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)
80 South Eighth Street
3300 IDS Center
Minneapolis, MN 55402
(Address of principal executive offices)
Paul E. Rasmussen, VP Treasurer
Sit Mutual Funds, Inc.
80 South Eighth Street
3300 IDS Center
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, 2005
Date of reporting period: December 31, 2004
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)
80 South Eighth Street
3300 IDS Center
Minneapolis, MN 55402
(Address of principal executive offices)
Paul E. Rasmussen, VP Treasurer
Sit Mutual Funds, Inc.
80 South Eighth Street
3300 IDS Center
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, 2005
Date of reporting period: December 31, 2004
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: 811-06373
---------
Sit Mutual Funds, Inc.
(Exact name of registrant as specified in charter)
80 South Eighth Street
3300 IDS Center
Minneapolis, MN 55402
(Address of principal executive offices)
Paul E. Rasmussen, VP Treasurer
Sit Mutual Funds, Inc.
80 South Eighth Street
3300 IDS Center
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, 2005
Date of reporting period: December 31, 2004
Item 1: Reports to Stockholders
SIT MUTUAL FUNDS
STOCK FUNDS
SEMI-ANNUAL REPORT
YEAR ENDED DECEMBER 31, 2004
A FAMILY OF NO-LOAD FUNDS
-------------------------
BALANCED FUND
DIVIDEND GROWTH 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
S I T M U T U A L F U N D S
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
Dividend Growth Fund 14
Large Cap Growth Fund 18
Mid Cap Growth Fund 22
International Growth Fund 26
Small Cap Growth Fund 30
Science and Technology Growth Fund 34
Developing Markets Growth Fund 38
Notes to Portfolios of Investments 42
Statements of Assets and Liabilities 44
Statements of Operations 46
Statements of Changes in Net Assets 48
Notes to Financial Statements 52
Financial Highlights 58
Expense Example 66
Additional Information 69
Results of Shareholder Meeting 70
A Look at Sit Mutual Funds 72
1
SIT MUTUAL FUNDS
SIX MONTHS ENDED DECEMBER 31, 2004
- --------------------------------------------------------------------------------
CHAIRMAN'S LETTER
Dear Fellow Shareholders:
U.S. stocks surged ahead during the final two months of 2004, rewarding
investors with a solid return for the full year. We believe further gains for
equities lie ahead in 2005, particularly for growth stocks, as the equity market
and economy appear to have solid momentum to begin the new year.
ECONOMIC OVERVIEW
Despite formidable headwinds in 2004, particularly the ongoing conflict in Iraq,
global terrorism and increasing oil prices, U.S. gross domestic product (GDP)
grew at a robust +4.5% for the year. The stimulative effects of tax cuts buoyed
both consumer and business spending, and low interest rates contributed to yet
another year of strength in the housing sector. Our projections call for
somewhat slower GDP growth in 2005 in the range of +3.5% to +4.0%, with this
moderation largely reflecting the normal maturation of the business cycle.
Importantly, the economy appears to be entering 2005 with solid momentum. Data
from the Institute for Supply Management (ISM) for December on manufacturing and
non-manufacturing sectors were better than expected, while consumer spending
also surpassed expectations. We expect consumer spending to remain relatively
strong in 2005, even as the stimulus of the Administration's tax measures
diminish, as the improving trend in labor markets becomes the key driver. We
also expect sustained growth in business spending, driven by both record levels
of corporate profitability and cash-rich balance sheets prevailing throughout
most of corporate America.
The Consumer Price Index (CPI) rose approximately +2.7% in 2004, indicating that
inflation remained remarkably subdued despite robust economic growth, rising
commodity prices, a strengthening labor market and a weak U.S. dollar (which
drives up the cost of exports). We suspect, however, that the lagged impact from
some of these factors may result in a slightly higher CPI gain in 2005. The
potential for higher inflation was a key factor behind the five Federal Reserve
interest rate hikes during the second half of 2004, and we believe similar
increases are likely in 2005. Specifically, we are forecasting the federal funds
rate to reach 3.5% to 4% by year-end, up from 2.25% at the close of 2004.
In terms of fiscal policy, President Bush begins his second term with an
ambitious agenda, which includes such issues as social security reform, tort
reform, an income tax code overhaul and reduced regulation of businesses. These
are complicated and controversial issues that will clearly test the President's
leadership skills in the months ahead. The news so far on the 2005 fiscal
deficit is reasonably positive, with the cumulative three-month deficit about
$11.5 billion better than a year ago. Encouragingly, tax receipts have grown
much faster than outlays in recent months, and we expect a modest improvement in
the deficit for fiscal year 2005.
We project global economic growth of +3% in 2005, with solid growth in the U.S.
and most Asian regions offset by continued sluggish growth in Europe and Japan.
The slow growth environment in Europe is being exacerbated by the strength of
the European currency relative to the U.S. dollar, which is having a negative
impact on export sectors. The strengthening yen is having a similar impact in
Japan. The headwind from a weakening U.S. dollar is likely to remain in place
over the near-term, as our currency continues to be impacted by the lack of a
clear-cut U.S. dollar policy amid the substantial dual deficits. Conversely,
economic growth in China is expected to remain robust, with GDP growth of +8%,
as policy officials appear to have taken appropriate steps to engineer a soft
landing.
EQUITY STRATEGY SUMMARY
After struggling to gain ground through most of 2004, a strong year-end rally
helped propel domestic equities sol-
2
idly higher for the year. Improving valuations, a drop in oil prices, the
absence of a domestic terrorist event and a decisive outcome to the presidential
election were among the factors contributing to the positive environment
experienced over the final two months of 2004.
After two strong recovery years following the bear market bottom in 2002, we
believe valuations for equities are reasonable. Overall, we anticipate that
equity returns are likely to reflect the mid- to high- single digit projected
gains in corporate profits in 2005. There are always opportunities, however, for
outperformance in a given economic/ market environment. With relative valuations
for growth and value stocks now at their historical norms, we believe, in an
environment of decelerating momentum, earnings growth will prove to be the
differentiating factor favoring the growth style in 2005. Based on our
projections, the holdings within all Sit Funds' equity portfolios exhibit
substantially higher earnings growth relative to both comparable core and value
indices. Based on the outlook for strong earnings, our principal sector
overweights are in electronic technology, energy, health care and technology
services. Conversely, the prospect of rising rates is expected to limit gains in
the utility and finance sectors, which remain underweighted.
While the strong 2003 equity market was characterized by a sharp rally in lower
quality, higher risk stocks (i.e., those with poor balance sheets, low stock
prices, high beta), this trend reversed in 2004 as investors appropriately
focused on valuations and business fundamentals. As interest rates are likely to
climb higher and the economic expansion matures, we believe investors will place
a greater emphasis on higher quality stocks with long-term earnings and dividend
growth potential. This ongoing rotation will favor the types of companies
emphasized in the Funds. On the subject of dividends, the change in dividend
taxation combined with strong corporate profitability propelled significant
dividend increases throughout the equity market in 2004. We expect this trend to
continue in the year ahead. The fact that both corporations and investors are
increasing their focus on the importance of dividends makes us optimistic on the
longer-term prospects for the Sit Dividend Growth Fund, which recently completed
its successful first year.
We believe the risk/reward potential for global equities remains favorable over
the intermediate term. Solid economic growth, ample financial liquidity and
reasonable valuations provide the foundation for positive returns in the year
ahead. Our recent changes in regional allocations generally reflect our
assessment of the respective economic outlooks. While we are maintaining an
overweighted position in Asia based on favorable growth prospects, we have
recently reduced the allocation to Japan owing to the significant slowing in
economic activity. Similarly, while we remain optimistic that structural reform
measures will eventually take hold in Europe, our underweight in the region
reflects the sluggish near-term growth outlook. Growth stocks continue to look
attractive on a global basis, due to valuations and improving relative growth
earnings growth rates, in the context of slightly lower economic growth in 2005
compared to 2004.
With best wishes,
/s/ Eugene C. Sit
Eugene C. Sit, CFA
Chairman and Chief Investment Officer
3
SIT MUTUAL FUNDS
SIX MONTHS ENDED DECEMBER 31, 2004
- --------------------------------------------------------------------------------
PERFORMANCE SUMMARY AND STOCK FUNDS MARKET REVIEW
Domestic equity returns were strong across the board over the past six
months, as every major index we follow posted a positive return.
Once again, small- and mid-capitalization stocks continued their strong
performance relative to larger issues. Over the past six months, the S&P 400
MidCap Index and the Russell 2000 Index rose +9.8% and +10.8%, respectively,
while the S&P 500 Index gained +7.2%. In fact, 2004 marked the fifth consecutive
year that the Russell 2000 Index outperformed the S&P 500 Index. Although growth
stocks outperformed value issues during the market rally near the end of the
year, growth lagged value over the full six-month period across all
capitalization styles. For example, the Russell 1000 Growth Index rose +3.5%
over the period, while the Russell 1000 Value gained +12.1%, and the Russell
2000 Value Index (+13.4%) outperformed the Russell 2000 Growth (+8.2%) by over
five percentage points.
In terms of sector performance, sixteen of eighteen groups we monitor
within the S&P 500 Index posted a positive return in the second half of 2004.
Within the S&P 500 Index, the strongest sectors included utilities, finance,
energy minerals and communications. We estimate that each of these sectors
provided a return of 15% or more over the period. The laggards during the period
include health technology (-3%), which was weighed down by large drug stocks,
and the electronic technology sector (-1%), which was impacted by weak
performance in the semiconductor industry. The relative underperformance of the
technology sector was the primary factor that the NASDAQ OTC Composite Index,
which rose +6.2% for the six-month period, lagged the return for the S&P 500
Index.
Within the MSCI global indices, the broad U.S. stock marked fared
relatively poorly in international comparisons, in part due to the weakness of
the U.S. dollar. The MSCI World Index gained +10.8% over the six-month period,
with the U.S. component up only +7.1%. The MSCI Europe Index increased +17.3%
over the period. The MSCI Pacific Index rose 10.0%, while the Japan component
increased +4.6%.
TOTAL RETURN - CALENDAR YEAR
1992 1993 1994
------ ------ -------
SIT BALANCED -- -- -0.33%
- --------------------------------------------------------------------------------
SIT DIVIDEND GROWTH FUND -- -- --
- --------------------------------------------------------------------------------
SIT LARGE CAP GROWTH 4.94% 3.15% 2.83
- --------------------------------------------------------------------------------
SIT MID CAP GROWTH(1) -2.14 8.55 -0.47
- --------------------------------------------------------------------------------
SIT INTERNATIONAL GROWTH(2) 2.69 48.37 -2.99
- --------------------------------------------------------------------------------
SIT SMALL CAP GROWTH(1) -- -- 11.57(4)
- --------------------------------------------------------------------------------
SIT SCIENCE AND TECHNOLOGY GROWTH(3) -- -- --
- --------------------------------------------------------------------------------
SIT DEVELOPING MARKETS GROWTH(2) -- -- -2.02(4)
- --------------------------------------------------------------------------------
S&P 500 INDEX -7.64 10.07 1.32
S&P MIDCAP 400 INDEX 11.92 13.95 -3.60
MSCI EAFE INDEX -12.17 32.56 7.78
RUSSELL 2000 INDEX -- -- 4.61
MSCI EMERGING MARKETS INDEX -- -- 2.80
NASDAQ
SYMBOL INCEPTION
------ ---------
SIT BALANCED SIBAX 12/31/93
- --------------------------------------------------------------------------------
DIVIDEND GROWTH FUND SDVGX 12/31/03
- --------------------------------------------------------------------------------
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 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
TOTAL RETURN - CALENDAR YEAR
YTD
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
- ------------------------------------------------------------------------------------------------------------------------------------
25.43% 15.80% 21.73% 21.30% 20.15% -4.80% -12.99% -18.59% 19.20% 9.22%
- ------------------------------------------------------------------------------------------------------------------------------------
-- -- -- -- -- -- -- -- -- 10.91
- ------------------------------------------------------------------------------------------------------------------------------------
31.66 23.05 31.70 30.56 33.41 -13.84 -27.70 -30.58 26.34 12.79
- ------------------------------------------------------------------------------------------------------------------------------------
33.64 21.87 17.70 6.84 70.65 -4.35 -33.39 -34.64 38.51 17.02
- ------------------------------------------------------------------------------------------------------------------------------------
9.36 10.31 4.81 18.95 50.77 -26.66 -33.26 -29.84 28.70 12.97
- ------------------------------------------------------------------------------------------------------------------------------------
52.16 14.97 7.63 1.97 108.63 6.25 -28.19 -26.22 34.57 6.79
- ------------------------------------------------------------------------------------------------------------------------------------
-- -- -- 38.40 85.98 -6.55 -47.78 -44.45 40.09 7.39
- ------------------------------------------------------------------------------------------------------------------------------------
- -4.29 17.27 -5.20 -24.93 82.50 -30.18 -12.01 -18.37 45.96 16.54
- ------------------------------------------------------------------------------------------------------------------------------------
37.58 22.96 33.36 28.58 21.04 -9.11 -11.88 -22.10 28.68 10.88
30.94 19.19 32.29 19.11 14.72 17.50 -0.61 -14.52 35.62 16.48
11.21 6.05 1.78 20.00 26.96 -14.17 -21.44 -15.94 38.59 20.25
28.45 16.49 22.36 -2.54 21.26 -3.02 2.49 -20.48 47.25 18.33
- -6.94 3.92 -13.40 -27.52 63.70 -31.80 -4.91 -7.97 51.59 22.45
AVERAGE ANNUAL TOTAL RETURNS FOR THE
TOTAL RETURN PERIODS ENDED DECEMBER 31, 2004
QUARTER SIX MONTHS SINCE
ENDED 12/31/04 ENDED 12/31/04 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION
6.35% 5.53% 9.22% 1.96% -2.57% 8.51% 7.67%
- -------------------------------------------------------------------------------------------------------------
7.72 9.00 10.91 -- -- -- 10.91*
- -------------------------------------------------------------------------------------------------------------
9.52 6.61 12.79 -0.36 -9.23 8.64 11.19
- -------------------------------------------------------------------------------------------------------------
14.72 8.21 17.02 1.94 -7.56 8.96 13.76
- -------------------------------------------------------------------------------------------------------------
14.09 12.57 12.97 0.66 -12.97 1.25 4.30
- -------------------------------------------------------------------------------------------------------------
12.59 5.69 6.79 1.97 -4.15 12.48 13.00
- -------------------------------------------------------------------------------------------------------------
13.00 1.50 7.39 -5.81 -16.42 -- 0.69
- -------------------------------------------------------------------------------------------------------------
13.67 21.60 16.54 11.56 -3.13 2.20 1.90
- -------------------------------------------------------------------------------------------------------------
9.23 7.19 10.88 3.59 -2.30 12.07 13.94
12.16 9.80 16.48 10.53 9.54 16.10 16.63
15.32 15.00 20.25 11.89 -1.13 5.62 6.07
14.10 10.83 18.33 11.48 6.61 11.54 11.42
16.81 25.44 22.45 19.54 2.07 0.96 1.18
(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.
(*) FUND'S INCEPTION DATE WAS DECEMBER 31, 2003.
5
SIT MUTUAL FUNDS
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDED DECEMBER 31, 2004
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, 2004. 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 9.2% -2.6% 8.5%
Return After Taxes on Distributions 8.7% -3.5% 7.1%
Return After Taxes on Distributions and Sale of Fund Shares 7.6% -2.7% 6.8%
Lehman Aggregate Bond Index 4.3% 7.7% 7.7%
S&P 500 Index 10.9% -2.3% 12.1%
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
DIVIDEND GROWTH FUND 1 YEAR 5 YEARS SINCE INCEPTION*
Return Before Taxes 10.9% n/a 10.9%
Return After Taxes on Distributions 10.7% n/a 10.7%
Return After Taxes on Distributions and Sale of Fund Shares 9.2% n/a 9.2%
S&P 500 Index 10.9% n/a 10.9%
- -------------------------------------------------------------------------------------------------
*Inception date 12/31/03.
- -------------------------------------------------------------------------------------------------
SIT LARGE CAP GROWTH FUND 1 YEAR 5 YEARS 10 YEARS
Return Before Taxes 12.8% -9.2% 8.6%
Return After Taxes on Distributions 12.7% -9.6% 7.4%
Return After Taxes on Distributions and Sale of Fund Shares 10.9% -7.6% 7.3%
S&P 500 Index 10.9% -2.3% 12.1%
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
SIT MID CAP GROWTH FUND 1 YEAR 5 YEARS 10 YEARS
Return Before Taxes 17.0% -7.6% 9.0%
Return After Taxes on Distributions 17.0% -8.4% 6.9%
Return After Taxes on Distributions and Sale of Fund Shares 14.5% -6.2% 7.2%
S&P MidCap 400 Index 16.5% 9.5% 16.1%
- -------------------------------------------------------------------------------------------------
6
- -------------------------------------------------------------------------------------------------
SIT INTERNATIONAL GROWTH FUND 1 YEAR 5 YEARS 10 YEARS
Return Before Taxes 13.0% -13.0% 1.3%
Return After Taxes on Distributions 12.9% -13.1% 0.5%
Return After Taxes on Distributions and Sale of Fund Shares 11.0% -10.5% 0.9%
MSCI EAFE Index 20.3% -1.1% 5.6%
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
SIT SMALL CAP GROWTH FUND 1 YEAR 5 YEARS 10 YEARS
Return Before Taxes 6.8% -4.2% 12.5%
Return After Taxes on Distributions 6.8% -4.2% 11.8%
Return After Taxes on Distributions and Sale of Fund Shares 5.8% -3.5% 10.8%
Russell 2000 Index 18.3% 6.6% 11.5%
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
SIT SCIENCE AND TECHNOLOGY GROWTH FUND 1 YEAR 5 YEARS SINCE INCEPTION*
Return Before Taxes 7.4% -16.4% 0.7%
Return After Taxes on Distributions 7.4% -16.5% 0.6%
Return After Taxes on Distributions and Sale of Fund Shares 6.3% -13.0% 0.7%
S&P 500 Index 10.9% -2.3% 4.8%
- -------------------------------------------------------------------------------------------------
*Inception date 12/31/97.
- -------------------------------------------------------------------------------------------------
SIT DEVELOPING MARKETS GROWTH FUND 1 YEAR 5 YEARS 10 YEARS
Return Before Taxes 16.5% -3.1% 2.2%
Return After Taxes on Distributions 16.5% -3.2% 2.2%
Return After Taxes on Distributions and Sale of Fund Shares 14.1% -2.6% 1.9%
MSCI Emerging Markets Free Index 22.5% 2.1% 1.0%
- -------------------------------------------------------------------------------------------------
7
SIT BALANCED FUND
SIX MONTHS ENDED DECEMBER 31, 2004
- --------------------------------------------------------------------------------
PETER L. MITCHELSON, CFA, SENIOR PORTFOLIO MANAGER
BRYCE A. DOTY, CFA, SENIOR PORTFOLIO MANAGER
The Sit Balanced Fund's six-month return was +5.53%, with much of the gain
coming on the heels of the strong equity market rebound experienced at the end
of 2004. The S&P 500 Index return was +7.19% over the period, while the Lehman
Aggregate Bond Index increased +4.18%. For the calendar year 2004, the Fund
returned +9.22%, while the S&P 500 Index and the Lehman Aggregate Bond Index
gained +10.88% and +4.34%, respectively.
U.S. stocks came alive in the fourth quarter after muted performance during
the first ten months of 2004. While the decisive conclusion to the presidential
election was the catalyst for the sharp improvement in investor sentiment,
market fundamentals (e.g., valuations, falling oil prices, strong corporate
earnings) also played a key role. Looking ahead, we expect "more of the same" in
2005. Valuations for stocks appear relatively attractive compared to interest
rates, and we expect the U.S. economy to continue on the path of steady
expansion, although 2005 GDP growth may be somewhat below the sharp gain in
2004. In this environment of somewhat slower corporate earnings growth, with
further support from attractive valuations, we believe a positive backdrop for
growth stocks exists as we begin the new year. The most heavily weighted sectors
in the Fund are health technology, electronic technology and finance.
Fixed-income returns in 2004, while modest, were quite impressive in the
context of five interest rate increases by the Federal Reserve. We believe that
more increases are coming in 2005 and, therefore, our view is that a defensive
positioning within the fixed-income portion of the Fund is appropriate. This
strategy includes focusing on securities with high relative yields while
maintaining a shorter-than-benchmark duration, which we believe will cushion the
portfolio against the expected increase in interest rates.
As of December 31, 2004, the asset allocation of the Fund was 64% equities
(down from 65% on June 30, 2004), 33% fixed income (up from 32%), and 3% cash
and other net assets. We will continue to emphasize high quality securities in
each asset class within the Fund, and we appreciate shareholders' continued
interest.
