AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY ___, 1997
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 _X_
(File No. 33-42101)
Post-Effective Amendment No. _11_
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 _X_
(File No. 811-6373)
Post-Effective Amendment No. _12_
SIT MUTUAL FUNDS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
4600 Norwest Center, Minneapolis, Minnesota 55402
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(612) 332-3223
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
Paul E. Rasmussen, Vice President
SIT Mutual Funds
4600 Norwest Center
Minneapolis, Minnesota 55402
(NAME AND ADDRESS OF AGENT FOR SERVICE)
COPY TO:
Michael J. Radmer, Esq.
Dorsey & Whitney LLP
2200 First Bank Place East
Minneapolis, Minnesota 55402
___ immediately upon filing pursuant to paragraph (b) of rule 485
___ on (specify date) pursuant to paragraph (b) of rule 485
___ 60 days after filing pursuant to paragraph (a)(1) of rule 485
___ on (specify date) pursuant to paragraph (a)(1) of rule 485
_X_ 75 days after filing pursuant to paragraph (a)(2) of rule 485
___ on (specify date) pursuant to paragraph (a)(2) of rule 485
The Registrant has registered an indefinite number or amount of securities under
the Securities Act of 1933 pursuant to Rule 24f-2 under the Investment Company
Act of 1940. A Rule 24f-2 Notice for the Registrant's most recent fiscal year
was filed with the Securities and Exchange Commission on or about August 26,
1996.
EXPLANATORY NOTE
Sit Mutual Funds, Inc. (the "Registrant") (Registration Nos. 33-42101
and 811-6373) offers its shares in multiple series pursuant to Section 18(f)(2)
under the Investment Company Act of 1940 and pursuant to the Registrant's
Articles of Incorporation. The Registrant's Series A common shares (representing
interests in a series named Sit International Growth Fund), Series B common
shares (representing interests in a series named Sit Balanced Fund), Series C
common shares (representing interests in a series named Sit Developing Markets
Growth Fund), and Series D common shares (representing interests in a series
named Sit Small Cap Growth Fund) have previously been registered with the
Securities and Exchange Commission (the "SEC"). The Registrant is herewith
(I.E., in connection with this Post-Effective Amendment No. 11) registering its
Series E common shares (which will represent interest in a series to be named
Sit Science and Technology Fund ).
Series E of the Registrant will have a separate Prospectus and
Statement of Additional Information, and this Post-Effective Amendment No. 11
does not include or relate to Series A, B, C or D of the Company.
<TABLE>
<CAPTION>
SIT MUTUAL FUNDS, INC.
FORM N-1A
CROSS-REFERENCE SHEET
ITEM NUMBER CAPTION PROSPECTUS CAPTION
- - ----------- ------- ------------------
<S> <C> <C>
1 Cover Page Inside Cover of Prospectus
2 Synopsis Prospectus Summary
3 Condensed Financial Information Not Applicable
4 General Description of Registrant Investment Objective and Investment Policies;
Capitalization and Voting Rights; Additional
Information
5 Management of the Fund Summary of Fund Expenses; Custodian and Transfer
Agent; Management; Additional Information
6 Capital Stock and Other Dividend Reinvestment; Securities Exchanges;
Capitalization and Voting Rights; Taxes; Additional
Information
7 Purchase of Securities Being How to Purchase Fund Shares; Exchanges; Retirement
Offered Accounts; Computation of Net Asset Value
8 Redemption or Repurchase Redemption of Fund Shares
9 Pending Legal Proceedings Not Applicable
ITEM NUMBER CAPTION STATEMENT OF ADDITIONAL INFORMATION CAPTION
- - ----------- ------- -------------------------------------------
10 Cover Page Cover Page of Statement of Additional Information
11 Table of Contents Table of Contents
12 General Information and History Not Applicable
13 Investment Objective and Policies Additional Investment Restrictions;
14 Management of the Fund Management; Investment Adviser
15 Control Persons and Principal Holders of Control Persons and Principal Holders of Securities
Securities
16 Investment Advisory and Other Services Investment Adviser
17 Brokerage Allocation Brokerage
18 Capital Stock and Other Securities In Prospectus - Capitalization and Voting Rights
19 Purchase, Redemption and Pricing of Computation of Net Asset Value
Securities Being Offered
20 Tax Status Taxes
21 Underwriters Distributor
22 Calculation of Performance Data Calculation of Performance Data
23 Financial Statements Financial Statements
</TABLE>
[front cover]
SIT SCIENCE AND TECHNOLOGY FUND
PROSPECTUS
OCTOBER 1, 1997
THE SIT MUTUAL FUNDS
A FAMILY OF 100% NO-LOAD FUNDS
SIT MUTUAL FUNDS
[inside front cover]
SIT MUTUAL FUNDS
4600 Norwest Center - Minneapolis, MN 55402
612-334-5888 or 800-332-5580
<TABLE>
<CAPTION>
(CHART)
OUR FAMILY OF FUNDS
<S> <C> <C> <C>
Stability: Income: Growth & Income: Growth:
Safety of principal Increased income Long-term capital Long-term
and current income appreciation and capital
income appreciation
Funds:
Money Market U.S. Govt. Securities Balanced
Large Cap Growth Mid Cap Growth
Tax-Free Income International Growth
MN Tax-Free Income Small Cap Growth
Bond Developing Markets Growth
Science and Technology
Principal Stability Growth
& Current Income Potential
</TABLE>
NOT PART OF THE PROSPECTUS
Prospectus dated October 1, 1997
SIT SCIENCE AND TECHNOLOGY FUND
The Sit Science and Technology Fund (the "Fund") is a diversified no-load series
of Sit Mutual Funds, Inc. (the Company"), an open-end management investment
company, as defined in the Investment Company Act of 1940 (the "1940 Act").
The objective of the Fund is to maximize long-term capital appreciation. The
Fund pursues this objective by investing primarily in common stocks of companies
which Sit Investment Associates, Inc. (the "Adviser") expects to benefit from
the development, improvement, advancement and use of science and technology;
with an emphasis on the securities of companies that the Adviser believes have
potential for long-term capital growth.
This prospectus concisely sets forth facts about the Fund that you should know
before investing and it should be retained for future reference. You should read
it to decide if the Fund is the right investment for you. Additional facts about
the Fund are contained in a Statement of Additional Information (dated October
1, 1997) which has been filed with the Securities and Exchange Commission and is
incorporated herein by reference. For a free copy call or write the Fund.
TABLE OF CONTENTS
Summary of Fund Expenses...........................3
Performance........................................4
Investment Objective...............................5
Investment Policies................................5
Foreign Securities............................6
Securities Lending............................6
Puts and Calls................................6
Illiquid Securities...........................6
Investment in Sit Money Market Fund...........7
When-Issued and Forward
Commitment Securities, and
Repurchase Agreements.....................7
Portfolio Turnover............................7
Temporary Defensive Investments...............7
Ratings on Debt Securities....................8
Other Investment Restrictions.................8
Computation of Net Asset Value.....................8
How to Purchase Fund Shares........................9
Redemption of Fund Shares.........................10
Exchanges.........................................12
Dividend Reinvestment.............................13
Retirement Accounts...............................13
Custodian and Transfer Agent......................13
Management........................................13
Taxes.............................................14
Capitalization and Voting Rights..................15
Additional Information............................16
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS (AND /OR IN THE
STATEMENT OF ADDITIONAL INFORMATION REFERRED TO ABOVE), AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE FUND.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This prospectus does not constitute an offer or solicitation by anyone in any
state in which such offer or solicitation is not authorized or in which the
person making such offer or solicitation is not qualified to do so, or to any
person to whom it is unlawful to make such offer or solicitation.
PROSPECTUS SUMMARY
THE FUND
The Fund is a 100% no-load, open-end, diversified, management investment company
(commonly known as a "mutual fund"), as defined in the Investment Company Act of
1940 (the "1940 Act").
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is to maximize long-term capital
appreciation. The Fund pursues this objective by investing primarily in common
stocks of companies which the Adviser expects to benefit from the development,
improvement, advancement and use of science and technology, with an emphasis on
the securities of companies that the Adviser believes have potential for
long-term capital growth. The investment objective of the Fund is "fundamental,"
which means that it may not be changed unless approved by a vote of the
"majority" of the shareholders of the Fund (as defined in the 1940 Act). There
can be no assurance that the investment objective of the Fund will be achieved.
INVESTMENT ADVISER
Sit Investment Associates, Inc. (the "Adviser") serves as the investment adviser
to the Fund and receives an annual fee based on a percentage of the Fund's
average daily net assets. The Adviser manages more that $6 billion for both
public and private clients, including $1 billion for the 12 Sit Mutual Funds.
PRICE OF FUND SHARES
Fund shares are sold at their net asset value ("NAV"). There is no sales charge
or redemption fee. The NAV is based upon the market value of the securities
owned by the Fund and is determined once daily as of the close of the New York
Stock Exchange on each day the Exchange is open for trading.
HOW TO PURCHASE SHARES
You can purchase shares of the Fund with no sales charges at the next determined
NAV by completing the application and mailing it along with a check to the Fund
at the address listed on the inside back cover of this prospectus or as
instructed on the application.
- - -------------------------------------------------------------------------------
100% NO-LOAD
NO SALES COMMISSIONS
NO DEFERRED SALES CHARGES
NO 12b-1 FEES
$2,000 MINIMUM INITIAL INVESTMENT / $100 MINIMUM SUBSEQUENT INVESTMENT
NO MINIMUM INVESTMENT FOR IRAS, OTHER RETIREMENT PLANS, OR
GIFTS OR TRANSFERS TO MINORS (UGMA/UTMA) ACCOUNTS
ELECTRONIC TRANSFER OF FUNDS FOR PURCHASES AND REDEMPTIONS
AUTOMATIC MONTHLY INVESTMENT PLAN
NO CHARGE FOR EXCHANGES
- - -------------------------------------------------------------------------------
SUMMARY OF FUND EXPENSES
The fund expense summary was developed for use by all mutual funds. You should
consider this expense information as well as other important information in this
prospectus:
SHAREHOLDER TRANSACTION EXPENSES
Sales load on purchases none
Sales load on reinvested dividends none
Deferred sales load none
Redemption fees none
Exchange fees none
ANNUAL FUND OPERATING EXPENSES (as a percentage of average daily net assets)
Management fees 1.25% (1)
12b-1 fees none
Other expenses none
Total fund operating expenses 1.25% (1)
(1) Net of voluntary fee waiver.
- - -----------------
Example: You would pay the following expenses on a $1,000 investment,
assuming (a) 5% annual rate of return and (b) redemption at the end of each
period.
1 year $13
3 years 40
5 years 69
10 years 152
The purpose of the above table is to assist you in understanding the various
costs and expenses that an investor in the Fund will bear directly or
indirectly. No transaction expenses are incurred by you when you buy or sell
shares of the Fund. Management fees and other expenses are reflected in the
Fund's share price and are not charged directly to individual shareholder
accounts.
The example contained in the above table should not be considered a
representation of past or future expenses. Actual expenses may be greater or
less than those shown.
The Fund has engaged the Adviser as its investment adviser pursuant to an
Investment Management Agreement. Absent a voluntary fee waiver, the Fund is
obligated under the Fund's Investment Management Agreement to pay the Adviser an
annual management fee of 1.50% of the Fund's average daily net assets; however,
the Adviser is obligated to pay all of the Fund's other expenses (other than
extraordinary expenses, interest, brokerage commissions and other transaction
charges). See "Management - Investment Adviser" for more information. For the
period from inception through December 31, 1998 the Adviser has voluntarily
agreed to limit the management fee (and, thereby, all Fund expenses except those
not payable by the Adviser as set forth above) of the Fund to 1.25% per year of
the Fund's average daily net assets. After December 31, 1998 this voluntary fee
waiver may be discontinued by the Adviser in its sole discretion.
PERFORMANCE
From time to time the Fund may refer to monthly, quarterly, yearly or cumulative
total return and average annual total return in advertisements or other sales
literature. All such figures are based on historical performance data and are
not intended to be indicative of future performance. The investment return on
and the principal value of an investment in the Fund will fluctuate, so that an
investor's shares, when redeemed, may be worth more or less than their original
cost.
Monthly, quarterly, yearly and cumulative total returns are computed by finding
the rates of return over the indicated periods that would equate the initial
amount invested to the ending redeemable value. Average annual total return is
computed by finding the average annual compounded rates of return over the
indicated periods that would equate the initial amount invested to the ending
redeemable value. In calculating ending redeemable value, all income and capital
gains distributions are assumed to be reinvested in additional Fund shares.
Because average annual returns tend to smooth out variations in the Fund's
return, you should recognize that they are not the same as actual year-by-year
results. To illustrate the components of overall performance, the Fund may
separate its cumulative and average annual returns into income results and
capital gain or loss.
In advertising and sales literature the Fund may compare performance with that
of other mutual funds, indices and other competing investment and deposit
products. The composition of these indices or products differs from that of the
Fund. The comparison of the Fund to an alternative investment should be made
with consideration of differences in features and expected performance. As with
other performance data, performance comparisons should not be considered
indicative of the Fund's relative performance for any future period. The Fund
may also be mentioned in newspapers, magazines, or other media from time to
time. The Fund assumes no responsibility for the accuracy of such data. For
additional information on the types of indices, averages and periodicals that
might be utilized by the Fund in advertising and sales literature, see the
section "Calculation of Performance Data" in the Statement of Additional
Information.
