UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
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CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-04033
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Sit Mutual Funds II, Inc.
(Exact name of registrant as specified in charter)
4600 Wells Fargo Center
90 South Seventh Street
Minneapolis, Mn 55402
(Address of principal executive offices)
Paul E. Rasmussen, VP Treasurer
Sit Mutual Funds, Inc.
4600 Wells Fargo Center
90 South Seventh Street
Minneapolis, Mn 55402
(Name and address of agent for service)
Copy to:
Mike Radmer, Esq.
Dorsey & Whitney
Suite 1500
50 South Sixth Street
Minneapolis, MN 55402-1498
Registrant's telephone number, including area code:
(612) 344-5888
Date of fiscal year end: March 31, 2004
Date of reporting period: September 30, 2003
Item 1: Reports to Stockholders
SIT MUTUAL FUNDS
BOND FUNDS
SEMI-ANNUAL REPORT
SEPTEMBER 30, 2003
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
SIT MUTUAL FUNDS
BOND FUNDS SEMI-ANNUAL REPORT
TABLE OF CONTENTS
PAGE
----
Chairman's Letter 2
Performance Summary 4
Average Annual Total Returns 6
FUND REVIEWS AND PORTFOLIOS OF INVESTMENTS
Money Market Fund 8
U.S. Government Securities Fund 12
Tax-Free Income Fund 24
Minnesota Tax-Free Income Fund 40
Bond Fund 52
Notes to Portfolios of Investments 56
Statements of Assets and Liabilities 57
Statements of Operations 58
Statements of Changes in Net Assets 60
Notes to Financial Statements 62
Financial Highlights 66
Information About Directors and Officers 71
A Look at Sit Mutual Funds 75
This document must be preceded or accompanied by a Prospectus.
SIT MUTUAL FUNDS
[PHOTO] SIX MONTHS ENDED SEPTEMBER 30, 2003
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CHAIRMAN'S LETTER
Dear fellow shareholders:
Bond yields declined to historic lows in mid-June and then rose to end the
six-month period relatively unchanged. The sharp drop in yields was fueled by
the Federal Reserve considering buying intermediate and longer term Treasury
bonds to implement monetary policy. Recent strong economic news subsequently
caused yields to move higher. Stronger equity markets as well as concern over
the burgeoning federal deficit contributed to the volatility in bond yields.
ECONOMIC OVERVIEW
Second quarter U.S. real GDP growth was reported at a +3.3% annualized rate
with continued support from the consumer sector, accounting for over two-thirds
of GDP. Moderate improvements in inventory accumulation and residential
investment were offset by weakness in net exports. More positive news lies ahead
with the third quarter 2003 GDP report which could show growth to be as high as
+6.0%. The 2003 tax cut package has led to gains in disposable personal income
and stronger than expected personal consumption expenditures (PCE) in August.
We expect growth in subsequent quarters will be maintained at a lower but
still above-average pace as other sectors of the economy contribute to more
balanced growth. For example, nonresidential fixed investment, which accounts
for just over 12% of GDP, is showing signs of emerging activity and posted a
small +1.0% year-over-year gain in 2Q03 after eight straight quarters of
decline. Equipment and software (E&S) spending represents 80% of this sector and
is growing slightly faster than the overall economy, primarily due to
double-digit growth in the information processing equipment component. In
addition, the downward momentum in structures, which represents the other 20% of
nonresidential spending, appears to be subsiding.
Despite above-average growth, the lack of improvement in the job market has
caused the economic expansion to be dubbed the job loss recovery. We believe
this is likely to change as the economy accelerates further, and the most recent
unemployment report suggests that the turn may finally be occurring. September
non-farm payrolls increased 57,000 following a seven-month slide, while the
unemployment rate remained unchanged at 6.1%. In addition, the mid-September
Manpower Employment Outlook Survey showed employers planning to increase hiring
in the fourth quarter, marking the first increase in job prospects since the
first quarter of 2003.
Continued productivity increases have helped to control inflation. The
year-over-year increase in the Consumer Price Index (CPI) was relatively stable
at +2.2% in August. Inflation in services, accounting for slightly more than
half of the total CPI, has advanced at slightly more than +3.0%, while inflation
in goods prices has advanced at a less than +1.0% rate. We expect the recent
pressure on oil prices to subside. It remains to be seen whether OPEC's recent
decision to cut oil production starting in November as increased Iraqi
production comes on line will hold fast as other non-OPEC countries are in the
wings with production capability.
Trends in the federal budget deficit continue to deteriorate. For the first
eleven months of fiscal year 2003, the federal deficit more than doubled to
$400.5 billion from a deficit of $200.2 billion for the same period one year
ago. In July, the White House projected that the fiscal 2003 deficit would be
$455 billion, and this figure compares to a deficit of $157.8 billion in fiscal
year 2002. The deficit in fiscal 2004 is destined to exceed $500 billion under
current trends. However, fiscal measures already in place will add further
stimulus to the economy in 2004 that should ultimately result in increased tax
receipts from higher corporate profits and personal income.
The 2004 presidential election is shaping up to be a contentious race, as
President Bush's approval ratings have slipped with the struggling economy and
the public reaction to the rising costs of rebuilding Iraq. A Democratic
contender will promote rolling back the 2003 tax cuts, using the funds for
increased spending and deficit reduction. If a Democrat wins the 2004
presidential election, the level of perceived gridlock will undoubtedly
increase. If Bush wins reelection, completing his first-term agenda (making tax
cuts permanent, Social Security private savings accounts, Medicare reform, etc.)
would rank as the top priorities.
The U.S. dollar exchange rate has fallen more than -10%, on average, versus
the major currencies since the
2
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beginning of the year and more than -17% from its peak in February 2002.
Nevertheless, it remains above the average level that prevailed in the first
half of the 1990s. Recent weakness has largely been in reaction to G-7 finance
officials' calling for more flexibility in exchange rates, aimed particularly at
China and Japan. Further depreciation of the U.S. dollar is likely, given our
large and still-growing twin deficits, and its impact would be to stimulate
growth, albeit on a lagged basis, as well as increase inflation.
STRATEGY SUMMARY
The Federal Reserve lowered the federal funds rate 0.25% to 1.0% at its
FOMC meeting on June 25th, assessing economic risks as balanced and expressing
concern over the possibility of deflation. 3-month Treasury bill yields fell
approximately 0.15% and have stabilized around 0.95%. The Fed shifted its
concern from deflation to disinflation at its August 12th meeting and since then
has left its target for the federal funds rate unchanged at 1.0%. Most observers
believe the Fed will wait until the second half of 2004 before raising interest
rates. This thesis could be tested in coming months with the strength in third
quarter GDP and further improvement in the labor market. That being said, we
expect that Fed policy will remain on hold over the next several meetings with a
federal funds target of 1.0% being maintained.
Nonetheless, expectations for stronger economic growth, as well as likely
large increases in issuance of U.S. Treasury securities due to the increasing
budget deficit, should lead to higher interest rates in the intermediate term.
Taxable bond portfolios continue to be defensively positioned with durations
shorter than their benchmarks and are focused on generating high levels of
income. Portfolios are overweighted in high-quality securities that provide
attractive incremental yields, including asset-backed securities and
collateralized mortgage obligations where appropriate. Our mortgage pass-through
holdings continue to emphasize seasoned securities with lower than average
prepayment rates. Corporates richened considerably over the past year in
anticipation of stronger economic growth, and we have reduced weightings
slightly. We continue to underweight Treasuries.
The municipal yield curve has remained steep as shorter intermediate yields
remain near their historic lows reached previously in June, helped by continued
demand from individual investors seeking greater-than-money-market yields.
Despite a decline in issuance volume during September, year-to-date issuance
remains well ahead of 2002 volume. Demand from insurance companies and taxable
crossover buyers has helped offset outflows from municipal bond mutual funds.
The third quarter was one of extremes for municipal bonds, which typically
exhibit less volatility in return than taxable bonds. With the exception of
corporates, municipals have continued to outperform taxable bonds year to date,
even before taking taxes into consideration. On a relative yield basis, shorter
intermediate municipals have returned to more normal valuation levels compared
to similar-duration taxable bonds while longer maturity municipals remain
cheaply valued, particularly on an after-tax basis. Municipal portfolios
continue to be defensively positioned in anticipation of higher bond yields next
year. Our focus remains on investing in securities of high credit quality that
provide high levels of tax-exempt income and relative price stability, which
makes them well positioned to provide attractive relative returns as interest
rates move higher.
We believe our focus on high current income and relative stability of
principal value will provide attractive incremental returns to shareholders over
long time periods. We appreciate your continued interest in 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
SIT MUTUAL FUNDS
SIX MONTHS ENDED SEPTEMBER 30, 2003
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PERFORMANCE SUMMARY - BOND FUNDS
The Federal Reserve lowered the federal funds rate 0.25% to 1.0% at its
FOMC meeting on June 25th, assessing economic risks as balanced and expressing
concern over deflation risk. Three-month Treasury bill yields fell approximately
0.15% and have stabilized around 0.95% as Fed policy has since remained on hold.
The Fed shifted concern from risk of deflation to disinflation at its August
12th meeting.
Treasury yields fell to all-time lows in mid-June before rising to end the
period relatively unchanged. The yield on the 10-year Treasury note rose from
3.11% on June 13th to 4.60% in early September before ending the period at
3.94%. Similarly, the 30-year Treasury bond yield increased from 4.18% to 5.45%,
ending the period at 4.88%. The corporate sector was the best performing taxable
bond sector, benefiting from an improving economy and corporate profits. The
Lehman Corporate Index's +5.0% return was more than double that provided by any
other investment grade taxable sector. The mortgage sector provided the lowest
return due to increased prepayment concerns.
Longer-term municipal yields also ended the period little changed, although
intermediate yields declined by as much as 0.35%. The Bond Buyer 40-Bond Index
yield ranged between 4.70% and 5.32% and ended the period at 4.97%. It was a
period of extremes as the Lehman Municipal Index experienced its highest (+2.9%
in September) and lowest (-3.5% in July) monthly returns in over eight and nine
years, respectively. Intermediate municipals are now at more normal valuation
levels compared to taxable bonds, while longer municipals remain cheap. Aside
from corporates, municipals outperformed most taxable sectors. Industrial
revenue bonds rebounded in September but provided the worst revenue sector
return for the period, negatively affected by tobacco settlement bonds. Hospital
and resource recovery bonds performed best.
Fixed income portfolios are defensively positioned in anticipation of
higher rates next year and remain focused on generating high levels of income.
1994 1995
SIT MONEY MARKET FUND 3.84% 5.58%
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SIT U.S. GOV'T. SECURITIES FUND 1.77 11.50
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SIT TAX-FREE INCOME FUND -0.63 12.86
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SIT MINNESOTA TAX-FREE
INCOME FUND 0.63 11.90
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SIT BOND FUND -1.31 16.83
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3-MONTH U.S. TREASURY BILL 4.47 5.98
LEHMAN INTER. GOVERNMENT BOND INDEX -1.75 14.41
LEHMAN 5-YEAR MUNICIPAL BOND INDEX -1.28 11.65
LEHMAN AGGREGATE BOND INDEX -2.92 18.47
NASDAQ
SYMBOL INCEPTION
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SIT MONEY MARKET FUND(1) SNIXX 11/01/93
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SIT U.S. GOV'T. SECURITIES FUND SNGVX 06/02/87
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SIT TAX-FREE INCOME FUND SNTIX 09/29/88
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SIT MINNESOTA TAX-FREE INCOME FUND SMTFX 12/01/93
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SIT BOND FUND SIBOX 12/01/93
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3-MONTH U.S. TREASURY BILL 11/01/93
LEHMAN INTER. GOVERNMENT BOND INDEX 05/31/87
LEHMAN 5-YEAR MUNICIPAL BOND INDEX 09/30/88
LEHMAN AGGREGATE BOND INDEX 11/30/93
(1) Converted from Sit Investment Reserve Fund to Sit Money Market Fund on
11/1/93.
(2) Based on the last 12 monthly distributions of net investment income and
average NAV as of 9/30/03.
(3) Figure represents 7-day compound effective yield. The 7-day simple yield as
of 9/30/03 was 0.54%.
(4) For individuals in the 25%, 28%, 33%, and 35% federal tax brackets, the
federal tax equivalent yields are 6.24%, 6.50%, 6.99% and 7.20%,
respectively (Income subject to state tax, if any).
4
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30-DAY
TOTAL RETURN - CALENDAR YEAR SEC YIELD
YTD AS OF DISTRIBUTION
1996 1997 1998 1999 2000 2001 2002 2003 9/30/03 RATE(2)
5.08% 5.22% 5.17% 4.79% 6.03% 3.67% 1.25% 0.51% 0.54%(3)
- -----------------------------------------------------------------------------------------
4.99 8.19 6.52 1.37 9.15 8.56 5.79 0.77 2.55 2.74%
- -----------------------------------------------------------------------------------------
5.69 9.87 6.29 -4.01 8.32 5.84 5.69 1.87 4.68(4) 4.41
- -----------------------------------------------------------------------------------------
5.89 8.19 6.14 -3.82 8.09 5.85 7.06 2.94 4.92(5) 4.57
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4.25 9.44 6.52 -0.34 9.25 8.36 6.68 3.56 4.81 4.77
- -----------------------------------------------------------------------------------------
5.27 5.32 5.01 4.88 6.16 3.50 1.67 0.80
4.06 7.72 8.49 0.49 10.47 8.42 9.64 2.49
4.22 6.38 5.84 0.74 7.72 6.21 9.27 3.99
3.63 9.65 8.69 -0.82 11.63 8.44 10.25 3.78
AVERAGE ANNUAL TOTAL RETURNS FOR THE
PERIODS ENDED SEPTEMBER 30, 2003
TOTAL RETURN
QUARTER SIX MONTHS SINCE
ENDED 9/30/03 ENDED 9/30/03 1 YEAR 5 YEARS 10 YEARS INCEPTION
0.14% 0.32% 0.79% 3.48% -- 4.18%
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0.00 0.24 1.54 5.27 5.93% 7.31
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0.17 1.16 2.12 3.56 5.21 6.38
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0.47 1.91 3.75 4.11 -- 5.46
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0.34 2.48 3.93 5.45 -- 6.35
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0.24 0.50 1.14 3.60 -- 4.36
-0.13 1.55 3.49 6.28 6.36 7.67
1.01 2.84 4.87 5.71 5.54 6.60
-0.15 2.35 5.41 6.63 -- 7.09
(5) For Minnesota residents in the 25%, 28%, 33% and 35% federal tax brackets,
the double exempt tax equivalent yields are 7.12%, 7.42%, 7.97% and 8.21%,
respectively (Assumes the maximum Minnesota tax bracket of 7.85%).
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
SIT MUTUAL FUNDS
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDED DECEMBER 31, 2002
The tables on the next page show the Funds' average annual total returns (before
and after taxes) and the change in value of a broad-based market index over
various periods ended December 31, 2002. The index information is intended to
permit you to compare each Fund's performance to a broad measure of market
performance. The after-tax returns are intended to show the impact of federal
income taxes on an investment in a Fund. The highest individual federal marginal
income tax rate in effect during the specified period is assumed, and the state
and local tax impact is not reflected.
A Fund's Return After Taxes on Distributions shows the effect of taxable
distributions (dividends and capital gain distributions), but assumes that you
still hold the fund shares at the end of the period and so do not have any
taxable gain or loss on your investment in the Fund.
A Fund's Return After Taxes on Distributions and Sale of Fund Shares shows the
effect of both taxable distributions and any taxable gain or loss that would be
realized if the Fund shares were purchased at the beginning and sold at the end
of the specified period.
The Funds' past performance, before and after taxes, is not an indication of how
the Funds will perform in the future. Your actual after-tax returns depend on
your own tax situation and may differ from those shown. After-tax returns
reflect past tax effects and are not predictive of future tax effects. After-tax
returns are not relevant to investors who hold their Fund shares in a
tax-deferred account (including a 401(k) or IRA account).
6
- -----------------------------------------------------------------------[GRAPHIC]
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SIT U. S. GOVERNMENT SECURITIES FUND 1 YEAR 5 YEARS 10 YEARS
Return Before Taxes 5.8% 6.2% 6.5%
Return After Taxes on Distributions 3.9% 3.9% 4.0%
Return After Taxes on Distributions and Sale of Fund Shares 3.7% 3.8% 3.9%
Lehman Intermediate Government Bond Index* 9.6% 7.4% 6.9%
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SIT TAX-FREE INCOME FUND 1 YEAR 5 YEARS 10 YEARS
Return Before Taxes 5.7% 4.3% 5.9%
Return After Taxes on Distributions 5.7% 4.3% 5.9%
Return After Taxes on Distributions and Sale of Fund Shares 5.5% 4.4% 5.8%
Lehman 5-Year Municipal Bond Index* 9.3% 5.9% 5.9%
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- -------------------------------------------------------------------------------------------------------
SIT MINNESOTA TAX-FREE INCOME FUND 1 YEAR 5 YEARS SINCE INCEPTION**
Return Before Taxes 7.1% 4.6% 5.6%
Return After Taxes on Distributions 7.1% 4.6% 5.6%
Return After Taxes on Distributions and Sale of Fund Shares 6.6% 4.6% 5.6%
Lehman 5-Year Municipal Bond Index* 9.3% 5.9% 5.7%
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SIT BOND FUND 1 YEAR 5 YEARS SINCE INCEPTION**
Return Before Taxes 6.7% 6.0% 6.5%
Return After Taxes on Distributions 4.4% 3.5% 3.9%
Return After Taxes on Distributions and Sale of Fund Shares 4.2% 3.6% 3.9%
Lehman Aggregate Bond Index* 10.3% 7.6% 7.3%
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*Indices reflect no deduction for fees, expenses, or taxes.
**Inception date 12/1/93
7
SIT MONEY MARKET FUND
SIX MONTHS ENDED SEPTEMBER 30, 2003
[PHOTO]-------------------------------------------------------------------------
MICHAEL C. BRILLEY, SENIOR PORTFOLIO MANAGER
PAUL J. JUNGQUIST, CFA, SENIOR PORTFOLIO MANAGER
The Sit Money Market Fund provided investors with a +0.32% return for the
six months ended September 30, 2003, compared to a +0.50% for the U.S. Treasury
Bill. The Fund again out-performed its Lipper category for the period(1). The
Fund's 7-day compound yield was 0.54% and its average maturity was 23 days at
the end of this period.
STEADY FED
The Federal Reserve Board held the federal funds rate steady at its two
meetings during the quarter, as positive growth and inflation indications were
offset by employment concerns. Ninety-day Treasury bill yields were fairly
stable over the past quarter, ranging from 0.85% in early July to 0.99% by late
August, and finishing at 0.94% on September 30th. Current yield levels imply
that the market is not expecting any tightening by the Fed in the next two
quarters. With the economic data reported in September and early October still
mixed, we also believe steady policy is likely. Until Fed policy becomes
clearer, the Fund anticipates maintaining an average maturity near 30 days.
HISTORICALLY LOW YIELDS
Paltry returns continue to plague the money market fund industry as the Fed
persists with its accommodative monetary policy. The Fund has produced
competitive returns by maintaining its high credit quality standards while
attempting to optimize returns through targeting its average maturity near 30
days. We anticipate maintaining this strategy for the foreseeable future, until
a tightening begins to appear likely, perhaps in the middle or second half of
2004. When a tightening becomes imminent, the Fund will shorten its average
maturity in anticipation of earning higher yields on future investments. The
Fund will not compromise on credit quality to earn higher yields. Credit quality
of top tier commercial paper issuers is strengthening as the economy improves.
With current short-term interest rates at or near historic lows, however, it is
likely that the yield on the Fund will remain well below 1.00% for the next
year.
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 9/30/03: $1.00 Per Share
3/31/03: $1.00 Per Share
Total Net Assets: $55.7 Million
(1)See next page.
PORTFOLIO STRUCTURE
(% OF TOTAL NET ASSETS)
Asset-Backed Securities 17.7
Diversified Finance 11.5
Financial Services 9.7
Health Technology 9.7
Communications 8.7
Consumer Loan Finance 8.4
Consumer Non-Durables 7.1
Insurance 6.3
Sectors Less Than 6.0% 20.2
Cash and Other Net Assets 0.7
Page 8
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AVERAGE ANNUAL TOTAL RETURNS*
SIT MONEY 3-MONTH LIPPER
MARKET U.S. TREASURY MONEY
FUND BILL MARKET AVG.
----------- ----------- -----------
3 Month** 0.14% 0.24% 0.09%
6 Month** 0.32 0.50 n/a
1 Year 0.79 1.14 0.56
3 Years 2.32 2.50 2.09
5 Years 3.48 3.60 3.23
Inception 4.18 4.36 4.01
(11/1/93)
CUMULATIVE TOTAL RETURNS*
SIT MONEY 3-MONTH LIPPER
MARKET U.S. TREASURY MONEY
FUND BILL MARKET AVG.
----------- ----------- -----------
1 Year 0.79% 1.14% 0.56%
3 Year 7.11 7.69 6.39
5 Year 18.65 19.36 17.24
Inception 50.11 52.76 47.71
(11/1/93)
*AS OF 9/30/03. **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.
- --------------------------------------------------------------------------------
(1) Lipper Analytical Services, Inc., a large independent evaluator of mutual
funds, rankings reflect historical performance returns through 9/30/03. Sit
Money Market Fund rankings for the 3-month, 3- and 5-year and since inception
periods were 98th of 411 funds, 130th of 354 funds, 94th of 280 funds and 43rd
of 164 funds, respectively.
GROWTH OF $10,000
[PLOT POINTS CHART]
The sum of $10,000 invested at inception (11/1/93) and held until 9/30/03 would
have grown to $15,011 in the Fund or $15,276 in the 3-Month U.S. Treasury Bill
assuming reinvestment of all dividends and capital gains.
SIT MONEY MARKET MATURITY RANGES
[BAR CHART]
37.2% 35.1% 18.0% 4.3% 5.4%
-------------------------------------------------------------------
0-15 DAYS 16-30 DAYS 31-45 DAYS 46-60 DAYS 61+ DAYS
9
SIT MONEY MARKET FUND
SEPTEMBER 30, 2003
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PORTFOLIO OF INVESTMENTS
QUANTITY ($) NAME OF ISSUER MARKET VALUE($)(1)
- --------------------------------------------------------------------------------
COMMERCIAL PAPER (98.8%) (2)
ASSET-BACKED (17.7%)
Daimler-Chrysler Auto Conduit:
1,000,000 1.06%, 10/16/2003 999,558
1,000,000 1.05%, 10/27/2003 999,242
854,000 1.06%, 12/2/2003 852,441
2,000,000 FCAR Owner Trust Series I,
1.04%, 10/7/2003 1,999,653
Mortgage Interest Networking Trust:
1,500,000 1.07%, 10/16/2003 1,499,331
1,500,000 1.06%, 10/22/2003 1,499,073
2,000,000 New Center Asset Trust, 1.05%, 10/8/03 1,999,592
-----------
9,848,890
-----------
BANKING (3.6%)
Citicorp:
1,033,000 1.06%, 10/17/2003 1,032,513
1,000,000 1.06%, 10/30/2003 999,146
-----------
2,031,659
-----------
CAPTIVE AUTO FINANCE (4.6%)
Toyota Motor Credit Corp.:
1,000,000 1.01%, 10/29/2003 (5) 999,214
1,574,000 1.04%, 12/5/2003 (5) 1,571,044
-----------
2,570,258
-----------
CAPTIVE EQUIPMENT FINANCE (3.1%)
Caterpillar Financial Services Corp.:
1,000,000 1.03%, 11/6/2003 998,970
757,000 1.04%, 11/17/2003 755,972
-----------
1,754,942
-----------
COMMUNICATIONS (8.7%)
Bellsouth Corp.:
1,000,000 1.01%, 10/6/2003 999,860
1,400,000 1.02%, 10/14/2003 1,399,484
SBC International:
1,500,000 1.03%, 10/23/2003 1,499,056
950,000 1.04%, 10/23/2003 949,396
-----------
4,847,796
-----------
CONSUMER DURABLES (5.0%)
American Honda Finance:
1,200,000 1.03%, 10/20/2003 1,199,348
1,600,000 1.05%, 11/4/2003 1,598,413
-----------
2,797,761
-----------
CONSUMER LOAN FINANCE (8.4%)
American Express Credit Corp.:
1,070,000 1.00%, 10/1/2003 1,070,000
1,143,000 1.03%, 11/5/2003 1,141,855
American General Financial Corp.:
713,000 1.05%, 10/10/2003 712,813
1,000,000 1.05%, 11/3/2003 999,038
743,000 1.04%, 11/25/2003 741,819
-----------
4,665,525
-----------
CONSUMER NON-DURABLES (7.1%)
Coca Cola Co.:
970,000 1.01%, 10/2/2003 969,973
400,000 1.02%, 10/6/2003 399,943
Coca Cola Enterprises:
2,000,000 1.04%, 10/3/2003 (5) 1,999,884
600,000 1.03%, 11/3/2003 (5) 599,434
-----------
3,969,234
-----------
DIVERSIFIED FINANCE (11.5%)
CIT Group Holdings:
2,000,000 1.06%, 10/9/2003 1,999,529
675,000 1.08%, 12/10/2003 673,583
GE Capital International Funding:
1,500,000 1.06%, 10/21/2003 (5) 1,499,117
1,300,000 1.07%, 11/7/2003 (5) 1,298,570
934,000 General Electric Capital Services,
1.05%, 10/31/2003 933,183
-----------
6,403,982
-----------
ENERGY (3.4%)
Chevron UK Investment:
800,000 1.04%, 10/2/2003 799,977
1,075,000 1.03%, 10/17/2003 1,074,508
-----------
1,874,485
-----------
FINANCIAL SERVICES (9.7%)
Transamerica Finance Corp.:
1,800,000 1.06%, 10/22/2003 1,798,887
1,000,000 1.06%, 11/13/2003 998,734
UBS Finance Corp.:
1,600,000 1.11%, 10/1/2003 1,600,000
1,000,000 1.05%, 10/15/2003 999,592
-----------
5,397,213
-----------
10
- -----------------------------------------------------------------------[GRAPHIC]
QUANTITY ($) NAME OF ISSUER MARKET VALUE($)(1)
- --------------------------------------------------------------------------------
HEALTH TECHNOLOGY (9.7%)
Bristol-Myers Squibb Co.:
1,200,000 1.09%, 10/1/2003 (5) 1,200,000
615,000 1.02%, 10/15/2003 (5) 614,756
1,000,000 0.90%, 10/28/2003 (5) 999,325
Pfizer, Inc.:
1,000,000 1.01%, 10/10/2003 (5) 999,748
1,000,000 1.02%, 10/23/2003 (5) 999,377
600,000 1.02%, 11/13/2003 (5) 599,269
-----------
5,412,475
-----------
INSURANCE (6.3%)
1,500,000 AIG Funding, Inc., 1.01%, 10/14/03 1,499,453
American Family Financial:
1,000,000 0.92%, 10/24/2003 999,412
1,000,000 1.02%, 10/24/2003 999,348
-----------
3,498,213
-----------
TOTAL COMMERCIAL PAPER 55,072,433
(cost: $55,072,433) -----------
U.S. GOVERNMENT SECURITIES (3.6%) (2)
1,092,000 FHLMC Discount Note, 1.04%, 11/12/03 1,090,681
FNMA Discount Note:
423,000 1.05%, 11/20/2003 422,383
510,000 1.06%, 11/26/2003 509,159
-----------
Total U.S. Government Securities 2,022,223
(cost: $2,022,223)
-----------
Total investments in securities
(cost: $57,094,656) (7) $57,094,656
===========
See accompanying notes to portfolios of investments on page 56.
11
SIT U.S. GOVERNMENT SECURITIES FUND
SIX MONTHS ENDED SEPTEMBER 30, 2003
[PHOTO] ------------------------------------------------------------------------
SENIOR PORTFOLIO MANAGERS, MICHAEL C. BRILLEY AND BRYCE A. DOTY, CFA
PORTFOLIO MANAGER, MARK H. BOOK, CFA
The Sit U.S. Government Securities Fund provided investors with a +0.24%
return during the past six months while the Lehman Intermediate Government Bond
Index returned +1.55%. The Fund's 30-day SEC yield was 2.55% and its 12-month
distribution rate was 2.74%.
ECONOMIC UNCERTAINTY SWINGS BOND YIELDS
U.S. Treasury yields ended the six-month period nearly unchanged, but that
certainly does not tell the story of the bond market over that period. After
U.S. Treasury yields fell to historic lows in June, we saw a dramatic reversal
in July and August as yields climbed sharply. This volatility led to extreme
fluctuation in monthly returns for bonds.
The Fund's investment activity during this period consisted primarily of
selling U.S. Treasury securities as yields neared their historical lows and
purchasing high coupon seasoned agency mortgage pass-through securities.
Mortgage securities decreased in price during the last six months, contrary to
all other sectors, as fears of record levels of mortgage refinancing were
realized. While the Fund's significant holdings in high coupon mortgages
experienced much lower than average prepayments, their return trailed the Index,
which caused the Fund's performance to lag the Index. The Index does not include
mortgage securities. However, when interest rates rose in July and August, the
Fund's mortgage holdings helped the Fund outperform the Index during those
months.
BETTER ECONOMY SHOULD BUOY RATES IN 2004
The economy continues to exhibit signs of strength with the September
increase in non-farm payrolls possibly marking a turning point in employment.
Expectations for stronger economic growth, as well as likely large increases in
issuance of U.S. Treasury securities due to the increasing budget deficit,
should lead to modestly higher interest rates. Therefore, we will maintain the
Fund's defensive position by emphasizing high levels of current income. Our
strategy of investing in high coupon agency pass-through securities to maintain
the Fund's yield has been used consistently since the Fund's inception.
