STOCK FUNDS SEMI-ANNUAL REPORT
DECEMBER 31, 1996
A FAMILY OF 100% NO-LOAD FUNDS
DEVELOPING MARKETS GROWTH FUND
SMALL CAP GROWTH FUND
INTERNATIONAL GROWTH FUND
MID CAP GROWTH FUND
LARGE CAP GROWTH FUND
BALANCED FUND
[LOGO]
SIT MUTUAL FUNDS
A LOOK AT THE SIT MUTUAL FUNDS
The Sit Mutual Funds 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 $5.2 billion for some
of America's largest corporations, foundations and endowments.
The Sit Mutual Funds 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
SIT FAMILY OF FUNDS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
STABILITY: INCOME: GROWTH & INCOME: GROWTH:
Safety of principal Increased income Long-term capital Long-term capital
and current income appreciation and appreciation
income
Money Market Bond Large Cap Growth Developing Markets Growth
Minnesota Tax-Free Income Balanced Small Cap Growth
Tax-Free Income International Growth
U.S. Government Securities Mid Cap Growth
</TABLE>
SIT MUTUAL FUNDS
STOCK FUNDS SEMI-ANNUAL REPORT
TABLE OF CONTENTS
PAGE
Chairman's Letter.............................................. 2
Performance Review............................................. 4
Fund Reviews and Portfolios of Investment
Developing Markets Growth Fund........................... 6
Small Cap Growth Fund.................................... 10
International Growth Fund................................ 14
Mid Cap Growth Fund...................................... 18
Large Cap Growth 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........................................... 41
This document must be preceded or accompanied by a Prospectus.
SIT MUTUAL FUNDS
CHAIRMAN'S LETTER - DECEMBER 31, 1996
[PHOTO]
Dear Fellow Shareholders,
Most global equity markets recorded strong results during the calendar year
ended December 31, 1996. Despite higher U.S. interest rates in 1996, domestic
stocks advanced on positive economic momentum, healthy corporate earnings
growth, generally contained inflation and large capital flows into equity mutual
funds.
Economic Overview
The U.S. economy finished on a strong note in 1996, as fourth quarter real
GDP rose at a +4.7% annual rate, which was considerably higher than our
forecast. This resulted in a 1996 calendar growth rate of +2.5%, which was in
line with our expectations. Despite weak initial retail reports, personal
consumption expenditures contributed significantly to fourth quarter growth.
Surprisingly, net exports contributed a similar amount, even though the U.S.
dollar strengthened during the fourth quarter. On the consumer side, real final
sales rose +4.9%, which reflects the strong and stable levels of consumer income
and spending during most of 1996. More recently, however, consumer spending has
decelerated, while savings rates have increased. Purchasing activity in the
manufacturing sector also implies modest expansionary conditions at the present
time. Outside the U.S., the dollar's higher value could impact trade prospects,
but we believe that U.S. exports will remain reasonably competitive in the near
term. We are projecting an approximate +2.9% economic growth rate for 1997,
although the quarterly pattern of growth will not likely be smooth.
With respect to inflation, it remains tolerable at the consumer level, with
the latest year-over-year increase in the CPI showing a +3.3% increase. Food and
energy prices have risen, although we believe this was largely the result of
seasonal factors. Excluding these items, the "core" rate of inflation remains at
+2.6%. At the producer level, prices paid for finished goods rose +2.8%
according to the PPI. Looking ahead, commodity price pressures, particularly in
grains, appear well contained. Energy prices, which increased strongly in 1996,
should also decelerate, particularly in the natural gas area where prices have
become decoupled with storage levels. On the wage front, the recent Employment
Cost Index report was positive, although we are monitoring changes in salaries
and benefits closely, since they appear to be in a bottoming trend. In 1997, we
are forecasting consumer inflation of approximately +3.2%.
Fiscal policy will also be a significant factor to 1997's investment
environment. Several important fiscal policy issues lie ahead such as the
balanced budget proposal and major entitlement reform, including possible
revisions to the CPI that could save up to $1 trillion in government
expenditures over 12 years. Social security reform is on the agenda with three
possible plans for modification being advanced by an advisory council. President
Clinton has also stated that education will be his major priority in 1997;
however, we believe that initiatives in this area must consider the broader
fiscal policy issues. Immediately following November's elections, Republicans
and Democrats emphasized bipartisanship as a necessary element of substantive
reforms. Financial markets will be watching closely as the 105th Congress begins
the budget process. Through the first three months of fiscal 1997, the federal
deficit was slightly higher than in 1996, but most estimates call for a stable
deficit in 1997 in the $120-130 billion range.
Given our expectations for continued moderate economic growth and contained
inflation in 1997, we expect that the Federal Reserve will maintain the neutral
policy stance that has been in place for several months but with a bias toward
restraint. Long-term bond yields are expected to remain within a fairly narrow
trading range in 1997. Even though 30-year U.S. Treasury yields rose by nearly
30 basis points in December, they have receded and are presently at the 6 3/4%
level. From this level, we believe rates should remain fairly stable in the near
term, and we are calling for a 6 1/2-7% range for the first half of the year. On
the short end of the curve, rates could edge slightly higher if the Fed
increases the fed funds rate, but we believe that a single rate adjustment might
not significantly drive long-term rates higher.
Stable U.S. interest rates will also be important to international equity
returns. The U.S. dollar rose strongly during the fourth quarter, particularly
against the Japanese yen and the German mark. Real interest rate differentials
and structural reforms within each of these markets appear to be the primary
reasons for the dollar's strength. Unlike 1995, foreign investors were somewhat
reluctant to participate in U.S. equity markets, a likely result of strong
European and Asian equity market performance. Looking ahead, European monetary
authorities continue to have room to lower rates further to stimulate their
economies; however, it is expected that the impact of the Maastricht criteria
for European union will be detrimental. Japan is currently grappling with
structural reforms within its economy and will rely on higher exports due to yen
weakness as a means of stimulating growth.
Equity Investment Strategy
We believe the fundamental underpinnings necessary for the outperformance
of financial assets remain intact. Given the strong returns of 1995 and 1996,
domestic equity performance should be more in line with historical norms in
1997. The domestic equity market appears fairly valued at the present time on
the basis of price relative to sales, cash flow and earnings. The S&P 500
Index's valuation at 19 times estimated calendar 1997 earnings is consistent
with prior periods of moderate growth and low inflation, but its recent strength
suggests that a cyclical correction may be in order over the near term.
Although growth stocks underperformed slightly during the fourth quarter,
we believe the investment environment in 1997 will be favorable for growth stock
investing. The moderate economic growth we are forecasting should translate into
decelerating earnings growth for the companies in the S&P 500 Index, enhancing
the relative attractiveness of companies that can provide consistently high
rates of earnings growth.
In the domestic growth funds, we are maintaining modest amounts of
opportunity cash reserves in light of the market's recent momentum. We will
continue to emphasize investments in technology and health care as avenues for
superior earnings growth, and these sectors have begun to perform increasingly
well thus far in 1997. Given our forecasts, we also may look to increase our
exposure to financial services stocks should growth slow measurably early in the
year. Investment themes we are pursuing continue to include
productivity-enhancing companies and the outsourcing of business and health care
services. Sentiment in the semiconductor and biotechnology sectors also is
improving and could provide future opportunities.
The international growth funds continue to emphasize growth opportunities
on a global and regional scale. We are modestly expanding our exposure to
European growth companies that stand to benefit from corporate restructuring or
that have dominant positions in global markets. We are also hedging the German
mark as a means of protecting these positions. Asian equities remain the funds'
primary investment focus, and we are bullish on investments in Hong Kong,
Singapore and Taiwan, particularly as China continues to develop as a global
economic power. Latin American equities should also be bolstered by favorable
valuations and improving economic fundamentals.
We appreciate your continued interest and support as shareholders in the
Sit Mutual Funds. We continue to strive to provide superior results for
obtaining your investment goals.
With best wishes,
/s/ Eugene C. Sit
Eugene C. Sit, CFA
Chairman & Chief Investment Officer
SIT MUTUAL FUNDS
DECEMBER 31, 1996 PERFORMANCE REVIEW - STOCK FUNDS
Stock Funds Review
Domestic stocks performed strongly during the fourth quarter ended December
31, 1996, amid continued indications of moderate growth and healthy corporate
earnings. Investor enthusiasm was also bolstered by November's election results
and the perception of increased bipartisanship in Washington. Momentum continued
to favor large company stocks, as the DJIA surged +10.2% and the S&P 500 Index
rose +8.3% during the quarter. In fact, nearly one-third of the S&P 500 Index's
+23.0% return in 1996 was provided by the ten largest companies in the index.
Medium and smaller-sized companies also performed positively during the quarter,
as seen in the +6.1% rise in the S&P Midcap 400 Index and the +5.2% advance in
the Russell 2000 Index.
Generally declining interest rates and rising energy prices, particularly
for oil, sparked an acceleration in the typically value-oriented financial
services and energy sectors. For these reasons, growth stocks lagged value
stocks in varying degrees across all capitalization ranges during the quarter.
However, growth-oriented stocks in the consumer, pharmaceutical and technology
sectors did perform well on advances in earnings and price-earnings multiple
expansion. For calendar 1996, large cap growth stocks outperformed value stocks
by approximately +2.4%, led by technology issues. Energy issues performed most
positively in the medium and small cap groups during the year. Given our
expectations for moderate growth again in 1997, we believe that growth stocks
will be favorably positioned relative to their value counterparts.
International markets also provided strong results during the fourth quarter
and for the entire year. The Pacific Rim markets, most notably Hong Kong and
Malaysia, recorded strong gains during the quarter, and the MSCI Pacific
Ex-Japan gained +8.4%. The MSCI EAFE, a broad measure of non-U.S. performance,
gained only +1.6% during this time and was considerably impacted by Japan's
- -11.5% decline in U.S. dollar terms, which was the result of several proposals
for structural reform. Europe also performed strongly, and the MSCI Europe Index
rose +9.6%. In 1996, the MSCI Europe, Pacific Ex-Japan and EAFE Indices rose
+21.1%, +20.5% and +6.1%, respectively.
<TABLE>
<CAPTION>
TOTAL RETURN - CALENDAR YEAR
1985 1986 1987 1988 1989 1990 1991
<S> <C> <C> <C> <C> <C> <C> <C>
SIT DEVELOPING MARKETS GROWTH ---- ---- ---- ---- ---- ---- ----
(NASDAQ Symbol: SDMGX)
SIT SMALL CAP GROWTH ---- ---- ---- ---- ---- ---- ----
(NASDAQ Symbol: SSMGX)
SIT INTERNATIONAL GROWTH ---- ---- ---- ---- ---- ---- 4.10%(1)
(NASDAQ Symbol: SNGRX)
SIT MID CAP GROWTH 43.65% 10.33% 5.50% 9.77% 35.15% -2.04% 65.50
(NASDAQ Symbol: NBNGX)
SIT LARGE CAP GROWTH 23.48 21.83 5.32 5.33 32.02 -2.37 32.72
(NASDAQ Symbol: SNIGX)
SIT BALANCED ---- ---- ---- ---- ---- ---- ----
MSCI EMERGING MARKETS FREE INDEX(2) ---- ---- ---- ---- ---- ---- ----
RUSSELL 2000 INDEX(3) ---- ---- ---- ---- ---- ---- ----
EAFE INDEX(4) ---- ---- ---- ---- ---- ---- 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>
[WIDE TABLE CONTINUED FROM ABOVE]
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C>
SIT DEVELOPING MARKETS GROWTH ---- ---- -2.02%(1) -4.29% 17.27%
(NASDAQ Symbol: SDMGX)
SIT SMALL CAP GROWTH ---- ---- 11.57(1) 52.16 14.97
(NASDAQ Symbol: SSMGX)
SIT INTERNATIONAL GROWTH 2.69% 48.37% -2.99 9.36 10.31
(NASDAQ Symbol: SNGRX)
SIT MID CAP GROWTH -2.14 8.55 -0.47 33.64 21.87
(NASDAQ Symbol: NBNGX)
SIT LARGE CAP GROWTH 4.94 3.15 2.83 31.66 23.05
(NASDAQ Symbol: SNIGX)
SIT BALANCED ---- ---- -0.33 25.43 15.80
MSCI EMERGING MARKETS FREE INDEX(2) ---- ---- 2.80 -6.94 3.92
RUSSELL 2000 INDEX(3) ---- ---- 4.61 28.45 16.49
EAFE INDEX(4) -12.17 32.56 7.78 11.21 6.05
NASDAQ OTC COMPOSITE INDEX 15.45 14.75 -3.20 39.92 22.71
S&P 500 INDEX 7.64 10.07 1.32 37.58 22.96
</TABLE>
<TABLE>
<CAPTION>
TOTAL RETURN AVERAGE ANNUAL TOTAL RETURNS FOR
QUARTER SIX MONTHS THE PERIODS ENDED DECEMBER 31, 1996
ENDED ENDED SINCE
INCEPTION 12/31/96 12/31/96 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SIT DEVELOPING MARKETS GROWTH 07/01/94 -0.73% -0.18% 17.27% ---- ---- ---- 3.87%
SIT SMALL CAP GROWTH 07/01/94 -2.60 -0.12 14.97 ---- ---- ---- 30.61
SIT INTERNATIONAL GROWTH 11/01/91 4.51 3.68 10.31 5.38% 12.26% ---- 12.71
SIT MID CAP GROWTH 09/02/82 1.81 8.41 21.87 17.47 11.48 15.89% 19.13
SIT LARGE CAP GROWTH 09/02/82 3.99 10.37 23.05 18.54 12.51 13.09 15.16
SIT BALANCED 12/31/93 4.28 8.57 15.80 13.13 ---- ---- 13.13
MCSI EMERGING MARKETS FREE INDEX (2) -0.89 -4.93 3.92 ---- ---- ---- -0.24
RUSSELL 2000 INDEX (3) 5.20 5.56 16.49 ---- ---- ---- 19.60
EAFE INDEX (4) 1.59 1.46 6.05 8.32 8.15 ---- 7.92
NASDAQ OTC COMPOSITE INDEX (5) 5.23 8.95 22.71 18.45 17.10 13.98 14.75
S&P 500 INDEX (5) 8.34 11.68 22.96 19.68 15.22 15.28 17.42
</TABLE>
(1)Period from Fund inception through calendar year-end.
(2)Figures assume an inception date of 6/30/94.
(3)Figures assume an inception date of 7/1/94.
(4)Figures assume an inception date of 10/31/91.
(5)Figures assume an inception date of 9/2/82.
PLEASE REMEMBER THAT PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS
AND IS ONLY ONE OF THE FACTORS TO CONSIDER IN CHOOSING A FUND. AS WITH ALL
INVESTMENTS, THE SHARE PRICE AND RETURN MAY VARY, AND YOU MAY HAVE A GAIN OR
LOSS AT THE TIME OF SALE.
SIT DEVELOPING MARKETS GROWTH FUND REVIEW
DECEMBER 31, 1996
[PHOTO]
EUGENE C. SIT, CFA
SENIOR PORTFOLIO MANAGER
ANDREW B. KIM, CFA
SENIOR PORTFOLIO MANAGER
The Sit Developing Markets Growth Fund returned -0.18% for the six months
ended December 31, 1996, surpassing the MSCI Emerging Market Index return of
- -4.93%. Investment performance for emerging markets has stagnated during the
past two quarters as the flow of funds diminished. The Index was further
impacted by the -10.5% decline in South Africa, which represents 11% of the
Index. Stock selection in Singapore, Hong Kong and Israel also contributed to
the Fund's outperformance.