- --------------------------------------------------------------------------------
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 12/31/04: $14.35 Per Share
6/30/04: $13.80 Per Share
Total Net Assets: $12.2 Million
- --------------------------------------------------------------------------------
PORTFOLIO STRUCTURE
(% OF TOTAL NET ASSETS)
- --------------------------------------------------------------------------------
Cash & Other
Net Assets
3.2%
Bonds
32.6%
Equities
64.2%
8
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS*
- --------------------------------------------------------------------------------
SIT LEHMAN
BALANCED S&P AGGREGATE
FUND 500 INDEX BOND INDEX
-------- --------- ----------
3 Month** 6.35% 9.23% 0.95%
6 Month** 5.53 7.19 4.18
1 Year 9.22 10.88 4.34
5 Years -2.57 -2.30 7.71
10 Years 8.51 12.07 7.72
Inception 7.67 11.04 6.70
(12/31/93)
- --------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURNS*
- --------------------------------------------------------------------------------
SIT LEHMAN
BALANCED S&P AGGREGATE
FUND 500 INDEX BOND INDEX
-------- --------- ----------
1 Year 9.22% 10.88% 4.34%
5 Years -12.21 -10.98 44.97
10 Years 126.20 212.54 110.38
Inception 125.47 216.67 104.25
(12/31/93)
*As of 12/31/04 **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.
- --------------------------------------------------------------------------------
GROWTH OF $10,000
- --------------------------------------------------------------------------------
The sum of $10,000 invested at inception (12/31/93) and held until 12/31/04
would have grown to $22,547 in the Fund, $20,425 in the Lehman Aggregate Bond
Index or $31,667 in the S&P 500 Index assuming reinvestment of all dividends and
capital gains.
- --------------------------------------------------------------------------------
TOP HOLDINGS
- --------------------------------------------------------------------------------
Stocks o General Electric Co.
o United Healthgroup, Inc.
o Microsoft Corp.
o Citigroup, Inc.
o Target Corp.
Bonds o Northwest Airlines Corp., 8.07%, 10/1/19
o American Strategic Income Portfolio II
o Prologis Trust, 7.625%, 7/1/17
o U.S. Treasury Note, 6.50%, 5/15/05
o Morton Intl., Inc., 9.25%, 6/1/20
Total Number of Holdings: 134
9
SIT BALANCED FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 2004 (UNAUDITED)
- --------------------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE ($)(1)
- --------------------------------------------------------------------------
COMMON STOCKS (64.2%) (2)
COMMUNICATIONS (2.3%)
2,600 Crown Castle Intl. Corp. (3) 43,264
2,700 Nextel Communications, Inc. (3) 81,000
6,000 Vodafone Group, A.D.R. 164,280
--------------
288,544
--------------
CONSUMER DURABLES (0.3%)
600 Electronic Arts, Inc. (3) 37,008
--------------
CONSUMER NON-DURABLES (2.9%)
3,700 PepsiCo, Inc. 193,140
3,000 The Procter & Gamble Co. 165,240
--------------
358,380
--------------
CONSUMER SERVICES (4.9%)
2,600 Comcast Corp. (3) 86,528
1,500 Harrah's Entertainment, Inc. 100,335
3,400 International Game Technology 116,892
1,500 Marriott International, Inc. 94,470
2,200 News Corp. (3) 41,052
900 Royal Caribbean Cruises, Ltd. 48,996
2,900 Time Warner, Inc. (3) 56,376
1,400 Viacom, Inc. 50,946
--------------
595,595
--------------
ELECTRONIC TECHNOLOGY (8.7%)
3,000 Analog Devices, Inc. 110,760
9,000 Cisco Systems, Inc. (3) 173,700
3,600 Dell Computer Corp. (3) 151,704
7,500 EMC Corp. (3) 111,525
6,000 Intel Corp. 140,340
3,000 Jabil Circuit, Inc. (3) 76,740
2,800 Juniper Networks, Inc. (3) 76,132
4,800 Nokia Corp., A.D.R. 75,216
3,600 Qualcomm, Inc. 152,640
--------------
1,068,757
--------------
ENERGY MINERALS (5.5%)
900 ConocoPhillips Co. 78,147
1,200 Murphy Oil Corp. 96,540
2,300 Occidental Petroleum Corp. 134,228
2,800 Suncor Energy, Inc. 99,120
3,600 Valero Energy Corp. 163,440
2,800 XTO Energy, Inc. 99,064
--------------
670,539
--------------
- --------------------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE ($)(1)
- --------------------------------------------------------------------------
FINANCE (6.8%)
2,321 American International Group, Inc. 152,420
4,666 Citigroup, Inc. 224,808
2,300 Franklin Resources, Inc. 160,195
1,000 Goldman Sachs Group, Inc. 104,040
1,000 Prudential Financial, Inc. 54,960
2,300 Wells Fargo Co. 142,945
--------------
839,368
--------------
HEALTH SERVICES (2.2%)
3,000 UnitedHealth Group, Inc. 264,090
--------------
HEALTH TECHNOLOGY (9.4%)
2,700 Amgen, Inc. (3) 173,205
2,100 Boston Scientific Corp. (3) 74,655
6,300 Elan Corp., A.D.R. (3) 171,675
1,800 Eli Lilly and Co. 102,150
2,500 Genentech, Inc. (3) 136,100
2,800 Gilead Sciences, Inc. (3) 97,972
1,600 Johnson & Johnson 101,472
1,300 Medtronic, Inc. 64,571
4,755 Pfizer, Inc. 127,862
400 Stryker Corp. 19,300
2,600 Teva Pharmaceutical, Ltd., A.D.R. 77,636
--------------
1,146,598
--------------
INDUSTRIAL SERVICES (1.2%)
400 Nabors Industries, Ltd. (3) 20,516
400 Noble Corp. (3) 19,896
1,600 Schlumberger Ltd. 107,120
--------------
147,532
--------------
PRODUCER MANUFACTURING (6.4%)
1,000 Caterpillar, Inc. 97,510
1,600 Danaher Corp. 91,856
1,000 Eaton Corp. 72,360
7,500 General Electric Co. 273,750
1,600 ITT Industries, Inc. 135,120
1,400 3M Co. 114,898
--------------
785,494
--------------
RETAIL TRADE (5.3%)
900 Best Buy Co., Inc. 53,478
500 eBay, Inc. (3) 58,140
2,600 J.C. Penney Co., Inc. 107,640
3,500 Lowe's Companies, Inc. 201,565
4,300 Target Corp. 223,299
--------------
644,122
--------------
10
- --------------------------------------------------------------------------
QUANTITY/PAR($) NAME OF ISSUER MARKET VALUE ($)(1)
- --------------------------------------------------------------------------
TECHNOLOGY SERVICES (6.3%)
1,000 Adobe Systems, Inc. 62,740
1,900 Check Point Software Technology (3) 46,797
2,200 First Data Corp. 93,588
8,600 Microsoft Corp. 229,706
2,100 SAP AG 92,841
2,800 Symantec Corp. (3) 72,128
2,400 Veritas Software Corp. (3) 68,520
2,700 Yahoo!, Inc. (3) 101,736
--------------
768,056
--------------
TRANSPORTATION (2.0%)
2,000 Burlington Northern Sante Fe Corp. 94,620
1,200 United Parcel Service, Inc. 102,552
700 UTI Worldwide, Inc. 47,614
--------------
244,786
--------------
Total common stocks 7,858,869
(cost: $6,633,113) --------------
BONDS (29.3%) (2)
ASSET-BACKED SECURITIES (2.2%)
55,896 Advanta Mortgage Loan Trust,
1999-3 A4, 7.75%, 10/25/26 57,562
66,835 Conseco Mfg. Housing
Series 2002, 6.03%, 3/1/33 67,378
Green Tree Financial Corp.:
9,833 1995-5, 7.25%, 9/15/26 10,176
56,968 1997-1 A6, 7.29%, 3/15/28 61,715
20,069 Green Tree Home Equity Loan Trust,
1999-D A5, 7.88%, 9/15/30 20,153
50,000 Origen Mfg. Housing
Series 2001A, 7.08%, 3/15/32 52,903
--------------
269,887
--------------
COLLATERALIZED MORTGAGE OBLIGATIONS (1.9%)
64,359 FHLMC, 3.25%, 4/15/32 61,958
Washington Mutual Mtg. Pass-Through:
63,205 Series 2002-S8, 5.25%, 1/25/18 62,400
104,617 Series 2003-MS5, 5.00%, 3/25/18 105,882
--------------
230,240
--------------
CORPORATE BONDS (12.5%)
100,000 Academica Charter School, 8.00%, 8/15/24 102,218
84,000 ConocoPhillips, 8.00%, 1/15/37 96,177
Continental Airlines:
82,378 Series 2000-2 A1, 7.71%, 4/2/21 82,145
38,982 Series 2001-1B, 7.37%, 12/15/15 32,908
- -------------------------------------------------------------------------
QUANTITY/PAR($) NAME OF ISSUER MARKET VALUE ($)(1)
- -------------------------------------------------------------------------
50,000 CSX Corp., 9.75%, 6/15/20 69,750
50,000 Everest Reins. Hldgs., 8.75%, 3/15/10 59,251
35,000 Fifth Third Capital Trust, 8.14%, 3/15/27 39,552
100,000 McDonald's Corp., 7.31%, 9/15/27 107,831
100,000 Morton Intl., Inc., 9.25%, 6/1/20 141,031
100,000 NB Capital Trust IV (Bank of America),
8.25%, 4/15/27 111,262
204,825 Northwest Airlines Corp., 8.07%, 10/1/19 228,887
50,000 Proctor & Gamble, 9.36%, 1/1/21 66,386
150,000 Prologis Trust, 7.625%, 7/1/17 177,246
100,000 Virginia Electric & Power, 8.25%, 3/1/25 104,188
100,000 Wells Fargo Capital, 7.96%, 12/15/26 108,616
--------------
1,527,448
--------------
FEDERAL HOME LOAN MORTGAGE CORPORATION (2.6%)
94,716 7.50%, 3/1/31 101,523
56,883 8.38%, 5/17/20 61,974
78,001 8.50%, 7/1/18 85,877
69,953 8.50%, 10/1/30 75,834
--------------
325,208
--------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (4.9%)
11,162 7.00%, 3/1/07 11,405
120,418 7.00%, 10/1/11 127,677
40,160 7.50%, 6/1/32 43,251
35,930 8.00%, 7/1/26 39,093
39,519 8.00%, 12/1/27 43,027
91,028 8.00%, 2/1/31 98,703
69,170 8.46%, 4/15/26 77,154
58,410 9.50%, 5/1/27 65,696
17,686 9.75%, 1/15/13 19,373
1,981 10.00%, 1/1/20 2,207
51,095 10.00%, 7/1/26 56,816
19,635 10.25%, 6/15/13 21,658
--------------
606,060
--------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (2.9%)
74,087 7.00%, 7/15/23 79,153
93,955 7.50%, 7/15/23 101,595
6,451 9.00%, 6/15/11 7,228
15,808 9.00%, 6/15/09 17,167
18,568 9.00%, 11/15/16 20,778
1,291 9.50%, 7/20/05 1,306
2,323 9.50%, 5/20/16 2,603
50,733 9.50%, 9/15/30 57,152
8,511 9.50%, 9/20/18 9,563
13,325 9.50%, 2/20/19 14,978
4,142 9.75%, 10/15/05 4,217
28,502 10.00%, 3/20/16 31,533
2,089 11.25%, 10/15/11 2,362
--------------
349,635
--------------
See accompanying notes to portfolios of investments on page 42. 11
SIT BALANCED FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 2004 (UNAUDITED)
- -------------------------------------------------------------------------
QUANTITY/PAR($) NAME OF ISSUER MARKET VALUE ($)(1)
- -------------------------------------------------------------------------
TAXABLE MUNICIPAL SECURITIES (0.3%)
9,000 Bernalillo Multifamily. Series 1998A,
7.50%, 9/20/20 9,926
23,000 CA Rural Home Mtg. Fin. Auth.
Rev. Series 2003A, 5.25%, 12/1/24 23,012
--------------
32,938
--------------
U.S. GOVERNMENT SECURITIES (2.0%)
300,000 U.S. Treasury Strip, Zero Coupon,
5.64% Effective Yield, 11/15/27 93,999
150,000 U.S. Treasury Note, 6.50%, 5/15/05 152,191
--------------
246,190
--------------
Total bonds 3,587,606
(cost: $3,531,468) --------------
CLOSED-END MUTUAL FUNDS (3.3%) (2)
6,009 American Select Portfolio 76,975
403 American Strategic, Inc. Portfolio 4,860
15,470 American Strategic, Inc. Portfolio II 191,519
10,609 American Strategic, Inc. Portfolio III 129,748
--------------
Total closed-end mutual funds 403,102
(cost: $368,185) --------------
SHORT-TERM SECURITIES (2.5%) (2)
304,000 Sit Money Market Fund, 1.76% (4) 304,000
(cost: $304,000) --------------
Total investments in securities
(cost: $10,836,766) (5) $12,153,577
==============
12 See accompanying notes to portfolios of investments on page 42.
This page has been left blank intentionally.
13
SIT DIVIDEND GROWTH FUND
SIX MONTHS ENDED DECEMBER 31, 2004
- --------------------------------------------------------------------------------
EQUITY MANAGEMENT TEAM
The Sit Dividend Growth Fund posted a +9.00% return for the last six months
of 2004, compared to the +7.19% return for the S&P 500 Index.
Stocks surged ahead during the fourth quarter of 2004, propelling most market
indices solidly higher for the full calendar year. Market gains were essentially
in line with our initial expectations for 2004 and, looking ahead, we believe
fundamentals support another positive year in 2005. While an expansion of P/E
ratios is unlikely based on our expectations of rising interest rates, equity
gains are apt to reflect the high single-digit growth we expect in corporate
profits. We believe this "slow and steady" environment, along with other
factors, will provide a positive investment backdrop for companies that can
generate consistent earnings growth and, importantly, can increase return
capital to shareholders in the form of higher dividends. Approximately
two-thirds of the current companies held in the Fund increased dividend payouts
in 2004, with average growth of approximately +17%, and we expect a continuation
of steadily rising dividends in 2005.
The Sit Dividend Growth Fund ended its first year on a high note,
outperforming the S&P 500 during the second half of the year. The Fund's
third-quarter performance depicts the relative stability of the Fund, as it
posted modestly positive returns in this difficult quarter (outperforming the
Index by +3.3 percentage points), but lagged somewhat in the strong fourth
quarter rally (underperforming by -1.5 percentage points). Relative to the S&P
500 Index, the strong six-month return for the Fund was due to good stock
selection in finance, an underweight in electronic technology, and strong stock
performance and an overweighted position in the transportation sector. Weak
performance of the drug stocks, particularly Merck, resulted in a negative
contribution from the health technology sector over the period.
The Fund's sector positioning includes significant overweightings in producer
manufacturing, energy, and utilities, with underweights in electronic technology
and technology services. In addition, the statistical attributes of the Fund
remain unchanged from six months ago. Relative to the S&P 500 Index, the Fund
has a significantly higher dividend yield, a lower P/E ratio, and a lower
projected beta. Based on a renewed investor focus on dividend income and growth,
we remain optimistic about the prospects for the Fund in the year ahead.
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE AND STRATEGY
- --------------------------------------------------------------------------------
The objective of the Dividend Growth Fund is to provide current income that
exceeds the dividend yield of the S&P 500 Index and that grows over a period of
years. Secondarily, the Fund seeks long-term capital appreciation.
The Fund seeks to achieve its objectives by investing, under normal market
conditions, at least 80% of its net assets in dividend-paying common stocks. The
Fund may invest the balance of its assets in preferred stocks, convertible
bonds, and U.S. Treasury securities.
- --------------------------------------------------------------------------------
PORTFOLIO SUMMARY
- --------------------------------------------------------------------------------
Net Asset Value 12/31/04: $10.92 Per Share
6/30/04: $10.14 Per Share
Total Net Assets: $8.6 Million
Weighted Average Market Cap: $64.4 Billion
- --------------------------------------------------------------------------------
PORTFOLIO STRUCTURE - BY SECTOR
(% OF TOTAL NET ASSETS)
- --------------------------------------------------------------------------------
Finance 18.0
Producer Manufacturing 13.1
Energy Minerals 9.7
Consumer Non-Durables 9.6
Health Technology 9.4
Process Industries 6.4
Industrial Services 6.2
Sectors less than 5.0% 22.7
Cash & Other
Net Assets 4.9
14
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS*
- --------------------------------------------------------------------------------
SIT
DIVIDEND S&P
GROWTH FUND 500 INDEX
----------- ---------
3 Month** 7.72% 9.23%
6 Month** 9.00 7.19
1 Year 10.91 10.88
3 Years n/a n/a
5 Years n/a n/a
Inception 10.91 10.88
(12/31/03)
- --------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURNS*
- --------------------------------------------------------------------------------
SIT
DIVIDEND S&P
GROWTH FUND 500 INDEX
----------- ---------
1 Year 10.91% 10.88%
3 Years n/a n/a
5 Years n/a n/a
Inception 10.91 10.88
(12/31/03)
- --------------------------------------------------------------------------------
*As of 12/31/04 **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 (12/31/03) and held until
12/31/04 would have grown to $11,091 in the Fund or $11,088 in the S&P 500 Index
assuming reinvestment of all dividends and capital gains.
- --------------------------------------------------------------------------------
TOP 10 HOLDINGS
- --------------------------------------------------------------------------------
o General Electric Co.
o BP p.l.c., A.D.R.
o Wells Fargo Co.
o Kinder Morgan, Inc.
o Citigroup, Inc.
o Procter & Gamble Co.
o PepsiCo, Inc.
o 3M Company
o United Parcel Service, Inc.
o Kayne Anderson MLP
Total Number of Holdings: 69
15
SIT DIVIDEND GROWTH FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 2004 (UNAUDITED)
- -------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE ($)(1)
- -------------------------------------------------------------
COMMON STOCKS (91.4%) (2)
COMMERCIAL SERVICES (1.3%)
1,250 McGraw-Hill Companies, Inc. 114,425
-------------
COMMUNICATIONS (2.2%)
4,000 SBC Communcations, Inc. 103,080
3,200 Vodafone Group, A.D.R. 87,616
-------------
190,696
-------------
CONSUMER DURABLES (3.3%)
2,900 Briggs & Stratton Corp. 120,582
1,700 CLARCOR, Inc. 93,109
1,000 Polaris Industries, Inc. 68,020
-------------
281,711
-------------
CONSUMER NON-DURABLES (9.6%)
2,600 Diageo p.l.c. 150,488
3,100 General Mills, Inc. 154,101
2,300 Kimberly-Clark Corp. 151,363
3,400 PepsiCo, Inc. 177,480
3,600 Procter & Gamble Co. 198,288
-------------
831,720
-------------
CONSUMER SERVICES (1.0%)
2,500 International Game Technology 85,950
-------------
ELECTRONIC TECHNOLOGY (3.9%)
2,800 Diebold, Inc. 156,044
5,100 Hewlett-Packard Co. 106,947
4,900 Nokia Corp., A.D.R. 76,783
-------------
339,774
-------------
ENERGY MINERALS (9.7%)
4,000 BP p.l.c. , A.D.R. 233,600
4,500 Hugoton Royalty Trust 117,900
4,350 Marathon Oil Corp. 163,604
2,700 Occidental Petroleum Corp. 157,572
1,500 Total S.A. 164,760
-------------
837,436
-------------
FINANCE (18.0%)
3,100 Alliance Capital Mgmt. Hldg., LP 130,200
2,100 AMB Property Corp. 84,819
2,000 American Intl. Group, Inc. 131,340
4,400 Citigroup, Inc. 211,992
2,350 General Growth Properties, Inc. 84,976
3,350 J.P. Morgan Chase & Co. 130,684
1,800 Lincoln National Corp. 84,024
- -------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE ($)(1)
- -------------------------------------------------------------
1,400 Mercury General Corp. 83,888
3,300 Montpelier Re Holdings, Ltd. 126,885
2,300 Prudential Financial, Inc. 126,408
3,200 Stewart, W.P. & Co. 75,712
2,050 U.S. Bancorp 64,206
3,500 Wells Fargo Co. 217,525
-------------
1,552,659
-------------
HEALTH TECHNOLOGY (9.4%)
2,300 Abbott Laboratories 107,295
2,400 Arrow Intl., Inc. 74,376
2,300 Becton, Dickinson & Co. 130,640
5,200 Bristol-Myers Squibb Co. 133,224
2,250 Eli Lilly and Co. 127,687
2,200 Merck & Co., Inc. 70,708
6,100 Pfizer, Inc. 164,029
-------------
807,959
-------------
INDUSTRIAL SERVICES (2.5%)
2,950 Kinder Morgan, Inc. 215,733
-------------
PROCESS INDUSTRIES (6.4%)
4,300 Bemis Company, Inc. 125,087
2,600 E.I. Du Pont de Nemours & Co. 127,530
900 Potash Corp. 74,754
1,300 PPG Industries, Inc. 88,608
3,000 Sherwin-Williams Co. 133,890
-------------
549,869
-------------
PRODUCER MANUFACTURING (13.1%)
2,950 American Power Conversion Corp. 63,130
1,600 Autoliv, Inc. 77,280
900 Caterpillar, Inc. 87,759
1,100 Deere & Co. 81,840
8,900 General Electric Co. 324,850
1,050 Illinois Tool Works, Inc. 97,314
1,000 ITT Industries, Inc. 84,450
1,300 United Technologies Corp. 134,355
2,150 3M Co. 176,451
-------------
1,127,429
-------------
RETAIL TRADE (2.9%)
2,900 Buckle, Inc. 85,550
3,100 Deb Shops, Inc. 77,624
3,650 Limited Brands 84,023
-------------
247,197
-------------
16
- -------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE ($)(1)
- -------------------------------------------------------------
TRANSPORTATION (3.8%)
1,800 Burlington Northern Santa Fe
Corp. 85,158
1,900 Tsakos Energy Navigation, Ltd. 68,001
2,050 United Parcel Service, Inc. 175,193
-------------
328,352
-------------
UTILITIES (4.3%)
1,200 Entergy Corp. 81,108
1,800 Equitable Resources, Inc. 109,188
1,200 South Jersey Industries, Inc. 63,072
500 TXU Corp. 32,280
3,800 Westar Energy, Inc. 86,906
-------------
372,554
-------------
Total common stocks 7,883,464
(cost: $7,190,162) -------------
CLOSED-END MUTUAL FUNDS (3.7%) (2)
6,700 Kayne Anderson MLP Invest. Co. 167,500
5,400 Tortoise Energy Infrastructure
Corp. 148,176
-------------
Total closed-end mutual funds 315,676
(cost: $299,572) -------------
SHORT-TERM SECURITIES (7.3%) (2)
628,000 Sit Money Market Fund, 1.76% (4) 628,000
(cost: $628,000) -------------
Total investments in securities
(cost: $8,117,734) $8,827,140
-------------
See accompanying notes to portfolios of investments on page 42. 17
SIT LARGE CAP GROWTH FUND
SIX MONTHS ENDED DECEMBER 31, 2004
- --------------------------------------------------------------------------------
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 +6.61%, compared to the
+7.19% return for the S&P 500 Index. The Russell 1000 Growth Index return for
the period was +3.47%. For the calendar year 2004, the Fund's return of +12.79%
compared favorably to the +10.88% and +6.30% gains for the S&P 500 Index and the
Russell 1000 Growth Index, respectively.
