SIT MUTUAL FUNDS, INC.
4600 NORWEST CENTER
90 SOUTH SEVENTH STREET
MINNEAPOLIS, MINNESOTA 55402
May 22, 2000
To the Shareholders of Sit Regional Growth Fund:
I am writing to inform you of a Special Meeting of the shareholders of
Sit Regional Growth Fund ("Regional Fund"), a series of Sit Mutual Funds, Inc.,
that will be held at 9:00 a.m. on Thursday, June 15, 2000 at the offices of Sit
Investment Associates, Inc., 4600 Norwest Center, 90 South Seventh Street,
Minneapolis, Minnesota. The purpose of this meeting is to vote on a proposal to
combine Regional Fund into Sit Large Cap Growth Fund, Inc. ("Large Cap Fund").
If the proposed reorganization is approved, you will receive shares of Large Cap
Fund with a value equal to the value of your Regional Fund shares.
The attached Prospectus/Proxy Statement provides you with additional
information about the proposed reorganization and a comparison of the two Funds.
There is also attached a "Q&A" which should provide answers to many of your
questions. We urge you to read all of the enclosed materials carefully.
Sit Mutual Funds' Board of Directors has approved the proposed
combination of the Funds and recommends it for your approval. I encourage you to
vote "FOR" the proposal, and ask that you please send your completed proxy
ballot in as soon as possible to help save the cost of additional solicitations.
As always, we thank you for your confidence and support.
Sincerely,
/s/ Mary K. Stern
Mary K. Stern
President
<PAGE>
WHAT YOU SHOULD KNOW ABOUT
THIS PROPOSED FUND REORGANIZATION
THE BOARD OF DIRECTORS OF SIT MUTUAL FUNDS ENCOURAGES YOU TO READ THE
ATTACHED PROSPECTUS/PROXY STATEMENT CAREFULLY. THE FOLLOWING IS A BRIEF OVERVIEW
OF THE KEY ISSUES.
WHY IS MY FUND HOLDING A SPECIAL SHAREHOLDERS MEETING?
The meeting is being called to ask you to approve the reorganization of
Regional Fund into Large Cap Fund, a similar fund in the Sit fund family. If
shareholders vote in favor of the reorganization, Large Cap Fund will acquire
all of the assets of Regional Fund and your shares of Regional Fund will be
exchanged for shares of Large Cap Fund with the same net asset value.
WHY WAS THE REORGANIZATION PROPOSED?
Sit Investment Associates, Inc. (the "Adviser), the investment adviser
to both Regional Fund and Large Cap Fund, recommended the reorganization to the
Board because it believes that Regional Fund is unlikely to grow to a size that
is economically viable. At May 4, 2000, Regional Fund had net assets of less
than $7 million. The small size of the Fund makes portfolio management
difficult. The Fund cannot maintain the level of investment diversification that
the Adviser desires. In addition, the Fund's midwestern geographic focus
precludes the Fund from taking advantage of a number of investment opportunities
available in other areas of the country. Large Cap Fund is a much larger Fund,
with net assets of approximately $166 million at May 4, 2000. Therefore, Large
Cap Fund is able to achieve greater investment diversification. In addition,
Large Cap Fund is not subject to any geographic limitations on its investments.
ARE THERE ANY OTHER ADVANTAGES TO MERGING THE FUNDS?
The contractual advisory fee for Large Cap Fund is lower than for
Regional Fund. Because the Adviser pays all Fund expenses (other than interest,
brokerage commissions, transaction charges and certain extraordinary expenses),
overall expenses will be lower for Large Cap Fund. During the past year, the
Adviser waived fees for Regional Fund so that overall expenses were the same for
the two Funds. However, the Adviser is not obligated to continue these waivers
after December 31, 2000.
The potential benefits and possible disadvantages of merging the Funds
are explained in more detail in the attached Prospectus/Proxy Statement.
HOW ARE REGIONAL FUND AND LARGE CAP FUND ALIKE? HOW DO THEY DIFFER?
The investment objectives of these Funds are identical; each has an
objective of maximizing long-term capital appreciation. In addition, each Fund
invests in growth-oriented companies that the Adviser believes exhibit the
potential for superior growth. However, there are differences in the Funds'
investment strategies:
* Large Cap Fund invests at least 65% of its total assets in
stocks of large cap companies - that is, companies with
capitalizations of $5 billion or more at the time of purchase.
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* Regional Fund's investments include stocks of small, mid and
large cap companies.
* Large Cap Fund invests primarily in stocks of domestic
companies, but is not subject to any other geographic
limitation on its investments.
* Regional Fund invests at least 80% of its total assets in
common stocks of companies with their headquarters in a
midwest region comprised of Minnesota, Iowa, Missouri, North
Dakota, South Dakota, Nebraska, Kansas, Wisconsin, Illinois,
Michigan, Indiana and Ohio.
WHAT HAPPENS IF SHAREHOLDERS DECIDE IN FAVOR OF A REORGANIZATION?
The reorganization cannot occur until the Funds obtain from the
Securities and Exchange Commission certain exemptive relief from the provisions
of the Investment Company Act of 1940. Although the Funds believe that they will
obtain this relief, they cannot be certain of this, nor can they predict when
the required relief will be obtained. After the exemptive relief is granted, a
closing date will be set for the reorganization. Shareholders will receive full
and fractional shares of Large Cap Fund equal in value to the shares of Regional
Fund that they owned immediately prior to the reorganization.
WHAT HAPPENS IF SHAREHOLDERS DO NOT APPROVE THE REORGANIZATION?
If shareholders do not approve the reorganization, Regional Fund
initially will continue to be managed as a separate fund in accordance with its
current investment objective and investment strategies. However, the Board of
Directors may consider other alternatives, such as re-submission of the
reorganization proposal to shareholders, submission of a liquidation proposal to
shareholders or changes in the investment strategies of Regional Fund.
IF THE FUNDS MERGE, WILL THERE BE TAX CONSEQUENCES FOR ME?
Unlike a transaction where you sell shares of one fund in order to buy
shares of another, the reorganization will not be considered a taxable event.
The Funds themselves will recognize no gains or losses on assets as a result of
the reorganization. So you will not have reportable capital gains or losses due
to the reorganization.
However, you should consult your own tax advisor regarding any possible
effect the proposed reorganization might have on you, given your personal
circumstances - particularly regarding state and local taxes.
WHO WILL PAY FOR THIS REORGANIZATION?
The expenses of the reorganization, including legal expenses, printing,
packaging and postage, plus the costs of any supplementary solicitation, will be
borne by the Adviser.
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WHAT DOES THE BOARD OF DIRECTORS RECOMMEND?
The Board of Directors recommends that you vote in favor of the
reorganization. Before you do, however, be sure to study the issues involved and
call us with any questions, then vote promptly to ensure that a quorum will be
represented at the special shareholders meeting.
WHERE DO I GET MORE INFORMATION ABOUT LARGE CAP GROWTH FUND?
Please call the Fund at (800) 332-5580 or (612) 334-5888.
<PAGE>
SIT REGIONAL GROWTH FUND
A SERIES OF
SIT MUTUAL FUNDS, INC.
4600 NORWEST CENTER
90 SOUTH SEVENTH STREET
MINNEAPOLIS, MINNESOTA 55402
(612) 334-5888
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 15, 2000
------------------------
To the Shareholders of Sit Regional Growth Fund: May 22, 2000
NOTICE IS HEREBY GIVEN that a special meeting of shareholders of Sit
Regional Growth Fund ("Regional Fund"), a series of Sit Mutual Funds, Inc. ("Sit
Mutual Funds"), will be held at 9:00 a.m., Central time, on Thursday, June 15,
2000, at the offices of Sit Investment Associates, Inc., 4600 Norwest Center, 90
South Seventh Street, Minneapolis, Minnesota. The purpose of the special meeting
is as follows:
1. To consider and vote on a proposed Agreement and Plan of
Reorganization (the "Plan") providing for (a) the acquisition
of substantially all of the assets and the assumption of all
liabilities of Regional Fund by Sit Large Cap Growth Fund,
Inc. ("Large Cap Fund") in exchange for shares of common stock
of Large Cap Fund having an aggregate net asset value equal to
the aggregate value of the assets acquired (less the
liabilities assumed) of Regional Fund and (b) the liquidation
of Regional Fund and the pro rata distribution of Large Cap
Fund shares to Regional Fund shareholders. Under the Plan,
each Regional Fund shareholder will receive Large Cap Fund
shares with a net asset value equal as of the effective time
of the Plan to the net asset value of their Regional Fund
shares. A vote in favor of the Plan will be considered a vote
in favor of an amendment to the articles of incorporation of
Sit Mutual Funds required to effect the reorganization
contemplated by the Plan.
2. To transact such other business as may properly come before
the meeting or any adjournments or postponements thereof.
Even if Regional Fund shareholders vote to approve the Plan,
consummation of the Plan is subject to certain other conditions. See
"Information About the Reorganization -- Plan of Reorganization" in the attached
Prospectus/Proxy Statement.
THE BOARD OF DIRECTORS OF SIT MUTUAL FUNDS RECOMMENDS APPROVAL OF THE
PLAN.
The close of business on May 12, 2000 has been fixed as the record date
for the determination of shareholders entitled to notice of and to vote at the
meeting and any adjournments or postponements thereof.
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WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE SIGN AND
PROMPTLY RETURN THE ENCLOSED PROXY IN THE ENCLOSED POSTAGE-PREPAID ENVELOPE. IN
ORDER TO AVOID THE ADDITIONAL EXPENSE OF FURTHER SOLICITATION, WE RESPECTFULLY
ASK FOR YOUR COOPERATION IN MAILING IN YOUR PROXY PROMPTLY. If you are present
at the meeting, you may then revoke your proxy and vote in person, as explained
in the Prospectus/Proxy Statement in the section entitled "Voting Information."
By Order of the Board of Directors,
MICHAEL J. RADMER
SECRETARY
<PAGE>
PROSPECTUS/PROXY STATEMENT
DATED MAY 22, 2000
SIT LARGE CAP GROWTH FUND, INC.
SIT MUTUAL FUNDS, INC.
4600 NORWEST CENTER, 90 SOUTH SEVENTH STREET
MINNEAPOLIS, MINNESOTA 55402
(612) 334-5888
ACQUISITION OF THE ASSETS OF SIT REGIONAL GROWTH FUND, A SERIES OF SIT MUTUAL
FUNDS, INC., BY AND IN EXCHANGE FOR SHARES OF SIT LARGE CAP GROWTH FUND, INC.
We are furnishing this combined Prospectus/Proxy Statement to the
shareholders of Sit Regional Growth Fund ("Regional Fund"), a series of Sit
Mutual Funds, Inc. ("Sit Mutual Funds"), in connection with a special meeting
(the "Meeting") of Regional Fund shareholders to be held at the offices of Sit
Investment Associates, Inc., 4600 Norwest Center, 90 South Seventh Street,
Minneapolis, Minnesota, on June 15, 2000, for the purposes set forth in the
accompanying Notice of Special Meeting of Shareholders. This Prospectus/Proxy
Statement is first being mailed to Regional Fund shareholders on or about May
23, 2000.
