N-CSR
1
ncsr-603.txt
SIT MUTUAL FUNDS, INC.
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
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CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-06373
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Sit Mutual Funds, Inc.
(Exact name of registrant as specified in charter)
4600 Wells Fargo Center
90 South Seventh Street
Minneapolis, Mn 55402
(Address of principal executive offices)
Paul E. Rasmussen, VP Treasurer
Sit Mutual Funds, Inc.
4600 Wells Fargo Center
90 South Seventh Street
Minneapolis, Mn 55402
(Name and address of agent for service)
Copy to:
Mike Radmer, Esq.
Dorsey & Whitney
Suite 1500
50 South Sixth Street
Minneapolis, MN 55402-1498
Registrant's telephone number, including area code:
(612) 344-5888
Date of fiscal year end: June 30, 2003
Date of reporting period: June 30, 2003
Item 1: Reports to Stockholders
SIT MUTUAL FUNDS
STOCK FUNDS
ANNUAL REPORT
YEAR ENDED JUNE 30, 2003
A FAMILY OF NO-LOAD FUNDS
-------------------------
BALANCED FUND
LARGE CAP GROWTH FUND
MID CAP GROWTH FUND
INTERNATIONAL GROWTH FUND
SMALL CAP GROWTH FUND
SCIENCE AND TECHNOLOGY GROWTH FUND
DEVELOPING MARKETS GROWTH FUND
[LOGO] SIT INVESTMENT ASSOCIATES
-------------------------
SIT MUTUAL FUNDS
SIT MUTUAL FUNDS
STOCK FUNDS ANNUAL REPORT
TABLE OF CONTENTS
PAGE
Chairman's Letter
2
Performance Summary and Stock Funds Market Review
4
Average Annual Total Returns
6
FUND REVIEWS AND PORTFOLIOS OF INVESTMENTS
Balanced Fund
8
Large Cap 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
47
Financial Highlights
54
Independent Auditors' Report
61
Information About Directors and Officers
62
Federal Tax Information
66
A Look at Sit Mutual Funds
67
1
SIT MUTUAL FUNDS
ONE YEAR ENDED JUNE 30, 2003
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CHAIRMAN'S LETTER
Dear Fellow Shareholders:
Global equity markets have climbed higher in recent months due to a
combination
of diminishing risks and prospects for a significantly better economy in
the
months ahead. We remain particularly optimistic on the outlook for growth
stocks, given the improvements in investor sentiment, attractive
valuations, and
signs of improving business conditions in the important technology sector.
ECONOMIC OVERVIEW
Although the performance of the U.S. economy has not been as robust as
expected
following the war with Iraq, all the pieces are in place for a strong
rebound in
the second half of 2003, with momentum carrying into 2004. Gross Domestic
Product (GDP) was a mere +1.4% in the first quarter of 2003, but we believe
more
recent economic data suggest that the economy is picking up steam. Monthly
data
for consumer spending, for example, point to an improvement from the first
quarter rate of growth. Moreover, the stimulative effect of the Bush
Administration's tax package, combined with ongoing low interest rates and
higher stock prices, should contribute to the momentum in the months ahead.
A
strengthening consumer, solid government spending, and slowly improving
business
investment are among the key factors supporting our second half 2003 GDP
forecast of +3.5%.
While inflation data continues to come in at very moderate levels, we
believe
the near-term fears over deflation are overstated. As discussed, the
recently
enacted tax bill will drive economic growth, which will serve to reduce the
excess production capacity that is crimping manufacturers' pricing power.
Moreover, it is important to remember that the economy is increasingly
service-oriented, and prices in this sector have been rising +3%. Despite
our
expectation that inflation will remain well under control, it is our belief
that
interest rates will climb slowly higher over the next few months,
reflecting a
stronger economy and the fact that the Federal Reserve has cut rates to
extraordinarily low levels in its efforts to revive the economy. In this
regard,
however, we do not expect the Federal Reserve to RAISE short-term interest
rates
in the foreseeable future, based on its clear goal of stemming deflationary
risks and ensuring the economy is on a sustainable growth path.
The $350 billion Jobs and Growth Tax Relief and Reconciliation Act of 2003
is
the third largest tax cut in U.S. history and should provide more than $150
billion in consumer and business tax relief over the next sixteen months.
The
law also contains reductions in taxes on dividends and capital gains that
have
positive implications for investors in the stock market. Even though state
and
local budgets are a drag on the economy, we believe the federal package
still
produces a net positive effect of +1% in GDP in both 2003 and 2004. The
downside, of course, is that it will accelerate the federal deficit, which
is
estimated to be between $400 billion and $425 billion for 2003.
EQUITY STRATEGY SUMMARY
Domestic equities have produced solid returns so far in 2003, as many of
the
uncertainties that have faced investors over the past three difficult years
have
finally begun to diminish. First, the worst of the news related to
corporate
governance, though never completely absent, seems to have already played
out in
2002 and early-2003. Second, following the successful war in Iraq, the
geopolitical environment appears to have stabilized. Third, the prospects
for an
economic recovery are brighter than ever in light of low interest rates,
considerable monetary and fiscal stimuli, and early signs that business
investment has finally turned the corner.
Despite the sluggish economic backdrop, U.S. corporate
2
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profits posted solid gains during the first quarter of 2003 and have
actually
been improving since the third quarter of 2002. Even with lackluster
revenue
growth, the combination of low interest rates, productivity gains, and cost
reductions have led to impressive gains in earnings, particularly in the
first
quarter of 2003. We believe that once improvements in the economy begin to
manifest in better revenues for corporate America, earnings will surprise
on the
upside and provide the basis for continued strength in stock prices.
Although
equity valuations may still edge higher from their current levels, we
believe
that earnings will be the key driver for stocks in the months ahead.
Absolute
valuations, while definitely more attractive than three years ago, remain
"acceptable" versus current interest rates, but cannot be considered
"cheap" by
historical standards, with the S&P 500 Index trading at a price-earnings
ratio
of 19x (based on 2003 earnings). There are reasons, however, for supporting
the
notion that higher valuations may persist for quite some time. First, there
are
sizable pools of cash "on the sidelines" that are earnings subpar rates of
return, given the low interest rate environment. Second, low inflation and
lower
capital gains taxes also support a continuation of above-average P/E ratios
for
stocks. Finally, it is not unusual for valuations to be higher than average
at
the beginning of an upturn in the economy, as investors realize that
earnings
(the "E" in the P/E ratio) are TEMPORARILY depressed by economic
conditions.
Growth stocks have rallied sharply thus far in 2003, and we continue to
believe
that the environment remains attractive for both strong relative (to value)
and
absolute performance of the growth style. While the breadth of the current
market rally has been particularly encouraging, we believe the most
significant
potential rests in those sectors most likely to benefit from a stronger
economy.
In particular, we have added to our positions in the beleaguered technology
sector in recent months, as our analysts are beginning to identify
improvement
in orders in many technology-related end markets. The healthcare segment
also
remains an area of focus, as there are numerous attractive investments in
companies developing new drugs, medical instruments, and services to keep
up
with the nation's ever-increasing demand for better healthcare.
We are also increasingly optimistic about investment opportunities outside
the
U.S. The same factors supporting a U.S. recovery, including low interest
rates
and global monetary and fiscal policies, hold true in many economies around
the
world. Specifically, we have added to our weightings in Asia in order to
capitalize on a "post SARS" recovery in the regions and a slightly more
optimistic outlook for economic and fiscal improvements in Japan. We remain
significantly underweighted in Europe, based, in part, on concerns that the
stronger euro may weaken the competitive position of the region's key
export
sector.
Other areas with bright prospects include finance (due to continued low
interest
rates, strong capital markets), energy (based on a natural gas supply
shortage),
and retail (based on accelerating consumer spending).
With best wishes,
/s/ Eugene C. Sit
Eugene C. Sit, CFA
Chairman and Chief Investment Officer
3
SIT MUTUAL FUNDS
ONE YEAR ENDED JUNE 30, 2003
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PERFORMANCE SUMMARY AND STOCK FUNDS MARKET REVIEW
Domestic equity returns generally were mixed over the past 12 months,
but the
year was marked by extreme weakness in the first quarter of the period and
gathering strength since then, including solid double-digit gains in the
latest
quarter. The third quarter of 2002 was particularly challenging, as most
indices
fell -15% or more. Since the end of that quarter, which ended just prior to
the
October 2002 low mark for many indices, equity returns have been very
strong by
all measures.
In contrast to numerous prior periods, small and mid-capitalization
stocks
trailed larger issues, albeit by a small differential. Over the past twelve
months, the S&P 500 Index rose 0.3%, while the S&P 400 MidCap Index and the
Russell 2000 Index fell -0.7% and -1.6%, respectively. In another change of
leadership, growth stocks outperformed value issues over the period across
all
capitalization styles. For example, the Russell 1000 Growth Index rose
+2.9%
over the past year, while the Russell 1000 Value fell -1.0%, and the
Russell
2000 Growth Index (+0.7% for the period) outperformed the Russell 2000
Value
(-3.8%) by 450 basis points. The difference was most striking in the mid
cap
sector, where the Russell Mid Cap Growth Index return of +7.4% exceeded the
- - -0.6% return for its value counterpart by a full eight percentage points.
There was a particularly wide differential in sector performance over
the
past twelve months, with traditional "growth" sectors generally posting
solid
returns. For example, within the S&P 500 Index, sectors that outperformed
the
overall index over the period include health technology, electronic
technology,
and communications. Sectors that lagged the broader market included
consumer
durables, energy minerals, retail trade, and health services.
In contrast to the U.S., global indices generally posted modest declines
over
the past twelve months. The broadest measure of global equity performance,
the
MSCI World Index, fell -2.4% over the twelve-month period. The MSCI Europe
Index
decreased -5.2% over the period. The MSCI Pacific Index fell -9.6%, weighed
down
by the heavily weighted Japanese component, which fell -14.6%.
TOTAL RETURN - CALENDAR YEAR
1991 1992
1993
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SIT BALANCED -- --
- --
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SIT LARGE CAP GROWTH 32.72% 4.94%
3.15%
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SIT MID CAP GROWTH(1) 65.50 -2.14
8.55
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SIT INTERNATIONAL GROWTH(2) 4.10(4) 2.69
48.37
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SIT SMALL CAP GROWTH(1) -- --
- --
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- -------
SIT SCIENCE AND TECHNOLOGY GROWTH(3) -- --
- --
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- -------
SIT DEVELOPING MARKETS GROWTH(2) -- --
- --
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- -------
S&P 500 INDEX 30.46 7.64
10.07
S&P MIDCAP 400 INDEX 50.11 11.92
13.95
MSCI EAFE INDEX 0.26(5) -12.17
32.56
RUSSELL 2000 INDEX -- --
- --
MSCI EMERGING MARKETS
FREE INDEX -- --
- --
NASDAQ
SYMBOL INCEPTION
------ ---------
SIT BALANCED SIBAX 12/31/93
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SIT LARGE CAP GROWTH SNIGX 09/02/82
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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(6)
RUSSELL 2000 INDEX(7)
MSCI EMERGING MARKETS FREE INDEX(8)
(1) STOCKS OF SMALL- AND MID-SIZED COMPANIES MAY BE SUBJECT TO MORE ABRUPT
OR
ERRATIC MARKET MOVEMENTS THAN STOCKS OF LARGER, MORE ESTABLISHED
COMPANIES.
(2) INTERNATIONAL INVESTING HAS SPECIAL RISKS, SUCH AS CURRENCY EXCHANGE
FLUCTUATIONS, HIGH VOLITILITY, ILLIQUIDITY AND THE POSSIBILITY OF
POLITICAL
INSTABILITY.
(3) SINCE THE FUND FOCUSES ITS INVESTMENT ON COMPANIES INVOLVED IN THE
TECHNOLOGY SECTOR, AN INVESTMENT IN THE FUND MAY INVOLVE A GREATER
DEGREE
OF RISK THAN AN INVESTMENT IN OTHER MUTUAL FUNDS WITH GREATER
DIVERSIFICATION.
(4) PERIOD FROM FUND INCEPTION THROUGH CALENDAR YEAR-END.
4
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TOTAL RETURN - CALENDAR YEAR
YTD
1994 1995 1996 1997
1998 1999 2000 2001 2002 2003
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SIT BALANCED -0.33% 25.43% 15.80% 21.73%
21.30% 20.15% -4.80% -12.99% -18.59% 9.62%
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- -----------------------------------------------------------
SIT LARGE CAP GROWTH 2.83 31.66 23.05 31.70
30.56 33.41 -13.84 -27.70 -30.58 12.49
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- -----------------------------------------------------------
SIT MID CAP GROWTH(1) -0.47 33.64 21.87 17.70
6.84 70.65 -4.35 -33.39 -34.64 18.01
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SIT INTERNATIONAL GROWTH(2) -2.99 9.36 10.31 4.81
18.95 50.77 -26.66 -33.26 -29.84 7.07
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SIT SMALL CAP GROWTH(1) 11.57(4) 52.16 14.97 7.63
1.97 108.63 6.25 -28.19 -26.22 16.34
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SIT SCIENCE AND TECHNOLOGY GROWTH(3) -- -- -- --
38.40 85.98 -6.55 -47.78 -44.45 19.08
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- -----------------------------------------------------------
SIT DEVELOPING MARKETS GROWTH(2) -2.02(4) -4.29 -17.27 -5.20
- -24.93 82.50 -30.18 -12.01 -18.37 14.21
- - -------------------------------------------------------------------------
- -----------------------------------------------------------
S&P 500 INDEX 1.32 37.58 22.96 33.36
28.58 21.04 -9.11 -11.88 -22.10 11.76
S&P MIDCAP 400 INDEX -3.60 30.94 19.19 32.29
19.11 14.72 17.50 -0.61 -14.52 12.41
MSCI EAFE INDEX 7.78 11.21 6.05 1.78
20.00 26.96 -14.17 -21.44 -15.94 9.47
RUSSELL 2000 INDEX 4.61 28.45 16.49 22.36
- -2.54 21.26 -3.02 2.49 -20.48 17.88
MSCI EMERGING MARKETS FREE INDEX 2.80 -6.94 3.92 -13.40
- -27.52 63.70 -31.80 -4.91 -7.97 13.90
AVERAGE ANNUAL TOTAL RETURNS FOR THE
TOTAL RETURN
PERIODS ENDED JUNE 30, 2003
QUARTER SIX MONTHS
SINCE
ENDED 6/30/03 ENDED 6/30/03
1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION
SIT BALANCED 9.72% 9.62%
4.43% 10.41% -1.26% -- 6.98%
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SIT LARGE CAP GROWTH 14.50 12.49
1.97 -22.38 -7.22 6.77% 10.78
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SIT MID CAP GROWTH 16.81 18.01
1.90 -24.44 -4.41 6.42 13.09
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SIT INTERNATIONAL GROWTH 16.50 7.07
- -12.97 -25.80 -10.65 0.65 2.16
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SIT SMALL CAP GROWTH 20.02 16.34
2.75 -18.95 5.55 -- 12.67
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SIT SCIENCE AND TECHNOLOGY GROWTH 19.61 19.08
7.05 -37.10 -6.73 -- -3.31
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SIT DEVELOPING MARKETS GROWTH 19.41 14.21
0.25 -15.44 -2.14 -- -2.21
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- -----------------------------------------------------------
S&P 500 INDEX(5) 15.39 11.76
0.25 -11.20 -1.61 10.04 13.68
S&P MIDCAP 400 INDEX(5) 17.63 12.41
- -0.71 0.99 7.14 12.65 16.03
MSCI EAFE INDEX(6) 19.27 9.47
- -6.46 -13.52 -4.00 2.78 3.10
RUSSELL 2000 INDEX(7) 23.42 17.88
- -1.64 -3.30 0.97 -- 8.64
MSCI EMERGING MARKETS FREE INDEX(8) 22.19 13.90
4.04 -9.28 0.13 -- -3.97
(5) FIGURES ASSUME AN INCEPTION DATE OF 09/02/82.
(6) FIGURES ASSUME AN INCEPTION DATE OF 10/31/91.
(7) FIGURES ASSUME AN INCEPTION DATE OF 07/01/94.
(8) FIGURES ASSUME AN INCEPTION DATE OF 06/30/94.
PERFORMANCE FIGURES ARE HISTORICAL AND DO NOT GUARANTEE FUTURE RESULTS.
INVESTMENT RETURNS AND PRINCIPAL VALUE WILL VARY, AND YOU MAY HAVE A GAIN
OR
LOSS WHEN YOU SELL SHARES. AVERAGE ANNUAL TOTAL RETURNS INCLUDE CHANGES IN
SHARE
PRICE AS WELL AS REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAINS.
5
SIT MUTUAL FUNDS
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AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDED DECEMBER 31, 2002
The tables on this page and the next page show the Funds' average annual
total
returns (before and after taxes) and the change in value of a broad-based
market
index over various periods ended December 31, 2002. The index information
is
intended to permit you to compare each Fund's performance to a broad
measure of
market performance. The after-tax returns are intended to show the impact
of
federal income taxes on an investment in a Fund. The highest individual
federal
marginal income tax rate in effect during the specified period are assumed,
and
the state and local tax impact is not reflected.
A Fund's "Return After Taxes on Distributions" shows the effect of taxable
distributions (dividends and capital gain distributions), but assumes that
you
still hold the fund shares at the end of the period and so do not have any
taxable gain or loss on your investment in the Fund.
A Fund's "Return After Taxes on Distributions and Sale of Fund Shares"
shows the
effect of both taxable distributions and any taxable gain or loss that
would be
realized if the Fund shares were purchased at the beginning and sold at the
end
of the specified period.
The Funds' past performance, before and after taxes, is not an indication
of how
the Funds will perform in the future. Your actual after-tax returns depend
on
your own tax situation and may differ from those shown. After-tax returns
reflect past tax effects and are not predictive of future tax effects.
After-tax
returns are not relevant to investors who hold their Fund shares in a
tax-deferred account (including a 401(k) or IRA account).
- - -------------------------------------------------------------------------
- ----------------------------------
SIT BALANCED FUND 1 YEAR
5 YEARS SINCE INCEPTION*
Return Before Taxes -18.6%
- -0.4% 6.3%
Return After Taxes on Distributions -19.5%
- -1.7% 4.8%
Return After Taxes on Distributions and Sale of Fund Shares -15.3%
- -0.6% 4.7%
S&P 500 Index -22.1%
- -0.6% 9.3%
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- ----------------------------------
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- ----------------------------------
SIT LARGE CAP GROWTH FUND 1 YEAR
5 YEARS 10 YEARS
Return Before Taxes -30.6%
- -5.5% 5.5%
Return After Taxes on Distributions -30.6%
- -6.4% 3.9%
Return After Taxes on Distributions and Sale of Fund Shares -24.5%
- -3.7% 4.5%
S&P 500 Index -22.1%
- -0.6% 9.3%
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- ----------------------------------
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- ----------------------------------
SIT MID CAP GROWTH FUND 1 YEAR
5 YEARS 10 YEARS
Return Before Taxes -34.6%
- -5.4% 4.6%
Return After Taxes on Distributions -34.6%
- -7.1% 2.3%
Return After Taxes on Distributions and Sale of Fund Shares -27.7%
- -3.1% 4.3%
S&P MidCap 500 Index -14.5%
6.4% 12.0%
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6
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- ----------------------------------
SIT INTERNATIONAL GROWTH FUND 1 YEAR
5 YEARS 10 YEARS
Return Before Taxes -29.8%
- -9.2% 1.2%
Return After Taxes on Distributions -29.8%
- -9.8% 0.4%
Return After Taxes on Distributions and Sale of Fund Shares -23.9%
- -6.7% 1.1%
MSCI EAFE Index -15.9%
- -2.9% 4.0%
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- ----------------------------------
- - -------------------------------------------------------------------------
- ----------------------------------
SIT SMALL CAP GROWTH FUND 1 YEAR
5 YEARS SINCE INCEPTION*
Return Before Taxes -26.2%
3.7% 11.5%
Return After Taxes on Distributions -26.2%
2.9% 10.6%
Return After Taxes on Distributions and Sale of Fund Shares -21.0%
2.9% 9.6%
Russell 2000 Index 20.5%
- -1.4% 7.1%
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- ----------------------------------
*Inception date 7/1/94.
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- ----------------------------------
SIT SCIENCE AND TECHNOLOGY GROWTH FUND 1 YEAR
5 YEARS SINCE INCEPTION*
Return Before Taxes -44.5%
N/A -6.9%
Return After Taxes on Distributions -44.5%
N/A -7.1%
Return After Taxes on Distributions and Sale of Fund Shares -35.6%
N/A -5.1%
S&P 500 Index -22.1%
N/A -0.6%
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- ----------------------------------
*Inception date 12/31/97.
- - -------------------------------------------------------------------------
- ----------------------------------
SIT DEVELOPING MARKETS GROWTH FUND 1 YEAR
5 YEARS SINCE INCEPTION*
Return Before Taxes -18.4%
- -7.2% -3.9%
Return After Taxes on Distributions -18.4%
- -7.2% -3.9%
Return After Taxes on Distributions and Sale of Fund Shares -14.7%
- -5.6% -2.9%
MSCI Emerging Markets Free Index -8.0%
- -6.7% -5.7%
- - -------------------------------------------------------------------------
- ----------------------------------
*Inception date 7/1/94.
7
SIT BALANCED FUND
ONE YEAR ENDED JUNE 30, 2003
[PHOTO]--------------------------------------------------------------------
- -----
PETER L. MITCHELSON, CFA, SENIOR PORTFOLIO MANAGER
BRYCE A. DOTY, CFA, SENIOR PORTFOLIO MANAGER
The Sit Balanced Fund's past fiscal year return was +4.4%, while the
Lipper
Balanced Fund Index increased +3.5%. The S&P 500 Index return was +0.3%,
while
the Lehman Aggregate Bond Index increased +10.4%.
