STOCK FUNDS SEMI-ANNUAL REPORT
SIX MONTHS ENDED DECEMBER 31, 1998
A FAMILY OF 100% NO-LOAD FUNDS
------------------------------
LARGE CAP GROWTH FUND
MID CAP GROWTH FUND
SMALL CAP GROWTH FUND
BALANCED FUND
INTERNATIONAL GROWTH FUND
DEVELOPING MARKETS GROWTH FUND
REGIONAL GROWTH FUND
SCIENCE AND TECHNOLOGY GROWTH FUND
[LOGO]
SIT MUTUAL FUNDS
----------------
THE INVESTMENT IS MUTUAL(SM)
<PAGE>
SIT MUTUAL FUNDS
4600 NORWEST CENTER - MINNEAPOLIS, MN 55402
www.sitfunds.com * e-mail: [email protected]
612-334-5888 or 800-332-5580
The Sit Mutual Funds are managed by Sit Investment Associates, Inc. Sit
Investment Associates was founded by Eugene C. Sit in July 1981 and is dedicated
to a single purpose, to be one of the premier investment management firms in the
United States. Sit Investment Associates currently manages approximately $7
billion of combined assets for some of America's largest corporations,
foundations and endowments.
The Sit Mutual Funds are comprised of thirteen 100% no-load funds. 100%
no-load means that the Sit Mutual Funds have no sales charges on purchases, no
deferred sales charges, no 12b-1 fees, no redemption fees and no exchange fees.
Every dollar you invest goes to work for you.
Some other features include:
* Free telephone exchange
* Dollar-cost averaging through automatic investment plan
* Electronic transfer for purchases and redemptions
* Free check-writing privileges on bond funds
* Retirement accounts including IRAs, Keoghs and 401(k) Plans
SIT FAMILY OF FUNDS
[CHART]
<TABLE>
<S> <C> <C> <C>
STABILITY: INCOME: GROWTH: HIGH GROWTH:
SAFETY OF PRINCIPAL INCREASED INCOME LONG-TERM CAPITAL LONG-TERM CAPITAL
AND CURRENT INCOME APPRECIATION AND INCOME APPRECIATION
MONEY MARKET BOND REGIONAL GROWTH DEVELOPING MARKETS GROWTH
MINNESOTA TAX-FREE INCOME LARGE CAP GROWTH SCIENCE AND TECHNOLOGY GROWTH
TAX-FREE INCOME BALANCED SMALL CAP GROWTH
U.S. GOVERNMENT SECURITIES INTERNATIONAL GROWTH
MID CAP GROWTH
</TABLE>
<PAGE>
SIT MUTUAL FUNDS
STOCK FUNDS SEMI-ANNUAL REPORT
TABLE OF CONTENTS
PAGE
----
Chairman's Letter................................................... 2
Performance Review.................................................. 4
Fund Reviews and Portfolios of Investments
Large Cap Growth Fund....................................... 6
Mid Cap Growth Fund......................................... 10
Small Cap Growth Fund....................................... 14
Balanced Fund............................................... 18
International Growth Fund................................... 22
Developing Markets Growth Fund.............................. 26
Regional Growth Fund........................................ 30
Science and Technology Growth Fund.......................... 34
Notes to Portfolios of Investments.................................. 37
Statements of Assets and Liabilities................................ 38
Statements of Operations............................................ 40
Statements of Changes in Net Assets................................. 42
Notes to Financial Statements....................................... 46
Financial Highlights................................................ 51
Results of the Shareholder Meeting.................................. 59
This document must be preceded or accompanied by a Prospectus.
<PAGE>
SIT MUTUAL FUNDS
CHAIRMAN'S LETTER - SIX MONTHS ENDED DECEMBER 31, 1998
[PHOTO]
EUGENE C. SIT, CFA
CHIEF INVESTMENT OFFICER
Dear Fellow Shareholders:
During 1998, the President of the United States was impeached, the Speaker of
the House, Newt Gingrich resigned, as did his apparent successor, Bob
Livingston, even before assuming the Speaker's duties. Russia defaulted on its
debt obligations, a financial crisis was caused by the collapse of a major hedge
fund (Long-Term Capital Management) and corporate earnings came in well below
analysts' expectations and will be down for the year. Despite these disruptive
events, large capitalization domestic stocks, as measured by the Standard &
Poor's 500-stock index, posted a fourth consecutive year of gains over 20%.
ECONOMIC OVERVIEW
Fourth quarter 1998 real GDP growth of +5.6% was very strong. Full year 1998
real GDP growth was +3.9%, the same as in 1997 and a remarkable achievement. The
biggest surprise in 1998 was the continued exuberance of consumer spending,
which continued at a blistering pace despite an extremely low savings rate. The
latest explanation of how personal spending can remain so strong is that the
surging stock market and realization of capital gains are now being counted on
to sustain spending. It is true that jobs are plentiful, the unemployment rate
is low, consumer confidence remains high and the stock market continues to roll.
However, it is also true that consumers are spending at a faster rate than their
incomes are increasing, a phenomenon that cannot continue forever. Therefore, we
think the U.S. economy is likely to slow in 1999 to +3.0%, though this is still
quite strong in the context of recent experience and would represent the eighth
year in a row of better than +2.0% growth. The economic expansion is at 93
months in duration and counting.
Notwithstanding strong economic growth, the inflation rate fell in 1998 to +1.6%
compared to +2.4% in 1997. Falling energy prices were a major factor. Oil, on
average, fell about $6 per barrel in 1998 to end the year at $12.05. Producer
price and commodity indices experienced even lower rates of growth. For example,
the Producer Price Index actually declined -0.1%. Excess global supplies, weak
Asian demand, increasing corporate efficiencies, new retail delivery systems
(e.g. the Internet and e-commerce) and astute consumers have worked in
combination to keep prices moving lower. The +0.8% increase in the GDP price
deflator for the fourth quarter was the smallest increase in 40 years. We
believe U.S. CPI should trend up slightly in 1999, due largely to the fact that
the sharp decline in oil prices in 1998 cannot possibly be repeated. Our
positive attitude toward inflation supported our favorable outlook for financial
assets in 1998 and does so again in 1999.
The dollar strengthened +2.5% against a trade-weighted basket of G-10 currencies
in 1998. We believe the advent of the euro is a significant competitive event in
relation to the supremacy of the U.S. dollar. The eleven countries that have so
far converted to the euro have a combined population of 288 million (versus 261
million for the U.S.), account for 19% of world GDP (20% for the U.S.), and 19%
of total world trade (16% for the U.S.). While it remains to be seen how
effectively the countries will work together under conditions of duress, the
fact that they are in earlier stages of corporate reorganization, consolidation
and efficiency-enhancing change suggests they will become an increasingly
competitive threat to U.S. economic supremacy.
Economic problems in Asia, the Russian ruble crisis in August, the plummeting
price of oil, and the severe strain placed upon the financial system by the
Long-Term Capital Management hedge-fund debacle in late September combined to
drive interest rates materially lower last year. The Federal Reserve executed
three easing moves over a seven-week period from September 29th to November
17th, which took the federal funds rate from 5.50% to 4.75%. We believe the Fed
is now in a "holding pattern" and that interest rates will remain in a fairly
narrow trading range in 1999. This would be much different from 1998 when the
30-year Treasury bond yield dropped from 5.92% to 5.12% over the course of the
year.
The federal budget picture is off to a good start in fiscal 1999. The White
House Office of Management and Budget estimates a $76 billion surplus for the
year. President Clinton, however, articulated an expansive, and expensive,
legislative and policy agenda in his January 19th
2
<PAGE>
State of the Union address that proposed new or expanded spending for education,
the environment, crime prevention, welfare, and the military. We will be
examining government budget proposals for potential investment opportunities.
We expect global economic growth to slow to 2.0% in 1999 from 2.3% in 1998.
Japan remains in persistent recession, growth is slowing in the large
continental European economies and the UK, and Brazil's recent financial crisis
will impede growth in Latin America. We are cautiously optimistic about a return
to economic growth in the emerging-market Asian countries as currencies are
becoming stronger and interest rates fall. China should be able to achieve
economic and political stability in 1999.
EQUITY STRATEGY SUMMARY
1998 proved to be another year of remarkable financial asset returns in the U.
S., at least for the large cap investor. Over the past four years, annualized
large capitalization returns averaged just over +30%, roughly three times the
long-term average. Financial asset returns in the 1990s have equaled those of
the 1980s, a feat not thought possible, but are reflective of the extraordinary
market conditions that have prevailed.
The past year was one of extraordinary contrasts: South Korea's market advanced
+117.1% and Venezuela's dropped -55.5% for a spread of 173 percentage points. By
market index, the technology stock-laden, large cap NASDAQ Composite rose
+39.6%, but the Russell 2000 small cap measure dropped -2.5%. By capitalization
size, over the past three years the spread in total returns between the large
cap Russell 1000 and small cap Russell 2000 indices increased from 5.9% in 1996
to 10.5% in 1997 to 29.6% in 1998. Within each market index, the largest
companies tended to do the best. The 20 largest companies in the S&P 500 Index,
for example, contributed over 50% of the Index's total return in 1998. The 20
largest companies in the Russell 1000 Growth Index contributed nearly 67%. By
style, the Russell 1000 performance spread between growth and value sub-indices
had never been more than 8% in the years 1995-97, but last year the differential
grew to more than 23%. And by industry sector, spreads widened and the number of
groups that outperformed each total index sharply contracted. For the 17
industry groups in the S&P 500 Index, the high/low industry performance spread
was 52 percentage points in 1996, 65 points in 1997 and 102 points in 1998. Out
of the 17 industry sectors, nine outperformed in 1996, seven in 1997 and only
five in 1998. The combined weight in the Index of the outperforming groups was
72% in 1996, 62% in 1997 and only 38% in 1998! In other words, a major narrowing
in equity performance occurred last year, with a few groups, particularly those
that were technology related, showing spectacular results, while many others
languished. The S&P MidCap Index sector spread was 194 percentage points. The
technology services group in the Index rose +155.4% in 1998 due mainly to the
+585% gain of the shares of America Online. The return of this one stock
produced a contribution for 1998 of +7.1%, over one-third of the total S&P
MidCap Index return. Narrowness of equity performance was also evident in the
fact that only 138 stocks in the S&P 500 Index beat the Index in 1998.
Despite the Index's +28.6% return, 208 stocks actually declined in price.
After another 20%-plus equity advance in 1998, "market" valuations appear
stretched and the preference for predictable growth companies, which was
well-placed over the past year, has become even more extremely focused.
Outperforming industry sectors narrowed sharply in 1998, and we expect some
broadening to occur this year. Smaller company valuations are at all-time lows,
making these stocks a desired component of portfolios.
Internationally, we are optimistic about Europe where the outlook for monetary
conditions and corporate earnings growth remains positive. The successful launch
of the euro by EMU on January 1st gives added support to the investor perception
of integrated financial strength and stability in Europe. Based on our optimism
of a return to growth in non-Japan Asia, we are biased toward these developing
markets in lieu of Latin American markets.
With best wishes,
/s/ Eugene C. Sit
Eugene C. Sit, CFA
Chairman & Chief Investment Officer
3
<PAGE>
SIT MUTUAL FUNDS
PERFORMANCE REVIEW - STOCK FUNDS - SIX MONTHS ENDED DECEMBER 31, 1998
STOCK FUNDS REVIEW
Domestically, large cap stocks continued to outperform small cap stocks
over the most recent semi-annual and annual time frames. Return differences by
investment style, geography and industry sector were striking.
The nearly 30 percentage point return differential between the large cap
Russell 1000 Index (+27.0%) and small cap Russell 2000 Index (-2.6%) was the
largest in 60 years. For growth stock investors, the difference was even
greater, as the Russell 1000 Growth Index returned +38.7% versus +1.2% for the
Russell 2000 Growth Index. The large cap advance has been concentrated in the
very largest companies. The 20 largest companies in the Russell 1000 Growth
Index contributed 25.3 percentage points, or two-thirds, of the Index's return.
The 20 largest growth stocks constituted 33.2% of the S&P 500's weight at year
end, which is a record level and double the weight of 1990. The technology
services sector, led by Microsoft, was the top-performing S&P 500 sector.
Industrial services, primarily oil services companies, performed the worst. The
102% performance gap between the two sectors was huge.
Large cap growth stocks outperformed value stocks with returns of +38.7%
and +15.6%, respectively, as measured by the respective Russell 1000 Indices.
Growth stocks outperformed in small caps as well, though in a less pronounced
fashion, with the Russell 2000 Growth Index rising +1.2% versus the value
component's -6.5% decline. Growth stock outperformance is frequently observed
during periods of modest earnings growth, as was the case in 1998.
International returns varied widely in 1998 with South Korea rising +117.1%
and Brazil dropping -46.2%, in dollar terms. The MSCI Europe Index moved up
+28.5%, the fourth consecutive year with a gain over +20%. The MSCI Pacific
Index advanced +2.5%, its first gain in three years. The MSCI World Index rose
for the sixth consecutive year, posting its strongest result of the decade at
+24.3%.
1986 1987 1988
----------------------
SIT LARGE CAP GROWTH 21.83% 5.32% 5.33%
SIT MID CAP GROWTH 10.33 5.50 9.77
SIT SMALL CAP GROWTH -- -- --
SIT BALANCED -- -- --
SIT INTERNATIONAL GROWTH -- -- --
SIT DEVELOPING MARKETS GROWTH -- -- --
SIT REGIONAL GROWTH -- -- --
SIT SCIENCE AND TECHNOLOGY GROWTH -- -- --
S&P 500 INDEX 18.64 5.28 16.55
S&P MIDCAP 400 INDEX 16.21 -2.04 20.87
RUSSELL 2000 INDEX -- -- --
EAFE INDEX -- -- --
MSCI EMERGING MARKETS FREE INDEX -- -- --
PSE TECH 100 INDEX -- -- --
NASDAQ
SYMBOL INCEPTION
------ ---------
SIT LARGE CAP GROWTH SNIGX 09/02/82
SIT MID CAP GROWTH NBNGX 09/02/82
SIT SMALL CAP GROWTH SSMGX 07/01/94
SIT BALANCED SIBAX 12/31/93
SIT INTERNATIONAL GROWTH SNGRX 11/01/91
SIT DEVELOPING MARKETS GROWTH SDMGX 07/01/94
SIT REGIONAL GROWTH n/a 12/31/97
SIT SCIENCE AND TECHNOLOGY GROWTH n/a 12/31/97
S&P 500 INDEX (5)
S&P MIDCAP 400 INDEX (5)
RUSSELL 2000 INDEX (2)
EAFE INDEX (3)
MCSI EMERGING MARKETS FREE INDEX (4)
PSE TECH 100 INDEX
(1) Period from Fund inception through calendar year end.
(2) Figures assume an inception date of 7/1/94.
(3) Figures assume an inception date of 10/31/91.
(4) Figures assume an inception date of 6/30/94.
(5) Figures assume an inception date of 9/2/82.
4
<PAGE>
TOTAL RETURN - CALENDAR YEAR
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
- --------------------------------------------------------------------------------
32.02% -2.37% 32.72% 4.94% 3.15% 2.83% 31.66% 23.05% 31.70% 30.56%
35.15 -2.04 65.50 -2.14 8.55 -0.47 33.64 21.87 17.70 6.84
-- -- -- -- -- 11.57(1) 52.16 14.97 7.63 1.97
-- -- -- -- -- -0.33 25.43 15.80 21.73 21.30
-- -- 4.10(1) 2.69 48.37 -2.99 9.36 10.31 4.81 18.95
-- -- -- -- -- -2.02(1) -4.29 17.27 -5.20 -24.93
-- -- -- -- -- -- -- -- -- 23.05
-- -- -- -- -- -- -- -- -- 38.40
31.61 -3.05 30.46 7.64 10.07 1.32 37.58 22.96 33.36 28.58
35.55 -5.12 50.11 11.92 13.95 -3.60 30.94 19.19 32.29 19.11
-- -- -- -- -- 4.61 28.45 16.49 22.36 -2.54
-- -- 0.26 -12.17 32.56 7.78 11.21 6.05 1.78 20.00
-- -- -- -- -- 2.80 -6.94 3.92 -13.40 -27.52
-- -- -- -- -- -- -- -- -- 54.60
AVERAGE ANNUAL TOTAL RETURNS FOR THE
TOTAL RETURN PERIODS ENDED DECEMBER 31, 1998
QUARTER SIX MONTHS SINCE
ENDED 12/31/98 ENDED 12/31/98 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION
- ------------------------------ ------------------------------------------------
22.54% 5.95% 30.56% 28.38% 23.43% 18.16% 17.01%
17.65 -4.83 6.84 15.29 15.31 16.85 18.25
15.56 -4.14 1.97 8.06 -- -- 18.43
14.00 5.65 21.30 19.58 16.40 -- 16.40
19.97 2.73 18.95 11.21 7.85 -- 12.41
11.64 -14.14 -24.93 -5.85 -- -- -5.29
27.65 9.28 23.05 -- -- -- --
25.48 17.59 38.40 -- -- -- --
21.30 9.23 28.58 28.23 24.06 19.21 19.00
28.19 9.64 19.11 23.38 18.84 19.29 19.02
16.31 -7.12 -2.54 11.58 -- -- 14.86
20.66 3.51 20.00 9.00 9.19 -- 8.64
17.30 -9.54 -27.52 -13.28 -- -- -9.94
40.47 29.85 54.60 -- -- -- --
PERFORMANCE FIGURES ARE HISTORICAL AND DO NOT GUARANTEE FUTURE RESULTS.
INVESTMENT RETURNS AND PRINCIPAL VALUE WILL VARY, AND YOU MAY HAVE A GAIN OR
LOSS WHEN YOU SELL SHARES. AVERAGE ANNUAL TOTAL RETURNS INCLUDE CHANGES IN SHARE
PRICE AS WELL AS REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAINS.
5
<PAGE>
SIT LARGE CAP GROWTH FUND REVIEW
SIX MONTHS ENDED DECEMBER 31, 1998
SENIOR PORTFOLIO MANAGERS
PETER L. MITCHELSON, CFA
ROGER J. SIT
RONALD D. SIT, CFA
The Sit Large Cap Growth Fund benefited from a strong fourth quarter to
achieve a total return of +6.0% during the last six months of 1998. The Fund's
1998 return of +30.56% ranked in the 6th percentile of the 768 Growth & Income
Funds ranked by Lipper Analytical Services. For the five and ten years ended
12/31/98, the Fund placed in the 5th and 14th percentiles out of 310 and 148
funds, respectively.
After a volatile third quarter, U.S. equity prices rallied strongly in the
fourth quarter as investor confidence responded to Federal Reserve easing and
continued evidence that the domestic economy remains quite healthy. Large cap
growth stocks significantly outperformed both small and value-oriented issues as
investors became concerned with overall corporate profit growth based on
consensus economic forecasts pointing to a slowing global economy in future
quarters. Given expectations for slower economic growth, the Fund's overweighted
positions in traditional high earnings growth groups, particularly technology,
were beneficial during 1998. As of the end of December, the projected 1999
earnings gain for the companies held in the Fund was +23%, which is
significantly higher than the projected earnings increase in the S&P 500 of +2%.
Sector weightings changed modestly during the last six months. Weighting
increases included consumer non-durables, electronic technology and health
technology. New positions in these sectors included Colgate-Palmolive, Groupe
Danone, Raytheon, Sun Microsystems, Schering-Plough, and American Home Products.