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 9/30/03: $10.74 Per Share
3/31/03: $10.83 Per Share
Total Net Assets: $325.3 Million
30-day SEC Yield: 2.55%
12-Month Distribution Rate: 2.74%
Average Maturity: 15.8 Years
Effective Duration: 2.1 Years(1)
(1) Effective duration is a measure which reflects estimated price sensitivity
to a given change in interest rates. For example, for an interest rate
change of 1.0%, a portfolio with a duration of 5 years would be expected to
experience a price change of 5%. Effective duration is based on current
interest rates and the Adviser's assumptions regarding the expected average
life of individual securities held in the portfolio.
PORTFOLIO STRUCTURE
(% OF TOTAL NET ASSETS)
[BAR CHART]
FNMA Pass-Through 30.2
GNMA Pass-Through 16.9
Collateralized Mortgage Obligations 16.0
FHLMC Pass-Through 12.4
U.S. Treasury/Federal Agency 11.2
Taxable Municipal 0.5
Cash & Other Net Assets 12.8
12
- ---------------------------------------------------------------------- [GRAPHIC]
AVERAGE ANNUAL TOTAL RETURNS*
SIT
U.S. GOV'T. LEHMAN LIPPER
SECURITIES INTER. GOV'T. U.S. GOV'T.
FUND BOND INDEX FUND AVG.
----------- ----------- -----------
3 Month** 0.00% -0.13% -0.89%
6 Month** 0.24 1.55 n/a
1 Year 1.54 3.49 2.23
5 Year 5.27 6.28 5.14
10 Year 5.93 6.36 5.68
Inception 7.31 7.67 7.27
(6/2/87)
CUMULATIVE TOTAL RETURNS*
SIT
U.S. GOV'T. LEHMAN LIPPER
SECURITIES INTER. GOV'T. U.S. GOV'T.
FUND BOND INDEX FUND AVG.
----------- ----------- -----------
1 Year 1.54% 3.49% 2.23%
5 Year 29.25 35.58 28.51
10 Year 77.97 85.18 73.83
Inception 216.52 234.87 214.65
(6/2/87)
*AS OF 9/30/03. **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 9/30/03 would
have grown to $31,652 in the Fund or $33,487 in the Lehman Intermediate
Government Bond Index assuming reinvestment of all dividends and capital gains.
ESTIMATED AVERAGE LIFE PROFILE
[BAR CHART]
12.8% 79.4% 6.7% 0.0% 1.1%
-----------------------------------------------------------------
0-1 Year 1-5 Years 5-10 Years 10-20 Years 20+ Years
The Adviser's estimates of the dollar weighted average life of the portfolio's
securities, which may vary from their stated maturities.
13
SIT U.S. GOVERNMENT SECURITIES FUND
SEPTEMBER 30, 2003
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (UNAUDITED)
MORTGAGE PASS-THROUGH SECURITIES (59.5%) (2)
FEDERAL HOME LOAN MORTGAGE CORPORATION (12.4%):
PAR ($) COUPON MATURITY MARKET VALUE($)(1) PAR ($) COUPON MATURITY MARKET VALUE($)(1)
------- ------ -------- ------------------ ------- ------ -------- ------------------
344,238 7.50% 4/1/2021 368,636 61,483 9.00% 7/1/2009 66,880
97,988 7.50% 2/1/2027 105,031 44,190 9.00% 7/1/2009 47,649
440,290 7.50% 4/1/2027 471,936 185,582 9.00% 12/1/2009 200,080
215,189 8.00% 10/1/2016 233,548 35,827 9.00% 10/1/2013 39,643
1,508,404 8.00% 12/1/2016 1,632,376 818,464 9.00% 11/1/2015 914,377
50,412 8.00% 5/1/2017 54,855 27,471 9.00% 5/1/2016 30,437
366,687 8.00% 7/1/2024 398,543 108,740 9.00% 7/1/2016 120,829
567,803 8.00% 9/1/2024 617,219 199,432 9.00% 10/1/2016 219,475
1,129,937 8.00% 9/15/2024 1,212,917 152,266 9.00% 11/1/2016 169,194
418,064 8.00% 11/1/2025 453,883 21,986 9.00% 1/1/2017 24,430
140,440 8.00% 12/1/2026 152,904 17,115 9.00% 1/1/2017 18,880
459,218 8.00% 1/1/2027 497,821 29,113 9.00% 2/1/2017 32,349
652,684 8.00% 10/1/2027 705,715 188,242 9.00% 2/1/2017 209,184
364,926 8.00% 1/1/2028 395,638 91,816 9.00% 2/1/2017 99,624
223,551 8.00% 7/1/2028 241,178 145,283 9.00% 4/1/2017 154,340
993,609 8.00% 6/1/2030 1,077,391 11,822 9.00% 4/1/2017 13,068
806,776 8.00% 2/1/2032 867,788 79,759 9.00% 6/1/2017 88,066
68,347 8.25% 12/1/2008 72,917 117,991 9.00% 6/1/2017 131,234
98,814 8.25% 12/1/2017 107,615 140,772 9.00% 7/1/2017 156,422
708,467 8.50% 1/1/2016 782,192 8,545 9.00% 9/1/2017 9,504
956,089 8.50% 5/1/2016 1,055,283 204,915 9.00% 10/1/2017 227,914
15,714 8.50% 1/1/2017 16,988 93,388 9.00% 6/1/2018 103,335
66,148 8.50% 4/1/2017 72,867 45,446 9.00% 6/1/2018 50,547
90,897 8.50% 5/1/2017 99,390 360,283 9.00% 6/1/2019 399,885
60,552 8.50% 7/1/2017 66,210 50,631 9.00% 10/1/2019 56,174
450,872 8.50% 8/1/2023 493,745 104,266 9.00% 10/1/2019 116,138
115,509 8.50% 7/1/2024 125,580 92,172 9.00% 10/1/2019 102,657
165,438 8.50% 1/1/2025 177,683 795,957 9.00% 3/1/2020 885,329
138,554 8.50% 4/1/2025 148,809 514,130 9.00% 9/1/2020 559,866
166,315 8.50% 5/1/2025 178,625 90,329 9.00% 5/1/2021 100,832
260,861 8.50% 6/1/2025 280,169 1,318,034 9.00% 6/1/2021 1,447,371
89,438 8.50% 8/1/2025 96,058 74,649 9.00% 7/1/2021 83,286
256,807 8.50% 10/1/2026 278,394 94,564 9.00% 7/1/2021 105,441
34,893 8.50% 11/1/2026 38,121 123,275 9.00% 10/1/2021 137,259
54,124 8.50% 7/1/2028 58,787 67,216 9.00% 3/1/2022 74,835
1,541,816 8.50% 12/1/2029 1,655,934 143,863 9.00% 4/1/2025 159,836
828,936 8.50% 8/1/2030 900,432 25,143 9.25% 7/1/2008 27,122
107,802 8.50% 12/1/2030 116,014 65,154 9.25% 8/1/2008 70,282
788,524 8.50% 4/1/2031 847,171 61,604 9.25% 8/1/2009 62,135
127,484 8.50% 8/1/2031 136,951 114,213 9.25% 7/1/2010 121,554
138,973 8.75% 1/1/2017 152,530 67,020 9.25% 3/1/2011 71,981
1,285 9.00% 10/1/2004 1,296 95,740 9.25% 6/1/2016 106,343
7,734 9.00% 12/1/2005 8,143 75,087 9.25% 3/1/2017 83,403
7,904 9.00% 12/1/2005 8,321 832,763 9.25% 2/1/2018 915,204
5,791 9.00% 1/1/2006 6,097 46,693 9.25% 1/1/2019 50,149
89,433 9.00% 2/1/2006 94,158 197,417 9.25% 3/1/2019 218,023
48,946 9.00% 5/1/2009 52,777 366,308 9.25% 3/1/2019 399,208
22,775 9.00% 6/1/2009 25,396 65,788 9.50% 10/1/2005 68,607
87,511 9.50% 10/1/2008 94,694
111,585 9.50% 2/1/2010 120,815
14
- -----------------------------------------------------------------------[GRAPHIC]
PAR ($) COUPON MATURITY MARKET VALUE($)(1) PAR ($) COUPON MATURITY MARKET VALUE($)(1)
------- ------ -------- ------------------ ------- ------ -------- ------------------
120,155 9.50% 5/1/2010 126,144 25,088 11.00% 2/1/2018 28,563
39,082 9.50% 6/1/2010 42,314 52,739 11.00% 5/1/2019 59,202
30,697 9.50% 1/1/2011 33,860 142,583 11.00% 7/1/2019 161,129
264,009 9.50% 6/1/2011 284,653 27,384 11.25% 10/1/2009 30,520
89,267 9.50% 6/1/2016 99,547 91,516 11.25% 8/1/2011 104,207
22,776 9.50% 7/1/2016 25,163 71,083 13.00% 5/1/2017 79,579
31,145 9.50% 9/1/2016 34,056 ----------
94,274 9.50% 10/1/2016 104,153 40,405,136
8,960 9.50% 10/1/2016 9,992 ----------
98,374 9.50% 6/1/2017 109,671
79,977 9.50% 8/1/2017 89,149 FEDERAL NATIONAL MORTGAGE ASSOCIATION (30.2%):
45,322 9.50% 9/1/2017 50,121 2,999,538 6.95% 8/1/2021 3,156,309
52,623 9.50% 4/1/2018 58,659 3,838,431 7.00% 6/1/2032 4,060,534
21,677 9.50% 10/1/2018 24,166 59,850 7.11% 3/1/2019 63,355
520,619 9.50% 2/1/2019 580,573 240,938 7.24% 5/1/2007 270,079
27,586 9.50% 6/1/2019 30,164 1,582,220 7.50% 3/1/2016 1,698,124
800,581 9.50% 6/17/2019 881,890 3,116,555 7.50% 6/1/2022 3,329,845
87,458 9.50% 11/1/2019 97,425 1,602,443 7.50% 6/1/2025 1,720,122
183,775 9.50% 7/1/2020 202,917 137,670 7.50% 3/1/2027 147,221
134,850 9.50% 8/1/2020 150,528 50,227 7.50% 9/1/2027 53,947
23,289 9.50% 9/1/2020 25,969 223,793 7.50% 5/1/2028 239,109
532,768 9.50% 8/1/2021 573,987 187,141 7.50% 11/1/2029 200,767
3,131,928 9.50% 12/17/2021 3,452,078 248,213 7.50% 1/1/2030 264,892
29,198 9.75% 12/1/2008 31,823 2,762,747 7.50% 1/1/2031 2,949,232
61,608 9.75% 12/1/2008 67,144 1,739,751 7.50% 3/1/2032 1,856,641
127,555 9.75% 11/1/2009 139,497 1,583,152 7.50% 6/1/2032 1,707,924
23,619 9.75% 6/1/2011 25,831 564,180 7.54% 6/1/2016 629,975
744,018 9.75% 12/1/2016 825,458 2,958,781 7.87% 12/15/2025 3,199,182
46,993 9.75% 6/1/2017 52,605 141,866 8.00% 8/1/2009 153,017
320,894 9.75% 12/1/2017 358,267 165,422 8.00% 11/1/2016 180,317
19,916 9.85% 5/1/2016 22,308 98,037 8.00% 6/1/2018 106,921
137,231 10.00% 11/1/2010 150,544 230,232 8.00% 1/1/2022 251,385
215,160 10.00% 11/1/2011 242,493 254,366 8.00% 2/1/2023 277,908
490,053 10.00% 6/1/2020 554,304 277,154 8.00% 5/1/2023 301,308
303,433 10.00% 9/1/2020 341,661 107,540 8.00% 9/1/2023 116,412
256,413 10.00% 3/1/2021 287,401 1,476,509 8.00% 7/1/2024 1,610,779
155,541 10.00% 10/1/2021 174,027 470,702 8.00% 8/1/2024 513,065
65,971 10.25% 6/1/2010 72,949 63,979 8.00% 4/1/2025 69,673
50,974 10.25% 2/1/2017 56,366 665,212 8.00% 6/1/2027 724,457
100,241 10.29% 9/1/2016 111,396 348,405 8.00% 9/1/2027 380,524
438 10.50% 4/1/2004 443 132,085 8.00% 10/1/2027 143,984
105,403 10.50% 10/1/2013 118,225 886,523 8.00% 6/1/2028 959,661
231,165 10.50% 5/1/2014 256,464 604,401 8.00% 9/1/2028 654,267
78,596 10.50% 9/1/2015 88,568 1,008,154 8.00% 9/1/2029 1,095,936
122,579 10.50% 1/1/2019 138,902 152,382 8.00% 12/1/2029 164,143
1,029,121 10.50% 6/1/2019 1,160,977 192,822 8.00% 2/1/2030 209,024
868 10.50% 7/1/2020 981 223,081 8.00% 2/1/2031 240,579
23,657 11.00% 12/1/2011 26,631 1,047,141 8.00% 2/1/2031 1,132,221
51,703 11.00% 6/1/2015 58,502 652,022 8.00% 3/1/2031 712,359
73,716 11.00% 2/1/2016 83,068 1,544,117 8.00% 3/1/2032 1,663,304
1,837,774 8.00% 9/1/2032 1,999,153
102,457 8.25% 4/1/2022 111,454
See accompanying notes to portfolios of investments on page 56. 15
SIT U.S. GOVERNMENT SECURITIES FUND
SEPTEMBER 30, 2003
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (UNAUDITED)
PAR ($) COUPON MATURITY MARKET VALUE($)(1) PAR ($) COUPON MATURITY MARKET VALUE($)(1)
------- ------ -------- ------------------ ------- ------ -------- ------------------
2,304,554 8.29% 7/20/2030 2,505,482 37,259 9.00% 10/1/2019 41,532
578,195 8.33% 7/15/2020 647,054 165,731 9.00% 12/15/2019 183,288
786,290 8.38% 7/20/2028 855,337 181,140 9.00% 3/1/2021 201,125
40,957 8.50% 8/1/2006 43,788 8,807 9.00% 9/1/2021 9,809
175,748 8.50% 11/1/2010 190,137 123,572 9.00% 4/1/2025 137,629
1,336,221 8.50% 2/1/2016 1,487,381 153,915 9.00% 4/1/2025 170,587
82,100 8.50% 4/1/2017 89,967 563,511 9.00% 8/1/2025 625,674
711,351 8.50% 6/1/2017 756,478 1,221,470 9.00% 11/1/2025 1,360,030
74,918 8.50% 9/1/2017 82,784 4,679,962 9.00% 10/1/2026 5,196,220
162,204 8.50% 8/1/2018 180,553 116,723 9.00% 12/1/2026 129,206
44,639 8.50% 1/1/2022 48,824 851,363 9.00% 5/1/2027 947,141
726,485 8.50% 5/1/2022 796,502 186,515 9.00% 5/1/2030 206,157
270,598 8.50% 7/1/2022 300,448 1,647,626 9.00% 7/1/2030 1,836,588
42,327 8.50% 5/1/2024 46,957 481,482 9.00% 8/15/2030 535,348
318,520 8.50% 2/1/2025 349,218 187,273 9.00% 11/1/2030 203,246
145,927 8.50% 9/1/2025 159,608 108,660 9.00% 4/1/2031 117,014
1,217,497 8.50% 12/1/2025 1,327,390 293,044 9.00% 6/1/2031 315,598
782,308 8.50% 1/1/2026 852,252 106,319 9.00% 7/1/2031 115,423
1,080,066 8.50% 1/1/2026 1,176,632 382,277 9.25% 10/1/2009 413,144
545,324 8.50% 7/1/2026 586,905 131,995 9.25% 7/1/2010 144,616
2,575,722 8.50% 11/1/2026 2,802,708 21,523 9.25% 4/1/2012 22,546
97,871 8.50% 12/1/2026 106,496 62,095 9.25% 10/1/2016 68,924
327,910 8.50% 5/1/2027 357,508 36,694 9.25% 10/1/2016 40,730
741,653 8.50% 6/1/2027 807,962 70,949 9.25% 12/1/2016 78,753
662,484 8.50% 1/1/2030 712,999 307,848 9.25% 2/1/2017 341,615
398,582 8.50% 1/1/2030 429,846 68,468 9.25% 3/1/2017 75,999
581,857 8.50% 5/1/2030 626,951 873,258 9.34% 8/20/202 7967,926
362,886 8.50% 11/1/2030 390,556 25,976 9.50% 1/1/2006 26,214
118,027 8.50% 11/1/2030 127,270 47,789 9.50% 9/1/2008 50,918
1,026,450 8.50% 12/1/2030 1,106,962 142,666 9.50% 12/1/200 9155,609
211,240 8.50% 1/1/2031 227,347 44,250 9.50% 1/1/2011 47,971
984,993 8.52% 9/15/2030 1,060,406 37,271 9.50% 10/1/201 3 40,924
394,175 8.87% 12/15/2025 426,196 37,114 9.50% 5/1/2014 39,544
281,617 9.00% 1/1/2009 306,867 227,656 9.50% 4/1/2016 251,909
61,259 9.00% 5/1/2009 66,598 20,978 9.50% 4/1/2016 23,034
238,064 9.00% 5/1/2009 257,236 46,125 9.50% 9/1/2016 51,402
263,126 9.00% 5/1/2009 286,058 121,503 9.50% 9/1/2017 135,400
143,104 9.00% 5/1/2009 154,819 96,788 9.50% 11/1/2018 108,625
40,802 9.00% 4/1/2010 44,645 135,807 9.50% 12/1/2018 151,391
131,338 9.00% 3/1/2011 144,021 52,729 9.50% 5/1/2019 59,216
293,173 9.00% 8/1/2016 325,880 105,039 9.50% 10/1/2019 117,503
342,606 9.00% 11/1/2016 380,828 90,891 9.50% 12/1/2019 101,315
68,374 9.00% 6/1/2017 72,732 98,968 9.50% 3/1/2020 109,996
145,053 9.00% 6/1/2017 161,055 99,804 9.50% 6/1/2020 112,010
33,191 9.00% 7/1/2017 36,853 447,261 9.50% 9/1/2020 495,308
74,908 9.00% 9/1/2017 83,489 321,323 9.50% 9/1/2020 358,174
139,768 9.00% 12/1/2017 155,188 404,908 9.50% 10/15/2020 448,023
46,610 9.00% 2/1/2018 51,956 354,374 9.50% 12/15/2020 392,058
114,120 9.00% 7/1/2018 126,352 67,394 9.50% 12/15/2020 74,558
51,761 9.00% 9/1/2019 56,635 142,763 9.50% 3/1/2021 160,080
16
- -----------------------------------------------------------------------[GRAPHIC]
PAR ($) COUPON MATURITY MARKET VALUE($)(1) PAR ($) COUPON MATURITY MARKET VALUE($)(1)
------- ------ -------- ------------------ ------- ------ -------- ------------------
103,407 9.50% 4/15/2021 114,443 45,755 7.00% 9/20/2016 48,800
573,213 9.50% 7/1/2021 638,595 543,958 7.00% 1/15/2030 578,587
738,133 9.50% 5/1/2022 822,521 670,115 7.00% 1/15/2031 712,701
462,910 9.50% 4/1/2025 516,032 1,023,808 7.00% 11/15/2032 1,088,436
240,575 9.50% 8/1/2030 268,015 50,742 7.05% 2/15/2023 54,262
322,704 9.75% 1/15/2013 359,204 89,299 7.25% 8/15/2010 95,243
311,742 9.75% 1/1/2021 349,636 463,419 7.25% 10/15/2028 494,300
655,416 9.75% 10/1/2021 743,488 143,560 7.27% 7/20/2022 152,937
564,735 9.75% 4/1/2025 640,622 471,839 7.38% 3/15/2031 502,656
24,403 10.00% 3/1/2011 26,741 25,816 7.50% 3/15/2007 27,418
100,040 10.00% 5/1/2011 110,355 207,261 7.50% 5/15/2016 223,348
191,057 10.00% 7/1/2013 215,058 2,102,978 7.50% 2/15/2027 2,254,529
176,907 10.00% 6/1/2014 192,105 154,086 7.55% 7/20/2022 165,787
1,160,670 10.00% 2/1/2015 1,297,916 358,151 7.55% 10/20/2022 385,348
1,187,140 10.00% 3/1/2015 1,348,745 243,233 7.65% 10/20/2021 262,375
113,176 10.00% 11/1/2016 125,943 246,488 7.65% 7/20/2022 265,662
123,998 10.00% 3/1/2018 138,916 227,693 7.75% 6/15/2020 247,830
791,714 10.00% 7/1/2019 885,236 403,170 7.75% 7/15/2020 438,825
68,152 10.00% 9/1/2019 76,630 435,775 7.75% 8/15/2020 474,314
188,975 10.00% 12/1/201 9210,311 392,129 7.75% 8/15/2020 426,808
580,717 10.00% 6/1/2020 654,002 193,114 7.75% 11/15/2020 210,193
43,347 10.00% 11/1/202 0 49,037 821,400 7.75% 10/15/2022 894,042
121,129 10.00% 1/1/2021 136,954 54,613 7.75% 7/15/2027 58,862
62,931 10.00% 2/1/2021 70,688 99,849 7.90% 9/20/2020 108,243
580,402 10.00% 10/1/202 1653,134 56,522 7.90% 11/20/2020 61,274
350,017 10.00% 5/1/2022 393,163 45,943 7.90% 1/20/2021 49,777
196,664 10.00% 5/1/2022 222,358 104,468 7.90% 1/20/2021 113,184
319,591 10.00% 1/1/2024 359,660 111,610 7.90% 4/20/2021 120,923
254,242 10.00% 7/1/2028 286,909 56,893 7.90% 8/20/2021 61,640
1,009,201 10.25% 8/15/2013 1,130,742 413,357 7.95% 2/15/2020 451,493
41,716 10.50% 5/1/2009 45,996 207,384 7.99% 2/20/2021 225,076
84,384 10.50% 5/1/2015 96,066 99,375 7.99% 4/20/2021 107,853
440,735 10.50% 1/1/2016 504,427 172,560 7.99% 7/20/2021 187,282
64,380 10.50% 3/1/2017 71,361 174,574 7.99% 9/20/2021 189,468
230,845 10.50% 12/1/2017 258,547 178,829 7.99% 10/20/2021 194,086
22,578 10.75% 11/1/2010 24,977 293,511 7.99% 1/20/2022 318,184
45,778 11.00% 10/1/2006 47,355 509,651 7.99% 6/20/2022 552,493
98,975 11.00% 9/1/2012 112,377 49,087 8.00% 10/15/2012 53,604
7,732 11.00% 4/1/2014 8,735 142,401 8.00% 5/15/2016 155,995
83,096 11.00% 8/1/2015 93,039 460,423 8.00% 6/15/2016 504,376
200,531 11.00% 9/1/2015 223,216 200,303 8.00% 9/15/2016 219,425
75,449 11.00% 4/1/2017 86,695 152,022 8.00% 11/20/2016 165,228
1,056,500 11.27% 8/15/2020 1,208,832 172,228 8.00% 7/15/2017 188,496
601,191 11.75% 10/20/2022 690,079 159,230 8.00% 4/15/2022 173,013
----------- 75,896 8.00% 7/20/2023 82,205
98,203,136 193,614 8.00% 8/15/2023 211,161
----------- 438,455 8.00% 10/20/2023 474,892
60,072 8.00% 12/20/2023 65,066
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (16.9%) (3): 54,157 8.00% 2/20/2024 58,485
PAR ($) COUPON MATURITY 500,068 8.00% 2/20/2026 538,891
------- ------ --------
140,297 6.00% 9/15/2018 146,347
159,047 6.75% 9/15/2015 168,971
See accompanying notes to portfolios of investments on page 56. 17
SIT U.S. GOVERNMENT SECURITIES FUND
SEPTEMBER 30, 2003
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (UNAUDITED)
PAR ($) COUPON MATURITY MARKET VALUE($)(1) PAR ($) COUPON MATURITY MARKET VALUE($)(1)
------- ------ -------- ------------------ ------- ------ -------- ------------------
155,962 8.00% 12/15/2026 169,224 31,542 8.75% 5/15/2006 33,839
94,748 8.00% 12/20/2026 102,103 23,557 8.75% 5/15/2006 25,273
1,335,096 8.00% 4/15/2028 1,444,576 29,735 8.75% 10/15/2006 31,900
670,878 8.00% 4/15/2028 725,194 48,498 8.75% 11/15/2006 52,030
621,471 8.10% 5/20/2019 675,656 32,711 8.75% 2/15/2007 35,125
398,090 8.10% 6/20/2019 432,798 18,046 8.75% 3/15/2007 19,377
267,890 8.10% 7/20/2019 291,247 66,130 8.75% 11/15/2009 71,926
392,873 8.10% 9/20/2019 427,126 83,631 8.75% 6/15/2011 91,671
200,661 8.10% 9/20/2019 218,156 292,247 8.75% 11/15/2011 320,344
133,815 8.10% 10/20/2019 145,482 97,580 8.75% 12/15/2011 106,961
227,028 8.10% 1/20/2020 246,609 77,555 8.75% 7/15/2021 85,437
146,605 8.10% 4/20/2020 159,250 14,053 9.00% 10/15/2004 14,422
259,472 8.10% 7/20/2020 281,851 73,806 9.00% 4/15/2006 79,388
262,124 8.25% 12/15/2011 287,219 59,874 9.00% 4/15/2006 64,411
83,374 8.25% 1/15/2012 91,599 53,949 9.00% 5/15/2006 58,028
181,480 8.25% 8/15/2015 200,065 79,474 9.00% 5/15/2006 85,496
1,075,952 8.25% 4/15/2019 1,180,563 31,930 9.00% 6/15/2006 34,350
62,149 8.25% 1/15/2020 67,840 241,706 9.00% 6/15/2006 259,985
231,096 8.25% 2/15/2020 253,411 155,009 9.00% 7/15/2006 166,731
89,693 8.25% 4/15/2027 97,177 25,598 9.00% 10/15/2006 27,537
180,445 8.25% 6/15/2027 195,501 114,370 9.00% 10/15/2006 123,036
20,929 8.25% 1/15/2028 22,564 23,453 9.00% 6/15/2007 25,256
235,844 8.38% 10/15/2019 259,281 64,792 9.00% 10/15/2007 69,773
378,932 8.40% 2/15/2019 416,825 19,552 9.00% 9/15/2008 21,159
196,409 8.40% 4/15/2019 216,050 48,000 9.00% 9/15/2008 51,944
138,334 8.40% 6/15/2019 152,167 36,889 9.00% 10/15/2008 39,920
61,708 8.40% 6/15/2019 67,878 23,094 9.00% 11/15/2008 24,991
93,969 8.40% 9/15/2019 103,366 3,270 9.00% 11/15/2008 3,539
63,023 8.40% 9/15/2019 69,325 73,890 9.00% 12/15/2008 79,961
177,466 8.40% 2/15/2020 195,102 7,971 9.00% 2/15/2009 8,680
91,415 8.50% 12/15/2011 100,554 12,675 9.00% 3/15/2009 13,802
282,656 8.50% 1/15/2012 311,786 19,681 9.00% 4/15/2009 21,431
102,632 8.50% 4/15/2015 113,618 53,704 9.00% 4/15/2009 59,679
62,054 8.50% 4/15/2015 68,697 17,012 9.00% 5/15/2009 18,525
397,180 8.50% 9/15/2016 440,085 47,351 9.00% 8/15/2009 52,620
276,175 8.50% 1/15/2017 305,414 44,778 9.00% 9/15/2009 49,760
231,127 8.50% 12/15/2021 254,351 27,404 9.00% 10/15/2009 29,841
67,056 8.50% 2/15/2022 73,741 42,031 9.00% 11/15/2009 45,875
50,289 8.50% 7/20/2022 54,935 21,263 9.00% 12/15/2009 23,629
287,598 8.50% 10/20/2022 314,169 328,731 9.00% 7/15/2010 359,549
150,335 8.50% 9/20/2024 163,989 92,510 9.00% 5/15/2011 101,789
331,062 8.50% 3/20/2025 359,527 255,618 9.00% 5/15/2011 281,276
604,351 8.50% 12/20/2026 654,615 138,419 9.00% 6/15/2011 152,313
77,043 8.50% 3/20/2030 83,206 155,739 9.00% 7/15/2011 171,372
238,340 8.50% 6/15/2030 257,110 128,357 9.00% 8/15/2011 143,858
179,250 8.50% 8/15/2030 194,241 121,321 9.00% 8/15/2011 133,499
56,227 8.60% 3/15/2018 61,634 153,483 9.00% 9/15/2011 168,889
63,864 8.60% 5/15/2018 70,005 163,909 9.00% 9/15/2011 180,362
146,088 8.60% 6/15/2018 160,136 125,977 9.00% 9/15/2011 138,622
125,087 8.63% 10/15/2018 137,719 121,309 9.00% 10/15/2011 133,486
18
- -----------------------------------------------------------------------[GRAPHIC]
PAR ($) COUPON MATURITY MARKET VALUE($)(1) PAR ($) COUPON MATURITY MARKET VALUE($)(1)
------- ------ -------- ------------------ ------- ------ -------- ------------------
77,705 9.00% 1/15/2012 85,709 10,321 9.50% 10/15/2009 11,240
210,702 9.00% 7/15/2015 233,004 249,966 9.50% 10/15/2009 272,227
41,322 9.00% 8/15/2015 45,696 10,900 9.50% 10/15/2009 11,871
197,385 9.00% 12/20/2015 217,371 79,567 9.50% 10/15/2009 86,652
49,652 9.00% 5/20/2016 54,742 24,095 9.50% 10/15/2009 26,315
36,107 9.00% 6/20/2016 39,807 51,475 9.50% 10/15/2009 56,218
33,566 9.00% 7/20/2016 37,005 62,042 9.50% 11/15/2009 67,955
30,589 9.00% 7/20/2016 33,723 146,646 9.50% 1/15/2010 161,239
324,295 9.00% 1/15/2017 360,153 68,601 9.50% 2/15/2010 74,999
31,813 9.00% 3/20/2017 35,104 196,795 9.50% 4/15/2010 221,046
786,144 9.00% 6/15/2017 873,069 40,656 9.50% 8/15/2010 44,702
665,998 9.00% 7/15/2017 739,638 82,224 9.50% 11/15/2010 90,406
690,641 9.00% 8/20/2017 762,089 43,868 9.50% 1/15/2011 48,377
130,061 9.00% 5/15/2018 140,748 172,537 9.50% 3/15/2011 190,272
11,497 9.00% 12/15/2019 12,758 17,920 9.50% 3/20/2016 19,797
635,408 9.00% 12/15/2019 705,067 16,340 9.50% 6/15/2016 18,118
8,582 9.00% 7/20/2021 9,477 48,290 9.50% 10/15/2016 53,543
11,418 9.00% 10/20/2021 12,609 81,588 9.50% 10/15/2016 90,463
798,359 9.00% 11/15/2024 885,849 29,967 9.50% 11/15/2016 33,227
110,891 9.00% 2/20/2025 121,807 41,959 9.50% 11/15/2016 46,523
146,503 9.00% 7/20/2025 160,940 51,140 9.50% 11/20/2016 56,498
417,298 9.00% 4/15/2026 461,019 17,781 9.50% 1/15/2017 19,733
150,200 9.10% 5/15/2018 165,644 34,040 9.50% 4/15/2017 37,777
38,552 9.25% 3/15/2005 40,674 66,610 9.50% 8/15/2017 73,922
206,731 9.25% 11/15/2009 225,653 14,623 9.50% 8/20/2017 16,169
74,372 9.25% 1/15/2010 81,475 78,982 9.50% 9/15/2017 87,653
71,168 9.25% 4/15/2010 77,965 42,399 9.50% 9/15/2017 47,053