EQUITY OUTLOOK: EARNINGS GROWTH SHOULD DRIVE STOCKS TO NEXT LEVEL
Following a difficult third quarter of 2002, equities have gained
momentum
over the past three quarters as investor concerns have diminished over war,
corporate governance, and economic conditions. While stocks are not as
undervalued as they were at the market bottom, we believe valuations remain
reasonable, particularly given the low level of interest rates. In
addition, the
prospects for economic growth have clearly improved, given the sizable tax
cuts,
continued low interest rates, and recent gains in consumer confidence.
Corporate
profits have already begun to turn higher, largely driven by cost-cutting
efforts and productivity gains. As revenue growth resumes, concurrent with
better economic activity, cost-cutting efforts should have even more
dramatic
impact on corporate profitability. Thus, we believe strong earnings growth
will
drive equity returns higher in the second half of 2003.
FIXED INCOME: PREPARED FOR RISING RATES
A stronger economy is likely to translate into higher interest rates as
2003
progresses and into 2004, and we continue to position the fixed-income
portion
of the portfolio for this eventuality. In fact, we believe that June 2003
marked
the bottom for interest rates in this cycle, particularly for U.S.
Treasuries.
However, we believe that it is unlikely that the Federal Reserve will raise
interest rates until the economy is on solid footing and fears of deflation
subside. Based on our outlook for slowly rising interest rates over the
near-to-intermediate term, we are maintaining our short duration within the
bond
portion of the Fund, while emphasizing corporate and mortgage-backed
securities.
ADDING TO EQUITY WEIGHTINGS
Based on the stronger return potential for equities, we have gradually
increased the Fund's equity allocation over the past 12 months. As of June
30th,
the asset allocation of the Fund was 61% in stocks (vs. 53% in June 2002),
38%
in bonds (vs. 45%), and only 1% (vs. 2%) in cash.
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 and bonds. The Fund may emphasize either equity securities or
fixed-income securities, 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: 35-65% in equity
securities
and 35-65% in fixed-income securities. At all times at least 25% of the
fixed-income assets will be invested in fixed-income senior securities.
PORTFOLIO SUMMARY
Net Asset Value 6/30/03: $12.47 Per Share
6/30/02: $12.29 Per Share
Total Net Assets: $16.1 Million
TOTAL DIVIDEND: $0.33 PER SHARE
Ordinary Income: $0.33 Per Share
PORTFOLIO STRUCTURE
(% OF TOTAL NET ASSETS)
[PIE CHART]
Equities: 61.2%
Cash & Other Net Assets: 0.9%
Bonds: 37.9%
8
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AVERAGE ANNUAL TOTAL RETURNS*
SIT LEHMAN
BALANCED S&P AGGREGATE
FUND 500 INDEX BOND INDEX
---- --------- ----------
3 Month** 9.72% 15.39% 2.50%
6 Month** 9.62 11.76 3.93
1 Year 4.43 0.25 10.40
3 Years -10.41 -11.20 10.08
5 Years -1.26 -1.61 7.55
Inception 6.98 10.03 7.31
(12/31/93)
CUMULATIVE TOTAL RETURNS*
SIT LEHMAN
BALANCED S&P AGGREGATE
FUND 500 INDEX BOND INDEX
---- --------- ----------
1 Year 4.43% 0.25% 10.40%
3 Years -28.08 -29.98 33.39
5 Years -6.17 -7.81 43.87
Inception 89.86 148.05 95.42
(12/31/93)
*AS OF 6/30/03 **NOT
ANNUALIZED.
- - -------------------------------------------------------------------------
- -------
PERFORMANCE FIGURES ARE HISTORICAL AND DO NOT GUARANTEE FUTURE RESULTS.
INVESTMENT RETURNS AND PRINCIPAL VALUE WILL VARY, AND YOU MAY HAVE A GAIN
OR
LOSS WHEN YOU SELL SHARES. AVERAGE ANNUAL TOTAL RETURNS INCLUDE CHANGES IN
SHARE
PRICE AS WELL AS REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAINS.
MANAGEMENT
FEES AND ADMINISTRATIVE EXPENSES ARE INCLUDED IN THE FUND'S PERFORMANCE;
HOWEVER, FEES AND EXPENSES ARE NOT INCORPORATED IN THE LEHMAN AGGREGATE
BOND
INDEX AND THE S&P 500 INDEX. LIPPER AVERAGES AND INDICES ARE OBTAINED FROM
LIPPER ANALYTICAL SERVICES, INC., A LARGE INDEPENDENT EVALUATOR OF MUTUAL
FUNDS.
GROWTH OF $10,000
[PLOT POINTS GRAPH]
THE SUM OF $10,000 INVESTED AT INCEPTION (12/31/93) AND HELD UNTIL 6/30/03
WOULD
HAVE GROWN TO $18,986 IN THE FUND, $19,542 IN THE LEHMAN AGGREGATE BOND
INDEX OR
$24,805 IN THE S&P 500 INDEX ASSUMING REINVESTMENT OF ALL DIVIDENDS AND
CAPITAL
GAINS.
TOP HOLDINGS
Stocks * Pfizer, Inc.
* Amgen, Inc.
* Target Corp.
* Citigroup, Inc.
* General Electric Co.
Bonds * Conseco Home Equity Loan, 2001-A-1A5, 7.06%, 3/15/32
* Green Tree Home Eqty Loan Trust,1999-D A5,7.88%,9/15/30
* Advanta Mortgage Loan Trust, 1999-3 A4,7.75%,10/25/26
* Conseco Mfg. Housing, 2000-4 A5,7.97%, 5/1/32
* EQCC Home Equity Loan Trust, 1996-4 A8, 7.41%, 1/15/28
Total Number of Holdings: 136
9
SIT BALANCED FUND
- - -------------------------------------------------------------------------
- -------
PORTFOLIO OF INVESTMENTS - JUNE 30, 2003
- - -------------------------------------------------------------------------
- -------
QUANTITY NAME OF ISSUER MARKET VALUE
($)(1)
- - -------------------------------------------------------------------------
- -------
COMMON STOCKS (61.2%)(2)
COMMERCIAL SERVICES (0.5%)
1,200 Omnicom Group, Inc.
86,040
------
- -----
COMMUNICATIONS (3.0%)
14,200 AT&T Wireless Services, Inc.(3)
116,582
3,000 Nextel Communications, Inc.(3)
54,240
15,600 Sprint Corp.(3)
89,700
11,200 Vodafone Group, A.D.R.
220,080
------
- -----
480,602
------
- -----
CONSUMER DURABLES (0.8%)
800 Electronic Arts, Inc.(3)
59,192
1,800 Harley-Davidson, Inc.
71,748
------
- -----
130,940
------
- -----
CONSUMER NON-DURABLES (2.4%)
600 Colgate-Palmolive Co.
34,770
3,400 PepsiCo, Inc.
151,300
2,300 The Procter & Gamble Co.
205,114
------
- -----
391,184
------
- -----
CONSUMER SERVICES (4.0%)
5,900 AOL Time Warner, Inc.(3)
94,931
13,960 AT&T Corp. - Liberty Media Group(3)
161,378
2,400 Comcast Corp.(3)
72,432
2,000 Harrah's Entertainment, Inc.(3)
80,480
5,500 Viacom, Inc.(3)
240,130
------
- -----
649,351
------
- -----
ELECTRONIC TECHNOLOGY (8.5%)
5,800 Analog Devices, Inc.(3)
201,956
5,800 Applied Materials, Inc.(3)
91,988
15,600 Cisco Systems, Inc.(3)
260,364
4,700 Dell Computer Corp.(3)
150,212
7,200 EMC Corp.(3)
75,384
1,200 Hewlett-Packard Co.
25,560
8,100 Intel Corp.
168,350
1,900 International Business Machines Corp.
156,750
2,200 Linear Technology Corp.
70,862
6,200 Nokia Corp., A.D.R.
101,866
1,700 Qualcomm, Inc.
60,775
------
- -----
1,364,067
------
- -----
ENERGY MINERALS (2.2%)
1,600 ConocoPhillips Co.
87,680
1,500 Devon Energy Corp.
80,100
1,600 Murphy Oil Corp.
84,160
2,800 Occidental Petroleum Corp.
93,940
------
- -----
345,880
------
- -----
- - -------------------------------------------------------------------------
- -------
QUANTITY NAME OF ISSUER MARKET VALUE
($)(1)
- - -------------------------------------------------------------------------
- -------
FINANCE (8.6%)
4,600 ACE, Ltd.
157,734
4,321 American International Group, Inc.
238,433
8,366 Citigroup, Inc.
358,065
1,600 Fifth Third Bancorp
91,744
1,800 Goldman Sachs Group, Inc.
150,750
3,600 Marsh & McLennan Cos., Inc.
183,852
4,000 Wells Fargo Co.
201,600
-----
- -----
1,382,178
-----
- -----
HEALTH SERVICES (1.4%)
4,400 UnitedHealth Group, Inc.
221,100
-----
- -----
HEALTH TECHNOLOGY (12.1%)
5,600 Amgen, Inc.(3)
372,064
2,800 Bristol-Myers Squibb Co.
76,020
1,000 Boston Scientific Corp.(3)
61,100
10,400 Elan Corp., A.D.R.(3)
58,656
1,600 Eli Lilly and Co.
110,352
1,000 Forest Laboratories, Inc.(3)
54,750
800 Genentech, Inc.(3)
57,696
800 Gilead Sciences, Inc.(3)
44,464
4,400 Johnson & Johnson
227,480
1,600 MedImmune, Inc.(3)
58,192
3,200 Medtronic, Inc.
153,504
3,000 Merck & Co., Inc.
181,650
11,455 Pfizer, Inc.
391,188
1,600 Teva Pharmaceutical, Ltd., A.D.R.
91,088
-----
- -----
1,938,204
-----
- -----
INDUSTRIAL SERVICES (1.0%)
1,400 Noble Corp.(3)
48,020
2,200 Schlumberger Ltd.
104,654
-----
- -----
152,674
-----
- -----
PRODUCER MANUFACTURING (4.1%)
800 Eaton Corp.
62,888
12,400 General Electric Co.
355,632
2,500 Lockheed Martin Corp.
118,925
1,000 3M Co.
128,980
-----
- -----
666,425
-----
- -----
RETAIL TRADE (5.6%)
4,200 Best Buy Co., Inc. (3)
184,464
400 eBay, Inc. (3)
41,672
800 Home Depot, Inc.
26,496
1,600 Kohl's Corp. (3)
82,208
4,600 Lowe's Companies, Inc.
197,570
9,500 Target Corp.
359,480
-----
- -----
891,890
-----
- -----
10
- - -------------------------------------------------------------------------
- -[LOGO]
- - -------------------------------------------------------------------------
- -------
QUANTITY/PAR($) NAME OF ISSUER MARKET VALUE
($)(1)
- - -------------------------------------------------------------------------
- -------
TECHNOLOGY SERVICES (6.4%)
4,400 Adobe Systems, Inc.
141,108
3,650 Check Point Software Technology(3)
71,358
4,200 First Data Corp.
174,048
13,400 Microsoft Corp.
343,174
6,600 Oracle Corp.(3)
79,332
1,500 Symantec Corp.(3)
65,790
5,400 Veritas Software Corp.(3)
154,818
-----
- -----
1,029,628
-----
- -----
TRANSPORTATION (0.6%)
1,600 FedEx Corp.
99,248
-----
- -----
Total common stocks
(cost: $11,172,584)
9,829,411
-----
- -----
BONDS (35.2%)(2)
ASSET-BACKED SECURITIES (10.3%)
286,407 Advanta Mortgage Loan Trust,
1999-3 A4, 7.75%, 10/25/26
306,821
450,000 Conseco Home Equity Loan,
2001-A IA5, 7.06%, 3/15/32
476,643
250,000 Conseco Mfg. Housing,
2000-4 A5, 7.97%, 5/1/32
253,702
250,000 EQCC Home Equity Loan Trust,
1996-4 A8, 7.41%, 1/15/28
253,142
Green Tree Financial Corp.:
17,224 1995-5, 7.25%, 9/15/26
17,995
23,284 1997-4, 7.03%, 2/15/29
23,672
300,000 Green Tree Home Equity Loan Trust,
1999-D A5, 7.88%, 9/15/30
317,768
-----
- -----
1,649,743
-----
- -----
COLLATERALIZED MORTGAGE OBLIGATIONS (2.1%)
116,969 FHR Series 2496-GN, 8.50%, 9/15/32
117,857
151,888 Merrill Lynch Trust,
Series 45Z, 9.10%, 9/20/20
162,604
420 PNC Mortgage Securities Corp.,
Series 1998-6 4A, 6.75%, 8/25/13
420
Vendee Mortgage Trust:
30,662 Series 2000-3 2B, 7.50%, 4/15/08
30,889
18,536 Series 1997-2 E, 7.50%, 5/15/24
18,861
------
- ----
330,631
------
- ----
- - -------------------------------------------------------------------------
- -------
QUANTITY/PAR($) NAME OF ISSUER MARKET VALUE
($)(1)
- - -------------------------------------------------------------------------
- -------
CORPORATE BONDS (12.6%)
Continental Airlines:
89,511 Series 2000-2 A1, 7.71%, 4/2/21
88,010
150,000 Series 2001-1B, 7.37%, 12/15/15
121,753
92,000 Dow Capital BV, 8.70%, 5/15/22
95,232
95,000 Duke Realty LP, 7.375%, 9/22/05
104,062
150,000 Everest Reins. Hldgs., 8.75%, 3/15/10
179,397
100,000 Exxon Mobil Co. (Seariver), zero coupon,
4.04% effective yield, 9/1/12
68,271
100,000 First Hawaiian Cap., 8.34%, 7/1/27
119,246
75,000 Ford Motor Credit Co., 9.14%, 12/30/14
79,752
50,000 General Electric Cap. Corp., 6.75%, 3/15/32
58,478
General Motors Corp.:
100,000 Series 1991, 8.80%, 3/1/21
103,442
100,000 Series 2003, 8.375%, 7/15/33
99,875
200,000 Great Western Finance, 8.21%, 2/1/27
229,752
McDonald's Corp:
100,000 Series 1997, 7.31%, 9/15/27
107,746
100,000 Series 2003, 4.125%, 6/1/13
98,120
215,246 Northwest Airlines Corp., 8.07%, 10/1/19
234,343
100,000 Pacific Bell Corp., 7.25%, 11/1/27
112,757
100,000 Susa Partnership LP, 7.50%, 12/1/27
119,233
-----
- -----
2,019,469
-----
- -----
FEDERAL HOME LOAN MORTGAGE CORPORATION (0.8%)
89,233 8.38%, 5/17/20
97,097
6,397 9.00%, 7/1/16
7,120
21,384 9.00%, 7/1/16
23,800
-----
- -----
128,017
-----
- -----
FEDERAL NATIONAL MORTGAGE ASSOCIATION (3.5%)
77,710 7.50%, 6/1/32
83,635
88,911 8.00%, 7/1/26
96,448
85,347 9.00%, 6/1/27
94,336
97,869 9.50%, 5/1/27
108,387
30,776 9.75%, 1/15/13
34,900
4,520 10.00%, 1/1/20
5,182
87,083 10.00%, 7/1/26
100,234
37,075 10.25%, 6/15/13
42,351
-----
- -----
565,473
-----
- -----
See accompanying notes to portfolios of investments on page 38.
11
SIT BALANCED FUND
- - -------------------------------------------------------------------------
- -------
PORTFOLIO OF INVESTMENTS - JUNE 30, 2003
- - -------------------------------------------------------------------------
- -------
QUANTITY/PAR($) NAME OF ISSUER MARKET VALUE
($)(1)
- - -------------------------------------------------------------------------
- -------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (4.2%)
204,811 7.50%, 7/15/23
219,263
9,284 9.00%, 6/15/11
10,176
31,613 9.00%, 6/15/09
34,561
81,619 9.00%, 11/15/16
90,957
1,811 9.50%, 1/15/04
1,883
9,602 9.50%, 11/15/04
9,983
8,682 9.50%, 7/20/05
9,214
4,610 9.50%, 5/20/16
5,168
117,746 9.50%, 9/15/30
131,061
60,748 9.50%, 3/15/18
68,437
22,478 9.50%, 9/20/18
25,233
14,043 9.50%, 2/20/19
15,771
15,015 9.75%, 10/15/05
16,006
30,480 10.00%, 3/20/16
34,875
1,632 10.25%, 1/15/04
1,703
4,554 11.25%, 10/15/11
5,147
------
- -----
679,438
------
- -----
TAXABLE MUNICIPAL SECURITIES (1.7%)
10,000 Bernalillo Multifamily. Series 1998A,
7.50%, 9/20/20
11,268
199,000 CA Rural Home Mtg. Fin. Auth.
Rev. Series 2003A, 5.25%, 12/1/24
202,130
67,670 Tobacco Settlement Series 2001A,
7.67%, 5/15/16
67,281
------
- -----
280,679
------
- -----
Total bonds
5,653,450
(cost: $5,481,404) ------
- -----
CLOSED-END MUTUAL FUNDS (2.7%)(2)
6,009 American Select Portfolio
82,263
403 American Strategic, Inc. Portfolio
5,154
15,470 American Strategic, Inc. Portfolio II
210,701
10,609 American Strategic, Inc. Portfolio III
137,280
------
- -----
Total closed-end mutual funds
435,398
(cost: $368,186) ------
- -----
SHORT-TERM SECURITIES (2.1%)(2)
331,000 Sit Money Market Fund, 0.63%(4)
331,000
(cost: $331,000) ------
- -----
Total investments in securities
(cost: $17,353,174)(5)
$16,249,259
===========
12 See accompanying notes to portfolios of investments on page
38.
- - -------------------------------------------------------------------------
- -[LOGO]
This page has been left blank intentionally.
13
SIT LARGE CAP GROWTH FUND
ONE YEAR ENDED JUNE 30, 2003
[PHOTO]--------------------------------------------------------------------
- -----
SENIOR PORTFOLIO MANAGERS
PETER L. MITCHELSON, CFA O ROGER J. SIT O RONALD D. SIT, CFA
The Sit Large Cap Growth Fund's return was +2.0% for the past fiscal
year,
compared to the S&P 500 Index return of +0.3%. The Russell 1000 Growth
Index
returned +2.9% over the same time period.
RECENT RETURNS RESCUE A CHOPPY YEAR
While the Fund posted a modest +2.0% gain over the past 12 months, the
path
was volatile as returns were -15.2%, +6.8%, -1.8%, and +14.5% in the last
four
quarters, respectively. This mirrored the volatility of the S&P 500 Index
which
posted quarterly returns of -17.3%, +8.4%, -3.2%, and +15.4%, for a total
return
of only +0.3% for the fiscal year.
BETTER EARNINGS SHOULD LEAD MARKET HIGHER
While we believe much of the upward progress for the market in recent
months
represents a "snap back" from the depressed valuation levels of last fall,
the
improving outlook for corporate earnings provides a basis for continued
optimism. S&P 500 constituent earnings for 1Q 2003 were up a surprisingly
strong
+10%, while U.S. GDP growth was a mere +1.4%. We see a significantly
stronger
economy during the second half of 2003 (and into 2004), and we view rising
corporate profits as the catalyst for higher stock prices during that
recovery.
GROWTH SHOULD CONTINUE TO OUTPERFORM
Growth stocks have turned in solid results in the last year, and have
rallied
sharply in 2003. Consequently, key growth sectors, including health
technology,
communications, technology services, and electronic technology have driven
the
Fund's outperformance relative to the S&P 500. Given the multi-year nature
of
growth versus value performance cycles, we expect growth stock leadership
over
the near- to intermediate-term for several reasons. First, a stronger
market and
economic environment should reduce investors' premium on "safety", a
characteristic that typically favors value issues. Second, growth
valuations are
now attractive following the severe corrections since their peak in early
2000.
Finally, the improving fundamentals for the heavily-weighted technology
sector
should positively impact the growth style.
INVESTMENT OBJECTIVE AND STRATEGY
The objective of the Large Cap Growth Fund is to maximize long-term
capital
appreciation. The Fund pursues this objective by investing at least 80% of
its
net assets in the common stocks of domestic growth companies with
capitalizations of $5 billion or more at the time of purchase.
PORTFOLIO SUMMARY
Net Asset Value 6/30/03: $26.92 Per Share
6/30/02: $26.40 Per Share
Total Net Assets: $59.3 Million
Weighted Average Market Cap: $84.5 Billion
PORTFOLIO STRUCTURE - BY SECTOR
(% OF TOTAL NET ASSETS)
[BAR CHART]
HEALTH TECHNOLOGY 19.6
FINANCE 14.7
ELECTRONIC TECHNOLOGY 12.6
TECHNOLOGY SERVICES 10.0
RETAIL TRADE 8.6
CONSUMER SERVICES 6.6
PRODUCER MANUFACTURING 6.2
SECTORS LESS THAN 5.0% 19.8
CASH & OTHER NET ASSETS 1.9
14
- - -------------------------------------------------------------------------
- -[LOGO]
AVERAGE ANNUAL TOTAL RETURNS*
SIT RUSSELL
LARGE CAP S&P 1000
GROWTH FUND 500 INDEX GROWTH INDEX
----------- --------- ------------
3 Month** 14.50% 15.39% 14.30%
6 Month** 12.49 11.76 13.08
1 Year 1.97 0.25 2.93
5 Years -7.22 -1.61 -5.03
10 Year 6.77 10.04 8.29
Inception*** 10.78 13.68 12.25
(9/2/82)
CUMULATIVE TOTAL RETURNS*
SIT RUSSELL
LARGE CAP S&P 1000
GROWTH FUND 500 INDEX GROWTH INDEX
----------- --------- ------------
1 Year 1.97% 0.25% 2.93%
5 Year -31.23 -7.81 -22.76
10 Year 92.57 160.35 121.74
Inception*** 744.83 1347.38 1012.21
(9/2/82)
*AS OF 6/30/03 **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 THES&P 500 INDEX.
***ON 6/6/93, THE FUND'S INVESTMENT OBJECTIVE CHANGED TO ALLOW FOR A
PORTFOLIO
OF 100% STOCKS. PRIOR TO THAT TIME, THE PORTFOLIO WAS REQUIRED TO CONTAIN
NO
MORE THAN 80% STOCKS.
