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) 334-5888
Date of fiscal year end: June 30, 2011
Date of reporting period: December 31, 2010
Item 1: | Reports to Stockholders |
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 | 10 | |||
Global Dividend Growth Fund | 14 | |||
Large Cap Growth Fund | 20 | |||
Mid Cap Growth Fund | 24 | |||
Small Cap Growth Fund | 28 | |||
International Growth Fund | 32 | |||
Developing Markets Growth Fund | 38 | |||
Statements of Assets and Liabilities | 44 | |||
Statements of Operations | 46 | |||
Statements of Changes in Net Assets | 48 | |||
Financial Highlights | 52 | |||
Notes to Financial Statements | 60 | |||
Expense Example | 67 | |||
Additional Information | 68 |
This document must be preceded or accompanied by a Prospectus.
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Six Months Ended December 31, 2010
Dear Fellow Shareholders:
After a brief setback during the middle of 2010, equity markets rallied to close the year strong. Stimulative fiscal and monetary actions taken by policymakers throughout the world continue to have a positive economic impact, although signs of fiscal stress continue to emerge. While higher stock valuations and economic challenges may limit significant upside potential, we believe stock prices can climb higher in 2011.
After a weak second quarter (as measured by Gross Domestic Product, or GDP), the U.S. economy picked up speed during the second half of 2010. Real GDP growth for the third quarter was +2.6%, and we estimate growth of 3.0% for the final quarter. Consumer spending, which accounts for nearly 70% of the calculation, remains surprisingly strong. In addition, inventories continue to be on the rebound, and government spending remains strong. Manufacturing activity has been very solid, as December marked the 17th consecutive month of expansion, according to the Institute for Supply Management. While government transfer payments have helped keep consumer spending elevated, it is clear that future growth in the economy will be heavily dependent on an improvement in labor market conditions. The data on employment has been volatile in recent months, but hiring appears to be generally in an uptrend. While the December Bureau of Labor Statistics employment report (+103,000 jobs added) was below expectations, both the ADP National Employment Survey (+297,000) and the Household Survey (also +297,000) showed stronger gains. This slow and steady improvement in job creation is one factor behind our slightly increased forecast for economic growth in the months ahead. We now project economic growth of +2.8% for 2011, after similar growth in 2010.
In terms of monetary policy, the Federal Reserve’s plan to purchase $600 billion of long-term Treasuries by the end of June 2011 was a key factor behind the rally in stocks. Despite a recent reacceleration in economic data, it is clear that the Fed’s “QE2” plan is to ward off lingering fears of deflation and to keep the recovery on track until employment returns to a solid uptrend. While aggressive Fed policies could potentially lead to higher inflation down the road, it is unlikely to occur in the near term, as high unemployment has created significant economic slack. Fed Chairman Ben Bernanke recently stated his belief that inflation was expected to be at “historically low levels for some time.” In other words, historically low short-term interest rates will persist in 2011.
Despite increasing concern among the general population and rhetoric in Washington, fiscal policy challenges persist and solutions (and, more importantly, actions) to remedy both short-term and long-term deficits are elusive. The budget deficit for the fiscal year ending September 30, 2010 was $1.3 trillion, compared to the $1.4 trillion shortfall in 2009. These are the two largest deficits in U.S. history. And, while the recently-passed $858 billion tax-cut extension will boost economic growth, it makes the deficit outlook even more daunting. Republicans and Democrats disagree on spending and the appropriate size of government, so differences are already manifesting
themselves in budget battles. The debate over raising the “debt ceiling” above $14.3 trillion is now underway.
Equity Strategy
The second-half equity rally was fueled by better-than-expected earnings, generally favorable economic data, optimism about quantitative easing by the Federal Reserve, and passage of an $858 billion tax extension late in the year.
As we begin 2011, we remain generally optimistic on the outlook for stocks, although we believe the market might be due for at least a pause. This is because investor sentiment has turned very bullish, corporate earnings have already rebounded (with tougher comparisons ahead), and valuations have moved steadily higher since the market lows in early 2009. Despite some near-term caution, there is clearly a case to be made for higher stock prices by the end of 2011. First, corporate earnings should continue to move higher, as the U.S. economy is showing signs of acceleration and multinationals benefit from strong growth in emerging economies. Second, corporate balance sheets are the strongest on record and free cash generation remains unprecedented. Companies hold more than $1 trillion in cash, which is earning very little interest income. This liquidity is being used for share buybacks, dividend increases, and mergers and acquisitions. To this point, according to Thompson Reuters, M&A activity increased 23% in 2010, and we believe it could accelerate further in 2011. The strong liquidity also has the potential to boost the economy and lower unemployment, if it is invested in new plants, equipment and employees. A third reason for optimism is based on “Presidential Cycle” analysis. The third year of a presidential cycle has historically been very good for stocks, as the prospect of reelection motivates a president to avoid tough, unpopular decisions (e.g., spending cuts) that may impact the economy and public sentiment. Since 1945, the average return during a third year of presidential term has been +17%, and there has not been a single instance of a negative return. In short, we believe that these factors, combined with reasonable valuations for stocks, will lead to higher stock prices in 2011.
While the near-term outlook has improved for the stocks and the economy, we believe it is important for investors to recognize longer-term headwinds. Debt levels remain too high (for both the government and consumers); higher unemployment appears to be structural in nature; real estate markets are weak; and inflation risks could emerge down the road. As we consider these issues and the fact that many higher-risk stocks have dramatically outperformed since the market low, we believe a focus on “quality” and growth is more important then ever. Quality, as we define it, refers to companies with strong balance sheets, predictable earnings growth, consistent cash flow generation, and management teams that focus on improving returns on capital. In addition, since it is our view that volatility is likely to pick up in the months ahead, we believe it is prudent to
2 |
SIT MUTUAL FUNDS SEMI-ANNUAL REPORT |
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remain diversified among sectors, with a bias towards those benefiting from the improvement in economic conditions. Technology remains a key focus, as cyclical improvements in key segments (e.g., servers, semiconductors) are converging with secular trends (e.g., wireless communications, smartphones) to create attractive growth opportunities in the sector. We have recently added to the capital goods sector, as several key end markets, including commercial aerospace and agriculture, appear to be in a sustained uptrend. Conversely, we have reduced health care weightings, due to low hospital utilization rates, uncertainties related to the impact of health care reform, and the impact of austerity measures (particularly in Europe), which will pressure product pricing. We remain underweighted in U.S. consumer-oriented sectors, as the slow rebound in labor markets and still-high debt levels limit growth potential.
Equity markets outside the U.S. generally performed well in recent months, although there were exceptions. Concerns over rising inflation and monetary tightening have emerged in several developing economies, most notably China. While volatility may remain quite high, we continue to see attractive investment opportunities in emerging markets, particularly in Asia (including China), as long-term economic growth prospects remain bright. We continue to underweight Japan, however, due to weak domestic consumption trends and structural issues within the economy. We also remain cautious on Europe, as the region’s economic growth will be impeded by sovereign debt issues and related austerity measures.
Despite the strong rebound in stock prices in 2010, we believe there remain attractive investment opportunities that will serve our shareholders well over the long term.
With best wishes,
Roger J. Sit
Chairman, President, CEO and Global CIO
DECEMBER 31, 2010 |
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3 |
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OBJECTIVE & STRATEGY
The Sit Balanced Fund’s dual objectives are to seek long-term growth of capital consistent with the preservation of principal and to provide regular income. It pursues its objectives by investing in a diversified portfolio of stocks 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 +14.19%, while the S&P 500® Index gained +23.27% and the Barclays Capital Aggregate Bond Index increased +1.15% over the period. The Lipper Balanced Fund Index gained +14.95%.
Despite the strong move in equity prices over the last several quarters, conditions appear supportive for further gains in the year ahead for equities. Corporate profits are surging, as dramatic cost cutting during the downturn is leading to tremendous operating leverage for many companies with the return of revenue growth. As we begin 2011, our investment strategy is largely driven by our economic outlook, which is based on our expectation of a slower than “normal” economic recovery in developed economies and strong growth in emerging markets. Importantly, we believe that investors’ rotation into low-quality stocks over the last few quarters has led to very attractive relative valuations for many large cap, high-quality growth companies. Quality, as we define it, refers to companies with strong balance sheets, predictable earnings growth, consistent cash flow generation and management teams that are focused on improving returns on capital. Our largest sector overweights are in electronic technology, technology services, retail trade and producer manufacturing. In terms of equity performance, the Fund lagged the S&P 500® Index over the past six months, largely due to the underperformance of holdings within the energy sector. The Fund’s emphasis on natural gas companies, including Southwestern Energy and Ultra Petroleum, hurt performance over the period. In addition, relative returns were impacted by the absence of Exxon Mobil within the Fund, which is heavily weighted in the Index and gained almost +30% during the period.
We estimate that the fixed-income portion of the Fund modestly outperformed the Barclays Aggregate Bond Index during the second half of the year, largely due to the Fund’s underweighted position in U.S. Treasuries and strong performance of mortgage-backed security holdings. Interest rates were quite volatile during the second half of the year, falling during the third quarter and then rising during the final quarter of 2010. Looking ahead, we expect yields to continue to rise as the Federal Reserve “prints money” to ward off deflation. As a result, the Fund is defensively positioned against rising yields until the Fed changes course. As has been the case for some time, we continue to maintain a dramatic underweight in U.S. Treasuries, while overweighting high-quality mortgages and
HYPOTHETICAL GROWTH OF $10,000
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 S&P 500® Index and the Barclays Capital 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.
2 Barclays Capital 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.
corporate bonds. The Fund retains a healthy yield advantage over the Index and a shorter duration profile. Our core position in high-quality mortgages provides a high level of stability in a variety of interest rate environments.
The stock/fixed-income allocation is currently 63.7% equities, 34.7% fixed income, and 1.6% cash and equivalents. This above-average allocation to equities reflects our view of the relative attractiveness of stocks versus bonds and cash in the current environment.
Roger J. Sit
Bryce A. Doty
John M. Bernstein
Portfolio Managers
4 |
SIT MUTUAL FUNDS SEMI-ANNUAL REPORT |
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COMPARATIVE RATES OF RETURNS | ||||||
as of December 31, 2010 | ||||||
Sit Balanced Fund | S&P 500® Index 1 | Barclays Capital Aggregate Bond Index 2 | ||||
Six Month | 14.19% | 23.27% | 1.15% | |||
One Year | 10.51 | 15.06 | 6.54 | |||
Five Year | 3.47 | 2.29 | 5.80 | |||
Ten Year | 1.63 | 1.41 | 5.84 | |||
Since Inception | 6.41 | 8.03 | 6.18 | |||
(12/31/93) |
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 Barclays Capital 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 12/31/10: | $15.95 Per Share | |
Net Asset Value 6/30/10: | $14.18 Per Share | |
Total Net Assets: | $11.2 Million |
TOP 10 HOLDINGS |
Stocks: |
1. Google, Inc. |
2. International Business Machines Corp. |
3. Occidental Petroleum Corp. |
4. Oracle Corp. |
5. Apple, Inc. |
Bonds: |
1. U.S. Treasury Strips, 2.61%, 2/15/19 |
2. GNR Series 2005-74 HA, 7.50%, 9/16/35 |
3. Wachovia Bank NA, 6.00%, 11/15/17 |
4. PepsiCo, Inc., 5.00%, 6/1/18 |
5. Continental Airlines 2009-1 Pass Thru, 9.00%, 7/8/16 |
Based on total net assets as of December 31, 2010. Subject to change. |
FUND DIVERSIFICATION
Based on total net assets as of December 31, 2010. Subject to change.
DECEMBER 31, 2010 |
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5 |
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SCHEDULE OF INVESTMENTS (Unaudited)
December 31, 2010
Sit Balanced Fund
Quantity | Name of Issuer | Fair Value ($) | ||||
Common Stocks - 63.7% |
| |||||
Communications - 1.8% | ||||||
2,000 | Rogers Communications, Inc. | 69,260 | ||||
3,700 | Verizon Communications, Inc. | 132,386 | ||||
|
201,646 |
| ||||
Consumer Non-Durables - 5.2% | ||||||
2,100 | Coca-Cola Co. | 138,117 | ||||
775 | Colgate-Palmolive Co. | 62,287 | ||||
1,100 | General Mills, Inc. | 39,149 | ||||
1,900 | PepsiCo, Inc. | 124,127 | ||||
1,800 | Philip Morris International, Inc. | 105,354 | ||||
1,800 | Procter & Gamble Co. | 115,794 | ||||
|
584,828 |
| ||||
Consumer Services - 2.0% | ||||||
1,900 | McDonald’s Corp. | 145,844 | ||||
1,100 | Visa, Inc. | 77,418 | ||||
|
223,262 |
| ||||
Electronic Technology - 12.1% | ||||||
1,000 | Analog Devices, Inc. | 37,670 | ||||
550 | Apple, Inc. * | 177,408 | ||||
5,600 | Applied Materials, Inc. | 78,680 | ||||
2,800 | Broadcom Corp. | 121,940 | ||||
3,000 | Ciena Corp. * | 63,150 | ||||
1,900 | Cisco Systems, Inc. * | 38,437 | ||||
1,200 | EMC Corp. * | 27,480 | ||||
400 | F5 Networks, Inc. * | 52,064 | ||||
6,700 | Intel Corp. | 140,901 | ||||
1,300 | International Business Machines Corp. | 190,788 | ||||
1,700 | Juniper Networks, Inc. * | 62,764 | ||||
1,100 | Linear Technology Corp. | 38,049 | ||||
3,000 | Marvell Technology Group, Ltd. * | 55,650 | ||||
3,300 | QUALCOMM, Inc. | 163,317 | ||||
500 | Research In Motion, Ltd. * | 29,065 | ||||
2,700 | Seagate Technology * | 40,581 | ||||
1,000 | Veeco Instruments, Inc. * | 42,960 | ||||
|
1,360,904 |
| ||||
Energy Minerals - 6.0% | ||||||
725 | Apache Corp. | 86,442 | ||||
1,475 | Chevron Corp. | 134,594 | ||||
800 | Murphy Oil Corp. | 59,640 | ||||
1,900 | Occidental Petroleum Corp. | 186,390 | ||||
1,700 | Southwestern Energy Co. * | 63,631 | ||||
2,100 | Suncor Energy, Inc. | 80,409 | ||||
1,250 | Ultra Petroleum Corp. * | 59,712 | ||||
|
670,818 |
| ||||
Finance - 6.5% | ||||||
625 | ACE, Ltd. | 38,906 | ||||
700 | Aflac, Inc. | 39,501 | ||||
1,100 | Bank of New York Mellon Corp. | 33,220 |
Quantity | Name of Issuer | Fair Value ($) | ||||
225 | CME Group, Inc. | 72,394 | ||||
700 | Franklin Resources, Inc. | 77,847 | ||||
400 | Goldman Sachs Group, Inc. | 67,264 | ||||
2,800 | JPMorgan Chase & Co. | 118,776 | ||||
500 | M&T Bank Corp. | 43,525 | ||||
500 | PartnerRe, Ltd. | 40,175 | ||||
800 | Prudential Financial, Inc. | 46,968 | ||||
1,500 | US Bancorp | 40,455 | ||||
3,700 | Wells Fargo & Co. | 114,663 | ||||
|
733,694 |
| ||||
Health Services - 0.9% | ||||||
600 | McKesson Corp. | 42,228 | ||||
900 | Medco Health Solutions, Inc. * | 55,143 | ||||
|
97,371 |
| ||||
Health Technology - 4.8% | ||||||
700 | Abbott Laboratories | 33,537 | ||||
600 | Allergan, Inc. | 41,202 | ||||
2,000 | Celgene Corp. * | 118,280 | ||||
1,100 | Gilead Sciences, Inc. * | 39,864 | ||||
200 | Intuitive Surgical, Inc. * | 51,550 | ||||
700 | Johnson & Johnson | 43,295 | ||||
1,800 | St. Jude Medical, Inc. * | 76,950 | ||||
1,400 | Thermo Fisher Scientific, Inc. * | 77,504 | ||||
750 | Varian Medical Systems, Inc. * | 51,960 | ||||
|
534,142 |
| ||||
Industrial Services - 1.4% | ||||||
1,400 | Schlumberger, Ltd. | 116,900 | ||||
1,200 | Seadrill, Ltd. | 40,704 | ||||
|
157,604 |
| ||||
Non-Energy Minerals - 0.9% | ||||||
650 | Allegheny Technologies, Inc. | 35,867 | ||||
500 | Freeport-McMoRan Copper & Gold, Inc. | 60,045 | ||||
|
95,912 |
| ||||
Process Industries - 1.3% | ||||||
1,500 | Ecolab, Inc. | 75,630 | ||||
700 | Praxair, Inc. | 66,829 | ||||
|
142,459 |
| ||||
Producer Manufacturing - 6.4% | ||||||
600 | 3M Co. | 51,780 | ||||
2,600 | ABB, Ltd., ADR * | 58,370 | ||||
1,700 | Danaher Corp. | 80,189 | ||||
1,400 | Deere & Co. | 116,270 | ||||
1,400 | Emerson Electric Co. | 80,038 | ||||
700 | Flowserve Corp. | 83,454 | ||||
3,400 | General Electric Co. | 62,186 | ||||
500 | Goodrich Corp. | 44,035 | ||||
400 | Precision Castparts Corp. | 55,684 |
See accompanying notes to financial statements.
6 |
SIT MUTUAL FUNDS SEMI-ANNUAL REPORT |
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Quantity/ Pricinpal Amount ($) | Name of Issuer | Fair Value ($) | ||||
1,100 | United Technologies Corp. | 86,592 | ||||
|
718,598 |
| ||||
Retail Trade - 4.9% | ||||||
250 | Amazon.com, Inc. * | 45,000 | ||||
650 | Costco Wholesale Corp. | 46,936 | ||||
2,000 | CVS Caremark Corp. | 69,540 | ||||
1,400 | Home Depot, Inc. | 49,084 | ||||
1,600 | Kohl’s Corp. * | 86,944 | ||||
2,100 | Target Corp. | 126,273 | ||||
800 | TJX Cos., Inc. | 35,512 | ||||
1,600 | Wal-Mart Stores, Inc. | 86,288 | ||||
|
545,577 |
| ||||
Technology Services - 7.1% | ||||||
1,600 | Accenture, PLC | 77,584 | ||||
2,000 | Adobe Systems, Inc. * | 61,560 | ||||
1,100 | Cognizant Technology Solutions Corp. * | 80,619 | ||||
350 | Google, Inc. * | 207,889 | ||||
2,800 | Microsoft Corp. | 78,176 | ||||
5,800 | Oracle Corp. | 181,540 | ||||
400 | Salesforce.com, Inc. * | 52,800 | ||||
700 | VMware, Inc. * | 62,237 | ||||
|
802,405 |
| ||||
Transportation - 1.8% | ||||||
1,100 | Expeditors International of Washington, Inc. | 60,060 | ||||
1,100 | Union Pacific Corp. | 101,926 | ||||
625 | United Parcel Service, Inc. | 45,362 | ||||
|
207,348 |
| ||||
Utilities - 0.6% | ||||||
1,350 | Calpine Corp. * | 18,009 | ||||
900 | Wisconsin Energy Corp. | 52,974 | ||||
|
70,983 |
| ||||
Total Common Stocks | 7,147,551 | |||||
Bonds - 32.8% | ||||||
Asset-Backed Securities - 3.2% | ||||||
46,262 | Bayview Financial Acquisition Trust, | 45,425 | ||||
100,000 | Centex Home Equity, | 98,939 | ||||
47,656 | Chase Funding Mtge. Loan Asset-Backed Certs., | 47,289 | ||||
84,027 | Citifinancial Mortgage Securities, Inc., | 83,925 | ||||
Green Tree Financial Corp.: | ||||||
18,254 | 1997-6 A10, 6.87%, 1/15/29 | 18,942 | ||||
14,795 | 1997-1 A6, 7.29%, 3/15/28 | 15,690 |
Pricinpal Amount ($) | Name of Issuer | Fair Value ($) | ||||
Origen Manufactured Housing: | ||||||
9,758 | 2002-A A3, 6.17%, 5/15/32 1 | 10,083 | ||||
9,250 | 2001-A A5, 7.08%, 3/15/32 1 | 9,351 | ||||
28,067 | Residential Funding Mortgage Securities II, Inc., | 27,820 | ||||
|
357,464 |
| ||||
Collateralized Mortgage Obligations - 4.1% | ||||||
17,477 | Bank of America Funding Corp., | 18,202 | ||||
65,666 | Fannie Mae, | 73,452 | ||||
28,403 | Fannie Mae Grantor Trust, | 32,699 | ||||
126,746 | Government National Mortgage Association, | 145,226 | ||||
16,441 | Master Asset Securitization Trust, | 16,911 | ||||
40,669 | Residential Funding Mortgage Securities I, | 41,558 | ||||
41,619 | Specialty Underwriting & Residential Finance, | 41,619 | ||||
70,838 | Vendee Mortgage Trust, | 85,958 | ||||
|
455,625 |
| ||||
Corporate Bonds - 7.8% | ||||||
75,000 | Becton, Dickinson and Co., | 70,397 | ||||
25,000 | Comerica Bank (Subordinated), | 27,326 | ||||
95,958 | Continental Airlines 2009-1 Pass Thru Certs., | 109,872 | ||||
25,000 | eBay, Inc., | 23,254 | ||||
25,000 | First Maryland Capital I, | 18,984 | ||||
50,000 | Johnson & Johnson, | 61,233 | ||||
50,000 | JPMorgan Chase Capital XXV, | 51,554 | ||||
45,000 | NTC Capital I, | 35,831 | ||||
25,000 | PartnerRe Finance B LLC, | 25,176 | ||||
100,000 | PepsiCo, Inc., | 110,390 | ||||
50,000 | Pitney Bowes, Inc., | 50,665 | ||||
83,131 | Procter & Gamble ESOP, | 104,374 | ||||
50,000 | RenRe North America Holdings, Inc., | 50,197 |
DECEMBER 31, 2010 |
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7 |
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SCHEDULE OF INVESTMENTS (Unaudited)
December 31, 2010
Sit Balanced Fund (Continued)
Pricinpal Amount ($) | Name of Issuer | Fair Value ($) | ||||
25,000 | Susa Partnership LP, | 29,478 | ||||
100,000 | Wachovia Bank NA (Subordinated), | 111,104 | ||||
|
879,835 |
| ||||
Federal Home Loan Mortgage Corporation - 2.7% |
| |||||
51,906 | 7.00% 7/1/32 | 58,458 | ||||
42,948 | 7.00% 5/1/34 | 48,841 | ||||
65,517 | 7.00% 11/1/37 | 73,787 | ||||
27,929 | 7.00% 1/1/39 | 31,513 | ||||
39,584 | 7.50% 11/1/36 | 45,345 | ||||
21,556 | 8.00% 9/1/15 | 23,769 | ||||
21,121 | 8.38% 5/17/20 | 24,059 | ||||
|
305,772 |
| ||||
Federal National Mortgage Association - 6.4% |
| |||||
100,000 | 4.00% 1/1/41 | 99,580 | ||||
65,125 | 6.63% 11/1/30 | 73,752 | ||||
51,353 | 6.63% 1/1/31 | 58,156 | ||||
39,549 | 7.00% 12/1/32 | 45,482 | ||||
51,416 | 7.00% 12/1/36 | 59,009 | ||||
46,069 | 7.00% 11/1/38 | 52,021 | ||||
57,389 | 7.23% 12/1/30 | 65,684 | ||||
11,030 | 7.50% 6/1/32 | 12,707 | ||||
36,347 | 7.50% 4/1/33 | 41,073 | ||||
38,321 | 7.50% 11/1/33 | 43,947 | ||||
56,574 | 7.50% 1/1/34 | 64,880 | ||||
17,908 | 7.50% 4/1/38 | 20,537 | ||||
45,433 | 8.00% 2/1/31 | 52,543 | ||||
15,489 | 8.45% 7/15/26 | 18,442 | ||||
7,797 | 9.50% 5/1/27 | 9,287 | ||||
1,906 | 9.75% 1/15/13 | 2,058 | ||||
1,380 | 10.25% 6/15/13 | 1,496 | ||||
|
720,654 |
| ||||
Government National Mortgage Association - 3.8% |
| |||||
93,253 | 6.20% 9/15/40 | 99,309 | ||||
52,155 | 6.63% 4/20/31 | 58,712 | ||||
36,261 | 7.00% 12/15/24 | 41,658 | ||||
55,728 | 7.23% 12/20/30 | 63,643 | ||||
62,538 | 8.00% 7/15/24 | 73,687 | ||||
75,726 | 8.38% 3/15/31 | 91,085 | ||||
1,218 | 9.50% 9/20/18 | 1,420 | ||||
|
429,514 |
| ||||
Taxable Municipal Securities - 1.5% |
| |||||
100,000 | Academica Charter Schools, | 71,448 | ||||
45,000 | Colorado Springs Util. Rev. (Build America), | 43,151 | ||||
50,000 | Texas St. Pub. Fin. Auth. Charter Sch. Fin. Rev., | 48,756 | ||||
|
163,355 |
| ||||
Principal Amount ($)/ Quantity | Name of Issuer | Fair Value ($) | ||||
U.S. Government / Federal Agency Securities - 3.3% |
| |||||
U.S. Treasury Strips: | ||||||
415,000 | 2.61%, 2/15/19 6 | 323,924 | ||||
125,000 | 4.21%, 2/15/36 6 | 40,270 | ||||
|
364,194 |
| ||||
Total Bonds | 3,676,413 | |||||
Closed-End Mutual Funds - 1.9% |
| |||||
4,809 | American Select Portfolio | 50,302 | ||||
10,400 | American Strategic Income Portfolio II | 96,928 | ||||
3,900 | American Strategic Income Portfolio III | 29,835 | ||||
3,403 | American Strategic Income Portfolio, Inc. | 41,040 | ||||
Total Closed-End Mutual Funds | 218,105 | |||||
Short-Term Securities - 2.1% |
| |||||
235,119 | Wells Fargo Adv. Govt. Money Mkt., 0.02% | |||||
Total Short-Term Securities | 235,119 | |||||
Total Investments in Securities - 100.5% | 11,277,188 | |||||
Other Assets and Liabilities, net - (0.5%) | (59,960 | ) | ||||
Total Net Assets - 100.0% | $ | 11,217,228 |
| |||
* | Non-income producing security. |
1 | Variable rate security. Rate disclosed is as of December 31, 2010. |
4 | 144A Restricted Security. The total value of such security as of December 31, 2010 was $71,448 and represented 0.6% of net assets. This security has been determined to be liquid by the Adviser in accordance with guidelines established by the Board of Directors. |
6 | Zero coupon security. Rate disclosed is the effective yield on purchase date. |
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.
