accompanying notes to portfolios of investments on page 48.
31
<PAGE>
[PHOTO] SIT MINNESOTA TAX-FREE INCOME FUND
SIX MONTHS ENDED SEPTEMBER 30, 2000
-----------------------------------------------------------------------
MICHAEL C. BRILLEY, SENIOR PORTFOLIO MANAGER
DEBRA A. SIT, CFA, SENIOR PORTFOLIO MANAGER
Municipal bond prices rose during the six month period after bottoming in
mid-May. The Fund's price per share rose from $9.73 to $9.81 during the period
and ranged from a low of $9.55 in mid-May to a high of $9.87 in early September.
The Fund benefited from declining yields since mid-May and from stabilizing
yields in the health care sector, and provided a return of +3.56% for the six
month period ended September 29, 2000, compared to +3.58% for the Lehman 5-year
Municipal Index. The Fund's 30-day SEC yield rose from 5.42% to 5.71% during the
period and its 12-month distribution rate increased from 5.19% to 5.40%,
contrary to the general declining trend of bond yields.
We continue to look for opportunities to increase the yield in the portfolio,
as incremental credit spreads remain wide. Purchases were made in the hospital
and other revenue sectors, which increased from 21.5% to 24.1% and from 6.0% to
7.7%, respectively. Multifamily housing bonds increased from 37.5% to 39.0%,
despite net sales. Cash decreased from 10.6% to 3.3% as assets declined from
$172.9 million to $163.4 million. Securities rated A or better decreased from
52.1% to 48.6% while non-rated holdings increased from 40.0% to 42.7%. We intend
to keep non-rated holdings around their current weighting to ensure portfolio
liquidity. The Fund's average maturity extended from 16.6 years to 17.3 years
due to the decrease in cash. Nonetheless, the Fund's implied duration, which is
based on historical price changes, increased from 7.1 years to 8.2 years,
reflecting the increased price sensitivity of the Fund's holdings with the rise
in municipal yields during 1999 (following stable yields in 1998) as bonds
became priced to maturity rather than to shorter call dates.
We continue to monitor credits closely, particularly those in the health care
sector, which is seeing some improvement from operating margin pressures last
year. We are maintaining the Fund's health care weighting since underperformance
in that sector, such as during 1999, has typically been followed by a period of
strong outperformance. Our health care focus remains on issuers that are sole
community providers, are financially flexible and have strong managements. We
believe that bonds in the 8 to 15 year maturity range continue to offer the most
attractive risk/reward profile. Municipal bonds have seen continued strength in
recent months, and we believe they are an attractive complement to other asset
classes in the "soft landing" economic environment we foresee ahead.
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.
During normal market conditions, the Fund invests 100% of its net assets in
municipal securities that generate interest income that is exempt from regular
federal income tax and Minnesota regular personal income tax. The Fund
anticipates that substantially all of its distributions to its shareholders will
be exempt as such. For investors subject to the alternative minimum tax ("AMT"),
up to 20% of the Fund's income may be alternative minimum taxable income.
PORTFOLIO SUMMARY
Net Asset Value 9/30/00: $9.81 Per Share
3/31/00: $10.55 Per Share
Total Net Assets: $163.4 Million
30-day SEC Yield: 5.71%
Tax Equivalent Yield: 10.28%(1)
12-Month Distribution Rate: 5.40%
Average Maturity: 17.3 Years
Duration to Estimated Avg. Life: 7.4 Years(2)
Implied Duration: 8.2 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 39.0
Hospital/Health Care Revenue 24.1
Single Family Mortgage Revenue 9.4
Other Revenue Bonds 7.7
Industrial Revenue/Pollution Control 4.4
Education/Student Loan 3.8
Sectors Under 3.0% 8.3
Cash & Other Net Assets 3.3
32
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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** 2.51% 1.97% 2.21%
6 Month** 3.56 3.58 n/a
1 Year 2.93 4.82 4.16
3 Year 3.35 4.36 3.17
5 Year 4.89 4.80 4.52
Inception 5.14 4.89 4.38
(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 2.93% 4.82% 4.16%
3 Year 10.39 13.64 9.82
5 Year 26.99 26.44 24.75
Inception 40.88 38.55 34.03
(12/1/93)
*AS OF 9/30/00. **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 9/30/00 would
have grown to $14,088 in the Fund or $13,855 in the Lehman 5-Year Municipal Bond
Index assuming reinvestment of all dividends and capital gains.
QUALITY RATINGS
(% OF TOTAL NET ASSETS)
LOWER OF MOODY'S,
S&P, FITCH OR DUFF &
PHELPS RATINGS USED.
[PIE CHART]
A 15.9% ASSESSMENT OF
AA 14.2% NON-RATED
AAA 15.2% SECURITIES
Cash & Other Net Assets 3.3%
Not Rated 42.7% AAA 0.6%
BBB 8.7% AA 0.5
A 2.4
BBB 24.5
BB 13.6
B 1.1
----------
TOTAL 42.7%
33
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SIT MINNESOTA TAX-FREE INCOME FUND
SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (UNAUDITED)
<TABLE>
<CAPTION>
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QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
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<S> <C>
MUNICIPAL BONDS (94.5%) (2)
EDUCATION/STUDENT LOAN (3.8%)
Minnesota Higher Educ. Fac. Auth. Rev. :
750,000 Series 1997-4L (St. John's University), 5.35%, 10/1/17 722,122
2,600,000 Series 1998-4T (College of St. Benedict), 5.35%, 3/1/20 2,406,430
458,000 Lease Rev. Series 1999-5A (Concordia University), 5.25%, 4/25/14 425,990
Series 1999-4Y (Augsburg College):
700,000 5.05%, 10/1/13 650,335
500,000 5.20%, 10/1/16 460,370
275,000 Series 1999-4Z (Northwestern College of Chiropractic), 5.20%, 10/1/13 261,907
St. Paul Hsg. & Redev. Auth. Lease Rev.:
1,000,000 Series 1999 (ACORN Dual Language Academy Proj.), 6.30%, 11/1/17 976,650
175,000 Series 2000A (New Spirit Schools Proj.), 9.00%, 12/1/02 176,831
165,000 Winona Port. Auth. Lease Rev. Series 1999A (Bluffview Montessori School Proj.), 8.00%, 12/1/24 170,927
----------------
6,251,562
----------------
ESCROWED TO MATURITY/PREREFUNDED (1.3%)
100,000 Anoka Industrial Dev. Rev. Series 1994 (Lund Industries Inc. Proj.), 6.40%, 9/1/03 (4) 104,559
75,000 Minneapolis Multifamily Hsg. Rev. Series 1991 (Trinity Hsg. Proj.)
(Section 8), 7.875%, 2/1/06 77,284
Red Wing Hlth. Care Ctr. Fac. Rev. Refunding (River Region Obligated Group):
125,000 Series 1993A, 6.20%, 9/1/05 132,206
130,000 Series 1993A, 6.30%, 9/1/06 137,846
200,000 Series 1993B, 6.20%, 9/1/05 212,316
250,000 St. Paul Port Authority Hotel Fac. Senior Rev. Series 1996A (Radisson Kellogg Proj.), 7.00%, 8/1/01 254,320
1,135,000 University of Minnesota Rev. Series 1986A, 6.00%, 2/1/11 1,136,510
----------------
2,055,041
----------------
GENERAL OBLIGATION (1.0%)
570,000 Carver Co. Hsg. & Redev. Auth. Hsg. & Dev. Gross Rev. Ltd.Tax G.O.
