SIT LARGE CAP GROWTH FUND INC, 485BPOS, 2000-11-01

SIT LARGE CAP GROWTH FUND INC
485BPOS, 2000-11-01

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 1, 2000

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. _24_

AND/OR

REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 _X_
(File No. 811-03342)
Post-Effective Amendment No. _27_

SIT MID CAP GROWTH FUND, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)

4600 Wells Fargo Center, Minneapolis, Minnesota 55402
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

(612) 332-3223
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

Kelly K. Orning
Staff Attorney
Sit Mutual Funds
4600 Wells Fargo Center
Minneapolis, Minnesota 55402
(NAME AND ADDRESS OF AGENT FOR SERVICE)

COPY TO:
Michael J. Radmer, Esq.
Dorsey & Whitney
220 Pillsbury Center South
Minneapolis, Minnesota 55402

_XX_ immediately upon filing pursuant to paragraph (b) of rule 485
____ on (specify date) pursuant to paragraph (b) of rule 485
____ 60 days after filing pursuant to paragraph (a)(1) of rule 485
____ on (specify date) pursuant to paragraph (a)(1) of rule 485
____ 75 days after filing pursuant to paragraph (a)(2) of rule 485
____ on (specify date) pursuant to paragraph (a)(2) of rule 485

The Registrant has registered an indefinite number or amount of securities under
the Securities Act of 1933 pursuant to Rule 24f-2 under the Investment Company
Act of 1940. A Rule 24f-2 Notice for the Registrant's most recent fiscal year
was filed with the Securities and Exchange Commission on or about July 26, 2000.

<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 1, 2000

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. _24_

AND/OR

REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 _X_
(File No. 811-03343)
Post-Effective Amendment No. _27_

SIT LARGE CAP GROWTH FUND, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)

4600 Wells Fargo Center, Minneapolis, Minnesota 55402
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

(612) 332-3223
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

Kelly K. Orning
Staff Attorney
Sit Mutual Funds
4600 Wells Fargo Center
Minneapolis, Minnesota 55402
(NAME AND ADDRESS OF AGENT FOR SERVICE)

COPY TO:
Michael J. Radmer, Esq.
Dorsey & Whitney
220 Pillsbury Center South
Minneapolis, Minnesota 55402

<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 1, 2000

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. _18_

AND/OR

REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 _X_
(File No. 811-06373)
Post-Effective Amendment No. _19_

SIT MUTUAL FUNDS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)

4600 Wells Fargo Center, Minneapolis, Minnesota 55402
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

(612) 332-3223
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

Kelly K. Orning
Staff Attorney
Sit Mutual Funds
4600 Wells Fargo Center
Minneapolis, Minnesota 55402
(NAME AND ADDRESS OF AGENT FOR SERVICE)

COPY TO:
Michael J. Radmer, Esq.
Dorsey & Whitney
220 Pillsbury Center South
Minneapolis, Minnesota 55402

<PAGE>

STOCK FUNDS PROSPECTUS

NOVEMBER 1, 2000

BALANCED FUND

LARGE CAP GROWTH FUND

MID CAP GROWTH FUND

INTERNATIONAL GROWTH FUND

SMALL CAP GROWTH FUND

SCIENCE AND TECHNOLOGY GROWTH FUND

DEVELOPING MARKETS GROWTH FUND

[LOGO]
SIT MUTUAL FUNDS
----------------
<PAGE>

A FAMILY OF NO-LOAD FUNDS

SIT FAMILY OF FUNDS

[CHART]

STABILITY: INCOME: GROWTH: HIGH GROWTH:
SAFETY OF PRINCIPAL INCREASED INCOME LONG-TERM CAPITAL LONG-TERM CAPITAL
AND CURRENT INCOME APPRECIATION APPRECIATION
AND INCOME

MONEY MARKET U.S. GOVERNMENT BALANCED MID CAP GROWTH
SECURITIES LARGE CAP GROWTH INTERNATIONAL GROWTH
TAX-FREE INCOME SMALL CAP GROWTH
MINNESOTA TAX-FREE SCIENCE AND
INCOME TECHNOLOGY GROWTH
BOND DEVELOPING MARKETS
GROWTH

[ ] PRINCIPAL STABILITY & CURRENT INCOME [ ] GROWTH POTENTIAL

[LOGO]
SIT MUTUAL FUNDS
----------------

(Not part of Prospectus)

<PAGE>

SIT MUTUAL FUNDS

STOCK FUNDS PROSPECTUS

NOVEMBER 1, 2000

BALANCED FUND

LARGE CAP GROWTH FUND

MID CAP GROWTH FUND

INTERNATIONAL GROWTH FUND

SMALL CAP GROWTH FUND

SCIENCE AND TECHNOLOGY GROWTH FUND

DEVELOPING MARKETS GROWTH FUND

THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.

<PAGE>

TABLE OF CONTENTS

INTRODUCTION 1

FUND SUMMARIES
Investment Objectives and Principal Investment Strategies
BALANCED FUND 2
LARGE CAP GROWTH FUND 5
MID CAP GROWTH FUND 6
INTERNATIONAL GROWTH FUND 7
SMALL CAP GROWTH FUND 9
SCIENCE AND TECHNOLOGY GROWTH FUND 10
DEVELOPING MARKETS GROWTH FUND 12
Principal Investment Risks 14
Performance
BALANCED FUND 19
LARGE CAP GROWTH FUND 20
MID CAP GROWTH FUND 21
INTERNATIONAL GROWTH FUND 22
SMALL CAP GROWTH FUND 23
SCIENCE AND TECHNOLOGY GROWTH FUND 24
DEVELOPING MARKETS GROWTH FUND 25
Fees and Expenses 26

FUND MANAGEMENT
Investment Adviser 28
Investment Sub-Advisor 29
Portfolio Management 29
Distributor 30
Custodian and Transfer Agent 30

