ANNUAL REPORT
EQUITY FUNDS
June 30, 1995
SIT
MUTUAL FUND GROUP
A FAMILY
OF 100%
NO-LOAD FUNDS
* Developing Markets Growth Fund
* Small Cap Growth Fund
* International Growth Fund
* Growth Fund
* Growth & Income Fund
* Balanced Fund
A Look at the SIT Mutual Funds
The SIT Mutual Fund Group is managed by Sit Investment Associates, Inc.
Sit investment 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 currently manages more than $4.0 billion for some
of America's largest corporations, foundations and endowments.
The SIT Mutual Fund Group is comprised of eleven 100% no-load funds.
100% no-load means that the 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.
Some of the other features include:
* Free telephone exchange
* Dollar-cost averaging through automatic investment plan
* Electronic transfer of funds for purchases and redemptions
* Free check-writing privileges on bond funds
* Retirement accounts including IRAs, Keoghs and 401(k) Plans
(GRAPH) describing: 1) principal stability and current income and 2) growth
potential.
SIT FAMILY OF FUNDS
<TABLE>
<S> <C> <C> <C>
STABILITY: INCOME: GROWTH & INCOME: GROWTH:
Safety of principal Increased income Long-term capital Long-term capital
and current income appreciation and income appreciation
</TABLE>
SIT MUTUAL FUND GROUP
Stock Funds Annual Report
Table of Contents
PAGE
Chairman's Letter ........................ 2
Performance Review ....................... 4
Fund Reviews and Portfolios of Investments
Developing Markets Growth Fund .. 6
Small Cap Growth Fund ........... 10
International Growth Fund ....... 14
Growth Fund ..................... 18
Growth & Income Fund ............ 22
Balanced Fund ................... 26
Notes to Portfolios of Investments ....... 31
Statements of Assets and Liabilities ..... 32
Statements of Operations ................. 33
Statements of Changes in Net Assets ...... 34
Notes to Financial Statements ............ 36
Financial Highlights ..................... 40
Independent Auditors' Report ............. 46
Federal Income Tax Information ........... 47
This document must be preceded or accompanied by a Prospectus.
SIT MUTUAL FUND GROUP
Chairman's Letter - June 30, 1995
PHOTO Eugene C. Sit
Dear Fellow Shareholders:
Market expectations for lower short-term interest rates, relatively
stable inflation, strong second quarter corporate earnings reports, and
favorable prospects for an economic soft landing provided the basis for domestic
stocks to rise sharply in the first half of 1995.
ECONOMIC REVIEW
Domestic economic growth decelerated in the first half of 1995 as second quarter
real GDP expanded modestly at a +0.5% annual rate and first quarter data was
revised downward slightly to +2.7%. Slower second quarter growth was primarily
the result of a correction in inventories and slower growth in exports. Real
final sales for the quarter rose +2.1%. Although those leaning toward the
possibility of recession cite the increasing trend in unemployment and
decreasing capacity utilization as indicators of slowing growth, we believe a
recession will be avoided in 1995 and that the soft landing scenario is most
likely. Personal income growth remained strong at a +5.7% annual rate in June,
and personal consumption expenditures, the largest component of GDP, expanded by
a rate of slightly better than +2.5%. Looking toward the second half of 1995,
upticks in housing and auto sales and strong loan demand combined with more
moderate inventory levels suggest a more active economy during the latter half
of the year. We expect that economic growth will accelerate somewhat during this
period, resulting in a growth rate of approximately +3.0% for calendar 1995.
Mixed indications of second quarter economic activity led financial markets to
discount an impending reduction in short-term interest rates as a means of
economic stimulus to avert a possible recession. These expectations were
confirmed on July 6th when the Federal Reserve lowered the federal funds rate by
25 basis points at its FOMC meeting, citing an absence of price pressures as
reasonable justification. Although the Fed appears now to be leaning in favor of
monetary ease, we believe further reductions in short-term rates will depend
primarily upon future levels of economic activity.
Price increases in general continue at a modest pace, suggesting that the Fed's
July policy reversal was justified. Consumer price increases, as measured by the
year-over-year change in the CPI, remain moderate at +3.0%. Price increases at
the producer level were even more subdued, showing a +2.2% annual increase as
measured by the PPI. Although labor and energy prices appear completely in check
at the present time, wheat prices, which are now flirting with 25-year highs
because of dwindling inventories created by this year's extreme weather, could
spark a larger uptick in consumer prices.
In addition to stable inflation, the policies aimed at increased fiscal
restraint brought to Washington by the Republican majority have contributed to
the favorable investment environment. Congress continues to aggressively pursue
deficit reduction as evidenced by the nearly $983 billion in spending cuts
outlined in the compromise plan between House and Senate Republicans. The
majority of the cuts would be derived by slowing the growth in Medicare and
Medicaid spending and would provide for a balanced budget by the year 2002.
While President Clinton now favors a balanced budget, his plans provide
significant differences in spending for entitlement programs. Therefore, the
budget debate will likely intensify through the fall. The Administration now
estimates that the current fiscal deficit will approximate $160 billion.
International trade relations were strained recently as the U.S. clashed with
Japan over auto import policies before a last-minute agreement was reached.
Although the agreement contained little substance, the compromise was important
in terms of preserving momentum toward free trade. The competitive position of
the U.S. in international markets remains extremely strong, particularly among
the G-7 nations, in terms of its low unit labor costs as well as its exchange
rate, especially versus the Japanese yen, which could enhance prospects for
increased export activity.
Even though international equities performed well in light of generally lower
interest rates, global growth now appears to be slowing. Real GDP growth in
several of the European nations peaked during the first quarter, although
inflation seems to be tapering off as well. Germany's Bundesbank, a leader in
setting European monetary policy, could stimulate the region by lowering
short-term interest rates this fall. The Asian economies, ex-Japan, have also
slowed modestly as well, although from generally higher levels of economic
activity. In contrast to the other Asian economies, Japan appears once again on
the brink of recession and is currently grappling with rampant asset deflation,
a potential banking crisis, and public discord created by weak political
leadership. These problems will require a substantial fiscal stimulus package
coupled with an expansionary monetary policy by the Bank of Japan.
EQUITY STRATEGY SUMMARY
Growth stocks continued to perform well during the first half of 1995, fueled by
the strong earnings increases of technology-related issues and stable to
declining interest rates. In terms of market valuation, even though domestic
stocks performed strongly during the first half of 1995, corporate earnings
continue to advance and the current price/earnings ratio of the S&P 500 at 16
times trailing earnings still appears reasonable given the outlook for continued
profit increases and current interest rate levels. Moreover, growth stock
valuation in general remains well within historical ranges. We anticipate a
continued market advance through next year, albeit at a much slower rate, and a
near-term correction is probable, particularly after the market's strong first
half showing.
Given our expectations for moderate economic growth and stable to slightly
rising interest rates, we believe the cycle favoring growth stocks which began
12 months ago will continue. Moving toward the latter half of the year the
companies in the S&P 500 will encounter some fairly difficult earnings
comparisons, particularly economically-sensitive issues that benefited greatly
from the decline in interest rates that began in 1993. On a relative basis,
those companies that are able to deliver high and consistent earnings growth
will become increasingly favored by investors.
Portfolio strategy for domestic stock funds consists of maintaining considerable
weightings in sectors that present opportunities for superior earnings gains,
namely technology, business equipment and services, and health care. Since
relative earnings momentum and stock selection will be critical for investment
success in the second half of 1995, we are continually monitoring the earnings
growth potential of the companies in the portfolio. All portfolios are
essentially fully invested at the present time.
In terms of international strategy, we continue to emphasize non-Japan Asian
markets that offer attractive valuations and the potential for above-average
rates of economic growth. European markets should also continue to perform well
in anticipation of interest rate reductions and corporate restructuring.
Finally, we believe that following the volatility in emerging markets during the
late stages of 1994 and into 1995, investors will find renewed interest in these
markets as a means of pursuing above-average growth opportunities.
We appreciate your continued interest and support as fellow shareholders in the
SIT Mutual Fund Group. You will soon be receiving proxy material for our Annual
Meeting which is scheduled for Tuesday, October 24, 1995 in Minneapolis. We
welcome your attendance and look forward to meeting with you personally.
With best wishes,
Eugene C. Sit, CFA
Chairman and Chief Investment Officer
SIT MUTUAL FUND GROUP
JUNE 30, 1995 PERFORMANCE REVIEW - STOCK FUNDS
STOCK FUNDS REVIEW
Domestic equities soared to record highs during the twelve-month period ended
June 30, 1995 propelled by rising corporate profits and declining interest
rates. The broad market, as measured by the S&P 500 Index, gained +26.1% during
this period. Strong earnings coupled with volatility in the emerging markets
late in 1994 spurred a flight to larger company stocks which drove the DJIA to
advance +29.0%. Even stronger returns were recorded on the NASDAQ Composite,
which surged ahead +32.2%, largely on the momentum of technology-related shares.
Large company stocks gained +25.5% during this period according to the Russell
1000 Index, slightly ahead of the +20.1% provided by the Russell 2000 Index, a
broad indicator of smaller stock performance. Smaller stocks outperformed by
+2.7% during the month of June, however, as the dollar rebounded and investors
grew increasingly optimistic over an eventual capital gains tax reduction,
suggesting that the cycle favoring medium-to-smaller company issues remains
intact.
The cycle favoring growth stocks also turned markedly positive during this
period as investors began to discount expectations for more moderate economic
growth. At the large end of the capitalization spectrum, growth stock returns
exceeded value stock returns by +10.1%, but the growth/value differential was
even more dramatic for smaller company shares which outperformed by +11.2%.
International equity performance generally lagged that of the U.S. in U.S.
dollar terms, although regional strength was found in Finland and Switzerland.
European stocks advanced +18.8% as measured by the MSCI Europe Index, while the
Pacific Ex-Japan measure grew by +7.5%. Japanese and Mexican shares, however,
continued to languish under the weight of structural economic problems and
contracted considerably.
(TABLE)
<TABLE>
<CAPTION>
TOTAL RETURN - CALENDAR YEAR
YTD
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SIT DEVELOPING
MARKETS GROWTH FUND -- -- -- -- -- -- -- -- -- -2.02%(1) -3.49%
(NASDAQ Symbol:
SDMGX)
SIT SMALL CAP
GROWTH FUND -- -- -- -- -- -- -- -- -- 11.57(1) 21.53
(NASDAQ Symbol:
SSMGX)
SIT INTERNATIONAL
GROWTH FUND -- -- -- -- -- -- 4.10%(2) 2.69% 48.37% -2.99 5.58
(NASDAQ Symbol:
SNGRX)
SIT GROWTH FUND 43.65% 10.33% 5.50% 9.77% 35.15% -2.04% 65.50 -2.14 8.55 -0.47 12.95
(NASDAQ Symbol:
NBNGX)
SIT GROWTH &
INCOME FUND 23.48 21.83 5.32 5.33 32.02 -2.37 32.72 4.94 3.15 2.83 17.92
(NASDAQ Symbol:
SNIGX)
SIT BALANCED FUND -- -- -- -- -- -- -- -- -- -0.33 14.09
International
Emerging Markets
Free Index(3) -- -- -- -- -- -- -- -- -- 2.80 -4.30
Russell 2000
Index (3) -- -- -- -- -- -- -- -- -- 4.61 14.42
EAFE Index (4) -- -- -- -- -- -- 0.26 -12.17 32.56 7.78 2.60
NASDAQ OTC
Composite Index 31.36 7.36 -5.26 15.41 19.26 -17.80 56.84 15.45 14.75 -3.20 24.14
S&P 500 Index 31.60 18.64 5.28 16.55 31.61 - 3.05 30.46 7.64 10.07 1.32 20.21
</TABLE>
<TABLE>
<CAPTION>
QUARTERLY Average Annual Total Returns for
RETURN the Periods Ended June 30, 1995
3 MONTHS 1 YEAR 3 YEARS 5 YEARS 10 YEARS SINCE INCEPTION
INCEPTION
<S> <C> <C> <C> <C> <C> <C> <C>
SIT DEVELOPING
MARKETS GROWTH FUND 07/01/94 10.06% -5.44% -- -- -- -5.44%
SIT SMALL CAP
GROWTH FUND 07/01/94 10.03 35.59 -- -- -- 35.59
SIT INTERNATIONAL
GROWTH FUND 11/01/91 9.25 7.86 14.93% -- -- 14.16
SIT GROWTH FUND 09/02/82 7.62 28.44 11.74 12.53% 14.40% 18.19
SIT GROWTH &
INCOME FUND 09/02/82 10.23 26.33 11.21 10.32 12.75 14.22
SIT BALANCED FUND 12/31/93 7.75 19.16 -- -- -- 8.98
International
Emerging Markets
Free Index (3) 9.67 -1.63 -- -- -- -1.63
Russell 2000
Index (3) 9.37 19.70 -- -- -- 19.70
EAFE Index (4) 0.73 1.65 12.68 -- -- 7.21
NASDAQ OTC
Composite Index (5) 14.22 32.22 18.32 15.09 12.16 13.71
S&P 500 Index (5) 9.55 26.07 13.25 12.10 14.66 16.51
</TABLE>
(1) Period from inception (7/1/94) through 12/31/94.
(2) Period from inception (11/1/91) through 12/31/91.
(3) Figures assume an inception date of 7/1/94.
(4) Figures assume an inception date of 11/1/91.