65,084 9.25% 11/15/2010 71,300 12,900 9.50% 11/15/2017 14,317
131,321 9.25% 11/15/2011 144,268 57,010 9.50% 12/15/2017 63,211
31,553 9.25% 4/15/2012 34,741 353,377 9.50% 12/15/2017 391,720
49,177 9.25% 5/15/2016 54,141 160,198 9.50% 12/15/2017 177,770
77,758 9.25% 8/20/2016 85,363 161,070 9.50% 12/15/2017 178,737
18,815 9.25% 9/15/2016 20,715 12,107 9.50% 12/20/2017 13,387
13,738 9.25% 2/20/2017 15,094 6,721 9.50% 4/15/2018 7,464
58,578 9.25% 7/20/2017 64,362 16,904 9.50% 4/20/2018 18,705
18,566 9.25% 11/20/2017 20,399 19,386 9.50% 5/15/2018 21,529
687 9.50% 1/20/2005 723 10,190 9.50% 5/20/2018 11,275
4,200 9.50% 3/15/2005 4,445 185,711 9.50% 6/15/2018 206,237
28,059 9.50% 1/15/2006 30,317 138,536 9.50% 6/20/2018 153,293
27,296 9.50% 7/15/2009 29,812 34,944 9.50% 7/20/2018 38,666
58,257 9.50% 8/15/2009 63,626 14,156 9.50% 8/15/2018 15,721
25,883 9.50% 8/15/2009 28,268 89,895 9.50% 8/20/2018 99,471
48,722 9.50% 9/15/2009 53,212 56,927 9.50% 9/15/2018 63,219
20,028 9.50% 9/15/2009 21,874 73,559 9.50% 9/15/2018 81,689
30,579 9.50% 9/15/2009 33,397 14,465 9.50% 9/20/2018 16,006
49,900 9.50% 9/15/2009 54,343 84,825 9.50% 9/20/2018 93,861
23,956 9.50% 10/15/2009 26,164 498,513 9.50% 9/20/2018 551,616
11,919 9.50% 10/15/2009 13,017 71,094 9.50% 10/15/2018 78,859
33,458 9.50% 10/15/2009 36,542 34,823 9.50% 1/15/2019 38,635
5,923 9.50% 10/15/2009 6,450 58,178 9.50% 4/15/2019 64,545
See accompanying notes to portfolios of investments on page 56. 19
SIT U.S. GOVERNMENT SECURITIES FUND
SEPTEMBER 30, 2003
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (UNAUDITED)
PAR ($) COUPON MATURITY MARKET VALUE($)(1) PAR ($) COUPON MATURITY MARKET VALUE($)(1)
------- ------ -------- ------------------ ------- ------ -------- ------------------
24,459 9.50% 8/15/2019 27,136 34,373 10.00% 1/15/2011 38,458
122,197 9.50% 8/20/2019 135,082 53,687 10.00% 10/15/2015 60,416
90,599 9.50% 9/15/2019 100,515 37,245 10.00% 3/20/2016 41,780
11,232 9.50% 10/20/2019 12,416 45,497 10.00% 11/15/2017 51,320
44,584 9.50% 12/15/2019 49,464 19,736 10.00% 10/15/2018 22,283
21,426 9.50% 1/15/2020 23,774 35,572 10.00% 2/15/2019 40,193
30,499 9.50% 2/15/2020 33,841 77,901 10.00% 2/20/2019 87,630
13,916 9.50% 10/15/2020 15,441 76,681 10.00% 3/20/2019 86,258
15,723 9.50% 1/15/2021 17,453 26,458 10.00% 5/15/2019 29,895
14,271 9.50% 2/15/2021 15,841 66,188 10.00% 5/20/2019 74,455
84,123 9.50% 8/15/2021 93,381 403,364 10.00% 10/15/2019 457,062
629,385 9.50% 8/15/2022 698,639 69,802 10.00% 11/15/2019 78,868
1,121 9.75% 12/15/2003 1,132 9,959 10.00% 7/15/2020 11,260
1,316 9.75% 3/15/2004 1,354 34,535 10.00% 12/15/2020 39,046
15,738 9.75% 6/15/2005 16,628 131,441 10.00% 6/15/2021 148,700
62,364 9.75% 6/15/2005 65,887 147,543 10.00% 10/15/2030 167,369
45,596 9.75% 8/15/2005 48,172 4,863 10.25% 5/15/2004 5,014
34,403 9.75% 9/15/2005 36,349 4,167 10.25% 8/15/2004 4,296
30,423 9.75% 1/15/2006 32,821 56,298 10.25% 7/15/2005 59,879
44,296 9.75% 2/15/2006 47,788 64,848 10.25% 5/15/2009 70,977
148,620 9.75% 8/15/2009 164,364 50,614 10.25% 1/15/2012 56,024
72,949 9.75% 9/15/2009 80,676 54,508 10.25% 2/15/2012 60,333
232,792 9.75% 8/15/2010 258,583 88,297 10.25% 2/15/2012 97,734
72,815 9.75% 11/15/2010 80,883 26,019 10.25% 7/15/2012 28,800
323,622 9.75% 12/15/2010 359,477 70,674 10.50% 6/15/2009 77,624
383,993 9.75% 1/15/2011 427,997 37,881 10.50% 7/15/2010 41,812
173,212 9.75% 1/15/2011 193,061 11,403 10.50% 9/15/2015 12,922
37,574 9.75% 10/15/2012 41,989 14,823 10.50% 11/15/2015 16,798
37,792 9.75% 10/15/2012 42,233 20,902 10.50% 3/15/2016 23,719
62,481 9.75% 10/15/2012 69,823 27,379 10.50% 12/15/2016 31,070
124,007 9.75% 11/15/2012 138,592 54,711 10.50% 8/20/2017 61,857
34,039 9.75% 11/15/2012 38,042 60,018 10.50% 11/15/2018 68,250
126,251 9.75% 11/15/2012 141,085 126,073 10.50% 6/15/2019 143,487
94,694 9.75% 11/15/2012 105,831 618,305 10.50% 2/15/2020 702,726
43,193 9.75% 12/15/2012 48,272 335,205 10.50% 8/15/2021 376,897
32,745 9.75% 4/15/2018 36,707 18,786 10.75% 9/15/2005 20,005
1,253 10.00% 11/15/2003 1,266 35,732 10.75% 8/15/2006 39,144
10,529 10.00% 5/15/2004 10,844 11,974 10.75% 1/15/2010 13,244
39,953 10.00% 7/15/2005 42,294 3,297 10.75% 7/15/2011 3,661
128,401 10.00% 7/15/2005 135,924 22,978 10.75% 8/15/2011 25,511
7,062 10.00% 1/15/2006 7,639 7,872 11.00% 6/15/2004 8,142
82,544 10.00% 11/15/2008 91,054 90,761 11.00% 1/15/2010 102,113
14,110 10.00% 5/15/2009 15,658 117,112 11.00% 1/15/2010 131,762
3,820 10.00% 11/15/2009 4,228 105,353 11.00% 1/15/2010 118,531
110,920 10.00% 6/15/2010 123,660 102,230 11.00% 3/15/2010 115,009
11,636 10.00% 6/15/2010 12,973 15,232 11.00% 6/15/2010 17,137
46,721 10.00% 7/15/2010 52,088 83,366 11.00% 9/15/2010 93,786
13,773 10.00% 7/15/2010 15,354 28,959 11.25% 9/15/2005 30,960
20,704 10.00% 10/15/2010 23,082 35,728 11.25% 10/15/2005 38,196
188,816 10.00% 11/15/2010 210,503 100,183 11.25% 6/15/2010 111,595
20
- -----------------------------------------------------------------------[GRAPHIC]
PAR ($) COUPON MATURITY MARKET VALUE($)(1) QUANTITY ($) NAME OF ISSUER MARKET VALUE($)(1)
------- ------ -------- ------------------ ----------------------------------------------------------------------
7,745 11.25% 9/15/2010 8,628 TAXABLE MUNICIPAL SECURITIES (0.5%) (2)
97,461 11.25% 9/15/2010 108,564 256,000 Bernalillo Multifamily Rev. Series
29,677 11.25% 2/15/2011 33,194 1998A, 7.50%, 9/20/20 283,837
26,031 11.25% 2/15/2011 29,115 25,000 California Comm. Dev. Auth. Rev.
26,612 11.25% 3/15/2011 29,765 Series 2000, 7.50%, 5/20/04 25,520
52,226 11.25% 3/15/2011 58,414 90,000 Cuyahoga County Multifamily Rev.
95,526 11.25% 4/15/2011 106,844 Series 2000B, 7.00%, 1/20/08 101,696
37,092 11.25% 5/15/2011 41,487 75,000 Dakota Multifamily Rev. Series
43,678 11.25% 7/15/2011 48,853 1999A, 6.50%, 12/20/05 78,590
31,549 11.25% 7/15/2011 35,287 175,000 Louisiana Comm. Dev. Auth Rev.
59,912 11.25% 7/15/2011 67,010 Series 2002B, 5.25%, 12/20/07 184,406
64,183 11.25% 9/15/2011 71,788 475,000 Maplewood Multifamily Rev.
40,977 11.25% 10/15/2011 45,832 Series 1998B, 6.75%, 7/20/15 521,873
16,256 11.25% 11/15/2011 18,182 65,000 Metro Govt. (TN) Series 2001 - A2,
3,830 11.75% 6/15/2004 3,974 7.00%, 6/20/04 66,905
1,543 11.75% 6/15/2004 1,601 236,000 Nortex Multifamily Rev. Series
----------- 1999T, 6.50%, 3/20/06 250,870
55,072,936 ----------
----------- Total taxable municipal securities 1,513,697
(cost: $1,397,031) ----------
Total mortgage pass-through securities 193,681,208
(cost: $191,069,733) -----------
U.S. TREASURY/FEDERAL AGENCY SECURITIES (11.2%) (2)
Federal Home Loan Bank:
5,000,000 2.50%, 6/30/09 4,894,705
2,170,000 5.62%, 8/6/18 2,175,108
13,300,000 U.S. Treasury Strips, Zero Coupon,
4.80% Effective Yield, 11/15/27 3,652,433
36,400,000 U.S. Treasury Strips, Zero Coupon,
3.48% Effective Yield, 5/15/12 25,652,278
----------
TOTAL U.S. TREASURY/FEDERAL AGENCY SECURITIES 36,374,524
(cost: $36,717,908) ----------
See accompanying notes to portfolios of investments on page 56. 21
SIT U.S. GOVERNMENT SECURITIES FUND
SEPTEMBER 30, 2003
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (UNAUDITED)
COLLATERALIZED MORTGAGE OBLIGATIONS (16.0%) (2)
FEDERAL HOME LOAN MORTGAGE CORP.: PAR ($) COUPON MATURITY MARKET VALUE($)(1)
PAR ($) COUPON MATURITY MARKET VALUE($)(1) ------- ------ -------- ------------------
------- ------ -------- ------------------ VENDEE MORTGAGE TRUST:
65,495 7.75% 3/18/2025 70,946 208,482 5.63% 2/15/2024 215,829
130,694 9.15% 10/15/2020 133,353 2,000,000 6.00% 4/15/2027 2,129,376
2,000,000 6.00% 2/15/2030 2,166,849
FEDERAL NATIONAL MORTGAGE ASSOCIATION: 250,000 6.50% 10/15/2025 269,653
5,200,040 4.00% 11/25/2032 5,326,622 5,000,000 7.00% 9/15/2027 5,390,970
500,000 5.00% 8/25/2022 527,443 5,500,000 7.50% 11/15/2014 5,784,924
60,618 7.00% 1/25/2021 64,759 1,619,057 7.50% 5/15/2024 1,639,536
1,783,880 7.00% 1/25/2022 1,910,657 1,011,057 8.29% 12/15/2026 1,094,491
259,595 7.37% 1/17/2013 278,566 ------------
140,000 7.70% 3/25/2023 155,795
3,161,755 8.00% 7/25/2016 3,505,884 Total collateralized mortgage obligations 52,158,775
599,333 8.00% 7/25/2022 676,739 (cost: $51,120,307) ------------
359,908 8.20% 4/25/2025 386,475
98,388 8.50% 1/25/2021 109,253
219,676 8.50% 4/25/2021 239,685 QUANTITY ($) NAME OF ISSUER MARKET VALUE($)(1)
1,125,148 8.50% 9/25/2021 1,232,414 ----------------------------------------------------------------------
313,906 8.50% 1/25/2025 343,456 SHORT-TERM SECURITIES (11.2%) (2)
254,741 8.75% 9/25/2020 279,058 2,526,000 FHLB, 1.03%, 10/1/03 2,526,000
536,427 8.95% 10/25/2020 604,118 2,160,000 FHLB, 0.98%, 10/3/03 2,159,882
1,469,255 9.00% 7/25/2019 1,648,105 2,000,000 FHLB, 1.02%, 10/3/03 1,999,887
1,417,270 9.00% 12/25/2019 1,595,841 1,474,000 FHLMC, 1.02%, 10/7/03 1,473,749
370,776 9.00% 5/25/2020 401,845 3,000,000 FHLMC, 1.02%, 10/7/03 2,999,490
203,698 9.00% 6/25/2020 227,081 5,000,000 FHLMC, 1.02%, 10/7/03 4,999,154
561,236 9.00% 6/25/2020 635,300 7,843,000 FNMA, 1.00%, 10/1/03 7,843,000
71,568 9.00% 7/25/2020 80,538 2,400,000 FNMA, 1.02%, 10/6/03 2,399,660
624,475 9.00% 9/25/2020 703,770 3,500,000 FNMA, 1.02%, 10/8/03 3,499,306
342,059 9.00% 10/25/2020 381,194 6,535,362 Dreyfus Cash Mgmt. Fund, 0.98% 6,535,362
746,396 9.00% 3/1/2024 838,215 ------------
3,509,642 9.00% 11/25/2028 3,950,533
531,114 9.25% 1/25/2020 600,382 Total Short-term Securities 36,435,490
450,062 9.50% 12/25/2018 511,095 (cost: $36,435,490) ------------
946,001 9.50% 3/25/2020 1,072,678
246,010 9.50% 4/25/2020 270,822 Total Investments in Securities
665,864 9.50% 5/25/2020 757,001 (cost: $316,740,469) (7) $320,163,694
722,295 9.50% 11/25/2020 823,441 ============
1,078,817 9.60% 3/25/2020 1,227,237
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION:
1,865,000 7.00% 3/20/2030 1,896,846
22 See accompanying notes to portfolios of investments on page 56.
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This page has been left blank intentionally.
23
SIT TAX-FREE INCOME FUND
SIX MONTHS ENDED SEPTEMBER 30, 2003
[PHOTO] ------------------------------------------------------------------------
SENIOR PORTFOLIO MANAGERS
MICHAEL C. BRILLEY * DEBRA A. SIT, CFA * PAUL J. JUNGQUIST, CFA
ATTRACTIVE FUND YIELDS
The Tax Free Income Fund returned +1.16% for the six months ended September
30, 2003 compared with a return of +2.84% for the Lehman 5-Year Municipal Bond
Index. The Fund's 30-day SEC yield was 4.68% as of September 30th and its
12-month distribution rate was 4.41%. The Fund's taxable equivalent yield of
7.20% for investors in the highest federal tax bracket compares favorably with
taxable alternatives.
The Fund's implied duration is at 3.9 years, and we've maintained it at
less than five years for over a year. The shorter duration was a negative factor
for the Fund's returns relative to the Index during April and May when bond
yields were in a declining trend, reflecting both moderate economic growth and
an accommodative Federal Reserve policy. Bond yields reversed to a strong rising
trend in mid-June in anticipation of stronger economic growth in the third
quarter. The Fund outperformed the Index during the rising interest rate period.
Overall, the Fund underperformed the Index for the six month period.
Weak returns from the multifamily housing sector also negatively affected
the Fund's overall return for the past six months. The weakness in multifamily
issues reflected lower credit quality ratings in the sector caused by both
higher vacancy rates and higher operating costs, especially for property
insurance. Bonds issued by the National Benevolent Association, which had it's
rating reduced to below investment grade during the quarter, were especially
hard hit.
STRONG ECONOMY SHOULD LIFT RATES IN 2004
We expect strong economic growth at about a +5% annual rate in the second
half of 2003, slowing somewhat in 2004. This sustained growth should lead the
Federal Reserve to begin raising short-term interest rates during the second
half of 2004. The combination of sustained growth and a less accommodative Fed
policy support the rising trend of interest rates that we expect through next
year. The Fund's duration will allow us to more quickly reinvest at the higher
yield levels we expect in 2004.
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 9/30/03: $ 9.84 Per Share
3/31/03: $ 9.94 Per Share
Total Net Assets: $380.3 Million
30-day SEC Yield: 4.68%
Tax Equivalent Yield: 7.20%(1)
12-Month Distribution Rate: 4.41%
Average Maturity: 12.3 Years
Duration to Estimated Avg. Life: 4.0 Years(2)
Implied Duration: 3.9 Years(2)
(1) For individuals in the 35.0% federal tax bracket.
(2) See next page.
PORTFOLIO STRUCTURE
(% OF TOTAL NET ASSETS)
[BAR CHART]
Multifamily Mortage Revenue 22.0
Hospital/Health Care Revenue 19.4
Insured 13.5
Other Revenue 13.1
Industrial/Pollution Control 12.1
Sectors less than 4.0% 16.5
Cash & Other Net Assets 3.4
24
- -----------------------------------------------------------------------[GRAPHIC]
AVERAGE ANNUAL TOTAL RETURNS*
SIT LIPPER
TAX-FREE LEHMAN GENERAL
INCOME 5-YEAR MUNI. MUNI. BOND
FUND BOND INDEX FUND AVG.
----------- ----------- -----------
3 Month** 0.17% 1.01% -0.08%
6 Month** 1.16 2.84 n/a
1 Year 2.12 4.87 2.90
5 Year 3.56 5.71 4.24
10 Year 5.21 5.54 4.95
Inception 6.38 6.60 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 2.12% 4.87% 2.90%
5 Year 19.11 32.03 23.11
10 Year 66.19 71.41 62.16
Inception 153.21 161.09 167.22
(9/29/88)
*AS OF 9/30/03. **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 9/30/03 would
have grown to $25,321 in the Fund or $26,109 in the Lehman 5-Year Municipal Bond
Index assuming reinvestment of all dividends and capital gains.
QUALITY RATINGS
(% OF TOTAL NET ASSETS)
[PIE CHART]
BBB 31.9%
LESS THAN BBB 7.8%
OTHER ASSETS AND LIABILITIES 3.4%
AAA 22.9%
AA 4.9%
A 29.1%
Lower of Moody's, S&P, Fitch or Duff & Phelps ratings used.
25
SIT TAX-FREE INCOME FUND
SEPTEMBER 30, 2003
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (UNAUDITED)
- -----------------------------------------------------------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE($)(1)
MUNICIPAL BONDS (94.9%) (2)
ALABAMA (0.8%)
500,000 Birmingham Baptist Med. Ctr. Special Care Facs. Financing Auth. Rev. Series 1993A,
(Baptist Med. Ctr. Proj.)(MBIA insured), 5.50%, 8/15/23 511,590
470,000 Cullman Med. Park South Med. Clinic Board Rev. Series 1993A (Cullman Regional
Medical Center Proj.), 6.50%, 2/15/13 474,484
360,000 Fort Payne G.O. Sewer Refunding Warrants Series 1993B, 5.00%, 6/1/04 361,141
Montgomery Med. Clinic Board Hlth. Care Fac. Rev. Series 1991:
495,000 7.00%, 3/1/15 496,064
325,000 7.375%, 3/1/06 326,112
900,000 Oxford Public Park and Rec Board Rev. Series 2001 (ACA insured), 6.00%, 12/1/21 968,904
------------
3,138,295
------------
ALASKA (2.0%)
12,505,000 Alaska HFC Gen. Mtg. Rev. 1997 Series A, Zero Coupon, 6.15% Effective Yield on
Purchase Date, 12/1/17 5,594,862
Northern Alaska Tobacco Securitization Corp. Asset-Backed Rev.:
900,000 Series 2000, 6.20%, 6/1/22 832,545
885,000 Series 2001, 4.75%, 6/1/15 851,919
405,000 Valdez Marine Term Rev. Refunding Series 1993C (BP Pipelines, Inc. Proj.), 5.65%, 12/1/28 411,014
------------
7,690,340
------------
ARIZONA (0.4%)
230,000 Bullhead City Special Assessment Impt. Dist. Series 1993 (Bullhead Pkwy. Proj.), 6.10%, 1/1/10 235,867
500,000 Maricopa Co. Industrial Dev. Auth. Educ. Rev. Series 2000A (Arizona Charter Schools Proj. I),
6.50%, 7/1/12 514,030
600,000 Show Low Industrial Dev. Auth. Hosp. Rev. Series 1998A (Navapache Regl. Med. Ctr. Proj.)
(ACA insured), 5.125%, 12/1/04 623,964
------------
1,373,861
------------
ARKANSAS (0.8%)
84,289 Drew Co. Public Fac. Bd. Single Family Mtg. Rev. Refunding Series 1993-A2
(FNMA backed), 7.90%, 8/1/11 87,032
42,488 Jacksonville Res. Hsg. Fac. Bd. Single Family Mtg. Rev. Refunding Series 1993B, 7.75%, 1/1/11 43,855
1,170,000 Maumelle HDC First Lien Rev. Refunding 1992 Series A (Section 8), 7.875%, 7/1/09 1,183,865
North Little Rock Hlth. Facs. Bd. Health Care Rev. Series 2001 (Baptist Health Proj.):
555,000 5.00%, 7/1/06 596,730
300,000 5.00%, 7/1/07 325,911
490,000 5.00%, 7/1/08 534,673
410,000 Rogers Sales & Use Tax Rev. Series 1996, 5.35%, 11/1/11 414,354
------------
3,186,420
------------
CALIFORNIA (4.3%)
300,000 ABAG Fin. Auth. For Nonprofit Corp. Rev Series 2002 (Redwood Sr. Homes & Svcs.
Proj.), 4.10%, 11/15/07 310,500
1,000,000 Bell Cmty. Hsg. Auth. Rev. Series 1995A (Mobilehomes Park Acquisition Proj.), 6.40%, 10/1/15 1,044,480
5,680,000 CA Co. Tobacco Securitization Agy. Asset-Backed Rev. Series 2002 (Alameda Co.), 4.75%, 6/1/19 5,422,014
950,000 CA Cmnty. College Fin. Auth. Student Hsg. Rev. Series 2003A (Feather River Cmnty. District
Proj.), 4.625%, 7/1/13 928,283
1,000,000 Chula Vista Redev. Agency Refunding Tax Allocation Senior Series 1994A (Bayfront-Town
Center Redev. Proj.), 7.625%, 9/1/24 1,118,540
Glendale Hosp. Rev. Refunding Series 1994 (Verdugo Hills Hosp. Proj.)(Industrial Indemnity
insured):
1,340,000 7.75%, 1/1/09 1,319,431
1,585,000 8.00%, 1/1/12 1,555,741
26
- -----------------------------------------------------------------------[GRAPHIC]
- -----------------------------------------------------------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE($)(1)
Golden State Tobacco Securitization Corp. Tobacco Settlement Asset-Backed Rev.:
250,000 Series 2003A1, 5.00%, 6/1/21 245,098
500,000 Enhanced Series 2003B, 5.25%, 6/1/16 512,815
Ridgecrest Refunding Certificates of Participation Series 1999 (Ridgecrest Civic Center Proj.):
275,000 5.55%, 3/1/09 308,061
290,000 5.65%, 3/1/10 321,778
350,000 6.00%, 3/1/14 378,893
1,000,000 Sacramento Pwr. Auth. Rev. Series 1995 (Cogeneration Proj.) (MBIA Insured), 6.00%, 7/1/22 1,124,650
Southern CA Tobacco Securitization Auth. Asset-Backed Senior Rev:
1,000,000 Series 2001B, 6.00%, 5/15/22 887,220
915,000 Series 2002A, 5.25%, 6/1/27 885,317
------------
16,362,821
------------
COLORADO (3.3%)
500,000 Boulder Co. Hosp. Rev. Series 2000 (Longmont United Hosp. Proj.)
(Radian insured), 5.05%, 12/1/05 519,555
1,910,000 CO E-470 Business Met. Dist. G.O. Series 1999 (ACA insured), 5.00%, 12/1/11 2,009,778
345,000 CO Educ. & Cultural Fac. Rev. Refunding Series 2003C (Cheyenne Mtn. Charter Sch. Proj.),
4.625%, 6/15/12 338,797
1,250,000 CO Hlth. Fac. Auth. Rev. Series 1995 (Covenant Retirement Cmty. Proj.), 6.75%, 12/1/15 1,308,100
CO HFA Single Family Program Senior Series:
405,000 1996B-2, 7.45%, 11/1/27 416,632
265,000 1997B-3, 6.80%, 11/1/28 265,983
2,550,000 CO Hlth. Fac. Auth. Rev. Refunding & Impt. Hosp. Series 1995 (Parkview Proj.), 6.125%, 9/1/25 2,679,820
1,000,000 CO Hlth. Fac. Auth. Rev. Series 2000 (Evangelical Lutheran Proj.), 6.25%, 12/1/10 1,134,440
CO Hlth. Fac. Auth. Rev. (Natl. Benevolent Assoc. Proj.):
530,000 Series 1998A, 5.20%, 1/1/18 315,350
1,400,000 Series 1998B, 5.25%, 2/1/18 833,000
400,000 CO Hlth. Fac. Auth. Rev. Series 2000A (Porter Place Proj.) (GNMA collateralized), 5.10%,
1/20/11 432,888
600,000 Denver Hsg. Corp. Multifamily Rev. Refunding Series 1997A (Section 8), 5.35%, 10/1/12 619,992
Denver Hlth. & Hosp. Auth. Rev Series 2001A:
200,000 5.00%, 12/1/04 205,198
150,000 5.25%, 12/1/05 157,186
405,000 5.25%, 12/1/08 431,406
235,000 5.25%, 12/1/09 248,957
85,000 Thornton Single Family Mtg. Rev. Refunding 1992 Series A, 8.05%, 8/1/09 85,830
------------
12,002,912
------------
CONNECTICUT (0.8%)
750,000 CT Airport Rev. Series 1992 (FGIC insured), 7.65%, 10/1/12 797,137
65,000 CT Hlth. & Educ. Fac. Auth. Rev. Series 1993A (Griffin Hosp. Proj.), 6.00%, 7/1/13 66,301
1,850,000 Mashantucket Western Pequot Tribe Subordinated Special Rev. Series 1999B, Zero Coupon,
5.05% Effective Yield on Purchase Date, 9/1/09 1,429,828
700,000 Mohegan Tribe of Indians Gaming Auth. Priority Distribution Payment Public Impt., 5.50%,
1/1/06 725,186
------------
3,018,452
------------
DELAWARE (0.3%)
1,000,000 DE Health Facs. Auth. Rev. Series 1994 (Beebe Med. Ctr. Proj.), 6.80%, 6/1/24 1,050,989
------------
See accompanying notes to portfolios of investments on page 56. 27
SIT TAX-FREE INCOME FUND
SEPTEMBER 30, 2003
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (UNAUDITED)
- -----------------------------------------------------------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE($)(1)
FLORIDA (2.7%)
645,000 Capital Trust Agy. Multifamily Rev. Sr. Series 2003A (Golf Villas, Rivermill, and Village Square
Apts. Proj.), 4.75%, 6/1/13 632,713
700,000 Charlotte Co. Utility Rev. Refunding Series 1993 (FGIC insured), 5.50%, 10/1/09 714,091
1,700,000 Collier Co. Health Fac. Auth. Rev. Refunding Series 1994 (Moorings, Inc. Proj.), 7.00%, 12/1/19 1,827,602
695,000 Collier Co. HFA Multifamily Hsg. Rev. Series 2002C (Goodlette Arms Proj.), 5.25%, 8/15/15 730,508
170,000 Dunes Cmnty. Dev. Dist. Rev. Refunding Series 1993 (Intracoastal Waterway Bridge Proj.), 5.50%,
10/1/27 174,003
445,000 FL HFC Hsg. Rev. Refunding Series 2000D2 (Augustine Club Atps. Proj.), 8.25%, 10/1/30 433,292
755,000 Hialeah Hsg. Auth. Mtg. Rev. Refunding Series 1996B1 (Russ Allen Plaza Proj.)(Section 8), 5.80%,
9/1/11 759,462
1,000,000 Highlands Co. Hlth. Fac. Auth. Rev. Series 2002 (Adventist Health Sys./Sunbelt Proj.), 3.35%,
11/15/32 1,029,870
175,000 Hillsborough Co. Indus. Dev. Auth. Hosp. Rev. Refunding Series 2003A (Tampa General Hosp.