- - -------------------------------------------------------------------------
- -------
GROWTH OF $10,000
[PLOT POINTS CHART]
The sum of $10,000 invested at inception (9/2/82) and held until 6/30/03
WOULD
HAVE GROWN TO $84,483 IN THE FUND OR $144,738 IN THE S&P 500 INDEX ASSUMING
REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAINS.
TOP 10 HOLDINGS
* Amgen, Inc.
* Pfizer, Inc.
* Target Corp.
* General Electric Co.
* Microsoft Corp.
* Citigroup, Inc.
* American International Group, Inc.
* Viacom, Inc.
* Johnson & Johnson
* Wells Fargo Co.
Total Number of Holdings: 77
15
SIT LARGE CAP GROWTH FUND
- - -------------------------------------------------------------------------
- -------
PORTFOLIO OF INVESTMENTS - JUNE 30, 2003
- - -------------------------------------------------------------------------
- -------
QUANTITY NAME OF ISSUER MARKET VALUE
($)(1)
- - -------------------------------------------------------------------------
- -------
COMMON STOCKS (98.1%)(2)
COMMERCIAL SERVICES (1.7%)
6,500 Omnicom Group, Inc.
466,050
17,100 SYSCO Corp.
513,684
-----
- -----
979,734
-----
- -----
COMMUNICATIONS (4.8%)
83,500 AT&T Wireless Services, Inc.(3)
685,535
17,500 Nextel Communications, Inc.(3)
316,400
95,000 Sprint Corp.(3)
546,250
66,200 Vodafone Group, A.D.R.
1,300,830
-----
- -----
2,849,015
-----
- -----
CONSUMER DURABLES (1.3%)
4,500 Electronic Arts, Inc.(3)
332,955
10,900 Harley-Davidson, Inc.
434,474
-----
- -----
767,429
-----
- -----
CONSUMER NON-DURABLES (3.9%)
4,500 Colgate-Palmolive Co.
260,775
20,000 PepsiCo, Inc.
890,000
13,250 Procter & Gamble Co.
1,181,635
-----
- -----
2,332,410
-----
- -----
CONSUMER SERVICES (6.6%)
38,400 AOL Time Warner, Inc.(3)
617,856
13,500 Comcast Corp.(3)
407,430
11,500 Harrah's Entertainment, Inc.(3)
462,760
83,804 Liberty Media Corp.(3)
968,774
33,477 Viacom, Inc.(3)
1,461,606
-----
- -----
3,918,426
-----
- -----
ELECTRONIC TECHNOLOGY (12.6%)
33,000 Analog Devices, Inc.(3)
1,149,060
36,000 Applied Materials, Inc.(3)
570,960
68,800 Cisco Systems, Inc.(3)
1,148,272
30,000 Dell Computer Corp.(3)
958,800
21,900 EMC Corp.(3)
229,293
11,000 Hewlett-Packard Co.
234,300
47,800 Intel Corp.
993,475
10,500 International Business Machines, Inc.
866,250
12,850 Linear Technology Corp.
413,899
36,500 Nokia Corp., A.D.R.
599,695
9,500 Qualcomm, Inc.
339,625
-----
- -----
7,503,629
-----
- -----
ENERGY MINERALS (3.4%)
9,000 ConocoPhillips Co.
493,200
10,000 Devon Energy Corp.
534,000
8,500 Murphy Oil Corp.
447,100
16,000 Occidental Petroleum Corp.
536,800
-----
- -----
2,011,100
-----
- -----
- - -------------------------------------------------------------------------
- -------
QUANTITY NAME OF ISSUER MARKET VALUE
($)(1)
- - -------------------------------------------------------------------------
- -------
FINANCE (14.7%)
28,462 American International Group, Inc.
1,570,533
44,000 Citigroup, Inc.
1,883,200
7,500 Freddie Mac
380,775
9,500 Fifth Third Bancorp
544,730
20,000 Marsh & McLennan Cos., Inc.
1,021,400
10,500 The St. Paul Companies, Inc.
383,355
11,500 The Goldman Sachs Group, Inc.
963,125
26,000 Wells Fargo Co.
1,310,400
8,000 XL Capital, Ltd.
664,000
------
- -----
8,721,518
------
- -----
HEALTH SERVICES (2.2%)
2,850 Cardinal Health, Inc.
183,255
22,000 UnitedHealth Group, Inc.
1,105,500
------
- -----
1,288,755
------
- -----
HEALTH TECHNOLOGY (19.6%)
35,200 Amgen, Inc.(3)
2,338,688
6,000 Boston Scientific Corp.(3)
366,600
16,500 Bristol-Myers Squibb Co.
447,975
62,550 Elan Corp., A.D.R.(3)
352,782
8,800 Eli Lilly and Co.
606,936
5,500 Forest Laboratories, Inc.(3)
301,125
4,000 Genentech, Inc.(3)
288,480
4,500 Gilead Sciences, Inc.(3)
250,110
25,650 Johnson & Johnson
1,326,105
10,700 MedImmune, Inc.(3)
389,159
20,650 Medtronic, Inc.
990,581
18,000 Merck & Co., Inc.
1,089,900
68,325 Pfizer, Inc.
2,333,299
9,200 Teva Pharmaceutical, Ltd., A.D.R.
523,756
------
- -----
11,605,496
------
- -----
INDUSTRIAL SERVICES (1.6%)
8,500 Noble Corp.(3)
291,550
13,300 Schlumberger, Ltd.
632,681
------
- -----
924,231
------
- -----
PRODUCER MANUFACTURING (6.2%)
3,750 Eaton Corp.
294,787
71,700 General Electric Co.
2,056,356
14,000 Lockheed Martin Corp.
665,980
5,000 3M Co.
644,900
------
- -----
3,662,023
------
- -----
16
- - -------------------------------------------------------------------------
- -[LOGO]
- - -------------------------------------------------------------------------
- -------
QUANTITY NAME OF ISSUER MARKET VALUE
($)(1)
- - -------------------------------------------------------------------------
- -------
RETAIL TRADE (8.6%)
25,550 Best Buy Co., Inc.(3)
1,122,156
2,000 eBay, Inc.(3)
208,360
3,950 Home Depot, Inc.
130,824
9,600 Kohl's Corp.(3)
493,248
25,800 Lowe's Companies, Inc.
1,108,110
54,500 Target Corp.
2,062,280
------
- -----
5,124,978
------
- -----
TECHNOLOGY SERVICES (10.0%)
25,000 Adobe Systems, Inc.
801,750
21,700 Check Point Software Tech., Ltd.(3)
424,235
25,000 First Data Corp.
1,036,000
76,000 Microsoft Corp.
1,946,360
40,000 Oracle Corp.(3)
480,800
8,500 Symantec Corp.(3)
372,810
30,900 Veritas Software Corp.(3)
885,903
------
- -----
5,947,858
------
- -----
TRANSPORTATION (0.9%)
9,000 FedEx Corp.
558,270
------
- -----
Total common stocks
58,194,872
(cost: $60,584,551) ------
- -----
SHORT-TERM SECURITIES (1.7%)(2)
1,029,000 Sit Money Market Fund, 0.63%(4)
1,029,000
(cost: $1,029,000) ------
- -----
Total investments in securities
(cost: $61,613,551)(5)
$59,223,872
===========
See accompanying notes to portfolios of investments on page 38.
17
SIT MID CAP GROWTH FUND
ONE YEAR ENDED JUNE 30, 2003
[PHOTO]--------------------------------------------------------------------
- -----
EUGENE C. SIT, CFA, SENIOR PORTFOLIO MANAGER
ERIK S. ANDERSON, CFA, SENIOR PORTFOLIO MANAGER
Sit Mid Cap Growth Fund returned +1.9%, versus a -0.7% decline for the
S&P
Mid Cap 400 Index and a +7.4% gain for the Russell Mid Cap Growth Index for
the
year. The Fund's three-month return, ending June 30, 2003 was +16.8%,
compared
to a 17.6% return for the S&P Mid Cap 400 Index and +18.8% return for the
Russell Mid Cap Growth Index.
LINGERING FEARS HAVE DIMINISHED
Mid cap stocks generally posted higher returns over the past 12 months,
overcoming significant hurdles on a number of fronts, including a war with
Iraq,
terrorism warnings, corporate governance concerns, and muted growth in the
economy. Recent market gains, however, have been particularly encouraging,
as
investors appear more convinced that these risks have significantly
diminished.
Moreover, growth stocks have fared particularly well in recent months, as
signs
of improvement in technology spending has led to strong sector performance
in
2003.
ECONOMY, EARNINGS, AND PRICES ON THE RISE
With equity market valuations rising to more reasonable levels, we
believe
stocks' future advances will be driven by earnings gains amid an improving
backdrop for the economy. Catalysts for improving economic growth in the
months
ahead include lower energy prices, continued low interest rates, tax
reductions,
and improving consumer confidence.
MORE EXPOSURE TO GROWTH AND CYCLICALS
Over the past 12 months, in anticipation of an economic rebound, we have
added to positions in the technology services, electronic technology, and
transportation sectors. We believe these groups have great potential for
accelerating earnings growth as the economy picks up steam throughout 2003
and
into 2004. Conversely, we have reduced the weighting in less economically
sensitive sectors, including finance and health services. Although the
portfolio
emphasis has shifted to become more aggressive in response to a better
environment that we see ahead, the Fund remains well diversified, with at
least
a 3% weighting in ten different economic sectors.
As managers of (and investors in) the Fund, we are pleased to report
positive
returns over the three-month, YTD, and one-year periods.
INVESTMENT OBJECTIVE AND STRATEGY
The objective of the Sit Mid Cap Growth Fund is to maximize long-term
capital
appreciation. The Fund pursues this objective by investing at least 80% of
its
net assets in the common stocks of growth companies with capitalizations of
$2
billion to $15 billion at the time of purchase.
PORTFOLIO SUMMARY
Net Asset Value 6/30/03: $ 8.06 Per Share
6/30/02: $ 7.91 Per Share
Total Net Assets: $170.2 Million
Weighted Average Market Cap: $ 7.7 Billion
PORTFOLIO STRUCTURE - BY SECTOR
(% OF TOTAL NET ASSETS)
Health Technology 16.6
Electronic Technology 15.3
Technology Services 14.2
Finance 8.8
Health Services 8.1
Retail Trade 7.3
Consumer Services 5.0
Sectors less than 4.0% 20.1
Cash and
Other Net Assets 4.6
18
- - -------------------------------------------------------------------------
- -[LOGO]
AVERAGE ANNUAL TOTAL RETURNS*
SIT S&P RUSSELL
MID CAP MIDCAP MID CAP
GROWTH FUND 400 INDEX GROWTH INDEX
----------- --------- ------------
3 Month** 16.81% 17.63% 18.76%
6 Month** 18.01 12.41 18.74
1 Year 1.90 -0.71 7.35
5 Year -4.41 7.14 -0.64
10 Year 6.42 12.65 8.46
Inception 13.09 16.03 --
(9/2/82)
CUMULATIVE TOTAL RETURNS*
SIT S&P RUSSELL
MID CAP MIDCAP MID CAP
GROWTH FUND 400 INDEX GROWTH INDEX
----------- --------- ------------
1 Year 1.90% -0.71% 7.35%
5 Year -20.18 41.18 -3.18
10 Year 86.28 229.13 125.22
Inception 1198.43 2114.29 --
(9/2/82)
*AS OF 6/30/03 **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
SIT MID CAP GROWTH FUND
[PLOT POINTS CHART]
The sum of $10,000 invested at inception (9/2/82) and held until 6/30/03
WOULD
HAVE GROWN TO $129,843 IN THE FUND, OR $221,429 IN THE S&P MIDCAP 400 INDEX
ASSUMING REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAINS.
TOP 10 HOLDINGS
* TCF Financial Corp.
* Wellpoint Health Networks, Inc.
* Boston Scientific Corp.
* Devon Energy Corp.
* Teva Pharmaceutical Industries, A.D.R.
* KLA-Tencor Corp.
* Veritas Software Corp.
* Analog Devices, Inc.
* Legg Mason, Inc.
* EchoStar Communications Corp.
Total Number of Holdings: 78
19
SIT MID CAP GROWTH FUND
- - -------------------------------------------------------------------------
- -------
PORTFOLIO OF INVESTMENTS - JUNE 30, 2003
- - -------------------------------------------------------------------------
- -------
QUANTITY NAME OF ISSUER MARKET VALUE
($)(1)
- - -------------------------------------------------------------------------
- -------
COMMON STOCKS (95.4%)(2)
COMMERCIAL SERVICES (3.5%)
38,000 Fair Isaac Corp.
1,955,100
19,750 Iron Mountain, Inc.(3)
732,527
69,150 Lamar Advertising Co.(3)
2,434,771
15,550 Moody's Corp.
819,640
------
- -----
5,942,038
------
- -----
COMMUNICATIONS (1.2%)
114,500 Nextel Communications, Inc.(3)
2,070,160
------
- -----
CONSUMER DURABLES (1.3%)
29,900 Electronic Arts, Inc.(3)
2,212,301
------
- -----
CONSUMER NON-DURABLES (1.8%)
45,500 Coach, Inc.(3)
2,263,170
42,600 Pepsi Bottling Group, Inc.
852,852
------
- -----
3,116,022
------
- -----
CONSUMER SERVICES (5.0%)
44,000 Career Education Corp.(3)
3,010,480
91,100 EchoStar Communications Corp.(3)
3,153,882
31,400 Harrah's Entertainment, Inc.(3)
1,263,536
11,250 International Game Technology(3)
1,151,213
------
- -----
8,579,111
------
- -----
ELECTRONIC TECHNOLOGY (15.3%)
484,200 ADC Telecommunications, Inc.(3)
1,127,218
92,550 Analog Devices, Inc.(3)
3,222,591
71,850 Broadcom Corp.(3)
1,789,783
118,350 Jabil Circuit, Inc.(3)
2,615,535
73,000 KLA-Tencor Corp.(3)
3,393,770
36,500 Lexmark International, Inc.(3)
2,583,105
51,550 Nvidia Corp.(3)
1,186,166
35,000 QLogic Corp.(3)
1,691,550
88,000 Rockwell Automation, Inc.
2,097,920
332,150 Sonus Networks, Inc.(3)
1,670,715
27,500 Synopsys, Inc.(3)
1,700,875
113,700 Xilinx, Inc.(3)
2,877,747
------
- -----
25,956,975
------
- -----
ENERGY MINERALS (3.6%)
30,450 Apache Corp.
1,981,077
68,600 Devon Energy Corp.
3,663,240
21,600 XTO Energy, Inc.
434,376
------
- -----
6,078,693
------
- -----
- - -------------------------------------------------------------------------
- -------
QUANTITY NAME OF ISSUER MARKET VALUE
($)(1)
- - -------------------------------------------------------------------------
- -------
FINANCE (8.8%)
71,350 Ace, Ltd.
2,446,592
25,000 Commerce Bancorp, Inc.
927,500
49,500 Legg Mason, Inc.
3,215,025
28,300 Lehman Brothers Holdings, Inc.
1,881,384
118,900 TCF Financial Corp.
4,736,976
54,900 Willis Group Holdings, Ltd.
1,688,175
------
- -----
14,895,652
------
- -----
HEALTH SERVICES (8.1%)
30,200 AmerisourceBergen Corp.
2,094,370
121,350 Caremark Rx, Inc.(3)
3,116,268
99,300 Health Management Assoc., Inc.
1,832,085
28,800 Laboratory Corp.(3)
868,320
49,800 Stericycle, Inc.(3)
1,916,304
47,200 Wellpoint Health Networks, Inc.(3)
3,978,960
------
- -----
13,806,307
------
- -----
HEALTH TECHNOLOGY (16.6%)
56,800 Alcon, Inc.
2,595,760
70,700 Biogen, Inc.(3)
2,686,600
107,850 Biomet, Inc.
3,090,981
34,150 Biovail Corp.(3)
1,607,099
62,000 Boston Scientific Corp.(3)
3,788,200
27,500 Celgene Corp.(3)
836,000
341,450 Elan Corp., A.D.R.(3)
1,925,778
38,500 Genzyme Corp.(3)
1,609,300
55,750 Gilead Sciences, Inc.(3)
3,098,585
58,600 MedImmune, Inc.(3)
2,131,282
62,900 Teva Pharmaceutical Industries, A.D.R.
3,580,897
22,500 Varian Medical Systems, Inc.(3)
1,295,325
------
- -----
28,245,807
------
- -----
INDUSTRIAL SERVICES (2.7%)
71,400 BJ Services Co.(3)
2,667,504
55,000 Noble Corp.(3)
1,886,500
------
- -----
4,554,004
------
- -----
PROCESS INDUSTRIES (0.9%)
70,500 Pall Corp.
1,586,250
------
- -----
PRODUCER MANUFACTURING (3.1%)
31,350 Danaher Corp.
2,133,367
24,600 ITT Industries, Inc.
1,610,316
72,050 Thermo Electron Corp.(3)
1,514,491
------
- -----
5,258,174
------
- -----
20
- - -------------------------------------------------------------------------
- -[LOGO]
- - -------------------------------------------------------------------------
- -------
QUANTITY NAME OF ISSUER MARKET VALUE
($)(1)
- - -------------------------------------------------------------------------
- -------
RETAIL TRADE (7.3%)
60,000 Bed Bath & Beyond, Inc.(3)
2,328,600
51,550 Best Buy Co., Inc.(3)
2,264,076
97,900 Chico's FAS, Inc.(3)
2,060,795
36,700 Family Dollar Stores, Inc.
1,400,105
64,000 Michaels Stores, Inc.(3)
2,435,840
101,800 TJX Companies, Inc.
1,917,912
------
- -----
12,407,328
------
- -----
TECHNOLOGY SERVICES (14.2%)
89,590 Adobe Systems, Inc.
2,873,151
29,650 Affiliated Computer Services, Inc.(3)
1,355,894
147,450 BEA Systems, Inc.(3)
1,601,307
98,300 Ceridian Corp.(3)
1,668,151
103,550 Check Point Software Tech., Ltd.(3)
2,024,403
78,250 Citrix Systems, Inc.(3)
1,593,170
64,062 Fiserv, Inc.(3)
2,281,248
39,500 Intuit, Inc.(3)
1,758,935
83,900 SunGard Data Systems, Inc.(3)
2,173,849
48,000 Symantec Corp.(3)
2,105,280
112,600 Veritas Software Corp.(3)
3,228,242
46,500 Yahoo!, Inc.(3)
1,523,340
-------
- -----
24,186,970
-------
- -----
TRANSPORTATION (2.0%)
63,000 Expeditors Intl. of Washington, Inc.
2,182,320
34,500 J. B. Hunt Transport Services, Inc.(3)
1,302,375
-------
- -----
3,484,695
-------
- -----
Total common stocks
162,380,487
(cost: $155,552,404) -------
- -----
SHORT-TERM SECURITIES (4.8%)(2)
8,116,000 Sit Money Market Fund,0.63%(4)
8,116,000
(cost: $8,116,000) -------
- -----
Total investments in securities
(cost: $163,668,404)(5)
$170,496,487
============
See accompanying notes to portfolios of investments on page 38.
21
SIT INTERNATIONAL GROWTH FUND
ONE YEAR ENDED JUNE 30, 2003
[PHOTO]--------------------------------------------------------------------
- -----
EUGENE C. SIT, CFA, SENIOR PORTFOLIO MANAGER
ROGER J. SIT, SENIOR PORTFOLIO MANAGER
The Sit International Growth Fund returned -13.0% for the past fiscal
year.
During the same period, the MSCI EAFE and Lipper International Fund Indices
returned -6.5% and -6.4%, respectively. The Fund's relative performance was
helped by holdings in Israel, Japan, and several traditional growth
sectors, but
was more than offset by poor performance in Germany, France, utilities, and
insurance.
STOCK PICKERS MARKET
The equity markets are attractively valued and have not discounted the
positive long-term fundamentals of many companies. We believe that we are
now in
a stock picker's environment, where investors can focus on company and
industry
fundamentals after three years of short-term, emotional emphasis. Recent
economic indicators in the U.S. and Asia ex-Japan show encouraging signs,
with
business confidence and industrial production improving. This should help
lift
the European, Latin American and Japanese economies.
In Europe, the Fund's weight is 61.9% versus 69.6%. The Fund remains
underweight in Japan, with a weighting of 12.4%, compared to 20.6%. The
Fund has
a weighting of 17.2% in Asia ex-Japan, compared to 9.8% for the EAFE Index.
BETTING ON PACIFIC RIM, DESPITE SARS
The Pacific Rim region has recovered rapidly from the SARS epidemic, and
demand has built up during the past couple of months, which leads us to
expect
improved economic performance in the near term. Exports from Asia have been
in
an uptrend, and we believe that this will continue as the region's
manufacturers
continue to increase their global market share. Japanese stocks have
recently
seen a positive shift in investor sentiment, and the market's low
valuations are
beginning to attract the attention of global institutional investors. This
combined with signs that some improvement may be occurring on the economic
reform front have led us to adopt a modestly more positive outlook towards
this
market, and we are raising our weighting in Japan, with a target of 85% of
the
benchmark weighting. New additions to the Fund during the year included
Johnson
Electric, the Hong Kong micro-motor manufacturer with large-scale
manufacturing
facilities in China, and Hilton Group, the London-based hotel and health
club
operator.
INVESTMENT OBJECTIVE AND STRATEGY
The objective of the International Growth Fund is long-term growth. The
Fund
seeks to achieve its objective by investing at least 90% of its net assets
in
common stocks of growth companies domiciled outside the United States.
In selecting investments for the Fund, the Sub-Adviser begins by
selecting
countries or regions in which to invest by considering several factors
affecting
the economy and equity market of foreign countries and regions. After the
country and regional allocations are determined, the Sub-Adviser seeks
industries and sectors that it believes have earnings growth prospects that
are
greater than the average. Within the selected industries and sectors, the
Sub-Adviser invests in foreign growth-oriented companies it believes
exhibit the
potential for superior growth.