(5) Figures assume an inception date of 9/2/82.
Please remember that past performance is not a guarantee of future results and
is only one of the factors to consider in choosing a fund. As with all
investments, the share price and return may vary and you may have a gain or loss
at the time of sale.
SIT DEVELOPING MARKETS GROWTH FUND REVIEW
JUNE 30, 1995
PHOTO Andrew B. Kim, CFA
Senior Portfolio Manager
The SIT Developing Markets Growth Fund's investment return for the twelve months
ended June 30, 1995, was -5.4%, compared to the MSCI Emerging Markets Free Index
return of -1.6%. As shown in the attached chart, the Fund's underperformance
occurred during the initial start-up period. During the first quarter, the Fund
was not fully invested and as a result, the Fund lagged the Index significantly.
The Fund has, however, outperformed the Index during the remainder of the year.
The Fund is now fully invested.
Investments in Asia represented approximately 58% of the Fund's portfolio at
June 30, compared to 52% three months ago. Latin America and Europe represented
26% and 8% of the portfolio as of June 30, compared to 24% and 3% at the end of
the March quarter.
In the aftermath of the Mexican financial crisis, investment in the world's
emerging markets, especially in the Pacific Rim region, has not changed
materially. With global liquidity rebounding, we expect capital flows to
accelerate into emerging markets. The Federal Reserve's interest rate reduction
will have a salutary effect on equity valuations. The major investment risk now
appears to be an unexpectedly strong rebound in the U.S. economy in the second
half of 1995. This would reignite inflation pressure in emerging markets and
pre-empt the possibility of further interest rate reductions.
Our current investment strategy continues to emphasize the Asian markets where
valuations remain well below their early 1994 peaks. For diversification
purposes, we recently increased our allocation to Taiwan, Korea and India which
had declined substantially recently. These markets generally move independently
from the Southeast Asian and U.S. markets and have not yet participated in the
recent emerging market rebound. In Latin America, we will continue to focus on
Brazil and Peru as these countries continue to make progress in restructuring
their economies.
INVESTMENT OBJECTIVE AND STRATEGY
The objective of the Developing Markets Growth Fund is to maximize long-term
capital appreciation. The Fund pursues this objective by investing in equity
securities of companies deemed to be domiciled or otherwise operating in a
developing market.
Developing markets tend to be less economically developed regions of the world.
General characteristics also include a high demand for capital investment, a
high dependence on export markets for their major industries, a need to develop
basic economic infrastructures, rapid economic growth and lower degrees of
political stability. Investors should carefully consider the risks associated
with developing markets such as currency fluctuations, high volatility,
illiquidity and the possibility of political instability.
PORTFOLIO SUMMARY
Net Asset Value 6/30/95: $ 9.41 Per Share
7/ 1/94: $10.00 Per Share
Total Net Assets: $ 4.62 Million
PORTFOLIO STRUCTURE
(% of total net assets)
(BAR GRAPH)
Asia 57.6
Latin America 25.8
Europe 8.4
Africa 2.4
Other Assets & Liabilities 5.8
CUMULATIVE TOTAL RETURNS*
Developing International
Markets Emerging
Growth Markets Lipper Emerging
Fund Free Index Markets Index
3 Months 10.06% 9.67% 8.60%
1 Year -5.44 -1.63 -1.61
Inception -5.44 -1.63 -1.61
(7/1/94)
* As of 6/30/95
Performance is historical and assumes reinvestment of all dividends and capital
gains. Share price and return will vary so that a gain or loss may be realized
when shares are sold. Total return should not be taken as a representation of
future performance. Management fees and administrative expenses are included in
the Fund's performance; however, fees and expenses are not incorporated in the
International Emerging Markets Free Index. The Lipper averages and indices are
obtained from Lipper Analytical Services, Inc., a large independent evaluator of
mutual funds.
GROWTH OF $10,000
(LINE GRAPH)
SIT Developing Markets Growth Fund
International Emerging Markets Free Index
The sum of $10,000 invested at inception (7/1/94) and held until 6/30/95 would
have declined to $9,456 in the Fund or $9,837 in the International Emerging
Markets Free Index assuming reinvestment of all dividends and capital gains.
10 LARGEST HOLDINGS
Tele 2000
Genting Berhad
Banco Latinoamericano
IJM Berhad Corp.
Advanced Info Services
Makro Brazil
President Enterprises
Enersis, A.D.R.
Hutchison Whampoa
Lojas Americanos
Total number of holdings: 44
SIT DEVELOPING MARKETS GROWTH FUND
PORTFOLIO OF INVESTMENTS - JUNE 30, 1995
COMMON AND PREFERRED STOCKS (92.4%)(2)
CAPITAL GOODS (4.7%)
37,000 IJM Berhad Corp. (Malaysia) $147,211
20,000 Leader Universal Cables
(Malaysia) 71,370
218,581
CONSUMER DURABLES (3.6%)
1,900 Autoliv AB (Sweden) (4) 101,502
77,000 Multibras (Preferred) (Brazil) 63,602
165,104
CONSUMER NON-DURABLES (11.8%)
13,000 Cerebos Pacific Ltd. (Singapore)76,279
13,000 Nestle Berhad (Malaysia) 99,713
3,000 Panamerican Beverages, Inc.
(Mexico) 90,000
8,000 President Enterprises, G.D.R.
(Taiwan) (3) (4) 130,000
4,200 Quilmes Industrial (Argentina) 81,900
172,000 Vitasoy International(Hong Kong)68,355
546,247
CONSUMER SERVICES (5.6%)
16,000 Genting Berhad (Malaysia) 158,163
18,500 PT Modern Photo (Indonesia)(5) 100,516
258,679
ENERGY (2.6%)
5,000 Ban Pu Coal (Thailand) 118,290
FINANCIAL (7.0%)
BANKING (7.0%)
4,500 Banco Latinoamericano (Panama) 149,063
8,000 Bangkok Bank (Thailand) 88,151
9,000 United Overseas Bank (Singapore)85,008
322,222
HEALTH CARE (3.8%)
BIOTECHNOLOGY/PHARMACEUTICALS (3.8%)
3,600 Ranbaxy Labs, G.D.R. (India) 90,000
18,700 F.H. Faulding (Australia) 82,845
172,845
MULTI-INDUSTRY (9.4%)
26,000 Hutchison Whampoa (Hong Kong) 125,674
6,000 India Growth Fund (India) 110,250
228,000 International UNP Holdings Ltd.
(Poland) (3) (4) 86,296
9,800 Morgan Stanley Africa Investment
Fund (South Africa) 112,700
434,920
RAW MATERIALS (3.6%)
6,600 Asia Pulp & Paper, G.D.S.
(Indonesia) (3) $ 83,325
1,200 Concordia Paper, A.D.R.
(Hong Kong) (3) 16,950
8,695 Hankuk Glass, G.D.R.
(Korea) (3) (4) 65,213
165,488
RETAIL (7.7%)
3,246 Ceteco Holdings, A.D.S.
(Netherlands) (4) 98,581
5,600,000 Lojas Americanos (Preferred)
(Brazil) 124,606
93,000 Makro Brazil (Brazil) (3) 133,246
356,433
SHELTER (6.1%)
83,750 Ayala Land 'B' (Philippines) 96,736
17,200 City Developments (Singapore) 105,230
3,800 Land & House Company (Thailand) 80,049
282,015
TECHNOLOGY (6.7%)
ELECTRONIC EQUIPMENT (2.6%)
10,400 LG Electronics, G.D.R.
(Korea) (3) (4) 119,600
TELECOMMUNICATIONS & EQUIPMENT (4.1%)
147,702 Tele 2000 (Peru) (3) 189,681
UTILITIES (19.8%)
ELECTRIC POWER (9.1%)
4,080 Cemig, A.D.R. (Brazil) (3) (4) 78,540
4,300 Enersis, A.D.R. (Chile) 126,850
4,200 Korea Electric Power, A.D.R.
(Korea) (3) 95,025
15,150 Manila Electric Company
(Philippines) 121,603
422,018
TELECOMMUNICATIONS (10.7%)
9,000 Advanced Info Services
(Thailand) 133,441
3,700 Hong Kong Telecommunications,
A.D.R. (Hong Kong) 73,537
41,300 Pilipino Telephone Corp.
(Philippines) (3) 32,341
1,000 SPT Telecom
(Czech Republic) (3) 101,870
48,050 Telefonos Del Peru - B (Peru) 81,988
575,000 TELESP (Preferred) (Brazil) 71,143
494,320
Total common and preferred stocks
(cost: $4,211,953) $4,266,443
CONVERTIBLE BONDS (1.8%)
50,000 United Microelectronics, 1.25%,
6/8/04 (Taiwan)(cost:$87,100) 85,375
SHORT-TERM SECURITIES (3.9%)
180,000 Ford Motor Credit Co., 5.92%,
7/3/95 (cost: $179,941) 179,941
Total investments in securities
(cost: $4,478,994) (7) $4,531,759
See accompanying notes to portfolios of investments on page 31.
SIT SMALL CAP GROWTH FUND REVIEW
JUNE 30, 1995
PHOTO Eugene C. Sit, CFA
Senior Portfolio Manager
The SIT Small Cap Growth Fund kicked off its inaugural year in fine fashion,
providing investors with a solid +35.6% return. The Fund's return exceeded the
+19.7% performance of the Russell 2000 Index, a broad-based measure of small cap
equity performance, and has outperformed this benchmark every quarter since its
inception. Although recent performance has been driven largely by technology
sector holdings, stocks in the financial, capital goods, and consumer
non-durables sectors have also contributed positively.
As economic growth and corporate profits moderate through year-end and
into 1996, the relative attractiveness of companies generating high and
consistent levels of earnings growth remains solidly based. The Fund is well
positioned to capitalize on this belief with weighted average estimated earnings
gains of +33.8% in 1995 and +32.4% in 1996, more than triple the estimated
earnings gains for the broad equity market as measured by the S&P 500 Index.
Despite the superior earnings growth potential of the Fund's holdings, the
current valuation remains relatively attractive at 15.9 times estimated 1996
earnings. This valuation level represents a 10% premium to the broad stock
market for more than three times the earnings growth potential.
At the end of its first year, the Fund is most heavily weighted in
technology holdings at 40.4% of net assets, which is partially the result of the
group's strong performance but also stems from the recent additions of Anadigics
(telecommunications equipment), Computer Network Technology (networking), and
Data Systems & Software (software services). The Fund's largest holdings are
primarily semiconductor-related issues such as Advanced Semiconductor,
Integrated Process Equipment and Tower Semiconductor, due to the tremendous and
growing demand for microprocessors. Aside from technology, the health care and
financial sectors also offer prospects for substantial earnings growth and
comprised 15.7% and 11.6% of net assets, respectively, at year-end.
INVESTMENT OBJECTIVE AND STRATEGY
The objective of the Small Cap Growth Fund is to maximize long-term capital
appreciation. The Fund pursues this objective by investing primarily in the
common stocks of small companies that have a capitalization of under $500
million at the time of purchase.
In addition, the Fund may purchase securities convertible into common stocks,
preferred stocks and warrants. The Fund may invest in securities not listed on a
national securities exchange but generally such securities will have an
established over-the-counter market.
PORTFOLIO SUMMARY
Net Asset Value 6/30/95: $13.49 Per Share
7/ 1/94: $10.00 Per Share
Total Net Assets: $12.02 Million
PORTFOLIO STRUCTURE
(% of total net assets)
(BAR GRAPH)
Technology 40.4
Financial 11.6
Health Care 15.7
Business Equipment & Services 10.2
Retail 4.5
Capital Goods 4.3
Energy 3.0
Transportation 2.9
Consumer Non-Durables 2.2
Consumer Services 1.6
Consumer Durables 1.6
Other Assets & Liabilities 2.0
CUMULATIVE TOTAL RETURNS*
Small Cap Russell 2000 Lipper Small
Growth Fund Index Co. Growth
3 Months 10.03% 9.37% 9.55%
1 Year 35.59 19.70 26.07
Inception 35.59 19.70 26.07
(7/1/94)
* As of 6/30/95
Performance is historical and assumes reinvestment of all dividends and capital
gains. Share price and return will vary so that a gain or loss may be realized
when shares are sold. Total return should not be taken as a representation of
future performance. Management fees and administrative expenses are included in
the Fund's performance; however, fees and expenses are not incorporated in the
Russell 2000 Index. The Lipper averages and indices are obtained from Lipper
Analytical Services, Inc., a large independent evaluator of mutual funds.
GROWTH OF $10,000
(LINE GRAPH)
SIT Small Cap Growth Fund
Russell 2000 Index
The sum of $10,000 invested at inception (7/1/94) and held until
6/30/95 would have grown to $13,559 in the Fund or $11,970 in the Russell 2000
Index assuming reinvestment of all dividends and capital gains.
10 LARGEST HOLDINGS
Advanced Semiconductor Material Intl. N.V.
Integrated Process Equip. Corp.
Sierra Health Services, Inc.
CMAC Investment Corp.
Electronics for Imaging, Inc.
BISYS Group, Inc.
Tower Semiconductor Ltd.
National Data Corp.
ABC Rail Products Corp.
Clinicom, Inc.
