UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
----------
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-06373
---------
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) 334-5888
Date of fiscal year end: June 30, 2003
Date of reporting period: December 31, 2003
Item 1: Reports to Stockholders
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
----------
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-03343
---------
Sit Large Cap Growth Fund, 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) 334-5888
Date of fiscal year end: June 30, 2003
Date of reporting period: December 31, 2003
Item 1: Reports to Stockholders
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
----------
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-03342
---------
Sit Mid Cap Growth Fund, 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) 334-5888
Date of fiscal year end: June 30, 2003
Date of reporting period: December 31, 2003
Item 1: Reports to Stockholders
SIT MUTUAL FUNDS
STOCK FUNDS
SEMI-ANNUAL REPORT
SIX MONTHS ENDED DECEMBER 31, 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 SEMI-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 28
Science and Technology Growth Fund 32
Developing Markets Growth Fund 36
Notes to Portfolios of Investments 40
Statements of Assets and Liabilities 42
Statements of Operations 44
Statements of Changes in Net Assets 46
Notes to Financial Statements 49
Financial Highlights 54
Results of Shareholder Meeting 62
1
SIT MUTUAL FUNDS
[PHOTO] SIX MONTHS ENDED DECEMBER 31, 2003
------------------------------------------------------------------------
CHAIRMAN'S LETTER
Dear Fellow Shareholders:
Following a volatile period in early 2003, domestic equities surged over the
final nine months to post solid gains for the year. With increasing signs that
the economy is on a sustainable upswing, we remain positive on the investment
outlook for the year ahead.
ECONOMIC OVERVIEW
The U.S. economy, as measured by the Gross Domestic Product (GDP), grew by
+3.1% in 2003. Growth was particularly strong during the second half, largely
due to the powerful impact of monetary and fiscal stimuli put in place over the
last couple of years, along with the waning of geopolitical concerns.
Importantly, there have been increasing signs that a broad recovery is taking
place throughout the world and, importantly, is leading to a resurgence in
capital spending by corporations.
We believe the economic momentum established in late-2003 will carry into 2004,
driven by steady personal income gains (which will benefit in the first half of
2004 from the further impact of tax reductions), inventory rebuilding,
accelerating capital spending, ongoing strength in housing, and steady growth in
government expenditures. Even trends in net exports, which have been a
consistent drag on the economy for many years, are slowly improving, largely due
to weakness in the U.S. dollar. While there has been lingering concern over the
pace of the recovery in U.S. employment, as evidenced by the weak nonfarm
payroll figures for December, we believe that the jobs picture will improve
markedly in 2004. Job trends in the so-called household survey are already in a
strong uptrend, and initial unemployment claims have been trending down since
mid-2003. In addition, government employment surveys have historically
understated job gains at the start of recoveries, simply due to the fact that
these surveys often miss the pick up in new business formation at the beginning
of a recovery. In short, we believe that an imminent improvement in job creation
will further support consumer spending, and is a primary factor in our
optimistic outlook for +4.5% to +5.0% GDP growth in 2004.
Although this strong rate of growth will eventually raise inflation fears,
recent trends in the Consumer Price Index (CPI) have been surprisingly
quiescent. While the CPI rose to +2.3% in 2003, up from +1.6% in 2002, recent
monthly year-over-year have shown deceleration, which is somewhat surprising
given the significant economic rebound underway. Because of this lack of current
inflationary pressure and the lingering concerns about the labor market, the
Federal Reserve is unlikely to raise short-term interest rates in the near-
term. Market interest rates, however, will likely trend gradually upward as
anticipation of Federal Reserve action grows.
In terms of fiscal policy, the federal budget deficit is likely to grow further
in the coming year, with some estimates exceeding $500 billion. Although no
major tax initiatives appear to be on the way in 2004, the President's State of
the Union address included comments urging Congress to make permanent the tax
cuts put in place over the past three years. We believe the upcoming
presidential election will bring greater attention to the severe deterioration
in the country's fiscal situation. With the recent passage of a bill that
greatly expands Medicare expenditures, perhaps costing $410 billion over ten
years, it remains quite clear that the U.S. economy must grow at a robust pace
over the next several years to turn the deficit around.
EQUITY STRATEGY SUMMARY
After three straight years of negative stock returns, investors were rewarded
handsomely with broad-based and substantial gains in 2003. Improving economic
fundamentals, accelerating corporate profits, and steadily improving investor
psychology supported the strong market performance.
2
- -----------------------------------------------------------------------[GRAPHIC]
Although returns for the year ahead will probably be somewhat less robust than
in 2003, we remain optimistic on the prospects for the equity market for three
key reasons. First, investor sentiment remains very positive and, despite the
negative headlines focusing on improprieties in the investment industry,
billions of dollars have flowed into equity mutual funds in recent months.
Second, we believe that corporate earnings growth will remain strong over the
next several quarters, particularly in the most economically sensitive sectors
of the economy. Third, while the market's advance has left stocks less
undervalued than a year ago, we believe the relatively high equity market
valuations (i.e., P/E ratios) can be sustained, based on our view that interest
rates are unlikely to rise dramatically in the year ahead.
In terms of sector positioning within portfolios, our forecast for strong
economic growth argues for continued emphasis on companies most leveraged to the
strengthening economy and, specifically, to rapidly-improving business capital
spending trends. In this regard, over the past several months, we have been
gradually increasing our sector allocations to such areas as electronic
technology, technology services and capital goods. Looking ahead, we believe
that the prospect of higher Federal Reserve interest rates, perhaps coinciding
with signs of peaking in the current profits cycle, may result in a shift in
strategy sometime in 2004. In this type of environment, which has historically
been very positive for relative performance of the growth style (vs. value), our
emphasis may involve shifting from economically-sensitive companies to more
stable, consistent growth companies in such areas as health care, consumer
nondurables, growth retailers and technology services. The timing of this shift
cannot be precisely pinpointed, but we are continuously monitoring the events
that may lead to these incremental strategy adjustments over time.
While the environment remains attractive for many of the same groups that led
the market higher in 2003, we do not foresee continued market leadership from
some of the more speculative segments of the market. Over the past twelve
months, the stocks of companies with solid earnings, balance sheets, and
dividends have often trailed the performance of companies with weaker long-term
fundamentals. With market valuations now higher and interest rates likely to
trend upward as the economic expansion continues, we believe investors will
place a greater emphasis on higher quality stocks with long-term earnings and
dividend growth potential.
The investment environment remains favorable in many regions outside the U.S.,
as well. Economic activity has visibly improved throughout the world,
particularly in Asia, as surging growth in China continues to be the growth
engine for the entire region. We have continued to maintain an overweighted
allocation to Asia and have added to our weighting in Japan due to signs of
improving economic growth and progress on key reforms. Although most European
economies appear to be slowly rebounding, we continue to maintain an
underweighted allocation to the region, as the slow implementation of reforms,
along with a weak U.S. dollar versus the euro, may serve to undermine growth
prospects in the near-to-intermediate term.
With best wishes,
/s/ Eugene C. Sit, CFA
Eugene C. Sit, CFA
Chairman and Chief Investment Officer
3
SIT MUTUAL FUNDS
SIX MONTHS ENDED DECEMBER 31, 2003
- --------------------------------------------------------------------------------
PERFORMANCE SUMMARY AND STOCK FUNDS MARKET REVIEW
Domestic equity returns were strong across-the-board over the past six
months, with virtually every major index we monitor posting double-digit gains.
Small and mid-capitalization stocks continued their strong performance
relative to larger issues. For the second half of 2004, the S&P 400 MidCap Index
and the Russell 2000 Index rose +20.64% and +24.92%, respectively, while the S&P
500 Index gained +15.14%. In fact, 2003 marked the fourth consecutive year that
the Russell 2000 Index outperformed the S&P 500 Index. Although growth stocks
outperformed value issues in the first half of 2003, growth lagged value over
the last six months across all capitalization styles. For example, the Russell
1000 Growth Index rose +14.75% over the period, while the Russell 1000 Value
gained +16.55%, and the Russell 2000 Value Index (+25.35% for the period) edged
the Russell 2000 Growth (+24.48%) by +0.90%.
In terms of sector performance, all groups within the S&P 500 Index posted
gains in the second half of the year, although the strongest performing sectors
tended to be those most linked to the recovering economy. Within the S&P 500
Index, the strongest sectors included electronic technology, consumer durables,
producer manufacturing, and non-energy minerals. We estimate that each of these
sectors rose 20% or more during the period. The relatively weaker groups
included less cyclical areas such as health technology (+2%), utilities (+7%),
and communications (+3%). In general, this same trend (i.e., cyclicals
outperforming non-cyclicals) also took place in the smaller cap Russell 2000
Index. The strong performance of the technology sector was the primary factor
driving the tech-laden NASDAQ OTC Composite Index, which gained +23.45% over the
six-month period.
Despite achieving strong absolute returns in 2003, the broad U.S. stock
market fared poorly in international comparisons, in part due to the relative
weakness of the U.S. dollar. The MSCI World Index gained +19.79% over the
six-month period, with the U.S. component up only +14.85%. The MSCI Europe Index
increased +25.07% over the period. The MSCI Pacific Index rose 30.44%, led by
the heavily-weighted Japan component, which increased +32.05%.
1991 1992 1993
SIT BALANCED -- -- --
- --------------------------------------------------------------------------------
SIT LARGE CAP GROWTH 32.72% 4.94% 3.15%
- --------------------------------------------------------------------------------
SIT MID CAP GROWTH(1) 65.50 -2.14 8.55
- --------------------------------------------------------------------------------
SIT INTERNATIONAL GROWTH(2) 4.10(4) 2.69 48.37
- --------------------------------------------------------------------------------
SIT SMALL CAP GROWTH(1) -- -- --
- --------------------------------------------------------------------------------
SIT SCIENCE AND TECHNOLOGY GROWTH(3) -- -- --
- --------------------------------------------------------------------------------
SIT DEVELOPING MARKETS GROWTH(2) -- -- --
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
SIT LARGE CAP GROWTH SNIGX 09/02/82
- --------------------------------------------------------------------------------
SIT MID CAP GROWTH NBNGX 09/02/82
- --------------------------------------------------------------------------------
SIT INTERNATIONAL GROWTH SNGRX 11/01/91
- --------------------------------------------------------------------------------
SIT SMALL CAP GROWTH SSMGX 07/01/94
- --------------------------------------------------------------------------------
SIT SCIENCE AND TECHNOLOGY GROWTH SISTX 12/31/97
- --------------------------------------------------------------------------------
SIT DEVELOPING MARKETS GROWTH SDMGX 07/01/94
- --------------------------------------------------------------------------------
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
- -----------------------------------------------------------------------[GRAPHIC]
TOTAL RETURN - CALENDAR YEAR
- --------------------------------------------------------------------------------------------- YTD
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
- ------------------------------------------------------------------------------------------------------
-0.33% 25.43% 15.80% 21.73% 21.30% 20.15% -4.80% -12.99% -18.59% 19.20%
- ------------------------------------------------------------------------------------------------------
2.83 31.66 23.05 31.70 30.56 33.41 -13.84 -27.70 -30.58 26.34
- ------------------------------------------------------------------------------------------------------
-0.47 33.64 21.87 17.70 6.84 70.65 -4.35 -33.39 -34.64 38.51
- ------------------------------------------------------------------------------------------------------
-2.99 9.36 10.31 4.81 18.95 50.77 -26.66 -33.26 -29.84 28.70
- ------------------------------------------------------------------------------------------------------
11.57(4) 52.16 14.97 7.63 1.97 108.63 6.25 -28.19 -26.22 34.57
- ------------------------------------------------------------------------------------------------------
-- -- -- -- 38.40 85.98 -6.55 -47.78 -44.45 40.09
- ------------------------------------------------------------------------------------------------------
- -2.02(4) -4.29 17.27 -5.20 -24.93 82.50 -30.18 -12.01 -18.37 45.96
- ------------------------------------------------------------------------------------------------------
1.32 37.58 22.96 33.36 28.58 21.04 -9.11 -11.88 -22.10 28.68
-3.60 30.94 19.19 32.29 19.11 14.72 17.50 -0.61 -14.52 35.62
7.78 11.21 6.05 1.78 20.00 26.96 -14.17 -21.44 -15.94 38.59
4.61 28.45 16.49 22.36 -2.54 21.26 -3.02 2.49 -20.48 47.25
2.80 -6.94 3.92 -13.40 -27.52 63.70 -31.80 -4.91 -7.97 51.59
AVERAGE ANNUAL TOTAL RETURNS FOR THE
- ------------------------------ PERIODS ENDED DECEMBER 31, 2003
TOTAL RETURN --------------------------------------------------------------
QUARTER SIX MONTHS SINCE
ENDED 12/31/03 ENDED 12/31/03 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION
- ------------------------------ --------------------------------------------------------------
6.91% 8.73% 19.20% -5.49% -0.70% 7.51% 7.51%
- ------------------------------------------------------------------------------------------------------
9.50 12.30 26.34 -14.09 -6.13 7.64 11.12
- ------------------------------------------------------------------------------------------------------
10.77 17.37 38.51 -15.52 -0.32 7.21 13.61
- ------------------------------------------------------------------------------------------------------
14.24 20.20 28.70 -15.54 -7.80 -0.28 3.62
- ------------------------------------------------------------------------------------------------------
10.02 15.67 34.57 -10.66 9.59 -- 13.69
- ------------------------------------------------------------------------------------------------------
11.02 17.64 40.09 -25.93 -6.72 -- -0.38
- ------------------------------------------------------------------------------------------------------
15.31 27.81 45.96 1.59 5.96 -- 0.47
- ------------------------------------------------------------------------------------------------------
12.18 15.14 28.68 -4.05 -0.57 11.06 14.09
13.19 20.64 35.62 4.84 9.21 13.92 16.64
17.08 26.59 38.59 -2.91 -0.05 4.47 4.98
14.52 24.92 47.25 6.27 7.13 -- 10.72
17.25 33.09 51.59 9.88 8.17 -- -0.83
(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
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDED DECEMBER 31, 2003
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, 2003. 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). Indices reflect no
deduction for fees, expenses, or taxes.
SIT BALANCED FUND 1 YEAR 5 YEARS 10 YEARS
Return Before Taxes 19.2% -0.7% 7.5%
Return After Taxes on Distributions 18.6% -1.8% 6.1%
Return After Taxes on Distributions and Sale of Fund Shares 16.0% -1.1% 5.8%
Lehman Aggregate Bond Index 4.1% 6.6% 7.0%
S&P 500 Index 28.7% -0.6% 11.1%
SIT LARGE CAP GROWTH FUND 1 YEAR 5 YEARS 10 YEARS
Return Before Taxes 26.3% -6.1% 7.6%
Return After Taxes on Distributions 26.3% -6.7% 6.3%
Return After Taxes on Distributions and Sale of Fund Shares 22.4% -5.0% 6.3%
S&P 500 Index 28.7% -0.6% 11.1%
SIT MID CAP GROWTH FUND 1 YEAR 5 YEARS 10 YEARS
Return Before Taxes 38.5% -0.3% 7.2%
Return After Taxes on Distributions 38.5% -1.4% 4.9%
Return After Taxes on Distributions and Sale of Fund Shares 32.7% -0.1% 5.6%
S&P MidCap 500 Index 35.6% 9.2% 13.9%
6
- -----------------------------------------------------------------------[GRAPHIC]
SIT INTERNATIONAL GROWTH FUND 1 YEAR 5 YEARS 10 YEARS
Return Before Taxes 28.7% -7.8% -0.3%
Return After Taxes on Distributions 28.6% -8.2% -1.0%
Return After Taxes on Distributions and Sale of Fund Shares 24.4% -6.4% -0.4%
MSCI EAFE Index 38.6% -0.1% 4.5%
SIT SMALL CAP GROWTH FUND 1 YEAR 5 YEARS SINCE INCEPTION*
Return Before Taxes 34.6% 9.6% 13.7%
Return After Taxes on Distributions 34.6% 9.5% 12.9%
Return After Taxes on Distributions and Sale of Fund Shares 29.4% 8.4% 11.9%
Russell 2000 Index 47.3% 7.1% 10.7%
*Inception date 7/1/94
SIT SCIENCE AND TECHNOLOGY GROWTH FUND 1 YEAR 5 YEARS SINCE INCEPTION*
Return Before Taxes 40.1% -6.7% -0.4%
Return After Taxes on Distributions 40.1% -6.8% -0.5%
Return After Taxes on Distributions and Sale of Fund Shares 34.1% -5.5% -0.2%
S&P 500 Index 28.7% -0.6% 3.8%
*Inception date 12/31/97
SIT DEVELOPING MARKETS GROWTH FUND 1 YEAR 5 YEARS SINCE INCEPTION*
Return Before Taxes 46.0% 6.0% 0.5%
Return After Taxes on Distributions 45.8% 5.9% 0.4%
Return After Taxes on Distributions and Sale of Fund Shares 39.1% 5.2% 0.4%
MSCI Emerging Markets Free Index 51.6% 8.2% -0.8%
*Inception date 7/1/94
7
SIT BALANCED FUND
SIX MONTHS ENDED DECEMBER 31, 2003
[PHOTO] ------------------------------------------------------------------------
PETER L. MITCHELSON, CFA, SENIOR PORTFOLIO MANAGER
BRYCE A. DOTY , CFA, SENIOR PORTFOLIO MANAGER
The Sit Balanced Fund's six-month return was +8.73%, largely reflecting
strong equity markets during the second half of the year. The S&P 500 Index
return was +15.14%, while the Lehman Aggregate Bond Index increased +0.17%.
STOCKS SHOW STRONG GAINS
Following the conclusion of the Iraqi war and a subsequent jump in stock
prices in the second quarter of 2003, U.S. stocks continued their advance during
the second half of the year, as economic momentum fueled significantly greater
investor confidence. While equity valuations and expectations are clearly
elevated from the depressed levels in early 2003, we believe that economic
strength will translate into continued corporate profit gains. These gains
should be significant enough to drive stock prices higher in the year ahead,
even if valuations (i.e., P/E ratios) are constrained due to an expected up-tick
in interest rates. Over the past six months, the equity portion of the Fund
benefited from strong returns in the communications and electronic technology
sectors, while the finance and health technology sectors detracted from
performance.