This Prospectus/Proxy Statement relates to a proposed Agreement and
Plan of Reorganization (the "Plan") providing for (i) the acquisition of
substantially all the assets and the assumption of all liabilities of Regional
Fund by Sit Large Cap Growth Fund, Inc. ("Large Cap Fund") in exchange for
shares of common stock of Large Cap Fund having an aggregate net asset value
equal to the aggregate value of the assets acquired (less liabilities assumed)
of Regional Fund, and (ii) the liquidation of Regional Fund and the pro rata
distribution of its holdings of Large Cap Fund shares to Regional Fund
shareholders. As a result of the acquisition, each Regional Fund shareholder
will receive Large Cap Fund shares with a net asset value equal to the net asset
value of their Regional Fund shares.
Both Regional Fund and Large Cap Fund are diversified, open-end funds
with investment objectives of maximizing long-term capital appreciation. The
Funds' investment objectives, principal investment strategies and principal
risks are described and compared below under "Information About Regional Fund
and Large Cap Fund - Comparison of Investment Objectives, Principal Investment
Strategies and Principal Risks."
Because Regional Fund shareholders are being asked to approve a
transaction that will result in their receiving shares of Large Cap Fund, this
document also serves as a Prospectus for Large Cap Fund shares. This
Prospectus/Proxy Statement concisely sets forth information about Large Cap Fund
that shareholders of Regional Fund should know before voting on the Plan, and it
should be retained for future reference.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED
THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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Additional information about Large Cap Fund has been filed with the
Securities and Exchange Commission and is available upon request and without
charge by writing to the Funds at 4600 Norwest Center, 90 South Seventh Street,
Minneapolis, Minnesota 55402 or by calling (800) 332-5580. Information which has
been filed with the Commission includes a Statement of Additional Information
dated May 22, 2000 relating to this Prospectus/Proxy Statement, which is
incorporated herein by reference. The Prospectus dated November 1, 1999 of
Regional Fund and Large Cap Fund also is incorporated into this Prospectus/Proxy
Statement by reference, and a copy accompanies this Prospectus/Proxy Statement.
The documents listed below are incorporated by reference into the Statement of
Additional Information and these items will be provided with any copy of the
Statement of Additional Information which is requested. Any documents requested
will be sent within one business day of receipt of the request by first class
mail or other means designed to ensure equally prompt delivery.
* The financial statements of Regional Fund and Large Cap Fund
included in the Sit Stock Funds Annual Report for the fiscal
year ended June 30, 1999 are incorporated by reference in the
Statement of Additional Information relating to this
Prospectus/Proxy Statement, and a copy of the Annual Report
accompanies this Prospectus/Proxy Statement.
* The financial statements of Regional Fund and Large Cap Fund
included in the Sit Stock Funds Semi-Annual Report for the
six-month period ended December 31, 1999 are incorporated by
reference in the Statement of Additional Information relating
to this Prospectus/Proxy Statement.
* The Statement of Additional Information dated November 1, 1999
of Regional Fund and Large Cap Fund is incorporated by
reference in its entirety in the Statement of Additional
Information relating to this Prospectus/Proxy Statement.
Also accompanying and attached to this Prospectus/Proxy Statement as
Exhibit A is a copy of the Plan for the proposed Reorganization.
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FEES AND EXPENSES
The following table shows the fees and expenses that:
* you currently bear as a Regional Fund shareholder (under the
"Regional Fund" column);
* shareholders of Large Cap Fund currently bear (under the
"Large Cap Fund" column); and
* you can expect to bear as a Large Cap Fund shareholder after
the proposed reorganization (under the "Pro Forma" column).
Both Funds are no-load investments, so you will NOT pay any shareholder fees
such as sales loads, redemption fees or exchange fees when you buy or sell
shares of the Funds. However, when you hold shares of either Fund, you
indirectly pay a portion of that Fund's operating expenses. These expenses are
deducted from Fund assets.
REGIONAL LARGE CAP PRO
FUND FUND FORMA
---- ---- -----
SHAREHOLDER FEES (fees paid directly
from your investment)..................... None None None
ANNUAL FUND OPERATING EXPENSES
(as a % of average net assets)
Management Fees........................... 1.25%* 1.00% 1.00%
Distribution (12b-1) Fees................. None None None
Other Expenses............................ None None None
---- ---- ----
Total Fund Operating Expenses............. 1.25%* 1.00% 1.00%
EXAMPLE
This example is intended to help you compare the cost of investing in
each Fund with the cost of being a Large Cap Fund shareholder after the
proposed reorganization. It assumes that you invest $10,000 in a Fund
for the time periods indicated (with reinvestment of all dividends and
distributions), that your investment has a 5% return each year, that
the Fund's operating expenses remain the same, and that you redeem all
of your shares at the end of those periods. Although your actual costs
and returns may differ, based on these assumptions your costs would be:
1 year.................................... $128 $103 $103
3 years................................... $399 $320 $320
5 years................................... $690 $555 $555
10 years.................................. $1,518 $1,229 $1,229
- --------------------
* Does not reflect the Adviser's waiver of fees for Regional Fund. As a result
of fee waivers, actual management fees and total annual operating expenses
for Regional Fund were 1.00% of average daily net assets for the fiscal year
ended June 30, 1999. After December 31, 2000, fee waivers may be modified or
terminated at any time by the Adviser.
3
<PAGE>
SUMMARY
This summary is qualified by reference to the more complete information
contained elsewhere in this Prospectus/Proxy Statement and in the documents
incorporated into this Prospectus/Proxy Statement, and by reference to the Plan,
a copy of which is attached to this Prospectus/Proxy Statement as Exhibit A.
Regional Fund shareholders should review the accompanying documents carefully in
connection with their review of this Prospectus/Proxy Statement.
PROPOSED REORGANIZATION
The Plan provides for (i) the acquisition of substantially all of the
assets and the assumption of all liabilities of Regional Fund by Large Cap Fund
in exchange for shares of common stock of Large Cap Fund having an aggregate net
asset value equal to the aggregate value of the assets acquired (less
liabilities assumed) of Regional Fund and (ii) the liquidation of Regional Fund
and the pro rata distribution of its holdings of Large Cap Fund shares to
Regional Fund shareholders as of the effective time of the Reorganization (the
"Effective Time"). As a result of the Reorganization, each shareholder of
Regional Fund will receive Large Cap Fund shares with an aggregate net asset
value equal to the aggregate net asset value of the shareholder's Regional Fund
shares as of the Effective Time. See "Information About the Reorganization."
For the reasons set forth below under "Information About the
Reorganization -- Reasons for the Reorganization," the Board of Directors of Sit
Mutual Funds, including all of the "non-interested" directors, as that term is
defined in the Investment Company Act of 1940, as amended (the "Investment
Company Act"), has concluded that the Reorganization would be in the best
interests of the shareholders of Regional Fund and that the interests of
Regional Fund's existing shareholders would not be diluted as a result of the
transactions contemplated by the Reorganization. Therefore, the Board of
Directors has approved the Reorganization and has submitted the Plan for
approval by Regional Fund shareholders.
The Board of Directors of Large Cap Fund also has concluded that the
Reorganization would be in the best interests of Large Cap Fund's existing
shareholders and has therefore approved the Reorganization on behalf of Large
Cap Fund.
Approval of the Plan will require the affirmative vote of a majority of
the outstanding shares of Regional Fund.
TAX CONSEQUENCES
Prior to completion of the Reorganization, Regional Fund will have
received from counsel an opinion that, upon the Reorganization, no gain or loss
will be recognized by Regional Fund or its shareholders for federal income tax
purposes. The holding period and aggregate tax basis of Large Cap Fund shares
that are received by each Regional Fund shareholder will be the same as the
holding period and aggregate tax basis of Regional Fund shares previously held
by those shareholders. In addition, the holding period and tax basis of the
assets of Regional Fund in the hands of Large Cap Fund as a result of the
Reorganization will be the same as in the hands of Regional Fund
4
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immediately prior to the Reorganization. See "Information About the
Reorganization -- Federal Income Tax Consequences."
INVESTMENT OBJECTIVES AND PRINCIPAL INVESTMENT STRATEGIES
Regional Fund and Large Cap Fund are both diversified, open-end funds
with an investment objective of maximizing long-term capital appreciation. Both
Funds invest primarily in common stocks of growth-oriented companies that the
Adviser believes exhibit the potential for superior growth. However, the Funds'
investment strategies differ in other respects.
The Funds differ in their geographic focus. Regional Fund has a
midwestern focus and invests at least 80% of its total assets in common stocks
of companies with their headquarters in a region comprised of Minnesota, Iowa,
Missouri, North Dakota, South Dakota, Nebraska, Kansas, Wisconsin, Illinois,
Michigan, Indiana and Ohio. Large Cap Fund has no geographic restrictions on the
companies in which it invests, and therefore may take advantage of investment
opportunities available in all areas of the country.
The Funds also differ with respect to the size of the companies in
which they may invest. Regional Fund's investments may include stocks of small,
mid and large cap companies. Large Cap Fund invests at least 65% of its total
assets in the common stocks of companies with capitalizations of $5 billion or
more at the time of purchase.
FEES AND EXPENSES
Each Fund is a party to a separate Investment Management Agreement with
the Adviser under which the Adviser manages the Fund's business and investment
activities, subject to the authority of the board of directors. The Agreements
require the Adviser to bear each Fund's expenses except interest, brokerage
commissions and transaction charges and certain extraordinary expenses. The
investment advisory fees for the two Funds, calculated as a percentage of Fund
net assets, are 1.00% for Large Cap Fund and 1.25% for Regional Fund. Thus, if
the Reorganization is approved, shareholders will experience lower contractual
advisory fees as shareholders of Large Cap Fund. See "Fees and Expenses," above.
For the fiscal year ended June 30, 1999, the Adviser waived a portion of its fee
for Regional Fund, resulting in advisory fees equal to 1.00% of average daily
net assets for the fiscal year. However, the Adviser may modify or discontinue
voluntary waivers for Regional Fund at any time after December 31, 2000, in its
sole discretion.
PURCHASE, EXCHANGE AND REDEMPTION PROCEDURES; DISTRIBUTION OF FUND SHARES
Shares of Large Cap Fund received by Regional Fund shareholders in the
Reorganization will be subject to the same purchase, exchange and redemption
procedures that currently apply to Regional Fund shares. Shares of both Funds
are offered at net asset value, without any sales charges. Shares of the Funds
may be purchased, exchanged or sold on any day the New York Stock Exchange is
open. The minimum initial investment generally is $2,000 for each Fund , with
minimum additional investments of at least $100. For each Fund, shareholders may
sell their shares and use the proceeds to buy shares of another Sit Mutual Fund
at no cost. Purchase, exchange and redemption procedures are discussed in detail
the accompanying prospectus of Large Cap Fund and Regional Fund under the
caption "Shareholder Information."
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<PAGE>
SIA Securities Corp. (the "Distributor"), an affiliate of the Adviser,
is the distributor for both Funds. The Distributor markets the Funds' shares
only to certain institutional and individual investors and all other sales of
the Funds' shares are made by each Fund. The Distributor or the Adviser may
enter into agreements under which various brokerage firms provide administrative
services for customers who are beneficial owners of shares of the Funds. The
Distributor or Adviser may compensate these firms for the services provided,
with compensation based on the aggregate assets of customers that are invested
in the Funds.