PORTFOLIO SUMMARY
Net Asset Value 6/30/03: $ 9.39 Per Share
6/30/02: $10.79 Per Share
Total Net Assets: $ 48.5 Million
Weighted Average Market Cap: $ 45.8 Billion
PORTFOLIO STRUCTURE - BY REGION
(% OF TOTAL NET ASSETS)
[BAR CHART]
SIT INT'L MORGAN STANLEY
GROWTH FUND EAFE INDEX
----------- ----------
France, Germany, UK 41.3 41.1
Europe Other 20.6 28.5
Pacific Basin 17.2 9.8
Japan 12.4 20.6
Africa/Middle East 3.0 0.0
Latin America 2.8 0.0
North America 1.1 0.0
Cash and Other Net Assets 1.6 0.0
22
- - -------------------------------------------------------------------------
- -[LOGO]
AVERAGE ANNUAL TOTAL RETURNS*
SIT MORGAN STANLEY LIPPER
INTERNATIONAL CAPITAL INT'L INT'L
GROWTH FUND EAFE INDEX INDEX
----------- ---------- -----
3 Month** 16.50% 19.27% 19.72%
6 Month** 7.07 9.47 9.18
1 Year -12.97 -6.46 -6.40
5 Year -10.65 -4.00 -2.79
10 Year 0.65 2.78 5.05
Inception 2.16 3.10 5.38
(11/1/91)
CUMULATIVE TOTAL RETURNS*
SIT MORGAN STANLEY LIPPER
INTERNATIONAL CAPITAL INT'L INT'L
GROWTH FUND EAFE INDEX INDEX
----------- ---------- -----
1 Year -12.97% -6.46% -6.40%
5 Year -43.05 -18.46 -13.21
10 Year 6.70 31.53 63.70
Inception 28.29 42.74 84.27
(11/1/91)
*AS OF 6/30/03 **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 GRAPH]
The sum of $10,000 invested at inception (11/1/91) and held until 6/30/03
WOULD
HAVE GROWN TO $12,829 IN THE FUND, OR $14,274 IN THE MORGAN STANLEY EAFE
INDEX
ASSUMING REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAINS.
PORTFOLIO STRUCTURE - BY SECTOR
(% OF TOTAL NET ASSETS)
[BAR CHART]
Finance 19.1
Health Technology 14.6
Consumer Non-Durables 12.1
Communications 9.3
Energy Minerals 8.5
Electronic Technology 7.6
Retail Trade 5.4
Consumer Services 5.2
Sectors Less Than 5.0% 16.6
Cash and Other
Net Assets 1.6
23
SIT INTERNATIONAL GROWTH FUND
- - -------------------------------------------------------------------------
- -------
PORTFOLIO OF INVESTMENTS - JUNE 30, 2003
TOP 10 HOLDINGS
* Nestle, S.A.
* Royal Bank of Scotland
* Vodafone Group, p.l.c.
* HSBC Holdings p.l.c.
* Total, S.A.
* GlaxoSmithkline, A.D.R.
* BP p.l.c., A.D.R.
* Barclays, p.l.c.
* UBS, A.G.
* L'oreal Co.
Total Number of Holdings: 97
- - -------------------------------------------------------------------------
- -------
QUANTITY NAME OF ISSUER MARKET VALUE
($)(1)
- - -------------------------------------------------------------------------
- -------
COMMON STOCKS (98.4%)(2)
AFRICA/MIDDLE EAST (3.0%)
ISRAEL (3.0%)
6,000 Amdocs, Ltd., A.D.R. (Tech. Services)(3)
144,000
21,600 Check Point Software Technologies,
A.D.R. (Technology Services)(3)
422,280
15,600 Teva Pharmaceutical, A.D.R. (Health Tech.)
888,108
------
- -----
1,454,388
------
- -----
ASIA (29.6%)
AUSTRALIA (3.9%)
26,533 Australia and New Zealand Banking
Group (Finance)
331,157
104,852 BHP Billiton, Ltd. (Non-Energy Minerals)
607,564
27,100 News Corp., Ltd., A.D.R. (Consumer Svcs.)
678,855
30,700 Woolworths, Ltd. (Retail Trade)
257,777
------
- -----
1,875,353
------
- -----
HONG KONG (7.4%)
152,500 CLP Holdings, Ltd. (Utilities)
666,859
278,000 Citic Pacific, Ltd. (Industrial Services)
508,006
271,500 Cnooc, Ltd. (Energy Minerals)
400,385
80,000 Denway Motors, Ltd. (Producer Mfg.)
36,163
98,800 HSBC Holdings, p.l.c. (Finance)
1,171,948
110,500 Johnson Electric Holdings (Producer Mfg.)
136,741
216,000 Li & Fung, Ltd. (Retail Trade)
278,374
698,000 Petrochina Co., Ltd. (Energy Minerals)
210,345
284,000 Tsingtao Brewery Co., Ltd. (Consumer
Non-Durables)
205,767
------
- -----
3,614,588
------
- -----
- - -------------------------------------------------------------------------
- -------
QUANTITY NAME OF ISSUER MARKET VALUE
($)(1)
- - -------------------------------------------------------------------------
- -------
JAPAN (12.4%)
19,300 AFLAC, Inc., A.D.R. (Finance)
593,475
41,000 Ajinomoto Co. (Cons. Non-Durables)
392,671
10,000 Canon, Inc. (Electronic Technology)
458,880
74 East Japan Railway (Transportation)
329,094
9,000 Honda Motor Co., Ltd. (Producer Mfg.)
341,037
10,000 Ito Yokado Co., Ltd. (Retail Trade)
239,434
28,000 Kao Corp. (Consumber Non-Durables)
521,174
23,000 Nomura Holdings, Inc. (Finance)
291,918
358 NTT DoCoMo, Inc. (Communications)
775,182
11,700 Shin-Etsu Chemical Co., Ltd. (Industrial Svcs.)
399,500
11,700 Sony Corp. (Consumer Durables)
329,344
25,000 Takeda Chemical (Health Technology)
922,340
4,100 Tokyo Electron, Ltd. (Electronic Tech.)
194,287
23,000 Yamato Transport Co., Ltd. (Transportation)
254,566
------
- -----
6,042,902
------
- -----
SINGAPORE (2.9%)
82,846 DBS Group Holdings, Ltd. (Finance)
484,557
18,600 Flextronics Intl. (Electronic Tech.)(3)
193,254
13,000 Singapore Press Hldgs. (Consumer Services)
135,092
65,000 Venture Corp. (Electronic Technology)
594,258
------
- -----
1,407,161
------
- -----
SOUTH KOREA (1.0%)
26,000 Korea Electric Power Corp. (Utilities)
411,386
350 Samsung Electronics Co., G.D.R.
(Electronic Technology)
52,009
------
- -----
463,395
------
- -----
TAIWAN (1.1%)
72,226 Hon Hai Precision (Electronic Technology)
261,900
25,080 Taiwan Semiconductor, A.D.R. (Electronic
Technology)(3)
252,806
------
- -----
514,706
------
- -----
THAILAND (0.9%)
317,000 Advanced Info Services (Communications)
459,967
------
- -----
EUROPE (61.9%)
FINLAND (2.1%)
61,100 Nokia Corp., A.D.R. (Electronic Tech.)
1,003,873
------
- -----
FRANCE (15.8%)
38,716 AXA (Finance)
600,644
12,641 Aventis, S.A. (Health Technology)
695,471
11,500 Business Objects, A.D.R. (Tech. Svcs.)(3)
252,425
20,400 Business Objects (Tech. Services)(3)
454,937
10,060 Carrefour, S.A. (Retail Trade)
493,054
5,803 Danone (Consumer Non-Durables)
802,992
24
- - -------------------------------------------------------------------------
- -[LOGO]
- - -------------------------------------------------------------------------
- -------
QUANTITY NAME OF ISSUER MARKET VALUE
($)(1)
- - -------------------------------------------------------------------------
- -------
14,422 L'oreal Co. (Consumer Non-Durables)
1,016,870
19,500 STMicroelectronics, A.D.R. (Elec. Tech.)
405,405
8,123 Sanofi-Synthelabo, S.A. (Health Tech.)
475,727
15,800 Schlumberger, Ltd. (Industrial Svcs.)
751,606
19,427 Suez, S.A. (Utilities)
309,201
7,300 Total, S.A. (Energy Minerals)
1,103,190
14,921 Veolia Environment (Utilities)
306,706
-------
- -----
7,668,228
-------
- -----
GERMANY (1.4%)
3,246 Muenchener Rueckver (Finance)
328,022
2,782 SAP AG (Technology Services)
325,858
-------
- -----
653,880
-------
- -----
IRELAND (1.6%)
26,000 Allied Irish Banks p.l.c. (Finance)
388,439
63,700 Elan Corp., A.D.R. (Health Technology)(3)
359,268
-------
- -----
747,707
-------
- -----
ITALY (1.2%)
20,310 Telecom Italia (Saving) (Communications)
111,250
32,100 Telecom Italia (Ord.) (Communications)
290,471
37,050 Telecom Italia Mobile (Communications)
182,523
-------
- -----
584,244
-------
- -----
NETHERLANDS (4.0%)
28,900 ASML Holding N.V., A.D.R.
(Electronic Technology)(3)
276,284
48,235 ING Groep N.V. (Finance)
838,056
18,200 Royal Dutch Petroleum, A.D.R.
(Energy Minerals)
848,484
-------
- -----
1,962,824
-------
- -----
SPAIN (1.7%)
72,400 Telefonica, S.A. (Communications)
840,546
-------
- -----
SWEDEN (0.7%)
32,300 Securitas 'B' (Commercial Svcs.)
330,871
-------
- -----
SWITZERLAND (9.3%)
9,328 Adecco, S. A. (Commercial Svcs.)
384,265
18,034 Credit Suisse Group (Finance)
474,635
6,215 Nestle, S.A. (Consumer Non-Durables)
1,282,422
24,444 Novartis, A.G. (Health Technology)
967,264
5,115 Roche Holdings, A.G. (Health Tech.)
401,220
18,461 UBS, A.G. (Finance)
1,026,944
-------
- -----
4,536,750
-------
- -----
UNITED KINGDOM (24.1%)
87,975 Acambis, p.l.c. (Health Technology)(3)
529,882
15,344 AstraZeneca, p.l.c. (Health Technology)
622,008
25,900 BP p.l.c., A.D.R. (Energy Minerals)
1,088,318
145,046 Barclays, p.l.c. (Finance)
1,077,074
- - -------------------------------------------------------------------------
- -------
QUANTITY NAME OF ISSUER MARKET VALUE
($)(1)
- - -------------------------------------------------------------------------
- -------
50,955 Burberry Group p.l.c. (Retail Trade)(3)
208,529
14,550 Cambridge Antibody Technology Group,
p.l.c. (Health Technology)(3)
126,052
155,409 Compass Group, p.l.c. (Consumer Services)
837,952
60,844 Diageo, p.l.c. (Consumer Non-Durables)
649,605
27,184 GlaxoSmithkline, A.D.R. (Health Tech.)
1,102,039
140,204 Hilton Group, p.l.c. (Consumer Services)
425,702
46,178 Pearson, p.l.c. (Consumer Services)
431,300
13,754 Reckitt Benckiser, p.l.c. (Cons. Non-Durables)
252,384
43,482 Royal Bank of Scotland (Finance)
1,219,792
41,427 Shell Transport & Trading (Energy Minerals)
273,446
157,584 Tesco, p.l.c. (Retail Trade)
570,137
63,760 Unilever, p.l.c. (Consumer Non-Durables)
507,660
615,723 Vodafone Group, p.l.c. (Communications)
1,204,013
7,500 Vodafone Group, A.D.R. (Communications)
147,375
14,000 Willis Group Holdings, Ltd.(Finance)
430,500
------
- -----
11,703,768
------
- -----
LATIN AMERICA (2.8%)
BRAZIL (0.3%)
10,500 Tele Norte Leste Participacoes, A.D.R.
(Communications)
122,642
------
- -----
MEXICO (2.5%)
11,400 Coca-Cola Femsa, A.D.R. (Consumer Non-Durables)
245,100
12,900 Telefonos de Mexico, A.D.R.
(Communications)
405,318
194,030 Wal-Mart de Mexico (Retail Trade)
573,489
------
- -----
1,223,907
------
- -----
NORTH AMERICA (1.1%)
CANADA (1.1%)
9,000 Precision Drilling Corp. (Industrial Svcs.)(3)
339,840
4,200 Talisman Energy, Inc. (Energy Minerals)
192,570
------
- -----
532,410
------
- -----
Total common stocks
47,744,110
(cost: $57,669,291) ------
- -----
SHORT TERM SECURITIES (1.8%)(2)
881,000 Sit Money Market Fund, 0.63%(4)
881,000
(cost: $881,000) ------
- -----
Total investments in securities
(cost: $58,550,291)(5)
$48,625,110
===========
See accompanying notes to portfolios of investments on page 38.
25
SIT SMALL CAP GROWTH FUND
ONE YEAR ENDED JUNE 30, 2003
[PHOTO]--------------------------------------------------------------------
- -----
EUGENE C. SIT, CFA, SENIOR PORTFOLIO MANAGER
For the fiscal year, the Sit Small Cap Growth Fund's return was +2.8%,
compared to the -1.6% and +0.7% returns for the Russell 2000 and Russell
2000
Growth indices, respectively. The Fund returned +20.0% over the past
quarter,
compared to the Russell 2000 Index return of +23.4%. The Russell 2000
Growth
Index return was +24.2% over the same time period.
IMPROVING TRENDS ACROSS THE BOARD
In recent months, investor sentiment has sharply improved following the
outcome of the Iraq conflict, along with strengthening corporate profits,
substantial monetary stimuli (interest rate cuts), and fiscal stimuli (tax
cuts). While the economy clearly did not reach its growth potential during
the
first half of 2003, we believe prospects are markedly better for the second
half
and 2004.
ADDED VALUE THROUGH STOCK SELECTION
Over the past 12 months, our strategy was to emphasize stock selection
rather
than making large sector "bets," in light of the many cross-currents in the
economy over most of the period. We are pleased to report that the Fund's
positive returns, by our calculations, were achieved primarily through
sound
stock picking, as we tried to take advantage of specific opportunities amid
the
market volatility. Specifically, the strongest contributors to the Fund's
performance since June 30, 2002 included Netscreen Technologies (+143%
total
return), Mercury Interactive (+69%), Coach (+81%), Biosite (+71%), Career
Education (+52%), and New York Community Bancorp (+50%).
BETTING ON A BETTER ECONOMY
Although the portfolio remains well diversified, the improving outlook
for
growth stocks and the economy, in general, have led us to take a more
aggressive
stance in our sector positioning. For example, we have recently added
significantly to our weightings in both the electronic technology and
health
technology sectors, based on both the strong cyclical and secular growth
prospects in these sectors. Conversely, health services has been reduced,
as we
see high valuations and limited opportunity for improving growth going
forward.
We are enthused about the prospects in the year ahead.
INVESTMENT OBJECTIVE AND STRATEGY
The objective of the Sit Small Cap Growth Fund is to maximize long-term
capital appreciation. The Fund seeks to achieve its objective by investing
at
least 80% of its net assets in common stocks of small growth companies with
capitalizations of $2.5 billion or less at the time of purchase.
The Adviser invests in a diversified group of growing small companies it
believes exhibit the potential for superior growth. The Adviser believes
that a
company's earnings growth is the primary determinant of its potential long-
term
return and evaluates a company's potential for above average long-term
earnings
and revenue growth.
PORTFOLIO SUMMARY
Net Asset Value 6/30/03: $ 21.64 Per Share
6/30/02: $ 21.06 Per Share
Total Net Assets: $182.9 Million
Weighted Average Market Cap: $ 2.0 Billion
PORTFOLIO STRUCTURE - BY SECTOR
(% OF TOTAL NET ASSETS)
[BAR CHART]
Electronic Technology 17.8
Finance 13.6
Health Technology 13.3
Technology Services 6.9
Process Industries 6.0
Health Services 5.0
Sectors less than 5.0% 31.3
Cash & Other Net
Assets 6.1
26
- - -------------------------------------------------------------------------
- -[LOGO]
AVERAGE ANNUAL TOTAL RETURNS*
SIT RUSSELL
SMALL CAP RUSSELL 2000 2000
GROWTH FUND INDEX GROWTH INDEX
----------- ----- ------------
3 Month** 20.02% 23.42% 24.15%
6 Month** 16.34 17.88 19.32
1 Year 2.75 -1.64 0.67
3 Year -18.95 -3.30 -16.67
5 Year 5.55 0.97 -4.25
Inception 12.67 8.64 4.73
(7/1/94)
CUMULATIVE TOTAL RETURNS*
SIT RUSSELL
SMALL CAP RUSSELL 2000 2000
GROWTH FUND INDEX GROWTH INDEX
----------- ----- ------------
1 Year 2.75% -1.64% 0.67%
3 Year -46.76 -9.58 -42.13
5 Year 30.98 4.92 -19.53
Inception 192.71 110.87 51.64
(7/1/94)
*AS OF 6/30/03 **NOT
ANNUALIZED.
- - -------------------------------------------------------------------------
- -------
PERFORMANCE FIGURES ARE HISTORICAL AND DO NOT GUARANTEE FUTURE RESULTS.
INVESTMENT RETURNS AND PRINCIPAL VALUE WILL VARY, AND YOU MAY HAVE A GAIN
OR
LOSS WHEN YOU SELL SHARES. AVERAGE ANNUAL TOTAL RETURNS INCLUDE CHANGES IN
SHARE
PRICE AS WELL AS REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAINS.
MANAGEMENT
FEES AND ADMINISTRATIVE EXPENSES ARE INCLUDED IN THE FUND'S PERFORMANCE;
HOWEVER, FEES AND EXPENSES ARE NOT INCORPORATED IN THE RUSSELL 2000 INDEX
AND
THE RUSSELL 2000 GROWTH INDEX.
- - -------------------------------------------------------------------------
- -------
GROWTH OF $10,000
[PLOT POINTS CHART]
The sum of $10,000 invested at inception (7/1/94) and held until 6/30/03
WOULD
HAVE GROWN TO $29,271 IN THE FUND, OR $21,087 IN THE RUSSELL 2000 INDEX
ASSUMING
REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAINS.
TOP 10 HOLDINGS
* New York Community Bancorp, Inc.
* Intersil Corp.
* Biosite, Inc.
* Millipore Corp.
* Coach, Inc.
* Mercury General Corp.
* Cuno, Inc.
* NetScreen Technologies, Inc.
* Universal Health Services, Inc.
* Airgas, Inc.
Total Number of Holdings: 81
27
SIT SMALL CAP GROWTH FUND
- - -------------------------------------------------------------------------
- -------
PORTFOLIO OF INVESTMENTS - JUNE 30, 2003
- - -------------------------------------------------------------------------
- -------
QUANTITY NAME OF ISSUER MARKET VALUE
($)(1)
- - -------------------------------------------------------------------------
- -------
COMMON STOCKS (93.9%)(2)
COMMERCIAL SERVICES (3.3%)
68,775 FTI Consulting, Inc.(3)
1,717,312
79,500 Performance Food Group Co.(3)
2,941,500
262,200 SkillSoft, A.D.R.(3)
1,324,110
------
- -----
5,982,922
------
- -----
CONSUMER DURABLES (1.0%)
31,200 Polaris Industries, Inc.
1,915,680
------
- -----
CONSUMER NON-DURABLES (4.0%)
79,850 Coach, Inc.(3)
3,971,739
92,500 Liz Claiborne, Inc.
3,260,625
------
- -----
7,232,364
------
- -----
CONSUMER SERVICES (2.9%)
47,050 Career Education Corp.(3)
3,219,161
87,550 Emmis Communications Corp.(3)
2,009,272
------
- -----
5,228,433
------
- -----
ELECTRONIC TECHNOLOGY (17.8%)
452,850 ADC Telecommunications, Inc.(3)
1,054,235
203,150 Applied Micro Circuits Corp.(3)
1,229,057
261,400 ChipPAC, Inc.(3)
2,004,938
263,550 Cray, Inc.(3)
2,082,045
86,700 Cymer, Inc.(3)
2,736,252
60,850 Emulex Corp.(3)
1,385,554
171,950 Extreme Networks, Inc.(3)
911,335
38,900 Integrated Circuit Systems, Inc.(3)
1,222,627
178,460 Intersil Corp.(3)
4,748,821
74,000 InVision Technologies, Inc.(3)
1,838,900
52,750 Kronos, Inc.(3)
2,680,227
151,850 NetScreen Technologies, Inc.(3)
3,424,218
49,000 Nvidia Corp.(3)
1,127,490
270,750 Oak Technology, Inc.(3)
1,681,358
86,650 Silicon Laboratories, Inc.(3)
2,308,356
69,800 Varian Semiconductor Equip. Associates, Inc.(3)
2,077,248
------
- -----
32,512,661
------
- -----
ENERGY MINERALS (3.2%)
43,500 Newfield Exploration Co.(3)
1,633,425
49,000 Pogo Producing Co.
2,094,750
108,933 XTO Energy, Inc.
2,190,643
------
- -----
5,918,818
------
- -----
- - -------------------------------------------------------------------------
- -------
QUANTITY NAME OF ISSUER MARKET VALUE
($)(1)
- - -------------------------------------------------------------------------
- -------
FINANCE (13.6%)
41,850 Affiliated Managers Group, Inc.(3)
2,550,757
72,900 Arthur J. Gallagher & Co.
1,982,880
33,850 HCC Insurance Holdings, Inc.
1,000,944
41,000 Legg Mason, Inc.
2,662,950
80,550 Mercury General Corp.
3,677,108
201,340 New York Community Bancorp, Inc.
5,856,981
53,650 PartnerRe, Ltd. Platinum Underwriters
2,742,052
89,000 Holdings, Ltd.
2,415,460
70,420 UCBH Holdings, Inc.