Proj.), 2.50%, 10/1/05 174,643
Jacksonville Hlth. Fac. Auth. Industrial Dev. Rev. (Natl. Benevolent Assoc. - Cypress Village
Proj.):
700,000 Refunding Series 1992, 7.00%, 12/1/14 416,500
100,000 Refunding Series 1992, 7.00%, 12/1/22 59,500
450,000 Series 1993, 6.40%, 12/1/16 267,750
320,000 Series 1994, 7.55%, 12/1/07 190,400
1,100,000 Series 1994, 8.00%, 12/1/15 654,500
545,000 Lee Co. Indus. Dev. Auth. Hlth. Care Fac. Rev. Series 1999A (ShellPoint Village Proj.), 5.50%,
11/15/08: 587,646
570,000 Miami-Dade Co. Special Hsg. Rev. Refunding Series 1998 (Section 8), 5.30%, 10/1/05 570,319
200,000 Palm Beach Co. Hlth. Fac. Auth. Rev. Refunding Series 2003 (Abbey Delray South Proj.), 5.15%,
10/1/12 201,792
South Lake Co. Hosp. Dist. Rev. Series 2003 (South Lake Hosp. Inc.):
420,000 4.25%, 10/1/08 424,948
500,000 5.50%, 10/1/13 506,525
------------
10,356,064
------------
GEORGIA (0.8%)
DeKalb Co. Hsg. Auth. Multifamily Hsg. Rev. (Regency Woods I & II):
1,185,000 Senior Series 1996A, 6.375%, 1/1/11 (8)(9) 888,750
1,400,000 Senior Series 1996A, 6.375%, 1/1/16 (8)(9) 1,050,000
1,275,000 Subordinate Series 1996C, 7.25%, 1/1/26 (8)(9) 510,000
70,000 Royston Hosp. Auth. Rev. Refunding Series 1999 (Ty Cobb Healthcare Sys., Inc. Proj.), 6.00%,
7/1/04 70,608
500,000 Savannah Econ. Dev. Auth. Rev. Series 1999 (College of Art & Design Inc. Proj.), 6.00%, 10/1/03 500,055
------------
3,019,413
------------
HAWAII (0.3%)
1,170,000 Honolulu Mtg. Rev. Ref. Series 1996A (Hale-Pauahi Proj.)(FHA insured)(MBIA insured), 6.80%,
7/1/28 1,216,448
------------
ILLINOIS (10.2%)
Broadview Village of Cook Co. Tax Increment Rev. Series 1999:
750,000 4.90%, 7/1/06 790,357
1,000,000 5.00%, 7/1/07 1,058,410
1,085,000 5.05%, 7/1/08 1,148,245
2,030,000 5.10%, 7/1/09 2,132,962
1,500,000 Chicago Gas Supply Rev. Refunding Series 1995A (People's Gas, Light, & Coke Co. Proj.), 6.10%,
6/1/25 1,618,965
715,000 Collinsville (City of) Madison Co. Industrial Dev. Rev. Refunding (Drury Inn-Collinsville Proj.)
Series 1993, 6.00%, 11/1/04 711,082
350,000 Hoffman Estates Tax Increment Rev. Jr. Lien Series1991, Zero Coupon, 4.15% effective yield,
5/15/07 302,502
450,000 IL DFA Rev. Series 2002A (Chicago Charter School Fdn. Proj.), 5.25%, 12/1/12 444,173
28
- -----------------------------------------------------------------------[GRAPHIC]
- -----------------------------------------------------------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE($)(1)
500,000 IL DFA Pollution Ctrl. Rev. Refunding Series 1993B2 (Central IL Public Svc. Co. Proj.) (MBIA
insured), 5.90%, 6/1/28 504,895
IL DFA Refunding & New Money Rev. (Cmty. Rehab. Providers Fac. Acquisition Program):
685,000 Series 1997A, 5.60%, 7/1/04 698,899
1,690,000 Series 1997A, 5.80%, 7/1/08 1,798,583
300,000 Series 1997A, 5.90%, 7/1/09 316,965
4,390,000 Series 1997A, 6.00%, 7/1/15 4,510,901
1,200,000 Series 1997C, 5.65%, 7/1/19 1,180,236
580,000 Series 1998A, 5.00%, 7/1/06 604,163
655,000 Series 1998A, 5.50%, 7/1/12 663,410
1,000,000 IL Educ. Fac. Auth. Rev. Series 1998 (Augustana College Proj.), 5.00%, 10/1/13 1,123,890
2,780,000 IL HDA Elderly Hsg. Rev. Series 1992C (Village Ctr.) (Section 8), 6.85%, 3/1/20 2,839,214
IL Hlth. Fac. Auth. Rev.:
1,370,000 Refunding Series 1992 (Galesburg Cottage Hosp. Proj.)(Radian insured), 6.25%, 5/1/11 1,389,454
545,000 Refunding Series 1993 (Lutheran Social Svcs. IL), 6.10%, 8/15/04 554,396
750,000 Refunding Series 1993 (OSF Healthcare System), 5.75%, 11/15/07 767,595
1,250,000 Refunding Series 1994 (Passavant Memorial Area Hospital Assn.), 5.95%, 10/1/11 1,428,688
400,000 Refunding Series 1994 (Friendship Village of Schaumberg Proj.), 6.25%, 12/1/04 401,380
2,575,000 Refunding Series 1993A (Edward Hosp. Proj.), 6.00%, 2/15/19 2,666,902
300,000 Refunding Series 2000 (Riverside Hlth. Sys. Proj.), 6.00%, 11/15/03 301,599
Refunding Series 2001 (Decatur Memorial Hospital Proj.):
350,000 4.20%, 10/1/05 364,798
970,000 4.625%, 10/1/08 1,035,378
500,000 Series 2000 (IA Health System Proj.), 6.75%, 2/15/13 570,135
200,000 Refunding Series 2002 (Elmhurst Mem. Health Care Proj.), 5.00%, 1/1/04201,640
250,000 Melrose Park Tax Increment G.O. Series 1999A (FSA insured), 5.25%, 12/15/15 276,115
1,850,000 Roselle Multifamily Hsg. Rev. Refunding Series 1994A (GNMA collateralized) (Waterbury Apts.)
(FHA insured), 7.00%, 1/1/25 1,920,929
3,550,000 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 3,503,140
545,000 Upper Illinois River Valley Dev. Auth. Rev. Series 2001 (Morris Hosp. Proj.), 6.05%, 12/1/11 591,777
------------
500,000 Will Co. Student Hsg. Rev. Series 2002A (Joliet Junior College Proj.), 6.375%, 9/1/13 469,725 38,891,503
------------
INDIANA (6.3%)
1,975,000 IN Bond Bank Special Prgm. Series 1997C (Pittsboro Wastewater Treatment Plant Proj.), 5.70%,
8/1/17 2,094,132
2,175,000 IN DFA Educ. Fac. Rev. Series 1997 (Park Tudor Fdn. Proj.), 6.00%, 6/1/22 2,452,030
IN Hlth. Fac. Fin. Auth. Hosp. Rev.:
345,000 Series 1993 (Riverview Hosp. Proj.), 6.875%, 8/1/17 350,216
250,000 Series 1993 (Community Hosp. of Anderson Proj.), 6.00%, 1/1/23 255,600
600,000 Refunding Series 1998 (Floyd Memorial Hosp. & Hlth. Svcs. Proj.), 5.25%, 2/15/18 613,980
1,875,000 Refunding Series 1998 (Marquette Manor Proj.), 5.00%, 8/15/181, 806,281
1,000,000 Series 1999D (Charity Obligated Group), 5.50%, 11/15/11 1,095,930
Series 2001A (Community Foundation Northwest IN):
780,000 5.50%, 8/1/05 800,678
1,100,000 5.50%, 8/1/06 1,134,529
1,000,000 6.00%, 8/1/07 1,046,250
1,000,000 6.00%, 8/1/08 1,049,670
1,000,000 5.50%, 8/1/13 988,860
See accompanying notes to portfolios of investments on page 56. 29
SIT TAX-FREE INCOME FUND
SEPTEMBER 30, 2003
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (UNAUDITED)
- -----------------------------------------------------------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE($)(1)
500,000 IN HFA Single Family Mtg. Rev. Refunding Series 1992A, 6.80%, 1/1/17 505,750
IN Hlth. Fac. Fin. Auth. Rev. Refunding Series 1998 (Greenwood Village South Proj.):
140,000 5.15%, 5/15/04 140,100
150,000 5.25%, 5/15/06 150,032
170,000 5.35%, 5/15/08 169,912
1,000,000 IN Transportation Fin. Auth. Airport Facs. Lease Rev. Series 1992A, 6.25%, 11/1/16 1,024,159
2,545,000 Indianapolis Econ. Dev. Refunding & Imprv. Rev. Series 1992 (Natl. Benevolent Assn.-Robin Run
Village Proj.), 7.25%, 10/1/10 1,514,274
Indianapolis Econ. Dev. Rev. (Willowbrook Apts. Proj.):
1,075,000 Senior Series 1996A, 6.50%, 7/1/16 (8)(9) 537,500
1,290,000 Subordinate Series 1996C, 7.125%, 7/1/26 (8)(9) 9,030
500,000 Petersburg Pollution Ctrl. Rev. Refunding Series 1993A (Indianapolis Pwr. & Light Proj.) (MBIA
insured), 6.10%, 1/1/16 510,850
Sullivan Industrial Pollution Ctrl. Rev.:
615,000 Refunding Series 1991 (Hoosier Energy Corp. Proj.) (MBIA insured), 7.10%, 4/1/19 639,539
5,000,000 Refunding Series 1993C (Ind. Mich. Pwr. Co. Proj.), 5.95%, 5/1/09 5,107,500
100,000 Westview School Corp. Refunding Rev. Series 1993, 5.80%, 5/1/05 102,344
------------
24,099,146
------------
IOWA (1.4%)
1,305,000 IA Fin. Auth. Hlth. Care Fac. Rev. Series 1997 (Natl. Benevolent Assn.- Ramsey Home Proj),
6.15%, 5/1/17 776,475
1,130,000 IA Fin. Auth. Multifamily Hsg. Rev. Refunding Series 1997A (Kingswood Apts. Proj.)
(GNMA-collateralized), 6.15%, 5/1/32 1,189,754
IA Fin. Auth Single Family Rev. Series 2000D (GNMA/FNMA Mtg. Backed Securities Proj.):
335,000 5.65%, 7/1/07 359,371
390,000 5.75%, 7/1/09 416,005
1,190,000 Ottumwa Hosp. Rev. Refunding Series 1993 (Ottumwa Regional Hlth. Ctr.), 6.00%, 10/1/10 1,214,407
1,500,000 IA Tobacco Settlement Auth. Asset-Backed Rev. Series 2001B, 5.30%, 6/1/25 1,166,340
------------
5,122,352
------------
KANSAS (0.9%)
3,250,000 Burlington Co. Pollution Ctrl. Rev. Refunding Series 1991 (KS Gas & Electric Co. Proj.) (MBIA
insured), 7.00%, 6/1/31 3,393,324
360,000 Olathe & Labette Cos. Mtg. Loan Rev. 1991 Series B (GNMA collateralized) Zero Coupon, 7.56%
Effective Yield on Purchase Date, 2/1/23 89,957
------------
3,483,281
------------
KENTUCKY (0.1%)
500,000 Boone Co. Pollution Ctrl. Rev. Refunding Series 1992A (Dayton Pwr. & Light Co. Proj.), 6.50%,
11/15/22 514,449
------------
LOUISIANA (1.8%)
5,235,000 Denham Springs/Livingston HMFA Residual Rev. Series 1992C Zero Coupon, 7.65% Effective Yield on
Purchase Date, 7/10/14 2,336,485
East Baton Rouge Single Family Mtg. Rev. Refunding:
1,415,000 Series 1997C-3 Subordinate Bonds, 5.65%, 10/1/18 1,470,808
7,200,000 Capital Appreciation Series 2000D1 (GNMA & FNMA collateralized) Zero Coupon, 6.46% Effective
Yield on Purchase Date, 4/1/34 1,051,344
1,363 LA PFA Single Family Mtg. Rev. Series 1992 (Lafayette PTFA Mtg. Acquisition), 7.50%, 10/1/15 1,391
30
- -----------------------------------------------------------------------[GRAPHIC]
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QUANTITY ($) NAME OF ISSUER MARKET VALUE($)(1)
500,000 LA PFA Multifamily Mtg. Rev. Refunding Series 1994A (Carlyle Apt. Proj.) (Axa Reinsurance Co.
insured), 5.95%, 6/15/19 501,780
280,000 New Orleans HDC First Lien Rev. Refunding Series 1996A (Tivoli Place Apts. Proj.) (Section 8),
6.40%, 12/1/04 281,280
400,000 Orleans Levee Dist. Rev. Series 1995A (Tr. Rcpts.) (FSA insured), 5.95%, 11/1/14 449,184
1,015,000 Tobacco Settlement Financing Corp. Asset-Backed Rev. Series 2001B, 5.50%, 5/15/30 812,711
------------
6,904,983
------------
MAINE (0.5%)
1,000,000 Skowhegan Pollution Ctrl. Rev. Refunding Series 1993 (Scott Paper Co. Proj.), 5.90%, 11/1/13 1,023,960
1,000,000 South Berwick Educ. Rev. Series 1998 (Berwick Academy Issue), 5.25%, 8/1/13 1,017,730
------------
2,041,690
------------
MARYLAND (0.6%)
MD Econ. Dev. Corp. Student Hsg. Rev.:
470,000 Series 1999A (Collegiate Hsg. Fdn. - University Courtyard Proj.), 5.20%, 6/1/07 473,708
245,000 Senior Series 2003A (University of Maryland-Baltimore Proj.), 2.50%, 10/1/05 246,744
265,000 Series 2003 (Salisbury Univ. Proj.), 3.00%, 6/1/05 269,675
395,000 Series 2003 (Bowie St. Univ. Proj.), 3.00%, 6/1/05 399,321
800,000 MD Hlth. & Higher Educ. Fac. Auth. Rev. Refunding Series 2003A (Adventist Healthcare Proj.),
5.00%, 1/1/12 810,192
------------
2,199,640
------------
MASSACHUSETTS (1.0%)
MA Hlth. & Educ. Fac. Auth. Rev.:
200,000 Series 1993B (Lahey Clinic Med. Ctr. Proj.), 5.40%, 7/1/06 204,612
175,000 Series 1994B (Holyoke Hosp. Proj.), 6.25%, 7/1/04 176,528
250,000 Series 1996C (North Adams Regional Hosp. Proj.), 6.25%, 7/1/04 251,265
Series 1998B (Cape Cod Healthcare Obligated Group Issue):
320,000 5.00%, 11/15/05 333,763
430,000 5.00%, 11/15/07 453,934
175,000 5.125%, 11/15/08 184,914
2,000,000 Series 2001E (Berkshire Health Sys.), 4.50%, 10/1/05 2,071,500
50,000 MA HFA Hsg. Projs. Rev. Series 1993A, 6.375%, 4/1/21 51,100
225,000 MA Industrial Finance Agency Resource Recovery Rev. Refunding Series 1992A (Ogden Haverhill
Associates Proj.), 4.95%, 12/1/06 226,361
------------
3,953,977
------------
MICHIGAN (3.9%)
520,000 Central Wayne Co. Sanitation Auth. Incinerator Rev. Series 2003VII, 4.375%, 7/1/06 525,751
John Tolfree Hlth. System, Mtg. Rev. & Refunding Series 1999:
295,000 5.25%, 9/15/04 298,269
395,000 5.30%, 9/15/05 401,608
760,000 MI Hosp. Fin. Auth. Rev. Refunding Series 1993A (McLaren Oblig. Group), 5.25%, 10/15/07 776,766
MI Strategic Fund Ltd. Obligation Rev. Refunding:
1,550,000 Series 1991A (Ford Motor Co. Proj.), 7.10%, 2/1/06 1,668,281
1,250,000 Series 2003A (Dow Chemical Proj.)(Mandatory Put 6/1/06), 3.80%, 6/1/14 1,282,550
2,500,000 Series 2003 (Dow Chemical Proj.)(Mandatory Put 6/1/08), 4.60%, 6/1/14 2,608,650
2,095,000 Southfield Econ. Dev. Corp. Ltd. Obligation Rev. Series 1998A (Lawrence Tech. Univ. Proj.),
5.25%, 2/1/13 2,150,203
1,873,912 Suburban Mobility Auth. Regl. Transportation Certificates of Participation Series 2002, 4.90%,
2/15/09 (5) 1,901,515
See accompanying notes to portfolios of investments on page 56. 31
SIT TAX-FREE INCOME FUND
SEPTEMBER 30, 2003
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (UNAUDITED)
- -----------------------------------------------------------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE($)(1)
Summit Academy North Public School Certificates of Participation Series 2001:
130,000 5.60%, 7/1/05 135,950
135,000 5.70%, 7/1/06 143,057
145,000 5.95%, 7/1/07 154,429
2,545,000 Troy City EDC Econ. Dev. Rev. Refunding Series 1992 (Drury Inn-Troy Proj.) (Lincoln Natl.
Corp.), 6.75%, 10/1/12 2,570,857
------------
14,617,886
------------
MINNESOTA (1.9%)
3,410,000 Dakota Co. HRA Multifamily Mtg. Rev. Refunding Series 1997A (Park Place Apts. Proj.)(GNMA
Collateralized), 6.875%, 2/20/32 3,646,108
740,000 Hopkins Multifamily Hsg. Rev. Series 1996 (Hopkins Renaissance Proj.)(Section 8), 6.375%, 4/1/20 775,927
25,000 Mpls. & St. Paul Hsg. & Redev. Auth. Hlth. Care Sys. Rev. Series 1992 (Grp. Hlth. Plan Inc.
Proj.), 6.75%, 12/1/13 25,525
64,349 Moorhead Single Family Mtg. Rev. Refunding Series 1992B, 7.00%, 8/1/11 64,836
2,315,000 Plymouth Multifamily Hsg. Dev. Rev. Refunding Series 1996A (GNMA collateralized) (Fox Forest
Apts. Proj.), 8.05%, 6/20/31 2,498,672
------------
7,011,068
------------
MISSISSIPPI (0.2%)
350,000 MS Home Corp. Residual Rev. Capital Appreciation Series 1992I Zero Coupon, Escrowed to Maturity,
2.82% Yield on Purchase Date, 9/15/16 144,585
235,000 MS Hosp. Equip. & Fac. Auth. Rev. Refunding Series 2003 (SW Miss. Regl. Med. Proj.), 2.30%,
4/1/04 235,221
400,000 Lincoln Co. Hosp. Rev. Refunding Series 1998A (Kings Daughter Hosp. Proj.), 5.20%, 4/1/08 434,048
------------
813,854
------------
MISSOURI (2.1%)
1,000,000 Cameron Industrial Dev. Auth. Rev. Refunding Series 2000 (Cameron Cmnty. Hosp. Proj.) (ACA
Insured), 5.80%, 12/1/09 1,119,900
300,000 Cass Co. Industrial Dev. Auth. Rev. Refunding Series 1992 (Natl. Benevolent-Foxwood Proj.),
7.375%, 10/1/22 178,500
645,000 Chesterfield Rev. Refunding & Impt. Series 2002 (Chesterfield Vy. Projs.), 4.50%, 4/15/16 664,279
MO Dev. Finance Board Infrastructure Fac. Rev.:
Series 2000A (Eastland Ctr. Proj. Phase 1):
1,275,000 5.75%, 4/1/09 1,432,386
550,000 5.75%, 4/1/12 594,160
1,000,000 Series 2000B (Eastland Ctr. Proj. Phase 2), 6.00%, 4/1/15 1,063,390
700,000 MO Hlth. & Educ. Fac. Auth. Educ. Fac. Rev. Series 1999 (Park College Proj.), 5.55%, 6/1/09 737,485
150,000 MO Environmental Impt. & Energy Res. Auth. Water Fac. Rev. Refunding Series 1999 (Tri-Co. Water
Auth Proj.) (Radian Asset Assurance), 5.50%, 4/1/07 166,653
1,000,000 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 1,015,500
10,000 St. Louis Co. Single Family Res. Mtg. Series 1984 (MBIA insured), 6.75%, 4/1/10 10,130
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 1,052,720
------------
8,035,103
------------
MONTANA (0.3%)
1,000,000 Crow Finance Auth. Tribal Purpose Revenue Series 1997A, 5.70%, 10/1/27 1,011,380
85,000 Forsyth Pollution Ctrl. Rev. Refunding Series 1993 (Montana Power Co. Proj.) (MBIA insured),
6.125%, 5/1/23 86,999
------------
1,098,379
------------
32
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- -----------------------------------------------------------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE($)(1)
NEVADA (3.2%)
2,500,000 Clark Co. Industrial Dev. Rev. Refunding Series 1992C (Nevada Power Co.)(Ambac insured), 7.20%,
10/1/22 2,632,000
2,500,000 Clark Co. Pollution Ctrl. Rev. Refunding Series 1992B (Nevada Pwr. Co. Proj.)(FGIC insured),
6.60%, 6/1/19 2,578,875
3,000,000 Humboldt Co. Pollution Ctrl. Rev. Series 1984 (Idaho Power Co. Proj.), 8.30%, 12/1/14 3,124,950
NV Hsg. Dev. SF Mtg. Program:
515,000 Sr. Series 1995A-1, 6.45%, 10/1/18 526,124
800,000 Mezzanine Series 1998B-1, 5.30%, 4/1/16 840,256
400,000 6.00%, 6/1/08 416,864
1,000,000 6.125%, 6/1/12 1,019,580
1,000,000 Washoe Co. Gas & Water Fac. Rev. Refunding Series 1987 (AMBAC insured), 6.30%, 12/1/14 1,038,400
------------
12,177,049
------------
NEW HAMPSHIRE (2.0%)
NH Higher Educ. & Hlth. Fac. Auth. Rev.:
750,000 Series 1993 (Nashua Memorial Hosp. Proj.), 6.00%, 10/1/23 759,570
750,000 Series 1993 (Nashua Memorial Hosp. Proj.), 5.80%, 10/1/04 767,415
750,000 Series 1993 (Nashua Memorial Hosp. Proj.), 6.25%, 10/1/08 766,793
1,500,000 Series 1993 (Frisbie Memorial Hosp. Proj.), 6.125%, 10/1/13 1,534,815
690,000 Series 1997 (Catholic Charities Issue), 5.75%, 8/1/12 711,569
5,080,000 NH HFA Single Family Res. Mtg. 1982 Series A Zero Coupon, 11.75% Effective Yield on Purchase
Date, 1/1/14 2,217,623
730,000 NH Higher Educ. & Hlth. Fac. Auth. Rev. Series 1998 (New Hampton School), 5.00%, 10/1/08 772,982
------------
7,530,767
------------
NEW JERSEY (0.8%)
1,460,000 NJ Hsg. & Mtg. Finance Agy. Multifamily Hsg. Rev. Series 1995A (AMBAC insured), 6.00%,
11/1/14 1,523,977
NJ Tobacco Settlement Financing Corp. Asset-Backed Rev. Series 2003:
1,170,000 4.375%, 6/1/19 1,083,806
500,000 6.125%, 6/1/24 452,515
------------
3,060,298
------------
NEW MEXICO (0.9%)
2,350,000 NM MFA Forward Mortgage-Backed Series 1995E (GNMA collateralized), 6.95%, 1/1/26 2,481,671
NM Hsg. Auth. Region III Multifamily Hsg. Rev. Series 2003A (Villa Del Oso Apts. Proj.):
65,000 2.55%, 7/1/04 64,945
500,000 6.00%, 7/1/17 501,570
500,000 NM Hosp. Equip. Rev. Series 2003 (St. Vincent's Hosp.), 3.00%, 7/1/04 506,530
------------
3,554,716
------------
NEW YORK (0.1%)
170,000 Monroe Co. Industrial Dev. Agy. Student Hsg. Rev. Series 1999A (Collegiate Hsg. Fdn. - Rochester
Institute of Technology Proj.), 4.90%, 4/1/09 172,042
140,000 NY Dorm Auth. Rev. Series 2002 (FHA insured), 4.00%, 2/1/12 142,400
------------
314,442
------------
NORTH DAKOTA (0.1%)
500,000 Mercer Co. Pollution Ctl. Rev. Refunding Series 1992 (Montana-Dakota Utils. Co. Proj.) (FGIC
insured), 6.65%, 6/1/22 507,135
------------
See accompanying notes to portfolios of investments on page 56. 33
SIT TAX-FREE INCOME FUND
SEPTEMBER 30, 2003
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (UNAUDITED)
- -----------------------------------------------------------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE($)(1)
OHIO (2.6%)
Akron Certificates of Participation Series 1996 (Akron Municipal Baseball Stadium Proj.):
1,000,000 6.50%, 12/1/07 (5) 1,082,130
2,780,000 6.90%, 12/1/16 (5) 3,055,220
1,650,000 Bellefontaine Hosp. Rev. Refunding Series 1993 (Mary Rutan Hlth. Assoc.), 6.00%, 12/1/13 1,691,926
295,000 Cleveland-Cuyahoga Port. Auth. Dev. Rev. Series 1999A (Port of Cleveland Bond Fund Capital
Imprv. Proj.), 5.375%, 5/15/19 281,365
1,000,000 Lucas Co. Hlth. Care Fac. Rev. Series 2002 (Franciscan Care Ctr. Proj.)(LOC Bank One), 4.10%,
3/1/27 1,030,420
600,000 Mahoning Co. Hlth. Care Fac. Rev. Refunding Series 2002 (Copeland Oaks Proj.)(Mandatory Put
3/31/05) (LOC Sky Bank), 4.00%, 4/1/22 614,778
1,250,000 OH Air Quality Dev. Auth. Rev. Series 1985A (Columbus Southern Pwr. Co. Proj.), 6.375%, 12/1/20 1,279,975
950,000 OH Water Dev. Auth. Rev. Refunding Series 1992A (Dayton Pwr. & Light Co. Proj.), 6.40%, 8/15/27 969,475
------------
10,005,289
------------
OKLAHOMA (1.5%)
960,000 Muskogee Co. HFA Single Family Mtg. Rev. Refunding 1990 Series A (FGIC insured) Zero Coupon,
7.65% Effective Yield on Purchase Date, 6/1/11 551,885
500,000 OK Co. Industrial Auth. Health Care Rev. Series 1999 (Natl. Benevolent Assoc.), 5.50%, 2/1/29 297,500
1,500,000 Shawnee Hosp. Auth. Rev. Refunding Rev. Series 1993 (MidAmerica HealthCare Inc. Proj.), 6.125%,
10/1/14 1,534,905
1,320,000 Tulsa Industrial Auth. Educ. Fac. Rev. Refunding Series 1999B (Holland Hall School Proj.),
5.00%, 12/1/14 1,378,978
1,700,000 Tulsa Public Facilities Auth. Recreational Fac. Rev. Series 1985, 6.20%, 11/1/12 1,741,191
------------
5,504,459
------------
OREGON (1.4%)
3,705,000 Cow Creek Band Umpqua Tribe of Indians Rev. Series 1998B (Ambac insured), 5.10%, 7/1/12 3,826,969
Klamath Falls Intercmnty. Hosp. Auth. Rev. Refunding Series 2002 (Merle West Med. Ctr. Proj.):
250,000 4.80%, 9/1/07 264,553
200,000 5.20%, 9/1/09 213,400
935,000 OR Hsg. & Cmty. Svcs. Dept. Mtg. Rev. Series 2000K, 5.70%, 7/1/22 981,049
25,000 OR G.O. Refunding Series 1992B, 6.375%, 8/1/24 25,344
------------
5,311,315
------------
PENNSYLVANIA (7.6%)
Allegheny Co. Hosp. Dev. Auth. Rev. Series 2003A (Ohio Valley Gen. Hosp. Proj.):
200,000 2.50%, 4/1/05 200,118
245,000 3.30%, 4/1/08 242,753
135,000 3.875%, 4/1/10 131,948
5,500,000 Armstrong Co. Hosp. Auth. Rev. Refunding Series 1992A (St. Francis Med. Ctr. Proj.) (Ambac
insured), 6.25%, 6/1/13 5,577,385
Beaver Co. Industrial Dev. Auth. Pollution Ctrl. Rev.:
135,000 Series 1977 (St. Joe Minerals Corp. Proj.), 6.00%, 5/1/07 135,309
1,150,000 Refunding Series 1995A (Toledo Edison Proj.), 7.75%, 5/1/20 1,257,582
565,000 Chartiers Valley Industrial & Commercial Dev. Auth. Rev. Refuning Series 2003A (Friendship
Village South Proj.), 4.75%, 8/15/11 560,943
Columbia Co. Hosp. Auth. Hlth. Care Rev. Series 1999 (Bloomsburg Hosp. Obligated Group Proj.):
235,000 5.00%, 6/1/04 234,213
810,000 4.75%, 7/1/06 812,843
2,750,000 5.25%, 7/1/12 2,681,085
Horizon Hosp. System Auth. Hosp. Rev. Series 1996 (Horizon Hosp. Sys.):
715,000 6.15%, 5/15/08 775,375
710,000 6.25%, 5/15/09 766,807
1,145,000 6.30%, 5/15/11 1,233,360
34
- -----------------------------------------------------------------------[GRAPHIC]
- -----------------------------------------------------------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE($)(1)
250,000 Lancaster Industrial Dev. Auth. Rev. Refunding Series 1992 (Union Camp Corp. Proj.), 6.50%,
3/1/04 254,010
500,000 McKean Co. Hosp. Auth. Rev. Refunding Series 1994 (Bradford Hosp. Proj.) (ACA insured), 6.00%,
10/1/13 517,980
1,750,000 Montgomery Co. Industrial Dev. Auth. Retirement Cmnty. Rev. Series 1996B (ACTS Retirement Life
Cmntys. Proj.), 5.75%, 11/15/17 1,827,053
PA Econ. Dev. Fin. Auth. Rev. Series 1998A (Northwestern. Human Services Proj.):
2,245,000 5.25%, 6/1/09 2,080,037
2,210,000 5.30%, 6/1/10 2,017,001
2,485,000 5.35%, 6/1/11 2,235,158
PA Hgr. Educ. Fac. Auth. Hlth. Svcs. Rev. Series 1996A (Allegheny Delaware Valley Obligated
Group, Inc.)(MBIA insured):
150,000 5.500%, 11/15/08 168,635
3,890,000 5.875%, 11/15/16 4,369,248
270,000 PA Hgr. Educ. Fac. Auth. Rev. Series 2002 (Geneva College Proj.), 4.25%, 4/1/05 276,926
500,000 Philadelphia Muni Auth. Rev. Refunding Lease Series 1993D, 6.30%, 7/15/17 (5) 510,695
------------
28,866,464
------------
RHODE ISLAND (1.0%)
1,100,000 RI Hsg. & Mtg. Fin. Corp. Rental Hsg. Program Rev. Series 1993A (Section 8), 5.65%, 10/1/08 1,123,694
3,000,000 RI Tobacco Settlement Financing Corp. Asset-Backed Rev. Series 2002A, 6.00%, 6/1/23 2,646,930
------------
3,770,624
------------
SOUTH CAROLINA (1.3%)
500,000 Darlington Co. Annual Tender Pollution Ctl. Rev. Series 1983, (Carolina Pwr. & Light Co. Proj.),
6.60%, 11/1/10 517,085
1,385,000 North Charleston Muni. Golf Course Mtg. Rev. Series 1998, Escrowed to Maturity, 5.00%, 5/1/09 1,519,553
3,000,000 Oconee Co. Pollution Control Rev. Refunding Series 1993 (Duke Power Co. Proj.), 5.80%, 4/1/14 3,070,740
------------
5,107,378
------------
SOUTH DAKOTA (0.9%)
SD Hlth. & Educ. Fac. Auth. Rev (Sioux Valley Hosp. & Health Sys. Proj.):
2,250,000 Series 2001C (LOC US Bank)(Mandatory Put 11/1/06), 4.85%, 11/1/19 2,390,693
500,000 Series 2001E, 5.00%, 11/1/06 541,010
400,000 SD Hlth. & Educ. Fac. Auth. Rev. Series 1994 (Huron Regional Med. Ctr. Proj.), 7.25%, 4/1/20 413,720
------------
3,345,423
------------
TENNESSEE (2.2%)
Shelby Co. Hlth., Educ. & Hsg. Fac. Board Multifamily Hsg. Rev.:
(CME Memphis Apts. Proj.):
1,850,000 Senior Series 1998A, 5.35%, 1/1/19 (8)(9) 925,000
7,875,000 Senior Series 1998A, 5.55%, 1/1/29 (8)(9) 3,937,500
1,630,000 Subordinate Series 1998C, 6.00%, 1/1/29 (8)(9) 30,563
(Eastwood Park Apts. Proj.):
1,000,000 Senior Series 1995 A2, 6.40%, 9/1/25 (8)(9) 650,000
405,000 Subordinate Series 1995C, 7.50%, 9/1/25 (8)(9) 202,500
(Raleigh Forest & Sherwood Apts. Proj.):
2,670,000 Senior Series 1996A, 6.60%, 1/1/26 (8)(9) 2,269,500
610,000 Subordinate Series 1996C, 7.25%, 1/1/26 (8)(9) 396,500
------------
8,411,563
------------
See accompanying notes to portfolios of investments on page 56. 35
SIT TAX-FREE INCOME FUND
SEPTEMBER 30, 2003
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (UNAUDITED)
- -----------------------------------------------------------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE($)(1)
TEXAS (14.1%)
Austin Convention Enterprises, Inc. (Convention Ctr.) Revenue:
1,350,000 Series 2001A (Convention Center), 6.375%, 1/1/16 1,390,851
850,000 Series 2001B (ZC Specialty Ins. Co.), 5.75%, 1/1/16 924,375
1,000,000 Bell Co. Hlth. Fac. Dev. Corp. Retirement Fac. Rev. Series 1998 (Buckner Retirement Services,
Inc. Obligated Group, Proj.), 5.00%, 11/15/11 1,040,960
Beaumont HA Multifamily Mtg. Rev. Series 1993A (Section 8):
500,000 6.65%, 11/1/07 490,025
590,000 6.75%, 11/1/10 565,338
995,000 Bexar Co. Rev. Series 2000 (Venue Proj.)(MBIA insured), 5.75%, 8/15/22 1,089,047
Bexar Co. HFC Multifamily Hsg. Rev.:
580,000 Subordinated Series 2000C (Honey Creek Apts. Proj.), 8.00%, 4/1/30 568,760
190,000 Subordinated Series 2001B (American Oppty. Hsg. Dublin Kingswood & Waterford Apts. Proj.),
7.50%, 12/1/14 193,074
635,000 Subordinated Series 2001C (American Oppty. Hsg. Colinas Proj.), 7.50%, 1/1/13 641,629
145,000 Subordinated Series 2002B (American Oppty. Hsg. Cinnamon Creek Proj.), 7.25%, 1/1/14 143,128
250,000 Bluebonnet Trails Cmty. Mental Hlth. & Mental Retardation Rev. Series 2001, 5.50%, 12/1/09 266,117
650,000 Brazos River Hbr. Nav. Dist Rev. Series 2002B-2 (Dow Chemical Co. Proj.), 4.75%, 5/15/33 685,802
Dallas Hsg. Corp. Capital Program Revenue Bonds:
1,090,000 Series 1995A (Estell Village Apts.) (Section 8), 7.875%, 12/1/09 1,102,960
1,070,000 Series 1995 (Cedar Glen Apts.) (Section 8), 7.75%, 12/1/09 1,074,226
6,343,000 Dallas HFC Multifamily Mtg. Rev. Series 1998A (GNMA collateralized) (Towne Ctr. Apts. Proj.),
6.75%, 10/20/32 6,966,073
1,000,000 Galveston Special Contract Refunding Rev. Series 1998 (Farmland Industries, Inc. Proj.), 5.50%,
5/1/15 644,730
45,000 Houston HFC Single Family Mtg. Rev. Refunding Series 1996B-1, 8.00%, 6/1/14 45,197
Houston Water & Sewer Sys. Rev. Series 1991B:
440,000 6.75%, 12/1/08 444,308
6,920,000 6.375%, 12/1/10 6,983,387
1,250,000 Matagorda Co. Nav. Dist. No. 1 Rev. Refunding Series 2001A (Central Pwr. & Light Co.) (Mandatory
Put 11/1/06), 4.55%, 11/1/29 1,294,825
Midland HFC Single Family Mtg. Rev. Refunding:
138,435 Series 1992 A-2, 8.45%, 12/1/11 147,062
63,415 Series 1992 B2, 8.15%, 12/1/11 65,878
Mesquite Hlth. Fac. Dev. Corp. Retirement Fac. Rev. (Christian Care Ctr. Proj.):
Series 1996A:
1,000,000 6.30%, 2/15/12 993,760
1,000,000 6.40%, 2/15/16 988,730
1,000,000 Series 2000A, 7.00%, 2/15/10 1,034,340
7,272,000 Nortex Hsg. Fin. Corp. Multifamily Hsg. Rev. Series 1999 (GNMA collateralized) (Highland Oaks
Apts. Proj.), 6.75%, 9/20/32 7,914,845
339,225 Odessa HFC Single Family Mtg. Rev. Refunding Series 1992B Class B-2, 8.125%, 11/1/11 344,941
Panhandle Regional HFC Multifamily Hsg. Rev. (Canterbury, Puckett Place, River Falls and Three
Fountains Proj.):
610,000 Senior Series 2000A, 6.625%, 3/1/20 632,021
1,720,000 Subordinate Series 2000C, 8.125%, 3/1/31 1,696,591
675,000 Richardson Hosp. Auth. Rev. Series 1993 (Richardson Med Ctr.), 6.75%, 12/1/23 689,924
420,000 Rio Grande Valley Hlth. Fac. Dev. Corp. Hosp. Rev. Series 1992A (Valley Baptist Med. Ctr. Proj.)
