STOCK FUNDS SEMI-ANNUAL REPORT
SIX MONTHS ENDED DECEMBER 31, 1999
A FAMILY OF NO-LOAD FUNDS
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BALANCED FUND
LARGE CAP GROWTH FUND
REGIONAL GROWTH FUND
MID CAP GROWTH FUND
INTERNATIONAL GROWTH FUND
SMALL CAP GROWTH FUND
SCIENCE AND TECHNOLOGY GROWTH FUND
DEVELOPING MARKETS GROWTH FUND
[LOGO]
SIT MUTUAL FUNDS
----------------
THE INVESTMENT IS MUTUAL(SM)
<PAGE>
A LOOK AT THE SIT MUTUAL FUNDS
Sit Mutual Funds are managed by Sit Investment Associates, Inc. Sit
Investment Associates was founded by Eugene C. Sit in July 1981 and is dedicated
to a single purpose, to be one of the premier investment management firms in the
United States. Sit Investment Associates currently manages approximately $8
billion for some of America's largest corporations, foundations and endowments.
Sit Mutual Funds are comprised of thirteen NO-LOAD funds. NO-LOAD means
that Sit Mutual Funds have no sales charges on purchases, no deferred sales
charges, no 12b-1 fees, no redemption fees and no exchange fees. Every dollar
you invest goes to work for you.
Sit Mutual Funds offer:
* Free telephone exchange
* Dollar-cost averaging through an automatic investment plan
* Electronic transfer for purchases and redemptions
* Free check writing privileges on bond funds
* Retirement accounts including IRAs, Keoghs and 401(k) plan
[CHART]
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SIT FAMILY OF FUNDS
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STABILITY: INCOME: GROWTH: HIGH GROWTH:
Safety of principal Increased income Long-term capital Long-term capital
and current income appreciation and appreciation
income
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MONEY MARKET U.S. GOVERNMENT BALANCED MID CAP GROWTH
SECURITIES LARGE CAP GROWTH INTERNATIONAL GROWTH
TAX-FREE INCOME REGIONAL GROWTH SMALL CAP GROWTH
MINNESOTA TAX-FREE SCIENCE AND
INCOME TECHNOLOGY GROWTH
BOND DEVELOPING MARKETS
GROWTH
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[ ] PRINCIPAL STABILITY & CURRENT INCOME [ ] GROWTH POTENTIAL
[LOGO]
SIT MUTUAL FUNDS
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THE INVESTMENT IS MUTUAL(SM)
<PAGE>
SIT MUTUAL FUNDS
STOCK FUNDS SEMI-ANNUAL REPORT
TABLE OF CONTENTS
PAGE
----
Chairman's Letter 2
Performance Review 4
FUND REVIEWS AND PORTFOLIOS OF INVESTMENTS
Balanced Fund 6
Large Cap Growth Fund 10
Regional Growth Fund 14
Mid Cap Growth Fund 18
International Growth Fund 22
Small Cap Growth Fund 26
Science and Technology Growth Fund 30
Developing Markets Growth Fund 34
Notes to Portfolios of Investments 38
Statements of Assets and Liabilities 40
Statements of Operations 42
Statements of Changes in Net Assets 44
Notes to Financial Statements 48
Financial Highlights 53
Results of Shareholder Meeting 61
1
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[PHOTO] SIT MUTUAL FUNDS
SIX MONTHS ENDED DECEMBER 31, 1999
----------------------------------------------------------------------
CHAIRMAN'S LETTER
Dear Fellow Shareholders:
A strong year-end rally capped another year of excellent returns for domestic
equity indices. Despite the significant rise in interest rates in 1999, the
Standard & Poor's 500 Index posted gains of over 20% for a 5th consecutive year.
Economic Overview
December represented the 106th month of U.S. economic expansion, a period
characterized by strong economic growth and moderate inflation. Although there
was great debate over the potential Y2K impact in fourth quarter GDP, very
little evidence has emerged that the U.S economy slowed down from the rate
achieved during the first three quarters of 1999. We forecast over 5.5% GDP
growth in the fourth quarter, and as we examine momentum in key components
underlying the GDP calculation, it is very difficult to see how a major slowdown
will occur over the intermediate term. Strong employment and consumer confidence
levels have buoyed the largest component of GDP (personal consumption
expenditures) to consistent year-over-year growth of over 5.0%. Non-residential
fixed investment continues to be strong, and it appears that government spending
is on the rise. Finally, a strengthening global economy may support some
improvement in net exports, which have been the biggest drag on GDP growth. Our
only cautionary observation relates to the fact that consumer expenditures
continue to outpace personal income gains, and consumer borrowing has risen
sharply in recent months. Federal Reserve Chairman, Alan Greenspan, has
expressed similar concerns on this issue, specifically citing the "wealth
effect" created by the rising prices of homes and financial assets. Given
increasing evidence of the link between the equity markets and consumer
confidence (and spending), we believe that the Federal Reserve will apply the
brakes slowly to avoid any major disruption in the financial markets. Our
conclusion is that there will be "more of the same" in the year ahead;
therefore, we project full year GDP growth in the area of 4.0%.
Prospects for another year of solid global economic growth have pressured
interest rates upward in recent months, but we believe inflation pressures will
remain modest. While year-over-year consumer price index (CPI) data have
accelerated throughout the year, we believe this is largely commodity-related
and, specifically, oil-related. Excluding food and energy, the "core" rates of
both producer and consumer price inflation have been rising at a modest 2.0%
rate. We project a slight increase in the CPI in 2000, rising to 2.6% from 2.2%
in 1999. Part of our longer-term optimism on inflation stems from the rapid
introduction of new technology and the secular trend to substitute capital for
labor. In a recent speech before the Economic Club of New York, Mr. Greenspan
acknowledged the powerful impact that technology is having on the economy,
stating "What should be indisputable is that a number of new technologies that
evolved from the cumulative innovations of the past half century have now begun
to bring about awesome changes in the way goods and services are distributed to
final users." Global spending on technology, particularly the rapid adoption of
the Internet, is having the combined effect of increasing labor productivity,
while limiting price increases.
In spite of our optimism about inflation on a secular basis, we believe the
Federal Reserve is likely to raise rates as much as an additional one-half
percentage point in 25 basis point increments starting with the early February
Federal Open Markets Committee meeting. Tight labor markets in a rapidly growing
domestic economy concern Federal Reserve officials. Mr. Greenspan noted that,
despite the structural changes occurring in the economy that have to this point
contained inflation, the Federal Reserve's goal is "to extend the expansion by
containing its imbalances and avoiding the very recession that would complete a
business cycle."
With regard to U.S. fiscal policy, we believe that the fiscal 2000 budget
surplus will be considerably higher than the Clinton Administration's current
forecast of $142.5 billion. Our own forecast is $180-185 billion. Consequently,
President Clinton has advanced a number of spending plans focussed on education
and health care, while Republican presidential candidates are favoring a
balanced package including tax cuts. Spending is continuing to rise at faster
rates at the state and local government level than they had been previously. We
are monitoring all government spending patterns closely because of their
potentially inflationary implications.
In stark contrast to a year ago, economic growth outside the U.S. appears to
be on solid footing. We are estimating global GDP growth of 3.0% in 2000, ahead
of an estimated
2
<PAGE>
2.0% in 1999. Our optimistic view is based upon the following: European economic
growth is beginning to accelerate, the recession in Japan is coming to an end,
other Asian economies are recovering very quickly, and stronger commodity prices
and lower interest rates are aiding recovery in Latin America.
Equity Strategy Summary
A strong year-end rally helped push domestic equity indices markedly higher
in 1999, continuing the string of exceptional financial asset returns in the
U.S. Over the last five years, the cumulative total return for the Standard &
Poor's 500 Index has been a remarkable 250%.
1999 marked another year of wide dispersion among financial asset categories.
Stocks dramatically outperformed bonds, as investors shook off concerns over
higher interest rates and focussed on an improved outlook for corporate earnings
in the recovering global economy. Despite the strong performance of the U.S.
equity market, the U.S. ranked only 20th among the 33 largest markets worldwide.
Within the U.S., 1999 marked the widest differential favoring growth over
value in the history of the Frank Russell Company indices. The relatively higher
weightings within the technology sector were responsible for much of the
outperformance of growth over value. The technology-laden NASDAQ OTC Composite
posted an exceptional return for the year, increasing 85.6%. We estimate that
703 of the roughly 4000 companies in the Index for the entire year doubled in
price over the course of 1999. This strong performance relative to other market
indices perhaps best symbolizes the performance differential between the "New
Economy" and "Old Economy" sectors within the equity market. The surge in
technology shares has left many observers wondering if the trend will continue.
We believe the answer is yes, but it is clear that higher valuations imply a
higher level of risk going forward. Our enthusiasm for this sector is supported
by surging technological innovation coupled with strong global demand for
productivity-enhancing technology. In a market environment that has continuously
rewarded strong earnings growth, we attribute much of our success in 1999 to our
focus on enhancing projected earnings growth rates within our equity portfolios.
A sizable portfolio weighting in the fast-growing technology sector has been a
key factor in producing projected earnings growth rates that are at more than
twice that of the Standard & Poor's 500 Index based on 2000 estimates.
Internationally, we remain optimistic on the outlook for European equity
markets due to strengthened economic fundamentals, a widening corporate movement
to enhance productivity and profitability, and the growth of a capital
markets/equity culture in Europe. We are also positive on investment
opportunities in Japan, as the equity market posted strong results driven by
strong capital inflows, government fiscal stimulus, and corporate restructuring.
We are somewhat cautious on the near-term prospects for Latin America markets.
Political instability remains a key concern, and both Brazil and Argentina are
struggling with budget deficit reductions.
In general, we believe greatly improving economic conditions around the world
will continue to provide attractive investment opportunities in the year ahead.
With best wishes,
/s/ Eugene C. Sit
Eugene C. Sit, CFA
Chairman and Chief Investment Officer
3
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SIT MUTUAL FUNDS
SIX MONTHS ENDED DECEMBER 31, 1999
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PERFORMANCE SUMMARY - STOCK FUNDS
Domestically, equity markets generated strong results during in 1999. Strong
corporate earnings growth and surging performance in the technology sector was
enough to overcome a significant rise in interest rates that occurred throughout
the year. 1999 marked an unprecedented 5th consecutive year of returns over 20%
for the equity market (as measured by the Standard & Poor's 500 Index). This was
also a record 9th consecutive year of positive returns for the market.
Smaller capitalization issues showed improved relative performance in 1999.
For the first time since 1994, the Russell 2000 Index return (+21.3%) was
modestly higher than the return for the S&P 500 Index (+21.0%). Growth stocks
outperformed value issues across the capitalization spectrum. The large cap
Russell 1000 Growth Index bested the Russell 1000 Value Index by nearly twenty
six percentage points during 1999, with returns of +33.2% and +7.4%,
respectively. The growth/value performance differential was even greater among
small cap issues, as the Russell 2000 Growth returned +43.1%, while the Russell
2000 Value returned -1.5%.
The technology sector was the best performing sector in the market in 1999 by
a wide margin. We estimate that the combined returns of the technology sectors
were +73.7% and +113.9% in the S&P 500 Index and the Russell 2000 Index,
respectively. Sectors that lagged the market over the past year include
financial services, utilities, health services and consumer non-durables.
Continuing the trend that has existed over the past few years, a select group of
large stocks, mostly within technology, have disproportionately driven indices
higher. We estimate that just seven stocks contributed half of the total return
for the S&P 500 Index in 1999.
International equity market indices also moved higher in 1999. In fact, every
major regional equity market delivered double-digit investment returns, largely
due to an improving outlook for the global economy and corporate profits.
Emerging markets benefited the most from this improving economic outlook, as the
MSCI Pacific ex-Japan Index rose 42.6% and the MSCI Latin America Free Index
increased 55.5%. Japan's equity market turned in its strongest performance of
the decade, gaining 61.5%. Investment returns in Europe were somewhat mixed in
1999 (although generally positive), as the MSCI Europe Index posted a return of
+15.9%.
1987 1988 1989
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SIT BALANCED -- -- --
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SIT LARGE CAP GROWTH 5.32% 5.33% 32.02%
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SIT REGIONAL GROWTH -- -- --
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SIT MID CAP GROWTH 5.50 9.77 35.15
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SIT INTERNATIONAL GROWTH -- -- --
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SIT SMALL CAP GROWTH -- -- --
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SIT SCIENCE AND TECHNOLOGY GROWTH -- -- --
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SIT DEVELOPING MARKETS GROWTH -- -- --
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S&P 500 INDEX 5.28 16.55 31.61
S&P MIDCAP 400 INDEX -2.04 20.87 35.55
MSCI EAFE INDEX (3) -- -- --
RUSSELL 2000 INDEX (2) -- -- --
PSE TECH 100 INDEX -- -- --
MSCI EMERGING MARKETS FREE INDEX (4) -- -- --
NASDAQ
SYMBOL INCEPTION
------ -----------
SIT BALANCED SIBAX 12/31/93
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SIT LARGE CAP GROWTH SNIGX 09/02/82
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SIT REGIONAL GROWTH n/a 12/31/97
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SIT MID CAP GROWTH NBNGX 09/02/82
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SIT INTERNATIONAL GROWTH SNGRX 11/01/91
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SIT SMALL CAP GROWTH SSMGX 07/01/94
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SIT SCIENCE AND TECHNOLOGY GROWTH SISTX 12/31/97
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SIT DEVELOPING MARKETS GROWTH SDMGX 07/01/94
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S&P 500 INDEX(5)
S&P MIDCAP 400 INDEX(5)
MSCI EAFE INDEX (3)
RUSSELL 2000 INDEX (2)
PSE TECH 100 INDEX
MSCI EMERGING MARKETS FREE INDEX (4)
(1) PERIOD FROM FUND INCEPTION THROUGH CALENDAR YEAR-END.
(2) FIGURES ASSUME AN INCEPTION DATE OF 7/1/94.
(3) FIGURES ASSUME AN INCEPTION DATE OF 10/31/91.
(4) FIGURES ASSUME AN INCEPTION DATE OF 6/30/94.
(5) FIGURES ASSUME AN INCEPTION DATE OF 9/2/82.
4
<PAGE>
<TABLE>
<CAPTION>
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TOTAL RETURN - CALENDAR YEAR
- ----------------------------------------------------------------------------------------------------------------
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
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<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
-- -- -- -- -0.33% 25.43% 15.80% 21.73% 21.30% 20.15%
- ----------------------------------------------------------------------------------------------------------------
-2.37% 32.72% 4.94% 3.15% 2.83 31.66 23.05 31.70 30.56 33.41
- ----------------------------------------------------------------------------------------------------------------
-- -- -- -- -- -- -- -- 23.05 15.55
- ----------------------------------------------------------------------------------------------------------------
-2.04 65.50 -2.14 8.55 -0.47 33.64 21.87 17.70 6.84 70.65
- ----------------------------------------------------------------------------------------------------------------
-- 4.10(1) 2.69 48.37 -2.99 9.36 10.31 4.81 18.95 50.77
- ----------------------------------------------------------------------------------------------------------------
-- -- -- -- 11.57(1) 52.16 14.97 7.63 1.97 108.63
- ----------------------------------------------------------------------------------------------------------------
-- -- -- -- -- -- -- -- 38.40 85.98
- ----------------------------------------------------------------------------------------------------------------
-- -- -- -- -2.02(1) -4.29 17.27 -5.20 -24.93 82.50
- ----------------------------------------------------------------------------------------------------------------
-3.05 30.46 7.64 10.07 1.32 37.58 22.96 33.36 28.58 21.04
-5.12 50.11 11.92 13.95 -3.60 30.94 19.19 32.29 19.11 14.72
-- 0.26 -12.17 32.56 7.78 11.21 6.05 1.78 20.00 26.96
-- -- -- -- 4.61 28.45 16.49 22.36 -2.54 21.26
-- -- -- -- -- -- -- -- 54.60 116.40
-- -- -- -- 2.80 -6.94 3.92 -13.40 -27.52 63.70
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS FOR THE
PERIODS ENDED DECEMBER 31, 1999
TOTAL RETURN ---------------------------------------------------------
QUARTER SIX MONTHS SINCE
ENDED 12/31/99 ENDED 12/31/99 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION
- ------------------------------- ---------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
15.59% 14.11% 20.15% 21.06% 20.84% -- 17.02%
- ----------------------------------------------------------------------------------------------
26.01 22.81 33.41 31.89 30.02 18.28% 17.89
- ----------------------------------------------------------------------------------------------
14.99 7.74 15.55 -- -- -- 19.25
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45.95 51.87 70.65 28.98 28.43 19.60 20.78
- ----------------------------------------------------------------------------------------------
38.12 48.20 50.77 23.41 17.79 -- 16.52
- ----------------------------------------------------------------------------------------------
64.59 83.86 108.63 31.80 31.99 -- 31.26
- ----------------------------------------------------------------------------------------------
55.15 69.01 85.98 -- -- -- 60.44
- ----------------------------------------------------------------------------------------------
48.17 42.08 82.50 9.11 7.83 -- 6.69
- ----------------------------------------------------------------------------------------------
14.88 7.71 21.04 27.56 28.55 18.22 19.11
17.19 7.34 14.72 21.82 23.05 17.32 18.77
16.99 22.12 26.96 15.74 12.83 -- 10.73
18.44 10.96 21.26 13.08 16.69 -- 16.00
54.88 62.04 116.40 -- -- -- 82.91
25.15 18.27 63.70 0.91 -0.13 -- 0.38
</TABLE>
PERFORMANCE FIGURES ARE HISTORICAL AND DO NOT GUARANTEE FUTURE RESULTS.
INVESTMENT RETURNS AND PRINCIPAL VALUE WILL VARY, AND YOU MAY HAVE A GAIN OR
LOSS WHEN YOU SELL SHARES. AVERAGE ANNUAL TOTAL RETURNS INCLUDE CHANGES IN SHARE
PRICE AS WELL AS REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAINS.
5
<PAGE>
[PHOTO] SIT BALANCED FUND
SIX MONTHS ENDED DECEMBER 31, 1999
----------------------------------------------------------------------
PETER L. MITCHELSON, CFA, SENIOR PORTFOLIO MANAGER
BRYCE A. DOTY, CFA, SENIOR PORTFOLIO MANAGER
The Sit Balanced Fund's +14.1% return over the past six months was strong on
both an absolute and relative basis and compared favorably to the +2.7% return
for the Lipper Balanced Fund Index. The Fund's 1999 return of +20.2% ranked in
the 6th percentile of the 449 balanced funds ranked by Lipper Analytical
Services. For the 3-year and 5-year periods, the Fund ranked in the 7th
percentile out of 333 funds and the 9th percentile out of 223 funds.
As of December 31, 1999, the asset allocation of the Fund was 60.9% equities
(up from 54.6% at the end of June), 35.0% fixed income securities (down from
36.9%), and 4.1% cash and other net assets.
A strong year-end rally helped push equity market returns solidly higher over
the past six months. Investors were able to shake off inflation and interest
rate concerns, and focus on the recovering global economy and resultant
acceleration in corporate earnings. Growth stocks continue to outperform value
issues, largely fueled by the surging technology sector. The Fund significantly
benefited from an overweighted position in the technology sectors, with greater
sector weights in both electronic technology and technology services than six
months ago. Sector weighting decreases occurred in health services and health
technology. Strong earnings growth continues to be a distinct attribute of the
Fund, with an average projected 1-year and 5-year earnings growth rate for
companies held in the Fund of 25.0% and 23.5%, respectively. This compares to a
projected earnings growth rate for the S&P 500 Index of 9.1% for 2000 and 10.0%
for the next five years.
While the outlook for improving corporate earnings and a strong global
economy provided support for the equity markets over the past year, bond prices
fell over continued fears about excessive economic growth and a potential
acceleration in inflation. Yields on 30-year U.S. Treasury bonds rose 47 basis
points over the last six months and 140 basis points for the 1999 calendar year,
with the yield at year-end standing at 6.48%. The most significant recent change
in fixed income strategy occurred toward the end of 1999, as we began to
emphasize corporate securities over U.S. Treasuries, and relative yields on
corporates became attractive as investors' Y2K fears caused a temporary flight
to safety in Treasuries. Going forward, we believe interest rates will creep
somewhat higher over the near-term.
INVESTMENT OBJECTIVE AND STRATEGY
The Sit Balanced Fund's dual objectives are to seek long-term growth of
capital consistent with the preservation of principal and to provide regular
income. It pursues its objectives by investing in a diversified portfolio of
stocks, bonds and short-term instruments. The Fund may emphasize either equity
securities, fixed-income securities, or short-term instruments or hold equal
amounts of each, dependent upon the Adviser's analysis of market, financial and
economic conditions.
The Fund's permissible investment allocation is: 40-60% in equity
securities, 40-60% in fixed-income securities, and up to 20% in short-term
fixed-income instruments. At all times at least 25% of the assets will be
invested in fixed-income senior securities.