Sector weighting decreases occurred in finance, industrial services, and
technology services. These groups were reduced through the elimination of
positions in Associates First Capital, Citicorp, Equitable Companies, Transocean
Offshore, Peoplesoft, and Computer Associates. During 1998, the Fund maintained
generally low cash levels. As of December 31, 1998, cash reserve levels were
4.0%, unchanged from June 30, 1998.
Assets in the Large Cap Growth Fund experienced strong growth in 1998,
increasing to the December 31, 1998 level of $120 million. We greatly appreciate
shareholders' interest and participation in the Fund.
INVESTMENT OBJECTIVE AND STRATEGY
The objective of the Large Cap Growth Fund is to maximize long-term capital
appreciation. The Fund pursues this objective by investing primarily in common
stocks of growth companies with a capitalization of over $5 billion at the time
of purchase.
PORTFOLIO SUMMARY
Net Asset Value 12/31/98: $ 48.64 Per Share
6/30/98: $ 49.34 Per Share
Total Net Assets: $120.01 Million
Weighted Average Market Cap: $ 89.3 Billion
TOTAL DIVIDEND: $ 3.42 PER SHARE
Long-Term Capital Gain: $ 3.41 Per Share
Ordinary Income: $ 0.01 Per Share
PORTFOLIO STRUCTURE - BY SECTOR
(% of total net assets)
[BAR CHART]
Electronic Technology 24.9
Health Technology 16.6
Retail Trade 9.9
Finance 8.6
Consumer Non-Durables 7.7
Technology Services 7.0
Utilities 5.5
Producer Manufacturing 5.4
Consumer Services 4.2
Process Industries 2.3
Health Services 1.5
Consumer Durables 1.1
Industrial Services 0.8
Energy Minerals 0.5
Cash Equivalents 4.0
6
<PAGE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS* CUMULATIVE TOTAL RETURNS*
------------------------------------ --------------------------------------
Sit Sit
Large Cap Russell 1000 S&P Large Cap Russell 1000 S&P
Growth Fund Growth Index 500 Index Growth Fund Growth Index 500 Index
----------- ------------ --------- ----------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
3 Months 22.54% 26.75% 21.30% 22.54% 26.75% 21.30%
(not annualized)
1 Year 30.56 38.72 28.58 30.56 38.72 28.58
5 Years 23.43 25.70 24.06 186.44 213.85 193.89
10 Years** 18.16 20.57 19.21 430.36 549.00 479.58
Inception** 17.01 18.76 19.00 1201.69 1560.51 1614.91
(9/2/82)
</TABLE>
* As of 12/31/98
**ON 6/6/93, THE FUND'S INVESTMENT OBJECTIVE CHANGED TO ALLOW FOR A PORTFOLIO OF
100% STOCKS. PRIOR TO THAT TIME, THE PORTFOLIO WAS REQUIRED TO CONTAIN NO MORE
THAN 80% STOCKS.
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 S&P 500 INDEX NOR THE
RUSSELL 1000 GROWTH 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 (9/2/82) and held until 12/31/98 would
have grown to $130,169 in the Fund and $171,494 in the S&P 500 Index assuming
reinvestment of all dividends and capital gains. On 6/6/93, the Fund's
investment objective changed to allow for a portfolio of 100% stocks. Prior to
that time, the portfolio was required to contain no more than 80% stocks.
10 LARGEST HOLDINGS
* Cisco Systems, Inc.
* General Electric Co.
* Microsoft Corp.
* AirTouch Communications, Inc.
* Merck & Co., Inc.
* Pfizer, Inc.
* Home Depot, Inc.
* EMC Corp.
* Schering-Plough Corp.
* Dell Computer Corp.
Total number of holdings: 61
7
<PAGE>
SIT LARGE CAP GROWTH FUND
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1998 (UNAUDITED)
- -------------------------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE ($)(1)
- -------------------------------------------------------------------------------
COMMON STOCKS (96.0%) (2)
CONSUMER DURABLES (1.1%)
28,100 Harley-Davidson, Inc. 1,331,237
------------------
CONSUMER NON-DURABLES (7.7%)
28,500 Coca Cola Co. 1,905,937
16,600 Colgate-Palmolive Company 1,541,725
21,700 Gillette Co. 1,048,381
8,900 Group Danone, A.D.R. 508,985
43,400 Philip Morris Cos., Inc. 2,321,900
20,800 Proctor & Gamble Co. 1,899,300
------------------
9,226,228
------------------
CONSUMER SERVICES (4.2%)
45,500 CBS Corp. (3) 1,490,125
17,400 Clear Channel Comm., Inc. (3) 948,300
23,800 Time Warner, Inc. 1,477,087
15,700 Viacom, Inc. - Class B (3) 1,161,800
------------------
5,077,312
------------------
ELECTRONIC TECHNOLOGY (24.9%)
22,500 ADC Telecommunications, Inc. (3) 781,875
19,400 Ascend Communications, Inc. (3) 1,275,550
61,575 Cisco Systems, Inc. (3) 5,714,930
40,000 Compaq Computer Corp. 1,677,500
20,800 Computer Sciences Corp. (3) 1,340,300
38,300 Dell Computer Corp. (3) 2,803,081
34,900 EMC Corp. (3) 2,966,500
20,200 Intel Corp. 2,394,962
14,900 Lockheed Martin Corp. 1,262,775
13,600 Lucent Technologies, Inc. 1,496,000
17,400 Raytheon Co. - Class B 926,550
31,000 Sun Microsystems, Inc. (3) 2,654,375
25,100 Tellabs, Inc. (3) 1,720,919
18,300 Texas Instruments, Inc. 1,565,794
11,500 Xerox Corp. 1,357,000
------------------
29,938,111
------------------
ENERGY MINERALS (0.5%)
21,300 Anadarko Petroleum Corp. 657,638
------------------
FINANCE (8.6%)
12,300 American International Group, Inc. 1,188,487
19,600 Chase Manhattan Corp. 1,334,025
22,100 EXEL, Ltd. 1,657,500
27,200 Federal Home Loan Mortgage Corp. 1,752,700
- -------------------------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE ($)(1)
- -------------------------------------------------------------------------------
51,400 Mercury General Corp. 2,251,962
15,400 St. Paul Companies, Inc. 535,150
40,800 Wells Fargo Co. 1,629,450
------------------
10,349,274
------------------
HEALTH SERVICES (1.5%)
60,800 HBO & Co. 1,744,200
------------------
HEALTH TECHNOLOGY (16.6%)
20,400 American Home Products Corp. 1,148,775
18,300 Bristol-Myers Squibb Co. 2,448,769
23,800 Eli Lilly & Co. 2,115,225
36,100 Medtronic, Inc. 2,680,425
24,700 Merck & Co., Inc. 3,647,881
25,100 Pfizer, Inc. 3,148,481
51,400 Schering-Plough Corp. 2,839,850
24,700 Warner Lambert Corp. 1,857,131
------------------
19,886,537
------------------
INDUSTRIAL SERVICES (0.8%)
20,800 Schlumberger, Ltd. 959,400
------------------
PROCESS INDUSTRIES (2.3%)
58,700 Monsanto Co. 2,788,250
------------------
PRODUCER MANUFACTURING (5.4%)
46,800 General Electric Co. 4,776,525
22,100 Tyco International, Ltd. 1,667,169
------------------
6,443,694
------------------
RETAIL TRADE (9.9%)
46,700 Dayton Hudson Corp. 2,533,475
22,350 Gap, Inc. 1,257,188
49,700 Home Depot, Inc. 3,041,019
26,500 Kohl's Corp. (3) 1,628,094
28,900 Lowe's Companies, Inc. 1,479,319
32,300 Walgreen Co. 1,891,569
------------------
11,830,664
------------------
TECHNOLOGY SERVICES (7.0%)
27,200 Ceridian Corp. (3) 1,898,900
900 Compuware Corp. (3) 70,313
28,500 Microsoft Corp. (3) 3,952,594
11,200 Network Associates, Inc. (3) 742,000
20,525 Paychex, Inc. 1,055,755
18,700 SAP, A.D.R. 674,369
------------------
8,393,931
------------------
8
<PAGE>
- -------------------------------------------------------------------------------
QUANTITY/PAR($) NAME OF ISSUER MARKET VALUE ($)(1)
- -------------------------------------------------------------------------------
UTILITIES (5.5%)
54,000 AirTouch Communications, Inc. (3) 3,894,750
37,100 MCI WorldCom, Inc. (3) 2,661,925
------------------
6,556,675
------------------
Total common stocks
(cost: $77,939,795) 115,183,151
------------------
SHORT-TERM SECURITIES (3.5%) (2)
1,880,000 Ford Motor Credit Corp., 4.96%, 1/6/99 1,878,705
1,382,000 Texaco, Inc., 4.90%, 1/7/99 1,381,140
1,000,000 Sit Money Market Fund, 4.70% (6) 1,000,000
------------------
Total short-term securities
(cost: $4,259,845) 4,259,845
------------------
Total investments in securities
(cost: $82,199,640) (7) $119,442,996
==================
See accompanying notes to portfolios of investments on page 37.
9
<PAGE>
SIT MID CAP GROWTH FUND REVIEW
SIX MONTHS ENDED DECEMBER 31, 1998
[PHOTO] SENIOR PORTFOLIO MANAGERS
EUGENE C. SIT, CFA
ERIK S. ANDERSON, CFA
The Sit Mid Cap Growth Fund had a roller coaster second half of the year.
The Fund returned -19.1% during the third quarter, but sharply rebounded with a
+17.7% return during the fourth quarter. The six-month return of -4.8% belied
the solid business performances of holdings in the Fund. Discouraging stock
performance combined with forecasted earnings growth of +26.6% for the Fund's
holdings in 1999 have resulted in a low relative price-to-earnings ratio of
30.5.
Our long-term investment philosophy is evidenced by Staples, Inc., Elan
Corp. and Kohl's Corp. retaining top-five-holding rankings, as they were in our
June 1998 annual report. The two new top-five stocks, Legato Systems and Biogen
Inc., became such because of superior performance, with both stocks advancing an
identical +69% during 1998's last half. Interestingly, neither stock resides in
the Fund's two best-performing sectors. Consumer durables stocks advanced +75%,
with Harley- Davidson the sole holding, and retail stocks advanced +54%, on
average, in 1998. The technology services sector's 24.8% weighting and +40%
average return contributed significantly to the Fund's absolute return. The
average technology services stock in the S&P MidCap Index advanced +156%,
however. This figure was massively distorted by America Online. At over $10
billion in market capitalization at the start of 1998, AOL was too large for our
definition of mid cap, but did not exit the S&P MidCap Index until late in
December.
Over the last six months, the Fund's allocation in financial stocks
decreased from 16.7% to 9.0%. Cash increased to 7.6% of portfolio assets from
1.9% as of June 30th. Mid cap growth stocks outpaced mid cap value stocks in
1998, in large part due to superior earnings growth, and this trend is likely,
we believe, to continue in 1999. Versus large cap stocks, mid cap relative
valuation on price-to-book and price-to-sales metrics are at record lows and 30%
below long-term averages. Over time, mid cap stocks should return to average
valuation levels.
INVESTMENT OBJECTIVE AND STRATEGY
The objective of the Sit Mid Cap Growth Fund is to maximize long-term
capital appreciation. The Fund pursues this objective by investing primarily in
the common stocks of growth companies with a capitalization of $1.5 billion to
$5 billion at the time of purchase.
The Fund may invest in larger companies which offer improved growth
possibilities because of rejuvenated management, changes in product or other
developments that might stimulate earnings growth.
PORTFOLIO SUMMARY
Net Asset Value 12/31/98: $ 12.94 Per Share
6/30/98: $ 16.49 Per Share
Total Net Assets: $366.47 Million
Weighted Average Market Cap: $ 6.0 Billion
TOTAL DIVIDEND: $ 2.54
Long-Term Capital Gain: $ 2.54
PORTFOLIO STRUCTURE - BY SECTOR
(% of total net assets)
[BAR CHART]
Technology Services 24.8
Electronic Technology 14.9
Health Technology 11.9
Finance 9.0
Retail Trade 7.4
Health Services 7.1
Consumer Services 4.9
Consumer Non-Durables 3.4
Commercial Services 2.2
Consumer Durables 2.1
Process Industries 1.8
Industrial Services 1.6
Utilities 1.3
Cash Equivalents 7.6
10
<PAGE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS* CUMULATIVE TOTAL RETURNS*
------------------------------------------ -----------------------------------------
Sit Sit
Mid Cap Russell Mid Cap S&P MidCap Mid Cap Russell Mid Cap S&P MidCap
Growth Fund Growth Index 400 Index Growth Fund Growth Index 400 Index
----------- ------------ --------- ----------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
3 Months 17.65% 26.48% 28.19% 17.65% 26.48% 28.19%
(not annualized)
1 Year 6.84 17.87 19.11 6.84 17.87 19.11
5 Years 15.31 17.34 18.84 103.82 122.42 137.08
10 Years 16.85 17.30 19.29 374.44 393.10 483.72
Inception 18.25 n/a 19.02 1448.27 n/a 1619.73
(9/2/82)
</TABLE>
* As of 12/31/98
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 RUSSELL MID CAP GROWTH
INDEX NOR THE S&P MIDCAP 400 INDEX.
GROWTH OF $10,000
[PLOT POINTS CHART]
The sum of $10,000 invested at inception (9/2/82) and held until 12/31/98 would
have grown to $154,827 in the Fund or $171,973 in the S&P MidCap 400 Index
assuming reinvestment of all dividends and capital gains.
10 LARGEST HOLDINGS
* Legato Systems, Inc.
* Biogen, Inc.
* Staples, Inc.
* Elan Corp., p.l.c., A.D.R.
* Kohl's Corp.
* Dendrite International, Inc.
* Chancellor Media Corp.
* HBO & Co.
* BMC Software, Inc.
* Ace, Ltd.
Total number of holdings: 60
11
<PAGE>
SIT MID CAP GROWTH FUND
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1998 (UNAUDITED)
- -------------------------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE($)(1)
- -------------------------------------------------------------------------------
COMMON STOCKS (92.4%) (2)
COMMERCIAL SERVICES (2.2%)
147,600 Metamor Worldwide, Inc. (3) $3,690,000
137,400 Sylvan Learning Systems, Inc. (3) 4,190,700
-------------
7,880,700
-------------
CONSUMER DURABLES (2.1%)
161,000 Harley-Davidson, Inc. 7,627,375
-------------
CONSUMER NON-DURABLES (3.4%)
43,000 Clorox Co. 5,022,937
106,100 Dial Corp. 3,057,006
50,500 Estee Lauder Companies, Inc. 4,317,750
-------------
12,397,693
-------------
CONSUMER SERVICES (4.9%)
218,800 Chancellor Media Corp. (3) 10,475,050
342,200 Stewart Enterprises, Inc. 7,613,950
-------------
18,089,000
-------------
ELECTRONIC TECHNOLOGY (14.9%)
80,500 AAR Corp. 1,901,812
172,700 ADC Telecommunications, Inc. (3) 6,001,325
255,000 Analog Devices, Inc. (3) 8,000,625
51,000 Ascend Communications, Inc. (3) 3,353,250
135,500 Cadence Design Systems, Inc. (3) 4,031,125
31,700 Computer Sciences Corp. (3) 2,042,669
40,500 Linear Technology Corp. 3,627,281
45,000 Maxim Integrated Products, Inc. (3) 1,965,937
72,500 Symbol Technologies, Inc. 4,635,469
19,000 Synopsys, Inc. (3) 1,030,750
84,500 Uniphase Corp. (3) 5,862,188
97,500 Vitesse Semiconductor Corp. (3) 4,448,438
117,700 Xilinx, Inc. (3) 7,665,213
-------------
54,566,082
-------------
FINANCE (9.0%)
248,300 Ace, Ltd. 8,550,831
156,500 Mercury General Corp. 6,856,656
107,000 Mutual Risk Mgmt Ltd. 4,186,375
28,600 NAC Re Corp. 1,342,413
107,500 T. Rowe Price & Associates 3,681,875
342,500 TCF Financial Corp. 8,284,219
-------------
32,902,369
-------------
HEALTH SERVICES (7.1%)
50,250 Cardinal Health, Inc. 3,812,719
349,500 HBO & Co. 10,026,281
204,000 HEALTHSOUTH Corp. (3) 3,149,250
49,000 IMS Health, Inc. 3,696,438
102,000 Quintiles Transnational Corp. (3) 5,444,250
-------------
26,128,938
-------------
HEALTH TECHNOLOGY (11.9%)
157,500 Becton, Dickinson and Co. 6,723,281
185,000 Biogen, Inc. (3) 15,355,000
134,000 Boston Scientific Corp. (3) 3,592,875
167,000 Elan Corp., p.l.c., A.D.R. (3) 11,616,937
76,800 Genzyme Corp. (3) 3,820,800
19,500 Immunex Corp. (3) 2,453,344
-------------
43,562,237
-------------
- -------------------------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE($)(1)
- -------------------------------------------------------------------------------
INDUSTRIAL SERVICES (1.6%)
321,500 Newpark Resources, Inc. (3) 2,190,219
134,400 Transocean Offshore Drilling, Inc. 3,603,600
-------------
5,793,819
-------------
PROCESS INDUSTRIES (1.8%)
142,750 Crane Co. 4,309,266
60,000 Delta and Pine Land Co. 2,220,000
-------------
6,529,266
-------------
0
RETAIL TRADE (7.4%)
185,000 Kohl's Corp. (3) 11,365,937
79,000 Saks, Inc. (3) 2,493,438
304,650 Staples, Inc. (3) 13,309,397
-------------
27,168,772
-------------
TECHNOLOGY SERVICES (24.8%)
295,000 Aspen Technology, Inc. (3) 4,277,500
216,500 BMC Software, Inc. (3) 9,647,781
111,500 Ceridian Corp. (3) 7,784,094
134,000 Check Point Software Technologies Ltd. (3) 6,138,875
31,000 Compuware Corp. (3) 2,421,875
433,200 Dendrite International, Inc. (3) 10,816,462
156,450 Fiserv, Inc. (3) 8,047,397
104,900 Jabil Circuit, Inc. (3) 7,828,162
241,500 Legato Systems, Inc. (3) 15,923,906
42,500 Lexmark International Group, Inc. (3) 4,271,250
49,500 Network Associates, Inc. (3) 3,279,375
97,200 Paychex, Inc. 4,999,725
85,000 Peoplesoft, Inc. (3) 1,609,688
90,500 Sterling Commerce, Inc. (3) 4,072,500
-------------
91,118,590
-------------
UTILITIES (1.3%)
199,000 Nextel Communications, Inc. (3) 4,701,375
-------------
Total common stocks
(cost: $223,093,786) 338,466,216
-------------
SHORT-TERM SECURITIES (6.8%) (2)
American Express Credit Corp.:
3,000,000 5.80%, 1/4/99 2,998,550
4,159,000 5.80%, 1/6/99 4,155,650
3,584,000 5.00%, 1/7/99 3,581,013
2,000,000 Ford Motor Credit Co., 4.96%, 1/6/99 1,998,622
General Motors Accept. Corp.,
4,022,000 5.34%, 1/4/99 4,019,952
1,000,000 Sit Money Market Fund, 4.70% (6) 1,000,000
7,000,000 Texaco, Inc., 5.60%, 1/5/99 6,995,644
-------------
Total short-term securities
(cost: $24,749,431) 24,749,431
-------------
Total investments in securities
(cost: $247,843,217) (7) $363,215,647
=============
See accompanying notes to portfolios of investments on page 37.
