SIT MUTUAL FUNDS
STOCK FUNDS
ANNUAL REPORT
YEAR ENDED JUNE 30, 2000
A FAMILY OF NO-LOAD FUNDS
-------------------------
BALANCED FUND
LARGE CAP GROWTH FUND
REGIONAL GROWTH FUND
MID CAP GROWTH FUND
INTERNATIONAL GROWTH FUND
SMALL CAP GROWTH FUND
SCIENCE AND TECHNOLOGY GROWTH FUND
DEVELOPING MARKETS GROWTH FUND
[LOGO] SIT INVESTMENT ASSOCIATES
--------------------------------
SIT MUTUAL FUNDS
<PAGE>
SIT MUTUAL FUNDS
STOCK FUNDS ANNUAL REPORT
TABLE OF CONTENTS
PAGE
----
A Look at Sit Mutual Funds 2
Chairman's Letter 4
Performance Review 6
FUND REVIEWS AND PORTFOLIOS OF INVESTMENTS
Balanced Fund 8
Large Cap Growth Fund 14
Regional Growth Fund 18
Mid Cap Growth Fund 22
International Growth Fund 26
Small Cap Growth Fund 32
Science and Technology Growth Fund 36
Developing Markets Growth Fund 40
Notes to Portfolios of Investments 44
Statements of Assets and Liabilities 46
Statements of Operations 48
Statements of Changes in Net Assets 50
Notes to Financial Statements 54
Financial Highlights 59
Independent Auditors' Report 67
Federal Income Tax Information 68
1
<PAGE>
SIT MUTUAL FUNDS
A LOOK AT THE SIT MUTUAL FUNDS
Sit Mutual funds are managed by Sit Investment Associates, Inc. Sit
Investment Associates was founded by Eugene C. Sit in July 1981 and is dedicated
to a single purpose, to be one of the premier investment management firms in the
United States. Sit Investment Associates currently manages approximately $10
billion for some of America's largest corporations, foundations and endowments.
Sit Mutual Funds are NO-LOAD funds. NO-LOAD means that Sit Mutual Funds
have no sales charges on purchases, no deferred sales charges, no 12b-1 fees, no
redemption fees and no exchange fees. Every dollar you invest goes to work for
you.
Sit Mutual Funds offer:
* Free telephone exchange
* Dollar-cost averaging through an automatic investment plan
* Electronic transfer for purchases and redemptions
* Free checkwriting privileges on bond funds
* Retirement accounts including IRAs and 401(k) plans
SIT FAMILY OF FUNDS
[GRAPH]
STABILITY: INCOME: GROWTH: HIGH GROWTH:
SAFETY OF PRINCIPAL INCREASED INCOME LONG-TERM CAPITAL LONG-TERM CAPITAL
AND CURRENT INCOME APPRECIATION AND APPRECIATION
INCOME
MONEY MARKET U.S. GOVERNMENT BALANCED MID CAP GROWTH
SECURITIES LARGE CAP GROWTH INTERNATIONAL GROWTH
TAX-FREE INCOME REGIONAL GROWTH SMALL CAP GROWTH
MINNESOTA TAX-FREE SCIENCE AND
INCOME TECHNOLOGY GROWTH
BOND DEVELOPING MARKETS
GROWTH
PRINCIPAL STABILITY GROWTH
& CURRENT INCOME POTENTIAL
2
<PAGE>
<TABLE>
<S> <C> <C>
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
Stock Funds Officers:
Eugene C. Sit, CFA Chairman
Peter L. Mitchelson, CFA Vice Chairman
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 - Institutional Client Group
Shelley H. Shutes Vice President - Shareholder Services
Michael J. Radmer Secretary
Debra A. Sit, CFA Assistant Treasurer
Carla J. Rose Assistant Secretary
</TABLE>
(1) Sit Balanced Fund only.
(2) Sit Science and Technology Growth Fund only.
(3) Sit Regional Growth Fund only.
3
<PAGE>
[PHOTO] SIT MUTUAL FUNDS
YEAR ENDED JUNE 30, 2000
-----------------------------------------------------------------------
CHAIRMAN'S LETTER
Dear Fellow Shareholders:
Despite significant volatility in the equity markets over the past year, most
domestic indices posted solid gains for the period. Although rising interest
rates pressured fixed income markets, recent signs of a moderating U.S economy
may suggest that the worst is over for bond investors.
ECONOMIC OVERVIEW
The U.S economy continues to perform remarkably well as June represented the
111th month of the current economic expansion. The economy, as measured by Gross
Domestic Product (GDP), has grown at an average annualized rate of +6.2% over
the last three quarters that have been reported, although we forecast a
deceleration for the most recent (June) quarter. The economy finally appears to
have slowed down modestly from the torrid pace of the past few quarters,
primarily due to the cumulative impact of rising interest rates, higher energy
prices, and a moderating "wealth effect." Despite evidence of slowing consumer
spending and residential spending, we believe that the fundamentals of the
economy remain quite strong. The unemployment rate remains at a very low 4%,
personal income gains remain healthy, and consumer confidence remains high.
Furthermore, in recent years, second quarter slowdowns have been followed by
third quarter recoveries, which we believe will be the case again this year.
Specifically, many observers have pointed to sharp contractions in retail sales
as a sign of softness in the economy. However, we have studied historical retail
sales patterns and have concluded that weakness in sales has frequently been
followed by equally strong rebounds. Easing energy prices, growing export
orders, and a recovery in government spending are a formula for continued
strength in economic activity. Although we project a slowdown in second quarter
GDP (to +3.5%), we believe economic growth will exceed +4% in the second half of
the year.
The inflation outlook remains mixed, as some recent relief in commodity prices
(energy and grains) is being offset with ongoing concerns about labor costs. The
monthly increase in the June CPI rose sharply by +0.6%, although the "core" rate
- excluding food and energy--rose a more modest +0.2%. The widely followed
National Association of Purchasing Managers Prices Paid Index fell to 61.2, down
from a peak of 80.0 earlier in the year. Labor, however, continues to be in
tight supply, as evidenced by the July employment report. The civilian
unemployment rate fell from 4.1% to 4.0%, and average hourly earnings rose +3.6%
compared to last year.
Overall, we continue to see favorable economic trends over the near- to
intermediate-term. Economic growth has dropped off in the second quarter, which
is a favorable development in forestalling further Federal Reserve interest rate
increases. Inflation pressures persist but they should not worsen as energy
prices appear to be leveling out, manufacturing activity is beginning to
moderate, and corporations continue to invest heavily in productivity-enhancing
technology. We expect one final 25 basis point increase in the federal funds
rate by the Federal Reserve at the upcoming August FOMC meeting. We do not
expect significant movement in market interest rates over the intermediate term,
consistent with our projection for continued strength in the economy and a
moderate level of inflation.
In terms of fiscal policy, the outlook appears quite positive, as both near-term
and long-term budget surplus forecasts were raised during the past month. Most
private forecasters project the fiscal 2000 surplus at $225 billion, and we
believe it could be higher. The strong economy, low unemployment, and large
capital gains taxes generated by the strong stock market are some of the factors
that are driving total receipts, which have grown +11.2% over the past nine
months. Meanwhile, expenditures have been growing at half that rate (i.e.,
+5.6%) due, in part, to decreasing interest payments on the national debt.
Accounting for 13% of total outlays, interest payments decreased -1.7% on a
year-over-year basis and should continue on a downward path with further debt
buybacks and contained interest rates.
Importantly, while growth in the United States may have slowed somewhat, the
global economic expansion is going strong. The outlook for growth in Europe
remains particularly robust, supported by recent data on employment, capacity
utilization, and strong export growth. The European Central Bank has forecasted
that the economy will exceed its +3.0% targeted growth rate this year and next,
up from +2.4% in 1999. Asian economies continue to rebound from the downturn of
4
<PAGE>
two years ago, and we expect intra-regional trade and investment to fuel further
growth in the region. While we are more cautious on the outlook for many Latin
American markets, we believe the victory of Vicente Fox Quesada as president
bodes well for the future of Mexico.
EQUITY STRATEGY SUMMARY
Despite a modest setback in the second quarter, all major domestic stock indices
posted positive returns over the last twelve months. Once again, there were
significant performance variations across capitalizations (smaller stocks did
better than large), styles (growth outperformed value) and sectors (technology
outperformed everything). The strength in technology stocks over the past year
is particularly striking; we estimate that the electronic technology sector
within the S&P 500 Index outperformed the overall index by nearly 55 percentage
points. Equity returns for the Sit Mutual Funds clearly benefited from a strong
commitment to the technology sector and, despite a higher valuation level for
the sector, we believe an overweighted position is still appropriate. We
continue to believe that we are in the early stages of a broad-based,
technological advance for our economy that is providing attractive investment
opportunities across a wide variety of emerging growth industries within the
Internet, telecommunications, and biotechnology.
Although we project a slowdown in the U.S. economy from the unsustainable pace
of the last few quarters, we believe the economic environment will remain strong
enough to support healthy profit growth for the overall market. Importantly,
however, we expect some deceleration in the rate of earnings growth for the S&P
500 Index to occur throughout the year. This has historically provided a
positive backdrop for growth stocks relative to value issues, as investors tend
to be more willing to "pay up" for predictable earnings growth as overall
profits moderate. Therefore, our position in equity portfolio structuring is to
remain committed to the fastest earnings growth sectors of the economy
(particularly health care and technology) in spite of periodic bouts of
volatility associated with them. We have also become more upbeat on the
financial sector, largely based on industry consolidation activity and prospects
for more positive investor sentiment in a more benign interest rate environment.
Stock market volatility has remained high and has been at unprecedented levels
among the NASDAQ indices. First half 2000 volatility for the NASDAQ 100 Index
greatly exceeded that experienced in the second half of 1987, which included the
October 1987 stock market crash. Market volatility is rising due to the growing
number of retail investors involved in short-term trading and high turnover
practices, and increased use of "momentum" strategies by institutional
investors. In addition, the narrow number of industry groups that are
outperforming their related broad market indices and the continuing high
representation of more volatile technology and health care stocks among the
favored few sectors are the principal reasons for the sustained high volatility.
Our view is that the fundamental outlook for technology and other high growth
sectors remains strong and that volatility and market "corrections" that
inevitably occur within these sectors from time to time serve to create
investment opportunities.
Our view toward the international equity markets is positive despite current
cyclical interest rate pressures. Economic activity continues to expand and
corporate profit growth is strong, particularly in Europe, and we recently
raised our targeted allocation to the region based on improving growth
prospects. In Asia, the northern region is growing briskly, bolstered by robust
export sectors, and there are positive signs that Japan's economy is beginning
to revive. Although we continue to maintain only a modest exposure in Latin
America because of financial market volatility, we have increased our weighting
in Mexico. We believe that the recent election outcome increases the likelihood
of Mexico's strengthening participation in the global economy, increased
corporate profit growth, and domestic deregulation of key industries.
With best wishes,
/s/ Eugene C. Sit
Eugene C. Sit, CFA
Chairman and Chief Investment Officer
5
<PAGE>
Sit Mutual Funds
YEAR ENDED JUNE 30, 2000
--------------------------------------------------------------------------------
PERFORMANCE SUMMARY - STOCK FUNDS
Domestic equity markets generated solid results over the past 12 months,
although market volatility and rising interest rates posed challenges along the
way. In sharp contrast to previous years, small capitalization stocks turned in
strong performance relative to larger capitalization issues. The +14.3% return
for the Russell 2000 Index was almost twice the return of +7.3% for the S&P 500
Index. Medium capitalization indices also fared well, as evidenced by the +17.0%
return for the S&P 400 Mid Cap Index. While some of the strong relative
performance could be related to attractive valuation levels, much of the gain
can be attributed to investor enthusiasm for smaller growth companies focused in
the most dynamic areas within the new economy.
Growth stocks outperformed value stocks by a wide margin during the past
twelve months. The Russell 1000 Growth Index increased +25.7%, while the Russell
1000 Value Index fell -8.9%. This trend was also evident in small capitalization
indices, as the Russell 2000 Growth Index rose +28.4%, compared to the -0.9%
decline in the Russell 2000 Value Index. The exceptional performance of the
technology sector, which is more heavily weighted in growth indices, was a key
reason for the performance differential. Over the past twelve months, we
estimate the performance of the electronic technology sector within the S&P 500
Index and the Russell 2000 Index rose +62.2% and +96.6%, respectively. The
technology-laden NASDAQ OTC Composite Index rose an impressive +47.7% over the
period.
International equity market indices also moved higher over the past twelve
months. The MSCI World Index--one of the broadest measures of global equity
returns--increased +12.2%. The MSCI Pacific Index (+21.6%) and the MSCI Japan
Index (+26.6%) were particularly strong over the period, bolstered by continued
evidence of economic recovery in the Asian region. The MSCI Europe Index also
moved solidly higher, posting a one-year return of +15.1%.
1988 1989 1990
---------------------------
SIT BALANCED -- -- --
-------------------------------------------------------------------
SIT LARGE CAP GROWTH 5.33% 32.02% -2.37%
-------------------------------------------------------------------
SIT REGIONAL GROWTH -- -- --
-------------------------------------------------------------------
SIT MID CAP GROWTH(1) 9.77 35.15 -2.04
-------------------------------------------------------------------
SIT INTERNATIONAL GROWTH(2) -- -- --
-------------------------------------------------------------------
SIT SMALL CAP GROWTH(1) -- -- --
-------------------------------------------------------------------
SIT SCIENCE AND TECHNOLOGY GROWTH(3) -- -- --
-------------------------------------------------------------------
SIT DEVELOPING MARKETS GROWTH(2) --
-------------------------------------------------------------------
S&P 500 INDEX 16.55 31.61 -3.05
S&P MIDCAP 400 INDEX 20.87 35.55 -5.12
MSCI EAFE INDEX -- -- --
RUSSELL 2000 INDEX -- -- --
PSE TECH 100 INDEX -- -- --
MSCI EMERGING MARKETS FREE INDEX -- -- --
NASDAQ
SYMBOL INCEPTION
------ ---------
SIT BALANCED SIBAX 12/31/93
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SIT LARGE CAP GROWTH SNIGX 09/02/82
-------------------------------------------------------------------
SIT REGIONAL GROWTH n/a 12/31/97
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SIT MID CAP GROWTH NBNGX 09/02/82
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SIT INTERNATIONAL GROWTH SNGRX 11/01/91
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SIT SMALL CAP GROWTH SSMGX 07/01/94
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SIT SCIENCE AND TECHNOLOGY GROWTH SISTX 12/31/97
-------------------------------------------------------------------
SIT DEVELOPING MARKETS GROWTH SDMGX 07/01/94
-------------------------------------------------------------------
S&P 500 INDEX(8)
S&P MIDCAP 400 INDEX(8)
MSCI EAFE INDEX (5)
RUSSELL 2000 INDEX (6)
PSE TECH 100 INDEX
MSCI EMERGING MARKETS FREE INDEX (7)
--------------------------------------------------------------------------------
(1) STOCKS OF SMALL- AND MID-SIZED COMPANIES MAY BE SUBJECT TO MORE ABRUPT OR
ERRATIC MARKET MOVEMENTS THAN STOCKS OF LARGER, MORE ESTABLISHED COMPANIES.
(2) INTERNATIONAL INVESTING HAS SPECIAL RISKS, SUCH AS CURRENCY EXCHANGE
FLUCTUATIONS, HIGH VOLITILITY, ILLIQUIDITY AND THE POSSIBILITY OF POLITICAL
INSTABILITY.
(3) SINCE THE FUND FOCUSES ITS INVESTMENT ON COMPANIES INVOLVED IN THE
TECHNOLOGY SECTOR, AN INVESTMENT IN THE FUND MAY INVOLVE A GREATER DEGREE OF
RISK THAN AN INVESTMENT IN OTHER MUTUAL FUNDS WITH GREATER DIVERSIFICATION.
(4) PERIOD FROM FUND INCEPTION THROUGH CALENDAR YEAR-END.
6
<PAGE>
TOTAL RETURN -- CALENDAR YEAR
<TABLE>
<CAPTION>
YTD
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
-------------------------------------------------------------------------------------------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
-- -- -- -0.33% 25.43% 15.80% 21.73% 21.30% 20.15% 2.78%
-------------------------------------------------------------------------------------------------------
32.72% 4.94% 3.15% 2.83 31.66 23.05 31.70 30.56 33.41 4.02
-------------------------------------------------------------------------------------------------------
-- -- -- -- -- -- -- 23.05 15.55 -1.34
-------------------------------------------------------------------------------------------------------
65.50 -2.14 8.55 -0.47 33.64 21.87 17.70 6.84 70.65 13.92
-------------------------------------------------------------------------------------------------------
4.10(4) 2.69 48.37 -2.99 9.36 10.31 4.81 18.95 50.77 -10.00
-------------------------------------------------------------------------------------------------------
-- -- -- 11.57(4) 52.16 14.97 7.63 1.97 108.63 23.03
-------------------------------------------------------------------------------------------------------
-- -- -- -- -- -- -- 38.40 85.98 29.68
-------------------------------------------------------------------------------------------------------
-- -- -- -2.02(4) -4.29 17.27 -5.20 -24.93 82.50 -5.29
-------------------------------------------------------------------------------------------------------
30.46 7.64 10.07 1.32 37.58 22.96 33.36 28.58 21.04 -0.42
50.11 11.92 13.95 -3.60 30.94 19.19 32.29 19.11 14.72 8.97
0.26 -12.17 32.56 7.78 11.21 6.05 1.78 20.00 26.96 -4.06
-- -- -- 4.61 28.45 16.49 22.36 -2.54 21.26 3.04
-- -- -- -- -- -- -- 54.60 116.40 13.31
-- -- -- 2.80 -6.94 3.92 -13.40 -27.52 63.70 -8.97
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS FOR THE
TOTAL RETURN PERIODS ENDED JUNE 30, 2000
QUARTER SIX MONTHS SINCE
ENDED 6/30/00 ENDED 6/30/00 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION
------------------------------- --------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
-2.52% 2.78% 17.28% 17.38% 18.34% -- 16.10%
-----------------------------------------------------------------------------------------------------
-4.13 4.02 27.75 25.78 26.80 18.27% 17.61
-----------------------------------------------------------------------------------------------------
0.36 -1.34 6.30 -- -- -- 14.51
-----------------------------------------------------------------------------------------------------
-7.31 13.92 73.01 31.25 28.66 20.32 21.03
-----------------------------------------------------------------------------------------------------
-14.87 -10.00 33.38 14.44 14.09 -- 14.11
-----------------------------------------------------------------------------------------------------
-2.45 23.03 126.20 40.07 32.31 -- 32.84
-----------------------------------------------------------------------------------------------------
-0.54 29.68 119.17 -- -- -- 62.00
-----------------------------------------------------------------------------------------------------
-12.45 -5.29 34.57 1.03 7.43 -- 5.16
-----------------------------------------------------------------------------------------------------
-2.66 -0.42 7.25 19.67 23.80 17.80 18.50
-3.30 8.97 16.98 20.34 21.19 18.03 18.77
-3.96 -4.06 17.16 10.18 11.33 -- 9.56
-3.78 3.04 14.32 10.57 14.27 -- 15.15
-5.21 13.31 83.61 -- -- -- 70.46
-10.79 -8.97 7.66 -7.01 -1.12 -- -1.21
</TABLE>
(5) FIGURES ASSUME AN INCEPTION DATE OF 10/31/91.
(6) FIGURES ASSUME AN INCEPTION DATE OF 07/01/94.
(7) FIGURES ASSUME AN INCEPTION DATE OF 06/30/94.
(8) FIGURES ASSUME AN INCEPTION DATE OF 09/02/82.
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. HIGH DOUBLE
AND TRIPLE DIGIT PERFORMANCE FIGURES ARE ATTRIBUTABLE TO UNUSUALLY FAVORABLE
MARKET CONDITIONS AND MAY NOT BE REPEATED OR CONSISTENTLY ACHIEVED IN THE
FUTURE.