DIVIDENDS AND DISTRIBUTIONS
Each Fund distributes an annual dividend from its net investment
income. Capital gains, if any, are distributed at least once a year by each
Fund. Dividend and capital gain distributions are automatically reinvested in
additional shares of the Fund paying the distribution at the net asset value per
share on the distribution date. However, for each Fund, shareholders may request
that distributions be automatically reinvested in another Sit Mutual Fund, or
paid in cash.
RISK FACTORS
Because each Fund invests primarily in common stocks, the risks of the
two Funds are similar. Principal risks that apply to both Funds are "stock
market risk" and "management risk." Because of its differing investment
strategies, Regional Fund is also subject to "smaller company risk" and "risk of
geographic limitation." Each of these risks is discussed below. All investments
carry some degree of risk which will affect the value of each Fund's investments
and investment performance and the price of its shares. IT IS POSSIBLE TO LOSE
MONEY BY INVESTING IN EITHER FUND.
Each Fund is subject to the following risks:
* STOCK MARKET RISK: The value of the stocks in which a Fund
invests may go up or down in response to the activities of
individual companies, the stock market and general economic
conditions. Stock prices may decline over short or extended
periods. As of the date of this Prospectus/Proxy Statement,
U.S. stock markets and certain foreign markets are trading at
or close to record high levels. There is no guarantee that
such levels will continue.
* MANAGEMENT RISK: A strategy used by the investment team may
not produce the intended results.
Regional Fund is subject to the following additional risks:
* SMALLER COMPANY RISK: Stocks of smaller companies may be
subject to more abrupt or erratic market movements than stocks
of larger, more established companies. Small companies may
have limited product lines or financial resources, or may be
dependent upon a small or inexperienced management group. In
addition, small cap stocks typically are traded in lower
volume, and their issuers typically are subject to greater
degrees of change in their earnings and prospects.
* RISK OF GEOGRAPHIC LIMITATION: Regional Fund's policy of
investing primarily in a midwest geographic region means that
the Fund will be subject to adverse economic, political or
other
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developments in that region. The region in which the Fund
principally invests has a diverse industrial base (including
agriculture, mining, retail, transportation, utilities, heavy
and light manufacturing, financial services, insurance,
computer technology and medical technology); however, this
industrial base is not as diverse as that of the country as a
whole. Regional Fund therefore may be less diversified by
industry and company than other funds with a similar
investment objective and no geographic limitation, and its
value may be more susceptible to adverse developments in that
region than a more diversified fund.
The investment securities and techniques of the Funds, and the risks
associated therewith, are described in more detail in the Statement of
Additional Information of the Funds.
INFORMATION ABOUT THE REORGANIZATION
REASONS FOR THE REORGANIZATION
The Boards of Directors of both Regional Fund and Large Cap Fund,
including all of the "non-interested" directors, have determined that it is
advantageous to the respective Funds to combine Regional Fund with Large Cap
Fund. As discussed in detail below under "Information About Regional Fund and
Large Cap Fund," the Funds have identical investment objectives and similar
investment strategies. The Funds also have the same investment adviser (with the
same team of individuals managing both Funds) and the same distributor,
auditors, legal counsel, custodian and transfer agent.
Each Fund's Board of Directors has determined that the Reorganization
is expected to provide certain benefits to its Fund and is in the best interests
of that Fund and its shareholders. Each Board of Directors has also determined
that the interests of the existing shareholders of its Fund will not be diluted
as a result of the Reorganization. The Boards considered, among other things,
the following factors in making such determinations:
* The assessment of the Adviser that Regional Fund is unlikely
to grow to a size which is economically viable. The Board
considered the Adviser's assertion that the small size of the
Fund makes portfolio management difficult. Regional Fund
cannot maintain the level of investment diversification that
the Adviser desires, whereas, as a much larger fund, Large Cap
Fund is able to achieve greater investment diversification.
* The Fund's midwestern geographic focus precludes the Fund from
taking advantage of a number of investment opportunities
available in other areas of the country. Large Cap Fund is not
subject to any geographic limitations on its investments.
* Regional Fund shareholders will experience a lower contractual
management fee as a result of the Reorganization and, because
the Adviser bears all Fund expenses (except interest,
brokerage commissions and transaction charges and certain
extraordinary expenses), lower total Fund operating expenses.
* The proposed Reorganization will be tax-free.
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<PAGE>
* The terms and conditions of the Plan, including that the
exchange of Regional Fund shares for Large Cap Fund shares
will take place on a net asset value basis and that expenses
of the Reorganization will be borne by the Adviser.
The Boards concluded that the factors noted above render the proposed
Reorganization fair to and in the best interests of shareholders of Regional
Fund and Large Cap Fund.
PLAN OF REORGANIZATION
The following summary of the proposed Plan and the Reorganization is
qualified in its entirety by reference to the Plan attached to this
Prospectus/Proxy Statement as Exhibit A. The Plan provides that, as of the
Effective Time, Large Cap Fund will acquire all or substantially all of the
assets and assume all liabilities of Regional Fund in exchange for Large Cap
Fund shares having an aggregate net asset value equal to the aggregate value of
the assets acquired (less liabilities assumed) from Regional Fund. For corporate
law purposes the transaction is structured as a sale of the assets and
assumption of the liabilities of Regional Fund in exchange for the issuance of
Large Cap Fund shares to Regional Fund, followed immediately by the distribution
of such Large Cap Fund shares to Regional Fund shareholders and the cancellation
and retirement of outstanding Regional Fund shares. This reallocation of assets
and liabilities and exchange of shares is accomplished under the Plan by
amending the articles of incorporation of Sit Mutual Funds in the manner set
forth in the amendment to Sit Mutual Funds' articles of incorporation included
as Exhibit 1 to the Plan attached hereto as Exhibit A.
Under the Plan, each holder of Regional Fund shares will receive, at
the Effective Time, Large Cap Fund shares with an aggregate net asset value
equal to the aggregate net asset value of Regional Fund shares owned by that
shareholder immediately prior to the Effective Time. The net asset value per
share of each Fund's shares will be computed as of the Effective Time using the
valuation procedures set forth in the respective Funds' articles of
incorporation and bylaws and then-current Prospectus and Statement of Additional
Information and as may be required by the Investment Company Act.
At the Effective Time, Large Cap Fund will issue to Regional Fund, and
Regional Fund will distribute to Regional Fund's shareholders of record,
determined as of the Effective Time, the Large Cap Fund shares issued in
exchange for Regional Fund assets as described above. All outstanding shares of
Regional Fund will then be canceled and retired and no additional shares
representing interests in Regional Fund will be issued thereafter, and Regional
Fund will be deemed to be liquidated. The distribution of Large Cap Fund shares
to former Regional Fund shareholders will be accomplished by the establishment
of accounts on the share records of Large Cap Fund in the names of Regional Fund
shareholders, each representing the numbers of full and fractional Large Cap
Fund shares due such shareholders.
Regional Fund contemplates that it will make a distribution,
immediately prior to the Effective Time, of all of its current year net income
and net realized capital gains, if any, not previously distributed. This
distribution will be taxable to Regional Fund shareholders subject to taxation.
The consummation of the Reorganization is subject to the conditions set
forth in the Plan, including, among others:
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<PAGE>
* approval of the Plan by the shareholders of Regional Fund;
* obtaining the exemptive relief from the provisions of the
Investment Company Act of 1940 that is required to consummate
the Reorganization;
* the delivery of the opinion of counsel described below under
"--Federal Income Tax Consequences;"
* the accuracy as of the Effective Time of the representations
and warranties made by Regional Fund and Large Cap Fund in the
Plan; and
* the delivery of customary closing certificates.
See the Plan attached to this Prospectus/Proxy Statement as Exhibit A for a
complete listing of the conditions to the consummation of the Reorganization.
The Plan may be terminated and the Reorganization abandoned at any time prior to
the Effective Time, before or after approval by shareholders of Regional Fund,
by resolution of the Board of Directors of either Regional Fund or Large Cap
Fund, if circumstances should develop that, in the opinion of that Board, make
proceeding with the consummation of the Plan and Reorganization not in the best
interests of the respective Fund's shareholders.
The Plan provides that all expenses incurred in connection with the
Reorganization will be borne by the Adviser.
Approval of the Plan will require the affirmative vote of a majority of
the outstanding shares of Regional Fund. If the Plan is not approved, Regional
Fund initially will continue to be managed as a separate fund in accordance with
its current investment objective and investment strategies. However, the Board
of Directors may consider other possible courses of action, such as
re-submission of the reorganization proposal to shareholders, submission of a
liquidation proposal to shareholders or changes in the investment strategies of
Regional Fund. Regional Fund shareholders are not entitled to assert dissenters'
rights of appraisal in connection with the Plan or Reorganization. See "Voting
Information -- No Dissenters' Rights of Appraisal" below.
DESCRIPTION OF LARGE CAP FUND AND REGIONAL FUND SHARES
Sit Mutual Funds offers its shares in a number of separate series, one
of which is Regional Fund. Each share of a series has one vote (with
proportionate voting for fractional shares) irrespective of the relative net
asset values of the series' shares. On some issues, such as the election of
directors, all shares of Sit Mutual Funds vote together as one series. On an
issue affecting only a particular series, such as the Reorganization, the shares
of the affected series vote separately. Large Cap Fund offers a single series of
shares, each of which has one vote, with proportionate voting for fractional
shares. All Large Cap Fund shares issued in the Reorganization will be fully
paid and non-assessable and will not be entitled to pre-emptive or cumulative
voting rights.
FEDERAL INCOME TAX CONSEQUENCES
It is intended that the exchange of Large Cap Fund shares for Regional
Fund's net assets and the distribution of those shares to Regional Fund's
shareholders upon liquidation of Regional Fund will be treated as a tax-free
reorganization under the Internal Revenue Code of 1986, as amended (the "Code"),
and that, for federal income tax purposes, no income, gain or loss will be
recognized by Regional Fund's shareholders (except that Regional Fund
contemplates that it will make a distribution, immediately prior to the
Effective Time, of all of its
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current year net income and net realized capital gains, if any, not previously
distributed, and this distribution will be taxable to Regional Fund shareholders
subject to taxation). Regional Fund has not asked, nor does it plan to ask, the
Internal Revenue Service to rule on the tax consequences of the Reorganization.
