N-CSRS 1 d456381dncsrs.htm SIT MUTUAL FUNDS, INC. Sit Mutual Funds, Inc.

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM N-CSR

 

 

CERTIFIED SHAREHOLDER REPORT OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number: 811-06373

 

 

Sit Mutual Funds, Inc.

(Exact name of registrant as specified in charter)

 

 

80 South Eighth Street

3300 IDS Center

Minneapolis, MN 55402

(Address of principal executive offices)

 

 

Paul E. Rasmussen, VP Treasurer

Sit Mutual Funds, Inc.

80 South Eighth Street

3300 IDS Center

Minneapolis, MN 55402

(Name and address of agent for service)

 

 

Copy to:

Mike Radmer, Esq.

Dorsey & Whitney

Suite 1500

50 South Sixth Street

Minneapolis, MN 55402-1498

 

 

Registrant’s telephone number, including area code: (612) 332-3223

Date of fiscal year end: June 30, 2017

Date of reporting period: December 31, 2017

 

 

 

Item 1: Reports to Stockholders

 

Semi-Annual Report

December 31, 2017

     

Balanced Fund

Dividend Growth Fund

Global Dividend Growth Fund

Large Cap Growth Fund

ESG Growth Fund

Mid Cap Growth Fund

Small Cap Dividend Growth Fund

Small Cap Growth Fund

International Growth Fund

Developing Markets Growth Fund

 

 

LOGO

 

Sit Mutual Funds

STOCK FUNDS SEMI-ANNUAL REPORT

TABLE OF CONTENTS

 

     Page

Chairman’s Letter

   2

Fund Reviews and Schedules of Investments

   

Balanced Fund

    4

Dividend Growth Fund

    12

Global Dividend Growth Fund

    16

Large Cap Growth Fund

    22

ESG Growth Fund

    26

Mid Cap Growth Fund

    30

Small Cap Dividend Growth Fund

    34

Small Cap Growth Fund

    38

International Growth Fund

    42

Developing Markets Growth Fund

    48

Statements of Assets and Liabilities

    54

Statements of Operations

    56

Statements of Changes in Net Assets

    58

Financial Highlights

    62

Notes to Financial Statements

    76

Expense Example

    83

Additional Information

    85

 

This document must be preceded or accompanied by a Prospectus.

 

CHAIRMAN’S LETTER

 

February 1, 2018

Dear Fellow Shareholders:

 

Global economic momentum has improved over the last several quarters, and we believe 2018 will provide another year of slow but steady growth, representing the tenth year of expansion since the 2008 crisis. While equity markets have surged ahead over the last several quarters, we believe underlying fundamentals are in place to drive further gains in the year ahead.

Economic Overview

Economic growth in the U.S. picked up steam over the course of 2017, primarily driven by an uptick in consumer spending and improved business investment. As we enter the new year, we expect a further (but modest) growth acceleration as the Tax Cuts and Jobs Act (TCGA) is poised to kick-start a virtuous cycle of strong economic growth that could elongate the current expansion should “animal spirts” endure. The degree to which tax reductions will accelerate economic growth is contingent on how much of the tax savings and repatriated cash is allocated to domestic investment and higher wages relative to incremental corporate share repurchases and dividends. Additionally, small business formations, which have lagged this cycle, may also improve in a more stimulative regulatory and tax backdrop. One of the intriguing aspects of the tax package simply relates to when it is occurring. Unemployment is exceptionally low, both businesses and consumer confidence are at cycle highs, and the economic expansion is well advanced. While overhauls of the tax code are rare events, it is worth noting that prior reductions generally occurred when the economy was cyclically weak. According to Evercore ISI, the average U.S. unemployment rate when the past seven tax cuts occurred was 7.0%, compared to the most recent (December) reported rate of 4.1%. This unprecedented late cycle stimulus could prove inflationary and push interest rates higher, serving to offset the growth benefits.

The potential for an increasingly “hawkish” Federal Reserve represents a key risk factor for the economy and financial markets in the year ahead. A further tightening of labor markets should finally spark accelerating wage gains, in our view. In addition, “base” effects from wireless phone services and dollar weakness should diminish as the year progresses, and higher commodity prices (particularly oil) are likely to push inflation higher. We do, however, anticipate that the U.S. Federal Reserve will remain data dependent / market sensitive as it seeks to “normalize” the fed funds rate and its balance sheet concurrently. The Fed recently increased the fed funds rate by 25 basis points to a range of 125-150 basis points (its fifth increase since 2015) and is in the initial stages of gradually reducing the size of the balance sheet, which has swelled over 400% to nearly $4.5 trillion since mid-2007. We anticipate three 25 basis point rate increases in 2018, but we believe there is greater risk for more rather than less. Our base case is that this will result in continuation of the flattening yield curve, but we do not think a flatter curve is sending recessionary signals

because economic circumstances and technical factors, such as the reduction in the Fed balance sheet, are causing a typical distortions.

Outside the U.S., economic growth has shown broad-based improvement over the last several quarters. The improvement in Europe over the past year has been particularly impressive, with a healthier banking system critical in supporting both business and consumer spending. Still, as exports represent over 45% of GDP, the Euro area is sensitive to global trade conditions and moderating economic growth in China. Ongoing strength of the euro, which appreciated nearly +14% against the dollar over the past year, could begin to take a toll on exports. We believe growth in China likely peaked in early 2017, as tightening measures begin to impact industrial and consumption growth and, in particular, frothy property markets. China’s unprecedented growing debt levels remain a key risk to the global economy, but we believe there is still enough policy flexibility to avoid a major slowdown, at least for the time being. Finally, while the Japanese economy grew ahead of modest expectations over the past year, we believe structural challenges (i.e., aging population) continue to outweigh President Abe’s pro-growth fiscal policies.

Equity Strategy

Synchronized global growth, improving corporate earnings, and continued low interest rates have buoyed markets over the last several quarters. With interest rates and valuations incrementally less supportive, however, we believe corporate earnings growth will be the key determinant of market gains going forward.

After a long bull market — seemingly uninterrupted for nine years — investors are appropriately wondering how much upside remains. With U.S. market valuations hovering at historically high levels, the rebound in corporate earnings has been an essential driver of returns. Importantly, the improvement in the near-to intermediate-term outlook is broad-based, driven by a weaker U.S. dollar, easier comparisons in the beleaguered energy sector, improved capital spending (supporting manufacturing and technology, in particular), and higher bank earnings (aided by higher interest rates). The earnings rebound, which has been underway for several quarters, has now been augmented by tax reform. While a tax cut amounting to a relatively small amount of Gross Domestic Product (GDP) may not seem like much (perhaps approximating 0.50-0.60% of GDP over 10 years), we anticipate that the impact on businesses and financial markets will be quite significant.

Key beneficiaries from the legislation include consumers, domestically oriented businesses that currently have high effective tax rates, and multinational corporations with large offshore cash balances that can be repatriated. Our judgement is the benefits from tax reform are only partially priced into equity

 

 

  

 

2

   

 

 

 

SIT MUTUAL FUNDS SEMI-ANNUAL REPORT

 

 

 
 

 

 

markets as upward revisions in earnings estimates will serve as an additional catalyst for stocks in the months ahead. Furthermore, we expect merger and acquisition activity to accelerate in many sectors as clarity around tax reform (and to a lesser extent, regulatory reform) emerges. This will likely incentivize acquirers to pursue U.S.-based assets. In our view, the vast majority of U.S. companies will benefit from aspects of U.S. tax reform, but to greatly varying degrees. This reinforces our view that we are in a “stock pickers“ market as policy beneficiaries reward investors with improved earnings and dividend growth over the near-to intermediate-term.

In terms of investment strategy, we continue to believe that a “barbell” approach is still appropriate at this stage of the market cycle. This calls for maintaining positions in less cyclical/ secular growth stocks balanced against stocks/sectors levered to policy changes, particularly related to tax reductions and higher capital spending. As tax reform gained momentum in recent months, we have added to several groups that are attractively valued and stand to benefit from policy change across a number of different industries. Financial stocks, particularly banks and life insurers, are increasingly attractive, given their high (current) tax rates and leverage to an uptick in economic growth, including our view that interest rates will gradually move higher in 2018. In addition to financial groups, other industries with improving fundamentals (via policy change) include manufacturing, defense, food/beverage, managed care, media, retail, airlines, railroads, and telecommunications. While investors have not recently focused on the health care and technology sectors, largely because many firms are global enterprises with very low tax rates, these groups have the most to gain from repatriation (we estimate that Apple alone has over $250B in cash overseas, based on recent filings). We expect this to drive incremental merger and acquisition activity and capital returns for these sectors.

Outside the U.S., we are particularly positive on European equities as macroeconomic conditions and valuations remain favorable, although we are mindful of the risk a strengthening currency may present down the road. We are less enthusiastic on UK equities as Brexit uncertainties constrain economic growth in the near-to intermediate term. We remain underweight Japan due to our concerns over the sustainability of growth, but we see opportunities in exporters levered to stronger growth outside the country. While the valuations of Chinese stocks are generally attractive on a relative basis, we favor secular growers (i.e., the Internet sector) relative to cyclical firms, given the potential for a slowdown in economic growth against a backdrop of high debt levels and tightening monetary policy. In other emerging markets, we see attractive risk/reward opportunities in India and South Korea, largely based on improving economic growth in both countries.

 

While we expect an uptick in volatility in the year ahead from unusually subdued levels experienced in 2017, we are optimistic that the current backdrop supports further gains in equity markets. Our research staff remains committed to identifying investment opportunities that will serve our shareholders well over the long-term.

With best wishes,

LOGO

Roger J. Sit

Chairman, President, CEO and Global CIO

 

 

 

DECEMBER 31, 2017

   

 

3

 

    Sit Balanced Fund

 

 

 

OBJECTIVE & STRATEGY

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

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

 

The Sit Balanced Fund’s six-month return was +8.13% while the S&P 500® Index return gained +11.42% and the Bloomberg Barclays Capital Aggregate Bond Index increased +1.24% over the period.

An improving economic and corporate earnings backdrop led to out performance of stocks relative to bonds over the past six months. In short, we expect this to continue into 2018 based on our outlook for solid economic growth, the incremental impact from the passage of the Tax Cuts and Jobs Act, and the likelihood for a slow, but steady, rise in interest rates. The tax bill is a sweeping piece of legislation that will likely have both cyclical and structural impacts on the economy and financial markets. Importantly, benefits from tax reform are only partially priced in to equity markets as upward revisions in earnings estimates will serve as an additional catalyst for stocks in the months ahead. Within the equity portion of the Fund, we have recently added to several sectors that stand to benefit from faster growth and policy change (particularly lower corporate tax rates), including the finance and producer manufacturing sectors. The equity portion of the Fund outperformed the S&P 500® Index over the past six months, driven by strong stock selection in the energy minerals and consumer non-durables sectors, combined with an overweight position in the technology services sector. The most significant drag on performance during the period was our stock selection within health technology, as Incyte and Allergan posted negative returns over the period.

The bond market generated a modest but positive return during the last six months of 2017, as income earned offset principal losses that resulted from rising interest rates. The yield curve flattened dramatically during the period, with two-year maturity U.S. treasury yields rising by 0.5% while 30-year maturity treasuries had a yield decline of 0.1%. Looking forward, we expect three additional increases to the Fed Funds rate target during 2018, which in conjunction with the ramping up of the Fed’s balance sheet tapering program, is expected to continue to put upward pressure on interest rates. This will particularly impact 2–5-year maturity securities, which we expect to drive additional flattening of the yield curve. We estimate that the fixed income portion of the fund generated a return during the period of +2.7%, compared to +1.2% for the Bloomberg/Barclays Aggregate Bond Index. The funds bond investments continue to maintain a significant yield advantage relative to the benchmark, which was the primary driver of relative out-performance. Returns also benefitted from underweights to 5–10-year maturity securities paired with overweights to 2 and 30 year maturities (commonly referred to as a “barbell” yield curve positioning), as the combination of short and long maturities provided better performance than the benchmark

HYPOTHETICAL GROWTH OF $10,000

 

LOGO

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

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

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

 

while simultaneously allowing us to maintain a shorter than benchmark portfolio duration. As part of this barbell strategy, price gains from investments in long duration U.S. Government Bonds were a key driver of returns during the period.

The stock/fixed income allocation is currently 63.0% equities, 31.9% fixed income, and 5.1% cash and equivalents. We expect to continue an above average allocation to equities based our view that stocks, as a whole, are more attractive than bonds given our positive view on tax reform and our expectation that economic growth will accelerate in the year ahead.

Roger J. Sit

Bryce A. Doty

Portfolio Managers

 

 

 

4

   

 

 

 

SIT MUTUAL FUNDS SEMI-ANNUAL REPORT

 

 

 
 
 

 

 COMPARATIVE RATES OF RETURNS

 

 as of December 31, 2017

      Sit
Balanced
Fund		   S&P 500®
Index 1		   Bloomberg
Barclays
Aggregate
Bond
Index 2

 

 Six Month

   

 

8.13%

  

 

11.42%

  

 

1.24%

 One Year

    17.74         21.83      3.54    

 Five Year

    10.22         15.79      2.10    

 Ten Year

    6.15       8.50     4.01    

 Since Inception

 (12/31/93)

    7.15       9.67     5.30    

 

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

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

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

PORTFOLIO SUMMARY

 

 

 Net Asset Value 12/31/17:

    $23.39 Per Share

 Net Asset Value 6/30/17:

    $22.71 Per Share

 Total Net Assets:

    $27.6   Million

TOP HOLDINGS

 

Top Equity Holdings:

    1. Apple, Inc.

    2. Alphabet, Inc.

    3. Microsoft Corp.

    4. Visa, Inc.

    5. Facebook, Inc.

Top Fixed Income Holdings:

    1. Security Benefit Life Insurance Co., 7.45%, 10/1/33

    2. BlackRock Income Trust

    3. MFS Intermediate Income Trust

    4. FHLMC, 5.00%, 10/1/43

    5. National Rural Utilities Cooperative, 8.00%, 3/1/32

 

Based on total net assets as of December 31, 2017. Subject to change.

FUND DIVERSIFICATION

 

     LOGO

Based on total net assets as of December 31, 2017. Subject to change.

 

 

 

DECEMBER 31, 2017

   

 

5

 

SCHEDULE OF INVESTMENTS (Unaudited)

December 31, 2017

 

Sit Balanced Fund

 

     
Name of Issuer    Quantity      Fair Value ($)  

Common Stocks - 63.0%

      

Communications - 1.2%

      

SBA Communications Corp. *

     650        106,184  

Verizon Communications, Inc.

      4,150        219,660  
     

 

 

  
        325,844  
     

 

 

  

Consumer Durables - 0.6%

      

Electronic Arts, Inc. *

     1,600        168,096  
     

 

 

  

Consumer Non-Durables - 3.8%

      

Estee Lauder Cos., Inc. - Class A

      2,625        334,005  

NIKE, Inc.

      1,125        70,369  

PepsiCo, Inc.

      2,700        323,784  

Philip Morris International, Inc.

      1,450        153,192  

Procter & Gamble Co.

      1,800        165,384  
     

 

 

  
        1,046,734  
     

 

 

  

Consumer Services - 5.4%

      

CBS Corp.

      2,125        125,375  

Marriott International, Inc.

      1,900        257,887  

Starbucks Corp.

      5,350        307,250  

Visa, Inc.

      5,650        644,213  

Walt Disney Co.

      1,400        150,514  
     

 

 

  
        1,485,239  
     

 

 

  

Electronic Technology - 7.3%

      

Apple, Inc.

      4,350        736,151  

Applied Materials, Inc.

      7,100        362,952  

Arista Networks, Inc. *

     150        35,337  

Broadcom, Ltd.

      1,710        439,299  

Ciena Corp. *

     4,000        83,720  

Intel Corp.

      4,450        205,412  

NVIDIA Corp.

      325        62,888  

Skyworks Solutions, Inc.

      1,025        97,324  
     

 

 

  
        2,023,083  
     

 

 

  

Energy Minerals - 2.6%

      

Chevron Corp.

      650        81,374  

Continental Resources, Inc. *

     2,250        119,183  

EOG Resources, Inc.

      850        91,724  

Marathon Petroleum Corp.

      3,800        250,724  

Occidental Petroleum Corp.

      2,375        174,942  
     

 

 

  
        717,947  
     

 

 

  

Finance - 7.9%

      

Ameriprise Financial, Inc.

      850        144,050  

Bank of America Corp.

      6,000        177,120  

Chubb, Ltd.

      1,250        182,662  

Goldman Sachs Group, Inc.

      1,175        299,343  

Invesco, Ltd.

      3,250        118,755  

JPMorgan Chase & Co.

      4,575        489,250  

KeyCorp

      6,700        135,139  

Prudential Financial, Inc.

      1,575        181,094  

T Rowe Price Group, Inc.

      1,050        110,176  
     
Name of Issuer    Quantity      Fair Value ($)  

US Bancorp

      3,150        168,777  

Wells Fargo & Co.

      2,800        169,876  
     

 

 

  
        2,176,242  
     

 

 

  

Health Services - 1.6%

      

Centene Corp. *

     1,400        141,232  

UnitedHealth Group, Inc.

      1,400        308,644  
     

 

 

  
        449,876  
     

 

 

  

Health Technology - 5.2%

      

AbbVie, Inc.

      2,250        217,598  

Alexion Pharmaceuticals, Inc. *

     550        65,775  

Allergan, PLC

      625        102,238  

Boston Scientific Corp. *

     3,300        81,807  

Celgene Corp. *

     1,200        125,232  

Gilead Sciences, Inc.

      1,000        71,640  

Incyte Corp. *

     1,500        142,065  

Johnson & Johnson

      2,100        293,412  

Pfizer, Inc.

      4,000        144,880  

Thermo Fisher Scientific, Inc.

      1,000        189,880  
     

 

 

  
        1,434,527  
     

 

 

  

Process Industries - 2.5%

      

DowDuPont, Inc.

      2,900        206,538  

Ecolab, Inc.

      2,225        298,550  

Sherwin-Williams Co.

      485        198,869  
     

 

 

  
        703,957  
     

 

 

  

Producer Manufacturing - 5.2%

      

3M Co.

      825        194,180  

Honeywell International, Inc.

      1,850        283,716  

Ingersoll-Rand, PLC

      1,850        165,002  

Parker-Hannifin Corp.

      700        139,706  

Raytheon Co.

      1,800        338,130  

Rockwell Automation, Inc.

      700        137,445  

United Technologies Corp.

      1,400        178,598  
     

 

 

  
        1,436,777  
     

 

 

  

Retail Trade - 3.5%

      

Amazon.com, Inc. *

     275        321,604  

Home Depot, Inc.

      1,975        374,322  

TJX Cos., Inc.

      1,850        141,451  

Ulta Beauty, Inc. *

     555        124,131  
     

 

 

  
        961,508  
     

 

 

  

Technology Services - 13.2%

      

Accenture, PLC

      1,400        214,326  

Adobe Systems, Inc. *

     2,100        368,004  

Alphabet, Inc. - Class A *

      400        421,360  

Alphabet, Inc. - Class C *

      255        266,832  

ANSYS, Inc. *

     850        125,452  

Autodesk, Inc. *

     950        99,589  
 

 

See accompanying notes to financial statements.

   

 

6

   

 

 

 

SIT MUTUAL FUNDS SEMI-ANNUAL REPORT

 

 

    

 

 

 

 

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

Cognizant Technology Solutions Corp.

      2,725        193,530  

Facebook, Inc. *

     2,875        507,322  

Microsoft Corp.

      7,575        647,966  

Oracle Corp.

      4,400        208,032  

PayPal Holdings, Inc. *

     2,750        202,455  

priceline.com, Inc. *

     130        225,906  

Red Hat, Inc. *

     450        54,045  

salesforce.com, Inc. *

     1,050        107,342  
     

 

 

  
        3,642,161  
     

 

 

  

Transportation - 2.5%

      

Delta Air Lines, Inc.

      4,075        228,200  

FedEx Corp.

      925        230,824  

Union Pacific Corp.

      1,450        194,445  

United Parcel Service, Inc.

      400        47,660  
     

 

 

  
        701,129  
     

 

 

  

Utilities - 0.5%

      

NextEra Energy, Inc.

      975        152,285  
     

 

 

  

Total Common Stocks
(cost: $10,741,067)

         17,425,405  
     

 

 

  

Bonds - 30.0%

      

Asset-Backed Securities - 1.4%

      

Bayview Opportunity Master Fund,
2017-SPL1 A, 4.00%, 10/28/641,4

     86,502        89,064  

Credit Suisse First Boston Mortgage Corp., 2005-AGE1 M3, 1 Mo. Libor + 0.65, 2.20%, 2/25/321

     74,989        74,426  

Element Rail Leasing II, LLC,
2016-1A B1, 5.93%, 3/19/464

     75,000        79,241  

Irwin Home Equity Corp.,
2005-1 M1, 5.92%, 6/25/3514

     4,847        4,891  

New Century Home Equity Loan Trust, 2005-A A4W, 4.51%, 8/25/3514

     14,157        14,687  

OSCAR US Funding Trust VII, LLC, 2017-2A A4, 2.76%, 12/10/244

     100,000        98,714  

Park Place Securities, Inc.,
2005-WHQ3 M2, 1 Mo. Libor + 0.68, 2.23%, 6/25/351

     4,793        4,794  

Residential Funding Mortgage
Securities II, Inc.,
2003-HI2 A6, 5.26%, 7/25/2814

     2,656        2,657  
     

 

 

  
        368,474  
     

 

 

  

Collateralized Mortgage Obligations - 4.6%

 

   

Fannie Mae:

      

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

      39,284        43,846  

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

      21,836        23,687  

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

      29,116        32,136  

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

      78,570        86,045  

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

      8,475        9,464  

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

      25,440        28,818  

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

      60,678        67,898  
Name of Issuer   

 

Principal
Amount ($)

      Fair Value ($)  

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

      3,567        4,048  

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

      10,966        12,650  

1993-21 KA, 7.70%, 3/25/23

      53,535        58,147  

Freddie Mac:

      

4293 BA, 5.29%, 10/15/471

     26,620        28,054  

2102 Z, 6.00%, 12/15/28

      31,472        34,576  

2122 ZE, 6.00%, 2/15/29

      34,551        38,511  

2480 Z, 6.00%, 8/15/32

      54,937        62,414  

2980 QA, 6.00%, 5/15/35

      36,199        40,571  

2283 K, 6.50%, 12/15/23

      15,107        16,186  

2357 ZJ, 6.50%, 9/15/31

      32,251        35,923  

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

      29,830        32,646  

4520 HM, 6.50%, 8/15/45

      59,381        70,223  

1142 IA, 7.00%, 10/15/21

      73,338        77,505  

3946 KW, 7.00%, 11/15/29

      5,991        6,284  

3704 CT, 7.00%, 12/15/36

      28,932        33,267  

2238 PZ, 7.50%, 6/15/30

      24,331        28,171  

Government National Mortgage Association:

      

2015-80 BA, 6.98%, 6/20/451

     49,342        56,471  

2014-69 W, 7.27%, 11/20/341

     48,845        56,199  

2013-133 KQ, 7.29%, 8/20/381

     43,939        51,005  

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

      26,230        28,742  

New Residential Mortgage Loan Trust,
2016-2A B3, 5.68%, 11/26/351, 4

      46,994        50,852  

Sequoia Mortgage Trust:

      

2013-3 A2, 2.50%, 3/25/431

     26,760        26,026  

2012-4 A2, 3.00%, 9/25/421

     11,432        11,337  

2012-1 B1, 4.25%, 1/25/421

     72,804        74,034  

Vendee Mortgage Trust:

      

2008-1 B, 7.02%, 3/15/251

     20,954        23,898  

1994-2 2, 8.63%, 5/15/241

     17,804        18,853  
     

 

 

  
        1,268,487  
     

 

 

  

Corporate Bonds - 14.7%

      

Adobe Systems, Inc., 3.25%, 2/1/25

      75,000        77,024  

Affiliated Managers Group, Inc.:

      

3.50%, 8/1/25

      50,000        50,560  

4.25%, 2/15/24

      25,000        26,360  

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

      50,000        52,342  

Amazon.com, Inc., 3.80%, 12/5/24

      50,000        52,808  

American Airlines 2015-2 Trust, 4.00%, 9/22/27

      106,833        110,369  

American Express Credit, 3.30%, 5/3/27

      100,000        101,477  

Anheuser-Busch InBev Finance, Inc., 4.90%, 2/1/46

      100,000        115,899  

Apollo Mgmt. Hldgs. LP, 4.40%, 5/27/264

     25,000        26,112  

Archer-Daniels-Midland Co., 2.50%, 8/11/26

      25,000        23,846  

Arrow Electronics, Inc., 3.88%, 1/12/28

      50,000        49,850  

Bank of New York Mellon Corp.

      

(Subordinated), 3.30%, 8/23/29

      100,000        99,684  
 

 

See accompanying notes to financial statements.