Following the sluggish equity market performance through most of 2004,
investors were rewarded for their patience as the strong fourth quarter rally
propelled full year returns solidly higher for the calendar year. While economic
activity slowed somewhat in the second half of 2004, strong corporate earnings,
low (albeit rising) interest rates, and improving investor sentiment are among
the key factors still in place to support a positive investment environment in
the year ahead. Importantly, although corporate earnings remain strong, growth
is clearly moderating from the torrid paces of 2003 and 2004. History suggests
that, against this backdrop, investors will increasingly focus on growth sectors
and companies that can deliver sustained and higher relative earnings growth. We
believe this will favor the types of companies emphasized in the Fund.
Relative to the S&P 500 Index return over the past six months, the Fund
benefited from strong stock selection in health services (United Health Group,
+41% gain), retail trade (Target Corp., +23%) and energy (Suncor Energy, +39%).
Conversely, as investor preference shifted to more conservative sectors in the
second half of the year, our overweighted positions in health technology and
electronic technology negatively impacted returns over the period.
While large cap stocks (and the Fund) posted solid absolute return in recent
quarters, smaller company stocks have continued to outperform on a relative
basis. Our view continues to be that the stage is set for a narrowing of the
performance gap between large cap and small cap issues. Valuations now appear to
be at "normal" levels following four strong years of small cap outperformance,
and the current weak U.S. dollar disproportionately benefits larger companies
that tend to have greater exposure outside the U.S. And finally, there is a
growing investor focus on the importance of dividends, which tend to be more
prevalent among larger companies.
Given the strong earnings outlook and attractive valuations of companies held
in the Fund, we remain enthusiastic about the Fund's prospects in the year
ahead.
- --------------------------------------------------------------------------------
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 12/31/04: $33.95 Per Share
6/30/04: $31.96 Per Share
Total Net Assets: $64.6 Million
Weighted Average Market Cap: $78.2 Billion
- --------------------------------------------------------------------------------
PORTFOLIO STRUCTURE - BY SECTOR
(% OF TOTAL NET ASSETS)
- --------------------------------------------------------------------------------
Health Technology 14.7
Electronic
Technology 13.1
Finance 12.1
Technology Services 10.2
Producer
Manufacturing 8.4
Energy Minerals 8.3
Consumer Services 8.1
Retail Trade 7.7
Sectors less
than 5.0% 16.1
Cash & Other
Net Assets 1.3
18
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS*
- --------------------------------------------------------------------------------
SIT RUSSELL
LARGE CAP S&P 1000
GROWTH FUND 500 INDEX GROWTH INDEX
----------- --------- ------------
3 Month** 9.52% 9.23% 9.17%
6 Month** 6.61 7.19 3.47
1 Year 12.79 10.88 6.30
5 Years -9.23 -2.30 -9.29
10 Year 8.64 12.07 9.59
Inception*** 11.19 13.94 12.38
(9/2/82)
- --------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURNS*
- --------------------------------------------------------------------------------
SIT RUSSELL
LARGE CAP S&P 1000
GROWTH FUND 500 INDEX GROWTH INDEX
----------- --------- ------------
1 Year 12.79% 10.88% 6.30%
5 Year -38.38 -10.98 -38.60
10 Year 129.00 212.54 149.97
Inception*** 970.11 1747.83 1256.68
(9/2/82)
*As of 12/31/04 **Not annualized.
- --------------------------------------------------------------------------------
PERFORMANCE FIGURES ARE HISTORICAL AND DO NOT GUARANTEE FUTURE RESULTS.
INVESTMENT RETURNS AND PRINCIPAL VALUE WILL VARY, AND YOU MAY HAVE A GAIN OR
LOSS WHEN YOU SELL SHARES. AVERAGE ANNUAL TOTAL RETURNS INCLUDE CHANGES IN SHARE
PRICE AS WELL AS REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAINS. MANAGEMENT
FEES AND ADMINISTRATIVE EXPENSES ARE INCLUDED IN THE FUND'S PERFORMANCE;
HOWEVER, FEES AND EXPENSES ARE NOT INCORPORATED IN THE RUSSELL 1000 GROWTH INDEX
AND THES&P 500 INDEX.
***ON 6/6/93, THE FUND'S INVESTMENT OBJECTIVE CHANGED TO ALLOW FOR A PORTFOLIO
OF 100% STOCKS. PRIOR TO THAT TIME, THE PORTFOLIO WAS REQUIRED TO CONTAIN NO
MORE THAN 80% STOCKS.
- --------------------------------------------------------------------------------
GROWTH OF $10,000
- --------------------------------------------------------------------------------
The sum of $10,000 invested at inception (9/2/82) and held until
12/31/04 would have grown to $107,011 in the Fund or $184,783 in the S&P 500
Index assuming reinvestment of all dividends and capital gains.
- --------------------------------------------------------------------------------
TOP 10 HOLDINGS
- --------------------------------------------------------------------------------
o Microsoft Corp.
o Citigroup, Inc.
o General Electric Co.
o Target Corp.
o United Healthgroup, Inc.
o Lowe's Companies, Inc.
o Amgen, Inc.
o Procter & Gamble Co.
o PepsiCo, Inc.
o Cisco Systems, Inc.
Total Number of Holdings: 78
19
SIT LARGE CAP GROWTH FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 2004 (UNAUDITED)
- ---------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE ($)(1)
- ---------------------------------------------------------------
COMMON STOCKS (98.7%) (2)
COMMUNICATIONS (3.2%)
20,500 Crown Castle Intl. Corp. (3) 341,120
21,500 Nextel Communications, Inc. (3) 645,000
40,200 Vodafone Group, A.D.R. 1,100,676
-------------
2,086,796
-------------
CONSUMER DURABLES (0.5%)
5,500 Electronic Arts, Inc. (3) 339,240
-------------
CONSUMER NON-DURABLES (4.9%)
7,000 Avon Products, Inc. 270,900
27,000 PepsiCo, Inc. 1,409,400
26,500 Procter & Gamble Co. 1,459,620
-------------
3,139,920
-------------
CONSUMER SERVICES (8.1%)
19,500 Comcast Corp. (3) 648,960
11,500 Harrah's Entertainment, Inc. 769,235
25,500 International Game Technology 876,690
40,804 Liberty Media Corp. (3) 448,028
11,500 Marriott International, Inc. 724,270
17,500 News Corp. (3) 326,550
7,400 Royal Caribbean Cruises, Ltd. 402,856
23,400 Time Warner, Inc. (3) 454,896
15,977 Viacom, Inc. 581,403
-------------
5,232,888
-------------
ELECTRONIC TECHNOLOGY (13.1%)
24,000 Analog Devices, Inc. 886,080
31,000 Applied Materials, Inc. (3) 530,100
68,800 Cisco Systems, Inc. (3) 1,327,840
27,000 Dell Computer Corp. (3) 1,137,780
58,400 EMC Corp. (3) 868,408
47,800 Intel Corp. 1,118,042
22,500 Jabil Circuit, Inc. (3) 575,550
18,000 Juniper Networks, Inc. (3) 489,420
39,000 Nokia Corp., A.D.R. 611,130
22,000 Qualcomm, Inc. 932,800
-------------
8,477,150
-------------
ENERGY MINERALS (8.3%)
11,000 ConocoPhillips Co. 955,130
9,000 Murphy Oil Corp. 724,050
18,000 Occidental Petroleum Corp. 1,050,480
21,500 Suncor Energy, Inc. 761,100
27,000 Valero Energy Corp. 1,225,800
18,500 XTO Energy, Inc. 654,530
-------------
5,371,090
-------------
- ---------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE ($)(1)
- ---------------------------------------------------------------
FINANCE (12.1%)
17,962 American International Group,
Inc. 1,179,565
39,000 Citigroup, Inc. 1,879,020
17,500 Franklin Resources, Inc. 1,218,875
13,000 J.P. Morgan Chase & Co. 507,130
13,000 Prudential Financial, Inc. 714,480
11,500 The Goldman Sachs Group, Inc. 1,196,460
17,500 Wells Fargo Co. 1,087,625
-------------
7,783,155
-------------
HEALTH SERVICES (2.6%)
19,000 UnitedHealth Group, Inc. 1,672,570
-------------
HEALTH TECHNOLOGY (14.7%)
23,900 Amgen, Inc. (3) 1,533,185
5,000 Biogen, Inc. (3) 333,050
16,500 Boston Scientific Corp. (3) 586,575
48,550 Elan Corp., A.D.R. (3) 1,322,987
13,800 Eli Lilly and Co. 783,150
18,500 Genentech, Inc. (3) 1,007,140
22,000 Gilead Sciences, Inc. (3) 769,780
12,150 Johnson & Johnson 770,553
9,700 Medtronic, Inc. 481,799
42,825 Pfizer, Inc. 1,151,564
4,000 Stryker Corp. 193,000
19,000 Teva Pharmaceutical, Ltd.,
A.D.R. 567,340
-------------
9,500,123
-------------
INDUSTRIAL SERVICES (1.9%)
3,000 Nabors Industries, Ltd. (3) 153,870
3,000 Noble Corp. (3) 149,220
13,300 Schlumberger, Ltd. 890,435
-------------
1,193,525
-------------
PRODUCER MANUFACTURING (8.4%)
7,000 Caterpillar, Inc. 682,570
11,500 Danaher Corp. 660,215
8,000 Eaton Corp. 578,880
51,200 General Electric Co. 1,868,800
8,500 ITT Industries, Inc. 717,825
11,000 3M Co. 902,770
-------------
5,411,060
-------------
20
- ---------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE ($)(1)
- ---------------------------------------------------------------
RETAIL TRADE (7.7%)
6,550 Best Buy Co., Inc. 389,201
4,000 eBay, Inc. (3) 465,120
16,500 J.C. Penney Co., Inc. 683,100
28,800 Lowe's Companies, Inc. 1,658,592
33,500 Target Corp. 1,739,655
------------
4,935,668
------------
TECHNOLOGY SERVICES (10.2%)
7,500 Adobe Systems, Inc. 470,550
14,800 Check Point Software Tech.,
Ltd. (3) 364,524
16,500 First Data Corp. 701,910
71,300 Microsoft Corp. 1,904,423
16,000 SAP AG 707,360
25,500 Symantec Corp. (3) 656,880
27,400 Veritas Software Corp. (3) 782,270
27,000 Yahoo!, Inc. (3) 1,017,360
------------
6,605,277
------------
TRANSPORTATION (3.0%)
16,000 Burlington Northern Sante
Fe Corp. 756,960
10,000 United Parcel Service, Inc. 854,600
5,000 UTI Worldwide, Inc. 340,100
------------
1,951,660
------------
Total common stocks 63,700,122
(cost: $53,084,023) ------------
SHORT-TERM SECURITIES (0.9%) (2)
592,000 Sit Money Market Fund, 1.76% (4) 592,000
(cost: $592,000) ------------
Total investments in securities
(cost: $53,676,023) (5) $64,292,122
------------
See accompanying notes to portfolios of investments on page 42. 21
SIT MID CAP GROWTH FUND
SIX MONTHS ENDED DECEMBER 31, 2004
- --------------------------------------------------------------------------------
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 +8.21%, compared to +9.80%
for the S&P 400 Index. The Russell Mid Cap Growth Index rose +9.01% during the
period. For the 2004 calendar year, the Fund returned +17.02%, comparing
favorably to the +16.48% for the S&P MidCap Index and +15.48% return for the
Russell MidCap Growth Index.
Once again, small- and mid-sized growth companies turned in strong absolute
relative performance for both the six-month period and calendar year 2004. After
a difficult third quarter of 2004, stocks surged ahead in the final two months
of the year on the heels of a decisive election victory for President Bush and a
welcomed decline in oil prices. Although the equity market has experienced two
years of gains following the bear market bottom in 2002, we continue to see
attractive investment opportunities in many sectors. For example, while
technology stocks generally underperformed over the past year following the
exceptional performance in 2003, we believe fundamentals continue to improve and
valuations remain attractive. We also continue to have substantial commitments
in energy, producer manufacturing, and transportation, as these areas are
benefiting from improving global demand for commodities and a rebound in
industrial activity. The Fund's heaviest sector weights are currently in
electronic technology, health technology, technology services and finance.
Relative to the Russell MidCap Growth Index (the Index) returns, key
positives over the past six months included strong stock selection and a
significant overweight in the technology services sector, along with good,
strong performance from our holdings in the health services sector. Autodesk
(+78% return) Wellchoice (+29%), and Symantec Corp. (+18%) were among the key
winners in these sectors over the past six months. On the negative side, the
Fund's holdings lagged the Index sector returns in the consumer services,
consumer durables, and finance sectors.
Looking ahead, we are encouraged by the recent improvement in investor
sentiment and, perhaps more importantly, by the multitude of attractive
long-term investment opportunities in mid-cap growth stocks. We appreciate
shareholders' continued interest in the Fund.
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE AND STRATEGY
- --------------------------------------------------------------------------------
The objective of the Sit Mid Cap Growth Fund is to maximize long-term
capital appreciation. The Fund pursues this objective by investing at least 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 12/31/04: $11.07 Per Share
6/30/04: $10.23 Per Share
Total Net Assets: $211.5 Million
Weighted Average Market Cap: $9.1 Billion
- --------------------------------------------------------------------------------
PORTFOLIO STRUCTURE - BY SECTOR
(% OF TOTAL NET ASSETS)
- --------------------------------------------------------------------------------
Technology Services 19.0
Electronic
Technology 14.5
Health Technology 13.1
Finance 7.6
Energy Minerals 7.1
Health Services 6.2
Retail Trade 6.0
Consumer Services 5.9
Producer
Manufacturing 5.3
Sectors less
than 5.0% 14.0
Cash & Other
Net Assets 1.3
22
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS*
- --------------------------------------------------------------------------------
SIT S&P RUSSELL
MID CAP MIDCAP MID CAP
GROWTH FUND 400 INDEX GROWTH INDEX
----------- --------- ------------
3 Month** 14.72% 12.16% 13.95%
6 Month** 8.21 9.80 9.01
1 Year 17.02 16.48 15.48
5 Year -7.56 9.54 -3.36
10 Year 8.96 16.10 11.23
Inception 13.76 16.63 n/a
(9/2/82)
- --------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURNS*
- --------------------------------------------------------------------------------
SIT S&P RUSSELL
MID CAP MIDCAP MID CAP
GROWTH FUND 400 INDEX GROWTH INDEX
----------- --------- ------------
1 Year 17.02% 16.48% 15.48%
5 Year -32.50 57.71 -15.69
10 Year 135.87 344.96 189.95
Inception 1683.32 3011.54 n/a
(9/2/82)
*As of 12/31/04 **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
- --------------------------------------------------------------------------------
The sum of $10,000 invested at inception (9/2/82) and held until
12/31/04 would have grown to $178,332 in the Fund, or $311,154 in the S&P MidCap
400 Index assuming reinvestment of all dividends and capital gains.
- --------------------------------------------------------------------------------
TOP 10 HOLDINGS
- --------------------------------------------------------------------------------
o Elan Corp., A.D.R.
o TCF Financial Corp.
o WellChoice, Inc.
o Celgene Corp.
o Adobe Systems, Inc.
o Coach, Inc.
o XTO Energy, Inc.
o Caremark Rx, Inc.
o Juniper Networks, Inc.
o Autodesk, Inc.
