-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Pcga9vE/rtHSeGBD/JIb6/4mExvZadv9oiNTHLgXY2TXHTMTqNAvU2xye5C8GJ6q UFvI2iwUhYOnwiiFlNUEvw== 0000897101-02-000114.txt : 20020414 0000897101-02-000114.hdr.sgml : 20020414 ACCESSION NUMBER: 0000897101-02-000114 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20011231 FILED AS OF DATE: 20020219 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SIT LARGE CAP GROWTH FUND INC CENTRAL INDEX KEY: 0000356786 IRS NUMBER: 411414580 STATE OF INCORPORATION: MN FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-03343 FILM NUMBER: 02552884 BUSINESS ADDRESS: STREET 1: 4600 NORWEST CENTER 90 S SEVENTH ST CITY: MINNEAPOLIS STATE: MN ZIP: 55402 BUSINESS PHONE: 612-332-32 MAIL ADDRESS: STREET 1: 4600 NORWEST CENTER 90 SOUTH ST STREET 2: 4600 NORWEST CENTER 90 SOUTH ST CITY: MINNEAPOLIS STATE: MN ZIP: 55402 FORMER COMPANY: FORMER CONFORMED NAME: SIT GROWTH & INCOME FUND INC DATE OF NAME CHANGE: 19940620 FORMER COMPANY: FORMER CONFORMED NAME: NEW BEGINNING GROWTH FUND INC/NEW DATE OF NAME CHANGE: 19870907 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SIT MUTUAL FUNDS INC CENTRAL INDEX KEY: 0000877880 STATE OF INCORPORATION: MN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-06373 FILM NUMBER: 02552885 BUSINESS ADDRESS: STREET 1: 4600 NORWEST CENTER STREET 2: 90 S SEVENTH ST CITY: MINNEAPOLIS STATE: MN ZIP: 55402 BUSINESS PHONE: 612-332-32 MAIL ADDRESS: STREET 1: 4600 NORWEST CTR, 90 SOUTH SEVENTH ST STREET 2: 4600 NORWEST CTR, 90 SOUTH SEVENTH ST CITY: MINNEAPOLIS STATE: MN ZIP: 55402-4130 FORMER COMPANY: FORMER CONFORMED NAME: SIT NEW BEGINNING MUTUAL FUNDS INC DATE OF NAME CHANGE: 19920929 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SIT MID CAP GROWTH FUND INC CENTRAL INDEX KEY: 0000356787 IRS NUMBER: 411414580 STATE OF INCORPORATION: MN FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-03342 FILM NUMBER: 02552886 BUSINESS ADDRESS: STREET 1: 4600 NORWEST CTR 90 S 17TH ST CITY: MINNEAPOLIS STATE: MN ZIP: 55402 BUSINESS PHONE: 612-332-32 MAIL ADDRESS: STREET 1: 4600 NORWEST CTR, 90 S 17TH ST STREET 2: 4600 NORWEST CTR, 90 S 17TH ST CITY: MINNEAPOLIS STATE: MN ZIP: 55402-4130 FORMER COMPANY: FORMER CONFORMED NAME: SIT GROWTH FUND INC DATE OF NAME CHANGE: 19940620 FORMER COMPANY: FORMER CONFORMED NAME: NEW BEGINNING INCOME & GROWTH FUND INC DATE OF NAME CHANGE: 19870907 FORMER COMPANY: FORMER CONFORMED NAME: SIT NEW BEGINNING GROWTH & INCOME FUND INC DATE OF NAME CHANGE: 19930923 N-30D 1 sit-stock020811_n30d.txt SIT MUTUAL FUNDS - STOCK FUNDS SAR FORM N-30D SIT MUTUAL FUNDS STOCK FUNDS SEMI-ANNUAL REPORT SIX MONTHS ENDED DECEMBER 31, 2001 A FAMILY OF NO-LOAD FUNDS ------------------------- BALANCED FUND LARGE CAP GROWTH FUND MID CAP GROWTH FUND INTERNATIONAL GROWTH FUND SMALL CAP GROWTH FUND SCIENCE AND TECHNOLOGY GROWTH FUND DEVELOPING MARKETS GROWTH FUND [LOGO] SIT INVESTMENT ASSOCIATES ------------------------- SIT MUTUAL FUNDS SIT MUTUAL FUNDS STOCK FUNDS SEMI-ANNUAL REPORT TABLE OF CONTENTS PAGE ---- Chairman's Letter 2 Performance Summary and Stock Funds Market Review 4 FUND REVIEWS AND PORTFOLIOS OF INVESTMENTS Balanced Fund 6 Large Cap Growth Fund 12 Mid Cap Growth Fund 16 International Growth Fund 20 Small Cap Growth Fund 24 Science and Technology Growth Fund 28 Developing Markets Growth Fund 32 Notes to Portfolios of Investments 36 Statements of Assets and Liabilities 38 Statements of Operations 40 Statements of Changes in Net Assets 42 Notes to Financial Statements 45 Financial Highlights 50 Results of Shareholder Meeting 57 A Look at Sit Mutual Funds 60 1 [PHOTO] SIT MUTUAL FUNDS SIX MONTHS ENDED DECEMBER 31, 2001 ----------------------------------------------------------------------- CHAIRMAN'S LETTER Dear Fellow Shareholders: Bearing similarities to the previous year 2000, 2001 proved to be a very good year for fixed-income investors. At the same time, this past year brought new challenges for equity market participants. We believe, however, that prospects for both asset classes are positive in the year ahead, based on our projections for a slow, but steady, recovery in the U.S. economy. ECONOMIC OVERVIEW The longest economic expansion since World War II came to an end in 2001. According to the National Bureau of Economic Research, the U.S. economy "officially" slipped into recession in March 2001. If the current downturn is consistent with the historical average of eleven months, it will end in February 2002. Importantly, we believe this recession will be one of the mildest on record, largely because many critical consumer-oriented sectors have remained quite strong. Consumer spending, which accounts for two-thirds of GDP, has been supported by the positive impact from lower interest rates, lower energy costs, and tax rebates. We believe this is an important point to consider in forecasting the strength of the eventual upturn. Since many sectors of the economy (i.e., housing, autos) have been relatively resilient to overall economic conditions, a strong acceleration in these areas from current levels appears unlikely. However, we believe that there are areas that should support a recovery as 2002 unfolds. First, the manufacturing sector has been slumping for some time, but recent data from the Institute for Supply Management point to significant improvement in key metrics over the past several months. Second, the government sector should contribute to the recovery through: 1) The stimulative effects of the next round of tax cuts contained in the fiscal program outlined last year and 2) Outright federal spending in a wide variety of areas ranging from aid to the airline industry, reconstruction, defense, and security. Third, inventory levels now appear to be at their bare minimum, indicating that restocking should be a key driver of growth as the year progresses. In light of these considerations, we believe economic growth will gradually accelerate throughout 2002, with GDP perhaps reaching 3% by the end of the year. We also expect economic growth to resume in many international regions in the year ahead, supported by many of the same factors (i.e., lower interest rates, lower fuel costs, inventory restocking) underlying the projected recovery in the U.S. Since the end of the U.S. recession now appears to be in sight and short-term interest rates have declined precipitously, attention is now shifting to the determination of when the Federal Reserve may stop reducing interest rates and begin to increase them. We do not believe this is a major concern for 2002, based on our forecast for moderate economic growth and decelerating inflation. Although energy remains the wild card in the equation, we expect Consumer Price Index gains in 2002 to slow to less than +2.0% from the 2001 level of +3.0%. With this backdrop, we believe interest rates for U.S. Treasury Securities will rise modestly in 2002, and that the Federal Reserve will remain on hold at least until late in the year. Fiscal policy will remain at the forefront of discussion among politicians and economists, particularly in light of the significant change in the near- to intermediate-term budget outlook. The combination of the economic slowdown, the national emergency stemming from the September 11th attacks, and the $1.35 trillion tax cut package has reduced the projected federal budget surpluses and created the conditions for political gridlock and posturing. Spending initiatives in 2002 are likely to push the budget into deficit this year with current estimates ranging from $25 billion to $75 billion. EQUITY STRATEGY SUMMARY Despite a strong rebound in the fourth quarter, broad-capitalization U.S. common stock indices showed declines 2 - ------------------------------------------------------------------------- [LOGO] in 2001. The fall in U.S. stocks for the second consecutive year was a statistically rare event since this has occurred only three other times since 1926. However, it is encouraging to note that each of these periods of declining equity prices was followed by strongly positive market gains. Importantly, based on our outlook for a stronger economy with low inflation, we believe that fundamentals support improving equity market conditions in 2002. U.S. equity markets have rebounded strongly from lows reached in September. This recovery, however, was not unexpected since equities typically anticipate an upturn in the economy. History has shown that stock prices typically bottom about five months before economic troughs, so the "bottom" in September 2001 may well be consistent with past experiences, since it is our view that the economy will be improving early this year. Although growth stocks struggled again in 2001, the performance difference between growth and value issues narrowed significantly in 2001 compared to 2000. Furthermore, across the mid and large capitalization Frank Russell indices, growth stocks outperformed value stocks over the final nine months of the year. Since early 2000, growth stocks have been negatively impacted by performance of the heavily weighted technology sector, as the combination of high valuations and weakening fundamentals contributed to share price declines in the sector. We believe quite the opposite set of circumstances exists today. Valuations are attractive in many areas and, perhaps most importantly, fundamentals appear to be improving as order trends for key technology industries have been turning up recently. It remains our view that the technology sector has been experiencing a short-run cyclical slowdown and, over the intermediate and longer term, high technology will be the primary force driving modernization of the global economy. While equity portfolios will continue to be well-diversified, we expect to alter the portfolio sector weightings to conform to our projection for improving economic conditions in 2002 and 2003. This suggests a shift away from some defensive/non-cyclical areas (i.e., health care, financials, consumer non-durables) to more high-growth, economically-sensitive sectors (i.e., technology, producer manufacturing, communications) that are likely to show improving relative earnings growth as economic growth resumes. We also remain positive about the outlook for small and medium capitalization stocks, despite the fact that they outperformed larger companies in 2001. We believe that this trend has further positive potential in 2002, based on the attractive relative earnings growth and valuation characteristics of small- and mid-cap stocks. We also look for an improvement in international market performance in 2002. Our emphasis remains on Europe, where a return to positive corporate earnings growth is expected this year, along with continued progress in implementing reforms. We continue to be cautious on the outlook for Japanese equities, as the economy is in recession and little progress has been made in initiating much needed economic and structural reforms. Since it is our view that Latin American markets will continue to be plagued by economic and political concerns, only a minimal portfolio allocation has been made to the region. 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, 2001 - -------------------------------------------------------------------------------- PERFORMANCE SUMMARY AND STOCK FUNDS MARKET REVIEW Domestic equity markets generated negative results over the past six months, although a strong fourth quarter rally provided positive momentum for the onset of 2002. Small capitalization stocks continued their string of strong performance relative to larger capitalization issues, as the Russell 2000 Index fell -4.1%, while the Russell 1000 Index fell -5.8%. Medium capitalization indices also outperformed larger cap issues, as evidenced by the -1.6% return for the S&P 400 Mid Cap Index, which compares to the -5.6% return for the S&P 500 Index. Growth stocks underperformed value stocks over the past six months. The Russell 1000 Growth Index fell -7.2%, while the Russell 1000 Value Index fell - 4.4%. This trend was also evident in small capitalization indices, as the Russell 2000 Growth Index fell -9.3%, compared to a +1.2% gain for the Russell 2000 Value Index. In terms of sector performance over the past six months, non-cyclical sectors such as health care and consumer non-durables outperformed more economically sensitive areas like technology, producer manufacturing, and consumer services. The differences, in large part, explain the differences in growth/value performance over the past six months, as growth indices tend to have a higher weighting in cyclical sectors, particularly technology. It should be noted, however, that while the full six-month period favored value-oriented indices and sectors, the fourth quarter clearly favored high growth groups. Technology sectors turned in particularly strong performance over the past three months, as the technology-laden NASDAQ OTC Composite Index rose an impressive +30.1% over the period. International equity market indices moved lower over the past six months. The MSCI World Index - one of the broadest measures of global equity returns - decreased -7.0%. The MSCI Pacific Index fell -18.8% over the period, weighed down by the -23.0% return for the Japan component. The MSCI Europe Index fell - -3.2% over the past six months.
1989 1990 1991 ----------------------------------------- SIT BALANCED -- -- -- - ------------------------------------------------------------------------------- SIT LARGE CAP GROWTH 32.02% -2.37% 32.72% - ------------------------------------------------------------------------------- SIT MID CAP GROWTH(1) 35.15 -2.04 65.50 - ------------------------------------------------------------------------------- SIT INTERNATIONAL GROWTH(2) -- -- 4.10(4) - ------------------------------------------------------------------------------- SIT SMALL CAP GROWTH(1) -- -- -- - ------------------------------------------------------------------------------- SIT SCIENCE AND TECHNOLOGY GROWTH(3) -- -- -- - ------------------------------------------------------------------------------- SIT DEVELOPING MARKETS GROWTH(2) -- -- -- - ------------------------------------------------------------------------------- S&P 500 INDEX 31.61 -3.05 30.46 S&P MIDCAP 400 INDEX 35.55 -5.12 50.11 MSCI EAFE INDEX(5) -- -- 0.26 RUSSELL 2000 INDEX(6) -- -- -- MSCI EMERGING MARKETS FREE INDEX(7) -- -- --
NASDAQ SYMBOL INCEPTION ------ --------- SIT BALANCED SIBAX 12/31/93 - ------------------------------------------------------------------------------- SIT LARGE CAP GROWTH SNIGX 09/02/82 - ------------------------------------------------------------------------------- SIT MID CAP GROWTH NBNGX 09/02/82 - ------------------------------------------------------------------------------- SIT INTERNATIONAL GROWTH SNGRX 11/01/91 - ------------------------------------------------------------------------------- SIT SMALL CAP GROWTH SSMGX 07/01/94 - ------------------------------------------------------------------------------- SIT SCIENCE AND TECHNOLOGY GROWTH SISTX 12/31/97 - ------------------------------------------------------------------------------- SIT DEVELOPING MARKETS GROWTH SDMGX 07/01/94 - ------------------------------------------------------------------------------- S&P 500 INDEX(8) S&P MIDCAP 400 INDEX(8) MSCI EAFE INDEX(5) RUSSELL 2000 INDEX(6) MSCI EMERGING MARKETS FREE INDEX(7)
- ------------------------------------------------------------------------------- (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 - ------------------------------------------------------------------------- [LOGO]
TOTAL RETURN - CALENDAR YEAR YTD 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 - ----------------------------------------------------------------------------------------------- ----------- -- -- -0.33% 25.43% 15.80% 21.73% 21.30% 20.15% -4.80% -12.99% - ------------------------------------------------------------------------------------------------------------- 4.94% 3.15% 2.83 31.66 23.05 31.70 30.56 33.41 -13.84 -27.70 - ------------------------------------------------------------------------------------------------------------- -2.14 8.55 -0.47 33.64 21.87 17.70 6.84 70.65 -4.35 -33.39 - ------------------------------------------------------------------------------------------------------------- 2.69 48.37 -2.99 9.36 10.31 4.81 18.95 50.77 -26.66 -33.26 - ------------------------------------------------------------------------------------------------------------- -- -- 11.57(4) 52.16 14.97 7.63 1.97 108.63 6.25 -28.19 - ------------------------------------------------------------------------------------------------------------- -- -- -- -- -- -- 38.40 85.98 -6.55 -47.78 - ------------------------------------------------------------------------------------------------------------- -- -- -2.02(4) -4.29 17.27 -5.20 -24.93 82.50 -30.18 -12.01 - ------------------------------------------------------------------------------------------------------------- 7.64 10.07 1.32 37.58 22.96 33.36 28.58 21.04 -9.11 -11.88 11.92 13.95 -3.60 30.94 19.19 32.29 19.11 14.72 17.50 -0.61 -12.17 32.56 7.78 11.21 6.05 1.78 20.00 26.96 -14.17 -21.44 -- -- 4.61 28.45 16.49 22.36 -2.54 21.26 -3.02 2.49 -- -- 2.80 -6.94 3.92 -13.40 -27.52 63.70 -31.80 -4.91