(Chanhassen Apts. Proj.), 7.00%, 1/1/25 585,538
1,000,000 St. Paul ISD No. 625 G.O. Series 1997A, 5.125%, 2/1/15 971,850
----------------
1,557,388
----------------
HOSPITAL/HEALTH CARE (24.1%)
700,000 Bemidji Hosp. Fac. Rev. Refunding Series 1996 (North Country Hlth. Proj.), 5.625%, 9/1/21 650,048
Brooklyn Center Hlth. Care Fac. Rev. Series 1993 (Maranatha Proj.):
50,000 6.75%, 12/1/05 46,087
500,000 7.50%, 12/1/10 442,865
620,000 Cambridge Hsg. & Hlth. Care Fac. Rev. Series 1998C (Grandview West Proj.), 5.25%, 10/1/08 575,943
625,000 Clearwater Co. Hlth. Care Fac. Gross Rev. Series 1999, 5.90%, 11/1/15 534,006
1,290,000 Cokato Sr. Hsg. Rev. Series 1996 (Cokato Charitable Trust Proj.), 7.00%, 12/1/19 1,265,838
1,465,000 Columbia Heights Multifamily & Health Care Fac. Rev. Series 1998 (Crest View Corp. Proj.),
5.75%, 9/1/11 1,340,285
</TABLE>
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QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
1,000,000 Cuyuna Range Hosp. Dist. Hlth. Fac. Gross Rev. Series 1999A, 6.00%, 6/1/19 847,790
1,000,000 Dakota Co. Hsg. & Redev. Auth. Hlth. Care Fac. Rev. Refunding Series 1997 (South Suburban
Medical Ctr. Proj.), 6.75%, 8/1/17 946,130
715,000 Eden Prairie Hlth. Care Fac. Rev. Bonds Series 1998 (Castle Ridge Care Proj.), 5.70%, 7/1/18 584,899
140,000 Edina Hlth. Care Fac. Rev. Series 1995 (Volunteers of America Care Proj.), 7.875%, 3/1/19 140,426
Elk River Rev. Series 1998 (Care Choice Member Proj.):
1,500,000 5.60%, 8/1/13 1,297,530
1,400,000 5.70%, 8/1/18 1,150,618
325,000 5.75%, 8/1/23 262,788
215,000 Fergus Falls Hlth. Care Fac. Auth. Rev. Refunding Series 1993A
(Lake Region Hosp. Corp. Proj.), 6.25%, 9/1/04 219,100
650,000 Fergus Falls Hlth. Care Fac. Auth. Series 1995 (LRHC Long-Term Care Fac. Proj.), 6.40%, 12/1/15 624,364
Hastings Hlth. Care Fac. Rev. Series 1998 (Augustana Home of Hastings Proj.):
115,000 5.10%, 11/1/09 104,220
120,000 5.20%, 11/1/10 107,906
135,000 5.40%, 11/1/12 120,143
140,000 5.50%, 11/1/13 124,369
60,000 5.60%, 11/1/18 48,403
1,095,000 5.75%, 11/1/23 875,989
1,455,000 5.875% 11/1/28 1,169,514
565,000 Hastings Hlth. Care Fac. Rev. Series 1998 (Regina Med. Ctr.)(ACA insured), 5.25%, 9/15/18 512,438
635,000 Hopkins Hlth. Care Fac. Rev. Series 1999 (Augustana Chapel View Homes, Inc. Proj.), 6.00%, 3/1/14 566,064
1,685,000 Maplewood Hlth. Care Fac. Rev. (VOA Care Ctrs. Proj.), 7.375%, 10/1/12 1,703,164
Marshall Medical Center Gross Rev. Series 1999 (Weiner Memorial Medical Center Proj.):
305,000 5.65%, 11/1/13 270,752
320,000 5.70%, 11/1/14 283,510
1,000,000 5.80%, 11/1/19 839,060
1,045,000 Minneapolis Hlth. Care Fac. Rev. Series 1993 (St. Olaf Res. Proj.), 7.00%,10/1/18 992,750
1,000,000 Minneapolis Hlth. Care Fac. Rev. Series 1998A (Benchmark Hlth. Care Proj.), 6.625%, 12/1/28 839,590
1,170,000 Minneapolis Hlth. Care Fac. Rev. Series 1999 (Shelter Care Foundation Proj.), 6.00%, 4/1/10 1,072,656
1,500,000 Minneapolis Pooled Rev. Series 1999 (CareChoice Member Proj.), 5.625%, 4/1/14 1,300,425
Minneapolis Rev. Series 1998A (Walker Methodist Senior Services Obligated Group):
905,000 5.10%, 11/15/07 827,469
1,110,000 5.10%, 11/15/08 996,569
1,600,000 5.875%, 11/15/18 1,412,096
MN Agr. & Econ. Dev. Board Hlth. Care Rev. Series 1999 (Benedictine Care Centers Proj.):
115,000 5.45%, 2/1/09 106,291
120,000 5.45%, 8/1/09 110,104
120,000 5.50%, 2/1/10 109,549
125,000 5.50%, 8/1/10 113,250
130,000 5.55%, 2/1/11 117,361
</TABLE>
See accompanying notes to portfolios of investments on page 48.
35
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SIT MINNESOTA TAX-FREE INCOME FUND
SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (UNAUDITED)
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
130,000 5.55%, 8/1/11 116,571
135,000 5.60%, 2/1/12 120,809
2,355,000 5.90%, 2/1/19 1,990,799
495,000 5.75%, 2/1/29 392,337
MN Agr. & Econ. Dev. Board Rev. Series 2000 (Evangelical Lutheran Good Samaritan Society Proj.):
410,000 5.80%, 8/1/08 413,042
750,000 6.55%, 8/1/16 753,713
MN Agr. & Econ. Dev. Board Rev. Series 2000A (Fairview Hlth. Care Sys. Proj.):
500,000 6.00%, 11/15/03 513,695
500,000 5.625%. 11/15/04 509,255
590,000 5.70%, 11/15/06 603,411
1,000,000 New Hope Hsg. & Hlth. Care Fac. Rev. Series 1999 ( MN Masonic Home North Ridge Proj.),
5.75%, 3/1/15 870,260
Olmstead Co. Hlth. Care Fac. Rev. Series 1998 (Olmsted Medical Ctr. Proj.):
650,000 5.45%, 7/1/13 576,635
1,125,000 5.55%, 7/1/19 944,809
St. Paul Hsg. & Redev. Auth. Hlth. Care Rev. Series 1998 (Regions Hosp. Proj.):
500,000 5.00%, 5/15/10 449,460
1,540,000 5.20%, 5/15/13 1,353,845
2,850,000 5.25%, 5/15/18 2,407,766
960,000 St. Paul Hsg. & Redev. Auth. Nursing Home Dev. Rev. Refunding Series 1996C
(Franciscan Hlth. Cmmty. Proj., St. Mary's Home), 7.00%, 7/1/21 910,214
820,000 Wadena Co. Hlth. Care Fac. Rev. Series 1994B, 7.45%, 9/1/15 829,832
----------------
39,408,812
----------------
INDUSTRIAL /POLLUTION CONTROL (4.4%)
1,000,000 Anoka Co. Solid Waste Disp. Rev. Series 1987A (Natl. Rural Util. Proj.), 6.95%, 12/1/08 (4) 1,023,230
265,000 Duluth Commercial Dev. Rev. Refunding Series 1995A (Radisson Hotel Proj.), 7.00%, 12/1/00 262,249
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) 106,475
500,000 Series 1997C Lot 3 (DynaGraphics), 6.20%, 8/1/09 (4) 505,140
400,000 Series 1998A Lot 1 (Formative Engineering Corp.), 5.75%, 8/1/18 (4) 381,112
Medina Industrial Dev. Rev. Refunding Series 1998 (Temroc Metals, Inc. Proj.):
210,000 5.10%, 10/1/05 (4) 203,515
705,000 5.25%, 10/1/08 (4) 641,226
400,000 5.60%, 10/1/12 (4) 358,316
1,000,000 Minneapolis Commercial Dev. Rev. Refunding Series 1997 (Holiday Inn Metrodome Proj.),
6.00%, 12/1/01 1,000,260
</TABLE>
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QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Owatonna Industrial Dev. Rev. Series 1997:
280,000 7.25%, 5/1/14 (4) 276,884
505,000 7.375%, 5/1/17 (4) 499,955
200,000 Richfield Cmty. Dev. Rev. Refunding 1994 (Richfield Shoppes Proj.), 8.375%, 10/1/05 209,474
275,000 Sauk Centre Industrial Dev. Rev. Series 1998 (Seluemed LLP Proj.)(LOC US Bank), 5.75%, 4/1/18 (4) 259,375
500,000 St. Paul Hsg. & Redev. Auth. District Cooling Rev. Series 1998J, 5.35%, 3/1/18 474,145
1,070,000 St. Paul Port Authority Hotel Fac. Rev. Series 1999-2 (Radisson
Kellogg Proj.), 6.375%, 8/1/03 1,067,368
----------------
7,268,724
----------------
MULTIFAMILY MORTGAGE (39.0%)
200,000 Andover Elderly Hsg. Rev. Series 1997 (Presbyterian Homes of Andover, Inc. Proj.),
5.35%, 12/1/08 187,564
1,520,000 Apple Valley Multifamily Hsg. Rev. Refunding Series 1998A (Mtg. Loan/Apple Valley
Villa Proj.) (GNMA collateralized), 5.25%, 8/1/18 1,413,357
500,000 Aurora Hsg. & Redev. Auth. Multifamily Rev. (Irongate Apts. Proj.) (Section 8), 6.10%, 10/1/19 493,365
500,000 Austin Hsg. & Redev. Auth. Governmental Hsg. Gross Rev. Series 1995A (Courtyard Res. Proj.),
7.25%, 1/1/26 510,640
1,000,000 Bloomington Multifamily Hsg. Rev. Refunding Series 1998A (Hampshire Apts. Proj.),
6.20%, 12/1/31 889,790
960,000 Burnsville Multifamily Hsg. Rev. Refunding Series 1994 (Bridgeway Apts. Proj.), 7.25%, 2/1/14 968,093
Carver Co. Hsg. & Redev. Auth. Multifamily Hsg.:
1,200,000 Gross Rev. & Ltd. Tax Refunding Series 1997A (Lake Grace Apts. Proj.), 6.00%, 7/1/28 1,179,180
650,000 Rev. Refunding Series 1997A (Waybury Apts. Proj.), 5.875%, 8/1/27 624,942
2,630,000 Series 1998 (GNMA collateralized)(Jonathan Acres Proj.), 5.30%, 4/20/33 2,354,087
400,000 Subordinate Rev. Refunding Series 1997C (Waybury Apts. Proj.), 8.00%, 8/1/27 384,616
495,000 Chaska Multifamily Hsg. Rev. Series 1999 (West Suburban Hsg. Partners Proj.), 5.375%, 9/1/14 (4) 461,850
405,000 Chisago City Hlth. Fac. Rev. Refunding Series 1995A (Pleasant Heights Proj.),
7.30%, 7/1/18 408,037
700,000 Coon Rapids Multifamily Hsg. Rev. Refunding Series 1997A (Margaret Place Apts. Proj.),
6.50%, 5/1/25 669,403
Coon Rapids Senior Hsg. Rev. Refunding Series 1998 (Epiphany Sr. Citizens Hsg. Corp. Proj.):
115,000 5.30%, 11/1/07 106,746
115,000 5.40%, 11/1/08 105,948
170,000 5.50%, 11/1/10 152,849
545,000 5.80%, 11/1/18 459,920
230,000 Dakota Co. Hsg. & Redev. Auth. Multifamily Hsg. Rev. Refunding (Walnut Trails Apts. Proj.),
Series 1995C Subordinate, 9.00%, 1/20/15 (4) 230,232
1,000,000 Dakota Co. Hsg. & Redev. Auth. Multifamily Hsg. Rev.
