SIT GROWTH & INCOME FUND INC, 485APOS, 1995-10-25

SIT GROWTH & INCOME FUND INC
485APOS, 1995-10-25

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As filed with the Securities and Exchange Commission on October 25, 1995

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 _X_
(File No. 2-75151)
Post-Effective Amendment No. 19

and/or

REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 _X_
(File No. 811-03342)
Post-Effective Amendment No. 22

SIT GROWTH FUND, INC.
(Exact Name of Registrant as Specified in Charter)

4600 Norwest Center, Minneapolis, Minnesota 55402
(Address of Principal Executive Offices) (Zip Code)

(612) 332-3223
(Registrant's Telephone Number, including Area Code)

Parnell M. Kingsley, Assistant Secretary
SIT Mutual Funds Group
4600 Norwest Center
Minneapolis, Minnesota 55402
(Name and Address of Agent for Service)

Copy to:
Michael J. Radmer, Esq.
Dorsey & Whitney
2200 First Bank Place East
Minneapolis, Minnesota 55402

____ immediately upon filing pursuant to paragraph (b) of rule 485
____ on (specify date) pursuant to paragraph (b) of rule 485
____ 60 days after filing pursuant to paragraph (a) of rule 485
XX on November 1, 1995 pursuant to paragraph (a) of rule 485

The Registrant has registered an indefinite number or amount of securities under
the Securities Act of 1933 pursuant to Rule 24f-2 under the Investment Company
Act of 1940. A Rule 24f-2 Notice for the Registrant's most recent fiscal year
was filed with the Securities and Exchange Commission on or about August 10,
1995.

As filed with the Securities and Exchange Commission on October 25, 1995

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 _X_
(File No. 2-75152)
Post-Effective Amendment No. 19

and/or

REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 _X_
(File No. 811-03343)
Post-Effective Amendment No. 22

SIT GROWTH & INCOME FUND, INC.
(Exact Name of Registrant as Specified in Charter)

4600 Norwest Center, Minneapolis, Minnesota 55402
(Address of Principal Executive Offices) (Zip Code)

(612) 332-3223
(Registrant's Telephone Number, including Area Code)

Parnell M. Kingsley, Assistant Secretary
SIT Mutual Funds Group
4600 Norwest Center
Minneapolis, Minnesota 55402
(Name and Address of Agent for Service)

Copy to:
Michael J. Radmer, Esq.
Dorsey & Whitney
2200 First Bank Place East
Minneapolis, Minnesota 55402

As filed with the Securities and Exchange Commission on October 25, 1995

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 _X_
(File No. 33-42101)
Post-Effective Amendment No. 9

and/or

REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 _X_
(File No. 811-6373)
Post-Effective Amendment No. 10

SIT MUTUAL FUNDS, INC.
(Exact Name of Registrant as Specified in Charter)

4600 Norwest Center, Minneapolis, Minnesota 55402
(Address of Principal Executive Offices) (Zip Code)

(612) 332-3223
(Registrant's Telephone Number, including Area Code)

Parnell M. Kingsley, Assistant Secretary
SIT Mutual Funds Group
4600 Norwest Center
Minneapolis, Minnesota 55402
(Name and Address of Agent for Service)

Copy to:
Michael J. Radmer, Esq.
Dorsey & Whitney
2200 First Bank Place East
Minneapolis, Minnesota 55402

FORM N-1A
CROSS-REFERENCE SHEET

ITEM # CAPTION PROSPECTUS CAPTION
<S> <C> <C>
1 Cover Page Inside Cover of Prospectus

2 Synopsis Prospectus Summary

3 Condensed Financial Financial Highlights
Information

4 General Description Investment Objectives and Policies; Common Policies and
of Registrant Information; Capitalization and Voting Rights; Additional
Information

5 Management of the Fund Summary of Fund Expenses; Custodian and Transfer Agent;
Management; Additional Information

6 Capital Stock and Other Dividend Reinvestment; Securities Exchanges; Capitalization
and Voting Rights; Taxes; Additional Information

7 Purchase of Securities How to Purchase Fund Shares; Exchanges; Retirement Accounts;
Being Offered Computation of Net Asset Value

8 Redemption or Repurchase Redemption of Fund Shares

9 Pending Legal Proceedings Not Applicable

ITEM NO. CAPTION STATEMENT OF ADDITIONAL
INFORMATION CAPTION
10 Cover Page Cover Page of Statment of Additional Information

11 Table of Contents Table of Contents

12 General Information and History Not Applicable

13 Investment Objectives and Policies Additional Investment Restrictions; Securities in which
the Funds May Invest

14 Management of the Fund Management; Investment Adviser

15 Control Persons and Principal Control Persons and Principal Holders
Holders of Securities

16 Investment Advisory and Other Investment Adviser
Services

17 Brokerage Allocation Brokerage

18 Capital Stock and Other Securities Capitalization and Voting Rights (in Prospectus)

19 Purchase, Redemption and Pricing Computation of Net Asset Value
of Securities Being Offered

20 Tax Status Taxes

21 Underwriters Distributor

22 Calculation of Performance Data Calculation of Performance Data

23 Financial Statements Financial Statements

</TABLE>

SIT MUTUAL FUND GROUP

4600 Norwest Center - Minneapolis, MN 55402
612-334-5888 or 800-332-5580

(CHART)
OUR FAMILY OF FUNDS

<S> <C> <C> <C>
Stability: Income: Growth & Income: Growth:
Safety of principal Increased income Long-term capital Long-term capital
and current income appreciation and income appreciation

Funds:
Money Market U.S. Govt. Securities Balanced Growth
Tax-Free Income Growth & Income Int'l Growth
MN Tax-Free Income Small Cap Growth
Bond Dev Markets Growth

Principal Stability Growth
& Current Income Potential

</TABLE>

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS (AND/OR IN THE
STATEMENT OF ADDITIONAL INFORMATION REFERRED TO ON THE COVER PAGE OF THIS
PROSPECTUS), AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUNDS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY STATE IN WHICH SUCH OFFER
OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION.

Not part of the prospectus

PROSPECTUS
November 1, 1995

The Funds have the following investment objectives:

SMALL CAP GROWTH FUND
The objective of the Small Cap Growth Fund is to maximize long-term capital
appreciation. The Fund pursues this objective by investing primarily in common
stocks of small companies that have a capitalization of under $500 million at
the time of purchase.

GROWTH FUND
The objective of the Growth Fund is to maximize long-term capital appreciation.
The Fund pursues this objective by investing primarily in the common stocks of
small and medium-size emerging growth companies before they become well
recognized.

GROWTH & INCOME FUND
The objective of the Growth & Income Fund is to achieve long-term capital
appreciation and, secondarily, current income. The Fund pursues this objective
by investing primarily in common stocks of medium to large size growth
companies. As of June 30, 1995, the Fund was invested exclusively in such
securities. The Fund may also invest in corporate bonds, debentures and
government securities.

BALANCED FUND
The objective of the Balanced Fund is to seek long-term growth of capital
consistent with the preservation of principal and to provide shareholders with
regular income. The Fund pursues this objective by investing in a diversified
portfolio of stocks, bonds and short-term instruments.

DEVELOPING MARKETS GROWTH FUND
The objective of the Developing Markets Growth Fund is to maximize long-term
capital appreciation. The Fund pursues this objective by investing primarily in
common stocks of companies deemed to be domiciled or otherwise operating in a
developing market.

INTERNATIONAL GROWTH FUND
The objective of the International Growth Fund is to achieve long-term growth of
capital. The Fund pursues this objective by investing primarily in common stocks
of issuers domiciled outside the United States.

See the "Investment Objectives and Policies" beginning on page 14, and "Common
Policies and Information" beginning on page 27 for more detailed information.

This prospectus concisely sets forth facts about the Funds that you should know
before investing and it should be retained for future reference. You should read
it to decide if any of the Funds are the right investment for you. Additional
facts about each Fund are contained in a Statement of Additional Information
(dated November 1, 1995) which has been filed with the Securities and Exchange
Commission and is incorporated herein by reference. For a free copy, call or
write the Funds.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

SIT SMALL CAP GROWTH FUND
SIT GROWTH FUND, INC.
SIT GROWTH & INCOME FUND, INC.
SIT BALANCED FUND

SIT DEVELOPING MARKETS GROWTH FUND
SIT INTERNATIONAL GROWTH FUND

TABLE OF CONTENTS

Summary of Fund Expenses......................... 4
Financial Highlights............................. 5
Performance ................................... 11
Investment Objectives and Policies
Small Cap Growth Fund...................... 14
Growth Fund................................ 15
Growth & Income Fund....................... 15
Balanced Fund.............................. 16
Developing Markets Growth Fund............. 19
International Growth Fund.................. 22
Risks of International Investing........... 25
Common Policies and Information
Securities Lending......................... 27
Puts and Calls............................. 27
When-Issued and Forward Commitment
Securities......................... 27
Repurchase Agreements...................... 28
Illiquid Securities........................ 28
Investment in SIT Money Market Fund........ 28
Portfolio Turnover......................... 29
Relationship of Debt Securities &
Interest Rates........................ 29
Temporary Defensive Investments............ 29
Ratings of Debt Securities................. 29
Other Investment Restrictions.............. 30
Computation of Net Asset Value................... 30
How to Purchase Fund Shares...................... 31
Redemption of Fund Shares........................ 33
Exchanges........................................ 35
Dividend Reinvestment...................... 35
Retirement Accounts.............................. 36
Custodian and Transfer Agent..................... 36
Management....................................... 36
Taxes............................................ 38
Capitalization and Voting Rights................. 39
Additional Information........................... 40

PROSPECTUS SUMMARY

THE FUNDS
The Funds are each no-load, open-end, diversified, management investment
companies (commonly known as "mutual funds"), as defined in the Investment
Company Act of 1940 (the "1940 Act").

INVESTMENT OBJECTIVES AND POLICIES
The investment objectives of the Funds are set forth on page 1 of this
prospectus. The investment objective of each Fund is "fundamental," which means
that it may not be changed unless approved by a vote of the "majority" of the
shareholders of such Fund (as defined in the 1940 Act). There can be no
assurance that the investment objectives of any of the Funds will be achieved.

INVESTMENT ADVISER
Sit Investment Associates, Inc. (the "Adviser") serves as the investment adviser
to each Fund and receives an annual fee based on a percentage of average daily
net assets. The percentage varies from Fund to Fund.

SUB-ADVISER
Sit/Kim International Investment Associates, Inc. (the "Sub-Adviser") serves as
Sub-Adviser for the Developing Markets Growth Fund and the International Growth
Fund. The Sub-Adviser is an international investment management firm with
offices in New York and San Francisco and is an affiliate of the Adviser.

PRICE OF FUND SHARES
Fund shares are sold at their net asset value ("NAV"). There is no sales charge
or redemption fee. The NAV is based upon the market value of the securities
owned by a Fund and is determined once daily as of the close of the New York
Stock Exchange on each day the Exchange is open for trading.

HOW TO PURCHASE SHARES
You can purchase shares of any Fund with no sales charges at the next determined
NAV by completing the application and mailing it, along with a check to the
Funds at the address as listed on the inside back cover of this prospectus or as
instructed on the application.

100% NO-LOAD
NO SALES COMMISSIONS
NO DEFERRED SALES CHARGES
NO 12B-1 FEES

$2,000 MINIMUM INITIAL PURCHASE --- $100 SUBSEQUENT PURCHASE
NO MINIMUM PURCHASE FOR IRAS OR OTHER RETIREMENT ACCOUNTS

ELECTRONIC TRANSFER OF FUNDS FOR PURCHASES AND REDEMPTIONS
AUTOMATIC MONTHLY INVESTMENT PLAN
NO CHARGE FOR EXCHANGES

SUMMARY OF FUND EXPENSES

The fund expense summary was developed for use by all mutual funds. You should
consider this expense information as well as other important information in this
prospectus:

<TABLE>
<CAPTION>
Developing
Small Cap Growth & Markets Int'l
Growth Growth Income Balanced Growth Growth
Fund Fund Fund Fund Fund Fund
<S> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Sales load on purchases none none none none none none
Sales load on reinvested dividends none none none none none none
Deferred sales load none none none none none none
Redemption fees none none none none none none
Exchange fees none none none none none none
Annual Fund Operating Expenses
(as a percentage of average daily net assets)
Management fees 1.50% .61% .95%(1) 1.00% 2.00% 1.50%(1)
12b-1 fees none none none none none none
Other expenses none .22 .05 (1) none none none
Total fund operating expenses 1.50% .83% 1.00%(1) 1.00% 2.00% 1.50%(1)
(1) Net of voluntary fee waiver

</TABLE>

Example: You would pay the following expenses on a $1,000 investment, assuming
(a) 5% annual rate of return and (b) redemption at the end of each period.

Developing
Small Cap Growth & Markets Int'l
Growth Growth Income Balanced Growth Growth
Fund Fund Fund Fund Fund Fund
1 year $ 15 $ 8 $ 10 $ 10 $ 20 $ 15
3 years 47 26 32 32 63 47
5 years 82 46 55 55 108 82
10 years 179 103 122 122 233 179

The purpose of the above table is to assist you in understanding the various
costs and expenses that an investor in the Funds will bear directly or
indirectly. No transaction expenses are incurred by you when you buy or sell
shares of the Funds. Management fees and other expenses are reflected in each
Fund's share price and are not charged directly to individual shareholder
accounts.

Each Fund has engaged the Adviser as its investment adviser pursuant to an
Investment Management Agreement. Each of Growth Fund and Growth & Income Fund
pay all of their operating expenses; however, the Adviser is obligated to
reimburse such Funds for certain expenses if and to the extent such expenses
exceed an amount equal to 1.50% of the first $30 million of the Fund's average
daily net assets and 1.00% of the Fund's average daily net assets in excess of
$30 million.

Absent voluntary fee waivers by the Adviser, Small Cap Growth Fund, Balanced
Fund, Developing Markets Growth Fund and International Growth Fund are obligated
under the Funds' Investment Management Agreements to pay the Adviser annual
management fees of 1.50%, 1.00%, 2.00% and 1.85% per year, respectively, of each
Fund's average daily net assets; however, the Adviser is obligated to pay all of
each Fund's other expenses (other than extraordinary expenses, interest,
brokerage commissions and other transaction charges). See "Management -
Investment Adviser."

For the period January 1, 1994 through December 31, 1996, the Adviser has
voluntarily agreed to limit the management fee (and, thereby, all fund expenses,
except those not payable by the Adviser as set forth above) of the International
Growth Fund to 1.50% per year of the Fund's average daily net assets. After
December 31, 1996, this voluntary fee waiver may be discontinued by the Adviser
in its sole discretion.

The Growth & Income Fund's total expenses are contractually limited to 1.50% of
average daily net assets for the first $30 million in Fund net assets and 1.00%
of average daily net assets for Fund net assets exceeding $30 million. For the
period October 1, 1993 through December 31, 1996 the Adviser has voluntarily
agreed to absorb expenses that are otherwise payable by the Fund which exceed
1.00% of the Fund's average daily net assets. Absent voluntary fee waivers, the
ratio of expenses to average daily net assets would have been 1.35% for the year
ended June 30, 1995.

The examples contained in the above table should not be considered a
representation of past or future expenses. Actual expenses may be greater or
less than those shown.

FINANCIAL HIGHLIGHTS

The following tables show certain important financial information for evaluating
each Fund. This information has been audited by KPMG Peat Marwick LLP,
independent auditors. Additional information about the performance of the Funds
is contained in the Funds' annual report which may be obtained without charge.

Per share data for a share of capital stock outstanding during the period and
selected information for each period are as follows:

SIT SMALL CAP GROWTH FUND

YEAR ENDED
JUNE 30, 1995
NET ASSET VALUE:
Beginning of year $10.00
OPERATIONS:
Net investment loss (.02)
Net realized and unrealized gains
on investments 3.56
Total from operations 3.54
DISTRIBUTIONS TO SHAREHOLDERS:
From realized gains (.05)
Total distributions (.05)
NET ASSET VALUE:
End of year $13.49
Total investment return (1) 35.59%

RATIOS/SUPPLEMENTAL DATA:
Net assets at end of year (000's omitted) $12,015
Expenses to average daily net assets 1.50%
Net investment loss to average daily
net assets (.30%)
Portfolio turnover rate
(excluding short-term securities) 49.39%

(1) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value.

SIT GROWTH FUND

Per share amounts prior to December 10, 1993, have been restated to reflect the
4 for 1 stock split.

<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,

1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE:
Beginning of year $ 11.08 $ 11.91 $ 10.52 $ 9.35 $ 8.70
OPERATIONS:
Net investment income (loss) -- (.01) .03 .04 .07
Net realized and unrealized gains
(losses) on investments 2.96 (.51) 1.43 1.22 1.05
Total from operations 2.96 (.52) 1.46 1.26 1.12
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income -- (.02) (.05) (.06) (.08)
From realized gains (1.04) (.29) (.02) (.03) (.39)
Total distributions (1.04) (.31) (.07) (.09) (.47)
NET ASSET VALUE:
End of year $ 13.00 $ 11.08 $ 11.91 $ 10.52 $ 9.35
Total investment return (1) 28.44% (4.62%) 13.88% 13.34% 14.13%

RATIOS/SUPPLEMENTALDATA:
Net assets at end of year (000s omitted) $327,879 $285,175 $341,702 $241,831 $122,677
Expenses to average daily net assets 0.83% 0.82% 0.80% .83% 1.03%
Net investment income (loss) to
average daily net assets 0.02% (0.08%) 0.35% 0.52% 0.96%
Portfolio turnover rate
(excluding short-term securities) 75.40% 46.71% 45.18% 24.74% 37.01%

(table continued)

1990 1989 1988 1987 1986
NET ASSET VALUE:
Beginning of year $ 7.58 $ 6.98 $ 8.38 $ 8.19 $ 5.74
OPERATIONS:
Net investment income (loss) .06 .13 .04 .01 (.01)
Net realized and unrealized gains
(losses) on investments 1.51 .81 (.69) 1.15 2.44
Total from operations 1.57 .94 (.65) 1.16 2.45
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (.09) (.09) (.01) (.01) --
From realized gains (.36) (.25) (.74) (.96) --
Total distributions (.45) (.34) (.75) (.97) --
NET ASSET VALUE:
End of year $ 8.70 $ 7.58 $ 6.98 $ 8.38 $ 8.19
Total investment return (1) 21.13% 14.59% (8.44%) 17.43% 42.60%

RATIOS/SUPPLEMENTALDATA:
Net assets at end of year (000s omitted) $73,532 $53,982 $48,100 $56,152 $40,769
Expenses to average daily net assets 1.10% 1.19% 1.21% 1.20% 1.32%
Net investment income (loss) to
average daily net assets .75% 1.85% 0.57% 0.09% 0.19%
Portfolio turnover rate
(excluding short-term securities) 55.32% 88.39% 77.82% 81.25% 98.58%

</TABLE>

(1) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value.

SIT GROWTH & INCOME FUND

YEARS ENDED JUNE 30,

1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE:
Beginning of year $ 23.89 $ 25.61 $ 24.22 $ 21.89 $ 22.64
OPERATIONS:
Net investment income .11 .23 .33 .38 .58
Net realized and unrealized gains
(losses) on investments 5.88 (.33) 1.94 2.91 (.01)
Total from operations 5.99 (.10) 2.27 3.29 .57
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (.09) (.23) (.34) (.43) (.69)
From realized gains (1.41) (1.39) (.54) (.53) (.63)
Total distributions (1.50) (1.62) (.88) (.96) (1.32)
NET ASSET VALUE:
End of year $ 28.38 $ 23.89 $ 25.61 $ 24.22 $ 21.89
Total investment return (1) 26.33% (0.58%) 9.52% 15.22% 3.10%

RATIOS/SUPPLEMENTAL DATA:
Net assets at end of year
(000s omitted) $45,211 $34,612 $37,602 $32,040 $21,112
Expenses to average daily net assets 1.00%(2) 1.10%(2) 1.42% 1.50% 1.50%
Net investment income to average
daily net assets 0.42%(2) .89%(2) 1.31% 1.92% 2.74%
Portfolio turnover rate
(excluding short-term securities) 67.14% 73.62% 47.82% 73.40% 70.01%

(table continued)

1990 1989 1988 1987 1986
NET ASSET VALUE:
Beginning of year $ 20.62 $ 18.31 $ 21.33 $ 19.43 $ 14.68
OPERATIONS:
Net investment income .59 .54 .53 .47 .50
Net realized and unrealized gains
(losses) on investments 2.88 2.18 (1.88) 2.81 4.86
Total from operations 3.47 2.73 (1.35) 3.28 5.36
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (.54) (.42) (.53) (.46) (.61)
From realized gains (.91) -- (1.14) (.92) --
Total distributions (1.45) (.42) (1.67) (1.38) (.61)
NET ASSET VALUE:
End of year $ 22.64 $ 20.62 $ 18.31 $ 21.33 $ 19.43
Total investment return (1) 17.14% 15.30% (6.45%) 18.42% 35.80%

RATIOS/SUPPLEMENTAL DATA:
Net assets at end of year
(000s omitted) $17,682 $13,622 $12,245 $10,426 $4,982
Expenses to average daily net assets 1.50% 1.50% 1.50% 1.50% 1.50%
Net investment income to average
daily net assets 2.86% 2.95% 2.96% 2.70% 3.33%
Portfolio turnover rate
(excluding short-term securities) 55.00% 82.23% 66.80% 60.95% 71.71%

</TABLE>

(1) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value.

(2) Total Fund expenses are contractually limited to 1.50% of average daily net
assets for the first $30 million in Fund net assets and 1.00% of average
daily net assets for Fund net assets exceeding $30 million. However, during
the years ended June 30, 1995 and 1994, the investment adviser voluntarily
absorbed $132,305 and $112,191, respectively, in expenses that were
otherwise payable by the Fund. Had the Fund incurred these expenses, the
ratio of expenses to average daily net assets would have been 1.35% and
1.40% for the years ended June 30, 1995 and 1994, respectively, and the
ratio of net investment income to average daily net assets would have been
0.07% and 0.59%, respectively.

SIT BALANCED FUND

YEARS ENDED JUNE 30,
1995 1994(1)
NET ASSET VALUE:
Beginning of period $9.48 $10.00
OPERATIONS:
Net investment income .28 .13
Net realized and unrealized gains
(losses) on investments 1.50 (.59)
Total from operations 1.78 (.46)
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (.27) (.06)
Total distributions (.27) (.06)
NET ASSET VALUE:
End of period $10.99 $9.48
Total investment return (2) 19.16% (4.56%)

RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (000's omitted) $2,444 $1,296
Expenses to average daily net assets 1.00% 1.00%(3)
Net investment income to average daily net assets 2.97% 2.87%(3)
Portfolio turnover rate
(excluding short-term securities) 50.61% 52.53%

(1) Period from December 31, 1993 (commencement of operations) to June 30, 1994

(2) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value.

(3) Adjusted to an annual rate.

SIT DEVELOPING MARKETS GROWTH FUND

YEAR ENDED
JUNE 30, 1995
NET ASSET VALUE:
Beginning of year $10.00
OPERATIONS:
Net realized and unrealized gains
(losses) on investments (.54)
Total from operations (.54)
DISTRIBUTIONS TO SHAREHOLDERS:
From realized gains (.05)
Total distributions (.05)
NET ASSET VALUE:
End of year $9.41
Total investment return (1) (5.44%)

RATIOS/SUPPLEMENTAL DATA:
Net assets at end of year (000's omitted) $4,618
Expenses to average daily net assets 2.00%
Net investment income to average daily net assets 0.03%
Portfolio turnover rate (excluding short-term securities) 56.35%

(1) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value.

SIT INTERNATIONAL GROWTH FUND

YEARS ENDED JUNE 30,
1995 1994 1993 1992(1)
<S> <C> <C> <C> <C>
NET ASSET VALUE:
Beginning of period $ 14.87 $ 11.99 $ 10.70 $ 10.00
OPERATIONS:
Net investment income (loss) .09 (.04) (.03) .03
Net realized and unrealized gains
on investments 1.06 3.08 1.35 .67
Total from operations 1.15 3.04 1.32 .70
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (.04) (.10) (.03) --
From realized gains (.27) (.06) -- --
Total Distributions (.31) (.16) (.03) --
NET ASSET VALUE:
End of period $ 15.71 $ 14.87 $ 11.99 $ 10.70
Total investment return (2) 7.86% 25.26% 12.37% 7.00%

RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (000's omitted) $68,125 $63,699 $34,549 $ 24,631
Expenses to average daily net assets 1.50% 1.65% 1.85% 1.85%(3)
Net invesetment income (loss) to average
daily net assets 0.62%(4) (0.16%)(4) (0.29%) 0.67%(3)
Portfolio turnover rate
(excluding short-term securities) 40.42% 42.48% 52.50% 18.62%

</TABLE>

(1) Period from November 1, 1991 (commencement of operations) to June 30, 1992.

(2) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value.

(3) Adjusted to an annual rate.

(4) Total Fund expenses are contractually limited to 1.85% of average daily net
assets. However, during the years ended June 30, 1995 and 1994, the
investment adviser voluntarily absorbed $228,795 and $111,320,
respectively, in expenses that were otherwise payable by the Fund. Had the
Fund incurred these expenses, the ratio of expenses to average daily net
assets would have been 1.85% for the years ended June 30, 1995 and 1994,
and the ratio of net investment income (loss) to average daily net assets
would have been 0.27% and (0.36%), respectively.

PERFORMANCE

From time to time the Funds may refer to monthly, quarterly, yearly or
cumulative total return and average annual total return in advertisements or
other sales literature. All such figures are based on historical performance
data and are not intended to be indicative of future performance. The investment
return on and principal value of an investment in the Funds will fluctuate, so
that an investor's shares, when redeemed, may be worth more or less than their
original cost.

Monthly, quarterly, yearly and CUMULATIVE TOTAL RETURNS are computed by finding
the rates of return over the indicated periods that would equate the initial
amount invested to the ending redeemable value. AVERAGE ANNUAL TOTAL RETURN is
computed by finding the average annual compounded rates of return over the
indicated periods that would equate the initial amount invested to the ending
redeemable value. In calculating ending redeemable value, all income and capital
gains distributions are assumed to be reinvested in additional Fund shares.
Because average annual returns tend to smooth out variations in a Fund's return,
you should recognize that they are not the same as actual year-by-year results.
To illustrate the components of overall performance, a Fund may separate its
cumulative and average annual returns into income results and capital gain or
loss.

In advertising and sales literature the Funds may compare performance with that
of other mutual funds, indices and other competing investment and deposit
products. The composition of these indices or products differs from that of the
Funds. The comparison of the Funds to an alternative investment should be made
with consideration of differences in features and expected performance. The
Funds may also be mentioned in newspapers, magazines, or other media from time
to time. The Funds assume no responsibility for the accuracy of such data. For
additional information on the types of indices, averages and periodicals that
might be utilized by the Funds in advertising and sales literature, see the
section "Calculation of Performance Data" in the Statement of Additional
Information.

Standard & Poor's 500 Stock Index, the Russell 2000 Index, the Lehman Aggregate
Bond Index and the NASDAQ OTC Composite Index are unmanaged lists of common
stocks or bonds frequently used as general measures of market performance. The
annual and cumulative changes for the indexes reflect reinvestment of all
distributions and changes of market prices. No adjustment has been made for a
shareholder's income tax liability on dividends or capital gains and no
brokerage commissions or other fees were factored into these indexes. The Lipper
mutual fund indices are equally weighted indices each composed of the 30 largest
mutual funds within their respective investment objective classifications,
adjusted for the reinvestment of capital gains distributions and income
dividends. Lipper Analytical Services, Inc. is a large independent evaluator of
mutual funds. The Morgan Stanley Capital International EAFE Index includes 1,113
companies representing the stock markets of 14 European countries, Australia,
New Zealand, Japan, Hong Kong and Singapore/Malaysia. The Morgan Stanley Capital
International Emerging Markets Free Index includes 64 companies representing the
stock markets of 19 countries.

The following tables illustrate each Fund's average annual total returns,
cumulative total returns and annual total returns for the periods shown.