The excesses in the Asian emerging markets that led to overheating in 1994
have finally been purged. With a positive liquidity environment, we believe most
stock markets in the region have room to rise. Valuation in the region is quite
reasonable having contracted steadily over the past three years from the peak of
1993. Our target weighting is 55%, with the more developed markets of Singapore,
Hong Kong and Malaysia comprising approximately 25% of the portfolio.
We are increasing our allocation to Latin America to take advantage of
increased fund flows and positive structural changes. More specifically, we
recently added a Mexican conglomerate, Grupo Casa Autrey, as well as CTC, the
dominant Chilean telecom operator. Brazil remains our largest Latin American
weighting at 10%, and our target weighting for the region is 35%.
We reduced the Fund's holdings in other emerging markets subsequent to
year-end. We continue to invest in these markets on a selective, bottom-up
basis. During the past quarter we added Telecel, a wireless telephone operator
in Portugal.
Looking forward to 1997, we will continue to focus on three major themes:
consumer stocks benefiting from rising per capita consumption; dominant telecom
operators; and financial services. Although emerging markets demonstrated rather
lackluster performance during the past six months, the rally which began in
mid-December has continued well into this year. We are optimistic about these
markets, particularly Latin America, which will continue to benefit from excess
global liquidity.
INVESTMENT OBJECTIVE AND STRATEGY
The objective of the Sit 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 12/31/96: $10.93 Per Share
6/30/96: $10.95 Per Share
Total Net Assets: $10.83 Million
PORTFOLIO STRUCTURE - BY REGION
(% of total net assets)
[BAR CHART]
SIT DEVELOPING MARKETS MSCI Emerging
GROWTH FUND Markets Free Index
Pacific Basin 48.0 50.2
Latin
America 25.8 30.1
Africa/
Middle East 8.9 13.1
Europe 5.9 6.6
Other Assets & Liabilities 11.4 N/A
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS* CUMULATIVE TOTAL RETURNS*
----------------------------- -------------------------
Developing Morgan Stanley Lipper Developing Morgan Stanley Lipper
Markets International Emerging Markets International Emerging
Growth Emerging Markets Markets Growth Emerging Markets Markets
Fund Free Index Index Fund Free Index Index
<C> <C> <C> <C> <C> <C> <C>
3 Months -0.73% -0.89% 0.79% -0.73% -0.89% 0.79%
(unannualized)
1 Year 17.27 3.92 12.15 17.27 3.92 12.15
Inception 3.87 -0.24 2.68 9.98 -0.60 6.86
(7/1/94)
</TABLE>
* As of 12/31/96
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 EMERGING MARKETS FREE INDEX. THE LIPPER AVERAGES AND
INDICES ARE OBTAINED FROM LIPPER ANALYTICAL SERVICES, INC., A LARGE INDEPENDENT
EVALUATOR OF MUTUAL FUNDS.
GROWTH OF $10,00
[GRAPH]
The sum of $10,000 invested at inception (7/1/94) and held until 12/31/96 would
have grown to $10,998 in the Fund or $9,940 in the Morgan Stanley Capital Int'l
Emerging Markets Free Index assuming reinvestment of all dividends and capital
gains.
10 LARGEST HOLDINGS
Datacraft Asia Ltd.
Korea Electric Power, A.D.R.
Tadiran Telecom, A.D.R.
Banco Latinoamericano
Cemig, A.D.R.
Teva Pharmaceutical, A.D.R.
Hutchison Whampoa
Bangkok Bank
Panamerican Beverage, Inc.
Malaysian Assurance Alliance
Total number of holdings: 60
SIT DEVELOPING MARKETS GROWTH FUND
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1996 (UNAUDITED)
QUANTITY NAME OF ISSUER MARKET VALUE (1)
COMMON & PREFERRED STOCKS (88.6%) (2)
AFRICA/ MIDDLE EAST (8.9%)
ISRAEL (7.7%)
14,700 Home Centers, A.D.R. (Retail)(3) $ 67,987
10,600 Nice Systems Ltd., A.D.R.
(Utilities) (3) 190,800
14,000 Tadiran Telecom, A.D.R.
(Utilities) (3) 313,250
5,200 Teva Pharmaceutical, A.D.R.
(Health Care) 261,300
-------
833,337
-------
SOUTH AFRICA (1.2%)
9,800 Morgan Stanley Africa Investment
Fund (Multi-Industry) 133,525
-------
ASIA (48.0%)
HONG KONG (6.1%)
23,000 Citic Pacific Ltd. (Utilities) 133,519
138,627 First Pacific Co. (Multi-Industry) 180,128
32,500 Hutchison Whampoa
(Multi-Industry) 255,269
414,000 Nanjing Panda (Technology)(3) 90,995
-------
659,911
-------
INDONESIA (3.8%)
272,000 PT Dynaplast (Consumer
Non-Durables)(5) 151,229
37,000 PT Modern Photo (Consumer
Services)(5) 117,485
65,000 PT Ramayana Lestari (Retail)(3) 140,347
-------
409,061
KOREA (5.6%)
18,900 Korea Electric Power (Utilities)(3) 387,450
13,000 Kookmin Bank (Banking) 212,400
62 Samsung Electronics, G.D.R.
(Technology)(4) 2,343
-------
602,193
-------
MALAYSIA (6.2%)
57,000 DCB Holdings (Financial) 195,229
7,000 Genting Berhad (Consumer
Services) 48,228
44,000 IJM Berhad Corp. (Capital Goods) 103,663
46,000 Malaysian Assurance Alliance
(Financial) 224,035
27,000 Sime Darby Berhad (Multi-Industry) 106,375
-------
677,530
-------
PHILIPPINES (6.1%)
125,625 Ayala Land 'B' (Shelter) $ 143,298
13,000 Benpres Holdings Corp., G.D.R.
(Consumer Services)(3) 97,500
215,500 DMCI Holdings, Inc. (Shelter)(3) 141,345
21,645 Manila Electric Company (Utilities) 176,946
2,100 Philippine Long Distance, A.D.R.
(Utilities) 107,100
-------
666,189
-------
SINGAPORE (10.8%)
13,000 Cerebos Pacific Ltd. (Consumer
Non-Durables) 96,620
17,200 City Developments (Shelter) 154,877
61,000 Clipsal Industries (Capital
Goods) (4) 222,040
234,000 Datacraft Asia Ltd. (Technology) 390,780
330,000 Informatics Holdings (Consumer
Services) (3) 149,753
14,000 United Overseas Bank (Financial) 156,078
---------
1,170,148
---------
TAIWAN (2.1%)
4,754 President Enterprises, G.D.R.
(Consumer Non-Durables)
(3)(4) 85,579
14,280 Yageo, G.D.R. (Technology)(3) 144,585
-------
230,164
-------
THAILAND (7.3%)
9,000 Advanced Info Services
(Technology) 76,503
8,000 Ban Pu Coal (Energy) 148,483
25,100 Bangkok Bank (Financial) 242,720
14,000 Grammy Entertainment
(Consumer Services)(3) 159,401
22,700 Krung Thai Bank (Financial) 43,814
28,000 Siam Makro (Retail) 117,913
-------
788,834
-------
EUROPE (5.9%)
CZECH REPUBLIC (1.1%)
1,000 SPT Telecom (Utilities)(3) 122,169
-------
NETHERLANDS (1.8%)
3,279 Ceteco Holdings, A.D.S. (Retail)(4) 188,903
-------
POLAND (0.6%)
141,000 Pan Smak Pizza (Consumer
Non-Durables)(3)(5) 62,802
-------
PORTUGAL (2.4%)
7,100 Portugal Telecom, A.D.R.
(Utilities) $ 200,575
1,000 Telecel, A.D.S. (Utilities) (3)(4) 63,910
------
264,485
-------
LATIN AMERICA (25.8%)
BRAZIL (9.5%)
285,000 Brahma (Preferred) (Consumer
Non-Durables) 155,789
8,980 Cemig, A.D.R. (Utilities) (3)(4) 303,075
81,000 Makro Brazil (Retail) (3) 52,228
2,200 Telebras, A.D.R. (Utilities) 168,300
2,250,000 Telecom Brasileiras, S.A.
(Utilities) 161,317
15,000 TV Filme, Inc. (Consumer
Services) (3) 191,250
-------
1,031,959
---------
CHILE (4.8%)
2,000 Compania Telecom Chile, A.D.R.
(Utilities) 202,250
4,300 Enersis, A.D.R. (Utilities) 119,325
8,700 Santa Isabel, A.D.S. (Retail) 196,838
-------
518,413
-------
MEXICO (4.9%)
7,700 Controladora Comercial, A.D.R.
(Retail) (3) 137,638
8,000 Grupo Casa Autrey, A.D.R.
(Consumer Non-Durables) 156,000
4,900 Panamerican Beverage, Inc.
(Consumer Non-Durables) 229,688
-------
523,326
-------
PANAMA (2.8%)
6,000 Banco Latinoamericano
(Financial) 304,500
-------
PERU (3.8%)
6,300 Credicorp, A.D.R. (Financial) 116,550
166,665 Luz Del Sur (Utilities) (3) 200,394
5,000 Telefonica Del Peru, A.D.R.
(Utilities) (3) 94,377
------
411,321
-------
Total common and preferred stocks
(cost: $8,284,296) 9,598,770
---------
SHORT-TERM SECURITIES (10.6%)
350,000 Ford Motor Credit Corp.,
5.55%, 1/8/97 $ 349,622
350,000 General Motors Accept. Corp.,
5.78%, 1/6/97 349,719
451,000 Household Finance Corp.
6.00%, 1/3/97 450,850
-------
Total short-term securities
(cost: $1,150,191) 1,150,191
---------
Total investments in securities
(cost: $9,434,487) (7) $ 10,748,961
============
See accompanying notes to portfolios of investments on page 31.
SIT MID CAP GROWTH FUND REVIEW
December 31, 1996
[PHOTO]
EUGENE C. SIT, CFA
SENIOR PORTFOLIO MANAGER
The Sit Small Cap Growth Fund achieved a +15.0% total return during the
year ended December 31, 1996. The Fund's 1996 performance once again exceeded
the long-term average historical return for small cap stocks but was
considerably below 1995's unsustainable pace. Since the Fund's inception in July
1994, it has recorded an annualized total return of +30.6%. During the fourth
quarter, the Fund's performance trailed the benchmark indices as high-growth
companies, in general, provided below-average results. However, we believe the
fundamental characteristics of the companies in the Fund's portfolio will
continue to offer above-average potential.
The most significant portfolio changes made during the quarter included
increases in financial services, energy and technology holdings based on
generally positive earnings trends within these groups. New securities added to
the portfolio included Enterprise Systems (health care materials management
software), RCSB Financial (a New York savings institution) and Triumph Group
(mechanical aircraft components).
We remain optimistic on small cap growth stocks based on several criteria,
primarily that small companies continue to provide superior earnings growth
potential and have valuation appeal relative to their growth rates. We are
currently positioning the portfolio to capitalize on high quality growth
opportunities in the areas of semiconductor-related equipment,
productivity-enhancing software, death care and health care information systems.
We also intend to maintain the Fund's weighted average market capitalization
near the current $450 million, a range containing a variety of dynamic small cap
investment opportunities.
We estimate that the companies in the Fund's portfolio will generate
significant earnings growth that should exceed +40% on a weighted average basis
in 1997. This rate of expansion is well above the estimated growth rates for the
broad market and small company stock indices. The portfolio's price-earnings
ratio is currently valued at nearly a 50% discount to its estimated growth rate
for 1997, which historically has represented a very attractive valuation
opportunity for growth-oriented investors.
INVESTMENT OBJECTIVE AND STRATEGY
The objective of the Sit 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 12/31/96: $18.43 Per Share
6/30/96: $19.27 Per Share
Total Net Assets: $57.98 Million
PORTFOLIO STRUCTURE
(% of total net assets)
[BAR CHART]
Technology 25.3
Health Care 19.3
Financial 13.2
Consumer Services 9.2
Energy 8.4
Business Equipment & Services 5.9
Capital Goods 3.7
Retail 2.3
Consumer Non-Durables 1.3
Other Assets & Liabilities 11.4
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS* CUMULATIVE TOTAL RETURNS*
----------------------------- -------------------------
Small Cap Russell Lipper Small Cap Russell Lipper
Growth 2000 Small Co. Growth 2000 Small Co.
Fund Index Growth Index Fund Index Growth Index
<S> <C> <C> <C> <C> <C> <C>
3 Months -2.60% 5.20% -0.88% -2.60% 5.20% -0.88%
(unannualized)
1 Year 14.97 16.49 14.51 14.97 16.49 14.51
Inception 30.61 19.60 21.97 95.19 56.53 64.53
(7/1/94)
</TABLE>
* As of 12/31/96
PERFORMANCE IS HISTORICAL AND ASSUMES REINVESTMENT OF ALL DIVIDENDS AND CAPITAL
GAINS. SHARE PRICE AND RETURN WILL VARY SO THAT A GAIN OR LOSS MAY BE REALIZED
WHEN SHARES ARE SOLD. TOTAL RETURN SHOULD NOT BE TAKEN AS A REPRESENTATION OF
FUTURE PERFORMANCE. MANAGEMENT FEES AND ADMINISTRATIVE EXPENSES ARE INCLUDED IN
THE FUND'S PERFORMANCE; HOWEVER, FEES AND EXPENSES ARE NOT INCORPORATED IN THE
RUSSELL 2000 INDEX. THE LIPPER AVERAGES AND INDICES ARE OBTAINED FROM LIPPER
ANALYTICAL SERVICES, INC., A LARGE INDEPENDENT EVALUATOR OF MUTUAL FUNDS.
GROWTH OF $10,000
[GRAPH]
The sum of $10,000 invested at inception (7/1/94) and held until 12/31/96 would
have grown to $19,519 in the Fund or $15,653 in the Russell 2000 Index assuming
reinvestment of all dividends and capital gains.
10 LARGEST HOLDINGS
Technomatix Technologies, Ltd.
ANADIGICS, Inc.
Scopus Technology
Aspen Technology, Inc.
HA-LO Industries, Inc.
Regeneron Pharmaceuticals Inc.
Allied Group Inc.
Dura Pharmaceuticals, Inc.
Central European Media Enterprises, Ltd.
Marine Drilling Company, Inc.