Total number of holdings: 46
SIT SMALL CAP GROWTH FUND
PORTFOLIO OF INVESTMENTS - JUNE 30, 1995
COMMON STOCKS (98.0%) (2)
BUSINESS EQUIPMENT & SERVICES (10.2%)
16,500 BISYS Group, Inc. (The) (3) $ 367,125
20,000 Information Resources, Inc. (3)285,000
15,000 National Data Corp. 345,000
14,000 Transaction Network Services,
Inc. (3) 224,000
1,221,125
CAPITAL GOODS (4.3%)
12,500 BW/IP, Inc. 231,250
12,500 Molten Metal
Technology, Inc.(3) 290,625
521,875
CONSUMER DURABLES (1.6%)
7,500 Titan Wheel International, Inc.193,125
CONSUMER NON-DURABLES (2.2%)
10,500 BMC Industries, Inc. 263,813
CONSUMER SERVICES (1.6%)
6,500 Heritage Media Corp. (3) 187,687
ENERGY (3.0%)
10,000 Global Industries Limited (3) 222,500
10,000 HS Resources, Inc. (3) 140,000
362,500
FINANCIAL (11.6%)
BANKING (0.8%)
5,000 Long Island Bancorp, Inc. 95,000
FINANCIAL SERVICES (2.1%)
15,000 Olympic Financial Ltd. (3) 250,312
INSURANCE (8.7%)
8,000 Allied Group, Inc. 228,000
9,500 E.W. Blanch Holdings, Inc. 176,938
9,300 CMAC Investment Corp. 403,387
10,000 PXRE Corp. 235,000
1,043,325
HEALTH CARE (15.7%)
BIOTECHNOLOGY/ PHARMACEUTICALS (1.8%)
11,800 Dura Pharmaceuticals, Inc. (3) 221,988
MEDICAL EQUIPMENT/ SUPPLIES (2.3%)
52,000 Innerdyne, Inc. (3) 149,500
15,000 Resound Corp. (3) 121,875
271,375
MEDICAL FACILITIES MANAGEMENT (11.6%)
18,000 Clinicom, Inc. (3) 297,000
12,000 GMIS, Inc. (3) 273,750
9,000 Living Centers of
America, Inc.(3) 244,125
17,000 Sierra Health Services, Inc.(3)416,500
9,000 Summit Care Corp. (3) $ 164,250
1,395,625
RETAIL (4.5%)
14,000 Apple South, Inc. 273,000
20,000 Sports & Recreation, Inc. (3) 262,500
535,500
TECHNOLOGY (40.4%)
COMPUTER RELATED (6.9%)
22,500 Computer Network Technology
Corp. (3) 230,625
7,500 Electronics For
Imaging, Inc.(3) 391,875
7,500 Madge N.V. (3) 210,000
832,500
COMPUTER SOFTWARE/ SERVICES (9.2%)
11,500 Aspen Technology, Inc. (3) 293,250
6,500 Business Objects, S. A.,
A.D.R. (3) 214,500
18,000 Data Systems &
Software, Inc.(3) 186,750
1,000 Discreet Logic, Inc. (3) 33,000
6,000 Hyperion Software Corp. (3) 271,500
2,000 PeopleSoft, Inc. (3) 108,500
1,107,500
SEMICONDUCTORS & RELATED (15.3%)
29,500 Advanced Semiconductor
Material International N.V.(3)759,625
6,000 Cognex Corp. (3) 241,500
14,000 Integrated Process Equipment
Corp. (3) 494,375
12,000 Tower Semiconductor Ltd. (3) 348,000
1,843,500
TELECOMMUNICATIONS & EQUIPMENT (9.0%)
10,000 Anadigics Inc. (3) 195,000
6,000 Aspect Telecommunications
Corp. (3) 268,500
9,500 Centennial Cellular Corp. (3) 159,125
25,000 Intelcom Group Inc. (3) 223,438
8,500 Summa Four, Inc. (3) 240,125
1,086,188
TRANSPORTATION (2.9%)
15,000 ABC Rail Products Corp. (3) 345,000
Total common stocks
(cost: $9,698,813) 11,777,938
SHORT-TERM SECURITIES (4.3%)
American Express Credit Corp.:
194,000 5.85%, 7/3/95 193,937
150,000 6.00%, 7/6/95 $ 149,875
170,000 Ford Motor Credit Corp., 5.92%,
7/5/95 169,888
Total short-term securities
(cost: $513,700) 513,700
Total investments in securities
(cost: $10,212,513) (7) $12,291,638
See accompanying notes to portfolios of investments on page 31.
SIT INTERNATIONAL GROWTH FUND REVIEW
JUNE 30, 1995
PHOTO Andrew B. Kim, CFA
Senior Portfolio Manager
The SIT International Growth Fund's investment return for the fiscal year
ended June 30, 1995, was +7.86%, substantially ahead of the EAFE index's return
of +1.65%. The Fund's structural underweighting in Japan was a key to its strong
performance. During the year ended June 30, 1995, the Japanese market declined
- -18% in U.S. dollar terms.
Recently, major international equity markets have recovered strongly in
response to the stabilizing global interest rate cycle. One prominent exception
was Japan, due to concerns over the banking crisis and a possible double-dip
recession. We are focusing on those Japanese companies with visible earnings
growth and those that are beneficiaries of trade expansion with other Asian
economies. The Fund's Japanese weighting will continue to be around 23-25% of
the portfolio, well below the 40.9% of the EAFE Index.
At year-end, the Fund's allocation to non-Japan Asian markets remained
relatively unchanged at 30%. The large currency appreciation against the U.S.
dollar resulted in a slowdown in Asian export industries and has reduced
inflationary pressures. Valuations remain well below their early 1994 peak, and
we will continue to allocate approximately 30% of the Fund's assets to the
non-Japan Asian region.
During the past quarter we increased the Fund's European allocation from
36% to 39%. Europe had the best regional performance in the quarter, as well as
year-to-date. We believe European markets will continue to perform strongly due
to declining interest rates, corporate restructuring, and increasing trade with
emerging markets around the world.
Latin America will benefit from liquidity migration as the U.S. equity
market's upsurge begins to slow. Our Latin American holdings will continue to
focus on the growth opportunities in Brazil and Peru.
INVESTMENT OBJECTIVE AND STRATEGY
The objective of the International Growth Fund is to achieve long-term growth of
capital by investing in equity securities of issuers domiciled outside the
United States. The Fund's investment objective reflects the belief that
long-term investment planning should include the investment opportunities that
exist outside the U.S.
The Fund selects its investments based on the characteristics of the particular
markets and economies of the countries in which it invests. Emphasis is placed
on identifying securities of companies believed to be undervalued in the
marketplace in relation to factors such as the company's revenues, earnings,
assets and long-term competitive position which over time will enhance the
equity value of the company.
PORTFOLIO SUMMARY
Net Asset Value 6/30/95: $15.71 Per Share
6/30/94: $14.87 Per Share
Total Net Assets: $68.12 Million
PORTFOLIO STRUCTURE
( % OF TOTAL NET ASSETS)
(BAR GRAPH)
Pacific Basin 29.6 [ 9.8]
Japan 22.6 [40.9]
Other Europe 22.3 [19.1]
France, Germany & UK 16.3 [30.2]
Latin America 2.9 [ 0.0]
Other Assets & Liabilities 6.3
[MORGAN STANLEY
CAPITAL EAFE
INDEX WEIGHTINGS]
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS * CUMULATIVE TOTAL RETURNS *
Morgan Stanley Morgan Stanley
International Capital Int'l Lipper International Capital Int'l Lipper
Growth Fund EAFE Index Int'l Fund Growth Fund EAFE Index Int'l Fund
<S> <C> <C> <C> <C> <C> <C>
3 Months 9.25% 0.73% 5.09% 9.25% 0.73% 5.09%
(unannualized)
1 Year 7.86 1.65 1.78 7.86 1.65 1.78
3 Years 14.93 12.68 9.75 51.82 43.06 32.19
Inception 14.16 7.21 8.88 62.45 29.07 36.62
(11/1/91)
* As of 6/30/95
</TABLE>
Performance is historical and assumes reinvestment of all dividends and capital
gains. Share price and return will vary so that a gain or loss may be realized
when shares are sold. Total return should not be taken as a representation of
future performance. Management fees and administrative expenses are included in
the Fund's performance; however, fees and expenses are not incorporated in the
Morgan Stanley Capital International EAFE (Europe, Australia, Far East) Index.
The Lipper averages and indices are obtained from Lipper Analytical Services,
Inc., a large independent evaluator of mutual funds.
GROWTH OF $10,000
(LINE GRAPH)
SIT INTERNATIONAL GROWTH FUND
MORGAN STANLEY EAFE INDEX
The sum of $10,000 invested at inception (11/1/91) and held until 6/30/95 would
have grown to $16,245 in the Fund or $12,907 in the Morgan Stanley EAFE Index
assuming reinvestment of all dividends and capital gains.
10 LARGEST HOLDINGS
Autoliv AB
Aegon N.F., A.D.R.
Nokia Preferred
Genting Berhad
Hutchison Whampoa
Wolters Kluwer
United Overseas Bank
Telecom Corp. New Zealand, A.D.R.
Reuters Holdings, p.l.c., A.D.S.
Bangkok Bank
Total number of holdings: 63
SIT INTERNATIONAL GROWTH FUND
PORTFOLIO OF INVESTMENTS - JUNE 30, 1995
COMMON AND PREFERRED STOCKS (92.2%)(2)
BUSINESS EQUIPMENT & SERVICE (3.8%)
14,900 Canon Inc., A.D.R. (Japan) $1,218,075
27,800 Reuters Holdings p.l.c., A.D.S.
(United Kingdom) 1,393,475
2,611,550
CAPITAL GOODS (9.2%)
44,000 IHC Caland (Netherlands) 1,248,625
270,000 IJM Berhad Corp. (Malaysia) 1,074,245
315,000 Leader Universal Cables
(Malaysia) 1,124,081
16,000 Mabuchi Motor (Japan) 1,100,589
27,000 Murata Manufacturing Co., Ltd.
(Japan) 1,020,848
33,000 Raito Kogyo (Japan) 699,647
6,268,035
CONSUMER DURABLES (4.3%)
35,200 Autoliv AB (Sweden) (4) 1,880,465
47,300 Rinnai Corp. (Japan) 1,047,397
2,927,862
CONSUMER NON-DURABLES (5.0%)
22,500 Panamerican Beverages, Inc.
(Mexico) 675,000
64,333 President Enterprises, G.D.R.
(Taiwan) (3) (4) 1,045,411
236,725 PT Indofood Sukses Makmur
(Indonesia) (5) 1,020,458
1,660,000 Vitasoy International
(Hong Kong) 659,709
3,400,578
CONSUMER SERVICES (10.2%)
152,500 Genting Berhad (Malaysia) 1,507,491
190,000 News Corp. Ltd. Preferred
(Australia) 938,705
120,000 PT Modern Photo (Indonesia)(5) 651,998
230,000 Rentokil (United Kingdom) 987,949
17,000 Secom Co. (Japan) 1,067,256
386,000 Shaw Brothers (Hong Kong) 361,680
16,044 Wolters Kluwer (Netherlands) 1,414,515
6,929,594
FINANCIAL (6.7%)
BANKING (4.1%)
125,000 Bangkok Bank (Thailand) 1,377,354
148,500 United Overseas Bank
(Singapore) 1,402,637
2,779,991
INSURANCE (2.6%)
51,065 Aegon N.V., A.D.R.
(Netherlands) $1,780,892
HEALTH CARE (8.7%)
BIOTECHNOLOGY/ PHARMACEUTICALS (8.7%)
44,200 Astra "B" Free (Sweden) 1,329,350
2,500 Gehe, A.G. (Germany) 1,146,936
625 Gehe, A.G. New Shares
(Germany) 275,897
60,000 Banyu Pharmaceuticals (Japan) 706,007
186 Roche Holdings, A.G.
(Switzerland) 1,197,901
46,200 Santen Pharmaceutical (Japan)1,229,823
5,885,914
MULTI-INDUSTRY (3.5%)
296,000 Hutchison Whampoa(Hong Kong) 1,430,745
93,000 India Fund (India) 479,370
1,245,113 International UNP Holdings Ltd.
(Poland) (3) (4) 471,264
2,381,379
RAW MATERIALS (0.7%)
35,600 Concordia Paper, A.D.R.
(Hong Kong) 502,850
RETAIL (9.9%)
8,300 Autobacs Seven (Japan) 806,537
1,900 Carrefour (France) 974,006
40,064 Ceteco Holdings, A.D.S.
(Netherlands) (4) 1,216,744
1,000 Hornbach Preferred, A.G.
(Germany) 1,343,812
6,000 Ito Yokado, A.D.R. (Japan) 1,272,000
16,000 Seven Eleven Japan (Japan) 1,143,934
6,757,033
TECHNOLOGY (12.7%)
COMPUTER SOFTWARE/ SERVICES (1.9%)
1,050 SAP Preferred (Germany) 1,321,867
ELECTRONIC EQUIPMENT (1.5%)
15,500 Samsung Electronics, G.D.R.
(Korea) (4) 813,750
4,155 Samsung Electronics, G.D.R.