8 |
SIT MUTUAL FUNDS SEMI-ANNUAL REPORT |
|
A summary of the inputs used to value the Fund’s net assets as of December 31, 2010 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 * | $7,147,551 | — | — | $7,147,551 | ||||||||||
Asset-Backed Securities | — | $357,464 | — | 357,464 | ||||||||||
Collateralized Mortgage Obligations | — | 455,625 | — | 455,625 | ||||||||||
Corporate Bonds | — | 879,835 | — | 879,835 | ||||||||||
Federal Home Loan Mortgage Corporation | — | 305,772 | — | 305,772 | ||||||||||
Federal National Mortgage Association | — | 720,654 | — | 720,654 | ||||||||||
Government National Mortgage Association | — | 429,514 | — | 429,514 | ||||||||||
Taxable Municipal Securities | — | 163,355 | — | 163,355 | ||||||||||
U.S. Government / Federal Agency Securities | — | 364,194 | — | 364,194 | ||||||||||
Closed-End Mutual Funds | 218,105 | — | — | 218,105 | ||||||||||
Short-Term Securities | 235,119 | — | — | 235,119 | ||||||||||
Total: | $7,600,775 | $3,676,413 | — |
|
$11,277,188 |
|
* | For equity securities categorized in a single level, refer to the Schedule of Investments for further breakdown. |
DECEMBER 31, 2010 |
|
9 |
|
Sit Dividend Growth Fund - Class I and Class S
|
OBJECTIVE & STRATEGY
The objective of the 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 +24.12% return for the last six months of 2010, compared to the +23.27% return for the S&P 500® Index. |
Stocks produced strong gains over the past six months, buoyed by continued fiscal and monetary stimulus, exceptional corporate profits, and increasing signs that a global economic recovery is sustainable. Despite the strong advance in equities since the market bottom in early 2009, we believe underlying fundamentals support further gains for stocks in the year ahead. However, we remain cognizant of the risks (e.g., excessive government debt, weak housing, rising commodity prices) that may, at a minimum, result in increased market volatility in 2011. In addition, earnings comparisons are becoming more difficult, given the strong gains experienced the past twelve months. In this environment, we believe investors will seek out companies that can provide sustainable earnings growth and, importantly, accelerate dividend payments. To this point, it is encouraging to note that dividend increases are, once again, on the rise. Over the past twelve months, 80 companies within the Fund (out of 99 current holdings) have raised their dividends, with an average increase of +32%.
The finance sector remains the heaviest weighting in the Fund, followed by consumer non-durables, energy minerals and electronic technology. In general, new buys and sells reflected our view that the economy will continue to experience cyclical improvement in the year ahead. Significant new purchases over the last six months included General Motors (preferred shares), Guess, Marsh & McLennan, Merck, and Stanley Black & Decker. Positions were sold in Allied World Assurance, Eli Lilly and Lockheed Martin. In addition, the Fund’s statistical characteristics related to “stability” (e.g., earnings consistency, balance sheet strength) and “quality” (e.g., return on capital, cash flow generation) are superior to the S&P 500® Index average. We believe these metrics will be particularly important, if the pace of corporate earnings growth slows or market volatility increases, which we expect in 2011.
Despite its lower-risk orientation, the Fund fully participated in the strong market rally over the past six months. Strong stock selection in finance, electronic technology and industrial services were keys to the Fund’s positive relative performance versus the S&P 500® Index. Top performers in these sectors included National Oilwell Varco (+104% 6-month return), Seadrill (+94%), Ameriprise Financial (+60%), Qualcomm (+52%) and Allied World Assurance (+34%). In addition to the 2% cash position hurting performance over the
HYPOTHETICAL GROWTH OF $10,000
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 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.
period, sectors that detracted from relative performance included consumer non-durables and retail trade. Laggards within these sectors were Colgate-Palmolive (+3%), General Mills (+2%), Wal-Mart Stores (+13%) and TJX (+7%). We continue to maintain positions in these stocks, given their solid dividends and stable businesses; but we recognize these companies are somewhat “defensive” in nature and will tend to lag in a surging market.
We continue to believe that dividend-paying growth stocks remain attractive and will reward investors over the long term.
Roger J. Sit
Kent L. Johnson
Michael J. Stellmacher
Portfolio Managers
10 |
SIT MUTUAL FUNDS SEMI-ANNUAL REPORT |
|
COMPARATIVE RATES OF RETURNS
as of December 31, 2010 | |||||||||||||||
Sit Dividend Growth Fund | S&P 500® Index 1 | ||||||||||||||
Class I | Class S | ||||||||||||||
Six Month | 24.12 | % | 24.06 | % | 23.27 | % | |||||||||
One Year | 16.43 | 16.19 | 15.06 | ||||||||||||
Five Year | 6.57 | n/a | 2.29 | ||||||||||||
Since Inception - Class I (12/31/03) | 7.58 | n/a | 3.85 | ||||||||||||
Since Inception - Class S (3/31/06) | n/a | 5.32 | 1.52 |
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 12/31/10: | $13.06 Per Share | |||
Net Asset Value 6/30/10: | $10.64 Per Share | |||
Total Net Assets: | $150.3 Million | |||
Class S: | ||||
Net Asset Value 12/31/10: | $13.04 Per Share | |||
Net Asset Value 6/30/10: | $10.61 Per Share | |||
Total Net Assets: | $36.5 Million | |||
Weighted Average Market Cap: | $67.1 Billion |
TOP 10 HOLDINGS
1. International Business Machines Corp.
2. Chevron Corp.
3. Johnson & Johnson
4. PepsiCo, Inc.
5. Verizon Communications, Inc.
6. JPMorgan Chase & Co.
7. QUALCOMM, Inc.
8. Procter & Gamble Co.
9. Occidental Petroleum Corp.
10. EI du Pont de Nemours & Co.
Based on total net assets as of December 31, 2010. Subject to change.
FUND DIVERSIFICATION
Based on total net assets as of December 31, 2010. Subject to change.
DECEMBER 31, 2010 |
|
11 |
|
|
SCHEDULE OF INVESTMENTS (Unaudited)
December 31, 2010
Sit Dividend Growth Fund
Quantity | Name of Issuer | Fair Value ($) | ||||
Common Stocks - 93.4% |
| |||||
Communications - 3.4% |
| |||||
12,000 | Millicom International Cellular SA | 1,147,200 | ||||
43,100 | Rogers Communications, Inc. | 1,492,553 | ||||
105,100 | Verizon Communications, Inc. | 3,760,478 | ||||
|
6,400,231 |
| ||||
Consumer Durables - 3.4% | ||||||
11,500 | Polaris Industries, Inc. | 897,230 | ||||
46,200 | Snap-On, Inc. | 2,613,996 | ||||
19,900 | Stanley Black & Decker, Inc. | 1,330,713 | ||||
30,600 | Tupperware Brands Corp. | 1,458,702 | ||||
|
6,300,641 |
| ||||
Consumer Non-Durables - 10.0% | ||||||
21,900 | Colgate-Palmolive Co. | 1,760,103 | ||||
23,700 | Diageo, PLC, ADR | 1,761,621 | ||||
71,200 | General Mills, Inc. | 2,534,008 | ||||
25,200 | Guess?, Inc. | 1,192,464 | ||||
9,800 | Lancaster Colony Corp. | 560,560 | ||||
13,500 | NIKE, Inc. | 1,153,170 | ||||
58,100 | PepsiCo, Inc. | 3,795,673 | ||||
43,100 | Philip Morris International, Inc. | 2,522,643 | ||||
53,300 | Procter & Gamble Co. | 3,428,789 | ||||
|
18,709,031 |
| ||||
Consumer Services - 2.1% | ||||||
32,600 | McDonald’s Corp. | 2,502,376 | ||||
87,900 | Pearson, PLC, ADR | 1,396,731 | ||||
|
3,899,107 |
| ||||
Electronic Technology - 9.4% | ||||||
96,600 | Applied Materials, Inc. | 1,357,230 | ||||
34,000 | Broadcom Corp. | 1,480,700 | ||||
129,900 | Intel Corp. | 2,731,797 | ||||
38,500 | International Business Machines Corp. | 5,650,260 | ||||
50,300 | Linear Technology Corp. | 1,739,877 | ||||
70,600 | QUALCOMM, Inc. | 3,493,994 | ||||
30,600 | Tyco Electronics, Ltd. | 1,083,240 | ||||
|
17,537,098 |
| ||||
Energy Minerals - 9.5% | ||||||
17,700 | Apache Corp. | 2,110,371 | ||||
52,300 | Chevron Corp. | 4,772,375 | ||||
33,100 | EQT Corp. | 1,484,204 | ||||
42,400 | Marathon Oil Corp. | 1,570,072 | ||||
25,700 | Murphy Oil Corp. | 1,915,935 | ||||
33,000 | Occidental Petroleum Corp. | 3,237,300 | ||||
16,700 | Sasol, Ltd., ADR | 869,235 | ||||
34,000 | Total SA, ADR | 1,818,320 | ||||
|
17,777,812 |
| ||||
Finance - 14.5% | ||||||
30,000 | ACE, Ltd. | 1,867,500 |
Quantity | Name of Issuer | Fair Value ($) | ||||
35,300 | Ameriprise Financial, Inc. | 2,031,515 | ||||
80,400 | Apollo Investment Corp. | 890,028 | ||||
42,800 | Bank of New York Mellon Corp. | 1,292,560 | ||||
17,560 | Franklin Resources, Inc. | 1,952,848 | ||||
83,650 | JPMorgan Chase & Co. | 3,548,433 | ||||
60,700 | Marsh & McLennan Cos., Inc. | 1,659,538 | ||||
110,800 | Northwest Bancshares, Inc. | 1,303,008 | ||||
18,500 | PartnerRe, Ltd. | 1,486,475 | ||||
76,200 | PennantPark Investment Corp. | 932,688 | ||||
30,600 | Prudential Financial, Inc. | 1,796,526 | ||||
28,800 | Royal Bank of Canada | 1,507,968 | ||||
24,847 | State Auto Financial Corp. | 432,835 | ||||
27,500 | Travelers Cos., Inc. | 1,532,025 | ||||
83,600 | US Bancorp | 2,254,692 | ||||
85,300 | Wells Fargo & Co. | 2,643,447 | ||||
|
27,132,086 |
| ||||
Health Services - 1.7% | ||||||
20,700 | McKesson Corp. | 1,456,866 | ||||
33,250 | Owens & Minor, Inc. | 978,547 | ||||
29,100 | Pharmaceutical Product Development., Inc. | 789,774 | ||||
|
3,225,187 |
| ||||
Health Technology - 9.0% | ||||||
39,900 | Abbott Laboratories | 1,911,609 | ||||
38,600 | Baxter International, Inc. | 1,953,932 | ||||
22,700 | Becton Dickinson & Co. | 1,918,604 | ||||
67,700 | Johnson & Johnson | 4,187,245 | ||||
36,100 | Medtronic, Inc. | 1,338,949 | ||||
62,900 | Merck & Co., Inc. | 2,266,916 | ||||
29,392 | Meridian Bioscience, Inc. | 680,719 | ||||
26,200 | Teva Pharmaceutical Industries, Ltd., ADR | 1,365,806 | ||||
20,600 | Thermo Fisher Scientific, Inc. * | 1,140,416 | ||||
|
16,764,196 |
| ||||
Industrial Services - 2.3% | ||||||
42,000 | Halliburton Co. | 1,714,860 | ||||
21,600 | National Oilwell Varco, Inc. | 1,452,600 | ||||
32,000 | Seadrill, Ltd. | 1,085,440 | ||||
|
4,252,900 |
| ||||
Non-Energy Minerals - 1.4% | ||||||
15,600 | BHP Billiton, Ltd., ADR | 1,449,552 | ||||
25,120 | Haynes International, Inc. | 1,050,769 | ||||
|
2,500,321 |
| ||||
Process Industries - 2.2% | ||||||
58,400 | EI du Pont de Nemours & Co. | 2,912,992 | ||||
52,000 | RPM International, Inc. | 1,149,200 | ||||
|
4,062,192 |
| ||||
Producer Manufacturing - 9.3% | ||||||
29,000 | 3M Co. | 2,502,700 |
See accompanying notes to financial statements.
12 |
SIT MUTUAL FUNDS SEMI-ANNUAL REPORT |
|
Quantity | Name of Issuer | Fair Value ($) | ||||
57,400 | ABB, Ltd., ADR * | 1,288,630 | ||||
32,600 | Cooper Industries, PLC | 1,900,254 | ||||
31,500 | Deere & Co. | 2,616,075 | ||||
34,300 | Emerson Electric Co. | 1,960,931 | ||||
106,000 | General Electric Co. | 1,938,740 | ||||
21,700 | Goodrich Corp. | 1,911,119 | ||||
12,200 | Raytheon Co. | 565,348 | ||||
34,700 | United Technologies Corp. | 2,731,584 | ||||
|
17,415,381 |
| ||||
Retail Trade - 4.5% | ||||||
46,147 | Cato Corp. | 1,264,889 | ||||
37,100 | Home Depot, Inc. | 1,300,726 | ||||
33,000 | Target Corp. | 1,984,290 | ||||
27,000 | TJX Cos., Inc. | 1,198,530 | ||||
48,500 | Wal-Mart Stores, Inc. | 2,615,605 | ||||
|
8,364,040 |
| ||||
Technology Services - 5.5% | ||||||
41,400 | Accenture, PLC | 2,007,486 | ||||
35,100 | Automatic Data Processing, Inc. | 1,624,428 | ||||
91,700 | Microsoft Corp. | 2,560,264 | ||||
86,800 | Oracle Corp. | 2,716,840 | ||||
28,400 | Syntel, Inc. | 1,357,236 | ||||
|
10,266,254 |
| ||||
Transportation - 2.3% | ||||||
14,100 | Expeditors International of Washington, Inc. | 769,860 | ||||
20,300 | Union Pacific Corp. | 1,880,998 | ||||
23,150 | United Parcel Service, Inc. | 1,680,227 | ||||
|
4,331,085 |
| ||||
Utilities - 2.9% | ||||||
15,700 | Enbridge, Inc. | 885,480 | ||||
37,200 | NextEra Energy, Inc. | 1,934,028 | ||||
38,500 | UGI Corp. | 1,215,830 |
Quantity | Name of Issuer | Fair Value ($) | ||||
23,000 | Wisconsin Energy Corp. | 1,353,780 | ||||
|
5,389,118 |
| ||||
Total Common Stocks | 174,326,680 | |||||
Preferred Stocks - 0.5% | ||||||
Consumer Durables - 0.5% | ||||||
17,500 | General Motors Co., Series B | |||||
Total Preferred Stocks | 946,925 | |||||
Closed-End Mutual Funds - 1.9% | ||||||
70,859 | Kayne Anderson MLP Investment Co. | 2,229,933 | ||||
44,298 | Tortoise Energy Capital Corp. | 1,230,155 | ||||
Total Closed-End Mutual Funds | 3,460,088 | |||||
Short-Term Securities - 7.7% | ||||||
14,469,220 | Wells Fargo Adv. Govt. Money Mkt., 0.02% |
| ||||
Total Short-Term Securities | 14,469,220 | |||||
Total Investments in Securities - 103.5% | 193,202,913 | |||||
Other Assets and Liabilities, net - (3.5%) | (6,472,098 | ) | ||||
Total Net Assets - 100.0% |
$ |
186,730,815 |
| |||
* | 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 inputs used to value the Fund’s net assets as of December 31, 2010 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 ** | $ | 174,326,680 | — | — | $ | 174,326,680 | ||||||
Preferred Stocks ** | 946,925 | — | — | 946,925 | ||||||||
Closed-End Mutual Funds | 3,460,088 | — | — | 3,460,088 | ||||||||
Short-Term Securities | 14,469,220 | — | — | 14,469,220 | ||||||||
Total: |
$ |
193,202,913 |
| — | — | $ | 193,202,913 | |||||
** | For equity securities categorized in a single level, refer to the Schedule of Investments for further breakdown. |
DECEMBER 31, 2010 |
|
13 |
|
Sit Global Dividend Growth Fund - Class I and Class S
|
OBJECTIVE & STRATEGY
The objective of the Global Dividend Growth Fund is to provide current income that exceeds the dividend yield of a composite index (comprised of 60% S&P 500® Index and 40% MSCI EAFE 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 Sit Global Dividend Growth Fund Class I posted a +23.68% return over the last six months, in line with the +23.68% return for the Composite Index (60% S&P 500® Index and 40% MSCI EAFE Index). The Fund and most global equity markets experienced strong performance for the last six months of 2010 as stocks positively responded to improved economic data, optimism over another round of quantitative easing by the U.S. Federal Reserve, the passage of a $858 billion tax-cut extension in late 2010, and better-than-expected earnings. This positive market sentiment fluctuated with news surrounding the European debt crisis and the impact on world markets along with a sustained global recovery and the impact from the Chinese and other Asian country tightening measures. Additionally, in the last six months of 2010, performance was led by smaller capitalization stocks and higher beta, more speculative stocks.
On a regional basis, NorthAmerica remains the largest absolute weight in the Fund and was the principal reason for the in line performance for the last six months of 2010. The more defensive, larger cap, consumer-related stocks underperformed during this period and had a significant drag on the portfolio. Japan also detracted given the Fund’s underweight position and the appreciation of the Japanese yen. Asia ex-Japan was the main contributor to performance. Specifically, the material-related companies and industrial goods companies saw significant appreciation. Their performance was driven by China’s need for raw materials. Additionally, industrial good companies thrived on the demand from Asia along with the rest of the world.
On a sector basis, the Fund’s six-month performance was largely driven by positive stock selection in the material and financial sectors. The latter sector remains the heaviest weighted sector in the Fund. Within the financial sector, we have a bias towards bank and insurance stocks with more exposure in North America and less exposure to the volatile and uncertain European region. The defensive sector of consumer staples was the largest drag on the Fund as these types of stocks lagged in the market rally. We believe these stocks have considerable value and provide good portfolio diversification in a choppy market environment. The Fund also has significant exposure in the technology, industrial, and energy sectors, all of which have outperformed the market in the last six months.
The Fund remains comprised primarily of larger cap, higher quality stocks. The focus remains on companies with strong operational
HYPOTHETICAL GROWTH OF $10,000
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 Composite Index, S&P 500® Index and MSCI EAFE 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 A composite index comprised of 60% S&P 500® Index and 40% MSCI EAFE Index.
2 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.
3 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.
financial characteristics that generate solid and predictable earnings and dividend growth. The Fund continues to hold a diversified and global, high quality portfolio, focused on companies with dominant market share, high sales and earnings growth, operating margin leverage, free cash flow, and healthy balance sheets. Dividend increases remain on the rise and over the past six months, 42% of the companies within the Fund increased their dividends. We believe these stocks will reward shareholders over the longer term.
Roger J. Sit | Michael J. Stellmacher | |
Kent L. Johnson | Tasha M. Murdoff | |
Raymond E. Sit | ||
Portfolio Managers |
14 |
SIT MUTUAL FUNDS SEMI-ANNUAL REPORT |
|
COMPARATIVE RATES OF RETURNS |
| |||||||||||||||||||
as of December 31, 2010
|
| |||||||||||||||||||
Sit Global Dividend Growth Fund | MSCI | |||||||||||||||||||
Class I | Class S | Composite Index 1 | S&P 500® Index 2 | EAFE Index 3 | ||||||||||||||||
Six Month | 23.68 | % | 23.58 | % | 23.68 | % | 23.27 | % | 24.18 | % | ||||||||||
One Year | 11.58 | 11.32 | 12.21 | 15.06 | 7.75 | |||||||||||||||
Since Inception | 13.04 | 12.77 | 5.95 | 5.82 | 5.85 | |||||||||||||||
(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 A composite index comprised of 60% S&P 500® Index and 40% MSCI EAFE Index.
2 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.
3 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.
PORTFOLIO SUMMARY | ||
Class I: | ||
Net Asset Value 12/31/10: | $12.59 Per Share | |
Net Asset Value 6/30/10: | $10.41 Per Share | |
Total Net Assets: | $3.8 Million | |
Class S: | ||
Net Asset Value 12/31/10: | $12.59 Per Share | |
Net Asset Value 6/30/10: | $10.40 Per Share | |
Total Net Assets: | $1.1 Million | |
Weighted Average Market Cap: | $76.0 Billion |
TOP 10 HOLDINGS
1. Rio Tinto, PLC, ADR
2. BHP Billiton, Ltd., ADR
3. International Business Machines Corp.
4. McDonald’s Corp.
5. QUALCOMM, Inc.
6. Chevron Corp.
7. Verizon Communications, Inc.
8. Johnson & Johnson
9. Occidental Petroleum Corp.
10. PepsiCo, Inc.
Based on total net assets as of December 31, 2010. Subject to change.
FUND DIVERSIFICATION
Based on total net assets as of December 31, 2010. Subject to change.