Series 1999 (View Pointe Apts. Proj.), 6.125%, 11/1/17 925,200
</TABLE>
See accompanying notes to portfolios of investments on page 48.
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SEPTEMBER 30, 2000
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PORTFOLIO OF INVESTMENTS (UNAUDITED)
<TABLE>
<CAPTION>
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QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Eden Prairie Multifamily Hsg. Rev. Refunding :
55,000 Series 1990A (Welsh Parkway Apts. Ltd. Proj.)(FHA insured), 8.00%, 7/1/26 56,573
700,000 Series 1991 (Windslope Apts. Proj.)(Section 8), 7.00%, 11/1/06 724,556
1,500,000 Series 1991 (Windslope Apts. Proj.)(Section 8), 7.10%, 11/1/17 1,545,315
300,000 Series 1997A (Preserve Place Proj.) (GNMA collateralized), 5.50%, 1/20/18 288,954
435,000 Series 1997A (Preserve Place Proj.) (GNMA collateralized), 5.60%, 7/20/28 412,123
Grand Rapids Hsg. & Redev. Auth. (Lakeshore Place and Forest Park West Apts. Proj.):
95,000 Series 1999B, 5.00%, 10/1/09 90,173
500,000 Series 1999A, 5.20%, 10/1/19 452,380
1,660,000 Series 1999A, 5.30%, 10/1/29 1,478,330
110,000 Series 1999B, 5.70%, 10/1/29 97,667
275,000 Harmony Multifamily Hsg. Rev. Refunding Series 1997A (Zedakah Fdn. Proj.) (Section 8), 5.80%, 9/1/13 272,033
540,000 Hopkins Subordinate Multifamily Hsg. Rev. Refunding Series 1996C (Auburn Apts. Proj.), 8.00%, 6/20/31 546,388
Hopkins Multifamily Hsg. Rev. Series 1996 (Hopkins Renaissance Proj.) (Section 8):
100,000 5.85%, 4/1/09 101,410
450,000 6.25%, 4/1/15 457,708
500,000 Hutchinson Hsg. Fac. Rev. Series 1994 (Prince of Peace Proj.), 7.375%, 10/1/12 506,620
3,735,000 Little Canada Multifamily Hsg. Rev. Series 1997A (Hsg. Alt. Dev. Co. Proj.), 6.10%, 12/1/17 3,475,604
1,650,000 Maplewood Multifamily Hsg. Rev. Series 1998 (Park Edge Apts. Proj.), 6.50%, 5/1/29 (4) 1,556,230
Maplewood Multifamily Refunding Rev. (Village on Woodlyn Proj.):
1,605,000 Series 1999A (GNMA collateralized), 6.75%, 7/20/30 (4) 1,674,031
100,000 Subordinate Series 1999C-1, 8.00%, 11/1/30 (4) 100,050
275,000 Subordinate Series 1999C-2, 8.00%, 11/1/30 (4) 275,138
Minneapolis Multifamily Hsg. Rev.:
355,000 Series 1996 (Belmont Apts.), 7.25%, 11/1/16 353,303
Series 1994 (Findley Place Townhomes Proj.) (Section 8):
50,000 6.00%, 12/1/05 (4) 48,506
1,115,000 7.00%, 12/1/16 (4) 1,038,478
3,100,000 Series 1996A (Nicollet Towers) (Section 8), 6.00%, 12/01/19 3,080,501
3,220,000 Series 1998 (Riverside Plaza Proj.) (GNMA collateralized), 5.10%, 12/20/18 (4) 2,917,706
Minneapolis Student Hsg. Rev. Series 2000 (Riverton Community Hsg. Proj.):
100,000 6.80%, 7/1/10 102,550
240,000 6.90%, 7/1/11 244,118
MN HFA Rental Hsg. Rev.:
175,000 Series 1993C, 6.15%, 2/1/14 175,252
115,000 Series 1993E, 6.00%, 2/1/14 116,543
4,005,000 Series 1998A, 5.375%, 8/1/28 3,708,630
735,000 Minnetonka Hsg. Fac. Rev. Series 1994 (Beacon Hill Housing Proj.), 7.00%, 6/1/04 747,649
405,000 Minnetonka Multifamily Hsg. Rev. Refunding Subordinate Series 1994C (Brier Creek Proj.),
8.00%, 12/20/16 414,449
</TABLE>
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<TABLE>
<CAPTION>
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QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Minnetonka Multifamily Hsg. Rev. Refunding Series 1999A (GNMA collateralized) (Archer Heights Apts.
Proj.):
540,000 5.10%, 7/20/13 (4) 510,786
975,000 5.20%, 1/20/18 (4) 896,561
145,000 Mora Multifamily Rev. Refunding Hsg. Alternatives Partnership Series 1995, 6.50%, 6/1/02 144,667
New Ulm Multifamily Rev. Series 1999 (HADC Ridgeway Proj.):
95,000 5.35%, 12/1/08 90,571
100,000 5.40%, 12/1/09 94,859
105,000 5.50%, 12/1/10 99,279
110,000 5.60%, 12/1/11 103,543
650,000 6.125%, 12/1/19 597,773
Plymouth Multifamily Hsg. Rev. Refunding Series 1996A (Fox Forest Apts. Proj.) (GNMA collateralized):
750,000 Series 1996A, 8.05%, 6/20/31 830,610
680,000 Series 1996C, 8.00%, 6/20/31 688,044
960,000 Robbinsdale Multifamily Hsg. Rev. Series 1996A (Copperfield Hill Proj.), 7.20%, 12/1/16 936,634
1,400,000 Rochester Multifamily Rev. Refunding Series 2000A (Weatherstone Apts. Proj.) (LOC Household Finance)
(Mandatory Put 9/1/17) 6.375%, 9/1/37 (4) 1,399,902
Roseville Hsg. Fac. Rev. Refunding Bonds Series 1998 (College Properties Inc. Proj.):
2,820,000 5.60%, 10/1/13 2,425,990
400,000 5.625%, 10/1/18 324,868
325,000 Sandstone Econ. Dev. Auth. Hsg. & Dev. Rev. Series 1994A (Family Apts. Proj.), 8.00%, 1/1/12 337,360
1,500,000 St. Anthony Hsg. Dev. Rev. Refunding (Autumn Woods Proj.) (Asset Gty. insured), 6.875%, 7/1/22 1,556,310
500,000 St. Cloud Hsg. & Redev. Auth. Hsg. Rev. Refunding Series 1998 (Northway Manor Apts. Section 8
Assisted Proj.), 5.15%, 12/1/14 470,225
St. Cloud Hsg. & Redev. Auth. Multifamily Hsg. Rev.:
1,050,000 Series 1993 (Germain Towers Proj.) (Section 8), 5.90%, 9/1/20 1,009,544
Series 1999A (Parkview Terrace Apts. Proj.) (Section 8):
247,000 5.00%, 6/1/09 234,954
929,000 5.50%, 6/1/18 855,005
St. Louis Park Multifamily Hsg. Rev. Refunding:
650,000 Series 1995 (FHA insured) (Knollwood Cmty. Hsg. Proj.), 6.15%, 12/1/16 665,041
500,000 Series 1998A (Park Ridge Apts. Proj.) (GNMA collateralized), 5.25%, 11/1/20 459,260
St. Paul Hsg. & Redev. Auth. Multifamily Refunding Rev.:
500,000 Series 1992 (Point of St. Paul Proj.)(FNMA backed), 6.60%, 10/1/12 521,510
200,000 Series 1995 (Sun Cliffe Apts. Proj.)(GNMA collateralized), 5.875%, 7/1/15 204,058
1,137,939 Series 1998 (Superior Street Cottages Proj.), Lyngblomsten, Inc., 6.00%, 3/15/24 1,028,219
St. Paul Port Authority Multifamily Hsg. Refunding (Jackson Towers Apts. Proj.):
3,385,000 Senior Series 1998-1A (GNMA collateralized), 6.95%, 4/20/33 3,664,466
408,000 Subordinate Series 1998-1B, 8.00%, 4/20/33 385,560
2,000,000 Virginia Hsg. & Redev. Auth. Governmental Hsg. Rev. Refunding Series 1998A
(Laurentian Manor Proj.), 5.75%, 5/1/32 1,819,500
</TABLE>
See accompanying notes to portfolios of investments on page 48.