7
<PAGE>
[PHOTO] SIT BALANCED FUND
YEAR ENDED JUNE 30, 2000
-----------------------------------------------------------------------
PETER L. MITCHELSON, CFA, SENIOR PORTFOLIO MANAGER
BRYCE A. DOTY, CFA, SENIOR PORTFOLIO MANAGER
The Sit Balanced Fund posted strong absolute and relative returns for the
year ending June 30, 2000. The Fund's one-year return of +17.3% compared
favorably to the Lehman Aggregate Bond Index return of +4.6% and the S&P 500
Index return of +7.3%. The Lipper Balanced Fund Universe return was +4.4% over
the same time period. For the 1-year, 3-year, and 5-year periods ending June 30,
2000, the Fund has ranked in the 5th , 8th , and 7th percentiles out of 458,
340, and 237 funds, respectively, within the Lipper Balanced Fund Universe.
The equity portion of the portfolio posted solid returns over the past 12
months, as investors remained focused on the high growth sectors and themes that
are emphasized within the Fund. Although the electronic technology sector was
the standout performer over the period, the finance, health technology, and
technology services sectors also contributed significantly to the Fund's strong
relative returns. The Fund's sector overweights and underweights remain similar
to what they have been since the Fund's inception: overweights in high earnings
growth sectors and underweights in slower growing and/or more cyclical groups.
Although fixed income returns have lagged equity returns over the last 12
months, the first half of 2000 has produced improved relative returns for bonds.
After rising significantly over the past year, interest rates have recently
begun to decline in response to signs of slower domestic economic growth. We
expect interest rates to move modestly higher over the intermediate term, with
the Federal Reserve perhaps raising interest rates one more time this year at
the August FOMC meeting. Since we believe yield spreads will narrow in the
coming months, the Fund is maintaining a significant underweight in U.S.
Treasuries, with an overweighted position in corporate and mortgage-backed
sectors.
As of June 30, 2000 the asset allocation of the Fund was 54% equities, 36%
fixed income securities, and 10% cash and equivalents. We are very pleased with
both the short- and long-term record of the Sit Balanced Fund, and we thank
shareholders for their interest and participation.
INVESTMENT OBJECTIVE AND STRATEGY
The Sit Balanced Fund's dual objectives are to seek long-term growth of
capital consistent with the preservation of principal and to provide regular
income. It pursues its objectives by investing in a diversified portfolio of
stocks, bonds and short-term instruments. The Fund may emphasize either equity
securities, fixed-income securities, or short-term instruments or hold equal
amounts of each, dependent upon the Adviser's analysis of market, financial and
economic conditions.
The Fund's permissible investment allocation is: 40-60% in equity
securities, 40-60% in fixed-income securities, and up to 20% in short-term
fixed-income instruments. At all times at least 25% of the fixed-income assets
will be invested in fixed-income senior securities.
PORTFOLIO SUMMARY
Net Asset Value 6/30/00: $19.18 Per Share
6/30/99: $17.38 Per Share
Total Net Assets: $19.3 Million
TOTAL DIVIDEND: $1.11 PER SHARE
Long-Term Capital Gain: $0.74 Per Share
Ordinary Income: $0.37 Per Share
PORTFOLIO SUMMARY
(% OF TOTAL NET ASSETS)
[PIE CHART]
Cash & Other Net Assets 10.4%
Bonds 35.4%
Equities 54.2%
8
<PAGE>
AVERAGE ANNUAL TOTAL RETURNS*
SIT LEHMAN
BALANCED S&P AGGREGATE
FUND 500 INDEX BOND INDEX
-------- --------- ----------
3 Months** -2.52% -2.66% 1.74%
1 Year 17.28 7.25 4.56
3 Years 17.38 19.67 6.04
5 Years 18.34 23.80 6.25
Inception 16.10 21.48 6.05
(12/31/93)
CUMULATIVE TOTAL RETURNS*
SIT LEHMAN
BALANCED S&P AGGREGATE
FUND 500 INDEX BOND INDEX
-------- --------- ----------
1 Year 17.28% 7.25% 4.56%
3 Years 61.71 71.37 19.22
5 Years 132.13 190.82 35.41
Inception 163.98 254.23 46.51
(12/31/93)
*AS OF 6/30/00 **NOT ANNUALIZED.
--------------------------------------------------------------------------------
PERFORMANCE FIGURES ARE HISTORICAL AND DO NOT GUARANTEE FUTURE RESULTS.
INVESTMENT RETURNS AND PRINCIPAL VALUE WILL VARY, AND YOU MAY HAVE A GAIN OR
LOSS WHEN YOU SELL SHARES. AVERAGE ANNUAL TOTAL RETURNS INCLUDE CHANGES IN SHARE
PRICE AS WELL AS REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAINS. MANAGEMENT
FEES AND ADMINISTRATIVE EXPENSES ARE INCLUDED IN THE FUND'S PERFORMANCE;
HOWEVER, FEES AND EXPENSES ARE NOT INCORPORATED IN THE LEHMAN AGGREGATE BOND
INDEX AND THE S&P 500 INDEX. 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 6/30/00 would
have grown to $26,398 in the Fund, $14,651 in the Lehman Aggregate Bond Index or
$35,423 in the S&P 500 Index assuming reinvestment of all dividends and capital
gains.
TOP HOLDINGS
Stocks: * Intel Corp.
* Cisco Systems, Inc.
* General Electric Co.
* Microsoft Corp.
* Pfizer, Inc.
Bonds: * U.S. Treasury Note, 6.875%, 5/15/06
* U.S. Treasury Strip, 6.43%, 11/15/09
* Whirlpool Corp., 9.00%, 3/1/03
* Bradley Operating LP, 8.875%, 3/15/06
* Advanta Mortgage Loan Trust, 7.75%,
10/25/26
Total Number of Holdings: 149
9
<PAGE>
SIT BALANCED FUND
---------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS - JUNE 30, 2000
---------------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE($)(1)
---------------------------------------------------------------------
COMMON STOCKS (54.2%) (2)
COMMERCIAL SERVICES (0.5%)
2,100 SYSCO Corp. $88,463
--------------
CONSUMER DURABLES (0.6%)
3,000 Harley-Davidson, Inc. 115,500
--------------
CONSUMER NON-DURABLES (1.8%)
1,900 Coca Cola Co. 109,131
2,000 Colgate-Palmolive Co. 119,750
1,100 Kimberly-Clark Corp. 63,113
1,300 PepsiCo, Inc. 57,769
--------------
349,763
--------------
CONSUMER SERVICES (3.0%)
3,000 AT&T Corp. - Liberty Media Group (3) 72,750
2,000 Clear Channel Comm., Inc. (3) 150,000
1,000 General Motors Corp. - Class H 87,750
2,000 Time Warner, Inc. 152,000
2,800 Walt Disney Co. 108,675
--------------
571,175
--------------
ELECTRONIC TECHNOLOGY (15.7%)
600 Agilent Technologies, Inc. (3) 44,250
1,000 Applied Materials, Inc. (3) 90,625
150 Brocade Comm. Systems, Inc. (3) 27,523
9,000 Cisco Systems, Inc. (3) 572,062
3,800 EMC Corp. (3) 292,362
500 Hewlett-Packard Company 62,438
4,300 Intel Corp. 574,856
1,000 JDS Uniphase Corp. (3) 119,875
200 Juniper Networks, Inc. (3) 29,113
1,100 Lexmark International Group, Inc. (3) 73,975
1,000 Linear Technology Corp. 63,938
4,800 Nokia Corp., A.D.R. 239,700
800 Nortel Networks Corp. 54,600
1,100 QUALCOMM, Inc. (3) 66,000
2,300 Sun Microsystems, Inc. (3) 209,156
2,300 Tellabs, Inc. (3) 157,406
2,800 Texas Instruments, Inc. 192,325
2,000 Xilinx, Inc. (3) 165,125
--------------
3,035,329
--------------
ENERGY MINERALS (1.2%)
2,900 Anadarko Petroleum Corp. 143,006
2,500 EOG Resources, Inc. 83,750
--------------
226,756
--------------
---------------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE($)(1)
---------------------------------------------------------------------
FINANCE (5.6%)
1,681 American International Group, Inc. 197,517
2,700 Chase Manhattan Corp. 124,369
2,000 Citigroup, Inc. 120,500
2,000 Marsh & McLennan Cos., Inc. 208,875
2,000 Morgan Stanley Dean Witter & Co. 166,500
2,700 Wells Fargo Co. 104,625
3,100 XL Capital, Ltd. 167,787
--------------
1,090,173
--------------
HEALTH SERVICES (0.6%)
1,400 UnitedHealth Group, Inc. 120,050
--------------
HEALTH TECHNOLOGY (8.6%)
1,000 American Home Products Corp. 58,750
4,000 Amgen, Inc. (3) 281,000
1,000 Biogen, Inc. (3) 64,500
3,000 Bristol-Myers Squibb Co. 174,750
500 Eli Lilly and Co. 49,938
400 Genentech, Inc. (3) 68,800
1,500 MedImmune, Inc. (3) 111,000
4,800 Medtronic, Inc. 239,100
2,300 Merck & Co., Inc. 176,237
7,375 Pfizer, Inc. 354,000
1,500 Pharmacia Corp. 77,531
--------------
1,655,606
--------------
INDUSTRIAL SERVICES (1.6%)
2,900 Halliburton Co. 136,844
700 Schlumberger, Ltd. 52,238
2,200 Transocean Sedco Forex, Inc. 117,562
--------------
306,644
--------------
PRODUCER MANUFACTURING (3.0%)
9,000 General Electric Co. 459,000
2,700 Tyco International, Ltd. 127,913
--------------
586,913
--------------
RETAIL TRADE (2.5%)
3,000 Home Depot, Inc. 149,812
1,800 Kohl's Corp. (3) 100,125
2,300 Target Corp. 133,400
3,000 Walgreen Co. 96,562
--------------
479,899
--------------
TECHNOLOGY SERVICES (6.0%)
2,400 America Online, Inc. (3) 126,600
5,000 Ceridian Corp. (3) 120,312
1,400 Computer Sciences Corp. (3) 104,562
800 Inktomi Corp. (3) 94,600
5,500 Microsoft Corp. (3) 440,000
3,000 Oracle Corp. (3) 252,187
250 VERITAS Software Corp. (3) 28,254
--------------
1,166,515
--------------
10
<PAGE>
---------------------------------------------------------------------
QUANTITY/PAR($) NAME OF ISSUER MARKET VALUE($)(1)
---------------------------------------------------------------------
UTILITIES (3.5%)
600 Enron Corp. 38,700
4,300 Global Crossing, Ltd. (3) 113,144
1,000 Nextel Communications, Inc. (3) 61,188
3,100 Sprint Corp. 158,100
4,000 Vodafone Airtouch, A.D.R. 165,750
2,850 WorldCom, Inc (3) 130,744
--------------
667,626
--------------
Total common stocks
(cost: $6,806,550) 10,460,412
--------------
BONDS (34.8%) (2)
U.S. TREASURY (6.6%)
700,000 U.S. Treasury Note, 6.875%, 5/15/06 720,344
U.S. Treasury Strip, zero coupon:
25,000 6.93% Effective Yield, 11/15/04 19,141
900,000 6.43% Effective Yield, 11/15/09 497,042
125,000 6.22% Effective Yield, 2/15/19 39,602
--------------
1,276,129
--------------
ASSET-BACKED SECURITIES (8.9%)
Advanta Mortgage Loan Trust:
25,000 1995-3 A5, 7.37%, 2/25/27 24,567
50,000 1996-1 A7, 7.07%, 3/25/27 47,850
300,000 1999-3 A4, 7.75%, 10/25/26 297,843
Conseco Home Equity Loan:
150,000 1999-F A3, 6.97%, 10/15/30 147,649
300,000 2000-D A4, 8.17%, 10/15/31 297,525
150,000 Conseco Mfg. Housing,
2000-1 A5, 8.06%, 5/1/31 147,471
74,999 ContiMortgage Home Equity Loan Tr.,
1996-1 A7, 7.00%, 3/15/27 72,108
EQCC Home Equity Loan Trust:
25,000 1996-1 A5, 6.93%, 3/15/27 23,425
250,000 1996-4 A8, 7.41%, 1/15/28 239,622
Green Tree Financial Corp.:
20,000 1995-5, 7.25%, 9/15/26 19,494
25,000 1997-4, 7.03%, 2/15/29 24,181
50,000 1999-E A3, 7.18%, 6/15/15 49,786
Money Store Home Equity Mtg.:
300,000 6.725%, 6/15/24 277,365
50,000 7.265%, 7/15/38 49,092
--------------
1,717,978
--------------
---------------------------------------------------------------------
QUANTITY/PAR($) NAME OF ISSUER MARKET VALUE($)(1)
---------------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS (0.8%)
64,628 PNC Mortgage Securities Corp.
Series 1998-6 4A, 6.75%, 8/25/13 63,225
100,000 Norwest Asset Securities Corp.
Series 1998-19 2A12, 6.75%, 7/25/28 92,784
--------------
156,009
--------------
CORPORATE BONDS (11.4%)
125,000 Allstate Finance, 7.83%, 12/1/45 107,892
American Airlines:
25,000 1999-1 A2, 7.024%, 10/15/09 23,751
25,000 1999-1 B, 7.324%, 10/15/09 23,770
100,000 Bank America, 8.25%, 4/15/27 93,422
350,000 Bradley Operating LP, 8.875%, 3/15/06 332,951
50,000 Burlington North Santa Fe
Series 1999-2, 7.57%, 1/2/21 48,997
Continental Airlines:
46,403 1997-1A, 7.461%, 4/1/15 44,518
74,791 1999-1B, 6.795%, 8/2/18 68,414
48,694 1999-1A, 6.545%, 2/2/19 44,316
100,000 First Hawaiian Cap., 8.343%, 7/1/27 89,288
First Industrial LP:
100,000 7.00%, 12/1/06 91,513
50,000 7.15%, 5/15/27 48,930
100,000 Household Fin. Corp., 7.875%, 3/1/07 99,509
50,000 May Department Stores, 9.875%, 6/15/21 52,843
200,000 Pentair, Inc., 7.85%, 10/15/09 198,047
9,000 Ryder System, Inc., 8.75%, 3/15/17 9,194
150,000 Security Capital Group, 7.75%, 11/15/03 146,238
75,000 Supervalu, Inc., 7.875%, 8/1/09 73,780
50,000 Union Carbide Corp., 8.75%, 8/1/22 51,689
194,510 Union Tank Car Co., 6.57%, 1/2/14 182,507
350,000 Whirlpool Corp., 9.00%, 3/1/03 361,571
--------------
2,193,140
--------------
FEDERAL AGENCY (0.3%)
200,000 Resolution Funding Corp., zero coupon,
6.75% Effective Yield, 10/15/19 56,574
--------------
FEDERAL HOME LOAN MORTGAGE CORPORATION (0.5%)
35,715 9.00%, 7/1/16 37,021
20,554 9.00%, 7/1/16 21,306
9,578 9.25%, 6/1/02 9,938
30,486 10.00%, 10/1/18 32,534
--------------
100,799
--------------
SEE ACCOMPANYING NOTES TO PORTFOLIOS OF INVESTMENTS ON PAGE 44.
11
<PAGE>
SIT BALANCED FUND
---------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS - JUNE 30, 2000
---------------------------------------------------------------------
QUANTITY/PAR($) NAME OF ISSUER MARKET VALUE($)(1)
---------------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (1.1%)
12,293 9.00%, 11/1/06 12,647
53,165 9.25%, 1/1/17 54,926
62,035 9.75%, 1/1/13 66,959
15,072 10.00%, 1/1/20 16,018
63,205 10.25%, 6/1/13 68,104
--------------
218,654
--------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (5.2%)
16,970 9.00%, 6/15/11 17,596
84,818 9.00%, 6/15/09 87,628
169,017 9.00%, 11/15/16 174,616
84,387 9.00%, 12/15/19 87,235
9,928 9.25%, 9/15/01 10,207
16,899 9.50%, 1/15/04 17,776
43,084 9.50%, 11/15/04 45,319
26,262 9.50%, 7/20/05 27,197
33,910 9.50%, 12/15/09 35,330
16,864 9.50%, 5/20/16 17,297
85,967 9.50%, 12/15/17 89,970
65,756 9.50%, 3/15/18 68,366
63,609 9.50%, 9/20/18 65,239
15,358 9.50%, 2/20/19 15,752
76,239 9.50%, 3/20/19 78,193
34,666 9.50%, 12/15/19 36,085
33,444 9.75%, 10/15/05 35,231
33,629 10.00%, 3/20/16 35,426
26,410 10.25%, 1/15/04 27,870
1,039 11.25%, 10/15/00 1,041
11,551 11.25%, 10/15/11 12,515
Municipal (GNMA collateralized):
12,000 Bernalillo Multifamily. Ser. 1998A,
7.50%, 9/20/20 11,673
--------------
997,562
--------------
Total bonds
(cost: $6,800,404) 6,716,845
--------------
CLOSED-END MUTUAL FUNDS (0.6%) (2)
6,009 American Select Portfolio 68,352
403 American Strategic, Inc. Portfolio 4,357
1,870 American Strategic, Inc. Portfolio II 20,687
2,209 American Strategic, Inc. Portfolio III 23,333
--------------
Total closed-end mutual funds 116,729
(cost: $119,725) --------------
---------------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE($)(1)
---------------------------------------------------------------------
SHORT-TERM SECURITIES (15.6%) (2)
3,011,000 Sit Money Market Fund, 6.35% (4) 3,011,000
--------------
(cost: $3,011,000)
Total investments in securities
(cost: $16,737,679) (5) $20,304,986
==============
SEE ACCOMPANYING NOTES TO PORTFOLIOS OF INVESTMENTS ON PAGE 44.
12
<PAGE>
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13
<PAGE>
[PHOTO] SIT LARGE CAP GROWTH FUND
YEAR ENDED JUNE 30, 2000
-----------------------------------------------------------------------
SENIOR PORTFOLIO MANAGERS
PETER L. MITCHELSON, CFA * ROGER J. SIT * RONALD D. SIT, CFA
The Sit Large Cap Growth Fund's one-year return was +27.8%, comparing
favorably to the S&P 500 Index return of +7.3%. The Russell 1000 Growth Index
return was +25.7% over the same time period.
Despite an increase in interest rates, most domestic stock indices posted
solid returns over the last 12 months. Performance varied widely across sectors
with technology stocks, once again, providing leadership for the broad market.
In fact, we estimate that the S&P 500 Index return was a negative -3.2% over the
past 12 months, rather than the actual return of +7.3%, if one excludes the
exceptional performance of the electronic technology sector. Growth stocks
dramatically outperformed value stocks over the past year, and we remain
enthusiastic about their prospects. We believe that the U.S. economy is
gradually slowing, and that investors will become more skeptical regarding
continued earnings gains for cyclical companies. This has historically led
investors toward the traditional growth sectors that are typically overweighted
in the Fund, including electronic technology, technology services, and health
technology.
Over the past 12 months, the Fund's strong relative performance compared to
the S&P 500 Index was due to a combination of positive stock selection in
electronic technology, technology services, and financial services sectors, and
overweighting the electronic technology sector.
As of June 30, 2000, the Fund was 98% invested in equities. Significant
sector weighting changes during the past year included increases in health
technology, technology services, and industrial services. These sectors were
increased through the purchase of Genentech, Medimmune, Inktomi, Veritas
Software, Halliburton, and Schlumberger. Sector weighting decreases occurred in
retail trade and consumer non-durables though the sale of Gap, Lowes, Group
Danone (ADR), and Procter & Gamble.
Given the attractive environment for growth stock investing and the many
investment opportunities available, we remain optimistic about the Fund's
prospects.
Over the past 12 months, the Fund's assets have increased from $140.3 to
$172.4 million, and we thank shareholders for their continued support and
interest.
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 at least 65%
of its total assets in the common stocks of domestic growth companies with
capitalizations of $5 billion or more at the time of purchase.
