N-CSRS 1 d310659dncsrs.htm SIT MUTUAL FUNDS, INC. Sit Mutual Funds, Inc.

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSR

-------------------

CERTIFIED SHAREHOLDER REPORT OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number:   811-06373

                                                                  -------------

Sit Mutual Funds, Inc.

(Exact name of registrant as specified in charter)

80 South Eighth Street

3300 IDS Center

Minneapolis, MN 55402

(Address of principal executive offices)

Paul E. Rasmussen, VP Treasurer

Sit Mutual Funds, Inc.

80 South Eighth Street

3300 IDS Center

Minneapolis, MN 55402

(Name and address of agent for service)

Copy to:

Mike Radmer, Esq.

Dorsey & Whitney

Suite 1500

50 South Sixth Street

Minneapolis, MN 55402-1498

Registrant’s telephone number, including area code:

(612) 332-3223

Date of fiscal year end:       June 30, 2017

Date of reporting period:     December 31, 2016

Item 1:       Reports to Stockholders

LOGO

Sit Mutual Funds

STOCK FUNDS SEMI-ANNUAL REPORT

TABLE OF CONTENTS

 

     Page  

Chairman’s Letter

      2     

Fund Reviews and Schedules of Investments

   

Balanced Fund

      4     

Dividend Growth Fund

      12     

Global Dividend Growth Fund

      16     

Large Cap Growth Fund

      22     

ESG Growth Fund

      26     

Mid Cap Growth Fund

      30     

Small Cap Dividend Growth Fund

      34     

Small Cap Growth Fund

      38     

International Growth Fund

      42     

Developing Markets Growth Fund

      48     

Statements of Assets and Liabilities

      54     

Statements of Operations

      56     

Statements of Changes in Net Assets

      58     

Financial Highlights

      62     

Notes to Financial Statements

      72     

Expense Example

      79     

Additional Information

      81     

 

This document must be preceded or accompanied by a Prospectus.

    

   

CHAIRMAN’S LETTER

February 3, 2017

    

 

Dear Fellow Shareholders:

 

Despite many “expert” predictions to the contrary, equity markets rallied and bond prices fell sharply in response to the Trump/Republican victory in November. While investors could well be frustrated in the months ahead by challenges and delays to policy implementation, our view is that, for the first time in this economic cycle, growth prospects are now more skewed to the upside rather than the downside over the intermediate term.

Economic Overview

Importantly, the U.S. economy has begun 2017 with most indicators showing solid growth. Job gains have slowed as the economy is increasingly showing signs of full employment, with wage growth accelerating in recent months. Auto sales remain at elevated levels and housing continues to slowly recover, although higher interest rates may dampen near-term activity. The manufacturing economy has shown signs of improvement after several quarters of lackluster growth and a protracted inventory destocking cycle. Finally, near-term economic activity could be boosted by sharp post-election increases in CEO confidence, consumer confidence, and small business optimism. It remains to be seen whether more optimism will translate into an uptick in economic activity, but it will be critical given time required for the Trump Administration to bring forward their growth initiatives.

Key elements of the Trump Administration’s agenda include corporate tax reform, personal income tax reductions, repatriation of cash from abroad, regulatory reform, and increased spending on infrastructure and defense. While economists and analysts have studiously attempted to gauge the economic benefits of each of these initiatives, there is little historical precedent to model these potential once-in-a-generation changes. It stands to reason that measuring the “multiplier” effects is very difficult if these pro-growth proposals are enacted simultaneously. In addition, the impact of improved consumer confidence and “animal spirits” could lift business spending, which has been notably absent in recent years. Increased bank lending, lower taxes, and less regulation should have a particularly positive impact on new business formation and small business activity, which are truly the lifeblood of our entrepreneurial economy.

    To be sure, any major change in the environment will always bring about new risks. Higher inflation and interest rates, for example, are likely byproducts of faster economic growth. As the economy inches closer to full employment, faster growth may spark a strong uptick in wages, along with other inflationary pressures. Improved growth and inflation could result in the Federal Reserve tightening policy more than what is currently anticipated. In addition, the U.S. dollar could continue to appreciate as U.S. economic growth prospects diverge from the rest of the world. This would have negative implications for U.S. multinational earnings, U.S. manufacturers, and

many emerging economies struggling with elevated levels of U.S. dollar-denominated debt. Finally, President-elect Trump has clearly articulated his dissatisfaction with U.S. trade policy; punitive trade actions against China and/or Mexico could spark a broader trade war that could serve to offset pro-growth initiatives.

Outside the U.S., growth trends have been relatively stable in most major regions, but we see many near-term challenges. In Europe, growth remains fragile against a backdrop of rising political risk given Brexit negotiations and key upcoming elections in France, the Netherlands, and Germany. The Chinese economy has shown encouraging trends of late, but we remain concerned that sustainability is a question given debt-fueled growth and overreliance on government stimulus. Finally, Japan is having limited success in overcoming structural challenges (e.g., demographics, debt) with pro-growth policies, and we remain cautious on growth prospects in 2017.

Equity Strategy

Following a solid 2016, we believe 2017 has the potential to be another reasonable year for the U.S. stock market, driven by improvements in corporate earnings and various policy initiatives. We suspect, however, that the market will likely be subject to a number of fits and starts in response to progress (or lack thereof) in Washington and global macroeconomic conditions.

We believe market valuations are at “fair” levels relative to our view of the path of corporate earnings and interest rates. The S&P 500® Index is currently trading at a forward price-to-earnings multiple of roughly 17 times (in line with its long-term historical average), although consensus earnings expectations, which call for +12 percent growth, appear too aggressive unless pro-growth policies are enacted quickly. In this regard, earnings projections for the winners and losers of policy initiatives will continue to be adjusted as more policy details become available. For example, estimates do not yet take into consideration the benefit of tax reform, which alone could boost S&P 500® earnings by +10 to +15 percent. The benefits of fiscal stimulus and deregulation are more difficult to quantify, but we suspect any earnings uptick from these factors will not materialize until 2018 or later.

    From a positioning standpoint, we have implemented a barbell strategy, with recent portfolio changes emphasizing companies/industries with upside potential based on a combination of policy changes and the resulting, eventual uptick in economic growth. For example, we have significant positions in the finance and transportation sectors, two groups that have the most to gain from improved growth and policy initiatives, including tax reform and deregulation.

 

 

 

 

2

  

 

SIT MUTUAL FUNDS SEMI-ANNUAL REPORT

    

   

    

    

    

    

 

 

As discussed, however, we are cognizant of the risks and challenges as policy changes are undertaken. There are many moving parts on the policy front and only one thing is clear: the investment landscape is now more positive, but the range of outcomes, or “tail risks,” have increased as well. Therefore, we believe it is prudent to maintain exposure to attractively-valued, non-cyclical, largely domestically-focused industries that have growth potential, including defense, HMOs, and telecom. Conversely, underweights largely consist of low growth groups that may be negatively impacted by policy side effects, including higher interest rates and a stronger U.S. dollar. Regardless of sector, we strongly believe a quality focus is appropriate in the environment ahead, as the era of extremely accommodative monetary policy has largely run its course. Ultra-low interest rates and easy access to credit can often provide cover for fundamental weakness in a business. The year ahead may well be marked by greater volatility across financial markets after years of relative stability, resulting in significant opportunities to improve risk/reward potential across Sit Mutual Fund strategies. In general, our quality bias has not been rewarded in the QE-driven backdrop (i.e., easy money) prevailing in recent years. We strongly believe a different, and potentially more volatile, environment lies ahead.

    In Europe, equity valuations are generally in line-to-slightly-above long-term averages, but earnings still remain depressed for a number of sectors. The MSCI Europe Index is currently trading at a forward price-to-earnings multiple of about 14.5 times, which is slightly above its 30-year median of 13 times and a 15 percent discount to the S&P 500 Index. Equity fund flows and investor surveys have both been indicative of a fair amount of pessimism, suggesting European stocks may be poised for a meaningful reversal in sentiment as policy uncertainty eases and as corporate earnings improve against easy comparisons. Looking forward, we believe the performance of European equities will remain choppy in response to both political and global macroeconomic events. However, investors will likely begin to anticipate diminished political risk heading into 2018 and the potential for improved fiscal/corporate spending, implying a solid underlying bid for European stocks as we move through the year. We do not expect a “rising tide lifts all boats” scenario by any means and remain selective with regard to our sector, end-market, and company-specific exposures. Given the negative impact of a strong U.S. dollar and a myriad of other concerns, we are underweighting stocks with significant emerging market exposure. We prefer companies that are either plays on domestic secular/cyclical/niche growth, address markets where there is pent-up demand, benefit from modest inflation/rising global yields, and/or have meaningful exposure to the United States. As such, we have recently increased

weightings in financial stocks (i.e., insurance and banks) that will benefit from the potential for lower regulation and a steeper interest rate curve in the United States as well as a modestly improving banking environment in Europe.

Turning to Asia, Japanese equities performed well to finish 2016, bid higher as the yen fell and global growth prospects improved somewhat. Outflows from Japanese equities have also abated and valuations remain cheap relative to other global equity markets. However, we continue to remain meaningfully underweight Japan across global and international portfolios, given our cautious view on the economy’s long-term growth prospects. The key concern remains the ability of “Abenomics” to overcome the substantial structural challenges of a declining population, rigid labor market, and elevated debt levels. Within our Japanese holdings, we increasingly prefer beneficiaries from a weaker yen, such as exporters and multinationals that benefit from favorable currency translation as well as those leveraged to regions where growth prospects are improving, such as the U.S. In terms of China, we expect a mild slowdown in the economy in 2017, with debt levels and capital outflow concerns likely to linger. In addition, potential rising trade tensions with the incoming U.S. Administration may also limit near-term upside. However, looking beyond near-term cautiousness, we are maintaining our China Internet exposure despite its recent underperformance, as growth remains solid and the outlook is positive. We expect these stocks to outperform the market, even if growth concerns persist.

As we have often mentioned, the one common theme throughout each Sit Equity Mutual Fund is an emphasis on quality. Quality, from our perspective, refers to the sustainability of business models, strong balance sheets, and the quality of earnings, with generation of free cash flow an important indicator. In addition, the experience and track record of management teams is also an important consideration, as navigating a rapidly changing environment is sure to bring about both opportunities and challenges.

With best wishes,

 

LOGO

Roger J. Sit

Chairman, President, CEO and Global CIO

 

 

 

DECEMBER 31, 2016

  

 

3

 

Sit Balanced Fund

 

 

OBJECTIVE & STRATEGY

The dual objectives of the Sit Balanced Fund are to seek long-term growth of capital consistent with the preservation of principal and to provide regular income. It pursues its objectives by investing in a diversified portfolio of stocks and bonds. The Fund may emphasize either equity securities or fixed-income securities, or hold equal amounts of each, dependent upon the Adviser’s analysis of market, financial and economic conditions.

The Fund’s permissible investment allocation is: 35-65% in equity securities and 35-65% in fixed-income securities. At all times at least 25% of the fixed-income assets will be invested in fixed-income senior securities.

 

 

 

The Sit Balanced Fund’s six-month return was +3.37%, while the S&P 500® Index gained +7.82% and the Bloomberg Barclays Capital Aggregate Bond Index decreased -2.53% over the period.

Stocks and bond prices went in opposite directions, particularly after the election, as markets quickly determined that pro-growth policies, which could lift the economy (and corporate earnings) out of slow-growth mode, are on the way. A stronger dollar and higher interest rates (and lower bond prices) are near-term consequences of this optimism, representing headwinds for investors to consider until policy actions take hold. While the path may be choppy, we are optimistic that the combination of lower corporate and personal tax rates, a reduction in regulations, and fiscal stimulus will be positive for equity markets once it becomes clear that corporate earnings will step higher. Within the equity portion of the Fund, we have recently added to several sectors (including financials) that stand to benefit from faster growth, while maintaining a focus on quality with some attractively-valued, more defensive holdings should policy delays or headwinds to growth emerge. The Fund’s largest sector weightings are technology services, health technology and finance. The equity portion of the Fund underperformed the S&P 500® Index over the past six months, driven by poor stock selection in the commercial services sector and an underweighted position in the finance sector, which outperformed significantly over the period.

With respect to fixed income markets, interest rates increased meaningfully over the second half of 2016, as the unexpected November presidential election result produced a new market consensus for improved economic growth. Interestingly, the rise in bond yields did the heavy lifting for the Federal Reserve, paving the way for them to raise the fed funds rate target a quarter percent to 0.50% in December. The combined result was negative returns for most bonds (e.g., 30-year Treasury bond producing a 14% loss in the fourth quarter alone). Looking ahead, we believe the Federal Reserve is in the process of gradually moving towards a “neutral” fed funds rate that will neither be considered stimulative nor restrictive to economic policy, with additional rate hikes at a relatively slow, steady pace over time. In terms of performance over the second half of the year, we estimate the fixed income portion of the Fund generated a return of -1.5%, which compares favorably to the -2.5% return for the Bloomberg Barclays Aggregate Bond Index. A meaningful income advantage relative to the benchmark continues to be the primary driver of returns.

HYPOTHETICAL GROWTH OF $10,000

 

LOGO

The chart above illustrates the total value of a hypothetical $10,000 investment in the Fund over the past 10 years as compared to the performance of the S&P 500® Index and the Bloomberg Barclays Aggregate Bond Index. Past performance does not guarantee future results. Returns include the reinvestment of distributions. The chart does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

1 S&P 500® Index is an unmanaged capitalization-weighted index that measures the performance of 500 widely held common stocks of large-cap companies. It is not possible to invest directly in an index. This is the primary index for the equity portion of the Fund.

2 Bloomberg Barclays Aggregate Bond Index is an unmanaged market value-weighted index which measures the performance of investment grade debt securities with maturities of at least one year. This is the primary index for the fixed income portion of the Fund.

 

The portfolio also benefitted from a shorter-than-benchmark duration as interest rates rose. Lastly, an overweight allocation in corporate bonds also benefitted returns, as improving expectations for corporate profits resulted in this being one of the best performing sectors for the period.

The stock/fixed income allocation is currently 63.3% equities, 34.2% fixed income, and 2.5% cash and equivalents. We expect to continue an above-average allocation to equities, based our view that stocks, as a whole, are somewhat more attractive than bonds, given our expectation that economic growth may begin to improve.

Roger J. Sit

Bryce A. Doty

Portfolio Managers

 

 

 

4

  

 

SIT MUTUAL FUNDS SEMI-ANNUAL REPORT

 

    

 

 

 

COMPARATIVE RATES OF RETURNS

 

as of December 31, 2016

 

     

Sit

Balanced

Fund

     

S&P 500®

Index 1

     

Bloomberg

Barclays

Aggregate

Bond

Index 2

  

Six Month

      3.37%           7.82%           -2.53%     

One Year

      4.60              11.96              2.65        

Five Year

      8.72              14.66              2.23        

Ten Year

      5.48              6.95              4.34        

Since Inception

(12/31/93)

      6.71              9.17              5.38        

 

Performance figures are historical and do not guarantee future results. Investment returns and principal value will vary, and you may have a gain or loss when you sell shares. Current performance may be lower or higher than the performance data quoted. Contact the Fund for performance data current to the most recent month-end. Returns include changes in share price as well as reinvestment of all dividends and capital gains. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Management fees and administrative expenses are included in the Fund’s performance. Returns for periods greater than one year are compounded average annual rates of return.

1 S&P 500® Index is an unmanaged capitalization-weighted index that measures the performance of 500 widely held common stocks of large-cap companies. It is not possible to invest directly in an index.

2 Bloomberg Barclays Aggregate Bond Index is an unmanaged market value-weighted index which measures the performance of investment grade debt securities with maturities of at least one year.

PORTFOLIO SUMMARY

 

 

Net Asset Value 12/31/16:

    $20.91 Per Share    

Net Asset Value 6/30/16:

    $20.40 Per Share    

Total Net Assets:

    $24.6   Million       

TOP HOLDINGS

 

Top Equity Holdings:

1. Alphabet, Inc.

2. Apple, Inc.

3. Visa, Inc.

4. Microsoft Corp.

5. JPMorgan Chase & Co.

Top Fixed Income Holdings:

1. U.S. Treasury Note, 1.75%, 3/31/22

2. U.S. Treasury Strip, 2.59%, 5/15/44

3. FHLMC, 5.00%, 10/1/43

4. BlackRock Income Trust

5. INVISTA Finance, LLC, 4.25%, 10/15/19

 

Based on total net assets as of December 31, 2016. Subject to change.

FUND DIVERSIFICATION

 

 

LOGO

Based on total net assets as of December 31, 2016. Subject to change.

 

 

 

DECEMBER 31, 2016

  

 

5

    

   

SCHEDULE OF INVESTMENTS (Unaudited)

December 31, 2016

Sit Balanced Fund

 

 

  
  Quantity    Name of Issuer    Fair Value ($)  

 

  

Common Stocks - 63.3%

  

    Commercial Services - 1.1%

  

1,225   

Equifax, Inc.

      144,832   
3,150   

Nielsen Holdings, PLC

      132,142   
     

 

 

  
        276,974   
     

 

 

  

    Communications - 1.8%

  

850   

SBA Communications Corp. *

      87,771   
6,500   

Verizon Communications, Inc.

      346,970   
     

 

 

  
        434,741   
     

 

 

  

    Consumer Durables - 0.7%

  

1,450   

Electronic Arts, Inc. *

      114,202   
600   

Genuine Parts Co.

      57,324   
     

 

 

  
        171,526   
     

 

 

  

    Consumer Non-Durables - 4.2%

  

2,875   

Estee Lauder Cos., Inc.-Class A

      219,909   
3,825   

NIKE, Inc.

      194,425   
2,925   

PepsiCo, Inc.

      306,043   
1,150   

Philip Morris International, Inc.

      105,214   
2,500   

Procter & Gamble Co.

      210,200   
     

 

 

  
        1,035,791   
     

 

 

  

    Consumer Services - 5.8%

  

2,450   

CBS Corp.

      155,869   
1,900   

Marriott International, Inc.

      157,092   
6,200   

Starbucks Corp.

      344,224   
1,700   

Time Warner, Inc.

      164,101   
6,150   

Visa, Inc.

      479,823   
1,125   

Walt Disney Co.

      117,248   
     

 

 

  
        1,418,357   
     

 

 

  

    Electronic Technology - 6.3%

  

4,350   

Apple, Inc.

      503,817   
9,250   

Applied Materials, Inc.

      298,498   
1,925   

Broadcom, Ltd.

      340,282   
4,000   

Ciena Corp. *

      97,640   
6,700   

Intel Corp.

      243,009   
1,025   

Skyworks Solutions, Inc.

      76,526   
     

 

 

  
        1,559,772   
     

 

 

  

    Energy Minerals - 2.7%

  

650   

Chevron Corp.

      76,505   
2,250   

Continental Resources, Inc. *

      115,965   
850   

EOG Resources, Inc.

      85,935   
3,800   

Marathon Petroleum Corp.

      191,330   
2,825   

Occidental Petroleum Corp.

      201,225   
     

 

 

  
        670,960   
     

 

 

  

    Finance - 7.8%

  

850   

Ameriprise Financial, Inc.

      94,299   
3,800   

Brixmor Property Group, Inc.

      92,796   
1,250   

Chubb, Ltd.

      165,150   

 

  
  Quantity    Name of Issuer    Fair Value ($)  

 

  
1,175   

Goldman Sachs Group, Inc.

      281,354   
4,000   

Invesco, Ltd.

      121,360   
4,575   

JPMorgan Chase & Co.

      394,777   
2,600   

KeyCorp

      47,502   
1,600   

Marsh & McLennan Cos., Inc.

      108,144   
6,050   

Synchrony Financial

      219,434   
550   

T Rowe Price Group, Inc.

      41,393   
3,150   

US Bancorp

      161,816   
3,450   

Wells Fargo & Co.

      190,130   
     

 

 

  
        1,918,155   
     

 

 

  

    Health Services - 1.8%

  

2,000   

Centene Corp. *

      113,020   
550   

Humana, Inc.

      112,216   
1,400   

UnitedHealth Group, Inc.

      224,056   
     

 

 

  
        449,292   
     

 

 

  

    Health Technology - 7.5%

  

2,550   

AbbVie, Inc.

      159,681   
550   

Alexion Pharmaceuticals, Inc. *

      67,293   
625   

Allergan, PLC *

      131,256   
125   

Biogen, Inc. *

      35,448   
1,500   

Celgene Corp. *

      173,625   
2,150   

Gilead Sciences, Inc.

      153,962   
1,000   

Incyte Corp. *

      100,270   
2,100   

Johnson & Johnson

      241,941   
4,650   

Medtronic, PLC

      331,220   
5,650   

Pfizer, Inc.

      183,512   
1,000   

Thermo Fisher Scientific, Inc.

      141,100   
1,125   

Zimmer Holdings, Inc.

      116,100   
     

 

 

  
        1,835,408   
     

 

 

  

    Industrial Services - 0.4%

  

1,150   

Schlumberger, Ltd.

      96,542   
     

 

 

  

    Process Industries - 1.2%

  

2,425   

Ecolab, Inc.

      284,258   
     

 

 

  

    Producer Manufacturing - 3.9%

  

825   

3M Co.

      147,320   
525   

Danaher Corp.

      40,877   
1,200   

Delphi Automotive, PLC

      80,820   
2,450   

General Electric Co.

      77,420   
1,850   

Honeywell International, Inc.

      214,322   
1,800   

Raytheon Co.

      255,600   
1,400   

United Technologies Corp.

      153,468   
     

 

 

  
        969,827   
     

 

 

  

    Retail Trade - 4.3%

  

145   

Amazon.com, Inc. *

      108,731   
1,325   

CVS Health Corp.

      104,556   
2,375   

Home Depot, Inc.

      318,440   
1,600   

Macy’s, Inc.

      57,296   
2,300   

Target Corp.

      166,129   
 

 

See accompanying notes to financial statements.

 

  

 

6

  

 

SIT MUTUAL FUNDS SEMI-ANNUAL REPORT

    

   

 

    

    

 

    

 

 

  
Quantity /
Principal
Amount ($)		    Name of Issuer    Fair Value ($)  

 

  
2,900   

TJX Cos., Inc.

      217,877   
340   

Ulta Salon Cosmetics & Fragrance, Inc. *

      86,680   
     

 

 

  
        1,059,709   
     

 

 

  

    Technology Services - 10.4%

   
1,600   

Accenture, PLC

      187,408   
3,700   

Adobe Systems, Inc. *

      380,915   
450   

Alphabet, Inc.-Class A *

      356,603   
255   

Alphabet, Inc.-Class C *

      196,814   
1,250   

ANSYS, Inc. *

      115,613   
3,375   

Cognizant Technology Solutions Corp. *

      189,101   
2,525   

Facebook, Inc. *

      290,501   
7,575   

Microsoft Corp.

      470,710   
2,750   

PayPal Holdings, Inc.

      108,542   
185   

priceline.com, Inc. *

      271,221   
     

 

 

  
        2,567,428   
     

 

 

  

    Transportation - 2.9%

   
5,575   

Delta Air Lines, Inc.

      274,234   
925   

FedEx Corp.

      172,235   
1,450   

Union Pacific Corp.

      150,336   
900   

United Parcel Service, Inc.

      103,176   
     

 

 

  
        699,981   
     

 

 

  

    Utilities - 0.5%

   
975   

NextEra Energy, Inc.

      116,474   
     

 

 

  

Total Common Stocks
(cost: $11,543,421)

      15,565,195   
     

 

 

  

Bonds - 32.1%

   

    Asset-Backed Securities - 0.9%

   
2,165   

Centex Home Equity,
2004-D AF4, 5.18%, 6/25/32 14

      2,162   
6,256   

Citifinancial Mortgage Securities, Inc.,
2004-1 AF3, 4.27%, 4/25/34 14

      6,284   
8,184   

Conseco Finance, 2001-D M1,
2.05%, 11/15/32 1

      8,122   
8,223   

Conseco Financial Corp.,
1997-7 A6, 6.76%, 7/15/28

      8,333   
74,989   

Credit Suisse First Boston Mortgage Corp.,
2005-AGE1 M3, 1.41%, 2/25/32 1

      73,259   
23,783   

HouseHold Home Equity Loan Trust,
2007-2 A4, 0.86%, 7/20/36 1

      23,681   
6,747   

Irwin Home Equity Corp.,
2005-1 M1, 5.92%, 6/25/35 14

      6,812   
18,352   

New Century Home Equity Loan Trust,
2005-A A4W, 4.88%, 8/25/35 14

      18,999   
58,956   

Park Place Securities, Inc.,
2005-WHQ3 M2, 1.43%, 6/25/35 1

      58,886   
4,126   

Residential Funding Mortgage Securities II, Inc.,
2003-HI2 A6, 5.26%, 7/25/28 14

      4,117   
     

 

 

  
        210,655   
     

 

 

  

 

  

    

Principal
Amount ($)

    Name of Issuer    Fair Value ($)  

 

  

    Collateralized Mortgage Obligations - 5.2%

   
  

Fannie Mae:

   
48,173   

2004-T1 1A1, 6.00%, 1/25/44

      53,863   
26,828   

1999-17 C, 6.35%, 4/25/29

      29,595   
37,218   

2001-82 ZA, 6.50%, 1/25/32

      41,905   
13,171   

2009-30 AG, 6.50%, 5/25/39

      14,330   
5,732   

2013-28 WD, 6.50%, 5/25/42

      6,492   
28,341   

2004-W9 2A1, 6.50%, 2/25/44

      32,596   
76,444   

2015-88 CJ, 6.50%, 7/25/44

      86,568   
4,289   

2010-108 AP, 7.00%, 9/25/40

      4,820   
13,122   

2004-T3, 1A3, 7.00%, 2/25/44

      15,089   
  

Freddie Mac:

   
43,997   

K014 1A, 2.79%, 10/25/20

      44,713   
37,167   

4293 BA, 5.35%, 10/15/47 1

      39,763   
38,694   

2102 Z, 6.00%, 12/15/28

      43,241   
40,041   

2122 ZE, 6.00%, 2/15/29

      43,120   
47,010   

2980 QA, 6.00%, 5/15/35

      53,378   
22,535   

2283 K, 6.50%, 12/15/23

      24,607   
37,356   

2357 ZJ, 6.50%, 9/15/31

      42,395   
33,445   

T-59 1A1, 6.50%, 10/25/43

      39,211   
72,753   

4520 HM, 6.50%, 8/15/45

      86,083   
92,770   

1142 IA, 7.00%, 10/15/21

      101,001   
9,072   

3946 KW, 7.00%, 11/15/29

      9,602   
40,107   

3704 CT, 7.00%, 12/15/36

      46,503   
29,171   

2238 PZ, 7.50%, 6/15/30

      33,216   
  

Government National Mortgage Association:

  

61,059   

2015-80 BA, 6.98%, 6/20/45 1

      71,039   
60,967   

2014-69 W, 7.26%, 11/20/34 1

      71,982   
52,575   

2013-133 KQ, 7.37%, 8/20/38

      62,398   
34,366   

2005-74 HA, 7.50%, 9/16/35

      38,402   
48,905   

New Residential Mortgage Loan Trust,
2016-2A B3, 5.70%, 11/26/35 1, 4

      49,001   
  

Sequoia Mortgage Trust:

   
30,918   

2013-3 A2, 2.50%, 3/25/43 1

      28,981   
16,559   

2012-4 A2, 3.00%, 9/25/42 1

      16,325   
  

Vendee Mortgage Trust:

   
28,288   

2008-1 B, 7.43%, 3/15/25 1

      31,831   
22,746   

1994-2 2, 8.64%, 5/15/24 1

      24,663   
     

 

 

  
        1,286,713   
     

 

 

  

    Corporate Bonds - 13.4%

   
25,000   

Activision Blizzard, Inc., 6.13%, 9/15/23 4

      27,353   
25,000   

Affiliated Managers Group, Inc., 4.25%, 2/15/24

      25,131   
59,655   

Aircraft Certificate Owner Trust 2003,
7.00%, 9/20/22 4

      62,936   
50,000   

Alphabet, Inc., 3.63%, 5/19/21

      53,024   
39,429   

American Airlines 2013-2 Class B Trust,
5.60%, 7/15/20 4

      40,908   
50,000   

American Equity Investment Life Holding Co.,
6.63%, 7/15/21

      52,125   
50,000   

American Express Credit Corp., 2.38%, 5/26/20

      49,972   
50,000   

Ameriprise Financial, Inc., 3.70%, 10/15/24

      51,089   
 

 

See accompanying notes to financial statements.

 

  

 

DECEMBER 31, 2016

  

 

7

    

   

SCHEDULE OF INVESTMENTS (Unaudited)

December 31, 2016

Sit Balanced Fund (Continued)

 

 

  

    

Principal
Amount ($)

    Name of Issuer    Fair Value ($)  

 

  
25,000   

Anheuser-Busch InBev Finance, Inc., 3.65%,
2/1/26

      25,380   
25,000   

Aspen Insurance Holdings, Ltd., 4.65%,
11/15/23

      25,731   
100,000   

Assured Guaranty US Holdings, Inc.,
7.00%, 6/1/34

      109,282   
50,000   

Bank One Corp. (Subordinated), 7.63%,
10/15/26

      63,508   
25,000   

Bank One Michigan (Subordinated), 8.25%,
11/1/24

      31,983   
25,000   

Basell Finance Co. BV, 8.10%, 3/15/27 4

      32,685   
25,000   

Berkshire Hathaway Finance Corp., 3.00%,
5/15/22

      25,473   
50,000   

Berkshire Hathaway, Inc., 3.13%, 3/15/26

      49,675   
  

BlackRock, Inc.:

   
25,000   

3.50%, 3/18/24

      25,892   
50,000   

4.25%, 5/24/21

      53,807   
  

Burlington Northern Santa Fe, LLC:

   
25,000   

7.00%, 12/15/25

      31,867   
25,000   

7.08%, 5/13/29

      32,139   
50,000   

Caterpillar Financial Services Corp.,
2.50%, 11/13/20

      50,029   
75,000   

Citigroup, Inc., 3.50%, 2/27/33 14

      72,966   
25,000   

Comcast Corp., 2.75%, 3/1/23

      24,821   
50,000   

ConocoPhillips Co., 4.95%, 3/15/26

      55,200   
42,516   

Continental Airlines 2000-1 Class A-1 Trust,
8.05%, 11/1/20

      47,246   
20,693   

Continental Airlines 2012-1 Class A Trust,
4.15%, 4/11/24

      21,262   
25,000   

Costco Wholesale Corp., 2.25%, 2/15/22

      24,779   
39,555   

Delta Air Lines 2007-1 Class A Trust,
6.82%, 8/10/22

      45,488   
54,344   

Doric Nimrod Air Alpha 2012-1 Class A Trust, 5.13%, 11/30/22 4

      56,586   
50,916   

Doric Nimrod Air Alpha 2013-1 Trust, 5.25%, 5/30/23 4

      53,080   
25,000   

Dr. Pepper Snapple Group, Inc., 2.53%,
11/15/21

      24,854   
50,000   

Eaton Vance Corp., 3.63%, 6/15/23

      50,779   
80,000   

Exxon Mobil Corp., 4.11%, 3/1/46

      81,942   
25,000   

General Electric Co., 7.50%, 8/21/35

      33,498   
43,364   

Hawaiian Airlines 2013-1 Class A, 3.90%,
1/15/26

      44,285   
51,000   

Ingersoll-Rand Co., 7.20%, 6/1/25

      57,617   
25,000   

Intel Corp., 3.10%, 7/29/22

      25,708   
  

Invesco Finance, PLC:

   
25,000   

3.13%, 11/30/22

      25,184   
50,000   

3.75%, 1/15/26

      50,669   
150,000   

INVISTA Finance, LLC, 4.25%, 10/15/19 4

      148,709   
25,000   

ITT, LLC, 7.40%, 11/15/25

      31,660   
50,000   

JPMorgan Chase & Co., 3.88%, 2/1/24

      51,819   
25,000   

Kaiser Foundation Hospitals, 3.50%, 4/1/22

      25,799   
25,000   

KKR Group Finance Co., LLC, 6.38%,
9/29/20 4

      28,156   

 

  

    

Principal
Amount ($)

    Name of Issuer    Fair Value ($)  

 

  
50,000   

Loews Corp., 3.75%, 4/1/26

      50,826   
25,000   

Lowe’s Companies, Inc., 7.59%, 6/18/27

      30,429   
125,000   

Manufacturers & Traders Trust Co.
(Subordinated), 1.57%, 12/1/21 1

      122,656   
50,000   

Medtronic, Inc., 2.50%, 3/15/20

      50,560   
25,000   

Microsoft Corp., 2.00%, 8/8/23

      23,895   
40,000   

Northern States Power Co., 7.13%, 7/1/25

      49,956   
31,048   

Northwest Airlines 2007-1 A Trust,
7.03%, 11/1/19

      34,656   
50,000   

OM Asset Management, PLC, 4.80%, 7/27/26

      47,373   
25,000   

PACCAR Financial Corp., 1.65%, 8/11/21

      24,019   
25,000   

PepsiCo, Inc., 1.70%, 10/6/21

      24,287   
25,000   

Pfizer, Inc., 5.80%, 8/12/23

      29,476   
50,000   

Progressive Corp. (Subordinated),
6.70%, 6/15/37 1

      48,875   
75,000   

Raytheon Co., 4.88%, 10/15/40

      84,339   
50,000   

Rockwell Automation, Inc., 2.88%, 3/1/25

      48,978   
50,000   

Rockwell Collins, Inc., 3.70%, 12/15/23

      51,183   
75,000   

Security Benefit Life Insurance Co.
(Subordinated), 7.45%, 10/1/33 4

      83,660   
50,000   

Security Capital Group, Inc., 7.70%, 6/15/28

      65,949   
46,205   

Spirit Airlines 2015-1B Trust, 4.45%, 4/1/24

      47,014   
50,000   

State Street Corp., 7.35%, 6/15/26

      64,002   
75,000   

Symetra Financial Corp., 4.25%, 7/15/24

      74,110   
38,079   

US Airways 2001-1C Trust (Subordinated),
7.35%, 3/20/22

      41,982   
25,000   

US Bancorp, 2.95%, 7/15/22

      25,148   
25,000   

US Bancorp (Subordinated), 3.10%, 4/27/26

      24,339   
2,000   

Verizon Communications, 5.90%, 2/15/54

      52,180   
15,107   

Virgin Australia 2013-1A Trust,
5.00%, 10/23/23 4

      15,787   
50,000   

Wells Fargo & Co. (Subordinated), 4.10%,
6/3/26

      50,659   
25,000   

Wyeth, LLC, 5.95%, 4/1/37

      31,461   
     

 

 

  
        3,299,895   
     

 

 

  

    Federal Home Loan Mortgage Corporation - 1.4%

   
152,209   

5.00%, 10/1/43

      169,849   
6,151   

6.00%, 10/1/21

      6,451   
57,903   

6.50%, 2/1/22

      62,064   
39,904   

7.50%, 7/1/29

      46,221   
13,005   

7.50%, 11/1/36

      15,833   
23,554   

8.00%, 2/1/34

      28,079   
3,409   

8.38%, 5/17/20

      3,549   
     

 

 

  
        332,046   
     

 

 

  

    Federal National Mortgage Association - 3.0%

   
33,187   

5.00%, 2/1/33

      34,200   
131,449   

5.50%, 10/1/33

      148,046   
95,773   

6.00%, 2/1/38

      109,057   
53,211   

6.14%, 11/1/43

      59,217   
64,082   

6.50%, 9/1/27

      72,735   
96,582   

6.50%, 10/1/36

      109,269   
15,372   

7.00%, 1/1/32

      16,265   
 

 

See accompanying notes to financial statements.