Average Annual Total Returns and Cumulative Total Returns

<TABLE>
<CAPTION>
Lipper Small
Russell 2000 Company Growth
Small Cap Growth Fund Index Fund Index
Period in Average Average Average
Years Annual Cumulative Annual Cumulative Annual Cumulative

<S> <C> <C> <C> <C> <C> <C>
1 year* +35.6% +35.6% +19.4% +19.4% +26.1% +26.1%

* Since Inception on 7/1/94

NASDAQ OTC S & P 500
Growth Fund Composite Index Index
Period in Average Average Average
Years Annual Cumulative Annual Cumulative Annual Cumulative

12.8 years* +18.2% +753.9% +13.7% +420.0% +16.5% +610.7%
12 years +12.5 +311.7 +9.4 +192.9 +14.2 +389.5
11 years +15.5 +387.4 +13.2 +289.5 +16.0 +413.7
10 years +14.4 +284.1 +12.2 +215.1 +14.7 +292.8
9 years +11.6 +169.3 +9.7 +130.2 +12.5 +189.4
8 years +10.9 +129.4 +10.4 +119.8 +11.1 +131.3
7 years +14.0 +150.5 +13.1 +136.5 +13.9 +148.4
6 years +13.9 +118.6 +13.6 +114.4 +12.8 +106.2
5 years +12.5 +80.5 +15.1 +101.9 +12.1 +77.0
4 years +12.1 +58.1 +18.3 +96.1 +13.3 +64.8
3 years +11.7 +39.5 +18.3 +65.6 +13.3 +45.3
2 years +10.7 +22.5 +15.2 +32.6 +13.1 +27.8
1 year +28.4 +28.4 +32.2 +32.2 +26.1 +26.1

* Since Inception on 9/2/82

Lipper Growth & S & P 500
Growth & Income Fund Income Fund Index Index
Period in Average Average Average
Years Annual Cumulative Annual Cumulative Annual Cumulative

12.8 years* +14.2% +451.0% +15.1% +505.5% +16.5% +610.7%
12 years +11.4 +265.7 +12.7 +318.6 +14.2 +389.5
11 years +14.1 +327.9 +14.6 +346.8 +16.0 +413.7
10 years +12.8 +232.0 +13.2 +244.7 +14.7 +292.8
9 years +10.4 +144.5 +11.2 +159.2 +12.5 +189.4
8 years +9.5 +106.5 +10.1 +116.4 +11.1 +131.3
7 years +12.0 +120.7 +12.1 +122.8 +13.9 +148.4
6 years +11.4 +91.4 +11.2 +88.7 +12.8 +106.2
5 years +10.3 +63.4 +11.6 +72.9 +12.1 +77.0
4 years +12.2 +58.5 +13.0 +63.2 +13.3 +64.8
3 years +11.2 +37.6 +13.0 +44.1 +13.3 +45.3
2 years +12.1 +25.6 +11.3 +23.8 +13.1 +27.8
1 year +26.3 +26.3 +19.2 +19.2 +26.1 +26.1

* Since Inception on 9/2/82

</TABLE>

Annual Total Returns

Lipper
Small Small
Year Cap Russell Company
Ended Growth 2000 Fund
June 30, Fund Index Index

1995 +35.6% +19.4% +26.1%

NASDAQ
Years OTC S & P
Ended Growth Composite 500
June 30, Fund Index Index

1983 +107.4% +77.6% +45.2%
1984 -15.5 -24.8 -4.7
1985 +26.9 +23.6 +30.8
1986 +42.6 +36.9 +35.7
1987 +17.4 +4.7 +25.1
1988 -8.4 -7.1 -6.9
1989 +14.6 +10.3 +20.5
1990 +21.1 +6.2 +16.5
1991 +14.1 +3.0 +7.4
1992 +13.3 +18.4 +13.4
1993 +13.9 +24.9 +13.6
1994 -4.6 +0.3 +1.4
1995 +28.4 +32.2 +26.1

Growth Lipper
Years & Growth & S & P
Ended Income Income 500
June 30, Fund Fund Index Index

1983 +50.7% +46.4% +45.2%
1984 -14.5 -6.6 -4.7
1985 +28.9 +26.4 +30.8
1986 +35.8 +31.3 +35.7
1987 +18.4 +20.3 +25.1
1988 -6.5 -2.6 -6.9
1989 +15.3 +17.7 +20.5
1990 +17.1 +9.1 +16.5
1991 +3.1 +5.9 +7.4
1992 +15.2 +14.2 +13.4
1993 +9.5 +16.7 +13.6
1994 -0.6 +4.1 +1.4
1995 +26.3 +19.2 +26.1

Average Annual Total Returns and Cumulative Total Returns

<TABLE>
<CAPTION>
Lehman Aggregate S & P
Balanced Fund Bond Index Bond Index
Period in Average Average Average
Years Annual Cumulative Annual Cumulative Annual Cumulative

<S> <C> <C> <C> <C> <C> <C>
1.5 years* +9.0% +13.7% +5.4% +8.2% +14.1% +21.8%
1 year +19.2 +19.2 +12.6 +12.6 +26.1 +26.1

* Since Inception on 12/31/93

MSCI Lipper
Developing Markets Emerging Markets Emerging Market
Growth Fund Free Index Fund Index
Period in Average Average Average
Years Annual Cumulative Annual Cumulative Annual Cumulative

1 year* -5.4% -5.4% -1.6% -1.6% -1.6% -1.6%

* Since Inception on 7/1/94

Lipper
International MSCI International
Growth Fund EAFE Index Fund Index
Period in Average Average Average
Years Annual Cumulative Annual Cumulative Annual Cumulative

3.7 years* +14.2% +62.5% +7.2% +29.1% +8.9% +36.6%
3 years +14.9 +51.8 +12.7 +43.1 +9.8 +32.2
2 years +16.2 +35.1 +9.1 +18.9 +11.1 +23.5
1 year +7.9 +7.9 +1.7 +1.7 +1.8 +1.8

* Since Inception on 11/1/91

</TABLE>

Annual Total Returns

Lehman
Years Aggregate S & P
Ended Balanced Bond 500
June 30, Fund Index Index

1994 -4.6% -3.9% -3.4%
1995 +19.2 +12.6 +26.1

MSCI Lipper
Developing Emerging Emerging
Year Markets Markets Market
Ended Growth Free Fund
June 30, Fund Index Index

1995 -5.4% -1.6% -1.6%

Lipper
Years Int'l. MSCI Int'l.
Ended Growth EAFE Fund
June 30, Fund Index Index

1992 +7.0% -9.8% +4.3%
1993 +12.4 +20.3 +6.6
1994 +25.3 +17.0 +22.1
1995 +7.9 +1.7 +1.8

In addition to the investment performance information discussed above, the Funds
also may quote a YIELD. A Fund's yield illustrates the rate of income the Fund
earns on its investments as a percentage of the Fund's share price. Yield is
calculated by dividing the net investment income per share earned during a
30-day period by the Fund's net asset value per share on the last day of the
period. The result will then be annualized using a formula which provides for
semi-annual compounding of income.

Yield information may be helpful in considering whether to invest in a Fund.
However, because yield accounting methods differ from the methods used for other
accounting purposes, a Fund's yield may not equal its distribution rate, the
income credited to your account or the income reported in the Fund's financial
statements. A Fund's yield will vary from day to day and past yields should not
be considered a representation of future yields.

For additional information regarding the calculation of total return figures see
"Calculation of Performance Data" in the Statement of Additional Information.

Additional performance information regarding each Fund is included in the Funds'
combined annual report, which will be mailed to shareholders without charge upon
request.

INVESTMENT OBJECTIVES & POLICIES

The investment objective of each Fund is set forth on page 1 of this Prospectus.
The investment objective of each Fund is "fundamental," which means that it may
not be changed unless approved by a vote of the "majority" of the shareholders
of such Fund (as defined in the 1940 Act). There can be no assurance that the
investment objective of any of the Funds will be achieved.

In seeking their investment objectives, the Funds will be subject to the
following policies and limitations. Except as indicated, these policies are not
fundamental and may be changed by the Boards of Directors without shareholder
approval.

SMALL CAP GROWTH FUND

The Fund invests primarily in common stocks of small companies with a
capitalization of under $500 million at the time of purchase. Under normal
conditions, at least 65% of the Fund's total assets will be invested in such
securities. In addition, the Fund may purchase securities convertible into
common stocks, preferred stocks and warrants. The Fund may invest in securities
not listed on a national securities exchange but generally such securities will
have an established over-the-counter market.

Most of the Fund's investments are in common stocks or securities convertible
into common stocks. Many of these securities may be speculative and may involve
substantial risk. Since the Fund may invest in emerging growth companies
before they become well-recognized, investors should realize that the very
nature of investing in smaller companies involves greater risk than is
customarily associated with more established companies. Smaller companies often
have limited product lines, markets or financial resources, and they may be
dependent upon one-person management. The securities of smaller companies may
have limited marketability and may be subject to more abrupt or erratic market
movements than securities of larger companies or the market averages in general.

The Fund may invest up to 20% of its net assets in foreign corporate equity
securities. All foreign equity securities are limited to American Depository
Receipts (ADRs), which are traded in U.S. dollars, or in stocks listed on U.S.
exchanges including NASDAQ or on the Toronto Stock Exchange. Foreign investments
are subject to certain unique risks, such as fluctuations in the value of the
currencies, potential adverse political and economic developments. Foreign
investments are subject to certain unique risks, as discussed under "Risks of
International Investing" below.

GROWTH FUND

The Fund invests primarily in common stocks. The Fund may also purchase
securities convertible into common stocks, preferred stocks and warrants. The
Fund may invest in securities not listed on a national securities exchange but,
generally such securities will have an established over-the-counter market.

The Fund invests in a diversified group of emerging growth companies before they
become well-recognized. The Fund also invests in medium-size companies which
offer improved growth possibilities because of rejuvenated management, changes
in product or some other development that might stimulate earnings growth. To
qualify for investment by the Fund, a company should be expected to demonstrate
long term reasonable annual earnings growth.

The Fund may invest up to 20% of its net assets in foreign corporate equity
securities. All foreign equity securities are limited to American Depository
Receipts (ADRs), which are traded in U.S. dollars, or in stocks listed on U.S.
exchanges including NASDAQ or on the Toronto Stock Exchange. Foreign investments
are subject to certain unique risks, as discussed under "Risks of International
Investing" below.

GROWTH & INCOME FUND

The Fund invests primarily in common stocks, dividend paying common stocks,
preferred stocks, and securities convertible into stocks. In making common stock
investments, effort is directed toward the selection of "blue-chip" common
stocks that pay dividends, particularly those which have provided stable and
growing dividend rates on an historical basis.

The Fund may invest up to 50% of its assets in debt securities including
corporate bonds, debentures and government debt securities. The percentage of
assets allocated to common stocks and to various debt securities will vary in
accordance with the judgment of the Adviser. Currently, it is the intention of
the Adviser to invest primarily in common stocks.

The Fund may purchase debt securities which are rated at least Ba by Moody's or
BB by S&P and may purchase unrated securities which at the time of purchase are
judged by the Adviser to be of comparable quality to the rated securities in
which the Fund may invest. In acquiring debt securities, emphasis is placed on
acquiring nonspeculative issues (rated A or higher by Moody's or S&P) with
maturities of ten years or less. The Fund will not invest more than 5% of its
total assets at any time in debt securities rated lower than Baa by Moody's or
BBB by S&P (or comparable unrated securities). It is the Adviser's opinion that
if the maturity of a debt security is ten years or less, then the price
volatility in response to overall interest rate changes is generally less than
that experienced by debt securities of longer maturity.

The Fund may invest up to 20% of its assets in foreign corporate equity
securities or debt securities of foreign governments. All foreign equity
securities are limited to American Depository Receipts (ADRs), which are traded
in U.S. dollars, or in stocks listed on U.S. exchanges including NASDAQ or on
the Toronto Stock Exchange. Debt securities may include securities of the
governments of Canada, Japan and members of the European Economic Community. All
trades involving foreign debt securities will be transacted through U.S. based
brokerage firms or commercial banks. Canadian investments will be made through
the Toronto Stock Exchange member firms in U.S. dollars. Foreign investments are
subject to certain unique risks, as discussed under "Risks of International
Investing" below.

BALANCED FUND

The Fund's equity investments consist of securities which the Adviser believes
have an outstanding outlook for long-term growth of principal. The Fund balances
its growth objective by investing in income-producing debt securities and/or
common stocks selected primarily for their dividend payment potential. In order
to maximize total return, the Fund's allocation of assets will vary over time.

Under normal conditions, between 40% and 60% of the Fund's assets will be
invested in equity securities and between 40% and 60% in fixed-income
securities. At all times at least 25% of the assets of the Fund will be invested
in fixed-income senior securities.

WITH RESPECT TO THE EQUITY PORTION OF THE FUND'S PORTFOLIO, the Fund may
purchase common stocks, securities convertible into common stocks, preferred
stocks and warrants. The Fund may invest in securities not listed on a national
securities exchange, but generally such securities will have an established
over-the-counter market. The Fund invests in companies which offer growth
potential. To qualify for investment by the Fund, a company should be expected
to demonstrate long-term reasonable annual earnings growth. No assurance can be
given that expectations will be met.

The Fund may invest up to 20% of its net assets in foreign corporate equity
securities. All foreign equity securities are limited to American Depository
Receipts (ADRs), which are traded in U.S. dollars, or in stocks listed on U.S.
exchanges including NASDAQ or on the Toronto Stock Exchange. Foreign investments
are subject to certain unique risks, including foreign currency risks as
discussed under "Risks of International Investing" below.

WITH RESPECT TO THE FIXED-INCOME PORTION OF THE FUND'S PORTFOLIO, the Fund may
purchase fixed-income securities which may include obligations of the United
States government, its agencies and instrumentalities; corporate debt
securities; corporate commercial paper; mortgage and other asset-backed
securities; municipal securities; variable and floating rate debt securities;
bank certificates of deposit, fixed time deposits and bankers acceptances;
repurchase agreements; obligations of foreign governments or their subdivisions,
agencies and instrumentalities, or of international agencies or supernational
entities; and foreign currency exchange-related securities, including foreign
currency warrants. The Fund may invest in securities issued by foreign entities
and denominated in U.S. dollars or foreign currencies. See "Ratings of Debt
Securities" section below.

The Fund primarily invests in fixed-income securities with maturities of 2 to 30
years. Maturity is usually an accurate indication of the outstanding term,
however, mortgage pass-through securities which receive regular principal
payments have an average life less than the maturity. The average life of
mortgage pass-through investments will typically vary from 1 to 18 years. The
average maturity of the portfolio will generally vary between 3 and 30 years.

The Fund may invest up to 25% of the fixed-income portion of the Fund's
portfolio in debt securities that are rated below investment grade, i.e., rated
below Baa by Moody's Investors Services ("Moody's) or BBB by Standard & Poor's
Corporation ("S&P"), Fitch Investors Service, Inc. ("Fitch"), or Duff & Phelps
Credit Rating Co. ("Duff & Phelps") or comparable unrated securities. The Fund
will not invest in securities rated below B-3 by Moody's or B- by S&P, Fitch,
and Duff & Phelps, at the time of investment. The Fund will strive to maintain
an overall dollar-weighted quality average for the fixed-income portion of the
Fund's portfolio of at least A as rated by Moody's or S&P. See section on
"Ratings of Debt Securities" below and also the Appendix A of the Statement of
Additional Information.

The Fund may purchase short-term debt instruments maturing in 12 months or less
which may include commercial paper, bank obligations, short-term obligations of
the U.S. or Canadian governments, their agencies or instrumentalities,
repurchase agreements and other similar short-term instruments. The Fund will
invest in short-term securities rated at the time of purchase within the highest
rating category by a major rating service or if unrated, are of comparable
quality as determined by the Adviser. See "Ratings of Debt Securities" section
below.

U.S. GOVERNMENT SECURITIES. The Fund may invest in securities issued, guaranteed
or insured by the U.S. government, its agencies or instrumentalities whether or
not backed by the "full faith and credit" pledge of the U.S. government.
Guarantees as to the timely payment of principal and interest do not extend to
the value or yield of such securities nor do they extend to the value of the
Fund's shares. U.S. Treasury securities are bonds, notes and bills which are
issued by the U.S. government and which differ in their interest rates,
maturities and dates of issuance.

Other instrumentalities of the U.S. government which issue or guarantee
securities which the Fund may purchase include, for example, the Federal Farm
Credit System, Federal Land Banks, the Federal Intermediate Credit Bank, the
Bank for Cooperatives, Federal Home Loan Banks, and the Student Loan Marketing
Association. The U.S. Treasury is not obligated by law to provide support to all
U.S. government instrumentalities and agencies, and the Fund will invest in
securities which are not backed by the full faith and credit of the U.S.
Treasury issued by such instrumentalities and agencies only when the Fund's
Adviser determines that the credit risk with respect to the instrumentality or
agency issuing such securities does not make its securities unsuitable
investments for the Fund.

MORTGAGE AND OTHER ASSET-BACKED SECURITIES. The Fund may invest in mortgage
pass-through securities which are sold by various private, governmental and
government-related organizations. Pass-through securities are formed when
mortgages are pooled together and undivided interests in the pool are sold to
investors such as the Fund. The cash flow from the underlying mortgages is
"passed through" to the holders of the securities in the form of periodic
(generally monthly) payments of interest, principal and prepayments. Prepayments
occur when the holder of an individual mortgage prepays the remaining principal
and interest before the final scheduled payment month. Therefore, the Fund may
be subject to a higher rate of prepayments during periods of declining interest
rates when mortgages may be more frequently prepaid.

Mortgage pass-through securities include (1) obligations of U.S. government
agencies and instrumentalities which are secured by the full faith and credit of
the U.S. Treasury such as Government National Mortgage Association ("GNMA")
pass-through certificates; (2) obligations which are secured by the right of the
issuer to borrow from the Treasury, such as securities issued by the Federal
Financing Bank, the Federal Home Loan Banks and the United States Postal
Service; and (3) obligations which have the principal and interest payments
guaranteed by the government agency or instrumentality itself (but are not
backed by the full faith and credit of the U.S. government), such as securities
of the Federal National Mortgage Association ("FNMA") and Federal Home Loan
Mortgage Corporation ("FHLMC"), and (4) obligations of private corporations. See
Statement of Additional Information for further information.

In addition to mortgage-backed securities, the Fund may invest in other types of
asset-backed securities which represent other forms of consumer credit such as
automobile and credit card receivables or home equity loans. Asset-backed
securities are generally privately issued and, similar to mortgage-backed
securities, pass through cash flows to investors.

CORPORATE DEBT SECURITIES. The Fund may invest in corporate debt securities
(corporate bonds, debentures, notes and other similar corporate debt
instruments, including convertible securities) which meet the minimum ratings
criteria set forth by the Fund, or, if unrated, are in the Adviser's opinion of
comparable quality to corporate debt securities in which the Fund may invest.

FOREIGN CORPORATE DEBT SECURITIES. The Fund may invest up to 20% of its assets
in debt securities of foreign governments or foreign corporate debt securities
denominated in foreign currencies which are rated at least A by Moody's, S&P,
Fitch or Duff & Phelps or, if unrated, are in the Adviser's opinion of
comparable quality. All trades involving foreign debt securities will be
transacted through U.S. based brokerage firms or commercial banks. Foreign
investments are subject to certain unique risks, as discussed under Investment
Objectives and Policies - "Risks of International Investing" below.

FOREIGN CURRENCIES AND CURRENCY EXCHANGE TRANSACTIONS. The Fund may engage in
foreign currency exchange transactions by means of buying or selling foreign
currencies on a spot basis, entering into foreign currency forward contracts,
and buying and selling foreign currency options, foreign currency futures, and
options on foreign currency futures. Foreign currency exchange transactions may
be entered into for the purpose of hedging against foreign currency exchange
risk arising from the Fund's investment or anticipated investment in securities
denominated in foreign securities. Foreign currency exchange transactions will
be limited to the total value of securities denominated in foreign currencies.

CORPORATE COMMERCIAL PAPER. The commercial paper purchased by the Fund will
consist only of direct obligations which, at the time of purchase, are (a) rated
P-1 by Moody's or A-1 or A-1+ by S&P, or (b) if not rated, issued by companies
having an outstanding unsecured debt issue which at the time of purchase is
rated A or higher by Moody's or A or higher by S&P.

VARIABLE RATE NOTES. The Fund may purchase floating and variable rate notes. The
interest rate is adjusted either at predesignated periodic intervals (variable
rate) or when there is a change in the index rate on which the interest rate on
the obligation is based (floating rate). These notes normally have a demand
feature which permit the holder to demand payment of principal plus accrued
interest upon a specified number of days' notice. The issuer of floating and
variable rate demand notes normally has a corresponding right, after a given
period, to prepay at its discretion the outstanding principal amount of the note
plus accrued interest upon a specified number of days' notice to the
noteholders.

FUTURES, OPTIONS & SWAP AGREEMENTS. The Fund may invest up to 10% of its assets
in certain derivative instruments, including futures, options, options on
futures and enter into swap agreements for hedging purposes or as part of its
investment strategy. Use of these instruments may involve certain costs and
risks, including the risk that the Fund may not be able to close out a futures
or option position when it might be most advantageous to do so, and the risk of
an imperfect correlation between the value of the security being hedged and the
value of the particular derivative instrument. Since such instruments derive
their return from underlying securities, they are commonly referred to as
derivative securities.

FUTURES. A futures contract is an agreement to purchase or deliver a debt
security in the future for a specified price on a certain date. The Fund may buy
or sell interest rate futures contracts, options on interest rate futures
contracts and options on debt securities for the purpose of hedging against
changes in the value of securities which the Fund owns or anticipates purchasing
due to anticipated changes in interest rates. See the Statement of Additional
Information for further information.

OPTIONS - PUTS AND CALLS. The Fund may buy and sell options on debt securities
for the purpose of hedging against changes in the value of securities which the
Fund owns or anticipates purchasing due to changes in interest rates. A put
option gives the purchaser of the option, in return for a premium paid, the
right to sell the underlying security at a specified price during the term of
the option. A call option gives the purchaser of the option, in return for a
premium, the right to buy the security underlying the option at a specified
exercise price at any time during the term of the option. While the Fund does
not anticipate utilizing puts and calls on a regular basis, the Fund may from
time to time write exchange-traded call options on debt securities, for which it
will receive a purchase premium from the buyer, and may purchase and sell
exchange-traded call and put options on debt securities written by others or
combinations thereof. The Fund will not write put options. The aggregate cost of
all outstanding options purchased and held by the Fund will at no time exceed 5%
of the Fund's net assets.

SWAP AGREEMENTS. Swap agreements are two party contracts entered into primarily
by institutional investors in which two parties agree to exchange the returns
(or differential rates of return) earned or realized on particular predetermined
investments or instruments. The Fund may enter into swap agreements for purposes
of attempting to obtain a particular investment return at a lower cost to the
Fund than if the Fund had invested directly in an instrument that provided that
desired return. The Fund bears the risk of default by its swap counterpart and
may not be able to terminate its obligations under the agreement when it is most
advantageous to do so. In addition, certain tax aspects of swap agreements are
not entirely clear and their use, therefore, may be limited by the requirements
relating to the qualification of a Fund as a regulated investment company under
the Internal Revenue Code of 1986, as amended (the "Code").

ZERO COUPON SECURITIES. The Fund is permitted to invest in zero coupon
securities. Such securities are debt obligations which do not entitle the holder
to periodic interest payments prior to maturity and are issued and traded at a
discount from their face amounts. The discount varies depending on the time
remaining until maturity, prevailing interest rates, liquidity of the security
and the perceived credit quality of the issuer. The discount, in the absence of
financial difficulties of the issuer, decreases as the final maturity of the
security approaches. Zero coupon securities can be sold prior to their due date
in the secondary market at the then-prevailing market value which depends
primarily on the time remaining to maturity, prevailing levels of interest rates
and the perceived credit quality of the issuer. The market prices of zero coupon
securities are more volatile than the market prices of securities of comparable
quality and similar maturity that pay interest periodically and may respond to a
greater degree to fluctuations in interest rates than do such non-zero coupon
securities

DEVELOPING MARKETS GROWTH FUND

The Fund invests primarily in equity securities of companies deemed to be
domiciled or otherwise operating in a developing market. Equity securities
include common and preferred stock, rights and warrants to purchase equity
securities, and debt securities convertible into common stock. The Adviser
intends to invest substantially all of the Fund's assets in developing market
equity securities, to the extent that the Fund's assets are not invested in
developing market equity securities, the remaining assets may be invested in 1)
debt securities of government or corporate issuers in developing markets; 2)
equity and debt securities of issuers in developed countries; or 3) cash and
money market instruments. In normal market conditions, at least 65% of the
Fund's total assets will be invested in developing market equity securities.

The Fund may invest up to 5% of the Fund's assets in rights or warrants to
purchase equity securities. In addition to investing directly in equity
securities, the Fund may invest in sponsored and unsponsored American Depository
Receipts ("ADRs"), European Depository Receipts ("EDRs"), and Government
Depository Receipts ("GDRs"). Generally, ADRs in registered form are U.S. dollar
denominated securities designed for use in the U.S. securities markets, which
represent and may be converted into the underlying foreign security. Unsponsored
ADRs are offered by companies which are not prepared to meet either the
reporting or accounting standards of the U.S. While readily exchangeable with
stock in local markets, unsponsored ADRs may be less liquid than sponsored ADRs.
EDRs are typically issued in bearer form and are designed for use in European
securities markets.

The Fund also may invest in certain debt securities issued by the governments of
developing market countries that are or may be eligible for conversion into
investments in developing market companies under debt conversion programs
sponsored by such governments. To the extent such debt securities are
convertible to equity securities, they are considered by the Fund to be equity
derivative securities. Debt securities (defined as bonds, notes, debentures,
commercial paper, certificates of deposit, time deposits and bankers'
acceptances) may offer opportunities for long-term capital appreciation. The
Fund will only invest in debt securities rated at least C by Moody's Investors
Service, Inc. ("Moody's") or Standard & Poor's Corporation ("S&P") at the time
of purchase or, if unrated, of comparable quality as determined by the Adviser
or Sub-Adviser. The Fund will not invest more than 5% of its total assets in
debt securities rated Baa or lower by Moody's or BBB or lower by S&P at the time
of purchase or, if unrated, of comparable quality as determined by the Adviser
or Sub-Adviser. Debt securities rated Baa or BBB may have some speculative
elements. Debt securities rated C are regarded as having predominantly
speculative characteristics. As of June 30, 1995, none of the Fund's assets were
invested in securities rated below Baa. Subject to the above limitations, it is
likely that a portion of the debt securities in which the Fund will invest may
be unrated. Subsequent to their purchase, particular securities or other
investments may cease to be rated or their ratings may be reduced below the
minimum rating required for purchase by the Fund. Neither event will require the
elimination of an investment from the Fund's portfolio, but the Adviser or
Sub-Adviser will consider such an event in its determination of whether the Fund
should continue to hold the security. See Ratings of Bond Securities in the
Statement of Additional Information.

DEVELOPING MARKETS. For purposes of its investment policy, the Fund defines
"developing markets" as those countries determined by the Adviser or Sub-Adviser
to demonstrate developing or emerging markets or economies. Such countries will
generally be defined as "emerging stock markets" by the International Finance
Corporation, demonstrate low- to middle-income economies according to the
International Bank for Reconstruction and Development (the World Bank), or be
listed in World Bank publications as developing. Countries currently not
considered by the World Bank as having "developing markets" presently include:
Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Ireland,
Italy, Japan, the Netherlands, New Zealand, Norway, Spain, Sweden, Switzerland,
the United Kingdom, and the United States. The Fund will not seek to diversify
investments among geographic regions or levels of economic development in any
particular country.

Developing markets tend to be in less economically developed regions of the
world. General characteristics of developing market countries also include lower
degrees of political stability, a high demand for capital investment, a high
dependence on export markets for their major industries, a need to develop basic
economic infrastructures, and rapid economic growth. The Adviser and Sub-Adviser
believe that investments in equity securities of developing growth companies and
in international developing markets offer the opportunity for significant
long-term investment returns. However, these investments involve certain risks.
See section on "Risks of the Developing Markets Growth Fund" below.

The Adviser and Sub-Adviser consider a company domiciled or otherwise operating
in a developing market to be: i) a company whose securities are principally
traded in the capital market of a developing market country, ii) a company which
derives at least 50% of its gross revenues from goods produced or services
rendered in a developing market country, regardless of where the principal
trading market for such a company's securities is located, or iii) a company
organized under the laws of or conducting principal operations in a developing
market country.

SELECTION OF INVESTMENTS. Emphasis is placed on identifying securities of
companies believed to be undervalued in the marketplace in relation to certain
factors such as a company's revenues, earnings, assets and long-term competitive
positions which over time will enhance the equity value of the company. The Fund
will not concentrate its investments in companies of a particular asset size or
in a particular industry, but instead will select its investments based on the
characteristics of the particular developing markets and economies of the
countries in which it invests as well as the fundamentals of the underlying
securities. The Fund also will not necessarily seek to diversify investments
among geographic regions or levels of economic development in any particular
country.

In selecting portfolio investments, the Adviser or Sub-Adviser will consider:
(i) a company's growth prospects, including the potential for superior
appreciation due to growth in earnings, relative valuation of its securities,
and any risk associated with such investment; (ii) the industry in which the
company operates, with a view to identification of international developments
within industries, international investment trends, and social, economic or
political movements affecting a particular industry; (iii) the country in which
the company is based, as well as historical and anticipated foreign currency
exchange rate fluctuations; and (iv) the feasibility of gaining access to the
securities market in a country and of implementing the necessary custodial
arrangements. The investment program of the Fund has been developed in the
belief that research-based investment in a portfolio of equity securities of
companies in a number of foreign countries will give shareholders a chance to
participate on an international basis in the opportunities available in
developing markets and economies.

OPTIONS ON SECURITIES OR INDICES. The Fund may write (i.e. sell) covered put and
call options and purchase put and call options on securities or securities
indices that are traded on United States and foreign exchanges or in the
over-the-counter markets. An option on a security is a contract that permits the
purchaser of the option, in return for the premium paid, the right to buy a
specified security (in the case of a call option) or to sell a specified
security (in the case of a put option) from or to the writer of the option at a
designated price during the term of the option. An option on a securities index
permits the purchaser of the option, in return for the premium paid, the right
to receive from the seller cash equal to the difference between the closing
price of the index and the exercise price of the option. The Fund may write a
call or put option to generate income, and will do so only if the option is
"covered." This means that so long as the Fund is obligated as the writer of a
call option, it will own the underlying securities subject to the call, or hold
a call at the same or lower exericse price, for the same exercise period, and on
the same securities as the written call. A put is covered if the Fund maintains
liquid assets with value at least equal to the exercise price in a segregated
account, or holds a put on the same underlying securities at an equal or greater
exercise price. The value of the underlying securities on which options may be
written at any one time will not exceed 15% of the total assets of the Fund. The
Fund will not purchase put or call options if the aggregate premium paid for
such options would exceed 5% of its total assets at the time of purchase. See
the "Options" section in the Statement of Additional Information.