   

 

DECEMBER 31, 2017

   

 

 

 

7

 

 

 

SCHEDULE OF INVESTMENTS (Unaudited)

December 31, 2017

 

Sit Balanced Fund (Continued)

 

Name of Issuer   

 

Principal
Amount ($)

      Fair Value ($)  

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

      50,000        64,523  

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

      50,000        64,198  

Berkshire Hathaway Energy, 3.50%, 2/1/25

      25,000        25,776  

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

      50,000        50,566  

Chubb INA Holdings, Inc., 8.88%, 8/15/29

      50,000        72,954  

Comcast Corp., 3.38%, 8/15/25

      100,000        102,628  

Conoco Funding Co., 7.25%, 10/15/31

      50,000        68,952  

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

      50,000        56,754  

Doric Nimrod Air Alpha 2013-1 Trust, 5.25%, 5/30/234

     59,693        62,848  

Doric Nimrod Air Finance Alpha 2012-1 Trust, 5.13%, 11/30/224

     47,096        49,146  

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

      25,000        27,981  

First Maryland Capital II, 3 Mo. Libor + 0.85, 2.23%, 2/1/271

     100,000        94,000  

Georgia-Pacific, LLC, 7.25%, 6/1/28

      85,000        113,108  

Gilead Sciences, Inc.:

      

3.50%, 2/1/25

      100,000        103,421  

3.65%, 3/1/26

      100,000        103,740  

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

      80,383        82,392  

Home Depot, Inc., 5.95%, 4/1/41

      50,000        67,711  

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

      47,000        52,493  

Intel Corp., 3.70%, 7/29/25

      100,000        105,574  

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

      25,000        32,693  

JPMorgan Chase & Co., 2.95%, 10/1/26

      50,000        49,112  

Louisville Gas & Electric, 3.30%, 10/1/25

      50,000        51,265  

Manufacturers & Traders Trust Co. (Subordinated), 3 Mo. Libor + 0.64, 2.12%, 12/1/211

     75,000        74,441  

MetLife, Inc., 3.60%, 4/10/24

      50,000        52,309  

MUFG Americas Holdings Corp.:

      

3.00%, 2/10/25

      50,000        49,366  

3.50%, 6/18/22

      50,000        51,253  

National Rural Utilities Cooperative Finance Corp., 8.00%, 3/1/32

      100,000        145,970  

NIKE, Inc., 2.38%, 11/1/26

      50,000        47,636  

PepsiCo, Inc., 3.00%, 10/15/27

      100,000        99,647  

Pfizer, Inc., 2.75%, 6/3/26

      100,000        98,711  

PNC Bank NA, 3.10%, 10/25/27

      100,000        99,851  

Polar Tankers, Inc., 5.95%, 5/10/374

     25,000        28,729  

Provident Co, Inc., 7.25%, 3/15/28

      100,000        125,552  

Security Benefit Life Insurance Co. (Subordinated), 7.45%, 10/1/334

     150,000        180,640  

Spirit Airlines 2015-1A Trust, 4.10%, 4/1/28

      58,295        60,504  

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

      38,014        39,251  

TJX Cos, Inc., 2.25%, 9/15/26

      75,000        70,383  

United Insurance Holdings Corp., 6.25%, 12/15/27

      100,000        101,563  

United Parcel Service, Inc., 3 Mo. Libor + 0.45, 1.86%, 4/1/231

     100,000        100,251  
Name of Issuer   

 

Principal
Amount ($)

      Fair Value ($)  

US Bancorp, 3.15%, 4/27/27

      100,000        100,183  

USF&G Capital (Subordinated), 8.31%, 7/1/464

     60,000        90,250  

Verizon Communications, 5.90%, 2/15/54

      2,000        52,760  

Westar Energy, Inc., 3.25%, 12/1/25

      75,000        75,705  

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

      25,000        33,516  
     

 

 

  
        4,066,637  
     

 

 

  

Federal Home Loan Mortgage Corporation - 0.9%

 

   

5.00%, 10/1/43

      134,118        147,608  

6.50%, 2/1/22

      40,870        42,857  

7.50%, 7/1/29

      32,517        37,458  

8.00%, 2/1/34

      20,808        24,243  

8.38%, 5/17/20

      1,346        1,360  
     

 

 

  
        253,526  
     

 

 

  

Federal National Mortgage Association - 2.3%

 

   

5.00%, 2/1/33

      31,605        32,114  

5.50%, 10/1/33

      110,364        122,040  

6.00%, 2/1/38

      76,825        87,237  

6.10%, 11/1/43

      43,644        48,615  

6.50%, 9/1/27

      48,051        53,262  

7.00%, 1/1/32

      11,949        12,675  

7.00%, 3/1/33

      41,997        47,952  

7.00%, 12/1/38

      78,936        88,955  

8.00%, 6/1/24

      20,120        21,669  

8.00%, 1/1/31

      33,349        35,347  

8.00%, 2/1/31

      26,811        32,551  

8.47%, 7/15/26

      5,003        5,490  

8.50%, 10/1/30

      34,324        39,579  
     

 

 

  
        627,486  
     

 

 

  

Government National Mortgage Association - 1.6%

 

   

5.75%, 12/15/22

      59,293        63,158  

6.00%, 4/15/29

      54,849        61,886  

6.00%, 7/15/38

      82,251        92,011  

6.50%, 11/20/38

      41,968        48,224  

7.00%, 12/15/24

      14,977        15,959  

7.00%, 11/20/27

      19,857        22,800  

7.00%, 9/20/29

      51,617        59,135  

7.00%, 9/20/38

      16,954        19,671  

7.50%, 4/20/32

      42,457        47,787  

8.00%, 7/15/24

      17,625        18,866  
     

 

 

  
        449,497  
     

 

 

  

Taxable Municipal Securities - 4.2%

 

   

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

      50,000        53,540  

Geary County Unified School Dist. No. 475, 3.77%, 9/1/37

      50,000        50,392  

Hawaii Airports Sys. Rev., 3.89%, 7/1/37

      75,000        77,264  

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

      40,000        40,500  

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

      33,202        33,075  

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

      30,000        30,911  

Mercy Health, 3.56%, 8/1/27

      100,000        100,416  
 

 

See accompanying notes to financial statements.

   

 

8

   

 

 

 

SIT MUTUAL FUNDS SEMI-ANNUAL REPORT

 

 

    

 

 

 

 

Name of Issuer   

 

Principal
Amount ($)

      Fair Value ($)  

Multistate Liquidating Trust No. 1, 3.11%, 12/15/284, 17

      42,000        40,043  

Oklahoma Dev. Fin. Auth., 4.10%, 6/1/37

      100,000        103,265  

Partners Healthcare Sys., 3.77%, 7/1/48

      100,000        99,314  

Public Finance Authority, 5.08%, 10/1/324

     100,000        107,017  

San Francisco Comm. Facs., 3.75%, 9/1/37

      100,000        100,479  

San Jose Intl. Airport, 6.60%, 3/1/41

      110,000        121,999  

San Jose Red. Agency, 3.38%, 8/1/34

      100,000        98,520  

So. Dakota Hsg. Dev. Auth., 3.89%, 5/1/32

      45,000        46,112  

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

      60,000        63,282  
     

 

 

  
        1,166,129  
     

 

 

  

U.S. Treasury / Federal Agency Securities - 0.3%

 

   

U.S. Treasury Strip, 1.46%, 11/15/456

     175,000        80,571  
     

 

 

  

Total Bonds
(cost: $8,257,314)

         8,280,807  
     

 

 

  

Investment Companies - 1.9%

      

BlackRock Enhanced Government Fund

      8,281        110,965  

BlackRock Income Trust

      27,500        169,675  

Duff & Phelps Utility and Corp. Bond Trust

      8,700        76,995  

MFS Intermediate Income Trust

      39,300        163,095  

Nuveen Multi-Market Income Fund, Inc.

      2,153        16,406  
     

 

 

  

Total Investment Companies
(cost: $572,555)

         537,136  
     

 

 

  
Name of Issuer   

 

 

Quantity

      Fair Value ($)  

Short-Term Securities - 4.9%

      

Fidelity Inst. Money Mkt. Gvt. Fund, 1.14%

      1,347,232        1,347,232  
     

 

 

  

(cost: $1,347,232)

      

Total Investments in Securities - 99.8%
(cost: $20,918,168)

         27,590,580  

Other Assets and Liabilities, net - 0.2%

         57,083  
     

 

 

  

Total Net Assets - 100.0%

       $ 27,647,663  
     

 

 

  
                   

 

* 

Non-income producing security.

 

1

Variable rate security. Rate disclosed is as of December 31, 2017. Certain variable rate securities are not based on a published reference rate and spread but are determined by the issuer or agent and are based on current market conditions, or, for mortgage-backed securities, are impacted by the individual mortgages which are paying off over time. These securities do not indicate a reference rate and spread in their descriptions.

 

4 

144A Restricted Security. The total value of such securities as of December 31, 2017 was $902,656 and represented 3.3% of net assets. These securities have been determined to be liquid by the Adviser in accordance with guidelines established by the Board of Directors.

 

6 

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

 

14 

Step Coupon: A bond that pays an initial coupon rate for the first period and then a higher coupon rate for the following periods. Rate disclosed is as of December 31, 2017.

 

17

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

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

LLC — Limited Liability Company

PLC — Public Limited Company

 

 

See accompanying notes to financial statements.

   

 

DECEMBER 31, 2017

   

 

 

 

9

 

 

    

SCHEDULE OF INVESTMENTS (Unaudited)

December 31, 2017

 

Sit Balanced Fund (Continued)

A summary of the levels for the Fund’s investments as of December 31, 2017 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 **

     17,425,405                  —      —        17,425,405  

Asset-Backed Securities

      —         368,474      —        368,474  

Collateralized Mortgage Obligations

      —      1,268,487      —        1,268,487  

Corporate Bonds

      —      4,066,637      —        4,066,637  

Federal Home Loan Mortgage Corporation

      —         253,526      —        253,526  

Federal National Mortgage Association

      —         627,486      —        627,486  

Government National Mortgage Association

      —         449,497      —        449,497  

Taxable Municipal Securities

      —      1,166,129      —        1,166,129  

U.S. Treasury / Federal Agency Securities

      —          80,571      —        80,571  

Investment Companies

      537,136                —      —        537,136  

Short-Term Securities

      1,347,232                —      —        1,347,232  
  

 

 

  

Total:

      19,309,773      8,280,807      —        27,590,580  
  

 

 

  

 

**

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

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

 

See accompanying notes to financial statements.

   

 

10

   

 

 

 

SIT MUTUAL FUNDS SEMI-ANNUAL REPORT

 

 

[This page intentionally left blank.]

 

 

 

 

DECEMBER 31, 2017

   

 

11

 

    Sit Dividend Growth Fund - Class I and Class S

 

 

 

OBJECTIVE & STRATEGY

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

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

 

 

The Sit Dividend Growth Fund Class I posted a +10.71% return for the last six months of 2017, compared to the +11.42% return for the S&P 500® Index. The Fund’s gross yield (before deducting Fund expenses) was 2.28%, compared to 1.87% for the S&P 500® Index.

U.S. stocks posted exceptional returns during the second half of 2017, fueled by a combination of strong corporate earnings, continued low interest rates, and the prospect of lower corporate tax rates in the U.S. Importantly, this momentum is continuing into 2018 as global economic indicators remain on the upswing, with the pro-growth impact of tax reform likely resulting in stronger growth in the U.S in the near- to intermediate term. In terms of strategy, we have tilted the portfolio in recent months to companies levered to both policy change and improving economic growth. In particular, we have added to the finance sector, especially banks and life insurers. These two groups are increasingly attractive given their high (current) tax rates and leverage to an uptick in economic growth, including our view that interest rates will gradually move higher in 2018. Other industries with improving fundamentals (via policy change) include manufacturing, defense, food/beverage, managed care, media, retail, airlines, railroads, and telecommunications. We have reduced positions in low growth sectors that tend to underperform when interest rates increase, including REITs, utilities, pharmaceuticals, and tobacco stocks.

While we are optimistic on the outlook for equities in the year ahead, we recognize there are risks that could dampen investor sentiment, particularly later in 2018. First and foremost, inflation could emerge rather quickly as fiscal stimulus (i.e., tax cuts) is being applied to an economy that is already near the full employment zone. In addition, commodity prices, particularly oil, have generally been on the upswing over the past several months. This could bring about a more “hawkish” Federal Reserve, clearly a potential negative for stocks. With equities at historically high valuations, we believe the Fund’s diversification among high quality dividend paying stocks offers attractive risk/reward at this point in the economic and market cycle. Regardless of sector, we remain focused on companies that have strong balance sheets, generate consistent growth in earnings and cash flow, and maintain a commitment to consistently increasing dividends to shareholders.

HYPOTHETICAL GROWTH OF $10,000

LOGO

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

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

 

The Fund posted solid returns over the second half of 2017, but modestly trailed the S&P 500® index over the period. Underperformance in the finance sector was a key reason for lagging the overall index, as defensive positions (Physicians Realty Trust, Macquarie Infrastructure, and Validus) significantly trailed the benchmark sector, which was led by banks and life insurers during the period. In addition, media positions (CBS and Walt Disney) detracted from performance. Conversely, the Fund benefited from strong stock selection in the producer manufacturing, energy minerals, and process industries sectors. In terms of individual stocks, the most significant contributors during second half of the year included Abbvie, Suncor Energy, Parker-Hannifan, Verizon Communications, and Home Depot.

We appreciate investors’ continued interest in the Fund.

Roger J. Sit

Kent L. Johnson

Michael J. Stellmacher

Portfolio Managers

 

 

12

    SIT MUTUAL FUNDS ANNUAL REPORT

 
 
 

 

 COMPARATIVE RATES OF RETURNS

 

 as of December 31, 2017

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

 

 Six Month

   

 

10.71%

  

 

10.55%

  

 

11.42%

 One Year

    20.24      19.88      21.83   

 Five Year

    13.97      13.69      15.79   

 Ten Year

    8.79    8.51    8.50 

 Since Inception - Class I

    9.92    n/a       8.68 

 (12/31/03)

       

 Since Inception - Class S

    n/a       9.26    8.64 

 (3/31/06)

       

 

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 12/31/17:

      $16.80 Per Share  

 Net Asset Value 6/30/17:

      $16.88 Per Share  

 Total Net Assets:

      $939.7 Million  

 Class S:

   

 Net Asset Value 12/31/17:

      $16.73 Per Share  

 Net Asset Value 6/30/17:

      $16.81 Per Share  

 Total Net Assets:

      $60.2   Million  

 Weighted Average Market Cap:

      $148.9 Billion  

TOP 10 HOLDINGS

 

  1. Verizon Communications, Inc.

  2. Microsoft Corp.

  3. Johnson & Johnson

  4. Apple, Inc.

  5. JPMorgan Chase & Co.

  6. Home Depot, Inc.

  7. Bank of America Corp.

  8. Broadcom, Ltd.

  9. Morgan Stanley

10. Abbott Laboratories

 

 

Based on total net assets as of December 31, 2017. Subject to change.

FUND DIVERSIFICATION

 

 

   LOGO

Based on total net assets as of December 31, 2017. Subject to change.

 

 

 

DECEMBER 31, 2017

   

 

13

 

SCHEDULE OF INVESTMENTS (Unaudited)

December 31, 2017

 

Sit Dividend Growth Fund

 

Name of Issuer   

 

 

Quantity

      Fair Value ($)  

Common Stocks - 98.7%

      

Communications - 3.6%

      

CenturyLink, Inc.

      277,650        4,631,202  

Verizon Communications, Inc.

      596,175        31,555,543  
     

 

 

  
        36,186,745  
     

 

 

  

Consumer Durables - 1.2%

      

Snap-On, Inc.

      22,175        3,865,102  

Stanley Black & Decker, Inc.

      50,275        8,531,165  
     

 

 

  
        12,396,267  
     

 

 

  

Consumer Non-Durables - 7.9%

      

Conagra Brands, Inc.

      366,600        13,809,822  

Dr Pepper Snapple Group, Inc.

      102,975        9,994,753  

Kimberly-Clark Corp.

      41,000        4,947,060  

Kraft Heinz Co.

      177,300        13,786,848  

PepsiCo, Inc.

      150,100        17,999,992  

Philip Morris International, Inc.

      88,800        9,381,720  

Pinnacle Foods, Inc.

      147,825        8,791,153  
     

 

 

  
        78,711,348  
     

 

 

  

Consumer Services - 5.7%

      

Carnival Corp.

      124,575        8,268,043  

CBS Corp.

      146,625        8,650,875  

Comcast Corp.

      251,750        10,082,587  

Starbucks Corp.

      156,025        8,960,516  

Visa, Inc.

      107,300        12,234,346  

Walt Disney Co.

      83,125        8,936,769  
     

 

 

  
        57,133,136  
     

 

 

  

Electronic Technology - 9.8%

      

Apple, Inc.

      158,875        26,886,416  

Applied Materials, Inc.

      217,975        11,142,882  

Broadcom, Ltd.

      78,975        20,288,678  

Intel Corp.

      371,900        17,166,904  

Skyworks Solutions, Inc.

      103,425        9,820,204  

TE Connectivity, Ltd.

      83,200        7,907,328  

Xilinx, Inc.

      74,025        4,990,766  
     

 

 

  
        98,203,178  
     

 

 

  

Energy Minerals - 4.0%

      

Marathon Petroleum Corp.

      119,800        7,904,404  

Occidental Petroleum Corp.

      215,425        15,868,206  

Suncor Energy, Inc.

      432,750        15,890,580  
     

 

 

  
        39,663,190  
     

 

 

  

Finance - 16.9%

      

Allstate Corp.

      93,625        9,803,474  

American Financial Group, Inc.

      37,425        4,062,109  

Bank of America Corp.

      803,375        23,715,630  

CME Group, Inc.

      50,675        7,401,084  

East West Bancorp, Inc.

      146,225        8,894,867  

Everest Re Group, Ltd.

      31,375        6,942,032  

JPMorgan Chase & Co.

      249,500        26,681,530  
Name of Issuer   

 

 

Quantity

      Fair Value ($)  

KeyCorp

      555,500        11,204,435  

Legg Mason, Inc.

      228,625        9,597,678  

Lincoln National Corp.

      128,250        9,858,578  

Macquarie Infrastructure Corp.

      90,925        5,837,385  

Morgan Stanley

      361,850        18,986,270  

Physicians Realty Trust

      615,650        11,075,544  

T Rowe Price Group, Inc.

      76,225        7,998,289  

Validus Holdings, Ltd.

      147,100        6,901,932  
     

 

 

  
        168,960,837  
     

 

 

  

Health Services - 3.6%

      

Aetna, Inc.

      39,550        7,134,424  

Quest Diagnostics, Inc.

      116,475        11,471,623  

UnitedHealth Group, Inc.

      78,475        17,300,598  
     

 

 

  
        35,906,645  
     

 

 

  

Health Technology - 12.1%

      

Abbott Laboratories

      324,000        18,490,680  

AbbVie, Inc.

      191,000        18,471,610  

Allergan, PLC

      44,025        7,201,610  

Becton Dickinson and Co.

      83,000        17,766,980  

Gilead Sciences, Inc.

      131,450        9,417,078  

Johnson & Johnson

      202,425        28,282,821  

Merck & Co., Inc.

      97,300        5,475,071  

Pfizer, Inc.

      437,700        15,853,494  
     

 

 

  
        120,959,344  
     

 

 

  

Industrial Services - 1.1%

      

TransCanada Corp.

      235,025        11,431,616  
     

 

 

  

Process Industries - 5.2%

      

DowDuPont, Inc.

      255,900        18,225,198  

International Paper Co.

      170,775        9,894,703  

LyondellBasell Industries NV

      61,600        6,795,712  

Scotts Miracle-Gro Co.

      75,475        8,075,070  

Sherwin-Williams Co.

      21,950        9,000,378  
     

 

 

  
        51,991,061  
     

 

 

  

Producer Manufacturing - 9.4%

      

3M Co.

      37,775        8,891,102  

Boeing Co.

      32,650        9,628,811  

Honeywell International, Inc.

      108,500        16,639,560  

Ingersoll-Rand, PLC

      99,025        8,832,040  

Lockheed Martin Corp.

      30,930        9,930,076  

Parker-Hannifin Corp.

      74,675        14,903,636  

Raytheon Co.

      89,750        16,859,538  

Rockwell Automation, Inc.

      40,675        7,986,536  
     

 

 

  
        93,671,299  
     

 

 

  

Retail Trade - 5.7%

      

Best Buy Co., Inc.

      110,250        7,548,817  

Costco Wholesale Corp.

      41,600        7,742,592  
 

 

See accompanying notes to financial statements.

   

 

14

   

 

 

 

SIT MUTUAL FUNDS SEMI-ANNUAL REPORT

 

 

    

 

 

 

 

Name of Issuer   

 

 

Quantity

      Fair Value ($)  

Home Depot, Inc.

      132,350        25,084,295  

TJX Cos., Inc.

      215,075        16,444,634  
     

 

 

  
        56,820,338  
     

 

 

  

Technology Services - 6.1%

      

Accenture, PLC

      52,525        8,041,052  

Alphabet, Inc. - Class A *

     6,465        6,810,231  

Intuit, Inc.

      52,100        8,220,338  

Microsoft Corp.

      341,550        29,216,187  

Oracle Corp.

      193,800        9,162,864  
     

 

 

  
        61,450,672  
     

 

 

  

Transportation - 3.4%

      

Delta Air Lines, Inc.

      194,350        10,883,600  

FedEx Corp.

      48,000        11,977,920  

Union Pacific Corp.

      80,925        10,852,042  
     

 

 

  
        33,713,562  
     

 

 

  
Name of Issuer   

 

 

Quantity

      Fair Value ($)  

Utilities - 3.0%

      

DTE Energy Co.

      104,500        11,438,570  

NextEra Energy, Inc.

      89,450        13,971,196  

Southern Co.

      84,150        4,046,774  
     

 

 

  
        29,456,540  
     

 

 

  

Total Common Stocks

      

(cost: $797,628,515)

         986,655,778  
     

 

 

  

Short-Term Securities - 0.3%

      

Fidelity Inst. Money Mkt. Gvt. Fund, 1.14%

      3,558,992        3,558,992  
     

 

 

  

(cost: $3,558,992)

      

Total Investments in Securities - 99.0%

      

(cost: $801,187,507)

         990,214,770  

Other Assets and Liabilities, net - 1.0%

         9,733,985  
     

 

 

  

Total Net Assets - 100.0%

         $999,948,755  
     

 

 

  

 

* 

Non-income producing security.

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

PLC — Public Limited Company

 

 

A summary of the levels for the Fund’s investments as of December 31, 2017 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 **

     986,655,778      —    —      986,655,778  

Short-Term Securities

      3,558,992      —    —      3,558,992  

Total:

      990,214,770      —    —      990,214,770  

 

**

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

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

 

See accompanying notes to financial statements.

   

 

DECEMBER 31, 2017

   

 

 

 

15

 

 

 

    Sit Global Dividend Growth Fund - Class I and Class S

 

 

 

OBJECTIVE & STRATEGY

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

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

 

 

The Global Dividend Growth Fund Class I generated a return of +10.80% for the six-month period ending December 31, 2017 slightly outperforming the +10.61% return for the MSCI World Index. Encouraging global economic growth prospects and passage of the Tax Cuts and Jobs Act helped push the U.S. and international stock markets higher in the last six months of 2017. As one might expect, stocks of domestic-centric companies that are beneficiaries of tax reform and/or reflation generally outperformed, particularly in December.

Contributing favorably to the absolute and relative outperformance for the six-month period was the Fund’s strong stock selection in the pharmaceutical, software and energy industries. Partially offsetting this was the underweight exposure and negative stock selection in consumer oriented stocks. Regionally, the United States was the top contributing country in the Fund due to strong stock selection and the overweight position relative to the Index.

Key beneficiaries of the Tax Cuts and Jobs Act include consumers, domestic-centric firms with a high effective tax rate currently, and multinational corporations that can repatriate large offshore cash balances. Our judgment is that equity markets have only partially priced in the benefits of tax reform and that upward earnings revisions will be an additional catalyst for stocks in the months ahead. Furthermore, we expect merger and acquisition activity to accelerate in many sectors as clarity around tax reform (and to a lesser extent, regulatory reform) emerge.

As tax reform gained momentum in recent months, we have added to and are looking to add to several groups that are attractively valued and stand to benefit from policy change across a number of different industries. Financial stocks, particularly banks and life insurers, are increasingly attractive given their high (current) tax rates and leverage to an uptick in economic growth, including the likelihood that interest rates will gradually move higher in 2018. In addition to financial groups, other industries with improving fundamentals (via policy change) include manufacturing, defense, food/ beverage, managed care, media, retail, airlines, railroads, and telecommunications. While the introduction of tax reform adds intricacy to the current market environment, we strongly believe it also represents opportunity for active investors.

HYPOTHETICAL GROWTH OF $10,000

LOGO

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

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

 

The portfolio emphasizes high quality, dividend paying growth stocks and continues to be well diversified. The Fund’s gross dividend yield is 2.9% and is approximately +60 basis points higher than the 2.3% yield of the Index. In periods of low absolute returns, the dividend component of the return becomes more significant and this should benefit the dividend paying companies that are the focus of this strategy. Dividends rose throughout 2017 and the bulk of the companies (88%) in the Fund increased their dividends.

Roger J. Sit     Raymond E. Sit     Tasha M. Murdoff     Kent L. Johnson     Michael J. Stellmacher

Portfolio Managers

 

 

16

    SIT MUTUAL FUNDS SEMI-ANNUAL REPORT

 
 
 

 

COMPARATIVE RATES OF RETURNS

 

as of December 31, 2017

  
     Sit Global
Dividend
        Growth Fund        		     MSCI
World
Index 1
      Class I     Class S    

Six Months

      10.80 %      10.67 %      10.61%    

One Year

      19.75       19.54       22.40     

Five Year

      9.53       9.27       11.64     

Since Inception

(9/30/08)

      9.41       9.14       8.65     

 

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

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

PORTFOLIO SUMMARY

 

 Class I:

   

 Net Asset Value 12/31/17:

      $15.92 Per Share        

 Net Asset Value 6/30/17:

      $14.54 Per Share  

 Total Net Assets:

      $29.3   Million  

 Class S:

   

 Net Asset Value 12/31/17:

      $15.92 Per Share  

 Net Asset Value 6/30/17:

      $14.53 Per Share  

 Total Net Assets:

      $3.5     Million  

 Weighted Average Market Cap:

      $146.6 Billion  

TOP 10 HOLDINGS

 

  1. Microsoft Corp.

  2. Johnson & Johnson

  3. Verizon Communications, Inc.

  4. JPMorgan Chase & Co.

  5. Pfizer, Inc.

  6. AbbVie, Inc.

  7. PepsiCo, Inc.

  8. Apple, Inc.

  9. Diageo, PLC, ADR

10. Nestle SA

 

Based on total net assets as of December 31, 2017. Subject to change.

FUND DIVERSIFICATION

 

LOGO

Based on total net assets as of December 31, 2017. Subject to change.

 

 

 

DECEMBER 31, 2017

   

 

 

 

17

 

 

    

SCHEDULE OF INVESTMENTS (Unaudited)

December 31, 2017

 

Sit Global Dividend Growth Fund

 

Name of Issuer   

 

 

Quantity

     

 

 

Fair Value ($)

  

Common Stocks - 97.9%

      

Asia - 4.2%

      

Australia - 0.9%

      

Amcor, Ltd.

      24,700        295,963  
     

 

 

  

China/Hong Kong - 1.0%

      

HSBC Holdings, PLC, ADR

      6,475        334,369  
     

 

 

  

Japan - 1.1%

      

Mitsubishi UFJ Financial Group, Inc., ADR

      51,300        372,951  
     

 

 

  

Singapore - 1.2%

      

Broadcom, Ltd.

      1,500        385,350  
     

 

 

  

Europe - 25.4%

      

Belgium - 1.3%

      

Anheuser-Busch InBev NV, ADR

      3,675        409,983  
     

 

 

  

France - 1.5%

      

Unibail-Rodamco SE

      2,000        503,303  
     

 

 

  

Germany - 3.8%

      

Allianz SE, ADR

      16,400        376,626  

Aurelius SE & Co.

      5,500        375,067  

Siemens AG

      3,675        508,831  
     

 

 

  
        1,260,524  
     

 

 

  

Ireland - 2.2%

      

Accenture, PLC

      2,750        420,998  

Ingersoll-Rand, PLC

      3,275        292,097  
     

 

 

  
        713,095  
     

 

 

  

Netherlands - 4.8%

      

ING Groep NV, ADR

      34,900        644,254  

LyondellBasell Industries NV

      3,225        355,782  

RELX NV

      25,400        583,803  
     

 

 

  
        1,583,839  
     

 

 

  

Spain - 2.2%

      

Iberdrola SA

      60,400        467,573  

Industria de Diseno Textil SA

      7,525        261,657  
     

 

 

  
        729,230  
     

 

 

  

Switzerland - 4.0%

      

Chubb, Ltd.

      1,950        284,954  

Nestle SA

      7,825        672,764  

Zurich Insurance Group AG

      1,140        346,610  
     

 

 

  
        1,304,328  
     

 

 

  

United Kingdom - 5.6%

      

British American Tobacco, PLC, ADR

      2,300        154,077  

Diageo, PLC, ADR

      4,625        675,389  

DS Smith, PLC

      95,025        662,369  

WPP, PLC

      20,000        361,314  
     

 

 

  
        1,853,149  
     

 

 

  
Name of Issuer   

 

 

Quantity

     

 

 

Fair Value ($)

  

North America - 68.3%

      

Bermuda - 0.7%

      

XL Group, Ltd.