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 2001 TOTAL RETURN ------------------------------------------------------------------------- QUARTER SIX MONTHS SINCE ENDED 12/31/01 ENDED 12/31/01 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION - -------------------------------- ------------------------------------------------------------------------- 8.45% -3.61% -12.99% -0.16% 8.00% -- 9.89% - ------------------------------------------------------------------------------------------------------------- 15.06 -10.73 -27.70 -5.98 7.40 9.93% 13.10 - ------------------------------------------------------------------------------------------------------------- 24.74 -13.68 -33.39 2.83 6.46 8.94 15.72 - ------------------------------------------------------------------------------------------------------------- 6.47 -14.44 -33.26 -9.63 -1.65 5.07 5.40 - ------------------------------------------------------------------------------------------------------------- 17.22 -12.90 -28.19 16.76 11.80 -- 17.75 - ------------------------------------------------------------------------------------------------------------- 24.19 -20.00 -47.78 -3.18 -- -- 5.86 - ------------------------------------------------------------------------------------------------------------- 21.50 -5.00 -12.01 3.89 -4.41 -- -1.73 - ------------------------------------------------------------------------------------------------------------- 10.69 -5.56 -11.88 -1.03 10.70 12.94 15.64 17.99 -1.56 -0.61 10.24 16.12 15.02 17.61 6.97 -8.00 -21.44 -5.05 0.89 4.46 4.41 21.09 -4.09 2.49 6.42 7.52 -- 11.41 26.25 -1.70 -4.91 2.01 -7.80 -- -5.34
- -------------------------------------------------------------------------------- (5) FIGURES ASSUME AN INCEPTION DATE OF 10/31/91. (6) FIGURES ASSUME AN INCEPTION DATE OF 07/01/94. (7) FIGURES ASSUME AN INCEPTION DATE OF 06/30/94. (8) FIGURES ASSUME AN INCEPTION DATE OF 09/02/82. PERFORMANCE FIGURES ARE HISTORICAL AND DO NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURNS AND PRINCIPAL VALUE WILL VARY, AND YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL SHARES. AVERAGE ANNUAL TOTAL RETURNS INCLUDE CHANGES IN SHARE PRICE AS WELL AS REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAINS. 5 [PHOTO] SIT BALANCED FUND SIX MONTHS ENDED DECEMBER 31, 2001 ----------------------------------------------------------------------- PETER L. MITCHELSON, CFA, SENIOR PORTFOLIO MANAGER BRYCE A. DOTY, CFA, SENIOR PORTFOLIO MANAGER For the period ending December 31, 2001, the Sit Balanced Fund's six-month return was -3.6%. By comparison, the S&P 500 Index return was -5.6% for the period and the Lehman Aggregate Bond Index increased +4.7%. Although the equity portion of the portfolio provided a positive return over the final three months of the year, six- month and annual results were weighed down by the weakening global economic environment, exacerbated by the WTC attacks of September 11th. However, an improvement in key economic data during the fourth quarter led to a sharp improvement in stock prices, particularly for growth stocks. Up until the fourth quarter, the underperformance of growth stocks was largely due to the heavily weighted technology sector. This sector was particularly vulnerable to the slowdown in the economic environment, where high valuations and deteriorating business conditions led to a significant decline in share prices. Recent industry and company-specific commentary has been encouraging, however, as evidence continues to indicate that the trough in earnings has been reached and many companies will soon begin to meet or exceed analyst expectations. Given the long-term growth prospects for technology, the Fund continues to maintain a significant weighting in electronic technology and technology services. Other heavily weighted sectors include health technology and finance. The slowdown in the U.S. economy and Federal Reserve interest rate reductions have provided a positive backdrop for fixed-income markets as yields, particularly on shorter maturities, are substantially lower than twelve months ago. The Fund's sector positions and fixed-income strategy is based on our assumption that the Federal Reserve is at the end of the current cycle of lowering short-term rates and that the economy gradually improves throughout 2002. We continue to underweight U.S. Treasury securities, while focusing on high quality agency, mortgages, and corporate bonds. As of December 31, 2001, the asset allocation of the Fund was 58% equities (up from 56% on June 30, 2001), 37% fixed- income (down from 41%), and 5% cash and other net assets (up from 3%). We very much appreciate shareholders' continued interest and participation within the Fund. INVESTMENT OBJECTIVE AND STRATEGY The Sit Balanced Fund's dual objectives are to seek long-term growth of capital consistent with the preservation of principal and to provide regular income. It pursues its objectives by investing in a diversified portfolio of stocks and bonds. The Fund may emphasize either equity securities or fixed-income securities, or hold equal amounts of each, dependent upon the Adviser's analysis of market, financial and economic conditions. The Fund's permissible investment allocation is: 35-65% in equity securities and 35-65% in fixed-income securities. At all times at least 25% of the fixed-income assets will be invested in fixed-income senior securities. PORTFOLIO SUMMARY Net Asset Value 12/31/01: $14.47 Per Share 6/30/01: $15.33 Per Share Total Net Assets: $23.1 Million TOTAL DIVIDEND: $0.30 PER SHARE Long-Term Capital Gain: $0.01 Per Share Ordinary Income: $0.29 Per Share PORTFOLIO STRUCTURE (% OF TOTAL NET ASSETS) [PIE CHART] Cash & Other Net Assets 5.3% Bonds 36.9% Equities 57.8% 6 - ------------------------------------------------------------------------- [LOGO] AVERAGE ANNUAL TOTAL RETURNS* SIT LEHMAN BALANCED S&P AGGREGATE FUND 500 INDEX BOND INDEX -------- --------- ---------- 3 Month** 8.45% 10.69% 0.05% 6 Month** -3.61 -5.56 4.66 1 Year -12.99 -11.88 8.44 3 Years -0.16 -1.03 6.28 5 Years 8.00 10.70 7.43 Inception 9.89 13.97 6.90 (12/31/93) CUMULATIVE TOTAL RETURNS* SIT LEHMAN BALANCED S&P AGGREGATE FUND 500 INDEX BOND INDEX -------- --------- ---------- 1 Year -12.99% -11.88% 8.44% 3 Years -0.48 -3.05 20.06 5 Years 46.95 66.23 43.08 Inception 112.74 184.92 70.55 (12/31/93) *AS OF 12/31/01 **NOT ANNUALIZED. - -------------------------------------------------------------------------------- PERFORMANCE FIGURES ARE HISTORICAL AND DO NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURNS AND PRINCIPAL VALUE WILL VARY, AND YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL SHARES. AVERAGE ANNUAL TOTAL RETURNS INCLUDE CHANGES IN SHARE PRICE AS WELL AS REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAINS. MANAGEMENT FEES AND ADMINISTRATIVE EXPENSES ARE INCLUDED IN THE FUND'S PERFORMANCE; HOWEVER, FEES AND EXPENSES ARE NOT INCORPORATED IN THE LEHMAN AGGREGATE BOND INDEX AND THE S&P 500 INDEX. LIPPER AVERAGES AND INDICES ARE OBTAINED FROM LIPPER ANALYTICAL SERVICES, INC., A LARGE INDEPENDENT EVALUATOR OF MUTUAL FUNDS. GROWTH OF $10,000 [PLOT POINTS CHART] The sum of $10,000 invested at inception (12/31/93) and held until 12/31/01 would have grown to $21,274 in the Fund, $17,055 in the Lehman Aggregate Bond Index or $28,492 in the S&P 500 Index assuming reinvestment of all dividends and capital gains. TOP HOLDINGS Stocks: * Microsoft Corp. * General Electric * Target Corp. * Pfizer, Inc. * Intel Corp. Bonds: * Vendee Mtg. Trust, Series 1997-1 2E, 7.50%, 3/15/24 * GE Capital Mtg. Services, 1996-HE4 A7, 7.495%, 10/25/26 * Conseco Finance 2001-A IA5, 7.06%, 3/15/32 * PNC Mtg. Securities Corp. 1998-14 1A, 6.25%, 1/25/29 * American General Capital II, 8.50%, 7/1/30 Total Number of Holdings: 137 7 SIT BALANCED FUND - -------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS - DECEMBER 31, 2001 (UNAUDITED) - ------------------------------------------------------------------------------- QUANTITY NAME OF ISSUER MARKET VALUE($)(1) - ------------------------------------------------------------------------------- COMMON STOCKS (57.8%) (2) COMMERCIAL SERVICES (0.4%) 3,600 SYSCO Corp. $94,392 -------------- COMMUNICATIONS (2.2%) 8,200 Nextel Communications, Inc. (3) 89,872 5,600 Sprint Corp. (3) 136,696 11,200 Vodafone Group, A.D.R. 287,616 -------------- 514,184 -------------- CONSUMER DURABLES (0.6%) 2,600 Harley-Davidson, Inc. 141,206 -------------- CONSUMER NON-DURABLES (2.8%) 2,600 Colgate-Palmolive Co. 150,150 2,400 Kraft Foods, Inc. 81,672 5,400 PepsiCo, Inc. 262,926 1,800 The Procter & Gamble Co. 142,434 -------------- 637,182 -------------- CONSUMER SERVICES (2.6%) 7,900 AOL Time Warner, Inc. (3) 253,590 11,800 AT&T Corp. - Liberty Media Group (3) 165,200 4,300 Viacom, Inc. (3) 189,845 -------------- 608,635 -------------- ELECTRONIC TECHNOLOGY (10.7%) 1,400 Analog Devices, Inc. (3) 62,146 3,800 Brocade Comm. Systems, Inc. (3) 125,856 6,600 Ciena Corp. (3) 94,446 18,000 Cisco Systems, Inc. (3) 325,980 6,500 Dell Computer Corp. (3) 176,670 4,200 EMC Corp. (3) 56,448 14,100 Intel Corp. 443,445 2,800 International Business Machines Corp. 338,688 9,420 JDS Uniphase Corp. (3) 81,766 5,000 Linear Technology Corp. 195,200 12,200 Nokia Corp., A.D.R. 299,266 2,600 QUALCOMM, Inc. (3) 131,300 11,500 Sun Microsystems, Inc. (3) 141,450 -------------- 2,472,661 -------------- ENERGY MINERALS (0.8%) 3,200 Anadarko Petroleum Corp. 181,920 -------------- FINANCE (7.1%) 4,921 American International Group, Inc. 390,727 6,966 Citigroup, Inc. 351,644 1,800 Fifth Third Bancorp 110,394 1,200 Goldman Sachs Group, Inc. 111,300 2,700 Marsh & McLennan Cos., Inc. 290,115 4,000 Wells Fargo Co. 173,800 2,200 XL Capital, Ltd. 200,992 -------------- 1,628,972 -------------- - ------------------------------------------------------------------------------- QUANTITY NAME OF ISSUER MARKET VALUE($)(1) - ------------------------------------------------------------------------------- HEALTH SERVICES (1.3%) 1,300 Cardinal Health, Inc. 84,058 3,200 UnitedHealth Group, Inc. 226,464 -------------- 310,522 -------------- HEALTH TECHNOLOGY (10.9%) 7,300 Amgen, Inc. (3) 412,012 3,800 Baxter International, Inc. 203,794 2,800 Elan Corp., A.D.R. (3) 126,168 2,800 Eli Lilly and Co. 219,912 3,000 Genzyme Corp. (3) 179,580 1,300 Human Genome Sciences, Inc. 43,836 2,400 Johnson & Johnson 141,840 1,600 MedImmune, Inc. (3) 74,160 6,200 Medtronic, Inc. 317,502 4,000 Merck & Co., Inc. 235,200 11,175 Pfizer, Inc. 445,324 3,000 Pharmacia Corp. 127,950 -------------- 2,527,278 -------------- PRODUCER MANUFACTURING (5.1%) 15,300 General Electric Co. 613,224 2,900 Lockheed Martin Corp. 135,343 7,300 Tyco International, Ltd. 429,970 -------------- 1,178,537 -------------- RETAIL TRADE (6.0%) 1,000 Best Buy Co., Inc. (3) 74,480 6,900 Home Depot, Inc. 351,969 2,200 Kohl's Corp. (3) 154,968 3,600 Lowe's Companies, Inc. 167,076 11,700 Target Corp. 480,285 4,500 Walgreen Co. 151,470 -------------- 1,380,248 -------------- TECHNOLOGY SERVICES (7.1%) 1,800 Adobe Systems, Inc. 55,890 800 Automatic Data Processing, Inc. 47,120 5,000 Ceridian Corp. (3) 93,750 4,250 Check Point Software Tech., Ltd. (3) 169,532 1,800 Electronic Data Systems Corp. 123,390 1,400 First Data Corp. 109,830 9,600 Microsoft Corp. (3) 636,000 4,400 Oracle Corp. (3) 60,764 3,200 PeopleSoft, Inc. (3) 128,640 2,500 VeriSign, Inc. (3) 95,100 2,600 VERITAS Software Corp. (3) 116,558 -------------- 1,636,574 -------------- UTILITIES (0.2%) 2,200 Calpine Corp. (3) 36,938 -------------- Total common stocks (cost: $14,689,507) 13,349,249 -------------- 8 - ------------------------------------------------------------------------- [LOGO] - ------------------------------------------------------------------------------- QUANTITY/PAR($) NAME OF ISSUER MARKET VALUE($)(1) - ------------------------------------------------------------------------------- BONDS (35.1%) (2) ASSET-BACKED SECURITIES (11.9%) Advanta Mortgage Loan Trust: 25,000 1995-3 A5, 7.37%, 2/25/27 26,115 300,000 1999-3 A4, 7.75%, 10/25/26 318,490 Conseco Home Equity Loan: 300,000 2000-D A4, 8.17%, 12/15/25 318,367 450,000 2001-A IA5, 7.06%, 3/15/32 463,308 Conseco Mfg. Housing: 150,000 2000-1 A5, 8.06%, 5/1/31 157,141 250,000 2000-4 A5, 7.97%, 5/1/32 264,563 74,999 ContiMortgage Home Equity Loan Tr., 1996-1 A7, 7.00%, 3/15/27 77,626 250,000 EQCC Home Equity Loan Trust, 1996-4 A8, 7.41%, 1/15/28 260,109 485,000 GE Capital Corp Series 1996-HE4 A7, 7.495%, 10/25/26 504,975 Green Tree Financial Corp.: 20,000 1995-5, 7.25%, 9/15/26 20,775 24,970 1997-4, 7.03%, 2/15/29 25,805 300,000 Green Tree Home Equity Loan Trust, 1999-D A5, 7.88%, 9/15/30 318,786 -------------- 2,756,060 -------------- COLLATERALIZED MORTGAGE OBLIGATIONS (6.6%) 116,563 GE Capital Mortgage Services, Series 1997-6 A8, 7.50%, 7/25/27 118,999 PNC Mortgage Securities Corp.: 26,013 Series 1998-6 4A, 6.75%, 8/25/13 26,470 354,150 Series 1998-14 1A, 6.25%, 1/25/29 361,701 100,000 Norwest Asset Securities Corp. Series 1998-19 2A12, 6.75%, 7/25/28 100,650 Vendee Mortgage Trust: 200,000 Series 2000-3 2B, 7.50%, 4/15/08 212,770 625,000 Series 1997-1 2E, 7.50%, 3/15/24 664,146 50,000 Series 1997-2 E, 7.50%, 5/15/24 53,249 -------------- 1,537,985 -------------- CORPORATE BONDS (9.3%) 125,000 Allstate Finance, 7.83%, 12/1/45 126,672 25,000 American Airlines, 1999-1B, 7.324%, 10/15/09 23,174 300,000 American General Capital II, 8.50%, 7/1/30 350,138 150,000 Banc One Capital, 8.75%, 9/1/30 165,795 46,769 Burlington North Santa Fe, 7.57%, 1/2/21 49,726 162,846 Continental Airlines: 1996-B, 7.82%, 10/15/13 148,797 200,000 Elan Corp., 7.25%, 2/21/08 208,387 100,000 First Hawaiian Cap., 8.343%, 7/1/27 102,909 200,000 Ford Motor Credit Co., 9.14%, 12/30/14 214,603 - ------------------------------------------------------------------------------- QUANTITY/PAR($) NAME OF ISSUER MARKET VALUE($)(1) - ------------------------------------------------------------------------------- 200,000 Pentair, Inc., 7.85%, 10/15/09 197,349 150,000 Security Capital Group, 7.75%, 11/15/03 160,190 150,000 Shaw Communications, Inc., 7.20%, 12/15/11 149,131 50,000 Union Carbide Corp., 8.75%, 8/1/22 52,615 187,015 Union Tank Car Co., 6.57%, 1/2/14 190,828 -------------- 2,140,314 -------------- FEDERAL HOME LOAN MORTGAGE CORPORATION (0.3%) 32,942 9.00%, 7/1/16 35,747 6,745 9.00%, 7/1/16 7,319 529 9.25%, 6/1/02 530 18,736 10.00%, 10/1/18 21,015 -------------- 64,611 -------------- FEDERAL NATIONAL MORTGAGE ASSOCIATION (0.8%) 7,055 9.00%, 11/1/06 7,336 50,723 9.25%, 1/1/17 56,063 49,939 9.75%, 1/15/13 55,337 9,448 10.00%, 1/1/20 10,519 54,269 10.25%, 6/15/13 61,008 -------------- 190,263 -------------- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (3.9%) 14,504 9.00%, 6/15/11 15,788 51,455 9.00%, 6/15/09 55,897 140,086 9.00%, 11/15/16 153,396 8,802 9.50%, 1/15/04 9,233 28,343 9.50%, 11/15/04 29,729 15,364 9.50%, 7/20/05 16,218 18,519 9.50%, 12/15/09 20,397 10,337 9.50%, 5/20/16 11,472 63,439 9.50%, 3/15/18 70,737 42,935 9.50%, 9/20/18 47,730 14,676 9.50%, 2/20/19 16,325 34,150 9.50%, 3/20/19 37,986 306,614 9.50%, 12/15/19 341,179 25,587 9.75%, 10/15/05 27,084 32,171 10.00%, 3/20/16 36,062 10,759 10.25%, 1/15/04 11,355 7,632 11.25%, 10/15/11 8,753 -------------- 909,341 -------------- TAXABLE MUNICIPAL SECURITIES (1.3%) 11,000 Bernalillo Multifamily. Series 1998A, 7.50%, 9/20/20 11,508 Tobacco Settlement Series 2001A: 200,000 6.36%, 5/15/25 194,732 100,000 7.67%, 5/15/16 100,063 -------------- 306,303 -------------- See accompanying notes to portfolios of investments on page 36. 9 SIT BALANCED FUND - -------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS - DECEMBER 31, 2001 (UNAUDITED) - ------------------------------------------------------------------------------- QUANTITY/PAR($) NAME OF ISSUER MARKET VALUE($)(1) - ------------------------------------------------------------------------------- U.S. TREASURIES (0.9%) 250,000 U.S. Treasury Strips, Zero Coupon, 6.16% Effective Yield, 2/15/19 89,355 100,000 U.S. Treasury Note, 6.25%, 2/15/07 108,047 -------------- 197,402 -------------- CONVERTIBLE SECURITIES (0.1%) 14,000 Calpine Corp., 4.00%, 12/26/06 16,187 (cost: $ 14,000) -------------- Total bonds 8,118,466 (cost: $7,848,288) -------------- CLOSED-END MUTUAL FUNDS (1.8%) (2) 6,009 American Select Portfolio 79,439 403 American Strategic, Inc. Portfolio 5,158 15,470 American Strategic, Inc. Portfolio II 199,563 10,609 American Strategic, Inc. Portfolio III 129,854 -------------- Total closed-end mutual funds 414,014 (cost: $368,185) -------------- SHORT-TERM SECURITIES (4.8%) (2) 1,105,000 Sit Money Market Fund, 1.44% (4) 1,105,000 (cost: $1,105,000) -------------- Total investments in securities (cost: $24,010,980) (5) $22,986,729 ============== See accompanying notes to portfolios of investments on page 36. 10 - ------------------------------------------------------------------------- [LOGO] This page has been left blank intentionally. 