RISKS OF THE DEVELOPING MARKETS GROWTH FUND. Investors should carefully consider
the substantial risks associated with investments in securities issued by
companies and governments of foreign countries, which are in addition to the
usual risks inherent with domestic investments. These risk factors are increased
for investments in developing countries. There can be no guarantee against loss
resulting from an investment in the Fund, nor can there be any assurance that
the Fund's investment objective will be attained. The Fund should be considered
as a vehicle for allocating a portion of investor assets to foreign securities
markets and not as a complete investment program. See the discussion below on
"Risks of International Investing" and the Risk Considerations section in the
Statement of Additional Information.

INTERNATIONAL GROWTH FUND

The Fund invests primarily in international equity securities of issuers
domiciled outside the United States. International equity securities in which
the Fund may invest include common and preferred stock, rights and warrants to
purchase equity securities, and debt securities convertible into common stock.
In normal conditions, at least 90% of the Fund's total assets will be invested
in international equity securities.

The Fund may invest up to 5% of its total assets in rights or warrants to
purchase equity securities. In addition to investing directly in equity
securities, the Fund may invest in sponsored and unsponsored American Depository
Receipts ("ADRs") and European Depository Receipts ("EDRs"), and Government
Depository Receipts ("GDRs"). Generally, ADRs in registered form are U.S. dollar
denominated securities designed for use in the U.S. securities markets, which
represent and may be converted into the underlying foreign security. Unsponsored
ADRs are offered by companies which are not prepared to meet either the
reporting or accounting standards of the U.S. While readily exchangeable with
stock in local markets, unsponsored ADRs may be less liquid than sponsored ADRs.
Additionally, there generally is less publicly available information with
respect to unsponsored ADRs. EDRs are typically issued in bearer form and are
designed for use in the European securities markets.

The Fund may invest up to 50% of its total assets in equity securities of
smaller to medium sized emerging growth companies in both developed and
developing markets. For the developed markets, such investments include equity
securities with market capitalizations of over $100 million but less than $2
billion. However, market capitalizations of smaller to medium sized company
equity securities in developing markets are significantly smaller and currently
range between $25 million and $100 million.

Emerging growth companies are small- and medium-sized companies that the Adviser
or Sub-Adviser believes have a potential for earnings growth over time that is
above the growth rate of more established companies or are early in their life
cycles and have the potential to become major enterprises. With respect to the
International Growth Fund, international developing markets are countries
categorized as developing markets by the Interntional Finance Corporation, the
World Bank's private sector division. Such countries currently include but are
not limited to Malaysia, Thailand, Indonesia, the Philippines, South Korea,
Taiwan and certain Latin American countries. Such markets tend to be in the less
economically developed regions of the world. The general characteristics of
developing market countries are discussed above in "Developing Markets"section.

For liquidity purposes, the Fund may also invest up to 10% of its assets in U.S.
dollar denominated or foreign currency denominated cash or in high quality debt
securities with remaining maturities of one year or less. Such securities
include commercial paper, certificates of deposit, bankers acceptances and
securities issued by the U.S. or a foreign government, their agencies or
instrumentalities. All debt securities in which the Fund invests (other than
securities issued or guaranteed by the U.S. or a foreign government, its
agencies or instrumentalities) must be rated Aa or Prime or better by Moody's or
AA or A-1 or better by S&P, or AAA or F-1+ by Fitch, or AAA or Duff1+ by Duff &
Phelps, or be of comparable quality as determined by the Adviser or Sub-Adviser.

Emphasis is placed on identifying securities of companies believed to be
undervalued in the marketplace in relation to factors such as the company's
revenues, earnings, assets and long-term competitive positions which over time
will enhance the equity value of the company. The Fund will not concentrate its
investments in companies of a particular asset size or in a particular industry,
but instead will select its investments based on the characteristics of the
particular markets and economies of the countries in which it invests as well as
the fundamentals of the underlying securities.

In selecting portfolio investments, the Adviser or Sub-Adviser will consider: a
company's growth prospects, including the potential for superior appreciation
due to growth in earnings, relative valuation of its securities, and any risk
associated with such investment; the industry in which the company operates,
with a view to identification of international developments within industries,
international investment trends, and social, economic or political movements
affecting a particular industry; the country in which the company is based, as
well as historical and anticipated foreign currency exchange rate fluctuations;
and the feasibility of gaining access to the securities market in a country and
of implementing the necessary custodial arrangements. The investment program of
the Fund has been developed in the belief that research-based investment in a
portfolio of equity securities of companies in a number of foreign countries
will give shareholders a chance to participate on an international basis in the
opportunities available in the growing foreign securities markets.

Investment will be made in those countries where the Adviser or Sub-Adviser
believes that economic and political factors, including currency movements, are
likely to produce above average investment returns. There is no limitation on
the percentage of the Fund's assets that may be invested at any one time in
securities of companies in one or more countries, except insofar as the Fund is
limited in its ability to invest in other investment companies. However, except
during times that the Fund is in a temporary defensive posture, the Fund will
invest at least 90% of its total assets in the securities of issuers domiciled
in at least three different non-U.S. countries.

The Fund's management anticipates that, from time to time, the Fund may have
more than 25% of its assets invested in securities of companies and concerns
domiciled in the countries of Japan, the United Kingdom and/or Germany. These
are among the leading industrial economies outside the United States and the
values of their stock markets account for a significant portion of the value of
international markets. A discussion of the economies of such countries is set
forth below.

JAPAN. Japan is organized politically as a democratic, parliamentary republic
and has a population of approximately 125 million people. The Japanese economy
is heavily industrial and export oriented. Although Japan is dependent upon
foreign economies for raw materials, Japan's balance of payments in recent year
has been strong and positive.

Japan has eight stock exchanges located throughout the country, but over 80% of
all trading is conducted on the Tokyo Stock Exchange. As of June 30, 1995, the
Japanese market had a market capitalization of approximately $3.1 trillion.

Prices of stocks listed on the Japanese stock exchange are quoted continuously
during regular business hours. Trading commissions are at fixed scale rates
which vary by the type and the value of the transaction, but can be negotiable
for large transactions.

Securities in Japan are denominated and quoted in "yen." Yen are fully
convertible and transferable based on floating exchange rates into all
currencies, without administrative or legal restrictions, for both nonresidents
and residents of Japan.

UNITED KINGDOM OF GREAT BRITAIN AND NORTHERN IRELAND. The United Kingdom of
Great Britain and Northern Ireland ("U.K.") is a constitutional monarchy and
consists of England, Scotland, Wales and Northern Ireland. The population of the
U.K. is approximately 58 million people. Industry in the U.K. is predominantly
owned in the private sector.

The U.K. has a centralized screen-based trading system located in London, with
separate operating facilities located in Belfast, Birmingham, Bristol, Dublin,
Glasgow, Liverpool and Manchester. Stock exchange commission rates are
negotiable and stock exchange membership is available to limited companies and
to non-residents of the U.K. The Financial Services Act (the "FSA") created a
regulatory body known as the Securities and Investments Board (the "SIB"), which
has the power to delegate certain of its functions to various "self regulatory
organizations", of which the London Stock Exchange is one. Under the FSA
structure, the London Stock Exchange is largely self regulating.

Stock prices are continuously quoted during business hours of the London Stock
Exchange. Trading Commissions in the U.K. are negotiable. As of June 30, 1995,
the market value of the stock market in the U.K. exceeded $1.2 trillion.

Securities in the U.K. are denominated and quoted in "pounds sterling." Pounds
sterling are fully convertible and transferable based on floating exchange rates
into all currencies, without administrative or legal restrictions, for both
nonresidents and residents of the U.K.

THE FEDERAL REPUBLIC OF GERMANY. The Federal Republic of Germany ("Germany") is
a federated republic with a population of approximately 81 million people and a
democratic parliamentary form of government. The German economy is organized
primarily on the basis of private sector ownership, with the state exerting
major influence through ownership only in certain sectors, including
transportation, communication and energy. Unification of the Federal Republic of
Germany with the formerly communist controlled German Democratic Republic took
place in 1990.

Industrial activity makes the largest contribution to the German gross national
product. Although only 5% of German businesses are large scale enterprises, such
large scale businesses account for over half of industrial production and employ
over half the industrial labor force. Trading volume, therefore, tends to
concentrate on relatively few companies with both large capitalizations and
broad stock ownership. Historically the German economy has been strongly export
oriented. Privatization of formerly state owned enterprise in what was once East
Germany is in progress, but will make little difference to the predominance of
large scale businesses in overall industrial activity.

German equity securities trade predominantly on the country's eight independent
local stock exchanges, and the Frankfurt exchange accounts for 70% of turnover.
Subject to the provisions of pertinent securities law, mainly the Stock Exchange
Law of 1896, as amended, the council, management and other executive organs of
the stock exchanges constitute self administering and self regulatory bodies.
The "Working Group of German Stock Exchanes" headquartered in Frankfurt, of
which all eight stock exchanges are members, addresses all policy and
administrative questions of national and international character.

Prices for active stocks, including those for larger companies, are quoted
continuously during stock exchange hours. Less actively traded stocks are quoted
only once a day. Equity shares are normally fully paid and nonassessable. As of
June 30, 1995 the market value of the Frankfurt (German) market was
approximately $550 billion.

Orders for stocks executed for large customers on the stock exchanges are
negotiable. A federal stock exchange turnover tax, ranging up to 0.25%, is
levied on all securities transactions other than those between banks acting as
principal. Nonresidents such as the Fund are charged half these rates.

German equity securities are denominated in "deutchemarks." Deutchemarks are
fully convertible and transferable into all currencies, without administrative
or legal restrictions, for both nonresidents and residents of Germany. Since
1974, the deutchemark has traded on a floating exchange rate basis against all
currencies.

RISKS OF INTERNATIONAL INVESTING

CURRENCY CONTRACTS. The Developing Markets Growth Fund and the International
Growth Fund may enter into contracts for the purchase or sale of a specific
currency at a future date and at a price set at the time of the contract (a
"currency contract"). The Funds may enter into forward currency contracts either
with respect to specific transactions or with respect to the Funds' portfolio
positions. For example, when the Adviser or Sub-Adviser anticipates making a
purchase or sale of a security, the Fund may enter into a forward currency
contract in order to set the rate (either relative to the U.S. dollar or another
currency) at which a currency exchange transaction related to the purchase or
sale will be made. Further, when the Adviser or Sub-Adviser believes that a
particular currency may decline compared to the U.S. dollar or another currency,
the Funds may enter into a forward contract to sell the currency the Adviser or
Sub-Adviser expects to decline in the amount approximating the value of some or
all of the Funds' portfolio securities denominated in that currency or related
currencies that the Adviser or Sub-Adviser feels demonstrate a correlation in
exchange rate movements. The practice of using correlated currencies is known as
"cross-hedging". When the Adviser or Sub-Adviser believes that the U.S. dollar
may suffer a substantial decline against a foreign currency or currencies, the
Funds may enter into a forward contract to buy a foreign currency for a fixed
dollar amount. By entering into such transactions, however, the Funds may be
required to forego the benefits of advantageous changes in exchange rates.
Currency contracts are traded over-the-counter, and not on organized commodities
or securities exchanges. As a result, such contracts operate in a manner
distinct from exchange-traded instruments, and their use involves certain risks
beyond those associated with transactions in other futures contracts. The Funds
will establish a segregated account with its custodian containing cash and
liquid high grade debt obligations to cover the Funds' obligations with respect
to forward contracts it has entered into. The value of such assets will be
marked to market on a daily basis.

Although the Funds will enter into currency contracts solely for hedging
purposes, their use does involve certain risks. For example, there can be no
assurance that a liquid secondary market will exist for any currency contract
purchased or sold, and the Funds may be required to maintain a position until
exercise or expiration, which could result in losses.

Currency contracts may be entered into on United States exchanges regulated by
the SEC or the Commodity Futures Trading Commission (the "CFTC"), as well as in
the over-the-counter market and on foreign exchanges. Investors should recognize
that transactions involving foreign securities or foreign currencies, and
transactions entered into in foreign countries, may involve considerations and
risks not typically associated with investing in U.S. markets.

CURRENCY FLUCTUATIONS. The value of the Funds' portfolio securities computed in
U.S. dollars will vary with increases and decreases in the exchange rate between
the currencies in which the Funds have invested and the U.S. dollar. A decline
in the value of any particular currency against the U.S. dollar will cause a
decline in the U.S. dollar value of the Funds' holdings of securities
denominated in such currency and, therefore, will cause an overall decline in
the Funds' net asset value and net investment income and capital gains, if any,
to be distributed in U.S. dollars to shareholders by the Funds.

The rate of exchange between the U.S. dollar and other currencies is determined
by several factors, including the supply and demand for particular currencies,
central bank efforts to support particular currencies, the movement of interest
rates, the price of oil, the pace of activity in the industrial countries,
including the United States and other economic and financial conditions
affecting the world economy.

POLITICAL AND ECONOMIC RISKS. Investing in securities of non-U.S. companies may
entail additional risks due to the potential political and economic instability
of certain countries and the risks of expropriation, nationalization or
confiscatory taxation. In addition, favorable economic developments worldwide
may not continue or may be reversed by unanticipated political events which may
adversely affect the Funds. The Funds may also be adversely affected by exchange
control regulations.

CORPORATE DISCLOSURE STANDARDS AND GOVERNMENT REGULATION. Non-U.S. companies are
not generally subject to uniform accounting, auditing and financial reporting
standards or to other regulatory requirements comparable to those applicable to
U.S. companies. Thus, there may be less available information concerning
non-U.S. issuers of securities held by the Fund than is available concerning
U.S. companies.

MARKET CHARACTERISTICS. Securities of many non-U.S. companies may be less liquid
and their prices more volatile than securities of comparable U.S. companies. In
addition, securities of companies traded in many countries outside the U.S.,
particularly those of emerging countries, may be subject to further risks due to
the inexperience of financial intermediaries, the possibility of permanent or
temporary termination of trading and greater spreads between bid and ask prices
for securities in such markets. Non-U.S. stock exchanges and brokers are subject
to less governmental supervision and regulation than in the U.S. and non-U.S.
stock exchange transactions are usually subject to fixed commissions, which are
generally higher than negotiated commissions on U.S. transactions. In addition,
non-U.S. stock exchange transactions may be subject to difficulties associated
with the settlement of such transactions. Such settlement difficulties may
result in delays in reinvestment. The Adviser or Sub-Adviser will consider such
difficulties when determining the allocation of the Funds' assets, although the
Funds do not believe that such difficulties will materially adversely affect
their portfolio trading activities.

INVESTMENT AND REPATRIATION RESTRICTIONS. Several of the countries in which the
Funds may invest restrict, to varying degrees, foreign investments in their
securities markets. Governmental and private restrictions take a variety of
forms, including (i) limitations on the amount of funds that may be invested
into or repatriated from the country (including limitations on repatriation of
investment income and capital gains), (ii) prohibitions or substantial
restrictions on foreign investment in certain industries or market sectors, such
as defense, energy and transportation, (iii) restrictions (whether contained in
the charter of an individual company or mandated by the government) on the
percentage of securities of a single issuer which may be owned by a foreign
investor, (iv) limitations on the types of securities which a foreign investor
may purchase and (v) restrictions on a foreign investor's right to invest in
companies whose securities are not publicly traded. In some circumstances, these
restrictions may limit or preclude investment in certain countries and the Funds
intend to invest only through the purchase of shares of investment funds
organized under the laws of such countries.

The return on the Funds' investments in investment companies will be reduced by
the operating expenses, including investment advisory and administrative fees,
of such companies. The Funds' investment in an investment company may require
the payment of a premium above the net asset value of the investment company's
shares, and the market price of the investment company thereafter may decline
without any change in the value of the investment company's assets. The Funds,
however, will not invest in any investment company or trust unless it is
believed that the potential benefits of such investment are sufficient to
warrant the payment of any such premium.

EMERGING GROWTH COMPANIES. The Developing Markets Growth Fund and the
International Growth Fund may invest in emerging growth companies which involves
certain special risks. Emerging growth companies may have limited product lines,
markets, or financial resources, and their managements may be dependent on a
limited number of key individuals. The securities of emerging growth companies
may have limited market liquidity and may be subject to more abrupt or erratic
market movements than securities of larger, more established companies or the
market averages in general.

The risks of foreign investing are of greater concern in the case of investments
in developing markets which may exhibit greater price volatility and have less
liquidity. Furthermore, the economies of developing market countries generally
are heavily dependent upon international trade and, accordingly, have been and
may continue to be adversely affected by trade barriers, managed adjustments in
relative currency values, and other protectionist measures imposed or negotiated
by the countries with which they trade. These developing market economies also
have been and may continue to be adversely affected by economic conditions in
the countries with which they trade.

FOREIGN TAXATION. The Funds' interest and dividend income from foreign issuers
may be subject to non-U.S. withholding taxes. The Funds also may be subject to
taxes on trading profits in some countries. In addition, many of the countries
in the Pacific Basin have a transfer or stamp duties tax on certain securities
transactions. The imposition of these taxes will increase the cost to the Fund
of investing in any country imposing such taxes. For United States tax purposes,
United States shareholders may be entitled to a credit or deduction to the
extent of any foreign income taxes paid by the Fund. See "Taxes" section below.

COMMON POLICIES & INFORMATION

SECURITIES LENDING
From time to time, each of the Funds may lend portfolio securities to brokers,
dealers and other financial institutions needing to borrow securities to
complete certain transactions. Such loans may not exceed 33-1/3% of the value of
a Fund's total net assets. In connection with such loans, the Fund will receive
collateral consisting of cash, U.S. Government securities or irrevocable letters
of credit issued by domestic financial institutions which will be maintained in
an amount equal to at least 100% of the current market value of the loaned
securities.

PUTS AND CALLS
A put option gives the purchaser the option, in return for a premium paid, the
right to sell the underlying security at a specified price during the term of
the option. A call option gives the purchaser of the option, in return for a
premium, the right to buy the security underlying the option at a specified
exercise price at any time during the term of the option. While a Fund does not
anticipate utilizing puts and calls on a regular basis, a Fund may from time to
time write exchange-traded call options on common stocks, for which it will
receive a purchase premium from the buyer, and may purchase and sell
exchange-traded call and put options on common stocks written by others or
combinations thereof. A Fund will not write unsecured put options but may write
fully covered call options. The aggregate cost of all outstanding options
purchased and held by a Fund will at no time exceed 5% of the Fund's net assets.

WHEN-ISSUED AND FORWARD COMMITMENT SECURITIES
The Funds may purchase securities on a "when-issued" basis and may purchase or
sell securities on a "forward commitment" basis. When such transactions are
negotiated, the price is fixed at the time the commitment is made, but delivery
and payment for the securities take place at a later date, which can be a month
or more after the date of the transaction. The Funds will not accrue income in
respect of a security purchased on a forward commitment basis prior to its
stated delivery date. At the time the Funds make the commitment to purchase
securities on a when-issued or forward commitment basis, they will record the
transaction and thereafter reflect the value of such securities in determining
their net asset value. At the time the Funds enter into a transaction on a
when-issued or forward commitment basis, a segregated account consisting of cash
and liquid high grade debt obligations equal to the value of the when-issued or
forward commitment securities will be established and maintained with the
custodian and will be marked to the market daily. On the delivery date, the
Funds will meet their obligations from securities that are then maturing or
sales of the securities held in the segregated asset account and/or from then
available cash flow. If the Funds dispose of the right to acquire a when-issued
security prior to its acquisition or disposes of its right to deliver or receive
against a forward commitment, it can incur a gain or loss due to market
fluctuation.

There is always a risk that the securities may not be delivered and that the
Fund may incur a loss or will have lost the opportunity to invest the amount set
aside for such transaction in the segregated asset account. Settlements in the
ordinary course of business, which may take substantially more than five
business days for non-U.S. securities, are not treated by the Fund as
when-issued or forward commitment transactions and, accordingly, are not subject
to the foregoing limitations even though some of the risks described above may
be present in such transactions.

REPURCHASE AGREEMENTS
Each Fund is permitted to invest in repurchase agreements. A repurchase
agreement is a contract by which the Fund acquires the security ("collateral")
subject to the obligation of the seller to repurchase the security at a fixed
price and date (within seven days). A repurchase agreement may be construed as a
loan pursuant to the 1940 Act. The Funds may enter into repurchase agreements
with respect to any securities which it may acquire consistent with its
investment policies and restrictions. The Funds' custodian will hold the
securities underlying any repurchase agreement in a segregated account. In
investing in repurchase agreements, the Funds' risk is limited to the ability of
the seller to pay the agreed-upon price at the maturity of the repurchase
agreement. In the opinion of the Adviser, such risk is not material, since in
the event of default, barring extraordinary circumstances, the Funds would be
entitled to sell the underlying securities or otherwise receive adequate
protection under federal bankruptcy laws for its interest in such securities.
However, to the extent that proceeds from any sale upon a default are less than
the repurchase price, the Funds could suffer a loss. In addition, the Funds may
incur certain delays in obtaining direct ownership of the collateral. The
Adviser will continually monitor the value of the underlying securities to
ensure that their value always equals or exceeds the repurchase price. The
Adviser will submit a list of recommended issuers of repurchase agreements and
other short-term securities which it has reviewed for credit worthiness to the
Funds' directors at least quarterly for their approval.

ILLIQUID SECURITIES
Each Fund may invest up to 15% of its net assets in all forms of "illiquid
securities." An investment is generally deemed to be "illiquid" if it cannot be
disposed of within seven days in the ordinary course of business at
approximately the amount at which such securities are valued by the Fund.
Restricted securities are securities which were originally sold in private
placements and which have not been registered under the Securities Act of 1933
(the "1933 Act"). Such securities generally have been considered illiquid by the
staff of the Securities and Exchange Commission (the "SEC"), since such
securities may be resold only subject to statutory restsrictions and delays or
if registered under the 1933 Act. However, the SEC has recently acknowledged
that a market exists for certain restricted securities (for example, securities
qualifying for resale to certain "qualified institutional buyers" pursuant to
Rule 144A under the 1933 Act). Additionally, a similar market exists for
commercial paper issued pursuant to the private placement exemption of Section
4(2) of the 1933 Act. As a fundamental policy, the Funds may invest without
limitation in these forms of restricted securities if such securities are
determined by the Adviser to be liquid in accordance with standards established
by the Funds' Board of Directors. Under these standards, the Adviser must
consider (a) the frequency of trades and quotes for the security, (b) the number
of dealers willing to purchase or sell the security and the number of other
potential purchasers, (c) dealer undertakings to make a market in the security,
and (d) the nature of the security and the nature of the marketplace trades (for
example, the time needed to dispose of the secuity, the method of soliciting
offers and the mechanics of transfer).

At the present time, it is not possible to predict with accuracy how the markets
for certain restricted securities will develop. Investing in restricted
securities could have the effect of increasing the level of a Fund's illiquidity
to the extent that qualified institutional buyers become, for a time,
uninterested in purchasing these securities.

INVESTMENT IN SIT MONEY MARKET FUND
The Funds may invest up to the greater of 5% of their total net assets or $2.5
million in SIT Money Market Fund ("Money Market Fund"), which also is advised by
the Adviser, subject to the conditions contained in an exemptive order (the
"Exemptive Order") issued to the Funds and the Adviser by the Securities and
Exchange Commission. Such investments may be made in lieu of direct investments
in short term money market instruments if the Adviser believes that they are in
the best interest of the Funds. The Exemptive Order requires the Adviser and its
affiliates, in their capacities as service providers for the Money Market Fund,
to remit to the Funds, or waive, an amount equal to all fees otherwise due to
them under their advisory and other agreements with Money Market Fund to the
extent such fees are based upon a Fund's assets invested in shares of Money
Market Fund. This requirement is intended to prevent shareholders of the Funds
from being subjected to double management and other asset-based fees as a result
of a Fund's investments in Money Market Fund.

PORTFOLIO TURNOVER
To attain the investment goals of the Funds, the Adviser will usually hold
securities for the long-term. However, if weak or declining market values for
stocks are anticipated, the Adviser may convert any portion of these Fund assets
to cash or short-term securities as a temporary, defensive position. The
turnover rate of the Funds may be greater than other mutual funds with similar
objectives.

Generally, none of the Funds will trade in securities for short-term profits,
but if circumstances warrant, securities may be sold without regard to length of
time held. The Funds will make sector spread changes in response to changing
market conditions. Debt securities may be sold in anticipation of a market
decline (a rise in interest rates) or purchased in anticipation of a market rise
(a decline in interest rates) and later sold.

Increased turnover results in increased brokerage costs and may result in higher
transaction costs for the Funds and may affect the taxes shareholders pay. If a
security that has been held for less than the holding period set by law is sold,
any resulting gains will be taxed in the same manner as ordinary income as
opposed to long-term capital gain. Each Fund's turnover rate may vary from year
to year. For additional information, refer to the "Taxes" section below and the
"Taxes" and "Brokerage" sections in the Statement of Additional Information. The
portfolio turnover rates for each of the Funds are contained in the Condensed
Financial Information tables in this prospectus.

RELATIONSHIP OF DEBT SECURITIES AND INTEREST RATES
The value of debt securities purchased by the Funds, if any, may be affected by
changes in interest rates. There is normally an inverse relationship between the
market value of securities sensitive to prevailing interest rates and actual
changes in interest rates. When interest rates decline, the value of debt
securities generally increases and when interest rates rise, the value of debt
securities generally decreases. Therefore, changes in interest rates may affect
the Funds' net asset values. Common stocks and securities convertible into
common stocks may, under certain circumstances, be adversely impacted by rising
interest rates as well, due to the impact of those rates on stock prices in
general.

TEMPORARY DEFENSIVE INVESTMENTS
For temporary defensive purposes in periods of unusual market conditions, the
Funds may invest all or a portion of their assets in cash, short-term debt
securities including certificates of deposit, bankers' acceptances and other
bank obligations, corporate and direct U.S. obligation bonds, notes, bills,
commercial paper and repurchase agreements.

RATINGS OF DEBT SECURITIES
Investment grade debt securities are rated AAA, AA, A or BBB by Standard &
Poor's Corporation ("S&P"), Fitch Investors Service, Inc. ("Fitch"), and Duff &
Phelps Credit Rating Co. ("Duff & Phelps"); or Aaa, Aa, A or Baa by Moodys
Investors Services ("Moody's"). Investment grade municipal notes are rated MIG
1, MIG 2, MIG 3 or MIG 4 (VMIG 1, VMIG 2, VMIG 3 or VMIG 4 for notes with a
demand feature) by Moodys or SP-1 or SP-2 by S&P. Securities rated Baa, MIG 4,
VMIG 4 or BBB are medium grade, involve some speculative elements and are the
lowest investment grade available. These securities generally have less certain
protection of principal and interest payments than higher rated securities.
Securities rated Ba or BB (in which Growth & Income Fund, Balanced Fund and
Developing Markets Growth Fund may invest) are judged to have some speculative
elements with regard to capacity to pay interest and repay principal. Debt
securities rated C (in which the Developing Markets Growth Fund may invest) are
regarded as having predominantly speculative characteristic. DEBT SECURITIES
RATED BELOW INVESTMENT GRADE ARE COMMONLY KNOWN AS JUNK BONDS. See the Statement
of Additional Information for further information about ratings.

The commercial paper purchased by the Funds will consist only of direct
obligations which, at the time of purchase, are (a) rated P-1 by Moody's or A-1
by S&P, or (b) if not rated, issued by companies having an outstanding
unsecured debt issue which at the time of purchase is rated Aa or higher by
Moody's or AA or higher by S&P.

OTHER INVESTMENT RESTRICTIONS
In addition to the investment policies and restrictions referred to above, each
Fund is subject to various other investment restrictions. These restrictions,
which are set forth in more detail in the Statement of Additional Information,
include, but are not limited to, restrictions whereby the Funds may (a) not
invest more than 25% of the value of its assets in any particular industry,
except with regard to the purchase of obligations issued or guaranteed by the
U.S. government, its agencies or instrumentalities; and (b) except as part of a
merger, consolidation, acquisition, or reorganization, not invest more than 5%
of the value of its total assets in the securities of any one investment company
or more than 10% of the value of its total assets, in the aggregate, in the
securities of two or more investment companies, or acquire more than 3% of the
total outstanding voting securities of any one investment company. Since the
Adviser does not waive its fees if and to the extent a Fund invests in the
securities of one or more other investment companies (except for investments in
the SIT Money Market Fund), the Funds indirectly pay duplicate advisory fees
with respect to such investments. However, the Adviser believes that the return
and liquidity features of investment company securities may, from time to time,
be more beneficial to the Funds than alternative short-term, liquid investments,
and that the duplicate fees and expenses will have a relatively small impact on
overall Fund expenses.

COMPUTATION OF NET ASSET VALUE

Net asset value per share (the value of an individual share in a Fund) is
determined as of the close of the New York Stock Exchange (NYSE) on each day
that the exchange is open for business. Normally the NYSE closes at 3:00 p.m.
Central time. The net asset value is calculated by dividing the total value of a
Fund's investments and other assets (including accrued income), less any
liabilities, by the number of shares outstanding. The net asset value per share
of each Fund will fluctuate.

Securities which are traded on an exchange or on the NASDAQ over-the-counter
market are valued at the last quoted sale price of the day. Lacking a last sale
price, a security is generally valued at its last bid price. All other
securities for which over-the-counter market quotations are readily available
are valued at their last bid price. When market quotations are not readily
available, or when restricted securities are being valued, such securities are
valued at fair value using methods selected in good faith by the Boards of
Directors.

Debt securities may be valued on the basis of prices furnished by a pricing
service when the Adviser believes such prices accurately reflect the fair market
value of such securities. Such a pricing service utilizes electronic data
processing techniques to determine prices for normal institutional-size trading
units of debt securities without regard to sale or bid prices. When prices are
not readily available from a pricing service, or when restricted or illiquid
securities are being valued, securities may be valued at fair value using
methods selected in good faith by the Boards of Directors. Short-term
investments in debt securities with maturities of less than 60 days when
acquired, or which subsequently are within 60 days of maturity, are valued by
using the amortized cost method of valuation. The amortized cost method of
valuation will be used only if the Boards of Directors, in good faith, determine
that the fair value of the securities shall be their amortized cost value,
unless the particular circumstances dictate otherwise.