<PAGE>

SHAREHOLDER INFORMATION
Share Price 31
When Orders are Effective 31
Investing Through a Third Party 32
Other Account Policies 32
Purchasing Shares 33
Selling Shares 34
General Rules for Purchasing 7 Selling Shares 35
Dividends and Distributions 36
Retirement and other Tax-Deferred Accounts 37
Taxes 38

ADDITIONAL INFORMATION
Other Securities, Investment Practices, and Policies 39
Financial Highlights
BALANCED FUND 41
LARGE CAP GROWTH FUND 42
MID CAP GROWTH FUND 43
INTERNATIONAL GROWTH FUND 44
SMALL CAP GROWTH FUND 45
SCIENCE AND TECHNOLOGY GROWTH FUND 46
DEVELOPING MARKETS GROWTH FUND 47
For More Information back cover

<PAGE>

FUND SUMMARIES

INTRODUCTION

SIT MUTUAL FUNDS ARE A FAMILY OF NO-LOAD MUTUAL FUNDS OFFERING A SELECTION OF
FUNDS TO INVESTORS. EACH FUND HAS A DISTINCTIVE INVESTMENT OBJECTIVE AND
RISK/REWARD PROFILE.

THE SIT STOCK FUNDS CONSIST OF:

DOMESTIC GROWTH STOCK FUNDS

> Balanced Fund

> Large Cap Growth Fund

> Mid Cap Growth Fund

> Small Cap Growth Fund

> Science and Technology Growth Fund

INTERNATIONAL GROWTH STOCK FUNDS

> International Growth Fund

> Developing Markets Growth Fund

This Prospectus describes the seven stock funds that are a part of the Sit
Mutual Fund family. The descriptions on the following pages may help you choose
the Fund or Funds that best fit your investment goals. Keep in mind, however,
that no Fund can guarantee it will meet its investment objective, and no Fund
should be relied upon as a complete investment program.

The Fund Summaries section describes the principal strategies used by the Funds
in trying to achieve their objectives, and highlights the risks involved with
these strategies. It also provides you with information about the performance,
fees and expenses of the Funds.

1
<PAGE>

FUND SUMMARIES

BALANCED FUND

INVESTMENT OBJECTIVE

The Fund seeks long-term capital growth consistent with preservation of
principal and seeks to provide shareholders with regular income.

PRINCIPAL INVESTMENT STRATEGIES

The Fund seeks to achieve its objective by investing in a diversified portfolio
of stocks and bonds. In seeking to achieve the Fund's long-term capital growth
objective, the Fund invests in common stocks of growth companies. To provide
shareholders with regular income, the Fund invests in fixed-income securities
and/or common stocks selected primarily for their dividend payment potential.

Between 40% and 60% of the Fund's assets will be invested in common stocks and
between 40% and 60% in fixed-income securities. The Fund's allocation of assets
will vary over time in response to the Adviser's evaluation of present and
anticipated market and economic conditions.

The equity portion of the Fund's portfolio is invested primarily in the common
stocks of growth companies with a capitalization of $5 billion or more at the
time of purchase.

[LOGO]
THE FUND COMBINES THE INVESTMENT STRATEGIES OF THE SIT LARGE CAP GROWTH FUND AND
THE SIT BOND FUND.

2
<PAGE>

FUND SUMMARIES

BALANCED FUND CONTINUED

In selecting equity securities for the Fund, the Adviser invests in
growth-oriented companies it believes exhibit the potential for superior growth.
The Adviser believes that a company's earnings growth is the primary determinant
of its potential long-term return and evaluates a company's potential for above
average long-term earnings and revenue growth. Several factors are considered in
the Adviser's evaluation of a company, including:

> unique product or service,

> growing product demand,

> dominant and growing market share,

> management experience and capabilities, and

> strong financial condition.

When selling equity securities for the Fund, the Adviser considers several
factors, including changes in a company's fundamentals and anticipated earnings.

The fixed income portion of the Fund's portfolio is invested primarily in a
diversified portfolio of debt securities that may include the following
securities:

> mortgage-backed securities, such as securities issued by Government
National Mortgage Association (GNMA), Federal Home Loan Mortgage
Corporation (FHLMC) and Federal National Mortgage Association (FNMA), and
including collateralized mortgage obligations,

> asset-backed securities such as automobile and credit card receivables,
utilities, manufactured (mobile) home loans, home improvement loans and
home equity loans,

> obligations of the U.S. government, its agencies and instrumentalities,

> corporate debt securities,

> taxable municipal securities, and

> short-term debt obligations, including commercial paper and bank
instruments, such as certificates of deposit, time deposits, and bankers'
acceptances.

3
<PAGE>

FUND SUMMARIES

BALANCED FUND CONTINUED

The Fund invests primarily in debt securities that, at the time of purchase, are
either rated investment-grade or, if unrated, determined to be of comparable
quality by the Adviser. Unrated securities will not exceed 20% of the
fixed-income portion of the Fund's portfolio.

In selecting fixed-income securities for the Fund, the Adviser seeks
fixed-income securities providing maximum total return. In making purchase and
sales decisions for the Fund, the Adviser considers its economic outlook and
interest rate forecast, as well as its evaluation of a fixed-income security's
credit quality, yield, maturity, and liquidity. Based upon its economic outlook,
the Adviser attempts to shift the fixed-income sector concentrations of the
portfolio. Based upon its interest rate forecast, the Adviser attempts to shift
the fixed-income portfolio's average effective duration, seeking to maintain an
average effective duration for the fixed-income portion of the Fund's portfolio
of 3 to 7 years.

RISKS

You could lose money by investing in the Fund. The principal risks of investing
in the Fund are Stock Market Risk, Management Risk, Interest Rate Risk,
Prepayment Risk, Credit Risk, Income Risk, and Call Risk. See pages 14-15 for a
discussion of these risks.

4
<PAGE>

FUND SUMMARIES

LARGE CAP GROWTH FUND

INVESTMENT OBJECTIVE

The Fund seeks to maximize long-term capital appreciation.

PRINCIPAL INVESTMENT STRATEGIES

The Fund seeks to achieve its objective by investing at least 65% of its total
assets in the common stocks of domestic growth companies with capitalizations of
$5 billion or more at the time of purchase.