DECEMBER 31, 2010 |
|
15 |
|
|
SCHEDULE OF INVESTMENTS (Unaudited)
December 31, 2010
Sit Global Dividend Growth Fund
Quantity | Name of Issuer | Fair Value ($) | ||||
Common Stocks - 95.9% |
| |||||
Africa/Middle East - 0.7% | ||||||
Israel - 0.7% | ||||||
700 | Teva Pharmaceutical Industries, Ltd., ADR | 36,491 | ||||
Asia - 10.0% | ||||||
Australia - 6.3% | ||||||
1,400 | BHP Billiton, Ltd., ADR | 130,088 | ||||
2,000 | Rio Tinto, PLC, ADR | 143,320 | ||||
325 | Westpac Banking Corp., ADR | 37,199 | ||||
|
310,607 |
| ||||
China/Hong Kong - 1.6% | ||||||
914 | HSBC Holdings, PLC, ADR | 46,651 | ||||
3,000 | Hutchison Whampoa, Ltd. | 30,862 | ||||
|
77,513 |
| ||||
Japan ** - 2.1% |
| |||||
600 | Aflac, Inc. | 33,858 | ||||
1,000 | Canon, Inc., ADR | 51,340 | ||||
400 | Oracle Corp. | 19,608 | ||||
|
104,806 |
| ||||
Europe - 24.2% | ||||||
France - 3.1% |
| |||||
825 | Schlumberger, Ltd. | 68,888 | ||||
950 | Total SA, ADR | 50,806 | ||||
1,075 | Veolia Environnement, ADR | 31,562 | ||||
|
151,256 |
| ||||
Germany - 1.9% | ||||||
210 | Muenchener Rueckver | 31,805 | ||||
500 | Siemens AG, ADR | 62,125 | ||||
|
93,930 |
| ||||
Ireland - 1.0% | ||||||
1,075 | Accenture, PLC |
|
52,127 |
| ||
Italy - 1.4% | ||||||
8,800 | Enel SPA | 44,097 | ||||
550 | Tenaris SA, ADR | 26,939 | ||||
|
71,036 |
| ||||
Luxembourg - 0.5% | ||||||
260 | Millicom International Cellular SA |
|
24,856 |
| ||
Netherlands - 1.7% |
| |||||
1,100 | Philips Electronics, ADR | 33,770 | ||||
1,950 | TNT NV | 51,569 | ||||
|
85,339 |
| ||||
Norway - 0.8% |
| |||||
1,100 | Seadrill, Ltd. |
|
37,312 |
| ||
Quantity | Name of Issuer | Fair Value ($) | ||||
Spain - 1.5% | ||||||
560 | Inditex SA | 41,918 | ||||
500 | Telefonica SA, ADR | 34,210 | ||||
|
76,128 |
| ||||
Switzerland - 5.1% |
| |||||
1,000 | ABB, Ltd., ADR * | 22,450 | ||||
775 | ACE, Ltd. | 48,244 | ||||
350 | Kuehne & Nagel International | 48,695 | ||||
1,060 | Nestle SA | 62,099 | ||||
125 | Roche Holding AG | 18,324 | ||||
30 | SGS SA | 50,351 | ||||
|
250,163 |
| ||||
United Kingdom - 7.2% |
| |||||
575 | British American Tobacco, PLC | 22,118 | ||||
1,350 | Burberry Group, PLC | 23,726 | ||||
6,950 | Centrica, PLC | 36,010 | ||||
800 | Diageo, PLC, ADR | 59,464 | ||||
1,100 | GlaxoSmithKline, PLC, ADR | 43,142 | ||||
3,800 | Pearson, PLC, ADR | 60,382 | ||||
975 | Royal Dutch Shell, PLC, ADR | 65,003 | ||||
6,650 | Tesco, PLC | 44,096 | ||||
|
353,941 |
| ||||
North America - 61.0% |
| |||||
Bermuda - 1.0% |
| |||||
625 | PartnerRe, Ltd. | 50,219 | ||||
Canada - 2.6% |
| |||||
2,300 | Rogers Communications, Inc. | 79,649 | ||||
900 | Royal Bank of Canada | 47,124 | ||||
|
126,773 |
| ||||
United States - 57.4% |
| |||||
700 | 3M Co. | 60,410 | ||||
800 | Abbott Laboratories | 38,328 | ||||
300 | Apache Corp. | 35,769 | ||||
2,900 | Applied Materials, Inc. | 40,745 | ||||
950 | Automatic Data Processing, Inc. | 43,966 | ||||
925 | Baxter International, Inc. | 46,824 | ||||
725 | Becton Dickinson & Co. | 61,277 | ||||
450 | Caterpillar, Inc. | 42,147 | ||||
1,000 | Chevron Corp. | 91,250 | ||||
450 | Colgate-Palmolive Co. | 36,166 | ||||
750 | Deere & Co. | 62,288 | ||||
125 | Eaton Corp. | 12,689 | ||||
1,100 | EI du Pont de Nemours & Co. | 54,868 | ||||
400 | Emerson Electric Co. | 22,868 | ||||
625 | EQT Corp. | 28,025 | ||||
425 | Franklin Resources, Inc. | 47,264 | ||||
1,175 | General Electric Co. | 21,491 | ||||
1,750 | General Mills, Inc. | 62,282 | ||||
200 | Goldman Sachs Group, Inc. | 33,632 |
See accompanying notes to financial statements.
16 |
SIT MUTUAL FUNDS SEMI-ANNUAL REPORT |
|
Quantity | Name of Issuer | Fair Value ($) | ||||
35 | Google, Inc. * | 20,789 | ||||
1,475 | Home Depot, Inc. | 51,714 | ||||
500 | Illinois Tool Works, Inc. | 26,700 | ||||
3,600 | Intel Corp. | 75,708 | ||||
825 | International Business Machines Corp. | 121,077 | ||||
1,400 | Johnson & Johnson | 86,590 | ||||
1,700 | JPMorgan Chase & Co. | 72,114 | ||||
1,500 | Linear Technology Corp. | 51,885 | ||||
1,300 | Marathon Oil Corp. | 48,139 | ||||
1,800 | Marsh & McLennan Cos., Inc. | 49,212 | ||||
1,225 | McDonald’s Corp. | 94,031 | ||||
625 | McKesson Corp. | 43,987 | ||||
1,000 | Medtronic, Inc. | 37,090 | ||||
925 | Merck & Co., Inc. | 33,337 | ||||
1,375 | Microsoft Corp. | 38,390 | ||||
525 | Murphy Oil Corp. | 39,139 | ||||
875 | Occidental Petroleum Corp. | 85,838 | ||||
2,400 | Oracle Corp. | 75,120 | ||||
1,225 | PepsiCo, Inc. | 80,029 | ||||
1,200 | Philip Morris International, Inc. | 70,236 | ||||
1,150 | Procter & Gamble Co. | 73,980 | ||||
650 | Prudential Financial, Inc. | 38,161 | ||||
1,850 | QUALCOMM, Inc. | 91,556 | ||||
900 | Snap-On, Inc. | 50,922 | ||||
1,100 | Target Corp. | 66,143 | ||||
1,225 | TJX Cos., Inc. | 54,378 | ||||
675 | Travelers Cos., Inc. | 37,604 | ||||
750 | Tupperware Brands Corp. | 35,752 | ||||
400 | Union Pacific Corp. | 37,064 | ||||
700 | United Technologies Corp. | 55,104 | ||||
2,000 | US Bancorp | 53,940 | ||||
2,500 | Verizon Communications, Inc. | 89,450 | ||||
900 | Wal-Mart Stores, Inc. | 48,537 | ||||
2,125 | Wells Fargo & Co. | 65,854 | ||||
|
2,841,859 |
| ||||
Total Common Stocks | 4,744,356 | |||||
Exchange-Traded Funds - 1.1% |
| |||||
5,000 | iShares MSCI Japan Index Fund ** | |||||
Total Exchange-Traded Funds | 54,550 | |||||
Closed-End Mutual Funds - 1.6% |
| |||||
1,400 | Kayne Anderson MLP Investment Co. | 44,058 | ||||
1,300 | Tortoise Energy Capital Corp. | 36,101 | ||||
Total Closed-End Mutual Funds | 80,159 | |||||
Quantity | Name of Issuer | Fair Value ($) | ||||
Short-Term Securities - 4.2% | ||||||
204,765 | Wells Fargo Adv. Govt. Money Mkt., 0.02% | |||||
Total Short-Term Securities | 204,765 | |||||
Total Investments in Securities - 102.8% | 5,083,830 | |||||
Other Assets and Liabilities, net - (2.8%) | (136,325 | ) | ||||
Total Net Assets - 100.0% |
$ |
4,947,505 |
| |||
* | Non-income producing security. |
** | The Fund’s total investment in Japan including the iShares comprises 3.2% of the Fund’s net assets. |
Numeric footnotes not disclosed are not applicable to this Schedule of Investments.
ADR — American Depositary Receipt
MLP — Master Limited Partnership
PLC — Public Limited Company
DECEMBER 31, 2010 |
|
17 |
|
|
SCHEDULE OF INVESTMENTS (Unaudited)
December 31, 2010
Sit Global Dividend Growth Fund (Continued)
A summary of the inputs used to value the Fund’s net assets as of December 31, 2010 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 | $310,607 | — | — | $310,607 | ||||||||||||
Bermuda | 50,219 | — | — | 50,219 | ||||||||||||
Canada | 126,773 | — | — | 126,773 | ||||||||||||
China/Hong Kong | 46,651 | $30,862 | — | 77,513 | ||||||||||||
France | 151,256 | — | — | 151,256 | ||||||||||||
Germany | 62,125 | 31,805 | — | 93,930 | ||||||||||||
Ireland | 52,127 | — | — | 52,127 | ||||||||||||
Israel | 36,491 | — | — | 36,491 | ||||||||||||
Italy | 26,939 | 44,097 | — | 71,036 | ||||||||||||
Japan | 85,198 | 19,608 | — | 104,806 | ||||||||||||
Luxembourg | 24,856 | — | — | 24,856 | ||||||||||||
Netherlands | 33,770 | 51,569 | — | 85,339 | ||||||||||||
Norway | 37,312 | — | — | 37,312 | ||||||||||||
Spain | 34,210 | 41,918 | — | 76,128 | ||||||||||||
Switzerland | 70,694 | 179,469 | — | 250,163 | ||||||||||||
United Kingdom | 227,991 | 125,950 | — | 353,941 | ||||||||||||
United States | 2,841,859 | — | — | 2,841,859 | ||||||||||||
4,219,078 | 525,278 | — |
|
4,744,356 |
| |||||||||||
Exchange-Traded Funds | 54,550 | — | — | 54,550 | ||||||||||||
Closed-End Mutual Funds | 80,159 | — | — | 80,159 | ||||||||||||
Short-Term Securities | 204,765 | — | — | 204,765 | ||||||||||||
Total: | $4,558,552 | $525,278 | — |
|
$5,083,830 |
|
* | Level 2 equity securities are primarily foreign securities where the closing price has been adjusted by application of a systematic process for events occurring after the close of the foreign exchange. |
See accompanying notes to financial statements.
18 |
SIT MUTUAL FUNDS SEMI-ANNUAL REPORT |
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DECEMBER 31, 2010 |
|
19 |
|
|
OBJECTIVE & STRATEGY
The objective of the 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 Sit Large Cap Growth Fund’s six-month return was +22.23%, compared to the +26.37% return for the Russell 1000® Growth Index. The S&P 500® Index return for the period was +23.27%.
U.S. stocks posted very strong returns over the second half of 2010, as markets responded to better-than-expected earnings, improvements in the global economy, and a highly accommodative Federal Reserve policy. Despite the strong advance in equities since the market bottom in early 2009, we believe underlying fundamentals support further gains for stocks in the year ahead. However, we remain cognizant of risks (e.g., excessive government debt, weak housing, rising commodity prices) that may, at a minimum, result in increased market volatility in 2011.
Relative to the Russell 1000® Growth Index, stock selection in finance, retail trade, energy minerals and consumer non-durables negatively impacted performance during the past six months. In finance, our positions in bank stocks (Bank of America, Wells Fargo, JPMorgan Chase) hurt performance over the period, as concerns over regulations and “mortgage put-backs” weighed on share prices. Our defensive positioning in the retail trade and consumer non-durable sectors was detrimental during the second half of the year, as the Fund’s holdings in conservative growth stocks, including Procter & Gamble, General Mills, PepsiCo and CVS Caremark, underperformed. Conversely, strong stock selection in electronic technology and transportation contributed to relative performance over the period. Top performers in these sectors included F5 Networks (+90% six-month return), Ciena (+66%), Expeditors International (+59%) and Qualcomm (+52%).
As we begin 2011, our investment strategy is largely based on our economic outlook, which calls for a slower than “normal” economic recovery in developed economies and strong growth in emerging markets. Importantly, we believe that investors’ rotation into low-quality stocks over the last few quarters has led to very attractive relative valuations for shares of many large cap, high-quality growth companies. Quality, as we define it, refers to companies with strong balance sheets, predictable earnings growth, consistent cash flow generation, and management teams that focus on improving returns on capital. Our largest sector weightings are in electronic technology, technology services and producer manufacturing. We believe the outlook for technology stocks remains very attractive due to cyclical recoveries in key segments (e.g., personal computers, semiconductors) and secular demand in several areas, such as wireless communications (e.g., smart phones). In addition, most technology companies have exceptional balance sheets, which are leading to increases in dividends, share repurchases, and merger and acquisition activity in
HYPOTHETICAL GROWTH OF $10,000
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 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.
the sector. The producer manufacturing sector is experiencing a strong rebound, led by surging growth in developing economies. Key areas of emphasis include commercial aerospace, automation and agriculture.
Based on the strong fundamentals and attractive valuations for companies held in the Fund, we remain enthusiastic about its long-term outlook.
Roger J. Sit
Ronald D. Sit
Michael J. Stellmacher
Portfolio Managers
20 |
SIT MUTUAL FUNDS SEMI-ANNUAL REPORT |
|
COMPARATIVE RATES OF RETURNS
as of December 31, 2010
Sit Large Cap Growth Fund | Russell 1000® Growth Index 1 | Russell 1000® Index 2 | |||||||||||||
Six Month | 22.23 | % | 26.37 | % | 24.03 | % | |||||||||
One Year | 10.79 | 16.71 | 16.10 | ||||||||||||
Five Year | 3.19 | 3.75 | 2.59 | ||||||||||||
Ten Year | -0.86 | 0.02 | 1.83 | ||||||||||||
Since Inception 3 (9/2/82) | 9.68 | 10.55 | 11.51 |
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 12/31/10: | $42.25 Per Share | |
Net Asset Value 6/30/10: | $34.75 Per Share | |
Total Net Assets: | $426.8 Million | |
Weighted Average Market Cap: | $77.8 Billion |
TOP 10 HOLDINGS
1. Apple, Inc.
2. International Business Machines Corp.
3. Google, Inc.
4. Oracle Corp.
5. QUALCOMM, Inc.
6. Occidental Petroleum Corp.
7. Coca Cola Co.
8. McDonald’s Corp.
9. Intel Corp.
10. Chevron Corp.
Based on total net assets as of December 31, 2010. Subject to change.
FUND DIVERSIFICATION
Based on total net assets as of December 31, 2010. Subject to change.
DECEMBER 31, 2010 |
|
21 |
|
|
SCHEDULE OF INVESTMENTS (Unaudited)
December 31, 2010
Sit Large Cap Growth Fund
Quantity | Name of Issuer | Fair Value ($) | ||||
Common Stocks - 99.4% | ||||||
Communications - 1.2% | ||||||
57,500 | Rogers Communications, Inc. | 1,991,225 | ||||
90,900 | Verizon Communications, Inc. | 3,252,402 | ||||
|
5,243,627 |
| ||||
Consumer Durables - 0.9% | ||||||
208,900 | Activision Blizzard, Inc. | 2,598,716 | ||||
30,000 | General Motors Co. * | 1,105,800 | ||||
|
3,704,516 |
| ||||
Consumer Non-Durables - 8.8% | ||||||
136,000 | Coca-Cola Co. | 8,944,720 | ||||
55,800 | Colgate-Palmolive Co. | 4,484,646 | ||||
93,100 | General Mills, Inc. | 3,313,429 | ||||
116,400 | PepsiCo, Inc. | 7,604,412 | ||||
102,100 | Philip Morris International, Inc. | 5,975,913 | ||||
114,100 | Procter & Gamble Co. | 7,340,053 | ||||
|
37,663,173 |
| ||||
Consumer Services - 3.1% | ||||||
116,400 | McDonald’s Corp. | 8,934,864 | ||||
60,800 | Visa, Inc. | 4,279,104 | ||||
|
13,213,968 |
| ||||
Electronic Technology - 23.2% | ||||||
80,400 | Analog Devices, Inc. | 3,028,668 | ||||
51,400 | Apple, Inc. * | 16,579,584 | ||||
316,800 | Applied Materials, Inc. | 4,451,040 | ||||
168,200 | Broadcom Corp. | 7,325,110 | ||||
204,400 | Ciena Corp. * | 4,302,620 | ||||
205,100 | Cisco Systems, Inc. * | 4,149,173 | ||||
74,900 | EMC Corp. * | 1,715,210 | ||||
28,100 | F5 Networks, Inc. * | 3,657,496 | ||||
417,200 | Intel Corp. | 8,773,716 | ||||
103,200 | International Business Machines Corp. | 15,145,632 | ||||
111,700 | Juniper Networks, Inc. * | 4,123,964 | ||||
65,200 | Linear Technology Corp. | 2,255,268 | ||||
185,200 | Marvell Technology Group, Ltd. * | 3,435,460 | ||||
240,100 | QUALCOMM, Inc. | 11,882,549 | ||||
37,100 | Research In Motion, Ltd. * | 2,156,623 | ||||
167,000 | Seagate Technology * | 2,510,010 | ||||
83,000 | Veeco Instruments, Inc. * | 3,565,680 | ||||
|
99,057,803 |
| ||||
Energy Minerals - 8.2% | ||||||
36,600 | Apache Corp. | 4,363,818 | ||||
87,000 | Chevron Corp. | 7,938,750 | ||||
40,800 | Murphy Oil Corp. | 3,041,640 | ||||
99,400 | Occidental Petroleum Corp. | 9,751,140 | ||||
96,500 | Southwestern Energy Co. * | 3,611,995 |
Quantity | Name of Issuer | Fair Value ($) | ||||
91,700 | Suncor Energy, Inc. | 3,511,193 | ||||
55,300 | Ultra Petroleum Corp. * | 2,641,681 | ||||
|
34,860,217 |
| ||||
Finance - 4.8% | ||||||
34,600 | ACE, Ltd. | 2,153,850 | ||||
41,200 | Aflac, Inc. | 2,324,916 | ||||
8,600 | CME Group, Inc. | 2,767,050 | ||||
35,200 | Franklin Resources, Inc. | 3,914,592 | ||||
21,000 | Goldman Sachs Group, Inc. | 3,531,360 | ||||
79,700 | JPMorgan Chase & Co. | 3,380,874 | ||||
43,900 | Prudential Financial, Inc. | 2,577,369 | ||||
|
20,650,011 |
| ||||
Health Services - 1.3% | ||||||
28,000 | McKesson Corp. | 1,970,640 | ||||
54,300 | Medco Health Solutions, Inc.* | 3,326,961 | ||||
|
5,297,601 |
| ||||
Health Technology - 7.5% | ||||||
40,200 | Abbott Laboratories | 1,925,982 | ||||
28,800 | Allergan, Inc. | 1,977,696 | ||||
105,100 | Celgene Corp. * | 6,215,614 | ||||
54,900 | Genzyme Corp. * | 3,908,880 | ||||
82,600 | Gilead Sciences, Inc. * | 2,993,424 | ||||
8,100 | Intuitive Surgical, Inc. * | 2,087,775 | ||||
31,050 | Johnson & Johnson | 1,920,443 | ||||
107,500 | St. Jude Medical, Inc. * | 4,595,625 | ||||
60,500 | Thermo Fisher Scientific, Inc.* | 3,349,280 | ||||
45,740 | Varian Medical Systems, Inc.* | 3,168,867 | ||||
|
32,143,586 |
| ||||
Industrial Services - 2.3% | ||||||
52,200 | McDermott International, Inc. * | 1,080,018 | ||||
77,100 | Schlumberger, Ltd. | 6,437,850 | ||||
67,900 | Seadrill, Ltd. | 2,303,168 | ||||
|
9,821,036 |
| ||||
Non-Energy Minerals - 1.5% | ||||||
19,600 | Allegheny Technologies, Inc. | 1,081,528 | ||||
43,600 | Freeport-McMoRan Copper & Gold, Inc. | 5,235,924 | ||||
|
6,317,452 |
| ||||
Process Industries - 2.2% | ||||||
95,200 | Ecolab, Inc. | 4,799,984 | ||||
48,900 | Praxair, Inc. | 4,668,483 | ||||
|
9,468,467 |
| ||||
Producer Manufacturing - 9.4% | ||||||
48,400 | 3M Co. | 4,176,920 | ||||
158,900 | ABB, Ltd., ADR * | 3,567,305 | ||||
102,700 | Danaher Corp. | 4,844,359 | ||||
75,800 | Deere & Co. | 6,295,190 | ||||
87,800 | Emerson Electric Co. | 5,019,526 |
See accompanying notes to financial statements.
22 |
SIT MUTUAL FUNDS SEMI-ANNUAL REPORT |
|
Quantity | Name of Issuer | Fair Value ($) | ||||
40,100 | Flowserve Corp. | 4,780,722 | ||||
31,600 | Goodrich Corp. | 2,783,012 | ||||
20,900 | Precision Castparts Corp. | 2,909,489 | ||||
74,000 | United Technologies Corp. | 5,825,280 | ||||
|
40,201,803 |
| ||||
Retail Trade - 8.3% | ||||||
14,500 | Amazon.com, Inc. * | 2,610,000 | ||||
50,961 | Costco Wholesale Corp. | 3,679,894 | ||||
127,700 | CVS Caremark Corp. | 4,440,129 | ||||
114,800 | Home Depot, Inc. | 4,024,888 | ||||
100,600 | Kohl’s Corp. * | 5,466,604 | ||||
117,500 | Target Corp. | 7,065,275 | ||||
47,900 | TJX Cos., Inc. | 2,126,281 | ||||
109,400 | Wal-Mart Stores, Inc. | 5,899,942 | ||||
|
35,313,013 |
| ||||
Technology Services - 13.5% | ||||||
125,100 | Accenture, PLC | 6,066,099 | ||||
127,700 | Adobe Systems, Inc. * | 3,930,606 | ||||
89,000 | Cognizant Technology Solutions Corp. * | 6,522,810 | ||||
26,100 | Dolby Laboratories, Inc. * | 1,740,870 | ||||
20,900 | Google, Inc. * | 12,413,973 | ||||
246,400 | Microsoft Corp. | 6,879,488 | ||||
391,100 | Oracle Corp. | 12,241,430 | ||||
24,200 | Salesforce.com, Inc. * | 3,194,400 | ||||
51,500 | VMware, Inc. * | 4,578,865 | ||||
|
57,568,541 |
| ||||
Quantity | Name of Issuer | Fair Value ($) | ||||
Transportation - 2.2% | ||||||
39,300 | Expeditors International of Washington, Inc. | 2,145,780 | ||||
56,400 | Union Pacific Corp. | 5,226,024 | ||||
28,100 | United Parcel Service, Inc. | 2,039,498 | ||||
|
9,411,302 |
| ||||
Utilities - 1.0% | ||||||
86,000 | Calpine Corp. * | 1,147,240 | ||||
51,400 | Wisconsin Energy Corp. | 3,025,404 | ||||
|
4,172,644 |
| ||||
Total Common Stocks | 424,108,760 | |||||
Short-Term Securities - 1.1% | ||||||
4,907,160 | Wells Fargo Adv. Govt. Money Mkt., 0.02% | |||||
Total Short-Term Securities | 4,907,160 | |||||
Total Investments in Securities - 100.5% | 429,015,920 | |||||
Other Assets and Liabilities, net (0.5%) | (2,204,754 | ) | ||||
Total Net Assets - 100.0% | $ | 426,811,166 | ||||
* | 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 inputs used to value the Fund’s net assets as of December 31, 2010 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 | Level 3 Significant | Total | |||||||||
Common Stocks ** | $ | 424,108,760 | — | — | $ | 424,108,760 | ||||||
Short-Term Securities | 4,907,160 | — | — | 4,907,160 | ||||||||
Total: | $ | 429,015,920 | — | — | $ | 429,015,920 |
** | For equity securities categorized in a single level, refer to the Schedule of Investments for further breakdown. |
DECEMBER 31, 2010 |
|
23 |
|
|
OBJECTIVE & STRATEGY
The objective of the Sit Mid 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 growth companies with capitalizations of $2 billion to $15 billion at the time of purchase.
The Sit Mid Cap Growth Fund’s return for the second half of 2010 was +29.73%, compared to +30.71% for the Russell Midcap® Growth Index. The S&P Mid Cap Index gained +28.39% during the period.
Stock prices surged during the second half of 2010, as investors gained confidence in the economic recovery. Small and mid cap stocks performed particularly well, which is not unusual in the early stages of an economic recovery. Despite the strong run-up in share prices, we do not believe valuations are a constraining factor, as gains in stocks have coincided with significant growth in corporate earnings, driven by accelerating revenues in most sectors. We do expect, however, that stock returns will be more modest in 2011, due in part to more difficult earnings comparisons in the year ahead.