PORTFOLIO SUMMARY
Net Asset Value 6/30/00: $63.66 Per Share
6/30/99: $52.84 Per Share
Total Net Assets: $172.4 Million
Weighted Average Market Cap: $156.6 Billion
TOTAL DIVIDEND: $3.41 PER SHARE
Long-Term Capital Gain: $3.41 Per Share
PORTFOLIO STRUCTURE - BY SECTOR
(% OF TOTAL NET ASSETS)
[BAR CHART]
Electronic Technology 28.3
Health Technology 15.6
Technology Services 11.0
Finance 9.4
Utilities 6.9
Consumer Services 6.0
Producer Manufacturing 5.9
Retail Trade 5.2
Consumer Non-Durables 3.0
Sectors Under 3.0% 6.3
Cash & Other Net Assets 2.4
14
<PAGE>
AVERAGE ANNUAL TOTAL RETURNS*
SIT RUSSELL
LARGE CAP S&P 1000
GROWTH FUND 500 INDEX GROWTH INDEX
----------- --------- ------------
3 Month** -4.13% -2.66% -2.70%
1 Year 27.75 7.25 25.66
5 Years 26.80 23.80 28.67
10 Year*** 18.27 17.80 20.11
Inception*** 17.61 18.50 19.23
(9/2/82)
CUMULATIVE TOTAL RETURNS*
SIT RUSSELL
LARGE CAP S&P 1000
GROWTH FUND 500 INDEX GROWTH INDEX
----------- --------- ------------
1 Year 27.75% 7.25% 25.66%
5 Year 227.84 190.82 252.74
10 Year*** 435.70 414.79 524.84
Inception*** 1706.45 1966.95 2202.90
(9/2/82)
*AS OF 6/30/00 **NOT ANNUALIZED.
--------------------------------------------------------------------------------
PERFORMANCE FIGURES ARE HISTORICAL AND DO NOT GUARANTEE FUTURE RESULTS.
INVESTMENT RETURNS AND PRINCIPAL VALUE WILL VARY, AND YOU MAY HAVE A GAIN OR
LOSS WHEN YOU SELL SHARES. AVERAGE ANNUAL TOTAL RETURNS INCLUDE CHANGES IN SHARE
PRICE AS WELL AS REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAINS. MANAGEMENT
FEES AND ADMINISTRATIVE EXPENSES ARE INCLUDED IN THE FUND'S PERFORMANCE;
HOWEVER, FEES AND EXPENSES ARE NOT INCORPORATED IN THE RUSSELL 1000 GROWTH INDEX
AND THE S&P 500 INDEX.
***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.
GROWTH OF $10,000
[PLOT POINTS CHART]
The sum of $10,000 invested at inception (9/2/82) and held until
6/30/00 would have grown to $180,645 in the Fund or $206,695 in the S&P 500
Index assuming reinvestment of all dividends and capital gains.
TOP 10 HOLDINGS
* Cisco Systems, Inc.
* General Electric Co.
* Microsoft Corp.
* Intel Corp.
* Pfizer, Inc.
* EMC Corp.
* Amgen, Inc.
* Oracle Corp.
* Nokia Corp., ADR
* American International Group, Inc.
Total Number of Holdings: 73
15
<PAGE>
SIT LARGE CAP GROWTH FUND
--------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS - JUNE 30, 2000
--------------------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE ($)(1)
--------------------------------------------------------------------------
COMMON STOCKS (97.6%) (2)
COMMERCIAL SERVICES (0.5%)
21,500 SYSCO Corp. $905,688
---------------
CONSUMER DURABLES (1.0%)
45,200 Harley-Davidson, Inc. 1,740,200
---------------
CONSUMER NON-DURABLES (3.0%)
25,500 Coca Cola Co. 1,464,656
31,200 Colgate-Palmolive Co. 1,868,100
20,000 Kimberly-Clark Corp. 1,147,500
13,500 PepsiCo, Inc. 599,906
---------------
5,080,162
---------------
CONSUMER SERVICES (6.0%)
53,000 AT&T Corp. - Liberty Media Group (3) 1,285,250
37,900 Clear Channel Communications, Inc. (3) 2,842,500
14,000 General Motors Corp. - Class H 1,228,500
23,800 Time Warner, Inc. 1,808,800
34,177 Viacom, Inc. (3) 2,330,444
21,500 Walt Disney Co. 834,469
---------------
10,329,963
---------------
ELECTRONIC TECHNOLOGY (28.3%)
10,500 Agilent Technologies, Inc. (3) 774,375
18,000 Applied Materials, Inc. (3) 1,631,250
1,500 Brocade Comm. Systems, Inc. (3) 275,227
159,300 Cisco Systems, Inc. (3) 10,125,506
66,600 EMC Corp. (3) 5,124,037
2,000 Hewlett-Packard Company 249,750
50,900 Intel Corp. 6,804,694
20,000 JDS Uniphase Corp. (3) 2,397,500
2,500 Juniper Networks, Inc. (3) 363,906
18,000 Lexmark International Group, Inc. (3) 1,210,500
22,000 Linear Technology Corp. 1,406,625
82,000 Nokia Corp., A.D.R. 4,094,875
20,600 Nortel Networks Corp. 1,405,950
16,500 QUALCOMM, Inc. (3) 990,000
36,500 Sun Microsystems, Inc. (3) 3,319,219
39,700 Tellabs, Inc. (3) 2,716,969
42,200 Texas Instruments, Inc. 2,898,612
37,000 Xilinx, Inc. (3) 3,054,812
---------------
48,843,807
---------------
--------------------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE ($)(1)
--------------------------------------------------------------------------
ENERGY MINERALS (1.7%)
32,000 Anadarko Petroleum Corp. 1,578,000
42,500 EOG Resources, Inc. 1,423,750
---------------
3,001,750
---------------
FINANCE (9.4%)
28,375 American International Group, Inc. 3,334,062
43,650 Chase Manhattan Corp. 2,010,628
25,500 Citigroup, Inc. 1,536,375
27,000 Marsh & McLennan Cos., Inc. 2,819,812
35,000 Morgan Stanley Dean Witter & Co. 2,913,750
31,300 Wells Fargo Co. 1,212,875
43,600 XL Capital, Ltd. 2,359,850
---------------
16,187,352
---------------
HEALTH SERVICES (1.1%)
21,500 UnitedHealth Group, Inc. 1,843,625
---------------
HEALTH TECHNOLOGY (15.6%)
19,000 American Home Products Corp. 1,116,250
71,000 Amgen, Inc. (3) 4,987,750
14,500 Biogen, Inc. (3) 935,250
40,400 Bristol-Myers Squibb Co. 2,353,300
8,500 Eli Lilly and Co. 848,938
6,000 Genentech, Inc. (3) 1,032,000
28,500 MedImmune, Inc. (3) 2,109,000
54,200 Medtronic, Inc. 2,699,838
39,900 Merck & Co., Inc. 3,057,337
135,925 Pfizer, Inc. 6,524,400
23,000 Pharmacia Corp. 1,188,813
---------------
26,852,876
---------------
INDUSTRIAL SERVICES (2.0%)
33,500 Halliburton Co. 1,580,781
11,500 Schlumberger, Ltd. 858,188
19,500 Transocean Sedco Forex, Inc. 1,042,031
---------------
3,481,000
---------------
PRODUCER MANUFACTURING (5.9%)
153,300 General Electric Co. 7,818,300
48,200 Tyco International, Ltd. 2,283,475
---------------
10,101,775
---------------
16
<PAGE>
--------------------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE ($)(1)
--------------------------------------------------------------------------
RETAIL TRADE (5.2%)
56,550 Home Depot, Inc. 2,823,966
31,500 Kohl's Corp. (3) 1,752,187
41,700 Target Corp. 2,418,600
60,600 Walgreen Co. 1,950,563
---------------
8,945,316
---------------
TECHNOLOGY SERVICES (11.0%)
43,000 America Online, Inc. (3) 2,268,250
76,400 Ceridian Corp. (3) 1,838,375
23,300 Computer Sciences Corp. (3) 1,740,219
10,000 Inktomi Corp. (3) 1,182,500
88,500 Microsoft Corp. (3) 7,080,000
54,000 Oracle Corp. (3) 4,539,375
3,500 VERITAS Software Corp. (3) 395,555
---------------
19,044,274
---------------
UTILITIES (6.9%)
9,000 Enron Corp. 580,500
58,000 Global Crossing, Ltd. (3) 1,526,125
29,000 Nextel Communications, Inc. (3) 1,774,438
54,000 Sprint Corp. 2,754,000
69,500 Vodafone Airtouch, A.D.R. 2,879,906
53,400 WorldCom, Inc (3) 2,449,725
---------------
11,964,694
---------------
Total common stocks 168,322,482
(cost: $99,839,638) ---------------
SHORT-TERM SECURITIES (2.7%) (2)
4,721,000 Sit Money Market Fund, 6.35% (4) 4,721,000
(cost: $4,721,000) ---------------
Total investments in securities
(cost: $104,560,638) (5) $173,043,482
===============
SEE ACCOMPANYING NOTES TO PORTFOLIOS OF INVESTMENTS ON PAGE 44.
17
<PAGE>
[PHOTO] SIT REGIONAL GROWTH FUND
YEAR ENDED JUNE 30, 2000
-----------------------------------------------------------------------
EUGENE C. SIT, CFA, SENIOR PORTFOLIO MANAGER
For the year ending June 30, 2000, the Sit Regional Growth Fund posted a
return of +6.3%, while the S&P 500 Index return was +7.3% over the same time
period.
Despite an increase in interest rates over the past twelve months, investment
returns were positive for most major domestic indices during the period.
Although solid corporate earnings provided a degree of support for the broad
market, the remarkably strong performance of technology stocks allowed the
sector to almost single-handedly carry the market averages higher. Recently
released economic data have indicated a moderation in economic growth, which is
typically accompanied by a slowdown in corporate earnings. This suggests a
continued positive environment for growth stock investing, and we believe that
overweighting the "traditional" growth sectors -- particularly technology and
health care -- is appropriate.
Shareholders recently approved a proposal to combine the Sit Regional Growth
Fund into the Sit Large Cap Growth Fund. We believe the primary benefits of the
proposal, from a shareholder's perspective, are twofold. First, the Sit Regional
Growth Fund carried a higher contractual management fee, which was largely based
on the level of portfolio management necessary to manage a Fund with a
relatively small total asset level. Second, the Fund's geographic focus
prevented us from taking advantage of a number of attractive investment
opportunities outside the Midwestern region. Simply put, from both a risk and
return perspective, we believe that the Fund shareholders will benefit from the
broader objectives and strategy of the Sit Large Cap Growth Fund.
The strategy underlying the Sit Large Cap Growth Fund is very similar to the
Sit Regional Fund, in that a key investment objective is to identify investment
opportunities in dominant companies in high growth industries. However, we
believe that the ability to seek out the very best companies anywhere in the
country will, over time, lead to enhanced investment returns for Fund
shareholders. At the same time, we will continue to take advantage of the many
excellent investment opportunities within our geographic region. The Sit Large
Cap Growth Fund has posted solid investment results over both the near- and
long-term, and currently carries a four-star rating from Morningstar, Inc.
We have greatly appreciated shareholders' interest and participation in the
Sit Regional Growth Fund.
INVESTMENT OBJECTIVE AND STRATEGY
The objective of the Fund is to maximize long-term capital appreciation. The
Fund pursues this objective by investing at least 80% of its total assets in
common stocks of companies with their headquarters in Minnesota, Iowa, Missouri,
North Dakota, South Dakota, Nebraska, Kansas, Wisconsin, Illinois, Michigan,
Indiana, and Ohio. The Fund invests in growth-oriented companies it believes
exhibit the potential for superior growth.
PORTFOLIO SUMMARY
Net Asset Value 6/30/00: $14.00 Per Share
6/30/99: $13.17 Per Share
Total Net Assets: $ 6.58 Million
Weighted Average Market Cap: $27.0 Billion
PORTFOLIO STRUCTURE - BY SECTOR
(% OF TOTAL NET ASSETS)
[BAR CHART]
Electronic Technology 16.2
Retail Trade 14.2
Health Technology 11.8
Finance 10.3
Technology Services 6.3
Consumer Non-Durables 5.8
Producer Manufacturing 5.0
Consumer Services 4.4
Utilities 3.9
Sectors 3.0% and Under 7.7
Cash & Other Net Assets 14.4
18
<PAGE>
AVERAGE ANNUAL TOTAL RETURNS*
SIT
REGIONAL S&P RUSSELL
GROWTH FUND 500 INDEX 3000 INDEX
----------- --------- ----------
3 Month** 0.36% -2.66% -3.46%
1 Year 6.30 7.25 9.59
Inception 14.51 19.16 18.09
(12/31/97)
CUMULATIVE TOTAL RETURNS*
SIT
REGIONAL S&P RUSSELL
GROWTH FUND 500 INDEX 3000 INDEX
----------- --------- ----------
1 Year 6.30% 7.25% 9.59%
Inception 40.29 54.97 51.51
(12/31/97)
*AS OF 6/30/00 **NOT ANNUALIZED.
--------------------------------------------------------------------------------
PERFORMANCE FIGURES ARE HISTORICAL AND DO NOT GUARANTEE FUTURE RESULTS.
INVESTMENT RETURNS AND PRINCIPAL VALUE WILL VARY, AND YOU MAY HAVE A GAIN OR
LOSS WHEN YOU SELL SHARES. AVERAGE ANNUAL TOTAL RETURNS INCLUDE CHANGES IN SHARE
PRICE AS WELL AS REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAINS. MANAGEMENT
FEES AND ADMINISTRATIVE EXPENSES ARE INCLUDED IN THE FUND'S PERFORMANCE;
HOWEVER, FEES AND EXPENSES ARE NOT INCORPORATED IN THE S&P 500 INDEX AND THE
RUSSELL 3000 INDEX.
GROWTH OF $10,000
[PLOT POINTS CHART]
The sum of $10,000 invested at inception (12/31/97) and held until 6/30/00 would
have grown to $14,029 in the Fund, or $15,497 in the S&P 500 Index assuming
reinvestment of all dividends and capital gains.
TOP 10 HOLDINGS
* ADC Telecommunications, Inc.
* General Mills, Inc.
* Tellabs, Inc.
* Minnesota Mining & Mfg. Co.
* Northern Trust Corp.
* Emmis Communications Corp.
* Kohl's Corp.
* Sprint Corp.
* Eli Lilly & Co.
* Medtronic, Inc.
Total Number of Holdings: 23
19
<PAGE>
SIT REGIONAL GROWTH FUND
--------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS - JUNE 30, 2000
--------------------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE ($)(1)
--------------------------------------------------------------------------
COMMON STOCKS (85.6%) (2)
COMMERCIAL SERVICES (2.7%)
4,500 Ecolab, Inc. $175,781
------------
CONSUMER DURABLES (2.9%)
5,000 Harley-Davidson, Inc. 192,500
------------
CONSUMER SERVICES (4.4%)
7,000 Emmis Communications Corp. (3) 289,625
------------
CONSUMER NON-DURABLES (5.8%)
10,000 General Mills, Inc. 382,500
------------
ELECTRONIC TECHNOLOGY (16.2%)
6,000 ADC Telecommunications, Inc. (3) 503,250
4,500 National Computer Systems, Inc. 221,625
5,000 Tellabs, Inc. (3) 342,188
------------
1,067,063
------------
FINANCE (10.3%)
4,500 Northern Trust Corp. 292,781
6,000 TCF Financial Corp. 154,125
6,000 Wells Fargo Co. 232,500
------------
679,406
------------
HEALTH TECHNOLOGY (11.8%)
2,500 Eli Lilly & Co. 249,688
5,000 Medtronic, Inc. 249,063
3,500 Pharmacia Corp. 180,906
5,000 Sybron Int'l Corp. (3) 99,062
------------
778,719
------------
PRODUCER MANUFACTURING (5.0%)
4,000 Minnesota Mining & Mfg. Co. 330,000
------------
RETAIL TRADE (14.2%)
3,500 Best Buy, Inc. (3) 221,375
5,000 Kohl's Corp. (3) 278,125
3,500 Target Corp. 203,000
7,000 Walgreen Co. 225,312
------------
927,812
------------
--------------------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE ($)(1)
--------------------------------------------------------------------------
TECHNOLOGY SERVICES (6.3%)
7,500 Ceridian Corp. (3) 180,469
5,425 Fiserv, Inc. (3) 234,631
------------
415,100
------------
TRANSPORTATION (2.1%)
2,800 C.H. Robinson Worldwide, Inc. 138,600
------------
UTILITIES (3.9%)
5,000 Sprint Corp. 255,000
------------
Total common stocks 5,632,106
(cost: $3,664,761) ------------
SHORT-TERM SECURITIES (11.8%) (2)
775,000 Sit Money Market Fund, 6.35% (4) 775,000
------------
(cost: $775,000)
Total investments in securities
(cost: $4,439,761) (5) $6,407,106
============
SEE ACCOMPANYING NOTES TO PORTFOLIOS OF INVESTMENTS ON PAGE 44.
20
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This page has been left blank intentionally.
21
<PAGE>
[PHOTO] SIT MID CAP GROWTH FUND
YEAR ENDED JUNE 30, 2000
-----------------------------------------------------------------------
EUGENE C. SIT, CFA, SENIOR PORTFOLIO MANAGER
ERIK S. ANDERSON, CFA, SENIOR PORTFOLIO MANAGER
The Sit Mid Cap Growth Fund posted strong performance for the year ended June
30, 2000. The Fund's +73.0% return compares favorably with the +17.0% return for
the S&P 400 MidCap Index and the +48.6% return for the Russell MidCap Growth
Index.
Small and mid capitalization stocks outperformed large capitalization stocks
over the past year, ending an extended period of underperformance. While some of
the strong relative performance could be related to attractive valuation levels,
much of the gain can be attributed to investor enthusiasm for smaller growth
companies focused in the most dynamic areas within our new economy, including
such diverse areas as biotechnology, semiconductors, telecommunications and
software. The Fund's annual performance clearly benefited from significant
exposure to these highest growth areas. Some of the "winners" over the past year
include JDS Uniphase (+478%), Applied Micro Circuits (+380%), ADC
Telecommunications (+268%), MedImmune (+228%) and Check Point Software (690%).
While this strong outperformance has led to markedly increased valuations for
many of the companies, we believe that strong secular trends driving the sector
will lead to significantly higher earnings growth rates for technology companies
relative to the broader market. Furthermore, as U.S. economic growth appears to
be in the early stages of slowing, the technology sector may benefit as
investors seek out companies that can grow earnings under more challenging
economic conditions.
Over the past year, the most significant sector weighting increase occurred
in electronic technology. While some of the eight percentage point increase was
due to strong relative price appreciation, there were several new purchases,
including: Qualcomm, Scientific Atlanta, Waters, Network Appliance, and Brocade
Communications. The retail trade and consumer non-durable sectors had the
greatest weight decreases. Sales in these sectors included Dial, Dollar General,
and Staples. Electronic technology, technology services, and health technology
are currently the heaviest weighted sectors within the Fund.
Assets in the Sit Mid Cap Growth Fund totaled $566.6 million at the end of
June, up from $375.3 million a year ago. We appreciate shareholders' continued
interest and participation in the Fund.
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 at least 65% of its
total assets in the common stocks of growth companies with capitalizations of $2
billion to $15 billion at the time of purchase.
PORTFOLIO SUMMARY
Net Asset Value 6/30/00: $ 23.57 Per Share
6/30/99: $ 14.54 Per Share
Total Net Assets: $566.6 Million
Weighted Average Market Cap: $19.13 Billion
TOTAL DIVIDEND: $1.23 PER SHARE
Long-Term Capital Gain: $1.23 Per Share
PORTFOLIO STRUCTURE - BY SECTOR
(% OF TOTAL NET ASSETS)
[BAR CHART]
Electronic Technology 39.4
Technology Services 17.9
Health Technology 9.8
Finance 7.9
Utilities 4.3
Retail Trade 3.9
Consumer Services 3.5
Sectors less than 2.0% 7.1
Cash Equivalents 6.2
22
<PAGE>
AVERAGE ANNUAL TOTAL RETURNS*
SIT S&P RUSSELL
MID CAP MIDCAP MID CAP
GROWTH FUND 400 INDEX GROWTH INDEX
----------- --------- ------------
3 Month** -7.31% -3.30% -7.41%
1 Year 73.01 16.98 48.58
5 Year 28.66 21.19 26.37
10 Year 20.32 18.03 19.77
Inception 21.03 18.77 --
(9/2/82)
CUMULATIVE TOTAL RETURNS*
SIT S&P RUSSELL
MID CAP MIDCAP MID CAP
GROWTH FUND 400 INDEX GROWTH INDEX
----------- --------- ------------
1 Year 73.01% 16.98% 48.58%
5 Year 252.48 161.40 222.22
10 Year 536.13 424.61 507.50
Inception 2909.89 2049.97 --
(9/2/82)
*AS OF 6/30/00 **NOT ANNUALIZED.
