[LOGO] SIT
Mutual Fund Group
SEMI-ANNUAL REPORT
STOCK FUNDS
December 31, 1995
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
SIT MUTUAL FUND GROUP
STOCK FUNDS SEMI-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
This document must be preceded or accompanied by a Prospectus.
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
[Chart]
SIT FAMILY OF FUNDS
Chart shows PRINCIPAL STABILITY & CURRENT INCOME and GROWTH POTENTIAL
STABILITY:
SAFETY OF PRINCIPAL
AND CURRENT INCOME
Money Market
INCOME:
INCREASED INCOME
U.S. Government Securities
Tax-Free Income
Minnesota Tax-Free Income
Bond
GROWTH & INCOME:
LONG-TERM CAPITAL
APPRECIATION AND INCOME
Balanced
Growth & Income
GROWTH:
LONG-TERM CAPITAL
APPRECIATION
Growth
International Growth
Small Cap Growth
Developing Markets Growth
SIT MUTUAL FUND GROUP
CHAIRMAN'S LETTER - DECEMBER 31, 1995
[Photo]
Dear Fellow Shareholders:
Domestic stocks performed strongly during the six months ended December 31,
1995, fueled by falling interest rates, healthy increases in corporate profits,
reasonably contained inflation, continued debate over federal budget deficit
reduction, substantial inflows into domestic equity mutual funds, and a rebound
in the dollar's valuation versus the yen and the mark.
ECONOMIC REVIEW
Economic growth in the U.S. seems likely to have moderated during the
fourth quarter of 1995 compared to the third quarter's +3.2% annual real GDP
growth rate. The GDP figures are now being calculated using the Commerce
Department's new, chain-linked accounting methodology that is designed to more
accurately reflect yearly price fluctuations of goods than the older,
fixed-weight method. The net effect of this change in recent years has been to
reduce growth rates slightly as compared to the older method.
The majority of data for the fourth quarter points toward softer economic
growth at the end of 1995. Personal income grew steadily through the end of the
year; however, personal consumption expenditures, a major component of the
economy, were relatively modest. Holiday retail sales were generally weak, and
year-over-year retail sales for 1995 grew by +3.4%, the lowest gain since 1991.
In addition to moderate consumer activity, a year-end moderation in job creation
combined with decreases in consumer sentiment and the leading economic
indicators seemed to confirm this softening trend.
Despite the rhetoric over a possible recession, it should be noted that the
economy was impacted both by the temporary shutdown of the federal government as
well as by adverse weather conditions throughout the country. We estimate that
during 1996 economic growth should approximate slightly less than +2.0%.
Inflation remained in check during the second half of 1995, a positive
factor for financial markets, as the CPI closed out the year recording a modest
annual increase of +2.5%. Despite the recent uptick in gold prices, we believe
that consumer inflation should continue to be moderate in 1996 at approximately
+2.5%. We are, however, monitoring rising price patterns in grain commodities
which appear to have been driven by extreme weather conditions. The PPI for
crude materials, which includes energy, has also risen slightly, but has not
induced broad price pressures.
In Washington, Republicans and Democrats continue to debate the best means
for balancing the budget. Both sides have agreed to a seven-year timeframe and
to the more conservative CBO scoring method that previously had been major
stumbling blocks. The divisive issues yet to be resolved include future
reductions in Medicare and Medicaid spending growth and additional tax
reductions. Given the duration of the stalemate and the political toll that has
been paid by the conservatives, a compromise is likely before March. However,
Republicans are likely to resume the entitlement spending debate during the
upcoming election. Fiscal policy in 1996 will be moderately restrictive based on
the absence of a tax cut and decreased federal outlays resulting from the
federal shutdown. Through the first three months of the fiscal year, the federal
deficit was $17 billion less than last year.
Since July, when the Federal Reserve lowered the federal funds rate by
1/4%, domestic monetary policy has been slightly accommodative. Subsequent
short-term interest rate reductions in December and January have moved the
federal funds and discount rates to 5.25% and 5.00%, respectively. The Fed
recently signaled that additional reductions could be warranted if inflation
remains at bay and if the economy remains soft. However, Washington's progress
in finalizing a budget package will also play a major role in near-term monetary
policy. Longer-term interest rates anticipated these Fed actions as the
bellwether 30-year Treasury bond closed out the year at 5.95%. Since then,
long-term rates have backed up slightly, but we are forecasting that they should
remain within a range of 5 1/2-6 1/2% over the intermediate term.
The U.S. dollar bottomed during the second half of 1996 as major developed
nations reduced short-term interest rates to stimulate their lagging economies.
Foreign investors subsequently increased their appetite for U.S. Treasury
securities and, to a lesser extent, U.S. equities given the dollar's strength
and the relatively more attractive yields available in U.S. fixed income
markets. Looking ahead, European economies could lower interest rates further as
a means of stimulating growth, while Japan should move to provide fiscal
stimulus to resolve its banking crisis and reaccelerate its faltering economy.
Both of these events could provide additional momentum for the dollar in 1996.
However, we still believe that U.S. goods and services are competitively priced
in international markets and that the dollar's appreciation will not
significantly impair prospects for exports. In November, the U.S. closed its
trade deficit to $7.1 billion, the smallest trade gap in recent memory.
[Line Graph]
A 200 BASIS POINT INCREASE IN THE DEFAULT RATE SUGGESTS
A STRONG TILT TOWARD GROWTH OVER VALUE
EQUITY STRATEGY
SUMMARY
Even though domestic equities provided investors with outstanding returns
in 1995, the investment environment continues to appear favorable for equity
investors in 1996, although returns should return to more modest levels. Equity
market valuation at 17.5 times estimated calendar 1996 earnings for the S&P 500
Index remains within historical norms, particularly when compared to other
periods of stable economic growth and low inflation.
Prospects for growth stocks appear particularly favorable given the
deceleration in S&P 500 earnings growth to +6% we are forecasting for 1996.
Historically, periods of moderating economic growth evidenced by decelerating
broad market earnings gains and increases in default rates have been correlated
with superior growth stock performance. For this reason, we believe the cycle
favoring growth stocks over value and cyclical stocks remains intact.
We are maintaining fully-invested positions in domestic equity portfolios
with continued emphasis on the technology, health care, and financial sectors as
a means of maintaining high levels of expected portfolio earnings growth. Given
prospects for a moderating economy, we are moving to reduce the economic
cyclicality within portfolios. The environment appears especially attractive for
networking and software companies among technology investments, while
biotechnology and efficiency-improving health services firms should benefit.
Other attractive investment themes include productivity-enhancing and
outsourcing opportunities as well as stocks that would benefit from further
decreases in domestic interest rates. All domestic equity portfolios are
estimated to generate 1996 earnings increases that are more than four times the
rate of broad market earnings growth, which should attract the attention of
investors searching for growth in a moderating economy.
The generally uptrending U.S. dollar, continuing low inflation, low
interest rates and improving capital flows should further strengthen Asian
market momentum in 1996. Non-Japan Asian nations, which are heavily emphasized
in international equity portfolios, will likely experience slower rates of
economic growth in 1996, but they continue to appear relatively attractive
compared to the growth prospects of the developed nations. Investments in these
regions will focus on companies benefiting from cost-cutting and productivity
enhancements as well as those that are not overly dependent on the U.S. for
export opportunities. In Japan, we are focusing on attractively valued,
non-financial sectors that will benefit from an economic rebound. In Europe, we
are looking for investments in interest-sensitive financial sectors and
multinational companies with considerable dollar-based earnings. Finally, Latin
American investments in the Developing Markets Growth Fund feature opportunities
for strong corporate earnings gains at reasonable valuations, primarily in
Brazil, Peru and Chile.
We appreciate your continued interest and support as shareholders in the
SIT Mutual Fund Group.
With best wishes,
Eugene C. Sit, CFA
Chairman and Chief Investment Officer
SIT MUTUAL FUND GROUP
DECEMBER 31, 1995 PERFORMANCE REVIEW - STOCK FUNDS
STOCK FUNDS REVIEW
Domestic stocks continued their strong advance during the second half of 1995
as declining interest rates and reports of increases in corporate profits sent
most domestic indices to record highs.
U.S. equities in general, as measured by the S&P 500 Index, rose by +14.5%
during the final six months of 1995. For the entire calendar year, the S&P 500
recorded a +37.6% gain, its most impressive calendar return in more than 25
years. The NASDAQ Composite returned +12.7% in the second half of 1995, as
investors took profits in some of the bellwether technology names during the
fourth quarter.
Large company stocks outperformed small company stocks by an average of +2.5%
during this period as measured by the Russell 1000/2000 Indices. Despite the
dollar's rebound and continued debate over an eventual capital gains tax rate
reduction, investors were drawn to the stability of larger-sized companies late
in the year.
Growth stocks performed very favorably in the third quarter driven by strong
second quarter earnings reports from several highly visible technology concerns.
As economic questions arose later in the year, however, investors fretted over
the economic sensitivity of many of these issues and moved toward
financial-related issues in anticipation of further reductions in short-term
interest rates. This late stage move toward value caused large cap growth stocks
to underperform slightly, but small cap growth stocks managed to maintain their
lead and closed the second half of the year with a +1.5% advantage.
U.S. equity market performance was surpassed only by Switzerland and Sweden
in U.S. dollar terms, although a substantial portion of these markets' returns
were enhanced by currency movement. European stocks performed well during the
second half of 1995, rising by an average of +7.8% as measured by the MSCI
Europe Index, while the MSCI Pacific-Ex Japan increased by +5.6%. Japanese
markets rebounded sharply in local currency terms during this period as the
Nikkei surged by +36.9% sparked by hope of a resolution to Japan's banking
crisis and a final bottoming in the economy; however, the yen's deterioration
eroded much of this performance for U.S. investors.
<TABLE>
<CAPTION>
TOTAL RETURN - CALENDAR YEAR YTD
1985 1986 1987 1988 1989 1990 1991
<S> <C> <C> <C> <C> <C> <C> <C>
SIT DEVELOPING MARKETS GROWTH FUND ---- ---- ---- ---- ---- ---- ----
(NASDAQ Symbol: SDMGX)
SIT SMALL CAP GROWTH FUND ---- ---- ---- ---- ---- ---- ----
(NASDAQ Symbol: SSMGX)
SIT INTERNATIONAL GROWTH FUND ---- ---- ---- ---- ---- ---- 4.10%(1)
(NASDAQ Symbol: SNGRX)
SIT GROWTH FUND 43.65% 10.33% 5.50% 9.77% 35.15% -2.04% 65.50
(NASDAQ Symbol: NBNGX)
SIT GROWTH & INCOME FUND 23.48 21.83 5.32 5.33 32.02 -2.37 32.72
(NASDAQ Symbol: SNIGX)
SIT BALANCED FUND ---- ---- ---- ---- ---- ---- ----
International Emerging Markets
Free Index(2) ---- ---- ---- ---- ---- ---- ----
Russell 2000 Index(2) ---- ---- ---- ---- ---- ---- ----
EAFE Index(3) ---- ---- ---- ---- ---- ---- 0.26
NASDAQ OTC Composite Index 31.36 7.36 -5.26 15.41 19.26 -17.80 56.84
S&P 500 Index 31.60 18.64 5.28 16.55 31.61 -3.05 30.46
</TABLE>
(TABLE CONTINUED FROM ABOVE)
1992 1993 1994 1995
SIT DEVELOPING MARKETS GROWTH FUND ---- ---- -2.02%(1) -4.29%
(NASDAQ Symbol: SDMGX)
SIT SMALL CAP GROWTH FUND ---- ---- 11.57(1) 52.16
(NASDAQ Symbol: SSMGX)
SIT INTERNATIONAL GROWTH FUND 2.69% 48.37% -2.99 9.36
(NASDAQ Symbol: SNGRX)
SIT GROWTH FUND -2.14 8.55 -0.47 33.64
(NASDAQ Symbol: NBNGX)
SIT GROWTH & INCOME FUND 4.94 3.15 2.83 31.66
(NASDAQ Symbol: SNIGX)
SIT BALANCED FUND ---- ---- -0.33 25.43
International Emerging Markets
Free Index(2) ---- ---- 2.80 -6.94
Russell 2000 Index(2) ---- ---- 4.61 28.45
EAFE Index(3) -12.17 32.56 7.78 11.21
NASDAQ OTC Composite Index 15.45 14.75 -3.20 39.92
S&P 500 Index 7.64 10.07 1.32 37.58
<TABLE>
<CAPTION>
TOTAL TOTAL
RETURN RETURN AVERAGE ANNUAL TOTAL RETURNS FOR
QUARTER SIX MONTHS THE PERIODS ENDED DECEMBER 31, 1995
ENDED ENDED SINCE
INCEPTION 12/31/95 12/31/95 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SIT DEVELOPING MARKETS GROWTH FUND 07/01/94 -0.94% -0.83% -4.29% ---- ---- ---- -4.19%
SIT SMALL CAP GROWTH FUND 07/01/94 4.13 25.21 52.16 ---- ---- ---- 42.27
SIT INTERNATIONAL GROWTH FUND 11/01/91 -0.53 3.58 9.36 16.32% ---- ---- 13.30
SIT GROWTH FUND 09/02/82 -0.38 18.32 33.64 13.02 18.52% 14.74% 18.94
SIT GROWTH & INCOME FUND 09/02/82 1.01 11.65 31.66 11.77 14.23 12.98 14.59
SIT BALANCED FUND 12/31/93 2.77 9.94 25.43 ---- ---- ---- 11.81
International Emerging Markets
Free Index (2) -1.72 -2.76 -6.94 ---- ---- ---- -2.91
Russell 2000 Index (2) 2.17 12.26 28.45 ---- ---- ---- 21.75
EAFE Index (3) 4.05 8.39 11.21 16.69 ---- ---- 8.39
NASDAQ OTC Composite Index (4) 0.82 12.71 39.92 15.83 22.99 12.47 14.18
S&P 500 Index (4) 6.02 14.45 37.58 15.34 16.59 14.87 17.02
(1) Period from Fund inception through calendar year-end.
