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) 334-5888
Date of fiscal year end: March 31, 2004
Date of reporting period: March 31, 2004
Item 1: Reports to Stockholders
SIT MUTUAL FUNDS
BOND FUNDS
ANNUAL REPORT
MARCH 31, 2004
MONEY MARKET FUND
U.S. GOVERNMENT SECURITIES FUND
TAX-FREE INCOME FUND
MINNESOTA TAX-FREE INCOME FUND
FLORIDA TAX-FREE INCOME FUND
BOND FUND
[LOGO] SIT INVESTMENT ASSOCIATES
-------------------------
SIT MUTUAL FUNDS
SIT MUTUAL FUNDS
BOND FUNDS 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
Florida Tax-Free Income Fund 52
Bond Fund 56
Notes to Portfolios of Investments 60
Statements of Assets and Liabilities 62
Statements of Operations 64
Statements of Changes in Net Assets 66
Notes to Financial Statements 68
Financial Highlights 73
Independent Auditors Report 79
Results of Shareholder Meeting 80
Information About Directors and Officers 82
Federal Tax Information 86
A Look at Sit Mutual Funds 88
This document must be preceded or accompanied by a Prospectus.
SIT MUTUAL FUNDS
ONE YEAR ENDED MARCH 31, 2004
[PHOTO]-------------------------------------------------------------------------
CHAIRMAN'S LETTER
Dear fellow shareholders:
Interest rates finished the 12 months ended March 31, 2004 relatively unchanged
from March 31st of 2003. The Federal Reserve lowered the federal funds rate only
once over that period, reducing the rate by 0.25% to 1.00% on June 25, 2003. The
Fed's continued accommodative monetary policy has encouraged economic growth and
recent economic data suggests the Fed will be poised to begin raising rates in
the second half of the year.
The U.S. economy has shown steady improvement from the depths reached in the
third and fourth quarters of 2001, growing an estimated +4.3% in 2003.
Two-thirds of GDP is comprised of the consumer sector. The trend of real
personal expenditures has been steadily upward, fueled by low interest rates and
tax cuts. Personal consumption for the first two months of 1Q04 showed a +3.0%
annualized growth rate. Tax refunds, one of the elements widely projected to be
a stimulus to spending in early 2004, have been weaker than expected. Various
explanations have been cited to account for the shortfall and include higher tax
payments required with bonuses, stock options and proprietors' income as well as
more taxpayers being exposed to the alternative minimum tax.
Attitudes concerning employment opportunities are also a factor impacting
individuals' willingness to spend or save. On April 2nd, the consumer received a
major boost with the announcement that nonfarm payrolls in March increased
308,000, which was more than 150,000 above consensus and a marked improvement
over all recent figures. We believe the March report will be followed by more
positive reports, although the path is likely to be bumpy, as it has been in the
past. The current expansion has been very unique in terms of its weak job
performance combined with top-quartile productivity gains measured by output per
employee. The robust employment report released in early April clearly was a
positive development favoring the sustainability of the economic expansion, and
bond market participants now anticipate the first tightening move by the Fed at
its meeting on August 10th, if not earlier. The trend in employment levels will
be one of the key ingredients leading to the Committee's eventual decision to
increase interest rates.
In addition to the March payroll report, many other indicators reflect a
generally strong level of business activity. The March ISM manufacturing index
moved up slightly to remain at very high levels compared to prior expansions,
corporate profits are continuing very strong, and the Conference Board reported
that the confidence of corporate CEOs rose in the first quarter to the highest
level in 20 years. Accelerating commodity prices were accompanied by an uptick
in consumer price index (CPI) in March, however, year-over-year CPI remains at a
low +1.7%. Many question whether the official statistics adequately portray
real-life experience. We are forecasting a modestly rising trend for CPI in the
remainder of 2004.
In the first five months of the current fiscal year, the federal budget deficit
increased $32.5 billion, or +16.7%. The current trend in the Federal deficit is
currently running at about a -$415 billion pace. Fiscal policy will still have a
stimulative effect on economic growth in 2004, but it will be substantially
diminished from the impacts in 2002 and 2003. Given the sharp deterioration in
the federal budget, the country's fiscal affairs will be a subject of intense
debate in the election campaign.
In summary, we have been expecting strong economic growth this year in the
United States ranging between +4.5% and +5% real GDP growth. Consumer spending
should be strong in the first half assisted by the tax cuts and the early-April
announcement of stronger labor growth. Business capital spending trends are
favorable which should be supplemented by inventory accumulation as demand is
sustained. Consequently, inflation should accelerate in the second half of the
year. The global geopolitical environment remains a major concern especially
with respect to how the Iraq
2
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transition to self-rule will occur and the longer-term role that will be played
by the United States in that country.
STRATEGY SUMMARY
Although record lows were set in June of 2003, interest rates finished March
2004 relatively unchanged from March of 2003. Among taxable bonds, the corporate
sector led performance over the past 12 months, benefiting from expectations for
continued strong earnings growth, while U.S. Treasury and Agency returns lagged
in the low interest rate environment. The mortgage and asset-backed sectors also
trailed corporates, reflecting the continued significant levels of homeowner
prepayments caused by the prolonged low interest rate environment.
Interest rates rose sharply after the March 2004 job report was announced on
April 2nd, which validated our current defensive portfolio positioning. While
Treasury yields have increased 30 to 40 basis points from the end of March, we
believe there is more to come. Given our expectations for higher interest rates,
we are continuing our strategy of focusing on securities that provide a strong
yield advantage while maintaining shorter-than-benchmark durations. We have been
forecasting an increase in yields, coupled with a strengthening economy. During
times of improving economic activity, investors typically become less risk
averse and sell Treasuries in favor of higher yielding alternatives. We continue
to underweight U.S. Treasuries in our taxable bond funds and emphasize higher
yielding asset-backed, mortgage and corporate securities. The rise in interest
rates should help slow refinancing activity in the mortgage sector, and the
expectation of more stable prepayment rates should result in increased investor
demand and narrower yield spreads. Corporate yield spreads should also narrow
further as the economic recovery should lead investors to become more optimistic
about corporate profitability.
In the municipal market, yields ended the 12-month period slightly lower, and
just above historical lows reached in early March 2004. Municipal yields
remained in a much narrower range than did Treasuries during the period and
remain attractively valued compared to Treasuries on a relative yield basis. We
continue to be concerned that municipal yields will rise over the course of the
year, albeit to a lesser extent than that expected for U.S. Treasuries.
Accordingly, municipal portfolio durations have been relatively short. Sit
Investment Associates' municipal portfolios benefited from their defensive
positioning during the month of March, and our continued focus will be on
securities that provide high levels of tax-exempt income and relative price
stability. We believe our focus on income will contribute to attractive relative
returns as interest rates move higher.
Fixed-income investments are an important component of a well-diversified
long-term portfolio. We believe that the Sit bond funds, with their dual
objectives of high income with stability of principal, offer an attractive
risk/reward profile to complement equity holdings. We appreciate your continued
interest and investment in Sit Mutual Funds and look forward to assisting you in
achieving your long-term investment goals.
With best wishes,
/s/ Eugene C. Sit
Eugene C. Sit, CFA
Chairman and Chief Investment Officer
3
SIT MUTUAL FUNDS
ONE YEAR ENDED MARCH 31, 2004
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PERFORMANCE SUMMARY - BOND FUNDS
Interest rates finished the 12 months ended March 31st, 2004 relatively
unchanged from March 31st of 2003. The Federal Reserve lowered the federal funds
rate only once over that period, reducing the rate by 0.25% to 1.00% on June 25,
2003. The Fed's continued accommodative monetary policy has encouraged economic
growth and recent data suggests the Fed will be poised to begin raising rates in
the second half of the year.
While interest rates ended near where they began, the Treasury market
experienced high volatility as interest rates shifted dramatically during this
period. The 10-year Treasury yield began the period at 3.81%, reached as low as
3.11% and as high as 4.60%, while ending only 2 basis points higher at 3.83%.
The corporate sector was by far the best performing taxable bond sector as
historically high yield advantages and a strengthening economy increased
investor demand for corporate bonds. Mortgages were the worst performing sector
as record levels of refinancings boosted prepayment levels. Interestingly, the
vast majority of the +5.40% return of the Lehman Aggregate Bond Index for the
twelve months ended March 31st, 2004, was earned during the first six months as
interest rates were declining and bonds were appreciating.
Municipal yields remained in a much narrower range than Treasury securities
during the year. Longer term yields ended the period slightly lower and just
above record lows reached in early March 2004. The Bond Buyer 40-Bond Index
yield fell 20 basis points to 4.79% on March 31, 2004. Longer duration sectors
performed best and, as in the taxable sector, higher yielding sectors such as
hospitals and industrial revenue bonds performed best, the latter buoyed by a
rebound in the prices of tobacco settlement revenue bonds, while similarly the
housing sector performed worst.
Fixed-income portfolios remain defensively positioned in anticipation of higher
rates next year and remain focused on generating high levels of income.
TOTAL RETURN - CALENDAR YEAR
1995 1996
SIT MONEY MARKET FUND 5.58% 5.08%
- --------------------------------------------------------
SIT U.S. GOV'T. SECURITIES FUND 11.50 4.99
- --------------------------------------------------------
SIT TAX-FREE INCOME FUND 12.86 5.69
- --------------------------------------------------------
SIT MINNESOTA TAX-FREE
INCOME FUND 11.90 5.89
- --------------------------------------------------------
SIT FLORIDA TAX-FREE
INCOME FUND -- --
- --------------------------------------------------------
SIT BOND FUND 16.83 4.25
- --------------------------------------------------------
3-MONTH U.S. TREASURY BILL 5.98 5.27
LEHMAN INTER. GOVERNMENT BOND INDEX 14.41 4.06
LEHMAN 5-YEAR MUNICIPAL BOND INDEX 11.65 4.22
LEHMAN AGGREGATE BOND INDEX 18.47 3.63
NASDAQ
SYMBOL INCEPTION
------ ---------
SIT MONEY MARKET FUND(1) SNIXX 11/01/93
- --------------------------------------------------------
SIT U.S. GOV'T. SECURITIES FUND SNGVX 06/02/87
- --------------------------------------------------------
SIT TAX-FREE INCOME FUND SNTIX 09/29/88
- --------------------------------------------------------
SIT MINNESOTA TAX-FREE INCOME FUND SMTFX 12/01/93
- --------------------------------------------------------
SIT FLORIDA TAX-FREE INCOME FUND SFLIX 12/31/03
- --------------------------------------------------------
SIT BOND FUND SIBOX 12/01/93
- --------------------------------------------------------
3-MONTH U.S. TREASURY BILL 11/01/93
LEHMAN INTER. GOVERNMENT BOND INDEX 05/31/87
LEHMAN 5-YEAR MUNICIPAL BOND INDEX 09/30/88
LEHMAN AGGREGATE BOND INDEX 11/30/93
(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 3/31/04.
(3) Figure represents 7-day compound effective yield. The 7-day simple yield as
of 3/31/04 was 0.43%.
(4) For individuals in the 25%, 28%, 33%, and 35% federal tax brackets, the
federal tax equivalent yields are 5.79%, 6.03%, 6.48% and 6.68%,
respectively (Income subject to state tax, if any).
4
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TOTAL RETURN - CALENDAR YEAR 30-DAY
SEC YIELD
YTD AS OF DISTRIBUTION
1997 1998 1999 2000 2001 2002 2003 2004 3/31/04 RATE(2)
5.22% 5.17% 4.79% 6.03% 3.67% 1.25% 0.65% 0.14%(3) 0.43%(3)
- -------------------------------------------------------------------------------------------------
8.19 6.52 1.37 9.15 8.56 5.79 1.19 1.52 3.52 2.54%
- -------------------------------------------------------------------------------------------------
9.87 6.29 -4.01 8.32 5.84 5.69 2.87 1.70 4.34(4) 4.23
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8.19 6.14 -3.82 8.09 5.85 7.06 4.42 1.56 4.54(5) 4.48
- -------------------------------------------------------------------------------------------------
-- -- -- -- -- -- -- 1.08 3.90(6) n/a
- -------------------------------------------------------------------------------------------------
9.44 6.52 -0.34 9.25 8.36 6.68 5.08 2.58 4.66 4.66
- -------------------------------------------------------------------------------------------------
5.32 5.01 4.88 6.16 3.50 1.67 1.03 0.24
7.72 8.49 0.49 10.47 8.42 9.64 2.29 2.21
6.38 5.84 0.74 7.72 6.21 9.27 4.13 1.28
9.65 8.69 -0.82 11.63 8.44 10.25 4.10 2.66
AVERAGE ANNUAL TOTAL RETURNS FOR THE
TOTAL RETURN PERIODS ENDED MARCH 31, 2004
QUARTER SIX MONTHS
ENDED 3/31/04 ENDED 3/31/04 SINCE
1 YEAR 5 YEARS 10 YEARS INCEPTION
0.14% 0.28% 0.60% 3.06% 4.06% 4.00%
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1.52 1.95 2.19 5.48 5.99 7.20
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1.70 2.70 3.89 3.90 5.68 6.35
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1.56 3.02 4.99 4.42 5.77 5.49
----------------------------------------------------------------------------
1.08 -- -- -- -- 1.08*
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2.58 4.08 6.66 6.29 6.80 6.45
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0.24 0.47 0.98 3.24 4.24 4.20
2.21 2.00 3.58 6.71 6.75 7.56
1.28 1.41 4.30 5.62 5.89 6.48
2.66 2.98 5.40 7.29 7.54 7.04
(5) For Minnesota residents in the 25%, 28%, 33% and 35% federal tax brackets,
the double exempt tax equivalent yields are 6.57%, 6.84%, 7.35% and 7.58%,
respectively (Assumes the maximum Minnesota tax bracket of 7.85%).
(6) For individuals in the 25%, 28%, 33%, and 35% federal tax brackets, the tax
equivalent yields are 5.20%, 5.42%, 5.82% and 6.00%, respectively (Income
subject to state tax, if any).
*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.
5
SIT MUTUAL FUNDS
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDED DECEMBER 31, 2003*
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, 2003. 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
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=========================================================================================================
SIT U. S. GOVERNMENT SECURITIES FUND 1 YEAR 5 YEARS 10 YEARS
Return Before Taxes 1.19% 5.16% 5.85%
Return After Taxes on Distributions 0.35% 3.19% 3.56%
Return After Taxes on Distributions and Sale of Fund Shares 0.53% 3.15% 3.55%
Lehman Intermediate Government Bond Index 2.29% 6.18% 6.32%
=========================================================================================================
=========================================================================================================
SIT TAX-FREE INCOME FUND 1 YEAR 5 YEARS 10 YEARS
Return Before Taxes 2.87% 3.65% 5.18%
Return After Taxes on Distributions 2.87% 3.65% 5.14%
Return After Taxes on Distributions and Sale of Fund Shares 3.11% 3.81% 5.18%
Lehman 5-Year Municipal Bond Index 4.13% 5.57% 5.42%
=========================================================================================================
=========================================================================================================
SIT MINNESOTA TAX-FREE INCOME FUND 1 YEAR 5 YEARS 10 YEARS
Return Before Taxes 4.42% 4.23% 5.35%
Return After Taxes on Distributions 4.42% 4.23% 5.35%
Return After Taxes on Distributions and Sale of Fund Shares 4.44% 4.31% 5.33%
Lehman 5-Year Municipal Bond Index 4.13% 5.57% 5.42%
=========================================================================================================
=========================================================================================================
SIT BOND FUND 1 YEAR 5 YEARS 10 YEARS
Return Before Taxes 5.08% 5.75% 6.36%
Return After Taxes on Distributions 3.39% 3.38% 3.82%
Return After Taxes on Distributions and Sale of Fund Shares 3.34% 3.40% 3.82%
Lehman Aggregate Bond Index 4.10% 6.62% 6.95%
=========================================================================================================
(*) NOTES:
- --- -----
(1) After-tax returns are calculated using the historical highest individual
federal marginal income tax rates and do not reflect the impact of state
and local taxes.
(2) Actual after-tax returns depend on an investor's tax situation and may
differ from those shown, and after-tax returns shown are not relevant to
investors who hold their shares through tax-deferred arrangements, such as
401(k) plans or individual retirement accounts.
(3) Indices reflect no deduction for fees, expenses, or taxes.
7
SIT MONEY MARKET FUND
ONE YEAR ENDED MARCH 31, 2004
- --------------------------------------------------------------------------------
MICHAEL C. BRILLEY, SENIOR PORTFOLIO MANAGER
PAUL J. JUNGQUIST, CFA, SENIOR PORTFOLIO MANAGER
The Sit Money Market Fund provided investors with a +0.60% return for the
fiscal year ended March 31, 2004, compared to a +0.98% return for the 3-Month
U.S. Treasury Bill. The Fund again outperformed the Lipper money market fund
universe(1) for all reported time periods (see chart). The Fund's 7-day compound
yield was 0.43% and its average maturity was 25 days at the end of this period.
STABLE SHORT-TERM RATE ENVIRONMENT
The most significant factor affecting the Sit Money Market Fund's return
over the past twelve months was the reduction of the federal funds rate by 25
basis points on June 25, 2003 which had the effect of lowering most short-term
interest rates by about 0.25%.
YIELD CURVE UNCHANGED, COMPRESSED
There has been very little change in the yield curve for maturities of 120
days or less which is the maturity range in which the Fund invests. Furthermore,
the yield differences among the various credits in which the Fund invests have
been only slight.
RISING YIELDS EXPECTED SOON
We expect short-term interest rates to rise modestly (0.25% to 0.50%) in
the second half of 2004, and the Fund's yield should rise commensurately.
INVESTMENT OBJECTIVE AND STRATEGY
The objective of the Fund is to achieve maximum current income to the
extent consistent with the preservation of capital and maintenance of liquidity.
The Fund pursues this objective by investing in short-term debt instruments
which mature in 397 days or less and by maintaining a dollar-weighted portfolio
maturity of 90 days or less.
An investment in the Fund is neither insured nor guaranteed by the U.S.
Government and there can be no assurance that the Fund will be able to maintain
a stable net asset value of $1.00 per share.
PORTFOLIO SUMMARY
Net Asset Value 3/31/04: $ 1.00 Per Share
3/31/03: $ 1.00 Per Share
Total Net Assets: $44.6 Million
PORTFOLIO STRUCTURE
(% OF TOTAL NET ASSETS)
Asset-Backed Securities 18.1
Diversified Finance 12.8
Communications 9.0
Health Techology 9.0
Insurance 7.1
Consumer Non-Durables 6.6
Consumer Durables 6.3
Sectors less than 6.0% 27.7
Cash & Other
Net Assets 3.4
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** 0.28 0.47 n/a
1 Year 0.60 0.98 0.38
5 Years 3.06 3.24 2.82
10 Years 4.06 4.24 3.87
Inception 4.00 4.20 3.84
(11/1/93)
CUMULATIVE TOTAL RETURNS*
SIT MONEY 3-MONTH LIPPER
MARKET U.S. TREASURY MONEY
FUND BILL MARKET AVG.
--------- ------------- -----------
1 Year 0.60% 0.98% 0.38%
5 Year 16.26 17.29 14.91
10 Year 48.83 51.41 46.28
Inception 50.53 53.48 48.04
(11/1/93)
*AS OF 3/31/04 **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 3/31/04. Sit
Money Market Fund rankings for the 3-month, 5- and 10-year and since inception
periods were 78th of 412 funds, 95th of 291 funds, 41st of 168 funds and 41st of
159 funds, respectively.
GROWTH OF $10,000
[PLOT POINTS CHART]
The sum of $10,000 invested at inception (11/1/93) and held until 3/31/04 would
have grown to $15,053 in the Fund or $15,348 in the 3-Month U.S. Treasury Bill
assuming reinvestment of all dividends and capital gains.
SIT MONEY MARKET MATURITY RANGES
0-15 16-30 31-45 46-60 61+
Days Days Days Days Days
- --------------------------------------------------------------------------------
% of Assets 42.0% 27.1% 11.9% 12.7% 6.3%
9
SIT MONEY MARKET FUND
MARCH 31, 2004
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
QUANTITY ($) NAME OF ISSUER MARKET VALUE($)(1)
- ---------------------------------------------------------------------------
COMMERCIAL PAPER (100.3%)(2)
ASSET-BACKED (18.1%)
Daimler-Chrysler Auto Conduit:
857,000 1.03%, 4/6/2004 856,877
1,100,000 1.02%, 4/7/2004 1,099,813
FCAR Owner Trust Series I:
1,300,000 1.04%, 4/2/2004 1,299,963
1,000,000 1.04%, 4/6/2004 999,856
Mortgage Interest Networking Trust:
1,400,000 1.03%, 4/22/2004 1,399,159
600,000 1.04%, 4/27/2004 599,549
New Center Asset Trust:
800,000 1.02%, 4/21/2004 799,547
1,016,000 1.01%, 4/27/2004 1,015,259
-------------
8,070,023
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CAPTIVE AUTO FINANCE (3.8%)
Toyota Motor Credit Corp.,
1,700,000 1.02%, 4/14/2004 1,699,374
-------------
CAPTIVE EQUIPMENT FINANCE (4.0%)
Caterpillar Financial Services Corp.:
1,000,000 1.00%, 4/7/2004 999,833
800,000 1.05%, 6/21/2004 798,110
-------------
1,797,943
-------------
COMMUNICATIONS (9.0%)
2,000,000 Bellsouth Corp., 1.01%, 4/23/04(5) 1,998,766
2,000,000 SBC International, 1.02%, 4/20/04 1,998,923
-------------
3,997,689
-------------
CONSUMER DURABLES (6.3%)
American Honda Finance:
1,400,000 1.02%, 5/7/2004 1,398,572
1,400,000 1.02%, 5/26/2004 1,397,818
-------------
2,796,390
-------------
CONSUMER LOAN FINANCE (4.5%)
American General Financial Corp.:
500,000 1.02%, 4/5/2004 499,943
611,000 1.03%, 4/5/2004 610,930
900,000 1.02%, 5/21/2004 898,731
-------------
2,009,604
-------------
QUANTITY ($) NAME OF ISSUER MARKET VALUE($)(1)
- ---------------------------------------------------------------------------
CONSUMER NON-DURABLES (6.6%)
1,000,000 Coca Cola Co.,
1.00%, 5/6/2004 999,028
Coca Cola Enterprises:
1,300,000 1.01%, 5/4/2004 (5) 1,298,796
648,000 1.02%, 5/6/2004 (5) 647,357
-------------
2,945,181
-------------
DIVERSIFIED FINANCE (12.8%)
CIT Group Holdings:
1,035,000 1.03%, 5/18/2004 1,033,608
1,200,000 1.03%, 5/25/2004 1,198,146
GE Capital International Funding:
1,400,000 1.04%, 4/15/2004 (5) 1,399,434
1,100,000 1.04%, 4/21/2004 (5) 1,099,365
1,000,000 GE Capital Services, 1.01%, 4/16/04 999,579
-------------
5,730,132
-------------
ELECTRONIC TECHNOLOGY (3.8%)
1,718,000 IBM Corp., 1.04%, 4/1/04 1,718,000
-------------
ENERGY (5.4%)
1,200,000 Chevron Texaco Funding Corp.,
1.00%, 4/19/2004 1,199,400
1,227,000 Exxon Asset Management,
0.98%, 4/1/2004 (5) 1,227,000
-------------
2,426,400
-------------
FINANCIAL SERVICES (5.4%)
UBS Finance Corp.:
1,300,000 1.02%, 4/8/2004 1,299,742
600,000 1.03%, 4/8/2004 599,880
500,000 1.05%, 4/12/2004 499,840
-------------
2,399,462
-------------
HEALTH TECHNOLOGY (9.0%)
2,000,000 Bristol-Myers Squibb Co.,
1.01%, 4/12/2004 (5) 1,999,383
Pfizer, Inc.:
1,000,000 1.00%, 5/3/2004 (5) 999,111
1,000,000 1.00%, 6/3/2004 (5) 998,250
-------------
3,996,744
-------------
10
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QUANTITY ($) NAME OF ISSUER MARKET VALUE($)(1)
- ---------------------------------------------------------------------------
INSURANCE (7.1%)
655,000 AIG Funding, Inc., 1.01%, 5/24/04 654,031
American Family Financial:
2,000,000 1.10%, 4/13/2004 1,999,270
500,000 1.05%, 5/20/2004 499,285
--------------
3,152,586
--------------
PRODUCER MANUFACTURING (4.5%)
Siemens Capital:
1,000,000 0.97%, 4/26/2004 999,326
1,000,000 1.02%, 6/1/2004 998,272
--------------
1,997,598
--------------
Total Commercial Paper 44,737,126
(cost: $44,737,126) --------------
Total investments in securities
(cost: $44,737,126)(7) $44,737,126
==============
See accompanying notes to portfolios of investments on page 60.
11
SIT U.S. GOVERNMENT SECURITIES FUND
ONE YEAR ENDED MARCH 31, 2004
- --------------------------------------------------------------------------------
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 +2.19%
return during the fiscal year ending March 31, 2004, while the Lehman
Intermediate Government Bond Index returned +3.58%. The Fund's 30-day SEC yield
was 3.52% and its 12-month distribution rate was 2.54%.
CMO AND TREASURY POSITIONS HELPED
Two of the Fund's strategies aided performance during the 12-month period.
The Fund's underweighting of U.S. Treasury securities boosted performance as
intermediate Treasuries underperformed the benchmark. In addition, the use of
collateralized mortgage obligations (CMOs) also benefited performance as these
securities demonstrated favorable prepayment experience over the last twelve
months.
MORTGAGES OUT OF FAVOR
Hindering performance was the Fund's use of high coupon mortgage
pass-through securities, which underperformed the benchmark. The low yield
earned on the low levels of cash equivalents also negatively affected
performance.
INVESTMENT OBJECTIVE AND STRATEGY
The objective of the U.S. Government Securities Fund is to provide high
current income and safety of principal, which it seeks to attain by investing
solely in debt obligations issues, guaranteed or insured by the U.S. government
or its agencies or its instrumentalities.
Agency mortgage securities and U.S. Treasury securities will be the
principal holdings in the Fund. The mortgage securities that the Fund will
purchase consist of pass-through securities including those issued by Government
National Mortgage Association (GNMA), Federal National Mortgage Asociation
(FNMA), and Federal Home Loan Mortgage Corporation (FHLMC).
PORTFOLIO SUMMARY
Net Asset Value 3/31/04: $ 10.79 Per Share
3/31/03: $ 10.83 Per Share
Total Net Assets: $287.4 Million
30-day SEC Yield: 3.52%
12-Month Distribution Rate: 2.54%
Average Maturity: 18.6 Years
Effective Duration: 2.4 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)
FNMA Pass-Through 37.3
Collateralized Mortgage Obligations 23.0
GNMA Pass-Through 16.3
FHLMC Pass-Through 13.7
U.S. Treasury/
Federal Agency 5.9
Taxable Municipal 0.9
Cash & Other
Net Assets 2.9
12
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AVERAGE ANNUAL TOTAL RETURNS*
SIT
U.S. GOV'T. LEHMAN LIPPER
SECURITIES INTER. GOV'T. U.S. GOV'T.
FUND BOND INDEX FUND AVG.
----------- ------------- -----------
3 Month** 1.52% 2.21% 2.43%
6 Month** 1.95 2.00 n/a
1 Year 2.19 3.58 2.98
5 Year 5.48 6.71 5.95
10 Year 5.99 6.75 6.29
Inception 7.20 7.56 7.18
(6/2/87)
CUMULATIVE TOTAL RETURNS*
SIT
U.S. GOV'T. LEHMAN LIPPER
SECURITIES INTER. GOV'T. U.S. GOV'T.
FUND BOND INDEX FUND AVG.
----------- ------------- -----------
1 Year 2.19% 3.58% 2.98%
5 Year 30.55 38.33 33.57
10 Year 78.89 92.15 84.18
Inception 222.68 241.56 221.47
(6/2/87)
*AS OF 3/31/04. **NOT ANNUALIZED.
PERFORMANCE FIGURES ARE HISTORICAL AND DO NOT GUARANTEE FUTURE RESULTS.
INVESTMENT RETURNS AND PRINCIPAL VALUE WILL VARY, AND YOU MAY HAVE A GAIN OR
LOSS WHEN YOU SELL SHARES. AVERAGE ANNUAL TOTAL RETURNS INCLUDE CHANGES IN SHARE
PRICE AS WELL AS REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAINS. MANAGEMENT
FEES AND ADMINISTRATIVE EXPENSES ARE INCLUDED IN THE FUND'S PERFORMANCE;
HOWEVER, FEES AND EXPENSES ARE NOT INCORPORATED IN THE LEHMAN INTERMEDIATE
GOVERNMENT BOND INDEX. THE LIPPER AVERAGES AND INDICES ARE OBTAINED FROM LIPPER
ANALYTICAL SERVICES, INC., A LARGE INDEPENDENT EVALUATOR OF MUTUAL FUNDS.
GROWTH OF $10,000
[PLOT POINTS CHART]
The sum of $10,000 invested at inception (6/2/87) and held until 3/31/04 would
have grown to $32,268 in the Fund or $34,156 in the Lehman Intermediate
Government Bond Index assuming reinvestment of all dividends and capital gains.
ESTIMATED AVERAGE LIFE PROFILE
[BAR CHART]
2.9% 89.3% 3.6% 1.0% 3.2%
- -------------------------------------------------------------------
0-1 Year 1-5 Years 5-10 Years 10-20 Years 20+ Years
- --------------------------------------------------------------------------------
The Adviser's estimates of the dollar weighted average life of the portfolio's
securities, which may vary from their stated maturities.