 

  

 

8

  

 

SIT MUTUAL FUNDS SEMI-ANNUAL REPORT

    

   

 

    

    

 

    

 

 

  

    

Principal
Amount ($)

    Name of Issuer    Fair Value ($)  

 

  
21,526   

7.00%, 3/1/33

      24,712   
15,106   

7.00%, 12/1/36

      18,013   
26,844   

8.00%, 6/1/24

      29,902   
36,420   

8.00%, 1/1/31

      39,077   
28,280   

8.00%, 2/1/31

      34,876   
5,905   

8.47%, 7/15/26

      6,704   
36,226   

8.50%, 10/1/30

      42,630   
     

 

 

  
        744,703   
     

 

 

  

    Government National Mortgage Association - 2.1%

   
76,374   

5.75%, 12/15/22

      82,647   
70,745   

6.00%, 4/15/29

      82,200   
42,932   

6.50%, 11/20/38

      49,558   
16,530   

7.00%, 12/15/24

      17,914   
24,173   

7.00%, 11/20/27

      28,077   
60,529   

7.00%, 9/20/29

      70,341   
24,011   

7.00%, 9/20/38

      27,299   
59,389   

7.50%, 4/20/32

      66,286   
22,692   

8.00%, 7/15/24

      24,875   
64,560   

8.38%, 3/15/31

      66,934   
     

 

 

  
        516,131   
     

 

 

  

    Taxable Municipal Securities - 3.7%

   
50,000   

Alaska Muni Bond Bank Auth., 5.99%, 9/1/25

      53,987   
50,000   

Banning Redevelopment Agency Successor
Agency, 3.51%, 9/1/31

      46,848   
75,000   

City of Tooele City UT, 2.32%, 12/1/24

      70,930   
40,000   

Kentucky Housing Corp., 3.50%, 1/1/40

      40,396   
50,000   

Los Angeles Comm. Red. Agy.,
8.00%, 9/1/38

      62,798   
38,398   

Louisiana Housing Corp., 3.05%, 12/1/38

      37,681   
50,000   

Louisiana Public Facilities Auth.,
4.50%, 7/1/43

      46,311   
50,000   

Macomb Interceptor Drain Drainage District,
5.50%, 5/1/30

      51,654   
50,000   

Massachusetts Edu. Fin. Auth., 4.00%, 1/1/32

      49,666   
100,000   

Mississippi Development Bank,
2.54%, 8/1/24

      95,729   
61,000   

Multistate Liquidating Trust No. 1, 3.11%,
12/15/28 4,

    
 		 17
57,479		   
  
75,000   

Northern Illinois Muni Power Agy., 6.86%,
1/1/39

      89,012   
50,000   

Soledad Redevelopment Agency, 6.13%, 12/1/32

      52,237   
150,000   

Tennessee Valley Auth., 3.67%, 1/15/30 6

      93,633   
65,000   

Texas St. Pub. Fin. Auth. Charter Sch. Fin.,
8.75%, 8/15/27

      69,735   
     

 

 

  
        918,096   
     

 

 

  

    U.S. Government / Federal Agency Securities - 1.3%

   
300,000   

U.S. Treasury Note, 1.75%, 3/31/22

      296,004   
50,000   

U.S. Treasury Strips, 3.16%, 11/15/45 6

      20,124   
     

 

 

  
        316,128   
     

 

 

  

 

  

Principal
Amount ($)

Quantity

    Name of Issuer    Fair Value ($)  

 

  

    U.S. Treasury / Federal Agency Securities - 1.1%

  

  

U.S. Treasury Strips:

   
50,000   

2.04%, 2/15/27 6

      38,791   
525,000   

2.59%, 5/15/44 6

      222,766   
     

 

 

  
        261,557   
     

 

 

  

Total Bonds
(cost: $8,013,507)

      7,885,924   
     

 

 

  

Investment Companies - 2.1%

   
6,513   

BlackRock Enhanced Government Fund

      85,972   
24,300   

BlackRock Income Trust

      153,819   
8,700   

Duff & Phelps Utility and Corporate Bond Trust

      82,128   
27,600   

MFS Intermediate Income Trust

      122,544   
16,352   

Putnam Premier Income Trust

      81,269   
     

 

 

  

Total Investment Companies
(cost: $552,701)

      525,732   
     

 

 

  

Short-Term Securities - 2.4%

   
591,726   

Fidelity Instl. Money Mkt. Govt. Fund, 0.39%

   

Total Short-Term Securities
(cost: $591,726)

      591,726   
     

 

 

  

Total Investments in Securities - 99.9%
(cost: $20,701,355)

      24,568,577   

Other Assets and Liabilities, net - 0.1%

      29,012   
     

 

 

  

Total Net Assets - 100.0%

      $24,597,589   
     

 

 

  

 

 

* Non-income producing security.

 

1  Variable rate security. Rate disclosed is as of December 31, 2016.

 

4  144A Restricted Security. The total value of such securities as of December 31, 2016 was $656,340 and represented 2.7% of net assets. These securities have been determined to be liquid by the Adviser in accordance with guidelines established by the Board of Directors.

 

6  Zero coupon or convertible capital appreciation bond, for which the rate disclosed is either the effective yield on purchase date or the coupon rate to be paid upon conversion to coupon paying, respectively.

 

14  Step Coupon: A bond that pays an initial coupon rate for the first period and then a higher coupon rate for the following periods. Rate disclosed is as of December 31, 2016.

 

17  Security that is either an absolute and unconditional obligation of the United States Government or is collateralized by securities, loans, or leases guaranteed by the U.S. Government or its agencies or instrumentalities.

Numeric footnotes not disclosed are not applicable to this Schedule of Investments.

LLC — Limited Liability Company

PLC — Public Limited Company

 

 

See accompanying notes to financial statements.

 

  

 

DECEMBER 31, 2016

  

 

9

    

   

SCHEDULE OF INVESTMENTS (Unaudited)

December 31, 2016

Sit Balanced Fund (Continued)

    

    

 

A summary of the levels for the Fund’s investments as of December 31, 2016 is as follows (see Note 2 - significant accounting policies in the notes to financial statements):

 

     Investment in Securities
     Level 1
Quoted
Price ($)		    Level 2
Other significant
observable inputs ($)		   

Level 3

Significant
unobservable inputs ($)

    Total ($)

Common Stocks **

        15,565,195          —          —          15,565,195  

Asset-Backed Securities

        —          210,655          —          210,655  

Collateralized Mortgage Obligations

        —          1,286,713          —          1,286,713  

Corporate Bonds

        —          3,299,895          —          3,299,895  

Federal Home Loan Mortgage Corporation

        —          332,046          —          332,046  

Federal National Mortgage Association

        —          744,703          —          744,703  

Government National Mortgage Association

        —          516,131          —          516,131  

Taxable Municipal Securities

        —          918,096          —          918,096  

U.S. Government / Federal Agency Securities

        —          316,128          —          316,128  

U.S. Treasury / Federal Agency Securities

        —          261,557          —          261,557  

Investment Companies

        525,732          —          —          525,732  

Short-Term Securities

        591,726          —          —          591,726  

Total:

        16,682,653          7,885,924          —          24,568,577  

 

**  For equity securities categorized in a single level, refer to the Schedule of Investments for further breakdown.

For the reporting period, there were no transfers between levels 1, 2 and 3.

 

See accompanying notes to financial statements.

 

  

 

10

  

 

SIT MUTUAL FUNDS SEMI-ANNUAL REPORT

    

 

    

    

 

 

[This page intentionally left blank.]

 

 

 

 

DECEMBER 31, 2016

  

 

11

 

Sit Dividend Growth Fund - Class I and Class S

 

 

OBJECTIVE & STRATEGY

The objective of the Sit Dividend Growth Fund is to provide current income that exceeds the dividend yield of the S&P 500® Index and that grows over a period of years. Secondarily, the Fund seeks long-term capital appreciation.

The Fund seeks to achieve its objectives by investing, under normal market conditions, at least 80% of its net assets in dividend-paying common stocks. The Fund may invest the balance of its assets in preferred stocks, convertible bonds, and U.S. Treasury securities.

 

 

 

The Sit Dividend Growth Fund Class I posted a +6.27% return for the last six months of 2016, compared to the +7.82% return for the S&P 500® Index. The Fund’s gross dividend yield (before deduction of Fund expenses) is 2.52% compared to the 2.08% of the S&P 500® Index.

U.S. stocks posted solid returns during the second half of 2016, fueled by a sharp rally following the presidential election. Markets have risen in hopes that an improving economic and corporate earnings backdrop will emerge from President-elect Trump’s pro-growth policies, including lower tax rates, fiscal stimulus and deregulation. While there is clearly a risk that the market may be expecting too much, too soon, we believe there could be significant opportunities for investors if growth initiatives are pushed forward. Certainly, tax, spending, and regulatory policies will likely have very different impacts across companies and sectors. Our recent portfolio positioning, therefore, has been based on identifying likely “winners” once policies are enacted. For example, we have increased positions in financials, transportation and producer manufacturing, as these are cyclical sectors that should see immediate benefits of policy changes and an uptick in economic growth. Conversely, we have reduced our commitment to the health technology sector, given the lack of policy upside, currency pressures, and concerns over drug pricing. Regardless of sector, we remain focused on companies that have strong balance sheets, generate consistent growth in earnings and cash flow, and maintain a commitment to increasing dividends to shareholders over the longer term. To this point, 81 out of 85 companies held in the Fund increased their dividends over the past twelve months, with an average increase of just over +9%.

The Fund’s defensive positioning relative to the S&P 500® Index negatively impacted performance over the second half of 2016. Poor stock selection and overweighting the lagging health care sector was a key detractor, while performance in the finance sector was weighed down by overweighting REITs and underweighting banks and life insurers, which surged during the period with the sharp increase in interest rates. In terms of individual stocks, Medtronic, CVS Health,

HYPOTHETICAL GROWTH OF $10,000

 

LOGO

The chart above illustrates the total value of a hypothetical $10,000 investment in the Fund over the past 10 years as compared to the performance of the S&P 500® Index. Past performance does not guarantee future results. Returns include the reinvestment of distributions. The chart does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

1 S&P 500® Index is an unmanaged capitalization-weighted index that measures the performance of 500 widely held common stocks of large-cap companies. It is not possible to invest directly in an index. This is the Fund’s primary index.

 

Nielsen Holdings, Teva Pharmaceutical Industries and Life Storage were among the underperformers during the period. The Fund benefitted from strong stock selection in process industries and technology services sectors. Top individual performers included KeyCorp, Applied Materials, Synchrony Financial, Delta Air Lines and Scotts Miracle-Gro.

We continue to believe that dividend-paying growth stocks held in the Fund remain attractively valued relative to current dividend yields and growth rates.

Roger J. Sit

Kent L. Johnson

Michael J. Stellmacher

Portfolio Managers

 

 

 

12

  

 

SIT MUTUAL FUNDS SEMI-ANNUAL REPORT

 

    

 

 

 

COMPARATIVE RATES OF RETURNS

 

as of December 31, 2016

 

     Sit Dividend    
     Growth Fund    
             S&P 500®
      Class I   Class S   Index 1

Six Month

        6.27 %       6.16 %       7.82 %

One Year

        10.73         10.49         11.96  

Five Year

        12.67         12.40         14.66  

Ten Year

        8.10         7.83         6.95  

Since Inception - Class I

(12/31/03)

        9.16         n/a         7.73  

Since Inception - Class S

(3/31/06)

        n/a         8.32         7.49  

 

Performance figures are historical and do not guarantee future results. Investment returns and principal value will vary, and you may have a gain or loss when you sell shares. Current performance may be lower or higher than the performance data quoted. Contact the Fund for performance data current to the most recent month-end. Returns include changes in share price as well as reinvestment of all dividends and capital gains. Returns do not reflect the deduction of the 2% redemption fee imposed if shares are redeemed or exchanged within 30 calendar days from their date of purchase. If imposed, the fee would reduce the performance quoted. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Management fees and administrative expenses are included in the Fund’s performance. Returns for periods greater than one year are compounded average annual rates of return.

1 S&P 500® Index is an unmanaged capitalization-weighted index that measures the performance of 500 widely held common stocks of large-cap companies. It is not possible to invest directly in an index.

PORTFOLIO SUMMARY

 

 

Class I:

   

Net Asset Value 12/31/16:

      $15.59 Per Share   

Net Asset Value 6/30/16:

      $15.82 Per Share   

Total Net Assets:

      $927.3 Million   

Class S:

   

Net Asset Value 12/31/16:

      $15.54 Per Share   

Net Asset Value 6/30/16:

      $15.76 Per Share   

Total Net Assets:

      $67.4   Million   

Weighted Average Market Cap:

      $111.7 Billion   

TOP 10 HOLDINGS

 

  1. Microsoft Corp.

  2. Verizon Communications, Inc.

  3. Johnson & Johnson

  4. JPMorgan Chase & Co.

  5. Intel Corp.

  6. Home Depot, Inc.

  7. Broadcom, Ltd.

  8. Apple, Inc.

  9. UnitedHealth Group, Inc.

10. Pfizer, Inc.

 

Based on total net assets as of December 31, 2016. Subject to change.

FUND DIVERSIFICATION

 

 

LOGO

Based on total net assets as of December 31, 2016. Subject to change.

 

 

 

DECEMBER 31, 2016

  

 

13

    

   

SCHEDULE OF INVESTMENTS (Unaudited)

December 31, 2016

Sit Dividend Growth Fund

 

 

  
Quantity    Name of Issuer    Fair Value ($)  

 

  

Common Stocks - 99.3%

  

    Communications - 2.9%

  

547,875   

Verizon Communications, Inc.

      29,245,568   
     

 

 

  

    Consumer Durables - 2.9%

   
      124,950   

Genuine Parts Co.

      11,937,723   
39,800   

Snap-On, Inc.

      6,816,546   
88,000   

Stanley Black & Decker, Inc.

      10,092,720   
     

 

 

  
        28,846,989   
     

 

 

  

    Consumer Non-Durables - 8.0%

   
129,300   

B&G Foods, Inc.

      5,663,340   
135,075   

General Mills, Inc.

      8,343,583   
86,300   

JM Smucker Co.

      11,051,578   
123,350   

Kraft Heinz Co.

      10,770,922   
152,750   

PepsiCo, Inc.

      15,982,232   
140,650   

Philip Morris International, Inc.

      12,868,068   
174,350   

Procter & Gamble Co.

      14,659,348   
     

 

 

  
        79,339,071   
     

 

 

  

    Consumer Services - 4.7%

   
190,800   

CBS Corp.

      12,138,696   
143,450   

Starbucks Corp.

      7,964,344   
73,600   

Time Warner, Inc.

      7,104,608   
126,525   

Visa, Inc.

      9,871,480   
94,175   

Walt Disney Co.

      9,814,918   
     

 

 

  
        46,894,046   
     

 

 

  

    Electronic Technology - 8.7%

   
164,300   

Apple, Inc.

      19,029,226   
488,800   

Applied Materials, Inc.

      15,773,576   
109,900   

Broadcom, Ltd.

      19,427,023   
544,150   

Intel Corp.

      19,736,320   
111,300   

Skyworks Solutions, Inc.

      8,309,658   
64,600   

Xilinx, Inc.

      3,899,902   
     

 

 

  
        86,175,705   
     

 

 

  

    Energy Minerals - 3.8%

   
161,450   

Marathon Petroleum Corp.

      8,129,008   
207,925   

Occidental Petroleum Corp.

      14,810,498   
444,725   

Suncor Energy, Inc.

      14,538,060   
     

 

 

  
        37,477,566   
     

 

 

  

 

  
Quantity    Name of Issuer    Fair Value ($)  

 

  

    Finance - 18.7%

   
123,475   

Allstate Corp.

      9,151,967   
457,200   

Brixmor Property Group, Inc.

      11,164,824   
75,275   

Chubb, Ltd.

      9,945,333   
54,300   

Goldman Sachs Group, Inc.

      13,002,135   
207,400   

Hartford Financial Services Group, Inc.

      9,882,610   
      645,075   

Huntington Bancshares, Inc.

      8,527,892   
247,875   

Invesco, Ltd.

      7,520,528   
268,275   

JPMorgan Chase & Co.

      23,149,450   
840,600   

KeyCorp

      15,357,762   
386,275   

Legg Mason, Inc.

      11,553,485   
157,200   

Macquarie Infrastructure Corp.

      12,843,240   
196,100   

MetLife, Inc.

      10,567,829   
383,375   

Synchrony Financial

      13,905,011   
94,900   

T Rowe Price Group, Inc.

      7,142,174   
269,500   

US Bancorp

      13,844,215   
211,600   

XL Group, Ltd.

      7,884,216   
     

 

 

  
        185,442,671   
     

 

 

  

    Health Services - 3.2%

   
36,300   

Aetna, Inc.

      4,501,563   
144,725   

Cardinal Health, Inc.

      10,415,858   
107,725   

UnitedHealth Group, Inc.

      17,240,309   
     

 

 

  
        32,157,730   
     

 

 

  

    Health Technology - 12.0%

   
209,125   

Abbott Laboratories

      8,032,491   
218,650   

AbbVie, Inc.

      13,691,863   
95,675   

Becton Dickinson and Co.

      15,838,996   
55,575   

Gilead Sciences, Inc.

      3,979,726   
217,275   

Johnson & Johnson

      25,032,253   
202,450   

Medtronic, PLC

      14,420,514   
232,700   

Merck & Co., Inc.

      13,699,049   
518,075   

Pfizer, Inc.

      16,827,076   
79,450   

Zimmer Holdings, Inc.

      8,199,240   
     

 

 

  
        119,721,208   
     

 

 

  

    Industrial Services - 1.0%

   
121,000   

Schlumberger, Ltd.

      10,157,950   
     

 

 

  

    Process Industries - 5.1%

   
241,525   

Dow Chemical Co.

      13,820,060   
177,175   

International Paper Co.

      9,400,906   
115,500   

LyondellBasell Industries NV

      9,907,590   
83,150   

Scotts Miracle-Gro Co.

      7,944,982   
37,475   

Sherwin-Williams Co.

      10,071,032   
     

 

 

  
        51,144,570   
     

 

 

  
 

 

See accompanying notes to financial statements.

 

  

 

14

  

 

SIT MUTUAL FUNDS SEMI-ANNUAL REPORT

    

   

 

    

    

 

    

 

 

  
  Quantity    Name of Issuer    Fair Value ($)  

 

  

    Producer Manufacturing - 8.9%

   
38,500   

3M Co.

      6,874,945   
71,850   

Delphi Automotive, PLC

      4,839,098   
284,225   

General Electric Co.

      8,981,510   
138,275   

Honeywell International, Inc.

      16,019,159   
5,032   

Hubbell, Inc.

      587,234   
142,550   

Ingersoll-Rand, PLC

      10,696,952   
39,720   

Lockheed Martin Corp.

      9,927,617   
75,950   

Orbital ATK, Inc.

      6,663,094   
106,075   

Raytheon Co.

      15,062,650   
81,800   

United Technologies Corp.

      8,966,916   
     

 

 

  
        88,619,175   
     

 

 

  

    Retail Trade - 4.2%

   
45,350   

Costco Wholesale Corp.

      7,260,988   
146,500   

Home Depot, Inc.

      19,642,720   
65,375   

Target Corp.

      4,722,036   
130,100   

TJX Cos., Inc.

      9,774,413   
     

 

 

  
        41,400,157   
     

 

 

  

    Technology Services - 5.3%

   
94,475   

Accenture, PLC

      11,065,857   
9,125   

Alphabet, Inc.-Class A *

      7,231,106   
550,500   

Microsoft Corp.

      34,208,070   
     

 

 

  
        52,505,033   
     

 

 

  

    Transportation - 4.8%

   
58,600   

Alaska Air Group, Inc.

      5,199,578   
243,125   

Delta Air Lines, Inc.

      11,959,319   
69,825   

FedEx Corp.

      13,001,415   
72,629   

Ryder System, Inc.

      5,406,503   
112,400   

Union Pacific Corp.

      11,653,632   
     

 

 

  
        47,220,447   
     

 

 

  

 

  
  Quantity    Name of Issuer    Fair Value ($)  

 

  

    Utilities - 5.1%

   
529,200   

CenterPoint Energy, Inc.

      13,039,488   
132,770   

DTE Energy Co.

      13,079,173   
110,100   

NextEra Energy, Inc.

      13,152,546   
239,000   

Southern Co.

      11,756,410   
     

 

 

  
        51,027,617   
     

 

 

  

Total Common Stocks
(cost: $858,848,363)

      987,375,503   
     

 

 

  

Short-Term Securities - 0.5%

   
5,064,387   

Fidelity Instl. Money Mkt. Govt. Fund, 0.39%

   

Total Short-Term Securities
(cost: $5,064,387)

      5,064,387   
     

 

 

  

Total Investments in Securities - 99.8%
(cost: $863,912,750)

      992,439,890   

Other Assets and Liabilities, net - 0.2%

      2,297,412   
     

 

 

  

Total Net Assets - 100.0%

      $994,737,302   
     

 

 

  

 

 

* Non-income producing security.

Numeric footnotes not disclosed are not applicable to this Schedule of Investments.

PLC — Public Limited Company

 

 

A summary of the levels for the Fund’s investments as of December 31, 2016 is as follows (see Note 2 - significant accounting policies in the notes to financial statements):

 

    

Investment in Securities

  
     Level 1      Level 2    Level 3       
     Quoted      Other significant    Significant       
     Price ($)      observable inputs ($)    unobservable inputs ($)    Total ($)  

Common Stocks **

      987,375,503       —    —      987,375,503   

Short-Term Securities

      5,064,387       —    —      5,064,387   

Total:

      992,439,890       —    —      992,439,890   

 

**  For equity securities categorized in a single level, refer to the Schedule of Investments for further breakdown.

For the reporting period, there were no transfers between levels 1, 2 and 3.

 

See accompanying notes to financial statements.

 

  

 

DECEMBER 31, 2016

  

 

15

 

Sit Global Dividend Growth Fund - Class I and Class S

 

 

 

OBJECTIVE & STRATEGY

The objective of the Sit Global Dividend Growth Fund is to provide current income that exceeds the dividend yield of the MSCI World Index and that grows over a period of years. Secondarily, the Fund seeks long-term capital appreciation.

The Fund seeks to achieve its objectives by investing, under normal market conditions, at least 80% of its net assets in dividend-paying common stocks issued by U.S. and foreign companies. The Fund may invest the balance of its assets in preferred stocks, convertible bonds, and U.S. Treasury securities.

 

 

 

The Global Dividend Growth Fund Class I generated a total return +3.57% for the 6-month period ending December 31, 2016 versus a total return of +6.81% for the MSCI World Index. The growth equity investment style underperformed the Index meaningfully in the last six months, but particularly in the fourth quarter of 2016, as did the Fund.

Global equities posted solid returns during the second half of 2016, fueled by a sharp rally following U.S. presidential election. Equity markets have risen in anticipation of improving economic growth and higher corporate earnings on the back of President-elect Trump’s pro-growth policies, which include lower tax rates, fiscal stimulus, and deregulation. Although there is a risk that investors may be expecting too much too soon, we believe attractive investment prospects exist for stocks and continue selectively invest in potential beneficiaries of Trump’s pro-growth initiatives. We continue to increase exposure to the transportation and industrial sectors while at the same time reducing health technology exposure where drug-pricing issues continue to plague stocks and companies. Elsewhere in the world, we believe the performance of European equities will remain choppy in response to both political and global macroeconomic events. In Japan, the key concern remains the ability of “Abenomics” to overcome the substantial structural challenges of a declining population, rigid labor market, and elevated debt levels.

Contributing favorably to relative performance during the 6-month period were the Fund’s holdings in transportation (Delta Airlines and Union Pacific), software & services (Microsoft) and insurance (Prudential) industries. The household & personal products industry also contributed to the outperformance given the underweight position relative to the Index. Conversely, pharmaceutical (Teva Pharmaceutical and Roche Holding), health care equipment (Medtronic and Cardinal Health) and diversified financial (Macquarie Infrastructure and AURELIUS Equity) industries negatively impacted absolute and relative performance.

Regionally, the Asia/Pacific region was the top contributing region due to strong stock selection. The top contributing stocks in Asia/ Pacific were HSBC Holdings and Broadcom. Stock selection in Euroland was the largest negative detractor to the Fund, with more defensive-oriented holdings in Medtronic, Anheuser-Busch Inbev, Nielsen

HYPOTHETICAL GROWTH OF $10,000

 

LOGO

The chart above illustrates the total value of a hypothetical $10,000 investment in the Fund over the past 10 years (or for the life of the Fund if shorter) as compared to the performance of the MSCI World Index. Past performance does not guarantee future results. Returns include the reinvestment of distributions. The chart does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

1 The MSCI World Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets. It is not possible to invest directly in an index. This is the Fund’s primary index.

 

Holding, and Veolia Environment having the largest negative impact.

The Fund’s gross dividend (before deduction of Fund expenses) yield is 3.0% and is approximately +50 basis points higher than the 2.5% yield of the Index. In periods of low absolute returns, the dividend component of the return becomes more significant and this should benefit the dividend paying companies that are the focus of this strategy. The portfolio emphasizes high quality, dividend paying growth stocks and continues to be well diversified. We believe the portfolio is well positioned to outperform in down markets if financial market volatility pick up, as we believe it will throughout 2017. Dividends rose throughout 2016 and the bulk of the companies (79%) in the Fund increased their dividends. The median dividend increase for the Fund in 2016 was 7.0% versus 2.6% for the Index.

Roger J. Sit             Raymond E. Sit     Tasha M. Murdoff

Kent L. Johnson     Michael J. Stellmacher

Portfolio Managers

 

 

 

16

  

 

SIT MUTUAL FUNDS SEMI-ANNUAL REPORT

 

    

 

 

 

COMPARATIVE RATES OF RETURNS

 

as of December 31, 2016

 

     Sit Global    
     Dividend    
     Growth Fund   MSCI
      Class I   Class S  

World

Index 1

Six Month

        3.57 %       3.38 %       6.81 %

One Year

        4.96         4.71         7.51  

Five Year

        8.38         8.11         10.41  

Since Inception

        8.22         7.95         7.10  

(9/30/08)

             

 

 

Performance figures are historical and do not guarantee future results. Investment returns and principal value will vary, and you may have a gain or loss when you sell shares. Current performance may be lower or higher than the performance data quoted. Contact the Fund for performance data current to the most recent month-end. Returns include changes in share price as well as reinvestment of all dividends and capital gains. Returns do not reflect the deduction of the 2% redemption fee imposed if shares are redeemed or exchanged within 30 calendar days from their date of purchase. If imposed, the fee would reduce the performance quoted. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Management fees and administrative expenses are included in the Fund’s performance. Returns for periods greater than one year are compounded average annual rates of return.

1 The MSCI World Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets. It is not possible to invest directly in an index.

PORTFOLIO SUMMARY

 

 

Class I:

   

Net Asset Value 12/31/16:

      $13.51 Per Share   

Net Asset Value 6/30/16:

      $13.19 Per Share   

Total Net Assets:

      $ 22.7   Million   

Class S:

   

Net Asset Value 12/31/16:

      $13.50 Per Share   

Net Asset Value 6/30/16:

      $13.18 Per Share   

Total Net Assets:

      $3.1     Million   

Weighted Average Market Cap:

      $ 115.4 Billion   

TOP 10 HOLDINGS

 

  1. Verizon Communications, Inc.

  2. Microsoft Corp.

  3. JPMorgan Chase & Co.

  4. Pfizer, Inc.

  5. Roche Holding AG

  6. Nestle SA

  7. Apple, Inc.

  8. BCE, Inc.

  9. Iberdrola SA

10. Diageo, PLC, ADR

 

 

Based on total net assets as of December 31, 2016. Subject to change.

FUND DIVERSIFICATION

 

 

LOGO

Based on total net assets as of December 31, 2016. Subject to change.

 

 

 

DECEMBER 31, 2016

  

 

17

    

   

SCHEDULE OF INVESTMENTS (Unaudited)

December 31, 2016

Sit Global Dividend Growth Fund

 

 

  
  Quantity    Name of Issuer    Fair Value ($)  

 

  

Common Stocks - 97.7%

   

    Asia - 5.4%

   

        China/Hong Kong - 1.0%

   
6,475   

HSBC Holdings, PLC, ADR

      260,165   
     

 

 

  

        Japan - 2.6%

   
21,000   

Astellas Pharma, Inc.

      291,340   
61,900   

Mitsubishi UFJ Financial Group, Inc., ADR

      381,304   
     

 

 

  
        672,644   
     

 

 

  

        Singapore - 1.8%

   
2,525   

Broadcom, Ltd.

      446,344   
     

 

 

  

    Europe - 29.5%

   

        Belgium - 1.4%

   
3,475   

Anheuser-Busch InBev NV, ADR

      366,404   
     

 

 

  

        France - 3.0%

   
4,900   

Schlumberger, Ltd.

      411,355   
1,550   

Unibail-Rodamco SE

      369,374   
     

 

 

  
        780,729   
     

 

 

  

        Germany - 3.6%

   
16,400   

Allianz SE, ADR

      270,272   
4,200   

Aurelius SE & Co.

      245,562   
3,325   

Siemens AG

      407,114   
     

 

 

  
        922,948   
     

 

 

  

        Ireland - 3.1%

   
2,750   

Accenture, PLC

      322,108   
6,900   

Medtronic, PLC

      491,487   
     

 

 

  
        813,595   
     

 

 

  

        Netherlands - 5.0%

   
31,900   

ING Groep NV, ADR

      449,790   
4,450   

LyondellBasell Industries NV

      381,721   
28,100   

RELX NV

      472,640   
     

 

 

  
        1,304,151   
     

 

 

  

        Spain - 2.0%

   
77,400   

Iberdrola SA

      506,808   
     

 

 

  

        Switzerland - 6.8%

   
2,500   

Chubb, Ltd.