--------------------------------------------------------------------------------
PERFORMANCE FIGURES ARE HISTORICAL AND DO NOT GUARANTEE FUTURE RESULTS.
INVESTMENT RETURNS AND PRINCIPAL VALUE WILL VARY, AND YOU MAY HAVE A GAIN OR
LOSS WHEN YOU SELL SHARES. AVERAGE ANNUAL TOTAL RETURNS INCLUDE CHANGES IN SHARE
PRICE AS WELL AS REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAINS. MANAGEMENT
FEES AND ADMINISTRATIVE EXPENSES ARE INCLUDED IN THE FUND'S PERFORMANCE;
HOWEVER, FEES AND EXPENSES ARE NOT INCORPORATED IN THE RUSSELL MID CAP GROWTH
INDEX AND 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 6/30/00 would
have grown to $300,989 in the Fund, or $214,997 in the S&P MidCap 400 Index
assuming reinvestment of all dividends and capital gains.
TOP 10 HOLDINGS
* JDS Uniphase Corp.
* Xilinx, Inc.
* Applied Micro Circuits Corp.
* Check Point Software Tech., Ltd.
* ADC Telecommunications, Inc.
* Jabil Circuit, Inc.
* Ace, Ltd.
* Dendrite International, Inc.
* MedImmune, Inc.
* Analog Devices, Inc.
Total Number of Holdings: 77
23
<PAGE>
SIT MID CAP GROWTH FUND
--------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS - JUNE 30, 2000
--------------------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE ($)(1)
--------------------------------------------------------------------------
COMMON STOCKS (93.2%) (2)
COMMERCIAL SERVICES (0.3%)
21,400 Omnicom Group, Inc. $1,905,938
---------------
CONSUMER DURABLES (1.3%)
38,000 Electronic Arts, Inc. (3) 2,771,625
122,500 Harley-Davidson, Inc. 4,716,250
---------------
7,487,875
---------------
CONSUMER NON-DURABLES (0.5%)
63,000 Estee Lauder Companies, Inc. 3,114,562
---------------
CONSUMER SERVICES (3.5%)
133,800 AMFM, Inc. (3) 9,232,200
60,800 Adelphia Communications Corp. (3) 2,850,000
112,800 EchoStar Communications Corp. (3) 3,734,737
36,200 Univision Communications, Inc. (3) 3,746,700
---------------
19,563,637
---------------
ELECTRONIC TECHNOLOGY (38.8%)
173,500 ADC Telecommunications, Inc. (3) 14,552,312
164,200 ASM Lithography Hldg., A.D.R. (3) 7,245,325
129,000 American Tower Corp. (3) 5,377,687
158,500 Analog Devices, Inc. (3) 12,046,000
190,800 Applied Micro Circuits Corp. (3) 18,841,500
127,700 Asyst Technologies, Inc. (3) 4,373,725
31,500 Brocade Communications Sys., Inc. (3) 5,779,758
105,900 Comverse Technology, Inc. (3) 9,848,700
351,800 JDS Uniphase Corp. (3) 42,172,025
270,600 Jabil Circuit, Inc. (3) 13,428,525
101,000 Lexmark International Group, Inc. (3) 6,792,250
85,600 Linear Technology Corp. 5,473,050
75,000 Maxim Integrated Products, Inc. (3) 5,095,312
69,700 Network Appliance, Inc. (3) 5,610,850
6,100 PMC-Sierra, Inc. (3) 1,083,894
94,900 QUALCOMM, Inc. (3) 5,694,000
82,200 Scientific-Atlanta, Inc. 6,123,900
130,125 Symbol Technologies, Inc. 7,246,336
138,200 Teradyne, Inc. (3) 10,157,700
102,800 Vitesse Semiconductor Corp. (3) 7,562,225
304,600 Xilinx, Inc. (3) 25,148,538
---------------
219,653,612
---------------
--------------------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE ($)(1)
--------------------------------------------------------------------------
ENERGY MINERALS (1.9%)
96,500 Devon Energy Corp. 5,422,094
154,000 EOG Resources, Inc. 5,159,000
---------------
10,581,094
---------------
FINANCE (7.9%)
461,900 Ace, Ltd. 12,933,200
120,000 American General Corp. 7,320,000
110,100 Kansas City Southern Industries, Inc. 9,764,494
51,400 Legg Mason, Inc. 2,570,000
234,600 TCF Financial Corp. 6,026,288
25,400 The Goldman Sachs Group, Inc. 2,409,825
84,700 Zions Bancorporation 3,886,936
---------------
44,910,743
---------------
HEALTH SERVICES (1.6%)
258,500 Oxford Health Plans, Inc. (3) 6,155,531
106,500 Tenet Healthcare Corp. (3) 2,875,500
---------------
9,031,031
---------------
HEALTH TECHNOLOGY (9.8%)
163,900 Biogen, Inc. (3) 10,571,550
155,300 Elan Corp., A.D.R. (3) 7,522,344
33,400 IDEC Pharmaceuticals Corp. (3) 3,918,237
192,400 Immunex Corp. (3) 9,511,775
167,700 MedImmune, Inc. (3) 12,409,800
23,000 Millennium Pharmaceuticals, Inc. (3) 2,573,125
65,600 PE Biosystems Group 4,321,400
36,700 Waters Corp. (3) 4,580,619
---------------
55,408,850
---------------
INDUSTRIAL SERVICES (1.5%)
70,300 Noble Drilling Corp. (3) 2,895,481
64,800 Transocean Sedco Forex, Inc. 3,462,750
49,800 Weatherford International, Inc. (3) 1,982,663
---------------
8,340,894
---------------
RETAIL TRADE (3.9%)
81,100 Bed Bath & Beyond, Inc. (3) 2,939,875
84,300 Best Buy Co., Inc. (3) 5,331,975
208,500 Kohl's Corp. (3) 11,597,812
34,200 Tiffany & Co. 2,308,500
---------------
22,178,162
---------------
24
<PAGE>
------------------------------------------------------------------------
QUANTITY/PAR($) NAME OF ISSUER MARKET VALUE($)(1)
------------------------------------------------------------------------
TECHNOLOGY SERVICES (17.9%)
83,200 BEA Systems, Inc. (3) 4,113,200
209,500 Ceridian Corp. (3) 5,041,094
74,100 Check Point Software Tech., Ltd. (3) 15,690,675
45,900 Computer Sciences Corp. (3) 3,428,156
376,700 Dendrite International, Inc. (3) 12,548,819
229,075 Fiserv, Inc. (3) 9,907,494
14,000 I2 Technologies, Inc. (3) 1,459,719
82,100 InfoSpace.com, Inc. (3) 4,536,025
69,400 Inktomi Corp. (3) 8,206,550
84,600 Internap Network Services (3) 3,512,222
226,800 Legato Systems, Inc. (3) 3,430,350
8,400 Micromuse, Inc. (3) 1,390,069
7,500 Sapient Corp. (3) 802,031
56,600 Siebel Systems, Inc. (3) 9,257,638
80,300 Vignette Corp. (3) 4,176,855
32,500 VeriSign, Inc. (3) 5,736,250
75,100 VERITAS Software Corp. (3) 8,487,473
---------------
101,724,620
---------------
UTILITIES (4.3%)
166,200 Allegiance Telecom, Inc. (3) 10,636,800
46,500 Dynegy, Inc. 3,176,531
188,200 NEXTLINK Communications, Inc. (3) 7,139,837
34,500 Telephone and Data Systems, Inc. 3,458,625
---------------
24,411,793
---------------
Total common stocks 528,312,811
---------------
(cost: $265,876,681)
CONVERTIBLE BOND (0.6%) (2)
3,250,000 Juniper Networks, 4.75%, 3/15/07 3,538,437
---------------
(cost: $3,249,926)
SHORT-TERM SECURITIES (4.4%) (2)
25,031,000 Sit Money Market Fund, 6.35% (4) 25,031,000
---------------
(cost: $25,031,000)
Total investments in securities
(cost: $294,157,607) (5) $556,882,248
===============
SEE ACCOMPANYING NOTES TO PORTFOLIOS OF INVESTMENTS ON PAGE 44.
25
<PAGE>
[PHOTO] SIT INTERNATIONAL GROWTH FUND REVIEW
YEAR ENDED JUNE 30, 2000
-----------------------------------------------------------------------
SENIOR PORTFOLIO MANAGERS
EUGENE C. SIT, CFA AND ROGER J. SIT
The Sit International Growth Fund's one-year return of 33.4% compared
favorably with the MSCI EAFE Index gain of 17.2% and the Lipper International
Fund Index rise of 23.6%. A major reason for the Fund's outperformance relative
to the EAFE and Lipper Indexes was the Fund's weight in telecommunication and
technology companies (42.3%) and the non-index Canadian holdings (6.5%).
The first half of 2000 was rocked by significant volatility in international
markets as the run-up of "TMT" stocks (telecommunications, media, and
technology) in 1999 and early 2000 succumbed to a sharp sell-off in March and
April. The TMT sector did stage a partial recovery in late May and June, but
most stocks are still below their highs. We continue to believe the focus of the
markets will be growth, which will carry telecommunication and technology stocks
to new highs. The earnings outlook for these companies is positive and
valuations can be justified.
The main factor, in our opinion, that will drive the equity markets higher
over the next 12 months will be the growth of the global economies. We have been
seeing increasing evidence that the recovery of the European economies is
underway. Signs of increasing employment, higher rates of capacity utilization,
and strong export growth on the back of a competitive euro are all evident in
Europe. The euro has appreciated from its lows as sentiment in Euroland
improves. The economic recovery in Japan is more tenuous, although the economy
has returned to positive growth in the first quarter of 2000 after two previous
quarters of contraction. Recent increases in private corporate investment and
capital expenditures increase our cautious optimism that a prolonged recovery is
underway in Japan.
We will continue to target a Europe weight of 58%. Our weight in Japan
declined from 25.0% in June1999 to 21.0% in June 2000. We are increasing the
Japan weight to 24.0% in the near term to take advantage of an economic
turnaround. Our non-Japan Asia weight has also decreased from 12.9% a year ago
to the current 9.2% as the explosive growth experienced after the 1997 Asian
financial crisis stabilized. The reduced weightings in Asia this past year were
reallocated to non-index holdings in Canada, Israel and South Africa. We also
will increase our weighting slightly in Mexico after the favorable election
results.
INVESTMENT OBJECTIVE AND STRATEGY
The objective of the International Growth Fund is long-term growth. The Fund
seeks to achieve its objective by investing at least 90% of its total assets in
common stocks of growth companies domiciled outside the United States.
In selecting investments for the Fund, the Sub-Adviser begins by selecting
countries or regions in which to invest by considering several factors affecting
the economy and equity market of foreign countries and regions. After the
country and regional allocations are determined, the Sub-Adviser seeks
industries and sectors that it believes have earnings growth prospects that are
greater than the average. Within the selected industries and sectors, the
Sub-Adviser invests in foreign growth-oriented companies it believes exhibit the
potential for superior growth.
PORTFOLIO SUMMARY
Net Asset Value 6/30/00: $23.58 Per Share
6/30/99: $18.77 Per Share
Total Net Assets: $167.9 Million
Weighted Average Market Cap: $68.21 Billion
TOTAL DIVIDEND: $1.51 PER SHARE
Long-Term Capital Gain: $1.28 Per Share
Ordinary Income: $0.23 Per Share
PORTFOLIO STRUCTURE - BY REGION
(% OF TOTAL NET ASSETS)
[BAR CHART]
SIT INT'L Morgan Stanley
GROWTH FUND EAFE Index
Europe Other 28.2 27.8
France, Germany, UK 22.0 39.4
Japan 21.0 26.9
Pacific Basin 9.2 5.9
North America 5.8 0.0
Africa/Middle East 3.1 0.0
Latin America 0.6 0.0
Cash & Other Net Assets 10.1 0.0
26
<PAGE>
AVERAGE ANNUAL TOTAL RETURNS*
SIT MORGAN STANLEY LIPPER
INTERNATIONAL CAPITAL INT'L INT'L
GROWTH FUND EAFE INDEX INDEX
----------- ---------- -----
3 Month** -14.87% -3.96% -4.70%
1 Year 33.38 17.16 23.63
3 Year 14.44 10.18 11.90
5 Year 14.09 11.33 14.43
Inception 14.11 9.56 12.28
(11/1/91)
CUMULATIVE TOTAL RETURNS*
SIT MORGAN STANLEY LIPPER
INTERNATIONAL CAPITAL INT'L INT'L
GROWTH FUND EAFE INDEX INDEX
----------- ---------- -----
1 Year 33.38% 17.16% 23.63%
3 Year 49.86 33.77 40.10
5 Year 93.31 70.99 96.18
Inception 214.02 120.70 172.98
(11/1/91)
*AS OF 6/30/00 **NOT ANNUALIZED.
--------------------------------------------------------------------------------
PERFORMANCE FIGURES ARE HISTORICAL AND DO NOT GUARANTEE FUTURE RESULTS.
INVESTMENT RETURNS AND PRINCIPAL VALUE WILL VARY, AND YOU MAY HAVE A GAIN OR
LOSS WHEN YOU SELL SHARES. AVERAGE ANNUAL TOTAL RETURNS INCLUDE CHANGES IN SHARE
PRICE AS WELL AS REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAINS. MANAGEMENT
FEES AND ADMINISTRATIVE EXPENSES ARE INCLUDED IN THE FUND'S PERFORMANCE;
HOWEVER, FEES AND EXPENSES ARE NOT INCORPORATED IN THE 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 6/30/00 would
have grown to $31,402 in the Fund, or $22,070 in the Morgan Stanley EAFE Index
assuming reinvestment of all dividends and capital gains.
PORTFOLIO STRUCTURE - BY SECTOR
(% OF TOTAL NET ASSETS)
[BAR CHART]
Electronic Technology 21.8
Utilities 20.3
Finance 17.9
Technology Services 9.8
Health Technology 6.7
Retail Trade 3.6
Sectors less than 3% 9.8
Cash and Other Net Assets 10.1
27
<PAGE>
SIT INTERNATIONAL GROWTH FUND
-------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS - JUNE 30, 2000
TOP 10 HOLDINGS
* PMC-Sierra, Inc., A.D.R.
* Nokia Corp., A.D.R.
* NTT DoCoMo, Inc.
* Vodafone AirTouch, p.l.c.
* Seven Eleven Japan
* Banca Fideuram
* Orix Corp.
* Takeda Chemical Industries
* CMG, p.l.c.
* Elan Corp., p.l.c., A.D.R.
Total Number of Holdings: 84
-------------------------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE ($)(1)
-------------------------------------------------------------------------------
COMMON STOCKS (89.9%)(2)
AFRICA/ MIDDLE EAST (3.1%)
ISRAEL (2.7%)
22,000 Amdocs, Ltd. (Electronic Technology) (3) $1,688,500
5,800 Check Point Software Technologies, Ltd.,
A.D.R. (Technology Services) (3) 1,228,150
16,800 Comverse Technology, Inc. (Electronic
Technology) (3) 1,562,400
----------------
4,479,050
----------------
SOUTH AFRICA (0.4%)
304,501 Old Mutual, p.l.c. (Finance) (3) 669,579
----------------
ASIA (30.2%)
AUSTRALIA (0.8%)
146,040 Cable & Wireless Optus Limited
(Utilities) (3) 436,673
18,600 The News Corp., Ltd., A.D.R.
(Consumer Services) 883,500
----------------
1,320,173
----------------
HONG KONG (2.8%)
75,000 Cheung Kong Hldgs., Ltd. (Industrial
Services) 829,856
188,000 China Mobile (Hong Kong) (Utilities) (3) 1,658,108
259,000 Citic Pacific, Ltd. (Utilities)(3) 1,355,633
70,800 HSBC Holdings, p.l.c. (Finance) 808,361
----------------
4,651,958
----------------
-------------------------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE ($)(1)
-------------------------------------------------------------------------------
JAPAN (21.0%)
27,200 AFLAC, Inc., A.D.R. (Finance) 1,249,500
12,600 Internet Initiative Japan Inc., A.D.R.
(Technology Services) (3) 746,550
263 NTT Data Corp. (Tech. Services) 2,709,508
223 NTT DoCoMo, Inc. (Utilities) 6,049,158
35,000 Nihon Unisys, Ltd. (Tech. Services) 709,583
123 Nippon Telephone (Utilities) 1,639,202
27,600 Orix Corp. (Finance) 4,082,550
8,900 Ryohin Keikaku Co., Ltd. (Retail Trade) 1,135,617
53,000 Seven Eleven Japan (Retail Trade) 4,443,320
6,900 Softbank Corp. (Technology Services) 939,117
25,800 Sony Corp. (Consumer Durables) 2,414,143
57,000 Takeda Chemical Industries
(Health Technology) 3,749,663
172,000 The Fuji Bank, Ltd. (Finance) 1,310,303
206,000 The Nikko Securities Co., Ltd. (Finance) 2,044,394
256,000 The Sanwa Bank, Ltd. (Finance) 2,047,003
----------------
35,269,611
----------------
SINGAPORE (1.8%)
59,846 DBS Group Holdings, Ltd. (Finance) 768,419
393,000 Natsteel Electronics, Ltd. (Electronic
Technology) 1,204,699
109,000 Venture Mfg., Ltd. (Electronic Tech.) 1,109,556
----------------
3,082,674
----------------
SOUTH KOREA (1.7%)
8,764 Samsung Electronics (Electronic Tech.) 2,900,404
----------------
TAIWAN (1.6%)
172,200 Hon Hai Precision Industry (Electronic
Technology) (3) 1,554,323
28,032 Taiwan Semiconductor Mfg. Co.,
A.D.R. (Electronic Technology) (3) 1,086,240
----------------
2,640,563
----------------
THAILAND (0.5%)
63,400 Advanced Info Services (Utilities) 788,788
----------------
28
<PAGE>
-------------------------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE ($)(1)
-------------------------------------------------------------------------------
EUROPE (50.2%)
BELGIUM (0.4%)
17,600 UCB, S.A. (Health Technology) 649,202
----------------
FINLAND (4.9%)
133,300 Nokia Corp., A.D.R. (Electronic Tech.) 6,656,669
46,360 Tietoenator Corp. (Technology Services) 1,553,184
----------------
8,209,853
----------------
FRANCE (8.7%)
16,020 AXA (Finance) 2,533,838
38,200 Alstom (Producer Manufacturing) 1,036,658
6,800 Business Objects (Tech. Services)(3) 625,115
7,788 Carrefour, S.A. (Retail Trade) 534,529
14,430 France Telecom, S.A. (Utilities) 2,025,069
13,120 Groupe Danone (Cons. Non-Durables) 1,748,160
1,615 L'oreal Co. (Consumer Non-Durables) 1,404,146
43,800 STMicroelectronics, A.D.R. (Electronic
Technology) 2,811,413
21,500 Vivendi (Utilities) 1,905,363
----------------
14,624,291
----------------
GERMANY (4.1%)
3,397 Allianz, A.G. (Finance) 1,237,404
47,230 Deutsche Telekom, A.G. (Utilities) 2,698,340
12,950 Epcos, A.G. (Electronic Technology) (3) 1,308,407
11,600 Infineon Technologies, AG
(Electronic Technology) (3) 922,929
3,750 SAP Preferred (Technology Services) 695,576
----------------
6,862,656
----------------
IRELAND (2.1%)
36,800 Bank of Ireland (Finance) 231,940
69,000 Elan Corp., p.l.c., A.D.R. (Health
Technology) (3) 3,342,188
----------------
3,574,128
----------------
ITALY (5.2%)
271,150 Banca Fideuram (Finance) 4,106,758
159,200 Telecom Italia (Utilities) 2,197,546
234,000 Telecom Italia Mobile Spa (Utilities) 2,400,115
----------------
8,704,419
----------------
-------------------------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE ($)(1)
-------------------------------------------------------------------------------
NETHERLANDS (8.0%)
54,900 ASM Lithography Holding, A.D.R.