Total number of holdings: 61
SIT SMALL CAP GROWTH FUND
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1996 (UNAUDITED)
QUANTITY NAME OF ISSUER MARKET VALUE (1)
COMMON STOCKS (88.6%) (2)
BUSINESS EQUIPMENT & SERVICES (5.9%)
156,900 Commodore Applied Technologies,
Inc. (3) $ 784,500
203,500 Commodore Applied Technologies,
Inc., (warrants) (3) 279,813
57,100 Dendrite International, Inc. (3) 471,075
39,500 Employee Solutions, Inc. (3) 809,750
17,000 On Assignment, Inc. (3) 501,500
52,500 Transaction Network Services,
Inc. (3) 603,750
-------
3,450,388
---------
CAPITAL GOODS (3.7%)
19,000 Molten Metal Technology, Inc. (3) 223,250
27,500 Triumph Group Inc. 656,563
55,000 Rohr, Inc. (3) 1,244,375
---------
2,124,188
---------
CONSUMER NON-DURABLES (1.3%)
32,000 Northland Cranberries, Inc. 736,000
-------
CONSUMER SERVICES (9.2%)
37,000 American Radio Systems Corp. (3) 1,008,250
16,500 Carriage Services, Inc. (3) 369,188
40,000 Central European Media
Enterprises, Ltd. (3) 1,270,000
24,000 Chancellor Broadcasting Company,
Class A (3) 570,000
59,688 HA-LO Industries, Inc. (3) 1,641,406
25,500 York Group, Inc. (The) 497,250
-------
5,356,094
---------
ENERGY (8.4%)
63,500 Marine Drilling Company, Inc. (3) 1,250,156
29,000 Newfield Exploration Co. (3) 754,000
22,000 Newpark Resources, Inc. (3) 819,500
57,000 Oceaneering International, Inc. (3) 904,875
38,000 Swift Energy Co. (3) 1,135,250
---------
4,863,781
---------
FINANCIAL (13.2%)
FINANCIAL SERVICES (7.8%)
35,000 Community First Bankshares, Inc. 962,500
56,000 Imperial Credit Industries, Inc. (3) 1,176,000
30,875 Provident Bankshares Corp. 1,204,125
13,400 Queens County Bankcorp, Inc. 634,825
19,000 RCSB Financial, Inc. 551,000
-------
4,528,450
---------
INSURANCE (5.4%)
46,000 Allied Group Inc. 1,500,750
26,000 Amerin Corp. (3) 669,500
16,600 CMAC Investment Corp. 610,050
51,000 Crop Growers Corp. (3) 357,000
-------
3,137,300
---------
HEALTH CARE (19.3%)
BIOTECHNOLOGY/ PHARMACEUTICALS (6.6%)
43,500 Collaborative Clinical Research,
Inc. (3) 467,625
28,000 Dura Pharmaceuticals, Inc. (3) 1,337,000
68,500 Life Medical Sciences Inc. (3) 453,813
96,500 Regeneron Pharmaceuticals
Inc. (3) 1,556,063
---------
3,814,501
---------
MEDICAL EQUIPMENT/ SUPPLIES (6.4%)
30,000 Cantel Industries, Inc. (3) 232,500
58,500 CardioThoracic Systems, Inc. (3) 1,082,250
77,000 FemRx, Inc. (3) 346,500
29,000 I-Stat Corp. (3) 688,750
220,300 InnerDyne, Inc. (3) 715,975
42,500 Neuromedical Systems, Inc. (3) 563,125
6,000 Sano Corp. 91,500
------
3,720,600
---------
MEDICAL FACILITIES MANAGEMENT (6.3%)
23,500 Enterprise Systems, Inc. 552,250
25,000 HCIA Inc. (3) 862,500
47,500 Imnet Systems, Inc. (3) 1,151,875
31,500 MECON, Inc. 208,688
103,900 Physician Computer Network,
Inc. (3) 883,150
-------
3,658,463
---------
RETAIL (2.3%)
21,000 Quality Dining, Inc. (3) 375,375
36,500 Sonic Corp. (3) 930,750
-------
1,306,125
---------
TECHNOLOGY (25.3%)
COMPUTER SOFTWARE/ SERVICES (19.0%)
48,500 Alternative Resources Corp. (3) 842,688
22,000 Aspen Technology, Inc. (3) 1,765,500
22,000 BDM International, Inc. (3) 1,193,500
60,500 Business Objects, S. A., A.D.R. (3) 816,750
76,500 Datalogix International Inc. (3) 607,219
33,000 Legato Systems, Inc. (3) 1,076,625
45,000 Novadigm, Inc. (3) 371,250
40,500 Scopus Technology (3) 1,883,250
93,000 Technomatix Technologies
Ltd. (3) 2,464,500
---------
11,021,282
----------
SEMICONDUCTORS & RELATED (2.0%)
6,300 Integrated Process Equipment
Corp. (3) 113,400
20,000 Uniphase Corp. (3) 1,050,000
---------
1,163,400
---------
TELECOMMUNICATIONS & EQUIPMENT (4.3%)
51,000 ANADIGICS, Inc. (3) 2,001,750
50,000 Arch Communications Group,
Inc. (3) 468,746
-------
2,470,496
---------
Total common stocks
(cost: $41,327,126) 51,351,068
----------
SHORT-TERM SECURITIES (12.6%)
2,504,000 Ford Motor Credit Corp.,
5.91%, 1/2/97 2,503,589
2,452,000 General Motors Accept. Corp.,
5.84%, 1/6/97 2,450,015
1,669,000 Household Finance Corp.,
6.15%, 1/3/97 1,668,430
710,000 Sit Money Market Fund,
4.95% (6) 710,000
-------
Total short-term securities
(cost: $7,332,034) 7,332,034
---------
Total investments in securities
(cost: $48,659,160) (7) $ 58,683,102
============
See accompanying notes to portfolios of investments on page 31.
SIT INTERNATIONAL GROWTH FUND REVIEW
DECEMBER 31, 1996
[PHOTO]
EUGENE C. SIT, CFA
SENIOR PORTFOLIO MANAGER
ANDREW B. KIM, CFA
SENIOR PORTFOLIO MANAGER
The Sit International Growth Fund's investment return for the six months
ended December 31, 1996 was +3.7%, compared to the MSCI EAFE Index return of
+1.5%. The Fund's European stocks continued to perform strongly during the
period, but these gains were offset by Japanese holdings, as the major Japanese
indices declined by over -20% in U.S. dollar terms. We are continuing to reduce
the Fund's exposure to Japan, while the Fund's European allocation has been
increased to 46% from 35% one year ago.
Our focus in Europe is on the beneficiaries of corporate restructuring
designed to enhance shareholder value. Additionally, we continue to emphasize
those companies that have stepped up their global expansion, particularly in the
emerging markets. The Fund's globalization and privatization themes provide the
framework for above-average growth prospects relative to the region.
We have reduced the Fund's weighting in Japan to 21% from 31% a year ago.
With the Japanese recovery losing steam, we expect the current environment of
low interest rates and weak currency to continue. In 1997, the technology sector
should continue to recover, aided by a weak yen. Other domestic-oriented stocks
should participate in a potential recovery towards late in 1997 as today's
widespread skepticism begins to recede. In the near term, we are further
reducing the Fund's Japanese weightings by approximately 3% as we increase the
Fund's emerging market exposure to 14% from 12% at year-end.
The economic slowdown in non-Japan Asia appears to be coming to an end. A
rebound in the electronics industry should help sustain export gains.
Significantly, with overheating pressures in most countries abating, easier
monetary policies should be beneficial to equity valuations. Growth in Latin
American economies should improve in 1997 and beyond due to a further easing in
liquidity and continued structural reforms. We are slightly increasing the
Fund's weighting in both Latin America and non-Japan Asia.
INVESTMENT OBJECTIVE AND STRATEGY
The objective of the Sit 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 12/31/96: $16.45 Per Share
6/30/96: $16.29 Per Share
Total Net Assets: $87.36 Million
PORTFOLIO STRUCTURE - BY REGION
( % of total net assets)
[BAR GRAPH]
Sit Int'l Growth Fund Morgan Stanley EAFE Index
Pacific Basin 23.7 11.1
France, Germany 23.4 34.3
& UK
Other Europe 23.0 22.3
Japan 21.3 32.3
Latin America 3.5 0.0
Africa/ 1.0 0.0
Middle East
Other Assets & Liabilities 4.1 N/A
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS* CUMULATIVE TOTAL RETURNS*
International Morgan Stanley Lipper International Morgan Stanley Lipper
Growth Capital Int'l Int'l Growth Capital Int'l Int'l
Fund EAFE Index Index Fund EAFE Index Index
<C> <C> <C> <C> <C> <C> <C>
3 Months 4.51% 1.59% 5.19% 4.51% 1.59% 5.19%
(unannualized)
1 Year 10.31 6.05 14.43 10.31 6.05 14.43
3 Years 5.38 8.32 7.71 17.03 27.11 24.97
5 Years 12.26 8.15 11.28 78.31 47.98 70.62
Inception 12.71 7.92 10.92 85.62 48.36 70.94
(11/1/91)
* As of 12/31/96
</TABLE>
PERFORMANCE IS HISTORICAL AND ASSUMES REINVESTMENT OF ALL DIVIDENDS AND CAPITAL
GAINS. SHARE PRICE AND RETURN WILL VARY SO THAT A GAIN OR LOSS MAY BE REALIZED
WHEN SHARES ARE SOLD. TOTAL RETURN SHOULD NOT BE TAKEN AS A REPRESENTATION OF
FUTURE PERFORMANCE. MANAGEMENT FEES AND ADMINISTRATIVE EXPENSES ARE INCLUDED IN
THE FUND'S PERFORMANCE; HOWEVER, FEES AND EXPENSES ARE NOT INCORPORATED IN THE
MORGAN STANLEY CAPITAL INTERNATIONAL EAFE (EUROPE, AUSTRALIA, FAR EAST) INDEX.
THE LIPPER AVERAGES AND INDICES ARE OBTAINED FROM LIPPER ANALYTICAL SERVICES,
INC., A LARGE INDEPENDENT EVALUATOR OF MUTUAL FUNDS.
GROWTH OF $10,000
[GRAPH]
The sum of $10,000 invested at inception (11/1/91) and held until 12/31/96 would
have grown to $18,562 in the Fund or $14,836 in the Morgan Stanley EAFE Index
assuming reinvestment of all dividends and capital gains.
10 LARGEST HOLDINGS
* Hutchison Whampoa
* Canon, Inc., A.D.R.
* Reuters Holdings, p.l.c., A.D.S.
* Nutricia
* Aegon N.V., A.D.R.
* Societe Generale de Surveillance
* Carrefour
* Telecom Corp. New Zealand, A.D.R.
* Citic Pacific Ltd.
* Wolters Kluwer
Total number of holdings: 70
SIT INTERNATIONAL GROWTH FUND
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1996 (UNAUDITED)
QUANTITY NAME OF ISSUER MARKET VALUE (1)
COMMON AND PREFERRED STOCKS (95.9%)(2)
AFRICA/MIDDLE EAST (1.0%)
ISRAEL (1.0%)
41,000 Tadiran Telecom Corp, A.D.R.
(Utilities) (3) $ 917,375
ASIA (45.0%)
AUSTRALIA (1.5%)
192,416 News Corp. Ltd. (Preferred)
(Consumer Services) 856,474
172,837 Village Roadshow Ltd.
(Consumer Services) 469,838
-------
1,326,312
---------
HONG KONG (7.1%)
84,200 Concordia Paper, A.D.R.
(Raw Materials) (3) (5) 399,950
318,000 Citic Pacific Ltd. (Multi-Industry) 1,846,040
1,224,000 First Pacific Co. (Multi-Industry) 1,590,432
296,000 Hutchison Whampoa
(Multi-Industry) 2,324,908
---------
6,161,330
---------
INDONESIA (0.6%)
170,000 PT Modern Photo (Consumer
Services) (5) 539,797
-------
JAPAN (21.3%)
40,100 AFLAC, Inc. (Financial) 1,714,275
27,000 Amway Japan Ltd. (Consumer
Non-Durables) 867,283
8,300 Autobacs Seven (Retail) 586,970
109,000 Banyu Pharmaceutical
(Health Care) 1,524,739
20,100 Canon, Inc., A.D.R. (Business
Equipment & Services) 2,211,000
161 DDI Corp. (Utilities) 1,064,899
43,000 JUSCO Co. (Retail) 1,459,200
65,000 Matsushita Kotobuki (Technology) 1,695,018
27,000 Murata Manufacturing Co., Ltd.
(Capital Goods) 897,591
38 NTT Data Communications
Systems Co. (Utilities) 1,112,339
47,300 Rinnai Corp. (Consumer Durables) 951,636
28,600 Santen Pharmaceutical (Health
Care) 592,695
26,000 Secom Co. (Consumer Services) 1,573,785
23,000 Seven Eleven Japan (Retail) 1,346,516
50,000 Takeda Chemical Industries
(Health Care) 1,049,132
-----------
18,647,078
----------
KOREA (0.7%)
37,000 Kookmin Bank (Financial) 604,523
-------
MALAYSIA (2.9%)
142,000 DCB Holdings (Financial Services) 486,359
60,500 Genting Berhad (Consumer
Services) 416,828
232,000 IJM Berhad Corp. (Capital Goods) 546,585
269,000 Sime Darby (Raw Materials) 1,059,810
---------
2,509,582
---------
PHILIPPINES (1.7%)
175,877 Manila Electric Co. (Utilities) 1,437,778
---------
NEW ZEALAND (2.1%)
23,100 Telecom Corp. New Zealand,
A.D.R.(Utilities) 1,871,084
---------
SINGAPORE (2.8%)
185,000 City Developments (Shelter) 1,665,833
72,500 United Overseas Bank
(Financial) 808,261
-------
2,474,094
---------
TAIWAN (2.7%)
61,090 President Enterprises, G.D.R.
(Consumer Non-Durables) (3)(4) 1,099,620
121,800 Yageo, G.D.R. (Technology) 1,233,225
---------
2,332,845
---------
THAILAND (1.6%)
55,000 Advanced Info Services (Utilities) 467,519
95,000 Bangkok Bank (Financial) 918,662
-------
1,386,181
---------
EUROPE (46.4%)
BELGIUM (0.5%)
176 UCB, S.A. (Health Care) 458,757
-------
FRANCE (5.6%)
2,893 Carrefour (Retail) 1,882,388
11,800 Cetelem (Financial) 1,364,556
10,200 Christian Dior (Retail) 1,645,447
---------
4,892,391
---------
GERMANY (6.8%)
37,200 Bayer, A.G. (Health Care) 1,518,121
4,830 Fresenius A.G. (Health Care) 998,109
25,950 Gehe, A.G. (Health Care) 1,661,029
30,000 Veba A.G. (Utilities) 1,735,062
---------
5,912,321
---------
ITALY (2.6%)
12,100 Luxottica Group SPA (Consumer
Non-Durables) 629,200
661,000 Telecom Italia Mobile SPA
(Utilities) (3) 1,671,021
---------
2,300,221
---------
NETHERLANDS (7.2%)
31,535 Aegon, N.V., A.D.R. (Financial) 1,994,560
30,180 CMG (Business Equipment &
Services) 436,733
13,269 Nutricia (Consumer
Non-Durables) 2,016,107
13,528 Wolters Kluwer (Consumer
Services) 1,797,158
---------
6,244,558
---------
POLAND (0.2%)
909,113 International UNP Holdings Ltd.
(Multi-Industry) (3)(4)(5) 185,865
-------
SPAIN (2.0%)
25,300 Empresa Nacional De Electricidad,
A.D.R. (Utilities) 1,771,000
---------
SWEDEN (3.4%)
32,000 Astra "B" Free (Health Care) 1,543,887
48,400 L.M. Ericsson Telephone Co.
(Technology) 1,461,075
---------
3,004,962
---------
SWITZERLAND (7.1%)
1,136 Novartis A.G. (Health Care) (3) 1,301,073
186 Roche Holdings, A.G. (Health
Care) 1,447,284
795 Societe Generale de Surveillance
(Transportation) 1,954,090
5,460 Zurich Insurance (Financial) 1,517,460
---------
6,219,907
---------
UNITED KINGDOM (11.0%)
152,000 Electrocomponents, p.l.c.