In terms of our current strategy, nothing has materially altered the key investment themes and sector strategies that we have highlighted over the past several quarters. We continue to emphasize companies benefiting from a cyclical pickup in the global economy and firms with significant exposure to emerging economies. We feel strongly that an emphasis on “quality” is particularly important, as risks to the fragile economic recovery still exist (e.g., housing, excessive debt, geopolitics). The Fund remains well diversified among sectors, with the largest sector weights in electronic technology, technology services and producer manufacturing. We feel these sectors offer the most attractive combination of cyclical and secular growth. For example, while both technology and manufacturing companies will benefit presently from an increase in corporate capital spending, technology companies that are exposed to dynamic areas, such as wireless communications, have excellent long-term prospects. Long-term growth prospects are also excellent for manufacturing companies that are benefiting from infrastructure growth in developing economies. Conversely, the Fund remains underweighted in sectors most dependent on the U.S, consumer, including retail trade and consumer services. We believe growth in these sectors will be more difficult over the long term due to a subpar recovery in labor markets and elevated consumer debt levels.
Although the Fund generated a strong absolute return over the past six months, it modestly lagged the gain for the Russell Midcap® Growth Index. Relative to this index, the key reasons for underperformance were stock selection in several sectors, including health technology, technology services, and consumer services. Stocks that lagged over the period included NuVasive (-28%), Amylin Pharmaceuticals (-22%), Strayer Education (-31%) and Devry (-16%). While the Fund’s holdings in the technology services sector appreciated during the quarter, relative returns were impacted by the absence of Priceline, which is heavily-weighted in the Index and gained +126%
HYPOTHETICAL GROWTH OF $10,000
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 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.
over the period. On the positive side, strong stock selection in electronic technology, consumer non-durables and consumer durables aided performance during the second half of the year. In terms of individual stocks, the most significant contributors included F5 Networks (+90% six-month return), Fossil (+103%), AGCO (+88%) and Cognizant Technologies Solutions (+46%).
Our research team remains committed and focused on identifying long-term investment opportunities that will help our shareholders achieve their investment goals over the long term.
Roger J. Sit
Kent L. Johnson
Matthew T. Loucks
Robert W. Sit
Portfolio Managers
24 |
SIT MUTUAL FUNDS SEMI-ANNUAL REPORT |
|
COMPARATIVE RATES OF RETURNS
as of December 31, 2010
Sit Mid Cap Growth Fund | Russell Midcap® Growth Index 1 | Russell Midcap® Index 2 | ||||
Six Month | 29.73% | 30.71% | 28.12% | |||
One Year | 27.10 | 26.38 | 25.48 | |||
Five Year | 4.17 | 4.88 | 4.66 | |||
Ten Year | -0.02 | 3.12 | 6.54 | |||
Since Inception (9/2/82) | 12.06 | 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 12/31/10: | $15.01 Per Share | |
Net Asset Value 6/30/10: | $11.57 Per Share | |
Total Net Assets: | $162.0 Million | |
Weighted Average Market Cap: | $12.7 Billion |
TOP 10 HOLDINGS
1. Cognizant Technology Solutions Corp.
2. Cummins, Inc.
3. F5 Networks, Inc.
4. Snap-On, Inc.
5. Citrix Systems, Inc.
6. Affiliated Managers Group, Inc.
7. Broadcom Corp.
8. Ecolab, Inc.
9. ANSYS, Inc.
10. Celgene Corp.
Based on total net assets as of December 31, 2010. Subject to change.
FUND DIVERSIFICATION
Based on total net assets as of December 31, 2010. Subject to change.
DECEMBER 31, 2010 |
|
25 |
|
|
SCHEDULE OF INVESTMENTS (Unaudited)
December 31, 2010
Sit Mid Cap Growth Fund
Quantity | Name of Issuer | Fair Value ($) | ||||
Common Stocks - 100.2% | ||||||
Communications - 1.2% | ||||||
23,650 | Akamai Technologies, Inc. * | 1,112,732 | ||||
15,000 | American Tower Corp. * | 774,600 | ||||
|
1,887,332 |
| ||||
Consumer Durables - 4.6% | ||||||
69,200 | Activision Blizzard, Inc. | 860,848 | ||||
24,300 | Fossil, Inc. * | 1,712,664 | ||||
49,900 | Snap-On, Inc. | 2,823,342 | ||||
44,700 | Tupperware Brands Corp. | 2,130,849 | ||||
|
7,527,703 |
| ||||
Consumer Non-Durables - 6.3% | ||||||
51,900 | Alberto-Culver Co. | 1,922,376 | ||||
23,500 | Avon Products, Inc. | 682,910 | ||||
54,500 | Central European Distribution Corp. * | 1,248,050 | ||||
44,100 | Coach, Inc. | 2,439,171 | ||||
62,300 | Coca-Cola Enterprises, Inc. | 1,559,369 | ||||
29,000 | Guess?, Inc. | 1,372,280 | ||||
18,000 | Hansen Natural Corp. * | 941,040 | ||||
|
10,165,196 |
| ||||
Consumer Services - 1.7% | ||||||
60,600 | International Game Technology | 1,072,014 | ||||
39,532 | Marriott International, Inc. | 1,642,159 | ||||
|
2,714,173 |
| ||||
Electronic Technology - 16.0% | ||||||
42,750 | Analog Devices, Inc. | 1,610,392 | ||||
1,500 | Apple, Inc. * | 483,840 | ||||
34,400 | Atmel Corp. * | 423,808 | ||||
58,075 | Broadcom Corp. | 2,529,166 | ||||
76,000 | Ciena Corp. * | 1,599,800 | ||||
25,800 | F5 Networks, Inc. * | 3,358,128 | ||||
44,000 | Finisar Corp. * | 1,306,360 | ||||
49,900 | Juniper Networks, Inc. * | 1,842,308 | ||||
33,400 | KLA-Tencor Corp. | 1,290,576 | ||||
46,700 | Linear Technology Corp. | 1,615,353 | ||||
115,600 | Marvell Technology Group, Ltd. * | 2,144,380 | ||||
35,500 | NetApp, Inc. * | 1,951,080 | ||||
14,400 | Research In Motion, Ltd. * | 837,072 | ||||
106,800 | Seagate Technology * | 1,605,204 | ||||
56,800 | Synaptics, Inc. * | 1,668,784 | ||||
40,500 | Veeco Instruments, Inc. * | 1,739,880 | ||||
|
26,006,131 |
| ||||
Energy Minerals - 4.8% | ||||||
11,000 | Apache Corp. | 1,311,530 | ||||
20,200 | EQT Corp. | 905,768 | ||||
22,400 | Murphy Oil Corp. | 1,669,920 | ||||
32,800 | Southwestern Energy Co. * | 1,227,704 | ||||
28,800 | Ultra Petroleum Corp. * | 1,375,776 |
Quantity | Name of Issuer | Fair Value ($) | ||||
9,900 | Walter Energy, Inc. | 1,265,616 | ||||
|
7,756,314 |
| ||||
Finance - 8.5% | ||||||
24,950 | ACE, Ltd. | 1,553,138 | ||||
26,700 | Affiliated Managers Group, Inc. * | 2,649,174 | ||||
25,200 | Aflac, Inc. | 1,422,036 | ||||
16,500 | Ameriprise Financial, Inc. | 949,575 | ||||
15,300 | IntercontinentalExchange, Inc. * | 1,822,995 | ||||
47,700 | Marsh & McLennan Cos., Inc. | 1,304,118 | ||||
9,300 | PartnerRe, Ltd. | 747,255 | ||||
27,100 | T Rowe Price Group, Inc. | 1,749,034 | ||||
106,900 | TCF Financial Corp. | 1,583,189 | ||||
|
13,780,514 |
| ||||
Health Services - 3.8% | ||||||
43,500 | Allscripts Healthcare Solutions, Inc. * | 838,245 | ||||
25,200 | Covance, Inc. * | 1,295,532 | ||||
37,800 | Express Scripts, Inc. * | 2,043,090 | ||||
9,400 | Laboratory Corp. of America Holdings * | 826,448 | ||||
13,400 | Stericycle, Inc. * | 1,084,328 | ||||
|
6,087,643 |
| ||||
Health Technology - 8.4% | ||||||
7,100 | Alcon, Inc. | 1,160,140 | ||||
23,400 | Allergan, Inc. | 1,606,878 | ||||
43,200 | Amylin Pharmaceuticals, Inc. * | 635,472 | ||||
41,400 | Celgene Corp. * | 2,448,396 | ||||
13,800 | Edwards Lifesciences Corp. * | 1,115,592 | ||||
28,900 | Gilead Sciences, Inc. * | 1,047,336 | ||||
13,400 | IDEXX Laboratories, Inc. * | 927,548 | ||||
3,946 | Intuitive Surgical, Inc. * | 1,017,082 | ||||
44,088 | NuVasive, Inc. * | 1,130,857 | ||||
29,450 | Thermo Fisher Scientific, Inc. * | 1,630,352 | ||||
12,600 | Varian Medical Systems, Inc. * | 872,928 | ||||
|
13,592,581 |
| ||||
Industrial Services - 4.7% | ||||||
42,600 | Aecom Technology Corp. * | 1,191,522 | ||||
18,450 | Babcock & Wilcox Co. * | 472,136 | ||||
28,400 | Chicago Bridge & Iron Co. NV * | 934,360 | ||||
30,400 | Jacobs Engineering Group, Inc. * | 1,393,840 | ||||
36,900 | McDermott International, Inc. * | 763,461 | ||||
17,100 | National Oilwell Varco, Inc. | 1,149,975 | ||||
14,950 | Schlumberger, Ltd. | 1,248,325 | ||||
12,500 | Seadrill, Ltd. | 424,000 | ||||
|
7,577,619 |
| ||||
Non-Energy Minerals - 1.9% | ||||||
20,300 | Allegheny Technologies, Inc. | 1,120,154 |
See accompanying notes to financial statements.
26 |
SIT MUTUAL FUNDS SEMI-ANNUAL REPORT |
|
Quantity | Name of Issuer | Fair Value ($) | ||||
26,500 | Haynes International, Inc. | 1,108,495 | ||||
38,700 | Stillwater Mining Co. * | 826,245 | ||||
3,054,894 | ||||||
Process Industries - 6.3% | ||||||
17,200 | Airgas, Inc. | 1,074,312 | ||||
43,300 | Albemarle Corp. | 2,415,274 | ||||
11,500 | CF Industries Holdings, Inc. | 1,554,225 | ||||
49,500 | Ecolab, Inc. | 2,495,790 | ||||
10,600 | FMC Corp. | 846,834 | ||||
36,700 | Scotts Miracle-Gro Co. | 1,863,259 | ||||
10,249,694 | ||||||
Producer Manufacturing - 10.9% | ||||||
31,600 | AGCO Corp. * | 1,600,856 | ||||
40,125 | AMETEK, Inc. | 1,574,906 | ||||
30,000 | Cooper Industries, PLC | 1,748,700 | ||||
31,300 | Cummins, Inc. | 3,443,313 | ||||
14,800 | Flowserve Corp. | 1,764,456 | ||||
16,400 | Precision Castparts Corp. | 2,283,044 | ||||
24,700 | Rockwell Collins, Inc. | 1,439,022 | ||||
29,000 | SPX Corp. | 2,073,210 | ||||
45,000 | Trimble Navigation, Ltd. * | 1,796,850 | ||||
17,724,357 | ||||||
Retail Trade - 6.3% | ||||||
10,700 | BJ’s Wholesale Club, Inc. * | 512,530 | ||||
62,200 | Dick’s Sporting Goods, Inc. * | 2,332,500 | ||||
64,900 | GameStop Corp. * | 1,484,912 | ||||
32,600 | Macy’s, Inc. | 824,780 | ||||
18,300 | Nordstrom, Inc. | 775,554 | ||||
47,300 | TJX Cos., Inc. | 2,099,647 | ||||
63,300 | Ulta Salon Cosmetics & Fragrance, Inc. * | 2,152,200 | ||||
10,182,123 | ||||||
Technology Services - 11.1% | ||||||
54,190 | Adobe Systems, Inc. * | 1,667,968 | ||||
44,700 | Amdocs, Ltd. * | 1,227,909 | ||||
47,100 | ANSYS, Inc. * | 2,452,497 |
Quantity | Name of Issuer | Fair Value ($) | ||||
52,800 | Autodesk, Inc. * | 2,016,960 | ||||
41,000 | Citrix Systems, Inc. * | 2,804,810 | ||||
47,200 | Cognizant Technology Solutions Corp. * | 3,459,288 | ||||
30,000 | Dolby Laboratories, Inc. * | 2,001,000 | ||||
17,700 | Salesforce.com, Inc. * | 2,336,400 | ||||
17,966,832 | ||||||
Transportation - 2.3% | ||||||
19,700 | CH Robinson Worldwide, Inc. | 1,579,743 | ||||
38,700 | Expeditors International of Washington, Inc. | 2,113,020 | ||||
3,692,763 | ||||||
Utilities - 1.4% | ||||||
51,500 | Calpine Corp. * | 687,010 | ||||
25,100 | UGI Corp. | 792,658 | ||||
12,800 | Wisconsin Energy Corp. | 753,408 | ||||
2,233,076 | ||||||
Total Common Stocks | 162,198,945 | |||||
Short-Term Securities - 0.7% | ||||||
1,146,048 | Wells Fargo Adv. Govt. Money Mkt., 0.02% | |||||
Total Short-Term Securities | 1,146,048 | |||||
Total Investments in Securities - 100.9% | 163,344,993 | |||||
Other Assets and Liabilities, net (0.9%) | (1,389,843 | ) | ||||
Total Net Assets - 100.0% | $161,955,150 | |||||
* | Non-income producing security. |
Numeric footnotes not disclosed are not applicable to this Schedule of Investments.
PLC — Public Limited Company
A summary of the inputs used to value the Fund’s net assets as of December 31, 2010 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 | Level 3 Significant | Total | |||||||||
Common Stocks ** | $162,198,945 | — | — | $ | 162,198,945 | |||||||
Short-Term Securities | 1,146,048 | — | — | 1,146,048 | ||||||||
Total: | $163,344,993 | — | — | $ | 163,344,993 | |||||||
** | For equity securities categorized in a single level, refer to the Schedule of Investments for further breakdown. |
DECEMBER 31, 2010 |
|
27 |
|
|
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 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.
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 +27.08% over the past six months. This compares to the six-month return of +32.14% for the Russell 2000® Growth Index and the +29.38% return for the Russell 2000® Index.
Stock prices surged during the second half of 2010, as investors gained confidence that economic conditions were improving around the world. Small cap stocks dramatically outperformed their large cap peers, which is not unusual in the early stages of an economic recovery. In addition, small cap stocks were beneficiaries of increasing mergers and acquisitions activity over the past year, and we expect this to continue in 2011. The rationale is quite simple: large companies have very strong balance sheets, interest income on cash is very low, and other growth opportunities may be more limited in a moderate economic recovery. We anticipate, therefore, that large companies will be on the hunt for small companies that can either boost growth prospects or help build economies of scale. In our view, M&A (mergers and acquisitions) activity will likely be significant in many sectors, including technology, health care, energy and capital goods.
Despite strong absolute returns during the second half of 2010, the Fund lagged the Russell 2000® Growth Index over the period. Relative performance was negatively impacted by stock selection in health technology, energy minerals and consumer services. The Fund’s position in Thoratec was particularly costly over the period, as the stock fell 34%. The company, which makes a product used to prevent end-stage heart failure, fell out of favor with investors when a competitor’s products had positive trial results. We continue to own the stock, however, given the large market opportunity (even for two companies). Other holdings that hurt performance during the period included Amylin Pharmaceuticals, TCF Financial, NuVasive, Intuitive Surgical and Icon. Conversely, holdings in commercial services, retail trade and technology services positively impacted returns over the period. In terms of individual stocks, Informatica, F5 Networks, Skyworks Solutions, Ciena and CF Industries had the most positive impact on relative returns. Each of these stocks rose +60% or more during the period.
Looking ahead, we believe the odds favor a continuance of economic growth in 2011 and a favorable environment for small cap stocks. While the Fund remains positioned in companies that we believe can benefit from a cyclical recovery in the global economy,
HYPOTHETICAL GROWTH OF $10,000
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 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.
we believe risks must also be considered. These include high consumer and government debt levels, rising inflation in emerging markets, and continued stresses in the U.S. housing market. We believe, therefore, that diversification among sectors and a focus on fundamentally strong companies are keys to manage and mitigate potential downside. Fortunately, our investment staff continues to identify attractive themes within many sectors. For example, innovation in wireless communications is driving growth for many technology companies. Capital goods companies are benefitting from booming infrastructure growth in emerging economies. And our analysis of long-term supply and demand trends points to a very positive outlook for commodities, particularly relating to agriculture and energy.
We remain enthusiastic about the Fund’s prospects in the year ahead, and appreciate shareholders’ continued interest.
Roger J. Sit | Matt T. Loucks | Michael J. Stellmacher | ||
Kent L. Johnson | Robert W. Sit | Portfolio Managers |
28 |
SIT MUTUAL FUNDS SEMI-ANNUAL REPORT |
|
COMPARATIVE RATES OF RETURNS
as of December 31, 2010
Sit Small Cap Fund | Russell 2000® Growth Index 1 | Russell 2000® Index 2 | ||||||||||
Six Month | 27.08 | % | 32.14 | % | 29.38 | % | ||||||
One Year | 27.28 | 29.09 | 26.86 | |||||||||
Five Year | 4.67 | 5.30 | 4.47 | |||||||||
Ten Year | 1.26 | 3.78 | 6.33 | |||||||||
Since Inception (7/1/94) | 10.73 | 6.68 | 8.85 |
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 perfor- mance 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 12/31/10: | $39.80 Per Share | |
Net Asset Value 6/30/10: | $31.32 Per Share | |
Total Net Assets: | $73.4 Million | |
Weighted Average Market Cap: | $3.7 Billion |
TOP 10 HOLDINGS
1. Informatica Corp.
2. Skyworks Solutions, Inc.
3. Ciena Corp.
4. F5 Networks, Inc.
5. ANSYS, Inc.
6. Alexion Pharmaceuticals, Inc.
7. Ulta Salon Cosmetics & Fragrance, Inc.
8. Ultimate Software Group, Inc.
9. Core Laboratories NV
10. Affiliated Managers Group, Inc.
Based on total net assets as of December 31, 2010. Subject to change.
FUND DIVERSIFICATION
Based on total net assets as of December 31, 2010. Subject to change.
DECEMBER 31, 2010 |
|
29 |
|
|
SCHEDULE OF INVESTMENTS (Unaudited)
December 31, 2010
Sit Small Cap Growth Fund
Quantity | Name of Issuer | Fair Value ($) | ||||
Common Stocks - 99.5% | ||||||
Commercial Services - 1.0% | ||||||
7,800 | Factset Research Systems, Inc. | 731,328 | ||||
Communications - 1.5% | ||||||
9,250 | SBA Communications Corp. * | 378,695 | ||||
42,300 | TW Telecom, Inc. * | 721,215 | ||||
|
1,099,910 |
| ||||
Consumer Durables - 5.1% | ||||||
5,800 | Fossil, Inc. * | 408,784 | ||||
10,700 | Polaris Industries, Inc. | 834,814 | ||||
22,100 | Snap-On, Inc. | 1,250,418 | ||||
25,400 | Tupperware Brands Corp. | 1,210,818 | ||||
|
3,704,834 |
| ||||
Consumer Non-Durables - 4.5% | ||||||
10,300 | Alberto-Culver Co. | 381,512 | ||||
24,800 | Central European Distribution Corp. * | 567,920 | ||||
13,200 | Guess?, Inc. | 624,624 | ||||
18,500 | Hansen Natural Corp. * | 967,180 | ||||
34,600 | True Religion Apparel, Inc. * | 770,196 | ||||
|
3,311,432 |
| ||||
Consumer Services - 2.2% | ||||||
15,400 | Buffalo Wild Wings, Inc. * | 675,290 | ||||
7,975 | Capella Education Co. * | 530,975 | ||||
17,300 | Red Robin Gourmet Burgers, Inc. * | 371,431 | ||||
|
1,577,696 |
| ||||
Electronic Technology - 16.0% | ||||||
15,400 | Atmel Corp. * | 189,728 | ||||
72,400 | Ciena Corp. * | 1,524,020 | ||||
11,500 | F5 Networks, Inc. * | 1,496,840 | ||||
27,100 | Finisar Corp. * | 804,599 | ||||
27,600 | Meru Networks, Inc. * | 425,592 | ||||
20,800 | MICROS Systems, Inc. * | 912,288 | ||||
20,000 | Microsemi Corp. * | 458,000 | ||||
22,900 | Rubicon Technology, Inc. * | 482,732 | ||||
59,700 | Skyworks Solutions, Inc. * | 1,709,211 | ||||
28,900 | Synaptics, Inc. * | 849,082 | ||||
17,900 | Varian Semiconductor Equipment Assoc., Inc. * | 661,763 | ||||
21,600 | Veeco Instruments, Inc. * | 927,936 | ||||
15,500 | VeriFone Systems, Inc. * | 597,680 | ||||
31,900 | Volterra Semiconductor Corp. * | 738,804 | ||||
|
11,778,275 |
| ||||
Energy Minerals - 4.0% | ||||||
7,700 | Atlas Energy, Inc. * | 338,569 | ||||
26,500 | Brigham Exploration Co. * | 721,860 | ||||
20,800 | Gas Natural, Inc. | 218,192 |
Quantity | Name of Issuer | Fair Value ($) | ||||
33,700 | Northern Oil and Gas, Inc. * | 916,977 | ||||
19,300 | Southwestern Energy Co. * | 722,399 | ||||
|
2,917,997 |
| ||||
Finance - 5.4% | ||||||
13,175 | Affiliated Managers Group, Inc. * | 1,307,224 | ||||
8,900 | Allied World Assurance Co. Holdings, Ltd. | 529,016 | ||||
16,800 | Hanover Insurance Group, Inc. | 784,896 | ||||
8,900 | Stifel Financial Corp. * | 552,156 | ||||
55,100 | TCF Financial Corp. | 816,031 | ||||
|
3,989,323 |
| ||||
Health Services - 2.7% | ||||||
39,300 | Allscripts Healthcare Solutions, Inc. * | 757,311 | ||||
14,300 | Covance, Inc. * | 735,163 | ||||
5,800 | Stericycle, Inc. * | 469,336 | ||||
|
1,961,810 |
| ||||
Health Technology - 12.3% | ||||||
17,300 | Alexion Pharmaceuticals, Inc. * | 1,393,515 | ||||
44,100 | Amylin Pharmaceuticals, Inc. * | 648,711 | ||||
16,400 | Celgene Corp. * | 969,896 | ||||
10,900 | Gen-Probe, Inc. * | 636,015 | ||||
9,300 | Haemonetics Corp. * | 587,574 | ||||
2,000 | Intuitive Surgical, Inc. * | 515,500 | ||||
15,700 | Meridian Bioscience, Inc. | 363,612 | ||||
22,900 | NuVasive, Inc. * | 587,385 | ||||
19,400 | PerkinElmer, Inc. | 500,908 | ||||
9,600 | Techne Corp. | 630,432 | ||||
33,000 | Thoratec Corp. * | 934,560 | ||||
9,300 | United Therapeutics Corp. * | 587,946 | ||||
23,300 | Volcano Corp. * | 636,323 | ||||
|
8,992,377 |
| ||||
Industrial Services - 7.3% | ||||||
17,500 | Atwood Oceanics, Inc. * | 653,975 | ||||
4,700 | CARBO Ceramics, Inc. | 486,638 | ||||
19,100 | Chicago Bridge & Iron Co. NV * | 628,390 | ||||
14,900 | Core Laboratories NV | 1,326,845 | ||||
15,600 | Lufkin Industries, Inc. | 973,284 | ||||
22,600 | McDermott International, Inc. * | 467,594 | ||||
19,300 | URS Corp. * | 803,073 | ||||
|
5,339,799 |
| ||||
Non-Energy Minerals - 1.7% | ||||||
7,150 | Allegheny Technologies, Inc. | 394,537 | ||||
11,200 | Haynes International, Inc. | 468,496 | ||||
17,600 | Stillwater Mining Co. * | 375,760 | ||||
|
1,238,793 |
| ||||
Process Industries - 2.7% | ||||||
5,200 | CF Industries Holdings, Inc. | 702,780 |
See accompanying notes to financial statements.