FIXED-INCOME STRATEGY: PLAYING DEFENSE
We believe that as long as inflation remains subdued, the Federal Reserve is
unlikely to raise interest rates as aggressively as they have in the past at
this point in the economic cycle. The prospect for higher interest rates at some
point, however, has led us to a "defensive" tilt within the fixed-income portion
of the Fund. We continue to maintain relatively short durations, emphasizing
corporate and mortgage-backed securities, while under-weighting U.S. Treasuries.
CONTINUING SHIFT TOWARD EQUITIES
As of December 31, 2003, the asset allocation of the Fund was 64% equities
(up from 61% on June 30, 2003), 33% fixed-income (down from 38%), and 3% cash
and other net assets (up from 1%). We will continue to emphasize high-quality
securities in each asset class within the Fund.
- --------------------------------------------------------------------------------
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 12/31/03: $13.38 Per Share
6/30/03: $12.47 Per Share
Total Net Assets: $17.4 Million
TOTAL DIVIDEND: $0.17 PER SHARE
Ordinary Income: $0.17 Per Share
- --------------------------------------------------------------------------------
PORTFOLIO STRUCTURE
(% OF TOTAL NET ASSETS)
- --------------------------------------------------------------------------------
[PIE CHART]
Cash & Other Net
Assets
3.3%
Bonds
33.2%
Equities
63.5%
8
- -----------------------------------------------------------------------[GRAPHIC]
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS*
- --------------------------------------------------------------------------------
SIT LEHMAN
BALANCED S&P AGGREGATE
FUND 500 INDEX BOND INDEX
---- --------- ----------
3 Month** 6.91% 12.18% 0.32%
6 Month** 8.73 15.14 0.17
1 Year 19.20 28.68 4.10
3 Years -0.70 -0.57 6.62
5 Years 7.51 11.06 6.94
Inception 7.51 11.06 6.94
(12/31/93)
- --------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURNS*
- --------------------------------------------------------------------------------
SIT LEHMAN
BALANCED S&P AGGREGATE
FUND 500 INDEX BOND INDEX
---- --------- ----------
1 Year 19.20% 28.68% 4.10%
5 Years -3.43 -2.82 37.80
10 Years 106.44 185.61 95.76
Inception 106.44 185.61 95.76
(12/31/93)
*AS OF 12/31/03 **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
- --------------------------------------------------------------------------------
[LINE GRAPH]
The sum of $10,000 invested at inception (12/31/93) and held until 12/31/03
would have grown to $20,644 in the Fund, $19,576 in the Lehman Aggregate Bond
Index or $28,561 in the S&P 500 Index assuming reinvestment of all dividends and
capital gains.
- --------------------------------------------------------------------------------
TOP HOLDINGS
- --------------------------------------------------------------------------------
Stocks * Citigroup, Inc.
* Cisco Systems, Inc.
* Microsoft Corp.
* Amgen, Inc.
* General Electric Co.
Bonds * Sunamerica, Inc. (AIG), 8.125%, 4/28/23
* CA Rural Home Mtg. Fin. Auth., 5.25%, 12/1/24
* US Treasury Note, 1.625%, 1/31/05
* GNMA,7.00%, 7/15/23
* Northwest Airlines Corp.,8.07%, 10/1/19
Total Number of Holdings: 145
9
SIT BALANCED FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS - December 31, 2003 (Unaudited)
- --------------------------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE($)(1)
- --------------------------------------------------------------------------------
COMMON STOCKS (63.5%) (2)
COMMERCIAL SERVICES (0.9%)
1,200 Omnicom Group, Inc. 104,796
1,400 SYSCO Corp. 52,122
--------------
156,918
--------------
COMMUNICATIONS (2.6%)
14,200 AT&T Wireless Services, Inc. (3) 113,458
3,000 Nextel Communications, Inc. (3) 84,180
10,600 Sprint Corp. (3) 59,572
7,600 Vodafone Group, A.D.R. 190,304
--------------
447,514
--------------
CONSUMER DURABLES (1.1%)
2,200 Electronic Arts, Inc. (3) 105,116
1,800 Harley-Davidson, Inc. 85,554
--------------
190,670
--------------
CONSUMER NON-DURABLES (2.5%)
4,600 PepsiCo, Inc. 214,452
2,300 The Procter & Gamble Co. 229,724
--------------
444,176
--------------
CONSUMER SERVICES (3.7%)
6,700 Time Warner, Inc. (3) 120,533
3,400 Comcast Corp. (3) 111,758
2,000 Harrah's Entertainment, Inc. (3) 99,540
10,160 Liberty Media Group (3) 120,802
4,500 Viacom, Inc. (3) 199,710
--------------
652,343
--------------
ELECTRONIC TECHNOLOGY (10.8%)
5,800 Analog Devices, Inc. 264,770
7,400 Applied Materials, Inc. (3) 166,130
15,600 Cisco Systems, Inc. (3) 378,924
6,300 Dell Computer Corp. (3) 213,948
9,400 EMC Corp. (3) 121,448
1,000 Hewlett-Packard Co. 22,970
8,100 Intel Corp. 260,820
4,000 Jabil Circuit, Inc. (3) 113,200
2,400 Linear Technology Corp. 100,968
6,200 Nokia Corp., A.D.R. 105,400
2,500 Qualcomm, Inc. 134,825
--------------
1,883,403
--------------
ENERGY MINERALS (3.0%)
1,800 ConocoPhillips Co. 118,026
1,600 Murphy Oil Corp. 104,496
3,200 Occidental Petroleum Corp. 135,168
2,200 Suncor Energy, Inc. 55,132
2,800 Unocal Corp. 103,124
--------------
515,946
--------------
- --------------------------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE($)(1)
- --------------------------------------------------------------------------------
FINANCE (9.6%)
4,600 ACE, Ltd. 190,532
3,921 American International Group, Inc. 259,884
8,366 Citigroup, Inc. 406,086
2,400 Franklin Resources, Inc. 124,944
1,800 Goldman Sachs Group, Inc. 177,714
3,000 J.P. Morgan Chase & Co. 110,190
200 Legg Mason, Inc. 15,436
1,800 Marsh & McLennan Cos., Inc. 86,202
4,000 Wells Fargo Co. 235,560
800 XL Capital, Ltd. 62,040
--------------
1,668,588
--------------
HEALTH SERVICES (1.5%)
4,400 UnitedHealth Group, Inc. 255,992
--------------
HEALTH TECHNOLOGY (9.5%)
5,600 Amgen, Inc. (3) 346,080
2,800 Bristol-Myers Squibb Co. 80,080
3,400 Boston Scientific Corp. (3) 124,984
10,400 Elan Corp., A.D.R. (3) 71,656
1,600 Eli Lilly and Co. 112,528
1,200 Genentech, Inc. (3) 112,284
800 Gilead Sciences, Inc. (3) 46,512
2,000 Johnson & Johnson 103,320
1,600 MedImmune, Inc. (3) 40,640
1,800 Medtronic, Inc. 87,498
2,400 Merck & Co., Inc. 110,880
7,655 Pfizer, Inc. 270,451
2,700 Teva Pharmaceutical, Ltd., A.D.R. 153,117
--------------
1,660,030
--------------
INDUSTRIAL SERVICES (0.8%)
400 Noble Corp. (3) 14,312
2,200 Schlumberger Ltd. 120,384
--------------
134,696
--------------
PRODUCER MANUFACTURING (5.1%)
1,000 Danaher Corp. 91,750
1,000 Eaton Corp. 107,980
10,800 General Electric Co. 334,584
1,200 ITT Industries, Inc. 89,052
1,700 Lockheed Martin Corp. 87,380
2,000 3M Co. 170,060
--------------
880,806
--------------
RETAIL TRADE (5.4%)
4,200 Best Buy Co., Inc. 219,408
800 eBay, Inc. (3) 51,672
1,600 Kohl's Corp. (3) 71,904
4,600 Lowe's Companies, Inc. 254,794
8,700 Target Corp. 334,080
--------------
931,858
--------------
10
- -----------------------------------------------------------------------[GRAPHIC]
- --------------------------------------------------------------------------------
QUANTITY/PAR($) NAME OF ISSUER MARKET VALUE($)(1)
- --------------------------------------------------------------------------------
TECHNOLOGY SERVICES (7.0%)
4,400 Adobe Systems, Inc. 172,920
3,850 Check Point Software Technology (3) 64,757
3,400 First Data Corp. 139,706
13,400 Microsoft Corp. 369,036
4,000 Oracle Corp. (3) 52,800
4,200 Symantec Corp. (3) 145,530
5,400 Veritas Software Corp. (3) 200,664
1,400 Yahoo!, Inc. (3) 63,238
--------------
1,208,651
--------------
Total common stocks 11,031,591
--------------
(cost: $10,868,948)
BONDS (30.7%) (2)
ASSET-BACKED SECURITIES (4.3%)
190,562 Advanta Mortgage Loan Trust,
1999-3 A4, 7.75%, 10/25/26 199,897
85,305 Conseco Mfg. Housing
Series 2002, 6.03%, 3/1/33 85,402
Green Tree Financial Corp.:
14,440 1995-5, 7.25%, 9/15/26 15,171
20,933 1997-4, 7.03%, 2/15/29 21,653
140,231 1999-4, 6.97%, 5/1/31 145,368
220,184 Green Tree Home Equity Loan Trust,
1999-D A5, 7.88%, 9/15/30 228,530
50,000 Origen Mfg. Housing
Series 2001A, 7.08%, 3/15/32 52,630
--------------
748,651
--------------
COLLATERALIZED MORTGAGE OBLIGATIONS (0.1%)
7,092 Vendee Mortgage Trust,
Series 1997-2 E, 7.50%, 5/15/24 7,155
--------------
CORPORATE BONDS (12.4%)
Continental Airlines:
86,895 Series 2000-2 A1, 7.71%, 4/2/21 88,053
94,468 Series 2001-1B, 7.37%, 12/15/15 82,060
55,000 Conoco Philips, 8.125%, 2/15/30 70,138
92,000 Dow Capital BV, 8.70%, 5/15/22 94,799
95,000 Duke Realty LP, 7.375%, 9/22/05 103,347
100,000 El Paso Electric Co., 9.40%, 5/1/11 117,034
150,000 Everest Reins. Hldgs., 8.75%, 3/15/10 181,798
100,000 Exxon Mobil Co. (Seariver), zero coupon,
4.04% effective yield, 9/1/12 65,540
100,000 First Hawaiian Cap., 8.34%, 7/1/27 114,331
- --------------------------------------------------------------------------------
QUANTITY/PAR($) NAME OF ISSUER MARKET VALUE($)(1)
- --------------------------------------------------------------------------------
75,000 Ford Motor Credit Co., 9.14%, 12/30/14 78,579
50,000 General Electric Cap. Corp., 6.75%,3/15/32 55,356
100,000 General Motors Corp.,
Series 1991, 8.80%, 3/1/21 115,818
100,000 McDonald's Corp., 7.31%, 9/15/27 106,833
212,089 Northwest Airlines Corp., 8.07%, 10/1/19 233,093
100,000 Pacific Bell Corp., 7.25%, 11/1/27 106,531
151,780 Southwest Air Co., 7.67%, 1/2/14 175,413
200,000 Sunamerica, Inc. (AIG), 8.125%, 4/28/23 251,674
100,000 Susa Partnership LP, 7.50%, 12/1/27 116,087
--------------
2,156,484
--------------
FEDERAL HOME LOAN MORTGAGE CORPORATION (1.2%)
72,252 8.38%, 5/17/20 78,687
99,724 8.50%, 10/1/30 107,547
6,269 9.00%, 7/1/16 6,962
21,037 9.00%, 7/1/16 23,362
--------------
216,558
--------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (4.6%)
43,714 7.00%, 3/1/07 44,903
184,838 7.00%, 10/1/11 197,494
61,064 7.50%, 6/1/32 65,737
61,466 8.00%, 7/1/26 66,850
87,440 8.46%, 4/15/26 96,987
61,128 9.00%, 6/1/27 68,107
88,926 9.50%, 5/1/27 99,093
28,608 9.75%, 1/15/13 31,681
3,020 10.00%, 1/1/20 3,381
74,524 10.00%, 7/1/26 83,602
34,481 10.25%, 6/15/13 38,437
--------------
796,272
--------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (4.0%)
219,600 7.00%, 7/15/23 235,624
127,902 7.50%, 7/15/23 137,998
7,139 9.00%, 6/15/11 8,064
22,743 9.00%, 6/15/09 24,979
37,660 9.00%, 11/15/16 42,057
61 9.50%, 1/15/04 62
2,768 9.50%, 11/15/04 2,839
6,083 9.50%, 7/20/05 6,385
3,896 9.50%, 5/20/16 4,338
79,501 9.50%, 9/15/30 88,976
59,758 9.50%, 3/15/18 66,927
17,272 9.50%, 9/20/18 19,258
13,823 9.50%, 2/20/19 15,399
11,332 9.75%, 10/15/05 11,963
29,855 10.00%, 3/20/16 33,280
3,859 11.25%, 10/15/11 4,422
--------------
702,571
--------------
See accompanying notes to portfolios of investments on page 40.
11
SIT BALANCED FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS - December 31, 2003 (Unaudited)
- --------------------------------------------------------------------------------
QUANTITY/PAR($) NAME OF ISSUER MARKET VALUE($)(1)
- --------------------------------------------------------------------------------
TAXABLE MUNICIPAL SECURITIES (1.9%)
10,000 Bernalillo Multifamily. Series 1998A,
7.50%, 9/20/20 11,003
249,000 CA Rural Home Mtg. Fin. Auth.
Rev. Series 2003A, 5.25%, 12/1/24 251,652
66,878 Tobacco Settlement Series 2001A,
7.67%, 5/15/16 66,763
--------------
329,418
--------------
U.S. GOVERNMENT SECURITIES (2.2%)
U.S. Treasury Bond, 5.50%, 8/15/28
50,000 5.50%, 8/15/28 52,080
50,000 5.375%, 2/15/31 52,143
100,000 U.S. Treasury Strip, Zero Coupon,
5.64% Effective Yield, 11/15/27 26,942
250,000 U.S. Treasury Note, 1.625%, 1/31/05 250,967
--------------
382,132
--------------
Total bonds 5,339,241
--------------
(cost: $5,242,509)
CLOSED-END MUTUAL FUNDS (2.5%) (2)
6,009 American Select Portfolio 84,066
403 American Strategic, Inc. Portfolio 5,307
15,470 American Strategic, Inc. Portfolio II 215,961
10,609 American Strategic, Inc. Portfolio III 137,493
--------------
Total closed-end mutual funds 442,827
--------------
(cost: $368,185)
SHORT-TERM SECURITIES (2.7%) (2)
461,000 Sit Money Market Fund, 0.58% (4) 461,000
--------------
(cost: $461,000)
Total investments in securities
(cost: $16,940,642) (5) $17,274,659
==============
See accompanying notes to portfolios of investments on page 40.
12
- -----------------------------------------------------------------------[GRAPHIC]
This page has been left blank intentionally.
13
SIT LARGE CAP GROWTH FUND
SIX MONTHS ENDED DECEMBER 31, 2003
[PHOTO] ------------------------------------------------------------------------
SENIOR PORTFOLIO MANAGERS
PETER L. MITCHELSON, CFA * ROGER J. SIT * RONALD D. SIT, CFA
The Sit Large Cap Growth Fund's six-month return was +12.30%, compared to the
+15.14% return for the S&P 500 Index (the "Index").
DRAMATIC MARKET CHANGE FOR THE BETTER
Investors were rewarded for their patience in 2003, as the rally that began
last spring proved to be sustainable for the balance of the year. Economic
activity accelerated sharply during the second half of the year, corporate
earnings came on strong, and investor sentiment turned decidedly positive. We
believe fundamentals are in place for momentum in the economy in 2004. Business
and consumer confidence is rising, interest rates remain low, and strengthening
corporate profitability should contribute to improved labor market conditions as
the year progresses. While stock prices have clearly reflected some of this
optimism, we believe that there is more room to go. Although valuations (i.e.,
P/E ratios) are unlikely to advance this year as much as they did in 2003,
corporate earnings growth should still propel stock prices higher.
SOLID RETURNS FROM TECHNOLOGY
While the absolute return for the Fund was strong in 2003, an overweight
position in the health technology sector caused us to lag the Index over the
six-month period as investors moved to more economically sensitive sectors.
Conversely, the Fund benefited from strong stock selection in the communications
sector and an overweight position in the electronic technology sector.
A BETTER ENVIRONMENT FOR LARGE COMPANIES
Large stocks continued to lag smaller issues over the period, but we believe
that the stage is set for stronger large cap relative performance for two key
reasons. First, after five reasonably strong years, smaller stocks are no longer
as undervalued relative to larger issues. Second, the weak U.S. dollar, combined
with improving economic conditions outside the U.S., suggests that large
multinational companies will show stronger earnings growth in 2004. Current
holdings such as American International Group, General Electric, Medtronic,
Microsoft, and 3M all stand to benefit.
- --------------------------------------------------------------------------------
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 12/31/03: $30.21 Per Share
6/30/03: $26.92 Per Share
Total Net Assets: $61.9 Million
Weighted Average Market Cap: $85.8 Billion
- --------------------------------------------------------------------------------
PORTFOLIO STRUCTURE - BY SECTOR
(% OF TOTAL NET ASSETS)
- --------------------------------------------------------------------------------
[BAR CHART]
Electronic Technology 16.6
Health Technology 16.0
Finance 13.3
Technology Services 11.1
Retail Trade 8.1
Producer Manufacturing 7.6
Consumer Services 6.0
Sectors less than 5.0% 21.0
Cash & Other
Net Assets 0.3
14
- -----------------------------------------------------------------------[GRAPHIC]
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS*
- --------------------------------------------------------------------------------
SIT RUSSELL
LARGE CAP S&P 1000
GROWTH FUND 500 INDEX GROWTH INDEX
----------- --------- ------------
3 Month** 9.50% 12.18% 10.42%
6 Month** 12.30 15.14 14.75
1 Year 26.34 28.68 29.76
5 Years -6.13 -0.57 -5.11
10 Year 7.64 11.06 9.21
Inception*** 11.12 14.09 12.67
(9/2/82)
- --------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURNS*
- --------------------------------------------------------------------------------
SIT RUSSELL
LARGE CAP S&P 1000
GROWTH FUND 500 INDEX GROWTH INDEX
----------- --------- ------------
1 Year 26.34% 28.68% 29.76%
5 Year -27.11 -2.82 -23.08
10 Year 108.78 185.61 141.40
Inception*** 848.78 1566.56 1176.25
(9/2/82)
*AS OF 12/31/03 **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 THE S&P 500 INDEX.