As a condition to the closing of the Reorganization, the two Funds will
receive an opinion from Dorsey & Whitney LLP, counsel to the Funds, based in
part on certain representations to be furnished by each Fund, substantially to
the effect that the federal income tax consequences of the Reorganization will
be as follows:
* the Reorganization will constitute a reorganization within the
meaning of Section 368(a)(1)(C) of the Code, and Large Cap
Fund and Regional Fund each will qualify as a party to the
Reorganization under Section 368(b) of the Code;
* Regional Fund shareholders will recognize no income, gain or
loss upon receipt, pursuant to the Reorganization, of Large
Cap Fund shares. Regional Fund shareholders subject to
taxation will recognize income upon receipt of any net
investment income or net capital gains of Regional Fund which
are distributed by Regional Fund prior to the Effective Time;
* the tax basis of the Large Cap Fund shares received by each
Regional Fund shareholder pursuant to the Reorganization will
be equal to the tax basis of Regional Fund shares exchanged
therefor;
* the holding period of the Large Cap Fund shares received by
each Regional Fund shareholder pursuant to the Reorganization
will include the period during which the Regional Fund
shareholder held the Regional Fund shares exchanged therefor,
provided that the Regional Fund shares were held as a capital
asset at the Effective Time;
* Regional Fund will recognize no income, gain or loss by reason
of the Reorganization;
* Large Cap Fund will recognize no income, gain or loss by
reason of the Reorganization;
* the tax basis of the assets received by Large Cap Fund
pursuant to the Reorganization will be the same as the basis
of those assets in the hands of Regional Fund as of the
Effective Time;
* the holding period of the assets received by Large Cap Fund
pursuant to the Reorganization will include the period during
which such assets were held by Regional Fund; and
* Large Cap Fund will succeed to and take into account the
earnings and profits, or deficit in earnings and profits, of
Regional Fund as of the Effective Time.
Shareholders of Regional Fund should consult their tax advisors
regarding the effect, if any, of the proposed Reorganization in light of their
individual circumstances. Since the foregoing discussion only relates to the
federal income tax consequences of the Reorganization, shareholders of Regional
Fund should consult their tax advisors as to state and local tax consequences,
if any, of the Reorganization.
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RECOMMENDATION AND VOTE REQUIRED
The Board of Directors of Regional Fund, including the "non-interested"
directors, recommends that shareholders of Regional Fund approve the Plan.
Approval of the Plan will require the affirmative vote of a majority of the
outstanding shares of Regional Fund.
INFORMATION ABOUT REGIONAL FUND AND LARGE CAP FUND
Information concerning Large Cap Fund and Regional Fund is incorporated
into this Prospectus/Proxy Statement by reference from their current Prospectus
dated November 1, 1999. That Prospectus accompanies this Prospectus/Proxy
Statement and forms part of the Registration Statements of Large Cap Fund and
Regional Fund on Form N-1A which have been filed with the Commission.
Large Cap Fund and Regional Fund are subject to the informational
requirements of the Securities Exchange Act of 1934 and in accordance with those
requirements file reports and other information, including proxy materials,
reports and charter documents, with the Commission. These proxy materials,
reports and other information can be reviewed and copied at the Commission's
Public Reference Room in Washington, D.C. Information on the operation of the
Public Reference Room may be obtained by calling the Commission at
1-202-942-8090. Reports and other information about the Fund are available on
the EDGAR database on the Commission's Internet site at http://www.sec.gov.
Copies of this information may be obtained, after paying a duplicating fee, by
electronic request at the following e-mail address: [email protected], or by
writing the Commission's Public Reference Section, Washington, D.C. 20549-0102.
COMPARISON OF INVESTMENT OBJECTIVES AND PRINCIPAL INVESTMENT STRATEGIES
The investment objective of each Fund is to maximize long-term capital
appreciation. The principal investment strategies that the Funds use to achieve
this objective differ in a number of respects.
Large Cap Fund seeks to achieve its 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.
Regional Fund seeks to achieve its objective by investing at least 80%
of its total assets in common stocks of companies with their headquarters in a
midwest region comprised of Minnesota, Iowa, Missouri, North Dakota, South
Dakota, Nebraska, Kansas, Wisconsin, Illinois, Michigan, Indiana and Ohio. The
Fund's investments will include stocks of small, mid and large cap companies.
Because of its geographic limitation and its ability to invest in stocks of
smaller companies, Regional Fund is subject to additional risks when compared to
Large Cap Fund. See "Risk Factors."
For each Fund, the Adviser invests in growth-oriented companies that it
believes exhibit the potential for superior growth. The Adviser believes that a
company's earning 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. Several factors are considered in the Adviser's evaluation
of a company, including:
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* unique product or service,
* growing product demand,
* dominant and growing market share,
* management experience and capabilities, and
* strong financial condition.
When selling equity securities for either Fund, the Adviser considers
several factors, including changes in the factors discussed above and
anticipated earnings.
The foregoing comparison is not a complete summary of the investment
policies and restrictions of Regional Fund or Large Cap Fund. For more
information on the investment policies and restrictions of the respective Funds,
see the Statement of Additional Information of the Funds.
CAPITALIZATION
The following table shows the capitalization of Regional Fund and of
Large Cap Fund as of May 4, 2000 and on a pro forma basis as of that date,
giving effect to the proposed Reorganization:
(In thousands, except per share values)
REGIONAL LARGE CAP
FUND FUND PRO FORMA
---- ---- ---------
Net assets........................... $6,669 $166,406 $173,075
Net asset value per share............ $13.82 $61.33 $61.33
Shares outstanding................... 482 2,713 2,822
VOTING INFORMATION
GENERAL
THIS PROSPECTUS/PROXY STATEMENT IS FURNISHED IN CONNECTION WITH A
SOLICITATION OF PROXIES BY THE BOARD OF DIRECTORS OF REGIONAL FUND TO BE USED AT
THE SPECIAL MEETING OF REGIONAL FUND SHAREHOLDERS TO BE HELD AT 9:00 A.M.,
CENTRAL TIME, ON JUNE 15, 2000, AT THE OFFICES OF THE ADVISER, 4600 NORWEST
CENTER, 90 SOUTH SEVENTH STREET, MINNEAPOLIS, MINNESOTA AND AT ANY ADJOURNMENTS
THEREOF. Only shareholders of record as of the close of business on May 12, 2000
(the "Record Date") will be entitled to notice of, and to vote at, the Meeting
or any adjournment thereof. If the enclosed form of proxy is properly executed
and returned on time to be voted at the Meeting, the proxies named in the form
of proxy will vote the shares represented by the proxy in accordance with the
instructions marked thereon. Unmarked proxies will be voted "for" the proposed
Plan and Reorganization. A proxy may be revoked by giving written notice, in
person or by mail, of revocation before the Meeting to Regional Fund at its
principal executive offices, 4600 Norwest Center, 90 South Seventh Street,
Minneapolis, Minnesota, or by properly executing and submitting a later-dated
proxy, or by voting in person at the Meeting.
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If a shareholder executes and returns a proxy but abstains from voting,
the shares held by that shareholder will be deemed present at the Meeting for
purposes of determining a quorum and will be included in determining the total
number of votes cast. If a proxy is received from a broker or nominee indicating
that such person has not received instructions from the beneficial owner or
other person entitled to vote Regional Fund shares (i.e., a broker "non-vote"),
the shares represented by that proxy will not be considered present at the
Meeting for purposes of determining a quorum and will not be included in
determining the number of votes cast. Brokers and nominees will not have
discretionary authority to vote shares for which instructions are not received
from the beneficial owner.
Approval of the Plan and Reorganization will require the affirmative
vote described above under "Information About the Reorganization --
Recommendation and Vote Required."
As of May 12, 2000, Regional Fund had 480,926 shares outstanding and
entitled to vote at the Meeting. The following table sets forth, as of that
date, (i) share ownership of individual directors and officers who own of record
or beneficially more than one percent of the outstanding shares of Regional
Fund; (ii) share ownership of all directors and officers as a group; and (iii)
share ownership of those persons known by Regional Fund to own of record or
beneficially more than 5% of the outstanding shares of such Fund. The persons
named below have both record and beneficial ownership. Unless otherwise noted,
the address of each person named below is 4600 Norwest Center, 90 South Seventh
Street, Minneapolis, Minnesota 55402:
REGIONAL FUND NUMBER OF
RECORD HOLDER SHARES PERCENTAGE OWNERSHIP
------------- ------ --------------------
Eugene C. Sit 6,217 1.29%
William B. Frenzel 8,137 1.69%
All officers and directors
as a group 14,354 2.98%
Sit Investment Associates,
Inc.* 102,536 21.32%
Minnesota Lawyers Mutual 46,456 9.66%
3850 Norwest Center
90 South Seventh Street
Minneapolis, MN 55402
---------------
* Includes shares owned by profit sharing plans of this and affiliated
companies.
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As of May 12, 2000, the directors and officers of Large Cap Fund as a
group owned less than one percent of the outstanding shares of such Fund, and
the Fund knew of no person or entity which owned of record or beneficially more
than 5% of the Fund's outstanding shares.
Proxies are solicited by mail. Additional solicitations may be made by
telephone or personal contact by officers or employees of the Adviser and its
affiliates without cost to the Funds.
In the event that sufficient votes to approve the Plan and
Reorganization are not received by the date set for the Meeting, the persons
named as proxies may propose one or more adjournments of the Meeting for up to
120 days to permit further solicitation of proxies. In determining whether to
adjourn the Meeting, the following factors may be considered: the percentage of
votes actually cast, the percentage of negative votes actually cast, the nature
of any further solicitation and the information to be provided to shareholders
with respect to the reasons for the solicitation. Any such adjournment will
require the affirmative vote of a majority of the shares present in person or by
proxy and entitled to vote at the Meeting. The persons named as proxies will
vote upon such adjournment after consideration of the best interests of all
shareholders.
INTERESTS OF CERTAIN PERSONS
The following person affiliated with the Funds receives payments from
Regional Fund and Large Cap Fund for services rendered pursuant to contractual
arrangements with the Funds: Sit Investment Associates, Inc., as the investment
adviser to each Fund, receives payments for its investment advisory and
management services.
NO DISSENTERS' RIGHTS OF APPRAISAL
Under the Investment Company Act, Regional Fund shareholders are not
entitled to assert dissenters' rights of appraisal in connection with the Plan
of Reorganization.
FINANCIAL STATEMENTS AND EXPERTS
The audited statements of assets and liabilities, including the
schedules of investments in securities, of Regional Fund and of Large Cap Fund
as of June 30, 1999, and the related statements of operations for the year then
ended, the statements of changes in net assets for each of the periods indicated
therein, and the financial highlights for the periods indicated therein, as
included in the Annual Report of Regional Fund and Large Cap Fund for the fiscal
year ended June 30, 1999, have been incorporated by reference into the Statement
of Additional Information relating to this Prospectus/Proxy Statement in
reliance on the reports of KPMG LLP, independent auditors for the Funds, given
on the authority of such firm as experts in accounting and auditing.
LEGAL MATTERS
Certain legal matters concerning the issuance of the shares of Large
Cap Fund to be issued in the Reorganization will be passed upon by Dorsey &
Whitney LLP, 220 South Sixth Street, Minneapolis, Minnesota 55402.
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EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
SIT REGIONAL GROWTH FUND AND SIT LARGE CAP GROWTH FUND, INC.
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as
of this ____ day of _______, 2000, by and between Sit Mutual Funds, Inc. ("Sit
Funds"), a Minnesota corporation, on behalf of its series Sit Regional Growth
Fund ("Regional Fund"), and Sit Large Cap Growth Fund, Inc. ("Large Cap Fund"),
a Minnesota corporation. As used in this Agreement, the term "Regional Fund"
shall be construed to mean "Sit Funds on behalf of Regional Fund" where
necessary to reflect the fact that a corporate series is generally considered
the beneficiary of corporate level actions taken with respect to the series and
is not itself recognized as a person under law. The shares of Regional Fund are
designated in the amended and restated articles of incorporation of Sit Funds as
the Series F shares of Sit Funds.