(Consumer Services) 1,202,585
179,530 Lloyds TSB Group p.l.c.
(Financial) 1,323,550
95,628 Powergen, p.l.c. (Utilities) 937,542
230,000 Rentokil Group, p.l.c.
(Consumer Services) 1,729,110
72,000 Reed International (Business
Equipment & Services) 1,358,149
27,800 Reuters Holdings p.l.c., A.D.S.
(Business Equipment &
Services) 2,126,700
13,500 SmithKline Beecham p.l.c.,
A.D.R., (Health Care) 918,000
-------
9,595,636
---------
LATIN AMERICA (3.5%)
BRAZIL (0.8%)
9,500,000 Telecom Brasileiras, S.A.
(Utilities) 681,118
CHILE (1.6%)
25,500 Enersis, A.D.R. (Utilities) 707,625
31,000 Santa Isabel, A.D.R. (Retail) (3) 701,375
-------
1,409,000
---------
MEXICO (0.6%)
10,400 Panamerican Beverage, Inc.
(Consumer Non-Durables) 487,500
-------
PANAMA (0.5%)
8,000 Banco Latinoamericano
(Financial) 406,000
-------
Total common and preferred stocks
(cost: $62,721,286) 83,777,215
----------
SHORT-TERM SECURITIES (3.3%)
503,000 General Motors Acceptance
Corp., 5.83%, 1/3/97 502,837
1,667,000 Household Finance Corp.,
6.15%, 1/2/97 1,666,715
710,000 Sit Money Market Fund,
4.95% (6) 710,000
-------
Total short-term securities
(cost: $2,879,552) 2,879,552
---------
Total investments in securities
(cost: $65,600,838) (7) $ 86,656,767
============
See accompanying notes to portfolios of investments of page 31.
SIT MID CAP GROWTH FUND REVIEW
DECEMBER 31, 1996
[PHOTO]
EUGENE C. SIT, CFA
SENIOR PORTFOLIO MANAGER
ERIK S. ANDERSON, CFA
PORTFOLIO MANAGER
The Sit Mid Cap Growth Fund performed strongly during calendar 1996,
achieving a +21.9% total return. The Fund's performance for the year exceeded
the +19.2% return of the S&P Midcap Index and the +17.5% increase in the Russell
Midcap Growth Index, a universe of medium-sized growth companies. The Fund's
cumulative total return since inception exceeds that of its benchmark indices.
During the fourth quarter, the Fund trailed the S&P Midcap Index as the
typically value-oriented financial services, energy and multi-industry stocks
came to life, while business equipment & services and health care stocks lagged
somewhat.
During the quarter, we raised the Fund's weighting in financial services
and energy stocks given our expectations for modestly declining interest rates
and the fundamental strength of the oil services industry. Technology and health
care holdings were pared modestly to provide increased sector diversification,
while business equipment & services stocks were reduced on sector weakness among
temporary staffing and electronic payment processing issues. New additions to
the Fund's portfolio included Ace Limited (a Bermuda-based multi-line insurer)
and First American Corporation of Tennessee (a bank holding company). Several of
the investment themes we are currently pursuing include productivity-enhancing
software, oil services and the death care industry. We also look for improved
sentiment toward semiconductor and biotechnology issues. The Fund's weighted
average market capitalization as of December 31, 1996 increased slightly to $3.3
billion, and it remains nearly fully invested with cash reserves of 4%.
We estimate that the companies in the Fund's portfolio will increase
earnings by a weighted average +31% in 1997, a growth rate that considerably
exceeds that expected from other midcap or broad market indices. Yet the
companies in the portfolio are valued at a weighted average 23.9 times 1997
estimated earnings, which represents approximately a 22% discount to its 1997
estimated growth rate. On this basis, we believe the Sit Mid Cap Growth Fund
represents an attractive investment opportunity for long-term, growth-oriented
investors.
INVESTMENT OBJECTIVE AND STRATEGY
The objective of the Sit Mid Cap Growth Fund is to maximize long-term
capital appreciation. The Fund pursues this objective by investing 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 12/31/96: $14.27 Per Share
6/30/96: $15.58 Per Share
Total Net Assets: $375.32 Million
PORTFOLIO STRUCTURE
(% of total net assets)
[BAR CHART]
Technology 25.4
Financial 18.2
Health Care 18.0
Business Equipment
& Services 10.1
Energy 9.3
Consumer Services 4.7
Retail 2.9
Capital Goods 2.7
Consumer Durables 2.0
Utilities 1.6
Raw Materials 1.0
Other Assets
& Liabilities 4.1
<TABLE>
AVERAGE ANNUAL TOTAL RETURNS* CUMULATIVE TOTAL RETURNS*
Mid Cap NASDAQ S&P Mid Cap NASDAQ S&P
Growth OTC Composite Midcap Growth OTC Composite Midcap
Fund Index 400 Index Fund Index 400 Index
<S> <C> <C> <C> <C> <C> <C>
3 Months 1.81% 5.23% 6.06% 1.81 5.23 6.06
(unannualized)
1 Year 21.87 22.71 19.19 21.87 22.71 19.19
5 Years 11.48 17.10 13.92 72.19 120.18 91.89
10 Years 15.89 13.98 15.93 336.95 270.10 338.62
Inception 19.13 14.75 18.14 1,131.28 619.24 991.40
(9/2/82)
</TABLE>
* As of 12/31/96
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 MIDCAP 400 INDEX.
GROWTH OF $10,000
[GRAPH]
The sum of $10,000 invested at inception (9/2/82) and held until 12/31/96 would
have grown to $123,128 in the Fund or $71,924 in the NASDAQ OTC Composite Index
assuming reinvestment of all dividends and capital gains.
10 LARGEST HOLDINGS
* Parametric Technology Corp.
* T. Rowe Price Associates Inc.
* Oxford Health Plans, Inc.
* TCF Financial Corp.
* Mercury General Corp.
* MGIC Investment Corp.
* PeopleSoft, Inc.
* HBO & Co.
* HEALTHSOUTH Corp.
* 3Com Corp.
Total number of holdings: 62
SIT MID CAP GROWTH FUND
PORTFOLIO OF INVESTMENTS -- DECEMBER 31, 1996 (UNAUDITED)
QUANTITY NAME OF ISSUER MARKET VALUE (1)
COMMON & PREFERRED STOCKS (95.9%) (2)
BUSINESS EQUIPMENT & SERVICES (10.1%)
74,205 AccuStaff Inc (3) $1,567,581
228,300 Ceridian Corp. (3) 9,246,150
48,500 Computer Sciences Corp. (3) 3,983,063
148,300 COREStaff, Inc. (3) 3,512,856
255,500 Dendrite International, Inc. (3) 2,107,875
205,600 FIserv, Inc. (3) 7,555,800
78,500 National Data Corp. 3,414,750
127,000 Paychex, Inc. 6,532,563
----------
37,920,638
----------
CAPITAL GOODS (2.7%)
197,850 Crane Co. 5,737,650
102,000 Sundstrand Corp. 4,335,000
----------
10,072,650
----------
CONSUMER DURABLES (2.0%)
162,500 Harley-Davidson, Inc. 7,637,500
----------
CONSUMER SERVICES (4.7%)
158,200 Loewen Group Inc. (The) 6,189,575
100,000 Promus Hotel Corp. (3) 2,962,500
247,500 Stewart Enterprises, Inc. 8,415,000
----------
17,567,075
----------
ENERGY (9.3%)
111,500 Camco International Inc. 5,142,938
90,500 Noble Affiliates, Inc. 4,332,688
244,000 Parker & Parsley Petroleum Co. 8,967,000
129,000 Petroleum Geo-Services,
A.D.R. (3) 5,031,000
119,200 Transocean Offshore Inc. 7,464,900
80,500 Triton Energy Ltd. (3) 3,904,250
----------
34,842,776
----------
FINANCIAL (18.2%)
BANKING (3.5%)
306,000 TCF Financial Corp. 13,311,000
----------
FINANCIAL SERVICES (5.2%)
20,000 First American Corp. 1,152,500
116,300 Green Tree Financial Corp. 4,492,087
321,000 T. Rowe Price Associates Inc. 13,963,500
----------
19,608,087
----------
INSURANCE (9.5%)
105,000 ACE, Ltd. 6,313,125
119,600 CMAC Investment Corp. 4,395,300
238,900 Mercury General Corp. $12,542,250
161,500 MGIC Investment Corp. 12,274,000
-----------
35,524,675
-----------
HEALTH CARE (18.0%)
BIOTECHNOLOGY/PHARMACEUTICALS (5.8%)
224,000 Biogen, Inc. (3) 8,680,000
200,000 Cephalon, Inc. (3) 4,100,000
273,000 Elan Corp., p.l.c., A.D.R. (3) 9,077,250
----------
21,857,250
----------
MEDICAL FACILITIES MANAGEMENT (12.2%)
90,000 Cerner Corp. (3) 1,395,000
205,000 HBO & Co. 12,171,875
15,500 HCIA Inc. (3) 534,750
301,500 HEALTHSOUTH Corp. (3) 11,494,687
164,800 Medic Computer Systems,
Inc. (3) 6,643,500
230,500 Oxford Health Plans, Inc. (3) 13,498,656
----------
45,738,468
----------
RAW MATERIALS (1.0%)
91,500 IMC Global, Inc. 3,579,937
RETAIL (2.9%)
198,500 Kohls Corp. (3) 7,791,125
145,000 PETsMART, Inc. (3) 3,171,875
----------
10,963,000
----------
TECHNOLOGY (25.4%)
COMPUTER RELATED (4.8%)
155,500 3 Com Corp. (3) 11,409,812
80,800 Electronics For Imaging, Inc. (3) 6,645,800
----------
18,055,612
----------
COMPUTER SOFTWARE/SERVICES (11.8%)
21,800 Aspen Technology, Inc. (3) 1,749,450
139,000 Baan Co. N.V. (3) 4,830,250
250,000 Business Objects, S. A.,
A.D.R. (3) 3,375,000
129,800 Informix Corp. (3) 2,644,675
70,000 Intuit, Inc. (3) 2,205,000
56,000 Legato Systems, Inc. (3) 1,827,000
297,500 Parametric Technology
Corp. (3) 15,284,062
254,000 PeopleSoft, Inc. (3) 12,176,125
----------
44,091,562
----------
SEMICONDUCTORS & RELATED (5.0%)
328,000 Analog Devices Inc. (3) 11,111,000
205,800 Xilinx Inc. (3) 7,576,012
----------
18,687,012
----------
TELECOMMUNICATIONS & EQUIPMENT (3.8%)
146,000 ADC Telecommunications,
Inc. (3) 4,544,250
233,500 Paging Network, Inc. (3) 3,560,875
181,000 PictureTel Corp. (3) 4,706,000
47,500 Premisys Communications,
Inc. (3) 1,603,125
----------
14,414,250
----------
UTILITIES (1.6%)
277,500 LCI International, Inc. (3) 5,966,250
----------
Total common stocks
(cost: $229,035,184) 359,837,742
-----------
SHORT-TERM SECURITIES (4.3%)
4,486,000 Beneficial Corp., 6.10%, 1/6/97 4,482,199
General Motors Accept. Corp.:
4,504,000 6.03%, 1/2/97 4,503,246
1,844,000 5.78%, 1/7/97 1,842,224
4,558,000 Household Finance Corp.,
6.00%, 1/3/97 4,556,481
710,000 Sit Money Market Fund,
4.95% (6) 710,000
------------
Total short-term securities
(cost: $16,094,150) 16,094,150
------------
Total investments in securities
(cost: $245,129,334) (7) $375,931,892
============
See accompanying notes to portfolios of investments on page 31.
SIT LARGE CAP GROWTH FUND REVIEW
DECEMBER 31, 1996
[PHOTO]
PETER L. MITCHELSON, CFA
SENIOR PORTFOLIO MANAGER
RONALD D. SIT, CFA
PORTFOLIO MANAGER
Performance of the Sit Large Cap Growth Fund was +10.4% for the last six
months of 1996, which was competitive with relevant benchmarks. In addition, the
cumulative results for the full calendar year, slightly exceeding +23%, were
very satisfactory in both absolute and relative terms. Based on data from Lipper
Analytical Services, Inc., the Fund's total return ranked in the 27th percentile
for all Growth & Income Funds in 1996 and, for the three years ended in 1996,
placed in the 18th percentile.
Throughout 1996, the Fund maintained generally low cash reserve levels,
which permitted the Fund to participate well in the surprisingly strong stock
market environment. As of December 31, 1996, cash reserve levels were 3.3%, down
from the 6.2% level at June 30, 1996 and the 5.8% level at the end of the prior
calendar year. Total dividends paid in 1996 were approximately $2.46 per share,
of which $2.42 per share were long-term capital gains.
As was the case for most of the year, industry weightings changed very
little over the latest three months. The four most heavily weighted sectors
represent some of the most rapidly growing areas of the economy, namely,
technology, health care, financial and consumer non-durables. Reflecting the
emphasis on technology, the three largest positions in the portfolio are leading
companies with global reach: Cisco Systems, Intel and Microsoft. Two new names
entered the list of five largest holdings in the quarter, Intel and General
Electric, which edged out Pfizer and Amgen, both of which continue to be held,
but in smaller relative positions.
Domestic common stock prices advanced strongly again in 1996, at more than
double the rate of long-term historical experience for large and established
U.S. companies. We believe it is wise, therefore, to expect less in the year
ahead. Current moderate economic and inflationary conditions are favorable for
financial asset investing, but two strong years in a row have historically been
followed by more subdued returns in subsequent periods. In accordance with our
growth-oriented investment philosophy, we continue to search for and invest in
companies capable of increasing their earnings at rates faster than the growth
of the economy as a whole. This philosophy appears particularly well-suited for
the present economic and financial market environment.
INVESTMENT OBJECTIVE AND STRATEGY
The objective of the Sit Large Cap Growth Fund is to achieve long-term
capital appreciation and, secondarily, current income. The Fund pursues this
objective by investing primarily in common stocks of medium to large size growth
companies. As of June 30, 1996, the Fund was invested exclusively in such
securities.