***ON 6/6/93, THE FUND'S INVESTMENT OBJECTIVE CHANGED TO ALLOW FOR A PORTFOLIO
OF 100% STOCKS. PRIOR TO THAT TIME, THE PORTFOLIO WAS REQUIRED TO CONTAIN NO
MORE THAN 80% STOCKS.
- --------------------------------------------------------------------------------
GROWTH OF $10,000
- --------------------------------------------------------------------------------
[LINE GRAPH]
The sum of $10,000 invested at inception (9/2/82) and held until 12/31/03 would
have grown to $94,878 in the Fund or $166,656 in the S&P 500 Index assuming
reinvestment of all dividends and capital gains.
- --------------------------------------------------------------------------------
TOP 10 HOLDINGS
- --------------------------------------------------------------------------------
* Amgen, Inc.
* Citigroup, Inc.
* Microsoft Corp.
* General Electric Co.
* Target Corp.
* Pfizer, Inc.
* Cisco Systems, Inc.
* Intel Corp.
* Analog Devices, Inc.
* Lowe's Companies, Inc.
Total Number of Holdings: 77
15
SIT LARGE CAP GROWTH FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 2003 (UNAUDITED)
- ----------------------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE($)(1)
- ----------------------------------------------------------------------------
COMMON STOCKS (99.7%) (2)
COMMERCIAL SERVICES (2.1%)
6,500 Omnicom Group, Inc. 567,645
19,600 SYSCO Corp. 729,708
-------------
1,297,353
-------------
COMMUNICATIONS (4.2%)
83,500 AT&T Wireless Services, Inc. (3) 667,165
17,500 Nextel Communications, Inc. (3) 491,050
60,000 Sprint Corp. (3) 337,200
43,200 Vodafone Group, A.D.R. 1,081,728
-------------
2,577,143
-------------
CONSUMER DURABLES (1.8%)
12,000 Electronic Arts, Inc. (3) 573,360
10,900 Harley-Davidson, Inc. 518,077
-------------
1,091,437
-------------
CONSUMER NON-DURABLES (4.1%)
26,000 PepsiCo, Inc. 1,212,120
13,250 Procter & Gamble Co. 1,323,410
-------------
2,535,530
-------------
CONSUMER SERVICES (6.0%)
19,500 Comcast Corp. (3) 640,965
11,500 Harrah's Entertainment, Inc. 572,355
57,304 Liberty Media Corp. (3) 681,345
39,400 Time Warner, Inc. (3) 708,806
24,977 Viacom, Inc. 1,108,479
-------------
3,711,950
-------------
ELECTRONIC TECHNOLOGY (16.6%)
33,000 Analog Devices, Inc. 1,506,450
40,500 Applied Materials, Inc. (3) 909,225
68,800 Cisco Systems, Inc. (3) 1,671,152
31,500 Dell Computer Corp. (3) 1,069,740
55,400 EMC Corp. (3) 715,768
9,500 Hewlett-Packard Co. 218,215
47,800 Intel Corp. 1,539,160
22,500 Jabil Circuit, Inc. (3) 636,750
13,850 Linear Technology Corp. 582,670
36,500 Nokia Corp., A.D.R. 620,500
14,500 Qualcomm, Inc. 781,985
-------------
10,251,615
-------------
- ----------------------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE($)(1)
- ----------------------------------------------------------------------------
ENERGY MINERALS (4.6%)
11,000 ConocoPhillips Co. 721,270
8,500 Murphy Oil Corp. 555,135
18,000 Occidental Petroleum Corp. 760,320
12,000 Suncor Energy, Inc. 300,720
14,500 Unocal Corp. 534,035
-------------
2,871,480
-------------
FINANCE (13.3%)
20,462 American International Group, Inc. 1,356,221
44,000 Citigroup, Inc. 2,135,760
13,000 Franklin Resources, Inc. 676,780
17,500 J.P. Morgan Chase & Co. 642,775
1,500 Legg Mason, Inc. 115,770
9,500 Marsh & McLennan Cos., Inc. 454,955
11,500 The Goldman Sachs Group, Inc. 1,135,395
24,000 Wells Fargo Co. 1,413,360
4,000 XL Capital, Ltd. 310,200
-------------
8,241,216
-------------
HEALTH SERVICES (2.1%)
22,000 UnitedHealth Group, Inc. 1,279,960
-------------
HEALTH TECHNOLOGY (16.0%)
35,200 Amgen, Inc. (3) 2,175,360
20,000 Boston Scientific Corp. (3) 735,200
16,500 Bristol-Myers Squibb Co. 471,900
62,550 Elan Corp., A.D.R. (3) 430,969
8,800 Eli Lilly and Co. 618,904
7,000 Genentech, Inc. (3) 654,990
4,500 Gilead Sciences, Inc. (3) 261,630
12,150 Johnson & Johnson 627,669
10,700 MedImmune, Inc. (3) 271,780
9,700 Medtronic, Inc. 471,517
13,000 Merck & Co., Inc. 600,600
48,825 Pfizer, Inc. 1,724,987
15,300 Teva Pharmaceutical, Ltd., A.D.R. 867,663
-------------
9,913,169
-------------
INDUSTRIAL SERVICES (1.3%)
2,500 Noble Corp. (3) 89,450
13,300 Schlumberger, Ltd. 727,776
-------------
817,226
-------------
16
- -----------------------------------------------------------------------[GRAPHIC]
- ----------------------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE($)(1)
- ----------------------------------------------------------------------------
PRODUCER MANUFACTURING (7.6%)
5,500 Danaher Corp. 504,625
4,750 Eaton Corp. 512,905
63,700 General Electric Co. 1,973,426
5,000 ITT Industries, Inc. 371,050
10,000 Lockheed Martin Corp. 514,000
10,000 3M Co. 850,300
-------------
4,726,306
-------------
RETAIL TRADE (8.1%)
24,050 Best Buy Co., Inc. 1,256,372
4,000 eBay, Inc. (3) 258,360
6,100 Kohl's Corp. (3) 274,134
25,800 Lowe's Companies, Inc. 1,429,062
46,500 Target Corp. 1,785,600
-------------
5,003,528
-------------
TECHNOLOGY SERVICES (11.1%)
25,000 Adobe Systems, Inc. 982,500
23,200 Check Point Software Tech., Ltd. (3) 390,224
18,500 First Data Corp. 760,165
76,000 Microsoft Corp. 2,093,040
23,000 Oracle Corp. (3) 303,600
25,000 Symantec Corp. (3) 866,250
30,900 Veritas Software Corp. (3) 1,148,244
7,500 Yahoo!, Inc. (3) 338,775
-------------
6,882,798
-------------
TRANSPORTATION (0.8%)
7,000 FedEx Corp. 472,500
-------------
Total common stocks 61,673,211
-------------
(cost: $56,816,079)
SHORT-TERM SECURITIES (0.7%) (2)
421,000 Sit Money Market Fund, 0.58% (4) 421,000
-------------
(cost: $421,000)
Total investments in securities
(cost: $57,237,079) (5) $62,094,211
=============
See accompanying notes to portfolios of investments on page 40.
17
SIT MID CAP GROWTH FUND
SIX MONTHS ENDED DECEMBER 31, 2003
[PHOTO] ------------------------------------------------------------------------
EUGENE C. SIT, CFA, SENIOR PORTFOLIO MANAGER
ERIK S. ANDERSON, CFA, SENIOR PORTFOLIO MANAGER
The Sit Mid Cap Growth Fund's six-month return was +17.37%, compared to
+20.64% for the S&P Mid Cap 400 Index.
TURNING THE CORNER
Small- and mid-sized growth companies turned in strong stock performance in
2003, as improving economic and market sentiment buoyed stock prices. Some
advances in the early months of the rally were clearly due to investors
breathing a sigh of relief that geopolitical risks were waning. However, we
believe that returns in the second half of the year were reflective of a
significantly improved business environment, and these conditions continue as we
enter 2004. Earnings improvement appears broad-based across sectors, and we
anticipate the next "leg" of the market rally will relate to investors' focus
on companies delivering accelerating earnings. We believe that the Fund is
positioned to benefit from this emerging trend.
TECHNOLOGY LEADS THE WAY
Technology stocks were the star performers in 2003. The absolute return of
the Fund benefited from a significant weighting in this sector during the
second half of 2003, with particularly strong performance from key holdings such
as ASML Holding (up +70% since June 30, 2003), Xilinx (+53%), Sonus Networks
(+56%), and Symantec (+57%). The Fund's under-performance relative to the S&P
Mid Cap 400 Index for the period was caused by our holdings in technology
services and health technology, particularly Biovail Corporation, which fell
- -60%.
SECTOR LEADERSHIP TO CONTINUE IN 2004
We expect that companies with sensitivity to improving global economic
conditions will continue to do well in the year ahead. We have therefore added
to our sector weightings in electronic technology, technology services, and
producer manufacturing in recent months. These increases were offset in the less
economically sensitive health technology and health services sectors.
- --------------------------------------------------------------------------------
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 12/31/03: $9.46 Per Share
6/30/03: $8.06 Per Share
Total Net Assets: $192.3 Million
Weighted Average Market Cap: $7.5 Billion
- --------------------------------------------------------------------------------
PORTFOLIO STRUCTURE - BY SECTOR
(% OF TOTAL NET ASSETS)
- --------------------------------------------------------------------------------
[BAR CHART]
Electronic Technology 19.8
Technology Services 16.3
Health Technology 13.5
Finance 8.6
Retail Trade 7.7
Sectors Less
Than 6.0% 29.6
Cash and Other
Net Assets 4.5
18
- -----------------------------------------------------------------------[GRAPHIC]
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS*
- --------------------------------------------------------------------------------
SIT S&P RUSSELL
MID CAP MIDCAP MID CAP
GROWTH FUND 400 INDEX GROWTH INDEX
----------- --------- ------------
3 Month** 10.77% 13.91% 12.16%
6 Month** 17.37 20.64 20.19
1 Year 38.51 35.62 42.71
5 Year -0.32 9.21 2.01
10 Year 7.21 13.92 9.40
Inception 13.61 16.64 --
(9/2/82)
- --------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURNS*
- --------------------------------------------------------------------------------
SIT S&P RUSSELL
MID CAP MIDCAP MID CAP
GROWTH FUND 400 INDEX GROWTH INDEX
----------- --------- ------------
1 Year 38.51% 35.62% 42.71%
5 Year -1.57 55.34 10.45
10 Year 100.62 268.28 145.65
Inception 1423.96 2571.36 --
(9/2/82)
*As of 12/31/03 **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
- --------------------------------------------------------------------------------
[LINE GRAPH]
The sum of $10,000 invested at inception (9/2/82) and held until 12/31/03 would
have grown to $152,396 in the Fund, or $267,136 in the S&P MidCap 400 Index
assuming reinvestment of all dividends and capital gains.
- --------------------------------------------------------------------------------
TOP 10 HOLDINGS
- --------------------------------------------------------------------------------
* TCF Financial Corp.
* ASML Holding N.V.
* Ceridian Corp.
* Legg Mason, Inc.
* Symantec Corp.
* Celgene Corp.
* Chico's FAS, Inc.
* Adobe Systems, Inc.
* Xilinx, Inc.
* Coach, Inc.
Total Number of Holdings: 88
19
SIT MID CAP GROWTH FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE($)(1)
- --------------------------------------------------------------------------------
COMMON STOCKS (95.5%) (2)
COMMERCIAL SERVICES (1.8%)
30,500 Fair Isaac Corp. 1,499,380
48,000 Fisher Scientific International, Inc. (3) 1,985,760
------------------
3,485,140
------------------
COMMUNICATIONS (1.9%)
69,500 Nextel Communications, Inc. (3) 1,950,170
57,250 Nextel Partners, Inc. (3) 770,013
156,250 Sprint Corp. (PCS) (3) 878,125
------------------
3,598,308
------------------
CONSUMER DURABLES (1.5%)
59,800 Electronic Arts, Inc. (3) 2,857,244
------------------
CONSUMER NON-DURABLES (1.8%)
91,000 Coach, Inc. (3) 3,435,250
------------------
CONSUMER SERVICES (5.1%)
49,500 Career Education Corp. (3) 1,983,465
57,100 EchoStar Communications Corp. (3) 1,941,400
31,400 Harrah's Entertainment, Inc. 1,562,778
116,500 Hilton Hotels Corp. 1,995,645
65,500 International Game Technology 2,338,350
------------------
9,821,638
------------------
ELECTRONIC TECHNOLOGY (19.8%)
32,750 ADC Telecommunications, Inc. (3) 97,267
56,000 ADTRAN, Inc. 1,736,000
45,050 Analog Devices, Inc. 2,056,532
203,500 ASML Holding N.V. (3) 4,080,175
67,500 ATI Technologies, Inc. (3) 1,020,600
58,850 Broadcom Corp. (3) 2,006,196
15,950 Brooks Automation, Inc. (3) 385,511
86,000 Foundry Networks, Inc. (3) 2,352,960
102,850 Jabil Circuit, Inc. (3) 2,910,655
81,900 Juniper Networks, Inc. (3) 1,529,892
33,500 KLA-Tencor Corp. (3) 1,965,445
18,700 Lam Research Corp. (3) 604,010
36,500 Lexmark International, Inc. (3) 2,870,360
47,000 Marvell Technology Group, Ltd. (3) 1,782,710
48,000 Novellus Systems, Inc. (3) 2,018,400
35,000 QLogic Corp. (3) 1,806,000
76,000 Rockwell Automation, Inc. 2,705,600
13,500 SanDisk Corp. (3) 825,390
246,150 Sonus Networks, Inc. (3) 1,860,894
90,200 Xilinx, Inc. (3) 3,494,348
------------------
38,108,945
------------------
- --------------------------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE($)(1)
- --------------------------------------------------------------------------------
ENERGY MINERALS (3.4%)
23,450 Apache Corp. 1,901,795
32,500 Murphy Oil Corp. 2,122,575
90,250 XTO Energy, Inc. 2,554,075
------------------
6,578,445
------------------
FINANCE (8.6%)
71,350 Ace, Ltd. 2,955,317
49,500 Legg Mason, Inc. 3,820,410
19,800 Lehman Brothers Holdings, Inc. 1,528,956
54,500 New York Community Bancorp, Inc. 2,073,725
118,900 TCF Financial Corp. 6,105,515
------------------
16,483,923
------------------
HEALTH SERVICES (5.5%)
102,850 Caremark Rx, Inc. (3) 2,605,190
54,800 Laboratory Corp. (3) 2,024,860
36,000 Oxford Health Plans, Inc. 1,566,000
49,800 Stericycle, Inc. (3) 2,325,660
36,500 Universal Health Services, Inc. 1,960,780
------------------
10,482,490
------------------
HEALTH TECHNOLOGY (13.5%)
25,800 Alcon, Inc. 1,561,932
21,500 Beckman Coulter, Inc. 1,092,845
54,905 Biogen Idec, Inc. (3) 2,019,406
58,000 Boston Scientific Corp. (3) 2,132,080
81,500 Celgene Corp. (3) 3,669,130
324,100 Elan Corp., A.D.R. (3) 2,233,049
38,500 Genzyme Corp. (3) 1,899,590
36,250 Gilead Sciences, Inc. (3) 2,107,575
58,600 MedImmune, Inc. (3) 1,488,440
31,000 NPS Pharmaceuticals, Inc. (3) 952,940
35,350 Pharmaceutical Resources, Inc. (3) 2,303,053
39,700 Teva Pharmaceutical Industries, A.D.R. 2,251,387
31,500 Varian Medical Systems, Inc. (3) 2,176,650
------------------
25,888,077
------------------
INDUSTRIAL SERVICES (1.0%)
55,000 Noble Corp. (3) 1,967,900
------------------
PROCESS INDUSTRIES (1.0%)
70,500 Pall Corp. 1,891,515
------------------
20
- -----------------------------------------------------------------------[GRAPHIC]
- --------------------------------------------------------------------------------
QUANTITY/PAR($) NAME OF ISSUER MARKET VALUE($)(1)
- --------------------------------------------------------------------------------
PRODUCER MANUFACTURING (5.4%)
31,500 AMETEK, Inc. 1,520,190
24,350 Danaher Corp. 2,234,113
24,000 Gentex Corp. 1,059,840
33,100 ITT Industries, Inc. 2,456,351
123,050 Thermo Electron Corp. (3) 3,100,860
------------------
10,371,354
------------------
RETAIL TRADE (7.7%)
46,050 Best Buy Co., Inc. 2,405,652
97,900 Chico's FAS, Inc. (3) 3,617,405
44,200 Family Dollar Stores, Inc. 1,585,896
64,000 Michaels Stores, Inc. 2,828,800
23,000 PETsMART, Inc. 547,400
58,950 Staples, Inc. (3) 1,609,335
101,800 TJX Companies, Inc. 2,244,690
------------------
14,839,178
------------------
TECHNOLOGY SERVICES (16.3%)
89,590 Adobe Systems, Inc. 3,520,887
147,450 BEA Systems, Inc. (3) 1,813,635
48,500 Business Objects, A.D.R. (3) 1,681,495
78,500 Cadence Design Systems, Inc. (3) 1,411,430
186,800 Ceridian Corp. (3) 3,911,592
108,050 Check Point Software Tech., Ltd. (3) 1,817,401
78,250 Citrix Systems, Inc. (3) 1,659,683
63,500 Cognos, Inc. (3) 1,944,370
64,062 Fiserv, Inc. (3) 2,531,090
39,500 Intuit, Inc. (3) 2,089,945
30,500 Mercury Interactive Corp. (3) 1,483,520
66,900 SunGard Data Systems, Inc. (3) 1,853,799
108,000 Symantec Corp. (3) 3,742,200
52,600 Veritas Software Corp. (3) 1,954,616
------------------
31,415,663
------------------
TRANSPORTATION (1.2%)
63,000 Expeditors Intl. of Washington, Inc. 2,372,580
------------------
Total common stocks 183,597,650
------------------
(cost: $150,372,471)
SHORT-TERM SECURITIES (3.1%) (2)
6,036,000 Sit Money Market Fund, 0.58% (4) 6,036,000
------------------
(cost: $6,036,000)
Total investments in securities
(cost: $156,408,471) (5) $189,633,650
==================
See accompanying notes to portfolios of investments on page 40.