- --------------------------------------------------------------------------------
13
SIT U.S. GOVERNMENT SECURITIES FUND
MARCH 31, 2004
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
MORTGAGE PASS-THROUGH SECURITIES (67.3%)(2)
FEDERAL HOME LOAN MORTGAGE CORPORATION (13.7%):
Par ($) Coupon Maturity Market Value($)(1)
------- ------ -------- ------------------
150,030 5.50% 8/1/17 156,922
411,085 6.38% 12/1/26 429,584
129,751 6.38% 8/1/27 136,401
154,083 6.38% 12/1/27 161,979
305,275 7.50% 10/1/12 328,934
200,721 7.50% 4/1/21 216,080
97,376 7.50% 2/1/27 104,953
248,995 7.50% 4/1/27 268,370
5,360,560 7.50% 1/1/31 5,767,628
208,849 8.00% 10/1/16 227,710
1,263,839 8.00% 12/1/16 1,359,416
48,846 8.00% 5/1/17 53,304
363,574 8.00% 7/1/24 397,091
426,174 8.00% 9/1/24 465,513
802,335 8.00% 9/15/24 880,312
308,734 8.00% 11/1/25 336,643
125,606 8.00% 12/1/26 138,246
254,723 8.00% 1/1/27 277,409
555,611 8.00% 10/1/27 603,533
267,885 8.00% 1/1/28 291,740
187,995 8.00% 7/1/28 204,062
614,788 8.00% 6/1/30 674,415
281,619 8.00% 11/1/30 304,501
428,887 8.00% 2/1/32 463,599
59,234 8.25% 12/1/08 62,918
96,647 8.25% 12/1/17 105,729
636,791 8.50% 1/1/16 701,664
893,187 8.50% 5/1/16 983,622
11,778 8.50% 1/1/17 12,823
64,844 8.50% 4/1/17 71,612
88,951 8.50% 5/1/17 97,679
59,266 8.50% 7/1/17 65,082
354,923 8.50% 8/1/23 390,826
22,109 8.50% 7/1/24 24,168
163,711 8.50% 1/1/25 176,864
136,544 8.50% 4/1/25 147,515
164,889 8.50% 5/1/25 178,137
42,698 8.50% 6/1/25 46,128
88,719 8.50% 8/1/25 95,847
184,121 8.50% 10/1/26 200,749
1,114,355 8.50% 12/1/29 1,203,886
750,466 8.50% 8/1/30 819,650
88,582 8.50% 12/1/30 95,867
655,460 8.50% 4/1/31 708,306
100,887 8.50% 8/1/31 109,025
90,671 8.75% 1/1/17 99,336
2,770 9.00% 12/1/05 2,866
Par ($) Coupon Maturity Market Value($)(1)
------- ------ -------- ------------------
4,614 9.00% 1/1/06 4,775
61,904 9.00% 2/1/06 64,062
44,883 9.00% 5/1/09 48,786
10,046 9.00% 6/1/09 11,199
50,683 9.00% 7/1/09 54,797
40,069 9.00% 7/1/09 43,553
166,555 9.00% 12/1/09 181,024
30,347 9.00% 10/1/13 33,735
614,097 9.00% 11/1/15 684,718
22,698 9.00% 5/1/16 25,228
106,542 9.00% 7/1/16 118,676
150,438 9.00% 10/1/16 167,289
23,621 9.00% 11/1/16 26,311
21,284 9.00% 1/1/17 23,707
16,831 9.00% 1/1/17 18,770
184,652 9.00% 2/1/17 205,656
27,010 9.00% 2/1/17 30,086
83,174 9.00% 2/1/17 91,033
124,130 9.00% 4/1/17 131,044
9,898 9.00% 4/1/17 11,006
115,786 9.00% 6/1/17 129,035
78,051 9.00% 6/1/17 87,134
138,098 9.00% 7/1/17 153,826
8,411 9.00% 9/1/17 9,373
98,981 9.00% 10/1/17 110,307
87,486 9.00% 6/1/18 97,253
294,121 9.00% 6/1/19 327,400
102,552 9.00% 10/1/19 114,358
90,910 9.00% 10/1/19 101,365
40,650 9.00% 10/1/19 45,321
637,106 9.00% 3/1/20 711,231
404,937 9.00% 9/1/20 438,810
68,663 9.00% 5/1/21 76,715
1,053,995 9.00% 6/1/21 1,153,623
35,038 9.00% 7/1/21 39,163
92,500 9.00% 7/1/21 103,377
77,802 9.00% 10/1/21 86,895
65,316 9.00% 3/1/22 72,950
113,527 9.00% 4/1/25 126,652
17,534 9.25% 7/1/08 19,043
51,623 9.25% 8/1/08 56,064
43,292 9.25% 8/1/09 46,104
102,509 9.25% 7/1/10 108,457
51,138 9.25% 3/1/11 54,891
45,203 9.25% 6/1/16 50,373
73,199 9.25% 3/1/17 81,570
741,956 9.25% 2/1/18 817,743
37,399 9.25% 1/1/19 40,144
297,889 9.25% 3/1/19 326,171
14
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Par ($) Coupon Maturity Market Value($)(1)
------- ------ -------- ------------------
186,868 9.25% 3/1/19 206,956
52,574 9.50% 10/1/05 54,064
69,678 9.50% 10/1/08 75,891
88,950 9.50% 2/1/10 97,240
77,475 9.50% 5/1/10 80,116
35,320 9.50% 6/1/10 38,611
28,657 9.50% 1/1/11 31,693
236,014 9.50% 6/1/11 254,566
62,621 9.50% 6/1/16 70,040
16,198 9.50% 7/1/16 18,026
26,444 9.50% 9/1/16 29,045
69,704 9.50% 10/1/16 77,572
4,683 9.50% 10/1/16 5,238
94,197 9.50% 6/1/17 105,344
44,540 9.50% 9/1/17 49,794
51,949 9.50% 4/1/18 58,081
19,791 9.50% 10/1/18 22,132
231,997 9.50% 12/1/18 260,054
426,879 9.50% 2/1/19 477,414
18,184 9.50% 6/1/19 19,973
672,632 9.50% 6/17/19 749,565
158,166 9.50% 7/1/20 175,311
101,609 9.50% 8/1/20 113,888
21,840 9.50% 9/1/20 24,457
424,118 9.50% 8/1/21 460,571
2,523,359 9.50% 12/17/21 2,811,749
52,982 9.75% 12/1/08 57,921
25,303 9.75% 12/1/08 27,662
102,534 9.75% 11/1/09 112,093
21,890 9.75% 6/1/11 23,931
542,778 9.75% 12/1/16 602,784
46,205 9.75% 6/1/17 51,716
289,666 9.75% 12/1/17 323,748
18,902 9.85% 5/1/16 21,168
126,517 10.00% 11/1/10 138,709
173,071 10.00% 11/1/11 195,011
402,709 10.00% 6/1/20 455,897
266,736 10.00% 9/1/20 300,614
245,298 10.00% 3/1/21 275,184
121,025 10.00% 10/1/21 135,525
56,980 10.25% 6/1/10 62,988
48,985 10.25% 2/1/17 54,149
94,565 10.29% 9/1/16 105,056
47 10.50% 4/1/04 47
69,327 10.50% 10/1/13 77,727
147,356 10.50% 5/1/14 163,397
76,565 10.50% 9/1/15 86,303
68,808 10.50% 1/1/19 77,952
823,345 10.50% 6/1/19 928,322
Par ($) Coupon Maturity Market Value($)(1)
------- ------ -------- ------------------
868 10.50% 7/1/20 984
22,079 11.00% 12/1/11 24,844
49,386 11.00% 6/1/15 55,899
67,555 11.00% 2/1/16 76,169
23,823 11.00% 2/1/18 27,113
45,623 11.00% 5/1/19 51,252
63,666 11.00% 7/1/19 72,005
20,393 11.25% 10/1/09 22,855
66,547 11.25% 8/1/11 75,771
50,246 13.00% 5/1/17 56,105
-----------
39,317,739
-----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (37.3%):
Par ($) Coupon Maturity
------- ------ --------
1,996,444 4.41% 2/1/34 2,040,066
8,801,497 5.00% 11/1/10 9,057,291
1,382,236 6.00% 9/1/17 1,468,230
50,895 6.86% 3/1/19 53,583
1,798,665 6.95% 8/1/21 1,915,385
103,014 7.00% 4/1/27 110,483
3,257,245 7.00% 6/1/32 3,456,618
239,540 7.24% 5/1/07 266,280
1,202,057 7.50% 3/1/16 1,293,376
2,628,294 7.50% 6/1/22 2,818,024
1,050,429 7.50% 6/1/25 1,135,120
56,048 7.50% 3/1/27 60,164
38,435 7.50% 9/1/27 41,666
78,126 7.50% 5/1/28 83,815
163,887 7.50% 11/1/29 176,435
160,147 7.50% 1/1/30 171,661
1,019,644 7.50% 12/1/30 1,092,612
1,420,218 7.50% 1/1/31 1,522,740
1,128,878 7.50% 3/1/32 1,209,664
1,270,502 7.50% 6/1/32 1,381,232
559,814 7.54% 6/1/16 615,432
2,272,093 7.87% 12/15/25 2,499,303
116,619 8.00% 8/1/09 125,084
126,501 8.00% 11/1/16 138,199
86,615 8.00% 6/1/18 94,086
226,806 8.00% 1/1/22 248,282
138,490 8.00% 2/1/23 151,660
201,808 8.00% 5/1/23 219,922
84,371 8.00% 9/1/23 91,569
1,237,248 8.00% 7/1/24 1,352,854
195,445 8.00% 8/1/24 213,585
47,842 8.00% 4/1/25 52,237
564,260 8.00% 6/1/27 616,101
281,713 8.00% 9/1/27 309,972
110,025 8.00% 10/1/27 120,237
See accompanying notes to portfolios of investments on page 60. 15
SIT U.S. GOVERNMENT SECURITIES FUND
MARCH 31, 2004
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
Par ($) Coupon Maturity Market Value($)(1)
------- ------ -------- ------------------
689,711 8.00% 6/1/28 748,336
470,876 8.00% 9/1/28 510,935
798,570 8.00% 9/1/29 875,142
149,193 8.00% 12/1/29 161,221
124,220 8.00% 2/1/30 135,009
89,434 8.00% 2/1/31 96,588
574,595 8.00% 2/1/31 622,717
491,450 8.00% 3/1/31 536,980
710,414 8.00% 3/1/32 767,247
1,417,612 8.00% 9/1/32 1,545,640
74,380 8.25% 4/1/22 81,190
1,798,966 8.29% 7/20/30 1,997,414
477,956 8.33% 7/15/20 540,099
617,615 8.38% 7/20/28 686,711
25,879 8.50% 8/1/06 27,470
164,543 8.50% 11/1/10 178,478
1,083,466 8.50% 2/1/16 1,203,325
65,995 8.50% 4/1/17 72,561
419,846 8.50% 6/1/17 446,611
51,855 8.50% 9/1/17 56,846
157,371 8.50% 8/1/18 174,879
44,128 8.50% 1/1/22 48,430
598,956 8.50% 5/1/22 658,836
236,844 8.50% 7/1/22 264,229
116,656 8.50% 11/1/23 127,775
41,485 8.50% 5/1/24 46,243
283,875 8.50% 2/1/25 312,255
129,800 8.50% 9/1/25 142,456
999,373 8.50% 12/1/25 1,093,214
601,565 8.50% 1/1/26 657,459
842,335 8.50% 1/1/26 920,599
374,664 8.50% 7/1/26 404,677
948,049 8.50% 9/1/26 1,036,929
2,097,638 8.50% 11/1/26 2,290,359
74,965 8.50% 12/1/26 81,852
322,844 8.50% 5/1/27 353,160
730,868 8.50% 6/1/27 798,775
1,784,531 8.50% 11/1/28 1,945,139
4,335,678 8.50% 12/1/28 4,734,018
470,531 8.50% 12/1/29 514,643
158,948 8.50% 1/1/30 171,962
537,148 8.50% 1/1/30 580,456
162,472 8.50% 8/1/30 175,488
85,975 8.50% 11/1/30 93,016
238,937 8.50% 11/1/30 258,052
734,840 8.50% 12/1/30 795,005
118,347 8.50% 1/1/31 127,815
516,303 8.50% 6/1/32 564,222
766,232 8.52% 9/15/30 855,546
Par ($) Coupon Maturity Market Value($)(1)
------- ------ -------- ------------------
303,983 8.87% 12/15/25 342,258
257,099 9.00% 1/1/09 281,230
162,350 9.00% 5/1/09 175,364
48,314 9.00% 5/1/09 52,187
194,595 9.00% 5/1/09 208,668
114,696 9.00% 5/1/09 124,027
26,391 9.00% 4/1/10 28,739
101,397 9.00% 3/1/11 111,663
253,991 9.00% 8/1/16 283,336
334,525 9.00% 11/1/16 373,174
57,088 9.00% 6/1/17 60,329
117,278 9.00% 6/1/17 130,739
32,217 9.00% 7/1/17 35,915
62,137 9.00% 9/1/17 69,723
124,577 9.00% 12/1/17 138,876
45,693 9.00% 2/1/18 51,276
32,036 9.00% 9/1/19 34,887
26,492 9.00% 10/1/19 29,729
122,651 9.00% 12/15/19 136,985
107,466 9.00% 3/1/21 119,801
6,503 9.00% 9/1/21 7,260
64,638 9.00% 4/1/25 72,152
119,795 9.00% 4/1/25 133,439
155,176 9.00% 8/1/25 173,022
920,518 9.00% 11/1/25 1,027,528
3,594,591 9.00% 10/1/26 4,007,969
88,694 9.00% 12/1/26 98,743
668,239 9.00% 5/1/27 745,922
2,098,713 9.00% 5/1/28 2,337,754
141,083 9.00% 5/1/30 156,603
1,274,135 9.00% 7/1/30 1,423,050
331,233 9.00% 8/15/30 369,532
134,440 9.00% 11/1/30 146,538
105,787 9.00% 4/1/31 114,746
151,559 9.00% 6/1/31 164,426
30,311 9.00% 7/1/31 33,039
344,210 9.25% 10/1/09 373,241
84,424 9.25% 7/1/10 92,980
18,941 9.25% 4/1/12 19,581
60,860 9.25% 10/1/16 67,834
69,518 9.25% 12/1/16 77,485
253,537 9.25% 2/1/17 282,536
65,834 9.25% 3/1/17 73,379
672,600 9.34% 8/20/27 774,222
13,477 9.50% 1/1/06 14,556
43,616 9.50% 9/1/08 46,288
116,639 9.50% 12/1/09 127,640
37,457 9.50% 1/1/11 40,733
35,353 9.50% 10/1/13 38,954
16
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Par ($) Coupon Maturity Market Value($)(1)
------- ------ -------- ------------------
33,360 9.50% 5/1/14 35,405
205,789 9.50% 4/1/16 228,514
18,590 9.50% 4/1/16 20,484
42,942 9.50% 9/1/16 48,044
117,207 9.50% 9/1/17 131,126
95,399 9.50% 11/1/18 107,739
106,000 9.50% 12/1/18 118,641
52,005 9.50% 5/1/19 58,771
100,292 9.50% 10/1/19 112,831
71,849 9.50% 12/1/19 80,411
77,381 9.50% 3/1/20 86,317
97,976 9.50% 6/1/20 110,650
319,977 9.50% 9/1/20 355,763
252,468 9.50% 9/1/20 282,555
359,324 9.50% 10/15/20 401,549
277,016 9.50% 12/15/20 310,063
57,841 9.50% 12/15/20 64,704
125,980 9.50% 3/1/21 142,128
81,710 9.50% 4/15/21 91,408
405,419 9.50% 7/1/21 453,435
363,158 9.50% 5/1/22 406,324
350,771 9.50% 4/1/25 392,604
443,847 9.50% 4/1/25 495,247
1,047,070 9.50% 11/1/25 1,170,458
611,544 9.50% 3/1/26 682,445
935,078 9.50% 9/1/26 1,043,366
829,148 9.50% 10/1/26 923,981
171,941 9.50% 8/1/30 192,306
3,000,000 9.55% 8/20/25 3,475,313
242,553 9.75% 1/15/13 270,241
219,634 9.75% 1/1/21 246,607
531,689 9.75% 10/1/21 600,975
457,275 9.75% 4/1/25 516,863
14,254 10.00% 3/1/11 15,629
92,602 10.00% 5/1/11 102,219
148,569 10.00% 7/1/13 166,908
155,287 10.00% 6/1/14 168,429
1,023,280 10.00% 2/1/15 1,145,234
1,129,189 10.00% 3/1/15 1,277,640
108,957 10.00% 11/1/16 121,350
50,123 10.00% 3/1/18 56,200
654,764 10.00% 7/1/19 732,721
67,113 10.00% 9/1/19 75,528
171,273 10.00% 12/1/19 190,757
472,440 10.00% 6/1/20 532,550
17,426 10.00% 11/1/20 19,729
88,245 10.00% 1/1/21 99,856
27,994 10.00% 2/1/21 31,472
510,224 10.00% 10/1/21 574,640
Par ($) Coupon Maturity Market Value($)(1)
------- ------ -------- ------------------
284,946 10.00% 5/1/22 320,352
165,162 10.00% 5/1/22 186,893
270,843 10.00% 1/1/24 305,076
220,822 10.00% 7/1/28 249,408
653,363 10.25% 8/15/13 732,588
19,762 10.50% 5/1/09 21,804
49,192 10.50% 5/1/15 55,894
390,465 10.50% 1/1/16 447,028
47,651 10.50% 3/1/17 52,863
209,386 10.50% 12/1/17 234,708
21,230 10.75% 11/1/10 23,506
22,991 11.00% 10/1/06 23,457
94,661 11.00% 9/1/12 107,270
7,274 11.00% 4/1/14 8,224
65,895 11.00% 8/1/15 73,814
128,854 11.00% 9/1/15 143,511
58,947 11.00% 4/1/17 67,108
901,335 11.27% 8/15/20 1,038,142
485,812 11.75% 10/20/22 559,939
------------
107,170,750
------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (16.3%)(3):
Par ($) Coupon Maturity
------- ------ --------
80,672 6.00% 9/15/18 84,429
396,941 6.38% 12/15/27 419,145
386,162 6.38% 4/15/28 407,522
952,386 6.43% 9/15/33 1,062,262
155,365 6.75% 9/15/15 166,741
70,067 6.75% 8/15/28 74,468
44,160 7.00% 9/20/16 47,196
540,571 7.00% 1/15/30 576,153
664,765 7.00% 1/15/31 708,381
818,050 7.00% 11/15/32 871,223
50,129 7.05% 2/15/23 53,857
83,931 7.25% 8/15/10 89,911
289,814 7.25% 10/15/28 310,725
107,559 7.27% 7/20/22 115,592
383,561 7.38% 11/15/30 410,650
469,318 7.38% 3/15/31 502,463
20,643 7.50% 3/15/07 21,947
201,989 7.50% 5/15/16 220,286
1,547,550 7.50% 2/15/27 1,666,936
152,144 7.55% 7/20/22 165,570
346,801 7.55% 10/20/22 377,405
166,843 7.65% 10/20/21 181,976
210,720 7.65% 7/20/22 229,681
224,307 7.75% 6/15/20 246,737
370,592 7.75% 7/15/20 407,651
359,734 7.75% 8/15/20 395,708
See accompanying notes to portfolios of investments on page 60. 17
SIT U.S. GOVERNMENT SECURITIES FUND
MARCH 31, 2004
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
Par ($) Coupon Maturity Market Value($)(1)
------- ------ -------- ------------------
314,111 7.75% 8/15/20 345,522
119,056 7.75% 11/15/20 130,961
640,342 7.75% 10/15/22 709,779
95,188 7.90% 9/20/20 104,260
53,002 7.90% 11/20/20 58,054
44,281 7.90% 1/20/21 48,502
101,675 7.90% 1/20/21 111,366
32,421 7.90% 4/20/21 35,511
55,795 7.90% 8/20/21 61,113
341,410 7.95% 2/15/20 376,779
156,224 7.99% 2/20/21 171,358
98,085 7.99% 4/20/21 107,587
170,150 7.99% 7/20/21 186,634
172,195 7.99% 9/20/21 188,876
176,239 7.99% 10/20/21 193,313
288,865 7.99% 1/20/22 316,578
500,427 7.99% 6/20/22 548,437
46,389 8.00% 10/15/12 51,041
138,668 8.00% 5/15/16 153,695
430,004 8.00% 6/15/16 476,601
176,768 8.00% 9/15/16 195,923
148,765 8.00% 11/20/16 162,386
145,262 8.00% 7/15/17 159,996
54,010 8.00% 7/20/23 59,141
115,949 8.00% 8/15/23 127,833
343,178 8.00% 10/20/23 375,820
59,305 8.00% 12/20/23 64,939
33,683 8.00% 2/20/24 36,802
381,123 8.00% 2/20/26 415,114
90,145 8.00% 12/15/26 98,851
68,567 8.00% 12/20/26 74,682
215,979 8.00% 4/15/28 236,255
723,810 8.00% 4/15/28 792,357
88,635 8.00% 9/15/29 96,917
510,014 8.10% 5/20/19 559,741
294,480 8.10% 6/20/19 323,192
212,058 8.10% 7/20/19 232,734
232,326 8.10% 9/20/19 254,978
91,969 8.10% 9/20/19 100,936
131,767 8.10% 10/20/19 144,614
129,101 8.10% 1/20/20 141,607
106,527 8.10% 4/20/20 116,847
222,404 8.10% 7/20/20 243,950
217,079 8.25% 12/15/11 239,200
75,265 8.25% 1/15/12 83,178
156,777 8.25% 8/15/15 174,438
851,303 8.25% 4/15/19 942,761
61,202 8.25% 1/15/20 67,437
224,496 8.25% 2/15/20 248,489
Par ($) Coupon Maturity Market Value($)(1)
------- ------ -------- ------------------
62,444 8.25% 4/15/27 68,318
179,081 8.25% 6/15/27 195,926
231,751 8.38% 10/15/19 257,099
226,803 8.40% 2/15/19 251,751
162,213 8.40% 4/15/19 180,056
136,024 8.40% 6/15/19 150,986
60,715 8.40% 6/15/19 67,394
62,071 8.40% 9/15/19 68,899
92,430 8.40% 9/15/19 102,598
61,486 8.40% 2/15/20 68,211
80,820 8.50% 12/15/11 89,373
222,866 8.50% 1/15/12 247,204
86,775 8.50% 4/15/15 96,937
58,190 8.50% 4/15/15 65,004
389,593 8.50% 9/15/16 436,670
270,868 8.50% 1/15/17 304,410
197,254 8.50% 12/15/21 219,024
66,309 8.50% 2/15/22 73,582
35,544 8.50% 7/20/22 39,181
214,998 8.50% 10/20/22 236,999
122,797 8.50% 9/20/24 135,034
267,799 8.50% 3/20/25 293,511
453,611 8.50% 12/20/26 495,638
77,157 8.50% 3/20/30 84,125
129,384 8.50% 8/15/30 141,556
62,733 8.60% 5/15/18 69,570
104,527 8.60% 6/15/18 115,920
106,318 8.63% 10/15/18 118,405
14,593 8.75% 5/15/06 15,553
20,438 8.75% 5/15/06 21,784
25,425 8.75% 10/15/06 27,099
33,241 8.75% 11/15/06 35,429
27,737 8.75% 2/15/07 30,443
12,166 8.75% 3/15/07 13,353
60,170 8.75% 11/15/09 67,203
75,776 8.75% 6/15/11 85,357
263,477 8.75% 11/15/11 296,792
89,192 8.75% 12/15/11 100,470
6,361 9.00% 10/15/04 6,454
59,600 9.00% 4/15/06 63,679
43,692 9.00% 4/15/06 46,677
62,208 9.00% 5/15/06 66,457
44,595 9.00% 5/15/06 47,647
20,847 9.00% 6/15/06 22,271
195,572 9.00% 6/15/06 208,956
118,449 9.00% 7/15/06 126,555
19,891 9.00% 10/15/06 21,250
85,130 9.00% 10/15/06 90,945
20,257 9.00% 6/15/07 22,290
18
- --------------------------------------------------------------------------[LOGO]
Par ($) Coupon Maturity Market Value($)(1)
------- ------ -------- ------------------
49,137 9.00% 10/15/07 54,067
17,738 9.00% 9/15/08 19,350
43,951 9.00% 9/15/08 47,945
33,210 9.00% 10/15/08 36,227
3,013 9.00% 11/15/08 3,287
21,105 9.00% 11/15/08 23,023
56,767 9.00% 12/15/08 61,925
7,378 9.00% 2/15/09 8,104
5,462 9.00% 3/15/09 5,999
18,218 9.00% 4/15/09 20,011
36,855 9.00% 4/15/09 40,877
11,620 9.00% 5/15/09 12,763
43,490 9.00% 8/15/09 48,236
41,605 9.00% 9/15/09 46,145
22,289 9.00% 10/15/09 24,483
33,308 9.00% 11/15/09 37,318
16,664 9.00% 12/15/09 18,483
256,866 9.00% 7/15/10 283,535
199,812 9.00% 5/15/11 225,866
49,684 9.00% 5/15/11 56,158
122,438 9.00% 6/15/11 138,403
149,541 9.00% 7/15/11 169,041
122,358 9.00% 8/15/11 136,844
116,575 9.00% 8/15/11 131,775
100,134 9.00% 9/15/11 113,191
139,530 9.00% 9/15/11 157,724
133,885 9.00% 9/15/11 151,342
108,840 9.00% 10/15/11 123,032
73,905 9.00% 1/15/12 83,763
87,880 9.00% 5/20/15 97,766
204,489 9.00% 7/15/15 228,540
40,329 9.00% 8/15/15 45,072
154,953 9.00% 12/20/15 172,385
37,382 9.00% 5/20/16 41,646
35,335 9.00% 6/20/16 39,366
32,879 9.00% 7/20/16 36,631
29,948 9.00% 7/20/16 33,365
284,612 9.00% 1/15/17 325,108
23,341 9.00% 3/20/17 26,032
723,242 9.00% 6/15/17 826,149
597,858 9.00% 7/15/17 682,925
520,404 9.00% 8/20/17 580,392
55,952 9.00% 5/15/18 61,281
11,049 9.00% 12/15/19 12,397
487,682 9.00% 12/15/19 547,189
5,392 9.00% 7/20/21 6,020
7,241 9.00% 10/20/21 8,084
637,155 9.00% 11/15/24 714,898
110,056 9.00% 2/20/25 122,265
Par ($) Coupon Maturity Market Value($)(1)
------- ------ -------- ------------------
109,187 9.00% 7/20/25 121,287
325,703 9.00% 4/15/26 363,851
86,716 9.10% 5/15/18 96,723
16,879 9.25% 3/15/05 17,495
179,290 9.25% 11/15/09 202,300
63,061 9.25% 1/15/10 71,452
47,491 9.25% 4/15/10 53,810
61,021 9.25% 11/15/10 69,141
117,497 9.25% 11/15/11 133,476
29,039 9.25% 4/15/12 33,058
76,233 9.25% 8/20/16 84,619
18,436 9.25% 9/15/16 20,522
4,927 9.25% 2/20/17 5,475
57,568 9.25% 7/20/17 63,964
435 9.50% 1/20/05 449
2,684 9.50% 3/15/05 2,789
22,658 9.50% 1/15/06 24,328
25,399 9.50% 7/15/09 28,049
46,771 9.50% 8/15/09 51,651
22,719 9.50% 8/15/09 25,089
23,403 9.50% 9/15/09 25,845
33,869 9.50% 9/15/09 37,403
46,756 9.50% 9/15/09 51,490
19,463 9.50% 10/15/09 21,494
25,740 9.50% 10/15/09 28,425
199,904 9.50% 10/15/09 220,144
10,102 9.50% 10/15/09 11,124
5,265 9.50% 10/15/09 5,798
74,605 9.50% 10/15/09 82,158
22,241 9.50% 10/15/09 24,562
47,955 9.50% 10/15/09 52,959
10,716 9.50% 10/15/09 11,835
58,164 9.50% 11/15/09 65,832
123,344 9.50% 1/15/10 140,217
63,666 9.50% 2/15/10 70,428
155,219 9.50% 4/15/10 173,996
38,017 9.50% 8/15/10 43,218
75,857 9.50% 11/15/10 86,234
29,652 9.50% 1/15/11 33,801
158,188 9.50% 3/15/11 180,319
17,530 9.50% 3/20/16 19,558
15,984 9.50% 6/15/16 17,913
79,876 9.50% 10/15/16 89,516
47,360 9.50% 10/15/16 53,076
41,050 9.50% 11/15/16 46,004
29,402 9.50% 11/15/16 32,951
50,115 9.50% 11/20/16 55,912
17,447 9.50% 1/15/17 19,573
32,794 9.50% 4/15/17 36,790
See accompanying notes to portfolios of investments on page 60. 19
SIT U.S. GOVERNMENT SECURITIES FUND
MARCH 31, 2004
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
Par ($) Coupon Maturity Market Value($)(1)
------- ------ -------- ------------------
57,357 9.50% 8/15/17 64,346
5,506 9.50% 8/20/17 6,150
41,096 9.50% 9/15/17 46,104
48,856 9.50% 9/15/17 54,809
299,743 9.50% 12/15/17 335,816
129,616 9.50% 12/15/17 145,413
128,578 9.50% 12/15/17 144,249
42,325 9.50% 12/15/17 47,433
8,797 9.50% 12/20/17 9,825
6,616 9.50% 4/15/18 7,427
13,418 9.50% 4/20/18 14,996
13,664 9.50% 5/15/18 15,339
6,851 9.50% 5/20/18 7,656
182,396 9.50% 6/15/18 204,758
90,843 9.50% 6/20/18 101,527
34,416 9.50% 7/20/18 38,463
13,942 9.50% 8/15/18 15,652
47,329 9.50% 8/20/18 52,895
72,461 9.50% 9/15/18 81,345
51,294 9.50% 9/15/18 57,583
83,322 9.50% 9/20/18 93,120
13,869 9.50% 9/20/18 15,500
309,186 9.50% 9/20/18 345,546
59,526 9.50% 10/15/18 66,741
34,312 9.50% 1/15/19 38,491
29,697 9.50% 4/15/19 33,314
14,992 9.50% 8/15/19 16,818
120,435 9.50% 8/20/19 134,499
68,197 9.50% 9/15/19 76,502
9,148 9.50% 10/20/19 10,216
29,837 9.50% 12/15/19 33,470
16,480 9.50% 1/15/20 18,490
30,056 9.50% 2/15/20 33,722
13,498 9.50% 10/15/20 15,144
15,547 9.50% 1/15/21 17,450
14,113 9.50% 2/15/21 15,841
66,751 9.50% 8/15/21 74,921
508,960 9.50% 8/15/22 571,286
11,599 9.75% 6/15/05 12,059
40,375 9.75% 6/15/05 41,976
31,162 9.75% 8/15/05 32,397
22,575 9.75% 9/15/05 23,470
20,724 9.75% 1/15/06 22,313
29,343 9.75% 2/15/06 31,593
139,927 9.75% 8/15/09 158,275
68,747 9.75% 9/15/09 77,762
221,686 9.75% 8/15/10 251,833
68,257 9.75% 11/15/10 77,540
308,523 9.75% 12/15/10 350,478
Par ($) Coupon Maturity Market Value($)(1)
------- ------ -------- ------------------
149,398 9.75% 1/15/11 170,273
361,066 9.75% 1/15/11 411,517
29,018 9.75% 10/15/12 33,162
49,195 9.75% 10/15/12 56,220
24,173 9.75% 10/15/12 27,625
87,367 9.75% 11/15/12 99,844
58,282 9.75% 11/15/12 66,601
90,637 9.75% 11/15/12 103,573
32,923 9.75% 11/15/12 37,622
14,514 9.75% 12/15/12 16,585
32,198 9.75% 4/15/18 36,121
1,695 10.00% 5/15/04 1,724
28,247 10.00% 7/15/05 29,411
75,700 10.00% 7/15/05 78,819
833 10.00% 1/15/06 899
76,401 10.00% 11/15/08 86,180
8,173 10.00% 5/15/09 9,274
2,948 10.00% 11/15/09 3,263
6,699 10.00% 6/15/10 7,635
105,636 10.00% 6/15/10 120,396
13,130 10.00% 7/15/10 14,965
40,368 10.00% 7/15/10 46,008
19,208 10.00% 10/15/10 21,892
149,025 10.00% 11/15/10 169,847
32,247 10.00% 1/15/11 36,879
36,503 10.00% 3/20/16 40,967
20,677 10.00% 11/15/17 23,334
19,421 10.00% 10/15/18 21,936
35,081 10.00% 2/15/19 39,654
49,626 10.00% 2/20/19 55,847
60,905 10.00% 3/20/19 68,540
25,868 10.00% 5/15/19 29,240
52,610 10.00% 5/20/19 59,205
369,593 10.00% 10/15/19 427,920
68,378 10.00% 11/15/19 77,291
9,541 10.00% 7/15/20 10,792
34,169 10.00% 12/15/20 38,648
128,334 10.00% 6/15/21 145,235
75,312 10.00% 10/15/30 85,456
876 10.25% 5/15/04 892
1,478 10.25% 8/15/04 1,504
39,869 10.25% 7/15/05 41,547
60,793 10.25% 5/15/09 68,262
36,823 10.25% 11/15/11 41,679
48,837 10.25% 1/15/12 55,446
11,985 10.25% 2/15/12 13,607
69,853 10.25% 2/15/12 79,305
21,012 10.25% 7/15/12 23,856
47,062 10.50% 6/15/09 53,009
20
- --------------------------------------------------------------------------[LOGO]
Par ($) Coupon Maturity Market Value($)(1)
------- ------ -------- ------------------
19,577 10.50% 7/15/10 22,156
11,155 10.50% 9/15/15 12,647
14,509 10.50% 11/15/15 16,449
5,576 10.50% 3/15/16 6,330
26,328 10.50% 12/15/16 29,890
32,058 10.50% 8/20/17 36,265
58,408 10.50% 11/15/18 66,446
97,279 10.50% 6/15/19 110,746
496,625 10.50% 2/15/20 564,673
280,257 10.50% 8/15/21 322,997
10,227 10.75% 9/15/05 10,690
25,876 10.75% 8/15/06 28,077
11,253 10.75% 1/15/10 12,764
1,983 10.75% 7/15/11 2,258
15,295 10.75% 8/15/11 17,414
98,548 11.00% 1/15/10 110,920
99,276 11.00% 1/15/10 111,740
85,445 11.00% 1/15/10 96,172
87,723 11.00% 3/15/10 98,743
14,381 11.00% 6/15/10 16,186
79,156 11.00% 9/15/10 89,100
15,697 11.25% 9/15/05 16,456
20,709 11.25% 10/15/05 21,711
87,835 11.25% 6/15/10 100,684
66,479 11.25% 9/15/10 76,204
7,296 11.25% 9/15/10 8,363
9,462 11.25% 2/15/11 10,899
13,429 11.25% 2/15/11 15,469
22,887 11.25% 3/15/11 26,363
47,538 11.25% 3/15/11 54,758
85,090 11.25% 4/15/11 98,014
35,051 11.25% 5/15/11 40,375
34,356 11.25% 7/15/11 39,574
9,056 11.25% 7/15/11 10,432
40,899 11.25% 7/15/11 47,112
59,117 11.25% 9/15/11 68,096
25,446 11.25% 10/15/11 29,311
8,828 11.25% 11/15/11 10,169
1,012 11.75% 6/15/04 1,034
521 11.75% 6/15/04 533
------------
46,936,556
------------
Total mortgage pass-through securities 193,425,045
(cost: $189,736,640) ------------
QUANTITY NAME OF ISSUER MARKET VALUE($)(1)
- --------------------------------------------------------------------------------
TAXABLE MUNICIPAL SECURITIES (0.9%)(2)
249,000 Bernalillo Multifamily Rev. Series
1998A, 7.50%, 9/20/20 277,515
1,145,000 Boone County Hsg. Series
1999B, 6.95%, 12/20/16 1,283,499
13,000 California Comm. Dev. Auth. Rev.