Standard & Poor's 500 Stock Index and the Hambrecht & Quist Technology Index are
unmanaged lists of common stocks frequently used as general measures of market
performance. The Hambrecht & Quist Technology Index is comprised of the publicly
traded stocks of approximately 275 technology companies. The annual and
cumulative changes for the indexes reflect reinvestment of all distributions and
changes of market prices. No adjustment has been made for a shareholder's income
tax liability on dividends or capital gains and no brokerage commissions or
other fees were factored into these indexes. The Lipper mutual fund indices are
equally weighted indices each composed of the 30 largest mutual funds within
their respective investment objective classification, adjusted for the
reinvestment of capital gains distributions and income dividends. Lipper
Analytical Services, Inc. is a large independent evaluator of mutual funds. The
risk-adjusted performance ratings assigned by Morningstar Publications, Inc. may
also be referenced.
For additional information regarding the calculation of return see "Calculation
of Performance Data" in the Statement of Additional Information. Additional
performance information regarding the Fund is included in the Fund's annual
report, which will be mailed to shareholders without charge upon request.
INVESTMENT OBJECTIVE
The investment objective of the Fund is to maximize long-term capital
appreciation. The Fund pursues this objective by investing primarily in common
stocks of companies which the Adviser expects to benefit from the development,
improvement, advancement and use of science and technology, with an emphasis on
the securities of companies that the Adviser believes have potential for
long-term capital growth. The investment objective is "fundamental," which means
that it may not be changed unless approved by a vote of the "majority" of the
shareholders of the Fund (as defined in the 1940 Act). There can be no assurance
that the investment objective of the Fund will be achieved.
INVESTMENT POLICIES
In seeking its investment objective, the Fund will be subject to the following
policies and limitations. Except as indicated, these policies are not
fundamental and may be changed by the Board of Directors without shareholder
approval.
Science and Technology companies include those whose processes, products or
services, in the judgment of the Adviser, are or may be expected to
significantly benefit from scientific developments and the application of
technical advances in industry, manufacturing and commerce resulting from
improving technology in such fields as, for example, aerospace, chemistry,
electronic components and systems, environmental services, genetic engineering,
geology, information sciences (including computers, software and peripheral
products), medicine (including pharmacology, biotechnology and biophysics),
hospital supply and medical devices. This investment policy permits the Adviser
to seek stocks of science and technology companies having superior growth
potential in virtually any industry in which they may be found. Under normal
conditions, at least 80% of the Fund's total assets will be invested in such
securities.
Since a relatively high percentage of the assets of the Fund may be invested in
the securities of issuers which will be in the same or related economic sectors,
the Fund's portfolio securities may be more susceptible to any single economic,
technological or regulatory occurrence than the portfolio securities of
investment companies which invest in a greater number of economic sectors. The
Fund may involve significantly greater risks and therefore may experience
greater volatility than such funds. Many products and services of science and
technology companies may become rapidly obsolete due to technological and
scientific advances. In addition, competitive pressures may have a significant
effect on the financial condition of science and technology companies. For
example, if technology continues to advance at an accelerated rate, and the
number of companies and product offerings continue to expand, these companies
could become increasingly sensitive to short product cycles and aggressive
pricing.
The Fund's strategies in seeking to achieve its investment objective may lead to
investments in smaller companies. Securities of smaller companies, especially
those whose business involves emerging products or concepts, may be more
volatile due to their limited product lines, markets, or financial resources as
well as their susceptibility to major setbacks or downturns.
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. Most of the Fund's investments are in common stocks or
securities convertible into common stocks. Current income from dividends and
interest will not be an important consideration in selecting portfolio
securities.
FOREIGN SECURITIES
The Fund may invest up to 20% of its net assets in foreign corporate equity
securities. All foreign equity securities are limited to American Depository
Receipts (ADRs), which are traded in U.S. dollars, or in stocks listed on U.S.
exchanges including NASDAQ or on the Toronto Stock Exchange. Foreign investments
are subject to certain unique risks, such as fluctuations in the value of the
currencies, and potential adverse political and economic developments. There
also may be less publicly available information about foreign issuers, and
foreign issuers generally are not subject to the uniform accounting, auditing,
and financial reporting standards and practices applicable to domestic issuers.
SECURITIES LENDING
From time to time, the Fund may lend portfolio securities to brokers, dealers
and other financial institutions needing to borrow securities to complete
certain transactions. Such loans may not exceed 33-1/3% of the value of the
Fund's total net assets. In connection with such loans, the Fund will receive
collateral consisting of cash, U.S. Government securities or irrevocable letters
of credit issued by domestic financial institutions which will be maintained in
an amount equal to at least 100% of the current market value of the loaned
securities.
PUTS AND CALLS
A put option gives the purchaser the option, in return for a premium paid, the
right to sell the underlying security at a specified price during the term of
the option. A call option gives the purchaser of the option, in return for a
premium, the right to buy the security underlying the option at a specified
exercise price at any time during the term of the option. While the Fund does
not anticipate utilizing puts and calls on a regular basis, the Fund may from
time to time write exchange-traded call options on common stocks, for which it
will receive a purchase premium from the buyer, and may purchase and sell
exchange-traded call and put options on common stocks written by others or
combinations thereof. The Fund will not write unsecured put options but may
write fully covered call options. The aggregate cost of all outstanding options
purchased and held by the Fund will at no time exceed 5% of the Fund's total net
assets.
ILLIQUID SECURITIES
The Fund may invest up to 15% of its net assets in all forms of "illiquid
securities." An investment is generally deemed to be "illiquid" if it cannot be
disposed of within seven days in the ordinary course of business at
approximately the amount at which such securities are valued by the Fund.
Restricted securities are securities which were originally sold in private
placements and which have not been registered under the Securities Act of 1933
(the "1933 Act"). Such securities generally have been considered illiquid by the
staff of the Securities and Exchange Commission (the "SEC"), since such
securities may be resold only subject to statutory restrictions and delays or if
registered under the 1933 Act. However, the SEC has acknowledged that a market
exists for certain restricted securities (for example, securities qualifying for
resale to certain "qualified institutional buyers" pursuant to Rule 144A under
the 1933 Act). Additionally, a similar market exists for commercial paper issued
pursuant to the private placement exemption of Section 4(2) of the 1933 Act. The
Fund may invest without limitation in these forms of restricted securities if
such securities are determined by the Adviser to be liquid in accordance with
standards established by the Fund's Board of Directors. Under these standards,
the Adviser must consider (a) the frequency of trades and quotes for the
security, (b) the number of dealers willing to purchase or sell the security and
the number of other potential purchasers, (c) dealer undertakings to make a
market in the security, and (d) the nature of the security and the nature of the
marketplace trades (for example, the time needed to dispose of the security, the
method of soliciting offers and the mechanics of transfer).
At the present time, it is not possible to predict with accuracy how the markets
for certain restricted securities will develop. Investing in restricted
securities could have the effect of increasing the level of a Fund's illiquidity
to the extent that qualified institutional buyers become, for a time,
uninterested in purchasing these securities.
INVESTMENT IN SIT MONEY MARKET FUND
The Fund may invest up to the greater of 5% of its total net assets or $2.5
million in the Sit Money Market Fund ("Money Market Fund"), which also is
advised by the Adviser, subject to the conditions contained in an exemptive
order (the "Exemptive Order") issued to the Fund and the Adviser by the
Securities and Exchange Commission. Such investments may be made in lieu of
direct investments in short term money market instruments if the Adviser
believes that they are in the best interest of the Fund. The Exemptive Order
requires the Adviser and its affiliates, in their capacities as service
providers for the Money Market Fund, to remit to the Fund, or waive, an amount
equal to all fees otherwise due to them under their advisory and other
agreements with Money Market Fund to the extent such fees are based upon the
Fund's assets invested in shares of Money Market Fund. This requirement is
intended to prevent shareholders of the Fund from being subjected to double
management and other asset-based fees as a result of the Fund's investments in
Money Market Fund.
WHEN-ISSUED AND FORWARD COMMITMENT SECURITIES AND REPURCHASE AGREEMENTS
The Fund may purchase securities on a "when issued basis" and may purchase or
sell securities on a "forward commitment basis." The Fund may invest in
repurchase agreements. See the Statement of Additional Information for further
information.
PORTFOLIO TURNOVER
To attain the investment goals of the Fund, the Adviser will usually hold
securities for the long-term. However, if weak or declining market values for
stocks are anticipated, the Adviser may convert any portion of these Fund assets
to cash or short-term securities as a temporary, defensive position. The
turnover rate of the Fund may be greater than other mutual funds with similar
objectives.
Generally, the Fund will not trade in securities for short-term profits, but if
circumstances warrant, securities may be sold without regard to length of time
held. Debt securities may be sold in anticipation of a market decline (a rise in
interest rates) or purchased in anticipation of a market rise (a decline in
interest rates) and later sold.
Increased turnover results in increased brokerage costs and may result in higher
transaction costs for the Fund and may affect the taxes shareholders pay. If a
security that has been held for less than the holding period set by law is sold,
any resulting gains will be taxed in the same manner as ordinary income as
opposed to long-term capital gain. The Fund's turnover rate may vary from year
to year. For additional information, refer to the "Taxes" section below and the
"Taxes" and "Brokerage" sections in the Statement of Additional Information. It
is expected that the Fund's portfolio turnover rate during its first year of
operation will be less than 100%.
TEMPORARY DEFENSIVE INVESTMENTS
For temporary defensive purposes in periods of unusual market conditions, the
Fund may invest all or a portion of its assets in cash, short-term debt
securities including certificates of deposit, bankers' acceptances and other
bank obligations, corporate and direct U.S. obligation bonds, notes, bills,
commercial paper and repurchase agreements.
RATINGS OF DEBT SECURITIES
The debt securities purchased by the Fund will be investment grade. Investment
grade debt securities are rated AAA, AA, A or BBB by Standard & Poor's
Corporation ("S& P"), Fitch Investors Service, Inc. ("Fitch"), and Duff & Phelps
Credit Rating Co. ("Duff & Phelps"); Aaa, Aa, A or Baa by Moodys Investors
Services ("Moody's"), or if unrated, are determined by the Adviser to be of
comparable quality. See the Statement of Additional Information for further
information about ratings.
The commercial paper purchased by the Fund will consist only of direct
obligations which, at the time of purchase, are (a) rated P-1 by Moody's or A-1
by S& P, or (b) if not rated, issued by companies having an outstanding
unsecured debt issue which at the time of purchase is rated Aa or higher by
Moody's or AA or higher by S&P.
OTHER INVESTMENT RESTRICTIONS
In addition to the investment policies and restrictions referred to above, the
Fund is subject to various other investment restrictions. These restrictions,
which are set forth in more detail in the Statement of Additional Information,
include, but are not limited to, restrictions whereby the Fund may (a) not
invest more than 25% of the value of its assets in any particular industry,
except with regard to the purchase of obligations issued or guaranteed by the
U.S. government, its agencies or instrumentalities; and (b) except as part of a
merger, consolidation, acquisition, or reorganization, not invest more than 5%
of the value of its total assets in the securities of any one investment company
or more than 10% of the value of its total assets, in the aggregate, in the
securities of two or more investment companies, or acquire more than 3% of the
total outstanding voting securities of any one investment company. Since the
Adviser does not waive its fees if and to the extent the Fund invests in the
securities of one or more other investment companies (except for investments in
the Sit Money Market Fund), the Fund indirectly pays duplicate advisory fees
with respect to such investments. However, the Adviser believes that the return
and liquidity features of investment company securities may, from time to time,
be more beneficial to the Fund than alternative short-term, liquid investments,
and that the duplicate fees and expenses will have a relatively small impact on
overall Fund expenses.
COMPUTATION OF NET ASSET VALUE
Net asset value per share (the value of an individual share in the Fund) is
determined as of the close of the New York Stock Exchange (NYSE) on each day
that the exchange is open for business. Normally the NYSE closes at 3:00 p.m.
Central time. The net asset value is calculated by dividing the total value of
the Fund's investments and other assets (including accrued income), less any
liabilities, by the number of shares outstanding. The net asset value per share
of the Fund will fluctuate.
Securities which are traded on an exchange or on the NASDAQ over-the-counter
market are valued at the last quoted sale price of the day. Lacking a last sale
price, a security is generally valued at its last bid price. All other
securities for which over-the-counter market quotations are readily available
are valued at their last bid price. When market quotations are not readily
available, or when restricted securities are being valued, such securities are
valued at fair value using methods selected in good faith by the Board of
Directors.
Debt securities may be valued on the basis of prices furnished by a pricing
service when the Adviser believes such prices accurately reflect the fair market
value of such securities. Such a pricing service utilizes electronic data
processing techniques to determine prices for normal institutional-size trading
units of debt securities without regard to sale or bid prices. When prices are
not readily available from a pricing service, or when restricted or illiquid
securities are being valued, securities may be valued at fair value using
methods selected in good faith by the Boards of Directors. Short-term
investments in debt securities with maturities of less than 60 days when
acquired, or which subsequently are within 60 days of maturity, are valued by
using the amortized cost method of valuation. The amortized cost method of
valuation will be used only if the Board of Directors, in good faith, determine
that the fair value of the securities shall be their amortized cost value,
unless the particular circumstances dictate otherwise.