Any assets or liabilities initially expressed in terms of foreign currencies are
translated into U.S. dollars at the official exchange rate or, alternatively, at
the mean of the current bid and ask prices of such currencies against the U.S.
dollar last quoted by a major bank that is a regular participant in the foreign
exchange market or on the basis of a pricing service that takes into account the
quotes provided by a number of such major banks. If neither of these
alternatives is available or both are deemed not to provide a suitable
methodology for converting a foreign currency into U.S. dollars, the Board of
Directors in good faith will establish a conversion rate for such currency.

Foreign securities trading may not take place on all days on which the New York
Stock Exchange is open. Further, trading takes place in various foreign markets
on days on which the Exchange is not open and therefore the Fund's net asset
value is not calculated. The calculation of the International Growth Fund and
Developing Markets Growth Fund's net asset value therefore may not take place
contemporaneously with the determination of the prices of securities held by
these Funds. Events affecting the values of portfolio securities that occur
between the time their prices are determined and the close of the Exchange will
not be reflected in the Developing Markets Growth Fund or International Growth
Fund's net asset value unless management, under the supervision of the Board of
Directors, determines that the particular event would materially affect the net
asset value. As a result, the Developing Markets Growth Fund or International
Growth Fund's net asset value may be significantly affected by such trading on
days when the Fund is not open for shareholder purchases and redemptions.

HOW TO PURCHASE FUND SHARES

Shares of the Funds may be purchased without a sales commission at the net asset
value per share (see "Computation of Net Asset Value") next determined after
receipt of a purchase order in proper form. The minimum initial investment is
$2,000 for each Fund and additional investments must be at least $100. Accounts
may be established with a $500 minimum initial purchase if an Automatic
Investment Plan for at least $100 per month is also established. The minimum
purchase requirements do not apply to retirement accounts (see "Retirement
Accounts").

SEE THE INSIDE BACK COVER OF THIS PROSPECTUS FOR THE FUNDS' MAILING ADDRESS,
TELEPHONE NUMBERS, AND WIRE INSTRUCTIONS.

INITIAL INVESTMENT
BY MAIL. To open an account, complete and sign an application and mail it with a
check to the Funds as instructed on the application.

BY WIRE. Shares of the Funds may be purchased by wiring Federal Funds from your
bank, which may charge you a fee. Before money is wired for an initial purchase
(new account), you must call the Funds and provide the following information:
name or names of the account registration; address; social security or tax
identification number; the amount being wired; the name of the wiring bank; and
the name and telephone number of the person at your bank. The Funds will provide
you with an account number and your bank must then wire the specified amount
(minimum $2,000 if non-retirement account) to your account.

YOU MUST MAIL A COMPLETED APPLICATION TO THE FUNDS AFTER OPENING AN ACCOUNT BY
WIRE TRANSFER. IF A COMPLETED APPLICATION IS NOT RECEIVED OR YOUR SOCIAL
SECURITY OR TAX IDENTIFICATION NUMBER IS NOT CERTIFIED WITH A FORM W-9, YOUR
ACCOUNT WILL BE SUBJECT TO BACK-UP WITHHOLDING WITHIN 60 DAYS.

Wire orders will be accepted only on a day on which the Funds and the Funds'
Transfer Agent are open for business. A wire purchase will not be considered
made until the wired money is received and the purchase is accepted by the Fund.
Any delays which may occur in wiring money, including delays which may occur in
processing by the banks, are not the responsibility of the Funds or the Funds'
Transfer Agent.

BY ACH. Shares of the Fund may be purchased by electronic transfer of funds via
Automated Clearing House (ACH) for non-IRA accounts. Complete the Telephone
Authorization section for ACH on the application, and the purchase will be made
immediately upon receipt of the application. Your bank account will be debited
for your initial purchase within 1-2 business days.

WHEN ORDERS ARE EFFECTIVE
Purchases made by mail will be effective at the net asset value per share next
determined after receipt of the purchase order in proper form.

Purchases transmitted by wire to the Funds and received prior to the close of
the New York Stock Exchange (NYSE), normally 3:00 p.m. Central time, will be
invested at the net asset value per share calculated for that day. If received
after this deadline, the purchase will be made at the net asset value next
calculated. You become a shareholder after declaration of any dividend on the
day on which the order is effective. Dividends begin to accrue after you become
a shareholder.

ADDITIONAL INVESTMENTS
BY MAIL. You may make subsequent purchases (minimum $100) by mailing the
reinvestment stub attached to your account confirmation statement or a letter of
instruction (providing your account number and the name(s) on the account)
together with a check made payable to the Fund.

BY WIRE. You may purchase additional shares by wiring funds. For wire
instructions, see the inside back cover of this prospectus. After you have
initiated the wire purchase through your bank, please notify the Funds that a
wire purchase is being made to your account.

BY ACH. You may purchase shares for non-IRA accounts via electronic transfer of
funds if you have selected this option in Section 6 of the application. If you
call the Funds prior to the close of the NYSE, normally 3:00 p.m. Central time,
your purchase will be effective at the net asset value that same day and your
bank account will be debited within 1-2 business days.

BY AUTOMATIC INVESTMENT PLAN. After your initial investment of $2,000 or more,
you can make automatic monthly purchases (on the 15th of the month) of $100 or
more. To use this option, you must complete the Automatic Investment Plan
section of the application. You can change the amount or terminate this option
by written notice to the Fund at any time.

OTHER PURCHASE INFORMATION
All purchases are subject to acceptance by authorized officers of the Funds and
are not binding until accepted. The Funds reserve the right to reject purchase
orders when, in the judgment of management, such rejection is in the best
interests of the Funds. At their discretion, the Funds may accept telephone
purchases and redemptions from a broker and/or a broker-dealer. Investors who
purchase or redeem shares through a broker and/or a broker-dealer may be charged
a transaction fee.

REDEMPTION OF FUND SHARES

You may redeem (sell) all or a portion of your shares at any time that the net
asset value is calculated. Shares will be redeemed at the net asset value per
share next determined after the request is received. A redemption may be more or
less than your cost depending on the market value of the Fund's securities. IF
YOU REQUEST A REDEMPTION AFTER A PURCHASE BY PERSONAL CHECK, E.G. NONGUARANTEED
FUNDS, THE FUND MAY DELAY SENDING YOUR REDEMPTION PROCEEDS UNTIL YOUR CHECK HAS
CLEARED (GOOD PAYMENT HAS BEEN COLLECTED), WHICH MAY TAKE SEVEN OR MORE DAYS.
YOU MAY AVOID THIS DELAY BY PURCHASING SHARES WITH A CERTIFIED CHECK OR BANK
WIRE OF FEDERAL FUNDS.

Each Fund may suspend redemption privileges or postpone the date of payment (1)
during any period that the New York Stock Exchange is closed other than
customary weekend or holiday closings, or when trading is restricted, as
determined by the Securities and Exchange Commission, (2) during any period when
an emergency exists, as determined by the Securities and Exchange Commission, as
a result of which it is not reasonably practical for the Fund to dispose of
securities owned by it or to fairly determine the value of its assets, and (3)
for such other periods as the Securities and Exchange Commission may permit.

BY MAIL. You may request a redemption by sending a written request in "good
order" to the Funds. "Good order" means that the request for redemption must
include the following:

1. A letter of instruction specifying the name of the Fund, account number and
number of shares or dollar amount to be redeemed, signed by all registered
owners exactly as their names appear on the account.

2. Other supporting legal documents, if required, in the case of estates,
trusts, guardianships, custodianships, corporations, pension and profit
sharing plans and other organizations.

Payment will generally be made within 7 days after receipt of a redemption
request in "good order". A request for redemption cannot be canceled or revoked.
A signature guarantee is required if you request a redemption to be made payable
to someone other than the registered owners and if you request the proceeds to
be sent to an address other than the registered address.

If you are uncertain of the requirements for redemption, write or call the Funds
at 800-332-5580 or 612-334-5888.

BY WIRE. If you desire to make a redemption by wire of Federal Funds, a written
request in "good order" must first be received by the Funds. Your request should
contain specific wire instructions including the bank to which the proceeds are
to be wired, its address and your account number. Shares will be redeemed at the
net asset value next determined after the redemption request is received in good
order. If the proceeds are wired to your account at a bank which is not a member
of the Federal Reserve System, there could be a delay in crediting the funds to
your bank account. You will be required to pay a charge for the wiring cost
(currently $8) which will be deducted from the balance of your account or from
the amount being wired if your account has been completely redeemed.

TELEPHONE REDEMPTION
You may redeem up to $50,000 per day by telephone if you have authorized this
option for your account. This limitation does not apply to omnibus accounts. For
purposes of this limitation, accounts with the same registration in different
Funds will be aggregated.

If you call the Funds prior to the close of the NYSE, normally 3:00 p.m. Central
time your redemption will be effective at the net asset value that same day. You
must complete the Telephone Redemption Authorization section of the application
to establish this option for each account for which you want this option. You
must obtain a signature guarantee(s) to add this option to an existing account.
The Fund will employ reasonable procedures to confirm that telephone
instructions are genuine, and including requiring that payments be made only to
the shareholder's address of record or the bank account designated on the
application and requiring certain means of telephonic identification. If the
Fund fails to employ such procedures, it may be liable for any losses suffered
by Fund shareholders as a result of unauthorized or fraudulent instructions.
During times of chaotic economic or market circumstances, a shareholder may have
difficulty reaching Norwest or the Funds by telephone. Consequently, an exchange
or redemption may be difficult to implement at those times.

BY MAIL. Telephone redemption proceeds can be mailed to your address of record.
If you wish to change your address or bank information and you have elected the
telephone rdemption option, a signature guarantee is necessary to make these
changes.

BY WIRE. Telephone redemption proceeds can be wired to your bank. Proceeds will
be wired to your bank account the next business day after you request a
telephone redemption.

BY ACH. Electronic transfer of funds via Automated Clearing House (ACH) is
available for redemption of shares for non-IRA accounts. Your bank account will
be credited within 1-2 business days after you request a telephone redemption.
To establish this option, complete the ACH section of the application.

SYSTEMATIC WITHDRAWAL PLAN
You may establish a Systematic Withdrawal Plan to receive periodic redemptions
of at least $100 on a monthly, quarterly, semi-annual or annual basis.
Systematic withdrawals may eventually exhaust your account. Each withdrawal
constitutes a redemption and any gain or loss realized must be recognized for
federal income tax purposes.

OTHER REDEMPTION INFORMATION
At the discretion of the Board of Directors, each Fund may involuntarily redeem
accounts which have a balance less than $2,000. Such accounts may be redeemed
after giving written notice to the registered owner of the account. If the
shareholder does not increase the amount of the account above $2,000 within 30
days, the Fund may send the shareholder a check for the redemption proceeds as
determined at the next calculated net asset value.

EXCHANGES

An exchange is made by redeeming shares of one Fund and using the proceeds to
buy shares of another SIT Fund. There is no charge for this service, but the
Funds reserve the right to charge a fee in the future. An exchange results in a
sale of shares for federal income tax purposes and you may realize either a
long-term or short-term capital gain or loss on the shares redeemed. Before
making an exchange, you should read the prospectus and consider the investment
objective of the Fund to be purchased.

An exchange may be done by telephone (subject to the same procedures for
telephone identification as telephone redemption above) or by written request to
the Funds. A written request must be signed by all registered owners of the
account. There is no charge for this service, but the Fund reserves the right to
charge a fee in the future. When you establish your account, the exchange
privilege will automatically be established unless you indicate that you do not
want it. If your exchange creates a new account, the new account ownership must
be identical and you must satisfy the minimum initial purchase requirement. You
may make an exchange to a new account or an existing account. There is a limit
of four exchanges out of each Fund per year per account. Exchanges may be made
only in states where allowed by law.

In addition, each Fund reserves the right to refuse exchanges if, in the
Adviser's judgment, the Fund would be unable to invest effectively in accordance
with its investment objectives and policies, or would otherwise potentially be
adversely affected. Exchanges may be restricted or refused if a Fund receives or
anticipates simultaneous orders affecting significant portions of the Fund's
assets. Although the Fund will attempt to give prior notice whenever it is
reasonably able to do so, it may impose these restrictions at any time. The
Funds reserve the right to terminate or modify the exchange privilege in the
future.

SYSTEMATIC EXCHANGE PLAN
If you wish to exchange fixed periodic amounts between Funds, you may establish
the Systematic Exchange Plan. You may exchange a predetermined amount from one
Fund to another Fund on the first business day of the month. An exchange may be
done monthly, or you may choose which months you wish to have the exchange made.
Systematic exchanges are subject to the same requirements as other exchanges.

DIVIDEND REINVESTMENT

The policy of the Small Cap Growth Fund, Growth Fund, Developing Markets Growth
Fund, and the International Growth Fund is to distribute an annual dividend from
its net investment income. The policy of the Growth & Income Fund and Balanced
Fund is to distribute quarterly dividends from its net investment income. Net
investment income includes dividends on stocks and interest earned on bonds or
other debt securities less operating expenses.

When any Fund sells portfolio securities, it may realize a gain or loss,
depending on whether it sells them for more or less than its cost. Net realized
capital gain, if any, will be distributed at least once annually by each Fund.

Income dividends and capital gain distributions are automatically reinvested in
additional shares at the net asset value per share on the distribution date.
Dividends may be automatically directed from one Fund to another Fund. You may
request a cash payment of dividends and/or capital gain distributions on the
application or by separate written notice to the Funds. Shareholders will
receive a confirmation statement reflecting the payment and reinvestment of
dividends. If cash payment is requested, a check normally will be mailed within
five business days after the payable date. If you withdraw your entire account,
all dividends accrued to the time of withdrawal, including the day of
withdrawal, will be paid at that time.

RETIREMENT ACCOUNTS

Taxes on current income can be deferred by investing in Keogh plans, Individual
Retirement Accounts (IRAs), Simplified Employee Pensions (SEPs), 401(k),
pension, profit-sharing, employee benefit, deferred compensation and other
qualified retirement plans. The federal tax law governing these tax-deferred
retirement plans must be complied with to avoid adverse tax consequences.

The Funds are available for your tax-deferred retirement plan with no minimum
investment requirements for initial or additional contributions. Such retirement
plans must have a qualified plan sponsor or trustee. The Adviser sponsors
prototype 401(k), profit sharing, and money purchase plans as well as IRA,
SEP-IRA and Keogh plans. You should contact the Adviser for specific plan
documentation. You should also consult your tax adviser before investing.

CUSTODIAN AND TRANSFER AGENT

Norwest Bank Minnesota, N.A., Sixth and Marquette, Minneapolis, MN, acts as
Custodian for each Fund pursuant to the terms of a Custodian Contract. The
Custodian holds all securities and cash, receives and pays for securities
purchased, delivers against payment for securities sold, receives and collects
income from investments and performs other administrative duties, all under the
supervision of officers of the Funds or the Adviser or Sub-Adviser. Morgan
Stanley Trust Company serves as sub-custodian for Developing Markets Growth Fund
and International Growth Fund and has engaged sub-custodian institutions in
various foreign countries in which such Fund's assets are custodied. For a
further discussion of foreign countries and institutions in which Developing
Markets Growth Fund or International Growth Fund's assets are custodied, see the
Statement of Additional Information.

Pursuant to the terms of a Transfer Agency Agreement with each Fund, Norwest
Bank is the transfer agent, dividend disbursing agent and accounting services
agent for each Fund. Norwest Bank processes purchase orders, redemption orders
and all related shareholder accounting services.

MANAGEMENT

BOARD OF DIRECTORS
The Growth Fund, Growth & Income Fund, and the corporate issuer of the
International Growth Fund, Balanced Fund, Developing Markets Growth Fund, and
Small Cap Growth Fund have corporate officers and Boards of Directors. Pursuant
to Minnesota law, the Boards of Directors are responsible for the management of
the Funds and he establishment of the Fund policies. The officers of the Funds
manage the day-to-day operation of the Funds.

INVESTMENT ADVISER
Sit Investment Associates, Inc. (the Adviser") was incorporated in Minnesota on
July 14, 1981 and serves as the Funds' Investment Adviser pursuant to Investment
Management Agreements (the "Agreements"). In addition to the Funds, the Adviser
together with its affiliates (including the Sub-Adviser) currently manage public
and private accounts with combined assets of approximately $4.5 billion. The
address of the Adviser is 4600 Norwest Center, Minneapolis, Minnesota 55402.

The Investment Management Agreement between the Adviser and each of Growth Fund
and Growth & Income Fund provides that the Fund is obligated to pay the Adviser
a monthly fee based on average daily net assets ("net assets") on an annual
basis as follows:

1.00% first $30 million of net assets
.75% next $70 million of net assets
.50% excess of $100 million of net assets

The Adviser is obligated to reimburse each of Growth Fund and Growth & Income
Fund for all of the Fund's expenses except for extraordinary expenses (as
designated by a majority of each Fund's disinterested directors), interest,
brokerage commissions and other transaction charges relating to each Fund's
investing activities (which expenses are the sole responsibility of the Fund,
irrespective of amount), which exceed, on an annual basis, an amount equal to
1.50% of the first $30 million of the Fund's average daily net assets and 1.00%
of average daily net assets in excess of $30 million. Subject to this expense
limitation, each of Growth Fund and Growth & Income Fund is responsible for all
of its expenses to the extent not specifically assumed by the Adviser under the
Agreement. For the period October 1, 1993 through December 31, 1996, the Adviser
has voluntarily agreed to absorb expenses that are otherwise payable by the
Growth & Income Fund which exceed 1.00% of the Fund's average daily net assets.

Under each of Small Cap Growth Fund's, Balanced Fund's, Developing Markets
Growth Fund's and International Growth Fund's Investment Management Agreement,
each Fund is obligated to pay the Adviser a flat monthly fee based on the
average daily net assets ("net assets") on an annual basis as follows:

Small Cap Growth Fund 1.50% of net assets
Balanced Fund 1.00% of net assets
Developing Markets Growth Fund 2.00% of net assets
International Growth Fund 1.85% of net assets

Under each Funds' Agreements, the Adviser has agreed to bear all of the Funds'
expenses, except for extraordinary expenses (as designated by a majority of the
Funds' disinterested directors), interest, brokerage commissions and other
transaction charges relating to the investing activities of the Fund. Investment
advisory fees in excess of .75% per year of a fund's average daily net assets
are considered to be higher than investment advisory fees paid by most other
investment companies; however, the Adviser has either agreed to pay or reimburse
each Fund for all or certain of their other operating expenses as more fully set
forth above.

For the period January 1, 1994 through December 31, 1996, the Adviser has
voluntarily agreed to limit the management fee (and, thereby, all Fund expenses,
except those not payable by the Adviser as set forth above) of the International
Growth Fund to 1.50% of the Fund's average daily net assets. After December 31,
1996, this voluntary fee waiver may be discontinued by the Adviser in its sole
discretion.

PORTFOLIO MANAGEMENT
All investment decisions of all Funds are made by committee. Eugene C. Sit is
the Chief Investment Officer of the Adviser and oversees all investment
decisions for the Funds. Additionally, he is the Senior Portfolio Manager for
Small Cap Growth, Growth, Balanced, Developing Markets Growth and International
Growth Funds. Peter L. Mitchelson is the Senior Portfolio Manager for the
Balanced and Growth & Income Funds and has held that office since the inception
of the Funds.

Sit/Kim International Investment Associates, Inc. (the "Sub-Adviser") is the
sub-adviser for the Developing Markets Growth Fund and International Growth
Fund. Andrew B. Kim is President and Chief Investment Officer of the
Sub-Adviser. Eugene C. Sit is the Sub-Adviser's CEO and serves on its Investment
Policy Committee.

THE SUB-ADVISER

The Sub-Adviser currently serves as sub-adviser for the Developing Markets
Growth Fund and International Growth Fund under a Sub-Advisory Agreement with
the Adviser. The Sub-Adviser was incorporated in Minnesota on February 9, 1989
and is a majority owned subsidiary of the Adviser. The Sub-Adviser is an
international investment management firm and currently manages approximately
$450 million in separate accounts. The Sub-Adviser has offices in New York and
San Francisco and has consulting relationships in Beijing, Manila, Hong Kong and
Seoul. As compensation for its services under the Sub-Advisory Agreement, absent
voluntary fee waiver, the Adviser pays the Sub-Adviser fees for the
International Growth Fund generally equal on an annual basis to .75% on the
first $100 million of the Fund's average daily net assets, .50% on the next $100
million of average daily net assets and .40% of average daily net assets in
excess of $200 million, and for the Developing Markets Growth Fund generally
equal on an annual basis to .75% on the first $100 million of the Fund's average
daily net assets, .60% on the next $100 million of average daily net assets and
.50% of average daily net assets in excess of $200 million as more fully set
forth in the Statement of Additional Information.

DISTRIBUTOR

The Funds have entered into Underwriting and Distribution Agreements with SIA
Securities Corp. ("Securities"), an affiliate of the Adviser, pursuant to which
Securities will act as the Funds' principal underwriter. Securities will market
the Funds' shares only to certain institutional investors and all other sales of
the Funds' shares will be made by each Fund. The Adviser will pay all expenses
of Securities in connection with such services and Securities is otherwise not
entitled to any other compensation under the Underwriting and Distribution
Agreement. The Funds will incur no additional fees or expenses in connection
with the Underwriting and Distribution Agreement.

TAXES

Each Fund qualified as a regulated investment company under Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code"), during its last taxable
year and intends to continue to do so during the current taxable year in order
to be relieved of payment of federal income taxes on amounts distributed to
shareholders (both net investment income and net realized capital gains).

Dividends paid from each Fund's net investment taxable income and net short-term
capital gains will be taxable to shareholders as ordinary income, whether or not
the shareholder elects to have such dividends automatically reinvested in
additional shares. Dividends paid by Developing Markets Growth Fund and
International Growth Fund will not be eligible for the 70% reduction for
dividends received by corporations if, as expected, none of those Funds' income
consists of dividends paid by U.S. corporations.

Each Fund distributes annually any net realized capital gains. Dividends paid
from the net capital gains of each Fund and designated as capital gain dividends
will be taxable to shareholders as long-term capital dividends, regardless of
the length of time for which they have held their shares in the Fund.

Gain or loss realized upon the sale of shares in each Fund will be treated as
capital gain or loss, provided that the shares represented a capital asset in
the hands of the shareholder. Such gain or loss will be long-term gain or loss
if the shares were held for more than one year.

After every distribution from each of the Funds, the value of a share drops by
the amount of the distribution. If you purchase shares shortly before the record
date of a dividend or capital gain distribution, you will pay the full price for
the shares ("buying a dividend") and then receive some portion of the price back
as a taxable dividend or capital gain distribution. Each Fund's unrealized
appreciation on investments, undistributed net investment income and accumulated
net realized gains or losses are contained in the annual and semi-annual reports
in the Statements of Changes in Net Assets.

The Developing Markets Growth Fund and International Growth Fund may be required
to pay withholding and other taxes imposed by foreign countries, generally at
rates from 10% to 40%, which would reduce the Funds' investment income. Tax
conventions between certain countries and the United States may reduce or
eliminate such taxes. If at the end of the Funds' fiscal year more than 50% of
its total assets consist of securities of foreign corporations, the Funds will
be eligible to file elections with the Internal Revenue Service pursuant to the
Funds may "pass-through" to shareholders the amount of foreign income taxes paid
by the Funds with respect to their direct holdings of stock or securities in
foreign corporations. If this election is made, shareholders of the Funds will
be required to include their respective pro rata portions of such withholding
taxes as gross income, treat such amounts as foreign taxes paid by them, and
deduct such amounts in computing their taxable incomes or, alternatively, use
them as foreign tax credits against their federal income taxes. The Funds will
make such an election only if it deems such election to be in the best interests
of its shareholders.

Pursuant to the Code, distributions of net investment income by the Funds to a
shareholder who, as to the U.S., is a nonresident alien individual, nonresident
alien fiduciary of a trust or estate, foreign corporation, or foreign
partnership (a "foreign shareholder") will be subject to U.S. withholding tax
(at a rate of 30% or lower treaty rate) Withholding will not apply if a dividend
paid by the Funds to a foreign shareholder is "effectively connected" with a
U.S. trade or business of such shareholder, in which case the reporting and
withholding requirements applicable to U.S. citizens or domestic corporations
will apply. Distributions of net long-term capital gains are not subject to tax
withholding but, in the case of a foreign shareholder who is a nonresident alien
individual, such distributions ordinarily will be subject to U.S. income tax at
a rate of 30% if the individual is physically present in the U.S. for more than
182 days during the taxable year. The Funds will report annually to its
shareholders the amount of any withholding.

Each Fund is required by federal law to withhold 31% of reportable payments
(which may include dividends, capital gain distributions and redemptions) paid
to certain accounts whose owners have not complied with IRS regulations. In
connection with this withholding requirement, you will be asked to certify on
your account application that the social security or taxpayer identification
number you provide is correct and that you are not subject to 31% backup
withholding for previous underreporting to the IRS.

This is a general summary of the federal tax law in effect as of the date of
this prospectus. See the Statement of Additional Information for further
details. You may also be subject to state and local taxes, depending on the laws
of your home state and locality. Information about the tax status of each year's
dividends and distributions will be mailed to shareholders annually.

CAPITALIZATION AND VOTING RIGHTS

Each of the Funds (or the corporate issuer of their shares) is organized as a
Minnesota corporation. Each of the Funds (or its corporate issuer) has only one
class of shares -- common shares. The Growth Fund and the Growth & Income Fund,
each have one series of common shares consisting of ten billion shares with a
par value of one-tenth of one cent per share. The corporate issuer of
International Growth Fund, Balanced Fund, Developing Markets Growth Fund, and
Small Cap Growth Fund, (SIT Mutual Funds, Inc.) is organized as a series fund
with one trillion shares of common stock authorized and a par value of one tenth
of one cent per share. Ten billion of these shares have been designated by the
Board of Directors for each series: Series A Common Shares, which represent
shares of International Growth Fund; Series B Common Shares, which represent
shares of Balanced Fund; Series C Common Shares which represent shares of
Developing Markets Growth Fund; Series D Common Shares which represent shares of
Small Cap Growth Fund. The Board of Directors of SIT Mutual Funds, Inc. is
empowered to issue other series of common stock without shareholder approval.

The shares of each Fund are nonassessable, can be redeemed or transferred and
have no preemptive or conversion rights. All shares have equal, noncumulative
voting rights which means that the holders of more than 50% of the shares voting
for the election of Directors can elect all of the Directors if they choose to
do so. A shareholder is entitled to one vote for each full share (and a
fractional vote for each fractional share) then registered in his/her name on
the books of each Fund. The shares of each Fund are of equal value and each
share is entitled to a pro rata portion of the income dividends and any capital
gain distributions.

ADDITIONAL INFORMATION

Under Minnesota law, the Board of Directors of each Fund has overall
responsibility for managing the Fund, in good faith, in a manner reasonably
believed to be in the best interests of each Fund, and with the care an ordinary
prudent person would exercise in similar circumstances.

This prospectus omits certain of the information contained in the Registration
Statements filed with the Securities and Exchange Commission, Washington, D.C.
20549. Items of information which are omitted may be obtained from the
Securities and Exchange Commission upon payment of the fees prescribed by the
rules and regulations of the Commission.

In the opinion of the staff of the Securities and Exchange Commission, the use
of this combined Prospectus may possibly subject all Funds to a certain amount
of liability for any losses arising out of any statement or omission in this
prospectus regarding a particular Fund. In the opinion of the Funds' management,
however, the risk of such liability is not materially increased by the use of a
combined prospectus.

Directors:

Eugene C. Sit, CFA
Peter L. Mitchelson, CFA
William E. Frenzel
John E. Hulse
Sidney L. Jones
Donald W. Phillips

Director Emeritus:

Melvin C. Bahle

Officers:

Eugene C. Sit, CFA Chairman
Peter L. Mitchelson, CFA Vice Chairman
Mary K. Stern President
Erik S. Anderson, CFA (1) Vice President - Investments
Ronald D. Sit (2) Vice President - Investments
Paul E. Rasmussen Vice President & Treasurer
Michael P. Eckert Vice President - Group Manager
Randy C. Henze, CFA Vice President - Group Manager
Michael J. Radmer Secretary
Parnell M. Kingsley Assistant Secretary
Carla J. Rose Assistant Secretary
Debra A. Sit, CFA Assistant Treasurer

(1) Growth Fund only
(2) Growth & Income Fund only

ADDRESS AND TELEPHONE REFERENCE:

REGULAR MAIL EXPRESS OR CERTIFIED MAIL

SIT Mutual Fund Group SIT Mutual Fund Group
c/o Norwest Bank Minnesota, N.A. 4600 Norwest Center
NW 8638 90 S. 7th Street
P. O. Box 1450 Minneapolis, MN 55402-4130
Minneapolis, MN 55485-8638

SIT INVESTOR SERVICES

To speak with a Client Service Representative:
1-800-332-5580 or 612-334-5888

WIRE INSTRUCTIONS To wire money for a purchase:

Norwest Bank Minnesota, N.A.
ABA #091-000019
SIT (name of Fund)
DDA #10-84-306
For Further Credit: (Shareholder name)
Account Number: (Shareholder account number)

PART B

STATEMENT OF ADDITIONAL INFORMATION

SIT SMALL CAP GROWTH FUND
SIT GROWTH FUND, INC.
SIT GROWTH & INCOME FUND, INC.
SIT BALANCED FUND

SIT DEVELOPING MARKETS GROWTH FUND
SIT INTERNATIONAL GROWTH FUND

NW 8638 - P.O. Box 1450
Minneapolis, Minnesota 55485-8638
612-334-5888
800-332-5580

This Statement of Additional Information is not a prospectus. It should be read
in conjunction with the Funds' prospectus which may be obtained from the Funds
without charge by contacting the Funds at NW 8638 - P.O. Box 1450, Minneapolis,
Minnesota 55485-8638. Telephone: (612) 334-5888 or (800) 332-5580. The date of
this Statement of Additional Information is November 1, 1995, and it is to be
used with the Funds' prospectus dated November 1, 1995.