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SIT MINNESOTA TAX-FREE INCOME FUND
SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (UNAUDITED)
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
965,000 Washington Co. Hsg. & Redev. Auth. Multifamily Hsg. Rev. Refunding Series 1994
(White Bear Lake Transitional Hsg. Proj.), 6.625%, 8/1/24 984,261
755,000 Washington Co. Hsg. & Redev. Auth. Governmental Hsg. Rev. Refunding Series 1999A (Briar Pond
Apts. Proj.) (GNMA collateralized), 5.50%, 2/20/14 716,895
----------------
63,641,042
----------------
MUNICIPAL LEASE (2.4%)
585,000 Burnsville Solid Waste Rev. Series 1990 (Freeway Transfer, Inc. Proj.), 9.00%, 4/1/10 (4) 597,882
125,000 Hennepin Co. Hsg. & Redev. Auth. Rev. Series 1993A (Community Provider Program), 5.70%, 8/1/13 125,314
655,000 Hibbing Econ. Dev. Auth. Public Proj. Rev. Series 1997 (Hibbing Lease Obligations Proj.),
6.10%, 2/1/08 672,213
100,000 Rice Co. Certificates of Participation Series 1996A, 5.85%, 12/1/14 102,337
800,000 St. Cloud Certificates of Participation Series 1997, 5.90%, 12/1/17 802,392
1,624,830 St. Paul Lease Series 1998 (City Hall Annex Building), 5.71%, 10/1/18 1,590,871
----------------
3,891,009
----------------
PUBLIC FACILITIES (1.2%)
480,000 Eagan Ice Arena Gross Rev. Series 1998B, 5.50%, 4/1/19 450,336
300,000 Puerto Rico Pub. Bldg. Auth. Gtd. Pub. Ed. & Hlth. Fac. Rev. Refunding Series 1989I, 6.00%, 7/1/12 300,369
1,245,000 St. Paul Recreational Fac. Gross Rev. Series 1996D, 5.875%, 6/1/18 1,266,165
----------------
2,016,870
----------------
SINGLE FAMILY MORTGAGE (9.4%)
Dakota County Hsg. & Redev. Auth. Single Family Mtg. Rev.:
420,000 Series 1994A (FNMA backed), 6.70%, 10/1/09 (4) 428,610
380,000 Series 1995 (FNMA & GNMA backed), 6.25%, 10/1/09 (4) 384,036
170,000 Dakota/Wash./Stearns Cos. Hsg. & Redev. Auth. Single Family Rev. Refunding
Series 1994A (FNMA backed), 6.50%, 9/1/10 (4) 172,776
775,000 Minneapolis Redev. Mtg. Rev. Series 1987A (Riverplace Proj.) (LOC Bk. of Tokyo),
7.10%, 1/1/20 776,162
2,100,000 Minneapolis Residual Interest Mtg. Rev. Series 1995 Convertible Capital Appreciation Bonds,
Zero Coupon, 7.00% Effective Yield on Purchase Date, 10/1/12 958,797
415,000 Minneapolis Single Family Mtg. Rev. Series 1995V (FNMA & GNMA backed), 6.25%, 4/1/22 426,827
5,000 Minneapolis/ St. Paul Hsg. Fin. Bd. Single Family Mtg. Rev. Series 1989A (GNMA backed),
7.65%, 12/1/00 (4) 5,008
MN HFA Single Family Mtg. Rev.:
165,000 Series 1991A, 7.05%, 7/1/22 (4) 167,231
1,485,000 Series 1992B-1, 6.75%, 1/1/26 (4) 1,509,963
380,000 Series 1992E, 6.85%, 1/1/24 (4) 389,903
950,000 Series 1992F, 6.75%, 7/1/12 (4) 961,637
1,020,000 Series 1994F, 6.30%, 7/1/25 1,044,562
20,000 Series 1994G, 5.875%, 7/1/15 (4) 20,164
65,000 Series 1994K, 5.90%, 1/1/07 67,846
395,000 Series 1994L, 6.70%, 7/1/20 (4) 409,236
1,870,000 Series 1997D, 5.85%, 7/1/19, (4) 1,872,955
</TABLE>
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<TABLE>
<CAPTION>
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QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
2,450,000 Series 1998C, 5.25%, 1/1/17 2,346,439
800,000 Series 1998F-1, 5.45%, 1/1/17 784,384
155,000 Series 1998F, 5.70%, 1/1/17 156,189
850,000 Series 1999B, 5.25%, 1/1/20 802,706
888,862 Moorhead Single Family Mtg. Rev. Refunding Series 1992B, 7.00%, 8/1/11 914,932
210,000 St. Paul Hsg. & Redev. Auth. Single Family Mtg. Rev. Refunding Series 1995 (FNMA backed),
6.00%, 9/1/10 220,114
966,042 St. Paul Residual Interest Rev. Series 1995 Convertible Capital Appreciation
Bonds, Zero Coupon, 7.23% Effective Yield on Purchase Date, 9/1/11 455,721
----------------
15,276,198
----------------
UTILITY (0.2%)
400,000 Southern MN Muni. Power Agy. Pwr. Supply Sys. Rev. Refunding Series 1986A, 5.00%, 1/1/16 369,764
----------------
OTHER REVENUE BONDS (7.7%)
Columbia Heights Commercial Dev. Refunding Rev. Series 1999 (Columbia Park Properties -
Medical Clinic Proj.):
150,000 5.00%, 12/1/06 140,842
235,000 5.10%, 12/1/07 218,905
250,000 5.15%, 12/1/08 232,177
1,750,000 5.60%, 12/1/15 1,548,417
600,000 Commissioner of Iron Range Resources and Rehabilitation Gross Rev.
Series 1996 (Giants Ridge Rec. Area Proj.), 7.25%, 10/1/11 624,294
Minneapolis Cmty. Dev. Agy. Ltd. Tax Common Bond Fund:
100,000 Series 1993-5 (Winslow Printing), 6.125%, 12/1/06 (4) 100,989
170,000 Series 1997-1 (Halper Corrugated Box Mfg. Co.), 5.90%, 6/1/07 (4) 176,139
640,000 Series 1995-1 (Microtron, Inc.), 6.625%, 12/1/09 (4) 671,674
1,310,000 Series 1995-1 (Microtron, Inc.), 7.25%, 12/1/15 (4) 1,377,884
500,000 Series 1999-1A (Discount Steel), 5.25%, 6/1/19 (4) 463,470
1,250,000 Minneapolis Public Hsg. Auth. Series 1997 (General Credit Energy Savings Proj.), 6.00%, 7/1/08 1,239,950
200,000 Renville Gross Rev. Golf Course Bond Series 1997, 6.50%, 2/1/19 200,870
300,000 Scott Co. Hsg. & Redev. Auth. Ltd. Special Benefits Tax Series 1997B (River City Centre Proj.),
(AMBAC insured), 5.45%, 2/1/20 295,746
2,745,000 St. Paul Hsg. & Redev. Sales Tax Rev. Refunding Series 1996 (FSA insured)
(Civic Center Proj.), 7.10%, 11/1/23 3,198,803
600,000 Steele Co. Hlth. Care Fac. Rev. Series 2000 (Elderly Hsg. Proj.), 6.625%, 6/1/20 619,596
1,500,000 White Earth Band of Chippewa Indians Rev. Series 2000A (ACA insured), 7.00%, 12/1/11 1,528,890
----------------
12,638,646
----------------
Total municipal bonds (cost: $162,637,040) 154,375,056
----------------
</TABLE>
See accompanying notes to portfolios of investments on page 48.
41
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SIT MINNESOTA TAX-FREE INCOME FUND
SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (UNAUDITED)
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
CLOSED-END MUTUAL FUNDS (2.2%) (2)
171,900 Minnesota Municipal Term Trust 2001 1,740,487
103,500 Minnesota Municipal Term Trust II 2003 1,028,531
65,000 Voyageur Minnesota Municipal Income Fund II 861,250
----------------
Total Closed-End Mutual Funds (cost: $3,924,438) 3,630,268
----------------
SHORT-TERM SECURITIES (1.9%) (2)
3,136,862 Federated Minnesota Municipal Cash Fund, 3.96% 3,136,862
----------------
Total Short-Term Securities (cost: $3,136,862)
Total investments in securities (cost: $169,698,340) (7) $161,142,186
================
</TABLE>
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[PHOTO] SIT BOND FUND
SIX MONTHS ENDED SEPTEMBER 30, 2000
-----------------------------------------------------------------------
MICHAEL C. BRILLEY, SENIOR PORTFOLIO MANAGER
BRYCE A. DOTY, CFA, SENIOR PORTFOLIO MANAGER
The Sit Bond Fund provided investors with a +3.9% return for the six months
ended September 2000, compared to a +4.8% return for the Lehman Aggregate Bond
Index. The Fund's average annual total return since inception of +5.8% exceeds
the +5.4% return of the Lipper Intermediate Investment Grade Bond Fund Average.
This ranks the Fund 24th of the 99 funds comprising the Lipper Average.
The U.S. Treasury yield curve steepened significantly during the third
quarter after changing very little during the second quarter. Shorter maturity
Treasuries declined 20-40 basis points in yield, while the 30-year Treasury
yield ended the quarter essentially unchanged. This yield curve shift was the
result of the market's perception of a slowing economy and an approaching end to
the Federal Reserve's recent series of interest rate hikes. The Fund's
government bond holdings and collateralized mortgage obligations provided the
highest returns over the last six months as Treasury buybacks by the government
and investor demand for high quality securities drove up prices. However,
corporate and asset-backed securities outperformed Treasuries and
mortgage-backed securities during the third quarter.
Activity in the Fund reflects our expectation of continued outperformance in
the corporate, asset-backed, and collateralized mortgage obligation sectors over
the next several months. We increased the Fund's exposure to those sectors as
these sectors have a historically wide yield advantage over Treasuries. We
believe a soft landing for the U.S. economy will provide the setting for
continued outperformance.