12
<PAGE>
(This page has been left blank intentionally.)
13
<PAGE>
SIT SMALL CAP GROWTH FUND REVIEW
SIX MONTHS ENDED DECEMBER 31, 1998
[PHOTO] SENIOR PORTFOLIO MANAGER
EUGENE C. SIT, CFA
The Sit Small Cap Growth Fund returned +15.6% during the December quarter,
a sharp reversal from the September quarter's -17.1% decline, giving a
semi-annual return of -4.1%. This compared favorably with the Russell 2000 Index
return of -7.1% and the -6.9% result for the Lipper Small Cap Fund universe. The
Fund also outdistanced the benchmark and peer group for full-year 1998 and since
inception periods. Small cap investors continue to be frustrated by the strong
relative performance of large cap issues. In terms of the magnitude of the
difference in returns between small cap and large cap stocks, 1998 was the worst
year in the past 60. Intra-year performance was disappointing with the Russell
2000 dropping -38.3% from the April peak to October trough before recovering
late in the year.
Small cap underperformance has produced unprecedented relative valuation
conditions that should create potential for very strong results going forward.
In fact, on 12-month trailing relative earnings, small caps are trading at a
record low level and 33% below long-term averages. In the long run, we believe
the market rewards the attractive valuations and earnings growth that small caps
currently possess. Earnings growth is very strong for stocks in the Fund at a
forecasted rate of +32% for 1999.
Five of the Fund's top six holdings at the start of the semi-annual period
remained such at year end. Indeed, Legato Systems was the Fund's largest holding
at year end 1997 and 1998. The stock rose +200% in 1998. Pervasive Software
(+165%) and Dendrite International (+158%) also posted strong results. All three
companies are in the technology services sector and fueled a +66% average return
for technology services stocks in the Fund. By comparison, the average
technology services stock in the Russell 2000 Index rose +29%. The most
important sector shift during 1998 was a decreasing weight in financial stocks
from 24.5% as of 12/31/97 to 11.8% as of 12/31/98. Cash at year end was 8.2% and
will be judiciously invested as opportunities permit.
INVESTMENT OBJECTIVE AND STRATEGY
The objective of the Sit Small Cap Growth Fund is to maximize long-term
capital appreciation. The Fund pursues this objective by investing primarily in
the common stocks of small companies that have a capitalization of $1.5 billion
or less at the time of purchase.
In addition, the Fund may purchase securities convertible into common
stocks, preferred stocks and warrants. The Fund may invest in securities not
listed on a national securities exchange but generally such securities will have
an established over-the-counter market.
PORTFOLIO SUMMARY
Net Asset Value 12/31/98: $16.11 Per Share
6/30/98: $20.35 Per Share
Total Net Assets: $47.78 Million
Weighted Average Market Cap: $ 1.2 Billion
TOTAL DIVIDEND: $ 3.09
Long-Term Capital Gain: $ 3.09
PORTFOLIO STRUCTURE - BY SECTOR
(% of total net assets)
[BAR CHART]
Technology Services 31.7
Electronic Technology 14.2
Finance 11.8
Health Services 7.3
Health Technology 6.9
Commercial Services 5.2
Consumer Services 4.1
Utilities 3.1
Retail Trade 2.3
Transportation 1.5
Industrial Services 1.2
Consumer 1.1
Energy Minerals 1.0
Producer Manufacturing 0.4
Cash Equivalents 8.2
14
<PAGE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS* CUMULATIVE TOTAL RETURNS*
--------------------------------------- ---------------------------------------
Sit Sit
Small Cap Russell 2000 Russell 2000 Small Cap Russell 2000 Russell 2000
Growth Fund Index Growth Index Growth Fund Index Growth Index
----------- ------------ ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
3 Months 15.56% 16.31% 23.64% 15.56% 16.31% 23.64%
(not annualized)
1 Year 1.97 -2.54 1.24 1.97 -2.54 1.24
3 Year 8.06 11.58 8.35 26.18 38.92 27.22
Inception 18.43 14.86 14.06 114.22 86.66 80.90
(7/1/94)
</TABLE>
* As of 12/31/98
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 NOR THE S&P 500 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 (7/1/94) and held until 12/31/98 would
have grown to $21,422 in the Fund or $18,666 in the Russell 2000 Index assuming
reinvestment of all dividends and capital gains.
10 LARGEST HOLDINGS
* Legato Systems, Inc.
* Dendrite International, Inc.
* HA-LO Industries, Inc.
* BISYS Group, Inc.
* Queens County Bancorp, Inc.
* Uniphase Corp.
* Pervasive Software, Inc.
* Aspect Development, Inc.
* Great Plains Software, Inc.
* Emmis Broadcasting Corp.
Total number of holdings: 52
15
<PAGE>
SIT SMALL CAP GROWTH FUND
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1998 (UNAUDITED)
- -------------------------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE ($)(1)
- -------------------------------------------------------------------------------
COMMON STOCKS (91.8%) (2)
COMMERCIAL SERVICES (5.2%)
40,000 HA-LO Industries, Inc. (3) 1,505,000
14,000 On Assignment, Inc. (3) 483,000
16,250 Sylvan Learning Systems, Inc. (3) 495,625
-------------
2,483,625
-------------
CONSUMER DURABLES (1.1%)
20,000 Select Comfort Corp. (3) 528,750
-------------
CONSUMER SERVICES (4.1%)
26,000 Emmis Broadcasting Corp. (3) 1,127,750
35,000 Rent-Way, Inc. (3) 850,937
-------------
1,978,687
-------------
ELECTRONIC TECHNOLOGY (14.2%)
27,500 Applied Micro Circuits Corp. (3) 934,141
42,000 Burr-Brown Corp. (3) 984,375
14,000 Etec Systems, Inc. (3) 560,000
13,000 Flextronics International, Ltd. (3) 1,113,125
15,000 PMC-Sierra, Inc. (3) 946,875
25,500 Triumph Group, Inc. (3) 816,000
21,000 Uniphase Corp. (3) 1,456,875
-------------
6,811,391
-------------
ENERGY MINERALS (1.0%)
23,000 Newfield Exploration Co. (3) 480,125
-------------
FINANCE (11.8%)
15,923 Delphi Financial Group, Inc. (3) 834,962
52,000 Federated Investors, Inc. 942,500
38,000 Fremont General Corp. 940,500
4,000 NAC Re Corp. 187,750
49,925 Queens County Bancorp, Inc. 1,485,269
27,000 Scottish Annuity & Life Holdings, Ltd. (3) 371,250
50,000 Stirling Cooke Brown Holdings (5) 868,750
-------------
5,630,981
-------------
HEALTH SERVICES (7.3%)
30,500 Cerner Corp. (3) 815,875
18,125 HBO & Co. 519,961
17,000 Medical Manager Corp. (3) 533,375
35,500 Stericycle, Inc. (3) 572,437
20,000 Sunrise Assisted Living, Inc. (3) 1,037,500
-------------
3,479,148
-------------
HEALTH TECHNOLOGY (6.9%)
44,000 Biosite Diagnostics, Inc. (3) 536,250
17,000 Guilford Pharmaceuticals, Inc. (3) 242,250
60,000 I-Stat Corp. (3) 450,000
18,000 Protein Design Labs, Inc. (3) 418,500
10,000 Sepracor, Inc. (3) 875,625
35,000 Ventana Medical Systems, Inc. (3) 756,875
-------------
3,279,500
-------------
- -------------------------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE ($)(1)
- -------------------------------------------------------------------------------
INDUSTRIAL SERVICES (1.2%)
85,500 Newpark Resources, Inc. (3) 582,469
-------------
PRODUCER MANUFACTURING (0.4%)
12,750 Watsco, Inc. 213,562
-------------
RETAIL TRADE (2.3%)
34,500 Men's Wearhouse, Inc. (3) 1,095,375
-------------
TECHNOLOGY SERVICES (31.7%)
27,000 Aspect Development, Inc. (3) 1,196,438
44,000 Aspen Technology, Inc. (3) 638,000
29,000 BISYS Group, Inc. (3) 1,497,125
31,500 Brightpoint, Inc. (3) 433,125
102,000 Dendrite International, Inc. (3) 2,546,812
24,000 Great Plains Software, Inc. (3) 1,158,000
5,000 Inktomi Corp. (3) 646,875
38,500 Intelligroup, Inc. (3) 688,188
40,000 Legato Systems, Inc. (3) 2,637,500
74,800 Pervasive Software, Inc. (3) 1,439,900
15,000 Sapient Corp. (3) 840,000
20,229 Siebel Systems, Inc. (3) 686,522
26,000 Whittman-Hart, Inc. (3) 718,250
-------------
15,126,735
-------------
TRANSPORTATION (1.5%)
27,000 C.H. Robinson Worldwide, Inc. 700,313
-------------
UTILITIES (3.1%)
17,000 Nextlink Communications (3) 482,375
49,000 Transaction Network Svcs., Inc. (3) 983,063
-------------
1,465,438
-------------
Total common stocks
(cost: $33,048,374) 43,856,099
-------------
SHORT-TERM SECURITIES (6.4%) (2)
1,627,000 American Express Cr. Corp. , 4.80%, 1/5/99 1,625,951
805,000 Ford Motor Credit Co., 4.96%, 1/6/99 804,445
621,000 Gen. Motor Acc. Corp., 5.11%, 1/4/99 620,684
-------------
Total short-term securities
(cost: $3,051,080) 3,051,080
-------------
Total investments in securities
(cost: $36,099,454) (7) $46,907,179
=============
See accompanying notes to portfolios of investments on page 37.
16
<PAGE>
(This page has been left blank intentionally.)
17
<PAGE>
SIT BALANCED FUND REVIEW
SIX MONTHS ENDED DECEMBER 31, 1998
[PHOTO] SENIOR PORTFOLIO MANAGER
PETER L. MITCHELSON, CFA
BRYCE A. DOTY, CFA
The Sit Balanced Fund benefited from a strong fourth quarter to achieve a
total return of +5.7% during the last six months of 1998. The Fund's 1998 return
of +21.30% ranked in the 13th percentile out of the 409 Balanced Funds ranked by
Lipper Analytical Services. For the five years ended 12/31/98, the Fund placed
in the 10th percentile out of 162 funds.
As of December 31, 1998, the asset allocation of the Fund was 61% in
equities (up from 58% at the end of June), 37% in fixed income securities (38%),
and 2% in cash reserve instruments (4%).
Within the equity portion of the portfolio, sector weightings were
increased in the technology, consumer non-durables, and health technology
sectors through purchases of Colgate-Palmolive, Groupe Danone, Philip Morris,
Dell Computer, Raytheon, Sun Microsystems, Schering-Plough, and American Home
Products. Sector weightings decreased in finance, industrial services, and
technology services through the sale of Associates First Capital, Citigroup,
Schlumberger, Transocean Offshore, Peoplesoft, Computer Associates, and
Parametric Technology. Given expectations for somewhat slower economic growth,
the Fund's overweighted positions in traditional high earnings growth groups,
particularly technology, were beneficial during 1998. As of the end of December
1998, the average projected earnings gain for the companies held in the Fund was
+23%, which is significantly higher than the projected earnings increase of the
S&P 500 of +2%
Within the fixed income portion of the portfolio, a continued emphasis is
being placed on short- to intermediate-duration securities, with an
underweighted position in U.S. Treasuries. We believe U.S. Treasury yields may
rise relative to other sectors as the stabilization of global markets will
reduce the "safe haven" appeal of U.S. Treasuries.
The Fund continues to focus on high quality securities that offer
attractive total return opportunities. We greatly appreciate shareholders'
interest and participation in the Fund.
INVESTMENT OBJECTIVE AND STRATEGY
The objective of the Balanced Fund is to seek long-term growth of capital
consistent with the preservation of principal and to provide shareholders with
regular income. The Fund pursues this objective by investing in a diversified
portfolio of stocks, bonds, and short-term instruments.
Under normal conditions, between 40% and 60% of the Fund's assets will be
invested in equity securities and between 40% and 60% in fixed-income
securities. At all times at least 25% of the fixed-income securities will be
invested in fixed-income senior securities.
PORTFOLIO SUMMARY
Net Asset Value 12/31/98: $16.57 Per Share
6/30/98: $16.68 Per Share
Total Net Assets: $ 8.33 Million
TOTAL DIVIDEND: $ 1.00 PER SHARE
Long-Term Capital Gain: $ 0.76 Per Share
Ordinary Income: $ 0.24 Per Share
PORTFOLIO STRUCTURE - BY SECTOR
(% of total net assets)
[PIE CHART]
Cash Equivalents 2.4%
Bonds 37.0%
Stocks 60.6%
18
<PAGE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS* CUMULATIVE TOTAL RETURNS*
--------------------------------------- ---------------------------------------
Sit Sit
Balanced Lehman Aggregate S&P Balanced Lehman Aggregate S&P
Fund Bond Index 500 Index Fund Bond Index 500 Index
-------- ---------------- --------- -------- ---------------- ---------
<S> <C> <C> <C> <C> <C> <C>
3 Months 14.00% 0.34% 21.30% 14.00% 0.34% 21.30%
(not annualized)
1 Year 21.30 8.69 28.58 21.30 8.69 28.58
3 Years 19.58 7.29 28.23 70.99 23.51 110.83
5 Years 16.40 7.27 24.05 113.77 42.06 193.89
Inception 16.40 7.27 24.05 113.77 42.06 193.89
(12/31/93)
</TABLE>
* As of 12/31/98
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 RUSSELL 2000 INDEX NOR
THE RUSSELL 2000 GROWTH INDEX. THE LIPPER AVERAGES AND INDICES ARE OBTAINED FROM
LIPPER ANALYTICAL SERVICES, INC., A LARGE INDEPENDENT EVALUATOR OF MUTUAL FUNDS.
GROWTH OF $10,000
[PLOT POINTS CHART]
The sum of $10,000 invested at inception (12/31/93) and held until 12/31/98
would have grown to $21,377 in the Fund, $14,206 in the Lehman Aggregate Bond
Index or $29,389 in the S&P 500 Index assuming reinvestment of all dividends and
capital gains.
TOP HOLDINGS
Stocks:
* Cisco Systems, Inc.
* General Electric Co.
* AirTouch Communications, Inc.
* Merck & Co., Inc.
* Pfizer, Inc.
Bonds:
* U.S. Treasury Note, 6.125%, 8/15/07
* GNMA, 9.50%, 12/15/17
* GNMA, 9.00%, 12/15/19
* Security Capital Industrial Trust, 8.65%, 5/15/16
* FHLMC, 9.00%, 7/1/16
Total number of holdings: 108
19
<PAGE>
SIT BALANCED FUND
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1998 (UNAUDITED)
- ------------------------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE ($)(1)
- ------------------------------------------------------------------------------
COMMON STOCKS (60.6%) (2)
CONSUMER DURABLES (0.7%)
1,200 Harley-Davidson, Inc. 56,850
------------
CONSUMER NON-DURABLES (5.0%)
1,300 Coca Cola Co. 86,937
700 Colgate-Palmolive Company 65,013
900 Gillette Co. 43,481
500 Group Danone, A.D.R. 28,595
1,900 Philip Morris Cos., Inc. 101,650
1,000 Proctor & Gamble Co. 91,312
------------
416,988
------------
CONSUMER SERVICES (2.5%)
800 Clear Channel Comm., Inc. (3) 43,600
2,000 Time Warner, Inc. 124,125
500 Viacom, Inc. - Class B (3) 37,000
------------
204,725
------------
ELECTRONIC TECHNOLOGY (15.1%)
1,000 Ascend Communications, Inc. (3) 65,750
2,750 Cisco Systems, Inc. (3) 255,234
2,200 Dell Computer Corp. (3) 161,013
1,500 EMC Corp. (3) 127,500
900 Intel Corp. 106,706
900 Lockheed Martin Corp. 76,275
1,000 Lucent Technologies, Inc. 110,000
1,000 Raytheon Co. - Class B 53,250
1,400 Sun Microsystems, Inc. (3) 119,875
700 Tellabs, Inc. (3) 47,994
900 Texas Instruments, Inc. 77,006
500 Xerox Corp. 59,000
------------
1,259,603
------------
FINANCE (5.6%)
325 American International Group, Inc. 31,403
2,000 Chase Manhattan Corp. 136,125
900 EXEL, Ltd. 67,500
1,000 Federal Home Loan Mortgage Corp. 64,437
2,000 Mercury General Corp. 87,625
1,900 Wells Fargo Co. 75,881
------------
462,971
------------
HEALTH SERVICES (1.0%)
2,900 HBO & Co. 83,194
------------
HEALTH TECHNOLOGY (12.2%)
1,000 American Home Products Corp. 56,312
1,000 Bristol-Myers Squibb Co. 133,812
1,300 Eli Lilly & Co. 115,537
1,500 Medtronic, Inc. 111,375
1,300 Merck & Co., Inc. 191,994
- ------------------------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE ($)(1)
- ------------------------------------------------------------------------------
1,500 Pfizer, Inc. 188,156
2,000 Schering-Plough Corp. 110,500
1,500 Warner Lambert Corp. 112,781
------------
1,020,467
------------
PROCESS INDUSTRIES (1.1%)
2,000 Monsanto Co. 95,000
------------
PRODUCER MANUFACTURING (4.4%)
2,500 General Electric Co. 255,156
1,500 Tyco International, Ltd. 113,156
------------
368,312
------------
RETAIL TRADE (5.5%)
2,000 Dayton Hudson Corp. 108,500
350 Gap, Inc. 19,688
3,000 Home Depot, Inc. 183,562
1,000 Kohl's Corp. (3) 61,438
1,500 Walgreen Co. 87,844
------------
461,032
------------
TECHNOLOGY SERVICES (3.4%)
1,000 Ceridian Corp. (3) 69,812
1,300 Microsoft Corp. (3) 180,294
500 Network Associates, Inc. (3) 33,125
------------
283,231
------------
UTILITIES (4.1%)
3,000 AirTouch Communications, Inc. (3) 216,375
1,700 MCI WorldCom, Inc. (3) 121,975
------------
338,350
------------
Total common stocks
(cost: $3,141,796) 5,050,723
------------
BONDS (37.0%) (2)
U.S. TREASURY (6.1%)
325,000 U.S. Treasury Note, 6.125%, 8/15/07 355,583
U.S. Treasury Strip:
25,000 6.93% Eff. Yield on Pur. Date, 11/15/04 19,008
50,000 4.72% Eff. Yield on Pur. Date, 5/15/06 35,237
175,000 5.95% Eff. Yield on Pur. Date, 11/15/09 100,191
------------
510,019
------------
ASSET-BACKED SECURITIES (4.9%)
Advanta Mortgage Loan Trust:
25,000 1995-3 A5, 7.37%, 2/25/27 25,533
50,000 1996-1 A7, 7.07%, 3/25/27 51,337
50,000 Cityscape Home Equity Loan Trust,
1996-3 A8, 7.65%, 9/25/25 51,091
74,999 ContiMortgage Home Equity Loan Tr.,
1996-1 A7 7.00%, 3/15/27 76,414
20
<PAGE>
- ------------------------------------------------------------------------------
QUANTITY/PAR($) NAME OF ISSUER MARKET VALUE ($)(1)
- ------------------------------------------------------------------------------
25,000 EQCC Home Equity Loan Trust,
Series 1996-1, 6.93%, 3/15/27 25,870
75,000 EquiVantage, 1996-3 A3, 7.70%, 9/25/27 76,343
Green Tree Financial Corp.:
20,000 1995-5, 7.25%, 9/15/25 20,508
25,000 1997-4, 7.03%, 2/15/29 25,412
50,000 Money Store Home Equity Mortgage,
7.265%, 7/15/38 51,131
------------
403,639
------------
CLOSED-END MUTUAL FUNDS (2.1%)
9,000 American Select Portfolio 105,187
500 American Strategic Income Portfolio 5,875
2,288 American Strategic Income Portfolio II 26,884
2,969 American Strategic Income Portfolio III 34,329
------------
172,275
------------
CORPORATE BONDS (7.2%)
50,000 American Gen. Fin., 5.875%, 12/15/05 49,750
25,000 Bank One Texas, 6.25%, 2/15/08 26,156
50,000 Countrywide Capital, 8.00%, 12/15/26 51,688
50,000 Franchise Fin. Corp., 8.25%, 10/30/03 50,750
25,000 Nationwide Health Prop., 7.00%, 9/18/01 24,750
25,000 Omega Health Care Inv., 6.95%, 6/15/02 24,063
125,000 Security Cap. Ind. Trust, 8.65%, 5/15/16 128,906
100,000 Service Corp. Int'l, 7.375%, 4/15/04 106,125
25,000 Summit Properties, Inc., 7.20%, 8/15/07 23,781
13,000 Toys R Us, Inc., 8.25%, 2/1/17 13,439
50,000 Trinet Corp. Realty Trust, 7.70%, 7/15/17 45,063
50,000 Washington Mutual Cap., 8.375%, 6/1/27 55,750
------------
600,221
------------
MORTGAGE PASS-THROUGH SECURITIES (15.2%)
FEDERAL HOME LOAN MORTGAGE CORPORATION (2.8%)
106,718 9.00%, 7/1/16 112,668
31,101 9.00%, 7/1/16 32,817
50,106 9.25%, 6/1/02 52,328
31,321 10.00%, 10/1/18 33,839
------------
231,652
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (3.1%)
29,334 9.00%, 11/1/06 30,839
90,359 9.75%, 1/1/13 98,718
27,624 10.00%, 1/1/20 29,745
91,366 10.25%, 6/1/13 100,617
------------
259,919
------------
- ------------------------------------------------------------------------------
QUANTITY/PAR($) NAME OF ISSUER MARKET VALUE ($)(1)
- ------------------------------------------------------------------------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (9.3%)
25,008 9.00%, 6/15/11 26,230
48,780 9.00%, 8/15/16 51,798
132,547 9.00%, 12/15/19 141,456
27,889 9.25%, 9/15/01 29,370
28,227 9.50%, 1/15/04 29,872
56,069 9.50%, 11/15/04 59,326
35,831 9.50%, 7/20/05 37,386
53,333 9.50%, 12/15/09 56,940
27,764 9.50%, 5/20/16 29,579
147,984 9.50%, 12/15/17 160,568
52,822 9.50%, 12/15/19 57,040
1,210 9.75%, 2/20/01 1,274
1,520 10.00%, 9/15/99 1,519
44,281 10.25%, 1/15/04 46,984
8,789 11.25%, 10/15/00 8,910
17,161 11.25%, 10/15/11 18,594
1,393 11.75%, 3/15/00 1,412
13,000 Bernalillo Multifamily. Ser. 1998A,
7.50%, 9/20/20 13,390
------------
771,648
------------
COLLATERALIZED MORTGAGE OBLIGATIONS (0.6%)
50,000 FNMA 1994-38 Pac, 6.65%, 12/25/23 50,681
------------
TRUST PREFERRED SECURITIES (0.9%)
2,000 Allstate Financing I, 7.95%, 12/1/26 52,000
25,000 Allstate Financing II, 7.83%, 12/1/45 26,750
------------
78,750
------------
Total bonds
(cost: $3,052,778) 3,078,804
------------
SHORT-TERM SECURITIES (3.6%) (2)
303,000 G. E. Capital Corp., 4.70%, 1/4/99 302,881
------------
(cost: $302,881)
Total investments in securities
(cost: $6,497,455) (7) $8,432,408
============
See accompanying notes to portfolios of investments on page 37.