Total Number of Holdings: 95
23
SIT MID CAP GROWTH FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 2004 (UNAUDITED)
- ----------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE ($)(1)
- ----------------------------------------------------------------
COMMON STOCKS (98.7%) (2)
COMMERCIAL SERVICES (1.0%)
46,000 ChoicePoint, Inc. (3) 2,115,540
---------------
COMMUNICATIONS (4.0%)
100,700 American Tower Corp. (3) 1,852,880
34,350 Nextel Communications, Inc. (3) 1,030,500
173,250 Nextel Partners, Inc. (3) 3,385,305
73,250 Western Wireless Corp. (3) 2,146,225
---------------
8,414,910
---------------
CONSUMER DURABLES (0.7%)
17,300 Electronic Arts, Inc. (3) 1,067,064
19,000 Scientific Games Corp. (3) 452,960
---------------
1,520,024
---------------
CONSUMER NON-DURABLES (2.0%)
75,000 Coach, Inc. (3) 4,230,000
---------------
CONSUMER SERVICES (5.9%)
11,200 Aztar Corp. (3) 391,104
51,500 Education Management Corp. (3) 1,700,015
39,900 Harrah's Entertainment, Inc. 2,668,911
108,500 International Game Technology 3,730,230
45,500 Royal Caribbean Cruises, Ltd. 2,477,020
39,200 XM Satellite Radio Holdings,
Inc. (3) 1,474,704
---------------
12,441,984
---------------
ELECTRONIC TECHNOLOGY (14.5%)
45,050 Analog Devices, Inc. 1,663,246
20,850 Apple Computer, Inc. (3) 1,342,740
115,500 ATI Technologies, Inc. (3) 2,239,545
58,850 Broadcom Corp. (3) 1,899,678
130,000 Foundry Networks, Inc. (3) 1,710,800
102,850 Jabil Circuit, Inc. (3) 2,630,903
138,850 Juniper Networks, Inc. (3) 3,775,332
33,500 KLA-Tencor Corp. (3) 1,560,430
69,800 Lam Research Corp. (3) 2,017,918
41,500 Lexmark International, Inc. (3) 3,527,500
65,500 Marvell Technology Group, Ltd. (3) 2,323,285
33,500 Network Appliance, Inc. (3) 1,112,870
246,150 Sonus Networks, Inc. (3) 1,410,440
17,150 Trimble Havigation, Ltd. (3) 566,636
95,200 Xilinx, Inc. 2,822,680
---------------
30,604,003
---------------
- ----------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE ($)(1)
- ----------------------------------------------------------------
ENERGY MINERALS (7.1%)
59,100 Apache Corp. 2,988,687
35,500 Murphy Oil Corp. 2,855,975
48,500 Premcor, Inc. (3) 2,045,245
68,000 Valero Energy Corp. 3,087,200
112,812 XTO Energy, Inc. 3,991,289
---------------
14,968,396
---------------
FINANCE (7.6%)
21,850 Ace, Ltd. 934,087
33,750 Legg Mason, Inc. 2,472,525
30,300 Lehman Brothers Holdings, Inc. 2,650,644
88,416 New York Community Bancorp, Inc. 1,818,717
46,350 T. Rowe Price Group, Inc. 2,882,970
165,800 TCF Financial Corp. 5,328,812
---------------
16,087,755
---------------
HEALTH SERVICES (6.2%)
98,350 Caremark Rx, Inc. (3) 3,877,940
34,800 Laboratory Corp. (3) 1,733,736
49,800 Stericycle, Inc. (3) 2,288,310
98,100 WellChoice, Inc. (3) 5,238,540
---------------
13,138,526
---------------
HEALTH TECHNOLOGY (13.1%)
30,800 Alcon, Inc. 2,482,480
34,205 Biogen Idec, Inc. (3) 2,278,395
58,000 Boston Scientific Corp. (3) 2,061,900
163,000 Celgene Corp. (3) 4,324,390
277,250 Elan Corp., A.D.R. (3) 7,555,062
98,500 Gilead Sciences, Inc. (3) 3,446,515
13,000 OSI Pharmaceuticals, Inc. (3) 973,050
61,600 Teva Pharmaceutical Industries,
A.D.R. 1,839,376
63,000 Varian Medical Systems, Inc. (3) 2,724,120
---------------
27,685,288
---------------
INDUSTRIAL SERVICES (3.5%)
35,000 BJ Services Co. 1,628,900
79,100 Chicago Bridge & Iron Co., A.D.R. 3,164,000
9,250 Nabors Industries, Ltd. (3) 474,432
40,750 Smith International, Inc. (3) 2,217,208
---------------
7,484,540
---------------
PROCESS INDUSTRIES (0.0%)
1,500 Cuno, Inc. (3) 89,100
---------------
24
- ----------------------------------------------------------------
QUANTITY/PAR($) NAME OF ISSUER MARKET VALUE ($)(1)
- ----------------------------------------------------------------
PRODUCER MANUFACTURING (5.3%)
58,500 AMETEK, Inc. 2,086,695
36,200 Danaher Corp. 2,078,242
9,500 DRS Technologies, Inc. (3) 405,745
33,100 ITT Industries, Inc. 2,795,295
15,700 Rockwell Automation, Inc. 777,935
100,550 Thermo Electron Corp. (3) 3,035,605
---------------
11,179,517
---------------
RETAIL TRADE (6.0%)
28,050 Best Buy Co., Inc. 1,666,731
81,400 Chico's FAS, Inc. (3) 3,706,142
25,850 Costco Wholesale Corp. 1,251,398
39,600 Michael's Stores, Inc. 1,186,812
64,000 PETsMART, Inc. 2,273,920
59,050 Staples, Inc. 1,990,576
22,000 TJX Companies, Inc. 552,860
---------------
12,628,439
---------------
TECHNOLOGY SERVICES (19.0%)
68,590 Adobe Systems, Inc. 4,303,337
17,500 Affiliated Computer Services,
Inc. (3) 1,053,325
26,000 Alliance Data Systems Co. (3) 1,234,480
80,000 Amdocs, Ltd. (3) 2,100,000
99,400 Autodesk, Inc. 3,772,230
104,450 BEA Systems, Inc. (3) 925,427
118,000 Business Objects, A.D.R. (3) 2,990,120
100,100 Ceridian Corp. (3) 1,829,828
106,050 Check Point Software Tech.,
Ltd. (3) 2,612,011
57,550 Citrix Systems, Inc. (3) 1,411,701
31,100 Cognizant Tech. Solutions Corp. (3) 1,316,463
65,500 Cognos, Inc. (3) 2,885,930
54,062 Fiserv, Inc. (3) 2,172,752
62,800 McAfee, Inc. (3) 1,816,804
41,500 Mercury Interactive Corp. (3) 1,890,325
31,550 NAVTEQ (3) 1,462,658
33,900 SunGard Data Systems, Inc. (3) 960,387
101,000 Symantec Corp. (3) 2,601,760
27,600 VeriSign, Inc. (3) 925,152
70,100 Veritas Software Corp. (3) 2,001,355
---------------
40,266,045
---------------
- ----------------------------------------------------------------
QUANTITY/PAR($) NAME OF ISSUER MARKET VALUE ($)(1)
- ----------------------------------------------------------------
TRANSPORTATION (2.8%)
29,850 C.H. Robinson Worldwide, Inc. 1,657,272
57,500 Expeditors Intl. of Washington,
Inc. 3,213,100
65,500 Southwest Airlines Co. 1,066,340
---------------
5,936,712
---------------
Total common stocks 208,790,779
(cost: $153,635,250) ---------------
SHORT-TERM SECURITIES (1.2%) (2)
2,551,000 Sit Money Market Fund, 1.76% (4) 2,551,000
(cost: $2,551,000) ---------------
Total investments in securities
(cost: $156,186,250) (5) $211,341,779
===============
See accompanying notes to portfolios of investments on page 42. 25
SIT INTERNATIONAL GROWTH FUND
SIX MONTHS ENDED DECEMBER 31, 2004
- --------------------------------------------------------------------------------
EUGENE C. SIT, CFA, SENIOR PORTFOLIO MANAGER
ROGER J. SIT, SENIOR PORTFOLIO MANAGER
The Sit International Growth Fund returned +12.57% for the last half of 2004
compared with +15.00% for the MSCI EAFE Index. The Fund's holdings in the United
Kingdom (stock selection) and India (overweight) caused the Fund to lag its
Index for the period. Additionally, the Fund's currency exposure (underweight in
euro denominated assets and overweight in dollar-pegged assets) negatively
impacted relative performance. Excellent results from Canada and Israel (stock
selection and overweight) partially offset the relative underperformance.
The Fund had a weighting of 50.0% in Europe at year-end versus 67.5% for the
Index. Even though reform measures are gradually taking hold and European
economies are experiencing modest improvement, we continue to see more
attractive opportunities in Asia ex-Japan and select non-Index countries. Within
Europe, we are shifting to higher-quality companies with high, consistent and
conservative growth prospects and solid fundamentals. We increased our exposure
to telecom by purchasing a new position in Deutsche Telekom and increasing our
position in Vodafone. We also increased our healthcare weight through
Sanofi-Aventis, Roche and Synthes.
In Japan, our weight decreased to 18.1% versus 21.9% for the Index. We look
to maintain a balanced growth portfolio of globally dominant companies,
conservative growth companies and Japan restructuring participants. We have
added to consumer companies such as Asahi Breweries, Ito-En (tea), Ito-Yokado
(retailing) and Kao Corp (healthcare products). We also took an initial position
in Nippon Oil to take advantage of record high refining margins.
Our weighting in Asia ex-Japan was 19.8% and continues to be nearly twice the
Index weight of 10.6%. We increased our exposure to material companies (BHP
Billiton and Rio Tinto) that will benefit from China's continued demand for oil
and basic materials. As has been the case for the past year, we purchased new
positions in real estate stocks (Suntec REIT and Hysan Development), as they
will benefit from rising office and retail demand.
The Fund increased its weight in Canada to 7.8% versus 0.0% for the Index. We
have added to globally, economy sensitive stocks with superior fundamentals such
as Four Seasons Hotels, Research in Motion and Shoppers Drug Mart.
- --------------------------------------------------------------------------------
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 12/31/04: $12.62 Per Share
6/30/04: $11.24 Per Share
Total Net Assets: $34.9 Million
Weighted Average Market Cap: $53.3 Billion
- --------------------------------------------------------------------------------
PORTFOLIO STRUCTURE - BY REGION
(% OF TOTAL NET ASSETS)
- --------------------------------------------------------------------------------
SIT INT'L Morgan Stanley
GROWTH FUND EAFE Index
Europe 50.0 67.5
Asia 37.9 32.5
Other 11.9 0.0
Cash & Other Net Assets 0.2 0.0
26
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS*
- --------------------------------------------------------------------------------
SIT MORGAN STANLEY LIPPER
INTERNATIONAL CAPITAL INT'L INT'L
GROWTH FUND EAFE INDEX INDEX
------------- -------------- -------
3 Month** 14.09% 15.32% 14.39%
6 Month** 12.57 15.00 14.19
1 Year 12.97 20.25 18.59
5 Year -12.97 -1.13 -0.89
10 Year 1.25 5.62 7.20
Inception 4.30 6.07 7.89
(11/1/91)
- --------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURNS*
- --------------------------------------------------------------------------------
SIT MORGAN STANLEY LIPPER
INTERNATIONAL CAPITAL INT'L INT'L
GROWTH FUND EAFE INDEX INDEX
------------- -------------- -------
1 Year 12.97% 20.25% 18.59%
5 Year -50.07 -5.55 -4.38
10 Year 13.22 72.73 100.47
Inception 74.21 117.29 172.20
(11/1/91)
*As of 12/31/04 **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
- --------------------------------------------------------------------------------
The sum of $10,000 invested at inception (11/1/91) and held until 12/31/04 would
have grown to $17,421 in the Fund, or $21,729 in the Morgan Stanley EAFE Index
assuming reinvestment of all dividends and capital gains.
- --------------------------------------------------------------------------------
PORTFOLIO STRUCTURE - BY SECTOR
(% OF TOTAL NET ASSETS)
- --------------------------------------------------------------------------------
Finance 22.8
Communications 11.6
Health
Technology 10.8
Consumer
Non-Durables 8.9
Energy Minerals 8.1
Consumer
Services 7.3
Retail Trade 6.3
Electronic
Technology 5.7
Sectors less
than 5.0% 18.3
Cash & Other
Net Assets 0.2
27
SIT INTERNATIONAL GROWTH FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
TOP 10 HOLDINGS
- --------------------------------------------------------------------------------
o Vodafone Group, p.l.c.
o BHP Billiton, Ltd.
o Tesco, p.l.c.
o Elan Corp., A.D.R.
o Telefonica SA
o UBS, A.G.
o Royal Bank of Scotland
o Sumitomo Financial Group
o Rio Tinto, A.D.R.
o Novartis, A.G.
Total Number of Holdings: 97
- ---------------------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE ($)(1)
- ---------------------------------------------------------------------------
COMMON STOCKS (98.5%) (2)
AFRICA/ MIDDLE EAST (1.9%)
ISRAEL (1.9%)
17,200 Amdocs, Ltd., A.D.R. (Tech. Services) (3) 451,500
6,300 Teva Pharmaceutical, A.D.R. (Health Tech.) 188,118
---------------
639,618
---------------
ASIA (36.6%)
AUSTRALIA (7.2%)
20,568 Australia and New Zealand Banking
Group (Finance) 331,978
68,648 BHP Billiton, Ltd. (Non-Energy Minerals) 825,495
28,800 News Corp., Ltd., A.D.R. (Consumer Svcs.) 537,408
5,400 Rio Tinto, p.l.c., A.D.R. (Non-Energy Minerals) 643,734
12,000 Westpac Banking Corp. (Finance) 183,339
---------------
2,521,954
---------------
HONG KONG / CHINA (7.0%)
102,300 Hongkong Land Holdings, Ltd. (Finance) 271,095
36,200 HSBC Holdings, p.l.c. (Finance) 619,424
82,000 Hysan Development Co. (Finance) 172,488
160,000 Li & Fung, Ltd. (Retail Trade) 269,662
434,000 Petrochina Co., Ltd. (Energy Minerals) 231,721
40,600 Sun Hung Kai Properties, Ltd. (Finance) 406,120
133,000 Techtronic Industries Co., Ltd.
(Consumer Durables) 290,034
178,000 Tsingtao Brewing Co., Ltd. (Consumer Non-
Durables) 179,770
---------------
2,440,314
---------------
INDIA (0.7%)
11,500 ICICI Bank, A.D.R. (Finance) 231,725
---------------
- ------------------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE ($)(1)
- ------------------------------------------------------------------------
JAPAN (18.1%)
4,300 AFLAC, Inc., A.D.R. (Finance) 171,312
36,200 Asahi Breweries (Consumer Non-Durables) 448,305
8,000 Canon, Inc. (Electronic Technology) 431,736
65 East Japan Railway (Transportation) 361,569
5,600 Honda Motor Co., Ltd. (Producer Mfg.) 290,192
2,500 Hitachi, Ltd. (Electronic Technology) 173,575
7,100 Ito En, Ltd. (Consumer Non Durables) 368,615
6,000 Ito-Yokado Co. (Retail) 251,781
11,000 Kao Corp. (Consumer Non-Durables) 281,253
45 Mitsubishi Tokyo Financial Group, Inc.
(Finance) 456,719
76,000 Nippon Oil Corp. (Energy Minerals) 487,284
4,000 NITTO DENKO Corp. (Producer Manufacturing) 219,381
20,000 Nomura Holdings, Inc. (Finance) 291,598
192 NTT DoCoMo, Inc. (Communications) 354,133
3,500 Softbank Corp. (Technology Services) 170,440
93 Sumitomo Mitsui Financial Group, Inc.
(Finance) 676,149
8,500 Takeda Pharmaceutical Co. (Health Tech.) 428,028
29 UFJ Holdings, Inc. (Finance) 175,749
6,200 Yamada Denki Co. (Consumer Durables) 265,619
-------------
6,303,438
-------------
SINGAPORE (2.0%)
43,446 DBS Group Holdings, Ltd. (Finance) 428,498
20,000 Flextronics Intl. (Electronic Tech.) (3) 276,400
2,000 Suntec (Finance) (3) 1,360
-------------
706,258
-------------
SOUTH KOREA (0.5%)
17,523 Industrial Bank of Korea, G.D.R. (Finance) 122,661
750 Samsung Electronics Co., G.D.R.
(Electronic Technology) 163,193
-------------
285,854
-------------
THAILAND (1.1%)
134,000 Advanced Info Services (Communications) 369,061
-------------
EUROPE (50.0%)
FINLAND (0.7%)
15,050 Nokia Corp., A.D.R. (Electronic Tech.) 235,834
-------------
FRANCE (7.5%)
15,386 AXA (Finance) 380,206
8,000 Business Objects, A.D.R. (Tech. Svcs.) (3) 202,720
3,472 Danone (Consumer Non-Durables) 320,678
7,208 Sanofi-Aventis (Health Technology) (3) 576,091
5,600 Schlumberger, Ltd. (Industrial Svcs.) 374,920
2,403 Total, S.A. (Energy Minerals) 524,891
6,437 Veolia Environment (Utilities) 232,999
-------------
2,612,505
-------------
28
- ---------------------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE ($)(1)
- ---------------------------------------------------------------------------
GERMANY (4.3%)
21,500 Deutsche Telekom, A.D.R. (Communications) 487,620
2,525 Muenchener Rueckver (Finance) 309,885
2,723 SAP AG (Technology Services) 485,602
2,558 Siemens AG (Technology Services) 216,893
---------------
1,500,000
---------------
GREECE (1.2%)
13,000 Top Tankers, Inc. (Transportation) (3) 211,250
6,000 Tsakos Energy Navigation, Ltd., A.D.R.
(Transportation) 214,740
---------------
425,990
---------------
IRELAND (2.2%)
27,500 Elan Corp., A.D.R. (Health Technology) (3) 749,375
---------------
ITALY (2.2%)
66,957 Telecom Italia (Saving) (Communications) 273,944
39,540 Telecom Italia (Ord.) (Communications) 128,450
47,750 Telecom Italia Mobile (Communications) 356,973
---------------
759,367
---------------
NETHERLANDS (3.3%)
12,500 ASML Holding N.V., A.D.R.
(Electronic Technology) (3) 198,875
18,210 ING Groep N.V. (Finance) 550,978
7,185 Koninklijke (Royal) Philips Electronics N.V.
(Electronic Technology) 190,539
3,500 Royal Dutch Petroleum, A.D.R.
(Energy Minerals) 200,830
---------------
1,141,222
---------------
SPAIN (2.1%)
38,100 Telefonica, S.A. (Communications) 717,774
---------------
SWEDEN (1.1%)
12,500 Ericsson, A.D.R. (Electronic Tech.) (3) 393,625
---------------
SWITZERLAND (9.4%)
10,234 Credit Suisse Group (Finance) 430,204
2,358 Nestle, S.A. (Consumer Non-Durables) 616,925
12,586 Novartis, A.G. (Health Technology) 634,226
4,717 Roche Holdings, A.G. (Health Tech.) 543,009
2,987 Synthes, Inc. (Health Technology) 334,924
8,500 UBS, A.G. (Finance) 712,756
---------------
3,272,044
---------------
UNITED KINGDOM (16.0%)
5,600 BP p.l.c., A.D.R. (Energy Minerals) 327,040
28,790 Barclays, p.l.c. (Finance) 323,905
50,056 Burberry Group, p.l.c. (Retail Trade) 385,371
13,914 Cairn Energy, p.l.c. (Energy Minerals) (3) 291,177
16,666 Diageo, p.l.c. (Consumer Non-Durables) 237,738
- ---------------------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE ($)(1)
- ---------------------------------------------------------------------------
6,500 GlaxoSmithkline, A.D.R. (Health Tech.) 308,035
40,486 Hilton Group, p.l.c. (Consumer Services) 221,139
9,488 Reckitt Benckiser, p.l.c. (Cons. Non-Durables) 286,720
21,115 Royal Bank of Scotland (Finance) 710,238
124,762 Tesco, p.l.c. (Retail Trade) 770,690
38,380 Unilever, p.l.c. (Consumer Non-Durables) 376,903
339,846 Vodafone Group, p.l.c. (Communications) 921,615
37,200 WPP Group p.l.c. (Consumer Services) 409,239
---------------
5,569,810
---------------
LATIN AMERICA (2.2%)
MEXICO (2.2%)
9,000 NII Holdings, Inc. (Communications) (3) 427,050
97,130 Wal-Mart de Mexico (Retail Trade) 333,729
---------------
760,779
---------------
NORTH AMERICA (7.8%)
CANADA (7.8%)
8,500 Cognos, Inc. (Technology Services) (3) 374,510
4,500 EnCana Corp. (Energy Minerals) 256,896
5,300 Four Seasons Hotels, Inc. (Consumer Svcs.) 433,487
12,500 Great Canadian Gaming Corp. (Consumer
Services) (3) 474,795
5,500 Precision Drilling Corp. (Industrial Svcs.) (3) 345,400
1,500 Research In Motion, Ltd. (Electronic Tech.) (3) 123,630
6,050 Shoppers Drug Mart Corp. (Retail) (3) 188,193
8,000 Suncor Energy, Inc. (Energy Minerals) 283,200
9,000 Talisman Energy, Inc. (Energy Minerals) 242,640
---------------
2,722,751
---------------
Total common stocks 34,359,298
(cost: $28,419,233) ---------------
CLOSED-END MUTUAL FUND (1.3%) (2)
15,500 India Fund (Consumer Services) 459,420
(cost: $277,184) ---------------
SHORT TERM SECURITIES (0.2%) (2)
71,000 Sit Money Market Fund, 1.76% (4) 71,000
(cost: $71,000) ---------------
Total investments in securities
(cost: $28,767,417) (5) $34,889,718
===============
See accompanying notes to portfolios of investments on page 42. 29
SIT SMALL CAP GROWTH FUND
SIX MONTHS ENDED DECEMBER 31, 2004
- --------------------------------------------------------------------------------
EUGENE C. SIT, CFA, SENIOR PORTFOLIO MANAGER
The Sit Small Cap Growth Fund returned +5.69% over the past six months. This
compares to the six-month return of +10.83% for the Russell 2000 Index, while
the Russell 2000 Growth Index rose +8.15% over the period.
The equity markets capped what had been a frustrating first ten months of the
year with a strong rally in the final two months of 2004. Although the decisive
outcome of the national election was the primary catalyst for the rally, market
fundamentals clearly played a role. Oil prices retreating from their highs, the
economy continuing to expand at a solid pace with minimal signs of inflation,
and the long awaited pickup in mergers and acquisition activity were also key
factors. While equity valuations appear reasonable based on our 2005 forecast
for slowly rising interest rates and solid corporate earnings growth, we believe
small cap stocks have potential to outperform once again, given the positive
investor sentiment and strong fundamentals within many sectors.
While the Fund posted solid absolute returns during the second half of 2004,
its relative returns (to the Russell 2000 Growth Index) were negatively impacted
by our holdings in health services, electronic technology and finance. On a
positive note, the strategic decision to overweight the energy sector continued
to pay off over the past six months, with strong stock selection in the group
further enhancing returns. Good stock selection in technology services and
transportation also helped relative returns over the period.
Although the Fund's largest sector weights remain electronic technology,
health technology and technology services, the commitment to these areas is
somewhat below that of June 30, 2004. In light of attractive valuations and
improving cyclical fundamentals in the industrial economy, we have allocated
more of the portfolio in recent months to the energy, producer manufacturing,
and transportation sectors.
We strongly believe that the Fund is positioned well to benefit from the
continued positive investor sentiment for small cap stocks and the attractive
investment environment for growth stock investing that we foresee in the year
ahead.
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE AND STRATEGY
- --------------------------------------------------------------------------------
The objective of the Sit Small Cap Growth Fund is to maximize long-term
capital appreciation. The Fund seeks to achieve its objective by investing at
least 80% of its net assets in common stocks of small growth companies with
capitalizations of $2.5 billion or less at the time of purchase.
The Adviser invests in a diversified group of growing small companies it
believes exhibit the potential for superior growth. The Adviser believes that a
company's earnings growth is the primary determinant of its potential long-term
return and evaluates a company's potential for above average long-term earnings
and revenue growth.