(Electronic Technology) (3) 2,422,463
27,879 Aegon N.V., A.D.R. (Finance) 993,195
241,440 CMG, p.l.c. (Technology Services) 3,425,337
38,000 Equant, A.D.R. (Technology Services) 1,634,000
30,120 ING Groep N.V. (Finance) 2,044,187
13,200 Royal Dutch Petroleum, A.D.R.
(Energy Minerals) 812,625
46,620 United Pan-Europe Communications
N.V. (Consumer Services) (3) 1,224,043
31,789 Wolters Kluwer (Commercial Svcs.) 850,185
----------------
13,406,035
----------------
SPAIN (2.6%)
87,733 Banca Bilbao Vizcaya Argentaria, S.A.
(Finance) (3) 1,316,163
140,110 Telefonica, S.A. (Utilities) 3,021,928
----------------
4,338,091
----------------
SWEDEN (1.6%)
72,800 L.M. Ericsson Telephone Co., A.D.R.
(Electronic Technology) 1,456,000
60,800 Securitas 'B '(Commercial Svcs.) 1,296,313
----------------
2,752,313
----------------
SWITZERLAND (3.4%)
134 Givaudan (Consumer Non-Durables) (3) 40,695
675 Novartis, A.G. (Health Technology) 1,072,648
67 Roche Holdings, A.G. (Health Tech.) 654,314
17,400 UBS, A.G. (Finance) 2,557,454
2,870 Zurich Allied, A.G. (Finance) 1,422,583
----------------
5,747,694
----------------
UNITED KINGDOM (9.2%)
26,154 AstraZeneca Group, p.l.c. (Health
Technology) 1,222,607
27,700 BP Amoco, A.D.R. (Energy Minerals) 1,566,781
65,300 Compass Group, p.l.c.. A.D.R.
(Consumer Services) 860,556
72,126 Lloyds TSB Group, p.l.c. (Finance) 681,355
SEE ACCOMPANYING NOTES TO PORTFOLIOS OF INVESTMENTS ON PAGE 44.
29
<PAGE>
SIT INTERNATIONAL GROWTH FUND
-------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS - JUNE 30, 2000
-------------------------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE ($)(1)
-------------------------------------------------------------------------------
260,535 Misys, p.l.c. (Technology Services) 2,200,886
47,005 Pearson, p.l.c. (Consumer Services) 1,494,378
9,600 SmithKline Beecham, p.l.c., A.D.R.
(Health Technology) 625,800
1,278,175 Vodafone AirTouch, p.l.c. (Utilities) 5,166,528
38,000 Vodafone AirTouch, A.D.R. (Utilities) 1,574,625
----------------
15,393,516
----------------
LATIN AMERICA (0.6%)
MEXICO (0.6%)
17,900 Telefonos de Mexico S.A., A.D.R.
(Utilities) 1,022,538
----------------
NORTH AMERICA (5.8%)
CANADA (5.8%)
9,200 JDS Uniphase Corp. (Electronic
Technology) 1,102,850
30,200 Nortel Networks Corp. (Electronic
Technology) 2,061,150
37,500 PMC-Sierra, Inc., A.D.R. (Electronic
Technology) (3) 6,663,281
----------------
9,827,281
----------------
Total common stocks 150,914,817
----------------
(cost: $96,767,253)
SHORT TERM SECURITIES (10.9%) (2)
18,295,000 Sit Money Market Fund, 6.35% (4) 18,295,000
----------------
(cost: $18,295,000)
Total investments in securities
(cost: $115,062,253) (5) $169,209,817
================
SEE ACCOMPANYING NOTES TO PORTFOLIOS OF INVESTMENTS ON PAGE 44.
30
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31
<PAGE>
[PHOTO] SIT SMALL CAP GROWTH FUND
-----------------------------------------------------------------------
YEAR ENDED JUNE 30, 2000
EUGENE C. SIT, CFA, SENIOR PORTFOLIO MANAGER
The Sit Small Cap Growth Fund's one-year return was +126.2%, comparing
favorably to the +14.3% return for the Russell 2000 Index and the +28.4% return
for the Russell 2000 Growth Index. The Fund's since-inception, annualized return
was +32.8%, more than twice the +15.2% return for Russell 2000 Index over the
same time period.
Over the past year, small stocks have regained considerable momentum relative
to larger cap issues, as the Russell 2000 Index outperformed the S&P 500 Index
by over seven percentage points. Small cap growth stocks fared particularly well
during the period, buoyed by the continuing exceptional performance of
technology stocks. The Fund has been very well positioned in many of the
technology groups that have drawn investor enthusiasm over the past year. The
three heaviest weighted sectors in the Fund-- electronic technology, health
technology, and technology services-- posted estimated one-year returns of
+312%, +174%, and 80%, respectively. While thesE exceptional returns are
unlikely to be repeated over the next 12 months, we remain optimistic about
fundamentals within each sector. We continue to believe that we are in the early
stages of a broad-based, technological advance within our economy that is
providing attractive investment opportunities in fast-growing companies in
dynamic areas such as the Internet, telecommunications and biotechnology.
As of June 30, the Fund was 84% invested in equity securities. Over the past
12 months, the most significant sector weight increases occurred in health
technology and process industries through the purchases of Aclara Biosciences,
Affymetrix, Protein Design Labs, and Millipore. The weights in the retail trade
and utility sectors declined the most, accomplished though the sale of Ann
Taylor, Men's Wearhouse, Allegiance Telecom, and Nextlink Communications.
We believe the Fund is well positioned to grow along side some of the most
dynamic small growth companies in the domestic equity market. We also remain
encouraged about the return of investor interest in smaller capitalization
issues. We very much appreciate shareholders' continued interest and
participation in the Fund.
INVESTMENT OBJECTIVE AND STRATEGY
The objective of the Sit Small Cap Growth Fund is to maximize long-term
capital appreciation. The Fund seeks to achieve its objective by investing at
least 65% of its total assets in common stocks of small growth companies with
capitalizations of $2.5 billion or less at the time of purchase.
The Advisor invests in a diversified group of growing small companies it
believes exhibit the potential for superior growth. The Advisor believes that a
company's earnings growth is the primary determinant of its potential long-term
return and evaluates a company's potential for above average long-term earnings
and revenue growth.
PORTFOLIO SUMMARY
Net Asset Value 6/30/00: $41.35 Per Share
6/30/99: $18.28 Per Share
Total Net Assets: $190.6 Million
Weighted Average Market Cap: $11.1 Billion
PORTFOLIO STRUCTURE - BY SECTOR
(% OF TOTAL NET ASSETS)
[BAR CHART]
Electronic Technology 32.7
Technology Services 12.6
Health Technology 11.7
Finance 8.3
Utilities 3.7
Process Industries 3.4
Sectors Under 3.0% 11.4
Cash & Other Net Assets 16.2
32
<PAGE>
AVERAGE ANNUAL TOTAL RETURNS*
SIT RUSSELL
SMALL CAP RUSSELL 2000 2000
GROWTH FUND INDEX GROWTH INDEX
----------- ----- ------------
3 Month** -2.45% -3.78% -7.38%
1 Year 126.20 14.32 28.39
3 Year 40.07 10.57 16.32
5 Year 32.31 14.27 15.80
Inception 32.84 15.15 17.40
(7/1/94)
CUMULATIVE TOTAL RETURNS*
SIT RUSSELL
SMALL CAP RUSSELL 2000 2000
GROWTH FUND INDEX GROWTH INDEX
----------- ----- ------------
1 Year 126.20% 14.32% 28.39%
3 Year 174.83 35.19 57.40
5 Year 305.51 94.84 108.26
Inception 449.84 133.21 162.04
(7/1/94)
*AS OF 6/30/00 **NOT ANNUALIZED.
--------------------------------------------------------------------------------
PERFORMANCE FIGURES ARE HISTORICAL AND DO NOT GUARANTEE FUTURE RESULTS.
INVESTMENT RETURNS AND PRINCIPAL VALUE WILL VARY, AND YOU MAY HAVE A GAIN OR
LOSS WHEN YOU SELL SHARES. AVERAGE ANNUAL TOTAL RETURNS INCLUDE CHANGES IN SHARE
PRICE AS WELL AS REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAINS. MANAGEMENT
FEES AND ADMINISTRATIVE EXPENSES ARE INCLUDED IN THE FUND'S PERFORMANCE;
HOWEVER, FEES AND EXPENSES ARE NOT INCORPORATED IN THE RUSSELL 2000 INDEX AND
THE RUSSELL 2000 GROWTH INDEX.
GROWTH OF $10,000
[PLOT POINTS CHART]
The sum of $10,000 invested at inception (7/1/94) and held until 6/30/00 would
have grown to $54,984 in the Fund, or $23,321 in the Russell 2000 Index assuming
reinvestment of all dividends and capital gains.
TOP 10 HOLDINGS
* SDL, Inc.
* PMC-Sierra, Inc.
* JDS Uniphase Corp.
* Millipore Corp.
* Dendrite International, Inc.
* Burr-Brown Corp.
* Applied Micro Circuits Corp.
* Sapient Corp.
* Emmis Communications Corp.
* RSA Security, Inc.
Total Number of Holdings: 68
33
<PAGE>
SIT SMALL CAP GROWTH FUND
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS - JUNE 30, 2000
--------------------------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE ($)(1)
--------------------------------------------------------------------------------
COMMON STOCKS (83.8%) (2)
COMMERCIAL SERVICES (0.3%)
12,000 SmartForce Public Ltd., A.D.R. (3) $576,000
---------------
CONSUMER SERVICES (2.1%)
95,800 Emmis Communications Corp. (3) 3,963,725
---------------
ELECTRONIC TECHNOLOGY (32.7%)
50,000 Applied Micro Circuits Corp. (3) 4,937,500
67,000 Asyst Technologies, Inc. (3) 2,294,750
63,500 Burr-Brown Corp. (3) 5,504,656
14,500 Extreme Networks, Inc. (3) 1,529,750
45,000 Flextronics International, Ltd. (3) 3,090,937
78,000 JDS Uniphase Corp. (3) 9,350,250
21,000 Juniper Networks, Inc. (3) 3,056,812
50,000 National Computer Systems, Inc. 2,462,500
1,000 New Focus, Inc. (3) 82,125
49,000 PerkinElmer, Inc. 3,240,125
55,000 PMC-Sierra, Inc. (3) 9,772,812
25,400 RF Micro Devices, Inc. (3) 2,225,675
56,500 RSA Security, Inc. (3) 3,912,625
36,000 SDL, Inc. (3) 10,266,750
6,000 Sycamore Networks, Inc. (3) 662,250
---------------
62,389,517
---------------
ENERGY MINERALS (1.0%)
50,500 Newfield Exploration Co. (3) 1,975,813
---------------
FINANCE (8.3%)
51,500 Ambac Financial Group, Inc. 2,822,844
70,000 Arthur J. Gallagher & Co. 2,940,000
69,100 Everest Re Group, Ltd. 2,271,662
77,500 Federated Investors, Inc. 2,717,344
58,500 Legg Mason, Inc. 2,925,000
39,325 Queens County Bancorp, Inc. 725,055
21,800 TCF Financial Corp. 559,988
25,650 Waddell & Reed Financial, Inc. 841,641
---------------
15,803,534
---------------
HEALTH SERVICES (2.8%)
27,000 Allscripts, Inc. (3) 621,000
79,000 Oxford Health Plans, Inc. (3) 1,881,188
60,700 Stericycle, Inc. (3) 1,456,800
24,400 Trigon Healthcare, Inc. (3) 1,279,475
---------------
5,238,463
---------------
--------------------------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE ($)(1)
--------------------------------------------------------------------------------
HEALTH TECHNOLOGY (11.7%)
21,500 Aclara Biosciences, Inc. (3) 1,095,156
15,500 Affymetrix, Inc. (3) 2,559,437
20,000 Alexion Pharmaceuticals, Inc. (3) 1,430,000
71,500 Biosite Diagnostics, Inc. (3) 3,445,406
20,000 Caliper Technologies Corp. (3) 920,000
7,500 Celera Genomics (3) 701,250
13,880 Corixa Corp. (3) 595,973
50,000 I-Stat Corp. (3) 871,875
20,000 IDEC Pharmaceuticals Corp. (3) 2,346,250
10,500 Maxygen, Inc. (3) 596,039
8,000 Millenium Pharmaceuticals, Inc. (3) 895,000
17,100 Protein Design Labs, Inc. (3) 2,820,698
14,000 QLT PhotoTherapeutics, Inc. (3) 1,082,375
13,000 Sepracor, Inc. (3) 1,568,125
56,500 Ventana Medical Systems, Inc. (3) 1,327,750
---------------
22,255,334
---------------
INDUSTRIAL SERVICES (2.5%)
49,800 Helmerich & Payne, Inc. 1,767,900
43,300 National - Oilwell, Inc. (3) 1,423,488
63,200 Pride International, Inc. (3) 1,564,200
---------------
4,755,588
---------------
PROCESS INDUSTRIES (3.4%)
86,000 Millipore Corp. 6,482,250
---------------
PRODUCER MANUFACTURING (1.2%)
42,000 C & D Technologies, Inc. 2,373,000
---------------
RETAIL TRADE (0.8%)
54,700 Cost Plus, Inc. (3) 1,569,206
---------------
TECHNOLOGY SERVICES (12.6%)
22,000 BISYS Group, Inc. (3) 1,353,000
22,700 Business Objects S.A., A.D.R. (3) 2,000,438
11,500 Cais Internet, Inc. (3) 161,719
177,750 Dendrite International, Inc. (3) 5,921,297
5,250 Diamond Technology Partners, Inc. (3) 462,000
57,400 Great Plains Software, Inc. (3) 1,126,475
20,000 Inktomi Corp. (3) 2,365,000
26,000 Internap Network Services Corp. (3) 1,079,406
60,000 Legato Systems, Inc. (3) 907,500
21,000 Mercury Interactive Corp. (3) 2,031,750
18,000 Portal Software, Inc. (3) 1,149,750
41,000 Sapient Corp. (3) 4,384,437
29,500 VerticalNet, Inc. (3) 1,089,656
---------------
24,032,428
---------------
34
<PAGE>
--------------------------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE ($)(1)
--------------------------------------------------------------------------------
TRANSPORTATION (0.7%)
28,600 C.H. Robinson Worldwide, Inc. 1,415,700
---------------
UTILITIES (3.7%)
91,700 Adelphia Business Solutions, Inc. (3) 2,126,294
45,200 Pinnacle Holdings, Inc. (3) 2,440,800
31,500 Rural Cellular Corp. (3) 2,411,719
---------------
6,978,813
---------------
Total common stocks 159,809,371
(cost: $79,402,563) ---------------
SHORT-TERM SECURITIES (17.8%) (2)
33,983,000 Sit Money Market Fund, 6.35% (4) 33,983,000
---------------
(cost: $33,983,000)
Total investments in securities
(cost: $113,385,563) (5) $193,792,371
===============
SEE ACCOMPANYING NOTES TO PORTFOLIOS OF INVESTMENTS ON PAGE 44.
35
<PAGE>
[PHOTO] SIT SCIENCE AND TECHNOLOGY GROWTH FUND
YEAR ENDED JUNE 30, 2000
-----------------------------------------------------------------------
EUGENE C. SIT, CFA, SENIOR PORTFOLIO MANAGER
For the year ended June 30, 2000, the Sit Science and Technology Growth Fund
posted a return of +119.2%, comparing favorably to the +7.3% return for the S&P
500 Index. The Pacific Stock Exchange Technology Index increased +83.6% over the
same time period.
Technology stocks continue to provide leadership in the domestic equity
market. Although most major stock indices posted positive returns over the past
12 months, we estimate that many indices, including the S&P 500 Index, would
have posted negative returns were it not for the strong performance of the
electronic technology sector. Investor enthusiasm for technology stocks rests
largely on the accelerating pace of change occurring within our "new economy"
that is being facilitated by surging innovation combined with strong worldwide
corporate spending on information technology. There continues to be a multitude
of themes driving investment opportunities within the science and technology
sectors. Innovations in biotechnology, the rapid build-out of telecommunications
infrastructure, E-commerce, and a powerful cyclical upswing in the semiconductor
industry are a few examples of current areas of emphasis within the Fund.
The Fund's returns in the electronic technology sector were especially
strong, and we estimate that the 12-month return for the sector within the Fund
was +169%. The other two major sectors-- health technology and technology
services-- produced estimated returns of +97% and +81%, respectively. The most
significant contributors tO the Fund's performance over the past year include:
SDL (+1017%), Check Point Software (+654%), Protein Design Labs (+643%), PMC
Sierra (+503%), Applied Micro Circuit (+391%), and JDS Uniphase (+328%). Since
the strong investment returns for technology stocks in recent periods have
resulted in an increase in valuations for the stocks, we expect that sector
volatility will remain high. However, we believe that the fundamental outlook
for technology companies remains strong. Volatility and market "corrections"
that inevitably occur within the sector from time to time serve to create
investment opportunities.
Sector changes have been relatively minor over the past year, with a slight
weighting shift out of the health technology sector into electronic technology
and technology services sectors. As of June 30, 2000, the Fund was 95% invested
in equity securities.
INVESTMENT OBJECTIVE AND STRATEGY
The objective of the Fund is to maximize long-term capital appreciation. The
Fund seeks to achieve its objective by investing at least 80% of its total
assets in common stocks of companies principally engaged in science and
technology business activities. Such companies include those whose assets, gross
income, or net profits are significantly committed to, or derived from, science
and technology. The Adviser seeks stocks of science and technology companies
having superior growth potential in virtually any industry in which they may be
found.
PORTFOLIO SUMMARY
Net Asset Value 6/30/00: $33.38 Per Share
6/30/99: $15.23 Per Share
Total Net Assets: $46.2 Million
Weighted Average Market Cap: $77.1 Billion
PORTFOLIO STRUCTURE - BY SECTOR
(% OF TOTAL NET ASSETS)
[BAR CHART]
Electronic Technology 52.2
Technology Services 21.1
Health Technology 17.2
Utilities 3.4
Producer Manufacturing 1.4
Cash & Other Net Assets 4.7
36
<PAGE>
AVERAGE ANNUAL TOTAL RETURNS*
SIT PACIFIC STOCK
SCIENCE AND EXCHANGE
TECHNOLOGY TECHNOLOGY S&P
GROWTH FUND 100 INDEX 500 INDEX*
----------- --------- ----------
3 Month** -0.54% -5.21% -2.66%
1 Year 119.17 83.61 7.25
Inception 62.00 70.46 19.16
(12/31/97)
CUMULATIVE TOTAL RETURNS*
SIT PACIFIC STOCK
SCIENCE AND EXCHANGE
TECHNOLOGY TECHNOLOGY S&P
GROWTH FUND 100 INDEX 500 INDEX*
----------- --------- ----------
1 Year 119.17% 83.61% 7.25%
Inception 233.80 279.07 54.97
(12/31/97)
*AS OF 6/30/00 **NOT ANNUALIZED.
--------------------------------------------------------------------------------
PERFORMANCE FIGURES ARE HISTORICAL AND DO NOT GUARANTEE FUTURE RESULTS.
INVESTMENT RETURNS AND PRINCIPAL VALUE WILL VARY, AND YOU MAY HAVE A GAIN OR
LOSS WHEN YOU SELL SHARES. AVERAGE ANNUAL TOTAL RETURNS INCLUDE CHANGES IN SHARE
PRICE AS WELL AS REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAINS. MANAGEMENT
FEES AND ADMINISTRATIVE EXPENSES ARE INCLUDED IN THE FUND'S PERFORMANCE;
HOWEVER, FEES AND EXPENSES ARE NOT INCORPORATED IN THE PACIFIC STOCK EXCHANGE
TECHNOLOGY 100 INDEX AND THE S&P 500 INDEX.