PORTFOLIO SUMMARY
Net Asset Value 12/31/96: $33.68 Per Share
6/30/96: $32.75 Per Share
Total Net Assets: $57.72 Million
Quarterly Dividend:
Long-Term Capital Gain $2.42 Per Share
Ordinary Income $0.01 Per Share
PORTFOLIO STRUCTURE
(% of total net assets)
Technology 23.4
Health Care 17.0
Financial 13.0
Consumer Non-Durables 10.5
Business Equip. & Services 6.3
Capital Goods 6.1
Energy 5.5
Retail 5.2
Consumer Services 4.2
Raw Materials 2.7
Utilities 1.3
Consumer Durables 1.0
Multi-Industry 0.5
Other Assets &
Liabilities 3.3
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS* CUMULATIVE TOTAL RETURNS*
Large Cap Lipper Growth S&P Large Cap Lipper Growth S&P
Growth & Income 500 Growth & Income 500
Fund Index Index Fund Index Index
<S> <C> <C> <C> <C> <C> <C>
3 Months 3.99% 7.80% 8.34% 3.99% 7.80% 8.34%
(unannualized)
1 Year 23.05 20.69 22.96 23.05 20.69 22.96
5 Years 12.51 14.65 15.22 80.31 98.06 103.05
10 Years 13.09 13.59 15.28 242.17 257.52 314.69
Inception 15.16 15.84 17.42 657.03 723.47 900.15
(9/2/82)
</TABLE>
* As of 12/31/96
PERFORMANCE IS HISTORICAL AND ASSUMES REINVESTMENT OF ALL DIVIDENDS AND
CAPITAL GAINS. SHARE PRICE AND RETURN WILL VARY SO THAT A GAIN OR LOSS MAY BE
REALIZED WHEN SHARES ARE SOLD. TOTAL RETURN SHOULD NOT BE TAKEN AS A
REPRESENTATION OF FUTURE PERFORMANCE. MANAGEMENT FEES AND ADMINISTRATIVE
EXPENSES ARE INCLUDED IN THE FUND'S PERFORMANCE; HOWEVER, FEES AND EXPENSES ARE
NOT INCORPORATED IN THE S&P 500 INDEX. THE LIPPER INDEX FIGURES ARE OBTAINED
FROM LIPPER ANALYTICAL SERVICES, INC., A LARGE INDEPENDENT EVALUATOR OF MUTUAL
FUNDS.
ON 6/6/93, THE FUND'S INVESTMENT OBJECTIVE CHANGED TO ALLOW FOR A PORTFOLIO
OF 100% STOCKS. PRIOR TO THAT TIME, THE PORTFOLIO WAS REQUIRED TO CONTAIN NO
MORE THAN 80% STOCKS.
GROWTH OF $10,000
[GRAPH]
The sum of $10,000 invested at inception (9/2/82) and held until 12/31/96 would
have grown to $75,703 in the Fund, $82,347 in the Lipper Growth & Income Fund
Index or $100,015 in the S&P 500 Index assuming reinvestment of all dividends
and capital gains.
10 LARGEST HOLDINGS
* Cisco Systems, Inc.
* Intel Corp.
* Microsoft Corp.
* General Electric Co.
* Philip Morris Cos. Inc.
* Johnson & Johnson
* Pfizer Inc.
* Gillette Co. (The)
* Coca-Cola Co. (The)
* American International Group, Inc.
Total number of holdings: 62
SIT LARGE CAP GROWTH FUND
PORTFOLIO OF INVESTMENTS -- DECEMBER 31, 1996 (UNAUDITED)
QUANTITY NAME OF ISSUER MARKET VALUE (1)
COMMON STOCKS (96.7%) (2)
BUSINESS EQUIPMENT & SERVICES (6.3%
19,500 Ceridian Corp. (3) $ 789,750
7,000 Computer Sciences Corp. (3) 574,875
14,000 Danka Business Systems p.l.c,
A.D.R. 495,250
34,000 First Data Corp. 1,241,000
10,500 Paychex, Inc. 540,094
-----------
3,640,969
-----------
CAPITAL GOODS (6.1%)
18,000 General Electric Co. 1,779,750
12,500 Owens Corning (3) 532,813
14,500 Sundstrand Corp. 616,250
11,000 Tyco International Ltd. 581,625
-----------
3,510,438
-----------
CONSUMER DURABLES (1.0%)
12,000 Harley-Davidson, Inc. 564,000
-----------
CONSUMER NON-DURABLES (10.5%)
27,000 Coca-Cola Co. (The) 1,420,875
18,500 Gillette Co. (The) 1,438,375
8,000 NIKE, Inc. Class B 478,000
15,500 Philip Morris Cos. Inc. 1,759,250
9,000 Proctor & Gamble Co. (The) 967,500
-----------
6,064,000
-----------
CONSUMER SERVICES (4.2%)
47,500 CUC International, Inc. (3) 1,128,125
19,500 Marriot International, Inc. 1,077,375
8,000 Promus Hotel Corp. (3) 237,000
-----------
2,442,500
-----------
ENERGY (5.5%)
18,500 Baker Hughes Inc. 638,250
7,000 British Petroleum Co., p.l.c, A.D.R. 989,683
11,500 Schlumberger Ltd. 1,148,563
6,000 Transocean Offshore Inc. 375,750
-----------
3,152,246
-----------
FINANCIAL (13.0%)
BANKING (3.8%)
10,500 Citicorp 1,081,500
26,000 Norwest Corp. 1,131,000
-----------
2,212,500
-----------
FINANCIAL SERVICES (2.6%)
9,000 Federal Home Loan Mortgage
Corp. $ 991,125
7,500 Franklin Resources Inc. 512,813
-----------
1,503,938
-----------
INSURANCE (6.6%)
12,000 American International Group, Inc. 1,299,000
25,000 EXEL Ltd. 946,875
17,000 Mercury General Corp. 892,500
8,500 MGIC Investment Corp. 646,000
-----------
3,784,375
-----------
HEALTH CARE (17.0%)
BIOTECHNOLOGY/ PHARMACEUTICALS (9.3%)
22,000 Amgen Inc. (3) 1,196,250
11,000 Astra AB, A.D.R. Class A 539,000
17,000 Medtronic, Inc. 1,156,000
20,500 Pfizer Inc. 1,698,938
11,500 Smithkline Beecham, A.D.R. 782,000
-----------
5,372,188
-----------
MEDICAL EQUIPMENT/ SUPPLIES (4.1%)
35,000 Johnson & Johnson 1,741,250
21,000 Stryker Corp. 627,375
-----------
2,368,625
-----------
MEDICAL FACILITIES MANAGEMENT (3.6%)
13,000 HBO & Co. 771,875
15,000 HEALTHSOUTH Corp. (3) 571,875
12,500 Oxford Health Plans, Inc. (3) 732,031
-----------
2,075,781
-----------
MULTI-INDUSTRY (0.5%)
13,500 Whitman Corp. 308,813
-----------
RAW MATERIALS (2.7%)
23,500 Monsanto Co. 913,563
7,500 Potash Corp. of Saskatchewan,
Inc. 637,500
-----------
1,551,063
-----------
RETAIL (5.2%)
27,000 Federated Department Stores,
Inc. (3) 921,375
19,000 Gap, Inc. 572,375
19,500 Home Depot, Inc. (The) 977,438
14,000 Kohl's Corp. (3) 549,500
-----------
3,020,688
-----------
TECHNOLOGY (23.4%)
AEROSPACE/ DEFENSE (2.2%)
12,000 Boeing Company (The) $ 1,276,500
-----------
COMPUTER RELATED (5.1%)
38,000 Cisco Systems, Inc. (3) 2,417,750
10,000 Hewlett-Packard Co. 502,500
-----------
2,920,250
-----------
COMPUTER SOFTWARE/ SERVICES (8.4%)
9,500 Computer Associates International,
Inc. 472,625
23,000 Microsoft Corp. (3) 1,900,375
26,500 Oracle Systems Corp. (3) 1,106,375
22,000 Parametric Technology Corp. (3) 1,130,250
6,000 SAP, AG, A.D.S. (4) 272,250
-----------
4,881,875
-----------
SEMICONDUCTORS & RELATED (4.1%)
16,000 Intel Corp. 2,095,000
7,000 Xilinx, Inc. (3) 257,688
-----------
2,352,688
-----------
TELECOMMUNICATIONS & EQUIPMENT (3.6%)
28,500 AirTouch Communications, Inc. (3) 719,625
6,000 Ascend Communications, Inc. (3) 372,750
13,000 Tellabs, Inc. (3) 489,125
7,000 U.S. Robotics Corp. (3) 504,000
-----------
2,085,500
-----------
UTILITIES (1.3%)
22,000 MCI Communications Corp. 719,121
-----------
Total common stocks
(cost: $36,051,933) 55,808,058
-----------
SHORT-TERM SECURITIES (3.5%)
859,000 General Motors Acceptance Corp.,
5.83%, 1/3/97 858,722
1,154,000 Household Finance Corp.,
6.15%, 1/2/97 1,153,803
-----------
Total short-term securities
(cost: $2,012,525) 2,012,525
-----------
Total investments in securities
(cost: $38,064,458) (7) $57,820,583
===========
See accompanying notes to portfolios of investments on page 31.
SIT BALANCED FUND REVIEW
DECEMBER 31, 1996
[PHOTO]
PETER L. MITCHELSON, CFA
SENIOR PORTFOLIO MANAGER
BRYCE A. DOTY, CFA
PORTFOLIO MANAGER
During the last six months of 1996, the Sit Balanced Fund's total return
was +8.6% and for the calendar year was +15.8%, which exceeded the +13.0% annual
return of the Lipper Balanced Fund Index. The Fund's 12-month total return
ranked 64th out of 272 funds (24th percentile) in its Lipper style grouping and,
over the last three years, has placed in the 21st percentile. Total dividends
paid on the Fund's shares in 1996 were approximately $0.38 per share, of which
$0.07 were long-term capital gains.
As of December 31, 1996, the asset allocation of the Fund was 59% in
equities, 36% in bonds and 5% in cash reserve instruments, which is basically
unchanged from the end of June. The normal equity operating range for the Fund
is 40% to 60% of total assets.
Within the equity sector of the portfolio, industry weightings have stayed
relatively constant since mid-year. The four most heavily weighted sectors
represent some of the most rapidly growing areas of the economy, namely,
technology, health care, financial and consumer non-durables. The largest
positions in the portfolio include world-class growth companies Cisco Systems,
Intel, Microsoft and Gillette. Current moderate economic and inflationary
conditions are favorable for financial asset investing, but after two strong
years in a row we believe it is wise to expect less in the year ahead. In
accordance with our growth-oriented investment philosophy, we continue to search
for and invest in companies capable of increasing their earnings at rates faster
than the growth of the economy as a whole.
In the fixed income portion of the portfolio, the most significant sector
shift involved selling collateralized mortgage obligations (CMOs) and purchasing
home equity loan asset-backed and corporate securities. Performance benefitted
from the fixed income portion's higher income return relative to its benchmark,
the Lehman Aggregate Bond Index. The Fund's fixed income holdings as a whole are
currently more sensitive to price movements than the Lehman Aggregate Index.
This positioning reflects our outlook that interest rates could move somewhat
lower, causing most bonds to appreciate in price, in an environment of moderate
economic growth and inflation.
INVESTMENT OBJECTIVE AND STRATEGY
The Sit Balanced Fund's dual objectives are to seek long-term growth of
capital consistent with the preservation of principal and to provide regular
income. It pursues its objectives by investing in a diversified portfolio of
stocks, 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 12/31/96: $13.33 Per Share
6/30/96: $12.57 Per Share
Total Net Assets: $4.30 Million
Quarterly Dividend:
Long-Term Capital Gain $0.07 Per Share
Oridinary Income $0.15 Per Share
PORTFOLIO STRUCTURE
(% of total net assets)
[PIE CHART]
Fixed Income 40.7%
(Bonds & Cash)
Stocks 59.3%
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS* CUMULATIVE TOTAL RETURNS*
Lehman S&P Lehman S&P
Balanced Aggregate 500 Balanced Aggregate 500
Fund Bond Index Index Fund Bond Index Index
<S> <C> <C> <C> <C> <C> <C>
3 Months 4.28% 3.00% 8.34% 4.28% 3.00% 8.34%
(unannualized)
1 Year 15.80 3.63 22.96 15.80 3.63 22.96
3 Year 13.13 6.03 19.68 44.77 19.19 71.40
Inception 13.13 6.03 19.68 44.77 19.19 71.40
(12/31/93)
</TABLE>
* As of 12/31/96
PERFORMANCE IS HISTORICAL AND ASSUMES REINVESTMENT OF ALL DIVIDENDS AND CAPITAL
GAINS. SHARE PRICE AND RETURN WILL VARY SO THAT A GAIN OR LOSS MAY BE REALIZED
WHEN SHARES ARE SOLD. TOTAL RETURN SHOULD NOT BE TAKEN AS A REPRESENTATION OF
FUTURE PERFORMANCE. MANAGEMENT FEES AND ADMINISTRATIVE EXPENSES ARE INCLUDED IN
THE FUND'S PERFORMANCE; HOWEVER, FEES AND EXPENSES ARE NOT INCORPORATED IN THE
LEHMAN AGGREGATE BOND INDEX NOR THE S&P 500 INDEX.
GROWTH OF $10,000
[GRAPH]
The sum of $10,000 invested at inception (12/31/93) and held until 12/31/96
would have grown to $14,477 in the Fund, $11,919 in the Lehman Aggregate Bond
Index or $17,140 in the S&P 500 Index assuming reinvestment of all dividends and
capital gains.
TOP HOLDINGS
STOCKS:
* Cisco Systems, Inc.
* Intel Corp.
* Philip Morris Cos. Inc.
* Microsoft Corp.