Series 2000, 7.50%, 5/20/04 13,098
80,000 Cuyahoga County Multifamily Rev.
Series 2000B, 7.00%, 1/20/08 90,181
60,000 Dakota Multifamily Rev. Series
1999A, 6.50%, 12/20/05 62,098
160,000 Louisiana Comm. Dev. Auth Rev.
Series 2002B, 5.25%, 12/20/07 167,541
460,000 Maplewood Multifamily Rev.
Series 1998B, 6.75%, 7/20/15 504,206
30,000 Metro Govt. (TN) Series 2001 - A2,
7.00%, 6/20/04 30,274
186,000 Nortex Multifamily Rev. Series
1999T, 6.50%, 3/20/06 195,544
--------------
Total taxable municipal securities 2,623,956
(cost: $2,515,537) --------------
U.S. TREASURY/FEDERAL AGENCY SECURITIES (5.9%)(2)
Federal Home Loan Bank:
5,000,000 2.50%, 6/30/09 4,989,995
2,170,000 5.62%, 8/6/18 2,192,455
31,300,000 U.S. Treasury Strips, Zero Coupon,
4.80% Effective Yield, 11/15/27 9,223,453
1,000,000 U.S. Treasury Strips, Zero Coupon,
4.88% Effective Yield, 5/15/16 578,249
--------------
Total U.S. Treasury/Federal Agency securities 16,984,152
(cost: $16,286,831) --------------
COLLATERALIZED MORTGAGE OBLIGATIONS (23.0%)(2)
FEDERAL HOME LOAN MORTGAGE CORP.:
Par ($) Coupon Maturity Market Value($)(1)
------- ------ -------- ------------------
4,144,674 3.25% 4/15/32 4,134,228
1,171,072 4.00% 12/15/32 1,181,927
798,436 5.00% 4/15/18 811,022
790,812 7.50% 6/15/17 856,576
51,194 7.75% 3/18/25 54,817
102,416 9.15% 10/15/20 109,312
See accompanying notes to portfolios of investments on page 60. 21
SIT U.S. GOVERNMENT SECURITIES FUND
MARCH 31, 2004
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
FEDERAL NATIONAL MORTGAGE ASSOCIATION:
Par ($) Coupon Maturity Market Value($)(1)
------- ------ -------- ------------------
4,786,431 3.50% 2/25/33 4,738,965
3,565,042 4.00% 11/25/32 3,635,677
540,275 4.00% 1/25/33 544,790
472,351 5.00% 8/25/22 483,762
47,802 7.00% 1/25/21 50,832
1,338,950 7.00% 1/25/22 1,424,157
129,323 7.37% 1/17/13 133,912
129,041 7.70% 3/25/23 140,487
454,439 8.00% 7/25/22 496,357
279,810 8.20% 4/25/25 315,777
93,356 8.50% 1/25/21 102,501
169,075 8.50% 4/25/21 183,704
860,975 8.50% 9/25/21 946,691
246,403 8.50% 1/25/25 271,894
206,726 8.75% 9/25/20 225,459
423,677 8.95% 10/25/20 470,672
1,189,688 9.00% 7/25/19 1,316,012
995,753 9.00% 12/25/19 1,105,245
292,963 9.00% 5/25/20 321,724
174,824 9.00% 6/25/20 192,862
445,337 9.00% 6/25/20 500,916
56,899 9.00% 7/25/20 63,154
495,172 9.00% 9/25/20 550,399
279,813 9.00% 10/25/20 307,928
559,603 9.00% 3/1/24 633,248
2,699,898 9.00% 11/25/28 2,951,704
405,889 9.25% 1/25/20 452,071
357,702 9.50% 12/25/18 400,265
742,043 9.50% 3/25/20 838,271
184,750 9.50% 4/25/20 202,314
494,428 9.50% 5/25/20 551,976
606,737 9.50% 11/25/20 680,199
853,306 9.60% 3/25/20 956,293
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION:
Par ($) Coupon Maturity
------- ------ --------
1,839,060 4.00% 10/17/29 1,854,907
2,000,000 5.00% 5/16/30 2,045,371
2,805,920 6.00% 4/16/28 2,827,181
828,141 7.00% 3/20/30 833,777
VENDEE MORTGAGE TRUST:
Par ($) Coupon Maturity
------- ------ --------
1,000,000 5.00% 8/15/28 1,012,669
1,000,000 5.00% 7/15/30 993,173
188,847 5.63% 2/15/24 195,961
2,000,000 6.00% 4/15/27 2,144,080
Par ($) Coupon Maturity Market Value($)(1)
------- ------ -------- ------------------
2,000,000 6.00% 2/15/30 2,156,589
250,000 6.50% 10/15/25 267,381
7,281,839 6.50% 12/15/28 7,864,532
5,000,000 7.00% 9/15/27 5,413,688
3,701,923 7.50% 11/15/14 3,828,631
468,818 7.50% 5/15/24 470,414
835,928 8.29% 12/15/26 902,062
------------
Total collateralized mortgage obligations 66,148,516
(cost: $65,185,936) ------------
QUANTITY($) NAME OF ISSUER MARKET VALUE($)(1)
- --------------------------------------------------------------------------------
SHORT-TERM SECURITIES (2.5%)(2)
2,500,000 FNMA, 0.99%, 4/1/04 2,500,000
4,797,161 Dreyfus Cash Mgmt. Fund, 0.90% 4,797,161
------------
Total short-term securities 7,297,161
(cost: $7,297,161) ------------
Total investments in securities
(cost: $281,022,105) (7) $286,478,830
============
22 See accompanying notes to portfolios of investments on page 60.
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This page has been left blank intentionally.
23
SIT TAX-FREE INCOME FUND
ONE YEAR ENDED MARCH 31, 2004
- --------------------------------------------------------------------------------
MICHAEL C. BRILLEY, SENIOR PORTFOLIO MANAGER
DEBRA A. SIT, CFA, SENIOR PORTFOLIO MANAGER
The Tax Free Income Fund returned +3.89% for the fiscal year ended March
31, 2004 compared with a return of +4.30% for the Lehman 5-Year Municipal Bond
Index (the Index). The Fund's 30-day SEC yield was 4.34% and its 12-month
distribution rate was 4.23%.
YIELD CURVE REMAINS VERY STABLE
Interest rates on March 31, 2004 were only slightly lower across the entire
yield curve from their levels twelve months earlier. Reflecting the stability of
interest rates, the Fund's net asset value was $9.90 on March 31, 2004, down by
- -0.4% from the prior fiscal year end. The Fund's overall return was comprised
almost entirely of tax-exempt interest income.
WEAKNESS IN MULTI-FAMILY OFFSET ELSEWHERE
The multifamily sector was the only sector to experience significant market
value deterioration, with a price decline of about -3.7%. Substantially
offsetting that weakness were market value gains of +0.9% or more from the
Fund's investments in single family mortgages, industrial revenue, and other
revenue issues. Weakness in the multifamily sector reflected lower occupancy
rates, rental concessions, and weak rental pricing primarily caused by the
affordability of single family homes. We believe there is some firming in the
multifamily market, which should lead to improved performance from this sector
over the next few years.
FUND MAINTAINS DEFENSIVE STANCE
Performance varied substantially between short and longer duration
securities. Since the yield curve was very steep and prices were relatively
stable, lower yielding shorter duration bonds earned considerably lower returns
than higher yielding longer duration bonds over the twelve month period. The
Fund's average life duration varied between 3.9 and 4.1 years, which was
slightly shorter than the 4.2-year duration of the Index. The Fund's duration is
considerably shorter than the average duration of funds in the Lipper General
Municipal Funds category and was the primary reason why the Fund's return lagged
the average return in its Lipper category. We expect higher interest rates over
the coming twelve months, and believe the Fund's shorter duration should enable
it to outperform most tax-exempt funds over the next year.
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 3/31/04: $ 9.90 Per Share
3/31/03: $ 9.94 Per Share
Total Net Assets: $352.3 Million
30-day SEC Yield: 4.34%
Tax Equivalent Yield: 6.68%(1)
12-Month Distribution Rate: 4.23%
Average Maturity: 12.9 Years
Duration to Estimated Avg. Life: 3.9 Years(2)
Implied Duration: 4.0 Years(2)
(1) For individuals in the 35.0% federal tax bracket.
(2) See next page.
PORTFOLIO STRUCTURE
(% OF TOTAL NET ASSETS)
Hospital/Health Care
Revenue 20.9
Multifamily Mortgage 20.2
Insured 18.7
Other Revenue 12.1
Industrial/Pollution
Control 12.0
Sectors less
than 5.0% 14.3
Cash & Other
Net Assets 1.8
24
- --------------------------------------------------------------------------[LOGO]
AVERAGE ANNUAL TOTAL RETURNS*
SIT LIPPER
TAX-FREE LEHMAN GENERAL
INCOME 5-YEAR MUNI. MUNI. BOND
FUND BOND INDEX FUND AVG.
-------- ------------ ----------
3 Month** 1.70% 1.28% 1.39%
6 Month** 2.70 1.41 n/a
1 Year 3.89 4.30 5.46
5 Year 3.90 5.62 4.70
10 Year 5.68 5.86 5.75
Inception 6.35 6.48 6.75
(9/29/88)
CUMULATIVE TOTAL RETURNS*
SIT LIPPER
TAX-FREE LEHMAN GENERAL
INCOME 5-YEAR MUNI. MUNI. BOND
FUND BOND INDEX FUND AVG.
-------- ------------ ----------
1 Year 3.89% 4.30% 5.46%
5 Year 21.07 31.44 25.87
10 Year 73.81 76.73 74.95
Inception 160.06 164.78 175.42
(9/29/88)
*AS OF 3/31/04. **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 GRAPH]
The sum of $10,000 invested at inception (9/29/88) and held until 3/31/04 would
have grown to $26,006 in the Fund or $26,478 in the Lehman 5-Year Municipal Bond
Index assuming reinvestment of all dividends and capital gains.
QUALITY RATINGS
(% OF TOTAL NET ASSETS)
[PIE CHART]
Other Assets
and Liabilities 1.8%
AAA 27.3%
AA 5.3%
A 28.3%
Less Than BBB 5.8%
BBB 31.5%
LOWER OF MOODY'S, S&P, FITCH OR DUFF & PHELPS RATINGS USED.
25
SIT TAX-FREE INCOME FUND
MARCH 31, 2004
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
QUANTITY ($) NAME OF ISSUER MARKET VALUE ($)(1)
MUNICIPAL BONDS (96.4%)(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%, 8/15/23 506,260
435,000 Cullman Med. Park South Med. Clinic Board Rev. Series 1993A (Cullman Regional
Medical Center Proj.), 6.50%, 2/15/13 439,241
Montgomery Med. Clinic Board Hlth. Care Fac. Rev. Series 1991:
495,000 7.00%, 3/1/15 496,168
225,000 7.375%, 3/1/06 225,713
890,000 Oxford Public Park and Rec Board Rev. Series 2001 (ACA insured), 6.00%, 12/1/21 961,627
--------------
2,629,009
--------------
ALASKA (2.6%)
12,505,000 Alaska HFC Gen. Mtg. Rev. 1997 Series A, Zero Coupon, 6.15% Effective Yield on
Purchase Date, 12/1/17 5,798,193
Northern Alaska Tobacco Securitization Corp. Asset-Backed Rev.:
2,375,000 Series 2000, 6.20%, 6/1/22 2,365,785
865,000 Series 2001, 4.75%, 6/1/15 851,186
--------------
9,015,164
--------------
ARIZONA (0.5%)
410,000 AZ Muni Financing Program C.O.P. Refunding Series 1993-3 (MBIA insured), 5.25%,
8/1/23 419,200
230,000 Bullhead City Special Assessment Impt. Dist. Series 1993 (Bullhead Pkwy. Proj.),
6.10%, 1/1/10 236,049
500,000 Maricopa Co. Industrial Dev. Auth. Educ. Rev. Series 2000A (Arizona Charter
Schools Proj. I), 6.50%, 7/1/12 526,990
Pima Co. Industrial Dev. Auth. Educ. Rev.:
145,000 Series 2004I (AZ Charter Schools Proj.), 5.00%, 7/1/12 144,796
250,000 Series 2004A (Noah Webster Basic School Proj.), 5.25%, 12/15/16 245,438
--------------
1,572,473
--------------
ARKANSAS (0.8%)
74,339 Drew Co. Public Fac. Bd. Single Family Mtg. Rev. Refunding Series 1993-A2
(FNMA backed), 7.90%, 8/1/11 76,789
25,766 Jacksonville Res. Hsg. Fac. Bd. Single Family Mtg. Rev. Refunding Series 1993B,
7.75%, 1/1/11 26,544
1,095,000 Maumelle HDC First Lien Rev. Refunding 1992 Series A (Section 8), 7.875%, 7/1/09 1,101,318
North Little Rock Hlth. Facs. Bd. Health Care Rev. Series 2001 (Baptist Health
Proj.):
555,000 5.00%, 7/1/06 590,298
300,000 5.00%, 7/1/07 323,844
490,000 5.00%, 7/1/08 531,660
265,000 Rogers Sales & Use Tax Rev. Series 1996, 5.35%, 11/1/11 265,912
--------------
2,916,365
--------------
CALIFORNIA (6.3%)
300,000 ABAG Fin. Auth. For Nonprofit Corp. Rev Series 2002 (Redwood Sr. Homes & Svcs.
Proj.), 4.10%, 11/15/07 312,684
Baldwin Park Public Fing. Auth. Sales Tax & Tax Alloc. Rev. Refunding Series 2003
(Merced Redev. Proj.):
150,000 1.70%, 8/1/04 150,108
120,000 2.00%, 8/1/05 120,408
1,000,000 Bell Cmty. Hsg. Auth. Rev. Series 1995A (Mobilehomes Park Acquisition Proj.),
6.40%, 10/1/15 1,038,270
5,245,000 CA Co. Tobacco Securitization Agy. Asset-Backed Rev. Series 2002 (Alameda Co.),
4.75%, 6/1/19 5,145,188
950,000 CA Cmnty. College Fin. Auth. Student Hsg. Rev. Series 2003A (Feather River Cmnty.
District Proj.), 4.625%, 7/1/13 962,578
495,000 CA Govt. Fin. Auth. Lease Rev. Series 2003A (Placer Co. Transportation Proj.),
6.00%, 12/1/28 491,802
26
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QUANTITY ($) NAME OF ISSUER MARKET VALUE ($)(1)
CA Public Works Board Lease Rev. Series 1993A (Various CA State Univ. Proj.):
130,000 4.90%, 12/1/04 132,978
300,000 5.25%, 12/1/13(5) 306,843
1,500,000 Chula Vista Redev. Agency Refunding Tax Allocation Senior Series 1994A
(Bayfront-Town Center Redev. Proj.), 7.625%, 9/1/24 1,642,005
Glendale Hosp. Rev. Refunding Series 1994 (Verdugo Hills Hosp. Proj.)(Industrial
Indemnity insured):
1,340,000 7.75%, 1/1/09 1,313,334
1,585,000 8.00%, 1/1/12 1,512,613
Golden State Tobacco Securitization Corp. Tobacco Settlement Asset-Backed Rev.:
250,000 Series 2003A1, 5.00%, 6/1/21 250,492
500,000 Enhanced Series 2003B, 5.25%, 6/1/16 509,720
165,000 Loma Linda Hosp. Rev. Refunding Series 1993C (Loma Linda Univ. Med. Ctr.)(MBIA
insured), 5.375%, 12/1/22 169,158
500,000 Oceanside C.O.P. Refunding Series 1995 (Oceanside Civic Ctr. Proj.)(MBIA insured),
5.25%, 8/1/19 531,350
1,000,000 Rancho Cucamonga Redev. Agy. Tax Allocation Series 1996 (MBIA insured), 5.25%,
9/1/16 1,091,600
Ridgecrest Refunding C.O.P. Series 1999 (Ridgecrest Civic Center Proj.):
275,000 5.55%, 3/1/09 305,990
290,000 5.65%, 3/1/10 321,511
350,000 6.00%, 3/1/14 380,499
1,000,000 Sacramento Pwr. Auth. Rev. Series 1995 (Cogeneration Proj.) (MBIA insured), 6.00%,
7/1/22 1,106,660
2,000,000 Sacramento District Fing. Auth. Rev. Series 2000A, 5.875%, 12/1/27 2,140,560
300,000 San Jose Redev. Agy. Tax Alloc. Series 1993 (Merged Area Redev. Proj.)(MBIA
insured), 5.00%, 8/1/20 306,684
Southern CA Tobacco Securitization Auth. Asset-Backed Senior Rev:
1,000,000 Series 2001B, 6.00%, 5/15/22 951,200
885,000 Series 2002A, 5.25%, 6/1/27 877,088
--------------
22,071,323
--------------
COLORADO (3.2%)
345,000 Boulder Co. Hosp. Rev. Series 2000 (Longmont United Hosp. Proj.)
(Radian insured), 5.05%, 12/1/05 352,876
1,910,000 CO E-470 Business Met. Dist. G.O. Series 1999 (ACA insured), 5.00%, 12/1/11 2,037,492
345,000 CO Educ. & Cultural Fac. Rev. Refunding Series 2003C (Cheyenne Mtn. Charter Sch.
Proj.), 4.625%, 6/15/12 338,859
1,250,000 CO Hlth. Fac. Auth. Rev. Series 1995 (Covenant Retirement Cmty. Proj.), 6.75%,
12/1/15 1,307,062
CO HFA Single Family Program Senior Series:
275,000 1996B-2, 7.45%, 11/1/27 276,094
175,000 1997B-3, 6.80%, 11/1/28 175,607
2,550,000 CO Hlth. Fac. Auth. Rev. Refunding & Impt. Hosp. Series 1995 (Parkview Proj.),
6.125%, 9/1/25 2,667,682
CO Hlth. Fac. Auth. Rev. (Evangelical Lutheran Proj.):
1,000,000 Series 2000, 6.25%, 12/1/10 1,149,000
1,500,000 Series 2002, 5.90%, 10/1/27 1,562,205
400,000 CO Hlth. Fac. Auth. Rev. Series 2000A (Porter Place Proj.) (GNMA collateralized),
5.10%, 1/20/11 438,716
600,000 Denver Hsg. Corp. Multifamily Rev. Refunding Series 1997A (Section 8), 5.35%,
10/1/12 627,768
200,000 Denver Hlth. & Hosp. Auth. Rev Series 2001A, 5.00%, 12/1/04 203,756
65,000 Thornton Single Family Mtg. Rev. Refunding 1992 Series A, 8.05%, 8/1/09 65,265
--------------
11,202,382
--------------
See accompanying notes to portfolios of investments on page 60. 27
SIT TAX-FREE INCOME FUND
MARCH 31, 2004
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
QUANTITY ($) NAME OF ISSUER MARKET VALUE ($)(1)
CONNECTICUT (0.9%)
750,000 Bristol Res. Recovery Fac. Operating Committee Solid Waste Rev. Refunding Series
1995 (Ogden Martin Sys. Proj.), 6.50%, 7/1/14 802,455
750,000 CT Airport Rev. Series 1992 (FGIC insured), 7.65%, 10/1/12 771,915
65,000 CT Hlth. & Educ. Fac. Auth. Rev. Series 1993A (Griffin Hosp. Proj.), 6.00%, 7/1/13 66,242
1,850,000 Mashantucket Western Pequot Tribe Subordinated Special Rev. Series 1999B, Zero
Coupon, 5.05% Effective Yield on Purchase Date, 9/1/09 1,494,874
--------------
3,135,486
--------------
DELAWARE (0.3%)
1,000,000 DE Health Facs. Auth. Rev. Series 1994 (Beebe Med. Ctr. Proj.), 6.80%, 6/1/24 1,027,939
--------------
FLORIDA (3.1%)
600,000 Capital Trust Agy. Multifamily Rev. Sr. Series 2003A (Golf Villas, Rivermill, and
Village Square Apts. Proj.), 4.75%, 6/1/13 588,174
1,725,000 Collier Co. Health Fac. Auth. Rev. Refunding Series 1994 (Moorings, Inc. Proj.),
7.00%, 12/1/19 1,815,459
670,000 Collier Co. HFA Multifamily Hsg. Rev. Series 2002C (Goodlette Arms Proj.), 5.25%,
8/15/15 716,712
385,000 Dade Co. Hlth. Fac. Auth. Hosp. Rev. Refunding Series 1993A (Baptist Hosp. Miami
Proj.) (MBIA insured), 5.25%, 5/15/21 389,774
125,000 Dunes Cmnty. Dev. Dist. Rev. Refunding Series 1993 (Intracoastal Waterway Bridge
Proj.), 5.50%, 10/1/07 127,857
1,750,000 Escambia Hlth. Facs. Auth. Rev. Series 2000 (FL Hlth. Care Fac. Loan Pgm.) (Ambac
insured), 5.95%, 7/1/20 1,837,745
750,000 FL HFC Hsg. Rev. Hsg. Series 2000D-1 (Augustine Club Apts. Proj.)(MBIA insured),
5.75%, 10/1/30 796,567
1,000,000 Highlands Co. Hlth. Fac. Auth. Rev. Series 2002 (Adventist Health Sys./Sunbelt
Proj.), 3.35%, 11/15/32 1,022,130
150,000 Hillsborough Co. Indus. Dev. Auth. Hosp. Rev. Refunding Series 2003A (Tampa General
Hosp. Proj.), 2.50%, 10/1/05 151,357
100,000 Jacksonville Elec. Auth Water & Sewer Rev. Series 2000A (MBIA-IBC insured), 5.30%,
10/1/30 106,031
Jacksonville Hlth. Fac. Auth. Industrial Dev. Rev. (Natl. Benevolent Assoc. -
Cypress Village Proj.):
1,000,000 Refunding Series 1992, 7.00%, 12/1/14(8)(9) 723,500
450,000 Series 1993, 6.40%, 12/1/16(8)(9) 325,575
545,000 Lee Co. Indus. Dev. Auth. Hlth. Care Fac. Rev. Series 1999A (ShellPoint Village
Proj.), 5.50%, 11/15/08: 594,257
200,000 Leesburg Hosp. Rev. Refunding Series 2003A (Leesburg Regl. Med. Ctr. Proj.),
3.00%, 7/1/05 202,926
135,000 Leon Co. Educ. Facs. Auth. Student Hsg. Rev. Series 2003 (Heritage Grove
Proj.)(ACA insured), 3.00%, 8/1/05 137,626
385,000 Miami-Dade Co. Special Hsg. Rev. Refunding Series 1998 (Section 8), 5.30%, 10/1/05 383,633
200,000 Palm Beach Co. Hlth. Fac. Auth. Rev. Refunding Series 2003 (Abbey Delray South
Proj.), 5.15%, 10/1/12 207,098
South Lake Co. Hosp. Dist. Rev. Series 2003 (South Lake Hosp. Inc.):
420,000 4.25%, 10/1/08 429,967
500,000 5.50%, 10/1/13 523,075
--------------
11,079,463
--------------
GEORGIA (0.2%)
1,275,000 DeKalb Co. Hsg. Auth. Multifamily Hsg. Rev. (Regency Woods I & II) Subordinate
Series 1996C, 7.25%, 1/1/26(8)(9) 255,000
500,000 Private Colleges & Univ. Auth. Rev. Refunding Series 1999A (Mercer Univ. Proj.),
5.25%, 10/1/14 525,500
70,000 Royston Hosp. Auth. Rev. Refunding Series 1999 (Ty Cobb Healthcare Sys., Inc.
Proj.), 6.00%, 7/1/04 70,309
--------------
850,809
--------------
HAWAII (0.3%)
1,165,000 Honolulu Mtg. Rev. Ref. Series 1996A (Hale-Pauahi Proj.)(FHA insured)(MBIA
insured), 6.80%, 7/1/28 1,204,528
--------------
28
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QUANTITY ($) NAME OF ISSUER MARKET VALUE ($)(1)
ILLINOIS (13.4%)
Broadview Village of Cook Co. Tax Increment Rev. Series 1999:
750,000 4.90%, 7/1/06 781,545
1,000,000 5.00%, 7/1/07 1,051,930
1,085,000 5.05%, 7/1/08 1,140,530
2,030,000 5.10%, 7/1/09 2,156,408
Chicago Gas Supply Rev. Refunding Series 1995A (People's Gas, Light, & Coke Co.
Proj.):
1,500,000 6.10%, 6/1/25 1,591,860
2,500,000 (Ambac insured), 6.10%, 6/1/25 2,671,500
450,000 Chicago Metro Hsg. Dev. Corp. Mtg. Rev. Refunding Series 1992A (FHA insured)
(Section 8), 6.85%, 7/1/22 465,525
375,000 Collinsville (City of) Madison Co. Industrial Dev. Rev. Refunding (Drury
Inn-Collinsville Proj.) Series 1993, 6.00%, 11/1/04 374,077
250,000 Hoffman Estates Tax Increment Rev. Jr. Lien Series1991, Zero Coupon, 4.15%
effective yield, 5/15/07 227,567
450,000 IL DFA Rev. Series 2002A (Chicago Charter School Fdn. Proj.), 5.25%, 12/1/12 457,483
500,000 IL DFA Pollution Ctrl. Rev. Refunding Series 1993B2 (Central IL Public Svc. Co.
Proj.) (MBIA insured), 5.90%, 6/1/28 505,485
IL DFA Pollution Ctrl. Rev. Refunding:
485,000 Series 1993C2 (Public Svc. Co. Proj.), 5.70%, 8/15/26 496,077
2,500,000 Series 2000A (American CIPS Proj.), 5.50%, 3/1/14 2,596,350
IL DFA Refunding & New Money Rev. (Cmty. Rehab. Providers Fac. Acquisition
Program):
685,000 Series 1997A, 5.60%, 7/1/04 690,706
1,740,000 Series 1997A, 5.80%, 7/1/08 1,856,928
300,000 Series 1997A, 5.90%, 7/1/09 318,261
4,535,000 Series 1997A, 6.00%, 7/1/15 4,678,805
1,200,000 Series 1997C, 5.65%, 7/1/19 1,204,896
580,000 Series 1998A, 5.00%, 7/1/06 602,081
655,000 Series 1998A, 5.50%, 7/1/12 675,449
100,000 Series 1998A, 5.70%, 7/1/19 100,669
1,000,000 IL Educ. Fac. Auth. Rev. Series 1998 (Augustana College Proj.), 5.00%, 10/1/13 1,109,830
2,780,000 IL HDA Elderly Hsg. Rev. Series 1992C (Village Ctr.) (Section 8), 6.85%, 3/1/20 2,812,359
100,000 IL HDA Multifamily Rev. Series 1994-5 (Section 8), 6.75%, 9/1/23 103,280
IL Hlth. Fac. Auth. Rev.:
1,560,000 Refunding Series 1992 (Galesburg Cottage Hosp. Proj.)(Radian insured), 6.25%,
5/1/11 1,565,710
545,000 Refunding Series 1993 (Lutheran Social Svcs. IL), 6.10%, 8/15/04 550,325
750,000 Refunding Series 1993 (OSF Healthcare System), 5.75%, 11/15/07 766,935
1,405,000 Refunding Series 1993 (OSF Healthcare System), 6.00%, 11/15/23 1,433,114
1,250,000 Refunding Series 1994 (Passavant Memorial Area Hospital Assn.), 5.95%, 10/1/11 1,409,287
207,000 Refunding Series 1994 (Friendship Village of Schaumberg Proj.), 6.25%, 12/1/04 207,468
2,575,000 Refunding Series 1993A (Edward Hosp. Proj.), 6.00%, 2/15/19 2,635,667
250,000 Refunding Series 1996A (Advocate Hlth. Proj.)(MBIA insured), 5.80%, 8/15/16 277,728
400,000 Refunding Series 1999 (Silver Cross Hosp. Proj.), 5.25%, 8/15/15 424,360
970,000 Refunding Series 2001 (Decatur Memorial Hospital Proj.), 4.625%, 10/1/08 1,043,381
500,000 Series 2000 (IA Health System Proj.), 6.75%, 2/15/13 573,030
200,000 IL Sales Tax Rev. Series 1994U, 5.00%, 6/15/10 205,414
250,000 Melrose Park Tax Increment G.O. Series 1999A (FSA insured), 5.25%, 12/15/15 275,473
750,000 Onterie Ctr. Hsg. Fin. Corp. Mtg. Rev. Refunding Series 1992 (Onterie Ctr. Proj.)
(MBIA - FHA insured), 7.05%, 7/1/27 775,313
See accompanying notes to portfolios of investments on page 60. 29
SIT TAX-FREE INCOME FUND
MARCH 31, 2004
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
QUANTITY ($) NAME OF ISSUER MARKET VALUE ($)(1)
1,850,000 Roselle Multifamily Hsg. Rev. Refunding Series 1994A (GNMA collateralized)
(Waterbury Apts.) (FHA insured), 7.00%, 1/1/25 1,911,809
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 3,500,939
495,000 Upper Illinois River Valley Dev. Auth. Rev. Series 2001 (Morris Hosp. Proj.),
6.05%, 12/1/11 549,806
500,000 Will Co. Student Hsg. Rev. Series 2002A (Joliet Junior College Proj.), 6.375%,
9/1/13 437,020
--------------
47,212,380
--------------
INDIANA (6.8%)
1,975,000 IN Bond Bank Special Prgm. Series 1997C (Pittsboro Wastewater Treatment Plant
Proj.), 5.70%, 8/1/17 2,094,804
2,175,000 IN DFA Educ. Fac. Rev. Series 1997 (Park Tudor Fdn. Proj.), 6.00%, 6/1/22 2,429,388
IN Hlth. Fac. Fin. Auth. Hosp. Rev.:
375,000 Series 1993 (Riverview Hosp. Proj.), 6.875%, 8/1/17 381,109
250,000 Series 1993 (Community Hosp. of Anderson Proj.), 6.00%, 1/1/23 253,135
Refunding Series 1998 (Floyd Memorial Hosp. & Hlth. Svcs. Proj.):
505,000 4.85%, 2/15/06 531,260
600,000 5.25%, 2/15/18 622,026
Series 2001A (Community Foundation Northwest IN):
780,000 5.50%, 8/1/05 800,366
1,100,000 5.50%, 8/1/06 1,142,317
1,000,000 6.00%, 8/1/07 1,057,610
1,000,000 6.00%, 8/1/08 1,067,550
1,120,000 5.50%, 8/1/13 1,141,493
500,000 IN HFA Single Family Mtg. Rev. Refunding Series 1992A, 6.80%, 1/1/17 502,735
IN Hlth. Fac. Fin. Auth. Rev. Refunding Series 1998:
(Greenwood Village South Proj.):
140,000 5.15%, 5/15/04 140,175
150,000 5.25%, 5/15/06 150,089
170,000 5.35%, 5/15/08 170,047
1,875,000 (Marquette Manor Proj.), 5.00%, 8/15/18 1,861,612
1,000,000 IN Transportation Fin. Auth. Airport Facs. Lease Rev. Series 1992A, 6.25%, 11/1/16 1,013,519
2,545,000 Indianapolis Econ. Dev. Refunding & Imprv. Rev. Series 1992 (Natl. Benevolent
Assn.-Robin Run Village Proj.), 7.25%, 10/1/10(8)(9) 1,841,307
400,000 Lawrenceburg Indus. Pollution Ctl. Rev. Refunding Series 1993E (Ind.-Mich. Pwr.
Co. Proj.), 5.90%, 11/1/19 407,144
500,000 Petersburg Pollution Ctrl. Rev. Refunding Series 1993A (Indianapolis Pwr. & Light
Proj.) (MBIA insured), 6.10%, 1/1/16 506,860
Sullivan Industrial Pollution Ctrl. Rev.:
615,000 Refunding Series 1991 (Hoosier Energy Corp. Proj.) (MBIA insured), 7.10%,
4/1/19 637,386
5,000,000 Refunding Series 1993C (Ind. Mich. Pwr. Co. Proj.), 5.95%, 5/1/09 5,108,500
--------------
23,860,432
--------------
IOWA (1.2%)
1,305,000 IA Fin. Auth. Hlth. Care Fac. Rev. Series 1997 (Natl. Benevolent Assn.- Ramsey
Home Proj), 6.15%, 5/1/17 (8) (9) 944,167
1,130,000 IA Fin. Auth. Multifamily Hsg. Rev. Refunding Series 1997A (Kingswood Apts. Proj.)