      330,300   
7,350   

Nestle SA

      526,536   
2,375   

Roche Holding AG

      541,387   
1,265   

Zurich Insurance Group AG

      347,647   
     

 

 

  
        1,745,870   
     

 

 

  

        United Kingdom - 4.6%

   
1,900   

Delphi Automotive, PLC

      127,965   
4,825   

Diageo, PLC, ADR

      501,510   

 

  
  Quantity    Name of Issuer    Fair Value ($)  

 

  
72,925   

DS Smith, PLC

      366,202   
4,500   

Nielsen Holdings, PLC

      188,775   
     

 

 

  
        1,184,452   
     

 

 

  

    North America - 62.8%

   

        Bermuda - 1.7%

   
8,900   

Invesco, Ltd.

      270,026   
4,700   

XL Group, Ltd.

      175,122   
     

 

 

  
        445,148   
     

 

 

  

        Canada - 2.6%

   
11,725   

BCE, Inc.

      506,989   
4,800   

Suncor Energy, Inc.

      156,912   
     

 

 

  
        663,901   
     

 

 

  

        United States - 58.5%

   
2,225   

3M Co.

      397,318   
6,050   

AbbVie, Inc.

      378,851   
3,825   

Allstate Corp.

      283,509   
400   

Alphabet, Inc.-Class A *

      316,980   
4,500   

Apple, Inc.

      521,190   
8,000   

Applied Materials, Inc.

      258,160   
5,300   

Arthur J Gallagher & Co.

      275,388   
15,575   

Brixmor Property Group, Inc.

      380,341   
3,365   

Cardinal Health, Inc.

      242,179   
11,500   

CenterPoint Energy, Inc.

      283,360   
9,075   

Delta Air Lines, Inc.

      446,399   
4,700   

Dow Chemical Co.

      268,934   
8,750   

General Electric Co.

      276,500   
2,625   

Genuine Parts Co.

      250,792   
3,600   

Gilead Sciences, Inc.

      257,796   
3,075   

Home Depot, Inc.

      412,296   
4,100   

Honeywell International, Inc.

      474,985   
10,925   

Intel Corp.

      396,250   
4,450   

International Paper Co.

      236,117   
3,875   

Johnson & Johnson

      446,439   
7,950   

JPMorgan Chase & Co.

      686,006   
20,900   

KeyCorp

      381,843   
2,250   

Kimberly-Clark Corp.

      256,770   
1,365   

Lockheed Martin Corp.

      341,168   
4,600   

Macquarie Infrastructure Corp.

      375,820   
5,300   

Marathon Petroleum Corp.

      266,855   
12,325   

Microsoft Corp.

      765,876   
6,200   

Occidental Petroleum Corp.

      441,626   
4,275   

PepsiCo, Inc.

      447,293   
19,200   

Pfizer, Inc.

      623,616   
3,025   

Prudential Financial, Inc.

      314,782   
1,200   

Snap-On, Inc.

      205,524   
7,075   

Starbucks Corp.

      392,804   
3,300   

Target Corp.

      238,359   
5,150   

TJX Cos., Inc.

      386,920   
4,325   

Union Pacific Corp.

      448,416   
 

 

See accompanying notes to financial statements.

 

  

 

18

  

 

SIT MUTUAL FUNDS SEMI-ANNUAL REPORT

    

   

 

    

    

 

    

 

 

 

  
  Quantity    Name of Issuer    Fair Value ($)  

 

  
2,100   

United Parcel Service, Inc.

      240,744   
3,000   

United Technologies Corp.

      328,860   
14,875   

Verizon Communications, Inc.

      794,028   
6,300   

WEC Energy Group, Inc.

      369,495   
     

 

 

  
        15,110,589   
     

 

 

  

Total Common Stocks
(cost: $23,015,551)

      25,223,748   
     

 

 

  

Short-Term Securities - 2.3%

   
580,438   

Fidelity Instl. Money Mkt. Govt. Fund, 0.39%

  

Total Short-Term Securities
(cost: $580,438)

      580,438   
     

 

 

  

Total Investments in Securities - 100.0%
(cost: $23,595,989)

      25,804,186   

Other Assets and Liabilities, net - 0.0%

      8,251   
     

 

 

  

Total Net Assets - 100.0%

      $25,812,437   
     

 

 

  

 

* Non-income producing security.

Numeric footnotes not disclosed are not applicable to this Schedule of Investments

ADR — American Depositary Receipt

PLC — Public Limited Company

 

 

See accompanying notes to financial statements.

 

  

 

DECEMBER 31, 2016

  

 

19

    

   

SCHEDULE OF INVESTMENTS (Unaudited)

December 31, 2016

Sit Global Dividend Growth Fund (Continued)

    

    

 

A summary of the levels for the Fund’s investments as of December 31, 2016 is as follows (see Note 2 - significant accounting policies in the notes to financial statements):

 

     Investment in Securities  
     Level 1
Quoted
Price ($)		      Level 2
Other significant
observable inputs ($)		     

Level 3

Significant
unobservable inputs ($)

      Total ($)  

Common Stocks

            

Belgium

      366,404         —                 —         366,404   

Bermuda

      445,148         —                 —         445,148   

Canada

      663,901         —                 —         663,901   

China/Hong Kong

      260,165         —                 —         260,165   

France

      411,355         369,374                 —         780,729   

Germany

      270,272         652,676                 —         922,948   

Ireland

      813,595         —                 —         813,595   

Japan

      381,304         291,340                 —         672,644   

Netherlands

      831,511         472,640                 —         1,304,151   

Singapore

      446,344         —                 —         446,344   

Spain

      —         506,808                 —         506,808   

Switzerland

      330,300         1,415,570                 —         1,745,870   

United Kingdom

      818,250         366,202                 —         1,184,452   

United States

      15,110,589         —                 —         15,110,589   

Short-Term Securities

      580,438         —                 —         580,438   

Total:

      21,729,576         4,074,610                 —         25,804,186   

The Fund adjusts the closing price of foreign equity securities by applying a systematic process for events occurring after the close of the foreign exchanges. At each reporting period, this process is applied for all foreign securities and therefore all foreign securities are classified as level 2. There are no transfers between level 1 and level 2 between reporting periods as a result of applying this process. Level 1 securities of foreign issuers are primarily American Depositary Receipts (ADRs), Public Limited Companies (PLCs) or Global Depositary Receipts (GDRs). There were no transfers into or out of level 3 during the reporting period.

 

See accompanying notes to financial statements.

 

  

 

20

  

 

SIT MUTUAL FUNDS SEMI-ANNUAL REPORT

    

 

    

    

 

 

[This page intentionally left blank.]

 

 

 

 

 

DECEMBER 31, 2016

  

 

21

 

Sit Large Cap Growth Fund

 

 

OBJECTIVE & STRATEGY

The objective of the Sit Large Cap Growth Fund is to maximize long-term capital appreciation. The Fund pursues this objective by investing at least 80% of its net assets in the common stocks of domestic growth companies with capitalizations of $5 billion or more at the time of purchase.

 

 

 

The The Sit Large Cap Growth Fund’s six-month return was +6.04%, compared to the +5.64% return for the Russell 1000® Growth Index. The S&P 500® Index return for the period was +7.82%.

Equities surged ahead following the U.S. presidential election, as investors became optimistic that pro-growth policies will lift economic growth out of the subdued range experienced over the past several years. While headwinds (e.g., stronger dollar, higher rates) and policy initiatives are a concern, we believe the combined impact of tax cuts, fiscal spending and deregulation will jump-start growth and eventually lead to higher corporate earnings. Recognizing both the upside and downside potential in this environment, we have adopted a “barbell” strategy within the portfolio, increasing exposure to sectors most leveraged to positive policy changes (e.g., financials, transports), while maintaining a high quality bias in more defensive groups (e.g., health care) to provide some downside support if markets are disappointed with progress on proposed initiatives. In general, our quality bias has not been rewarded in recent years, as unprecedented monetary policy has broadly lifted markets. We believe a different, and potentially more volatile, environment lies ahead in which quality will be rewarded. The heaviest-weighted sectors within the Fund are technology services, electronic technology and health technology. We believe these sectors are attractively valued relative to their growth prospects. Conversely, the Fund has limited exposure to slow growth groups, including utilities, industrial services and consumer durables.

The Fund outperformed the Russell 1000® Growth Index over the past six months. Relative performance was positively impacted by stock selection in finance and transportation. From a sector standpoint, overweighting transportation and electronic technology, while underweighting consumer non-durables, added to relative returns. Goldman Sachs Group, Applied Materials, JP Morgan Chase, Synchrony Financial and Alaska Air Group were among the standout individual stock performers over the past six months. On the negative

HYPOTHETICAL GROWTH OF $10,000

 

LOGO

The chart above illustrates the total value of a hypothetical $10,000 investment in the Fund over the past 10 years as compared to the performance of the Russell 1000® Growth Index. Past performance does not guarantee future results. Returns include the reinvestment of distributions. The chart does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

1 Russell 1000® Growth Index is an unmanaged index that measures the performance of those Russell 1000 Index companies with higher price-to-book ratios and higher forecasted growth values. It is not possible to invest directly in an index. This is the Fund’s primary index.

 

side, stock selection negatively impacted returns in the health technology, commercial services and producer manufacturing sectors.

We remain enthusiastic about the long-term outlook for companies held in the Fund, based on attractive valuations and sustainable earnings growth potential.

Roger J. Sit

Ronald D. Sit

Michael J. Stellmacher

Portfolio Managers

 

 

 

22

  

 

SIT MUTUAL FUNDS SEMI-ANNUAL REPORT

 

    

 

 

 

COMPARATIVE RATES OF RETURNS

 

as of December 31, 2016

 

         Russell    
     Sit Large   1000®   Russell
     Cap Growth   Growth   1000®
      Fund   Index 1   Index 2

Six Month

        6.04 %       5.64 %       8.01%     

One Year

        4.36         7.08         12.05       

Five Year

        12.24         14.50         14.69       

Ten Year

        6.59         8.33         7.08       

Since Inception 3

(9/2/82)

        9.73         10.87         11.66       

 

Performance figures are historical and do not guarantee future results. Investment returns and principal value will vary, and you may have a gain or loss when you sell shares. Current performance may be lower or higher than the performance data quoted. Contact the Fund for performance data current to the most recent month-end. Returns include changes in share price as well as reinvestment of all dividends and capital gains. Returns do not reflect the deduction of the 2% redemption fee imposed if shares are redeemed or exchanged within 30 calendar days from their date of purchase. If imposed, the fee would reduce the performance quoted. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Management fees and administrative expenses are included in the Fund’s performance. Returns for periods greater than one year are compounded average annual rates of return.

1 Russell 1000® Growth Index is an unmanaged index that measures the performance of those Russell 1000 Index companies with higher price-to-book ratios and higher forecasted growth values. It is not possible to invest directly in an index.

2 Russell 1000® Index is an unmanaged index that measures the performance of approximately 1,000 of the largest U.S. companies by market capitalization.

3 On 6/6/93, the Fund’s investment objective changed to allow for a portfolio of 100% stocks. Prior to that time, the portfolio was required to contain no more than 80% stocks.

PORTFOLIO SUMMARY

 

 

Net Asset Value 12/31/16:

    $35.49 Per Share        

Net Asset Value 6/30/16:

    $36.02 Per Share        

Total Net Assets:

    $111.9 Million        

Weighted Average Market Cap:

    $151.3 Billion        

TOP 10 HOLDINGS

 

 

  1. Alphabet, Inc.

  2. Apple, Inc.

  3. Microsoft Corp.

  4. Facebook, Inc.

  5. Visa, Inc.

  6. PepsiCo, Inc.

  7. Adobe Systems, Inc.

  8. Broadcom, Ltd.

  9. Home Depot, Inc.

  9. Verizon Communications, Inc.

 

 

Based on total net assets as of December 31, 2016. Subject to change.

FUND DIVERSIFICATION

 

 

LOGO

Based on total net assets as of December 31, 2016. Subject to change.

 

 

 

DECEMBER 31, 2016

  

 

23

    

   

SCHEDULE OF INVESTMENTS (Unaudited)

December 31, 2016

Sit Large Cap Growth Fund

 

 

  
  Quantity    Name of Issuer    Fair Value ($)  

 

  

Common Stocks - 99.5%

  

    Commercial Services - 1.8%

  

9,300   

Equifax, Inc.

      1,099,539   
21,400   

Nielsen Holdings, PLC

      897,730   
     

 

 

  
        1,997,269   
     

 

 

  

    Communications - 2.8%

   
5,900   

SBA Communications Corp. *

      609,234   
46,775   

Verizon Communications, Inc.

      2,496,850   
     

 

 

  
        3,106,084   
     

 

 

  

    Consumer Durables - 1.1%

   
10,300   

Electronic Arts, Inc. *

      811,228   
4,200   

Genuine Parts Co.

      401,268   
     

 

 

  
        1,212,496   
     

 

 

  

    Consumer Non-Durables - 6.6%

   
19,775   

Estee Lauder Cos., Inc.-Class A

      1,512,590   
31,450   

NIKE, Inc.

      1,598,604   
26,300   

PepsiCo, Inc.

      2,751,769   
17,600   

Procter & Gamble Co.

      1,479,808   
     

 

 

  
        7,342,771   
     

 

 

  

    Consumer Services - 8.9%

   
18,100   

CBS Corp.

      1,151,522   
13,900   

Marriott International, Inc.

      1,149,252   
41,900   

Starbucks Corp.

      2,326,288   
14,575   

Time Warner, Inc.

      1,406,925   
40,100   

Visa, Inc.

      3,128,602   
7,600   

Walt Disney Co.

      792,072   
     

 

 

  
        9,954,661   
     

 

 

  

    Electronic Technology - 11.8%

   
49,875   

Apple, Inc.

      5,776,522   
69,500   

Applied Materials, Inc.

      2,242,765   
14,900   

Broadcom, Ltd.

      2,633,873   
28,100   

Ciena Corp. *

      685,921   
34,600   

Intel Corp.

      1,254,942   
12,400   

MACOM Technology Solutions Holdings, Inc. *

      573,872   
     

 

 

  
        13,167,895   
     

 

 

  

    Energy Minerals - 2.0%

   
3,900   

Chevron Corp.

      459,030   
18,600   

Marathon Petroleum Corp.

      936,510   
5,400   

Occidental Petroleum Corp.

      384,642   
2,300   

Pioneer Natural Resources Co.

      414,161   
     

 

 

  
        2,194,343   
     

 

 

  

    Finance - 6.3%

   
28,600   

Brixmor Property Group, Inc.

      698,412   
5,450   

Chubb, Ltd.

      720,054   
5,900   

Goldman Sachs Group, Inc.

      1,412,755   
20,600   

JPMorgan Chase & Co.

      1,777,574   
24,200   

Legg Mason, Inc.

      723,822   

 

  
  Quantity    Name of Issuer    Fair Value ($)  

 

  
40,125   

Synchrony Financial

      1,455,334   
3,900   

T Rowe Price Group, Inc.

      293,514   
     

 

 

  
        7,081,465   
     

 

 

  

    Health Services - 2.7%

   
14,000   

Centene Corp. *

      791,140   
3,500   

Humana, Inc.

      714,105   
9,825   

UnitedHealth Group, Inc.

      1,572,393   
     

 

 

  
        3,077,638   
     

 

 

  

    Health Technology - 11.7%

   
20,400   

AbbVie, Inc.

      1,277,448   
4,700   

Alexion Pharmaceuticals, Inc. *

      575,045   
5,175   

Allergan, PLC *

      1,086,802   
900   

Biogen, Inc. *

      255,222   
11,475   

Celgene Corp. *

      1,328,231   
19,700   

Gilead Sciences, Inc.

      1,410,717   
15,300   

Johnson & Johnson

      1,762,713   
31,000   

Medtronic, PLC

      2,208,130   
42,000   

Pfizer, Inc.

      1,364,160   
7,500   

Thermo Fisher Scientific, Inc.

      1,058,250   
7,925   

Zimmer Holdings, Inc.

      817,860   
     

 

 

  
        13,144,578   
     

 

 

  

    Industrial Services - 0.7%

   
9,100   

Schlumberger, Ltd.

      763,945   
     

 

 

  

    Process Industries - 1.8%

   
17,300   

Ecolab, Inc.

      2,027,906   
     

 

 

  

    Producer Manufacturing - 6.6%

   
8,850   

3M Co.

      1,580,344   
3,700   

Danaher Corp.

      288,008   
21,800   

General Electric Co.

      688,880   
14,425   

Honeywell International, Inc.

      1,671,136   
13,500   

Raytheon Co.

      1,917,000   
11,600   

United Technologies Corp.

      1,271,592   
     

 

 

  
        7,416,960   
     

 

 

  

    Retail Trade - 7.1%

   
1,025   

Amazon.com, Inc. *

      768,617   
12,475   

CVS Health Corp.

      984,402   
18,725   

Home Depot, Inc.

      2,510,648   
16,100   

Target Corp.

      1,162,903   
24,600   

TJX Cos., Inc.

      1,848,198   
2,500   

Ulta Salon Cosmetics & Fragrance, Inc. *

      637,350   
     

 

 

  
        7,912,118   
     

 

 

  

    Technology Services - 22.4%

   
15,075   

Accenture, PLC

      1,765,735   
26,100   

Adobe Systems, Inc. *

      2,686,995   
3,950   

Alphabet, Inc.-Class A *

      3,130,177   
5,966   

Alphabet, Inc.-Class C *

      4,604,678   
10,800   

ANSYS, Inc. *

      998,892   
 

 

See accompanying notes to financial statements.

 

  

 

24

  

 

SIT MUTUAL FUNDS SEMI-ANNUAL REPORT

    

   

 

    

    

 

    

 

 

  
  Quantity    Name of Issuer    Fair Value ($)  

 

  
28,600   

Cognizant Technology Solutions Corp. *

      1,602,458   
27,800   

Facebook, Inc. *

      3,198,390   
70,600   

Microsoft Corp.

      4,387,084   
21,500   

PayPal Holdings, Inc.

      848,605   
1,275   

priceline.com, Inc. *

      1,869,226   
     

 

 

  
        25,092,240   
     

 

 

  

Transportation - 4.7%

   
11,900   

Alaska Air Group, Inc.

      1,055,887   
21,615   

Delta Air Lines, Inc.

      1,063,242   
6,900   

FedEx Corp.

      1,284,780   
9,800   

Union Pacific Corp.

      1,016,064   
7,000   

United Parcel Service, Inc.

      802,480   
     

 

 

  
        5,222,453   
     

 

 

  

Utilities - 0.5%

   
5,000   

NextEra Energy, Inc.

      597,300   
     

 

 

  

Total Common Stocks
(cost: $71,721,275)

      111,312,122   
     

 

 

  

 

  
  Quantity    Name of Issuer    Fair Value ($)  

 

  

Short-Term Securities - 0.7%

   
775,998   

Fidelity Instl. Money Mkt. Govt. Fund, 0.39%

   

Total Short-Term Securities
(cost: $775,998)

      775,998   
     

 

 

  

Total Investments in Securities - 100.2%
(cost: $72,497,273)

      112,088,120   

Other Assets and Liabilities, net - (0.2%)

      (174,421 ) 
     

 

 

  

Total Net Assets - 100.0%

      $111,913,699   
     

 

 

  

 

 

*  Non-income producing security.

Numeric footnotes not disclosed are not applicable to this Schedule of Investments.

PLC — Public Limited Company

 

 

A summary of the levels for the Fund’s investments as of December 31, 2016 is as follows (see Note 2 - significant accounting policies in the notes to financial statements):

 

     Investment in Securities  
     Level 1
Quoted
Price ($)		      Level 2
Other significant
observable inputs ($)		   

Level 3

Significant
unobservable inputs ($)

    Total ($)  

Common Stocks **

      111,312,122       —    —      111,312,122   

Short-Term Securities

      775,998       —    —      775,998   

Total:

      112,088,120       —    —      112,088,120   

 

**  For equity securities categorized in a single level, refer to the Schedule of Investments for further breakdown.

For the reporting period, there were no transfers between levels 1, 2 and 3.

 

See accompanying notes to financial statements.

 

  

 

DECEMBER 31, 2016

  

 

25

 

Sit ESG Growth Fund - Class I and Class S

 

 

OBJECTIVE & STRATEGY

The objective of the Sit ESG Growth Fund is to maximize long-term capital appreciation. The Fund seeks to achieve its objectives by investing, under normal market conditions, at least 80% of its net assets in companies that the Adviser believes have strong environmental, social and corporate governance (ESG) practices at the time of purchase. The Fund invests in common stocks of U.S. and foreign companies, primarily of large to medium capitalizations (companies with market capitalization in excess of $2 billion).

 

 

 

The Sit ESG Growth Fund Class I generated a total return of +2.01% in the second half of calendar 2016 compared to the MSCI World Index return of +6.81%. Just over 70% of the underperformance relative to the Index is attributable to an average cash balance of 17.6% over the six-month period. While the cash balance remained elevated during the first three months of the Fund’s inception as we opportunistically purchased stocks in the uncertain market environment (i.e., Brexit, U.S. political elections), the cash balance is currently at a more normalized level of roughly 2%.

Global equities performed well following the U.S. presidential election as investors became optimistic that pro-growth policies would lift economic growth out of the subdued range experienced over the past several years. While headwinds (i.e., stronger U.S. dollar and higher rates) policy initiatives are a concern, we believe the combined impact of tax cuts, fiscal spending, and deregulation will jump start growth and eventually lead to higher corporate earnings, particularly in the U.S. Recognizing both the upside and downside potential in this environment, we have adopted a “barbell” strategy within the portfolio, increasing exposure to sectors (i.e., financials and transports) most levered to policy change while maintaining a high quality bias in more defensive groups (i.e., health care) provides some downside support if markets are disappointed with progress on proposed initiatives.

Elsewhere, we believe the performance of European equities will remain choppy in response to both political and global macroeconomic events. However, investors will likely begin to anticipate diminished political risk heading into 2018 and the potential for improved fiscal/corporate spending, implying a solid underlying bid for European stocks as we move through the year. In Japan, the key concern remains the ability of “Abenomics” to overcome the substantial structural challenges of a declining population, rigid labor market, and elevated debt levels.

The industries contributing most favorably to relative performance were transportation (Delta Airlines and FedEx), insurance (Prudential Financial and Zurich Insurance) and health care equipment & services (Humana and UnitedHealth Group). Conversely, cash was the largest detractor, followed by the technology hardware & equipment (Ingenico) and food, beverage & tobacco (Coca-Cola

 

HYPOTHETICAL GROWTH OF $10,000

 

LOGO

The chart above illustrates the total value of a hypothetical $10,000 investment in the Fund over the past 10 years (or for the life of the Fund if shorter) as compared to the performance of the MSCI World Index. Past performance does not guarantee future results. Returns include the reinvestment of distributions. The chart does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

1 The MSCI World Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets. It is not possible to invest directly in an index. This is the Fund’s primary index

 

European Partners, Anheuser-Busch Inbev, Nestle and Ajinomoto) industries.

The focus of the Sit ESG Fund is to invest at least 80% of the assets in companies that have strong ESG (environmental, social and corporate governance) practices. At of the end calendar 2016, the Fund’s Sustainalytics ESG percentile of 86% was well ahead of the Index at 70%. The Fund has a High Morningstar Sustainability Ranking and is ranked in the top 1% in the Large Growth category. We remain positive about the long-term outlook for companies held in the Fund based on attractive valuations and sustainable earnings growth potential.

Roger J. Sit

Ronald D. Sit

Michael J. Stellmacher

Portfolio Managers

 

 

 

26

  

 

SIT MUTUAL FUNDS SEMI-ANNUAL REPORT

 

    

 

 

 

COMPARATIVE RATES OF RETURNS

 

as of December 31, 2016

 

     Sit ESG
    Growth Fund    		    MSCI    
             World 
      Class I   Class S   Index 1

Since Inception

(6/30/16)

        2.01 %       1.88 %       6.81 %  

 

 

Performance figures are historical and do not guarantee future results. Investment returns and principal value will vary, and you may have a gain or loss when you sell shares. Current performance may be lower or higher than the performance data quoted. Contact the Fund for performance data current to the most recent month-end. Returns include changes in share price as well as reinvestment of all dividends and capital gains. Returns do not reflect the deduction of the 2% redemption fee imposed if shares are redeemed or exchanged within 30 calendar days from their date of purchase. If imposed, the fee would reduce the performance quoted. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Management fees and administrative expenses are included in the Fund’s performance. Returns for periods greater than one year are compounded average annual rates of return.

1 The MSCI World Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets. It is not possible to invest directly in an index.

PORTFOLIO SUMMARY

 

 

Class I:

   

Net Asset Value 12/31/16:

      $10.18 Per Share   

Net Asset Value 6/30/162:

      $10.00 Per Share   

Total Net Assets:

      $2.1     Million   

Class S:

   

Net Asset Value 12/31/16:

      $10.18 Per Share   

Net Asset Value 6/30/162:

      $10.00 Per Share   

Total Net Assets:

      $2.1     Million   

Weighted Average Market Cap:

      $105.8   Billion   

2   Inception date of the Fund.

TOP 10 HOLDINGS

 

  1. Johnson & Johnson

  2. Pfizer, Inc.

  3. Iberdrola SA, ADR

  4. Delta Air Lines, Inc.

  5. Verizon Communications, Inc.

  6. Ingersoll-Rand, PLC

  7. ING Groep NV, ADR

  8. Occidental Petroleum Corp.

  9. Marriott International, Inc.

10. Goldman Sachs Group, Inc.

 

 

Based on total net assets as of December 31, 2016. Subject to change.

FUND DIVERSIFICATION

 

 

LOGO

Based on total net assets as of December 31, 2016. Subject to change.

 

 

 

DECEMBER 31, 2016

  

 

27

    

   

SCHEDULE OF INVESTMENTS (Unaudited)

December 31, 2016

Sit ESG Growth Fund

 

 

  
  Quantity    Name of Issuer    Fair Value ($)  

 

  

Common Stocks - 98.0%

  

    Asia - 6.8%

   

        China/Hong Kong - 1.3%

   
1,300   

HSBC Holdings, PLC, ADR

      52,234   
     

 

 

  

        Japan - 5.5%

  

2,900   

Ajinomoto Co., Inc.

      58,355   
2,400   

Asics Corp.

      47,827   
5,300   

Astellas Pharma, Inc.

      73,529   
8,325   

Mitsubishi UFJ Financial Group, Inc., ADR

      51,282   
     

 

 

  
        230,993   
     

 

 

  

        Europe - 29.0%

  

        Belgium - 1.3%

  

500   

Anheuser-Busch InBev NV, ADR

      52,720   
     

 

 

  

        France - 3.8%

  

685   

Ingenico Group SA

      54,653   
550   

Schlumberger, Ltd.

      46,172   
2,500   

Unibail-Rodamco SE, ADR

      59,425   
     

 

 

  
        160,250   
     

 

 

  

        Germany - 2.9%

  

3,200   

Allianz SE, ADR

      52,736   
550   

Siemens AG, ADR

      67,331   
     

 

 

  
        120,067   
     

 

 

  

        Ireland - 5.1%

  

510   

Accenture, PLC

      59,736   
1,250   

Ingersoll-Rand, PLC

      93,800   
825   

Medtronic, PLC

      58,765   
     

 

 

  
        212,301   
     

 

 

  

        Netherlands - 4.1%

  

6,575   

ING Groep NV, ADR

      92,708   
4,700   

RELX NV, ADR

      78,772   
     

 

 

  
        171,480   
     

 

 

  

        Spain - 4.3%

  

3,850   

Iberdrola SA, ADR

      100,986   
2,250   

Industria de Diseno Textil SA

      76,649   
     

 

 

  
        177,635   
     

 

 

  

        Switzerland - 4.4%

  

900   

Nestle SA, ADR

      64,566   
1,500   

Roche Holding AG, ADR

      42,795   
2,725   

Zurich Insurance Group AG, ADR

      75,128   
     

 

 

  
        182,489   
     

 

 

  

        United Kingdom - 3.1%

  

2,100   

Coca-Cola European Partners, PLC

      65,940   
600   

Diageo, PLC, ADR

      62,364   
     

 

 

  
        128,304   
     

 

 

  

 

  
  Quantity    Name of Issuer    Fair Value ($)  

 

  

    North America - 62.2%

  

        Canada - 5.3%

  

1,925   

BCE, Inc.

      83,237   
2,200   

Gildan Activewear, Inc.

      55,814   
2,475   

Suncor Energy, Inc.

      80,908   
     

 

 

  
        219,959   
     

 

 

  

        United States - 56.9%

  

475   

3M Co.

      84,821   
950   

AbbVie, Inc.

      59,489   
500   

Adobe Systems, Inc. *

      51,475   
1,050   

Allstate Corp.

      77,826   
85   

Alphabet, Inc.-Class A *

      67,358   
750   

Cognizant Technology Solutions Corp. *

      42,022   
2,050   

Delta Air Lines, Inc.

      100,840   
1,000   

Dow Chemical Co.

      57,220   
425   

Ecolab, Inc.

      49,818   
340   

Facebook, Inc. *

      39,117   
400   

FedEx Corp.

      74,480   
2,500   

General Electric Co.

      79,000   
375   

Goldman Sachs Group, Inc.

      89,794   
665   

Home Depot, Inc.

      89,163   
400   

Humana, Inc.

      81,612   
2,350   

Intel Corp.

      85,234   
975   

Johnson & Johnson

      112,330   
800   

JPMorgan Chase & Co.

      69,032   
350   

Kimberly-Clark Corp.

      39,942   
1,600   

Legg Mason, Inc.

      47,856   
1,100   

Marriott International, Inc.

      90,948   
1,400   

Microsoft Corp.

      86,996   
1,100   

NIKE, Inc.

      55,913   
1,300   

Occidental Petroleum Corp.

      92,599   
700   

PepsiCo, Inc.

      73,241   
3,375   

Pfizer, Inc.

      109,620   
835   

Prudential Financial, Inc.

      86,890   
1,525   

Starbucks Corp.

      84,668   
950   

TJX Cos., Inc.

      71,374   
375   

UnitedHealth Group, Inc.

      60,015   
1,775   

Verizon Communications, Inc.

      94,750   
800   

Visa, Inc.

      62,416   
     

 

 

  
        2,367,859   
     

 

 

  

Total Common Stocks
(cost: $3,974,627)

      4,076,291   
     

 

 

  
 

 

See accompanying notes to financial statements.

 

  

 

28

  

 

SIT MUTUAL FUNDS SEMI-ANNUAL REPORT

    

   

 

    

    

 

    

 

 

  
  Quantity    Name of Issuer    Fair Value ($)  

 

  

Short-Term Securities - 2.0%

   
81,313   

Fidelity Instl. Money Mkt. Govt. Fund, 0.39%

  

Total Short-Term Securities
(cost: $81,313)

      81,313   
     

 

 

  

Total Investments in Securities - 100.0%
(cost: $4,055,940)

      4,157,604   

Other Assets and Liabilities, net - 0.0%

      1,503   
     

 

 

  

Total Net Assets - 100.0%

      $4,159,107   
     

 

 

  

 

 

*  Non-income producing security.

Numeric footnotes not disclosed are not applicable to this Schedule of Investments

ADR — American Depositary Receipt

PLC — Public Limited Company

 

 

A summary of the levels for the Fund’s investments as of December 31, 2016 is as follows (see Note 2 - significant accounting policies in the notes to financial statements):

 

     Investment in Securities  
     Level 1
Quoted
Price ($)		      Level 2
Other significant
observable inputs ($)		     

Level 3

Significant
unobservable inputs ($)

      Total ($)  

Common Stocks

            

Belgium

      52,720         —                 —         52,720   

Canada

      219,959         —                 —         219,959   

China/Hong Kong

      52,234         —                 —         52,234   

France

      105,597         54,653                 —         160,250   

Germany

      120,067         —                 —         120,067   

Ireland

      212,301         —                 —         212,301   

Japan

      51,282         179,711                 —         230,993   

Netherlands

      171,480         —                 —         171,480   

Spain

      100,986         76,649                 —         177,635   

Switzerland

      182,489         —                 —         182,489   

United Kingdom

      128,304         —                 —         128,304   

United States

      2,367,859         —                 —         2,367,859   

Short-Term Securities

      81,313         —                 —         81,313   

Total:

      3,846,591         311,013                 —         4,157,604   

The Fund adjusts the closing price of foreign equity securities by applying a systematic process for events occurring after the close of the foreign exchanges. At each reporting period, this process is applied for all foreign securities and therefore all foreign securities are classified as level 2. There are no transfers between level 1 and level 2 between reporting periods as a result of applying this process. Level 1 securities of foreign issuers are primarily American Depositary Receipts (ADRs), Public Limited Companies (PLCs) or Global Depositary Receipts (GDRs). There were no transfers into or out of level 3 during the reporting period.