21
<PAGE>
SIT INTERNATIONAL GROWTH FUND REVIEW
SIX MONTHS ENDED DECEMBER 31, 1998
[PHOTO] SENIOR PORTFOLIO MANAGERS
EUGENE C. SIT, CFA
ANDREW B. KIM, CFA
ROGER J. SIT
The Fund's investment return for the six months ended December 31, 1998 was
+2.7% compared with the MSCI EAFE Index return of +3.5%. The Lipper
International Fund index had a negative return of -2.72%. Combined with a
+15.79% return in the first half of 1998, the Fund's return for all 1998 was
+18.95% compared with gains of +20.0% for the MSCI Index and +12.65% for the
Lipper Index.
The Fund's European holdings recovered strongly, up +18.7% in the December
quarter from a substantial decline of -14.4% during the preceding quarter. The
European portfolio's weighting remained basically unchanged at 71.4% at year
end. The European rate reductions reflected the urgent sense of central bankers
that the risks in the world economy shifted to an accelerating slowdown from the
long-standing anti-inflation policy. The creation of the new single currency,
effective January 1999, also benefited investor expectations for continued
increase in capital flows into equities and the positive impact of corporate
restructuring and privatization.
We have increased the Fund's weighting in Japan to 16.6% from 12.8% at mid
year. Japan experienced a stellar gain of +26.8% in the December quarter, after
a -15.0% drop in the previous three months. The yen/dollar exchange rate
appreciated +20.5% during the December quarter. We continue to focus on specific
investment themes such as telecom operators, pharmaceuticals and specialty
retailing. The yen's unexpected strength benefited the recovery of Asian
markets, overcoming uncertainties over the possible devaluation of China's
renminbi. Asia's corporate restructuring and banking reforms are proceeding,
especially in Korea and Thailand, paving the way for sustained economic recovery
in 1999 and beyond. The dominant investment themes are contract manufacturing in
high technology areas and telecom operators.
Following the Russian debt default in August, the global financial system
was again put to a severe test as a result of the Brazilian financial crisis.
Fortunately, liquidity appears to have returned to the major financial markets
due to a wide range of positive monetary policy measures. The small (0.8%) Latin
American holding was sold in January 1999.
INVESTMENT OBJECTIVE AND STRATEGY
The objective of the Sit International Growth Fund is to achieve long-term
growth. The Fund pursues this objective by investing primarily in common stocks
of issuers domiciled outside the United States.
The Fund selects its investments based on the characteristics of the
particular markets and economies of the countries in which it invests. Emphasis
is placed on identifying securities of companies believed to be undervalued in
the marketplace in relation to factors such as the company's revenues, earnings,
assets and long-term competitive position which over time will enhance the
equity value of the company.
PORTFOLIO SUMMARY
Net Asset Value 12/31/98: $18.45 Per Share
6/30/98: $19.14 Per Share
Total Net Assets: $96.08 Million
Weighted Average Market Cap: $31.0 Billion
TOTAL DIVIDEND: $ 1.14
Long-Term Capital Gain: $ 1.08
Ordinary Income: $ 0.06
PORTFOLIO STRUCTURE - BY REGION
(% of total net assets)
[BAR CHART]
Sit Int'l Morgan Stanley
Growth Fund EAFE Index
Europe Other 46.4 32.1
France, Germany & UK 25.0 41.3
Japan 16.6 21.0
Pacific Basin 8.1 5.6
Latin America 0.8 0.0
Other Assets and Liabilities 3.1 0.0
22
<PAGE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS* CUMULATIVE TOTAL RETURNS*
---------------------------------------- -----------------------------------------
Sit Morgan Stanley Lipper Sit Morgan Stanley Lipper
International Capital Int'l Int'l International Capital Int'l Int'l
Growth Fund EAFE Index Index Growth Fund EAFE Index Index
------------- -------------- ------ ------------- -------------- ------
<S> <C> <C> <C> <C> <C> <C>
3 Months 19.97% 20.66% 15.50% 19.97% 20.66% 15.50%
(not annualized)
1 Year 18.95 20.00 12.65 18.95 20.00 12.65
3 Years 11.21 9.00 11.40 37.53 29.52 38.26
5 Years 7.85 9.19 8.59 45.90 55.23 51.00
Inception 12.41 8.64 10.64 131.42 81.19 106.54
(11/1/91)
</TABLE>
* As of 12/31/98
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 MORGAN STANLEY CAPITAL
INTERNATIONAL EAFE (EUROPE, AUSTRALIA, FAR EAST) 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 (11/1/91) and held until 12/31/98 would
have grown to $23,142 in the Fund or $18,119 in the Morgan Stanley EAFE Index
assuming reinvestment of all dividends and capital gains.
PORTFOLIO STRUCTURE - BY SECTOR
(% of total net assets)
[BAR CHART]
Finance 29.0
Utilities 15.5
Health Technology 13.1
Electronic Technology 10.7
Technology Services 8.6
Commercial Services 7.1
Consumer Non-Durables 4.9
Process Industries 3.0
Retail Trade 2.1
Producer Manufacturing 2.0
Consumer Durables 0.9
Cash Equivalents 3.1
23
<PAGE>
SIT INTERNATIONAL GROWTH FUND
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1998 (UNAUDITED)
10 LARGEST HOLDINGS
* Aegon N.V., A.D. R.
* Nokia Corp., A.D.R.
* Wolters Kluwer
* Rentokil Group, p.l.c.
* Bank of Ireland
* Zurich Allied, AG
* Telefonica, S.A.
* AFLAC, Inc., A.D.R.
* Groupe Danone
* SAP Preferred
Total number of holdings: 66
- -------------------------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE($)(1)
- -------------------------------------------------------------------------------
COMMON STOCKS (96.9%)(2)
ASIA (24.7%)
AUSTRALIA (2.2%)
620,496 Colonial, Ltd. (Finance) (3) (4) $2,129,343
---------------
HONG KONG (1.5%)
142,000 Citic Pacific, Ltd. (Utilities) 306,082
15,201 HSBC Holdings, p.l.c. (Finance) 378,682
618,960 Hong Kong & China Gas (Utilities) 786,922
---------------
1,471,686
---------------
JAPAN (16.6%)
54,400 AFLAC, Inc., A.D.R. (Finance) 2,393,600
71,000 Banyu Pharmaceuticals (Health Tech.) 1,319,411
18,000 Matsushita Kotobuki (Consumer Dur.) 388,655
240 NTT Data Corp. (Utilities) 1,191,452
36 NTT Mobile Communications
Network, Inc. (Utilities) 1,481,350
33 Nippon Telephone (Utilities) 254,644
22,400 Orix Corp. (Finance) 1,672,988
9,100 Ryohin Keikaku Co., Ltd. (Retail Trade) 1,211,937
10,000 Seven Eleven Japan (Retail Trade) 805,274
1,600 Shohkoh Fund Co. (Finance) 515,375
6,000 Sony Corp. (Consumer Durables) 436,972
- -------------------------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE($)(1)
- -------------------------------------------------------------------------------
50,000 Takeda Chemical Industries
(Health Technology) 1,924,694
18,000 TDK Corp. (Electronic Technology) 1,645,414
31,000 Terumo Corp. (Health Technology) 729,702
---------------
15,971,468
---------------
TAIWAN (1.7%)
770,000 Yageo Corp. (Electronic Tech.) (3) 994,165
95,088 Yageo Corp., G.D.R. (Electronic
Technology) (3)(4) 618,072
---------------
1,612,237
---------------
SINGAPORE (0.9%)
167,000 Natsteel Electronics, Ltd. (Electronic
Technology) 424,833
109,000 Venture Mfg., Ltd. (Electronic Tech.) 415,930
---------------
840,763
---------------
SOUTH KOREA (1.2%)
17,100 Samsung Electronics (Electronic Tech.) 1,147,107
---------------
THAILAND (0.6%)
101,000 Advanced Info Services (Utilities) 600,165
---------------
EUROPE (71.4%)
BELGIUM (1.1%)
176 UCB, S.A. (Health Technology) 1,079,317
---------------
FINLAND (5.5%)
27,800 Nokia Corp., A.D.R. (Electronic Tech.) 3,348,166
46,360 Tieto Corp. (Technology Services) 2,063,899
---------------
5,412,065
---------------
FRANCE (6.7%)
14,520 AXA-UAP (Finance) 2,103,595
9,430 France Telecom, S.A. (Utilities) 748,868
8,260 Groupe Danone (Consumer Non-Dur.) 2,363,799
1,615 L'oreal Co. (Consumer Non-Durables) 1,166,983
---------------
6,383,245
---------------
24
<PAGE>
- -------------------------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE($)(1)
- -------------------------------------------------------------------------------
GERMANY (10.7%)
3,397 Allianz, A.G. (Finance) 1,245,577
37,200 Bayer, A.G. (Process Industries) 1,552,651
19,900 Deutsche Telekom, A.G. (Utilities) 654,436
5,366 Fresenius, A.G. (Health Technology) 1,130,294
17,100 Mannesmann, A.G. (Producer Mfg.) 1,960,032
4,945 SAP Preferred (Technology Services) 2,359,807
22,300 Veba, A.G. (Process Industries) 1,334,240
---------------
10,237,037
---------------
IRELAND (5.3%)
129,800 Bank of Ireland (Finance) 2,850,878
32,200 Elan Corp., p.l.c., A.D.R. (Health
Technology) (3) 2,239,912
---------------
5,090,790
---------------
ITALY (5.4%)
231,000 Banca di Roma (Finance) 391,182
272,200 Banca Fideuram (Finance) 1,943,404
123,000 Telecom Italia (Utilities) 1,048,898
242,100 Telecom Italia Mobile Spa (Utilities) 1,786,338
---------------
5,169,822
---------------
NETHERLANDS (10.4%)
30,139 Aegon, N.V., A.D.R. (Finance) 3,684,512
60,360 CMG, p.l.c. (Technology Services) 1,590,366
28,800 ING Groep, N.V. (Finance) 1,755,256
13,666 Wolters Kluwer (Commercial Svcs.) 2,922,765
---------------
9,952,899
---------------
PORTUGAL (1.0%)
20,500 Portugal Telecom, A.D.R. (Utilities) 914,813
---------------
SPAIN (6.7%)
79,120 Argentaria (Finance) 2,045,919
67,500 Endesa, A.D.R. (Utilities) 1,822,500
57,222 Telefonica, S.A. (Utilities) 2,540,605
57,222 Telefonica, S.A. (Rights) (Utilities) 50,732
---------------
6,459,756
---------------
SWEDEN (3.9%)
57,333 Astra "B" Free (Health Technology) 1,164,337
68,500 L.M. Ericsson Telephone Co., A.D.R.
(Electronic Technology) 1,639,719
- -------------------------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE($)(1)
- -------------------------------------------------------------------------------
60,800 Securitas 'AB' (Commercial Svcs.) 942,897
---------------
3,746,953
---------------
SWITZERLAND (7.1%)
530 Nestle, S.A. (Consumer Non-Durables) 1,153,768
675 Novartis, A.G. (Health Technology) 1,326,902
50 Roche Holdings, A.G. (Health Tech.) 610,120
3,590 UBS, AG (Finance) 1,103,007
3,570 Zurich Allied, AG (Finance) 2,643,386
---------------
6,837,183
---------------
UNITED KINGDOM (7.6%)
72,127 Lloyds TSB Group, p.l.c. (Finance) 1,025,332
311,685 Misys, p.l.c. (Technology Services) 2,268,523
386,620 Rentokil Group, p.l.c. (Commercial Svcs.) 2,911,949
16,100 SmithKline Beecham, p.l.c., A.D.R.
(Health Technology) 1,118,950
---------------
7,324,754
---------------
LATIN AMERICA (0.8%)
BRAZIL (0.8%)
31,700,000 Telesp Participacoes (Utilities) 721,498
---------------
Total common stocks
(cost: $58,170,151) 93,102,901
---------------
SHORT TERM SECURITIES (3.3%) (2)
2,665,000 G.E. Capital Corp., 4.70%, 1/4/99 2,663,956
500,000 Sit Money Market Fund, 4.70% (6) 500,000
---------------
Total short-term securities
(cost: $3,163,956) 3,163,956
---------------
Total investments in securities
(cost: $61,334,107) (7) $96,266,857
===============
See accompanying notes to portfolios of investments on page 37.
25
<PAGE>
SIT DEVELOPING MARKETS GROWTH FUND REVIEW
SIX MONTHS ENDED DECEMBER 31, 1998
[PHOTO] SENIOR PORTFOLIO MANAGERS
EUGENE C. SIT, CFA
ANDREW B. KIM, CFA
The Sit Developing Markets Growth Fund returned a negative -14.1% for the
six months ended December 31, 1998 compared with declines of -9.5% for the MSCI
Emerging Market Index and -11.9% for the Lipper Emerging Markets Funds Index.
The Fund's underperformance reflects in part a high cash position of 37% at the
end of September, which declined to 15.1% at year end. The Russian debt default
in August had a major negative impact on the global financial system, especially
on emerging markets. For all of 1998, the Fund returned a negative -24.9% versus
the MSCI Emerging Markets Free Index return of -27.5% and the Lipper Emerging
Markets Funds Index return of -26.4%.
The recent Brazilian financial crisis is likely to cause an economic
contraction in 1999 throughout Latin America. The Fund's Latin American
weighting was 12.8% at year end, compared with 35.4% in the MSCI Emerging
Markets Free Index. Mexico was the largest country holding at 5.7%, followed by
Brazil (2.8%) and Chile (1.9%).
There was relative stability in our European, Middle Eastern and African
holdings, which accounted for 23.1% of the portfolio at year end versus the
Index's average of 29.5%. Portugal, which was shifted to the MSCI EAFE Index a
year ago, remains the largest country weighting at 10.7%, followed by Israel's
4.5%.
In line with the economic recovery beginning in Asia, our investments in
the region increased to 46.7% at year end from 34.7% at mid year. While a
deflationary spiral in Japan is a formidable risk, we look for further gains in
Asia in dollar terms. Importantly, interest rates are trending down due to the
sharp improvement in the overall inflation outlook. In Korea and Thailand, the
wide-ranging financial sector reform measures underpin a sustained economic
recovery in 1999 and 2000. However, in other Asian markets the recent rally has
resulted in overvaluation of many interest rate-sensitive sectors. Our
investment process thus is even more selective, focusing on reasonable
valuations relative to visible earnings and cash flow prospects. In this
context, we are closely reviewing the valuation of Taiwan holdings, which
accounted for 12.1% of net assets at year end.
INVESTMENT OBJECTIVE AND STRATEGY
The objective of the Sit Developing Markets Growth Fund is to maximize
long-term capital appreciation. The Fund pursues this objective by investing
primarily in common stocks of companies deemed to be domiciled or otherwise
operating in a developing market.
Developing markets tend to be less economically developed regions of the
world. General characteristics also include a high demand for capital
investment, a high dependence on export markets for their major industries, a
need to develop basic economic infrastructures, rapid economic growth and lower
degrees of political stability. Investors should carefully consider the risks
associated with developing markets such as currency fluctuations, high
volatility, illiquidity and the possibility of political instability.