      6,000        210,960  
     

 

 

  

Canada - 4.3%

      

BCE, Inc.

      10,925        524,509  

Suncor Energy, Inc.

      10,275        377,298  

TransCanada Corp.

      6,600        321,024  

Vermilion Energy, Inc.

      5,400        196,128  
     

 

 

  
        1,418,959  
     

 

 

  

United States - 63.3%

      

3M Co.

      2,225        523,698  

Abbott Laboratories

      9,150        522,190  

AbbVie, Inc.

      7,300        705,983  

Alphabet, Inc. - Class A *

     450        474,030  

Apple, Inc.

      4,000        676,920  

Applied Materials, Inc.

      8,175        417,906  

Arthur J Gallagher & Co.

      4,875        308,490  

CenterPoint Energy, Inc.

      7,400        209,864  

CenturyLink, Inc.

      11,625        193,905  

CubeSmart

      8,900        257,388  

Delta Air Lines, Inc.

      9,450        529,200  

Domtar Corp.

      5,400        267,408  

DowDuPont, Inc.

      8,825        628,516  

Home Depot, Inc.

      3,000        568,590  

Honeywell International, Inc.

      3,875        594,270  

Intel Corp.

      8,625        398,130  

International Paper Co.

      5,900        341,846  

Johnson & Johnson

      6,925        967,561  

JPMorgan Chase & Co.

      8,750        935,725  

KeyCorp

      24,100        486,097  

Kraft Heinz Co.

      4,350        338,256  

Lockheed Martin Corp.

      1,365        438,233  

Macquarie Infrastructure Corp.

      5,275        338,655  

Marathon Petroleum Corp.

      6,650        438,767  

Microsoft Corp.

      14,400        1,231,776  

Occidental Petroleum Corp.

      5,975        440,118  

Parker-Hannifin Corp.

      1,875        374,212  

PepsiCo, Inc.

      5,775        692,538  

Pfizer, Inc.

      20,600        746,132  

Physicians Realty Trust

      23,600        424,564  

Prudential Financial, Inc.

      3,025        347,814  

Rockwell Automation, Inc.

      1,825        358,339  

Scotts Miracle-Gro Co.

      3,225        345,043  

Starbucks Corp.

      11,050        634,602  

T Rowe Price Group, Inc.

      4,800        503,664  

Union Pacific Corp.

      4,600        616,860  

United Parcel Service, Inc.

      2,700        321,705  

United Technologies Corp.

      2,675        341,250  

US Bancorp

      8,475        454,090  
 

 

See accompanying notes to financial statements.

   

 

18

   

 

 

 

SIT MUTUAL FUNDS SEMI-ANNUAL REPORT

 

 

    

 

    

 

 

 

Name of Issuer   

 

 

Quantity

     

 

 

Fair Value ($)

  

Verizon Communications, Inc.

      18,000        952,740  

WEC Energy Group, Inc.

      6,775        450,063  
     

 

 

  
        20,797,138  
     

 

 

  

Total Common Stocks
(cost: $25,259,287)

         32,173,141  
     

 

 

  

Short-Term Securities - 1.9%

      

Fidelity Inst. Money Mkt. Gvt. Fund, 1.14%

      630,507        630,507  
     

 

 

  

    (cost: $630,507)

      

Total Investments in Securities - 99.8%
(cost: $25,889,794)

         32,803,648  

Other Assets and Liabilities, net - 0.2%

         60,371  
     

 

 

  

Total Net Assets - 100.0%

         $32,864,019  
     

 

 

  
             

 

*

Non-income producing security.

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

ADR — American Depositary Receipt

PLC — Public Limited Company

 

 

See accompanying notes to financial statements.

   

 

DECEMBER 31, 2017

   

 

 

 

19

 

 

 

SCHEDULE OF INVESTMENTS (Unaudited)

December 31, 2017

 

Sit Global Dividend Growth Fund (Continued)

A summary of the levels for the Fund’s investments as of December 31, 2017 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

        —        295,963        —        295,963   

Belgium

        409,983        —        —        409,983

Bermuda

        210,960        —        —        210,960

Canada

        1,418,959        —        —        1,418,959

China/Hong Kong

        334,369        —        —        334,369

France

        —        503,303        —        503,303

Germany

        376,626        883,898        —        1,260,524

Ireland

        713,095        —        —        713,095

Japan

        372,951        —        —        372,951

Netherlands

        1,000,036        583,803        —        1,583,839

Singapore

        385,350        —        —        385,350

Spain

        —        729,230        —        729,230

Switzerland

        284,954        1,019,374        —        1,304,328

United Kingdom

        829,466        1,023,683        —        1,853,149

United States

        20,797,138        —        —        20,797,138

Short-Term Securities

        630,507        —        —        630,507

Total:

        27,764,394        5,039,254        —        32,803,648

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

 

See accompanying notes to financial statements.

   

 

20

   

 

 

 

SIT MUTUAL FUNDS SEMI-ANNUAL REPORT

 

 

[This page intentionally left blank.]

 

 

 

 

DECEMBER 31, 2017

   

 

21

 

    Sit Large Cap Growth Fund

 

 

 

OBJECTIVE & STRATEGY

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

 

 

The Sit Large Cap Growth Fund’s six-month return was +11.86%, compared to the +14.23% return for the Russell 1000® Growth index. The S&P 500® Index return for the period was +11.42%.

U.S. stocks posted strong returns over the second half of 2017, propelled by a combination of a favorable global earnings backdrop, muted inflation, and optimism over the stimulative impact of tax reform. Despite recent gains, we believe the environment remains supportive for stocks in the year ahead. However, with interest rates and valuations somewhat less supportive, we believe corporate earnings growth will be the key determinant of market gains going forward. Tax reform has clearly added some complexity to the environment, but we believe it is a clear positive for equity investors. Firms with a large proportion of domestic revenues (i.e., banks, retailers) stand to gain the most from lower corporate tax rates, while many large technology and health care firms will significantly benefit from repatriating overseas cash. In our view, these benefits have yet to be fully priced into many stocks.

From a strategy perspective, we continue to favor a “barbell” strategy within the portfolio and have recently increased exposure to sectors (i.e., financials) most levered to policy change while maintaining a high-quality bias in secular/ non-cyclical growth companies (technology, health care). We believe this strategy provides upside should policy-driven economic growth continue to gain traction, while offering some downside support if conditions change. The heaviest weighted sectors within the Fund are technology services, electronic technology, and health technology. We believe these sectors are attractively valued relative to growth prospects. Conversely, the Fund has limited exposure to slow growth groups including utilities, industrial services, and consumer durables. Regardless of sector, our research emphasis remains focused on building a diversified portfolio of attractively valued, high quality companies that compound earnings growth on a consistent basis.

The Fund underperformed the Russell 1000® Growth Index over the past six months, largely due to stock selection in health technology, retail trade, and producer manufacturing. Stocks that lagged

HYPOTHETICAL GROWTH OF $10,000

 

 

LOGO

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

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

 

 

within these sectors included Allergan, Incyte, Zimmer Biomet, Ulta Beauty, CVS Health, and Ingersoll Rand. Relative performance was positively impacted by stock selection in consumer non-durables and finance. Individual standouts within these sectors included Estee Lauder, T. Rowe Price, and JP Morgan Chase.

We remain enthusiastic about the near- and long-term outlook for companies held in the Fund, and we appreciate shareholders’ continued interest.

Roger J. Sit

Ronald D. Sit

Michael J. Stellmacher

Portfolio Managers

 

 

22

    SIT MUTUAL FUNDS SEMI-ANNUAL REPORT

 
 

 

COMPARATIVE RATES OF RETURNS

 

as of December 31, 2017

 

      Sit Large
Cap Growth
Fund		  

Russell

1000®

Growth

Index 1

   Russell
1000®
Index 2

Six Month

        11.86 %       14.23 %       11.36%  

One Year

        27.83       30.21       21.69   

Five Year

        14.85       17.33       15.71   

Ten Year

        7.80       10.00       8.59   

Since Inception 3

(9/2/82)

        10.21       11.38       11.93   

 

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 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 12/31/17:

    $40.56 Per Share

Net Asset Value 6/30/17:

    $40.56 Per Share

Total Net Assets:

    $118.3 Million

Weighted Average Market Cap:

   

$225.8 Billion

 

TOP 10 HOLDINGS

 

1. Alphabet, Inc.

2. Apple, Inc.

3. Microsoft Corp.

4. Facebook, Inc.

5. Visa, Inc.

6. Broadcom, Ltd.

7. Adobe Systems, Inc.

8. Home Depot, Inc.

9. PepsiCo, Inc.

10. Amazon.com, Inc.

 

Based on total net assets as of December 31, 2017. Subject to change.

FUND DIVERSIFICATION

 

LOGO

Based on total net assets as of December 31, 2017. Subject to change.

 

 

 

DECEMBER 31, 2017

   

 

23

 

SCHEDULE OF INVESTMENTS (Unaudited)

December 31, 2017

 

Sit Large Cap Growth Fund

 

 

Name of Issuer

    Quantity     Fair Value ($)  

Common Stocks - 98.8%

 

  

Communications - 0.9%

 

  

Verizon Communications, Inc.

      20,925       1,107,560  
    

 

 

  

Consumer Durables - 1.0%

     

Electronic Arts, Inc. *

     11,200       1,176,672  
    

 

 

  

Consumer Non-Durables - 4.8%

     

Estee Lauder Cos., Inc. - Class A

      16,075       2,045,383  

PepsiCo, Inc.

      21,600       2,590,272  

Philip Morris International, Inc.

      2,600       274,690  

Procter & Gamble Co.

      8,800       808,544  
    

 

 

  
       5,718,889  
    

 

 

  

Consumer Services - 8.5%

 

  

CBS Corp.

      15,000       885,000  

Marriott International, Inc.

      11,700       1,588,041  

Starbucks Corp.

      35,000       2,010,050  

Visa, Inc.

      35,000       3,990,700  

Walt Disney Co.

      14,600       1,569,646  
    

 

 

  
       10,043,437  
    

 

 

  

Electronic Technology - 14.3%

 

  

Apple, Inc.

      45,100       7,632,273  

Applied Materials, Inc.

      49,700       2,540,664  

Arista Networks, Inc. *

     975       229,691  

Broadcom, Ltd.

      12,400       3,185,560  

Ciena Corp. *

     37,000       774,410  

Intel Corp.

      16,800       775,488  

NVIDIA Corp.

      6,825       1,320,638  

Skyworks Solutions, Inc.

      4,700       446,265  
    

 

 

  
       16,904,989  
    

 

 

  

Energy Minerals - 1.2%

 

  

Marathon Petroleum Corp.

      15,300       1,009,494  

Pioneer Natural Resources Co.

      2,300       397,555  
    

 

 

  
       1,407,049  
    

 

 

  

Finance - 6.2%

 

  

Bank of America Corp.

      26,000       767,520  

Chubb, Ltd.

      4,450       650,278  

Goldman Sachs Group, Inc.

      4,800       1,222,848  

JPMorgan Chase & Co.

      20,600       2,202,964  

Legg Mason, Inc.

      18,300       768,234  

Prudential Financial, Inc.

      5,700       655,386  

T Rowe Price Group, Inc.

      10,500       1,101,765  
    

 

 

  
       7,368,995  
    

 

 

  

 

Name of Issuer

    Quantity     Fair Value ($)  

Health Services - 2.7%

     

Centene Corp. *

     9,700       978,536  

UnitedHealth Group, Inc.

      10,025       2,210,112  
    

 

 

  
       3,188,648  
    

 

 

  

Health Technology - 8.7%

     

AbbVie, Inc.

      15,900       1,537,689  

Alexion Pharmaceuticals, Inc. *

     4,700       562,073  

Allergan, PLC

      4,200       687,036  

Boston Scientific Corp. *

     42,400       1,051,096  

Celgene Corp. *

     8,975       936,631  

Gilead Sciences, Inc.

      8,400       601,776  

Incyte Corp. *

     10,850       1,027,604  

Johnson & Johnson

      13,700       1,914,164  

Pfizer, Inc.

      22,600       818,572  

Thermo Fisher Scientific, Inc.

      5,850       1,110,798  
    

 

 

  
       10,247,439  
    

 

 

  

Process Industries - 4.0%

     

DowDuPont, Inc.

      20,200       1,438,644  

Ecolab, Inc.

      14,500       1,945,610  

Sherwin-Williams Co.

      3,400       1,394,136  
    

 

 

  
       4,778,390  
    

 

 

  

Producer Manufacturing - 8.6%

     

3M Co.

      7,450       1,753,506  

Honeywell International, Inc.

      12,425       1,905,498  

Ingersoll-Rand, PLC

      12,500       1,114,875  

Parker-Hannifin Corp.

      5,000       997,900  

Raytheon Co.

      12,225       2,296,466  

Rockwell Automation, Inc.

      4,925       967,024  

United Technologies Corp.

      9,000       1,148,130  
    

 

 

  
       10,183,399  
    

 

 

  

Retail Trade - 6.3%

     

Amazon.com, Inc. *

     2,175       2,543,597  

Home Depot, Inc.

      14,200       2,691,326  

TJX Cos., Inc.

      16,600       1,269,236  

Ulta Beauty, Inc. *

     3,975       889,048  
    

 

 

  
       7,393,207  
    

 

 

  

Technology Services - 26.9%

     

Accenture, PLC

      10,975       1,680,163  

Adobe Systems, Inc. *

     15,700       2,751,268  

Alphabet, Inc. - Class A *

     1,400       1,474,760  

Alphabet, Inc. - Class C *

     5,966       6,242,822  

ANSYS, Inc. *

     6,200       915,058  

Autodesk, Inc. *

     6,700       702,361  

Cognizant Technology Solutions Corp.

      21,800       1,548,236  

Facebook, Inc. *

     25,800       4,552,668  

Microsoft Corp.

      71,400       6,107,556  

Oracle Corp.

      27,400       1,295,472  

PayPal Holdings, Inc. *

     21,500       1,582,830  
 

 

See accompanying notes to financial statements.

   

 

24

   

 

 

 

SIT MUTUAL FUNDS SEMI-ANNUAL REPORT

 

 

 

 

 

Name of Issuer

    Quantity      Fair Value ($)  

priceline.com, Inc. *

     1,085        1,885,448  

Red Hat, Inc. *

     3,000        360,300  

salesforce.com, Inc. *

     7,400        756,502  
     

 

 

  
        31,855,444  
     

 

 

  

Transportation - 4.0%

      

Alaska Air Group, Inc.

      11,900        874,769  

Delta Air Lines, Inc.

      21,615        1,210,440  

FedEx Corp.

      6,000        1,497,240  

Union Pacific Corp.

      8,800        1,180,080  
     

 

 

  
        4,762,529  
     

 

 

  

Utilities - 0.7%

      

NextEra Energy, Inc.

      5,000        780,950  
     

 

 

  

Total Common Stocks
(cost: $62,435,004)

 

      116,917,597  
     

 

 

  

 

Name of Issuer

    Quantity      Fair Value ($)  

Short-Term Securities - 1.3%

      

Fidelity Inst. Money Mkt. Gvt. Fund, 1.14%
(cost: $1,467,365)

      1,467,365        1,467,365  
     

 

 

  

Total Investments in Securities - 100.1%
(cost: $63,902,369)

 

      118,384,962  

Other Assets and Liabilities, net - (0.1%)

 

      (67,961 ) 
     

 

 

  

Total Net Assets - 100.0%

 

      $118,317,001  
     

 

 

  

 

 

*

Non-income producing security.

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

PLC — Public Limited Company

 

 

A summary of the levels for the Fund’s investments as of December 31, 2017 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 **

     116,917,597      —    —      116,917,597  

Short-Term Securities

      1,467,365      —    —      1,467,365  

Total:

      118,384,962      —    —      118,384,962  

 

**

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

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

 

See accompanying notes to financial statements.

 

DECEMBER 31, 2017

   

 

25

 

    Sit ESG Growth Fund – Class I and Class S

 

 

 

OBJECTIVE & STRATEGY

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

 

 

 

The Sit ESG Growth Fund Class I generated a return of +11.55% in the second half of calendar year 2017 outperforming the MSCI World Index return of +10.61%. Synchronized global growth, improving corporate earnings, benign inflation, supportive financial conditions, the passage of the Tax Cuts and Jobs Act and a healthy dose of “animal spirits” helped propel equity markets worldwide appreciably higher in the last six months of 2017.

The pharmaceutical, telecommunication, diversified financial and consumer service industries were the top contributing industries thanks to positive stock selection. Conversely, the holdings in the retailing industries detracted due to negative stock selection. The materials industry also detracted from relative performance given the underweight position and the outperformance of the Index securities.

From a geographic perspective, the U.S. was the top contributing country in the Fund relative to the Index due to strong stock selection and the overweight position. The Fund’s holdings in Spain and Japan only partially offset the positive U.S. contribution due to negative stock selection and the allocation effect (overweight Spain and underweight Japan).

We are generally constructive on U.S. equities in 2018 given the supportive global macroeconomic backdrop, outlook for improved corporate earnings, and stimulative fiscal policies. Moreover, we anticipate that earnings growth, rather than price-to-earnings (P/E) multiple expansion, will be the primary determinant of stock appreciation as equity markets continue to shift from a monetary policy-driven market (rising tide lifts all boats) to one driven by company fundamentals.

Internationally, we are also positive on European equities as macroeconomic conditions and valuation remain favorable, particularly for the Euro Area. We are less enthusiastic on UK equities as Brexit continues to cap economic growth in the intermediate term. Political risk associated with the 2018 Italian elections is likely minimal, but the ongoing Brexit negotiations remain a headwind. In general, we favor equities with continental Europe exposure, along with companies that will benefit from tax reform and other pro-growth policies in the United States. We are cautious on securities with emerging

HYPOTHETICAL GROWTH OF $10,000

 

LOGO

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

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

 

markets exposure, given less robust conditions, particularly if we see U.S. dollar strength in 2018 relative to the euro, a reversal from 2017. In Japan we expect a more mixed environment for equities moving into 2018 and continue to prefer exporters and multinationals levered to higher growth regions, such as the U.S. or Continental Europe, and resilient defensive consumption names.

The focus of the Sit ESG Fund is to invest at least 80% of the assets in companies that have strong ESG (environmental, social and corporate governance) practices. We remain positive about the long-term outlook for companies held in the Fund based on attractive valuations and sustainable earnings growth potential.

Roger J. Sit

Ronald D. Sit

Michael J. Stellmacher

Portfolio Managers

 

 

26

   SIT MUTUAL FUNDS SEMI-ANNUAL REPORT

 

    

 

 

COMPARATIVE RATES OF RETURNS

 

as of December 31, 2017

 

 

     Sit ESG
Growth Fund		  

MSCI

World

Index 1

     

 

Class I

   Class S  

Six Month

        11.55 %       11.53 %       10.61 %

One Year

        23.72       23.47       22.40

Since Inception

(6/30/16)

        16.73       16.49       19.51

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

PORTFOLIO SUMMARY

 

 

Class I:

   

Net Asset Value 12/31/17:

      $12.48 Per Share  

Net Asset Value 6/30/17:

      $11.29 Per Share  

Total Net Assets:

      $3.1     Million  

Class S:

   

Net Asset Value 12/31/17:

      $12.47 Per Share  

Net Asset Value 6/30/17:

      $11.28 Per Share  

Total Net Assets:

      $2.7     Million  

Weighted Average Market Cap:

      $152.2 Billion  

TOP 10 HOLDINGS

 

    1. Verizon Communications, Inc.

    2. Microsoft Corp.

    3. Starbucks Corp.

    4. Suncor Energy, Inc.

    5. Marriott International, Inc.

    6. Ingersoll-Rand,PLC

    7. 3M Co.

    8. Home Depot, Inc.

    9. Intel Corp.

  10. ING Groep NV, ADR

 

 

Based on total net assets as of December 31, 2017. Subject to change.

FUND DIVERSIFICATION

 

LOGO

Based on total net assets as of December 31, 2017. Subject to change.

 

 

 

DECEMBER 31, 2017

   

 

27

 

SCHEDULE OF INVESTMENTS (Unaudited)

December 31, 2017

 

Sit ESG Growth Fund

 

 

Name of Issuer

    Quantity     Fair Value ($)  

Common Stocks - 98.4%

     

Asia - 2.9%

     

China/Hong Kong - 1.2%

     

HSBC Holdings, PLC, ADR

      1,300       67,132  
    

 

 

  

Japan - 1.7%

     

Asics Corp.

      2,400       38,148  

Mitsubishi UFJ Financial Group, Inc., ADR

      8,325       60,523  
    

 

 

  
       98,671  
    

 

 

  

Europe - 28.2%

     

Belgium - 1.4%

     

Anheuser-Busch InBev NV, ADR

      700       78,092  
    

 

 

  

France - 3.5%

     

Ingenico Group SA

      685       73,157  

Unibail-Rodamco SE, ADR

      5,100       128,188  
    

 

 

  
       201,345  
    

 

 

  

Germany - 4.1%

     

Allianz SE, ADR

      5,100       117,122  

Siemens AG, ADR

      1,725       119,491  
    

 

 

  
       236,613  
    

 

 

  

Ireland - 3.9%

     

Accenture, PLC

      510       78,076  

Ingersoll-Rand, PLC

      1,625       144,934  
    

 

 

  
       223,010  
    

 

 

  

Netherlands - 4.3%

     

ING Groep NV, ADR

      7,475       137,988  

RELX NV,ADR

      4,700       108,429  
    

 

 

  
       246,417  
    

 

 

  

Spain - 3.4%

     

Iberdrola SA, ADR

      2,950       91,258  

Industria de Diseno Textil SA

      3,075       106,923  
    

 

 

  
       198,181  
    

 

 

  

Switzerland - 3.6%

     

Nestle SA, ADR

      1,200       103,164  

Zurich Insurance Group AG, ADR

      3,500       106,435  
    

 

 

  
       209,599  
    

 

 

  

United Kingdom - 4.0%

     

Coca-Cola European Partners, PLC

      2,100       83,685  

Diageo, PLC, ADR

      600       87,618  

Royal Dutch Shell, PLC, ADR - Class B

      875       59,754  
    

 

 

  
       231,057  
    

 

 

  

North America - 67.3%

     

Canada - 4.2%

     

BCE, Inc.

      1,825       87,618  

Suncor Energy, Inc.

      4,100       150,552  
    

 

 

  
       238,170  
    

 

 

  

 

Name of Issuer

    Quantity     Fair Value ($)  

United States - 63.1%

     

3M Co.

      600       141,222  

AbbVie, Inc.

      1,225       118,470  

Adobe Systems, Inc. *

     500       87,620  

Allstate Corp.

      525       54,973  

Alphabet, Inc. - Class A *

     100       105,340  

Apple, Inc.

      675       114,230  

Baxter International, Inc.

      850       54,944  

Boston Scientific Corp. *

     4,025       99,780  

Cognizant Technology Solutions Corp.

      750       53,265  

Delta Air Lines, Inc.

      1,500       84,000  

DowDuPont, Inc.

      1,925       137,099  

Ecolab, Inc.

      925       124,116  

Facebook, Inc. *

     320       56,467  

FedEx Corp.

      535       133,504  

Goldman Sachs Group, Inc.

      375       95,535  

Home Depot, Inc.

      745       141,200  

Intel Corp.

      3,050       140,788  

Johnson & Johnson

      975       136,227  

JPMorgan Chase & Co.

      1,200       128,328  

KeyCorp

      2,500       50,425  

Legg Mason, Inc.

      1,600       67,168  

Marriott International, Inc.

      1,100       149,303  

Microsoft Corp.

      2,000       171,080  

NIKE, Inc.

      1,100       68,805  

Occidental Petroleum Corp.

      1,200       88,392  

PepsiCo, Inc.

      875       104,930  

Pfizer, Inc.

      3,375       122,242  

Prudential Financial, Inc.

      560       64,389  

Rockwell Automation, Inc.

      350       68,722  

Starbucks Corp.

      2,750       157,932  

T Rowe Price Group, Inc.

      925       97,060  

TJX Cos., Inc.

      690       52,757  

UnitedHealth Group, Inc.

      375       82,672  

Verizon Communications, Inc.

      3,300       174,669  

Visa, Inc.

      875       99,768  
    

 

 

  
       3,627,422  
    

 

 

  

Total Common Stocks
(cost: $4,563,079)

 

     5,655,709  
    

 

 

  
 

 

  

 

28

  

 

 

 

SIT MUTUAL FUNDS SEMI-ANNUAL REPORT

 

 

    

    

 

 

 

Name of Issuer

    Quantity      Fair Value ($)  

Short-Term Securities - 1.6%

 

   

Fidelity Inst. Money Mkt. Gvt. Fund, 1.14%
(cost: $89,218)

      89,218        89,218  
     

 

 

  

 

Total Investments in Securities - 100.0%
(cost: $4,652,297)

 

      5,744,927  

Other Assets and Liabilities, net - 0.0%

 

      1,363  
     

 

 

  

Total Net Assets - 100.0%

 

      $5,746,290  
     

 

 

  

 

 

*

Non-income producing security.

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

ADR — American Depositary Receipt

PLC — Public Limited Company

 

 

A summary of the levels for the Fund’s investments as of December 31, 2017 is as follows (see Note 2 - significant accounting policies in the notes to financial statements):

 

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

Level 3

Significant
unobservable inputs ($)

      Total ($)  

Common Stocks

            

Belgium

      78,092        —          —          78,092    

Canada

      238,170        —          —          238,170    

China/Hong Kong

      67,132        —          —          67,132    

France

      128,188        73,157                —          201,345    

Germany

      236,613        —          —          236,613    

Ireland

      223,010        —          —          223,010    

Japan

      60,523        38,148                —          98,671    

Netherlands

      246,417        —          —          246,417    

Spain

      91,258        106,923                —          198,181    

Switzerland

      209,599        —          —          209,599    

United Kingdom

      231,057        —          —          231,057    

United States

      3,627,422        —          —          3,627,422    

Short-Term Securities

      89,218        —          —          89,218    

Total:

      5,526,699        218,228                —          5,744,927    

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

 

See accompanying notes to financial statements.

   

 

DECEMBER 31, 2017

   

 

 

 

29

 

 

 

    Sit Mid Cap Growth Fund

 

 

 

OBJECTIVE & STRATEGY

The objective of the Sit Midcap® Growth Fund is to maximize long-term capital appreciation. The Fund pursues this objective by investing at least 80% of its net assets in common stocks that, at the time of purchase, have market capitalizations that fall within the range of companies included in the Russell Midcap® Growth Index during the most recent 12-month period. The Russell Midcap® Growth Index ranged from approximately $50 million to $86 billion during the 12-month period ended December 31, 2017.

 

 

 

The Sit Mid Cap Growth Fund’s return for the second half of 2017 was +5.96%, compared to +12.45% for the Russell Midcap® Growth Index and +9.75% for the Russell Midcap® Index.