This Agreement is intended to be and is adopted as a plan of
reorganization and liquidation pursuant to Sections 368(a)(1)(C) and
368(a)(2)(G) of the United States Internal Revenue Code of 1986, as amended (the
"Code"). The reorganization (the "Reorganization") will consist of the transfer
of all or substantially all of the assets of Regional Fund to Large Cap Fund and
the assumption by Large Cap Fund of all of the liabilities of Regional Fund in
exchange solely for full and fractional shares of common stock, par value $.01
per share, of Large Cap Fund (the "Large Cap Fund Shares"), having an aggregate
net asset value equal to the aggregate value of the assets acquired (less
liabilities assumed) of Regional Fund, and the distribution of Large Cap Fund
Shares to the shareholders of Regional Fund in liquidation of Regional Fund as
provided herein, all upon the terms and conditions hereinafter set forth. The
distribution of Large Cap Fund Shares to Regional Fund shareholders and the
retirement and cancellation of Regional Fund shares will be effected pursuant to
an amendment to the Articles of Incorporation of Sit Funds in the form attached
hereto as Exhibit 1 (the "Amendment"), to be adopted by Sit Funds in accordance
with the Minnesota Business Corporation Act.
WITNESSETH:
WHEREAS, each of Sit Funds and Large Cap Fund is a registered, open-end
management investment company, with Sit Funds offering its shares of common
stock in multiple series (each of which series represents a separate and
distinct portfolio of assets and liabilities), one of those series being
Regional Fund, and Large Cap Fund offering its shares of common stock in a
single series;
WHEREAS, Regional Fund owns securities which generally are assets of
the character in which Large Cap Fund is permitted to invest; and
WHEREAS, the Board of Directors of each of Sit Funds and Large Cap Fund
has determined that the exchange of all or substantially all of the assets of
Regional Fund for Large Cap Fund Shares and the assumption of all of the
liabilities of Regional Fund by Large Cap Fund is in the best interests of the
shareholders of Regional Fund and Large Cap Fund, respectively.
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NOW, THEREFORE, in consideration of the premises and of the
representations, warranties, covenants and agreements hereinafter set forth, the
parties hereto covenant and agree as follows:
1. TRANSFER OF ALL OR SUBSTANTIALLY ALL OF THE ASSETS OF REGIONAL FUND TO
LARGE CAP FUND SOLELY IN EXCHANGE FOR LARGE CAP FUND SHARES, THE
ASSUMPTION OF ALL REGIONAL FUND LIABILITIES AND THE LIQUIDATION OF
REGIONAL FUND
1.1 Subject to the requisite approval by Regional Fund shareholders and
to the other terms and conditions set forth herein and on the basis of the
representations and warranties contained herein, Regional Fund agrees to
transfer all or substantially all of Regional Fund's assets as set forth in
Section 1.2 to Large Cap Fund, and Large Cap Fund agrees in exchange therefor
(a) to deliver to Regional Fund that number of full and fractional Large Cap
Fund Shares determined in accordance with Article 2, and (b) to assume all of
the liabilities of Regional Fund, as set forth in Section 1.3. Such transactions
shall take place as of the effective time provided for in Section 3.1 (the
"Effective Time").
1.2 (a) The assets of Regional Fund to be acquired by Large Cap Fund
shall consist of all or substantially all of Regional Fund's property,
including, but not limited to, all cash, securities, commodities, futures, and
interest and dividends receivable which are owned by Regional Fund as of the
Effective Time. All of said assets shall be set forth in detail in an unaudited
statement of assets and liabilities of Regional Fund as of the Effective Time
(the "Effective Time Statement"). The Effective Time Statement shall, with
respect to the listing of Regional Fund's portfolio securities, detail the
adjusted tax basis of such securities by lot, the respective holding periods of
such securities and the current and accumulated earnings and profits of Regional
Fund. The Effective Time Statement shall be prepared in accordance with
generally accepted accounting principles (except for footnotes) consistently
applied from the prior audited period.
(b) Regional Fund has provided Large Cap Fund with a list of all of
Regional Fund's assets as of the date of execution of this Agreement. Regional
Fund reserves the right to sell any of these securities in the ordinary course
of its business and, subject to Section 5.1, to acquire additional securities in
the ordinary course of its business.
1.3 Large Cap Fund shall assume all of the liabilities, expenses,
costs, charges and reserves (including, but not limited to, expenses incurred in
the ordinary course of Regional Fund's operations, such as accounts payable
relating to custodian fees, investment management and administrative fees, legal
and audit fees, and expenses of state securities registration of Regional Fund's
shares), including those reflected in the Effective Time Statement.
1.4 Immediately after the transfer of assets provided for in Section
1.1 and the assumption of liabilities provided for in Section 1.3, and pursuant
to the plan of reorganization adopted herein, Regional Fund will distribute pro
rata (as provided in Article 2) to Regional Fund's shareholders of record,
determined as of the Effective Time (the "Regional Fund Shareholders"), the
Large Cap Fund Shares received by Regional Fund pursuant to Section 1.1, and all
other assets of Regional Fund, if any. Thereafter, no additional shares
representing interests in Regional Fund shall be issued. Such distribution will
be accomplished by the transfer of the Large Cap Fund Shares then credited to
the account of Regional Fund on the books of Large Cap Fund to open accounts on
the share records of Large Cap Fund in the names of Regional Fund shareholders
representing the numbers and classes of Large Cap
A-2
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Fund Shares due each such shareholder. All issued and outstanding shares of
Regional Fund will simultaneously be canceled on the books of Regional Fund,
although share certificates representing interests in Regional Fund will
represent those numbers and classes of Large Cap Fund Shares after the Effective
Time as determined in accordance with Article 2. Unless requested by Regional
Fund Shareholders, Large Cap Fund will not issue certificates representing Large
Cap Fund Shares issued in connection with such exchange.
1.5 Ownership of Large Cap Fund Shares will be shown on the books of
Large Cap Fund. Large Cap Fund Shares will be issued in the manner described in
Large Cap Fund's Prospectus and Statement of Additional Information as in effect
as of the Effective Time.
1.6 Any reporting responsibility of Regional Fund, including, but not
limited to, the responsibility for filing of regulatory reports, tax returns, or
other documents with the Securities and Exchange Commission (the "Commission"),
any state securities commissions, and any federal, state or local tax
authorities or any other relevant regulatory authority, is and shall remain the
responsibility of Regional Fund.
2. VALUATION; ISSUANCE OF LARGE CAP FUND SHARES
2.1 The net asset value per share of Regional Fund's shares shall be
computed as of the Effective Time using the valuation procedures set forth in
its articles of incorporation and bylaws, its then-current Prospectus and
Statement of Additional Information, and as may be required by the Investment
Company Act of 1940, as amended (the "1940 Act").
2.2 The total number of Large Cap Fund shares to be issued (including
fractional shares, if any) in exchange for the assets and liabilities of
Regional Fund shall be determined as of the Effective Time by multiplying the
number of Regional Fund shares outstanding immediately prior to the Effective
Time by a fraction, the numerator of which is the net asset value per share of
Regional Fund's shares immediately prior to the Effective Time, and the
denominator of which is the net asset value per share of Large Cap Fund's shares
immediately prior to the Effective Time, each as determined pursuant to Section
2.1.
2.3 Immediately after the Effective Time, Regional Fund shall
distribute to Regional Fund Shareholders in liquidation of Regional Fund pro
rata (based upon the ratio that the number of Regional Fund shares owned by each
Regional Fund Shareholder immediately prior to the Effective Time bears to the
total number of issued and outstanding Regional Fund shares immediately prior to
the Effective Time) the full and fractional Large Cap Fund Shares received by
Regional Fund pursuant to Section 2.2. Accordingly, each Regional Fund
Shareholder shall receive, immediately after the Effective Time, Large Cap Fund
shares with an aggregate net asset value equal to the aggregate net asset value
of the Regional Fund shares owned by such Regional Fund Shareholder immediately
prior to the Effective Time.
3. EFFECTIVE TIME; CLOSING
3.1 The closing of the transactions contemplated by this Agreement (the
"Closing") shall occur as of the close of normal trading on the New York Stock
Exchange (the "Exchange") (currently, 4:00 p.m. Eastern time) on the first day
upon which the conditions to closing shall have been satisfied, or at such time
on such later date as provided herein or as the parties otherwise may agree in
writing (such time and date being referred to herein as the
A-3
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"Effective Time"). All acts taking place at the Closing shall be deemed to take
place simultaneously as of the Effective Time unless otherwise agreed to by the
parties. The Closing shall be held at the offices of Dorsey & Whitney LLP, 220
South Sixth Street, Minneapolis, Minnesota 55402, or at such other place as the
parties may agree.
3.2 Regional Fund shall deliver at the Closing its written instructions
to the custodian for Regional Fund, acknowledged and agreed to in writing by
such custodian, irrevocably instructing such custodian to transfer to Large Cap
Fund all of Regional Fund's portfolio securities, cash, and any other assets to
be acquired by Large Cap Fund pursuant to this Agreement.
3.3 In the event that the Effective Time occurs on a day on which (a)
the Exchange or another primary trading market for portfolio securities of Large
Cap Fund or Regional Fund shall be closed to trading or trading thereon shall be
restricted, or (b) trading or the reporting of trading on the Exchange or
elsewhere shall be disrupted so that accurate appraisal of the value of the net
assets of Large Cap Fund or Regional Fund is impracticable, the Effective Time
shall be postponed until the close of normal trading on the Exchange on the
first business day when trading shall have been fully resumed and reporting
shall have been restored.
3.4 Regional Fund shall deliver at the Closing its certificate stating
that the records maintained by its transfer agent (which shall be made available
to Large Cap Fund) contain the names and addresses of Regional Fund shareholders
and the number of outstanding Regional Fund shares owned by each such
shareholder as of the Effective Time. Large Cap Fund shall certify at the
Closing that Large Cap Fund Shares required to be issued by it pursuant to this
Agreement have been issued and delivered as required herein.
3.5 At the Closing, each party to this Agreement shall deliver to the
other such bills of sale, liability assumption agreements, checks, assignments,
share certificates, if any, receipts or other similar documents as such other
party or its counsel may reasonably request.