The Adviser invests in growth-oriented companies it believes exhibit the
potential for superior growth. The Adviser believes that a company's earnings
growth is the primary determinant of its potential long-term return and
evaluates a company's potential for above average long-term earnings and revenue
growth. Several factors are considered in the Adviser's evaluation of a company,
including:

> unique product or service,

> growing product demand,

> dominant and growing market share,

> management experience and capabilities, and

> strong financial condition.

When selling equity securities for the Fund, the Adviser considers several
factors, including changes in a company's fundamentals and anticipated earnings.

RISKS

You could lose money by investing in the Fund. The principal risks of investing
in the Fund are Stock Market Risk and Management Risk. See page 14 for a
discussion of these risks.

[LOGO]
THE FUND INVESTS IN COMPANIES HAVING A MARKET CAPITALIZATION OF $5 BILLION OR
MORE

[LOGO]
THE FUND INVESTS PRIMARILY IN "BLUE CHIP" STOCKS ISSUED BY COMPANIES WITH LONG
RECORDS OF PROFIT GROWTH.

5
<PAGE>

FUND SUMMARIES

MID CAP GROWTH FUND

INVESTMENT OBJECTIVE

The Fund seeks to maximize long-term capital appreciation.

PRINCIPAL INVESTMENT STRATEGIES

The Fund seeks to achieve its objective by investing at least 65% of its total
assets in the common stocks of growth companies with capitalizations of $2
billion to $15 billion at the time of purchase.

The Adviser invests in a diversified group of growing medium to small companies
it believes exhibit the potential for superior growth. The Adviser believes that
a company's earnings growth is the primary determinant of its potential
long-term return and evaluates a company's potential for above average long-term
earnings and revenue growth. Several factors are considered in the Adviser's
evaluation of a company, including:

> unique product or service,

> growing product demand,

> dominant and growing market share,

> management experience and capabilities, and

> strong financial condition.

When selling equity securities for the Fund, the Adviser considers several
factors, including changes in a company's fundamentals and anticipated earnings.

RISKS

You could lose money by investing in the Fund. The principal risks of investing
in the Fund are Stock Market Risk, Management Risk, and Smaller Company Risk.
See pages 14-15 for a discussion of these risks.

[LOGO]
THE FUND INVESTS IN COMPANIES HAVING A MARKET CAPITALIZATION OF $2 BILLION TO
$15 BILLION.

6
<PAGE>

FUND SUMMARIES

INTERNATIONAL GROWTH FUND

INVESTMENT OBJECTIVE

The Fund seeks long-term growth.

PRINCIPAL INVESTMENT STRATEGIES

The Fund seeks to achieve its objective by investing at least 90% of its total
assets in common stocks of growth companies domiciled outside the United States.

In selecting investments for the Fund, the Sub-Adviser begins by selecting
countries or regions in which to invest. In making its selections, the
Sub-Adviser considers several factors affecting the economy and equity market of
foreign countries and regions, including:

> economic trends,

> earnings outlook,

> liquidity within the market,

> fiscal and monetary policy,

> currency exchange rate expectations,

> market sentiment, and

> social and political trends.

After the country and regional allocations are determined, the Sub-Adviser seeks
industries and sectors that it believes have earnings growth prospects that are
greater than the average. Within the selected industries and sectors, the
Sub-Adviser invests in foreign growth-oriented companies it believes exhibit the
potential for superior growth. The Sub-Adviser believes that a company's
earnings growth is the primary determinant of its potential long-term return and
evaluates a company's potential for above average long-term earnings and revenue
growth. Several factors are considered in the Adviser's evaluation of a company,
including:

7
<PAGE>

FUND SUMMARIES

INTERNATIONAL GROWTH FUND CONTINUED

> unique product or service,

> growing product demand,

> dominant and growing market share,

> management experience and capabilities, and

> strong financial condition.

When selling equity securities for the Fund, the Adviser considers several
factors, including changes in a company's fundamentals and anticipated earnings.

The Fund invests in common stocks of issuers domiciled in at least three foreign
countries. Up to 50% of the Fund's total assets may be invested in equity
securities of small- to medium-sized emerging growth companies in developed
markets (such as Germany and Japan) and developing markets (such as Thailand and
Brazil). Emerging growth companies are small- and medium-sized companies that
the 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.

The Fund may invest in securities representing underlying international
securities such as American Depository Receipts, European Depository Receipts
and Global Depository Receipts.

In order to hedge against adverse movements in currency exchange rates, the Fund
may from time to time enter into forward foreign currency exchange contracts.

RISKS

You could lose money by investing in the Fund. The principal risks of investing
in the Fund are Stock Market Risk, Management Risk, Risk of International
Investing, Currency Risk, Liquidity Risk, Political and Economic Risk, Foreign
Tax Risk, Risk of Investment Restrictions, Foreign Securities Market Risk,
Information Risk, Risk of Developing Markets, and Risk of Foreign Currency
Hedging Transactions. See pages 14-18 for a discussion of these risks.

8
<PAGE>

FUND SUMMARIES

SMALL CAP GROWTH FUND

INVESTMENT OBJECTIVE

The Fund seeks to maximize long-term capital appreciation.

PRINCIPAL INVESTMENT STRATEGIES

The Fund seeks to achieve its objective by investing at least 65% of its total
assets in common stocks of small growth companies with capitalizations of $2.5
billion or less at the time of purchase.

The Adviser invests in a diversified group of growing small companies it
believes exhibit the potential for superior growth. The Adviser believes that a
company's earnings growth is the primary determinant of its potential long-term
return and evaluates a company's potential for above average long-term earnings
and revenue growth. Several factors are considered in the Adviser's evaluation
of a company, including:

> unique product or service,

> growing product demand,

> dominant and growing market share,

> management experience and capabilities, and

> strong financial condition.

When selling equity securities for the Fund, the Adviser considers several
factors, including changes in a company's fundamentals and anticipated earnings.