PORTFOLIO SUMMARY
Net Asset Value 12/31/99: $18.75 Per Share
6/30/99: $17.38 Per Share
Total Net Assets: $14.5 Million
TOTAL DIVIDEND: $ 1.02 PER SHARE
Long-Term Capital Gain: $ 0.74 Per Share
Ordinary Income: $ 0.28 Per Share
PORTFOLIO STRUCTURE
(% OF TOTAL NET ASSETS)
[PIE CHART]
Cash & Other Net Assets 4.1%
Bonds 35.0%
Equities 60.9%
6
<PAGE>
AVERAGE ANNUAL TOTAL RETURNS*
-----------------------------
SIT LEHMAN
BALANCED S&P AGGREGATE
FUND 500 INDEX BOND INDEX
-------- --------- ----------
3 Months** 15.59% 14.88% -0.12%
1 Year 20.15 21.04 -0.82
3 Years 21.06 27.56 5.73
5 Years 20.84 28.55 7.73
Inception 17.02 23.54 5.88
(12/31/93)
CUMULATIVE TOTAL RETURNS*
-------------------------
SIT LEHMAN
BALANCED S&P AGGREGATE
FUND 500 INDEX BOND INDEX
-------- --------- ----------
1 Year 20.15% 21.04% -0.82%
3 Years 77.41 107.55 18.20
5 Years 157.68 251.09 45.12
Inception 156.84 255.74 40.89
(12/31/93)
*AS OF 12/31/99 **NOT ANNUALIZED.
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PERFORMANCE FIGURES ARE HISTORICAL AND DO NOT GUARANTEE FUTURE RESULTS.
INVESTMENT RETURNS AND PRINCIPAL VALUE WILL VARY, AND YOU MAY HAVE A GAIN OR
LOSS WHEN YOU SELL SHARES. AVERAGE ANNUAL TOTAL RETURNS INCLUDE CHANGES IN SHARE
PRICE AS WELL AS REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAINS. MANAGEMENT
FEES AND ADMINISTRATIVE EXPENSES ARE INCLUDED IN THE FUND'S PERFORMANCE;
HOWEVER, FEES AND EXPENSES ARE NOT INCORPORATED IN THE LEHMAN AGGREGATE BOND
INDEX AND THE S&P 500 INDEX. LIPPER AVERAGES AND INDICES ARE OBTAINED FROM
LIPPER ANALYTICAL SERVICES, INC., A LARGE INDEPENDENT EVALUATOR OF MUTUAL FUNDS.
GROWTH OF $10,000
[PLOT POINTS CHART]
The sum of $10,000 invested at inception (12/31/93) and held until 12/31/99
would have grown to $25,684 in the Fund, $14,089 in the Lehman Aggregate Bond
Index or $35,574 in the S&P 500 Index assuming reinvestment of all dividends and
capital gains.
TOP HOLDINGS
Stocks:
* Cisco Systems, Inc.
* Microsoft Corp.
* General Electric Co.
* QUALCOMM, Inc.
* Nokia Corp., A.D.R.
Bonds:
* U.S. Treasury Strip, 6.43%, 11/15/09
* EQCC HEL, 1996-4 A8, 7.41%, 1/15/28
* Pentair, Inc., 7.85%, 10/15/09
* Union Tank Car Co., 6.57%, 1/2/14
* TIPS, 3.875%, 1/15/09
Total Number of Holdings: 139
7
<PAGE>
SIT BALANCED FUND
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PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1999 (UNAUDITED)
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QUANTITY NAME OF ISSUER MARKET VALUE ($)(1)
- --------------------------------------------------------------------------------
COMMON STOCKS (60.9%) (2)
COMMERCIAL SERVICES (0.3%)
1,000 SYSCO Corp. $39,563
--------------
CONSUMER DURABLES (0.5%)
1,100 Harley-Davidson, Inc. 70,469
--------------
CONSUMER NON-DURABLES (2.3%)
1,100 Coca Cola Co. 64,075
1,400 Colgate-Palmolive Co. 91,000
1,100 Kimberly-Clark Corp. 71,775
1,000 Procter & Gamble Co. 109,563
--------------
336,413
--------------
CONSUMER SERVICES (2.5%)
1,500 AT&T Corp.-Liberty Media Group (3) 85,125
1,500 Clear Channel Comm., Inc. (3) 133,875
2,000 Time Warner, Inc. 144,875
--------------
363,875
--------------
ELECTRONIC TECHNOLOGY (18.6%)
500 Applied Materials, Inc. (3) 63,344
5,500 Cisco Systems, Inc. (3) 589,187
1,900 EMC Corp. (3) 207,575
1,800 Intel Corp. 148,162
500 JDS Uniphase Corp. (3) 80,656
700 Lexmark International Group, Inc. (3) 63,350
500 Linear Technology Corp. 35,781
2,550 Lucent Technologies, Inc. 190,772
1,700 Nokia Corp., A.D.R. 323,000
200 Nortel Networks Corp. 20,200
2,000 QUALCOMM, Inc. (3) 352,250
3,300 Sun Microsystems, Inc. (3) 255,544
2,300 Tellabs, Inc. (3) 147,631
1,400 Texas Instruments, Inc. 135,625
2,000 Xilinx, Inc. (3) 90,938
--------------
2,704,015
--------------
ENERGY MINERALS (0.6%)
2,500 EOG Resources, Inc. 43,906
1,300 Unocal Corp. 43,631
--------------
87,537
--------------
FINANCE (6.0%)
1,681 American International Group, Inc. 181,758
1,400 Chase Manhattan Corp. 108,762
1,000 Citigroup, Inc. 55,563
1,500 Federal Home Loan Mortgage Corp. 70,594
1,500 Marsh & McLennan Cos., Inc. 143,531
1,000 Morgan Stanley Dean Witter & Co. 142,750
1,500 Wells Fargo Co. 60,656
2,000 XL Capital, Ltd. 103,750
--------------
867,364
--------------
HEALTH TECHNOLOGY (7.5%)
4,000 Amgen, Inc. (3) 240,250
500 Biogen, Inc. (3) 42,250
2,200 Bristol-Myers Squibb Co. 141,212
1,100 Johnson & Johnson Co. 102,437
400 MedImmune, Inc. (3) 66,350
3,000 Medtronic, Inc. 109,312
- --------------------------------------------------------------------------------
QUANTITY/PAR($) NAME OF ISSUER MARKET VALUE ($)(1)
- --------------------------------------------------------------------------------
1,900 Merck & Co., Inc. 127,419
3,700 Pfizer, Inc. 120,019
1,700 Warner Lambert Corp. 139,294
--------------
1,088,543
--------------
INDUSTRIAL SERVICES (0.3%)
1,000 Halliburton Co. 40,250
--------------
PROCESS INDUSTRIES (0.4%)
1,500 Monsanto Co. 53,438
--------------
PRODUCER MANUFACTURING (3.9%)
3,000 General Electric Co. 464,250
2,700 Tyco International, Ltd. 104,963
--------------
569,213
--------------
RETAIL TRADE (4.2%)
1,000 CVS Corp. 39,938
2,300 Dayton Hudson Corp. 168,906
3,000 Home Depot, Inc. 205,687
900 Kohl's Corp. (3) 64,969
600 Wal-Mart Stores, Inc 41,475
3,000 Walgreen Co. 87,750
--------------
608,725
--------------
TECHNOLOGY SERVICES (8.8%)
2,400 America Online, Inc. (3) 181,050
500 BMC Software, Inc. (3) 39,969
4,500 Ceridian Corp. (3) 97,031
1,400 Computer Sciences Corp. (3) 132,475
2,000 First Data Corp. 98,625
800 Inktomi Corp. (3) 71,000
4,000 Microsoft Corp. (3) 467,000
1,750 Oracle Corp. (3) 196,109
--------------
1,283,259
--------------
TRANSPORTATION (0.3%)
700 United Parcel Service, Inc. 48,300
--------------
UTILITIES (4.7%)
2,000 Global Crossing, Ltd. (3) 100,000
2,850 MCI WorldCom, Inc. (3) 151,228
500 Nextel Communications, Inc. (3) 51,563
2,600 Sprint Corp. 175,012
4,000 Vodafone Airtouch, A.D.R. 198,000
--------------
675,803
--------------
Total common stocks
(cost: $5,184,827) 8,836,767
--------------
BONDS (34.1%) (2)
U.S. TREASURY (8.3%)
U.S. Treasury Strip:
25,000 6.93% Effective Yield, 11/15/04 18,279
1,600,000 6.43% Effective Yield, 11/15/09 809,184
500,000 6.83% Effective Yield, 2/15/19 137,205
U.S.Treasury Inflation Index Bond:
153,833 3.875%, 1/15/09 148,658
102,310 3.875%, 4/15/29 95,522
--------------
1,208,848
--------------
8
<PAGE>
- --------------------------------------------------------------------------------
QUANTITY/PAR($) NAME OF ISSUER MARKET VALUE ($)(1)
- --------------------------------------------------------------------------------
ASSET-BACKED SECURITIES (4.9%)
Advanta Mortgage Loan Trust:
25,000 1995-3 A5, 7.37%, 2/25/27 24,812
50,000 1996-1 A7, 7.07%, 3/25/27 48,756
150,000 Conseco Home Equity Loan,
1999-F A3, 6.97%, 10/15/30 146,461
74,999 ContiMortgage Home Equity Loan Tr.,
1996-1 A7, 7.00%, 3/15/27 72,275
EQCC Home Equity Loan Trust:
25,000 1996-1 A5, 6.93%, 3/15/27 23,939
250,000 1996-4 A8, 7.41%, 1/15/28 253,660
Green Tree Financial Corp.:
20,000 1995-5, 7.25%, 9/15/25 19,862
25,000 1997-4, 7.03%, 2/15/29 24,553
50,000 1999-E A3, 7.18%, 8/30/30 49,891
50,000 Money Store Home Equity Mtg.,
7.265%, 7/15/38 49,325
--------------
713,534
--------------
COLLATERALIZED MORTGAGE OBLIGATIONS (1.1%)
73,258 PNC Mortgage Securities Corp.
Series 1998-6 4A, 6.75%, 8/25/13 72,611
100,000 Norwest Asset Securities Corp.
Series 1998-19 2A12, 6.75%, 7/25/28 91,226
--------------
163,837
--------------
CORPORATE BONDS (9.8%)
125,000 Allstate Finance, 7.83%, 12/1/45 114,687
American Airlines:
25,000 1999-1 A2, 7.024%, 10/15/09 24,229
25,000 1999-1 B, 7.324%, 10/15/09 24,238
100,000 Bank America, 8.25%, 4/15/27 96,500
50,000 Burlington North Santa Fe
Series 1999-2, 7.57%, 1/2/21 47,923
50,000 CIT Group, Inc., 7.125%, 10/15/04 49,625
Continental Airlines:
47,321 1997-1A, 7.461%, 4/1/15 45,429
75,000 1999-1B, 6.795%, 8/2/18 68,642
49,979 1999-1A, 6.545%, 2/2/19 45,521
50,000 First Industrial LP, 7.15%, 5/15/27 48,625
50,000 Ford Motor Credit Corp., 5.75%, 2/23/04 47,188
50,000 Franchise Fin. Corp., 8.25%, 10/30/03 49,500
150,000 Gen. Electric Capital, 6.52%, 10/8/02 148,500
50,000 May Department Stores, 9.875%, 6/15/21 53,500
200,000 Pentair, Inc., 7.85%, 10/15/09 195,750
32,000 Ryder System, Inc., 8.75%, 3/15/17 32,360
100,000 Service Corp. Int'l, 7.375%, 4/15/04 85,625
6,000 Toys R Us, Inc., 8.25%, 2/1/17 6,000
50,000 Union Carbide Corp., 8.75%, 8/1/22 52,313
200,000 Union Tank Car Co., 6.57%, 1/2/14 184,692
--------------
1,420,847
--------------
MORTGAGE PASS-THROUGH SECURITIES (10.0%)
FEDERAL HOME LOAN MORTGAGE CORPORATION (0.8%)
36,552 9.00%, 7/1/16 38,110
20,888 9.00%, 7/1/16 21,776
16,632 9.25%, 6/1/02 17,236
- --------------------------------------------------------------------------------
QUANTITY/PAR($) NAME OF ISSUER MARKET VALUE ($)(1)
- --------------------------------------------------------------------------------
30,766 10.00%, 10/1/18 32,985
--------------
110,107
--------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (1.7%)
15,622 9.00%, 11/1/06 16,198
53,951 9.25%, 1/1/17 56,337
68,400 9.75%, 1/1/13 74,128
17,202 10.00%, 1/1/20 18,383
71,342 10.25%, 6/1/13 77,875
--------------
242,921
--------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (7.5%)
22,093 9.00%, 6/15/11 22,990
96,769 9.00%, 6/15/09 100,867
94,418 9.00%, 12/15/19 98,717
18,011 9.25%, 9/15/01 18,787
20,151 9.50%, 1/15/04 21,160
47,690 9.50%, 11/15/04 50,075
28,476 9.50%, 7/20/05 29,481
35,922 9.50%, 12/15/09 38,200
19,079 9.50%, 5/20/16 19,987
100,400 9.50%, 12/15/17 107,316
66,455 9.50%, 3/15/18 70,370
70,485 9.50%, 9/20/18 73,841
62,759 9.50%, 1/20/19 65,745
47,242 9.50%, 2/20/19 49,486
76,910 9.50%, 3/20/19 80,575
39,307 9.50%, 12/15/19 41,825
60,820 9.75%, 10/15/05 63,945
64,186 10.00%, 3/20/16 68,360
29,505 10.25%, 1/15/04 31,066
3,571 11.25%, 10/15/00 3,585
16,407 11.25%, 10/15/11 18,016
Municipal (GNMA collateralized):
13,000 Bernalillo Multifamily. Ser. 1998A,
7.50%, 9/20/20 12,244
--------------
1,086,638
--------------
Total bonds
(cost: $5,065,822) 4,946,732
--------------
CLOSED-END MUTUAL FUNDS (0.9%) (2)
7,009 American Select Portfolio 81,918
403 American Strategic, Inc. Portfolio 4,534
1,870 American Strategic, Inc. Portfolio II 21,271
2,209 American Strategic, Inc. Portfolio III 24,713
--------------
Total closed-end mutual funds 132,436
--------------
(cost: $131,807)
SHORT-TERM SECURITIES (3.7%) (2)
544,000 Sit Money Market Fund, 5.35% (6) 544,000
--------------
(cost: $544,000)
Total investments in securities
(cost: $10,926,456) (7) $14,459,935
==============
See accompanying notes to portfolios of investments on page 38.
9
<PAGE>
[PHOTO] SIT LARGE CAP GROWTH FUND
SIX MONTHS ENDED DECEMBER 31, 1999
----------------------------------------------------------------------
SENIOR PORTFOLIO MANAGERS
PETER L. MITCHELSON, CFA * ROGER J. SIT * RONALD D. SIT, CFA
The Sit Large Cap Growth Fund posted strong results for the last six months
and full calendar year of 1999, increasing 22.8% and 33.4%, respectively. By
comparison, the S&P 500 Index return was +7.7% for the final six months of 1999
and +21.0% for the calendar year.
A strong year-end rally capped another year of solid returns for most major
stock indices. Although concerns over inflation and a significant increase in
long-term interest rates caused volatility along the way, strong corporate
earnings provided key support for the advance in the equity markets. Growth
stocks continued their strong relative performance, largely due to the continued
exceptional performance of the technology sector. Although the strong
performance of technology issues has led to increased valuation for the sector,
we believe that future earnings growth will be significantly higher for these
companies than for the broader market. The rapid pace of technological
innovation is fueling robust corporate and consumer spending on information
technology, providing for a broad variety of investment opportunities in several
areas, including telecommunications, networking, E-commerce, semiconductors and
software applications. Since we believe that the technology boom is far from
over, the Fund continues to be significantly overweighted in the technology
sector.
The most significant sector weighting increases over the past six months
include electronic technology, technology services and utilities through the
purchases of Nokia, QUALCOMM, Global Crossing, First Data, Xilinx and JDS
Uniphase. Sector weighting decreases occurred in health technology, health
services and retail trade through the reduction or elimination of positions in
McKesson HBOC, Gap, Lowe's, American Home Products, Eli Lilly and
Schering-Plough. As of December 31st, the Fund was 97% invested in equities, up
from 93% six months ago.
Securities in the Fund continue to exhibit high projected earnings growth
rates. We estimate that companies within the Fund will grow earnings in excess
of 25% in the coming year, well above the 9% growth projection for the S&P 500
Index. In addition to strong fundamentals, attractive relative valuations for
fast-growing companies give us optimism about the Fund's outlook.
INVESTMENT OBJECTIVE AND STRATEGY
The objective of the Large Cap Growth Fund is to maximize long-term capital
appreciation. The Fund pursues this objective by investing primarily in common
stocks of growth companies with a capitalization of $5 billion or more at the
time of purchase.
PORTFOLIO SUMMARY
Net Asset Value 12/31/99: $ 61.20 Per Share
6/30/99: $ 52.84 Per Share
Total Net Assets: $164.0 Million
Weighted Average Market Cap: $152.7 Billion
TOTAL DIVIDEND: $ 3.41 PER SHARE
Long-Term Capital Gain: $ 3.41 Per Share
PORTFOLIO STRUCTURE - BY SECTOR
(% OF TOTAL NET ASSETS)
[BAR CHART]
Electronic Technology 28.9
Technology Services 14.1
Health Technology 12.6
Finance 8.8
Utilities 7.7
Retail Trade 7.1
Producer Manufacturing 6.0
Consumer Services 4.9
Consumer Non-Durables 4.1
Sectors Under 1.0% 3.2
Cash & Other Net Assets 2.6
10
<PAGE>
AVERAGE ANNUAL TOTAL RETURNS*
-----------------------------
SIT RUSSELL
LARGE CAP S&P 1000
GROWTH FUND 500 INDEX GROWTH INDEX
----------- --------- ------------
3 Month** 26.01% 14.88% 25.15%
1 Year 33.41 21.04 33.16
5 Years 30.02 28.55 32.42
10 Year*** 18.28 18.22 20.32
Inception*** 17.89 19.11 19.54
(9/2/82)
CUMULATIVE TOTAL RETURNS*
-------------------------
SIT RUSSELL
LARGE CAP S&P 1000
GROWTH FUND 500 INDEX GROWTH INDEX
----------- --------- ------------
1 Year 33.41% 21.04% 33.16%
5 Year 271.64 251.09 307.10
10 Year*** 435.95 433.03 535.78
Inception*** 1636.64 1975.78 2109.42
(9/2/82)
*AS OF 12/31/99 **NOT ANNUALIZED.
- --------------------------------------------------------------------------------
PERFORMANCE FIGURES ARE HISTORICAL AND DO NOT GUARANTEE FUTURE RESULTS.
INVESTMENT RETURNS AND PRINCIPAL VALUE WILL VARY, AND YOU MAY HAVE A GAIN OR
LOSS WHEN YOU SELL SHARES. AVERAGE ANNUAL TOTAL RETURNS INCLUDE CHANGES IN SHARE
PRICE AS WELL AS REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAINS. MANAGEMENT
FEES AND ADMINISTRATIVE EXPENSES ARE INCLUDED IN THE FUND'S PERFORMANCE;
HOWEVER, FEES AND EXPENSES ARE NOT INCORPORATED IN THE RUSSELL 1000 GROWTH INDEX
AND THE S&P 500 INDEX.
***ON 6/6/93, THE FUND'S INVESTMENT OBJECTIVE CHANGED TO ALLOW FOR A PORTFOLIO
OF 100% STOCKS. PRIOR TO THAT TIME, THE PORTFOLIO WAS REQUIRED TO CONTAIN NO
MORE THAN 80% STOCKS.
GROWTH OF $10,000
[PLOT POINTS CHART]
The sum of $10,000 invested at inception (9/2/82) and held until 12/31/99 would
have grown to $173,664 in the Fund, or $207,578 in the S&P 500 Index assuming
reinvestment of all dividends and capital gains.
TOP 10 HOLDINGS
* Cisco Systems, Inc.
* Microsoft Corp.
* General Electric Co.
* Nokia Corp., A.D.R.
* Sun Microsystems, Inc.
* Amgen, Inc.
* QUALCOMM, Inc.
* EMC Corp.
* Oracle Corp.
* Home Depot, Inc.