- --------------------------------------------------------------------------------
PORTFOLIO SUMMARY
- --------------------------------------------------------------------------------
Net Asset Value 12/31/04: $26.73 Per Share
6/30/04: $25.29 Per Share
Total Net Assets: $192.4 Million
Weighted Average Market Cap: $2.4 Billion
- --------------------------------------------------------------------------------
PORTFOLIO STRUCTURE - BY SECTOR
- --------------------------------------------------------------------------------
Electronic Technology 15.9
Health Technology 14.4
Technology Services 11.2
Energy Minerals 9.6
Finance 7.4
Producer
Manufacturing 6.3
Retail Trade 6.3
Sectors less than 5.0% 28.1
Cash & Other
Net Assets 0.8
30
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS*
- --------------------------------------------------------------------------------
SIT RUSSELL
SMALL CAP RUSSELL 2000 2000
GROWTH FUND INDEX GROWTH INDEX
----------- ------------ ------------
3 Month** 12.59% 14.10% 15.07%
6 Month** 5.69 10.83 8.15
1 Year 6.79 18.33 14.31
5 Year -4.15 6.61 -3.58
10 Year 12.48 11.54 7.11
Inception 13.00 11.42 7.59
(7/1/94)
- --------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURNS*
- --------------------------------------------------------------------------------
SIT RUSSELL
SMALL CAP RUSSELL 2000 2000
GROWTH FUND INDEX GROWTH INDEX
----------- ------------ ------------
1 Year 6.79% 18.33% 14.31%
5 Year -19.10 37.71 -16.65
10 Year 224.07 197.96 98.83
Inception 261.56 211.69 115.77
(7/1/94)
*As of 12/31/04 **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 12/31/04 would
have grown to $36,156 in the Fund, or $31,169 in the Russell 2000 Index assuming
reinvestment of all dividends and capital gains.
- --------------------------------------------------------------------------------
TOP 10 HOLDINGS
- --------------------------------------------------------------------------------
o Quicksilver Resources, Inc.
o Biosite, Inc.
o Juniper Networks, Inc.
o Kronos, Inc.
o C.H. Robinson Worldwide, Inc.
o Equitable Resources, Inc.
o Coach, Inc.
o Southwestern Energy Co.
o Cuno, Inc.
o Chico's FAS, Inc.
Total Number of Holdings: 99
31
SIT SMALL CAP GROWTH FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 2004 (UNAUDITED)
- ----------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE ($)(1)
- ----------------------------------------------------------------
COMMON STOCKS (99.2%) (2)
COMMERCIAL SERVICES (3.3%)
47,700 Getty Images, Inc. (3) 3,284,145
11,500 Portfolio Recovery Assoc. (3) 474,030
142,700 SkillSoft, A.D.R. (3) 806,255
32,500 Zebra Technologies Corp. (3) 1,829,100
--------------
6,393,530
--------------
COMMUNICATIONS (3.0%)
46,750 Alamosa Hldgs., Inc. (3) 582,972
55,250 NII Holdings, Inc. (3) 2,621,613
26,350 Spectrasite, Inc. (3) 1,525,665
65,800 Ubiquitel, Inc. (3) 468,496
109,700 US Unwired, Inc. (3) 526,560
--------------
5,725,306
--------------
CONSUMER DURABLES (2.5%)
29,900 Polaris Industries, Inc. 2,033,798
58,400 Scientific Games Corp. (3) 1,392,256
40,500 WMS Industries, Inc. (3) 1,358,370
--------------
4,784,424
--------------
CONSUMER NON-DURABLES (2.0%)
68,250 Coach, Inc. (3) 3,849,300
--------------
CONSUMER SERVICES (1.5%)
45,000 Aztar Corp. (3) 1,571,400
67,000 Corinthian Colleges, Inc. (3) 1,262,615
--------------
2,834,015
--------------
ELECTRONIC TECHNOLOGY (15.9%)
60,600 Cognex Corp. 1,690,740
188,500 Cray, Inc. (3) 878,410
78,700 Cymer, Inc. (3) 2,324,798
139,500 Foundry Networks, Inc. (3) 1,835,820
105,460 Intersil Corp. 1,765,400
164,061 Juniper Networks, Inc. (3) 4,460,819
84,625 Kronos, Inc. (3) 4,326,876
53,200 OmniVision Technologies, Inc. (3) 976,220
52,800 Plantronics, Inc. (3) 2,189,616
17,500 Silicon Image, Inc. (3) 288,050
71,200 Silicon Laboratories, Inc. (3) 2,514,072
29,400 Skyworks Solutions, Inc. (3) 277,242
49,175 Synaptics, Inc. (3) 1,503,772
243,050 Sonus Networks, Inc. (3) 1,392,677
49,400 Trimble Navigation, Ltd. (3) 1,632,176
69,800 Varian Semiconductor Equip.
Associates, Inc. (3) 2,572,130
--------------
30,628,818
--------------
- ----------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE ($)(1)
- ----------------------------------------------------------------
ENERGY MINERALS (9.6%)
97,850 Carrizo Oil & Gas, Inc. (3) 1,105,705
112,450 Frontier Oil Corp. 2,997,917
755,575 Gasco Energy, Inc. (3) 3,218,749
155,100 Quicksilver Resources, Inc. (3) 5,704,578
73,300 Southwestern Energy Co. (3) 3,715,577
47,000 Spinnaker Exploration Co. (3) 1,648,290
--------------
18,390,816
--------------
FINANCE (7.4%)
33,275 Affiliated Managers Group, Inc. (3) 2,254,048
50,300 National Financial Partners Corp. 1,951,640
145,436 New York Community Bancorp, Inc. 2,991,619
68,000 Platinum Underwriters Holdings, Ltd. 2,114,800
57,770 UCBH Holdings, Inc. 2,647,021
39,350 Wintrust Financial Corp. 2,241,376
--------------
14,200,504
--------------
HEALTH SERVICES (2.0%)
23,500 Covance, Inc. (3) 910,625
44,350 Stericycle, Inc. (3) 2,037,883
45,500 VCA Antech, Inc. (3) 891,800
--------------
3,840,308
--------------
HEALTH TECHNOLOGY (14.4%)
43,500 Amylin Pharmaceuticals, Inc. (3) 1,016,160
79,700 Biosite, Inc. (3) 4,904,738
131,100 Celgene Corp. (3) 3,478,083
44,500 Connetics Corp. (3) 1,080,905
210,850 CryoLife, Inc. (3) 1,490,709
42,750 Dendreon Corp. (3) 460,845
317,670 Encore Medical Corp. (3) 2,156,979
64,650 Given Imaging, Ltd. (3) 2,321,582
23,500 Invitrogen Corp. (3) 1,577,555
106,900 Kyphon, Inc. (3) 2,753,744
19,450 Neurocrine Biosciences, Inc. (3) 958,885
58,000 NuVasive, Inc. (3) 594,500
162,700 Sangamo BioSciences, Inc. (3) 976,200
61,750 Telik, Inc. (3) 1,181,895
94,400 Wright Medical Group, Inc. (3) 2,690,400
--------------
27,643,180
--------------
INDUSTRIAL SERVICES (3.7%)
29,300 CARBO Ceramics, Inc. 2,021,700
80,500 Chicago Bridge & Iron Co. 3,220,000
45,600 Core Laboratories N.V. (3) 1,064,760
28,000 FMC Technologies, Inc. (3) 901,600
--------------
7,208,060
--------------
32
- ----------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE ($)(1)
- ----------------------------------------------------------------
PROCESS INDUSTRIES (3.5%)
61,250 Cuno, Inc. (3) 3,638,250
33,950 Dionex Corp. (3) 1,923,946
23,700 Millipore Corp. (3) 1,180,497
--------------
6,742,693
--------------
PRODUCER MANUFACTURING (6.3%)
54,200 AMETEK, Inc. 1,933,314
17,100 DRS Technologies, Inc. (3) 730,341
50,600 IDEX Corp. 2,049,300
75,500 Joy Global, Inc. 3,278,965
70,050 Kaydon Corp. 2,313,051
30,800 Roper Industries, Inc. 1,871,716
--------------
12,176,687
--------------
RETAIL TRADE (6.3%)
56,000 Advance Auto Parts, Inc. (3) 2,446,080
42,000 Aeropostale, Inc. (3) 1,236,060
17,400 Cabela's Inc. (3) 395,676
77,750 Chico's FAS, Inc. (3) 3,539,957
38,500 Coldwater Creek, Inc. (3) 1,188,495
5,750 Guitar Center Mgmt., Inc. (3) 302,968
75,200 PETCO Animal Supplies, Inc. (3) 2,968,896
--------------
12,078,132
--------------
TECHNOLOGY SERVICES (11.2%)
67,000 Altiris, Inc. (3) 2,373,810
127,550 Business Objects S.A., A.D.R. (3) 3,232,117
28,300 CACI International, Inc. (3) 1,928,079
99,200 Citrix Systems, Inc. (3) 2,433,376
15,500 Hyperion Solutions, Inc. (3) 722,610
227,350 Informatica Corp. (3) 1,846,082
37,500 InfoSpace, Inc. (3) 1,783,125
50,700 Mercury Interactive Corp. (3) 2,309,385
18,000 Navigant Consulting, Inc. (3) 478,800
112,800 Quest Software, Inc. (3) 1,799,160
73,450 SS&C Technologies, Inc. 1,516,743
17,450 Websense, Inc. (3) 885,064
66,100 Zix Corp. (3) 340,415
--------------
21,648,766
--------------
TRANSPORTATION (4.6%)
77,350 C.H. Robinson Worldwide, Inc. 4,294,472
32,550 Tsakos Energy Navigation, Ltd. 1,164,965
48,700 UTI Worldwide, Inc. 3,312,574
--------------
8,772,011
--------------
- ----------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE ($)(1)
- ----------------------------------------------------------------
UTILITIES (2.0%)
64,100 Equitable Resources, Inc. 3,888,306
--------------
Total common stocks
(cost: $151,394,804) 190,804,856
--------------
SHORT-TERM SECURITIES (0.8%) (2)
1,632,000 Sit Money Market Fund, 1.76% (4) 1,632,000
(cost: $1,632,000) --------------
Total investments in securities
(cost: $153,026,804) (5) $192,436,856
==============
See accompanying notes to portfolios of investments on page 42. 33
SIT SCIENCE AND TECHNOLOGY GROWTH FUND
SIX MONTHS ENDED DECEMBER 31, 2004
- --------------------------------------------------------------------------------
EUGENE C. SIT, CFA, SENIOR PORTFOLIO MANAGER
The Sit Science and Technology Growth Fund returned +1.50% over the last six
months, compared to a +7.19% return for the S&P 500 Index and a +5.93% return
for the Pacific Stock Exchange (PSE) Technology 100 Index.
Following the strong performance of 2003, science and technology stocks
posted more modest returns in 2004. While fundamentals for most
technology-related industries continued to improve though the year, investor
preference for more conservative stocks took hold as concerns mounted over the
presidential election, interest rates, Iraq, and terrorism. Investor sentiment
on science and technology stocks improved markedly with the year-end market
rally, and we believe several fundamental factors support a positive outlook for
2005. First, recent trends and surveys related to capital spending continue to
support slow and steady growth of business outlays, including technology-related
investments. Second, balance sheets for most technology companies have never
been as strong, therefore increasing the potential for share repurchases,
dividends, and merger and acquisition activity. And finally, with earnings
growth generally exceeding price gains for many technology stocks over the past
twelve months, valuations for companies held in the Fund remain attractive based
on our expectations for solid earnings growth in 2005. Software, storage,
network security, biotechnology and medical devices are among the areas of
investment focus within the Fund.
Although the Fund participated in the market run up in the final two months
of 2004, results for the full six-month period trailed the PSE Technology 100
Index. Relative to the Index return, the Fund's electronic technology sector
negatively impacted returns, largely due to our holding in Broadcom Corp. (which
fell -31%) and an underweight in shares of Apple Computer, which rose +98%
during the second half of the year. On a positive note, the Fund's technology
services sector outperformed during the period, led by strong performance from
Autodesk (+77%), NAVTEQ Corp. (+83%) and Cognos (+22%).
The Fund continues to be well diversified and our research team remains
focused on identifying the most attractive cyclical and secular growth
opportunities in the science and technology sectors.
- --------------------------------------------------------------------------------
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 12/31/04: $10.17 Per Share
6/30/04: $10.02 Per Share
Total Net Assets: $17.4 Million
Weighted Average Market Cap: $29.0 Billion
- --------------------------------------------------------------------------------
PORTFOLIO STRUCTURE - BY SECTOR
(% OF TOTAL NET ASSETS)
- --------------------------------------------------------------------------------
Electronic Technology 33.6
Technology Services 31.2
Health Technology 29.0
Sectors less than 5.0% 4.0
Cash & Other
Net Assets 2.2
34
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS*
- --------------------------------------------------------------------------------
SIT
SCIENCE AND
TECHNOLOGY S&P
GROWTH FUND 500 INDEX
----------- ---------
3 Month** 13.00% 9.23%
6 Month** 1.50 7.19
1 Year 7.39 10.88
3 Years -5.81 3.59
5 Years -16.42 -2.30
Inception 0.69 4.76
(12/31/97)
- --------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURNS*
- --------------------------------------------------------------------------------
SIT
SCIENCE AND
TECHNOLOGY S&P
GROWTH FUND 500 INDEX
----------- ---------
1 Year 7.39% 10.88%
3 Years -16.43 11.15
5 Years -59.22 -10.98
Inception 4.97 38.54
(12/31/97)
*As of 12/31/04 **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 12/31/04
would have grown to $10,497 in the Fund or grown to $13,854 in the S&P 500
Index.
- --------------------------------------------------------------------------------
TOP 10 HOLDINGS
- --------------------------------------------------------------------------------
o Elan Corp., A.D.R.
o Juniper Networks, Inc.
o Autodesk, Inc.
o Adobe Systems, Inc.
o Amgen, Inc.
o Yahoo!, Inc.
o Veritas Software Corp.
o Ebay, Inc.
o Symantec Corp.
o Qualcomm, Inc.
Total Number of Holdings: 62
35
SIT SCIENCE AND TECHNOLOGY GROWTH FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 2004 (UNAUDITED)
- ----------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE ($)(1)
- ----------------------------------------------------------------
COMMON STOCKS (100.2%) (2)
ELECTRONIC TECHNOLOGY (33.6%)
6,800 Agilent Technologies, Inc. (3) 163,880
7,800 Analog Devices, Inc. 287,976
3,800 Apple Computer, Inc. (3) 244,720
9,000 Broadcom Corp. (3) 290,520
21,000 Cisco Systems, Inc. (3) 405,300
6,400 Cognex Corp. 178,560
8,000 Dell Computer Corp. (3) 337,120
20,300 EMC Corp. (3) 301,861
14,800 Foundry Networks, Inc. (3) 194,768
11,200 Intel Corp. 261,968
7,000 Intervoice, Inc. (3) 93,450
30,617 Juniper Networks, Inc. (3) 832,476
9,200 Lam Research Corp. (3) 265,972
6,800 Network Appliance, Inc. (3) 225,896
9,600 Qualcomm, Inc. 407,040
2,000 Portalplayer, Inc. (3) 49,360
2,000 Research In Motion, Ltd. (3) 164,840
11,200 Rimage Corp. (3) 179,872
40,200 Sonus Networks, Inc. (3) 230,346
5,800 Synaptics, Inc. (3) 177,364
8,000 Tekelec 163,520
5,000 Tessera Technologies, Inc. (3) 186,050
6,800 Xilinx, Inc. 201,620
--------------
5,844,479
--------------
HEALTH TECHNOLOGY (29.0%)
7,200 Amgen, Inc. (3) 461,880
6,000 Biogen Idec, Inc. (3) 399,660
4,200 Biomet, Inc. 182,238
8,000 Boston Scientific Corp. (3) 284,400
4,600 Connetics Corp. (3) 111,734
2,000 Cyberonics, Inc. (3) 41,440
37,000 Elan Corp., A.D.R (3) 1,008,250
3,400 Eyetech Pharmaceuticals, Inc. (3) 154,700
7,000 Genentech, Inc. (3) 381,080
8,000 Gilead Sciences, Inc. (3) 279,920
8,600 Given Imaging, Ltd. (3) 308,826
13,800 Kyphon, Inc. (3) 355,488
- ----------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE ($)(1)
- ----------------------------------------------------------------
6,800 Medimmune, Inc. (3) 184,348
4,600 Medtronic, Inc. 228,482
17,400 NuVasive, Inc. (3) 178,350
8,200 St. Jude Medical, Inc. (3) 343,826
15,000 Tercica, Inc. (3) 150,150
--------------
5,054,772
--------------
PRODUCER MANUFACTURING (4.0%)
5,600 Harris Corp. 346,024
11,400 Thermo Electron Corp. (3) 344,166
--------------
690,190
--------------
RETAIL TRADE (2.4%)
3,600 eBay, Inc. (3) 418,608
--------------
TECHNOLOGY SERVICES (31.2%)
7,600 Adobe Systems, Inc. 476,824
7,400 Amdocs, Ltd. (3) 194,250
13,200 Autodesk, Inc. 500,940
12,200 Business Objects, A.D.R. (3) 309,148
6,000 Check Point Software Technology (3) 147,780
8,200 Cognos, Inc. (3) 361,292
5,500 First Data Corp. 233,970
1,800 Google, Inc. (3) 347,580
7,800 McAfee, Inc. (3) 225,654
6,900 Mercury Interactive Corp. (3) 314,295
9,000 Microsoft Corp. 240,390
3,600 NAVTEQ (3) 166,896
8,600 Oracle Corp. (3) 117,992
7,800 SAP, A.D.R. 344,838
16,000 Symantec Corp. (3) 412,160
15,800 Veritas Software Corp. (3) 451,090
12,000 Yahoo!, Inc. (3) 452,160
25,000 Zix Corp. 128,750
--------------
5,426,009
--------------
Total common stocks 17,434,058
(cost: $14,328,441) --------------
SHORT-TERM SECURITIES (0.0%) (2)
1,000 Sit Money Market Fund, 1.76% (4) 1,000
(cost: $1,000) --------------
Total investments in securities
(cost: $14,329,441) $17,435,058
--------------
36 See accompanying notes to portfolios of investments on page 42.
This page has been left blank intentionally.
37
SIT DEVELOPING MARKETS GROWTH FUND
SIX MONTHS ENDED DECEMBER 31, 2004
- --------------------------------------------------------------------------------
SENIOR PORTFOLIO MANAGERS
EUGENE C. SIT, CFA AND ROGER J. SIT
The Sit Developing Markets Growth Fund returned +21.60% for six months ended
December 31, 2004 compared with +25.44% for the MSCI Emerging Markets Index. The
Fund's Russian energy holdings drove most of the relative underperformance due
to stock selection along with the Fund's limited Brazilian currency exposure.
The Fund's holdings in Romania, Mexico and Thailand performed very well, but
only partially offset this underperformance.
In Asia, the Fund had a weighting of 64.4% versus 54.0% for the Index. It
appears that China has engineered a soft landing with GDP growth estimated to be
in the mid-single digits in 2005 and that the speculated Renminbi revaluation
will have a smaller impact on the economy than initially anticipated. The Fund
increased its positions in Rio Tinto and Thai Oil, as China continues to demand
more oil and basic materials. The Fund also increased its position in Tsingtao
Brewery due to the strong Chinese consumer. Finally, the Fund purchased a new
position in the Singapore telecom company, Starhub, based on its stellar growth
prospects.
The Fund increased its weight in Latin America to 22.9% versus the Index
weight of 19.3%, as the economic recovery is well underway. Mexico's economy
will continue to benefit from the high price of oil and the strong U.S. economy.
Brazil is seeing gradual signs of a turnaround. The Fund recently increased its
positions in Homex (Mexican home builder) and Tele Norte Leste (Brazilian
telecom).
We remain materially underweight in the Middle East, Emerging Europe and
Africa (10.9% versus 26.7% for the Index). In Eastern Europe, the Fund increased
its positions in Central European Media (television broadcasting) and Mobile
Telesystems (Russian wireless telecom) based on improving growth prospects. In
Israel, the Fund increased its holdings in Reliance Industries (oil refining)
and Amdocs (billing software provider) based on strong company fundamentals.