 

See accompanying notes to financial statements.

 

  

 

DECEMBER 31, 2016

  

 

29

 

Sit Mid Cap Growth Fund

 

 

OBJECTIVE & STRATEGY

The objective of the Sit Midcap® Growth Fund is to maximize long-term capital appreciation. The Fund pursues this objective by investing at least 80% of its net assets in common stocks that, at the time of purchase, have market capitalizations that fall within the range of companies included in the Russell Midcap® Growth Index during the most recent 12-month period. The Russell Midcap® Growth Index ranged from approximately $171 million to $33 billion during the 12-month period ended December 31, 2016.

 

 

 

The Sit Mid Cap Growth Fund’s return for the second half of 2016 was +5.72%, compared to +5.07% for the Russell Mid Cap® Growth Index. The S&P MidCap 400® Index rose 11.87% during the period.

Mid-cap stocks posted solid gains over the second half of 2016, as the U.S. presidential election proved to be a much-needed catalyst for stock prices. While we see the market’s positive reaction to potential policy changes as rational, we caution investors that President-elect Trump’s initiatives will take time to be formulated and have an impact on the economy and corporate earnings. However, given relatively high valuations following the run-up in prices, we believe the market will need to see signs of progress rather quickly, if market enthusiasm is to be maintained. Our investment team continues to focus on high quality, well-managed mid-cap companies that can produce strong earnings growth, even if the current slow growth environment prevails into the future. We continue to believe that maintaining a well-diversified, high quality portfolio is appropriate given the many crosscurrents at the present time. Technology services and electronic technology carry the heaviest sector weightings within the Fund, as we think many tech companies are undervalued relative to both their cyclical and secular growth prospects. We also hold a significant weighting in the finance sector, as we believe many financial firms have much to gain from faster growth and expected policy changes, including lower taxes and decreased regulations. Regardless of sector, we remain focused on quality companies that have strong balance sheets and exhibit consistent growth in both earnings and cash flow over the longer term.

Over the past six months, the Fund exceeded the return for the Russell Mid Cap® Growth Index. In terms of relative returns, the sectors that had the most positive impact over the period included consumer non- durables, transportation and process industries. In terms of individual stocks, the top six-month performers included Alaska Air Group, Applied Materials, Cardtronics, Aspen Technology and Scotts Miracle-Gro. The worst performing sectors, in terms of relative returns, included health services, health technology and

HYPOTHETICAL GROWTH OF $10,000

 

LOGO

The chart above illustrates the total value of a hypothetical $10,000 investment in the Fund over the past 10 years as compared to the performance of the Russell Midcap® Growth Index. Past performance does not guarantee future results. Returns include the reinvestment of distributions. The chart does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

1 Russell Midcap® Growth Index is an unmanaged index that measures the performance of those Russell Midcap Index companies with higher price-to-book ratios and higher forecasted growth values. It is not possible to invest directly in an index. This is the Fund’s primary index.

 

producer manufacturing. Individual stocks that hurt returns over the period included Ultimate Software Group, Novavax, Envision Healthcare, Acadia Healthcare and Mobileye.

Our research staff remains committed and focused on identifying investment opportunities that will help our shareholders achieve their investment goals over the long term.

Roger J. Sit

Kent L. Johnson

Robert W. Sit

Portfolio Managers

 

 

 

30

  

 

SIT MUTUAL FUNDS SEMI-ANNUAL REPORT

 

    

 

 

 

COMPARATIVE RATES OF RETURNS

 

as of December 31, 2016

 

     

Sit

Mid Cap
Growth Fund

   Russell
Midcap®
Growth
Index 1		   Russell
Midcap®
Index 2

Six Month

        5.72 %       5.07 %       7.87 %

One Year

        3.10         7.33         13.80  

Five Year

        11.04         13.51         14.72  

Ten Year

        5.85         7.83         7.86  

Since Inception

(9/2/82)

        11.32         n/a         n/a  

 

 

Performance figures are historical and do not guarantee future results. Investment returns and principal value will vary, and you may have a gain or loss when you sell shares. Current performance may be lower or higher than the performance data quoted. Contact the Fund for performance data current to the most recent month-end. Returns include changes in share price as well as reinvestment of all dividends and capital gains and all fee waivers. Without the fee waivers total return and yield figures would have been lower. Returns do not reflect the deduction of the 2% redemption fee imposed if shares are redeemed or exchanged within 30 calendar days from their date of purchase. If imposed, the fee would reduce the performance quoted. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Management fees and administrative expenses are included in the Fund’s performance. Returns for periods greater than one year are compounded average annual rates of return.

1 Russell Midcap® Growth Index is an unmanaged index that measures the performance of those Russell Midcap Index companies with higher price-to-book ratios and higher forecasted growth values. It is not possible to invest directly in an index.

2 Russell Midcap® Index is an unmanaged index that measures the performance of approximately 800 of the smallest companies in the Russell 1000® Index.

PORTFOLIO SUMMARY

 

 

Net Asset Value 12/31/16:

    $16.08 Per Share        

Net Asset Value 6/30/16:

    $15.36 Per Share

Total Net Assets:

    $142.0 Million

Weighted Average Market Cap:

    $20.3   Billion

TOP 10 HOLDINGS

 

  1. Ulta Salon Cosmetics & Fragrance, Inc.

  2. TJX Cos., Inc.

  3. Broadcom, Ltd.

  4. Ecolab, Inc.

  5. Waste Connections, Inc.

  6. Alaska Air Group, Inc.

  7. Ultimate Software Group, Inc.

  8. Applied Materials, Inc.

  9. priceline.com, Inc.

10. Cardtronics, PLC

 

 

Based on total net assets as of December 31, 2016. Subject to change.

FUND DIVERSIFICATION

 

 

LOGO

Based on total net assets as of December 31, 2016. Subject to change.

 

 

 

DECEMBER 31, 2016

  

 

31

    

   

SCHEDULE OF INVESTMENTS (Unaudited)

December 31, 2016

Sit Mid Cap Growth Fund

 

 

  
  Quantity    Name of Issuer    Fair Value ($)  

 

  

Common Stocks - 95.6%

  

    Commercial Services - 5.4%

  

37,900   

Booz Allen Hamilton Holding Corp.

      1,367,054   
55,300   

Cardtronics, PLC *

      3,017,721   
15,000   

Equifax, Inc.

      1,773,450   
35,200   

Nielsen Holdings, PLC

      1,476,640   
     

 

 

  
        7,634,865   
     

 

 

  

    Communications - 1.3%

  

18,300   

SBA Communications Corp. *

      1,889,658   
     

 

 

  

    Consumer Durables - 4.7%

  

15,300   

Carlisle Cos., Inc.

      1,687,437   
20,000   

Electronic Arts, Inc. *

      1,575,200   
8,700   

Genuine Parts Co.

      831,198   
6,300   

Polaris Industries, Inc.

      519,057   
12,350   

Snap-On, Inc.

      2,115,184   
     

 

 

  
        6,728,076   
     

 

 

  

    Consumer Non-Durables - 1.1%

  

48,900   

Coca-Cola European Partners, PLC

      1,535,460   
     

 

 

  

    Consumer Services - 6.9%

  

3,000   

Chipotle Mexican Grill, Inc. *

      1,131,960   
42,600   

Cinemark Holdings, Inc.

      1,634,136   
53,600   

Dunkin’ Brands Group, Inc.

      2,810,784   
33,832   

Marriott International, Inc.

      2,797,230   
48,900   

Service Corp. International

      1,388,760   
     

 

 

  
        9,762,870   
     

 

 

  

    Electronic Technology - 10.7%

  

98,400   

Applied Materials, Inc.

      3,175,368   
24,800   

Arista Networks, Inc. *

      2,399,896   
22,800   

Broadcom, Ltd.

      4,030,356   
58,200   

Ciena Corp. *

      1,420,662   
27,200   

MACOM Technology Solutions Holdings, Inc. *

      1,258,816   
38,300   

Skyworks Solutions, Inc.

      2,859,478   
     

 

 

  
        15,144,576   
     

 

 

  

    Energy Minerals - 2.2%

  

23,800   

Continental Resources, Inc. *

      1,226,652   
39,010   

Marathon Petroleum Corp.

      1,964,154   
     

 

 

  
        3,190,806   
     

 

 

  

    Finance - 9.3%

  

11,400   

Affiliated Managers Group, Inc. *

      1,656,420   
7,800   

Ameriprise Financial, Inc.

      865,332   
35,300   

Arthur J Gallagher & Co.

      1,834,188   
66,300   

Brixmor Property Group, Inc.

      1,619,046   
23,600   

First Republic Bank

      2,174,504   
16,600   

Hartford Financial Services Group, Inc.

      790,990   
28,500   

Intercontinental Exchange, Inc.

      1,607,970   
51,600   

Legg Mason, Inc.

      1,543,356   

 

  
  Quantity    Name of Issuer    Fair Value ($)  

 

  
4,400   

SVB Financial Group *

      755,304   
4,900   

T Rowe Price Group, Inc.

      368,774   
     

 

 

  
        13,215,884   
     

 

 

  

    Health Services - 4.0%

  

26,300   

Centene Corp. *

      1,486,213   
20,200   

Envision Healthcare Corp. *

      1,278,458   
23,100   

HealthSouth Corp.

      952,644   
21,800   

Patterson Cos, Inc.

      894,454   
15,500   

Surgical Care Affiliates, Inc. *

      717,185   
7,400   

Team Health Holdings, Inc. *

      321,530   
     

 

 

  
        5,650,484   
     

 

 

  

    Health Technology - 8.6%

  

12,000   

Alexion Pharmaceuticals, Inc. *

      1,468,200   
12,200   

Align Technology, Inc. *

      1,172,786   
8,100   

Allergan, PLC *

      1,701,081   
15,700   

Celgene Corp. *

      1,817,275   
4,500   

DexCom, Inc. *

      268,650   
9,300   

Incyte Corp. *

      932,511   
7,900   

Jazz Pharmaceuticals, PLC *

      861,337   
19,650   

Thermo Fisher Scientific, Inc.

      2,772,615   
11,675   

Zimmer Holdings, Inc.

      1,204,860   
     

 

 

  
        12,199,315   
     

 

 

  

    Industrial Services - 2.5%

  

45,500   

Waste Connections, Inc.

      3,575,845   
     

 

 

  

    Process Industries - 5.4%

  

31,200   

Ecolab, Inc.

      3,657,264   
18,800   

International Paper Co.

      997,528   
30,800   

Scotts Miracle-Gro Co.

      2,942,940   
     

 

 

  
        7,597,732   
     

 

 

  

    Producer Manufacturing - 7.4%

  

4,689   

Adient, PLC *

      274,775   
24,000   

AMETEK, Inc.

      1,166,400   
10,950   

Anixter International, Inc. *

      887,498   
18,400   

Delphi Automotive, PLC

      1,239,240   
3,100   

Hubbell, Inc.

      361,770   
26,400   

Ingersoll-Rand, PLC

      1,981,056   
46,890   

Johnson Controls International, PLC

      1,931,399   
18,600   

Mobileye NV *

      709,032   
23,100   

Orbital ATK, Inc.

      2,026,563   
     

 

 

  
        10,577,733   
     

 

 

  

    Retail Trade - 7.1%

  

40,200   

Macy’s, Inc.

      1,439,562   
55,300   

TJX Cos., Inc.

      4,154,689   
17,700   

Ulta Salon Cosmetics & Fragrance, Inc. *

      4,512,438   
     

 

 

  
        10,106,689   
     

 

 

  

    Technology Services - 14.2%

  

25,100   

ANSYS, Inc. *

      2,321,499   
53,300   

Aspen Technology, Inc. *

      2,914,444   
 

 

See accompanying notes to financial statements.

 

  

 

32

  

 

SIT MUTUAL FUNDS SEMI-ANNUAL REPORT

    

   

 

    

    

 

    

 

 

  
  Quantity    Name of Issuer    Fair Value ($)  

 

  
17,900   

Autodesk, Inc. *

      1,324,779   
36,400   

Cognizant Technology Solutions Corp. *

      2,039,492   
6,700   

DST Systems, Inc.

      717,905   
31,275   

Euronet Worldwide, Inc. *

      2,265,248   
11,700   

Fair Isaac Corp.

      1,394,874   
30,300   

Genpact, Ltd. *

      737,502   
2,150   

priceline.com, Inc. *

      3,152,029   
18,100   

Ultimate Software Group, Inc. *

      3,300,535   
     

 

 

  
        20,168,307   
     

 

 

  

    Transportation - 3.7%

  

38,100   

Alaska Air Group, Inc.

      3,380,613   
24,700   

Ryder System, Inc.

      1,838,668   
     

 

 

  
        5,219,281   
     

 

 

  

    Utilities - 1.1%

  

27,800   

WEC Energy Group, Inc.

      1,630,470   
     

 

 

  

Total Common Stocks
(cost: $84,319,899)

      135,828,051   
     

 

 

  

 

  
  Quantity    Name of Issuer    Fair Value ($)  

 

  

Short-Term Securities - 4.4%

   
6,222,617   

Fidelity Instl. Money Mkt. Govt. Fund, 0.39%

   

Total Short-Term Securities
(cost: $6,222,617)

      6,222,617   
     

 

 

  

Total Investments in Securities - 100.0%
(cost: $90,542,516)

      142,050,668   

Other Assets and Liabilities, net - 0.0%

      (51,744 ) 
     

 

 

  

Total Net Assets - 100.0%

      $141,998,924   
     

 

 

  

 

 

* Non-income producing security.

Numeric footnotes not disclosed are not applicable to this Schedule of Investments.

PLC — Public Limited Company

 

 

A summary of the levels for the Fund’s investments as of December 31, 2016 is as follows (see Note 2 - significant accounting policies in the notes to financial statements):

 

    Investment in Securities  
    Level 1      Level 2    Level 3       
    Quoted
Price ($)		      Other significant
observable inputs ($)		    Significant
unobservable inputs ($)		    Total ($)  

Common Stocks **

     135,828,051       —    —      135,828,051   

Short-Term Securities

     6,222,617       —    —      6,222,617   

Total:

     142,050,668       —    —      142,050,668   

 

**  For equity securities categorized in a single level, refer to the Schedule of Investments for further breakdown.

For the reporting period, there were no transfers between levels 1, 2 and 3.

 

See accompanying notes to financial statements.

 

  

 

DECEMBER 31, 2016

  

 

33

 

Sit Small Cap Dividend Growth Fund Class I and Class S

 

 

OBJECTIVE & STRATEGY

The objective of the Sit Small Cap Dividend Growth Fund is to provide current income that exceeds the Fund’s benchmark index and that grows over a period of years. Secondarily the Fund seeks long-term capital appreciation. The Fund seeks to achieve its objectives by investing, under normal market conditions, at least 80% of its net assets in small cap dividend-paying common stocks that have market capitalizations at the time of purchase of up to $3.0 billion, or up to the market capitalization of the largest company included in the Russell 2000® Index measured at the end of the previous twelve months ($8.5 billion as of December 31, 2016). The Fund may invest the balance of its assets in preferred stocks, convertible bonds, U.S. Treasury securities (including Treasury bills, notes and bonds), closed-end investment companies, and master limited partnerships.

 

 

 

The Sit Small Cap Dividend Growth Fund posted a +11.29% return over the past six months, compared to the +18.68% return for the Russell 2000® Index. The Fund’s gross dividend yield (before deduction of Fund expenses) is 2.30% compared to the 1.80% yield of the Russell 2000® Index.

Investor sentiment toward small capitalization stocks soared in recent months, as post-election optimism propelled small cap stocks to record levels. We believe much of this optimism is justified, but given elevated valuations, investors may need to see visible signs of progress on policies for further gains to be achieved. Importantly, small cap stocks stand to benefit disproportionately (relative to larger cap stocks) from President-elect Trump’s agenda, which calls for lower tax rates, deregulation and fiscal stimulus. These initiatives will clearly favor U.S. domestically-focused companies which tend to fall within the small cap universe. We view the financial sector as the greatest beneficiary of policy changes and an improving economic backdrop, including higher interest rates. While the heaviest weighting is in finance, the Fund remains well-diversified in other sectors, with significant positions in consumer services, process industries and consumer durables. While we are hopeful that pro-growth policies will catalyze economic growth (and corporate earnings growth) for many sectors held in the Fund, we recognize the risks (e.g., dollar strength, inflation) and potential for investor frustration if policy implementation is delayed. We believe downside risks can be mitigated with a focus on quality firms that pay consistent dividends to shareholders.

The Fund underperformed the Russell 2000® Index over the past six months. Underweighting banks within the finance sector was a key factor, with additional pressure from poor stock selection in commercial service and health services. In addition, the Fund’s cash balance negatively impacted returns, given the market surge. In terms of individual stocks, Life Storage, Kindred Healthcare, Carter’s, DST Systems and Physicians Realty Trust were laggards. On the positive side, the Fund’s holdings in the transportation, energy minerals and

HYPOTHETICAL GROWTH OF $10,000

 

LOGO

The chart above illustrates the total value of a hypothetical $10,000 investment in the Fund over the past 10 years as compared to the performance of the Russell 2000® Index. Past performance does not guarantee future results. Returns include the reinvestment of distributions. The chart does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

1 Russell 2000® Index is an unmanaged index that measures the performance of the 2,000 smallest companies in the Russell 3000® Index, an index consisting of the 3,000 largest U.S. companies based on market capitalization. It is not possible to invest directly in an index. This is the Fund’s primary index.

 

consumer durables sectors aided returns. Key outperformers within these sectors included Alaska Air Group, Western Refining, and Thor Industries.

We strongly believe in the merits of the Sit Small Cap Dividend Growth Fund’s strategy. Our focus remains on high quality, well-managed firms, with strong financial characteristics and management teams committed to returning capital to shareholders. We appreciate our investors’ interest in the Fund.

 

Roger J. Sit   Michael T. Manns   
Kent L. Johnson   Robert W. Sit   
Portfolio Managers   
 

 

 

34

  

 

SIT MUTUAL FUNDS SEMI-ANNUAL REPORT

 

    

 

 

COMPARATIVE RATES OF RETURNS

 

as of December 31, 2016

 

     Sit Small Cap    
     Dividend    
     Growth Fund   Russell
             2000®
      Class I   Class S   Index 1

Six Month

        11.29 %       11.09 %       18.68%   

One Year

        20.59         20.31         21.31     

Since Inception

(3/31/15)

        7.07         6.81         6.21     

 

 

Performance figures are historical and do not guarantee future results. Investment returns and principal value will vary, and you may have a gain or loss when you sell shares. Current performance may be lower or higher than the performance data quoted. Contact the Fund for performance data current to the most recent month-end. Returns include changes in share price as well as reinvestment of all dividends and capital gains. Returns do not reflect the deduction of the 2% redemption fee imposed if shares are redeemed or exchanged within 30 calendar days from their date of purchase. If imposed, the fee would reduce the performance quoted. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Management fees and administrative expenses are included in the Fund’s performance. Returns for periods greater than one year are compounded average annual rates of return.

1 Russell 2000® Index is an unmanaged index that measures the performance of the 2,000 smallest companies in the Russell 3000® Index, an index consisting of the 3,000 largest U.S. companies based on market capitalization. It is not possible to directly invest in an index.

PORTFOLIO SUMMARY

 

 

Class I:

   

Net Asset Value 12/31/16:

      $11.04 Per Share   

Net Asset Value 6/30/16:

      $10.00 Per Share   

Total Net Assets:

      $10.5   Million   

Class S:

   

Net Asset Value 12/31/16:

      $11.04 Per Share   

Net Asset Value 6/30/16:

      $10.00 Per Share   

Total Net Assets:

      $3.0     Million   

Weighted Average Market Cap:

      $3.9     Billion   

TOP 10 HOLDINGS

 

  1. East West Bancorp, Inc.

  2. MKS Instruments, Inc.

  3. Thor Industries, Inc.

  4. DST Systems, Inc.

  5. Deluxe Corp.

  6. Power Integrations, Inc.

  7. Monolithic Power Systems, Inc.

  8. Booz Allen Hamilton Holding Corp.

  9. Legg Mason, Inc.

10. HealthSouth Corp.

 

 

Based on total net assets as of December 31, 2016. Subject to change.

FUND DIVERSIFICATION

 

 

 

 

LOGO

Based on total net assets as of December 31, 2016. Subject to change.

 

 

 

DECEMBER 31, 2016

  

 

35

    

   

SCHEDULE OF INVESTMENTS (Unaudited)

December 31, 2016

Sit Small Cap Dividend Growth Fund

 

 

  
  Quantity    Name of Issuer    Fair Value ($)  

 

  

Common Stocks - 93.1%

  

    Commercial Services - 5.3%

  

5,475   

Booz Allen Hamilton Holding Corp.

      197,483   
1,600   

CEB, Inc.

      96,960   
2,850   

Deluxe Corp.

      204,088   
950   

Dun & Bradstreet Corp.

      115,254   
2,425   

Herman Miller, Inc.

      82,935   
1,400   

Nautilus, Inc. *

      25,900   
     

 

 

  
        722,620   
     

 

 

  

    Communications - 0.9%

  

4,300   

Shenandoah Telecommunications Co.

      117,390   
     

 

 

  

    Consumer Durables - 6.1%

  

1,125   

Carlisle Cos, Inc.

      124,076   
3,675   

Ethan Allen Interiors, Inc.

      135,424   
610   

Snap-On, Inc.

      104,475   
2,300   

Thor Industries, Inc.

      230,115   
1,925   

Toro Co.

      107,704   
2,350   

Tupperware Brands Corp.

      123,657   
     

 

 

  
        825,451   
     

 

 

  

    Consumer Non-Durables - 5.2%

  

3,750   

B&G Foods, Inc.

      164,250   
950   

Cal-Maine Foods, Inc.

      41,966   
900   

Carter’s, Inc.

      77,751   
1,600   

Fresh Del Monte Produce, Inc.

      97,008   
2,900   

Pinnacle Foods, Inc.

      155,005   
2,100   

Sensient Technologies Corp.

      165,018   
     

 

 

  
        700,998   
     

 

 

  

    Consumer Services - 9.0%

  

6,200   

Bloomin’ Brands, Inc.

      111,786   
2,625   

Brinker International, Inc.

      130,016   
1,850   

Capella Education Co.

      162,430   
4,525   

Cinemark Holdings, Inc.

      173,579   
3,475   

Dunkin’ Brands Group, Inc.

      182,229   
6,250   

Service Corp. International

      177,500   
7,200   

Time, Inc.

      128,520   
925   

Vail Resorts, Inc.

      149,212   
     

 

 

  
        1,215,272   
     

 

 

  

    Electronic Technology - 4.7%

  

3,875   

MKS Instruments, Inc.

      230,175   
2,425   

Monolithic Power Systems, Inc.

      198,680   
3,000   

Power Integrations, Inc.

      203,550   
     

 

 

  
        632,405   
     

 

 

  

    Energy Minerals - 1.7%

  

2,750   

Vermilion Energy, Inc.

      115,968   
3,225   

Western Refining, Inc.

      122,066   
     

 

 

  
        238,034   
     

 

 

  

 

  
  Quantity    Name of Issuer    Fair Value ($)  

 

  

    Finance - 24.1%

  

3,675   

BankUnited, Inc.

      138,511   
4,525   

Berkshire Hills Bancorp, Inc.

      166,746   
4,350   

BlackRock Capital Investment Corp.

      30,276   
4,900   

Brixmor Property Group, Inc.

      119,658   
3,900   

Chimera Investment Corp.

      66,378   
3,250   

Columbia Banking System, Inc.

      145,210   
6,200   

Donegal Group, Inc.

      108,376   
4,950   

East West Bancorp, Inc.

      251,608   
1,300   

Equity LifeStyle Properties, Inc.

      93,730   
1,500   

Evercore Partners, Inc.

      103,050   
7,275   

Farmland Partners, Inc.

      81,189   
3,900   

Horace Mann Educators Corp.

      166,920   
8,125   

Janus Capital Group, Inc.

      107,819   
11,900   

Kingstone Cos, Inc.

      163,625   
6,550   

Legg Mason, Inc.

      195,910   
1,000   

Life Storage, Inc.

      85,260   
2,050   

Macquarie Infrastructure Co.

      167,485   
6,700   

Monogram Residential Trust, Inc.

      72,494   
4,400   

National General Holdings Corp.

      109,956   
7,350   

Old National Bancorp

      133,402   
1,100   

PacWest Bancorp

      59,884   
8,250   

Physicians Realty Trust

      156,420   
5,825   

Provident Financial Services, Inc.

      164,848   
3,800   

STORE Capital Corp.

      93,898   
3,325   

Umpqua Holdings Corp.

      62,444   
1,700   

Validus Holdings, Ltd.

      93,517   
1,600   

Wintrust Financial Corp.

      116,112   
     

 

 

  
        3,254,726   
     

 

 

  

    Health Services - 3.3%

  

3,875   

Healthcare Services Group, Inc.

      151,784   
4,550   

HealthSouth Corp.

      187,642   
2,725   

Patterson Cos, Inc.

      111,807   
     

 

 

  
        451,233   
     

 

 

  

    Health Technology - 3.1%

  

1,675   

PerkinElmer, Inc.

      87,351   
2,500   

STERIS, PLC

      168,475   
1,000   

Teleflex, Inc.

      161,150   
     

 

 

  
        416,976   
     

 

 

  

    Industrial Services - 1.0%

  

1,725   

Waste Connections, Inc.

      135,568   
     

 

 

  

    Non-Energy Minerals - 1.0%

  

2,550   

Commercial Metals Co.

      55,539   
2,000   

Potlatch Corp.

      83,300   
     

 

 

  
        138,839   
     

 

 

  

    Process Industries - 7.3%

  

2,400   

Apogee Enterprises, Inc.

      128,544   
1,700   

Avery Dennison Corp.

      119,374   
4,650   

Huntsman Corp.

      88,722   
 

 

See accompanying notes to financial statements.

 

  

 

36

  

 

SIT MUTUAL FUNDS SEMI-ANNUAL REPORT

    

   

 

    

    

 

    

 

 

  
  Quantity    Name of Issuer    Fair Value ($)  

 

  
1,200   

Ingredion, Inc.

      149,952   
1,275   

Innophos Holdings, Inc.

      66,632   
1,225   

Neenah Paper, Inc.

      104,370   
8,675   

Orion Engineered Carbons SA

      163,524   
1,700   

Scotts Miracle-Gro Co.

      162,435   
     

 

 

  
        983,553   
     

 

 

  

    Producer Manufacturing - 7.2%

  

1,300   

Applied Industrial Technologies, Inc.

      77,220   
3,100   

Atkore International Group, Inc. *

      74,121   
1,700   

Crane Co.

      122,604   
650   

Graco, Inc.

      54,008   
1,125   

Hubbell, Inc.

      131,288   
1,875   

ITT, Inc.

      72,319   
925   

Lincoln Electric Holdings, Inc.

      70,920   
1,375   

MSA Safety, Inc.

      95,329   
1,950   

Orbital ATK, Inc.

      171,074   
675   

Watsco, Inc.

      99,981   
     

 

 

  
        968,864   
     

 

 

  

    Retail Trade - 2.7%

  

2,825   

Big Lots, Inc.

      141,843   
1,200   

Camping World Holdings, Inc.

      39,108   
1,050   

Casey’s General Stores, Inc.

      124,824   
1,950   

Cato Corp.

      58,656   
     

 

 

  
        364,431   
     

 

 

  

    Technology Services - 3.4%

  

1,800   

Broadridge Financial Solutions, Inc.

      119,340   
1,950   

DST Systems, Inc.

      208,942   
550   

Fair Isaac Corp.

      65,571   
1,550   

ManTech International Corp.

      65,488   
     

 

 

  
        459,341   
     

 

 

  

 

  
  Quantity    Name of Issuer    Fair Value ($)  

 

  

    Transportation - 3.1%

  

1,400   

Alaska Air Group, Inc.

      124,222   
3,350   

Golar LNG, Ltd.

      76,849   
2,000   

Marten Transport, Ltd.

      46,600   
2,300   

Ryder System, Inc.

      171,212   
     

 

 

  
        418,883   
     

 

 

  

    Utilities - 4.0%

  

2,000   

Black Hills Corp.

      122,680   
1,100   

Connecticut Water Service, Inc.

      61,435   
4,700   

Covanta Holding Corp.

      73,320   
3,775   

New Jersey Resources Corp.

      134,012   
2,350   

Spire, Inc.

      151,692   
     

 

 

  
        543,139   
     

 

 

  

Total Common Stocks
(cost: $11,091,602)

      12,587,723   
     

 

 

  

Investment Companies - 0.6%

  

2,900   

Tortoise Energy Infrastructure Corp.

      89,001   
     

 

 

  

    (cost: $107,796)

  

Short-Term Securities - 5.6%

  

753,149   

Fidelity Instl. Money Mkt. Govt. Fund, 0.39%

   

Total Short-Term Securities
(cost: $753,149)

      753,149   
     

 

 

  

Total Investments in Securities - 99.3%
(cost: $11,952,547)

      13,429,873   

Other Assets and Liabilities, net - 0.7%

      91,227   
     

 

 

  

Total Net Assets - 100.0%

      $13,521,100   
     

 

 

  

 

 

*  Non-income producing security.

Numeric footnotes not disclosed are not applicable to this Schedule of Investments.

PLC — Public Limited Company

 

 

A summary of the levels for the Fund’s investments as of December 31, 2016 is as follows (see Note 2 - significant accounting policies in the notes to financial statements):

 

    Investment in Securities  
    Level 1      Level 2    Level 3       
    Quoted
Price ($)		      Other significant
observable inputs ($)		    Significant
unobservable inputs ($)		    Total ($)    

Common Stocks **

     12,587,723       —    —      12,587,723   

Investment Companies

     89,001       —    —      89,001   

Short-Term Securities

     753,149       —    —      753,149   

Total:

     13,429,873       —    —      13,429,873   

 

**  For equity securities categorized in a single level, refer to the Schedule of Investments for further breakdown.

For the reporting period, there were no transfers between levels 1, 2 and 3.

 

See accompanying notes to financial statements.

 

  

 

DECEMBER 31, 2016

  

 

37

 

Sit Small Cap Growth Fund

 

 

OBJECTIVE & STRATEGY

The objective of the Sit Small Cap Growth Fund is to maximize long-term capital appreciation. The Fund seeks to achieve its objective by investing, under normal market conditions, at least 80% of its net assets in common stocks of companies with market capitalizations at the time of purchase of up to $3.0 billion, or up to the market capitalization of the largest company included in the Russell 2000® Index measured at the end of the previous twelve months ($8.5 billion as of December 31, 2016).

The Adviser invests in a diversified group of growing small companies it believes exhibit the potential for superior growth. The Adviser believes that a company’s earnings growth is the primary determinant of its potential long-term return and evaluates a company’s potential for above average long-term earnings and revenue growth.

 

 

 

The Sit Small Cap Growth Fund returned +10.76% over the past six months. This compares to the six-month return of +13.12% for the Russell 2000® Growth Index and the +18.68% return for the Russell 2000® Index.

Small capitalization stocks rallied sharply over the past six months as a “risk on” sentiment quickly emerged within the markets, reflecting optimism that President-elect Trump’s pro-growth policies will provide an improvement in corporate earnings, following a long period of sluggish growth. While the move up in small cap stocks has left valuations at elevated levels, it is important to emphasize that small companies have the most to gain from key elements of Mr. Trump’s plan. Smaller companies, for example, tend to be domestic- oriented, pay high corporate tax rates, and are faced with elevated regulatory compliance costs within the U.S. A rollback in taxes and regulation could allow for a significantly improved growth outlook for many smaller companies. Our investment staff is focusing on identifying which companies/sectors appear to be best-positioned for pro-growth policies. For example, we have increased exposure to the banking and producer manufacturing sectors, as these are cyclical groups that should respond quickly once growth policies are implemented. In addition to these cyclical groups, the Fund continues to have significant exposure to secular growth sectors, including technology services and health technology, which remain the heaviest sector weightings.