Total Number of Holdings: 68
11
<PAGE>
SIT LARGE CAP GROWTH FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE ($)(1)
- --------------------------------------------------------------------------------
COMMON STOCKS (97.4%) (2)
COMMERCIAL SERVICES (0.5%)
21,500 SYSCO Corp. $850,594
----------------
CONSUMER DURABLES (0.9%)
22,600 Harley-Davidson, Inc. 1,447,812
----------------
CONSUMER NON-DURABLES (4.1%)
25,500 Coca Cola Co. 1,485,375
31,200 Colgate-Palmolive Co. 2,028,000
20,000 Kimberly-Clark Corp. 1,305,000
17,200 Procter & Gamble Co. 1,884,475
----------------
6,702,850
----------------
CONSUMER SERVICES (4.9%)
26,500 AT&T Corp.-Liberty Media Group (3) 1,503,875
44,500 CBS Corp. (3) 2,845,219
21,900 Clear Channel Communications, Inc. (3) 1,954,575
23,800 Time Warner, Inc. 1,724,012
----------------
8,027,681
----------------
ELECTRONIC TECHNOLOGY (28.9%)
9,000 Applied Materials, Inc. (3) 1,140,188
95,150 Cisco Systems, Inc. (3) 10,192,944
37,300 EMC Corp. (3) 4,075,025
43,900 Intel Corp. 3,613,519
10,000 JDS Uniphase Corp. (3) 1,613,125
12,500 Lexmark International Group, Inc. (3) 1,131,250
11,000 Linear Technology Corp. 787,188
41,710 Lucent Technologies, Inc. 3,120,429
30,500 Nokia Corp., A.D.R. 5,795,000
8,500 Nortel Networks Corp. 858,500
24,000 QUALCOMM, Inc. (3) 4,227,000
57,000 Sun Microsystems, Inc. (3) 4,413,937
39,700 Tellabs, Inc. (3) 2,548,244
23,100 Texas Instruments, Inc. 2,237,812
37,000 Xilinx, Inc. (3) 1,682,344
----------------
47,436,505
----------------
ENERGY MINERALS (0.9%)
43,500 EOG Resources, Inc. 763,969
23,000 Unocal Corp. 771,938
----------------
1,535,907
----------------
FINANCE (8.8%)
22,375 American International Group, Inc. 2,419,297
24,100 Chase Manhattan Corp. 1,872,269
13,500 Citigroup, Inc. 750,094
- --------------------------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE ($)(1)
- --------------------------------------------------------------------------------
27,200 Federal Home Loan Mortgage Corp. 1,280,100
27,000 Marsh & McLennan Cos., Inc. 2,583,562
17,500 Morgan Stanley Dean Witter & Co. 2,498,125
31,300 Wells Fargo Co. 1,265,694
34,100 XL Capital, Ltd. 1,768,937
----------------
14,438,078
----------------
HEALTH TECHNOLOGY (12.6%)
71,000 Amgen, Inc. (3) 4,264,437
9,000 Biogen, Inc. (3) 760,500
40,400 Bristol-Myers Squibb Co. 2,593,175
21,000 Johnson & Johnson Co. 1,955,625
7,000 MedImmune, Inc. (3) 1,161,125
54,200 Medtronic, Inc. 1,974,912
39,900 Merck & Co., Inc. 2,675,794
77,300 Pfizer, Inc. 2,507,419
33,500 Warner Lambert Corp. 2,744,906
----------------
20,637,893
----------------
INDUSTRIAL SERVICES (0.4%)
18,000 Halliburton Co. 724,500
----------------
PRODUCER MANUFACTURING (6.0%)
51,100 General Electric Co. 7,907,725
48,200 Tyco International, Ltd. 1,873,775
----------------
9,781,500
----------------
RETAIL TRADE (7.1%)
17,000 CVS Corp. 678,938
41,700 Dayton Hudson Corp. 3,062,344
56,550 Home Depot, Inc. 3,877,209
18,500 Kohl's Corp. (3) 1,335,469
12,500 Wal-Mart Stores, Inc 864,063
60,600 Walgreen Co. 1,772,550
----------------
11,590,573
----------------
TECHNOLOGY SERVICES (14.1%)
43,000 America Online, Inc. (3) 3,243,813
10,500 BMC Software, Inc. (3) 839,344
65,900 Ceridian Corp. (3) 1,420,969
23,300 Computer Sciences Corp. (3) 2,204,762
2,500 Dendrite International, Inc. (3) 84,688
34,500 First Data Corp. 1,701,281
10,000 Inktomi Corp. (3) 887,500
75,000 Microsoft Corp. (3) 8,756,250
35,250 Oracle Corp. (3) 3,950,203
----------------
23,088,810
----------------
12
<PAGE>
- --------------------------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE ($)(1)
- --------------------------------------------------------------------------------
TRANSPORTATION (0.5%)
11,500 United Parcel Service, Inc. 793,500
----------------
UTILITIES (7.7%)
37,000 Global Crossing, Ltd. (3) 1,850,000
53,400 MCI WorldCom, Inc. (3) 2,833,537
14,500 Nextel Communications, Inc. (3) 1,495,312
45,000 Sprint Corp. 3,029,062
69,500 Vodafone Airtouch, A.D.R. 3,440,250
----------------
12,648,161
----------------
Total common stocks 159,704,364
----------------
(cost: $91,934,231)
SHORT-TERM SECURITIES (2.6%) (2)
4,239,000 Sit Money Market Fund, 5.35% (6) 4,239,000
----------------
(cost: $4,239,000)
Total investments in securities
(cost: $96,173,231) (7) $163,943,364
================
See accompanying notes to portfolios of investments on page 38.
13
<PAGE>
[PHOTO] SIT REGIONAL GROWTH FUND
SIX MONTHS ENDED DECEMBER 31, 1999
----------------------------------------------------------------------
EUGENE C. SIT, CFA, SENIOR PORTFOLIO MANAGER
The Sit Regional Growth Fund rose +7.7% over the second half of 1999, equal
to the +7.7% return for the S&P 500 Index.
The Fund's longer term record relative to the S&P 500 Index has been
negatively impacted by the underweighting of the very large companies outside of
the Fund's regional focus, as a select few stocks have disproportionately driven
the Index higher. Recent evidence supporting a broadening market, however, bodes
well for the Fund's prospects, given that the Fund's weighted market
capitalization remains well below that of the S&P 500 Index.
Strong earnings growth continues to be a primary focus of the portfolio. We
project earnings growth of +21.9% over the next year and +19.4% over the next
five years, which compares quite favorably to the +9.1% and +10.0% projected
growth rates for the S&P 500 Index over the same time periods. We believe that
the valuations of companies held in the Fund are highly attractive, especially
in light of superior relative growth rates. For example, the weighted
price-to-earnings ratio for companies held in the Fund is 30x (based on 2000
estimates), which is only slightly higher than the S&P 500 Index multiple of
29x. We believe this valuation is compelling, given that the projected earnings
growth rate for companies held in the Fund is twice that of the S&P 500 Index
over the next year.
As of December 31st, the Fund was 98% invested in equity securities, up from
95% six months ago. Significant sector weighting changes over the past six
months include increases in electronic technology and consumer services, while
retail trade and health technology had the largest decrease. Given the Fund's
emphasis on growth companies and the dynamic changes occurring within our
economy, the electronic technology and technology services sectors are the
heaviest weighted sectors within the Fund.
INVESTMENT OBJECTIVE AND STRATEGY
The objective of the Fund is to maximize long-term capital appreciation.
The Fund pursues this objective by investing primarily in common stocks of
companies with their headquarters in Minnesota, Iowa, Missouri, North Dakota,
South Dakota, Nebraska, Kansas, Wisconsin, Illinois, Michigan, Indiana, and
Ohio. During normal market conditions, at least 80% of the Fund's total assets
will be invested in such securities. The Fund emphasizes securities of companies
that the Adviser believes have potential for long-term capital growth.
PORTFOLIO SUMMARY
Net Asset Value 12/31/99: $14.19 Per Share
6/30/99: $13.17 Per Share
Total Net Assets: $ 7.9 Million
Weighted Average Market Cap: $22.5 Billion
PORTFOLIO STRUCTURE - BY SECTOR
(% OF TOTAL NET ASSETS)
[BAR CHART]
Electronic Technology 20.1
Technology Services 15.3
Finance 12.6
Retail Trade 10.4
Health Technology 8.0
Consumer Services 8.0
Producer Manufacturing 5.0
Utilities 4.7
Commercial Services 4.1
Sectors 3.0% and Under 9.9
Cash & Other Net Assets 1.9
14
<PAGE>
AVERAGE ANNUAL TOTAL RETURNS*
-----------------------------
SIT
REGIONAL S&P RUSSELL
GROWTH FUND 500 INDEX 3000 INDEX
----------- --------- ----------
3 Month** 14.99% 14.88% 16.22%
1 Year 15.55 21.04 20.89
Inception 19.25 24.75 22.51
(12/31/97)
CUMULATIVE TOTAL RETURNS*
-------------------------
SIT
REGIONAL S&P RUSSELL
GROWTH FUND 500 INDEX 3000 INDEX
----------- --------- ----------
1 Year 15.55% 21.04% 20.89%
Inception 42.19 55.63 50.08
(12/31/97)
*AS OF 12/31/99 **NOT ANNUALIZED.
- --------------------------------------------------------------------------------
PERFORMANCE FIGURES ARE HISTORICAL AND DO NOT GUARANTEE FUTURE RESULTS.
INVESTMENT RETURNS AND PRINCIPAL VALUE WILL VARY, AND YOU MAY HAVE A GAIN OR
LOSS WHEN YOU SELL SHARES. AVERAGE ANNUAL TOTAL RETURNS INCLUDE CHANGES IN SHARE
PRICE AS WELL AS REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAINS. MANAGEMENT
FEES AND ADMINISTRATIVE EXPENSES ARE INCLUDED IN THE FUND'S PERFORMANCE;
HOWEVER, FEES AND EXPENSES ARE NOT INCORPORATED IN THE S&P 500 INDEX AND THE
RUSSELL 3000 INDEX. LIPPER ANALYTICAL SERVICES, INC. IS A LARGE INDEPENDENT
EVALUATOR OF MUTUAL FUNDS.
GROWTH OF $10,000
[PLOT POINTS CHART]
The sum of $10,000 invested at inception (12/31/97) and held until 12/31/99
would have grown to $14,219 in the Fund, or $15,563 in the S&P 500 Index
assuming reinvestment of all dividends and capital gains.
TOP 10 HOLDINGS
* Motorola, Inc.
* Emmis Communications Corp.
* Sprint Corp.
* ADC Telecommunications, Inc.
* Tellabs, Inc.
* Great Plains Software, Inc.
* Gateway 2000, Inc.
* First Data Corp.
* Whittman-Hart, Inc.
* Northern Trust Corp.
Total Number of Holdings: 37
15
<PAGE>
SIT REGIONAL GROWTH FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE ($)(1)
- --------------------------------------------------------------------------------
COMMON STOCKS (98.1%) (2)
COMMERCIAL SERVICES (4.1%)
3,000 Deluxe Corp. $82,312
4,500 Ecolab, Inc. 176,062
1,500 Valassis Communications, Inc. (3) 63,375
----------------
321,749
----------------
CONSUMER DURABLES (2.0%)
2,500 Harley-Davidson, Inc. 160,156
----------------
CONSUMER SERVICES (8.0%)
3,500 Emmis Communications Corp. (3) 436,242
3,500 Tribune Co. 192,719
----------------
628,961
----------------
CONSUMER NON-DURABLES (1.3%)
3,000 General Mills, Inc. 107,250
----------------
ELECTRONIC TECHNOLOGY (20.1%)
5,000 ADC Telecommunications, Inc. (3) 362,812
4,000 Gateway 2000, Inc. (3) 288,250
3,000 Motorola, Inc. 441,750
4,500 National Computer Systems, Inc. 169,313
5,000 Tellabs, Inc. (3) 320,938
----------------
1,583,063
----------------
FINANCE (12.6%)
4,500 Aon Corp. 180,000
5,000 Northern Trust Corp. 265,000
4,000 Reliastar Financial Corp. 156,750
6,000 TCF Financial Corp. 149,250
6,000 Wells Fargo Co. 242,625
----------------
993,625
----------------
HEALTH SERVICES (2.2%)
3,637 Cardinal Health, Inc. 174,121
----------------
HEALTH TECHNOLOGY (8.0%)
2,500 Baxter International, Inc. 157,031
2,500 Eli Lilly & Co. 166,250
5,000 Medtronic, Inc. 182,188
5,000 Sybron Int'l Corp. (3) 123,438
----------------
628,907
----------------
PROCESS INDUSTRIES (3.0%)
2,000 H.B. Fuller Co. 111,875
3,500 Monsanto Co. 124,688
----------------
236,563
----------------
- --------------------------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE ($)(1)
- --------------------------------------------------------------------------------
PRODUCER MANUFACTURING (5.0%)
3,000 Illinois Tool Works, Inc. 202,687
2,000 Minnesota Mining & Mfg. Co. 195,750
----------------
398,437
----------------
RETAIL TRADE (10.4%)
3,500 Best Buy, Inc. (3) 175,656
3,500 Dayton Hudson Corp. 257,031
2,500 Kohl's Corp. (3) 180,469
7,000 Walgreen Co. 204,750
----------------
817,906
----------------
TECHNOLOGY SERVICES (15.3%)
7,500 Ceridian Corp. (3) 161,719
5,500 First Data Corp. 271,219
5,425 Fiserv, Inc. (3) 207,845
4,000 Great Plains Software, Inc. (3) 299,000
5,000 Whittman-Hart, Inc. (3) 268,125
----------------
1,207,908
----------------
TRANSPORTATION (1.4%)
2,800 C.H. Robinson Worldwide, Inc. 111,300
----------------
UTILITIES (4.7%)
5,500 Sprint Corp. 370,219
----------------
Total common stocks 7,740,165
----------------
(cost: $5,569,139)
SHORT-TERM SECURITIES (1.9%) (2)
147,000 Sit Money Market Fund, 5.35% (6) 147,000
----------------
(cost: $147,000)
Total investments in securities
(cost: $5,716,139) (7) $7,887,165
=================
See accompanying notes to portfolios of investments on page 38.
16
<PAGE>
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17
<PAGE>
[PHOTO] SIT MID CAP GROWTH FUND
SIX MONTHS ENDED DECEMBER 31, 1999
----------------------------------------------------------------------
EUGENE C. SIT, CFA, SENIOR PORTFOLIO MANAGER
ERIK S. ANDERSON, CFA, SENIOR PORTFOLIO MANAGER
The Sit Mid Cap Growth Fund returned +51.9% during the second half of 1999
and produced a calendar 1999 return of +70.7%. This compares favorably with the
+7.3% semi-annual return and +14.7% calendar return for the S&P MidCap 400
Index.
Over the past year, small and mid cap stocks posted improved returns relative
to larger cap issues, we attribute this outperformance to extreme undervaluation
and renewed investor confidence in the global economic environment. In addition,
the accelerating pace of change within technology has led to surging performance
of many dynamic small- and mid-sized technology companies. This sector's
performance has been strong enough to almost single-handedly drive most small
and mid cap indices higher. Indeed, the Fund's excess return over the S&P MidCap
400 Index is largely attributable to its overweighted position and favorable
stock selection within the electronic technology and technology services
sectors.
These sectors within the Fund posted a combined return of nearly 100% over
the past six months. Several large holdings, including JDS Uniphase, QUALCOMM,
Applied Micro Circuits and Check Point Software, posted returns of over +200%
for the period. Although such remarkable performance cannot be expected to
persist in the future, we believe the fundamentals underlying this strong stock
performance support continued overweighted position in the technology sectors.
Along with the Fund's positioning in other high growth sectors, technology
investments are a key element underlying the strong projected earnings growth
for companies held in the Fund, which we currently estimate at 37.0% for 2000
and 33.2% over the next five years. This compares quite favorably with the S&P
500 Index estimated 2000 earnings growth of 9.1% and 5-year projected growth
rate of 10.0%.
In terms of sector weightings, electronic technology, consumer services and
technology services showed the largest increases over the past six months. New
purchases included QUALCOMM, International Speedway, Siebel Systems and VERITAS
Software. Significant sector weighting decreases occurred in health technology,
retail trade and finance through the sale of Biogen, Boston Scientific, Elan,
Staples and Mutual Risk Management. As of December 31st, the Fund was 97%
invested in equity securities.
INVESTMENT OBJECTIVE AND STRATEGY
The objective of the Sit Mid Cap Growth Fund is to maximize long-term
capital appreciation. The Fund pursues this objective by investing primarily in
the common stocks of growth companies with a capitalization of $2 billion to $15
billion at the time of purchase.
PORTFOLIO SUMMARY
Net Asset Value 12/31/99: $ 20.69 Per Share
6/30/99: $ 14.54 Per Share
Total Net Assets: $510.5 Million
Weighted Average Market Cap: $ 16.3 Billion
TOTAL DIVIDEND: $ 1.23 PER SHARE
Long-Term Capital Gain: $ 1.23 Per Share
PORTFOLIO STRUCTURE - BY SECTOR
(% OF TOTAL NET ASSETS)
[BAR CHART]
Electronic Technology 37.9
Technology Services 23.6
Health Technology 7.8
Consumer Services 7.1
Finance 6.4
Utilities 4.8
Retail Trade 4.6
Sectors Under 2.0% 5.2
Cash & Other Net Assets 2.6
18
<PAGE>
AVERAGE ANNUAL TOTAL RETURNS*
-----------------------------
SIT S&P RUSSELL
MID CAP MIDCAP MID CAP
GROWTH FUND 400 INDEX GROWTH INDEX
----------- --------- ------------
3 Month** 45.95% 17.19% 39.47%
1 Year 70.65 14.72 51.29
5 Year 28.43 23.05 28.02
10 Year 19.60 17.32 18.96
Inception 20.78 18.77 --
(9/2/82)
CUMULATIVE TOTAL RETURNS*
-------------------------
SIT S&P RUSSELL
MID CAP MIDCAP MID CAP
GROWTH FUND 400 INDEX GROWTH INDEX
----------- --------- ------------
1 Year 70.65% 14.72% 51.29%
5 Year 249.46 182.14 243.93
10 Year 499.04 394.06 467.35
Inception 2542.12 1872.95 --
(9/2/82)
*AS OF 12/31/99 **NOT ANNUALIZED.
- --------------------------------------------------------------------------------
PERFORMANCE FIGURES ARE HISTORICAL AND DO NOT GUARANTEE FUTURE RESULTS.
INVESTMENT RETURNS AND PRINCIPAL VALUE WILL VARY, AND YOU MAY HAVE A GAIN OR
LOSS WHEN YOU SELL SHARES. AVERAGE ANNUAL TOTAL RETURNS INCLUDE CHANGES IN SHARE
PRICE AS WELL AS REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAINS. MANAGEMENT
FEES AND ADMINISTRATIVE EXPENSES ARE INCLUDED IN THE FUND'S PERFORMANCE;
HOWEVER, FEES AND EXPENSES ARE NOT INCORPORATED IN THE RUSSELL MID CAP GROWTH
INDEX AND THE S&P MIDCAP 400 INDEX.
GROWTH OF $10,000
[PLOT POINTS CHART]
The sum of $10,000 invested at inception (12/31/82) and held until 12/31/99
would have grown to $264,212 in the Fund, or $197,295 in the S&P MidCap 400
Index assuming reinvestment of all dividends and capital gains.
TOP 10 HOLDINGS
* JDS Uniphase Corp.
* QUALCOMM, Inc.
* Applied Micro Circuits Corp.
* Check Point Software Tech., Ltd.
* Xilinx, Inc.
* Legato Systems, Inc.
* Dendrite International, Inc.
* Vitesse Semiconductor Corp.
* Biogen, Inc.
* AMFM, Inc.
Total Number of Holdings: 73
19
<PAGE>
SIT MID CAP GROWTH FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE ($)(1)
- --------------------------------------------------------------------------------
COMMON STOCKS (97.4%) (2)
COMMERCIAL SERVICES (0.4%)
23,000 Omnicom Group, Inc. $2,300,000
-----------------
CONSUMER DURABLES (1.3%)
26,800 Electronic Arts, Inc. (3) 2,251,200
65,800 Harley-Davidson, Inc. 4,215,313
-----------------
6,466,513
-----------------
CONSUMER NON-DURABLES (1.2%)
114,800 Dial Corp. 2,791,075
67,700 Estee Lauder Companies, Inc. 3,414,619
-----------------
6,205,694
-----------------
CONSUMER SERVICES (7.1%)
143,700 AMFM, Inc. (3) 11,244,525
133,500 Adelphia Communications Corp. (3) 8,760,937
35,700 BEA Systems, Inc. (3) 2,496,769
30,100 EchoStar Communications Corp. (3) 2,934,750
111,000 International Speedway Corp. 5,591,625
34,800 UnitedGlobalCom, Inc. (3) 2,457,750
24,900 Univision Communications, Inc. (3) 2,544,469
-----------------
36,030,825
-----------------
ELECTRONIC TECHNOLOGY (37.9%)
117,200 ADC Telecommunications, Inc. (3) 8,504,325
58,800 ASM Lithography Hldg., A.D.R. (3) 6,688,500
85,100 Analog Devices, Inc. (3) 7,914,300
157,000 Applied Micro Circuits Corp. (3) 19,978,250
75,200 Asyst Technologies, Inc. (3) 4,930,300
16,900 Brocade Communications Systems,
Inc. (3) 2,991,300
56,900 Comverse Technology, Inc. (3) 8,236,275
189,000 JDS Uniphase Corp. (3) 30,488,062
145,400 Jabil Circuit, Inc. (3) 10,614,200
93,500 Lexmark International Group, Inc. (3) 8,461,750
76,200 Linear Technology Corp. 5,453,062
114,700 Maxim Integrated Products, Inc. (3) 5,412,406
29,100 Network Appliance, Inc. (3) 2,417,119
1,200 PE Corp-PE Biosystems Group 144,375
135,200 QUALCOMM, Inc. (3) 23,812,100
93,150 Symbol Technologies, Inc. 5,920,847
148,600 Teradyne, Inc. (3) 9,807,600
254,600 Vitesse Semiconductor Corp. (3) 13,350,587
408,800 Xilinx, Inc. (3) 18,587,625
-----------------
193,712,983
-----------------
- --------------------------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE ($)(1)
- --------------------------------------------------------------------------------
ENERGY MINERALS (1.9%)
88,200 Devon Energy Corp. 2,899,575
290,500 EOG Resources, Inc. 5,101,906
66,700 Newfield Exploration Co. (3) 1,784,225
-----------------
9,785,706
-----------------
FINANCE (6.4%)
283,300 Ace, Ltd. 4,727,569
110,500 Aon Corp. 4,420,000
70,000 Kansas City Southern Industries, Inc. 5,223,750
125,200 ReliaStar Financial Corp. 4,906,275
84,400 T. Rowe Price & Associates 3,117,525
230,200 TCF Financial Corp. 5,726,225
27,300 The Goldman Sachs Group, Inc. 2,571,319
32,900 Zions Bancorporation 1,947,269
-----------------
32,639,932
-----------------
HEALTH SERVICES (0.4%)
82,300 IMS Health, Inc. 2,237,531
-----------------
HEALTH TECHNOLOGY (7.8%)
155,600 Biogen, Inc. (3) 13,148,200
166,800 Elan Corp., A.D.R. (3) 4,920,600
87,400 Immunex Corp. (3) 9,570,300
60,200 MedImmune, Inc. (3) 9,985,675
37,600 VISX, Inc. (3) 1,945,800
-----------------
39,570,575
-----------------
RETAIL TRADE (4.6%)
84,100 Bed Bath & Beyond, Inc. (3) 2,922,475
90,500 Best Buy Co., Inc. (3) 4,541,969
135,400 Kohl's Corp. (3) 9,774,187
62,100 Tandy Corp. 3,054,544
36,700 Tiffany & Co. 3,275,475
-----------------
23,568,650
-----------------
TECHNOLOGY SERVICES (23.6%)
96,800 BMC Software, Inc. (3) 7,737,950
225,000 Ceridian Corp. (3) 4,851,563
95,700 Check Point Software Tech., Ltd. (3) 19,020,375
88,800 Computer Sciences Corp. (3) 8,402,700
404,700 Dendrite International, Inc. (3) 13,709,212
16,900 DoubleClick, Inc. (3) 4,276,756
246,075 Fiserv, Inc. (3) 9,427,748
7,500 I2 Technologies, Inc. (3) 1,462,500
38,300 InfoSpace.com, Inc. (3) 8,196,200
20
<PAGE>
- --------------------------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE ($)(1)
- --------------------------------------------------------------------------------
103,400 Inktomi Corp. (3) 9,176,750
263,700 Legato Systems, Inc. (3) 18,145,856
10,300 RealNetworks, Inc. (3) 1,239,219
56,900 Siebel Systems, Inc. (3) 4,779,600
18,800 Vignette Corp. (3) 3,064,400
8,900 VeriSign, Inc. (3) 1,699,344
36,700 VERITAS Software Corp. (3) 5,252,688
-----------------
120,442,861
-----------------
UTILITIES (4.8%)
71,000 Allegiance Telecom, Inc. (3) 6,549,750
135,400 Global TeleSystems Group, Inc. (3) 4,688,225
101,100 NEXTLINK Communications, Inc. (3) 8,397,619
37,100 Telephone and Data Systems, Inc. 4,674,600
-----------------
24,310,194
-----------------
Total common stocks 497,271,464
-----------------
(cost: $248,259,266)
SHORT-TERM SECURITIES (2.2%) (2)
931,000 American Express Credit Corp.,
1.50%, 1/3/00 930,922
10,547,000 Sit Money Market Fund, 5.35% (6) 10,547,000
-----------------
Total short-term securities 11,477,922
-----------------
(cost: $11,477,922)
Total investments in securities
(cost: $259,737,188) (7) $508,749,386
=================
See accompanying notes to portfolios of investments on page 38.