PORTFOLIO SUMMARY
Net Asset Value 12/31/98: $ 7.77 Per Share
6/30/98: $ 9.05 Per Share
Total Net Assets: $ 9.91 Million
Weighted Average Market Cap: $17.4 Billion
PORTFOLIO STRUCTURE - BY REGION
(% of total net assets)
[BAR CHART]
Sit Developing MSCI Emerging
Markets Growth Fund Markets Free Index
Asia 46.7 35.1
Europe 16.4 14.7
Latin America 12.8 35.4
Africa/Middle East 6.7 14.8
North America 2.1 0.0
Other Assets and Liabilities 15.3 0.0
26
<PAGE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS* CUMULATIVE TOTAL RETURNS*
-------------------------------------- --------------------------------------
Sit MSCI Lipper Sit MSCI Lipper
Developing Emerging Emerging Developing Emerging Emerging
Markets Markets Markets Markets Markets Markets
Growth Fund Free Index Index Growth Fund Free Index Index
----------- ---------- -------- ----------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
3 Months 11.64% 17.30% 15.51% 11.64% 17.30% 15.51%
(not annualized)
1 Year -24.93 -27.52 -26.87 -24.93 -27.52 -26.87
3 Year -5.85 -13.28 -9.69 -16.54 -34.77 -26.34
Inception -5.29 -9.94 -7.56 -21.73 -37.61 -29.82
(7/1/94)
</TABLE>
* As of 12/31/98
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 MORGAN STANLEY
INTERNATIONAL EMERGING MARKETS FREE 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 (7/1/94) and held until 12/31/98 would
have declined to $7,827 in the Fund or $6,239 in the Morgan Stanley Capital
Int'l Emerging Markets Free Index assuming reinvestment of all dividends and
capital gains.
PORTFOLIO STRUCTURE - BY SECTOR
(% of total net assets)
[BAR CHART]
Utilities 34.0
Electronic Technology 29.7
Retail Trade 5.4
Finance 5.0
Consumer Non-Durables 3.9
Consumer Services 2.5
Technology Services 2.2
Industrial Services 1.6
Process Industries 0.4
Cash Equivalents 15.3
27
<PAGE>
SIT DEVELOPING MARKETS GROWTH FUND
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1998 (UNAUDITED)
10 LARGEST HOLDINGS
* Hon Hai Precision Industry
* Advanced Info Services
* Nice Systems, Ltd., A.D.R.
* Portugal Telecom, A.D.R.
* Telecel Comunicasoes Pessoais, S.A.
* Datacraft Asia, Ltd.
* Yageo Corp., G.D.R.
* VTech Holdings, Ltd.
* Espirito Santo, A.D.R.
* Samsung Electronics
Total number of holdings: 61
- -------------------------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE ($)(1)
- -------------------------------------------------------------------------------
COMMON STOCKS (84.7%)(2)
AFRICA/ MIDDLE EAST (6.7%)
ISRAEL (4.5%)
11,400 Home Centers, A.D.R. (Retail Trade) (3)(5) 122,550
15,100 Nice Systems, Ltd., A.D.R. (Utilities) (3) 326,537
-------------
449,087
-------------
SOUTH AFRICA (2.2%)
52,000 Dimension Data Holdings, Ltd.
(Technology Services) 220,704
-------------
ASIA (46.7%)
HONG KONG (10.3%)
1,006,000 China Hong Kong Photo Products Holdings,
Ltd. (Retail Trade) 97,385
41,000 Citic Pacific, Ltd. (Utilities) 88,376
4,401 HSBC Holdings, p.l.c. (Finance) 109,624
202,400 Hong Kong & China Gas (Utilities) 257,324
9,900 Hong Kong Telecommunications, Ltd.,
A.D.R., (Utilities) 173,869
68,000 VTech Hldgs., Ltd. (Electronic Tech.) 296,660
-------------
1,023,238
-------------
- -------------------------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE ($)(1)
- -------------------------------------------------------------------------------
INDONESIA (1.1%)
625,600 PT Dynaplast (Process Industries) (5) 41,055
258,000 PT Ramayana Lestari (Retail Trade) 62,081
-------------
103,136
-------------
PHILIPPINES (6.8%)
8,406,000 Digital Telecom Philippines (Utilities) (3) 205,288
531,000 Jollibee Foods Co. (Warrants) (Consumer
Services) (3)(4)(5) 245,707
1,181,000 SM Prime Holdings, Inc. (Retail Trade) 224,663
-------------
675,658
-------------
SINGAPORE (9.0%)
91,000 Avimo Group, Ltd. (Electronic Tech.) 142,756
168,000 Datacraft Asia, Ltd. (Electronic Tech.) 297,360
79,000 Natsteel Electronics, Ltd. (Electronic
Technology) 200,969
65,000 Venture Mfg., Ltd. (Electronic Tech.) 248,031
-------------
889,116
-------------
SOUTH KOREA (2.7%)
4,000 Samsung Electronics (Electronic
Technology) 268,329
-------------
TAIWAN (12.1%)
86,229 Chroma Ate, Inc. (Electronic Tech.) (3) 228,820
67,200 Hon Hai Precision Industry (Electronic
Technology) (3) 371,248
81,000 President Chain Store Corp. (Retail Trade) 255,168
44,229 Yageo Corp., G.D.R. (Elec. Tech.) (3)(4) 287,487
43,000 Yageo Corp. (Electronic Technology) (3) 55,518
-------------
1,198,241
-------------
THAILAND (4.7%)
59,800 Advanced Info Services (Utilities) 355,345
54,000 Bangkok Bank (Finance) 111,417
-------------
466,762
-------------
EUROPE (16.4%)
GREECE (2.0%)
7,600 Hellenic Telecommunications
Organization (Utilities) 202,301
-------------
PORTUGAL (10.7%)
7,430 Electricidad de Portugal, S.A. (Utilities) 163,660
13,800 Espirito Santo, A.D.R. (Finance) 269,962
7,100 Portugal Telecom, A.D.R. (Utilities) 316,837
1,500 Telecel Comunicasoes Pessoais, S.A.
(Utilities) (3) 306,759
-------------
1,057,218
-------------
28
<PAGE>
- -------------------------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE ($)(1)
- -------------------------------------------------------------------------------
SPAIN (2.4%)
148 Banco Santander (Finance) 2,923
1,780 Telefonica, A.D.R. (Utilities) 240,954
-------------
243,877
-------------
UNITED KINGDOM (1.3%)
71,700 Coca Cola Beverages, p.l.c. (Consumer
Non-Durables) (3) 125,173
-------------
LATIN AMERICA (12.8%)
ARGENTINA (2.4%)
8,500 Telefonica de Argentina, A.D.R. (Utilities) 237,469
-------------
BRAZIL (2.8%)
6,500 Cemig, A.D.R. (Utilities) 123,695
6,800,000 Telesp Participacoes, S.A. (Utilities) (3) 154,769
-------------
278,464
-------------
CHILE (1.9%)
7,400 Enersis, A.D.R. (Utilities) 191,013
-------------
MEXICO (5.7%)
55,700 Corporacion GEO - B
(Industrial Services) (3) 154,644
12,100 Panamerican Beverage, Inc.
(Consumer Non-Durables) 263,931
2,900 Telefonos de Mexico, A.D.R. (Utilities) 141,194
-------------
559,769
-------------
NORTH AMERICA (2.1%)
CANADA (2.1%)
18,800 Bell Canada Int'l (Utilities) (3) 211,098
-------------
Total common stocks
(cost: $8,267,111) 8,400,653
-------------
SHORT-TERM SECURITIES (13.7%) (2)
430,000 American Express Credit, 5.80%, 1/5/99 429,723
411,000 Ford Motor Credit Co., 4.96%, 1/6/99 410,717
125,000 General Motors Accept. Corp., 5.11%, 1/5/99 124,915
396,000 Household Finance Corp., 5.00% 1/4/99 395,802
-------------
Total short-term securities
(cost: $1,361,157) 1,361,157
-------------
Total investments in securities
(cost: $9,628,268) (7) $9,761,810
=============
See accompanying notes to portfolios of investments on page 37.
29
<PAGE>
SIT REGIONAL GROWTH FUND REVIEW
SIX MONTHS ENDED DECEMBER 31, 1998
[PHOTO] SENIOR PORTFOLIO MANAGER
EUGENE C. SIT, CFA
We are pleased to report the semi-annual and first-year performance for the
Sit Regional Growth Fund. The Fund rose +9.3% over the six-month period,
outperforming the +9.2% and +7.9% returns of the S&P 500 and Russell 3000
Indices, respectively. For the year, the Fund's +23.1% return compared favorably
with the +14.5% return achieved by the average diversified U.S. stock fund, as
calculated by Lipper Analytical Services.
Outperformance posted by the very largest stocks in the U.S. equity markets
in 1998 has been well documented. The 20 largest companies in the S&P 500
accounted for +14.1% of the Index's +28.6% return in 1998. None of these
companies are domiciled in the Fund's 12-state region. The Fund's +23.1% result
compared favorably with the +14.5% return of the S&P 500 ex-the 20 largest
firms. The weighted average capitalization of stocks in the Fund was $15.6
billion versus $86.6 billion for the S&P 500 Index.
The retail sector, driven by strong consumer confidence and disposable
income growth, delivered robust returns for our shareholders in 1998. Walgreen
Co. (+88%), Best Buy, Inc. (+78%), Kohl's Corp. (+80%) and Dayton Hudson (+62%)
all delivered better-than-market returns. In fact, the +91% average return
garnered by retail stocks held in the Fund far outpaced the +63% return seen by
the average S&P 500 retail stock. In addition, our 12.9% average weight over the
year (and 15.2% weight at year end) was far larger than the 5.5% weight in the
Index. Sharp advances were also posted by motorcycle maker Harley-Davidson
(+75%), information processor Fiserv (+57), drug delivery manufacturer RP
Scherer (+49%), and medical device leader Medtronic (+42%).
In an environment of essentially flat earnings for the overall market, the
Fund's 1999 earnings growth is forecasted to be +21.8%. In fact, this is an
acceleration of +1.6% since the third quarter. We expect companies that can post
material earnings per share growth to be well rewarded by the market.
Additionally, valuation and earnings growth considerations could see mid and
small cap stocks do relatively better in 1999.
INVESTMENT OBJECTIVE AND STRATEGY
The objective of the Regional Growth Fund is to maximize long-term capital
appreciation. The Fund pursues this objective by investing primarily in common
stocks of companies with their headquarters in Minnesota, Iowa, Missouri, North
Dakota, South Dakota, Nebraska, Kansas, Wisconsin, Illinois, Michigan, Indiana,
and Ohio. During normal market conditions, at least 80% of the Fund's total
assets will be invested in such securities. The Fund emphasizes securities of
companies that the Adviser believes have potential for long-term capital growth.
PORTFOLIO SUMMARY
Net Asset Value 12/31/98: $12.28 Per Share
6/30/98: $11.26 Per Share
Total Net Assets: $ 6.19 Million
Weighted Average Market Cap: $15.6 Billion
TOTAL DIVIDEND: $ 0.02
Ordinary Income: $ 0.02
PORTFOLIO STRUCTURE - BY SECTOR
(% of total net assets)
[BAR CHART]
Technology Services 15.5
Retail Trade 15.2
Health Technology 14.2
Finance 13.8
Electronic Technology 11.1
Consumer Non-Durables 6.8
Commerical Services 4.5
Process Industries 4.2
Health Services 2.6
Utilities 2.4
Producer Manufacturing 2.1
Consumer Durables 1.9
Transportation 1.2
Cash Equivalents 4.5
30
<PAGE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS* CUMULATIVE TOTAL RETURNS*
---------------------------------- ----------------------------------
Regional Russell S&P Regional Russell S&P
Growth 3000 500 Growth 3000 500
Fund Index Index Fund Index Index
-------- ------- ----- -------- ------- -----
<S> <C> <C> <C> <C> <C> <C>
3 Months 27.65% 21.44% 21.30% 27.65% 21.44% 21.30%
(not annualized)
1 Year 23.05 24.15 28.58 23.05 24.15 28.58
Inception 23.05 24.15 28.58 23.05 24.15 28.58
(12/31/97)
</TABLE>
* As of 12/31/98
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 S&P 500 INDEX NOR THE
RUSSELL 3000 GROWTH INDEX. THE LIPPER AVERAGES AND INDICES ARE OBTAINED FROM
LIPPER ANALYTICAL SERVICES, INC., A LARGE INDEPENDENT EVALUATOR OF MUTUAL FUNDS.
GROWTH OF $10,000
[PLOT POINTS CHART]
The sum of $10,000 invested at inception (12/31/97) and held until 12/31/98
would have grown to $12,305 in the Fund, or $12,858 in the S&P 500 Index
assuming reinvestment of all dividends and capital gains.
10 LARGEST HOLDINGS
* Walgreen Co.
* Fiserv, Inc.
* Best Buy, Inc.
* Whittman-Hart, Inc.
* Northern Trust Corp.
* Dayton Hudson Corp.
* Kohl's Corp.
* Whitman Corp.
* Wells Fargo Co.
* Medtronic, Inc.
Total number of holdings: 38
31
<PAGE>
SIT REGIONAL GROWTH FUND
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1998 (UNAUDITED)
- -------------------------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE ($)(1)
- -------------------------------------------------------------------------------
COMMON STOCKS (95.5%) (2)
COMMERCIAL SERVICES (4.5%)
3,500 Ecolab, Inc. 126,656
4,000 Ha-Lo Industries, Inc. (3) 150,500
--------------
277,156
--------------
CONSUMER DURABLES (1.9%)
2,500 Harley-Davidson, Inc. 118,437
--------------
CONSUMER NON-DURABLES (6.8%)
3,000 Sara Lee Corp. 84,563
8,000 Whitman Corp. 203,000
1,500 Wm. Wrigley Jr. Co. 134,344
--------------
421,907
--------------
ELECTRONIC TECHNOLOGY (11.1%)
5,000 ADC Telecommunications, Inc. (3) 173,750
2,000 Gateway 2000, Inc. (3) 102,375
1,500 Motorola, Inc. 91,594
4,000 National Computer Systems, Inc. 148,000
2,500 Tellabs, Inc. (3) 171,406
--------------
687,125
--------------
FINANCE (13.8%)
4,150 Charter One Financial, Inc. 115,162
2,500 Northern Trust Corp. 218,281
1,500 Reliastar Financial Corp. 69,187
3,000 St. Paul Companies, Inc. 104,250
6,000 TCF Financial Corp. 145,125
5,000 Wells Fargo Co. 199,688
--------------
851,693
--------------
HEALTH SERVICES (2.6%)
2,137 Cardinal Health, Inc. 162,145
--------------
HEALTH TECHNOLOGY (14.2%)
2,500 Abbott Laboratories 122,500
3,000 Biomet, Inc. 120,750
2,000 Eli Lilly & Co. 177,750
2,500 Medtronic, Inc. 185,625
5,000 Sybron Intl. Corp. (3) 135,938
2,500 Stryker Corp. 137,656
--------------
880,219
--------------
- -------------------------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE ($)(1)
- -------------------------------------------------------------------------------
PROCESS INDUSTRIES (4.2%)
2,500 Bemis, Inc. 94,844
3,500 Monsanto Co. 166,250
--------------
261,094
--------------
PRODUCER MANUFACTURING (2.1%)
3,500 Applied Power, Inc. 132,125
--------------
RETAIL TRADE (15.2%)
4,000 Best Buy, Inc. (3) 245,500
4,000 Dayton Hudson Corp. 217,000
3,500 Kohl's Corp. (3) 215,031
4,500 Walgreen Co. 263,531
--------------
941,062
--------------
TECHNOLOGY SERVICES (15.5%)
10,000 Brightpoint, Inc. (3) 137,500
2,500 Ceridian Corp. (3) 174,531
4,950 Fiserv, Inc. (3) 254,616
3,500 Great Plains Software, Inc. (3) 168,875
8,000 Whittman-Hart, Inc. (3) 221,000
--------------
956,522
--------------
TRANSPORTATION (1.2%)
2,800 C.H. Robinson Worldwide, Inc. 72,625
--------------
UTILITIES (2.4%)
4,000 Cincinnati Bell, Inc. 151,250
--------------
Total common stocks
(cost: $4,728,947) 5,913,360
--------------
SHORT-TERM SECURITIES (4.5%) (2)
277,000 G.E. Capital Corp., 4.70%, 1/4/99 276,892
--------------
Total short-term securities
(cost: $276,892)
Total investments in securities
(cost: $5,005,839) (7) $6,190,252
==============
See accompanying notes to portfolios of investments on page 37.
32
<PAGE>
(This page has been left blank intentionally.)
33
<PAGE>
SIT SCIENCE AND TECHNOLOGY GROWTH FUND REVIEW
SIX MONTHS ENDED DECEMBER 31, 1998
[PHOTO] SENIOR PORTFOLIO MANAGER
EUGENE C. SIT, CFA
The Sit Science and Technology Growth Fund delivered a strong +17.6% return
during the second half of 1998 to close out a positive first year. The
semi-annual and yearly returns compared favorably with broad market indices, but
lagged those of the Pacific Stock Exchange (PSE) Technology 100 Index. This was
because of our larger commitment to health care stocks, which performed well in
absolute terms, but not as well as the Internet-driven advance of the technology
services sector.
Investing in science and technology stocks was rewarding in 1998.
Electronic technology, technology services and health technology were three of
the top four performing sectors within the S&P 500's seventeen sectors. In
general, we target 25% to 35% of Fund assets in each of these three sectors for
diversification purposes. As noted above, our diversification hindered
short-term returns vis-a-vis the PSE Technology 100 Index that has only 15% of
its weight in health care stocks. We continue to diversify between health care
and technology sectors to achieve a prudent balance between risk and reward.
Electronic technology returns were strong in 1998 with average returns of
+64.7% for components of the Fund. EMC Corp., Lucent Technologies and Cisco
Systems were leading stocks for the Fund, up +160%, +153% and +150%,
respectively. Software providers Legato Systems and Microsoft were the best
technology services selections rising +200% and +115%, respectively. Leading
health care stocks included Biogen (+128%) and Warner Lambert (+88%).
Going forward, year-over-year earnings growth comparisons should be helped
by last year's PC inventory correction and the Asian financial crisis. In
addition, indications are emerging that businesses might spend more on
technology early in the year to prepare for Year 2000 issues. Sector valuation
is not extended relative to the broad market and dynamic technology and health
care companies can, we believe, post earnings growth in excess of the overall
market's scant +2.2% estimate. For 1999, we project +29.8% earnings growth for
the Fund's holdings.
INVESTMENT OBJECTIVE AND STRATEGY
The objective of the Fund is to maximize long-term capital appreciation.
The Fund pursues this objective by investing primarily in common stocks of
companies which Sit Investment Associates, Inc. expects to benefit from the
development, improvement, advancement and use of science and technology. During
normal market conditions, at least 80% of the Fund's total assets will be
invested in such securities. The Fund emphasizes securities of companies that
the adviser believes have potential for long-term capital growth.
PORTFOLIO SUMMARY
Net Asset Value 12/31/98: $13.84 Per Share
6/30/98: $11.77 Per Share
Total Net Assets: $ 9.63 Million
Weighted Average Market Cap: $50.6 Billion
PORTFOLIO STRUCTURE - BY SECTOR
(% of total net assets)
[BAR CHART]
Electronic Technology 34.5
Technology Services 26.3
Health Technology 26.0
Health Services 2.6
Cash Equivalents 10.6
34
<PAGE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS* CUMULATIVE TOTAL RETURNS*
---------------------------------- --------------------------------
Sit Pacific Stock Sit Pacific Stock
Science and Exchange Science and Exchange
Technology Technology Technology Technology
Growth Fund 100 Index Growth Fund 100 Index
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
3 Months 25.48% 40.47% 25.48% 40.47%
(not annualized)
1 Year 38.40 54.60 38.40 54.60
Inception 38.40 54.60 38.40 54.60
(12/31/97)
</TABLE>
* As of 12/31/98
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 PACIFIC STOCK EXCHANGE
TECHNOLOGY 100 INDEX.