(MBIA insured), 6.375%, 8/1/22 426,044
1,000,000 Rio Grande Valley Hlth. Fac. Dev. Corp. Retirement Fac. Rev. Series 1992B (Golden Palms
Retirement & Hlth. Ctr. Proj.)(MBIA insured), 6.40%, 8/1/12 1,014,500
36
- -----------------------------------------------------------------------[GRAPHIC]
- -----------------------------------------------------------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE($)(1)
Tarrant Co. Hlth. Fac. Dev. Corp. Hosp. Rev. Series 2000 (Adventist Hlth. Sys. Proj.):
460,000 5.70%, 11/15/03 462,369
490,000 5.75%, 11/15/04 511,364
515,000 5.80%, 11/15/05 554,372
Tarrant Co. HFC Multifamily Hsg. Rev:
530,000 Senior Series 2001A (Westridge Apts. Proj.), 5.50%, 6/1/11 498,333
500,000 Subordinate Series 2001C (Crossroads Apt. Proj.), 7.25%, 12/1/36 468,010
TX Affordable Hsg. Corp. Multifamily Hsg. Rev:
1,275,000 Senior Series 2001A (NHT / GTEX Proj.)(MBIA insured), 4.10%, 10/1/08 1,351,449
825,000 Junior Series 2001B (NHT / GTEX Proj.), 6.75%, 10/1/16 772,868
395,000 Junior Series 2002B (American Oppty. Hsg. Proj.), 7.375%, 9/1/14 391,327
TX Dept. Hsg. & Cmnty. Affairs Multifamily Hsg. Rev.:
850,000 Senior Series 1996A (Harbors & Plumtree Apts. Proj.), 6.35%, 7/1/16 886,618
3,610,000 Senior Series 1996A (Harbors & Plumtree Apts. Proj.), 6.45%, 7/1/26 3,718,228
890,000 Subordinate Series 1996C (Harbors & Plumtree Apts. Proj.), 7.375%, 7/1/26 873,989
55,000 Senior Series 1996A (NHP Foundation - Asmara Apts. Proj.), 6.40%, 1/1/27 56,146
600,000 TX Public Property Fin. Corp. Mental Hlth. & Mental Retardation Rev. Series 1996, 6.20%, 9/1/16 632,958
------------
53,681,479
------------
UTAH (1.4%)
725,000 Eagle Mountain Water & Sewer Rev. Refunding Series 2000 (ACA insured), 5.60%, 11/15/13 788,278
Ogden Neighborhood Dev. Agency Tax Increment Rev:
3,265,000 Series 1990A (25th Street Proj.) (LOC Sumitomo Bank), Zero Coupon, 5.55% Effective Yield on
Purchase Date, 12/30/05 3,058,228
120,000 Series 1990B (Wash. Blvd Proj.)(LOC Sumitomo Bank), Zero Coupon, 4.255% Effective Yield on
Purchase Date, 12/30/05 112,400
Salt Lake Co. College Rev. Series 1999 (Westminister College Proj.):
120,000 5.15%, 10/1/11 125,080
125,000 5.20%, 10/1/12 129,069
130,000 5.25%, 10/1/13 133,912
835,000 UT Hsg. Finance Agy. Multifamily Refunding Rev. Series 1996A (Section 8) (FHA insured), 6.10%,
7/1/22 875,840
------------
5,222,807
------------
VERMONT (0.3%)
VT Educ. & Hlth. Bldgs. Financing Agency Rev.:
420,000 Series 1998 (Norwich Univ. Proj.), 5.13%, 7/1/09 443,722
235,000 Series 2002A (Developmental & Mental Hlth. Proj.), 4.375%, 6/15/07 234,311
400,000 Series 2003A (Vermont Law School Proj.), 5.00%, 1/1/13 398,212
------------
1,076,245
------------
VIRGINIA (0.7%)
300,000 Alexandria Industrial Dev. Auth. Rev. Pollution Control Refunding Series 1994 (Potomac Electric
Proj.) (MBIA insured), 5.375%, 2/15/24 309,048
250,000 Chesterfield Co. Industrial Dev. Auth. Pollution Ctrl. Rev. Series 1987A Rmktg.
(VA Elec. & Power Co. Proj.), 5.875%, 6/1/17 269,417
2,000,000 Norfolk Industrial Dev. Auth. Hosp. Rev. Refunding Series 1994A (Sentara Hosp. Proj.), 6.50%,
11/1/13 2,150,600
------------
2,729,065
------------
See accompanying notes to portfolios of investments on page 56. 37
SIT TAX-FREE INCOME FUND
SEPTEMBER 30, 2003
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (UNAUDITED)
- -----------------------------------------------------------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE($)(1)
WASHINGTON (0.4%)
200,000 Energy Northwest Wind Proj. Rev. Series 2001B, 4.55%, 7/1/06 209,582
275,000 Grant Co. Public Hosp. Dist. #1 Rev. Series 1998 (Samaritan Hosp. Proj.) (Radian Asset
Assurance), 5.25%, 9/1/13 291,368
1,000,000 WA HFC Nonprofit Housing Revenue Series 1995A (Judson Park Proj.)(LOC US Bk. Wash.), 6.90%,
7/1/16 1,004,400
------------
1,505,350
------------
WEST VIRGINIA (0.1%)
500,000 Putnam Co. Pollution Ctrl. Rev. Series 1992C (Appalachian Pwr. Co. Proj.), 6.60%, 7/1/19 511,400
------------
WISCONSIN (4.6%)
100,000 WI Hsg. & Econ. Dev. Auth. Home Ownership Rev. Series 1997A, 6.00%, 3/1/17 105,829
2,295,000 WI G.O. Unlimited TaxRefunding Series 1995-2, 5.50%, 11/1/11 2,487,918
1,000,000 WI HEDA Hsg. Rev. Series 1993C (MBIA insured)(Section 8), 5.80%, 11/1/13 1,022,050
500,000 WI G.O. Refunding Series 1993-5, 4.85%, 5/1/06 501,525
WI Hlth. & Educ. Fac. Auth. Rev. (FH Hlth. Care Dev. Inc Proj.):
1,395,000 Series 1999, 5.25%, 11/15/04 1,421,672
1,020,000 Series 1999, 5.625%, 11/15/09 1,103,783
WI Hlth. & Educ. Fac. Auth. Rev.:
480,000 Series 1992 (Mercy Hosp. Of Janesville Proj.), 6.60%, 8/15/22 487,877
2,000,000 Series 1993 (Medical College of WI Inc. Proj.), 5.95%, 12/1/15 2,055,060
640,000 Series 1996 (Meriter Hosp., Inc. Proj.), 6.00%, 12/1/06 672,410
750,000 Refunding Series 1997B, (United Hlth. Grp., Inc. Proj.), 5.50%, 12/15/20 805,478
Series 1999 (Kenosha Hosp. & Med. Ctr., Inc. Proj.):
670,000 5.00%, 5/15/06 715,031
705,000 5.10%, 5/15/07 760,152
740,000 5.15%, 5/15/08 801,287
820,000 5.35%, 5/15/10 885,616
865,000 5.45%, 5/15/11 926,502
Series 2001 (Agnesian Healthcare, Inc. Proj.):
110,000 5.00%, 7/1/04 112,209
125,000 5.00%, 7/1/05 130,169
150,000 5.00%, 7/1/06 158,474
200,000 5.00%, 7/1/07 211,826
550,000 6.00%, 7/1/17 575,229
340,000 6.00%, 7/1/21 352,532
500,000 Series 2001B (Marshfield Clinic), 5.25%, 2/15/05 518,285
575,000 Series 2003A (Franciscan Sisters of Christian Charity HealthCare Ministry, Inc. Proj.), 3.00%,
9/1/06 581,141
------------
17,392,055
------------
Total municipal bonds (cost: $368,746,652) 360,788,649
------------
38
- -----------------------------------------------------------------------[GRAPHIC]
- -----------------------------------------------------------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE($)(1)
CLOSED-END MUTUAL FUNDS (1.8%) (2)
46,900 Blackrock CA Insured Municipal Term Trust 2008 776,195
10,500 Blackrock FL Insured Municipal Term Trust 2008 169,575
300,300 Blackrock Insured Municipal Term Trust 2008 5,159,154
56,700 Blackrock Insured Municipal Term Trust 2010 626,535
------------
Total closed-end mutual funds (Cost: $6,075,754) 6,731,459
------------
SHORT-TERM SECURITIES (1.7%) (2)
6,294,775 Dreyfus Tax-Exempt Cash Management Fund, 0.80% 6,294,775
10,000 Northern Institutional Tax-Exempt, 0.75% 10,000
------------
Total short-term securities (cost: $6,304,775) 6,304,775
------------
Total investments in securities (cost: $381,127,181) (7) $373,824,883
============
See accompanying notes to portfolios of investments on page 56. 39
SIT MINNESOTA TAX-FREE INCOME FUND
SIX MONTHS ENDED SEPTEMBER 30, 2003
[PHOTO] ------------------------------------------------------------------------
SENIOR PORTFOLIO MANAGERS
MICHAEL C. BRILLEY * DEBRA A. SIT, CFA * PAUL J. JUNGQUIST, CFA
ATTRACTIVE FUND YIELDS
The Minnesota Tax Free Income Fund returned +1.91% for the six months ended
September 30, 2003 and compared with a return of +2.84% for the Lehman 5-Year
Municipal Bond Index. The Fund's 30-day SEC yield was 4.92% as of September 30th
and its 12-month distribution rate was 4.57%. The Fund's taxable equivalent
yield of 8.21% for investors in the highest federal tax bracket compares
favorably with taxable alternatives.
The duration of the portfolio has been less than 5 years throughout the
past 12 months. The portfolio's shorter duration was a negative factor for the
Fund's returns relative to the Index through April and May when bond yields were
in a declining trend, reflecting both moderate economic growth and an
accommodative Federal Reserve policy. Bond yields reversed to a strong rising
trend in mid-June in anticipation of stronger economic growth in the third
quarter. Overall, the Fund underperformed the Index for the six month period.
The Fund's returns from the six largest sectors were consistent with the
Index sector returns over the past six months. The percentage of assets invested
in various sectors remained relatively stable during the period, except for the
healthcare sector which increased by 2% during the quarter and 5% during the
past six months.
STRONG ECONOMY SHOULD CONTINUE IN 2004
We expect strong economic growth at about a +5% annual rate in the second
half of 2003, slowing somewhat in 2004. This sustained growth should lead the
Federal Reserve to begin raising short-term interest rates during the second
half of 2004. The combination of sustained growth and a less accommodative Fed
policy support the rising trend of interest rates that we expect through next
year. In addition to providing protection against loss of principal, the Fund's
relatively short 4.9 year average duration will provide for substantial
reinvestment opportunities at the higher yield levels we expect in 2004.
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 9/30/03: $10.18 Per Share
3/31/03: $10.22 Per Share
Total Net Assets: $209.8 Million
30-day SEC Yield: 4.92%
Tax Equivalent Yield: 8.21%(1)
12-Month Distribution Rate: 4.57%
Average Maturity: 14.1 Years
Duration to Estimated Avg. Life: 4.9 Years(2)
Implied Duration: 4.3 Years(2)
(1) For individuals in the 35.0% federal tax and 7.85% MN tax brackets.
(2) See next page.
PORTFOLIO STRUCTURE
(% OF TOTAL NET ASSETS)
Multifamily Mortgage Revenue 36.0
Hospital/Health Care Revenue 18.9
Industrial/PollutionControl 9.7
Other Revenue Bonds 7.8
Single Family Mortgage Revenue 7.6
Insured 5.8
Sectors less than 4.0% 9.4
Cash & Other Net Assets 4.8
40
- -----------------------------------------------------------------------[GRAPHIC]
AVERAGE ANNUAL TOTAL RETURNS*
SIT MONEY LEHMAN LIPPER
MN TAX-FREE 5-YEAR MUNI. MN MUNI. BOND
INCOME FUND BOND INDEX FUND AVG.
------------- ------------- -------------
3 Month** 0.47% 1.01% -0.10%
6 Month** 1.91 2.84 n/a
1 Year 3.75 4.87 3.34
3 Years 6.19 7.44 6.60
5 Years 4.11 5.71 4.31
Inception 5.46 5.66 5.13
(12/1/93)
CUMULATIVE TOTAL RETURNS*
SIT MONEY LEHMAN LIPPER
MN TAX-FREE 5-YEAR MUNI. MN MUNI. BOND
INCOME FUND BOND INDEX FUND AVG.
------------- ------------- -------------
1 Year 3.75% 4.87% 3.34%
3 Years 19.74 24.03 21.14
5 Years 22.30 32.03 23.52
Inception 68.69 71.84 63.59
(12/1/93)
*AS OF 9/30/03. **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 9/30/03 would
have grown to $16,869 in the Fund or $17,184 in the Lehman 5-Year Municipal Bond
Index assuming reinvestment of all dividends and capital gains.
QUALITY RATINGS
(% OF TOTAL NET ASSETS)
LOWER OF MOODY'S, S&P, FITCH OR DUFF & PHELPS RATINGS USED.
[PIE CHART]
AAA 13.4%
AA 8.5%
A 18.1%
BBB 14.9%
Less Than BBB 2.4%
Not Rated 37.9%
Other Assets and Liabilities 4.8%
Assessment of Non-Rated Securities
AAA 4.3%
AA 3.1
A 5.2
BBB 14.6
BB 10.0
Less than BB 0.7
----------
Total 37.9%
41
SIT MINNESOTA TAX-FREE INCOME FUND
SEPTEMBER 30, 2003
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (UNAUDITED)
- -----------------------------------------------------------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE($)(1)
MUNICIPAL BONDS (95.2%) (2)
EDUCATION/STUDENT LOAN (3.8%)
Minnesota Higher Educ. Fac. Auth. Rev. :
425,000 Series 1996-4F1 (Augsburg College), 6.25%, 5/1/23 444,881
750,000 Series 1997-4L (St. John's University), 5.35%, 10/1/17 778,342
750,000 Series 1998-4T (College of St. Benedict), 5.35%, 3/1/20 759,720
458,000 Lease Rev. Series 1999-5A (Concordia University), 5.25%, 4/25/14 461,151
700,000 Series 1999-4Y (Augsburg College), 5.05%, 10/1/13 728,189
275,000 Series 1999-4Z (Northwestern Hlth. Services University), 5.20%, 10/1/13 278,542
100,000 Series 2000-5D (College Art & Design), 5.75%, 5/1/08 109,720
110,000 Refunding Series 2001-5J (St. Scholastica), 4.625%, 12/1/05 116,008
95,000 Refunding Series 1993-3R2 (St. Thomas), 5.60%, 9/1/14 96,066
450,000 Series 2002-5N1 (St. Catherine), 3.00%, 10/1/03 450,018
420,000 Series 2002-5N1 (St. Catherine), 3.00%, 10/1/04 426,035
St. Paul Hsg. & Redev. Auth. Lease Rev.:
930,000 Series 1999 (ACORN Dual Language Academy Proj.), 6.30%, 11/1/17 874,591
630,000 Series 2001A (Cmty. of Peace Academy Proj.), 6.375%, 12/1/11 638,524
750,000 Series 2001A (Cmty. of Peace Academy Proj.), 7.00%, 12/1/15 770,820
350,000 Series 2001A (Cmty. of Peace Academy Proj.), 7.375%, 12/1/19 360,752
415,000 Series 2002A (New Spirit Charter School Proj.), 6.50%, 12/1/12 409,891
100,000 Victoria Private School Fac. Rev. Series 1999A (Holy Family Catholic H.S. Proj.), 5.20%, 9/1/11 99,164
165,000 Winona Port. Auth. Lease Rev. Series 1999A (Bluffview Montessori School Proj.), 8.00%, 12/1/24 174,563
------------
7,976,977
------------
ESCROWED TO MATURITY/PREREFUNDED (0.5%)
790,000 Puerto Rico Childrens Trust Fund Tobacco Settlement Rev. Series 2000, 5.75%, 7/1/20 897,582
200,000 Red Wing Hlth. Care Ctr. Fac. Rev. Refunding Series 1993B (River Region Oblig. Group), 6.20%,
9/1/05 218,664
------------
1,116,246
------------
GENERAL OBLIGATION (1.0%)
540,000 Carver Co. Hsg. & Redev. Auth. Hsg. & Dev. Gross Rev. Ltd.Tax G.O. (Chanhassen Apts. Proj.),
7.00%, 1/1/25 572,465
100,000 Hopkins Redev. Refunding G.O. Series 1993C, 4.60%, 2/1/09 100,158
50,000 Hutchinson ISD No. 423 G.O. Series 1997A, 5.65%, 2/1/18 50,685
60,000 MN G.O. Series 1993, 5.30%, 4/1/07 60,007
30,000 Minneapolis G.O. Series 1993A, 5.40%, 12/1/13 30,210
1,000,000 St. Paul ISD No. 625 G.O. Series 1997A, 5.125%, 2/1/15 1,042,590
100,000 St. Paul Port Auth. G.O. Series 1994, 5.125%, 3/1/17 101,743
20,000 Young America G.O. Series 1992, 6.00%, 2/1/07 20,252
------------
1,978,110
------------
HOSPITAL/HEALTH CARE (18.9%)
Aitkin Hlth. Care Fac. Rev. Series 2001 (Riverwood Hlth. Care Ctr. Proj.):
250,000 6.00%, 2/1/06 252,557
250,000 6.25%, 2/1/07 253,397
Alexandria Hlth. Care Fac. Rev. Series 2002B (BSM Property - Bethany Home Proj.):
375,000 4.65%, 7/1/06 375,176
375,000 4.95%, 7/1/07 375,109
42
- -----------------------------------------------------------------------[GRAPHIC]
- -----------------------------------------------------------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE($)(1)
700,000 Bemidji Hosp. Fac. Rev. Refunding Series 1996 (North Country Hlth. Proj.), 5.625%, 9/1/21
719,145
Brooklyn Center Hlth. Care Fac. Rev. Series 1993 (Maranatha Proj.):
50,000 6.75%, 12/1/05 50,113
500,000 7.50%, 12/1/10 501,105
200,000 7.60%, 12/1/18 200,402
440,000 Cambridge Hsg. & Hlth. Care Fac. Rev. Series 1998C (Grandview West Proj.), 5.25%, 10/1/08 424,081
1,290,000 Cokato Sr. Hsg. Rev. Series 1996 (Cokato Charitable Trust Proj.), 7.00%, 12/1/19 1,257,015
1,150,000 Columbia Heights Multifamily & Health Care Fac. Rev. Series 1998 (Crest View Corp. Proj.),
5.75%, 9/1/11 1,122,837
Crookston Nursing Home & Multifamily Hsg. Rev Series 2002A (Villa St. Vincent Proj.):
100,000 4.75%, 9/1/08 99,434
75,000 5.50%, 9/1/11 74,725
1,000,000 Cuyuna Range Hosp. Dist. Hlth. Fac. Gross Rev. Series 1999A, 6.00%, 6/1/19 971,260
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 (8)(9) 582,200
2,810,000 Duluth Econ. Dev. Auth. Hlth. Care Fac. Rev. Series 2002 (St. Luke's Hosp. Proj.), 6.00%,
6/15/12 2,845,209
1,000,000 Elk River Rev. Series 1998 (Care Choice Member Proj.), 5.60%, 8/1/13 938,700
400,000 Fergus Falls Hlth. Care Fac. Auth. Rev. Series 1995 (Lake Region Hosp. Corp.), 6.40%, 12/1/15 422,024
Hastings Hlth. Care Fac. Rev. Series 1998 (Augustana Home of Hastings Proj.):
115,000 5.10%, 11/1/09 109,894
120,000 5.20%, 11/1/10 113,987
135,000 5.40%, 11/1/12 126,861
140,000 5.50%, 11/1/13 130,931
540,000 Hopkins Hlth. Care Fac. Rev. Series 1999 (Augustana Chapel View Homes, Inc. Proj.), 6.00%,
3/1/14 532,580
1,685,000 Maplewood Hlth. Care Fac. Rev. (Volunteers of America Care Ctrs. Proj.), 7.375%, 10/1/12 1,696,879
Marshall Medical Center Gross Rev. (Weiner Memorial Medical Center Proj.):
305,000 Series 1999, 5.65%, 11/1/13 310,890
320,000 Series 1999, 5.70%, 11/1/14 324,608
430,000 Series 2003B, 2.00%, 11/1/04 429,871
150,000 Series 2003B, 4.85%, 11/1/11 157,387
1,426,304 Minneapolis CDA Promissory Note (Augustana Chapel View Proj.), 4.25%, 5/23/09 1,402,926
Minneapolis & St. Paul Hsg. & Redev. Auth. Hlth. Care Sys. Rev. Series 1992 (Group Health Plan
Proj.):
4,280,000 6.75%, 12/1/13 4,369,880
425,000 6.90%, 10/15/22 430,529
1,045,000 Minneapolis Hlth. Care Fac. Rev. Series 1993 (St. Olaf Res. Proj.), 7.00%, 10/1/18 866,106
1,000,000 Minneapolis Hlth. Care Fac. Rev. Series 1998A (Benchmark Hlth. Care Proj.), 6.625%,
12/1/28 (8)(9) 601,080
895,000 Minneapolis Hlth. Care Fac. Rev. Series 1999 (Shelter Care Foundation Proj.), 6.00%, 4/1/10 878,058
MN Agr. & Econ. Dev. Board Hlth. Care Rev. Series 1999 (Benedictine Care Centers Proj.):
115,000 5.45%, 2/1/09 116,546
120,000 5.45%, 8/1/09 121,502
120,000 5.50%, 2/1/10 121,268
125,000 5.50%, 8/1/10 125,981
See accompanying notes to portfolios of investments on page 56. 43
SIT MINNESOTA TAX-FREE INCOME FUND
SEPTEMBER 30, 2003
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (UNAUDITED)
- -----------------------------------------------------------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE($)(1)
MN Agr. & Econ. Dev. Board Rev. Series 2000 (Evangelical Lutheran Good Samaritan Society Proj.):
410,000 5.80%, 8/1/08 452,308
750,000 6.55%, 8/1/16 832,050
MN Agr. & Econ. Dev. Board Rev. Series 2002 (Evangelical Lutheran Good Samaritan Society Proj.):
320,000 3.85%, 2/1/04 322,042
230,000 4.35%, 2/1/05 236,295
220,000 5.50%, 2/1/12 234,476
MN Agr. & Econ. Dev. Board Rev. Series 2000A (Fairview Hlth. Care Sys. Proj.):
500,000 6.00%, 11/15/03 502,685
500,000 5.625%. 11/15/04 520,535
645,000 5.625%. 11/15/05 691,201
590,000 5.70%, 11/15/06 647,761
Northfield Hospital Rev. Series 2001C:
1,080,000 6.00%, 11/1/13 1,156,993
1,600,000 6.00%, 11/1/26 1,629,616
650,000 Olmsted Co. Hlth. Care Fac. Rev. Series 1998 (Olmsted Medical Ctr. Proj.), 5.45%, 7/1/13 676,676
Rochester Hlth. Care & Hsg. Rev. Series 2003A (Samaritan Bethany Inc. Proj.):
50,000 2.375%, 2/1/04 49,999
160,000 3.25%, 2/1/06 161,562
500,000 6.25%, 8/1/19 511,175
St. Paul Hsg. & Redev. Auth. Hlth. Care Rev. Series 1998 (Regions Hosp. Proj.): 800,000 5.00%,
5/15/08 857,224
250,000 5.00%, 5/15/10 262,458
1,340,000 5.20%, 5/15/13 1,384,073
2,000,000 5.25%, 5/15/18 2,022,180
960,000 St. Paul Hsg. & Redev. Auth. Nursing Home Dev. Rev. Refunding Series 1996C (Franciscan Hlth.