30 |
SIT MUTUAL FUNDS SEMI-ANNUAL REPORT |
|
Quantity | Name of Issuer | Fair Value ($) | ||||
2,800 | Dionex Corp. * | 330,428 | ||||
18,800 | Scotts Miracle-Gro Co. | 954,476 | ||||
|
1,987,684 |
| ||||
Producer Manufacturing - 10.6% | ||||||
25,500 | AMETEK, Inc. | 1,000,875 | ||||
12,500 | Anixter International, Inc. | 746,625 | ||||
6,700 | Esterline Technologies Corp. * | 459,553 | ||||
21,300 | IDEX Corp. | 833,256 | ||||
18,200 | Kaydon Corp. | 741,104 | ||||
12,200 | MTS Systems Corp. | 457,012 | ||||
20,100 | Rofin-Sinar Technologies, Inc. * | 712,344 | ||||
12,300 | Thomas & Betts Corp. * | 594,090 | ||||
27,400 | Trimble Navigation, Ltd. * | 1,094,082 | ||||
10,500 | Wabtec Corp. | 555,345 | ||||
15,400 | Woodward Governor Co. | 578,424 | ||||
|
7,772,710 |
| ||||
Retail Trade - 6.2% | ||||||
2,200 | BJ’s Wholesale Club, Inc. * | 105,380 | ||||
20,700 | Casey’s General Stores, Inc. | 879,957 | ||||
24,000 | Cato Corp. | 657,840 | ||||
23,900 | Dick’s Sporting Goods, Inc. * | 896,250 | ||||
27,700 | GameStop Corp. * | 633,776 | ||||
40,600 | Ulta Salon Cosmetics & Fragrance, Inc. * | 1,380,400 | ||||
4,553,603 | ||||||
Technology Services - 14.7% | ||||||
27,800 | ANSYS, Inc. * | 1,447,546 | ||||
27,400 | AsiaInfo-Linkage, Inc. * | 454,018 | ||||
10,500 | Citrix Systems, Inc. * | 718,305 | ||||
24,800 | Concur Technologies, Inc. * | 1,287,864 | ||||
10,800 | Dolby Laboratories, Inc. * | 720,360 |
Quantity | Name of Issuer | Fair Value ($) | ||||
41,000 | Informatica Corp. * | 1,805,230 | ||||
27,400 | Quest Software, Inc. * | 760,076 | ||||
23,500 | Solera Holdings, Inc. | 1,206,020 | ||||
22,900 | Syntel, Inc. | 1,094,391 | ||||
27,300 | Ultimate Software Group, Inc. * | 1,327,599 | ||||
|
10,821,409 |
| ||||
Transportation - 0.6% | ||||||
13,400 | HUB Group, Inc. * | 470,876 | ||||
Utilities - 1.0% | ||||||
6,600 | ITC Holdings Corp. | 409,068 | ||||
11,300 | UGI Corp. | 356,854 | ||||
765,922 | ||||||
Total Common Stocks |
|
73,015,778 |
| |||
Short-Term Securities - 0.5% | ||||||
407,006 | Wells Fargo Adv. Govt. Money Mkt., 0.02% | |||||
Total Short-Term Securities | 407,006 | |||||
Total Investments in Securities - 100.0% | 73,422,784 | |||||
Other Assets and Liabilities, net 0.0% | (9,995 | ) | ||||
Total Net Assets - 100.0% |
$ |
73,412,789 |
| |||
* | Non-income producing security. |
Numeric footnotes not disclosed are not applicable to this Schedule of Investments.
ADR — American Depositary Receipt
A summary of the inputs used to value the Fund’s net assets as of December 31, 2010 is as follows (see Note 2 - significant accounting policies in the notes to financial statements):
Investment in Securities | ||||||||||||
Level 1 Quoted Price | Level 2 observable inputs | Level 3 Significant unobservable inputs | Total | |||||||||
Common Stocks ** | $ | 73,015,778 | — | — | $ | 73,015,778 | ||||||
Short-Term Securities | 407,006 | — | — | 407,006 | ||||||||
Total: | $ | 73,422,784 | — | — | $ | 73,422,784 |
** | For equity securities categorized in a single level, refer to the Schedule of Investments for further breakdown. |
DECEMBER 31, 2010 |
|
31 |
|
|
OBJECTIVE & STRATEGY
The objective of the 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.
The Sit International Growth Fund returned +24.34% in the past six months while the MSCI EAFE Growth Index returned +25.74% for the same period. The Fund and most international equity markets experienced positive performance for the last six months of 2010, as stocks positively responded to improved economic data and better-than-expected earnings. This positive market sentiment fluctuated with news surrounding the European debt crisis and the impact on world markets along with a sustained recovery and the impact of the Chinese tightening measures. While the Fund experienced significant positive absolute performance, it did slightly underperform the Index by 140 basis points.
The Fund is strategically positioned with high-quality, attractively-valued stocks across a wide variety of sectors. The energy sector, in which the Fund is materially overweight, significantly contributed to performance while the heavily-weighted industrial sector had excellent stock selection. The Fund’s underweight in the more defensive sectors of health care and consumer staples also helped the performance on a relative basis. However, the overweight in financials, although underweight in Europe, detracted from relative performance along with the underweight in the materials sector.
On a regional basis, the positive allocation effect was more than offset by the negative stock selection and currency effect. Regionally, Europe ex-UK and Canada were the largest detracting regions given dismal stock selection albeit Europe was underweight versus the Index. The emerging markets of Latin America and Asia ex-Japan positively impacted performance due to stock selection and the overweight position. Additionally, the underweight in Japan contributed to Fund’s performance. In regards to currency, the overweight of dollar-pegged and dollar-denominated securities along with the underweight of appreciating currencies (mainland European currencies) accounted for the bulk of the negative currency impact. However, the underweight in the UK (British pound) partly mitigated the currency impact.
We are maintaining an underweight in Europe versus the Index as the debt crisis remains unresolved and austerity measures take hold. Within Europe, the Fund’s holdings have exposure to emerging markets, global exporters, and domestic consumption companies. In Japan, the Fund has been gradually increasing its export exposure in anticipation of a weak yen but is still significantly underweight
HYPOTHETICAL GROWTH OF $10,000
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 EAFE 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 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 developed market stocks within Europe, Australasia and the Far East. It is not possible to invest directly in an index.
the Index, owning a diversified portfolio of globally dominant export companies and domestic consumption plays. The Fund remains significantly overweight Asia ex-Japan versus the Index preferring material stocks, which continue to see strong demand for raw materials as Asian countries develop their infrastructure. Further, supply pressure remains given China’s decision to reduce exports of rare-earth metals, crucial to hybrid automobiles, wind turbines, and high tech electronics. In addition, the Fund has exposure to consumer-oriented stocks that will benefit from the growth of the middle class. Given the volatility and general uncertainty, the Fund continues to hold a diversified and high quality portfolio, focused on companies with dominant market share, high sales and earnings growth, operating margin leverage, free cash flow, and healthy balance sheets. We believe this focus will reward shareholders over the long term.
Roger J. Sit | Tasha M. Murdoff | Janet K. Kinzler | ||
Portfolio Managers |
32 |
SIT MUTUAL FUNDS SEMI-ANNUAL REPORT |
|
COMPARATIVE RATES OF RETURNS
as of December 31, 2010
Sit International Growth Fund | MSCI EAFE Growth Index 1 | MSCI EAFE Index 2 | ||||
Six Month | 24.34% | 25.74% | 24.18% | |||
One Year | 9.51 | 12.25 | 7.75 | |||
Five Year | 1.08 | 3.46 | 2.46 | |||
Ten Year | -1.92 | 2.69 | 3.50 | |||
Since Inception (11/1/91) | 3.96 | 3.98 | 5.49 |
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 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 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 developed market stocks within Europe, Australasia and the Far East. It is not possible to invest directly in an index.
2 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.
FUND DIVERSIFICATION - BY REGION
Sit Int’l Growth Fund | MSCI EAFE Growth Index | |||||||
Europe | 51.4% | 56.5% | ||||||
Asia | 35.5% | 42.8% | ||||||
Other | 11.1% | 0.7% | ||||||
Cash & Other Net Assets | 2.0% | — |
Based on total net assets as of December 31, 2010. Subject to change.
PORTFOLIO SUMMARY
Net Asset Value 12/31/10: | $14.38 Per Share | |
Net Asset Value: 6/30/10: | $11.67 Per Share | |
Total Net Assets: | $24.0 Million | |
Weighted Average Market Cap: | $56.5 Billion |
TOP 10 HOLDINGS
1. BHP Billiton, Ltd.
2. Rio Tinto, PLC, ADR
3. Nestle SA
4. Royal Dutch Shell, PLC, ADR
5. Total SA
6. Syngenta AG
7. Honda Motor Co., Ltd.
8. AGCO Corp.
9. Pearson, PLC, ADR
10. Telefonica SA
Based on total net assets as of December 31, 2010. Subject to change.
FUND DIVERSIFICATION
Based on total net assets as of December 31, 2010. Subject to change.
DECEMBER 31, 2010 |
|
33 |
|
|
SCHEDULE OF INVESTMENTS (Unaudited)
December 31, 2010
Sit International Growth Fund
Quantity | Name of Issuer | Fair Value ($) | ||||||
| Common Stocks - 97.0% | |||||||
| Africa/Middle East - 1.4% | |||||||
| Israel - 0.8% | |||||||
3,700 | Teva Pharmaceutical Industries, Ltd., ADR | 192,881 | ||||||
| South Africa - 0.6% | |||||||
2,600 | Sasol, Ltd., ADR | 135,330 | ||||||
| Asia - 34.5% | |||||||
| Australia - 9.8% | |||||||
10,100 | Australia & New Zealand Banking Group, Ltd. | 241,239 | ||||||
25,400 | BHP Billiton, Ltd. | 1,181,126 | ||||||
9,700 | Rio Tinto, PLC, ADR | 695,102 | ||||||
2,100 | Westpac Banking Corp., ADR | 240,366 | ||||||
|
2,357,833 |
| ||||||
| China/Hong Kong - 8.5% | |||||||
7,300 | AsiaInfo-Linkage, Inc. * | 120,961 | ||||||
16,700 | China Unicom Hong Kong, Ltd., ADR | 237,975 | ||||||
7,900 | Hong Kong Exchanges & Clearing, Ltd. | 179,114 | ||||||
16,270 | HSBC Holdings, PLC | 166,281 | ||||||
27,150 | HSBC Holdings, PLC | 277,241 | ||||||
17,000 | Hutchison Whampoa, Ltd. | 174,884 | ||||||
28,000 | Li & Fung, Ltd. | 162,457 | ||||||
1,300 | New Oriental Education & Tech. Group, ADR * | 136,799 | ||||||
4,100 | Standard Chartered, PLC | 110,682 | ||||||
13,600 | Sun Hung Kai Properties, Ltd. | 225,646 | ||||||
46,000 | Tsingtao Brewery Co., Ltd. | 240,650 | ||||||
|
2,032,690 |
| ||||||
| Japan - 14.1% | |||||||
5,300 | Aflac, Inc. | 299,079 | ||||||
5,000 | Canon, Inc. | 256,826 | ||||||
35,000 | Daicel Chemical Industries, Ltd. | 254,693 | ||||||
1,300 | Fanuc, Ltd. | 198,713 | ||||||
9,600 | Honda Motor Co., Ltd. | 378,900 | ||||||
7,000 | Kao Corp. | 188,126 | ||||||
13,000 | Kirin Holdings Co., Ltd. | 181,819 | ||||||
6,800 | Komatsu, Ltd. | 204,659 | ||||||
32,000 | Kubota Corp. | 301,476 | ||||||
24,000 | Mitsui OSK Lines, Ltd. | 162,627 | ||||||
5,100 | Oracle Corp. | 250,002 | ||||||
1,500 | SMC Corp. | 255,970 | ||||||
5,600 | Sony Corp., ADR | 199,976 | ||||||
3,400 | Yamada Denki Co., Ltd. | 231,306 | ||||||
|
3,364,172 |
| ||||||
| South Korea - 1.1% | |||||||
650 | Samsung Electronics Co., Ltd., GDR | 271,764 | ||||||
| Taiwan - 1.0% | |||||||
7,500 | HTC Corp. | 231,216 | ||||||
Quantity | Name of Issuer | Fair Value ($) | ||||
Europe - 51.4% | ||||||
Denmark - 0.5% | ||||||
2,000 | Pandora A/S * | 120,472 | ||||
France - 7.0% | ||||||
3,260 | Alstom SA | 156,256 | ||||
6,925 | AXA SA | 115,270 | ||||
3,500 | BNP Paribas | 222,903 | ||||
3,300 | Dassault Systemes SA | 249,121 | ||||
3,675 | Schlumberger, Ltd. | 306,862 | ||||
7,900 | Total SA | 420,774 | ||||
7,000 | Veolia Environnement | 204,900 | ||||
|
1,676,086 |
| ||||
Germany - 6.1% | ||||||
4,700 | Adidas AG | 305,731 | ||||
6,800 | Aixtron AG, ADR | 252,960 | ||||
1,800 | Allianz SE | 213,868 | ||||
1,575 | Muenchener Rueckver | 238,541 | ||||
515 | Rational AG | 113,828 | ||||
2,800 | Siemens AG | 346,849 | ||||
|
1,471,777 |
| ||||
Italy - 2.0% | ||||||
44,428 | Enel SPA | 222,631 | ||||
5,000 | Tenaris SA, ADR | 244,900 | ||||
|
467,531 |
| ||||
Luxembourg - 1.0% | ||||||
2,500 | Millicom International Cellular SA | 239,000 | ||||
Netherlands - 3.3% | ||||||
5,400 | ASML Holding NV | 207,036 | ||||
19,988 | ING Groep NV * | 194,998 | ||||
5,275 | Philips Electronics | 161,717 | ||||
8,925 | TNT NV | 236,029 | ||||
|
799,780 |
| ||||
Norway - 0.8% | ||||||
5,800 | Seadrill, Ltd. | 196,736 | ||||
Poland - 1.0% | ||||||
10,700 | Central European Distribution Corp. * | 245,030 | ||||
Spain - 3.5% | ||||||
11,200 | Banco Bilbao Vizcaya SA, ADR | 113,904 | ||||
14,700 | Banco Santander SA, ADR | 156,555 | ||||
2,653 | Inditex SA | 198,586 | ||||
16,075 | Telefonica SA | 366,993 | ||||
|
836,038 |
| ||||
Switzerland - 11.6% | ||||||
11,500 | ABB, Ltd., ADR * | 258,175 | ||||
3,100 | Credit Suisse Group AG | 124,852 | ||||
1,800 | Kuehne & Nagel International | 250,432 | ||||
10,200 | Nestle SA | 597,553 | ||||
3,959 | Novartis AG | 233,049 |
See accompanying notes to financial statements.
34 |
SIT MUTUAL FUNDS SEMI-ANNUAL REPORT |
|
Quantity | Name of Issuer | Fair Value ($) | ||||
1,980 | Roche Holding AG | 290,254 | ||||
145 | SGS SA | 243,364 | ||||
825 | Sulzer AG | 125,863 | ||||
1,300 | Syngenta AG | 381,074 | ||||
1,978 | Synthes, Inc. | 266,985 | ||||
|
2,771,601 |
| ||||
United Kingdom - 14.6% | ||||||
5,000 | Anglo American, PLC | 261,563 | ||||
5,100 | Autonomy Corp., PLC * | 119,983 | ||||
8,025 | British American Tobacco, PLC | 308,689 | ||||
11,000 | Burberry Group, PLC | 193,324 | ||||
39,300 | Carphone Warehouse Group, PLC * | 242,178 | ||||
35,800 | Centrica, PLC | 185,490 | ||||
4,600 | Diageo, PLC, ADR | 341,918 | ||||
6,000 | GlaxoSmithKline, PLC, ADR | 235,320 | ||||
23,400 | Pearson, PLC, ADR | 371,826 | ||||
6,575 | Reckitt Benckiser Group, PLC | 361,722 | ||||
7,600 | Royal Dutch Shell, PLC, ADR | 506,692 | ||||
35,000 | Tesco, PLC | 232,086 | ||||
54,000 | Vodafone Group, PLC | 141,757 | ||||
|
3,502,548 |
| ||||
Latin America - 3.8% | ||||||
Brazil - 2.3% | ||||||
7,400 | AGCO Corp. * | 374,884 | ||||
4,500 | Petrobras, ADR | 170,280 | ||||
|
545,164 |
| ||||
Chile - 0.7% | ||||||
1,925 | Banco Santander Chile, ADR | 179,930 | ||||
Mexico - 0.8% | ||||||
63,020 | Wal-Mart de Mexico | 180,079 | ||||
North America - 5.9% | ||||||
Bermuda - 1.0% | ||||||
3,000 | PartnerRe, Ltd. | 241,050 | ||||
Canada - 4.4% | ||||||
3,600 | Canadian National Railway Co. | 239,292 | ||||
1,650 | Research In Motion, Ltd. * | 95,915 | ||||
7,300 | Rogers Communications, Inc. | 252,799 | ||||
5,725 | Royal Bank of Canada | 299,761 | ||||
4,200 | Suncor Energy, Inc. | 160,818 | ||||
|
1,048,585 |
| ||||
United States - 0.5% | ||||||
1,100 | Lululemon Athletica, Inc. * | 75,262 | ||||
1,300 | Veeco Instruments, Inc. * | 55,848 | ||||
|
131,110 |
| ||||
Total Common Stocks | 23,238,403 | |||||
Quantity | Name of Issuer | Fair Value ($) | ||||
Exchange-Traded Funds - 1.0% | ||||||
30,300 | iShares MSCI India *, ** | |||||
Total Exchange-Traded Funds | 246,642 | |||||
Short-Term Securities - 0.1% | ||||||
11,865 | Wells Fargo Adv. Govt. Money Mkt., 0.02% | |||||
Total Short-Term Securities | 11,865 | |||||
Total Investments in Securities - 98.1% | 23,496,910 | |||||
Other Assets and Liabilities, net - 1.9% | 456,638 | |||||
Total Net Assets - 100.0% | $ | 23,953,548 | ||||
* | Non-income producing security. |
** | The Fund’s total investment in India including the iShares comprises 1.0% of the Fund’s net assets. |
Numeric footnotes not disclosed are not applicable to this Schedule of Investments.
ADR — American Depositary Receipt
GDR — Global Depositary Receipt
PLC — Public Limited Company
DECEMBER 31, 2010 |
|
35 |
|
|
SCHEDULE OF INVESTMENTS (Unaudited)
December 31, 2010
Sit International Growth Fund (Continued)
A summary of the inputs used to value the Fund’s net assets as of December 31, 2010 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 | $935,468 | $1,422,365 | — | $2,357,833 | ||||||||||||||
Bermuda | 241,050 | — | — | 241,050 | ||||||||||||||
Brazil | 545,164 | — | — | 545,164 | ||||||||||||||
Canada | 1,048,585 | — | — | 1,048,585 | ||||||||||||||
Chile | 179,930 | — | — | 179,930 | ||||||||||||||
China/Hong Kong | 495,735 | 1,536,955 | — | 2,032,690 | ||||||||||||||
Denmark | 120,472 | — | — | 120,472 | ||||||||||||||
France | 306,862 | 1,369,224 | — | 1,676,086 | ||||||||||||||
Germany | 366,788 | 1,104,989 | — | 1,471,777 | ||||||||||||||
Israel | 192,881 | — | — | 192,881 | ||||||||||||||
Italy | 244,900 | 222,631 | — | 467,531 | ||||||||||||||
Japan | 499,055 | 2,865,117 | — | 3,364,172 | ||||||||||||||
Luxembourg | 239,000 | — | — | 239,000 | ||||||||||||||
Mexico | 180,079 | — | — | 180,079 | ||||||||||||||
Netherlands | 207,036 | 592,744 | — | 799,780 | ||||||||||||||
Norway | 196,736 | — | — | 196,736 | ||||||||||||||
Poland | 245,030 | — | — | 245,030 | ||||||||||||||
South Africa | 135,330 | — | — | 135,330 | ||||||||||||||
South Korea | 271,764 | — | — | 271,764 | ||||||||||||||
Spain | 270,459 | 565,579 | — | 836,038 | ||||||||||||||
Switzerland | 258,175 | 2,513,426 | — | 2,771,601 | ||||||||||||||
Taiwan | — | 231,216 | — | 231,216 | ||||||||||||||
United Kingdom | 1,697,934 | 1,804,614 | — | 3,502,548 | ||||||||||||||
United States | 131,110 | — | — | 131,110 | ||||||||||||||
9,009,543 | 14,228,860 | — | 23,238,403 | |||||||||||||||
Exchange-Traded Funds | 246,642 | — | — | 246,642 | ||||||||||||||
Short-Term Securities | 11,865 | — | — | 11,865 | ||||||||||||||
Total: | $9,268,050 | $14,228,860 | — | $23,496,910 | ||||||||||||||
* | Level 2 equity securities are primarily foreign securities where the closing price has been adjusted by application of a systematic process for events occurring after the close of the foreign exchange. |
See accompanying notes to financial statements.
36 |
SIT MUTUAL FUNDS SEMI-ANNUAL REPORT |
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DECEMBER 31, 2010 |
|
37 |
|
Sit Developing Markets Growth Fund
|
OBJECTIVE & STRATEGY
The Fund seeks to 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 returned +28.39% over the last six months, outperforming the MSCI Emerging Markets return of +25.43%. This outperformance was driven by stock selection on both a sector and regional basis. Sector wise, material, utility, and technology stocks drove performance higher. On a regional basis, the Latin American and Asian regions led.
Emerging market equities were led by consumer discretionary, industrial, and material sectors, all of which appreciated in excess of 30% for the last six months of 2010. The defensive utility sector lagged rising only 10% for the same time period. The Fund remains heavily exposed to the materials and consumer discretionary sectors along with the technology, financial, and energy sectors. We are positive on the consumer theme in emerging Asia, given a young population, an increasing middle class, and high savings rates. China’s shift to a consumption/consumer-driven economy away from an export-driven economy supports our investment thesis. Within technology, the Fund has meaningful exposure to the emerging and improving technology trends in the LED and smart phone arena. Although the financial sector is a large absolute weight, the Fund remains underweight compared to the Index, particularly in regards to the Chinese banks. Although the asset quality concerns moderated in the second half of 2010, we prefer to wait for more clarity on the regulatory and policy tightening front. We like material-related companies, which should continue to see strong demand for raw materials as Asian countries develop their infrastructure. Further, supply pressure remains, given China’s decision to reduce exports of rare-earth metals, which are crucial for hybrid automobiles, wind turbines, and high tech electronics.
Relative to other global stocks, emerging market stocks continued their outperformance in the second half of 2010, as investors became less risk-averse amid signs of improvement in the global economy remained. While valuations are not as compelling as earlier this year, revenue and earnings growth should continue to support these somewhat premium valuations. Investors will continue to look for
HYPOTHETICAL GROWTH OF $10,000
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 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.
growth throughout the world and invest in companies in the emerging markets, particularly Asia ex-Japan, as growth is higher in this region. As noted earlier, the Fund offers a diversified portfolio across sectors; however, on a regional basis, is much more heavily weighted in Asia, followed by Latin America. The research effort continues to be focused on companies with strong, experienced management teams, sound balance sheets, cash flow generation, and sustainable earnings and revenue growth.
Roger J. Sit
Raymond E. Sit
Portfolio Managers
38 |
SIT MUTUAL FUNDS SEMI-ANNUAL REPORT |
|
COMPARATIVE RATES OF RETURN
as of December 31, 2010
Sit Developing Markets Growth Fund | MSCI Emerging Markets Index 1 | MSCI Emerging Markets Growth Index 2 | ||||
Six Month | 28.39% | 25.43% | 26.72% | |||
One Year | 14.53 | 16.36 | 17.22 | |||
Five Year | 10.54 | 10.26 | 8.97 | |||
Ten Year | 10.43 | 13.18 | 11.28 | |||
Since Inception | 6.18 | 5.45 | n/a | |||
(7/1/94) |
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 | 56.5% | 57.8% | ||
Latin America | 27.1% | 23.6% | ||
Europe | 8.4% | 10.2% | ||
Africa/Middle East | 7.5% | 8.4% | ||
Cash & Other Net Assets | 0.5% | — |
Based on total net assets as of December 31, 2010. Subject to change.
PORTFOLIO SUMMARY
Net Asset Value 12/31/10: | $23.69 Per Share | |
Net Asset Value 6/30/10: | $19.00 Per Share | |
Total Net Assets: | $16.5 Million | |
Weighted Average Market Cap: | $44.0 Billion |
TOP 10 HOLDINGS
1. Vale SA, ADR
2. BHP Bilton, Ltd., ADR
3. Petrobas
4. Rio Tinto, Ltd.
5. Samsung Electronics Co., Ltd.
6. CNOOC, Ltd., ADR
7. Banco Bradesco SA
8. Southern Copper Corp.
9. America Movil SAB de CV, ADR
10. AGCO Corp.
Based on total net assets as of December 31, 2010. Subject to change.