Looking ahead, we expect the Treasury yield curve to continue to steepen as
short rates decline with longer term rates changing little. We are assuming that
the economy will slow and inflation has likely peaked. We intend to keep the
Fund's duration at or slightly above its benchmark and expect highly rated
securities in the corporate bond and asset-backed sectors to provide the most
attractive total return opportunities.
INVESTMENT OBJECTIVE AND STRATEGY
The investment objective of the Fund is to maximize total return,
consistent with preservation of capital. The Fund pursues this objective by
investing in a diversified portfolio of fixed-income securities.
The fund will pursue its objective by investing in a diversified portfolio
or fixed-income securities which include, but are not limited to, the following:
U.S. government securities; corporate debt securities; corporate commercial
paper; mortgage and other asset-backed securities.
PORTFOLIO SUMMARY
Net Asset Value 9/30/00: $9.47 Per Share
3/31/00: $9.43 Per Share
Total Net Assets: $13.5 Million
30-day SEC Yield: 6.63%
12-Month Distribution Rate: 6.53%
Average Maturity: 17.4 Years
Effective Duration: 5.0 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 33.1
Asset-Backed Securities 23.1
Mortgage Pass Through 16.0
U.S. Treasury 11.3
Collateralized Mortgage Obligations 4.4
Closed-End Mutual Funds 3.9
Federal Agency 0.7
Cash & Other Net Assets 7.5
44
<PAGE>
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AVERAGE ANNUAL TOTAL RETURNS*
LIPPER INTER.
SIT LEHMAN INVESTMENT
BOND AGGREGATE GRADE BOND
FUND BOND INDEX FUND AVG.
---- ---------- ---------
3 Month** 3.00% 3.01% 2.71%
6 Months** 3.86 4.81 n/a
1 Year 5.10 6.99 5.75
3 Year 4.47 5.93 4.86
5 Year 5.77 6.47 5.55
Inception 5.84 6.29 5.41
(12/1/93)
CUMULATIVE TOTAL RETURNS*
LIPPER INTER.
SIT LEHMAN INVESTMENT
BOND AGGREGATE GRADE BOND
FUND BOND INDEX FUND AVG.
---- ---------- ---------
1 Year 5.10% 6.99% 5.75%
3 Year 14.03 18.87 15.29
5 Year 32.36 36.81 31.03
Inception 47.41 51.74 43.37
(12/1/93)
*AS OF 9/30/00. **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 9/30/00 would
have grown to $14,741 in the Fund or $15,174 in the Lehman Aggregate Bond Index
assuming reinvestment of all dividends and capital gains. Sit Bond Fund Lehman
Aggregate Bond Index
QUALITY RATINGS
(% OF TOTAL NET ASSETS)
LOWER OF MOODY'S
OR S&P RATING USED.
[PIE CHART]
U.S. Government 11.3%
Government Agency Backed Securities 16.7%
Cash and other Assets and Liabilities 7.5%
BBB 16.8%
A 14.5%
AA 3.5%
AAA 29.9%
45
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SIT BOND FUND
SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (UNAUDITED)
--------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
--------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES (11.3%) (2)
750,000 U.S. Treasury Note, 7.875%, 11/15/04 $802,500
U.S. Treasury Strip, zero coupon:
950,000 6.43% effective yield, 11/15/09 544,854
550,000 6.22% Effective Yield, 2/15/19 179,805
--------------
Total U.S. government securities 1,527,159
--------------
(cost: $1,520,786)
ASSET-BACKED SECURITIES (23.1%) (2)
Advanta Mortgage Loan Trust:
200,000 1995-3 A5, 7.37%, 2/25/27 199,376
250,000 1996-1 A7, 7.07%, 3/25/27 245,095
200,000 1999-3 A4, 7.75%, 10/25/26 202,530
Conseco Home Equity Loan:
200,000 Series 1999-F A3, 6.97%, 10/15/30 199,650
300,000 Series 2000-D A4, 8.17%, 10/15/31 309,177
Conseco Mfg. Housing Series:
500,000 2000-1 A5, 8.06%, 5/1/31 502,065
200,000 2000-4 A5, 7.97%, 5/1/32 202,662
249,998 ContiMortgage Home Equity Loan Trust
Series 1996-1 A7, 7.00%, 3/15/27 246,086
EQCC Home Equity Loan Trust:
100,000 1996-1 A5, 6.93%, 3/15/27 96,426
150,000 1998-2 A5F, 6.64%, 7/15/29 140,890
Green Tree Financial Corp.:
75,000 1995-5 A6, 7.25%, 9/15/26 74,417
75,000 1997-4 A6, 7.03%, 2/15/29 73,888
200,000 1999-1 A5, 6.11%, 9/1/23 179,472
125,000 1999-E A3, 7.18%, 6/15/15 125,359
Money Store Home Equity Mortgage:
250,000 6.725%, 6/15/24 237,008
75,000 7.265%, 7/15/38 74,978
--------------
Total asset-backed securities 3,109,079
--------------
(cost: $3,099,944)
COLLATERALIZED MORTGAGE OBLIGATIONS (4.4%) (2)
159,354 PNC Mortgage Securities Corp.
Series 1998-6 4A, 6.75%, 8/25/13 157,904
350,000 Norwest Asset Securities Corp.
Series 1998-19 2A12, 6.75%, 7/25/28 329,301
100,000 Vendee Mortgage Trust,
Series 2000-3 2B, 7.75%, 4/15/08 101,125
--------------
Total collateralized mortgage obligations 588,330
--------------
(cost: $606,874)
--------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
--------------------------------------------------------------------------------
CORPORATE BONDS & NOTES (33.1%) (2)
300,000 Allstate Finance, 7.83%, 12/1/45 265,498
American Airlines:
75,000 1999-1 A2, 7.024%, 10/15/09 72,977
75,000 1999-1 B, 7.324%, 10/15/09 73,479
100,000 American General Corp., 7.50%, 8/11/10 100,315
200,000 Banc One Capital, 8.75%, 9/1/30 201,693
250,000 Bank America, 8.25%, 4/15/27 238,184
50,000 Bradley Operating LP, 7.00%, 11/15/04 45,690
Burlington North Santa Fe:
94,760 7.57%, 1/2/21 92,525
100,000 7.91%, 1/15/20 100,995
100,000 Conagra, Inc., 6.70%, 8/1/27 93,945
Continental Airlines:
139,209 1997-1A, 7.461%, 4/1/15 135,918
99,299 1999-1B, 6.795%, 8/2/18 92,431
97,194 1999-1A, 6.545%, 2/2/19 89,848
200,000 First Empire Capital, 8.234%, 2/1/27 175,292
100,000 First Hawaiian Capital, 8.343%, 7/1/27 88,215
150,000 First Industrial LP, 7.15%, 5/15/27 148,124
200,000 Household Fin. Corp., 7.875%, 3/1/07 205,007
150,000 Louisiana Pacific Corp., 8.875%, 8/15/10 149,237
125,000 May Department Stores, 9.875%, 6/15/21 131,919
600,000 Pentair, Inc., 7.85%, 10/15/09 595,595
400,000 Security Capital Group, 7.75%, 11/15/03 396,239
50,000 Shaw Communications, Inc., 8.25%, 4/11/10 51,241
400,000 U.S. Airways Series 2000-2G, 8.02%, 2/15/19 404,104
50,000 Union Carbide Corp., 8.75%, 8/1/22 51,899
316,079 Union Tank Car Co., 6.57%, 1/2/14 302,561
150,000 Whirlpool Corp., 9.00%, 3/1/03 154,564
--------------
Total corporate bonds & notes 4,457,495
--------------
(cost: $4,511,156)
FEDERAL AGENCY (0.7%) (2)
300,000 Resolution Funding Corp., zero coupon,
6.75% effective yield, 10/15/19 88,398
--------------
(cost: $84,553)
MORTGAGE PASS-THROUGH SECURITIES (16.0%) (2)(3)
Federal Home Loan Mortgage Corporation:
95,718 9.00%, 12/1/17 99,207
21,529 10.25%, 9/1/09 22,832
26,173 10.75%, 3/1/11 28,071
46
<PAGE>
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--------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
--------------------------------------------------------------------------------
Federal National Mortgage Association:
181,726 9.00%, 12/1/19 188,945
176,647 9.75%, 1/1/13 184,210
164,593 10.25%, 8/15/13 179,304
57,362 11.00%, 11/1/20 62,485
Government National Mortgage Association:
3,091 8.75%, 11/15/01 3,097
38,133 9.00%, 10/15/06 39,331
45,668 9.00%, 9/15/08 47,564
58,719 9.00%, 4/15/09 61,236
45,491 9.00%, 4/15/09 47,441
88,823 9.00%, 4/15/09 92,630
5,245 9.00%, 8/15/11 5,494
100,653 9.00%, 01/15/17 105,908
36,421 9.00%, 8/20/19 37,961
32,674 9.00%, 6/20/21 34,003
46,215 9.00%, 12/20/21 48,096
4,615 9.25%, 5/15/01 4,633
43,680 9.25%, 5/15/10 45,377
6,626 9.50%, 3/15/03 6,777
55,857 9.50%, 11/15/05 57,748
37,062 9.50%, 2/15/11 39,170
97,972 9.50%, 5/20/16 102,071
41,237 9.50%, 5/20/18 42,905
181,521 9.50%, 7/20/18 188,865
105,485 9.50%, 7/20/18 109,753
67,775 9.50%, 9/20/18 70,518
9,158 9.50%, 4/15/20 9,623
14,240 9.50%, 9/15/20 14,963
21,886 9.50%, 11/15/21 22,997
1,478 9.75%, 8/15/02 1,512
12,839 10.00%, 8/15/02 13,148
43,789 10.00%, 6/15/19 45,854
1,987 10.25%, 4/15/01 2,003
1,396 10.25%, 4/15/01 1,408
2,539 10.75%, 1/15/01 2,566
3,136 11.75%, 7/15/01 3,217
Municipal (GNMA collateralized):
55,000 Aurora, CO, Multifamily Series 1999A,
6.75%, 7/1/01 54,917
23,000 Bernalillo Multifamily Series 1998A,
7.50%, 9/20/20 22,721
--------------
Total mortgage pass-through securities 2,150,561
--------------
(cost: $2,184,292)
--------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE (1)
--------------------------------------------------------------------------------
CLOSED-END MUTUAL FUNDS (3.9%) (2)
6,725 American Select Portfolio 76,497
9,145 American Strategic Income Portfolio (I) 101,738
23,394 American Strategic Income Portfolio (II) 269,031
7,672 American Strategic Income Portfolio (III) 83,912
--------------
Total closed-end mutual funds 531,178
--------------
(cost: $532,103)
SHORT-TERM SECURITIES (7.3%) (2)
300,000 American Express Corp., 6.60%, 10/2/00 299,890
23,373 Dreyfus Gov't Cash Mgmt. Fund, 6.39% 23,373
300,000 Ford Motor Credit Corp., 6.57%, 10/4/00 299,781
356,000 Sit Money Market Fund, 6.32% (6) 356,000
--------------
Total short-term securities 979,044
--------------
(cost: $979,044)
Total investments in securities
(cost: $13,518,752) (7) $13,431,244
==============
See accompanying notes to portfolios of investments on page 48.