Mid cap stocks posted solid gains over the second half of 2017, as the “Goldilocks” environment of solid economic growth and moderate inflation bolstered investor sentiment. While higher interest rates may pose a risk to equity valuations at some point, we believe the backdrop for corporate earnings will remain supportive of further gains for stocks in the year ahead. This backdrop has been augmented by the passage of the Tax Cuts and Jobs Act, which we believe represents an additional catalyst for equities over the near- to intermediate term. This bill is significant enough to alter the investment landscape as investors sort through relative winners and losers from the key provisions. We believe the finance sector (particularly banks and life insurers) stands to gain the most, as many companies currently pay high tax rates and have leverage to an uptick in economic growth and higher interest rates. Producer manufacturing firms should see improved growth from lower tax rates, repatriated cash, and significant investment incentives contained in the bill. Accordingly, we have opportunistically added to both of these sectors over the past several months. We continue to emphasize technology within the Fund, as we believe many companies within the sector will continue to benefit from strong cyclical (e.g., improving business spending) and secular (e.g., e-commerce, wireless communications) growth.

Over the past six-months, the Fund significantly lagged the return for the Russell Midcap® Growth Index. Stock selection was the primary factor. Retail Trade was the most significant underperforming sector, as our positions in Ulta Beauty and TJX Companies significantly lagged the index sector return. While we are disappointed with the near-term performance, we are strong believers in both companies in light of their strong business models, proven management teams, and leverage to corporate tax reform. Other sectors that lagged over the period included health technology and technology services, as positions in Allergan PLC, DexCom, Celgene, Priceline, Euronet Worldwide, and Ultimate Software trailed the benchmark. On a posi-

HYPOTHETICAL GROWTH OF $10,000

 

LOGO

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

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

 

tive note, sectors that added to relative performance were consumer services, energy minerals, and consumer non-durables. In terms of individual stocks, the top six-month performers included Arista Networks, Marriott International, Applied Materials, Orbital ATK, and Align technology.

Our research staff remains highly focused on improving performance, and we continue to focus on attractive long-term growth companies in the mid-cap universe. We continue to appreciate shareholders’ interest in the Fund.

Roger J. Sit

Kent L. Johnson

Robert W. Sit

Portfolio Managers

 

 

30

    SIT MUTUAL FUNDS SEMI-ANNUAL REPORT

    
    
    

 

 

COMPARATIVE RATES OF RETURNS

 

as of December 31, 2017

     

Sit

Mid Cap
Growth Fund

   Russell
Midcap®
Growth
Index  1		   Russell
Midcap®
Index 2

Six Month

        5.96 %       12.45 %       9.75 %

One Year

        19.01       25.27       18.52

Five Year

        11.16       15.30       14.96

Ten Year

        5.87       9.10       9.11

Since Inception

(9/2/82)

        11.53       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 12/31/17:

    $18.36 Per Share

Net Asset Value 6/30/17:

    $18.06 Per Share

Total Net Assets:

    $159.5 Million

Weighted Average Market Cap:

    $24.5   Billion
  

TOP 10 HOLDINGS

 

    1. Broadcom, Ltd.

    2. Arista Networks, Inc.

    3. TJX Cos., Inc.

    4. Applied Materials, Inc.

    5. Waste Connections, Inc.

    6. Ecolab, Inc.

    7. Marriott International, Inc.

    8. priceline.com, Inc.

    9. Skyworks Solutions, Inc.

  10. Ulta Beauty, Inc.

 

 

Based on total net assets as of December 31, 2017. Subject to change.

FUND DIVERSIFICATION

 

 

LOGO

Based on total net assets as of December 31, 2017. Subject to change.

 

 

  

 

DECEMBER 31, 2017

   

 

 

 

31

 

 

 

SCHEDULE OF INVESTMENTS (Unaudited)

December 31, 2017

 

Sit Mid Cap Growth Fund

 

 

Name of Issuer

    Quantity      Fair Value ($)  

Common Stocks - 98.1%

 

   

Commercial Services - 1.7%

 

   

Booz Allen Hamilton Holding Corp.

      37,900        1,445,127  

Brink’s Co.

      16,500        1,298,550  
     

 

 

  
        2,743,677  
     

 

 

  

Communications - 1.3%

      

CenturyLink, Inc.

      56,400        940,752  

SBA Communications Corp. *

     7,100        1,159,856  
     

 

 

  
        2,100,608  
     

 

 

  

Consumer Durables - 3.7%

      

Electronic Arts, Inc. *

     20,000        2,101,200  

Snap-On, Inc.

      10,400        1,812,720  

Thor Industries, Inc.

      13,400        2,019,648  
     

 

 

  
        5,933,568  
     

 

 

  

Consumer Non-Durables - 2.1%

      

Coca-Cola European Partners, PLC

      40,700        1,621,895  

Pinnacle Foods, Inc.

      28,100        1,671,107  
     

 

 

  
        3,293,002  
     

 

 

  

Consumer Services - 6.4%

      

Cinemark Holdings, Inc.

      43,500        1,514,670  

Dunkin’ Brands Group, Inc.

      49,400        3,184,818  

Marriott International, Inc.

      27,532        3,736,919  

Service Corp. International

      48,900        1,824,948  
     

 

 

  
        10,261,355  
     

 

 

  

Electronic Technology - 13.9%

      

Advanced Micro Devices, Inc. *

     120,000        1,233,600  

Applied Materials, Inc.

      79,600        4,069,152  

Arista Networks, Inc. *

     20,000        4,711,600  

Broadcom, Ltd.

      19,400        4,983,860  

Ciena Corp. *

     37,900        793,247  

Cognex Corp.

      14,300        874,588  

MACOM Tech Solutions Holdings, Inc. *

     27,200        885,088  

NVIDIA Corp.

      5,100        986,850  

Skyworks Solutions, Inc.

      38,300        3,636,585  
     

 

 

  
        22,174,570  
     

 

 

  

Energy Minerals - 1.6%

      

Marathon Petroleum Corp.

      39,010        2,573,880  
     

 

 

  

Finance - 10.9%

      

Affiliated Managers Group, Inc.

      11,400        2,339,850  

Ameriprise Financial, Inc.

      7,800        1,321,866  

Arthur J Gallagher & Co.

      18,900        1,195,992  

First Republic Bank

      23,600        2,044,704  

Intercontinental Exchange, Inc.

      28,500        2,010,960  

Legg Mason, Inc.

      53,000        2,224,940  

Lincoln National Corp.

      15,700        1,206,859  

Physicians Realty Trust

      76,400        1,374,436  

SVB Financial Group *

     8,800        2,057,176  

 

Name of Issuer

    Quantity      Fair Value ($)  

T Rowe Price Group, Inc.

      7,800        818,454  

Western Alliance Bancorp *

     13,400        758,708  
     

 

 

  
        17,353,945  
     

 

 

  

Health Services - 3.6%

      

Centene Corp. *

     23,000        2,320,240  

Envision Healthcare Corp. *

     20,200        698,112  

HealthSouth Corp. *

     30,100        1,487,241  

Patterson Cos, Inc.

      32,600        1,177,838  
     

 

 

  
        5,683,431  
     

 

 

  

Health Technology - 7.6%

      

Alexion Pharmaceuticals, Inc. *

     7,900        944,761  

Align Technology, Inc. *

     10,800        2,399,652  

Allergan, PLC

      8,100        1,324,998  

Celgene Corp. *

     10,600        1,106,216  

Incyte Corp. *

     15,500        1,468,005  

Jazz Pharmaceuticals, PLC *

     5,700        767,505  

Thermo Fisher Scientific, Inc.

      17,250        3,275,430  

West Pharmaceutical Services, Inc.

      8,300        818,961  
     

 

 

  
        12,105,528  
     

 

 

  

Industrial Services - 2.5%

      

Waste Connections, Inc.

      57,150        4,054,221  
     

 

 

  

Process Industries - 5.2%

      

Ecolab, Inc.

      28,700        3,850,966  

International Paper Co.

      25,100        1,454,294  

Scotts Miracle-Gro Co.

      27,600        2,952,924  
     

 

 

  
        8,258,184  
     

 

 

  

Producer Manufacturing - 10.7%

      

Adient, PLC

      9,889        778,264  

AMETEK, Inc.

      24,000        1,739,280  

Anixter International, Inc. *

     25,586        1,944,536  

Carlisle Cos., Inc.

      17,700        2,011,605  

Hubbell, Inc.

      9,300        1,258,662  

Ingersoll-Rand, PLC

      31,700        2,827,323  

Orbital ATK, Inc.

      12,100        1,591,150  

Oshkosh Corp.

      8,800        799,832  

Parker-Hannifin Corp.

      10,400        2,075,632  

Rockwell Automation, Inc.

      8,000        1,570,800  

Watsco, Inc.

      2,325        395,343  
     

 

 

  
        16,992,427  
     

 

 

  

Retail Trade - 5.3%

      

Casey’s General Stores, Inc.

      7,300        817,162  

TJX Cos., Inc.

      55,300        4,228,238  

Ulta Beauty, Inc. *

     15,600        3,489,096  
     

 

 

  
        8,534,496  
     

 

 

  

Technology Services - 17.4%

      

ANSYS, Inc. *

     15,700        2,317,163  

Aspen Technology, Inc. *

     33,000        2,184,600  

Autodesk, Inc. *

     17,900        1,876,457  
 

 

See accompanying notes to financial statements.

   

 

32

   

 

 

 

SIT MUTUAL FUNDS SEMI-ANNUAL REPORT

 

 

    

    

 

 

 

Name of Issuer

    Quantity      Fair Value ($)  

Cognizant Technology Solutions Corp.

      32,800        2,329,456  

DST Systems, Inc.

      26,700        1,657,269  

Euronet Worldwide, Inc. *

     31,275        2,635,544  

Genpact, Ltd.

      30,300        961,722  

Guidewire Software, Inc. *

     16,300        1,210,438  

LogMeIn, Inc.

      16,400        1,877,800  

priceline.com, Inc. *

     2,150        3,736,141  

PTC, Inc. *

     39,600        2,406,492  

Splunk, Inc. *

     25,200        2,087,568  

Ultimate Software Group, Inc. *

     11,200        2,444,176  
     

 

 

  
        27,724,826  
     

 

 

  

Transportation - 3.0%

      

Alaska Air Group, Inc.

      40,100        2,947,751  

XPO Logistics, Inc. *

     20,900        1,914,231  
     

 

 

  
        4,861,982  
     

 

 

  

 

Name of Issuer

    Quantity      Fair Value ($)  

Utilities - 1.2%

      

WEC Energy Group, Inc.

      27,800        1,846,754  
     

 

 

  

Total Common Stocks
(cost: $88,608,893)

         156,496,454  
     

 

 

  

Short-Term Securities - 1.6%

      

Fidelity Inst. Money Mkt. Gvt. Fund, 1.14%

      2,512,867        2,512,867  
     

 

 

  

(cost: $2,512,867)

      

Total Investments in Securities - 99.7%
(cost: $91,121,760)

         159,009,321  

Other Assets and Liabilities, net - 0.3%

         479,335  
     

 

 

  

Total Net Assets - 100.0%

         $159,488,656  
     

 

 

  

 

 

*

Non-income producing security.

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

 

 

PLC — Public Limited Company

 

 

A summary of the levels for the Fund’s investments as of December 31, 2017 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 **

     156,496,454      —    —      156,496,454  

Short-Term Securities

      2,512,867      —    —      2,512,867  

Total:

      159,009,321      —    —      159,009,321  

 

**

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

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

 

See accompanying notes to financial statements.

   

 

DECEMBER 31, 2017

   

 

 

 

33

 

 

 

    Sit Small Cap Dividend Growth Fund Class I and Class S

 

 

 

OBJECTIVE & STRATEGY

The objective of the Sit Small Cap Dividend Growth Fund is to provide current income that exceeds the Fund’s benchmark index and that grows over a period of years. Secondarily the Fund seeks long-term capital appreciation. The Fund seeks to achieve its objectives by investing, under normal market conditions, at least 80% of its net assets in small cap dividend-paying common stocks that have market capitalizations at the time of purchase of up to $3.0 billion, or up to the market capitalization of the largest company included in the Russell 2000® Index measured at the end of the previous twelve months ($16.0 billion as of December 31, 2017). The Fund may invest the balance of its assets in preferred stocks, convertible bonds, U.S. Treasury securities (including Treasury bills, notes and bonds), closed-end investment companies, and master limited partnerships.

 

The Sit Small Cap Dividend Growth Fund Class I posted a +9.23% return over the past six months, compared to the +9.20% return for the Russell 2000® Index. The Fund’s gross yield (before deducting Fund expenses) was 1.91%, compared to 1.25% for the Russell 2000® Index.

Investor sentiment toward small capitalization stocks improved over the second half of 2017, aided by an uptick in economic growth and the passage of tax reform late in the year. While small cap stocks generally lagged their larger cap brethren over past year, it is important to note that small cap stocks stand to benefit disproportionately (relative to larger cap stocks) from tax reform and other policy initiatives, including deregulation and increased infrastructure spending. These initiatives will clearly favor U.S. focused companies that tend to fall within the small cap universe. Accordingly, we have shifted portfolio sector weightings towards stocks and sectors most levered to a combination of improving growth and leverage to tax reform. Within the finance sector, for example, we have reduced positions in REITs (which tend to lag when interest rates rise) and added to bank positions. We believe banks are the greatest beneficiary of policy changes (e.g., tax reform, deregulation) and are levered to an improving economic backdrop, including higher interest rates. In addition, we have added to the producer manufacturing sector, as many companies within the sector will benefit from lower taxes, higher commodity prices, and a sharp acceleration in capital spending, which will be aided by investment incentives (i.e., accelerated depreciation) within the new tax code. While we are hopeful that pro-growth policies will catalyze economic growth (and corporate earnings growth) for many companies held in the Fund, we recognize the risks, particularly higher interest rates, could derail this positive backdrop as the year progresses. We believe downside risks can be mitigated with a focus on quality firms that pay consistent dividends to shareholders.

 

The Fund outperformed the Russell 2000® Index over the past six months. Strong stock selection in the electronic technology sector was a key factor, led by a +41% gain in MKS Instruments. In addition, the Fund’s finance sector significantly outperformed the benchmark sector, led by strong gains in Piper Jaffrey, Kingstone, Evercore, and Janus Henderson. Underweighting REITs, which lagged

HYPOTHETICAL GROWTH OF $10,000

 

 

LOGO

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

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

 

during the period, also aided relative returns. Sectors that lagged the Russell 2000® over the period included health technology, consumer services, and consumer non-durables. Within the health technology sector, a key reason for underperformance was the Fund’s lack of exposure to the biotechnology industry, which turned in very strong performance over the past six months.

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

Roger J. Sit                Michael T. Manns

Kent L. Johnson        Robert W. Sit

Portfolio Managers

 

 

34

    SIT MUTUAL FUNDS SEMI-ANNUAL REPORT

 

 

 

COMPARATIVE RATES OF RETURNS

 

as of December 31, 2017

     Sit Small Cap
Dividend
Growth Fund		    
      

Russell

2000®
Index 1

      Class I   Class S  

Six Month

        9.23 %       9.13 %       9.20 %

One Year

        13.69       13.42       14.65

Since Inception
(3/31/15)

        9.42       9.16       9.20

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

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

PORTFOLIO SUMMARY

 

Class I:

   

Net Asset Value 12/31/17:

      $12.44  Per Share  

Net Asset Value 6/30/17:

      $11.47  Per Share  

Total Net Assets:

      $14.9    Million  

Class S:

   

Net Asset Value 12/31/17:

      $12.44  Per Share  

Net Asset Value 6/30/17:

      $11.46  Per Share  

Total Net Assets:

      $4.0      Million  

Weighted Average Market Cap:

      $4.3      Billion  

TOP 10 HOLDINGS

 

  1. MKS Instruments, Inc.

  2. East West Bancorp, Inc.

  3. Provident Financial Services, Inc.

  4. Thor Industries, Inc.

  5. Scotts Miracle-Gro Co.

  6. Legg Mason, Inc.

  7. Dunkin’ Brands Group, Inc.

  8.Wintrust Financial Corp.

  9. Camping World Holdings, Inc.

10. Oshkosh Corp.

 

 

Based on total net assets as of December 31, 2017. Subject to change.

FUND DIVERSIFICATION

 

LOGO

Based on total net assets as of December 31, 2017. Subject to change.

 

 

DECEMBER 31, 2017

    35

 

SCHEDULE OF INVESTMENTS (Unaudited)

December 31, 2017

 

Sit Small Cap Dividend Growth Fund

 

 

Name of Issuer

   Quantity      Fair Value ($)  

Common Stocks - 94.7%

 

   

Commercial Services - 4.6%

 

   

Booz Allen Hamilton Holding Corp.

     6,575        250,705  

Brink’s Co.

     1,850        145,595  

Deluxe Corp.

     3,350        257,414  

Herman Miller, Inc.

     5,325        213,266  
    

 

 

  
       866,980  
    

 

 

  

Communications - 1.4%

 

   

Shenandoah Telecommunications Co.

     7,900        267,020  
    

 

 

  

Consumer Durables - 6.7%

 

   

Ethan Allen Interiors, Inc.

     6,600        188,760  

National Presto Industries, Inc.

     1,875        186,469  

Snap-On, Inc.

     800        139,440  

Tenneco, Inc.

     2,250        131,715  

Thor Industries, Inc.

     2,300        346,656  

Toro Co.

     1,925        125,568  

Tupperware Brands Corp.

     2,350        147,345  
    

 

 

  
       1,265,953  
    

 

 

  

Consumer Non-Durables - 4.3%

 

   

B&G Foods, Inc.

     4,350        152,902  

Carter’s, Inc.

     900        105,741  

Fresh Del Monte Produce, Inc.

     2,800        133,476  

Pinnacle Foods, Inc.

     3,650        217,066  

Sensient Technologies Corp.

     2,800        204,820  
    

 

 

  
       814,005  
    

 

 

  

Consumer Services - 6.5%

 

   

Capella Education Co.

     3,075        238,005  

Cinemark Holdings, Inc.

     4,925        171,488  

Dunkin’ Brands Group, Inc.

     4,825        311,068  

Nexstar Media Group, Inc.

     725        56,695  

Service Corp. International

     6,250        233,250  

Vail Resorts, Inc.

     1,025        217,782  
    

 

 

  
       1,228,288  
    

 

 

  

Electronic Technology - 4.9%

 

   

MKS Instruments, Inc.

     4,600        434,700  

Monolithic Power Systems, Inc.

     2,425        272,473  

Power Integrations, Inc.

     3,150        231,682  
    

 

 

  
       938,855  
    

 

 

  

Energy Minerals - 0.7%

 

   

Vermilion Energy, Inc.

     3,650        132,568  
    

 

 

  

Finance - 23.4%

 

   

CoBiz Financial, Inc.

     7,375        147,426  

Columbia Banking System, Inc.

     3,850        167,244  

CubeSmart

     3,325        96,159  

Donegal Group, Inc.

     6,200        107,260  

East West Bancorp, Inc.

     6,900        419,727  

Evercore Partners, Inc.

     2,375        213,750  

Farmland Partners, Inc.

     7,275        63,147  

 

 

Name of Issuer

   Quantity      Fair Value ($)  

Great Western Bancorp, Inc.

     4,400        175,120  

Hanover Insurance Group, Inc.

     825        89,166  

Hercules Capital, Inc.

     7,250        95,120  

Janus Henderson Group,PLC

     3,678        140,720  

Kingstone Cos, Inc.

     9,800        184,240  

Legg Mason, Inc.

     7,600        319,048  

Macquarie Infrastructure Corp.

     2,050        131,610  

Mercury General Corp.

     1,400        74,816  

Old National Bancorp

     4,750        82,888  

PacWest Bancorp

     5,325        268,380  

Physicians Realty Trust

     15,300        275,247  

Piper Jaffray Cos

     2,875        247,969  

Provident Financial Services, Inc.

     15,000        404,550  

QTS Realty Trust, Inc.

     2,600        140,816  

STORE Capital Corp.

     5,200        135,408  

Validus Holdings, Ltd.

     3,500        164,220  

Wintrust Financial Corp.

     3,500        288,295  
    

 

 

  
       4,432,326  
    

 

 

  

Health Services - 3.5%

 

   

Healthcare Services Group, Inc.

     3,625        191,110  

HealthSouth Corp. *

    5,550        274,225  

Patterson Cos, Inc.

     5,300        191,489  
    

 

 

  
       656,824  
    

 

 

  

Health Technology - 5.2%

 

   

Mesa Laboratories, Inc.

     1,350        167,805  

PerkinElmer, Inc.

     1,675        122,476  

Phibro Animal Health Corp.

     7,400        247,900  

STERIS, PLC

     2,500        218,675  

Teleflex, Inc.

     525        130,630  

West Pharmaceutical Services, Inc.

     950        93,736  
    

 

 

  
       981,222  
    

 

 

  

Industrial Services - 1.2%

 

   

EMCOR Group, Inc.

     1,900        155,325  

KBR, Inc.

     3,375        66,926  
    

 

 

  
       222,251  
    

 

 

  

Non-Energy Minerals - 1.0%

 

   

Commercial Metals Co.

     3,950        84,214  

Potlatch Corp.

     2,000        99,800  
    

 

 

  
       184,014  
    

 

 

  

Process Industries - 8.7%

 

   

Apogee Enterprises, Inc.

     4,325        197,782  

Avery Dennison Corp.

     1,900        218,234  

Domtar Corp.

     3,575        177,034  

Huntsman Corp.

     4,650        154,798  

Ingredion, Inc.

     1,375        192,225  

Neenah, Inc.

     1,550        140,508  
 

 

See accompanying notes to financial statements.

   

 

36

   

 

 

 

SIT MUTUAL FUNDS SEMI-ANNUAL REPORT

 

 

    

    

 

 

 

Name of Issuer

    Quantity      Fair Value ($)  

Orion Engineered Carbons SA

      9,475        242,560  

Scotts Miracle-Gro Co.

      3,025        323,645  
     

 

 

  
        1,646,786  
     

 

 

  

Producer Manufacturing - 9.7%

 

   

Anixter International, Inc. *

     1,900        144,400  

Applied Industrial Technologies, Inc.

      3,250        221,325  

Carlisle Cos, Inc.

      1,700        193,205  

Crane Co.

      2,100        187,362  

Hubbell, Inc.

      1,375        186,092  

Lincoln Electric Holdings, Inc.

      1,250        114,475  

MSA Safety, Inc.

      2,400        186,048  

MTS Systems Corp.

      2,625        140,962  

Oshkosh Corp.

      3,100        281,759  

Watsco, Inc.

      1,075        182,793  
     

 

 

  
        1,838,421  
     

 

 

  

Retail Trade - 3.3%

 

   

Big Lots, Inc.

      3,325        186,699  

Camping World Holdings, Inc.

      6,400        286,272  

Casey’s General Stores, Inc.

      1,350        151,119  
     

 

 

  
        624,090  
     

 

 

  

Technology Services - 4.2%

 

   

Blackbaud, Inc.

      2,150        203,154  

DST Systems, Inc.

      3,900        242,073  

LogMeIn, Inc.

      1,900        217,550  

ManTech International Corp.

      2,700        135,513  
     

 

 

  
        798,290  
     

 

 

  

 

Name of Issuer

    Quantity      Fair Value ($)  

Transportation - 2.4%

 

   

Alaska Air Group, Inc.

      2,650        194,802  

Golar LNG, Ltd.

      4,725        140,852  

Ryder System, Inc.

      1,350        113,630  
     

 

 

  
        449,284  
     

 

 

  

Utilities - 3.0%

 

   

Black Hills Corp.

      2,000        120,220  

Connecticut Water Service, Inc.

      1,550        88,986  

Covanta Holding Corp.

      6,300        106,470  

New Jersey Resources Corp.

      3,775        151,755  

Spire, Inc.

      1,375        103,331  
     

 

 

  
        570,762  
     

 

 

  

Total Common Stocks
(cost: $14,642,918)

         17,917,939  
     

 

 

  

Investment Companies - 0.7%

 

   

Tortoise Energy Infrastructure Corp.

      4,800        139,584  
     

 

 

  

(cost: $157,933)

      

Short-Term Securities - 5.7%

 

   

Fidelity Inst. Money Mkt. Gvt. Fund, 1.14%

      1,070,115        1,070,115  
     

 

 

  

(cost: $1,070,115)

      

Total Investments in Securities - 101.1%
(cost: $15,870,966)

 

      19,127,638  

Other Assets and Liabilities, net - (1.1%)

 

      (214,467 ) 
     

 

 

  

Total Net Assets - 100.0%

             $ 18,913,171  
     

 

 

  

 

* 

Non-income producing security.

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

PLC — Public Limited Company

 

 

A summary of the levels for the Fund’s investments as of December 31, 2017 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 **

     17,917,939      —    —      17,917,939  

Investment Companies

      139,584      —    —      139,584  

Short-Term Securities

      1,070,115      —    —      1,070,115  

Total:

      19,127,638      —    —      19,127,638  

 

**

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

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

 

See accompanying notes to financial statements.

   

 

DECEMBER 31, 2017

   

 

 

 

37

 

 

 

    Sit Small Cap Growth Fund

 

 

 

OBJECTIVE & STRATEGY

The objective of the Sit Small Cap Growth Fund is to maximize long-term capital appreciation. The Fund seeks to achieve its objective by investing, under normal market conditions, at least 80% of its net assets in common stocks of companies with market capitalizations at the time of purchase of up to $3.0 billion, or up to the market capitalization of the largest company included in the Russell 2000® Index measured at the end of the previous twelve months ($16.0 billion as of December 31, 2017).

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 +7.64% over the past six months. This compares to the return of +11.09% for the Russell 2000® Growth Index and the +9.20% return for the Russell 2000® Index.

Small capitalization stocks rallied sharply over the past six months, fueled by a combination of strong corporate earnings, moderate inflation trends, and the prospect of tax reform. As valuations for smaller companies are elevated compared to historical levels, we believe earnings growth must be the main driver of returns going forward. The passage of the Tax Cuts and Jobs Act in December will have a significant impact, on small companies, in particular, given their domestic orientation. A roll back in taxes and regulation could allow for a significantly improved growth outlook for many companies. Our investment staff is focusing on which companies/sectors appear to be best positioned for these changes. We have increased exposure to banks and producer manufacturing sectors, for example, as these are cyclical groups that are strongly levered to a lower tax rate, reduced regulations, and investment spending incentives. In addition to these cyclical groups, the Fund continues to have significant exposure to secular growth sectors, including technology services and health technology, which remain the heaviest sector weightings within the Fund. The Fund holds only small weightings in utilities, communications, and energy minerals, as we believe these sectors will not generate above-average growth over the near-term.

The Fund underperformed the Russell 2000® Growth Index during the second half of 2017, largely due to stock selection in several sectors. Relative performance was negatively impacted by stock selection in the producer manufacturing, retail trade, health services, consumer services, and health technology sectors. Ulta Beauty, K2M Group, First Republic Bank, MACOM Technology, and Acadia Healthcare were among the individual stocks that lagged during the second half of 2017. On the positive side, the Fund benefited from strong stock selection in the consumer durables and electronic technology sectors. In terms of individual stocks, the top contributors to

HYPOTHETICAL GROWTH OF $10,000

 

LOGO

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

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

 

the Fund return during the period included Arista Networks, Take-Two Interactive, Thor Industries, Align Technology, and Camping Worldwide Holdings.