HOW TO PURCHASE FUND SHARES
Shares of the Fund may be purchased without a sales commission at the net asset
value per share (see "Computation of Net Asset Value") next determined after
receipt of a purchase order in proper form. The minimum initial investment is
$2,000 and additional investments must be at least $100. Accounts may be
established with a $500 minimum initial investment if an Automatic Investment
Plan for at least $100 per month is established. The minimum investment
requirements do not apply to gifts and transfers to minors (UGMA and UTMA)
accounts or retirement accounts (see "Retirement Accounts").
SEE THE INSIDE BACK COVER OF THIS PROSPECTUS FOR THE FUND'S MAILING ADDRESS,
TELEPHONE NUMBERS, AND WIRE INSTRUCTIONS.
INITIAL INVESTMENT
BY MAIL. To open an account, complete and sign an application and mail it with a
check to the Fund as instructed on the application.
BY WIRE. Shares of the Fund may be purchased by wiring federal funds from your
bank, which may charge you a fee. Before money is wired for an initial
investment (new account), you must call the Fund and provide the following
information: name or names of the account registration; address; social security
or tax identification number; the amount being wired; the name of the wiring
bank; and the name and telephone number of the person at your bank. The Fund
will provide you with an account number and your bank must then wire the
specified amount.
YOU MUST MAIL A COMPLETED APPLICATION TO THE FUND AFTER OPENING AN ACCOUNT BY
WIRE TRANSFER. IF A COMPLETED APPLICATION IS NOT RECEIVED OR YOUR SOCIAL
SECURITY OR TAX IDENTIFICATION NUMBER IS NOT CERTIFIED WITH A FORM W-9, YOUR
ACCOUNT WILL BE SUBJECT TO BACK-UP WITHHOLDING WITHIN 60 DAYS.
Wire orders will be accepted only on a day on which the Fund and the Fund's
Transfer Agent are open for business. A wire purchase will not be considered
made until the wired money is received and the investment is accepted by the
Fund. Any delays which may occur in wiring money, including delays which may
occur in processing by the banks, are not the responsibility of the Fund or the
Fund's Transfer Agent.
WHEN ORDERS ARE EFFECTIVE
Purchases made by mail will be invested at the net asset value per share next
determined after receipt of the purchase order in proper form.
Purchases transmitted by wire to the Fund and received prior to the close of the
New York Stock Exchange (NYSE), normally 3:00 p.m. Central time, will be
invested at the net asset value per share calculated for that day. If received
after this deadline, the investment will be made at the net asset value next
calculated. You become a shareholder after declaration of any dividend on the
day on which the order is effective. Dividends begin to accrue after you become
a shareholder.
ADDITIONAL INVESTMENTS
BY MAIL. You may make subsequent investments by mailing the reinvestment stub
attached to your account confirmation statement or a letter of instruction
(providing your account number and the name(s) on the account) together with a
check made payable to the Fund.
BY WIRE. You may purchase additional shares by wiring funds. For wire
instructions, see the inside back cover of this prospectus. After you have
initiated the wire purchase through your bank, please notify the Fund that a
wire purchase is being made to your account.
BY ACH. You may purchase shares for non-IRA accounts via electronic transfer of
funds if you have selected this option in Step 4 of the application. If you call
the Fund prior to the close of the NYSE, normally 3:00 p.m. Central time, your
purchase will be effective at the net asset value on the next business day (on
which the net asset value is calculated) after your telephone call and your bank
account will be debited within 1 to 2 business days.
BY AUTOMATIC INVESTMENT PLAN. After your initial investment you can make
automatic monthly investments of $100 or more on any day of the month. To use
this option, you must complete the Automatic Investment Plan section of the
application or if adding this option to an existing account, the Change of
Account Options form. You can change the amount or terminate this option by
written notice to the Fund at any time.
OTHER INVESTMENT INFORMATION
All purchases are subject to acceptance by authorized officers of the Fund and
are not binding until accepted. The Fund reserves the right to reject purchase
orders when, in the judgment of management, such rejection is in the best
interests of the Fund. At its discretion, the Fund may accept telephone
purchases and redemptions from a broker and/or a broker-dealer. Investors who
purchase or redeem shares through a broker and/or a broker-dealer may be charged
a transaction fee, by such broker-dealer.
REDEMPTION OF FUND SHARES
You may redeem (sell) all or a portion of your shares on any day that the net
asset value is calculated. Shares will be redeemed at the net asset value per
share next determined after the request is received. A redemption may be more or
less than your cost depending on the market value of the Fund's securities. IF
YOU REQUEST A REDEMPTION AFTER A PURCHASE BY NONGUARANTEED FUNDS, e.g., A
PERSONAL CHECK, THE FUND MAY DELAY SENDING YOUR REDEMPTION PROCEEDS UNTIL YOUR
CHECK HAS CLEARED (GOOD PAYMENT HAS BEEN COLLECTED), WHICH MAY TAKE UP TO TEN
DAYS. YOU MAY AVOID THIS DELAY BY PURCHASING SHARES WITH A CERTIFIED CHECK OR
BANK WIRE OF FEDERAL FUNDS.
The Fund may suspend redemption privileges or postpone the date of payment (1)
during any period that the New York Stock Exchange is closed other than
customary weekend or holiday closings, or when trading is restricted, as
determined by the Securities and Exchange Commission, (2) during any period when
an emergency exists, as determined by the Securities and Exchange Commission, as
a result of which it is not reasonably practical for the Fund to dispose of
securities owned by it or to fairly determine the value of its assets, and (3)
for such other periods as the Securities and Exchange Commission may permit.
BY MAIL. You may request a redemption by sending a written request in "good
order" to the Fund. "Good order" means that the request for redemption must
include the following:
1. A letter of instruction specifying the name of the Fund, account number
and number of shares or dollar amount to be redeemed, signed by all registered
owners exactly as their names appear on the account.
2. Other supporting legal documents as required for estates, trusts,
guardianships, custodianships, corporations, pension and profit sharing plans
and other organizations.
Payment will generally be made within 7 days after receipt of a redemption
request in "good order". A request for redemption cannot be canceled or revoked.
A SIGNATURE GUARANTEE IS REQUIRED IF YOU REQUEST A REDEMPTION TO BE MADE PAYABLE
TO SOMEONE OTHER THAN THE REGISTERED OWNERS AND/OR IF YOU REQUEST THE PROCEEDS
TO BE SENT TO AN ADDRESS OTHER THAN THE REGISTERED ADDRESS.
If you are uncertain of the requirements for redemption, write or call the Fund
at 800-332-5580 or 612-334-5888.
BY WIRE. If you desire to make a redemption by wire of federal funds, a written
request in "good order" must first be received by the Fund. Your request should
contain specific wire instructions including the bank to which the proceeds are
to be wired, its address and your account number. A signature guarantee is
required with initial wire instructions. Shares will be redeemed at the net
asset value next determined after the redemption request is received in good
order. If the proceeds are wired to your account at a bank which is not a member
of the Federal Reserve System, there could be a delay in crediting the funds to
your bank account. You will be required to pay a charge for the wiring cost
(currently $8) which will be deducted from the balance of your account or from
the amount being wired if your account has been completely redeemed.
TELEPHONE REDEMPTION
You may redeem up to $50,000 per day by telephone if you have authorized this
option for your account. This limitation does not apply to omnibus accounts. For
purposes of this limitation, accounts with the same registration in different
Sit Mutual Funds will be aggregated.
If you call the Fund prior to the close of the NYSE, normally 3:00 p.m. Central
time, your redemption will be effective at the net asset value that same day.
You must complete the Telephone Redemption Authorization section of the
application to establish this option. THE FUND WILL EMPLOY REASONABLE PROCEDURES
TO CONFIRM THAT TELEPHONE INSTRUCTIONS ARE GENUINE, INCLUDING REQUIRING THAT
PAYMENTS BE MADE ONLY TO THE SHAREHOLDER'S ADDRESS OF RECORD OR THE BANK ACCOUNT
DESIGNATED ON THE APPLICATION AND REQUIRING CERTAIN MEANS OF TELEPHONIC
IDENTIFICATION. If the Fund fails to employ such procedures, it may be liable
for any losses suffered by Fund shareholders as a result of unauthorized or
fraudulent instructions. During times of chaotic economic or market
circumstances, a shareholder may have difficulty reaching the Fund by telephone.
Consequently, an exchange or redemption may be difficult to implement at those
times.
BY MAIL. Telephone redemption proceeds can be mailed to your address of record.
If you wish to change your address, complete the Change of Account Information
form, signed by all shareholders.
BY WIRE. Telephone redemption proceeds can be wired to your bank. Proceeds will
be wired to your bank account the next business day after you request a
telephone redemption. To establish this option, complete the Telephone Services
section of the application.
BY ACH. Electronic transfer of funds via Automated Clearing House (ACH) is
available for redemption of shares for non-IRA accounts. Your bank account will
be credited within 1-2 business days after you request a telephone redemption.
To establish this option, complete the Telephone Services section of the
application.
SYSTEMATIC WITHDRAWAL PLAN
You may establish a Systematic Withdrawal Plan to receive periodic redemptions
of at least $100 on a monthly, quarterly, semi-annual or annual basis.
Systematic withdrawals may eventually exhaust your account. Each withdrawal
constitutes a redemption and any gain or loss realized must be recognized for
federal income tax purposes.
OTHER REDEMPTION INFORMATION
At the discretion of the Board of Directors, the Fund may unilaterally redeem
accounts which have a balance less than $2,000. Such accounts may be redeemed
after giving written notice to the registered owner of the account. If the
shareholder does not increase the amount of the account above $2,000 within 30
days, the Fund may send the shareholder a check for the redemption proceeds as
determined at the next calculated net asset value.
EXCHANGES
An exchange is made by redeeming shares of one Fund and using the proceeds to
buy shares of another Sit Mutual Fund. There is no charge for this service, but
the Fund reserves the right to charge a fee in the future. An exchange results
in a sale of shares for federal income tax purposes and you may realize either a
long-term or short-term capital gain or loss on the shares redeemed. Before
making an exchange, you should read the prospectus and consider the investment
objective of the Fund to be purchased.
An exchange may be done by telephone (subject to the same procedures for
telephone identification as telephone redemption above) or by written request to
the Fund. A written request must be signed by all registered owners of the
account. When you establish your account, the exchange privilege will
automatically be established unless you indicate that you do not want it. You
may make an exchange to a new account or an existing account. If your exchange
creates a new account, the new account ownership must be identical and you must
satisfy the minimum initial purchase requirement. There is a limit of four
exchanges out of each Fund per year per account. Exchanges may be made only in
states where allowed by law.
In addition, each Fund reserves the right to refuse exchanges if, in the
Adviser's judgment, the Fund would be unable to invest effectively in accordance
with its investment objectives and policies, or would otherwise potentially be
adversely affected. Exchanges may be restricted or refused if a Fund receives or
anticipates simultaneous orders affecting significant portions of the Fund's
assets. Although the Fund will attempt to give prior notice whenever it is
reasonably able to do so, it may impose these restrictions at any time. The Fund
reserves the right to terminate or modify the exchange privilege in the future.
AUTOMATIC EXCHANGE PLAN
If you wish to exchange fixed periodic amounts between funds, you may establish
the Automatic Exchange Plan. You may exchange a predetermined amount from one
Fund to another Fund on monthly, quarterly, semiannual or annual intervals.
Automatic exchanges are subject to the same requirements as other exchanges.
DIVIDEND REINVESTMENT
The policy of the Fund is to distribute an annual dividend from its net
investment income. Net investment income includes dividends on stocks and
interest earned on bonds or other debt securities less operating expenses.
When the Fund sells portfolio securities it may realize a gain or loss,
depending on whether it sells them for more or less than its cost. Net realized
capital gain, if any, will be distributed at least once annually by the Fund.
Income dividends and capital gain distributions are automatically reinvested in
additional shares at the net asset value per share on the distribution date.
Dividends may be automatically directed from one Sit Mutual Fund to another Sit
Mutual Fund. You may request a cash payment of dividends and/or capital gain
distributions on the application or by separate written notice to the Fund.
Shareholders will receive a confirmation statement reflecting the payment and
reinvestment of dividends. If cash payment is requested, a check normally will
be mailed within five business days after the payable date.
RETIREMENT ACCOUNTS
Taxes on current income can be deferred by investing in Keogh plans, Individual
Retirement Accounts (IRAs), Simplified Employee Pensions (SEPs), 401(k),
pension, profit-sharing, employee benefit, deferred compensation and other
qualified retirement plans. The federal tax law governing these tax-deferred
retirement plans must be complied with to avoid adverse tax consequences.
The Fund is available for your tax-deferred retirement plan with no minimum
investment requirements for initial or additional contributions. Such retirement
plans must have a qualified plan sponsor or trustee. The Adviser sponsors
prototype 401(k), profit sharing, and money purchase plans as well as IRA,
SEP-IRA and Keogh plans. You should contact the Adviser for specific plan
documentation. You should also consult your tax adviser before investing.
CUSTODIAN AND TRANSFER AGENT
The Northern Trust Company, 50 South LaSalle Street, Chicago, IL 60675, acts as
Custodian for the Fund pursuant to the terms of a Custodian Contract. The
Custodian holds all securities and cash, receives and pays for securities
purchased, delivers against payment for securities sold, receives and collects
income from investments and performs other administrative duties, all under the
supervision of officers of the Fund or the Adviser.