*THE FUND HAS DETERMINED THAT THE S&P 500 INDEX IS MORE REPRESENTATIVE OF THE
PORTFOLIO AND IS NOW USING THIS INDEX AS ITS PRIMARY INDEX.
GROWTH OF $10,000
[PLOT POINTS CHART]
The sum of $10,000 invested at inception (12/31/97) and held until 6/30/00 would
have grown to $33,380 in the Fund, $15,497 in the S&P 500 Index, or $37,907 in
the PSETech 100 Index assuming reinvestment of all dividends and capital gains.
TOP 10 HOLDINGS
* SDL, Inc.
* Cisco Systems, Inc.
* Microsoft Corp.
* PMC - Sierra, Inc.
* Check Point Software Technology
* Protein Design Labs
* Applied Micro Circuits Corp.
* Intel Corp.
* Corning, Inc.
* JDS Uniphase Corp.
Total Number of Holdings: 60
37
<PAGE>
SIT SCIENCE AND TECHNOLOGY GROWTH FUND
------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS - JUNE 30, 2000
------------------------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE ($)(1)
------------------------------------------------------------------------------
COMMON STOCKS (95.3%) (2)
ELECTRONIC TECHNOLOGY (52.2%)
11,000 ADC Telecommunications, Inc. (3) $922,625
7,000 Amdocs, Ltd. (3) 537,250
11,000 Analog Devices, Inc. (3) 836,000
4,500 Applied Materials, Inc. (3) 407,813
14,000 Applied Micro Circuits Corp. (3) 1,382,500
28,000 Cisco Systems, Inc. (3) 1,779,750
7,500 Comverse Technology, Inc. (3) 697,500
4,000 Corning, Inc. 1,079,500
9,200 EMC Corp. (3) 707,825
10,000 Harmonic, Inc. (3) 247,500
9,000 Intel Corp. 1,203,187
9,000 JDS Uniphase Corp. (3) 1,078,875
20,000 Jabil Circuit, Inc. (3) 992,500
3,000 Juniper Networks, Inc. (3) 436,688
8,000 Lexmark International Group, Inc. (3) 538,000
12,000 Nokia Corp., A.D.R. 599,250
7,000 Nortel Networks Corp. 477,750
8,500 PMC-Sierra, Inc. (3) 1,510,344
4,000 QUALCOMM, Inc. (3) 240,000
8,000 RF Micro Devices, Inc. (3) 701,000
10,000 SDL, Inc. (3) 2,851,875
12,000 STMicroelectronics, A.D.R. 770,250
14,000 Scientific-Atlanta, Inc. 1,043,000
6,500 Tellabs, Inc. (3) 444,844
8,000 Teradyne, Inc. (3) 588,000
4,000 Texas Instruments, Inc. 274,750
8,500 Three-Five Systems, Inc. (3) 501,500
10,000 Vitesse Semiconductor Corp. (3) 735,625
6,000 Xilinx, Inc. (3) 495,375
-----------------
24,081,076
-----------------
HEALTH TECHNOLOGY (17.2%)
3,000 Affymetrix, Inc. (3) 495,375
8,500 Amgen, Inc. (3) 597,125
9,000 Biogen, Inc. (3) 580,500
7,500 Bristol Myers Squibb Co. 436,875
1,800 Celera Genomics (3) 168,300
8,000 IDEC Pharmaceuticals Corp. (3) 938,500
12,000 Immunex Corp. (3) 593,250
6,000 MedImmune, Inc. (3) 444,000
------------------------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE ($)(1)
------------------------------------------------------------------------------
6,000 Medtronic, Inc. 298,875
5,000 Millennium Pharmaceuticals, Inc. (3) 559,375
8,500 Protein Design Labs (3) 1,402,102
15,150 Pfizer, Inc. 727,200
4,000 QLT PhotoTherapeutics, Inc. (3) 309,250
9,000 Stryker Corp. 393,750
-----------------
7,944,477
-----------------
PRODUCER MANUFACTURER (1.4%)
15,000 Capstone Turbine Corp. (3) 675,937
-----------------
TECHNOLOGY SERVICES (21.1%)
6,000 America Online, Inc. (3) 316,500
14,000 BEA Systems, Inc. (3) 692,125
7,000 Check Point Software Technology (3) 1,482,250
20,000 Dendrite International, Inc. (3) 666,250
6,100 Digital Insight Corp. (3) 207,400
10,000 Exodus Communications, Inc. (3) 460,625
8,000 I2 Technologies, Inc. (3) 834,125
6,000 Inktomi Corp. (3) 709,500
11,000 Legato Systems, Inc. (3) 166,375
5,000 Mercury Interactive Corp. (3) 483,750
4,000 Micromuse, Inc. (3) 661,937
20,000 Microsoft Corp. (3) 1,600,000
3,000 Siebel Systems, Inc. (3) 490,688
9,000 TIBCO Software, Inc. (3) 965,109
-----------------
9,736,634
-----------------
UTILITIES (3.4%)
12,500 Sprint Corp. 637,500
15,000 Nextel Communications, Inc. (3) 917,812
-----------------
1,555,312
-----------------
Total common stocks 43,993,436
-----------------
(cost: $22,197,409)
SHORT-TERM SECURITIES (5.3%) (2)
2,459,000 Sit Money Market Fund, 6.35% (4) 2,459,000
-----------------
(cost: $2,459,000)
Total investments in securities
(cost: $24,656,409) (5) $46,452,436
=================
SEE ACCOMPANYING NOTES TO PORTFOLIOS OF INVESTMENTS ON PAGE 44.
38
<PAGE>
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39
<PAGE>
[PHOTO] SIT DEVELOPING MARKETS GROWTH FUND
YEAR ENDED JUNE 30, 2000
-----------------------------------------------------------------------
EUGENE C. SIT, CFA, SENIOR PORTFOLIO MANAGER
The Sit Developing Markets Growth Fund posted a +34.57% return for the year
ended June 30, 2000, compared to a +7.66% rise in the MSCI Emerging Markets Free
Index and a +13.06% rise in the Lipper Emerging Markets Index. During the year,
the fund's overweight position in Asia and the technology and telecommunication
sectors contributed to this strong outperformance. However, recently the Fund
has given up some of its gains of the past year, as the global correction in
growth equities has extended into the emerging markets. In the quarter ended
June 30, 2000, the Fund lost -12.45% compared to -10.79% for the MSCI Emerging
Markets Free Index and -11.44% for the Lipper Emerging Markets Index.
The Fund remains overweight in Asia, with a 53.1% weighting as of June 30 vs.
44.8% for the MSCI Emerging Markets Free Index. Economic growth in this region
continues to exceed expectations, and we took advantage of the sell-off in Asian
equities during the quarter by increasing our positions in some of our existing
holdings such as President Chain Store and China-Hong Kong Photo. We also added
a new position in Citic Pacific, a diversified conglomerate that is
well-positioned to benefit from the nascent economic turnaround in China.
During the quarter, the Fund increased its weighting in Latin America to
18.3% vs. 27.7% for the MSCI Emerging Markets Free Index. Economic and political
fundamentals in the region continue to improve, with the recent unprecedented
election of an opposition party member, Vicente Fox, to the presidency of Mexico
the most notable example that political reform is making progress in Latin
America. The Fund recently added Tele Norte Leste Participaco, a leading
Brazilian telecom operator, to its holdings.
We maintain an underweight position in Emerging-Europe, Middle East, and
Africa of 20.2% vs. 27.5% for the Index. Our exposure to this region increased
during the quarter through the addition of an Israeli technology firm, Check
Point Software.
INVESTMENT OBJECTIVE AND STRATEGY
The Fund seeks to maximize long-term capital appreciation. The Fund seeks to
achieve its objective by investing at least 65% of its total assets in common
stocks of companies domiciled or operating in a developing market. In selecting
investments for the Fund, the Sub-Advisor begins by selecting countries or
regions in which to invest by considering several factors affecting the economy
and equity market of foreign countries and regions. After the country and
regional allocations are determined, the Sub-Adviser seeks industries and
sectors that appear to have strong earnings growth prospects. Within the
selected industries and sectors, the Sub-Adviser invests in foreign
growth-oriented companies it believes exhibit the potential for superior growth.
PORTFOLIO SUMMARY
Net Asset Value 6/30/00: $13.43 Per Share
6/30/99: $ 9.98 Per Share
Total Net Assets: $14.7 Million
Weighted Average Market Cap: $53.9 Billion
PORTFOLIO STRUCTURE - BY REGION
(% OF TOTAL NET ASSETS)
[BAR CHART]
Sit Developing MSCI Emerging
Markets Growth Fund Markets Free Index
Asia 53.1 44.8
Latin America 18.3 27.7
Africa/Middle East 14.6 14.9
Europe 5.6 12.6
North America 0.7 0.0
Cash & Other Net Assets 7.7 0.0
40
<PAGE>
AVERAGE ANNUAL TOTAL RETURNS*
SIT MSCI LIPPER
DEVELOPING EMERGING EMERGING
MARKETS MARKETS MARKETS
GROWTH FUND FREE INDEX INDEX
----------- ---------- --------
3 Month** -12.45% -10.79% -11.44%
1 Year 34.57 7.66 13.06
3 Year 1.03 -7.01 -5.23
5 Year 7.43 -1.12 1.75
Inception 5.16 -1.21 1.16
(7/1/94)
CUMULATIVE TOTAL RETURNS*
SIT MSCI LIPPER
DEVELOPING EMERGING EMERGING
MARKETS MARKETS MARKETS
GROWTH FUND FREE INDEX INDEX
----------- ---------- --------
1 Year 34.57% 7.66% 13.06%
3 Year 3.11 -19.60 -14.89
5 Year 43.06 -5.49 9.06
Inception 35.29 -7.02 7.20
(7/1/94)
*AS OF 6/30/00 **NOT ANNUALIZED.
--------------------------------------------------------------------------------
PERFORMANCE FIGURES ARE HISTORICAL AND DO NOT GUARANTEE FUTURE RESULTS.
INVESTMENT RETURNS AND PRINCIPAL VALUE WILL VARY, AND YOU MAY HAVE A GAIN OR
LOSS WHEN YOU SELL SHARES. AVERAGE ANNUAL TOTAL RETURNS INCLUDE CHANGES IN SHARE
PRICE AS WELL AS REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAINS. MANAGEMENT
FEES AND ADMINISTRATIVE EXPENSES ARE INCLUDED IN THE FUND'S PERFORMANCE;
HOWEVER, FEES AND EXPENSES ARE NOT INCORPORATED IN THE MSCI 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
The sum of $10,000 invested at inception (7/1/94) and held until 6/30/00 would
have grown to $13,529 in the Fund, or $9,298 in the Morgan Stanley Capital Int'l
Emerging Markets Free Index assuming reinvestment of all dividends and capital
gains.
PORTFOLIO STRUCTURE - BY SECTOR
(% OF TOTAL NET ASSETS)
[BAR CHART]
Electronic Technology 33.3
Utilities 28.5
Retail Trade 9.8
Technology Services 7.1
Finance 7.9
Sectors less than 4.0% 5.7
Cash & Other Net Assets 7.7
41
<PAGE>
SIT DEVELOPING MARKETS GROWTH FUND
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS - JUNE 30, 2000
10 LARGEST HOLDINGS
* Telefonos de Mexico, A.D.R.
* Samsung Electronics
* Datacraft Asia, Ltd.
* Hon Hai Precision Industry
* Dimension Data Holdings, Ltd.
* Wal-Mart de Mexico
* Nice Systems, Ltd., A.D.R.
* SK Telecom Co., A.D.R.
* China Mobile (Hong Kong) Limited
* India Fund
Total Number of Holdings: 54
--------------------------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE ($)(1)
--------------------------------------------------------------------------------
COMMON STOCKS (89.2%)(2)
AFRICA/ MIDDLE EAST (14.6%)
ISRAEL (10.1%)
1,900 Amdocs, Ltd. (Electronic Technology) (3) $145,825
900 Check Point Software Technologies, Ltd.
(Technology Services) (3) 190,575
3,400 Comverse Technology, Inc. (Electronic
Technology) (3) 316,200
6,800 Nice Systems, Ltd., A.D.R. (Electronic
Technology ) (3) 524,875
6,800 RADVision, Ltd. (Technology Services) (3) 189,975
4,200 RADWARE, Ltd. (Electronic Technology) (3) 111,300
-----------
1,478,750
-----------
SOUTH AFRICA (4.5%)
65,506 Dimension Data Holdings, Ltd.
(Technology Services) 542,037
51,455 Old Mutual p.l.c. (Finance) (3) 113,146
-----------
655,183
-----------
ASIA (50.0%)
HONG KONG (6.9%)
13,000 Cheung Kong Hldgs., Ltd. (Indus. Svcs.) 143,842
1,280,000 China Hong Kong Photo Products Hldgs.,
Ltd. (Retail Trade) 159,281
56,000 China Mobile (Hong Kong) Limited
(Utilities) (3) 493,904
27,000 Citic Pacific, Ltd. (Utilities) 141,321
36,000 Pacific Century CyberWorks Limited
(Technology Services) 71,122
-----------
1,009,470
-----------
--------------------------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE ($)(1)
--------------------------------------------------------------------------------
INDONESIA (0.8%)
189,000 PT Ramayana Lestari (Retail Trade) 120,929
-----------
MALAYSIA (1.7%)
24,000 Commerce Asset-Holding Berhad (Finance) 69,475
15,000 Malayan Banking Berhad (Finance) 60,791
43,000 Resorts World Berhad (Consumer
Services) 117,687
-----------
247,953
-----------
PHILIPPINES (0.6%)
2,343,000 Digital Telecom Philippines (Utilities) (3) 40,108
424,000 SM Prime Holdings, Inc. (Retail Trade) 51,003
-----------
91,111
-----------
SINGAPORE (8.9%)
5,500 Creative Technology, Ltd. (Electronic
Technology) 131,313
72,800 Datacraft Asia, Ltd. (Electronic Tech.) 640,640
11,097 DBS Group Holdings, Ltd. (Finance) 142,485
51,000 Natsteel Electronics, Ltd. (Electronic
Technology) 156,335
23,000 Venture Mfg., Ltd. (Electronic Tech.) 234,126
-----------
1,304,899
-----------
SOUTH KOREA (12.2%)
8,700 Korea Electric Power, A.D.R. (Utilities) 160,406
3,000 Korea Telecom Corp. (Utilities) 264,218
3,000 Korea Telecom Corp., A.D.R. (Utilities) 145,125
14,200 SK Telecom Co., A.D.R. (Utilities) 515,638
2,129 Samsung Electronics (Electronic
Technology) 704,582
-----------
1,789,969
-----------
TAIWAN (14.0%)
41,816 Accton Technology Corp., G.D.R
(Electronic Technology) (3) 183,990
91,906 Chroma Ate, Inc. (Electronic Technology) (3) 205,900
67,880 Hon Hai Precision Industry (Electronic
Technology) (3) 612,703
96,420 President Chain Store Corp. (Retail Trade) 360,021
131,128 Phoenixtec Power Co. (Elec. Tech.) 238,421
80,294 Taiwan Semiconductor Co. (Electronic
Technology) (3) 380,629
84,000 United World Chinese Commercial Bank
(Finance) 79,639
-----------
2,061,303
-----------
42
<PAGE>
--------------------------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE ($)(1)
--------------------------------------------------------------------------------
THAILAND (4.9%)
32,800 Advanced Info Services (Utilities) 408,079
42,000 Hana Microelectronics Public Co., Ltd.
(Electronic Technology) 310,526
------------
718,605
------------
EUROPE (5.6%)
GREECE (2.8%)
5,906 Alpha Bank (Finance) 234,342
5,000 Hellenic Telecommunications Org. S.A.
(OTE) (Utilities) 60,938
10,500 Panafon Telecom (Utilities) 119,814
------------
415,094
------------
SPAIN (2.8%)
5,550 Telefonica, A.D.R. (Utilities) 355,547
1,200 Terra Networks, S.A., A.D.R.
(Technology Services) (3) 43,763
------------
399,310
------------
LATIN AMERICA (18.3%)
BRAZIL (7.2%)
6,900 Companhia Brasileira de Distribuicao
Grupo Pao de Acucar (Retail Trade) 221,663
9,100 Embratel Participacoes, A.D.R.
(Utilities) 214,988
5,860 Petrobras (Energy Minerals) 177,039
3,000 Tele Centro Sul Participacoes S.A.,
A.D.R. (Utilities) 219,188
6,100 Tele Norte Leste Participacoes S.A.
(Utilities) 144,113
4,400 Telesp Participacoes S.A., A.D.R.
(Utilities) (3) 81,400
------------
1,058,391
------------
MEXICO (11.1%)
5,800 Grupo Televisa S.A. (Consumer Services) 399,838
12,400 Telefonos de Mexico, A.D.R. (Utilities) 708,350
223,700 Wal-Mart de Mexico (Retail Trade) (3) 524,979
------------
1,633,167
------------
NORTH AMERICA (0.7%)
CANADA (0.7%)
5,800 Telesystems Int'l. Wireless, Inc.
(Utilities) (3) 106,083
------------
Total common stocks 13,090,217
------------
(cost: $8,030,909)
--------------------------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE ($)(1)
--------------------------------------------------------------------------------
CLOSED-END MUTUAL FUND (3.1%) (2)
31,600 India Fund (Consumer Services) 448,325
------------
(cost: $564,571)
SHORT-TERM SECURITIES (10.2%) (2)
1,500,000 Sit Money Market Fund, 6.35% (4) 1,500,000
------------
(cost: $1,500,000)
Total investments in securities
(cost: $10,095,480) (5) $15,038,542
============
SEE ACCOMPANYING NOTES TO PORTFOLIOS OF INVESTMENTS ON PAGE 44.
43
<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) This security represents an investment in an affiliated party. See note 3
to the accompanying financial statements.
(5) At June 30, 2000, the cost of securities for federal income tax purposes
and the aggregate gross unrealized appreciation and depreciation based on
that cost were as follows:
<TABLE>
<CAPTION>
LARGE CAP REGIONAL MID CAP
BALANCED GROWTH GROWTH GROWTH
FUND FUND FUND FUND
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Cost for federal income tax purposes $ 16,744,399 $ 104,560,639 $ 4,456,785 $ 294,494,756
============= ============= ============= =============
Unrealized appreciation (depreciation) on
investments:
Gross unrealized appreciation $ 3,839,621 $ 71,004,864 $ 2,034,484 $ 266,156,875
Gross unrealized depreciation (279,034) (2,522,021) (84,163) (3,769,383)
------------- ------------- ------------- -------------
Net unrealized appreciation $ 3,560,587 $ 68,482,843 $ 1,950,321 $ 262,387,492
============= ============= ============= =============
<CAPTION>
SCIENCE AND DEVELOPING
INTERNATIONAL SMALL CAP TECHNOLOGY MARKETS
GROWTH GROWTH GROWTH GROWTH
FUND FUND FUND FUND
------------- ------------- ------------- -------------
Cost for federal income tax purposes $ 117,008,717 $ 113,866,926 $ 24,831,047 $ 10,095,480
============= ============= ============= =============
Unrealized appreciation (depreciation) on
investments:
Gross unrealized appreciation $ 56,997,378 $ 82,491,077 $ 22,669,985 $ 15,038,542
Gross unrealized depreciation (4,796,278) (2,565,632) (1,048,596) (10,095,480)
------------- ------------- ------------- -------------
Net unrealized appreciation $ 52,201,100 $ 79,925,445 $ 21,621,389 $ 4,943,062
============= ============= ============= =============
</TABLE>
44
<PAGE>
This page has been left blank intentionally.