(GNMA-collateralized), 6.15%, 5/1/32 1,193,574
IA Fin. Auth Single Family Rev. Series 2000D (GNMA/FNMA Mtg. Backed Securities
Proj.):
185,000 5.65%, 7/1/07 198,248
220,000 5.75%, 7/1/09 234,588
1,345,000 Ottumwa Hosp. Rev. Refunding Series 1993 (Ottumwa Regional Hlth. Ctr.), 6.00%,
10/1/10 1,373,433
250,000 IA Tobacco Settlement Auth. Asset-Backed Rev. Series 2001B, 5.30%, 6/1/25 216,513
--------------
4,160,523
--------------
30
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QUANTITY ($) NAME OF ISSUER MARKET VALUE ($)(1)
KANSAS (1.1%)
3,750,000 Burlington Co. Pollution Ctrl. Rev. Refunding Series 1991 (KS Gas & Electric Co.
Proj.) (MBIA insured), 7.00%, 6/1/31 3,947,999
200,000 Olathe & Labette Cos. Mtg. Loan Rev. 1991 Series B (GNMA collateralized) Zero
Coupon, 7.56% Effective Yield on Purchase Date, 2/1/23 52,762
--------------
4,000,761
--------------
KENTUCKY (0.1%)
500,000 Boone Co. Pollution Ctrl. Rev. Refunding Series 1992A (Dayton Pwr. & Light Co.
Proj.), 6.50%, 11/15/22 509,850
--------------
LOUISIANA (1.5%)
East Baton Rouge Single Family Mtg. Rev. Refunding:
1,415,000 Series 1997C-3 Subordinate Bonds, 5.65%, 10/1/18 1,486,203
7,200,000 Capital Appreciation Series 2000D1 (GNMA & FNMA collateralized) Zero Coupon,
6.46% Effective Yield on Purchase Date, 4/1/34 1,096,632
650,000 LA HFA Multifamily Mtg. Rev. Series 2003A (Section 8-202 Proj)(FSA insured),
4.40%, 6/1/33 672,380
500,000 LA PFA Multifamily Mtg. Rev. Refunding Series 1994A (Carlyle Apt. Proj.)
(Axa Reinsurance Co. insured), 5.95%, 6/15/19 500,940
500,000 Monroe Sales Tax Increment Rev. Refunding Series 2003 (Garrett Rd. Dev. Area
Proj.), 4.40%, 3/1/16 499,525
280,000 New Orleans HDC First Lien Rev. Refunding Series 1996A (Tivoli Place Apts.
Proj.) (Section 8), 6.40%, 12/1/04 280,692
400,000 Orleans Levee Dist. Rev. Series 1995A (Tr. Rcpts.) (FSA insured), 5.95%, 11/1/14 440,152
515,000 Tobacco Settlement Financing Corp. Asset-Backed Rev. Series 2001B, 5.50%, 5/15/30 467,383
---------------
5,443,907
---------------
MAINE (0.6%)
1,000,000 Skowhegan Pollution Ctrl. Rev. Refunding Series 1993 (Scott Paper Co. Proj.),
5.90%, 11/1/13 1,023,650
1,000,000 South Berwick Educ. Rev. Series 1998 (Berwick Academy Issue), 5.25%, 8/1/13 1,031,830
--------------
2,055,480
--------------
MARYLAND (0.1%)
500,000 MD Hlth. & Higher Educ. Fac. Auth. Rev. Refunding Series 2003A (Adventist
Healthcare Proj.), 5.00%, 1/1/12 519,485
--------------
MASSACHUSETTS (1.0%)
MA Hlth. & Educ. Fac. Auth. Rev.:
200,000 Series 1993B (Lahey Clinic Med. Ctr. Proj.), 5.40%, 7/1/06 204,604
175,000 Series 1994B (Holyoke Hosp. Proj.), 6.25%, 7/1/04 175,772
250,000 Series 1996C (North Adams Regional Hosp. Proj.), 6.25%, 7/1/04 250,850
Series 1998B (Cape Cod Healthcare Obligated Group Issue):
320,000 5.00%, 11/15/05 331,610
520,000 5.00%, 11/15/06 546,692
430,000 5.00%, 11/15/07 455,624
175,000 5.125%, 11/15/08 186,410
500,000 Series 2001E (Berkshire Health Sys.), 4.50%, 10/1/05 511,695
10,000 MA HFA Hsg. Projs. Rev. Series 1993A, 6.375%, 4/1/21 10,113
400,000 MA Indus. Fin. Agy. Pollution Ctrl. Rev. Refunding Series 1993 (Eastern Edison
Co. Proj.), 5.875%, 8/1/08 409,372
225,000 MA Indus. Fin. Agy. Resource Recovery Rev. Refunding Series 1992A
(Ogden Haverhill Associates Proj.), 4.95%, 12/1/06 227,054
270,000 MA Indus. Fin. Agy. First Mtg. Rev. Series 1994A (Berkshire Retirement Proj.),
6.375%, 7/1/05 275,786
--------------
3,585,582
--------------
See accompanying notes to portfolios of investments on page 60. 31
SIT TAX-FREE INCOME FUND
MARCH 31, 2004
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
QUANTITY ($) NAME OF ISSUER MARKET VALUE ($)(1)
MICHIGAN (2.9%)
520,000 Central Wayne Co. Sanitation Auth. Incinerator Rev. Series 2003VII, 4.375%,
7/1/06 526,978
395,000 John Tolfree Hlth. System, Mtg. Rev. & Refunding Series 1999, 5.30%, 9/15/05 402,248
760,000 MI Hosp. Fin. Auth. Rev. Refunding Series 1993A (McLaren Oblig. Group), 5.25%,
10/15/07 776,849
MI Strategic Fund Ltd. Obligation Rev. Refunding:
1,250,000 Series 2003A (Dow Chemical Proj.)(Mandatory Put 6/1/06), 3.80%, 6/1/14 1,291,788
2,500,000 Series 2003 (Dow Chemical Proj.)(Mandatory Put 6/1/08), 4.60%, 6/1/14 2,695,125
2,095,000 Southfield Econ. Dev. Corp. Ltd. Obligation Rev. Series 1998A (Lawrence Tech.
Univ. Proj.), 5.25%, 2/1/13 2,175,322
1,873,912 Suburban Mobility Auth. Regl. Transportation C.O.P. Series 2002, 4.90%, 2/15/09(5) 1,899,098
Summit Academy North Public School C.O.P. Series 2001:
130,000 5.60%, 7/1/05 134,550
135,000 5.70%, 7/1/06 142,324
145,000 5.95%, 7/1/07 154,776
--------------
10,199,058
--------------
MINNESOTA (2.1%)
3,410,000 Dakota Co. HRA Multifamily Mtg. Rev. Refunding Series 1997A (Park Place
Apts. Proj.)(GNMA Collateralized), 6.875%, 2/20/32 3,713,831
740,000 Hopkins Multifamily Hsg. Rev. Series 1996 (Hopkins Renaissance Proj.)
(Section 8), 6.375%, 4/1/20 780,678
500,000 Minneapolis & St. Paul HRA Hlth. Care Sys. Rev. Series 2003(Healthpartners
Oblig. Grp. Proj.), 4.00%, 12/1/05 515,450
2,315,000 Plymouth Multifamily Hsg. Dev. Rev. Refunding Series 1996A (GNMA collateralized)
(Fox Forest Apts. Proj.), 8.05%, 6/20/31 2,500,061
--------------
7,510,020
--------------
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, 9/15/16 146,853
235,000 MS Hosp. Equip. & Fac. Auth. Rev. Refunding Series 2003 (SW Miss. Regl. Med.
Proj.), 2.30%, 4/1/04 235,000
400,000 Lincoln Co. Hosp. Rev. Refunding Series 1998A (Kings Daughter Hosp. Proj.),
5.20%, 4/1/08 427,768
--------------
809,621
--------------
MISSOURI (2.4%)
1,000,000 Cameron Industrial Dev. Auth. Rev. Refunding Series 2000 (Cameron Cmnty. Hosp.
Proj.) (ACA Insured), 5.80%, 12/1/09 1,106,660
300,000 Cass Co. Industrial Dev. Auth. Rev. Refunding Series 1992 (Natl. Benevolent
Proj.), 7.375%, 10/1/22(8)(9) 217,050
645,000 Chesterfield Rev. Refunding & Impt. Series 2002 (Chesterfield Vy. Projs.),
4.50%, 4/15/16 659,467
MO Dev. Finance Board Infrastructure Fac. Rev.:
Series 2000A (Eastland Ctr. Proj. Phase 1):
1,275,000 5.75%, 4/1/09 1,390,171
550,000 5.75%, 4/1/12 596,470
1,000,000 Series 2000B (Eastland Ctr. Proj. Phase 2), 6.00%, 4/1/15 1,078,090
1,230,000 MO Hlth. & Educ. Fac. Auth. Educ. Fac. Rev. Series 1999 (Park College Proj.),
5.55%, 6/1/09 1,279,950
150,000 MO Environmental Impt. & Energy Res. Auth. Water Fac. Rev. Refunding Series 1999
(Tri-Co. Water
Auth Proj.) (Radian Asset Assurance), 5.50%, 4/1/07 164,387
990,000 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 1,020,928
10,000 St. Louis Co. Single Family Res. Mtg. Series 1984 (MBIA insured), 6.75%, 4/1/10 10,131
St. Louis Industrial Dev. Auth. Tax-Exempt Impt. Rev. Series 1998 (St. Louis Zoo
1,000,000 Fdn.) (LOC Nationsbank), 5.10%, 8/15/12 1,058,400
--------------
8,581,704
--------------
32
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QUANTITY ($) NAME OF ISSUER MARKET VALUE ($)(1)
MONTANA (0.4%)
1,000,000 Crow Finance Auth. Tribal Purpose Revenue Series 1997A, 5.70%, 10/1/27 1,018,920
Forsyth Pollution Ctrl. Rev. Refunding Series 1993 (Montana Power Co. Proj.)
130,000 (Ambac insured), 5.90%, 12/1/23 133,009
85,000 (MBIA insured), 6.125%, 5/1/23 86,998
--------------
1,238,927
--------------
NEVADA (2.5%)
2,500,000 Clark Co. Industrial Dev. Rev. Refunding Series 1992C (Nevada Power Co.)(Ambac
insured), 7.20%, 10/1/22 2,600,225
2,750,000 Clark Co. Pollution Ctrl. Rev. Refunding Series 1992B (Nevada Pwr. Co.
Proj.)(FGIC insured), 6.60%, 6/1/19 2,846,800
NV Hsg. Dev. SF Mtg. Program:
215,000 Sr. Series 1995A-1, 6.45%, 10/1/18 215,000
675,000 Mezzanine Series 1998B-1, 5.30%, 4/1/16 714,859
400,000 6.00%, 6/1/08 414,804
1,000,000 6.125%, 6/1/12 1,020,340
1,000,000 Washoe Co. Gas & Water Fac. Rev. Refunding Series 1987 (AMBAC insured), 6.30%,
12/1/14 1,028,300
--------------
8,840,328
--------------
NEW HAMPSHIRE (2.4%)
300,000 Manchester Hsg. & Redev. Auth. Cap. Appreciation Rev. Series 2000 (Radian
insured), zero coupon, 5.25% effective yield, 1/1/19 136,512
275,000 NH Hlth. & Educ. Fac. Auth. Rev. Series 2004A (So. NH Med. Ctr. Proj.), 3.00%,
10/1/04 277,156
NH Higher Educ. & Hlth. Fac. Auth. Rev.:
1,020,000 Series 1993 (Nashua Memorial Hosp. Proj.), 6.00%, 10/1/23 1,044,235
750,000 Series 1993 (Nashua Memorial Hosp. Proj.), 5.80%, 10/1/04 767,700
750,000 Series 1993 (Nashua Memorial Hosp. Proj.), 6.25%, 10/1/08 767,963
1,575,000 Series 1993 (Frisbie Memorial Hosp. Proj.), 6.125%, 10/1/13 1,611,729
690,000 Series 1997 (Catholic Charities Issue), 5.75%, 8/1/12 722,685
5,080,000 NH HFA Single Family Res. Mtg. 1982 Series A Zero Coupon, 11.75% Effective Yield
on Purchase Date, 1/1/14 2,316,124
625,000 NH Higher Educ. & Hlth. Fac. Auth. Rev. Series 1998 (New Hampton School), 5.00%,
10/1/08 665,544
--------------
8,309,648
--------------
NEW JERSEY (1.2%)
1,155,000 NJ Econ. Dev. Auth Dist. Heating & Cooling Rev. Series 1993A (Trenton Proj.),
6.20%, 12/1/10 1,180,549
1,460,000 NJ Hsg. & Mtg. Finance Agy. Multifamily Hsg. Rev. Series 1995A (AMBAC insured),
6.00%, 11/1/14 1,517,933
NJ Tobacco Settlement Financing Corp. Asset-Backed Rev. Series 2003:
1,170,000 4.375%, 6/1/19 1,151,959
500,000 6.125%, 6/1/24 491,715
--------------
4,342,156
--------------
NEW MEXICO (0.8%)
1,720,000 NM MFA Forward Mortgage-Backed Series 1995E (GNMA collateralized), 6.95%, 1/1/26 1,775,384
NM Hsg. Auth. Region III Multifamily Hsg. Rev. Series 2003A (Villa Del Oso Apts.
Proj.):
65,000 2.55%, 7/1/04 64,976
500,000 6.00%, 7/1/17 500,730
500,000 NM Hosp. Equip. Rev. Series 2003 (St. Vincent's Hosp.), 3.00%, 7/1/04 502,070
--------------
2,843,160
--------------
See accompanying notes to portfolios of investments on page 60. 33
SIT TAX-FREE INCOME FUND
MARCH 31, 2004
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
QUANTITY ($) NAME OF ISSUER MARKET VALUE ($)(1)
NEW YORK (1.2%)
170,000 Monroe Co. Industrial Dev. Agy. Student Hsg. Rev. Series 1999A (Collegiate Hsg.
Fdn. - Rochester Institute of Technology Proj.), 4.90%, 4/1/09 174,009
200,000 NY Dorm Auth. Rev. Series 1992A (Upstate Cmnty. Colleges)(Connie Lee insured),
5.75%, 7/1/22 202,356
125,000 NY Dorm Auth. Rev. Series 2002 (FHA insured), 4.00%, 2/1/12 126,756
400,000 NY Urban Dev. Corp. Rev. Series 1996 (Pine Barrens Proj.), 5.375%, 4/1/17 420,156
NY Tobacco Settlement Fing. Corp Asset-Backed Rev.:
325,000 Series 2003A-1, 5.00%, 6/1/09 326,827
160,000 Series 2003C-1, 5.00%, 6/1/11 168,242
500,000 Series 2003A-1, 5.00%, 6/1/11 525,755
2,100,000 Series 2003C-1, 5.50%, 6/1/10 2,194,479
--------------
4,138,580
--------------
NORTH CAROLINA (0.1%)
200,000 Currituck Co. G.O. Series 1995 (MBIA insured), 5.40%, 4/1/14 211,820
250,000 NC Hlth. Care Fac. First Mtg. Rev. Refunding Series 2004B (Deerfield Episcopal
Retirement Cmty. Proj.), 3.80%, 11/1/24 249,583
--------------
461,403
--------------
NORTH DAKOTA (0.2%)
Mercer Co. Pollution Ctl. Rev. Refunding:
500,000 Series 1992 (Montana-Dakota Utils. Co. Proj.) (FGIC insured), 6.65%, 6/1/22 504,200
200,000 Series 1995 (Basin Elec. Pwr. Proj.)(Ambac insured), 6.05%, 1/1/19 210,648
--------------
714,848
--------------
OHIO (2.6%)
2,780,000 Akron C.O.P. Series 1996 (Akron Baseball Stadium Proj.), 6.90%, 12/1/16 (5) 3,033,314
1,445,000 Bellefontaine Hosp. Rev. Refunding Series 1993 (Mary Rutan Hlth. Assoc.), 6.00%,
12/1/13 1,477,903
295,000 Cleveland-Cuyahoga Port. Auth. Dev. Rev. Series 1999A (Port of Cleveland Bond Fund
Capital Imprv. Proj.), 5.375%, 5/15/19 291,705
450,000 Dayton Airport Rev. Refunding Series 1995 (Cox-Dayton Intl. Proj.)(Ambac insured),
5.25%, 12/1/15 477,306
1,000,000 Lucas Co. Hlth. Care Fac. Rev. Series 2002 (Franciscan Care Ctr. Proj.)(LOC Bank
One), 4.10%, 3/1/27 1,021,290
600,000 Mahoning Co. Hlth. Care Fac. Rev. Refunding Series 2002 (Copeland Oaks
Proj.)(Mandatory Put 3/31/05) (LOC Sky Bank), 4.00%, 4/1/22 610,146
1,250,000 OH Air Quality Dev. Auth. Rev. Series 1985A (Columbus Southern Pwr. Co. Proj.),
6.375%, 12/1/20 1,267,275
950,000 OH Water Dev. Auth. Rev. Refunding Series 1992A (Dayton Pwr. & Light Co. Proj.),
6.40%, 8/15/27 956,394
--------------
9,135,333
--------------
OKLAHOMA (1.6%)
250,000 Comanche Co. Hosp. Auth. Rev. Series 1993A (Connie Lee insured), 5.375%, 7/1/23 250,585
785,000 Muskogee Co. HFA Single Family Mtg. Rev. Refunding 1990 Series A (FGIC insured)
Zero Coupon, 7.65% Effective Yield on Purchase Date, 6/1/11 468,928
OK Dev. Fin. Auth. Hosp. Rev. Series 2003A (Duncan Regl. Hosp. Proj.):
250,000 2.50%, 12/1/04 252,578
670,000 4.00%, 12/1/05 694,844
800,000 4.00%, 12/1/06 835,952
200,000 5.00%, 10/1/05 208,264
1,500,000 Shawnee Hosp. Auth. Rev. Refunding Rev. Series 1993 (MidAmerica HealthCare Inc.
Proj.), 6.125%, 10/1/14 1,530,000
1,320,000 Tulsa Industrial Auth. Educ. Fac. Rev. Refunding Series 1999B (Holland Hall School
Proj.), 5.00%, 12/1/14 1,388,891
--------------
5,630,042
--------------
34
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QUANTITY ($) NAME OF ISSUER MARKET VALUE ($)(1)
OREGON (1.4%)
3,705,000 Cow Creek Band Umpqua Tribe of Indians Rev. Series 1998B (Ambac insured), 5.10%,
7/1/12 3,826,228
200,000 Klamath Falls Intercmnty. Hosp. Auth. Rev. Refunding Series 2002 (Merle West Med.
Ctr. Proj.), 5.20%, 9/1/09 216,054
775,000 OR Hsg. & Cmty. Svcs. Dept. Mtg. Rev. Series 2000K, 5.70%, 7/1/22 813,355
25,000 OR G.O. Refunding Series 1992B, 6.375%, 8/1/24 25,347
--------------
4,880,984
--------------
PENNSYLVANIA (5.7%)
Allegheny Co. Hosp. Dev. Auth. Rev. Series 2003A (Ohio Valley Gen. Hosp. Proj.):
200,000 2.50%, 4/1/05 201,004
245,000 3.30%, 4/1/08 247,134
135,000 3.875%, 4/1/10 136,790
250,000 Allegheny Co. Redev. Auth. Tax Alloc. Rev. Series 2000B (Waterfront Proj.), 5.75%,
12/15/05 259,852
Beaver Co. Industrial Dev. Auth. Pollution Ctrl. Rev.:
455,000 Series 1977 (St. Joe Minerals Corp. Proj.), 6.00%, 5/1/07 464,373
1,150,000 Refunding Series 1995A (Toledo Edison Proj.), 7.75%, 5/1/20 1,267,334
730,000 Berks Co. Muni Auth. College Rev. Series 2004 (Albright College Proj.), 2.50%,
10/1/04 732,570
325,000 Bucks Co. Redev. Auth. Mtg. Rev. Refunding Series 1992A (Warminster Hts. Proj.)
(FHA insured)(Section 8), 6.875%, 8/1/23 336,862
565,000 Chartiers Valley Industrial & Commercial Dev. Auth. Rev. Refuning Series 2003A
(Friendship Village South Proj.), 4.75%, 8/15/11 564,972
235,000 Columbia Co. Hosp. Auth. Hlth. Care Rev. Series 1999 (Bloomsburg Hosp. Oblig. Grp.
Proj.), 5.00%, 6/1/04 235,059
500,000 Delaware Co. Auth. Hosp. Rev. Series 1993 (Crozer-Chester Proj.), 6.00%, 12/15/20 505,345
150,000 Erie Higher Educ. Bldg. Auth. College Rev. Series 1993B (Mercyhurst College
Proj.), 5.75%, 3/15/13 152,835
2,750,000 Grove City Area Hosp. Auth. Rev. Series 1998 (United Cmnty. Hosp. Proj.), 5.25%,
7/1/12 2,793,697
Horizon Hosp. System Auth. Hosp. Rev. Series 1996 (Horizon Hosp. Sys.):
715,000 6.15%, 5/15/08 772,422
710,000 6.25%, 5/15/09 764,507
1,145,000 6.30%, 5/15/11 1,232,764
175,000 Jenks Township G.O. Series 2004A (Radian insured), 2.00%, 7/1/05 176,468
500,000 Lehigh Co. General Purpose Auth. Rev. Refunding Series 1996B (Cedar Crest
College), 6.65%, 4/1/17 530,580
500,000 McKean Co. Hosp. Auth. Rev. Refunding Series 1994 (Bradford Hosp. Proj.) (ACA
insured), 6.00%, 10/1/13 514,625
1,750,000 Montgomery Co. Industrial Dev. Auth. Retirement Cmnty. Rev. Series 1996B (ACTS
Retirement Life Cmntys. Proj.), 5.75%, 11/15/17 1,817,340
PA Hgr. Educ. Fac. Auth. Hlth. Svcs. Rev. Series 1996A (Allegheny Delaware Valley
Obligated Group, Inc.)(MBIA insured):
150,000 5.500%, 11/15/08 164,270
3,890,000 5.875%, 11/15/16 4,267,369
590,000 PA Hgr. Educ. Fac. Auth. Rev. Series 2000 (Univ. of the Arts Proj.)(Radian
insured), 5.75%, 3/15/30 624,604
270,000 PA Hgr. Educ. Fac. Auth. Rev. Series 2002 (Geneva College Proj.), 4.25%, 4/1/05 275,090
1,050,000 Pittsburgh G.O. Series 1995B (FGIC insured), 5.00%, 3/1/08 1,099,497
--------------
20,137,363
--------------
RHODE ISLAND (0.8%)
1,100,000 RI Hsg. & Mtg. Fin. Corp. Rental Hsg. Program Rev. Series 1993A (Section 8),
5.65%, 10/1/08 1,112,947
260,000 RI Hlth. & Educ. Bldg. Corp. Rev. Series 1997 (Steere House Proj.), 5.375%, 7/1/07 265,944
1,500,000 RI Tobacco Settlement Financing Corp. Asset-Backed Rev. Series 2002A, 6.00%, 6/1/23 1,430,940
--------------
2,809,831
--------------
See accompanying notes to portfolios of investments on page 60. 35
SIT TAX-FREE INCOME FUND
MARCH 31, 2004
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
QUANTITY ($) NAME OF ISSUER MARKET VALUE ($)(1)
SOUTH CAROLINA (0.2%)
600,000 Darlington Co. Annual Tender Pollution Ctl. Rev. Series 1983, (Carolina Pwr. &
Light Co. Proj.), 6.60%, 11/1/10 617,322
--------------
SOUTH DAKOTA (0.9%)
Deadwood C.O.P. Series 2003 (ACA insured):
170,000 3.00%, 11/1/04 171,494
250,000 3.00%, 11/1/05 254,750
2,250,000 SD Hlth. & Educ. Fac. Auth. Rev Series 2001C (Sioux Valley Hosp. & Health Sys.
Proj.) (LOC US Bank) (Mandatory Put 11/1/06), 4.85%, 11/1/19 2,380,185
400,000 SD Hlth. & Educ. Fac. Auth. Rev. Series 1994 (Huron Regional Med. Ctr. Proj.),
7.25%, 4/1/20 409,328
--------------
3,215,757
--------------
TENNESSEE (2.3%)
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)
7,875,000 Senior Series 1998A, 5.55%, 1/1/29(8)(9)
1,630,000 Subordinate Series 1998C, 6.00%, 1/1/29(8)(9) 934,250
3,976,875
28,525
(Eastwood Park Apts. Proj.):
15,000 Series 1995A, 6.00%, 9/1/05(8)(9) 10,500
1,000,000 Senior Series 1995 A2, 6.40%, 9/1/25(8)(9) 700,000
405,000 Subordinate Series 1995C, 7.50%, 9/1/25(8)(9) 162,000
(Raleigh Forest & Sherwood Apts. Proj.):
2,670,000 Senior Series 1996A, 6.60%, 1/1/26(8)(9) 2,276,175
610,000 Subordinate Series 1996C, 7.25%, 1/1/26(8)(9) 122,000
---------------
8,210,325
---------------
TEXAS (11.8%)
Austin Convention Enterprises, Inc. (Convention Ctr.) Revenue:
750,000 Series 2001A (Convention Center), 6.375%, 1/1/16 798,765
850,000 Series 2001B (ZC Specialty Ins. Co.), 5.75%, 1/1/16 913,240
250,000 Series 2001B (ZC Specialty Ins. Co.), 6.00%, 1/1/23 264,150
500,000 Austin Utilities System Rev. Series 1994 (FGIC insured), 5.75%, 5/15/24 511,335
Bell Co. Hlth. Fac. Dev. Corp. Retirement Fac. Rev. Series 1998 (Buckner
1,000,000 Retirement Services, Inc. Obligated Group, Proj.), 5.00%, 11/15/11 1,057,740
Beaumont HA Multifamily Mtg. Rev. Series 1993A (Section 8):
500,000 6.65%, 11/1/07 487,425
590,000 6.75%, 11/1/10 559,674
995,000 Bexar Co. Rev. Series 2000 (Venue Proj.)(MBIA insured), 5.75%, 8/15/22 1,066,869
Bexar Co. HFC Multifamily Hsg. Rev.:
580,000 Subordinated Series 2000C (Honey Creek Apts. Proj.), 8.00%, 4/1/30 578,492
180,000 Subordinated Series 2001B (American Oppty. Hsg. Dublin Kingswood & Waterford
Apts. Proj.), 7.50%, 12/1/14 182,563
250,000 Bluebonnet Trails Cmty. Mental Hlth. & Mental Retardation Rev. Series 2001, 5.50%,
12/1/09 269,265
650,000 Brazos River Hbr. Nav. Dist Rev. Series 2002B-2 (Dow Chemical Co. Proj.), 4.75%,
5/15/33 696,481
Dallas Hsg. Corp. Capital Program Revenue Bonds:
965,000 Series 1995A (Estell Village Apts.) (Section 8), 7.875%, 12/1/09 977,381
945,000 Series 1995 (Cedar Glen Apts.) (Section 8), 7.75%, 12/1/09 968,152
6,343,000 Dallas HFC Multifamily Mtg. Rev. Series 1998A (GNMA collateralized) (Towne Ctr.
Apts. Proj.), 6.75%, 10/20/32 7,000,071
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 1,301,113
36
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QUANTITY ($) NAME OF ISSUER MARKET VALUE ($)(1)
Midland HFC Single Family Mtg. Rev. Refunding:
125,926 Series 1992 A-2, 8.45%, 12/1/11 133,039
26,290 Series 1992 B2, 8.15%, 12/1/11 27,330
Mesquite Hlth. Fac. Dev. Corp. Retirement Fac. Rev. (Christian Care Ctr. Proj.):
1,000,000 Series 1996A, 6.30%, 2/15/12 1,018,970
880,000 Series 2000A, 7.00%, 2/15/10 939,726
7,272,000 Nortex Hsg. Fin. Corp. Multifamily Hsg. Rev. Series 1999 (GNMA collateralized)
(Highland Oaks Apts. Proj.), 6.75%, 9/20/32 7,925,462
266,760 Odessa HFC Single Family Mtg. Rev. Refunding Series 1992B Class B-2, 8.125%,
11/1/11 267,851
725,000 Richardson Hosp. Auth. Rev. Series 1993 (Richardson Med Ctr.), 6.75%, 12/1/23 740,153
700,000 Rio Grande Valley Hlth. Fac. Dev. Corp. Hosp. Rev. Series 1992A (Valley Baptist
Med. Ctr. Proj.) (MBIA insured), 6.375%, 8/1/22 709,688
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 1,013,810
Tarrant Co. Hlth. Fac. Dev. Corp. Hosp. Rev. Series 2000 (Adventist Hlth. Sys.
Proj.):
490,000 5.75%, 11/15/04 504,568
515,000 5.80%, 11/15/05 549,567
Tarrant Co. HFC Multifamily Hsg. Rev:
530,000 Senior Series 2001A (Westridge Apts. Proj.), 5.50%, 6/1/11 493,075
490,000 Subordinate Series 2001C (Crossroads Apt. Proj.), 7.25%, 12/1/36 423,086
TX Affordable Hsg. Corp. Multifamily Hsg. Rev:
1,170,000 Senior Series 2001A (NHT / GTEX Proj.)(MBIA insured), 4.10%, 10/1/08 1,244,131
785,000 Junior Series 2001B (NHT / GTEX Proj.), 6.75%, 10/1/16 518,100
TX Dept. Hsg. & Cmnty. Affairs Multifamily Hsg. Rev.:
850,000 Senior Series 1996A (Harbors & Plumtree Apts. Proj.), 6.35%, 7/1/16 890,010
3,610,000 Senior Series 1996A (Harbors & Plumtree Apts. Proj.), 6.45%, 7/1/26 3,747,974
880,000 Subordinate Series 1996C (Harbors & Plumtree Apts. Proj.), 7.375%, 7/1/26 862,444
900,000 TX Public Property Fin. Corp. Mental Hlth. & Mental Retardation Rev. Series 1996,
6.20%, 9/1/16 947,700
805,000 Weslaco Hlth. Fac. Rev. Series 1994B (Knapp Med. Ctr. Proj.), 5.375%, 6/1/23 824,827
--------------
41,414,227
--------------
UTAH (1.4%)
725,000 Eagle Mountain Water & Sewer Rev. Refunding Series 2000 (ACA insured), 5.60%,
11/15/13 795,180
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 3,097,146
120,000 Series 1990B (Wash. Blvd Proj.)(LOC Sumitomo Bank), Zero Coupon,
4.255% Effective Yield on Purchase Date, 12/30/05 113,831
Salt Lake Co. College Rev. Series 1999 (Westminister College Proj.):
120,000 5.15%, 10/1/11 126,916
125,000 5.20%, 10/1/12 131,104
130,000 5.25%, 10/1/13 135,889
405,000 UT Hsg. Finance Agy. Multifamily Refunding Rev. Series 1996A (Section 8)
(FHA insured), 6.10%, 7/1/22 426,218
--------------
4,826,284
--------------
See accompanying notes to portfolios of investments on page 60. 37
SIT TAX-FREE INCOME FUND
MARCH 31, 2004
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
QUANTITY ($) NAME OF ISSUER MARKET VALUE ($)(1)
VERMONT (0.3%)
VT Educ. & Hlth. Bldgs. Financing Agency Rev.:
420,000 Series 1998 (Norwich Univ. Proj.), 5.13%, 7/1/09 450,509
235,000 Series 2002A (Developmental & Mental Hlth. Proj.), 4.375%, 6/15/07 236,988
400,000 Series 2003A (Vermont Law School Proj.), 5.00%, 1/1/13 410,520
--------------
1,098,017
--------------
VIRGINIA (1.4%)
300,000 Alexandria Industrial Dev. Auth. Rev. Pollution Control Refunding Series 1994
(Potomac Electric Proj.) (MBIA insured), 5.375%, 2/15/24 306,786
Arlington Co. Indus. Dev. Auth. Multifamily Rev. Refunding Series 1998A (Woodbury
480,000 Parks Apts. Proj.) 5.45%, 1/1/29 490,243
250,000 Chesterfield Co. Industrial Dev. Auth. Pollution Ctrl. Rev. Series 1987A Rmktg.
(VA Elec. & Power Co. Proj.), 5.875%, 6/1/17 273,172
2,000,000 Norfolk Industrial Dev. Auth. Hosp. Rev. Refunding Series 1994A (Sentara Hosp.