* Johnson & Johnson
BONDS:
* Franchise Finance Corp., 7.875%, 11/30/05
* Ford Motor Credit Corp., 9.14%, 12/30/14
* EquiVantage 1996-3 A-3, 7.70%, 9/25/27
* GNMA 9.50%, 11/15/04
* ContiMortgage Home Equity Loan Trust
1996-1 A7, 7.00%, 9/25/27
Total number of holdings: 96
SIT BALANCED FUND
PORTFOLIO OF INVESTMENTS -- DECEMBER 31, 1996 (UNAUDITED)
QUANTITY NAME OF ISSUER MARKET VALUE (1)
COMMON STOCKS (59.3%) (2)
BUSINESS EQUIPMENT & SERVICES (3.3%)
800 Ceridian Corp. (3) $ 32,400
700 Danka Business Systems p.l.c,
A.D.R. 24,763
1,600 First Data Corp. 58,400
500 Paychex, Inc. 25,719
-----------
141,282
-----------
CAPITAL GOODS (4.1%)
800 General Electric Co. 79,100
500 Owens Corning (3) 21,313
800 Sundstrand Corp. 34,000
800 Tyco International Ltd. 42,300
-----------
176,713
-----------
CONSUMER DURABLES (0.5%)
500 Harley-Davidson, Inc. 23,500
-----------
CONSUMER NON-DURABLES (7.3%)
1,300 Coca-Cola Co. (The) 68,413
1,000 Gillette Co. (The) 77,750
400 NIKE, Inc. Class B 23,900
800 Philip Morris Cos. Inc. 90,800
500 Proctor & Gamble Co. (The) 53,750
-----------
314,613
-----------
CONSUMER SERVICES (2.5%)
2,500 CUC International, Inc. (3) 59,375
900 Marriot International, Inc. 49,725
-----------
109,100
-----------
ENERGY (3.6%)
900 Baker Hughes Inc. 31,050
511 British Petroleum p.l.c., A.D.R. 72,303
500 Schlumberger Ltd. 49,938
-----------
153,291
-----------
FINANCIAL (8.1%)
BANKING (2.4%)
500 Citicorp 51,500
1,200 Norwest Corp. 52,200
-----------
103,700
-----------
FINANCIAL SERVICES (1.5%)
400 Federal Home Loan Mortgage Corp. 44,050
300 Franklin Resources Inc. 20,513
-----------
64,563
-----------
INSURANCE (4.2%)
500 American International Group, Inc. 54,125
1,500 EXEL Ltd. 56,813
700 Mercury General Corp. 36,750
400 MGIC Investment Corp. 30,400
-----------
178,088
-----------
HEALTH CARE (10.5%)
BIOTECHNOLOGY/ PHARMACEUTICALS (5.7%)
1,000 Amgen Inc. (3) 54,375
600 Astra AB, A.D.R. Class A 29,400
800 Medtronic, Inc. 54,400
900 Pfizer Inc. 74,588
500 Smithkline Beecham, p.l.c., A.D.R. 34,000
-----------
246,763
-----------
MEDICAL EQUIPMENT/ SUPPLIES (2.5%)
1,600 Johnson & Johnson 79,600
1,000 Stryker Corp. 29,875
-----------
109,475
-----------
MEDICAL FACILITIES MANAGEMENT (2.3%)
600 HBO & Co. 35,625
700 HEALTHSOUTH Corp. (3) 26,688
600 Oxford Health Plans, Inc. (3) 35,138
-----------
97,451
-----------
MULTI-INDUSTRY (0.3%)
500 Whitman Corp. 11,438
-----------
RAW MATERIALS (1.7%)
1,000 Monsanto Co. 38,875
400 Potash Corp. of Saskatchewan,
Inc. 34,000
-----------
72,875
-----------
RETAIL (3.3%)
1,300 Federated Department Stores,
Inc.(3) 44,363
800 Gap, Inc. 24,100
700 Home Depot, Inc. (The) 35,088
1,000 Kohl's Corp. (3) 39,250
-----------
142,801
-----------
TECHNOLOGY (13.3%)
AEROSPACE/ DEFENSE (1.7%)
700 Boeing Company (The) 74,463
-----------
COMPUTER RELATED (3.1%)
1,700 Cisco Systems, Inc. (3) 108,163
500 Hewlett-Packard Co. 25,125
-----------
133,288
-----------
COMPUTER SOFTWARE/ SERVICES (4.7%)
500 Computer Associates International,
Inc. 24,875
1,000 Microsoft Corp. (3) 82,625
1,200 Oracle Corp. (3) 50,100
800 Parametric Technology Corp. (3) 41,100
-----------
198,700
-----------
SEMICONDUCTORS & RELATED (2.3%)
700 Intel Corp. 91,656
200 Xilinx, Inc. (3) 7,363
-----------
99,019
-----------
TELECOMMUNICATIONS EQUIPMENT (1.5%)
1,400 AirTouch Communications, Inc. (3) $ 35,350
400 U.S. Robotics Corp. (3) 28,800
-----------
64,150
-----------
UTILITIES (0.8%)
1,000 MCI Communications Corp. 32,688
-----------
Total common stocks (cost: $1,681,657) 2,547,961
-----------
BONDS (35.6%)
U.S. TREASURY (2.4%)
U.S. Treasury Note:
25,000 7.25%, 5/15/04 26,305
50,000 8.25%, 7/15/98 51,774
25,000 U.S. Treasury Coupon Strip,
6.93% Effective Yield on
Purchase Date, 11/15/04 15,193
50,000 U.S. Treasury Principal Strip,
7.14% EffectiveYield on
Purchase Date, 2/15/19 11,080
-----------
104,352
-----------
ASSET-BACKED SECURITIES (8.6%)
Advanta Mortgage Loan Trust:
25,000 1995-3 A5, 7.37%, 2/25/27 24,770
50,000 1996-1 A7, 7.07%, 3/25/27 48,301
50,000 Cityscape Home Equity Loan Trust,
1996-3 A8, 7.65%, 9/25/25 50,397
ContiMortgage Home Equity Loan
Trust:
74,999 1996-1 A7, 7.00%, 3/15/27 72,875
50,000 1996-3 A7, 8.04%, 9/15/27 51,808
25,000 EQCC Home Equity Loan Trust,
Series 1996-1, 6.93%, 3/15/27 24,172
75,000 EquiVantage, 1996-3 A3, 7.70%,
9/25/27 76,632
20,000 Green Tree Corp., Series 1995-5,
7.25%, 9/15/25 19,989
-----------
368,944
-----------
CLOSED-END FUNDS (1.7%)
600 American Strategic Income Portfolio 6,450
2,700 American Strategic Income
Portfolio II 29,363
3,600 American Strategic Income
Portfolio III 38,700
-----------
74,513
-----------
CORPORATE BONDS (7.2%)
70,000 Ford Motor Credit Corp.,
9.14%, 12/30/14 77,613
100,000 Franchise Finance Corp.,
7.875%, 11/30/05 102,625
Nationwide Health Properties:
50,000 Series B, 7.23%, 11/08/06 49,375
25,000 8.67%, 3/1/05 26,875
25,000 Security Capital Pacific Trust,
7.55%, 8/1/08 25,531
25,000 Simon DeBartolo Group L.P.,
6.875%, 11/15/06 24,313
-----------
306,332
-----------
MORTGAGE PASS-THROUGH SECURITIES (14.0%)
FEDERAL NATIONAL MORTGAGE ASSOCIATION (1.2%)
49,818 9.00%, 1/1/17 52,245
-----------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (9.7%)
47,126 9.00%, 6/15/11 49,512
34,726 9.00%, 12/15/18 36,416
48,988 9.00%, 10/15/19 51,391
50,387 9.25%, 9/15/01 53,445
55,087 9.50%, 1/15/04 58,682
69,953 9.50%, 11/15/04 74,448
6,321 9.75%, 2/20/01 6,674
27,864 10.00%, 9/15/99 28,952
22,521 11.25%, 10/15/00 24,011
21,725 11.25%, 10/15/11 23,883
8,156 11.75%, 3/15/00 8,694
-----------
416,108
-----------
COLLATERALIZED MORTGAGE OBLIGATIONS (3.1%)
50,000 FNMA 1994-38 Pac, 6.65%,
12/25/23 48,192
Vendee Mortgage Trust:
12,473 1992-1 2B, 7.75%, 9/15/10 12,583
25,000 1996-2 1D, 6.75%, 11/15/15 24,471
50,000 1996-2 1E, 6.75%, 5/15/20 48,500
-----------
133,746
-----------
TRUST PREFERRED SECURITIES (1.7%)
1,000 Allstate Financing I, 7.95%, 12/1/26 25,000
25,000 Allstate Financing II, 7.83%, 12/1/45 24,625
25,000 Chase Capital I, 7.67%,12/1/26 24,521
74,146
-----------
Total bonds (cost: $1,518,946) 1,530,386
===========
SHORT-TERM SECURITIES (4.8%)
205,000 Sit Money Market Fund, 4.95% (6) 205,000
-----------
(cost: $205,000)
Total investments in securities
(cost: $3,405,603) (7) $4,283,347
===========
See accompanying notes to portfolios of investments on page 31.
(This page has been left blank intentionally.)
SIT MUTUAL FUNDS
NOTES TO PORTFOLIOS OF INVESTMENTS
(1) Securities are valued by procedures described in note 1 to the
financial statements.
(2) Percentage figures indicate percentage of total net assets.
(3) Presently non-income producing securities.
(4) 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, 1996, is $331,516 and $1,125,612 in the Developing Markets
Growth and International Growth Funds, respectively, which represents
3.1% and 1.3% of the Fund's net assets, respectively. The following
table summarizes the purchase date(s) and cost basis of these
securities:
<TABLE>
<CAPTION>
Purchase
Fund Security Date(s) Shares/Par Cost Basis
---- -------- ------- ---------- ----------
<S> <C> <C> <C> <C>
Developing Markets Growth Fund PT Modern Photo 4/3/95 - 5/8/96 37,000 $160,171
Developing Markets Growth Fund Pan Smak Pizza 12/22/95 - 8/19/96 141,000 87,065
Developing Markets Growth Fund PT Dynaplast 1/17/96 - 1/19/96 272,000 115,953
International Growth Fund PT Modern Photo 3/17/93 - 1/25/96 170,000 635,467
International Growth Fund International UNP Holdings 1/26/94 909,113 625,059
International Growth Fund Concordia Paper, A.D.R. 3/30/95 - 10/10/95 84,200 1,087,175
</TABLE>
(6) This security represents an investment in an affiliated party and
comprises 1.2%, 0.8%, 0.2%, and 4.8% of the Small Cap Growth,
International Growth, Mid Cap Growth and Balanced Fund's net assets,
respectively. See note 3 to the accompanying financial statements.
(7) At December 31, 1996, 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 $9,434,487 $48,659,160 $65,600,838
========== =========== ===========
Unrealized appreciation (depreciation) on
investments:
Gross unrealized appreciation $1,670,034 $14,323,813 $24,013,037
Gross unrealized depreciation (355,560) (4,299,871) (2,957,108)
---------- ----------- -----------
Net unrealized appreciation $1,314,474 $10,023,942 $21,055,929
========== =========== ===========
MID CAP LARGE CAP
GROWTH GROWTH BALANCED
FUND FUND FUND
------------ ----------- --------
Cost for federal income tax purposes $245,129,334 $38,064,458 $3,405,603
============ =========== ==========
Unrealized appreciation (depreciation) on
investments:
Gross unrealized appreciation $140,427,708 $19,810,803 $890,419
Gross unrealized depreciation (9,625,150) (54,678) (12,675)
------------ ----------- --------
Net unrealized appreciation $130,802,558 $19,756,125 $877,744
============ =========== ========
</TABLE>
SIT MUTUAL FUNDS
STATEMENTS OF ASSETS & LIABILITIES -- DECEMBER 31, 1996
<TABLE>
<CAPTION>
DEVELOPING SMALL
MARKETS CAP INTERNATIONAL
GROWTH GROWTH GROWTH
FUND FUND FUND
-------------- -------------- --------------
<S> <C> <C> <C>
ASSETS
Investments in securities, at
identified cost $ 9,434,487 $ 48,659,160 $ 65,600,838
=============== =============== ===============
Investments in securities, at
market value - see
accompanying schedule for
detail $ 10,748,961 $ 58,683,102 $ 86,656,767
Cash in bank on demand deposit -- -- --
Other receivables:
Dividends and accrued interest 52,167 3,054 267,667
Fund shares sold 37,220 56,916 52,662
Investment securities sold 106,736 32,109 665,275
Foreign withholding taxes
receivable 17,070 -- 53,951
-------------- -------------- --------------
Total assets 10,962,154 58,775,181 87,696,322
-------------- -------------- --------------
LIABILITIES
Disbursements in excess
of cash balances 56 22,254 198,199
Payables:
Investment securities purchased 108,866 331,862 --
Fund shares redeemed -- 371,860 --
Accrued investment management
and advisory services fee 17,032 73,243 109,996
Foreign withholding taxes payable 7,100 -- 22,225
Other payables -- -- 4,895
Other accrued expenses -- -- --
-------------- -------------- --------------
Total liabilities 133,054 799,219 335,315
-------------- -------------- --------------
Net assets applicable to
outstanding capital stock $ 10,829,100 $ 57,975,962 $ 87,361,007
=============== =============== ===============
Capital Stock:
Par $ 0.001 $ 0.001 $ 0.001
Authorized shares 10,000,000,000 10,000,000,000 10,000,000,000
Outstanding shares 991,169 3,146,032 5,311,764
=============== =============== ===============
Net asset value per share of
outstanding capital stock $ 10.93 $ 18.43 $ 16.45
=============== =============== ===============
</TABLE>
(WIDE TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
MID CAP LARGE CAP
GROWTH GROWTH BALANCED
FUND FUND FUND
--------------- --------------- ---------------
<S> <C> <C> <C>
ASSETS
Investments in securities, at
identified cost $ 245,129,334 $ 38,064,458 $ 3,405,603
=============== =============== ===============
Investments in securities, at
market value - see
accompanying schedule for
detail $ 375,931,892 $ 57,820,583 $ 4,283,347
Cash in bank on demand deposit -- -- 2,817
Other receivables:
Dividends and accrued interest 89,444 57,135 19,767
Fund shares sold 43,199 39,856 674
Investment securities sold 1,056,635 -- --
Foreign withholding taxes
receivable -- -- --
-------------- -------------- --------------
Total assets 377,121,170 57,917,574 4,306,605
-------------- -------------- --------------
LIABILITIES
Disbursements in excess
of cash balances 2,618 12,176 --
Payables:
Investment securities purchased 53,891 114,240 7,197
Fund shares redeemed 1,425,583 16,813 500
Accrued investment management
and advisory services fee 322,749 49,476 3,704
Foreign withholding taxes payable -- -- --
Other payables -- -- --
Other accrued expenses -- -- --
-------------- -------------- --------------
Total liabilities 1,804,841 192,705 11,401
-------------- -------------- --------------
Net assets applicable to
outstanding capital stock $ 375,316,329 $ 57,724,869 $ 4,295,204
=============== =============== ===============
Capital Stock:
Par $ 0.001 $ 0.001 $ 0.001
Authorized shares 10,000,000,000 10,000,000,000 10,000,000,000
Outstanding shares 26,302,376 1,714,157 322,102
=============== =============== ===============
Net asset value per share of
outstanding capital stock $ 14.27 $ 33.68 $ 13.33
=============== =============== ===============
</TABLE>
See accompanying notes to financial statements on pages 36-46.
<TABLE>
<CAPTION>
SIT MUTUAL FUNDS
STATEMENTS OF OPERATIONS -- SIX MONTHS ENDED DECEMBER 31, 1996 (UNAUDITED)
DEVELOPING SMALL MID LARGE
MARKETS CAP INTERNATIONAL CAP CAP
GROWTH GROWTH GROWTH GROWTH GROWTH BALANCED
FUND FUND FUND FUND FUND FUND
------- ------- --------- ---------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
INCOME:
Dividends * $ 77,143 $ 41,479 $ 384,105 $ 623,161 $ 243,724 $ 16,802
Interest 20,064 164,666 103,192 673,080 95,445 56,001
------- ------- --------- ---------- --------- -------
Total income 97,207 206,145 487,297 1,296,241 339,169 72,803
------- ------- --------- ---------- --------- -------
EXPENSES (NOTE 3):
Investment management and
advisory services fee 93,526 414,409 803,970 1,513,413 259,318 21,240
Custodian, transfer agent
and accounting services fees -- -- -- 150,574 7,216 --
Auditing and legal fees -- -- -- 10,153 22,992 --
Printing costs -- -- -- 15,124 2,213 --
Postage -- -- -- 5,275 974 --
Registration fees -- -- -- 25,827 11,422 --
Directors' fees and expenses -- -- -- 3,151 3,151 --
Other -- -- -- 7,896 3,518 --
------- ------- --------- ---------- --------- -------
Total expenses 93,526 414,409 803,970 1,731,413 310,804 21,240
------- ------- --------- ---------- --------- -------
Less fees and expenses absorbed
by investment adviser -- -- (152,103) (160,297) (31,571) --
------- ------- --------- ---------- --------- -------
Total net expenses 93,526 414,409 651,867 1,571,116 279,233 21,240
------- ------- --------- ---------- --------- -------
Net investment income (loss) 3,681 (208,264) (164,570) (274,875) 59,936 51,563
------- ------- --------- ---------- --------- -------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net realized gain (loss) (note 2) (104,792) 372,612 826,873 10,265,903 1,217,106 53,658
Net change in unrealized appreciation
(depreciation) on investments 100,561 158,950 2,481,291 20,414,271 4,193,883 244,928
Realized gain (loss) on foreign
currency transactions (5,986) -- (63,362) -- 22 1
Net change in unrealized appreciation
(depreciation) on foreign currency
transactions (533) -- (5,167) -- (27) (2)
------- ------- --------- ---------- --------- -------
Net gain on investments (10,750) 531,562 3,239,635 30,680,178 5,410,984 298,585
------- ------- --------- ---------- --------- -------
Net increase (decrease) in net assets
resulting from operations ($ 7,069) $ 323,298 $ 3,075,065 $ 30,405,299 $ 5,470,920 $ 350,148
========= ========= =========== ============ =========== =========
</TABLE>
* Dividends are net of foreign withholding tax of $7,053 and $31,997 in the
Developing Markets Growth Fund and International Growth Fund, respectively.