4. REPRESENTATIONS, WARRANTIES AND COVENANTS
4.1 Sit Funds represents, warrants and covenants to Large Cap Fund as
follows:
(a) Sit Funds is a corporation duly organized, validly existing and in
good standing under the laws of the State of Minnesota;
(b) Sit Funds is a registered investment company classified as a
management company of the open-end type, and its registration with the
Commission as an investment company under the 1940 Act, and of each series of
shares offered by Sit Funds under the Securities Act of 1933, as amended (the
"1933 Act"), is in full force and effect;
(c) All of the issued and outstanding shares of common stock of
Regional Fund have been offered and sold in compliance in all material respects
with applicable registration requirements of the 1933 Act and state securities
laws. Shares of Regional Fund are registered in all jurisdictions in which they
are required to be registered under state securities laws and other laws, and
Sit Funds is not subject to any stop order and is fully qualified to sell
Regional Fund shares in each state in which such shares have been registered;
A-4
<PAGE>
(d) The Prospectus and Statement of Additional Information of Regional
Fund, as of the date hereof and up to and including the Effective Time, conform
and will conform in all material respects to the applicable requirements of the
1933 Act and the 1940 Act and the rules and regulations of the Commission
thereunder and do not and will not include any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not materially misleading;
(e) Regional Fund is not, and the execution, delivery and performance
of this Agreement will not result, in a violation of Sit Fund's articles of
incorporation or bylaws or of any material agreement, indenture, instrument,
contract, lease or other undertaking to which Regional Fund is a party or by
which it is bound;
(f) No material litigation or administrative proceeding or
investigation of or before any court or governmental body is presently pending
or, to the best of Regional Fund's knowledge, threatened against Regional Fund
or any of its properties or assets. Regional Fund is not a party to or subject
to the provisions of any order, decree or judgment of any court or governmental
body which materially and adversely affects its business or its ability to
consummate the transactions herein contemplated;
(g) Regional Fund's Statement of Assets and Liabilities, Statement of
Operations, Statement of Changes in Net Assets and Financial Highlights as of
June 30, 1999 and for the year then ended, certified by KPMG LLP, and Regional
Fund's unaudited Statement of Assets and Liabilities, Statement of Operations,
Statement of Changes in Net Assets and Financial Highlights as of December 31,
1999 and for the six-month period then ended (copies of which have been
furnished to Large Cap Fund) fairly present, in all material respects, Regional
Fund's financial condition as of such dates, and its results of operations,
changes in its net assets and financial highlights for such periods in
accordance with generally accepted accounting principles, and as of such dates
there were no known liabilities of Regional Fund (contingent or otherwise) not
disclosed therein that would be required in accordance with generally accepted
accounting principles to be disclosed therein;
(h) Since the date of the most recent unaudited financial statements,
there has not been any material adverse change in Regional Fund's financial
condition, assets, liabilities or business, other than changes occurring in the
ordinary course of business, or any incurrence by Regional Fund of indebtedness
maturing more than one year from the date such indebtedness was incurred, except
as otherwise disclosed in writing to and acknowledged by Large Cap Fund prior to
the date of this Agreement and prior to the Closing Date. All liabilities of
Regional Fund (contingent and otherwise) are reflected in the Valuation Date
Statement. For the purpose of this subparagraph (h), neither a decline in
Regional Fund's net asset value per share nor a decrease in Regional Fund's size
due to redemptions by Regional Fund shareholders shall constitute a material
adverse change;
(i) All material federal and other tax returns and reports of Regional
Fund required by law to have been filed prior to the Effective Time shall have
been filed and shall be correct, and all federal and other taxes shown as due or
required to be shown as due on said returns and reports shall have been paid or
provision shall have been made for the payment thereof, and, to the best of
Regional Fund's knowledge, no such return is currently under audit and no
assessment shall have been asserted with respect to such returns;
(j) For each taxable year of its operation, Regional Fund has met the
requirements of Subchapter M of the Code for qualification and treatment as a
regulated investment company, and Regional Fund intends to meet the
A-5
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requirements of Subchapter M of the Code for qualification and treatment as a
regulated investment company for its final, partial taxable year;
(k) All issued and outstanding shares of Regional Fund are, and at the
Effective Time will be, duly and validly issued and outstanding, fully paid and
non-assessable, and were offered for sale and sold in conformity with the
registration requirements of all applicable federal and state securities laws.
All of the issued and outstanding shares of Regional Fund will, at the Effective
Time, be held by the persons and in the amounts set forth in the records of
Regional Fund, as provided in Section 3.4. Regional Fund does not have
outstanding any options, warrants or other rights to subscribe for or purchase
any Regional Fund shares, and there is not outstanding any security convertible
into any Regional Fund shares;
(l) At the Effective Time, Regional Fund will have good and marketable
title to Regional Fund's assets to be transferred to Large Cap Fund pursuant to
Section 1.2 and full right, power, and authority to sell, assign, transfer and
deliver such assets hereunder, and upon delivery of and payment for such assets,
Large Cap Fund will acquire good and marketable title thereto, subject to no
restrictions on the full transfer thereof, including such restrictions as might
arise under the 1933 Act other than as disclosed to Large Cap Fund in the
Effective Time Statement;
(m) The execution, delivery and performance of this Agreement will have
been duly authorized prior to the Effective Time by all necessary action on the
part of Sit Fund's Board of Directors, and, subject to the approval of Regional
Fund shareholders, this Agreement will constitute a valid and binding obligation
of Regional Fund, enforceable in accordance with its terms, subject, as to
enforcement, to bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance and other laws relating to or affecting creditors' rights and to the
application of equitable principles in any proceeding, whether at law or in
equity;
(n) The information to be furnished by and on behalf of Regional Fund
for use in registration statements, proxy materials and other documents which
may be necessary in connection with the transactions contemplated hereby shall
be accurate and complete in all material respects;
(o) All information pertaining to Regional Fund, its agents and
affiliates and included in the Registration Statement referred to in Section 5.5
(or supplied by Regional Fund or its agents or affiliates for inclusion in said
Registration Statement), on the effective date of said Registration Statement
and up to and including the Effective Time, will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which such statements are made, not materially misleading
(other than as may timely be remedied by further appropriate disclosure);
(p) Since the end of Regional Fund's most recently concluded fiscal
year, there have been no material changes by Regional Fund in accounting
methods, principles or practices, including those required by generally accepted
accounting principles, except as disclosed in writing to Large Cap Fund; and
(q) The Effective Time Statement will be prepared in accordance with
generally accepted accounting principles (except for footnotes) consistently
applied and will present accurately the assets and liabilities of Regional Fund
as of the Effective Time, and the values of Regional Fund's assets and
liabilities to be set forth in the Effective Time Statement will be computed as
of the Effective Time using the valuation procedures set forth in Regional
Fund's articles of incorporation and bylaws, its then-current Prospectus and
Statement of Additional
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<PAGE>
Information, and as may be required by the 1940 Act. At the Effective Time,
Regional Fund will have no liabilities, whether absolute or contingent, known or
unknown, accrued or unaccrued, which are not reflected in the Effective Time
Statement.
4.2 Large Cap Fund represents, warrants and covenants to Regional Fund
as follows:
(a) Large Cap Fund is a corporation duly organized, validly existing
and in good standing under the laws of the State of Minnesota;
(b) Large Cap Fund is a registered investment company classified as a
management company of the open-end type, and its registration with the
Commission as an investment company under the 1940 Act, and of its shares under
the 1933 Act, is in full force and effect;
(c) All of the issued and outstanding shares of common stock of Large
Cap Fund have been offered and sold in compliance in all material respects with
applicable registration requirements of the 1933 Act and state securities laws.
Shares of Large Cap Fund are registered in all jurisdictions in which they are
required to be registered under state securities laws and other laws, and Large
Cap Fund is not subject to any stop order and is fully qualified to sell Large
Cap Fund shares in each state in which such shares have been registered;
(d) The Prospectus and Statement of Additional Information of Large Cap
Fund, as of the date hereof and up to and including the Effective Time, conform
and will conform in all material respects to the applicable requirements of the
1933 Act and the 1940 Act and the rules and regulations of the Commission
thereunder and do not and will not include any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not materially misleading;
(e) Large Cap Fund is not, and the execution, delivery and performance
of this Agreement will not result, in a violation of its articles of
incorporation or bylaws or of any material agreement, indenture, instrument,
contract, lease or other undertaking to which it is a party or by which it is
bound;
(f) No material litigation or administrative proceeding or
investigation of or before any court or governmental body is presently pending
or, to the best of Large Cap Fund's knowledge, threatened against Large Cap Fund
or any of its properties or assets. Large Cap Fund is not a party to or subject
to the provisions of any order, decree or judgment of any court or governmental
body which materially and adversely affects its business or its ability to
consummate the transactions herein contemplated;
(g) Large Cap Fund's Statement of Assets and Liabilities, Statement of
Operations, Statement of Changes in Net Assets and Financial Highlights as of
June 30, 1999, and for the year then ended, certified by KPMG LLP, and Large Cap
Fund's unaudited Statement of Assets and Liabilities, Statement of Operations,
Statement of Changes in Net Assets and Financial Highlights as of December 31,
1999 and for the six-month period then ended (copies of which have been
furnished to Regional Fund), fairly present, in all material respects, Large Cap
Fund's financial condition as of such dates in accordance with generally
accepted accounting principles, and its results of operations, changes in its
net assets and financial highlights for such periods, and as of such dates there
were no
A-7
<PAGE>
known liabilities of Large Cap Fund (contingent or otherwise) not disclosed
therein that would be required in accordance with generally accepted accounting
principles to be disclosed therein;
(h) Since the date of the most recent unaudited financial statements,
there has not been any material adverse change in Large Cap Fund's financial
condition, assets, liabilities or business, other than changes occurring in the
ordinary course of business, or any incurrence by Large Cap Fund of indebtedness
maturing more than one year from the date such indebtedness was incurred, except
indebtedness incurred in the ordinary course of business. For the purpose of
this subparagraph (h), neither a decline in Large Cap Fund's net asset value per
share nor a decrease in Large Cap Fund's size due to redemptions by Large Cap
Fund shareholders shall constitute a material adverse change;
(i) All material federal and other tax returns and reports of Large Cap
Fund required by law to have been filed prior to the Effective Time shall have
been filed and shall be correct, and all federal and other taxes shown as due or
required to be shown as due on said returns and reports shall have been paid or
provision shall have been made for the payment thereof, and, to the best of
Large Cap Fund's knowledge, no such return is currently under audit and no
assessment shall have been asserted with respect to such returns;
(j) For each taxable year of its operation, Large Cap Fund has met the
requirements of Subchapter M of the Code for qualification and treatment as a
regulated investment company, and Large Cap Fund intends to meet the
requirements of Subchapter M of the Code for qualification and treatment as a
regulated investment company in the current and future years;
(k) All issued and outstanding shares of Large Cap Fund are, and at the
Effective Time will be, duly and validly issued and outstanding, fully paid and
non-assessable, and were offered for sale and sold in conformity with the
registration requirements of all applicable federal and state securities laws.
Large Cap Fund Shares to be issued and delivered to Regional Fund for the
account of Regional Fund Shareholders, pursuant to the terms of this Agreement,
at the Effective Time will have been duly authorized and, when so issued and
delivered, will be duly and validly issued and outstanding, fully paid and
non-assessable. Large Cap Fund does not have outstanding any options, warrants
or other rights to subscribe for or purchase any Large Cap Fund shares, and
there is not outstanding any security convertible into any Large Cap Fund
shares;
(l) The execution, delivery and performance of this Agreement will have
been duly authorized prior to the Effective Time by all necessary action on the
part of Large Cap Fund's Board of Directors, and at the Effective Time this
Agreement will constitute a valid and binding obligation of Large Cap Fund,
enforceable in accordance with its terms, subject, as to enforcement, to
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and
other laws relating to or affecting creditors' rights and to the application of
equitable principles in any proceeding, whether at law or in equity.