Pursuant to the terms of a Transfer Agency and Services Agreement and the
Accounting Services Agreement with the Fund, First Data Investor Services Group,
Inc. 4400 Computer Drive, Westboro, MA 01581 is the transfer agent, dividend
disbursing agent and accounting services agent for the Fund. First Data Investor
Services processes purchase orders, redemption orders and all related
shareholder accounting services.
MANAGEMENT
BOARD OF DIRECTORS
The corporate issuer of the Fund has corporate officers and a Board of
Directors. Pursuant to Minnesota law, the Board of Directors is responsible for
the management of the Fund and the establishment of the Fund policies. The
officers of the Fund manage the day-to-day operation of the Fund.
INVESTMENT ADVISER
Sit Investment Associates, Inc. (the Adviser") was incorporated in Minnesota on
July 14, 1981 and serves as the Fund's Investment Adviser pursuant to an
Investment Management Agreement (the "Agreement"). The Adviser together with its
affiliates currently manage public and private accounts with combined assets of
approximately $6 billion, including the Sit Mutual Funds. The address of the
Adviser is 4600 Norwest Center, Minneapolis, Minnesota 55402.
Under the Investment Management Agreement, the Fund is obligated to pay the
Adviser a flat annual fee of 1.50% based on the average daily net assets ("net
assets"). However, for the period from inception through December 31, 1998 the
Adviser has voluntarily agreed to limit the management fee (and, thereby, all
Fund expenses except those not payable by the Adviser as set forth above) of the
Fund to 1.25% per year of the Fund's average daily net assets. After December
31, 1998 this voluntary fee waiver may be discontinued by the Adviser in its
sole discretion.
Under the Fund's Agreement, the Adviser has agreed to bear all of the Fund's
expenses, except for extraordinary expenses (as designated by a majority of the
Fund's disinterested directors), interest, brokerage commissions and other
transaction charges relating to the investing activities of the Fund. Investment
advisory fees in excess of .75% per year of the fund's average daily net assets
are considered to be higher than investment advisory fees paid by most other
investment companies; however, the Adviser has either agreed to pay or reimburse
Fund for all or certain of its other operating expenses as more fully set forth
above.
PORTFOLIO MANAGEMENT
All investment decisions of the Fund are made by committee. Eugene C. Sit is the
Chief Investment Officer of the Adviser and oversees all investment decisions
for the Fund. He is the Senior Portfolio Manager for the Fund and has held this
office since the inception of the Fund.
DISTRIBUTOR
The Fund has entered into an Underwriting and Distribution Agreement with SIA
Securities Corp. ("Securities"), an affiliate of the Adviser, pursuant to which
Securities will act as the Fund's principal underwriter. Securities will market
the Fund's shares only to certain institutional investors and all other sales of
the Fund's shares will be made by the Fund. The Adviser will pay all expenses of
Securities in connection with such services and Securities is otherwise not
entitled to any other compensation under the Underwriting and Distribution
Agreement. The Fund will incur no additional fees or expenses in connection with
the Underwriting and Distribution Agreement.
TAXES
The Fund intends to qualify as a regulated investment company under Subchapter M
of the Internal Revenue Code of 1986, as amended (the "Code") in order to be
relieved of payment of federal income taxes on amounts distributed to
shareholders (both net investment income and net realized capital gains).
Dividends paid from the Fund's net investment taxable income and net short-term
capital gains will be taxable to shareholders as ordinary income, whether or not
the shareholder elects to have such dividends automatically reinvested in
additional shares.
The Fund will distribute annually any net realized capital gains. Dividends paid
from the net capital gains of the Fund and designated as capital gain dividends
will be taxable to shareholders as long-term capital dividends, regardless of
the length of time for which they have held their shares in the Fund.
Gain or loss realized upon the sale of shares in each Fund will be treated as
capital gain or loss, provided that the shares represented a capital asset in
the hands of the shareholder. Such gain or loss will be long-term gain or loss
if the shares were held for more than one year.
After every distribution from the Fund, the value of a share drops by the amount
of the distribution. If you purchase shares shortly before the record date of a
dividend or capital gain distribution, you will pay the full price for the
shares ("buying a dividend") and then receive some portion of the price back as
a taxable dividend or capital gain distribution. The Fund's unrealized
appreciation on investments, undistributed net investment income and accumulated
net realized gains or losses are contained in the annual and semi-annual reports
in the Statement of Changes in Net Assets.
Pursuant to the Code, distributions of net investment income by the Fund to a
shareholder who, as to the U.S., is a nonresident alien individual, nonresident
alien fiduciary of a trust or estate, foreign corporation, or foreign
partnership (a "foreign shareholder") will be subject to U.S. withholding tax
(at a rate of 30% or lower treaty rate). Withholding will not apply if a
dividend paid by the Fund to a foreign shareholder is "effectively connected"
with a U.S. trade or business of such shareholder, in which case the reporting
and withholding requirements applicable to U.S. citizens or domestic
corporations will apply. Distributions of net long-term capital gains are not
subject to tax withholding but, in the case of a foreign shareholder who is a
nonresident alien individual, such distributions ordinarily will be subject to
U.S. income tax at a rate of 30% if the individual is physically present in the
U.S. for more than 182 days during the taxable year. The Fund will report
annually to its shareholders the amount of any withholding.
The Fund is required by federal law to withhold 31% of reportable payments
(which may include dividends, capital gain distributions and redemptions) paid
to certain accounts whose owners have not complied with IRS regulations. In
connection with this withholding requirement, you will be asked to certify on
your account application that the social security or taxpayer identification
number you provide is correct and that you are not subject to 31% backup
withholding for previous underreporting to the IRS.
This is a general summary of the federal tax law in effect as of the date of
this prospectus. See the Statement of Additional Information for further
details. You may also be subject to state and local taxes, depending on the laws
of your home state and locality. Information about the tax status of each year's
dividends and distributions will be mailed to shareholders annually.
CAPITALIZATION AND VOTING RIGHTS
Sit Mutual Funds, Inc. is the corporate issuer of the Fund's shares and is
organized as a Minnesota corporation as a series fund with one trillion shares
of common stock authorized and a par value of one tenth of one cent per share.
Sit Mutual Funds, Inc. has only one class of shares which are common shares. Ten
billion of these shares have been designated by the Board of Directors for each
of five series: Series A Common Shares represent shares of International Growth
Fund; Series B Common Shares represent shares of Balanced Fund; Series C Common
Shares represent shares of Developing Markets Growth Fund; Series D Common
Shares represent shares of Small Cap Growth Fund and Series E Common Shares
represent share of Science and Technology Fund. The Board of Directors of Sit
Mutual Funds, Inc. is empowered to issue other series of common stock without
shareholder approval.
The shares of the Fund are nonassessable, can be redeemed or transferred and
have no preemptive or conversion rights. All shares have equal, noncumulative
voting rights which means that the holders of more than 50% of the shares voting
for the election of Directors can elect all of the Directors if they choose to
do so. A shareholder is entitled to one vote for each full share (and a
fractional vote for each fractional share) then registered in his/her name on
the books of the Fund. The shares of the Fund are of equal value and each share
is entitled to a pro rata portion of the income dividends and any capital gain
distributions.
As of the date of this Prospectus, there were 10 shares of the Fund outstanding.
All of such shares were acquired by the Adviser for investment purposes.
ADDITIONAL INFORMATION
Under Minnesota law, the Board of Directors of the Fund has overall
responsibility for managing the Fund, in good faith, in a manner reasonably
believed to be in the best interests of the Fund, and with the care an ordinary
prudent person would exercise in similar circumstances.
This prospectus omits certain of the information contained in the Registration
Statements filed with the Securities and Exchange Commission, Washington, D.C.
20549. Items of information which are omitted may be obtained from the
Securities and Exchange Commission upon payment of the fees prescribed by the
rules and regulations of the Commission.
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 - Group Manager
Michael J. Radmer Secretary
Carla J. Rose Assistant Secretary
Debra A. Sit, CFA Assistant Treasurer
[inside back cover]
SIT MUTUAL FUNDS
ADDRESS AND TELEPHONE NUMBERS
REGULAR MAIL EXPRESS OR CERTIFIED MAIL
Sit Mutual Funds Sit Mutual Funds
P.O. Box 5166 4400 Computer Drive
Westboro, MA 01581-5166 Westboro, MA 01581
SIT INVESTOR SERVICES
To speak with a Client Service Representative:
1-800-332-5580 or 612-334-5888
WIRE INSTRUCTIONS To wire money for a purchase:
Boston Safe Deposit & Trust, Boston, MA
ABA #011001234
DDA #056146
Sit Mutual Funds
For Further Credit: (Shareholder name)
Account Number: (Shareholder account number)
NOT PART OF THE PROSPECTUS
[back cover]
PROSPECTUS
SIT SCIENCE AND TECHNOLOGY FUND
October 1, 1997
INVESTMENT ADVISER
Sit Investment Associates, Inc.
4600 Norwest Center
90 South Seventh Street
Minneapolis, MN 55402
612-334-5888 (Metro Area)
800-332-5580
DISTRIBUTOR
SIA Securities Corp.
4600 Norwest Center
90 South Seventh Street
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 5166
Westboro, MA 01581-5166
AUDITORS
KPMG Peat Marwick LLP
4200 Norwest Center
Minneapolis, MN 55402
LEGAL COUNSEL
Dorsey & Whitney LLP
220 South Sixth Street
Minneapolis, MN 55402
Member 100% No-Load Mutual Fund Council
PART B
STATEMENT OF ADDITIONAL INFORMATION
SIT SCIENCE AND TECHNOLOGY FUND
(A series of Sit Mutual Funds, Inc.)
4600 Norwest Center, 90 S. 7th Street
Minneapolis, Minnesota 55402-4130
612-334-5888 800-332-5580
This Statement of Additional Information is not a prospectus. It should be read
in conjunction with the Fund's prospectus which may be obtained from the Fund
without charge by contacting the Fund at 4600 Norwest Center, 90 South Seventh
Street, Minneapolis, Minnesota 55402-4130. Telephone: (612) 334-5888 or (800)
332-5580. The date of this Statement of Additional Information is October 1,
1997, and it is to be used with the Fund's prospectus dated October 1, 1997.
TABLE OF CONTENTS
- - --------------------------------------------------------------------------------
Page
Additional Investment Restrictions....................................2
Diversification.......................................................3
Securities Lending....................................................3
Additional Investments................................................4
Computation of Net Asset Value........................................6
Calculation of Performance Data.......................................6
Management............................................................7
Investment Adviser....................................................9
Distributor..........................................................10
Brokerage............................................................11
Control Persons and Principal Holders of Securities..................12
Taxes................................................................12
Financial Statements.................................................13
Other Information....................................................13
Limitation of Director Liability.....................................14
Bond and Commercial Paper Ratings............................Appendix A
ADDITIONAL INVESTMENT RESTRICTIONS
- - --------------------------------------------------------------------------------
The investment objective, policies and restrictions of the Fund are set forth in
the Prospectus. Certain additional investment information is set forth below.
All capitalized terms not defined herein have the same meanings as set forth in
the Prospectus. In addition to the restrictions in the prospectus, the Fund is
subject to other restrictions which are fundamental and may not be changed
without shareholder approval. Shareholder approval, as defined in the Investment
Company Act of 1940, means the lesser of the vote of (a) 67% of the shares of
the Fund at a meeting where more than 50% of the outstanding shares of the Fund
are present in person or by proxy or (b) more than 50% of the outstanding shares
of the Fund. A percentage limitation must be met at the time of investment and a
later deviation resulting from a change in values or net assets will not be a
violation.
The Fund is subject to the following fundamental investment restrictions. The
Fund will not:
1. Purchase securities of any issuer (other than obligations of, or guaranteed
by, the U.S. government or its agencies or instrumentalities), if as a
result, more than 5% of the Fund's net assets would be invested in
securities of that issuer. This restriction is limited to 75% of the Fund's
net assets;
2. Purchase or sell commodities or commodity futures, provided that this
restriction does not apply to financial futures contracts or options
thereon;
3. Invest in real estate (including real estate limited partnerships),
although it may invest in securities which are secured by or represent
interests in real estate;
4. Make loans except by (a) purchasing publicly distributed debt securities
such as bonds, debentures and similar securities in which the Fund may
invest consistent with its investment policies, and (b) by lending its
portfolio securities to broker-dealers, banks and other institutions in an
amount not to exceed 33-1/3% of its total net assets if such loans are
secured by collateral equal to 100% of the value of the securities lent;
5. Underwrite the securities of other issuers;
6. Borrow money, except for temporary or emergency purposes but not for the
purchase of investments, and then not in excess of 33 1/3% of the Fund's
net assets; or pledge the Fund's securities or receivables, transfer,
assign or otherwise encumber them in an amount exceeding the amount of the
borrowing secured thereby;
7. Invest in exploration or development for oil, gas or other minerals
(including mineral leases), although it may invest in the securities of
issuers which deal in or sponsor such activities; or
8. Issue senior securities as defined in the Investment Company Act of 1940.
The following investment restrictions of the Fund are not fundamental. The Fund
will not:
1. Purchase on margin or sell short except to obtain short-term credit as may
be necessary for the clearance of transactions and it may make margin
deposits in connection with futures contracts;
2. Invest for the purpose of exercising control or management;
3. Invest more than 15% of its net assets collectively in all types of
illiquid securities;
4. Invest in more than 10% of the outstanding voting securities of any one
issuer;
5. Purchase more than 10% of any class of securities of any issuer except
securities issued or guaranteed by the U.S. government, its agencies or
instrumentalities. All debt securities and all preferred stocks are each
considered as one class. This restriction is limited to 75% of the Fund's
net assets; or
Additional restrictions of the Fund which are not fundamental provide that the
Fund may not engage in arbitrage transactions or write unsecured put options but
may write fully covered call options. The Fund may purchase put and call options
provided that the aggregate premiums paid for all such options do not exceed 5%
of the Fund's total assets.