21
<PAGE>
[PHOTO] SIT INTERNATIONAL GROWTH FUND REVIEW
SIX MONTHS ENDED DECEMBER 31, 1999
----------------------------------------------------------------------
SENIOR PORTFOLIO MANAGERS
EUGENE C. SIT, CFA * ANDREW B. KIM, CFA * ROGER J. SIT
The Sit International Growth Fund gained 48.2% for the six months ended
December 31, 1999 compared with the MSCI EAFE Index return of +22.1% and the
Lipper International Fund Index return of +28.9%. The Fund's return for 1999 was
+50.8% compared with gains of 27.0% for the MSCI Index and 37.8% for the Lipper
Index. The Fund's outperformance had been primarily led by the portfolio's
Japanese and European holdings. The sector leaders continued to be information
technology services, telecommunications, technology and retailers.
The returns for the Fund's European holdings increased substantially in the
December quarter, up 43%, after being up only 1% in the September quarter.
European markets reacted favorably over the last three months, as investor
sentiment has become more positive. Structural and financial reforms are being
proposed and implemented. Merger and acquisition activity more than doubled in
1999 as European companies sought pan-European alliances and cross border deals
with rivals. Consolidation in the telecommunications and financial service
sectors is expected to continue. Lastly, companies are benefiting from
increasing exports, supported by the weak euro, as global growth accelerates. We
believe European equities will continue to outperform as economies improve,
corporate restructuring and consolidation continues, and Europe closes the
technology gap with the U.S.
The Fund's Japanese holdings continued to perform strongly, up 36.9% in the
December quarter, on top of the 36.8% in the preceding quarter. Foreign and
domestic investors have taken an optimistic view as corporate restructuring
gathers speed. As with Europe, focus is on the global technology boom
concentrated on telecommunications, Internet and service-related industries. Our
Japanese portfolio has greatly benefited by the price appreciation in these
sectors. Our non-Japan Asia investments remain directed toward semiconductor and
contract manufacturers.
We expect to maintain the Fund's European weighting in the mid 50% area and
the Japan weighting around 30% as we begin the new calendar year. We believe
capital flows will favor these markets. We also intend to retain our sector
preferences in those industries that have long-term growth opportunities:
technology, telecommunications and service.
INVESTMENT OBJECTIVE AND STRATEGY
The objective of the Sit International Growth Fund is to achieve long-term
growth of capital by investing in equity securities of issuers domiciled outside
the United States. The Fund's investment objective reflects the belief that
long-term investment planning should include the investment opportunities that
exist outside the U.S.
The Fund selects its investments based on the characteristics of the
particular markets and economies of the countries in which it invests. Emphasis
is placed on identifying securities of companies believed to be undervalued in
the marketplace in relation to factors such as the company's revenues, earnings,
assets and long-term competitive position which over time will enhance the
equity value of the company.
PORTFOLIO SUMMARY
Net Asset Value 12/31/99: $ 26.20 Per Share
6/30/99: $ 18.77 Per Share
Total Net Assets: $136.2 Million
Weighted Average Market Cap: $ 81.7 Billion
TOTAL DIVIDEND: $ 1.51 PER SHARE
Long-Term Capital Gain: $ 1.28 Per Share
Ordinary Income: $ 0.23 Per Share
PORTFOLIO STRUCTURE - BY REGION
(% OF TOTAL NET ASSETS)
[BAR CHART]
Sit Int'l Morgan Stanley
Growth Fund EAFE Index
Europe Other 30.9 26.5
Japan 29.0 27.4
France, Germany, UK 23.1 40.0
Pacific Basin 9.5 6.1
North America 2.3 0.0
Africa/Middle East 1.2 0.0
Latin America 0.5 0.0
Cash & Other Net Assets 3.5 0.0
22
<PAGE>
AVERAGE ANNUAL TOTAL RETURNS*
-----------------------------
SIT MORGAN STANLEY LIPPER
INTERNATIONAL CAPITAL INT'L INT'L
GROWTH FUND EAFE INDEX INDEX
----------- ---------- -----
3 Month** 38.12% 16.99% 24.73%
1 Year 50.77 26.96 37.83
3 Year 23.41 15.74 18.53
5 Year 17.79 12.83 15.96
Inception 16.52 10.73 13.66
(11/1/91)
CUMULATIVE TOTAL RETURNS*
-------------------------
SIT MORGAN STANLEY LIPPER
INTERNATIONAL CAPITAL INT'L INT'L
GROWTH FUND EAFE INDEX INDEX
----------- ---------- -----
1 Year 50.77% 26.96% 37.83%
3 Year 87.97 55.06 66.54
5 Year 126.77 82.87 109.67
Inception 248.91 130.05 184.69
(11/1/91)
*AS OF 12/31/99 **NOT ANNUALIZED.
- --------------------------------------------------------------------------------
PERFORMANCE FIGURES ARE HISTORICAL AND DO NOT GUARANTEE FUTURE RESULTS.
INVESTMENT RETURNS AND PRINCIPAL VALUE WILL VARY, AND YOU MAY HAVE A GAIN OR
LOSS WHEN YOU SELL SHARES. AVERAGE ANNUAL TOTAL RETURNS INCLUDE CHANGES IN SHARE
PRICE AS WELL AS REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAINS. MANAGEMENT
FEES AND ADMINISTRATIVE EXPENSES ARE INCLUDED IN THE FUND'S PERFORMANCE;
HOWEVER, FEES AND EXPENSES ARE NOT INCORPORATED IN THE MORGAN STANLEY CAPITAL
INTERNATIONAL EAFE (EUROPE, AUSTRALIA, FAR EAST) INDEX. THE LIPPER AVERAGES AND
INDICES ARE OBTAINED FROM LIPPER ANALYTICAL SERVICES, INC., A LARGE INDEPENDENT
EVALUATOR OF MUTUAL FUNDS.
GROWTH OF $10,000
[PLOT POINTS CHART]
The sum of $10,000 invested at inception (11/1/91) and held until 12/31/99 would
have grown to $34,891 in the Fund, or $23,005 in the Morgan Stanley EAFE Index
assuming reinvestment of all dividends and capital gains.
PORTFOLIO STRUCTURE - BY REGION
(% OF TOTAL NET ASSETS)
[BAR CHART]
Utilities 19.9
Electronic Technology 18.8
Finance 18.5
Technology Services 15.9
Retail Trade 6.8
Health Technology 5.2
Producer Manufacturing 4.8
Sectors Under 3.0% 6.6
Cash & Other Net Assets 3.5
23
<PAGE>
SIT INTERNATIONAL GROWTH FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1999 (UNAUDITED)
TOP 10 HOLDINGS
* Nokia Corp., A.D.R.
* NTT Mobile Communications Network, Inc.
* Seven Eleven Japan
* NTT Data Corp.
* Mannesmann, A.G.
* CMG, p.l.c.
* Orix Corp.
* Misys, p.l.c.
* Telefonica, S.A.
* Tietoenator Corp.
Total Number of Holdings: 81
- --------------------------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE ($)(1)
- --------------------------------------------------------------------------------
COMMON STOCKS (95.8%)(2)
AFRICA/ MIDDLE EAST (1.2%)
ISRAEL (0.7%)
6,400 Comverse Technology, Inc. (Electronic
Technology) (3) $926,400
----------------
SOUTH AFRICA (0.5%)
242,280 Old Mutual, p.l.c. (Finance) (3) 659,433
----------------
ASIA (37.8%)
AUSTRALIA (1.3%)
131,007 Colonial, Ltd. (Finance) (3) 585,702
88,900 Telstra Corp., Ltd. (Utilities) 483,245
202,040 Telstra Corp., Ltd. Installment
Receipts (Utilities) 712,273
----------------
1,781,220
----------------
HONG KONG (2.4%)
63,000 Cheung Kong Hldgs., Ltd. (Industrial
Services) 800,315
140,000 China Telecom, Ltd. (Utilities) 875,281
226,000 Citic Pacific, Ltd. (Utilities) 850,389
57,600 HSBC Holdings, p.l.c. (Finance) 807,667
----------------
3,333,652
----------------
JAPAN (28.3%)
27,200 AFLAC, Inc. (Finance) 1,283,500
223,000 Asahi Bank, Ltd. (Finance) 1,375,061
59 East Japan Railway Co. (Transportation) 318,185
240 NTT Data Corp. (Tech. Services) 5,520,211
180 NTT Mobile Communications Network,
Inc. (Ord.) (Utilities) 6,923,755
29,000 Nihon Unisys, Ltd. (Tech. Services) 999,119
102 Nippon Telephone (Utilities) 1,747,088
18,800 Orix Corp. (Finance) 4,235,842
14,000 Ryohin Keikaku Co., Ltd. (Retail Trade) 2,810,414
- --------------------------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE ($)(1)
- --------------------------------------------------------------------------------
36,000 Seven Eleven Japan (Retail Trade) 5,708,134
1,800 Softbank Corp. (Technology Services) 1,723,011
50,000 Takeda Chemical Industries
(Health Technology) 2,471,371
128,000 The Fuji Bank, Ltd. (Finance) 1,244,044
172,000 The Nikko Securities Co., Ltd. (Finance) 2,176,725
----------------
38,536,460
----------------
TAIWAN (1.5%)
172,200 Hon Hai Precision Industry (Electronic
Technology) (3) 1,283,887
15,700 Taiwan Semiconductor Mfg. Co.,
A.D.R. (Electronic Technology) (3) 706,500
----------------
1,990,387
----------------
SINGAPORE (2.2%)
48,846 DBS Group Holdings, Ltd. (Finance) 800,658
167,000 Natsteel Electronics, Ltd. (Electronic
Technology) 882,378
109,000 Venture Mfg., Ltd. (Electronic Tech.) 1,250,015
----------------
2,933,051
----------------
SOUTH KOREA (1.5%)
8,764 Samsung Electronics (Electronic Tech.) 2,053,037
----------------
THAILAND (0.6%)
50,500 Advanced Info Services (Utilities) 847,365
----------------
EUROPE (54.0%)
BELGIUM (0.6%)
17,600 UCB, S.A. (Health Technology) 763,173
----------------
FINLAND (7.8%)
40,900 Nokia Corp., A.D.R. (Electronic Tech.) 7,771,000
46,360 Tietoenator Corp. (Technology Services) 2,895,159
----------------
10,666,159
----------------
FRANCE (7.4%)
14,520 AXA-UAP (Finance) 2,024,138
38,200 Alstom, A.D.R. (Producer Mfg.) 1,273,587
3,894 Carrefour, S.A. (Retail Trade) 718,161
9,430 France Telecom, S.A. (Utilities) 1,247,136
6,560 Groupe Danone (Cons. Non-Durables) 1,546,169
1,615 L'oreal Co. (Consumer Non-Durables) 1,295,674
12,800 STMicroelectronics, A.D.R. (Electronic
Technology) 1,938,400
----------------
10,043,265
----------------
GERMANY (7.0%)
3,397 Allianz, A.G. (Finance) 1,141,113
21,930 Deutsche Telekom, A.G. (Utilities) 1,561,692
10,350 Epcos, A.G. (Electronic Technology) (3) 776,666
21,677 Mannesmann, A.G. (Producer Mfg.) 5,284,005
1,250 SAP Preferred (Technology Services) 752,920
----------------
9,516,396
----------------
24
<PAGE>
- --------------------------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE ($)(1)
- --------------------------------------------------------------------------------
IRELAND (1.3%)
136,800 Bank of Ireland (Finance) 1,088,556
23,400 Elan Corp., p.l.c., A.D.R. (Health
Technology) (3) 690,300
----------------
1,778,856
----------------
ITALY (5.2%)
224,300 Banca Fideuram (Finance) 2,656,892
106,000 Enel Spa (Utilities) (3) 444,157
123,000 Telecom Italia (Utilities) 1,734,485
203,200 Telecom Italia Mobile Spa (Utilities) 2,269,826
----------------
7,105,360
----------------
NETHERLANDS (8.2%)
15,500 ASM Lithography Holding, A.D.R.
(Electronic Technology) (3) 1,763,125
13,940 Aegon N.V., A.D.R. (Finance) 1,331,230
60,360 CMG, p.l.c. (Technology Services) 4,492,944
8,000 Equant, A.D.R. (Technology Services) 896,000
22,640 Libertel N.V. (Elec. Technology) (3) 592,908
7,900 Royal Dutch Petroleum, A.D.R.
(Energy Minerals) 477,456
8,040 United Pan-Europe Communications
N.V. (Consumer Services) (3) 1,028,483
18,064 Wolters Kluwer (Commercial Svcs.) 611,351
----------------
11,193,497
----------------
SPAIN (3.7%)
52,640 Argentaria (Finance) 1,236,995
5,000 Jazztel, A.D.R. (Electronic Tech.) (3) 325,625
126,335 Telefonica, S.A. (Utilities) 3,155,824
6,400 Terra Networks, S.A. (Technology
Services) (3) 349,717
----------------
5,068,161
----------------
SWEDEN (1.7%)
18,200 L.M. Ericsson Telephone Co., A.D.R.
(Electronic Technology) 1,195,513
60,800 Securitas AB (Commercial Svcs.) 1,100,517
----------------
2,296,030
----------------
SWITZERLAND (2.4%)
675 Novartis, A.G. (Health Technology) 991,114
50 Roche Holdings, A.G. (Health Tech.) 593,481
2,870 Zurich Allied, AG (Finance) 1,636,601
----------------
3,221,196
----------------
UNITED KINGDOM (8.7%)
21,454 AstraZeneca Group, p.l.c. (Health
Technology) 907,786
19,200 BP Amoco, A.D.R. (Energy Minerals) 1,138,800
52,800 British Telecom, p.l.c. (Utilities) 1,290,405
72,126 Lloyds TSB Group, p.l.c. (Finance) 902,332
260,535 Misys, p.l.c. (Technology Services) 4,061,127
23,305 Pearson, p.l.c. (Consumer Services) 754,397
- --------------------------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE ($)(1)
- --------------------------------------------------------------------------------
9,600 SmithKline Beecham, p.l.c., A.D.R.
(Health Technology) 618,600
58,800 Thus, p.l.c. (Utilities) (3) 368,521
38,000 Vodafone Airtouch, A.D.R. (Utilities) 1,881,000
----------------
11,922,968
----------------
LATIN AMERICA (0.5%)
MEXICO (0.5%)
5,700 Telefonos de Mexico S.A., A.D.R.
(Utilities) 641,250
----------------
NORTH AMERICA (2.3%)
CANADA (2.3%)
6,600 Nortel Networks Corp. (Electronic
Technology) 666,600
15,900 PMC-Sierra, Inc., A.D.R. (Electronic
Technology) (3) 2,548,969
----------------
3,215,569
----------------
Total common stocks 130,492,885
----------------
(cost: $55,551,487)
STRUCTURED NOTE (0.7%) (2)
371 Sony Corp. (Currency Protected,
Equity-Linked), 7.50%, 5/8/00 (8) 935,634
----------------
(cost: $717,236)
SHORT TERM SECURITIES (5.5%) (2)
7,427,000 Sit Money Market Fund, 5.35% (6) 7,427,000
----------------
(cost: $7,427,000)
Total investments in securities
(cost: $66,695,723) (7) $138,855,519
================
See accompanying notes to portfolios of investments on page 38.
25
<PAGE>
[PHOTO] SIT SMALL CAP GROWTH FUND
SIX MONTHS ENDED DECEMBER 31, 1999
----------------------------------------------------------------------
EUGENE C. SIT, CFA, SENIOR PORTFOLIO MANAGER
The Sit Small Cap Growth Fund returned +83.9% over the last six months and
+108.6% for the calendar year. This compares favorably to the six-month return
of +11.0% and the 1999 return of +21.3% for the Russell 2000 Index. The Fund's
annual return ranked in the 12th percentile of the 263 small cap growth funds
ranked by Lipper Analytical Services. For the 3-year and 5-year periods, the
Fund ranked in the 25th percentile out of 165 funds and 9th percentile out of 91
funds, respectively.
In 1999, small stocks rebounded after three years of underperformance
relative to larger capitalization issues. Given that there is still a
significant valuation gap between large and small cap stocks, we believe
smaller-capitalization outperformance may be in the early stages. The technology
sector remains a key driver of small stock performance, as innovation within the
"new economy" is opening up investment opportunities in dynamic industries such
as telecommunications, the Internet and biotechnology. A significant
overweighting in the technology sector was a key factor underlying the Fund's
strong performance relative to the Russell 2000 Index. We estimate that over the
past six months, the Fund's positions in the electronic technology and
technology services sectors returned +152.0% and +103.7%, respectively, compared
to the +59.4% and +86.5% return for the same sectors within the Russell 2000
Index. Four of the Fund's largest positions, including JDS Uniphase, Applied
Micro Circuits, SDL and Sapient, posted six-month returns in excess of 200%.
Given the dynamic investment opportunities within the sector, the Fund will
continue to hold a significantly overweighted position across many different
industries within technology.
We believe the equity market's focus on strong earnings growth has been a key
element behind the Fund's performance. The projected earnings growth rates for
companies held in the Fund is 37.7% for 2000 and 35.6% over the next five years.
This compares to a growth rate of 9.1% and 10.0% over the next 1-year and 5-year
periods, respectively, for the S&P 500.
The most significant sector weighting increases occurred in the electronic
technology and health technology sectors. Weightings decreased in the finance
and utilities sectors. As of December 31, 1999, the Fund was 95.5% invested in
equity securities.
INVESTMENT OBJECTIVE AND STRATEGY
The objective of the Sit Small Cap Growth Fund is to maximize long-term
capital appreciation. The Fund pursues this objective by investing primarily in
the common stocks of small growth companies that have a capitalization of $2.5
billion or less at the time of purchase.
In addition, the Fund may purchase securities convertible into common
stocks, preferred stocks and warrants. The Fund may invest in securities not
listed on a national securities exchange but generally such securities will have
an established over-the-counter market.
PORTFOLIO SUMMARY
Net Asset Value 12/31/99: $ 33.61 Per Share
6/30/99: $ 18.28 Per Share
Total Net Assets: $102.9 Million
Weighted Average Market Cap: $ 6.2 Billion
PORTFOLIO STRUCTURE - BY SECTOR
(% OF TOTAL NET ASSETS)
[BAR CHART]
Electronic Technology 34.1
Technology Services 21.2
Health Technology 13.9
Finance 6.5
Consumer Services 5.0
Utilities 4.8
Sectors Under 3.0% 10.0
Cash & Other Net Assets 4.5
26
<PAGE>
AVERAGE ANNUAL TOTAL RETURNS*
-----------------------------
SIT RUSSELL
SMALL CAP RUSSELL 2000 2000
GROWTH FUND INDEX GROWTH INDEX
----------- ------------ ------------
3 Month** 64.59% 18.44% 33.39%
1 Year 108.63 21.26 43.10
3 Year 31.80 13.08 17.84
5 Year 31.99 16.69 18.99
Inception 31.26 16.00 18.85
(7/1/94)
CUMULATIVE TOTAL RETURNS*
-------------------------
SIT RUSSELL
SMALL CAP RUSSELL 2000 2000
GROWTH FUND INDEX GROWTH INDEX
----------- ------------ ------------
1 Year 108.63% 21.26% 43.10%
3 Year 128.96 44.60 63.62
5 Year 300.57 116.37 138.55
Inception 346.92 126.34 158.87
(7/1/94)
*AS OF 12/31/99 **NOT ANNUALIZED.