(2) Figures assume an inception date of 7/1/94.
(3) Figures assume an inception date of 11/1/91.
(4) Figures assume an inception date of 9/2/82.
</TABLE>
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
DECEMBER 31, 1995
[Photo]
Andrew B. Kim, CFA
Senior Portfolio
Manager
The SIT Developing Markets Growth Fund's investment return for the six
months ended December 31, 1995, was -0.83%, compared to the MSCI Emerging
Markets Free Index decline of -2.76%. The Fund's significant allocation to Hong
Kong and Singapore (which are not included in the Index) was the primary reason
for the Fund's outperformance during the period as these markets were up +10%
and +7% respectively. Additionally, the Brazilian market was up +15%, and Brazil
was the Fund's largest country allocation representing 12% of the portfolio at
December 31.
As of December 31, 1995, Asian holdings represented 59% of the portfolio.
The Fund's allocation to Hong Kong and Singapore totaled 16% as these markets
are most likely to benefit from lower U.S. interest rates. In 1996, improving
liquidity is likely to benefit the emerging markets in Asia, many of which have
underperformed for the last eighteen months.
Latin America represented about 25% of the total portfolio. The Fund's
Latin American holdings remain concentrated in Brazil, Peru and Chile as these
markets provide the best opportunities for strong corporate earnings growth at
reasonable valuation levels.
In other markets, we recently added a new Polish holding, Pan Smak Pizza.
Fast food service is in its infancy in Poland, and Pan Smak dominates the pizza
market. The Fund's South Africa investment continues to perform well based on
strong fundamentals, and we expect future price appreciation to benefit from a
narrowing discount as the closed-end fund continues to trade at a 22% discount
to net asset value.
The month of January provided positive signs of returning liquidity to
emerging markets, and we expect this trend to continue throughout the year.
Although volatility in these markets will continue, we have an optimistic
outlook for emerging markets in 1996.
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 located 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 flucuations, high
volatility, illiquidity and the possibility of political instability.
PORTFOLIO SUMMARY
Net Asset Value 12/31/95: $9.32 Per Share
6/30/95: $9.41 Per Share
Total Net Assets: $5.13 Million
[Bar Graph]
PORTFOLIO STRUCTURE
(% of total net assets)
SIT DEVELOPING MARKETS International Emerging
GROWTH FUND Markets Free Index
Pacific Basin 59.2 44.8
Latin American 25.1 31.0
Europe 6.0 4.8
Middle East/Africa 2.5 19.4
Other Assets & Liabilities 7.2 N/A
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS* CUMULATIVE TOTAL RETURNS*
Morgan Stanley Morgan Stanley
Developing International Lipper Developing International Lipper
Markets Emerging Markets Emerging Markets Emerging Markets Emerging
Growth Fund Free Index Markets Index Growth Fund Free Index Markets Index
<S> <C> <C> <C> <C> <C> <C>
3 Months -0.94% -1.72% -4.90% -0.94% -1.72% -4.90%
(unannualized)
1 Year -4.29 -6.94 -8.20 -4.29 -6.94 -8.20
Inception -4.19 -2.91 -4.15 -6.22 -4.34 -6.17
(12/31/93)
</TABLE>
* As of 12/31/95
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.
[Line Graph]
GROWTH OF $10,000
The sum of $10,000 invested at inception (7/1/94) and held until 12/31/95 would
have declined to $9,378 in the Fund or $9,566 in the International Emerging
Markets Free Index assuming reinvestment of all dividends and capital gains.
10 LARGEST HOLDINGS
* Advanced Info Services
* Hutchison Whampoa
* Genting Berhad
* India Growth Fund
* Lojas Americanos
* Cemig, A.D.R.
* Morgan Stanley So. Africa Inv. Fund
* Banco Latinoamericano
* City Developments
* Manila Electric Co.
Total number of holdings: 49
SIT DEVELOPING MARKETS GROWTH FUND
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 (UNAUDITED)
- --------------------------------------------------------------------------------
Quantity Name of Issuer Market Value(1)
- --------------------------------------------------------------------------------
COMMON AND PREFERRED STOCKS (91.6%)(2)
CAPITAL GOODS (3.9%)
44,000 IJM Berhad Corp. (Malaysia) $ 70,015
4,800 Larsen & Toubro, G.D.R. (India) 85,200
20,000 Leader Universal Cables (Malaysia) 45,689
200,904
CONSUMER DURABLES (2.0%)
137,000 Multibras (Preferred) (Brazil) 101,490
CONSUMER NON-DURABLES (11.3%)
170,000 Brahma (Preferred) (Brazil) 69,967
13,000 Cerebos Pacific Ltd. (Singapore) 90,069
110,300 Fabril Pacifico (Peru) 123,544
55,500 Pan Smak Pizza (Poland) (3) (5) 35,811
10,262 President Enterprises, G.D.R.
(Taiwan) (3) (4) 118,013
15,000 PT Indofood Sukses
(Indonesia) (5) 72,165
172,000 Vitasoy International (Hong Kong) 73,410
582,979
CONSUMER SERVICES (7.6%)
16,000 Genting Berhad (Malaysia) 133,601
8,000 Grammy Entertainment
(Thailand) (3) 74,953
188,000 Informatics Holdings
(Singapore) (3) 72,437
18,500 PT Modern Photo (Indonesia) (5) 107,209
388,200
ENERGY (2.1%)
5,000 Ban Pu Coal (Thailand) 108,777
FINANCIAL (6.0%)
BANKING (6.0%)
2,700 Banco Latinoamericano (Panama) 125,550
8,000 Bangkok Bank (Thailand) 97,184
9,000 United Overseas Bank (Singapore) 86,534
309,268
HEALTH CARE (1.7%)
BIOTECHNOLOGY/PHARMACEUTICALS (1.7%)
3,600 Ranbaxy Labs, G.D.R. (India) 88,200
MULTI-INDUSTRY (11.1%)
68,627 First Pacific Co. (Hong Kong) 76,332
26,000 Hutchison Whampoa (Hong Kong) 158,382
10,300 India Growth Fund (India) 132,612
228,000 International UNP Holdings Ltd.
(Poland) (3) (5) 76,900
9,800 Morgan Stanley Africa Investment
Fund (South Africa) 126,175
570,401
RAW MATERIALS (0.8%)
4,900 Concordia Paper, A.D.R.
(Hong Kong) (3) 38,587
RETAIL (10.0%)
3,246 Ceteco Holdings, A.D.S.
(Netherlands) (4) 103,612
5,600,000 Lojas Americanos (Preferred)
(Brazil) 131,369
93,000 Makro Brazil (Brazil) (3) 53,585
5,000 Santa Isabel, A.D.S. (Chile) 120,000
28,000 Siam Makro (Thailand) 102,822
511,388
SHELTER (4.4%)
83,750 Ayala Land 'B' (Philippines) 102,176
17,200 City Developments (Singapore) 125,249
227,425
TECHNOLOGY (6.0%)
COMPUTER RELATED (2.4%)
153,000 Datacraft Asia Ltd. (Singapore) 120,870
ELECTRONIC EQUIPMENT (3.6%)
1,600 Samsung Electronics, G.D.R.
(Korea) (4) 93,600
10,200 Yageo, G.D.R. (Taiwan) 91,800
185,400
UTILITIES (24.7%)
ELECTRIC POWER (9.5%)
5,980 Cemig, A.D.R. (Brazil) (3) (4) 130,812
4,300 Enersis, A.D.R. (Chile) 122,550
4,200 Korea Electric Power, A.D.R.
(Korea) (3) 112,350
15,150 Manila Electric Company
(Philippines) 123,607
489,319
TELECOMMUNICATIONS (15.2%)
9,000 Advanced Info Services (Thailand) 159,354
2,800 Indosat, A.D.R. (Indonesia) 102,200
2,100 Philippine Long Distance, A.D.R.
(Philippines) 113,662
1,000 SPT Telecom (Czech Republic) (3) 94,671
1,000 Telebras, A.D.R. (Brazil) 47,375
2,250,000 Telecom Brasileiras, S.A. (Brazil) 87,044
48,050 Telefonos Del Peru - B (Peru) (3) 103,258
74,704 Tele 2000 (Peru) (3) 70,377
777,941
Total common and preferred stocks
(cost: $4,567,269) 4,701,149
CONVERTIBLE BONDS (1.2%)
50,000 United Microelectronics,
1.25%, 6/8/04 (Taiwan) 63,125
Total convertible bonds
(cost: $84,537)
SHORT-TERM SECURITIES (8.8%)
225,000 Ford Motor Credit Corp.,
5.76%, 1/10/96 224,677
225,000 General Motors Accept. Corp.,
5.80%, 1/5/96 224,855
Total short-term securities 449,532
(cost: $449,532)
Total investments in securities
(cost: $5,101,338) (7) $5,213,806
See accompanying notes to portfolios of investments on page 31.
SIT SMALL CAP GROWTH FUND REVIEW
DECEMBER 31, 1995
[Photo]
Eugene C. Sit, CFA
Senior Portfolio
Manager
The Small Cap Growth Fund finished 1995 in strong fashion, providing
investors with a total return of +25.2% during the second half of 1995. During
this period, small cap stocks performed positively but lagged larger cap issues
in the face of perceived economic slowing and continued partisan delays over the
federal budget resolution. The Russell 2000 Index, a benchmark measure of small
cap stock performance, rose +12.3% during the last six months of 1995. For the
entire calendar year, the Fund's +52.2% return eclipsed the +28.5% increase of
the Russell 2000 and placed it among the nation's best performing mutual funds
for 1995 according to Lipper Analytical Services.
Small cap growth stocks outperformed small cap value stocks by +1.5% during
the second half of 1995 as measured by the Russell 2000 Growth/Value Indices.
Strong earnings gains, particularly among technology issues, drew the attention
of investors, propelling growth stocks higher moving into the fourth quarter. As
economic uncertainties arose late in the year, value issues gained momentum,
particularly among financial issues, as investors began to anticipate impending
interest rate reductions. Certain technology stocks deemed to be economically
sensitive experienced increased volatility during this period.