Our research team remains highly focused on improving relative performance. We strongly believe in the long-term outlook for companies held in the Fund, and we believe our focus on tax reform beneficiaries has potential to add value as it is not adequately reflected in share prices of many small cap companies.

 

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

 

38

    SIT MUTUAL FUNDS SEMI-ANNUAL REPORT

 
 

 

COMPARATIVE RATES OF RETURNS

 

as of December 31, 2017

 

     

Sit

Small Cap

Growth
Fund

  

Russell

2000®
Growth Index  1

   Russell
2000®
Index 2

Six Month

        7.64 %       11.09 %       9.20 %

One Year

        15.71       22.17       14.65

Five Year

        9.93       15.21       14.12

Ten Year

        5.88       9.19       8.71

Since Inception

        10.22       8.33       9.66

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

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

PORTFOLIO SUMMARY

 

 

Net Asset Value 12/31/17:

    $54.62 Per Share

Net Asset Value 6/30/17:

    $54.18 Per Share

Total Net Assets:

    $95.6   Million

Weighted Average Market Cap:

    $7.3     Billion

TOP 10 HOLDINGS

 

  1. Arista Networks, Inc.

  2. Take-Two Interactive Software, Inc.

  3. Skyworks Solutions, Inc.

  4. Waste Connections, Inc.

  5. Scotts Miracle-Gro Co.

  6. Dunkin’ Brands Group, Inc.

  7. Thor Industries, Inc.

  8. Euronet Worldwide, Inc.

  9. On Assignment, Inc.

10. Booz Allen Hamilton Holding Corp.

 

 

Based on total net assets as of December 31, 2017. Subject to change.

FUND DIVERSIFICATION

 

LOGO

Based on total net assets as of December 31, 2017. Subject to change.

 

 

 

DECEMBER 31, 2017

   

 

39

 

SCHEDULE OF INVESTMENTS (Unaudited)

December 31, 2017

 

Sit Small Cap Growth Fund

 

Name of Issuer  

 

Quantity

      Fair Value ($)  

Common Stocks - 97.7%

 

   

Commercial Services - 4.7%

 

   

Booz Allen Hamilton Holding Corp.

     40,100        1,529,013  

Brink’s Co.

     9,900        779,130  

Deluxe Corp.

     8,800        676,192  

On Assignment, Inc. *

    23,800        1,529,626  
    

 

 

  
       4,513,961  
    

 

 

  

Communications - 1.2%

 

   

SBA Communications Corp. *

    2,700        441,072  

Shenandoah Telecommunications Co.

     22,300        753,740  
    

 

 

  
       1,194,812  
    

 

 

  

Consumer Durables - 7.7%

 

   

Century Communities, Inc. *

    23,500        730,850  

Ethan Allen Interiors, Inc.

     22,600        646,360  

Snap-On, Inc.

     6,850        1,193,955  

Take-Two Interactive Software, Inc. *

    20,300        2,228,534  

Tenneco, Inc.

     14,800        866,392  

Thor Industries, Inc.

     11,200        1,688,064  
    

 

 

  
       7,354,155  
    

 

 

  

Consumer Non-Durables - 1.9%

 

   

B&G Foods, Inc.

     16,900        594,035  

Pinnacle Foods, Inc.

     21,200        1,260,764  
    

 

 

  
       1,854,799  
    

 

 

  

Consumer Services - 6.8%

 

   

Capella Education Co.

     6,575        508,905  

Cinemark Holdings, Inc.

     25,200        877,464  

Dunkin’ Brands Group, Inc.

     26,600        1,714,902  

Grand Canyon Education, Inc. *

    7,500        671,475  

Nexstar Media Group, Inc.

     3,800        297,160  

Service Corp. International

     28,600        1,067,352  

Vail Resorts, Inc.

     6,600        1,402,302  
    

 

 

  
       6,539,560  
    

 

 

  

Electronic Technology - 8.8%

 

   

Ambarella, Inc. *

    5,600        329,000  

Arista Networks, Inc. *

    9,600        2,261,568  

Ciena Corp. *

    27,000        565,110  

MACOM Tech Solutions Holdings, Inc. *

    19,000        618,260  

MKS Instruments, Inc.

     15,750        1,488,375  

Monolithic Power Systems, Inc.

     9,200        1,033,712  

Skyworks Solutions, Inc.

     21,900        2,079,405  
    

 

 

  
       8,375,430  
    

 

 

  

Energy Minerals - 0.9%

 

   

Andeavor

     7,331        838,227  
    

 

 

  

Finance - 10.3%

     

Affiliated Managers Group, Inc.

     6,100        1,252,025  

East West Bancorp, Inc.

     10,100        614,383  

First Republic Bank/CA

     16,600        1,438,224  
Name of Issuer   

 

Quantity

      Fair Value ($)  

Legg Mason, Inc.

      31,800        1,334,964  

PacWest Bancorp

      23,600        1,189,440  

Physicians Realty Trust

      55,400        996,646  

QTS Realty Trust, Inc.

      13,200        714,912  

SVB Financial Group *

     6,400        1,496,128  

Validus Holdings, Ltd.

      18,400        863,328  
     

 

 

  
        9,900,050  
     

 

 

  

Health Services - 3.4%

 

   

Envision Healthcare Corp. *

     11,800        407,808  

Healthcare Services Group, Inc.

      21,690        1,143,497  

HealthSouth Corp. *

     16,450        812,794  

Patterson Cos, Inc.

      23,300        841,829  
     

 

 

  
        3,205,928  
     

 

 

  

Health Technology - 12.4%

 

   

Alexion Pharmaceuticals, Inc. *

     4,500        538,155  

Align Technology, Inc. *

     5,600        1,244,264  

Bio-Techne Corp.

      5,400        699,570  

Celgene Corp. *

     5,450        568,762  

Corcept Therapeutics, Inc. *

     68,100        1,229,886  

DBV Technologies SA *

     13,400        329,640  

Exact Sciences Corp. *

     16,800        882,672  

Ionis Pharmaceuticals, Inc. *

     17,900        900,370  

K2M Group Holdings, Inc. *

     55,900        1,006,200  

PerkinElmer, Inc.

      8,400        614,208  

Phibro Animal Health Corp.

      31,200        1,045,200  

Sarepta Therapeutics, Inc. *

     19,500        1,084,980  

STERIS, PLC

      13,800        1,207,086  

West Pharmaceutical Services, Inc.

      5,000        493,350  
     

 

 

  
        11,844,343  
     

 

 

  

Industrial Services - 4.6%

 

   

Advanced Disposal Services, Inc. *

     40,200        962,388  

EMCOR Group, Inc.

      18,700        1,528,725  

Waste Connections, Inc.

      27,400        1,943,756  
     

 

 

  
        4,434,869  
     

 

 

  

Process Industries - 3.8%

 

   

Apogee Enterprises, Inc.

      22,100        1,010,633  

Domtar Corp.

      15,800        782,416  

Scotts Miracle-Gro Co.

      16,800        1,797,432  
     

 

 

  
        3,590,481  
     

 

 

  

Producer Manufacturing - 9.9%

 

   

Anixter International, Inc. *

     15,300        1,162,800  

Applied Industrial Technologies, Inc.

      8,915        607,111  

Crane Co.

      13,600        1,213,392  

Hubbell, Inc.

      7,000        947,380  

IDEX Corp.

      8,100        1,068,957  

Lincoln Electric Holdings, Inc.

      9,600        879,168  

MSA Safety, Inc.

      11,000        852,720  

MTS Systems Corp.

      3,400        182,580  

Orbital ATK, Inc.

      7,300        959,950  
 

 

See accompanying notes to financial statements.

   

 

40

   

 

SIT MUTUAL FUNDS SEMI-ANNUAL REPORT

    

    

 

 

 

 

Name of Issuer

    Quantity      Fair Value ($)  

Oshkosh Corp.

      9,900        899,811  

Watsco, Inc.

      4,000        680,160  
     

 

 

  
        9,454,029  
     

 

 

  

Retail Trade - 3.7%

 

   

Big Lots, Inc.

      3,400        190,910  

Camping World Holdings, Inc.

      33,550        1,500,692  

Casey’s General Stores, Inc.

      4,300        481,342  

Ulta Beauty, Inc. *

     5,950        1,330,777  
     

 

 

  
        3,503,721  
     

 

 

  

Technology Services - 13.9%

 

   

ANSYS, Inc. *

     5,800        856,022  

Aspen Technology, Inc. *

     18,900        1,251,180  

Blackbaud, Inc.

      12,000        1,133,880  

DST Systems, Inc.

      21,800        1,353,126  

Euronet Worldwide, Inc. *

     18,300        1,542,141  

GoDaddy, Inc. *

     12,550        631,014  

Guidewire Software, Inc. *

     9,700        720,322  

HubSpot, Inc. *

     6,500        574,600  

LogMeIn, Inc.

      9,900        1,133,550  

Paycom Software, Inc. *

     18,300        1,470,039  

PTC, Inc. *

     19,300        1,172,861  

Ultimate Software Group, Inc. *

     6,675        1,456,685  
     

 

 

  
        13,295,420  
     

 

 

  
Name of Issuer   

 

Quantity

      Fair Value ($)  

Transportation - 2.6%

 

   

Alaska Air Group, Inc.

      16,200        1,190,862  

Atlas Air Worldwide Holdings, Inc. *

     9,600        563,040  

Marten Transport, Ltd.

      36,333        737,560  
     

 

 

  
        2,491,462  
     

 

 

  

Utilities - 1.1%

 

   

Fortis, Inc.

      12,107        443,964  

Spire, Inc.

      7,525        565,504  
     

 

 

  
        1,009,468  
     

 

 

  

Total Common Stocks
(cost: $61,028,836)

 

      93,400,715  
     

 

 

  

Short-Term Securities - 2.3%

 

   

Fidelity Inst. Money Mkt. Gvt. Fund, 1.14%

      2,257,288        2,257,288  
     

 

 

  

(cost: $2,257,288)

      

Total Investments in Securities - 100.0%
(cost: $63,286,124)

 

      95,658,003  

Other Assets and Liabilities, net - 0.0%

 

      (23,123 ) 
     

 

 

  

Total Net Assets - 100.0%

 

          $ 95,634,880  
     

 

 

  

 

 

*

Non-income producing security.

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

PLC — Public Limited Company

 

 

A summary of the levels for the Fund’s investments as of December 31, 2017 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 **

     93,400,715     

 

—

   

 

—

      93,400,715    

Short-Term Securities

      2,257,288     

 

—

   

 

—

      2,257,288    

Total:

      95,658,003     

 

—

   

 

—

      95,658,003    

 

** 

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

 

 

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

 

See accompanying notes to financial statements.

   

 

DECEMBER 31, 2017

   

 

 

 

41

 

 

 

    Sit International Growth Fund

 

 

 

OBJECTIVE STRATEGY

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

 

 

For the six-month period ended December 31 2017, the Sit International Growth Fund generated a return of +7.67% versus the MSCI EAFE Index return of +9.86%. Stock selection and an underweight position in Japan contributed to the modest relative underperformance during the second half of calendar 2017. Policy clarity following Prime Minister Abe’s election win in October 2017, upbeat corporate earnings, and cheap valuations spurred a rally in Japanese stocks in the fourth calendar quarter. However, moderating growth and continued structural challenges points to a muted outlook for Japan equities in calendar 2018.

In terms of the EAFE economies, GDP growth in the Euro Area has been resilient and broad-based, with signs that a virtuous cycle driven by domestic investment is taking hold. Still, as exports represent over 45% of GDP, the Euro Area is sensitive to global trade conditions and moderating economic growth in China. Ongoing strength in the euro, appreciating +13.8 percent against the U.S. dollar in calendar 2017, could also begin to affect exports negatively. We currently forecast Euro Area real GDP will increase +2.0% to +2.5% in 2018 versus an estimated pace of +2.3% in 2017. Brexit-related uncertainty has weighed on confidence, business activity and household spending in the UK, likely capping GDP growth at roughly +1.5% in 2017 and 2018. Within Asia, Japan continues to grow ahead of modest expectations as improving activity globally lifts its export-driven economy. However, ongoing structural challenges and moderating growth overseas dampen the outlook. Therefore, we expect Japan’s GDP growth to moderate to 0.5% in 2018 from +1.5% in 2017 as exports slow and the boost from fiscal stimulus fades. Finally, we remain cautiously optimistic that China can balance growth and structural reform. We currently expect China’s GDP growth to decelerate only slightly to +6.5% in 2018 from +6.8% in 2017. Nevertheless, we expect policymakers to reverse or moderate tightening measures if there are signs that economic growth is slowing too much.

As for investment strategy, we are positive on European equities as macroeconomic conditions and valuation remain favorable, particularly for the Euro Area. We are less enthusiastic on UK equities as Brexit continues to cap economic growth in the intermediate term. In general, we favor equities with continental Europe exposure, along with companies that will benefit from tax reform and other pro-growth policies in the United States. The portfolio remains under-

HYPOTHETICAL GROWTH OF $10,000

 

 

LOGO

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

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

 

weight Japan as we expect a more mixed environment for equities in calendar 2018 and continue to prefer exporters and multinationals levered to higher growth regions, such as the U.S. or continental Europe, and resilient defensive consumption names. While “New China” remains our key long-term investment strategy, there may be some profit-taking pressures in Chinese stocks in the near term given their strong performance in calendar 2017. Looking beyond near-term stock volatility, we prefer Chinese companies with solid earnings growth/balance sheets, attractive valuation, and improving fundamentals.

Roger J. Sit         Tasha M. Murdoff

Portfolio Managers

 

 

42

    SIT MUTUAL FUNDS SEMI-ANNUAL REPORT

 
 

 

 

COMPARATIVE RATES OF RETURNS

 

as of December 31, 2017

 

      Sit
International
Growth
Fund		   MSCI EAFE
Index 1		   MSCI EAFE
Growth
Index 2

Six Month

        7.67 %       9.86 %       10.44 %

One Year

        24.02       25.03       28.86

Five Year

        5.62       7.90       8.78

Ten Year

        0.69       1.94       2.67

Since Inception

        4.20       5.63       4.67

(11/1/91)

                               

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

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

 

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

Europe

        67.2 %       61.3 %

Asia

        23.4       38.3

North America

        7.2       —

Africa/Middle East

        —       0.4

Cash & Other Net Assets

        2.2       —

Based on total net assets as of December 31, 2017. Subject to change.

 

PORTFOLIO SUMMARY

 

Net Asset Value 12/31/17:

    $17.33 Per Share

Net Asset Value 6/30/17:

    $16.23 Per Share

Total Net Assets:

    $24.0   Million

Weighted Average Market Cap:

    $87.5   Billion

TOP 10 HOLDINGS

 

  1. Nestle SA

  2. ING Groep NV

  3. Tencent Holdings, Ltd.

  4. Royal Dutch Shell, PLC, ADR

  5. Reckitt Benckiser Group, PLC

  6. Siemens AG

  7. DS Smith, PLC

  8. RELX NV

  9. Diageo, PLC, ADR

10. British American Tobacco, PLC

 

Based on total net assets as of December 31, 2017. Subject to change.

FUND DIVERSIFICATION

 

LOGO

Based on total net assets as of December 31, 2017. Subject to change.

 

 

 

 

DECEMBER 31, 2017

   

 

43

 

SCHEDULE OF INVESTMENTS (Unaudited)

December 31, 2017

 

Sit International Growth Fund

 

 

Name of Issuer

    Quantity      Fair Value ($)  

Common Stocks - 96.5%

 

   

Asia - 22.1%

      

Australia - 2.6%

      

Amcor, Ltd.

      23,400        280,386  

Rio Tinto, PLC, ADR

      2,500        132,325  

Westpac Banking Corp., ADR

      8,300        202,354  
     

 

 

  
        615,065  
     

 

 

  

China/Hong Kong - 6.7%

 

   

AIA Group, Ltd.

      32,200        273,882  

Alibaba Group Holding, Ltd., ADR *

     2,350        405,211  

HSBC Holdings, PLC, ADR

      7,025        362,771  

Tencent Holdings, Ltd.

      10,900        564,162  
     

 

 

  
        1,606,026  
     

 

 

  

Japan - 8.7%

 

   

Asics Corp.

      12,900        205,043  

Daicel Corp.

      13,400        152,067  

Keyence Corp.

      600        335,179  

Makita Corp.

      4,200        176,138  

Mitsubishi UFJ Financial Group, Inc., ADR

      43,000        312,610  

Nintendo Co., Ltd.

      700        252,068  

Secom Co., Ltd.

      2,300        173,519  

Suzuki Motor Corp.

      8,400        486,223  
     

 

 

  
        2,092,847  
     

 

 

  

Singapore - 2.7%

 

   

Broadcom, Ltd.

      1,350        346,815  

DBS Group Holdings, Ltd.

      15,600        288,542  
     

 

 

  
        635,357  
     

 

 

  

South Korea - 1.4%

 

   

Samsung Electronics Co., Ltd., GDR

      285        337,498  
     

 

 

  

Europe - 67.2%

 

   

Belgium - 1.3%

 

   

Anheuser-Busch InBev NV, ADR

      2,870        320,177  
     

 

 

  

Denmark - 1.0%

 

   

Danske Bank A/S

      5,900        229,640  
     

 

 

  

France - 10.1%

 

   

AXA SA

      8,250        244,474  

BNP Paribas SA

      4,870        362,272  

Dassault Systemes SA

      3,225        342,427  

DBV Technologies SA *

     1,950        97,836  

Ingenico Group SA

      1,700        181,557  

Safran SA

      4,400        453,839  

Schneider Electric SE

      5,000        423,901  

Unibail-Rodamco SE

      1,265        318,339  
     

 

 

  
        2,424,645  
     

 

 

  

 

Name of Issuer

    Quantity      Fair Value ($)  

Germany - 6.3%

 

   

Allianz SE

      2,000        457,694  

Aurelius SE & Co.

      4,160        283,687  

Bayer AG

      1,900        236,099  

Siemens AG

      3,900        539,984  
     

 

 

  
        1,517,464  
     

 

 

  

Ireland - 0.9%

 

   

CRH, PLC, ADR

      5,800        209,322  
     

 

 

  

Netherlands - 10.6%

 

   

ASML Holding NV

      1,700        295,494  

Galapagos NV *

     3,725        350,996  

ING Groep NV

      34,900        640,648  

Koninklijke Philips NV

      6,500        245,700  

LyondellBasell Industries NV

      4,400        485,408  

RELX NV

      22,800        524,043  
     

 

 

  
        2,542,289  
     

 

 

  

Spain - 3.4%

 

   

Iberdrola SA

      54,200        419,577  

Industria de Diseno Textil SA

      11,650        405,090  
     

 

 

  
        824,667  
     

 

 

  

Sweden - 2.0%

 

   

Hexagon AB

      5,200        260,853  

Nordea Bank AB

      17,000        205,835  
     

 

 

  
        466,688  
     

 

 

  

Switzerland - 7.9%

 

   

Interroll Holding AG

      120        177,700  

Nestle SA

      7,470        642,243  

Novartis AG

      4,650        391,309  

Roche Holding AG

      1,470        371,697  

Zurich Insurance Group AG

      1,020        310,125  
     

 

 

  
        1,893,074  
     

 

 

  

United Kingdom - 23.7%

 

   

Ashtead Group, PLC

      12,600        337,950  

ASOS, PLC *

     4,275        385,674  

Babcock International Group, PLC

      25,300        240,990  

BAE Systems, PLC

      37,500        289,737  

British American Tobacco, PLC

      7,330        495,498  

BT Group, PLC, ADR

      5,800        105,676  

Cineworld Group, PLC

      19,900        161,034  

Coca-Cola European Partners, PLC

      5,400        215,190  

Diageo, PLC, ADR

      3,475        507,454  

DS Smith, PLC

      76,700        534,635  

Greencore Group, PLC

      39,900        123,741  

Just Eat, PLC *

     29,401        309,244  

Prudential, PLC

      12,200        312,445  

Reckitt Benckiser Group, PLC

      5,800        541,101  

Royal Dutch Shell, PLC, ADR - Class A

      4,500        300,195  

Royal Dutch Shell, PLC, ADR - Class B

      3,700        252,673  

 

 

 

See accompanying notes to financial statements.

   

44

   

SIT MUTUAL FUNDS SEMI-ANNUAL REPORT

    

    

 

 

 

Name of Issuer

    Quantity      Fair Value ($)  

STERIS, PLC

      2,700        236,169  

WPP, PLC

      18,800        339,635  
     

 

 

  
        5,689,041  
     

 

 

  

North America - 7.2%

 

   

Canada - 5.3%

 

   

BCE, Inc.

      3,700        177,637  

Suncor Energy, Inc.

      13,100        481,032  

TransCanada Corp.

      4,900        238,336  

Waste Connections, Inc.

      5,450        386,623  
     

 

 

  
        1,283,628  
     

 

 

  

United States - 1.9%

 

   

Euronet Worldwide, Inc. *

     3,250        273,878  

priceline.com, Inc. *

     100        173,774  
     

 

 

  
        447,652  
     

 

 

  

Total Common Stocks

    (cost: $18,223,094)

 

 

      23,135,080  
     

 

 

  

Investment Companies - 1.3%

 

   

iShares MSCI India ETF

      8,700        313,809  
     

 

 

  

    (cost: $258,887)

 

   

Short-Term Securities - 1.9%

      

Fidelity Inst. Money Mkt. Gvt. Fund, 1.14%

      460,850        460,850  
     

 

 

  

    (cost: $460,850)

      

Total Investments in Securities - 99.7%

    (cost: $18,942,831)

 

 

      23,909,739  

Other Assets and Liabilities, net - 0.3%

         75,747  
     

 

 

  

Total Net Assets - 100.0%

         $23,985,486  
     

 

 

  
 

 

 

*

Non-income producing security.

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

ADR — American Depositary Receipt

GDR — Global Depositary Receipt

PLC — Public Limited Company

 

See accompanying notes to financial statements.

   

 

DECEMBER 31, 2017

   

 

 

 

45

 

 

 

SCHEDULE OF INVESTMENTS (Unaudited)

December 31, 2017

 

Sit International Growth Fund (Continued)

 

A summary of the levels for the Fund’s investments as of December 31, 2017 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

      334,679        280,386                —        615,065    

Belgium

      320,177        —                —        320,177    

Canada

      1,283,628        —                —        1,283,628    

China/Hong Kong

      767,982        838,044                —        1,606,026    

Denmark

      —        229,640                —        229,640    

France

      —        2,424,645                —        2,424,645    

Germany

      —        1,517,464                —        1,517,464    

Ireland

      209,322        —                —        209,322    

Japan

      312,610        1,780,237                —        2,092,847    

Netherlands

      1,026,602        1,515,687                —        2,542,289    

Singapore

      346,815        288,542                —        635,357    

South Korea

      —        337,498                —        337,498    

Spain

      —        824,667                —        824,667    

Sweden

      —        466,688                —        466,688    

Switzerland

      —        1,893,074                —        1,893,074    

United Kingdom

      1,982,088        3,706,953                —        5,689,041    

United States

      447,652        —                —        447,652    

Investment Companies

      313,809        —                —        313,809    

Short-Term Securities

      460,850        —                —        460,850    

Total:

      7,806,214        16,103,525                —        23,909,739    

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

 

See accompanying notes to financial statements.

   

46

      SIT MUTUAL FUNDS SEMI-ANNUAL REPORT  

 

[This page intentionally left blank.]

 

 

 

 

 

DECEMBER 31, 2017

   

 

47

 

    Sit Developing Markets Growth Fund

 

 

 

OBJECTIVE & STRATEGY

The objective of the Sit Developing Markets Growth Fund is 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 advanced +14.54% for the six-month period ended December 31, 2017, slightly underperforming the MSCI Emerging Markets Index’s +14.61%. The consumer services (TAL Education), capital goods (Bidvest Group), and food beverage & tobacco (China Mengniu Dairy) sectors helped contribute to relative outperformance. Conversely, the sectors of automobiles & components (PTAstra, Kordsa), cash, and insurance (China Life) hurt performance. Stock selection in South Africa, China, and Peru were positive to returns. However, stock selection was negative in the United States and South Korea.

We are cautiously optimistic that China can balance growth and structural reform. Policymakers have introduced supervisory tightening measures to include removing unqualified projects from the public-private partnership system, cracking down on online lending, and issuing new guidance on asset management products. Combined with rising government bond yields, these actions have led to concerns of a debt crisis. Yet the probability of a debt crisis in the near term is low given solid long-term growth prospects, heavy state involvement in the economy, limited external debt, and ample domestic savings. We expect the policy-induced growth moderation to continue, with 2018 GDP growth of +6.5%.

India’s economy will continue to recover post major reforms, with fiscal year 2019 GDP growth forecast at +7.3%, supported by buoyant consumption and industrial strength. The Indian government has since taken steps to integrate these reforms (currency demonetization, Goods & Services Tax) more successfully in order to lessen the impact on the economy. In South Korea, 2018 economic growth will be led by exports and consumption. We expect consumer spending to recover as the benefits of the government’s supplementary budget to create jobs and boost economic growth are realized.

Brazil’s economy is slowly recovering, led by investment and consumption. Brazil’s second quarter 2017 growth of +0.7% quarter-over-quarter was higher-than-expected, on stronger agriculture and private consumption. We forecast 2018 GDP growth of +2.5%. The central bank cut interest rates in December and signaled additional cuts are forthcoming given the low inflation environment.

We are positive on the equity markets of China, India, and South Korea. Our key long-term investment strategy in China remains in “New China” stocks. We prefer companies with solid earnings growth/

HYPOTHETICAL GROWTH OF $10,000

 

 

LOGO

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

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

 

balance sheets, attractive valuations, and improving fundamentals. In India, economic growth will be led by consumer spending. We continue to like sectors related to a strong economy (e.g., consumer, financials, and information services). In South Korea, exports and the consumer should drive continued economic growth. We favor investments in the technology, financial, consumer, and utility sectors.

In Latin America, we are underweight Brazil and Mexico equity markets. However, we are more optimistic on Brazil given higher economic growth from the consumer. Consumption should benefit from low interest rates and improving employment. We own balanced holdings of financials and consumer staples. In Mexico, we are underweight the market because of uncertainty over the North American Free Trade Agreement negotiations on trade and economic growth and high inflation.

Roger J. Sit        Raymond E. Sit

Portfolio Managers

 

 

48

    SIT MUTUAL FUNDS SEMI-ANNUAL REPORT

 

    

 

 

 

 

COMPARATIVE RATES OF RETURN  

 

as of December 31, 2017

             
      Sit
Developing
Markets
Growth
Fund		   MSCI
Emerging
Markets
Index 1		   MSCI
Emerging
Markets
Growth
Index 2

 

Six Month

     

 

 

 

14.54

 

%

    

 

 

 

14.61

 

%

    

 

 

 

18.27

 

%

One Year

        43.23       34.35       44.88

Five Year

        2.97       1.88       5.08

Ten Year

        -0.68       -0.72       0.49

Since Inception

(7/1/94)

 

        4.51       3.82       n/a

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

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

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

 

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

Asia

     72.6%    73.2%

Africa/Middle East

    11.9       8.3  

Latin America

      9.8     11.8  

North America

      3.2       —

Europe

      0.9       6.7  

Cash & Other Net Assets

      1.6       —

Based on total net assets as of December 31, 2017. Subject to change.