FUND DIVERSIFICATION
Based on total net assets as of December 31, 2010. Subject to change.
DECEMBER 31, 2010 |
|
39 |
|
|
SCHEDULE OF INVESTMENTS (Unaudited)
December 31, 2010
Sit Developing Markets Growth Fund
Quantity | Name of Issuer | Fair Value ($) | ||||
Common Stocks - 98.4% | ||||||
Africa/Middle East - 7.5% | ||||||
Israel - 1.6% | ||||||
4,400 | Amdocs, Ltd. * | 120,868 | ||||
4,100 | NICE Systems, Ltd., ADR * | 143,090 | ||||
|
263,958 |
| ||||
South Africa - 5.9% | ||||||
9,579 | Bidvest Group, Ltd. | 227,969 | ||||
11,500 | MTN Group, Ltd. | 234,701 | ||||
4,600 | Naspers, Ltd. | 271,204 | ||||
4,600 | Sasol, Ltd., ADR | 239,430 | ||||
|
973,304 |
| ||||
Asia - 55.4% | ||||||
Australia - 7.1% | ||||||
6,500 | BHP Billiton, Ltd., ADR | 603,980 | ||||
6,405 | Rio Tinto, Ltd. | 560,866 | ||||
|
1,164,846 |
| ||||
China/Hong Kong - 21.6% | ||||||
7,700 | AsiaInfo-Linkage, Inc. * | 127,589 | ||||
4,800 | China Life Insurance Co., Ltd., ADR | 293,616 | ||||
78,000 | China Oilfield Services, Ltd. | 168,888 | ||||
49,500 | China Shenhua Energy Co., Ltd. | 207,451 | ||||
13,900 | China Unicom Hong Kong, Ltd., ADR | 198,075 | ||||
1,900 | CNOOC, Ltd., ADR | 452,903 | ||||
82,000 | Daphne International Holdings, Ltd. | 76,783 | ||||
52,000 | ENN Energy Holdings, Ltd. | 155,952 | ||||
19,500 | Hengan International Group Co., Ltd. | 168,128 | ||||
900 | Home Inns & Hotels Management, Inc., ADR * | 36,864 | ||||
5,600 | Hong Kong Exchanges & Clearing, Ltd. | 126,967 | ||||
1,600 | HSBC Holdings, PLC, ADR | 81,664 | ||||
81,000 | Huabao International Holdings, Ltd. | 131,015 | ||||
34,000 | Li & Fung, Ltd. | 197,269 | ||||
2,700 | New Oriental Education & Tech. Group, ADR * | 284,121 | ||||
102,000 | PetroChina Co., Ltd. | 133,969 | ||||
31,500 | Ports Design, Ltd. | 86,915 | ||||
10,000 | Sun Hung Kai Properties, Ltd. | 165,916 | ||||
4,200 | Tencent Holdings, Ltd. | 91,180 | ||||
158,000 | Travelsky Technology, Ltd. | 164,853 | ||||
40,000 | Tsingtao Brewery Co., Ltd. | 209,261 | ||||
|
3,559,379 |
| ||||
India ** - 4.2% | ||||||
5,900 | ICICI Bank, Ltd., ADR | 298,776 | ||||
1,900 | Infosys Technologies, Ltd., ADR | 144,552 | ||||
5,400 | Reliance Industries, Ltd., GDR 4 | 255,707 | ||||
|
699,035 |
| ||||
Quantity | Name of Issuer | Fair Value ($) | ||||
Indonesia - 2.0% | ||||||
41,500 | Astra International Tbk PT | 250,802 | ||||
2,400 | PT Telekom., ADR | 85,560 | ||||
|
336,362 |
| ||||
Phillipines - 1.0% | ||||||
386,000 | Manila Water Co., Inc. | 168,806 | ||||
Singapore - 0.5% | ||||||
7,000 | DBS Group Holdings, Ltd. | 78,131 | ||||
South Korea - 10.5% | ||||||
14,375 | Cheil Worldwide, Inc. | 175,176 | ||||
9,007 | Industrial Bank of Korea, GDR 4 | 148,807 | ||||
2,370 | KB Financial Group, Inc. | 124,649 | ||||
2,375 | KB Financial Group, Inc., ADR | 125,614 | ||||
1,900 | POSCO, ADR | 204,611 | ||||
570 | Samsung Electronics Co., Ltd. | 476,028 | ||||
6,800 | Shinhan Financial Group Co., Ltd. * | 316,193 | ||||
300 | Shinsegae Co., Ltd. * | 162,305 | ||||
|
1,733,383 |
| ||||
Taiwan - 6.9% | ||||||
54,954 | Cathay Financial Holding Co., Ltd. | 97,450 | ||||
32,209 | Hon Hai Precision Industry Co., Ltd., GDR | 260,129 | ||||
8,523 | HTC Corp. | 262,754 | ||||
10,019 | MediaTek, Inc. | 143,404 | ||||
112,482 | Taiwan Semiconductor Co. | 273,815 | ||||
10,478 | Young Fast Optoelectronics Co., Ltd. | 99,969 | ||||
|
1,137,521 |
| ||||
Thailand - 1.6% | ||||||
51,300 | Bangkok Bank PCL | 259,500 | ||||
Europe - 8.4% | ||||||
Austria - 0.8% | ||||||
2,290 | Raiffeisen International Bank Holding AG | 126,145 | ||||
Luxembourg - 1.2% | ||||||
2,100 | Millicom International Cellular SA | 200,760 | ||||
Poland - 1.4% | ||||||
10,000 | Central European Distribution Corp. * | 229,000 | ||||
Russia - 4.1% | ||||||
10,100 | Gazprom OAO, ADR | 256,944 | ||||
11,450 | Mobile Telesystems, ADR | 238,962 | ||||
3,900 | X5 Retail Group NV, GDR * | 180,644 | ||||
|
676,550 |
| ||||
United Kingdom - 0.9% | ||||||
2,785 | Anglo American, PLC | 145,690 | ||||
Latin America - 27.1% | ||||||
Brazil *** - 18.6% | ||||||
9,400 | AES Tiete SA | 135,904 | ||||
6,300 | AGCO Corp. * | 319,158 | ||||
21,477 | Banco Bradesco SA | 422,424 |
See accompanying notes to financial statements.
40 |
SIT MUTUAL FUNDS SEMI-ANNUAL REPORT |
|
Quantity | Name of Issuer | Fair Value ($) | ||||
4,200 | Cia Brasileira de Distribuicao Grupo Pao de Acucar, ADR | 176,316 | ||||
9,700 | Cia de Bebidas das Americas, ADR | 300,991 | ||||
3,883 | Embraer SA, ADR | 114,160 | ||||
34,680 | Petrobras | 570,131 | ||||
2,500 | Petrobras, ADR | 94,600 | ||||
20,200 | Vale SA, ADR | 698,314 | ||||
7,000 | Vivo Participacoes SA, ADR | 228,130 | ||||
|
3,060,128 |
| ||||
Chile - 1.3% | ||||||
2,300 | Banco Santander Chile, ADR | 214,981 | ||||
Mexico - 4.8% | ||||||
5,700 | America Movil SAB de CV, ADR | 326,838 | ||||
3,800 | Grupo Televisa SA, ADR * | 98,534 | ||||
3,200 | Homex, ADR * | 108,192 | ||||
91,080 | Wal-Mart de Mexico | 260,260 | ||||
|
793,824 |
| ||||
Peru - 2.4% | ||||||
8,200 | Southern Copper Corp. | 399,668 | ||||
Total Common Stocks | 16,220,971 | |||||
Exchange-Traded Funds - 1.1% | ||||||
22,000 | iShares MSCI India *, ** | |||||
Total Exchange-Traded Funds | 179,080 | |||||
Quantity | Name of Issuer | Fair Value ($) | ||||
Rights - 0.0% | ||||||
356 | Banco Bradesco SA Brazil, Price 24BRL, Expires 01/21/11*, *** | |||||
Total Rights | 1,842 | |||||
Short-Term Securities - 2.0% | ||||||
340,778 | Wells Fargo Adv. Govt. Money Mkt., 0.02% | |||||
Total Short-Term Securities | 340,778 | |||||
Total Investments in Securities - 101.5% | 16,742,671 | |||||
Other Assets and Liabilities, net - (1.5%) | (252,404 | ) | ||||
Total Net Assets - 100.0% |
$ |
16,490,267 |
| |||
* | Non-income producing security. |
** | The Fund’s total investment in India including the iShares comprises 5.3% of the Fund’s net assets. |
*** | The Fund’s total investment in Brazil including the Rights comprises 18.6% of the Fund’s net assets. |
4 | 144A Restricted Security. The total value of such securities as of December 31, 2010 was $404,514 and represented 2.5% of net assets. These securities have been determined to be liquid by the Adviser in accordance with guidelines established by the Board of Directors. |
Numeric footnotes not disclosed are not applicable to this Schedule of Investments.
ADR — American Depositary Receipt
PLC — Public Limited Company
DECEMBER 31, 2010 |
|
41 |
|
|
SCHEDULE OF INVESTMENTS (Unaudited)
December 31, 2010
Sit Developing Markets Growth Fund (Continued)
A summary of the inputs used to value the Fund’s net assets as of December 31, 2010 is as follows (see Note 2 - significant accounting policies in the notes to financial statements):
Investment in Securities | ||||||||||||||
Level 1 Price | Level 2* Other significant observable inputs | Level 3 Significant unobservable inputs | Total | |||||||||||
Common Stocks | ||||||||||||||
Australia | $603,980 | $560,866 | — | $1,164,846 | ||||||||||
Austria | — | 126,145 | — | 126,145 | ||||||||||
Brazil | 3,060,128 | — | — | 3,060,128 | ||||||||||
Chile | 214,981 | — | — | 214,981 | ||||||||||
China/Hong Kong | 1,474,832 | 2,084,547 | — | 3,559,379 | ||||||||||
India | 699,035 | — | — | 699,035 | ||||||||||
Indonesia | 85,560 | 250,802 | — | 336,362 | ||||||||||
Israel | 263,958 | — | — | 263,958 | ||||||||||
Luxembourg | 200,760 | — | — | 200,760 | ||||||||||
Mexico | 793,824 | — | — | 793,824 | ||||||||||
Peru | 399,668 | — | — | 399,668 | ||||||||||
Phillipines | — | 168,806 | — | 168,806 | ||||||||||
Poland | 229,000 | — | — | 229,000 | ||||||||||
Russia | 495,906 | 180,644 | — | 676,550 | ||||||||||
Singapore | — | 78,131 | — | 78,131 | ||||||||||
South Africa | 239,430 | 733,874 | — | 973,304 | ||||||||||
South Korea | 641,337 | 1,092,046 | — | 1,733,383 | ||||||||||
Taiwan | — | 1,137,521 | — | 1,137,521 | ||||||||||
Thailand | — | 259,500 | — | 259,500 | ||||||||||
United Kingdom | — | 145,690 | — | 145,690 | ||||||||||
9,402,399 | 6,818,572 | — | 16,220,971 | |||||||||||
Exchange-Traded Funds | 179,080 | — | — | 179,080 | ||||||||||
Rights | 1,842 | — | — | 1,842 | ||||||||||
Short-Term Securities | 340,778 | — | — | 340,778 | ||||||||||
Total: | $9,924,099 | $6,818,572 | — | $16,742,671 |
* | Level 2 equity securities are primarily foreign securities where the closing price has been adjusted by application of a systematic process for events occurring after the close of the foreign exchange. |
See accompanying notes to financial statements.
42 |
SIT MUTUAL FUNDS SEMI-ANNUAL REPORT |
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DECEMBER 31, 2010 |
|
43 |
|
|
STATEMENTS OF ASSETS AND LIABILITIES (Unaudited)
December 31, 2010
Sit Balanced Fund | Sit Dividend Growth Fund | Sit Global Dividend Growth Fund | ||||||||||
ASSETS | ||||||||||||
Investments in securities, at identified cost | $9,621,278 | $171,736,088 | $4,046,907 | |||||||||
Investments in securities, at fair value - see accompanying schedule for detail | $11,277,188 | $193,202,913 | $5,083,830 | |||||||||
Cash in bank on demand deposit | — | — | — | |||||||||
Accrued interest and dividends receivable | 39,644 | 233,624 | 7,073 | |||||||||
Receivable for investment securities sold | 459,705 | 17,480 | — | |||||||||
Other receivables (note 5) | — | 2,763 | 161 | |||||||||
Receivable for Fund shares sold | 676 | 1,111,126 | 3,998 | |||||||||
Total assets | 11,777,213 | 194,567,906 | 5,095,062 | |||||||||
LIABILITIES | ||||||||||||
Payable for investment securities purchased | 26,424 | 7,592,188 | 142,333 | |||||||||
Payable for Fund shares redeemed | 517,419 | 98,325 | — | |||||||||
Other payables | 6,144 | — | — | |||||||||
Accrued investment management fees and advisory fees | 9,998 | 139,079 | 4,834 | |||||||||
Accrued 12b-1 fees (Class S) | — | 7,499 | 390 | |||||||||
Total liabilities | 559,985 | 7,837,091 | 147,557 | |||||||||
Net assets applicable to outstanding capital stock | $11,217,228 | $186,730,815 | $4,947,505 | |||||||||
Net assets consist of: | ||||||||||||
Capital (par value and paid-in surplus) | $14,245,941 | $168,841,164 | $3,915,267 | |||||||||
Undistributed (distributions in excess of) net investment income | (3,137 | ) | 23,299 | 766 | ||||||||
Accumulated net realized gain (loss) from security transactions and foreign currency transactions | (4,681,486 | ) | (3,600,473 | ) | (5,565 | ) | ||||||
Unrealized appreciation (depreciation) on investments and foreign currency transactions | 1,655,910 | 21,466,825 | 1,037,037 | |||||||||
$11,217,228 | $186,730,815 | $4,947,505 | ||||||||||
Outstanding shares: | ||||||||||||
Common Shares (Class I) * | 703,081 | 11,503,308 | 302,343 | |||||||||
Common Shares (Class S) * | — | 2,796,412 | 90,583 | |||||||||
Net assets applicable to outstanding shares: | ||||||||||||
Common Shares (Class I) * | $11,217,228 | $150,275,954 | $3,807,234 | |||||||||
Common Shares (Class S) * | — | 36,454,861 | 1,140,271 | |||||||||
Net asset value per share of outstanding capital stock: | ||||||||||||
Common Shares (Class I) * | $15.95 | $13.06 | $12.59 | |||||||||
Common Shares (Class S) * | — | $13.04 | $12.59 | |||||||||
* | Dividend Growth and Global Dividend Growth Funds offer multiple share classes (I and S). All other Funds offer a single share class. |
See accompanying notes to financial statements.
44 |
SIT MUTUAL FUNDS SEMI-ANNUAL REPORT |
|
Sit Large Cap Growth Fund | Sit Mid Cap Growth Fund | Sit Small Cap Growth Fund | Sit International Growth Fund | Sit Developing Markets Growth Fund | ||||||||||||||
$344,688,668 | $120,574,042 | $52,266,750 | $17,812,252 | $9,841,658 | ||||||||||||||
$429,015,920 | $163,344,993 | $73,422,784 | $23,496,910 | $16,742,671 | ||||||||||||||
199,759 | — | — | — | — | ||||||||||||||
335,763 | 92,447 | 21,440 | 113,778 | 13,916 | ||||||||||||||
— | — | 147,618 | 61,914 | 285,822 | ||||||||||||||
20,868 | 2,188 | 65,796 | 343,245 | 6,965 | ||||||||||||||
148,182 | 13,828 | 10,164 | 2,112 | 11,984 | ||||||||||||||
429,720,492 | 163,453,456 | 73,667,802 | 24,017,959 | 17,061,358 | ||||||||||||||
1,642,832 | — | 109,157 | — | 86,528 | ||||||||||||||
890,433 | 1,180,592 | 52,545 | 605 | 455,660 | ||||||||||||||
— | 151,416 | — | 28,220 | — | ||||||||||||||
376,061 | 166,298 | 93,311 | 35,586 | 28,903 | ||||||||||||||
— | — | — | — | — | ||||||||||||||
2,909,326 | 1,498,306 | 255,013 | 64,411 | 571,091 | ||||||||||||||
$426,811,166 | $161,955,150 | $73,412,789 | $23,953,548 | $16,490,267 | ||||||||||||||
$390,661,608 | $125,519,453 | $86,593,255 | $42,455,946 | $9,132,931 | ||||||||||||||
157,024 | (230,573 | ) | (242,422 | ) | 14,890 | (18,508 | ) | |||||||||||
(48,334,718) | (6,104,681 | ) | (34,094,078 | ) | (24,213,362 | ) | 474,728 | |||||||||||
84,327,252 | 42,770,951 | 21,156,034 | 5,696,074 | 6,901,116 | ||||||||||||||
$426,811,166 | $161,955,150 | $73,412,789 | $23,953,548 | $16,490,267 | ||||||||||||||
10,102,441 | 10,786,982 | 1,844,688 | 1,665,757 | 696,096 | ||||||||||||||
— | — | — | — | — | ||||||||||||||
$426,811,166 | $161,955,150 | $73,412,789 | $23,953,548 | $16,490,267 | ||||||||||||||
— | — | — | — | — | ||||||||||||||
$42.25 | $15.01 | $39.80 | $14.38 | $23.69 | ||||||||||||||
— | — | — | — | — | ||||||||||||||
DECEMBER 31, 2010 |
|
45 |
|
|
STATEMENTS OF OPERATIONS (Unaudited)
Six Months Ended December 31, 2010
Sit Balanced Fund | Sit Dividend Growth Fund | Sit Global Dividend Growth Fund | ||||||||||
Investment income: | ||||||||||||
Income: | ||||||||||||
Dividends* | $78,258 | $1,525,339 | $55,103 | |||||||||
Interest | 89,248 | 853 | 17 | |||||||||
Total income | 167,506 | 1,526,192 | 55,120 | |||||||||
Expenses (note 4): | ||||||||||||
Investment management and advisory service fee | 56,556 | 566,292 | 27,277 | |||||||||
12b-1 fees (Class S) | — | 37,545 | 1,280 | |||||||||
Total expenses |
|
56,556 |
| 603,837 | 28,557 | |||||||
Less fees and expenses absorbed by investment adviser | — | — | — | |||||||||
Total net expenses |
|
56,556 |
| 603,837 | 28,557 | |||||||
Net investment income (loss) | 110,950 | 922,355 | 26,563 | |||||||||
Realized and unrealized gain (loss): | ||||||||||||
Net realized gain (loss) on investments | 150,593 | 84,432 | 30,009 | |||||||||
Net realized gain (loss) on foreign currency transactions | — | — | 47 | |||||||||
Net change in unrealized appreciation (depreciation) on investments and foreign currency transactions | 1,227,440 | 21,993,054 | 836,979 | |||||||||
Net gain (loss) on investments | 1,378,033 | 22,077,486 | 867,035 | |||||||||
Net increase (decrease) in net assets resulting from operations | $1,488,983 | $22,999,841 | $893,598 | |||||||||
* Foreign taxes withheld on dividends received | $317 | $14,487 | $1,126 |
See accompanying notes to financial statements.
46 |
SIT MUTUAL FUNDS SEMI-ANNUAL REPORT |
|
Sit Large Cap Growth Fund | Sit Mid Cap Growth Fund | Sit Small Cap Growth Fund | Sit International Growth Fund | Sit Developing Markets Growth Fund | ||||||||||||||
$3,364,540 | $619,650 | $257,612 | $219,673 | $146,613 | ||||||||||||||
336 | 614 | 275 | 54 | 46 | ||||||||||||||
3,364,876 | 620,264 | 257,887 | 219,727 | 146,659 | ||||||||||||||
2,138,109 | 924,823 | 500,309 | 203,951 | 165,167 | ||||||||||||||
— | — | — | — | — | ||||||||||||||
2,138,109 | 924,823 | 500,309 | 203,951 | 165,167 | ||||||||||||||
— | (73,986 | ) | — | (27,041 | ) | — | ||||||||||||
2,138,109 | 850,837 | 500,309 | 176,910 | 165,167 | ||||||||||||||
1,226,767 | (230,573 | ) | (242,422 | ) | 42,817 | (18,508 | ) | |||||||||||
(1,963,390) | 7,256,272 | 2,813,792 | 425,500 | 614,655 | ||||||||||||||
— | — | — | 978 | 658 | ||||||||||||||
85,624,254 | 31,037,913 | 13,352,665 | 4,373,274 | 3,343,784 | ||||||||||||||
83,660,864 | 38,294,185 | 16,166,457 | 4,799,752 | 3,959,097 | ||||||||||||||
$84,887,631 | $ | 38,063,612 | $ | 15,924,035 | $ | 4,842,569 | $ | 3,940,589 | ||||||||||
$13,516 | — | $ | 2,136 | $ | 14,529 | $ | 19,028 |
DECEMBER 31, 2010 |
|
47 |
|
|
STATEMENTS OF CHANGES IN NET ASSETS
Sit Balanced Fund | Sit Dividend Growth Fund | |||||||||||||||
Six Months Ended December 31, 2010 (Unaudited) | Year Ended June 30, 2010 | Six Months Ended December 31, 2010 (Unaudited) | Year Ended June 30, 2010 | |||||||||||||
Operations: | ||||||||||||||||
Net investment income (loss) | $110,950 | $276,203 | $922,355 | $953,362 | ||||||||||||
Net realized gain (loss) on investments and foreign currency transactions | 150,593 | (434,743 | ) | 84,432 | 1,675,499 | |||||||||||
Net change in unrealized appreciation (depreciation) on investments and foreign currency transactions | 1,227,440 | 1,476,636 | 21,993,054 | 2,901,091 | ||||||||||||
Net increase (decrease) in net assets resulting from operations | 1,488,983 | 1,318,096 | 22,999,841 | 5,529,952 | ||||||||||||
Distributions from: | ||||||||||||||||
Net investment income | ||||||||||||||||
Common shares (Class I) | (169,000 | ) | (293,000 | ) | (908,483 | ) | (548,746 | ) | ||||||||
Common shares (Class S) | — | — | (283,517 | ) | (330,254 | ) | ||||||||||
Net realized gains on investments | ||||||||||||||||
Common shares (Class I) | — | — | — | — | ||||||||||||
Common shares (Class S) | — | — | — | — | ||||||||||||
Total distributions | (169,000 | ) | (293,000 | ) | (1,192,000 | ) | (879,000 | ) | ||||||||
Capital share transactions: | ||||||||||||||||
Proceeds from shares sold | ||||||||||||||||
Common shares (Class I) | 198,870 | 714,605 | 105,674,689 | 11,452,027 | ||||||||||||
Common shares (Class S) | — | — | 8,086,965 | 16,562,200 | ||||||||||||
Capital share proceeds (note 5) | — | — | — | — | ||||||||||||
Reinvested distributions | ||||||||||||||||
Common shares (Class I) | 167,602 | 291,180 | 501,051 | 522,134 | ||||||||||||
Common shares (Class S) | — | — | 283,089 | 328,928 | ||||||||||||
Payments for shares redeemed | ||||||||||||||||
Common shares (Class I) | (1,019,053 | ) | (1,829,957 | ) | (11,089,067 | ) | (3,637,969 | ) | ||||||||
Common shares (Class S) | — | — | (2,857,722 | ) | (9,589,022 | ) | ||||||||||
Increase (decrease) in net assets from capital transactions. | (652,581 | ) | (824,172 | ) | 100,599,005 | 15,638,298 | ||||||||||
Total increase (decrease) in net assets | 667,402 | 200,924 | 122,406,846 | 20,289,250 | ||||||||||||
Net assets: | ||||||||||||||||
Beginning of period | 10,549,826 | 10,348,902 | 64,323,969 | 44,034,719 | ||||||||||||
End of period * | $11,217,228 | $10,549,826 | $186,730,815 | $64,323,969 | ||||||||||||
Capital transactions in shares: | ||||||||||||||||
Sold | ||||||||||||||||
Common shares (Class I) | 13,117 | 49,409 | 8,716,997 | 1,042,818 | ||||||||||||
Common shares (Class S) | — | — | 665,596 | 1,530,590 | ||||||||||||
Reinvested distributions | ||||||||||||||||
Common shares (Class I) | 11,058 | 20,558 | 41,627 | 48,739 | ||||||||||||
Common shares (Class S) | — | — | 23,613 | 30,536 | ||||||||||||
Redeemed | ||||||||||||||||
Common shares (Class I) | (65,268 | ) | (124,370 | ) | (962,685 | ) | (332,759 | ) | ||||||||
Common shares (Class S) | — | — | (239,810 | ) | (856,775 | ) | ||||||||||
Net increase (decrease) | (41,093 | ) | (54,403 | ) | 8,245,338 | 1,463,149 | ||||||||||
* includes undistributed net investment income (loss) | ($3,137 | ) | $54,913 | $23,299 | $292,944 |
See accompanying notes to financial statements.