See accompanying notes to financial statements on pages 36-46.
SIT MUTUAL FUNDS
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
1996 JUNE 30, 1996 JUNE 30,
(UNAUDITED) 1996 (UNAUDITED) 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) $ 3,681 $ 3,567 ($ 208,264) ($ 289,348)
Net realized gain (loss) on investments (104,792) (111,020) 372,612 2,792,536
Net change in unrealized appreciation
(depreciation) on investments 100,561 1,161,148 158,950 7,785,867
Net realized gain (loss) on foreign currency transactions (5,986) (3,915) -- --
Net change in unrealized appreciation (depreciation) on
foreign currency transactions (533) (253) -- --
------------ ------------ ------------ ------------
Net increase (decrease) in net assets resulting from
operations (7,069) 1,049,527 323,298 10,289,055
------------ ------------ ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income -- (413) -- --
Net realized gains on investments -- (5,518) (2,420,001) (250,045)
------------ ------------ ------------ ------------
Total distributions -- (5,931) (2,420,001) (250,045)
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 4,298,072 4,847,931 27,236,566 35,164,082
Reinvested distributions -- 5,758 2,376,323 246,163
Payments for shares redeemed (2,107,628) (1,869,993) (20,386,321) (6,618,421)
------------ ------------ ------------ ------------
Increase (decrease) in net assets from
capital share transactions 2,190,444 2,983,696 9,226,568 28,791,824
------------ ------------ ------------ ------------
Total increase in net assets 2,183,375 4,027,292 7,129,865 38,830,834
NET ASSETS
Beginning of period 8,645,725 4,618,433 50,846,097 12,015,263
------------ ------------ ------------ ------------
End of period $ 10,829,100 $ 8,645,725 $ 57,975,962 $ 50,846,097
============ ============ ============ ============
NET ASSETS CONSIST OF:
Capital (par value and paid-in surplus) $ 10,102,826 $ 7,912,382 $ 47,909,244 $ 38,682,676
Undistributed (distributions in excess of) net
investment income 3,681 -- (208,264) --
Accumulated net realized gain (loss) from
security transactions and foreign
currency transactions (591,082) (480,304) 251,040 2,298,429
Unrealized appreciation on investments 1,314,474 1,213,913 10,023,942 9,864,992
Unrealized depreciation on foreign
currency transactions (799) (266) -- --
------------ ------------ ------------ ------------
$ 10,829,100 $ 8,645,725 $ 57,975,962 $ 50,846,097
============ ============ ============ ============
CAPITAL TRANSACTIONS IN SHARES:
Sold 396,721 486,886 1,465,814 2,120,150
Reinvested distributions -- 630 130,948 15,578
Redeemed (194,895) (189,064) (1,088,984) (387,897)
------------ ------------ ------------ ------------
Net increase (decrease) 201,826 298,452 507,778 1,747,831
============ ============ ============ ============
</TABLE>
(WIDE TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
INTERNATIONAL MID CAP
GROWTH FUND GROWTH FUND
------------------------------- -----------------------------
SIX MONTHS SIX MONTHS
ENDED ENDED
DECEMBER 31, YEAR ENDED DECEMBER 31, YEAR ENDED
1996 JUNE 30, 1996 JUNE 30,
(UNAUDITED) 1996 (UNAUDITED) 1996
------------ ------------- ------------- -------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) ($ 164,570) $ 101,450 ($ 274,875) ($ 831,547)
Net realized gain (loss) on investments 826,873 5,630,000 10,265,903 68,471,876
Net change in unrealized appreciation 2,481,291 1,920,031 20,414,271 34,843,137
(depreciation) on investments
Net realized gain (loss) on foreign currency transactions (63,362) (24,337) -- --
Net change in unrealized appreciation (depreciation) on
foreign currency transactions (5,167) (13,980) -- --
------------ ------------- ------------- -------------
Net increase (decrease) in net assets resulting from
operations 3,075,065 7,613,164 30,405,299 102,483,466
------------ ------------- ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (72,156) (390,572) -- (50,975)
Net realized gains on investments (2,161,979) (3,758,362) (59,500,008) (35,900,021)
------------ ------------- ------------- -------------
Total distributions (2,234,135) (4,148,934) (59,500,008) (35,950,996)
CAPITAL SHARE TRANSACTIONS: ------------ ------------- ------------- -------------
Proceeds from shares sold 22,308,186 29,862,086 123,262,638 94,477,676
Reinvested distributions 2,103,428 3,946,122 56,947,602 34,550,208
Payments for shares redeemed (26,604,320) (16,684,601) (132,116,199) (167,122,012)
------------ ------------- ------------- -------------
Increase (decrease) in net assets from
capital share transactions (2,192,706) 17,123,607 48,094,041 (38,094,128)
------------ ------------- ------------- -------------
Total increase in net assets (1,351,776) 20,587,837 18,999,332 28,438,342
NET ASSETS
Beginning of period 88,712,783 68,124,946 356,316,997 327,878,655
------------ ------------- ------------- -------------
End of period $ 87,361,007 $ 88,712,783 $ 375,316,329 $ 356,316,997
============ ============= ============= =============
NET ASSETS CONSIST OF:
Capital (par value and paid-in surplus) $ 65,855,633 $ 68,048,339 $ 240,456,693 $ 192,362,652
Undistributed (distributions in excess of) net
investment income (162,922) 73,804 (274,875) --
Accumulated net realized gain (loss) from
security transactions and foreign
currency transactions 626,554 2,025,022 4,331,953 53,566,058
Unrealized appreciation on investments 21,055,929 18,574,638 130,802,558 110,388,287
Unrealized depreciation on foreign
currency transactions (14,187) (9,020) -- --
------------ ------------- ------------- -------------
$ 87,361,007 $ 88,712,783 $ 375,316,329 $ 356,316,997
CAPITAL TRANSACTIONS IN SHARES: ============ ============= ============= =============
Sold 1,387,074 1,891,318 7,893,422 6,311,934
Reinvested distributions 130,810 265,196 3,987,927 2,607,555
Redeemed (1,650,585) (1,047,893) (8,444,767) (11,272,708)
------------ ------------- ------------- -------------
Net increase (decrease) (132,701) 1,108,621 3,436,582 (2,353,219)
============ ============= ============= =============
[WIDE TABLE CONTINUED FROM ABOVE]
LARGE CAP BALANCED
GROWTH FUND FUND
---------------------------- -----------------------------
SIX MONTHS SIX MONTHS
ENDED ENDED
DECEMBER 31, YEAR ENDED DECEMBER 31, YEAR ENDED
1996 JUNE 30, 1996 JUNE 30,
(UNAUDITED) 1996 (UNAUDITED) 1996
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) $ 59,936 $ 68,160 $ 51,563 $ 91,159
Net realized gain (loss) on investments 1,217,106 5,081,899 53,658 76,955
Net change in unrealized appreciation
(depreciation) on investments 4,193,883 5,103,022 244,928 358,571
Net realized gain (loss) on foreign currency transactions 22 (1) 1 --
Net change in unrealized appreciation (depreciation) on
foreign currency transactions (27) (4) (2) --
------------ ------------ ----------- -----------
Net increase (decrease) in net assets resulting from
operations 5,470,920 10,253,076 350,148 526,685
------------ ------------ ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (47,000) (68,302) (75,900) (80,680)
Net realized gains on investments (3,850,001) (3,279,734) (23,900) --
------------ ------------ ----------- -----------
Total distributions (3,897,001) (3,348,036) (99,800) (80,680)
CAPITAL SHARE TRANSACTIONS: ------------ ------------ ----------- -----------
Proceeds from shares sold 8,237,929 8,919,140 211,434 1,430,436
Reinvested distributions 3,795,621 3,266,526 99,755 78,415
Payments for shares redeemed (8,899,127) (11,285,026) (328,195) (337,378)
------------ ------------ ----------- -----------
Increase (decrease) in net assets from
capital share transactions 3,134,423 900,640 (17,006) 1,171,473
------------ ------------ ----------- -----------
Total increase in net assets 4,708,342 7,805,680 233,342 1,617,478
NET ASSETS
Beginning of period 53,016,527 45,210,847 4,061,862 2,444,384
------------ ------------ ----------- -----------
End of period $ 57,724,869 $ 53,016,527 $ 4,295,204 $ 4,061,862
============ ============ =========== ===========
NET ASSETS CONSIST OF:
Capital (par value and paid-in surplus) $ 37,409,121 $ 34,274,698 $ 3,376,782 $ 3,393,788
Undistributed (distributions in excess of) net
investment income 43,115 30,175 2,840 27,177
Accumulated net realized gain (loss) from
security transactions and foreign
currency transactions 516,543 3,149,416 37,840 8,081
Unrealized appreciation on investments 19,756,121 15,562,242 877,744 632,816
Unrealized depreciation on foreign
currency transactions (31) (4) (2) --
------------ ------------ ----------- -----------
$ 57,724,869 $ 53,016,527 $ 4,295,204 $ 4,061,862
CAPITAL TRANSACTIONS IN SHARES: ============ ============ =========== ===========
Sold 236,708 290,926 16,254 122,024
Reinvested distributions 114,020 112,216 7,715 6,742
Redeemed (255,181) (377,404) (25,021) (27,962
------------ ------------ ----------- -----------
Net increase (decrease) 95,547 25,738 (1,052) 100,804
============ ============ =========== ===========
</TABLE>
See accompanying notes to financial statements on pages 36-46.
SIT MUTUAL FUNDS
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.
On November 1, 1996, the Sit Growth Fund and Sit Growth & Income Fund
changed their names to Sit Mid Cap Growth Fund and Sit Large Cap Growth
Fund, respectively.
This report covers the equity funds of the Sit Mutual Funds. The
investment objective for each Fund is as follows:
<TABLE>
FUND INVESTMENT OBJECTIVE
<S> <C>
Developing Markets Growth Maximize long-term capital appreciation.
Small Cap Growth Maximize long-term capital appreciation.
International Growth Maximize long-term capital appreciation.
Mid Cap Growth Maximize long-term capital appreciation.
Large Cap Growth Maximize long-term capital appreciation and, secondarily, current income.
Balanced Long-term capital appreciation consistent with the preservation of principal and to
provide regular income.
</TABLE>
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.
ILLIQUID SECURITIES
Each Fund currently limits investments in illiquid securities to 15% of
net assets. At December 31, 1996, the Developing Markets Growth Fund
and International Growth Fund held investments in securities deemed
illiquid by the investment adviser. The aggregate value of such
securities at December 31, 1996 was $331,516 and $1,125,612,
representing 3.1% and 1.3% of the Funds' net assets, respectively.
Pursuant to the guidelines adopted by the Board of Directors, certain
unregistered securities are determined to be liquid and are not
included within the limitation specified above.
FOREIGN CURRENCY TRANSLATIONS AND FORWARD FOREIGN CURRENCY CONTRACTS
The market value of securities and other assets and liabilities
denominated in foreign currencies for Developing Markets Growth Fund
and International Growth Fund are translated daily into U.S. dollars at
the closing rate of exchange. Purchases and sales of securities, income
and expenses are translated at the exchange rate on the transaction
date. Dividend and interest income includes currency exchange gains
(losses) realized between the accrual and payment dates on such income.
Exchange gains (losses) may also be realized between the trade and
settlement dates on security and forward contract transactions. For
securities denominated in foreign currencies, the effect of changes in
foreign exchange rates on realized and unrealized gains or losses is
reflected as a component of such gains or losses.
The Developing Markets Growth and International Growth Funds may enter
into forward foreign currency exchange contracts for operational
purposes and to protect against adverse exchange rate fluctuation. The
net U.S. dollar value of foreign currency underlying all contractual
commitments held by the Funds and the resulting unrealized appreciation
or depreciation 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.
At December 31, 1996 the Developing Markets Growth Fund and
International Growth Fund had entered into foreign currency exchange
contracts in the course of completing ordinary equity transactions that
obligate the Fund to deliver currencies at specified future dates. The
unrealized appreciation and/or depreciation on these contracts is
included in the accompanying financial statements. The terms of the
open contracts are as follows:
Developing Markets Growth Fund:
Currency to be Currency to be Unrealized
Exchange date delivered received depreciation
------------- --------- -------- ------------
January 2, 1997 252,004,465 106,533 $ (155)
Indonesian Rupiah U.S. Dollar
January 8, 1997 66,242 167,293 (27)
U.S. Dollar Malaysian Ringgit
January 9, 1997 42,403 107,156 (17)
U.S. Dollar Malaysian Ringgi ------
$ (199)
International Growth Fund:
Currency to be Currency to be Unrealized
Exchange date delivered received depreciation
------------- --------- -------- ------------
January 6, 1997 412,984 1,088,832 $ (3,954)
U.S. Dollar Peruvian New Sol
January 7, 1997 247,504 28,759,946 (941)
U.S. Dollar Japanese Yen -------
$ (4,895)
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 Fund has
a capital loss carryforward of $480,304 at June 30, 1996 which, if not
offset by subsequent capital gains, will begin to expire in 2004. 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 the Balanced Fund and declared and paid annually for
Developing Markets Growth, Small Cap Growth, International Growth, Mid
Cap Growth, and Large Cap Growth Funds. Distributions from net realized
gains, if any, will be made annually for each of the Funds.
CONCENTRATION OF INVESTMENTS
The Developing Markets Growth Fund may concentrate investments in
countries with limited or developing capital markets which may involve
greater risks than investments in more developed markets and the prices
of such investments may be volatile. The consequences of political,
social or economic changes in these markets may have disruptive effects
on the market prices of the Fund's investments and the income it
generates, as well as the Fund's ability to repatriate such amounts.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported results. Actual
results could differ from those estimates.
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, 1996, were as follows:
Purchases Proceeds
--------- --------
Developing Markets Growth Fund $3,722,632 $2,018,026
Small Cap Growth Fund 18,372,486 15,046,042
International Growth Fund 11,741,372 13,834,044
Mid Cap Growth Fund 61,743,816 68,019,171
Large Cap Growth Fund 9,605,442 8,939,610
Balanced Fund 1,515,280 1,678,116
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
Funds 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:
Contractual Net of Adviser's
Management Fee Voluntary Fee Waiver
-------------- --------------------
Developing Markets Growth Fund 2.00% 2.00%
Small Cap Growth Fund 1.50% 1.50%
International Growth Fund 1.85% 1.50%
Mid Cap Growth Fund 1.25% 1.00%
Large Cap Growth Fund 1.00% 1.00%
Balanced Fund 1.00% 1.00%
SIA is obligated to pay all of the Funds' expenses (excluding
extraordinary expenses, stock transfer taxes, interest, brokerage
commissions and other transaction charges relating to investing
activities).
For the period November 1, 1996, through June 30, 1998 the Adviser has
agreed to limit the management fee (and, thereby, all fund expenses,
except those not payable by the fund as set forth above) of the Mid Cap
Growth Fund to 1.00% of the Fund's average daily net assets. After June
30, 1998, this voluntary fee waiver may be discontinued by the Adviser
in its sole discretion.