Cmmty. Proj., St. Mary's Home), 7.00%, 7/1/21 923,155
400,000 St. Paul Hsg. & Redev. Auth. Hlth. Care Rev. Series 2001A (Model Cities Hlth. Ctr. Proj.),
6.50%, 11/1/11 399,524
820,000 Wadena Co. Hlth. Care Fac. Rev. Series 1994B, 7.45%, 9/1/15 831,242
------------
39,737,483
------------
INDUSTRIAL/POLLUTION CONTROL (9.7%)
140,000 Anoka Co. Res. Recovery Rev. Refunding Series 1999 (Northern States Power Co.), 4.35%, 12/1/04 141,586
2,710,000 Anoka Co. Solid Waste Disp. Rev. Series 1987A (Natl. Rural Util. Proj.), 6.95%, 12/1/08 (4) 2,746,504
475,000 Bass Brook Pollution Ctrl. Rev. Refunding Series 1992 (MN Power & Light Co. Proj.), 6.00%,
7/1/22 481,370
1,695,000 Burnsville Solid Waste Rev. Refunding Series 2003A (Freeway Transfer Inc. Proj.), 4.15%,
4/1/10 (4) 1,653,472
830,000 East Grand Forks Industrial Dev. Rev. Refunding Series 2001B (Am. Crystal Sugar Proj.), 5.40%,
4/1/11 897,305
335,000 Guam Economic Dev. Auth. Tobacco Settlement Asset-Backed Series 2001A, 5.00%, 5/15/22 327,831
1,000,000 Guam Econ. Dev. Auth. Tobacco Settlement Asset-Backed Rev. Series 2001B, Zero Coupon, 5.20%
Effective Yield on Purchase Date, 5/15/15 759,340
1,500,000 Hugo Industial Dev. Rev. Refunding Series 2002 (MN Union Builders Proj.), 7.75%, 3/1/17 (4) 1,471,500
MN Agricultural & Econ. Dev. Board Small Business Dev. Loan Program Rev.:
150,000 Series 2002A Lot 1, 3.15%, 8/1/04 (4) 151,380
155,000 Series 2002A Lot 1, 3.65%, 8/1/05 (4) 158,692
210,000 Medina Industrial Dev. Rev. Refunding Series 1998 (Temroc Metals, Inc. Proj.), 5.10%,
10/1/05(4) 220,013
44
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- -----------------------------------------------------------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE($)(1)
Owatonna Industrial Dev. Rev. Series 1997:
280,000 7.25%, 5/1/14 (4) 261,293
505,000 7.375%, 5/1/17 (4) 470,993
525,000 Puerto Rico Tourist, Educational, Medical and Environmental Control Fac. Financing Auth.
Industrial Rev. Series 1998A (Guaynabo Warehouse for Emergencies Proj.), 4.35%, 7/1/06 556,857
Puerto Rico Childrens Trust Fund Tobacco Settlement Rev.:
3,745,000 Series 2002, 5.375%, 5/15/33 3,318,819
1,000,000 Series 2002, 5.50%, 5/15/39 867,980
80,000 Ramsey & Washington Cos. Res. Recovery Refunding Rev. Series 1999 (NSP Co. Proj.), 3.75%,
12/1/03 80,062
200,000 Richfield Cmty. Dev. Rev. Refunding 1994 (Richfield Shoppes Proj.), 8.375%, 10/1/05 202,984
Sauk Centre Industrial Dev. Rev. Series 1998 (Seluemed LLP Proj.)(LOC First Trust):
75,000 4.95%, 4/1/10 (4) 76,739
275,000 5.75%, 4/1/18 (4) 271,807
Seaway Port Auth. (Duluth) Industrial Dev. Dock & Wharf Rev. Refunding:
1,500,000 Series 1992B (Cargill, Inc. Proj.), 6.80%, 5/1/12 1,554,000
1,400,000 Series 1993A (Cargill, Inc. Proj.), 5.75%, 12/1/16 1,431,640
St. Paul Hsg. & Redev. Auth. District Cooling Rev. Series 1998J:
95,000 5.125%, 3/1/12 100,481
500,000 5.35%, 3/1/18 520,610
1,810,000 Virgin Islands Tobacco Settlement Financing Corp. Asset-Backed Rev. Series 2001, 5.00%, 5/15/21 1,584,257
------------
20,307,515
------------
INSURED (5.8%)
240,000 Anoka-Hennepin ISD No. 11 G.O. Series 1994B (MBIA insured), 6.20%, 2/1/13 244,030
95,000 Dakota Co. Hsg. Dev. G.O. Series 1995 (Ambac insured), 5.10%, 1/1/11 99,531
50,000 Detroit Lakes G.O. Series 1997A (FSA insured), 4.90%, 2/1/08 50,608
2,500,000 Duluth Econ. Dev. Auth. Hlth. Care Fac. Rev. Series 1993C (Benedictine Health System -
St. Mary Medical Ctr. Proj.)(Connie Lee insured), 5.875%, 2/15/08 2,557,100
565,000 Hastings Hlth. Care Fac. Rev. Series 1998 (Regina Med. Ctr.)(ACA insured), 5.25%, 9/15/18 576,837
190,000 MN HFA Rental Hsg. Series 1995D (MBIA insured), 5.15%, 2/1/04 192,162
105,000 Lincoln Co. Refunding G.O. Series 2003A (Water Sys. Proj)(Ambac insured), 2.50%, 1/1/04 105,401
70,000 Minneapolis & St. Paul Hsg. & Redev. Auth. Hlth. Care Sys. Rev. Series 1993A (Healthspan Proj.)
(Ambac insured), 5.00%, 11/15/13 71,712
1,650,000 Minneapolis & St. Paul Metro Airport Comm. Airport Rev. Series 1998B (Ambac insured), 5.25%,
1/1/13 (4) 1,762,018
300,000 Scott Co. Hsg. & Redev. Auth. Ltd. Special Benefits Tax Series 1997B (River City Centre Proj.),
(Ambac insured), 5.45%, 2/1/20 327,087
2,600,000 St. Paul Hsg. & Redev. Sales Tax Rev. Refunding Series 1996 (Civic Center Proj.) (FSA insured),
7.10%, 11/1/23 3,238,482
400,000 St. Paul Hsg. & Redev. Auth. Hosp. Rev. Series 1993 (St. Paul - Ramsey Med. Ctr. Proj.) (Ambac
insured), 5.15%, 5/15/04 409,308
St. Paul Port Auth. Tax Increment Rev. Series 1993 (Energy Park Proj.)(Radian insured):
370,000 5.20%, 2/1/05 371,158
185,000 5.00%, 2/1/06 185,505
1,750,000 White Earth Band of Chippewa Indians Rev. Series 2000A (ACA insured), 7.00%, 12/1/11 2,009,648
------------
12,200,587
------------
See accompanying notes to portfolios of investments on page 56. 45
SIT MINNESOTA TAX-FREE INCOME FUND
SEPTEMBER 30, 2003
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (UNAUDITED)
- -----------------------------------------------------------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE($)(1)
MULTIFAMILY MORTGAGE (36.0%)
1,520,000 Apple Valley Multifamily Hsg. Rev. Refunding Series 1998A (Mtg. Loan/Apple Valley Villa Proj.)
(GNMA collateralized), 5.25%, 8/1/18 1,570,297
Austin Hsg. & Redev. Auth. Governmental Hsg. Gross Rev. Series 1995A (Courtyard Res. Proj.):
50,000 7.00%, 1/1/15 50,393
500,000 7.25%, 1/1/26 503,905
1,000,000 Brooklyn Center Multifamily Hsg. Rev. Series 1993 (Ponds Family Hsg. Proj.), 5.90%, 1/1/20 1,003,440
Buffalo Rev. Refunding Series 1998 (Covenant Retirement Cmtys. Proj.):
350,000 4.35%, 12/1/03 351,270
250,000 4.45%, 12/1/04 255,770
250,000 4.55%, 12/1/05 259,825
Burnsville Multifamily Hsg. Rev. Refunding Series 1991 (Oak Leaf Apts. Proj.)(GNMA
collateralized):
835,000 7.05%, 1/1/12 844,761
780,000 7.125%, 1/1/17 789,087
860,000 7.125%, 1/1/21 869,881
150,000 7.15%, 1/1/27 151,696
530,000 7.15%, 1/1/23 536,037
425,000 7.15%, 1/1/25 429,807
960,000 Burnsville Multifamily Hsg. Rev. Refunding Series 1994 (Bridgeway Apts. Proj.), 7.25%, 2/1/14 960,422
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 1,220,256
650,000 Rev. Refunding Series 1997A (Waybury Apts. Proj.), 5.875%, 8/1/27 667,186
400,000 Subordinate Rev. Refunding Series 1997C (Waybury Apts. Proj.), 8.00%, 8/1/27 404,000
Chaska Multifamily Hsg. Rev. Series 1999 (West Suburban Hsg. Partners Proj.):
235,000 5.00%, 9/1/09 (4) 228,660
495,000 5.375%, 9/1/14 (4) 465,161
405,000 Chisago City Hlth. Fac. Rev. Refunding Series 1995A (Pleasant Heights Proj.), 7.30%, 7/1/18 424,675
Cloquet Multifamily Hsg. Rev. Refunding Series 2001A (HADC Proj.):
55,000 6.00%, 2/1/05 55,392
60,000 6.25%, 2/1/06 60,546
60,000 6.50%, 2/1/07 60,685
75,000 7.10%, 2/1/10 75,874
700,000 Coon Rapids Multifamily Hsg. Rev. Refunding Series 1997A (Margaret Place Apts. Proj.), 6.50%,
5/1/25 657,573
Coon Rapids Senior Hsg. Rev. Refunding Series 1998 (Epiphany Sr. Citizens Hsg. Corp. Proj.):
115,000 5.30%, 11/1/07 114,773
115,000 5.40%, 11/1/08 114,430
170,000 5.50%, 11/1/10 165,237
545,000 5.80%, 11/1/18 500,114
Dakota Co. Hsg. & Redev. Auth. Multifamily Hsg. Rev. Refunding (Walnut Trails Apts. Proj.):
4,400,000 Series 1995A (GNMA collateralized), 7.90%, 1/20/31 (4) 4,748,920
200,000 Subordinate Series 1995C, 9.00%, 1/20/15 (4) 198,698
Dakota Co. Hsg. & Redev. Auth. Multifamily Hsg. Rev.:
1,000,000 Series 1999 (View Pointe Apts. Proj.), 6.125%, 11/1/17 943,680
94,000 Series 1999 (Dakota Station Proj.), 5.65%, 1/20/24 98,421
46
- -----------------------------------------------------------------------[GRAPHIC]
- -----------------------------------------------------------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE($)(1)
800,000 Dakota Co. Cmty. Dev. Agy. Hsg. Fac. Rev. Subordinate Series 2002B (HADC Apple Valley Sr. Apts.
Proj.), 7.50%, 8/15/43 787,936
Eden Prairie Multifamily Hsg. Rev. Refunding :
660,000 Series 1991 (Windslope Apts. Proj.)(Section 8), 7.00%, 11/1/06 660,937
1,500,000 Series 1991 (Windslope Apts. Proj.)(Section 8), 7.10%, 11/1/17 1,501,530
300,000 Series 1997A (Preserve Place Proj.) (GNMA collateralized), 5.50%, 1/20/18 314,277
410,000 Series 1997A (Preserve Place Proj.) (GNMA collateralized), 5.60%, 7/20/28 421,168
420,000 Senior Series 2001A (Rolling Hills Proj.) (GNMA collateralized), 6.00%, 8/20/21 463,352
1,100,000 Subordinate Series 2001C (Rolling Hills Proj.), 9.00%, 4/1/43 1,065,493
Fairmont Hsg. Fac. Rev. Series 2002-A1 (Homestead-GEAC Proj.):
1,100,000 6.625%, 10/1/11 1,121,307
295,000 6.875%, 10/1/14 295,938
Grand Rapids Hsg. & Redev. Auth. (Lakeshore Place and Forest Park West Apts. Proj.):
70,000 Series 1999B, 5.00%, 10/1/09 67,024
500,000 Series 1999A, 5.20%, 10/1/19 505,435
1,660,000 Series 1999A, 5.30%, 10/1/29 1,647,500
110,000 Series 1999B, 5.70%, 10/1/29 96,540
510,000 Hopkins Subordinate Multifamily Hsg. Rev. Refunding Series 1996C (Auburn Apts. Proj.), 8.00%,
6/20/31 509,337
Hopkins Multifamily Hsg. Rev. Series 1996 (Hopkins Renaissance Proj.) (Section 8):
100,000 5.85%, 4/1/09 107,817
450,000 6.25%, 4/1/15 475,290
500,000 Hutchinson Hsg. Fac. Rev. Series 1994 (Prince of Peace Proj.), 7.375%, 10/1/12 501,260
Inver Grove Heights Hsg. Rev. (PHM/Inver Grove, Inc Proj):
105,000 Series 2001A, 5.50%, 5/1/08 104,575
110,000 Series 2001A, 5.50%, 11/1/08 109,513
65,000 Series 2001B, 5.00%, 5/1/06 65,927
70,000 Series 2001B, 5.25%, 5/1/07 70,932
75,000 Series 2001B, 5.50%, 5/1/08 75,937
80,000 Series 2001B, 5.60%, 5/1/09 80,952
70,000 Series 2001B, 5.00%, 11/1/06 71,227
75,000 Series 2001B, 5.50%, 11/1/08 76,245
80,000 Series 2001B, 5.60%, 11/1/09 80,859
3,340,000 Little Canada Multifamily Hsg. Rev. Series 1997A (Hsg. Alt. Dev. Co. Proj.), 6.10%, 12/1/17 3,286,861
1,400,000 Maplewood Multifamily Hsg. Rev. Series 1998 (Park Edge Apts. Proj.), 6.50%, 5/1/29 (4) 1,293,698
Maplewood Multifamily Refunding Rev. (Village on Woodlyn Proj.):
1,605,000 Series 1999A (GNMA collateralized), 6.75%, 7/20/30 (4) 1,686,486
100,000 Subordinate Series 1999C-1, 8.00%, 11/1/30 (4) 97,826
275,000 Subordinate Series 1999C-2, 8.00%, 11/1/30 (4) 269,021
Minneapolis Multifamily Hsg. Rev.:
500,000 Series 2002A (Keeler Apts. Proj.), 7.00%, 10/1/17 492,565
355,000 Series 1996 (Belmont Apts.), 7.25%, 11/1/16 356,161
Series 1994 (Findley Place Townhomes Proj.) (Section 8):
50,000 6.00%, 12/1/05 (4) 50,622
1,465,000 7.00%, 12/1/16 (4) 1,465,630
See accompanying notes to portfolios of investments on page 56. 47
SIT MINNESOTA TAX-FREE INCOME FUND
SEPTEMBER 30, 2003
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (UNAUDITED)
- -----------------------------------------------------------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE($)(1)
4,630,000 Series 1996A (Nicollet Towers) (Section 8), 6.00%, 12/01/19 4,753,436
1,000,000 Series 1998 (Riverside Plaza Proj.) (GNMA collateralized), 5.10%, 12/20/18 (4) 1,025,710
345,000 Series 2000 (Garr Scott Loft Proj.)(LOC U.S. Bank), 5.95%, 5/1/30 (4) 368,046
2,500,000 Series 2002B Mandatory Put 5/20/04 (Sumner Field Partners Proj.), 3.75%, 5/20/07 (4) 2,518,175
50,000 Series 2003A (Sumner Proj.) (GNMA collateralized), 3.00%, 8/20/08 (4) 50,444
1,000,000 Series 2003 (Sumner Field Phase II Proj.), 2.60%, 8/20/08 (4) 1,002,740
Minneapolis Student Hsg. Rev. Series 2000 (Riverton Community Hsg. Proj.):
100,000 6.80%, 7/1/10 104,715
240,000 6.90%, 7/1/11 249,257
50,000 MN HFA Rental Hsg. Rev. Series 1996A, 6.10%, 8/1/27 (4) 51,713
200,000 Minnetonka Hsg. Fac. Rev. Series 1994 (Beacon Hill Housing Proj.), 7.00%, 6/1/04 201,006
350,000 Minnetonka Multifamily Hsg. Rev. Refunding Subordinate Series 1994C (Brier Creek Proj.), 8.00%,
12/20/16 356,962
Minnetonka Multifamily Hsg. Rev. Refunding Series 1999A (GNMA collateralized) (Archer Heights
Apts. Proj.):
540,000 5.10%, 7/20/13 (4) 562,896
975,000 5.20%, 1/20/18 (4) 1,015,531
Minnetonka Senior Hsg. Rev. Series 1997 (Westridge Sr. Hsg. Proj.):
110,000 6.30%, 9/1/08 110,002
185,000 6.50%, 9/1/12 184,493
New Ulm Multifamily Rev. Series 1999 (HADC Ridgeway Proj.):
95,000 5.35%, 12/1/08 92,977
100,000 5.40%, 12/1/09 95,596
105,000 5.50%, 12/1/10 99,797
110,000 5.60%, 12/1/11 104,123
Plymouth Multifamily Hsg. Rev. Refunding Series 1996A (Fox Forest Apts. Proj.) (GNMA
collateralized):
1,650,000 Series 1996A, 8.05%, 6/20/31 1,780,911
650,000 Series 1996C, 8.00%, 6/20/31 649,155
Robbinsdale Multifamily Hsg. Rev. Series 1996A (Copperfield Hill Proj.):
960,000 7.20%, 12/1/16 942,298
180,000 7.35%, 12/1/31 175,387
2,800,000 Rochester Multifamily Rev. Refunding Series 2000A (Weatherstone Apts. Proj.) (LOC Household
Finance) (Mandatory Put 9/1/17) 6.375%, 9/1/37 (4) 2,944,508
2,820,000 Roseville Hsg. Fac. Rev. Refunding Bonds Series 1998 (College Properties Inc. Proj.), 5.60%,
10/1/13 2,845,916
325,000 Sandstone Econ. Dev. Auth. Hsg. & Dev. Rev. Series 1994A (Family Apts. Proj.), 8.00%, 1/1/12 331,237
500,000 Shoreview Sr. Hsg. Rev. Series 1996 (Shoreview Sr. Residence Proj.), 7.25%, 2/1/26 526,320
St. Cloud Hsg. & Redev. Auth. Multifamily Hsg. Rev.:
1,365,000 Series 1993 (Germain Towers Proj.) (Section 8), 5.90%, 9/1/20 1,099,453
Series 1999A (Parkview Terrace Apts. Proj.) (Section 8):
85,000 5.00%, 6/1/09 79,754
1,029,000 5.50%, 6/1/18 905,067
300,000 St. Louis Park Rental Hsg. Dev. Rev. Refunding Series 1993 (FNMA-Tamarind Proj.), 5.50%, 11/1/13 307,161
St. Louis Park Multifamily Hsg. Rev. Refunding:
650,000 Series 1995 (FHA insured) (Knollwood Cmty. Hsg. Proj.), 6.15%, 12/1/16 677,905
500,000 Series 1998A (Park Ridge Apts. Proj.) (GNMA collateralized), 5.25%, 11/1/20 514,870
48
- -----------------------------------------------------------------------[GRAPHIC]
- -----------------------------------------------------------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE($)(1)
200,000 St. Paul Hsg. & Redev. Auth. Multifamily Refunding Rev. Series 1995 (Sun Cliffe Apts. Proj.)
(GNMA collateralized), 5.875%, 7/1/15 210,048
3,300,000 St. Paul Port Authority Multifamily Hsg. Refunding (Jackson Towers Apts. Proj.) Senior Series
1998-1A (GNMA collateralized), 6.95%, 4/20/33 3,567,267
1,500,000 Victoria Sr. Hsg. Rev. Series 2003B (PHM/Chanhassen Inc. Proj.), 6.25%, 8/1/33 1,502,310
1,750,000 Virginia Hsg. & Redev. Auth. Governmental Hsg. Rev. Refunding Series 1998A (Laurentian Manor
Proj.), 5.75%, 5/1/32 1,709,120
880,000 Washington Co. Hsg. & Redev. Auth. Multifamily Hsg. Rev. Refunding Series 1994 (White Bear Lake
Transitional Hsg. Proj.), 6.625%, 8/1/24 889,038
755,000 Washington Co. Hsg. & Redev. Auth. Governmental Hsg. Rev. Refunding Series 1999A (Briar Pond
Apts. Proj.) (GNMA collateralized), 5.50%, 2/20/14 776,721
------------
75,440,115
------------
MUNICIPAL LEASE (2.4%) (5)
250,000 Brooklyn Park Certificates of Participation Series 1996, 5.45%, 9/27/06 253,695
115,000 Hennepin Co. Hsg. & Redev. Auth. Rev. Series 1993A (Community Provider Program), 5.70%, 8/1/13 115,113
655,000 Hibbing Econ. Dev. Auth. Public Proj. Rev. Series 1997 (Hibbing Lease Obligations Proj.), 6.10%,
2/1/08 695,040
125,000 Mountain Iron Hsg. & Redev. Auth. Rev. Series 2001A (Arrowhead Library Sys. Proj.), 5.00%,
9/1/09 136,079
Shorewood Econ. Dev. Auth. Public Safety Fire Fac. Lease Rev. Series 2002A:
135,000 3.00%, 2/1/05 136,364
140,000 3.50%, 2/1/06 142,618
800,000 St. Cloud Certificates of Participation Series 1997, 5.90%, 12/1/17 822,376
1,461,779 St. Paul Lease Series 1998 (City Hall Annex Building), 5.71%, 10/1/18 1,428,699
400,000 St. Paul Hsg. & Redev. Auth. Lease Rev. Series 2000 (Rivercentre Pkg. Ramp Proj.), 5.70%, 5/1/08 450,580
589,853 University of Puerto Rico Certificates of Participation Series 2001, 6.25%, 1/10/05 590,997
350,000 Washington Co. Hsg. & Redev. Auth Jail Facility Rev. Refunding Series 1993, 5.00%, 2/1/06 351,064
------------
5,122,625
------------
PUBLIC FACILITIES (1.5%)
1,000,000 Minneapolis Cmty. Dev. Agy. Ltd. Tax Supported Dev. Rev. Common Bond Fund Series 2001G3
(LOC-U.S. Bank), 5.35%, 12/1/21 1,037,970
MN Agric. Society State Fair Rev. Series 2003:
250,000 3.00%, 9/15/04 253,270
395,000 3.00%, 9/15/05 402,967
St. Paul Recreational Fac. Gross Rev. Series 1996D:
160,000 5.50%, 6/1/08 167,645
1,245,000 5.875%, 6/1/18 1,306,379
------------
3,168,231
------------
SINGLE FAMILY MORTGAGE (7.6%)
Dakota County Hsg. & Redev. Auth. Single Family Mtg. Rev.:
295,000 Series 1994A (FNMA backed), 6.70%, 10/1/09 (4) 300,068
140,000 Series 1995 (FNMA & GNMA backed), 6.25%, 10/1/09 (4) 142,769
885,000 Minneapolis Redev. Mtg. Rev. Series 1987A (Riverplace Proj.) (LOC Bk. of Tokyo), 7.10%, 1/1/20 888,159
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 1,148,931
110,000 Minneapolis Single Family Mtg. Rev. Series 1995V (FNMA & GNMA backed), 6.25%, 4/1/22 110,016
See accompanying notes to portfolios of investments on page 56. 49
SIT MINNESOTA TAX-FREE INCOME FUND
SEPTEMBER 30, 2003
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (UNAUDITED)
- -----------------------------------------------------------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE($)(1)
MN HFA Single Family Mtg. Rev.:
125,000 Series 1994F, 5.45%, 7/1/04 128,580
135,000 Series 1994F, 5.55%, 7/1/05 138,918
545,000 Series 1994F, 6.30%, 7/1/25 557,366
1,960,000 Series 1994I, 6.90%, 7/1/22 (4) 2,004,355
30,000 Series 1994K, 5.90%, 1/1/07 30,821
205,000 Series 1994L, 6.70%, 7/1/20 (4) 209,834
25,000 Series 1995K, 6.20%, 7/1/20 (4) 25,854
330,000 Series 1996D, 6.00%, 1/1/16 346,365
245,000 Series 1997A, 5.60%, 7/1/09 260,989
575,000 Series 1996H, 6.00%, 1/1/21 600,984
1,580,000 Series 1997D, 5.85%, 7/1/19 (4) 1,649,204
80,000 Series 1997E, 5.90%, 7/1/29 (4) 82,865
195,000 Series 1997G, 6.00%, 1/1/18 204,539
2,080,000 Series 1998C, 5.25%, 1/1/17 2,174,224
90,000 Series 1998F, 4.95%, 7/1/08 95,171
670,000 Series 1998F-1, 5.45%, 1/1/17 710,414
145,000 Series 1998F, 5.70%, 1/1/17 152,243
755,000 Series 1999B, 5.25%, 1/1/20 779,885
635,000 Series 1999C, 4.25%, 7/1/04 (4) 648,252
1,015,000 Series 1999C, 4.40%, 7/1/05 (4) 1,061,274
290,000 Series 2000C, 6.10%, 7/1/30 (4) 300,678
500,000 Series 2003H, 1.00%, 7/1/36 (4) 499,965
53,619 Moorhead Single Family Mtg. Rev. Refunding Series 1992B, 7.00%, 8/1/11 54,025
966,042 St. Paul Residual Interest Rev. Series 1995 Convertible Capital Appreciation Bonds, Zero Coupon,
7.23% Effective Yield on Purchase Date, 9/1/11 563,106
------------
15,869,854
------------
TRANSPORTATION REVENUE (0.1%)
250,000 Minneapolis & St. Paul Metro Airport Comm. Special Fac. Rev. Series 2001B (Northwest Airlines),
6.50%, 4/1/25 (4) 230,205
------------
UTILITY (0.1%)
Lake Crystal Public Utilities Comm. Electric Rev. Series 1998:
130,000 5.45%, 12/1/13 132,679
120,000 5.50%, 12/1/16 122,140
------------
254,819
------------
OTHER REVENUE BONDS (7.8%)
Columbia Heights Commercial Dev. Refunding Rev. Series 1999 (Columbia Park Properties -
Medical Clinic Proj.):
250,000 5.15%, 12/1/08 239,400
1,750,000 5.60%, 12/1/15 1,572,497
Commissioner of Iron Range Resources and Rehab. Gross Rev. (Giant's Ridge Rec. Area Proj.):
205,000 Series 2000, 5.90%, 11/1/03 205,576
200,000 Series 2000, 6.25%, 11/1/05 212,416
900,000 Series 2000, 7.25%, 11/1/16 940,680
50
- -----------------------------------------------------------------------[GRAPHIC]
- -----------------------------------------------------------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE($)(1)
Minneapolis Cmty. Dev. Agy. Ltd. Tax Common Bond Fund:
100,000 Series 1993-5 (Winslow Printing), 6.125%, 12/1/06 (4) 100,567
170,000 Series 1997-1 (Halper Corrugated Box Mfg. Co.), 5.90%, 6/1/07 (4) 189,569
500,000 Series 1999-1A (Discount Steel), 5.25%, 6/1/19 (4) 510,520
1,105,000 Minneapolis Public Hsg. Auth. Series 1997 (General Credit Energy Savings Proj.), 6.00%, 7/1/08 1,091,884
200,000 Renville Gross Rev. Golf Course Bond Series 1997, 6.50%, 2/1/19 204,178
St. Paul Hsg. & Redev. Auth. Tax Increment Rev.:
700,000 Series 2001 (US Bank Operations Ctr. Proj.), 6.125%, 8/1/19 713,216
1,140,000 Series 2002 (North Quadrant Owner Occupied Proj. Phase 2), 7.00%, 2/15/28 1,160,189
1,084,000 Series 2002 (North Quadrant Owner Occupied Proj. Phase 1), 7.50%, 2/15/28 1,170,384
3,000,000 Series 2002A (Upper Landing Proj.), 6.80%, 3/1/29 3,003,750
2,000,000 Series 2002B-2 (Upper Landing Proj.), 6.90%, 3/1/29 1,969,240
1,300,000 Series 2002 (Drake Marble Proj.), 6.75%, 3/1/28 1,295,281
730,000 Steele Co. Hlth. Care Fac. Rev. Series 2000 (Elderly Hsg. Proj.), 6.625%, 6/1/20 793,495
Victoria Recreational Facility Gross Rev. Series 2002:
70,000 4.75%, 2/1/12 70,606
75,000 4.75%, 8/1/12 75,649
85,000 5.10%, 8/1/15 86,068
800,000 Virgin Islands Public Fin. Auth. Rev. Series 1998C, 5.50%, 10/1/04 828,760
------------
16,433,925
------------
TOTAL MUNICIPAL BONDS (COST: $199,343,354) 199,836,692
------------
SHORT-TERM SECURITIES (5.1%) (2)
350,540 Federated Minnesota Municipal Cash Fund, 0.77% 350,540
4,850,000 Minneapolis CDA Pollution Ctrl. Agy. Rev. Series 1985 (NSP Co. Proj.), variable rate, 3/1/11 4,850,000
3,600,000 Minneapolis Convention Ctr. Rev. Series 2000, variable rate, 12/1/18 3,600,000
1,780,000 MN Higher Educ. Facs. Auth. Rev. Series 1992 (Carleton College), varaible rate, 11/1/12 1,780,000
50,009 Wells Fargo Minnesota Municipal Cash Fund, 0.33% 50,009
------------
TOTAL SHORT-TERM SECURITIES (COST: $10,630,549) 10,630,549
------------
TOTAL INVESTMENTS IN SECURITIES (COST: $209,973,903) (7) $210,467,241
============
See accompanying notes to portfolios of investments on page 56. 51
SIT BOND FUND
SIX MONTHS ENDED SEPTEMBER 30, 2003
[PHOTO] ------------------------------------------------------------------------
SENIOR PORTFOLIO MANAGERS, MICHAEL C. BRILLEY AND BRYCE A. DOTY, CFA
PORTFOLIO MANAGER, MARK H. BOOK, CFA
The Sit Bond Fund returned +2.48% during the past six months while the
Lehman Aggregate Bond Index returned +2.35%. The Fund's 30-day SEC yield was
4.81% and its 12-month distribution rate was 4.77%.