2,019,646
------
- -----
24,908,778
------
- -----
HEALTH SERVICES (5.0%)
39,650 Accredo Health, Inc.(3)
864,370
64,700 AdvancePCS(3)
2,473,481
42,150 Allscripts Healthcare Solutions, Inc.(3)
154,690
59,950 Stericycle, Inc.(3)
2,306,876
84,950 Universal Health Services, Inc.(3)
3,365,719
------
- -----
9,165,136
------
- -----
HEALTH TECHNOLOGY (13.3%)
19,000 Amylin Pharmaceuticals, Inc.(3)
415,910
95,650 Biosite, Inc.(3)
4,600,765
29,000 Celgene Corp.(3)
881,600
185,700 Cell Therapeutics, Inc.(3)
1,806,861
241,550 CryoLife, Inc.(3)
2,500,042
87,000 CTI Molecular Imaging, Inc.(3)
1,645,170
28,500 Invitrogen Corp.(3)
1,093,545
34,450 Neurocrine Biosciences, Inc.(3)
1,720,433
57,750 NPS Pharmaceuticals, Inc.(3)
1,405,635
53,150 Pharmaceutical Resources, Inc.(3)
2,586,279
162,700 Sangamo BioSciences, Inc.(3)
463,695
35,850 SurModics, Inc.(3)
1,093,425
60,200 Telik, Inc.(3)
967,414
27,950 Varian Medical Systems, Inc.(3)
1,609,082
78,400 Wright Medical Group, Inc.(3)
1,489,600
------
- -----
24,279,456
------
- -----
INDUSTRIAL SERVICES (2.3%)
59,250 Chicago Bridge & Iron Co.
1,343,790
44,500 Smith International, Inc.(3)
1,634,930
64,350 Varco International, Inc.(3)
1,261,260
------
- -----
4,239,980
------
- -----
28
- - -------------------------------------------------------------------------
- -[LOGO]
- - -------------------------------------------------------------------------
- -------
QUANTITY NAME OF ISSUER MARKET VALUE
($)(1)
- - -------------------------------------------------------------------------
- -------
PROCESS INDUSTRIES (6.0%)
199,150 Airgas, Inc.
3,335,762
98,700 Cuno, Inc.(3)
3,565,044
93,150 Millipore Corp.(3)
4,133,066
-------
- -----
11,033,872
-------
- -----
PRODUCER MANUFACTURING (4.0%)
83,100 DRS Technologies, Inc.(3)
2,320,152
61,000 Flir Systems, Inc.(3)
1,839,150
54,500 Jacobs Engineering Group, Inc.(3)
2,297,175
25,150 Roper Industries, Inc.
935,580
-------
- -----
7,392,057
-------
- -----
RETAIL TRADE (4.3%)
48,500 Advance Auto Parts, Inc.(3)
2,953,650
135,850 Chico's FAS, Inc.(3)
2,859,642
58,450 Cost Plus, Inc.(3)
2,084,327
-------
- -----
7,897,619
-------
- -----
TECHNOLOGY SERVICES (6.9%)
98,000 Bisys Group, Inc.(3)
1,800,260
131,800 Business Objects S.A., A.D.R.(3)
2,893,010
140,700 Citrix Systems, Inc.(3)
2,864,652
82,700 Mercury Interactive Corp.(3)
3,193,047
158,150 Quest Software, Inc.(3)
1,881,985
-------
- -----
12,632,954
-------
- -----
TRANSPORTATION (2.1%)
58,700 C.H. Robinson Worldwide, Inc.
2,087,372
29,000 UTI Worldwide, Inc.
904,510
37,500 Werner Enterprises, Inc.
795,000
-------
- -----
3,786,882
-------
- -----
UTILITIES (4.2%)
437,400 Calpine Corp.(3)
2,886,840
63,700 Equitable Resources, Inc.
2,595,138
64,500 Questar Corp.
2,158,815
-------
- -----
7,640,793
-------
- -----
Total common stocks
(cost: $163,343,422)
171,768,405
-------
- -----
SHORT-TERM SECURITIES (5.9%)(2)
10,826,00 Sit Money Market Fund, 0.63%(4)
10,826,000
(cost: $10,826,000) -------
- -----
Total investments in securities
(cost: $174,169,422)(5)
$182,594,405
============
See accompanying notes to portfolios of investments on page 38.
29
SIT SCIENCE AND TECHNOLOGY GROWTH FUND
ONE YEAR ENDED JUNE 30, 2003
[PHOTO]--------------------------------------------------------------------
- -----
EUGENE C. SIT, CFA, SENIOR PORTFOLIO MANAGER
The Sit Science and Technology Growth Fund returned +7.1% in the past
fiscal
year, compared to the +0.3% return for the S&P 500 Index .
EARNINGS WILL DRIVE FUTURE RETURNS
Science and technology stocks have turned in solid performances since
the
market "bottom" in October 2002. While valuations remain attractive for
companies held in the Fund, we believe earnings growth, rather than
continued
improvement in current valuations, will be the primary contributor to
returns
going forward. We believe that the Fund is well positioned to capitalize on
continued innovation in science and technology industries, bolstered by
improvements in the economy. As we have often discussed, the long-term
fundamentals underlying science and technology are very positive, but in
the
end, technology spending is ultimately responsive to trends in corporate
profitability and the availability of free cash flow. Even with tepid
economic
growth during 1Q2003, however, the companies held in the Fund reported
median
sales growth of +16% for the quarter (compared to 1Q2002). Based on the
outlook
for a significantly faster economic growth during the second half of 2003
into
2004, we expect that company growth prospects will brighten further with
the
"tailwind" of a stronger economy.
STILL A MULTITUDE OF OPPORTUNITIES
Despite the strong recent performance for many science and technology
sectors, we continue to find many opportunities in a variety of high growth
segments. Examples of current areas of emphasis include semiconductor
capital
equipment, business intelligence software, security software,
biotechnology, and
medical instrumentation. Given the ongoing innovation in these and other
areas
in technology-related industries, we remain keenly focused on finding the
strongest long-term opportunities for our shareholders.
We are pleased to report positive returns for the most recent periods.
Recent
improvements in investor sentiment, improving economic conditions, and
strong
growth prospects for companies held in the Fund, make us optimistic about
the
outlook for the year ahead.
INVESTMENT OBJECTIVE AND STRATEGY
The objective of the Fund is to maximize long-term capital appreciation.
The
Fund seeks to achieve its objective by investing at least 80% of its net
assets
in common stocks of companies principally engaged in science and technology
business activities. Such companies include those whose assets, gross
income, or
net profits are significantly committed to, or derived from, science and
technology. The Adviser seeks stocks of science and technology companies
having
superior growth potential in virtually any industry in which they may be
found.
PORTFOLIO SUMMARY
Net Asset Value 6/30/03: $ 8.05 Per Share
6/30/02: $ 7.52 Per Share
Total Net Assets: $15.2 Million
Weighted Average Market Cap: $29.8 Billion
PORTFOLIO STRUCTURE - BY SECTOR
(% OF TOTAL NET ASSETS)
Health Technology 33.0
Electronic Technology 32.8
Technology Services 20.8
Sectors Less Than 5.0% 12.0
Cash & Other Net Assets 1.4
30
- - -------------------------------------------------------------------------
- -[LOGO]
AVERAGE ANNUAL TOTAL RETURNS*
SIT
SCIENCE AND
TECHNOLOGY S&P
GROWTH FUND 500 INDEX
----------- ---------
3 Month** 19.61% 15.39%
6 Month** 19.08 11.76
1 Year 7.05 0.25
3 Years -37.10 -11.20
5 Years -6.73 -1.61
Inception -3.31 1.50
(12/31/97)
CUMULATIVE TOTAL RETURNS*
SIT
SCIENCE AND
TECHNOLOGY S&P
GROWTH FUND 500 INDEX
----------- ---------
1 Year 7.05% 0.25%
3 Years -75.11 -29.98
5 Years -29.41 -7.81
Inception -16.91 8.52
(12/31/97)
*AS OF 6/30/03 **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.
- - -------------------------------------------------------------------------
- -------
GROWTH OF $10,000
[PLOT POINTS GRAPH]
THE SUM OF $10,000 INVESTED AT INCEPTION (12/31/97) AND HELD UNTIL 6/30/03
WOULD
HAVE DECLINED TO $8,309 IN THE FUND OR GROWN TO $10,852 IN THE S&P 500
INDEX.
TOP 10 HOLDINGS
* Elan Corp., A.D.R.
* Amgen, Inc.
* St. Jude Medical, Inc.
* Analog Devices, Inc.
* Boston Scientific Corp.
* Synopsys, Inc.
* Biogen, Inc.
* Teva Pharmaceutical, Ltd., A.D.R.
* Dell Computer Corp.
* Millipore Corp.
Total Number of Holdings: 62
31
SIT SCIENCE AND TECHNOLOGY GROWTH FUND
- - -------------------------------------------------------------------------
- -------
PORTFOLIO OF INVESTMENTS - JUNE 30, 2003
- - -------------------------------------------------------------------------
- -------
QUANTITY NAME OF ISSUER MARKET VALUE
($)(1)
- - -------------------------------------------------------------------------
- -------
COMMON STOCKS (98.6%)(2)
COMMUNICATIONS (1.1%)
9,400 Nextel Communications, Inc.(3)
169,952
-------
- -----
CONSUMER DURABLES (1.9%)
3,800 Electronic Arts, Inc.(3)
281,162
-------
- -----
CONSUMER SERVICES (1.0%)
9,600 AOL Time Warner, Inc.(3)
154,464
-------
- -----
ELECTRONIC TECHNOLOGY (32.8%)
12,400 Analog Devices, Inc.(3)
431,768
60,000 ADC Telecommunications, Inc.(3)
139,680
8,000 Applied Materials, Inc.(3)
126,880
12,400 Broadcom Corp.(3)
308,884
17,000 Cisco Systems, Inc.(3)
283,730
41,200 Cray, Inc.(3)
325,480
10,300 Dell Computer Corp.(3)
329,188
19,100 EMC Corp.(3)
199,977
5,000 Hewlett-Packard Co.
106,500
11,200 Intel Corp.
232,781
13,600 Jabil Circuit, Inc.(3)
300,560
6,200 KLA-Tencor Corp.(3)
288,238
4,200 Linear Technology Corp.
135,282
5,400 Maxim Integrated Products, Inc.
184,626
11,600 Netscreen Technologies, Inc.(3)
261,580
14,900 Nokia Corp., A.D.R.
244,807
5,600 Novellus Systems, Inc.(3)
205,077
6,600 Qualcomm, Inc.
235,950
6,200 Synopsys, Inc.(3)
383,470
10,200 Xilinx, Inc.(3)
258,162
-------
- -----
4,982,620
-------
- -----
HEALTH TECHNOLOGY (33.0%)
3,200 Alcon, Inc.
146,240
7,200 Amgen, Inc.(3)
478,368
8,900 Biogen, Inc.(3)
338,200
8,200 Biomet, Inc.
235,012
4,600 Biovail Corp.(3)
216,476
6,600 Boston Scientific Corp.(3)
403,260
90,000 Elan Corp., A.D.R(3)
507,600
3,600 Forest Laboratories, Inc.(3)
197,100
3,400 Genentech, Inc.(3)
245,208
6,600 Genzyme Corp.(3)
275,880
4,400 Gilead Sciences, Inc.(3)
244,552
5,200 IDEC Pharmaceuticals Corp.(3)
176,800
4,200 MedImmune, Inc.(3)
152,754
- - -------------------------------------------------------------------------
- -------
QUANTITY NAME OF ISSUER MARKET VALUE
($)(1)
- - -------------------------------------------------------------------------
- -------
5,800 Medtronic, Inc.
278,226
7,000 Pfizer, Inc.
239,050
37,200 Sangamo BioSciences, Inc.(3)
106,020
7,800 St. Jude Medical, Inc.(3)
448,500
5,800 Teva Pharmaceutical, Ltd., A.D.R.
330,194
-------
- -----
5,019,440
-------
- -----
PROCESS INDUSTRIES (2.2%)
7,400 Millipore Corp.(3)
328,338
-------
- -----
PRODUCER MANUFACTURING (4.6%)
8,600 DRS Technologies, Inc.(3)
240,112
7,400 Harris Corp.
222,370
11,400 Thermo Electron Corp.(3)
239,628
-------
- -----
702,110
-------
- -----
RETAIL TRADE (1.2%)
1,800 eBay, Inc.(3)
187,524
-------
- -----
TECHNOLOGY SERVICES (20.8%)
9,400 Adobe Systems, Inc.
301,458
4,800 Affiliated Computer Services, Inc.(3)
219,504
6,800 Amdocs, Ltd.(3)
163,200
20,400 BEA Systems, Inc.(3)
221,544
3,000 Business Objects, A.D.R.(3)
65,850
8,200 Check Point Software Technology(3)
160,310
7,400 First Data Corp.
306,656
3,600 Fiserv, Inc.(3)
128,196
5,000 Intuit, Inc.(3)
222,650
6,900 Mercury Interactive Corp.(3)
266,409
9,000 Microsoft Corp.
230,490
10,000 Oracle Corp.(3)
120,200
7,000 Symantec Corp.(3)
307,020
10,800 Veritas Software Corp.(3)
309,636
4,000 Yahoo!, Inc.(3)
131,040
-------
- -----
3,154,163
-------
- -----
Total common stocks
14,979,773
(cost: $17,650,570) -------
- -----
SHORT-TERM SECURITIES (1.6%) (2)
247,000 Sit Money Market Fund, 0.63%(4)
247,000
(cost: $247,000) -------
- -----
Total investments in securities
(cost: $17,897,570)
$15,226,773
===========
32 See accompanying notes to portfolios of investments on page 38.
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33
SIT DEVELOPING MARKETS GROWTH FUND
ONE YEAR ENDED JUNE 30, 2003
[PHOTO]--------------------------------------------------------------------
- -----
SENIOR PORTFOLIO MANAGERS
EUGENE C. SIT, CFA AND ROGER J. SIT
The Sit Developing Markets Growth Fund returned +0.3% during the fiscal
year
ending June 30, 2003, versus increases of +4.0% and +6.1% for the MSCI
Emerging
Markets Free and Lipper Emerging Markets Indices, respectively. The Fund's
relative performance was helped by holdings in Israel, Spain, and several
traditional growth sectors, but hampered by underweightings in Russia and
Indonesia and poor performance from utilities and retailing.
ASIA'S STRENGTH OVERPOWERS SARS SCARE
The Fund remains overweight in Asia, with a weighting of 60.1%, compared
with
52.9% for the Emerging Markets Free Index. The abating of SARS-related
fears
combined with increasing optimism over a global economic rebound and
encouraging
earnings results from many Asian companies have fueled the recent rally in
the
region's equity markets. We believe that the markets are only in the early
stages of a sustainable long-term price appreciation, as valuation levels
remain
low relative to both historical ranges and the developed markets. Positive
secular trends, such as outsourcing, fueled export growth and the emergence
of
China as a powerful economic force in the region provide a solid
fundamental
underpinning for future growth. During the year, Fund holding Petrochina,
the
largest oil company in China, saw its share price boosted when Warren
Buffett's
Berkshire Hathaway purchased a 7% stake in the company, a confirmation of
our
belief that the long-term fundamentals and valuation of the company remain
attractive.
LATIN AMERICAN OUTLOOK IS IMPROVING
The outlook for Latin American economies is gradually improving and the
liquidity-induced equity market rallies that occurred in the second quarter
could carry prices still higher over the next few months. The expected
recovery
in the U.S. should benefit Mexico, and Brazil's avoidance of a debt default
is
another positive sign for the region. The Fund's weighting in Latin America
is
21.5%, slightly overweight versus the 18.7% weighting for the MSCI
benchmark
Index.
OTHER DEVELOPING MARKETS UNDERWEIGHTED
The Fund has a weighting of 11.5% in Emerging Europe, the Middle East,
and
Africa, compared with 28.4% for the Index. While these regions are not
relatively attractive, we look to specific stories, such as a new position
in
Vimpelcom, the Russian wireless telecom operator.
INVESTMENT OBJECTIVE AND STRATEGY
The Fund seeks to maximize long-term capital appreciation. The Fund
seeks to
achieve its objective by investing at least 80% of its net assets in common
stocks of companies domiciled or operating in a developing market. In
selecting
investments for the Fund, the Sub-Adviser begins by selecting countries or
regions in which to invest by considering several factors affecting the
economy
and equity market of foreign countries and regions. After the country and
regional allocations are determined, the Sub-Adviser seeks industries and
sectors that appear to have strong earnings growth prospects. Within the
selected industries and sectors, the Sub-Adviser invests in foreign
growth-oriented companies it believes exhibit the potential for superior
growth.
PORTFOLIO SUMMARY
Net Asset Value 6/30/03: $8.12 Per Share
6/30/02: $8.10 Per Share
Total Net Assets: $8.6 Million
Weighted Average Market Cap: $27.9 Billion
PORTFOLIO STRUCTURE - BY REGION
(% OF TOTAL NET ASSETS)
[BAR CHART]
SIT MSCI
DEVELOPING EMERGING
MARKETS GROWTH MARKETS GROWTH
FUND INDEX
Asia 60.1 52.9
Latin America 21.5 18.7
Africa / Middle East 10.1 18.5
Europe 1.4 9.9
Cash and
Other Net Assets 6.9 0.0
34
- - -------------------------------------------------------------------------
- -[LOGO]
AVERAGE ANNUAL TOTAL RETURNS*
SIT MSCI LIPPER
DEVELOPING EMERGING EMERGING
MARKETS MARKETS MARKETS
GROWTH FUND FREE INDEX INDEX
----------- ---------- -----
3 Month** 19.41% 22.19% 23.43%
6 Month** 14.21 13.90 15.96
1 Year 0.25 4.04 6.14
3 Year -15.44 -9.28 -6.56
5 Year -2.14 0.13 1.89
Inception -2.21 -3.97 -1.48
(7/1/94)
CUMULATIVE TOTAL RETURNS*
SIT MSCI LIPPER
DEVELOPING EMERGING EMERGING
MARKETS MARKETS MARKETS
GROWTH FUND FREE INDEX INDEX
----------- ---------- -----
1 Year 0.25% 4.04% 6.14%
3 Year -39.53 -25.33 -18.42
5 Year -10.26 0.65 9.80
Inception -18.19 -30.57 -12.55
(7/1/94)
*AS OF 6/30/03 **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 6/30/03
WOULD
HAVE DECLINED TO $8,181 IN THE FUND, OR $6,943 IN THE MORGAN STANLEY
CAPITAL
INT'L EMERGING MARKETS FREE INDEX ASSUMING REINVESTMENT OF ALL DIVIDENDS
AND
CAPITAL GAINS.
PORTFOLIO STRUCTURE - BY SECTOR
(% OF TOTAL NET ASSETS)
[BAR CHART]
Communications 16.8
Electronic Technology 16.5
Finance 11.6
Energy Minerals 10.5
Retail Trade 7.2
Health Technology 6.7
Consumer Services 6.1
Non-energy Minerals 5.0
Sectors Less Than 5.0% 12.7
Cash and Other Net Assets 6.9
35
SIT DEVELOPING MARKETS GROWTH FUND
- - -------------------------------------------------------------------------
- -------
PORTFOLIO OF INVESTMENTS - JUNE 30, 2003
10 LARGEST HOLDINGS
* Samsung Electronics
* Teva Pharmaceutical, A.D.R.
* Petrochina Co.
* Wal-Mart de Mexico
* Taiwan Semiconductor
* Telephonos de Mexico, A.D.R.
* Hon Hai Precision Industry
* HSBC Holdings p.l.c.
* Advanced Info Service
* BHP Billiton Limited, A.D.R.
Total Number of Holdings: 54
- - -------------------------------------------------------------------------
- -------
QUANTITY NAME OF ISSUER MARKET VALUE
($)(1)
- - -------------------------------------------------------------------------
- -------
COMMON STOCKS (90.3%) (2)
AFRICA/MIDDLE EAST (10.1%)
ISRAEL (8.0%)
5,500 Check Point Software Technologies, Ltd.
(Technology Services)(3)
107,525
2,600 Taro Pharmaceutical Industries, Ltd.
(Health Technology)(3)
142,688
7,600 Teva Pharmaceutical, A.D.R.
(Health Technology)
432,676
-----
- -----
682,889
-----
- -----
SOUTH AFRICA (2.1%)
12,100 Anglo American p.l.c. (Non-Energy Minerals)
184,695
-----
- -----
ASIA (57.3%)
AUSTRALIA (2.9%)
21,410 BHP Billiton, Ltd., A.D.R. (Non-Energy Minerals)
248,142
-----
- -----
CHINA/HONG KONG (14.1%)
56,000 China Mobile (Hong Kong), Ltd. (Communications)
132,134
62,000 Citic Pacific, Ltd. (Industrial Services)
113,296
29,500 CLP Holdings (Utilities)
128,999
38,000 CNOOC, Ltd. (Energy Minerals)
56,039
92,000 Denway Motors, Ltd. (Producer Manufacturing)
41,587
22,800 HSBC Holdings p.l.c. (Finance)
270,449
42,000 Li & Fung, Ltd. (Retail Trade)
54,128
1,074,000 PetroChina Co. (Energy Minerals)
323,655
2,900 PetroChina Co., A.D.R. (Energy Minerals)
87,580
-----
- -----
1,207,867
-----
- -----
- - -------------------------------------------------------------------------
- -------
QUANTITY NAME OF ISSUER MARKET VALUE
($)(1)
- - -------------------------------------------------------------------------
- -------
MALAYSIA (3.3%)
47,000 Maxis Berhad (Communications)
70,500
40,000 Nestle Berhad (Consumer Non-Durables)
215,791
----
- -----
286,291
----
- -----
PHILIPPINES (0.6%)
494,000 SM Prime Holdings, Inc. (Retail Trade)
54,535
----
- -----
RUSSIA (3.2%)
700 LUKOIL, A.D.R. (Energy Minerals)
55,300
1,000 Vimpel Communications, A.D.R. (Communications)(3)
46,440
3,000 YUKOS, A.D.R. (Energy Minerals)
168,000
----
- -----
269,740
----
- -----
SINGAPORE (3.6%)
24,097 DBS Group Holdings, Ltd. (Finance)
140,941
18,000 Venture Corp., Ltd. (Electronic Tech.)