11 [PHOTO] SIT LARGE CAP GROWTH FUND SIX MONTHS ENDED DECEMBER 31, 2001 ----------------------------------------------------------------------- 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 -10.7%, compared to the - -7.2% return for the Russell 1000 Growth Index. The S&P 500 Index return for the period was -5.6%. These negative returns reflect a trying third quarter for the equity market, compounded by the tragic events of September 11th. The performance over the final three months of the year was much more encouraging, as the Fund returned +15.1%, compared to returns of +10.7% and +15.2% for the S&P 500 Index and Russell 1000 Growth Index, respectively. By most measures, 2001 was a difficult year for large cap equity investors, as every large stock index that we monitor declined during the year. Persistent weakness in the economy resulted in a significant reduction in corporate profitability, with the terrorist attacks in September providing another blow to the near-term outlook. As difficult as 2000 and 2001 have been, however, recent economic data has provided a basis for more optimism for the outlook in 2002. Over the past month, statistics relative to consumer spending, durable goods orders, and manufacturing activity have been better than expected. Indeed, it appears that the combined impact of low interest rates, monetary and fiscal stimulus, and lower energy costs are beginning to revive the economy. Although the strong performance of the equity market over the past three months has begun to reflect an anticipated improvement in corporate profits, we believe that the U.S. equity market is poised to show further gains as the economy gradually accelerates over the course of 2002. In absolute terms, the Fund's performance over the past six months was negatively impacted by sectors that are closely tied to economic growth, including electronic technology, technology services, consumer services, and communications. Since it is our view that the economic backdrop is likely to improve in 2002, we remain committed to long-term positions in growth companies within these sectors. In terms of sector weightings, the most significant increases over the past six months occurred in health technology, finance, consumer non-durables, and retail trade. Sectors with the largest decreases over the period included technology services, producer manufacturing, and consumer services. As of December 31st, the Fund was 98% invested in equities. Given an improving earnings outlook and attractive valuations for 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 12/31/01: $34.47 Per Share 6/30/01: $38.99 Per Share Total Net Assets: $95.5 Million Weighted Average Market Cap: $113.5 Billion TOTAL DIVIDEND: $0.34 PER SHARE Long-Term Capital Gain: $0.34 Per Share PORTFOLIO STRUCTURE - BY SECTOR (% OF TOTAL NET ASSETS) [BAR CHART] Health Technology 18.8 Electronic Technology 16.8 Finance 11.8 Technology Services 11.6 Retail Trade 10.2 Producer Manufacturing 9.0 Consumer Non-Durables 5.4 Consumer Services 4.8 Sectors 3.4% and Under 9.2 Cash & Other Net Assets 2.4 12 - ------------------------------------------------------------------------- [LOGO] AVERAGE ANNUAL TOTAL RETURNS* SIT RUSSELL LARGE CAP S&P 1000 GROWTH FUND 500 INDEX GROWTH INDEX ----------- --------- ------------ 3 Month** 15.06% 10.69% 15.15% 6 Month** -10.73 -5.56 -7.20 1 Year -27.70 -11.88 -20.42 5 Years 7.40 10.70 8.27 10 Year*** 9.93 12.94 10.80 Inception*** 13.10 15.64 14.46 (9/2/82) CUMULATIVE TOTAL RETURNS* SIT RUSSELL LARGE CAP S&P 1000 GROWTH FUND 500 INDEX GROWTH INDEX ----------- --------- ------------ 1 Year -27.70% -11.88% -20.42% 5 Year 42.90 66.23 48.79 10 Year*** 157.67 237.52 178.77 Inception*** 981.78 1562.53 1263.97 (9/2/82) *AS OF 12/31/01 **NOT ANNUALIZED. - -------------------------------------------------------------------------------- PERFORMANCE FIGURES ARE HISTORICAL AND DO NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURNS AND PRINCIPAL VALUE WILL VARY, AND YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL SHARES. AVERAGE ANNUAL TOTAL RETURNS INCLUDE CHANGES IN SHARE PRICE AS WELL AS REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAINS. MANAGEMENT FEES AND ADMINISTRATIVE EXPENSES ARE INCLUDED IN THE FUND'S PERFORMANCE; HOWEVER, FEES AND EXPENSES ARE NOT INCORPORATED IN THE RUSSELL 1000 GROWTH INDEX AND THE S&P 500 INDEX. ***ON 6/6/93, THE FUND'S INVESTMENT OBJECTIVE CHANGED TO ALLOW FOR A PORTFOLIO OF 100% STOCKS. PRIOR TO THAT TIME, THE PORTFOLIO WAS REQUIRED TO CONTAIN NO MORE THAN 80% STOCKS. GROWTH OF $10,000 [PLOT POINTS CHART] The sum of $10,000 invested at inception (9/2/82) and held until 12/31/01 would have grown to $108,178 in the Fund or $166,253 in the S&P 500 Index assuming reinvestment of all dividends and capital gains. TOP 10 HOLDINGS * Microsoft Corp. * General Electric Co. * Target Corp. * Pfizer, Inc. * Tyco International, Ltd. * Amgen, Inc. * American International Group, Inc. * Cisco Systems, Inc. * Intel Corp. * Citigroup, Inc. Total Number of Holdings: 70 13 SIT LARGE CAP GROWTH FUND - ------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS - DECEMBER 31, 2001 (UNAUDITED) - ------------------------------------------------------------------------------- QUANTITY NAME OF ISSUER MARKET VALUE($)(1) - ------------------------------------------------------------------------------- COMMON STOCKS (97.6%) (2) COMMERCIAL SERVICES (0.7%) 25,000 SYSCO Corp. $655,500 -------------- COMMUNICATIONS (3.4%) 53,600 Nextel Communications, Inc. (3) 587,456 38,500 Sprint Corp. (3) 939,785 66,200 Vodafone Group, A.D.R. 1,700,016 -------------- 3,227,257 -------------- CONSUMER DURABLES (0.6%) 10,900 Harley-Davidson, Inc. 591,979 -------------- CONSUMER NON-DURABLES (5.4%) 25,700 Colgate-Palmolive Co. 1,484,175 20,550 Kraft Foods, Inc. 699,316 46,100 PepsiCo, Inc. 2,244,609 9,000 The Procter & Gamble Co. 712,170 -------------- 5,140,270 -------------- CONSUMER SERVICES (4.8%) 55,900 AOL Time Warner, Inc. (3) 1,794,390 98,350 Liberty Media Corp. (3) 1,376,900 32,977 Viacom, Inc. (3) 1,455,935 -------------- 4,627,225 -------------- ELECTRONIC TECHNOLOGY (16.8%) 9,500 Analog Devices, Inc. (3) 421,705 20,000 Brocade Comm. Systems, Inc. (3) 662,400 41,300 Ciena Corp. (3) 591,003 142,300 Cisco Systems, Inc. (3) 2,577,053 42,000 Dell Computer Corp. (3) 1,141,560 29,000 EMC Corp. (3) 389,760 81,300 Intel Corp. 2,556,885 20,400 International Business Machines, Inc. 2,467,584 67,500 JDS Uniphase Corp. (3) 585,900 34,350 Linear Technology Corp. 1,341,024 62,400 Nokia Corp., A.D.R. 1,530,672 19,000 QUALCOMM, Inc. (3) 959,500 69,600 Sun Microsystems, Inc. (3) 856,080 -------------- 16,081,126 -------------- ENERGY MINERALS (1.6%) 27,500 Anadarko Petroleum Corp. 1,563,375 -------------- FINANCE (11.8%) 33,462 American International Group, Inc. 2,656,883 50,000 Citigroup, Inc. 2,524,000 - ------------------------------------------------------------------------------- QUANTITY NAME OF ISSUER MARKET VALUE($)(1) - ------------------------------------------------------------------------------- 14,500 Fifth Third Bancorp 889,285 17,600 Marsh & McLennan Cos., Inc. 1,891,120 4,300 Northern Trust Corp. 258,946 3,500 The Goldman Sachs Group, Inc. 324,625 29,400 Wells Fargo Co. 1,277,430 15,500 XL Capital, Ltd. 1,416,080 -------------- 11,238,369 -------------- HEALTH SERVICES (2.6%) 10,850 Cardinal Health, Inc. 701,561 24,500 UnitedHealth Group, Inc. 1,733,865 -------------- 2,435,426 -------------- HEALTH TECHNOLOGY (18.8%) 49,700 Amgen, Inc. (3) 2,805,068 19,600 Baxter International, Inc. 1,051,148 19,300 Elan Corp., A.D.R. (3) 869,658 23,800 Eli Lilly and Co. 1,869,252 20,000 Genzyme Corp. (3) 1,197,200 11,600 Human Genome Sciences, Inc. (3) 391,152 16,000 Johnson & Johnson 945,600 10,700 MedImmune, Inc. (3) 495,945 46,150 Medtronic, Inc. 2,363,342 24,700 Merck & Co., Inc. 1,452,360 86,625 Pfizer, Inc. 3,452,006 25,000 Pharmacia Corp. 1,066,250 -------------- 17,958,981 -------------- PRODUCER MANUFACTURING (9.0%) 107,200 General Electric Co. 4,296,576 19,500 Lockheed Martin Corp. 910,065 3,800 MN Mining and Manufacturing Co. 449,198 49,500 Tyco International, Ltd. 2,915,550 -------------- 8,571,389 -------------- RETAIL TRADE (10.2%) 8,700 Best Buy Co., Inc. (3) 647,976 46,950 Home Depot, Inc. 2,394,919 14,600 Kohl's Corp. (3) 1,028,424 17,300 Lowe's Companies, Inc. 802,893 86,200 Target Corp. 3,538,510 38,800 Walgreen Co. 1,306,008 -------------- 9,718,730 -------------- TECHNOLOGY SERVICES (11.6%) 15,000 Adobe Systems, Inc. 465,750 5,500 Automatic Data Processing, Inc. 323,950 14 - ------------------------------------------------------------------------- [LOGO] - ------------------------------------------------------------------------------- QUANTITY NAME OF ISSUER MARKET VALUE($)(1) - ------------------------------------------------------------------------------- 39,400 Ceridian Corp. (3) 738,750 23,200 Check Point Software Tech., Ltd. (3) 925,448 12,000 Electronic Data Systems Corp. 822,600 8,000 First Data Corp. 627,600 68,500 Microsoft Corp. (3) 4,538,125 36,200 Oracle Corp. (3) 499,922 16,500 PeopleSoft, Inc. (3) 663,300 14,500 VeriSign, Inc. (3) 551,580 19,900 VERITAS Software Corp. (3) 892,117 -------------- 11,049,142 -------------- UTILITIES (0.3%) 18,900 Calpine Corp. (3) 317,331 -------------- Total common stocks 93,176,100 (cost: $89,526,240) -------------- SHORT-TERM SECURITIES (1.0%) (2) 980,000 Sit Money Market Fund, 1.44% (4) 980,000 (cost: $980,000) -------------- Total investments in securities (cost: $90,506,240) (5) $94,156,100 ============== See accompanying notes to portfolios of investments on page 36. 15 [PHOTO] SIT MID CAP GROWTH FUND SIX MONTHS ENDED DECEMBER 31, 2001 ----------------------------------------------------------------------- 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 -13.7%, compared to -8.3% for the Russell MidCap Growth Index. The S&P MidCap 400 Index Fund fell -1.6% during the period. Performance trends improved during the fourth quarter, as the Fund returned +24.7%, compared to the +18.0% and +27.1% for the S&P MidCap 400 Index and Russell MidCap Growth Index, respectively. While the second half of 2001 proved to be another challenging period for the equity markets, the economic environment during the third quarter was dramatically different than that of the fourth quarter. The third quarter was marked by a rapid deceleration in the economy, the tragic events of September 11th, and a sharp decline in the equity market. A more positive environment emerged in the fourth quarter, which was characterized by early successes in the war against terrorism, improving consumer confidence, signs of improvement in the industrial sector (including technology), and a rise in the equity market. The strong stock performance during the final months of the year was led by many of the sectors that had been hit hard in the economic downturn, particularly technology-related sectors. Based on our outlook for improving economic conditions in 2002, it is our view that the "defensive" orientation of the market, which has strongly favored value-oriented issues, has largely run its course. Indeed, as measured by the Russell MidCap Indices, growth stocks outperformed value issues by fifteen percentage points during the fourth quarter. Based on improved relative valuation metrics and the prospect for improving fundamentals in the several key high growth sectors (particularly technology), we believe a better environment for growth investing lies ahead. The most significant sector weighting increases over the past six months include electronic technology, retail trade, producer manufacturing, and commercial services. New purchases in these sectors included Nvidia, Broadcom, Brocade Communications, Best Buy, Costco, Autozone, TJX, L-3 Communications, ITT Industries, Lamar Advertising, and McGraw-Hill. Sector weighting decreases occurred in technology services, finance, and industrial services. Sales included Mercury Interactive, BEA Systems, PNC Financial, Stillwell, Noble Drilling, and Transocean Sedco. As of December 31st , the Fund was 95% invested in equities. The strong recent performance of mid cap growth stocks has been encouraging , and we look forward to an improving investment environment the year ahead. 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 12/31/01: $10.45 Per Share 6/30/01: $12.37 Per Share Total Net Assets: $252.9 Million Weighted Average Market Cap: $9.6 Billion TOTAL DIVIDEND: $0.23 PER SHARE Long-Term Capital Gain: $0.23 Per Share PORTFOLIO STRUCTURE - BY SECTOR (% OF TOTAL NET ASSETS) [BAR CHART] Electronic Technology 19.1 Health Technology 18.5 Technology Services 15.3 Retail Trade 10.2 Finance 8.8 Health Services 6.2 Producer Manufacturing 4.6 Sectors 3.5% and Under 12.4 Cash and Other Net Assets 4.9 16 - ------------------------------------------------------------------------- [LOGO] AVERAGE ANNUAL TOTAL RETURNS* SIT S&P RUSSELL MID CAP MIDCAP MID CAP GROWTH FUND 400 INDEX GROWTH INDEX ----------- --------- ------------ 3 Month** 24.74% 17.99% 27.06% 6 Month** -13.68 -1.56 -8.26 1 Year -33.39 -0.61 -20.15 5 Year 6.46 16.12 9.02 10 Year 8.94 15.02 11.10 Inception 15.72 17.61 -- (9/2/82) CUMULATIVE TOTAL RETURNS* SIT S&P RUSSELL MID CAP MIDCAP MID CAP GROWTH FUND 400 INDEX GROWTH INDEX ----------- --------- ------------ 1 Year -33.39% -0.61% -20.15% 5 Year 36.72 111.12 53.99 10 Year 135.42 305.13 186.62 Inception 1583.44 2204.21 -- (9/2/82) *AS OF 12/31/01 **NOT ANNUALIZED. - -------------------------------------------------------------------------------- PERFORMANCE FIGURES ARE HISTORICAL AND DO NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURNS AND PRINCIPAL VALUE WILL VARY, AND YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL SHARES. AVERAGE ANNUAL TOTAL RETURNS INCLUDE CHANGES IN SHARE PRICE AS WELL AS REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAINS. MANAGEMENT FEES AND ADMINISTRATIVE EXPENSES ARE INCLUDED IN THE FUND'S PERFORMANCE; HOWEVER, FEES AND EXPENSES ARE NOT INCORPORATED IN THE RUSSELL MID CAP GROWTH INDEX AND THE S&P MIDCAP 400 INDEX. GROWTH OF $10,000 [PLOT POINTS CHART] The sum of $10,000 invested at inception (9/2/82) and held until 12/31/01 would have grown to $168,344 in the Fund, or $230,421 in the S&P MidCap 400 Index assuming reinvestment of all dividends and capital gains. TOP 10 HOLDINGS * Elan Corp., A.D.R. * Kohl's Corp. * IDEC Pharmaceuticals Corp. * TCF Financial Corp. * Genzyme Corp. * Electronic Arts, Inc. * Concord EFS, Inc. * Fiserv, Inc. * Check Point Software Tech., Ltd. * Biogen, Inc. Total Number of Holdings: 70 17 SIT MID CAP GROWTH FUND - ------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS - DECEMBER 31, 2001 (UNAUDITED) - ------------------------------------------------------------------------------- QUANTITY NAME OF ISSUER MARKET VALUE($)(1) - ------------------------------------------------------------------------------- COMMON STOCKS (95.1%) (2) COMMERCIAL SERVICES (3.2%) 112,650 Lamar Advertising Co. (3) 4,769,601 56,500 McGraw-Hill Companies, Inc. 3,445,370 --------------- 8,214,971 --------------- CONSUMER DURABLES (3.5%) 106,900 Electronic Arts, Inc. (3) 6,408,655 43,400 Harley-Davidson, Inc. 2,357,054 --------------- 8,765,709 --------------- CONSUMER SERVICES (1.2%) 110,600 EchoStar Communications Corp. (3) 3,038,182 --------------- ELECTRONIC TECHNOLOGY (19.1%) 348,200 ADC Telecommunications, Inc. (3) 1,601,720 95,050 Analog Devices, Inc. (3) 4,219,270 175,400 Applied Micro Circuits Corp. (3) 1,985,528 116,450 Broadcom Corp. (3) 4,759,312 96,400 Brocade Communications Sys., Inc. (3) 3,192,768 59,050 Celestica, Inc. (3) 2,385,029 101,400 CIENA Corp. (3) 1,451,034 68,500 Integrated Device Technology, Inc. (3) 1,821,415 150,050 Jabil Circuit, Inc. (3) 3,409,136 358,400 JDS Uniphase Corp. (3) 3,110,912 56,500 KLA-Tencor Corp. (3) 2,800,140 47,950 Lexmark International, Inc. (3) 2,829,050 83,200 NVIDIA Corp. (3) 5,566,080 147,600 ONI Systems Corp. (3) 925,452 164,250 RF Micro Devices, Inc. (3) 3,158,527 392,250 Sonus Networks, Inc. (3) 1,812,195 85,700 Xilinx, Inc. (3) 3,346,585 --------------- 48,374,153 --------------- ENERGY MINERALS (1.9%) 125,100 Devon Energy Corp. 4,835,115 --------------- FINANCE (8.8%) 96,350 Ace, Ltd. 3,868,452 26,900 Capital One Financial Corp. 1,451,255 34,700 Hartford Financial Sevices Group, Inc. 2,180,201 87,500 Legg Mason, Inc. 4,373,250 48,800 Lehman Brothers Holdings, Inc. 3,259,840 147,900 TCF Financial Corp. 7,096,242 --------------- 22,229,240 --------------- - ------------------------------------------------------------------------------- QUANTITY NAME OF ISSUER MARKET VALUE($)(1) - ------------------------------------------------------------------------------- HEALTH SERVICES (6.2%) 24,700 AmerisourceBergen Corp. 1,569,685 29,700 Express Scripts, Inc. (3) 1,388,772 38,500 McKesson Corp. 1,439,900 21,850 Oxford Health Plans, Inc. (3) 658,559 93,850 Tenet Healthcare Corp. (3) 5,510,872 43,100 Wellpoint Health Networks, Inc. (3) 5,036,235 --------------- 15,604,023 --------------- HEALTH TECHNOLOGY (18.5%) 49,900 Allergan, Inc. 3,744,995 97,200 Biogen, Inc. (3) 5,574,420 64,750 Biomet, Inc. 2,000,775 194,500 Elan Corp., A.D.R. (3) 8,764,170 107,500 Genzyme Corp. (3) 6,434,950 8,600 Gilead Sciences, Inc. (3) 565,192 89,100 Human Genome Sciences, Inc. (3) 3,004,452 109,200 IDEC Pharmaceuticals Corp. (3) 7,527,156 60,000 MedImmune, Inc. (3) 2,781,000 60,100 Sepracor, Inc. (3) 3,429,306 77,100 Waters Corp. (3) 2,987,625 --------------- 46,814,041 --------------- INDUSTRIAL SERVICES (1.0%) 39,400 Dynegy, Inc. 1,004,700 43,550 Weatherford International, Inc. (3) 1,622,673 --------------- 2,627,373 --------------- PROCESS INDUSTRIES (1.0%) 41,700 Millipore Corp. 2,531,190 --------------- PRODUCER MANUFACTURING (4.6%) 90,000 Danaher Corp. 5,427,900 51,100 ITT Industries, Inc. 2,580,550 40,500 L-3 Communications Holdings, Inc. (3) 3,645,000 --------------- 11,653,450 --------------- RETAIL TRADE (10.2%) 39,100 AutoZone, Inc. (3) 2,807,380 113,900 Bed Bath & Beyond, Inc. (3) 3,861,210 58,500 Best Buy Co., Inc. (3) 4,357,080 64,000 Costco Wholesale Corp. (3) 2,840,320 28,150 Family Dollar Stores, Inc. 843,937 121,400 Kohl's Corp. (3) 8,551,416 65,150 The TJX Companies, Inc. 2,596,879 --------------- 25,858,222 --------------- 18 - ------------------------------------------------------------------------- [LOGO] - ------------------------------------------------------------------------------- QUANTITY/PAR($) NAME OF ISSUER MARKET VALUE($)(1) - ------------------------------------------------------------------------------- TECHNOLOGY SERVICES (15.3%) 150,300 Ceridian Corp. (3) 2,818,125 139,850 Check Point Software Tech., Ltd. (3) 5,578,617 176,200 Concord EFS, Inc. (3) 5,775,836 224,100 Dendrite International, Inc. (3) 3,144,123 135,212 Fiserv, Inc. (3) 5,722,172 128,100 PeopleSoft, Inc. (3) 5,149,620 52,300 Siebel Systems, Inc. (3) 1,463,354 100,900 SunGard Data Systems, Inc. (3) 2,919,037 67,200 VeriSign, Inc. (3) 2,556,288 79,300 VERITAS Software Corp. (3) 3,555,019 --------------- 38,682,191 --------------- UTILITIES (0.6%) 82,700 Calpine Corp. (3) 1,388,533 --------------- Total common stocks 240,616,393 (cost: $217,651,867) --------------- SHORT-TERM SECURITIES (2.2%) (2) 5,655,000 Sit Money Market Fund, 1.44% (4) 5,655,000 (cost: $5,655,000) --------------- Total investments in securities (cost: $223,306,867) (5) $246,271,393 =============== See accompanying notes to portfolios of investments on page 36. 