PORTFOLIO SUMMARY     

Net Asset Value 12/30/17:

    $17.19 Per Share        

Net Asset Value 6/30/17:

    $15.23 Per Share        

Total Net Assets:

    $11.2 Million    

Weighted Average Market Cap:

    $107.3 Billion    

 

TOP 10 HOLDINGS

  1. Tencent Holdings, Ltd.

  2. Alibaba Group Holding, Ltd., ADR

  3. Samsung Electronics Co., Ltd.

  4. Naspers, Ltd.

  5. TAL Education Group, ADR

  6. iShares MSCI India ETF

  7. NICE Systems, Ltd., ADR

  8. CSPC Pharmaceutical Group, Ltd.

  9. Shinhan Financial Group Co., Ltd.

10. China Construction Bank Corp.

 

 

Based on total net assets as of December 31, 2017. Subject to change.

FUND DIVERSIFICATION

 

LOGO

Based on total net assets as of December 31, 2017. Subject to change.

 

 

  

 

DECEMBER 31, 2017

   

 

 

 

49

 

 

 

SCHEDULE OF INVESTMENTS (Unaudited)

December 31, 2017

 

Sit Developing Markets Growth Fund

 

 

Name of Issuer

    Quantity      Fair Value ($)  

Common Stocks - 94.8%

 

   

Africa/Middle East - 11.9%

 

   

Israel - 3.0%

 

   

NICE Systems, Ltd., ADR

      3,700        340,067  
     

 

 

  

South Africa - 8.9%

      

Bid Corp., Ltd.

      7,600        184,718  

Bidvest Group, Ltd.

      9,775        171,548  

Naspers, Ltd.

      1,675        464,064  

Sasol, Ltd., ADR

      5,000        171,050  
     

 

 

  
        991,380  
     

 

 

  

Asia - 69.0%

      

Australia - 1.2%

      

Rio Tinto, PLC, ADR

      2,475        131,002  
     

 

 

  

China/Hong Kong - 35.0%

      

AIA Group, Ltd.

      15,600        132,688  

Alibaba Group Holding, Ltd., ADR *

     3,000        517,290  

Baidu, Inc., ADR *

     800        187,368  

China Construction Bank Corp.

      320,000        294,577  

China Life Insurance Co., Ltd., ADR

      12,900        201,369  

China Mengniu Dairy Co., Ltd.

      64,000        190,114  

China Mobile, Ltd., ADR

      4,450        224,903  

China Petroleum & Chemical Corp., ADR

      2,800        205,436  

CSPC Pharmaceutical Group, Ltd.

      162,000        326,369  

Ctrip.com International,Ltd., ADR *

     3,200        141,120  

ENN Energy Holdings, Ltd.

      28,000        199,149  

Hong Kong Exchanges & Clearing, Ltd.

      2,900        88,706  

JD.com, Inc.,ADR *

     4,450        184,319  

TAL Education Group, ADR

      14,400        427,824  

Tencent Holdings, Ltd.

      11,400        590,041  
     

 

 

  
        3,911,273  
     

 

 

  

India - 4.3%

      

HDFC Bank, Ltd., ADR

      2,675        271,967  

Tata Motors, Ltd., ADR *

     6,425        212,490  
     

 

 

  
        484,457  
     

 

 

  

Indonesia - 1.0%

      

Astra International Tbk PT

      177,000        108,117  
     

 

 

  

Japan - 1.9%

      

Suzuki Motor Corp.

      3,600        208,381  
     

 

 

  

Singapore - 4.0%

      

Broadcom, Ltd.

      775        199,097  

DBS Group Holdings, Ltd.

      13,500        249,700  
     

 

 

  
        448,797  
     

 

 

  

South Korea - 12.1%

      

E-Mart Co., Inc.

      790        199,786  

Korea Electric Power Corp. *

     4,200        149,295  

Medy-Tox, Inc.

      400        181,178  

 

Name of Issuer

    Quantity      Fair Value ($)  

Samsung Electronics Co., Ltd.

      215        510,821  

Shinhan Financial Group Co., Ltd. *

     6,700        309,253  
     

 

 

  
        1,350,333  
     

 

 

  

Taiwan - 7.4%

      

Cathay Financial Holding Co., Ltd.

      82,086        147,061  

Hon Hai Precision Industry Co., Ltd., GDR

      21,148        132,824  

President Chain Store Corp.

      16,000        152,379  

Taiwan Semiconductor Co.

      37,482        287,002  

Taiwan Semiconductor Co., ADR

      2,800        111,020  
     

 

 

  
        830,286  
     

 

 

  

Thailand - 1.0%

      

Bangkok Bank PCL

      16,600        111,550  
     

 

 

  

Turkey - 1.1%

      

Kordsa Global Endustriyel Iplik A/S

      60,900        123,126  
     

 

 

  

Europe - 0.9%

      

Belgium - 0.9%

      

Anheuser-Busch InBev NV, ADR

      950        105,982  
     

 

 

  

Latin America - 9.8%

      

Brazil - 5.3%

      

Ambev SA, ADR

      40,425        261,145  

Banco Bradesco SA

      15,176        154,866  

Qualicorp SA

      19,000        177,565  
     

 

 

  
        593,576  
     

 

 

  

Chile - 2.6%

      

Banco Santander Chile, ADR

      3,900        121,961  

Geopark, Ltd.*

     16,700        165,497  
     

 

 

  
        287,458  
     

 

 

  

Peru - 1.9%

      

Southern Copper Corp.

      4,600        218,274  
     

 

 

  

North America - 3.2%

      

Mexico - 1.2%

      

Alsea SAB de CV

      41,100        134,488  
     

 

 

  

United States - 2.0%

      

Laureate Education, Inc. *

     9,650        130,854  

Skyworks Solutions, Inc.

      925        87,829  
     

 

 

  
        218,683  
     

 

 

  

Total Common Stocks

      

(cost: $7,481,498)

         10,597,230  
     

 

 

  

Investment Companies - 3.6%

      

iShares MSCI India ETF

      11,100        400,377  
     

 

 

  

(cost: $334,045)

      
 

 

 

See accompanying notes to financial statements.

   

 

50

   

 

 

 

SIT MUTUAL FUNDS SEMI-ANNUAL REPORT

 

 

    

    

 

 

 

Name of Issuer

    Quantity      Fair Value ($)  

Short-Term Securities - 1.4%

 

   

Fidelity Inst. Money Mkt. Gvt. Fund, 1.14%

      158,153        158,153  
     

 

 

  

(cost: $158,153)

      

Total Investments in Securities - 99.8%
(cost: $7,973,696)

 

      11,155,760  

Other Assets and Liabilities, net - 0.2%

 

      17,087  
     

 

 

  

Total Net Assets - 100.0%

 

      $11,172,847  
     

 

 

  

 

 

*

Non-income producing security.

ADR — American Depositary Receipt

GDR — Global Depositary Receipt

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

 

 

See accompanying notes to financial statements.

   

 

DECEMBER 31, 2017

   

 

 

 

51

 

 

 

SCHEDULE OF INVESTMENTS (Unaudited)

December 31, 2017

 

Sit Developing Markets Growth Fund (Continued)

A summary of the levels for the Fund’s investments as of December 31, 2017 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

        131,002        —        —        131,002  

Belgium

        105,982        —        —        105,982  

Brazil

        593,576        —        —        593,576  

Chile

        287,458        —        —        287,458  

China/Hong Kong

        2,089,629        1,821,644        —        3,911,273  

India

        484,457        —        —        484,457  

Indonesia

        —        108,117        —        108,117  

Israel

        340,067        —        —        340,067  

Japan

        —        208,381        —        208,381  

Mexico

        134,488        —        —        134,488  

Peru

        218,274        —        —        218,274  

Singapore

        199,097        249,700        —        448,797  

South Africa

        171,050        820,330        —        991,380  

South Korea

        —        1,350,333        —        1,350,333  

Taiwan

        111,020        719,266        —        830,286  

Thailand

        111,550        —        —        111,550  

Turkey

        —        123,126        —        123,126  

United States

        218,683        —        —        218,683  

Investment Companies

        400,377        —        —        400,377  

Short-Term Securities

        158,153        —        —        158,153  

Total:

        5,754,863        5,400,897        —        11,155,760  

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

 

See accompanying notes to financial statements.

   

 

52

   

 

 

 

SIT MUTUAL FUNDS SEMI-ANNUAL REPORT

 

 

 
 

 

 

 

[This page intentionally left blank.]

 

 

 

DECEMBER 31, 2017

   

 

53

 

STATEMENTS OF ASSETS AND LIABILITIES (Unaudited)

December 31, 2017

 

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

ASSETS

        

Investments in securities, at identified cost

      $20,918,168       $801,187,507        $25,889,794  
  

 

 

    

 

 

     

 

 

  

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

      $27,590,580       $990,214,770        $32,803,648  

Cash in bank on demand deposit

      —       —        —  

Accrued interest and dividends receivable

      76,209       1,255,540        84,107  

Receivable for investment securities sold

      —       4,401,004        —  

Receivable for Fund shares sold

      6,396       9,375,012        2,974  
  

 

 

    

 

 

     

 

 

  

Total assets

      27,673,185       1,005,246,326        32,890,729  
  

 

 

    

 

 

     

 

 

  

LIABILITIES

        

Disbursements in excess of cash balances

      —       279        —  

Payable for investment securities purchased

      —       4,098,590        —  

Payable for Fund shares redeemed

      3,842       603,192        —  

Accrued investment management fees and advisory fees

      21,680       582,854        25,990  

Accrued 12b-1 fees (Class S)

      —       12,656        720  
  

 

 

    

 

 

     

 

 

  

Total liabilities

      25,522       5,297,571        26,710  
  

 

 

    

 

 

     

 

 

  

Net assets applicable to outstanding capital stock

      $27,647,663       $999,948,755        $32,864,019  
  

 

 

    

 

 

     

 

 

  

Net assets consist of:

        

Capital (par value and paid-in surplus).

      $20,992,816       $784,359,048        $26,657,519  

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

      (83,920 )      13,315        4,773  

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

      66,355       26,549,129        (712,384 ) 

Unrealized appreciation (depreciation) on investments and foreign currency transactions

      6,672,412       189,027,263        6,914,111  
  

 

 

    

 

 

     

 

 

  
     $27,647,663       $999,948,755        $32,864,019  
  

 

 

    

 

 

     

 

 

  

Outstanding shares:

        

Common Shares (Class I) *

      1,181,968       55,947,468        1,841,158  
  

 

 

    

 

 

     

 

 

  

Common Shares (Class S) *

      —       3,599,374        222,972  
  

 

 

    

 

 

     

 

 

  

Net assets applicable to outstanding shares:

        

Common Shares (Class I) *

      $27,647,663       $939,726,659        $29,315,282  
  

 

 

    

 

 

     

 

 

  

Common Shares (Class S)*

      —       60,222,096        3,548,737  
  

 

 

    

 

 

     

 

 

  

Net asset value per share of outstanding capital stock:

        

Common Shares (Class I) *

      $23.39       $16.80        $15.92  
  

 

 

    

 

 

     

 

 

  

Common Shares (Class S) *

      —       $16.73        $15.92  
  

 

 

    

 

 

     

 

 

  

 

*

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

 

See accompanying notes to financial statements.

   

 

54

   

 

 

 

SIT MUTUAL FUNDS SEMI-ANNUAL REPORT

 

 

 

 

 

Sit
Large Cap
Growth
Fund		      Sit
ESG
Growth
Fund		     Sit
Mid Cap
Growth
Fund		     Sit
Small Cap
Dividend
Growth
Fund		     Sit
Small Cap
Growth
Fund		     Sit
International
Growth
Fund		     Sit
Developing
Markets
Growth
Fund		  
            
  $63,902,369        $4,652,297       $91,121,760       $15,870,966       $63,286,124       $18,942,831       $7,973,696  

 

 

     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
  $118,384,962        $5,744,927       $159,009,321       $19,127,638       $95,658,003       $23,909,739       $11,155,760  
  —        —       —       —       —       —       754  
  57,826        6,400       52,827       25,490       63,386       103,463       26,056  
  —        —       1,235,196       —       178,258       —       —  
  13,448        —       9,294       1,119       9,515       1,602       2,773  

 

 

     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
  118,456,236        5,751,327       160,306,638       19,154,247       95,909,162       24,014,804       11,185,343  

 

 

     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
            
  —        —       —       —       —       —       —  
  —        —       655,984       225,591       154,956       —       —  
  44,224        —       3,232       —       5,601       1,050       370  
  95,011        4,509       158,766       14,693       113,725       28,268       12,126  
  —        528       —       792       —       —       —  

 

 

     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
  139,235        5,037       817,982       241,076       274,282       29,318       12,496  

 

 

     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
  $118,317,001        $5,746,290       $159,488,656       $18,913,171       $95,634,880       $23,985,486       $11,172,847  

 

 

     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
            
  $60,982,649        $4,697,913       $86,786,076       $15,807,495       $61,573,615       $19,837,061       $7,907,289  
  7,440        216       (162,226 )      3,482       (236,166 )      (8,083 )      (1,922 ) 
 
     
2,844,319
 		      (44,485 )      4,977,245       (154,478 )      1,925,552       (809,982 )      85,320  
 
     
54,482,593
 		      1,092,646       67,887,561       3,256,672       32,371,879       4,966,490       3,182,160  

 

 

     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
  $118,317,001        $5,746,290       $159,488,656       $18,913,171       $95,634,880       $23,985,486       $11,172,847  

 

 

     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
            
  2,916,806        245,544       8,684,902       1,196,471       1,751,011       1,383,703       649,774  

 

 

     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
  —        215,052       —       323,666       —       —       —  

 

 

     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
            
  $118,317,001        $3,065,352       $159,488,656       $14,886,831       $95,634,880       $23,985,486       $11,172,847  

 

 

     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
  —        2,680,938       —       4,026,340       —       —       —  

 

 

     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
            
  $40.56        $12.48       $18.36       $12.44       $54.62       $17.33       $17.19  

 

 

     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
  —        $12.47       —       $12.44       —       —       —  

 

 

     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

  

 

DECEMBER 31, 2017

   

 

 

 

55

 

 

 

STATEMENTS OF OPERATIONS (Unaudited)

Six Months Ended December 31, 2017

 

 

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

Investment income:

        

Income:

        

Dividends*

      $139,606        $12,536,948       $393,679  

Interest

      131,819        57,195       3,833  
  

 

 

     

 

 

    

 

 

  

Total income.

      271,425        12,594,143       397,512  
  

 

 

     

 

 

    

 

 

  

Expenses (note 4):

        

Investment management and advisory service fee

      130,768        5,186,037       192,782  

12b-1 fees (Class S)

      —        80,360       4,401  
  

 

 

     

 

 

    

 

 

  

Total expenses

      130,768        5,266,397       197,183  
  

 

 

     

 

 

    

 

 

  

Less fees and expenses waived by investment adviser

      —        (770,011 )      (19,855 ) 
  

 

 

     

 

 

    

 

 

  

Total net expenses

      130,768        4,496,386       177,328  
  

 

 

     

 

 

    

 

 

  

Net investment income (loss)

      140,657        8,097,757       220,184  
  

 

 

     

 

 

    

 

 

  

Realized and unrealized gain (loss):

        

Net realized gain (loss) on investments

      468,747        74,963,338       214,416  

Net realized gain (loss) on foreign currency transactions

      —        —       (470 ) 

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

      1,438,419        23,192,009       2,770,308  
  

 

 

     

 

 

    

 

 

  

Net gain (loss)

      1,907,166        98,155,347       2,984,254  
  

 

 

     

 

 

    

 

 

  

Net increase (decrease) in net assets resulting from operations

      $2,047,823        $106,253,104       $3,204,438  
  

 

 

     

 

 

    

 

 

  

 

        

* Foreign taxes withheld on dividends received

      —        $67,132       $12,521  

 

See accompanying notes to financial statements.

   

 

56

   

 

 

 

SIT MUTUAL FUNDS SEMI-ANNUAL REPORT

 

 

 

 

 

 

Sit
Large Cap
Growth
Fund		      Sit
ESG
Growth
Fund		     Sit
Mid Cap
Growth
Fund		     Sit
Small Cap
Dividend
Growth
Fund		     Sit
Small Cap
Growth
Fund		     Sit
International
Growth
Fund		      Sit
Developing
Markets
Growth
Fund		  
                      
                      
  $765,161        $48,413       $802,909       $171,869       $452,398       $185,358        $87,387  
  6,333        806       20,410       3,772       10,879       2,377        2,110  

 

 

     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

     

 

 

  
  771,494        49,219       823,319       175,641       463,277       187,735        89,497  

 

 

     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

     

 

 

  
                      
  584,495        32,416       985,545       107,010       699,443       176,039        107,791  
  —        3,100       —       4,596       —       —        —  

 

 

     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

     

 

 

  
  584,495        35,516       985,545       111,606       699,443       176,039        107,791  

 

 

     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

     

 

 

  
  —        (3,374 )      —       (11,081 )      —       —        (16,372 ) 

 

 

     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

     

 

 

  
  584,495        32,142       985,545       100,525       699,443       176,039        91,419  

 

 

     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

     

 

 

  
  186,999        17,077       (162,226 )      75,116       (236,166 )      11,696        (1,922 ) 

 

 

     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

     

 

 

  
                      
  6,043,542        15,118       7,520,969       171,115       5,012,086       130,288        428,323  
  —        (19 )      (351 )      (7 )      —       628        (584 ) 
 

     

6,945,369

  

 

      539,341       1,891,411       1,292,085       2,123,126       1,588,933        996,260  

 

 

     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

     

 

 

  
  12,988,911        554,440       9,412,029       1,463,193       7,135,212       1,719,849        1,423,999  

 

 

     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

     

 

 

  
  $13,175,910        $571,517       $9,249,803       $1,538,309       $6,899,046       $1,731,545        $1,422,077  

 

 

     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

     

 

 

  
                      
  —        $1,835       $2,662       $1,267       $2,622       $12,205        $14,749  

 

 

  

 

DECEMBER 31, 2017

   

 

 

 

57

 

 

    

STATEMENTS OF CHANGES IN NET ASSETS

 

     Sit Balanced Fund     Sit Dividend Growth Fund  
     Six Months Ended
December 31, 2017,
(Unaudited)		     Year Ended
June 30,
2017		     Six Months Ended
December 31, 2017,
(Unaudited)		     Year Ended
June 30,
2017		  

Operations:

         

Net investment income

      $140,657       $291,909       $8,097,757       $15,174,483  

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

      468,747       681,151       74,963,338       72,506,740  

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

      1,438,419       1,963,274       23,192,009       59,079,432  
  

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets resulting from operations

      2,047,823       2,936,334       106,253,104       146,760,655  
  

 

 

    

 

 

    

 

 

    

 

 

  

Distributions from:

         

Net investment income

         

Common shares (Class I)

      (307,000 )      (270,000 )      (11,310,056 )      (13,709,100 ) 

Common shares (Class S)

      —       —       (620,944 )      (789,900 ) 

Net realized gains on investments

         

Common shares (Class I)

      (1,006,844 )      —       (90,926,168 )      (60,795,024 ) 

Common shares (Class S)

      —       —       (5,944,642 )      (4,229,591 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Total distributions

      (1,313,844 )      (270,000 )      (108,801,810 )      (79,523,615 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Capital share transactions:

         

Proceeds from shares sold

         

Common shares (Class I)

      1,850,086       5,470,617       121,154,466       235,309,300  

Common shares (Class S)

      —       —       1,304,842       4,759,392  

Reinvested distributions

         

Common shares (Class I)

      1,299,020       268,772       39,667,521       21,753,300  

Common shares (Class S)

      —       —       6,530,714       4,974,693  

Payments for shares redeemed

         

Common shares (Class I)

      (1,477,103 )      (6,675,093 )      (234,544,100 )      (246,146,918 ) 

Common shares (Class S)

      —       —       (12,814,448 )      (16,552,919 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Increase (decrease) in net assets from capital transactions.

      1,672,003       (935,704 )      (78,701,005 )      4,096,848  
  

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      2,405,982       1,730,630       (81,249,711 )      71,333,888  

Net assets:

         

Beginning of period

      25,241,681       23,511,051       1,081,198,466       1,009,864,578  
  

 

 

    

 

 

    

 

 

    

 

 

  

End of period *

      $27,647,663       $25,241,681       $999,948,755       $1,081,198,466  
  

 

 

    

 

 

    

 

 

    

 

 

  

Capital transactions in shares:

         

Sold

         

Common shares (Class I)

      77,586       251,315       6,994,100       14,366,496  

Common shares (Class S)

      —       —       75,004       296,303  

Reinvested distributions

         

Common shares (Class I)

      55,504       12,751       2,354,550       1,378,945  

Common shares (Class S)

      —       —       389,327       316,539  

Redeemed

         

Common shares (Class I)

      (62,583 )      (305,161 )      (13,587,646 )      (15,130,992 ) 

Common shares (Class S)

      —       —       (748,263 )      (1,021,341 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease)

      70,507       (41,095 )      (4,522,928 )      205,950  
  

 

 

    

 

 

    

 

 

    

 

 

  

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

      ($83,920 )      $82,423       $13,315       $3,846,558  

1 The Fund commenced investment operations on June 30, 2016.

 

 

 

See accompanying notes to financial statements.

   

58

      SIT MUTUAL FUNDS SEMI-ANNUAL REPORT  

    

    

 

 

Sit Global Dividend Growth Fund     Sit Large Cap Growth Fund     Sit ESG Growth Fund  
Six Months Ended
December 31, 2017,
(Unaudited)		     Year Ended
June 30,
2017		     Six Months Ended
December 31, 2017,
(Unaudited)		     Year Ended
June 30,
2017		     Six Months Ended
December 31, 2017,
(Unaudited)		     Year Ended
June 30,
2017 1		  
                  
  $220,184       $426,320       $186,999       $633,963       $17,077       $37,896  
 

     

213,946

  

 

     (233,749 )      6,043,542       11,226,235       15,099       (60,493 ) 
 

     

2,770,308

  

 

     2,814,059       6,945,369       10,499,569       539,341       553,305  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

3,204,438

 

     3,006,630       13,175,910       22,359,767       571,517       530,708  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
                  
                  
  (323,505 )      (354,957 )      (460,000 )      (571,000 )      (27,776 )      (4,383 ) 
  (34,495 )      (38,043 )      —       —       (21,224 )      (1,717 ) 
                  
  —       —       (12,334,121 )      (7,612,702 )      —       —  
  —       —       —       —       —       —  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
  (358,000 )      (393,000 )      (12,794,121 )      (8,183,702 )      (49,000 )      (6,100 ) 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
                  
                  
  1,938,518       2,665,400       1,846,768       2,592,948       417,304       2,077,200  
  197,877       409,892       —       —       88,166       2,072,000  
                  
  317,120       354,297       12,508,440       8,064,947       27,776       4,383  
  33,584       37,741       —       —       21,224       1,717  
                  
  (1,083,555 )      (2,041,964 )      (10,040,006 )      (28,672,696 )      (406 )      —  
  (283,225 )      (334,935 )      —       —       —       (10,199 ) 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

1,120,319

 

     1,090,431       4,315,202       (18,014,801 )      554,064       4,145,101  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
  3,966,757       3,704,061       4,696,991       (3,838,736 )      1,076,581       4,669,709  
                  
  28,897,262       25,193,201       113,620,010       117,458,746       4,669,709       —  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
  $32,864,019       $28,897,262       $118,317,001       $113,620,010       $5,746,290       $4,669,709  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
                  
         
  128,273       194,406       43,444       66,462       35,297       207,625  
  13,333       29,646       —       —       7,537       206,622  
         
  20,896       26,168       305,905       224,089       2,227       428  
  2,219       2,789       —       —       1,703       168  
         
  (69,993 )      (151,558 )      (234,146 )      (750,228 )      (33 )      —  
  (17,969 )      (24,106 )      —       —       —       (978 ) 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
  76,759       77,345       115,203       (459,677 )      46,731       413,865  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
 

     

$4,773

  

 

     $142,589       $7,440       $280,441       $216       $32,139  

 

 

  

 

DECEMBER 31, 2017

   

 

 

 

59

 

 

    

STATEMENTS OF CHANGES IN NET ASSETS (Continued)

 

     Sit Mid Cap Growth Fund     Sit Small Cap
Dividend Growth Fund		  
     Six Months Ended
December 31, 2017,
(Unaudited)		     Year Ended
June 30,
2017		     Six Months Ended
December 31, 2017,
(Unaudited)		     Year Ended
June 30,
2017		  

Operations:

         

Net investment income (loss)

      ($162,226 )      ($10,878 )      $75,116       $128,102  

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

      7,520,618       4,151,414       171,108       (155,013 ) 

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

      1,891,411       21,044,515       1,292,085       1,772,310  
  

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in net assets resulting from operations

      9,249,803       25,185,051       1,538,309       1,745,399  
  

 

 

    

 

 

    

 

 

    

 

 

  

Distributions from:

         

Net investment income

         

Common shares (Class I)

      (4,961 )      —       (96,206 )      (87,515 ) 

Common shares (Class S)

      —       —       (19,794 )      (21,485 ) 

Net realized gains on investments

         

Common shares (Class I)

      (6,517,375 )      (1,410,787 )      —       —  
  

 

 

    

 

 

    

 

 

    

 

 

  

Total distributions

      (6,522,336 )      (1,410,787 )      (116,000 )      (109,000 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Capital share transactions:

         

Proceeds from shares sold

         

Common shares (Class I)

      942,665       1,746,154       1,552,423       6,275,456  

Common shares (Class S)

      —       —       270,047       876,893  

Reinvested distributions

         

Common shares (Class I)

      6,256,872       1,364,194       93,230       83,800  

Common shares (Class S)

      —       —       18,850       21,044  

Payments for shares redeemed

         

Common shares (Class I)

      (6,743,250 )      (10,102,829 )      (588,647 )      (656,383 ) 

Common shares (Class S)

      —       —       (31,600 )      (424,301 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Increase (decrease) in net assets from capital transactions

      456,287       (6,992,481 )      1,314,303       6,176,509  
  

 

 

    

 

 

    

 

 

    

 

 

  

Total increase (decrease) in net assets

      3,183,754       16,781,783       2,736,612       7,812,908  

Net assets:

         

Beginning of period

      156,304,902       139,523,119       16,176,559       8,363,651  
  

 

 

    

 

 

    

 

 

    

 

 

  

End of period*

      $159,488,656       $156,304,902       $18,913,171       $16,176,559  
  

 

 

    

 

 

    

 

 

    

 

 

  

Capital transactions in shares:

         

Sold

         

Common shares (Class I)

      51,102       102,473       130,283       582,458  

Common shares (Class S)

      —       —       22,769       79,594  

Reinvested distributions

         

Common shares (Class I)

      339,494       83,899       7,780       7,829  

Common shares (Class S)

      —       —       1,574       1,981  

Redeemed

         

Common shares (Class I)

      (362,515 )      (613,095 )      (50,630 )      (58,652 ) 

Common shares (Class S)

      —       —       (2,762 )      (38,205 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease)

      28,081       (426,723 )      109,014       575,005  
  

 

 

    

 

 

    

 

 

    

 

 

  

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

      ($162,226 )      $4,961       $3,482       $44,366  

 

See accompanying notes to financial statements.