TURBULENT TIMES IN THE BOND MARKET
U.S. Treasury yields ended the six-month period nearly unchanged, but that
certainly does not tell the story of the bond market over that period. After
U.S. Treasury yields fell to historic lows in June, we saw a dramatic reversal
in July and August as yields climbed sharply. September saw yields plummet
again, albeit to levels higher than June. This volatility led to extreme
fluctuation in monthly returns for bonds. For example, the Index saw its highest
monthly return in over six years in September, but experienced its worst monthly
return in over 21 years in July.
Corporate bonds provided superior returns versus any other sector during
the past six months. In particular, lower quality corporates had historically
high returns as the markets became convinced an economic recovery was unfolding.
U.S. Treasury and Agency securities returned much less, essentially earning
their coupons, while mortgages were the worst performing sector due to
historically high levels of prepayments. The Fund benefited from its security
selection within the corporate sector and its under-weighting of Treasuries and
Agencies while its under-weighting in 5-year maturity securities, the best
performing part of the yield curve, hindered performance. Overall, the Fund
out-performed the Index for the six month period.
STRONG ECONOMIC GROWTH SHOULD CONTINUE
The economy continues to exhibit signs of strength despite the
disappointing lack of job creation. The September increase in non-farm payrolls
surprised the market and could be a turning point in employment. Expectations
for stronger economic growth, as well as likely large increases in issuance of
U.S. Treasury securities due to the increasing budget deficit, should lead to
modestly higher interest rates. Therefore, the Fund continues to be defensively
positioned with a duration shorter than the Index and an emphasis on generating
high levels of current income.
INVESTMENT OBJECTIVE AND STRATEGY
The investment objective of the Fund is to maximize total return,
consistent with preservation of capital. The Fund will pursue its objective by
investing in a diversified portfolio of fixed-income securities which include,
but are not limited to, the following: U.S. government securities; corporate
debt securities; corporate commercial paper; mortgage and other asset-backed
securities.
PORTFOLIO SUMMARY
Net Asset Value 9/30/03: $9.91 Per Share
3/31/03: $9.89 Per Share
Total Net Assets: $17.9 Million
30-day SEC Yield: 4.81%
12-Month Distribution Rate: 4.77%
Average Maturity: 18.7 Years
Effective Duration: 3.8 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 and Notes 29.3
Mortgage Pass Through 25.8
Asset-Backed Securities 18.8
Closed End Mutual Funds 6.7
Collateralized Mortgage Obligations 5.3
Sectors less than 5.0% 8.6
Cash & Other Net Assets 5.5
52
- -----------------------------------------------------------------------[GRAPHIC]
AVERAGE ANNUAL TOTAL RETURNS*
LIPPER INTER.
SIT LEHMAN INVESTMENT
BOND AGGREGATE GRADE BOND
FUND BOND INDEX FUND AVG.
----------- ----------- -----------
3 Month** 0.34% -0.15% -0.16%
6 Month** 2.48 2.35 n/a
1 Year 3.93 5.41 5.97
3 Years 7.53 8.94 8.03
5 Years 5.45 6.63 5.74
Inception 6.35 7.09 6.29
(12/1/93)
CUMULATIVE TOTAL RETURNS*
LIPPER INTER.
SIT LEHMAN INVESTMENT
BOND AGGREGATE GRADE BOND
FUND BOND INDEX FUND AVG.
----------- ----------- -----------
1 Year 3.93% 5.41% 5.97%
3 Years 24.32 29.30 26.08
5 Years 30.38 37.83 32.22
Inception 83.27 96.20 82.26
(12/1/93)
*AS OF 9/30/03. **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 POINT CHART]
The sum of $10,000 invested at inception (12/1/93) and held until 9/30/03 would
have grown to $18,327 in the Fund or $19,620 in the Lehman Aggregate Bond Index
assuming reinvestment of all dividends and capital gains.
QUALITY RATINGS
(% OF TOTAL NET ASSETS)
[PIE CHART]
BBB 17.8%
BB 0.3%
Other Assets and Liabilities 5.5%
U.S. Treasury 3.7%
Govt. Agency Backed Securities 28.0%
AAA 23.6%
A 21.1%
LOWER OF MOODY'S OR S&P rating used.
53
SIT BOND FUND
SEPTEMBER 30, 2003
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (UNAUDITED)
- -----------------------------------------------------------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE($)(1) QUANTITY ($) NAME OF ISSUER MARKET VALUE($)(1)
U.S. GOVERNMENT SECURITIES (3.7%) (2) COLLATERALIZED MORTGAGE OBLIGATIONS (5.3%) (2)
170,873 Countrywide Home Loans Series
450,000 U.S. Treasury Strips, Zero Coupon, 2002-27 A8, 4.00%, 12/25/32 172,952
6.04% Effective Yield, 11/15/27 123,579 190,247 FNMA Series 1990 45J, 9.50%, 216,286
500,000 U.S. Treasury Bond, 5.50%, 8/15/28 535,586 5/25/20 Vendee Mortgage Trust:
------------ 59,744 Series 1997-2 E, 7.50%, 5/15/24 60,499
Total U.S. Government securities 659,165 269,193 Series 1999-1 2Z, 6.50%, 12/15/28 289,321
(cost: $633,615) ------------ 209,159 Washington Mutual Series 2002-S8
A7, 5.25%, 1/25/18 21
ASSET-BACKED SECURITIES (18.8%) (2) ------------
240,772 Advanta Mortgage Loan Trust
Series 1999-3 A4, 7.75%, 10/25/26 257,349 Total collateralized mortgage obligations 952,473
470,000 Amresco Residential Securities Mtg. Loan (cost: $935,955) ------------
Trust Series 1998-1 A5, 7.07%, 10/25/27 498,489
112,049 Bear Stearns Securities, Inc. CORPORATE BONDS & NOTES (29.3%) (2)
Series 2000-1 AF, 7.52%, 3/25/30 297,181 Canadian Natl. Railway Co.
116,014 Conseco Finance Series: Series 1997-A2, 7.195%, 1/2/16 347,607
200,000 2000-4 A4, 7.73%, 4/1/32 205,786 358,044 Continental Airlines Series
400,000 2002-A A5, 7.05%, 4/15/32 430,567 2000-2, 7.707%, 4/2/21 349,008
Conseco Mfg. Housing Series: 276,000 Dow Capital BV, 8.70%, 5/15/22 285,259
100,000 2000-4 A5, 7.97%, 5/1/32 92,927 200,000 El Paso Electric Co., 9.40%,
100,000 2000-6 A5, 7.27%, 9/1/32 95,559 5/1/112 35,881
200,000 EQCC Home Equity Loan Trust 300,000 First Hawaiian Capital Trust,
Series 1998-2 5F, 6.64%, 7/15/29 211,089 8.343%, 7/1/27 344,846
195,075 Greenpoint Manufactured Hsg. Ford Motor Credit Co.:
Series 2000-1 A5, 7.84%, 12/20/29 202,736 200,000 7.50%, 3/15/05 212,210
Green Tree Financial Corp.: 59,102 200,000 9.14%, 12/30/14 210,730
1995-5 A6, 7.25%, 9/15/26 62,022 250,000 Hertz Corp., 4.70%, 10/2/06 251,157
66,308 1997-4 A6, 7.03%, 2/15/29 67,630 50,000 General Electric Capital Corp.,
227,641 1998-1 A6, 6.33%, 11/1/29 226,825 36.75%, /15/32 56,425
200,000 1999-1 A5, 6.11%, 9/1/23 198,576 150,000 General Motors Accept. Corp.,
133,609 Green Tree Home Equity Loan Trust 6.875%, 9/15/11 155,700
Series 1999-D A5, 7.88%, 9/15/30 140,014 General Motors Corp.:
Indymac Manufactured Housing Contract: 211,763 300,000 8.375%, 7/15/33 313,679
1998-2 A3, 6.20%, 9/25/17 198,110 100,000 8.80%, 3/1/21 106,752
158,823 1998-2 A4, 6.64%, 12/25/27 150,236 200,000 Great Western Financial Trust,
83,218 Oakwood Mortgage Investors, Inc. 8.206%, 2/1/27 229,100
Series 1997-D A4, 6.725%, 2/15/28 86,871 50,000 McDonald's Corp., 7.31%, 9/15/27 53,292
114,450 Residential Asset Securitization Trust Northwest Airlines Corp.:
Series 2001-A A4, 6.86%, 8/25/29 114,533 179,501 7.935%, 4/1/19 198,134
------------ 369,106 8.072%, 10/1/19 411,180
300,000 Pacific Bell Corp.(SBC), 7.25%,
Total asset-backed securities 3,355,333 11/1/27 326,371
(cost: $3,314,054) ------------ 50,000 Shaw Communications, Inc.,
8.25%, 4/11/10 55,125
379,451 Southwest Air Co., 7.67%, 1/2/14 436,577
200,000 Sunamerica, Inc. (AIG), 8.125%,
4/28/23 254,322
350,000 Susa Partnership, 7.50%, 12/1/27 410,980
-------
Total corporate bonds & notes 5,244,335
(cost: $5,075,952) -------
54
- -----------------------------------------------------------------------[GRAPHIC]
- -----------------------------------------------------------------------------------------------------------------------------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE($)(1) QUANTITY ($) NAME OF ISSUER MARKET VALUE($)(1)
MORTGAGE PASS-THROUGH SECURITIES (25.8%) (2)(3) 22,775 9.50%, 2/15/11 25,116
Federal Home Loan Mortgage Corporation: 56,722 9.50%, 5/20/16 62,665
242,886 8.375%, 5/17/20 264,518 11,332 9.50%, 5/20/18 12,539
128,513 9.00%, 3/1/21 142,569 62,826 9.50%, 7/20/18 69,519
42,118 9.00%, 7/1/22 46,896 98,250 9.50%, 7/20/18 108,716
34,201 9.00%, 7/1/30 37,289 595 9.50%, 4/15/20 660
69,550 9.50%, 8/1/16 77,308 7,483 9.50%, 11/15/21 8,306
8,647 10.25%, 9/1/09 9,528 14,380 10.00%, 6/15/19 16,176
16,017 10.75%, 3/1/11 17,816 -----------
Federal National Mortgage Association: Total mortgage pass-through securities 4,618,970
364,777 7.00%, 5/1/32 385,865 (cost: $4,565,650) -----------
255,387 7.00%, 6/1/32 270,164
275,331 7.50%, 6/1/32 297,030 TAXABLE MUNICIPAL SECURITIES (4.9%) (2)
59,867 8.50%, 2/1/25 65,545 20,000 Bernalillo Multifamily.
129,415 9.00%, 1/1/15 144,043 Series 1998A, 7.50%, 9/20/20 22,175
95,824 9.00%, 12/1/19 106,395 CA Rural HMFA Single Family
161,810 9.00%, 5/1/25 178,761 Mtg. Rev.:
303,797 9.00%, 6/1/27 336,703 250,196 Series 2002C, 6.75%, 3/1/24 267,424
48,438 9.50%, 4/1/25 53,842 411,000 Series 2003A, 5.25%, 12/1/24 416,039
89,028 9.75%, 1/15/13 99,098 100,000 Reeves Co. TX C.O.P., 7.25%,
82,083 10.25%, 8/15/13 91,969 6/1/11 101,500
133,918 10.50%, 5/1/19 150,417 67,670 Tobacco Settlement
66,674 11.00%, 9/1/19 75,506 Series 2001A, 7.67%, 5/15/16 65,282
58,099 11.00%, 11/1/20 65,638 -----------
Government National Mortgage Association: Total taxable municipal securities 872,420
87,003 7.90%, 8/20/21 94,263 (cost: $855,783) -----------
95,402 8.50%, 10/15/24 104,766
228,789 8.50%, 11/20/26 247,817 CLOSED-END MUTUAL FUNDS (6.7%) (2)
67,271 8.50%, 10/15/24 73,874 9,925 American Select Portfolio 129,223
66,590 8.75%, 11/15/09 72,427 8,145 American Strategic Income
13,213 9.00%, 10/15/06 14,215 Portfolio (I) 98,962
16,057 9.00%, 9/15/08 17,377 38,394 American Strategic Income
14,936 9.00%, 4/15/09 16,265 Portfolio (II) 502,961
30,766 9.00%, 4/15/09 33,502 37,672 American Strategic Income
211,925 9.00%, 6/15/09 230,799 Portfolio (III) 467,886
2,896 9.00%, 8/15/11 3,187 -----------
70,988 9.00%, 1/15/17 78,837 Total closed-end mutual funds 1,199,032
10,051 9.00%, 8/20/19 11,106 (cost: $1,128,649) -----------
8,299 9.00%, 6/20/21 9,165
11,809 9.00%, 12/20/21 13,040 SHORT-TERM SECURITIES (4.9%) (2)
97,911 9.00%, 2/20/27 107,005 50,392 Dreyfus Gov't Cash Mgmt.
18,018 9.25%, 5/15/10 19,739 Fund, 0.98% 50,392
210,993 9.25%, 10/15/11 231,796 824,000 Sit Money Market Fund,
18,156 9.50%, 11/15/05 19,193 0.54% (6) 824,000
-----------
Total short-term securities 874,392
(cost: $874,392) -----------
Total investments in securities
(cost: $17,384,050) (7) $17,776,120
===========
See accompanying notes to portfolios of investments on page 56. 55
SIT MUTUAL FUNDS
SEPTEMBER 30, 2003
- --------------------------------------------------------------------------------
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, 2003, 5.1% of net assets in the U.S. Government Securities
Fund and 2.6% of net assets in the Bond Fund were 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, 2003, 17.2% of net
assets in the Minnesota Tax-Free Income Fund was invested in such
securities.
(5) Rule 144A Securities, Section 4(2) Commercial Paper, and Municipal Lease
Securities (Restricted Securities) held by the Funds which have been
determined to be liquid by the Adviser in accordance to guidelines
established by the Board of Directors.
(6) This security represents an investment in an affiliated party. See notes to
the accompanying financial statements.
(7) At September 30, 2003 the cost of securities for federal income tax
purposes and the aggregate gross unrealized appreciation and depreciation
based on that cost were as follows:
U.S.
MONEY GOVERNMENT TAX-FREE
MARKET SECURITIES INCOME
FUND FUND FUND
Cost for federal income tax purposes $ 57,094,656 $316,740,469 $381,127,181
============ ============ ============
Unrealized appreciation (depreciation)
on investments:
Gross unrealized appreciation -- $ 4,803,909 $ 9,682,373
Gross unrealized depreciation -- (1,380,684) (16,984,671)
------------ ------------ ------------
Net unrealized appreciation (depreciation) -- $ 3,423,225 ($ 7,302,298)
============ ============ ============
MINNESOTA
TAX-FREE
INCOME BOND
FUND FUND
Cost for federal income tax purposes $209,973,903 $ 17,384,050
============ ============
Unrealized appreciation (depreciation)
on investments:
Gross unrealized appreciation $ 3,902,018 $ 473,523
Gross unrealized depreciation (3,408,680) (81,453)
------------ ------------
Net unrealized appreciation
(depreciation) $ 493,338 $ 392,070
============ ============
(8) These securities have been identified by the investment adviser as illiquid
securities. The aggregate value of these securities at September 30, 2003,
is $11,406,843 and $1,183,280 in the Tax-Free Income and Minnesota Tax-Free
Income Funds respectively, which represents 3.0% and 0.6% of the Fund's net
assets, respectively.
(9) Presently non-income producing securities. Items identified are in default
as to payment of interest.
56
SIT MUTUAL FUNDS
SEPTEMBER 30, 2003
- -----------------------------------------------------------------------[GRAPHIC]
STATEMENTS OF ASSETS AND LIABILITIES (UNAUDITED)
U.S. MINNESOTA
MONEY GOVERNMENT TAX-FREE TAX-FREE
MARKET SECURITIES INCOME INCOME BOND
ASSETS FUND FUND FUND FUND FUND
------------ ------------ ------------ ------------ -------------
Investments in securities, at
identified cost.............. $ 57,094,656 $316,740,469 $381,127,181 $209,973,903 $ 17,384,050
Investments in securities, at
market value - see
accompanying schedules
for detail................... $ 57,094,656 $320,163,694 $373,824,883 $210,467,241 $ 17,776,120
Cash in bank on demand
deposit...................... -- 409 -- -- 453
Accrued interest and dividends
receivable................... -- 1,733,459 6,164,429 3,525,270 188,025
Receivable for investment
securities sold.............. -- -- 4,085,455 184,824 --
Receivable for principal
paydowns..................... -- 449,808 -- -- 4,270
Other
receivables.................. -- -- -- 1,525 --
Receivable for Fund shares
sold......................... 86,336 4,029,116 157,014 6 1,460
------------ ------------ ------------ ------------ -------------
Total assets 57,180,992 326,376,486 384,231,781 214,178,866 17,970,328
------------ ------------ ------------ ------------ -------------
LIABILITIES
Disbursements in excess of
cash balances................ -- -- 3,278 6,974 --
Payable for investment securities
purchased.................... -- -- 2,313,503 3,381,070 --
Payable for Fund shares
redeemed..................... 1,380,757 185,926 15,622 -- 13,568
Cash portion of dividends
payable to shareholders 27,674 689,601 1,387,676 849,463 71,808
Other payables................... -- 2,380 10,591 -- 242
Accrued investment management
and advisory services fee.... 25,046 211,874 237,076 137,890 11,657
------------ ------------ ------------ ------------ -------------
Total liabilities....... 1,433,477 1,089,781 3,967,746 4,375,397 97,275
------------ ------------ ------------ ------------ -------------
Net assets applicable to
outstanding capital stock.... $ 55,747,515 $325,286,705 $380,264,035 $209,803,469 $ 17,873,053
============ ============ ============ ============ ============
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.......... 55,750,601 30,299,790 38,626,828 20,601,077 1,803,045
============ ============ ============ ============ ============
Net asset value per share of
outstanding capital stock... $ 1.00 $ 10.74 $ 9.84 $ 10.18 $ 9.91
============ ============ ============ ============ ============
See accompanying notes to financial statements on page 62-65. 57
Sit Mutual Funds
Six Months Ended September 30, 2003
- --------------------------------------------------------------------------------
Statements of Operations (Unaudited)
U.S. MINNESOTA
MONEY GOVERNMENT TAX-FREE TAX-FREE
MARKET SECURITIES INCOME INCOME BOND
FUND FUND FUND FUND FUND
------------ ------------ ------------ ------------ ------------
Investment income:
INCOME:
Interest ......................... $ 370,560 $ 5,524,897 $ 10,065,498 $ 5,784,869 $ 494,966
------------ ------------ ------------ ------------ ------------
Total income ................... 370,560 5,524,897 10,065,498 5,784,869 494,966
------------ ------------ ------------ ------------ ------------
EXPENSES (note 3):
Investment management and
advisory services fee ............. 244,217 1,556,485 1,584,037 863,491 74,851
Less fees and expenses absorbed
by investment adviser ........... (82,484) (50,137) (72,662) -- --
------------ ------------ ------------ ------------ ------------
Total net expenses .................. 161,733 1,506,348 1,511,375 863,491 74,851
------------ ------------ ------------ ------------ ------------
Net investment income ............... 208,827 4,018,549 8,554,123 4,921,378 420,115
------------ ------------ ------------ ------------ ------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS :
Net realized gain (loss) ............ -- (1,325,028) (1,229,570) (133,403) 7,707
Net change in unrealized appreciation
(or depreciation) on investments .. -- (2,476,696) (2,741,090) (619,074) 25,503
------------ ------------ ------------ ------------ ------------
Net gain (loss) on investments .... -- (3,801,724) (3,970,660) (752,477) 33,210
------------ ------------ ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations ........... $ 208,827 $ 216,825 $ 4,583,463 $ 4,168,901 $ 453,325
============ ============ ============ ============ ============
58 See accompanying notes to financial statements on page 62-65.
- -----------------------------------------------------------------------[GRAPHIC]
This page has been left blank intentionally.
59
SIT MUTUAL FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
MONEY MARKET U.S. GOVERNMENT
FUND SECURITIES FUND
--------------------------------- ---------------------------------
SIX MONTHS SIX MONTHS
ENDED ENDED
SEPTEMBER 30, YEAR ENDED SEPTEMBER 30, YEAR ENDED
2003 MARCH 31, 2003 MARCH 31,
(UNAUDITED) 2003 (UNAUDITED) 2003
------------- ------------- ------------- -------------
OPERATIONS:
Net investment income ............................. $ 208,827 $ 827,964 $ 4,018,549 $ 12,773,972
Net realized gain (loss) on investments ........... -- -- (1,325,028) 191,850
Net change in unrealized appreciation
(depreciation) of investments ................... -- -- (2,476,696) 2,579,600
------------- ------------- ------------- -------------
Net increase (decrease) in net assets resulting
from operations ............................. 208,827 827,964 216,825 15,545,422
------------- ------------- ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income .............................. (208,827) (827,964) (4,018,549) (12,773,972)
Net realized gains on investments .................. -- -- -- --
------------- ------------- ------------- -------------
Total distributions ............................ (208,827) (827,964) (4,018,549) (12,773,972)
------------- ------------- ------------- -------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold .......................... 158,991,065 455,807,319 84,639,859 375,452,226
Reinvested distributions ........................... 142,841 560,232 3,752,693 11,592,130
Payments for shares redeemed ....................... (177,229,538) (476,309,083) (168,143,842) (192,923,331)
------------- ------------- ------------- -------------
Increase (decrease) in net assets from
capital share transactions .................. (18,095,632) (19,941,532) (79,751,290) 194,121,025
------------- ------------- ------------- -------------
Total increase (decrease) in net assets ..... (18,095,632) (19,941,532) (83,553,014) 196,892,475
NET ASSETS
Beginning of period ................................ 73,843,147 93,784,679 408,839,719 211,947,244
------------- ------------- ------------- -------------
End of period ...................................... $ 55,747,515 $ 73,843,147 $ 325,286,705 $ 408,839,719
============= ============= ============= =============
NET ASSETS CONSIST OF:
Capital (par value and paid-in surplus) ............ $ 55,747,515 $ 73,843,147 $ 325,715,776 $ 405,467,066
Undistributed (distributions in excess of) net
investment income ........................... -- -- -- --
Accumulated net realized gain (loss) from
security transactions ....................... -- -- (3,852,296) (2,527,268)
Unrealized appreciation (depreciation)
on investments ................................... -- -- 3,423,225 5,899,921
------------- ------------- ------------- -------------
$ 55,747,515 $ 73,843,147 $ 325,286,705 $ 408,839,719
============= ============= ============= =============
CAPITAL TRANSACTIONS IN SHARES:
Sold ............................................... 158,991,065 455,807,360 7,868,707 34,677,651
Reinvested distributions ........................... 142,841 560,232 348,565 1,071,578
Redeemed ........................................... (177,229,538) (476,309,083) (15,673,744) (17,827,236)
------------- ------------- ------------- -------------
Net increase (decrease) .............................. (18,095,632) (19,941,491) (7,456,472) 17,921,993
============= ============= ============= =============
60
- -----------------------------------------------------------------------[GRAPHIC]
TAX-FREE MINNESOTA TAX-FREE BOND
INCOME FUND INCOME FUND FUND
- --------------------------------- --------------------------------- ---------------------------------
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED ENDED ENDED
SEPTEMBER 30, YEAR ENDED SEPTEMBER 30, YEAR ENDED SEPTEMBER 30, YEAR ENDED
2003 MARCH 31, 2003 MARCH 31, 2003 MARCH 31,
(UNAUDITED) 2003 (UNAUDITED) 2003 (UNAUDITED) 2003
- ------------- ------------- ------------- ------------- ------------- -------------
$ 8,554,123 $ 19,371,555 $ 4,921,378 $ 9,589,605 $ 420,115 $ 923,071
(1,229,570) 881,329 (133,403) (997,718) 7,707 88,365
(2,741,090) 4,490,386 (619,074) 5,502,200 25,503 251,470
- ------------- ------------- ------------- ------------- ------------- -------------
4,583,463 24,743,270 4,168,901 14,094,087 453,325 1,262,906
- ------------- ------------- ------------- ------------- ------------- -------------
(8,554,123) (19,371,555) (4,921,378) (9,589,605) (420,115) (923,005)
-- -- -- -- -- --
- ------------- ------------- ------------- ------------- ------------- -------------
(8,554,123) (19,371,555) (4,921,378) (9,589,605) (420,115) (923,005)
- ------------- ------------- ------------- ------------- ------------- -------------
48,141,846 122,526,104 27,712,745 77,074,420 3,505,597 12,874,720
7,368,261 16,287,715 3,950,799 7,783,102 406,752 867,206
(85,694,111) (170,198,305) (40,475,731) (65,269,259) (5,769,872) (9,121,542)
- ------------- ------------- ------------- ------------- ------------- -------------
(30,184,004) (31,384,486) (8,812,187) 19,588,263 (1,857,523) 4,620,384
- ------------- ------------- ------------- ------------- ------------- -------------
(34,154,664) (26,012,771) (9,564,664) 24,092,745 (1,824,313) 4,960,285
414,418,699 440,431,470 219,368,133 195,275,388 19,697,366 14,737,081
- ------------- ------------- ------------- ------------- ------------- -------------
$ 380,264,035 $ 414,418,699 $ 209,803,469 $ 219,368,133 $ 17,873,053 $ 19,697,366
============= ============= ============= ============= ============= =============
$ 413,441,462 $ 443,625,466 $ 216,041,575 $ 224,853,762 $ 17,888,673 $ 19,746,196
-- -- -- -- -- --
(25,875,129) (24,645,559) (6,731,444) (6,598,041) (407,690) (415,397)
(7,302,298) (4,561,208) 493,338 1,112,412 392,070 366,567
- ------------- ------------- ------------- ------------- ------------- -------------
$ 380,264,035 $ 414,418,699 $ 209,803,469 $ 219,368,133 $ 17,873,053 $ 19,697,366
============= ============= ============= ============= ============= =============
4,888,550 12,327,611 2,718,848 7,586,422 354,326 1,305,543
745,530 1,637,735 387,938 766,203 41,111 87,771
(8,687,548) (17,112,887) (3,977,200) (6,428,863) (584,327) (923,618)
- ------------- ------------- ------------- ------------- ------------- -------------
(3,053,468) (3,147,541) (870,414) 1,923,762 (188,890) 469,696
============= ============= ============= ============= ============= =============
See accompanying notes to financial statements on pages 62-65 61
SIT MUTUAL FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Sit Mutual Funds (the Funds) are 100% no-load funds, and are
registered under the Investment Company Act of 1940 (as amended) as
diversified (except Minnesota Tax-Free Income Fund which is
non-diversified), open-end management investment companies, or series
thereof. The Sit Bond Fund, Sit Minnesota Tax-Free Income Fund, and the
Sit Tax-Free Income Fund are series funds of Sit Mutual Funds II, Inc.
This report covers the bond funds of the Sit Mutual Funds. The
investment objective for each Fund is as follows:
-----------------------------------------------------------------------
FUND INVESTMENT OBJECTIVES
-----------------------------------------------------------------------
Money Market Maximum current income with the preservation of
capital and maintenance of liquidity.
-----------------------------------------------------------------------
U.S. Government High current income and safety of principal.
Securities
-----------------------------------------------------------------------
Tax-Free Income High current income that is exempt from federal
income tax, consistent with the preservation of
capital.
-----------------------------------------------------------------------
Minnesota High current income that is exempt from federal
Tax-Free Income income tax and Minnesota regular personal income tax,
consistent with the preservation of capital.
-----------------------------------------------------------------------
Bond Maximize total return, consistent with the
preservation of capital.
-----------------------------------------------------------------------
Significant accounting policies followed by the Funds are summarized
below:
INVESTMENTS IN SECURITIES
Securities maturing more than 60 days from the valuation date, with the
exception of those in Money Market Fund, are valued at the market price
supplied by an independent pricing vendor based on current interest
rates; those securities with maturities of less than 60 days when
acquired, or which subsequently are within 60 days of maturity, are
valued at amortized cost, which approximates market value. When market
quotations are not readily available, securities are valued at fair
value based on procedures determined in good faith by the Boards of
Directors. Pursuant to Rule 2a-7 of the Investment Company Act of 1940,
all securities in the Money Market Fund are valued at amortized cost,
which approximates market value, in order to maintain a constant net
asset value of $1 per share.