Relative to the Russell 2000 Index, incremental performance during the
latter half of 1995 was contributed by overweighting health care and technology
holdings, by underweighting consumer non-durable holdings, and through stock
selection in the technology and financial services sector. Among technology
issues, software and networking issues generally fared well, while performance
among semiconductor-related and telecommunications issues was somewhat mixed.
Primary portfolio adjustments made included reducing technology holdings
slightly in favor of increased sector weights in financial services and health
care stocks. New portfolio issues included Amerin (private mortgage insurance)
and Meadowbrook Insurance (alternative market insurance) among financial issues
and HCIA (health care information systems) and Uromed (incontinence devices)
among health care holdings. The Fund's weighted average market capitalization of
$344 million remains below that of its benchmark indices. As 1996 unfolds, the
estimated earnings growth rate of the Fund's portfolio at +33.7% for 1996 should
appear compelling as market earnings slow, particularly since its valuation at
23.9 times estimated 1996 earnings represents an attractive value relative to
its growth rate.
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 12/31/95: $16.74 Per Share
6/30/95: $13.49 Per Share
Total Net Assets: $31.75 Million
[Bar Graph]
PORTFOLIO STRUCTURE
(% of total net assets)
Technology 34.5
Financial 17.9
Health Care 17.3
Consumer Services 8.3
Business Equipment
& Services 6.4
Retail 3.4
Capital Goods 2.8
Transportation 2.4
Consumer
Durables 1.3
Other Assets
& Liabilities 5.7
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS* CUMULATIVE TOTAL RETURNS*
Lipper Lipper
Small Cap Russell 2000 Small Co. Small Cap Russell 2000 Small Co.
Growth Fund Index Growth Growth Fund Index Growth
<S> <C> <C> <C> <C> <C> <C>
3 Months 4.13% 2.17% 1.24% 4.13% 2.17% 1.24%
(unannualized)
1 Year 52.16 28.45 31.43 52.16 28.45 31.43
Inception 42.27 21.75 27.14 69.77 34.37 43.50
(12/31/93)
</TABLE>
* As of 12/31/95
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.
[Line Graph]
GROWTH OF $10,000
The sum of $10,000 invested at inception (7/1/94) and held until 12/31/95 would
have grown to $16,977 in the Fund or $13,437 in the Russell 2000 Index assuming
reinvestment of all dividends and capital gains.
10 LARGEST HOLDINGS
* Advanced Semiconductor Material Intl. N.V.
* Transaction Network Services, Inc.
* Sierra Health Services, Inc.
* American Radio Systems Corp.
* Aspen Technology, Inc.
* BDM International, Inc.
* Community First Bankshares
* Imperial Credit Industries, Inc.
* Novadigm, Inc.
* Risk Capital Holdings, Inc.
Total number of holdings: 59
SIT SMALL CAP GROWTH FUND
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 (UNAUDITED)
- --------------------------------------------------------------------------------
Quantity Name of Issuer Market Value(1)
- --------------------------------------------------------------------------------
COMMON STOCKS (94.3%) (2)
BUSINESS EQUIPMENT & SERVICES (6.4%)
20,000 BISYS Group, Inc. (The) (3) $ 615,000
17,000 Dendrite International, Inc. (3) 306,000
45,000 Transaction Network Services,
Inc. (3) 1,125,000
2,046,000
CAPITAL GOODS (2.8%)
30,000 BW/IP, Inc. 495,000
12,500 Molten Metal Technology, Inc. (3) 407,813
902,813
CONSUMER DURABLES (1.3%)
25,000 Titan Wheel International, Inc. 406,250
CONSUMER SERVICES (8.3%)
37,000 American Radio Systems
Corp. (3) 1,036,000
15,000 Cadmus Communications Corp. 405,000
25,000 Central European Media
Enterprises, Ltd. (3) 512,500
10,000 HA-LO Industries, Inc. (3) 307,500
15,000 Heritage Media Corp. (3) 384,375
2,645,375
FINANCIAL (17.9%)
FINANCIAL SERVICES (7.9%)
35,000 Community First Bankshares, Inc. 796,250
35,000 Imperial Credit Industries, Inc. (3) 761,250
15,000 Provident Bankshares Corp. 442,500
13,000 Queens County Bankcorp, Inc. 514,313
2,514,313
INSURANCE (10.0%)
16,000 Allied Group, Inc. 576,000
25,000 Amerin Corp. (3) 668,750
9,300 CMAC Investment Corp. 409,200
20,000 Crop Growers Corp. (3) 280,000
16,000 Meadowbrook Insurance Group (3) 536,000
30,000 Risk Capital Holdings, Inc. (3) 701,250
3,171,200
HEALTH CARE (17.3%)
BIOTECHNOLOGY/ PHARMACEUTICALS (2.8%)
17,000 Dura Pharmaceuticals, Inc. (3) 590,750
20,000 Genzyme Corp. (3) 317,500
908,250
MEDICAL EQUIPMENT/ SUPPLIES (5.7%)
12,000 I-Stat Corp. (3) 390,000
115,000 Innerdyne, Inc. (3) 316,250
20,000 Neuromedical Systems, Inc. (3) 402,500
18,000 Resound Corp. (3) 130,500
15,000 Possis Medical, Inc. (3) 241,875
25,000 Uromed Corp. (3) 321,875
1,803,000
MEDICAL FACILITIES MANAGEMENT (8.8%)
15,000 Cycare Systems, Inc. (3) 384,375
28,000 GMIS, Inc. (3) 364,000
10,000 HCIA, Inc. (3) 467,500
35,000 Sierra Health Services, Inc. (3) 1,111,250
20,000 Summit Care Corp. (3) 457,500
2,784,625
RETAIL (3.4%)
14,000 Apple South, Inc. 301,000
30,000 Books-A-Million, Inc. (3) 386,250
20,000 Sonic Corp. (3) 380,000
1,067,250
TECHNOLOGY (34.5%)
COMPUTER RELATED (2.1%)
15,000 Electronics For Imaging, Inc. (3) 656,250
COMPUTER SOFTWARE/ SERVICES (18.7%)
15,000 Alternative Resources Corp. (3) 453,750
28,000 Aspen Technology, Inc. (3) 945,000
27,900 BDM International, Inc. (3) 809,100
9,500 Business Objects, S. A., A.D.R. (3) 459,563
36,700 Data Systems & Software, Inc. (3) 256,900
42,500 Datalogix International, Inc. (3) 536,562
30,000 Hyperion Software Corp. (3) 637,500
12,500 Legato Systems, Inc. (3) 387,500
26,000 Novadigm, Inc. (3) 737,750
16,000 Scopus Technology (3) 404,000
25,000 Technomatix Technologies, Ltd. (3) 312,500
5,940,125
SEMICONDUCTORS & RELATED (8.1%)
29,500 Advanced Semiconductor
Material International N.V. (3) 1,452,875
14,000 Integrated Process Equipment
Corp. (3) 329,000
30,000 Mattson Technology, Inc. (3) 450,000
10,000 Uniphase Corp. (3) 357,500
2,589,375
TELECOMMUNICATIONS & EQUIPMENT (5.6%)
27,500 Anadigics Inc. (3) 584,375
15,000 Arch Communications Group,
Inc. (3) 360,000
30,000 Centennial Cellular Corp. (3) 513,750
25,000 Intelcom Group Inc. (3) 309,375
1,767,500
TRANSPORTATION (2.4%)
22,500 ABC Rail Products Corp. (3) 497,813
15,000 Western Pacific Airlines, Inc. (3) 251,250
749,063
Total common stocks
(cost: $25,025,695) 29,951,389
SHORT-TERM SECURITIES (7.0%)
Ford Motor Credit Corp.:
600,000 5.75%, 1/3/96 599,808
500,000 5.76%, 1/4/96 499,752
General Motors Acceptance Corp.:
250,000 5.84%, 1/2/96 249,959
350,000 6.00%, 1/3/96 349,883
510,000 SIT Money Market Fund,
5.44% (6) 510,000
Total short-term securities
(cost: $2,209,402) 2,209,402
Total investments in securities
(cost: $27,235,097) (7) $32,160,791
See accompanying notes to portfolios of investments on page 31.
SIT INTERNATIONAL GROWTH FUND REVIEW
DECEMBER 31, 1995
[Photo]
Andrew B. Kim, CFA
Senior Portfolio
Manager
The SIT International Growth Fund's investment return for the six months
ended December 31, 1995, was +3.58%, compared to the EAFE index return of
+8.39%. The Japanese market was relatively strong during the period, and the
Nikkei increased +12% in dollar terms. The Fund's underweighting in Japan (by as
much as 18% at the beginning of the period) was the primary reason for the
Fund's underperformance relative to the Index.
During the period we increased the Fund's Japanese allocation from 23% to
32%. Our focus in Japan remains on non-financial sectors where valuations are
more attractive on a historical basis. Although we anticipate the yen will
continue to weaken, we do not expect a significant depreciation from the
year-end rate of 103 yen per U.S. dollar. We believe the gains in Japanese
equities will be sufficient to offset any currency loss.
Non-Japan Asian holdings represented 25% of the portfolio at calendar
year-end, down from 30% at June 30, 1995. The slowing economy in Asia ex-Japan
should be positive for equity markets in general, but will result in
increasingly diverse performance from market to market. We have added companies
that have the ability to keep earnings growth through cost-cutting and
productivity gains. We are avoiding cyclical stocks in those export industries
that are too heavily dependent on the U.S. market.
High equity valuations in Europe reflect expectations for substantial
interest rate reductions as well as continuing strong earnings growth. However,
the current valuations appear vulnerable to earnings downgrades in 1996. We have
reduced our European weighting to 35%, down from 39%. The Fund's European
holdings are focused on interest-sensitive financial sectors and multinational
companies with extensive dollar-based earnings.
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 12/31/95: $15.30 Per Share
6/30/95: $15.71 Per Share
Total Net Assets: $73.35 Million
[Bar Graph]
PORTFOLIO STRUCTURE
( % of total net assets)
SIT INT'L Morgan Stanley
GROWTH FUND EAFE Index
Japan 31.6 40.9
Pacific Basin 25.1 9.5
Other Europe 22.5 19.5
France, Germany & UK 12.4 30.1
Latin America 4.7 0.0
Other Assets & Liabilities 3.7 N/A
<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 Fu
<S> <C> <C> <C> <C> <C> <C>
3 Months -0.53% 4.05% 1.11% -0.53% 4.05% 1.11%
(unannualized)
1 Year 9.36 11.21 9.28 9.36 11.21 9.28
3 Years 16.32 16.69 14.66 57.40 58.88 50.74
Inception 13.30 8.39 9.44 68.27 39.90 45.65
(11/1/91)
</TABLE>
* As of 12/31/95
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
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.
[Line Graph]
GROWTH OF $10,000
The sum of $10,000 invested at inception (11/1/91) and held until 12/31/95 would
have grown to $16,827 in the Fund or $13,990 in the Morgan Stanley EAFE Index
assuming reinvestment of all dividends and capital gains.
10 LARGEST HOLDINGS
* Aegon N.V., A.D.R.
* Canon, Inc., A.D.R.
* Secom Co.
* Hutchison Whampoa
* Astra "B" Free
* Telecom Corp. New Zealand, A.D.R.
* Reuters Holdings, p.l.c., A.D.S.
* Nomura Securities
* Wolters Kluwer
* Ito Yokado, A.D.R.
Total number of holdings: 67
SIT INTERNATIONAL GROWTH FUND
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 (UNAUDITED)
- --------------------------------------------------------------------------------
Quantity Name of Issuer Market Value(1)
- --------------------------------------------------------------------------------
COMMON AND PREFERRED STOCKS (95.3%)(2)
BUSINESS EQUIPMENT & SERVICE (4.6%)
20,100 Canon Inc., A.D.R. (Japan) $1,836,637
27,800 Reuters Holdings p.l.c., A.D.S.