- --------------------------------------------------------------------------------
PERFORMANCE FIGURES ARE HISTORICAL AND DO NOT GUARANTEE FUTURE RESULTS.
INVESTMENT RETURNS AND PRINCIPAL VALUE WILL VARY, AND YOU MAY HAVE A GAIN OR
LOSS WHEN YOU SELL SHARES. AVERAGE ANNUAL TOTAL RETURNS INCLUDE CHANGES IN SHARE
PRICE AS WELL AS REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAINS. MANAGEMENT
FEES AND ADMINISTRATIVE EXPENSES ARE INCLUDED IN THE FUND'S PERFORMANCE;
HOWEVER, FEES AND EXPENSES ARE NOT INCORPORATED IN THE RUSSELL 2000 INDEX.
LIPPER ANALYTICAL SERVICES, INC. IS A LARGE INDEPENDENT EVALUATOR OF MUTUAL
FUNDS.
GROWTH OF $10,000
[PLOT POINTS CHART]
The sum of $10,000 invested at inception (7/1/94) and held until 12/31/99 would
have grown to $44,692 in the Fund, or $22,634 in the Russell 2000 Index assuming
reinvestment of all dividends and capital gains.
TOP 10 HOLDINGS
* JDS Uniphase Corp.
* Applied Micro Circuits Corp.
* Sapient Corp.
* PMC-Sierra, Inc.
* Legato Systems, Inc.
* SDL, Inc.
* Emmis Communications Corp.
* RSA Security, Inc.
* Dendrite International, Inc.
* Progenics Pharmaceuticals, Inc.
Total Number of Holdings: 70
27
<PAGE>
SIT SMALL CAP GROWTH FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE ($)(1)
- --------------------------------------------------------------------------------
COMMON STOCKS (95.5%) (2)
COMMERCIAL SERVICES (1.8%)
12,000 CBT Group, A.D.R. (3) $402,000
55,000 Profit Recovery Group, Inc. (3) 1,460,937
---------------
1,862,937
---------------
CONSUMER SERVICES (5.0%)
28,900 Emmis Communications Corp. (3) 3,602,114
21,500 Jones Intercable, Inc. (3) 1,490,219
---------------
5,092,333
---------------
ELECTRONIC TECHNOLOGY (34.1%)
38,500 Applied Micro Circuits Corp. (3) 4,899,125
33,500 Asyst Technologies, Inc. (3) 2,196,344
43,500 Burr-Brown Corp. (3) 1,571,437
13,500 Carrier Access Corp. (3) 908,719
6,100 Cobalt Networks, Inc. (3) 661,088
3,000 Extreme Networks, Inc. (3) 250,500
45,000 Flextronics International, Ltd. (3) 2,070,000
11,500 Gilat Satellite Networks, Ltd. (3) 1,365,625
39,000 JDS Uniphase Corp. (3) 6,291,187
3,500 Juniper Networks, Inc. (3) 1,190,000
27,500 PMC-Sierra, Inc. (3) 4,408,594
25,400 RF Micro Devices, Inc. (3) 1,738,312
38,000 RSA Security, Inc. (3) 2,945,000
18,000 SDL, Inc. (3) 3,924,000
2,000 Sycamore Networks, Inc. (3) 616,000
---------------
35,035,931
---------------
ENERGY MINERALS (1.3%)
50,500 Newfield Exploration Co. (3) 1,350,875
---------------
FINANCE (6.5%)
30,000 Arthur J. Gallagher & Co. 1,942,500
38,500 Federated Investors, Inc. 772,406
10,000 InsWeb Corp. (3) 255,625
26,500 Legg Mason, Inc. 960,625
29,000 Protective Life Corp. 922,562
39,325 Queens County Bancorp, Inc. 1,066,691
94,000 Scottish Annuity & Life Hldgs., Ltd. 769,625
---------------
6,690,034
---------------
HEALTH SERVICES (1.1%)
11,500 Allscripts, Inc. (3) 506,000
35,500 Stericycle, Inc. (3) 667,844
---------------
1,173,844
---------------
HEALTH TECHNOLOGY (13.9%)
9,000 Affymetrix, Inc. (3) 1,527,187
14,500 Alexion Pharmaceuticals, Inc. (3) 436,813
71,500 Biosite Diagnostics, Inc. (3) 1,144,000
5,500 Celera Genomics (3) 819,500
39,000 Guilford Pharmaceuticals, Inc. (3) 663,000
- --------------------------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE ($)(1)
- --------------------------------------------------------------------------------
50,000 I-Stat Corp. (3) 725,000
20,000 IDEC Pharmaceuticals Corp. (3) 1,965,000
10,500 Maxygen, Inc. (3) 745,500
4,000 Millenium Pharmaceuticals, Inc. (3) 488,000
9,500 Novoste Corp. (3) 156,750
47,500 Progenics Pharmaceuticals, Inc. (3) 2,321,562
17,100 Protein Design Labs, Inc. (3) 1,197,000
13,000 QLT PhotoTherapeutics, Inc. (3) 763,750
6,500 Sepracor, Inc. (3) 644,719
30,000 Ventana Medical Systems, Inc. (3) 746,250
---------------
14,344,031
---------------
PROCESS INDUSTRIES (0.9%)
23,500 Millipore Corp. 907,688
---------------
PRODUCER MANUFACTURING (0.6%)
11,500 C & D Technologies, Inc. 488,750
5,300 Kennametal, Inc. 178,213
---------------
666,963
---------------
RETAIL TRADE (2.2%)
10,000 AnnTaylor Stores Corp. (3) 344,375
48,700 Cost Plus, Inc. (3) 1,734,937
13,000 PlanetRX.Com, Inc. (3) 188,500
---------------
2,267,812
---------------
TECHNOLOGY SERVICES (21.2%)
22,000 BISYS Group, Inc. (3) 1,435,500
3,500 Business Objects S.A., A.D.R. (3) 467,688
11,500 Cais Internet, Inc. (3) 408,250
79,250 Dendrite International, Inc. (3) 2,684,594
20,000 Great Plains Software, Inc. (3) 1,495,000
20,000 Inktomi Corp. (3) 1,775,000
3,000 Internap Network Services Corp. (3) 519,000
60,000 Legato Systems, Inc. (3) 4,128,750
9,000 Portal Software, Inc. (3) 925,875
12,932 PSINet, Inc. (3) 798,551
34,000 Sapient Corp. (3) 4,791,875
6,000 VerticalNet, Inc. (3) 984,000
26,000 Whittman-Hart, Inc. (3) 1,394,250
---------------
21,808,333
---------------
TRANSPORTATION (2.1%)
25,000 C.H. Robinson Worldwide, Inc. 993,750
26,500 Eagle USA Airfreight, Inc. (3) 1,142,812
---------------
2,136,562
---------------
UTILITIES (4.8%)
27,500 Adelphia Business Solutions, Inc. (3) 1,320,000
24,000 Nextlink Communications (3) 1,993,500
10,500 Rhythms NetConnections, Inc. (3) 325,500
9,000 Rural Cellular Corp. (3) 814,500
11,500 TeleCorp PCS, Inc. (3) 437,000
---------------
4,890,500
---------------
28
<PAGE>
- --------------------------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE ($)(1)
- --------------------------------------------------------------------------------
Total common stocks 98,227,843
---------------
(cost: $42,408,254)
SHORT-TERM SECURITIES (4.6%) (2)
4,719,000 Sit Money Market Fund, 5.35% (6) 4,719,000
---------------
(cost: $4,719,000)
Total investments in securities
(cost: $47,127,254) (7) $102,946,843
===============
See accompanying notes to portfolios of investments on page 38.
29
<PAGE>
[PHOTO] SIT SCIENCE AND TECHNOLOGY GROWTH FUND
SIX MONTHS ENDED DECEMBER 31, 1999
----------------------------------------------------------------------
EUGENE C. SIT, CFA, SENIOR PORTFOLIO MANAGER
The Sit Science and Technology Growth Fund returned +69.0% over the last six
months and +86.0% for calendar year 1999. The S&P 500 Index return was +7.7% and
+21.0% over the past six-month and twelve-month periods, respectively. The
six-month return for the Pacific Stock Exchange (PSE) Technology 100 Index was
+62.0%, while the 1999 calendar year return was +116.4%.
Science and technology stocks posted excellent returns in 1999, driven by the
remarkable surge in technological innovation combined with accelerating
worldwide spending on information technology. Enthusiasm for technology was
broad-based. The explosive growth in e-commerce, rapid upgrading of
telecommunications and networking infrastructure, the cyclical recovery of the
semiconductor industry, and rapid new product development occurring within
biotechnology are all examples of this enthusiasm. We continue to believe that
the technology boom is in its early stages, with continued innovation and strong
global demand for productivity-enhancing technology providing strong underlying
support for companies within the Fund.
Returns in the electronic technology sector were particularly strong over the
last six months, producing an estimated return of nearly +85% over the period.
SDL, Applied Micro Circuits, QUALCOMM, and PMC-Sierra were among the strongest
performers in the electronic technology sector, increasing 327%, 209%, 395%, and
172%, respectively. Biotechnology companies (Protein Design, up 215%, and IDEC
Pharmaceuticals, up 155%) and software providers (Checkpoint Software, up 271%
and I2 Technologies, up 353%) were other important contributors to the Fund's
semi-annual performance.
There were only minor changes in sector weightings over the past six months,
with a modest increase in the electronic technology and technology services
sectors, and a slight decrease in the health care sector weighting. Although our
commitment to the health care sector has been a detriment to returns since the
inception of the Fund, particularly relative to purer technology indices like
the PSE Technology 100 Index, we believe that compelling fundamentals and
favorable valuations exist within this sector. As of December 31st, the Fund was
97% invested in equity securities, down from 99% six months ago.
INVESTMENT OBJECTIVE AND STRATEGY
The objective of the Fund is to maximize long-term capital appreciation.
The Fund pursues this objective by investing primarily in common stocks of
companies which Sit Investment Associates, Inc. expects to benefit from the
development, improvement, advancement and use of science and technology. During
normal market conditions, at least 80% of the Fund's total assets will be
invested in such securities. The Fund emphasizes securities of companies that
the adviser believes have potential for long-term capital growth.
PORTFOLIO SUMMARY
Net Asset Value 12/31/99: $25.74 Per Share
6/30/99: $15.23 Per Share
Total Net Assets: $26.1 Million
Weighted Average Market Cap: $64.1 Billion
PORTFOLIO STRUCTURE - BY SECTOR
(% OF TOTAL NET ASSETS)
[BAR CHART]
Electronic Technology 52.6
Technology Services 23.6
Health Technology 18.8
Consumer Services 1.3
Utilities 1.1
Cash & Other Net Assets 2.6
30
<PAGE>
AVERAGE ANNUAL TOTAL RETURNS*
-----------------------------
SIT PACIFIC STOCK
SCIENCE AND EXCHANGE
TECHNOLOGY TECHNOLOGY S&P
GROWTH FUND 100 INDEX 500 INDEX*
----------- --------- ----------
3 Month** 55.15% 54.88% 14.88%
1 Year 85.98 116.40 21.04
Inception 60.44 82.91 24.75
(12/31/97)
CUMULATIVE TOTAL RETURNS*
-------------------------
SIT PACIFIC STOCK
SCIENCE AND EXCHANGE
TECHNOLOGY TECHNOLOGY S&P
GROWTH FUND 100 INDEX 500 INDEX*
----------- --------- ----------
1 Year 85.98% 116.40% 21.04%
Inception 157.40 234.55 55.63
(12/31/97)
*AS OF 12/31/99 **NOT ANNUALIZED.
- --------------------------------------------------------------------------------
PERFORMANCE FIGURES ARE HISTORICAL AND DO NOT GUARANTEE FUTURE RESULTS.
INVESTMENT RETURNS AND PRINCIPAL VALUE WILL VARY, AND YOU MAY HAVE A GAIN OR
LOSS WHEN YOU SELL SHARES. AVERAGE ANNUAL TOTAL RETURNS INCLUDE CHANGES IN SHARE
PRICE AS WELL AS REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAINS. MANAGEMENT
FEES AND ADMINISTRATIVE EXPENSES ARE INCLUDED IN THE FUND'S PERFORMANCE;
HOWEVER, FEES AND EXPENSES ARE NOT INCORPORATED IN THE PACIFIC STOCK EXCHANGE
TECHNOLOGY 100 INDEX AND THE S&P 500 INDEX.
*THE FUND HAS DETERMINED THAT THE S&P 500 INDEX IS MORE REPRESENTATIVE OF THE
PORTFOLIO AND IS NOW USING THIS INDEX AS ITS PRIMARY INDEX.
GROWTH OF $10,000
[PLOT POINTS CHART]
The sum of $10,000 invested at inception (12/31/97) and held until 12/31/99
would have grown to $25,740 in the Fund, $15,563 in the S&P 500 Index, or
$33,455 in the PSE Tech 100 Index assuming reinvestment of all dividends and
capital gains.
TOP 10 HOLDINGS
* SDL, Inc.
* Applied Micro Circuits Corp.
* Cisco Systems, Inc.
* PMC-Sierra, Inc.
* I2 Technologies, Inc.
* Legato Systems, Inc.
* QUALCOMM, Inc.
* Microsoft Corp.
* Check Point Software Technology
* Dendrite International, Inc.
Total Number of Holdings: 58
31
<PAGE>
SIT SCIENCE AND TECHNOLOGY GROWTH FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE ($)(1)
- --------------------------------------------------------------------------------
COMMON STOCKS (97.4%) (2)
ELECTRONIC TECHNOLOGY (52.6%)
5,500 ADC Telecommunications, Inc. (3) $399,094
5,500 Analog Devices, Inc. (3) 511,500
8,000 Applied Micro Circuits Corp. (3) 1,018,000
8,000 Cisco Systems, Inc. (3) 857,000
3,750 Comverse Technology, Inc. (3) 542,812
4,600 EMC Corp. (3) 502,550
2,500 Harmonic, Inc. (3) 237,344
6,000 Intel Corp. 493,875
3,000 JDS Uniphase Corp. (3) 483,937
7,000 Jabil Circuit, Inc. (3) 511,000
5,000 Lexmark International Group, Inc. (3) 452,500
4,000 Lucent Technologies, Inc. 299,250
3,000 Motorola, Inc. 441,750
3,000 Nokia Corp., A.D.R. 570,000
5,000 PMC-Sierra, Inc. (3) 801,563
4,000 QUALCOMM, Inc. (3) 704,500
8,000 RF Micro Devices, Inc. (3) 547,500
5,000 SDL, Inc. (3) 1,090,000
4,000 STMicroelectronics N.V. 605,750
3,500 Scientific-Atlanta, Inc. 194,688
3,000 Synopsys, Inc. (3) 200,250
6,500 Tellabs, Inc. (3) 417,219
8,000 Teradyne, Inc. (3) 528,000
2,000 Texas Instruments, Inc. 193,750
8,000 Three-Five Systems, Inc. (3) 328,000
10,000 Vitesse Semiconductor Corp. (3) 524,375
6,000 Xilinx, Inc. (3) 272,813
---------------
13,729,020
---------------
CONSUMER SERVICES (1.3%)
5,000 BEA Systems, Inc. (3) 349,687
---------------
HEALTH TECHNOLOGY (18.8%)
2,000 Affymetrix, Inc. (3) 339,375
5,000 Biogen, Inc. (3) 422,500
4,000 Bristol Myers Squibb Co. 256,750
1,500 Celera Genomics (3) 223,500
11,000 Guilford Pharmaceuticals, Inc. (3) 187,000
4,000 IDEC Pharmaceuticals Corp. (3) 393,000
4,000 Immunex Corp. (3) 438,000
2,000 Johnson & Johnson Co. 186,250
- --------------------------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE ($)(1)
- --------------------------------------------------------------------------------
2,000 MedImmune, Inc. (3) 331,750
6,000 Medtronic, Inc. 218,625
4,000 Merck & Co., Inc. 268,250
2,500 Millennium Pharmaceuticals, Inc. (3) 305,000
3,000 Novoste Corp. (3) 49,500
8,500 Protein Design Labs (3) 595,000
6,900 Pfizer, Inc. 223,819
4,000 QLT PhotoTherapeutics, Inc. (3) 235,000
3,000 Warner Lambert Co. 245,813
---------------
4,919,132
---------------
TECHNOLOGY SERVICES (23.6%)
6,000 America Online, Inc. (3) 452,625
5,000 BMC Software, Inc. (3) 399,687
3,500 Check Point Software Technology (3) 695,625
20,000 Dendrite International, Inc. (3) 677,500
6,100 Digital Insight Corp. (3) 221,887
4,000 I2 Technologies, Inc. (3) 780,000
6,000 Inktomi Corp. (3) 532,500
11,000 Legato Systems, Inc. (3) 756,937
2,500 Mercury Interactive Corp. (3) 269,844
2,000 Micromuse, Inc. (3) 340,000
6,000 Microsoft Corp. (3) 700,500
6,000 Whittman-Hart, Inc. (3) 321,750
---------------
6,148,855
---------------
UTILITIES (1.1%)
5,250 MCI WorldCom, Inc. (3) 278,578
---------------
Total common stocks 25,425,272
---------------
(cost: $11,645,028)
SHORT-TERM SECURITIES (2.3%) (2)
612,000 Sit Money Market Fund, 5.35% (6) 612,000
---------------
(cost: $612,000)
Total investments in securities
(cost: $12,257,028) (7) $26,037,272
===============
See accompanying notes to portfolios of investments on page 38.
32
<PAGE>
This page has been left blank intentionally.
33
<PAGE>
[PHOTO] SIT DEVELOPING MARKETS GROWTH FUND
SIX MONTHS ENDED DECEMBER 31, 1999
----------------------------------------------------------------------
EUGENE C. SIT, CFA, SENIOR PORTFOLIO MANAGER
ANDREW B. KIM, CFA, SENIOR PORTFOLIO MANAGER
The Sit Developing Markets Growth Fund outperformed the MSCI Emerging Markets
Free Index and the Lipper Emerging Markets Index for the six months ended
December 31, 1999. The Fund gained 42.1% versus 18.3% for the MSCI Index and
25.1% for the Lipper Index. As the global rally continued in companies perceived
to be internet-related, the Fund benefited from its overweighted position and
stock selection in the telecommunications and technology sectors.
The Fund continues to hold an overweighted position in Asia, with a 60.3%
weighting as of December 31st vs. 38.2% for the Index. Higher-than-expected GDP
and export growth figures announced during the past six months demonstrated that
the economic rebound in the region has been sustained. The recent WTO agreement
between China and the U.S. bodes well for the Asian markets as increased
economic ties between China and the rest of the world will create new investment
opportunities for Asian firms and reduce the security risks in the region.
During the past six months, we added three Malaysian stocks--Maybank, Commerce
Asset, and Resorts World--in anticipation of economic reform in Malaysia and the
abolition of its exit tax on foreign investment.
Over the past six months, the Fund increased its weighting in Latin America
to 13.9% vs. 30.5% for the Index. Rebounding GDP growth, rising commodity
prices, and a recovery in corporate earnings suggest that fundamentals are
improving. Our purchases of Brazilian retailer, Grupo Pao de Acucar, and Grupo
Televisa, the leading Mexican media conglomerate, reflect our more optimistic
view on the region. We will be making additional purchases in Latin America in
the near future if these positive trends continue.
We are maintaining an underweighted position in Emerging-Europe, Middle East
and Africa of 17.2% vs. 31.2% for the Index. Our holdings in these regions
continue to focus on globally-competitive technology firms, such as South
African systems integrator Dimension Data and Comverse Technology, an Israeli
firm specializing in enhanced wireless services.
INVESTMENT OBJECTIVE AND STRATEGY
The objective of the Sit Developing Markets Growth Fund is to maximize
long-term capital appreciation. The Fund pursues this objective by investing in
equity securities of companies located or otherwise operating in a developing
market.
Developing markets tend to be less economically developed regions of the
world. General characteristics also include a high demand for capital
investment, a high dependence on export markets for their major industries, a
need to develop basic economic infrastructures, rapid economic growth and lower
degrees of political stability. Investors should carefully consider the risks
associated with developing markets such as currency flucuations, high
volatility, illiquidity and the possibility of political instability.