- --------------------------------------------------------------------------------
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 12/31/04: $12.01 Per Share
6/30/04: $9.89 Per Share
Total Net Assets: $9.7 Million
Weighted Average Market Cap: $50.6 Billion
- --------------------------------------------------------------------------------
PORTFOLIO STRUCTURE - BY REGION
(% OF TOTAL NET ASSETS)
- --------------------------------------------------------------------------------
Sit Developing MSCI Emerging
Markets Growth Fund Markets Free Index
Asia 64.4 54.0
Latin America 22.9 19.3
Africa/
Middle East 7.7 17.0
Europe 3.2 9.7
Cash & Other
Net Assets 1.8 0.0
38
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS*
- --------------------------------------------------------------------------------
SIT MSCI LIPPER
DEVELOPING EMERGING EMERGING
MARKETS MARKETS MARKETS
GROWTH FUND INDEX INDEX
----------- -------- --------
3 Month** 13.67% 16.81% 17.31%
6 Month** 21.60 25.44 27.12
1 Year 16.54 22.45 25.70
5 Year -3.13 2.07 4.64
10 Year 2.20 0.96 3.83
Inception 1.90 1.18 3.85
(7/1/94)
- --------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURNS*
- --------------------------------------------------------------------------------
SIT MSCI LIPPER
DEVELOPING EMERGING EMERGING
MARKETS MARKETS MARKETS
GROWTH FUND INDEX INDEX
----------- -------- --------
1 Year 16.54% 22.45% 25.70%
5 Year -14.70 10.78 25.47
10 Year 24.36 10.07 45.57
Inception 21.85 13.15 48.78
(7/1/94)
*As of 12/31/04 **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
INDEX. THE LIPPER AVERAGES AND INDICES ARE OBTAINED FROM LIPPER ANALYTICAL
SERVICES, INC., A LARGE INDEPENDENT EVALUATOR OF MUTUAL FUNDS.
- --------------------------------------------------------------------------------
GROWTH OF $10,000
- --------------------------------------------------------------------------------
The sum of $10,000 invested at inception (7/1/94) and held until
12/31/04 would have increased to $12,185 in the Fund, or $11,315 in the Morgan
Stanley Capital Intl Emerging Markets Index assuming reinvestment of all
dividends and capital gains.
- --------------------------------------------------------------------------------
PORTFOLIO STRUCTURE - BY SECTOR
(% OF TOTAL NET ASSETS)
- --------------------------------------------------------------------------------
Finance 19.3
Communications 18.1
Non-Energy Minerals 14.3
Consumer Services 11.3
Energy Minerals 9.7
Electronic Technology 7.4
Retail Trade 7.0
Sectors less than 3.0% 11.1
Cash & Other
Net Assets 1.8
39
SIT DEVELOPING MARKETS GROWTH FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
10 LARGEST HOLDINGS
- --------------------------------------------------------------------------------
o Samsung Electronics
o BHP Billiton Limited, A.D.R.
o India Fund
o Anglo American p.l.c.
o Petrochina Co.
o America Movil, A.D.R.
o Advanced Info Service Public Co., Ltd.
o Central European Media Enterprises, Ltd.
o Grupo Televisa S.A., A.D.R.
o Posco, A.D.R.
Total Number of Holdings: 60
- -----------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE ($)(1)
- -----------------------------------------------------------------
COMMON STOCKS (93.1%) (2)
AFRICA/ MIDDLE EAST (7.7%)
ISRAEL (4.7%)
8,000 Amdocs, Ltd. (Technology Services) (3) 210,000
2,500 Given Imaging, Ltd. (Health
Technology) (3) 89,775
5,200 Teva Pharmaceutical, A.D.R.
(Health Technology) 155,272
-----------
455,047
-----------
SOUTH AFRICA (3.0%)
12,100 Anglo American p.l.c. (Non-Energy
Minerals) 286,203
-----------
ASIA (59.3%)
AUSTRALIA (7.5%)
21,410 BHP Billiton, Ltd., A.D.R.
(Non-Energy Minerals) 514,268
1,800 Rio Tinto, A.D.R, (Non-Energy
Minerals) 214,578
-----------
728,846
-----------
CHINA / HONG KONG (14.9%)
44,500 China Mobile (Hong Kong), Ltd.
(Communications) 150,858
75,000 Hongkong Land Holdings, Ltd.
(Finance) 198,750
9,400 HSBC Holdings p.l.c. (Finance) 160,845
42,000 Li & Fung, Ltd. (Retail Trade) 70,786
512,000 PetroChina Co. (Energy Minerals) 273,367
276,000 PICC Property & Casualty Co., Ltd.
(Finance)(3) 95,874
222,508 Ports Design, Ltd. (Retail Trade) 119,517
13,000 Sun Hung Kai Properties, Ltd.
(Finance) 130,038
118,000 Tsingtao Brewery Co., Ltd. (Consumer
Non-Durables) 119,174
15,100 Wing Lung Bank, Ltd. (Finance) 122,390
-----------
1,441,599
-----------
- -----------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE ($)(1)
- -----------------------------------------------------------------
INDIA (2.7%)
6,500 ICICI Bank, A.D.R. (Finance) 130,975
5,000 Reliance Industries, Ltd., G.D.R.
(Energy Minerals) 129,500
-----------
260,475
-----------
MALAYSIA (2.2%)
71,100 Astro All Asia Networks, p.l.c.
(Consumer Services) (3) 101,037
47,000 Maxis Berhad (Communications) 115,645
-----------
216,682
-----------
RUSSIA (4.7%)
1,500 LUKOIL, A.D.R. (Energy Minerals) 182,100
800 Mobile Telesystems, A.D.R.
(Communications) 110,808
4,500 Vimpel Communications, A.D.R.
(Communications) (3) 162,630
-----------
455,538
-----------
SINGAPORE (2.0%)
12,097 DBS Group Holdings, Ltd. (Finance) 119,310
109,000 Starhub, Ltd. (Communications) (3) 73,450
-----------
192,760
-----------
SOUTH KOREA (16.0%)
700 Cheil Communications, Inc.
(Commercial Services) 101,768
16,007 Industrial Bank of Koea (Finance) 112,049
2,200 Kookmin Bank (Finance) 86,070
600 Kookmin Bank, A.D.R. (Finance) 23,448
5,000 POSCO, A.D.R. (Non-Energy Minerals) 222,650
1,269 Samsung Electronics (Electronic
Technology) 552,245
8,100 Shinhan Financial Group (Finance) 183,095
570 Shinsegae Co., Ltd. (Retail Trade) 156,651
5,100 SK Telecom Co., A.D.R.
(Communications) 113,475
-----------
1,551,451
-----------
TAIWAN (4.2%)
52,000 Cathay Financial Holding Co., Ltd.
(Finance) 106,658
86,887 Chinatrust Financial Holding Co., Ltd.
(Finance) 103,914
102,460 Taiwan Semiconductor Co. (Electronic
Technology) 163,276
25,000 Thai Public Oil Co. (Energy
Minerals) (3) 32,819
-----------
406,667
-----------
40
- -----------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE ($)(1)
- -----------------------------------------------------------------
THAILAND (5.1%)
94,600 Advanced Info Service Public Co.,
Ltd. (Communications) 260,546
50,600 Bangkok Bank Public Co., Ltd.
(Finance) (3) 148,479
278,800 Land & Houses Public Co., Ltd.
(Consumer Durables) 81,092
----------
490,117
----------
EUROPE (3.2%)
GREECE (0.6%)
1,500 Tsakos Energy Navigation, Ltd.,
A.D.R. (Transportation) 53,685
----------
53,685
----------
ROMANIA (2.6%)
6,500 Central European Media Enterprises,
Ltd. (Consumer Services) (3) 253,383
----------
LATIN AMERICA (22.9%)
BRAZIL (11.7%)
5,979 Banco Bradesco S.A. (Finance) 144,590
220 Banco Bradesco S.A. (Rights) (Finance) 2,007
1,500 Brasil Telecom, A.D.R. (Communications) 57,225
5,100 Companhia Vale do Rio Doce, A.D.R.
(Non-Energy Minerals) 147,951
3,883 Embraer de Aeronautica, A.D.R.
(Transportation) 129,848
6,900 Pao de Acucar, A.D.R. (Retail
Trade) 176,640
5,860 Petrobras (Energy Minerals) 214,345
2,800 Petrobras, A.D.R. (Energy Minerals) 111,384
8,600 Tele Norte Leste Participacoes, A.D.R.
(Communications) 145,082
----------
1,129,072
----------
MEXICO (11.2%)
5,200 America Movil, A.D.R. (Communications) 272,220
4,100 Grupo Televisa S.A., A.D.R. (Consumer
Services) 248,050
2,500 Homex, A.D.R. (Consumer Durables)
(3) 59,125
4,500 NII Holdings, Inc. (Communications)
(3) 213,525
1,900 Telefonos de Mexico, A.D.R.
(Communications) 72,808
64,770 Wal-Mart de Mexico (Retail
Trade) 222,543
----------
1,088,271
----------
Total common stocks 9,009,796
(cost: $6,389,550) ----------
- -----------------------------------------------------------------
QUANTITY NAME OF ISSUER MARKET VALUE ($)(1)
- -----------------------------------------------------------------
CLOSED-END MUTUAL FUND (5.1%) (2)
16,640 India Fund (Consumer Services) 493,210
(cost: $276,224) ------------
SHORT-TERM SECURITIES (2.5%) (2)
240,000 Sit Money Market Fund, 1.76% (4) 240,000
(cost: $240,000) ------------
Total investments in securities
(cost: $6,905,774) (5) $9,743,006
============
See accompanying notes to portfolios of investments on page 42. 41
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, 2004, the cost of securities for federal income tax
purposes and the aggregate gross unrealized appreciation and depreciation
based on that cost were as follows:
DIVIDEND LARGE CAP MID CAP
BALANCED GROWTH GROWTH GROWTH
FUND FUND FUND FUND
----------- ----------- ----------- ----------
Cost for federal income tax purposes $10,836,766 $8,117,734 $53,676,023 $156,186,250
=========== =========== =========== ============
Unrealized appreciation (depreciation) on
investments:
Gross unrealized appreciation $1,755,510 $844,603 $14,521,384 $58,763,971
Gross unrealized depreciation (438,700) (135,197) (3,905,285) (3,608,441)
----------- ----------- ----------- ----------
Net unrealized appreciation (depreciation) $1,316,810 $709,406 $10,616,099 $55,155,530
=========== =========== =========== ============
SCIENCE AND DEVELOPING
INTERNATIONAL SMALL CAP TECHNOLOGY MARKETS
GROWTH GROWTH GROWTH GROWTH
FUND FUND FUND FUND
----------- ----------- ----------- ----------
Cost for federal income tax purposes $28,767,417 $153,026,804 $14,329,441 $6,905,774
=========== =========== =========== ============
Unrealized appreciation (depreciation) on
investments:
Gross unrealized appreciation $6,801,314 $50,414,063 $4,664,230 $2,990,823
Gross unrealized depreciation (679,013) (11,004,012) (1,558,612) (153,592)
----------- ----------- ----------- ----------
Net unrealized appreciation (depreciation) $6,122,301 $39,410,051 $3,105,618 $2,837,231
=========== =========== ========== ==========
42
This page has been left blank intentionally.
43
SIT MUTUAL FUNDS
DECEMBER 31, 2004
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES (UNAUDITED)
DIVIDEND LARGE CAP MID CAP
BALANCED GROWTH GROWTH GROWTH
ASSETS FUND FUND FUND FUND
--------------- --------------- --------------- ---------------
Investments in securities, at
identified cost $ 10,836,766 $ 8,117,734 $ 53,676,023 $ 156,186,250
=============== =============== =============== ===============
Investments in securities, at
market value - see
accompanying schedule for detail $ 12,153,577 $ 8,827,140 $ 64,292,122 $ 211,341,779
Cash in bank on demand
deposit 26,441 247 -- 766
Receivables:
Dividends and accrued interest 53,090 20,451 58,992 57,257
Fund shares sold 1,111 -- 37,199 2,237
Investment securities sold 27,805 56,067 217,635 859,451
Other receivables -- 18 10,770 --
--------------- --------------- --------------- ---------------
Total assets 12,262,024 8,903,923 64,616,718 212,261,490
--------------- --------------- --------------- ---------------
LIABILITIES
Payables:
Disbursements in excess of
cash balances -- -- 686 --
Investment securities purchased -- 270,906 -- 387,483
Fund shares redeemed 2,247 -- 1,813 60,186
Accrued investment management
and advisory services fee 10,459 7,090 55,362 204,689
Other payables 6,257 -- -- 147,519
--------------- --------------- --------------- ---------------
Total liabilities 18,963 277,996 57,861 799,877
--------------- --------------- --------------- ---------------
Net assets applicable to
outstanding capital stock 12,243,061 8,625,927 64,558,857 211,461,613
=============== =============== =============== ===============
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 853,079 789,867 1,901,524 19,097,783
=============== =============== =============== ===============
Net asset value per share of
outstanding capital stock $ 14.35 $ 10.92 $ 33.95 $ 11.07
=============== =============== =============== ===============
44
SCIENCE AND DEVELOPING
INTERNATIONAL SMALL CAP TECHNOLOGY MARKETS
GROWTH GROWTH GROWTH GROWTH
ASSETS FUND FUND FUND FUND
--------------- --------------- --------------- ---------------
Investments in securities, at
identified cost $ 28,767,417 $ 153,026,804 $ 14,329,441 $ 6,905,774
=============== =============== =============== ===============
Investments in securities, at
market value - see
accompanying schedule for detail $ 34,889,718 $ 192,436,856 $ 17,435,058 $ 9,743,006
Cash in bank on demand
deposit 261 -- 180 371
Receivables:
Dividends and accrued interest 65,401 45,579 1,470 54,695
Fund shares sold 1,028 2,818 1,559 5,229
Investment securities sold -- 712,009 -- 88,043
Other receivables 1,720 49,852 -- 4,537
--------------- --------------- --------------- ---------------
Total assets 34,958,128 193,247,114 17,438,267 9,895,881
--------------- --------------- --------------- ---------------
LIABILITIES
Payables:
Disbursements in excess of
cash balances -- 5,199 -- --
Investment securities purchased -- 534,414 -- --
Fund shares redeemed 1,149 59,392 243 200,515
Accrued investment management
and advisory services fee 48,703 241,554 20,236 16,870
Other payables 30,910 -- 13,854 --
--------------- --------------- --------------- ---------------
Total liabilities 80,762 840,559 34,333 217,385
--------------- --------------- --------------- ---------------
Net assets applicable to
outstanding capital stock 34,877,366 192,406,555 17,403,934 9,678,496
=============== =============== =============== ===============
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 2,763,042 7,198,358 1,711,718 805,729
=============== =============== =============== ===============
Net asset value per share of
outstanding capital stock $ 12.62 $ 26.73 $ 10.17 $ 12.01
=============== =============== =============== ===============
See accompanying notes to financial statements on page 52. 45
SIT MUTUAL FUNDS
SIX MONTHS ENDED DECEMBER 31, 2004
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS (UNAUDITED)
DIVIDEND LARGE CAP MID CAP
BALANCED GROWTH GROWTH GROWTH
FUND FUND FUND FUND
------------ ------------ ------------ ------------
INVESTMENT INCOME:
INCOME:
Dividends * $ 83,951 $ 97,839 $ 524,015 $ 396,005
Interest 99,340 3,582 7,568 51,530
------------ ------------ ------------ ------------
Total income 183,291 101,421 531,583 447,535
------------ ------------ ------------ ------------
EXPENSES (NOTE 3):
Investment management and
advisory services fee 60,917 37,690 308,592 1,218,630
Less fees and expenses absorbed
by investment adviser -- -- -- (97,490)
------------ ------------ ------------ ------------
Total net expenses 60,917 37,690 308,592 1,121,140
------------ ------------ ------------ ------------
Net investment income (loss) 122,374 63,731 222,991 (673,605)
------------ ------------ ------------ ------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS :
Net realized gain (loss) 86,669 46,008 1,254,529 7,387,279
Net change in unrealized appreciation
(depreciation) on investments 443,362 587,223 2,480,117 8,868,908
Realized gain (loss) on foreign
currency transactions -- -- -- --
Net change in unrealized appreciation
(depreciation) on foreign currency
transactions -- -- -- --
------------ ------------ ------------ ------------
Net gain (loss) on investments 530,031 633,231 3,734,646 16,256,187
------------ ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations $ 652,405 $ 696,962 $ 3,957,637 $ 15,582,582
============ ============ ============ ============
- ---------------
* Dividends are net of foreign withholding tax of $15,297 and $7,893 in the
International Growth Fund and Developing Markets Growth Fund, respectively.