(United Kingdom) 1,532,475
3,369,112
CAPITAL GOODS (5.4%)
540,000 IJM Berhad Corp. (Malaysia) 859,269
23,000 Mabuchi Motor (Japan) 1,431,484
27,000 Murata Manufacturing Co., Ltd.
(Japan) 994,652
33,000 Raito Kogyo (Japan) 649,432
3,934,837
CONSUMER DURABLES (1.5%)
47,300 Rinnai Corp. (Japan) 1,105,101
CONSUMER NON-DURABLES (5.2%)
27,000 Amway Japan Ltd. (Japan) 1,141,232
13,400 Amway Japan, A.D.R. (Japan) 279,725
13,100 Nutricia (Netherlands) 1,060,756
50,909 President Enterprises, G.D.R.
(Taiwan) (3) (4) 585,454
1,660,000 Vitasoy International (Hong Kong) 708,490
3,775,657
CONSUMER SERVICES (10.8%)
152,500 Genting Berhad (Malaysia) 1,273,385
191,193 News Corp. Ltd. Preferred
(Australia) 894,578
120,000 PT Modern Photo (Indonesia) (5) 695,408
230,000 Rentokil (United Kingdom) 1,196,278
26,000 Secom Co. (Japan) 1,809,762
167,183 Village Roadshow Ltd. (Australia) 522,320
16,044 Wolters Kluwer (Netherlands) 1,519,336
7,911,067
FINANCIAL (10.9%)
BANKING (2.5%)
95,000 Bangkok Bank (Thailand) 1,154,065
72,500 United Overseas Bank (Singapore) 697,083
1,851,148
FINANCIAL SERVICES (3.6%)
5,900 Cetelem (France) 1,108,728
70,000 Nomura Securities (Japan) 1,526,878
2,635,606
INSURANCE (4.8%)
51,602 Aegon N.V., A.D.R. (Netherlands) 2,270,488
4,120 Zurich Insurance (Switzerland) 1,235,301
3,505,789
HEALTH CARE (9.5%)
BIOTECHNOLOGY/ PHARMACEUTICALS (9.5%)
44,200 Astra "B" Free (Sweden) 1,754,073
2,500 Gehe, A.G. (Germany) 1,275,085
625 Gehe, A.G. New Shares
(Germany) 310,256
89,000 Banyu Pharmaceuticals (Japan) 1,095,765
186 Roche Holdings, A.G.
(Switzerland) 1,475,035
46,000 Santen Pharmaceutical (Japan) 1,043,512
6,953,726
MULTI-INDUSTRY (5.0%)
153,000 Citic Pacific Ltd. (Hong Kong) 523,394
850,000 First Pacific Co. (Hong Kong) 945,430
296,000 Hutchison Whampoa (Hong Kong) 1,803,119
1,245,113 International UNP Holdings Ltd.
(Poland) (3) (5) 419,955
3,691,898
RAW MATERIALS (0.9%)
84,200 Concordia Paper, A.D.R.
(Hong Kong) (3) 663,075
RETAIL (8.8%)
8,300 Autobacs Seven (Japan) 690,381
1,900 Carrefour (France) 1,154,287
40,064 Ceteco Holdings, A.D.S.
(Netherlands) (4) 1,278,843
6,000 Ito Yokado, A.D.R. (Japan) 1,476,750
31,000 Santa Isabel, A.D.R. (Chile) (3) 744,000
16,000 Seven Eleven Japan (Japan) 1,129,211
6,473,472
SHELTER (1.8%)
185,000 City Developments (Singapore) 1,347,151
TECHNOLOGY (12.0%)
ELECTRONIC EQUIPMENT (3.6%)
15,500 Samsung Electronics, G.D.R.
(Korea) (4) (3) 906,750
24,000 Tokyo Electron (Japan) 930,668
87,000 Yageo, G.D.R. (Taiwan)(3) 783,000
2,620,418
TELECOMMUNICATIONS & EQUIPMENT (8.4%)
20,900 Indosat, A.D.R. (Indonesia) 762,850
7,000 Kyocera Corp. (Japan) 520,496
6,400 Kyocera Corp., A.D.R. (Japan) 955,200
94,000 Kyowa Exeo (Japan) 844,756
48,400 L.M. Ericsson Telephone Co.,
A.D.R. (Sweden) 943,800
54,000 Matsushita Kotobuki (Japan) 1,371,572
18,400 Nokia Series A (Finland) 724,642
6,123,316
TRANSPORTATION (1.5%)
560 Societe Generale de
Surveillance (Switzerland) 1,114,500
UTILITIES (17.4%)
ELECTRIC POWER (6.4%)
25,300 Empresa Nacional De Electricidad,
A.D.R. (Spain) 1,448,425
25,500 Enersis, A.D.R. (Chile) 726,750
152,935 Powergen p.l.c. (United Kingdom) 1,264,404
30,000 Veba A.G. (Germany) 1,276,482
4,716,061
TELECOMMUNICATIONS (11.0%)
55,000 Advanced Info Services (Thailand) 973,829
130 DDI Corp. (Japan) 1,008,224
163 Nippon Telephone & Telegraph
(Japan) 1,319,465
477,508 Tele 2000 (Peru) (3) 449,848
19,000,000 Telecom Brasileiras, S.A. (Brazil) 735,041
23,100 Telecom Corp. New Zealand,
A.D.R. (New Zealand) 1,602,563
661,000 Telecom Italia Mobile Spa
(Italy) (3) 1,164,584
382,600 Telefonos Del Peru - B (Peru) 822,197
8,075,751
Total common and preferred stocks
(cost: $55,302,595) 69,867,685
CONVERTIBLE BONDS (1.0%)
$ 590,000 United Microelectronics, 1.25%,
6/8/04 (Taiwan) 744,875
(cost: $967,856)
SHORT-TERM SECURITIES (6.5%)
Ford Motor Credit Corp.:
1,000,000 5.95%, 1/5/96 999,339
General Motors Acceptance Corp.:
1,300,000 6.00%, 1/3/96 1,299,578
910,000 6.00%, 1/4/96 909,545
380,000 5.79%, 1/5/96 379,756
667,000 Norwest Financial, Inc., 5.70%,
1/2/96 666,894
510,000 SIT Money Market Fund,
5.44% (6) 510,000
Total short-term securities
(cost: $4,765,112) 4,765,112
Total investments in securities
(cost: $61,035,563) (7) $75,377,672
See accompanying notes to portfolios of investments on page 31.
SIT GROWTH FUND REVIEW
DECEMBER 31, 1995
[Photo]
Eugene C. Sit, CFA
Senior Portfolio
Manager
Erik S. Anderson, CFA
Portfolio Manager
The Growth Fund rose to new highs during the second half of 1995, providing
investors with a total return of +18.3%. During this period, the Fund's
performance exceeded both the +14.5% gain of the S&P 500 and the +12.7% increase
in the technology-laden NASDAQ Composite. The Fund's second-half performance was
even more notable given the fact that midcap growth stocks generally
underperformed midcap value stocks by -6.0% as measured by the S&P Midcap
Growth/Value Indices. This disparity was largely the result of growing concerns
over a softening domestic economy that created volatility among economically
sensitive stocks, namely retailing, semiconductor-related, and
telecommunications issues during the fourth quarter.
Stock selection among technology issues, particularly during the third
quarter, was the driving factor behind the Fund's favorable showing as shares of
networking and software companies performed well. In addition, the Fund's
overweight in health care stocks was a benefit as was stock selection among
financial stocks, particularly as investors began to anticipate a reduction in
interest rates late in the fourth quarter.
Historically, growth stocks have tended to outperform value stocks and the
broad market during periods of economic and profit deceleration. Therefore, the
Fund's portfolio continues to emphasize companies with prospects for
consistently superior earnings growth. These issues are predominantly found in
the technology and health care sectors, although we are moving to reduce
portfolio exposure to economic cyclicality within these groups. The estimated
34% earnings growth of the equities held in the Fund's portfolio should be
looked upon favorably in the coming year, particularly in light of its current
valuation at 24.2 times 1996 estimated earnings, a nearly 30% discount to its
near-term growth rate.
We believe the fundamental case in favor of growth stock investing remains
intact, and the Fund continues to be fully invested with an equity ratio of
95.6% of total net assets. The Fund's current weighted average market cap of
$2.4 billion approximates that of most midcap indices, although its growth
potential is considerably higher. Companies representing more than 75% of the
Fund's portfolio weight are expected to show earnings growth of more than 16%
over the long term. New issues added during the second half of 1995 included
Cordis (catheter manufacturer), Dendrite International (sales force management
software), and Petroleum Geo Services (energy services).
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 12/31/95: $ 13.86 Per Share
6/30/95: $ 13.00 Per Share
Total Net Assets: $377.15 Million
[Bar Graph]
PORTFOLIO STRUCTURE
(% of total net assets)
Technology 32.7
Health Care 17.5
Financial 16.7
Business Equipment
& Services 13.7
Energy 4.2
Consumer Services 3.0
Consumer Durables 2.0
Retail 1.8
Raw Materials 1.6
Capital Goods 1.4
Transportation 1.0
Other Assets
& Liabilities 4.4
<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
<S> <C> <C> <C> <C> <C> <C>
3 Months -0.38% 0.82% 6.02% -0.38% 0.82% 6.02%
(unannualized)
1 Year 33.64 39.92 37.58 33.64 39.92 37.58
5 Years 18.52 22.99 16.59 133.83 181.44 115.44
10 Years 14.74 12.47 14.87 295.60 223.80 300.12
Inception 18.94 14.18 17.02 910.35 486.14 713.40
(9/2/82)
</TABLE>
* As of 12/31/95
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.
[Line Graph]
GROWTH OF $10,000
The sum of $10,000 invested at inception (9/2/82) and held until 12/31/95 would
have grown to $101,035 in the Fund or $58,614 in the NASDAQ OTC Composite Index
assuming reinvestment of all dividends and capital gains.
10 LARGEST HOLDINGS
* 3Com Corp.
* Oxford Health Plans, Inc.
* TCF Financial Corp.
* Parametric Technology, Inc.
* Mercury General Corp.
* Xilinx, Inc.
* HBO & Co.
* Ceridian Corp.
* MGIC Investment Corp.
* Madge N.V.