TABLE OF CONTENTS
Page
ADDITIONAL INVESTMENT RESTRICTIONS
Small Cap Growth Fund ........................................ 2
Growth Fund .................................................. 3
Growth & Income Fund ......................................... 3
Balanced Fund ................................................ 4
Developing Markets Growth Fund ............................... 5
International Growth Fund .................................... 5
DIVERSIFICATION ................................................... 6
SECURITIES IN WHICH THE BALANCED FUND MIGHT INVEST ................ 7
SECURITIES IN WHICH THE DEVELOPING MARKETS GROWTH FUND MIGHT INVEST 9
SECURITIES IN WHICH THE INTERNATIONAL GROWTH FUND MIGHT INVEST .... 9
INTERNATIONAL RISK CONSIDERATIONS ................................. 10
COMMON POLICIES ................................................... 11
COMPUTATION OF NET ASSET VALUE .................................... 17
CALCULATION OF PERFORMANCE DATA ................................... 17
MANAGEMENT ........................................................ 18
INVESTMENT ADVISER ................................................ 20
DISTRIBUTOR ....................................................... 23
BROKERAGE ......................................................... 23
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES ............... 25
TAXES ............................................................. 26
FINANCIAL STATEMENTS .............................................. 27
OTHER INFORMATION ................................................. 28
LIMITATION OF DIRECTOR LIABILITY .................................. 30
APPENDIX A - BOND AND COMMERCIAL PAPER RATINGS .................... 32

ADDITIONAL INVESTMENT RESTRICTIONS

The investment objectives, policies and restrictions of the Funds are set forth
in the Prospectus. Certain additional investment information is set forth below.
All capitalized terms not defined herein have the same meanings as set forth in
the Prospectus. In addition to the restrictions in the prospectus, each Fund is
subject to other restrictions which are fundamental and may not be changed
without shareholder approval. Shareholder approval, as defined in the Investment
Company Act of 1940, means the lesser of the vote of (a) 67% of the shares of a
Fund at a meeting where more than 50% of the outstanding shares of the Fund are
present in person or by proxy or (b) more than 50% of the outstanding shares of
a Fund. A percentage limitation must be met at the time of investment and a
later deviation resulting from a change in values or net assets will not be a
violation.

SMALL CAP GROWTH FUND

The Fund is subject to the following fundamental investment restrictions. The
Fund will not:

1. Purchase securities of any issuer (other than obligations of, or guaranteed
by, the U.S. government or its agencies or instrumentalities), if as a
result, more than 5% of the Fund's net assets would be invested in
securities of that issuer. This restriction is limited to 75% of the Fund's
net assets;

2. Purchase or sell commodities or commodity futures, provided that this
restriction does not apply to financial futures contracts or options
thereon;

3. Invest in real estate (including real estate limited partnerships),
although it may invest in securities which are secured by or represent
interests in real estate;

4. Make loans except by (a) purchasing publicly distributed debt securities
such as bonds, debentures and similar securities in which the Fund may
invest consistent with its investment policies, and (b) by lending its
portfolio securities to broker-dealers, banks and other institutions in an
amount not to exceed 33-1/3% of its total net assets if such loans are
secured by collateral equal to 100% of the value of the securities lent;

5. Underwrite the securities of other issuers;

6. Borrow money, except for temporary or emergency purposes but not for the
purchase of investments, and then not in excess of 5% of the Fund's net
assets; or pledge the Fund's securities or receivables, transfer, assign or
otherwise encumber them in an amount exceeding the amount of the borrowing
secured thereby;

7. Invest in exploration or development for oil, gas or other minerals
(including mineral leases), although it may invest in the securities of
issuers which deal in or sponsor such activities; or

8. Issue senior securities as defined in the Investment Company Act of 1940.

The following investment restrictions of the Fund are not fundamental. The Fund
will not:

1. Purchase on margin or sell short except to obtain short-term credit as may
be necessary for the clearance of transactions and it may make margin
deposits in connection with futures contracts;

2. Except as part of a merger, consolidation, acquisition or reorganization,
invest more than 5% of the value of its total assets in the securities of
any one investment company or more than 10% of the value of its total
assets, in the aggregate, in the securities of two or more investment
companies, or acquire more than 3% of the total outstanding voting
securities of any one investment company;

3. Purchase or retain securities of any issuer if to the knowledge of the
Fund, officers and directors of either the Fund or its investment adviser
beneficially owning more than 0.5% of such securities together own more
than 5% of such securities;

4. Invest more than 10% of its net assets in securities of issuers which, with
their predecessors have a record of less than three years continuous
operation. Securities of such issuers will not be deemed to fall within
this limitation if they are guaranteed by an entity in continuous operation
for more than three years;

5. Invest for the purpose of exercising control or management;

6. Enter into reverse repurchase agreements;

7. Invest more than 15% of its net assets collectively in all types of
illiquid securities;

8. Invest in more than 10% of the outstanding voting securities of any one
issuer;

9. Purchase more than 10% of any class of securities of any issuer except
securities issued or guaranteed by the U.S. government, its agencies or
instrumentalities. All debt securities and all preferred stocks are each
considered as one class. This restriction is limited to 75% of the Fund's
net assets; or

10. Invest more than 5% of the Fund's net assets in warrants (valued at lower
of cost or market) including a maximum of 2% which are not listed on the
New York or American Stock Exchanges. For this purpose, warrants acquired
by the Fund in units or attached to other securities will be deemed to be
without value.

Additional restrictions of the Fund which are not fundamental provide that the
Fund may not engage in arbitrage transactions or write unsecured put options but
may write fully covered call options. The Fund may purchase put and call options
provided that the aggregate premiums paid for all such options do not exceed 5%
of the Fund's total assets.

GROWTH FUND AND GROWTH & INCOME FUND

The Growth Fund and Growth & Income Fund are subject to the following
fundamental investment restrictions. The Funds will not:

2. Purchase more than 10% of any class of securities of any issuer except
securities issued or guaranteed by the U.S. government, its agencies or
instrumentalities. All debt securities and all preferred stocks are each
considered as one class. This restriction is limited to 75% of the Fund's
net assets;

3. Invest more than 10% of the Fund's net assets in securities of companies
which have (with their predecessors) a record of less than five years
continuous operation;

5. Borrow money, except for temporary or emergency purposes but not for the
purchase of investments, and then not in excess of 5% of the Fund's net
assets; or pledge the Fund's securities or receivables, transfer, assign or
otherwise encumber them in an amount exceeding the amount of the borrowing
secured thereby;

6. Invest more than 5% of the Fund's net assets in warrants (valued at lower
of cost or market) including a maximum of 2% which are not listed on the
New York or American Stock Exchanges. For this purpose, warrants acquired
by the Fund in units or attached to other securities will be deemed to be
without value;

7. Purchase on margin or sell short except to obtain short-term credit as may
be necessary for the clearance of transactions;

8. Concentrate more than 25% of its net assets in any one industry, provided
that (i) there shall be no limitation on the purchase of obligations issued
or guaranteed by the U.S. government, its agencies or instrumentalities and
(ii) utility companies will be classified according to their services, for
example, water, gas, electric and communications, and each will be
considered a separate industry;

9. Purchase or retain the securities of any issuer if, in total, the holdings
of all officers and directors of the Fund and of its investment adviser,
who individually own beneficially more than 0.5% of such securities,
together own more than 5% of such securities;

10. Invest for the purpose of controlling management of any company;

11. Invest in commodities or commodity futures contracts or in real estate,
although it may invest in securities which are secured by interests in real
estate and in securities of companies which invest or deal in real estate;

12. Invest in exploration or development for oil, gas or other minerals,
although it may invest in the securities of issuers which deal in or
sponsor such activities;

13. Except as part of a merger, consolidation, acquisition or reorganization,
invest more than 5% of the value of its total assets in the securities of
any one investment company or more than 10% of the value of its total
assets, in the aggregate, in the securities of two or more investment
companies, or acquire more than 3% of the total outstanding voting
securities of any one investment company;

14. Underwrite the securities of other issuers;

15. Issue senior securities as defined in the Investment Company Act of 1940;

16. Invest more than 15% of its net assets collectively in all types of
illiquid securities.

Additional restrictions of the Growth Fund and Growth & Income Fund which are
not fundamental provide that the Funds may not engage in arbitrage transactions
or write unsecured put options but may write fully covered call options. These
Funds may purchase put and call options provided that the aggregate premiums
paid for all such options do not exceed 5% of each Fund's net assets.

BALANCED FUND

The Fund is subject to the following fundamental investment restrictions. The
Fund will not:

2. Purchase or sell commodities or commodity futures, provided that this
restrictions does not apply to financial futures contracts or options
thereon;

3. Invest in real estate (including real estate limited partnerships),
although it may invest in securities which are secured by or represent
interests in real estate;

5. Underwrite the securities of other issuers;

7. Invest in exploration or development for oil, gas or other minerals
(including mineral leases), although it may invest in the securities of
issuers which deal in or sponsor such activities;

8. Issue senior securities as defined in the Investment Company Act of 1940;
and

The following investment restrictions of the Fund are not fundamental. The Fund
will not:

1. Purchase on margin or sell short except to obtain short-term credit as may
be necessary for the clearance of transactions and it may make margin
deposits in connection with futures contracts;

3. Purchase or retain securities of any issuer if to the knowledge of the
Fund, officers and directors of either the Fund its investment adviser
beneficially owning more than 0.5% of such securities together own more
than 5% of such securities;

5. Invest for the purpose of exercising control or management;

6. Enter into reverse repurchase agreements;

7. Invest more than 15% of its net assets collectively in all types of
illiquid securities;

8. Invest in more than 10% of the outstanding voting securities of any one
issuer; or

DEVELOPING MARKETS GROWTH FUND

The Fund is subject to the following restrictions which are fundamental. The
Fund will not:

2. Purchase or sell commodities or commodity contracts, provided that this
restriction does not apply to financial futures contracts or options
thereon;

3. Invest in real estate (including real estate limited partnerships),
although it may invest in securities which are secured by or represent
interests in real estate;

5. Underwrite the securities of other issuers;

7. Invest in exploration or development for oil, gas or other minerals
(including mineral leases), although it may invest in the securities of
issuers which deal in or sponsor such activites; or

8. Issue senior securities as defined by the Investment Company Act of 1940.

The following investment restrictions of the Fund are not fundamental and may be
changed by the Board of Directors of the Fund. The Fund will not:

1. Purchase on margin or sell short except to obtain short-term credit as may
be necessary for the clearance of transactions and it may make margin
deposits in connection with futures contracts;

3. Purchase or retain the securities of any issuer if, to the Fund's
knowledge, those holdings of all officers and directors of the Fund or its
affiliates, who individually own beneficially more than 0.5% of such
securities, together own more than 5% of such securities;

4. Invest more than 5% of its net assets in securities of companies which have
(with their predecessors) a record of less than three years' continuous
operation;

5. Invest for the purpose of exercising control or management;

6. Invest more than 5% of the Fund's net assets in warrants (valued at lower
of cost or market) including a maximum of 2% which are not listed on the
New York Stock Exchange, American Stock Exchange or a recognized foreign
exchange. For this purpose, warrants acquired by the Fund in units or
attached to other securities will be deemed to be without value;

7. Enter into reverse repurchase agreements;

8. Invest more than 15% of its net assets collectively in all types of
illiquid securities; or

9. Purchase more than 10% of any class of securities of any issuer except
securities issued or guaranteed by the U.S. government, its agencies or
instrumentalities. All debt securities and all preferred stocks are
considered as one class. This restriction is limited to 75% of the Fund's
net assets.

INTERNATIONAL GROWTH FUND

The Fund is subject to the following fundamental investment restrictions. The
Fund will not:

3. Invest more than 5% of the Fund's net assets in securities of companies
which have (with their predecessors) a record of less than three years
continuous operation;

7. Purchase on margin or sell short except to obtain short-term credit as may
be necessary for the clearance of transactions;

8. Concentrate more than 25% of its net assets in any one industry, provided
that there shall be no limitation on the purchase of obligations issued or
guaranteed by the U.S. government, its agencies or instrumentalities;

9. Purchase or retain the securities of any issuer if, to the Fund's
knowledge, those holdings of all officers and directors of the Fund or its
affiliates, who individually own beneficially more than 0.5% of such
securities, together own more than 5% of such securities;

10. Invest for the purpose of controlling management of any company;

11. Invest in commodities or commodity futures contracts provided; however,
that the entering into of a foreign currency contract shall not be
prohibited by this restriction;

12. Invest in real estate or limited partnerships with assets invested in real
estate, although the Fund may invest in securities which are secured by
interests in real estate and in securities of companies which invest or
deal in real estate;

13. Invest in exploration or development for oil, gas or other minerals,
although it may invest in the securities of issuers which deal in or
sponsor such activities;

14. Invest more than 15% of its net assets collectively in all types of
illiquid securities;

15. Except as part of a merger, consolidation, acquisition, or reorganization,
invest more than 5% of the value of its total assets in the securities of
any one investment company or more than 10% of the value of its total
assets, in the aggregate, in the securities of two or more investment
companies, or acquire more than 3% of the total outstanding voting
securities of any one investment company;

16. Underwrite the securities of other issuers;

17. Issue senior securities as defined in the Investment Company Act of 1940;

18. Modify the Fund's investment objective.

DIVERSIFICATION

As a fundamental policy (in addition to the fundamental policies and
restrictions set forth in the Prospectus and this Statement of Additional
Information), each Fund intends to operate as a "diversified" management
investment company, as defined in the Investment Company Act of 1940, as
amended. A "diversified" investment company means a company which meets the
following requirements: At least 75% of the value of the company's total assets
is represented by cash and cash items (including receivables), "Government
Securities", securities of other investment companies, and other securities for
the purposes of this calculation limited in respect of any one issuer to an
amount not greater in value than 5% of the value of the total assets of such
management company and to not more than 10% of the outstanding voting securities
of such issuer. "Government Securities" means securities issued or guaranteed as
to principal or interest by the United States, or by a person controlled or
supervised by and acting as an instrumentality of the Government of the United
States pursuant to authority granted by the Congress of the United States; or
certificates of deposit for any of the foregoing. Additionally, as set forth
above, each of the Funds has adopted certain restrictions that are more
restrictive than the policies set forth in this paragraph.

SECURITIES IN WHICH THE BALANCED FUND MIGHT INVEST

MORTGAGE-BACKED SECURITIES
The mortgage-backed securities in which the Fund invests provide funds for
mortgage loans made to residential home buyers. These include securities which
represent interests in pools of mortgage loans made by lenders such as savings
and loan institutions, mortgage banks, commercial banks and insurance companies.
Pools of mortgage loans are assembled for sale to investors such as the Fund by
various private, governmental and government-related organizations.

Interests in pools of mortgage-backed securities differ from other forms of debt
securities, which normally provide for periodic payment of interest in fixed
amounts with principal payments at maturity or specified call dates.
Mortgage-backed securities provide monthly payments which consist of both
interest and principal payments to the investor. In effect, these payments are a
"pass-through" of the monthly payments made by the individual borrowers on their
residential mortgage loans, net of any fees paid to the issuer or guarantor of
such securities. Additional payments are caused by repayments of principal
resulting from the sale of the underlying residential property, refinancing or
foreclosure, net of fees or costs which may be incurred. Some mortgage-backed
securities, i.e., GNMA's, are described as "modified pass-through." These
securities entitle the holders to receive all interest and principal payments
owed on the mortgages in the pool, net of certain fees, regardless of whether or
not the mortgagors actually make the payments.

The principal government guarantor of mortgage-backed securities is the
Government National Mortgage Association ("GNMA"). GNMA is a wholly-owned U.S.
government corporation within the Department of Housing and Urban Development.
GNMA is authorized to guarantee, with the full faith and credit of the U.S.
government, the timely payment of principal and interest on securities issued by
approved institutions and backed by pools of FHA-insured or VA-guaranteed
mortgages.

Residential mortgage loans are pooled by the Federal Home Loan Mortgage
Corporation ("FHLMC"). FHLMC is a corporate instrumentality of the U.S.
government and was created by Congress in 1970 for the purpose of increasing the
availability of mortgage credit for residential housing. Its stock is owned by
the twelve Federal Home Loan Banks. FHLMC issues Participation Certificates
("PC's") which represent interest in mortgages from FHLMC's national portfolio.
FHLMC guarantees the timely payment of interest and ultimate collection of
principal, however, PC's are not backed by the full faith and credit of the U.S.
government.

The Federal Mortgage Association ("FNMA") is a government sponsored corporation
owned entirely by private stockholders. It is subject to general regulation by
the Secretary of Housing and Urban Development. FNMA purchases residential
mortgages from a list of approved seller/services which include state and
federally-chartered savings and loan associations, mutual savings banks,
commercial banks and credit unions and mortgage banks. Pass-through securities
issued by FNMA are guaranteed as to timely payment of principal and interest by
FNMA, but are not backed by the full faith and credit of the U.S. government.

The Federal Housing Administration ("FHA") was established by Congress in 1934
under the National Housing Act. A major purpose of the Act was to encourage the
flow of private capital into residential financing on a protected basis. FHA is
authorized to insure mortgage loans, primarily those related to residential
housing. FHA does not make loans and does not plan or build housing. FHA Project
Pools are pass-through securities representing undivided interests in pools of
FHA-insured multi-family project mortgage loans.

The Fund may purchase securities which are insured but not issued or guaranteed
by the U.S. government, its agencies or instrumentalities. An example of such a
security is a housing revenue bond (the interest on which is subject to federal
taxation) issued by a state and insured by an FHA mortgage loan. The Fund has
not purchased this type of security and has no current intent to do so. This
type of mortgage is insured by FHA pursuant to the provisions of Section
221(d)(4) of the National Housing Act of 1934, as amended. After a mortgagee
files a claim for insurance benefits, FHA will pay insurance benefits up to 100%
of the unpaid principal amount of the mortgage (generally 70% of the amount is
paid within six months of the claim and the remainder within the next six
months). The risks associated with this type of security are the same as other
mortgage securities -- prepayment and/or redemption prior to maturity, loss of
premium (if paid) if the security is redeemed prior to maturity and fluctuation
in principal value due to an increase or decrease in interest rates.

The average life of pass-through pools varies with the maturities of the
underlying mortgage instruments. In addition, the pool's term may be shortened
by unscheduled or early payments of principal and interest on the underlying
mortgages. The occurrence of mortgage prepayment is affected by factors
including the level of interest rates, general economic conditions, the location
and age of the mortgage and other social and demographic conditions.

As prepayment rates of individual pools vary widely, it is not possible to
accurately predict the average life of a particular pool. Mortgage pass-through
securities which receive regular principal payments have an average life less
than their maturity. The average life of mortgage pass-through investments will
typically vary from 1 to 18 years.

Yields on pass-through mortgage-backed securities are typically quoted based on
the maturity of the underlying instruments and the associated average life
assumption. Actual prepayment experience may cause the yield to differ from the
assumed average life yield. The compounding effect from reinvestments of monthly
payments received by the Fund will increase the yield to shareholders.

OTHER ASSET-BACKED SECURITIES
The Fund may invest in asset-backed securities that are backed by consumer
credit such as automobile receivables, and consumer credit card receivables.

MUNICIPAL SECURITIES
Municipal securities in which the Fund may invest include securities that are
issued by states, territories and possessions of the United States and the
District of Columbia and their agencies, instrumentalities and political
subdivisions. Tax-exempt municipal securities include municipal bonds, municipal
notes and municipal commercial paper. MUNICIPAL BONDS generally have maturities
at the time of issuance ranging from one to thirty years, or more. MUNICIPAL
NOTES are short-term and generally mature in three months to three years.
MUNICIPAL COMMERCIAL PAPER matures in one year or less.

The yields on municipal securities are dependent on a variety of factors,
including the general level of interest rates, the financial condition of the
issuer, general conditions of the tax-exempt securities market, the size of the
issue, the maturity of the obligation and the rating of the issue. Ratings are
general, and not absolute, standards of quality. Consequently, securities of the
same maturity, interest rate and rating may have different yields, while
securities of the same maturity and interest rate with different ratings may
have the same yield.

SECURITIES IN WHICH THE DEVELOPING MARKETS GROWTH FUND MIGHT INVEST

The Fund defines "developing markets" as those countries determined by the
Sub-Adviser (see "Investment Adviser") to have developing or emerging markets or
economies. Such countries will generally be defined as "emerging stock markets"
by the International Finance Corporation, demonstrate low- to middle-income
economies according to the International Bank for Reconstruction and Development
(the World Bank), or be listed in World Bank publications as developing.
Countries currently not considered as having "developing markets" presently
include: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany,
Ireland, Italy, Japan, the Netherlands, New Zealand, Norway, Spain, Sweden,
Switzerland, the United Kingdom, and the United States.

The countries in which the Fund may seek to invest include those listed below
and, unless otherwise prohibited herein, the countries listed as potential
investments for the International Growth Fund as well. The Fund is not obligated
and may not invest in all the countries listed; moreover the Fund may invest in
countries other than those listed below, when such investments are consistent
with the Fund's investment objectives and policies. The Fund will also not seek
to diversify investments among geographic regions or levels of economic
development in any particular country.

<S> <C> <C> <C> <C> <C> <C>
Pacific Basin: Bangladesh China Hong Kong India Indonesia Sousth Korea
Malaysia Pakistan Philippines Singapore Sri Lanka Taiwan
Thailand Vietnam +
Europe: Czech Rep. Greece Hungary + Poland Portugal
Latin America: Argentina Barbados Belize Bolivia Brazil Chile
Colombia Costa Rica Ecuador Jamaica Mexico Panama
Paraguay Peru Trinidad & Tobago Uruguay Venezuela
Africa: Botswana Egypt Ghana+ Ivory Coast + Kenya + Mauritius +
Morocco Namibia + Nigeria South Africa Swaziland + Tunisia
Zimbabwe
Other: Bermuda Cyprus + Israel Jordan Kuwait + Russia +
Turkey
</TABLE>

+ Indicates countries in which the Fund effectively may invest only
through investment funds. Such investments are subject to the
provisions of the Investment Company Act of 1940 relating to the
purchase of securities of investment companies. See "Additional
Investment Restrictions".

Investments in companies domiciled in developing market countries may be subject
to potentially higher risks than investments in developed countries. See
discussion of International Risks Considerations below.

SECURITIES IN WHICH THE INTERNATIONAL GROWTH FUND MIGHT INVEST

The countries in which the Fund will seek investments include those listed
below. The Fund is not obligated and may not invest in all the countries listed;
moreover the Fund may invest in countries other than those listed below, when
such investments are consistent with the Fund's investment objective and
policies.

<S> <C> <C> <C> <C> <C> <C>
Pacific Basin: Australia Hong Kong Indonesia Japan Malaysia New Zealand
Philippines Singapore South Korea Taiwan Thailand

Europe: Austria Belgium Denmark Finland France Germany
Greece Ireland Italy Luxembourg Netherlands Norway
Portugal Spain Sweden Switzerland United Kingdom
Other: Argentina Brazil Canada Chile Hungary + India +
Mexico Turkey Venezuela
</TABLE>

Under exceptional economic or market conditions abroad, the Fund may temporarily
invest all or a major portion of its assets in United States government
obligations or high grade debt obligations of companies incorporated in or
having their principal activities in the United States.

In certain countries, governmental restrictions and other limitations on
investment may affect the maximum percentage of equity ownership in any one
company. In addition, in some instances only special classes of securities may
be purchased by foreigners, and the market prices, liquidity, and rights with
respect to those securities may vary from shares owned by nationals. The Adviser
and Sub-Adviser are not aware at this time of the existence of any investment or
exchange control regulations which might substantially impair the operations of
the Fund as described in the Prospectus and this Statement of Additional
Information. Although restrictions may in the future make it undesirable to
invest in certain countries, the Adviser and Sub-Adviser do not believe that any
current repatriation restrictions would affect its decisions to invest in the
countries eligible for investment by the Fund. It should be noted, however, that
this situation could change at any time. The Fund has no intention of making any
significant investment in any country or stock market where the political or
economic situation might be considered by the Sub-Adviser to be at risk of
substantial or total loss because of such political or economic situation.

INTERNATIONAL RISK CONSIDERATIONS

Investors should consider carefully the substantial risks involved in securities
of companies and governments of foreign nations, which are in addition to the
usual risks inherent in domestic investments. There may be less publicly
available information about foreign companies comparable to the reports and
ratings published regarding companies in the United States. Foreign companies
are not generally subject to uniform accounting, auditing and financial
reporting standards, and auditing practices and requirements may not be
comparable to those applicable to United States companies. Many foreign markets
have substantially less volume than either the established domestic securities
exchanges or the OTC markets. Securities of some foreign companies are less
liquid and more volatile than securities of comparable United States companies.
Commission rates in foreign countries, which may be fixed rather than subject to
negotiation as in the United States, are likely to be higher. In many foreign
countries there is less government supervision and regulation of securities
exchanges, brokers and listed companies than in the United States and capital
requirements for brokerage firms are generally lower. Settlement of transactions
in foreign securities may, in some instances, be subject to delays and related
administrative uncertainties.

Investments in companies domiciled in developing market countries may be subject
to potentially higher risks than investments in developed countries. These risks
include (i) volatile social, political and economic conditions; (ii) the small
current size of the markets for such securities and the currently low or
nonexistent volume of trading, which result in a lack of liquidity and in
greater price volatility; (iii) the existence of national policies which may
restrict the Funds' investment opportunities, including restrictions on
investment in issuers or industries deemed sensitive to national interests; (iv)
foreign taxation; (v) the absence of developed structures governing private or
foreign investment or allowing for judicial redress for injury to private
property; (vi) the absence, until recently in certain developing market
countries, of a capital market structure or market-oriented economy; and (vii)
the possibility that recent favorable economic developments in certain
developing market countries may be slowed or reversed by unanticipated political
or social events in such countries.

The Funds endeavor to buy and sell foreign currencies on favorable terms. Some
price spread on currency exchange (to cover service charges) may be incurred,
particularly when the Funds change investments from one country to another or
when proceeds for the sale of shares in U.S. dollars are used for the purchase
of securities in foreign countries. Also, some countries may adopt policies
which would prevent the Funds from repatriating invested capital and dividends,
withhold portions of interest and dividends at the source, or impose other
taxes, with respect to the Funds' investments in securities of issuers of that
country. There also is the possibility of expropriation, nationalization,
confiscatory or other taxation, foreign exchange controls (which may include
suspension of the ability to transfer currency from a given country), default in
foreign government securities, political or social instability, or diplomatic
developments that could adversely affect investments in securities of issuers in
those nations.

The Funds may be affected either favorably or unfavorably by fluctuations in the
relative rates of exchange between the currencies of different nations, exchange
control regulations and indigenous economic and political developments.

While transactions in forward currency contracts, options, futures contracts and
options on futures contracts (i.e., "hedging positions") may reduce certain
risks, such transactions themselves entail certain other risks. Thus, while the
Funds may benefit from the use of hedging positions, unanticipated changes in
interest rates, securities prices or currency exchange rates may result in a
poorer overall performance for the Funds than if they had not entered into any
hedging positions. In the event of an imperfect correlation between a hedging
position and portfolio position which is intended to be protected, the desired
protection may not be obtained and the Funds may be exposed to risk of financial
loss.

Perfect correlation between the Funds' hedging positions and portfolio positions
may be difficult to achieve because hedging instruments in most developing
market countries are not yet available. In addition, it is not possible to hedge
fully or perfectly against currency fluctuations affecting the value of
securities denominated in foreign currencies because the value of such
securities is likely to fluctuate as a result of independent factors not related
to currency fluctuations.

The Board of Directors of the Funds considers at least annually the likelihood
of the impositions by any foreign government of exchange control restrictions
which would affect the liquidity of the Funds' assets maintained with custodians
in foreign countries, as well as the degree of risk from political acts of
foreign governments to which such assets may be exposed. The Board also
considers the degree of risk attendant to holding portfolio securities in
domestic and foreign securities depositories. See "Other Information".

COMMON POLICIES

SECURITIES LENDING
The lending of portfolio securities to broker-dealers, banks, and other
institutions may increase the average annual return to shareholders. Lending of
portfolio securities also involves certain risks to a Fund. As with other
extensions of credit, there are risks of delay in recovery of loaned securities,
or even loss of rights in collateral pledged by the borrower, should the
borrower fail financially. However, the Funds will only enter into loan
agreements with broker-dealers, banks, and other institutions which the Adviser
has determined are creditworthy. The Funds may also experience a loss if, upon
the failure of a borrower to return loaned securities, the collateral is not
sufficient in value or liquidity to cover the value of such loaned securities
(including accrued interest thereon). However, the borrower will be required to
pledge collateral which the custodian for a Fund's portfolio securities will
take into possession before any securities are loaned. Additionally, the
borrower may pledge only cash, securities issued or guaranteed by the U.S.
Government or its agencies and instrumentalities, certificate of deposit or
other high-grade, short-term obligations or interest-bearing cash equivalents as
collateral. There will be a daily procedure to ensure that the pledged
collateral is equal in value to at least 100% of the value of the securities
loaned. Under such procedure, the value of the collateral pledged by the
borrower as of any particular business day will be determined on the next
succeeding business day. If such value is less than 100% of the value of the
securities loaned, the borrower will be required to pledge additional
collateral. The risks of borrower default (and the resultant risk of loss to a
Fund) also are reduced by lending only securities for which a ready market
exists. This will reduce the risk that the borrower will not be able to return
such securities due to its inability to cover its obligation by purchasing such
securities on the open market.