48 |
DECEMBER 31, 2010 |
|
Sit Global Dividend Growth Fund | Sit Large Cap Growth Fund | Sit Mid Cap Growth Fund | ||||||||||||||||||||
Six Months Ended December 31, 2010 (Unaudited) | Year Ended June 30, 2010 | Six Months Ended December 31, 2010 (Unaudited) | Year Ended June 30, 2010 | Six Months Ended December 31, 2010 (Unaudited) | Year Ended June 30, 2010 | |||||||||||||||||
$26,563 | $53,143 | $1,226,767 | $2,471,926 | ($230,573 | ) | ($590,430 | ) | |||||||||||||||
|
30,056 |
| 52,534 | (1,963,390 | ) | (6,406,205 | ) | 7,256,272 | 5,885,385 | |||||||||||||
| 836,979 |
| 126,766 | 85,624,254 | 28,265,518 | 31,037,913 | 16,424,075 | |||||||||||||||
|
893,598 |
| 232,443 | 84,887,631 | 24,331,239 | 38,063,612 | 21,719,030 | |||||||||||||||
(39,530 | ) | (35,594 | ) | (2,300,000 | ) | (2,475,000 | ) | — | — | |||||||||||||
(10,470 | ) | (9,406 | ) | — | — | — | — | |||||||||||||||
(35,832 | ) | — | — | — | — | — | ||||||||||||||||
(11,278 | ) | — | — | — | — | — | ||||||||||||||||
(97,110 | ) | (45,000 | ) | (2,300,000 | ) | (2,475,000 | ) | — | — | |||||||||||||
388,617 | 800,548 | 18,829,732 | 168,575,536 | 2,866,669 | 3,455,887 | |||||||||||||||||
47,167 | 87,287 | — | — | — | — | |||||||||||||||||
— | — | — | — | 2,188 | — | |||||||||||||||||
75,362 | 38,856 | 2,229,694 | 2,388,780 | — | — | |||||||||||||||||
21,748 | 9,406 | — | — | — | — | |||||||||||||||||
(95,737 | ) | (438,850 | ) | (84,195,379 | ) | (109,531,746 | ) | (9,234,929 | ) | (22,394,021 | ) | |||||||||||
(30 | ) | — | — | — | — | — | ||||||||||||||||
437,127 | 497,247 | (63,135,953 | ) | 61,432,570 | (6,366,072 | ) | (18,938,134 | ) | ||||||||||||||
1,233,615 | 684,690 | 19,451,678 | 83,288,809 | 31,697,540 | 2,780,896 | |||||||||||||||||
3,713,890 | 3,029,200 | 407,359,488 | 324,070,679 | 130,257,610 | 127,476,714 | |||||||||||||||||
$4,947,505 | $3,713,890 | $426,811,166 | $407,359,488 | $161,955,150 | $130,257,610 | |||||||||||||||||
|
|
| ||||||||||||||||||||
32,033 | 71,957 | 498,034 | 4,598,800 | 207,564 | 295,669 | |||||||||||||||||
3,961 | 7,643 | — | — | — | — | |||||||||||||||||
6,303 | 3,662 | 53,151 | 63,112 | — | — | |||||||||||||||||
1,817 | 889 | — | — | — | — | |||||||||||||||||
(7,988 | ) | (39,538 | ) | (2,172,444 | ) | (2,934,489 | ) | (676,440 | ) | (1,919,160 | ) | |||||||||||
(2 | ) | — | — | — | — | — | ||||||||||||||||
36,124 | 44,613 | (1,621,259 | ) | 1,727,423 | (468,876 | ) | (1,623,491 | ) | ||||||||||||||
$766 | $24,203 | $157,024 | $1,230,257 | ($230,573 | ) | — |
SIT MUTUAL FUNDS SEMI-ANNUAL REPORT |
|
49 |
|
|
STATEMENTS OF CHANGES IN NET ASSETS (Continued)
Sit Small Cap Growth Fund | Sit International Growth Fund | |||||||||||||||
Six Months Ended December 31, 2010 (Unaudited) | Year Ended June 30, 2010 | Six Months Ended December 31, 2010 (Unaudited) | Year Ended June 30, 2010 | |||||||||||||
Operations: | ||||||||||||||||
Net investment income (loss) | ($242,422 | ) | ($504,900 | ) | $42,817 | $197,740 | ||||||||||
Net realized gain on investments and foreign currency transactions | 2,813,792 | 2,158,857 | 426,478 | 411,873 | ||||||||||||
Net change in unrealized appreciation (depreciation) of investments and foreign currency transactions | 13,352,665 | 10,263,345 | 4,373,274 | 1,060,153 | ||||||||||||
Net increase (decrease) in net assets resulting from operations | 15,924,035 | 11,917,302 | 4,842,569 | 1,669,766 | ||||||||||||
Distributions from: | ||||||||||||||||
Net investment income | ||||||||||||||||
Common shares (Class I) | — | — | (215,000 | ) | (228,000 | ) | ||||||||||
Net realized gains on investments | ||||||||||||||||
Common shares (Class I) | — | — | — | — | ||||||||||||
Total distributions | — | — | (215,000 | ) | (228,000 | ) | ||||||||||
Capital share transactions: | ||||||||||||||||
Proceeds from shares sold | ||||||||||||||||
Common shares (Class I) | 1,894,591 | 4,964,717 | 242,588 | 701,521 | ||||||||||||
Capital share proceeds (note 5) | 14,142 | — | 114,003 | 229,242 | ||||||||||||
Reinvested distributions | ||||||||||||||||
Common shares (Class I) | — | — | 212,964 | 225,692 | ||||||||||||
Payments for shares redeemed | ||||||||||||||||
Common shares (Class I) | (4,267,754 | ) | (15,386,598 | ) | (1,829,727 | ) | (3,021,002 | ) | ||||||||
Decrease in net assets from capital transactions | (2,359,021 | ) | (10,421,881 | ) | (1,260,172 | ) | (1,864,547 | ) | ||||||||
Total increase (decrease) in net assets | 13,565,014 | 1,495,421 | 3,367,397 | (422,781 | ) | |||||||||||
Net assets: | ||||||||||||||||
Beginning of period | 59,847,775 | 58,352,354 | 20,586,151 | 21,008,932 | ||||||||||||
End of period* | $73,412,789 | $59,847,775 | $23,953,548 | $20,586,151 | ||||||||||||
Capital transactions in shares: | ||||||||||||||||
Sold | ||||||||||||||||
Common shares (Class I) | 51,289 | 164,198 | 17,614 | 55,740 | ||||||||||||
Reinvested distributions | ||||||||||||||||
Common shares (Class I) | — | — | 15,114 | 17,496 | ||||||||||||
Redeemed | ||||||||||||||||
Common shares (Class I) | (117,745 | ) | (507,131 | ) | (131,151 | ) | (236,170 | ) | ||||||||
Net decrease | (66,456 | ) | (342,933 | ) | (98,423 | ) | (162,934 | ) | ||||||||
*includes undistributed net investment income (loss) | ($242,422 | ) | — | $14,890 | $187,073 |
See accompanying notes to financial statements.
50 |
DECEMBER 31, 2010 |
|
Sit Developing Markets Growth Fund | ||||||||
Six Months Ended December 31, 2010 (Unaudited) | Year Ended June 30, 2010 | |||||||
($18,508 | ) | $8,636 | ||||||
|
615,313 |
| 1,309,830 | |||||
|
3,343,784 |
| 999,287 | |||||
|
3,940,589 |
|
|
2,317,753 |
| |||
(10,903 | ) | (34,186 | ) | |||||
(469,086 | ) | — | ||||||
(479,989 | ) | (34,186 | ) | |||||
|
|
| ||||||
1,579,494 | 2,723,237 | |||||||
— | — | |||||||
474,459 | 33,593 | |||||||
(3,066,978 | ) | (4,200,831 | ) | |||||
(1,013,025 | ) | (1,444,001 | ) | |||||
2,447,575 | 839,566 | |||||||
|
|
| ||||||
14,042,692 | 13,203,126 | |||||||
$16,490,267 | $14,042,692 | |||||||
|
|
| ||||||
71,147 | 136,017 | |||||||
20,683 | 1,635 | |||||||
(134,656 | ) | (217,329 | ) | |||||
(42,826 | ) | (79,677 | ) | |||||
($18,508 | ) | $10,903 |
SIT MUTUAL FUNDS SEMI-ANNUAL REPORT |
|
51 |
|
|
Per share income and capital changes for a share outstanding throughout the period.
Sit Balanced Fund
Six Months Ended December 31, 2010 | Years Ended June 30, | |||||||||||||||||||||||||||||
(Unaudited) | 2010 | 2009 | 2008 | 2007 | 2006 | |||||||||||||||||||||||||
Net Asset Value: | ||||||||||||||||||||||||||||||
Beginning of period | $14.18 | $12.96 | $16.32 | $16.93 | $15.14 | $14.53 | ||||||||||||||||||||||||
Operations: | ||||||||||||||||||||||||||||||
Net investment income 1 | 0.15 | 0.35 | 0.41 | 0.38 | 0.34 | 0.28 | ||||||||||||||||||||||||
Net realized and unrealized gains (losses) on investments | 1.85 | 1.24 | (3.32 | ) | (0.66 | ) | 1.78 | 0.59 | ||||||||||||||||||||||
Total from operations | 2.00 | 1.59 | (2.91 | ) | (0.28 | ) | 2.12 | 0.87 | ||||||||||||||||||||||
Distributions to Shareholders: | ||||||||||||||||||||||||||||||
From net investment income | (0.23 | ) | (0.37 | ) | (0.45 | ) | (0.33 | ) | (0.33 | ) | (0.26 | ) | ||||||||||||||||||
Net Asset Value: | ||||||||||||||||||||||||||||||
End of period | $15.95 | $14.18 | $12.96 | $16.32 | $16.93 | $15.14 | ||||||||||||||||||||||||
Total investment return 2 | 14.19% | 3 | 12.33% | (17.84% | ) | (1.72% | ) | 14.24% | 6.03% | |||||||||||||||||||||
Net assets at end of period (000’s omitted) | $11,217 | $10,550 | $10,349 | $12,939 | $12,529 | $11,617 | ||||||||||||||||||||||||
Ratios: | ||||||||||||||||||||||||||||||
Expenses 4 | 1.00% | 1.00% | 1.00% | 1.00% | 1.00% | 1.00% | ||||||||||||||||||||||||
Net investment income | 1.96% | 2.44% | 3.12% | 2.22% | 2.13% | 1.84% | ||||||||||||||||||||||||
Portfolio turnover rate (excluding short-term securities) | 24.14% | 3 | 46.79% | 30.26% | 54.96% | 41.63% | 50.00% |
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 and assumes reinvestment of distributions at net asset value. |
3 | Not annualized. |
4 | 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. |
52 |
SIT MUTUAL FUNDS SEMI-ANNUAL REPORT |
|
FINANCIAL HIGHLIGHTS
Per share income and capital changes for a share outstanding throughout the period.
Sit Dividend Growth Fund
Class I | Six Months Ended December 31, 2010 (Unaudited) | Years Ended June 30, | ||||||||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||||||
Net Asset Value: | ||||||||||||||||||||||||
Beginning of period | $10.64 | $9.60 | $13.11 | $14.42 | $12.26 | $11.18 | ||||||||||||||||||
Operations: | ||||||||||||||||||||||||
Net investment income 1 | 0.10 | 0.19 | 0.23 | 0.23 | 0.24 | 0.25 | ||||||||||||||||||
Net realized and unrealized gains (losses) on investments | 2.45 | 1.03 | (3.09 | ) | (0.63 | ) | 2.35 | 1.20 | ||||||||||||||||
Total from operations | 2.55 | 1.22 | (2.86 | ) | (0.40 | ) | 2.59 | 1.45 | ||||||||||||||||
Distributions to Shareholders: | ||||||||||||||||||||||||
From net investment income | (0.13 | ) | (0.18 | ) | (0.26 | ) | (0.22 | ) | (0.23 | ) | (0.23 | ) | ||||||||||||
From net realized gains | — | — | (0.39 | ) | (0.69 | ) | (0.20 | ) | (0.14 | ) | ||||||||||||||
Total distributions | (0.13 | ) | (0.18 | ) | (0.65 | ) | (0.91 | ) | (0.43 | ) | (0.37 | ) | ||||||||||||
Net Asset Value: | ||||||||||||||||||||||||
End of period | $13.06 | $10.64 | $9.60 | $13.11 | $14.42 | $12.26 | ||||||||||||||||||
Total investment return 2 | 24.12%3 | 12.71% | (21.59% | ) | (3.06% | ) | 21.48% | 13.20% | ||||||||||||||||
Net assets at end of period (000’s omitted) | $150,276 | $39,430 | $28,305 | $41,239 | $37,674 | $24,137 | ||||||||||||||||||
Ratios: | ||||||||||||||||||||||||
Expenses 4 | 1.00% | 1.00% | 1.00% | 1.00% | 1.00% | 1.00% | ||||||||||||||||||
Net investment income | 1.69% | 1.70% | 2.35% | 1.68% | 1.81% | 2.09% | ||||||||||||||||||
Portfolio turnover rate (excluding short-term securities) 5 | 7.39%3 | 31.84% | 69.10% | 38.86% | 34.02% | 41.28% | ||||||||||||||||||
Class S | Six Months Ended (Unaudited) | Years Ended June 30, | Three Months Ended June 30, | |||||||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||||||
Net Asset Value: | ||||||||||||||||||||||||
Beginning of period | $10.61 | $9.58 | $13.08 | $14.39 | $12.26 | $12.28 | ||||||||||||||||||
Operations: | ||||||||||||||||||||||||
Net investment income 1 | 0.09 | 0.16 | 0.21 | 0.20 | 0.21 | 0.05 | ||||||||||||||||||
Net realized and unrealized gains (losses)on investments | 2.45 | 1.02 | (3.09 | ) | (0.63 | ) | 2.33 | (0.02 | ) | |||||||||||||||
Total from operations | 2.54 | 1.18 | (2.88 | ) | (0.43 | ) | 2.54 | 0.03 | ||||||||||||||||
Distributions to Shareholders: | ||||||||||||||||||||||||
From net investment income | (0.11 | ) | (0.15 | ) | (0.23 | ) | (0.19 | ) | (0.21 | ) | (0.05 | ) | ||||||||||||
From net realized gains | — | — | (0.39 | ) | (0.69 | ) | (0.20 | ) | — | |||||||||||||||
Total distributions | (0.11 | ) | (0.15 | ) | (0.62 | ) | (0.88 | ) | (0.41 | ) | (0.05 | ) | ||||||||||||
Net Asset Value: | ||||||||||||||||||||||||
End of period | $13.04 | $10.61 | $9.58 | $13.08 | $14.39 | $12.26 | ||||||||||||||||||
Total investment return 2 | 24.06%3 | 12.37% | (21.79% | ) | (3.27% | ) | 21.02% | 0.27% | 3 | |||||||||||||||
Net assets at end of period (000’s omitted) | $36,455 | $24,894 | $15,730 | $14,300 | $2,823 | $48 | ||||||||||||||||||
Ratios: | ||||||||||||||||||||||||
Expenses 4 | 1.25% | 1.25% | 1.25% | 1.25% | 1.25% | 1.25% | ||||||||||||||||||
Net investment income | 1.44% | 1.45% | 2.10% | 1.43% | 1.56% | 1.84% |
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 and assumes reinvestment of distributions at net asset value. |
3 | Not annualized. |
4 | 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 | The portfolio turnover rate presented is for the entire Fund. |
DECEMBER 31, 2010 |
|
53 |
|
|
FINANCIAL HIGHLIGHTS
Per share income and capital changes for a share outstanding throughout the period.
Sit Global Dividend Growth Fund
Class I
| Six Months Ended December 31, 2010 (Unaudited) | Year Ended June 30, 2010 | Nine Months Ended June 30, 2009 | |||||||||
Net Asset Value: | ||||||||||||
Beginning of period | $10.41 | $9.70 | $10.00 | |||||||||
Operations: | ||||||||||||
Net investment income 1 | 0.08 | 0.17 | 0.15 | |||||||||
Net realized and unrealized gains (losses) on investments | 2.37 | 0.68 | (0.36 | ) | ||||||||
Total from operations | 2.45 | 0.85 | (0.21 | ) | ||||||||
Distributions to Shareholders: | ||||||||||||
From net investment income | (0.14) | (0.14 | ) | (0.09 | ) | |||||||
From net realized gains | (0.13) | — | — | |||||||||
Total distributions | (0.27) | (0.14 | ) | (0.09 | ) | |||||||
Net Asset Value: | ||||||||||||
End of period | $12.59 | $10.41 | $9.70 | |||||||||
Total investment return 2 | 23.68%3 | 8.79% | (2.06% | )3 | ||||||||
Net assets at end of period (000’s omitted) | $3,807 | $2,832 | $2,290 | |||||||||
Ratios: | ||||||||||||
Expenses 4 | 1.25% | 1.25% | 1.25% | |||||||||
Net investment income | 1.28% | 1.48% | 2.30% | |||||||||
Portfolio turnover rate (excluding short-term securities) 5
| 10.39%3 | 21.60% | 17.69%3 | |||||||||
Class S
| Six Months Ended December 31, 2010 (Unaudited) | Year Ended June 30, 2010 | Nine Months Ended June 30, 2009 | |||||||||
Net Asset Value: | ||||||||||||
Beginning of period | $10.40 | $9.70 | $10.00 | |||||||||
Operations: | ||||||||||||
Net investment income 1 | 0.06 | 0.14 | 0.13 | |||||||||
Net realized and unrealized gains (losses) on investments | 2.38 | 0.68 | (0.36 | ) | ||||||||
Total from operations | 2.44 | 0.82 | (0.23 | ) | ||||||||
Distributions to Shareholders: | ||||||||||||
From net investment income | (0.12) | (0.12 | ) | (0.07 | ) | |||||||
From net realized gains | (0.13) | — | — | |||||||||
Total distributions | (0.25) | (0.12 | ) | (0.07 | ) | |||||||
Net Asset Value: | ||||||||||||
End of period | $12.59 | $10.40 | $9.70 | |||||||||
Total investment return 2 | 23.58%3 | 8.47% | (2.39% | )3 | ||||||||
Net assets at end of period (000’s omitted) | $1,140 | $882 | $740 | |||||||||
Ratios: | ||||||||||||
Expenses 4 | 1.50% | 1.50% | 1.50% | |||||||||
Net investment income | 1.03% | 1.23% | 2.05% |
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 and assumes reinvestment of distributions at net asset value. |
3 | Not annualized. |
4 | 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 | The portfolio turnover rate presented is for the entire Fund. |
54 |
SIT MUTUAL FUNDS SEMI-ANNUAL REPORT |
|
FINANCIAL HIGHLIGHTS
Per share income and capital changes for a share outstanding throughout the period.
Sit Large Cap Growth Fund
Six Months Ended December 31, 2010 | Years Ended June 30, | |||||||||||||||||||||||
(Unaudited) | 2010 | 2009 | 2008 | 2007 | 2006 | |||||||||||||||||||
Net Asset Value: | ||||||||||||||||||||||||
Beginning of period | $34.75 | $32.42 | $43.41 | $43.99 | $37.60 | $34.27 | ||||||||||||||||||
Operations: | ||||||||||||||||||||||||
Net investment income 1 | 0.11 | 0.22 | 0.28 | 0.20 | 0.24 | 0.17 | ||||||||||||||||||
Net realized and unrealized gains (losses) on investments | 7.61 | 2.33 | (11.05 | ) | (0.65 | ) | 6.43 | 3.23 | ||||||||||||||||
Total from operations | 7.72 | 2.55 | (10.77 | ) | (0.45 | ) | 6.67 | 3.40 | ||||||||||||||||
Distributions to Shareholders: | ||||||||||||||||||||||||
From net investment income | (0.22 | ) | (0.22 | ) | (0.22 | ) | (0.13 | ) | (0.28 | ) | (0.07 | ) | ||||||||||||
Net Asset Value: | ||||||||||||||||||||||||
End of period | $42.25 | $34.75 | $32.42 | $43.41 | $43.99 | $37.60 | ||||||||||||||||||
Total investment return 2 | 22.23%3 | 7.80% | (24.77% | ) | (1.03% | ) | 17.79% | 9.91% | ||||||||||||||||
Net assets at end of period (000’s omitted) | $426,811 | $407,359 | $324,071 | $287,695 | $125,741 | $101,873 | ||||||||||||||||||
Ratios: | ||||||||||||||||||||||||
Expenses 4 | 1.00% | 1.00% | 1.00% | 1.00% | 1.00% | 1.00% | ||||||||||||||||||
Net investment income | 0.57% | 0.58% | 0.85% | 0.46% | 0.59% | 0.46% | ||||||||||||||||||
Portfolio turnover rate (excluding short-term securities) | 11.77%3 | 15.93% | 27.98% | 21.97% | 27.80% | 23.71% |
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 and assumes reinvestment of distributions at net asset value. |
3 | Not annualized. |
4 | 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. |
DECEMBER 31, 2010 |
|
55 |
|
|
FINANCIAL HIGHLIGHTS
Per share income and capital changes for a share outstanding throughout the period.
Sit Mid Cap Growth Fund
Six Months Ended December 31, 2010 | Years Ended June 30, | |||||||||||||||||||||||
(Unaudited) | 2010 | 2009 | 2008 | 2007 | 2006 | |||||||||||||||||||
Net Asset Value: | ||||||||||||||||||||||||
Beginning of period | $11.57 | $9.90 | $14.83 | $15.71 | $13.01 | $11.28 | ||||||||||||||||||
Operations: | ||||||||||||||||||||||||
Net investment loss 1 | (0.02 | ) | (0.05 | ) | (0.03 | ) | (0.07 | ) | (0.04 | ) | — | |||||||||||||
Net realized and unrealized gains (losses) on investments | 3.46 | 1.72 | (4.81 | ) | (0.31 | ) | 2.74 | 1.73 | ||||||||||||||||
Total from operations | 3.44 | 1.67 | (4.84 | ) | (0.38 | ) | 2.70 | 1.73 | ||||||||||||||||
Distributions to Shareholders: | ||||||||||||||||||||||||
From net realized gains | — | — | (0.09 | ) | (0.50 | ) | — | — | ||||||||||||||||
Net Asset Value: | ||||||||||||||||||||||||
End of period | $15.01 | $11.57 | $9.90 | $14.83 | $15.71 | $13.01 | ||||||||||||||||||
Total investment return 2 | 29.73%3 | 16.87% | (32.51% | ) | (2.63% | ) | 20.75% | 15.34% | ||||||||||||||||
Net assets at end of period (000’s omitted) | $161,955 | $130,258 | $127,477 | $210,880 | $205,256 | $191,541 | ||||||||||||||||||
Ratios: 4 | ||||||||||||||||||||||||
Expenses (without waiver) 5 | 1.25% | 1.25% | 1.25% | 1.25% | 1.25% | 1.25% | ||||||||||||||||||
Expenses (with waiver) 5 | 1.15% | 1.15% | 1.15% | 1.15% | 1.15% | 1.15% | ||||||||||||||||||
Net investment loss (without waiver) | (0.41% | ) | (0.52% | ) | (0.40% | ) | (0.52% | ) | (0.41% | ) | (0.13% | ) | ||||||||||||
Net investment loss (with waiver) | (0.31% | ) | (0.42% | ) | (0.30% | ) | (0.42% | ) | (0.31% | ) | (0.03% | ) | ||||||||||||
Portfolio turnover rate (excluding short-term securities) | 11.44%3 | 20.39% | 18.07% | 34.61% | 40.08% | 32.48% |
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 and assumes reinvestment of distributions at net asset value. |
3 | Not annualized. |
4 | The ratio information is calculated based on average daily net assets. Total Fund expenses are limited to 1.25% of average daily net assets. However, during the periods above, the investment adviser voluntarily absorbed expenses that were otherwise payable by the Fund. |
5 | 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. |
56 |
SIT MUTUAL FUNDS SEMI-ANNUAL REPORT |
|
FINANCIAL HIGHLIGHTS
Per share income and capital changes for a share outstanding throughout the period.