GROWTH OF $10,000
[PLOT POINTS CHART]
The sum of $10,000 invested at inception (12/31/97) and held until 12/31/98
would have grown to $13,840 in the Fund, or $15,460 in the PSE Tech 100 Index
assuming reinvestment of all dividends and capital gains.
10 LARGEST HOLDINGS
* Solectron Corp.
* Cisco Systems, Inc.
* Microsoft Corp.
* Schering-Plough Corp.
* Legato Systems, Inc.
* Bristol Myers Squibb Co.
* Biogen, Inc.
* EMC Corp.
* Intel Corp.
* Warner Lambert Co.
Total number of holdings: 49
35
<PAGE>
SIT SCIENCE AND TECHNOLOGY GROWTH FUND
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1998 (UNAUDITED)
- -------------------------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE(1)
- -------------------------------------------------------------------------------
COMMON STOCKS (89.4%) (2)
ELECTRONIC TECHNOLOGY (34.5%)
4,000 ADC Telecommunications, Inc. (3) 139,000
6,000 Analog Devices, Inc. (3) 188,250
4,000 Applied Micro Circuits Corp. (3) 135,875
3,000 Cadence Design System, Inc. (3) 89,250
3,000 Cisco Systems, Inc. (3) 278,437
3,500 Compaq Computer Corp. 146,781
2,500 Comverse Technology, Inc. (3) 177,500
3,000 Dell Computer Corp. (3) 219,562
2,800 EMC Corp. (3) 238,000
2,000 Intel Corp. 237,125
2,000 Lucent Technologies, Inc. 220,000
1,500 PMC-Sierra, Inc. (3) 94,688
4,000 Seagate Technology, Inc. (3) 121,000
3,500 Solectron Corp. (3) 325,281
3,000 Synopsys, Inc. (3) 162,750
2,000 Tellabs, Inc. (3) 137,125
2,500 Veeco Instruments, Inc. (3) 132,813
3,500 Vitesse Semiconductor Corp. (3) 159,688
1,000 Xerox Corp. 118,000
--------------
3,321,125
--------------
HEALTH SERVICES (2.6%)
4,500 HBO & Co. 129,094
4,000 Medical Manager Corp. (3) 125,500
--------------
254,594
--------------
HEALTH TECHNOLOGY (26.0%)
3,000 Biogen, Inc. (3) 249,000
3,000 Biomet, Inc. 120,750
2,000 Bristol Myers Squibb Co. 267,625
3,000 Elan Corp., p.l.c., A.D.R. (3) 208,687
5,000 Guilford Pharmaceuticals, Inc. (3) 71,250
1,000 Immunex Corp. (3) 125,813
3,000 Medtronic, Inc. 222,750
1,500 Merck & Co., Inc. 221,531
7,500 Protein Design Labs (3) 174,375
1,300 Pfizer, Inc. 163,069
5,000 Schering-Plough Corp. 276,250
2,000 Sepracor, Inc. (3) 175,125
3,000 Warner Lambert Co. 225,563
--------------
2,501,788
--------------
- -------------------------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE(1)
- -------------------------------------------------------------------------------
TECHNOLOGY SERVICES (26.3%)
5,000 BMC Software, Inc. (3) 222,812
6,000 Brightpoint, Inc. (3) 82,500
2,200 Ceridian Corp. (3) 153,587
4,500 Check Point Software Technology (3) 206,156
2,000 Compuware Corp. (3) 156,250
7,500 Dendrite International, Inc. (3) 187,266
8,000 Intelligroup, Inc. (3) 143,000
4,100 Legato Systems, Inc. (3) 270,344
2,000 Lexmark International Group, Inc. (3) 201,000
2,000 Microsoft Corp. (3) 277,375
3,000 Network Associates, Inc. (3) 198,750
2,000 Paychex, Inc. 102,875
3,000 Sterling Commerce, Inc. (3) 135,000
7,000 Whittman-Hart, Inc. (3) 193,375
--------------
2,530,290
--------------
Total common stocks
(cost: $6,442,354) 8,607,797
--------------
CONVERTIBLE BONDS (0.4%) (2)
50,000 Tecnomatix Technologies Conv.,
5.25%, 8/15/04 (4) 35,375
--------------
(cost: $48,330)
SHORT-TERM SECURITIES (9.4%) (2)
434,000 American Express Cr. Corp., 4.80%, 1/4/99 433,790
470,000 G. E. Capital Corp., 4.70%, 1/5/99 469,755
--------------
Total short-term securites
(cost: $903,545) 903,545
--------------
Total investments in securities
(cost: $7,394,229) (7) $9,546,717
==============
See accompanying notes to portfolios of investments on page 37.
36
<PAGE>
SIT MUTUAL FUNDS
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) Presently non-income producing securities.
(4) Securities sold within terms of a private placement memorandum, exempt from
registration under section 144A of the Securities Act of 1933, as amended,
and sold only to dealers in that program or other "accredited investors".
This security has been determined liquid under the guidelines established
by the Board of Directors.
(5) These securities have been identified by the investment adviser as illiquid
securities. The aggregate value of these securities at December 31, 1998,
is $409,312 and $868,750 in Developing Markets Growth and Small Cap Growth
Funds respectively, which represents 4.1% and 1.8% of the Fund's net
assets, respectively. The following table summarizes the purchase date(s)
and cost basis of these securities:
<TABLE>
<CAPTION>
Purchase
Fund Security Date(s) Shares/Par Cost Basis
---- -------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Developing Markets Growth Fund Home Centers, A.D.R. 2/28/96 - 3/29/96 11,400 $120,175
Developing Markets Growth Fund PT Dynaplast 1/17/96 - 1/19/97 625,600 184,582
Developing Markets Growth Fund Jollibee Foods 3/98 - 12/98 531,000 250,846
Small Cap Growth Fund Stirling Cooke Brown Hldgs. 12/97 - 10/98 50,000 1,085,875
</TABLE>
(6) This security represents an investment in an affiliated party and comprises
0.8%, 0.5%, and 0.3% of the Large Cap Growth, International Growth, and Mid
Cap Growth Fund's net assets, respectively. See note 3 to the accompanying
financial statements.
(7) At December 31, 1998, the cost of securities for federal income tax
purposes and the aggregate gross unrealized appreciation and depreciation
based on that cost were as follows:
<TABLE>
<CAPTION>
LARGE CAP MID CAP SMALL CAP
GROWTH GROWTH GROWTH BALANCED
FUND FUND FUND FUND
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Cost for federal income tax purposes $ 82,199,640 $ 247,843,217 $ 36,099,454 $ 6,497,455
============= ============= ============= =============
Unrealized appreciation (depreciation) on
Investments:
Gross unrealized appreciation $ 38,251,544 $ 121,895,184 $ 12,130,610 $ 1,981,590
Gross unrealized depreciation (1,008,187) (6,522,754) (1,322,886) (46,637)
------------- ------------- ------------- -------------
Net unrealized appreciation $ 37,243,357 $ 115,372,430 $ 10,807,724 $ 1,934,953
============= ============= ============= =============
<CAPTION>
DEVELOPING SCIENCE &
INTERNATIONAL MARKETS REGIONAL TECHNOLOGY
GROWTH GROWTH GROWTH GROWTH
FUND FUND FUND FUND
------------- ------------- ------------- -------------
Cost for federal income tax purposes $ 61,334,107 $ 9,628,268 $ 5,005,839 $ 7,394,229
============= ============= ============= =============
Unrealized appreciation (depreciation) on
investments:
Gross unrealized appreciation $ 35,783,334 $ 1,130,080 $ 1,222,746 $ 2,193,965
Gross unrealized depreciation (850,584) (996,538) (38,333) (41,477)
------------- ------------- ------------- -------------
Net unrealized appreciation $ 34,932,750 $ 133,542 $ 1,184,413 $ 2,152,488
============= ============= ============= =============
</TABLE>
37
<PAGE>
SIT MUTUAL FUNDS
STATEMENTS OF ASSETS & LIABILITIES - DECEMBER 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
LARGE CAP MID CAP SMALL CAP
GROWTH GROWTH GROWTH BALANCED
ASSETS FUND FUND FUND FUND
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Investments in securities, at
identified cost ........................... $ 82,199,640 $ 247,843,217 $ 36,099,454 $ 6,497,455
=============== =============== =============== ===============
Investments in securities, at
market value - see
accompanying schedule for
detail .................................... $ 119,442,996 $ 363,215,647 $ 46,907,179 $ 8,432,408
Cash in bank on demand
deposit ................................... -- 880 763 3,447
Receivables:
Dividends and accrued interest ............ 78,709 79,301 5,652 31,944
Fund shares sold .......................... 173,897 2,803,667 514,057 12,479
Investment securities sold ................ 717,999 1,172,622 750,643 55,771
Other receivables ......................... 27,388 25,777 -- 1,559
--------------- --------------- --------------- ---------------
Total assets ...................... 120,440,989 367,297,894 48,178,294 8,537,608
--------------- --------------- --------------- ---------------
LIABILITIES
Disbursements in excess
of cash balances ....................... 19 -- -- --
Payables:
Investment securities purchased ........... 217,788 311,125 -- 195,351
Fund shares redeemed ...................... 100,227 231,319 334,924 5,034
Accrued investment management
and advisory services fee .............. 112,297 287,748 56,188 6,664
Other payables ............................ -- 1,082 5,373 12
--------------- --------------- --------------- ---------------
Total liabilities ................. 430,331 831,274 396,485 207,061
--------------- --------------- --------------- ---------------
Net assets applicable to
outstanding capital stock ................. 120,010,658 366,466,620 47,781,809 8,330,547
=============== =============== =============== ===============
Capital stock
Par ....................................... $ 0.001 $ 0.001 $ 0.001 $ 0.001
Authorized shares ......................... 10,000,000,000 10,000,000,000 10,000,000,000 10,000,000,000
Outstanding shares ........................ 2,467,353 28,316,446 2,965,239 502,674
=============== =============== =============== ===============
Net asset value per share of
outstanding capital stock ................. $ 48.64 $ 12.94 $ 16.11 $ 16.57
=============== =============== =============== ===============
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
DEVELOPING SCIENCE AND
INTERNATIONAL MARKETS REGIONAL TECHNOLOGY
GROWTH GROWTH GROWTH GROWTH
ASSETS FUND FUND FUND FUND
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Investments in securities, at
identified cost .............................. $ 61,334,107 $ 9,628,268 $ 5,005,839 $ 7,394,229
=============== =============== =============== ===============
Investments in securities, at
market value - see
accompanying schedule for
detail ....................................... $ 96,266,857 $ 9,761,810 $ 6,190,252 $ 9,546,717
Cash in bank on demand
deposit ...................................... -- 28,246 585 67,113
Receivables:
Dividends and accrued interest ............... 119,116 212 3,422 2,321
Fund shares sold ............................. 31,487 34,280 994 22,796
Investment securities sold ................... -- 128,746 -- --
Other receivables ............................ 10,608 5,129 1,030 --
--------------- --------------- --------------- ---------------
Total assets ............................. 96,428,068 9,958,423 6,196,283 9,638,947
--------------- --------------- --------------- ---------------
LIABILITIES
Disbursements in excess
of cash balances ............................. 14,518 -- -- --
Payables:
Investment securities purchased .............. -- -- -- --
Fund shares redeemed ......................... 212,877 26,561 576 2,752
Accrued investment management
and advisory services fee .................. 120,224 17,530 4,923 8,316
Other payables ............................... -- -- -- 1,090
--------------- --------------- --------------- ---------------
Total liabilities ........................ 347,619 44,091 5,499 12,158
--------------- --------------- --------------- ---------------
Net assets applicable to
outstanding capital stock .................... 96,080,449 9,914,332 6,190,784 9,626,789
=============== =============== =============== ===============
Capital stock
Par .......................................... $ 0.001 $ 0.001 $ 0.001 $ 0.001
Authorized shares ............................ 10,000,000,000 10,000,000,000 10,000,000,000 10,000,000,000
Outstanding shares ........................... 5,208,783 1,276,770 503,942 695,787
=============== =============== =============== ===============
Net asset value per share of
outstanding capital stock .................... $ 18.45 $ 7.77 $ 12.28 $ 13.84
=============== =============== =============== ===============
</TABLE>
See accompanying notes to financial statements on pages 46-58.
39
<PAGE>
SIT MUTUAL FUNDS
STATEMENTS OF OPERATIONS - SIX MONTHS ENDED DECEMBER 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
LARGE MID SMALL
CAP CAP CAP
GROWTH GROWTH GROWTH BALANCED
FUND FUND FUND FUND
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
INCOME:
Dividends * $ 374,932 $ 619,477 $ 43,366 $ 25,316
Interest 210,404 549,683 64,716 84,857
------------ ------------ ------------ ------------
Total income 585,336 1,169,160 108,082 110,173
------------ ------------ ------------ ------------
EXPENSES (NOTE 3):
Investment management and
advisory services fee 594,360 2,177,581 351,355 37,012
Less fees and expenses absorbed
by investment adviser -- (435,516) -- --
------------ ------------ ------------ ------------
Total net expenses 594,360 1,742,065 351,355 37,012
------------ ------------ ------------ ------------
Net investment income (loss) (9,024) (572,905) (243,273) 73,161
------------ ------------ ------------ ------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net realized gain (loss) (note 2) 14,381,014 6,612,573 (4,347,676) 332,018
Net change in unrealized appreciation
(depreciation) on investments (5,306,125) (25,678,856) 1,316,618 69,270
Realized gain (loss) on foreign
currency transactions -- -- -- --
Net change in unrealized appreciation
(depreciation) on foreign currency
transactions (note 3) -- -- -- --
------------ ------------ ------------ ------------
Net gain (loss) on investments 9,074,889 (19,066,283) (3,031,058) 401,288
------------ ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations $ 9,065,865 ($19,639,188) ($ 3,274,331) $ 474,449
============ ============ ============ ============
</TABLE>
- -------------------
40
<PAGE>
<TABLE>
<CAPTION>
DEVELOPING SCIENCE AND
INTERNATIONAL MARKETS REGIONAL TECHNOLOGY
GROWTH GROWTH GROWTH GROWTH
FUND FUND FUND FUND
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
INCOME:
Dividends * $ 229,588 $ 62,323 $ 19,707 $ 6,675
Interest 144,810 70,015 8,258 9,420
----------- ----------- ----------- -----------
Total income 374,398 132,338 27,965 16,095
----------- ----------- ----------- -----------
EXPENSES (NOTE 3):
Investment management and
advisory services fee 855,356 109,111 32,367 43,140
Less fees and expenses absorbed
by investment adviser (161,824) -- (6,391) (7,190)
----------- ----------- ----------- -----------
Total net expenses 693,532 109,111 25,976 35,950
----------- ----------- ----------- -----------
Net investment income (loss) (319,134) 23,227 1,989 (19,855)
----------- ----------- ----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net realized gain (loss) (note 2) 109,670 (2,710,399) (163,498) (190,824)
Net change in unrealized appreciation
(depreciation) on investments 3,529,777 992,879 771,739 1,487,394
Realized gain (loss) on foreign
currency transactions (141,812) (8,746) -- --
Net change in unrealized appreciation
(depreciation) on foreign currency
transactions (note 3) 8,459 8,084 -- --
----------- ----------- ----------- -----------
Net gain (loss) on investments 3,506,094 (1,718,182) 608,241 1,296,570
----------- ----------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations $ 3,186,960 ($1,694,955) $ 610,230 $ 1,276,715
=========== =========== =========== ===========
</TABLE>
* Dividends are net of foreign withholding tax of $600 and
$18,213 in the Developing Markets Growth Fund, and
International Growth Fund, respectively.
See accompanying notes to financial statements on pages 46-58.