19 [PHOTO] SIT INTERNATIONAL GROWTH FUND SIX MONTHS ENDED DECEMBER 31, 2001 ----------------------------------------------------------------------- SENIOR PORTFOLIO MANAGERS EUGENE C. SIT, CFA AND ROGER J. SIT The Sit International Growth Fund decreased -14.4% for the six months ended December 31, 2001, compared with declines of -8.0% for the MSCI EAFE Index and - -7.9% for the Lipper International Fund Index. The Fund's exposure to the software and insurance industries was the primary cause of underperformance, though this was partially offset by positive contributions from the Fund's holdings in the technology hardware industry and its underweighting in the automobile industry. For the quarter ended December 31st, the Fund returned +6.5%, while the MSCI EAFE and Lipper International Fund Indices increased +7.0% and +8.4%, respectively. Our weighting in Europe on December 31st was 65.3%, versus 73.3% for the Index. We expect modestly positive economic growth in Europe in the coming year, as subsiding inflation allows the European Central Bank to ease interest rates, and the launch of the Euro into circulation and ongoing structural reforms attract investors back to the equity markets. We are positioning the Fund more aggressively in anticipation of recovering consumer and corporate demand. Recent additions include Carrefour, a global "hypermart" operator headquartered in France, and Cambridge Antibody, a UK-based biotechnology firm. The Fund had a 10.1% weighting in Japan on December 31st, versus 20.1% for the Index. Sluggish consumer sentiment, poor export demand, persistent deflation, and lack of progress on the reform front does not bode well for the economy in the coming months. We believe that other regions of the world currently offer more promising investment opportunities and have reduced our holdings in this market. In Asia ex-Japan, the Fund had a weighting of 8.9% on December 31st, compared with 6.6% for the Index. We continue to believe that the large-capitalization, Hong Kong-based companies in our portfolio are well-positioned to benefit from the opportunities that will be created in the wake of China's recent entry into the WTO. In addition, during the quarter, we increased our position in News Corp, the Australian media conglomerate. We expect this company's regionally-diversified holdings will perform well during the global economic recovery. 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 12/31/01: $12.50 Per Share 6/30/01: $14.61 Per Share Total Net Assets: $87.6 Million Weighted Average Market Cap: $59.8 Billion PORTFOLIO STRUCTURE - BY REGION (% OF TOTAL NET ASSETS) [BAR CHART] SIT INT'L Morgan Stanley GROWTH FUND EAFE Index France, Germany, UK 38.3 43.7 Europe Other 27.0 29.6 Japan 10.1 20.1 Pacific Basin 8.9 6.6 Africa/Middle East 3.1 0.0 North America 1.9 0.0 Latin America 1.5 0.0 Cash and Other Net Assets 9.2 0.0 20 - ------------------------------------------------------------------------- [LOGO] AVERAGE ANNUAL TOTAL RETURNS* SIT MORGAN STANLEY LIPPER INTERNATIONAL CAPITAL INT'L INT'L GROWTH FUND EAFE INDEX INDEX ----------- ---------- ----- 3 Month** 6.47% 6.97% 8.44% 6 Month** -14.44 -8.00 -7.88 1 Year -33.26 -21.44 -19.33 5 Year -1.65 0.89 2.76 10 Year 5.07 4.46 6.93 Inception 5.40 4.41 6.83 (11/1/91) CUMULATIVE TOTAL RETURNS* SIT MORGAN STANLEY LIPPER INTERNATIONAL CAPITAL INT'L INT'L GROWTH FUND EAFE INDEX INDEX ----------- ---------- ----- 1 Year -33.26% -21.44% -19.33% 5 Year -7.99 4.55 14.58 10 Year 64.06 54.72 95.49 Inception 70.78 55.12 95.86 (11/1/91) *AS OF 12/31/01 **NOT ANNUALIZED. - -------------------------------------------------------------------------------- PERFORMANCE FIGURES ARE HISTORICAL AND DO NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURNS AND PRINCIPAL VALUE WILL VARY, AND YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL SHARES. AVERAGE ANNUAL TOTAL RETURNS INCLUDE CHANGES IN SHARE PRICE AS WELL AS REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAINS. MANAGEMENT FEES AND ADMINISTRATIVE EXPENSES ARE INCLUDED IN THE FUND'S PERFORMANCE; HOWEVER, FEES AND EXPENSES ARE NOT INCORPORATED IN THE MORGAN STANLEY CAPITAL INTERNATIONAL EAFE (EUROPE, AUSTRALIA, FAR EAST) INDEX. THE LIPPER AVERAGES AND INDICES ARE OBTAINED FROM LIPPER ANALYTICAL SERVICES, INC., A LARGE INDEPENDENT EVALUATOR OF MUTUAL FUNDS. GROWTH OF $10,000 [PLOT POINTS CHART] The sum of $10,000 invested at inception (11/1/91) and held until 12/31/01 would have grown to $17,078 in the Fund, or $15,512 in the Morgan Stanley EAFE Index assuming reinvestment of all dividends and capital gains. PORTFOLIO STRUCTURE - BY SECTOR (% OF TOTAL NET ASSETS) [BAR CHART] Finance 20.6 Health Technology 18.2 Electronic Technology 12.4 Communications 9.0 Consumer Non-Durables 6.9 Energy Minerals 4.7 Technology Services 4.1 Sectors Less than 4.0% 14.9 Cash and Other Net Assets 9.2 21 SIT INTERNATIONAL GROWTH FUND - -------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS - DECEMBER 31, 2001 (UNAUDITED) TOP 10 HOLDINGS * Vodafone Group, p.l.c. * Takeda Chemical Industries * Elan Corp., p.l.c., ADR * Glaxosmithkline, A.D.R. * UBS AG * Nokia Corp., A.D.R. * Muenchener Rueckver * HSBC Holdings p.l.c. * BP p.l.c., A.D.R. * ING Groep N.V. Total Number of Holdings: 74 - ------------------------------------------------------------------------------- QUANTITY NAME OF ISSUER MARKET VALUE($)(1) - ------------------------------------------------------------------------------- COMMON STOCKS (90.8%) (2) AFRICA/ MIDDLE EAST (3.1%) ISRAEL (3.1%) 22,000 Amdocs, Ltd. (Technology Services) (3) $747,340 21,600 Check Point Software Technologies, Ltd., A.D.R. (Technology Services) (3) 861,624 28,100 Comverse Technology, Inc. (Electronic Technology) (3) 628,597 7,000 Teva Pharmaceutical, A.D.R. (Health Technology) 431,410 ---------------- 2,668,971 ---------------- ASIA (19.0%) AUSTRALIA (0.9%) 28,700 News Corp., Ltd., A.D.R. (Consumer Svcs.) 759,402 ---------------- HONG KONG (3.9%) 98,000 Cheung Kong Hldgs., Ltd. (Industrial Services) 1,017,973 259,000 Citic Pacific, Ltd. (Industrial Services) 576,268 158,000 HSBC Holdings, p.l.c. (Finance) 1,848,907 ---------------- 3,443,148 ---------------- JAPAN (10.1%) 57,800 AFLAC, Inc., A.D.R. (Finance) 1,419,568 22,000 Canon, Inc. (Electronic Technology) 757,058 19,000 Ito Yokado Co., Ltd. (Retail Trade) 858,233 45,000 Kao Corp. (Consumber Non-Durables) 935,640 82 NTT DoCoMo, Inc. (Communications) 963,528 22,300 Sony Corp. (Consumer Durables) 1,019,205 65,000 Takeda Chemical Industries (Health Technology) 2,941,020 ---------------- 8,894,252 ---------------- - ------------------------------------------------------------------------------- QUANTITY NAME OF ISSUER MARKET VALUE($)(1) - ------------------------------------------------------------------------------- SINGAPORE (2.0%) 73,846 DBS Group Holdings, Ltd. (Finance) 551,895 18,600 Flextronics Intl., Ltd. (Electronic Technology) (3) 446,214 109,000 Venture Mfg., Ltd. (Electronic Tech.) 785,107 ---------------- 1,783,216 ---------------- TAIWAN (1.4%) 268,632 Hon Hai Precision Industry (Electronic Technology) (3) 1,228,382 ---------------- THAILAND (0.7%) 634,000 Advanced Info Services (Communications) 584,117 ---------------- EUROPE (65.3%) BELGIUM (0.5%) 16,500 Interbrew (Consumer Non-Durables) 451,755 ---------------- FINLAND (2.8%) 100,100 Nokia Corp., A.D.R. (Electronic Tech.) 2,455,453 ---------------- FRANCE (16.4%) 63,730 AXA (Finance) 1,331,775 11,390 Aventis, S.A. (Health Technology) 808,776 11,500 Business Objects, A.D.R. (Tech. Svcs.) (3) 388,700 20,400 Business Objects (Tech. Services) (3) 682,046 6,530 Carrefour SA (Retail Trade) 339,547 13,120 Groupe Danone (Cons. Non-Durables) 1,600,399 20,050 L'oreal Co. (Consumer Non-Durables) 1,444,231 43,800 STMicroelectronics, A.D.R. (Electronic Technology) 1,387,146 12,840 Sanofi-Synthelabo, S.A. (Health Tech.) 958,038 22,300 Schlumberger, Ltd. (Industrial Services) 1,225,385 51,310 Suez, S.A. (Utilities) 1,553,298 7,300 Total Fina, S.A. (Energy Minerals) 1,042,560 12,790 Vivendi Environment (Utilities) 426,591 12,790 Vivendi Environment Warrants 03/08/06 (Utilities) (3) 5,238 21,500 Vivendi Universal (Consumer Services) 1,177,301 ---------------- 14,371,031 ---------------- GERMANY (5.2%) 5,897 Allianz AG (Finance) 1,394,022 8,300 Muenchener Rueckver (Finance) 2,254,728 6,900 SAP AG (Technology Services) 904,399 ---------------- 4,553,149 ---------------- 22 - ------------------------------------------------------------------------- [LOGO] - ------------------------------------------------------------------------------- QUANTITY NAME OF ISSUER MARKET VALUE($)(1) - ------------------------------------------------------------------------------- IRELAND (3.4%) 65,200 Elan Corp., p.l.c., A.D.R. (Health Technology) (3) 2,937,912 ---------------- ITALY (2.1%) 20,500 Assicurazioni Generali (Finance) 569,485 57,100 Telecom Italia (Communications) 488,069 147,250 Telecom Italia Mobile Spa (Communications) 822,047 ---------------- 1,879,601 ---------------- NETHERLANDS (5.9%) 49,900 ASML Holding N.V., A.D.R. (Electronic Technology) (3) 850,795 32,380 Aegon N.V., A.D.R. (Finance) 866,813 71,440 ING Groep N.V. (Finance) 1,821,748 14,980 Koninklijke Ahold (Retail Trade) 435,881 25,200 Royal Dutch Petroleum, A.D.R. (Energy Minerals) 1,235,304 ---------------- 5,210,541 ---------------- SPAIN (3.3%) 66,553 Banca Bilbao Vizcaya Argentaria, S.A. (Finance) 823,676 47,500 Endesa, S.A. (Utilities) 743,086 95,311 Telefonica, S.A. (Communications) 1,275,487 ---------------- 2,842,249 ---------------- SWEDEN (2.1%) 137,300 L.M. Ericsson Telephone Co., A.D.R. (Electronic Technology) 716,706 60,800 Securitas 'B' (Commercial Svcs.) 1,153,437 ---------------- 1,870,143 ---------------- SWITZERLAND (6.9%) 5,000 Nestle, S.A. (Consumer Non-Durables) 1,066,079 31,700 Novartis, A.G. (Health Technology) 1,145,583 16,600 Roche Holdings, A.G. (Health Tech.) 1,184,793 52,200 UBS, A.G. (Finance) 2,634,696 ---------------- 6,031,151 ---------------- UNITED KINGDOM (16.7%) 29,534 AstraZeneca, p.l.c. (Health Technology) 1,354,268 39,400 BP p.l.c., A.D.R. (Energy Minerals) 1,832,494 41,570 Barclays, p.l.c. (Finance) 1,376,410 20,290 Cambridge Antibody Tech. Group (Health Technology) (3) 569,345 66,760 Celltech Group, p.l.c. (Health Tech.) (3) 849,208 - ------------------------------------------------------------------------------- QUANTITY NAME OF ISSUER MARKET VALUE($)(1) - ------------------------------------------------------------------------------- 91,920 Compass Group, p.l.c. (Consumer Services) 688,975 45,980 Diageo, p.l.c. (Consumer Non-Durables) 525,321 56,084 GlaxoSmithkline, p.l.c., A.D.R. (Health Technology) 2,794,105 30,544 Pearson, p.l.c. (Consumer Services) 351,632 48,190 Royal Bank of Scotland (Finance) 1,172,680 1,200,105 Vodafone Group, p.l.c. (Communications) 3,139,601 ---------------- 14,654,039 ---------------- LATIN AMERICA (1.5%) MEXICO (1.5%) 17,900 Telefonos de Mexico S.A., A.D.R. (Communications) 626,858 257,530 Wal-Mart de Mexico (Retail Trade) 702,211 ---------------- 1,329,069 ---------------- NORTH AMERICA (1.9%) CANADA (1.9%) 7,900 Celestica, Inc., A.D.R. (Electronic Technology) (3) 319,081 70,400 JDS Uniphase Corp. (Electronic Technology) 611,072 33,300 PMC-Sierra, Inc., A.D.R. (Electronic Technology) (3) 707,958 ---------------- 1,638,111 ---------------- Total common stocks 79,585,692 (cost: $86,846,726) ---------------- SHORT TERM SECURITIES (9.3%) (2) 8,138,000 Sit Money Market Fund, 1.44% (4) 8,138,000 (cost: $8,138,000) ---------------- Total investments in securities (cost: $94,984,726) (5) $87,723,692 ================ See accompanying notes to portfolios of investments on page 36. 23 [PHOTO] SIT SMALL CAP GROWTH FUND SIX MONTHS ENDED DECEMBER 31, 2001 ----------------------------------------------------------------------- EUGENE C. SIT, CFA, SENIOR PORTFOLIO MANAGER The Sit Small Cap Growth Fund returned -12.9% over the past six months. This compares to the six-month return of -9.3% for the Russell 2000 Growth Index, while the Russell 2000 Index fell to -4.1% over the period. Although stock returns were negative over the six-month period and for the full year, the equity market ended on an up note with a strong rebound in the final quarter of 2001. Over the last three months, the gain in stock prices has been supported by better than expected economic data along with the anticipation of improving economic conditions following the significant amount of fiscal and monetary stimuli applied over the past year, including eleven interest rate reductions by the Federal Reserve. The Fund's recent performance has been negatively impacted by performance in three of the most heavily weighted sectors, including technology services, electronic technology, and health technology. Until the most recent quarter, these sectors were among the hardest hit in the market correction, caused by a combination of high valuations, a deteriorating capital spending environment, and investors' strong preference for more conservative "value" issues. It is important to note that valuations in many of these high growth sectors are now much more reasonable, particularly relative to long-term growth rates. In addition, improving economic conditions in the year ahead should lead to less risk aversion on the part of investors, along with brightening prospects for information technology spending. In short, we believe investor psychology has potential to shift once again in favor of high growth stocks, quite similar to the rapid shift into value stocks that occurred in early 2000. The most significant sector weighting increases over the past six months include electronic technology, commercial services, and retail trade, through purchases of Microsemi, Fair Issac, Equifax, Chico's, and O'Reilly Automotive. Sector weighting decreases occurred in health technology and industrial services, through sales of Sepracor, Caliper Technologies, National Oilwell, Pride International, and Helmerich & Payne. As of December 31, 2001, the Fund was 93% invested in equities. We strongly believe that valuations for small company growth stocks remain attractive and, coupled with the likelihood of an improving economic environment, are optimistic about the Fund's intermediate- and long-term prospects. 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 12/31/01: $25.21 Per Share 6/30/01: $28.99 Per Share Total Net Assets: $205.7 Million Weighted Average Market Cap: $2.1 Billion TOTAL DIVIDEND: $0.04 PER SHARE Long-Term Capital Gain: $0.04 Per Share PORTFOLIO STRUCTURE - BY SECTOR (% OF TOTAL NET ASSETS) [BAR CHART] Electronic Technology 15.5 Finance 13.2 Health Technology 12.9 Technology Services 11.1 Health Services 7.8 Process Industries 6.1 Consumer Services 4.1 Sectors 3.6% and Under 22.8 Cash & Other Net Assets 6.5 24 - ------------------------------------------------------------------------- [LOGO] AVERAGE ANNUAL TOTAL RETURNS* SIT RUSSELL SMALL CAP RUSSELL 2000 2000 GROWTH FUND INDEX GROWTH INDEX ----------- ----- ------------ 3 Month** 17.22% 21.09% 26.17% 6 Month** -12.90 -4.09 -9.27 1 Year -28.19 2.49 -9.24 3 Year 16.76 6.42 0.25 5 Year 11.80 7.52 2.87 Inception 17.75 11.41 8.32 (7/1/94) CUMULATIVE TOTAL RETURNS* SIT RUSSELL SMALL CAP RUSSELL 2000 2000 GROWTH FUND INDEX GROWTH INDEX ----------- ----- ------------ 1 Year -28.19% 2.49% -9.24% 3 Year 59.18 20.52 0.74 5 Year 74.70 43.71 15.19 Inception 241.00 124.96 82.25 (7/1/94) *AS OF 12/31/01 **NOT ANNUALIZED. - -------------------------------------------------------------------------------- PERFORMANCE FIGURES ARE HISTORICAL AND DO NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURNS AND PRINCIPAL VALUE WILL VARY, AND YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL SHARES. AVERAGE ANNUAL TOTAL RETURNS INCLUDE CHANGES IN SHARE PRICE AS WELL AS REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAINS. MANAGEMENT FEES AND ADMINISTRATIVE EXPENSES ARE INCLUDED IN THE FUND'S PERFORMANCE; HOWEVER, FEES AND EXPENSES ARE NOT INCORPORATED IN THE RUSSELL 2000 INDEX AND THE RUSSELL 2000 GROWTH INDEX. GROWTH OF $10,000 [PLOT POINTS CHART] The sum of $10,000 invested at inception (7/1/94) and held until 12/31/01 would have grown to $34,100 in the Fund, or $22,496 in the Russell 2000 Index assuming reinvestment of all dividends and capital gains. TOP 10 HOLDINGS * Millipore Corp. * BISYS Group, Inc. * Arthur J. Gallagher & Co. * Stericycle, Inc. * New York Community Bancorp, Inc. * Elantec Semiconductor, Inc. * Legg Mason, Inc. * Partnerre, Ltd. * Mercury Genereal Corp. * Quest Software, Inc. Total Number of Holdings: 94 25 SIT SMALL CAP GROWTH FUND - ------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS - DECEMBER 31, 2001 (UNAUDITED) - ------------------------------------------------------------------------------- QUANTITY NAME OF ISSUER MARKET VALUE($)(1) - ------------------------------------------------------------------------------- COMMON STOCKS (93.5%) (2) COMMERCIAL SERVICES (3.4%) 77,550 Equifax, Inc. 1,872,832 31,600 Fair, Isaac and Company, Inc. 1,991,432 87,350 Performance Food Group Co. (3) 3,072,099 -------------- 6,936,363 -------------- COMMUNICATIONS (0.9%) 222,100 Pinnacle Holdings, Inc. (3) 75,514 96,950 Time Warner Telecom, Inc. (3) 1,715,045 -------------- 1,790,559 -------------- CONSUMER DURABLES (3.3%) 118,500 Activision, Inc. (3) 3,082,185 74,500 THQ, Inc. (3) 3,611,015 -------------- 6,693,200 -------------- CONSUMER NON-DURABLES (2.0%) 43,200 Coach, Inc. (3) 1,683,936 50,500 Liz Claiborne, Inc. 2,512,375 -------------- 4,196,311 -------------- CONSUMER SERVICES (4.1%) 87,800 Emmis Communications Corp. (3) 2,075,592 28,000 Lee Enterprises, Inc. 1,018,360 183,800 Mediacom Communications Corp. (3) 3,356,188 92,000 Sylvan Learning Systems, Inc. (3) 2,030,440 -------------- 8,480,580 -------------- ELECTRONIC TECHNOLOGY (15.5%) 16,500 Adaptec, Inc. (3) 239,250 57,450 Andrew Corp. (3) 1,257,581 195,650 Applied Micro Circuits Corp. (3) 2,214,758 16,000 Artisan Components, Inc. (3) 