   

60

      SIT MUTUAL FUNDS SEMI-ANNUAL REPORT  

    

    

 

 

Sit Small Cap Growth Fund     Sit International Growth Fund     Sit Developing Markets Growth Fund  
Six Months Ended
December 31, 2017,
(Unaudited)		     Year Ended
June 30,
2017		     Six Months Ended
December 31, 2017,
(Unaudited)		     Year Ended
June 30,
2017		     Six Months Ended
December 31, 2017,
(Unaudited)		     Year Ended
June 30,
2017		  
                  
  ($236,166 )      ($411,812 )      $11,696       $201,465       ($1,922 )      ($13,702 ) 
 
     
5,012,086
 		     3,000,251       130,916       (523,450 )      427,739       (16,828 ) 
 
     
2,123,126
 		     12,418,238       1,588,933       2,819,488       996,260       1,716,216  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
 
     
6,899,046
 		     15,006,677       1,731,545       2,497,503       1,422,077       1,685,686  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
                  
                  
  —       —       (197,000 )      (97,000 )      —       (18,811 ) 
  —       —       —       —       —       —  
                  
  (6,111,266 )      (144,732 )      —       —       (159,864 )      —  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
  (6,111,266 )      (144,732 )      (197,000 )      (97,000 )      (159,864 )      (18,811 ) 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
                  
                  
  952,755       1,705,891       834,158       739,301       2,001,641       1,191,396  
  —       —       —         —       —  
                  
  6,006,115       142,196       195,219       96,669       156,936       18,429  
  —       —       —       —       —       —  
                  
  (2,928,514 )      (7,102,157 )      (1,196,450 )      (1,058,121 )      (1,809,058 )      (612,094 ) 
  —       —       —       —       —       —  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
 
     
4,030,356
 		     (5,254,070 )      (167,073 )      (222,151 )      349,519       597,731  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
  4,818,136       9,607,875       1,367,472       2,178,352       1,611,732       2,264,606  
                  
  90,816,744       81,208,869       22,618,014       20,439,662       9,561,115       7,296,509  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
  $95,634,880       $90,816,744       $23,985,486       $22,618,014       $11,172,847       $9,561,115  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
                  
         
  17,116       33,242       49,262       47,796       121,258       79,312  
  —       —       —       —       —       —  
         
  109,661       2,793       11,343       6,875       9,352       1,517  
  —       —       —       —       —       —  
         
  (51,821 )      (141,431 )      (70,556 )      (72,598 )      (108,563 )      (48,216 ) 
  —       —       —       —       —       —  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
  74,956       (105,396 )      (9,951 )      (17,927 )      22,047       32,613  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
 

     

($236,166

  

) 

     —       ($8,083 )      $177,221       ($1,922 )      —  

 

 

  

 

DECEMBER 31, 2017

   

 

 

 

61

 

 

 

FINANCIAL HIGHLIGHTS

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

 

Sit Balanced Fund

 

  
     Six Months Ended
December 31, 2017		     

Years Ended June 30,

  
     (Unaudited)      2017     2016     2015     2014     2013  

 

  

Net Asset Value:

              

Beginning of period

      $22.71                 $20.40       $21.54       $21.01       $18.42       $16.97  
  

 

 

  

Operations:

              

Net investment income 1

     0.13                 0.25       0.26       0.25       0.27       0.27  

Net realized and unrealized gains

      1.71                 2.29       0.04       1.16       2.58       1.46  
  

 

 

  

Total from operations

      1.84                 2.54       0.30       1.41       2.85       1.73  
  

 

 

  

Distributions to Shareholders:

              

From net investment income

      (0.27)                (0.23 )      (0.45 )      (0.24 )      (0.26 )      (0.28 ) 

From net realized gains

      (0.89)                —       (0.99 )      (0.64 )      —       —  
  

 

 

  

Total distributions

      (1.16)                (0.23 )      (1.44 )      (0.88 )      (0.26 )      (0.28 ) 
  

 

 

  

Net Asset Value:

              

End of period

      $23.39                 $22.71       $20.40       $21.54       $21.01       $18.42  
  

 

 

  

Total investment return 2

     8.13%                12.56%       1.47%       6.86%       15.58%       10.26%  
  

 

 

  

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

      $27,648                $25,242       $23,511       $22,970       $15,645       $13,492  

Ratios: 3

             

Expenses

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

Net investment income

      1.08%                1.18%       1.25%       1.17%       1.36%       1.52%  

Portfolio turnover rate (excluding short-term securities)

      21.98%4                50.31%       54.46%       47.49%       54.52%       30.86%  

 

1 

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

 

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

 

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

 

4 

Not annualized.

 

  

 

62

   

 

 

 

SIT MUTUAL FUNDS SEMI-ANNUAL REPORT

 

 

 

FINANCIAL HIGHLIGHTS

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

 

Sit Dividend Growth Fund

 

  
     Six Months Ended                                 
Class I    December 31, 2017      Years Ended June 30,  
     (Unaudited)      2017     2016     2015     2014     2013  

 

  

Net Asset Value:

              

Beginning of period

      $16.88                 $15.82       $17.40       $18.69       $16.35       $14.10  
  

 

 

  

Operations:

              

Net investment income 1

     0.14                 0.24       0.26       0.25       0.26       0.27  

Net realized and unrealized gains

      1.66                 2.09       0.32       0.92       2.96       2.46  
  

 

 

  

Total from operations

      1.80                 2.33       0.58       1.17       3.22       2.73  
  

 

 

  

Redemption fees 2

     —                 —       —       —       —       —  
  

 

 

  

Distributions to Shareholders:

              

From net investment income

      (0.20)                (0.23 )      (0.32 )      (0.25 )      (0.25 )      (0.26 ) 

From net realized gains

      (1.68)                (1.04 )      (1.84 )      (2.21 )      (0.63 )      (0.22 ) 
  

 

 

  

Total distributions

      (1.88)                (1.27 )      (2.16 )      (2.46 )      (0.88 )      (0.48 ) 
  

 

 

  

Net Asset Value:

              

End of period

      $16.80                 $16.88       $15.82       $17.40       $18.69       $16.35  
  

 

 

  

Total investment return 3

     10.71%                15.41%       3.94%       6.39%       20.26%       19.77%  
  

 

 

  

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

      $939,727                $1,015,920       $942,244       $955,460       $1,017,106       $920,324  

Ratios: 4

             

Expenses (without waiver)

      1.00%5                 1.00%       1.00%       1.00%       1.00%       1.00%  

Expenses (with waiver)

      0.85%5                 1.00%       1.00%       1.00%       1.00%       1.00%  

Net investment income (without waiver)

      1.43%                1.49%       1.64%       1.39%       1.50%       1.78%  

Net investment income (with waiver)

      1.58%                1.49%       1.64%       1.39%       1.50%       1.78%  

Portfolio turnover rate (excluding short-term securities)

      32.33%6                 61.33%       75.94%       57.69%       44.36%       26.58%  

 

1 

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

 

2 

Amount represents less than $0.01 per share.

 

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

 

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

 

5  Total Fund expenses are limited to 1.00% of average daily net assets. However, during the period above, the investment advisor voluntarily absorbed expenses that were otherwise payable by the Fund.

 

6 

Not annualized.

 

 

 

DECEMBER 31, 2017

  

 

63

 

FINANCIAL HIGHLIGHTS

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

 

Sit Dividend Growth Fund

 

  
     Six Months Ended                                 
Class S    December 31, 2017      Years Ended June 30,  
     (Unaudited)      2017     2016     2015     2014     2013  

 

  

Net Asset Value:

              

Beginning of period

      $16.81                 $15.76       $17.34       $18.63       $16.29       $14.06  
  

 

 

  

Operations:

              

Net investment income 1

     0.11                 0.20       0.22       0.21       0.22       0.23  

Net realized and unrealized gains

      1.66                 2.08       0.32       0.91       2.96       2.44  
  

 

 

  

Total from operations

      1.77                 2.28       0.54       1.12       3.18       2.67  
  

 

 

  

Redemption fees

      —                 —   2      —   2      —   2      —   2      —   2 
  

 

 

  

Distributions to Shareholders:

              

From net investment income

      (0.17)                (0.19 )      (0.28 )      (0.20 )      (0.21 )      (0.22 ) 

From net realized gains

      (1.68)                (1.04 )      (1.84 )      (2.21 )      (0.63 )      (0.22 ) 
  

 

 

  

Total distributions

      (1.85)                (1.23 )      (2.12 )      (2.41 )      (0.84 )      (0.44 ) 
  

 

 

  

Net Asset Value:

   

End of period

      $16.73                 $16.81       $15.76       $17.34       $18.63       $16.29  
  

 

 

  

Total investment return 3

     10.55%                15.11%       3.68%       6.13%       20.02%       19.39%  
  

 

 

  

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

      $60,222                $65,278       $67,620       $82,959       $103,433       $134,498  

Ratios: 4

             

Expenses (without waiver)

      1.25%5                 1.25%       1.25%       1.25%       1.25%       1.25%  

Expenses (with waiver)

      1.10%5                 1.25%       1.25%       1.25%       1.25%       1.25%  

Net investment income (without waiver)

      1.18%                1.24%       1.39%       1.14%       1.25%       1.53%  

Net investment income (with waiver)

      1.33%                1.24%       1.39%       1.14%       1.25%       1.53%  

Portfolio turnover rate (excluding short-term securities)

      32.33%6                61.33%       75.94%       57.69%       44.36%       26.58%  

 

1 

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

 

2 

Amount represents less than $0.01 per share.

 

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

 

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

 

5  Total Fund expenses are limited to 1.25% of average daily net assets. However, during the period above, the investment advisor voluntarily absorbed expenses that were otherwise payable by the Fund.

 

6 

Not annualized.

 

  

 

64

   

 

 

 

SIT MUTUAL FUNDS SEMI-ANNUAL REPORT

 

 

 

FINANCIAL HIGHLIGHTS

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

 

Sit Global Dividend Growth Fund

 

  
     Six Months Ended                                 
Class I    December 31, 2017      Years Ended June 30,  
     (Unaudited)      2017     2016     2015     2014     2013  

 

  

Net Asset Value:

              

Beginning of period

      $14.54                 $13.19       $14.80       $15.74       $14.27       $12.55  
  

 

 

  

Operations:

   

Net investment income 1

     0.11                 0.22       0.21       0.20       0.23       0.25  

Net realized and unrealized gains (losses)

      1.45                 1.34       (0.48 )      0.13       2.09       1.78  
  

 

 

  

Total from operations

      1.56                 1.56       (0.27 )      0.33       2.32       2.03  
  

 

 

  

Redemption fees

      —                 —   2      —       —       —   2      —   2 
  

 

 

  

Distributions to Shareholders:

              

From net investment income

      (0.18)                (0.21 )      (0.34 )      (0.20 )      (0.22 )      (0.23 ) 

From net realized gains

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

 

 

  

Total distributions

      (0.18)                (0.21 )      (1.34 )      (1.27 )      (0.85 )      (0.31 ) 
  

 

 

  

Net Asset Value:

              

End of period

      $15.92                 $14.54       $13.19       $14.80       $15.74       $14.27  
  

 

 

  

Total investment return 3

     10.80%                11.94%       (1.67% )      2.19%       16.76%       16.36%  
  

 

 

  

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

      $29,315                $25,623       $22,333       $21,424       $21,467       $14,196  

Ratios: 4

              

Expenses (without waiver)

      1.25%5                 1.25%       1.25%       1.25%       1.25%       1.25%  

Expenses (with waiver)

      1.12%5                 1.25%       1.25%       1.25%       1.25%       1.25%  

Net investment income (without waiver)

      1.33%                1.63%       1.56%       1.33%       1.55%       1.81%  

Net investment income (with waiver)

      1.45%                1.63%       1.56%       1.33%       1.55%       1.81%  

Portfolio turnover rate (excluding short-term securities)

      8.02%6                 32.04%       48.30%       75.06%       48.68%       26.15%  

 

1 

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

 

2 

Amount represents less than $0.01 per share.

 

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

 

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

 

5  Total Fund expenses are limited to 1.25% of average daily net assets. However, during the period above, the investment advisor voluntarily absorbed expenses that were otherwise payable by the Fund.

 

6 

Not annualized.

 

 

 

DECEMBER 31, 2017

  

 

65

 

FINANCIAL HIGHLIGHTS

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

 

Sit Global Dividend Growth Fund

 

  
     Six Months Ended                                 
Class S    December 31, 2017      Years Ended June 30,  
     (Unaudited)      2017     2016     2015     2014     2013  

 

  

Net Asset Value:

              

Beginning of period

      $14.53                 $13.18       $14.78       $15.72       $14.25       $12.54  
  

 

 

  

Operations:

              

Net investment income 1

     0.09                 0.19       0.18       0.16       0.20       0.21  

Net realized and unrealized gains (losses)

      1.45                 1.33       (0.48 )      0.13       2.09       1.78  
  

 

 

  

Total from operations

      1.54                 1.52       (0.30 )      0.29       2.29       1.99  
  

 

 

  

Redemption fees

      —                 —       —       —       —   2      —  

Distributions to Shareholders:

   

 

 

  

From net investment income

      (0.15)                (0.17 )      (0.30 )      (0.16 )      (0.19 )      (0.20 ) 

From net realized gains

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

 

 

  

Total distributions.

      (0.15)                (0.17 )      (1.30 )      (1.23 )      (0.82 )      (0.28 ) 
  

 

 

  

Net Asset Value:

              

End of period

      $15.92                 $14.53       $13.18       $14.78       $15.72       $14.25  
  

 

 

  

Total investment return 3

     10.67%                11.67%       (1.89% )      2.00%       16.49%       16.01%  
  

 

 

  

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

      $3,549                $3,274       $2,861       $3,451       $3,323       $3,257  

Ratios: 4

              

Expenses (without waiver)

      1.50%5                 1.50%       1.50%       1.50%       1.50%       1.50%  

Expenses (with waiver)

      1.37%5                 1.50%       1.50%       1.50%       1.50%       1.50%  

Net investment income (without waiver)

      1.08%                1.38%       1.31%       1.08%       1.30%       1.56%  

Net investment income (with waiver)

      1.20%                1.38%       1.31%       1.08%       1.30%       1.56%  

Portfolio turnover rate (excluding short-term securities)

      8.02%6                 32.04%       48.30%       75.06%       48.68%       26.15%  

 

1 

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

 

2 

Amount represents less than $0.01 per share.

 

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

 

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

 

5  Total Fund expenses are limited to 1.50% of average daily net assets. However, during the period above, the investment advisor voluntarily absorbed expenses that were otherwise payable by the Fund.

 

6 

Not annualized.

 

  

 

66

   

 

 

 

SIT MUTUAL FUNDS SEMI-ANNUAL REPORT

 

 

    

FINANCIAL HIGHLIGHTS

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

 

Sit Large Cap Growth Fund

 

 

  
    Six Months Ended
December 31, 2017		      Years Ended June 30,  
    (Unaudited)      2017     2016     2015     2014     2013  

 

  

Net Asset Value:

             

Beginning of period

     $40.56                 $36.02       $47.21       $52.51       $47.53       $45.53  
 

 

 

  

Operations:

             

Net investment income 1

    0.07                 0.21       0.18       0.20       0.29       0.43  

Net realized and unrealized gains (losses)

     4.77                 7.07       (0.42 )      5.04       10.23       5.69  
 

 

 

  

Total from operations

     4.84                 7.28       (0.24 )      5.24       10.52       6.12  
 

 

 

  

Redemption fees 2

    —                 —       —       —       —       —  
 

 

 

  

Distributions to Shareholders:

             

From net investment income

     (0.17)                (0.19 )      (1.44 )      (0.24 )      (0.39 )      (0.46 ) 

From net realized gains

     (4.67)                (2.55 )      (9.51 )      (10.30 )      (5.15 )      (3.66 ) 
 

 

 

  

Total distributions

     (4.84)                (2.74 )      (10.95 )      (10.54 )      (5.54 )      (4.12 ) 
 

 

 

  

Net Asset Value:

             

End of period

     $40.56                 $40.56       $36.02       $47.21       $52.51       $47.53  
 

 

 

  

Total investment return 3

    11.86%                21.18%       (0.89%)       10.62%       22.92%       14.18%  
 

 

 

  

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

     $118,317                $113,620       $117,459       $144,807       $188,574       $196,285  

Ratios: 4

            

Expenses

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

Net investment income

     0.32%                0.54%       0.44%       0.41%       0.57%       0.92%  

Portfolio turnover rate (excluding short-term securities)

     5.84%5                17.69%       20.05%       24.04%       27.34%       13.42%  

 

1 

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

 

2 

Amount represents less than $0.01 per share.

 

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

 

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

 

5 

Not annualized.

 

  

 

DECEMBER 31, 2017

   

 

 

 

67

 

 

 

FINANCIAL HIGHLIGHTS

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

 

Sit ESG Growth Fund

 

Class I   Six Months Ended
December 31, 2017
(Unaudited)		    

Year Ended

June 30, 2017 *

  

Net Asset Value:

    

Beginning of period

     $11.29           $10.00      

Operations:

    

Net investment income 1

    0.05       0.11  

Net realized and unrealized gains

     1.25       1.20  

Total from operations

     1.30       1.31  

Distributions to Shareholders:

    

From net investment income

     (0.11)       (0.02)  

Net Asset Value:

    

End of period

     $12.48           $11.29      

Total investment return 2

    11.55%           13.13%      

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

     $3,065          $2,349     

Ratios: 3

   

Expenses (without waiver)

     1.25%4          1.25%    

Expenses (with waiver)

     1.12%4          1.25%    

Net investment income (without waiver)

     0.65%         1.01%    

Net investment income (with waiver)

     0.78%         1.01%    

Portfolio turnover rate (excluding short-term securities)

     3.44%5           27.60%    

 

* 

The Fund commenced investment operations on June 30, 2016.

 

1 

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

 

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

 

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

 

4  Total Fund expenses are limited to 1.25% of average daily net assets. However, during the period above, the investment advisor voluntarily absorbed expenses that were otherwise payable by the Fund.

 

5 

Not annualized.

 

  

 

68

   

 

 

 

SIT MUTUAL FUNDS SEMI-ANNUAL REPORT

 

 

    

FINANCIAL HIGHLIGHTS

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

 

Sit ESG Growth Fund

 

Class S  

Six Months Ended

December 31, 2017
(Unaudited)

     Year Ended
June 30, 2017  *		  

Net Asset Value:

    

Beginning of period

     $11.28             $10.00       

Operations:

    

Net investment income 1

    0.03             0.08       

Net realized and unrealized gains

     1.26             1.21       

Total from operations

     1.29             1.29       

Distributions to Shareholders:

    

From net investment income

     (0.10)            (0.01)      

Net Asset Value:

    

End of period

     $12.47             $11.28       

Total investment return 2

    11.53%             12.79%       

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

     $2,681             $2,321       

Ratios: 3

   

Expenses (without waiver)

     1.50%4              1.50%       

Expenses (with waiver)

     1.37%4              1.50%       

Net investment income (without waiver)

     0.40%             0.76%       

Net investment income (with waiver)

     0.53%             0.76%       

Portfolio turnover rate (excluding short-term securities)

     3.44%5              27.60%       

 

* 

The Fund commenced investment operations on June 30, 2016.

 

1 

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

 

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

 

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

 

4  Total Fund expenses are limited to 1.50% of average daily net assets. However, during the period above, the investment advisor voluntarily absorbed expenses that were otherwise payable by the Fund.

 

5 

Not annualized.

 

  

 

DECEMBER 31, 2017

   

 

 

 

69

 

 

 

FINANCIAL HIGHLIGHTS

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

 

Sit Mid Cap Growth Fund

 

 

  
    Six Months Ended
December 31, 2017		     

Years Ended June 30,

  
    (Unaudited)      2017     2016     2015     2014     2013  

 

  

Net Asset Value:

             

Beginning of period

     $18.06              $15.36       $20.22       $21.08       $17.69       $15.77  
 

 

 

  

Operations:

             

Net investment loss 1

    (0.02)             —    2      (0.04 )      (0.06 )      (0.07 )        (0.03 ) 

Net realized and unrealized gains (losses)

     1.10              2.86       (1.92 )      1.91       4.54       2.32  
 

 

 

  

Total from operations

     1.08              2.86       (1.96 )      1.85       4.47       2.29  
 

 

 

  

Redemption fees 2

    —              —       —       —       —       —  
 

 

 

  

Distributions to Shareholders:

             

From net investment income

     —  2           —       —       —       —       —  

From net realized gains

     (0.78)             (0.16 )      (2.90 )      (2.71 )      (1.08 )        (0.37 ) 
 

 

 

  

Total distributions

     (0.78)             (0.16 )      (2.90 )      (2.71 )      (1.08 )        (0.37 ) 
 

 

 

  

Net Asset Value:

             

End of period

     $18.36              $18.06       $15.36       $20.22       $21.08       $17.69  
 

 

 

  

Total investment return 3

    5.96%              18.74%       (9.97% )      9.52%       25.58%       14.70%  
 

 

 

  

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

     $159,489              $156,305       $139,523       $171,854       $180,276       $152,129  

Ratios: 4

            

Expenses

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

Net investment loss

     (0.21%)             (0.01% )      (0.23% )      (0.30% )      (0.37% )        (0.17% ) 

Portfolio turnover rate (excluding short-term securities)

     14.52%5               23.02%       21.57%       23.39%       27.65%       16.91%  

 

1 

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

 

2

Amount represents less than $0.01 per share.

 

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

 

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

 

5

Not annualized.

 

  

 

70

   

 

 

 

SIT MUTUAL FUNDS SEMI-ANNUAL REPORT

 

 

 

FINANCIAL HIGHLIGHTS

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

 

Sit Small Cap Dividend Growth Fund

 

 

  
Class I   Six Months Ended
December 31, 2017		      Year Ended     Year Ended     Three
Months Ended		  
    (Unaudited)      June 30, 2017     June 30, 2016     June 30, 2015 *  

 

  

Net Asset Value:

         

Beginning of period

     $11.47              $10.00       $9.96       $10.00     
 

 

 

  

Operations:

         

Net investment income 1

    0.05              0.12       0.14       0.02     

Net realized and unrealized gains (losses)

     1.00              1.46       0.02       (0.06)    
 

 

 

  

Total from operations

     1.05              1.58       0.16       (0.04)    
 

 

 

  

Distributions to Shareholders:

         

From net investment income

     (0.08)             (0.11 )      (0.12 )      —     

From net realized gains

     —               —       —   2      —     
 

 

 

  

Total distributions

     (0.08)             (0.11 )      (0.12 )      —     
 

 

 

  

Net Asset Value:

         

End of period

     $12.44              $11.47       $10.00       $9.96     
 

 

 

  

Total investment return 3

    9.23%              15.84%       1.71%       (0.40%)   
 

 

 

  

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

     $14,887              $12,716       $5,777       $3,708     

Ratios: 4

        

Expenses (without waiver)

     1.25%5               1.25%       1.25%       1.25%     

Expenses (with waiver)

     1.12%5               1.25%       1.25%       1.25%     

Net investment income (without waiver)

     0.80%              1.06%       1.46%       0.98%     

Net investment income (with waiver)

     0.93%              1.06%       1.46%       0.98%     

Portfolio turnover rate (excluding short-term securities)

     14.03%6              19.57%       26.43%       2.63%6     

 

* 

The Fund commenced investment operations on March 31, 2015.

 

1 

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

 

2 

Amount represents less than $0.01 per share.

 

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

 

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

 

5  Total Fund expenses are limited to 1.25% of average daily net assets. However, during the period above, the investment advisor voluntarily absorbed expenses that were otherwise payable by the Fund.

 

6 

Not annualized.

 

  

 

DECEMBER 31, 2017

   

 

 

 

71

 

 

 

FINANCIAL HIGHLIGHTS

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

 

Sit Small Cap Dividend Growth Fund

 

 

  
Class S    Six Months Ended
December 31, 2017
(Unaudited)		     Year Ended
June 30, 2017		     Year Ended
June 30, 2016		   Three
Months Ended
June 30, 2015 *		  

 

  

Net Asset Value:

         

Beginning of period

      $11.46           $10.00     $9.96     $10.00  
  

 

 

  

Operations:

         

Net investment income 1

     0.04           0.09     0.11         0.02  

Net realized and unrealized gains (losses)

      1.00           1.45     0.03         (0.06)  
  

 

 

  

Total from operations

      1.04           1.54     0.14         (0.04)  
  

 

 

  

Distributions to Shareholders:

         

From net investment income

      (0.06)           (0.08)     (0.10)     —       

From net realized gains

          —       —          — 2     —       
  

 

 

  

Total distributions

      (0.06)           (0.08)     (0.10)     —       
  

 

 

  

Net Asset Value:

         

End of period

      $12.44          $11.46     $10.00             $9.96  
  

 

 

  

Total investment return 3

     9.13%         15.46%     1.46%     (0.40%)  
  

 

 

  

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

      $4,026         $3,461     $2,587         $2,230  

Ratios: 4

        

Expenses (without waiver)

      1.50%5         1.50%     1.50%       1.50%  

Expenses (with waiver)

      1.37%5         1.50%     1.50%       1.50%  

Net investment income (without waiver)

      0.55%         0.81%     1.21%       0.73%  

Net investment income (with waiver)

      0.68%         0.81%     1.21%       0.73%  

Portfolio turnover rate (excluding short-term securities)

      14.03%6           19.57%       26.43%       2.63%6    

 

* 

The Fund commenced investment operations on March 31, 2015.

 

1 

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

 

2 

Amount represents less than $0.01 per share.

 

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

 

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

 

5  Total Fund expenses are limited to 1.50% of average daily net assets. However, during the period above, the investment advisor voluntarily absorbed expenses that were otherwise payable by the Fund.

 

6 

Not annualized.