To the extent that collateral is comprised of cash, a Fund will be able to
invest such collateral only in securities issued or guaranteed by the U.S.
Government or its agencies and instrumentalities and in certificates of deposit
or other high-grade, short-term obligations or interest-bearing cash
equivalents. If a Fund invests cash collateral in such securities, the Fund
could experience a loss if the value of such securities declines below the value
of the cash collateral pledged to secure the loaned securities. The amount of
such loss would be the difference between the value of the collateral pledged by
the borrower and the value of the securities in which the pledged collateral was
invested.

Although there can be no assurance that the risks described above will not
adversely affect a Fund, the Adviser believes that the potential benefits that
may accrue to a Fund as a consequence of securities lending will outweigh any
such increase in risk.

OBLIGATIONS OF, OR GUARANTEED BY, THE UNITED STATES GOVERNMENT, ITS AGENCIES OR
INSTRUMENTALITIES
Securities issued or guaranteed by the United States include a variety of
Treasury securities, which differ only in their interest rates, maturities and
dates of issuance. Treasury bills have a maturity of one year or less. Treasury
notes have maturities of one to ten years and Treasury bonds generally have
maturities of greater than ten years at the date of issuance.

Securities issued and or guaranteed by agencies of the U.S. government and
various instrumentalities which have been established or sponsored by the U.S.
government may or may not be backed by the "full faith and credit" of the United
States. In the case of securities not backed by the full faith and credit of the
United States, the investor must look principally to the agency issuing or
guaranteeing the obligation for ultimate repayment and may not be able to assert
a claim against the United States itself in the event the agency or
instrumentality does not meet its commitment.

Some of the government agencies which issue or guarantee securities are the
Department of Housing and Urban Development, the Department of Health and Human
Services, the Government National Mortgage Association, the Farmers Home
Administration, the Department of Transportation, the Department of Defense and
the Department of Commerce. Instrumentalities which issue or guarantee
securities include the Export-Import Bank, the Federal Farm Credit System,
Federal Land Banks, the Federal Intermediate Credit Bank, the Bank for
Cooperatives, Federal Home Loan Banks, the Federal National Mortgage Association
and the Federal Home Loan Mortgage Corporation.

OBLIGATIONS OF BANKS
Bank money instruments in which the Small Cap Growth Fund and the Balanced Fund
may invest include certificates of deposit, including variable rate certificates
of deposit, bankers' acceptances and time deposits. "Bank" includes commercial
banks, savings banks and savings and loan associations. Certificates of deposit
are generally short-term, interest-bearing negotiable certificates issued by
commercial banks or savings and loan associations against funds deposited in the
issuing institution. Variable rate certificates of deposit are certificates of
deposit on which the interest rate is periodically adjusted prior to their
stated maturity, usually at 30, 90 or 180 day intervals ("coupon dates"), based
upon a specified market rate, which is tied to the then prevailing certificate
of deposit rate, with some premium paid because of the longer final maturity
date of the variable rate certificate of deposit. As a result of these
adjustments, the interest rate on these obligations may be increased or
decreased periodically. Variable rate certificates of deposit normally carry a
higher interest rate than fixed rate certificates of deposit with shorter
maturities, because the bank issuing the variable rate certificate of deposit
pays the investor a premium as the bank has the use of the investors's money for
a longer period of time. Variable rate certificates of deposit can be sold in
the secondary market. In addition, frequently banks or dealers sell variable
rate certificates of deposit and simultaneously agree, either formally or
informally, to repurchase such certificates, at the option of the purchaser of
the certificate, at par on the coupon dates. In connection with the Fund's
purchase of variable rate certifies of deposit, it may enter into formal or
informal agreements with banks or dealers allowing the Fund to resell the
certificates to the bank or dealer, at the Fund's option. If the agreement to
repurchase is informal, there can be no assurance that the Fund would always be
able to resell such certificates. Before entering into any such transactions
governed by formal agreements, however, the Fund will comply with the provisions
of SEC Release 10666 which generally provides that the repurchase agreement must
be fully collateralized. With respect to variable rate certificates of deposit
maturing in 180 days or less from the time of purchase with interest rates
adjusted on a monthly cycle, the Fund uses the period remaining until the next
rate adjustment date for purposes of determining the average weighted maturity
of its portfolio. With respect to all variable rate instruments not meeting the
foregoing criteria, the Fund uses the remaining period to maturity for purposes
of determining the average weighted maturity of its portfolio until such time as
the Securities and Exchange Commission has determined otherwise.

A banker's acceptance is a time draft drawn on a commercial bank by a borrower
usually in connection with an international commercial transaction (to finance
the import, export, transfer or storage of goods). The borrower is liable for
payment as well as the bank, which unconditionally guarantees to pay the draft
at its face amount on the maturity date. Most acceptances have maturities of six
months or less and are traded in secondary markets prior to maturity.

Both domestic banks and foreign branches of domestic banks are subject to
extensive, but different, governmental regulations which may limit both the
amount and types of loans which may be made and interest rates which may be
charged. In addition, the profitability of the banking industry is largely
dependent upon the availability and cost of funds for the purpose of financing
lending operations under prevailing short-term debt conditions. General economic
conditions, as well as exposure to credit losses arising from possible financial
difficulties of borrowers, also play an important part in the operations of the
banking industry.

As a result of federal and state laws and regulations, domestic banks are, among
other things, generally required to maintain specified levels of reserves,
limited in the amount which they can loan to a single borrower, and are subject
to other regulations designed to promote financial soundness. Since the
portfolio may contain securities of foreign banks and foreign branches of
domestic banks, the Fund may be subject to additional investment risks that are
different in some respects from those incurred by a fund that invests only in
debt obligations of domestic banks.

The Fund only purchases certificates of deposit from savings and loan
institutions which are members of the Federal Home Loan Bank and are insured by
the Federal Savings and Loan Insurance Corporation. Such savings and loan
associations are subject to regulation and examination. Unlike most savings
accounts, certificates of deposit held by the Fund do not benefit materially
from insurance either from the Federal Deposit Insurance Corporation or the
Federal Savings and Loan Insurance Corporation. Certificates of deposit of
foreign branches of domestic banks are not covered by such insurance and
certificates of deposit of domestic banks purchased by the Fund are generally in
denominations far in excess of the dollar limitations on insurance coverage.

INTERNATIONAL BANK OBLIGATIONS
For the purposes of the Developing Markets Growth Fund's and International
Growth Fund's investment policies with respect to bank obligations, obligations
of foreign branches of U.S. banks and of foreign banks may be obligations of the
parent bank in addition to the issuing bank, or may be limited by the terms of a
specific obligation and by government regulation. As with investment in non-U.S.
securities in general, investments in the obligations of foreign branches of
U.S. banks and of foreign banks may subject the Funds to investment risks that
are different in some respects from those of investments in obligations of
domestic issuers. Although the Funds will typically acquire obligations issued
and supported by the credit of U.S. or foreign banks having total assets at the
time of purchase in excess of $1 billion, this $1 billion figure is not a
fundamental investment policy or restriction of the Fund. For the purposes of
calculation with respect to the $1 billion figure, the assets of a bank will be
deemed to include the assets of its U.S. and non-U.S. branches.

DEPOSITORY RECEIPTS
The Developing Markets Growth Fund and International Growth Fund may hold
securities of foreign issuers in the form of American Depository Receipts
("ADRs"), European Depository Receipts ("EDRs"), Government Depository Receipts
("GDRs") and other similar global instruments available in developing markets,
or other securities convertible into securities of eligible issuers. These
securities may not necessarily be denominated in the same currency as the
securities for which they may be exchanged. Generally, ADRs in registered form
are designed for use in United States securities markets, and EDRs and other
similar global instruments in bearer form are designed for use in European
securities markets. For purposes of the Fund's investment policies, the Fund's
investment in ADRs, EDRs, and similar instruments will be deemed to be
investments in the equity securities representing securities of foreign issuers
into which they may be converted.

FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
The Developing Markets Growth Fund and International Growth Fund may enter into
forward currency contracts to attempt to minimize the risk to the Funds from
adverse changes in the relationship between the U.S. dollar and foreign
currencies. A forward currency contract is an obligation to purchase or sell a
specific currency for an agreed upon price at a future date which is
individually negotiated and privately traded by currency traders and their
customers. The Funds may enter into a forward currency contract, for example,
when it enters into a contract for the purchase or sale of a security
denominated in a foreign currency or is expecting a dividend or interest payment
in order to "lock in" the U.S. dollar price of the security or dividend or
interest payment. In addition, when the Funds believe that a foreign currency or
currencies may suffer a substantial decline against the U.S. dollar, it may
enter into a forward currency contract to sell an amount of a foreign currency
approximating the value of some or all of the Funds' portfolio securities
denominated in such foreign currency or related currencies that the Adviser
feels demonstrate correlation in exchange rate movements (such a practice is
called "crosshedging"), or when the Funds believe that the U.S. dollar may
suffer a substantial decline against a foreign currency or currencies, it may
enter into a forward contract to buy a foreign currency for a fixed dollar
amount. In connection with the Funds' forward contract transactions, an amount
of the Funds' assets equal to the amount of the Fund's commitment will be held
aside or segregated to be used to pay for the commitment. Accordingly, the Funds
will always have cash, cash equivalents or high quality debt securities
denominated in the appropriate currency available in an amount sufficient to
cover any commitments under these contracts. Segregated assets used to cover
forward currency contracts will be marked to market on a daily basis. While
these contracts are not presently regulated by the Commodity Futures Trading
Commission ("CFTC"), the CFTC may in the future regulate forward currency
contracts. In such event, the Funds' ability to utilize forward currency
contracts in the manner set forth above may be restricted. Forward currency
contracts may limit potential gain from a positive change in the relationship
between the U.S. dollar and foreign currencies. Unanticipated changes in
currency prices may result in poorer overall performance by the Funds than if it
had not engaged in such contracts. The Funds will generally not enter into a
forward foreign currency exchange contract with a term greater than one year.

COMMERCIAL PAPER
Short-term debt instruments purchased by the Small Cap Growth Fund and the
Balanced Fund consist of commercial paper (including variable amount master
demand notes), which refers to short-term, unsecured promissory notes issued by
corporations to finance short-term credit needs. Commercial paper is usually
sold on a discount basis and has a maturity at the time of issuance not
exceeding nine months. Variable amount master demand notes are demand
obligations that permit the investment of fluctuating amounts at varying market
rates of interest pursuant to arrangements between the issuer and a commercial
bank acting as agent for the payees of such notes, whereby both parties have the
right to vary the amount of the outstanding indebtedness of the notes.

The Balanced Fund may invest in commercial paper obligations issued by domestic
and foreign entities which, at the time of their purchase, are rated in the
highest rating category assigned by Moody's, S&P, Duff and Phelps, Inc. or Fitch
Investors Service, Inc. or, if not rated, are issued or guaranteed by companies
with an unsecured debt issue currently outstanding rated A or better by Moody's
or S&P. The Fund may also invest in participation interests in loans extended by
banks or other financial institutions to such companies, and other domestic
corporate obligations such as publicly traded bonds, debentures and notes
(including variable amount master demand notes) rated in the highest category by
the aforementioned rating services.

FUTURES CONTRACTS, OPTIONS AND OPTIONS ON FUTURES CONTRACTS
The Balanced Fund, Developing Markets Growth Fund and International Growth Fund
may invest in interest rate futures contracts, index futures contracts and may
buy options on such contracts for the purpose of hedging its portfolio of fixed
income securities (and not for speculative purposes) against the adverse effects
of anticipated movements in interest rates. As a result of entering into futures
contracts, no more than 5% of a Fund's net assets may be committed to margin.

The Funds may also purchase exchange traded put and call options on debt
securities up to 5% of its net assets for the purpose of hedging. A put option
(sometimes called a standby commitment) gives the purchaser of the option, in
return for a premium paid, the right to sell the underlying security at a
specified price during the term of the option. The writer of the put option
receives the premium and has the obligation to buy the underlying securities
upon exercise at the exercise price during the option period. A call option
(sometimes called a reverse standby commitment) gives the purchaser of the
option, in return for a premium, the right to buy the security underlying the
option at a specified exercise price at any time during the term of the option.
The writer of the call option receives the premium and has the obligation at the
exercise of the option, to deliver the underlying security against payment of
the exercise price during the option period. A principal risk of standby
commitments is that the writer of a commitment may default on its obligation to
repurchase or deliver the securities.

A futures contract is an agreement to purchase or deliver a debt security in the
future for a stated price on a certain date. The Funds may use interest rate
futures solely as a defense or hedge against anticipated interest rate changes
and not for speculation. The Funds presently could accomplish a similar result
to that which it hopes to achieve through the use of futures contracts by
selling debt securities with long maturities and investing in debt securities
with short maturities when interest rates are expected to increase, or
conversely, selling short-term debt securities and investing in long-term debt
securities when interest rates are expected to decline. However, because of the
liquidity that is often available in the futures market, such protection is more
likely to be achieved, perhaps at a lower cost and without changing the rate of
interest being earned by the Funds, through using futures contracts.

DESCRIPTION OF FUTURES CONTRACTS. A futures contract sale creates an obligation
by a Fund, as seller, to deliver the type of financial instrument called for in
the contract at a specified future time for a stated price. A futures contract
purchase creates an obligation by the Fund, as purchaser, to take delivery of
the underlying financial instrument at a specified future time for a stated
price. The specific securities delivered or taken, respectively, at settlement
date, are not determined until at or near that date. The determination is made
in accordance with the rules of the exchange on which the futures contract sale
or purchase was made.

Although futures contracts by their terms call for actual delivery or acceptance
of securities, in most cases the contracts are closed out before the settlement
date without the making or taking of delivery. Closing out a futures contract
sale is effected by purchasing a futures contract for the same aggregate amount
of the specific type of financial instrument and the same delivery date. If the
price of the initial sale of the futures contract exceeds the price of the
offsetting purchase, the Fund is paid the difference and realizes a gain. If the
price of the offsetting purchase exceeds the price of the initial sale, the Fund
pays the difference and realizes a loss. Similarly, the closing out of a futures
contract purchase is effected by the Fund entering into a futures contract sale.
If the offsetting sale price exceeds the purchase price, the Fund realizes a
gain, and if the purchase price exceeds the offsetting sale price, the Fund
realizes a loss.

The Fund is required to maintain margin deposits with brokerage firms through
which it enters into futures contracts. Margin balances will be adjusted at
least weekly to reflect unrealized gains and losses on open contracts. In
addition, the Fund will pay a commission on each contract, including offsetting
transactions.

Futures contracts are traded only on commodity exchanges--known as "contract
markets"--approved for such trading by the Commodity Futures Trading Commission
("CFTC"), and must be executed through a futures commission merchant or
brokerage firm which is a member of the relevant contract market. The CFTC
regulates trading activity on the exchanges pursuant to the Commodity Exchange
Act. The principal exchanges are the Chicago Board of Trade, the Chicago
Mercantile Exchange and the New York Futures Exchange. Each exchange guarantees
performance under contract provisions through a clearing corporation, a
nonprofit organization managed by the exchange membership. The staff of the CFTC
has indicated that an entity such as the Fund would not be a "pool" if it traded
commodity futures contracts solely for hedging purposes and not for speculation.
Furthermore, the Fund is restricted to no more than 5% of its net assets being
committed to margin on futures contracts and premiums for options on futures
contracts, and therefore will not operate as a "pool" as that term is defined by
the CFTC.

RISKS IN FUTURES CONTRACTS. One risk in employing futures contracts to protect
against cash market price volatility is the prospect that futures prices will
correlate imperfectly with the behavior of cash prices. The ordinary spreads
between prices in the cash and futures markets, due to differences in the
natures of those markets, are subject to distortions. First, all participants in
the futures market are subject to margin deposit and maintenance requirements.
Rather than meeting additional margin deposit requirements, investors may close
futures contracts through offsetting transactions which could distort the normal
relationship between the cash and futures markets. Second, the liquidity of the
futures market depends on participants entering into offsetting transactions
rather than making or taking delivery. To the extent participants decide to make
or take delivery, liquidity in the futures market could be reduced, thus
producing distortion. Third, from the point of view of speculators the deposit
requirements in the futures market are less onerous than margin requirements in
the securities market. Therefore, increased participation by speculators in the
futures market may cause temporary price distortions. Due to the possibility of
distortion, a correct forecast of general interest trends by the Adviser may
still not result in a successful transaction.

Another risk is that the Adviser would be incorrect in its expectation as to the
extent of various interest rate movements (anticipated securities prices and
foreign currency exchange rates for the Developing Markets Growth Fund and
International Growth Fund) or the time span within which the movements take
place. Closing out a futures contract purchase at a loss because of higher
interest rates will generally have one or two consequences depending on whether,
at the time of closing out, the "yield curve" is normal (long-term rates
exceeding short-term). If the yield curve is normal, it is possible that the
Fund will still be engaged in a program of buying long-term securities. Thus,
closing out the futures contract purchase at a loss will reduce the benefit of
the reduced price of the securities purchased. If the yield curve is inverted,
it is possible that the Fund will retain its investments in short-term
securities earmarked for purchase of longer term securities. Thus, closing out
of a loss will reduce the benefit of the incremental income that the Fund will
experience by virtue of the high short-term rates.

RISKS OF OPTIONS. The use of options and options on interest rate futures
contracts also involves additional risk. Compared to the purchase or sale of
futures contracts, the purchase of call or put options and options on futures
contracts involves less potential risk to a Fund because the maximum amount at
risk is the premium paid for the options (plus transaction costs).

The effective use of options strategies is dependent, among other things, upon
the Fund's ability to terminate options positions at a time when the Adviser
deems it desirable to do so. Although the Fund will enter into an option
position only if the Adviser believes that a liquid secondary market exists for
such option, there is no assurance that the Fund will be able to effect closing
transactions at any particular time or at an acceptable price. The Fund's
transactions involving options on futures contracts will be conducted only on
recognized exchanges.

Although the Funds will generally purchase only those options for which there
appears to be an active secondary market, there can be no assurance that a
liquid secondary market on an exchange will exist for any particular option, or
at any particular time. For some options no secondary market on an exchange may
exist. In such event, it might not be possible to effect closing transactions in
particular options, with the result that the Funds would have to exercise its
options in order to realize any profit and would incur transaction costs upon
the purchase or sale of underlying securities.

Secondary markets on an exchange may not exist or may not be liquid for a
variety of reasons including: (i) insufficient trading interest in certain
options; (ii) restrictions on opening transactions or closing transactions
imposed by an exchange; (iii) trading halts, suspension or other restrictions
may be imposed with respect to particular classes or series of options; (iv)
unusual or unforeseen circumstances which interrupt normal operations on an
exchange; (v) inadequate facilities of an exchange or the Options Clearing
Corporation to handle current trading volume at all times; or (vi)
discontinuance in the future by one or more exchanges for economic or other
reasons, of trading of options (or of a particular class or series of options),
in which event the secondary market on that exchange (or in that class or series
of options) would cease to exist, although outstanding options on that exchange
that had been issued by the Options Clearing Corporation as a result of trades
on that exchange would continue to be exercisable in accordance with their
terms.

PURCHASE OF PUT OPTIONS ON FUTURES CONTRACTS. The Funds may purchase put options
on futures contracts if the Adviser anticipates a rise in interest rates.
Because the value of an interest rate or municipal bond index futures contract
moves inversely in relation to changes in interest rates, a put option on such a
contract becomes more valuable as interest rates rise. By purchasing put options
on futures contracts at a time when the Adviser expects interest rates to rise,
the Fund will seek to realize a profit to offset the loss in value of its
portfolio securities.

PURCHASE OF CALL OPTIONS ON FUTURES CONTRACTS. The Funds may purchase call
options on futures contracts if the Adviser anticipates a decline in interest
rates. The purchase of a call option on an interest rate of municipal bond index
futures contract represents a means of obtaining temporary exposure to market
appreciation at limited risk. Because the value of an interest rate or municipal
bond index futures contract moves inversely in relation to changes to interest
rates, a call option on such a contract becomes more valuable as interest rates
decline. The Fund will purchase a call option on a futures contract to hedge
against a decline in interest rates in a market advance when the Fund is holding
cash. The Fund can take advantage of the anticipated rise in the value of
long-term securities without actually buying them until the market is
stabilized. At that time, the options can be liquidated and the Fund's cash can
be used to buy long-term securities.

The Funds expect that new types of securities, futures contracts, options
thereon, and put and call options on securities and indices may be developed in
the future. As new types of instruments are developed and offered to investors,
the Adviser will be permitted to invest in them provided that the Adviser
believes their quality is equivalent to the Fund's quality standards.

COMPUTATION OF NET ASSET VALUE

Net asset value is determined as of the close of the New York Stock Exchange on
each day that the exchange is open for business and on any other day on which
there is sufficient trading in a Fund's securities to materially affect the
Fund's net asset value per share. The customary national business holidays
observed by the New York Stock Exchange and on which the Funds are closed are:
New Year's Day, President's Day, Good Friday, Memorial Day, July Fourth, Labor
Day, Thanksgiving Day and Christmas Day. The net asset value per share will not
be determined on these national holidays.

On June 30, 1995, the net asset value and public offering price per share for
each Fund was calculated as follows:

Small Cap Growth Fund:

net assets ($12,015,263) / shares outstanding (890,423) =
net asset value ((NAV) per share = public offering price per share ($13.49)

Growth Fund:

net assets ($327,878,655) / shares outstanding (25,219,013) =
NAV per share = public offering price per share ($13.00)

Growth & Income Fund:

net assets ($45,210,847) / shares outstanding (1,592,872) =
NAV per share = public offering price per share ($28.38)

Balanced Fund:

net assets ($2,444,384) / shares outstanding (222,350) =
NAV per share = public offering price per share ($10.99)

International Growth Fund:

net assets ($68,124,946) / shares outstanding (4,335,844) =
NAV per share = public offering price per share ($15.71)

Developing Markets Growth Fund:

net assets ($4,618,433) / shares outstanding (490,891) =
NAV per share = public offering price per share ($9.41)

CALCULATION OF PERFORMANCE DATA

Advertisements and other sales literature for the Funds may refer to cumulative
total return, average annual total return and yield.

CUMULATIVE TOTAL RETURN. Total return means cumulative total return and is
calculated by finding the cumulative compounded rate of return over the period
indicated that would equate the initial amount invested to the ending redeemable
value, according to the following formula:

CTR = (ERV-P)/P X 100

CTR = cumulative total return
ERV = ending redeemable value at the end of the period
of a hypothetical $1,000 payment made at the
beginning of such period
P = initial payment of $1,000

This calculation assumes all dividends and capital gains distributions are
reinvested at net asset value on the appropriate reinvestment dates and includes
all recurring fees, such as investment advisory and management fees, charged to
all shareholder accounts.

AVERAGE ANNUAL TOTAL RETURN. Average annual total return is computed by finding
the average annual compounded rates of return over the periods indicated that
would equate the initial amount invested to the ending redeemable value,
according to the following formula:

n
P(1+T) = ERV
P = a hypothetical initial payment of $1,000;
T = average annual total return;
n = number of years; and
ERV = ending redeemable value at the end of the period
of a hypothetical $1,000 payment made at the
beginning of such period.

YIELD. Yield is computed by dividing the net investment income per share (as
defined under Securities and Exchange Commission rules and regulations) earned
during the computation period by the maximum offering price per share on the
last day of the period, according to the following formula:

Yield = 2[((a - b/cd) + 1) 6 - 1]

a = dividends and interest earned during the periods;
b = expenses accrued for the period (net of
reimbursements);
c = the average daily number of shares outstanding
during the period that were entitled to receive
dividends; and
d = the maximum offering price per share on the last
day of the period.

MANAGEMENT

The Funds as a group pay each director, who is not also an officer, an annual
fee of $8,000, $2,000 for each meeting attended, and provide reimbursement for
travel and other expenses. The names, addresses, principal occupations and other
affiliations of directors and officers of the Funds are given below. Except as
noted below, the business address of each officer and director is the same as
that of the Adviser - 4600 Norwest Center, Minneapolis, Minnesota.

NAME & ADDRESS POSITION WITH THE FUNDS PRINCIPAL OCCUPATION DURING PAST 5 YEARS

<S> <C> <C>
Eugene C. Sit * Director - All Funds Chairman, CEO and CIO Sit Investment Associates, Inc.
Chairman - All Funds (the "Adviser"); Chairman and CEO of Sit/Kim Inter-
national Investment Associates, Inc. (the "Sub-Adviser")

Peter L. Mitchelson * Director - All Funds President and Director of the Adviser; Executive Vice
Vice Chairman - All Funds President and Director the of Sub-Adviser
Sr. Portfolio Manager - Growth &
Income and Balanced Funds

William E. Frenzel * Director - All Funds Senior Visiting Scholar at The Brookings Institution;
1775 Massachusetts Ave. NW Advisory Director of the Adviser, Director of Sub-Adviser;
Washington, DC 20036 formerly a Senior member of Congress and a ranking
member on the House Ways and Means Committee and
Vice Chairman of the House Budget Committee,

John E. Hulse Director - All Funds Director, Vice Chairman and Chief Financial Officer at
Pacific Telesis Group until June 1992; Trustee, Benild
Religious & Charitable Trust; Trustee, Pacific Gas &
Electric Nuclear Decommissioning Trust

Sidney L. Jones Director - All Funds Adjunct Faculty, Center for Public Policy Education, The
8505 Parliament Drive Brookings Institution; Visiting Professor, Dartmouth
Potomac, MD 20854 College and Carleton College; Former Assistant Secretary
for Economic Policy, United States Department of the
Treasury

Donald W. Phillips Director - All Funds Executive Vice President and Director of Equity Financial
Two North Riverside Plaza and Management Company; Chairman of Equity
Chicago, IL 60606 Institutional Investors, Inc.; Chief Investment Officer of
Ameritech, Inc., Chicago, IL until 1990

Melvin C. Bahle Director Emeritus - All Funds Financial consultant; director and/or officer of several
#1 Muirfield Lane companies, foundations and religious organizations.
St. Louis, MO 63141

Erik S. Anderson Vice President-Investments - Vice President - Equity Research & Portfolio Managment
Growth Fund of the Adviser

Michael P. Eckert Vice President - Group Manager Vice President - Mutual Fund Sales of the Adviser;
All Funds Formerly Regional Vice President of MacKenzie
Investment Management Company until October, 1989

Randy C. Henze Vice President - Group Manager Vice President - Mutual Fund Sales of the Adviser;
All Funds Formerly Vice President - Norwest Bank until March, 1992

Michael J. Radmer Secretary - All Funds Partner of the Funds' general counsel, Dorsey & Whitney
220 South Sixth Street P.L.L.P.
Minneapolis, MN

Paul E. Rasmussen Vice President & Treasurer Vice President, Secretary and Controller for the Adviser;
All Funds Senior Tax Associate for Coopers & Lybrand until 1991.

Ronald D. Sit Vice President-Investments Vice President - Equity Research and Portfolio Managment
Growth & Income Fund of the Adviser

Mary K. Stern President - All Funds President - Mutual Fund Group of the Adviser;
Executive Vice President of Society Bank, Cleveland, Ohio
until 1994; Vice President of Norwest Bank Minnesota,
N.A. until 1993.
</TABLE>

* Directors who are deemed to be "interested persons" of the Funds as that
term is defined by the Investment Company Act of 1940. Messrs. Sit and
Mitchelson are interested persons because they are officers of the Adviser.
Mr. Frenzel is an interested person of the International Growth Fund and
Developing Markets Growth Fund because he is a director of the Sub-Adviser,
and may be deemed to be an interested person of all Funds because he is an
Advisory Director of the Adviser. Mr. Ron Sit is a son of Eugene C. Sit.

INVESTMENT ADVISER

The Adviser (or an affiliate) has served as the investment adviser for each Fund
since the inception of each Fund.

TERMS COMMON TO ALL FUNDS' INVESTMENT MANAGEMENT AGREEMENTS.
Each Fund's Investment Management Agreement provides that the Adviser will
manage the investment of the Fund's assets, subject to the applicable provisions
of the Fund's articles of incorporation, bylaws and current registration
statement (including, but not limited to, the investment objective, policies and
restrictions delineated in the Fund's current prospectus and Statement of
Additional Information), as interpreted from time to time by the Fund's Board of
Directors. Under each Agreement, the Adviser has the sole and exclusive
responsibility for the management of the Fund's investment portfolio and for
making and executing all investment decisions for the Fund. The Adviser is
obligated under each Agreement to report to the Fund's Board of Directors
regularly at such times and in such detail as the Board may from time to time
determine appropriate, in order to permit the Board to determine the adherence
of the Adviser to the Fund's investment policies. Each Agreement also provides
that the Adviser shall not be liable for any loss suffered by the Fund in
connection with the matters to which the Agreement relates, except losses
resulting from willful misfeasance, bad faith or gross negligence on the part of
the Adviser in the performance of its obligations and duties or by reason of its
reckless disregard of its obligations and duties under the Agreement.

Each Agreement provides that the Adviser shall, at its own expense, furnish all
office facilities, equipment and personnel necessary to discharge its
responsibilities and duties under the Agreement and that the Adviser will
arrange, if requested by the Fund, for officers or employees of the Adviser to
serve without compensation from the Fund as directors, officers or employees of
the Fund if duly elected to such positions by the shareholders or directors of
the Fund.