Bonus Shares (Korea) (4) 207,231
1,020,981
TELECOMMUNICATIONS & EQUIPMENT (9.3%)
7,000 Kyocera Corp. (Japan) 575,501
6,400 Kyocera Corp., A.D.R.(Japan) 1,046,400
94,000 Kyowa Exeo (Japan) $ 863,604
44,000 L.M. Ericsson Telephone Co.,
A.D.R. (Sweden) 880,000
40,000 Matsushita Kotobuki (Japan) 782,097
26,800 Nokia Preferred (Finland) 1,566,330
477,498 Tele 2000 (Peru) (3) 613,210
6,327,142
UTILITIES (17.5%)
ELECTRIC POWER (9.6%)
15,184 Cemig, A.D.R. (Brazil) (3) (4) 292,292
25,300 Empresa Nacional De Electricidad,
A.D.R. (Spain) 1,246,025
162,000 Manila Electric Company
(Philippines) 1,300,313
105,000 Northern Electric
(United Kingdom) 1,326,333
151,089 Powergen p.l.c.
(United Kingdom) 1,162,177
3,000 Veba A.G. (Germany) 1,178,003
6,505,143
TELECOMMUNICATIONS (7.9%)
55,000 Advanced Info Services
(Thailand) 815,474
51,200 Hong Kong Telecommunications,
A.D.R. (Hong Kong) 1,017,600
100 Nippon Telephone & Telegraph
(Japan) 836,278
23,100 Telecom Corp. New Zealand,
A.D.R. (New Zealand) 1,400,438
350,000 Telecom Italia (Italy) 948,228
222,600 Telefonos Del Peru - B (Peru) 379,822
5,397,840
Total common and preferred stocks
(cost: $46,156,000) 62,798,651
CONVERTIBLE BONDS (1.5%)
590,000 United Microelectronics, 1.25%,
6/8/04 (Taiwan)
(cost:$995,469) 1,007,425
SHORT-TERM SECURITIES (4.9%)
COMMERCIAL PAPER
American Express Credit Co.:
430,000 5.85%, 7/3/95 429,860
325,000 6.00%, 7/6/95 324,729
Ford Motor Credit Corp.:
400,000 6.00%, 7/7/95 399,600
700,000 5.92%, 7/5/95 $ 699,538
375,000 Household Finance Corp., 5.95%,
7/3/95 374,876
300,000 Pitney Bowes Credit Corp., 5.98%,
7/10/95 299,551
Texaco, Inc.:
500,000 5.95%, 7/6/95 499,587
325,000 5.95%, 7/7/95 324,678
Total short-term securities
(cost: $3,352,419) 3,352,419
Total investments in securities
(cost: $50,503,888) (7) $67,158,495
See accompanying notes to portfolios of investments on page 31.
SIT GROWTH FUND REVIEW
JUNE 30, 1995
PHOTO Eugene C. Sit, CFA, Senior Portfolio Manager
Erik S. Anderson, CFA, Portfolio Manager
The SIT Growth Fund provided a strong +28.4% return for the 12-month period
ended June 30, 1995, outpacing the S&P 500 Index's +26.1% performance. The
Fund's annual return exceeded those of virtually all mid-cap market indices, but
lagged the NASDAQ Composite Index, which benefited from strong gains by several
larger cap technology stocks. Momentum continues to build in favor of growth
stock investing, and the Fund is participating well in the rally of
smaller-to-medium capitalization issues that began earlier this year.
At a time when estimates for overall corporate earnings are
decelerating, weighted average earnings growth rates for the Fund's investments
are actually increasing. Current estimates indicate that the companies in the
Fund's portfolio are expected to grow earnings at substantial rates of +30.7% in
1995 and +28.2% in 1996, easily exceeding the +16.4% and +4.8% earnings gains
anticipated for the market as a whole as measured by the S&P 500 Index. Despite
the Fund's superior earnings growth potential, its earnings multiple of 19.7
times 1996 estimates represents an acceptable 36% premium to the market's
valuation and is well within the bounds of historical growth stock valuation.
Consistent with our expectations for moderate economic growth,
portfolio structure has shifted increasingly toward companies in the technology
and business equipment/services sectors that demonstrate significant unit and
earnings growth characteristics. Technology holdings increased to 31.0% due
partly to market appreciation as well as the addition of networking stocks such
as 3Com and Madge, software companies such as Informix and Peoplesoft, and
semiconductor-related issues, Analog Devices and KLA Instruments. Since the
beginning of the year, portfolio weightings were increased in the business
equipment & services and financial sectors. The health care and capital goods
sectors decreased.
INVESTMENT OBJECTIVE AND STRATEGY
The objective of the Growth Fund is to maximize long-term capital appreciation.
The Fund pursues this objective by investing primarily in the common stocks of
small and medium-size emerging growth companies before they become well
recognized.
The Fund may invest in larger companies which offer improved growth
possibilities because of rejuvenated management, changes in product or some
other development that might stimulate earnings growth.
PORTFOLIO SUMMARY
Net Asset Value 6/30/95: $13.00 Per Share
6/30/94: $11.08 Per Share
Total Net Assets: $327.88 Million
PORTFOLIO STRUCTURE
(% of total net assets)
(BAR GRAPH)
Technology 31.0
Health Care 17.4
Financial 15.7
Business Equipment & Services 14.8
Energy 4.9
Retail 4.1
Consumer Services 3.0
Transportation 2.8
Capital Goods 2.3
Consumer Durables 2.1
Raw Materials 1.2
Other Assets & Liabilities 0.7
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS* CUMULATIVE TOTAL RETURNS*
Growth NASDAQ OTC S&P Growth NASDAQ OTC S&P
Fund Composite Index 500 Index Fund Composite Index 500 Index
<C> <C> <C> <C> <C> <C> <C>
3 Months 7.62% 14.22% 9.55% 7.62% 14.22% 9.55%
(unannualized)
1 Year 28.44 32.22 26.07 28.44 32.22 26.07
5 Years 12.53 15.09 12.10 80.47 101.92 77.01
10 Years 14.40 12.16 14.66 284.06 215.14 292.81
Inception 18.19 13.71 16.51 753.92 420.03 610.73
(9/2/82)
</TABLE>
* As of 6/30/95
Performance is historical and assumes reinvestment of all dividends and capital
gains. Share price and return will vary so that a gain or loss may be realized
when shares are sold. Total return should not be taken as a representation of
future performance. Management fees and administrative expenses are included in
the Fund's performance; however, fees and expenses are not incorporated in the
NASDAQ OTC Composite Index nor the S&P 500 Index.
GROWTH OF $10,000
(LINE GRAPH)
SIT Growth Fund
NASDAQ OTC Composite Index
The sum of $10,000 invested at inception (9/2/82) and held until 6/30/95 would
have grown to $85,392 in the Fund or $52,003 in the NASDAQ OTC Composite Index
assuming reinvestment of all dividends and capital gains.
10 LARGEST HOLDINGS
3Com Corp.
Parametric Technology, Inc.
Paychex, Inc.
Xilinx, Inc.
TCF Financial Corp.
MGIC Investment Corp.
HBO & Co.
Analog Devices, Inc.
Ceridian Corp.
Federated Dept. Stores, Inc.
Total number of holdings: 62
SIT GROWTH FUND
PORTFOLIO OF INVESTMENTS - JUNE 30, 1995
COMMON AND PREFERRED STOCKS (99.3%) (2)
BUSINESS EQUIPMENT & SERVICE (14.8%)
30,500 Broderbund
Software, Inc.(3) $ 1,944,375
225,600 Ceridian Corp. (3) 8,319,000
178,600 Danka Business Systems, Inc.,
A.D.R. 4,319,887
88,000 First Financial
Management Corp. 7,524,000
146,500 Fiserv, Inc. (3) 4,120,313
204,000 Office Depot, Inc. (3) 5,737,500
288,750 Paychex, Inc. 10,467,187
174,000 Sensormatic Electronics Corp.6,177,000
48,609,262
CAPITAL GOODS (2.3%)
115,300 American Power Conversion
Corp. (3) 2,637,488
110,500 Varity Corp. (3) 4,862,000
7,499,488
CONSUMER DURABLES (2.1%)
285,500 Harley-Davidson, Inc. 6,959,063
CONSUMER SERVICES (3.0%)
100,000 Loewen Group, Inc. 3,562,500
186,600 Stewart Enterprises, Inc. 6,251,100
9,813,600
ENERGY (4.9%)
160,600 Devon Energy Corp. 3,452,900
301,000 HS Resources, Inc. (3) 4,214,000
173,900 Parker & Parsley
Petroleum Co. 3,412,787
106,500 Triton Energy Corp. (3) 4,938,937
16,018,624
FINANCIAL (15.7%)
BANKING (4.0%)
81,500 Mercantile
Bancorporation, Inc. 3,657,313
197,000 TCF Financial Corp. 9,357,500
13,014,813
FINANCIAL SERVICES (4.8%)
85,400 Green Tree Financial Corp. 3,789,625
367,600 Mercury Finance Co. 7,076,300
129,900 T. Rowe Price & Associates 5,001,150
15,867,075
INSURANCE (6.9%)
118,000 Equitable of Iowa Co. 3,879,250
201,500 Mercury General Corp. 6,926,562
189,500 MGIC Investment Corp. 8,882,813
60,500 Unitrin, Inc. 2,873,750
22,562,375
HEALTH CARE (17.4%)
BIOTECHNOLOGY/PHARMACEUTICALS (8.4%)
113,000 Biogen, Inc. (3) 5,028,500
51,500 Chiron Corp. (3) $ 3,347,500
93,100 Elan Corp., p.l.c., A.D.R.(3)3,793,825
102,700 Forest Laboratories, Inc. (3)4,557,312
81,500 Medtronic, Inc. 6,285,688
110,500 R. P. Scherer Corp. (3) 4,668,625
27,681,450
MEDICAL FACILITIES MANAGEMENT (9.0%)
209,000 Coventry Corp. (3) 2,952,125
156,400 HBO & Co. 8,523,800
415,000 HEALTHSOUTH Rehabilitation
Corp. (3) 7,210,625
150,500 Integrated Health
Services, Inc. 4,515,000
132,500 Oxford Health Plans, Inc.(3) 6,260,625
29,462,175
RAW MATERIALS (1.2%)
76,000 IMC Global, Inc. 4,113,500
RETAIL (4.1%)
318,500 Federated Department Stores,
Inc. (3) 8,201,375
59,500 Kohls Corp (3) 2,714,688
180,650 Sports & Recreation, Inc.(3) 2,371,031
13,287,094
TECHNOLOGY (31.0%)
COMPUTER RELATED (6.7%)
170,900 3Com Corp. (3) 11,450,300
69,500 Electronics For
Imaging, Inc. (3) 3,631,375
242,000 Madge N.V. (3) 6,776,000
21,857,675
COMPUTER SOFTWARE/SERVICES (9.9%)
56,500 Adobe Systems, Inc. 3,277,000
37,500 Hyperion Software, Inc. (3) 1,696,875
187,000 Informix Corp. (3) 4,745,125
37,500 Intuit, Inc. (3) 2,850,000
225,500 Parametric
Technology, Inc.(3) 11,218,625
108,500 Peoplesoft, Inc. (3) 5,886,125
89,500 Sybase, Inc. (3) 2,629,063
32,302,813
SEMICONDUCTORS & RELATED (8.8%)
246,500 Analog Devices, Inc. (3) 8,381,000
160,100 Integrated Device Technology,
Inc. (3) 7,404,625
40,000 KLA Instruments Corp. (3) 3,090,000
108,000 Xilinx, Inc. (3) 10,152,000
29,027,625
TELECOMMUNICATIONS & EQUIPMENT (5.6%)
124,000 Cellular Communications, Inc.
(common stock) (3) 5,642,000
39,500 Cellular Communications, Inc.
(cv preferred stock) (3) 1,797,250
171,000 DSC Communications Corp.(3) 7,951,500
39,750 Glenayre Technologies,
Inc.(3) 2,027,250
29,500 Paging Network, Inc. (3) 1,010,375
18,428,375
TRANSPORTATION (2.8%)
184,500 TNT Freightways Corp. 3,666,938
116,500 XTRA Corp. 5,388,125
9,055,063
Total common & preferred stocks
(cost: $250,014,920) 325,560,070
SHORT-TERM SECURITIES (3.2%)
Ford Motor Credit Co.:
2,400,000 5.92%, 7/3/95 2,399,211
850,000 5.93%, 7/3/95 849,720
861,000 5.94%, 7/3/95 860,716
500,000 SIT Money Market Fund,
5.53% (6) 500,000
6,020,000 The Travelers Insurance Co.,
5.93%, 7/3/95 6,018,020
Total short-term securities
(cost: $10,627,667) 10,627,667
Total investments in securities
(cost: $260,642,587) (7) $336,187,737
See accompanying notes to portfolios of investments on page 31.
SIT GROWTH & INCOME FUND REVIEW
JUNE 30, 1995
PHOTO Peter L. Mitchelson, CFA, Senior Portfolio Manager
Ronald D. Sit, CFA, Portfolio Manager
For the fiscal year ended June 30, 1995, the SIT Growth & Income Fund's
total return was +26.3% as compared to +26.1% for the S&P 500 Index and +19.2%
for the Lipper Growth & Income Index. The Fund's 12-month return ranked 4th out
of 53 funds in its Lipper style and size grouping.
The domestic stock market's strong performance over the past year has
surprised some observers. The fact remains, however, that average price-earnings
ratios are not excessive, and dynamic growth companies, which are the focus of
the Growth & Income Fund's investments, remain attractive on a valuation basis,
particularly in relation to prior peaks. Accordingly, the Fund remains
essentially fully invested with approximately 4% of assets in cash reserve
instruments as of June 30, 1995.