Total number of holdings: 60
SIT GROWTH FUND
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 (UNAUDITED)
- --------------------------------------------------------------------------------
Quantity Name of Issuer Market Value(1)
- --------------------------------------------------------------------------------
COMMON STOCKS (95.6%) (2)
BUSINESS EQUIPMENT & SERVICE (13.7%)
69,000 BISYS Group. Inc. (The) (3) $ 2,121,750
48,500 Broderbund Software, Inc. (3) 2,946,375
252,600 Ceridian Corp. (3) 10,419,750
186,700 Danka Business Systems, Inc.,
A.D.R. 6,907,900
112,000 Dendrite International, Inc. (3) 2,016,000
81,500 First Data Corp. 5,450,313
215,500 Fiserv, Inc. (3) 6,465,000
140,100 National Data Corp. 3,467,475
192,000 Office Depot, Inc. (3) 3,792,000
159,500 Paychex, Inc. 7,955,063
51,541,626
CAPITAL GOODS (1.4%)
75,500 Sundstrand Corp. 5,313,313
CONSUMER DURABLES (2.0%)
265,000 Harley-Davidson, Inc. 7,618,750
CONSUMER SERVICES (3.0%)
140,000 Loewen Group, Inc. 3,543,750
208,200 Stewart Enterprises, Inc. 7,703,400
11,247,150
ENERGY (4.2%)
111,000 Devon Energy Corp. 2,830,500
138,500 HS Resources, Inc. (3) 1,783,188
168,600 Parker & Parsley Petroleum Co. 3,709,200
39,500 Petroleum Geo-Services,
A.D.R. (3) 987,500
141,200 Sonat Offshore Drilling, Inc. 6,318,700
15,629,088
FINANCIAL (16.7%)
BANKING (5.0%)
81,500 Mercantile Bancorporation, Inc. 3,749,000
394,000 TCF Financial Corp. 13,051,250
63,000 UJB Financial Corp. 2,252,250
19,052,500
FINANCIAL SERVICES (4.7%)
258,800 Green Tree Financial Corp. 6,825,850
362,250 Mercury Finance Co. 4,799,812
123,900 T. Rowe Price & Associates 6,102,075
17,727,737
INSURANCE (7.0%)
114,000 CMAC Investment Corp. 5,016,000
231,000 Mercury General Corp. 11,030,250
189,500 MGIC Investment Corp. 10,280,375
26,326,625
HEALTH CARE (17.5%)
BIOTECHNOLOGY/PHARMACEUTICALS (6.3%)
140,000 Biogen, Inc. (3) 8,610,000
39,500 Cordis Corp. (3) 3,969,750
142,500 Elan Corp., p.l.c., A.D.R. (3) 6,929,062
86,500 R. P. Scherer Corp. (3) 4,249,312
23,758,124
MEDICAL FACILITIES MANAGEMENT (11.2%)
133,900 Cerner Corp. (3) 2,744,950
140,400 HBO & Co. 10,758,150
310,200 HEALTHSOUTH Rehabilitation
Corp. (3) 9,034,575
130,500 Integrated Health Services, Inc. 3,262,500
36,500 Medic Computer Systems,
Inc. (3) 2,208,250
195,000 Oxford Health Plans, Inc. (3) 14,405,625
42,414,050
RAW MATERIALS (1.6%)
150,600 IMC Global, Inc. 6,155,775
RETAIL (1.8%)
128,000 Kohls Corp. (3) 6,720,000
TECHNOLOGY (32.7%)
COMPUTER RELATED (8.9%)
341,800 3Com Corp. (3) 15,936,425
175,000 Electronics For Imaging, Inc. (3) 7,656,250
225,500 Madge N.V. (3) 10,091,125
33,683,800
COMPUTER SOFTWARE/SERVICES (12.7%)
56,500 Adobe Systems, Inc. 3,503,000
25,700 Baan Co N.V. (3) 1,162,925
72,500 Business Objects, S. A.,
A.D.R. (3) 3,507,187
277,000 Hyperion Software, Inc. (3) 5,886,250
187,000 Informix Corp. (3) 5,610,000
75,000 Intuit, Inc. (3) 5,850,000
71,000 Legato Systems, Inc. (3) 2,201,000
166,000 Parametric Technology, Inc. (3) 11,039,000
209,000 Peoplesoft, Inc. (3) 8,987,000
47,746,362
SEMICONDUCTORS & RELATED (6.3%)
188,000 Analog Devices, Inc. (3) 6,650,500
209,200 Integrated Device Technology,
Inc. (3) 2,693,450
131,000 KLA Instruments Corp. (3) 3,414,187
355,500 Xilinx, Inc. (3) 10,842,750
23,600,887
TELECOMMUNICATIONS & EQUIPMENT (4.8%)
181,108 Cellular Communications,
Inc. (3) 9,010,123
130,400 DSC Communications Corp. (3) 4,808,500
178,000 Paging Network, Inc. (3) 4,338,750
18,157,373
TRANSPORTATION (1.0%)
86,500 XTRA Corp. 3,676,250
Total common stocks
(cost: $252,675,323) 360,369,410
SHORT-TERM SECURITIES (4.2%)
Ford Motor Credit Co.:
2,000,000 5.76%, 1/3/96 1,999,361
2,000,000 5.96%, 1/4/96 1,999,008
1,920,000 5.96%, 1/5/96 1,918,731
1,865,000 5.76%, 1/9/96 1,862,617
General Motors Acceptance Corp.:
1,770,000 5.81%, 1/2/96 1,769,715
1,500,000 5.85%, 1/3/96 1,499,513
1,490,000 5.85%, 1/4/96 1,489,275
1,500,000 6.01%, 1/5/96 1,499,000
1,323,000 6.01%, 1/8/96 1,321,457
510,000 SIT Money Market Fund,
5.44% (6) 510,000
Total short-term securities
(cost: $15,868,677) 15,868,677
Total investments in securities
(cost: $268,544,000) (7) $376,238,087
See accompanying notes to portfolios of investments on page 31.
SIT GROWTH & INCOME FUND REVIEW
DECEMBER 31, 1995
[Photo]
Peter L. Mitchelson, CFA
Senior Portfolio
Manager
Ronald D. Sit, CFA
Portfolio Manager
Performance of the SIT Growth & Income Fund was +11.7% for the last six
months of 1995 and was also very satisfactory for the full calendar year. As
shown in the adjoining table, the Fund's total return (appreciation plus
dividends) was +31.7% in 1995 and this exceeded the +30.5% average return of 495
growth and income funds as calculated by Lipper Analytical Services, Inc.
During 1995, the Fund maintained quite modest cash reserve levels,
preferring to remain effectively fully invested to participate in the dynamic
equity market opportunities. As of December 31, 1995, cash reserve levels were
5.8%, up slightly from the 4% level at June 30, 1995. Total dividends paid in
1995 were approximately $2.30 per share, of which $2.24 per share were long-term
capital gains.
Industry weightings in the equity sector of the portfolio were changed only
modestly in the latest quarter. The technology group decreased in weighting by
approximately three percentage points, influenced importantly by market trends
during the period. We did, however, sell General Instrument and trimmed the
holding of Motorola. Two groups experiencing increases were health care, which
performed well in the quarter, and, to a lesser degree, financial. We started a
position in HBO & Co., a health care information services company, as well as
Whitman Corporation, one of the country's most profitable soft drink bottlers
with an interesting new bottling opportunity in Poland.
There are many crosscurrents influencing financial markets at the present
time, ranging from apparent weakness in the economy (partly exacerbated by the
government shutdown) to uncertainty over the budget battles being fought in
Washington. Normally, presidential election years are satisfactory ones for
equity investors, although our expectations are certainly more modest than the
very favorable results of 1995. The companies held in the Growth & Income Fund
portfolio possess well-above-average projected earnings growth rates and stocks
of this type historically have done well during periods of economic slowdown.
Accordingly, we remain generally optimistic about prospects for 1996 and believe
that long-term investors should stay the course.
INVESTMENT OBJECTIVE AND STRATEGY
The objective of the Growth & Income Fund is to achieve long-term capital
appreciation and, secondarily, current income. The Fund may invest 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 12/31/95: $29.39 Per Share
6/30/95: $28.38 Per Share
Total Net Assets: $46.46 Million
Quarterly Dividend:
Long-Term Capital Gain $ 2.24 Per Share
Ordinary Income $ 0.01 Per Share
[Bar Graph]
PORTFOLIO STRUCTURE
(% of total net assets)
Technology 25.4
Health Care 18.3
Financial 13.8
Consumer
Non-Durables 9.2
Business Equip.
& Services 8.0
Consumer
Services 4.5
Retail 3.8
Energy 3.0
Raw Materials 3.0
Capital Goods 2.6
Utilities 2.6
Other Assets
& Liabilities 5.8
<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 1.01% 4.05% 6.02% 1.01% 4.05% 6.02%
(unannualized)
1 Year 31.66 30.47 37.58 31.66 30.47 37.58
5 Years 14.23 15.75 16.59 94.48 107.80 115.44
10 Years 12.98 13.20 14.87 238.77 245.46 300.12
Inception 14.59 15.42 17.02 515.21 577.00 713.40
(9/2/82)
</TABLE>
* As of 12/31/95
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.
[Line Graph]
GROWTH OF $10,000
The sum of $10,000 invested at inception (9/2/82) and held until 12/31/95 would
have grown to $61,521 in the Fund, $67,700 in the Lipper Growth & Income Fund
Index or $81,340 in the S&P 500 Index assuming reinvestment of all dividends and
capital gains.
10 LARGEST HOLDINGS
* First Data Corp.
* Cisco Systems, Inc.
* Amgen, Inc.
* Pfizer, Inc.
* Citicorp
* Intel Corp.
* Oracle Systems Corp.
* Medtronic Inc.
* Philip Morris Cos., Inc.
* Johnson & Johnson
Total number of holdings: 58
SIT GROWTH & INCOME FUND
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 (UNAUDITED)
- --------------------------------------------------------------------------------
Quantity Name of Issuer Market Value(1)
- --------------------------------------------------------------------------------
COMMON STOCKS (94.2%) (2)
BUSINESS EQUIPMENT & SERVICES (8.0%)
20,500 Ceridian Corp. (3) $ 845,625
27,444 First Data Corp. 1,835,318
15,500 Office Depot Inc. (3) 306,125
9,500 Paychex, Inc. 473,813
16,000 Sensormatic Electronics Corp. 278,000
3,738,881
CAPITAL GOODS (2.6%)
10,000 Alco Standard Corp. 456,250
17,000 Owens-Corning Fiberglas Corp. (3) 762,875
1,219,125
CONSUMER NON-DURABLES (9.2%)
12,500 Coca Cola Co. 928,125
18,500 Gillette Co. (The) 964,313
13,000 Philip Morris Cos., Inc. 1,176,500
1,500 Pioneer Hi-Bred International, Inc. 83,438
11,000 Proctor & Gamble Co. 913,000
8,000 Whitman Corp. 186,000
4,251,376
CONSUMER SERVICES (4.5%)
28,875 CUC International, Inc. (3) 985,359
14,000 Marriot International, Inc. 535,500
12,500 Viacom, Inc. Class B (3) 592,188
2,113,047
ENERGY (3.0%)
3,500 British Petroleum Co., p.l.c, A.D.R. 357,437
9,500 Schlumberger Ltd. 657,875
20,000 Union Texas Petroleum
Holdings, Inc. 387,500
1,402,812
FINANCIAL (13.8%)
BANKING (4.6%)
20,500 Citicorp 1,378,625
23,000 Norwest Corp. 759,000
2,137,625
FINANCIAL SERVICES (2.9%)
10,500 American Express Co. 434,437
11,000 Federal Home Loan Mortgage
Corp. 918,500
1,352,937
INSURANCE (6.3%)
11,000 American International Group, Inc. 1,017,500
12,000 EXEL Ltd. 732,000
15,000 Mercury General Corp. 716,250
8,000 MGIC Investment Corp. 434,000
2,899,750
HEALTH CARE (18.3%)
BIOTECHNOLOGY/ PHARMACEUTICALS (9.1%)
26,000 Amgen, Inc. (3) 1,543,750
21,500 Medtronic, Inc. 1,201,312
23,500 Pfizer, Inc. 1,480,500
4,225,562
MEDICAL EQUIPMENT/ SUPPLIES (3.9%)
13,500 Johnson & Johnson 1,155,937
12,000 Stryker Corp. 630,000
1,785,937
MEDICAL FACILITIES MANAGEMENT (5.3%)
6,000 HBO & Co. 459,750
20,500 HEALTHSOUTH Rehabilitation
Corp. (3) 597,062
15,500 Mid Atlantic Medical Services
Corp. (3) 375,875
16,000 United HealthCare Corp. (3) 1,048,000
2,480,687
RAW MATERIALS (3.0%)
6,000 Monsanto Co. 735,000
9,000 Potash Corp. Saskatchewan, Inc. 637,875
1,372,875
RETAIL (3.8%)
24,500 Federated Department Stores,
Inc. (3) 673,750
22,400 Home Depot, Inc. (The) 1,072,400
1,746,150
TECHNOLOGY (25.4%)
AEROSPACE/ DEFENSE (2.0%)
12,000 Boeing Company 940,500
COMPUTER RELATED (4.5%)
23,500 Cisco Systems, Inc. (3) 1,753,688
12,500 Silicon Graphics, Inc. (3) 343,750
2,097,438
COMPUTER SOFTWARE/ SERVICES (8.0%)
11,250 Computer Associates International,
Inc. 639,844
11,000 Microsoft Corp. (3) 965,250
29,000 Oracle Systems Corp. (3) 1,228,875
8,500 Parametric Technology Corp. (3) 565,250
6,000 SAP A.D.S. (4) 302,400
3,701,619
SEMICONDUCTORS & RELATED (5.2%)
9,000 Applied Materials, Inc. (3) 354,375
23,000 Intel Corp. 1,305,250
23,500 LSI Logic Corp. (3) 769,625
2,429,250
TELECOMMUNICATIONS & EQUIPMENT (5.7%)
33,500 Airtouch Communications,
Inc. (3) 946,375
19,000 DSC Communications Corp. (3) 700,625
8,000 Motorola, Inc. 456,000
8,500 Nokia Corp., A.D.R. 330,438
5,500 Tellabs, Inc. (3) 203,500
2,636,938
UTILITIES (2.6%)
17,000 Enron Corp. 648,125
22,000 MCI Communications, Inc. 574,750
1,222,875
Total common stocks
(cost: $30,900,402) 43,755,384
SHORT-TERM SECURITIES (6.3%)
Ford Motor Credit Co.:
600,000 5.95%, 1/5/96 599,603
650,000 5.75%, 1/8/96 649,273
General Motors Acceptance Corp:
425,000 6.00%, 1/3/96 424,862
700,000 6.00%, 1/4/96 699,650
544,000 Norwest Financial, Inc., 5.70%,
1/2/96 543,914
Total short-term securities
(cost: $2,917,302) 2,917,302
Total investments in securities
(cost: $33,817,704) (7) $46,672,686
See accompanying notes to portfolios of investments on page 31.