252,800 41,000 Catapult Communications Corp. (3) 1,068,460 55,050 ChipPAC, Inc. (3) 408,471 71,000 Concurrent Computer Corp. (3) 1,054,350 104,000 Elantec Semiconductor, Inc. (3) 3,993,600 125,300 Exfo Electro-Optical Engineering, Inc. (3) 1,488,564 83,650 Extreme Networks, Inc. (3) 1,079,085 197,500 Finisar Corp. (3) 2,008,575 61,400 Flextronics International, Ltd. (3) 1,472,986 116,750 JDS Uniphase Corp. (3) 1,013,390 62,550 Microsemi Corp. 1,857,735 22,500 Microtune, Inc. (3) 527,850 37,000 Nanometrics Inc. (3) 717,800 44,500 NetScreen Technologies, Inc. (3) 984,785 53,200 Newport Corp. 1,025,696 36,000 Oak Technology, Inc. (3) 495,000 114,500 ONI Systems Corp. (3) 717,915 - ------------------------------------------------------------------------------- QUANTITY NAME OF ISSUER MARKET VALUE($)(1) - ------------------------------------------------------------------------------- 342,500 Oplink Communications, Inc. (3) 645,612 59,350 Plexus Corp. (3) 1,576,336 77,500 PMC-Sierra, Inc. (3) 1,647,650 44,000 Powerwave Technologies, Inc. (3) 760,320 33,000 SeaChange International, Inc. (3) 1,125,960 68,000 TriQuint Semiconductor, Inc. (3) 833,680 37,300 Varian Semiconductor Equip. Associates, Inc. (3) 1,290,207 19,700 Xicor, Inc. (3) 218,670 -------------- 31,977,086 -------------- ENERGY MINERALS (1.8%) 101,500 Newfield Exploration Co. (3) 3,604,265 -------------- FINANCE (13.2%) 14,500 Affiliated Managers Group, Inc. (3) 1,021,960 9,750 Ambac Financial Group, Inc. 564,135 169,400 Arthur J. Gallagher & Co. 5,842,606 15,100 Commerce Bancorp, Inc. 594,034 78,250 Federated Investors, Inc. 2,494,610 78,000 Legg Mason, Inc. 3,898,440 83,950 Mercury General Corp. 3,665,257 233,905 New York Community Bancorp, Inc. 5,349,407 70,700 Partnerre, Ltd. 3,817,800 -------------- 27,248,249 -------------- HEALTH SERVICES (7.8%) 70,500 AdvancePCS (3) 2,069,175 27,500 Express Scripts, Inc. (3) 1,285,900 16,400 Oxford Health Plans, Inc. (3) 494,296 90,900 Stericycle, Inc. (3) 5,533,992 45,900 Trigon Healthcare, Inc. (3) 3,187,755 79,400 Universal Health Services, Inc. (3) 3,396,732 -------------- 15,967,850 -------------- HEALTH TECHNOLOGY (12.9%) 176,650 Biosite, Inc. (3) 3,245,061 127,100 Cell Therapeutics, Inc. (3) 3,068,194 74,550 CryoLife, Inc. (3) 2,236,500 43,500 IDEC Pharmaceuticals Corp. (3) 2,998,455 29,604 ImClone Systems, Inc. (3) 1,375,402 16,500 Invitrogen Corp. (3) 1,021,845 4,000 NPS Pharmaceuticals, Inc. (3) 153,200 68,000 PerkinElmer, Inc. 2,381,360 89,600 Protein Design Labs, Inc. (3) 2,938,880 30,500 ResMed, Inc. (3) 1,644,560 154,200 Sangamo BioSciences, Inc. (3) 1,440,228 55,500 Techne Corp. (3) 2,045,175 89,600 Ventana Medical Systems, Inc. (3) 2,026,752 -------------- 26,575,612 -------------- 26 - ------------------------------------------------------------------------- [LOGO] - ------------------------------------------------------------------------------- QUANTITY NAME OF ISSUER MARKET VALUE($)(1) - ------------------------------------------------------------------------------- INDUSTRIAL SERVICES (0.6%) 47,000 Insituform Technologies, Inc. (3) 1,202,260 -------------- PROCESS INDUSTRIES (6.1%) 44,700 CUNO, Inc. (3) 1,363,350 152,400 Millipore Corp. 9,250,680 79,500 Pall Corp. 1,912,770 -------------- 12,526,800 -------------- PRODUCER MANUFACTURING (3.6%) 111,950 Capstone Turbine Corp. (3) 605,650 82,350 Flowserve Corp. (3) 2,191,333 49,000 Jacobs Engineering Group, Inc. (3) 3,234,000 62,000 Shaw Group, Inc. (3) 1,457,000 -------------- 7,487,983 -------------- RETAIL TRADE (2.9%) 61,500 Chico's FAS, Inc. (3) 2,441,550 48,750 Christopher & Banks Corp. (3) 1,669,688 52,200 O'Reilly Automotive, Inc. (3) 1,903,734 -------------- 6,014,972 -------------- TECHNOLOGY SERVICES (11.1%) 114,400 BISYS Group, Inc. (3) 7,320,456 71,250 Business Objects S.A., A.D.R. (3) 2,408,250 208,050 Dendrite International, Inc. (3) 2,918,942 20,250 Kronos, Inc. (3) 979,695 47,000 Mercury Interactive Corp. (3) 1,597,060 64,000 Portal Software, Inc. (3) 133,120 164,750 Quest Software, Inc. (3) 3,642,622 136,250 RSA Security, Inc. (3) 2,378,925 56,000 SmartForce Public Ltd., A.D.R. (3) 1,386,000 -------------- 22,765,070 -------------- TRANSPORTATION (2.1%) 78,700 C.H. Robinson Worldwide, Inc. 2,275,611 97,800 Swift Transportation Co., Inc. (3) 2,103,678 -------------- 4,379,289 -------------- UTILITIES (2.2%) 62,050 Equitable Resources, Inc. 2,114,044 156,000 NRG Energy, Inc. (3) 2,418,000 -------------- 4,532,044 -------------- Total common stocks (cost: $213,247,907) 192,378,493 -------------- SHORT-TERM SECURITIES (4.6%) (2) 9,409,000 Sit Money Market Fund, 1.44% (4) 9,409,000 (cost: $9,409,000) -------------- Total investments in securities (cost: $222,656,907) (5) $201,787,493 ============== See accompanying notes to portfolios of investments on page 36. 27 [PHOTO] SIT SCIENCE AND TECHNOLOGY GROWTH FUND SIX MONTHS ENDED DECEMBER 31, 2001 ----------------------------------------------------------------------- EUGENE C. SIT, CFA, SENIOR PORTFOLIO MANAGER The Sit Science and Technology Growth Fund returned -20.0% over the last six months. The S&P 500 Index return was -5.6% over the period. The Fund's fourth quarter return was +24.2% compared to the +10.7% return for the S&P 500 Index. The difficult environment for Science and Technology investing persisted through most of 2001, although we believe the positive developments that supported the fourth quarter rebound in share prices portends a more favorable outlook for 2002 and 2003. First, since technology companies have been severely impacted by the global economic downturn, it has been encouraging to see that recent data points (i.e., consumer confidence, manufacturing surveys, durable goods orders) have indicated that the worst of the decline may be behind us. Second, perhaps coincident with this data, several major technology companies including Dell, Cisco, and Intel have stated that they are witnessing signs of stability in many key end markets. Importantly, as the economy begins to recover, we expect improved corporate cash flows to lead to capital expenditure increases, particularly for technology-related products. Although one should not expect a repeat of the "boom" period of the late 1990s, it is important to note that the long-term fundamentals underlying science and technology investing have not been altered by the recent economic slowdown. The pace of technological innovation will continue to be an essential driver of economic growth and productivity enhancement. We believe that the secular growth story is still in the early innings in such areas as wireless communication, E-commerce, broadband technology, software, and biotechnology. Changes in sector weightings over the past six months included an increase in electronic technology and technology services, while the weight declined in the health technology sector. As of December 31, 2001, the Fund was 98% invested in equity securities. Given the ongoing innovation and rapid change occurring within our economy, we believe there are many investment opportunities for dynamic companies within the science and technology universe. We continue to remain enthusiastic about the growth prospects for companies held in the Fund. 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 12/31/01: $12.17 Per Share 6/30/01: $15.23 Per Share Total Net Assets: $24.6 Million Weighted Average Market Cap: $62.8 Billion TOTAL DIVIDEND: $0.01 PER SHARE Long-Term Capital Gain: $0.01 Per Share PORTFOLIO STRUCTURE - BY SECTOR (% OF TOTAL NET ASSETS) [BAR CHART] Electronic Technology 36.5 Health Technology 28.0 Technology Services 20.3 Sectors 3.9% and Under 13.4 Cash & Other Net Assets 1.8 28 - ------------------------------------------------------------------------- [LOGO] AVERAGE ANNUAL TOTAL RETURNS* SIT SCIENCE AND TECHNOLOGY S&P GROWTH FUND 500 INDEX ----------- --------- 3 Month** 24.19% 10.69% 6 Month** -20.00 -5.56 1 Year -47.78 -11.88 3 Years -3.18 -1.03 Inception 5.86 5.66 (12/31/97) CUMULATIVE TOTAL RETURNS* SIT SCIENCE AND TECHNOLOGY S&P GROWTH FUND 500 INDEX ----------- --------- 1 Year -47.78% -11.88% 3 Years -9.24 -3.05 Inception 25.61 24.65 (12/31/97) *AS OF 12/31/01 **NOT ANNUALIZED. - -------------------------------------------------------------------------------- PERFORMANCE FIGURES ARE HISTORICAL AND DO NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURNS AND PRINCIPAL VALUE WILL VARY, AND YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL SHARES. AVERAGE ANNUAL TOTAL RETURNS INCLUDE CHANGES IN SHARE PRICE AS WELL AS REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAINS. MANAGEMENT FEES AND ADMINISTRATIVE EXPENSES ARE INCLUDED IN THE FUND'S PERFORMANCE; HOWEVER, FEES AND EXPENSES ARE NOT INCORPORATED IN THE S&P 500 INDEX. GROWTH OF $10,000 [PLOT POINTS CHART] The sum of $10,000 invested at inception (12/31/97) and held until 12/31/01 would have grown to $12,561 in the Fund or $12,465 in the S&P 500 Index. TOP 10 HOLDINGS * Microsoft Corp. * Intel Corp. * IDEC Pharmaceuticals * VERITAS Software * Amgen, Inc. * Elan Corp., A.D.R. * Cisco Systems, Inc. * PeopleSoft, Inc. * AOL Time Warner, Inc. * Pfizer, Inc. Total Number of Holdings: 57 29 SIT SCIENCE AND TECHNOLOGY GROWTH FUND - ------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS - DECEMBER 31, 2001 (UNAUDITED) - ------------------------------------------------------------------------------- QUANTITY NAME OF ISSUER MARKET VALUE($)(1) - ------------------------------------------------------------------------------- COMMON STOCKS (98.2%) (2) COMMUNICATIONS (3.9%) 44,600 Nextel Communications, Inc. (3) 488,816 19,400 Sprint Corp. (3) 473,554 -------------- 962,370 -------------- CONSUMER SERVICES (3.3%) 20,700 AOL Time Warner, Inc. (3) 664,470 7,600 Mediacom Communications Corp. (3) 138,776 -------------- 803,246 -------------- ELECTRONIC TECHNOLOGY (36.5%) 44,500 ADC Telecommunications, Inc. (3) 204,700 12,400 Analog Devices, Inc. (3) 550,436 25,000 Applied Micro Circuits Corp. (3) 283,000 11,000 Broadcom Corp. (3) 449,570 14,600 Brocade Comm. Systems, Inc. (3) 483,552 13,600 Ciena Corp. (3) 194,616 37,500 Cisco Systems, Inc. (3) 679,125 17,100 Dell Computer Corp. (3) 464,778 19,100 EMC Corp. (3) 256,704 7,200 Integrated Device Technology, Inc. (3) 191,448 30,000 Intel Corp. 943,500 4,500 International Business Machines Corp. 544,320 20,000 Jabil Circuit, Inc. (3) 454,400 38,300 JDS Uniphase Corp. (3) 332,444 4,800 KLA-Tencor Corp. (3) 237,888 7,200 Lexmark International, Inc. (3) 424,800 4,800 Maxim Integrated Products, Inc. (3) 252,048 5,000 Microsemi Corp. (3) 148,500 5,400 NetScreen Technologies, Inc. (3) 119,502 25,500 Nokia Corp., A.D.R. 625,515 41,400 ONI Systems Corp. (3) 259,578 3,200 QUALCOMM, Inc. (3) 161,600 22,200 RF Micro Devices, Inc. (3) 426,906 63,200 Sonus Networks, Inc. (3) 291,984 -------------- 8,980,914 -------------- HEALTH SERVICES (3.5%) 6,200 Express Scripts, Inc. (3) 289,912 9,800 Tenet Healthcare Corp. (3) 575,456 -------------- 865,368 -------------- - ------------------------------------------------------------------------------- QUANTITY NAME OF ISSUER MARKET VALUE($)(1) - ------------------------------------------------------------------------------- HEALTH TECHNOLOGY (28.0%) 12,800 Amgen, Inc. (3) 722,432 6,900 Biogen, Inc. (3) 395,715 15,800 Elan Corp., A.D.R (3) 711,948 7,000 Eli Lilly and Co. 549,780 9,000 Genzyme Corp. (3) 538,740 5,000 Guidant Corp. (3) 249,000 7,600 Human Genome Sciences, Inc. (3) 256,272 10,800 IDEC Pharmaceuticals Corp. (3) 744,444 3,671 ImClone Systems, Inc. (3) 170,555 6,000 MedImmune, Inc. (3) 278,100 11,800 Medtronic, Inc. 604,278 15,950 Pfizer, Inc. 635,607 15,200 Protein Design Labs (3) 498,560 23,000 Sangamo BioSciences, Inc. (3) 214,820 8,400 Techne Corp. (3) 309,540 -------------- 6,879,791 -------------- PRODUCER MANUFACTURING (2.7%) 15,500 Capstone Turbine Corp. (3) 83,855 21,300 Flowserve Corp. (3) 566,793 -------------- 650,648 -------------- TECHNOLOGY SERVICES (20.3%) 2,400 Affiliated Computer Services, Inc. (3) 254,712 14,600 Check Point Software Technology (3) 582,394 3,600 Electronic Data Systems Corp. 246,780 9,000 Mercury Interactive Corp. (3) 305,820 20,000 Microsoft Corp. (3) 1,325,000 16,800 PeopleSoft, Inc. (3) 675,360 10,900 RSA Security, Inc. (3) 190,314 8,400 SunGard Data Systems, Inc. (3) 243,012 12,000 VeriSign, Inc. (3) 456,480 16,200 VERITAS Software Corp. (3) 726,246 -------------- 5,006,118 -------------- Total common stocks 24,148,455 (cost: $29,376,223) -------------- SHORT-TERM SECURITIES (3.3%) (2) 820,000 Sit Money Market Fund, 1.44% (4) 820,000 (cost: $820,000) -------------- Total investments in securities (cost: $30,196,223) (5) $24,968,455 ============== See accompanying notes to portfolios of investments on page 36. 30 - ------------------------------------------------------------------------- [LOGO] This page has been left blank intentionally. 31 [PHOTO] SIT DEVELOPING MARKETS GROWTH FUND SIX MONTHS ENDED DECEMBER 31, 2001 ----------------------------------------------------------------------- EUGENE C. SIT, CFA, SENIOR PORTFOLIO MANAGER The Sit Developing Markets Growth Fund fell -5.0% for the six months ended December 31, 2001, while the MSCI Emerging Markets Free Index decreased -1.7% and the Lipper Emerging Markets Index dropped -2.5%. During the past six months, the Fund's exposure to the software industry was the primary cause of underperformance. This was offset somewhat by a positive contribution from the Fund's holdings in the telecommunication services and banking industries. For the three months ended December 31, 2001, the Fund appreciated +21.5%, versus gains of +26.3% for the MSCI Emerging Markets Free Index and +23.1% for the Lipper Emerging Markets Index. The Fund had a 53.8% weighting in Asia as of December 31, versus 53.5% for the MSCI Emerging Markets Free Index. In recent weeks, evidence of stabilization in the European and U.S. economies and indications that the trough in global IT spending has passed have raised hopes of an export recovery for Asia and led stock markets to rally from depressed levels. We continue to favor firms in high value-added businesses in North Asia, which we believe are best-positioned to benefit from a global economic recovery this year. Among our largest holdings in this region are Samsung Electronics, a Korean manufacturer of semiconductors and cellular handsets, and CITIC Pacific, which operates a variety of infrastructure-related and other businesses in China. The Fund's weighting in Latin America was 22.5% as of December 31, versus 23.8% for the MSCI Index. Latin American stock markets have shared in the global equity rally of the past several weeks despite the ongoing financial and political instability in Argentina. Our largest weightings in the region are in Mexico, whose economy is closely linked with that of the U.S., and Brazil, where businesses have benefited from the recent fall in oil prices. We remain uninvested in Argentina. Our weighting in Emerging Europe, the Middle East, and Africa was 11.3% as of December 31st, versus 22.7% for the MSCI Index. During the quarter, we added Teva Pharmaceutical, an Israel-based pharmaceutical company with strong R&D capabilities. 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 12/31/01: $8.71 Per Share 6/30/01: $9.17 Per Share Total Net Assets: $12.1 Million Weighted Average Market Cap: $39.3 Billion PORTFOLIO STRUCTURE - BY REGION (% OF TOTAL NET ASSETS) [BAR CHART] Sit Developing MSCI Emerging Markets Growth Fund Markets Free Index Asia 53.8 53.5 Latin America 22.5 23.8 Africa/Middle East 8.0 14.9 Europe 3.3 7.8 Cash and Other Net Assets 12.4 0.0 32 - ------------------------------------------------------------------------- [LOGO] AVERAGE ANNUAL TOTAL RETURNS* SIT MSCI LIPPER DEVELOPING EMERGING EMERGING MARKETS MARKETS MARKETS GROWTH FUND FREE INDEX INDEX ----------- ---------- ----- 3 Month** 21.50% 26.25% 23.05% 6 Month** -5.00 -1.70 -2.51 1 Year -12.01 -4.91 -3.50 3 Year 3.89 2.01 4.06 5 Year -4.41 -7.80 -5.84 Inception -1.73 -5.34 -3.08 (7/1/94) CUMULATIVE TOTAL RETURNS* SIT MSCI LIPPER DEVELOPING EMERGING EMERGING MARKETS MARKETS MARKETS GROWTH FUND FREE INDEX INDEX ----------- ---------- ----- 1 Year -12.01% -4.91% -3.50% 3 Year 12.11 6.16 12.67 5 Year -20.21 -33.36 -26.00 Inception -12.25 -33.76 -20.93 (7/1/94) *AS OF 12/31/01 **NOT ANNUALIZED. - -------------------------------------------------------------------------------- PERFORMANCE FIGURES ARE HISTORICAL AND DO NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURNS AND PRINCIPAL VALUE WILL VARY, AND YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL SHARES. AVERAGE ANNUAL TOTAL RETURNS INCLUDE CHANGES IN SHARE PRICE AS WELL AS REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAINS. MANAGEMENT FEES AND ADMINISTRATIVE EXPENSES ARE INCLUDED IN THE FUND'S PERFORMANCE; HOWEVER, FEES AND EXPENSES ARE NOT INCORPORATED IN THE MSCI EMERGING MARKETS FREE INDEX. THE LIPPER AVERAGES AND INDICES ARE OBTAINED FROM LIPPER ANALYTICAL SERVICES, INC., A LARGE INDEPENDENT EVALUATOR OF MUTUAL FUNDS. GROWTH OF $10,000 [PLOT POINTS CHART] The sum of $10,000 invested at inception (7/1/94) and held until 12/31/01 would have grown to $8,775 in the Fund, or $6,624 in the Morgan Stanley Capital Int'l Emerging Markets Free Index assuming reinvestment of all dividends and capital gains. PORTFOLIO STRUCTURE - BY SECTOR (% OF TOTAL NET ASSETS) [BAR CHART] Electronic Technology 23.6 Communications 16.8 Retail Trade 10.4 Finance 8.8 Consumer Services 5.9 Utilities 4.6 Consumer Non-Durables 4.0 Sectors 3.6% and Under 13.5 Cash & Other Net Assets 12.4 33 SIT DEVELOPING MARKETS GROWTH FUND - ------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS - DECEMBER 31, 2001 (UNAUDITED) 10 LARGEST HOLDINGS * Wal-Mart de Mexico * Taiwan Semiconductor * Hon Hai Precision Industry * Telefonos de Mexico, A.D.R. * Samsung Electronics * Grupo Televisa S.A. * Advance Info