RISKS

You could lose money by investing in the Fund. The principal risks of investing
in the Fund are Stock Market Risk, Management Risk, Smaller Company Risk and
Liquidity Risk. See pages 14-15 for a discussion of these risks.

[LOGO]
THE FUND INVESTS IN COMPANIES HAVING A MARKET CAPITALIZATION OF $2.5 BILLION OR
LESS.

9
<PAGE>

FUND SUMMARIES

SCIENCE AND TECHNOLOGY GROWTH FUND

INVESTMENT OBJECTIVE

The Fund seeks to maximize long-term capital appreciation.

PRINCIPAL INVESTMENT STRATEGIES

The Fund seeks to achieve its objective by investing at least 80% of its total
assets in common stocks of companies principally engaged in science and
technology business activities. Such companies include those whose assets, gross
income, or net profits are significantly committed to, or derived from, science
and technology. The Adviser seeks stocks of science and technology companies
having superior growth potential in virtually any industry in which they may be
found. These industries may include:

> aerospace,

> chemistry,

> electronic technology (including electronic components, computer systems
and peripherals and networking equipment),

> environmental services,

> genetic engineering,

> geology,

> information sciences (including software, telecommunication, data
processing and information technology services),

> medicine (including pharmacology, biotechnology and biophysics), and

> hospital supply and medical devices.

10
<PAGE>

FUND SUMMARIES

SCIENCE AND TECHNOLOGY GROWTH FUND CONTINUED

The Adviser invests in growth-oriented companies it believes exhibit the
potential for superior growth. The Adviser believes that a company's earnings
growth is the primary determinant of its potential long-term return and
evaluates a company's potential for above average long-term earnings and revenue
growth. The Fund's investments will include stocks of small, mid and large cap
companies. Several factors are considered in the Adviser's evaluation of a
company, including:

> unique product or service,

> growing product demand,

> dominant and growing market share,

> management experience and capabilities, and

> strong financial condition.

When selling equity securities for the Fund, the Adviser considers several
factors, including changes in a company's fundamentals and anticipated earnings.

RISKS

You could lose money by investing in the Fund. The principal risks of investing
in the Fund are Stock Market Risk, Management Risk, Smaller Company Risk and
Technology Stock Risk. See pages 14-16 for a discussion of these risks.

11
<PAGE>

FUND SUMMARIES

DEVELOPING MARKETS GROWTH FUND

INVESTMENT OBJECTIVE

The Fund seeks to maximize long-term capital appreciation.

PRINCIPAL INVESTMENT STRATEGIES

The Fund seeks to achieve its objective by investing at least 65% of its total
assets in common stocks of companies domiciled or operating in a developing
market.

Developing markets are those countries that:

> have emerging stock markets as defined by the International Finance
Corporation,

> have low-to middle-income economies according to the World Bank, or

> are listed in World Bank publications as "developing."

As of September 30, 2000, the Fund held investments in Hong Kong, Indonesia,
Philippines, South Korea, Taiwan, Thailand, Greece, Spain, Brazil, Mexico,
Israel and South Africa.

> economic trends,

> earnings outlook,

> liquidity within the market,

> fiscal and monetary policy,

> currency exchange rate expectations,

> investment valuation,

> market sentiment, and

> social and political trends.

12
<PAGE>

FUND SUMMARIES

DEVELOPING MARKETS GROWTH FUND CONTINUED

After the country and regional allocations are determined, the Sub-Adviser seeks
industries and sectors that appear to have strong earnings growth prospects.
Within the selected industries and sectors, the Sub-Adviser invests in foreign
growth-oriented companies it believes exhibit the potential for superior growth.
The Sub-Adviser believes that a company's earnings growth is the primary
determinant of its potential long-term return and evaluates a company's
potential for above average long-term earnings and revenue growth. Several
factors are considered in the Adviser's evaluation of a company, including:

> unique product or service,

> growing product demand,

> regional or country dominance and growing market share,

> management experience and capabilities, and

> strong financial condition.

When selling equity securities for the Fund, the Sub-Adviser considers several
factors, including changes in a company's fundamentals and anticipated earnings.

The Fund may invest in securities representing underlying international
securities such as American Depository Receipts, European Depository Receipts
and Global Depository Receipts.

In order to hedge against adverse movements in currency exchange rates, the Fund
may from time to time enter into forward foreign currency exchange contracts.

RISKS

You could lose money by investing in the Fund. The principal risks of
investing in the Fund are Stock Market Risk, Management Risk, Risk of
International Investing, Currency Risk, Liquidity Risk, Political and Economic
Risk, Foreign Tax Risk, Risk of Investment Restrictions, Foreign Securities
Market Risk, Information Risk, Risk of Developing Markets, and Risk of Foreign
Currency Hedging Transactions. See pages 14-18 for a discussion of these risks.

13
<PAGE>

FUND SUMMARIES

PRINCIPAL INVESTMENT RISKS

All investments carry some degree of risk which will affect the value of a
Fund's investments, investment performance, and price of its shares. IT IS
POSSIBLE TO LOSE MONEY BY INVESTING IN THE FUNDS.

The principal risks of investing in the Funds include:

RISKS THAT APPLY TO ALL FUNDS

> Stock Market Risk: The value of the stocks in which a Fund invests may go
up or down in response to the activities of individual companies, the stock
market and general economic conditions. Stock prices may decline over short
or extended periods. As of the date of this Prospectus, U.S. stock markets
and certain foreign markets are trading at or close to record high levels.
There is no guarantee that such levels will continue.

> Management Risk: A strategy used by the investment management team may not
produce the intended results.

RISKS THAT APPLY PRIMARILY TO THE BALANCED FUND

> Interest Rate Risk: Due to the Fund's investments in fixed-income
securities, an increase in interest rates may lower the Fund's value and
the overall return on your investment. The magnitude of this decrease is
often greater for longer-term fixed income securities than shorter-term
securities.