164,564
----
- -----
305,505
----
- -----
SOUTH KOREA (15.2%)
2,200 Kookmin Bank (Finance)
66,304
600 Kookmin Bank, A.D.R. (Finance)
18,150
20,300 Korea Electric Power, A.D.R. (Utilities)
180,873
3,000 KT Corp. (Communications)
117,288
1,769 Samsung Electronics (Electronic Technology)
525,739
15,600 Shinhan Financial Group (Finance)
162,595
570 Shinsegae Co., Ltd. (Retail Trade)
88,995
7,600 SK Telecom Co., A.D.R. (Communications)
143,336
----
- -----
1,303,280
----
- -----
TAIWAN (8.5%)
68,677 Accton Technology Corp. (Electronic Technology)
52,584
146,056 Chroma Ate, Inc. (Electronic Technology)
91,575
76,625 Hon Hai Precision Industry (Electronic Technology)
277,851
186,391 Taiwan Semiconductor Co. (Electronic Technology)
306,972
----
- -----
728,982
----
- -----
THAILAND (5.9%)
184,800 Advanced Info Service Public Co., Ltd.
(Communications)
268,145
91,800 Bangkok Bank Public Co., Ltd. (Finance)(3)
147,395
15,600 BEC World Public Co. (Consumer Services)
89,058
----
- -----
504,598
----
- -----
36
- - -------------------------------------------------------------------------
- -[LOGO]
- - -------------------------------------------------------------------------
- -------
QUANTITY NAME OF ISSUER MARKET VALUE
($)(1)
- - -------------------------------------------------------------------------
- -------
EUROPE (1.4%)
SPAIN (1.4%)
3,592 Telefonica, A.D.R. (Communications)
124,176
-----
- -----
LATIN AMERICA (21.5%)
BRAZIL (7.7%)
19,936,532 Banco Bradesco S.A. (Finance)
74,631
2,000 Brasil Telecom, A.D.R. (Communications)
74,900
18,900 Copel, A.D.R. (Utilities)
56,700
3,883 Embraer de Aeronautica, A.D.R. (Transportation)
74,165
6,400 Pao de Acucar, A.D.R. (Retail Trade)
98,176
5,860 Petrobras (Energy Minerals)
103,964
5,300 Petrobras, A.D.R. (Energy Minerals)
103,668
6,100 Tele Norte Leste Participacoes, A.D.R.
(Communications)
71,248
-----
- -----
657,452
-----
- -----
MEXICO (13.8%)
6,200 America Movil, A.D.R. (Communications)
116,250
7,500 Coca-Cola Femsa S.A., A.D.R. (Consumer Non-Durables)
161,250
132,000 Grupo Financiero BBVA Bancomer, S.A. (Finance)(3)
111,815
5,600 Grupo Televisa S.A., A.D.R. (Consumer Services)
193,200
8,900 Telefonos de Mexico, A.D.R. (Communications)
279,638
109,270 Wal-Mart de Mexico (Retail Trade)
322,966
-----
- -----
1,185,119
-----
- -----
Total common stocks
7,743,271
(cost: $7,776,669) -----
- -----
CLOSED-END MUTUAL FUND (2.8%)(2)
19,640 India Fund (Consumer Services)
240,590
(cost: $336,404) -----
- -----
SHORT-TERM SECURITIES (6.8%)(2)
587,000 Sit Money Market Fund, 0.63% (4)
587,000
(cost: $587,000) -----
- -----
Total investments in securities
(cost: $8,700,073)(5)
$8,570,861
==========
See accompanying notes to portfolios of investments on page 38.
37
SIT MUTUAL FUNDS
- - -------------------------------------------------------------------------
- -------
NOTES TO PORTFOLIOS OF INVESTMENTS
(1) Securities are valued by procedures described in note 1 to the
financial
statements.
(2) Percentage figures indicate percentage of total net assets.
(3) Presently non-income producing securities.
(4) This security represents an investment in an affiliated party. See
note 3
to the accompanying financial statements.
(5) At June 30, 2003, the cost of securities for federal income tax
purposes
and the aggregate gross unrealized appreciation and depreciation based
on
that cost were as follows:
LARGE CAP
MID CAP INTERNATIONAL
BALANCED GROWTH
GROWTH GROWTH
FUND FUND
FUND FUND
----------- -----------
- ------------ -------------
Cost for federal income tax purposes $ 17,476,751 $ 61,737,184
$163,985,890 $ 58,550,291
============ ============
============ ===========
Unrealized appreciation
(depreciation) on investments:
Gross unrealized appreciation $ 710,866 $ 7,435,576
$ 24,841,684 $ 3,752,208
Gross unrealized depreciation (1,938,358) (9,948,888)
(18,331,087) (13,677,389)
------------ ------------
- ------------ ------------
Net unrealized appreciation
(depreciation) ($ 1,227,492) ($ 2,513,312)
$ 6,510,597 ($ 9,925,181)
============ ============
============ ============
SCIENCE AND
DEVELOPING
SMALL CAP TECHNOLOGY
MARKETS
GROWTH GROWTH
GROWTH
FUND FUND
FUND
------------ ------------
- ------------
Cost for federal income tax purposes $174,538,604 $ 18,205,091
$ 8,700,073
============ ============
============
Unrealized appreciation
(depreciation) on investments:
Gross unrealized appreciation $ 26,649,131 $ 1,308,693
$ 1,373,185
Gross unrealized depreciation (18,593,330) (4,287,011)
(1,502,397)
------------ ------------
- ------------
Net unrealized appreciation
(depreciation) $ 8,055,801 ($ 2,978,318)
($ 129,212)
============ ============
============
38
- - -------------------------------------------------------------------------
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This page has been left blank intentionally.
39
SIT MUTUAL FUNDS
JUNE 30, 2003
- - -------------------------------------------------------------------------
- -------
STATEMENTS OF ASSETS AND LIABILITIES
LARGE CAP
MID CAP
BALANCED GROWTH
GROWTH
ASSETS FUND FUND
FUND
--------------- --------------
- - ---------------
Investments in securities, at
identified cost $17,353,174
$61,613,551 $163,668,404
===============
=============== ===============
Investments in securities, at
market value - see
accompanying schedule for detail $16,249,259
$59,223,872 $170,496,487
Cash in bank on demand
deposit --
560 1,612
Receivables:
Dividends and accrued interest 64,470
46,372 40,467
Fund shares sold 819
2,523 4,121
Investment securities sold 41,571
207,857 444,448
Other receivables --
10,621 --
--------------- --------------
- - ---------------
Total assets 16,356,119
59,491,805 170,987,135
--------------- --------------
- - ---------------
LIABILITIES
Payables:
Disbursements in excess of
cash balances 63,863 -
- - --
Investment securities purchased 206,062
116,333 504,437
Fund shares redeemed 1,600
1,460 --
Accrued investment management
and advisory services fee 13,625
50,319 162,819
Other payables 6,097 -
- - 147,343
--------------- --------------
- - ---------------
Total liabilities 291,247
168,112 814,599
--------------- --------------
- - ---------------
Net assets applicable to
outstanding capital stock 16,064,872
59,323,693 170,172,536
===============
=============== ===============
Capital Stock Par $0.001
$0.001 $0.001
Authorized shares 10,000,000,000
10,000,000,000 10,000,000,000
Outstanding shares 1,288,762
2,203,754 21,102,929
===============
=============== ===============
Net asset value per share of
outstanding capital stock $12.47
$26.92 $8.06
===============
=============== ===============
40
- - -------------------------------------------------------------------------
- -[LOGO]
SCIENCE AND DEVELOPING
INTERNATIONAL SMALL CAP
TECHNOLOGY MARKETS
GROWTH GROWTH
GROWTH GROWTH
FUND FUND
FUND FUND
--------------- ---------------
- --------------- ---------------
ASSETS
Investments in securities, at
identified cost $58,550,291 $174,169,422
$17,897,570 $8,700,073
=============== ===============
=============== ===============
Investments in securities, at
market value - see
accompanying schedule for detail $48,625,110 $182,594,405
$15,226,773 $8,570,861
Cash in bank on demand
deposit 315,935 1,192
6,666 725
Receivables:
Dividends and accrued interest 71,912 37,516
898 15,204
Fund shares sold 3,390 39,982
2,202 758
Investment securities sold -- 2,019,049
- -- --
Other receivables -- 54,774
- -- 4,660
--------------- ---------------
- --------------- ---------------
Total assets 49,016,347 184,746,918
15,236,539 8,592,208
--------------- ---------------
- --------------- ---------------
LIABILITIES
Payables:
Disbursements in excess of
cash balances -- --
- -- --
Investment securities purchased 102,852 1,574,890
- -- --
Fund shares redeemed 282,356 35,609
- -- 165
Accrued investment management
and advisory services fee 68,044 224,547
17,165 14,773
Other payables 29,844 152
19,701 ------
--------------- ---------------
- --------------- ---------------
Total liabilities 483,096 1,835,198
36,866 14,938
--------------- ---------------
- --------------- ---------------
Net assets applicable to
outstanding capital stock 48,533,251 182,911,720
15,199,673 8,577,270
=============== ===============
=============== ===============
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 5,170,300 8,451,718
1,888,195 1,056,587
=============== ===============
=============== ===============
Net asset value per share of
outstanding capital stock $9.39 $21.64
$8.05 $8.12
=============== ===============
=============== ===============
See accompanying notes to financial statements on page 47.
41
SIT MUTUAL FUNDS
ONE YEAR ENDED JUNE 30, 2003
- - -------------------------------------------------------------------------
- -------
STATEMENTS OF OPERATIONS
LARGE
CAP MID CAP INTERNATIONAL
BALANCED
GROWTH GROWTH GROWTH
FUND FUND
FUND FUND
------------ --------
- ---- ------------ ------------
INVESTMENT INCOME:
INCOME:
Dividends * $148,754
$587,182 $559,701 $1,154,086
Interest 412,878
21,905 96,374 46,167
------------ --------
- ---- ------------ ------------
Total income 561,632
609,087 656,075 1,200,253
------------ --------
- ---- ------------ ------------
EXPENSES (NOTE 3):
Investment management and
advisory services fee 158,894
565,330 1,935,217 962,154
Less fees and expenses absorbed
by investment adviser --
- -- (154,818) (182,029)
------------ --------
- ---- ------------ ------------
Total net expenses 158,894
565,330 1,780,399 780,125
------------ --------
- ---- ------------ ------------
Net investment income (loss) 402,738
43,757 (1,124,324) 420,128
------------ --------
- ---- ------------ ------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net realized gain (loss) (1,647,606)
(6,536,986) (29,541,134) (11,557,686)
Net change in unrealized appreciation
(depreciation) on investments 1,829,489
7,056,934 31,743,942 4,260,724
Realized gain (loss) on foreign
currency transactions --
- -- -- 4,027
Net change in unrealized
appreciation (depreciation) on
foreign currency transactions --
- -- -- (2,822)
------------ --------
- ---- ------------ ------------
Net gain (loss) on investments 181,883
519,948 2,202,808 (7,295,757)
------------ --------
- ---- ------------ ------------
Net increase (decrease) in net assets
resulting from operations $584,621
$563,705 $1,078,484 ($6,875,629)
============
============ ============ ============
- - ---------------
* Dividends are net of foreign withholding tax of $108,332 and $19,842 in
the
International Growth Fund and Developing Markets Growth Fund, respectively.
42
- - -------------------------------------------------------------------------
- -[LOGO]
SCIENCE
AND DEVELOPING
SMALL CAP
TECHNOLOGY MARKETS
GROWTH
GROWTH GROWTH
FUND FUND
FUND
------------ --------
- ---- ------------
INVESTMENT INCOME:
INCOME:
Dividends * $622,430
$30,744 $200,592
Interest 171,911
6,825 6,215
------------ --------
- ---- ------------
Total income 794,341
37,569 206,807
------------ --------
- ---- ------------
EXPENSES (NOTE 3):
Investment management and
advisory services fee 2,362,299
190,028 178,798
Less fees and expenses absorbed
by investment adviser --
(19,003) --
------------ --------
- ---- ------------
Total net expenses 2,362,299
171,025 178,798
------------ --------
- ---- ------------
Net investment income (loss) (1,567,958)
(133,456) 28,009
------------ --------
- ---- ------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net realized gain (loss) (24,258,198)
(5,718,058) (692,664)
Net change in unrealized appreciation
(depreciation) on investments 29,931,512
6,706,666 684,551
Realized gain (loss) on foreign
currency transactions --
- -- (65)
Net change in unrealized appreciation
(depreciation) on foreign currency
transactions --
- -- 12
------------ --------
- ---- ------------
Net gain (loss) on investments 5,673,314
988,608 (8,166)
------------ --------
- ---- ------------
Net increase (decrease) in net assets
resulting from operations $4,105,356
$855,152 $19,843
============
============ ============
- - ------------
See accompanying notes to financial statements on page 47.
43
SIT MUTUAL FUNDS
- - -------------------------------------------------------------------------
- -------
STATEMENTS OF CHANGES IN NET ASSETS
BALANCED LARGE CAP
FUND
GROWTH FUND
------------------
- -------------- --------------------------------
YEAR ENDED
YEAR ENDED YEAR ENDED YEAR ENDED
JUNE 30,
JUNE 30, JUNE 30, JUNE 30,
2003
2002 2003 2002
-------------
- ------------- ------------- -------------
OPERATIONS:
Net investment income (loss) $402,738
$546,453 $43,757 ($226,597)
Net realized gain (loss) on investments (1,647,606)
(3,053,017) (6,536,986) (16,004,850)
Net change in unrealized appreciation
(depreciation) on investments 1,829,489
(1,596,602) 7,056,934 (17,827,153)
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 584,621
(4,103,166) 563,705 (34,058,600)
-------------
- ------------- ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (455,000)
(596,000) -- --
Net realized gains on investments --
(9,747) -- (931,511)
-------------
- ------------- ------------- -------------
Total distributions (455,000)
(605,747) -- (931,511)
-------------
- ------------- ------------- -------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 4,198,470
5,679,337 10,694,474 11,394,068
Reinvested distributions 450,934
598,409 -- 880,335
Payments for shares redeemed (6,539,306)
(8,690,437) (15,773,839) (36,274,376)
-------------
- ------------- ------------- -------------
Increase (decrease) in net assets from
capital share transactions (1,889,902)
(2,412,691) (5,079,365) (23,999,973)
-------------
- ------------- ------------- -------------
Total increase (decrease) in net assets (1,760,281)
(7,121,604) (4,515,660) (58,990,084)
NET ASSETS
Beginning of period 17,825,153
24,946,757 63,839,353 122,829,437
-------------
- ------------- ------------- -------------
End of period $16,064,872
$17,825,153 $59,323,693 $63,839,353
=============
============= ============= =============
NET ASSETS CONSIST OF:
Capital (par value and paid-in surplus) $22,477,433
$24,367,335 $85,275,589 $90,354,954
Undistributed (distributions in excess of)
net investment income 80,738
133,000 43,757 --
Accumulated net realized gain (loss) from
security transactions and foreign
currency transactions (5,389,384)
(3,741,778) (23,605,974) (17,068,988)
Unrealized appreciation (depreciation) on
investments (1,103,915)
(2,933,404) (2,389,679) (9,446,613)
Unrealized appreciation (depreciation) on
foreign currency transactions --
- -- -- --
-------------
- ------------- ------------- -------------
$16,064,872
$17,825,153 $59,323,693 $63,839,353
=============
============= ============= =============
CAPITAL TRANSACTIONS IN SHARES:
Sold 359,102
407,429 436,179 343,513
Reinvested distributions 39,140
42,385 -- 25,565
Redeemed (559,312)
(626,912) (650,676) (1,101,363)
-------------
- ------------- ------------- -------------
Net increase (decrease) (161,070)
(177,098) (214,497) (732,285)
=============
============= ============= =============
44
- - -------------------------------------------------------------------------
- -[LOGO]
MID CAP INTERNATIONAL
SMALL CAP
GROWTH FUND GROWTH FUND
GROWTH FUND
- - -------------------------------- --------------------------------
- --------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
JUNE 30, JUNE 30,
2003 2002 2003 2002
2003 2002
- - ------------- ------------- ------------- -------------
- ------------- -------------
($1,124,324) ($1,948,664) $420,128 ($193,630)
($1,567,958) ($1,954,876)
(29,541,134) (30,225,225) (11,557,686) (15,739,196)
(24,258,198) (49,917,873)
31,743,942 (76,620,570) 4,260,724 (10,198,066)
29,931,512 (12,837,016)
-- -- 4,027 (5,938)
- -- --
-- -- (2,822) 5,562
- -- --
- - ------------- ------------- ------------- -------------
- ------------- -------------
1,078,484 (108,794,459) (6,875,629) (26,131,268)
4,105,356 (64,709,765)
- - ------------- ------------- ------------- -------------
- ------------- -------------
- - ------------- ------------- ------------- -------------
- ------------- -------------
-- (5,755,281) -- --
- -- (319,828)
- - ------------- ------------- ------------- -------------
- ------------- -------------
-- (5,755,281) -- --
- -- (319,828)
- - ------------- ------------- ------------- -------------
- ------------- -------------
36,506,428 77,479,794 232,337,183 376,817,380
59,140,518 133,648,941
-- 5,495,225 -- --
- -- 311,390
(48,759,036) (147,115,266) (246,748,641) (403,950,480)
(61,017,722) (116,134,977)
- - ------------- ------------- ------------- -------------
- ------------- -------------
(12,252,608) (64,140,247) (14,411,458) (27,133,100)
(1,877,204) 17,825,354
- - ------------- ------------- ------------- -------------
- ------------- -------------
(11,174,124) (178,689,987) (21,287,087) (53,264,368)
2,228,152 (47,204,239)
181,346,660 360,036,647 69,820,338 123,084,706
180,683,568 227,887,807
- - ------------- ------------- ------------- -------------
- ------------- -------------
$170,172,536 $181,346,660 $48,533,251 $69,820,338
$182,911,720 $180,683,568
============= ============= ============= =============
============= =============
$229,024,402 $242,401,334 $92,375,615 $106,787,073
$254,617,566 $258,062,728
-- -- 424,155 --
- -- --
(65,679,949) (36,138,815) (34,342,194) (22,784,508)
(80,130,829) (55,872,631)
6,828,083 (24,915,859) (9,925,181) (14,185,905)
8,424,983 (21,506,529)
-- -- 856 3,678
- -- --
- - ------------- ------------- ------------- -------------
- ------------- -------------
$170,172,536 $181,346,660 $48,533,251 $69,820,338
$182,911,720 $180,683,568
============= ============= ============= =============
============= =============
5,098,620 7,870,846 26,277,940 31,516,144
3,132,916 5,501,805
-- 524,854 -- --
- -- 12,317
(6,920,288) (14,579,237) (27,581,341) (33,468,771)
(3,260,004) (4,797,505)
- - ------------- ------------- ------------- -------------
- ------------- -------------
(1,821,668) (6,183,537) (1,303,401) (1,952,627)
(127,088) 716,617
============= ============= ============= =============
============= =============
See accompanying notes to financial statements on page 47.
45
SIT MUTUAL FUNDS
- - -------------------------------------------------------------------------
- -------
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
SCIENCE
AND
TECHNOLOGY
DEVELOPING MARKETS
GROWTH
FUND GROWTH FUND
-------------------
- ----------- ------------------------------
YEAR ENDED
YEAR ENDED YEAR ENDED YEAR ENDED
JUNE 30,
JUNE 30, JUNE 30, JUNE 30,
2003
2002 2003 2002
------------ -
- ----------- ------------ ------------
OPERATIONS:
Net investment income (loss) ($133,456)
($233,417) $28,009 ($23,766)
Net realized gain (loss) on investments (5,718,058)
(11,594,790) (692,664) (372,873)
Net change in unrealized appreciation
(depreciation) on investments 6,706,666
(3,413,606) 684,551 (965,437)
Net realized gain (loss) on foreign currency
transactions --
- -- (65) (837)
Net change in unrealized appreciation (depreciation)
on foreign currency transactions --
- -- 12 (7)
------------ -
- ----------- ------------ ------------
Net increase (decrease) in net assets resulting
from operations 855,152
(15,241,813) 19,843 (1,362,920)
------------ -
- ----------- ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income --
- -- -- (1,738)
Net realized gains on investments --
(28,438) -- --
------------ -
- ----------- ------------ ------------
Total distributions --
(28,438) -- (1,738)
------------ -
- ----------- ------------ ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 5,517,587
6,106,003 37,920,464 52,082,112
Reinvested distributions --
27,921 -- 1,602
Payments for shares redeemed (5,190,596)
(7,299,453) (40,613,325) (53,345,284)
------------ -
- ----------- ------------ ------------
Increase (decrease) in net assets
from capital share transactions 326,991
(1,165,529) (2,692,861) (1,261,570)
------------ -
- ----------- ------------ ------------
Total increase (decrease) in net assets 1,182,143
(16,435,780) (2,673,018) (2,626,228)
NET ASSETS
Beginning of period 14,017,530
30,453,310 11,250,288 13,876,516
------------ -
- ----------- ------------ ------------
End of period $15,199,673
$14,017,530 $8,577,270 $11,250,288
===========
============ ============ ============
NET ASSETS CONSIST OF:
Capital (par value and paid-in surplus) $38,287,479
$38,093,944 $12,245,116 $14,937,977
Undistributed (distributions in excess of) net
investment income --
- -- 27,944 --
Accumulated net realized gain (loss) from
security transactions and foreign
currency transactions (20,417,009)
(14,698,951) (3,566,583) (2,873,919)
Unrealized appreciation (depreciation) on
investments (2,670,797)
(9,377,463) (129,212) (813,763)
Unrealized appreciation (depreciation) on
foreign currency transactions --
- -- 5 (7)
------------ -
- ----------- ------------ ------------
$15,199,673
$14,017,530 $8,577,270 $11,250,288
===========
============ ============ ============
CAPITAL TRANSACTIONS IN SHARES:
Sold 772,939
552,797 5,153,943 6,020,956
Reinvested distributions --
2,200 -- 187
Redeemed (749,462)
(690,196) (5,486,325) (6,145,987)
------------ -
- ----------- ------------ ------------
Net increase (decrease)
23,477
(135,199) (332,382) (124,844)
============
============ ============ ============
46 See accompanying notes to financial statements on page 47.
SIT MUTUAL FUNDS
- - -------------------------------------------------------------------------
- -[LOGO]
NOTES TO FINANCIAL STATEMENTS
(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, 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
------------------------------------------------------------------
- ----------------------------------
Balanced Long-term capital
appreciation consistent with the
preservation of
principal and to provide regular
income.