Service Public Co., Ltd. * India Fund * Henderson China Holdings, Ltd. * Teva Pharmaceutical, A.D.R. Total Number of Holdings: 55 - ------------------------------------------------------------------------------- QUANTITY NAME OF ISSUER MARKET VALUE($)(1) - ------------------------------------------------------------------------------- COMMON STOCKS (85.1%) (2) AFRICA/ MIDDLE EAST (8.0%) ISRAEL (7.0%) 6,200 Amdocs, Ltd. (Technology Services) (3) 210,614 5,500 Check Point Software Technologies, Ltd. (Technology Services) (3) 219,395 6,400 Comverse Technology, Inc. (Electronic Technology) (3) 143,168 4,400 Teva Pharmaceutical, A.D.R. (Health Technology) 271,172 --------------- 844,349 --------------- SOUTH AFRICA (1.0%) 18,000 South African Breweries p.l.c. (Consumer Non-Durables) 122,604 --------------- ASIA (51.3%) AUSTRALIA (1.2%) 13,010 BHP Billiton, Ltd., A.D.R. (Energy Non-Minerals) 139,337 --------------- HONG KONG (12.4%) 13,000 Cheung Kong Hldgs., Ltd. (Indus. Svcs.) 135,037 1,280,000 China Hong Kong Photo Products Hldgs., Ltd. (Retail Trade) 103,413 56,000 China Mobile (Hong Kong), Ltd. (Communications) (3) 197,131 87,000 Citic Pacific, Ltd. (Industrial Services) 193,573 29,500 CLP Holdings (Utilities) 112,547 22,800 HSBC Holdings p.l.c. (Finance) 266,804 - ------------------------------------------------------------------------------- QUANTITY NAME OF ISSUER MARKET VALUE($)(1) - ------------------------------------------------------------------------------- 642,500 Henderson China Holdings, Ltd. (Finance) 296,620 68,000 Li & Fung, Ltd. (Retail Trade) 76,303 410,000 PetroChina Co., Ltd. (Energy Minerals) 72,558 2,900 PetroChina Co., Ltd., A.D.R. (Energy Minerals) 51,620 --------------- 1,505,606 --------------- INDIA (1.2%) 2,400 Infosys Technologies, A.D.R. (Electronic Technology) 148,800 --------------- INDONESIA (0.8%) 378,000 PT Ramayana Lestari (Retail Trade) 97,226 --------------- MALAYSIA (1.8%) 40,000 Nestle Berhad (Consumer Non-Durables) 215,787 --------------- PHILIPPINES (1.3%) 2,343,000 Digital Telecom Philippines (Communications) (3) 17,255 1,098,000 SM Prime Holdings, Inc. (Retail Trade) 134,058 --------------- 151,313 --------------- SINGAPORE (3.9%) 72,800 Datacraft Asia, Ltd. (Electronic Tech.) 158,704 24,097 DBS Group Holdings, Ltd. (Finance) 180,091 18,000 Venture Mfg., Ltd. (Electronic Tech.) 129,651 --------------- 468,446 --------------- SOUTH KOREA (9.8%) 28,400 Korea Electric Power, A.D.R. (Utilities) 259,860 3,000 Korea Telecom Corp. (Communications) 114,085 3,000 Korea Telecom Corp., A.D.R. (Communications) 60,990 7,600 SK Telecom Co., A.D.R. (Communications) 164,312 1,749 Samsung Electronics (Electronic Technology) 371,504 15,600 Shinhan Financial Group (Finance) (3) 208,435 --------------- 1,179,186 --------------- TAIWAN (15.7%) 49,746 Accton Technology Corp., G.D.R (Electronic Technology) (3) 259,923 100,800 Accton Technology Corp. (Electronic Technology) (3) 259,274 59,800 Advantech Co., Ltd. (Electronic Technology) 153,815 240,240 Chroma Ate, Inc. (Electronic Technology) 179,888 105,892 Hon Hai Precision Industry (Electronic Technology) 484,216 225,810 Taiwan Semiconductor Co. (Electronic Technology) (3) 564,686 --------------- 1,901,802 --------------- 34 - ------------------------------------------------------------------------- [LOGO] - ------------------------------------------------------------------------------- QUANTITY NAME OF ISSUER MARKET VALUE($)(1) - ------------------------------------------------------------------------------- THAILAND (3.2%) 328,000 Advanced Info Service Public Co., Ltd. 302,193 (Communications) 19,000 BEC World Public Co. (Consumer Services) 88,492 --------------- 390,685 --------------- EUROPE (3.3%) GREECE (1.1%) 11,200 Hellenic Telecommunications Org. S.A. (OTE) (Communications) 85,344 10,500 Panafon Vodafone (Communications) 54,224 --------------- 139,568 --------------- SPAIN (2.2%) 6,553 Telefonica, A.D.R. (Communications) 262,644 --------------- LATIN AMERICA (22.5%) BRAZIL (9.0%) 19,936,532 Banco Bradesco S.A. (Finance) 107,859 3,000 Brasil Telecom, A.D.R. (Communications) 124,440 3,400 Embraer Aircraft Corp., A.D.R. (Transportation) 75,242 10,900 Pao de Acucar, A.D.R. (Retail Trade) 239,800 23,900 Paranaense de Energia, A.D.R. (Utilities) 187,615 5,860 Petrobras (Energy Minerals) 129,730 5,300 Petrobras, A.D.R. (Energy Minerals) 123,490 6,100 Tele Norte Leste Participacoes S.A. (Communications) 95,343 --------------- 1,083,519 --------------- MEXICO (13.5%) 6,200 America Movil, A.D.R. (Communications) 120,776 7,500 Coca-Cola Femsa S.A., A.D.R. (Consumer Non-Durables) 150,525 7,400 Grupo Televisa S.A., A.D.R. (Consumer Services) 319,532 12,400 Telefonos de Mexico, A.D.R. (Communications) 434,248 223,700 Wal-Mart de Mexico (Retail Trade) 609,966 --------------- 1,635,047 --------------- Total common stocks 10,285,919 (cost: $10,378,460) --------------- - ------------------------------------------------------------------------------- QUANTITY NAME OF ISSUER MARKET VALUE($)(1) - ------------------------------------------------------------------------------- CLOSED-END MUTUAL FUND (2.5%) (2) 31,600 India Fund (Consumer Services) 300,200 (cost: $564,571) --------------- SHORT-TERM SECURITIES (16.3%) (2) 1,968,000 Sit Money Market Fund, 1.44% (4) 1,968,000 (cost: $1,968,000) --------------- Total investments in securities (cost: $12,911,031) (5) $12,554,119 =============== See accompanying notes to portfolios of investments on page 36. 35 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, 2001, the cost of securities for federal income tax purposes and the aggregate gross unrealized appreciation and depreciation based on that cost were as follows:
LARGE CAP MID CAP INTERNATIONAL BALANCED GROWTH GROWTH GROWTH FUND FUND FUND FUND ------------- ------------- ------------- ------------- Cost for federal income tax purposes $ 24,010,980 $ 90,506,240 $ 223,306,867 $ 94,984,726 ============= ============= ============= ============= Unrealized appreciation (depreciation) on investments: Gross unrealized appreciation $ 1,367,299 $ 16,609,345 $ 50,746,065 $ 9,797,430 Gross unrealized depreciation (2,391,550) (12,959,485) (27,781,539) (17,058,464) ------------- ------------- ------------- ------------- Net unrealized appreciation (depreciation) ($ 1,024,251) $ 3,649,860 $ 22,964,526 ($ 7,261,034) ============= ============= ============= ============= SCIENCE AND DEVELOPING SMALL CAP TECHNOLOGY MARKETS GROWTH GROWTH GROWTH FUND FUND FUND ------------- ------------- ------------- Cost for federal income tax purposes $ 222,656,907 $ 30,196,223 $ 12,911,031 ============= ============= ============= Unrealized appreciation (depreciation) on investments: Gross unrealized appreciation $ 26,412,010 $ 2,638,767 $ 1,703,083 Gross unrealized depreciation (47,281,424) (7,866,535) (2,059,995) ------------- ------------- ------------- Net unrealized appreciation (depreciation) ($ 20,869,414) ($ 5,227,768) ($ 356,912) ============= ============= =============
36 - ------------------------------------------------------------------------- [LOGO] This page has been left blank intentionally. 37 SIT MUTUAL FUNDS DECEMBER 31, 2001 (UNAUDITED) - -------------------------------------------------------------------------------- STATEMENTS OF ASSETS AND LIABILITIES
LARGE CAP MID CAP INTERNATIONAL BALANCED GROWTH GROWTH GROWTH ASSETS FUND FUND FUND FUND ---------------- ---------------- ---------------- ---------------- Investments in securities, at identified cost $ 24,010,980 $ 90,506,240 $ 223,306,867 $ 94,984,726 ================ ================ ================ ================ Investments in securities, at market value - see accompanying schedule for detail $ 22,986,729 $ 94,156,100 $ 246,271,393 $ 87,723,692 Cash in bank on demand deposit -- -- 1,011,905 1,055,494 Receivables: Dividends and accrued interest 106,057 63,131 58,288 82,254 Fund shares sold 2,260 15,782 44,018 11,498 Investment securities sold 76,289 1,811,449 7,212,330 -- Other receivables -- 13,379 -- 2,129 ---------------- ---------------- ---------------- ---------------- Total assets 23,171,335 96,059,841 254,597,934 88,875,067 ---------------- ---------------- ---------------- ---------------- LIABILITIES Payables: Disbursements in excess of cash balances 12,482 16,921 -- -- Investment securities purchased 37,065 424,583 1,241,255 -- Fund shares redeemed 4,311 36,114 45,782 1,129,118 Accrued investment management and advisory services fee 19,600 83,259 256,078 114,822 Other payables 6,649 -- 146,438 -- ---------------- ---------------- ---------------- ---------------- Total liabilities 80,107 560,877 1,689,553 1,243,940 ---------------- ---------------- ---------------- ---------------- Net assets applicable to outstanding capital stock 23,091,228 95,498,964 252,908,381 87,631,127 ================ ================ ================ ================ 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 1,595,514 2,770,281 24,202,059 7,011,769 ================ ================ ================ ================ Net asset value per share of outstanding capital stock $ 14.47 $ 34.47 $ 10.45 $ 12.50 ================ ================ ================ ================
38 - ------------------------------------------------------------------------- [LOGO]
SCIENCE AND DEVELOPING SMALL CAP TECHNOLOGY MARKETS GROWTH GROWTH GROWTH ASSETS FUND FUND FUND ---------------- ---------------- ---------------- Investments in securities, at identified cost $ 222,656,907 $ 30,196,223 $ 12,911,031 ================ ================ ================ Investments in securities, at market value - see accompanying schedule for detail $ 201,787,493 $ 24,968,455 $ 12,554,119 Cash in bank on demand deposit 298,455 31,534 165 Receivables: Dividends and accrued interest 70,296 437 15,309 Fund shares sold 67,640 4,046 20,301 Investment securities sold 5,562,503 730,318 -- Other receivables 48,109 -- 4,001 ---------------- ---------------- ---------------- Total assets 207,834,496 25,734,790 12,593,895 ---------------- ---------------- ---------------- LIABILITIES Payables: Disbursements in excess of cash balances -- -- -- Investment securities purchased 1,326,117 1,079,424 -- Fund shares redeemed 585,111 1,300 481,328 Accrued investment management and advisory services fee 260,485 29,031 20,904 Other payables -- 21,482 -- ---------------- ---------------- ---------------- Total liabilities 2,171,713 1,131,237 502,232 ---------------- ---------------- ---------------- Net assets applicable to outstanding capital stock 205,662,783 24,603,553 12,091,663 ================ ================ ================ Capital stock Par $ 0.001 $ 0.001 $ 0.001 Authorized shares 10,000,000,000 10,000,000,000 10,000,000,000 Outstanding shares 8,159,551 2,021,340 1,388,714 ================ ================ ================ Net asset value per share of outstanding capital stock $ 25.21 $ 12.17 $ 8.71 ================ ================ ================
See accompanying notes to financial statements on page 45. 39 SIT MUTUAL FUNDS SIX MONTHS ENDED DECEMBER 31, 2001 (UNAUDITED) - -------------------------------------------------------------------------------- STATEMENTS OF OPERATIONS
LARGE CAP MID CAP INTERNATIONAL BALANCED GROWTH GROWTH GROWTH FUND FUND FUND FUND -------------- -------------- -------------- -------------- INVESTMENT INCOME: INCOME: Dividends * $ 61,303 $ 317,215 $ 303,060 $ 324,781 Interest 335,042 33,454 175,415 81,665 -------------- -------------- -------------- -------------- Total income 396,345 350,669 478,475 406,446 -------------- -------------- -------------- -------------- EXPENSES (NOTE 3): Investment management and advisory services fee 114,592 501,574 1,711,375 894,921 Less fees and expenses absorbed by investment adviser -- -- (136,006) (168,352) -------------- -------------- -------------- -------------- Total net expenses 114,592 501,574 1,575,369 726,569 -------------- -------------- -------------- -------------- Net investment income (loss) 281,753 (150,905) (1,096,894) (320,123) -------------- -------------- -------------- -------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain (loss) (note 2) (1,472,210) (8,117,540) (19,083,237) (12,033,938) Net change in unrealized appreciation (depreciation) on investments 312,551 (4,730,680) (28,740,185) (3,273,195) Realized gain (loss) on foreign currency transactions -- -- -- (3,955) Net change in unrealized appreciation (depreciation) on foreign currency transactions -- -- -- 3,091 -------------- -------------- -------------- -------------- Net gain (loss) on investments (1,159,659) (12,848,220) (47,823,422) (15,307,997) -------------- -------------- -------------- -------------- Net increase (decrease) in net assets resulting from operations ($ 877,906) ($ 12,999,125) ($ 48,920,316) ($ 15,628,120) ============== ============== ============== ==============
- ----------------- * Dividends are net of foreign withholding tax of $40,779 and $10,284 in the International Growth Fund and Developing Markets Growth Fund, respectively. 40 - ------------------------------------------------------------------------- [LOGO]
SCIENCE AND DEVELOPING SMALL CAP TECHNOLOGY MARKETS GROWTH GROWTH GROWTH FUND FUND FUND -------------- -------------- -------------- INVESTMENT INCOME: INCOME: Dividends * $ 399,798 $ 13,022 $ 65,386 Interest 156,039 23,308 30,268 -------------- -------------- -------------- Total income 555,837 36,330 95,654 -------------- -------------- -------------- EXPENSES (NOTE 3): Investment management and advisory services fee 1,511,363 185,454 119,444 Less fees and expenses absorbed by investment adviser -- (18,433) -- -------------- -------------- -------------- Total net expenses 1,511,363 167,021 119,444 -------------- -------------- -------------- Net investment income (loss) (955,526) (130,691) (23,790) -------------- -------------- -------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain (loss) (note 2) (16,250,657) (6,657,595) (96,681) Net change in unrealized appreciation (depreciation) on investments (12,199,901) 736,089 (508,586) Realized gain (loss) on foreign currency transactions -- -- (118) Net change in unrealized appreciation (depreciation) on foreign currency transactions -- -- 107 -------------- -------------- -------------- Net gain (loss) on investments (28,450,558) (5,921,506) (605,278) -------------- -------------- -------------- Net increase (decrease) in net assets resulting from operations ($ 29,406,084) ($ 6,052,197) ($ 629,068) ============== ============== ==============
See accompanying notes to financial statements on page 45. 41 SIT MUTUAL FUNDS - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
BALANCED LARGE CAP FUND GROWTH FUND ------------------------------ ------------------------------ SIX MONTHS SIX MONTHS ENDED ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, YEAR ENDED 2001 JUNE 30, 2001 JUNE 30, (UNAUDITED) 2001 (UNAUDITED) 2001 ------------- ------------- ------------- ------------- OPERATIONS: Net investment income (loss) $ 281,753 $ 712,620 ($ 150,905) ($ 505,749) Net realized gain (loss) on investments (1,472,210) (581,226) (8,117,540) 2,210,287 Net change in unrealized appreciation (depreciation) on investments 312,551 (4,904,109) (4,730,680) (60,102,303) 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 (877,906) (4,772,715) (12,999,125) (58,397,765) ------------- ------------- ------------- ------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income (467,000) (655,000) -- -- Net realized gains on investments (9,747) (475,000) (931,511) (14,000,000) ------------- ------------- ------------- ------------- Total distributions (476,747) (1,130,000) (931,511) (14,000,000) ------------- ------------- ------------- ------------- CAPITAL SHARE TRANSACTIONS: Proceeds from shares sold 2,642,836 19,504,517 6,367,735 36,993,038 Reinvested distributions 470,833 1,117,681 880,210 13,196,131 Payments for shares redeemed (3,614,545) (9,076,241) (20,647,782) (27,362,239) ------------- ------------- ------------- ------------- Increase (decrease) in net assets from capital share transactions (500,876) 11,545,957 (13,399,837) 22,826,930 ------------- ------------- ------------- ------------- Total increase (decrease) in net assets (1,855,529) 5,643,242 (27,330,473) (49,570,835) NET ASSETS Beginning of period 24,946,757 19,303,515 122,829,437 172,400,272 ------------- ------------- ------------- ------------- End of period $ 23,091,228 $ 24,946,757 $ 95,498,964 $ 122,829,437 ============= ============= ============= ============= NET ASSETS CONSIST OF: Capital (par value and paid-in surplus) $ 26,279,150 $ 26,780,026 $ 100,550,156 $ 113,949,993 Undistributed (distributions in excess of) net investment income (900) 184,347 (150,905) -- Accumulated net realized gain (loss) from security transactions and foreign currency transactions (2,162,771) (680,814) (8,550,147) 498,904 Unrealized appreciation (depreciation) on investments (1,024,251) (1,336,802) 3,649,860 8,380,540 Unrealized appreciation (depreciation) on foreign currency transactions -- -- -- -- ------------- ------------- ------------- ------------- $ 23,091,228 $ 24,946,757 $ 95,498,964 $ 122,829,437 ============= ============= ============= ============= CAPITAL TRANSACTIONS IN SHARES: Sold 185,883 1,100,388 185,481 729,724 Reinvested distributions 32,921 63,455 25,565 250,163 Redeemed (250,220) (543,165) (591,301) (537,365) ------------- ------------- ------------- ------------- Net increase (decrease) (31,416) 620,678 (380,255) 442,522 ============= ============= ============= =============
42 - ------------------------------------------------------------------------- [LOGO]