41
<PAGE>
SIT MUTUAL FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
LARGE CAP MID CAP
GROWTH FUND GROWTH FUND
---------------------------- ----------------------------
SIX MONTHS SIX MONTHS
ENDED ENDED
DECEMBER 31, YEAR ENDED DECEMBER 31, YEAR ENDED
1998 JUNE 30, 1998 JUNE 30,
(UNAUDITED) 1998 (UNAUDITED) 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) .............................. (9,024) $ 50,303 $ (572,905) $ (1,634,045)
Net realized gain (loss) on investments ................... 14,381,014 12,220,496 6,612,573 82,862,743
Net change in unrealized appreciation
(depreciation) on investments ......................... (5,306,125) 14,921,853 (25,678,856) (831,087)
Net realized gain (loss) on foreign currency transactions . -- (46) -- --
Net change in unrealized appreciation (depreciation) on
foreign currency transactions ......................... -- 83 -- --
------------ ------------ ------------ ------------
Net increase (decrease) in net assets resulting from
operations ........................................ 9,065,865 27,192,689 (19,639,188) 80,397,611
------------ ------------ ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ..................................... (17,000) (132,500) -- --
Net realized gains on investments ......................... (9,200,000) (7,922,500) (59,500,000) (46,136,334)
------------ ------------ ------------ ------------
Total distributions ................................... (9,217,000) (8,055,000) (59,500,000) (46,136,334)
------------ ------------ ------------ ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold ................................. 30,559,562 35,549,440 262,201,326 327,420,150
Reinvested distributions .................................. 9,027,091 7,865,696 56,954,555 43,699,380
Payments for shares redeemed .............................. (36,921,012) (17,283,050) (277,877,543) (387,596,125)
------------ ------------ ------------ ------------
Increase (decrease) in net assets from
capital share transactions ........................ 2,665,641 26,132,086 41,278,338 (16,476,595)
------------ ------------ ------------ ------------
Total increase in net assets ...................... 2,514,506 45,269,775 (37,860,850) 17,784,682
NET ASSETS
Beginning of period ....................................... 117,496,152 72,226,377 404,327,470 386,542,788
------------ ------------ ------------ ------------
End of period ............................................. $120,010,658 $117,496,152 $366,466,620 $404,327,470
============ ============ ============ ============
NET ASSETS CONSIST OF:
Capital (par value and paid-in surplus) ................... $ 68,974,279 $ 66,308,638 $245,325,180 $204,046,842
Undistributed (distributions in excess of) net
investment income ..................................... (8,704) 17,320 (572,905) --
Accumulated net realized gain (loss) from
security transactions and foreign
currency transactions ................................. 13,801,726 8,620,712 6,341,915 59,229,342
Unrealized appreciation (depreciation) on investments ..... 37,243,357 42,549,482 115,372,430 141,051,286
Unrealized appreciation (depreciation) on foreign
currency transactions ................................. -- -- -- --
------------ ------------ ------------ ------------
$120,010,658 $117,496,152 $366,466,620 $404,327,470
============ ============ ============ ============
CAPITAL TRANSACTIONS IN SHARES:
Sold ...................................................... 666,153 796,463 19,033,778 20,467,307
Reinvested distributions .................................. 197,705 199,890 4,770,085 3,101,446
Redeemed .................................................. (777,861) (403,112) (20,014,076) (24,097,062)
------------ ------------ ------------ ------------
Net increase (decrease) ........................................ 85,997 593,241 3,789,787 (528,309)
============ ============ ============ ============
</TABLE>
(*) Period since commencement of operations (12/31/97)
42
<PAGE>
<TABLE>
<CAPTION>
SMALL CAP BALANCED INTERNATIONAL DEVELOPING MARKETS
GROWTH FUND FUND GROWTH FUND GROWTH FUND
- ---------------------------- ---------------------------- ---------------------------- ----------------------------
SIX MONTHS SIX MONTHS SIX MONTHS SIX MONTHS
ENDED ENDED ENDED ENDED
DECEMBER 31, YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, YEAR ENDED
1998 JUNE 30, 1998 JUNE 30, 1998 JUNE 30, 1998 JUNE 30,
(UNAUDITED) 1998 (UNAUDITED) 1998 (UNAUDITED) 1998 (UNAUDITED) 1998
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ (243,273) $ (466,768) $ 73,161 $ 131,419 $ (319,134) $ 120,344 $ 23,227 $ (72,297)
(4,347,676) 10,959,585 332,018 548,219 109,670 6,485,017 (2,710,399) (532,256)
1,316,618 (3,664,222) 69,270 624,195 3,529,777 874,697 992,879 (4,417,826)
-- -- -- 5 (141,812) 831,317 (8,756) (20,693)
-- -- -- -- 8,459 (805,596) 8,084 550
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
(3,274,331) 6,828,595 474,449 1,303,838 3,186,960 7,505,779 (1,694,965) (5,042,522)
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
-- -- (107,000) (127,000) (284,000) (159,683) -- (13,900)
(7,700,000) (2,211,000) (350,000) (443,000) (5,500,000) (3,469,317) -- --
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
(7,700,000) (2,211,000) (457,000) (570,000) (5,784,000) (3,629,000) 0 (13,900)
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
18,488,949 86,265,023 1,778,581 2,008,168 42,688,633 97,772,151 6,034,746 10,606,901
7,466,984 2,167,174 452,068 567,624 5,530,064 3,462,126 -- 13,512
(24,672,164) (93,935,313) (1,339,089) (991,255) (49,262,056) (104,669,312) (5,930,337) (10,848,159)
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
1,283,769 (5,503,116) 891,560 1,584,537 (1,043,359) (3,435,035) 104,409 (227,746)
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
(9,690,562) (885,521) 909,009 2,318,375 (3,640,399) 441,744 (1,590,556) (5,284,168)
57,472,371 58,357,892 7,421,538 5,103,163 99,720,848 99,279,104 11,504,888 16,789,056
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
$ 47,781,809 $ 57,472,371 $ 8,330,547 $ 7,421,538 $ 96,080,449 $ 99,720,848 $ 9,914,332 $ 11,504,888
============ ============ ============ ============ ============ ============ ============ ============
$ 41,550,923 $ 40,267,154 $ 6,122,409 $ 5,230,849 $ 62,088,102 $ 63,131,461 $ 13,405,064 $ 13,300,655
(243,273) -- 1,656 35,495 (318,197) 284,937 23,227 --
(4,333,565) 7,714,111 271,529 289,511 (622,657) 4,909,485 (3,654,722) (935,567)
10,807,724 9,491,106 1,934,953 1,865,683 34,932,750 31,402,973 133,542 (859,337)
-- -- -- -- 451 (8,008) 7,221 (863)
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
$ 47,781,809 $ 57,472,371 $ 8,330,547 $ 7,421,538 $ 96,080,449 $ 99,720,848 $ 9,914,332 $ 11,504,888
============ ============ ============ ============ ============ ============ ============ ============
990,152 4,344,293 112,331 129,469 2,358,545 5,340,368 737,977 960,282
509,689 118,231 28,572 38,770 317,636 213,976 -- 1,354
(1,358,756) (4,726,969) (83,241) (65,109) (2,678,021) (5,690,151) (732,994) (977,683)
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
141,085 (264,445) 57,662 103,130 (1,840) (135,807) 4,983 (16,047)
============ ============ ============ ============ ============ ============ ============ ============
</TABLE>
See accompanying notes to financial statements on pages 46-58.
43
<PAGE>
SIT MUTUAL FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
REGIONAL SCIENCE AND TECHNOLOGY
GROWTH FUND GROWTH FUND
-------------------------- --------------------------
SIX MONTHS SIX MONTHS
ENDED SIX MONTHS ENDED SIX MONTHS
DECEMBER 31, ENDED DECEMBER 31, ENDED
1998 JUNE 30, 1998 JUNE 30,
(UNAUDITED) 1998(*) (UNAUDITED) 1998(*)
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) ............................... $ 1,989 $ 8,500 $ (19,855) $ (3,908)
Net realized gain (loss) on investments .................... (163,498) 26,658 (190,824) (44,932)
Net change in unrealized appreciation
(depreciation) on investments .......................... 771,739 412,674 1,487,394 665,094
Net realized gain (loss) on foreign currency transactions .. -- -- -- --
Net change in unrealized appreciation (depreciation) on
foreign currency transactions .......................... -- -- -- --
----------- ----------- ----------- -----------
Net increase (decrease) in net assets resulting from
operations ......................................... 610,230 447,832 1,276,715 616,254
----------- ----------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ...................................... (12,000) -- -- --
Net realized gains on investments .......................... -- -- -- --
----------- ----------- ----------- -----------
Total distributions .................................... (12,000) 0 0 0
----------- ----------- ----------- -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold .................................. 1,345,180 4,764,788 4,410,786 4,529,940
Reinvested distributions ................................... 11,188 -- -- --
Payments for shares redeemed ............................... (745,587) (230,847) (919,051) (287,855)
----------- ----------- ----------- -----------
Increase (decrease) in net assets from
capital share transactions ......................... 610,781 4,533,941 3,491,735 4,242,085
----------- ----------- ----------- -----------
Total increase in net assets ....................... 1,209,011 4,981,773 4,768,450 4,858,339
NET ASSETS
Beginning of period ........................................ 4,981,773 0 4,858,339 0
----------- ----------- ----------- -----------
End of period .............................................. $ 6,190,784 $ 4,981,773 $ 9,626,789 $ 4,858,339
=========== =========== =========== ===========
NET ASSETS CONSIST OF:
Capital (par value and paid-in surplus) .................... $ 5,144,722 $ 4,533,941 $ 7,729,912 $ 4,238,177
Undistributed (distributions in excess of) net
investment income ...................................... (1,511) 8,500 (19,855) --
Accumulated net realized gain (loss) from
security transactions and foreign
currency transactions .................................. (136,840) 26,658 (235,756) (44,932)
Unrealized appreciation (depreciation) on investments ...... 1,184,413 412,674 2,152,488 665,094
Unrealized appreciation (depreciation) on foreign
currency transactions .................................. -- -- -- --
----------- ----------- ----------- -----------
$ 6,190,784 $ 4,981,773 $ 9,626,789 $ 4,858,339
=========== =========== =========== ===========
CAPITAL TRANSACTIONS IN SHARES:
Sold ....................................................... 131,406 463,573 359,939 439,554
Reinvested distributions ................................... 979 -- -- --
Redeemed ................................................... (70,741) (21,275) (77,080) (26,626)
----------- ----------- ----------- -----------
Net increase (decrease) ......................................... 61,644 442,298 282,859 412,928
=========== =========== =========== ===========
</TABLE>
(*) Period since commencement of operations (12/31/97)
See accompanying notes to financial statements on pages 46-58.
44
<PAGE>
(This page has been left blank intentionally.)
45
<PAGE>
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,
open-end management investment companies, or series thereof. The Sit
Developing Markets Growth, Sit Small Cap Growth, Sit International Growth,
Sit Balanced, Sit Regional, and Sit Science and Technology Growth Funds are
series funds of Sit Mutual Funds, Inc.
This report covers the equity funds of the Sit Mutual Funds. The investment
objective for each Fund is as follows:
<TABLE>
<CAPTION>
Fund Investment Objective
---- --------------------
<S> <C>
Large Cap Growth Maximize long-term capital appreciation.
Mid Cap Growth Maximize long-term capital appreciation.
Small Cap Growth Maximize long-term capital appreciation.
Balanced Long-term capital appreciation consistent with the preservation of
principal and to provide regular income.
International Growth Maximize long-term capital appreciation.
Developing Markets Growth Maximize long-term capital appreciation.
Regional Growth Fund Maximize long-term capital appreciation.
Science and Technology Growth Fund Maximize long-term capital appreciation.
</TABLE>
Significant accounting policies followed by the Funds are summarized below:
INVESTMENTS IN SECURITIES
Investments in securities traded on national or international securities
exchanges or on the NASDAQ National Market System are valued at the last
quoted sales price prior to the time when assets are valued; securities
traded in the over-the-counter market and listed securities for which no
sale was reported on that date are valued at the last bid price; foreign
securities that are purchased in the form of American Depository Receipts
(ADRs) are valued in United States dollars at the latest quoted price on
the national securities exchange on which the ADR is traded. When market
quotations are not readily available, securities are valued at fair value
based on procedures determined in good faith by the Board of Directors.
Such fair values are determined using prices quoted by independent brokers
or pricing services. Securities maturing more than 60 days from the
valuation date are valued at the market price or approximate market value
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.
Security transactions are accounted for on the date the securities are
purchased or sold. Securities gains and losses are calculated on the
identified-cost basis. Dividend income is recorded on the ex-dividend date
or upon the receipt of ex-dividend notification in the case of certain
foreign securities. Interest, including level-yield amortization of
long-term bond premium and discount, is recorded on the accrual basis.
46
<PAGE>
ILLIQUID SECURITIES
Each Fund currently limits investments in illiquid securities to 15% of net
assets. At December 31, 1998, the Developing Markets Growth Fund and Small
Cap Growth Fund held investments in securities deemed illiquid by the
investment adviser. The aggregate value of such securities at December 31,
1998, was $409,312 and $868,750, representing 4.1% and 1.8% of the Fund's
net assets, respectively. Pursuant to the guidelines adopted by the Board
of Directors, certain unregistered securities are determined to be liquid
and are not included within the limitation specified above.
FOREIGN CURRENCY TRANSLATIONS AND FORWARD FOREIGN CURRENCY CONTRACTS
The market value of securities and other assets and liabilities denominated
in foreign currencies for Developing Markets Growth Fund and International
Growth Fund are translated daily into U.S. dollars at the closing rate of
exchange. Purchases and sales of securities, income and expenses are
translated at the exchange rate on the transaction date. Dividend and
interest income includes currency exchange gains (losses) realized between
the accrual and payment dates on such income. Exchange gains (losses) may
also be realized between the trade and settlement dates on security and
forward contract transactions. For securities denominated in foreign
currencies, the effect of changes in foreign exchange rates on realized and
unrealized gains or losses is reflected as a component of such gains or
losses.
The Developing Markets Growth and International Growth Funds may enter into
forward foreign currency exchange contracts for operational purposes and to
protect against adverse exchange rate fluctuation. The net U.S. dollar
value of foreign currency underlying all contractual commitments held by
the Funds and the resulting unrealized appreciation or depreciation are
determined using foreign currency exchange rates from an independent
pricing service. The Funds are subject to the credit risk that the other
party will not complete the obligations of the contract.
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. Also, due to the timing of
dividend distributions, the fiscal year in which amounts are distributed
may differ from the year that the income or realized gain (losses) were
recorded by the fund.
For federal income tax purposes the Developing Markets Growth Fund has a
capital loss carryover of $935,567 at June 30, 1998 which, if not offset by
subsequent capital gains, will begin to expire in 2004. It is unlikely that
the Board of Directors will authorize a distribution of net realized gains
until the available capital loss carryover is offset or expires.
DISTRIBUTIONS
Distributions to shareholders are recorded as of the close of business on
the record date. Such distributions are payable in cash or reinvested in
additional shares of the Funds' capital stock. Distributions from net
investment income, if any, are declared and paid quarterly for the Balanced
Fund and declared and paid annually for Regional Growth, Science and
Technology Growth, Developing Markets Growth, Small Cap Growth,
International Growth, Mid Cap Growth, and Large Cap Growth Funds.
Distributions from net realized gains, if any, will be made annually for
each of the Funds.
47
<PAGE>
SIT MUTUAL FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
CONCENTRATION OF INVESTMENTS
The Developing Markets Growth Fund may concentrate investments in countries
with limited or developing capital markets which may involve greater risks
than investments in more developed markets and the prices of such
investments may be volatile. The consequences of political, social or
economic changes in these markets may have disruptive effects on the market
prices of the Fund's investments and the income it generates, as well as
the Fund's ability to repatriate such amounts.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported results. Actual results could
differ from those estimates.
(2) INVESTMENT SECURITY TRANSACTIONS
Purchases of and proceeds from sales and maturities of investment
securities, other than short-term securities, for the period ended December
31, 1998, were as follow:
Purchases Proceeds
--------- --------
Large Cap Growth Fund $46,235,499 $52,950,692
Mid Cap Growth Fund 118,548,238 155,499,912
Small Cap Growth Fund 14,341,725 23,553,803
Balanced Fund 4,330,132 3,696,580
International Growth Fund 19,254,560 27,283,604
Developing Markets Growth Fund 4,061,138 4,212,510
Regional Growth Fund 2,405,648 1,986,245
Science and Technology Growth Fund 4,496,686 1,859,426
(3) EXPENSES
INVESTMENT ADVISER
The Funds each have entered into an investment management agreement with
Sit Investment Associates Inc. (SIA), under which SIA manages the Fund's
assets and provides research, statistical and advisory services, and pays
related office rental, executive expenses and executive salaries. The fee
for investment management and advisory services is based on the average
daily net assets of the Funds at the annual rate of:
48
<PAGE>
Contractual Net of Adviser's
Management Voluntary Fee
Fee Waiver
--- ------
Large Cap Growth Fund 1.00% 1.00%
Mid Cap Growth Fund 1.25% 1.00%
Small Cap Growth Fund 1.50% 1.50%
Balanced Fund 1.00% 1.00%
International Growth Fund 1.85% 1.50%
Developing Markets Growth Fund 2.00% 2.00%
Regional Growth Fund 1.25% 1.00%
Science and Technology Growth Fund 1.50% 1.25%
SIA 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).
For the period November 1, 1996 through December 31, 1999 the Adviser has
agreed to limit the management fee (and, thereby, all fund expenses, except
those not payable by the fund as set forth above) of the Mid Cap Growth
Fund to 1.00% of the Fund's average daily net assets. For the period
January 1, 1994 through December 31, 1999, the Adviser has agreed to limit
the management fee (and, thereby, all fund expenses, except those not
payable by the fund as set forth above) of the International Growth Fund to
1.50% of the Fund's average daily net assets. For the period January 1,
1998 through December 31, 1999 the Adviser has agreed to limit the
management fee (and, thereby, all fund expenses, except those not payable
by the fund as set forth above) of the Regional Growth and Science and
Technology Growth Fund to 1.00% and 1.25%, respectively, of the Fund's
average daily net assts. After December 31, 1999, these voluntary fee
waivers may be discontinued by the Adviser in its sole discretion. During
the period ended December 31, 1998, for the Mid Cap Growth, International
Growth, Regional Growth, and Science and Technology Growth Funds, SIA
voluntarily absorbed an additional $435,516, $161,824, $6,391 and $7,190,
respectively, in expenses that were otherwise payable by the Funds.
As of December 31, 1998, the Large Cap Growth Fund, International Growth
Fund, and Mid Cap Growth Fund had invested $1,000,000, $500,000, and
$1,000,000, respectively, in the Sit Money Market Fund. The terms of such
transactions were identical to those of non-related entities except that,
to avoid duplicate investment advisory fees, SIA remits to each Fund an
amount equal to all fees otherwise due to them under their investment
management agreement for the assets invested in the Sit Money Market Fund.
INVESTMENT SUB-ADVISER
SIA has entered into a sub-advisory arrangement with an affiliated
international investment adviser, Sit/Kim International Investment
Associates, Inc. ("SKI"). SKI provides investment research information and
portfolio management service for the Developing Markets Growth Fund and
International Growth Fund. Generally, as compensation for its services
under the sub-advisory agreement, SIA pays SKI a monthly fee of 1/12 of
.75% on the first $100 million of each Fund's average daily net assets,
1/12 of .50% on the next $100 million of average daily net assets and 1/12
of .40% of average daily net assets in excess of $200 million. SKI has
agreed to waive any fees under the agreement to the extent that cumulative
out of pocket expenses of each Fund borne by SIA exceed the cumulative fees
received by SIA pursuant to each Fund's investment management agreement. In
accordance with the Agreement, fees of $337,952 were paid or payable to SKI
for the period ended December 31, 1998.
49
<PAGE>
SIT MUTUAL FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 December
31, 1998:
% Shares
Shares Outstanding
------ -----------
Large Cap Growth Fund 457,492 18.54%
Mid Cap Growth Fund 3,738,211 13.20
Small Cap Growth Fund 1,039,501 35.06
Balanced Fund 135,313 26.92
International Growth Fund 1,060,615 20.36
Developing Markets Growth Fund 208,879 16.36
Regional Growth Fund 107,700 21.37
Science and Technology Growth Fund 154,952 22.27
(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 in the following financial highlights for each Fund.
50
<PAGE>
SIT LARGE CAP GROWTH FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Six Months
Ended
December 31, Years Ended June 30,
1998 ------------------------------------------------------------
(Unaudited) 1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE:
Beginning of period $ 49.34 $ 40.39 $ 32.75 $ 28.38 $ 23.89 $ 25.61
- ------------------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income -- .02 .07 .04 .11 .23
Net realized and unrealized gains
(losses) on investments 2.72 13.17 10.02 6.61 5.88 (.33)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from operations 2.72 13.19 10.09 6.65 5.99 (.10)
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (.01) (.07) (.03) (.04) (.09) (.23)
From realized gains (3.41) (4.17) (2.42) (2.24) (1.41) (1.39)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (3.42) (4.24) (2.45) (2.28) (1.50) (1.62)
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE:
End of period $ 48.64 $ 49.34 $ 40.39 $ 32.75 $ 28.38 $ 23.89
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return (1) 5.95% 35.33% 32.36% 24.48% 26.33% (0.58%)
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000's omitted) $120,011 $117,496 $ 72,226 $ 53,017 $ 45,211 $ 34,612
RATIOS:
Expenses to average daily net assets 1.00% (3) 1.00% 1.00%(2) 1.00% 1.00%(2) 1.10%(2)
Net investment income (loss) to average daily net
assets (0.02%)(3) 0.06% 0.20%(2) 0.14% 0.42%(2) 0.89%(2)
Portfolio turnover rate (excluding short-term securities) 42.52% 43.61% 32.23% 49.99% 67.14% 73.62%
</TABLE>
- --------------
(1) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value.
(2) During the years ended June 30, 1997, 1996, 1995 and 1994, the investment
adviser voluntarily absorbed $50,548, $110,099, $132,305 and $112,191
respectively, in expenses that were otherwise payable by the Fund. Had the
Fund incurred these expenses, the ratio of expenses to average daily net
assets would have been 1.08%, 1.23%, 1.35% and 1.40% for the years ended
June 30, 1997, 1996, 1995, and 1994 respectively, and the ratio of net
investment income(loss) to average daily net assets would have been 0.11%,
(.09%), 0.07%, and 0.59% respectively.
(3) Percentages are adjusted to an annual rate.