Proj.), 6.50%, 11/1/13 2,093,400
Prince William Co. Indus. Dev. Auth. Educ. Fac. Rev. Series 2003 (Catholic Diocese
Arlington):
1,000,000 4.375%, 10/1/13 1,027,560
100,000 5.00%, 10/1/18 102,882
500,000 VA Hsg. Dev. Auth. Commonwealth Mtg. Series 2000B-B5, 5.45%, 7/1/15 542,240
--------------
4,836,283
--------------
WASHINGTON (0.3%)
200,000 Energy Northwest Wind Proj. Rev. Series 2001B, 4.55%, 7/1/06 208,686
Skagit Co. Public Hosp. Rev Refunding Series 2003:
350,000 3.50%, 12/1/04 353,119
350,000 3.75%, 12/1/05 356,216
--------------
918,021
--------------
WEST VIRGINIA (1.0%)
3,200,000 Pleasants Co. Pollution Ctrl. Rev. Series 1995C (Monongahela Pwr. Co.), 6.15%,
5/1/15 3,422,368
--------------
WISCONSIN (3.3%)
100,000 WI Hsg. & Econ. Dev. Auth. Home Ownership Rev. Series 1997A, 6.00%, 3/1/17 106,149
1,000,000 WI HEDA Hsg. Rev. Series 1993C (MBIA insured)(Section 8), 5.80%, 11/1/13 1,021,430
520,000 WI Hlth. & Educ. Fac. Auth. Rev. Series 1999 (FH Hlth. Care Dev. Inc Proj.),
5.625%, 11/15/09 557,060
WI Hlth. & Educ. Fac. Auth. Rev.:
2,000,000 Series 1993 (Medical College of WI Inc. Proj.), 5.95%, 12/1/15 2,047,000
490,000 Series 1996 (Meriter Hosp., Inc. Proj.), 6.00%, 12/1/06 513,427
750,000 Refunding Series 1997B, (United Hlth. Grp., Inc. Proj.), 5.50%, 12/15/20 810,698
Series 1999 (Kenosha Hosp. & Med. Ctr., Inc. Proj.):
670,000 5.00%, 5/15/06 708,833
705,000 5.10%, 5/15/07 759,377
740,000 5.15%, 5/15/08 805,549
820,000 5.35%, 5/15/10 900,319
865,000 5.45%, 5/15/11 942,686
500,000 Series 1999B (Aurora Hlth. Care Proj)(ACA insured), 5.625%, 2/15/29 515,445
Series 2001 (Agnesian Healthcare, Inc. Proj.):
110,000 5.00%, 7/1/04 111,077
125,000 5.00%, 7/1/05 129,983
150,000 5.00%, 7/1/06 159,438
38
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QUANTITY ($) NAME OF ISSUER MARKET VALUE ($)(1)
100,000 5.00%, 7/1/07 107,948
550,000 6.00%, 7/1/17 598,736
340,000 6.00%, 7/1/21 364,058
575,000 Series 2003A (Franciscan Sisters of Christian Charity HealthCare Ministry, Inc.
Proj.), 3.00%, 9/1/06 584,079
--------------
11,743,292
--------------
WYOMING (0.2%)
500,000 Sweetwater Co. Pollution Ctrl. Rev. Refunding Series 1996A (Idaho Pwr. Co. Proj.),
6.05%, 7/15/26 532,670
--------------
Total municipal bonds (cost: $341,500,497) 339,470,913
--------------
CLOSED-END MUTUAL FUNDS (1.8%)(2)
46,900 Blackrock CA Insured Municipal Term Trust 2008 805,742
280,000 Blackrock Insured Municipal Term Trust 2008 4,866,400
56,700 Blackrock Insured Municipal Term Trust 2010 658,287
--------------
Total closed-end mutual funds (cost: $5,627,562) 6,330,429
--------------
SHORT-TERM SECURITIES (1.0%)(2)
3,676,299 Dreyfus Tax-Exempt Cash Management Fund, 0.85% 3,676,299
10,000 Northern Institutional Tax-Exempt, 0.71% 10,000
--------------
Total short-term securities (cost: $3,686,299) 3,686,299
--------------
Total investments in securities (cost: $350,814,358)(7) $349,487,641
==============
See accompanying notes to portfolios of investments on page 60. 39
SIT MINNESOTA TAX-FREE INCOME FUND
ONE YEAR ENDED MARCH 31, 2004
- --------------------------------------------------------------------------------
SENIOR PORTFOLIO MANAGERS
MICHAEL C. BRILLEY o DEBRA A. SIT, CFA o PAUL J. JUNGQUIST, CFA
The Minnesota Tax Free Income Fund returned +4.99% for the fiscal year
ended March 31, 2004 and compared with a return of +4.30% for the Lehman 5-Year
Municipal Bond Index (the Index). The Fund's 30-day SEC yield was 4.54% and its
12-month distribution rate was 4.48%.
TOTAL RETURN ALMOST ENTIRELY INCOME
Interest rates on March 31, 2004 were only slightly lower across the entire
yield curve from their levels twelve months earlier. Reflecting the stability of
interest rates, the Fund's net asset value was $10.26 on March 31, 2004, up by
+0.4% from the prior fiscal year end. While the Fund's overall return was
composed almost entirely of tax-exempt interest income, four market sectors
experienced market value deterioration of -1% to -2% including general
obligation bonds, single family mortgages, municipal leases, and public facility
revenue issues. Offsetting that market weakness, the Fund's investments in
education, hospitals, and escrowed issues saw price appreciation of +1% to +2%.
MAINTAINING A DEFENSIVE POSTURE
Performance varied substantially between short and longer duration
securities. Since the yield curve was very steep and prices were relatively
stable, lower yielding shorter duration bonds earned considerably lower returns
than higher yielding longer duration bonds over the twelve month period. The
Fund's average life duration varied between 4.7 and 4.9 years, which was
somewhat longer than the 4.2-year duration of the Index and was a positive
factor for the Fund's return in comparison to that index. The Fund's duration is
shorter than most other Minnesota tax-exempt funds and was the primary reason
for its somewhat lower return compared to other Minnesota funds over the last
twelve months.
WE BELIEVE HIGHER RATES ARE NEAR
We expect higher interest rates over the coming twelve months, and believe
the Fund's shorter duration should enable it to outperform most other Minnesota
tax-exempt funds over the next year.
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 3/31/04: $ 10.26 Per Share
3/31/03: $ 10.22 Per Share
Total Net Assets: $217.8 Million
30-day SEC Yield: 4.54%
Tax Equivalent Yield: 7.58%(1)
12-Month Distribution Rate: 4.48%
Average Maturity: 13.5 Years
Duration to Estimated Avg. Life: 4.7 Years(2)
Implied Duration: 4.6 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
MortgageRevenue 33.6
Hospital/Health
Care Revenue 19.1
Industrial/Polution
Control 9.1
Other Revenue
Bonds 8.5
General Obligations 6.5
Sectors less
than 6.0% 20.6
Cash & Other
Net Assets 2.6
40
- -------------------------------------------------------------------------[LOGO]
AVERAGE ANNUAL TOTAL RETURNS*
SIT LEHMAN LIPPER
MN TAX-FREE 5-YEAR MUNI. MN MUNI. BOND
INCOME FUND BOND INDEX FUND AVG.
----------- ------------ -------------
3 Month** 1.56% 1.28% 1.51%
6 Month** 3.02 1.41 n/a
1 Year 4.99 4.30 5.32
5 Years 4.42 5.62 4.74
10 Years 5.77 5.86 5.68
Inception 5.49 5.52 5.17
(12/1/93)
CUMULATIVE TOTAL RETURNS*
SIT LEHMAN LIPPER
MN TAX-FREE 5-YEAR MUNI. MN MUNI. BOND
INCOME FUND BOND INDEX FUND AVG.
----------- ------------ -------------
1 Year 4.99% 4.30% 5.32%
5 Years 24.12 31.44 26.07
10 Years 75.19 76.73 73.80
Inception 73.79 74.26 68.42
(12/1/93)
*AS OF 3/31/04. **NOT ANNUALIZED.
- --------------------------------------------------------------------------------
PERFORMANCE FIGURES ARE HISTORICAL AND DO NOT GUARANTEE FUTURE RESULTS.
INVESTMENT RETURNS AND PRINCIPAL VALUE WILL VARY, AND YOU MAY HAVE A GAIN OR
LOSS WHEN YOU SELL SHARES. AVERAGE ANNUAL TOTAL RETURNS INCLUDE CHANGES IN SHARE
PRICE AS WELL AS REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAINS. MANAGEMENT
FEES AND ADMINISTRATIVE EXPENSES ARE INCLUDED IN THE FUND'S PERFORMANCE;
HOWEVER, FEES AND EXPENSES ARE NOT INCORPORATED IN THE LEHMAN 5-YEAR MUNICIPAL
BOND INDEX. THE LIPPER AVERAGES AND INDICES ARE OBTAINED FROM LIPPER ANALYTICAL
SERVICES, INC., A LARGE INDEPENDENT EVALUATOR OF MUTUAL FUNDS.
(2) Duration is a measure which reflects estimated price sensitivity to a given
change in interest rates. For example, for an interest rate change of 1%, a
portfolio with a duration of 5 years would be expected to experience a
price change of 5%. Estimated average life duration is based on current
interest rates and the Adviser's assumptions regarding the expected average
life of individual securities held in the portfolio. Implied duration is
calculated based on historical price changes of securities held by the
Fund. The Adviser believes that the portfolio's implied duration is a more
accurate estimate of price sensitivity provided interest rates remain
within their historical range. If interest rates exceed the historical
range, the estimated average life duration may be a more accurate estimate
of price sensitivity.
GROWTH OF $10,000
[PLOT POINTS CHART]
The sum of $10,000 invested at inception (12/1/93) and held until 3/31/04 would
have grown to $17,379 in the Fund or $17,426 in the Lehman 5-Year Municipal Bond
Index assuming reinvestment of all dividends and capital gains
QUALITY RATINGS
(% OF TOTAL NET ASSETS)
Other Assets
and Liabilities 2.6%
AAA 12.0%
AA 11.7%
A 19.5%
BBB 14.3%
Less Than BBB 2.4%
Not Rated 37.5%
LOWER OF MOODY'S, S&P, FITCH OR DUFF & PHELPS RATINGS USED.
ASSESSMENT OF
NON-RATED SECURITIES
AAA 5.0%
AA 0.7
A 6.3
BBB 17.0
BB 8.5
Less than BB 0.0
----
Total 37.5%
41
SIT MINNESOTA TAX-FREE INCOME FUND
MARCH 31, 2004
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
QUANTITY ($) NAME OF ISSUER MARKET VALUE ($)(1)
MUNICIPAL BONDS (97.4%) (2)
EDUCATION/STUDENT LOAN (4.5%)
Minnesota Higher Educ. Fac. Auth. Rev. :
425,000 Series 1996-4F1 (Augsburg College), 6.25%, 5/1/23 445,103
750,000 Series 1997-4L (St. John's University), 5.35%, 10/1/17 778,845
750,000 Series 1998-4T (College of St. Benedict), 5.35%, 3/1/20 762,255
458,000 Lease Rev. Series 1999-5A (Concordia University), 5.25%, 4/25/14 462,978
700,000 Series 1999-4Y (Augsburg College), 5.05%, 10/1/13 734,454
100,000 Series 1999-4Z (Northwestern Hlth. Services University), 4.875%, 10/1/09 104,151
275,000 Series 1999-4Z (Northwestern Hlth. Services University), 5.20%, 10/1/13 280,794
100,000 Series 2000-5D (College Art & Design), 5.75%, 5/1/08 109,939
110,000 Refunding Series 2001-5J (St. Scholastica), 4.625%, 12/1/05 115,014
500,000 Rev. Series 1993-3Q (St. Mary's Univ.), 6.10%, 10/1/16 505,000
25,000 Rev. Series 1993-3Q (St. Mary's Univ.), 6.15%, 10/1/23 25,250
50,000 Rev. Series 1996-4A1 (University of St. Thomas), 5.625%, 10/1/21 51,639
50,000 Rev. Series 1994-3W (College of St. Benedict), 5.90%, 3/1/05 50,172
420,000 Series 2002-5N1 (St. Catherine), 3.00%, 10/1/04 423,104
Rev. Series 2004-5U (St. Mary's Univ.):
200,000 2.00%, 10/1/04 200,626
200,000 2.00%, 10/1/05 201,596
270,000 3.75%, 10/1/13 265,294
650,000 4.80%, 10/1/23 642,057
310,000 Northfield Lease Rev. Series 1999A (Village School Proj.), 7.50%, 12/1/24 271,873
550,000 Ramsey Lease Rev. Series 2004A (Pact Charter School Proj.), 5.65%, 12/1/13 547,124
St. Paul Hsg. & Redev. Auth. Lease Rev.:
830,000 Series 2001A (Cmty. of Peace Academy Proj.), 6.375%, 12/1/11 869,574
750,000 Series 2001A (Cmty. of Peace Academy Proj.), 7.00%, 12/1/15 805,028
350,000 Series 2001A (Cmty. of Peace Academy Proj.), 7.375%, 12/1/19 379,796
415,000 Series 2002A (New Spirit Charter School Proj.), 6.50%, 12/1/12 409,829
100,000 Victoria Private School Fac. Rev. Series 1999A (Holy Family Catholic
H.S. Proj.), 5.20%, 9/1/11 101,076
165,000 Winona Port. Auth. Lease Rev. Series 1999A (Bluffview Montessori School
Proj.), 8.00%, 12/1/24 175,440
--------------
9,718,011
--------------
ESCROWED TO MATURITY/PREREFUNDED (0.9%)
500,000 Hutchison Hsg. Fac. Rev. Series 1994 (Prince of Peace Proj.), 7.375%,
10/1/12 515,280
790,000 Puerto Rico Childrens Trust Fund Tobacco Settlement Rev. Series 2000,
5.75%, 7/1/20 880,834
200,000 Red Wing Hlth. Care Ctr. Fac. Rev. Refunding Series 1993B (River Region
Oblig. Group), 6.20%, 9/1/05 213,640
325,000 Sandstone Econ. Dev. Auth. Hsg. & Dev. Rev. Series 1994A (Family Apts.
Proj.), 8.00%, 1/1/12 348,166
--------------
1,957,920
--------------
GENERAL OBLIGATION (6.5%)
1,500,000 Appleton Temporary Hlths. Facs. G.O. Series 2003, 1.40%, 6/15/04 1,500,015
150,000 Brainerd ISD No. 181 G.O. Series 1995A, 5.50%, 2/1/15 155,209
530,000 Carver Co. Hsg. & Redev. Auth. Hsg. & Dev. Gross Rev. Ltd.Tax G.O.
(Chanhassen Apts. Proj.), 7.00%, 1/1/25 559,049
100,000 Hopkins Redev. Refunding G.O. Series 1993C, 4.60%, 2/1/09 100,169
120,000 Jackson Co. G.O. Series 2001, 3.25%, 12/1/04 121,660
100,000 Luverne ISD No. 2184 G.O. Series 1997, 5.45%, 2/1/14 103,432
50,000 Minneapolis Refunding G.O. Series 1993A, 5.10%, 12/1/08 52,879
42
- --------------------------------------------------------------------------[LOGO]
QUANTITY ($) NAME OF ISSUER MARKET VALUE ($)(1)
MN G.O.:
1,925,000 Refunding Series 2003, 2.00%, 8/1/05 1,947,754
2,000,000 Series 1995, 5.50%, 8/1/09 2,102,980
6,200,000 Series 1995, 5.70%, 8/1/11 6,535,544
1,000,000 St. Paul ISD No. 625 G.O. Series 1997A, 5.125%, 2/1/15 1,025,470
--------------
14,204,161
--------------
HOSPITAL/HEALTH CARE (19.1%)
Aitkin Hlth. Care Fac. Rev. Series 2001 (Riverwood Hlth. Care Ctr. Proj.):
250,000 6.00%, 2/1/06 253,987
250,000 6.25%, 2/1/07 255,687
Alexandria Hlth. Care Fac. Rev. Series 2002B (BSM Property - Bethany Home Proj.):
375,000 4.65%, 7/1/06 375,551
375,000 4.95%, 7/1/07 375,517
Bemidji Hosp. Fac. Rev. Refunding Series 1996 (North Country Hlth. Proj.):
60,000 4.90%, 9/1/04 60,964
1,000,000 5.625%, 9/1/21 1,049,760
150,000 Breckenridge Hlth. Facs. Rev. Series 1993 (Catholic Hlth. Corp.), 5.25%, 11/15/08 153,291
Brooklyn Center Hlth. Care Fac. Rev. Series 1993 (Maranatha Proj.):
50,000 6.75%, 12/1/05 50,173
500,000 7.50%, 12/1/10 501,700
200,000 7.60%, 12/1/18 200,648
375,000 Cambridge Hsg. & Hlth. Care Fac. Rev. Series 1998C (Grandview West Proj.), 5.25%,
10/1/08 365,490
1,290,000 Cokato Sr. Hsg. Rev. Series 1996 (Cokato Charitable Trust Proj.), 7.00%, 12/1/19 1,243,586
1,090,000 Columbia Heights Multifamily & Health Care Fac. Rev. Series 1998
(Crest View Corp. Proj.), 5.75%, 9/1/11 1,072,538
Crookston Nursing Home & Multifamily Hsg. Rev Series 2002A (Villa St. Vincent
Proj.):
100,000 4.75%, 9/1/08 99,917
75,000 5.50%, 9/1/11 76,551
1,000,000 Cuyuna Range Hosp. Dist. Hlth. Fac. Gross Rev. Series 1999A, 6.00%, 6/1/19 980,420
2,810,000 Duluth Econ. Dev. Auth. Hlth. Care Fac. Rev. Series 2002 (St. Luke's Hosp. Proj.),
6.00%, 6/15/12 2,921,641
1,000,000 Elk River Rev. Series 1998 (Care Choice Member Proj.), 5.60%, 8/1/13 948,370
800,000 Fergus Falls Hlth. Care Fac. Auth. Rev. Series 1995 (Lake Region Hosp. Corp.),
6.40%, 12/1/15 841,080
Hastings Hlth. Care Fac. Rev. Series 1998 (Augustana Home of Hastings Proj.):
115,000 5.10%, 11/1/09 110,830
120,000 5.20%, 11/1/10 115,024
135,000 5.40%, 11/1/12 128,145
140,000 5.50%, 11/1/13 132,314
505,000 Hopkins Hlth. Care Fac. Rev. Series 1999 (Augustana Chapel View Homes, Inc.
Proj.), 6.00%, 3/1/14 502,364
1,685,000 Maplewood Hlth. Care Fac. Rev. (Volunteers of America Care Ctrs. Proj.), 7.375%,
10/1/12 1,699,272
Marshall Medical Center Gross Rev. (Weiner Memorial Medical Center Proj.):
305,000 Series 1999, 5.65%, 11/1/13 315,516
320,000 Series 1999, 5.70%, 11/1/14 329,242
430,000 Series 2003B, 2.00%, 11/1/04 432,374
150,000 Series 2003B, 4.85%, 11/1/11 161,701
Minneapolis & St. Paul Hsg. & Redev. Auth. Hlth. Care Sys. Rev. Series 2003
(Healthpartners Proj.):
500,000 4.00%, 12/1/05 515,450
750,000 5.25%, 12/1/12 802,897
700,000 5.25%, 12/1/13 746,627
See accompanying notes to portfolios of investments on page 60. 43
SIT MINNESOTA TAX-FREE INCOME FUND
MARCH 31, 2004
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
QUANTITY ($) NAME OF ISSUER MARKET VALUE ($)(1)
1,150,000 5.00%, 12/1/14 1,188,306
500,000 5.875%, 12/1/29 518,805
100,000 Minneapolis Hsg. & Hlth. Care Facs. Rev. Series 1997 (Augustana Chapel View Homes
Proj.), 6.75%, 6/1/27 98,720
1,313,786 Minneapolis CDA Promissory Note (Augustana Chapel View Proj.), 4.25%, 5/23/09 1,300,517
1,045,000 Minneapolis Hlth. Care Fac. Rev. Series 1993 (St. Olaf Res. Proj.), 7.00%,10/1/18 876,389
1,000,000 Minneapolis Hlth. Care Fac. Rev. Series 1998A (Benchmark Hlth. Care Proj.),
6.625%, 12/1/28(8)(9) 608,450
1,055,000 Minneapolis Hlth. Care Fac. Rev. Series 1999 (Shelter Care Foundation Proj.),
6.00%, 4/1/10 1,041,971
Minneapolis Hlth. Care Fac. Rev. Series 2004A (Augustana Chapel View Homes Proj.):
115,000 3.00%, 1/1/05 115,217
270,000 3.50%, 1/1/06 270,354
280,000 4.00%, 1/1/07 280,566
315,000 5.20%, 1/1/11 316,399
500,000 5.75%, 1/1/19 502,165
500,000 5.80%, 1/1/24 498,785
MN Agr. & Econ. Dev. Board Hlth. Care Rev.:
Series 1999 (Benedictine Care Centers Proj.):
115,000 5.45%, 2/1/09 118,697
120,000 5.45%, 8/1/09 123,983
120,000 5.50%, 2/1/10 123,974
125,000 5.50%, 8/1/10 129,033
MN Agr. & Econ. Dev. Board Rev. Series 2000 (Evangelical Lutheran Good Samaritan
Society Proj.):
410,000 5.80%, 8/1/08 454,456
750,000 6.55%, 8/1/16 837,413
MN Agr. & Econ. Dev. Board Rev. Series 2002 (Evangelical Lutheran Good Samaritan
Society Proj.):
230,000 4.35%, 2/1/05 234,432
220,000 5.50%, 2/1/12 240,398
MN Agr. & Econ. Dev. Board Rev. Series 2000A (Fairview Hlth. Care Sys. Proj.):
500,000 5.625%. 11/15/04 514,255
645,000 5.625%. 11/15/05 685,571
590,000 5.70%, 11/15/06 645,006
90,000 6.375%, 11/15/22 100,018
New Hope Hlth. Care Facs. Rev. (St. Therese Home, Inc. Proj.):
45,000 Series 2003B, 3.00%, 10/1/06 45,487
300,000 Series 2003A, 5.90%, 10/1/23 309,324
Northfield Hospital Rev. Series 2001C:
1,080,000 6.00%, 11/1/13 1,199,016
1,600,000 6.00%, 11/1/26 1,693,664
650,000 Olmsted Co. Hlth. Care Fac. Rev. Series 1998 (Olmsted Medical Ctr. Proj.), 5.45%,
7/1/13 679,120
240,000 Pine Island Hlth. Care Facs. Rev. Series 2001 (Olmsted Med. Ctr. Proj.), 5.00%,
7/1/10 252,230
Plymouth Hlth. Facs. Rev. Series 2003 (Mission Farm Nursing Home Proj.):
100,000 3.25%, 8/1/04 100,355
100,000 3.25%, 8/1/05 100,494
Rochester Hlth. Care & Hsg. Rev. Series 2003A (Samaritan Bethany Inc. Proj.):
160,000 3.25%, 8/1/06 161,840
500,000 6.25%, 8/1/19 518,440
44
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QUANTITY ($) NAME OF ISSUER MARKET VALUE ($)(1)
St. Paul Hsg. & Redev. Auth. Hlth. Care Rev. Series 1998 (Regions Hosp. Proj.):
800,000 5.00%, 5/15/08 862,672
250,000 5.00%, 5/15/10 267,098
1,340,000 5.20%, 5/15/13 1,405,647
2,000,000 5.25%, 5/15/18 2,047,620
960,000 St. Paul Hsg. & Redev. Auth. Nursing Home Dev. Rev. Refunding Series 1996C
(Franciscan Hlth. Cmmty. Proj., St. Mary's Home), 7.00%, 7/1/21 933,677
400,000 St. Paul Hsg. & Redev. Auth. Hlth. Care Rev. Series 2001A (Model Cities Hlth. Ctr.
Proj.), 6.50%, 11/1/11 410,108
820,000 Wadena Co. Hlth. Care Fac. Rev. Series 1994B, 7.45%, 9/1/15 831,808
150,000 White Bear Lake First Mtg. Rev. Series 2004 (Healtheast Care Ctr. Proj.),
2.75%, 11/1/06(10) 150,438
--------------
41,611,545
--------------
INDUSTRIAL/POLLUTION CONTROL (9.1%)
140,000 Anoka Co. Res. Recovery Rev. Refunding Series 1999 (Northern States Power
Co.), 4.35%, 12/1/04 141,949
2,635,000 Anoka Co. Solid Waste Disp. Rev. Series 1987A (Natl. Rural Util. Proj.),
6.95%, 12/1/08(4) 2,655,658
735,000 Bass Brook Pollution Ctrl. Rev. Refunding Series 1992 (MN Power & Light
Co. Proj.), 6.00%, 7/1/22 750,141
1,610,000 Burnsville Solid Waste Rev. Refunding Series 2003A (Freeway Transfer Inc.
Proj.), 4.15%, 4/1/10(4) 1,609,147
830,000 East Grand Forks Industrial Dev. Rev. Refunding Series 2001B (Am. Crystal
Sugar Proj.), 5.40%, 4/1/11 903,928
325,000 Guam Economic Dev. Auth. Tobacco Settlement Asset-Backed Series 2001A,
5.00%, 5/15/22 325,484
1,000,000 Guam Econ. Dev. Auth. Tobacco Settlement Asset-Backed Rev. Series 2001B,
Zero Coupon, 5.20% Effective Yield on Purchase Date, 5/15/15 801,420
1,500,000 Hugo Industial Dev. Rev. Refunding Series 2002 (MN Union Builders Proj.),
7.75%, 3/1/17(4) 1,325,550
MN Agricultural & Econ. Dev. Board Small Business Dev. Loan Program Rev.:
150,000 Series 2002A Lot 1, 3.15%, 8/1/04(4) 150,647
155,000 Series 2002A Lot 1, 3.65%, 8/1/05(4) 158,005
210,000 Medina Industrial Dev. Rev. Refunding Series 1998 (Temroc Metals, Inc.
Proj.), 5.10%, 10/1/05(4) 217,999
Owatonna Industrial Dev. Rev. Series 1997:
280,000 7.25%, 5/1/14(4) 235,822
505,000 7.375%, 5/1/17(4) 424,523
20,000 7.375%, 5/1/20(4) 16,788
10,000 7.50%, 5/1/24 8,383
525,000 Puerto Rico Indus. Tourist, Educ., Medical and Environmental Control
Facs. Financing Auth.
Industrial Rev. Series 1998A (Guaynabo Warehouse for Emergencies
Proj.), 4.35%, 7/1/06 552,237
Puerto Rico Childrens Trust Fund Tobacco Settlement Rev. :
300,000 Series 2002, 4.00%, 5/15/10 295,983
2,730,000 Series 2002, 5.375%, 5/15/33 2,688,340
200,000 Richfield Cmty. Dev. Rev. Refunding 1994 (Richfield Shoppes Proj.),
8.375%, 10/1/05 204,000
Sauk Centre Industrial Dev. Rev. Series 1998 (Seluemed LLP Proj.)(LOC
First Trust):
75,000 4.95%, 4/1/10(4) 76,292
275,000 5.75%, 4/1/18(4) 275,369
Seaway Port Auth. (Duluth) Industrial Dev. Dock & Wharf Rev. Refunding:
1,500,000 Series 1992B (Cargill, Inc. Proj.), 6.80%, 5/1/12 1,543,350
1,400,000 Series 1993A (Cargill, Inc. Proj.), 5.75%, 12/1/16 1,429,932
St. Paul Hsg. & Redev. Auth. District Cooling Rev. Series 1998J:
95,000 5.125%, 3/1/12 101,086
500,000 5.35%, 3/1/18 522,955
Virgin Islands Tobacco Settlement Financing Corp. Asset-Backed Rev. Series 2001:
750,000 Zero Coupon, 4.95% Effective Yield on Purchase Date, 5/15/14 596,798
1,805,000 5.00%, 5/15/21 1,715,201
--------------
19,726,987
--------------
See accompanying notes to portfolios of investments on page 60. 45
SIT MINNESOTA TAX-FREE INCOME FUND
MARCH 31, 2004
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
QUANTITY ($) NAME OF ISSUER MARKET VALUE ($)(1)
INSURED (5.2%)
50,000 Bemidji ISD No. 031 G.O. Series 1998 (FSA insured), 5.00%, 4/1/19 53,043
Dakota Co. Hsg. Dev. G.O. Series 1995 (Ambac insured):
95,000 5.10%, 1/1/11 97,551
235,000 5.125%, 1/1/17 240,558
50,000 East Bethel G.O. Refunding Series 1998 (MBIA insured), 4.30%, 2/1/05 50,514
Hastings Hlth. Care Fac. Rev. Series 1998 (Regina Med. Ctr.)(ACA insured):
565,000 5.25%, 9/15/18 582,153
200,000 5.30%, 9/15/28 204,188
Minneapolis & St. Paul Hsg. & Redev. Auth. Hlth. Care Sys. Rev. Series 1993A
(Healthspan Proj.)(Ambac insured):
70,000 5.00%, 11/15/13 71,591
110,000 4.75%, 11/15/18 111,244
1,650,000 Minneapolis & St. Paul Metro Airport Comm. Airport Rev. Series 1998B (Ambac
insured), 5.25%, 1/1/13(4) 1,788,220
250,000 New Ulm ISD No. 088 G.O. Series 1996 (FSA insured), 5.50%, 2/1/15 258,683
200,000 Puerto Rico Indus. Tourist Educ. Med. & Environmental Ctl. Facs. Rev. Series 1995A
(Hosp. Auxilio Oblig. Group Proj.), 6.25%, 7/1/16 211,070
300,000 Scott Co. Hsg. & Redev. Auth. Ltd. Special Benefits Tax Series 1997B (River City
Centre Proj.), (Ambac insured), 5.45%, 2/1/20 325,950
45,000 St. Cloud Multifamily Rev. Refunding Series 1993B (St. Cloud Hosp. Proj.), 5.40%,
10/1/23 46,008
2,545,000 St. Paul Hsg. & Redev. Sales Tax Rev. Refunding Series 1996 (Civic Center Proj.)
(FSA insured), 7.10%, 11/1/23 3,200,287
400,000 St. Paul Hsg. & Redev. Auth. Hosp. Rev. Series 1993 (St. Paul-Ramsey Med. Ctr.
Proj.) (Ambac insured), 5.15%, 5/15/04 401,952
500,000 St. Paul Port Auth. Tax Increment Rev. Refunding Series 2003-16 (Energy Park Dist.
Proj.) (Radian insured), 2.00%, 2/1/05 502,815
765,000 Waconia Hlth. Care Facs. Rev. Series 1999A (Ridgeview Med. Ctr. Proj.) 6.125%,
1/1/29 850,244
100,000 Wayzata ISD No. 284 G.O. Series 1995B (FSA insured), 5.95%, 2/1/13 103,862
200,000 White Bear Lake ISD No. 624 G.O. Series 2004-4A (FSA insured), 2.00%, 2/1/05 201,610
1,750,000 White Earth Band of Chippewa Indians Rev. Series 2000A (ACA insured), 7.00%,
12/1/11 2,019,343
--------------
11,320,886
--------------
MULTIFAMILY MORTGAGE (33.6%)
1,520,000 Apple Valley Multifamily Hsg. Rev. Refunding Series 1998A (Mtg.
Loan/Apple Valley Villa Proj.) (GNMA collateralized), 5.25%, 8/1/18 1,581,317
Austin Hsg. & Redev. Auth. Governmental Hsg. Gross Rev. Series 1995A
(Courtyard Res. Proj.):
50,000 7.00%, 1/1/15 50,335
500,000 7.25%, 1/1/26 503,330
1,160,000 Brooklyn Center Multifamily Hsg. Rev. Series 1993 (Ponds Family Hsg. Proj.),
5.90%, 1/1/20 1,165,220
Buffalo Rev. Refunding Series 1998 (Covenant Retirement Cmtys. Proj.):
250,000 4.45%, 12/1/04 254,292
250,000 4.55%, 12/1/05 258,507
Burnsville Multifamily Hsg. Rev. Refunding Series 1991 (Oak Leaf Apts. Proj.)(GNMA
collateralized):
800,000 7.05%, 1/1/12 805,088
780,000 7.125%, 1/1/17 784,618
860,000 7.125%, 1/1/21 864,704
150,000 7.15%, 1/1/27 150,729
530,000 7.15%, 1/1/23 532,735
425,000 7.15%, 1/1/25 427,108
46
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QUANTITY ($) NAME OF ISSUER MARKET VALUE ($)(1)
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 1,217,640
650,000 Rev. Refunding Series 1997A (Waybury Apts. Proj.), 5.875%, 8/1/27 673,978
400,000 Subordinate Rev. Refunding Series 1997C (Waybury Apts. Proj.), 8.00%, 8/1/27 403,540
Chaska Multifamily Hsg. Rev. Series 1999 (West Suburban Hsg. Partners Proj.):
235,000 5.00%, 9/1/09(4) 229,012
495,000 5.375%, 9/1/14(4) 465,785
405,000 Chisago City Hlth. Fac. Rev. Refunding Series 1995A (Pleasant Heights Proj.),
7.30%, 7/1/18 422,002
Cloquet Multifamily Hsg. Rev. Refunding Series 2001A (HADC Proj.):
55,000 6.00%, 2/1/05 55,428
60,000 6.25%, 2/1/06 60,902
60,000 6.50%, 2/1/07 61,249
75,000 7.10%, 2/1/10 76,950
700,000 Coon Rapids Multifamily Hsg. Rev. Refunding Series 1997A (Margaret Place Apts.