SIT BALANCED FUND REVIEW
DECEMBER 30, 1995
[Photo]
Peter L. Mitchelson, CFA
Senior Portfolio
Manager
Bryce A. Doty, CFA
Portfolio Manager
During the last 6 months of 1995, the SIT Balanced Fund's total return was
+9.9% and for the calendar year was +25.4%, which exceeded the +24.6% annual
return of the Lipper Balanced Fund Index. The Fund's 12-month total return
ranked 25th out of 60 funds in its Lipper style and size grouping. Total
dividends paid on the Fund's shares in 1995 were approximately $0.27 per share,
the same as in 1994.
As of December 31, 1995, the asset allocation of the Fund was 53% in
equities (down from 59% at the end of June), 37% in bonds and 10% in cash
reserve instruments. The normal equity operating range for the Fund is 40% to
60% of total assets.
Within the equity sector of the portfolio, industry weighting changes were
quite modest in the final quarter. The biggest sectoral shift over the course of
the year was increased emphasis on financial stocks, which increased from 11% of
total equities at the end of 1994 to 17% a year later. Reductions were made in
the cyclically-sensitive capital goods sector as well as retail. The primary
financial characteristic of the equity holdings is above-average projected
earnings growth, which is very much stronger than the currently decelerating
trend of corporate profits as a whole.
In the fixed income portion of the portfolio, during the fourth quarter the
Fund invested cash flow and reallocated some intermediate U.S. Treasury holdings
into corporate and mortgage-backed securities. For 1996, current plans are to
maintain the duration of the Fund's fixed income holdings near that of the
Lehman Aggregate Bond Index and to continue to emphasize high quality
securities.
Despite current crosscurrents in the economy and in Washington, our outlook
continues to call for moderate growth and inflation, two ingredients that
normally enhance prospects for financial assets. Over the past 12 months, the
Fund's net assests have grown from $1.5 million to $3.6 million and we are most
appreciative of investors' increasing interest and participation.
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 12/31/95: $11.86 Per Share
6/30/95: $10.99 Per Share
Total Net Assets: $ 3.58 Million
Quarterly Dividend: $ 0.08 Per Share
[Pie Graph]
PORTFOLIO STRUCTURE
(% of total net assets)
Stocks 52.9%
Fixed Income 47.1% (Bonds & Cash)
<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 2.77% 4.26% 6.02% 2.77% 4.26% 6.02%
(unannualized)
1 Year 25.43 18.47 37.58 25.43 18.47 37.58
Inception 11.81 7.25 18.07 25.02 15.02 39.40
(12/31/93)
</TABLE>
* As of 12/31/95
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.
[Line Graph]
GROWTH OF $10,000
The sum of $10,000 invested at inception (12/31/93) and held until 12/31/95
would have grown to $12,502 in the Fund, $11,502 in the Lehman Aggregate Bond
Index or $13,940 in the S&P 500 Index assuming reinvestment of all dividends and
capital gains.
TOP HOLDINGS
STOCKS:
* First Data Corp.
* Citicorp
* Cisco Systems, Inc.
* Pfizer, Inc.
* Amgen, Inc.
BONDS:
* U.S. Treasury Note, 7.75%, 1/31/00
* U.S. Treasury Note, 12.00%, 8/15/13
* FNMA 10.00%, 10/1/19
* GNMA 9.25%, 9/15/01
* GNMA 9.00%, 6/15/11
Total number of holdings: 79
SIT BALANCED FUND
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1995 (UNAUDITED)
- --------------------------------------------------------------------------------
Quantity Name of Issuer Market Value(1)
- --------------------------------------------------------------------------------
COMMON STOCKS (52.9%) (2)
BUSINESS EQUIPMENT & SERVICES (5.1%)
800 Ceridian Corp. (3) $ 33,000
1,192 First Data Corp. 79,715
800 Office Depot, Inc. (3) 15,800
700 Paychex, Inc. 34,913
1,000 Sensormatic Electronics Corp. 17,375
180,803
CAPITAL GOODS (0.8%)
600 Owens-Corning Fiberglas Corp. (3) 26,925
CONSUMER NON-DURABLES (4.9%)
500 Coca Cola Co. 37,125
1,000 Gillette Co. (The) 52,125
600 Philip Morris Cos., Inc. 54,300
400 Proctor & Gamble Co. 33,200
176,750
CONSUMER SERVICES (2.9%)
1,300 CUC International, Inc. (3) 44,362
800 Marriot International, Inc. 30,600
600 Viacom Inc., Class B (3) 28,425
103,387
ENERGY (2.3%)
900 McDermott International, Inc. 19,800
500 Schlumberger Ltd. 34,625
1,500 Union Texas Petroleum Holdings,
Inc. 29,063
83,488
FINANCIAL (9.1%)
BANKING (2.8%)
1,000 Citicorp 67,250
1,000 Norwest Corp. 33,000
100,250
FINANCIAL SERVICES (2.2%)
500 American Express Co. 20,687
700 Federal Home Loan Mortgage Corp. 58,450
79,137
INSURANCE (4.1%)
600 American International Group, Inc. 55,500
600 EXEL Ltd. 36,600
700 Mercury General Corp. 33,425
400 MGIC Investment Corp. 21,700
147,225
HEALTH CARE (9.8%)
BIOTECHNOLOGY/ PHARMACEUTICALS (4.7%)
1,000 Amgen, Inc. (3) 59,375
800 Medtronic, Inc. 44,700
1,000 Pfizer, Inc. 63,000
167,075
MEDICAL EQUIPMENT/ SUPPLIES (2.3%)
600 Johnson & Johnson 51,375
600 Stryker Corp. 31,500
82,875
MEDICAL FACILITIES MANAGEMENT (2.8%)
300 HBO & Co. 22,987
1,000 HEALTHSOUTH Rehabilitation
Corp. (3) 29,125
700 Mid Atlantic Medical Services,
Inc. (3) 16,975
500 United HealthCare Corp. (3) 32,750
101,837
RAW MATERIALS (1.8%)
300 Monsanto Co. 36,750
400 Potash Corp. Saskatchewan, Inc. 28,350
65,100
RETAIL (1.8%)
1,100 Federated Department Stores,
Inc. (3) 30,250
700 Home Depot, Inc. (The) 33,512
63,762
TECHNOLOGY (13.2%)
AEROSPACE/ DEFENSE (1.3%)
600 Boeing Company 47,025
COMPUTER RELATED (2.3%)
900 Cisco Systems, Inc. (3) 67,162
500 Silicon Graphics, Inc. (3) 13,750
80,912
COMPUTER SOFTWARE/ SERVICES (4.1%)
500 Computer Associates International,
Inc. 28,438
500 Microsoft Corp. (3) 43,875
1,100 Oracle Systems Corp. (3) 46,612
400 Parametric Technology Corp. (3) 26,600
145,525
SEMICONDUCTORS & RELATED (2.4%)
400 Applied Materials, Inc. (3) 15,750
800 Intel Corp. 45,400
800 LSI Logic Corp. (3) 26,200
87,350
TELECOMMUNICATIONS EQUIPMENT (3.1%)
1,300 Airtouch Communications, Inc. (3) 36,725
800 DSC Communications Corp. (3) 29,500
400 Motorola, Inc. 22,800
600 Nokia Corp., A.D.R. 23,325
112,350
UTILITIES (1.2%)
800 Enron Corp. 30,500
500 MCI Communications, Inc. 13,062
43,562
Total common stocks (cost: $1,478,441) 1,895,338
BONDS (37.0%)
U.S. TREASURY (14.6%)
U.S. Treasury Notes:
250,000 7.75%, 1/31/00 271,653
100,000 12.00%, 8/15/13 154,266
U.S. Treasury Strips:
100,000 Principal Strip, 6.57%, 8/15/20 21,976
100,000 Interest Strip, 6.28% Effective
Yield on Purchase Date,
5/15/09 45,721
100,000 Interest Strip, 6.56%, Effective
Yield on Purchase Date,
11/15/15 29,495
523,111
ASSET-BACKED SECURITIES (1.4%)
25,000 American Housing Trust Corp.,
8.25%, 6/25/20 26,603
25,000 Green Tree Financial Corp.,
Series 1993-3, 6.40%, 10/15/18 23,762
50,365
CORPORATE BONDS & NOTES (3.3%)
20,000 Green Tree Financial Corp.,
7.25%, 9/15/26 20,907
50,000 Nac Re Corp., 7.15%, 11/15/05 51,063
50,000 Price/ Costco Inc., Convertible Deb.,
5.75%, 5/15/02 47,500
119,470
MORTGAGE PASS-THROUGH SECURITIES (17.7%)
FEDERAL NATIONAL MORTGAGE ASSOCIATION (3.1%)
100,423 10.00%, 10/1/19 109,473
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (9.0%)
57,844 9.00%, 6/15/11 61,182
37,322 9.00%, 12/15/16 39,336
90,647 9.25%, 9/15/01 96,443
7,742 9.75%, 2/1/01 8,169
34,361 10.50%, 3/15/19 37,812
29,328 11.25%, 10/15/00 31,641
29,691 11.25%, 10/15/11 31,637
13,918 11.75%, 3/15/00 15,112
321,332
COLLATERALIZED MORTGAGE OBLIGATIONS (5.6%)
25,000 FHLMC CMO,
1617, 6.25%, 3/15/23 24,589
50,000 FNMA 1994-38 Pac, 6.65%,
12/25/23 50,844
Vendee Mortgage Trust:
23,619 1992-1 2B, 7.75%, 9/15/10 24,076
25,000 1993-2 2C, 6.25%, 3/15/10 24,962
25,000 1992-1 2D, 7.75%, 12/15/14 26,261
25,000 1992-2 2D, 7.00%, 9/15/15 25,527
24,000 1994-3 2D, 7.75%, 5/15/18 25,883
202,142
Total Bonds (cost: $1,293,336) 1,325,893
SHORT TERM SECURITIES (9.1%)
170,000 General Motors Accept. Corp.,
5.84%, 1/2/9 169,972
155,000 SIT Money Market Fund,
5.44% (6) 155,000
Total Short Term (cost: $324,972) 324,972
Total investments in securities
(cost: $3,096,749) (7) $3,546,203
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 December 31, 1995 is
$292,085 and $1,115,363 in Developing Markets Growth Fund and International
Growth Fund, respectively, which represents 5.7% and 1.5% of the Fund's net
assets, respectively. The following table summarizes the purchase date and
cost basis of these securities:
<TABLE>
<CAPTION>
Purchase
Fund Security Date(s) Shares Cost Basis
<S> <C> <C> <C> <C>
Developing Markets Growth Fund PT Modern Photo 4/3/95 18,500 $ 77,176
Developing Markets Growth Fund International UNP Holdings 7/20/94-6/14/95 228,000 115,344
Developing Markets Growth Fund Pan Smak Pizza 12/22/95 55,500 35,103
Developing Markets Growth Fund PT Indofood Sukses 11/30/95 15,000 66,947
International Growth Fund PT Modern Photo 3/17/93-4/29/93 120,000 331,688
International Growth Fund International UNP Holdings 1/26/94 1,245,113 856,075
</TABLE>
(6) This security represents an investment in an affiliated party and comprises
1.6%, .7%, .1%, and 4.3% of the Small Cap Growth, International Growth,
Growth and Balanced Fund's net assets, respectively. See note 3 to the
accompanying financial statements.