------------------------------------------------------------------
- ----------------------------------
Large Cap Growth Fund, Inc. Maximize long-term
capital appreciation.
------------------------------------------------------------------
- ----------------------------------
Mid Cap Growth Fund, Inc. Maximize long-term
capital appreciation.
------------------------------------------------------------------
- ----------------------------------
International Growth Maximize long-term
growth.
------------------------------------------------------------------
- ----------------------------------
Small Cap Growth Maximize long-term
capital appreciation.
------------------------------------------------------------------
- ----------------------------------
Science and Technology
Growth Fund Maximize long-term
capital appreciation.
------------------------------------------------------------------
- ----------------------------------
Developing Markets Growth Maximize long-term
capital appreciation.
------------------------------------------------------------------
- ----------------------------------
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 cannot 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.
47
SIT MUTUAL FUNDS
- - -------------------------------------------------------------------------
- -------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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.
ILLIQUID SECURITIES
Each fund currently limits investments in illiquid securities to
15% of
net assets. At June 30, 2003, there were no securities held by the
Funds deemed illiquid by the investment adviser. Pursuant to the
guidelines adopted by the Board of Directors, certain unregistered
securities are determined to be liquid and are not included within
the
limitation specified above.
FOREIGN CURRENCY TRANSLATIONS AND FORWARD FOREIGN CURRENCY
CONTRACTS
The market value of securities and other assets and liabilities
denominated in foreign currencies for Developing Markets Growth
Fund
and International Growth Fund are translated daily into U.S.
dollars at
the closing rate of exchange. Purchases and sales of securities,
income
and expenses are translated at the exchange rate on the
transaction
date. Dividend and interest income includes currency exchange
gains
(losses) realized between the accrual and payment dates on such
income.
Exchange gains (losses) may also be realized between the trade and
settlement dates on security and forward contract transactions.
For
securities denominated in foreign currencies, the effect of
changes in
foreign exchange rates on realized and unrealized gains or losses
is
reflected as a component of such gains or losses.
The Developing Markets Growth and International Growth Funds may
enter
into forward foreign currency exchange contracts for operational
purposes and to protect against adverse exchange rate fluctuation.
The
net U.S. dollar value of foreign currency underlying all
contractual
commitments held by the Funds and the resulting unrealized
appreciation
or depreciation is determined using foreign currency exchange
rates
from an independent pricing service. The Funds are subject to the
credit risk that the other party will not complete the obligations
of
the contract.
FEDERAL TAXES
The Funds' policy is to comply with the requirements of the
Internal
Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income to shareholders. Therefore,
no
income tax provision is required. Also, in order to avoid the
payment
of any federal excise taxes, the Funds will distribute
substantially
all of their net investment income and net realized gains on a
calendar
year basis.
Net investment income and net realized gains may differ for
financial
statement and tax purposes. The character of distributions made
during
the year for net investment income or net realized gains may also
differ from its ultimate characterization for tax purposes. The
tax
character of distributions paid during the fiscal years ended June
30,
was as follows:
48
- - -------------------------------------------------------------------------
- -[LOGO]
YEAR ENDED JUNE 30, 2003:
Ordinary Income Long
Term Capital Gain Total
--------------- ------
- ---------------- -----
Balanced $455,000
- -- $455,000
Large Cap Growth --
- -- --
Mid Cap Growth --
- -- --
International Growth --
- -- --
Small Cap Growth --
- -- --
Science & Technology Growth --
- -- --
Developing Markets Growth --
- -- --
YEAR ENDED JUNE 30, 2002:
Ordinary Income Long
Term Capital Gain Total
--------------- -------
- --------------- -----
Balanced $596,000
$9,747 $605,747
Large Cap Growth --
931,511 931,511
Mid Cap Growth --
5,755,281 5,755,281
International Growth --
- -- --
Small Cap Growth --
319,828 319,828
Science & Technology Growth --
28,438 28,438
Developing Markets Growth 1,738
- -- 1,738
As of June 30, 2003, the components of distributable earnings on a
tax
basis were as follows:
Undistributed
Accumulated Unrealized
Ordinary
Capital Appreciation
Income Gain
(Loss) (Depreciation)
------------- ------
- ------- --------------
Balanced $80,738
($5,265,807) ($1,227,492)
Large Cap Growth 43,757
(23,482,341) (2,513,312)
Mid Cap Growth --
(65,362,463) 6,510,597
International Growth 424,155
(34,342,194) (9,925,181)
Small Cap Growth --
(79,761,647) 8,055,801
Science & Technology Growth --
(20,109,488) (2,978,318)
Developing Markets Growth 27,944
(3,566,583) (129,212)
49
SIT MUTUAL FUNDS
- - -------------------------------------------------------------------------
- -------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Undistributed net investment income and accumulated net realized
gains
(losses) from the Statement of Changes in Net Assets have been
increased (decreased) by current permanent book-to-tax differences
resulting in reclassification of additional paid-in capital as
follows:
Undistributed
Accumulated Additional
net investment net
realized paid-in
income
gains (losses) capital
-------------- ----
- ---------- ----------
Mid Cap Growth 1,124,324
- -- (1,124,324)
International Growth 4,027
(4,027) --
Small Cap Growth 1,567,958
- -- (1,567,958)
Science & Technology Growth 133,456
- -- (133,456)
Developing Markets Growth (65)
65 --
As of June 30, 2003, for federal income tax purposes, some Funds
have
capital loss carryovers which, if not offset by subsequent capital
gains, will begin to expire as follows:
Loss Carryover
Expiration Year
--------------
- ---------------
Balanced $5,265,807
2010
Large Cap Growth 23,482,341
2010
Mid Cap Growth 65,362,463
2010
International Growth 34,342,194
2009
Small Cap Growth 79,761,647
2010
Science & Technology Growth 20,109,488
2010
Developing Markets Growth 3,566,583
2007
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
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.
50
- - -------------------------------------------------------------------------
- -[LOGO]
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
accounting
principles generally accepted in the United States of America
requires
management to make certain estimates and assumptions that affect
the
reported amounts of assets and liabilities and disclosure of
contingent
assets and liabilities at the date of the financial statements and
the
reported results. Actual results could differ from those
estimates.
(2) INVESTMENT SECURITY TRANSACTIONS
Purchases of and proceeds from sales and maturities of investment
securities, other than short-term securities, for the period ended
June 30, 2003, were as follow:
Purchases ($)
Proceeds ($)
-------------
- ------------
Balanced Fund 7,580,497
9,316,061
Large Cap Growth Fund 18,432,448
24,337,522
Mid Cap Growth Fund 80,118,296
99,296,981
International Growth Fund 10,386,441
18,888,150
Small Cap Growth Fund 89,016,919
88,521,576
Science and Technology Growth Fund 6,546,684
6,122,477
Developing Markets Growth Fund 559,109
2,812,628
(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 current fee for investment management and advisory
services is based on the average daily net assets of the Funds at
the
annual rate of:
51
SIT MUTUAL FUNDS
- - -------------------------------------------------------------------------
- -------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Contractual Net of
Adviser's
Management Voluntary
Fee
Fee Waiver
----------- -----------
- -----
Balanced Fund 1.00% 1.00%
Large Cap Growth Fund 1.00% 1.00%
Mid Cap Growth Fund 1.25% 1.15%
International Growth Fund 1.85% 1.50%
Small Cap Growth Fund 1.50% 1.50%
Science and Technology Growth Fund 1.50% 1.35%
Developing Markets Growth Fund 2.00% 2.00%
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 periods through December 31, 2004 the Adviser has agreed
to
limit the management fee of the Mid Cap Growth Fund, Science and
Technology Growth Fund, and International Growth Fund to 1.15%,
1.35%,
and 1.50% of the Fund's average daily net assets respectively.
As of June 30, 2003, the Large Cap Growth Fund, International
Growth
Fund, Mid Cap Growth Fund, Small Cap Growth Fund, Science and
Technology Growth Fund, Developing Markets Growth Fund, and
Balanced
Fund had invested $1,029,000, $881,000, $8,116,000, $10,826,000,
$247,000, $587,000 and $331,000, respectively, in the Sit Money
Market
Fund. The terms of such transactions were identical to those of
non-related entities except that, to avoid duplicate investment
advisory fees, SIA remits to each Fund an amount equal to all fees
otherwise due to them under their investment management agreement
for
the assets invested in the Sit Money Market Fund.
INVESTMENT SUB-ADVISER
SIA has entered into a sub-advisory arrangement with an affiliated
international investment adviser, Sit/Kim International Investment
Associates, Inc. ("SKI"). SKI provides investment research
information
and portfolio management service for the Developing Markets Growth
Fund
and International Growth Fund. Generally, as compensation for its
services under the sub-advisory agreement, SIA pays SKI a monthly
fee
of 1/12 of .75% (.65% net of waiver for the International Growth
Fund)
on the first $100 million of each Fund's average daily net assets,
1/12
of .50% on the next $100 million of average daily net assets and
1/12
of .40% of average daily net assets in excess of $200 million. SKI
has
agreed to waive any fees under the agreement to the extent that
cumulative out of pocket expenses of each Fund borne by SIA exceed
the
cumulative fees received by SIA pursuant to each Fund's investment
management agreement. In accordance with the agreement, fees of
$401,354 were paid or payable to SKI for the year ended June 30,
2003.
52
- - -------------------------------------------------------------------------
- -[LOGO]
TRANSACTIONS WITH AFFILIATES
The investment adviser, affiliates of the investment adviser,
directors
and officers of the Funds as a whole owned the following shares as
of
June 30, 2003:
% Shares
Shares Outstanding
------ -----------
Balanced Fund 214,401 16.64
Large Cap Growth Fund 416,589 18.90
Mid Cap Growth Fund 2,989,903 14.17
International Growth Fund 725,502 14.03
Small Cap Growth Fund 1,022,482 12.10
Science and Technology Growth Fund 505,177 26.75
Developing Markets Growth Fund 150,480 14.24
53
SIT BALANCED FUND
- - -------------------------------------------------------------------------
- -------
FINANCIAL HIGHLIGHTS
Years Ended June 30,
----------------------
- ------------------------------------------
2003 2002
2001 2000 1999
- - -------------------------------------------------------------------------
- --------------------------------------------
NET ASSET VALUE:
Beginning of period $ 12.29 $ 15.33
$ 19.18 $ 17.38 $ 16.68
- - -------------------------------------------------------------------------
- --------------------------------------------
OPERATIONS:
Net investment income(2) .29 .36
..46 .40 .32
Net realized and unrealized gains
(losses) on investments .22 (3.01)
(3.51) 2.51 1.45
- - -------------------------------------------------------------------------
- --------------------------------------------
Total from operations .51 (2.65)
(3.05) 2.91 1.77
- - -------------------------------------------------------------------------
- --------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (.33) (.38)
(.48) (.37) (.31)
From realized gains -- (.01)
(.32) (.74) (.76)
- - -------------------------------------------------------------------------
- --------------------------------------------
Total distributions (.33) (.39)
(.80) (1.11) (1.07)
- - -------------------------------------------------------------------------
- --------------------------------------------
NET ASSET VALUE:
End of period $ 12.47 $ 12.29
$ 15.33 $ 19.18 $ 17.38
- - -------------------------------------------------------------------------
- --------------------------------------------
Total investment return(1) 4.43%
(17.62%) (16.39%) 17.28% 11.25%
- - -------------------------------------------------------------------------
- --------------------------------------------
Net assets at end of period (000's omitted) $ 16,065 $ 17,825
$ 24,947 $ 19,304 $ 12,112
RATIOS:
Expenses to average daily net assets 1.00% 1.00%
1.00% 1.00% 1.00%
Net investment income to average daily
net assets 2.54% 2.52%
2.89% 2.34% 2.01%
Portfolio turnover rate (excluding short-term
securities) 48.86% 53.53%
63.32% 68.22% 89.37%
- - ---------
(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) The net investment income (loss) per share is based on average shares
outstanding for the period.
54
SIT LARGE CAP GROWTH FUND
- - -------------------------------------------------------------------------
- -------
FINANCIAL HIGHLIGHTS
Years Ended June 30,
-----------------------
- -------------------------------------------
2003 2002
2001 2000 1999
- - -------------------------------------------------------------------------
- ---------------------------------------------
NET ASSET VALUE:
Beginning of period $ 26.40 $ 38.99
$ 63.66 $ 52.84 $ 49.34
- - -------------------------------------------------------------------------
- ---------------------------------------------
OPERATIONS:
Net investment income (loss)(2) .02 (.08)
(.16) (.18) (.04)
Net realized and unrealized gains
(losses) on investments .50 (12.17)
(19.48) 14.41 6.96
- - -------------------------------------------------------------------------
- ---------------------------------------------
Total from operations .52 (12.25)
(19.64) 14.23 6.92
- - -------------------------------------------------------------------------
- ---------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income -- --
- -- -- (.01)
From realized gains -- (.34)
(5.03) (3.41) (3.41)
- - -------------------------------------------------------------------------
- ---------------------------------------------
Total distributions -- (.34)
(5.03) (3.41) (3.42)
- - -------------------------------------------------------------------------
- ---------------------------------------------
NET ASSET VALUE:
End of period $ 26.92 $ 26.40
$ 38.99 $ 63.66 $ 52.84
- - -------------------------------------------------------------------------
- ---------------------------------------------
Total investment return(1) 1.97%
(31.63%) (32.92%) 27.75% 15.10%
- - -------------------------------------------------------------------------
- ---------------------------------------------
Net assets at end of period (000's omitted) $ 59,324 $ 63,839
$ 122,829 $ 172,400 $ 140,258
RATIOS:
Expenses to average daily net assets 1.00% 1.00%
1.00% 1.00% 1.00%
Net investment income (loss) to average daily
net assets 0.08%
(0.25%) (0.33%) (0.31%) (0.09%)
Portfolio turnover rate (excluding short-term
securities) 33.40% 34.74%
45.26% 48.95% 70.51%
- - ---------
(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) The net investment income (loss) per share is based on average shares
outstanding for the period.
See accompanying notes to financial statements on page 47.
55
SIT MID CAP GROWTH FUND
- - -------------------------------------------------------------------------
- -------
FINANCIAL HIGHLIGHTS
Years Ended June 30,
----------------------
- ----------------------------------------------
2003 2002
2001 2000 1999
- - -------------------------------------------------------------------------
- ------------------------------------------------
NET ASSET VALUE:
Beginning of period $ 7.91 $ 12.37
$ 23.57 $ 14.54 $ 16.49
- - -------------------------------------------------------------------------
- ------------------------------------------------
OPERATIONS:
Net investment income (loss)(3) (.05) (.07)
(.08) (.12) (.06)
Net realized and unrealized gains
(losses) on investments .20 (4.16)
(7.05) 10.38 .65
- - -------------------------------------------------------------------------
- ------------------------------------------------
Total from operations .15 (4.23)
(7.13) 10.26 .59
- - -------------------------------------------------------------------------
- ------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income -- --
- -- -- --
From realized gains -- (.23)
(4.07) (1.23) (2.54)
- - -------------------------------------------------------------------------
- ------------------------------------------------
Total distributions -- (.23)
(4.07) (1.23) (2.54)
- - -------------------------------------------------------------------------
- ------------------------------------------------
NET ASSET VALUE:
End of period $ 8.06 $ 7.91
$ 12.37 $ 23.57 $ 14.54
- - -------------------------------------------------------------------------
- ------------------------------------------------
Total investment return(1) 1.90%
(34.66%) (35.21%) 73.01% 6.94%
- - -------------------------------------------------------------------------
- ------------------------------------------------
Net assets at end of period (000's omitted) $170,173 $181,347
$360,037 $566,639 $375,343
RATIOS:
Expenses to average daily net assets 1.15%(2)
1.15%(2) 1.06%(2) 1.00%(2) 1.00%(2)
Net investment income (loss) to average daily
net assets (0.73%)(2)
(0.79%)(2) (0.49%)(2) (0.58%)(2) (0.46%)(2)
Portfolio turnover rate (excluding short-term
securities) 53.19% 60.88%
56.21% 62.21% 68.62%
- - ---------
(1) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at
net
asset value.
(2) Total Fund expenses are contractually limited to 1.25% of average
daily net
assets. However, during the years ended June 30, 2003, 2002, 2001,
2000,
and 1999 the investment adviser voluntarily absorbed expenses that
were
otherwise payable by the Fund. Had the Fund incurred these expenses,
the
ratio of expenses to average daily net assets would have been 1.25%
for
each of these periods and the ratio of net investment income (loss) to
average daily net assets would have been (0.83%), (0.89%), (0.68%),
(0.83%), and (0.71%), respectively.
(3) The net investment income (loss) per share is based on average shares
outstanding for the period.
56
SIT INTERNATIONAL GROWTH FUND
- - -------------------------------------------------------------------------
- -[LOGO]
FINANCIAL HIGHLIGHTS
Years Ended June 30,
------------------------
- ---------------------------------------------------------
2003 2002
2001 2000 1999 1998
- - -------------------------------------------------------------------------
- -----------------------------------------------------------
NET ASSET VALUE:
Beginning of period $ 10.79 $ 14.61
$ 23.58 $ 18.77 $ 19.14 $ 18.57
- - -------------------------------------------------------------------------
- -----------------------------------------------------------
OPERATIONS:
Net investment income (loss)(3) .07 (.03)
(.03) (.04) (.07) .02
Net realized and unrealized gains
(losses) on investments (1.47) (3.79)
(8.42) 6.36 .84 1.25
- - -------------------------------------------------------------------------
- -----------------------------------------------------------
Total from operations (1.40) (3.82)
(8.45) 6.32 .77 1.27
- - -------------------------------------------------------------------------
- -----------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income -- --
- -- (.23) (.06) (.03)
From realized gains -- --
(.52) (1.28) (1.08) (.67)
- - -------------------------------------------------------------------------
- -----------------------------------------------------------
Total distributions -- --
(.52) (1.51) (1.14) (.70)
- - -------------------------------------------------------------------------
- -----------------------------------------------------------
NET ASSET VALUE:
End of period $ 9.39 $ 10.79
$ 14.61 $ 23.58 $ 18.77 $ 19.14
- - -------------------------------------------------------------------------
- -----------------------------------------------------------
Total investment return(1) (12.97%) (26.15%)
(36.43%) 33.38% 4.51% 7.50%
- - -------------------------------------------------------------------------
- -----------------------------------------------------------
Net assets at end of period (000's omitted) $ 48,533 $ 69,820
$123,085 $167,909 $ 94,982 $ 99,721
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 0.81%(2)
(0.22%)(2) (0.20%)(2) (0.40%)(2) (0.37%)(2) 0.12%(2)
Portfolio turnover rate (excluding short-term
securities) 21.02% 25.78%
25.22% 30.61% 45.91% 43.74%
- - ---------
(1) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at
net
asset value.
(2) Total Fund expenses are contractually limited to 1.85% of average
daily net
assets. However, during the years ended June 30, 2003, 2002, 2001,
2000,
and 1999 the investment adviser voluntarily absorbed expenses that
were
otherwise payable by the Fund. Had the Fund incurred these expenses,
the
ratio of expenses to average daily net assets would have been 1.85%
for
each of these periods and the ratio of net investment income (loss) to
average daily net assets would have been 0.46%, (0.57%), (0.55%),
(0.75%),
and (0.72%), respectively.
(3) The net investment income (loss) per share is based on average shares
outstanding for the period.
See accompanying notes to financial statements on page 47.
57
SIT SMALL CAP GROWTH FUND
- - -------------------------------------------------------------------------
- -[LOGO]
FINANCIAL HIGHLIGHTS
Years Ended June 30,
----------------------
- -------------------------------------------
2003 2002
2001 2000 1999
- - -------------------------------------------------------------------------
- ---------------------------------------------
NET ASSET VALUE:
Beginning of period $ 21.06 $ 28.99
$ 41.35 $ 18.28 $ 20.35
- - -------------------------------------------------------------------------
- ---------------------------------------------
OPERATIONS:
Net investment income (loss)(2) (.18) (.24)
(.13) (.18) (.18)
Net realized and unrealized gains
(losses) on investments .76 (7.65)
(11.65) 23.25 1.20
- - -------------------------------------------------------------------------
- ---------------------------------------------
Total from operations .58 (7.89)
(11.78) 23.07 1.02
- - -------------------------------------------------------------------------
- ---------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From realized gains -- (.04)
(.58) -- (3.09)
- - -------------------------------------------------------------------------
- ---------------------------------------------
Total distributions -- (.04)
(.58) -- (3.09)
- - -------------------------------------------------------------------------
- ---------------------------------------------
NET ASSET VALUE:
End of period $ 21.64 $ 21.06
$ 28.99 $ 41.35 $ 18.28
- - -------------------------------------------------------------------------
- ---------------------------------------------
Total investment return(1) 2.75%
(27.24%) (28.79%) 126.20% 8.77%
- - -------------------------------------------------------------------------
- ---------------------------------------------
Net assets at end of period (000's omitted) $182,912 $180,684
$227,888 $190,630 $ 50,335
RATIOS:
Expenses to average daily net assets 1.50% 1.50%
1.50% 1.50% 1.50%
Net investment income (loss) to average daily
net assets (1.00%)
(0.99%) (0.41%) (0.83%) (1.08%)
Portfolio turnover rate (excluding short-term
securities) 59.98% 65.25%
39.91% 39.31% 71.84%
- - ---------
(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) The net investment income (loss) per share is based on average shares
outstanding for the period.