Security transactions are accounted for on the date the securities are
purchased or sold. Gains and losses are calculated on the
identified-cost basis. Interest, including level-yield amortization of
long-term bond premium and discount, is recorded on the accrual basis.
Dividends received from closed-end fund holdings are included in
Interest Income and are generated from the underlying investments.
Delivery and payment for securities which have been purchased by the
Funds on a forward commitment or when-issued basis can take place two
weeks or more after the transaction date. During this period, such
securities are subject to market fluctuations and may increase or
decrease in value prior to delivery, and the Funds maintain, in a
segregated account with their custodian, assets with a market value
greater than the amount of their purchase commitments.
62
- -----------------------------------------------------------------------[GRAPHIC]
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. The tax
character of distributions paid during the fiscal years ended March 31,
was as follows:
YEAR ENDED MARCH 31, 2003:
Ordinary Income Long Term Capital Gain Total
--------------- ---------------------- -----
Money Market $ 827,964 -- $ 827,964
U.S. Government Securities $12,773,972 -- $12,773,972
Tax-Free Income (*) $19,371,555 -- $19,371,555
MN Tax-Free Income (*) $ 9,589,605 -- $ 9,589,605
Bond $ 923,005 -- $ 923,005
(*) 100% of dividends were derived from interest on tax-exempt securities.
YEAR ENDED MARCH 31, 2002:
Ordinary Income Long Term Capital Gain Total
--------------- ---------------------- -----
Money Market $ 2,551,390 -- $ 2,551,390
U.S. Government Securities $ 9,985,451 -- $ 9,985,451
Tax-Free Income (*) $22,115,843 -- $22,115,843
MN Tax-Free Income (*) $ 8,800,200 -- $ 8,800,200
Bond $ 872,071 -- $ 872,071
(*) 100% of dividends were derived from interest on tax-exempt
securities.
As of March 31, 2003, the components of distributable earnings on a tax
basis were as follows:
U.S. Minnesota
Money Government Tax-Free Tax-Free
Market Securities Income Income Bond
------------------------------------------------------------------------
Undistributed ordinary income $ 44,851 $ 836,988 $ 1,563,353 $ 820,714 $ 73,399
Accumulated gain (loss) -- (2,527,268) (24,625,120) (6,597,256) (415,397)
Unrealized appreciation -- 5,899,921 (4,581,647) 1,111,627 366,567
(depreciation)
63
SIT MUTUAL FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
As of March 31, 2003, for federal income tax purposes, some Funds have
capital loss carryovers which, if not offset by subsequent gains will
begin to expire as follows:
Loss Carryover Expiration Year
-------------- ---------------
U.S. Government Securities $ 2,527,268 2007
Tax-Free Income $ 24,625,120 2008
MN Tax-Free Income $ 6,597,256 2004
Bond $ 415,397 2008
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 accounting
principles generally accepted in the United States of America requires
management to make certain estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the
reported results. Actual results could differ from those estimates.
(2) INVESTMENT SECURITY TRANSACTIONS
Purchases of and proceeds from sales and maturities of investment
securities, other than short-term securities, for the period ended
September 30, 2003, were as follows:
Purchases ($) Proceeds ($)
------------- ------------
U.S. Government Securities Fund 99,402,379 209,392,815
Tax-Free Income Fund 45,151,166 80,774,850
Minnesota Tax-Free Income Fund 22,054,768 13,732,071
Bond Fund 7,559,510 9,173,483
For the Money Market Fund during the period ended September 30, 2003
purchases of and proceeds from sales and maturities of investment
securities aggregated $511,264,798 and $528,369,000, respectively.
(3) EXPENSES
INVESTMENT ADVISER
The Funds each have entered into an investment management agreement
with Sit Investment Associates Inc. (SIA), under which SIA manages the
Funds' assets and provides research, statistical and advisory services,
and pays related office rental, 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:
64
- -----------------------------------------------------------------------[GRAPHIC]
Average Daily
Net Assets
Bond Fund .80%
Tax-Free Income Fund .80%
Minnesota Tax-Free Income Fund .80%
First $50 Million Over $50 Million
----------------- ----------------
Money Market Fund .80% .60%
U.S. Government Securities Fund 1.00% .80%
For the period October 1, 1993, through December 31, 2004, 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, 2004, this voluntary fee waiver may be discontinued by the
Adviser in its sole discretion.
For the period October 1, 1993, through December 31, 2004, 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, 2004, this voluntary fee waiver may be
discontinued by the Adviser in its sole discretion.
As of September 30, 2003, the Bond Fund had invested $824,000 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 the Fund an amount equal to all
fees otherwise due to them under its 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, 2003:
% Shares
Shares Outstanding
------ -----------
Money Market Fund 17,198,654 30.8
U.S. Government Securities Fund 331,079 1.1
Tax-Free Income Fund 1,882,360 4.9
Minnesota Tax-Free Income Fund 983,269 4.8
Bond Fund 203,564 11.3
(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 66 through 70.
65
SIT MONEY MARKET FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Six Months
Ended
September 30, Years Ended March 31,
2003 --------------------------------------------------
(Unaudited) 2003 2002 2001 2000
==============================================================================================================================
NET ASSET VALUE:
Beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -------------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income 0.00 0.01 0.03 0.06 0.05
- -------------------------------------------------------------------------------------------------------------------------------
Total from operations 0.00 0.01 0.03 0.06 0.05
- -------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income 0.00 (0.01) (0.03) (0.06) (0.05)
- -------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE:
End of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -------------------------------------------------------------------------------------------------------------------------------
Total investment return(1) 0.32% 1.13% 2.63% 6.00% 5.05%
- -------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000's omitted) $ 55,748 $ 73,843 $ 93,785 $110,505 $150,897
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 0.65%(2) 1.14%(2) 2.65%(2) 5.88%(2) 5.05%(2)
- ---------------------
(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, 2003 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, 2003 and the years ended
March 31, 2003, 2002, 2001, and 2000, the investment adviser voluntarily
absorbed 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 .76%, .74%, .70%, .67%, and .71% for each of these periods
and the ratio of net investment income to average daily net assets would
have been .39%, .90%, 2.45%, 5.71%, and 4.84%, respectively.
66
SIT U.S. GOVERNMENT SECURITIES FUND
- ---------------------------------------------------------------------- [GRAPHIC]
FINANCIAL HIGHLIGHTS
Six Months
Ended
September 30, Years Ended March 31,
2003 -----------------------------------------------------
(Unaudited) 2003 2002 2001 2000
==============================================================================================================================
NET ASSET VALUE:
Beginning of period $ 10.83 $ 10.69 $ 10.59 $ 10.22 $ 10.51
- -------------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income .12 .45 .58 .65 .59
Net realized and unrealized gains
(losses) on investments (.09) .14 .10 .37 (.29)
- -------------------------------------------------------------------------------------------------------------------------------
Total from operations .03 .59 .68 1.02 .30
- -------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (.12) (.45) (.58) (.65) (.59)
From realized gains -- -- -- -- --
- -------------------------------------------------------------------------------------------------------------------------------
Total Distributions (.12) (.45) (.58) (.65) (.59)
- -------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE:
End of period $ 10.74 $ 10.83 $ 10.69 $ 10.59 $ 10.22
- -------------------------------------------------------------------------------------------------------------------------------
Total investment return(1) 0.24% 5.60% 6.53% 10.34% 2.92%
- -------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000's omitted) $325,287 $408,840 $211,947 $154,356 $135,841
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 2.14%(2) 3.98%(2) 5.40%(2) 6.30%(2) 5.66%(2)
Portfolio turnover rate (excluding short-term securities) 28.37% 77.06% 54.69% 55.53% 98.17%
- ---------------------
(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, 2003 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 for Fund net assets exceeding $50 million.
However, during the period ended September 30, 2003 and the years ended
March 31, 2003, 2002, 2001, and 2000 the investment adviser voluntarily
absorbed 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 .83%, .83%, .85%, .87%, and .86% for each of these periods
and the ratio of net investment income to average daily net assets would
have been 2.11%, 3.95%, 5.35%, 6.23%, and 5.60%, respectively.
67
SIT TAX-FREE INCOME FUND
- --------------------------------------------------------------------------------
HIGHLIGHTS
Six Months
Ended
September 30, Years Ended March 31,
2003 -----------------------------------------------------
(Unaudited) 2003 2002 2001 2000
==============================================================================================================================
NET ASSET VALUE:
Beginning of period $ 9.94 $ 9.82 $ 9.90 $ 9.57 $ 10.39
- -------------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income .21 .45 .48 .51 .51
Net realized and unrealized gains
(losses) on investments (.10) .12 (.08) .33 (.82)
- -------------------------------------------------------------------------------------------------------------------------------
Total from operations .11 .57 .40 .84 (.31)
- -------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (.21) (.45) (.48) (.51) (.51)
From realized gains -- -- -- -- --
- -------------------------------------------------------------------------------------------------------------------------------
Total distributions (.21) (.45) (.48) (.51) (.51)
- -------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE:
End of period $ 9.84 $ 9.94 $ 9.82 $ 9.90 $ 9.57
- -------------------------------------------------------------------------------------------------------------------------------
Total investment return(1) 1.16% 5.90% 4.05% 9.02% (2.98%)
- -------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000's omitted) $380,264 $414,419 $440,431 $502,184 $582,549
RATIOS:
Expenses to average daily net assets 0.76%(2) 0.76%(2) 0.75%(2) 0.74%(2) 0.70%(2)
Net investment income to average daily net assets 4.32%(2) 4.53%(2) 4.79%(2) 5.27%(2) 5.15%(2)
Portfolio turnover rate (excluding short-term securities) 11.75% 37.98% 40.02% 12.14% 24.72%
- -----------------
(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, 2003 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, 2003 and years ended
March 31, 2003, 2002, 2001, and 2000, the investment adviser voluntarily
absorbed expenses that were otherwise payable by the Fund. Had the Fund
incurred these expenses, the ratio of expenses to average daily net assets
would have been .80% for these periods, and the ratio of net investment
income to average daily net assets would have been 4.28%, 4.49%, 4.74%,
5.21%, and 5.05%, respectively.
68
SIT MINNESOTA TAX-FREE INCOME FUND
- ---------------------------------------------------------------------- [GRAPHIC]
FINANCIAL HIGHLIGHTS
Six Months
Ended
September 30, Years Ended March 31,
2003 -----------------------------------------------------
(Unaudited) 2003 2002 2001 2000
==============================================================================================================================
NET ASSET VALUE:
Beginning of period $ 10.22 $ 9.99 $ 10.01 $ 9.73 $ 10.55
- -------------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income .23 .47 .49 .52 .52
Net realized and unrealized gains
(losses) on investments (.04) .23 (.02) .28 (.82)
- -------------------------------------------------------------------------------------------------------------------------------
Total from operations .19 .70 .47 .80 (.30)
- -------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (.23) (.47) (.49) (.52) (.52)
- -------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE:
End of period $ 10.18 $ 10.22 $ 9.99 $ 10.01 $ 9.73
- -------------------------------------------------------------------------------------------------------------------------------
Total investment return(1) 1.91% 7.14% 4.74% 8.43% (2.84%)
- -------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000's omitted) $209,803 $219,368 $195,275 $181,182 $172,905
RATIOS:
Expenses to average daily net assets 0.80%(2) 0.80% 0.80% 0.80% 0.80%
Net investment income to average daily net assets 4.56%(2) 4.62% 4.87% 5.27% 5.16%
Portfolio turnover rate (excluding short-term securities) 6.96% 19.51% 23.81% 14.59% 18.50%
- ---------------------
(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.
69
SIT BOND FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Six Months
Ended
September 30, Years Ended March 31,
2003 -----------------------------------------------------
(Unaudited) 2003 2002 2001 2000
==============================================================================================================================
NET ASSET VALUE:
Beginning of period $ 9.89 $ 9.68 $ 9.80 $ 9.43 $ 9.95
- -------------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income .22 .53 .62 .64 .58
Net realized and unrealized gains
(losses) on investments .02 .21 (.12) .37 (.50)
- -------------------------------------------------------------------------------------------------------------------------------
Total from operations .24 .74 .50 1.01 .08
- -------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (.22) (.53) (.62) (.64) (.58)
From realized gains -- -- -- -- (.02)
- -------------------------------------------------------------------------------------------------------------------------------
Total Distributions (.22) (.53) (.62) (.64) (.60)
- -------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE:
End of period $ 9.91 $ 9.89 $ 9.68 $ 9.80 $ 9.43
- -------------------------------------------------------------------------------------------------------------------------------
Total investment return(1) 2.48% 7.74% 5.18% 11.18% 0.93%
- -------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000's omitted) $ 17,873 $ 19,697 $ 14,737 $ 13,281 $ 12,162
RATIOS:
Expenses to average daily net assets 0.80%(2) 0.80% 0.80% 0.80% 0.80%
Net investment income to average daily net assets 4.49%(2) 5.30% 6.34% 6.79% 6.06%
Portfolio turnover rate (excluding short-term securities) 42.64% 76.19% 91.23% 89.65% 131.67%
(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.
70
SIT MUTUAL FUNDS
- ---------------------------------------------------------------------- [GRAPHIC]
INFORMATION ABOUT DIRECTORS AND OFFICERS
The Sit Mutual Funds are a family of 12 no-load mutual funds. The five Bond
Funds described in this Bond Funds Annual Report are the Sit Money Market Fund,
Sit U.S. Government Securities Fund, Sit Bond Fund, Sit Tax-Free Income Fund and
the Sit Minnesota Tax-Free Income Fund (the "Funds" or individually, a "Fund").
The Sit Money Market Fund, Sit U.S. Government Securities Fund, and the
corporate issuer of the Sit Bond Fund, Sit Tax-Free Income Fund and the Sit
Minnesota Tax-Free Income Fund have a Board of Directors and officers. Pursuant
to Minnesota law, the Boards of Directors are responsible for the management of
the Funds and the establishment of the Funds' policies. The officers of the
Funds manage the day-to-day operation of the Funds. Information pertaining to
the directors and officers of the Funds is set forth below. The Bond Funds' SAI
has additional information about the Funds' directors and is available without
charge upon request by calling the Sit Funds at 800-332-5580.
- -------------------------- --------------------- -------------------------- ------------------------- ------------ -----------------
NUMBER OF
PRINCIPAL FUNDS IN OTHER
NAME, POSITION TERM OF OFFICE(1) OCCUPATIONS FUND COMPLEX DIRECTORSHIP
ADDRESS HELD WITH AND LENGTH OF DURING PAST OVERSEEN BY HELD BY
AND AGE THE FUND TIME SERVED FIVE YEARS DIRECTOR DIRECTOR(4)
- -------------------------- --------------------- -------------------------- ------------------------- ------------ -----------------
INDEPENDENT DIRECTORS:
- -------------------------- --------------------- -------------------------- ------------------------- ------------ -----------------
John E. Hulse Director Director since 1995. Trustee, Pacific Gas & 12 None.
Suite 4600 Electric Nuclear
90 South Seventh Street Decommissioning Trust.
Minneapolis, MN 55402
Age: 70
- -------------------------- --------------------- -------------------------- ------------------------- ------------ -----------------
Sidney L. Jones Director Director from 1988 to Lecturer, Washington 12 None.
Suite 4600 1989 and from 1993 or Campus Consortium of 17
90 South Seventh Street the Fund's inception if Universities;
Minneapolis, MN 55402 later. Senior Advisor to
Age: 70 Lawrence and Company,
Toronto, Canada.
- -------------------------- --------------------- -------------------------- ------------------------- ------------ -----------------
Donald W. Phillips Director Director of the Sit CEO and CIO of WestLB 12 None.
Suite 4600 International Fund since Asset Management (USA)
90 South Seventh Street 1993, and since 1990 or LLC, 4/00 to present;
Minneapolis, MN 55402 the Fund's inception if President of
Age: 55 later for all other Forstmann-Leff
Funds. International, Inc. (an
investment adviser) from
1997 to 4/00.
- -------------------------- --------------------- -------------------------- ------------------------- ------------ -----------------
Melvin C. Bahle Director Emeritus Director Emeritus since Director and/or officer 12 None.
Suite 4600 1995. of several foundations
90 South Seventh Street and charitable
Minneapolis, MN 55402 organizations.
Age: 84
- -------------------------- --------------------- -------------------------- ------------------------- ------------ -----------------
71
SIT MUTUAL FUNDS
- --------------------------------------------------------------------------------
INFORMATION ABOUT DIRECTORS AND OFFICERS (CONTINUED)
- -------------------------- --------------------- -------------------------- ------------------------- ------------ -----------------
NUMBER OF
PRINCIPAL FUNDS IN OTHER
NAME, POSITION TERM OF OFFICE(1) OCCUPATIONS FUND COMPLEX DIRECTORSHIP
ADDRESS HELD WITH AND LENGTH OF DURING PAST OVERSEEN BY HELD BY
AND AGE THE FUND TIME SERVED FIVE YEARS DIRECTOR DIRECTOR(4)
- -------------------------- --------------------- -------------------------- ------------------------- ------------ -----------------
INTERESTED DIRECTORS:
- -------------------------- --------------------- -------------------------- ------------------------- ------------ -----------------
Eugene C. Sit (2) Director and Director since Chairman, CEO and CIO 12 None.
Suite 4600 Chairman inception. of Sit Investment
90 South Seventh Street Associates, Inc. (the
Minneapolis, MN 55402 "Adviser") and Sit/Kim
Age: 65 International Investment
Associates, Inc. ("Sit/
Kim"); Director of SIA
Securities Corp. (the
"Distributor"), and
Chairman and CEO of Sit
Investment Fixed Income
Advisors, Inc. ("SF").
- -------------------------- --------------------- -------------------------- ------------------------- ------------ -----------------
William E. Frenzel(2) Director Director since 1991 Guest Scholar at The 12 None.
Suite 4600 or the Fund's Brookings Institution and
90 South Seventh Street inception if later. member of several
Minneapolis, MN 55402 government policy
Age: 75 committees, foundations
and organizations;
Director of the Adviser,
Sit/Kim and SF.
- -------------------------- --------------------- -------------------------- ------------------------- ------------ -----------------
OFFICERS:
- -------------------------- --------------------- -------------------------- ------------------------- ------------ -----------------
Peter L. Mitchelson Vice Chairman Re-Elected by the Director and President of N/A N/A
Suite 4600 Boards annually; the Adviser; Director and
90 South Seventh Street Officer since Executive Vice President
Minneapolis, MN 55402 inception. of Sit/Kim; Director of
Age: 62 the Distributor; and Vice
Chairman of SF. Director
of the Sit Funds through
4/30/02.
- -------------------------- --------------------- -------------------------- ------------------------- ------------ -----------------
Roger J. Sit(3) Executive Vice Re-Elected by the Executive Vice President N/A N/A
Suite 4600 President Boards annually; - Research and Investment
90 South Seventh Street Officer since 1998. Management of the
Minneapolis, MN 55402 Adviser; Director,
Age: 41 President, COO, and
Deputy CIO of Sit/Kim;
Director of SF
- -------------------------- --------------------- -------------------------- ------------------------- ------------ -----------------
72
- ---------------------------------------------------------------------- [GRAPHIC]
- -------------------------- --------------------- -------------------------- ------------------------- ------------ -----------------
NUMBER OF
PRINCIPAL FUNDS IN OTHER
NAME, POSITION TERM OF OFFICE(1) OCCUPATIONS FUND COMPLEX DIRECTORSHIP
ADDRESS HELD WITH AND LENGTH OF DURING PAST OVERSEEN BY HELD BY
AND AGE THE FUND TIME SERVED FIVE YEARS DIRECTOR DIRECTOR(4)
- -------------------------- --------------------- -------------------------- ------------------------- ------------ -----------------
OFFICERS (CONTINUED):
- -------------------------- --------------------- -------------------------- ------------------------- ------------ -----------------
Michael C. Brilley Senior Vice Re-Elected by the Senior Vice President and N/A N/A
Suite 4600 President Boards annually; Senior Fixed Income
90 South Seventh Street Officer since 1985. Officer of the Adviser;
Minneapolis, MN 55402 Director and President
Age: 58 and Chief Fixed Income
Officer of SF.
- -------------------------- --------------------- -------------------------- ------------------------- ------------ -----------------
G. Todd Berkley Chief Re-Elected by the Sr. Vice President, US N/A N/A
Suite 4600 Operating Boards annually; Bancorp 12/00 to 2/01;
90 South Seventh Street Officer Officer since 2002. Vice President, US Bank
Minneapolis, MN 55402 5/95 to 12/99.
Age: 41
- -------------------------- --------------------- -------------------------- ------------------------- ------------ -----------------
Debra A. Sit(3) Vice President, Re-Elected by the Vice President - Bond N/A N/A
Suite 4600 Investments Boards annually; Investments of the
90 South Seventh Street Officer since Adviser; Assistant
Minneapolis, MN 55402 1994. Treasurer and Assistant
Age: 43 Secretary of Sit/Kim and
SF; and Senior Vice
President - Investments
of SF.
- -------------------------- --------------------- -------------------------- ------------------------- ------------ -----------------
Mark H. Book Vice President Re-Elected by the Vice President and N/A N/A
Suite 4600 - Investments. Boards annually; Portfolio Manager of SF.
90 South Seventh Street U.S. Govern- Officer since Bond Analyst, U.S.
Minneapolis, MN 55402 ment, Balanced 2002. Bancorp Piper Jaffray
Age: 40 and Bond 2/98 to 8/00.
Funds only.
- -------------------------- --------------------- -------------------------- ------------------------- ------------ -----------------
Bryce A. Doty Vice President Re-Elected by the Vice President and N/A N/A
Suite 4600 - Investments. Boards annually; Portfolio Manager of SF.
90 South Seventh Street U.S. Govern- Officer since 1996.
Minneapolis, MN 55402 ment, Balanced
Age: 36 and Bond
Funds only.
- -------------------------- --------------------- -------------------------- ------------------------- ------------ -----------------
Paul J. Junquist VicePresident Re-Elected by the Vice President and N/A N/A
Suite 4600 - Investments Boards annually; Portfolio Manager of SF.
90 South Seventh Street of Money Officer since 1996.
Minneapolis, MN 55402 Market, Tax-
Age: 42 Free Income,
and MN
Tax-Free
Income Funds
only.
- -------------------------- --------------------- -------------------------- ------------------------- ------------ -----------------
Page 73
SIT MUTUAL FUNDS
- --------------------------------------------------------------------------------
INFORMATION ABOUT DIRECTORS AND OFFICERS (CONTINUED)
- -------------------------- --------------------- -------------------------- ------------------------- ------------ -----------------
NUMBER OF
PRINCIPAL FUNDS IN OTHER
NAME, POSITION TERM OF OFFICE(1) OCCUPATIONS FUND COMPLEX DIRECTORSHIP
ADDRESS HELD WITH AND LENGTH OF DURING PAST OVERSEEN BY HELD BY
AND AGE THE FUND TIME SERVED FIVE YEARS DIRECTOR DIRECTOR(4)
- -------------------------- --------------------- -------------------------- ------------------------- ------------ -----------------
OFFICERS (CONTINUED):
- -------------------------- --------------------- -------------------------- ------------------------- ------------ -----------------
Michael P. Eckert Vice President Re-Elected by the Mutual Fund Institutional N/A N/A
Suite 4600 - Institutional Boards annually; Client Group of Adviser
90 South Seventh Street Client Group Officer since 1989.
Minneapolis, MN 55402
Age: 48
- -------------------------- --------------------- -------------------------- ------------------------- ------------ -----------------
Paul E. Rasmussen Vice Re-Elected by the Vice President, Secre N/A N/A
Suite 4600 President and Boards annually; tary, Controller and
90 South Seventh Street Treasurer Officer since 1994. Chief Compliance Officer
Minneapolis, MN 55402 of the Adviser; Vice
Age: 42 President, Secretary, and
Chief Compliance Officer
of Sit/Kim and SF;
President of the
Distributor.
- -------------------------- --------------------- -------------------------- ------------------------- ------------ -----------------
Michael J. Radmer Secretary Re-Elected by the Partner of the Funds' N/A N/A
Suite 1500 Boards annually; general counsel, Dorsey
50 South Sixth Street Officer since 1984. & Whitney, LLP
Minneapolis, MN 55402
Age: 59
- -------------------------- --------------------- -------------------------- ------------------------- ------------ -----------------
Carla J. Rose Vice President, Re-Elected by the Vice President, Adminis- N/A N/A
Suite 4600 Assistant Boards annually; tration & Deputy
90 South Seventh Street Secretary & Officer since 2000. Controller of the
Minneapolis, MN 55402 Assistant Adviser; Vice President,
Age: 37 Treasurer Administration and
Controller of Sit/Kim;
Controller andTreasurer
of SF.
- -------------------------- --------------------- -------------------------- ------------------------- ------------ -----------------
Kelly K. Boston Assistant Re-Elected by the Staff Attorney of the N/A N/A
Suite 4600 Secretary & Boards annually; Adviser.
90 South Seventh Street Assistant Officer since 2000.
Minneapolis, MN 55402 Treasurer
Age: 34
- -------------------------- --------------------- -------------------------- ------------------------- ------------ -----------------
(1) Each Director serves until their resignation, removal or the next meeting
of the shareholders at which election of directors is an agenda item and
until his successor is duly elected and shall qualify.
(2) Directors who are deemed to be "interested persons" of the Funds as that
term is defined by the Investment Company Act of 1940. Mr. Sit is
considered an "interested person" because he is an officer of Sit
Investment Associates, Inc., the Fund's investment adviser. Mr. Frenzel is
deemed to be an interested person because he is a director and shareholder
of the Fund's investment adviser.
(3) Mr. Roger Sit is the son of Eugene C. Sit. Ms. Debra Sit is the daughter of
Eugene C. Sit.
(4) Includes only directorships of companies required to report under the
Securities Exchange Act of 1934 (i.e. public companies) or other investment
companies registered under the 1940 Act.
74
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 $6.2
billion for some of America's largest companies, 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 and no redemption fees and no exchange fees. Every dollar you
invest goes to work for you.
Sit Mutual Funds offer:
* Free telephone exchange
* Dollar-cost averaging through an automatic investment plan
* Electronic transfer for purchases and redemptions
* Free checkwriting privileges on bond funds
* Retirement accounts including IRAs and 401(k) plans.
SIT FAMILY OF FUNDS
STABILITY: SAFETY OF PRINCIPAL INCOME: INCREASED INCOME GROWTH: LONG-TERM CAPITAL HIGH GROWTH: LONG-TERM
AND CURRENT INCOME APPRECIATION AND INCOME CAPITAL APPRECIATION
- ------------------------------ ---------------------------- ------------------------- ----------------------
* MONEY MARKET * BOND * LARGE CAP GROWTH * DEVELOPING MARKETS GROWTH
* MINNESOTA TAX-FREE INCOME * BALANCED * SCIENCE AND TECHNOLOGY GROWTH
* TAX FREE INCOME * SMALL CAP GROWTH
* U.S. GOVERNMENT SECURITIES * INTERNATIONAL GROWTH
* MID CAP GROWTH
SEMI-ANNUAL REPORT BOND FUNDS
Six Months Ended September 30, 2003
INVESTMENT ADVISER AUDITORS
Sit Investment Associates, Inc. KPMG LLP
90 South Seventh Street 90 South Seventh Street
Suite 4600 Suite 4200
Minneapolis, MN 55402 Minneapolis, MN 55402
612-334-5888 (Metro Area)
800-332-5580
LEGAL COUNSEL
DISTRIBUTOR Dorsey & Whitney LLP
50 South Sixth Street, Suite 1500
SIA Securities Corp. Minneapolis, MN 55402
90 South Seventh Street
Suite 4600
Minneapolis, MN 55402
612-334-5888 (Metro Area)
800-332-5580
CUSTODIAN
The Northern Trust Company
90 South LaSalle Street
Chicago, IL 60675
TRANSFER AGENT AND
DISBURSING AGENT
PFPC Inc.
P.O. Box 5166
Westboro, MA 01581-5186
[LOGO] SIT INVESTMENT ASSOCIATES
-------------------------
SIT MUTUAL FUNDS
Item 2: Code of Ethics. Not applicable to Semi-Annual Report.
Item 3: Audit Committee Financial Expert. Not applicable to Semi-Annual Report.
Item 4: Principal Accountant Fees and Services. Not applicable to Semi-Annual
Report.
Item 5: Audit Committee of Listed Registrants. Not applicable to Semi-Annual
Report.
Item 6: [Reserved.]
Item 7: Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies. - Not applicable
Item 8: Reserved.
Item 9: Controls and Procedures -
(a) Based on their evaluation of the Registrant's disclosure controls and
procedures as of a date within 90 days of the filing date of the
report, the Registrant's Chairman and Treasurer have concluded that the
Disclosure Controls and Procedures (as defined in Rule 30a-2(c) under
the Investment Company Act of 1940) are sufficient to ensure that
information required to be disclosed by the Registrant in this Form
N-CSR was recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange Commission's rules and
forms.
(b) There were no significant changes in the Registrant's internal controls
or in other factors that could significantly affect these controls
subsequent to the date of their evaluation, and there were no
corrective actions with regard to significant deficiencies and material
weaknesses.
Item 10: Exhibits:
(a) Any code of ethics, or amendment thereto, that is the subject of the
disclosure required by Item 2, to the extent that the registrant
intends to satisfy the Item 2 requirements through filing of an
exhibit. Not applicable to Semi-Annual Report.
(b) A separate certification for each principal executive officer and
principal financial officer of the registrant as required by Rule 30a-2
under the Act (17 CFR 270.30a-2). Attached hereto as part of EX-99.CERT
(c) Certification pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
SIT MUTUAL FUNDS II, INC.
- ----------------------------
By /s/ Paul E. Rasmussen
- ----------------------------
Paul E. Rasmussen
Vice President Treasurer
Date November 26, 2003
- ----------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
SIT MUTUAL FUNDS II, INC.
By /s/ Eugene C. Sit
- ----------------------------
Eugene C. Sit
Chairman
Date November 26, 2003
- ----------------------------