(7) At December 31, 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 $5,101,338 $27,235,097 $61,035,563
Unrealized appreciation (depreciation) on
investments:
Gross unrealized appreciation $ 531,840 $5,941,628 $16,865,828
Gross unrealized depreciation (419,372) (1,015,934) (2,523,719)
Net unrealized appreciation $ 112,468 $4,925,694 $14,342,109
</TABLE>
<TABLE>
<CAPTION>
GROWTH &
GROWTH INCOME BALANCED
FUND FUND FUND
<S> <C> <C> <C>
Cost for federal income tax purposes $268,544,000 $33,817,704 $3,096,749
Unrealized appreciation (depreciation) on
investments:
Gross unrealized appreciation $114,005,907 $13,470,875 $ 485,672
Gross unrealized depreciation (6,311,820) (615,893) (36,218)
Net unrealized appreciation $107,694,087 $12,854,982 $ 449,454
</TABLE>
SIT MUTUAL FUND GROUP
STATEMENT OF ASSETS & LIABILITIES - DECEMBER 31, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
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............. $5,101,338 $27,235,097 $61,035,563 $268,544,000 $33,817,704 $3,096,749
Investments in securities, at
market value - see
accompanying schedule for
detail...................... $5,213,806 $32,160,791 $75,377,672 $376,238,087 $46,672,686 $3,546,203
Cash in bank on demand
deposit..................... 41,141 85,753 6,694 18,071 2,154 4,282
Dividends and accrued interest
receivable.................. 16,276 4,903 55,392 77,695 23,603 19,575
Receivable for investment
securities sold............. 73,455 82,920 ---- 3,455,230 655,569 28,308
Receivable for Fund shares
sold........................ 35,145 137,513 50,163 142,347 15,170 896
Total assets......... 5,379,823 32,471,880 75,489,921 379,931,430 47,369,182 3,599,264
LIABILITIES
Payable for investment securities
purchased................... 240,051 681,650 2,043,392 1,880,758 669,844 15,534
Payable for Fund shares
redeemed.................... ---- 1,260 9,881 639,729 199,144 275
Accrued investment management
and advisory services fee... 8,090 37,531 91,099 186,015 23,276 2,997
Other accrued expenses......... ---- ---- ---- 77,500 16,253 ----
Total liabilities.... 248,141 720,441 2,144,372 2,784,002 908,517 18,806
Net assets applicable to
outstanding capital stock... $5,131,682 $31,751,439 $73,345,549 $377,147,428 $46,460,665 $3,580,458
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.......... 550,722 1,896,922 4,792,279 27,217,905 1,580,968 301,817
Net asset value per share of
outstanding capital stock... $9.32 $16.74 $15.30 $13.86 $29.39 $11.86
</TABLE>
See accompanying notes to financial statements on pages 36-45.
SIT MUTUAL FUND GROUP
STATEMENTS OF OPERATIONS - SIX MONTHS ENDED DECEMBER 31, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
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 *....................... $29,500 $28,532 $302,940 $715,441 $202,305 $8,236
Interest.......................... 5,627 47,623 115,767 340,289 36,046 46,522
Total income................... 35,127 76,155 418,707 1,055,730 238,351 54,758
EXPENSES (NOTE 3):
Investment management and
advisory services fee............. 48,109 171,422 657,006 1,084,882 208,346 15,600
Custodian, transfer agent
and accounting services fees...... ---- ---- ---- 223,241 33,300 ----
Auditing and legal fees............. ---- ---- ---- 12,804 10,463 ----
Printing costs...................... ---- ---- ---- 22,905 3,324 ----
Postage ............................ ---- ---- ---- 6,125 1,954 ----
Registration fees................... ---- ---- ---- 34,607 19,059 ----
Directors' fees and expenses........ ---- ---- ---- 5,156 5,219 ----
Other............................... ---- ---- ---- 25,562 7,830 ----
Total expenses.................... 48,109 171,422 657,006 1,415,282 289,495 15,600
Less fees and expenses absorbed
by investment adviser.......... ---- ---- (124,298) ---- (62,111) ----
Total net expenses................ 48,109 171,422 532,708 1,415,282 227,384 15,600
Net investment income (loss)...... (12,982) (95,267) (114,001) (359,552) 10,967 39,158
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net realized gain (loss) (note 2). (84,036) 1,504,040 4,848,375 27,242,522 2,392,705 61,307
Net change in unrealized
appreciation (depreciation) of
investment..................... 59,703 2,846,569 (2,312,498) 32,148,937 2,395,762 175,209
Realized loss on foreign
currency transactions.......... (606) ---- (3,927) ---- ---- ----
Unrealized appreciation (depreciation)
on foreign currency transactions (111) ---- (1,839) ---- ---- ----
Net gain (loss) on investments. (25,050) 4,350,609 2,530,111 59,391,459 4,788,467 236,516
Net increase (decrease) in net assets
resulting from operations........... ($38,032) $4,255,342 $2,416,110 $59,031,907 $4,799,434 $275,674
</TABLE>
* Dividends are net of foreign withholding tax of $1,619 and $31,630 in the
Developing Markets Growth Fund and International Growth Fund, respectively.
See accompanying notes to financial statements on pages 36-45.
SIT MUTUAL FUND GROUP
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
DEVELOPING MARKETS SMALL CAP
GROWTH FUND GROWTH FUND
SIX MONTHS SIX MONTHS
ENDED ENDED
DECEMBER 31, YEAR ENDED DECEMBER 31, YEAR ENDED
1995 JUNE 30, 1995 JUNE 30,
(UNAUDITED) 1995 (UNAUDITED) 1995
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss)....................... ($12,982) $1,068 ($95,267) ($16,690)
Net realized gain (loss) on investments............ (84,036) (346,290) 1,504,040 79,816
Net realized loss on foreign currency transactions. (606) (749) ---- ----
Net change in unrealized appreciation
(depreciation) of investments..................... 59,703 52,765 2,846,569 2,079,125
Net change in unrealized appreciation (depreciation) of
foreign currency transactions..................... (111) (13) ---- ----
Net increase (decrease) in net assets resulting from
operations...................................... (38,032) (293,219) 4,255,342 2,142,251
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income.............................. (413) ---- ---- ----
Net realized gains on investments.................. (5,518) (17,476) (250,045) (17,840)
Total distributions............................... (5,931) (17,476) (250,045) (17,840)
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold.......................... 1,273,177 6,135,667 16,804,887 10,375,386
Reinvested distributions........................... 5,758 17,122 246,053 17,806
Payments for shares redeemed....................... (721,723) (1,223,761) (1,320,061) (502,440)
Increase (decrease) in net assets from
capital share transactions...................... 557,212 4,929,028 15,730,879 9,890,752
Total increase in net assets.................... 513,249 4,618,333 19,736,176 12,015,163
NET ASSETS
Beginning of period................................ 4,618,433 100 12,015,263 100
End of period...................................... $5,131,682 $4,618,433 $31,751,439 $12,015,263
NET ASSETS CONSIST OF:
Capital (par value and paid-in surplus)............ $5,486,233 $4,929,021 $25,621,731 $9,890,852
Undistributed (distributions in excess of) net
investment income................................. (12,969) 426 (95,267) ----
Accumulated net realized gain (loss) from
security transactions and foreign
currency transactions............................. (453,926) (363,766) 1,299,281 45,286
Unrealized appreciation (depreciation)
on investments.................................... 112,468 52,765 4,925,694 274,245
Unrealized appreciation (depreciation) on foreign
currency transactions............................. (124) (13) ---- ----
$5,131,682 $4,618,433 $31,751,439 $12,015,263
CAPITAL TRANSACTIONS IN SHARES:
Sold............................................... 135,878 606,755 1,074,325 931,351
Reinvested distributions........................... 630 1,723 15,573 1,696
Redeemed........................................... (76,677) (117,597) (83,399) (42,634)
Net increase (decrease)............................... 59,831 490,881 1,006,499 890,413
</TABLE>
<TABLE>
<CAPTION>
INTERNATIONAL GROWTH GROWTH & BALANCED
GROWTH FUND FUND INCOME FUND FUND
SIX MONTHS SIX MONTHS SIX MONTHS SIX MONTHS
ENDED ENDED ENDED ENDED
DECEMBER 31, YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, YEAR ENDED
1995 JUNE 30, 1995 JUNE 30, 1995 JUNE 30, 1995 JUNE 30,
(UNAUDITED) 1995 (UNAUDITED) 1995 (UNAUDITED) 1995 (UNAUDITED) 1995
<C> <C> <C> <C> <C> <C> <C> <C>
($ 114,001) $ 405,689 ($ 359,552) $ 50,605 $ 10,967 $ 159,215 $ 39,158 $ 50,937
4,848,375 1,189,544 27,242,522 25,409,872 2,392,705 1,917,168 61,307 (48,392)
(3,927) (17,082) ---- ---- ---- ---- ---- ----
(2,312,498) 3,216,287 32,148,937 52,036,551 2,395,762 7,081,827 175,209 327,093
(1,839) 3,632 ---- ---- ---- ---- ---- ----
2,416,110 4,798,070 59,031,907 77,497,028 4,799,434 9,158,210 275,674 329,638
(392,223) (171,445) (50,975) ---- (43,300) (131,512) (56,300) (42,750)
(3,774,246) (1,158,084) (35,900,021) (25,299,507) (3,279,734) (2,040,000) ---- ----
(4,166,469) (1,329,529) (35,950,996) (25,299,507) (3,323,034) (2,171,512) (56,300) (42,750)
9,968,777 18,209,502 32,954,123 56,655,364 4,632,129 7,686,224 978,338 1,160,193
3,963,657 1,271,854 34,550,289 23,722,299 3,243,091 2,113,345 54,049 42,696
(6,961,472) (18,523,460) (41,316,550) (89,871,342) (8,101,802) (6,187,506) (115,687) (341,220)
6,970,962 957,896 26,187,862 (9,493,679) (226,582) 3,612,063 916,700 861,669
5,220,603 4,426,437 49,268,773 42,703,842 1,249,818 10,598,761 1,136,074 1,148,557
68,124,946 63,698,509 327,878,655 285,174,813 45,210,847 34,612,086 2,444,384 1,295,827
$ 73,345,549 $ 68,124,946 $ 377,147,428 $ 327,878,655 $ 46,460,665 $ 45,210,847 $ 3,580,458 $ 2,444,384
$ 57,895,694 $ 50,924,732 $ 256,644,642 $ 230,456,780 $ 33,147,476 $ 33,374,058 $ 3,139,015 $ 2,222,315
(118,961) 387,263 (359,922) 50,605 (2,016) 30,317 (444) 16,698
1,223,586 153,384 13,168,621 21,826,120 460,223 1,347,252 (7,567) (68,874)
2,079,125 14,342,109 16,654,607 107,694,087 75,545,150 12,854,982 10,459,220 449,454
3,121 4,960 ---- ---- ---- ---- ---- ----
$ 73,345,549 $ 68,124,946 $ 377,147,428 $ 327,878,655 $ 46,460,665 $ 45,210,847 $ 3,580,458 $ 2,444,384
623,834 1,195,496 2,245,002 4,757,900 151,790 303,028 84,779 115,099
266,375 86,580 2,607,555 2,160,501 111,445 89,220 4,701 4,375
(433,774) (1,229,768) (2,853,665) (7,435,697) (275,139) (248,087) (10,013) (33,817)
456,435 52,308 1,998,892 (517,296) (11,904) 144,161 79,467 85,657
</TABLE>
See accompanying notes to financial statements on pages 36-45.