The Fund underperformed the Russell 2000® Growth Index over during the second half of 2016. Relative performance was negatively by impacted by stock selection in the health services, technology services and finance sectors. The Fund’s cash position also detracted from returns, given the strong market run-up during the period. Ultimate Software Group, Acadia Healthcare, Manhattan Associates, Envision Healthcare and Novavax were individual stocks that lagged during the second half of 2016. On the positive side, the Fund benefited from strong stock selection in the commercial services, transportation

 

HYPOTHETICAL GROWTH OF $10,000

 

LOGO

The chart above illustrates the total value of a hypothetical $10,000 investment in the Fund over the past 10 years as compared to the performance of the Russell 2000® Growth Index. Past performance does not guarantee future results. Returns include the reinvestment of distributions. The chart does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

1 Russell 2000® Growth Index is an unmanaged index that measures the performance of those Russell 2000 Index companies with higher price-to-book ratios and higher forecasted growth values. It is not possible to invest directly in an index. This is the Fund’s primary index.

 

and consumer services sectors. In terms of individual stocks, the top contributors to the Fund return during the period included Ionis Pharmaceuticals, Alaska Air Group, EMCOR Group, Arista Networks and Scotts Miracle-Gro.

Our research team remains highly focused on identifying long-term investment opportunities within the small cap universe. We appreciate shareholders’ continued interest in the Fund.

 

Roger J. Sit   Michael J. Stellmacher   
Kent L. Johnson   Robert W. Sit   
Portfolio Managers   
 

 

 

38

  

 

SIT MUTUAL FUNDS SEMI-ANNUAL REPORT

 

    

 

 

COMPARATIVE RATES OF RETURNS

 

as of December 31, 2016

 

      Sit
Small Cap
Growth
Fund		   Russell 2000®
Growth Index 1		   Russell
2000®
Index 2

Six Month

        10.76 %       13.12 %       18.68 %

One Year

        3.56         11.32         21.31  

Five Year

        9.68         13.74         14.46  

Ten Year

        6.30         7.76         7.07  

Since Inception

(7/1/94)

        9.98         7.76         9.45  

 

 

Performance figures are historical and do not guarantee future results. Investment returns and principal value will vary, and you may have a gain or loss when you sell shares. Current performance may be lower or higher than the performance data quoted. Contact the Fund for performance data current to the most recent month-end. Returns include changes in share price as well as reinvestment of all dividends and capital gains. Returns do not reflect the deduction of the 2% redemption fee imposed if shares are redeemed or exchanged within 30 calendar days from their date of purchase. If imposed, the fee would reduce the performance quoted. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Management fees and administrative expenses are included in the Fund’s performance. Returns for periods greater than one year are compounded average annual rates of return.

1 Russell 2000® Growth Index is an unmanaged index that measures the performance of those Russell 2000 Index companies with higher price-to-book ratios and higher forecasted growth values. It is not possible to invest directly in an index.

2 Russell 2000® Index is an unmanaged index that measures the performance of the 2,000 smallest companies in the Russell 3000® Index, an index consisting of the 3,000 largest U.S. companies based on market capitalization.

PORTFOLIO SUMMARY

 

 

Net Asset Value 12/31/16:

    $50.41 Per Share    

Net Asset Value 6/30/16:

    $45.59 Per Share

Total Net Assets:

    $86.5   Million

Weighted Average Market Cap:

    $6.6     Billion

TOP 10 HOLDINGS

 

  1. Ultimate Software Group, Inc.

  2. Waste Connections, Inc.

  3. Ulta Salon Cosmetics & Fragrance, Inc.

  4. First Republic Bank/CA

  5. Skyworks Solutions, Inc.

  6. Scotts Miracle-Gro Co.

  7. Aspen Technology, Inc.

  8. Cardtronics, PLC

  9. Dunkin’ Brands Group, Inc.

10. EMCOR Group, Inc.

 

 

Based on total net assets as of December 31, 2016. Subject to change.

FUND DIVERSIFICATION

 

 

LOGO

Based on total net assets as of December 31, 2016. Subject to change.

 

 

 

DECEMBER 31, 2016

  

 

39

    

   

SCHEDULE OF INVESTMENTS (Unaudited)

December 31, 2016

Sit Small Cap Growth Fund

 

 

  
  Quantity    Name of Issuer    Fair Value ($)  

 

  

Common Stocks - 99.2%

  

    Commercial Services - 7.1%

  

40,100   

Booz Allen Hamilton Holding Corp.

      1,446,407   
30,525   

Cardtronics, PLC *

      1,665,749   
8,800   

Deluxe Corp.

      630,168   
11,800   

ICF International, Inc. *

      651,360   
9,300   

Nautilus, Inc. *

      172,050   
36,000   

On Assignment, Inc. *

      1,589,760   
     

 

 

  
        6,155,494   
     

 

 

  

    Communications - 1.8%

  

8,950   

SBA Communications Corp. *

      924,177   
22,300   

Shenandoah Telecommunications Co.

      608,790   
     

 

 

  
        1,532,967   
     

 

 

  

    Consumer Durables - 7.5%

  

23,500   

Century Communities, Inc. *

      493,500   
22,600   

Ethan Allen Interiors, Inc.

      832,810   
5,500   

Polaris Industries, Inc.

      453,145   
8,500   

Snap-On, Inc.

      1,455,795   
20,300   

Take-Two Interactive Software, Inc. *

      1,000,587   
12,800   

Tenneco, Inc. *

      799,616   
11,200   

Thor Industries, Inc.

      1,120,560   
6,700   

Tupperware Brands Corp.

      352,554   
     

 

 

  
        6,508,567   
     

 

 

  

    Consumer Non-Durables - 1.2%

  

10,400   

B&G Foods, Inc.

      455,520   
10,200   

Pinnacle Foods, Inc.

      545,190   
     

 

 

  
        1,000,710   
     

 

 

  

    Consumer Services - 7.7%

  

9,900   

Brinker International, Inc.

      490,347   
3,000   

Buffalo Wild Wings, Inc. *

      463,200   
10,200   

Capella Education Co.

      895,560   
24,900   

Cinemark Holdings, Inc.

      955,164   
31,000   

Dunkin’ Brands Group, Inc.

      1,625,640   
5,900   

Grand Canyon Education, Inc. *

      344,855   
28,600   

Service Corp. International

      812,240   
6,600   

Vail Resorts, Inc.

      1,064,646   
     

 

 

  
        6,651,652   
     

 

 

  

    Electronic Technology - 9.5%

  

18,000   

Ambarella, Inc. *

      974,340   
13,700   

Arista Networks, Inc. *

      1,325,749   
57,200   

Ciena Corp. *

      1,396,252   
15,700   

MACOM Technology Solutions Holdings, Inc. *

      726,596   
7,075   

MKS Instruments, Inc.

      420,255   
9,200   

Monolithic Power Systems, Inc.

      753,756   
23,300   

Skyworks Solutions, Inc.

      1,739,578   
16,000   

Synaptics, Inc. *

      857,280   
     

 

 

  
        8,193,806   
     

 

 

  

 

  
  Quantity    Name of Issuer    Fair Value ($)  

 

  

    Energy Minerals - 0.9%

  

20,950   

Western Refining, Inc.

      792,958   
     

 

 

  

    Finance - 8.9%

  

6,800   

Affiliated Managers Group, Inc. *

      988,040   
6,800   

East West Bancorp, Inc.

      345,644   
18,900   

First Republic Bank/CA

      1,741,446   
26,600   

Legg Mason, Inc.

      795,606   
33,700   

National General Holdings Corp.

      842,163   
14,900   

PacWest Bancorp

      811,156   
50,400   

Physicians Realty Trust

      955,584   
2,600   

SVB Financial Group *

      446,316   
14,000   

Validus Holdings, Ltd.

      770,140   
     

 

 

  
        7,696,095   
     

 

 

  

    Health Services - 3.9%

  

11,800   

Envision Healthcare Corp. *

      746,822   
31,500   

Healthcare Services Group, Inc.

      1,233,855   
8,450   

HealthSouth Corp.

      348,478   
12,725   

Patterson Cos, Inc.

      522,107   
13,000   

Team Health Holdings, Inc. *

      564,850   
     

 

 

  
        3,416,112   
     

 

 

  

    Health Technology - 10.7%

  

6,700   

Alexion Pharmaceuticals, Inc. *

      819,745   
12,000   

Align Technology, Inc. *

      1,153,560   
5,400   

Bio-Techne Corp.

      555,282   
9,500   

Celgene Corp. *

      1,099,625   
2,700   

DexCom, Inc. *

      161,190   
50,100   

Halozyme Therapeutics, Inc. *

      494,988   
17,900   

Ionis Pharmaceuticals, Inc. *

      856,157   
66,000   

K2M Group Holdings, Inc. *

      1,322,640   
17,100   

NxStage Medical, Inc. *

      448,191   
8,400   

PerkinElmer, Inc.

      438,060   
15,900   

STERIS, PLC

      1,071,501   
34,800   

VWR Corp. *

      871,044   
     

 

 

  
        9,291,983   
     

 

 

  

    Industrial Services - 4.2%

  

22,900   

EMCOR Group, Inc.

      1,620,404   
25,800   

Waste Connections, Inc.

      2,027,622   
     

 

 

  
        3,648,026   
     

 

 

  

    Process Industries - 3.0%

  

16,200   

Apogee Enterprises, Inc.

      867,672   
18,100   

Scotts Miracle-Gro Co.

      1,729,455   
     

 

 

  
        2,597,127   
     

 

 

  

    Producer Manufacturing - 10.0%

  

6,700   

Anixter International, Inc. *

      543,035   
22,325   

Atkore International Group, Inc. *

      533,791   
12,500   

CLARCOR, Inc.

      1,030,875   
15,800   

Crane Co.

      1,139,496   
6,500   

Hubbell, Inc.

      758,550   
 

 

See accompanying notes to financial statements.

 

  

 

40

  

 

SIT MUTUAL FUNDS SEMI-ANNUAL REPORT

    

   

 

    

    

 

    

 

 

 

  
  Quantity    Name of Issuer    Fair Value ($)  

 

  
8,100   

IDEX Corp.

      729,486   
17,700   

ITT, Inc.

      682,689   
8,300   

Lincoln Electric Holdings, Inc.

      636,361   
6,600   

MSA Safety, Inc.

      457,578   
16,800   

Orbital ATK, Inc.

      1,473,864   
8,400   

Wabtec Corp.

      697,368   
     

 

 

  
        8,683,093   
     

 

 

  

    Retail Trade - 3.8%

  

3,400   

Big Lots, Inc.

      170,714   
8,100   

Camping World Holdings, Inc.

      263,979   
8,400   

Casey’s General Stores, Inc.

      998,592   
7,100   

Ulta Salon Cosmetics & Fragrance, Inc. *

      1,810,074   
     

 

 

  
        3,243,359   
     

 

 

  

    Technology Services - 13.7%

  

13,100   

ANSYS, Inc. *

      1,211,619   
31,300   

Aspen Technology, Inc. *

      1,711,484   
14,000   

comScore, Inc. *

      442,120   
10,900   

DST Systems, Inc.

      1,167,935   
18,300   

Euronet Worldwide, Inc. *

      1,325,469   
6,800   

Fair Isaac Corp.

      810,696   
12,550   

GoDaddy, Inc. *

      438,622   
25,400   

Manhattan Associates, Inc. *

      1,346,962   
33,100   

Synchronoss Technologies, Inc. *

      1,267,730   
11,500   

Ultimate Software Group, Inc. *

      2,097,025   
     

 

 

  
        11,819,662   
     

 

 

  

 

  
  Quantity    Name of Issuer    Fair Value ($)  

 

  

    Transportation - 4.1%

  

16,200   

Alaska Air Group, Inc.

      1,437,426   
17,700   

Echo Global Logistics, Inc. *

      443,385   
21,800   

Marten Transport, Ltd.

      507,940   
15,000   

Ryder System, Inc.

      1,116,600   
     

 

 

  
        3,505,351   
     

 

 

  

    Utilities - 1.2%

  

12,107   

Fortis, Inc.

      373,864   
10,100   

Spire, Inc.

      651,955   
     

 

 

  
        1,025,819   
     

 

 

  

Total Common Stocks
(cost: $59,329,935)

      85,762,781   
     

 

 

  

Short-Term Securities - 1.0%

   
877,840   

Fidelity Instl. Money Mkt. Govt. Fund, 0.39%

  

Total Short-Term Securities
(cost: $877,840)

      877,840   
     

 

 

  

Total Investments in Securities - 100.2%
(cost: $60,207,775)

      86,640,621   

Other Assets and Liabilities, net - (0.2%)

      (137,976 ) 
     

 

 

  

Total Net Assets - 100.0%

      $86,502,645   
     

 

 

  

 

*  Non-income producing security.

Numeric footnotes not disclosed are not applicable to this Schedule of Investments.

PLC — Public Limited Company

 

 

A summary of the levels for the Fund’s investments as of December 31, 2016 is as follows (see Note 2 - significant accounting policies in the notes to financial statements):

 

    Investment in Securities  
    Level 1      Level 2    Level 3       
    Quoted
Price ($)		      Other significant
observable inputs ($)		    Significant
unobservable inputs ($)		    Total ($)    

Common Stocks **

     85,762,781       —    —      85,762,781   

Short-Term Securities

     877,840       —    —      877,840   

Total:

     86,640,621       —    —      86,640,621   

 

**  For equity securities categorized in a single level, refer to the Schedule of Investments for further breakdown.

For the reporting period, there were no transfers between levels 1, 2 and 3.

 

See accompanying notes to financial statements.

 

  

 

DECEMBER 31, 2016

  

 

41

 

Sit International Growth Fund

 

 

OBJECTIVE STRATEGY

The objective of the Sit International Growth Fund is long-term growth. The Fund seeks to achieve its objective by investing at least 90% of its net assets in common stocks of growth companies domiciled outside the United States. In selecting investments for the Fund, the Adviser begins by selecting countries or regions in which to invest by considering several factors affecting the economy and equity market of foreign countries and regions. After the country and regional allocations are determined, the Adviser seeks industries and sectors that it believes have earnings growth prospects that are greater than the average. Within the selected industries and sectors, the Adviser invests in foreign growth-oriented companies it believes exhibit the potential for superior growth.

 

 

For the six-month period ended December 31 2016, the Sit International Growth Fund generated a total return of -2.21% versus total returns of +5.67% and -0.84% for the MSCI EAFE and MSCI EAFE Growth indices, respectively. An overweight in food/beverage/ tobacco stocks, an underweight position in bank stocks, and poor stock selection within the auto sector contributed to underperformance relative to the MSCI EAFE Index. The portfolio was also negatively impacted by the strong performance of value-oriented and U.S.-exposed stocks following the surprise presidential election victory of Donald Trump on November 8th.

Looking forward, we believe the performance of European equities will remain choppy in response to both political and global macroeconomic events. However, investors will likely begin to anticipate diminished political risk heading into 2018 and the potential for improved fiscal/corporate spending, implying a solid underlying bid for European stocks as we move through the year. We do not expect a “rising tide lifts all boats” scenario by any means and remain selective with regard to our sector, end market, and company-specific exposures. Given the negative impact of a strong U.S. dollar and a myriad of other concerns, we are underweighting stocks with significant emerging market exposure and prefer companies that are either plays on domestic secular/cyclical/niche growth, address markets where there is pent-up demand, benefit from modest inflation/rising global yields, and/or have meaningful exposure to the United States. As such, we have recently increased weightings in financial stocks (insurance and banks) that will benefit from the potential for lower regulation and a steeper interest rate curve in the United States as well as a modestly improving banking environment in Europe. We have also been selectively pursuing other beneficiaries of President-elect Trump’s policies in terms of lower taxes, infrastructure spending, and deregulation, while also being cognizant of the various risks associated with tax, currency, and trade issues.

Outflows from Japan equities have abated and valuations remain cheap relative to other global equity markets. However, we continue to remain meaningfully underweight Japan given our cautious view on the economy’s long-term growth prospects. The key concern remains the ability of “Abenomics” to overcome the substantial structural challenges of a declining population, rigid labor market, and elevated debt levels. Within our Japanese holdings, we increasingly prefer beneficiaries from a weaker yen such as exporters and multinationals that benefit from favorable currency translation as well as those leveraged to regions where growth prospects are improving, such as the US. We round out Japanese holdings with defensive domestic

HYPOTHETICAL GROWTH OF $10,000

 

LOGO

The chart above illustrates the total value of a hypothetical $10,000 investment in the Fund over the past 10 years as compared to the performance of the MSCI EAFE Index and MSCI EAFE Growth Index. The primary index used to compare the Fund’s performance was changed to the MSCI EAFE Index from the MSCI EAFE Growth Index because the Investment Adviser believes that the MSCI EAFE Index more accurately reflects the Fund’s investment objectives and strategies. Past performance does not guarantee future results. Returns include the reinvestment of distributions. The chart does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

1 MSCI EAFE Index (Europe, Australasia, Far East) is an unmanaged free float-adjusted market capitalization index that measures the equity market performance of developed markets, excluding the US & Canada. This is the Fund’s primary index.

2 MSCI EAFE Growth Index (Europe, Australasia, Far East) is an unmanaged free float-adjusted market capitalization index that measures the equity market performance of growth oriented stocks of developed markets excluding the US & Canada.

 

consumption stocks that stand to best weather a subdued domestic growth environment. Across all holdings, we focus on names with proprietary technologies and/or well-entrenched leading market positions, quality earnings, and strong balance sheets.

While we only expect a mild slowdown in the economy in 2017, capital outflow concerns are likely to linger in China. Concerns on potential rising trade tensions with the incoming U.S. administration may also limit near-term upside. However, looking beyond near-term cautiousness, we are maintaining our China Internet exposure despite its recent underperformance, as growth remains solid and the outlook is positive. We expect these stocks to outperform the market once macro concerns fade, as we have seen in the past.

Roger J. Sit     Tasha M. Murdoff

Portfolio Managers

 

 

 

42

  

 

SIT MUTUAL FUNDS SEMI-ANNUAL REPORT

 

    

 

 

 

COMPARATIVE RATES OF RETURNS

 

 

as of December 31, 2016  
      Sit
International
Growth
Fund		   MSCI EAFE
Index 1		   MSCI EAFE
Growth
Index 2		  

Six Month

    -2.21%   5.67%     -0.84%   

One Year

    -6.66      1.00        -3.04      

Five Year

    4.72     6.53        6.67     

Ten Year

    0.03     0.75        1.64     

Since Inception

(11/1/91)

    3.48     4.93        3.81     

Performance figures are historical and do not guarantee future results. Investment returns and principal value will vary, and you may have a gain or loss when you sell shares. Current performance may be lower or higher than the performance data quoted. Contact the Fund for performance data current to the most recent month-end. Returns include changes in share price as well as reinvestment of all dividends and capital gains and all fee waivers. Without the fee waivers total return and yield figures would have been lower. Returns do not reflect the deduction of the 2% redemption fee imposed if shares are redeemed or exchanged within 30 calendar days from their date of purchase. If imposed, the fee would reduce the performance quoted. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Management fees and administrative expenses are included in the Fund’s performance. Returns for periods greater than one year are compounded average annual rates of return.

The index used to compare the Fund’s performance was changed to the MSCI EAFE Index from the MSCI EAFE Growth Index because the Investment Adviser believes that the MSCI EAFE Index more accurately reflects the Fund’s investment objectives and strategies. It is not possible to invest directly in an index.

1 MSCI EAFE Index (Europe, Australasia, Far East) is an unmanaged free float-adjusted market capitalization index that measures the equity market performance of developed markets, excluding the US & Canada.

2 MSCI EAFE Growth Index (Europe, Australasia, Far East) is an unmanaged free float-adjusted market capitalization index that measures the equity market performance of growth oriented stocks of developed markets excluding the US & Canada.

 

FUND DIVERSIFICATION - BY REGION
      Sit Int’l
Growth Fund		   MSCI EAFE
Index

Europe

    64.0%   60.9%

Asia

    25.3      38.4    

North America

    8.5     —   

Africa/Middle East

    0.0     0.7   

Cash & Other Net Assets

 

    2.2     —   

Based on total net assets as of December 31, 2016. Subject to change.

PORTFOLIO SUMMARY         

Net Asset Value 12/31/16:

      $14.09 Per Share   

Net Asset Value 6/30/16:

      $14.48 Per Share   

Total Net Assets:

      $19.6   Million   

Weighted Average Market Cap:

      $58.9   Billion   

 

TOP 10 HOLDINGS

  1. Nestle SA

  2. ING Groep NV

  3. Astellas Pharma, Inc.

  4. Iberdrola SA

  5. Siemens AG

  6. DS Smith, PLC

  7. RELX NV

  8. Reckitt Benckiser Group, PLC

  9. Diageo, PLC, ADR

10. British American Tobacco, PLC

 

Based on total net assets as of December 31, 2016. Subject to change.

FUND DIVERSIFICATION

 

 

LOGO

Based on total net assets as of December 31, 2016. Subject to change.

 

 

 

DECEMBER 31, 2016

  

 

43

    

   

SCHEDULE OF INVESTMENTS (Unaudited)

December 31, 2016

Sit International Growth Fund

 

 

  
  Quantity    Name of Issuer    Fair Value ($)  

 

  

Common Stocks - 96.6%

  

  Asia - 24.1%

  

    Australia - 1.0%

  

8,300   

Westpac Banking Corp., ADR

      194,884   
     

 

 

  

    China/Hong Kong - 6.5%

  

32,200   

AIA Group, Ltd.

      180,379   
2,075   

Alibaba Group Holding, Ltd., ADR *

      182,206   
7,025   

HSBC Holdings, PLC, ADR

      282,264   
79,500   

Techtronic Industries Co., Ltd.

      284,489   
13,900   

Tencent Holdings, Ltd.

      337,035   
     

 

 

  
        1,266,373   
     

 

 

  

    Japan - 12.2%

  

13,900   

Ajinomoto Co., Inc.

      279,704   
14,600   

Asics Corp.

      290,948   
33,700   

Astellas Pharma, Inc.

      467,532   
25,600   

Daicel Corp.

      281,448   
200   

Keyence Corp.

      136,850   
2,100   

Makita Corp.

      140,320   
49,600   

Mitsubishi UFJ Financial Group, Inc., ADR

      305,536   
3,500   

Secom Co., Ltd.

      255,724   
6,600   

Suzuki Motor Corp.

      231,719   
     

 

 

  
        2,389,781   
     

 

 

  

    Singapore - 2.4%

  

1,850   

Broadcom, Ltd.

      327,024   
12,000   

DBS Group Holdings, Ltd.

      143,170   
     

 

 

  
        470,194   
     

 

 

  

    South Korea - 2.0%

  

6,200   

Korea Electric Power Corp.

      226,164   
235   

Samsung Electronics Co., Ltd., GDR

      174,725   
     

 

 

  
        400,889   
     

 

 

  

  Europe - 64.0%

  

    Belgium - 1.5%

  

2,870   

Anheuser-Busch InBev NV, ADR

      302,613   
     

 

 

  

    France - 9.7%

  

8,250   

AXA SA

      207,973   
4,870   

BNP Paribas SA

      309,918   
3,225   

Dassault Systemes SA

      245,475   
2,300   

DBV Technologies SA *

      160,305   
2,500   

Ingenico Group SA

      199,465   
3,825   

Safran SA

      275,110   
2,300   

Schlumberger, Ltd.

      193,085   
1,265   

Unibail-Rodamco SE

      301,457   
     

 

 

  
        1,892,788   
     

 

 

  

    Germany - 5.5%

  

1,815   

Allianz SE

      299,545   
2,960   

Aurelius SE & Co.

      173,063   

 

  
  Quantity    Name of Issuer    Fair Value ($)  

 

  
1,100   

Linde AG

      180,442   
3,425   

Siemens AG

      419,358   
     

 

 

  
        1,072,408   
     

 

 

  

    Ireland - 2.5%

  

2,900   

CRH, PLC, ADR

      99,702   
5,400   

Medtronic, PLC

      384,642   
     

 

 

  
        484,344   
     

 

 

  

    Netherlands - 9.6%

  

1,325   

ASML Holding NV

      148,665   
3,200   

Galapagos NV *

      204,945   
34,900   

ING Groep NV

      491,350   
4,375   

LyondellBasell Industries NV

      375,288   
6,350   

Mobileye NV *

      242,062   
24,200   

RELX NV

      407,042   
     

 

 

  
        1,869,352   
     

 

 

  

    Spain - 4.0%

  

66,900   

Iberdrola SA

      438,055   
10,300   

Industria de Diseno Textil SA

      350,881   
     

 

 

  
        788,936   
     

 

 

  

    Switzerland - 8.0%

  

140   

Interroll Holding AG

      152,607   
7,470   

Nestle SA

      535,133   
3,325   

Novartis AG

      241,806   
1,470   

Roche Holding AG

      335,090   
1,120   

Zurich Insurance Group AG

      307,798   
     

 

 

  
        1,572,434   
     

 

 

  

    United Kingdom - 23.2%

  

10,500   

Ashtead Group, PLC

      204,125   
4,875   

ASOS, PLC *

      297,854   
25,300   

Babcock International Group, PLC

      296,756   
6,790   

British American Tobacco, PLC

      384,828   
5,500   

Cardtronics, PLC *

      300,135   
22,900   

Cineworld Group, PLC

      159,198   
7,525   

Coca-Cola European Partners, PLC

      236,285   
3,050   

Delphi Automotive, PLC

      205,418   
3,750   

Diageo, PLC, ADR

      389,775   
83,000   

DS Smith, PLC

      416,795   
66,700   

Greencore Group, PLC

      202,282   
32,501   

Just Eat, PLC *

      233,537   
5,725   

Nielsen Holdings, PLC

      240,164   
4,700   

Reckitt Benckiser Group, PLC

      398,130   
4,500   

Royal Dutch Shell, PLC, ADR - Class A

      244,710   
2,200   

Royal Dutch Shell, PLC, ADR - Class B

      127,534   
3,000   

STERIS, PLC

      202,170   
     

 

 

  
        4,539,696   
     

 

 

  
 

 

See accompanying notes to financial statements.

 

  

 

44

  

 

SIT MUTUAL FUNDS SEMI-ANNUAL REPORT

    

   

 

    

    

 

    

 

 

  
Quantity    Name of Issuer    Fair Value ($)  

 

  

  North America - 8.5%

   

    Canada - 5.3%

  

6,925   

BCE, Inc.

      299,437   
7,600   

Gildan Activewear, Inc.

      192,812   
10,600   

Suncor Energy, Inc.

      346,514   
2,500   

Waste Connections, Inc.

      196,475   
     

 

 

  
        1,035,238   
     

 

 

  

    United States - 3.2%

  

3,675   

Cognizant Technology Solutions Corp. *

      205,910   
3,275   

Euronet Worldwide, Inc. *

      237,208   
120   

priceline.com, Inc. *

      175,927   
     

 

 

  
        619,045   
     

 

 

  

Total Common Stocks
(cost: $18,174,530)

      18,898,975   
     

 

 

  

Investment Companies - 1.2%

   
8,700   

iShares MSCI India ETF

      233,247   
     

 

 

  

    (cost: $258,887)

   

Short-Term Securities - 1.9%

   
366,006   

Fidelity Instl. Money Mkt. Govt. Fund, 0.39%

  

Total Short-Term Securities
(cost: $366,006)

      366,006   
     

 

 

  

Total Investments in Securities - 99.7%
(cost: $18,799,423)

      19,498,228   

Other Assets and Liabilities, net - 0.3%

      66,160   
     

 

 

  

Total Net Assets - 100.0%

      $19,564,388   
     

 

 

  

 

 

* 

Non-income producing security.

Numeric footnotes not disclosed are not applicable to this Schedule of Investments.

ADR — American Depositary Receipt

GDR — Global Depositary Receipt

PLC — Public Limited Company

 

 

See accompanying notes to financial statements.

 

  

 

DECEMBER 31, 2016

  

 

45

    

   

SCHEDULE OF INVESTMENTS (Unaudited)

December 31, 2016

Sit International Growth Fund (Continued)

    

    

 

A summary of the levels for the Fund’s investments as of December 31, 2016 is as follows (see Note 2 - significant accounting policies in the notes to financial statements):

 

     Investment in Securities  
    

Level 1

Quoted

Price ($)

     

Level 2

Other significant
observable inputs ($)

     

Level 3

Significant
unobservable inputs ($)

      Total ($)  

Common Stocks

            

Australia

      194,884         —                 —           194,884   

Belgium

      302,613         —                 —           302,613   

Canada

      1,035,238         —                 —           1,035,238   

China/Hong Kong

      464,470         801,903                 —           1,266,373   

France

      193,085         1,699,703                 —           1,892,788   

Germany

      —         1,072,408                 —           1,072,408   

Ireland

      484,344         —                 —           484,344   

Japan

      305,536         2,084,245                 —           2,389,781   

Netherlands

      766,015         1,103,337                 —           1,869,352   

Singapore

      327,024         143,170                 —           470,194   

South Korea

      —         400,889                 —           400,889   

Spain

      —         788,936                 —           788,936   

Switzerland

      152,607         1,419,827                 —           1,572,434   

United Kingdom

      1,946,191         2,593,505                 —           4,539,696   

United States

      619,045         —                 —           619,045   

Investment Companies

      233,247         —                 —           233,247   

Short-Term Securities

      366,006         —                 —           366,006   

Total:

      7,390,305         12,107,923                 —           19,498,228   

The Fund adjusts the closing price of foreign equity securities by applying a systematic process for events occurring after the close of the foreign exchanges. At each reporting period, this process is applied for all foreign securities and therefore all foreign securities are classified as level 2. There are no transfers between level 1 and level 2 between reporting periods as a result of applying this process. Level 1 securities of foreign issuers are primarily American Depositary Receipts (ADRs), Public Limited Companies (PLCs) or Global Depositary Receipts (GDRs). There were no transfers into or out of level 3 during the reporting period.

 

See accompanying notes to financial statements.

 

  

 

46

  

 

SIT MUTUAL FUNDS SEMI-ANNUAL REPORT

    

    

 

 

 

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DECEMBER 31, 2016

   

 

 

 

47

 

  

 

Sit Developing Markets Growth Fund

 

 

 

OBJECTIVE & STRATEGY

The objective of the Sit Developing Markets Growth Fund is to seek maximize long-term capital appreciation. The Fund seeks to achieve its objective by investing at least 80% of its net assets in common stocks of companies domiciled or operating in a developing market. In selecting investments for the Fund, the Adviser begins by selecting countries or regions in which to invest by considering several factors affecting the economy and equity market of foreign countries and regions. After the country and regional allocations are determined, the Adviser seeks industries and sectors that appear to have strong earnings growth prospects. Within the selected industries and sectors, the Adviser invests in foreign growth-oriented companies it believes exhibit the potential for superior growth.

 

 

The Sit Developing Markets Growth Fund declined -0.39% for the six-month period ended December 31, 2016, underperforming the MSCI Emerging Markets Index’s +3.38% return. Emerging markets’ performance was affected by concerns over weakness in China’s economy, debt-fueled growth in China, President-elect Donald Trump’s possible policies on trade, and higher U.S. interest rates. China’s economy remains the engine of global growth and fears over slower economic growth impact other economies.

China’s 2017 economic growth target is about 6.5%, reinforcing a policy shift from supporting growth to pushing reforms to contain high debt and an overheating property market. The Chinese Renminbi depreciated -7% against the U.S. dollar in 2016, and with rising depreciation expectations, capital outflow pressure continues.

India’s economy continues to show strength from consumer spending and manufacturing, but the rupee demonetization was a setback. The demonetization affected 86% of the cash in circulation and constrained consumer spending. The NAFTA issue creates uncertainty for Mexico’s economy, as they have the highest external trade of 73% of GDP. Trump’s other potential negatives are taxation of workers’ remittances, the building of a wall along the U.S.-Mexico border, massive deportations of Mexicans, and fiscal stimulus in the U.S. to discourage U.S. firms from investing abroad. Brazil’s economic outlook remains tepid, with domestic demand weak and industrial production growth negative.

The software & services (Tencent), technology hardware (Skyworks Solutions, Hon Hai), and consumer services (TAL Education) sectors helped contribute to relative outperformance. The sectors of utilities (Korea Electric Power, ENN Energy), food & staples retailing (BIM Birlesik Magazalar, Alsea), and media (CJ CGV) had the most negative relative underperformance. The Funds underweight in telecommunication services contributed positively to allocation. However, our underweight in the materials and energy sectors hurt our performance. Our overweight in Israel and underweight in Russia also contributed negatively. Conversely, our underweight in Mexico and overweight in Singapore had a positive impact.

In China, we have a modest overweight. We only expect a mild slowdown in the economy in 2017, but capital outflow concerns are likely to linger. In addition, concerns on potential rising trade tensions with the incoming U.S. administration may also limit near-term upside.