58
SIT SCIENCE AND TECHNOLOGY GROWTH FUND
- - -------------------------------------------------------------------------
- -[LOGO]
FINANCIAL HIGHLIGHTS
Years Ended June 30,
---------------
- ---------------------------------------------
2003
2002 2001 2000 1999
- - -------------------------------------------------------------------------
- -----------------------------------------------
NET ASSET VALUE:
Beginning of period $ 7.52 $
15.23 $ 33.38 $ 15.23 $ 11.77
- - -------------------------------------------------------------------------
- -----------------------------------------------
Operations:
Net investment income (loss)(3) (.07)
(.12) (.19) (.17) (.07)
Net realized and unrealized gains
(losses) on investments .60
(7.58) (17.10) 18.32 3.53
- - -------------------------------------------------------------------------
- -----------------------------------------------
Total from operations .53
(7.70) (17.29) 18.15 3.46
- - -------------------------------------------------------------------------
- -----------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income --
- -- -- -- --
From realized gains --
(.01) (.86) -- --
- - -------------------------------------------------------------------------
- -----------------------------------------------
Total distributions --
(.01) (.86) -- --
- - -------------------------------------------------------------------------
- -----------------------------------------------
NET ASSET VALUE:
End of period $8.05 $
7.52 $ 15.23 $ 33.38 $ 15.23
- - -------------------------------------------------------------------------
- -----------------------------------------------
Total investment return(1) 7.05%
(50.57%) (52.96%) 119.17% 29.40%
- - -------------------------------------------------------------------------
- -----------------------------------------------
Net assets at end of period (000's omitted) $15,200
$14,018 $30,453 $ 46,173 $14,194
RATIOS:
Expenses to average daily net assets 1.35%(2)
1.35%(2) 1.29%(2) 1.25%(2) 1.25%(2)
Net investment income (loss) to average net assets (1.05%)(2)
(1.06%)(2) (0.94%)(2) (0.86%)(2) (0.72%)(2)
Portfolio turnover rate (excluding short-term securities) 49.67%
76.78% 34.59% 29.60% 58.29%
- - ---------
(1) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at
net
asset value.
(2) Total Fund expenses are contractually limited to 1.50% of average
daily net
assets. However, during the years ended June 30, 2003, 2002, 2001,
2000,
and 1999 the investment adviser voluntarily absorbed expenses that
were
otherwise payable by the Fund. Had the Fund incurred these expenses,
the
ratio of expenses to average daily net assets would have been 1.50%
for
each of these periods and the ratio of net investment income (loss) to
average daily net assets would have been (1.20%), (1.21%), (1.15%),
(1.11%), and (0.97%), respectively.
(3) The net investment income (loss) per share is based on average shares
outstanding for the period.
See accompanying notes to financial statements on page 47.
59
SIT DEVELOPING MARKETS GROWTH FUND
- - -------------------------------------------------------------------------
- -------
FINANCIAL HIGHLIGHTS
Years Ended June 30,
---------------
- ------------------------------------------
2003
2002 2001 2000 1999
- - -------------------------------------------------------------------------
- --------------------------------------------
NET ASSET VALUE:
Beginning of period $ 8.10 $
9.17 $ 13.43 $ 9.98 $ 9.05
- - -------------------------------------------------------------------------
- --------------------------------------------
OPERATIONS:
Net investment income (loss)(2) .02
(.02) -- (.06) --
Net realized and unrealized gains
(losses) on investments --
(1.05) (4.26) 3.51 .93
- - -------------------------------------------------------------------------
- --------------------------------------------
Total from operations .02
(1.07) (4.26) 3.45 .93
- - -------------------------------------------------------------------------
- --------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income --
- -- -- -- --
From realized gains --
- -- -- -- --
- - -------------------------------------------------------------------------
- --------------------------------------------
Total distributions --
- -- -- -- --
- - -------------------------------------------------------------------------
- --------------------------------------------
NET ASSET VALUE:
End of period $ 8.12 $
8.10 $ 9.17 $ 13.43 $ 9.98
- - -------------------------------------------------------------------------
- --------------------------------------------
Total investment return(1) 0.25%
(11.66%) (31.72%) 34.57% 10.28%
- - -------------------------------------------------------------------------
- --------------------------------------------
Net assets at end of period (000's omitted) $ 8,577
$11,250 $13,877 $14,676 $11,338
RATIOS:
Expenses to average daily net assets 2.00%
2.00% 2.00% 2.00% 2.00%
Net investment income (loss) to average daily
net assets 0.31%
(0.20%) 0.02% (0.55%) (0.05%)
Portfolio turnover rate (excluding short-term
securities) 6.61%
25.40% 21.87% 48.39% 98.24%
- - ---------
(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) The net investment income (loss) per share is based on average shares
outstanding for the period.
60 See accompanying notes to financial statements on page 47.
INDEPENDENT AUDITORS' REPORT
- - -------------------------------------------------------------------------
- -[LOGO]
The Board of Directors and Shareholders
Sit Large Cap Growth Fund, Inc.
Sit Mid Cap Growth Fund, Inc.
Sit Mutual Funds, Inc.:
We have audited the accompanying statements of assets and liabilities,
including
the schedules of portfolios of investments, of Sit Balanced Fund (a series
of
Sit Mutual Funds, Inc.), Sit Large Cap Growth Fund, Inc., Sit Mid Cap
Growth
Fund, Inc., Sit International Growth Fund (a series of Sit Mutual Funds,
Inc.),
Sit Small Cap Growth Fund (a series of Sit Mutual Funds, Inc.), Sit Science
and
Technology Growth Fund (a series of Sit Mutual Funds, Inc.), and Sit
Developing
Markets Growth Fund (a series of Sit Mutual Funds, Inc.), as of June 30,
2003;
the related statements of operations for the year then ended; the
statements of
changes in net assets for each of the years in the two-year period then
ended;
and the financial highlights for each of the five years in the period then
ended. These financial statements and the financial highlights are the
responsibility of fund management. Our responsibility is to express an
opinion
on these financial statements and the financial highlights based on our
audits.
We conducted our audits in accordance with auditing standards generally
accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial
statements and financial highlights are free of material misstatement. An
audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included
confirmation of
securities owned as of June 30, 2003, by correspondence with the custodian
or by
other appropriate auditing procedures. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well
as evaluating the overall financial statement presentation. We believe that
our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to
above present fairly, in all material respects, the financial position of
Sit
Balanced Fund, Sit Large Cap Growth Fund, Sit Mid Cap Growth Fund, Sit
International Growth Fund, Sit Small Cap Growth Fund, Sit Science and
Technology
Growth Fund, and Sit Developing Markets Growth Fund as of June 30, 2003 and
the
results of their operations, the changes in their net assets, and the
financial
highlights for the periods stated in the first paragraph above, in
conformity
with accounting principles generally accepted in the United States of
America.
KPMG LLP
August 1, 2003
61
INFORMATION ABOUT DIRECTORS AND OFFICERS
- - -------------------------------------------------------------------------
- -------
The Sit Mutual Funds are a family of 12 no-load mutual funds. The seven
Stock
Funds described in this Stock Funds Annual Report are the Sit Mid Cap
Growth
Fund, Sit Large Cap Growth Fund, Sit International Growth Fund, Sit
Balanced
Fund, Sit Developing Markets Growth Fund, Sit Small Cap Growth Fund and the
Sit
Science and Technology Growth Fund (the "Funds" or individually, a "Fund").
The
five Bond Funds within the Sit Mutual Fund family are described in a Bond
Funds
Annual Report. The Sit Mid Cap Growth Fund and Sit Large Cap Growth Fund,
and
the corporate issuer of the Sit International Growth Fund, Sit Balanced
Fund,
Sit Developing Markets Growth Fund, Sit Small Cap Growth Fund and the Sit
Science and Technology Growth Fund have a Board of Directors and officers.
Pursuant to Minnesota law, the Boards of Directors are responsible for the
management of the Funds and the establishment of the Funds' policies. The
officers of the Funds manage the day-to-day operation of the Funds.
Information
pertaining to the directors and officers of the Funds is set forth below.
The
Stock Funds SAI has additional information about the Fund directors and is
available without charge upon request by calling the Sit Funds at 800-332-
5580.
OTHER
TERM OF OFFICE(1)
NUMBER OF DIRECTORSHIPS
NAME, ADDRESS POSITION(S) AND LENGTH OF
PRINCIPAL OCCUPATION(S) FUNDS IN FUND COMPLEX HELD BY
AND AGE HELD WITH FUND TIME SERVED
DURING PAST FIVE YEARS OVERSEEN BY DIRECTOR DIRECTOR(4)
INDEPENDENT DIRECTORS: Director Director since 1995.
Trustee, Pacific Gas & 12 None
John E. Hulse
Electric Nuclear
Suite 4600
Decommissioning Trust.
90 South Seventh Street
Minneapolis, MN 55402
Age: 70
Sidney L. Jones Director Director from 1988 to
Lecturer, Washington 12 None
Suite 4600 1989 and from 1993 or
Campus Consortium of
90 South Seventh Street the Fund's inception 17
Universities;
Minneapolis, MN 55402 if later.
Senior Advisor to
Age: 69
Lawrence and Company,
Toronto, Canada.
Donald Phillips Director Director of the CEO
and CIO of WestLB 12 None
Suite 4600 International Fund since Asset
Management (USA)
90 South Seventh Street 1993 and since 1990 or LLC,
4/00 to present;
Minneapolis, MN 55402 the Fund's inception if
President of Forstmann-
Age: 55 later for all other Funds. Leff
International, Inc.
from
1997 to 4/00.
Melvin C. Bahle Director Director Emeritus since
Director and/or officer 12 None
Suite 4600 Emeritus 1995. of
several foundations
90 South Seventh Street and
charitable
Minneapolis, MN 55402
organizations.
Age: 84
INTERESTED DIRECTORS: Director and Director
Chairman, CEO and CIO 12 None
Eugene C. Sit(2) Chairman since inception. of
Sit Investment
Suite 4600
Associates, Inc. (the
Minneapolis, MN 55402
"Adviser); and Sit/Kim
90 South Seventh Street
International Investment
Age: 64
Associates, Inc.,
("Sit/Kim"); Director of
SIA
Securities Corp.
(the
"Distributor"); and
Chairman and CEO of Sit
Investment Fixed Income
Advisors, Inc. ("SF")
62
- - -------------------------------------------------------------------------
- -[LOGO]
OTHER
TERM OF OFFICE(1)
NUMBER OF DIRECTORSHIPS
NAME, ADDRESS POSITION(S) AND LENGTH OF
PRINCIPAL OCCUPATION(S) FUNDS IN FUND COMPLEX HELD BY
AND AGE HELD WITH FUND TIME SERVED
DURING PAST FIVE YEARS OVERSEEN BY DIRECTOR DIRECTOR(4)
William E. Frenzel(2) Director Director since 1991 or the Guest
Scholar at the 12 None
Suite 4600 Fund's inception if later.
Brookings Institution
90 South Seventh Street and
member of several
Minneapolis, MN 55402
government policy
Age: 74
committees, foundations
and
organizations.
Advisory Director of
the
Adviser; Director
of
Sit/Kim and SF.
OFFICERS: Vice Re-Elected by the Boards
Director and President N/A N/A
Peter L. Mitchelson Chairman annually; Officer since of
the Adviser; Director
Suite 4600 inception. and
Executive Vice
90 South Seventh Street
President of Sit/Kim;
Minneapolis, MN 55402
Director of the
Age: 62
Distributor; and Vice
Chairman of SF. Director
of
the Sit Funds through
4/30/02.
Roger J. Sit(3) Executive Re-Elected by the Boards
Present: Executive Vice N/A N/A
Suite 4600 Vice annually; Officer since
President - Research and
90 South Seventh Street President 1998.
Investment Management of
Minneapolis, MN 55402 the
Adviser; Director,
Age: 41
President, COO and Deputy
CIO
of Sit/Kim.
G. Todd Berkley Chief Re-Elected by the Boards COO
of the Funds; Sr. N/A N/A
Suite 4600 Operating annually; Officer since Vice
President, US
90 South Seventh Street Officer 2002.
Bancorp 12/00 to 2/01;
Minneapolis, MN 55402 Vice
President, US Bank
Age: 41 5/95
to 12/99.
Erik S. Anderson Vice Re-Elected by the Boards Vice
President - Research N/A N/A
Suite 4600 President - annually; Officer since and
Investment Management
90 South Seventh Street Investments 1991. of
the Adviser.
Minneapolis, MN 55402
Age: 59
Ronald D. Sit(3) Vice Re-Elected by the Boards Vice
President - Research N/A N/A
Suite 4600 President - annually; Officer since and
Investment Management
90 South Seventh Street Investments 1985. of
the Adviser.
Minneapolis, MN 55402
Age: 43
63
INFORMATION ABOUT DIRECTORS AND OFFICERS (CONTINUED)
- - -------------------------------------------------------------------------
- -------
OTHER
TERM OF OFFICE(1)
NUMBER OF DIRECTORSHIPS
NAME, ADDRESS POSITION(S) AND LENGTH OF
PRINCIPAL OCCUPATION(S) FUNDS IN FUND COMPLEX HELD BY
AND AGE HELD WITH FUND TIME SERVED
DURING PAST FIVE YEARS OVERSEEN BY DIRECTOR DIRECTOR(4)
Robert W. Sit(3) Vice Re-Elected by the Boards Vice
President - Research N/A N/A
Suite 4600 President - annually; Officer since and
Investment Management
90 South Seventh Street Investments 1997. of
the Adviser.
Minneapolis, MN 55402
Age: 34
Bryce A. Doty Vice Re-Elected by the Boards Vice
President and Fixed N/A N/A
Suite 4600 President - annually; Officer since
Income Portfolio Manager
90 South Seventh Street Investments. 1996. of
SF.
Minneapolis, MN 55402 Balanced
Age: 36 Fund only.
Michael P. Eckert Vice Re-Elected by the Boards
Mutual Fund Institutional N/A N/A
Suite 4600 President - annually; Officer since
Client Group of Adviser
90 South Seventh Street Institutional 1989.
Minneapolis, MN 55402 Client
Age: 47 Group
Paul E. Rasmussen Vice Re-Elected by the Boards Vice
President, Secretary, N/A N/A
Suite 4600 President annually; Officer since
Controller and Chief
90 South Seventh Street and 1994.
Compliance Officer of the
Minneapolis, MN 55402 Treasurer
Adviser; Vice President,
Age: 42
Secretary, and Chief
Compliance Officer of
Sit/Kim and SF; President
of
the Distributor.
Michael J. Radmer Secretary Re-Elected by the Boards
Partner of the Funds' N/A N/A
Suite 1500 annually; Officer since
general counsel, Dorsey &
50 South Sixth Street 1984.
Whitney, LLP
Minneapolis, MN 55402
Age: 58
Carla J. Rose Vice Re-Elected by the Boards Vice
President, N/A N/A
Suite 4600 President, annually; Officer since
Administration & Deputy
90 South Seventh Street Assistant 2000.
Controller of the
Minneapolis, MN 55402 Secretary &
Adviser; Vice President,
Age: 37 Assistant
Administration and
Treasurer
Controller of Sit/Kim;
Controller and Treasurer
of
SF.
Kelly K. Boston Assistant Re-Elected by the Boards Staff
Attorney of the N/A N/A
Suite 4600 Secretary & annually; Officer since
Adviser.
90 South Seventh Street Assistant 2000.
Minneapolis, MN 55402 Treasurer
Age: 34
64
- - -------------------------------------------------------------------------
- -[LOGO]
(1) Each Director serves until his resignation, removal or the next
meeting of
the shareholders at which election of directors is an agenda item and
until
his successor is duly elected and shall qualify.
(2) Directors who are deemed to be "interested person" of the Funds as
that
term is defined by the Investment Company Act of 1940. Mr. Sit is
considered an "interested person" because he is an officer of Sit
Investment Associates, Inc., the Fund's investment adviser. Mr.
Frenzel is
deemed to be an interested person because he is an advisory director
and
shareholder of the Fund's investment adviser.
(3) Mr. Roger Sit, Mr. Ronald Sit, and Mr. Robert Sit are sons of Eugene
C.
Sit.
(4) Includes only directorships of companies required to report under the
Securities Exchange Act of 1934 (i.e. public companies) or other
investment
companies registered under the 1940 Act.
65
FEDERAL TAX INFORMATION
- - -------------------------------------------------------------------------
- -------
We are required by Federal tax regulations to provide shareholders with
certain information regarding dividend distributions on an annual fiscal
year
basis. The figures are for informational purposes only and should not be
used
for reporting to federal or state revenue agencies. All necessary tax
information will be mailed in January each year.
ORDINARY
FUND AND PAYABLE DATE INCOME(a)
- - ---------------------- ------------
Balanced Fund
October 8, 2002 $ 0.08431
December 10, 2002 0.07828
April 8, 2003 0.07618(b)
July 8, 2003 0.06339(b)
------------
$ 0.30216(c)
============
(a) Includes distributions of short-term gains, if any, which are taxable
as
ordinary income.
(b) Taxable as ordinary income, 35.81% qualifying for reduced dividend
income
tax rate for individuals.
(c) Taxable as ordinary income, 32.27% qualifying for dividends-received
deduction by corporations.
66
SIT MUTUAL FUNDS
- - -------------------------------------------------------------------------
- -[LOGO]
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
$6.4 billion for some of America's largest corporations, foundations and
endowments.
Sit Mutual Funds are comprised of twelve NO-LOAD funds. NO-LOAD means
that
Sit Mutual Funds have no sales charges on purchases, no deferred sales
charges,
no 12b-1 fees and no redemption fees and no exchange fees. Every dollar you
invest goes to work for you.
Sit Mutual Funds offer:
* Free telephone exchange
* Dollar-cost averaging through an automatic investment plan
* Electronic transfer for purchases and redemptions
* Free checkwriting privileges on bond funds
* Retirement accounts including IRAs and 401(k) plans
SIT FAMILY OF FUNDS
[GRAPH]
STABILITY: INCOME: GROWTH: HIGH GROWTH:
SAFETY OF PRINCIPAL INCREASED INCOME LONG-TERM CAPITAL LONG-TERM
CAPITAL
AND CURRENT INCOME APPRECIATION APPRECIATION
AND INCOME
MONEY MARKET U.S. GOVERNMENT BALANCED MID CAP GROWTH
SECURITIES LARGE CAP GROWTH INTERNATIONAL
GROWTH
TAX-FREE INCOME SMALL CAP
GROWTH
MINNESOTA TAX-FREE SCIENCE AND
INCOME TECHNOLOGY
GROWTH
BOND DEVELOPING
MARKETS
GROWTH
67
ANNUAL REPORT STOCK FUNDS
Year Ended June 30, 2003
INVESTMENT ADVISER AUDITORS
Sit Investment Associates, Inc. KPMG LLP
90 South Seventh Street, Suite 4600 90 South Seventh Street, Suite
4200
Minneapolis, MN 55402 Minneapolis, MN 55402
612-334-5888 (Metro Area)
800-332-5580
LEGAL COUNSEL
DISTRIBUTOR Dorsey & Whitney LLP
220 South Sixth Street, Suite
1500
SIA Securities Corp. Minneapolis, MN 55402
90 South Seventh Street, Suite 4600
Minneapolis, MN 55402
612-334-5888 (Metro Area) INVESTMENT SUB-ADVISER
800-332-5580
(Developing Markets Growth Fund
and
CUSTODIAN International Growth Fund)
Sit/Kim International Associates,
Inc.
The Northern Trust Company 90 South Seventh Street, Suite
4600
50 South LaSalle Street Minneapolis, MN 55402
Chicago, IL 60675 612-334-5888 (Metro Area)
800-332-5580
TRANSFER AGENT AND
DISBURSING AGENT
PFPC Inc.
P.O. BOX 5166
Westboro, MA 01581-5166
[LOGO] SIT INVESTMENT ASSOCIATES
-------------------------
SIT MUTUAL FUNDS
Item 2: Code of Ethics. The registrant has adopted a code of ethics
that applies to the registrant's principal executive officer, principal
financial officer, principal accounting officer, and persons performing
similar functions.
A copy of the registrant's code of ethics is available without charge upon
request by calling the registrant at 612-344-5888 or 1-800-332-5580, or by
mail at Sit Mutual Funds, 4600 Wells Fargo Center, 90 South Seventh Street,
Minneapolis, MN 55402.
Item 3: Audit Committee Financial Expert - the registrant's Board of
Directors has determined that Mr. John E. Hulse is an audit committee
financial expert serving on its audit committee. Mr. Hulse is independent
for purposes of this item.
Item 4: Principal Accountant Fees and Services - Not applicable to this
Annual Report
Items 5-6: Reserved.
Item 7: Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies. - Not applicable
Item 8: Reserved.
Item 9: Controls and Procedures -
(a) Based on their evaluation of the Registrant's Disclosure Controls and
Procedures as of a date within 90 days of the Filing Date, the Registrant's
Chairman and Treasurer have determined that the Disclosure Controls and
Procedures (as defined in Rule 30a-2(c) under the Act) are designed to
ensure that information required to be disclosed by the Registrant is
recorded, processed, summarized and reported by the filing Date, and that
information required to be disclosed in the report is communicated to the
Registrant's management, as appropriate, to allow timely decisions
regarding required disclosure.
(b) There were no significant changes in the Registrant's internal
controls or in other factors that could significantly affect these controls
subsequent to the date of their evaluation, and there were no corrective
actions with regard to significant deficiencies and material weaknesses.
Item 10: Exhibits: - Certifications required by Item 10(b) of Form N-
CSR are filed herewith.
(a) Any code of ethics, or amendment thereto, that is the subject of the
disclosure required by Item 2, to the extent that the registrant intends to
satisfy the Item 2 requirements through filing of an exhibit. Not
applicable.
(b) A separate certification for each principal executive officer and
principal financial officer of the registrant as required by Rule 30a-2
under the Act (17 CFR 270.30a-2).
(c) Certification pursuant to Section 906 of the Sarbanes-Oxley Act
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
SIT MUTUAL FUNDS, INC.
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By (Signature and Title)* /s/ Paul E. Rasmussen
------------------------
Paul E. Rasmussen
Vice President Treasurer
Date August 28, 2003
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Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report
to be
signed on its behalf by the undersigned, thereunto duly authorized.
SIT MUTUAL FUNDS, INC.
By (Signature and Title)* /s/ Eugene C. Sit
------------------------
Eugene C. Sit
Chairman
Date August 28, 2003
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