The two largest weighting changes in industry groups during the latest
quarter occurred in health care and technology. The former declined about four
percentage points with the sales of Biogen, Columbia/HCA Healthcare and
Integrated Health Services, while the latter increased nearly six percentage
points, partly due to strong price gains among technology holdings generally.
During the quarter, both Compaq Computer and Sybase were sold, while Applied
Materials and SAP, a German client/server software leader, were acquired. Two
other new purchases for the Fund in the quarter were Marriott International, the
hotel and food service management company, and Coca Cola.
Given evidence of the economy's slowing, the relative attraction of
companies with strong and predictable earnings growth rates has improved. These
trends appear likely to continue and the Growth & Income Fund has been
positioned accordingly. The Fund's assets over the past 12 months have grown
from $34.6 million to $45.2 million and shareholders' confidence and
participation are greatly appreciated.
INVESTMENT OBJECTIVE AND STRATEGY
The objective of the Growth & Income Fund is to achieve long-term capital
appreciation and, secondarily, current income. The Fund invests in common
stocks, preferred stocks, convertible stocks and bonds, corporate bonds,
debentures and government securities.
Currently, the fund invests exclusively in common and preferred stocks and
securities convertible into common stock. In making common stock investments,
effort is directed toward the selection of "blue-chip" common stocks that pay
dividends, particularly those with which have provided stable and growing
dividend rates on an historical basis.
PORTFOLIO SUMMARY
Net Asset Value 6/30/95: $28.38 Per Share
6/30/94: $23.89 Per Share
Total Net Assets: $45.21 Million
Total Dividend: $1.50
Long-Term Capital Gain: $1.41
Ordinary Income: $0.09
PORTFOLIO STRUCTURE
(% of total net assets)
(BAR GRAPH)
Technology 27.9
Health Care 16.5
Financial 12.3
Consumer Non-Durables 10.5
Business Equipment & Services 8.9
Energy 4.8
Capital Goods 3.7
Retail 3.0
Consumer Services 2.9
Raw Materials 2.3
Utilities 1.5
Multi-Industry 1.0
Shelter 1.0
Other Assets & Liabilities 3.7
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS* CUMULATIVE TOTAL RETURNS*
Growth & Lipper Growth S&P Growth & Lipper Growth S&P
Income Fund & Income Index 500 Index Income Fund & Income Index 500 Index
<S> <C> <C> <C> <C> <C> <C>
3 Months 10.23% 8.21% 9.55% 10.23% 8.21% 9.55%
(unannualized)
1 Year 26.33 19.16 26.07 26.33 19.16 26.07
5 Years 10.32 11.57 12.10 63.41 72.86 77.01
10 Years 12.75 13.17 14.66 232.01 244.71 292.81
Inception 14.22 15.07 16.51 451.02 505.54 610.73
(9/2/82)
</TABLE>
* As of 6/30/95
Performance is historical and assumes reinvestment of all dividends and
capital gains. Share price and return will vary so that a gain or loss may be
realized when shares are sold. Total return should not be taken as a
representation of future performance. 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. The Lipper Index figures are obtained
from Lipper Analytical Services, Inc., a large independent evaluator of mutual
funds.
On 6/6/93, the Fund's investment objective changed to allow for a portfolio
of 100% stocks. Prior to that time, the portfolio was required to contain no
more than 80% stocks.
GROWTH OF $10,000
(LINE GRAPH)
SIT Growth & Income Fund
Lipper Growth & Income Fund Index
S&P 500 Index
The sum of $10,000 invested at inception (9/2/82) and held until 6/30/95 would
have grown to $55,102 in the Fund, $60,554 in the Lipper Growth & Income Fund
Index or $71,073 in the S&P 500 Index assuming reinvestment of all dividends and
capital gains.
10 LARGEST HOLDINGS
Intel Corp.
Motorola, Inc.
Cisco Systems, Inc.
Pfizer, Inc.
Citicorp
Home Depot, Inc. (The)
Amgen, Inc.
Oracle Systems Corp.
LSI Logic Corp.
Federal Home Loan Mortgage Corp.
Total number of holdings: 60
SIT GROWTH & INCOME FUND
PORTFOLIO OF INVESTMENTS - JUNE 30, 1995
COMMON STOCKS (96.3%) (2)
BUSINESS EQUIPMENT & SERVICES (8.9%)
22,000 Ceridian Corp. (3) $ 811,250
14,000 First Data Corp. 796,250
11,000 First Financial Management
Corp. 940,500
17,500 Office Depot Inc. (3) 492,188
14,250 Paychex, Inc. 516,562
13,000 Sensormatic Electronics Corp. 461,500
4,018,250
CAPITAL GOODS (3.7%)
5,000 Alco Standard Corp. 399,375
17,000 Owens-Corning Fiberglas
Corp. (3) 626,875
15,000 Varity Corp. (3) 660,000
1,686,250
CONSUMER NON-DURABLES (10.5%)
10,000 Coca Cola Co. 637,500
14,000 Crown Cork & Seal Co., Inc.(3) 701,750
21,000 Gillette Co. (The) 937,125
13,000 Philip Morris Cos., Inc. 966,875
13,000 Proctor & Gamble Co. 934,375
19,000 UST, Inc. 565,250
4,742,875
CONSUMER SERVICES (2.9%)
19,250 CUC International, Inc. (3) 808,500
14,000 Marriot International, Inc. 502,250
1,310,750
ENERGY (4.8%)
23,000 McDermott International, Inc. 554,875
9,000 Schlumberger Ltd. 559,125
19,000 Union Texas Petroleum
Holdings, Inc. 401,375
24,000 Unocal Corp. 663,000
2,178,375
FINANCIAL (12.3%)
BANKING (4.3%)
22,500 Citicorp 1,302,187
23,000 Norwest Corp. 661,250
1,963,437
FINANCIAL SERVICES (2.2%)
14,500 Federal Home Loan Mortgage
Corp. 996,875
INSURANCE (5.8%)
8,000 American International
Group, Inc. 912,000
17,000 EXEL Ltd. 884,000
13,000 Mercury General Corp. 446,875
9,500 Progressive Corp. 364,563
2,607,438
HEALTH CARE (16.5%)
BIOTECHNOLOGY/ PHARMACEUTICALS (8.8%)
15,000 Amgen, Inc. (3) $1,206,562
13,000 Forest Laboratories, Inc. (3) 576,875
10,500 Medtronic, Inc. 809,812
15,000 Pfizer, Inc. 1,385,625
3,978,874
MEDICAL EQUIPMENT/ SUPPLIES (3.1%)
13,000 Johnson & Johnson 879,125
13,000 Stryker Corp. 498,875
1,378,000
MEDICAL FACILITIES MANAGEMENT (4.6%)
24,500 HEALTHSOUTH Rehabilitation
Corp. (3) 425,687
29,500 Humana, Inc. (3) 519,937
26,000 Mid Atlantic Medical Services
Corp. (3) 481,000
16,000 United HealthCare Corp. 662,000
2,088,624
MULTI-INDUSTRY (1.0%)
12,500 General Instruments Corp. (3) 479,687
RAW MATERIALS (2.3%)
8,500 Monsanto Co. 766,063
4,500 Potash Corp. Saskatchewan, Inc.251,438
1,017,501
RETAIL (3.0%)
2,500 Federated Department Stores,
Inc. (3) 64,375
32,000 Home Depot, Inc. (The) 1,300,000
1,364,375
SHELTER (1.0%)
5,000 Georgia Pacific Corp. 433,750
TECHNOLOGY (27.9%)
AEROSPACE/ DEFENSE (1.0%)
7,500 Boeing Company 469,688
COMPUTER RELATED (4.3%)
29,000 Cisco Systems, Inc. (3) 1,466,313
12,000 Silicon Graphics, Inc. (3) 478,500
1,944,813
COMPUTER SOFTWARE/ SERVICES (7.4%)
7,500 Computer Associates
International, Inc. 508,125
10,500 Microsoft Corp. (3) 948,937
28,000 Oracle Systems Corp. (3) 1,081,500
10,000 Parametric Technology Corp. (3)497,500
7,000 SAP A.D.S. (3) (4) 294,413
3,330,475
SEMICONDUCTORS & RELATED (6.7%)
4,000 Applied Materials, Inc. (3)$ 346,500
26,000 Intel Corp. 1,646,125
27,000 LSI Logic Corp. (3) 1,056,375
3,049,000
TELECOMMUNICATIONS & EQUIPMENT (8.5%)
33,500 Airtouch Communications,
Inc. (3) 954,750
21,000 DSC Communications Corp. (3) 976,500
18,000 Ericsson, (L. M.) Telephone Co.,
A.D.R. 360,000
23,000 Motorola, Inc. 1,543,875
3,835,125
UTILITIES (1.5%)
19,000 Enron Corp. 667,375
Total common stocks
(cost: $33,082,317) 43,541,537
SHORT-TERM SECURITIES (4.1%)
American Express Credit Co:
500,000 5.85%, 7/3/95 499,838
360,000 6.00%, 7/6/95 359,700
Ford Motor Credit Co.:
400,000 5.92%, 7/3/95 399,868
300,000 5.92%, 7/5/95 299,803
300,000 6.00%, 7/6/95 299,750
Total short-term securities
(cost: $1,858,959) 1,858,959
Total investments in securities
(cost: $34,941,276) (7) $45,400,496
See accompanying notes to portfolios of investments on page 31.
SIT BALANCED FUND REVIEW
JUNE 30, 1995
PHOTO Peter L. Mitchelson, CFA, Senior Portfolio Manager
Douglas S. Rogers, CFA Portfolio Manager
The SIT Balanced Fund began operations on December 31, 1993 with the
specific objective of providing a relatively conservative investment vehicle
employing both stocks and bonds. The equities in the Fund are managed using a
growth-oriented philosophy common to all of the SIT equity funds, and the fixed
income holdings are managed to maximize total return.
For the fiscal year ended June 30, 1995, the Fund's total return was +19.2%.
The Fund's 12-month return ranked 4th out of 41 funds in its Lipper style and
size grouping.
As of June 30, 1995, the asset allocation of the Fund was 59% in equities
and 41% in fixed-income securities (bonds and cash reserves). The figure for
stocks is near the upper end of the Fund's normal 40% to 60% equity operating
range as we have believed the outlook for growth stocks has been quite
attractive. This remains our view.
The dominant characteristic of the equities held in the portfolio is high
earnings growth. The average projected 1995 earnings growth rate for the
companies held is +26.1% and the comparable figure for 1996 is +22.3% Both of
these growth rates are significantly higher than those expected for the broad
stock market, which augurs well for the continuation of the resurgence of growth
stocks that began in the last half of 1994.
In the fixed-income portion of the Fund, we continue to emphasize
asset-backed and collateralized mortgage obligations with collateral that
displays relatively stable prepayment characteristics. The Fund's fixed-income
holdings currently have an effective maturity of approximately six years, which
is similar to the investment grade bond universe.
INVESTMENT OBJECTIVE AND STRATEGY
The Balanced Fund's dual objectives are to seek long-term growth of capital
consistent with the preservation of principal and to provide regular income. It
pursues its objectives by investing in a diversified portfolio of stocks, bonds
and short-term instruments. The Fund may emphasize either equity securities,
fixed-income securities, or short-term instruments or hold equal amounts of
each, dependent upon the Adviser's analysis of market, financial and economic
conditions.
The Fund's permissible investment allocation is: 40-60% in equity securities,
40-60% in fixed-income securities, and up to 20% in short-term fixed-income
instruments. At all times at least 25% of the assets will be invested in
fixed-income senior securities.
PORTFOLIO SUMMARY
Net Asset Value 6/30/95: $10.99 Per Share
6/30/94: $ 9.48 Per Share
Total Net Assets: $ 2.44 Million
Total Dividend: $ 0.27
PORTFOLIO STRUCTURE
(% of total net assets)
(PIE CHART)
Stocks: 59.3%
Fixed Income (Bonds & Cash): 40.7%
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS* CUMULATIVE TOTAL RETURNS*
Balanced Lehman Aggregate S&P Balanced Lehman Aggregate S&P
Fund Bond Index 500 Index Fund Bond Index 500 Index
<S> <C> <C> <C> <C> <C> <C>
3 Months 7.75% 6.09% 9.55% 7.75% 6.09% 9.55%
(unannualized)
1 Year 19.16 12.55 26.07 19.16 12.55 26.07
Inception 8.98 5.41 14.09 13.72 8.19 21.80
(12/31/93)
</TABLE>
* As of 6/30/95
Performance is historical and assumes reinvestment of all dividends and capital
gains. Share price and return will vary so that a gain or loss may be realized
when shares are sold. Total return should not be taken as a representation of
future performance. 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 nor the S&P 500 Index.
GROWTH OF $10,000
(LINE GRAPH)
SIT BALANCED FUND
LEHMAN AGGREGATE BOND INDEX
S&P 500 INDEX
The sum of $10,000 invested at inception (12/31/93) and held until 6/30/95 would
have grown to $11,372 in the Fund, $10,819 in the Lehman Aggregate Bond Index or
$12,180 in the S&P 500 Index assuming reinvestment of all dividends and capital
gains.
TOP HOLDINGS
Stocks:
Cisco Systems, Inc.
Citicorp
Intel Corp.
Home Depot, Inc. (The)
Pfizer, Inc.