21
SIT INTERNATIONAL GROWTH FUND
SIX MONTHS ENDED DECEMBER 31, 2003
[PHOTO] ------------------------------------------------------------------------
EUGENE C. SIT, CFA, SENIOR PORTFOLIO MANAGER
ROGER J. SIT, SENIOR PORTFOLIO MANAGER
The Sit International Growth Fund returned +20.20% for the last half of 2003
compared with +26.59% for the MSCI EAFE Index (the "Index") and +23.37% in the
MSCI EAFE Growth Index. The Fund's holdings in Japan (stock selection) and
Israel (overweight) caused the Fund to lag the Index for the period, while
excellent results from the Netherlands (stock selection) and India (overweight)
partially offset the relative under-performance.
EUROPE IMPROVING, BUT STILL UNDERWEIGHT
The Fund had a weighting of 54.0% in Europe at year-end, versus 68.4% for the
Index. Although European reform measures appear to be headed in the right
direction and the economies are showing modest economic improvement, we see
better opportunities elsewhere, as further strengthening of the euro may dampen
growth prospects. Within Europe, we are shifting to higher-quality companies
with solid fundamentals and superior growth prospects. Recent additions include
Philips Electronics (consumer electronics), WPP Group (advertising) and Siemens
(capital goods).
ASIAN EXPOSURE GROWS, INCLUDING JAPAN
In Japan, our weight increased to 18.0% versus 21.4% for the Index. We look
for companies best positioned within their industries to take advantage of
tangible progress in banking and corporate reform. The strengthening yen will
likely continue to put a damper on export-oriented companies. We added to three
financials, Nikko Cordial, Sumitomo Mitsui Financial, and Mitsubishi Tokyo
Financial. We have also added to consumer- or capital-related stocks such as
Nitto Denko, Takashimaya, and NEC Electronics.
Our weighting in Asia ex-Japan was 20.5%, nearly twice the Index weight of
10.2%. Robust economic growth is taking place powered by China's
industrialization and urbanization trends. Exports are rising now that IT
expenditures are picking up and domestic consumption is strengthening.
Anticipating Hong Kong property price appreciation, we added Henderson Land and
Sun Hung Kai Property. New holdings in China Life and PICC Property and Casualty
reflect tremendous growth prospects in insurance. We also added Neptune Orient
Lines, a Singapore shipper.
- --------------------------------------------------------------------------------
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 12/31/03: $11.20 Per Share
6/30/03: $9.39 Per Share
Total Net Assets: $57.8 Million
Weighted Average Market Cap: $50.5 Billion
- --------------------------------------------------------------------------------
PORTFOLIO STRUCTURE - BY REGION
(% OF TOTAL NET ASSETS)
- --------------------------------------------------------------------------------
[BAR CHART]
SIT INT'L MORGAN STANLEY
GROWTH FUND EAFE INDEX
France, Germany, UK 33.1 40.1
Europe Other 20.9 28.3
Pacific Basin 20.5 10.2
Japan 18.0 21.4
Africa /Middle East 2.8 0.0
Latin America 2.0 0.0
North America 2.0 0.0
Cash and 0.7 0.0
Other Net Assets
22
- -----------------------------------------------------------------------[GRAPHIC]
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS*
- --------------------------------------------------------------------------------
SIT MORGAN STANLEY LIPPER
INTERNATIONAL CAPITAL INT'L INT'L
GROWTH FUND EAFE INDEX INDEX
----------- ---------- -----
3 Month** 14.24% 17.08% 15.45%
6 Month** 20.20 26.59 24.56
1 Year 28.70 38.59 36.00
5 Year -7.80 -0.05 2.13
10 Year -0.28 4.47 5.31
Inception 3.62 4.98 7.06
(11/1/91)
- --------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURNS*
- --------------------------------------------------------------------------------
SIT MORGAN STANLEY LIPPER
INTERNATIONAL CAPITAL INT'L INT'L
GROWTH FUND EAFE INDEX INDEX
----------- ---------- -----
1 Year 28.70% 38.59% 36.00%
5 Year -33.36 -0.27 11.13
10 Year -2.78 54.81 67.80
Inception 54.20 80.70 129.52
(11/1/91)
*AS OF 12/31/03 **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
- --------------------------------------------------------------------------------
[LINE GRAPH]
The sum of $10,000 invested at inception (11/1/91) and held until 12/31/03 would
have grown to $15,420 in the Fund, or $18,070 in the Morgan Stanley EAFE Index
assuming reinvestment of all dividends and capital gains.
- --------------------------------------------------------------------------------
PORTFOLIO STRUCTURE - BY SECTOR
(% OF TOTAL NET ASSETS)
- --------------------------------------------------------------------------------
Finance 23.5
Electronic Technology 11.0
Health Technology 10.4
Communications 9.8
Consumer Non-Durables 7.6
Consumer Services 7.0
Energy Minerals 6.9
Sectors Less Than 5.0% 23.1
Cash & Other Net Assets 0.7
23
SIT INTERNATIONAL GROWTH FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
TOP 10 HOLDINGS
- --------------------------------------------------------------------------------
* Vodafone Group, p.l.c.
* Royal Bank of Scotland
* HSBC Holdings, p.l.c.
* ING Groep N.V.
* Novartis, A.G.
* Nestle, S.A.
* Nomura Holdings, Inc.
* Telefonica, S.A.
* Total, S.A.
* ASML Holding N.V., A.D.R.
Total Number of Holdings: 103
- --------------------------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE($)(1)
- --------------------------------------------------------------------------------
COMMON STOCKS (98.6%) (2)
AFRICA/ MIDDLE EAST (2.8%)
ISRAEL (2.8%)
33,000 Amdocs, Ltd., A.D.R. (Tech. Services) (3) 741,840
15,600 Teva Pharmaceutical, A.D.R. (Health Tech.) 884,676
--------------
1,626,516
--------------
ASIA (37.8%)
AUSTRALIA (4.4%)
42,663 Australia and New Zealand Banking
Group (Finance) 568,313
104,852 BHP Billiton, Ltd. (Non-Energy Minerals) 963,018
27,100 News Corp., Ltd., A.D.R. (Consumer Svcs.) 819,775
1,500 Rio Tinto, p.l.c., A.D.R. (Non-Energy Minerals) 166,965
--------------
2,518,071
--------------
HONG KONG / CHINA (8.1%)
5,000 China Life Insurance Co., Ltd., A.D.R.
(Finance) (3) 164,850
47,500 CLP Holdings, Ltd. (Utilities) 226,377
131,000 Citic Pacific, Ltd. (Industrial Services) 334,098
199,000 Cnooc, Ltd. (Energy Minerals) 389,613
85,000 Henderson Land Development Co., Ltd.
(Finance) 375,535
78,400 HSBC Holdings, p.l.c. (Finance) 1,237,055
321,915 Johnson Electric Holdings (Producer Mfg.) 410,500
216,000 Li & Fung, Ltd. (Retail Trade) 370,035
698,000 Petrochina Co., Ltd. (Energy Minerals) 400,085
490,000 PICC Property & Casualty Co., Ltd.
(Finance) (3) 219,325
35,000 Sun Hung Kai Properties, Ltd. (Finance) 289,653
238,000 Tsingtao Brewing Co., Ltd. (Consumer Non-
Durables) 278,968
--------------
4,696,094
--------------
- --------------------------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE($)(1)
- --------------------------------------------------------------------------------
JAPAN (18.0%)
7,800 AFLAC, Inc., A.D.R. (Finance) 282,204
14,000 Canon, Inc. (Electronic Technology) 651,861
137 East Japan Railway (Transportation) 645,563
9,000 Honda Motor Co., Ltd. (Producer Mfg.) 399,739
28,000 Kao Corp. (Consumber Non-Durables) 569,562
100 Mitsubishi Tokyo Financial Group, Inc.
(Finance) 780,069
1,900 NEC Electronics Corp. (Electronic
Technology) 138,994
52,000 Nikko Cordial Corp. (Finance) 289,671
2,500 NITTO DENKO Corp. (Producer Manufacturing) 132,966
63,000 Nomura Holdings, Inc. (Finance) 1,072,828
419 NTT DoCoMo, Inc. (Communications) 950,051
16,300 Shin-Etsu Chemical Co., Ltd. (Industrial Svcs.) 666,175
5,000 SMC Corp. (Producer Manufacturing) 622,376
11,700 Sony Corp. (Consumer Durables) 405,029
190 Sumitomo Mitsui Financial Group, Inc.
(Finance) 1,012,317
42,000 Takashimaya Co., Ltd. (Retail Trade) 299,804
14,000 Takeda Chemical (Health Technology) 555,193
7,600 Tokyo Electron, Ltd. (Electronic Tech.) 577,251
10,500 Yamada Denki Co. (Consumer Durables) 352,711
--------------
10,404,364
--------------
SINGAPORE (4.9%)
72,846 DBS Group Holdings, Ltd. (Finance) 630,534
49,100 Flextronics Intl. (Electronic Tech.) (3) 728,644
359,000 Neptune Orient Lines, Ltd. (Transportation) (3) 456,598
23,000 Singapore Press Hldgs. (Consumer Services) 255,962
65,000 Venture Corp. (Electronic Technology) 765,471
--------------
2,837,209
--------------
SOUTH KOREA (0.1%)
28,023 Industrial Bank of Korea, G.D.R. (Finance) (3) 161,132
350 Samsung Electronics Co., G.D.R.
(Electronic Technology) 66,240
--------------
227,372
--------------
TAIWAN (1.5%)
86,671 Hon Hai Precision (Electronic Technology) 340,812
49,586 Taiwan Semiconductor, A.D.R. (Electronic
Technology) (3) 507,761
--------------
848,573
--------------
THAILAND (0.8%)
214,800 Advanced Info Services (Communications) 458,088
--------------
24
- -----------------------------------------------------------------------[GRAPHIC]
- --------------------------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE($)(1)
- --------------------------------------------------------------------------------
EUROPE (54.0%)
FINLAND (1.4%)
45,600 Nokia Corp., A.D.R. (Electronic Tech.) 775,200
--------------
FRANCE (10.5%)
35,252 AXA (Finance) 754,574
7,523 Aventis, S.A. (Health Technology) 497,232
11,500 Business Objects, A.D.R. (Tech. Svcs.) (3) 398,705
20,400 Business Objects (Tech. Services) (3) 711,478
6,560 Carrefour, S.A. (Retail Trade) 360,105
3,554 Danone (Consumer Non-Durables) 580,080
5,503 L'oreal Co. (Consumer Non-Durables) 451,179
12,900 STMicroelectronics, A.D.R. (Elec. Tech.) 348,429
11,800 Schlumberger, Ltd. (Industrial Svcs.) 645,696
5,705 Total, S.A. (Energy Minerals) 1,060,692
10,337 Veolia Environment (Utilities) 277,722
--------------
6,085,892
--------------
GERMANY (2.3%)
4,172 Muenchener Rueckver (Finance) 509,502
2,782 SAP AG (Technology Services) 469,515
4,158 Siemens AG (Technology Services) 333,039
--------------
1,312,056
--------------
IRELAND (1.3%)
18,000 Allied Irish Banks p.l.c. (Finance) 286,983
63,700 Elan Corp., A.D.R. (Health Technology) (3) 438,893
--------------
725,876
--------------
ITALY (1.5%)
105,957 Telecom Italia (Saving) (Communications) 314,075
67,040 Telecom Italia (Ord.) (Communications) (3) 136,566
76,550 Telecom Italia Mobile (Communications) 416,158
--------------
866,799
--------------
NETHERLANDS (6.1%)
52,900 ASML Holding N.V., A.D.R.
(Electronic Technology) (3) 1,060,645
48,235 ING Groep N.V. (Finance) 1,124,956
13,542 Koninklijke (Royal) Philips Electronics N.V.
(Electronic Technology) (3) 395,430
18,200 Royal Dutch Petroleum, A.D.R.
(Energy Minerals) 953,498
--------------
3,534,529
--------------
SPAIN (1.9%)
72,400 Telefonica, S.A. (Communications) 1,062,987
--------------
- --------------------------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE($)(1)
- --------------------------------------------------------------------------------
SWITZERLAND (8.7%)
9,328 Adecco, S. A. (Commercial Svcs.) 599,617
18,034 Credit Suisse Group (Finance) 659,825
4,331 Nestle, S.A. (Consumer Non-Durables) 1,082,093
24,444 Novartis, A.G. (Health Technology) 1,109,788
5,115 Roche Holdings, A.G. (Health Tech.) 515,946
15,402 UBS, A.G. (Finance) 1,054,821
--------------
5,022,090
--------------
UNITED KINGDOM (20.3%)
47,783 Acambis, p.l.c. (Health Technology) (3) 261,108
15,344 AstraZeneca, p.l.c. (Health Technology) 747,442
12,900 BP p.l.c., A.D.R. (Energy Minerals) 636,615
96,569 Barclays, p.l.c. (Finance) 861,343
73,561 Burberry Group, p.l.c. (Retail Trade) 481,311
155,409 Compass Group, p.l.c. (Consumer Services) 1,057,185
41,900 Diageo, p.l.c. (Consumer Non-Durables) 551,306
21,184 GlaxoSmithkline, A.D.R. (Health Tech.) 987,598
140,204 Hilton Group, p.l.c. (Consumer Services) 564,094
46,178 Pearson, p.l.c. (Consumer Services) 514,182
13,754 Reckitt Benckiser, p.l.c. (Cons. Non-Durables) 311,220
43,482 Royal Bank of Scotland (Finance) 1,281,240
157,584 Tesco, p.l.c. (Retail Trade) 727,113
61,580 Unilever, p.l.c. (Consumer Non-Durables) 574,064
615,723 Vodafone Group, p.l.c. (Communications) 1,526,604
7,500 Vodafone Group, A.D.R. (Communications) 187,800
45,800 WPP Group p.l.c. (Consumer Services) 449,711
--------------
11,719,936
--------------
LATIN AMERICA (2.0%)
BRAZIL (0.3%)
10,500 Tele Norte Leste Participacoes, A.D.R.
(Communications) 162,015
--------------
MEXICO (1.7%)
12,900 Telefonos de Mexico, A.D.R.
(Communications) 426,087
194,030 Wal-Mart de Mexico (Retail Trade) 553,052
--------------
979,139
--------------
NORTH AMERICA (2.0%)
CANADA (2.0%)
13,500 Precision Drilling Corp. (Industrial Svcs.) (3) 589,680
11,500 Suncor Energy, Inc. (Energy Minerals) 288,190
4,700 Talisman Energy, Inc. (Energy Minerals) 266,020
--------------
1,143,890
--------------
Total common stocks 57,006,696
--------------
(cost: $55,677,290)
See accompanying notes to portfolios of investments on page 40.
25
SIT INTERNATIONAL GROWTH FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE($)(1)
- --------------------------------------------------------------------------------
CLOSED-END MUTUAL FUND (0.7%) (2)
15,500 India Fund (Consumer Services) 390,600
--------------
(cost: $277,184)
SHORT TERM SECURITIES (0.0%) (2)
1,000 Sit Money Market Fund, 0.58% (4) 1,000
--------------
(cost: $1,000)
Total investments in securities
(cost: $55,955,474) (5) $57,398,296
==============
See accompanying notes to portfolios of investments on page 40.
26
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This page has been left blank intentionally.
27
SIT SMALL CAP GROWTH FUND
SIX MONTHS ENDED DECEMBER 31, 2003
[PHOTO] ------------------------------------------------------------------------
EUGENE C. SIT, CFA, SENIOR PORTFOLIO MANAGER
The Sit Small Cap Growth Fund returned +15.67% over the past six months.
This compares to +24.92% for the Russell 2000 Index.
A STRONG REBOUND
After three years of negative returns, 2003 proved to be a rewarding year
for participants in the equity markets. In addition, small cap stocks turned in
another strong performance compared to larger issues. In fact, 2003 marked the
fifth consecutive year where the Russell 2000 Index outperformed the Russell
1000 Index. Equity markets surged following the end of the Iraqi conflict, and
momentum was sustained through the second half of 2003, as the economy began to
show clear signs of rebounding. For the first time in three years, we begin a
new year with positive market sentiment and tangible signs of a global
economic upturn.
SPECULATIVE STOCKS LEAD THE PACK IN 2003
In 2003, investors showed a strong preference for more speculative issues,
regardless of the long-term fundamental appeal. For example, within the Russell
2000 Index, many of the best performers included companies without positive
earnings, with stock prices under $5, and with poor balance sheets. These types
of stocks are not emphasized within the Fund. We believe our not investing in
these speculative stocks accounted for much of the Fund's relative
under-performance in the short run. Health technology and electronic technology
were the two sectors with high speculative activity that drove most of the
shortfall.
SMALL CAP LEADERSHIP SHIFT EXPECTED
Although we believe the foundation is in place for another good year in
2004, we expect a change in market leadership will occur during the year ahead,
particularly within small cap investing. We believe our shareholders will
benefit from a market shift to "higher quality" investments, as investors
gravitate towards companies with improving earnings, attractive valuations, and
sustainable business models. Our research team remains focused on identifying
the best long-term investment opportunities for our shareholders.