DIVERSIFICATION
- - --------------------------------------------------------------------------------
As a fundamental policy (in addition to the fundamental policies and
restrictions set forth in the Prospectus and this Statement of Additional
Information), the Fund intends to operate as a "diversified" management
investment company, as defined in the Investment Company Act of 1940, as
amended. A "diversified" investment company means a company which meets the
following requirements: At least 75% of the value of the company's total assets
is represented by cash and cash items (including receivables), "Government
Securities", securities of other investment companies, and other securities for
the purposes of this calculation limited in respect of any one issuer to an
amount not greater in value than 5% of the value of the total assets of such
management company and to not more than 10% of the outstanding voting securities
of such issuer. "Government Securities" means securities issued or guaranteed as
to principal or interest by the United States, or by a person controlled or
supervised by and acting as an instrumentality of the Government of the United
States pursuant to authority granted by the Congress of the United States; or
certificates of deposit for any of the foregoing. Additionally, as set forth
above, the Fund has adopted certain restrictions that are more restrictive than
the policies set forth in this paragraph.
ADDITIONAL INVESTMENTS
- - --------------------------------------------------------------------------------
OBLIGATIONS OF, OR GUARANTEED BY, THE UNITED STATES GOVERNMENT, ITS AGENCIES OR
INSTRUMENTALITIES Securities issued or guaranteed by the United States include a
variety of Treasury securities, which differ only in their interest rates,
maturities and dates of issuance. Treasury bills have a maturity of one year or
less. Treasury notes have maturities of one to ten years and Treasury bonds
generally have maturities of greater than ten years at the date of issuance.
Securities issued and or guaranteed by agencies of the U.S. government and
various instrumentalities which have been established or sponsored by the U.S.
government may or may not be backed by the "full faith and credit" of the United
States. In the case of securities not backed by the full faith and credit of the
United States, the investor must look principally to the agency issuing or
guaranteeing the obligation for ultimate repayment and may not be able to assert
a claim against the United States itself in the event the agency or
instrumentality does not meet its commitment.
Some of the government agencies which issue or guarantee securities are the
Department of Housing and Urban Development, the Department of Health and Human
Services, the Government National Mortgage Association, the Farmers Home
Administration, the Department of Transportation, the Department of Defense and
the Department of Commerce. Instrumentalities which issue or guarantee
securities include the Export-Import Bank, the Federal Farm Credit System,
Federal Land Banks, the Federal Intermediate Credit Bank, the Bank for
Cooperatives, Federal Home Loan Banks, the Federal National Mortgage Association
and the Federal Home Loan Mortgage Corporation.
OBLIGATIONS OF BANKS
Bank money instruments in which the Fund may invest include certificates of
deposit, including variable rate certificates of deposit, bankers' acceptances
and time deposits. "Bank" includes commercial banks, savings banks and savings
and loan associations. Certificates of deposit are generally short-term,
interest-bearing negotiable certificates issued by commercial banks or savings
and loan associations against funds deposited in the issuing institution.
Variable rate certificates of deposit are certificates of deposit on which the
interest rate is periodically adjusted prior to their stated maturity, usually
at 30, 90 or 180 day intervals ("coupon dates"), based upon a specified market
rate, which is tied to the then prevailing certificate of deposit rate, with
some premium paid because of the longer final maturity date of the variable rate
certificate of deposit. As a result of these adjustments, the interest rate on
these obligations may be increased or decreased periodically. Variable rate
certificates of deposit normally carry a higher interest rate than fixed rate
certificates of deposit with shorter maturities, because the bank issuing the
variable rate certificate of deposit pays the investor a premium as the bank has
the use of the investor's money for a longer period of time. Variable rate
certificates of deposit can be sold in the secondary market. In addition,
frequently banks or dealers sell variable rate certificates of deposit and
simultaneously agree, either formally or informally, to repurchase such
certificates, at the option of the purchaser of the certificate, at par on the
coupon dates. In connection with the Fund's purchase of variable rate certifies
of deposit, it may enter into formal or informal agreements with banks or
dealers allowing the Fund to resell the certificates to the bank or dealer, at
the Fund's option. If the agreement to repurchase is informal, there can be no
assurance that the Fund would always be able to resell such certificates. Before
entering into any such transactions governed by formal agreements, however, the
Fund will comply with the provisions of SEC Release 10666 which generally
provides that the repurchase agreement must be fully collateralized. With
respect to variable rate certificates of deposit maturing in 180 days or less
from the time of purchase with interest rates adjusted on a monthly cycle, the
Fund uses the period remaining until the next rate adjustment date for purposes
of determining the average weighted maturity of its portfolio. With respect to
all variable rate instruments not meeting the foregoing criteria, the Fund uses
the remaining period to maturity for purposes of determining the average
weighted maturity of its portfolio until such time as the Securities and
Exchange Commission has determined otherwise.
A banker's acceptance is a time draft drawn on a commercial bank by a borrower
usually in connection with an international commercial transaction (to finance
the import, export, transfer or storage of goods). The borrower is liable for
payment as well as the bank, which unconditionally guarantees to pay the draft
at its face amount on the maturity date. Most acceptances have maturities of six
months or less and are traded in secondary markets prior to maturity.
Both domestic banks and foreign branches of domestic banks are subject to
extensive, but different, governmental regulations which may limit both the
amount and types of loans which may be made and interest rates which may be
charged. In addition, the profitability of the banking industry is largely
dependent upon the availability and cost of funds for the purpose of financing
lending operations under prevailing short-term debt conditions. General economic
conditions, as well as exposure to credit losses arising from possible financial
difficulties of borrowers, also play an important part in the operations of the
banking industry.
As a result of federal and state laws and regulations, domestic banks are, among
other things, generally required to maintain specified levels of reserves,
limited in the amount which they can loan to a single borrower, and are subject
to other regulations designed to promote financial soundness. Since the
portfolio may contain securities of foreign banks and foreign branches of
domestic banks, the Fund may be subject to additional investment risks that are
different in some respects from those incurred by a fund that invests only in
debt obligations of domestic banks.
The Fund only purchases certificates of deposit from savings and loan
institutions which are members of the Federal Home Loan Bank and are insured by
the Federal Savings and Loan Insurance Corporation. Such savings and loan
associations are subject to regulation and examination. Unlike most savings
accounts, certificates of deposit held by the Fund do not benefit materially
from insurance either from the Federal Deposit Insurance Corporation or the
Federal Savings and Loan Insurance Corporation. Certificates of deposit of
foreign branches of domestic banks are not covered by such insurance and
certificates of deposit of domestic banks purchased by the Fund are generally in
denominations far in excess of the dollar limitations on insurance coverage.
COMMERCIAL PAPER
Short-term debt instruments purchased by the Fund consist of commercial paper
(including variable amount master demand notes), which refers to short-term,
unsecured promissory notes issued by corporations to finance short-term credit
needs. Commercial paper is usually sold on a discount basis and has a maturity
at the time of issuance not exceeding nine months. Variable amount master demand
notes are demand obligations that permit the investment of fluctuating amounts
at varying market rates of interest pursuant to arrangements between the issuer
and a commercial bank acting as agent for the payees of such notes, whereby both
parties have the right to vary the amount of the outstanding indebtedness of the
notes.
DEPOSITORY RECEIPTS
The Fund may hold securities of foreign issuers in the form of American
Depository Receipts ("ADRs"). Generally ADRs are U.S. dollar denominated
securities designed for use in the U.S. securities markets which represent and
may be converted into the underlying foreign security.
SECURITIES LENDING
The lending of portfolio securities to broker-dealers, banks, and other
institutions may increase the average annual return to shareholders. Lending of
portfolio securities also involves certain risks to the Fund. As with other
extensions of credit, there are risks of delay in recovery of loaned securities,
or even loss of rights in collateral pledged by the borrower, should the
borrower fail financially. However, the Fund will only enter into loan
agreements with broker-dealers, banks, and other institutions which the Adviser
has determined are creditworthy. The Fund may also experience a loss if, upon
the failure of a borrower to return loaned securities, the collateral is not
sufficient in value or liquidity to cover the value of such loaned securities
(including accrued interest thereon). However, the borrower will be required to
pledge collateral which the custodian for the Fund's portfolio securities will
take into possession before any securities are loaned. Additionally, the
borrower may pledge only cash, securities issued or guaranteed by the U.S.
Government or its agencies and instrumentalities, certificate of deposit or
other high-grade, short-term obligations or interest-bearing cash equivalents as
collateral. There will be a daily procedure to ensure that the pledged
collateral is equal in value to at least 100% of the value of the securities
loaned. Under such procedure, the value of the collateral pledged by the
borrower as of any particular business day will be determined on the next
succeeding business day. If such value is less than 100% of the value of the
securities loaned, the borrower will be required to pledge additional
collateral. The risks of borrower default (and the resultant risk of loss to the
Fund) also are reduced by lending only securities for which a ready market
exists. This will reduce the risk that the borrower will not be able to return
such securities due to its inability to cover its obligation by purchasing such
securities on the open market.
To the extent that collateral is comprised of cash, the Fund will be able to
invest such collateral only in securities issued or guaranteed by the U.S.
Government or its agencies and instrumentalities and in certificates of deposit
or other high-grade, short-term obligations or interest-bearing cash
equivalents. If the Fund invests cash collateral in such securities, the Fund
could experience a loss if the value of such securities declines below the value
of the cash collateral pledged to secure the loaned securities. The amount of
such loss would be the difference between the value of the collateral pledged by
the borrower and the value of the securities in which the pledged collateral was
invested.
Although there can be no assurance that the risks described above will not
adversely affect the Fund, the Adviser believes that the potential benefits that
may accrue to the Fund as a consequence of securities lending will outweigh any
such increase in risk.
WHEN-ISSUED AND FORWARD COMMITMENT SECURITIES
The Fund may purchase securities on a "when-issued" basis and may purchase or
sell securities on a "forward commitment" basis. When such transactions are
negotiated, the price is fixed at the time the commitment is made, but delivery
and payment for the securities take place at a later date, which can be a month
or more after the date of the transaction. The Fund will not accrue income in
respect of a security purchased on a forward commitment basis prior to its
stated delivery date. At the time the Fund makes the commitment to purchase
securities on a when-issued or forward commitment basis, it will record the
transaction and thereafter reflect the value of such securities in determining
its net asset value. At the time the Fund enters into a transaction on a
when-issued or forward commitment basis, a segregated account consisting of cash
and liquid high grade debt obligations equal to the value of the when-issued or
forward commitment securities will be established and maintained with the
custodian and will be marked to the market daily. On the delivery date, the Fund
will meet its obligations from securities that are then maturing or sales of the
securities held in the segregated asset account and/or from then available cash
flow. If the Fund disposes of the right to acquire a when-issued security prior
to its acquisition or disposes of its right to deliver or receive against a
forward commitment, it can incur a gain or loss due to market fluctuation.
There is always a risk that the securities may not be delivered and that the
Fund may incur a loss or will have lost the opportunity to invest the amount set
aside for such transaction in the segregated asset account. Settlements in the
ordinary course of business are not treated by the Fund as when-issued or
forward commitment transactions and, accordingly, are not subject to the
foregoing limitations even though some of the risks described above may be
present in such transactions.
REPURCHASE AGREEMENTS
The Fund is permitted to invest in repurchase agreements. A repurchase agreement
is a contract by which the Fund acquires the security ("collateral") subject to
the obligation of the seller to repurchase the security at a fixed price and
date (within seven days). A repurchase agreement may be construed as a loan
pursuant to the 1940 Act. The Fund may enter into repurchase agreements with
respect to any securities which it may acquire consistent with its investment
policies and restrictions. The Fund's custodian will hold the securities
underlying any repurchase agreement in a segregated account. In investing in
repurchase agreements, the Fund's risk is limited to the ability of the seller
to pay the agreed-upon price at the maturity of the repurchase agreement. In the
opinion of the Adviser, such risk is not material, since in the event of
default, barring extraordinary circumstances, the Fund would be entitled to sell
the underlying securities or otherwise receive adequate protection under federal
bankruptcy laws for its interest in such securities. However, to the extent that
proceeds from any sale upon a default are less than the repurchase price, the
Fund could suffer a loss. In addition, the Fund may incur certain delays in
obtaining direct ownership of the collateral. The Adviser will continually
monitor the value of the underlying securities to ensure that their value always
equals or exceeds the repurchase price. The Adviser will submit a list of
recommended issuers of repurchase agreements and other short-term securities
which it has reviewed for credit worthiness to the Fund's directors at least
quarterly for their approval.