Sit Small Cap Growth Fund
Six Months Ended December 31, 2010 | Years Ended June 30, | |||||||||||||||||||||||||||||
(Unaudited) | 2010 | 2009 | 2008 | 2007 | 2006 | |||||||||||||||||||||||||
Net Asset Value: | ||||||||||||||||||||||||||||||
Beginning of period | $31.32 | $25.89 | $37.44 | $40.14 | $33.46 | $27.74 | ||||||||||||||||||||||||
Operations: | ||||||||||||||||||||||||||||||
Net investment loss 1 | (0.13 | ) | (0.24 | ) | (0.16 | ) | (0.37 | ) | (0.27 | ) | (0.23 | ) | ||||||||||||||||||
Net realized and unrealized gains (losses) on investments | 8.60 | 5.67 | (11.39 | ) | (2.33 | ) | 6.95 | 5.95 | ||||||||||||||||||||||
Total from operations | 8.47 | 5.43 | (11.55 | ) | (2.70 | ) | 6.68 | 5.72 | ||||||||||||||||||||||
Capital share proceeds 2 | 0.01 | — | — | — | — | — | ||||||||||||||||||||||||
Net Asset Value: | ||||||||||||||||||||||||||||||
End of period | $39.80 | $31.32 | $25.89 | $37.44 | $40.14 | $33.46 | ||||||||||||||||||||||||
Total investment return 3 | 27.08%4 | 20.97% | (30.85% | ) | (6.73% | ) | 19.96% | 20.62% | ||||||||||||||||||||||
Net assets at end of period (000’s omitted) | $73,413 | $59,848 | $58,352 | $93,527 | $105,800 | $106,977 | ||||||||||||||||||||||||
Ratios: | ||||||||||||||||||||||||||||||
Expenses 5 | 1.50% | 1.50% | 1.50% | 1.50% | 1.50% | 1.50% | ||||||||||||||||||||||||
Net investment loss | (0.73% | ) | (0.80% | ) | (0.61% | ) | (0.93% | ) | (0.79% | ) | (0.67% | ) | ||||||||||||||||||
Portfolio turnover rate (excluding short-term securities) | 17.37%4 | 22.41% | 26.19% | 37.20% | 38.79% | 54.73% |
1 | The net investment income per share is based on average shares outstanding for the period. |
2 | The Fund accounted for proceeds during the year from market timing settlements. |
3 | Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of distributions at net asset value. |
4 | Not annualized. |
5 | 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. |
DECEMBER 31, 2010 |
|
57 |
|
|
FINANCIAL HIGHLIGHTS
Per share income and capital changes for a share outstanding throughout the period.
Sit International Growth Fund
Six Months Ended December 31, 2010 | Years Ended June 30, | |||||||||||||||||||||||||||
(Unaudited) | 2010 | 2009 | 2008 | 2007 | 2006 | |||||||||||||||||||||||
Net Asset Value: | ||||||||||||||||||||||||||||
Beginning of period | $11.67 | $10.90 | $17.80 | $18.70 | $15.48 | $12.31 | ||||||||||||||||||||||
Operations: | ||||||||||||||||||||||||||||
Net investment income 1 | 0.03 | 0.11 | 0.13 | 0.15 | 0.20 | 0.14 | ||||||||||||||||||||||
Net realized and unrealized gains (losses) on investments | 2.74 | 0.65 | (6.95 | ) | (0.85 | ) | 3.17 | 3.10 | ||||||||||||||||||||
Total from operations | 2.77 | 0.76 | (6.82 | ) | (0.70 | ) | 3.37 | 3.24 | ||||||||||||||||||||
Capital share proceeds 2 | 0.07 | 0.13 | 0.10 | — | — | — | ||||||||||||||||||||||
Distributions to Shareholders: | ||||||||||||||||||||||||||||
From net investment income | (0.13) | (0.12 | ) | (0.18 | ) | (0.20 | ) | (0.15 | ) | (0.07 | ) | |||||||||||||||||
Net Asset Value: | ||||||||||||||||||||||||||||
End of period 3 | $14.38 | $11.67 | $10.90 | $17.80 | $18.70 | $15.48 | ||||||||||||||||||||||
Total investment return 3 | 24.34%4 | 8.10% | (37.71% | ) | (3.82% | ) | 21.87% | 26.37% | ||||||||||||||||||||
Net assets at end of period (000’s omitted) | $23,954 | $20,586 | $21,009 | $37,714 | $39,511 | $34,700 | ||||||||||||||||||||||
Ratios: 5 | ||||||||||||||||||||||||||||
Expenses (without waiver) 6 | 1.73% | 1.85% | 1.85% | 1.85% | 1.85% | 1.85% | ||||||||||||||||||||||
Expenses (with waiver) 6 | 1.50% | 1.50% | 1.50% | 1.50% | 1.50% | 1.50% | ||||||||||||||||||||||
Net investment income (without waiver) | 0.01% | 0.50% | 0.74% | 0.43% | 0.84% | 0.60% | ||||||||||||||||||||||
Net investment income (with waiver) | 0.36% | 0.85% | 1.09% | 0.78% | 1.19% | 0.95% | ||||||||||||||||||||||
Portfolio turnover rate (excluding short-term securities) | 13.83%4 | 25.09% | 33.12% | 16.83% | 17.25% | 20.21% |
1 | The net investment income per share is based on average shares outstanding for the period. |
2 | The Fund accounted for proceeds during the year from market timing settlements. |
3 | Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of distributions at net asset value. |
4 | Not annualized. |
5 | The ratio information is calculated based on average daily net assets. Total Fund expenses are limited to 1.85% of average daily net assets. However, during the periods above, the investment adviser voluntarily absorbed expenses that were otherwise payable by the Fund. |
6 | 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. |
58 |
SIT MUTUAL FUNDS SEMI-ANNUAL REPORT |
|
FINANCIAL HIGHLIGHTS
Per share income and capital changes for a share outstanding throughout the period.
Sit Developing Markets Growth Fund
Six Months Ended December 31, 2010 (Unaudited) | AYears Ended June 30, | |||||||||||||||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||||||||||||
Net Asset Value: | ||||||||||||||||||||||||||||||
Beginning of period | $19.00 | $16.13 | $25.97 | $24.94 | $17.38 | $12.97 | ||||||||||||||||||||||||
Operations: | ||||||||||||||||||||||||||||||
Net investment income (loss) 1 | (0.02 | ) | 0.01 | 0.04 | (0.07 | ) | 0.05 | 0.04 | ||||||||||||||||||||||
Net realized and unrealized gains (losses) on investments | 5.40 | 2.90 | (9.15 | ) | 1.41 | 7.56 | 4.43 | |||||||||||||||||||||||
Total from operations | 5.38 | 2.91 | (9.11 | ) | 1.34 | 7.61 | 4.47 | |||||||||||||||||||||||
Capital share proceeds 2 | — | — | 0.09 | — | — | — | ||||||||||||||||||||||||
Distributions to Shareholders: | ||||||||||||||||||||||||||||||
From net investment income | (0.02 | ) | (0.04 | ) | — | (0.04 | ) | (0.05 | ) | (0.06 | ) | |||||||||||||||||||
From net realized gains | (0.67 | ) | — | (0.82 | ) | (0.27 | ) | — | — | |||||||||||||||||||||
Total distributions | (0.69 | ) | (0.04 | ) | (0.82 | ) | (0.31 | ) | (0.05 | ) | (0.06 | ) | ||||||||||||||||||
Net Asset Value: | ||||||||||||||||||||||||||||||
End of period | $23.69 | $19.00 | $16.13 | $25.97 | $24.94 | $17.38 | ||||||||||||||||||||||||
Total investment return 3 | 28.39% | 4 | 18.05% | (33.73% | ) | 5.26% | 43.82% | 34.47% | ||||||||||||||||||||||
Net assets at end of period (000’s omitted) | $16,490 | $14,043 | $13,203 | $23,195 | $18,430 | $13,057 | ||||||||||||||||||||||||
Ratios: | ||||||||||||||||||||||||||||||
Expenses 5 | 2.00% | 2.00% | 2.00% | 2.00% | 2.00% | 2.00% | ||||||||||||||||||||||||
Net investment income (loss) | (0.22% | ) | 0.06% | 0.24% | (0.27% | ) | 0.25% | 0.24% | ||||||||||||||||||||||
Portfolio turnover rate (excluding short-term securities) | 9.47% | 4 | 19.90% | 13.56% | 9.40% | 16.25% | 27.38% |
1 | The net investment income per share is based on average shares outstanding for the period. |
2 | The Fund received proceeds during the year ended June 30, 2009 from market timing settlements. |
3 | Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of distributions at net asset value. |
4 | Not annualized. |
5 | 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. |
DECEMBER 31, 2010 |
|
59 |
|
|
NOTES TO FINANCIAL STATEMENTS (Unaudited)
Six Months Ended December 31, 2010
(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 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 a composite index | |
(60% S&P 500 Index and 40% MSCI EAFE Index) and that grows over a period | ||
of years. Secondarily, maxime long-term capital appreciation. | ||
Large Cap Growth Fund, Inc. | Maximize long-term capital appreciation. | |
Mid Cap Growth Fund, Inc. | 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 and Global 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 |
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, 2010, the Funds received the following redemptions fees:
Class I | Class S | |||||||||
Dividend Growth | $826 | $355 | ||||||||
Large Cap Growth | 1,448 | — | ||||||||
Mid Cap Growth | 4 | — | ||||||||
Small Cap Growth | 114 | — | ||||||||
International Growth | 3 | — |
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. 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,
60 |
SIT MUTUAL FUNDS SEMI-ANNUAL REPORT |
|
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 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.
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 valuations 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 for 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 – as described in footnote 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. 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 Fund’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, 2010 is included with the Funds’ schedule of investments.
New Accounting Pronouncements
In January 2010, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2010-06 “Improving Disclosures about Fair Value Measurements”. ASU 2010-06 amends FASB Accounting Standards Codification Topic 820, Fair Value Measurements and Disclosures, to require additional disclosures regarding fair value measurements. Certain disclosures required by ASU No. 2010-06 are currently effective for interim and annual reporting periods beginning after December 15, 2009, and other required disclosures are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. Management has evaluated the impact and has incorporated the appropriate disclosures required by ASU No. 2010-06 in the Funds’ financial statement disclosures.
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. E.S.T). 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.
DECEMBER 31, 2010 |
|
61 |
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NOTES TO FINANCIAL STATEMENTS (Unaudited)
Six Months Ended December 31, 2010 (Continued)
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.
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, 2010, no provision for income would be required in the Funds’ financial statements. The Funds’ federal and state income and federal excise returns for the 2007, 2008, 2009 and 2010 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, 2010, the gross unrealized appreciation (depreciation) on investments and cost of securities on a tax basis for federal income tax purposes are identical to book and are as follows:
Unrealized Appreciation | Unrealized Depreciation | Net Unrealized Appreciation (Depreciation) | Cost of Securities on a | |||||||||||||||||
Balanced | $1,893,483 | ($237,573 | ) | $1,655,910 | $9,621,278 | |||||||||||||||
Dividend Growth | 21,924,159 | (457,334 | ) | 21,466,825 | 171,736,088 | |||||||||||||||
Global Dividend Growth | 1,054,561 | (17,638 | ) | 1,036,923 | 4,046,907 | |||||||||||||||
Large Cap Growth | 86,625,554 | (2,298,302 | ) | 84,327,252 | 344,688,668 | |||||||||||||||
Mid Cap Growth | 51,527,409 | (8,756,458 | ) | 42,770,951 | 120,574,042 | |||||||||||||||
Small Cap Growth | 23,867,739 | (2,711,705 | ) | 21,156,034 | 52,266,750 | |||||||||||||||
International Growth | 6,497,249 | (812,591 | ) | 5,684,658 | 17,812,252 | |||||||||||||||
Developing Markets Growth | 7,272,396 | (371,383 | ) | 6,901,013 | 9,841,658 |
Net investment income and net realized gains differ for financial statement and tax purposes because of 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, 2010 and 2009 were as follows:
62 |
SIT MUTUAL FUNDS SEMI-ANNUAL REPORT |
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Year Ended June 30, 2010: | |||||||||||||||
Ordinary Income | Long Term Capital Gain | Total | |||||||||||||
Balanced | $293,000 | — | $293,000 | ||||||||||||
Dividend Growth (Class I) | 548,746 | — | 548,746 | ||||||||||||
Dividend Growth (Class S) | 330,254 | — | 330,254 | ||||||||||||
Global Dividend Growth (Class I) | 35,594 | — | 35,594 | ||||||||||||
Global Dividend Growth (Class S) | 9,406 | — | 9,406 | ||||||||||||
Large Cap Growth | 2,475,000 | — | 2,475,000 | ||||||||||||
Mid Cap Growth | — | — | — | ||||||||||||
Small Cap Growth | — | — | — | ||||||||||||
International Growth | 228,000 | — | 228,000 | ||||||||||||
Developing Markets Growth | 34,186 | — | 34,186 | ||||||||||||
Year Ended June 30, 2009: | |||||||||||||||
Ordinary Income | Long Term Capital Gain | Total | |||||||||||||
Balanced | $351,000 | — | $351,000 | ||||||||||||
Dividend Growth (Class I) | 775,366 | $1,171,782 | 1,947,148 | ||||||||||||
Dividend Growth (Class S) | 205,634 | 242,236 | 447,870 | ||||||||||||
Global Dividend Growth (Class I) | 14,403 | — | 14,403 | ||||||||||||
Global Dividend Growth (Class S) | 5,597 | — | 5,597 | ||||||||||||
Large Cap Growth | 1,549,999 | — | 1,549,999 | ||||||||||||
Mid Cap Growth | — | 1,273,427 | 1,273,427 | ||||||||||||
Small Cap Growth | — | — | — | ||||||||||||
International Growth | 350,000 | — | 350,000 | ||||||||||||
Developing Markets Growth | — | 602,947 | 602,947 |
As of June 30, 2010, the components of distributable earnings on a tax basis were as follows:
Undistributed Ordinary Income | Accumulated Gain (Loss) | Unrealized Appreciation (Depreciation) | |||||||||||||
Balanced | $54,913 | ($4,827,248 | ) | $423,639 | |||||||||||
Dividend Growth | 292,944 | (3,267,051 | ) | (944,083) | |||||||||||
Global Dividend Growth | 24,203 | 11,489 | 200,058 | ||||||||||||
Large Cap Growth | 1,230,257 | (43,815,761 | ) | (3,852,568) | |||||||||||
Mid Cap Growth | — | (13,358,991 | ) | 11,731,076 | |||||||||||
Small Cap Growth | — | (36,873,618 | ) | 7,769,117 | |||||||||||
International Growth | 190,375 | (24,601,563 | ) | 1,281,222 | |||||||||||
Developing Markets Growth | 10,903 | 366,086 | 3,519,748 |
DECEMBER 31, 2010 |
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63 |
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|
NOTES TO FINANCIAL STATEMENTS (Unaudited)
Six Months Ended December 31, 2010 (Continued)
Net capital loss carryovers and post-October capital losses, if any, as of June 30, 2010, are available to offset future realized capital gains and thereby reduce future capital gains distributions. The net capital loss carryovers and the post-October capital losses deferred as of June 30, 2010, were as follows:
Capital Loss Carryover Expiring in: | Net Capital Loss Carryover | Post-October Capital Loss Deferral | Accumulated Other Losses | |||||||||||||||
2011 | 2012 | 2013-2018 | ||||||||||||||||
Balanced | $2,910,534 | $1,023,296 | $778,944 | $4,712,774 | $114,474 | $4,827,248 | ||||||||||||
Dividend Growth | — | — | 3,267,051 | 3,267,051 | — | 3,267,051 | ||||||||||||
Large Cap Growth | 8,969,766 | 4,615,151 | 26,810,529 | 40,395,446 | 3,420,315 | 43,815,761 | ||||||||||||
Mid Cap Growth | 1,264,618 | 250,465 | 11,843,908 | 13,358,991 | — | 13,358,991 | ||||||||||||
Small Cap Growth | 24,655,520 | 3,736,397 | 8,481,701 | 36,873,618 | — | 36,873,618 | ||||||||||||
International Growth | 14,933,645 | 5,988,227 | 3,676,389 | 24,598,261 | — | 24,598,261 |
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 and Global Dividend Growth Funds and declared and paid annually for Developing Markets Growth, Small Cap Growth, International Growth, Mid Cap Growth, and Large Cap Growth Funds. Distributions from net realized gains, if any, will be made annually for each of the Funds.
Concentration of Investments
The Developing Markets Growth Fund may concentrate investments in countries with limited or developing capital markets which may involve greater risks than investments in more developed markets and the prices of such investments may be volatile. The consequences of political, social or economic changes in these markets may have disruptive effects on the market prices of the Fund’s investments and the income it generates, as well as the Fund’s ability to repatriate such amounts.
Use of Estimates
The preparation of financial statements in conformity with 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. 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.
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(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, 2010, were as follow:
Purchases | Proceeds | |||||||||||
U.S. Government | Other | U.S. Government | Other | |||||||||
Balanced | $57,464 | $ | 2,538,003 | $97,425 | $ | 3,045,720 | ||||||
Dividend Growth | — | 101,066,680 | — | 8,164,412 | ||||||||
Global Dividend Growth | — | 767,810 | — | 438,181 | ||||||||
Large Cap Growth | — | 49,016,232 | — | 114,495,707 | ||||||||
Mid Cap Growth | — | 16,377,342 | — | 21,613,422 | ||||||||
Small Cap Growth | — | 11,194,793 | — | 13,191,044 | ||||||||
International Growth | — | 3,093,224 | — | 4,496,510 | ||||||||
Developing Markets Growth | — | 1,495,095 | — | 2,843,726 |
(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:
Management Fee | Net of Adviser’s Voluntary Fee Waiver | |||
Balanced | 1.00% | N/A | ||
Dividend Growth Fund Class I and Class S | 1.00% | N/A | ||
Global Dividend Growth Fund Class I and Class S | 1.25% | N/A | ||
Large Cap Growth | 1.00% | N/A | ||
Mid Cap Growth | 1.25% | 1.15% | ||
Small Cap Growth | 1.50% | N/A | ||
International Growth | 1.50%* | N/A | ||
Developing Markets Growth | 2.00% | N/A | ||
*Effective November 1, 2010. |
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 Global Dividend Growth and 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.
The Adviser has agreed to limit the management fee of the Mid Cap Growth Fund to 1.15% for the period through December 31, 2010, and International Growth Fund to 1.50% for the period through October 31, 2010 of the Fund’s average daily net assets, respectively. The agreement for the International Growth Fund was terminated on October 31, 2010.
DECEMBER 31, 2010 |
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NOTES TO FINANCIAL STATEMENTS (Unaudited)
Six Months Ended December 31, 2010 (Continued)
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, 2010:
Shares | % Shares Outstanding | |||||||
Balanced | 201,434 | 28.7 | ||||||
Dividend Growth | 591,855 | 4.1 | ||||||
Global Dividend Growth | 255,040 | 64.9 | ||||||
Large Cap Growth | 326,033 | 3.2 | ||||||
Mid Cap Growth | 2,295,018 | 21.3 | ||||||
Small Cap Growth | 619,840 | 33.6 | ||||||
International Growth | 535,427 | 32.1 | ||||||
Developing Markets Growth | 186,396 | 26.8 |
(5) | Capital Share Proceeds |
The International Growth Fund expects to receive a settlement for approximately $229,242 from market timing settlements payable to the Fund for the fiscal year ended June 30, 2010. The Mid Cap Growth Fund, Small Cap Growth Fund and International Growth Fund expect to receive a settlement for approximately $2,188, $14,142 and $114,003, respectively from market timing settlements payable to the Funds for the period ended December 31, 2010. These amounts are separately reflected on the statements of changes in net assets and in the financial highlights.
(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.
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SIT MUTUAL FUNDS SEMI-ANNUAL REPORT |
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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, 2010 to December 31, 2010.
Actual Expenses
The first line of the table below 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 below 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.
Fund | Beginning Account Value (7/1/10) | Ending Account Value (12/31/10) | Expenses Paid During Period* (7/1/10- 12/31/10) | |||||||||
Balanced Fund | ||||||||||||
Actual | $ | 1,000 | $ | 1,141.90 | $ | 5.40 | ||||||
Hypothetical | $ | 1,000 | $ | 1,020.16 | $ | 5.09 | ||||||
Dividend Growth Fund | ||||||||||||
Actual | ||||||||||||
Class I | $ | 1,000 | $ | 1,241.20 | $ | 5.65 | ||||||
Class S | $ | 1,000 | $ | 1,240.60 | $ | 7.06 | ||||||
Hypothetical | ||||||||||||
Class I | $ | 1,000 | $ | 1,020.16 | $ | 5.09 | ||||||
Class S | $ | 1,000 | $ | 1,018.90 | $ | 6.36 | ||||||
Global Dividend Growth Fund | ||||||||||||
Actual | ||||||||||||
Class I | $ | 1,000 | $ | 1,236.80 | $ | 7.05 | ||||||
Class S | $ | 1,000 | $ | 1,235.80 | $ | 8.45 | ||||||
Hypothetical | ||||||||||||
Class I | $ | 1,000 | $ | 1,018.90 | $ | 6.36 | ||||||
Class S | $ | 1,000 | $ | 1,017.64 | $ | 7.63 | ||||||
Large Cap Growth | ||||||||||||
Actual | $ | 1,000 | $ | 1,222.30 | $ | 5.60 | ||||||
Hypothetical | $ | 1,000 | $ | 1,020.16 | $ | 5.09 | ||||||
Mid Cap Growth Fund | ||||||||||||
Actual | $ | 1,000 | $ | 1,297.30 | $ | 6.66 | ||||||
Hypothetical | $ | 1,000 | $ | 1,019.41 | $ | 5.85 | ||||||
Small Cap Growth Fund | ||||||||||||
Actual | $ | 1,000 | $ | 1,270.80 | $ | 8.59 | ||||||
Hypothetical | $ | 1,000 | $ | 1,017.64 | $ | 7.63 | ||||||
International Growth Fund | ||||||||||||
Actual | $ | 1,000 | $ | 1,243.40 | $ | 8.48 | ||||||
Hypothetical | $ | 1,000 | $ | 1,017.64 | $ | 7.63 | ||||||
Developing Markets Growth Fund | ||||||||||||
Actual | $ | 1,000 | $ | 1,283.90 | $ | 11.51 | ||||||
Hypothetical | $ | 1,000 | $ | 1,015.12 | $ | 10.16 |
*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 Fund, Class S and Global Dividend Growth Fund, Class I; 1.50% for Global Dividend Growth, Class S, Small Cap Growth and International Growth Funds; 1.15% for Mid Cap Growth Fund; and 2.00% for Developing Markets Growth Fund, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period.)
DECEMBER 31, 2010 |
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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 25, 2010 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 recent 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.
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SIT MUTUAL FUNDS SEMI-ANNUAL REPORT |
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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 $9.75 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 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 and Sit Global Dividend Growth Fund, interest, brokerage commissions and transaction charges and certain extraordinary expenses. The Directors reviewed fees paid in prior years (both before and after the voluntary waiver of fees by SIA with respect to the Mid Cap Growth Fund and International Growth Fund) and the fees to be paid under the Agreements. The Directors noted that under the Agreements, the fees paid with respect to the International Growth Fund will be equal to the fees paid previously net of the voluntary waiver of fees by SIA, and SIA will discontinue its voluntary waiver of fees with respect to the Mid Cap Growth Fund as of December 31, 2010.
The Directors reviewed the average and median expense ratios of mutual funds within the same investment category for each Fund. The Directors noted that each Fund’s total expense ratio compares favorably to the total expense ratios of other no-load funds within the Fund’s Morningstar category, and are lower than the average total expense ratio for the full 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 limited size of the Funds, negotiating a graduated fee structure for each Fund is unnecessary since it is unlikely that the size of the Funds will increase enough to justify a graduated fee schedule within the near future.
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
DECEMBER 31, 2010 |
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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.
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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 24, 2011 |
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 24, 2011 | ||||
By (Signature and Title) | /s/ Roger J. Sit | |||
Roger J. Sit | ||||
Chairman | ||||
Date February 24, 2011 |