Each Investment Management Agreement provides that it will continue in effect
from year to year only as long as such continuance is specifically approved at
least annually by the applicable Fund's Board of Directors or shareholders and
by a majority of the Board of Directors who are not "interested persons" (as
defined in the 1940 Act) of the Adviser or the Fund. The Agreement is terminable
upon 60 days' written notice by the Adviser or the Fund and will terminate
automatically in the event of its "assignment" (as defined in the 1940 Act).

COMPENSATION AND ALLOCATION OF EXPENSES.
The Investment Management Agreement between the Adviser and each of Growth Fund
and Growth & Income Fund provides that the Fund is obligated to pay the Adviser
a monthly fee equal on an annual basis to 1.00% of the first $30 million of the
Fund's average daily net assets, .75% of the next $70 million of the Fund's
average daily net assets and .50% of average daily net assets in excess of $100
million. Except for extraordinary expenses (as designated by a majority of the
Fund's disinterested directors), interest, brokerage commissions and other
transaction charges relating to the Fund's investing activities (which expenses
are the sole responsibility of the Fund, irrespective of amount), the Adviser is
obligated to reimburse each of Growth Fund and Growth & Income Fund for all of
the Fund's expenses which exceed, on an annual basis, an amount equal to 1.50%
of the first $30 million of the Fund's average daily net assets and 1.00% of
average daily net assets in excess of $30 million. Subject to this expense
limitation, each of Growth Fund and Growth & Income Fund is responsible for all
of its expenses to the extent not specifically assumed by the Adviser,
including, but not limited to, custodian fees, director fees, charges and
expenses of independent auditors, legal counsel, transfer agents, dividend
disbursing agents and registrars, membership dues in the Investment Company
Institute or any similar organization, costs of reports and notices to
shareholders, interest, brokerage commissions, other transaction charges
relating to the Fund's investing activities and extraordinary expenses.

Under each of International Growth Fund's, Balanced Fund's, Developing Markets
Growth Fund's and Small Cap Growth Fund's Investment Management Agreement, the
Fund is obligated to pay the Adviser a flat monthly fee, which is equal on an
annual basis to 1.85%, 1.00%, 2.00%, and 1.50%, respectively, of the average
daily net assets of the Funds. However, under each such Fund's Agreement, the
Adviser has agreed to bear all of the Fund's expenses, except for extraordinary
expenses (as designated by a majority of the Fund's disinterested directors),
interest, brokerage commissions and other transaction charges relating to the
investing activities of the Fund.

For the period January 1, 1994 through December 31, 1996, the Adviser has
voluntary agreed to limit the management fee (and thereby, all Fund expenses,
except those not payable by the Adviser as set forth above) of the International
Growth Fund to 1.50% per year of the Fund's average daily net assets. After
December 31, 1996, this voluntary fee waiver may be discontinued by the Adviser
at its sole discretion. For the period October 1, 1993 through December 31,
1996, the Adviser has voluntarily agreed to absorb expenses that are otherwise
payable by the Growth & Income Fund which exceed 1.00% of the Fund's average
daily net assets.

Set forth below are the investment management fees and other expenses paid by
each of Growth Fund and Growth & Income Fund during the fiscal years ended June
30, 1995, 1994, and 1993; the Balanced Fund for the fiscal year ended June 30,
1995 and the period from December 31, 1993 (inception date) through June 30,
1994, and the Developing Markets Growth Fund and Small Cap Growth Fund for the
fiscal year ended June 30, 1995. Fees and expenses of the Funds waived or paid
by the Adviser during such years are also set forth below.

DEVELOPING
SMALL CAP GROWTH & MARKETS INT'L
GROWTH GROWTH INCOME BALANCED GROWTH GROWTH
1995 FUND FUND FUND FUND FUND FUND
<S> <C> <C> <C> <C> <C> <C>
AVERAGE NET ASSETS $ 5,578,503 $ 307,708,007 $ 38,025,336 $ 1,715,183 $3,493,458 $ 65,382,362
Investment Advisory Fees 83,184 1,862,769 359,972 17,120 69,616 1,209,349
Other Expenses 00 687,200 152,295 00 00 00
Expenses Waived 00 00 (132,305) 00 00 (228,795)
Net Fund Expenses 83,184 2,549,969 379,962 17,120 69,616 980,554
Ratio of expenses to average
daily net assets 1.50% .83% 1.00% 1.00% 2.00% 1.50%

1994
AVERAGE NET ASSETS $324,283,311 $ 37,063,517 $ 564,873 $55,370,294
Investment Advisory Fees 1,947,187 353,037 5,613 1,022,869
Other Expenses 719,900 167,679 00 00
Expenses Waived 00 (112,191) 00 00
Net Fund Expenses 2,667,087 408,525 5,613 1,022,869
Ratio of expenses to average
daily net assets .82% 1.10% 1.00% 1.65%

1993
AVERAGE NET ASSETS $316,142,556 $ 35,776,569 $ 27,846,744
Investment Advisory Fees 1,901,955 342,752 514,000
Other Expenses 613,485 181,325 00
Expenses Waived 00 (17,143) 00
Net Fund Expenses 2,515,440 506,934 514,000
Ratio of expenses to average
daily net assets .80% 1.42% 1.85%

</TABLE>

THE SUB-ADVISER - DEVELOPING MARKETS GROWTH FUND AND INTERNATIONAL GROWTH FUND
The Developing Markets Growth Fund's and International Growth Fund's Investment
Management Agreement authorizes the Adviser, at its option and at its sole
expense, to appoint a sub-adviser, which may assume all or such responsibilities
and obligations of the Adviser pursuant to the Investment Management Agreement
as shall be delegated to the sub-adviser; provided, however, that any
discretionary investment decisions made by the sub-adviser shall be subject to
approval or ratification by the Adviser, and any appointment of a sub-adviser
and assumption of responsibilities and obligations of the Adviser by such
sub-adviser shall be subject to approval by the Board of Directors, and as
required by law the shareholders, of the Company; and provided, further, that
the appointment of any sub-adviser shall in no way limit or diminish the
Adviser's obligations and responsibilities under the Investment Management
Agreement. Pursuant to this authority, the Sub-Adviser serves as Developing
Markets Growth Fund's and International Growth Fund's Sub-Adviser.

The current Sub-Advisory Agreement provides that the Sub-Adviser agrees to
manage the investment of Developing Markets Growth Fund's and International
Growth Fund's assets, subject to the applicable provisions of the Funds'
articles of incorporation, bylaws and current registration statement (including,
but not limited to, the investment objective, policies and restrictions
delineated in the Fund's current prospectus and Statement of Additional
Information), as interpreted from time to time by the Fund's Board of Directors.
The Agreement also provides that any discretionary investment decisions made by
the Sub-Adviser are subject to the Adviser's review, approval or ratification at
the Adviser's discretion.

For its services under the Sub-Advisory Agreement, absent any voluntary fee
waivers, the Adviser has agreed to pay the Sub-Adviser a monthly fee equal to
the percentages set forth below of the value of the Developing Markets Growth
Fund's and International Growth Fund's average daily net assets:

Developing Markets International
Growth Fund Growth Fund
First $100 million of average daily net assets .75% .75%
Next $100 million of average daily net assets .60% .50%
Assets in excess of $200 million .50% .40%

However, until such month that the cumulative fees received by the Adviser
pursuant to the Investment Management Agreement equal or exceed the cumulative
out-of-pocket expenses of the Funds borne by the Adviser pursuant to the
Investment Management Agreement ("Positive Cash Flow"), the Sub-Adviser has
agreed to waive any fees otherwise receivable by it from the Adviser pursuant to
the Sub-Advisory Agreement. After the Adviser has achieved Positive Cash Flow,
the Adviser has agreed to pay the Sub-Adviser the lesser of (i) 75% of the
Adviser's Positive Cash Flow during each applicable month, or (ii) the fee
provided for above. Pursuant to the Investment Management Agreement the Adviser
paid the Sub-Adviser fees of $0, $161,850, $448,876, $425,433 for the fiscal
years ended June 30, 1992, 1993, 1994 and 1995 respectively with respect to
services provided on behalf of the International Growth Fund; and fees of $0 for
the fiscal year ended June 30, 1995 with respect to services provided on behalf
of the Developing Markets Growth Fund.

The Sub-Advisory Agreement continues in effect from year to year only as long as
such continuance is specifically approved at least annually by (i) the Board of
Directors of the Fund or by the vote of a majority of the outstanding voting
shares of the Fund, and (ii) by the vote of a majority of the directors of the
Company who are not parties to the Agreement or interested persons of the
Adviser, the Sub-Adviser, the International Growth Fund or the Developing
Markets Growth Fund. The Agreement may be terminated at any time, without the
payment of any penalty, by the Board of Directors of SIT Mutual Funds, Inc., the
issuer of the International Growth Fund and Developing Markets Growth Fund or by
the vote of a majority of the outstanding voting shares of the Fund, or by the
Sub-Adviser or the Adviser, upon 30 days' written notice to the other party.
Additionally, the Agreement automatically terminates in the event of its
assignment.

DISTRIBUTOR

SIT Mutual Funds, Inc. (the "Company") on behalf of the International Growth
Fund, Balanced Fund, Developing Markets Growth Fund, Small Cap Growth Fund; and
the Growth Fund, Inc.; and the Growth & Income Fund, Inc. have entered into
Underwriting and Distribution Agreements with SIA Securities Corp.
("Securities"), an affiliate of the Adviser, pursuant to which Securities will
act as each Fund's principal underwriter. Securities will market each Fund's
shares only to certain institutional investors and all other sales of each
Fund's shares will be made by each Fund. The Adviser will pay all expenses of
Securities in connection with such services and Securities is otherwise not
entitled to any other compensation under the Underwriting and Distribution
Agreement. Each Fund will incur no additional fees in connection with the
Underwriting and Distribution Agreement.

Pursuant to the Underwriting and Distribution Agreement, Securities has agreed
to act as the principal underwriter for each Fund in the sale and distribution
to the public of shares of each Fund, either through dealers or otherwise.
Securities has agreed to offer such shares for sale at all times when such
shares are available for sale and may lawfully be offered for sale and sold. The
Underwriting and Distribution Agreement is renewable from year to year if the
Fund's directors approve such agreement. The Fund or Securities can terminate
the Underwriting and Distribution Agreement at any time without penalty on 60
days' notice written notice to the other party. The Underwriting and
Distribution Agreement terminates automatically upon its assignment. In the
Underwriting and Distribution Agreement, Securities agrees to indemnify each
Fund against all costs of litigation and other legal proceedings and against any
liability incurred by or imposed on the Fund in any way arising out of or in
connection with the sale or distribution of each Fund's shares, except to the
extent that such liability is the result of information which was obtainable by
Securities only from persons affiliated with the Fund but not Securities.

BROKERAGE

Transactions on a stock exchange in equity securities will be executed primarily
through brokers that will receive a commission paid by the applicable Fund.
Fixed income securities, as well as equity securities traded in the
over-the-counter market, are generally traded on a "net" basis with dealers
acting as principals for their own accounts without a stated commission,
although the price of the security usually includes a profit to the dealer. In
underwritten fixed income and equity offerings, securities are purchased at a
fixed price that includes an amount of compensation to the underwriter,
generally referred to as the underwriter's selling concession or discount.
Certain of these securities may also be purchased directly from the issuer, in
which case neither commissions nor discounts are paid.

The Adviser (or Sub-Adviser, as applicable) selects and, where applicable,
negotiates commissions with the broker-dealers who execute the transactions for
one or more of the Funds. The primary criterion for the selection of a
broker-dealer is the ability of the broker-dealer, in the opinion of the Adviser
(or Sub-Adviser, as applicable) to secure prompt execution of the transactions
on favorable terms, including the best price of the security, the reasonableness
of the commission and considering the state of the market at the time. When
consistent with these objectives, business may be placed with broker-dealers who
furnish investment research or services to the Adviser or Sub-Adviser. Such
research or services include advice, both directly and in writing, as to the
value of securities, the advisability of investing in, purchasing or selling
securities, and the availability of securities, or purchasers or sellers of
securities. Such services also may include analyses and reports concerning
issues, industries, securities, economic factors and trends, portfolio strategy,
and the performance of accounts. This allows the Adviser (or Sub-Adviser, as
applicable) to supplement its own investment research activities and enables the
Adviser (or Sub-Adviser, as applicable) to obtain the views and information of
individuals and research staffs of many different securities firms prior to
making investment decisions for the Funds. To the extent portfolio transactions
are effected with broker-dealers who furnish research services to the Adviser or
Sub-Adviser, the Adviser or Sub-Adviser receives a benefit, not capable of
valuation in dollar amounts, without providing any direct monetary benefit to
the applicable Funds from these transactions. The Adviser and the Sub-Adviser
believe that most research services they receive generally benefit several or
all of the investment companies and private accounts which they manage, as
opposed to solely benefiting one specific managed fund or account. Normally,
research services obtained through managed funds or accounts investing in common
stocks would primarily benefit the managed funds or accounts which invest in
common stock; similarly, services obtained from transactions in fixed income
securities would normally be of greater benefit to the managed funds or accounts
which invest in debt securities.

Both the Adviser and the Sub-Adviser maintain an informal list of
broker-dealers, which is used from time to time as a general guide in the
placement of Fund business, in order to encourage certain broker-dealers to
provide the Adviser and the Sub-Adviser with research services which the Adviser
and the Sub-Adviser anticipate will be useful to them in managing the Funds.
Because the list is merely a general guide, which is to be used only after the
primary criterion for the selection of broker-dealers (discussed above) has been
met, substantial deviations from the list are permissible and may be expected to
occur. Each of the Adviser and the Sub-Adviser will authorize a Fund to pay an
amount of commission for effecting a securities transaction in excess of the
amount of commission another broker-dealer would have charged only if the
Adviser (or Sub-Adviser, as applicable) determines in good faith that such
amount of commission is reasonable in relation to the value of the brokerage and
research services provided by such broker-dealer, viewed in terms of either that
particular transaction or the Adviser's or Sub-Adviser's overall
responsibilities with respect to the accounts as to which it exercises
investment discretion. Generally, the Fund pays commissions higher than the
lowest commission rates available.

Most all domestic (U.S.) securities trades will be executed through U.S.
brokerage firms and commercial banks. Most foreign equity securities will be
obtained in over-the-counter markets or stock exchanges located in the countries
in which the respective principal offices of the issuers of the various
securities are located, if that is the best available market. The fixed
commissions paid in connection with most such foreign stock transactions
generally are higher than negotiated commissions on United States transactions.
There generally is less government supervision and regulation of foreign stock
exchanges and brokers than in the United States. Foreign security settlements
may in some instances be subject to delays and related administrative
uncertainties.

Foreign equity securities may be held in the form of American Depository
Receipts ("ADRs"), European Depository Receipts ("EDRs"), or securities
convertible into foreign equity securities. ADRs or EDRs may be listed on stock
exchanges, or traded in the over-the-counter markets in the United States or
Europe, as the case may be. ADRs, like other securities traded in the United
States, will be subject to negotiated commission rates. The foreign and domestic
debt securities and money market instruments in which International Growth Fund
may invest are generally traded in the over-the-counter markets.

Fund management does not currently anticipate that the Fund will effect
brokerage transactions in its portfolio securities with any broker-dealer
affiliated directly or indirectly with the Funds, the Adviser or the
Sub-Adviser.

The Adviser has entered into agreements with Capital Institutional Services,
Inc. ("CIS"), and Lipper Analytical Securities Corporation ("LAS"), unaffiliated
registered broker-dealers located in Dallas and New York respectively. All
transactions placed with CIS and LAS are subject to the above criteria. CIS and
LAS provide the Adviser with a wide variety of economic, performance, and
investment research information.

Investment decisions for each Fund are made independently of those for other
clients of the Adviser, including the other Funds. When the Funds or clients
simultaneously engage in the purchase or sale of the same securities, the price
of the transactions is averaged and the amount allocated in accordance with a
formula deemed equitable to each Fund and client. In some cases, this system may
adversely affect the price paid or received by the Fund or the size of the
position obtainable. Total brokerage commissions paid by the Funds for the
fiscal years ended June 30, 1995, 1994, and 1993 include commissions as set
forth below which were paid to firms that supplied the Funds and Adviser with
statistical and research services.

<TABLE>
<CAPTION>
1995 1994 1993
Amt paid to Amt paid to Amt paid to
firms for firms for firms for
statistics & statistics & statistics &
Fund Total research Total research Total research

<S> <C> <C> <C> <C> <C> <C>
Small Cap Growth 19,529 1,730 n/a n/a n/a n/a
Growth 573,104 102,087 326,784 264,760 325,674 16,774
Growth & Income 63,079 19,164 50,554 46,413 25,788 3,625
Balanced 1,764 622 536 0 n/a n/a
Developing Markets 32,804 0 n/a n/a n/a n/a
Int'l Growth 180,798 2,340 191,814 0 124,610

</TABLE>

CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES

The following persons owned of record or beneficially 5% or more of the
respective Fund's outstanding shares as of August 28, 1995:

<TABLE>
<CAPTION>
Record Beneficially Of Record &
Person Only Only Beneficially

<S> <C> <C> <C>
GROWTH FUND
The Northern Trust Co., Trustee, Airtouch Communications Ret. Plan. 8.60%
PO Box 92956, Chicago, IL

GROWTH & INCOME FUND
Danforth Foundation, c/o Melvin C. Bahle, 231 So. Bemiston Ave., 7.28%
Ste. 1080, St. Louis, MO

BALANCED FUND
Sit Investment Associates (various accounts), 4600 Norwest Center 48.10%
Minneapolis, MN

Dennis W. Gartner, Trustee, Electric Component Sales, Inc. Profit Sharing 12.98%
Plan & Trust, 4974 Lincoln Drive, Minneapolis, MN

Richard & Marlys Lynch, Trustees, El-Tronic Precision Inc. Profit Sharing 7.50%
amd 401k Plan, 7345 NE Baker Street, Fridley, MN

Robert Vokes & Kraig Lungstrom, Trustees, Northstar Matrix Service 7.03%
401K Plan, 7101 31st Avenue North, Minneapolis, MN

James Olson, Trustee, Cote Family Corporation Salary Savings Plan 5.99%
110 South Woodward, Nisswa, MN

SMALL CAP GROWTH FUND
Frederick R. Adler, c/o Venad Management, Inc. 10.42%
1520 S. Ocean Blvd., Palm Beach, FL

Sit Investment Associates (various accounts), 4600 Norwest Center 7.90%
Minneapolis, MN

DEVELOPING MARKETS GROWTH FUND
Sit Investment Associates (various accounts), 4600 Norwest Center 19.49%
Minneapolis, MN

Eugene C. and Gail V. Sit, PO Box 232, Minneapolis, MN 6.21%

</TABLE>

TAXES

The tax status of the Funds and the distributions which they may make are
summarized in the prospectus in the section entitled "Taxes." Each Fund intends
to fulfill the requirements of Subchapter M of the Internal Revenue Code of
1986, as amended (the "Code"), as a regulated investment company. If so
qualified, each Fund will not be liable for federal income taxes to the extent
it distributes its taxable income to its shareholders.

To qualify under Subchapter M for tax treatment as a regulated investment
company, each Fund must, among other things: (1) distribute to its shareholders
at least 90% of its investment company taxable income (as that term is defined
in the Code determined without regard to the deduction for dividends paid) and
90% of its net tax-exempt income; (2) derive at least 90% of its gross income
from dividends, interest, payments with respect to securities loans, gains from
the sale or other disposition of stock or securities, or other income derived
with respect to its business of investing in such stocks, securities, or
currency; (3) derive less than 30% of its annual gross income from the sale or
other disposition of stock, securities, options, futures, or forward contracts
held for less than three months; and (4) diversify its holdings so that, at the
end of each fiscal quarter of the Fund, (a) at least 50% of the market value of
the Fund's assets is represented by cash, cash items, United States Government
securities and securities of other regulated investment companies, and other
securities, with these other securities limited, with respect to any one issuer,
to an amount no greater than 5% of the Fund's total assets and no greater than
10% of the outstanding voting securities of such issuer, and (b) not more than
25% of the market value of the Fund's total assets is invested in the securities
of any one issuer (other than United States Government securities or securities
of other regulated investment companies).

Each Fund is subject to a non-deductible excise tax equal to 4% of the excess,
if any, of the amount required to be distributed for each calendar year over the
amount actually distributed. In order to avoid the imposition of this excise
tax, each Fund must declare and pay dividends representing 98% of its net
investment income for that calendar year and 98% of its capital gains (both
long-term and short-term) for the twelve-month period ending October 31 of the
calendar year.

When shares of a Fund are sold or otherwise disposed of, the Fund shareholder
will realize a capital gain or loss equal to the difference between the purchase
price and the sale price of the shares disposed of, if, as is usually the case,
the Fund shares are a capital asset in the hands of the Fund shareholder. In
addition, pursuant to a special provision in the Code, if Fund shares with
respect to which a long-term capital gain distribution has been made are held
for six months or less, any loss on the sale or other disposition of such shares
will be a long-term capital loss to the extent of such long-term capital gain
distribution.

Any loss on the sale or exchange of shares of a Fund generally will be
disallowed to the extent that a shareholder acquires or contracts to acquire
shares of the same Fund within 30 days before or after such sale or exchange.

Except for the transactions the Developing Markets Growth Fund or International
Growth Fund identifies for federal income tax purposes as hedging transactions,
the Developing Markets Growth Fund and International Growth Fund are required to
recognize as income for each taxable year their net unrealized gains and losses
on forward currency contracts as of the end of the year as well as those
actually realized during the year, if any. Except for transactions in forward
currency contracts which are classified as part of a "mixed straddle," gain or
loss recognized with respect to forward currency contracts is considered to be
60% long-term capital gain or loss and 40% short-term capital gain or loss,
without regard to the holding period of the contract. In the case of a
transaction classified as a "mixed straddle," the recognition of losses may be
deferred to a later taxable year.

Sales of forward currency contracts which are intended to hedge against a change
in the value of securities or currencies held by the Developing Markets Growth
Fund and International Growth Fund may affect the holding period of such
securities or currencies and, consequently, the nature of the gain or loss on
such securities or currencies upon disposition.

It is expected that any net gain realized from the closing out of forward
currency contracts will be considered gain from the sale of securities or
currencies and therefore be qualifying income for purposes of the 90% of gross
income from qualified sources requirement, as discussed above. In order to avoid
realizing excessive gains on securities or currencies held less than three
months, the Developing Markets Growth Fund and International Growth Fund may be
required to defer the closing out of forward currency contracts beyond the time
when it would otherwise be advantageous to do so. It is expected that unrealized
gains on forward currency contracts, which have been open for less than three
months as of the end of the Developing Markets Growth Fund's and International
Growth Fund's fiscal year and which are recognized for tax purposes, will not be
considered gains on securities or currencies held less than three months for
purposes of the 30% test, as discussed above.

Any realized gain or loss on closing out a forward currency contract such as a
forward commitment for the purchase or sale of foreign currency will generally
result in a recognized capital gain or loss for tax purposes. Under Code Section
1256, forward currency contracts held by the Developing Markets Growth Fund and
International Growth Fund at the end of each fiscal year will be required to be
"marked to market" for federal income tax purposes, that is, deemed to have been
sold at market value. Code Section 988 may also apply to forward currency
contracts. Under Section 988, each foreign currency gain or loss is generally
computed separately and treated as ordinary income or loss. In the case of
overlap between Sections 1256 and 988, special provisions determine the
character and timing of any income, gain or loss. The Developing Markets Growth
Fund and International Growth Fund will attempt to monitor Section 988
transactions to avoid an adverse tax impact.

The Developing Markets Growth Fund and International Growth Fund may purchase
the securities of certain foreign investment funds or trusts called passive
foreign investment companies. Currently, such funds are the only or primary
means by which the Funds may invest in Hungary and India. In addition to bearing
their proportionate share of the Developing Markets Growth Fund's and
International Growth Fund's expenses (management fees and operating expenses),
shareholders will also bear indirectly similar expenses of such funds. Capital
gains on the sale of such holdings will be deemed to be ordinary income
regardless of how long the Fund holds its investment. In addition, the
Developing Markets Growth Fund and International Growth Fund may be subject to
corporate income tax and an interest charge on certain dividends and capital
gains earned from these investments, regardless of whether such income and gains
are distributed to shareholders.

The foregoing relates only to federal income taxation and is a general summary
of the federal tax law in effect as of the date of this Statement of Additional
Information.

FINANCIAL STATEMENTS

The information contained in the financial statements and annual reports to
shareholders of the Funds is incorporated by reference in this Statement of
Additional Information.

OTHER INFORMATION

CUSTODIAN; SUB-CUSTODIAN; COUNSEL; ACCOUNTANTS
Norwest Bank Minnesota, N.A., 733 Marquette Avenue, Minneapolis, Minnesota 55402
acts as custodian of the Funds' assets and portfolio securities; Morgan Stanley
Trust Company, 1 Evertrust Plaza, Jersey City, New Jersey 07302 acts as
sub-custodian of the Developing Markets Growth Fund's and International Growth
Fund's assets and portfolio securities; Dorsey & Whitney P.L.L.P., 220 South
Sixth Street, Minneapolis, Minnesota 55402, is the independent General Counsel
for the Funds; and KPMG Peat Marwick LLP, 4200 Norwest Center, Minneapolis,
Minnesota 55402, acts as the Funds' independent accountants.

Pursuant to Rule 17f-5 under the 1940 Act, the Board of Directors of the
Developing Markets Growth Fund and International Growth Fund approved the use of
the following sub-custodian banks and securities depositories to maintain
foreign securities in or near the market in which they are principally traded
and to maintain cash in amounts reasonably necessary to effect foreign
securities transactions in such locations. The Board of Directors may from time
to time approve other countries and subcustodian banks pursuant to Rule 17f-5.

RULE 17F-5
BASIS OF
COUNTRY BANK/DEPOSITORY ELIGIBILITY
Argentina Citibank, N.A. - Buenos Aires Branch (1)
Caja de Valores (5)
Australia Australia and New Zealand Banking Group Limited (2)
Clearing House Electronic Subregister System (5)
Austria Creditsanstalt Bankverein, Vienna (2)
Euroclear Clearance System (n/a) (4)
Wertpapiersammelbank (5)
Belgium Banque Bruxelles Lambert (2)
Caisse Interprofessionnelle de Depot et de
Virements de Titres (5)
Brazil Banco de Boston (2)
Bolsa de Valores de Sao Paulo (5)
Bolsa de Valores de Rio de Janerio (5)
Canada Toronto Dominion Bank (2)
The Canadian Depository for Securities (5)
Chile Citibank, N.A. - Santiago Branch (1)
Colombia Citibank, N.A./Cititrust Columbia S.A (1)
Czech Republic ING Bank N.V. (2)
Center for Securities (5)
Denmark Den Danske Bank A/S (2)
Euroclear Clearance System (n/a) (4)
Vaerdipapircentralen (5)
Finland Union Bank of Finland (2)
Euroclear Clearance System (n/a) (4)
France Banque Indosuez (2)
Societe Interprofessionelle la Compensacion
des Valuers Mobilieres, (5)
Societe de Compensacion des Marches Conditionnels, (5)
Chambre de Compensation des Instruments Financiers
de Paris (5)
Germany Berliner Handels-und Frankfurter Bank (2)
Deutscher Kassenverein AG (5)
Greece Citibank, N.A. - Athens Branch (1)
Central Clearing Office of Athens Stock Exchange (5)
Hong Kong Hong Kong and Shanghai Banking Corporation Ltd. (2)
Hong Kong Securities Clearing Company (5)
Hungary Citibank Budapest (1)
India Standard Chartered Bank (2)
Indonesia Hong Kong and Shanghai Banking corporation Ltd. (2)
Ireland Allied Irish Bank (2)
Stock Exchange Talisman System (5)
Israel Bank Leumi (2)
Stock Exchange Clearing House (5)
Italy Barclays Bank PLC (2)
Monte Titoli S.p.A. (5)
Japan The Mitsubishi Bank Limited (2)
Japan Securities Depository Center (5)
Korea Standard Chartered Bank (2)
The Korean Central Depository (5)
Malaysia Oversea Chinese Banking Corporation (2)
The Malaysian Central Depository (5)
Mexico Citibank, N.A. - Mexico City Branch (1)
Instituto para el Deposito de Valores (S.D. Indeval) (5)
Netherlands ABN Amro Bank (3/89) (2)
Nederlands Centraal Institut voor Giraal
Effectenverkeer B.V. (NECIGEF) (5)
New Zealand Australia and New Zealand Banking Group Ltd. (2)
Bank of New Zealand (2)
Austraclear New Zealand System (5)
Norway Den Norske Bank A.S. (2)
Euroclear clearance System (n/a) (4)
Verdipapirsentralen (5)
Pakistan Standard Chartered Bank (2)
The Karachi Stock Exchange Clearinghouse (5)
Peru Citibank, N.A. - Lima Branch (1)
Philippines Hong Kong and Shanghai Banking Corporation Ltd. (2)
Poland Citibank Poland S.A. (3)
National Depository of Securities (5)
Portugal Banco Comercial Portuges (2)
Lisbon Stock Exchange (SCIOB system) (5)
Oporto Stock Exchange (CAMBIUM system) (5)
Singapore Overseas Chinese Banking Corporation (2)
Central Depository Pte Ltd. (5)
South Africa First National Bank of South Africa (2)
Spain Banco Santader (2)
Servicio de Compensacion y Liquidacion de Valores (5)
Sri Lanka Hong Kong and Shanghai Banking Corporation Ltd. (2)
Central Depository System Piri Ltd. (5)
Sweden Svenska Handelsbanken (2)
Euroclear Clearance System (n/a) (4)
Vardepapperscentralen (5)
Switzerland Bank Leu Ltd. (2)
Schweizerische Effekten Giro A.G. (SEGA) (5)
Taiwan Hong Kong and Shanghai Banking Corp. Ltd. (2)
Taiwan Securities Depository Co. (5)
Thailand Standard Chartered Bank (2)
Share Depository Center (5)
Turkey Citibank, N.A. - Istanbul Branch (1)
United Kingdom Barclays Bank PLC (2)
Stock Exchange Talisman System (5)
Venezuela Citibank, N.A. - Caracas Branch (1)

(1) Foreign branch of a United States bank, which qualifies as an eligible
domestic custodian under Section 17(f) of the Investment Company Act of
1940.