COMPUTATION OF NET ASSET VALUE
- - --------------------------------------------------------------------------------
Net asset value is determined as of the close of the New York Stock Exchange on
each day that the exchange is open for business and on any other day on which
there is sufficient trading in the Fund's securities to materially affect the
Fund's net asset value per share. The customary national business holidays
observed by the New York Stock Exchange and on which the Fund is closed are: New
Year's Day, Martin Luther King Jr. Day, President's Day, Good Friday, Memorial
Day, July Fourth, Labor Day, Thanksgiving Day and Christmas Day. The net asset
value per share will not be determined on these national holidays.
CALCULATION OF PERFORMANCE DATA
- - --------------------------------------------------------------------------------
Advertisements and other sales literature for the Fund may refer to cumulative
total return, average annual total return and yield.
CUMULATIVE TOTAL RETURN. Total return means cumulative total return and is
calculated by finding the cumulative compounded rate of return over the period
indicated that would equate the initial amount invested to the ending redeemable
value, according to the following formula:
CTR = (ERV-P) X 100
-----
P
CTR = cumulative total return
ERV = ending redeemable value at the end of the period of a hypothetical
$1,000 payment made at the beginning of such period
P = initial payment of $1,000
This calculation assumes all dividends and capital gains distributions are
reinvested at net asset value on the appropriate reinvestment dates and includes
all recurring fees, such as investment advisory and management fees, charged to
all shareholder accounts.
AVERAGE ANNUAL TOTAL RETURN. Average annual total return is computed by finding
the average annual compounded rates of return over the periods indicated that
would equate the initial amount invested to the ending redeemable value,
according to the following formula:
P(1+T)n = ERV
P = a hypothetical initial payment of $1,000;
T = average annual total return;
n = number of years; and
ERV = ending redeemable value at the end of the period of a
hypothetical $1,000 payment made at the beginning of such
period.
This calculation assumes all dividends and capital gains distributions are
reinvested at net asset value on the appropriate reinvestment dates and includes
all recurring fees, such as investment advisory and management fees, charged to
all shareholder accounts.
YIELD. Yield is computed by dividing the net investment income per share (as
defined under Securities and Exchange Commission rules and regulations) earned
during the computation period by the maximum offering price per share on the
last day of the period, according to the following formula:
Yield = 2[( a - b + 1) 6 - 1]
-----
cd
a = dividends and interest earned during the periods;
b = expenses accrued for the period (net of reimbursements);
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends; and
d = the maximum offering price per share on the last day of the
period.
MANAGEMENT
- - --------------------------------------------------------------------------------
Each director, who is not also an officer, is paid by the Sit Mutual Funds (the
"Sit Funds") as a group, an annual fee of $8,000, $2,000 for each meeting
attended, and receives reimbursement for travel and other expenses. The Sit
Funds are a family of twelve no-load, open-end, diversified, management
investment companies, as defined in the 1940 Act, and includes the Sit Science
and Technology Fund. Sit Investment Associates, Inc. serves as the adviser for
each of the Sit Funds. The names, addresses, principal occupations and other
affiliations of directors and officers of the Fund are given below. Except as
noted below, the business address of each officer and director is the same as
that of the Adviser - 4600 Norwest Center, Minneapolis, Minnesota, 55402-4130.
<TABLE>
<CAPTION>
POSITION WITH
NAME & ADDRESS THE FUND PRINCIPAL OCCUPATION DURING PAST 5 YEARS
- - -------------- ------------- ----------------------------------------
<S> <C> <C>
Eugene C. Sit * Director and Chairman, CEO and CIO Sit Investment Associates, Inc. (the
Chairman "Adviser"); Chairman and CEO of Sit/Kim International
Investment Associates, Inc. ("Sit/Kim"); Director and
Chairman of the Sit Funds and Director of SIA Securities
Corp. (the "Distributor")
Peter L. Mitchelson * Director and President and Director of the Adviser; Executive Vice President
Vice Chairman and Director of Sit/Kim; Director and Vice Chairman of
the Sit Funds and Director of the Distributor
William E. Frenzel * Director Senior Visiting Scholar at The Brookings Institution; Advisory
1775 Massachusetts Ave. NW Director of the Adviser; Director of Sit/Kim; formerly a Senior
Washington, DC 20036 member of Congress and a ranking member on the House Ways
and Means Committee and Vice Chairman of the House Budget
Committee; Director of the Sit Funds
John E. Hulse Director Director, Vice Chairman and Chief Financial Officer at Pacific
4303 Quail Run Lane Telesis Group until June 1992; Trustee, Benild Religious &
Danville, CA 94506 Charitable Trust; Trustee, Pacific Gas & Electric Nuclear
Decommissioning Trust; Director of the Sit Funds
Sidney L. Jones Director Adjunct Faculty, Center for Public Policy Education, The
8505 Parliament Drive Brookings Institution; Visiting Professor, Carleton College;
Potomac, MD 20854 Former Assistant Secretary for Economic Policy, United States
Department of the Treasury; Director of the Sit Funds
Donald W. Phillips Director President of Forstmann-Leff International, Inc.; Executive Vice
111 West Jackson Boulevard President and Director of Equity Financial and Management
Chicago, IL 60604 Company until 1997, Chairman of Equity Institutional
Investors, Inc. until 1997; Chief Investment Officer of
Ameritech, Inc., Chicago, IL until 1990; Director of the Sit
Funds
Melvin C. Bahle Director Financial consultant; director and/or officer of several
#1 Muirfield Lane Emeritus companies, foundations and religious organizations; Director of
St. Louis, MO 63141 the Sit Funds
Erik S. Anderson Vice President- Vice President - Equity Research & Portfolio Management of
Investment the Adviser and Vice President - Investments Sit Mutual Funds,
Inc., Sit Mid Cap Growth Fund, Inc., and Sit Large Cap
Growth Fund, Inc.
Michael P. Eckert Vice President- Vice President - Group Manager of the Sit Funds
Group Manager
Michael J. Radmer Secretary Partner of the Fund's general counsel, Dorsey & Whitney LLP;
220 South Sixth Street Secretary of the Sit Funds
Minneapolis, MN
Paul E. Rasmussen Vice President Vice President, Secretary and Controller for the Adviser and
& Treasurer Sit/Kim; Vice President and Treasurer of the Sit Funds;
President and Treasurer of the Distributor
Ronald D. Sit Vice President- Vice President - Equity Research and Portfolio Management of the
Investments Advisor; Vice President - Investments Sit Mutual Funds, Inc.,
Sit Mid Cap Vice Growth Fund, Inc., and Sit Large Cap Growth
Fund, Inc.
Mary K. Stern President President of the Sit Funds; Vice President - Mutual Funds of
Adviser; formerly President of Mutual Fund Group and
Executive Vice President of Society Bank until 1993; Vice
President of Norwest Bank Minnesota, N.A. until 1992.
</TABLE>
* Directors who are deemed to be "interested persons" of the Fund as that term
is defined by the Investment Company Act of 1940. Messrs. Sit and Mitchelson are
interested persons because they are officers of the Adviser. Mr. Frenzel may be
deemed to be an interested person of the Fund because he is an advisory director
of the Adviser.
Mr. Ronald D. Sit is a son of Eugene C. Sit.
INVESTMENT ADVISER
- - --------------------------------------------------------------------------------
The Adviser has served as the investment adviser for the Fund since the
inception of the Fund.
TERMS OF FUND'S INVESTMENT MANAGEMENT AGREEMENT
The Fund's Investment Management Agreement provides that the Adviser will manage
the investment of the Fund's assets, subject to the applicable provisions of the
Fund's articles of incorporation, bylaws and current registration statement
(including, but not limited to, the investment objective, policies and
restrictions delineated in the Fund's current prospectus and Statement of
Additional Information), as interpreted from time to time by the Fund's Board of
Directors. Under the Agreement, the Adviser has the sole and exclusive
responsibility for the management of the Fund's investment portfolio and for
making and executing all investment decisions for the Fund. The Adviser is
obligated under the Agreement to report to the Fund's Board of Directors
regularly at such times and in such detail as the Board may from time to time
determine appropriate, in order to permit the Board to determine the adherence
of the Adviser to the Fund's investment policies. The Agreement also provides
that the Adviser shall not be liable for any loss suffered by the Fund in
connection with the matters to which the Agreement relates, except losses
resulting from willful misfeasance, bad faith or gross negligence on the part of
the Adviser in the performance of its obligations and duties or by reason of its
reckless disregard of its obligations and duties under the Agreement.
The Agreement provides that the Adviser shall, at its own expense, furnish all
office facilities, equipment and personnel necessary to discharge its
responsibilities and duties under the Agreement and that the Adviser will
arrange, if requested by the Fund, for officers or employees of the Adviser to
serve without compensation from the Fund as directors, officers or employees of
the Fund if duly elected to such positions by the shareholders or directors of
the Fund.
The Investment Management Agreement provides that it will continue in effect
from year to year only as long as such continuance is specifically approved at
least annually by the Fund's Board of Directors or shareholders and by a
majority of the Board of Directors who are not "interested persons" (as defined
in the 1940 Act) of the Adviser or the Fund. The Agreement is terminable upon 60
days' written notice by the Adviser or the Fund and will terminate automatically
in the event of its "assignment" (as defined in the 1940 Act).
COMPENSATION AND ALLOCATION OF EXPENSES
Under the Fund's Investment Management Agreement, the Fund is obligated to pay
the Adviser a flat monthly fee, which is equal on an annual basis to 1.50%
percent of the average daily net assets of the Fund. However, under the
Agreement, the Adviser has agreed to bear all of the Fund's expenses, except for
extraordinary expenses (as designated by a majority of the Fund's disinterested
directors), interest, brokerage commissions and other transaction charges
relating to the investing activities of the Fund.
For the period of inception of the Fund through December 31, 1998 the Adviser
has voluntarily agreed to limit the management fee (and thereby, all Fund
expenses, except those not payable by the Adviser as set forth above) to 1.25%
of the Fund's average daily net assets. After December 31, 1998, this voluntary
fee waiver may be discontinued by the Adviser in its sole discretion.
DISTRIBUTOR
- - --------------------------------------------------------------------------------
Sit Mutual Funds, Inc. (the "Company") on behalf of the Fund has entered into
Underwriting and Distribution Agreements with SIA Securities Corp.
("Securities"), an affiliate of the Adviser, pursuant to which Securities will
act as the Fund's principal underwriter. Securities will market the Fund's
shares only to certain institutional investors and all other sales of the Fund's
shares will be made by the Fund. The Adviser will pay all expenses of Securities
in connection with such services and Securities is otherwise not entitled to any
other compensation under the Underwriting and Distribution Agreement. The Fund
will incur no additional fees in connection with the Underwriting and
Distribution Agreement.
Pursuant to the Underwriting and Distribution Agreement, Securities has agreed
to act as the principal underwriter for the Fund in the sale and distribution to
the public of shares of the Fund, either through dealers or otherwise.
Securities has agreed to offer such shares for sale at all times when such
shares are available for sale and may lawfully be offered for sale and sold. The
Underwriting and Distribution Agreement is renewable from year to year if the
Fund's directors approve such agreement. The Fund or Securities can terminate
the Underwriting and Distribution Agreement at any time without penalty on 60
days' notice written notice to the other party. The Underwriting and
Distribution Agreement terminates automatically upon its assignment. In the
Underwriting and Distribution Agreement, Securities agrees to indemnify the Fund
against all costs of litigation and other legal proceedings and against any
liability incurred by or imposed on the Fund in any way arising out of or in
connection with the sale or distribution of the Fund's shares, except to the
extent that such liability is the result of information which was obtainable by
Securities only from persons affiliated with the Fund but not Securities.
BROKERAGE
- - --------------------------------------------------------------------------------
Transactions on a stock exchange in equity securities will be executed primarily
through brokers that will receive a commission paid by the Fund. Fixed income
securities, as well as equity securities traded in the over-the-counter market,
are generally traded on a "net" basis with dealers acting as principals for
their own accounts without a stated commission, although the price of the
security usually includes a profit to the dealer. In underwritten fixed income
and equity offerings, securities are purchased at a fixed price that includes an
amount of compensation to the underwriter, generally referred to as the
underwriter's selling concession or discount. Certain of these securities may
also be purchased directly from the issuer, in which case neither commissions
nor discounts are paid.
The Adviser selects and, where applicable, negotiates commissions with the
broker-dealers who execute the transactions for the Fund. The primary criterion
for the selection of a broker-dealer is the ability of the broker-dealer, in the
opinion of the Adviser to secure prompt execution of the transactions on
favorable terms, including the best price of the security, the reasonableness of
the commission and considering the state of the market at the time. When
consistent with these objectives, business may be placed with broker-dealers who
furnish investment research or services to the Adviser. Such research or
services include advice, both directly and in writing, as to the value of
securities, the advisability of investing in, purchasing or selling securities,
and the availability of securities, or purchasers or sellers of securities. Such
services also may include analyses and reports concerning issues, industries,
securities, economic factors and trends, portfolio strategy, and the performance
of accounts. This allows the Adviser to supplement its own investment research
activities and enables the Adviser to obtain the views and information of
individuals and research staffs of many different securities firms prior to
making investment decisions for the Fund. To the extent portfolio transactions
are effected with broker-dealers who furnish research services to the Adviser,
the Adviser receives a benefit, not capable of valuation in dollar amounts,
without providing any direct monetary benefit to the Fund from these
transactions. The Adviser believes that most research services it receives
generally benefit several or all of the investment companies and private
accounts which they manage, as opposed to solely benefiting one specific managed
fund or account. Normally, research services obtained through managed funds or
accounts investing in common stocks would primarily benefit the managed funds or
accounts which invest in common stock; similarly, services obtained from
transactions in fixed income securities would normally be of greater benefit to
the managed funds or accounts which invest in debt securities.