> Prepayment Risk: Declining interest rates may compel borrowers to prepay
mortgages and debt obligations underlying the mortgage-backed securities
and manufactured home loan pass-through securities owned by the Fund. The
proceeds received by the Fund from prepayments will likely be reinvested at
interest rates lower than the original investment, thus resulting in a
reduction of income to the Fund. Likewise, rising interest rates could
reduce prepayments and extend the life of securities with lower interest
rates, which may increase the sensitivity of the Fund's value to rising
interest rates.

14
<PAGE>

FUND SUMMARIES

> Credit Risk: The issuers or guarantors of fixed-income securities owned by
the Fund may default on the payment of principal or interest, or on other
obligations to the Fund, causing the value of the Fund to decrease.

> Income Risk: The income you earn from the Fund may decline due to declining
interest rates.

> Call Risk: Many bonds may be redeemed ("called") at the option of the
issuer before their stated maturity date. In general, an issuer will call
its bonds if they can be refinanced by issuing new bonds which bear a lower
interest rate. The Fund would then be forced to invest the unanticipated
proceeds at lower interest rates, resulting in a decline in the Fund's
income.

RISK THAT APPLIES PRIMARILY TO THE MID CAP GROWTH, SMALL CAP GROWTH, AND SCIENCE
AND TECHNOLOGY GROWTH FUNDS

> Smaller Company Risk: Stocks of smaller companies may be subject to more
abrupt or erratic market movements than stocks of larger, more established
companies. Small companies may have limited product lines or financial
resources, or may be dependent upon a small or inexperienced management
group. In addition, small cap stocks typically are traded in lower volume,
and their issuers typically are subject to greater degrees of change in
their earnings and prospects.

RISK THAT APPLIES PRIMARILY TO THE SMALL CAP GROWTH FUND

> Liquidity Risk: Certain securities may be difficult to sell at the time and
price that the Adviser would like to sell. The Adviser may have to lower
the selling price, sell other securities instead or forego an investment
opportunity, any of which could have a negative effect on fund performance.
During unusual market conditions, unusually high volume of redemption
requests or other reasons, the Fund may not be able to pay redemption
proceeds within the time periods described in this Prospectus.

15
<PAGE>

FUND SUMMARIES

RISK THAT APPLIES PRIMARILY TO THE SCIENCE AND TECHNOLOGY GROWTH FUND

> Technology Stock Risk: Stocks of science and technology companies may be
subject to greater price volatility than stocks of companies in other
sectors or the overall stock market. Science and technology companies may
produce or use products or services that prove commercially unsuccessful,
become obsolete or become adversely impacted by government regulation.
Technology stocks may experience significant price movements caused by
disproportionate investor optimism or pessimism. The Fund may be more
affected by events influencing these sectors than a fund that is more
diversified across numerous sectors.

RISKS THAT APPLY PRIMARILY TO THE INTERNATIONAL GROWTH AND DEVELOPING MARKETS
GROWTH FUNDS

> Risk of International Investing: International investing involves risks not
typically associated with domestic investing. Because of these risks, and
because of the Sub-Adviser's ability to invest substantial portions of the
Funds' assets in a small number of countries, the Funds may be subject to
greater volatility than mutual funds that invest principally in domestic
securities.

> Currency Risk: The value of the Funds' securities computed in U.S. dollars
will vary with increases and decreases in exchange rates. 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 a Fund's holdings of securities
denominated in that currency.

> Political and Economic Risk: Investing in securities of non-U.S. companies
may entail additional risks due to the potential political, social and
economic instability of certain countries, changes in international trade
patterns, the possibility of the imposition of exchange controls,
expropriation, limits on removal of currency or other assets and
nationalization of assets.

16
<PAGE>

FUND SUMMARIES

> Foreign Tax Risk: Each Fund's income from foreign issuers may be subject to
non-U.S. withholding taxes. In some countries, the Funds also may be
subject to taxes on trading profits and, on certain securities
transactions, transfer or stamp duties tax. To the extent foreign income
taxes are paid by a Fund, U.S. shareholders may be entitled to a credit or
deduction for U.S. tax purposes. See the Statement of Additional
Information for details.

> Risk of Investment Restrictions: Some countries, particularly developing
markets, restrict to varying degrees foreign investment in their securities
markets. In some circumstances, these restrictions may limit or preclude
investment in certain countries or may increase the cost of investing in
securities of particular companies.

> Foreign Securities Market Risk: Securities of many non-U.S. companies may
be less liquid and their prices more volatile than securities of comparable
U.S. companies. Securities of companies traded in many countries outside
the U.S., particularly developing markets countries, may be subject to
further risks due to the inexperience of local brokers and financial
institutions, the possibility of permanent or temporary termination of
trading, and greater spreads between bid and asked prices for securities.
In addition, non-U.S. stock exchanges and brokers are subject to less
governmental regulation, and commissions may be higher than in the United
States. Also, there may be delays in the settlement of non-U.S. stock
exchange transactions.

> Liquidity Risk: Certain securities of non-U.S. companies may be difficult
to sell at the time and price that the Adviser would like to sell. The
Adviser may have to lower the selling price, sell other securities instead
or forego an investment opportunity, any of which could have a negative
effect on fund performance. During unusual market conditions, unusually
high volume of redemption requests or other reasons, the Fund may not be
able to pay redemption proceeds within the time periods described in this
Prospectus.

17
<PAGE>

FUND SUMMARIES

> Information Risk: Non-U.S. companies generally are not subject to uniform
accounting, auditing and financial reporting standards or to other
regulatory requirements that apply to U.S. companies. As a result, less
information may be available to investors concerning non-U.S. issuers.
Accounting and financial reporting standards in developing markets may be
especially lacking.

> Risk of Developing Markets: Investing in securities of issuers in
developing markets involves exposure to economic infrastructures that are
generally less diverse and mature than, and to political systems that can
be expected to have less stability than, those of developed countries.
Other characteristics of developing market countries that may affect
investment in their markets include certain governmental policies that may
restrict investment by foreigners and the absence of developed legal
structures governing private and foreign investments and private property.
The typical small size of the markets for securities issued by issuers
located in developing markets and the possibility of low or nonexistent
volume of trading in those securities may also result in a lack of
liquidity and in price volatility of those securities. In addition, issuers
in developing markets typically are subject to a greater degree of change
in earnings and business prospects than are companies in developed markets.