HYPOTHETICAL GROWTH OF $10,000

 

LOGO

The chart above illustrates the total value of a hypothetical $10,000 investment in the Fund over the past 10 years as compared to the performance of the MSCI Emerging Markets Index. Past performance does not guarantee future results. Returns include the reinvestment of distributions. The chart does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.

1 MSCI Emerging Markets Index is an unmanaged free float-adjusted market capitalization index that measures equity market performance of emerging markets. It is not possible to invest directly in an index. This is the Fund’s primary index.

 

We are maintaining our China Internet exposure, as growth remains solid and the outlook is positive. Our investment strategy in India is concentrated in consumer and financial sectors.

In Latin America, we remain underweight, especially in Mexico and Brazil. U.S. President-elect Donald Trump’s plan to renegotiate or withdraw from the NAFTA will negatively affect Mexico’s economic growth. The industry most impacted by NAFTA by value of two-way trade with Canada and Mexico is the transportation equipment industry. We like Mexico’s consumer sector, as private consumption remains robust, supported by workers’ remittances. In Brazil, we have turned slightly more positive on the market, but are uncertain of the country’s economic rebound from a recession. We are maintaining a defensive strategy in Brazil, with a focus on consumer staples, exporters, and financials.

Roger J. Sit     Raymond E. Sit

Portfolio Managers

 

 

 

48

  

 

SIT MUTUAL FUNDS SEMI-ANNUAL REPORT

 

    

 

 

COMPARATIVE RATES OF RETURN

 

 

as of December 31, 2016  
      Sit
Developing
Markets
Growth
Fund		   MSCI
Emerging
Markets
Index 1		   MSCI
Emerging
Markets
Growth
Index 2		  

Six Month

    -0.39%   3.38%     1.33%   

One Year

    3.59     8.58       5.84     

Five Year

    -2.13      -1.21        0.87     

Ten Year

    -0.85      -0.57        -0.25      

Since Inception

(7/1/94)

    3.05     2.64       n/a     

 

Performance figures are historical and do not guarantee future results. Investment returns and principal value will vary, and you may have a gain or loss when you sell shares. Current performance may be lower or higher than the performance data quoted. Contact the Fund for performance data current to the most recent month-end. Returns include changes in share price as well as reinvestment of all dividends and capital gains. Returns do not reflect the deduction of the 2% redemption fee imposed if shares are redeemed or exchanged within 30 calendar days from their date of purchase. If imposed, the fee would reduce the performance quoted. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Management fees and administrative expenses are included in the Fund’s performance. Returns for periods greater than one year are compounded average annual rates of return.

1 MSCI Emerging Markets Index is an unmanaged free float-adjusted market capitalization index that measures equity market performance of emerging markets. It is not possible to invest directly in an index.

2 MSCI Emerging Markets Growth Index is an unmanaged free float-adjusted market capitalization index that measures equity market performance of growth oriented emerging market stocks.

 

FUND DIVERSIFICATION - BY REGION
      Sit
Developing
Markets
Growth
Fund		   MSCI
Emerging
Markets
Index

Asia

    69.1%   70.1%

Africa/Middle East

    11.1      9.0 

Latin America

    8.8    13.3  

North America

    4.9    — 

Europe

    3.5    7.6 

Cash & Other Net Assets

 

    2.6    — 

Based on total net assets as of December 31, 2016. Subject to change.

PORTFOLIO SUMMARY         

Net Asset Value 12/31/16:

      $12.18 Per Share   

Net Asset Value 6/30/16:

      $12.26 Per Share   

Total Net Assets:

      $6.9     Million   

Weighted Average Market Cap:

      $64.2   Billion   

 

TOP 10 HOLDINGS

  1. Tencent Holdings, Ltd.

  2. Samsung Electronics Co., Ltd.

  3. Naspers, Ltd.

  4. TAL Education Group, ADR

  5. Shinhan Financial Group Co., Ltd.

  6. iShares MSCI India ETF

  7. NICE Systems, Ltd., ADR

  8. China Construction Bank Corp.

  9. Taiwan Semiconductor Co.

10. Alibaba Group Holding, Ltd., ADR

 

 

 

Based on total net assets as of December 31, 2016. Subject to change.

FUND DIVERSIFICATION

 

 

LOGO

Based on total net assets as of December 31, 2016. Subject to change.

 

 

 

DECEMBER 31, 2016

  

 

49

    

   

SCHEDULE OF INVESTMENTS (Unaudited)

December 31, 2016

Sit Developing Markets Growth Fund

 

 

  
  Quantity   Name of Issuer    Fair Value ($)  

 

  

Common Stocks - 94.1%

   

  Africa/Middle East - 11.1%

  

    Israel - 3.1%

  

3,100  

NICE Systems, Ltd., ADR

      213,156   
    

 

 

  

    South Africa - 8.0%

  

6,410  

Bid Corp., Ltd.

      113,611   
6,910  

Bidvest Group, Ltd.

      90,986   
1,800  

Naspers, Ltd.

      262,785   
3,050  

Sasol, Ltd., ADR

      87,200   
    

 

 

  
       554,582   
    

 

 

  

  Asia - 65.8%

  

    China/Hong Kong - 29.7%

  

14,600  

AIA Group, Ltd.

      81,787   
2,125  

Alibaba Group Holding, Ltd., ADR *

      186,596   
277,000  

China Construction Bank Corp.

      212,135   
4,600  

China Life Insurance Co., Ltd., ADR

      59,202   
50,000  

China Mengniu Dairy Co., Ltd.

      95,873   
3,300  

China Mobile, Ltd., ADR

      173,019   
750  

CNOOC, Ltd., ADR

      92,970   
120,000  

CSPC Pharmaceutical Group, Ltd.

      127,773   
1,825  

Ctrip.com International, Ltd., ADR *

      73,000   
28,000  

ENN Energy Holdings, Ltd.

      114,723   
1,600  

Hong Kong Exchanges & Clearing, Ltd.

      37,629   
5,025  

JD.com, Inc., ADR *

      127,836   
1,350  

PetroChina Co., Ltd., ADR

      99,495   
3,350  

TAL Education Group, ADR *

      235,003   
13,900  

Tencent Holdings, Ltd.

      337,035   
    

 

 

  
       2,054,076   
    

 

 

  

    India - 3.4%

  

1,925  

HDFC Bank, Ltd., ADR

      116,809   
3,400  

Tata Motors, Ltd., ADR

      116,942   
    

 

 

  
       233,751   
    

 

 

  

    Indonesia - 2.3%

  

258,500  

Astra International Tbk PT

      158,065   
    

 

 

  

    Japan - 1.3%

  

2,500  

Suzuki Motor Corp.

      87,772   
    

 

 

  

    Malaysia - 1.2%

  

8,300  

British American Tobacco Malaysia

      82,519   
    

 

 

  

    Singapore - 3.6%

  

675  

Broadcom, Ltd.

      119,320   
11,000  

DBS Group Holdings, Ltd.

      131,239   
    

 

 

  
       250,559   
    

 

 

  

    South Korea - 12.0%

  

1,040  

CJ CGV Co., Ltd.

      60,463   
3,175  

Korea Electric Power Corp.

      115,818   
325  

Medy-Tox, Inc.

      95,646   

 

  
  Quantity   Name of Issuer    Fair Value ($)  

 

  
220  

Samsung Electronics Co., Ltd.

      327,429   
6,200  

Shinhan Financial Group Co., Ltd.

      232,507   
    

 

 

  
       831,863   
    

 

 

  

    Taiwan - 8.1%

  

82,086  

Cathay Financial Holding Co., Ltd.

      122,030   
27,148  

Hon Hai Precision Industry Co., Ltd., GDR

      137,912   
13,000  

President Chain Store Corp.

      92,927   
37,482  

Taiwan Semiconductor Co.

      209,946   
    

 

 

  
       562,815   
    

 

 

  

    Thailand - 2.0%

  

31,800  

Bangkok Bank PCL

      142,945   
    

 

 

  

    Turkey - 2.2%

  

4,100  

BIM Birlesik Magazalar A/S

      56,896   
51,000  

Kordsa Global Endustriyel Iplik A/S

      93,331   
    

 

 

  
       150,227   
    

 

 

  

  Europe - 3.5%

  

    Belgium - 2.1%

  

1,350  

Anheuser-Busch InBev NV, ADR

      142,344   
    

 

 

  

    Netherlands - 1.4%

  

2,625  

Mobileye NV *

      100,065   
    

 

 

  

  Latin America - 8.8%

  

    Brazil - 5.7%

  

29,500  

Ambev SA, ADR

      144,845   
8,343  

Banco Bradesco SA

      74,337   
3,400  

Embraer SA, ADR

      65,450   
19,000  

Qualicorp SA

      112,376   
    

 

 

  
       397,008   
    

 

 

  

    Chile - 1.8%

  

5,500  

Banco Santander Chile, ADR

      120,290   
    

 

 

  

    Peru - 1.3%

  

2,800  

Southern Copper Corp.

      89,435   
    

 

 

  

  North America - 4.9%

  

    Mexico - 1.4%

  

34,800  

Alsea SAB de CV

      99,416   
    

 

 

  

    United States - 3.5%

  

1,800  

Cognizant Technology Solutions Corp. *

      100,854   
800  

Skyworks Solutions, Inc.

      59,728   
1,575  

Tupperware Brands Corp.

      82,877   
    

 

 

  
       243,459   
    

 

 

  

Total Common Stocks
(cost: $6,080,388)

      6,514,347   
    

 

 

  

Investment Companies - 3.3%

  

8,400  

iShares MSCI India ETF

      225,204   
    

 

 

  

    (cost: $244,916) 

  

 

 

See accompanying notes to financial statements.

 

  

 

50

  

 

SIT MUTUAL FUNDS SEMI-ANNUAL REPORT

    

   

 

    

    

 

    

 

 

  
  Quantity   Name of Issuer    Fair Value ($)  

 

  

Short-Term Securities - 2.5%

   
173,736  

Fidelity Instl. Money Mkt. Govt. Fund, 0.39%

  

Total Short-Term Securities
(cost: $173,736)

      173,736   
    

 

 

  

Total Investments in Securities - 99.9%
(cost: $6,499,040)

      6,913,287   

Other Assets and Liabilities, net - 0.1%

      10,224   
    

 

 

  

Total Net Assets - 100.0%

      $6,923,511   
    

 

 

  

 

 

 

* 

Non-income producing security.

ADR — American Depositary Receipt

GDR — Global Depositary Receipt

Numeric footnotes not disclosed are not applicable to this Schedule of Investments.

 

 

See accompanying notes to financial statements.

 

  

 

DECEMBER 31, 2016

  

 

51

    

   

SCHEDULE OF INVESTMENTS (Unaudited)

December 31, 2016

Sit Developing Markets Growth Fund (Continued)

    

    

 

 

A summary of the levels for the Fund’s investments as of December 31, 2016 is as follows (see Note 2 - significant accounting policies in the notes to financial statements):

 

     Investment in Securities  
    

Level 1

Quoted
Price ($)

 

     

Level 2

Other significant
observable inputs ($)

 

     

Level 3

Significant
unobservable inputs ($)

 

     

Total ($)

 

  

Common Stocks

            

Belgium

      142,344         —                 —           142,344   

Brazil

      397,008         —                 —           397,008   

Chile

      120,290         —                 —           120,290   

China/Hong Kong

      1,047,121         1,006,955                 —           2,054,076   

India

      233,751         —                 —           233,751   

Indonesia

      —         158,065                 —           158,065   

Israel

      213,156         —                 —           213,156   

Japan

      —         87,772                 —           87,772   

Malaysia

      82,519         —                 —           82,519   

Mexico

      99,416         —                 —           99,416   

Netherlands

      100,065         —                 —           100,065   

Peru

      89,435         —                 —           89,435   

Singapore

      119,320         131,239                 —           250,559   

South Africa

      87,200         467,382                 —           554,582   

South Korea

      —         831,863                 —           831,863   

Taiwan

      137,912         424,903                 —           562,815   

Thailand

      —         142,945                 —           142,945   

Turkey

      —         150,227                 —           150,227   

United States

      243,459         —                 —           243,459   

Investment Companies

      225,204         —                 —           225,204   

Short-Term Securities

      173,736         —                 —           173,736   

Total:

      3,511,936         3,401,351                 —           6,913,287   

The Fund adjusts the closing price of foreign equity securities by applying a systematic process for events occurring after the close of the foreign exchanges. At each reporting period, this process is applied for all foreign securities and therefore all foreign securities are classified as level 2. There are no transfers between level 1 and level 2 between reporting periods as a result of applying this process. Level 1 securities of foreign issuers are primarily American Depositary Receipts (ADRs), Public Limited Companies (PLCs) or Global Depositary Receipts (GDRs). There were no transfers into or out of level 3 during the reporting period.

 

See accompanying notes to financial statements.

 

  

 

52

  

 

SIT MUTUAL FUNDS SEMI-ANNUAL REPORT

    

 

 

 

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DECEMBER 31, 2016

   

 

 

 

53

 

  

 

STATEMENTS OF ASSETS AND LIABILITIES (Unaudited)

December 31, 2016

 

         Sit   

Sit

Global

     Sit   Dividend    Dividend
     Balanced   Growth    Growth
     Fund   Fund    Fund

ASSETS

        

Investments in securities, at identified cost

        $20,701,355          $863,912,750           $23,595,989   
  

 

 

 

  

 

 

 

   

 

 

 

Investments in securities, at fair value - see accompanying schedule for detail

      $24,568,577        $992,439,890         $25,804,186   

Cash in bank on demand deposit

      19        —         —   

Accrued interest and dividends receivable

      77,274        1,730,814         64,810   

Receivable for investment securities sold

      87,739        13,280,095         —   

Receivable for Fund shares sold

      9,281        1,062,084         473   
  

 

 

 

  

 

 

 

   

 

 

 

Total assets

      24,742,890        1,008,512,883         25,869,469   
  

 

 

 

  

 

 

 

   

 

 

 

LIABILITIES

        

Payable for investment securities purchased

      90,087        11,750,385         —   

Payable for Fund shares redeemed

      34,996        1,173,180         30,000   

Accrued investment management fees and advisory fees

      20,218        838,169         26,405   

Accrued 12b-1 fees (Class S)

      —        13,847         627   
  

 

 

 

  

 

 

 

   

 

 

 

Total liabilities

      145,301        13,775,581         57,032   
  

 

 

 

  

 

 

 

   

 

 

 

Net assets applicable to outstanding capital stock

      $24,597,589        $994,737,302         $25,812,437   
  

 

 

 

  

 

 

 

   

 

 

 

Net assets consist of:

        

Capital (par value and paid-in surplus)

      $20,759,522        $857,405,810         $24,472,317   

Undistributed (distributions in excess of) net investment income (loss)

      (4,487 )      85,307         (214 ) 

Accumulated net realized gain (loss) from security transactions and foreign currency transactions

      (24,668 )      8,719,045         (864,778 ) 

Unrealized appreciation (depreciation) on investments and foreign currency transactions

      3,867,222        128,527,140         2,205,112   
  

 

 

 

  

 

 

 

   

 

 

 

     $24,597,589        $994,737,302         $25,812,437   
  

 

 

 

  

 

 

 

   

 

 

 

Outstanding shares:

        

Common Shares (Class I) *

      1,176,567        59,479,901         1,680,822   
  

 

 

 

  

 

 

 

   

 

 

 

Common Shares (Class S) *

      —        4,337,743         230,557   
  

 

 

 

  

 

 

 

   

 

 

 

Net assets applicable to outstanding shares:

        

Common Shares (Class I) *

      $24,597,589        $927,344,556         $22,699,959   
  

 

 

 

  

 

 

 

   

 

 

 

Common Shares (Class S) *

      —        67,392,746         3,112,478   
  

 

 

 

  

 

 

 

   

 

 

 

Net asset value per share of outstanding capital stock:

        

Common Shares (Class I) *

      $20.91        $15.59         $13.51   
  

 

 

 

  

 

 

 

   

 

 

 

Common Shares (Class S) *

      —        $15.54         $13.50   
  

 

 

 

  

 

 

 

   

 

 

 

* Dividend Growth, Global Dividend Growth, ESG Growth and Small Cap Dividend Growth Funds offer multiple share classes (I and S). All other Funds offer a single share class.

 

See accompanying notes to financial statements.

   

54

      SIT MUTUAL FUNDS SEMI-ANNUAL REPORT   

 

 

    

    

 

                    Sit                 Sit  
Sit      Sit     Sit      Small Cap     Sit     Sit     Developing  
Large Cap      ESG     Mid Cap      Dividend     Small Cap     International     Markets  
Growth      Growth     Growth      Growth     Growth     Growth     Growth  
Fund      Fund     Fund      Fund     Fund     Fund     Fund  
                    
  $72,497,273         $4,055,940        $90,542,516         $11,952,547        $60,207,775        $18,799,423        $6,499,040   

 

 

     

 

 

    

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  
  $112,088,120         $4,157,604        $142,050,668         $13,429,873        $86,640,621        $19,498,228        $6,913,287   
  —         —        —         264,509        —        2,242        753   
  89,350         6,200        77,431         22,828        45,120        99,040        20,802   
  599,336         —        381,291         18,416        261,820        86,858        —   
  5,519         —        8,101         1,377        6,361        1,030        512   

 

 

     

 

 

    

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  
  112,782,325         4,163,804        142,517,491         13,737,003        86,953,922        19,687,398        6,935,354   

 

 

     

 

 

    

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  
                    
  406,241         —        —         201,851        342,542        97,821        —   
  368,728         —        370,794         —        1,038        1,098        363   
  93,657         4,275        147,773         13,439        107,697        24,091        11,480   
  —         422        —         613        —        —        —   

 

 

     

 

 

    

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  
  868,626         4,697        518,567         215,903        451,277        123,010        11,843   

 

 

     

 

 

    

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  
  $111,913,699         $4,159,107        $141,998,924         $13,521,100        $86,502,645        $19,564,388        $6,923,511   

 

 

     

 

 

    

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  
                    
  $70,349,530         $4,086,065        $89,283,853         $12,382,618        $60,024,004        $19,901,903        $6,642,025   
  1,924         (614 )      103,445         4,177        (195,606 )      1,470        (12,547 ) 
 

 

     

1,971,398

   

  

      (28,002 )      1,103,414         (343,021 )      241,401        (1,030,110 )      (120,225 ) 
 

 

     

39,590,847

   

  

      101,658        51,508,212         1,477,326        26,432,846        691,125        414,258   

 

 

     

 

 

    

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  
  $111,913,699         $4,159,107        $141,998,924         $13,521,100        $86,502,645        $19,564,388        $6,923,511   

 

 

     

 

 

    

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  
                    
  3,153,272         207,160        8,830,305         954,637        1,716,058        1,388,974        568,403   

 

 

     

 

 

    

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  
  —         201,363        —         270,269        —        —        —   

 

 

     

 

 

    

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  
                    
  $111,913,699         $2,109,094        $141,998,924         $10,537,909        $86,502,645        $19,564,388        $6,923,511   

 

 

     

 

 

    

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  
  —         2,050,013        —         2,983,191        —        —        —   

 

 

     

 

 

    

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  
                    
  $35.49         $10.18        $16.08         $11.04        $50.41        $14.09        $12.18   

 

 

     

 

 

    

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  
  —         $10.18        —         $11.04        —        —        —   

 

 

     

 

 

    

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  

 

 

DECEMBER 31, 2016

  

 

55

 

STATEMENTS OF OPERATIONS (Unaudited)

Six Months Ended December 31, 2016

 

                   Sit  
            Sit      Global  
     Sit      Dividend      Dividend  
     Balanced      Growth      Growth  
     Fund      Fund      Fund  

Investment income:

         

Income:

         

Dividends*

    $ 156,483       $ 13,459,664       $ 327,808   

Interest

      106,184         25,407         1,248   
  

 

 

     

 

 

     

 

 

  

Total income

      262,667         13,485,071         329,056   
  

 

 

     

 

 

     

 

 

  

Expenses (note 4):

         

Investment management and advisory service fee

      121,719         5,131,811         161,035   

12b-1 fees (Class S)

      —         84,246         3,649   
  

 

 

     

 

 

     

 

 

  

Total expenses

      121,719         5,216,057         164,684   
  

 

 

     

 

 

     

 

 

  

Net investment income (loss)

      140,948         8,269,014         164,372   
  

 

 

     

 

 

     

 

 

  

Realized and unrealized gain (loss):

         

Net realized gain (loss) on investments

      52,082         32,785,403         (166,738 ) 

Net realized gain (loss) on foreign currency transactions

      —         —         (1,314 ) 

Net change in unrealized appreciation (depreciation) on investments and foreign currency transactions

      596,503         21,771,318         875,368   
  

 

 

     

 

 

     

 

 

  

Net gain (loss)

      648,585         54,556,721         707,316   
  

 

 

     

 

 

     

 

 

  

Net increase (decrease) in net assets resulting from operations

    $ 789,533       $ 62,825,735       $ 871,688   
  

 

 

     

 

 

     

 

 

  

 

                     

* Foreign taxes withheld on dividends received

      —       $ 62,186       $ 9,538   

 

1

The Fund commenced investment operations on June 30, 2016.

 

See accompanying notes to financial statements.

   

56

      SIT MUTUAL FUNDS SEMI-ANNUAL REPORT   

 

 

    

    

 

                    Sit                 Sit  
Sit      Sit     Sit      Small Cap     Sit     Sit     Developing  
Large Cap      ESG     Mid Cap      Dividend     Small Cap     International     Markets  
Growth      Growth     Growth      Growth     Growth     Growth     Growth  
Fund      Fund 1     Fund      Fund     Fund     Fund     Fund  
             
             
  $938,812         $32,292        $990,117         $131,690        $437,724        $176,154        $61,922   
  3,206         1,433        10,618         981        2,781        947        364   

 

 

     

 

 

    

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  
  942,018         33,725        1,000,735         132,671        440,505        177,101        62,286   

 

 

     

 

 

    

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  
             
  586,956         25,700        897,290         67,027        636,111        155,175        74,833   
  —         2,539        —         3,430        —        —        —   

 

 

     

 

 

    

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  
  586,956         28,239        897,290         70,457        636,111        155,175        74,833   

 

 

     

 

 

    

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  
  355,062         5,486        103,445         62,214        (195,606 )      21,926        (12,547 ) 

 

 

     

 

 

    

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  
             
  4,063,119         (27,067 )      1,264,987         (172,757 )      210,527        (604,720 )      44,122   
  —         (935 )      —         9        —        (4,154 )      239   
 

 

     

2,553,192

   

  

      101,658        6,556,577         1,285,049        8,602,331        133,056        (55,426 ) 

 

 

     

 

 

    

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  
  6,616,311         73,656        7,821,564         1,112,301        8,812,858        (475,818 )      (11,065 ) 

 

 

     

 

 

    

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  
  $6,971,373         $79,142        $7,925,009         $1,174,515        $8,617,252        ($453,892 )      ($23,612 ) 

 

 

     

 

 

    

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  
             
  —         $1,405        $2,218         $1,058        $1,802        $15,012        $8,210   

 

 

DECEMBER 31, 2016

  

 

57

    

STATEMENTS OF CHANGES IN NET ASSETS

        

 

     Sit Balanced Fund     Sit Dividend Growth Fund  
     Six Months Ended          Year Ended         Six Months Ended         Year Ended      
     December 31, 2016      June 30,     December 31, 2016     June 30,  
     (Unaudited)      2016     (Unaudited)     2016  

Operations:

          

Net investment income

      $140,948             $281,339        $8,269,014        $16,810,135   

Net realized gain (loss) on investments and foreign currency transactions

      52,082             405,475        32,785,403        64,500,977   

Net change in unrealized appreciation (depreciation) of investments and foreign currency transactions

      596,503             (494,909 )      21,771,318        (40,919,305 ) 
  

 

 

     

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets resulting from operations

      789,533             191,905        62,825,735        40,391,807   
  

 

 

     

 

 

    

 

 

    

 

 

  

Distributions from:

          

Net investment income

          

Common shares (Class I)

      (206,000)            (483,000 )      (10,742,221 )      (18,773,757 ) 

Common shares (Class S)

      —             —        (628,779 )      (1,221,244 ) 

Net realized gains on investments

          

Common shares (Class I)

      —             (1,053,969 )      (60,795,025 )      (106,854,655 ) 

Common shares (Class S)

      —             —        (4,229,591 )      (7,776,788 ) 
  

 

 

     

 

 

    

 

 

    

 

 

  

Total distributions

      (206,000)            (1,536,969 )      (76,395,616 )      (134,626,444 ) 
  

 

 

     

 

 

    

 

 

    

 

 

  

Capital share transactions:

          

Proceeds from shares sold

          

Common shares (Class I)

      1,996,278             8,592,853        75,702,644        361,580,592   

Common shares (Class S)

      —             —        3,273,108        4,208,565   

Reinvested distributions

          

Common shares (Class I)

      205,190             1,524,296        20,812,396        40,052,131   

Common shares (Class S)

      —             —        4,814,701        8,936,473   

Payments for shares redeemed

          

Common shares (Class I)

      (1,698,463)            (8,230,744 )      (98,686,524 )      (327,488,522 ) 
  

 

 

     

 

 

    

 

 

    

 

 

  

Common shares (Class S)

      —             —        (7,473,720 )      (21,609,224 ) 
  

 

 

     

 

 

    

 

 

    

 

 

  

Increase (decrease) in net assets from capital transactions

      503,005             1,886,405        (1,557,395 )      65,680,015   
  

 

 

     

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      1,086,538             541,341        (15,127,276 )      (28,554,622 ) 

Net assets:

          

Beginning of period

      23,511,051             22,969,710        1,009,864,578        1,038,419,200   
  

 

 

     

 

 

    

 

 

    

 

 

  

End of period*

      $24,597,589             $23,511,051        $994,737,302        $1,009,864,578   
  

 

 

     

 

 

    

 

 

    

 

 

  

Capital transactions in shares:

          

Sold

          

Common shares (Class I)

      95,577             413,544        4,693,713        22,658,489   

Common shares (Class S)

      —             —        205,022        263,412   

Reinvested distributions

          

Common shares (Class I)

      9,844             74,586        1,321,115        2,621,435   

Common shares (Class S)

      —             —        306,669        587,079   

Redeemed

          

Common shares (Class I)

      (81,410)            (401,816 )      (6,106,942 )      (20,620,329 ) 

Common shares (Class S)

      —             —        (465,753 )      (1,343,328 ) 
  

 

 

     

 

 

    

 

 

    

 

 

  

Net increase (decrease)

      24,011             86,314        (46,176 )      4,166,758   
  

 

 

     

 

 

    

 

 

    

 

 

  

* includes undistributed (distributions in excess) net investment income (loss)

      ($4,487)            $60,565        $85,307        $3,187,293   

 

  1

The Fund commenced investment operations on June 30, 2016.

 

 

See accompanying notes to financial statements.

   

58

      SIT MUTUAL FUNDS SEMI-ANNUAL REPORT   

    

 

        

        

 

Sit Global Dividend Growth Fund     Sit Large Cap Growth Fund     Sit ESG Growth Fund  
Six Months Ended      Year Ended     Six Months Ended     Year Ended     Six Months Ended  
December 31, 2016      June 30,     December 31, 2016     June 30,     December 31, 2016  
(Unaudited)      2016     (Unaudited)     2016     (Unaudited) 1  
        
  $164,372             $375,267        $355,062        $576,725        $5,486       
 
 		     
(168,052)  		  
  		      (610,940 )      4,063,119        8,600,977        (28,002)     
 
 		     
875,368    		  
  		      (170,944 )      2,553,192        (10,559,412 )      101,658       

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  
 
 		     
871,688    		  
  		      (406,617 )      6,971,373        (1,381,710 )      79,142       

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  
        
        
  (250,917)           (530,057 )      (571,000 )      (4,260,000 )      (4,383)     
  (27,083)           (62,943 )      —        —        (1,717)     
        
  —             (1,512,966 )      (7,612,702 )      (28,228,978 )      —       
  —             (201,110 )      —        —        —       

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  
  (278,000)           (2,307,076 )      (8,183,702 )      (32,488,978 )      (6,100)     

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  
        
        
  1,031,267             2,302,443        838,901        6,199,628        2,068,000       
  216,464             181,452        —        —        2,017,000       
        
  250,917             2,042,797        8,064,947        32,014,455        4,383       
  27,083             264,053        —        —        1,717       
        
  (1,439,064)           (1,040,365 )      (13,236,566 )      (31,691,511 )      —       

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  
  (61,119)           (719,020 )      —        —        (5,035)     

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  
  25,548             3,031,360        (4,332,718 )      6,522,572        4,086,065       

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  
  619,236             317,667        (5,545,047 )      (27,348,116 )      4,159,107       
        
  25,193,201             24,875,534        117,458,746        144,806,862        —       

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  
  $25,812,437             $25,193,201        $111,913,699        $117,458,746        $4,159,107       

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  
        
        
  77,613             164,944        22,481        145,288        206,733       
  16,076             13,425        —        —        201,689       
        
  18,768             154,832        224,089        874,234        427       
  2,025             20,031        —        —        168       
        
  (108,525)           (74,696 )      (354,578 )      (825,719 )      —       
  (4,604)           (49,928 )      —        —        (494)     

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  
  1,353             228,608        (108,008 )      193,803        408,523       

 

 

     

 

 

    

 

 

    

 

 

    

 

 

  
  ($214)           $113,414        $1,924        $217,862        ($614)     

 

 

 

DECEMBER 31, 2016

  

 

59

    

STATEMENTS OF CHANGES IN NET ASSETS (Continued)

 

     Sit Mid Cap Growth Fund     Sit Small Cap
Dividend Growth Fund		  
     Six Months Ended
December 31, 2016
(Unaudited)		      Year Ended
June 30,
2016		     Six Months Ended
December 31, 2016
(Unaudited)		      Year Ended
June 30,
2016		  

Operations:

           

Net investment income (loss)

      $103,445            ($340,217 )      $62,214            $97,450   

Net realized gain (loss) on investments and foreign currency transactions

      1,264,987            3,828,112        (172,748)          (178,755 ) 

Net change in unrealized appreciation (depreciation) of investments and foreign currency transactions

      6,556,577            (19,621,396 )      1,285,049            237,270   
  

 

 

     

 

 

    

 

 

     

 

 

  

Net increase (decrease) in net assets resulting from operations

      7,925,009            (16,133,501 )      1,174,515            155,965   
  

 

 

     

 

 

    

 

 

     

 

 

  

Distributions from:

           

Net investment income

           

Common shares (Class I)

      —            —        (65,817)          (59,286 ) 

Common shares (Class S)

      —            —        (17,183)          (24,214 ) 

Net realized gains on investments

           

Common shares (Class I)

      (1,410,787)          (23,213,056 )      —            (452 ) 

Common shares (Class S)

      —            —        —            (218 ) 
  

 

 

     

 

 

    

 

 

     

 

 

  

Total distributions

      (1,410,787)          (23,213,056 )      (83,000)          (84,170 ) 
  

 

 

     

 

 

    

 

 

     

 

 

  

Capital share transactions:

           

Proceeds from shares sold

           

Common shares (Class I)

      582,911            1,517,223        3,921,321            2,301,643   

Common shares (Class S)

      —            —        289,825            312,218   

Reinvested distributions

           

Common shares (Class I)

      1,364,195            22,382,176        62,847            57,003   

Common shares (Class S)

      —            —        16,956            24,085   

Payments for shares redeemed

           

Common shares (Class I)

      (5,985,523)          (16,883,360 )      (38,496)          (338,246 ) 

Common shares (Class S)

      —            —        (186,519)          (3,034 ) 
  

 

 

     

 

 

    

 

 

     

 

 

  

Increase (decrease) in net assets from capital transactions

      (4,038,417)          7,016,039        4,065,934            2,353,669   
  

 

 

     

 

 

    

 

 

     

 

 

  

Total increase (decrease) in net assets

      2,475,805            (32,330,518 )      5,157,449            2,425,464   

Net assets:

           

Beginning of period

      139,523,119            171,853,637        8,363,651            5,938,187   
  

 

 

     

 

 

    

 

 

     

 

 

  

End of period*

        $141,998,924            $139,523,119          $13,521,100            $8,363,651   
  

 

 

     

 

 

    

 

 

     

 

 

  

Capital transactions in shares:

           

Sold

           

Common shares (Class I)

      36,452            84,771        374,994            234,507   

Common shares (Class S)

      —            —        27,188            32,561   

Reinvested distributions

           

Common shares (Class I)

      83,899            1,427,435        5,961            5,975   

Common shares (Class S)

      —            —        1,616            2,522   

Redeemed

           

Common shares (Class I)

      (373,590)          (928,645 )      (3,721)          (35,249 ) 

Common shares (Class S)

      —            —        (17,250)          (304 ) 
  

 

 

     

 

 

    

 

 

     

 

 

  

Net increase (decrease)

      (253,239)          583,561        388,788            240,012   
  

 

 

     

 

 

    

 

 

     

 

 

  

*includes undistributed (distributions in excess) net investment income (loss)

      $103,445            —        $4,177            $24,963   

 

See accompanying notes to financial statements.