The Adviser maintains an informal list of broker-dealers, which is used from
time to time as a general guide in the placement of Fund business, in order to
encourage certain broker-dealers to provide the Adviser with research services
which the Adviser anticipates will be useful to them in managing the Fund.
Because the list is merely a general guide, which is to be used only after the
primary criterion for the selection of broker-dealers (discussed above) has been
met, substantial deviations from the list are permissible and may be expected to
occur. The Adviser will authorize the Fund to pay an amount of commission for
effecting a securities transaction in excess of the amount of commission another
broker-dealer would have charged only if the Adviser determines in good faith
that such amount of commission is reasonable in relation to the value of the
brokerage and research services provided by such broker-dealer, viewed in terms
of either that particular transaction or the Adviser's overall responsibilities
with respect to the accounts as to which it exercises investment discretion.
Generally, the Fund pays commissions higher than the lowest commission rates
available. Some investment companies enter into arrangements under which a
broker-dealer agrees to pay the cost of certain products or services (not
including research services) in exchange for fund brokerage ("brokerage/services
arrangements"). Under a typical brokerage/service arrangement, a broker agrees
to pay a fund's custodian fees or transfer agent fees and, in exchange, the fund
agrees to direct a minimum amount of brokerage to the broker. The Adviser does
not intend to enter into such brokerage/service arrangements on behalf of the
Fund. Some investment companies enter into arrangements that provide for
specified or reasonably ascertainable fee reductions in exchange for the use of
fund assets ("expense offset arrangements"). Under such expense offset
agreements, expenses are reduced by foregoing income rather than by
re-characterizing them as capital items. For example, a fund may have a
"compensating balance" agreement with its custodian under which the custodian
reduces its fee if the fund maintains cash or deposits with the custodian in
non-interest bearing accounts. The Adviser does not intend to enter into expense
offset agreements involving assets of the Fund. Most all securities trades will
be executed through U.S. brokerage firms and commercial banks.
Foreign equity securities may be held in the form of American Depository
Receipts ("ADRs"). ADRs may be listed on stock exchanges, or traded in the
over-the-counter markets in the United States. ADRs, like other securities
traded in the United States, will be subject to negotiated commission rates.
Fund management does not currently anticipate that the Fund will effect
brokerage transactions in its portfolio securities with any broker-dealer
affiliated directly or indirectly with the Fund or the Adviser.
The Adviser has entered into agreements with Capital Institutional Services,
Inc. ("CIS"), and Lipper Analytical Securities Corporation ("LAS"), unaffiliated
registered broker-dealers located in Dallas and New York respectively. All
transactions placed with CIS and LAS are subject to the above criteria. CIS and
LAS provide the Adviser with a wide variety of economic, performance, and
investment research information.
Investment decisions for the Fund are made independently of those for other
clients of the Adviser, including the other investment companies. When the Fund
and other client(s) simultaneously engage in the purchase or sale of the same
securities, the price of the transactions is averaged and the amount allocated
in accordance with a formula deemed equitable to the Fund and client(s). In some
cases, this system may adversely affect the price paid or received by the Fund
or the size of the position obtainable.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
- - --------------------------------------------------------------------------------
The following persons owned of record or beneficially 5% or more of the
respective Fund's outstanding shares as ______________ 1997.
<TABLE>
<CAPTION>
Record Beneficially Of Record &
Person Only Only Beneficially
------ ---- ---- ------------
<S> <C> <C> <C>
Sit Investment Associates (various accounts) ___%
4600 Norwest Center
Minneapolis, MN
</TABLE>
TAXES
- - --------------------------------------------------------------------------------
The tax status of the Fund and the distributions which it may make are
summarized in the prospectus in the section entitled "Taxes." The Fund intends
to fulfill the requirements of Subchapter M of the Internal Revenue Code of
1986, as amended (the "Code"), as a regulated investment company. If so
qualified, the Fund will not be liable for federal income taxes to the extent it
distributes its taxable income to its shareholders.
To qualify under Subchapter M for tax treatment as a regulated investment
company, the Fund must, among other things: (1) distribute to its shareholders
at least 90% of its investment company taxable income (as that term is defined
in the Code determined without regard to the deduction for dividends paid) and
90% of its net tax-exempt income; (2) derive at least 90% of its gross income
from dividends, interest, payments with respect to securities loans, gains from
the sale or other disposition of stock or securities, or other income derived
with respect to its business of investing in such stocks, securities, or
currency; (3) derive less than 30% of its annual gross income from the sale or
other disposition of stock, securities, options, futures, or forward contracts
held for less than three months; and (4) diversify its holdings so that, at the
end of each fiscal quarter of the Fund, (a) at least 50% of the market value of
the Fund's assets is represented by cash, cash items, United States Government
securities and securities of other regulated investment companies, and other
securities, with these other securities limited, with respect to any one issuer,
to an amount no greater than 5% of the Fund's total assets and no greater than
10% of the outstanding voting securities of such issuer, and (b) not more than
25% of the market value of the Fund's total assets is invested in the securities
of any one issuer (other than United States Government securities or securities
of other regulated investment companies).
The Fund is subject to a non-deductible excise tax equal to 4% of the excess, if
any, of the amount required to be distributed for each calendar year over the
amount actually distributed. In order to avoid the imposition of this excise
tax, the Fund must declare and pay dividends representing 98% of its net
investment income for that calendar year and 98% of its capital gains (both
long-term and short-term) for the twelve-month period ending October 31 of the
calendar year.
When shares of the Fund are sold or otherwise disposed of, the Fund shareholder
will realize a capital gain or loss equal to the difference between the purchase
price and the sale price of the shares disposed of, if, as is usually the case,
the Fund shares are a capital asset in the hands of the Fund shareholder. In
addition, pursuant to a special provision in the Code, if Fund shares with
respect to which a long-term capital gain distribution has been made are held
for six months or less, any loss on the sale or other disposition of such shares
will be a long-term capital loss to the extent of such long-term capital gain
distribution.
Any loss on the sale or exchange of shares of the Fund generally will be
disallowed to the extent that a shareholder acquires or contracts to acquire
shares of the same Fund within 30 days before or after such sale or exchange.
The foregoing relates only to federal income taxation and is a general summary
of the federal tax law in effect as of the date of this Statement of Additional
Information.
FINANCIAL STATEMENTS
- - --------------------------------------------------------------------------------
The information contained in the financial statements and annual reports to
shareholders of the Fund is incorporated by reference in this Statement of
Additional Information.
OTHER INFORMATION
- - --------------------------------------------------------------------------------
CUSTODIAN, COUNSEL, AND ACCOUNTANTS
The Northern Trust Company, 50 South LaSalle Street, Chicago, IL 60675 acts as
custodian of the Fund's assets and portfolio securities; Dorsey & Whitney LLP,
220 South Sixth Street, Minneapolis, Minnesota 55402, is the independent General
Counsel for the Fund; and KPMG Peat Marwick LLP, 4200 Norwest Center,
Minneapolis, Minnesota 55402, acts as the Fund's independent accountants.
LIMITATION OF DIRECTOR LIABILITY
- - --------------------------------------------------------------------------------
Under Minnesota law, each director of the Fund owes certain fiduciary duties to
the Fund and to its shareholders. Minnesota law provides that a director "shall
discharge the duties of the position of director in good faith, in a manner the
director reasonably believes to be in the best interest of the corporation, and
with the care an ordinarily prudent person in a like position would exercise
under similar circumstances." Fiduciary duties of a director of a Minnesota
corporation include, therefore, both a duty of "loyalty" (to act in good faith
and act in a manner reasonably believed to be in the best interests of the
corporation) and a duty of "care" (to act with the care an ordinarily prudent
person in a like position would exercise under similar circumstances). Minnesota
law authorizes corporations to eliminate or limit the personal liability of a
director to the corporation or its shareholders for monetary damages for breach
of the fiduciary duty of "care". Minnesota law does not, however, permit a
corporation to eliminate or limit the liability of a director (i) for any breach
of the directors' duty of "loyalty" to the corporation or its shareholders, (ii)
for acts or omissions not in good faith or that involve intentional misconduct
or a knowing violation of law, (iii) for authorizing a dividend, stock
repurchase or redemption or other distribution in violation of Minnesota law or
for violation of certain provisions of Minnesota securities laws or (iv) for any
transaction from which the director derived an improper personal benefit. The
Articles of Incorporation of the Company limit the liability of directors to the
fullest extent permitted by Minnesota statutes, except to the extent that such
liability cannot be limited as provided in the Investment Company Act of 1940
(which Act prohibits any provisions which purport to limit the liability of
directors arising from such directors' willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of their
role as directors).
Minnesota law does not eliminate the duty of "care" imposed upon a director. It
only authorizes a corporation to eliminate monetary liability for violations of
that duty. Minnesota law, further, does not permit elimination or limitation of
liability of "officers" to the corporation for breach of their duties as
officers (including the liability of directors who serve as officers for breach
of their duties as officers). Minnesota law does not permit elimination or
limitation of the availability of equitable relief, such as injunctive or
rescissionary relief. Further, Minnesota law does not permit elimination or
limitation of a director's liability under the Securities Act of 1933 or the
Securities Exchange Act of 1934, and it is uncertain whether and to what extent
the elimination of monetary liability would extend to violations of duties
imposed on directors by the Investment Company Act of 1940 and the rules and
regulations adopted under such Act.
The Fund is not required under Minnesota law to hold annual or periodically
scheduled meetings of shareholders. Minnesota corporation law provides for the
Board of Directors to convene shareholder meetings when it deems appropriate.
However, the Fund intends to hold meetings of shareholders annually. In
addition, if a regular meeting of shareholders has not been held during the
immediately preceding fifteen months, a shareholder or shareholders holding
three percent or more of the voting shares of the Fund may demand a regular
meeting of shareholders by written notice of demand given to the chief executive
officer or the chief financial officer of the Fund. Within ninety days after
receipt of the demand, a regular meeting of shareholders must be held at the
expense of the Fund. Irrespective of whether a regular meeting of shareholders
has been held during the immediately preceding fifteen months, in accordance
with Section 16(c) under the 1940 Act, the Board of Directors of the Fund shall
promptly call a meeting of shareholders for the purpose of voting upon the
question of removal of any director when requested in writing so to do by the
record holders of not less than 10 percent of the outstanding shares.
Additionally, the 1940 Act requires shareholder votes for all amendments to
fundamental investment policies and restrictions and for all investment advisory
contracts and amendments thereto. The Fund will assist in communications with
other shareholders as required by Section 16(c) of the 1940 Act.
APPENDIX A
BOND AND COMMERCIAL PAPER RATINGS
BOND RATINGS
MOODY'S INVESTORS SERVICE, INC.
Aaa Judged to be the best quality, carry the smallest degree of
investment risk.
Aa Judged to be of high quality by all standards.
A Possess many favorable investment attributes and are to be
considered as higher medium grade obligations.
Baa Medium grade obligations. Lack outstanding investment
characteristics.
Ba Judged to have speculative elements. Protection of interest and
principal payments may be very moderate.
B Generally lack characteristics of a desirable investment.
Assurance of interest and principal payments over any long period
of time may be small.
Caa May be present elements of danger with respect to principal or
interest or may be in default
Ca Represent obligations which are speculative in a high degree.
Often in default.
C Lowest class of bonds and issued regarded as having extremely
poor prospects of attaining any real investment standing.
Moody's also applies numerical indicators, 1, 2, and 3, to rating
categories Aa through Ba. The modifier 1 indicates that the security is in
the higher end of the rating category; the modifier 2 indicates a mid-range
ranking; and 3 indicates a ranking toward the lower end of the category.
STANDARD & POOR'S CORPORATION
AAA Highest grade obligations and possess the ultimate degree of
protection as to principal and interest.
AA Also qualify as high grade obligations, and in the majority of
instances differ from AAA issues only in small degree.
A Regarded as upper medium grade, have considerable investment
strength but are not entirely free from adverse effects of
changes in economic and trade conditions, interest and principal
are regarded as safe.
BBB Considered investment grade with adequate capacity to pay
interest and repay principal.
BB Judged to be speculative with some inadequacy to meet timely
interest and principal payments.
B Has greater vulnerability to default than other speculative grade
securities. Adverse economic conditions will likely impair
capacity or willingness to pay interest and principal.
CCC Has a vulnerability to default and is dependent upon favorable
business, financial and economic conditions to meet timely
payment of interest and repayment of principal.
CC Applied to debt subordinated to senior debt.
C Applied to debt subordinated to senior debt that is assigned an
actual or implied CCC debt rating.
Standard & Poor's applies indicators "+", no character, and "-" to the
above rating categories AA through BB. The indicators show relative
standing within the major rating categories.
FITCH INVESTORS SERVICE, INC.
AAA Highest credit quality with exceptional ability to pay interest
and repay principal.
AA Investment grade and very high credit quality ability to pay
interest and repay principal is very strong, although not quite
as strong as AAA.