> Risk of Foreign Currency Hedging Transactions: If the Sub-Adviser's
forecast of exchange rate movements is incorrect, the Funds may realize
losses on their foreign currency transactions. In addition, the Funds'
hedging transactions may prevent the Funds from realizing the benefits of a
favorable change in the value of foreign currencies.

18
<PAGE>

FUND SUMMARIES

PERFORMANCE

The following information illustrates how each Fund's performance has varied
over time, which is one indication of the risks of investing in a Fund. A Fund's
past performance does not necessarily indicate how it will perform in the
future. Each bar chart depicts the change in a Fund's performance from year to
year. Each table depicts a Fund's average annual total returns for the periods
indicated. Both the charts and the tables assume that all distributions have
been reinvested.

BALANCED FUND

TOTAL RETURN FOR THE CALENDAR YEARS ENDED 12/31(1)

[BAR CHART]

-0.33% 25.43% 15.80% 21.73% 21.30% 20.15%
-------------------------------------------------------------
1994 1995 1996 1997 1998 1999

(1) The Fund's year-to-date return as of 9/30/00 (not annualized) was 3.15%.

Best Quarter: 15.59% (4th Q 1999) Worst Quarter: -7.32% (3rd Q 1998)

AVERAGE ANNUAL TOTAL RETURN AS OF 12/31/99

Since Inception
1-Year 5-Years (12/31/93)
-------------------------------------------------------------------------------
BALANCED FUND 20.15% 20.84% 17.02%

S&P 500 Index(1) 21.04% 28.55% 23.54%

Lehman Aggregate Bond Index(2) -0.82% 7.73% 5.88%

(1) An unmanaged index which measures the performance of 500 widely held common
stocks of large-cap companies.
(2) An unmanaged index which measures the performance of U.S. investment-grade
bonds. It is composed of investment-grade securities from the Lehman
Government/Corporate Bond Index, Mortgage-Backed Securities Index, and the
Asset-Backed Securities Index.

19
<PAGE>

FUND SUMMARIES

LARGE CAP GROWTH FUND

TOTAL RETURN FOR THE CALENDAR YEARS ENDED 12/31(1)

[BAR CHART]

-2.37% 32.72% 4.94% 3.15% 2.83% 31.66% 23.05% 31.70% 30.56% 33.41%
------------------------------------------------------------------------------
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

(1) The Fund's year-to-date return as of 9/30/00 (not annualized) was 1.98%.

Best Quarter: 26.01% (4th Q 1999) Worst Quarter: -13.54% (3rd Q 1998)

AVERAGE ANNUAL TOTAL RETURN AS OF 12/31/99

1-Year 5-Years 10-Years
-------------------------------------------------------------------------------
LARGE CAP GROWTH FUND 33.41% 30.02% 18.28%

S&P 500 Index(1) 21.04% 28.55% 18.22%

Russell 1000 Growth Index(2) 33.16% 32.42% 20.32%

(1) An unmanaged index which measures the performance of 500 widely held common
stocks of large cap companies.

(2) An unmanaged index which measures the performance of those Russell 1000
companies with higher price-to-book ratios and higher forecasted growth
values.

20
<PAGE>

FUND SUMMARIES

MID CAP GROWTH FUND

TOTAL RETURN FOR THE CALENDAR YEARS ENDED 12/31(1)

[BAR CHART]

-2.04% 65.50% -2.14% 8.55% -0.47% 33.64% 21.87% 17.70% 6.84% 70.65%
------------------------------------------------------------------------------
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

(1) The Fund's year-to-date return as of 9/30/00 (not annualized) was 24.21%.

Best Quarter: 45.95% (4th Q 1999) Worst Quarter; -19.10% (3rd Q 1998)

AVERAGE ANNUAL TOTAL RETURN AS OF 12/31/99

1-Year 5-Years 10-Years
-------------------------------------------------------------------------------
MID CAP GROWTH FUND 70.65% 28.43% 19.60%

S&P MidCap 400 Index(1) 14.72% 23.05% 17.32%

Russell MidCap Growth Index(2) 51.29% 28.02% 18.96%

(1) An unmanaged index which measures the performance of 400 widely held common
stocks of mid cap companies.

(2) An unmanaged index which measures the performance of those Russell Midcap
companies with higher price-to-book ratios and higher forecasted growth
values. The stocks are also members of the Russell 1000 Growth index.

Recent high double digit returns were obtained during unusually favorable market
conditions and may not be repeated or consistently achieved in the future.

21
<PAGE>

FUND SUMMARIES

INTERNATIONAL GROWTH FUND

TOTAL RETURN FOR THE CALENDAR YEARS ENDED 12/31(1)

[BAR CHART]

4.10%(2) 2.69% 48.37% -2.99% 9.36% 10.31% 4.81% 18.95% 50.77%
-------------------------------------------------------------------------------
1991 1992 1993 1994 1995 1996 1997 1998 1999

(1) The Fund's year-to-date return as of 9/30/00 (not annualized) was -16.64%.

(2) Period from Fund inception (11/01/91) through calendar year-end.

Best Quarter: 38.12% (4th Q 1999) Worst Quarter: -14.87% (2nd Q 2000)

AVERAGE ANNUAL TOTAL RETURN AS OF 12/31/99

Since Inception
1-Year 5-Years (11/1/91)
-------------------------------------------------------------------------------
INTERNATIONAL GROWTH FUND 50.77% 17.79% 16.52%

Morgan Stanley Capital Int'l EAFE Index(1) 26.96% 12.83% 10.73%

Lipper International Fund Index(2) 37.83% 15.96% 13.66%

(1) An unmanaged index which measures the performance of international
companies screened for liquidity, cross ownership, and industry
representation within the stock markets of Europe, Australia, New Zealand,
and the Far East.

(2) An equally weighted index composed of the largest mutual funds, within the
international fund classification, adjusted for the reinvestment for
capital gains distributions and income dividends. International funds are
those funds that invest fund assets in securities with primary trading
markets outside of the United States.