Bonds:
U.S. Treasury Note, 7.125%, 2/15/23
GNMA 9.25%, 9/15/01
U.S. Treasury Note, 7.75%, 2/15/01
GNMA 9.00%, 6/15/11
FNMA 6.65%, 12/25/23
Total number of holdings: 78
SIT BALANCED FUND
PORTFOLIO OF INVESTMENTS - JUNE 30, 1995
COMMON STOCKS (59.3%) (2)
BUSINESS EQUIPMENT & SERVICES (5.6%)
800 Ceridian Corp. (3) $29,500
400 First Data Corp. 22,750
500 First Financial Management Corp.42,750
600 Office Depot, Inc. (3) 16,875
400 Paychex, Inc. 14,500
300 Sensormatic Electronics Corp. 10,650
137,025
CAPITAL GOODS (1.6%)
600 Owens-Corning Fiberglas Corp.(3)22,125
400 Varity Corp. (3) 17,600
39,725
CONSUMER NON-DURABLES (6.2%)
400 Coca Cola Co. 25,500
400 Crown Cork & Seal Co., Inc. (3) 20,050
800 Gillette Co. (The) 35,700
400 Philip Morris Cos., Inc. 29,750
400 Proctor & Gamble Co. 28,750
400 UST, Inc. 11,900
151,650
CONSUMER SERVICES (1.8%)
700 CUC International, Inc. (3) 29,400
400 Marriot International, Inc. 14,350
43,750
ENERGY (3.5%)
800 McDermott International, Inc. 19,300
500 Schlumberger Ltd. 31,062
600 Union Texas Petroleum Holdings,
Inc. 12,675
800 Unocal Corp. 22,100
85,137
FINANCIAL (8.5%)
BANKING (3.1%)
900 Citicorp 52,088
800 Norwest Corp. 23,000
75,088
FINANCIAL SERVICES (1.4%)
500 Federal Home Loan Mortgage Corp.34,375
INSURANCE (4.0%)
300 American International Group,
Inc. 34,200
600 EXEL Ltd. 31,200
500 Mercury General Corp. 17,188
400 Progressive Corp. 15,350
97,938
HEALTH CARE (9.3%)
BIOTECHNOLOGY/ PHARMACEUTICALS (4.8%)
500 Amgen, Inc. (3) 40,219
400 Medtronic, Inc. 30,850
500 Pfizer, Inc. $ 46,188
117,257
MEDICAL EQUIPMENT/ SUPPLIES (2.0%)
400 Johnson & Johnson 27,050
600 Stryker Corp. 23,025
50,075
MEDICAL FACILITIES MANAGEMENT (2.5%)
700 HEALTHSOUTH Rehabilitation
Corp. (3) 12,163
800 Humana, Inc. (3) 14,100
700 Mid Atlantic Medical Services,
Inc. (3) 12,950
500 United HealthCare Corp. 20,687
59,900
RAW MATERIALS (1.1%)
300 Monsanto Co. 27,038
RETAIL (2.6%)
600 Federated Department Stores,
Inc. (3) 15,450
1,200 Home Depot, Inc. (The) 48,750
64,200
SHELTER (0.7%)
200 Georgia Pacific Corp. 17,350
TECHNOLOGY (17.4%)
AEROSPACE/ DEFENSE (0.5%)
200 Boeing Company 12,525
COMPUTER RELATED (3.1%)
1,200 Cisco Systems, Inc. (3) 60,675
400 Silicon Graphics, Inc. (3) 15,950
76,625
COMPUTER SOFTWARE/ SERVICES (4.8%)
200 Computer Associates International,
Inc. 13,550
500 Microsoft Corp. (3) 45,187
1,100 Oracle Systems Corp. (3) 42,487
300 Parametric Technology Corp. (3) 14,925
116,149
SEMICONDUCTORS & RELATED (4.1%)
200 Applied Materials, Inc. (3) 17,325
800 Intel Corp. 50,650
800 LSI Logic Corp. (3) 31,300
99,275
TELECOMMUNICATIONS EQUIPMENT (4.9%)
1,100 Airtouch Communications,
Inc. (3) 31,350
700 DSC Communications Corp. (3) 32,550
800 Ericsson, (L. M.) Telephone Co.,
A.D.R. 16,000
600 Motorola, Inc. $ 40,275
120,175
UTILITIES (1.0%)
700 Enron Corp. 24,587
Total common stocks
(cost: $1,210,153) 1,449,844
BONDS (37.3%)
U.S. TREASURY (10.9%)
U.S. Treasury Notes/Bonds:
150,000 7.125%, 2/15/23 158,059
25,000 8.875%, 11/15/97 26,629
75,000 7.75%, 2/15/01 81,052
265,740
ASSET-BACKED SECURITIES (2.0%)
25,000 American Housing Trust Corp.,
8.25%, 6/25/20 26,187
25,000 Green Tree Financial Corp.,
Series 1993-3, 6.40%,
10/15/18 22,719
48,906
CORPORATE BONDS & NOTES (3.5%)
25,000 Corestates Capital Corp.,
9.625%, 2/15/01 28,625
25,000 Green Tree Financial Corp.,
10.25%, 6/1/02 29,312
25,000 Texas Instruments Inc.,
9.00%, 3/15/01 28,031
85,968
MORTGAGE PASS-THROUGH SECURITIES (20.9%)
FEDERAL NATIONAL MORTGAGE ASSOCIATION (2.0%)
50,000 1994-38 Pac, 6.65%, 12/25/23 48,422
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION (11.9%)
63,697 9.00%, 6/15/11 66,601
96,885 9.25%, 9/15/01 102,083
30,252 9.75%, 2/1/01 31,765
1,139 11.25%, 12/15/95 1,238
33,617 11.25%, 10/15/00 36,580
34,096 11.25%, 10/15/11 36,681
15,141 11.75%, 3/15/00 16,568
291,516
COLLATERALIZED MORTGAGE OBLIGATIONS (7.0%)
25,000 FHLMC CMO,
1617, 6.25%, 3/15/23 $ 23,405
Vendee Mortgage Trust:
25,000 1992-1 2B, 7.75%, 9/15/10 25,508
25,000 1993-2 2C, 6.25%, 3/15/10 24,324
25,000 1993-1 3D, 5.75%, 6/15/13 23,440
25,000 1992-1 2D, 7.75%, 12/15/14 25,706
25,000 1992-2 2D, 7.00%, 9/15/15 24,835
24,000 1994-3 2D, 7.75%, 5/15/18 24,837
172,055
Total bonds
(cost: $878,053) 912,607
Total investments in securities
(cost: $2,088,206) (7) $2,362,451
See accompanying notes to portfolios of investments on page 31.
SIT MUTUAL FUND GROUP
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) Common stock sold within terms of a private placement memorandum, exempt
from registration under section 144A of the Securities Act of 1933, as
amended, and sold only to dealers in that program or other "accredited
investors". This security has been determined liquid under the guidelines
established by the Board of Directors.
(5) These securities have been identified by the investment adviser as illiquid
securities. The aggregate value of these securities at June 30, 1995 is
$100,516 and $1,672,456 in Developing Markets Growth Fund and International
Growth Fund, respectively, which represents 2.2% and 2.5% of the Fund's net
assets, respectively. The following table summarizes the purchase date and
cost basis of these securities:
Purchase
<TABLE>
<CAPTION>
Fund Security Date Shares Cost Basis
<S> <C> <C> <C> <C>
Developing Markets Growth Fund PT Modern Photo 4/3/95 18,500 $ 77,176
International Growth Fund PT Modern Photo 3/17/93 20,000 56,074
International Growth Fund PT Modern Photo 4/8/93 25,000 70,522
International Growth Fund PT Modern Photo 4/29/93 75,000 205,092
International Growth Fund PT Indofood Sukses Makmur 2/9/95 236,725 850,000
</TABLE>
(6) This security represents an investment in an affiliated party and comprises
.2% of the Growth Fund's net assets. See note 3 to the accompanying
financial statements.
(7) At June 30, 1995, the cost of securities for federal income tax purposes
and the aggregate gross unrealized appreciation and depreciation based on
that cost were as follows:
<TABLE>
<CAPTION>
DEVELOPING SMALL
MARKETS CAP INTERNATIONAL
GROWTH GROWTH GROWTH
FUND FUND FUND
<S> <C> <C> <C>
Cost for federal income tax purposes $ 4,478,994 $10,226,259 $50,799,965
Unrealized appreciation (depreciation) on investments:
Gross unrealized appreciation $ 340,091 $ 2,374,345 $18,071,876
Gross unrealized depreciation (287,326) (308,966) (1,713,346)
Net unrealized appreciation $ 52,765 $ 2,065,379 $16,358,530
GROWTH &
GROWTH INCOME BALANCED
FUND FUND FUND
Cost for federal income tax purposes $260,666,422 $34,941,276 $ 2,088,206
Unrealized appreciation (depreciation) on investments:
Gross unrealized appreciation $ 80,415,294 $10,756,852 $ 288,944
Gross unrealized depreciation (4,893,979) (297,632) (14,699)
Net unrealized appreciation $ 75,521,315 $10,459,220 $ 274,245
</TABLE>
<TABLE>
<CAPTION>
SIT MUTUAL FUND GROUP
STATEMENTS OF ASSETS AND LIABILITIES - JUNE 30, 1995
DEVELOPING SMALL
MARKETS CAP INTERNATIONAL GROWTH &
GROWTH GROWTH GROWTH GROWTH INCOME BALANCED
FUND FUND FUND FUND FUND FUND
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments in securities, at
identified cost .......... $ 4,478,994 $ 10,212,513 $ 50,503,888 $ 260,642,587 $ 34,941,276 $ 2,088,206
Investments in securities, at
market value - see
accompanying schedule for
detail ................... $ 4,531,759 $ 12,291,638 $ 67,158,495 $ 336,187,737 $ 45,400,496 $ 2,362,451
Cash in bank on demand
deposit .................. 102,357 7,556 854 25,650 5,049 65,945
Dividends and accrued interest
receivable ............... 7,293 1,147 192,693 62,773 26,375 12,858
Receivable for investment
securities sold .......... -- -- 846,689 227,826 22,138 4,922
Receivable for Fund shares
sold ..................... 2,438 4,938 21,150 122,522 29,074 187
Total assets ...... 4,643,847 12,305,279 68,219,881 336,626,508 45,483,132 2,446,363
LIABILITIES
Payable for investment securities
purchased ................ 17,100 274,501 -- 2,132,766 235,928 --
Payable for Fund shares
redeemed ................. 810 1,350 11,937 6,430,915 -- --
Accrued investment management
and advisory services fee 7,504 14,165 82,998 161,892 33,431 1,979
Other accrued expenses ...... -- -- -- 22,280 2,926 --
Total liabilities . 25,414 290,016 94,935 8,747,853 272,285 1,979
Net assets applicable to
outstanding capital stock $ 4,618,433 $ 12,015,263 $ 68,124,946 $ 327,878,655 $ 45,210,847 $ 2,444,384
Capital stock
Par ...................... $ 0.001 $ 0.001 $ 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 10,000,000,000 10,000,000,000
Outstanding shares ....... 490,891 890,423 4,335,844 25,219,013 1,592,872 222,350
Net asset value per share of
outstanding capital stock $ 9.41 $ 13.49 $ 15.71 $ 13.00 $ 28.38 $ 10.99
</TABLE>
See accompanying notes to financial statements on pages 36-45.
<TABLE>
<CAPTION>
SIT MUTUAL FUND GROUP
STATEMENTS OF OPERATIONS - YEAR ENDED JUNE 30, 1995
DEVELOPING SMALL
MARKETS CAP INTERNATIONAL GROWTH &
GROWTH GROWTH GROWTH GROWTH INCOME BALANCED
FUND FUND FUND FUND FUND FUND
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
INCOME:
Dividends * ...................... $ 34,525 $ 14,725 $ 1,122,473 $ 1,484,484 $ 441,720 $ 9,619
Interest ......................... 36,159 51,769 263,770 1,116,090 97,457 58,438
Total income .................. 70,684 66,494 1,386,243 2,600,574 539,177 68,057
EXPENSES (NOTE 3):
Investment management and
advisory services fee ......... 69,616 83,184 1,209,349 1,862,769 359,972 17,120
Custodian, transfer agent
and accounting services fees .. -- -- -- 469,093 69,168 --
Auditing and legal fees .......... -- -- -- 23,016 18,545 --
Printing costs ................... -- -- -- 53,277 7,143 --
Postage .......................... -- -- -- 65,374 9,226 --
Registration fees ................ -- -- -- 45,892 24,269 --
Directors' fees and expenses ..... -- -- -- 7,455 7,455 --
Other ............................ -- -- -- 23,093 16,489 --
Total expenses ................ 69,616 83,184 1,209,349 2,549,969 512,267 17,120
Less fees and expenses absorbed
by investment adviser ...... -- -- (228,795) -- (132,305) --
Total net expenses ............ 69,616 83,184 980,554 2,549,969 379,962 17,120
Net investment income (loss) .. 1,068 (16,690) 405,689 50,605 159,215 50,937
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS :
Net realized gain (loss) (note 2) (346,290) 79,816 1,189,544 25,409,872 1,917,168 (48,392)
Net change in unrealized
appreciation .................. 52,765 2,079,125 3,216,287 52,036,551 7,081,827 327,093
Realized loss on foreign
currency transactions ......... (749) -- (17,082) -- -- --
Unrealized gain (loss) on foreign
currency transactions ......... (13) -- 3,632 -- -- --
Net gain (loss) on investments ... (294,287) 2,158,941 4,392,381 77,446,423 8,998,995 278,701
Net increase (decrease) in net assets
resulting from operations .......... ($ 293,219) $ 2,142,251 $ 4,798,070 $77,497,028 $ 9,158,210 $ 329,638
</TABLE>
* Dividends are net of foreign withholding tax of $3,687 and $84,422 in the
Developing Markets Growth Fund and International Growth Fund, respectively.