- --------------------------------------------------------------------------------
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 12/31/03: $25.03 Per Share
6/30/03: $21.64 Per Share
Total Net Assets: $219.2 Million
Weighted Average Market Cap: $2.4 Billion
- --------------------------------------------------------------------------------
PORTFOLIO STRUCTURE - BY SECTOR
(% OF TOTAL NET ASSETS)
- --------------------------------------------------------------------------------
Electronic Technology 24.7
Finance 11.9
Health Technology 11.8
Technology Services 9.0
Retail Trade 5.6
Sectors 5.0% and Less 34.9
Cash and Other
Net Assets 2.1
28
- -----------------------------------------------------------------------[GRAPHIC]
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS*
- --------------------------------------------------------------------------------
SIT RUSSELL
SMALL CAP RUSSELL 2000 2000
GROWTH FUND INDEX GROWTH INDEX
----------- ----- ------------
3 Month** 10.02% 14.52% 12.69%
6 Month** 15.67 24.92 24.48
1 Year 34.57 47.25 48.53
3 Year -10.66 6.27 -2.04
5 Year 9.59 7.13 0.85
Inception 13.69 10.72 6.91
(7/1/94)
- --------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURNS*
- --------------------------------------------------------------------------------
SIT RUSSELL
SMALL CAP RUSSELL 2000 2000
GROWTH FUND INDEX GROWTH INDEX
----------- ----- ------------
1 Year 34.57% 47.25% 48.53%
3 Year -28.70 20.00 -5.99
5 Year 58.05 41.11 4.34
Inception 238.56 163.41 88.76
(7/1/94)
*AS OF 12/31/03 **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
- --------------------------------------------------------------------------------
The sum of $10,000 invested at inception (7/1/94) and held until 12/31/03 would
have grown to $33,856 in the Fund, or $26,341 in the Russell 2000 Index assuming
reinvestment of all dividends and capital gains.
- --------------------------------------------------------------------------------
TOP 10 HOLDINGS
- --------------------------------------------------------------------------------
* New York Community Bancorp, Inc.
* Coach, Inc.
* Business Objects S.A., A.D.R.
* Chico's FAS, Inc.
* Affiliated Managers Group, Inc.
* XTO Energy, Inc.
* Intersil Corp.
* NetScreen Technologies, Inc.
* Cuno, Inc.
* Cymer, Inc.
Total Number of Holdings: 91
29
SIT SMALL CAP GROWTH FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE($)(1)
- --------------------------------------------------------------------------------
COMMON STOCKS (97.9%) (2)
COMMERCIAL SERVICES (2.6%)
74,200 Performance Food Group Co. (3) 2,683,814
358,100 SkillSoft, A.D.R. (3) 3,097,565
------------------
5,781,379
------------------
CONSUMER DURABLES (1.8%)
24,700 Polaris Industries, Inc. 2,187,926
64,000 WMS Industries, Inc. (3) 1,676,800
------------------
3,864,726
------------------
CONSUMER NON-DURABLES (3.0%)
142,700 Coach, Inc. (3) 5,386,925
30,000 Liz Claiborne, Inc. 1,063,800
------------------
6,450,725
------------------
CONSUMER SERVICES (2.6%)
56,600 Career Education Corp. (3) 2,267,962
79,300 Emmis Communications Corp. (3) 2,145,065
26,000 Getty Images, Inc. (3) 1,303,380
------------------
5,716,407
------------------
ELECTRONIC TECHNOLOGY (24.7%)
61,550 Applied Micro Circuits Corp. (3) 368,069
118,600 At Road, Inc. (3) 1,577,380
7,000 Avid Technology, Inc. (3) 336,000
16,850 Benchmark Electronics, Inc. (3) 586,548
130,950 Brooks Automation, Inc. (3) 3,165,061
322,400 ChipPAC, Inc. (3) 2,447,016
39,150 Cognex Corp. 1,105,596
288,050 Cray, Inc. (3) 2,860,336
87,200 Cymer, Inc. (3) 4,027,768
122,850 Emulex Corp. (3) 3,277,638
172,950 Extreme Networks, Inc. (3) 1,246,969
139,500 Foundry Networks, Inc. (3) 3,816,720
51,150 Integrated Circuit Systems, Inc. (3) 1,457,263
178,460 Intersil Corp. 4,434,731
77,500 InVision Technologies, Inc. (3) 2,601,675
80,125 Kronos, Inc. (3) 3,173,751
54,500 Lexar Media, Inc. (3) 949,935
167,850 NetScreen Technologies, Inc. (3) 4,154,288
22,750 OmniVision Technologies, Inc. (3) 1,256,938
83,200 Silicon Laboratories, Inc. (3) 3,595,904
330,300 Sonus Networks, Inc. (3) 2,497,068
69,800 Varian Semiconductor Equip.
Associates, Inc. (3) 3,049,562
15,700 Zebra Technologies Corp. (3) 1,042,009
65,395 Zoran Corp. (3) 1,137,219
------------------
54,165,444
------------------
- --------------------------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE($)(1)
- --------------------------------------------------------------------------------
ENERGY MINERALS (2.1%)
159,433 XTO Energy, Inc. 4,511,954
------------------
FINANCE (11.9%)
66,850 Affiliated Managers Group, Inc. (3) 4,652,091
44,000 Aspen Insurance Holdings, Ltd. (3) 1,091,640
27,000 Legg Mason, Inc. 2,083,860
62,050 Mercury General Corp. 2,888,428
183,340 New York Community Bancorp, Inc. 6,976,087
36,150 PartnerRe, Ltd. 2,098,508
89,000 Platinum Underwriters Holdings, Ltd. 2,670,000
64,920 UCBH Holdings, Inc. 2,529,932
26,350 Wintrust Financial Corp. 1,188,385
------------------
26,178,931
------------------
HEALTH SERVICES (4.4%)
39,650 Accredo Health, Inc. (3) 1,253,337
37,500 AdvancePCS (3) 1,974,750
14,450 Covance, Inc. (3) 387,260
11,050 e-Research Technology, Inc. (3) 280,891
64,450 Stericycle, Inc. (3) 3,009,815
49,950 Universal Health Services, Inc. 2,683,314
------------------
9,589,367
------------------
HEALTH TECHNOLOGY (11.8%)
43,500 Amylin Pharmaceuticals, Inc. (3) 966,570
118,300 Biosite, Inc. (3) 3,424,785
52,500 Celgene Corp. (3) 2,363,550
133,500 Cell Therapeutics, Inc. (3) 1,161,450
241,550 CryoLife, Inc. (3) 1,396,159
41,500 Invitrogen Corp. (3) 2,905,000
35,450 Neurocrine Biosciences, Inc. (3) 1,933,443
70,750 NPS Pharmaceuticals, Inc. (3) 2,174,855
61,650 Pharmaceutical Resources, Inc. (3) 4,016,498
162,700 Sangamo BioSciences, Inc. (3) 901,358
16,750 Telik, Inc. (3) 385,418
27,950 Varian Medical Systems, Inc. (3) 1,931,345
78,400 Wright Medical Group, Inc. (3) 2,386,496
------------------
25,946,927
------------------
INDUSTRIAL SERVICES (3.0%)
130,400 Chicago Bridge & Iron Co. 3,768,560
65,500 Smith International, Inc. (3) 2,719,560
------------------
6,488,120
------------------
PROCESS INDUSTRIES (3.5%)
89,900 Cuno, Inc. (3) 4,048,197
86,450 Millipore Corp. (3) 3,721,673
------------------
7,769,870
------------------
30
- -----------------------------------------------------------------------[GRAPHIC]
- --------------------------------------------------------------------------------
QUANTITY Name of Issuer MARKET VALUE($)(1)
- --------------------------------------------------------------------------------
PRODUCER MANUFACTURING (4.9%)
23,600 AMETEK, Inc. 1,138,936
10,800 Dionex Corp. (3) 497,016
83,100 DRS Technologies, Inc. (3) 2,308,518
60,000 Gardner Denver, Inc. (3) 1,432,200
33,500 Jacobs Engineering Group, Inc. (3) 1,608,335
53,500 Joy Global, Inc. 1,399,025
45,800 Roper Industries, Inc. 2,256,108
------------------
10,640,138
------------------
RETAIL TRADE (5.6%)
41,000 Advance Auto Parts, Inc. (3) 3,337,400
130,850 Chico's FAS, Inc. (3) 4,834,907
59,950 Cost Plus, Inc. (3) 2,457,950
57,000 PETCO Animal Supplies, Inc. (3) 1,735,650
------------------
12,365,907
------------------
TECHNOLOGY SERVICES (9.0%)
154,550 Business Objects S.A., A.D.R. (3) 5,358,249
33,100 CACI International, Inc. (3) 1,609,322
180,700 Citrix Systems, Inc. (3) 3,832,647
32,450 Hyperion Solutions Corp. (3) 978,043
91,450 Informatica Corp. (3) 941,935
82,700 Mercury Interactive Corp. (3) 4,022,528
211,000 Quest Software, Inc. (3) 2,996,200
------------------
19,738,924
------------------
TRANSPORTATION (2.0%)
58,700 C.H. Robinson Worldwide, Inc. 2,225,317
59,500 UTI Worldwide, Inc. 2,256,835
------------------
4,482,152
------------------
UTILITIES (5.0%)
446,900 Calpine Corp. (3) 2,149,589
66,700 Equitable Resources, Inc. 2,862,764
66,000 Questar Corp. 2,319,900
149,500 Southwestern Energy Co. (3) 3,573,050
------------------
10,905,303
------------------
Total common stocks
(cost: $179,338,154) 214,596,274
------------------
SHORT-TERM SECURITIES (1.7%) (2)
3,808,000 Sit Money Market Fund, 0.58% (4) 3,808,000
------------------
(cost: $3,808,000)
Total investments in securities
(cost: $183,146,154) (5) $218,404,274
==================
See accompanying notes to portfolios of investments on page 40.
31
SIT SCIENCE AND TECHNOLOGY GROWTH FUND
SIX MONTHS ENDED DECEMBER 31, 2003
[PHOTO] ------------------------------------------------------------------------
EUGENE C. SIT, CFA, SENIOR PORTFOLIO MANAGER
The Sit Science and Technology Growth Fund returned +17.64% over the last six
months, compared to the +15.14% return for the S&P 500 Index.
A DRAMATIC CHANGE IN SENTIMENT
Science and technology stocks continued their strong performance during the
second half of 2003, as attractive valuations and improving economic conditions
fueled the advance. The long-awaited upturn in business capital spending has
begun, and it is clearly translating into stronger revenues for the companies
held in the Fund. For example, last quarter the median sales growth rate for
companies held in the Fund was +20% over the prior year, accelerating to post
the highest figure since the downturn began in early 2000. In addition, the
improvements appear to be broad-based across a number of industries, including
semiconductors, storage, software, security, and Internet-focused companies.
TECHNOLOGY OUTPERFORMED HEALTH CARE
In absolute terms, the major technology sectors outperformed health care by a
wide margin during the second half of the year. This is not surprising since
technology fundamentals are more closely linked with economic trends. The Fund's
strong returns in both electronic technology and technology services drove its
out-performance to the S&P 500, with particularly strong returns coming from
Business Objects (six-month return of +59%), Symantec (+57%), Documentum (+55%),
Intel (+54%), and Xilinx (+53%). The Fund was most negatively impacted by
under-performance in the health technology sector, by our position in Biovail
(-60% over the period), in particular.
STRONG FUNDAMENTALS IN PLACE
We believe that the 2003 turnaround is sustainable into the new year. The
global economy is improving, capital spending is on the rise, and intense cost
cutting by many technology companies over the past three years should cause
increases in revenue growth to have an outsized impact on the bottom line for
most companies. We believe that the companies held in the Fund will be
beneficiaries of improving business fundamentals in 2004.
- --------------------------------------------------------------------------------
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 12/31/03: $9.47 Per Share
6/30/03: $8.05 Per Share
Total Net Assets: $18.0 Million
Weighted Average Market Cap: $30.8 Billion
- --------------------------------------------------------------------------------
PORTFOLIO STRUCTURE - BY SECTOR
(% OF TOTAL NET ASSETS)
- --------------------------------------------------------------------------------
Electronic Technology 41.1
Technology Services 27.7
Health Technology 17.7
Sectors less than 3.0% 11.3
Cash & Other Net Assets 2.2
32
- -----------------------------------------------------------------------[GRAPHIC]
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS*
- --------------------------------------------------------------------------------
SIT
SCIENCE AND
TECHNOLOGY S&P
GROWTH FUND 500 INDEX
----------- ---------
3 Month** 11.02% 12.18%
6 Month** 17.64 15.14
1 Year 40.09 28.68
3 Years -25.93 -4.05
5 Years -6.72 -0.57
Inception -0.38 3.78
(12/31/97)
- --------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURNS*
- --------------------------------------------------------------------------------
SIT
SCIENCE AND
TECHNOLOGY S&P
GROWTH FUND 500 INDEX
----------- ---------
1 Year 40.09% 28.68%
3 Years -59.36 -11.67
5 Years -29.38 -2.82
Inception -2.26 24.95
(12/31/97)
*AS OF 12/3103 **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
- --------------------------------------------------------------------------------
The sum of $10,000 invested at inception (12/31/97) and held until 12/31/03
would have declined to $9,774 in the Fund or grown to $12,495 in the S&P 500
Index.
- --------------------------------------------------------------------------------
TOP 10 HOLDINGS
- --------------------------------------------------------------------------------
* Cisco Systems, Inc.
* Symantec Corp.
* Analog Devices, Inc.
* Genetech, Inc.
* Amgen, Inc.
* Qualcomm, Inc.
* Foundry Networks, Inc.
* Veritas Software Corp.
* Adobe Systems, Inc.
* St. Jude Medical, Inc.
Total Number of Holdings: 64
33
SIT SCIENCE AND TECHNOLOGY GROWTH FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 2003 (UNAUDITED)
- ------------------------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE($)(1)
- ------------------------------------------------------------------------------
COMMON STOCKS (97.8%) (2)
COMMUNICATIONS (2.0%)
12,600 Nextel Communications, Inc. (3) 353,556
--------------------
CONSUMER DURABLES (2.0%)
7,600 Electronic Arts, Inc. (3) 363,128
--------------------
CONSUMER SERVICES (1.0%)
9,600 Time Warner, Inc. (3) 172,704
--------------------
ELECTRONIC TECHNOLOGY (41.1%)
6,800 Agilent Technologies, Inc. (3) 198,832
10,000 Analog Devices, Inc. 456,500
13,800 Applied Materials, Inc. (3) 309,810
10,400 ASML Holding N.V. (3) 208,520
11,800 At Road, Inc. (3) 156,940
9,000 Broadcom Corp. (3) 306,810
10,400 Brooks Automation, Inc. (3) 251,368
25,200 Cisco Systems, Inc. (3) 612,108
6,400 Cognex Corp. 180,736
37,000 Cray, Inc. (3) 367,410
3,600 Cymer, Inc. (3) 166,284
9,000 Dell Computer Corp. (3) 305,640
19,100 EMC Corp. (3) 246,772
14,800 Foundry Networks, Inc. (3) 404,928
7,800 Hewlett-Packard Co. 179,166
11,200 Intel Corp. 360,640
11,000 Jabil Circuit, Inc. (3) 311,300
6,200 KLA-Tencor Corp. (3) 363,754
14,400 Netscreen Technologies, Inc. (3) 356,400
8,000 Novellus Systems, Inc. (3) 336,400
7,700 Qualcomm, Inc. 415,261
40,200 Sonus Networks, Inc. (3) 303,912
7,800 Synopsys, Inc. (3) 263,328
9,000 Xilinx, Inc. (3) 348,660
--------------------
7,411,479
--------------------
HEALTH SERVICES (1.1%)
8,100 e-Research Technology, Inc. (3) 205,902
--------------------
HEALTH TECHNOLOGY (17.7%)
7,200 Amgen, Inc. (3) 444,960
10,000 Boston Scientific Corp. (3) 367,600
44,400 Elan Corp., A.D.R (3) 305,916
4,800 Genentech, Inc. (3) 449,136
5,000 Genzyme Corp. (3) 246,700
3,800 Gilead Sciences, Inc. (3) 220,932
- ------------------------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE($)(1)
- ------------------------------------------------------------------------------
3,400 MedImmune, Inc. (3) 86,360
4,600 Medtronic, Inc. 223,606
21,600 Sangamo BioSciences, Inc. (3) 119,664
30,000 StemCells, Inc. (3) 59,400
6,000 St. Jude Medical, Inc. (3) 368,100
5,400 Teva Pharmaceutical, Ltd., A.D.R. 306,234
--------------------
3,198,608
--------------------
PROCESS INDUSTRIES (1.2%)
5,000 Millipore Corp. (3) 215,250
--------------------
PRODUCER MANUFACTURING (2.7%)
8,000 American Power Conversion Corp. 195,600
11,400 Thermo Electron Corp. (3) 287,280
--------------------
482,880
--------------------
RETAIL TRADE (1.3%)
3,600 eBay, Inc. (3) 232,524
--------------------
TECHNOLOGY SERVICES (27.7%)
9,400 Adobe Systems, Inc. 369,420
12,800 Amdocs, Ltd. (3) 287,744
14,200 BEA Systems, Inc. (3) 174,660
7,800 Business Objects, A.D.R. (3) 270,426
4,000 CACI International, Inc. (3) 194,480
4,200 Cadence Design Systems, Inc. (3) 75,516
12,000 Check Point Software Technology (3) 201,840
8,600 Citrix Systems, Inc. (3) 182,406
8,200 Cognos, Inc. (3) 251,084
5,000 First Data Corp. 205,450
7,600 Fiserv, Inc. (3) 300,276
20,600 Informatica Corp. (3) 212,180
4,000 Intuit, Inc. (3) 211,640
6,900 Mercury Interactive Corp. (3) 335,616
9,000 Microsoft Corp. 247,860
7,800 SAP, A.D.R. 324,168
14,000 Symantec Corp. (3) 485,100
10,800 Veritas Software Corp. (3) 401,328
6,000 Yahoo!, Inc. (3) 271,020
--------------------
5,002,214
--------------------
Total common stocks 17,638,245
--------------------
(cost: $16,029,059)
SHORT-TERM SECURITIES (1.0%) (2)
172,000 Sit Money Market Fund, 0.58% (4) 172,000
--------------------
(cost: $172,000)
Total investments in securities
(cost: $16,201,059) $17,810,245
====================
See accompanying notes to portfolios of investments on page 40.