22
<PAGE>

FUND SUMMARIES

SMALL CAP GROWTH FUND

TOTAL RETURN FOR THE CALENDAR YEARS ENDED 12/31(1)

[BAR CHART]

11.57%(2) 52.16% 14.97% 7.63% 1.97% 108.63%
------------------------------------------------------------
1994 1995 1996 1997 1998 1999

(1) The Fund's year-to-date return as of 9/30/00 (not annualized) was 32.31%.

(2) Period from Fund inception (07/01/94) through calendar year-end.

Best Quarter: 64.59% (4th Q 1999) Worst Quarter: -17.05 (3rd Q 1998)

AVERAGE ANNUAL TOTAL RETURN AS OF 12/31/99

Since Inception
1-Year 5-years (7/1/94)
-------------------------------------------------------------------------------
SMALL CAP GROWTH FUND 108.63% 31.99% 31.26%

Russell 2000 Index(1) 21.26% 16.69% 16.00%

Russell 2000 Growth Index(2) 43.10% 18.99% 18.85%

(1) An unmanaged index which measures the performance of the 2,000 smallest
companies in the Russell 3000 Index (an index of the 3,000 largest U.S.
companies based on total market capitalization).

(2) An unmanaged index which measures the performance of those Russell 2000
companies with higher price-to-book ratios and higher forecasted growth
values.

Recent high double or triple digit returns were obtained during unusually
favorable market conditions and may not be repeated or consistently achieved in
the future.

23
<PAGE>

FUND SUMMARIES

SCIENCE AND TECHNOLOGY GROWTH FUND

TOTAL RETURN FOR THE CALENDAR YEARS ENDED 12/31(1)

[BAR CHART]

38.40% 85.98%
--------------------
1998 1999

(1) The Fund's year-to-date return as of 9/30/00 (not annualized) was 35.16%

Best Quarter: 55.15% (4th Q 1999) (Worst Quarter: -6.29% (3rd Q 1998)

AVERAGE ANNUAL TOTAL RETURN AS OF 12/31/99

Since Inception
1-Year (12/31/97)
-------------------------------------------------------------------------------
SCIENCE AND TECHNOLOGY GROWTH FUND 85.98% 60.44%

S&P 500 Index(1) 21.04% 24.75%

(1) An unmanaged index which measures the performance of 500 widely held common
stocks of large-cap companies.

Recent high double digit returns were obtained during unusually favorable market
conditions and may not be repeated or consistently achieved in the future.

24
<PAGE>

FUND SUMMARIES

DEVELOPING MARKETS GROWTH FUND

TOTAL RETURN FOR THE CALENDAR YEARS ENDED 12/31(1)

[BAR CHART]

-2.02%(2) -4.29% 17.27% -5.20% -24.93% 82.50%
----------------------------------------------------------------
1994 1995 1996 1997 1998 1999

(1) The Fund's year-to-date return as of 9/30/00 (not annualized) was -16.50%.

(2) Period from Fund inception (7/01/94) through calendar year-end.

Best Quarter: 48.17% (4th Q 1999) Worst Quarter: -23.09% (3rd Q 1998)

AVERAGE ANNUAL TOTAL RETURN AS OF 12/31/99

Since Inception
1-Year 5-Year (7/1/94)
-------------------------------------------------------------------------------
DEVELOPING MARKETS GROWTH FUND 82.50% 7.83% 6.69%

MSCI Emerging Markets Free Index(1) 63.70% -0.13% 0.38%

Lipper Emerging Market Fund Index(2) 68.96% 3.02% 3.14%

(1) An unmanaged index which measures the performance of over 1,000
international emerging companies representing the stock markets of over 25
countries.

(2) An equally weighted index composed of the largest mutual funds within the
emerging market fund classification, adjusted for the reinvestment of
capital gains distributions and income dividends. Emerging market funds are
those funds that seek long-term capital appreciation by investing at least
65% of total assets in emerging market equity securities, where "emerging
market" is defined by a country's GNP per capita or other economic
measures.

Recent high double digit returns were obtained during unusually favorable market
conditions and may not be repeated or consistently achieved in the future.

25
<PAGE>

FUND SUMMARIES

FEES AND EXPENSES

This table shows fees and expenses that you may pay if you buy and hold shares
of the Funds. All Sit Mutual Funds are no-load investments, so you will not pay
any shareholder fees such as sales loads, redemption fees or exchange fees when
you buy or sell shares of the Funds. However, when you hold shares of a Fund you
indirectly pay a portion of the Fund's operating expenses. These expenses are
deducted from Fund assets.

SHAREHOLDER FEES (fees paid directly from your investment) None
-----------------------------------------------------------------------------

ANNUAL FUND OPERATING EXPENSES AS A % OF AVERAGE NET ASSETS
-----------------------------------------------------------------------------

Management Distribution Other Total Annual
Fees (12b-1) Fees Expenses Fund Operating
Expenses

Balanced 1.00% None None 1.00%

Large Cap Growth 1.00% None None 1.00%

Mid Cap Growth 1.25%(1) None None 1.25%(1)

International Growth 1.85%(1) None None 1.85%(1)

Small Cap Growth 1.50% None None 1.50%

Science and Technology Growth 1.50%(1) None None 1.50%(1)

Developing Markets Growth 2.00% None None 2.00%
-----------------------------------------------------------------------------

(1) Management fees do not reflect the Adviser's waiver of fees. Actual
expenses are lower than those shown in the table because of voluntary fee
waivers by the Adviser. As a result of the fee waivers, actual management
fees paid by the Mid Cap Growth, International Growth, and Science and
Technology Growth Funds were 1.00%, 1.50% and 1.25%, respectively, of the
Fund's average daily net assets. After December 31, 2000, actual management
fees paid by the Mid Cap Growth, International Growth, and Science and
Technology Growth Funds will be 1.15%, 1.50% and 1.35%, respectively, of
the Fund's average daily net assets. After December 31, 2001, these fee
waivers may be terminated at any time by the Adviser.