See accompanying notes to financial statements on pages 36-45.
[START]
<TABLE>
<CAPTION>
SIT MUTUAL FUND GROUP
STATEMENTS OF CHANGES IN NET ASSETS
DEVELOPING SMALL
MARKETS CAP
GROWTH GROWTH INTERNATIONAL
FUND FUND GROWTH FUND
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1995 1995 1995 1994
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) ........................ $ 1,068 ($ 16,690) $ 405,689 ($ 89,543)
Net realized gain (loss) on investments ............. (346,290) 79,816 1,189,544 1,746,352
Net realized loss on foreign currency transactions .. (749) -- (17,082) (77,414)
Net change in unrealized appreciation
(depreciation) of investments ...................... 52,765 2,079,125 3,216,287 8,684,981
Net change in unrealized appreciation (depreciation)
of foreign currency transactions ................... (13) -- 3,632 (89,915)
Net increase (decrease) in net assets resulting from
operations ....................................... (293,219) 2,142,251 4,798,070 10,174,461
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ............................... -- -- (171,445) (372,990)
Net realized gains on investments ................... (17,476) (17,840) (1,158,084) (217,198)
Total distributions ................................ (17,476) (17,840) (1,329,529) (590,188)
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold ........................... 6,135,667 10,375,386 18,209,502 39,382,567
Reinvested distributions ............................ 17,122 17,806 1,271,854 552,934
Payments for shares redeemed ........................ (1,223,761) (502,440) (18,523,460) (20,369,824)
Increase (decrease) in net assets from
capital share transactions ....................... 4,929,028 9,890,752 957,896 19,565,677
Total increase (decrease) in net assets .......... 4,618,333 12,015,163 4,426,437 29,149,950
NET ASSETS
Beginning of period ................................. 100 100 63,698,509 34,548,559
End of period ....................................... $ 4,618,433 $ 12,015,263 $ 68,124,946 $ 63,698,509
NET ASSETS CONSIST OF:
Capital (par value and paid-in surplus) ............. $ 4,929,021 $ 9,890,852 $ 50,924,732 $ 49,966,836
Undistributed (distributions in excess of) net
investment income .................................. 426 -- 387,263 170,101
Accumulated net realized gain (loss) from
security transactions and foreign
currency transactions .............................. (363,766) 45,286 153,384 121,924
Unrealized appreciation (depreciation) on investments 52,765 2,079,125 16,654,607
13,438,320
Unrealized appreciation (depreciation) on foreign
currency transactions .............................. (13) -- 4,960 1,328
$ 4,618,433 $ 12,015,263 $ 68,124,946 $ 63,698,509
CAPITAL TRANSACTIONS IN SHARES:
Sold ................................................ 606,755 931,351 1,195,496 2,735,026
Reinvested distributions ............................ 1,723 1,696 86,580 36,694
Redeemed ............................................ (117,597) (42,634) (1,229,768) (1,370,035)
Net increase (decrease) ................................ 490,881 890,413 52,308 1,401,685
</TABLE>
* Period from December 31, 1993 (commencement of operations) to June 30,
1994.
<TABLE>
<CAPTION>
[TABLE CONTINUED FROM ABOVE]
SIT MUTUAL FUND GROUP
STATEMENTS OF CHANGES IN NET ASSETS
GROWTH GROWTH & BALANCED
FUND INCOME FUND FUND
PERIOD
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1995 1994 1995 1994 1995 1994*
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) ........... $ 50,605 ($ 271,390) $ 159,215 $ 330,349 $ 50,937 $ 16,211
Net realized gain (loss) on investments .. 25,409,872 23,619,521 1,917,168 2,983,086 (48,392) (20,482)
Net realized loss on foreign
currency transactions ................ -- -- -- -- -- --
Net change in unrealized appreciation
(depreciation) of investments ......... 52,036,551 (35,778,817) 7,081,827 (3,442,652) 327,093 (52,848)
Net change in unrealized appreciation
(depreciation) of foreign currency
transactions ......................... -- -- -- -- -- --
Net increase (decrease) in net assets
resulting from operations ........... 77,497,028 (12,430,686) 9,158,210 (129,217) 329,638 (57,119)
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income .................. -- (477,159) (131,512) (342,530) (42,750) (7,700)
Net realized gains on investments ...... (25,299,507) (7,602,602) (2,040,000) (1,994,333) -- --
Total distributions ................... (25,299,507) (8,079,761) (2,171,512) (2,336,863) (42,750) (7,700)
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold .............. 56,655,364 103,838,219 7,686,224 3,824,633 1,160,193 1,370,332
Reinvested distributions ............... 23,722,299 7,404,127 2,113,345 2,265,370 42,696 7,667
Payments for shares redeemed ........... (89,871,342) (147,259,053) (6,187,506) (6,614,220) (341,220) (17,453)
Increase (decrease) in net assets from
capital share transactions .......... (9,493,679) (36,016,707) 3,612,063 (524,217) 861,669 1,360,546
Total increase (decrease) in net assets 42,703,842 (56,527,154) 10,598,761 (2,990,297) 1,148,557 1,295,727
NET ASSETS
Beginning of period .................... 285,174,813 341,701,967 34,612,086 37,602,383 1,295,827 100
End of period .......................... $ 327,878,655 $ 285,174,813 $ 45,210,847 $ 34,612,086 $ 2,444,384 $ 1,295,827
NET ASSETS CONSIST OF:
Capital (par value and paid-in
surplus) ............................. $ 230,456,780 $ 239,950,459 $ 33,374,058 $ 29,761,995 $ 2,222,315 $ 1,360,646
Undistributed (distributions
in excess of) net investment
income ............................... 50,605 -- 30,317 2,614 16,698 8,511
Accumulated net realized gain
(loss) from security transactions
and foreign currency transactions .... 21,826,120 21,715,755 1,347,252 1,470,084 (68,874) (20,482)
Unrealized appreciation (depreciation)
on investments ....................... 75,545,150 23,508,599 10,459,220 3,377,393 274,245 (52,848)
Unrealized appreciation
(depreciation)on foreign
currency transactions ................ -- -- -- -- -- --
$ 327,878,655 $ 285,174,813 $ 45,210,847 $ 34,612,086 $ 2,444,384 $ 1,295,827
CAPITAL TRANSACTIONS IN SHARES:
Sold ................................... 4,757,900 8,353,054 303,028 150,177 115,099 137,712
Reinvested distributions ............... 2,160,501 596,698 89,220 91,390 4,375 795
Redeemed ............................... (7,435,697) (11,912,207) (248,087) (260,977) (33,817) (1,824)
Net increase (decrease) .................. (517,296) (2,962,455) 144,161 (19,410) 85,657 136,683
</TABLE>
See accompanying notes to financial statements on pages 36-45.
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The SIT Mutual Funds (the Funds) are 100% 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 Fund, SIT Small Cap Growth Fund, SIT
International Growth Fund and SIT Balanced Fund are series funds of SIT
Mutual Funds, Inc.
The Developing Markets Growth and Small Cap Growth Funds commenced
operations on July 1, 1994. The only transactions for the Funds prior to
this date was the sale of 10 shares for $100 in each of the funds to Sit
Investment Associates, Inc. on March 31, 1994.
Significant accounting policies followed by the Funds are summarized below:
INVESTMENTS IN SECURITIES
Investments in securities traded on national or international securities
exchanges or on the NASDAQ National Market System are valued at the last
quoted sales price prior to the time when assets are valued; securities
traded in the over-the-counter market and listed securities for which no
sale was reported on that date are valued at the last bid price; foreign
securities that are purchased in the form of American Depository Receipts
(ADRs) are valued in United States dollars at the latest quoted price on
the national securities exchange on which the ADR is traded. When market
quotations are not readily available, securities are valued at fair value
based on procedures determined in good faith by the Board of Directors.
Such fair values are determined using prices quoted by independent brokers
or pricing services. Securities maturing more than 60 days from the
valuation date are valued at the market price or approximate market value
based on current interest rates; those securities with maturities of less
than 60 days when acquired, or which subsequently are within 60 days of
maturity, are valued at amortized cost, which approximates market value.
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.
FOREIGN CURRENCY TRANSLATIONS AND FORWARD FOREIGN CURRENCY CONTRACTS
The market value of securities and other assets and liabilities denominated
in foreign currencies for Developing Markets Growth Fund and International
Growth Fund are translated daily into U.S. dollars at the closing rate of
exchange. Purchases and sales of securities, income and expenses are
translated at the exchange rate on the transaction date. Dividend and
interest income includes currency exchange gains (losses) realized between
the accrual and payment dates on such income. Exchange gains (losses) may
also be realized between the trade and settlement dates on security and
forward contract transactions. For securities denominated in foreign
currencies, the effect of changes in foreign exchange rates on realized and
unrealized gains or losses is reflected as a component of such gains or
losses.
The Developing Markets Growth and International Growth Funds may enter into
forward foreign currency exchange contracts for operational purposes and to
protect against adverse exchange rate fluctuation. The net U.S. dollar
value of foreign currency underlying all contractual commitments held by
the Funds and the resulting unrealized appreciation or depreciation are
determined using foreign currency exchange rates from an independent
pricing service. The Funds are subject to the credit risk that the other
party will not complete the obligations of the contract.
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.
Undistributed net investment income and accumulated net realized gains
(losses) from the Statement of Changes in Net Assets have been increased
(decreased) by current permanent book-to-tax differences resulting in
reclassification of additional paid-in capital as follows:
Developing Small
Markets Cap International
Growth Growth Growth
Fund Fund Fund
Undistributed net investment income (642) 16,690 (17,082)
Accumulated net realized gains (losses) 749 (16,690) 17,082
Additional paid-in capital (107) -- --
For federal income tax purposes the Developing Markets Growth and the
Balanced Funds have capital loss carryovers of $369,284 and $68,874,
respectively at June 30, 1995 which, if not offset by subsequent capital
gains, will expire in 2004 and 2003, respectively. It is unlikely that the
Board of Directors will authorize a distribution of net realized gains
until the available capital loss carryover is offset or expires.
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 Growth &
Income and Balanced Funds and declared and paid annually for Developing
Markets Growth, Small Cap Growth, International Growth, and Growth Funds.
Distributions from net realized gains, if any, will be made annually for
each of the Funds.
NOTE 2 - INVESTMENT SECURITY TRANSACTIONS
Purchases of and proceeds from sales and maturities of investment
securities, other than short-term securities, for the year ended June 30,
1995, were as follow:
<TABLE>
<CAPTION>
Purchases Proceeds
<S> <C> <C>
Developing Markets Growth Fund $ 6,204,892 $ 1,559,401
Small Cap Growth Fund 12,176,595 2,557,559
International Growth Fund 27,461,681 24,583,505
Growth Fund 217,095,494 225,382,260
Growth & Income Fund 26,596,998 24,356,300
Balanced Fund 1,816,491 785,234
</TABLE>
NOTE 3 - EXPENSES
INVESTMENT ADVISER
The Funds each have entered into an investment management agreement with
Sit Investment Associates, Inc. (SIA), under which SIA manages the Fund's
assets and provides research, statistical and advisory services, and pays
related office rental, executive expenses and executive salaries. The fee
for investment management and advisory services is based on the average
daily net assets of the Funds at the annual rate of:
<TABLE>
<CAPTION>
First Next Over
$30 Million $70 Million $100 Million
<S> <C> <C> <C>
Developing Markets Growth Fund 2.00% 2.00% 2.00%
Small Cap Growth Fund 1.50% 1.50% 1.50%
International Growth Fund 1.85% 1.85% 1.85%
Growth Fund 1.00% .75% .50%
Growth & Income Fund 1.00% .75% .50%
Balanced Fund 1.00% 1.00% 1.00%
</TABLE>
SIA is obligated to pay all of Developing Markets Growth, Small Cap Growth,
International Growth and Balanced Funds' expenses (excluding extraordinary
expenses, stock transfer taxes, interest, brokerage commissions and other
transaction charges relating to investing activities).
The Growth and Growth & Income Funds will bear certain other expenses
including outside directors' fees, custodian and transfer agent fees,
registration fees, printing and shareholder reports, legal, auditing and
accounting services and other miscellaneous expenses. SIA is obligated to
pay all expenses (excluding stock transfer taxes, interest, and brokerage
commissions) in any fiscal year which exceed the following limitations:
First Over
$30 Million $30 Million
Growth Fund 1.50% 1.00%
Growth & Income Fund 1.50% 1.00%
Under the agreements, SIA directly incurs and pays the above expenses
relating to the Growth and Growth & Income Funds and the Funds in turn
reimburse SIA to the extent of the lower of the actual expenses (including
the investment management and advisory services fee) or the expense
limitation.
During the year ended June 30, 1995, for the International Growth and
Growth & Income Funds, SIA voluntarily absorbed an additional $228,795 and
$132,305, respectively, in expenses that were otherwise payable by the
Funds.
As of June 30, 1995, the Growth Fund had invested $500,000 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 the Growth Fund an amount equal to all fees otherwise
due to them under their investment management agreement for the assets
invested in the SIT Money Market Fund.