Consummation of the transactions contemplated by this Agreement does not require
the approval of Large Cap Fund's shareholders;
(m) The information to be furnished by and on behalf of Large Cap Fund
for use in registration statements, proxy materials and other documents which
may be necessary in connection with the transactions contemplated hereby shall
be accurate and complete in all material respects;
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<PAGE>
(n) Since the end of Large Cap Fund's most recently concluded fiscal
year, there have been no material changes by Large Cap Fund in accounting
methods, principles or practices, including those required by generally accepted
accounting principles, except as disclosed in writing to Regional Fund; and
(o) The Registration Statement referred to in Section 5.5, on its
effective date and up to and including the Effective Time, will (i) conform in
all material respects to the applicable requirements of the 1933 Act, the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and the 1940 Act
and the rules and regulations of the Commission thereunder, and (ii) not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which such statements were made, not materially
misleading (other than as may timely be remedied by further appropriate
disclosure); provided, however, that the representations and warranties in
clause (ii) of this paragraph shall not apply to statements in (or omissions
from) the Registration Statement concerning Regional Fund, its agents and
affiliates (or supplied by Regional Fund, its agents or affiliates for inclusion
in said Registration Statement).
5. FURTHER COVENANTS OF LARGE CAP FUND AND REGIONAL FUND
5.1 Each of Regional Fund and Large Cap Fund will operate its business
in the ordinary course between the date hereof and the Effective Time, it being
understood that such ordinary course of business will include the declaration
and payment of customary dividends and distributions, and any other
distributions that may be advisable (which may include distributions prior to
the Effective Time of net income and/or net realized capital gains not
previously distributed). Regional Fund agrees that, through the Effective Time,
it will not acquire any securities which are not permissible investments for
Large Cap Fund.
5.2 Regional Fund will call a meeting of its shareholders to consider
and act upon this Agreement and to take all other action necessary to obtain
approval of the transactions contemplated herein.
5.3 Regional Fund will assist Large Cap Fund in obtaining such
information as Large Cap Fund reasonably requests concerning the beneficial
ownership of Regional Fund shares.
5.4 Subject to the provisions of this Agreement, Large Cap Fund and
Regional Fund will each take, or cause to be taken, all actions, and do or cause
to be done, all things reasonably necessary, proper or advisable to consummate
and make effective the transactions contemplated by this Agreement.
5.5 Regional Fund will provide Large Cap Fund with information
reasonably necessary with respect to Regional Fund and its agents and affiliates
for the preparation of the Registration Statement on Form N-14 of Large Cap Fund
(the "Registration Statement"), in compliance with the 1933 Act, the 1934 Act
and the 1940 Act.
5.6 Large Cap Fund agrees to use all reasonable efforts to obtain the
approvals and authorizations required by the 1933 Act, the 1940 Act and such
state blue sky or securities laws as may be necessary in order to conduct its
operations after the Effective Time.
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<PAGE>
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF REGIONAL FUND
The obligations of Regional Fund to consummate the transactions
provided for herein shall be subject, at its election, to the performance by
Large Cap Fund of all the obligations to be performed by it hereunder at or
before the Effective Time, and, in addition thereto, the following further
conditions (any of which may be waived by Regional Fund, in its sole and
absolute discretion):
6.1 All representations and warranties of Large Cap Fund contained in
this Agreement shall be true and correct as of the date hereof and, except as
they may be affected by the transactions contemplated by this Agreement, as of
the Effective Time with the same force and effect as if made at such time;
6.2 Large Cap Fund shall have delivered to Regional Fund a certificate
executed in its name by its President or a Vice President, in a form reasonably
satisfactory to Regional Fund and dated as of the date of the Closing, to the
effect that the representations and warranties of Large Cap Fund made in this
Agreement are true and correct at the Effective Time, except as they may be
affected by the transactions contemplated by this Agreement, and as to such
other matters as Regional Fund shall reasonably request; and
6.3 Large Cap Fund shall have delivered to Regional Fund the
certificate as to the issuance of Large Cap Fund shares contemplated by the
second sentence of Section 3.4.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF LARGE CAP FUND
The obligations of Large Cap Fund to consummate the transactions
provided for herein shall be subject, at its election, to the performance by
Regional Fund of all of the obligations to be performed by it hereunder at or
before the Effective Time and, in addition thereto, the following conditions
(any of which may be waived by Large Cap Fund, in its sole and absolute
discretion):
7.1 All representations and warranties of Regional Fund contained in
this Agreement shall be true and correct as of the date hereof and, except as
they may be affected by the transactions contemplated by this Agreement, as of
the Effective Time with the same force and effect as if made at such time;
7.2 Large Cap Fund shall have received, and certified as to its receipt
of, the Effective Time Statement;
7.3 Regional Fund shall have delivered to Large Cap Fund a certificate
executed in the name of Sit Funds by Sit Funds' President or a Vice President,
in a form reasonably satisfactory to Large Cap Fund and dated as of the date of
the Closing, to the effect that the representations and warranties of Sit Fund
and Regional Fund made in this Agreement are true and correct at the Effective
Time, except as they may be affected by the transactions contemplated by this
Agreement, and as to such other matters as Large Cap Fund shall reasonably
request;
7.4 Regional Fund shall have delivered to Large Cap Fund the written
instructions to the custodian for Regional Fund contemplated by Section 3.2;
7.5 Regional Fund shall have delivered to Large Cap Fund the
certificate as to its shareholder records contemplated by the first sentence of
Section 3.4;
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<PAGE>
7.6 At or prior to the Effective Time, Regional Fund's investment
adviser, or an affiliate thereof, shall have reimbursed Regional Fund by the
amount, if any, that the expenses incurred by Regional Fund (or accrued up to
the Effective Time) exceed any applicable contractual expense limitations; and
7.7 Immediately prior to the Effective Time, Regional Fund shall not
hold any securities which are not permissible investments for Large Cap Fund.
8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF LARGE CAP FUND AND
REGIONAL FUND
The following shall constitute further conditions precedent to the
consummation of the Reorganization:
8.1 This Agreement and the transactions contemplated herein shall have
been approved by the requisite vote of the holders of the outstanding shares of
Regional Fund in accordance with the provisions of Sit Funds' articles of
incorporation and bylaws and applicable law, and certified copies of the
resolutions evidencing such approval shall have been delivered to Large Cap
Fund. Notwithstanding anything herein to the contrary, neither Large Cap Fund
nor Regional Fund may waive the conditions set forth in this Section 8.1;
8.2 Sit Funds and Large Cap Fund shall have obtained such exemptive
relief from the provisions of the 1940 Act as may, in the view of their counsel,
be required in order to consummate the transactions contemplated hereby;
8.3 As of the Effective Time, no action, suit or other proceeding shall
be threatened or pending before any court or governmental agency in which it is
sought to restrain or prohibit, or obtain damages or other relief in connection
with, this Agreement or the transactions contemplated herein;
8.4 All consents of other parties and all other consents, orders and
permits of federal, state and local regulatory authorities deemed necessary by
Large Cap Fund or Regional Fund to permit consummation, in all material
respects, of the transactions contemplated hereby shall have been obtained,
except where failure to obtain any such consent, order or permit would not
involve a risk of a material adverse effect on the assets or properties of Large
Cap Fund or Regional Fund, provided that either party hereto may for itself
waive any of such conditions;
8.5 The Registration Statement shall have become effective under the
1933 Act, and no stop order suspending the effectiveness thereof shall have been
issued and, to the best knowledge of the parties hereto, no investigation or
proceeding for that purpose shall have been instituted or be pending, threatened
or contemplated under the 1933 Act;
8.6 The parties shall have received the opinion of Dorsey & Whitney LLP
addressed to Sit Funds and Large Cap Fund, dated as of the date of the Closing,
and based in part on certain representations to be furnished by Sit Funds, Large
Cap Fund, and their investment adviser and other service providers,
substantially to the effect that:
(i) the Reorganization will constitute a reorganization within
the meaning of Section 368(a)(1)(C) of the Code, and Large Cap Fund and
Regional Fund each will qualify as a party to the Reorganization under
Section 368(b) of the Code;
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<PAGE>
(ii) Regional Fund shareholders will recognize no income, gain
or loss upon receipt, pursuant to the Reorganization, of Large Cap Fund
Shares. Regional Fund shareholders subject to taxation will recognize
income upon receipt of any net investment income or net capital gains
of Regional Fund which are distributed by Regional Fund prior to the
Effective Time;
(iii) the tax basis of the Large Cap Fund Shares received by
each Regional Fund shareholder pursuant to the Reorganization will be
equal to the tax basis of Regional Fund shares exchanged therefor;
(iv) the holding period of the Large Cap Fund Shares received
by each Regional Fund shareholder pursuant to the Reorganization will
include the period during which the Regional Fund shareholder held the
Regional Fund shares exchanged therefor, provided that the Regional
Fund shares were held as a capital asset at the Effective Time;
(v) Regional Fund will recognize no income, gain or loss by
reason of the Reorganization;
(vi) Large Cap Fund will recognize no income, gain or loss by
reason of the Reorganization;
(vii) the tax basis of the assets received by Large Cap Fund
pursuant to the Reorganization will be the same as the basis of those
assets in the hands of Regional Fund as of the Effective Time;
(viii) the holding period of the assets received by Large Cap
Fund pursuant to the Reorganization will include the period during
which such assets were held by Regional Fund; and
(ix) Large Cap Fund will succeed to and take into account the
earnings and profits, or deficit in earnings and profits, of Regional
Fund as of the Effective Time.
Notwithstanding anything herein to the contrary, neither Large
Cap Fund nor Regional Fund may waive the condition set forth in this paragraph
8.6.
8.7 The Amendment shall have been filed in accordance with applicable
provisions of Minnesota law.
9. EXPENSES
All expenses incurred by the parties hereto in connection with the
transactions contemplated hereby (including, without limitation, the fees and
expenses associated with the preparation and filing of the Registration
Statement referred to in Section 5.5 above and the application for exemptive
relief referred to in Section 8.2 above, and the expenses of printing and
mailing the prospectus/proxy statement, soliciting proxies and holding the
Regional Fund shareholders meeting required to approve the transactions
contemplated hereby) shall be borne by Sit Investment Associates, Inc.
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<PAGE>
10. ENTIRE AGREEMENT; SURVIVAL OF REPRESENTATIONS AND WARRANTIES
10.1 Large Cap Fund and Regional Fund agree that neither party has made
any representation, warranty, covenant or agreement not set forth herein and
that this Agreement constitutes the entire agreement between the parties.
10.2 The representations and warranties contained in this Agreement or
in any document delivered pursuant hereto or in connection herewith shall
survive the consummation of the transactions contemplated hereby.
11. TERMINATION
This Agreement and the transactions contemplated hereby may be
terminated and abandoned by either party by resolution of the party's board of
directors at any time prior to the Effective Time, if circumstances should
develop that, in the good faith opinion of such board, make proceeding with this
Agreement and such transactions not in the best interest of the applicable
party's shareholders.
12. AMENDMENTS
This Agreement may be amended, modified or supplemented in such manner
as may be mutually agreed upon in writing by the authorized officers of Sit
Funds and Large Cap Fund; provided, however, that following the meeting of
Regional Fund shareholders called by Regional Fund pursuant to Section 5.2 of
this Agreement, no such amendment may have the effect of changing the provisions
for determining the number of Large Cap Fund Shares to be issued to Regional
Fund shareholders under this Agreement to the detriment of such shareholders
without their further approval.