47
<PAGE>
SIT MUTUAL FUNDS
SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
NOTES TO PORTFOLIOS OF INVESTMENTS (UNAUDITED)
(1) Securities are valued by procedures described in note 1 to the financial
statements.
(2) Percentage figures indicate percentage of total net assets.
(3) At September 30, 2000, 16.9% of net assets in the U.S. Government
Securities Fund and 2.5% of net assets in the Bond Fund was invested in
GNMA mobile home pass-through securities.
(4) Securities the income from which is treated as a tax preference that is
included in alternative minimum taxable income for purposes of computing
federal alternative minimum tax (AMT). At September 30, 2000, approximately
15.4% 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 September 30, 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 $ 153,341,819 $ 140,473,695 $ 13,518,752
============= ============= =============
Unrealized appreciation (depreciation) on
investments:
Gross unrealized appreciation -- $ 597,136 $ 102,999
Gross unrealized depreciation -- (1,657,351) (190,507)
------------- ------------- -------------
Net unrealized appreciation (depreciation) -- ($ 1,060,215) ($ 87,508)
============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
MINNESOTA
TAX-FREE TAX-FREE
INCOME INCOME
FUND FUND
------------- -------------
<S> <C> <C>
Cost for federal income tax purposes $ 529,682,510 $ 169,698,340
============= =============
Unrealized appreciation (depreciation) on
investments:
Gross unrealized appreciation $ 3,303,620 $ 998,078
Gross unrealized depreciation (29,749,669) (9,554,232)
------------- -------------
Net unrealized appreciation (depreciation) ($ 26,446,049) ($ 8,556,154)
============= =============
</TABLE>
48
<PAGE>
SIT MUTUAL FUNDS
SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES (UNAUDITED)
<TABLE>
<CAPTION>
U.S. MINNESOTA
MONEY GOVERNMENT TAX-FREE TAX-FREE
MARKET SECURITIES BOND INCOME INCOME
ASSETS FUND FUND FUND FUND FUND
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Investments in securities, at
identified cost ................ $153,341,819 $140,473,695 $ 13,518,752 $529,682,510 $169,698,340
============ ============ ============ ============ ============
Investments in securities, at
market value - see
accompanying schedules for
detail ......................... $153,341,819 $139,413,480 $ 13,431,244 $503,236,461 $161,142,186
Cash in bank on demand
deposit ........................ 313,981 -- -- -- --
Accrued interest and dividends
receivable ..................... -- 1,085,273 159,161 8,141,933 3,031,077
Receivable for investment
securities sold ................ -- -- -- -- --
Receivable for principal
paydowns ....................... -- 337,999 -- -- --
Other
receivables .................... -- -- -- -- 1,970
Receivable for Fund shares
sold ........................... -- 19,972 -- 1,200 1,276
------------ ------------ ------------ ------------ ------------
Total assets ............. 153,655,800 140,856,724 13,590,405 511,379,594 164,176,509
------------ ------------ ------------ ------------ ------------
LIABILITIES
Disbursements in excess of
cash balances .................. -- 504 56,038 5,001 4,427
Payable for investment securities
purchased ...................... -- 240,200 -- 77,040 --
Payable for Fund shares
redeemed ....................... -- 2,750 -- 11,301 6,028
Cash portion of dividends
payable to shareholders ........ 801,125 707,741 70,074 2,159,713 698,308
Other
payables ....................... -- 2,924 718 8,824 --
Accrued investment management
and advisory services fee ...... 67,350 89,275 8,184 307,575 104,858
------------ ------------ ------------ ------------ ------------
Total liabilities ........ 868,475 1,043,394 135,014 2,569,454 813,621
------------ ------------ ------------ ------------ ------------
Net assets applicable to
outstanding capital stock ...... $152,787,325 $139,813,330 $ 13,455,391 $508,810,140 $163,362,888
============ ============ ============ ============ ============
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 ............. 152,790,370 13,588,139 1,420,415 52,627,073 16,649,417
============ ============ ============ ============ ============
Net asset value per share of
outstanding capital stock ...... $ 1.00 $ 10.29 $ 9.47 $ 9.67 $ 9.81
============ ============ ============ ============ ============
</TABLE>
See accompanying notes to financial statements on pages 54 - 57.
49
<PAGE>
SIT MUTUAL FUNDS
SIX MONTHS ENDED SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
U.S. MINNESOTA
MONEY GOVERNMENT TAX-FREE TAX-FREE
MARKET SECURITIES BOND INCOME INCOME
FUND FUND FUND FUND FUND
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Investment income:
INCOME:
Interest .............................. $ 5,025,544 $ 5,038,927 $ 460,203 $ 16,548,054 $ 5,085,823
------------ ------------ ------------ ------------ ------------
Total income .................... 5,025,544 5,038,927 460,203 16,548,054 5,085,823
------------ ------------ ------------ ------------ ------------
EXPENSES (NOTE 3):
Investment management and
advisory services fee .............. 512,684 612,349 48,682 2,203,773 660,944
Less fees and expenses absorbed
by investment adviser ........... (127,000) (49,863) -- (176,971) --
------------ ------------ ------------ ------------ ------------
Total net expenses ................. 385,684 562,486 48,682 2,026,802 660,944
------------ ------------ ------------ ------------ ------------
Net investment income .............. 4,639,860 4,476,441 411,521 14,521,252 4,424,879
------------ ------------ ------------ ------------ ------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net realized gain (loss) (note 2) ..... -- (77,652) (9,380) (5,862,643) (495,170)
Net change in unrealized appreciation
or (depreciation) on investments ... -- 988,281 69,019 11,433,935 1,863,074
------------ ------------ ------------ ------------ ------------
Net gain (loss) on investments ..... -- 910,629 59,639 5,571,292 1,367,904
------------ ------------ ------------ ------------ ------------
Net increase (decrease) in net assets resulting
from operations .......................... $ 4,639,860 $ 5,387,070 $ 471,160 $ 20,092,544 $ 5,792,783
============ ============ ============ ============ ============
</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
------------------------------ ------------------------------
SIX MONTHS SIX MONTHS
ENDED ENDED
SEPTEMBER 30, YEAR ENDED SEPTEMBER 30, YEAR ENDED
2000 MARCH 31, 2000 MARCH 31,
(UNAUDITED) 2000 (UNAUDITED) 2000
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income ............................... $ 4,639,860 $ 4,441,701 $ 4,476,441 $ 8,848,375
Net realized gain (loss) on investments ............. -- -- (77,652) (2,997,944)
Net change in unrealized appreciation
(depreciation) of investments ..................... -- -- 988,281 (1,549,436)
------------- ------------- ------------- -------------
Net increase (decrease) in net assets resulting
from operations ................................ 4,639,860 4,441,701 5,387,070 4,300,995
------------- ------------- ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ............................... (4,639,860) (4,441,701) (4,477,607) (8,848,375)
Net realized gains on investments ................... -- -- -- --
------------- ------------- ------------- -------------
Total distributions ............................... (4,639,860) (4,441,701) (4,477,607) (8,848,375)
------------- ------------- ------------- -------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold ........................... 358,583,872 698,628,894 38,567,824 54,553,405
Reinvested distributions ............................ 1,617,146 2,721,406 3,540,642 8,278,649
Payments for shares redeemed ........................ (358,310,683) (611,894,877) (39,045,171) (81,774,329)
------------- ------------- ------------- -------------
Increase (decrease) in net assets from
capital share transactions ...................... 1,890,335 89,455,423 3,063,295 (18,942,275)
------------- ------------- ------------- -------------
Total increase (decrease) in net assets ......... 1,890,335 89,455,423 3,972,758 (23,489,655)
NET ASSETS
Beginning of period ................................. 150,896,990 61,441,567 135,840,572 159,330,227
------------- ------------- ------------- -------------
End of period ....................................... $ 152,787,325 $ 150,896,990 $ 139,813,330 $ 135,840,572
============= ============= ============= =============
NET ASSETS CONSIST OF:
Capital (par value and paid-in surplus) ............. $ 152,787,325 $ 150,896,990 $ 144,247,994 $ 141,184,699
Undistributed (distributions in excess of) net
investment income ................................. -- -- -- 1,166
Accumulated net realized gain (loss) from
security transactions ............................. -- -- (3,374,449) (3,296,797)
Unrealized appreciation (depreciation)
on investments .................................... -- -- (1,060,215) (2,048,496)
------------- ------------- ------------- -------------
$ 152,787,325 $ 150,896,990 $ 139,813,330 $ 135,840,572
============= ============= ============= =============
CAPITAL TRANSACTIONS IN SHARES:
Sold ................................................ 358,583,875 698,628,899 3,770,740 5,270,957
Sold ................................................ 1,617,144 2,721,406 346,670 803,761
Sold ................................................ (358,310,723) (611,894,877) (3,817,203) (7,943,500)