INVESTMENT SUB-ADVISER
SIA has entered into a sub-advisory arrangement with an affiliated
international investment adviser, Sit/Kim International Investment
Associates, Inc. ("SKI"). SKI provides investment research information and
portfolio management service for the Developing Markets Growth Fund and
International Growth Fund. Generally, as compensation for its services
under the sub-advisory agreement, SIA pays SKI a monthly fee of 1/12 of
.75% 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 $424,864 were paid or payable to SKI
for the year ended June 30, 1995.
TRANSACTIONS WITH AFFILIATES
The investment adviser, affiliates of the investment adviser, directors and
officers of the Funds as a whole owned the following shares as of June 30,
1995:
% Shares
Shares Outstanding
Developing Markets Growth Fund 225,351 45.91%
Small Cap Growth Fund 432,148 48.53
International Growth Fund 940,766 21.70
Growth Fund 2,309,139 9.16
Growth & Income Fund 323,986 20.34
Balanced Fund 121,639 54.71
Legal fees are paid by Growth and Growth & Income Funds to a law firm of
which the Funds' secretary is a partner. The total legal fees paid by these
Funds for the period ended June 30, 1995 were $7,637.
NOTE 4 - FINANCIAL HIGHLIGHTS
Per share data for a share of capital stock outstanding during the period
and selected supplemental and ratio information for each period(s), are
indicated as follows:
SIT DEVELOPING MARKETS GROWTH FUND
FINANCIAL HIGHLIGHTS
Year Ended
June 30,
1995
NET ASSET VALUE:
Beginning of year $ 10.00
Operations:
Net realized and unrealized
losses on investments (.54)
Total from operations (.54)
DISTRIBUTIONS TO SHAREHOLDERS:
From realized gains (.05)
Total distributions (.05)
NET ASSET VALUE:
End of year $ 9.41
Total investment return (1) (5.44%)
Net assets at end of year (000's omitted) $4,618
RATIOS:
Expenses to average daily net assets 2.00%
Net investment income to average daily net assets 0.03%
Portfolio turnover rate (excluding short-term securities) 56.35%
(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.
SIT SMALL CAP GROWTH FUND
FINANCIAL HIGHLIGHTS
Year Ended
June 30,
1995
NET ASSET VALUE:
Beginning of year $ 10.00
Operations:
Net investment loss (.02)
Net realized and unrealized
gains on investments 3.56
Total from operations 3.54
DISTRIBUTIONS TO SHAREHOLDERS:
From realized gains (.05)
Total distributions (.05)
NET ASSET VALUE:
End of year $ 13.49
Total investment return (1) 35.59%
Net assets at end of year (000's omitted) $12,015
RATIOS:
Expenses to average daily net assets 1.50%
Net investment loss to average daily net assets (0.30%)
Portfolio turnover rate (excluding short-term securities) 49.39%
(1) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value.
<TABLE>
<CAPTION>
SIT INTERNATIONAL GROWTH FUND
FINANCIAL HIGHLIGHTS
Years Ended June 30,
1995 1994 1993 1992 (1)
<S> <C> <C> <C> <C>
NET ASSET VALUE:
Beginning of period $ 14.87 $ 11.99 $ 10.70 $ 10.00
Operations:
Net investment income (loss) .09 (.04) (.03) .03
Net realized and unrealized gains
on investments 1.06 3.08 1.35 .67
Total from operations 1.15 3.04 1.32 .70
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (.04) (.10) (.03) --
From realized gains (.27) (.06) -- --
Total distributions (.31) (.16) (.03) --
NET ASSET VALUE:
End of period $ 15.71 $ 14.87 $ 11.99 $ 10.70
Total investment return (2) 7.86% 25.26% 12.37% 7.00%
Net assets at end of period (000's omitted) $68,125 $63,699 $34,549 $24,631
RATIOS:
Expenses to average daily net assets 1.50%(3) 1.65%(3) 1.85% 1.85%(4)
Net investment income (loss) to average daily net assets 0.62%(3) (0.16%W)(3) (0.29%) 0.67%(4)
Portfolio turnover rate (excluding short-term securities) 40.42% 42.48% 52.50% 18.62%
</TABLE>
(1) Period from November 1, 1991 (commencement of operations), to June 30,
1992.
(2) 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.
(3) Total Fund expenses are contractually limited to 1.85% of average daily net
assets. However, during the years ended June 30, 1995 and 1994, the
investment adviser voluntarily absorbed $228,795 and $111,320,
respectively, in expenses that were otherwise payable by the Fund. Had the
Fund incurred these expenses, the ratio of expenses to average daily net
assets would have been 1.85% for the years ended June 30, 1995 and 1994,
and the ratio of net investment income (loss) to average daily net assets
would have been 0.27% and (0.36%), respectively.
(4) Adjusted to an annual rate.
<TABLE>
<CAPTION>
SIT GROWTH FUND
FINANCIAL HIGHLIGHTS
Per share amounts prior to December 10, 1993 have been restated to reflect the 4
to 1 stock split.
Years Ended June 30,
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE:
Beginning of year $ 11.08 $ 11.91 $ 10.52 $ 9.35 $ 8.70
Operations:
Net investment income (loss) -- (.01) .03 .04 .07
Net realized and unrealized gains
(losses) on investments 2.96 (.51) 1.43 1.22 1.05
Total from operations 2.96 (.52) 1.46 1.26 1.12
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income -- (.02) (.05) (.06) (.08)
From realized gains (1.04) (.29) (.02) (.03) (.39)
Total distributions (1.04) (.31) (.07) (.09) (.47)
NET ASSET VALUE:
End of year $ 13.00 $ 11.08 $ 11.91 $ 10.52 $ 9.35
Total investment return (1) 28.44% (4.62%) 13.88% 13.34% 14.13%
Net assets at end of year (000's omitted) $327,879 $285,175 $341,702 $241,831 $122,677
RATIOS:
Expenses to average daily net assets 0.83% 0.82% 0.80% 0.83% 1.03%
Net investment income (loss) to average daily net assets 0.02% (0.08%) 0.35% 0.52% 0.96%
Portfolio turnover rate (excluding short-term securities) 75.40% 46.71% 45.18% 24.74% 37.01%
</TABLE>
(1) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value.
<TABLE>
<CAPTION>
SIT GROWTH & INCOME FUND
FINANCIAL HIGHLIGHTS
Years Ended June 30,
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE:
Beginning of year $ 23.89 $ 25.61 $ 24.22 $ 21.89 $ 22.64
Operations:
Net investment income .11 .23 .33 .38 .58
Net realized and unrealized gains
(losses) on investments 5.88 (.33) 1.94 2.91 (.01)
Total from operations 5.99 (.10) 2.27 3.29 .57
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (.09) (.23) (.34) (.43) (.69)
From realized gains (1.41) (1.39) (.54) (.53) (.63)
Total distributions (1.50) (1.62) (.88) (.96) (1.32)
NET ASSET VALUE:
End of year $ 28.38 $ 23.89 $ 25.61 $ 24.22 $ 21.89
Total investment return (1) 26.33% (0.58%) 9.52% 15.22% 3.10%
Net assets at end of year (000's omitted) $45,211 $34,612 $37,602 $32,040 $21,112
RATIOS:
Expenses to average daily net assets 1.00%(2) 1.10%(2) 1.42% 1.50% 1.50%
Net investment income to average daily net assets 0.42%(2) 0.89%(2) 1.31% 1.92% 2.74%
Portfolio turnover rate (excluding short-term securities) 67.14% 73.62% 47.82% 73.40% 70.01%
</TABLE>
(1) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value.
(2) During the years ended June 30, 1995 and 1994, the investment adviser
voluntarily absorbed $132,305 and $112,191, respectively, in expenses that
were otherwise payable by the Fund. Had the Fund incurred these expenses,
the ratio of expenses to average daily net assets would have been 1.35% and
1.40% for the years ended June 30, 1995 and 1994, respectively, and the
ratio net investment income to average daily net assets would have been
0.07% and 0.59%, respectively.
<TABLE>
<CAPTION>
SIT BALANCED FUND
FINANCIAL HIGHLIGHTS
Year Ended Period Ended
June 30, June 30,
1995 1994 (1)
<S> <C> <C>
NET ASSET VALUE:
Beginning of period $ 9.48 $ 10.00
Operations:
Net investment income .28 .13
Net realized and unrealized gains
(losses) on investments 1.50 (.59)
Total from operations 1.78 (.46)
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (.27) (.06)
Total distributions (.27) (.06)
NET ASSET VALUE:
End of period $ 10.99 $ 9.48
Total investment return (2) 19.16% (4.56%)
Net assets at end of period (000's omitted) $2,444 $1,296
RATIOS:
Expenses to average daily net assets 1.00% 1.00%(3)
Net investment income to average daily net assets 2.97% 2.87%(3)
Portfolio turnover rate (excluding short-term securities) 50.61% 52.53%
</TABLE>
(1) Period from December 31, 1993 (commencement of operations), to June 30,
1994.
(2) 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.
(3) Adjusted to an annual rate.
SIT Mutual Fund Group
Independent Auditors' Report
The Board of Directors and Shareholders
SIT Mutual Funds, Inc.
SIT Growth Fund, Inc.
SIT Growth & Income Fund, Inc.:
We have audited the accompanying statements of assets and liabilities,
including the schedules of portfolios of investments in securities of SIT
Developing Markets Growth Fund (a series of SIT Mutual Funds Inc.), SIT Small
Cap Growth Fund (a series of SIT Mutual Funds Inc.), SIT International Growth
Fund (a series of SIT Mutual Funds, Inc.), SIT Growth Fund, Inc., SIT Growth &
Income Fund, Inc. and SIT Balanced Fund (a series of SIT Mutual Funds, Inc.) as
of June 30, 1995; the related statements of operations for the year ended June
30, 1995; the statements of changes in net assets for the year ended June 30,
1995 and the year ended June 30, 1994 for SIT International Growth Fund, SIT
Growth Fund, Inc., SIT Growth & Income Fund, Inc. and the period from December
31, 1993, commencement of operations, to June 30, 1994 for SIT Balanced Fund;
and the financial highlights as presented in footnote 4 to the financial
statements. These financial statements and the financial highlights are the
responsibility of the Funds' management. Our responsibility is to express an
opinion on these financial statements and the financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted accounting
standards. Those standards require that we plan and perform our audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Investment securities held in custody are confirmed to us by the
custodian. As to securities purchased and sold but not received or delivered, we
request confirmations from brokers and where replies are not received, we carry
out other appropriate auditing procedures. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and the financial highlights
referred to above present fairly, in all material respects, the financial
position of SIT Growth Fund, Inc., SIT International Growth Fund, SIT Growth &
Income Fund, Inc. and SIT Balanced Fund as of June 30, 1995 and the results of
their operations, the changes in their net assets, and the financial highlights
for the periods stated in the first paragraph above, in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
August 4, 1995
SIT Mutual Fund Group
Federal Income Tax Information
We are required by Federal tax regulations to provide shareholders with certain
information regarding dividend distributions on an annual fiscal year basis. The
figures are for informational purposes only and should not be used for reporting
to federal or state revenue agencies. All necessary tax information will be
mailed in January each year.
LONG-TERM
ORDINARY CAPITAL
FUND AND PAYABLE DATE INCOME (a) GAIN (b)
Developing Markets Growth Fund
December 20, 1994 $ 0.04895(c) $0.00000
Small Cap Growth Fund
December 20, 1994 $ 0.05389(d) $0.00000
International Growth Fund
December 20, 1994 $ 0.03962(c) $0.26763
Growth Fund
December 20, 1994 $ 0.00000 $1.04029
Growth & Income Fund
October 10, 1994 $ 0.02044 --
December 20, 1994 0.02418 1.40957
April 10, 1995 0.02437 --
July 11, 1995 0.01776 --
$ 0.08675(e) $1.40957
Balanced Fund
October 10, 1994 $ 0.07454 --
December 20, 1994 0.07662 --
April 10, 1995 0.06094 --
July 11, 1995 0.07256 --
$ 0.28466(f) $0.00000
(a) Includes distributions of short-term gains, if any, which are taxable as
ordinary income.
(b) Taxable as long-term gain.
(c) Taxable as dividend income and does not qualify for dividends-received
deduction by corporations.
(d) Taxable as dividend income, 19.16% qualifying for dividends-received
deduction by corporations.
(e) Taxable as dividend income, 100% qualifying for dividends-received
deduction by corporations.
(f) Taxable as dividend income, 18.34% qualifying for dividends-received
deduction by corporations.
Directors:
Eugene C. Sit, CFA
Peter L. Mitchelson, CFA
Melvin C. Bahle
Sidney L. Jones
Donald W. Phillips
William E. Frenzel
Officers:
Eugene C. Sit, CFA Chairman
Peter L. Mitchelson, CFA Vice Chairman
Mary K. Stern President
Erik S. Anderson, CFA (1) Vice President - Investments
Ronald D. Sit, CFA (2) Vice President - Investments
Paul E. Rasmussen Vice President & Treasurer
Michael P. Eckert Vice President
Michael J. Radmer Secretary
Parnell M. Kingsley Assistant Secretary
Carla J. Rose Assistant Secretary
Debra A. Sit, CFA Assistant Treasurer
(1) Growth Fund only.
(2) Growth & Income Fund only.