46
SCIENCE AND DEVELOPING
INTERNATIONAL SMALL CAP TECHNOLOGY MARKETS
GROWTH GROWTH GROWTH GROWTH
FUND FUND FUND FUND
- --------------- --------------- --------------- ---------------
$291,333 $339,580 $37,352 $107,286
2,179 25,197 2,342 2,295
- --------------- --------------- --------------- ---------------
293,512 364,777 39,694 109,581
- --------------- --------------- --------------- ---------------
307,225 1,357,631 126,161 88,730
(58,124) -- (12,616) --
- --------------- --------------- --------------- ---------------
249,101 1,357,631 113,545 88,730
- --------------- --------------- --------------- ---------------
44,411 (992,854) (73,851) 20,851
- --------------- --------------- --------------- ---------------
352,908 (1,916,494) (14,342) (45,755)
3,487,410 12,510,056 197,937 1,799,982
(175) -- -- (101)
1,772 -- -- 481
- --------------- --------------- --------------- ---------------
3,841,915 10,593,562 183,595 1,754,607
- --------------- --------------- --------------- ---------------
$3,886,326 $9,600,708 $109,744 $1,775,458
=============== =============== =============== ===============
See accompanying notes to financial statements on page 52. 47
SIT MUTUAL FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
BALANCED DIVIDEND
FUND GROWTH FUND
---------------------------- ----------------------------
SIX MONTHS SIX MONTHS
ENDED ENDED SIX MONTHS
DECEMBER 31, YEAR ENDED DECEMBER 31, ENDED
2004 JUNE 30, 2004 JUNE 30,
(UNAUDITED) 2004 (UNAUDITED) 2004
------------ ------------ ------------ ------------
OPERATIONS:
Net investment income (loss) $ 122,374 $ 249,536 $ 63,731 47,194
Net realized gain (loss) on investments 86,669 (328,461) 46,008 (52,229)
Net change in unrealized appreciation
(depreciation) on investments 443,362 1,977,363 587,223 122,183
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 652,405 1,898,438 696,962 117,148
------------ ------------ ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (180,000) (273,000) (92,000) (20,000)
Net realized gains on investments -- -- -- --
------------ ------------ ------------ ------------
Total distributions (180,000) (273,000) (92,000) (20,000)
------------ ------------ ------------ ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 463,525 2,328,446 1,492,522 6,831,427
Reinvested distributions 178,340 270,870 80,253 16,785
Payments for shares redeemed (1,312,476) (7,848,359) (423,583) (73,587)
------------ ------------ ------------ ------------
Increase (decrease) in net assets from
capital share transactions (670,611) (5,249,043) 1,149,192 6,774,625
------------ ------------ ------------ ------------
Total increase (decrease) in net assets (198,206) (3,623,605) 1,754,154 6,871,773
NET ASSETS
Beginning of period 12,441,267 16,064,872 6,871,773 --
------------ ------------ ------------ ------------
End of period $ 12,243,061 $ 12,441,267 $ 8,625,927 6,871,773
============ ============ ============ ============
NET ASSETS CONSIST OF:
Capital (par value and paid-in surplus) $ 16,557,779 $ 17,228,390 $ 7,923,817 6,774,625
Undistributed (distributions in excess of) net
investment income (352) 57,274 (1,075) 27,194
Accumulated net realized gain (loss) from
security transactions and foreign
currency transactions (5,631,176) (5,717,845) (6,221) (52,229)
Unrealized appreciation (depreciation) on investments 1,316,810 873,448 709,406 122,183
Unrealized appreciation (depreciation) on foreign
currency transactions -- -- -- --
------------ ------------ ------------ ------------
$ 12,243,061 $ 12,441,267 $ 8,625,927 6,871,773
============ ============ ============ ============
CAPITAL TRANSACTIONS IN SHARES:
Sold 33,524 176,186 144,874 683,421
Reinvested distributions 12,869 20,770 7,704 1,659
Redeemed (94,933) (584,099) (40,454) (7,337)
------------ ------------ ------------ ------------
Net increase (decrease) (48,540) (387,143) 112,124 677,743
============ ============ ============ ============
48
LARGE CAP MID CAP INTERNATIONAL
GROWTH FUND GROWTH FUND GROWTH FUND
- ------------------------------ ------------------------------ ------------------------------
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED ENDED ENDED
DECEMBER 31, YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, YEAR ENDED
2004 JUNE 30, 2004 JUNE 30, 2004 JUNE 30,
(UNAUDITED) 2004 (UNAUDITED) 2004 (UNAUDITED) 2004
- ------------- ------------- ------------- ------------- ------------- -------------
$ 222,991 $ 11,089 ($ 673,605) ($ 1,353,672) $ 44,411 $ 65,690
1,254,529 35,909 7,387,279 5,815,043 352,908 (1,775,854)
2,480,117 10,525,661 8,868,908 39,458,539 3,487,410 12,560,072
-- -- -- -- (175) 1,398
-- -- -- -- 1,772 (907)
- ------------- ------------- ------------- ------------- ------------- -------------
3,957,637 10,572,659 15,582,582 43,919,910 3,886,326 10,850,399
- ------------- ------------- ------------- ------------- ------------- -------------
(233,000) (43,757) -- -- (89,000) (424,155)
-- -- -- -- -- --
- ------------- ------------- ------------- ------------- ------------- -------------
(233,000) (43,757) -- -- (89,000) (424,155)
- ------------- ------------- ------------- ------------- ------------- -------------
1,944,250 6,125,777 6,160,807 20,601,327 588,921 41,670,314
226,788 42,592 -- -- 85,684 372,107
(5,111,132) (12,246,650) (15,227,572) (29,747,977) (3,875,898) (66,720,583)
- ------------- ------------- ------------- ------------- ------------- -------------
(2,940,094) (6,078,281) (9,066,765) (9,146,650) (3,201,293) (24,678,162)
- ------------- ------------- ------------- ------------- ------------- -------------
784,543 4,450,621 6,515,817 34,773,260 596,033 (14,251,918)
63,774,314 59,323,693 204,945,796 170,172,536 34,281,333 48,533,251
- ------------- ------------- ------------- ------------- ------------- -------------
$ 64,558,857 $ 63,774,314 $ 211,461,613 $ 204,945,796 $ 34,877,366 $ 34,281,333
============= ============= ============= ============= ============= =============
$ 76,257,214 $ 79,197,308 $ 209,457,315 $ 218,524,080 $ 64,496,160 $ 67,697,453
1,080 11,089 (673,605) -- 22,499 67,088
(22,315,536) (23,570,065) (52,477,627) (59,864,906) (35,765,315) (36,118,048)
10,616,099 8,135,982 55,155,530 46,286,622 6,122,301 2,634,891
-- -- -- -- 1,721 (51)
- ------------- ------------- ------------- ------------- ------------- -------------
$ 64,558,857 $ 63,774,314 $ 211,461,613 $ 204,945,796 $ 34,877,366 $ 34,281,333
============= ============= ============= ============= ============= =============
60,829 206,906 608,455 2,202,389 53,322 4,305,121
6,710 1,477 -- -- 6,944 34,907
(161,429) (416,723) (1,545,930) (3,270,060) (345,910) (6,461,642)
- ------------- ------------- ------------- ------------- ------------- -------------
(93,890) (208,340) (937,475) (1,067,671) (285,644) (2,121,614)
============= ============= ============= ============= ============= =============
See accompanying notes to financial statements on page 52. 49
SIT MUTUAL FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
SCIENCE AND
SMALL CAP TECHNOLOGY
GROWTH FUND GROWTH FUND
------------------------------ ------------------------------
SIX MONTHS SIX MONTHS
ENDED ENDED
DECEMBER 31, YEAR ENDED DECEMBER 31, YEAR ENDED
2004 JUNE 30, 2004 JUNE 30,
(UNAUDITED) 2004 (UNAUDITED) 2004
------------- ------------- ------------- -------------
OPERATIONS:
Net investment income (loss) ($ 992,854) ($ 2,315,536) ($ 73,851) ($ 212,838)
Net realized gain (loss) on investments (1,916,494) 14,565,264 (14,342) (1,707,683)
Net change in unrealized appreciation
(depreciation) on investments 12,510,056 18,475,012 197,937 5,578,478
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 9,600,708 30,724,740 109,744 3,657,957
------------- ------------- ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income -- -- -- --
Net realized gains on investments -- -- -- --
------------- ------------- ------------- -------------
Total distributions -- -- -- --
------------- ------------- ------------- -------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 5,650,882 47,306,303 585,287 4,677,690
Reinvested distributions -- -- -- --
Payments for shares redeemed (22,655,397) (61,132,401) (2,344,621) (4,481,796)
------------- ------------- ------------- -------------
Increase (decrease) in net assets from
capital share transactions (17,004,515) (13,826,098) (1,759,334) 195,894
------------- ------------- ------------- -------------
Total increase (decrease) in net assets (7,403,807) 16,898,642 (1,649,590) 3,853,851
NET ASSETS
Beginning of period 199,810,362 182,911,720 19,053,524 15,199,673
------------- ------------- ------------- -------------
End of period $ 192,406,555 $ 199,810,362 $ 17,403,934 $ 19,053,524
============= ============= ============= =============
NET ASSETS CONSIST OF:
Capital (par value and paid-in surplus) $ 221,471,417 $ 238,475,932 $ 36,511,201 $ 38,270,535
Undistributed (distributions in excess of) net
investment income (992,854) -- (73,851) --
Accumulated net realized gain (loss) from
security transactions and foreign
currency transactions (67,482,059) (65,565,565) (22,139,034) (22,124,692)
Unrealized appreciation (depreciation) on investments 39,410,051 26,899,995 3,105,618 2,907,681
Unrealized appreciation (depreciation) on foreign
currency transactions -- -- -- --
------------- ------------- ------------- -------------
$ 192,406,555 $ 199,810,362 $ 17,403,934 $19,053,524
============= ============= ============= =============
CAPITAL TRANSACTIONS IN SHARES:
Sold 234,476 1,954,480 62,942 513,364
Reinvested distributions -- -- -- --
Redeemed (935,493) (2,506,823) (252,348) (500,435)
------------- ------------- ------------- -------------
Net increase (decrease) (701,017) (552,343) (189,406) 12,929
============= ============= ============= =============
50
DEVELOPING MARKETS
GROWTH FUND
- --------------------------------
SIX MONTHS
ENDED
DECEMBER 31, YEAR ENDED
2004 JUNE 30,
(UNAUDITED) 2004
- ------------- ------------
$ 20,851 $ 34,037
(45,755) 719,270
1,799,982 1,166,461
(101) 63
481 (12)
- ------------ ------------
1,775,458 1,919,819
- ------------ ------------
(13,236) (49,000)
-- --
- ------------ ------------
(13,236) (49,000)
- ------------ ------------
1,565,241 11,204,371
12,927 47,680
(1,692,312) (13,669,722)
- ------------ ------------
(114,144) (2,417,671)
- ------------ ------------
1,648,078 (546,852)
8,030,418 8,577,270
- ------------ ------------
$ 9,678,496 $ 8,030,418
============ ============
$ 9,713,301 $ 9,827,445
20,722 13,044
(2,893,232) (2,847,313)
2,837,231 1,037,249
474 (7)
- ------------ ------------
$ 9,678,496 $ 8,030,418
============ ============
149,247 1,243,812
1,121 4,895
(156,667) (1,493,266)
- ------------ ------------
(6,299) (244,559)
============ ============
See accompanying notes to financial statements on page 52. 51
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 Dividend 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.
----------------------------------------------------------------------
Dividend Growth Provide regular income that exceeds
the dividend yield of the S&P 500
Index and that grows over a period of
years. Secondarily, maximize long-term
capital appreciation.
----------------------------------------------------------------------
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
Growth Fund appreciation.
----------------------------------------------------------------------
Developing Markets Growth Maximize long-term capital
appreciation.
----------------------------------------------------------------------
Significant accounting policies followed by the Funds are summarized
below:
SHORT-TERM TRADING (REDEMPTION) FEES
The Funds (except Balanced) charge a redemption fee equal to 2.00% of
the proceeds on shares held for less than 30 calendar days. The fee is
retained by the Fund for the benefit of its long-term shareholders and
accounted for as an addition to paid in capital.
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
52
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.
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, 2004, there were no securities held by the
Funds deemed illiquid by the investment adviser. Pursuant to the
guidelines adopted by the Board of Directors, certain unregistered
securities are determined to be liquid and are not included within the
limitation specified above.
FOREIGN CURRENCY TRANSLATIONS AND FORWARD FOREIGN CURRENCY CONTRACTS
The market value of securities and other assets and liabilities
denominated in foreign currencies for Developing Markets Growth Fund
and International Growth Fund are translated daily into U.S. dollars at
the closing rate of exchange. Purchases and sales of securities, income
and expenses are translated at the exchange rate on the transaction
date. Dividend and interest income includes currency exchange gains
(losses) realized between the accrual and payment dates on such income.
Exchange gains (losses) may also be realized between the trade and
settlement dates on security and forward contract transactions. For
securities denominated in foreign currencies, the effect of changes in
foreign exchange rates on realized and unrealized gains or losses is
reflected as a component of such gains or losses.
The Developing Markets Growth and International Growth Funds may enter
into forward foreign currency exchange contracts for operational
purposes and to protect against adverse exchange rate fluctuation. The
net U.S. dollar value of foreign currency underlying all contractual
commitments held by the Funds and the resulting unrealized appreciation
or depreciation is determined using foreign currency exchange rates
from an independent pricing service. The Funds are subject to the
credit risk that the other party will not complete the obligations of
the contract.
FEDERAL TAXES
The Funds' policy is to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income to shareholders. Therefore, no
income tax provision is required. Also, in order to avoid the payment
of any federal excise taxes, the Funds will distribute substantially
all of their net investment income and net realized gains on a calendar
year basis.
Net investment income and net realized gains may differ for financial
statement and tax purposes. The character of distributions made during
the year for net investment income or net realized gains may also
differ from its ultimate characterization for tax purposes.
53
SIT MUTUAL FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
As of June 30, 2004, 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 Years
-------------- ----------------
Balanced $5,625,945 2010-2013
Dividend Growth 47,641 2013
Large Cap Growth 23,448,962 2010-2013
Mid Cap Growth 59,547,420 2010-2012
International Growth 36,116,184 2009-2013
Small Cap Growth 65,521,207 2010-2012
Science & Technology Growth 21,980,905 2010-2013
Developing Markets Growth 2,847,504 2008-2013
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 and Dividend Growth Funds 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.
54
(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, 2004, were as follow:
Purchases ($) Proceeds ($)
------------- ------------
Balanced Fund 1,894,265 2,654,439
Dividend Growth 3,253,860 2,180,952
Large Cap Growth Fund 4,553,643 7,295,458
Mid Cap Growth Fund 34,270,349 41,284,740
International Growth Fund 5,941,853 8,435,538
Small Cap Growth Fund 30,306,119 44,779,232
Science and Technology Growth Fund 3,557,090 5,030,530
Developing Markets Growth Fund 731,620 941,555
(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 Voluntary Fee
Fee Waiver
--- ------
Balanced Fund 1.00% 1.00%
Dividend Growth 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, 2005 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.
55
SIT MUTUAL FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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, 2004:
Fund Shares
---- ------
Balanced Fund 304,000
Dividend Growth Fund 628,000
Large Cap Growth Fund 592,000
Mid Cap Growth Fund 2,551,000
International Growth Fund 71,000
Small Cap Growth Fund 1,632,000
Science and Technology Growth Fund 1,000
Developing Markets Growth Fund 240,000
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
$140,122 were paid or payable to SKI for the six months ended December
31, 2004.
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, 2004:
% Shares
Shares Outstanding
------ -----------
Balanced Fund 217,805 25.5
Dividend Growth Fund 205,586 26.0
Large Cap Growth Fund 433,999 22.8
Mid Cap Growth Fund 3,005,307 15.7
International Growth Fund 697,179 25.2
Small Cap Growth Fund 937,482 13.0
Science and Technology Growth Fund 636,539 37.2
Developing Markets Growth Fund 147,085 18.3
56
This page has been left blank intentionally.
57
SIT BALANCED FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Six Months
Ended
December 31, Years Ended June 30,
2004 ----------------------------------------------------
(Unaudited) 2004 2003 2002 2001
=============================================================================================================================
NET ASSET VALUE:
Beginning of period $ 13.80 $ 12.47 $ 12.29 $ 15.33 $ 19.18
- -----------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (2) .14 .21 .29 .36 .46
Net realized and unrealized gains
(losses) on investments .62 1.34 .22 (3.01) (3.51)
- -----------------------------------------------------------------------------------------------------------------------------
Total from operations .76 1.55 .51 (2.65) (3.05)
- -----------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (.21) (.22) (.33) (.38) (.48)
From realized gains -- -- -- (.01) (.32)
- -----------------------------------------------------------------------------------------------------------------------------
Total distributions (.21) (.22) (.33) (.39) (.80)
- -----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE:
End of period $ 14.35 $ 13.80 $ 12.47 $ 12.29 $ 15.33
- -----------------------------------------------------------------------------------------------------------------------------
Total investment return (1) 5.53% 12.53% 4.43% (17.62%) (16.39%)
- -----------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000's omitted) $ 12,243 $ 12,441 $ 16,065 $ 17,825 $ 24,947
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 2.01% (3) 1.58% 2.54% 2.52% 2.89%
Portfolio turnover rate (excluding short-term securities) 15.95% 44.82% 48.86% 53.53% 63.32%
- ----------
(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, 2004 are adjusted to an
annual rate.
58
SIT DIVIDEND GROWTH FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Six Months
Ended Six months
December 31, ended
2004 June 30,
(Unaudited) 2004 (*)
===================================================================================================================
NET ASSET VALUE:
Beginning of period $10.14 $10.00
- -------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) (2) .09 .08
Net realized and unrealized gains
(losses) on investments .82 .10
- -------------------------------------------------------------------------------------------------------------------
Total from operations .91 .18
- -------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (.13) (.04)
From realized gains -- --
- -------------------------------------------------------------------------------------------------------------------
Total distributions (.13) (.04)
- -------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE:
End of period $10.92 $10.14
- -------------------------------------------------------------------------------------------------------------------
Total investment return (1) 9.00% 1.75%
- -------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000's omitted) $8,626 $6,872
RATIOS:
Expenses to average daily net assets 1.00% (3) 1.00% (3)
Net investment income (loss) to average daily net assets 1.69% (3) 1.79% (3)
Portfolio turnover rate (excluding short-term securities) 30.56% 13.67%
- ----------
(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 are adjusted to an annual rate.
(*) Fund's inception date was December 31, 2003
See accompanying notes to financial statements on page 52. 59
SIT LARGE CAP GROWTH FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Six Months
Ended
December 31, Years Ended June 30,
2004 --------------------------------------------------
(Unaudited) 2004 2003 2002 2001
=============================================================================================================================
NET ASSET VALUE:
Beginning of period $ 31.96 $ 26.92 $ 26.40 $ 38.99 $ 63.66
- -----------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) (2) .11 .01 .02 (.08) (.16)
Net realized and unrealized gains
(losses) on investments 2.00 5.05 .50 (12.17) (19.48)
- -----------------------------------------------------------------------------------------------------------------------------
Total from operations 2.11 5.06 .52 (12.25) (19.64)
- -----------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (.12) (.02) -- -- --
From realized gains -- -- -- (.34) (5.03)
- -----------------------------------------------------------------------------------------------------------------------------
Total distributions (.12) (.02) -- (.34) (5.03)
- -----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE:
End of period $ 33.95 $ 31.96 $ 26.92 $ 26.40 $ 38.99
- -----------------------------------------------------------------------------------------------------------------------------
Total investment return (1) 6.61% 18.81% 1.97% (31.63%) (32.92%)
- -----------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000's omitted) $ 64,559 $ 63,774 $ 59,324 $ 63,839 $ 122,829
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 0.72% (3) 0.02% 0.08% (0.25%) (0.33%)
Portfolio turnover rate (excluding short-term securities) 7.45% 29.71% 33.40% 34.74% 45.26%
- ----------
(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, 2004 are adjusted to an
annual rate.
60
SIT MID CAP GROWTH FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Six Months
Ended
December 31, Years Ended June 30,
2004 ---------------------------------------------------------
(Unaudited) 2004 2003 2002 2001
===================================================================================================================================
NET ASSET VALUE:
Beginning of period $ 10.23 $ 8.06 $ 7.91 $ 12.37 $ 23.57
- -----------------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) (3) (.03) (.07) (.05) (.07) (.08)
Net realized and unrealized gains
(losses) on investments .87 2.24 .20 (4.16) (7.05)
- -----------------------------------------------------------------------------------------------------------------------------------
Total from operations .84 2.17 .15 (4.23) (7.13)
- -----------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income -- -- -- -- --
From realized gains -- -- -- (.23) (4.07)
- -----------------------------------------------------------------------------------------------------------------------------------
Total distributions -- -- -- (.23) (4.07)
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE:
End of period $ 11.07 $ 10.23 $ 8.06 $ 7.91 $ 12.37
- -----------------------------------------------------------------------------------------------------------------------------------
Total investment return (1) 8.21% 26.92% 1.90% (34.66%) (35.21%)
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000's omitted) $211,462 $204,946 $170,173 $181,347 $360,037
RATIOS:
Expenses to average daily net assets 1.15% (2) 1.15% (2) 1.15% (2) 1.15% (2) 1.06% (2)
Net investment income (loss) to average daily net assets (0.69%)(2) (0.71%)(2) (0.73%)(2) (0.79%)(2) (0.49%)(2)
Portfolio turnover rate (excluding short-term securities) 17.91% 65.14% 53.19% 60.88% 56.21%
- ----------
(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, 2004 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,
2004, and the years ended June 30, 2004, 2003, 2002, and 2001, 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 (0.79%), (0.81%), (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.
See accompanying notes to financial statements on page 52. 61
SIT INTERNATIONAL GROWTH FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Six Months
Ended
December 31, Years Ended June 30,
2004 --------------------------------------------------------
(Unaudited) 2004 2003 2002 2001
===================================================================================================================================
NET ASSET VALUE:
Beginning of period $ 11.24 $ 9.39 $ 10.79 $ 14.61 $ 23.58
- -----------------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) (3) .02 .01 .07 (.03) (.03)
Net realized and unrealized gains
(losses) on investments 1.39 1.92 (1.47) (3.79) (8.42)
- -----------------------------------------------------------------------------------------------------------------------------------
Total from operations 1.41 1.93 (1.40) (3.82) (8.45)
- -----------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (.03) (.08) -- -- --
From realized gains -- -- -- -- (.52)
- -----------------------------------------------------------------------------------------------------------------------------------
Total distributions (.03) (.08) -- -- (.52)
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE:
End of period $ 12.62 $ 11.24 $ 9.39 $ 10.79 $14.61
- -----------------------------------------------------------------------------------------------------------------------------------
Total investment return (1) 12.57% 20.63% (12.97%) (26.15%) (36.43%)
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000's omitted) $34,877 $34,281 $48,533 $69,820 $123,085
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 0.27% (2) 0.14% (2) 0.81% (2) (0.22%)(2) (0.20%)(2)
Portfolio turnover rate (excluding short-term securities) 18.07% 44.37% 21.02% 25.78% 25.22%
- ----------
(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) Percentages for the period ended December 31, 2004 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,
2004, and the years ended June 30, 2004, 2003, 2002, and 2001, 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 (.08%), (.21%), 0.46%, (0.57%), and
(0.55%), respectively.
(3) The net investment income (loss) per share is based on average shares
outstanding for the period.
62
SIT SMALL CAP GROWTH FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Six Months
Ended
December 31, Years Ended June 30,
2004 ---------------------------------------------------------
(Unaudited) 2004 2003 2002 2001
===================================================================================================================================
NET ASSET VALUE:
Beginning of period $ 25.29 $ 21.64 $ 21.06 $ 28.99 $ 41.35
- -----------------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) (2) (.13) (.27) (.18) (.24) (.13)
Net realized and unrealized gains
(losses) on investments 1.57 3.92 .76 (7.65) (11.65)
- -----------------------------------------------------------------------------------------------------------------------------------
Total from operations 1.44 3.65 .58 (7.89) (11.78)
- -----------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From realized gains -- -- -- (.04) (.58)
- -----------------------------------------------------------------------------------------------------------------------------------
Total distributions -- -- -- (.04) (.58)
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE:
End of period $ 26.73 $ 25.29 $ 21.64 $ 21.06 $ 28.99
- -----------------------------------------------------------------------------------------------------------------------------------
Total investment return (1) 5.69% 16.87% 2.75% (27.24%) (28.79%)
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000's omitted) $192,407 $199,810 $182,912 $180,684 $227,888
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 (1.10%)(3) (1.10%) (1.00%) (0.99%) (0.41%)
Portfolio turnover rate (excluding short-term securities) 16.83% 65.79% 59.98% 65.25% 39.91%
- ----------
(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, 2004 are adjusted to an
annual rate.
See accompanying notes to financial statements on page 52. 63
SIT SCIENCE AND TECHNOLOGY GROWTH FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Six Months
Ended
December 31, Years Ended June 30,
2004 ---------------------------------------------------------
(Unaudited) 2004 2003 2002 2001
===================================================================================================================================
NET ASSET VALUE:
Beginning of period $ 10.02 $ 8.05 $ 7.52 $ 15.23 $ 33.38
- -----------------------------------------------------------------------------------------------------------------------------------
Operations:
Net investment income (loss) (3) (.04) (.11) (.07) (.12) (.19)
Net realized and unrealized gains
(losses) on investments .19 2.08 .60 (7.58) (17.10)
- -----------------------------------------------------------------------------------------------------------------------------------
Total from operations .15 1.97 .53 (7.70) (17.29)
- -----------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income -- -- -- -- --
From realized gains -- -- -- (.01) (.86)
- -----------------------------------------------------------------------------------------------------------------------------------
Total distributions -- -- -- (.01) (.86)
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE:
End of period $ 10.17 $ 10.02 $ 8.05 $ 7.52 $ 15.23
- -----------------------------------------------------------------------------------------------------------------------------------
Total investment return (1) 1.50% 24.47% 7.05% (50.57%) (52.96%)
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000's omitted) $17,404 $19,054 $15,200 $14,018 $30,453
RATIOS:
Expenses to average daily net assets 1.35% (2) 1.35% (2) 1.35% (2) 1.35% (2) 1.29% (2)
Net investment income (loss) to average net assets (0.88%)(2) (1.20%)(2) (1.05%)(2) (1.06%)(2) (0.94%)(2)
Portfolio turnover rate (excluding short-term securities) 21.06% 55.54% 49.67% 76.78% 34.59%
- ----------
(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, 2004 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,
2004, and the years ended June 30, 2004, 2003, 2002, and 2001, 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 (1.03%), (1.35%), (1.20%), (1.21%),
and (1.15%), respectively.