34
- -----------------------------------------------------------------------[GRAPHIC]
This page has been left blank intentionally.
35
SIT DEVELOPING MARKETS GROWTH FUND
SIX MONTHS ENDED DECEMBER 31, 2003
[PHOTO] ------------------------------------------------------------------------
SENIOR PORTFOLIO MANAGERS
EUGENE C. SIT, CFA AND ROGER J. SIT
The Sit Developing Markets Growth Fund returned +27.81% for six months ended
December 31, 2003 compared with +33.09% for the MSCI Emerging Markets Free Index
(the "Index") and +31.50% for the MSCI Emerging Markets Free Growth Index. The
Fund's holdings in Brazil and Mexico drove the relative underperformance due to
stock selection. Israel also caused relative underperformance due to our stock
selection and overweighting. Conversely, our holdings in India and China
outperformed the Index.
ASIAN GROWTH LEADS THE WORLD
The Fund's weight in Asia was 68.5% versus 54.1% for the Index. Robust
economic growth is taking place in Asia, powered by China's industrial and
urbanization trends, which are rapidly bidding up commodity prices. Exports are
rising now that IT expenditures are picking up and domestic consumption is
strengthening. The possible slowing of China's robust economic growth is a
concern, as is the possible reoccurrence of SARS. In China we added Tsingtao
Brewery (food beverage & tobacco), Ports Design (luxury goods) and PICC Property
and Casualty (insurance) to capitalize on consumer growth. We also added POSCO,
a steel producer in Korea, to benefit from rising commodity prices.
BRAZIL EMPHASIZED OVER MEXICO
The Fund had a weighting of 18.4% in Latin America versus the Index weight of
19.1%. We continue to maintain a material weight as the political environment
and economic outlook improve and inflation remains relatively low. However, we
have been shifting our weight to Brazil from Mexico, which faces political
uncertainty, tax reform issues, and long-term competitive challenges from Asia.
In Brazil we expect strong economic growth as interest rates decline and the
fiscal outlook improves. We recently added Companhia Vale do Rio Doce, a
Brazilian materials firm.
LESS EMPHASIS IN OTHER REGIONS
We remain materially underweight in the Middle East, Emerging Europe and
Africa (11.2% versus 26.8% for the Index). In Israel, we own two generic
pharmaceutical companies, Teva and Taro, both of which should benefit from
health care reform in Europe. For consumer exposure to India's growth, we added
ICICI Bank.
- --------------------------------------------------------------------------------
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 12/31/03: $10.32 Per Share
6/30/03: $8.12 Per Share
Total Net Assets: $9.1 Million
Weighted Average Market Cap: $36.8 Billion
- --------------------------------------------------------------------------------
PORTFOLIO STRUCTURE - BY REGION
(% OF TOTAL NET ASSETS)
- --------------------------------------------------------------------------------
[BAR CHART]
SIT DEVELOPING MSCI EMERGING
MARKETS GROWTH FUND MARKETS FREE INDEX
Asia 68.5 54.1
Latin America 18.4 19.1
Africa/ 9.9 17.6
Middle East
Europe 1.3 9.2
Cash and Other 1.9 0.0
Net Assets
36
- -----------------------------------------------------------------------[GRAPHIC]
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS*
- --------------------------------------------------------------------------------
SIT MSCI LIPPER
DEVELOPING EMERGING EMERGING
MARKETS MARKETS MARKETS
GROWTH FUND FREE INDEX INDEX
----------- ---------- -----
3 Month** 15.31% 17.25% 18.68%
6 Month** 27.81 33.09 35.34
1 Year 45.96 51.59 56.94
3 Year 1.59 9.88 13.04
5 Year 5.96 8.17 11.02
Inception 0.47 -0.83 1.79
(7/1/94)
- --------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURNS*
- --------------------------------------------------------------------------------
SIT MSCI LIPPER
DEVELOPING EMERGING EMERGING
MARKETS MARKETS MARKETS
GROWTH FUND FREE INDEX INDEX
----------- ---------- -----
1 Year 45.96% 51.59% 56.94%
3 Year 4.84 32.65 44.45
5 Year 33.58 48.10 68.65
Inception 4.56 -7.60 18.36
(7/1/94)
*AS OF 12/31/03 **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
- --------------------------------------------------------------------------------
[LINE GRAPH]
The sum of $10,000 invested at inception (7/1/94) and held until 12/31/03
would have increased to $10,456 in the Fund, or declined to $9,240 in the Morgan
Stanley Capital Int'l Emerging Markets Free Index assuming reinvestment of all
dividends and capital gains.
- --------------------------------------------------------------------------------
PORTFOLIO STRUCTURE - BY SECTOR
(% OF TOTAL NET ASSETS)
- --------------------------------------------------------------------------------
Electronic Technology 16.4
Communications 14.9
Finance 14.6
Energy Minerals 11.9
Non-EnergyMinerals 9.7
Retail Trade 8.6
Consumer Services 8.2
Sectors less than 5.0% 13.8
Cash and Other
Net Assets 1.9
37
SIT DEVELOPING MARKETS GROWTH FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS - DECMEBER 31, 2003
- --------------------------------------------------------------------------------
10 LARGEST HOLDINGS
- --------------------------------------------------------------------------------
* Samsung Electronics
* Petrochina Co.
* India Fund
* BHP Billiton Limited, A.D.R.
* Taiwan Semiconductor
* HSBC Holdings p.l.c.
* Hon Hai Precision Industry
* Teva Pharmaceutical, A.D.R.
* Anglo American p.l.c.
* Wal-Mart de Mexico
Total Number of Holdings: 58
- ------------------------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE($)(1)
- ------------------------------------------------------------------------------
COMMON STOCKS (92.6%) (2)
AFRICA/ MIDDLE EAST (9.9%)
ISRAEL (7.0%)
8,500 Amdocs, Ltd. (Technology Services) (3) 191,080
2,600 Taro Pharmaceutical Industries, Ltd.
(Health Technology) (3) 167,700
4,900 Teva Pharmaceutical, A.D.R.
(Health Technology) 277,879
-------------
636,659
-------------
SOUTH AFRICA (2.9%)
12,100 Anglo American p.l.c. (Non-Energy Minerals) 261,447
-------------
ASIA (63.0%)
AUSTRALIA (4.3%)
21,410 BHP Billiton, Ltd., A.D.R. (Non-Energy
Minerals) 390,947
-------------
CHINA / HONG KONG (17.7%)
32,000 China Mobile (Hong Kong), Ltd.
(Communications) 98,305
49,000 Citic Pacific, Ltd. (Industrial Services) 124,968
9,000 CLP Holdings (Utilities) 42,893
38,000 CNOOC, Ltd. (Energy Minerals) 74,399
19,600 HSBC Holdings p.l.c. (Finance) 309,264
22,962 Johnson Electric Holdings, Ltd.
(Producer Manufacturing) 29,281
42,000 Li & Fung, Ltd. (Retail Trade) 71,951
876,000 PetroChina Co. (Energy Minerals) 502,112
276,000 PICC Property & Casualty Co., Ltd.
(Finance) (3) 123,538
55,627 Ports Design, Ltd. (Retail Trade) (3) 99,953
- ------------------------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE($)(1)
- ------------------------------------------------------------------------------
13,000 Sun Hung Kai Properties, Ltd. (Finance) 107,585
16,000 Tsingtao Brewery Co., Ltd.
(Consumer Non-Durables) 18,754
-------------
1,603,003
-------------
INDIA (0.7%)
4,000 ICICI Bank, A.D.R. (Finance) 68,720
-------------
MALAYSIA (2.1%)
47,000 Maxis Berhad (Communications) 93,382
17,500 Nestle Berhad (Consumer Non-Durables) 100,395
-------------
193,777
-------------
PHILIPPINES (1.2%)
912,000 SM Prime Holdings, Inc. (Retail Trade) 106,772
-------------
RUSSIA (3.5%)
700 LUKOIL, A.D.R. (Energy Minerals) 65,100
600 Mobile Telesystems, A.D.R.
(Communications) (3) 49,680
1,000 Vimpel Communications, A.D.R.
(Communications) (3) 73,500
3,000 YUKOS, A.D.R. (Energy Minerals) 127,800
-------------
316,080
-------------
SINGAPORE (4.7%)
17,097 DBS Group Holdings, Ltd. (Finance) 147,987
54,000 Neptune Orient Lines, Ltd.
(Transportation) (3) 68,680
18,000 Venture Corp., Ltd. (Electronic Tech.) 211,977
-------------
428,644
-------------
SOUTH KOREA (15.5%)
8,507 Industrial Bank of Koea (Finance) (3) 48,915
2,200 Kookmin Bank (Finance) 82,442
600 Kookmin Bank, A.D.R. (Finance) 22,704
2,500 KT Corp. (Communications) 93,580
5,000 POSCO, A.D.R. (Non-Energy Minerals) 169,850
1,569 Samsung Electronics (Electronic
Technology) 593,889
10,100 Shinhan Financial Group (Finance) 161,481
570 Shinsegae Co., Ltd. (Retail Trade) 138,733
5,100 SK Telecom Co., A.D.R. (Communications) 95,115
-------------
1,406,709
-------------
TAIWAN (7.5%)
77,950 Hon Hai Precision Industry (Electronic
Technology) 306,519
201,302 Taiwan Semiconductor Co. (Electronic
Technology) 376,515
-------------
683,034
-------------
38
- -----------------------------------------------------------------------[GRAPHIC]
- ------------------------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE($)(1)
- ------------------------------------------------------------------------------
THAILAND (5.8%)
94,600 Advanced Info Service Public Co., Ltd. 201,746
(Communications)
50,600 Bangkok Bank Public Co., Ltd. (Finance) (3) 146,861
15,600 BEC World Public Co. (Consumer Services) 88,980
278,800 Land & Houses Public Co., Ltd. (Consumer
Durables) 89,362
-------------
526,949
-------------
EUROPE (1.3%)
SPAIN (1.3%)
2,592 Telefonica, A.D.R. (Communications) 114,541
-------------
LATIN AMERICA (18.4%)
BRAZIL (9.9%)
19,936,532 Banco Bradesco S.A. (Finance) 105,038
2,000 Brasil Telecom, A.D.R. (Communications) 75,600
1,000 Companhia Vale do Rio Doce, A.D.R.
(Non-Energy Minerals) (3) 58,500
3,883 Embraer de Aeronautica, A.D.R.
(Transportation) 136,022
4,900 Pao de Acucar, A.D.R. (Retail Trade) 123,235
5,860 Petrobras (Energy Minerals) 155,183
5,300 Petrobras, A.D.R. (Energy Minerals) 154,972
6,100 Tele Norte Leste Participacoes, A.D.R.
(Communications) 94,123
-------------
902,673
-------------
MEXICO (8.5%)
6,200 America Movil, A.D.R. (Communications) 169,508
4,100 Grupo Televisa S.A., A.D.R. (Consumer
Services) 163,426
5,900 Telefonos de Mexico, A.D.R.
(Communications) 194,877
84,770 Wal-Mart de Mexico (Retail Trade) 241,623
-------------
769,434
-------------
Total common stocks 8,409,389
-------------
(cost: $6,514,562)
CLOSED-END MUTUAL FUND (5.5%) (2)
19,640 India Fund (Consumer Services) 494,928
-------------
(cost: $336,404)
SHORT-TERM SECURITIES (0.6%) (2)
52,000 Sit Money Market Fund, 0.58% (4) 52,000
-------------
(cost: $52,000)
Total investments in securities
(cost: $6,902,966) (5) $8,956,317
=============
See accompanying notes to portfolios of investments on page 40.
39
- -----------------------------------------------------------------------[GRAPHIC]
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 December 31, 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 $ 16,940,642 $ 57,237,079 $ 156,408,471 $ 55,955,474
=============== =============== =============== ===============
Unrealized appreciation (depreciation) on investments:
Gross unrealized appreciation $ 1,504,099 $ 11,085,190 $ 41,708,325 $ 8,267,176
Gross unrealized depreciation (1,170,082) (6,228,058) (8,483,146) (6,824,354)
--------------- --------------- --------------- ---------------
Net unrealized appreciation (depreciation) $ 334,017 $ 4,857,132 $ 33,225,179 $ 1,442,822
=============== =============== =============== ===============
Cost for federal income tax purposes $ 183,146,154 $ 16,201,059 $ 6,902,966
=============== =============== ===============
SCIENCE AND DEVELOPING
SMALL CAP TECHNOLOGY MARKETS
GROWTH GROWTH GROWTH
FUND FUND FUND
--------------- --------------- ---------------
Unrealized appreciation (depreciation) on investments:
Gross unrealized appreciation $ 46,073,329 $ 3,271,180 $ 2,493,042
Gross unrealized depreciation (10,815,209) (1,661,994) (439,691)
--------------- --------------- ---------------
Net unrealized appreciation (depreciation) $ 35,258,120 $ 1,609,186 $ 2,053,351
=============== =============== ===============
40
- -----------------------------------------------------------------------[GRAPHIC]
This page has been left blank intentionally.
41
SIT MUTUAL FUNDS
DECEMBER 31, 2003
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS & LIABILITIES (Unaudited)
LARGE CAP MID CAP
BALANCED GROWTH GROWTH
ASSETS FUND FUND FUND
--------------- --------------- ---------------
Investments in securities, at
identified cost $ 16,940,642 $ 57,237,079 $ 156,408,471
=============== =============== ===============
Investments in securities, at
market value - see
accompanying schedule for detail $ 17,274,659 $ 62,094,211 $ 189,633,650
Cash in bank on demand
deposit 24 123,671 15,311
Receivables:
Dividends and accrued interest 72,834 54,016 32,330
Fund shares sold 29,649 107,286 91,736
Investment securities sold 176,818 599,751 5,360,809
Other receivables -- 10,598 --
--------------- --------------- ---------------
Total assets 17,553,984 62,989,533 195,133,836
--------------- --------------- ---------------
LIABILITIES
Payables:
Disbursements in excess of
cash balances -- -- --
Investment securities purchased 156,357 1,069,093 2,451,072
Fund shares redeemed -- 1,970 84,668
Accrued investment management
and advisory services fee 14,547 52,415 185,239
Other payables 6,156 -- 147,215
--------------- --------------- ---------------
Total liabilities 177,060 1,123,478 2,868,194
--------------- --------------- ---------------
Net assets applicable to
outstanding capital stock 17,376,924 61,866,055 192,265,642
=============== =============== ===============
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 1,298,416 2,048,096 20,333,204
=============== =============== ===============
Net asset value per share of
outstanding capital stock $ 13.38 $ 30.21 $ 9.46
=============== =============== ===============
42
- -----------------------------------------------------------------------[GRAPHIC]
SCIENCE AND DEVELOPING
INTERNATIONAL SMALL CAP TECHNOLOGY MARKETS
GROWTH GROWTH GROWTH GROWTH
ASSETS FUND FUND FUND FUND
--------------- --------------- --------------- ---------------
Investments in securities, at
identified cost $ 55,955,474 $ 183,146,154 $ 16,201,059 $ 6,902,966
=============== =============== =============== ===============
Investments in securities, at
market value - see
accompanying schedule for detail $ 57,398,296 $ 218,404,274 $ 17,810,245 $ 8,956,317
Cash in bank on demand
deposit 4,806 11,027 8,595 79,728
Receivables:
Dividends and accrued interest 74,226 21,400 1,206 33,239
Fund shares sold 54,519 115,235 36,120 34,767
Investment securities sold 588,893 1,746,105 498,365 --
Other receivables -- 54,825 -- 4,516
--------------- --------------- --------------- ---------------
Total assets 58,120,740 220,352,866 18,354,531 9,108,567
--------------- --------------- --------------- ---------------
LIABILITIES
Payables:
Disbursements in excess of
cash balances -- -- -- --
Investment securities purchased 137,705 752,499 274,873 --
Fund shares redeemed 89,301 123,285 5,387 15,534
Accrued investment management
and advisory services fee 75,935 275,524 20,419 15,241
Other payables 30,751 -- 19,636 --
--------------- --------------- --------------- ---------------
Total liabilities 333,692 1,151,308 320,315 30,775
--------------- --------------- --------------- ---------------
Net assets applicable to
outstanding capital stock 57,787,048 219,201,558 18,034,216 9,077,792
=============== =============== =============== ===============
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 5,160,760 8,758,229 1,904,485 879,492
=============== =============== =============== ===============
Net asset value per share of
outstanding capital stock $ 11.20 $ 25.03 $ 9.47 $ 10.32
=============== =============== =============== ===============
See accompanying notes to financial statements on page 49.
43
- -----------------------------------------------------------------------[GRAPHIC]
SIT MUTUAL FUNDS
SIX MONTHS ENDED DECEMBER 31, 2003
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS (UNAUDITED)
LARGE CAP MID CAP INTERNATIONAL
BALANCED GROWTH GROWTH GROWTH
FUND FUND FUND FUND
--------------- --------------- --------------- ---------------
INVESTMENT INCOME:
INCOME:
Dividends * $ 77,021 $ 315,293 $ 356,194 $ 372,066
Interest 145,553 4,354 22,718 4,750
--------------- --------------- --------------- ---------------
Total income 222,574 319,647 378,912 376,816
--------------- --------------- --------------- ---------------
EXPENSES (NOTE 3):
Investment management and
advisory services fee 82,835 305,097 1,142,180 494,736
Less fees and expenses absorbed
by investment adviser -- -- (91,374) (93,599)
--------------- --------------- --------------- ---------------
Total net expenses 82,835 305,097 1,050,806 401,137
--------------- --------------- --------------- ---------------
Net investment income (loss) 139,739 14,550 (671,894) (24,321)
--------------- --------------- --------------- ---------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS :
Net realized gain (loss) (176,715) (239,174) 2,744,662 (1,328,722)
Net change in unrealized appreciation
(depreciation) on investments 1,437,931 7,246,811 26,397,096 11,368,003
Realized gain (loss) on foreign
currency transactions -- -- -- 3,749
Net change in unrealized appreciation
(depreciation) on foreign currency
transactions -- -- -- 2,929
--------------- --------------- --------------- ---------------
Net gain (loss) on investments 1,261,216 7,007,637 29,141,758 10,045,959
--------------- --------------- --------------- ---------------
Net increase (decrease) in net assets
resulting from operations $ 1,400,955 $ 7,022,187 $ 28,469,864 $ 10,021,638
=============== =============== =============== ===============
- ----------------------
* Dividends are net of foreign withholding tax of $27,853 and $10,003 in the
International Growth Fund and Developing Markets Growth Fund, respectively.