------------- ------------- ------------- -------------
Net increase (decrease) ................................. 1,890,296 89,455,428 300,207 (1,868,782)
============= ============= ============= =============
</TABLE>
52
<PAGE>
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<TABLE>
<CAPTION>
BOND TAX-FREE MINNESOTA TAX-FREE
FUND INCOME FUND INCOME FUND
------------------------------ ------------------------------ ------------------------------
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED ENDED ENDED
SEPTEMBER 30, YEAR ENDED SEPTEMBER 30, YEAR ENDED SEPTEMBER 30, YEAR ENDED
2000 MARCH 31, 2000 MARCH 31, 2000 MARCH 31,
(UNAUDITED) 2000 (UNAUDITED) 2000 (UNAUDITED) 2000
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
$ 411,521 $ 757,632 $ 14,521,252 $ 38,573,289 $ 4,424,879 $ 11,493,239
(9,380) (502,006) (5,862,643) (10,666,334) (495,170) (3,798,169)
69,019 (148,558) 11,433,935 (55,497,204) 1,863,074 (15,569,670)
------------- ------------- ------------- ------------- ------------- -------------
471,160 107,068 20,092,544 (27,590,249) 5,792,783 (7,874,600)
------------- ------------- ------------- ------------- ------------- -------------
(410,349) (757,632) (14,529,295) (38,573,289) (4,424,879) (11,493,239)
-- (28,000) -- -- -- --
------------- ------------- ------------- ------------- ------------- -------------
(410,349) (785,632) (14,529,295) (38,573,289) (4,424,879) (11,493,239)
------------- ------------- ------------- ------------- ------------- -------------
2,049,670 3,453,526 67,546,352 311,825,160 28,342,095 163,224,819
325,451 756,779 10,654,362 32,918,780 3,092,907 9,619,454
(1,142,520) (3,289,443) (157,502,607) (591,384,797) (42,345,397) (251,845,830)
------------- ------------- ------------- ------------- ------------- -------------
1,232,601 920,862 (79,301,893) (246,640,857) (10,910,395) (79,001,557)
------------- ------------- ------------- ------------- ------------- -------------
1,293,412 242,298 (73,738,644) (312,804,395) (9,542,491) (98,369,396)
12,161,979 11,919,681 582,548,784 895,353,179 172,905,379 271,274,775
------------- ------------- ------------- ------------- ------------- -------------
$ 13,455,391 $ 12,161,979 $ 508,810,140 $ 582,548,784 $ 163,362,888 $ 172,905,379
============= ============= ============= ============= ============= =============
$ 14,079,519 $ 12,846,918 $ 551,861,311 $ 631,163,204 $ 176,248,492 $ 187,158,887
-- (1,172) -- 8,043 -- --
(536,620) (527,240) (16,606,146) (10,743,503) (4,329,117) (3,833,947)
(87,508) (156,527) (26,445,025) (37,878,960) (8,556,487) (10,419,561)
------------- ------------- ------------- ------------- ------------- -------------
$ 13,455,391 $ 12,161,979 $ 508,810,140 $ 582,548,784 $ 163,362,888 $ 172,905,379
============= ============= ============= ============= ============= =============
218,581 356,714 7,075,415 31,463,068 2,912,346 16,157,253
34,835 78,917 1,115,092 3,343,625 318,219 956,782
(122,297) (344,744) (16,437,362) (60,141,854) (4,354,656) (25,049,829)
------------- ------------- ------------- ------------- ------------- -------------
131,119 90,887 (8,246,855) (25,335,161) (1,124,091) (7,935,794)
============= ============= ============= ============= ============= =============
</TABLE>
See accompanying notes to financial statements on pages 54 - 57.
53
<PAGE>
SIT MUTUAL FUNDS
SIX MONTHS ENDED SEPTEMBER 30, 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 to the
extent consistent with preserving
capital and maintaining liquidity.
-----------------------------------------------------------------------
U.S. Government Securities High current income and safety of
principal.
-----------------------------------------------------------------------
Bond Maximize total return, consistent with
the preservation of capital.
-----------------------------------------------------------------------
Tax-Free Income High level of current income that is
exempt from federal income tax
consistent with the preservation of
capital.
-----------------------------------------------------------------------
Minnesota Tax-Free High current income that is exempt from
Income federal regular income tax and Minnesota
regular personal income tax consistent
with 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.
54
<PAGE>
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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.
FEDERAL TAXES
The Funds' policy is to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income to shareholders. Therefore, no
income tax provision is required. Also, in order to avoid the payment
of any federal excise taxes, the Funds will distribute substantially
all of their net investment income and net realized gains on a calendar
year basis.
Net investment income and net realized gains may differ for financial
statement and tax purposes. The character of distributions made during
the year for net investment income or net realized gains may also
differ from its ultimate characterization for tax purposes.
For federal income tax purposes the Minnesota Tax-Free Income, 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 $2,883,035,
respectively at March 31, 2000, which, if not offset by subsequent
capital gains, will begin to expire in the years 2004 - 2008. It is
unlikely the Board of Directors will authorize a distribution of any
net realized gains until the available capital loss carryover is offset
or expires.
DISTRIBUTIONS
Distributions to shareholders are recorded as of the close of business
on the record date. Such distributions are payable in cash or
reinvested in additional shares of the Funds' capital stock.
Distributions from net investment income are declared daily and paid
monthly for the Funds. Distributions from net realized gains, if any,
will be made annually for each of the Funds.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported results. Actual
results could differ from those estimates.
55
<PAGE>
SIT MUTUAL FUNDS
SIX MONTHS ENDED SEPTEMBER 30, 2000
-------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 2 - INVESTMENT SECURITY TRANSACTIONS
Purchases of and proceeds from sales and maturities of investment
securities, other than short-term securities, for the period ended
September 30, 2000, were as follows:
Purchases ($) Proceeds ($)
------------- ------------
U.S. Government Securities Fund 52,667,834 49,077,949
Bond Fund 6,747,920 6,193,132
Tax-Free Income Fund 24,454,109 86,959,162
Minnesota Tax-Free Income Fund 18,906,908 16,858,873
For Money Market Fund during the period ended September 30, 2000
purchases of and proceeds from sales and maturities of investment
securities aggregated $2,270,757,027 and $2,278,852,000, 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>
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For the period April 1, 1995, through December 31, 2001, 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, 2001, this voluntary fee waiver may be discontinued by the
Adviser in its sole discretion.
For the period April 1, 1995, through December 31, 2001, 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, 2001, this voluntary fee waiver may be
discontinued by the Adviser in its sole discretion.
As of September 30, 2000, the Bond Fund had invested $356,000 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
September 30, 2000:
% Shares
Shares Outstanding
------ -----------
Money Market Fund 96,522,723 63.2
U.S. Government Securities Funds 562,321 4.1
Bond Fund 146,982 10.3
Tax-Free Income Fund 1,566,425 3.0
Minnesota Tax-Free Income Fund 592,295 3.6
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>
Six months
ended
September 30, Years Ended March 31,
2000 --------------------------------------------------------------
(Unaudited) 2000 1999 1998 1997
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE:
Beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-----------------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income 0.03 0.05 0.05 0.05 0.05
-----------------------------------------------------------------------------------------------------------------------------------
Total from operations 0.03 0.05 0.05 0.05 0.05
-----------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (0.03) (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) 3.04% 5.05% 4.99% 5.29% 5.04%
-----------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000's omitted) $152,787 $150,897 $ 61,442 $ 43,111 $ 32,668
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 5.98%(2) 5.05%(2) 4.84%(2) 5.12%(2) 4.93%(2)
</TABLE>
---------
(1) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value.
(2) Percentages for the period ended September 30, 2000 are adjusted to an
annual rate.
Total Fund expenses are contractually limited to .80% of average daily net
assets for the first $50 million in Fund net assets and .60% of average
daily net assets for Fund net assets exceeding $50 million. However, during
the period ended September 30, 2000, and the years ended March 31, 2000,
1999, 1998, and 1997, the investment adviser voluntarily absorbed $127,000,
$187,726, $126,552, $98,857, and $78,042, 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 .66%,
.71%, .80%, .80%, and .80% for each of these periods and the ratio of net
investment income to average daily net assets would have been 5.82%, 4.84%,
4.54%, 4.82%, and 4.63%, respectively.