(2) A bank or trust company that has shareholders' equity in excess of $200
million (US) and is regulated as a bank or trust company by the foreign
country's government.

(3) A majority-owned direct or indirect subsidiary of a qualified U.S. Bank or
bank holding company that is incorporated or organized under the laws of a
country other than the United States and that has shareholder equity in
excess of $100 million (US)

(4) A securities depository or clearing agency which operates a trans-national
system for the central handling of securities or equivalent book entries.

(5) A central securities depository or clearing agency which operates the
central system for the handling of securities or book-entries in that
Country.

LIMITATION OF DIRECTOR
LIABILITY

Under Minnesota law, each director of the Funds owes certain fiduciary duties to
the Funds and to their shareholders. Minnesota law provides that a director
"shall discharge the duties of the position of director in good faith, in a
manner the director reasonably believes to be in the best interest of the
corporation, and with the care an ordinarily prudent person in a like position
would exercise under similar circumstances." Fiduciary duties of a director of a
Minnesota corporation include, therefore, both a duty of "loyalty" (to act in
good faith and act in a manner reasonably believed to be in the best interests
of the corporation) and a duty of "care" (to act with the care an ordinarily
prudent person in a like position would exercise under similar circumstances).
Minnesota law authorizes corporations to eliminate or limit the personal
liability of a director to the corporation or its shareholders for monetary
damages for breach of the fiduciary duty of "care". Minnesota law does not,
however, permit a corporation to eliminate or limit the liability of a director
(i) for any breach of the directors' duty of "loyalty" to the corporation or its
shareholders, (ii) for acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law, (iii) for authorizing a
dividend, stock repurchase or redemption or other distribution in violation of
Minnesota law or for violation of certain provisions of Minnesota securities
laws or (iv) for any transaction from which the director derived an improper
personal benefit. The Articles of Incorporation of the Company limit the
liability of directors to the fullest extent permitted by Minnesota statutes,
except to the extent that such liability cannot be limited as provided in the
Investment Company Act of 1940 (which Act prohibits any provisions which purport
to limit the liability of directors arising from such directors' willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of their role as directors).

Minnesota law does not eliminate the duty of "care" imposed upon a director. It
only authorizes a corporation to eliminate monetary liability for violations of
that duty. Minnesota law, further, does not permit elimination or limitation of
liability of "officers" to the corporation for breach of their duties as
officers (including the liability of directors who serve as officers for breach
of their duties as officers). Minnesota law does not permit elimination or
limitation of the availability of equitable relief, such as injunctive or
rescissionary relief. Further, Minnesota law does not permit elimination or
limitation of a director's liability under the Securities Act of 1933 or the
Securities Exchange Act of 1934, and it is uncertain whether and to what extent
the elimination of monetary liability would extend to violations of duties
imposed on directors by the Investment Company Act of 1940 and the rules and
regulations adopted under such Act.

The Funds are not required under Minnesota law to hold annual or periodically
scheduled meetings of shareholders. Minnesota corporation law provides for the
Board of Directors to convene shareholder meetings when it deems appropriate.
However, the Funds intend to hold meetings of shareholders annually. In
addition, if a regular meeting of shareholders has not been held during the
immediately preceding fifteen months, a shareholder or shareholders holding
three percent or more of the voting shares of the Funds may demand a regular
meeting of shareholders by written notice of demand given to the chief executive
officer or the chief financial officer of the Funds. Within ninety days after
receipt of the demand, a regular meeting of shareholders must be held at the
expense of the Funds. Irrespective of whether a regular meeting of shareholders
has been held during the immediately preceding fifteen months, in accordance
with Section 16(c) under the 1940 Act, the Board of Directors of the Funds shall
promptly call a meeting of shareholders for the purpose of voting upon the
question of removal of any director when requested in writing so to do by the
record holders of not less than 10 percent of the outstanding shares.
Additionally, the 1940 Act requires shareholder votes for all amendments to
fundamental investment policies and restrictions and for all investment advisory
contracts and amendments thereto. The Funds will assist in communications with
other shareholders as required by Section 16(c) of the 1940 Act.

APPENDIX A
BOND AND COMMERCIAL PAPER RATINGS

BOND RATINGS

MOODY'S INVESTORS SERVICE, INC.

Aaa Judged to be the best quality, carry the smallest degree of investment
risk

Aa Judged to be of high quality by all standards

A Possess many favorable investment attributes and are to be considered
as higher medium grade obligations Baa Medium grade obligations. Lack
outstanding investment characteristics. Ba Judged to have speculative
elements. Protection of interest and principal payments may be very
moderate.

B Generally lack characteristics of a desirable investment. Assurance of
interest and principal payments over any long period of time may be
small.

Caa May be present elements of danger with respect to principal or
interest or may be in default

Ca Represent obligations which are speculative in a high degree. Often in
default.

C Lowest class of bonds and issued regarded as having extremely poor
prospects of attaining any real investment standing.

Moody's also applies numerical indicators, 1, 2, and 3, to rating
categories Aa through Ba. The modifier 1 indicates that the security is in
the higher end of the rating category; the modifier 2 indicates a mid-range
ranking; and 3 indicates a ranking toward the lower end of the category.

STANDARD & POOR'S CORPORATION

AAA Highest grade obligations and possess the ultimate degree of
protection as to principal and interest

AA Also qualify as high grade obligations, and in the majority of
instances differ from AAA issues only in small degree

A Regarded as upper medium grade, have considerable investment strength
but are not entirely free from adverse effects of changes in economic
and trade conditions, interest and principal are regarded as safe

BBB Considered investment grade with adequate capacity to pay interest and
repay principal.

BB Judged to be speculative with some inadequacy to meet timely interest
and principal payments.

B Has greater vulnerability to default than other speculative grade
securities. Adverse economic conditions will likely impair capacity or
willingness to pay interest and principal.

CCC Has a vulnerability to default and is dependent upon favorable
business, financial and economic conditions to meet timely payment of
interest and repayment of principal.

CC Applied to debt subordinated to senior debt

C Applied to debt subordinated to senior debt that is assigned an actual
or implied CCC debt rating Standard & Poor's applies indicators "+",
no character, and "-" to the above rating categories AA through BB.
The indicators show relative standing within the major rating
categories.

FITCH INVESTORS SERVICE, INC.

AAA Highest credit quality with exceptional ability to pay interest and
repay principal

AA Investment grade and very high credit quality ability to pay interest
and repay principal is very strong, although not quite as strong as
AAA

A Investment grade with high credit quality. Ability to pay interest and
repay principal is strong.

BBB Investment grade and has satisfactory credit quality. Adequate ability
to pay interest and repay principal.

BB Considered speculative. Ability to pay interest and repay principal
may be affected over time by adverse economic changes.

B Considered highly speculative. Currently meeting interest and
principal obligations, but probability of continued payment reflects
limited margin of safety.

CCC Identifiable characteristics which if not remedied may lead to
default. Ability to meet obligations requires an advantageous business
and economic environment.

CC Minimally protected bonds. Default in payment of interest and/or
principal seems probable over time.

C Imminent default in payment of interest or principal

+and - indicators indicate the relative position within the rating
category, but are not used in AAA category.

DUFF & PHELPS CREDIT RATING CO.

AAA Highest credit quality, risk factors are negligible

AA+, AA, AA- High credit quality with moderate risk

A+, A, A- Protection factors are average but adequate, however,
risk factors are more variable and greater in periods of
economic stress

BBB+,BBB,BBB- Below average protection factors, but still considered
sufficient for prudent investment

BB+,BB,BB- Below investment grade but likely to meet obligations
when due.

B+,B,B- Below investment grade and possessing risk that
obligations will not be met when due.

CCC Well below investment grade. May be in default or
considerable uncertainty as to timely payment of
interest and/or principal.

COMMERCIAL PAPER RATINGS

MOODY'S

Commercial paper rated "Prime" carries the smallest degree of investment
risk. The modifiers 1, 2, and 3 are used to denote relative strength within
this highest classification.

STANDARD & POOR'S

The rating A-1 is the highest commercial paper rating assigned by Standard
& Poor's Corporation. The modifier "+" indicates that the security is in
the higher end of this rating category.

FITCH'S

F-1+ Exceptionally strong credit quality

DUFF & PHELPS'

Category 1 (top grade):

Duff1+ Highest certainty of timely payment
Duff1 Very high certainty of timely payment
Duff1- High certainty of timely payment

PART C

OTHER INFORMATION

Item 24. Financial Statements and Exhibits

(a) Financial Statements (incorporated by reference in Part B of this
Registration Statement).

(b) Exhibits (Explanatory Note: This Registration Statement contains the
combined Part C for SIT Growth Fund, Inc., SIT Growth & Income Fund,
Inc., and SIT Mutual Funds, Inc. Only the exhibits which relate to the
Registrant, as set forth in the Exhibit Index to this Registration
Statement, are being filed herewith).

1. Articles of Incorporation

(a) SIT Growth Fund, Inc.
(Incorporated by reference to Post-Effective Amendment No.
16 to the Fund's Registration Statement.)

(b) SIT Growth & Income Fund, Inc.
(Incorporated by reference to Post-Effective Amendment No.
16 to the Fund's Registration Statement.)

(c) SIT Mutual Funds, Inc.
(Incorporated by reference to Post-Effective Amendment No. 3
to the Fund's Registration Statement.)

2. Bylaws

(a) SIT Growth Fund, Inc.
(Incorporated by reference to the Fund's original
Registration Statement.)

(b) SIT Growth & Income Fund, Inc.
(Incorporated by reference to the Fund's original
Registration Statement.)

4. Specimen Copy of Share Certificate

(a) SIT Growth Fund, Inc.
(Incorporated by reference to Post-Effective Amendment No. 3
to the Fund's Registration Statement.)

(b) SIT Growth & Income Fund, Inc.
(Incorporated by reference to Post-Effective Amendment No. 3
to the Fund's Registration Statement.)

5.1 Form of Investment Management Agreement

(a) SIT Growth Fund, Inc.
(Incorporated by reference to Post-Effective Amendment No.
15 to the Fund's Registration Statement.)

(b) SIT Growth & Income Fund, Inc.
(Incorporated by reference to Post-Effective Amendment No.
15 to the Fund's Registration Statement.)

(c) SIT Mutual Funds, Inc.
(Incorporated by reference to Post-Effective Amendment No. 2
to the Fund's Registration Statement.)

5.2 Sub-Advisory Agreement - SIT Mutual Funds, Inc.
(Incorporated by reference to Post-Effective Amendment No. 2
to the Fund's Registration Statement.)

6. Underwriting and Distribution Agreement

(a) SIT Growth Fund, Inc.
(Incorporated by reference to Post-Effective Amendment No.
17 to the Fund's Registration Statement.)

(b) SIT Growth & Income Fund, Inc.
(Incorporated by reference to Post-Effective Amendment No.
17 to the Fund's Registration Statement.)

(c) SIT Mutual Funds, Inc.
(Incorporated by reference to Post-Effective Amendment No. 6
to the Fund's Registration Statement.)

8. Form of Custodian Agreement

(a) SIT Growth Fund, Inc.
(Incorporated by reference to Post-Effective Amendment No.
13 to the Fund's Registration Statement.)

(b) SIT Growth & Income Fund, Inc.
(Incorporated by reference to Post-Effective Amendment No.
13 to the Fund's Registration Statement.)

(c) SIT Mutual Funds, Inc.
(Incorporated by reference to Pre-Effective Amendment No. 1
to the Fund's original Registration Statement.)

10. Opinions and Consents of Dorsey & Whitney

(a) SIT Growth Fund, Inc.
(Incorporated by reference to Post-Effective Amendment No.
13 to the Fund's Registration Statement.)

(b) SIT Growth & Income Fund, Inc.
(Incorporated by reference to Post-Effective Amendment No.
13 to the Fund's Registration Statement.)

(c) SIT Mutual Funds, Inc.
(Incorporated by reference to Pre-Effective Amendment No. 1
to the Fund's original Registration Statement.)

11. Consent of KPMG Peat Marwick

(a) SIT Growth Fund, Inc. (Filed herewith.)

(b) SIT Growth & Income Fund, Inc. (Filed herewith.)

13. Letter of Investment Intent

(a) SIT Growth Fund, Inc.
(Incorporated by reference to Post-Effective Amendment No.
14 to the Fund's Registration Statement.)

(b) SIT Growth & Income Fund, Inc.
(Incorporated by reference to Post-Effective Amendment No.
14 to the Fund's Registration Statement.)

(c) SIT Mutual Funds, Inc.
(Incorporated by reference to Post-Effective Amendment No. 2
to the Fund's original Registration Statement.)

16. Calculations of Performance Data

(a) SIT Growth Fund, Inc.
(Incorporated by reference to Post-Effective Amendment No.
14 to the Fund's Registration Statement.)

(b) SIT Growth & Income Fund, Inc.
(Incorporated by reference to Post-Effective Amendment No.
14 to the Fund's Registration Statement.)

(c) SIT Mutual Funds, Inc.
(Incorporated by reference to Post-Effective Amendment No. 2
to the Fund's original Registration Statement.)

17. Powers of Attorney

(a) SIT Growth Fund, Inc. (Filed herewith.)

(b) SIT Growth & Income Fund, Inc. (Filed herewith.)

Item 25. Persons Controlled by or Under Common Control with Registrant

See the sections of the Prospectus entitled "Investment Adviser" and "The
Sub-Adviser."

Item 26. Number of Holders of Securities

The number of holders of shares of each Registrant as of June 30, 1995 are:

Fund Title of Class Record Holders
Growth Fund Common Stock 6,943
Growth & Income Fund Common Stock 1,026
International Growth Fund Common Stock, Series A 2,157
Balanced Fund Common Stock, Series B 65
Developing Markets Growth Fund Common Stock, Series C 268
Small Cap Growth Fund Common stock, Series D 449

Item 27. Indemnification

Each Registrant's Articles of Incorporation and Bylaws provide that the
Registrant shall indemnify such persons, for such expenses and liabilities, in
such manner, under such circumstances, and to such extent as permitted by
Section 302A.521 of the Minnesota Statutes, as now enacted or hereafter amended;
provided, however, that no such indemnification may be made if it would be in
violation of Section 17(h) of the Investment Company Act of 1940, as now enacted
or hereinafter amended, and any rules, regulations or releases promulgated
thereunder.

Each Registrant may indemnify its officers and directors and other
"persons" acting in an "official capacity" (as such terms are defined in Section
302A.521) pursuant to a determination by the board of directors or shraeholders
of the Registrant as set forth in Section 302A.521, by special legal counsel
selected by the board or a committee thereof for the purpose of making such a
determination, or by a Minnesota court upon application of the person seeking
indemnification. If a director is seeking indemnification for conduct in the
capacity of director or officer of a Registrant, then such director generally
may not be counted for the purpose of determining either the presence of a
quorum or such director's eligibility to be indemnified.

In any case, indemnification is proper only if the eligibility determining
body decides that the person seeking indemnification:

(a) has not received indemnification for the same conduct from any other
party or organization;

(b) acted in good faith;

(d) in the case of criminal proceedings, had no reasonable cause to
believe the conduct was unlawful;

(e) reasonably believed that the conduct was in the best interest of a
Registrant, or in certain contexts, was not opposed to the best
interest of a Registrant; and

(f) had not otherwise engaged in conduct which precludes indemnification
under either Minnesota or Federal law (including, but not limited to,
conduct constituting willful misfeasance, bad faith, gross negligence,
or reckless disregard of duties as set forth in Section 17(h) and (i)
of the Investment Company Act of 1940).

If a person is made or threatened to be made a party to a proceeding, the
person is entitled, upon written request to a Registrant, to payment or
reimbursement by a Registrant of reasonable expenses, including attorneys' fees
and disbursements, incurred by the person in advance of the final disposition of
the proceeding, (a) upon receipt by a Registrant of a written affirmation by the
person of a good faith belief that the criteria for indemnification set forth in
Section 302A.521 have been satisfied and a written undertaking by the person to
repay all amounts so paid or reimbursed by the Registrant, if it is ultimately
determined that the criteria for indemnification have not been satisfied, and
(b) after a determination that the facts then known to those making the
determination would not preclude indemnification under Section 302A.521. The
written undertaking required by clause (a) is an unlimited general obligation of
the person making it, but need not be secured and shall be accepted without
reference to financial ability to make the repayment.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of a
Registrant pursuant to the foregoing provisions, or otherwise, each Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by a Registrant of expenses incurred or
paid by a director, officer or controlling person of such Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless, in the opinion of its counsel, the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.

Each Registrant undertakes to comply with the indemnification requirements
of Investment Company Release 7221 (June 9, 1972) and Investment Company Release
11330 (September 2, 1980).

Item 28. Business and other Connections of Investment Adviser

Sit Investment Associates, Inc. (the "Adviser"), serves as the investment
adviser of each Registrant. Sit/Kim International Investment Associates, Inc.
(the "Sub-Adviser") serves as the sub-adviser of the Series A and Series D of
SIT Mutual Funds, Inc. In addition to serving as the investment adviser to the
Registrants and to various other public and private accounts, the Adviser serves
as sub-adviser to Fremont Equity Fund, Inc., an open-end fund managed by Fremont
Investment Advisers of San Francisco, CA, and receives fees therefor of .40% per
year of such fund's average daily net assets.

Below is a list of the officers and directors of the Adviser and the
Sub-Adviser and their business/employment during the past two years.

Business and Employment During Past Two Years;
Name Principal Business Address

Eugene C. Sit Chairman, CIO and Treasurer of the Adviser;
Chairman and CEO of the Sub-Adviser; Chairman of
the Board of Directors of all SIT Funds.

Andrew B. Kim Director, President and Chief Investment Officer of
the Sub-Adviser;
Director of the Vertical Group
1285 Avenue of the Americas
New York, NY 10019

Peter L. Mitchelson President and Director of the Adviser; Director and
Executive Vice President of the Sub-Adviser; Senior
Vice President and Senior Portfolio Manager of the
SIT Growth & Income Fund; Vice Chairman & Director
of all SIT Funds.

Charles W. Battey Director and Chairman of KN Energy, Inc.;
Director of the Sub-Adviser
4200 Somerset, Suite 200
Prairie Village, KS 66208

David L. Redo Managing Director of The Fremont Group;
Director of the Sub-Adviser
50 Fremont Street, Suite 3600
San Francisco, CA 94105

Charles R. Roberts Vice President, Portfolio Manager and Research
Analyst of the Sub-Adviser
50 Fremont Street, Suite 3600
San Francisco, CA 94105

Debra A. Sit Vice President - Bond Investments of the Adviser;
Officer of all Sit Funds; Assistant Treasurer and
Assistant Secretary of the Sub-Adviser

Jean M. Seikkula Vice President, Treasurer and Investment Specialist
of the Sub-Adviser

Richard S. Yeung Senior Vice President, Portfolio Manager and
Research Analyst of the Sub-Adviser

Paul E. Rasmussen Vice President, Secretary and Controller of the
Adviser and the Sub-Adviser

Michael C. Brilley Senior Vice President and Senior Fixed Income
Officer of the Adviser

Ronald D. Sit Vice President - Equity Research and Portfolio
Management of the Adviser

Erik S. Anderson Vice President - Equity Research and Portfolio
Management of the Adviser

Linda C. Scott Vice President - Equity Research and Portfolio
Management of the Adviser

Michael P. Eckert Vice President - Group Manager of all Sit Funds

Randy C. Henze Vice President - Group Manager of all Sit Funds

Frederick Adler Director of the Adviser
1520 S. Ocean Boulevard
Palm Beach, FL 33480

Norman Bud Grossman President, Cogel Management; Director of the
Adviser
4670 Norwest Center
Minneapolis MN 55402

Item 29. Principal Underwriters

The Distributor for each Registrant is SIA Securities Corp., 4600 Norwest
Center, Minneapolis, MN 55402, an affiliate of the Adviser, which distributes
only shares of each Registrant.

Below is a list of the officers and directors of the Distributor and their
business/employment during the past two years:

Business and Employment During Past Two Years;
Name Principal Business Address

Eugene C. Sit Chairman, CIO and Treasurer of the Adviser;
Chairman and CEO of the Sub-Adviser; Chairman of
the Board of Directors of all SIT Funds.

Peter L. Mitchelson President and Director of the Adviser; Director of
the Sub-Adviser; Senior Vice President and Senior
Portfolio Manager of the SIT Growth & Income Fund;
Vice Chairman & Director of all SIT Funds.

Parnell M. Kingsley Assistant Secretary of all SIT Funds

Paul E. Rasmussen Vice President, Secretary and Controller for the
Adviser and Sub-adviser; Vice President & Treasurer
of all SIT Funds

Item 30. Location of Accounts and Records

The Custodian and Transfer Agent for each Registrant is Norwest Bank
Minnesota, N.A. Mutual Fund Services, 733 Marquette Avenue, Minneapolis, MN
55479-0040. Other books and records are maintained by the Adviser, which is
located at 4600 Norwest Center, Minneapolis, MN 55402 and the Sub-Adviser, which
is located at the same address.

Item 31. Management Services

Not applicable

Item 32. Undertakings

(a) Not applicable

(b) Not applicable

(c) Each Registrant undertakes to call a meeting of shareholders for the
purpose of voting upon the question of removal of a director if
requested to do so by the holders of at least 10% of such Registrant's
outstanding shares and to assist in communications with other
shareholders as required by Section 16(c) of the Investment Company
Act of 1940.

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement on Form N-1A to be signed on its behalf by the undersigned, thereunder
duly authorized, in the City of Minneapolis, State of Minnesota, on the 23rd day
of October, 1995.

SIT GROWTH FUND, INC.

(Registrant)

By /s/ Eugene C. Sit
Eugene C. Sit, Chairman

Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registrant's Registration Statement has been
signed below by the following persons in the capacities and on the dates
indicated.

Signature and Title

/s/ Eugene C. Sit Dated: October 24, 1995
Eugene C. Sit Chairman
(Principal Executive Officer and Director)

/s/ Paul E. Rasmussen Dated: October 24, 1995
Paul E. Rasmussen, Treasurer
(Principal Financial Officer and Accounting Officer)

John E. Hulse, Director*

Sidney L. Jones, Director*

Peter L. Mitchelson, Director*

Donald W. Phillips, Director*

*By /s/ Eugene C. Sit Dated: October 24, 1995
Eugene C. Sit, Attorney-in-fact
(Pursuant to Powers of Attorney filed
previously with the Commission.)

SIGNATURES

SIT GROWTH & INCOME FUND, INC.

(Registrant)

By /s/ Eugene C. Sit
Eugene C. Sit, Chairman

Signature and Title

/s/ Eugene C. Sit Dated: October 24, 1995
Eugene C. Sit, Chairman
(Principal Executive Officer and Director)

/s/ Paul E. Rasmussen Dated: October 24, 1995
Paul E. Rasmussen, Treasurer
(Principal Financial Officer and Accounting Officer)

John E. Hulse, Director*

Sidney L. Jones, Director*

Peter L. Mitchelson, Director*

Donald W. Phillips, Director*

*By /s/ Eugene C. Sit Dated: October 24, 1995
Eugene C. Sit, Attorney-in-fact
(Pursuant to Powers of Attorney filed
previously with the Commission.)

SIGNATURES

SIT MUTUAL FUNDS, INC.

(Registrant)

By /s/ Eugene C. Sit
Eugene C. Sit, Chairman

Signature and Title

/s/ Eugene C. Sit Dated: October 24, 1995
Eugene C. Sit, Chairman
(Principal Executive Officer and Director)

/s/ Paul E. Rasmussen Dated: October 24, 1995
Paul E. Rasmussen, Treasurer
(Principal Financial Officer and Accounting Officer)

John E. Hulse, Director*

Sidney L. Jones, Director*

Peter L. Mitchelson, Director*

Donald W. Phillips, Director*

*By /s/ Eugene C. Sit Dated: October 24, 1995
Eugene C. Sit, Attorney-in-fact
(Pursuant to Powers of Attorney filed
previously with the Commission.)

REGISTRATION STATEMENT ON FORM N-1A

EXHIBIT INDEX

EXHIBIT NO. NAME OF EXHIBIT PAGE NO.

11 Consent of KPMG Peat Marwick --
17 Power of Attorney

Independent Auditors' Consent

The Board of Directors
SIT Mutual Funds, Inc.
SIT Growth Fund, Inc.
SIT Growth & Income Fund, Inc.:

We consent to the use of our report incorporated herein by reference and to the
references to our Firm under the headings "Financial Highlights" in Part A and
"Custodian; Sub-custodian; Counsel; Accounts" in Part B of the Registration
Statement.

/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP

Minneapolis, Minnesota
October 23, 1995

SIT GROWTH FUND, INC.

POWER OF ATTORNEY
TO SIGN REGISTRATION STATEMENTS

The undersigned, duly elected directors and officers of SIT Growth Fund,
Inc. (the "Company"), appoint Eugene C. Sit, Peter L. Mitchelson, Mary K. Stern
and Paul E. Rasmussen, or any of them, as attorney-in-fact for the purpose of
signing their names and on their behalf as directors and/or officers of the
Company and filing with the Securities and Exchange Commission or any other
regulatory authority as may be desirable or necessary, notifications,
registration statements and other filings, and any and all amendments to said
notifications, registration statements and other filings, and all exhibits
thereto and other documents, for the purpose of registering unissued shares of
common stock of the Company.

Signature Title Date

/s/ Eugene C. Sit Chairman (Principal Executive October 24, 1995
Eugene C. Sit Officer) & Director

/s/ Peter L. Mitchelson Vice Chairman & Director October 24, 1995
Peter L. Mitchelson

/s/ Mary K. Stern President October 24, 1995
Mary K. Stern

/s/ Paul E. Rasmussen Vice President & Treasurer October 24, 1995
Paul E. Rasmussen (Principal Financial and
Accounting Officer)

/s/ William E. Frenzel Director October 24, 1995
William E. Frenzel

/s/ John E. Hulse Director October 24, 1995
John E. Hulse

/s/ Sidney L. Jones Director October 24, 1995
Sidney L. Jones

/s/ Donald W. Phillips Director October 24, 1995
Donald W. Phillips

SIT GROWTH & INCOME FUND, INC.

POWER OF ATTORNEY
TO SIGN REGISTRATION STATEMENTS

The undersigned, duly elected directors and officers of SIT Growth & Income
Fund, Inc. (the "Company"), appoint Eugene C. Sit, Peter L. Mitchelson, Mary K.
Stern and Paul E. Rasmussen, or any of them, as attorney-in-fact for the purpose
of signing their names and on their behalf as directors and/or officers of the
Company and filing with the Securities and Exchange Commission or any other
regulatory authority as may be desirable or necessary, notifications,
registration statements and other filings, and any and all amendments to said
notifications, registration statements and other filings, and all exhibits
thereto and other documents, for the purpose of registering unissued shares of
common stock of the Company.

Signature Title Date

/s/ Eugene C. Sit Chairman (Principal Executive October 24, 1995
Eugene C. Sit Officer) & Director

/s/ Peter L. Mitchelson Vice Chairman & Director October 24, 1995
Peter L. Mitchelson

/s/ Mary K. Stern President October 24, 1995
Mary K. Stern

/s/ Paul E. Rasmussen Vice President & Treasurer October 24, 1995
Paul E. Rasmussen (Principal Financial and
Accounting Officer)

/s/ William E. Frenzel Director October 24, 1995
William E. Frenzel

/s/ John E. Hulse Director October 24, 1995
John E. Hulse

/s/ Sidney L. Jones Director October 24, 1995
Sidney L. Jones

/s/ Donald W. Phillips Director October 24, 1995
Donald W. Phillips

SIT MUTUAL FUNDS, INC.

POWER OF ATTORNEY
TO SIGN REGISTRATION STATEMENTS

The undersigned, duly elected directors and officers of SIT Mutual Funds,
Inc. (the "Company"), appoint Eugene C. Sit, Peter L. Mitchelson, Mary K. Stern
and Paul E. Rasmussen, or any of them, as attorney-in-fact for the purpose of
signing their names and on their behalf as directors and/or officers of the
Company and filing with the Securities and Exchange Commission or any other
regulatory authority as may be desirable or necessary, notifications,
registration statements and other filings, and any and all amendments to said
notifications, registration statements and other filings, and all exhibits
thereto and other documents, for the purpose of registering unissued shares of
common stock of the Company.

Signature Title Date

/s/ Eugene C. Sit Chairman (Principal Executive October 24, 1995
Eugene C. Sit Officer) & Director

/s/ Peter L. Mitchelson Vice Chairman & Director October 24, 1995
Peter L. Mitchelson

/s/ Mary K. Stern President October 24, 1995
Mary K. Stern

/s/ Paul E. Rasmussen Vice President & Treasurer October 24, 1995
Paul E. Rasmussen (Principal Financial and
Accounting Officer)

/s/ William E. Frenzel Director October 24, 1995
William E. Frenzel

/s/ John E. Hulse Director October 24, 1995
John E. Hulse

/s/ Sidney L. Jones Director October 24, 1995
Sidney L. Jones

/s/ Donald W. Phillips Director October 24, 1995
Donald W. Phillips