Proj.), 6.50%, 5/1/25 649,348
Coon Rapids Senior Hsg. Rev. Refunding Series 1998 (Epiphany Sr. Citizens Hsg.
Corp. Proj.):
115,000 5.30%, 11/1/07 115,674
115,000 5.40%, 11/1/08 115,597
170,000 5.50%, 11/1/10 169,713
545,000 5.80%, 11/1/18 534,313
Dakota Co. Hsg. & Redev. Auth. Multifamily Hsg. Rev. Refunding (Walnut Trails
Apts. Proj.):
4,375,000 Series 1995A (GNMA collateralized), 7.90%, 1/20/31(4) 4,761,881
195,000 Subordinate Series 1995C, 9.00%, 1/20/15(4) 192,188
Dakota Co. Hsg. & Redev. Auth. Multifamily Hsg. Rev.:
1,000,000 Series 1999 (View Pointe Apts. Proj.), 6.125%, 11/1/17 944,070
92,000 Series 1999 (Dakota Station Proj.), 5.65%, 1/20/24 97,951
800,000 Dakota Co. Cmty. Dev. Agy. Hsg. Fac. Rev. Subordinate Series 2002B (HADC Apple
Valley Sr. Apts. Proj.), 7.50%, 8/15/43 786,976
Eden Prairie Multifamily Hsg. Rev. Refunding :
510,000 Series 1991 (Windslope Apts. Proj.)(Section 8), 7.00%, 11/1/06 511,622
2,000,000 Series 1991 (Windslope Apts. Proj.)(Section 8), 7.10%, 11/1/17 2,003,060
300,000 Series 1997A (Preserve Place Proj.) (GNMA collateralized), 5.50%, 1/20/18 317,154
410,000 Series 1997A (Preserve Place Proj.) (GNMA collateralized), 5.60%, 7/20/28 425,822
420,000 Senior Series 2001A (Rolling Hills Proj.) (GNMA collateralized), 6.00%, 8/20/21 464,961
675,000 Senior Series 2001A (Rolling Hills Proj.) (GNMA collateralized), 6.15%, 8/20/31 739,442
540,000 Series 2001A (Rolling Hills Proj.) (GNMA collateralized), 6.20%, 2/20/43 589,383
1,100,000 Subordinate Series 2001C (Rolling Hills Proj.), 9.00%, 4/1/43 1,052,304
Fairmont Hsg. Fac. Rev. Series 2002-A1 (Homestead-GEAC Proj.):
1,100,000 6.625%, 10/1/11 1,149,676
295,000 6.875%, 10/1/14 297,885
500,000 Golden Valley Rev. Series 1999A (Covenant Retirement Cmntys. Proj.), 5.50%,
12/1/25 512,840
Grand Rapids Hsg. & Redev. Auth. (Lakeshore Place and Forest Park West Apts.
Proj.):
60,000 Series 1999B, 5.00%, 10/1/09 57,577
500,000 Series 1999A, 5.20%, 10/1/19 513,640
1,660,000 Series 1999A, 5.30%, 10/1/29 1,677,812
110,000 Series 1999B, 5.70%, 10/1/29 96,398
505,000 Hopkins Subordinate Multifamily Hsg. Rev. Refunding Series 1996C (Auburn Apts.
Proj.), 8.00%, 6/20/31 497,748
See accompanying notes to portfolios of investments on page 60. 47
SIT MINNESOTA TAX-FREE INCOME FUND
MARCH 31, 2004
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
QUANTITY ($) NAME OF ISSUER MARKET VALUE ($)(1)
Hopkins Multifamily Hsg. Rev. Series 1996 (Hopkins Renaissance Proj.) (Section 8):
100,000 5.85%, 4/1/09 108,058
450,000 6.25%, 4/1/15 477,396
Hutchinson Hsg. Fac. Rev. (Prince of Peace Apts. Proj.):
50,000 Series 2003A, 3.50%, 10/1/06 50,131
115,000 Series 2003A, 4.00%, 10/1/07 115,411
120,000 Series 2003A, 4.50%, 10/1/08 120,534
Inver Grove Heights Senior Hsg. Rev. (PHM/Inver Grove, Inc Proj):
10,000 Series 2001, 6.375%, 5/1/31 10,009
105,000 Series 2001A, 5.50%, 5/1/08 104,995
110,000 Series 2001A, 5.50%, 11/1/08 109,994
65,000 Series 2001B, 5.00%, 5/1/06 66,338
70,000 Series 2001B, 5.25%, 5/1/07 71,521
75,000 Series 2001B, 5.50%, 5/1/08 76,630
80,000 Series 2001B, 5.60%, 5/1/09 81,698
70,000 Series 2001B, 5.00%, 11/1/06 71,725
75,000 Series 2001B, 5.50%, 11/1/08 76,885
80,000 Series 2001B, 5.60%, 11/1/09 81,618
3,265,000 Little Canada Multifamily Hsg. Rev. Series 1997A (Hsg. Alt. Dev. Co. Proj.),
6.10%, 12/1/17 3,211,258
1,400,000 Maplewood Multifamily Hsg. Rev. Series 1998 (Park Edge Apts. Proj.), 6.50%, 5/1/29(4) 1,276,338
Maplewood Multifamily Refunding Rev. (Village on Woodlyn Proj.):
1,605,000 Series 1999A (GNMA collateralized), 6.75%, 7/20/30(4) 1,722,117
100,000 Subordinate Series 1999C-1, 8.00%, 11/1/30(4) 96,583
275,000 Subordinate Series 1999C-2, 8.00%, 11/1/30(4) 265,603
Minneapolis Multifamily Hsg. Rev.:
500,000 Series 2002A (Keeler Apts. Proj.), 7.00%, 10/1/17 492,300
355,000 Series 1996 (Belmont Apts.), 7.25%, 11/1/16 355,923
Series 1994 (Findley Place Townhomes Proj.) (Section 8):
50,000 6.00%, 12/1/05(4) 50,475
1,465,000 7.00%, 12/1/16(4) 1,465,161
5,020,000 Series 1996A (Nicollet Towers) (Section 8), 6.00%, 12/01/19 5,222,005
1,000,000 Series 1998 (Riverside Plaza Proj.) (GNMA collateralized), 5.10%, 12/20/18(4) 1,041,230
340,000 Series 2000 (Garr Scott Loft Proj.)(LOC U.S. Bank), 5.95%, 5/1/30(4) 367,907
50,000 Series 2003A (Sumner Proj.) (GNMA collateralized), 3.00%, 8/20/08(4) 51,197
4,445,000 Series 2003 (Sumner Field Phase II Proj.), 2.60%, 8/20/08(4) 4,481,093
Minneapolis Student Hsg. Rev. Series 2000 (Riverton Community Hsg. Proj.):
100,000 6.80%, 7/1/10 104,742
240,000 6.90%, 7/1/11 249,571
50,000 MN HFA Rental Hsg. Rev. Series 1996A, 6.10%, 8/1/27(4) 52,247
105,000 Minnetonka Hsg. Fac. Rev. Series 1994 (Beacon Hill Housing Proj.), 7.00%, 6/1/04 105,114
340,000 Minnetonka Multifamily Hsg. Rev. Refunding Subordinate Series 1994C (Brier Creek
Proj.), 8.00%, 12/20/16 354,287
Minnetonka Multifamily Hsg. Rev. Refunding Series 1999A (GNMA collateralized)
(Archer Height s Apts. Proj.):
540,000 5.10%, 7/20/13(4) 582,514
975,000 5.20%, 1/20/18(4) 1,038,492
Minnetonka Senior Hsg. Rev. Series 1997 (Westridge Sr. Hsg. Proj.):
110,000 6.30%, 9/1/08 109,992
185,000 6.50%, 9/1/12 184,395
48
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QUANTITY ($) NAME OF ISSUER MARKET VALUE ($)(1)
New Ulm Multifamily Rev. Series 1999 (HADC Ridgeway Proj.):
95,000 5.35%, 12/1/08 93,528
100,000 5.40%, 12/1/09 96,355
105,000 5.50%, 12/1/10 100,639
110,000 5.60%, 12/1/11 105,042
Plymouth Multifamily Hsg. Rev. Refunding Series 1996A (Fox Forest Apts. Proj.)
(GNMA collateralized):
1,650,000 Series 1996A, 8.05%, 6/20/31 1,781,901
645,000 Series 1996C, 8.00%, 6/20/31 635,738
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) 3,092,796
2,820,000 Roseville Hsg. Fac. Rev. Refunding Bonds Series 1998 (College Properties Inc.
Proj.), 5.60%, 10/1/13 2,864,077
520,000 Shoreview Sr. Hsg. Rev. Series 1996 (Shoreview Sr. Residence Proj.), 7.25%, 2/1/26 543,800
St. Cloud Hsg. & Redev. Auth. Multifamily Hsg. Rev.:
Series 1993 (Germain Towers Proj.) (Section 8):
90,000 5.00%, 9/1/04 89,288
1,650,000 5.90%, 9/1/20 1,303,269
Series 1999A (Parkview Terrace Apts. Proj.) (Section 8):
85,000 5.00%, 6/1/09 79,296
1,029,000 5.50%, 6/1/18 887,430
St. Louis Park Multifamily Hsg. Rev. Refunding:
650,000 Series 1995 (FHA insured) (Knollwood Cmty. Hsg. Proj.), 6.15%, 12/1/16 678,308
500,000 Series 1998A (Park Ridge Apts. Proj.) (GNMA collateralized), 5.25%, 11/1/20 522,880
200,000 St. Paul Hsg. & Redev. Auth. Multifamily Refunding Rev. Series 1995
(Sun Cliffe Apts. Proj.)(GNMA collateralized), 5.875%, 7/1/15 209,874
3,285,000 St. Paul Port Authority Multifamily Hsg. Refunding (Jackson Towers Apts. Proj.)
Senior Series 1998-1A (GNMA collateralized), 6.95%, 4/20/33 3,548,326
880,000 Washington Co. Hsg. & Redev. Auth. Multifamily Hsg. Rev. Refunding Series 1994
(White Bear Lake Transitional Hsg. Proj.), 6.625%, 8/1/24 887,154
755,000 Washington Co. Hsg. & Redev. Auth. Governmental Hsg. Rev. Refunding Series 1999A
(Briar Pond Apts. Proj.) (GNMA collateralized), 5.50%, 2/20/14 786,687
--------------
73,129,379
--------------
MUNICIPAL LEASE (2.5%)(5)
40,000 Anoka Co. C.O.P. Series 1998, 5.40%, 6/1/28 40,576
75,776 Brooklyn Park C.O.P. Series 1996, 5.45%, 9/27/06 76,953
110,000 Burnsville Econ. Dev. Auth. Lease Rev. Series 1994A, 5.90%, 12/1/05 113,272
50,000 Chaska Econ. Dev. Auth. ISD No. 112 Sch. Facs. Lease Rev. Series 1999A, 5.125%,
12/1/09 55,820
104,000 Hennepin Co. Hsg. & Redev. Auth. Rev. Series 1993A (Community Provider Program),
5.70%, 8/1/13 104,147
535,000 Hibbing Econ. Dev. Auth. Public Proj. Rev. Series 1997 (Hibbing Lease Obligations
Proj.), 6.10%, 2/1/08 566,881
125,000 Mountain Iron Hsg. & Redev. Auth. Rev. Series 2001A (Arrowhead Library Sys.
Proj.), 5.00%, 9/1/09 135,891
North St. Paul Maplewood ISD No. 622 C.O.P. Series 2004:
250,000 3.00%, 2/1/05(10) 253,285
580,000 4.00%, 2/1/15(10) 571,944
300,000 4.125%, 2/1/16(10) 295,704
Shorewood Econ. Dev. Auth. Public Safety Fire Fac. Lease Rev. Series 2002A:
135,000 3.00%, 2/1/05 136,050
140,000 3.50%, 2/1/06 142,551
800,000 St. Cloud C.O.P. Series 1997, 5.90%, 12/1/17 818,944
1,431,825 St. Paul Lease Series 1998 (City Hall Annex Building), 5.71%, 10/1/18 1,394,683
400,000 St. Paul Hsg. & Redev. Auth. Lease Rev. Series 2000 (Rivercentre Pkg. Ramp Proj.),
5.70%, 5/1/08 446,320
399,254 University of Puerto Rico C.O.P. Series 2001, 6.25%, 1/10/05(8)(9) 355,336
--------------
5,508,357
--------------
See accompanying notes to portfolios of investments on page 60. 49
SIT MINNESOTA TAX-FREE INCOME FUND
MARCH 31, 2004
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
QUANTITY ($) NAME OF ISSUER MARKET VALUE ($)(1)
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 1,054,540
MN Agric. Society State Fair Rev. Series 2003:
250,000 3.00%, 9/15/04 251,535
395,000 3.00%, 9/15/05 401,932
St. Paul Recreational Fac. Gross Rev. Series 1996D:
160,000 5.50%, 6/1/08 164,240
1,245,000 5.875%, 6/1/18 1,278,491
--------------
3,150,738
--------------
SINGLE FAMILY MORTGAGE (5.6%)
Dakota County Hsg. & Redev. Auth. Single Family Mtg. Rev.:
160,000 Series 1994A (FNMA backed), 6.70%, 10/1/09(4) 162,318
80,000 Series 1995 (FNMA & GNMA backed), 6.25%, 10/1/09(4) 81,395
885,000 Minneapolis Redev. Mtg. Rev. Series 1987A (Riverplace Proj.) (LOC Bk. of Tokyo),
7.10%, 1/1/20 888,885
1,082,067 Minneapolis Residual Interest Mtg. Rev. Series 1995, 7.00%, 10/1/12 1,121,952
MN HFA Single Family Mtg. Rev.:
205,000 Series 1994E, 5.90%, 7/1/25 210,851
90,000 Series 1994F, 5.45%, 7/1/04 90,832
95,000 Series 1994F, 5.55%, 7/1/05 97,189
380,000 Series 1994F, 6.30%, 7/1/25 388,026
1,205,000 Series 1994I, 6.90%, 7/1/22(4) 1,230,546
20,000 Series 1994K, 5.90%, 1/1/07 20,454
140,000 Series 1994L, 6.70%, 7/1/20(4) 143,014
15,000 Series 1995K, 6.20%, 7/1/20(4) 15,479
215,000 Series 1996D, 6.00%, 1/1/16 225,595
160,000 Series 1997A, 5.60%, 7/1/09 170,651
355,000 Series 1996H, 6.00%, 1/1/21 370,957
1,035,000 Series 1997D, 5.85%, 7/1/19(4) 1,088,044
55,000 Series 1997E, 5.90%, 7/1/29(4) 57,417
125,000 Series 1997G, 6.00%, 1/1/18 131,675
1,615,000 Series 1998C, 5.25%, 1/1/17 1,701,548
115,000 Series 1998F-1, 4.75%, 7/1/07 119,195
75,000 Series 1998F, 4.95%, 7/1/08 79,481
510,000 Series 1998F-1, 5.45%, 1/1/17 532,430
130,000 Series 1998F, 5.70%, 1/1/17 136,925
620,000 Series 1999B, 5.25%, 1/1/20 646,821
480,000 Series 1999C, 4.25%, 7/1/04(4) 483,437
765,000 Series 1999C, 4.40%, 7/1/05(4) 792,953
225,000 Series 2000C, 6.10%, 7/1/30(4) 230,632
500,000 Series 2003H, 1.00%, 7/1/36(4) 499,425
966,042 St. Paul Residual Interest Rev. Series 1995 Convertible Capital Appreciation
Bonds, Zero Coupon, 7.23% Effective Yield on Purchase Date, 9/1/11 583,663
--------------
12,301,790
--------------
50
- --------------------------------------------------------------------------[LOGO]
QUANTITY ($) NAME OF ISSUER MARKET VALUE ($)(1)
UTILITY (0.4%)
Glencoe Light & Power Commission Elec. Rev. Series 2004:
300,000 2.00%, 12/1/04 301,758
255,000 2.00%, 12/1/05 257,619
Lake Crystal Public Utilities Comm. Electric Rev. Series 1998:
130,000 5.45%, 12/1/13 133,295
120,000 5.50%, 12/1/16 121,434
70,000 MN Public Facs. Auth. Water Pollution Ctrl. Rev. Series 1996B, 5.00%, 3/1/17 73,795
--------------
887,901
--------------
OTHER REVENUE BONDS (8.5%)
Columbia Heights Commercial Dev. Refunding Rev. Series 1999 (Columbia
Park Properties - Medical Clinic Proj.):
250,000 5.15%, 12/1/08 241,567
1,750,000 5.60%, 12/1/15 1,594,372
Commissioner of Iron Range Resources and Rehab. Gross Rev. (Giant's
Ridge Rec. Area Proj.):
200,000 Series 2000, 6.25%, 11/1/05 207,360
900,000 Series 2000, 7.25%, 11/1/16 928,944
Minneapolis Cmty. Dev. Agy. Ltd. Tax Common Bond Fund:
170,000 Series 1997-1 (Halper Corrugated Box Mfg. Co.), 5.90%, 6/1/07(4) 187,104
500,000 Series 1999-1A (Discount Steel), 5.25%, 6/1/19(4) 514,300
1,025,000 Minneapolis Public Hsg. Auth. Series 1997 (General Credit Energy Savings Proj.),
6.00%, 7/1/08 1,009,461
Minneapolis Tax Increment Rev. Refunding Series 2004 (St. Anthony Falls Proj.):
100,000 2.35%, 2/1/05 99,907
600,000 4.50%, 2/1/13 593,076
200,000 Renville Gross Rev. Golf Course Bond Series 1997, 6.50%, 2/1/19 204,052
St. Paul Hsg. & Redev. Auth. Tax Increment Rev.:
700,000 Series 2001 (US Bank Operations Ctr. Proj.), 6.125%, 8/1/19 719,866
1,140,000 Series 2002 (North Quadrant Owner Occupied Proj. Phase 2), 7.00%, 2/15/28 1,173,277
1,076,000 Series 2002 (North Quadrant Owner Occupied Proj. Phase 1), 7.50%, 2/15/28 1,164,146
3,000,000 Series 2002A (Upper Landing Proj.), 6.80%, 3/1/29 3,024,570
2,000,000 Series 2002B-2 (Upper Landing Proj.), 6.90%, 3/1/29 1,995,120
1,300,000 Series 2002 (Drake Marble Proj.), 6.75%, 3/1/28 1,306,513
1,335,000 Series 2004 (9th St. Lofts Proj.), 6.375%, 2/15/28(10) 1,335,841
875,000 Steele Co. Hlth. Care Fac. Rev. Series 2000 (Elderly Hsg. Proj.), 6.625%, 6/1/20 953,453
Victoria Recreational Facility Gross Rev. Series 2002:
70,000 4.75%, 2/1/12 71,715
75,000 4.75%, 8/1/12 76,838
85,000 5.10%, 8/1/15 87,208
Virgin Islands Public Fin. Auth. Rev.:
800,000 Senior Lien Fund Series 1998C, 5.50%, 10/1/04 816,056
200,000 Gross Receipts Taxes Loan Note Series 1999A, 5.625%, 10/1/10 217,750
--------------
18,522,496
--------------
Total municipal bonds (cost: $209,497,632) 212,040,171
--------------
SHORT-TERM SECURITIES (2.9%) (2)
3,321,744 Federated Minnesota Municipal Cash Fund, 0.74% 3,321,744
1,100,000 Hennepin Co. G.O. Series 2000B, variable rate, 12/1/20 1,100,000
1,520,000 Minneapolis Convention Ctr. Rev. Series 2000, variable rate, 12/1/18 1,520,000
293,292 Wells Fargo Minnesota Municipal Cash Fund, 0.23% 293,292
--------------
Total Short-Term Securities (cost: $6,235,036) 6,235,036
--------------
Total investments in securities (cost: $215,732,668)(7) $218,275,207
==============
See accompanying notes to portfolios of investments on page 60. 51
SIT FLORIDA TAX-FREE INCOME FUND
PERIOD ENDED MARCH 31, 2004
- --------------------------------------------------------------------------------
FIXED-INCOME MANAGEMENT TEAM
The Florida Tax Free Income Fund returned +1.08% for the quarter ended
March 31, 2004 and compared with a return of +1.28% for the Lehman 5-Year
Municipal Bond Index (the Index). The Fund's 30-day SEC yield was 3.90%.
NEW FUND LAUNCHED AT YEAR-END
The Sit Florida Tax Free Income Fund commenced operation on December 31,
2003 at $10.00 per share. The Fund appreciated in value to $10.05 per share on
March 31, 2004, providing shareholders a +0.50% price gain and a +0.58% income
return for a +1.08% total return for the quarter. The Fund's investments in
insured, multifamily revenue, and other revenue bonds earned returns quite close
to the Fund's overall return. The Fund's investments in hospital bonds enhanced
the Fund's overall performance, with price appreciation of over +1%.
STABLE RATES DURING THE QUARTER
Interest rates were relatively stable during the quarter. Short to
intermediate maturity bond prices were relatively unchanged, while longer
maturity bond prices rose modestly.
DEFENSIVELY POSITIONED FOR RISING RATES
The Fund's duration of 2.1 years is considerable shorter than the Index
duration of 4.2 years and substantially shorter than most other Florida
tax-exempt funds.
We expect higher interest rates over the coming twelve months and believe
the Fund is well positioned for future reinvestment in longer duration and
higher yielding bonds.
INVESTMENT OBJECTIVE AND STRATEGY
The objective of the Florida Tax-Free Income Fund is to provide a high
level of current income that is exempt from federal regular income tax by
investing in securities that are exempt from the Florida intangibles tax.
The Fund seeks to achieve its objective by investing primarily in municipal
securities that generate interest income that is exempt from regular federal
income tax and that are exempt from the Florida intangible personal property
tax. During normal market conditions, the Fund invests 100% (and, as a
fundamental policy, no less than 80%) of its net assets in such tax-exempt
municipal securities. The Fund may invest up to 10% of its assets in securities
that generate interest income subject to federal alternative minimum tax.
PORTFOLIO SUMMARY
Net Asset Value 3/31/04: $10.05 Per Share
Total Net Assets: $ 2.6 Million
30-day SEC Yield: 3.90%
Tax Equivalent Yield: 6.00%(1)
12-Month Distribution Rate: n/a
Average Maturity: 10.3 Years
Duration to Estimated Avg. Life: 2.1 Years(2)
Implied Duration: 2.6 Years(2)
(1) For individuals in the 35.0% federal tax bracket.
(2) See next page.
PORTFOLIO STRUCTURE
(% OF TOTAL NET ASSETS)
Insured 51.1
Multifamily Mortgage
Revenue 16.4
Other Revenue Bonds 15.1
Hospital/Health
Care Revenue 11.1
Sectors less than 5.0% 4.9
Cash & Other
Net Assets 1.4
52
- --------------------------------------------------------------------------[LOGO]
AVERAGE ANNUAL TOTAL RETURNS*
SIT LEHMAN
FL TAX-FREE 5-YEAR MUNI.
INCOME FUND BOND INDEX
----------- -----------
3 Month** 1.08% 1.28%
6 Month** n/a n/a
1 Year n/a n/a
3 Years n/a n/a
5 Years n/a n/a
Inception** 1.08 1.28
(12/31/03)
CUMULATIVE TOTAL RETURNS*
SIT LEHMAN
FL TAX-FREE 5-YEAR MUNI.
INCOME FUND BOND INDEX
----------- -----------
1 Year n/a n/a
3 Years n/a n/a
5 Years n/a n/a
Inception 1.08% 1.28%
(12/31/03)
*AS OF 3/31/04. **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.
(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 GRAPH]
The sum of $10,000 invested at inception (12/31/03) and held until 3/31/04 would
have grown to $10,108 in the Fund or $10,128 in the Lehman 5-Year Municipal Bond
Index assuming reinvestment of all dividends and capital gains.
QUALITY RATINGS
(% OF TOTAL NET ASSETS)
[PIE CHART]
Other Assets
and Liabilities 1.4%
AAA 40.9%
AA 7.4%
A 17.7%
BBB 17.5%
Not Rated 15.1%
LOWER OF MOODY'S S&P, FITCH OR DUFF & PHELPS RATINGS USED.
ASSESSMENT OF
NON-RATED SECURITIES
AAA 0.0%
AA 0.0
A 0.0
BBB 4.0
BB 11.1
----
Total 15.1%
53
SIT FLORIDA TAX-FREE INCOME FUND
- --------------------------------------------------------------------------------
MARCH 31, 2004
PORTFOLIO OF INVESTMENTS
QUANTITY ($) NAME OF ISSUER MARKET VALUE ($)(1)
MUNICIPAL BONDS (98.6%)(2)
HOSPITAL/HEALTH CARE (11.1%)
Highlands Co. Hlth. Facs. Auth. Rev.:
40,000 Series 2002 (Adventist Health Sys./Sunbelt Proj.), 3.35%, 11/15/32 40,885
25,000 Series 2003D (Adventist Health Sys. Proj.), 5.875%, 11/15/29 26,791
25,000 Hillsborough Co. Industrial Dev. Auth. Hosp. Rev. Refunding Series 2003A (Tampa
General Hosp. Proj.), 2.50%, 10/1/05 25,226
65,000 Martin Co. Hlth. Fac. Auth. Hosp. Rev. Refunding Series 2002B (Martin Memorial
Medical Center Proj.), 3.35%, 11/15/04 65,646
50,000 Miami Hlth. Fac. Auth. Rev. Series 2003B (Catholic Hlth. East Proj.), 2.50%,
11/15/05 50,687
80,000 South Lake Co. Hosp. Dist. Rev. Series 2003 (South Lake Hosp., Inc. Proj.), 5.50%,
10/1/13 83,692
--------------
292,927
--------------
INDUSTRIAL / POLLUTION CONTROL (1.7%)
45,000 Dunes Cmnty. Dev. Dist. Rev. Refunding Series 1993 (Intracoastal Waterway Bridge
Proj.), 5.50%, 10/1/07 46,029
--------------
INSURED (51.1%)
90,000 Brevard Co. School Board C.O.P. Series 1996B (Ambac insured), 5.50%, 7/1/21 97,645
50,000 Clearwater Hsg. Auth. Rev. Refunding Series 1997 (Hamptons at Clearwater Proj.)
(ACA insured), 5.40%, 5/1/13 54,146
210,000 Dade Co. Hlth. Fac. Auth. Hosp. Rev. Refunding Series 1993A (Baptist Hosp. Miami
Proj.) (MBIA insured), 5.25%, 5/15/21 212,604
50,000 Dade Co. Public Fac. Rev. Series 1993 (Jackson Mem. Hosp. Proj.)(MBIA insured),
5.25%, 6/1/23 51,119
50,000 Escambia Co. Hlth. Fac. Auth. Rev. Series 2000 (Ambac insured), 5.95%, 7/1/20 52,507
50,000 FL HFC Hsg. Rev. Hsg. Series 2000D-1 (Augustine Club Apts. Proj.)(Ambac insured),
5.75%, 10/1/30 53,105
75,000 Fort Myers Impt. Rev. Series 1992C (Ambac Insured), 5.70%, 12/1/05 75,271
100,000 Halifax Hosp. Med. Ctr. Health Care Fac. Rev. Series 1998A (Halifax Mgmt. Sys.
Proj.) (ACA insured), 5.00%, 4/1/12 104,989
100,000 Hillsborough Co. Educ. Fac. Auth. Rev. Refunding Series 1998 (Univ. of Tampa
Proj.) (Radian insured), 5.75%, 4/1/18 112,704
60,000 Hillsborough Co. Industrial Dev. Auth. Rev. Series 1994 (Univ. Cmnty. Hosp. Proj.)
(MBIA insured), 5.80%, 8/15/24 61,998
30,000 Lee Co. Transportation Fac. Rev. Series 1995 (MBIA Insured), 5.75%, 10/1/27 32,205
65,000 Osceola Co. School Board C.O.P. Series 1995A Ambac insured), 5.25%, 6/1/10 68,448
90,000 Polk Co. Cap Impt. Rev. Refunding Series 1994 (FGIC insured), 5.00%, 12/1/11 93,875
150,000 Port Everglades Auth. Rev. Refunding & Impt. Series 1989A (MBIA-IBC insured),
5.00%, 9/1/16 150,369
50,000 Univ. of South FL Rev. Hsg. Fac. Series 1997A (MBIA insured), 5.35%, 7/1/15 54,005
25,000 Venice Hlth. Care Rev. Series 1996 (Bon Secours Hlth. Sys. Proj.)(MBIA insured),
5.625%, 8/15/26 27,118
50,000 Volusia Co. Hlth. Fac. Auth. Rev. Refunding & Impt. Series 1994 (Hosp. Fac.-
Memorial Hlth. Proj) (Ambac insured), 5.75%, 11/15/13 52,250
--------------
1,354,358
--------------
54
- --------------------------------------------------------------------------[LOGO]
QUANTITY ($) NAME OF ISSUER MARKET VALUE ($)(1)
MULTIFAMILY MORTGAGE (16.4%)
45,000 Capital Trust Agy. Multifamily Rev. Sr. Series 2003A (Golf Villas, Rivermill, and
Village Square Apts. Proj.), 4.75%, 6/1/13 44,113
75,000 Collier Co. Health Fac. Auth. Rev. Refunding Series 1994 (Moorings, Inc. Proj.),
7.00%, 12/1/19 78,933
45,000 Collier Co. HFA Multifamily Hsg. Rev. Series 2002C (Goodlette Arms Proj.), 5.25%,
8/15/15 48,137
60,000 FL HFC Rev. Series 1999-K1 (Sunset Place Proj.), 5.50%, 10/1/09 64,410
60,000 Lee Co. Industrial Dev. Auth. Hlth. Care Fac. Rev. Series 1999A (Shell Point
Village Proj.), 5.25%, 11/15/04 61,287
75,000 Miami-Dade Co. Special Hsg. Rev. Refunding Series 1998 (Section 8), 5.30%, 10/1/05 74,734
60,000 Palm Beach Co. Hlth. Fac. Auth. Rev. Series 1996 (ACTS Retirement Cmnty. Proj.),
5.625%, 11/15/20 61,951
--------------
433,565
--------------
UTILITY (3.2%)
Jacksonville Elec. Auth Rev.:
50,000 Refunding Series 1997-2-14 (St. John's River Proj.), 4.90%, 10/1/08 52,995
30,000 Water & Sewer Series 2000A, 4.50%, 10/1/09 31,454
--------------
84,449
--------------
OTHER REVENUE BONDS (15.1%)
100,000 Capital Trust Agy. Rev. Series 2002A (Seminole Tribe Convention Proj.), 8.50%,
10/1/07 106,847
30,000 Capital Region Cmnty. Dev. Dist. Rev. Series 2001B, 5.95%, 5/1/06 30,103
100,000 Fiddlers Creek Cmnty. Dev. Dist. No. 2 Rev. Series 2003B, 5.75%, 5/1/13 101,620
50,000 Mediterra North Cmnty. Dev. Dist. Impt. Rev. Series 2001B, 6.00%, 5/1/08 50,176
60,000 Parklands West Cmnty. Dev. Dist. Rev. Series 2001B, 6.00%, 5/1/06 60,136
50,000 Reunion East Cmnty. Dev. Dist. Series 2002B, 5.90%, 11/1/07 50,253
--------------
399,135
--------------
Total municipal bonds (cost: $2,602,489) 2,610,463
--------------
Total investments in securities (cost: $2,602,489) (7) $2,610,463
==============
See accompanying notes to portfolios of investments on page 60. 55
SIT BOND FUND
ONE YEAR ENDED MARCH 31, 2004
- --------------------------------------------------------------------------------
SENIOR PORTFOLIO MANAGERS, MICHAEL C. BRILLEY AND BRYCE A. DOTY, CFA
PORTFOLIO MANAGER, MARK H. BOOK, CFA
The Sit Bond Fund returned +6.66% for the fiscal year ended March 31, 2004
while the Lehman Aggregate Bond Index (the Index) returned +5.40%. The Fund's
30-day SEC yield was 4.66% and its 12-month distribution rate was 4.66%.
UNDERWEIGHT UNDERPERFORMING TREASURIES
Several of the Fund's strategies contributed to its strong outperformance
versus the Index during the 12-month period. The Fund's underweighting of U.S.