   

60

      SIT MUTUAL FUNDS SEMI-ANNUAL REPORT   

    

 

    

 

Sit Small Cap Growth Fund     Sit International Growth Fund     Sit Developing Markets Growth Fund  

Six Months Ended

December 31, 2016

(Unaudited)

      Year Ended
June 30,
2016		     Six Months Ended
December 31, 2016
(Unaudited)		      Year Ended
June 30,
2016		     Six Months Ended
December 31, 2016
(Unaudited)		      Year Ended
June 30,
2016		  
            
  ($195,606)          ($586,514 )      $21,926            $162,017        ($12,547)          $22,985   
 

 

     

210,527   

   

  

      144,734        (608,874)          (236,287 )      44,361            (86,530 ) 
 

 

     

8,602,331   

   

  

      (16,063,945 )      133,056            (1,782,725 )      (55,426)          (1,286,835 ) 

 

 

     

 

 

    

 

 

     

 

 

    

 

 

     

 

 

  
  8,617,252            (16,505,725 )      (453,892)          (1,856,995 )      (23,612)          (1,350,380 ) 

 

 

     

 

 

    

 

 

     

 

 

    

 

 

     

 

 

  
            
            
  —            —        (97,000)          (121,000 )      (18,811)          (12,000 ) 
  —            —        —            —        —            —   
                      
  (144,732)          (8,910,218 )      —            (1,330,288 )      —            (211,867 ) 
  —            —        —            —        —            —   

 

 

     

 

 

    

 

 

     

 

 

    

 

 

     

 

 

  
  (144,732)          (8,910,218 )      (97,000)          (1,451,288 )      (18,811)          (223,867 ) 

 

 

     

 

 

    

 

 

     

 

 

    

 

 

     

 

 

  
            
            
  647,306            2,774,375        223,987            833,973        108,013            274,576   
  —            —        —            —        —            —   
  142,196            8,733,559        96,669            1,443,980        18,430            219,826   
  —            —        —            —        —            —   
                      
  (3,968,246)          (8,698,957 )      (645,038)          (1,015,370 )      (457,018)          (815,737 ) 
  —            —        —            —        —            —   

 

 

     

 

 

    

 

 

     

 

 

    

 

 

     

 

 

  
  (3,178,744)          2,808,977        (324,382)          1,262,583        (330,575)          (321,335 ) 

 

 

     

 

 

    

 

 

     

 

 

    

 

 

     

 

 

  
  5,293,776            (22,606,966 )      (875,274)          (2,045,700 )      (372,998)          (1,895,582 ) 
            
  81,208,869            103,815,835        20,439,662            22,485,362        7,296,509            9,192,091   

 

 

     

 

 

    

 

 

     

 

 

    

 

 

     

 

 

  
    $86,502,645            $81,208,869          $19,564,388              $20,439,662          $6,923,511            $7,296,509   

 

 

     

 

 

    

 

 

     

 

 

    

 

 

     

 

 

  
            
            
  13,216            51,321        15,059            51,877        8,595            21,675   
  —            —        —            —        —            —   
            
  2,793            180,036        6,876            95,946        1,517            18,458   
  —            —        —            —        —            —   
            
  (81,402)          (177,213 )      (44,542)          (64,900 )      (36,823)          (67,398 ) 
  —            —        —            —        —            —   

 

 

     

 

 

    

 

 

     

 

 

    

 

 

     

 

 

  
  (65,393)          54,144        (22,607)          82,923        (26,711)          (27,265 ) 

 

 

     

 

 

    

 

 

     

 

 

    

 

 

     

 

 

  
  ($195,606)          —        $1,470            $76,544        ($12,547)          $18,811   

 

 

DECEMBER 31, 2016

  

 

61

    

FINANCIAL HIGHLIGHTS

Per share income and capital changes for a share outstanding throughout the period. See accompanying notes to financial statements.

 

 

Sit Balanced Fund

 

  
    Six Months Ended                                
    December 31, 2016           Years Ended June 30,        
    (Unaudited)     2016     2015     2014     2013     2012  

 

  

Net Asset Value:

            

Beginning of period

     $20.40        $21.54        $21.01        $18.42        $16.97        $16.47   
 

 

 

  

Operations:

            

Net investment income 1

     0.12        0.26        0.25        0.27        0.27        0.29   

Net realized and unrealized gains

     0.57        0.04        1.16        2.58        1.46        0.46   
 

 

 

  
Total from operations     0.69        0.30        1.41        2.85        1.73        0.75   
 

 

 

  

Distributions to Shareholders:

            

From net investment income

     (0.18 )      (0.45 )      (0.24 )      (0.26 )      (0.28 )      (0.25 ) 

From net realized gains

     —        (0.99)        (0.64)        —        —        —   
 

 

 

  
Total distributions     (0.18 )      (1.44 )      (0.88 )      (0.26 )      (0.28 )      (0.25 ) 
 

 

 

  

Net Asset Value:

            

End of period

     $20.91        $20.40        $21.54        $21.01        $18.42        $16.97   
 

 

 

  

Total investment return 2

     3.37%        1.47%        6.86%        15.58%        10.26%        4.61%   
 

 

 

  

Net assets at end of period (000’s omitted)

     $24,598        $23,511        $22,970        $15,645        $13,492        $11,821   

Ratios: 3

            

Expenses

     1.00%        1.00%        1.00%        1.00%        1.00%        1.00%   

Net investment income

     1.16%        1.25%        1.17%        1.36%        1.52%        1.75%   

Portfolio turnover rate
(excluding short-term securities)

     20.26% 4      54.46%        47.49%        54.52%        30.86%        47.01%   

 

 

1 

The net investment income per share is based on average shares outstanding for the period.

2 

Total investment return is based on the change in net asset value of a share during the period (not annualized) and assumes reinvestment of distributions at net asset value.

3 

Ratios are annualized for periods less than one year. In addition to fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios.

4 

Not annualized.

 

  

62

      SIT MUTUAL FUNDS SEMI-ANNUAL REPORT   

 

FINANCIAL HIGHLIGHTS

Per share income and capital changes for a share outstanding throughout the period. See accompanying notes to financial statements.

 

 

Sit Dividend Growth Fund

 

  
    Six Months Ended                                
Class I   December 31, 2016           Years Ended June 30,        
    (Unaudited)     2016     2015     2014     2013     2012  

 

  

Net Asset Value:

            

Beginning of period

     $15.82               $17.40        $18.69        $16.35        $14.10        $13.91   
 

 

 

  

Operations:

            

Net investment income 1

     0.13               0.26        0.25        0.26        0.27        0.24   

Net realized and unrealized gains

     0.86               0.32        0.92        2.96        2.46        0.26   
 

 

 

  
Total from operations     0.99               0.58        1.17        3.22        2.73        0.50   
 

 

 

  
Redemption fees 2     —               —        —        —        —        —   
 

 

 

  

Distributions to Shareholders:

            

From net investment income

     (0.18)              (0.32 )      (0.25 )      (0.25 )      (0.26 )      (0.21 ) 

From net realized gains

     (1.04)              (1.84 )      (2.21 )      (0.63 )      (0.22 )      (0.10 ) 
 

 

 

  

Total distributions.

     (1.22)              (2.16 )      (2.46 )      (0.88 )      (0.48 )      (0.31 ) 
 

 

 

  

Net Asset Value:

            

End of period

     $15.59               $15.82        $17.40        $18.69        $16.35        $14.10   
 

 

 

  

Total investment return 3

     6.27%               3.94%        6.39%        20.26%        19.77%        3.76%   
 

 

 

  

Net assets at end of period (000’s omitted)

     $927,345               $942,244        $955,460        $1,017,106        $920,324        $619,667   

Ratios: 4

            

Expenses

     1.00%               1.00%        1.00%        1.00%        1.00%        1.00%   

Net investment income

     1.63%               1.64%        1.39%        1.50%        1.78%        1.79%   

Portfolio turnover rate (excluding short-term securities)

     32.11%5               75.94%        57.69%        44.36%        26.58%        26.84%   

 

  
    Six Months Ended                                
Class S   December 31, 2016           Years Ended June 30,        
    (Unaudited)     2016     2015     2014     2013     2012  

 

  

Net Asset Value:

            

Beginning of period

     $15.76               $17.34        $18.63        $16.29        $14.06        $13.87   

Operations:

            

Net investment income 1

     0.11               0.22        0.21        0.22        0.23        0.21   

Net realized and unrealized gains

     0.86               0.32        0.91        2.96        2.44        0.26   
 

 

 

  

Total from operations

     0.97               0.54        1.12        3.18        2.67        0.47   
 

 

 

  
Redemption fees 2     —               —        —        —        —        —   
 

 

 

  

Distributions to Shareholders:

            

From net investment income

     (0.15)              (0.28 )      (0.20 )      (0.21 )      (0.22 )      (0.18 ) 

From net realized gains

     (1.04)              (1.84 )      (2.21 )      (0.63 )      (0.22 )      (0.10 ) 
 

 

 

  

Total distributions

     (1.19)              (2.12 )      (2.41 )      (0.84 )      (0.44 )      (0.28 ) 
 

 

 

  

Net Asset Value:

            

End of period

     $15.54               $15.76        $17.34        $18.63        $16.29        $14.06   
 

 

 

  
Total investment return 3     6.16%               3.68%        6.13%        20.02%        19.39%        3.53%   
 

 

 

  

Net assets at end of period (000’s omitted)

     $67,393               $67,620        $82,959        $103,433        $134,498        $100,878   

Ratios: 4

            

Expenses

     1.25%               1.25%        1.25%        1.25%        1.25%        1.25%   

Net investment income

     1.38%               1.39%        1.14%        1.25%        1.53%        1.54%   

Portfolio turnover rate (excluding short-term securities)

     32.11%5               75.94%        57.69%        44.36%        26.58%        26.84%   

 

 

1 

The net investment income per share is based on average shares outstanding for the period.

2 

Amount represents less than $0.01 per share.

3 

Total investment return is based on the change in net asset value of a share during the period (not annualized) and assumes reinvestment of distributions at net asset value.

4 

Ratios are annualized for periods less than one year. In addition to fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios.

5 

Not annualized.

 

 

DECEMBER 31, 2016

  

 

63

    

FINANCIAL HIGHLIGHTS

Per share income and capital changes for a share outstanding throughout the period. See accompanying notes to financial statements.

 

Sit Global Dividend Growth Fund

 

  
    Six Months Ended                                
Class I   December 31, 2016           Years Ended June 30,        
    (Unaudited)     2016     2015     2014     2013     2012  

 

  

Net Asset Value:

            

Beginning of period

     $13.19             $14.80        $15.74        $14.27        $12.55        $13.26   

Operations:

            

Net investment income 1

     0.09             0.21        0.20        0.23        0.25        0.24   

Net realized and unrealized gains (losses)

     0.38             (0.48 )      0.13        2.09        1.78        (0.58 ) 
 

 

 

  

Total from operations

     0.47             (0.27 )      0.33        2.32        2.03        (0.34 ) 
 

 

 

  

Redemption fees

     —             —        —        —  2      —  2      —   
 

 

 

  

Distributions to Shareholders:

            

From net investment income

     (0.15)            (0.34 )      (0.20 )      (0.22 )      (0.23 )      (0.22 ) 

From net realized gains

     —             (1.00 )      (1.07 )      (0.63 )      (0.08 )      (0.15 ) 
 

 

 

  

Total distributions

     (0.15)            (1.34 )      (1.27 )      (0.85 )      (0.31 )      (0.37 ) 
 

 

 

  

Net Asset Value:

            

End of period

     $13.51             $13.19        $14.80        $15.74        $14.27        $12.55   
 

 

 

  

Total investment return 3

     3.57%             (1.67% )      2.19%        16.76%        16.36%        (2.44% ) 
 

 

 

  

Net assets at end of period (000’s omitted)

     $22,700             $22,333        $21,424        $21,467        $14,196        $10,421   

Ratios: 4

            

Expenses

     1.25%             1.25%        1.25%        1.25%        1.25%        1.25%   

Net investment income

     1.30%             1.56%        1.33%        1.55%        1.81%        1.97%   

Portfolio turnover rate (excluding short-term securities)

     14.56%5             48.30%        75.06%        48.68%        26.15%        26.65%   

 

  
    Six Months Ended                                
Class S   December 31, 2016           Years Ended June 30,        
    (Unaudited)     2016     2015     2014     2013     2012  

 

  

Net Asset Value:

            

Beginning of period

     $13.18             $14.78        $15.72        $14.25        $12.54        $13.24   

Operations:

            

Net investment income 1

     0.07             0.18        0.16        0.20        0.21        0.21   

Net realized and unrealized gains (losses)

     0.37             (0.48 )      0.13        2.09        1.78        (0.57 ) 
 

 

 

  

Total from operations

     0.44             (0.30 )      0.29        2.29        1.99        (0.36 ) 
 

 

 

  

Redemption fees

     —             —        —        —  2      —        —   
 

 

 

  

Distributions to Shareholders:

            

From net investment income

     (0.12)            (0.30 )      (0.16 )      (0.19 )      (0.20 )      (0.19 ) 

From net realized gains

     —             (1.00 )      (1.07 )      (0.63 )      (0.08 )      (0.15 ) 
 

 

 

  

Total distributions

     (0.12)            (1.30 )      (1.23 )      (0.82 )      (0.28 )      (0.34 ) 
 

 

 

  

Net Asset Value:

            

End of period

     $13.50             $13.18        $14.78        $15.72        $14.25        $12.54   
 

 

 

  

Total investment return 3

     3.38%             (1.89% )      2.00%        16.49%        16.01%        (2.60% ) 
 

 

 

  

Net assets at end of period (000’s omitted)

     $3,112             $2,861        $3,451        $3,323        $3,257        $2,608   

Ratios: 4

            

Expenses

     1.50%             1.50%        1.50%        1.50%        1.50%        1.50%   

Net investment income

     1.05%             1.31%        1.08%        1.30%        1.56%        1.72%   

Portfolio turnover rate (excluding short-term securities)

     14.56%5             48.30%        75.06%        48.68%        26.15%        26.65%   

 

 

1 

The net investment income per share is based on average shares outstanding for the period.

2 

Amount represents less than $0.01 per share.

3 

Total investment return is based on the change in net asset value of a share during the period (not annualized) and assumes reinvestment of distributions at net asset value.

4 

Ratios are annualized for periods less than one year. In addition to fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios.

5 

Not annualized.

 

  

64

      SIT MUTUAL FUNDS SEMI-ANNUAL REPORT   

    

FINANCIAL HIGHLIGHTS

Per share income and capital changes for a share outstanding throughout the period. See accompanying notes to financial statements.

 

Sit Large Cap Growth Fund

 

  
    Six Months Ended        
    December 31, 2016          Years Ended June 30,     
    (Unaudited)        2016        2015        2014        2013        2012   

 

  

Net Asset Value:

            

Beginning of period

     $36.02             $47.21        $52.51        $47.53        $45.53        $43.96   
 

 

 

  

Operations:

            

Net investment income 1

     0.11             0.18        0.20        0.29        0.43        0.26   

Net realized and unrealized gains (losses)

     2.10             (0.42 )      5.04        10.23        5.69        1.63   
 

 

 

  

Total from operations

     2.21             (0.24 )      5.24        10.52        6.12        1.89   
 

 

 

  

Redemption fees 2

     —             —        —        —        —        —   
 

 

 

  

Distributions to Shareholders:

            

From net investment income

     (0.19)            (1.44 )      (0.24 )      (0.39 )      (0.46 )      (0.32 ) 

From net realized gains

     (2.55)            (9.51 )      (10.30 )      (5.15 )      (3.66 )      —   
 

 

 

  

Total distributions

     (2.74)            (10.95 )      (10.54 )      (5.54 )      (4.12 )      (0.32 ) 
 

 

 

  

Net Asset Value:

            

End of period

     $35.49             $36.02        $47.21        $52.51        $47.53        $45.53   
 

 

 

  

Total investment return 3

     6.04%             (0.89% )      10.62%        22.92%        14.18%        4.39%   
 

 

 

  

Net assets at end of period (000’s omitted)

     $111,914             $117,459        $144,807        $188,574        $196,285        $254,256   

Ratios: 4

            

Expenses

     1.00%             1.00%        1.00%        1.00%        1.00%        1.00%   

Net investment income

     0.61%             0.44%        0.41%        0.57%        0.92%        0.61%   

Portfolio turnover rate (excluding short-term securities)

     7.82%5             20.05%        24.04%        27.34%        13.42%        15.06%   

 

 

1 

The net investment income per share is based on average shares outstanding for the period.

2 

Amount represents less than $0.01 per share.

3 

Total investment return is based on the change in net asset value of a share during the period (not annualized) and assumes reinvestment of distributions at net asset value.

4 

Ratios are annualized for periods less than one year. In addition to fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios.

5 

Not annualized.

 

 

DECEMBER 31, 2016

  

 

65

 

FINANCIAL HIGHLIGHTS

Per share income and capital changes for a share outstanding throughout the period. See accompanying notes to financial statements.

 

 

Sit ESG Growth Fund

 

     Six Months Ended  
Class I    December 31, 2016  
      (Unaudited) *  

Net Asset Value:

   

Beginning of period

      $10.00         
  

 

 

  

Operations:

   

Net investment income 1

      0.02         

Net realized and unrealized gains

      0.18         
  

 

 

  

Total from operations

      0.20         
  

 

 

  

Distributions to Shareholders:

   

From net investment income

      (0.02)        
  

 

 

  

Net Asset Value:

   

End of period

      $10.18         
  

 

 

  

Total investment return 2

      2.01%         
  

 

 

  

Net assets at end of period (000’s omitted)

      $2,109         

Ratios: 3

   

Expenses

      1.25%         

Net investment income

      0.39%         

Portfolio turnover rate (excluding short-term securities)

      11.87%4         
  
      Six Months Ended  
Class S    December 31, 2016  
      (Unaudited) *  

Net Asset Value:

   

Beginning of period

      $10.00         
  

 

 

  

Operations:

   

Net investment income 1

      0.01         

Net realized and unrealized gains

      0.18         
  

 

 

  

Total from operations

      0.19         
  

 

 

  

Distributions to Shareholders:

   

From net investment income

      (0.01)        
  

 

 

  

Net Asset Value:

   

End of period

      $10.18         
  

 

 

  

Total investment return 2

      1.88%         
  

 

 

  

Net assets at end of period (000’s omitted)

      $2,050         

Ratios: 3

   

Expenses

      1.50%         

Net investment income

      0.14%         

Portfolio turnover rate (excluding short-term securities)

      11.87%4         

 

 

* 

The Fund commenced investment operations on June 30, 2016.

1 

The net investment income per share is based on average shares outstanding for the period.

2 

Total investment return is based on the change in net asset value of a share during the period (not annualized) and assumes reinvestment of distributions at net asset value.

3 

Ratios are annualized for periods less than one year. In addition to fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios.

4 

Not annualized.

 

  

66

      SIT MUTUAL FUNDS SEMI-ANNUAL REPORT   

 

FINANCIAL HIGHLIGHTS

Per share income and capital changes for a share outstanding throughout the period. See accompanying notes to financial statements.

 

 

Sit Mid Cap Growth Fund

 

     Six Months Ended        
     December 31, 2016           Years Ended June 30,        
     (Unaudited)        2016        2015        2014        2013        2012   

 

  

Net Asset Value:

             

Beginning of period

      $15.36             $20.22        $21.08        $17.69        $15.77        $15.88   
  

 

 

  

Operations:

             

Net investment income (loss) 1

      0.01             (0.04 )      (0.06 )      (0.07 )      (0.03 )      (0.05 ) 

Net realized and unrealized gains (losses)

      0.87             (1.92 )      1.91        4.54        2.32        (0.06 ) 
  

 

 

  

Total from operations

      0.88             (1.96 )      1.85        4.47        2.29        (0.11 ) 
  

 

 

  

Redemption fees 2

      —             —        —        —        —        —   
  

 

 

  

Distributions to Shareholders:

             

From net realized gains

      (0.16)            (2.90 )      (2.71 )      (1.08 )      (0.37 )      —   
  

 

 

  

Net Asset Value:

             

End of period

      $16.08             $15.36        $20.22        $21.08        $17.69        $15.77   
  

 

 

  

Total investment return 3

      5.72%             (9.97% )      9.52%        25.58%        14.70%        (0.69% ) 
  

 

 

  

Net assets at end of period (000’s omitted)

      $141,999             $139,523        $171,854        $180,276        $152,129        $144,601   

Ratios: 4

             

Expenses

      1.25%             1.25%        1.25%        1.25%        1.25%        1.25%   

Net investment income (loss)

      0.14%             (0.23% )      (0.30% )      (0.37% )      (0.17% )      (0.33% ) 

Portfolio turnover rate (excluding short-term securities)

      12.52%5             21.57%        23.39%        27.65%        16.91%        16.23%   

 

 

1 

The net investment income (loss) per share is based on average shares outstanding for the period.

2 

Amount represents less than $0.01 per share.

3 

Total investment return is based on the change in net asset value of a share during the period (not annualized) and assumes reinvestment of distributions at net asset value.

4 

Ratios are annualized for periods less than one year. In addition to fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios.

5 

Not annualized.

 

 

DECEMBER 31, 2016

  

 

67

 

FINANCIAL HIGHLIGHTS

Per share income and capital changes for a share outstanding throughout the period. See accompanying notes to financial statements.

 

 

Sit Small Cap Dividend Growth Fund

 

     Six Months Ended             Three  
Class I    December 31, 2016      Year Ended      Months Ended  
     (Unaudited)      June 30, 2016      June 30, 2015 *  

 

  

Net Asset Value:

         

Beginning of period

      $10.00               $9.96               $10.00         
  

 

 

  

Operations:

         

Net investment income 1

      0.06               0.14               0.02         

Net realized and unrealized gains (losses)

      1.06               0.02               (0.06)        
  

 

 

  

Total from operations

      1.12               0.16               (0.04)        
  

 

 

  

Distributions to Shareholders:

         

From net investment income

      (0.08)              (0.12)              —         

From net realized gains

      —               — 2               —         
  

 

 

  

Total distributions

      (0.08)              (0.12)              —         
  

 

 

  

Net Asset Value:

         

End of period

      $11.04               $10.00               $9.96         
  

 

 

  

Total investment return 3

      11.29%               1.71%               (0.40%)        
  

 

 

  

Net assets at end of period (000’s omitted)

      $10,538               $5,777               $3,708         

Ratios: 4

         

Expenses

      1.25%               1.25%               1.25%         

Net investment income

      1.22%               1.46%               0.98%         

Portfolio turnover rate (excluding short-term securities)

      6.56%5               26.43%               2.63%5         
        
      Six Months Ended              Three  
Class S    December 31, 2016      Year Ended      Months Ended  
     (Unaudited)      June 30, 2016      June 30, 2015 *  

 

  

Net Asset Value:

         

Beginning of period

      $10.00               $9.96               $10.00         
  

 

 

  

Operations:

         

Net investment income 1

      0.05               0.11               0.02         

Net realized and unrealized gains (losses)

      1.06               0.03               (0.06)        
  

 

 

  

Total from operations

      1.11               0.14               (0.04)        
  

 

 

  

Distributions to Shareholders:

         

From net investment income

      (0.07)              (0.10)              —         

From net realized gains

      —               — 2               —         
  

 

 

  

Total distributions

      (0.07)              (0.10)              —         
  

 

 

  

Net Asset Value:

         

End of period

      $11.04               $10.00               $9.96         
  

 

 

  

Total investment return 3

      11.09%               1.46%               (0.40%)        
  

 

 

  

Net assets at end of period (000’s omitted)

      $2,983               $2,587               $2,230         

Ratios: 4

         

Expenses

      1.50%               1.50%               1.50%         

Net investment income

      0.97%               1.21%               0.73%         

Portfolio turnover rate (excluding short-term securities)

      6.56%5               26.43%               2.63%5         

 

 

* 

The Fund commenced investment operations on March 31, 2015.

1 

The net investment income per share is based on average shares outstanding for the period.

2 

Amount represents less than $0.01 per share.

3 

Total investment return is based on the change in net asset value of a share during the period (not annualized) and assumes reinvestment of distributions at net asset value.

4 

Ratios are annualized for periods less than one year. In addition to fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios.

5 

Not annualized.

 

  

68

      SIT MUTUAL FUNDS SEMI-ANNUAL REPORT   

 

FINANCIAL HIGHLIGHTS

Per share income and capital changes for a share outstanding throughout the period. See accompanying notes to financial statements.

 

Sit Small Cap Growth Fund

 

     Six Months Ended        
     December 31, 2016          Years Ended June 30,     
     (Unaudited)        2016        2015        2014        2013        2012   

 

  

Net Asset Value:

             

Beginning of period

      $45.59             $60.10        $61.38        $50.08        $43.90        $43.86   
  

 

 

  

Operations:

             

Net investment loss 1

      (0.11)            (0.33 )      (0.48 )      (0.55 )      (0.30 )      (0.34 ) 

Net realized and unrealized gains (losses)

      5.01             (8.97 )      6.26        11.85        6.48        0.38   
  

 

 

  

Total from operations

      4.90             (9.30 )      5.78        11.30        6.18        0.04   
  

 

 

  

Redemption fees 2

      —             —        —        —        —        —   
  

 

 

  

Distributions to Shareholders:

             

From net realized gains

      (0.08)            (5.21 )      (7.06 )      —        —        —   
  

 

 

  

Net Asset Value:

             

End of period

      $50.41             $45.59        $60.10        $61.38        $50.08        $43.90   
  

 

 

  

Total investment return 3

      10.76%             (16.00% )      10.38%        22.56%        14.08%        0.09%   
  

 

 

  

Net assets at end of period (000’s omitted)

      $86,503             $81,209        $103,816        $99,510        $84,793        $78,202   

Ratios: 4

             

Expenses

      1.50%             1.50%        1.50%        1.50%        1.50%        1.50%   

Net investment loss

      (0.46%)            (0.65% )      (0.81% )      (0.94% )      (0.64% )      (0.82% ) 

Portfolio turnover rate (excluding short-term securities) .

      15.22%5             27.37%        31.07%        33.38%        28.36%        22.32%   

 

 

1 

The net investment income (loss) per share is based on average shares outstanding for the period.

2 

Amount represents less than $0.01 per share.

3 

Total investment return is based on the change in net asset value of a share during the period (not annualized) and assumes reinvestment of distributions at net asset value.

4 

Ratios are annualized for periods less than one year. In addition to fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios.

5 

Not annualized.

 

 

DECEMBER 31, 2016

  

 

69

 

FINANCIAL HIGHLIGHTS

Per share income and capital changes for a share outstanding throughout the period. See accompanying notes to financial statements.

 

Sit International Growth Fund

 

     Six Months Ended        
     December 31, 2016          Years Ended June 30,     
     (Unaudited)        2016        2015        2014        2013        2012   

 

  

Net Asset Value:

             

Beginning of period

      $14.48             $16.92        $17.44        $15.05        $13.29        $15.16   
  

 

 

  

Operations:

             

Net investment income 1

      0.02             0.12        0.09        0.28        0.20        0.22   

Net realized and unrealized gains (losses)

      (0.34)            (1.47 )      (0.34 )      2.28        1.80        (1.86 ) 
  

 

 

  

Total from operations

      (0.32)            (1.35 )      (0.25 )      2.56        2.00        (1.64 ) 
  

 

 

  

Redemption fees

      —             —        —        —        —        —  2 
  

 

 

  

Distributions to Shareholders:

             

From net investment income

      (0.07)            (0.09 )      (0.27 )      (0.17 )      (0.24 )      (0.23 ) 

From net realized gains

      —             (1.00 )      —        —        —        —   
  

 

 

  

Total distributions

      (0.07)            (1.09 )      (0.27 )      (0.17 )      (0.24 )      (0.23 ) 
  

 

 

  

Net Asset Value:

             

End of period

      $14.09             $14.48        $16.92        $17.44        $15.05        $13.29   
  

 

 

  

Total investment return 3

      (2.21%)            (8.19% )      (1.35% )      17.06%        15.06%        (10.69% ) 
  

 

 

  

Net assets at end of period (000’s omitted)

      $19,564             $20,440        $22,485        $24,127        $20,890        $19,296   

Ratios: 4

             

Expenses

      1.50%             1.50%        1.50%        1.50%        1.50%        1.50%   

Net investment income

      0.21%             0.76%        0.55%        1.69%        1.39%        1.62%   

Portfolio turnover rate (excluding short-term securities)

      21.88%5             37.94%        56.97%        46.91%        27.93%        27.82%   

 

 

1 

The net investment income per share is based on average shares outstanding for the period.

2 

Amount represents less than $0.01 per share.

3 

Total investment return is based on the change in net asset value of a share during the period (not annualized) and assumes reinvestment of distributions at net asset value.

4 

Ratios are annualized for periods less than one year. In addition to fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios.

5 

Not annualized.

 

  

70

      SIT MUTUAL FUNDS SEMI-ANNUAL REPORT   

 

FINANCIAL HIGHLIGHTS

Per share income and capital changes for a share outstanding throughout the period. See accompanying notes to financial statements.

 

Sit Developing Markets Growth Fund

 

     Six Months Ended                                
     December 31, 2016          Years Ended June 30,     
     (Unaudited)        2016        2015        2014        2013        2012   

 

  

Net Asset Value:

             

Beginning of period

      $12.26             $14.77        $17.48        $16.40        $17.70        $23.24   
  

 

 

  

Operations:

             

Net investment income (loss) 1

      (0.02)            0.04        0.03        (0.01 )      0.04        0.06   

Net realized and unrealized gains (losses)

      (0.03)            (2.18 )      (1.41 )      2.07        0.14        (3.89 ) 
  

 

 

  

Total from operations

      (0.05)            (2.14 )      (1.38 )      2.06        0.18        (3.83 ) 
  

 

 

  

Redemption fees

      —             —  2      —        —        —        —  2 
  

 

 

  

Distributions to Shareholders:

             

From net investment income

      (0.03)            (0.02 )      —        (0.03 )      (0.06 )      (0.06 ) 

From net realized gains

      —             (0.35 )      (1.33 )      (0.95 )      (1.42 )      (1.65 ) 
  

 

 

  

Total distributions

      (0.03)            (0.37 )      (1.33 )      (0.98 )      (1.48 )      (1.71 ) 
  

 

 

  

Net Asset Value:

             

End of period

      $12.18             $12.26        $14.77        $17.48        $16.40        $17.70   
  

 

 

  

Total investment return 3

      (0.39%)            (14.42% )      (7.64% )      12.79%        0.36%        (16.29% ) 
  

 

 

  

Net assets at end of period (000’s omitted)

      $6,924             $7,297        $9,192        $10,808        $10,615        $11,634   

Ratios: 4

             

Expenses

      2.00%             2.00%        2.00%        2.00%        2.00%        2.00%   

Net investment income (loss)

      (0.34%)            0.31%        0.16%        (0.07% )      0.24%        0.29%   

Portfolio turnover rate (excluding short-term securities)

      4.02%5             28.14%        21.51%        21.45%        15.48%        22.56%   

 

 

1 

The net investment income (loss) per share is based on average shares outstanding for the period.

2 

Amount represents less than $0.01 per share.

3 

Total investment return is based on the change in net asset value of a share during the period (not annualized) and assumes reinvestment of distributions at net asset value.

4 

Ratios are annualized for periods less than one year. In addition to fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios.

5 

Not annualized.

 

 

DECEMBER 31, 2016

  

 

71

 

NOTES TO FINANCIAL STATEMENTS

Six Months Ended December 31, 2016

 

 

(1)

Organization

Sit Mutual Funds are no-load funds, and are registered under the Investment Company Act of 1940 (as amended) as diversified, open-end management investment companies, or series thereof. The Sit Balanced, Sit Dividend Growth, Sit Global Dividend Growth, Sit ESG Growth, Sit Small Cap Dividend Growth, Sit Small Cap Growth, Sit International Growth, and Sit Developing Markets Growth are series funds of Sit Mutual Funds, Inc.