For the period January 1, 1994 through December 31, 1997, the Adviser
has agreed to limit the management fee (and, thereby, all fund
expenses, except those not payable by the fund as set forth above) of
the International Growth Fund to 1.50% of the Fund's average daily net
assets. After December 31, 1997, this voluntary fee waiver may be
discontinued by the Adviser in its sole discretion.
Prior to November 1, 1996, the Mid Cap Growth and Large Cap Growth
Funds bore 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 was obligated to pay all expenses
(excluding stock transfer taxes, interest, and brokerage commissions)
in any fiscal year which exceeded the following limitations:
First $30 million Over $30 million
----------------- ----------------
Mid Cap Growth Fund 1.50% 1.00%
Large Cap Growth Fund 1.50% 1.00%
Under the agreements, SIA directly incurred and paid the above expenses
relating to the Mid Cap Growth and Large Cap Growth Funds and the Funds
in turn reimbursed 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, 1996, for the International
Growth, Mid Cap Growth and Large Cap Growth Funds, SIA voluntarily
absorbed an additional $152,103, $160,297, and $31,571, respectively,
in expenses that were otherwise payable by the Funds.
As of December 31, 1996, the Small Cap Growth Fund, International
Growth Fund, Mid Cap Growth Fund, and Balanced Fund had invested
$710,000, $710,000, $710,000, and $205,000, 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 services 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 0.75% on the first $100 million of each Fund's average daily
net assets, 1/12 of 0.50% on the next $100 million of average daily net
assets and 1/12 of 0.40% 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 $314,982, were paid or payable to SKI for the six months ended
December 31, 1996.
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, 1996:
% Shares
Shares Outstanding
------ -----------
Developing Markets Growth Fund 322,413 32.53%
Small Cap Growth Fund 1,011,885 32.16
International Growth Fund 972,262 18.30
Mid Cap Growth Fund 2,843,280 10.81
Large Cap Growth Fund 362,101 21.12
Balanced Fund 120,263 37.34
Legal fees were paid by Mid Cap Growth and Large Cap Growth Funds to a
law firm of which the Funds' secretary is a partner. The total legal
fees paid by these Funds for the period July 1 to October 31, 1997 were
$3,419.
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>
Six Months
Ended
December 31, Years Ended June 30,
1996 --------------------
(Unaudited) 1996 1995
----------- ---- ----
NET ASSET VALUE:
<S> <C> <C> <C>
Beginning of period $10.95 $9.41 $10.00
- ----------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) ---- ---- ----
Net realized and unrealized gains
(losses) on investments (.02) 1.55 (.54)
- -----------------------------------------------------------------------------------------------------------
Total from operations (.02) 1.55 (.54)
- -----------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From realized gains ---- (.01) (.05)
- ----------------------------------------------------------------------------------------------------------
Total distributions ---- (.01) (.05)
- ----------------------------------------------------------------------------------------------------------
NET ASSET VALUE:
End of period $10.93 $10.95 $9.41
- -----------------------------------------------------------------------------------------------------------
Total investment return (1) (0.18%) 16.51% (5.44%)
- -----------------------------------------------------------------------------------------------------------
Net assets at end of period (000's omitted) $10,829 $8,646 $4,618
RATIOS:
Expenses to average daily net assets 2.00%(2) 2.00% 2.00%
Net investment income to average daily net assets 0.08%(2) 0.06% 0.03%
Average brokerage commisison rate (3) $0.0040 n/a n/a
Portfolio turnover rate (excluding short-term securities) 27.46% 46.22% 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.
(3) Beginning in fiscal 1996, the Fund is required to disclose an average
brokerage commission rate. This rate is calculated by dividing total
brokerage commissions paid on purchases and sales of portfolio securities
by the total number of related shares purchased and sold.
SIT SMALL CAP GROWTH FUND
FINANCIAL HIGHLIGHTS
<TABLE>
Six Months
Ended
December 31, Years Ended June 30,
1996 --------------------
(Unaudited) 1996 1995
----------- ---- ----
<S> <C> <C> <C>
NET ASSET VALUE:
Beginning of period $19.27 $13.49 $10.00
- -----------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment loss (.07) (.11) (.02)
Net realized and unrealized gains
on investments .04 6.03 3.56
- ----------------------------------------------------------------------------------------------------------
Total from operations (.03) 5.92 3.54
- -----------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From realized gains (.81) (.14) (.05)
- -----------------------------------------------------------------------------------------------------------
Total distributions (.81) (.14) (.05)
- -----------------------------------------------------------------------------------------------------------
NET ASSET VALUE:
End of period $18.43 $19.27 $13.49
- -----------------------------------------------------------------------------------------------------------
Total investment return (1) (0.12%) 44.13% 35.59%
- -----------------------------------------------------------------------------------------------------------
Net assets at end of period (000's omitted) $57,976 $50,846 $12,015
RATIOS:
Expenses to average daily net assets 1.50% (2) 1.50% 1.50%
Net investment income (loss) to average daily net assets (0.75%)(2) (0.91%) (0.30%)
Average brokerage commission rate(3) $0.0480 n/a n/a
Portfolio turnover rate (excluding short-term securities) 30.68% 69.92% 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.
(3) Beginning in fiscal 1996, the Fund is required to disclose an average
brokerage commission rate. This rate is calculated by dividing total
brokerage commissions paid on purchases and sales of portfolio securities
by the total number of related shares purchased and sold.
SIT INTERNATIONAL GROWTH FUND
FINANCIAL HIGHLIGHTS
<TABLE>
Six Months Period from
Ended November 1,
December 31, Years Ended June 30, 1991(1) to
1996 ------------------------------------- June 30,
(Unaudited) 1996 1995 1994 1993 1992
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE:
Beginning of period $16.29 $15.71 $14.87 $11.99 $10.70 $10.00
- ----------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) (.03) .02 .09 (.04) (.03) .03
Net realized and unrealized gains
on investments .62 1.50 1.06 3.08 1.35 .67
- ----------------------------------------------------------------------------------------------------------------
Total from operations .59 1.52 1.15 3.04 1.32 .70
- ----------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (.01) (.09) (.04) (.10) (.03) ----
From realized gains (.42) (.85) (.27) (.06) ---- ----
- ----------------------------------------------------------------------------------------------------------------
Total distributions (.43) (.94) (.31) (.16) (.03) ----
- ----------------------------------------------------------------------------------------------------------------
NET ASSET VALUE:
End of period $16.45 $16.29 $15.71 $14.87 $11.99 $10.70
- ----------------------------------------------------------------------------------------------------------------
Total investment return (2) 3.68% 10.21% 7.86% 25.26% 12.37% 7.00%
- ----------------------------------------------------------------------------------------------------------------
Net assets at end of period (000's omitted) $87,361 $88,712 $68,125 $63,699 $34,549 $24,631
RATIOS:
Expenses to average daily net assets 1.50% (3) 1.50%(3) 1.50%(3) 1.65%(3) 1.85% 1.85%(4)
Net investment income (loss) to average
daily net assets (0.38%)(3) 0.13%(3) 0.62%(3) (0.16%)(3) (0.29%) 0.67%(4)
Average brokerage commission rate (5) $0.0020 n/a n/a n/a n/a n/a
Portfolio turnover rate (excluding
short-term securities) 14.27% 38.55% 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, 1996, 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,
1996, and years ended June 30, 1996, 1995 and 1994, the investment adviser
voluntarily absorbed $152,103, $269,556, $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, 1996, and
1.85% for the years ended June 30, 1996, 1995 and 1994, and the ratio of net
investment income (loss) to average daily net assets would have been
(0.73%), (0.22%), 0.27%, and (0.36%), respectively.
(4) Adjusted to an annual rate.
(5) Beginning in fiscal 1996, the Fund is required to disclose an average
brokerage commission rate. This rate is calculated by dividing total
brokerage commissions paid on purchases and sales of portfolio securities by
the total number of related shares purchased and sold.
SIT MID CAP GROWTH FUND
FINANCIAL HIGHLIGHTS
<TABLE>
Six Months
Ended
December 31, Years Ended June 30,
1996 -------------------------------------------------
(Unaudited) 1996 1995 1994 1993 1992
-----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE:
Beginning of period $15.58 $13.00 $11.08 $11.91 $10.52 $9.35
- -----------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) (.01) (.04) ---- (.01) .03 .04
Net realized and unrealized gains
(losses) on investments 1.32 4.07 2.96 (.51) 1.43 1.22
- -----------------------------------------------------------------------------------------------------------------
Total from operations 1.31 4.03 2.96 (.52) 1.46 1.26
- -----------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income ---- ---- ---- (.02) (.05) (.06)
From realized gains (2.62) (1.45) (1.04) (.29) (.02) (.03)
- -----------------------------------------------------------------------------------------------------------------
Total distributions (2.62) (1.45) (1.04) (.31) (.07) (.09)
- -----------------------------------------------------------------------------------------------------------------
NET ASSET VALUE:
End of period $14.27 $15.58 $13.00 $11.08 $11.91 $10.52
- -----------------------------------------------------------------------------------------------------------------
Total investment return (1) 8.41% 33.00% 28.44% (4.62%) 13.88% 13.34%
- -----------------------------------------------------------------------------------------------------------------
Net assets at end of period (000's omitted) $375,316 $356,317 $327,879 $285,175 $341,702 $241,831
RATIOS:
Expenses to average daily net assets 0.85%(2) 0.77% 0.83% 0.82% 0.80% 0.83%
Net investment income (loss) to
average daily net assets (0.15%)(2) (0.23%) 0.02% (0.08%) 0.35% 0.52%
Average brokerage commission rate(3) $0.0510 n/a n/a n/a n/a n/a
Portfolio turnover rate (excluding
short-term securities) 20.85% 50.38% 75.40% 46.71% 45.18% 24.74%
</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.
(3) Beginning in fiscal 1996, the Fund is required to disclose an average
brokerage commission rate. This rate is calculated by dividing total
brokerage commissions paid on purchases and sales of portfolio securities
by the total number of related shares purchased and sold.
SIT LARGE CAP GROWTH FUND
FINANCIAL HIGHLIGHTS
<TABLE>
Six Months
Ended
December 31, Years Ended June 30,
1996 -------------------------------------------------
(Unaudited) 1996 1995 1994 1993 1992
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE:
Beginning of period $32.75 $28.38 $23.89 $25.61 $24.22 $21.89
- ------------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income .02 .04 .11 .23 .33 .38
Net realized and unrealized gains
(losses) on investments 3.34 6.61 5.88 (.33) 1.94 2.91
- ------------------------------------------------------------------------------------------------------------------
Total from operations 3.36 6.65 5.99 (.10) 2.27 3.29
- ------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (.01) (.04) (.09) (.23) (.34) (.43)
From realized gains (2.42) (2.24) (1.41) (1.39) (.54) (.53)
- ------------------------------------------------------------------------------------------------------------------
Total distributions (2.43) (2.28) (1.50) (1.62) (.88) (.96)
- ------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE:
End of period $33.68 $32.75 $28.38 $23.89 $25.61 $24.22
- ------------------------------------------------------------------------------------------------------------------
Total investment return (1) 10.37% 24.48% 26.33% (0.58%) 9.52% 15.22%
- ------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000's omitted) $57,725 $53,017 $45,211 $34,612 $37,602 $32,040
RATIOS:
Expenses to average daily net assets 1.00%(2) 1.00%(2) 1.00%(2) 1.10%(2) 1.42% 1.50%
Net investment income to average
daily net assets 0.21%(2) 0.14%(2) 0.42%(2) 0.89%(2) 1.31% 1.92%
Average brokerage commission rate(3) $0.0570 n/a n/a n/a n/a n/a
Portfolio turnover rate (excluding
short-term securities) 17.21% 49.99% 67.14% 73.62% 47.82% 73.40%
</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, 1996, are adjusted to an
annual rate. During the period ended December 31, 1996, and years ended
June 30, 1996, 1995 and 1994, the investment adviser voluntarily absorbed
$31,571, $110,099, $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 1.11% for
the period ended December 31, 1996, and 1.23%, 1.35% and 1.40% for the
years ended June 30, 1996, 1995 and 1994, respectively, and the ratio of
net investment income(loss) to average daily net assets would have been
0.10%, (.09%), 0.07%, and 0.59%, respectively.
(3) Beginning in fiscal 1996, the Fund is required to disclose an average
brokerage commission rate. This rate is calculated by dividing total
brokerage commissions paid on purchases and sales of portfolio securities
by the total number of related shares purchased and sold.
SIT BALANCED FUND
FINANCIAL HIGHLIGHTS
<TABLE>
Six Months Period from
Ended December 31,
December 31, Years Ended June 30, 1993 (1) to
1996 --------------------- June 30,
(Unaudited) 1996 1995 1994(1)
---------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE:
Beginning of period $12.57 $10.99 $9.48 $10.00
- ---------------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income .23 .30 .28 .13
Net realized and unrealized gains
(losses) on investments .83 1.57 1.50 (.59)
- ---------------------------------------------------------------------------------------------------------------
Total from operations 1.06 1.87 1.78 (.46)
- ---------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (.23) (.29) (.27) (.06)
From realized gains (.07) ---- ---- ----
- ---------------------------------------------------------------------------------------------------------------
Total distributions (.30) (.29) (.27) (.06)
- ---------------------------------------------------------------------------------------------------------------
NET ASSET VALUE:
End of period $13.33 $12.57 $10.99 $9.48
- ---------------------------------------------------------------------------------------------------------------
Total investment return(2) 8.57% 17.26% 19.16% (4.56%)
- ---------------------------------------------------------------------------------------------------------------
Net assets at end of period (000's omitted) $4,295 $4,062 $2,444 $1,296
RATIOS:
Expenses to average daily net assets 1.00 (3) 1.00% 1.00% 1.00%(3)
Net investment income to average daily net assets 2.43%(3) 2.61% 2.97% 2.87%(3)
Average brokerage commission rate(4) $0.0560 n/a n/a n/a
Portfolio turnover rate (excluding short-term
securities) 38.16% 101.37% 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.
(4) Beginning in fiscal 1996, the Fund is required to disclose an average
brokerage commission rate. This rate is calculated by dividing total
brokerage commissions paid on purchases and sales of portfolio securities
by the total number of related shares purchased and sold.
(This page has been left blank intentionally.)
[LOGO]
Directors:
Eugene C. Sit, CFA
Peter L. Mitchelson, CFA
William E. Frenzel
John E. Hulse
Sidney L. Jones
Donald W. Phillips
Director Emeritus:
Melvin C. Bahle
Officers:
Eugene C. Sit, CFA Chairman
Peter L. Mitchelson, CFA Vice Chairman
Mary K. Stern President
Erik S. Anderson, CFA Vice President - Investments
Ronald D. Sit, CFA 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
SEMI-ANNUAL REPORT
STOCK FUNDS
DECEMBER 31, 1996
INVESTMENT ADVISOR
SIT 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
THE NORTHERN TRUST COMPANY
50 SOUTH LaSALLE STREET
CHICAGO, IL 60675
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 COUNCEL
DORSEY & WHITNEY LLP
220 SOUTH SIXTH STREET
MINNEAPOLIS, MN 55402
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
MEMBER OF 100% NO-LOAD MUTUAL FUND COUNCIL