PORTFOLIO SUMMARY
Net Asset Value 12/31/99: $14.18 Per Share
6/30/99: $ 9.98 Per Share
Total Net Assets: $14.6 Million
Weighted Average Market Cap: $48.6 Billion
PORTFOLIO STRUCTURE - BY REGION
(% OF TOTAL NET ASSETS)
[BAR CHART]
Sit Developing MSCI Emerging
Markets Growth Fund Markets Free Index
Asia 60.3 38.2
Latin America 13.9 30.5
Africa/Middle East 11.1 15.1
Europe 6.1 16.1
North America 1.5 0.0
Cash & Other Net Assets 7.1 0.0
34
<PAGE>
AVERAGE ANNUAL TOTAL RETURNS*
-----------------------------
SIT MSCI LIPPER
DEVELOPING EMERGING EMERGING
MARKETS MARKETS MARKETS
GROWTH FUND FREE INDEX INDEX
----------- ---------- --------
3 Month** 48.17% 25.15% 34.47%
1 Year 82.50 63.70 68.96
3 Year 9.11 0.91 3.53
5 Year 7.83 -0.13 3.02
Inception 6.69 0.38 3.14
(7/1/94)
CUMULATIVE TOTAL RETURNS*
-------------------------
SIT MSCI LIPPER
DEVELOPING EMERGING EMERGING
MARKETS MARKETS MARKETS
GROWTH FUND FREE INDEX INDEX
----------- ---------- --------
1 Year 82.50% 63.70% 68.96%
3 Year 29.88 2.75 10.97
5 Year 45.79 -0.64 16.02
Inception 42.84 2.14 18.58
(7/1/94)
*AS OF 12/31/99 **NOT ANNUALIZED.
- --------------------------------------------------------------------------------
PERFORMANCE FIGURES ARE HISTORICAL AND DO NOT GUARANTEE FUTURE RESULTS.
INVESTMENT RETURNS AND PRINCIPAL VALUE WILL VARY, AND YOU MAY HAVE A GAIN OR
LOSS WHEN YOU SELL SHARES. AVERAGE ANNUAL TOTAL RETURNS INCLUDE CHANGES IN SHARE
PRICE AS WELL AS REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAINS. MANAGEMENT
FEES AND ADMINISTRATIVE EXPENSES ARE INCLUDED IN THE FUND'S PERFORMANCE;
HOWEVER, FEES AND EXPENSES ARE NOT INCORPORATED IN THE MSCI EMERGING MARKETS
FREE INDEX. THE LIPPER AVERAGES AND INDICES ARE OBTAINED FROM LIPPER ANALYTICAL
SERVICES, INC., A LARGE INDEPENDENT EVALUATOR OF MUTUAL FUNDS.
GROWTH OF $10,000
[PLOT POINTS CHART]
The sum of $10,000 invested at inception (7/1/94) and held until 12/31/99 would
have grown to $14,284 in the Fund, or $10,214 in the Morgan Stanley Capital
Int'l Emerging Markets Free Index assuming reinvestment of all dividends and
capital gains.
PORTFOLIO STRUCTURE - BY SECTOR
(% OF TOTAL NET ASSETS)
[BAR CHART]
Electronic Technology 33.3
Utilities 30.2
Retail Trade 10.1
Finance 7.5
Technology Services 5.9
Consumer Services 4.0
Industrial Services 1.1
Consumer Non-Durables 0.8
Cash & Other Net Assets 7.1
35
<PAGE>
SIT DEVELOPING MARKETS GROWTH FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1999 (UNAUDITED)
10 LARGEST HOLDINGS
* SK Telecom Co. Ltd.
* Telefonos de Mexico, A.D.R.
* Hon Hai Precision Industry
* Datacraft Asia, Ltd.
* Advanced Info Services
* Samsung Electronics
* President Chain Store Corp.
* Korea Telecom Corp.
* Korea Thrunet Co., Ltd.
* Cifra, S.A.
Total Number of Holdings: 49
- --------------------------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE ($)(1)
- --------------------------------------------------------------------------------
COMMON STOCKS (92.9%)(2)
AFRICA/ MIDDLE EAST (11.1%)
ISRAEL (7.8%)
1,700 Comverse Technology, Inc. (Electronic
Technology) (3) $246,075
2,500 Gilat Satellite Networks, Ltd., A.D.R.
(Electronic Technology) (3) 296,875
8,600 Nice Systems, Ltd., A.D.R. (Electronic
Technology ) (3) 423,013
4,200 RADWARE, Ltd. (Electronic Technology) (3) 181,125
--------------
1,147,088
--------------
SOUTH AFRICA (3.3%)
65,506 Dimension Data Holdings, Ltd.
(Technology Services) 410,811
25,000 Old Mutual p.l.c. (Finance) (3) 68,045
--------------
478,856
--------------
ASIA (60.3%)
HONG KONG (4.4%)
13,000 Cheung Kong Hldgs., Ltd. (Indus. Svcs.) 165,144
640,000 China Hong Kong Photo Products Hldgs.,
Ltd. (Retail Trade) 82,331
44,000 China Telecom (Utilities) 275,088
97,000 Founder Hong Kong, Ltd. (Elec. Tech.) 118,544
--------------
641,107
--------------
INDONESIA (1.1%)
189,000 PT Ramayana Lestari (Retail Trade) 159,585
--------------
MALAYSIA (1.6%)
24,000 Commerce Asset-Holding Berhad (Finance) 61,579
15,000 Malayan Banking Berhad (Finance) 53,289
- --------------------------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE ($)(1)
- --------------------------------------------------------------------------------
43,000 Resorts World Berhad (Consumer
Services) 123,342
--------------
238,210
--------------
PHILIPPINES (2.3%)
224,000 Del Monte Pacific, Ltd. (Consumer
Non-Durables) (3) 108,940
2,343,000 Digital Telecom Philippines (Utilities) (3) 81,395
173,000 Jollibee Foods Co. (Warrants) (Consumer
Services) (3)(4)(5) 72,978
424,000 SM Prime Holdings, Inc. (Retail Trade) 79,960
--------------
343,273
--------------
SINGAPORE (11.2%)
9,700 Creative Technology, Ltd. (Electronic
Technology) (3) 168,538
70,000 Datacraft Asia, Ltd. (Electronic Tech.) 581,000
22,097 DBS Group Holdings Ltd. (Finance) 362,202
51,000 Natsteel Electronics, Ltd. (Electronic
Technology) 269,469
23,000 Venture Mfg., Ltd. (Electronic Tech.) 263,765
--------------
1,644,974
--------------
SOUTH KOREA (18.5%)
20,000 Korea Electric Power, A.D.R. (Utilities) 335,000
3,000 Korea Telecom Corporation (Utilities) 472,919
3,000 Korea Telecom Corp., A.D.R. (Utilities) (3) 224,250
6,700 Korea Thrunet Co., Ltd. (Technology
Services) (3) 454,763
18,746 SK Telecom Co., A.D.R. (Utilities) 719,378
2,129 Samsung Electronics (Electronic
Technology) 498,735
--------------
2,705,045
--------------
TAIWAN (15.2%)
35,000 Accton Technology Corp., G.D.R
(Electronic Technology) (3) 255,500
70,698 Chroma Ate, Inc. (Electronic Technology) (3) 207,239
84,880 Hon Hai Precision Industry (Electronic
Technology) (3) 632,848
110,420 President Chain Store Corp. (Retail Trade) 487,276
104,902 Phoenixtec Power Co. (Elec. Tech.) (3) 202,217
62,730 Taiwan Semiconductor Co. (Electronic
Technology) (3) 333,787
84,000 United World Chinese Commercial Bank
(Finance) 101,437
--------------
2,220,304
--------------
THAILAND (6.0%)
32,800 Advanced Info Services (Utilities) 550,368
36
<PAGE>
- --------------------------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE ($)(1)
- --------------------------------------------------------------------------------
54,000 Bangkok Bank (Finance) 136,201
42,000 Hana Microelectronics Public Co., Ltd.
(Electronic Technology) 189,566
--------------
876,135
--------------
EUROPE (6.1%)
GREECE (3.1%)
3,937 Alpha Credit Bank (Finance) 308,280
10,500 Panafon Telecom (Utilities) (3) 140,983
--------------
449,263
--------------
SPAIN (3.0%)
5,550 Telefonica, A.D.R. (Utilities) 437,409
--------------
LATIN AMERICA (13.9%)
BRAZIL (3.4%)
6,900 Companhia Brasileira de Distribuicao
Grupo Pao de Acucar (Retail Trade) 222,956
1,800 Tele Centro Sul Participacoes S.A.,
A.D.R. (Utilities) 163,350
4,400 Telesp Participacoes S.A., A.D.R.
(Utilities) (3) 107,525
--------------
493,831
--------------
MEXICO (10.5%)
223,700 Cifra S.A. (Retail Trade) 448,580
5,800 Grupo Televisa S.A. (Consumer Services) 395,850
6,200 Telefonos de Mexico, A.D.R. (Utilities) 697,500
--------------
1,541,930
--------------
NORTH AMERICA (1.5%)
CANADA (1.5%)
5,800 Telesystems Int'l. Wireless, Inc.
(Utilities) (3) 213,356
--------------
Total common stocks 13,590,366
--------------
(cost: $7,338,939)
SHORT-TERM SECURITIES (7.8%) (2)
1,137,000 Sit Money Market Fund, 5.35% (6) 1,137,000
--------------
(cost: $1,137,000)
Total investments in securities
(cost: $8,475,939) (7) $14,727,366
==============
See accompanying notes to portfolios of investments on page 38.
37
<PAGE>
SIT MUTUAL FUNDS
- --------------------------------------------------------------------------------
NOTES TO PORTFOLIOS OF INVESTMENTS
(1) Securities are valued by procedures described in note 1 to the financial
statements.
(2) Percentage figures indicate percentage of total net assets.
(3) Presently non-income producing securities.
(4) Securities sold within terms of a private placement memorandum, exempt from
registration under section 144A of the Securities Act of 1933, as amended,
and sold only to dealers in that program or other "accredited investors".
(5) This security has been identified by the investment adviser as an illiquid
security. The aggregate value of the security at December 31, 1999, is
$72,978 in Developing Markets Growth which represents 0.5% of the Funds'
net assets. The following table summarizes the purchase date(s) and cost
basis of the security.
<TABLE>
<CAPTION>
Purchase
Fund Security Date(s) Shares/Par Cost Basis
----------------------------- ------------------ ---------------- -------------- --------------
<S> <C> <C> <C> <C>
Developing Markets Growth Jollibee Foods 3/98 - 12/98 173,000 77,228
</TABLE>
(6) This security represents an investment in an affiliated party. See note 3
to the accompanying financial statements.
(7) At December 31, 1999, the cost of securities for federal income tax
purposes and the aggregate gross unrealized appreciation and depreciation
based on that cost were as follows:
<TABLE>
<CAPTION>
LARGE CAP REGIONAL MID CAP
BALANCED GROWTH GROWTH GROWTH
FUND FUND FUND FUND
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Cost for federal income tax purposes $ 10,926,456 $ 96,173,231 $ 5,716,139 $ 259,737,188
============= ============= ============= =============
Unrealized appreciation (depreciation) on
investments:
Gross unrealized appreciation $ 3,731,653 $ 68,617,094 $ 2,384,038 $ 257,740,485
Gross unrealized depreciation (198,174) (846,961) (213,012) (8,728,286)
------------- ------------- ------------- -------------
Net unrealized appreciation $ 3,533,479 $ 67,770,133 $ 2,171,026 $ 249,012,199
============= ============= ============= =============
<CAPTION>
SCIENCE AND DEVELOPING
INTERNATIONAL SMALL CAP TECHNOLOGY MARKETS
GROWTH GROWTH GROWTH GROWTH
FUND FUND FUND FUND
------------- ------------- ------------- -------------
Cost for federal income tax purposes $ 66,695,723 $ 47,127,254 $ 12,257,028 $ 8,475,939
============= ============= ============= =============
Unrealized appreciation (depreciation) on
investments:
Gross unrealized appreciation $ 72,852,990 $ 56,858,962 $ 13,853,679 $ 6,317,492
Gross unrealized depreciation (693,193) (1,039,372) (73,435) (66,065)
------------- ------------- ------------- -------------
Net unrealized appreciation $ 72,159,797 $ 55,819,590 $ 13,780,244 $ 6,251,427
============= ============= ============= =============
</TABLE>
(8) Medium-term debt security whose return is linked to the performance of the
common stock of Sony Corporation. The security is subject to price
fluctuations of the Sony Corporation common stock, up to a limit of 130% of
its level at issue date (May 8, 1999), without being affected by changes in
the yen/U.S. dollar exchange rate. The quarterly interest payment for each
unit is based on the U.S. dollar equivalent market value of 20 shares of
Sony Corp. common stock on issue date.
38
<PAGE>
This page has been left blank intentionally.
39
<PAGE>
SIT MUTUAL FUNDS
DECEMBER 31, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
LARGE CAP REGIONAL MID CAP
BALANCED GROWTH GROWTH GROWTH
FUND FUND FUND FUND
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
ASSETS
Investments in securities, at
identified cost $ 10,926,456 $ 96,173,231 $ 5,716,139 $ 259,737,188
=============== =============== =============== ===============
Investments in securities, at
market value - see
accompanying schedule for detail $ 14,459,935 $ 163,943,364 $ 7,887,165 $ 508,749,386
Cash in bank on demand
deposit 11,060 110,857 460 2,000,717
Receivables:
Dividends and accrued interest 53,442 66,359 3,938 131,664
Fund shares sold 131 45,637 1,826 41,635
Investment securities sold -- -- -- --
Other receivables -- 6,596 309 6,661
--------------- --------------- --------------- ---------------
Total assets 14,524,568 164,172,813 7,893,698 510,930,063
--------------- --------------- --------------- ---------------
LIABILITIES
Payables:
Disbursements in excess of
cash balances -- -- -- --
Investment securities purchased -- -- -- --
Forward currency contracts, net (note 1) -- -- -- --
Fund shares redeemed 1,156 7,303 33 60,865
Accrued investment management
and advisory services fee 11,705 132,141 6,495 412,590
Other payables 38 -- -- --
--------------- --------------- --------------- ---------------
Total liabilities 12,899 139,444 6,528 473,455
--------------- --------------- --------------- ---------------
Net assets applicable to
outstanding capital stock 14,511,669 164,033,369 7,887,170 510,456,608
=============== =============== =============== ===============
Capital stock
Par $ 0.001 $ 0.001 $ 0.001 $ 0.001
Authorized shares 10,000,000,000 10,000,000,000 10,000,000,000 10,000,000,000
Outstanding shares 773,964 2,680,214 555,748 24,667,831
=============== =============== =============== ===============
Net asset value per share of
outstanding capital stock $ 18.75 $ 61.20 $ 14.19 $ 20.69
=============== =============== =============== ===============
</TABLE>
40
<PAGE>
<TABLE>
<CAPTION>
SCIENCE AND DEVELOPING
INTERNATIONAL SMALL CAP TECHNOLOGY MARKETS
GROWTH GROWTH GROWTH GROWTH
FUND FUND FUND FUND
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
ASSETS
Investments in securities, at
identified cost $ 66,695,723 $ 47,127,254 $ 12,257,028 $ 8,475,939
=============== =============== =============== ===============
Investments in securities, at
market value - see
accompanying schedule for detail $ 138,855,519 $ 102,946,843 $ 26,037,272 $ 14,727,366
Cash in bank on demand
deposit -- -- 66,079 --
Receivables:
Dividends and accrued interest 91,272 35,765 3,475 6,822
Fund shares sold 107,888 73,914 43,819 23,142
Investment securities sold -- -- -- --
Other receivables 827 10,775 -- 3,416
--------------- --------------- --------------- ---------------
Total assets 139,055,506 103,067,297 26,150,645 14,760,746
--------------- --------------- --------------- ---------------
LIABILITIES
Payables:
Disbursements in excess of
cash balances 109,827 41,954 -- 103,270
Investment securities purchased -- -- -- --
Forward currency contracts, net (note 1) 2,023,930 -- -- --
Fund shares redeemed 601,497 55,166 15,893 --
Accrued investment management
and advisory services fee 161,921 112,981 24,503 22,850
Other payables -- -- 2,192 --
--------------- --------------- --------------- ---------------
Total liabilities 2,897,175 210,101 42,588 126,120
--------------- --------------- --------------- ---------------
Net assets applicable to
outstanding capital stock 136,158,331 102,857,196 26,108,057 14,634,626
=============== =============== =============== ===============
Capital stock
Par $ 0.001 $ 0.001 $ 0.001 $ 0.001
Authorized shares 10,000,000,000 10,000,000,000 10,000,000,000 10,000,000,000
Outstanding shares 5,197,193 3,059,919 1,014,452 1,032,027
=============== =============== =============== ===============
Net asset value per share of
outstanding capital stock $ 26.20 $ 33.61 $ 25.74 $ 14.18
=============== =============== =============== ===============
</TABLE>
See accompanying notes to financial statements on page 48.
41
<PAGE>
SIT MUTUAL FUNDS
SIX MONTHS ENDED DECEMBER 31, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
LARGE CAP REGIONAL MID CAP
BALANCED GROWTH GROWTH GROWTH
FUND FUND FUND FUND
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Investment income:
INCOME:
Dividends * $ 27,876 $ 341,584 $ 27,048 $ 373,116
Interest 169,810 171,181 4,831 450,947
------------- ------------- ------------- -------------
Total income 197,686 512,765 31,879 824,063
------------- ------------- ------------- -------------
EXPENSES (NOTE 3):
Investment management and
advisory services fee 63,710 713,988 46,139 2,588,756
Less fees and expenses absorbed
by investment adviser -- -- (9,228) (517,751)
------------- ------------- ------------- -------------
Total net expenses 63,710 713,988 36,911 2,071,005
------------- ------------- ------------- -------------
Net investment income (loss) 133,976 (201,223) (5,032) (1,246,942)
------------- ------------- ------------- -------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS :
Net realized gain (loss) (note 2) 150,922 7,896,562 5,710 76,835,748
Net change in unrealized appreciation
(depreciation) on investments 1,461,851 22,990,541 570,641 110,575,117
Realized gain (loss) on foreign
currency transactions -- -- -- --
Net change in unrealized appreciation
(depreciation) on foreign currency
transactions (note 3) -- -- -- --
------------- ------------- ------------- -------------
Net gain (loss) on investments 1,612,773 30,887,103 576,351 187,410,865
------------- ------------- ------------- -------------
Net increase (decrease) in net assets
resulting from operations $ 1,746,749 $ 30,685,880 $ 571,319 $ 186,163,923
============= ============= ============= =============
</TABLE>
- -------------------
42
<PAGE>
<TABLE>
<CAPTION>
SCIENCE AND DEVELOPING
INTERNATIONAL SMALL CAP TECHNOLOGY MARKETS
GROWTH GROWTH GROWTH GROWTH
FUND FUND FUND FUND
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Investment income:
INCOME:
Dividends * $ 290,705 $ 61,902 $ 9,009 $ 51,570
Interest 126,273 75,728 13,200 57,954
------------- ------------- ------------- -------------
Total income 416,978 137,630 22,209 109,524
------------- ------------- ------------- -------------
EXPENSES (NOTE 3):
Investment management and
advisory services fee 987,790 485,191 132,223 112,586
Less fees and expenses absorbed
by investment adviser (186,879) -- (22,037) --
------------- ------------- ------------- -------------
Total net expenses 800,911 485,191 110,186 112,586
------------- ------------- ------------- -------------
Net investment income (loss) (383,933) (347,561) (87,977) (3,062)
------------- ------------- ------------- -------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS :
Net realized gain (loss) (note 2) 8,974,676 5,668,141 261,829 910,676
Net change in unrealized appreciation
(depreciation) on investments 38,289,342 39,347,847 10,173,911 3,466,027
Realized gain (loss) on foreign
currency transactions (93,132) -- -- (5,078)
Net change in unrealized appreciation
(depreciation) on foreign currency
transactions (note 3) (2,017,359) -- -- 1,586
------------- ------------- ------------- -------------
Net gain (loss) on investments 45,153,527 45,015,988 10,435,740 4,373,211
------------- ------------- ------------- -------------
Net increase (decrease) in net assets
resulting from operations $ 44,769,594 $ 44,668,427 $ 10,347,763 $ 4,370,149
============= ============= ============= =============
</TABLE>
- -------------------
* Dividends are net of foreign withholding tax of $32,578 and $2,719 in the
International Growth Fund and Developing Markets Growth Fund, respectively.