44
- -----------------------------------------------------------------------[GRAPHIC]
SCIENCE AND DEVELOPING
SMALL CAP TECHNOLOGY MARKETS
GROWTH GROWTH GROWTH
FUND FUND FUND
------------ ------------ ------------
INVESTMENT INCOME:
INCOME:
Dividends * $ 347,768 $ 10,701 $ 104,069
Interest 86,122 2,529 2,222
------------ ------------ ------------
Total income 433,890 13,230 106,291
------------ ------------ ------------
EXPENSES (NOTE 3):
Investment management and
advisory services fee 1,552,316 127,290 93,184
Less fees and expenses absorbed
by investment adviser -- (12,729) --
------------ ------------ ------------
Total net expenses 1,552,316 114,561 93,184
------------ ------------ ------------
Net investment income (loss) (1,118,426) (101,331) 13,107
------------ ------------ ------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS :
Net realized gain (loss) 3,325,059 (1,552,504) 74,485
Net change in unrealized appreciation
(depreciation) on investments 26,833,137 4,279,983 2,182,562
Realized gain (loss) on foreign
currency transactions -- -- 273
Net change in unrealized appreciation
(depreciation) on foreign currency
transactions -- -- 156
------------ ------------ ------------
Net gain (loss) on investments 30,158,196 2,727,479 2,257,476
------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations $ 29,039,770 $ 2,626,148 $ 2,270,583
============ ============ ============
- ----------------------
* Dividends are net of foreign withholding tax of $27,853 and $10,003 in the
International Growth Fund and Developing Markets Growth Fund, respectively.
See accompanying notes to financial statements on page 49.
45
SIT MUTUAL FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
BALANCED LARGE CAP
FUND GROWTH FUND
---------------------------- -----------------------------
SIX MONTHS SIX MONTHS
ENDED ENDED
DECEMBER 31, YEAR ENDED DECEMBER 31, YEAR ENDED
2003 JUNE 30, 2003 JUNE 30,
(UNAUDITED) 2003 (UNAUDITED) 2003
------------ ------------ ------------ ------------
Operations:
Net investment income (loss) $ 139,739 $ 402,738 $ 14,550 $ 43,757
Net realized gain (loss) on investments (176,715) (1,647,606) (239,174) (6,536,986)
Net change in unrealized appreciation
(depreciation) on investments 1,437,931 1,829,489 7,246,811 7,056,934
Net realized gain (loss) on foreign currency transactions -- -- -- --
Net change in unrealized appreciation (depreciation) on
foreign currency transactions -- -- -- --
------------ ------------ ------------ ------------
Net increase (decrease) in net assets resulting from
operations 1,400,955 584,621 7,022,187 563,705
------------ ------------ ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (219,000) (455,000) (43,757) --
Net realized gains on investments -- -- -- --
------------ ------------ ------------ ------------
Total distributions (219,000) (455,000) (43,757) --
------------ ------------ ------------ ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 1,188,038 4,198,470 3,359,693 10,694,474
Reinvested distributions 217,252 450,934 42,592 --
Payments for shares redeemed (1,275,193) (6,539,306) (7,838,353) (15,773,839)
------------ ------------ ------------ ------------
Increase (decrease) in net assets from
capital share transactions 130,097 (1,889,902) (4,436,068) (5,079,365)
------------ ------------ ------------ ------------
Total increase (decrease) in net assets 1,312,052 (1,760,281) 2,542,362 (4,515,660)
NET ASSETS
Beginning of period 16,064,872 17,825,153 59,323,693 63,839,353
------------ ------------ ------------ ------------
End of period $ 17,376,924 $ 16,064,872 $ 61,866,055 $ 59,323,693
============ ============ ============ ============
NET ASSETS CONSIST OF:
Capital (par value and paid-in surplus) $ 22,607,530 $ 22,477,433 $ 80,839,521 $ 85,275,589
Undistributed (distributions in excess of) net
investment income 1,477 80,738 14,550 43,757
Accumulated net realized gain (loss) from
security transactions and foreign
currency transactions (5,566,099) (5,389,384) (23,845,148) (23,605,974)
Unrealized appreciation (depreciation) on investments 334,016 (1,103,915) 4,857,132 (2,389,679)
Unrealized appreciation (depreciation) on foreign
currency transactions -- -- -- --
------------ ------------ ------------ ------------
$ 17,376,924 $ 16,064,872 $ 61,866,055 $ 59,323,693
============ ============ ============ ============
CAPITAL TRANSACTIONS IN SHARES:
Sold 92,373 359,102 118,406 436,179
Reinvested distributions 16,909 39,140 1,477 --
Redeemed (99,628) (559,312) (275,541) (650,676)
------------ ------------ ------------ ------------
Net increase (decrease) 9,654 (161,070) (155,658) (214,497)
============ ============ ============ ============
46
- -----------------------------------------------------------------------[GRAPHIC]
MID CAP INTERNATIONAL
GROWTH FUND GROWTH FUND
--------------------------- ----------------------------
SIX MONTHS SIX MONTHS
ENDED ENDED
DECEMBER 31, YEAR ENDED DECEMBER 31, YEAR ENDED
2003 JUNE 30, 2003 JUNE 30,
(UNAUDITED) 2003 (UNAUDITED) 2003
------------ ------------ ------------ ------------
Operations:
Net investment income (loss) ($ 671,894) ($ 1,124,324) ($ 24,321) $ 420,128
Net realized gain (loss) on investments 2,744,662 (29,541,134) (1,328,722) (11,557,686)
Net change in unrealized appreciation
(depreciation) on investments 26,397,096 31,743,942 11,368,003 4,260,724
Net realized gain (loss) on foreign currency transactions -- -- 3,749 4,027
Net change in unrealized appreciation (depreciation) on
foreign currency transactions -- -- 2,929 (2,822)
------------ ------------ ------------ ------------
Net increase (decrease) in net assets resulting from
operations 28,469,864 1,078,484 10,021,638 (6,875,629)
------------ ------------ ------------ ------------
Distributions to shareholders from:
Net investment income -- -- (424,155) --
Net realized gains on investments -- -- -- --
------------ ------------ ------------ ------------
Total distributions -- -- (424,155) --
------------ ------------ ------------ ------------
Capital share transactions:
Proceeds from shares sold 10,202,436 36,506,428 40,549,067 232,337,183
Reinvested distributions -- -- 372,107 --
Payments for shares redeemed (16,579,194) (48,759,036) (41,264,860) (246,748,641)
------------ ------------ ------------ ------------
Increase (decrease) in net assets from
capital share transactions (6,376,758) (12,252,608) (343,686) (14,411,458)
------------ ------------ ------------ ------------
Total increase (decrease) in net assets 22,093,106 (11,174,124) 9,253,797 (21,287,087)
Net assets
Beginning of period 170,172,536 181,346,660 48,533,251 69,820,338
------------ ------------ ------------ ------------
End of period $192,265,642 $170,172,536 $ 57,787,048 $ 48,533,251
============ ============ ============ ============
Net assets consist of:
Capital (par value and paid-in surplus) $222,647,644 $229,024,402 $ 92,031,929 $ 92,375,615
Undistributed (distributions in excess of) net
investment income (671,894) -- (24,321) 424,155
Accumulated net realized gain (loss) from
security transactions and foreign
currency transactions (62,935,287) (65,679,949) (35,667,167) (34,342,194)
Unrealized appreciation (depreciation) on investments 33,225,179 6,828,083 1,442,822 (9,925,181)
Unrealized appreciation (depreciation) on foreign
currency transactions -- -- 3,785 856
------------ ------------ ------------ ------------
$192,265,642 $170,172,536 $ 57,787,048 $ 48,533,251
============ ============ ============ ============
Capital transactions in shares:
Sold 1,158,188 5,098,620 4,206,726 26,277,940
Reinvested distributions -- -- 34,907 --
Redeemed (1,927,913) (6,920,288) (4,251,173) (27,581,341)
------------ ------------ ------------ ------------
Net increase (decrease) (769,725) (1,821,668) (9,540) (1,303,401)
============ ============ ============ ============
[WIDE TABLE CONTINUED BELOW]
[WIDE TABLE CONTINUED FROM ABOVE]
SMALL CAP
GROWTH FUND
---------------------------
SIX MONTHS
ENDED
DECEMBER 31, YEAR ENDED
2003 JUNE 30,
(UNAUDITED) 2003
------------ ------------
Operations:
Net investment income (loss) ($ 1,118,426) ($ 1,567,958)
Net realized gain (loss) on investments 3,325,059 (24,258,198)
Net change in unrealized appreciation
(depreciation) on investments 26,833,137 29,931,512
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 29,039,770 4,105,356
------------ ------------
Distributions to shareholders from:
Net investment income -- --
Net realized gains on investments -- --
------------ ------------
Total distributions -- --
------------ ------------
Capital share transactions:
Proceeds from shares sold 32,299,285 59,140,518
Reinvested distributions -- --
Payments for shares redeemed (25,049,217) (61,017,722)
------------ ------------
Increase (decrease) in net assets from
capital share transactions 7,250,068 (1,877,204)
------------ ------------
Total increase (decrease) in net assets 36,289,838 2,228,152
Net assets
Beginning of period 182,911,720 180,683,568
------------ ------------
End of period $219,201,558 $182,911,720
============ ============
Net assets consist of:
Capital (par value and paid-in surplus) $261,867,634 $254,617,566
Undistributed (distributions in excess of) net
investment income (1,118,426) --
Accumulated net realized gain (loss) from
security transactions and foreign
currency transactions (76,805,770) (80,130,829)
Unrealized appreciation (depreciation) on investments 35,258,120 8,424,983
Unrealized appreciation (depreciation) on foreign
currency transactions -- --
------------ ------------
$219,201,558 $182,911,720
============ ============
Capital transactions in shares:
Sold 1,366,448 3,132,916
Reinvested distributions -- --
Redeemed (1,059,937) (3,260,004)
------------ ------------
Net increase (decrease) 306,511 (127,088)
============ ============
See accompanying notes to financial statements on page 49.
47
SIT MUTUAL FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
SCIENCE AND
TECHNOLOGY DEVELOPING MARKETS
GROWTH FUND GROWTH FUND
---------------------------- ----------------------------
SIX MONTHS SIX MONTHS
ENDED ENDED
DECEMBER 31, YEAR ENDED DECEMBER 31, YEAR ENDED
2003 JUNE 30, 2003 JUNE 30,
(UNAUDITED) 2003 (UNAUDITED) 2003
------------ ------------ ------------ ------------
Operations:
Net investment income (loss) ($ 101,331) ($ 133,456) $ 13,107 $ 28,009
Net realized gain (loss) on investments (1,552,504) (5,718,058) 74,485 (692,664)
Net change in unrealized appreciation
(depreciation) on investments 4,279,983 6,706,666 2,182,562 684,551
Net realized gain (loss) on foreign currency transactions -- -- 273 (65)
Net change in unrealized appreciation (depreciation) on
foreign currency transactions -- -- 156 12
------------ ------------ ------------ ------------
Net increase (decrease) in net assets resulting from
operations 2,626,148 855,152 2,270,583 19,843
------------ ------------ ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income -- -- (49,000) --
Net realized gains on investments -- -- -- --
------------ ------------ ------------ ------------
Total distributions -- -- (49,000) --
------------ ------------ ------------ ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 3,369,365 5,517,587 9,993,947 37,920,464
Reinvested distributions -- -- 47,680 --
Payments for shares redeemed (3,160,970) (5,190,596) (11,762,688) (40,613,325)
------------ ------------ ------------ ------------
Increase (decrease) in net assets from
capital share transactions 208,395 326,991 (1,721,061) (2,692,861)
------------ ------------ ------------ ------------
Total increase (decrease) in net assets 2,834,543 1,182,143 500,522 (2,673,018)
NET ASSETS
Beginning of period 15,199,673 14,017,530 8,577,270 11,250,288
------------ ------------ ------------ ------------
End of period $ 18,034,216 $ 15,199,673 $ 9,077,792 $ 8,577,270
============ ============ ============ ============
NET ASSETS CONSIST OF:
Capital (par value and paid-in surplus) $ 38,495,874 $ 38,287,479 $ 10,524,055 $ 12,245,116
Undistributed (distributions in excess of) net
investment income (101,331) -- (7,949) 27,944
Accumulated net realized gain (loss) from
security transactions and foreign
currency transactions (21,969,513) (20,417,009) (3,491,825) (3,566,583)
Unrealized appreciation (depreciation) on investments 1,609,186 (2,670,797) 2,053,350 (129,212)
Unrealized appreciation (depreciation) on foreign
currency transactions -- -- 161 5
------------ ------------ ------------ ------------
$ 18,034,216 $ 15,199,673 $ 9,077,792 $ 8,577,270
============ ============ ============ ============
CAPITAL TRANSACTIONS IN SHARES:
Sold 380,501 772,939 1,131,337 5,153,943
Reinvested distributions -- -- 4,895 --
Redeemed (364,211) (749,462) (1,313,327) (5,486,325)
------------ ------------ ------------ ------------
Net increase (decrease) 16,290 23,477 (177,095) (332,382)
============ ============ ============ ============
See accompanying notes to financial statements on page 49.
48
SIT MUTUAL FUNDS
- --------------------------------------------------------------------------------
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 growth 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 Maximize long-term capital appreciation.
Growth Fund
- --------------------------------------------------------------------------------
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.
49
- -----------------------------------------------------------------------[GRAPHIC]
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 December 31, 2003, there were no securities held by the Funds
deemed illiquid by the 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.
50
- -----------------------------------------------------------------------[GRAPHIC]
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 3,566,582 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.
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.
51
- -----------------------------------------------------------------------[GRAPHIC]
SIT MUTUAL FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(2) INVESTMENT SECURITY TRANSACTIONS
Purchases of and proceeds from sales and maturities of investment
securities, other than short-term securities, for the period ended
December 31, 2003, were as follow:
Purchases ($) Proceeds ($)
------------- ------------
Balanced Fund 4,078,09 14,433,733
Large Cap Growth Fund 7,294,549 10,823,846
Mid Cap Growth Fund 61,033,988 68,958,933
International Growth Fund 13,817,966 14,203,927
Small Cap Growth Fund 57,720,859 45,051,186
Science and Technology Growth Fund 5,408,526 5,477,533
Developing Markets Growth Fund 1,136,344 2,472,928
(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:
Contractual Net of Adviser's
Management Fee Voluntary 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.
52
- -----------------------------------------------------------------------[GRAPHIC]
The Funds invest 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.
The Funds owned the following shares as of December 31, 2003:
Shares
------
Balanced Fund 461,000
Large Cap Growth Fund 421,000
Mid Cap Growth Fund 6,036,000
International Growth Fund 1,000
Small Cap Growth Fund 3,808,000
Science and Technology Growth Fund 172,000
Developing Markets Growth Fund 52,000
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 $207,258 were paid or payable to SKI for the
period ended December 31, 2003.
TRANSACTIONS WITH AFFILIATES
The investment adviser, affiliates of the investment adviser, directors and
officers of the Funds as a whole owned the following shares as of
December 31, 2003:
% Shares
Shares Outstanding
------ -----------
Balanced Fund 223,521 17.2
Large Cap Growth Fund 393,595 19.2
Mid Cap Growth Fund 2,898,674 14.3
International Growth Fund 624,164 12.1
Small Cap Growth Fund 950,997 10.9
Science and Technology Growth Fund 594,544 31.2
Developing Markets Growth Fund 158,120 18.0
53
SIT BALANCED FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Six Months
Ended
December 31, Years Ended June 30,
2003 -----------------------------------------------------
(Unaudited) 2003 2002 2001 2000
- --------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE:
Beginning of period $ 12.47 $ 12.29 $ 15.33 $ 19.18 $ 17.38
- --------------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (2) .11 .29 .36 .46 .40
Net realized and unrealized gains
(losses) on investments .97 .22 (3.01) (3.51) 2.51
- --------------------------------------------------------------------------------------------------------------------------------
Total from operations 1.08 .51 (2.65) (3.05) 2.91
- --------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (.17) (.33) (.38) (.48) (.37)
From realized gains -- -- (.01) (.32) (.74)
- --------------------------------------------------------------------------------------------------------------------------------
Total distributions (.17) (.33) (.39) (.80) (1.11)
- --------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE:
End of period $ 13.38 $ 12.47 $ 12.29 $ 15.33 $ 19.18
- --------------------------------------------------------------------------------------------------------------------------------
Total investment return (1) 8.73% 4.43% (17.62%) (16.39%) 17.28%
- --------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000's omitted) $ 17,377 $ 16,065 $ 17,825 $ 24,947 $ 19,304
RATIOS:
Expenses to average daily net assets 1.00%(3) 1.00% 1.00% 1.00% 1.00%
Net investment income to average daily net assets 1.69%(3) 2.54% 2.52% 2.89% 2.34%
Portfolio turnover rate (excluding short-term securities) 25.19% 48.86% 53.53% 63.32% 68.22%
- -----------
(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.
(3) Percentages for the period ended December 31, 2003 are adjusted to an
annual rate.