58
<PAGE>
SIT U.S. GOVERNMENT SECURITIES FUND
----------------------------------------------------------------------- [LOGO]
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Six months
ended
September 30, Years Ended March 31,
2000 -----------------------------------------------------------
(Unaudited) 2000 1999 1998 1997
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE:
Beginning of period $ 10.22 $ 10.51 $ 10.63 $ 10.28 $ 10.47
------------------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income .33 .59 .54 .63 .65
Net realized and unrealized gains
(losses) on investments .07 (.29) (.01) .35 (.19)
------------------------------------------------------------------------------------------------------------------------------------
Total from operations .40 .30 .53 .98 .46
------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (.33) (.59) (.54) (.63) (.65)
From realized gains -- -- (.11) -- --
------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (.33) (.59) (.65) (.63) (.65)
------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE:
End of period $ 10.29 $ 10.22 $ 10.51 $ 10.63 $ 10.28
------------------------------------------------------------------------------------------------------------------------------------
Total investment return (1) 3.95% 2.92% 5.05% 9.70% 4.55%
------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000's omitted) $139,813 $135,841 $159,330 $103,868 $ 73,394
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 6.33%(2) 5.66%(2) 5.06%(2) 5.93%(2) 6.30%(2)
Portfolio turnover rate (excluding short-term securities) 35.61% 98.17% 86.16% 50.67% 85.21%
</TABLE>
---------
(1) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value.
(2) Percentages for the period ended September 30, 2000 are adjusted to an
annual rate.
Total Fund expenses are contractually limited to 1.00% of average daily net
assets for the first $50 million in Fund net assets and .80% of average
daily net assets exceeding $50 million. However, during the period ended
September 30, 2000, and the years ended March 31, 2000, 1999, 1998, and
1997, the investment advisor voluntarily absorbed $49,863, $100,000,
$100,000, $100,000, and $99,999 of expenses that were otherwise payable by
the Fund. Had the Fund incurred these expenses, the ratio of expenses to
average daily net assets would have been .87%, .86%, .87%, .91%, and .97%
for these periods and the ratio of net investment income to average daily
net assets would have been 6.26%, 5.60%, 4.99%, 5.82%, and 6.13%,
respectively.
59
<PAGE>
SIT TAX-FREE INCOME FUND
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Six months
ended
September 30, Years Ended March 31,
2000 -----------------------------------------------------------
(Unaudited) 2000 1999 1998 1997
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE:
Beginning of period $ 9.57 $ 10.39 $ 10.41 $ 9.98 $ 9.88
------------------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income .25 .51 .51 .54 .56
Net realized and unrealized gains
(losses) on investments .10 (.82) .03 .50 .10
------------------------------------------------------------------------------------------------------------------------------------
Total from operations .35 (.31) .54 1.04 .66
------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (.25) (.51) (.51) (.54) (.56)
From realized gains -- -- (.05) (.07) --
------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.25) (.51) (.56) (.61) (.56)
------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE:
End of period $ 9.67 $ 9.57 $ 10.39 $ 10.41 $ 9.98
------------------------------------------------------------------------------------------------------------------------------------
Total investment return (1) 3.74% (2.98%) 5.30% 10.69% 6.82%
------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000's omitted) $508,810 $582,549 $895,353 $519,579 $342,540
RATIOS:
Expenses to average daily net assets 0.73%(2) 0.70%(2) 0.71%(2) 0.76%(2) 0.79%(2)
Net investment income to average daily net assets 5.25%(2) 5.15%(2) 4.90%(2) 5.29%(2) 5.63%(2)
Portfolio turnover rate (excluding short-term securities) 4.62% 24.72% 14.27% 21.40% 25.34%
</TABLE>
---------
(1) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value.
(2) Percentages for the period ended September 30, 2000 are adjusted to an
annual rate.
Total Fund expenses are contractually limited to .80% of average daily net
assets. However, during the period ended September 30, 2000, and the years
ended March 31, 2000, 1999, 1998, and 1997, the investment adviser
voluntarily absorbed $176,971, $749,173, $621,348, $171,504, and $46,819,
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 5.18%, 5.05%, 4.81%, 5.25%, and
5.62%, respectively.
60
<PAGE>
SIT MINNESOTA TAX-FREE INCOME FUND
----------------------------------------------------------------------- [LOGO]
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Six months
ended
September 30, Years Ended March 31,
2000 --------------------------------------------------
(Unaudited) 2000 1999 1998 1997
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE:
Beginning of period $ 9.73 $ 10.55 $ 10.49 $ 10.14 $ 10.09
-----------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income .26 .52 .51 .55 .57
Net realized and unrealized gains
(losses) on investments .08 (.82) .06 .35 .05
-----------------------------------------------------------------------------------------------------------------------------
Total from operations .34 (.30) .57 .90 .62
-----------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (.26) (.52) (.51) (.55) (.57)
-----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE:
End of period $ 9.81 $ 9.73 $ 10.55 $ 10.49 $ 10.14
-----------------------------------------------------------------------------------------------------------------------------
Total investment return (1) 3.56% (2.84%) 5.58% 9.07% 6.26%
-----------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000's omitted) $163,363 $172,905 $271,275 $143,634 $ 93,976
RATIOS:
Expenses to average daily net assets 0.80%(2) 0.80% 0.80% 0.80% 0.80%
Net investment income to average daily net assets 5.33%(2) 5.16% 4.83% 5.32% 5.56%
Portfolio turnover rate (excluding short-term securities) 10.73% 18.50% 13.67% 17.58% 17.16%
</TABLE>
---------
(1) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value.
(2) Adjusted to an annual rate.
61
<PAGE>
SIT BOND FUND
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Six months
ended
September 30, Years Ended March 31,
2000 ----------------------------------------------
(Unaudited) 2000 1999 1998 1997
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE:
Beginning of period $ 9.43 $ 9.95 $ 10.03 $ 9.62 $ 9.83
-----------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income .32 .58 .54 .63 .64
Net realized and unrealized gains
(losses) on investments .04 (.50) (.02) .43 (.14)
-----------------------------------------------------------------------------------------------------------------------
Total from operations .36 .08 .52 1.06 .50
-----------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (.32) (.58) (.54) (.63) (.64)
From realized gains -- (.02) (.06) (.02) (.07)
-----------------------------------------------------------------------------------------------------------------------
Total distributions (.32) (.60) (.60) (.65) (.71)
-----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE:
End of period $ 9.47 $ 9.43 $ 9.95 $ 10.03 $ 9.62
-----------------------------------------------------------------------------------------------------------------------
Total investment return (1) 3.86% 0.93% 5.30% 11.22% 5.21%
-----------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000's omitted) $13,455 $12,162 $11,920 $10,706 $ 6,403
RATIOS:
Expenses to average daily net assets 0.80%(2) 0.80% 0.80% 0.80% 0.80%
Net investment income to average daily net assets 6.72%(2) 6.06% 5.34% 6.31% 6.52%
Portfolio turnover rate (excluding short-term securities) 53.79% 131.67% 89.29% 76.15% 128.06%
</TABLE>
---------
(1) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value.
(2) Adjusted to an annual rate.
62
<PAGE>
----------------------------------------------------------------------- [LOGO]
Directors:
Eugene C. Sit, CFA
Peter L. Mitchelson, CFA
Michael C. Brilley
John E. Hulse
Sidney L. Jones
Donald W. Phillips
William E. Frenzel
Director Emeritus:
Melvin C. Bahle
Bond Funds Officers:
Eugene C. Sit, CFA Chairman
Peter L. Mitchelson, CFA Vice Chairman
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
Shelley H. Shutes Vice President - Shareholder
Services
Michael J. Radmer Secretary
Paul E. Rasmussen Vice President & Treasurer
Carla J. Rose Assistant Secretary
(1) Bond and U.S. Government Securities Funds only.
(2) Money Market Fund only.
63
<PAGE>
SIT MUTUAL FUNDS
--------------------------------------------------------------------------------
A LOOK AT THE SIT MUTUAL FUNDS
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 $10.2
billion for some of America's largest corporations, foundations and endowments.
Sit Mutual Funds are comprised of twelve NO-LOAD funds. NO-LOAD means that
Sit Mutual Funds have no sales charges on purchases, no deferred sales charges,
no 12b-1 fees, no redemption fees and no exchange fees. Every dollar you invest
goes to work for you.
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 and 401(k) plans
SIT FAMILY OF FUNDS
[GRAPH]
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 SMALL CAP GROWTH
MINNESOTA TAX-FREE SCIENCE AND
INCOME TECHNOLOGY GROWTH
BOND DEVELOPING MARKETS
GROWTH
64
<PAGE>
SEMI-ANNUAL REPORT BOND FUNDS
SIX MONTHS ENDED SEPTEMBER 30, 2000
INVESTMENT ADVISER
Sit Investment Associates, Inc.
90 South Seventh Street
Suite 4600
Minneapolis, MN 55402
612-334-5888 (Metro Area)
800-332-5580
DISTRIBUTOR
SIA Securities Corp.
90 South Seventh Street
Suite 4600
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
90 South Seventh Street
Suite 4200
Minneapolis, MN 55402
LEGAL COUNSEL
Dorsey & Whitney LLP
220 South Sixth Street
Minneapolis, MN 55402
[LOGO] SIT INVESTMENT ASSOCIATES
-------------------------
SIT MUTUAL FUNDS