Treasury securities boosted performance as Treasuries underperformed the
benchmark.
CORPORATES PROPEL OUTPERFORMANCE
In addition, overweighting corporate bonds, the best performing sector of
the taxable bond market, aided the Fund's performance as strong corporate
profits increased demand, causing yield spreads to narrow relative to Treasury
securities. The Fund also benefited from security selection within the corporate
and mortgage-backed sectors. The Fund's corporate bond holdings, which emphasize
issuers that benefit from a strengthening economy, also outperformed the Lehman
Credit Index.
OTHER SECTORS PROVIDE MIXED RESULTS
While the overall sector hindered performance, the mortgage securities in
the portfolio exhibited more stable prepayment characteristics than the overall
market, allowing the Fund's mortgage securities to outperform the Lehman MBS
Index. Low yields earned on the small amounts of cash and cash equivalents in
the Fund hindered performance.
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 3/31/04: $10.07 Per Share
3/31/03: $ 9.89 Per Share
Total Net Assets: $14.9 Million
30-day SEC Yield: 4.66%
12-Month Distribution Rate: 4.66%
Average Maturity: 19.1 Years
Effective Duration: 3.9 Years(1)
(1) Effective duration is a measure which reflects estimated price sensitivity
to a given change in interest rates. For example, for an interest rate change of
1.0%, a portfolio with a duration of 5 years would be expected to experience a
price change of 5%. Effective duration is based on current interest rates and
the Adviser's assumptions regarding the expected average life of individual
securities held in the portfolio.
PORTFOLIO STRUCTURE
(% OF TOTAL NET ASSETS)
[BAR CHART]
Corporate Bonds & Notes 30.9
Mortgage Pass-Through 27.5
Asset-Backed Securities 21.5
Closed-End Mutual Funds 8.6
Collateralized Mortgage
Obligations 5.3
Sectors less than 5.0% 4.7
Cash & Other
Net Assets 1.5
56
- --------------------------------------------------------------------------[LOGO]
AVERAGE ANNUAL TOTAL RETURNS*
LIPPER INTER.
SIT LEHMAN INVESTMENT
BOND AGGREGATE GRADE BOND
FUND BOND INDEX FUND AVG.
----- ---------- -------------
3 Month** 2.58% 2.66% 2.36%
6 Month** 4.08 2.98 n/a
1 Year 6.66 5.40 5.43
5 Years 6.29 7.29 6.45
10 Years 6.80 7.54 6.73
Inception 6.45 7.04 6.28
(12/1/93)
CUMULATIVE TOTAL RETURNS*
LIPPER INTER.
SIT LEHMAN INVESTMENT
BOND AGGREGATE GRADE BOND
FUND BOND INDEX FUND AVG.
----- ---------- -------------
1 Year 6.66% 5.40% 5.43%
5 Years 35.64 42.17 36.76
10 Years 93.11 106.89 91.86
Inception 90.75 102.05 87.77
(12/1/93)
*AS OF 3/31/04 **NOT ANNUALIZED.
- --------------------------------------------------------------------------------
PERFORMANCE FIGURES ARE HISTORICAL AND DO NOT GUARANTEE FUTURE RESULTS.
INVESTMENT RETURNS AND PRINCIPAL VALUE WILL VARY, AND YOU MAY HAVE A GAIN OR
LOSS WHEN YOU SELL SHARES. AVERAGE ANNUAL TOTAL RETURNS INCLUDE CHANGES IN SHARE
PRICE AS WELL AS REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAINS. MANAGEMENT
FEES AND ADMINISTRATIVE EXPENSES ARE INCLUDED IN THE FUND'S PERFORMANCE;
HOWEVER, FEES AND EXPENSES ARE NOT INCORPORATED IN THE LEHMAN AGGREGATE BOND
INDEX. THE LIPPER AVERAGES AND INDICES ARE OBTAINED FROM LIPPER ANALYTICAL
SERVICES, INC., A LARGE INDEPENDENT EVALUATOR OF MUTUAL FUNDS.
GROWTH OF $10,000
[PLOT POINTS GRAPH]
The sum of $10,000 invested at inception (12/1/93) and held until 3/31/04 would
have grown to $19,075 in the Fund or $20,205 in the Lehman Aggregate Bond Index
assuming reinvestment of all dividends and capital gains.
QUALITY RATINGS
(% OF TOTAL NET ASSETS)
[PIE CHART]
U.S. Treasury 0.8%
Govt. Agency
Backed
Securities 30.7%
Other Assets
and Liabilities 1.5%
A 21.4%
AA 6.9%
BBB 16.8%
Less Than BBB 2.2%
AAA 19.7%
LOWER OF MOODY'S OR S&P RATING USED.
57
SIT BOND FUND
MARCH 31, 2004
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
QUANTITY ($) NAME OF ISSUER MARKET VALUE ($)(1)
U.S. GOVERNMENT SECURITIES (0.8%)(2)
400,000 U.S. Treasury Strips, Zero Coupon, 6.04% Effective Yield, 11/15/27 117,872
--------------
(cost: $107,602)
ASSET-BACKED SECURITIES (21.5%) (2)
156,802 Advanta Mortgage Loan Trust Series 1999-3 A4, 7.75%, 10/25/26 164,584
86,951 Bear Stearns Securities, Inc. Series 2000-1 AF, 7.52%, 3/25/30 89,784
150,000 Chase Funding Mtg. Series 2002-1, 6.595%, 2/25/32 161,968
400,000 Conseco Home Equity Loan Series 2002-A A5, 7.05%, 4/15/32 439,751
Conseco Mfg. Housing Series:
100,000 2000-6 A5, 7.27%, 9/1/32 103,181
200,931 2002-2 A2, 6.03%, 3/1/33 208,285
144,564 Deutsche Financial Capital Securitization Series 1997-I A3, 6.75%, 9/15/27 153,316
173,795 EQCC Home Equity Loan Trust Series 1998-2 5F, 6.64%, 7/15/29 180,736
195,146 FMAC Trust Series 1997C, 6.75%, 12/15/19 191,346
189,068 Greenpoint Manufactured Hsg. Series 2000-1 A5, 7.84%, 12/20/29 187,788
Green Tree Financial Corp.:
49,600 1995-5 A6, 7.25%, 9/15/26 52,324
208,263 1998-1 A6, 6.33%, 11/1/29 214,767
200,000 1999-1 A5, 6.11%, 9/1/23 205,626
214,640 1999-4 A5, 6.97%, 5/1/31 225,419
71,301 Green Tree Home Equity Loan Trust Series 1999-D A5, 7.88%, 9/15/30 72,519
Indymac Manufactured Housing Contract:
190,061 1998-2 A3, 6.20%, 9/25/17 181,926
142,546 1998-2 A4, 6.64%, 12/25/27 137,917
75,062 Oakwood Mortgage Investors, Inc. Series 1997-D A4, 6.725%, 2/15/28 78,347
150,000 Origen Mfg. Housing Series 2001A, 7.08%, 3/15/32 157,377
--------------
Total asset-backed securities 3,206,961
(cost: $3,142,160) --------------
COLLATERALIZED MORTGAGE OBLIGATIONS (5.3%)(2)
137,344 Countrywide Home Loans Series 2002-27 A8, 4.00%, 12/25/32 138,908
141,265 FNMA Series 1990 45J, 9.50%, 5/25/20 157,707
Vendee Mortgage Trust:
17,300 Series 1997-2 E, 7.50%, 5/15/24 17,358
278,062 Series 1999-1 2Z, 6.50%, 12/15/28 300,312
165,150 Washington Mutual Series 2002-S8 A7, 5.25%, 1/25/18 170,822
--------------
Total collateralized mortgage obligations 785,107
(cost: $769,528) --------------
CORPORATE BONDS & NOTES (30.9%)(2)
200,000 Barnett Capital (BOA), 8.06%, 12/1/26 233,345
297,181 Canadian Natl. Railway Co. Series 1997-A2, 7.195%, 1/2/16 353,660
Conoco Philips:
100,000 8.125%, 2/15/30 132,089
100,000 8.00%, 1/15/37 116,744
347,582 Continental Airlines Series 2000-2, 7.707%, 4/2/21 352,902
100,000 Delta Air Lines Series 2002-1, 6.417%, 7/2/12 107,720
276,000 Dow Capital BV, 8.70%, 5/15/22 284,301
300,000 First Hawaiian Capital Trust, 8.343%, 7/1/27 352,567
300,000 Ford Motor Credit Co., 7.20%, 6/15/07 329,334
150,000 General Motors Accept. Corp., 6.875%, 9/15/11 162,737
100,000 General Motors Corp., 8.80%, 3/1/21 116,789
100,000 Great Western Financial Trust, 8.206%, 2/1/27 118,033
50,000 McDonald's Corp., 7.31%, 9/15/27 55,844
100,000 Narragansett Electric Co., 7.39%, 10/1/27 108,093
Northwest Airlines Corp.:
167,214 7.935%, 10/1/20 183,323
363,692 8.072%, 10/1/19 405,573
200,000 Pacific Bell Corp. (SBC), 7.25%, 11/1/27 220,587
50,000 Prologis Trust, 7.625%, 7/1/17 62,081
360,108 Southwest Air Co., 7.67%, 1/2/14 425,893
200,000 Sunamerica, Inc. (AIG), 8.125%, 4/28/23 258,638
100,000 Union Pacific Corp., 7.00%, 2/1/16 118,163
100,000 US Bancorp Capital, 8.27%, 12/15/26 120,472
-----------
Total corporate bonds & notes 4,618,888
(cost: $4,416,602) -----------
58
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QUANTITY ($) NAME OF ISSUER MARKET VALUE ($)(1)
MORTGAGE PASS-THROUGH SECURITIES (27.5%)(2)(3)
Federal Home Loan Mortgage Corporation:
300,000 8.00%, 11/15/29 331,875
211,198 8.375%, 5/17/20 232,912
120,391 9.00%, 3/1/21 134,236
34,230 9.00%, 7/1/22 38,231
24,383 9.00%, 7/1/30 26,707
208,077 9.00%, 8/1/30 227,910
58,040 9.50%, 8/1/16 64,807
76,803 9.50%, 12/1/22 86,092
54,808 9.50%, 12/1/22 61,436
6,864 10.25%, 9/1/09 7,587
12,009 10.75%, 3/1/11 13,354
Federal National Mortgage Association:
150,000 4.028%, 4/1/34 154,383
321,711 7.00%, 5/1/32 341,415
220,957 7.50%, 6/1/32 240,214
50,867 8.50%, 2/1/25 55,875
111,145 9.00%, 1/1/15 124,027
94,580 9.00%, 12/1/19 105,436
32,534 9.50%, 4/1/25 36,306
66,916 9.75%, 1/15/13 74,555
53,141 10.25%, 8/15/13 59,585
99,609 10.50%, 5/1/19 111,969
54,168 11.00%, 9/1/19 61,392
51,176 11.00%, 11/1/20 57,863
Government National Mortgage Association:
83,132 7.90%, 8/20/21 91,056
60,797 8.00%, 4/15/17 66,971
94,585 8.50%, 10/15/24 104,706
173,389 8.50%, 11/20/26 189,454
53,208 8.50%, 10/15/24 58,901
58,021 8.75%, 11/15/09 64,802
10,268 9.00%, 10/15/06 10,969
13,132 9.00%, 9/15/08 14,325
11,907 9.00%, 4/15/09 13,079
25,767 9.00%, 4/15/09 28,303
173,094 9.00%, 6/15/09 190,132
2,656 9.00%, 8/15/11 3,002
62,301 9.00%, 1/15/17 71,165
7,063 9.00%, 8/20/19 7,889
6,970 9.00%, 6/20/21 7,782
9,447 9.00%, 12/20/21 10,548
67,851 9.00%, 2/20/27 74,963
14,107 9.25%, 5/15/10 15,984
201,120 9.25%, 10/15/11 228,471
13,223 9.50%, 11/15/05 13,726
20,925 9.50%, 2/15/11 23,853
55,537 9.50%, 5/20/16 61,962
7,618 9.50%, 5/20/18 8,514
56,465 9.50%, 7/20/18 63,105
20,308 9.50%, 7/20/18 22,696
541 9.50%, 4/15/20 607
6,110 9.50%, 11/15/21 6,858
-----------
Total mortgage pass-through securities 4,101,990
(cost: $4,021,552) -----------
TAXABLE MUNICIPAL SECURITIES (3.9%)(2)
20,000 Bernalillo Multifamily. Series 1998A,
7.50%, 9/20/20 22,290
CA Rural HMFA Single Family Mtg. Rev.:
133,365 Series 2002C, 6.75%, 3/1/24 142,621
106,000 Series 2003A, 5.25%, 12/1/24 107,291
150,000 Series 2004A, 5.375%, 6/1/29 153,283
95,000 Reeves Co. TX C.O.P., 7.25%, 6/1/11 96,827
66,878 Tobacco Settlement Series 2001A,
7.67%, 5/15/16 67,447
-----------
Total taxable municipal securities 589,759
-----------
(cost: $576,967)
CLOSED-END MUTUAL FUNDS (8.6%)(2)
9,925 American Select Portfolio 140,042
8,145 American Strategic Income Portfolio (I) 109,958
38,394 American Strategic Income Portfolio (II) 536,364
37,672 American Strategic Income Portfolio (III) 499,907
-----------
Total closed-end mutual funds 1,286,271
(cost: $1,128,649) -----------
SHORT-TERM SECURITIES (0.9%)(2)
39,534 Dreyfus Gov't Cash Mgmt. Fund, 0.90% 39,534
91,000 Sit Money Market Fund, 0.43%(6) 91,000
-----------
Total short-term securities 130,534
(cost: $130,534) -----------
Total investments in securities
(cost: $14,293,594)(7) $14,837,382
===========
See accompanying notes to portfolios of investments on page 60. 59
SIT MUTUAL FUNDS
MARCH 31, 2004
- --------------------------------------------------------------------------------
NOTES TO PORTFOLIOS OF INVESTMENTS
(1) Securities are valued by procedures described in note 1 to the financial
statements.
(2) Percentage figures indicate percentage of total net assets.
(3) At March 31, 2004, 5.0% of net assets in the U.S. Government Securities
Fund and 2.9% 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 March 31, 2004, 16.5% 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 March 31, 2004 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 $ 44,737,126 $ 281,022,105 $ 350,814,358
============= ============= =============
Unrealized appreciation (depreciation) on investments:
Gross unrealized appreciation -- $ 5,994,385 $ 10,120,921
Gross unrealized depreciation -- (537,660) (11,447,638)
------------- ------------- -------------
Net unrealized appreciation
(depreciation) -- $ 5,456,725 ($ 1,326,717)
============= ============= =============
MINNESOTA FLORIDA
TAX-FREE TAX-FREE
INCOME INCOME BOND
FUND FUND FUND
------------- ------------- -------------
Cost for federal income tax purposes $ 215,732,668 $ 2,602,489 $ 14,293,594
============= ============= =============
Unrealized appreciation (depreciation) on investments:
Gross unrealized appreciation $ 4,928,157 $ 11,371 $ 571,737
Gross unrealized depreciation (2,385,618) (3,397) (27,949)
------------- ------------- -------------
Net unrealized appreciation
(depreciation) $ 2,542,539 $ 7,974 $ 543,788
============= ============= =============
(8) These securities have been identified by the investment adviser as illiquid
securities. The aggregate value of these securities at March 31, 2004, is
$12,516,924 and $963,786 in the Tax-Free Income and Minnesota Tax-Free
Income Funds respectively, which represents 3.6% and 0.4% of the Fund's net
assets, respectively.
(9) Presently non-income producing securities. Items identified are in default
as to payment of interest.
(10) At March 31, 2004, the total cost of investments purchased on a when-issued
or forward-commitment basis was $2,609,896 for the Minnesota Tax-Free
Income Fund.
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This page has been intentionally left blank.
61
SIT MUTUAL FUNDS
MARCH 31, 2004
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
U.S.
MONEY GOVERNMENT TAX-FREE
MARKET SECURITIES INCOME
ASSETS FUND FUND FUND
------------ ------------ ------------
Investments in securities, at
identified cost ................ $ 44,737,126 $281,022,105 $350,814,358
============ ============ ============
Investments in securities, at
market value - see
accompanying schedules for
detail ......................... $ 44,737,126 $286,478,830 $349,487,641
Cash in bank on demand
deposit ........................ 33 -- --
Accrued interest and dividends
receivable ..................... -- 1,715,001 5,443,513
Receivable for investment
securities sold ................ -- -- 1,624,680
Receivable for principal
paydowns ....................... -- 230,879 --
Other
receivables .................... -- -- --
Receivable for Fund shares
sold ........................... -- 157,407 153,658
------------ ------------ ------------
Total assets ............ 44,737,159 288,582,117 356,709,492
------------ ------------ ------------
LIABILITIES
Disbursements in excess of
cash balances .................. -- -- --
Payable for investment securities
purchased - when issued (note 1) -- -- --
Payable for investment securities
purchased ...................... -- -- 2,823,877
Payable for Fund shares
redeemed ....................... 82,741 36,499 246,677
Cash portion of dividends
payable to shareholders ........ 23,311 905,893 1,115,514
Other
payables ....................... -- 2,221 10,646
Accrued investment management
and advisory services fee ...... 21,132 195,873 231,720
------------ ------------ ------------
Total liabilities ....... 127,184 1,140,486 4,428,434
------------ ------------ ------------
Net assets applicable to
outstanding capital stock ...... $ 44,609,975 $287,441,631 $352,281,058
============ ============ ============
Capital Stock Par .............. $ 0.001 $ 0.01 $ 0.001
Authorized shares (000's) ...... 10,000,000 10,000,000 10,000,000
Outstanding shares ............. 44,613,060 26,628,683 35,584,890
============ ============ ============
Net asset value per share of
outstanding capital stock ...... $ 1.00 $ 10.79 $ 9.90
============ ============ ============
62
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MINNESOTA FLORIDA
TAX-FREE TAX-FREE
INCOME INCOME BOND
FUND FUND FUND
------------ ------------ ------------
$215,732,668 $ 2,602,489 $ 14,293,594
============ ============ ============
$218,275,207 $ 2,610,463 $ 14,837,382
-- 20,505 604
3,424,965 51,779 152,971
2,915,363 -- --
-- -- 2,715
1,269 -- --
56,300 -- 838
------------ ------------ ------------
224,673,104 2,682,747 14,994,510
------------ ------------ ------------
------------ ------------ ------------
2,609,896 -- --
3,331,611 26,922 --
3,888 -- 1,038
806,287 6,253 59,615
-- -- 191
148,271 1,799 10,218
------------ ------------ ------------
6,899,953 34,974 71,062
------------ ------------ ------------
$217,773,151 $ 2,647,773 $ 14,923,448
============ ============ ============
$ 0.001 $ 0.001 $ 0.001
10,000,000 10,000,000 10,000,000
21,223,101 263,560 1,482,180
============ ============ ============
$ 10.26 $ 10.05 $ 10.07
============ ============ ============
See accompanying notes to financial statements on pages 68 - 72. 63
SIT MUTUAL FUNDS
ONE YEAR ENDED MARCH 31, 2004
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
U.S.
MONEY GOVERNMENT TAX-FREE
MARKET SECURITIES INCOME
ASSETS FUND FUND FUND
------------ ------------ ------------
INVESTMENT INCOME:
INCOME:
Interest $ 666,803 $ 11,087,930 $ 18,981,418
------------ ------------ ------------
Total income 666,803 11,087,930 18,981,418
------------ ------------ ------------
EXPENSES (NOTE 3):
Investment management and
advisory services fee 462,406 2,801,849 3,036,296
Less fees and expenses absorbed
by investment adviser (160,167) (100,000) (129,537)
------------ ------------ ------------
Total net expenses 302,239 2,701,849 2,906,759
------------ ------------ ------------
Net investment income 364,564 8,386,081 16,074,659
------------ ------------ ------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net realized gain (loss) -- (1,912,803) (5,180,250)
Net change in unrealized appreciation
(or depreciation) on investments
-- (443,196) 3,234,491
------------ ------------ ------------
Net gain (loss) on investments -- (2,355,999) (1,945,759)
------------ ------------ ------------
Net increase (decrease) in net assets resulting
from operations $ 364,564 $ 6,030,082 $ 14,128,900
============ ============ ============
(*) Period from commencement of operations, December 31, 2003
64
- --------------------------------------------------------------------------[LOGO]
MINNESOTA FLORIDA
TAX-FREE TAX-FREE
INCOME INCOME BOND
FUND FUND(*) FUND
------------ ------------ ------------
$ 11,335,791 $ 18,064 $ 957,808
------------ ------------ ------------
11,335,791 18,064 957,808
------------ ------------ ------------
1,716,463 4,386 140,648
------------ ------------ ------------
1,716,463 4,386 140,648
------------ ------------ ------------
9,619,328 13,678 817,160
------------ ------------ ------------
(566,405) 249 106,213
1,430,127 7,974 177,221
------------ ------------ ------------
863,722 8,223 283,434
------------ ------------ ------------
$ 10,483,050 $ 21,901 $ 1,100,594
============ ============ ============
See accompanying notes to financial statements on pages 68 - 72. 65
SIT MUTUAL FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
MONEY
MARKET U.S. GOVERNMENT
FUND SECURITIES FUND
---------------------------------- ----------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
MARCH 31, MARCH 31, MARCH 31, MARCH 31,
2004 2003 2004 2003
------------- ------------- ------------- -------------
OPERATIONS:
Net investment income ............................ $ 364,564 $ 827,964 $ 8,386,081 $ 12,773,972
Net realized gain (loss) on investments .......... -- -- (1,912,803) 191,850
Net change in unrealized appreciation
(depreciation) of investments .................. -- -- (443,196) 2,579,600
------------- ------------- ------------- -------------
Net increase (decrease) in net assets resulting
from operations ........................... 364,564 827,964 6,030,082 15,545,422
------------- ------------- ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ............................ (364,564) (827,964) (8,386,081) (12,773,972)
Net realized gains on investments ................ -- -- -- --
------------- ------------- ------------- -------------
Total distributions ........................... (364,564) (827,964) (8,386,081) (12,773,972)
------------- ------------- ------------- -------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold ........................ 293,752,413 455,807,319 138,253,374 375,452,226
Reinvested distributions ......................... 253,263 560,232 7,544,075 11,592,130
Payments for shares redeemed ..................... (323,238,848) (476,309,083) (264,839,538) (192,923,331)
------------- ------------- ------------- -------------
Increase (decrease) in net assets from
capital share transactions .................. (29,233,172) (19,941,532) (119,042,089) 194,121,025
------------- ------------- ------------- -------------
Total increase (decrease) in net assets .... (29,233,172) (19,941,532) (121,398,088) 196,892,475
NET ASSETS
Beginning of period .............................. 73,843,147 93,784,679 408,839,719 211,947,244
------------- ------------- ------------- -------------
End of period .................................... $ 44,609,975 $ 73,843,147 $ 287,441,631 $ 408,839,719
============= ============= ============= =============
NET ASSETS CONSIST OF:
Capital (par value and paid-in surplus) .......... $ 44,609,975 $ 73,843,147 $ 286,424,977 $ 405,467,066
Undistributed (distributions in excess of) net
investment income .............................. -- -- -- --
Accumulated net realized gain (loss) from
security transactions .......................... -- -- (4,440,071) (2,527,268)
Unrealized appreciation (depreciation)
on investments ................................. -- -- 5,456,725 5,899,921
------------- ------------- ------------- -------------
$ 44,609,975 $ 73,843,147 $ 287,441,631 $ 408,839,719
============= ============= ============= =============
CAPITAL TRANSACTIONS IN SHARES:
Sold ............................................. 293,752,412 455,807,360 12,864,871 34,677,651
Reinvested distributions ......................... 253,263 560,232 702,008 1,071,578
Redeemed ......................................... (323,238,848) (476,309,083) (24,694,458) (17,827,236)
------------- ------------- ------------- -------------
Net increase (decrease) ............................. (29,233,173) (19,941,491) (11,127,579) 17,921,993
============= ============= ============= =============
66
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TAX-FREE MINNESOTA TAX-FREE FLORIDA TAX-FREE BOND
INCOME FUND INCOME FUND INCOME FUND FUND
- ------------------------------ ------------------------------ ---------------------------- -------------------------------
THREE MONTHS
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED ENDED YEAR ENDED YEAR ENDED YEAR ENDED
MARCH 31, MARCH 31, MARCH 31, MARCH 31, MARCH 31, MARCH 31, MARCH 31, MARCH 31,
2004 2003 2004 2003 2004 2003 2004 2003
- ------------- ------------- ------------- ------------- ------------- ----------- ------------- -------------
$ 16,074,659 $ 19,371,555 $ 9,619,328 $ 9,589,605 $ 13,678 -- $ 817,160 $ 923,071
(5,180,250) 881,329 (566,405) (997,718) 249 -- 106,213 88,365
3,234,491 4,490,386 1,430,127 5,502,200 7,974 -- 177,221 251,470
- ------------- ------------- ------------- ------------- ------------- ----------- ------------- -------------
14,128,900 24,743,270 10,483,050 14,094,087 21,901 -- 1,100,594 1,262,906
- ------------- ------------- ------------- ------------- ------------- ----------- ------------- -------------
(16,074,659) (19,371,555) (9,619,328) (9,589,605) (13,678) -- (817,160) (923,005)
-- -- -- -- -- -- -- --
- ------------- ------------- ------------- ------------- ------------- ----------- ------------- -------------
(16,074,659) (19,371,555) (9,619,328) (9,589,605) (13,678) -- (817,160) (923,005)
- ------------- ------------- ------------- ------------- ------------- ----------- ------------- -------------
78,962,625 122,526,104 61,673,832 77,074,420 2,632,125 -- 4,564,417 12,874,720
13,966,051 16,287,715 7,727,688 7,783,102 7,425 -- 801,760 867,206
(153,120,558) (170,198,305) (71,860,224) (65,269,259) -- -- (10,423,529) (9,121,542)
- ------------- ------------- ------------- ------------- ------------- ----------- ------------- -------------
(60,191,882) (31,384,486) (2,458,704) 19,588,263 2,639,550 -- (5,057,352) 4,620,384
- ------------- ------------- ------------- ------------- ------------- ----------- ------------- -------------
(62,137,641) (26,012,771) (1,594,982) 24,092,745 2,647,773 -- (4,773,918) 4,960,285
414,418,699 440,431,470 219,368,133 195,275,388 -- -- 19,697,366 14,737,081
- ------------- ------------- ------------- ------------- ------------- ----------- ------------- -------------
$ 352,281,058 $ 414,418,699 $ 217,773,151 $ 219,368,133 $ 2,647,773 -- $ 14,923,448 $ 19,697,366
============= ============= ============= ============= ============= =========== ============= =============
$ 383,433,584 $ 443,625,466 $ 222,359,281 $ 224,853,762 $ 2,639,550 -- $ 14,688,844 $ 19,746,196
-- -- -- -- -- -- -- --
(29,825,809) (24,645,559) (7,128,669) (6,598,041) 249 -- (309,184) (415,397)
(1,326,717) (4,561,208) 2,542,539 1,112,412 7,974 -- 543,788 366,567
- ------------- ------------- ------------- ------------- ------------- ----------- ------------- -------------
$ 352,281,058 $ 414,418,699 $ 217,773,151 $ 219,368,133 $ 2,647,773 -- $ 14,923,448 $ 19,697,366
============= ============= ============= ============= ============= =========== ============= =============
8,012,221 12,327,611 6,042,923 7,586,422 262,821 -- 460,510 1,305,543
1,414,778 1,637,735 757,985 766,203 739 -- 80,921 87,771
(15,522,405) (17,112,887) (7,049,298) (6,428,863) -- -- (1,051,186) (923,618)
- ------------- ------------- ------------- ------------- ------------- ----------- ------------- -------------
(6,095,406) (3,147,541) (248,390) 1,923,762 263,560 -- (509,755) 469,696
============= ============= ============= ============= ============= =========== ============= =============
See accompanying notes to financial statements on pages 68 - 72. 67
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 and Florida Tax-Free Income Funds which are
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. The Sit
Florida Tax-Free Income Fund is a series fund of Sit Mutual Funds Trust.
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 income
Tax-Free Income tax and Minnesota regular personal income tax,
consistent with the preservation of capital.
---------------------------------------------------------------------------
Florida High current income that is exempt from federal regular
Tax-Free Income income tax by investing in securities that are exempt
from the Florida intangibles tax.
---------------------------------------------------------------------------
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.
68
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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. As of March 31, 2004, the Minnesota Tax-Free Income
Fund had entered into when-issued or forward commitments of $2,609,896.
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.
The Florida Tax-Free Income Fund concentrates its investments in Florida,
and therefore may have more credit risk related to the economic conditions
in the state of Florida 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, 2004:
Long Term
Ordinary Income Capital Gain Total
--------------- ------------ -----------
Money Market $364,564 ----- $364,564
U.S. Government Securities $8,386,081 ----- $8,386,081
Tax-Free Income (*) $16,074,659 ----- $16,074,659
MN Tax-Free Income (*) $9,619,328 ----- $9,619,328
FL Tax-Free Income (*) $13,678 ----- $13,678
Bond $817,160 ----- $817,160
(*) 100% of dividends were derived from interest on tax-exempt securities.
69
SIT MUTUAL FUNDS
- --------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED MARCH 31, 2003:
Long Term
Ordinary Income 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
FL Tax-Free Income (*) N/A ----- N/A
Bond $923,005 ----- $923,005
(*) 100% of dividends were derived from interest on tax-exempt securities.
As of March 31, 2004, the components of distributable earnings on a tax
basis were as follows:
Unrealized
Undistributed Accumulated Appreciation
Ordinary Income Gain (Loss) (Depreciation)
--------------- ----------- --------------
Money Market $23,311 ----- -----
U.S. Government Securities 905,893 ($4,440,071) $5,456,725
Tax-Free Income 1,115,514 (29,825,809) (1,326,717)
MN Tax-Free Income 806,287 (7,128,669) 2,542,539
FL Tax-Free Income 6,253 249 7,974
Bond 59,615 (309,184) 543,788
Accumulated net realized gains (losses) from the Statement of Changes in
Net Assets have been increased (decreased) by permanent book-to-tax
differences resulting in reclassification of additional paid-in-capital as
follows:
Accumulated Net Additional
Realized Gains (Losses) Paid-In-Capital
----------------------- ---------------
MN Tax-Free Income $35,777 ($35,777)
As of March 31, 2004, 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 $4,440,071 2007
Tax-Free Income $29,825,809 2008
MN Tax-Free Income $7,128,669 2008
Bond $309,184 2008
DISTRIBUTIONS
Distributions to shareholders are recorded as of the close of business on
the record date. Such distributions are payable in cash or reinvested in
additional shares of the Funds' capital stock. Distributions from net
investment income are declared daily and paid monthly for the Funds.
Distributions from net realized gains, if any, will be made annually for
each of the Funds.
70
- --------------------------------------------------------------------------[LOGO]
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make certain estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the
reported results. Actual results could differ from those estimates.
PROXY VOTING POLICIES AND PROCEDURES
Each Fund follows certain policies and procedures for voting proxies for
securities held in each portfolio. A description of the Funds' proxy voting
policies and procedures is available without charge, upon request, by
calling 1-800-332-5580.
Beginning in August, 2004, each Fund will file its proxy voting record with
the SEC and that record will be available on the SEC's website and from the
Fund.
(2) INVESTMENT SECURITY TRANSACTIONS
Purchases of and proceeds from sales and maturities of investment
securities, other than short-term securities, for the period ended March
31, 2004, were as follows:
Purchases ($) Proceeds ($)
------------- ------------
U.S. Government Securities Fund 198,373,455 314,354,417
Tax-Free Income Fund 119,924,037 178,821,438
Minnesota Tax-Free Income Fund 75,337,785 54,963,113
Florida Tax-Free Income Fund 2,688,646 78,875
Bond Fund 11,863,325 15,890,495
For the Money Market Fund during the period ended March 31, 2004 purchases
of and proceeds from sales and maturities of investment securities
aggregated $981,574,157 and $1,011,332,000, 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 the Funds' expenses (excluding extraordinary
expenses, stock transfer taxes, interest, brokerage commissions, and other
transaction charges relating to investing activities). The fee for
investment management and advisory services is based on the average daily
net assets of the Funds at the annual rate of:
Average Daily
Net Assets
-------------
Bond Fund .80%
Tax-Free Income Fund .80%
Minnesota Tax-Free Income Fund .80%
Florida Tax-Free Income Fund .80%
71
SIT MUTUAL FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
First Over
$50 Million $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 March 31, 2004, the Bond Fund had invested $91,000 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 March 31,
2004:
Shares % Outstanding
---------- -------------
Money Market Fund 11,966,811 26.8
U.S. Government Securities Fund 302,147 1.1
Tax-Free Income Fund 2,171,039 6.1
Minnesota Tax-Free Income Fund 1,088,258 5.1
Florida Tax-Free Income Fund 207,061 78.6
Bond Fund 140,765 9.5
(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 73 through 78.