MID CAP INTERNATIONAL SMALL CAP 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 2001 JUNE 30, 2001 JUNE 30, 2001 JUNE 30, (UNAUDITED) 2001 (UNAUDITED) 2001 (UNAUDITED) 2001 - ------------- ------------- ------------- ------------- ------------- ------------- ($ 1,096,894) ($ 2,332,447) ($ 320,123) ($ 294,210) ($ 955,526) ($ 995,151) (19,083,237) 11,697,628 (12,033,938) (5,792,945) (16,250,657) (5,597,078) (28,740,185) (211,019,930) (3,273,195) (58,135,403) (12,199,901) (89,076,321) -- -- (3,955) (17,666) -- -- -- -- 3,091 (4,371) -- -- - ------------- ------------- ------------- ------------- ------------- ------------- (48,920,316) (201,654,749) (15,628,120) (64,244,595) (29,406,084) (95,668,550) - ------------- ------------- ------------- ------------- ------------- ------------- -- -- -- -- -- -- (5,755,281) (99,000,000) -- (3,821,000) (319,828) (4,325,000) - ------------- ------------- ------------- ------------- ------------- ------------- (5,755,281) (99,000,000) -- (3,821,000) (319,828) (4,325,000) - ------------- ------------- ------------- ------------- ------------- ------------- 34,194,802 82,405,970 138,941,509 241,054,610 70,296,463 257,801,042 5,495,225 93,702,751 -- 3,602,513 311,216 4,251,589 (92,142,696) (82,056,462) (158,766,968) (221,415,927) (63,106,791) (124,800,880) - ------------- ------------- ------------- ------------- ------------- ------------- (52,452,669) 94,052,259 (19,825,459) 23,241,196 7,500,888 137,251,751 - ------------- ------------- ------------- ------------- ------------- ------------- (107,128,266) (206,602,490) (35,453,579) (44,824,399) (22,225,024) 37,258,201 360,036,647 566,639,137 123,084,706 167,909,105 227,887,807 190,629,606 - ------------- ------------- ------------- ------------- ------------- ------------- $ 252,908,381 $ 360,036,647 $ 87,631,127 $ 123,084,706 $ 205,662,783 $ 227,887,807 ============= ============= ============= ============= ============= ============= $ 254,052,771 $ 306,505,440 $ 114,294,282 $ 134,119,741 $ 249,693,138 $ 242,192,250 (1,096,894) -- (320,123) -- (955,526) -- (23,012,022) 1,826,496 (19,083,205) (7,045,312) (22,205,415) (5,634,930) 22,964,526 51,704,711 (7,261,034) (3,987,839) (20,869,414) (8,669,513) -- -- 1,207 (1,884) -- -- - ------------- ------------- ------------- ------------- ------------- ------------- $ 252,908,381 $ 360,036,647 $ 87,631,127 $ 123,084,706 $ 205,662,783 $ 227,887,807 ============= ============= ============= ============= ============= ============= 3,312,121 4,726,171 10,979,237 13,616,297 2,818,497 6,811,627 524,854 5,403,829 -- 180,674 12,311 113,953 (8,743,050) (5,062,552) (12,393,796) (12,491,615) (2,533,446) (3,673,222) - ------------- ------------- ------------- ------------- ------------- ------------- (4,906,075) 5,067,448 (1,414,559) 1,305,356 297,362 3,252,358 ============= ============= ============= ============= ============= =============
See accompanying notes to financial statements on page 45. 43 SIT MUTUAL FUNDS - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
SCIENCE AND TECHNOLOGY DEVELOPING MARKETS GROWTH FUND GROWTH FUND ------------------------------ ------------------------------ SIX MONTHS SIX MONTHS ENDED ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, YEAR ENDED 2001 JUNE 30, 2001 JUNE 30, (UNAUDITED) 2001 (UNAUDITED) 2001 ------------- ------------- ------------- ------------- OPERATIONS: Net investment income (loss) ($ 130,691) ($ 383,320) ($ 23,790) $ 3,125 Net realized gain (loss) on investments (6,657,595) (2,286,236) (96,681) (324,953) Net change in unrealized appreciation (depreciation) on investments 736,089 (27,759,884) (508,586) (4,791,388) Net realized gain (loss) on foreign currency transactions -- -- (118) (1,387) Net change in unrealized appreciation (depreciation) on foreign currency transactions -- -- 107 (3) ------------- ------------- ------------- ------------- Net increase (decrease) in net assets resulting from operations (6,052,197) (30,429,440) (629,068) (5,114,606) ------------- ------------- ------------- ------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income -- -- (1,738) -- Net realized gains on investments (28,438) (1,400,000) -- -- ------------- ------------- ------------- ------------- Total distributions (28,438) (1,400,000) (1,738) -- ------------- ------------- ------------- ------------- CAPITAL SHARE TRANSACTIONS: Proceeds from shares sold 3,169,602 28,355,440 14,630,199 15,242,570 Reinvested distributions 27,921 1,372,603 1,602 -- Payments for shares redeemed (2,966,645) (13,618,017) (15,785,848) (10,927,238) ------------- ------------- ------------- ------------- Increase (decrease) in net assets from capital share transactions 230,878 16,110,026 (1,154,047) 4,315,332 ------------- ------------- ------------- ------------- Total increase (decrease) in net assets (5,849,757) (15,719,414) (1,784,853) (799,274) NET ASSETS Beginning of period 30,453,310 46,172,724 13,876,516 14,675,790 ------------- ------------- ------------- ------------- End of period $ 24,603,553 $ 30,453,310 $ 12,091,663 $ 13,876,516 ============= ============= ============= ============= NET ASSETS CONSIST OF: Capital (par value and paid-in surplus) $ 39,723,768 $ 39,492,890 $ 15,070,103 $ 16,224,150 Undistributed (distributions in excess of) net investment income (130,691) -- (23,790) 1,738 Accumulated net realized gain (loss) from security transactions and foreign currency transactions (9,761,756) (3,075,723) (2,597,845) (2,501,046) Unrealized appreciation (depreciation) on investments (5,227,768) (5,963,857) (356,912) 151,674 Unrealized appreciation (depreciation) on foreign currency transactions -- -- 107 -- ------------- ------------- ------------- ------------- $ 24,603,553 $ 30,453,310 $ 12,091,663 $ 13,876,516 ============= ============= ============= ============= CAPITAL TRANSACTIONS IN SHARES: Sold 269,288 1,134,985 1,775,402 1,440,305 Reinvested distributions 2,200 49,303 187 -- Redeemed (250,065) (567,741) (1,900,688) (1,019,129) ------------- ------------- ------------- ------------- Net increase (decrease) 21,423 616,547 (125,099) 421,176 ============= ============= ============= =============
See accompanying notes to financial statements on page 45. 44 SIT MUTUAL FUNDS - ------------------------------------------------------------------------- [LOGO] NOTES TO FINANCIAL STATEMENTS (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Sit Mutual Funds are no-load funds, and are registered under the Investment Company Act of 1940 (as amended) as diversified, open-end management investment companies, or series thereof. The Sit Developing Markets Growth, Sit Small Cap Growth, Sit International Growth, Sit Balanced, and Sit Science and Technology Growth Funds are series funds of Sit Mutual Funds, Inc. This report covers the equity funds of the Sit Mutual Funds (the Funds). The investment objective for each Fund is as follows: ------------------------------------ ------------------------------------- FUND INVESTMENT OBJECTIVE ------------------------------------ ------------------------------------- Large Cap Growth Fund, Inc. Maximize long-term capital appreciation. ------------------------------------ ------------------------------------- Mid Cap Growth Fund, Inc. Maximize long-term capital appreciation. ------------------------------------ ------------------------------------- Small Cap Growth Maximize long-term capital appreciation. ------------------------------------ ------------------------------------- Balanced Long-term capital appreciation consistent with the preservation of principal and to provide regular income. ------------------------------------ ------------------------------------- International Growth Maximize long-term growth. ------------------------------------ ------------------------------------- Developing Markets Growth Maximize long-term capital appreciation. ------------------------------------ ------------------------------------- Science and Technology Growth Fund Maximize long-term capital appreciation. ------------------------------------ ------------------------------------- Significant accounting policies followed by the Funds are summarized below: INVESTMENTS IN SECURITIES Investments in securities traded on national or international securities exchanges are valued at the last reported sales price prior to the time when assets are valued. Securities traded on the over-the-counter market are valued at the last reported sales price or if the last sales price is not available at the last reported bid price. The sale and bid prices are obtained from independent pricing services. Debt securities maturing more than 60 days are priced by an independent pricing service. When market quotations are not readily available, or securities cannot be valued by the pricing service, securities are valued at fair value as determined in good faith using procedures established by the Board of Directors, which may include dealer supplied valuations. Debt securities maturing in less than 60 days when acquired, or which subsequently are within 60 days of maturity, are valued at amortized cost. 45 SIT MUTUAL FUNDS - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) Security transactions are accounted for on the date the securities are purchased or sold. Securities gains and losses are calculated on the identified-cost basis. Dividend income is recorded on the ex-dividend date or upon the receipt of ex-dividend notification in the case of certain foreign securities. Interest, including level-yield amortization of long-term bond premium and discount, is recorded on the accrual basis. ILLIQUID SECURITIES Each Fund currently limits investments in illiquid securities to 15% of net assets. At December 31, 2001, 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. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gain (losses) were recorded by the Fund. 46 - ------------------------------------------------------------------------- [LOGO] For federal income tax purposes the Developing Markets Growth, Small Cap Growth, International Growth, Science and Technology Growth, and Balanced Funds have capital loss carryovers of $2,501,045, $5,291,614, $6,999,362, $3,075,860, $688,762, respectively at June 30, 2001 which, if not offset by subsequent capital gains, will begin to expire in 2007. DISTRIBUTIONS Distributions to shareholders are recorded as of the close of business on the record date. Such distributions are payable in cash or reinvested in additional shares of the Funds' capital stock. Distributions from net investment income, if any, are declared and paid quarterly for the Balanced Fund and declared and paid annually for Science and Technology Growth, Developing Markets Growth, Small Cap Growth, International Growth, Mid Cap Growth, and Large Cap Growth Funds. Distributions from net realized gains, if any, will be made annually for each of the Funds. CONCENTRATION OF INVESTMENTS The Developing Markets Growth Fund may concentrate investments in countries with limited or developing capital markets which may involve greater risks than investments in more developed markets and the prices of such investments may be volatile. The consequences of political, social or economic changes in these markets may have disruptive effects on the market prices of the Fund's investments and the income it generates, as well as the Fund's ability to repatriate such amounts. USE OF ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported results. Actual results could differ from those estimates. (2) INVESTMENT SECURITY TRANSACTIONS Purchases of and proceeds from sales and maturities of investment securities, other than short-term securities, for the period ended December 31, 2001, were as follow: Purchases ($) Proceeds ($) ------------- ------------ Balanced Fund 4,524,123 5,662,891 Large Cap Growth Fund 15,769,483 26,700,898 Mid Cap Growth Fund 74,880,995 118,663,955 International Growth Fund 8,118,258 26,389,198 Small Cap Growth Fund 59,637,453 59,251,559 Science and Technology Growth Fund 8,576,798 7,657,918 Developing Markets Growth Fund 804,192 1,172,444 47 SIT MUTUAL FUNDS - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) (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% 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, 2002 the Adviser has agreed to limit the management fee (and, thereby, all Fund expenses, except those not payable by the Fund as set forth above) of the Mid Cap Growth Fund to 1.15%, the International Growth Fund to 1.50%, and of the Science and Technology Growth Fund to 1.35%, of the Fund's average daily net assets respectively. As of December 31, 2001, the Large Cap Growth Fund, International Growth Fund, Mid Cap Growth Fund, Small Cap Growth Fund, Science and Technology Growth Fund, Developing Markets Growth Fund, and Balanced Fund had invested $980,000, $8,138,000, $5,655,000, $9,409,000, $820,000, $1,968,000 and $1,105,000, respectively, in the Sit Money Market Fund. The terms of such transactions were identical to those of non-related entities except that, to avoid duplicate investment advisory fees, SIA remits to each Fund an amount equal to all fees otherwise due to them under their investment management agreement for the assets invested in the Sit Money Market Fund. 48 - ------------------------------------------------------------------------- [LOGO] 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 $351,160 were paid or payable to SKI for the period ended December 31, 2001. 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, 2001: % Shares Shares Outstanding ------ ----------- Balanced Fund 192,665 12.08 Large Cap Growth Fund 391,148 14.12 Mid Cap Growth Fund 2,709,496 11.20 International Growth Fund 713,869 10.18 Small Cap Growth Fund 1,003,301 12.30 Science and Technology Growth Fund 356,779 17.65 Developing Markets Growth Fund 129,296 9.31 49 SIT BALANCED FUND - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS
Six Months Ended December 31, Years Ended June 30, 2001 ------------------------------------------------- (Unaudited) 2001 2000 1999 1998 - ---------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE: Beginning of period $ 15.33 $ 19.18 $ 17.38 $ 16.68 $ 14.93 - ---------------------------------------------------------------------------------------------------------------------------- OPERATIONS: Net investment income .17 .46 .40 .32 .34 Net realized and unrealized gains (losses) on investments (.73) (3.51) 2.51 1.45 2.99 - ---------------------------------------------------------------------------------------------------------------------------- Total from operations (.56) (3.05) 2.91 1.77 3.33 - ---------------------------------------------------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS: From net investment income (.29) (.48) (.37) (.31) (.35) From realized gains (.01) (.32) (.74) (.76) (1.23) - ---------------------------------------------------------------------------------------------------------------------------- Total distributions (.30) (.80) (1.11) (1.07) (1.58) - ---------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE: End of period $ 14.47 $ 15.33 $ 19.18 $ 17.38 $ 16.68 - ---------------------------------------------------------------------------------------------------------------------------- Total investment return (1) (3.61%) (16.39%) 17.28% 11.25% 23.95% - ---------------------------------------------------------------------------------------------------------------------------- Net assets at end of period (000's omitted) $23,091 $24,947 $19,304 $12,112 $ 7,422 RATIOS: Expenses to average daily net assets 1.00%(2) 1.00% 1.00% 1.00% 1.00% Net investment income to average daily net assets 2.46%(2) 2.89% 2.34% 2.01% 2.20% Portfolio turnover rate (excluding short-term securities) 20.78% 63.32% 68.22% 89.37% 62.62%
- --------- (1) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of distributions at net asset value. (2) Percentages for the period ended December 31, 2001 are adjusted to an annual rate. 50 SIT LARGE CAP GROWTH FUND - ------------------------------------------------------------------------- [LOGO] FINANCIAL HIGHLIGHTS
Six Months Ended December 31, Years Ended June 30, 2001 ---------------------------------------------------- (Unaudited) 2001 2000 1999 1998 - ------------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE: Beginning of period $ 38.99 $ 63.66 $ 52.84 $ 49.34 $ 40.39 - ------------------------------------------------------------------------------------------------------------------------------- OPERATIONS: Net investment income (loss) (.05) (.16) (.18) (.04) .02 Net realized and unrealized gains (losses) on investments (4.13) (19.48) 14.41 6.96 13.17 - ------------------------------------------------------------------------------------------------------------------------------- Total from operations (4.18) (19.64) 14.23 6.92 13.19 - ------------------------------------------------------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS: From net investment income -- -- -- (.01) (.07) From realized gains (.34) (5.03) (3.41) (3.41) (4.17) - ------------------------------------------------------------------------------------------------------------------------------- Total distributions (.34) (5.03) (3.41) (3.42) (4.24) - ------------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE: End of period $ 34.47 $ 38.99 $ 63.66 $ 52.84 $ 49.34 - ------------------------------------------------------------------------------------------------------------------------------- Total investment return (1) (10.73%) (32.92%) 27.75% 15.10% 35.33% - ------------------------------------------------------------------------------------------------------------------------------- Net assets at end of period (000's omitted) $ 95,499 $122,829 $172,400 $140,258 $117,496 RATIOS: Expenses to average daily net assets 1.00% (2) 1.00% 1.00% 1.00% 1.00% Net investment income (loss) to average daily net assets (0.30%)(2) (0.33%) (0.31%) (0.09%) 0.06% Portfolio turnover rate (excluding short-term securities) 16.18% 45.26% 48.95% 70.51% 43.61%