13. NOTICES
Any notice, report, statement or demand required or permitted by any
provisions of this Agreement shall be in writing and shall be deemed duly given
if delivered or mailed by registered mail, postage prepaid, addressed to Large
Cap Fund or Regional Fund, 4600 Norwest Center, Minneapolis, MN 55402.
14. HEADINGS; COUNTERPARTS; ASSIGNMENT; MISCELLANEOUS
14.1 The Article and Section headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
14.2 This Agreement may be executed in any number of counterparts, each
of which shall be deemed an original and all of which together shall constitute
one and the same agreement.
14.3 This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof or of any rights or obligations hereunder shall be made by
either party without the prior written consent of the other party. Nothing
herein expressed or implied is intended or shall be construed to confer upon or
give any person, firm or corporation, other than the parties hereto and their
respective successors and assigns, any rights or remedies under or by reason of
this Agreement.
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<PAGE>
14.4 The validity, interpretation and effect of this Agreement shall
be governed exclusively by the laws of the State of Minnesota, without giving
effect to the principles of conflict of laws thereof.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed by its President or Vice President.
SIT MUTUAL FUNDS, INC.
ON BEHALF OF SIT REGIONAL GROWTH FUND
By
--------------------------------------
Its
--------------------------------------
SIT LARGE CAP GROWTH FUND, INC.
By
--------------------------------------
Its
--------------------------------------
A-14
<PAGE>
EXHIBIT 1 TO AGREEMENT AND PLAN OF REORGANIZATION
ARTICLES OF AMENDMENT
TO
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
SIT MUTUAL FUNDS, INC.
The undersigned officer of Sit Mutual Funds, Inc. ("Sit Funds"), a
corporation subject to the provisions of Chapter 302A of the Minnesota statutes,
hereby certifies that Sit Fund's (a) Board of Directors, at a meeting held
February 20, 2000, and (b) shareholders, at a meeting held June 15, 2000,
adopted the resolutions hereinafter set forth; and such officer further
certifies that the amendments to Sit Fund's Articles of Incorporation set forth
in such resolutions were adopted pursuant to Chapter 302A.
WHEREAS, Sit Funds is registered as an open-end management investment
company (I.E., a mutual fund) under the Investment Company Act of 1940 and
offers its shares to the public in more than one series, each of which
represents a separate and distinct portfolio of assets;
WHEREAS, it is desirable and in the best interest of the holders of the
Sit Regional Growth Fund ("Regional Fund"), a series of Sit Funds, that the
assets belonging to such series, subject to its stated liabilities, be sold to
Sit Large Cap Growth Fund, Inc. ("Growth Fund"), a Minnesota corporation and an
open-end management investment company registered under the Investment Company
Act of 1940, in exchange for shares of Growth Fund;
WHEREAS, Sit Funds wishes to provide for the PRO RATA distribution of
such shares of Growth Fund received by it to holders of shares of Regional Fund
and the simultaneous cancellation and retirement of the outstanding shares of
Regional Fund;
WHEREAS, Sit Funds and Growth Fund have entered into an Agreement and
Plan of Reorganization providing for the foregoing transactions; and
WHEREAS, the Agreement and Plan of Reorganization requires that, in
order to bind all shareholders of Regional Fund to the foregoing transactions,
and in particular to bind such shareholders to the cancellation and retirement
of the outstanding shares of Regional Fund, it is necessary to adopt an
amendment to Sit Fund's Amended and Restated Articles of Incorporation.
NOW, THEREFORE, BE IT RESOLVED, that Sit Fund's Amended and Restated
Articles of Incorporation be, and the same hereby are, amended to add the
following Article 5A immediately following Article 5 thereof:
5A. (a) For purposes of this Article 5A, the following terms
shall have the following meanings:
"SIT FUNDS" means the Corporation.
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<PAGE>
"ACQUIRED FUND" means Sit Regional Growth Fund, the Series F
Shares of the Corporation.
"ACQUIRING FUND" means Sit Large Cap Growth Fund, Inc., a
Minnesota corporation.
"VALUATION DATE" means the day established in the Agreement
and Plan of Reorganization as the day upon which the value of the
Acquired Fund's assets is determined for purposes of the
reorganization.
"CLOSING DATE" means 5:00 p.m., Eastern time, on the Valuation
Date or such other date and time upon which Sit Funds and the Acquiring
Fund agree.
(b) At the Closing Date, the assets belonging to the Acquired
Fund, the Special Liabilities associated with such assets, and the
General Assets and General Liabilities allocated to the Acquired Fund
shall be sold to and assumed by the Acquiring Fund in return for
Acquiring Fund shares, all pursuant to the Agreement and Plan of
Reorganization. For purposes of the foregoing, the terms "Assets
belonging to," "Special Liabilities," "General Assets" and "General
Liabilities" have the meanings assigned to them in Article 7(b), (c)
and (d) of Sit Fund's Articles of Incorporation.
(c) The number of Acquiring Fund shares to be received by the
Acquired Fund and distributed by it to the Acquired Fund shareholders
shall be determined as follows:
(i) The value of the Acquired Fund's assets and the
net asset value per share of the Acquiring Fund's shares shall
be computed as of the Valuation Date using the valuation
procedures set forth in the Acquiring Fund's then-current
Prospectus and Statement of Additional Information, and as may
be required by the Investment Company Act of 1940, as amended
(the "1940 Act").
(ii) The total number of Acquiring Fund shares to be
issued (including fractional shares, if any) in exchange for
assets and liabilities of the Acquired Fund shall be
determined as of the Valuation Date by dividing the value of
the Acquired Fund's assets, net of its stated liabilities on
the Closing Date to be assumed by the Acquiring Fund, by the
net asset value of the Acquiring Fund's shares, each as
determined pursuant to (i) above.
(iii) On the Closing Date, or as soon as practicable
thereafter, the Acquired Fund shall distribute PRO RATA to its
shareholders of record as of the Valuation Date the full and
fractional Acquiring Fund shares received by the Acquired Fund
pursuant to (ii) above.
(d) The distribution of Acquiring Fund shares to Acquired Fund
shareholders provided for in paragraph (c) above shall be accomplished
by an instruction, signed by Sit Funds' Secretary, to transfer
Acquiring Fund shares then credited to the Acquired Fund's account on
the books of the Acquiring Fund to open accounts on the books of the
Acquiring Fund in the names of the Acquired Fund shareholders in
amounts representing the respective PRO RATA number of Acquiring Fund
shares due each such shareholder pursuant to the foregoing provisions.
All issued and outstanding shares of the Acquired Fund shall
simultaneously be canceled on the books of the Acquired Fund and
retired.
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<PAGE>
(e) From and after the Closing Date, the Acquired Fund shares
canceled and retired pursuant to paragraph (d) above shall have the
status of authorized and unissued Shares of Sit Funds, without
designation as to series.
IN WITNESS WHEREOF, the undersigned officer of Sit Funds has executed
these Articles of Amendment on behalf of Sit Funds on __________, 2000.
SIT MUTUAL FUNDS, INC.
By
--------------------------------------
Its
----------------------------------
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<PAGE>
PROSPECTUS /PROXY STATEMENT
MAY 22, 2000
PROPOSED ACQUISITION OF ASSETS OF
SIT REGIONAL GROWTH FUND
A SEPARATELY MANAGED SERIES OF
SIT MUTUAL FUNDS, INC.
BY AND IN EXCHANGE FOR SHARES OF
SIT LARGE CAP GROWTH FUND, INC.
============================================
TABLE OF CONTENTS
============================================
PAGE
----
FEES AND EXPENSES..................................... 3
SUMMARY............................................... 4
RISK FACTORS.......................................... 6
INFORMATION ABOUT THE REORGANIZATION.................. 7
INFORMATION ABOUT REGIONAL FUND AND
LARGE CAP FUND................................... 11
VOTING INFORMATION.................................... 12
FINANCIAL STATEMENTS AND EXPERTS...................... 14
LEGAL MATTERS......................................... 14
EXHIBIT A -- AGREEMENT AND PLAN OF
REORGANIZATION................................... A-1
============================================
THE FOLLOWING DOCUMENTS ACCOMPANY THIS PROSPECTUS/PROXY
STATEMENT:
PROSPECTUS DATED NOVEMBER 1, 1999 OF SIT REGIONAL GROWTH
FUND AND SIT LARGE CAP GROWTH FUND
ANNUAL REPORT OF SIT REGIONAL GROWTH FUND AND SIT LARGE
CAP GROWTH FUND FOR THE FISCAL YEAR ENDED JUNE 30, 1999
<PAGE>
PART B
STATEMENT OF ADDITIONAL INFORMATION
DATED MAY 22, 2000
SIT LARGE CAP GROWTH FUND, INC.
4600 NORWEST CENTER, 90 SOUTH SEVENTH STREET
MINNEAPOLIS, MINNESOTA 55402
(612) 334-5888
(800) 332-5580
ACQUISITION OF THE ASSETS OF SIT REGIONAL GROWTH FUND, A SERIES OF SIT MUTUAL
FUNDS, INC., BY AND IN EXCHANGE FOR SHARES OF SIT LARGE CAP GROWTH FUND, INC.
This Statement of Additional Information relates to the proposed
Agreement and Plan of Reorganization providing for (a) the acquisition of
substantially all of the assets and the assumption of all liabilities of Sit
Regional Growth Fund (the "Acquired Fund"), a series of Sit Mutual Funds, Inc.,
in exchange for shares of common stock of Sit Large Cap Growth Fund, Inc. (the
"Acquiring Fund") having an aggregate net asset value equal to the aggregate
value of the assets acquired (less the liabilities assumed) of the Acquired Fund
and (b) the liquidation of the Acquired Fund and the pro rata distribution of
the Acquiring Fund shares to Acquired Fund shareholders.
This Statement of Additional Information consists of this cover page
and the following documents, which are incorporated by reference herein:
1. The Statement of Additional Information dated November 1, 1999
of the Acquiring Fund and the Acquired Fund.
2. Financial statements of the Acquiring Fund and the Acquired
Fund included in the Sit Stock Funds Annual Report for the
fiscal year ended June 30, 1999.
3. Financial statements of the Acquiring Fund and the Acquired
Fund included in the Sit Stock Funds Semi-Annual Report for
the six months ended December 31, 1999.
No additional financial statements are required by Form N-14, Item 14
because the net asset value of the Acquired Fund did not exceed 10% of the net
asset value of the Acquiring Fund as of March 31, 2000.
This Statement of Additional Information is not a prospectus. A
Prospectus/Proxy Statement dated May 22, 2000 relating to the above-referenced
transaction may be obtained without charge by writing or calling the Acquired
Fund or the Acquiring Fund at the addresses or telephone numbers noted above.
This Statement of Additional Information relates to, and should be read in
conjunction with, such Prospectus/Proxy Statement.
B-1
<PAGE>
[Note: In the SEC filing package, Item No. 2 referred to above is
included in Part A as materials to be delivered with the Prospectus/Proxy
Statement. A copy of Item No. 2 also will be delivered to any person requesting
the Statement of Additional Information.]
B-2