72
SIT MONEY MARKET FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Years Ended March 31,
------------------------------------------------------------
2004 2003 2002 2001 2000
===================================================================================================================
NET ASSET VALUE:
Beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income 0.01 0.01 0.03 0.06 0.05
- -------------------------------------------------------------------------------------------------------------------
Total from operations 0.01 0.01 0.03 0.06 0.05
- -------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (0.01) (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) 0.60% 1.13% 2.63% 6.00% 5.05%
- -------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000's omitted) $ 44,610 $ 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 0.60%(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) 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 years ended March 31, 2004, 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 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 .34%, .90%, 2.45%, 5.71%, and
4.84%, respectively.
73
SIT U.S. GOVERNMENT SECURITIES FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Years Ended March 31,
------------------------------------------------------------
2004 2003 2002 2001 2000
==========================================================================================================================
NET ASSET VALUE:
Beginning of period $ 10.83 $ 10.69 $ 10.59 $ 10.22 $ 10.51
- --------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income .27 .45 .58 .65 .59
Net realized and unrealized gains
(losses) on investments (.04) .14 .10 .37 (.29)
- --------------------------------------------------------------------------------------------------------------------------
Total from operations .23 .59 .68 1.02 .30
- --------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (.27) (.45) (.58) (.65) (.59)
From realized gains -- -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------
Total Distributions (.27) (.45) (.58) (.65) (.59)
- --------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE:
End of period $ 10.79 $ 10.83 $ 10.69 $ 10.59 $ 10.22
- --------------------------------------------------------------------------------------------------------------------------
Total investment return(1) 2.19% 5.60% 6.53% 10.34% 2.92%
- --------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000's omitted) $287,442 $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 2.48%(2) 3.98%(2) 5.40%(2) 6.30%(2) 5.66%(2)
Portfolio turnover rate (excluding short-term securities) 61.99% 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) 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 years ended March 31, 2004, 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 2.45%, 3.95%, 5.35%, 6.23%, and 5.60%,
respectively.
74
SIT TAX-FREE INCOME FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Years Ended March 31,
------------------------------------------------------------
2004 2003 2002 2001 2000
==========================================================================================================================
NET ASSET VALUE:
Beginning of period $ 9.94 $ 9.82 $ 9.90 $ 9.57 $ 10.39
- --------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income .42 .45 .48 .51 .51
Net realized and unrealized gains
(losses) on investments (.04) .12 (.08) .33 (.82)
- --------------------------------------------------------------------------------------------------------------------------
Total from operations .38 .57 .40 .84 (.31)
- --------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (.42) (.45) (.48) (.51) (.51)
From realized gains -- -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------
Total distributions (.42) (.45) (.48) (.51) (.51)
- --------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE:
End of period $ 9.90 $ 9.94 $ 9.82 $ 9.90 $ 9.57
- --------------------------------------------------------------------------------------------------------------------------
Total investment return(1) 3.89% 5.90% 4.05% 9.02% (2.98%)
- --------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000's omitted) $352,281 $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 4.23%(2) 4.53%(2) 4.79%(2) 5.27%(2) 5.15%(2)
Portfolio turnover rate (excluding short-term securities) 32.33% 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) Total Fund expenses are contractually limited to .80% of average daily net
assets. However, during the years ended March 31, 2004, 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 4.19%, 4.49%, 4.74%, 5.21%, and 5.05%, respectively.
75
SIT MINNESOTA TAX-FREE INCOME FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Years Ended March 31,
------------------------------------------------------------
2004 2003 2002 2001 2000
==========================================================================================================================
NET ASSET VALUE:
Beginning of period $ 10.22 $ 9.99 $ 10.01 $ 9.73 $ 10.55
- --------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income .46 .47 .49 .52 .52
Net realized and unrealized gains
(losses) on investments .04 .23 (.02) .28 (.82)
- --------------------------------------------------------------------------------------------------------------------------
Total from operations .50 .70 .47 .80 (.30)
- --------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (.46) (.47) (.49) (.52) (.52)
- --------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE:
End of period $ 10.26 $ 10.22 $ 9.99 $ 10.01 $ 9.73
- --------------------------------------------------------------------------------------------------------------------------
Total investment return(1) 4.99% 7.14% 4.74% 8.43% (2.84%)
- --------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000's omitted) $217,773 $219,368 $195,275 $181,182 $172,905
RATIOS:
Expenses to average daily net assets 0.80% 0.80% 0.80% 0.80% 0.80%
Net investment income to average daily net assets 4.47% 4.62% 4.87% 5.27% 5.16%
Portfolio turnover rate (excluding short-term securities) 27.31% 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.
76
SIT FLORIDA TAX-FREE INCOME FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Three months
ended
March 31,
2004
--------------
=============================================================================
NET ASSET VALUE:
Beginning of period $10.00
- -----------------------------------------------------------------------------
OPERATIONS:
Net investment income .06
Net realized and unrealized gains
(losses) on investments .05
- -----------------------------------------------------------------------------
Total from operations .11
- -----------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (.06)
- -----------------------------------------------------------------------------
NET ASSET VALUE:
End of period $10.05
- -----------------------------------------------------------------------------
Total investment return (1) 1.08%
- -----------------------------------------------------------------------------
Net assets at end of period (000's omitted) $2,648
RATIOS:
Expenses to average daily net assets 0.80%(2)
Net investment income to average daily net assets 2.49%(2)
Portfolio turnover rate (excluding short-term securities) 3.45%
- ---------
(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.
77
SIT BOND FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Years Ended March 31,
------------------------------------------------------------
2004 2003 2002 2001 2000
- --------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE:
Beginning of period $ 9.89 $ 9.68 $ 9.80 $ 9.43 $ 9.95
- --------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income .46 .53 .62 .64 .58
Net realized and unrealized gains
(losses) on investments .18 .21 (.12) .37 (.50)
- --------------------------------------------------------------------------------------------------------------------------
Total from operations .64 .74 .50 1.01 .08
- --------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (.46) (.53) (.62) (.64) (.58)
From realized gains -- -- -- -- (.02)
- --------------------------------------------------------------------------------------------------------------------------
Total distributions (.46) (.53) (.62) (.64) (.60)
- --------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE:
End of period $ 10.07 $ 9.89 $9.68 $ 9.80 $ 9.43
- --------------------------------------------------------------------------------------------------------------------------
Total investment return(1) 6.66% 7.74% 5.18% 11.18% 0.93%
- --------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000's omitted) $ 14,923 $ 19,697 $14,737 $ 13,281 $ 12,162
RATIOS:
Expenses to average daily net assets 0.80% 0.80% 0.80% 0.80% 0.80%
Net investment income to average daily net assets 4.64% 5.30% 6.34% 6.79% 6.06%
Portfolio turnover rate (excluding short-term securities) 70.43% 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.
78
SIT MUTUAL FUNDS
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS REPORT
The Board of Directors and Shareholders
Sit Money Market Fund, Inc.
Sit U.S. Government Securities Fund, Inc.
Sit Mutual Funds II, Inc.
Sit Mutual Funds Trust:
We have audited the accompanying statements of assets and liabilities, including
the schedules of investments, of Sit Money Market Fund, Inc., Sit U.S.
Government Securities Fund, Inc., Sit Bond Fund (a series of Sit Mutual Funds
II, Inc.), Sit Tax-Free Income Fund (a series of Sit Mutual Funds II, Inc.), Sit
Minnesota Tax-Free Income Fund (a series of Sit Mutual Funds II, Inc.), and Sit
Florida Tax-Free Income Fund (a series of Sit Mutual Funds Trust), as of March
31, 2004, and the related statements of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the five years in the period
then ended. These financial statements and financial highlights are the
responsibility of the Funds' management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of March 31, 2004, by correspondence with the custodian or
by other appropriate auditing procedures. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Sit
Money Market Fund, Sit U.S. Government Securities Fund, Sit Bond Fund, Sit
Tax-Free Income Fund, Sit Minnesota Tax-Free Income Fund, and Sit Florida
Tax-Free Income Fund as of March 31, 2004, and the results of their operations
for the year then ended, the changes in their net assets for each of the two
years in the period then ended, and their financial highlights for each of the
five years in the period then ended, in conformity with accounting principles
generally accepted in the United States of America.
KPMG LLP
May 7, 2004
79
SIT MUTUAL FUNDS
- --------------------------------------------------------------------------------
RESULTS OF SHAREHOLDER MEETING
The annual meeting of the shareholders of the Funds was held on October 20,
2003. Directors elected by the shareholders were as follows: Eugene C. Sit,
William E. Frenzel, John E. Hulse, Sidney L. Jones, Bruce C. Lueck, and Donald
W. Phillips. The matters voted on by the shareholders of record as of August 21,
2003 and results of the shareholders' vote at the October 20, 2003 meeting were
as follows:
PROPOSAL ONE: ELECTION OF DIRECTORS
=================================================================================================================================
SIT JONES FRENZEL LUECK
-------------- -------------- -------------- --------------
US GOVERNMENT SECURITIES
For 26,249,380.672 26,454,450.054 26,210,703.305 26,438,895.148
Against 472,228.349 267,158.967 510,905.716 282,713.873
Abstain 0.000 0.000 0.000 0.000
TAX-FREE INCOME
For 28,128,126.860 28,184,773.804 28,081,071.378 28,210,184.583
Against 361,466.781 304,819.837 408,522.263 279,409.058
Abstain 0.000 0.000 0.000 0.000
MONEY MARKET
For 47,556,740.734 47,551,270.254 47,546,946.954 47,556,740.734
Against 154,976.090 160,446.570 164,769.870 154,976.090
Abstain 0.000 0.000 0.000 0.000
MN TAX-FREE INCOME
For 13,528,412.960 13,671,963.666 13,488,388.755 13,680,571.686
Against 239,087.801 95,537.095 279,112.006 86,929.075
Abstain 0.000 0.000 0.000 0.000
BOND
For 1,088,343.294 1,088,343.294 1,088,343.294 1,088,343.294
Against 9,618.930 9,618.930 9,618.930 9,618.930
Abstain 0.000 0.000 0.000 0.000
80
- --------------------------------------------------------------------------[LOGO]
PROPOSAL TWO: RATIFY KPMG LLP AS THE FUNDS' AUDITORS
=========================================== =============================================================
HULSE PHILLIPS
-------------- --------------
US GOVERNMENT SECURITIES
26,415,668.884 26,473,702.606 For 26,209,141.860
305,940.137 247,906.415 Against 163,256.479
0.000 0.000 Abstain 349,210.682
TAX-FREE INCOME
28,113,449.413 28,128,673.768 For 27,913,534.695
376,144.228 360,919.873 Against 276,719.629
0.000 0.000 Abstain 299,339.317
MONEY MARKET
47,556,740.734 47,556,740.734 For 47,589,019.174
154,976.090 154,976.090 Against 116,077.910
0.000 0.000 Abstain 6,619.740
MN TAX-FREE INCOME
13,671,963.666 13,677,194.340 For 13,500,575.224
95,537.095 90,306.417 Against 72,021.326
0.000 0.000 Abstain 194,904.211
BOND
1,088,343.294 1,088,343.294 For 1,095,171.792
9,618.930 9,618.930 Against 2,790.432
0.000 0.000 Abstain 0.000
81
SIT MUTUAL FUNDS
- --------------------------------------------------------------------------------
INFORMATION ABOUT DIRECTORS AND OFFICERS
The Sit Mutual Funds are a family of 14 no-load mutual funds. The six Bond Funds
described in this Bond Funds Annual Report are the Sit Money Market Fund, Sit
U.S. Government Securities Fund, Sit Tax-Free Income Fund, Sit Minnesota
Tax-Free Income Fund, Sit Florida Tax-Free Income Fund, and the Sit Bond Fund
(the "Funds" or individually, a "Fund"). The eight stock funds within the Sit
Mutual Fund family are described in a Stock Funds Statement of Additional
Information (SAI). The Sit Money Market Fund, Sit U.S. Government Securities
Fund, the corporate issuer of the Sit Florida Tax-Free Income 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 business
address, unless otherwise noted below, is that of the Funds' investment adviser
- - 4600 Wells Fargo Center, 90 South Seventh Street, Minneapolis, Minnesota
55402. The Boards have a separate Audit Committee. The Bond Funds SAI has
additional information about the fund's 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 DIRECTORSHIPS
ADDRESS HELD WITH AND LENGTH OF DURING PAST OVERSEEN BY HELD BY
AND AGE THE FUNDS TIME SERVED FIVE YEARS DIRECTOR DIRECTOR(4)
------------------- ------------------ ------------------ ------------------ ------------------ -----------------
INTERESTED DIRECTORS:
-------------------------------------- ------------------ ------------------ ------------------ -----------------
Eugene C. Sit(2) Director and Director since Chairman, CEO 14 None.
Age: 65 Chairman inception. and CIO of Sit
Investment
Associates, Inc.
(the "Adviser")
and Sit/Kim
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. Director Director since Guest Scholar at 14 None.
Frenzel(2) 1991 or the The Brookings
Age: 75 Fund's inception Institution and
if later. member of
several
government
policy
committees,
foundations and
organizations;
Advisory
Director of the
Adviser;
Director of
Sit/Kim and SF.
------------------- ------------------ ------------------ ------------------ ------------------ -----------------
82
------------------- ------------------ ------------------ ------------------ ------------------ -----------------
NUMBER OF
PRINCIPAL FUNDS IN OTHER
NAME, POSITION TERM OF OFFICE(1) OCCUPATIONS FUND COMPLEX DIRECTORSHIPS
ADDRESS HELD WITH AND LENGTH OF DURING PAST OVERSEEN BY HELD BY
AND AGE THE FUNDS TIME SERVED FIVE YEARS DIRECTOR DIRECTOR(4)
------------------- ------------------ ------------------ ------------------ ------------------ -----------------
INDEPENDENT DIRECTORS:
-------------------------------------- ------------------ ------------------ ------------------ -----------------
John E. Hulse Director Director since Trustee, Pacific 14 None.
Age: 70 1995. Gas & Electric
Nuclear
Decommissioning
Master Trust.
------------------- ------------------ ------------------ ------------------ ------------------ -----------------
Sidney L. Jones Director Director from Lecturer, 14 None.
Age: 70 1988 to 1989 and Washington
from 1993 or the Campus
Fund's inception Consortium of 17
if later. Universities;
Senior Advisor
to Lawrence and
Company,
Toronto, Canada.
------------------- ------------------ ------------------ ------------------ ------------------ -----------------
Bruce C. Lueck Director Director since President & CIO, 14 None.
Age: 63 2004. Okabena
Investment
Services, Inc.
from 1985 to
2003; Board
Member, Okabena
Company from
1985 to 2003:
Board Member,
Zephyr
Management,
L.P., from 1995
to present.
------------------- ------------------ ------------------ ------------------ ------------------ -----------------
Donald W. Phillips Director Director of the CEO and CIO of 14 None.
Age: 55 International WestLB Asset
Fund since 1993, Management (USA)
and since 1990 LLC, 4/00 to
or the Fund's present;
inception if President of
later for all Forstmann-Leff
other Funds. International,
Inc. (an investment
adviser) from 1997 to
4/00.
------------------- ------------------ ------------------ ------------------ ------------------ -----------------
Melvin C. Bahle Director Emeritus Director Director and/or 14 None.
Age: 84 Emeritus officer of
since 1995. several
foundations and
charitable
organizations.
------------------- ------------------ ------------------ ------------------ ------------------ -----------------
OFFICERS:
------------------- ------------------ ------------------ ------------------ ------------------ -----------------
Peter L. Vice Chairman Re-Elected by Director and N/A N/A
Mitchelson the Boards President of the
Age: 62 annually; Adviser;
Officer since Director and
inception. Executive Vice
President of Sit/Kim;
Director of the
Distributor; and Vice
Chairman of SF.
Director of the Sit
Funds through
4/30/02.
------------------- ------------------ ------------------ ------------------ ------------------ -----------------
83
SIT MUTUAL FUNDS
- --------------------------------------------------------------------------------
INFORMATION ABOUT DIRECTORS AND OFFICERS (CONTINUED)
------------------- ------------------ ------------------ ------------------ ------------------ -----------------
NUMBER OF
PRINCIPAL FUNDS IN OTHER
NAME, POSITION TERM OF OFFICE(1) OCCUPATIONS FUND COMPLEX DIRECTORSHIPS
ADDRESS HELD WITH AND LENGTH OF DURING PAST OVERSEEN BY HELD BY
AND AGE THE FUNDS TIME SERVED FIVE YEARS DIRECTOR DIRECTOR(4)
------------------- ------------------ ------------------ ------------------ ------------------ -----------------
OFFICERS (CONTINUED):
-------------------------------------- ------------------ ------------------ ------------------ -----------------
Roger J. Sit(3) Executive Vice Re-Elected by Executive Vice N/A N/A
Age: 42 President the Boards President -
annually; Research and
Officer since Investment
1998. Management of
the Adviser;
Director,
President, COO,
and Deputy CIO
of Sit/Kim.
------------------- ------------------ ------------------ ------------------ ------------------ -----------------
Michael C. Brilley Senior Vice Re-Elected by Senior Vice N/A N/A
Age: 58 President the Boards President and
annually; Senior Fixed
Officer since Income Officer
1985. of the Adviser;
Director and
President and
Chief Fixed
Income Officer
of SF.
------------------- ------------------ ------------------ ------------------ ------------------ -----------------
G. Todd Berkley Chief Operating Re-Elected by COO of the N/A N/A
Age: 42 Officer the Boards Funds; Sr. Vice
annually; President, US
Officer since Bancorp 12/00 to
2002. 2/01; Vice
President, US
Bank 5/95 to
12/99.
------------------- ------------------ ------------------ ------------------ ------------------ -----------------
Debra A. Sit(3) Vice President, Re-Elected by Vice President - N/A N/A
Age: 43 Investments the Boards Bond Investments
annually; of the Adviser;
Officer since Assistant
1994. Treasurer and
Assistant 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
Age: 40 Investments. Boards annually; Fixed Income
U.S. Government Officer since Portfolio Manager
and Bond Funds 2002. of SF.
only.
------------------- ------------------ ------------------ ------------------ ------------------ -----------------
Bryce A. Doty Vice President - Re-Elected by the Vice President and N/A N/A
Age: 37 Investments. Boards annually; Fixed Income
U.S. Government Officer since Portfolio Manager
and Bond Funds 1996. of SF.
only.
------------------- ------------------ ------------------ ------------------ ------------------ -----------------
84
- --------------------------------------------------------------------------[LOGO]
------------------- ------------------ ------------------ ------------------ ------------------ -----------------
NUMBER OF
PRINCIPAL FUNDS IN OTHER
NAME, POSITION TERM OF OFFICE(1) OCCUPATIONS FUND COMPLEX DIRECTORSHIPS
ADDRESS HELD WITH AND LENGTH OF DURING PAST OVERSEEN BY HELD BY
AND AGE THE FUNDS TIME SERVED FIVE YEARS DIRECTOR DIRECTOR(4)
------------------- ------------------ ------------------ ------------------ ------------------ -----------------
OFFICERS (CONTINUED):
------------------- ------------------ ------------------ ------------------ ------------------ -----------------
Paul J. Junquist VicePresident - Re-Elected by Vice President N/A N/A
Age: 42 Investments. the Boards and Fixed Income
Money Market, MN annually; Portfolio
Tax-Free Income, Officer since Manager of SF.
and FL Tax-Free 1996.
Income Funds
only.
------------------- ------------------ ------------------ ------------------ ------------------ -----------------
Michael P. Eckert Vice President - Re-Elected by Mutual Fund N/A N/A
Age: 48 Institutional the Boards Institutional
Client Group. annually; Client Group of
Officer since Adviser
1989.
------------------- ------------------ ------------------ ------------------ ------------------ -----------------
Paul E. Rasmussen Vice President Re-Elected by Vice President, N/A N/A
Age: 43 and Treasurer the Boards Secretary,
annually; Controller and
Officer since Chief Compliance
1994. Officer of the
Adviser; Vice
President, Secretary,
and Chief Compliance
Officer of Sit/Kim
and SF; Presi-dent of
the Distributor.
------------------- ------------------ ------------------ ------------------ ------------------ -----------------
Michael J. Radmer Secretary Re-Elected by Partner of the N/A N/A
Age: 59 the Boards Funds' general
annually; counsel, Dorsey
Officer since & Whitney, LLP
1984.
------------------- ------------------ ------------------ ------------------ ------------------ -----------------
Carla J. Rose Vice President, Re-Elected by Vice President, N/A N/A
Age: 37 Assistant the Boards Administration
Secretary & annually; and Deputy
Assistant Officer since Controller of
Treasurer 2000. the Adviser;
Vice President,
Administration and
Controller of
Sit/Kim; Controller
and Treasurer of SF.
------------------- ------------------ ------------------ ------------------ ------------------ -----------------
Kelly K. Boston Assistant Re-Elected by Staff Attorney N/A N/A
Age: 35 Secretary & the Boards of the Adviser.
Assistant annually;
Treasurer Officer since
2000.
------------------- ------------------ ------------------ ------------------ ------------------ -----------------
(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 an advisory 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.
85
FEDERAL TAX INFORMATION
- --------------------------------------------------------------------------------
We are required by Federal tax regulations to provide shareholders with certain
information regarding dividend distrituions on an annual fiscal year basis. The
figures are for informational purposes only and should not be used for reporting
to federal or state revenue agencies. All necessary tax information will be
mailed in January each year.
LONG-TERM LONG-TERM
ORDINARY CAPITAL ORDINARY CAPITAL
FUND AND PAYABLE DATE INCOME (A) GAIN (B) FUND AND PAYABLE DATE INCOME (A) GAIN (B)
- -------------------------- ------------ ------------ ------------------------------ ------------- ------------
Money Market Fund U.S. Government Securities Fund
April 30, 2003 $0.00061 $ ---- April 30, 2003 $0.02484 $ ----
May 31, 2003 0.00063 ---- May 31, 2003 0.01296 ----
June 30, 2003 0.00058 ---- June 30, 2003 0.01769 ----
July 31, 2003 0.00048 ---- July 31, 2003 0.01939 ----
August 31, 2003 0.00042 ---- August 31, 2003 0.01733 ----
September 30, 2003 0.00047 ---- September 30, 2003 0.02282 ----
October 31, 2003 0.00047 ---- October 31, 2003 0.01947 ----
November 30, 2003 0.00042 ---- November 30, 2003 0.01822 ----
December 31, 2003 0.00050 ---- December 31, 2003 0.02702 ----
January 31, 2004 0.00047 ---- January 31, 2004 0.02824 ----
February 28, 2004 0.00041 ---- February 28, 2004 0.03045 ----
March 31, 2004 0.00048 ---- March 31, 2004 0.03400 ----
------------ ------------ ------------- ------------
$0.00595(c) $0.00000 $0.27241(c) $0.00000
============ ============ ============= ============
Bond Fund Tax-Free Income Fund
April 30, 2003 $0.03494 $ ---- April 30, 2003 $0.03691 $ ----
May 31, 2003 0.03784 ---- May 31, 2003 0.03513 ----
June 30, 2003 0.03733 ---- June 30, 2003 0.03614 ----
July 31, 2003 0.04216 ---- July 31, 2003 0.03594 ----
August 31, 2003 0.03090 ---- August 31, 2003 0.03359 ----
September 30, 2003 0.03971 ---- September 30, 2003 0.03619 ----
October 31, 2003 0.03807 ---- October 31, 2003 0.03518 ----
November 30, 2003 0.03639 ---- November 30, 2003 0.03186 ----
December 31, 2003 0.04989 ---- December 31, 2003 0.03970 ----
January 31, 2004 0.03679 ---- January 31, 2004 0.03393 ----
February 28, 2004 0.03820 ---- February 28, 2004 0.03162 ----
March 31, 2004 0.03986 ---- March 31, 2004 0.03132 ----
------------ ------------ ------------- ------------
$0.46206(c) $0.00000 $0.41750(d) $0.00000
============ ============ ============= ============
86
- --------------------------------------------------------------------------[LOGO]
LONG-TERM LONG-TERM
ORDINARY CAPITAL ORDINARY CAPITAL
FUND AND PAYABLE DATE INCOME (A) GAIN (B) FUND AND PAYABLE DATE INCOME (A) GAIN (B)
- -------------------------- ------------ ------------ ------------------------------ ------------- ------------
Minnesota Tax-Free Income Fund Florida Tax-Free Income Fund
April 30, 2003 0.03884 ---- April 30, 2003 $0.00000 $ ----
May 31, 2003 0.03772 ---- May 31, 2003 0.00000 ----
June 30, 2003 0.03929 ---- June 30, 2003 0.00000 ----
July 31, 2003 0.03877 ---- July 31, 2003 0.00000 ----
August 31, 2003 0.03714 ---- August 31, 2003 0.00000 ----
September 30, 2003 0.04117 ---- September 30, 2003 0.00000 ----
October 31, 2003 0.03929 ---- October 31, 2003 0.00000 ----
November 30, 2003 0.03517 ---- November 30, 2003 0.00000 ----
December 31, 2003 0.04091 ---- December 31, 2003 0.00000 ----
January 31, 2004 0.03683 ---- January 31, 2004 0.01487 ----
February 28, 2004 0.03426 ---- February 28, 2004 0.01924 ----
March 31, 2004 0.03811 ---- March 31, 2004 0.02378 ----
------------ ------------ ------------ ------------
$0.45749(d) $0.00000 $0.05789(d) $0.00000
============ ============ ============ ============
(a) Includes distributions of short-term gains, if any, which are taxable as
ordinary income.
(b) Taxable as long-term gain.
(c) Taxable as dividend income and does not qualify for deduction by
corporations or reduced dividend income tax rate for individuals.
(d) 100% of dividends were derived from interest on tax-exempt securities. This
portion of exempt-interest dividends is exempt from federal taxes and
should not be included in shareholders' gross income. Exempt-interest
dividends may be subject to state and local taxes. Each shareholder should
consult a tax adviser about reporting this income for state and local tax
purposes.
87
A LOOK AT 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 $6.4
billion for some of America's largest corporations, foundations and endowments.
Sit Mutual Funds are comprised of fourteen 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
[GRAPH]
STABILITY: INCOME: GROWTH: HIGH GROWTH:
SAFETY OF PRINCIPAL INCREASED INCOME LONG-TERM CAPITAL LONG-TERM CAPITAL
AND CURRENT INCOME APPRECIATION APPRECIATION
AND INCOME
MONEY MARKET U.S. GOVERNMENT BALANCED MID-CAP GROWTH
SECURITIES DIVIDEND GROWTH INTERNATIONAL GROWTH
TAX-FREE INCOME LARGE CAP GROWTH SMALL CAP GROWTH
MINNESOTA TAX-FREE SCIENCE AND
INCOME TECHNOLOGY GROWTH
FLORIDA TAX-FREE DEVELOPING MARKETS
INCOME GROWTH
BOND
88
ANNUAL REPORT BOND FUNDS
Year Ended March 31, 2004
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
50 South LaSalle Street
Chicago, IL 60675
TRANSFER AGENT AND
DISBURSING AGENT
PFPC, Inc.
P.O. Box 5166
Westboro, MA 01581-5166
[LOGO] SIT INVESTMENT ASSOCIATES
-------------------------
SIT MUTUAL FUNDS
Item 2: Code of Ethics.
The registrant has adopted a code of ethics that applies to the registrant's
principal executive officer, principal financial officer, principal accounting
officer, and persons performing similar functions.
The registrant's Board of Directors adopted an amendment to the Code of Ethics
which requires the registrant's principal executive officer, principal financial
officer, principal accounting officer, and persons performing similar functions,
to report transactions in the registrant's shares quarterly. The amendment also
prohibits such persons from purchasing or selling shares of the registrant's
common stock for the purpose of arbitrage or market timing.
A copy of the registrant's code of ethics is available without charge upon
request by calling the registrant at 612-334-5888 or 1-800-332-5580, or by mail
at Sit Mutual Funds, 4600 Wells Fargo Center, 90 South Seventh Street,
Minneapolis, MN 55402.
Item 3: Audit Committee Financial Expert.
The registrant's Board of Directors has determined that Mr. John E. Hulse, Mr.
Sidney L. Jones and Mr. Donald W. Phillips are audit committee financial experts
serving on its audit committee. Mr. Hulse, Mr. Jones and Mr. Phillips are
independent for purposes of this item.
Item 4: Principal Accountant Fees and Services.
(a) - (d) Aggregate fees billed to the registrant for the last two fiscal years
for professional services rendered by the registrant's principal accountant were
as follows:
Audit
Audit Related Tax Other
Fees Fees Fees Fees
------ ------- ------ -----
Fiscal year ended March 31, 2004 51,000 0 11,250 0
Fiscal year ended March 31, 2003 49,200 0 10,440 0
Audit fees include amounts related to the audit of the registrant's annual
financial statements and services normally provided by the accountant in
connection with statutory and regulatory filings. Audit-related fees include
amounts reasonably related to the performance of the audit of the registrant's
financial statements, and/or are traditionally performed by the auditor. Tax
fees include amounts related to tax compliance, tax planning, and tax advice.
(e) (1) The Audit Committee is required to pre-approve audit and non-audit
services performed for the registrant by the independent auditor in order to
assure that the provision of such services does not impair the auditor's
independence. The audit committee also is required to pre-approve certain
non-audit services performed by the registrant's independent auditor for the
registrant's investment adviser and certain of the adviser's affiliates if the
services relate directly to the operations and financial reporting of the
registrant. Services to be provided by the auditor must receive general
pre-approval or specific pre-approval by the audit committee. Any proposed
services exceeding pre-approved cost levels will require separate pre-approval
by the audit committee.
The audit committee may delegate pre-approval authority to the audit committee
chairman. The chairman shall report any pre-approval decisions to the audit
committee at its next scheduled meeting. The audit committee does not delegate
its responsibility to pre-approve services performed by the independent auditor
to management.
(2) Services included in (b) - (d) for which the auditors were engaged prior to
the effective date of SEC rules relating to the pre-approval of non-audit
services (May 6, 2003) were not approved pursuant to paragraph (c)(7)(i)(C) of
Rule 2-01 of Regulation S-X. Services included in (b) - (d) for which the
auditors were engaged after the effective date of SEC rules relating to the
pre-approval of non-audit services were approved pursuant to paragraph
(c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
(f) Not applicable.
(g) The aggregate fees billed for the most recent fiscal year and the preceding
fiscal year by the registrant's principal accountant for non-audit services
rendered to the registrant, its investment adviser, and any entity controlling,
controlled by, or under common control with the investment adviser that provides
ongoing services to the registrant were $108,200.00 and $121,300.00,
respectively.
(h) The registrant's audit committee has determined that the provision of
non-audit services rendered to the registrant's investment adviser, and any
entity controlling,
controlled by, or under common control with the investment adviser that provides
ongoing services to the registrant, that were not pre-approved pursuant to
paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is considered compatible
with maintaining the principal accountant's independence.
Item 5: Audit Committee of Listed Registrants.
Not applicable to open-end investment companies.
Item 6: Schedule of Investments.
The schedule of investments is included as part of the report to shareholders
filed under Item 1 of this Form.
Item 7: Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies. Not applicable to open-end investment
companies.
Item 8: Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers. Not applicable to open-end investment
companies.
Item 9. Submission of Matters to a vote of Security Holders.
There have been no material changes to the procedures by which shareholders may
recommend nominees to the registrant's board of directors.
Item 10: 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, the Registrant's
Chairman and Treasurer have determined that the Disclosure Controls and
Procedures (as defined in Rule 30a-2(c) under the Act) are designed to ensure
that information required to be disclosed by the Registrant is recorded,
processed, summarized and reported by the filing Date, and that information
required to be disclosed in the report is communicated to the Registrant's
management, as appropriate, to allow timely decisions regarding required
disclosure.
(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 11: Exhibits:
(a) The following exhibits are attached to this Form N-CSR:
(2) A separate certification for each principal executive and principal
financial officer of the registrant as required by Rule 30a-2(a) under the Act
(17 CFR 270.30a-2) (certification required by Section 302 of the Sarbanes-Oxley
Act of 2002).
(b) Certification required by Rule 30a-2(b) under the Act (certification
required by 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 (Signature and Title)* /s/ Paul E. Rasmussen
---------------------------------------
Paul E. Rasmussen
Vice President, Treasurer
Date May 27, 2004
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 (Signature and Title)* /s/ Eugene C. Sit
---------------------------------------
Eugene C. Sit
Chairman
Date May 27, 2004