45
<PAGE>
SIT MUTUAL FUNDS
JUNE 30, 2000
--------------------------------------------------------------------------------
STATEMENTS OF ASSETS & LIABILITIES
<TABLE>
<CAPTION>
LARGE CAP REGIONAL MID CAP
BALANCED GROWTH GROWTH GROWTH
ASSETS FUND FUND FUND FUND
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Investments in securities, at
identified cost $ 16,737,679 $ 104,560,639 $ 4,439,761 $ 294,157,607
=============== =============== =============== ===============
Investments in securities, at
market value - see
accompanying schedule for detail $ 20,304,986 $ 173,043,482 $ 6,407,106 $ 556,882,248
Cash in bank on demand
deposit 50,508 229,459 36,363 2,674
Receivables:
Dividends and accrued interest 98,253 63,984 4,827 281,033
Fund shares sold -- -- -- 8,606
Investment securities sold 70,511 1,544,499 176,039 15,289,795
Other receivables -- 6,585 374 --
--------------- --------------- --------------- ---------------
Total assets 20,524,258 174,888,009 6,624,709 572,464,356
--------------- --------------- --------------- ---------------
LIABILITIES
Payables:
Disbursements in excess of
cash balances -- -- -- --
Investment securities purchased 1,204,663 2,345,769 36,000 5,354,429
Fund shares redeemed -- -- -- 9,004
Accrued investment management
and advisory services fee 15,493 141,968 5,469 460,510
Other payables 587 -- -- 1,276
--------------- --------------- --------------- ---------------
Total liabilities 1,220,743 2,487,737 41,469 5,825,219
--------------- --------------- --------------- ---------------
Net assets applicable to
outstanding capital stock 19,303,515 172,400,272 6,583,240 566,639,137
=============== =============== =============== ===============
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 1,006,252 2,708,014 470,260 24,040,686
=============== =============== =============== ===============
Net asset value per share of
outstanding capital stock $ 19.18 $ 63.66 $ 14.00 $ 23.57
=============== =============== =============== ===============
</TABLE>
46
<PAGE>
<TABLE>
<CAPTION>
SCIENCE AND DEVELOPING
INTERNATIONAL SMALL CAP TECHNOLOGY MARKETS
GROWTH GROWTH GROWTH GROWTH
ASSETS FUND FUND FUND FUND
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Investments in securities, at
identified cost $ 115,062,253 $ 113,385,563 $ 24,656,409 $ 10,095,480
=============== =============== =============== ===============
Investments in securities, at
market value - see
accompanying schedule for detail $ 169,209,817 $ 193,792,371 $ 46,452,436 $ 15,038,542
Cash in bank on demand
deposit -- 416,004 46,260 --
Receivables:
Dividends and accrued interest 212,317 145,816 8,647 24,386
Fund shares sold -- 254,237 2 --
Investment securities sold 2,125,278 -- -- 323,000
Other receivables 2,163 -- -- --
--------------- --------------- --------------- ---------------
Total assets 171,549,575 194,608,428 46,507,345 15,385,928
--------------- --------------- --------------- ---------------
LIABILITIES
Payables:
Disbursements in excess of
cash balances 429,690 -- -- 64,764
Investment securities purchased 2,980,441 3,733,377 286,000 613,072
Fund shares redeemed 23,174 29,864 -- --
Accrued investment management
and advisory services fee 207,165 213,432 45,298 30,341
Other payables -- 2,149 3,323 1,961
--------------- --------------- --------------- ---------------
Total liabilities 3,640,470 3,978,822 334,621 710,138
--------------- --------------- --------------- ---------------
Net assets applicable to
outstanding capital stock 167,909,105 190,629,606 46,172,724 14,675,790
=============== =============== =============== ===============
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 7,120,972 4,609,831 1,383,370 1,092,637
=============== =============== =============== ===============
Net asset value per share of
outstanding capital stock $ 23.58 $ 41.35 $ 33.38 $ 13.43
=============== =============== =============== ===============
</TABLE>
See accompanying notes to financial statements on page 54.
47
<PAGE>
SIT MUTUAL FUNDS
YEAR ENDED JUNE 30, 2000
--------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
LARGE CAP REGIONAL MID CAP
BALANCED GROWTH GROWTH GROWTH
FUND FUND FUND FUND
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
INCOME:
Dividends * $ 52,444 $ 700,769 $ 49,426 $ 784,398
Interest 441,016 370,895 14,095 1,239,340
------------- ------------- ------------- -------------
Total income 493,460 1,071,664 63,521 2,023,738
------------- ------------- ------------- -------------
EXPENSES (NOTE 3):
Investment management and
advisory services fee 147,510 1,545,264 88,635 6,048,102
Less fees and expenses absorbed
by investment adviser -- -- (17,727) (1,209,620)
------------- ------------- ------------- -------------
Total net expenses 147,510 1,545,264 70,908 4,838,482
------------- ------------- ------------- -------------
Net investment income (loss) 345,950 (473,600) (7,387) (2,814,744)
------------- ------------- ------------- -------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net realized gain (loss) (note 2) 386,585 14,050,650 75,289 130,733,235
Net change in unrealized appreciation
(depreciation) on investments 1,495,679 23,703,251 366,960 124,287,559
Realized gain (loss) on foreign
currency transactions -- -- -- --
Net change in unrealized appreciation
(depreciation) on foreign currency
transactions (note 3) -- -- -- --
------------- ------------- ------------- -------------
Net gain (loss) on investments 1,882,264 37,753,901 442,249 255,020,794
------------- ------------- ------------- -------------
Net increase (decrease) in net assets
resulting from operations $ 2,228,214 $ 37,280,301 $ 434,862 $ 252,206,050
============= ============= ============= =============
</TABLE>
48
<PAGE>
<TABLE>
<CAPTION>
SCIENCE AND DEVELOPING
INTERNATIONAL SMALL CAP TECHNOLOGY MARKETS
GROWTH GROWTH GROWTH GROWTH
FUND FUND FUND FUND
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
INCOME:
Dividends * $ 939,321 $ 175,607 $ 22,970 $ 95,618
Interest 526,105 513,779 83,407 90,446
------------- ------------- ------------- -------------
Total income 1,465,426 689,386 106,377 186,064
------------- ------------- ------------- -------------
EXPENSES (NOTE 3):
Investment management and
advisory services fee 2,473,465 1,541,681 409,752 256,816
Less fees and expenses absorbed
by investment adviser (467,953) -- (68,292) --
------------- ------------- ------------- -------------
Total net expenses 2,005,512 1,541,681 341,460 256,816
------------- ------------- ------------- -------------
Net investment income (loss) (540,086) (852,295) (235,083) (70,752)
------------- ------------- ------------- -------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net realized gain (loss) (note 2) 8,621,857 8,186,994 971,751 1,521,891
Net change in unrealized appreciation
(depreciation) on investments 20,277,109 63,935,065 18,189,694 2,157,662
Realized gain (loss) on foreign
currency transactions (1,786,833) -- -- (8,215)
Net change in unrealized appreciation
(depreciation) on foreign currency
transactions (note 3) 9,112 -- -- 1,592
------------- ------------- ------------- -------------
Net gain (loss) on investments 27,121,245 72,122,059 19,161,445 3,672,930
------------- ------------- ------------- -------------
Net increase (decrease) in net assets
resulting from operations $ 26,581,159 $ 71,269,764 $ 18,926,362 $ 3,602,178
============= ============= ============= =============
</TABLE>
----------------------
* Dividends are net of foreign withholding tax of $90,820 and $12,782 in the
International Growth Fund and Developing Markets Growth Fund, respectively.
See accompanying notes to financial statements on page 54.
49
<PAGE>
SIT MUTUAL FUNDS
--------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
BALANCED LARGE CAP
FUND GROWTH FUND
------------------------------ ------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
2000 1999 2000 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) $ 345,950 $ 175,194 ($ 473,600) ($ 117,054)
Net realized gain (loss) on investments 386,585 591,404 14,050,650 17,648,687
Net change in unrealized appreciation
(depreciation) on investments 1,495,679 205,945 23,703,251 2,230,110
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 2,228,214 972,543 37,280,301 19,761,743
------------- ------------- ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (283,000) (147,000) -- (17,000)
Net realized gains on investments (542,000) (350,000) (8,800,000) (9,200,000)
------------- ------------- ------------- -------------
Total distributions (825,000) (497,000) (8,800,000) (9,217,000)
------------- ------------- ------------- -------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 8,343,376 6,001,022 39,161,983 55,525,759
Reinvested distributions 818,430 491,654 8,606,014 9,042,427
Payments for shares redeemed (3,373,868) (2,277,394) (44,105,722) (52,351,385)
------------- ------------- ------------- -------------
Increase (decrease) in net assets from
capital share transactions 5,787,938 4,215,282 3,662,275 12,216,801
------------- ------------- ------------- -------------
Total increase in net assets 7,191,152 4,690,825 32,142,576 22,761,544
NET ASSETS
Beginning of period 12,112,363 7,421,538 140,257,696 117,496,152
------------- ------------- ------------- -------------
End of period $ 19,303,515 $ 12,112,363 $ 172,400,272 $ 140,257,696
============= ============= ============= =============
NET ASSETS CONSIST OF:
Capital (par value and paid-in surplus) $ 15,234,069 $ 9,446,131 $ 91,628,812 $ 88,440,137
Undistributed (distributions in excess of) net
investment income 126,727 63,689 -- --
Accumulated net realized gain (loss) from
security transactions and foreign
currency transactions 375,412 530,915 12,288,617 7,037,967
Unrealized appreciation (depreciation) on investments 3,567,307 2,071,628 68,482,843 44,779,592
Unrealized appreciation (depreciation) on foreign
currency transactions -- -- -- --
------------- ------------- ------------- -------------
$ 19,303,515 $ 12,112,363 $ 172,400,272 $ 140,257,696
============= ============= ============= =============
CAPITAL TRANSACTIONS IN SHARES:
Sold 448,452 359,829 661,412 1,156,108
Reinvested distributions 45,564 30,798 152,481 198,041
Redeemed (184,825) (138,578) (760,107) (1,081,277)
------------- ------------- ------------- -------------
Net increase (decrease) 309,191 252,049 53,786 272,872
============= ============= ============= =============
</TABLE>
50
<PAGE>
<TABLE>
<CAPTION>
REGIONAL MID CAP INTERNATIONAL SMALL CAP
GROWTH FUND GROWTH FUND GROWTH FUND GROWTH FUND
------------------------------ ------------------------------ ------------------------------ -----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30,
2000 1999 2000 1999 2000 1999 2000 1999
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
($ 7,387) ($ 2,333) ($ 2,814,744) ($ 1,585,981) ($ 540,086) ($ 339,030) ($ 852,295) ($ 493,500)
75,289 (111,164) 130,733,235 25,382,637 8,621,857 2,669,179 8,186,994 (3,899,846)
366,960 1,187,711 124,287,559 (2,614,204) 20,277,109 2,467,482 63,935,065 6,980,637
-- -- -- -- (1,786,833) 75,709 -- --
-- -- -- -- 9,112 1,383 -- --
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
434,862 1,074,214 252,206,050 21,182,452 26,581,159 4,874,723 71,269,764 2,587,291
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
-- (12,000) -- -- (1,100,000) (284,000) -- --
-- -- (30,425,000) (59,500,000) (6,300,000) (5,500,000) -- (7,700,000)
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
0 (12,000) (30,425,000) (59,500,000) (7,400,000) (5,784,000) 0 (7,700,000)
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
638,297 3,331,498 161,654,024 430,451,763 125,192,358 74,962,278 109,971,768 27,461,865
-- 11,188 29,067,295 56,956,588 7,152,503 5,530,038 0 7,467,439
(2,013,527) (1,863,065) (221,205,810) (478,075,695) (78,599,135) (84,321,667) (40,946,523) (36,954,369)
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
(1,375,230) 1,479,621 (30,484,491) 9,332,656 53,745,726 (3,829,351) 69,025,245 (2,025,065)
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
(940,368) 2,541,835 191,296,559 (28,984,892) 72,926,885 (4,738,628) 140,295,009 (7,137,774)
7,523,608 4,981,773 375,342,578 404,327,470 94,982,220 99,720,848 50,334,597 57,472,371
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
$ 6,583,240 $ 7,523,608 $ 566,639,137 $ 375,342,578 $ 167,909,105 $ 94,982,220 $ 190,629,606 $ 50,334,597
============= ============= ============= ============= ============= ============= ============= =============
$ 4,625,112 $ 6,007,729 $ 214,785,628 $ 212,221,226 $ 113,211,541 $ 59,465,815 $ 106,417,013 $ 37,762,700
-- -- -- -- (1,087,580) 552,506 -- --
(9,217) (84,506) 89,128,868 24,684,270 1,635,093 1,100,069 3,805,785 (3,899,846)
1,967,345 1,600,385 262,724,641 138,437,082 54,147,564 33,870,455 80,406,808 16,471,743
-- -- -- -- 2,487 (6,625) -- --
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
$ 6,583,240 $ 7,523,608 $ 566,639,137 $ 375,342,578 $ 167,909,105 $ 94,982,220 $ 190,629,606 $ 50,334,597
============= ============= ============= ============= ============= ============= ============= =============
48,379 289,865 9,240,241 31,884,953 5,092,809 4,137,747 3,173,013 1,551,586
-- 979 1,590,961 4,770,255 292,775 317,635 -- 509,720
(149,217) (162,044) (12,602,557) (35,369,826) (3,325,438) (4,605,179) (1,317,136) (2,131,506)
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
(100,838) 128,800 (1,771,355) 1,285,382 2,060,146 (149,797) 1,855,877 (70,200)
============= ============= ============= ============= ============= ============= ============= =============
</TABLE>
See accompanying notes to financial statements on page 54.
51
<PAGE>
SIT MUTUAL FUNDS
--------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
SCIENCE AND
TECHNOLOGY DEVELOPING MARKETS
GROWTH FUND GROWTH FUND
------------------------------ ------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
2000 1999 2000 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) ($ 235,083) ($ 63,669) ($ 70,752) ($ 5,540)
Net realized gain (loss) on investments 971,751 (316,306) 1,521,891 (2,762,417)
Net change in unrealized appreciation
(depreciation) on investments 18,189,694 2,941,239 2,157,662 3,644,737
Net realized gain (loss) on foreign currency transactions -- -- (8,215) (33,292)
Net change in unrealized appreciation (depreciation) on
foreign currency transactions -- -- 1,592 (726)
------------- ------------- ------------- -------------
Net increase (decrease) in net assets resulting from
operations 18,926,362 2,561,264 3,602,178 842,762
------------- ------------- ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income -- -- -- --
Net realized gains on investments -- -- -- --
------------- ------------- ------------- -------------
Total distributions 0 0 0 0
------------- ------------- ------------- -------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 19,713,760 9,619,464 7,997,732 11,372,665
Reinvested distributions -- -- -- --
Payments for shares redeemed (6,661,063) (2,845,402) (8,261,866) (12,382,569)
------------- ------------- ------------- -------------
Increase (decrease) in net assets from
capital share transactions 13,052,697 6,774,062 (264,134) (1,009,904)
------------- ------------- ------------- -------------
Total increase in net assets 31,979,059 9,335,326 3,338,044 (167,142)
NET ASSETS
Beginning of period 14,193,665 4,858,339 11,337,746 11,504,888
------------- ------------- ------------- -------------
End of period $ 46,172,724 $ 14,193,665 $ 14,675,790 $ 11,337,746
============= ============= ============= =============
NET ASSETS CONSIST OF:
Capital (par value and paid-in surplus) $ 23,912,521 $ 10,948,570 $ 11,908,818 $ 12,251,919
Undistributed (distributions in excess of) net
investment income -- -- -- --
Accumulated net realized gain (loss) from
security transactions and foreign
currency transactions 464,176 (361,238) (2,176,093) (3,697,984)
Unrealized appreciation (depreciation) on investments 21,796,027 3,606,333 4,943,062 2,785,400
Unrealized appreciation (depreciation) on foreign
currency transactions -- -- 3 (1,589)
------------- ------------- ------------- -------------
$ 46,172,724 $ 14,193,665 $ 14,675,790 $ 11,337,746
============= ============= ============= =============
CAPITAL TRANSACTIONS IN SHARES:
Sold 693,056 733,282 651,095 1,343,413
Reinvested distributions -- -- -- --
Redeemed (241,913) (213,983) (694,347) (1,479,311)
------------- ------------- ------------- -------------
Net increase (decrease) 451,143 519,299 (43,252) (135,898)
============= ============= ============= =============
</TABLE>
See accompanying notes to financial statements on page 54.
52
<PAGE>
This page has been left blank intentionally.
53
<PAGE>
SIT MUTUAL FUNDS
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Sit Mutual Funds are 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 Funds). The
investment objective for each Fund is as follows:
------------------------------- --------------------------------------------
FUND INVESTMENT OBJECTIVE
------------------------------- --------------------------------------------
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 growth consistent with
the preservation of principal and to provide
regular income.
------------------------------- --------------------------------------------
International Growth Long-term capital growth.
------------------------------- --------------------------------------------
Developing Markets Growth Maximize long-term capital appreciation.
------------------------------- --------------------------------------------
Regional Growth Maximize long-term capital appreciation.
------------------------------- --------------------------------------------
Science and Technology Growth Maximize long-term capital appreciation.
------------------------------- --------------------------------------------
Pursuant to a Plan of Reorganization, on July 14, 2000 the Large Cap Growth Fund
acquired all of the assets of Regional Growth Fund in exchange for shares of
common stock of the Large Cap Growth Fund.
Significant accounting policies followed by the Funds are summarized below:
INVESTMENTS IN SECURITIES
Investments in securities traded on national or international securities
exchanges are valued at the last reported sales price prior to the time when
assets are valued. Securities traded on the over-the-counter market are valued
at the last reported sales price or if the last sales price is not available at
the last reported bid price. The sale and bid prices are obtained from
independent pricing services. Debt securities maturing more than 60 days are
priced by an independent pricing service. When market quotations are not readily
available, or securities can not be valued by the pricing service, securities
are valued at fair value as determined in good faith using procedures
established by the Board of Directors, which may include dealer supplied
valuations. Debt securities maturing in less than 60 days when acquired, or
which subsequently are within 60 days of maturity, are valued at amortized cost.
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-
54
<PAGE>
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.
ILLIQUID SECURITIES
Each Fund currently limits investments in illiquid securities to 15% of net
assets. At June 30, 2000, there were no securities held by the Funds deemed
illiquid by the investment adviser. 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 is 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.
Undistributed net investment income and accumulated net realized gains (losses)
from the Statement of Changes in Net Assets have been increased (decreased) by
current permanent book-to-tax differences resulting in reclassification of
additional paid-in capital as follows:
55
<PAGE>
SIT MUTUAL FUNDS
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
Undistributed Accumulated Additional
net invest. net realized paid-in
income gains (losses) capital
------ -------------- -------
<S> <C> <C> <C>
Developing Markets Growth 70,752 8,215 (78,967)
Small Cap Growth 852,295 (481,363) (370,932)
International Growth 1,087,580 (494,097) (593,483)
Mid Cap Growth 2,814,744 (35,863,637) 33,048,893
Regional Growth 7,387 -- (7,387)
Large Cap Growth 473,600 -- (473,600)
Science and Technology Growth 235,083 (146,337) (88,746)
Balanced 88 (88) --
</TABLE>
Included in the Mid Cap Growth Fund adjustment is $35,728,071 related to an
in-kind distribution.
For federal income tax purposes the Developing Markets Growth Fund has a capital
loss carryover of $2,176,093 at June 30, 2000 which, if not offset by subsequent
capital gains, will begin to expire in 2007. It is unlikely tha t the Board of
Directors will authorize a distribution of net realized gains until the
available capital loss carryovers are offset or expire.
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.
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.