(3) The net investment income (loss) per share is based on average shares
outstanding for the period.
64
SIT DEVELOPING MARKETS GROWTH FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Six Months
Ended
December 31, Years Ended June 30,
2004 ---------------------------------------------------------
(Unaudited) 2004 2003 2002 2001
===================================================================================================================================
NET ASSET VALUE:
Beginning of period $ 9.89 $ 8.12 $ 8.10 $ 9.17 $ 13.43
- -----------------------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) (2) .03 .04 .02 (.02) --
Net realized and unrealized gains
(losses) on investments 2.11 1.78 -- (1.05) (4.26)
- -----------------------------------------------------------------------------------------------------------------------------------
Total from operations 2.14 1.82 .02 (1.07) (4.26)
- -----------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (.02) (.05) -- -- --
From realized gains -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Total distributions (.02) (.05) -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE:
End of period $12.01 $ 9.89 $ 8.12 $ 8.10 $ 9.17
- -----------------------------------------------------------------------------------------------------------------------------------
Total investment return (1) 21.60% 22.48% 0.25% (11.66%) (31.72%)
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000's omitted) $9,678 $8,030 $8,577 $11,250 $13,877
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 0.47% (3) 0.37% 0.31% (0.20%) 0.02%
Portfolio turnover rate (excluding short-term securities) 8.55% 33.72% 6.61% 25.40% 21.87%
- ----------
(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, 2004 are adjusted to an
annual rate.
See accompanying notes to financial statements on page 52. 65
EXPENSE EXAMPLE (UNAUDITED)
- --------------------------------------------------------------------------------
As a shareholder of the Funds, you incur two types of costs: (1)
transaction costs, including redemption fees and (2) ongoing costs, including
management fees; and other Fund expenses. This Example is intended to help you
understand your ongoing costs (in dollars) of investing in the Funds and to
compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period of July 1, 2004 to December 31,
2004.
ACTUAL EXPENSES
The first line of the table below provides information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the first line under the heading entitled "Expenses Paid During Period" to
estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of the table below provides information about hypothetical
account values and hypothetical expenses based on the Fund's actual expense
ratio and an assumed rate of return of 5% per year before expenses, which is not
the Fund's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of the other funds.
Please note that the expenses shown in the table are meant to highlight
your ongoing costs only and do not reflect any transactional costs, such as
redemption fees. Therefore, the second line of the table is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs (redemption
fees) were included, your costs would have been higher.
- ---------------------------------------------------------------------------------------------------------------
Beginning Ending Expenses Paid
Account Value Account Value During Period*
BALANCED FUND (7/1/04) (12/31/04) (7/1/04 - 12/31/04)
- ---------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,055.30 $5.14
Hypothetical $1,000.00 $1,020.00 $5.05
(5% return before expenses)
- ---------------------------------------------------------------------------------------------------------------
*Expenses are equal to the Fund's annualized expense ratio of 1.00%, multiplied
by the average account value over the period, multiplied by 183/366 (to reflect
the one-half year period).
- ---------------------------------------------------------------------------------------------------------------
Beginning Ending Expenses Paid
Account Value Account Value During Period*
DIVIDEND GROWTH FUND (7/1/04) (12/31/04) (7/1/04 - 12/31/04)
- ---------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,090.00 $5.23
Hypothetical $1,000.00 $1,020.00 $5.05
(5% return before expenses)
- ---------------------------------------------------------------------------------------------------------------
*Expenses are equal to the Fund's annualized expense ratio of 1.00%, multiplied
by the average account value over the period, multiplied by 183/366 (to reflect
the one-half year period).
66
- ---------------------------------------------------------------------------------------------------------------
Beginning Ending Expenses Paid
Account Value Account Value During Period*
LARGE CAP GROWTH FUND (7/1/04) (12/31/04) (7/1/04 - 12/31/04)
- ---------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,066.10 $5.17
Hypothetical $1,000.00 $1,020.00 $5.05
(5% return before expenses)
- ---------------------------------------------------------------------------------------------------------------
*Expenses are equal to the Fund's annualized expense ratio of 1.00%, multiplied
by the average account value over the period, multiplied by 183/366 (to reflect
the one-half year period).
- ---------------------------------------------------------------------------------------------------------------
Beginning Ending Expenses Paid
Account Value Account Value During Period*
MIP CAP GROWTH FUND (7/1/04) (12/31/04) (7/1/04 - 12/31/04)
- ---------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,082.10 $5.99
Hypothetical $1,000.00 $1,019.25 $5.81
(5% return before expenses)
- ---------------------------------------------------------------------------------------------------------------
*Expenses are equal to the Fund's annualized expense ratio of 1.15%, multiplied
by the average account value over the period, multiplied by 183/366 (to reflect
the one-half year period).
- ---------------------------------------------------------------------------------------------------------------
Beginning Ending Expenses Paid
Account Value Account Value During Period*
INTERNATIONAL GROWTH FUND (7/1/04) (12/31/04) (7/1/04 - 12/31/04)
- ---------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,125.70 $7.97
Hypothetical $1,000.00 $1,017.50 $7.57
(5% return before expenses)
- ---------------------------------------------------------------------------------------------------------------
*Expenses are equal to the Fund's annualized expense ratio of 1.50%, multiplied
by the average account value over the period, multiplied by 183/366 (to reflect
the one-half year period).
- ---------------------------------------------------------------------------------------------------------------
Beginning Ending Expenses Paid
Account Value Account Value During Period*
SMALL CAP GROWTH FUND (7/1/04) (12/31/04) (7/1/04 - 12/31/04)
- ---------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,056.90 $7.71
Hypothetical $1,000.00 $1,017.50 $7.57
(5% return before expenses)
- ---------------------------------------------------------------------------------------------------------------
*Expenses are equal to the Fund's annualized expense ratio of 1.50%, multiplied
by the average account value over the period, multiplied by 183/366 (to reflect
the one-half year period).
- ---------------------------------------------------------------------------------------------------------------
Beginning Ending Expenses Paid
Account Value Account Value During Period*
SCIENCE AND TECHNOLOGY GROWTH FUND (7/1/04) (12/31/04) (7/1/04 - 12/31/04)
- ---------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,015.00 $6.80
Hypothetical $1,000.00 $1,018.25 $6.81
(5% return before expenses)
- ---------------------------------------------------------------------------------------------------------------
*Expenses are equal to the Fund's annualized expense ratio of 1.35%, multiplied
by the average account value over the period, multiplied by 183/366 (to reflect
the one-half year period).
67
EXPENSE EXAMPLE (CONTINUED)
- --------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
Beginning Ending Expenses Paid
Account Value Account Value During Period*
DEVELOPING MARKETS GROWTH FUND (7/1/04) (12/31/04) (7/1/04 - 12/31/04)
- ---------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,216.00 $11.08
Hypothetical $1,000.00 $1,015.00 $10.08
(5% return before expenses)
- ---------------------------------------------------------------------------------------------------------------
*Expenses are equal to the Fund's annualized expense ratio of 2.00%, multiplied
by the average account value over the period, multiplied by 183/366 (to reflect
the one-half year period).
68
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
PROXY VOTING
Each Fund follows certain policies and procedures for voting proxies for
securities held in each portfolio. A description of the Funds' proxy voting
polices and procedures is available without charge upon request by calling the
Funds at 1-800-332-5580.
Information regarding how each Fund voted proxies relating to its portfolio
securities during the most recent twelve-month period ended June 30 is available
1) without charge upon request by calling the Funds at 1-800-332-5580; and 2) on
the U.S. Securities and Exchange Commission's website at http://www.sec.gov.
AVAILABILITY OF QUARTERLY PORTFOLIO SCHEDULES
The Funds' annual and semi-annual reports include complete lists of each
portfolio's holdings. For the first and third quarters of each fiscal year, the
Funds file their complete schedules of portfolio holdings with the U.S.
Securities and Exchange Commission (SEC) on Forms N-Q. The Funds' Forms N-Q are
available on the SEC's website at http://www.sec.gov. The Funds' Forms N-Q may
be reviewed and copied at the SEC's Public Reference Room in Washington, DC.
Information on the operation of the Public Reference Room may be obtained by
calling 1-800-SEC-0330. Information on the Funds' Forms N-Q is also available
without charge upon request by calling the Funds at 1-800-332-5580.
69
RESULTS OF SHAREHOLDER MEETING
The annual meeting of the shareholders of the Funds was held on October 18,
2004. Directors elected by the shareholders at the meeting 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 20, 2004 and results of the shareholders' vote at the October 18,
2004 meeting were as follows:
PROPOSAL ONE: ELECTION OF DIRECTORS
=================================================================================================================================
SIT JONES FRENZEL
SMALL CAP GROWTH For 5,186,973.699 5,189,894.918 5,182,563.998
Total Shares Outstanding 7,535,087.963 Against 197,220.022 194,298.803 201,629.723
Total Shares Voted 5,384,193.721 Abstain 0.000 0.000 0.000
Percent of Shares Voted 71% % For 96% 96% 96%
MID CAP GROWTH For 10,441,913.881 10,413,142.194 10,423,456.819
Total Shares Outstanding 19,555,417.568 Against 234,101.892 262,873.579 252,558.954
Total Shares Voted 10,676,015.773 Abstain 0.000 0.000 0.000
Percent of Shares Voted 55% % For 98% 98% 98%
LARGE CAP GROWTH For 1,022,263.850 1,023,386.944 1,022,465.944
Total Shares Outstanding 1,951,280.321 Against 7,066.795 5,943.701 6,864.701
Total Shares Voted 1,029,330.645 Abstain 0.000 0.000 0.000
Percent of Shares Voted 53% % For 99% 99% 99%
SCIENCE & TECHNOLOGY For 619,954.224 621,203.466 620,174.131
Total Shares Outstanding 1,789,464.751 Against 20,428.896 19,179.654 20,208.989
Total Shares Voted 640,383.120 Abstain 0.000 0.000 0.000
Percent of Shares Voted 36% % For 97% 97% 97%
INTERNATIONAL GROWTH For 893,184.854 1,007,310.706 1,001,886.280
Total Shares Outstanding 2,957,488.499 Against 140,354.233 26,228.381 31,652.807
Total Shares Voted 1,033,539.087 Abstain 0.000 0.000 0.000
Percent of Shares Voted 35% % For 86% 97% 97%
DEVELOPING MARKETS For 419,691.815 420,553.322 419,691.815
Total Shares Outstanding 808,230.013 Against 17,879.772 17,018.265 17,879.772
Total Shares Voted 437,571.587 Abstain 0.000 0.000 0.000
Percent of Shares Voted 54% % For 96% 96% 96%
BALANCED For 264,867.110 259,081.524 259,081.524
Total Shares Outstanding 894,069.835 Against 762.818 6,548.404 6,548.404
Total Shares Voted 265,629.928 Abstain 0.000 0.000 0.000
Percent of Shares Voted 30% % For 100% 98% 98%
DIVIDEND FUND For 259,442.339 259,442.339 259,442.339
Total Shares Outstanding 686,344.934 Against 8,471.946 8,471.946 8,471.946
Total Shares Voted 267,914.285 Abstain 0.000 0.000 0.000
Percent of Shares Voted 39% % For 97% 97% 97%
70
PROPOSAL TWO: RATIFY KPMG LLP
AS THE FUNDS' AUDITORS
========================================================================== =============================
LUECK HULSE PHILLIPS
5,194,922.899 5,192,346.182 5,196,978.432 5,077,733.553
189,270.822 191,847.539 187,215.289 36,751.434
0.000 0.000 0.000 269,708.734
96% 96% 97% 94%
10,466,081.775 10,450,907.972 10,466,372.996 10,493,243.752
209,933.998 225,107.801 209,642.777 77,433.532
0.000 0.000 0.000 105,338.489
98% 98% 98% 98%
1,022,529.176 1,023,386.944 1,022,529.176 1,020,939.399
6,801.469 5,943.701 6,801.469 6,090.992
0.000 0.000 0.000 2,300.254
99% 99% 99% 99%
621,260.710 620,193.980 621,260.710 629,734.121
19,122.410 20,189.140 19,122.410 4,314.387
0.000 0.000 0.000 6,334.612
97% 97% 97% 98%
1,009,375.088 1,006,514.647 1,010,217.672 1,022,824.132
24,163.988 27,024.440 23,321.415 6,430.530
0.000 0.000 0.000 4,284.425
98% 97% 98% 99%
420,553.322 419,691.815 420,553.322 435,916.484
17,018.265 17,879.772 17,018.265 1,655.103
0.000 0.000 0.000 0.000
96% 96% 96% 100%
265,101.421 265,010.421 265,010.421 260,413.952
619.507 619.507 619.507 3,729.020
0.000 0.000 0.000 1,486.956
100% 100% 100% 98%
259,442.339 259,442.339 259,442.339 262,894.698
8,471.946 8,471.946 8,471.946 4,423.445
0.000 0.000 0.000 596.142
97% 97% 97% 98%
71
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 $6.1
Billion for some of America's largest corporations, foundations and endowments.
Sit Mutual Funds are comprised of fourteen 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 exchange fees. Every dollar you invest goes to work for
you. The Stock Funds, excluding the Balanced Fund, charge a 2% redemption fee on
shares hold less than 30 days.
Sit Mutual Funds offer:
o Free telephone exchange
o Dollar-cost averaging through an automatic investment plan
o Electronic transfer for purchases and redemptions
o Free checkwriting privileges on bond funds
o Retirement accounts including IRAs and 401(k) plans
[FLOW CHART]
- --------------------------------------------------------------------------------
SIT FAMILY OF FUNDS
- --------------------------------------------------------------------------------
STABILITY: SAFETY OF PRINCIPAL AND CURRENT INCOME
- -------------------------------------------------
Money Market
INCOME: INCREASED INCOME
- ------------------------
U.S. Government Securities
Tax-Free Income
Minnesota Tax-Free Income
Florida Tax-Free Income
Bond
GROWTH: LONG-TERM CAPITAL APPRECIATION AND INCOME
- -------------------------------------------------
Balanced
Dividend Growth Fund
Large Cap Growth
HIGH GROWTH: LONG-TERM CAPITAL APPRECIATION
- -------------------------------------------
Mid Cap Growth
International Growth
Small Cap Growth
Science and Technology Growth
Developing Markets Growth
Principal Stability & Current Income Growth Potential
72
S E M I - A N N U A L R E P O R T S T O C K F U N D S
Year Ended December 31, 2004
INVESTMENT ADVISER AUDITORS
Sit Investment Associates, Inc. KPMG LLP
3300 IDS Center, 80 South Eighth Street 90 South Seventh Street, Suite 4200
Minneapolis, MN 55402 Minneapolis, MN 55402
612-334-5888 (Metro Area)
800-332-5580 LEGAL COUNSEL
DISTRIBUTOR Dorsey & Whitney LLP
220 South Sixth Street, Suite 1500
SIA Securities Corp. Minneapolis, MN 55402
3300 IDS Center, 80 South Eighth Street
Minneapolis, MN 55402 INVESTMENT SUB-ADVISER
612-334-5888 (Metro Area)
800-332-5580 (Developing Markets Growth Fund and
International Growth Fund)
CUSTODIAN Sit/Kim International Associates, Inc.
3300 IDS Center, 80 South Eighth Street
The Northern Trust Company Minneapolis, MN 55402
50 South LaSalle Street 612-334-5888 (Metro Area)
Chicago, IL 60675 800-332-5580
TRANSFER AGENT AND
DISBURSING AGENT
PFPC Inc.
P.O. Box 5166
Westboro, MA 01581-5166
[LOGO] SIT INVESTMENT ASSOCIATES
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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 Semi-Annual Report.
Item 5: Audit Committee of Listed Registrants.
Not applicable to open-end investment companies.
Item 6: Schedule of Investments.
The schedule of investments is included as part of the report to shareholders
filed under Item 1 of this Form.
Item 7: Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable to open-end investment companies.
Item 8: Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers.
Not applicable to open-end investment companies.
Item 9. Submission of Matters to a vote of Security Holders.
There have been no material changes to the procedures by which shareholders may
recommend nominees to the registrant's board of directors.
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 changes in the Registrant's internal control over financial
reporting as defined in Rule 30a-3(d) under the Act) that occurred during the
Registrant's last fiscal half-year that has materially affected, or is
reasonably likely to materially affect, the Registrant's internal control over
financial reporting.
Item 11: Exhibits:
(a) The following exhibits are attached to this Form N-CSR:
(2) A separate certification for each principal executive and principal
financial officer of the registrant as required by Rule 30a-2(a) under the Act
(17 CFR 270.30a-2) (certification required by Section 302 of the Sarbanes-Oxley
Act of 2002).
(b) Certification required by Rule 30a-2(b) under the Act (certification
required by Section 906 of the Sarbanes-Oxley Act of 2002).
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.
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By (Signature and Title) /s/ Paul E. Rasmussen
-----------------------------------------
Paul E. Rasmussen
Vice President, Treasurer
Date February 24, 2005
-------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title) /s/ Paul E. Rasmussen
-----------------------------------------
Paul E. Rasmussen
Vice President, Treasurer
Date February 24, 2005
-------------------------
By (Signature and Title) /s/ Eugene C. Sit
-----------------------------------------
Eugene C. Sit
Chairman
Date February 24, 2005
-------------------------
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 Semi-Annual Report.
Item 5: Audit Committee of Listed Registrants.
Not applicable to open-end investment companies.
Item 6: Schedule of Investments.
The schedule of investments is included as part of the report to shareholders
filed under Item 1 of this Form.
Item 7: Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable to open-end investment companies.
Item 8: Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers.
Not applicable to open-end investment companies.
Item 9. Submission of Matters to a vote of Security Holders.
There have been no material changes to the procedures by which shareholders may
recommend nominees to the registrant's board of directors.
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 changes in the Registrant's internal control over financial
reporting as defined in Rule 30a-3(d) under the Act) that occurred during the
Registrant's last fiscal half-year that has materially affected, or is
reasonably likely to materially affect, the Registrant's internal control over
financial reporting.
Item 11: Exhibits:
(a) The following exhibits are attached to this Form N-CSR:
(2) A separate certification for each principal executive and principal
financial officer of the registrant as required by Rule 30a-2(a) under the Act
(17 CFR 270.30a-2) (certification required by Section 302 of the Sarbanes-Oxley
Act of 2002).
(b) Certification required by Rule 30a-2(b) under the Act (certification
required by Section 906 of the Sarbanes-Oxley Act of 2002).
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 24, 2005
-------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title) /s/ Paul E. Rasmussen
-----------------------------------------
Paul E. Rasmussen
Vice President, Treasurer
Date February 24, 2005
-------------------------
By (Signature and Title) /s/ Eugene C. Sit
-----------------------------------------
Eugene C. Sit
Chairman
Date February 24, 2005
-------------------------
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 Semi-Annual Report.
Item 5: Audit Committee of Listed Registrants.
Not applicable to open-end investment companies.
Item 6: Schedule of Investments.
The schedule of investments is included as part of the report to shareholders
filed under Item 1 of this Form.
Item 7: Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable to open-end investment companies.
Item 8: Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers.
Not applicable to open-end investment companies.
Item 9. Submission of Matters to a vote of Security Holders.
There have been no material changes to the procedures by which shareholders may
recommend nominees to the registrant's board of directors.
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 changes in the Registrant's internal control over financial
reporting as defined in Rule 30a-3(d) under the Act) that occurred during the
Registrant's last fiscal half-year that has materially affected, or is
reasonably likely to materially affect, the Registrant's internal control over
financial reporting.
Item 11: Exhibits:
(a) The following exhibits are attached to this Form N-CSR:
(2) A separate certification for each principal executive and principal
financial officer of the registrant as required by Rule 30a-2(a) under the Act
(17 CFR 270.30a-2) (certification required by Section 302 of the Sarbanes-Oxley
Act of 2002).
(b) Certification required by Rule 30a-2(b) under the Act (certification
required by Section 906 of the Sarbanes-Oxley Act of 2002).
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 24, 2005
-------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title) /s/ Paul E. Rasmussen
------------------------------------------
Paul E. Rasmussen
Vice President, Treasurer
Date February 24, 2005
-------------------------
By (Signature and Title) /s/ Eugene C. Sit
-----------------------------------------
Eugene C. Sit
Chairman
Date February 24, 2005
-------------------------