 

  

 

72

   

 

 

 

SIT MUTUAL FUNDS SEMI-ANNUAL REPORT

 

 

    

FINANCIAL HIGHLIGHTS

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

 

 

Sit Small Cap Growth Fund

 

 

  
    Six Months Ended                    
    December 31, 2017       Years Ended June 30,    
    (Unaudited)   2017   2016   2015   2014   2013

 

  

Net Asset Value:

                        

Beginning of period

       $54.18       $45.59       $60.10       $61.38       $50.08       $43.90
   

 

 

  

Operations:

                        

Net investment loss 1

      (0.14 )        (0.24 )       (0.33 )       (0.48 )       (0.55 )       (0.30 )

Net realized and unrealized gains (losses)

       4.30       8.91       (8.97 )       6.26       11.85       6.48
   

 

 

  

Total from operations

       4.16       8.67       (9.30 )       5.78       11.30       6.18
   

 

 

  

Redemption fees

       —       —   2       —   2       —   2       —   2       —   2
   

 

 

  

Distributions to Shareholders:

                        

From net realized gains

       (3.72 )        (0.08 )       (5.21 )       (7.06 )       —       —
   

 

 

  

Net Asset Value:

                        

End of period

       $54.62       $54.18       $45.59       $60.10       $61.38       $50.08
   

 

 

  

Total investment return 3

      7.64%       19.06%       (16.00% )       10.38%       22.56%       14.08%
   

 

 

  

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

       $95,635       $90,817       $81,209       $103,816       $99,510       $84,793

Ratios: 4

                       

Expenses

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

Net investment loss

       (0.51% )       (0.47% )       (0.65% )       (0.81% )       (0.94% )       (0.64% )

Portfolio turnover rate (excluding short-term securities)

       17.10%5       29.08%       27.37%       31.07%       33.38%       28.36%

 

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

 

2   Amount represents less than $0.01 per share.

 

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

 

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

 

5   Not annualized.

 

  

 

DECEMBER 31, 2017

   

 

 

 

73

 

 

 

FINANCIAL HIGHLIGHTS

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

 

 

Sit International Growth Fund

 

 

  
     Six Months Ended                    
     December 31, 2017       Years Ended June 30,    
     (Unaudited)   2017   2016   2015   2014   2013

 

  

Net Asset Value:

                         

Beginning of period.

        $16.23       $14.48       $16.92       $17.44       $15.05       $13.29
    

 

 

  

Operations:

                         

Net investment income 1

       0.01       0.14       0.12       0.09       0.28       0.20

Net realized and unrealized gains (losses)

        1.23       1.68       (1.47 )       (0.34 )       2.28       1.80
    

 

 

  

Total from operations

        1.24       1.82       (1.35 )       (0.25 )       2.56       2.00
    

 

 

  

Redemption fees

        —   2       —   2       —       —       —       —
    

 

 

  

Distributions to Shareholders:

                         

From net investment income

        (0.14 )       (0.07 )       (0.09 )       (0.27 )       (0.17 )       (0.24 )

From net realized gains

        —       —       (1.00 )       —       —       —
    

 

 

  

Total distributions

        (0.14 )       (0.07 )       (1.09 )       (0.27 )       (0.17 )       (0.24 )
    

 

 

  

Net Asset Value:

                         

End of period.

        $17.33       $16.23       $14.48       $16.92       $17.44       $15.05
    

 

 

  

Total investment return 3

       7.67%       12.64%       (8.19% )       (1.35% )       17.06%       15.06%
    

 

 

  

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

        $23,985       $22,618       $20,440       $22,485       $24,127       $20,890

Ratios: 4

                        

Expenses

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

Net investment income

        0.10%       0.97%       0.76%       0.55%       1.69%       1.39%

Portfolio turnover rate (excluding short-term securities)

        6.04%5       39.23%       37.94%       56.97%       46.91%       27.93%

 

1 

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

2 

Amount represents less than $0.01 per share.

3  Total investment return is based on the change in net asset value of a share during the period (not annualized) and assumes reinvestment of distributions at net asset value.
4  Ratios are annualized for periods less than one year. In addition to fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios.
5 

Not annualized.

 

  

 

74

   

 

 

 

SIT MUTUAL FUNDS SEMI-ANNUAL REPORT

 

 

    

FINANCIAL HIGHLIGHTS

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

 

 

Sit Developing Markets Growth Fund

 

 

  
     Six Months Ended                    
     December 31, 2017       Years Ended June 30,    
     (Unaudited)   2017   2016   2015   2014   2013

 

  

Net Asset Value:

                         

Beginning of period

        $15.23       $12.26       $14.77       $17.48       $16.40       $17.70
    

 

 

  

Operations:

                         

Net investment income (loss) 1

       —   2       (0.02 )       0.04       0.03       (0.01 )       0.04

Net realized and unrealized gains (losses)

        2.21       3.02       (2.18 )       (1.41 )       2.07       0.14
    

 

 

  

Total from operations

        2.21       3.00       (2.14 )       (1.38 )       2.06       0.18
    

 

 

  

Redemption fees

        —   2       —       —   2       —       —       —
    

 

 

  

Distributions to Shareholders:

                         

From net investment income

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

From net realized gains

        (0.25 )       —       (0.35 )       (1.33 )       (0.95 )       (1.42 )
    

 

 

  

Total distributions

        (0.25 )       (0.03 )       (0.37 )       (1.33 )       (0.98 )       (1.48 )
    

 

 

  

Net Asset Value:

                         

End of period

        $17.19       $15.23       $12.26       $14.77       $17.48       $16.40
    

 

 

  

Total investment return 3

       14.54%       24.56%       (14.42% )       (7.64% )       12.79%       0.36%
    

 

 

  

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

        $11,173       $9,561       $7,297       $9,192       $10,808       $10,615

Ratios: 4

                        

Expenses (without waiver)

        2.00% 5       2.00%       2.00%       2.00%       2.00%       2.00%

Expenses (with waiver)

        1.70% 5       2.00%       2.00%       2.00%       2.00%       2.00%

Net investment income (loss) (without waiver)

        (0.34% )       (0.18% )       0.31%       0.16%       (0.07% )       0.24%

Net investment income (loss) (with waiver)

        (0.04% )       (0.18% )       0.31%       0.16%       (0.07% )       0.24%

Portfolio turnover rate (excluding short-term securities)

        11.78% 6       19.67%       28.14%       21.51%       21.45%       15.48%

 

1 

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

2 

Amount represents less than $0.01 per share.

3  Total investment return is based on the change in net asset value of a share during the period (not annualized) and assumes reinvestment of distributions at net asset value.
4  Ratios are annualized for periods less than one year. In addition to fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios.
5  Total Fund expenses are limited to 2.00% of average daily net assets. However, during the period above, the investment advisor voluntarily absorbed expenses that were otherwise payable by the Fund.
6 

Not annualized.

 

  

 

DECEMBER 31, 2017

   

 

 

 

75

 

 

 

NOTES TO FINANCIAL STATEMENTS

Six Months Ended December 31, 2017

 

 

 

(1)

Organization

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

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

 

Fund    Investment Objective

Balanced

    Long-term growth consistent with the preservation of principal and to provide regular income.

Dividend Growth

    Provide current income that exceeds the dividend yield of the S&P 500® Index and that grows over a period of years. Secondarily, maximize long-term capital appreciation.

Global Dividend Growth

    Provide current income that exceeds the dividend yield of the MSCI World Index that grows over a period of years. Secondarily, maximize long-term capital appreciation.

Large Cap Growth

    Maximize long-term capital appreciation.

ESG Growth

    Maximize long-term capital appreciation.

Mid Cap Growth

    Maximize long-term capital appreciation.

Small Cap Dividend Growth

    Provide current income that exceeds the yield of the Russell 2000® Index and that grows over a period of years. Secondarily, maximize long-term capital appreciation.

Small Cap Growth

    Maximize long-term capital appreciation.

International Growth

    Maximize long-term growth.

Developing Markets Growth

    Maximize long-term capital appreciation.

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

 

(2)

Significant Accounting Policies

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

Investments in Securities

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

 

  

 

76

   

 

 

 

SIT MUTUAL FUNDS SEMI-ANNUAL REPORT

 

 

    

    

 

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

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

Fair Value Measurements

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

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

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

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

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

A summary of the levels for the Funds’ investments as of December 31, 2017 is included with the Funds’ schedule of investments.

Foreign Currency Translations and Forward Foreign Currency Contracts

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

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

 

  

 

DECEMBER 31, 2017

   

 

 

 

77

 

 

 

NOTES TO FINANCIAL STATEMENTS

Six Months Ended December 31, 2017 (Continued)

 

Federal Taxes

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

Management has analyzed the Funds’ tax positions taken in federal tax returns for all open tax years and has concluded that as of December 31, 2017, no provision for income tax would be required in the Funds’ financial statements. The Funds’ federal and state income and federal excise tax returns remain subject to examination by the Internal Revenue Service and state departments of revenue until such time as the applicable statute of limitations for audit has expired. For example, U.S. tax returns are generally subject to audit for three years from the date they are filed.

At December 31, 2017, the gross unrealized appreciation (depreciation) on investments and cost of securities on a tax basis for federal income tax purposes were as follows:

 

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

Balanced

      $6,881,011          ($208,599)         $6,672,412          $20,918,168    

Dividend Growth

      197,360,490          (8,333,227)         189,027,263          801,187,507    

Global Dividend Growth

      7,257,422          (343,568)         6,913,854          25,889,794    

Large Cap Growth

      55,631,029          (1,148,436)         54,482,593          63,902,369    

ESG Growth

      1,110,235          (17,605)         1,092,630          4,652,297    

Mid Cap Growth

      70,278,762          (2,391,201)         67,887,561          91,121,760    

Small Cap Dividend Growth

      3,448,639          (191,967)         3,256,672          15,870,966    

Small Cap Growth

      33,100,259          (728,380)         32,371,879          63,286,124    

International Growth

      5,376,579          (409,671)         4,966,908          18,942,831    

Developing Markets Growth

      3,391,457          (209,393)         3,182,064          7,973,696    

Net investment income and net realized gains differ for financial statement and tax purposes because of corporate actions on shares held and/or losses deferred due to “wash sale” transactions. A “wash sale” occurs when a Fund sells a security that it has acquired within a period beginning thirty days before and ending thirty days after the date of sale (a sixty one day period). The character of distributions made during the year from net investment income or net realized gains may also differ from its ultimate characterization for tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gains (losses) were recorded by the Funds. The tax character of distributions paid during the fiscal years ended June 30, 2017 and 2016 were as follows:

 

  

 

78

   

 

 

 

SIT MUTUAL FUNDS SEMI-ANNUAL REPORT

 

 

 

 

 

Year Ended June 30, 2017:

 

          Long Term     
     Ordinary Income    Capital Gain    Total

Balanced

        $270,000        —        $270,000

Dividend Growth (Class I)

        18,184,824        $56,369,317        74,554,141

Dividend Growth (Class S)

        1,047,785        3,921,689        4,969,474

Global Dividend Growth (Class I)

        354,957        —        354,957

Global Dividend Growth (Class S)

        38,043        —        38,043

Large Cap Growth

        598,249        7,585,453        8,183,702

ESG Growth

        6,100        —        6,100

Mid Cap Growth

        —        1,410,787        1,410,787

Small Cap Dividend Growth (Class I)

        87,515        —        87,515

Small Cap Dividend Growth (Class S)

        21,485        —        21,485

Small Cap Growth

        —        144,732        144,732

International Growth

        97,000        —        97,000

Developing Markets Growth

        18,811        —        18,811

Year Ended June 30, 2016:

 

     Ordinary Income    Long Term
Capital Gain		    Total

Balanced

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

Dividend Growth (Class I)

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

Dividend Growth (Class S)

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

Global Dividend Growth (Class I)

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

Global Dividend Growth (Class S)

        62,954        201,098        264,052

Large Cap Growth

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

Mid Cap Growth

        —        23,213,056        23,213,056

Small Cap Dividend Growth (Class I)

        59,292        446        59,738

Small Cap Dividend Growth (Class S)

        24,216        216        24,432

Small Cap Growth

        —        8,910,218        8,910,218

International Growth

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

Developing Markets Growth

        12,000        211,867        223,867

As of June 30, 2017, the components of distributable earnings on a tax basis were as follows:

 

     Undistributed
Ordinary
Income		    Accumulated
Gain		    Unrealized
Appreciation
(Depreciation)

Balanced

        $82,423        $605,591        $5,232,854  

Dividend Growth

        17,604,115        37,535,605        162,998,693  

Global Dividend Growth

        142,589        —        4,122,607  

Large Cap Growth

        641,691        8,842,329        47,468,543  

ESG Growth

        32,139        —        553,305  

Mid Cap Growth

        4,961        4,062,233        65,907,919  

Small Cap Dividend Growth

        44,366        —        1,961,302  

Small Cap Growth

        —        3,000,150        30,273,335  

International Growth

        177,221        —        3,309,174  

Developing Markets Growth

        —        —        2,185,900  

 

  

 

DECEMBER 31, 2017

   

 

 

 

79

 

 

 

NOTES TO FINANCIAL STATEMENTS

Six Months Ended December 31, 2017 (Continued)

 

 

Net capital loss carryovers and late year losses, if any, as of June 30, 2017, are available to offset future realized capital gains and thereby reduce future capital gains distributions. The Funds’ are permitted to carry forward capital losses for an unlimited period. Capital losses that are carried forward retain their character as either short-term or long-term capital losses. The net capital loss carryovers and the late year losses deferred as of June 30, 2017, were as follows:

 

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

Global Dividend Growth

        $718,740        $186,394        —          $905,134 

ESG Growth

        59,584        —        —          59,584 

Small Cap Dividend Growth

        234,504        87,797        —          322,301 

International Growth

        723,576        148,939        —          872,515 

Developing Markets Growth

        90,015        92,540        —          182,555 

Distributions

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

Concentration of Investments

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

Use of Estimates

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

Guarantees and Indemnifications

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

 

  

 

80

   

 

 

 

SIT MUTUAL FUNDS SEMI-ANNUAL REPORT

 

 

 

 

 

 

(3)

Investment Security Transactions

The cost of purchases and proceeds from sales and maturities of investment securities, other than short-term securities, for the year ended December 31, 2017, were as follows:

 

         Purchases      Proceeds  
     U.S. Government    Other      U.S. Government    Other  

Balanced

    $323,581      $5,239,701      $817,788      $5,050,006  

Dividend Growth

                —      332,617,542                  —      507,682,531  

Global Dividend Growth

                —      3,299,184                  —      2,420,140  

Large Cap Growth

                —      6,768,142                  —      15,551,182  

ESG Growth

                —      767,771                  —      174,491  

Mid Cap Growth

                —      22,437,265                  —      25,062,358  

Small Cap Dividend Growth

                —      3,625,675                  —      2,324,856  

Small Cap Growth

                —      15,702,395                  —      17,243,960  

International Growth

                —      1,386,263                  —      1,519,459  

Developing Markets Growth

                —      1,680,297                  —      1,215,300  

 

(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%   0.70%

Global Dividend Growth Fund Class I and Class S

    1.25%   1.00%

Large Cap Growth

    1.00%   N/A   

ESG Growth Fund Class I and Class S

    1.25%   1.00%

Mid Cap Growth

    1.25%   N/A   

Small Cap Dividend Growth Fund Class I and Class S

    1.25%   1.00%

Small Cap Growth

    1.50%   N/A   

International Growth

    1.50%   N/A   

Developing Markets Growth

    2.00%   1.40%

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

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

The Adviser has agreed to limit the management fee of the Dividend Growth Fund to 0.70%, the Global Dividend Growth Fund to 1.00%, the ESG Growth Fund to 1.00%, the Small Cap Dividend Growth Fund to 1.00% and the Developing Markets Growth Fund to 1.40% for the period through June 30, 2019 of the Fund’s daily average net assets, respectively.

 

  

 

DECEMBER 31, 2017

   

 

 

 

81

 

 

 

NOTES TO FINANCIAL STATEMENTS

Six Months Ended December 31, 2017 (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, 2017:

 

    Shares        % Shares
        Outstanding        

Balanced

     264,138      22.4

Dividend Growth

         1,313,115        2.2

Global Dividend Growth

     751,292      36.4

Large Cap Growth

     686,636      23.5

ESG Growth

     433,662      94.2

Mid Cap Growth

     3,979,711      45.8

Small Cap Dividend Growth

     875,880      57.6

Small Cap Growth

     968,198      55.3

International Growth

     827,592      59.8

Developing Markets Growth

     264,257      40.7

 

(5)

Capital Share Activity

Short-Term Trading (Redemption) Fees

The Funds (except Balanced) charge a redemption fee equal to 2.00% of the proceeds on shares held for less than 30 calendar days. The fee is retained by the Fund for the benefit of its long-term shareholders and accounted for as an addition to paid in capital. For the six months ended December 31, 2017, the Funds received the following redemption fees:

 

             Class I                    Class S        

Dividend Growth

        $295          —    

Large Cap Growth

        195          —    

Mid Cap Growth

        35          —    

International Growth

        208          —    

Developing Markets Growth

        28          —    

 

(6)

Regulatory Updates

In October 2016, the SEC amended existing rules intended to modernize reporting and disclosure information. These amendments relate to Regulation S-X which sets forth the form and content of financial statements. Management has evaluated the implications of adopting these amendments and has determined there is no material impact on the financial statements and accompanying notes. Effective August 1, 2017, the Funds have adopted these amendments.

 

(7)

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.

 

  

 

82

   

 

 

 

SIT MUTUAL FUNDS SEMI-ANNUAL REPORT

 

 

 

EXPENSE EXAMPLE (Unaudited)

 

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

The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period July 1, 2017 to December 31, 2017.

Actual Expenses

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

Hypothetical Example for Comparison Purposes

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

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

Fund    Beginning
Account
Value
(7/1/17)		      Ending
Account
Value
(12/31/17)		      Expenses
Paid During
Period*
(7/1/17-
12/31/17)		  

Balanced Fund

 

Actual

      $1,000        $1,081.30        $5.19  

Hypothetical

      $1,000        $1,019.95        $5.04  
        
 

Dividend Growth Fund

 

Actual

         

Class I

      $1,000        $1,107.10        $5.25  

Class S

      $1,000        $1,105.50        $6.56  

Hypothetical

         

Class I

      $1,000        $1,019.95        $5.04  

Class S

      $1,000        $1,018.70        $6.29  
        
 

Global Dividend Growth Fund

 

Actual

         

Class I

      $1,000        $1,108.00        $6.57  

Class S

      $1,000        $1,106.70        $7.88  

Hypothetical

         

Class I

      $1,000        $1,018.70        $6.29  

Class S

      $1,000        $1,017.45        $7.54  
        
 

Large Cap Growth Fund

 

Actual

      $1,000        $1,118.60        $5.28  

Hypothetical

      $1,000        $1,019.95        $5.04  
        
 

ESG Growth Fund

 

Actual

         

Class I

      $1,000        $1,115.50        $6.59  

Class S

      $1,000        $1,115.30        $7.91  

Hypothetical

         

Class I

      $1,000        $1,018.70        $6.29  

Class S

      $1,000        $1,017.45        $7.54  
        
 

Mid Cap Growth Fund

 

Actual

      $1,000        $1,059.60        $6.42  

Hypothetical

      $1,000        $1,018.70        $6.29  
        
 

Small Cap Dividend Growth Fund

 

Actual

         

Class I

      $1,000        $1,092.30        $6.52  

Class S

      $1,000        $1,091.30        $7.82  

Hypothetical

         

Class I

      $1,000        $1,018.70        $6.29  

Class S

      $1,000        $1,017.45        $7.54  
        
 

 

  

 

DECEMBER 31, 2017

   

 

 

 

83

 

 

 

EXPENSE EXAMPLE (Unaudited) (Continued)

 

 

Fund    Beginning
Account
Value
(7/1/17)		      Ending
Account
Value
(12/31/17)		      Expenses
Paid During
Period*
(7/1/17-
12/31/17)		  
 

Small Cap Growth Fund

 

Actual

      $1,000        $1,076.40        $7.77  

Hypothetical

      $1,000        $1,017.45        $7.54  
        
 

International Growth Fund

 

Actual

      $1,000        $1,076.70        $7.77  

Hypothetical

      $1,000        $1,017.45        $7.54  
        
 

Developing Markets Growth Fund

 

Actual

      $1,000        $1,145.40        $10.70  

Hypothetical

      $1,000        $1,014.96        $10.05  

*Expenses are equal to the Fund’s annualized expense ratio of 1.00%, for the Balanced, Dividend Growth, Class I and Large Cap Growth Funds; 1.25% for Dividend Growth, Class S, Global Dividend Growth, Class I, Small Cap Dividend Growth, Class I, Mid Cap Growth,and ESG Growth,Class I Funds; 1.50% for Global Dividend Growth,Class S, Small Cap Dividend Growth,Class S, Small Cap Growth, ESG Growth, Class S and International Growth Funds; and 2.00% for Developing Markets Growth Fund, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period.)

 

 

  

 

84

   

 

 

 

SIT MUTUAL FUNDS SEMI-ANNUAL REPORT

 

 

 

ADDITIONAL INFORMATION (Unaudited)

 

 

PROXY VOTING

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

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

AVAILABILITY OF QUARTERLY PORTFOLIO SCHEDULES

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

RE-APPROVAL OF INVESTMENT MANAGEMENT AGREEMENTS

At their joint meeting held on October 23, 2017 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 periods during which growth stocks have generally under-performed relative to value stocks, the Stock Funds may not rank favorably in comparisons with other funds investing in value stocks.

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

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

 

  

 

DECEMBER 31, 2017

   

 

 

 

85

 

 

 

ADDITIONAL INFORMATION (Unaudited) (Continued)

 

The Directors discussed the depth of SIA’s investment staff. The Directors noted that SIA has over 30 investment professionals. Given the investment products offered by SIA and the assets under management, the Directors determined that SIA’s investment staff is well positioned to meet the current needs of its clients, including the Funds, and to accommodate growth in the number of clients and assets under management for the near future. The Directors concluded that the depth of the investment staff, and in particular senior management and investment analysts, is actually greater than the Funds currently require at their present asset size. The Directors noted that SIA has the resources of a $13.8 billion investment firm working for the benefit of the Fund shareholders.

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

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

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

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

Fees and Expenses. The Directors noted that the Funds pay SIA a monthly fee and SIA is responsible for all of the Funds’ expenses, except interest, brokerage commissions and transaction charges, certain extraordinary expenses, and fees paid under a distribution plan adopted pursuant to Rule 12b-1 under the Investment Company Act of 1940 for Class S shares of Sit Dividend Growth Fund, Sit Global Dividend Growth Fund, Sit Small Cap Dividend Growth Fund, and Sit ESG Growth Fund. The Directors reviewed fees paid in prior years and the current fees to be paid under the Agreements both before and after fee waivers with respect to Sit Developing Markets Growth Fund, Sit Dividend Growth Fund, Sit Global Dividend Growth Fund, and Sit ESG Growth Fund.

The Directors compared each Fund’s expense ratio to the average and median expense ratios of no-load mutual funds within the same Morningstar, Inc. investment category, the average expense ratios for load funds within the Morningstar category, and the average expense ratios for all funds within the Morningstar category. Certain of the Fund’s expense ratios were higher than the averages, and certain of the Fund’s expense ratios were lower than the averages. The Directors noted that the Morningstar no-load categories include funds of various asset sizes, some of which are significantly larger in assets than the Funds. The Directors found each Fund’s total expense ratio to be within an acceptable range compared to the total expense ratios of other no-load funds within the Fund’s Morningstar category. The Directors concluded that the fees paid by the Funds are reasonable and appropriate.

The Directors reviewed the extent to which the fees to be paid under the Agreements by each Fund may be affected by an increase in the Fund’s assets, which included reviewing each Fund’s current and historical assets and the likelihood and magnitude of future increases in the Fund’s assets. The Directors agreed that it is appropriate that the Funds benefit from improved economies of scale as the Funds’ assets increase. However, the Directors concluded that given the amount of the Funds’ current assets and the likelihood and magnitude of future increases in the Funds’ assets, negotiating a graduated fee structure for each Fund is unnecessary at this time since the fees to be paid under the current Agreements are reasonable and appropriate.

The Directors reviewed the expenses paid by SIA relating to the operations of the Funds, and SIA’s income with respect to the management of the Funds for the past two calendar years. The Directors concluded that the expenses paid were appropriate.

 

 

  

 

86

   

 

 

 

SIT MUTUAL FUNDS SEMI-ANNUAL REPORT

 

 

 

ADDITIONAL INFORMATION (Unaudited) (Continued)

 

 

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 except as noted above. The Directors concluded that the fees paid by the Funds in relation to the fees paid by other SIA clients were appropriate and reasonable. The Directors also concluded that SIA’s profit margin with respect to the management of the Funds was appropriate.

The Directors discussed the extent to which SIA receives benefits from the relationship with the Funds such as soft dollar arrangements by which brokers provide research services to SIA as a result of brokerage generated by the Funds. The Board concluded that any benefits SIA receives from its relationship with the Funds are well within industry norms and are reflected in the amount of the fees paid by the Funds to SIA and are appropriate and reasonable.

Non-Advisory Services. The Directors considered the quality of non-advisory services which SIA provides to the Funds (and their shareholders) and the quality and depth of SIA’s non-investment personnel who provide such services. Directors concluded that the level of such services and the quality and depth of such personnel are consistent with industry standards.

Finally, the Directors considered the compliance staff and the regulatory history of SIA and the Funds, and concluded that both are consistent with industry standards.

Based on these conclusions, without any single conclusion being dispositive, the Directors determined that renewal of the Agreements was in the interest of each Fund and its shareholders.

 

 

  

 

DECEMBER 31, 2017

   

 

 

 

87

 

 

    

 

 

[This page intentionally left blank.]

 

 

 

 

  

88

         

LOGO

Item 2: Code of Ethics. Not applicable to Semi-Annual Report.

Item 3: Audit Committee Financial Expert. Not applicable to Semi-Annual Report.

Item 4: Principal Accountant Fees and Services. Not applicable to Semi-Annual Report.

Item 5: Audit Committee of Listed Registrants.

Not applicable to open-end investment companies.

Item 6: Schedule of Investments.

The schedule of investments is included as part of the report to shareholders filed under Item 1 of this Form.

Item 7: Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.

Not applicable to open-end investment companies.

Item 8: Portfolio Managers of Closed-End Management Companies.

Not applicable to open-end investment companies.

Item 9: Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.

Not applicable to open-end investment companies.

Item 10. Submission of Matters to a vote of Security Holders.

There have been no material changes to the procedures by which shareholders may recommend nominees to the registrant’s board of directors.

Item 11: Controls and Procedures -

(a) Based on their evaluation of the Registrant’s Disclosure Controls and Procedures as of a date within 90 days of the Filing Date, the Registrant’s Chairman and Treasurer have determined that the Disclosure Controls and Procedures (as defined in Rule 30a-2(c) under the Act) are designed to ensure that information required to be disclosed by the Registrant is recorded, processed, summarized and reported by the filing Date, and that information required to be disclosed in the report is communicated to the Registrant’s management, as appropriate, to allow timely decisions regarding required disclosure.

b) There were no changes in the Registrant’s internal control over financial reporting as defined in Rule 30a-3(d) under the Act) that occurred during the Registrant’s last fiscal half-year that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting.

Item 12: Exhibits:

(a) The following exhibits are attached to this Form N-CSR:

(2) A separate certification for each principal executive and principal financial officer of the registrant as required by Rule 30a-2(a) under the Act (17 CFR 270.30a-2) (certification required by Section 302 of the Sarbanes-Oxley Act of 2002).

(b) Certification required by Rule 30a-2(b) under the Act (certification required by Section 906 of the Sarbanes-Oxley Act of 2002).

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Sit Mutual Funds, Inc.

 

By (Signature and Title)   

/s/ Paul E. Rasmussen

   
   Paul E. Rasmussen   
   Vice President, Treasurer   

Date February 26, 2018

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 26, 2018

 

By (Signature and Title)   

/s/ Roger J . Sit

   
   Roger J . Sit   
   Chairman   

Date February 26, 2018