51
<PAGE>
SIT MID CAP GROWTH FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Six Months
Ended
December 31, Years Ended June 30,
1998 -----------------------------------------------------------
(Unaudited) 1998 1997 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE:
Beginning of period $ 16.49 $ 15.43 $ 15.58 $ 13.00 $ 11.08 $ 11.91
- -----------------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) (.02) (.07) (.03) (.04) -- (.01)
Net realized and unrealized gains
(losses) on investments (.99) 3.15 2.50 4.07 2.96 (.51)
- -----------------------------------------------------------------------------------------------------------------------------------
Total from operations (1.01) 3.08 2.47 4.03 2.96 (.52)
- -----------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income -- -- -- -- -- (.02)
From realized gains (2.54) (2.02) (2.62) (1.45) (1.04) (.29)
- -----------------------------------------------------------------------------------------------------------------------------------
Total distributions (2.54) (2.02) (2.62) (1.45) (1.04) (.31)
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE:
End of period $ 12.94 $ 16.49 $ 15.43 $ 15.58 $ 13.00 $ 11.08
- -----------------------------------------------------------------------------------------------------------------------------------
Total investment return (1) (4.83%) 22.19% 17.23% 33.00% 28.44% (4.62%)
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000's omitted) $366,467 $404,327 $386,543 $356,317 $327,879 $285,175
RATIOS:
Expenses to average daily net assets 1.00% (2) 1.00% (2) 0.92% (2) 0.77% 0.83% 0.82%
Net investment income (loss) to avg. daily net assets (0.33%)(2) (0.41%)(2) (0.20%)(2) (0.23%) 0.02% (0.08%)
Portfolio turnover rate (excluding short-term securities) 36.20% 52.62% 38.66% 50.38% 75.40% 46.71%
</TABLE>
- ---------------
(1) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value.
(2) Percentages for the period ended December 31, 1998 are adjusted to an
annual rate. Effective November 1, 1996, total Fund expenses are
contractually limited to 1.25% of average daily net assets. However, during
the period ended December 31, 1998, and the years ended June 30, 1998 and
1997, the investment adviser voluntarily absorbed $435,516, $1,004,074, and
$609,840, respectively, in expenses that were otherwise payable by the
Fund. Had the Fund incurred these expenses, the ratio of expenses to
average daily net assets would have been 1.25%, 1.25%, and 1.09% for the
period ended December 31, 1998, and the years ended June 30, 1998 and 1997,
respectively, and the ratio of net investment income (loss) to average
daily net assets would have been (0.58%), (0.66%) and (0.37%),
respectively.
52
<PAGE>
SIT SMALL CAP GROWTH FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Six Months
Ended
December 31, Years Ended June 30,
1998 ---------------------------------------------
(Unaudited) 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE:
Beginning of period $ 20.35 $ 18.89 $ 19.27 $ 13.49 $ 10.00
- -------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment loss (.08) (.17) (.14) (.11) (.02)
Net realized and unrealized gains
on investments (1.07) 2.31 .57 6.03 3.56
- -------------------------------------------------------------------------------------------------------------------------
Total from operations (1.15) 2.14 .43 5.92 3.54
- -------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From realized gains (3.09) (.68) (.81) (.14) (.05)
Total distributions (3.09) (.68) (.81) (.14) (.05)
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE:
End of period $ 16.11 $ 20.35 $ 18.89 $ 19.27 $ 13.49
- -------------------------------------------------------------------------------------------------------------------------
Total investment return (1) (4.14%) 11.70% 2.37% 44.13% 35.59%
- -------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000's omitted) $ 47,782 $ 57,472 $ 58,358 $ 50,846 $ 12,015
RATIOS:
Expenses to average daily net assets 1.50% 1.50% 1.50% 1.50% 1.50%
Net investment income (loss) to average daily net assets (1.04%)(2) (0.72%) (0.81%) (0.91%) (0.30%)
Portfolio turnover rate (excluding short-term securities) 31.82% 79.54% 58.39% 69.92% 49.39%
</TABLE>
- ---------------
(1) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value.
(2) Percentages are adjusted to an annual rate.
53
<PAGE>
SIT BALANCED FUND
FINANCIAL HIGHTLIGHTS
<TABLE>
<CAPTION>
Six Months
Ended
December 31, Years Ended June 30, Period Ended
1998 ------------------------------------------- June 30,
(Unaudited) 1998 1997 1996 1995 1994(1)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE:
Beginning of period $ 16.68 $ 14.93 $ 12.57 $ 10.99 $ 9.48 $ 10.00
- ---------------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income .16 .34 .33 .30 .28 .13
Net realized and unrealized gains
(losses) on investments .73 2.99 2.42 1.57 1.50 (.59)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from operations .89 3.33 2.75 1.87 1.78 (.46)
- ---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (.24) (.35) (.32) (.29) (.27) (.06)
From realized gains (.76) (1.23) (.07) -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (1.00) (1.58) (.39) (.29) (.27) (.06)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE:
End of period $ 16.57 $ 16.68 $ 14.93 $ 12.57 $ 10.99 $ 9.48
- ---------------------------------------------------------------------------------------------------------------------------------
Total investment return (2) 5.65% 23.95% 22.42% 17.26% 19.16% (4.56%)
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000's omitted) $ 8,331 $ 7,422 $ 5,103 $ 4,062 $ 2,444 $ 1,296
RATIOS:
Expenses to average daily net assets 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%(3)
Net investment income to average daily net assets 1.98% 2.20% 2.48% 2.61% 2.97% 2.87%(3)
Portfolio turnover rate (excluding short-term securities) 52.34% 62.62% 38.16% 101.37% 50.61% 52.53%
</TABLE>
- ---------------
(1) Period from December 31, 1993 (commencement of operations), to June 30,
1994.
(2) 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.
(3) Percentages are adjusted to an annual rate.
54
<PAGE>
SIT INTERNATIONAL GROWTH FUND
FINANCIAL HIGHTLIGHTS
<TABLE>
<CAPTION>
Six Months
Ended
December 31, Years Ended June 30,
1998 -----------------------------------------------------------
(Unaudited) 1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE:
Beginning of period $ 19.14 $ 18.57 $ 16.29 $ 15.71 $ 14.87 $ 11.99
- ------------------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) (.06) .02 .01 .02 .09 (.04)
Net realized and unrealized gains
on investments .51 1.25 2.70 1.50 1.06 3.08
- ------------------------------------------------------------------------------------------------------------------------------------
Total from operations .45 1.27 2.71 1.52 1.15 3.04
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (.06) (.03) (.01) (.09) (.04) (.10)
From realized gains (1.08) (.67) (.42) (.85) (.27) (.06)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (1.14) (.70) (.43) (.94) (.31) (.16)
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE:
End of period $ 18.45 $ 19.14 $ 18.57 $ 16.29 $ 15.71 $ 14.87
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return (1) 2.73% 7.50% 17.04% 10.21% 7.86% 25.26%
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000's omitted) $96,080 $99,721 $99,279 $88,712 $68,125 $63,699
RATIOS:
Expenses to average daily net assets 1.50% (2) 1.50%(2) 1.50%(2) 1.50%(2) 1.50%(2) 1.65% (2)
Net investment income (loss) to avg. daily net assets (0.69%)(2) 0.12%(2) 0.05%(2) 0.13%(2) 0.62%(2) (0.16%)(2)
Portfolio turnover rate (excluding short-term securities) 22.03% 43.74% 41.59% 38.55% 40.42% 42.48%
</TABLE>
- ---------------
(1) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value.
(2) Percetages for the period ended December 31, 1998, are adjusted to an
annual rate. Total Fund expenses are contractually limited to 1.85% of
average daily net assets. However, during the period ended December 31,
1998 and the years ended June 30, 1998, 1997, 1996, 1995, and 1994, the
investment adviser voluntarily absorbed $161,824, $338,651, $306,575,
$269,556, $228,795, and $111,320, respectively, in expenses that were
otherwise payable by the fund. Had the Fund incurred these expenses, the
ratio of expenses to average daily net assets would have been 1.85% for
the period ended December 31, 1998, and the years ended June 30, 1998,
1997, 1996, 1995 and 1994, and the ratio of net investment income (loss)
to average daily net assets would have been (1.04%), (0.23%), (0.30%),
(0.22%), 0.27% and (0.36%), respectively.
55
<PAGE>
SIT DEVELOPING MARKETS GROWTH FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Six Months
Ended Years Ended June 30,
December 31, --------------------------------------------
1998
(Unaudited) 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE:
Beginning of period $ 9.05 $ 13.04 $ 10.95 $ 9.41 $ 10.00
- --------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) .02 (.06) .03 -- --
Net realized and unrealized gains
(losses) on investments (1.30) (3.92) 2.06 1.55 (.54)
- --------------------------------------------------------------------------------------------------------------------------
Total from operations (1.28) (3.98) 2.09 1.55 (.54)
- --------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income -- (.01) -- -- --
From realized gains -- -- -- (.01) (.05)
- --------------------------------------------------------------------------------------------------------------------------
Total distributions -- (.01) -- (.01) (.05)
- --------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE:
End of period $ 7.77 $ 9.05 $ 13.04 $ 10.95 $ 9.41
- --------------------------------------------------------------------------------------------------------------------------
Total investment return (1) (14.14%) (30.52%) 19.09% 16.51% (5.44%)
- --------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000's omitted) $ 9,914 $11,505 $16,789 $ 8,646 $ 4,618
RATIOS:
Expenses to average daily net assets 2.00%(2) 2.00% 2.00% 2.00% 2.00%
Net investment income (loss) to average daily net assets 0.43%(2) (0.52%) 0.32% 0.06% 0.03%
Portfolio turnover rate (excluding short-term securities) 49.02% 53.36% 65.88% 46.22% 56.35%
</TABLE>
- ---------------
(1) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value.
(2) Percentages are adjusted to an annual rate.
56
<PAGE>
SIT REGIONAL GROWTH FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Six Months
Ended Six Months
December 31, Ended
1998 June 30,
(Unaudited) 1998
- ----------------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE:
Beginning of period $ 11.26 $ 10.00
- ----------------------------------------------------------------------------------------
OPERATIONS:
Net investment income -- .02
Net realized and unrealized gains
on investments 1.04 1.24
- ----------------------------------------------------------------------------------------
Total from operations 1.04 1.26
- ----------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (.02) --
From realized gains -- --
- ----------------------------------------------------------------------------------------
Total distributions (.02) .00
- ----------------------------------------------------------------------------------------
NET ASSET VALUE:
End of period $ 12.28 $ 11.26
- ----------------------------------------------------------------------------------------
Total investment return (1) 9.28% 12.60%
- ----------------------------------------------------------------------------------------
Net assets at end of period (000's omitted) $ 6,191 $ 4,982
RATIOS:
Expenses to average daily net assets 1.00%(2) 1.00%(2)
Net investment income to average net assets 0.08%(2) 0.44%(2)
Portfolio turnover rate (excluding short-term securities) 40.72% 19.71%
</TABLE>
- ----------------
(1) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value.
(2) Adjusted to an annual rate. Total Fund expenses are contractually limited
to 1.25% of average daily net assets. However, during the periods ended
December 31, and June 30, 1998, the investment adviser voluntarily absorbed
$6,391 and $3,611, respectively, in expenses that were otherwise payable by
the Fund. Had the fund incurred these expenses, the ratio of expenses to
average daily net assets would have been 1.25% for the periods ended
December 31, and June 30, 1998, and the ratio of net investment income
(loss) to average daily net assets would have been (0.17%) and 0.19%,
respectively.
57
<PAGE>
SIT SCIENCE AND TECHNOLOGY GROWTH FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Six Months
Ended Six Months
December 31, Ended
1998 June 30,
(Unaudited) 1998
- -----------------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE:
Beginning of period $ 11.77 $ 10.00
- -----------------------------------------------------------------------------------------
Operations:
Net investment income (.05) (.01)
Net realized and unrealized gains
on investments 2.12 1.78
- -----------------------------------------------------------------------------------------
Total from operations 2.07 1.77
- -----------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income -- --
From realized gains -- --
- -----------------------------------------------------------------------------------------
Total distributions .00 .00
- -----------------------------------------------------------------------------------------
NET ASSET VALUE:
End of period $ 13.84 $ 11.77
- -----------------------------------------------------------------------------------------
Total investment return (1) 17.59% 17.70%
- -----------------------------------------------------------------------------------------
Net assets at end of period (000's omitted) $ 9,627 $ 4,858
RATIOS:
Expenses to average daily net assets 1.25% (2) 1.25% (2)
Net investment income to average net assets (0.69%)(2) (0.21%)(2)
Portfolio turnover rate (excluding short-term securities) 33.74% 19.37%
</TABLE>
- ---------------
(1) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value.
(2) Adjusted to an annual rate. Total Fund expenses are contractually limited
to 1.50% of average daily net assets. However, during the periods ended
December 31, and June 30, 1998, the investment adviser voluntarily absorbed
$7,190 and $4,655, respectively, in expenses that were otherwise payable by
the Fund. Had the fund incurred these expenses, the ratio of expenses to
average daily net assets would have been 1.50% for the periods ended
December 31, and June 30, 1998, and the ratio of net investment income
(loss) to average daily net assets would have been (0.94%) and (0.46%),
respectively.
58
<PAGE>
SIT MUTUAL FUNDS
RESULTS OF THE SHAREHOLDER MEETING
The annual meeting of the shareholders of the Funds was held on October 27,
1998. Directors elected by the shareholders at the meeting were as follows:
Eugene C. Sit, Peter L. Mitchelson, William E. Frenzel, John E. Hulse, Sidney L.
Jones, and Donald W. Phillips for all Funds and Michael C. Brilley for the Sit
Bond Funds only.
The matters voted on by the shareholders of record as of August 28, 1998 and the
results of the shareholders' vote at the October 27, 1998 meeting were as
follows:
1. Election of Directors:
For Withheld
--- --------
Eugene C. Sit
Large Cap Growth 1,300,353 5,868
Mid Cap Growth 13,308,819 63,207
Small Cap Growth 1,811,055 9,035
Balanced 291,457 2,388
Regional Growth 317,320 400
Science and Technology Growth 307,741 1,136
International Growth 2,562,450 21,109
Developing Markets Growth 863,313 7,410
William E. Frenzel
Large Cap Growth 1,300,353 5,868
Mid Cap Growth 13,310,755 61,271
Small Cap Growth 1,810,883 9,207
Balanced 291,457 2,388
Regional Growth 317,275 445
Science and Technology Growth 307,697 1,180
International Growth 2,562,352 21,207
Developing Markets Growth 862,093 8,630
John E. Hulse
Large Cap Growth 1,299,197 7,024
Mid Cap Growth 13,307,957 64,068
Small Cap Growth 1,811,055 9,035
Balanced 291,457 2,388
Regional Growth 317,275 445
Science and Technology Growth 307,512 1,365
International Growth 2,562,352 21,207
Developing Markets Growth 861,901 8,822
Sidney L. Jones
Large Cap Growth 1,299,931 6,290
Mid Cap Growth 13,310,955 61,070
Small Cap Growth 1,811,055 9,035
Balanced 291,457 2,388
Regional Growth 317,320 400
Science and Technology Growth 307,741 1,365
International Growth 2,562,450 21,109
Developing Markets Growth 861,901 8,822
59
<PAGE>
SIT MUTUAL FUNDS
RESULTS OF THE SHAREHOLDER MEETING
For Withheld
--- --------
Peter L. Mitchelson
Large Cap Growth 1,299,925 6,296
Mid Cap Growth 13,313,941 58,085
Small Cap Growth 1,810,711 9,379
Balanced 291,457 2,388
Regional Growth 317,320 400
Science and Technology Growth 307,697 1,180
International Growth 2,562,352 21,207
Developing Markets Growth 863,121 7,602
Donald W. Phillips
Large Cap Growth 1,299,197 7,024
Mid Cap Growth 13,311,972 60,054
Small Cap Growth 1,811,055 9,035
Balanced 291,457 2,388
Regional Growth 317,320 400
Science and Technology Growth 307,697 1,180
International Growth 2,562,352 21,207
Developing Markets Growth 863,121 7,602
2. Ratification of KPMG Peat Marwick LLP as independent auditors for the
Funds:
For Against Abstain
--- ------- -------
Large Cap Growth 1,296,821 6,807 2,593
Mid Cap Growth 13,265,664 26,250 80,111
Small Cap Growth 1,818,150 290 1,649
Balanced 292,928 917 0
Regional Growth 315,919 45 1,756
Science and Technology Growth 308,416 43 417
International Growth 2,520,526 19,573 43,460
Developing Markets Growth 856,606 11,626 2,491
3. Amendment of the Sit Large Cap Growth Fund, Sit Mid Cap Growth Fund, Sit
U.S. Government Securities Fund, and the Sit International Growth Fund's
fundamental investment restrictions to eliminate the restrictions on
investing in securities of investment companies.
For Against Abstain
--- ------- -------
Large Cap Growth 1,227,595 23,778 17,516
Mid Cap Growth 11,877,175 323,696 200,456
U.S. Government Securities 5,248,572 347,985 201,296
International Growth 2,424,429 45,534 50,026
60
<PAGE>
[LOGO]
Directors:
Eugene C. Sit, CFA
Peter L. Mitchelson, CFA
William E. Frenzel
John E. Hulse
Sidney L. Jones
Donald W. Phillips
Director Emeritus:
Melvin C. Bahle
Officers:
Eugene C. Sit, CFA Chairman
Peter L. Mitchelson, CFA Vice Chairman
Mary K. Stern, CFA President
Roger J. Sit Executive Vice President
Erik S. Anderson, CFA Vice President - Investments
Ronald D. Sit, CFA Vice President - Investments
Bryce A. Doty, CFA (1) Vice President - Investments
Robert W. Sit (2) Vice President - Investments
John T. Groton, Jr., CFA (3) Vice President - Investments
Paul E. Rasmussen Vice President & Treasurer
Michael P. Eckert Vice President
Michael J. Radmer Secretary
Debra A. Sit, CFA Assistant Treasurer
Carla J. Rose Assistant Secretary
(1) Sit Balanced Fund only.
(2) Sit Science and Technology Growth Fund only.
(3) Sit Regional Growth Fund only.
61
<PAGE>
SEMI-ANNUAL REPORT
STOCK FUNDS
SIX MONTHS ENDED DECEMBER 31, 1998
INVESTMENT ADVISER SUB-ADVISER
SIT INVESTMENT ASSOCIATES, INC. (DEVELOPING MARKETS GROWTH FUND AND
4600 NORWEST CENTER INTERNATIONAL GROWTH FUND)
MINNEAPOLIS, MN 55402 SIT/KIM INTERNATIONAL INVESTMENT ASSOCIATES,
612-334-5888 (METRO AREA) INC.
800-332-5580 4600 NORWEST CENTER
MINNEAPOLIS, MN 55402
DISTRIBUTOR 612-334-5888 (METRO AREA)
800-332-5580
SIA SECURITIES CORP.
4600 NORWEST CENTER
MINNEAPOLIS, MN 55402
612-334-5888 (METRO AREA)
800-332-5580
CUSTODIAN
THE NORTHERN TRUST COMPANY
50 SOUTH LASALLE STREET
CHICAGO, IL 60675
TRANSFER AGENT AND
DISBURSING AGENT
FIRST DATA INVESTOR SERVICES
P.O. BOX 5166
WESTBORO, MA 01581-5166
AUDITORS
KPMG PEAT MARWICK LLP
4200 NORWEST CENTER
MINNEAPOLIS, MN 55402
LEGAL COUNSEL
DORSEY & WHITNEY LLP
220 SOUTH SIXTH STREET
MINNEAPOLIS, MN 55402
MEMBER OF
====================
100% NO-LOAD
MUTUAL FUND
COUNCIL
====================