A Investment grade with high credit quality. Ability to pay
interest and repay principal is strong.
BBB Investment grade and has satisfactory credit quality. Adequate
ability to pay interest and repay principal.
BB Considered speculative. Ability to pay interest and repay
principal may be affected over time by adverse economic changes.
B Considered highly speculative. Currently meeting interest and
principal obligations, but probability of continued payment
reflects limited margin of safety.
CCC Identifiable characteristics which if not remedied may lead to
default. Ability to meet obligations requires an advantageous
business and economic environment.
CC Minimally protected bonds. Default in payment of interest and/or
principal seems probable over time.
C Imminent default in payment of interest or principal.
+and - indicators indicate the relative position within the rating
category, but are not used in AAA category.
DUFF & PHELPS CREDIT RATING CO.
AAA Highest credit quality, risk factors are negligible.
AA+, AA, AA- High credit quality with moderate risk.
A+, A, A- Protection factors are average but adequate, however,
risk factors are more variable and greater in periods
of economic stress.
BBB+, BBB, BBB- Below average protection factors, but still
considered sufficient for prudent investment.
BB+, BB, BB- Below investment grade but likely to meet obligations
when due.
B+, B, B- Below investment grade and possessing risk that
obligations will not be met when due.
CCC Well below investment grade. May be in default or
considerable uncertainty as to timely payment of
interest and/or principal.
COMMERCIAL PAPER RATINGS
MOODY'S
Commercial paper rated "Prime" carries the smallest degree of
investment risk. The modifiers 1, 2, and 3 are used to denote relative
strength within this highest classification.
STANDARD & POOR'S
The rating A-1 is the highest commercial paper rating assigned by
Standard & Poor's Corporation. The modifier "+" indicates that the
security is in the higher end of this rating category.
FITCH'S
F-1+ Exceptionally strong credit quality
DUFF & PHELPS'
Category 1 (top grade):
Duff1+ Highest certainty of timely payment
Duff1 Very high certainty of timely payment
Duff1- High certainty of timely payment
Part C
Other Information
Item 24. Financial Statements and Exhibits
(a) Financial Statements (incorporated by reference in Part B of this
Registration Statement).
(b) Exhibits
1. Articles of Incorporation (incorporated by reference to
Post-Effective Amendment No. 3 to the Registrant's
Registration Statement).
1.1 Certificate of Designation (to be filed by amendment)
2. Amended Bylaws (to be filed by amendment)
3. Not applicable
4. Specimen Copy of Share Certificate (to be filed by amendment)
5. Investment Management Agreement (to be filed by amendment)
6. Underwriting and Distribution Agreement (to be filed by
amendment)
7. Not applicable
8.1 Custodian Agreement (to be filed by amendment)
8.2 Transfer Agency and Services Agreement (to be filed by
amendment)
8.3 Accounting Services Agreement (to be filed by amendment)
9. Not applicable
10. Opinion and Consent of Dorsey & Whitney (to be filed by
amendment)
11. Consent of KPMG Peat Marwick (incorporated by reference to
Post-Effective Amendment No. 10 to the Registrant's
Registration Statement.)
12. Not applicable
13. Letter of Investment Intent (Filed herewith)
14. Not applicable
15. Not applicable
16. Calculations of Performance Data (incorporated by reference to
Post-Effective Amendment No. 10 to the Registrant's
Registration Statement.)
17. Powers of Attorney (incorporated by reference to
Post-Effective Amendment No. 9 to the Registrant's
Registration Statement.)
Item 25. Persons Controlled by or Under Common Control with Registrant
See the section of the Prospectus entitled "Management" and the
section of the Statement of Additional Information entitled
"Investment Adviser."
Item 26. Number of Holders of Securities
The number of holders of shares of Sit Mutual Funds, Inc. as of June
30, 1997 are:
Title of Class Number of Record Holders
-------------- ------------------------
Common Stock, par value of $.01 per share
Series A 2,121
Series B 126
Series C 1,630
Series D 547
Series E None
Item 27. Indemnification
The Registrant's Articles of Incorporation provides that the Registrant
shall indemnify such persons, for such expenses and liabilities, in such manner,
under such circumstances, and to such extent as permitted by Section 302A.521 of
the Minnesota Statutes, as now enacted or hereafter amended; provided, however,
that no such indemnification may be made if it would be in violation of Section
17(h) of the Investment Company Act of 1940, as now enacted or hereinafter
amended.
The Registrant may indemnify its officers and directors and other "persons"
acting in an "official capacity" (as such terms are defined in Section 302A.521)
pursuant to a determination by the board of directors or shareholders of the
Registrant as set forth in Section 302A.521, by special legal counsel selected
by the board or a committee thereof for the purpose of making such
determination, or by a Minnesota court upon application of the person seeking
indemnification. If a director is seeking indemnification for conduct in the
capacity of director or officer of the Registrant, then such director generally
may not be counted for the purpose of determining either the presence of a
quorum or such director's eligibility to be indemnified.
In any case, indemnification is proper only if the eligibility determining
body decides that the person seeking indemnification:
(a) has not received indemnification for the same conduct from any other
party or organization;
(b) acted in good faith;
(c) received no improper personal benefit;
(d) in the case of criminal proceedings, had no reasonable cause to
believe the conduct was unlawful;
(e) reasonably believed that the conduct was in the best interest of the
Registrant, or in certain contexts, was not opposed to the best
interest of the Registrant; and
(f) had not otherwise engaged in conduct which precludes indemnification
under either Minnesota or Federal law (including, without limitation,
conduct constituting willful misfeasance, bad faith, gross negligence,
or reckless disregard of duties as set forth in Section 17(h) and (i)
of the Investment Company Act of 1940).
Advances. If a person is made or threatened to be made a party to a
proceeding, the person is entitled, upon written request to the Registrant, to
payment or reimbursement by the Registrant of reasonable expenses, including
attorneys' fees and disbursements, incurred by the person in advance of the
final disposition of the proceeding, (a) upon receipt by the Registrant of a
written affirmation by the person of a good faith belief that the criteria for
indemnification set forth in Section 302A.521 have been satisfied and a written
undertaking by the person to repay all amounts so paid or reimbursed by the
Registrant, if it is ultimately determined that the criteria for indemnification
have not been satisfied, and (b) after a determination that the facts then known
to those making the determination would not preclude indemnification under
Section 302A.521. The written undertaking required by clause (a) is an unlimited
general obligation of the person making it, but need not be secured and shall be
accepted without reference to financial ability to make the repayment.
Undertaking. The Registrant undertakes that insofar as indemnification for
liabilities arising under the Securities Act of 1933 may be permitted to
directors, officers and controlling persons of the Registrant pursuant to the
foregoing provisions, or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant will,
unless, in the opinion of its counsel, the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issues.
Item 28. Business and other Connections of Investment Adviser
Sit Investment Associates, Inc. (the "Adviser"), serves as the investment
adviser. Below is a list of the officers and directors of the Adviser and their
business/employment during the past two years.
Business and Employment During Past Two Years;
Name Principal Business Address
---- --------------------------
Eugene C. Sit Chairman, CIO and Treasurer of the Adviser;
Chairman and CEO of the Sit/Kim International
Investment Associates, Inc. ("Sit/Kim");
Chairman of the Board of Directors of all Sit
Mutual Funds.
Peter L. Mitchelson President and Director of the Adviser; Director
and Executive Vice President of Sit/Kim; Senior
Portfolio Manager of the Sit Large Cap Growth
Fund; Vice Chairman & Director of all Sit
Mutual Funds.
Michael C. Brilley Senior Vice President and Senior Fixed Income
Officer of the Adviser; Director and Senior
Vice President of Sit U.S. Government
Securities Fund, Inc., Sit Money Market Fund,
Inc., Sit Mutual Funds II, Inc. and Sit
Balanced Fund.
Frederick Adler Director of the Adviser; Venture Capitalist,
Managing Partner, Venad Management, Inc. 1520
S. Ocean Boulevard Palm Beach, FL 33480
Norman Bud Grossman Director of the Adviser; President, Cogel
Management; 4670 Norwest Center Minneapolis MN
55402
William E. Frenzel Advisory Director of the Adviser; Director of
Sit/Kim; Director of all Sit Mutual Funds 1775
Massachusetts Avenue N.W. Washington, D.C.
20036
Erik S. Anderson Vice President - Equity Research and Portfolio
Management of the Adviser
John K. Butler Vice President - Equity Research of the Adviser
Gary T. Dvorchak Vice President - Equity Research of the Adviser
Michael P. Eckert Vice President - Group Manager of all Sit Funds
John T. Groton, Jr. Vice President - Equity Research of the Adviser
Paul E. Rasmussen Vice President, Secretary and Controller of the
Adviser and Sit/Kim; Vice President and
Treasurer of all Sit Mutual Funds.
Debra A. Sit Vice President - Bond Investments of the
Adviser; Officer of all Sit Mutual Funds;
Assistant Treasurer and Assistant Secretary of
Sit/Kim
Ronald D. Sit Vice President - Equity Research and Portfolio
Management of the Adviser
Mary K. Stern Vice President - Mutual Funds and President of
all Sit Mutual Funds
Item 29. Principal Underwriters
The Distributor for the Registrant is SIA Securities Corp., 4600 Norwest
Center, Minneapolis, MN 55402, an affiliate of the Adviser. The Distributor
distributes only shares of the Sit Mutual Funds, which include the Registrant.
Below is a list of the officers and directors of the Distributor and their
business/employment during the past two years:
Business and Employment During Past Two Years;
Name Principal Business Address
---- --------------------------
Eugene C. Sit Chairman, CIO and Treasurer of the Adviser;
Director Chairman and CEO of Sit/Kim International
Investment Associates, Inc. ("Sit/Kim");
Chairman of the Board of Directors of all Sit
Mutual Funds.
Peter L. Mitchelson President and Director of the Adviser; Director
Director and Executive Vice President of Sit/Kim; Senior
Portfolio Manager of the Sit Large Cap Growth
Fund; Vice Chairman & Director of all Sit
Mutual Funds.
Paul E. Rasmussen Vice President, Secretary and Controller for
President & the Adviser and Sit/Kim, Vice President &
Treasurer Treasurer of all Sit Mutual Funds
Item 30. Location of Accounts and Records
The Custodian for Registrant is The Northern Trust Company, 50 South
LaSalle Street, Chicago, IL 60675. The Transfer Agent for each Registrant is
First Data Investor Services, 4400 Computer Drive, Westboro, MA 01581. Other
books and records are maintained by the Adviser, which is located at 4600
Norwest Center, Minneapolis, MN 55402.
Item 31. Management Services Not applicable
Item 32. Undertakings
(a) Not applicable
(b) Registrant undertakes to file a post-effective amendment, using
financial statements which need not be certified, within four to six
months from the initial public offering of its Series E common shares.
(c) Registrant undertakes to call a meeting of shareholders for the
purpose of voting upon the question of removal of a director if
requested to do so by the holders of at least 10% of such Registrant's
outstanding shares and to assist in communications with other
shareholders as required by Section 16(c) of the Investment Company
Act of 1940.
(d) Registrant undertakes to furnish each person to whom a prospectus or
any series of the Registrant is sent the latest Annual Report of such
series. Such Annual Report will be furnished by the Registrant without
charge upon request by such person.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement on Form N-1A to be signed on its behalf by the undersigned, thereunder
duly authorized, in the City of Minneapolis, State of Minnesota, on the 15th day
of July, 1997.
SIT MUTUAL FUNDS, INC.
(Registrant)
By /s/ Eugene C. Sit
--------------------------
Eugene C. Sit, Chairman
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registrant's Registration Statement has been
signed below by the following persons in the capacities and on the dates
indicated.
Signature and Title
-------------------
/s/ Eugene C. Sit Dated: July 15, 1997
- - ------------------------------------------
Eugene C. Sit Chairman
(Principal Executive Officer and Director)
/s/ Paul E. Rasmussen Dated: July 15, 1997
- - ------------------------------------------
Paul E. Rasmussen, Treasurer
(Principal Financial Officer and Accounting Officer)
William E. Frenzel, Director *
John E. Hulse, Director *
Sidney L. Jones, Director *
Peter L. Mitchelson, Director *
Donald W. Phillips, Director *
* By /s/ Eugene C. Sit Dated: July 15, 1997
--------------------------------------
Eugene C. Sit, Attorney-in-fact
(Pursuant to Powers of Attorney filed
previously with the Commission.)
SIT MUTUAL FUNDS, INC.
REGISTRATION STATEMENT ON FORM N-1A
EXHIBIT INDEX
EXHIBIT PAGE
NUMBER NAME OF EXHIBIT NUMBER
------ --------------- ------
1 Letter of Investment Intent C-7
Exhibit 1
Letter of Investment Intent
SIT INVESTMENT ASSOCIATES, INC.
LETTER OF INVESTMENT INTENT
Purchase of
Sit Mutual Funds, Inc.
Series E Common Shares
Sit Science and Technology Fund
Sit Investment Associates, Inc. ("SIA") intends to purchase approximately ten
(10) Series E Common Shares of Sit Mutual Funds, Inc. for $10 per share on or
before _______________. SIA will hold said shares for investment purposes.
SIT INVESTMENT ASSOCIATES, INC.
By: _____________________________________
Its _____________________________________
DATED: July ___, 1997