54
SIT LARGE CAP GROWTH FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Six Months
Ended
December 31, Years Ended June 30,
2003 -----------------------------------------------
(Unaudited) 2003 2002 2001 2000
- -----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE:
Beginning of period $ 26.92 $ 26.40 $ 38.99 $ 63.66 $ 52.84
- -----------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) (2) .01 .02 (.08) (.16) (.18)
Net realized and unrealized gains
(losses) on investments 3.28 .50 (12.17) (19.48) 14.41
- -----------------------------------------------------------------------------------------------------------------------------
Total from operations 3.29 .52 (12.25) (19.64) 14.23
- -----------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (.02) -- -- -- --
From realized gains -- -- (.34) (5.03) (3.41)
- -----------------------------------------------------------------------------------------------------------------------------
Total distributions (.02) -- (.34) (5.03) (3.41)
- -----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE:
End of period $ 30.21 $ 26.92 $ 26.40 $ 38.99 $ 63.66
- -----------------------------------------------------------------------------------------------------------------------------
Total investment return (1) 12.30% 1.97% (31.63%) (32.92%) 27.75%
- -----------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000's omitted) $ 61,866 $ 59,324 $ 63,839 $ 122,829 $ 172,400
RATIOS:
Expenses to average daily net assets 1.00%(3) 1.00% 1.00% 1.00% 1.00%
Net investment income (loss) to average daily net assets 0.05%(3) 0.08% (0.25%) (0.33%) (0.31%)
Portfolio turnover rate (excluding short-term securities) 12.27% 33.40% 34.74% 45.26% 48.95%
- -----------
(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.
(3) Percentages for the period ended December 31, 2003 are adjusted to an
annual rate.
See accompanying notes to financial statements on page 49.
55
SIT MID CAP GROWTH FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Six Months
Ended
December 31, Years Ended June 30,
2003 ---------------------------------------------------
(Unaudited) 2003 2002 2001 2000
- -------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE:
Beginning of period $ 8.06 $ 7.91 $ 12.37 $ 23.57 $ 14.54
- -------------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) (3) (.03) (.05) (.07) (.08) (.12)
Net realized and unrealized gains
(losses) on investments 1.43 .20 (4.16) (7.05) 10.38
- -------------------------------------------------------------------------------------------------------------------------------
Total from operations 1.40 .15 (4.23) (7.13) 10.26
- -------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income -- -- -- -- --
From realized gains -- -- (.23) (4.07) (1.23)
- -------------------------------------------------------------------------------------------------------------------------------
Total distributions -- -- (.23) (4.07) (1.23)
- -------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE:
End of period $ 9.46 $ 8.06 $ 7.91 $ 12.37 $ 23.57
- -------------------------------------------------------------------------------------------------------------------------------
Total investment return (1) 17.37% 1.90% (34.66%) (35.21%) 73.01%
- -------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000's omitted) $192,266 $170,173 $181,347 $360,037 $566,639
RATIOS:
Expenses to average daily net assets 1.15%(2) 1.15%(2) 1.15%(2) 1.06%(2) 1.00%(2)
Net investment income (loss) to average daily net assets (0.73%)(2) (0.73%)(2) (0.79%)(2) (0.49%)(2) (0.58%)(2)
Portfolio turnover rate (excluding short-term securities) 40.60% 53.19% 60.88% 56.21% 62.21%
- -----------
(1) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value.
(2) Percentages for the period ended December 31, 2003 are adjusted to an
annual rate. Total Fund expenses are contractually limited to 1.25% of
average daily net assets. However, during the period ended December 31,
2003, and the years ended June 30, 2003, 2002, 2001, and 2000, 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%), (0.83%), (0.89%), (0.68%), and
(0.83%), respectively.
(3) The net investment income (loss) per share is based on average shares
outstanding for the period.
56
SIT INTERNATIONAL GROWTH FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Six Months
Ended
December 31, Years Ended June 30,
2003 --------------------------------------------------
(Unaudited) 2003 2002 2001 2000
- -----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE:
Beginning of period $ 9.39 $ 10.79 $ 14.61 $ 23.58 $ 18.77
- -----------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) (3) .00 .07 (.03) (.03) (.04)
Net realized and unrealized gains
(losses) on investments 1.89 (1.47) (3.79) (8.42) 6.36
- -----------------------------------------------------------------------------------------------------------------------------
Total from operations 1.89 (1.40) (3.82) (8.45) 6.32
- -----------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (.08) -- -- -- (.23)
From realized gains -- -- -- (.52) (1.28)
- -----------------------------------------------------------------------------------------------------------------------------
Total distributions (.08) -- -- (.52) (1.51)
- -----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE:
End of period $ 11.20 $ 9.39 $ 10.79 $ 14.61 $ 23.58
- -----------------------------------------------------------------------------------------------------------------------------
Total investment return (1) 20.20% (12.97%) (26.15%) (36.43%) 33.38%
- -----------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000's omitted) $ 57,787 $ 48,533 $ 69,820 $123,085 $167,909
RATIOS:
Expenses to average daily net assets 1.50%(2) 1.50%(2) 1.50%(2) 1.50%(2) 1.50%(2)
Net investment income (loss) to average daily net assets (0.09%)(2) 0.81%(2) (0.22%)(2) (0.20%)(2) (0.40%)(2)
Portfolio turnover rate (excluding short-term securities) 26.59% 21.02% 25.78% 25.22% 30.61%
- -----------
(1) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value.
(2) Percentages for the period ended December 31, 2003 are adjusted to an
annual rate. Total Fund expenses are contractually limited to 1.85% of
average daily net assets. However, during the period ended December 31,
2003 and the years ended June 30, 2003, 2002, 2001, and 2000, 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 (.44%), 0.46%, (0.57%), (0.55%), and
(0.75%), 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 49.
57
SIT SMALL CAP GROWTH FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Six Months
Ended
December 31, Years Ended June 30,
2003 ---------------------------------------------
(Unaudited) 2003 2002 2001 2000
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE:
Beginning of period $ 21.64 $ 21.06 $ 28.99 $ 41.35 $ 18.28
- -------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) (2) (.13) (.18) (.24) (.13) (.18)
Net realized and unrealized gains
(losses) on investments 3.52 .76 (7.65) (11.65) 23.25
- -------------------------------------------------------------------------------------------------------------------------
Total from operations 3.39 .58 (7.89) (11.78) 23.07
- -------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From realized gains -- -- (.04) (.58) --
- -------------------------------------------------------------------------------------------------------------------------
Total distributions -- -- (.04) (.58) --
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE:
End of period $ 25.03 $ 21.64 $ 21.06 $ 28.99 $ 41.35
- -------------------------------------------------------------------------------------------------------------------------
Total investment return (1) 15.67% 2.75% (27.24%) (28.79%) 126.20%
- -------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000's omitted) $ 219,202 $ 182,912 $ 180,684 $ 227,888 $ 190,630
RATIOS:
Expenses to average daily net assets 1.50%(3) 1.50% 1.50% 1.50% 1.50%
Net investment income (loss) to average daily net assets (1.08%)(3) (1.00%) (0.99%) (0.41%) (0.83%)
Portfolio turnover rate (excluding short-term securities) 23.22% 59.98% 65.25% 39.91% 39.31%
- -----------
(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.
(3) Percentages for the period ended December 31, 2003 are adjusted to an
annual rate.
58
SIT SCIENCE AND TECHNOLOGY GROWTH FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Six Months
Ended
December 31, Years Ended June 30,
2003 ------------------------------------------------------
(Unaudited) 2003 2002 2001 2000
- -------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE:
Beginning of period $ 8.05 $ 7.52 $ 15.23 $ 33.38 $ 15.23
- -------------------------------------------------------------------------------------------------------------------------------
Operations:
Net investment income (loss) (3) (.05) (.07) (.12) (.19) (.17)
Net realized and unrealized gains
(losses) on investments 1.47 .60 (7.58) (17.10) 18.32
- -------------------------------------------------------------------------------------------------------------------------------
Total from operations 1.42 .53 (7.70) (17.29) 18.15
- -------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income -- -- -- -- --
From realized gains -- -- (.01) (.86) --
- -------------------------------------------------------------------------------------------------------------------------------
Total distributions -- -- (.01) (.86) --
- -------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE:
End of period $ 9.47 $ 8.05 $ 7.52 $ 15.23 $ 33.38
- -------------------------------------------------------------------------------------------------------------------------------
Total investment return (1) 17.64% 7.05% (50.57%) (52.96%) 119.17%
- -------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000's omitted) $ 18,034 $ 15,200 $ 14,018 $ 30,453 $ 46,173
RATIOS:
Expenses to average daily net assets 1.35%(2) 1.35%(2) 1.35%(2) 1.29%(2) 1.25%(2)
Net investment income (loss) to average net assets (1.19%)(2) (1.05%)(2) (1.06%)(2) (0.94%)(2) (0.86%)(2)
Portfolio turnover rate (excluding short-term securities) 33.01% 49.67% 76.78% 34.59% 29.60%
- -----------
(1) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value.
(2) Percentages for the period ended December 31, 2003 are adjusted to an
annual rate. Total Fund expenses are contractually limited to 1.50% of
average daily net assets. However, during the period ended December 31,
2003 and the years ended June 30, 2003, 2002, 2001, and 2000, 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 (1.34%), (1.20%), (1.21%), (1.15%), and
(1.11%), 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 49.
59
SIT DEVELOPING MARKETS GROWTH FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Six Months
Ended
December 31, Years Ended June 30,
2003 ---------------------------------------------
(Unaudited) 2003 2002 2001 2000
- ------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE:
Beginning of period $ 8.12 $ 8.10 $ 9.17 $ 13.43 $ 9.98
- ------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) (2) .01 .02 (.02) -- (.06)
Net realized and unrealized gains
(losses) on investments 2.19 -- (1.05) (4.26) 3.51
- ------------------------------------------------------------------------------------------------------------------------
Total from operations 2.20 .02 (1.07) (4.26) 3.45
- ------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (.05) -- -- -- --
From realized gains -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------
Total distributions -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE:
End of period $ 10.32 $ 8.12 $ 8.10 $ 9.17 $ 13.43
- ------------------------------------------------------------------------------------------------------------------------
Total investment return (1) 27.81% 0.25% (11.66%) (31.72%) 34.57%
- ------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000's omitted) $ 9,078 $ 8,577 $ 11,250 $ 13,877 $ 14,676
RATIOS:
Expenses to average daily net assets 2.00%(3) 2.00% 2.00% 2.00% 2.00%
Net investment income (loss) to average daily net assets 0.28%(3) 0.31% (0.20%) 0.02% (0.55%)
Portfolio turnover rate (excluding short-term securities) 12.93% 6.61% 25.40% 21.87% 48.39%
- -----------
(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.
(3) Percentages for the period ended December 31, 2003 are adjusted to an
annual rate.
See accompanying notes to financial statements on page 49.
60
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This page has been left blank intentionally.
61
RESULTS OF SHAREHOLDER MEETING
- --------------------------------------------------------------------------------
The annual meeting of the shareholders of the Funds was held on October 20,
2003. Directors elected by the shareholders were as follows: Eugene C. Sit,
William E. Frenzel, John E. Hulse, Sidney L. Jones, Bruce C. Lueck, and Donald
W. Phillips. The matters voted on by the shareholders of record as of August 21,
2003 and results of the shareholders' vote at the October 20, 2003 meeting were
as follows:
PROPOSAL ONE: ELECTION OF DIRECTORS
- --------------------------------------------------------------------------------
SIT JONES FRENZEL LUECK
--- ----- ------- -----
SMALL CAP GROWTH
For 6,972,042.277 7,051,201.822 6,962,702.858 7,055,937.425
Against 176,580.979 97,421.434 185,920.398 92,685.831
Abstain 0.000 0.000 0.000 0.000
MID CAP GROWTH
For 12,369,997.310 12,648,439.426 12,369,114.289 12,656,333.821
Against 467,278.469 188,836.353 468,161.490 180,941.958
Abstain 0.000 0.000 0.000 0.000
LARGE CAP GROWTH
For 1,395,078.700 1,436,697.097 1,394,906.766 1,436,379.684
Against 47,921.157 6,302.760 48,093.091 6,620.173
Abstain 0.000 0.000 0.000 0.000
SCIENCE & TECHNOLOGY
For 1,270,884.211 1,268,488.551 1,268,619.034 1,270,401.035
Against 7,496.934 9,892.594 9,762.111 7,980.111
Abstain 0.000 0.000 0.000 0.000
INTERNATIONAL GROWTH
For 2,452,260.729 2,600,125.301 2,451,686.251 2,601,126.763
Against 162,026.923 14,162.351 162,601.401 13,160.889
Abstain 0.000 0.000 0.000 0.000
DEVELOPING MARKETS
For 818,094.798 819,344.397 819,121.725 822,878.075
Against 17,993.259 16,743.660 16,966.332 13,209.982
Abstain 0.000 0.000 0.000 0.000
BALANCED
For 925,909.665 922,900.279 921,219.903 927,685.565
Against 8,509.299 11,518.685 13,199.061 6,733.399
Abstain 0.000 0.000 0.000 0.000
62
- -----------------------------------------------------------------------[GRAPHIC]
PROPOSAL TWO: RATIFY KPMG LLP AS THE
FUNDS' AUDITORS
- ------------------------------ --------------------------------------
HULSE PHILLIPS
SMALL CAP GROWTH
7,053,277.679 7,055,886.078 For 7,032,032.295
95,345.577 92,737.178 Against 69,949.604
0.000 0.000 Abstain 46,641.357
MID CAP GROWTH
12,662,206.201 12,643,874.141 For 12,653,041.101
175,069.578 193,401.638 Against 70,586.220
0.000 0.000 Abstain 113,648.458
LARGE CAP GROWTH
1,436,697.097 1,436,379.684 For 1,433,671.930
6,302.760 6,620.173 Against 6,988.677
0.000 0.000 Abstain 2,339.250
SCIENCE & TECHNOLOGY
1,268,916.034 1,270,319.035 For 1,269,412.583
9,465.111 8,062.110 Against 7,064.920
0.000 0.000 Abstain 1,903.642
INTERNATIONAL GROWTH
2,600,125.301 2,601,126.763 For 2,599,313.567
14,162.351 13,160.889 Against 9,567.266
0.000 0.000 Abstain 5,406.819
DEVELOPING MARKETS
819,344.394 820,597.772 For 827,173.475
16,743.660 15,490.285 Against 3,674.268
0.000 0.000 Abstain 5,240.314
BALANCED
927,685.565 927,685.565 For 928,071.985
6,733.399 6,733.399 Against 155.083
0.000 0.000 Abstain 6,191.896
63
SIT MUTUAL FUNDS
- --------------------------------------------------------------------------------
A LOOK AT 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
$6.3 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
64
SEMI-ANNUAL REPORT STOCK FUNDS
Six Months Ended December 31, 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
50 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. Not applicable to Semi-Annual Report.
Item 3: Audit Committee Financial Expert. Not applicable to Semi-Annual Report.
Item 4: Principal Accountant Fees and Services - Not applicable to this
Semi-Annual Report
Item 5: Audit Committee of Listed Registrants. Not applicable to Semi-Annual
Report.
Item 6: Reserved.
Item 7: Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
- Not applicable
Item 8: Reserved.
Item 9: Submission of Matters to a Vote of Security Holders.
- Not applicable
Item 10: 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 11: Exhibits:
(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 to
Semi-Annual Report.
(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). Attached hereto as part of EX-99.CERT.
(c) Certification pursuant to Section 906 of the Sarbanes-Oxley Act. Attached
hereto as part of Ex-99.906CERT.
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.
- ----------------------
By (Signature and Title)* /s/ Paul E. Rasmussen
----------------------------
Paul E. Rasmussen
Vice President Treasurer
Date February 25, 2004
-----------------
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 February 25, 2004
-----------------
Item 2: Code of Ethics. Not applicable to Semi-Annual Report.
Item 3: Audit Committee Financial Expert. Not applicable to Semi-Annual Report.
Item 4: Principal Accountant Fees and Services - Not applicable to this
Semi-Annual Report
Item 5: Audit Committee of Listed Registrants. Not applicable to Semi-Annual
Report.
Item 6: Reserved.
Item 7: Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
- Not applicable
Item 8: Reserved.
Item 9: Submission of Matters to a Vote of Security Holders.
- Not applicable
Item 10: 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 11: Exhibits:
(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 to
Semi-Annual Report.
(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). Attached hereto as part of EX-99.CERT.
(c) Certification pursuant to Section 906 of the Sarbanes-Oxley Act. Attached
hereto as part of Ex-99.906CERT.
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 Large Cap Growth Fund, INC.
- -------------------------------
By (Signature and Title)* /s/ Paul E. Rasmussen
----------------------------
Paul E. Rasmussen
Vice President Treasurer
Date February 25, 2004
-----------------
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 Large Cap Growth Fund, INC.
By (Signature and Title)* /s/ Eugene C. Sit
------------------------
Eugene C. Sit
Chairman
Date February 25, 2004
---------------------------------------------
Item 2: Code of Ethics. Not applicable to Semi-Annual Report.
Item 3: Audit Committee Financial Expert. Not applicable to Semi-Annual Report.
Item 4: Principal Accountant Fees and Services - Not applicable to this
Semi-Annual Report
Item 5: Audit Committee of Listed Registrants. Not applicable to Semi-Annual
Report.
Item 6: Reserved.
Item 7: Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
- Not applicable
Item 8: Reserved.
Item 9: Submission of Matters to a Vote of Security Holders.
- Not applicable
Item 10: 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 11: Exhibits:
(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 to
Semi-Annual Report.
(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). Attached hereto as part of EX-99.CERT.
(c) Certification pursuant to Section 906 of the Sarbanes-Oxley Act. Attached
hereto as part of Ex-99.906CERT.
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 Mid Cap Growth Fund, INC.
- -----------------------------
By (Signature and Title)* /s/ Paul E. Rasmussen
----------------------------
Paul E. Rasmussen
Vice President Treasurer
Date February 25, 2004
-----------------
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 Mid Cap Growth Fund, INC.
By (Signature and Title)* /s/ Eugene C. Sit
-----------------
Eugene C. Sit
Chairman
Date February 25, 2004
-----------------