- --------- (1) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of distributions at net asset value. (2) Percentages for the period ended December 31, 2001 are adjusted to an annual rate. 51 SIT MID CAP GROWTH FUND - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS
Six Months Ended December 31, Years Ended June 30, 2001 -------------------------------------------------------- (Unaudited) 2001 2000 1999 1998 - --------------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE: Beginning of period $ 12.37 $ 23.57 $ 14.54 $ 16.49 $ 15.43 - --------------------------------------------------------------------------------------------------------------------------------- OPERATIONS: Net investment income (loss) (.04) (.08) (.12) (.06) (.07) Net realized and unrealized gains (losses) on investments (1.65) (7.05) 10.38 .65 3.15 - --------------------------------------------------------------------------------------------------------------------------------- Total from operations (1.69) (7.13) 10.26 .59 3.08 - --------------------------------------------------------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS: From net investment income -- -- -- -- -- From realized gains (.23) (4.07) (1.23) (2.54) (2.02) - --------------------------------------------------------------------------------------------------------------------------------- Total distributions (.23) (4.07) (1.23) (2.54) (2.02) - --------------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE: End of period $ 10.45 $ 12.37 $ 23.57 $ 14.54 $ 16.49 - --------------------------------------------------------------------------------------------------------------------------------- Total investment return (1) (13.68%) (35.21%) 73.01% 6.94% 22.19% - --------------------------------------------------------------------------------------------------------------------------------- Net assets at end of period (000's omitted) $252,908 $360,037 $566,639 $375,343 $404,327 RATIOS: Expenses to average daily net assets 1.15% (2) 1.06% (2) 1.00% (2) 1.00% (2) 1.00% (2) Net investment income (loss) to average daily net assets (0.80%)(2) (0.49%)(2) (0.58%)(2) (0.46%)(2) (0.41%)(2) Portfolio turnover rate (excluding short-term securities) 28.31% 56.21% 62.21% 68.62% 52.62%
- ---------- (1) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of distributions at net asset value. (2) Percentages for the period ended December 31, 2001 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, 2001 and the years ended June 30, 2001, 2000, 1999, and 1998, 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 (0.90%), (0.68%), (0.83%), (0.71%), and (0.66%), respectively. 52 SIT INTERNATIONAL GROWTH FUND - ------------------------------------------------------------------------- [LOGO] FINANCIAL HIGHLIGHTS
Six Months Ended December 31, Years Ended June 30, 2001 ------------------------------------------------------- (Unaudited) 2001 2000 1999 1998 - -------------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE: Beginning of period $ 14.61 $ 23.58 $ 18.77 $ 19.14 $ 18.57 - -------------------------------------------------------------------------------------------------------------------------------- OPERATIONS: Net investment income (loss) (.04) (.03) (.04) (.07) .02 Net realized and unrealized gains (losses) on investments (2.07) (8.42) 6.36 .84 1.25 - -------------------------------------------------------------------------------------------------------------------------------- Total from operations (2.11) (8.45) 6.32 .77 1.27 - -------------------------------------------------------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS: From net investment income -- -- (.23) (.06) (.03) From realized gains -- (.52) (1.28) (1.08) (.67) - -------------------------------------------------------------------------------------------------------------------------------- Total distributions .00 (.52) (1.51) (1.14) (.70) - -------------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE: End of period $ 12.50 $ 14.61 $ 23.58 $ 18.77 $ 19.14 - -------------------------------------------------------------------------------------------------------------------------------- Total investment return (1) (14.44%) (36.43%) 33.38% 4.51% 7.50% - -------------------------------------------------------------------------------------------------------------------------------- Net assets at end of period (000's omitted) $ 87,631 $123,085 $167,909 $ 94,982 $ 99,721 RATIOS: Expenses to average daily net assets 1.50% (2) 1.50% (2) 1.50% (2) 1.50% (2) 1.50%(2) Net investment income (loss) to average daily net assets (0.66%)(2) (0.20%)(2) (0.40%)(2) (0.37%)(2) 0.12%(2) Portfolio turnover rate (excluding short-term securities) 8.96% 25.22% 30.61% 45.91% 43.74%
- ---------- (1) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of distributions at net asset value. (2) Percentages for the period ended December 31, 2001 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, 2001 and the years ended June 30, 2001, 2000, 1999, and 1998, 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 (1.01%), (0.55%), (0.75%), (0.72%), and (0.23%), respectively. 53 SIT SMALL CAP GROWTH FUND - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS
Six Months Ended December 31, Years Ended June 30, 2001 ----------------------------------------------------- (Unaudited) 2001 2000 1999 1998 - -------------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE: Beginning of period $ 28.99 $ 41.35 $ 18.28 $ 20.35 $ 18.89 - -------------------------------------------------------------------------------------------------------------------------------- OPERATIONS: Net investment loss (.12) (.13) (.18) (.18) (.17) Net realized and unrealized gains (losses) on investments (3.62) (11.65) 23.25 1.20 2.31 - -------------------------------------------------------------------------------------------------------------------------------- Total from operations (3.74) (11.78) 23.07 1.02 2.14 - -------------------------------------------------------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS: From realized gains (.04) (.58) -- (3.09) (.68) - ------------------------------------------------------------------------------------------------------------------------------ Total distributions (.04) (.58) -- (3.09) (.68) - -------------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE: End of period $ 25.21 $ 28.99 $ 41.35 $ 18.28 $ 20.35 - -------------------------------------------------------------------------------------------------------------------------------- Total investment return (1) (12.90%) (28.79%) 126.20% 8.77% 11.70% - -------------------------------------------------------------------------------------------------------------------------------- Net assets at end of period (000's omitted) $205,663 $227,888 $190,630 $ 50,335 $ 57,472 RATIOS: Expenses to average daily net assets 1.50% (2) 1.50% 1.50% 1.50% 1.50% Net investment income (loss) to average daily net assets (0.95%)(2) (0.41%) (0.83%) (1.08%) (0.72%) Portfolio turnover rate (excluding short-term securities) 31.15% 39.91% 39.31% 71.84% 79.54%
- ----------- (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, 2001 are adjusted to an annual rate. 54 SIT SCIENCE AND TECHNOLOGY GROWTH FUND - ------------------------------------------------------------------------- [LOGO] FINANCIAL HIGHLIGHTS
Six Months Ended Six Months December 31, Years Ended June 30, Ended 2001 ---------------------------------------- June 30, (Unaudited) 2001 2000 1999 1998 (*) - ------------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE: Beginning of period $ 15.23 $ 33.38 $ 15.23 $ 11.77 $ 10.00 - ------------------------------------------------------------------------------------------------------------------------------- Operations: Net investment income (loss) (.07) (.19) (.17) (.07) (.01) Net realized and unrealized gains (losses) on investments (2.98) (17.10) 18.32 3.53 1.78 - ------------------------------------------------------------------------------------------------------------------------------- Total from operations (3.05) (17.29) 18.15 3.46 1.77 - ------------------------------------------------------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS: From net investment income -- -- -- -- -- From realized gains (.01) (.86) -- -- -- - ------------------------------------------------------------------------------------------------------------------------------- Total distributions (.01) (.86) -- -- -- - ------------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE: End of period $ 12.17 $ 15.23 $ 33.38 $ 15.23 $ 11.77 - ------------------------------------------------------------------------------------------------------------------------------- Total investment return (1) (20.00%) (52.96%) 119.17% 29.40% 17.70% - ------------------------------------------------------------------------------------------------------------------------------- Net assets at end of period (000's omitted) $24,604 $30,453 $46,173 $14,194 $ 4,858 RATIOS: Expenses to average daily net assets 1.35% (2) 1.29% (2) 1.25% (2) 1.25% (2) 1.25% (2) Net investment income (loss) to average net assets (1.06%)(2) (0.94%)(2) (0.86%)(2) (0.72%)(2) (0.21%)(2) Portfolio turnover rate (excluding short-term securities) 31.59% 34.59% 29.60% 58.29% 19.37%
- ----------- (*) Commencement of operations was December 31, 1997 (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, 2001 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, 2001 and the periods ended June 30, 2001, 2000, 1999, and 1998, 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 (1.21%), (1.15%), (1.11%), (0.97%), and (0.46%), respectively. 55 SIT DEVELOPING MARKETS GROWTH FUND - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS
Six Months Ended December 31, Years Ended June 30, 2001 --------------------------------------------------- (Unaudited) 2001 2000 1999 1998 - -------------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE: Beginning of period $ 9.17 $ 13.43 $ 9.98 $ 9.05 $ 13.04 - -------------------------------------------------------------------------------------------------------------------------------- OPERATIONS: Net investment income (loss) (.02) -- (.06) -- (.06) Net realized and unrealized gains (losses) on investments (.44) (4.26) 3.51 .93 (3.92) - -------------------------------------------------------------------------------------------------------------------------------- Total from operations (.46) (4.26) 3.45 .93 (3.98) - -------------------------------------------------------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS: From net investment income -- -- -- -- (.01) From realized gains -- -- -- -- -- - -------------------------------------------------------------------------------------------------------------------------------- Total distributions -- -- -- -- (.01) - -------------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE: End of period $ 8.71 $ 9.17 $ 13.43 $ 9.98 $ 9.05 - -------------------------------------------------------------------------------------------------------------------------------- Total investment return (1) (5.00%) (31.72%) 34.57% 10.28% (30.52%) - -------------------------------------------------------------------------------------------------------------------------------- Net assets at end of period (000's omitted) $12,092 $13,877 $14,676 $11,338 $11,505 RATIOS: Expenses to average daily net assets 2.00% (2) 2.00% 2.00% 2.00% 2.00% Net investment income (loss) to average daily net assets (0.40%)(2) 0.02% (0.55%) (0.05%) (0.52%) Portfolio turnover rate (excluding short-term securities) 8.06% 21.87% 48.39% 98.24% 53.36%
- ----------- (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, 2001 are adjusted to an annual rate. 56 RESULTS OF SHAREHOLDER MEETING - ------------------------------------------------------------------------- [LOGO] The annual meeting of the shareholders of the Funds was held on October 24, 2001. Directors elected by the shareholders at the meeting were as follows: Eugene C. Sit, Peter L. Mitchelson, William E. Frenzel, John E. Hulse, Sidney L. Jones, and Donald W. Phillips. The matters voted on by the shareholders of record as of August 24, 2001 and the results of the shareholders' vote at the October 24, 2001 meeting were as follows: 1. Election of Directors: For Withheld --- -------- Eugene C. Sit Large Cap Growth 1,792,817 58,085 Mid Cap Growth 14,855,757 438,576 Small Cap Growth 5,239,145 136,046 Balanced 786,928 6,345 Science and Technology Growth 1,394,413 8,753 International Growth 3,153,736 83,300 Developing Markets Growth 1,153,501 1,640 William E. Frenzel Large Cap Growth 1,790,071 60,833 Mid Cap Growth 14,861,364 432,968 Small Cap Growth 5,232,944 142,247 Balanced 786,055 7,218 Science and Technology Growth 1,394,147 9,019 International Growth 3,155,719 81,317 Developing Markets Growth 1,154,045 1,096 John E. Hulse Large Cap Growth 1,843,852 7,053 Mid Cap Growth 15,205,094 89,238 Small Cap Growth 5,312,523 62,668 Balanced 786,485 6,789 Science and Technology Growth 1,395,654 7,512 International Growth 3,196,907 40,128 Developing Markets Growth 4,453,293 1,857 Sidney L. Jones Large Cap Growth 1,843,852 7,053 Mid Cap Growth 15,201,163 93,169 Small Cap Growth 5,312,686 52,505 Balanced 786,485 6,789 Science and Technology Growth 1,394,888 8,278 International Growth 3,198,872 38,163 Developing Markets Growth 1,153,722 1,419 57 RESULTS OF SHAREHOLDER MEETING (CONTINUED) - -------------------------------------------------------------------------------- For Withheld --- -------- Peter L. Mitchelson Large Cap Growth 1,793,062 57,842 Mid Cap Growth 14,855,757 438,576 Small Cap Growth 5,239,070 136,121 Balanced 786,928 6,345 Science and Technology Growth 1,393,647 9,519 International Growth 3,155,719 81,317 Developing Markets Growth 1,154,253 888 Donald W. Phillips Large Cap Growth 1,825,022 25,882 Mid Cap Growth 15,130,837 163,495 Small Cap Growth 5,314,043 61,148 Balanced 786,928 6,345 Science and Technology Growth 1,394,888 8,278 International Growth 3,198,872 38,163 Developing Markets Growth 1,154,253 888 2. Ratification of KPMG LLP as independent auditors for the Funds: For Against Abstain --- ------- ------- Large Cap Growth 1,837,794 9,489 3,621 Mid Cap Growth 15,173,929 19,436 100,968 Small Cap Growth 5,296,857 55,076 23,258 Balanced 787,567 4,688 1,018 Science and Technology Growth 1,390,968 2,833 9,365 International Growth 3,136,493 16,511 84,032 Developing Markets Growth 1,150,173 2,682 2,285 58 - ------------------------------------------------------------------------- [LOGO] Directors: Eugene C. Sit, CFA Peter L. Mitchelson, CFA William E. Frenzel John E. Hulse Sidney L. Jones Donald W. Phillips Director Emeritus: Melvin C. Bahle Stock Funds Officers: Eugene C. Sit, CFA Chairman Peter L. Mitchelson, CFA Vice Chairman Roger J. Sit Executive Vice President Erik S. Anderson, CFA(1) Vice President - Investments Ronald D. Sit, CFA(1) Vice President - Investments John T. Groton, Jr., CFA(1) Vice President - Investments Robert W. Sit, CFA(1) Vice President - Investments Bryce A. Doty, CFA(2) Vice President - Investments Paul E. Rasmussen Vice President & Treasurer Michael P. Eckert Vice President - Institutional Client Group Shelley H. Shutes Vice President - Shareholder Services Michael J. Radmer Secretary Carla J. Rose Vice President - Assistant Secretary & Assistant Treasurer Kelly K. Boston Assistant Secretary & Assistant Treasurer (1) Sit Mid Cap Growth Fund, Inc., Sit Large Cap Growth Fund, Inc., and Sit Mutual Funds, Inc. only. (2) Sit Balanced Fund only. 59 SIT MUTUAL FUNDS - ------------------------------------------------------------------------- [LOGO] A LOOK AT THE SIT MUTUAL FUNDS Sit Mutual funds are managed by Sit Investment Associates, Inc. Sit Investment Associates was founded by Eugene C. Sit in July 1981 and is dedicated to a single purpose, to be one of the premier investment management firms in the United States. Sit Investment Associates currently manages approximately $8.0 billion for some of America's largest corporations, foundations and endowments. Sit Mutual Funds are NO-LOAD funds. NO-LOAD means that Sit Mutual Funds have no sales charges on purchases, no deferred sales charges, no 12b-1 fees, no redemption fees and no exchange fees. Every dollar you invest goes to work for you. Sit Mutual Funds offer: * Free telephone exchange * Dollar-cost averaging through an automatic investment plan * Electronic transfer for purchases and redemptions * Free checkwriting privileges on bond funds * Retirement accounts including IRAs and 401(k) plans SIT FAMILY OF FUNDS [GRAPH] STABILITY: INCOME: GROWTH: HIGH GROWTH: SAFETY OF PRINCIPAL INCREASED INCOME LONG-TERM CAPITAL LONG-TERM CAPITAL AND CURRENT INCOME APPRECIATION AND APPRECIATION INCOME MONEY MARKET U.S. GOVERNMENT BALANCED MID CAP GROWTH SECURITIES LARGE CAP GROWTH INTERNATIONAL GROWTH TAX-FREE INCOME SMALL CAP GROWTH MINNESOTA TAX-FREE SCIENCE AND INCOME TECHNOLOGY GROWTH BOND DEVELOPING MARKETS GROWTH 60 SEMI-ANNUAL REPORT STOCK FUNDS Six Months Ended December 31, 2001 INVESTMENT ADVISOR AUDITORS Sit Investment Associates, Inc. KPMG LLP 90 South Seventh Street, Suite 4600 90 South Seventh Street, Suite 4200 Minneapolis, MN 55402 Minneapolis, MN 55402 612-334-5888 (Metro Area) 800-332-5580 LEGAL COUNSEL DISTRIBUTOR Dorsey & Whitney LLP 50 South Sixth Street SIA Securities Corp. Suite 1500 90 South Seventh Street, Suite 4600 Minneapolis, MN 55402 Minneapolis, MN 55402 612-334-5888 (Metro Area) INVESTMENT SUB-ADVISER 800-332-5580 (Developing Markets Growth Fund and International Growth Fund) CUSTODIAN Sit/Kim International Investment Associates, Inc. The Northern Trust Company 90 South Seventh Street, Suite 4600 50 South LaSalle Street Minneapolis, MN 55402 Chicago, IL 60675 612-334-5888 (Metro Area) 800-332-5580 TRANSFER AGENT AND DISBURSING AGENT PFPC Inc. P.O. BOX 5166 Westboro, MA 01581-5166 [LOGO] SIT INVESTMENT ASSOCIATES ------------------------- SIT MUTUAL FUNDS -----END PRIVACY-ENHANCED MESSAGE-----