This report covers the equity funds of the Sit Mutual Funds (the Funds). Each fund has 10 billion authorized shares of capital stock with a par value of $0.001. The investment objective for each Fund is as follows:

 

Fund    Investment Objective
Balanced    Long-term growth consistent with the preservation of principal and to provide regular income.
Dividend Growth    Provide current income that exceeds the dividend yield of the S&P 500® Index and that grows over a period of years. Secondarily, maximize long-term capital appreciation.
Global Dividend Growth    Provide current income that exceeds the dividend yield of the MSCI World Index that grows over a period of years. Secondarily, maximize long-term capital appreciation.
Large Cap Growth    Maximize long-term capital appreciation.
ESG Growth    Maximize long-term capital appreciation.
Mid Cap Growth    Maximize long-term capital appreciation.
Small Cap Dividend Growth    Provide current income that exceeds the yield of the Russell 2000® Index and that grows over a period of years. Secondarily, maximize long-term capital appreciation.
Small Cap Growth    Maximize long-term capital appreciation.
International Growth    Maximize long-term growth.
Developing Markets Growth    Maximize long-term capital appreciation.

The Dividend Growth, Global Dividend Growth, ESG Growth and Small Cap Dividend Growth Funds offer Class I and Class S shares. Both classes of shares have identical voting, dividend, and liquidation rights. The distribution fee differs among classes, the Class S shares have a 0.25% distribution fee, whereas Class I has no distribution fee. Income, expenses (other than class specific expenses) and realized and unrealized gains or losses on investments are allocated to each class of shares based upon its relative net assets.

 

(2)

Significant Accounting Policies

The Funds are investment companies and follow accounting and reporting guidance under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 946, “Financial Services-Investment Companies”. The following is a summary of significant accounting policies consistently followed by the Funds in the preparation of their financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”).

Investments in Securities

Investments in securities traded on national or international securities exchanges are valued at the last reported sales price prior to the time when assets are valued. Securities traded on the over-the-counter market are valued at the last reported sales price or if the last sales price is not available at the last reported bid price. The sale and bid prices or prices deemed best to reflect fair value quoted by dealers who make markets in these securities are obtained from independent pricing services. Consistent with the Funds’ valuation policies and procedures, debt securities maturing in more than 60 days are priced by an independent pricing service. The pricing service may use models that price securities based on current yields and relative security characteristics, such as coupon rate, maturity date, issuer credit quality, and prepayment speeds as applicable. When market quotations are not readily available, or when the Adviser becomes aware that a significant event impacting the value of a security or group of securities has occurred after the closing of the exchange on which the security or securities principally trade, but before the calculation of the daily net asset value, securities are valued at fair value as determined in good faith using procedures established by the Board of Directors. The procedures consider, among

 

  

72

      SIT MUTUAL FUNDS SEMI-ANNUAL REPORT   

 

 

 

others, the following factors to determine a security’s fair value: the nature and pricing history (if any) of the security; whether any dealer quotations for the security are available; and possible valuation methodologies that could be used to determine the fair value of the security. Debt securities of sufficient credit quality maturing in less than 60 days when acquired, or which subsequently are within 60 days of maturity, are valued at amortized cost, which approximates fair value.

Security transactions are accounted for on the date the securities are purchased or sold. Securities gains and losses are calculated on the identified-cost basis. Dividend income is recorded on the ex-dividend date or upon the receipt of ex-dividend notification in the case of certain foreign securities. Interest, including level-yield amortization of long-term bond premium and discount, is recorded on the accrual basis.

Fair Value Measurements

The inputs and valuation techniques used to measure fair value of the Funds’ net assets are summarized into three levels as described in the hierarchy below:

• Level 1 – quoted prices in active markets for identical securities. An active market for the security is a market in which transactions occur with sufficient frequency and volume to provide pricing information on an ongoing basis. A quoted price in an active market provides the most reliable evidence of fair value.

• Level 2 – debt securities are valued based on evaluated prices received from independent pricing services or from dealers who make markets in such securities. For corporate bonds, U.S. government and government agency obligations, and municipal securities the pricing services utilize matrix pricing which considers yield or price of bonds of comparable quality, coupon, maturity, and type as well as dealer supplied prices. For asset-backed securities and mortgage-backed securities, the pricing services utilize matrix pricing which considers prepayment speed assumptions, attributes of the collateral, yield or price of bonds of comparable quality, coupon, maturity, and type as well as dealer supplied prices. For foreign equities, the pricing services adjust closing prices by applying a systematic process for events occurring after the close of the foreign exchange by utilizing such inputs as Depositary Receipts, quoted prices for similar securities, exchange rates, and certain indexes. All of these inputs are derived principally from or corroborated by observable market data. An adjustment to any observable input that is significant to the fair value may render the measurement a Level 3 measurement.

• Level 3 – significant unobservable inputs, including the Adviser’s own assumptions in determining the fair value of investments.

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

A summary of the levels for the Funds’ investments as of December 31, 2016 is included with the Funds’ schedule of investments.

Foreign Currency Translations and Forward Foreign Currency Contracts

The fair value of securities and other assets and liabilities denominated in foreign currencies for Global Dividend Growth, International Growth and Developing Markets Growth Funds are translated daily into U.S. dollars at the closing rate of exchange (approximately 4:00 p.m. Eastern Time). Purchases and sales of securities, income and expenses are translated at the exchange rate on the transaction date. Dividend and interest income includes currency exchange gains (losses) realized between the accrual and payment dates on such income. Exchange gains (losses) may also be realized between the trade and settlement dates on security and forward contract transactions. For securities denominated in foreign currencies, the effect of changes in foreign exchange rates on realized and unrealized gains or losses is reflected as a component of such gains or losses.

The Global Dividend Growth, International Growth and Developing Markets Growth Funds may enter into forward foreign currency exchange contracts generally for operational purposes, but the Adviser may occasionally utilize contracts to protect against adverse exchange rate fluctuation. Any gains (losses) generated by these contracts are disclosed separately on the statement of operations. The net U.S. dollar value of foreign currency underlying all contractual commitments held by the Funds and the resulting unrealized appreciation or depreciation is determined using foreign currency exchange rates from an independent pricing service. The Funds are subject to the credit risk that the other party will not complete the obligations of the contract.

 

 

DECEMBER 31, 2016

  

 

73

 

NOTES TO FINANCIAL STATEMENTS

Six Months Ended December 31, 2016 (Continued)

 

 

Federal Taxes

The Funds’ policy is to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of their taxable income to shareholders. Therefore, no income tax provision is required. Also, in order to avoid the payment of any federal excise taxes, the Funds will distribute substantially all of their net investment income and net realized gains on a calendar year basis.

Management has analyzed the Funds’ tax positions taken in federal tax returns for all open tax years and has concluded that as of December 31, 2016, no provision for income tax would be required in the Funds’ financial statements. The Funds’ federal and state income and federal excise returns for the 2013, 2014 and 2015 tax years for which the applicable statutes of limitations have not expired remain subject to examination by the Internal Revenue Service and state departments of revenue.

At December 31, 2016, the gross unrealized appreciation (depreciation) on investments and cost of securities on a tax basis for federal income tax purposes were as follows:

 

               Net Unrealized    Cost of
     Unrealized    Unrealized    Appreciation    Securities on a
     Appreciation    Depreciation    (Depreciation)    Tax Basis

Balanced

        $4,252,627          ($385,405 )        $3,867,222          $20,701,355  

Dividend Growth

        134,144,726          (5,617,586 )        128,527,140          863,912,750  

Global Dividend Growth

        2,910,881          (702,684 )        2,208,197          23,595,989  

Large Cap Growth

        40,577,529          (986,682 )        39,590,847          72,497,273  

ESG Growth

        267,307          (165,643 )        101,664          4,055,940  

Mid Cap Growth

        53,246,814          (1,738,662 )        51,508,152          90,542,516  

Small Cap Dividend Growth

        1,730,683          (253,357 )        1,477,326          11,952,547  

Small Cap Growth

        27,329,462          (896,616 )        26,432,846          60,207,775  

International Growth

        1,604,826          (906,021 )        698,805          18,799,423  

Developing Markets Growth

        1,141,757          (727,510 )        414,247          6,499,040  

Net investment income and net realized gains differ for financial statement and tax purposes because of corporate actions on shares held and/or losses deferred due to “wash sale” transactions. A “wash sale” occurs when a Fund sells a security that it has acquired within a period beginning thirty days before and ending thirty days after the date of sale (a sixty one day period). The character of distributions made during the year from net investment income or net realized gains may also differ from its ultimate characterization for tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gains (losses) were recorded by the Funds. The tax character of distributions paid during the fiscal years ended June 30, 2016 and 2015 were as follows:

Year Ended June 30, 2016:

 

          Long Term       
     Ordinary Income    Capital Gain    Total

Balanced

        $508,889          $1,028,080            $1,536,969  

Dividend Growth (Class I)

        23,739,125          101,891,044            125,630,169  

Dividend Growth (Class S)

        1,582,606          7,415,541            8,998,147  

Global Dividend Growth (Class I)

        530,149          1,512,875            2,043,024  

Global Dividend Growth (Class S)

        62,954          201,098            264,052  

Large Cap Growth

        4,558,215          27,930,763            32,488,978  

Mid Cap Growth

        —          23,213,056            23,213,056  

Small Cap Dividend Growth (Class I)

        59,291          446            59,738  

Small Cap Dividend Growth (Class S)

        24,217          216            24,432  

Small Cap Growth

        —          8,910,218            8,910,218  

International Growth

        205,203          1,246,085            1,451,288  

Developing Markets Growth

        12,000          211,867            223,867  

 

  

74

      SIT MUTUAL FUNDS SEMI-ANNUAL REPORT   

 

    

 

Year Ended June 30, 2015:

 

          Long Term       
     Ordinary Income    Capital Gain    Total

Balanced

        $226,644          $452,434            $679,078  

Dividend Growth (Class I)

        19,006,449          114,151,521            133,157,970  

Dividend Growth (Class S)

        1,514,587          10,059,686            11,574,273  

Global Dividend Growth (Class I)

        315,934          1,468,820            1,784,754  

Global Dividend Growth (Class S)

        50,637          240,326            290,963  

Large Cap Growth

        1,318,355          32,548,866            33,867,221  

Mid Cap Growth

        —          22,297,244            22,297,244  

Small Cap Dividend Growth (Class I)

        —          —            —  

Small Cap Dividend Growth (Class S)

        —          —            —  

Small Cap Growth

        —          11,167,852            11,167,852  

International Growth

        354,576          —            354,576  

Developing Markets Growth

        —          795,509            795,509  

As of June 30, 2016, the components of distributable earnings on a tax basis were as follows:

 

     Undistributed         Unrealized
     Ordinary    Accumulated    Appreciation
     Income    Gain    (Depreciation)

Balanced

        $60,565          —            $3,273,670  

Dividend Growth

        3,187,293        $ 48,194,156            99,519,924  

Global Dividend Growth

        113,414          —            1,250,173  

Large Cap Growth

        217,862          5,546,908            37,011,728  

Mid Cap Growth

        —          1,410,683            44,790,166  

Small Cap Dividend Growth

        24,963          —            191,889  

Small Cap Growth

        —          144,631            17,861,490  

International Growth

        76,544          —            484,863  

Developing Markets Growth

        18,811          —            469,665  

Net capital loss carryovers and late year losses, if any, as of June 30, 2016, are available to offset future realized capital gains and thereby reduce future capital gains distributions. Under the Regulated Investment Company Modernization Act of 2010 (“Act”), the Funds’ are permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 for an unlimited period. Any losses incurred during those future taxable years will be required to be utilized prior to any losses incurred in pre-enactment taxable years. Additionally, post-enactment capital losses that are carried forward will retain their character as either short-term or long-term capital losses, and will not be considered exclusively short-term as under previous law. The Funds’ first fiscal year end subject to the Modernization Act was June 30, 2012. The net capital loss carryovers post-enactment and the late year losses deferred as of June 30,2016, were as follows:

 

     Post-Enactment              
     Unlimited Period of Net        Late Year    Accumulated
     Capital Loss Carryover        Losses    Capital and
     Short-Term    Long-Term        Deferred    Other Losses

Balanced

        —          —        $ 79,701        $ 79,701  

Global Dividend Growth

      $   392,798        $ 224,357          —          617,155  

Small Cap Dividend Growth

        169,885          —          —          169,885  

International Growth

        —          —          348,030          348,030  

Developing Markets Growth

        —          —          164,567          164,567  

 

  

 

DECEMBER 31, 2016

   

 

 

 

75

 

  

 

NOTES TO FINANCIAL STATEMENTS

Six Months Ended December 31, 2016 (Continued)

 

 

Distributions

Distributions to shareholders are recorded as of the close of business on the record date. Such distributions are payable in cash or reinvested in additional shares of the Funds’ capital stock. Distributions from net investment income, if any, are declared and paid quarterly for the Balanced, Dividend Growth, Global Dividend Growth and Small Cap Dividend Growth Funds and declared and paid annually for Developing Markets Growth, Small Cap Growth, International Growth, Mid Cap Growth, Large Cap Growth and ESG Growth Funds. Distributions from net realized gains, if any, will be made annually for each of the Funds.

Concentration of Investments

The Developing Markets Growth Fund may concentrate investments in countries with limited or developing capital markets which may involve greater risks than investments in more developed markets and the prices of such investments may be volatile. The consequences of political, social or economic changes in these markets may have disruptive effects on the market prices of the Fund’s investments and the income it generates, as well as the Fund’s ability to repatriate such amounts.

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported results for the respective periods. Actual results could differ from those estimates.

Guarantees and Indemnifications

Under each Fund’s organizational documents, its officers and directors are indemnified against certain liability arising out of the performance of their duties to each Fund. In addition, certain of each Fund’s contracts with its service providers contain general indemnification clauses. Each Fund’s maximum exposure under these arrangements is unknown since the amount of any future claims that may be made against each Fund cannot be determined and each Fund has no historical basis for predicting the likelihood of any such claims.

 

(3)

Investment Security Transactions

The cost of purchases and proceeds from sales and maturities of investment securities, other than short-term securities, for the six months ended December 31, 2016, were as follows:

 

     Purchases      Proceeds  
  

 

 

  
         U.S. Government      Other      U.S. Government      Other  
  

 

 

  

Balanced

      $860,352                 $4,329,770         $1,147,189                 $3,237,737   

Dividend Growth

      —                 321,939,575         —                 381,418,255   

Global Dividend Growth

      —                 3,917,900         —                 3,621,155   

Large Cap Growth

      —                 8,921,313         —                 16,556,559   

ESG Growth

      —                 4,373,187         —                 371,492   

Mid Cap Growth

      —                 16,970,496         —                 18,832,321   

Small Cap Dividend Growth

      —                 4,369,044         —                 655,278   

Small Cap Growth

      —                 12,185,608         —                 15,105,027   

International Growth

      —                 4,374,008         —                 4,551,558   

Developing Markets Growth

      —                 510,835         —                 821,570   

 

  

76

      SIT MUTUAL FUNDS SEMI-ANNUAL REPORT   

 

 

 

(4)

Affiliated Fees and Transactions

Investment Adviser

The Funds each have entered into an investment management agreement with Sit Investment Associates, Inc. (SIA), under which SIA manages the Funds’ assets and provides research, statistical and advisory services, and pays related office rental, executive expenses and executive salaries. The current fee for investment management and advisory services is based on the average daily net assets of the Funds at the annual rate of:

 

Balanced

      1.00 %   

Dividend Growth Class I and Class S

      1.00 %   

Global Dividend Growth Class I and Class S

      1.25 %   

Large Cap Growth

      1.00 %   

ESG Growth Class I and Class S

      1.25 %   

Mid Cap Growth

      1.25 %   

Small Cap Dividend Growth Class I and Class S

      1.25 %   

Small Cap Growth

      1.50 %   

International Growth

      1.50 %   

Developing Markets Growth

      2.00 %   

SIA is obligated to pay all of the Funds’ expenses (excluding extraordinary expenses, stock transfer taxes, interest, brokerage commissions, 12b-1 fees and other transaction charges relating to investing activities).

In addition to the annual management fees, the Class S shares of Dividend Growth, Global Dividend Growth, ESG Growth and Small Cap Dividend Growth Funds also have a 0.25% annual distribution (12b-1) fee, which is used to pay for distribution fees related to the sale and distribution of its shares.

Transactions with affiliates

The investment adviser, affiliates of the investment adviser, directors and officers of the Funds as a whole owned the following shares as of December 31, 2016:

 

            % Shares     
     Shares                Outstanding               

Balanced

      254,333       21.6   

Dividend Growth

      1,214,266         1.9   

Global Dividend Growth

      719,226       37.6   

Large Cap Growth

      616,230       19.5   

ESG Growth

      407,327       99.7   

Mid Cap Growth

      3,852,355       43.6   

Small Cap Dividend Growth

      858,788       70.1   

Small Cap Growth

      911,770       53.1   

International Growth

      805,553       58.0   

Developing Markets Growth

      258,018       45.4   

 

 

DECEMBER 31, 2016

  

 

77

 

NOTES TO FINANCIAL STATEMENTS

Six Months Ended December 31, 2016 (Continued)

 

 

(5)

Capital Share Activity

Short-Term Trading (Redemption) Fees

The Funds (except Balanced) charge a redemption fee equal to 2.00% of the proceeds on shares held for less than 30 calendar days. The fee is retained by the Fund for the benefit of its long-term shareholders and accounted for as an addition to paid in capital. For the six months ended December 31, 2016, the Funds received the following redemption fees:

 

     Class I                    Class S                      

Dividend Growth

        $947          —     

Large Cap Growth

        158          —     

Mid Cap Growth

        2          —     

Small Cap Growth

        1,179          —     

 

(6)

Subsequent Events

Management has evaluated the impact of all subsequent events on the Funds through the date the financial statements were issued, and has determined that there were no subsequent events that would require disclosure in or adjustments to the financial statements.

 

  

78

      SIT MUTUAL FUNDS SEMI-ANNUAL REPORT   

 

EXPENSE EXAMPLE (Unaudited)

 

 

As a shareholder of the Funds, you incur two types of costs: (1) transaction costs, including redemption fees and (2) ongoing costs, including management fees; and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Funds and to compare these costs with the ongoing costs of investing in other mutual funds.

The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period July 1, 2016 to December 31, 2016.

Actual Expenses

The first line of the following table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line of the table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as redemption fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs (redemption fees) were included, your costs would have been higher.

                   Expenses  
     Beginning      Ending      Paid During  
     Account      Account      Period*  
     Value      Value      (7/1/16-  
Fund    (7/1/16)      (12/31/16)      12/31/16)  
Balanced Fund   

Actual

      $1,000         $1,033.70         $5.10   

Hypothetical

      $1,000         $1,020.05         $5.06   
                            
Dividend Growth Fund   

Actual

         

Class I

      $1,000         $1,062.70         $5.17   

Class S

      $1,000         $1,061.60         $6.46   

Hypothetical

         

Class I

      $1,000         $1,020.05         $5.06   

Class S

      $1,000         $1,018.80         $6.33   
                            
Global Dividend Growth Fund   

Actual

         

Class I

      $1,000         $1,035.70         $6.38   

Class S

      $1,000         $1,033.80         $7.65   

Hypothetical

         

Class I

      $1,000         $1,018.80         $6.33   

Class S

      $1,000         $1,017.55         $7.59   
                            
Large Cap Growth Fund   

Actual

      $1,000         $1,060.40         $5.17   

Hypothetical

      $1,000         $1,020.05         $5.06   
                            
ESG Growth Fund   

Actual

         

Class I

      $1,000         $1,020.10         $6.33   

Class S

      $1,000         $1,018.80         $7.59   

Hypothetical

         

Class I

      $1,000         $1,018.80         $6.33   

Class S

      $1,000         $1,017.55         $7.59   
                            
Mid Cap Growth Fund   

Actual

      $1,000         $1,057.20         $6.45   

Hypothetical

      $1,000         $1,018.80         $6.33   
                            
Small Cap Dividend Growth Fund   

Actual

         

Class I

      $1,000         $1,112.90         $6.62   

Class S

      $1,000         $1,110.90         $7.94   

Hypothetical

         

Class I

      $1,000         $1,018.80         $6.33   

Class S

      $1,000         $1,017.55         $7.59   
 

 

 

DECEMBER 31, 2016

  

 

79

 

EXPENSE EXAMPLE (Unaudited) (Continued)

 

 

 

                   Expenses  
     Beginning      Ending      Paid During  
     Account      Account      Period*  
     Value      Value      (7/1/16-  
Fund    (7/1/16)      (12/31/16)      12/31/16)  
Small Cap Growth Fund   

Actual

      $1,000         $1,107.60         $7.93   

Hypothetical

      $1,000         $1,017.55         $7.59   
                            
International Growth Fund   

Actual

      $1,000         $997.90         $7.44   

Hypothetical

      $1,000         $1,017.55         $7.59   
                            
Developing Markets Growth Fund   

Actual

      $1,000         $996.10         $10.01   

Hypothetical

      $1,000         $1,015.04         $10.10   

* Expenses are equal to the Fund’s annualized expense ratio of 1.00%, for the Balanced, Dividend Growth, Class I and Large Cap Growth Funds; 1.25% for Dividend Growth, Class S, Global Dividend Growth, Class I, Small Cap Dividend Growth, Class I, Mid Cap Growth, and ESG Growth, Class I Funds; 1.50% for Global Dividend Growth, Class S, Small Cap Dividend Growth, Class S, Small Cap Growth, ESG Growth, Class S and International Growth Funds; and 2.00% for Developing Markets Growth Fund, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half year period.)

 

 

 

  

80

      SIT MUTUAL FUNDS SEMI-ANNUAL REPORT   

 

ADDITIONAL INFORMATION (Unaudited)

 

 

PROXY VOTING

Each Fund follows certain policies and procedures for voting proxies for securities held in each portfolio. A description of the Funds’ proxy voting policies and procedures is available without charge upon request by calling the Funds at 1-800-332-5580.

Information regarding how each Fund voted proxies relating to its portfolio securities during the most recent twelve-month period ended June 30 is available without charge upon request by calling the Funds at 1-800-332-5580, and is available on the U.S. Securities and Exchange Commission’s website at www.sec.gov.

AVAILABILITY OF QUARTERLY PORTFOLIO SCHEDULES

The Funds’ file their complete schedules of portfolio holdings with the U.S. Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-Q. The Funds’ Form N-Qs are available without charge upon request by calling the Funds at 1-800-332-5580 and are available on the SEC’s website at www.sec.gov. In addition, the Funds’ Form N-Qs may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-202-551-8090.

RE-APPROVAL OF INVESTMENT MANAGEMENT AGREEMENTS

At their joint meeting held on October 24, 2016 the Boards of Directors of the Sit Mutual Funds unanimously approved the continuation for another one year period the investment management agreements entered into by and between Sit Investment Associates, Inc. (“SIA”) and Sit Mid Cap Growth Fund, Inc. dated November 1, 1996; Sit Large Cap Growth Fund, Inc. dated November 1, 1996; and Sit Mutual Funds Inc., dated November 1, 1992; (the “Agreements”).

The Boards approved the Agreements after a lengthy discussion and consideration of various factors relating to the Boards’ selection of SIA as the investment adviser, and the Boards’ approval of the fees to be paid under the Agreements.

Investment Adviser Criteria. The Directors began their analysis by discussing their criteria for determining the quality of an investment adviser. The Directors’ noted that their analysis is similar to that used by institutional investors in evaluating and selecting investment advisers. The Directors discussed several factors used to determine the overall quality of an investment adviser and the nature, extent and quality of the services performed by SIA, including the following:

Investment Philosophy and Process. The Directors considered SIA’s philosophy of managing assets. With respect to equity securities, SIA identifies growth-oriented securities issued by companies with the potential for earnings growth at a faster rate than the general economy and market index. SIA believes that earnings growth is the primary determinant of superior long-term returns for equity securities, and invests in companies it believes exhibit above market and consistent growth as well as conservative and cyclical growth companies. SIA’s actively managed portfolios not only concentrate on the best growth opportunities but do so at reasonable valuation levels. The Directors determined that the Stock Funds’ investment objectives are consistent with SIA’s investment philosophy and growth style. The Directors reviewed the Stock Funds’ portfolio characteristics, and noted that SIA has consistently managed the Stock Funds in a growth style and the Directors found no indication of style drift away from growth stocks over market cycles. The Directors noted that in years during which growth stocks have generally under-performed relative to value stocks, many funds with a stated growth style objective actually strayed from the growth style and invested a portion of their portfolios in value stocks. This has been especially true with funds investing in international equity securities. In these instances, the Stock Funds may at times not rank favorably in comparisons with other funds investing in value stocks because the Stock Funds were disciplined in maintaining their growth style.

The Directors discussed SIA’s consistent and well-defined investment process. With respect to equity securities, SIA utilizes a team based top-down and bottom-up investment decision making process.

Investment Professionals. The Directors discussed the experience, knowledge and organizational stability of SIA and its investment professionals. The Directors noted that SIA’s senior professionals are actively involved in the investment process and have significant investment industry experience.

 

 

DECEMBER 31, 2016

  

 

81

 

ADDITIONAL INFORMATION (Unaudited) (Continued)

 

 

The Directors discussed the depth of SIA’s investment staff. The Directors noted that SIA has over 30 investment professionals. Given the investment products offered by SIA and the assets under management, the Directors determined that SIA’s investment staff is well positioned to meet the current needs of its clients, including the Funds, and to accommodate growth in the number of clients and assets under management for the near future. The Directors concluded that the depth of the investment staff, and in particular senior management and investment analysts, is actually greater than the Funds currently require at their present asset size. The Directors noted that SIA has the resources of a $13.7 billion investment firm working for the benefit of the Fund shareholders.

Investment Performance. The Directors reviewed and discussed the Funds’ investment performance on an absolute and comparable basis for various periods as discussed below. The Directors noted that the investment performance of the Funds has generally been competitive with indices and other funds with similar investment styles as the Funds, such as equity growth funds.

Corporate Culture. The Directors discussed SIA’s corporate values to operate under the highest ethical and professional standards. SIA’s culture is set and practiced by senior management who insist that all professionals exhibit honesty and integrity. The Board noted that the firm’s values are evident in all of the services provided to the Funds.

Review of Specific Factors. The Directors continued their analysis by reviewing specific information on SIA and the Funds and specific terms of the Agreements, including the following.

Investment Performance. The Directors reviewed investment performance of each Fund for 1 month, 3 months, 6 months, year-to-date, 1 year, 5 years (as applicable), 10 years (as applicable) and since inception, both on an absolute basis and on a comparative basis to indices and mutual funds within the same investment categories. As noted above, the Directors concluded that the investment performance of the Funds has been competitive in relation to their stated objectives and strategies on a comparable basis with funds with similar objectives and strategies.

Fees and Expenses. The Directors noted that the Funds pay SIA a monthly fee and SIA is responsible for all of the Funds’ expenses, except interest, brokerage commissions and transaction charges, certain extraordinary expenses, and fees paid under a distribution plan adopted pursuant to Rule 12b-1 under the Investment Company Act of 1940 for Class S shares of Sit Dividend Growth Fund, Sit Global Dividend Growth Fund, Sit Small Cap Dividend Growth Fund, and Sit ESG Growth Fund. The Directors reviewed fees paid in prior years (both before and after the voluntary waiver of fees by SIA with respect to Mid Cap Growth Fund prior to January 1, 2011 and International Growth Fund prior to November 1, 2010) and the current fees to be paid under the Agreements.

The Directors compared each Fund’s expense ratio to the average and median expense ratios of no-load mutual funds within the same Morningstar, Inc. investment category, the average expense ratios for load funds within the Morningstar category, and the average expense ratios for all funds within the Morningstar category. Certain of the Fund’s expense ratios were higher than the averages, and certain of the Fund’s expense ratios were lower than the averages. The Directors noted that the Morningstar no-load categories include funds of various asset sizes, some of which are significantly larger in assets than the Funds. The Directors found each Fund’s total expense ratio to be within an acceptable range compared to the total expense ratios of other no-load funds within the Fund’s Morningstar category. The Directors concluded that the fees paid by the Funds are reasonable and appropriate.

The Directors reviewed the extent to which the fees to be paid under the Agreements by each Fund may be affected by an increase in the Fund’s assets, which included reviewing each Fund’s current and historical assets and the likelihood and magnitude of future increases in the Fund’s assets. The Directors agreed that it is appropriate that the Funds benefit from improved economies of scale as the Funds’ assets increase. However, the Directors concluded that given the amount of the Funds’ current assets and the likelihood and magnitude of future increases in the Funds’ assets, negotiating a graduated fee structure for each Fund is unnecessary at this time since the fees to be paid under the current Agreements are reasonable and appropriate.

The Directors reviewed the expenses paid by SIA relating to the operations of the Funds, and SIA’s income with respect to the management of the Funds for the past two calendar years. The Directors concluded that the expenses paid were appropriate.

The Directors reviewed SIA’s investment advisory fee schedule for investment management services provided to other clients. The Directors compared the services provided to the Funds and other clients of SIA, and recognized that the Funds’ expenses are borne by SIA

 

  

82

      SIT MUTUAL FUNDS SEMI-ANNUAL REPORT   

 

ADDITIONAL INFORMATION (Unaudited) (Continued)

 

 

except as noted above. The Directors concluded that the fees paid by the Funds in relation to the fees paid by other SIA clients were appropriate and reasonable. The Directors also concluded that SIA’s profit margin with respect to the management of the Funds was appropriate.

The Directors discussed the extent to which SIA receives benefits from the relationship with the Funds such as soft dollar arrangements by which brokers provide research services to SIA as a result of brokerage generated by the Funds. The Board concluded that any benefits SIA receives from its relationship with the Funds are well within industry norms and are reflected in the amount of the fees paid by the Funds to SIA and are appropriate and reasonable.

Non-Advisory Services. The Directors considered the quality of non-advisory services which SIA provides to the Funds (and their shareholders) and the quality and depth of SIA’s non-investment personnel who provide such services. Directors concluded that the level of such services and the quality and depth of such personnel are consistent with industry standards.

Finally, the Directors considered the compliance staff and the regulatory history of SIA and the Funds, and concluded that both are consistent with industry standards.

Based on these conclusions, without any single conclusion being dispositive, the Directors determined that renewal of the Agreements was in the interest of each Fund and its shareholders.

 

 

DECEMBER 31, 2016

  

 

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LOGO

Item 2:       Code of Ethics. Not applicable to Semi-Annual Report.

Item 3:       Audit Committee Financial Expert. Not applicable to Semi-Annual Report.

Item 4:       Principal Accountant Fees and Services. Not applicable to Semi-Annual Report.

Item 5:       Audit Committee of Listed Registrants.

Not applicable to open-end investment companies.

Item 6:       Schedule of Investments.

The schedule of investments is included as part of the report to shareholders filed under Item 1 of this Form.

Item 7:       Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.

Not applicable to open-end investment companies.

Item 8:       Portfolio Managers of Closed-End Management Companies.

Not applicable to open-end investment companies.

Item 9:       Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.

Not applicable to open-end investment companies.

Item 10.     Submission of Matters to a vote of Security Holders.

There have been no material changes to the procedures by which shareholders may recommend nominees to the registrant’s board of directors.

Item 11:     Controls and Procedures -

(a)   Based on their evaluation of the Registrant’s Disclosure Controls and Procedures as of a date within 90 days of the Filing Date, the Registrant’s Chairman and Treasurer have determined that the Disclosure Controls and Procedures (as defined in Rule 30a-2(c) under the Act) are designed to ensure that information required to be disclosed by the Registrant is recorded, processed, summarized and reported by the filing Date, and that information required to be disclosed in the report is communicated to the Registrant’s management, as appropriate, to allow timely decisions regarding required disclosure.

b)   There were no changes in the Registrant’s internal control over financial reporting as defined in Rule 30a-3(d) under the Act) that occurred during the Registrant’s last fiscal half-year that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting.

Item 12:     Exhibits:

(a) The following exhibits are attached to this Form N-CSR:

(2)     A separate certification for each principal executive and principal financial officer of the registrant as required by Rule 30a-2(a) under the Act (17 CFR 270.30a-2) (certification required by Section 302 of the Sarbanes-Oxley Act of 2002).

(b)     Certification required by Rule 30a-2(b) under the Act (certification required by Section 906 of the Sarbanes-Oxley Act of 2002).

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Sit Mutual Funds, Inc.

 

By (Signature and Title)         /s/ Paul E. Rasmussen
  Paul E. Rasmussen
  Vice President, Treasurer

Date February 27, 2017

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

By (Signature and Title)         /s/ Paul E. Rasmussen
  Paul E. Rasmussen
  Vice President, Treasurer

Date February 27, 2017

 

By (Signature and Title)         /s/ Roger J. Sit
  Roger J. Sit
  Chairman

Date February 27, 2017