56
<PAGE>
NOTE 2 - INVESTMENT SECURITY TRANSACTIONS
Purchases of and proceeds from sales and maturities of investment securities,
other than short-term securities, for the period ended June 30, 2000, were as
follow:
Purchases ($) Proceeds ($)
------------- ------------
Large Cap Growth Fund 72,943,335 72,762,388
Mid Cap Growth Fund 286,680,496 362,211,050
Small Cap Growth Fund 76,950,096 37,537,162
Balanced Fund 13,524,028 9,201,668
International Growth Fund 68,891,096 38,748,397
Developing Markets Growth Fund 5,780,578 6,458,067
Regional Growth Fund 1,451,405 3,417,291
Science and Technology Growth Fund 18,489,202 7,774,287
NOTE 3 - EXPENSES
INVESTMENT ADVISER
The Funds each have entered into an investment management agreement with Sit
Investment Associates, Inc. (SIA), under which SIA manages the Funds' assets and
provides research, statistical and advisory services, and pays related office
rental, executive expenses and executive salaries. The fee for investment
management and advisory services is based on the average daily net assets of the
Funds at the annual rate of:
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, 2000 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%
57
<PAGE>
SIT MUTUAL FUNDS
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
of the Fund's average daily net assets. For the period January 1, 1994 through
December 31, 2000, 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, 2000 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 assets. After December 31, 2000, these voluntary fee
waivers may be discontinued by the Adviser in its sole discretion. During the
period ended June 30, 2000, for the Mid Cap Growth, International Growth,
Regional Growth, and Science and Technology Growth Funds, SIA voluntarily
absorbed an additional $1,209,620, $467,953, $17,727 and $68,292, respectively,
in expenses that were otherwise payable by the Funds.
As of June 30, 2000, the Large Cap Growth Fund, International Growth Fund, Mid
Cap Growth Fund, Small Cap Growth Fund, Regional Growth Fund, Science and
Technology Growth Fund, Developing Markets Growth Fund, and Balanced Fund had
invested $4,721,000, $18,295,000, $25,031,000, $33,983,000, $775,000,
$2,459,000, $1,500,000, and $3,011,000, 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% (.65% net of waiver for the International Growth
Fund) 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 $919,475 were paid or payable to SKI for the year ended June 30, 2000.
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 June 30, 2000:
% Shares
Shares Outstanding
------ -----------
Large Cap Growth Fund 488,252 18.03
Mid Cap Growth Fund 4,543,858 18.90
Small Cap Growth Fund 1,049,772 22.77
Balanced Fund 149,514 14.86
International Growth Fund 1,474,109 20.70
Developing Markets Growth Fund 194,534 17.80
Regional Growth Fund 106,154 22.57
Science and Technology Growth Fund 281,645 20.36
58
<PAGE>
SIT BALANCED FUND
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Years Ended June 30,
----------------------------------------------------------------------
2000 1999 1998 1997 1996
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE:
Beginning of period $ 17.38 $ 16.68 $ 14.93 $ 12.57 $ 10.99
------------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income 0.40 .32 .34 .33 .30
Net realized and unrealized gains
(losses) on investments 2.51 1.45 2.99 2.42 1.57
------------------------------------------------------------------------------------------------------------------------------
Total from operations 2.91 1.77 3.33 2.75 1.87
------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (.37) (.31) (.35) (.32) (.29)
From realized gains (.74) (.76) (1.23) (.07) --
------------------------------------------------------------------------------------------------------------------------------
Total distributions (1.11) (1.07) (1.58) (.39) (.29)
------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE:
End of period $ 19.18 $ 17.38 $ 16.68 $ 14.93 $ 12.57
------------------------------------------------------------------------------------------------------------------------------
Total investment return (1) 17.28% 11.25% 23.95% 22.42% 17.26%
------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000's omitted) $ 19,304 $ 12,112 $ 7,422 $ 5,103 $ 4,062
RATIOS:
Expenses to average daily net assets 1.00% 1.00% 1.00% 1.00% 1.00%
Net investment income to average daily net assets 2.34% 2.01% 2.20% 2.48% 2.61%
Portfolio turnover rate (excluding short-term securities) 68.22% 89.37% 62.62% 38.16% 101.37%
</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.
59
<PAGE>
SIT LARGE CAP GROWTH FUND
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Years Ended June 30,
------------------------------------------------------------------------
2000 1999 1998 1997 1996
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE:
Beginning of period $ 52.84 $ 49.34 $ 40.39 $ 32.75 $ 28.38
---------------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (.18) (.04) .02 .07 .04
Net realized and unrealized gains
(losses) on investments 14.41 6.96 13.17 10.02 6.61
---------------------------------------------------------------------------------------------------------------------------------
Total from operations 14.23 6.92 13.19 10.09 6.65
---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income -- (.01) (.07) (.03) (.04)
From realized gains (3.41) (3.41) (4.17) (2.42) (2.24)
---------------------------------------------------------------------------------------------------------------------------------
Total distributions (3.41) (3.42) (4.24) (2.45) (2.28)
---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE:
End of period $ 63.66 $ 52.84 $ 49.34 $ 40.39 $ 32.75
---------------------------------------------------------------------------------------------------------------------------------
Total investment return (1) 27.75% 15.10% 35.33% 32.36% 24.48%
---------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000's omitted) $ 172,400 $ 140,258 $ 117,496 $ 72,226 $ 53,017
RATIOS:
Expenses to average daily net assets 1.00% 1.00% 1.00% 1.00%(2) 1.00%(2)
Net investment income (loss) to average daily net assets (0.31%) (0.09%) 0.06% 0.20%(2) 0.14%(2)
Portfolio turnover rate (excluding short-term securities) 48.95% 70.51% 43.61% 32.23% 49.99%
</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 and 1996, the investment adviser
voluntarily absorbed $50,548 and $110,099, 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%
and 1.23% for the years ended June 30, 1997 and 1996, respectively, and
the ratio of net investment income(loss) to average daily net assets would
have been 0.11% and (.09%), respectively.
60
<PAGE>
SIT REGIONAL GROWTH FUND
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Six Months
Years Ended June 30, Ended
-------------------------------- June 30,
2000 1999 1998
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE:
Beginning of period $ 13.17 $ 11.26 $ 10.00
---------------------------------------------------------------------------------------------------------
Operations:
Net investment income (loss) (.02) (.01) .02
Net realized and unrealized gains
on investments .85 1.94 1.24
---------------------------------------------------------------------------------------------------------
Total from operations .83 1.93 1.26
---------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income -- (.02) --
From realized gains -- -- --
---------------------------------------------------------------------------------------------------------
Total distributions .00 (.02) .00
---------------------------------------------------------------------------------------------------------
NET ASSET VALUE:
End of period $ 14.00 $ 13.17 $ 11.26
---------------------------------------------------------------------------------------------------------
Total investment return (1) 6.30% 17.21% 12.60%
---------------------------------------------------------------------------------------------------------
Net assets at end of period (000's omitted) $ 6,583 $ 7,524 $ 4,982
RATIOS:
Expenses to average daily net assets 1.00% (2) 1.00% (2) 1.00%(2)
Net investment income to average net assets (0.10%)(2) (0.04%)(2) 0.44%(2)
Portfolio turnover rate (excluding short-term securities) 21.46% 68.71% 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) Percentages for period ended June 30, 1998 are adjusted to an annual rate.
Total Fund expenses are contractually limited to 1.25% of average daily
net assets. However, during the periods ended June 30, 2000, 1999 and
1998, the investment adviser voluntarily absorbed $17,727, $14,845 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 June 30,
2000, 1999 and 1998, and the ratio of net investment income (loss) to
average daily net assets would have been (0.35%), (0.29%) and 0.19%,
respectively.
61
<PAGE>
SIT MID CAP GROWTH FUND
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Years Ended June 30,
-------------------------------------------------------------------------
2000 1999 1998 1997 1996
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE:
Beginning of period $ 14.54 $ 16.49 $ 15.43 $ 15.58 $ 13.00
-----------------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) (.12) (.06) (.07) (.03) (.04)
Net realized and unrealized gains
(losses) on investments 10.38 .65 3.15 2.50 4.07
-----------------------------------------------------------------------------------------------------------------------------------
Total from operations 10.26 .59 3.08 2.47 4.03
-----------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income -- -- -- -- --
From realized gains (1.23) (2.54) (2.02) (2.62) (1.45)
-----------------------------------------------------------------------------------------------------------------------------------
Total distributions (1.23) (2.54) (2.02) (2.62) (1.45)
-----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE:
End of period $ 23.57 $ 14.54 $ 16.49 $ 15.43 $ 15.58
-----------------------------------------------------------------------------------------------------------------------------------
Total investment return (1) 73.01% 6.94% 22.19% 17.23% 33.00%
-----------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000's omitted) $566,639 $375,343 $404,327 $386,543 $356,317
RATIOS:
Expenses to average daily net assets 1.00% (2) 1.00% (2) 1.00% (2) 0.92% (2) 0.77%
Net investment income (loss) to average daily net assets (0.58%)(2) (0.46%)(2) (0.41%)(2) (0.20%)(2) (0.23%)
Portfolio turnover rate (excluding short-term securities) 62.21% 68.62% 52.62% 38.66% 50.38%
</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) Effective November 1, 1996, total Fund expenses are contractually limited
to 1.25% of average daily net assets. However, during the years ended June
30, 2000, 1999, 1998 and 1997, the investment adviser voluntarily absorbed
$1,209,620, $865,657, $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%, 1.25%, and 1.09% for the the years ended June 30, 2000,
1999, 1998 and 1997, respectively, and the ratio of net investment income
(loss) to average daily net assets would have been (0.83%), (0.71%),
(0.66%), and (0.37%), respectively.
62
<PAGE>
SIT INTERNATIONAL GROWTH FUND
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Years Ended June 30,
------------------------------------------------------------------------
2000 1999 1998 1997 1996
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE:
Beginning of period $ 18.77 $ 19.14 $ 18.57 $ 16.29 $ 15.71
---------------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) (.04) (.07) .02 .01 .02
Net realized and unrealized gains
on investments 6.36 .84 1.25 2.70 1.50
---------------------------------------------------------------------------------------------------------------------------------
Total from operations 6.32 .77 1.27 2.71 1.52
---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (.23) (.06) (.03) (.01) (.09)
From realized gains (1.28) (1.08) (.67) (.42) (.85)
---------------------------------------------------------------------------------------------------------------------------------
Total distributions (1.51) (1.14) (.70) (.43) (.94)
---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE:
End of period $ 23.58 $ 18.77 $ 19.14 $ 18.57 $ 16.29
---------------------------------------------------------------------------------------------------------------------------------
Total investment return (1) 33.38% 4.51% 7.50% 17.04% 10.21%
---------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000's omitted) $167,909 $ 94,982 $ 99,721 $ 99,279 $ 88,712
RATIOS:
Expenses to average daily net assets 1.50% (2) 1.50% (2) 1.50%(2) 1.50%(2) 1.50%(2)
Net investment income (loss) to average daily net assets (0.40%)(2) (0.37%)(2) 0.12%(2) 0.05%(2) 0.13%(2)
Portfolio turnover rate (excluding short-term securities) 30.61% 45.91% 43.74% 41.59% 38.55%
</TABLE>
------------
(1) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value.
(2) Total Fund expenses are contractually limited to 1.85% of average daily
net assets. However, during the years ended June 30, 2000, 1999, 1998,
1997, and 1996, the investment adviser voluntarily absorbed $467,953,
$325,038, $338,651, $306,575, and $269,556, 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 years ended June 30, 2000, 1999, 1998, 1997, and 1996, and the
ratio of net investment income (loss) to average daily net assets would
have been (0.75%), (0.72%), (0.23%), (0.30%), and (0.22%), respectively.
63
<PAGE>
SIT SMALL CAP GROWTH FUND
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Years Ended June 30,
----------------------------------------------------------------------
2000 1999 1998 1997 1996
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE:
Beginning of period $ 18.28 $ 20.35 $ 18.89 $ 19.27 $ 13.49
---------------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment loss (.18) (.18) (.17) (.14) (.11)
Net realized and unrealized gains
on investments 23.25 1.20 2.31 .57 6.03
---------------------------------------------------------------------------------------------------------------------------------
Total from operations 23.07 1.02 2.14 .43 5.92
---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From realized gains -- (3.09) (.68) (.81) (.14)
---------------------------------------------------------------------------------------------------------------------------------
Total distributions -- (3.09) (.68) (.81) (.14)
---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE:
End of period $ 41.35 $ 18.28 $ 20.35 $ 18.89 $ 19.27
---------------------------------------------------------------------------------------------------------------------------------
Total investment return (1) 126.20% 8.77% 11.70% 2.37% 44.13%
---------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000's omitted) $190,630 $ 50,335 $ 57,472 $ 58,358 $ 50,846
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 (0.83%) (1.08%) (0.72%) (0.81%) (0.91%)
Portfolio turnover rate (excluding short-term securities) 39.31% 71.84% 79.54% 58.39% 69.92%
</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.
64
<PAGE>
SIT SCIENCE AND TECHNOLOGY GROWTH FUND
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Six Months
Years Ended June 30, Ended
------------------------------ June 30,
2000 1999 1998
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE:
Beginning of period $ 15.23 $ 11.77 $ 10.00
---------------------------------------------------------------------------------------------------------
Operations:
Net investment income (loss) (.17) (.07) (.01)
Net realized and unrealized gains
on investments 18.32 3.53 1.78
---------------------------------------------------------------------------------------------------------
Total from operations 18.15 3.46 1.77
---------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income -- -- --
From realized gains -- -- --
---------------------------------------------------------------------------------------------------------
Total distributions .00 .00 .00
---------------------------------------------------------------------------------------------------------
NET ASSET VALUE:
End of period $ 33.38 $ 15.23 $ 11.77
---------------------------------------------------------------------------------------------------------
Total investment return (1) 119.17% 29.40% 17.70%
---------------------------------------------------------------------------------------------------------
Net assets at end of period (000's omitted) $46,173 $14,194 $ 4,858
RATIOS:
Expenses to average daily net assets 1.25% (2) 1.25% (2) 1.25% (2)
Net investment income to average net assets (0.86%)(2) (0.72%)(2) (0.21%)(2)
Portfolio turnover rate (excluding short-term securities) 29.60% 58.29% 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) Percentages for period ended June 30, 1998 are adjusted to an annual rate.
Total Fund expenses are contractually limited to 1.50% of average daily
net assets. However, during the periods ended June 30, 2000, 1999 and
1998, the investment adviser voluntarily absorbed $68,292, $22,008 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 June 30,
2000, 1999 and 1998, and the ratio of net investment income (loss) to
average daily net assets would have been (1.11%), (0.97%) and (0.46%),
respectively.
65
<PAGE>
SIT DEVELOPING MARKETS GROWTH FUND
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Years Ended June 30,
----------------------------------------------------------------
2000 1999 1998 1997 1996
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE:
Beginning of period $ 9.98 $ 9.05 $ 13.04 $ 10.95 $ 9.41
---------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) (.06) -- (.06) .03 --
Net realized and unrealized gains
(losses) on investments 3.51 .93 (3.92) 2.06 1.55
---------------------------------------------------------------------------------------------------------------------------
Total from operations 3.45 .93 (3.98) 2.09 1.55
---------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income -- -- (.01) -- --
From realized gains -- -- -- -- (.01)
---------------------------------------------------------------------------------------------------------------------------
Total distributions -- -- (.01) -- (.01)
---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE:
End of period $ 13.43 $ 9.98 $ 9.05 $ 13.04 $ 10.95
---------------------------------------------------------------------------------------------------------------------------
Total investment return (1) 34.57% 10.28% (30.52%) 19.09% 16.51%
---------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000's omitted) $14,676 $11,338 $11,505 $16,789 $ 8,646
RATIOS:
Expenses to average daily net assets 2.00% 2.00% 2.00% 2.00% 2.00%
Net investment income (loss) to average daily net assets (0.55%) (0.05%) (0.52%) 0.32% 0.06%
Portfolio turnover rate (excluding short-term securities) 49.25% 98.24% 53.36% 65.88% 46.22%
</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.
66
<PAGE>
INDEPENDENT AUDITORS' REPORT
--------------------------------------------------------------------------------
The Board of Directors and Shareholders
Sit Large Cap Growth Fund, Inc.
Sit Mid Cap Growth Fund, Inc.
Sit Mutual Funds, Inc.:
We have audited the accompanying statements of assets and liabilities,
including the schedules of portfolios of investments in securities of Sit
Balanced Fund (a series of Sit Mutual Funds, Inc.), Sit Large Cap Growth Fund,
Inc., Sit Regional Growth Fund (a series of Sit Mutual Funds, Inc.), Sit Mid Cap
Growth Fund, Inc., Sit International Growth Fund (a series of Sit Mutual Funds,
Inc.), Sit Small Cap Growth Fund (a series of Sit Mutual Funds, Inc.), Sit
Science and Technology Growth Fund (a series of Sit Mutual Funds, Inc.), and Sit
Developing Markets Growth Fund (a series of Sit Mutual Funds, Inc.), as of June
30, 2000; the related statements of operations for the year then ended; the
statements of changes in net assets for each of the years in the two-year period
then ended; and the financial highlights as presented in note 4 to the financial
statements. These financial statements and the financial highlights are the
responsibility of the Funds' management. Our responsibility is to express an
opinion on these financial statements and the financial highlights based on our
audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform our audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of June 30, 2000, by correspondence with the custodian and
brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and the financial highlights
referred to above present fairly, in all material respects, the financial
position of Sit Balanced Fund, Sit Large Cap Growth Fund, Sit Regional Growth
Fund, Sit Mid Cap Growth Fund, Sit International Growth Fund, Sit Small Cap
Growth Fund, Sit Science and Technology Growth Fund, and Sit Developing Markets
Growth Fund as of June 30, 2000 and the results of their operations, the changes
in their net assets, and the financial highlights for the periods stated in the
first paragraph above, in conformity with accounting principles generally
accepted in the United States of America.
KPMG LLP
Minneapolis, Minnesota
August 4, 2000
67
<PAGE>
FEDERAL INCOME TAX INFORMATION
--------------------------------------------------------------------------------
We are required by Federal tax regulations to provide shareholders with
certain information regarding dividend distributions on an annual fiscal year
basis. The figures are for informational purposes only and should not be used
for reporting to federal or state revenue agencies. All necessary tax
information will be mailed in January each year.
LONG-TERM
ORDINARY CAPITAL
FUND AND PAYABLE DATE INCOME (a) GAIN (b)
----------------------------------- --------- ---------
Large Cap Growth Fund
December 7, 1999 $ 0.00000 $ 3.40552
========= =========
Mid Cap Growth Fund
December 7, 1999 $ 0.00000 $ 1.22922
========= =========
Balanced Fund
October 8, 1999 $ 0.09027 --
December 7, 1999 0.09584 $ 0.74210
April 11, 2000 0.09261 --
July 11, 2000 0.11868 --
--------- ---------
$ 0.39740(d) $ 0.74210
========= =========
International Growth Fund
December 7, 1999 $ 0.11261(c) $ 1.39560
========= =========
Regional Growth Fund
July 13, 2000 $ 0.00537 $ 0.01678
========= =========
(a) Includes distributions of short-term gains, if any, which are taxable as
ordinary income.
(b) Taxable as long-term gain.
(c) Taxable as dividend income and does not qualify for dividends-received
deduction by corporations.
(d) Taxable as dividend income, 16.60% qualifying for dividends-received
deduction by corporations.
68
<PAGE>
ANNUAL REPORT STOCK FUNDS
Year Ended June 30, 2000
INVESTMENT ADVISER AUDITORS
Sit Investment Associates, Inc. KPMG LLP
4600 Wells Fargo Center 4200 Wells Fargo Center
Minneapolis, MN 55402 Minneapolis, MN 55402
612-334-5888 (Metro Area)
800-332-5580
LEGAL COUNSEL
DISTRIBUTOR Dorsey & Whitney LLP
220 South Sixth Street
SIA Securities Corp. Minneapolis, MN 55402
4600 Wells Fargo Center
Minneapolis, MN 55402
612-334-5888 (Metro Area) INVESTMENT SUB-ADVISER
800-332-5580
(Developing Markets Growth Fund and
International Growth Fund)
CUSTODIAN Sit/Kim International Investments
Associates, Inc.
The Northern Trust Company 4600 Wells Fargo Center
50 South LaSalle Street Minneapolis, MN 55402
Chicago, IL 60675 612-334-5888 (Metro Area)
800-332-5580
TRANSFER AGENT AND
DISBURSING AGENT
PFPC Inc.
P.O. BOX 5166
Westboro, MA 01581-5166
[LOGO] SIT INVESTMENT ASSOCIATES
--------------------------------
SIT MUTUAL FUNDS