43
<PAGE>
SIT MUTUAL FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
BALANCED LARGE CAP
FUND GROWTH FUND
----------------------------- -----------------------------
SIX MONTHS SIX MONTHS
ENDED ENDED
DECEMBER 31, YEAR ENDED DECEMBER 31, YEAR ENDED
1999 JUNE 30, 1999 JUNE 30,
(UNAUDITED) 1999 (UNAUDITED) 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Operations:
Net investment income (loss) $ 133,976 $ 175,194 $ (201,223) $ (117,054)
Net realized gain (loss) on investments 150,922 591,404 7,896,562 17,648,687
Net change in unrealized appreciation
(depreciation) on investments 1,461,851 205,945 22,990,541 2,230,110
Net realized gain (loss) on foreign currency transactions -- -- -- --
Net change in unrealized appreciation (depreciation) on
foreign currency transactions -- -- -- --
------------- ------------- ------------- -------------
Net increase (decrease) in net assets resulting from
operations 1,746,749 972,543 30,685,880 19,761,743
------------- ------------- ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (198,000) (147,000) -- (17,000)
Net realized gains on investments (542,000) (350,000) (8,800,000) (9,200,000)
------------- ------------- ------------- -------------
Total distributions (740,000) (497,000) (8,800,000) (9,217,000)
------------- ------------- ------------- -------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 2,041,068 6,001,022 16,228,480 55,525,759
Reinvested distributions 734,369 491,654 8,605,885 9,042,427
Payments for shares redeemed (1,382,880) (2,277,394) (22,944,572) (52,351,385)
------------- ------------- ------------- -------------
Increase (decrease) in net assets from
capital share transactions 1,392,557 4,215,282 1,889,793 12,216,801
------------- ------------- ------------- -------------
Total increase in net assets 2,399,306 4,690,825 23,775,673 22,761,544
NET ASSETS
Beginning of period 12,112,363 7,421,538 140,257,696 117,496,152
------------- ------------- ------------- -------------
End of period $ 14,511,669 $ 12,112,363 $ 164,033,369 $ 140,257,696
============= ============= ============= =============
NET ASSETS CONSIST OF:
Capital (par value and paid-in surplus) $ 10,838,688 $ 9,446,131 $ 90,329,930 $ 88,440,137
Undistributed (distributions in excess of) net
investment income (335) 63,689 (201,223) --
Accumulated net realized gain (loss) from
security transactions and foreign
currency transactions 139,837 530,915 6,134,529 7,037,967
Unrealized appreciation (depreciation) on investments 3,533,479 2,071,628 67,770,133 44,779,592
Unrealized appreciation (depreciation) on foreign
currency transactions -- -- -- --
------------- ------------- ------------- -------------
$ 14,511,669 $ 12,112,363 $ 164,033,369 $ 140,257,696
============= ============= ============= =============
CAPITAL TRANSACTIONS IN SHARES:
Sold 115,880 359,829 294,346 1,156,108
Reinvested distributions 41,237 30,798 152,479 198,041
Redeemed (80,214) (138,578) (420,839) (1,081,277)
------------- ------------- ------------- -------------
Net increase (decrease) 76,903 252,049 25,986 272,872
============= ============= ============= =============
</TABLE>
44
<PAGE>
<TABLE>
<CAPTION>
REGIONAL MID CAP INTERNATIONAL SMALL CAP
GROWTH FUND GROWTH FUND GROWTH FUND GROWTH FUND
- ----------------------------- ----------------------------- ----------------------------- -----------------------------
SIX MONTHS SIX MONTHS SIX MONTHS SIX MONTHS
ENDED ENDED ENDED ENDED
DECEMBER 31, YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, YEAR ENDED
1999 JUNE 30, 1999 JUNE 30, 1999 JUNE 30, 1999 JUNE 30,
(UNAUDITED) 1999 (UNAUDITED) 1999 (UNAUDITED) 1999 (UNAUDITED) 1999
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ (5,032) $ (2,333) $ (1,246,942) $ (1,585,981) $ (383,933) $ (339,030) $ (347,561) $ (493,500)
5,710 (111,164) 76,835,748 25,382,637 8,974,676 2,669,179 5,668,141 (3,899,846)
570,641 1,187,711 110,575,117 (2,614,204) 38,289,342 2,467,482 39,347,847 6,980,637
-- -- -- -- (93,132) 75,709 -- --
-- -- -- -- (2,017,359) 1,383 -- --
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
571,319 1,074,214 186,163,923 21,182,452 44,769,594 4,874,723 44,668,427 2,587,291
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
-- (12,000) -- -- (1,100,000) (284,000) -- --
-- -- (30,425,000) (59,500,000) (6,300,000) (5,500,000) -- (7,700,000)
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
-- (12,000) (30,425,000) (59,500,000) (7,400,000) (5,784,000) -- (7,700,000)
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
281,723 3,331,498 100,859,039 430,451,763 26,058,137 74,962,278 20,251,738 27,461,865
-- 11,188 29,067,082 56,956,588 7,152,503 5,530,038 -- 7,467,439
(489,480) (1,863,065) (150,551,014) (478,075,695) (29,404,123) (84,321,667) (12,397,566) (36,954,369)
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
(207,757) 1,479,621 (20,624,893) 9,332,656 3,806,517 (3,829,351) 7,854,172 (2,025,065)
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
363,562 2,541,835 135,114,030 (28,984,892) 41,176,111 (4,738,628) 52,522,599 (7,137,774)
7,523,608 4,981,773 375,342,578 404,327,470 94,982,220 99,720,848 50,334,597 57,472,371
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
$ 7,887,170 $ 7,523,608 $ 510,456,608 $ 375,342,578 $ 136,158,331 $ 94,982,220 $ 102,857,196 $ 50,334,597
============= ============= ============= ============= ============= ============= ============= =============
$ 5,799,972 $ 6,007,729 $ 191,596,333 $ 212,221,226 $ 63,272,332 $ 59,465,815 $ 45,616,872 $ 37,762,700
(5,032) -- (1,246,942) -- (931,427) 552,506 (347,561) --
(78,796) (84,506) 71,095,018 24,684,270 3,681,613 1,100,069 1,768,295 (3,899,846)
2,171,026 1,600,385 249,012,199 138,437,082 72,159,797 33,870,455 55,819,590 16,471,743
-- -- -- -- (2,023,984) (6,625) -- --
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
$ 7,887,170 $ 7,523,608 $ 510,456,608 $ 375,342,578 $ 136,158,331 $ 94,982,220 $ 102,857,196 $ 50,334,597
============= ============= ============= ============= ============= ============= ============= =============
21,619 289,865 6,640,707 31,884,953 1,228,941 4,137,747 869,453 1,551,586
-- 979 1,590,973 4,770,255 292,775 317,635 -- 509,720
(36,968) (162,044) (9,375,890) (35,369,826) (1,385,349) (4,605,179) (563,488) (2,131,506)
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
(15,349) 128,800 (1,144,210) 1,285,382 136,367 (149,797) 305,965 (70,200)
============= ============= ============= ============= ============= ============= ============= =============
</TABLE>
See accompanying notes to financial statements on page 48.
45
<PAGE>
SIT MUTUAL FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
SCIENCE AND
TECHNOLOGY DEVELOPING MARKETS
GROWTH FUND GROWTH FUND
----------------------------- -----------------------------
SIX MONTHS SIX MONTHS
ENDED ENDED
DECEMBER 31, YEAR ENDED DECEMBER 31, YEAR ENDED
1999 JUNE 30, 1999 JUNE 30,
(UNAUDITED) 1999 (UNAUDITED) 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Operations:
Net investment income (loss) $ (87,977) $ (63,669) $ (3,062) $ (5,540)
Net realized gain (loss) on investments 261,829 (316,306) 910,676 (2,762,417)
Net change in unrealized appreciation
(depreciation) on investments 10,173,911 2,941,239 3,466,027 3,644,737
Net realized gain (loss) on foreign currency transactions -- -- (5,078) (33,292)
Net change in unrealized appreciation (depreciation) on
foreign currency transactions -- -- 1,586 (726)
------------- ------------- ------------- -------------
Net increase (decrease) in net assets resulting from
operations 10,347,763 2,561,264 4,370,149 842,762
------------- ------------- ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income -- -- -- --
Net realized gains on investments -- -- -- --
------------- ------------- ------------- -------------
Total distributions -- -- -- --
------------- ------------- ------------- -------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 2,854,057 9,619,464 3,483,258 11,372,665
Reinvested distributions -- -- -- --
Payments for shares redeemed (1,287,428) (2,845,402) (4,556,527) (12,382,569)
------------- ------------- ------------- -------------
Increase (decrease) in net assets from
capital share transactions 1,566,629 6,774,062 (1,073,269) (1,009,904)
------------- ------------- ------------- -------------
Total increase in net assets 11,914,392 9,335,326 3,296,880 (167,142)
NET ASSETS
Beginning of period 14,193,665 4,858,339 11,337,746 11,504,888
------------- ------------- ------------- -------------
End of period $ 26,108,057 $ 14,193,665 $ 14,634,626 $ 11,337,746
============= ============= ============= =============
NET ASSETS CONSIST OF:
Capital (par value and paid-in surplus) $ 12,515,199 $ 10,948,570 $ 11,178,650 $ 12,251,919
Undistributed (distributions in excess of) net
investment income (87,977) -- (3,062) --
Accumulated net realized gain (loss) from
security transactions and foreign
currency transactions (99,409) (361,238) (2,792,386) (3,697,984)
Unrealized appreciation (depreciation) on investments 13,780,244 3,606,333 6,251,427 2,785,400
Unrealized appreciation (depreciation) on foreign
currency transactions -- -- (3) (1,589)
------------- ------------- ------------- -------------
$ 26,108,057 $ 14,193,665 $ 14,634,626 $ 11,337,746
============= ============= ============= =============
CAPITAL TRANSACTIONS IN SHARES:
Sold 151,656 733,282 331,108 1,343,413
Reinvested distributions -- -- -- --
Redeemed (69,431) (213,983) (434,969) (1,479,311)
------------- ------------- ------------- -------------
Net increase (decrease) 82,225 519,299 (103,861) (135,898)
============= ============= ============= =============
</TABLE>
See accompanying notes to financial statements on page 48.
46
<PAGE>
This page has been left blank intentionally.
47
<PAGE>
SIT MUTUAL FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Sit Mutual Funds are no-load funds, and are registered under the Investment
Company Act of 1940 (as amended) as diversified, open-end management investment
companies, or series thereof. The Sit Developing Markets Growth, Sit Small Cap
Growth, Sit International Growth, Sit Balanced, Sit Regional, and Sit Science
and Technology Growth Funds are series funds of Sit Mutual Funds, Inc.
This report covers the equity funds of the Sit Mutual Funds (the Funds). The
investment objective for each Fund is as follows:
--------------------------------------------------------------------------
FUND INVESTMENT OBJECTIVE
--------------------------------------------------------------------------
Large Cap Growth Fund, Inc. Maximize long-term capital appreciation and,
secondarily current income.
--------------------------------------------------------------------------
Mid Cap Growth Fund, Inc. Maximize long-term capital appreciation.
--------------------------------------------------------------------------
Small Cap Growth Maximize long-term capital appreciation.
--------------------------------------------------------------------------
Balanced Long-term capital appreciation consistent
with the preservation of principal and to
provide regular income.
--------------------------------------------------------------------------
International Growth Maximize long-term capital appreciation.
--------------------------------------------------------------------------
Developing Markets Growth Maximize long-term capital appreciation.
--------------------------------------------------------------------------
Regional Growth Fund Maximize long-term capital appreciation.
--------------------------------------------------------------------------
Science and Technology Maximize long-term capital appreciation.
Growth Fund
--------------------------------------------------------------------------
Significant accounting policies followed by the Funds are summarized below:
INVESTMENTS IN SECURITIES
Investments in securities traded on national or international securities
exchanges are valued at the last reported sales price prior to the time when
assets are valued. Securities traded on the over-the-counter market are valued
at the last reported sales price or if the last sales price is not available at
the last reported bid price. The sale and bid prices are obtained from
independent pricing services. Debt securities maturing more than 60 days are
priced by an independent pricing service. When market quotations are not readily
available, or securities can not be valued by the pricing service, securities
are valued at fair value as determined in good faith using procedures
established by the Board of Directors, which may include dealer supplied
valuations. Debt securities maturing in less than 60 days when acquired, or
which subsequently are within 60 days of maturity, are valued at amortized cost.
Security transactions are accounted for on the date the securities are purchased
or sold. Securities gains and losses are calculated on the identified-cost
basis. Dividend income is recorded on the ex-dividend date or upon the receipt
of ex-dividend notification in the case of certain foreign securities. Interest,
including level-yield amortization of long-term bond premium and discount, is
recorded on the accrual basis.
48
<PAGE>
ILLIQUID SECURITIES
Each Fund currently limits investments in illiquid securities to 15% of net
assets. At December 31, 1999, the Developing Markets Growth Fund held
investments in securities deemed illiquid by the investment adviser. The
aggregate value of such securities at December 31, 1999, was $72,978,
representing 0.5% of the Fund's net assets. Pursuant to the guidelines adopted
by the Board of Directors, certain unregistered securities are determined to be
liquid and are not included within the limitation specified above.
FOREIGN CURRENCY TRANSLATIONS AND FORWARD FOREIGN CURRENCY CONTRACTS
The market value of securities and other assets and liabilities denominated in
foreign currencies for Developing Markets Growth Fund and International Growth
Fund are translated daily into U.S. dollars at the closing rate of exchange.
Purchases and sales of securities, income and expenses are translated at the
exchange rate on the transaction date. Dividend and interest income includes
currency exchange gains (losses) realized between the accrual and payment dates
on such income. Exchange gains (losses) may also be realized between the trade
and settlement dates on security and forward contract transactions. For
securities denominated in foreign currencies, the effect of changes in foreign
exchange rates on realized and unrealized gains or losses is reflected as a
component of such gains or losses.
The Developing Markets Growth and International Growth Funds may enter into
forward foreign currency exchange contracts for operational purposes and to
protect against adverse exchange rate fluctuation. The net U.S. dollar value of
foreign currency underlying all contractual commitments held by the Funds and
the resulting unrealized appreciation or depreciation are determined using
foreign currency exchange rates from an independent pricing service. The Funds
are subject to the credit risk that the other party will not complete the
obligations of the contract.
As of December 31, 1999, the International Growth Fund had entered into an open
forward currency exchange contract with an exchange date of January 12, 2000.
The net unrealized depreciation of $2,023,930 for this contract is included in
the accompanying financial statements.
U.S. Dollar Value as of
December 31, 1999
-----------------
Currency to be Delivered 1,417,495,488 Japanese Yen $13,899,730
Currency to be Received 11,875,800 U.S. Dollars 11,875,800
-----------
Net Unrealized Depreciation $ 2,023,930
-----------
FEDERAL TAXES
The Funds' policy is to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute all of its
taxable income to shareholders. Therefore, no income tax provision is required.
Also, in order to avoid the payment of any federal excise taxes, the Funds will
distribute substantially all of their net investment income and net realized
gains on a calendar year basis.
Net investment income and net realized gains may differ for financial statement
and tax purposes. The character of distributions made during the year for net
investment income or net realized gains may also differ from its ultimate
characterization for tax purposes. Also, due to the timing of dividend
distributions, the fiscal year in which amounts are distributed may differ from
the year that the income or realized gains (losses) were recorded by the Fund.
49
<PAGE>
SIT MUTUAL FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
For federal income tax purposes the Developing Markets Growth Fund has a capital
loss carryover of $3,697,984 at June 30, 1999 which, if not offset by subsequent
capital gains, will begin to expire in 2004. Also at June 30, 1999, the Small
Cap Growth, Science and Technology Growth, and Regional Growth Funds have
capital loss carryovers of $3,899,846, $332,937, and $67,482, respectively
which, if not offset by subsequent capital gains, will begin to expire in 2007.
It is unlikely that the Board of Directors will authorize a distribution of net
realized gains until the available capital loss carryovers are offset or expire.
DISTRIBUTIONS
Distributions to shareholders are recorded as of the close of business on the
record date. Such distributions are payable in cash or reinvested in additional
shares of the Funds' capital stock. Distributions from net investment income, if
any, are declared and paid quarterly for the Balanced Fund and declared and paid
annually for Regional Growth, Science and Technology Growth, Developing Markets
Growth, Small Cap Growth, International Growth, Mid Cap Growth, and Large Cap
Growth Funds. Distributions from net realized gains, if any, will be made
annually for each of the Funds.
CONCENTRATION OF INVESTMENTS
The Developing Markets Growth Fund may concentrate investments in countries with
limited or developing capital markets which may involve greater risks than
investments in more developed markets and the prices of such investments may be
volatile. The consequences of political, social or economic changes in these
markets may have disruptive effects on the market prices of the Fund's
investments and the income it generates, as well as the Fund's ability to
repatriate such amounts.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make certain estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported results. Actual results could differ from those
estimates.
NOTE 2 - INVESTMENT SECURITY TRANSACTIONS
Purchases of and proceeds from sales and maturities of investment securities,
other than short-term securities, for the period ended December 31, 1999, were
as follow:
PURCHASES ($) PROCEEDS ($)
------------- ------------
Large Cap Growth Fund 43,683,778 45,254,150
Mid Cap Growth Fund 135,380,857 177,881,965
Small Cap Growth Fund 21,917,852 16,980,375
Balanced Fund 6,878,239 5,649,461
International Growth Fund 16,450,241 24,248,892
Developing Markets Growth Fund 2,963,861 4,286,676
Regional Growth Fund 1,009,927 1,001,856
Science and Technology Growth Fund 4,236,236 3,363,779
50
<PAGE>
NOTE 3 - EXPENSES
INVESTMENT ADVISER
The Funds each have entered into an investment management agreement with Sit
Investment Associates, Inc. (SIA), under which SIA manages the Funds' assets and
provides research, statistical and advisory services, and pays related office
rental, executive expenses and executive salaries. The fee for investment
management and advisory services is based on the average daily net assets of the
Funds at the annual rate of:
CONTRACTUAL NET OF ADVISER'S
MANAGEMENT VOLUNTARY FEE
FEE WAIVER
--- ------
Large Cap Growth Fund 1.00% 1.00%
Mid Cap Growth Fund 1.25% 1.00%
Small Cap Growth Fund 1.50% 1.50%
Balanced Fund 1.00% 1.00%
International Growth Fund 1.85% 1.50%
Developing Markets Growth Fund 2.00% 2.00%
Regional Growth Fund 1.25% 1.00%
Science and Technology Growth Fund 1.50% 1.25%
SIA is obligated to pay all of the Funds' expenses (excluding extraordinary
expenses, stock transfer taxes, interest, brokerage commissions and other
transaction charges relating to investing activities).
For the period November 1, 1996 through December 31, 2000 the Adviser has agreed
to limit the management fee (and, thereby, all Fund expenses, except those not
payable by the Fund as set forth above) of the Mid Cap Growth Fund to 1.00% of
the Fund's average daily net assets. For the period January 1, 1994 through
December 31, 2000, the Adviser has agreed to limit the management fee (and,
thereby, all Fund expenses, except those not payable by the Fund as set forth
above) of the International Growth Fund to 1.50% of the Fund's average daily net
assets. For the period January 1, 1998 through December 31, 2000 the Adviser has
agreed to limit the management fee (and, thereby, all fund expenses, except
those not payable by the Fund as set forth above) of the Regional Growth and
Science and Technology Growth Fund to 1.00% and 1.25%, respectively, of the
Fund's average daily net assets. After December 31, 2000, these voluntary fee
waivers may be discontinued by the Adviser in its sole discretion. During the
period ended December 31, 1999, for the Mid Cap Growth, International Growth,
Regional Growth, and Science and Technology Growth Funds, SIA voluntarily
absorbed an additional $517,751, $186,879, $9,228 and $22,037, respectively, in
expenses that were otherwise payable by the Funds.
As of December 31, 1999, the Large Cap Growth Fund, International Growth Fund,
Mid Cap Growth Fund, Small Cap Growth Fund, Regional Growth Fund, Science and
Technology Growth Fund, Developing Markets Growth Fund, and Balanced Fund had
invested $4,239,000, $7,427,000, $10,547,000, $4,719,000, $147,000, $612,000,
$1,137,000, and $544,000, respectively, in the Sit Money Market Fund. The terms
of such transactions were identical to those of non-related entities except
that, to avoid duplicate investment advisory fees, SIA remits to each Fund an
amount equal to all fees otherwise due to them under their investment management
agreement for the assets invested in the Sit Money Market Fund.
51
<PAGE>
SIT MUTUAL FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
INVESTMENT SUB-ADVISER
SIA has entered into a sub-advisory arrangement with an affiliated international
investment adviser, Sit/Kim International Investment Associates, Inc. ("SKI").
SKI provides investment research information and portfolio management service
for the Developing Markets Growth Fund and International Growth Fund. Generally,
as compensation for its services under the sub-advisory agreement, SIA pays SKI
a monthly fee of 1/12 of .75% on the first $100 million of each Fund's average
daily net assets, 1/12 of .50% on the next $100 million of average daily net
assets and 1/12 of .40% of average daily net assets in excess of $200 million.
SKI has agreed to waive any fees under the agreement to the extent that
cumulative out of pocket expenses of each Fund borne by SIA exceed the
cumulative fees received by SIA pursuant to each Fund's investment management
agreement. In accordance with the Agreement, fees of $724,675 were paid or
payable to SKI for the year ended December 31, 1999.
TRANSACTIONS WITH AFFILIATES
The investment adviser, affiliates of the investment adviser, directors and
officers of the Funds as a whole owned the following shares as of December 31,
1999:
% SHARES
SHARES OUTSTANDING
------ -----------
Large Cap Growth Fund 481,547 17.97
Mid Cap Growth Fund 4,483,527 18.18
Small Cap Growth Fund 1,025,761 33.52
Balanced Fund 149,303 19.29
International Growth Fund 1,435,386 27.62
Developing Markets Growth Fund 198,053 19.19
Regional Growth Fund 114,042 20.52
Science and Technology Growth Fund 237,407 23.40
52
<PAGE>
SIT BALANCED FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
NOTE 4 - FINANCIAL HIGHLIGHTS
Per share data for a share of capital stock outstanding during the period and
selected supplemental and ratio information for each period(s), are indicated in
the following highlights for each Fund.
<TABLE>
<CAPTION>
Six Months
Ended
December 31, Years Ended June 30,
1999 ------------------------------------------------------------
(Unaudited) 1999 1998 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE:
Beginning of period $ 17.38 $ 16.68 $ 14.93 $ 12.57 $ 10.99 $ 9.48
- -----------------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income 0.18 .32 .34 .33 .30 .28
Net realized and unrealized gains
(losses) on investments 2.21 1.45 2.99 2.42 1.57 1.50
- -----------------------------------------------------------------------------------------------------------------------------------
Total from operations 2.39 1.77 3.33 2.75 1.87 1.78
- -----------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (.28) (.31) (.35) (.32) (.29) (.27)
From realized gains (.74) (.76) (1.23) (.07) -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Total distributions (1.02) (1.07) (1.58) (.39) (.29) (.27)
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE:
End of period $ 18.75 $ 17.38 $ 16.68 $ 14.93 $ 12.57 $ 10.99
- -----------------------------------------------------------------------------------------------------------------------------------
Total investment return (1) 14.11% 11.25% 23.95% 22.42% 17.26% 19.16%
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000's omitted) $14,512 $12,112 $ 7,422 $ 5,103 $ 4,062 $ 2,444
RATIOS:
Expenses to average daily net assets 1.00%(2) 1.00% 1.00% 1.00% 1.00% 1.00%
Net investment income to average daily net assets 2.10%(2) 2.01% 2.20% 2.48% 2.61% 2.97%
Portfolio turnover rate (excluding short-term securities) 45.94% 89.37% 62.62% 38.16% 101.37% 50.61%
</TABLE>
- -----------
(1) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value.