SIT MUTUAL FUND GROUP
NOTES TO FINANCIAL STATEMENTS
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.
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 begin to 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 period ended
December 31, 1995, were as follow:
<TABLE>
<CAPTION>
Purchases Proceeds
<S> <C> <C>
Developing Markets Growth Fund $ 1,853,905 $ 1,414,553
Small Cap Growth Fund 22,238,785 8,415,945
International Growth Fund 21,194,655 16,896,434
Growth Fund 87,830,041 112,412,162
Growth & Income Fund 7,903,647 12,478,268
Balanced Fund 1,811,067 1,184,126
</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:
<TABLE>
<CAPTION>
First Over
$30 Million $30 Million
----------- -----------
<S> <C> <C>
Growth Fund 1.50% 1.00%
Growth & Income Fund 1.50% 1.00%
</TABLE>
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 period ended December 31, 1995, for the International Growth
and Growth & Income Funds, SIA voluntarily absorbed an additional
$124,298 and $62,111, respectively, in expenses that were otherwise
payable by the Funds.
As of December 31, 1995, the Small Cap Growth Fund, International
Growth Fund, Growth Fund, and Balanced Fund had invested $510,000,
$510,000, $510,000, and $155,000, respectively, in the SIT Money Market
Fund. The terms of such transactions were identical to those of
non-related entities except that, to avoid duplicate investment
advisory fees, SIA remits to each Fund an amount equal to all fees
otherwise due to them under their investment management agreement for
the assets invested in the SIT Money Market Fund.
INVESTMENT SUB-ADVISER
SIA has entered into a sub-advisory arrangement with an affiliated
international investment adviser, Sit/Kim International Investment
Associates, Inc. ("SKI"). SKI provides investment research information
and portfolio management service for the Developing Markets Growth Fund
and International Growth Fund. Generally, as compensation for its
services under the sub-advisory agreement, SIA pays SKI a monthly fee
of 1/12 of .75% 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 $229,032 were paid or payable to SKI for the period ended December
31, 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
December 31, 1995:
<TABLE>
<CAPTION>
% Shares
Shares Outstanding
<S> <C> <C>
Developing Markets Growth Fund 279,580 50.77%
Small Cap Growth Fund 902,452 47.57
International Growth Fund 972,268 20.29
Growth Fund 2,475,352 9.09
Growth & Income Fund 342,591 21.67
Balanced Fund 124,454 41.23
</TABLE>
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 December 31, 1995 were $667.
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
<TABLE>
<CAPTION>
Six Months
Ended
December 31, Year Ended
1995 June 30,
(Unaudited) 1995
<S> <C> <C>
NET ASSET VALUE:
Beginning of period $9.41 $10.00
Operations:
Net investment income (loss) (.02) ----
Net realized and unrealized
losses on investments (.06) (.54)
Total from operations (.08) (.54)
DISTRIBUTIONS TO SHAREHOLDERS:
From realized gains (.01) (.05)
Total distributions (.01) (.05)
NET ASSET VALUE:
End of period $9.32 $9.41
Total investment return (1) (0.83%) (5.44%)
Net assets at end of period (000's omitted) $5,132 $4,618
RATIOS:
Expenses to average daily net assets 2.00%(2) 2.00%
Net investment income (loss) to average daily net assets (0.54%)(2) 0.03%
Portfolio turnover rate (excluding short-term securities) 31.08% 56.35%
</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) Adjusted to an annual rate.
SIT SMALL CAP GROWTH FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Six Months
Ended
December 31, Year Ended
1995 June 30,
(Unaudited) 1995
<S> <C> <C>
NET ASSET VALUE:
Beginning of period $13.49 $10.00
Operations:
Net investment income (loss) (.05) (.02)
Net realized and unrealized gains
on investments 3.44 3.56
Total from operations 3.39 3.54
DISTRIBUTIONS TO SHAREHOLDERS:
From realized gains (.14) (.05)
Total distributions (.14) (.05)
NET ASSET VALUE:
End of period $16.74 $13.49
Total investment return (1) 25.21% 35.59%
Net assets at end of period (000's omitted) $31,751 $12,015
RATIOS:
Expenses to average daily net assets 1.50%(2) 1.50%
Net investment income (loss) to average daily net assets (0.83%)(2) (0.30%)
Portfolio turnover rate (excluding short-term securities) 39.06% 49.39%
</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) Adjusted to an annual rate.
SIT INTERNATIONAL GROWTH FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Six Months
Ended
December 31,
1995 Years Ended June 30,
(Unaudited) 1995 1994 1993 1992 (1)
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE:
Beginning of period $ 15.71 $ 14.87 $ 11.99 $ 10.70 $ 10.00
Operations:
Net investment income (loss) (.03) .09 (.04) (.03) .03
Net realized and unrealized gains
on investments .56 1.06 3.08 1.35 .67
Total from operations .53 1.15 3.04 1.32 .70
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (.09) (.04) (.10) (.03) ----
From realized gains (.85) (.27) (.06) ---- ----
Total Distributions (.94) (.31) (.16) (.03) ----
NET ASSET VALUE:
End of period $ 15.30 $ 15.71 $ 14.87 $ 11.99 $ 10.70
Total investment return (2) 3.58% 7.86% 25.26% 12.37% 7.00%
Net assets at end of period (000's omitted) $ 73,346 $ 68,125 $ 63,699 $ 34,549 $ 24,631
RATIOS:
Expenses to average daily net assets 1.50%(3) 1.50%(3) 1.65%(3) 1.85% 1.85%(4)
Net investment income (loss) to average
daily net assets (0.32%)(3) 0.62%(3) (0.16%)(3) (0.29%) 0.67%(4)
Portfolio turnover rate (excluding
short-term securities) 25.38% 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) Percentages for the period ended December 31, 1995, are adjusted to an
annual rate. Total Fund expenses are contractually limited to 1.85% of
average daily net assets. However, during the period ended December 31,
1995, and years ended June 30, 1995 and 1994, the investment adviser
voluntarily absorbed $124,298, $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 period ended December 31, 1995, and 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 (0.67%), 0.27% and (0.36%),
respectively.
(4) Adjusted to an annual rate.
SIT GROWTH FUND
FINANCIAL HIGHLIGHTS
Per share amounts prior to December 10, 1993 have been restated to reflect the 4
to 1 stock split.
<TABLE>
<CAPTION>
Six Months
Ended
December 31,
1995 Years Ended June 30,
(Unaudited) 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE:
Beginning of period $13.00 $11.08 $11.91 $10.52 $9.35 $8.70
Operations:
Net investment income (loss) (.01) ---- (.01) .03 .04 .07
Net realized and unrealized gains
(losses) on investments 2.32 2.96 (.51) 1.43 1.22 1.05
Total from operations 2.31 2.96 (.52) 1.46 1.26 1.12
Distributions to Shareholders:
From net investment income ---- ---- (.02) (.05) (.06) (.08)
From realized gains (1.45) (1.04) (.29) (.02) (.03) (.39)
Total distributions (1.45) (1.04) (.31) (.07) (.09) (.47)
NET ASSET VALUE:
End of period $13.86 $13.00 $11.08 $11.91 $10.52 $9.35
Total investment return (1) 18.32% 28.44% (4.62%) 13.88% 13.34% 14.13%
Net assets at end of period (000's omitted) $377,147 $327,879 $285,175 $341,702 $241,831 $122,677
RATIOS:
Expenses to average daily net assets 0.77%(2) 0.83% 0.82% 0.80% 0.83% 1.03%
Net investment income (loss) to average
daily net assets (0.20%)(2) 0.02% (0.08%) 0.35% 0.52% 0.96%
Portfolio turnover rate (excluding
short-term securities) 24.78% 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.
(2) Adjusted to an annual rate.
SIT GROWTH & INCOME FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Six Months
Ended
December 31,
1995 Years Ended June 30,
(Unaudited) 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE:
Beginning of period $28.38 $23.89 $25.61 $24.22 $21.89 $22.64
Operations:
Net investment income .01 .11 .23 .33 .38 .58
Net realized and unrealized gains
(losses) on investments 3.27 5.88 (.33) 1.94 2.91 (.01)
Total from operations 3.28 5.99 (.10) 2.27 3.29 .57
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (.03) (.09) (.23) (.34) (.43) (.69)
From realized gains (2.24) (1.41) (1.39) (.54) (.53) (.63)
Total distributions (2.27) (1.50) (1.62) (.88) (.96) (1.32)
NET ASSET VALUE:
End of period $29.39 $28.38 $23.89 $25.61 $24.22 $21.89
Total investment return (1) 11.65% 26.33% (0.58%) 9.52% 15.22% 3.10%
Net assets at end of period (000's omitted) $46,461 $45,211 $34,612 $37,602 $32,040 $21,112
RATIOS:
Expenses to average daily net assets 1.00%(2) 1.00%(2) 1.10%(2) 1.42% 1.50% 1.50%
Net investment income to average daily
net assets 0.05%(2) 0.42%(2) 0.89%(2) 1.31% 1.92% 2.74%
Portfolio turnover rate (excluding
short-term securities) 18.13% 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) Percentages for the period ended December 31, 1995, are adjusted to an
annual rate. During the period ended December 31, 1995, and years ended
June 30, 1995 and 1994, the investment adviser voluntarily absorbed
$62,111, $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
1.27%, for the period ended December 31, 1995, and 1.35% and 1.40% for
the years ended June 30, 1995 and 1994, respectively, and the ratio of
net investment income to average daily net assets would have been
(0.22%), 0.07% and 0.59%, respectively.
SIT BALANCED FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Six Months
Ended
December 31, Year Ended Period Ended
1995 June 30, June 30,
(Unaudited) 1995 1994 (1)
<S> <C> <C> <C>
NET ASSET VALUE:
Beginning of period $10.99 $9.48 $10.00
Operations:
Net investment income .14 .28 .13
Net realized and unrealized gains
(losses) on investments .94 1.50 (.59)
Total from operations 1.08 1.78 (.46)
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (.21) (.27) (.06)
Total distributions (.21) (.27) (.06)
NET ASSET VALUE:
End of period $11.86 $10.99 $9.48
Total investment return (2) 9.94% 19.16% (4.56%)
Net assets at end of period (000's omitted) $3,580 $2,444 $1,296
RATIOS:
Expenses to average daily net assets 1.00%(3) 1.00% 1.00%(3)
Net investment income to average daily net assets 2.51%(3) 2.97% 2.87%(3)
Portfolio turnover rate (excluding short-term securities) 42.20% 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.
Directors:
Eugene C. Sit, CFA
Peter L. Mitchelson, CFA
John E. Hulse
Sidney L. Jones
Donald W. Phillips
William E. Frenzel
Director Emeritus:
Melvin C. Bahle
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.
SEMI-ANNUAL REPORT
STOCK FUNDS
December 31, 1995
INVESTMENT ADVISER
Sit Investment Associates, Inc.
4600 Norwest Center
Minneapolis, MN 55402
612-334-5888 (Metro Area)
800-332-5580
INVESTMENT SUB-ADVISER
(Developing Markets Growth Fund and International
Growth Fund)
Sit/Kim International Investment Associates, Inc.
4600 Norwest Center
Minneapolis, MN 55402
612-334-5888 (Metro Area)
800-332-5580
DISTRIBUTOR
SIA Securities Corp.
4600 Norwest Center
Minneapolis, MN 55402
612-334-5888 (Metro Area)
800-332-5580
CUSTODIAN
Norwest Bank Minnesota, N.A.
733 Marquette Avenue
Minneapolis, MN 55479
TRANSFER AGENT AND
DISBURSING AGENT
First Data Investor Services
P.O. Box 9763
Providence, RI 02940-9763
AUDITORS
KPMG Peat Marwick LLP
4200 Norwest Center
Minneapolis, MN 55402
LEGAL COUNSEL
Dorsey & Whitney P.L.L.P.
220 South Sixth Street
Minneapolis, MN 55402
MEMBER OF
100%
NO-LOAD
MUTUAL FUND
COUNCIL