(2) Percentages are adjusted to an annual rate.
53
<PAGE>
SIT LARGE CAP GROWTH FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Six Months
Ended
December 31, Years Ended June 30,
1999 ----------------------------------------------------------
(Unaudited) 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE:
Beginning of period $ 52.84 $ 49.34 $ 40.39 $ 32.75 $ 28.38 $ 23.89
- ------------------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (.08) (.04) .02 .07 .04 .11
Net realized and unrealized gains
(losses) on investments 11.85 6.96 13.17 10.02 6.61 5.88
- ------------------------------------------------------------------------------------------------------------------------------------
Total from operations 11.77 6.92 13.19 10.09 6.65 5.99
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income .00 (.01) (.07) (.03) (.04) (.09)
From realized gains (3.41) (3.41) (4.17) (2.42) (2.24) (1.41)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (3.41) (3.42) (4.24) (2.45) (2.28) (1.50)
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE:
End of period $ 61.20 $ 52.84 $ 49.34 $ 40.39 $ 32.75 $ 28.38
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return (1) 22.81% 15.10% 35.33% 32.36% 24.48% 26.33%
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000's omitted) $164,033 $140,258 $117,496 $ 72,226 $ 53,017 $ 45,211
RATIOS:
Expenses to average daily net assets 1.00% (3) 1.00% 1.00% 1.00%(2) 1.00%(2) 1.00%(2)
Net investment income (loss) to average daily net assets (0.28%)(3) (0.09%) 0.06% 0.20%(2) 0.14%(2) 0.42%(2)
Portfolio turnover rate (excluding short-term securities) 31.82% 70.51% 43.61% 32.23% 49.99% 67.14%
</TABLE>
- -----------
(1) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value.
(2) During the years ended June 30, 1997, 1996, and 1995, the investment
adviser voluntarily absorbed $50,548, $110,099, and $132,305, respectively,
in expenses that were otherwise payable by the Fund. Had the Fund incurred
these expenses, the ratio of expenses to average daily net assets would
have been 1.08%, 1.23%, and 1.35% for the years ended June 30, 1997, 1996,
and 1995, respectively, and the ratio of net investment income(loss) to
average daily net assets would have been 0.11%, (.09%), and 0.07%,
respectively.
(3) Percentages are adjusted to an annual rate.
54
<PAGE>
SIT REGIONAL GROWTH FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Six Months
Ended Six Months
December 31, Year Ended Ended
1999 June 30, June 30,
(Unaudited) 1999 1998
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE:
Beginning of period $13.17 $11.26 $10.00
- -----------------------------------------------------------------------------------------------------
Operations:
Net investment income (.01) (.01) .02
Net realized and unrealized gains
on investments 1.03 1.94 1.24
- -----------------------------------------------------------------------------------------------------
Total from operations 1.02 1.93 1.26
- -----------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income -- (.02) --
From realized gains -- -- --
- -----------------------------------------------------------------------------------------------------
Total distributions .00 (.02) .00
- -----------------------------------------------------------------------------------------------------
NET ASSET VALUE:
End of period $14.19 $13.17 $11.26
- -----------------------------------------------------------------------------------------------------
Total investment return (1) 7.74% 17.21% 12.60%
- -----------------------------------------------------------------------------------------------------
Net assets at end of period (000's omitted) $7,887 $7,524 $4,982
RATIOS:
Expenses to average daily net assets 1.00% (2) 1.00% (2) 1.00%(2)
Net investment income to average net assets (0.14%)(2) (0.04%)(2) 0.44%(2)
Portfolio turnover rate (excluding short-term securities) 14.00% 68.71% 19.71%
</TABLE>
- ------------
(1) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value.
(2) Percentages for periods ended December 31, 1999 and June 30, 1998 are
adjusted to an annual rate. Total Fund expenses are contractually limited
to 1.25% of average daily net assets. However, during the periods ended
December 31, 1999, June 30, 1999 and 1998, the investment adviser
voluntarily absorbed $9,228, $14,845 and $3,611, respectively, in expenses
that were otherwise payable by the Fund. Had the fund incurred these
expenses, the ratio of expenses to average daily net assets would have been
1.25% for the periods ended December 31, 1999, June 30, 1999 and 1998, and
the ratio of net investment income (loss) to average daily net assets would
have been (0.39%), (0.29%) and 0.19%, respectively.
55
<PAGE>
SIT MID CAP GROWTH FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Six Months
Ended
December 31, Years Ended June 30,
1999 ---------------------------------------------------------------
(Unaudited) 1999 1998 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE:
Beginning of period $ 14.54 $ 16.49 $ 15.43 $ 15.58 $ 13.00 $ 11.08
- -----------------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) (.05) (.06) (.07) (.03) (.04) --
Net realized and unrealized gains
(losses) on investments 7.43 .65 3.15 2.50 4.07 2.96
- -----------------------------------------------------------------------------------------------------------------------------------
Total from operations 7.38 .59 3.08 2.47 4.03 2.96
- -----------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income -- -- -- -- -- --
From realized gains (1.23) (2.54) (2.02) (2.62) (1.45) (1.04)
- -----------------------------------------------------------------------------------------------------------------------------------
Total distributions (1.23) (2.54) (2.02) (2.62) (1.45) (1.04)
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE:
End of period $ 20.69 $ 14.54 $ 16.49 $ 15.43 $ 15.58 $ 13.00
- -----------------------------------------------------------------------------------------------------------------------------------
Total investment return (1) 51.87% 6.94% 22.19% 17.23% 33.00% 28.44%
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000's omitted) $510,457 $375,343 $404,327 $386,543 $356,317 $327,879
RATIOS:
Expenses to average daily net assets 1.00% (2) 1.00% (2) 1.00% (2) 0.92% (2) 0.77% 0.83%
Net investment income (loss) to average daily
net assets (0.60%)(2) (0.46%)(2) (0.41%)(2) (0.20%)(2) (0.23%) 0.02%
Portfolio turnover rate (excluding short-term
securities) 33.93% 68.62% 52.62% 38.66% 50.38% 75.40%
</TABLE>
- -----------
(1) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value.
(2) Percentages for the period ended December 31, 1999 are adjusted to an
annual rate. Effective November 1, 1996, total Fund expenses are
contractually limited to 1.25% of average daily net assets. However, during
the period ended December 31, 1999, and the years ended June 30, 1999, 1998
and 1997, the investment adviser voluntarily absorbed $517,751, $865,657,
$1,004,074, and $609,840, respectively, in expenses that were otherwise
payable by the Fund. Had the Fund incurred these expenses, the ratio of
expenses to average daily net assets would have been 1.25%, 1.25%, 1.25%,
and 1.09% for the period ended December 31, 1999, and the years ended June
30, 1999, 1998 and 1997, respectively, and the ratio of net investment
income (loss) to average daily net assets would have been (0.85%), (0.71%),
(0.66%) and (0.37%), respectively.
56
<PAGE>
SIT INTERNATIONAL GROWTH FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Six Months
Ended
December 31, Years Ended June 30,
1999 -----------------------------------------------------------------
(Unaudited) 1999 1998 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE:
Beginning of period $ 18.77 $ 19.14 $ 18.57 $ 16.29 $ 15.71 $ 14.87
- -----------------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) (.06) (.07) .02 .01 .02 .09
Net realized and unrealized gains
on investments 9.00 .84 1.25 2.70 1.50 1.06
- -----------------------------------------------------------------------------------------------------------------------------------
Total from operations 8.94 .77 1.27 2.71 1.52 1.15
- -----------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (.23) (.06) (.03) (.01) (.09) (.04)
From realized gains (1.28) (1.08) (.67) (.42) (.85) (.27)
- -----------------------------------------------------------------------------------------------------------------------------------
Total distributions (1.51) (1.14) (.70) (.43) (.94) (.31)
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE:
End of period $ 26.20 $ 18.77 $ 19.14 $ 18.57 $ 16.29 $ 15.71
- -----------------------------------------------------------------------------------------------------------------------------------
Total investment return (1) 48.20% 4.51% 7.50% 17.04% 10.21% 7.86%
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000's omitted) $136,158 $ 94,982 $ 99,721 $ 99,279 $ 88,712 $ 68,125
RATIOS:
Expenses to average daily net assets 1.50% (2) 1.50% (2) 1.50%(2) 1.50%(2) 1.50%(2) 1.50%(2)
Net investment income (loss) to average daily
net assets (0.72%)(2) (0.37%)(2) 0.12%(2) 0.05%(2) 0.13%(2) 0.62%(2)
Portfolio turnover rate (excluding short-term
securities) 15.86% 45.91% 43.74% 41.59% 38.55% 40.42%
</TABLE>
- -----------
(1) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value.
(2) Percentages for the period ended December 31, 1999, are adjusted to an
annual rate. Total Fund expenses are contractually limited to 1.85% of
average daily net assets. However, during the period ended December 31,
1999, and the years ended June 30, 1999, 1998, 1997, 1996, and 1995, the
investment adviser voluntarily absorbed $186,879, $325,038, $338,651,
$306,575, $269,556, and $228,795, respectively, in expenses that were
otherwise payable by the fund. Had the Fund incurred these expenses, the
ratio of expenses to average daily net assets would have been 1.85% for the
period ended December 31, 1999, and the years ended June 30, 1999, 1998,
1997, 1996, and 1995, and the ratio of net investment income (loss) to
average daily net assets would have been (1.07%), (0.72%), (0.23%),
(0.30%), (0.22%), and 0.27%, respectively.
57
<PAGE>
SIT SMALL CAP GROWTH FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Six Months
Ended
December 31, Years Ended June 30,
1999 ----------------------------------------------------------
(Unaudited) 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE:
Beginning of period $ 18.28 $ 20.35 $ 18.89 $ 19.27 $ 13.49 $ 10.00
- ------------------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment loss (.11) (.18) (.17) (.14) (.11) (.02)
Net realized and unrealized gains
on investments 15.44 1.20 2.31 .57 6.03 3.56
- ------------------------------------------------------------------------------------------------------------------------------------
Total from operations 15.33 1.02 2.14 .43 5.92 3.54
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From realized gains -- (3.09) (.68) (.81) (.14) (.05)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions -- (3.09) (.68) (.81) (.14) (.05)
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE:
End of period $ 33.61 $ 18.28 $ 20.35 $ 18.89 $ 19.27 $ 13.49
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return (1) 83.86% 8.77% 11.70% 2.37% 44.13% 35.59%
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000's omitted) $102,857 $ 50,335 $ 57,472 $ 58,358 $ 50,846 $ 12,015
RATIOS:
Expenses to average daily net assets 1.50% (2) 1.50% 1.50% 1.50% 1.50% 1.50%
Net investment income (loss) to average daily net assets (1.08%)(2) (1.08%) (0.72%) (0.81%) (0.91%) (0.30%)
Portfolio turnover rate (excluding short-term securities) 26.79% 71.84% 79.54% 58.39% 69.92% 49.39%
</TABLE>
- ------------
(1) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value.
(2) Percentages are adjusted to an annual rate.
58
<PAGE>
SIT SCIENCE AND TECHNOLOGY GROWTH FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Six Months
Ended Six Months
December 31, Year Ended Ended
1999 June 30, June 30,
(Unaudited) 1999 1998
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE:
Beginning of period $ 15.23 $ 11.77 $ 10.00
- ------------------------------------------------------------------------------------------------------------
Operations:
Net investment income (.09) (.07) (.01)
Net realized and unrealized gains
on investments 10.60 3.53 1.78
- ------------------------------------------------------------------------------------------------------------
Total from operations 10.51 3.46 1.77
- ------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income -- -- --
From realized gains -- -- --
- ------------------------------------------------------------------------------------------------------------
Total distributions .00 .00 .00
- ------------------------------------------------------------------------------------------------------------
NET ASSET VALUE:
End of period $ 25.74 $ 15.23 $ 11.77
- ------------------------------------------------------------------------------------------------------------
Total investment return (1) 69.01% 29.40% 17.70%
- ------------------------------------------------------------------------------------------------------------
Net assets at end of period (000's omitted) $26,108 $14,194 $ 4,858
RATIOS:
Expenses to average daily net assets 1.25% (2) 1.25% (2) 1.25% (2)
Net investment income to average net assets (1.00%)(2) (0.72%)(2) (0.21%)(2)
Portfolio turnover rate (excluding short-term securities) 19.39% 58.29% 19.37%
</TABLE>
- ------------
(1) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value.
(2) Percentages for periods ended December 31, 1999 and June 30, 1998 are
adjusted to an annual rate. Total Fund expenses are contractually limited
to 1.50% of average daily net assets. However, during the periods ended
December 31, 1999, June 30, 1999 and 1998, the investment adviser
voluntarily absorbed $22,037, $22,008 and $4,655, respectively, in expenses
that were otherwise payable by the Fund. Had the fund incurred these
expenses, the ratio of expenses to average daily net assets would have been
1.50% for the periods ended December 31, 1999, June 30, 1999 and 1998, and
the ratio of net investment income (loss) to average daily net assets would
have been (1.25%), (0.97%) and (0.46%), respectively.
59
<PAGE>
SIT DEVELOPING MARKETS GROWTH FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Six Months
Ended
December 31, Years Ended June 30,
1999 -------------------------------------------------------
(Unaudited) 1999 1998 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE:
Beginning of period $ 9.98 $ 9.05 $ 13.04 $ 10.95 $ 9.41 $ 10.00
- -----------------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) -- -- (.06) .03 -- --
Net realized and unrealized gains
(losses) on investments 4.20 .93 (3.92) 2.06 1.55 (.54)
- -----------------------------------------------------------------------------------------------------------------------------------
Total from operations 4.20 .93 (3.98) 2.09 1.55 (.54)
- -----------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income -- -- (.01) -- -- --
From realized gains -- -- -- -- (.01) (.05)
- -----------------------------------------------------------------------------------------------------------------------------------
Total distributions -- -- (.01) -- (.01) (.05)
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE:
End of period $ 14.18 $ 9.98 $ 9.05 $ 13.04 $ 10.95 $ 9.41
- -----------------------------------------------------------------------------------------------------------------------------------
Total investment return (1) 42.08% 10.28% (30.52%) 19.09% 16.51% (5.44%)
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000's omitted) $14,635 $11,338 $11,505 $16,789 $ 8,646 $ 4,618
RATIOS:
Expenses to average daily net assets 2.00% (2) 2.00% 2.00% 2.00% 2.00% 2.00%
Net investment income (loss) to average daily net assets (0.05%)(2) (0.05%) (0.52%) 0.32% 0.06% 0.03%
Portfolio turnover rate (excluding short-term securities) 27.56% 98.24% 53.36% 65.88% 46.22% 56.35%
</TABLE>
- ------------
(1) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value.
(2) Percentages are adjusted to an annual rate.
60
<PAGE>
SIT MUTUAL FUNDS
- --------------------------------------------------------------------------------
RESULTS OF THE SHAREHOLDER MEETING
The annual meeting of the shareholders of the Funds was held on October 26,
1999. Directors elected by the shareholders at the meeting were as follows:
Eugene C. Sit, Peter L. Mitchelson, William E. Frenzel, John E. Hulse, Sidney L.
Jones, and Donald W. Phillips for all Funds and Michael C. Brilley for the Sit
bond funds only.
The matters voted on by the shareholders of record as of August 25, 1999 and the
results of the shareholders' vote at the October 26, 1999 meeting were as
follows:
1. Election of Directors:
For Withheld
--- --------
Eugene C. Sit
Large Cap Growth 1,584,815 15,449
Mid Cap Growth 16,122,299 68,696
Small Cap Growth 2,042,807 4,444
Balanced 339,896 3,747
Regional Growth 405,167 2,690
Science and Technology Growth 647,082 1,651
International Growth 2,954,786 7,498
Developing Markets Growth 714,539 3,496
William E. Frenzel
Large Cap Growth 1,584,815 15,449
Mid Cap Growth 16,070,728 120,267
Small Cap Growth 2,041,437 5,814
Balanced 336,421 7,222
Regional Growth 405,006 2,851
Science and Technology Growth 645,937 2,796
International Growth 2,945,616 7,668
Developing Markets Growth 714,539 3,496
John E. Hulse
Large Cap Growth 1,594,548 15,715
Mid Cap Growth 16,102,501 88,494
Small Cap Growth 2,042,807 4,444
Balanced 337,035 6,608
Regional Growth 405,005 2,852
Science and Technology Growth 647,082 1,651
International Growth 2,954,786 7,498
Developing Markets Growth 714,480 3,555
61
<PAGE>
SIT MUTUAL FUNDS
- --------------------------------------------------------------------------------
RESULTS OF THE SHAREHOLDER MEETING (CONTINUED)
For Withheld
--- --------
Sidney L. Jones
Large Cap Growth 1,585,006 15,257
Mid Cap Growth 16,108,198 82,797
Small Cap Growth 2,041,677 5,574
Balanced 336,421 7,222
Regional Growth 405,005 2,852
Science and Technology Growth 645,777 2,956
International Growth 2,954,687 7,597
Developing Markets Growth 714,480 3,555
Peter L. Mitchelson
Large Cap Growth 1,584,816 15,447
Mid Cap Growth 16,122,152 68,843
Small Cap Growth 2,042,807 4,444
Balanced 337,035 6,608
Regional Growth 405,167 2,690
Science and Technology Growth 645,912 2,821
International Growth 2,954,616 7,668
Developing Markets Growth 714,480 3,555
Donald W. Phillips
Large Cap Growth 1,583,241 17,022
Mid Cap Growth 16,121,796 69,199
Small Cap Growth 2,041,885 5,366
Balanced 337,035 6,608
Regional Growth 404,844 3,013
Science and Technology Growth 645,912 2,821
International Growth 2,954,786 7,498
Developing Markets Growth 714,480 3,555
2. Ratification of KPMG LLP as independent auditors for the Funds:
For Against Abstain
--- ------- -------
Large Cap Growth 1,588,906 5,945 5,411
Mid Cap Growth 16,106,855 24,083 60,057
Small Cap Growth 2,030,257 10,686 6,308
Balanced 339,368 926 3,349
Regional Growth 402,908 1,686 3,263
Science and Technology Growth 644,922 1,025 2,786
International Growth 2,942,545 12,657 7,092
Developing Markets Growth 706,257 11,078 700
62
<PAGE>
[LOGO]
Directors:
Eugene C. Sit, CFA
Peter L. Mitchelson, CFA
William E. Frenzel
John E. Hulse
Sidney L. Jones
Donald W. Phillips
Director Emeritus:
Melvin C. Bahle
Officers:
Eugene C. Sit, CFA Chairman
Peter L. Mitchelson, CFA Vice Chairman
Mary K. Stern, CFA President
Roger J. Sit Executive Vice President
Erik S. Anderson, CFA Vice President - Investments
Ronald D. Sit, CFA Vice President - Investments
Bryce A. Doty, CFA (1) Vice President - Investments
Robert W. Sit (2) Vice President - Investments
John T. Groton, Jr., CFA (3) Vice President - Investments
Paul E. Rasmussen Vice President & Treasurer
Michael P. Eckert Vice President
Michael J. Radmer Secretary
Debra A. Sit, CFA Assistant Treasurer
Carla J. Rose Assistant Secretary
(1) Sit Balanced Fund only.
(2) Sit Science and Technology Growth Fund only.
(3) Sit Regional Growth Fund only.
<PAGE>
SEMI-ANNUAL REPORT STOCK FUNDS
SIX MONTHS ENDED DECEMBER 31, 1999
INVESTMENT ADVISER AUDITORS
SIT INVESTMENT ASSOCIATES, INC. KPMG LLP
4600 NORWEST CENTER 4200 NORWEST CENTER
MINNEAPOLIS, MN 55402 MINNEAPOLIS, MN 55402
612-334-5888 (METRO AREA)
800-332-5580
LEGAL COUNSEL
DISTRIBUTOR DORSEY & WHITNEY LLP
220 SOUTH SIXTH STREET
SIA SECURITIES CORP. MINNEAPOLIS, MN 55402
4600 NORWEST CENTER
MINNEAPOLIS, MN 55402
612-334-5888 (METRO AREA) INVESTMENT SUB-ADVISER
800-332-5580
(DEVELOPING MARKETS GROWTH FUND AND
INTERNATIONAL GROWTH FUND)
CUSTODIAN SIT/KIM INTERNATIONAL INVESTMENT
ASSOCIATES, INC.
THE NORTHERN TRUST COMPANY 4600 NORWEST CENTER
50 SOUTH LASALLE STREET MINNEAPOLIS, MN 55402
CHICAGO, IL 60675 612-334-5888 (METRO AREA)
800-332-5580
TRANSFER AGENT AND
DISBURSING AGENT
FIRST DATA INVESTOR SERVICES
P.O. BOX 5166
WESTBORO, MA 01581-5166
[LOGO]
SIT MUTUAL FUNDS
----------------
THE INVESTMENT IS MUTUAL(SM)