26
<PAGE>

FUND SUMMARIES

EXAMPLE

This example is intended to help you compare the cost of investing in each Fund
(before the fee waiver) with the cost of investing in other mutual funds. It
assumes that you invest $10,000 in a Fund for the time periods indicated (with
reinvestment of all dividends and distributions), that your investment has a 5%
return each year, that the Fund's operating expenses remain the same, and that
you redeem all of your shares at the end of those periods. Although your actual
costs and returns may differ, based on these assumptions your costs would be:

1-Year 3-Years 5-Years 10-Years
--------------------------------------------------------------------------------
Balanced $103 $320 $ 555 $1,229

Large Cap Growth $103 $320 $ 555 $1,229

Mid Cap Growth $128 $399 $ 690 $1,518

International Growth $190 $587 $1,009 $2,184

Small Cap Growth $154 $477 $ 824 $1,801

Science and Technology Growth $154 $477 $ 824 $1,801

Developing Markets Growth $205 $633 $1,087 $2,345

27
<PAGE>

FUND MANAGEMENT

INVESTMENT ADVISOR

Sit Investment Associates, Inc. (the "Adviser"), 4600 Wells Fargo Center,
Minneapolis, Minnesota 55402, is the Funds' investment adviser. The Adviser was
founded in 1981 and provides investment management services for both public and
private clients. As of September 30, 2000, the Adviser had approximately $10.4
billion in assets under management, including approximately $2.3 billion for the
12 Sit Mutual Funds.

Under Investment Management Agreements between each Fund and the Adviser (the
"Agreements"), the Adviser manages each Fund's business and investment
activities, subject to the authority of the board of directors. The Agreements
require the Adviser to bear each Fund's expenses except interest, brokerage
commissions and transaction charges and certain extraordinary expenses. Each
Fund pays the Adviser a monthly fee for its services. During their most recent
fiscal year, after taking into account voluntary fee waivers, the Funds paid the
following advisory fees to the Adviser:

ADVISORY FEE AS A % OF
FUND AVERAGE DAILY NET ASSETS
-----------------------------------------------------------------------------
Balanced Fund 1.00%

Large Cap Growth Fund 1.00%

Mid Cap Growth Fund 1.00%(1)

International Growth Fund 1.50%(1)

Small Cap Growth Fund 1.50%

Science and Technology Growth Fund 1.25%(1)

Developing Markets Growth Fund 2.00%
-----------------------------------------------------------------------------

(1) Net of voluntary fee waivers. After December 31, 2000, the Adviser has
agreed to waive fees paid by the Mid Cap Growth, International Growth, and
Science and Technology Growth Funds such that the fees paid net of the
voluntary waiver will be equal to 1.15%, 1.50% and 1.35%, respectively, of
the Fund's average daily net assets. The contractual fees (without waivers)
for the Mid Cap Growth, International Growth, and Science and Technology
Growth Funds are 1.25%, 1.85%, and 1.50%, per year, respectively, of the
Fund's average daily net assets. After December 31, 2001, these fee waivers
may be terminated at any time by the Adviser.

28
<PAGE>

FUND MANAGEMENT

INVESTMENT SUB-ADVISER

Sit/Kim International Investment Associates, Inc. (the "Sub-Adviser"), 4600
Wells Fargo Center, Minneapolis, Minnesota 55402, is the Sub-Adviser for the
Developing Markets Growth and International Growth Funds. The Sub-Adviser was
founded in 1989 and is a majority owned subsidiary of the Adviser. The
Sub-Adviser is an international investment management firm and as of September
30, 2000, had approximately $2.2 billion in assets under management. The
Sub-Adviser has offices in New York and San Francisco.

Under a Sub-Advisory Agreement with the Adviser, the Adviser pays the
Sub-Adviser a portion of its advisory fee for managing the Developing Market
Growth and International Growth Funds' investment activities.

PORTFOLIO MANAGEMENT

The Funds' investment decisions are made by a team. Eugene C. Sit is the
Adviser's Chief Investment Officer and oversees the investment decisions for the
Funds. Peter L. Mitchelson is the Adviser's President and Chief Strategist.
Roger J. Sit is the Adviser's Executive Vice President - Research and Investment
Management. Mr. Eugene C. Sit and Mr. Mitchelson have been with the Adviser and
each of the Funds since their inception. Mr. Roger Sit joined the Adviser in
early 1998 with 9 years of investment management experience.

Sit/Kim International Investment Associates, Inc. is the Sub-Adviser for the
International Growth Fund and the Developing Markets Growth Fund. Eugene C. Sit
is the Sub-Adviser's Chief Investment Officer. Roger J. Sit is Deputy Chief
Investment Officer of the Sub-Adviser. Mr. Eugene Sit has been with the
Sub-Adviser and the international funds since their inception. Mr. Roger Sit
joined the Sub-Adviser in early 1998 with 9 years of investment management
experience.

29
<PAGE>

FUND MANAGEMENT

DISTRIBUTOR

SIA Securities Corp. (the "Distributor"), an affiliate of the Adviser, is the
distributor for the Funds. The Distributor markets the Funds' shares only to
certain institutional and individual investors and all other sales of the Funds'
shares are made by each Fund.

The Distributor or the Adviser may enter into agreements under which various
financial institutions and brokerage firms provide administrative services for
customers who are beneficial owners of shares of the Funds. The Distributor or
Adviser may compensate these firms for the services provided, with compensation
based on the aggregate assets of customers that are invested in the Funds.

CUSTODIAN AND TRANSFER AGENT

The Northern Trust Company, located at 50 South LaSalle Street, Chicago, IL
60675, is the Custodian for the Funds.

PFPC Inc. (formally First Data Investor Services Group, Inc.) located at 4400
Computer Drive, Westboro, MA 01581, is the Transfer Agent for the Funds.

[LOGO]
THE CUSTODIAN HOLDS THE FUNDS' 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.

[LOGO]
THE TRANSFER AGENT PROCESSES PURCHASE ORDERS, REDEMPTION ORDERS AND HANDLES ALL
RELATED SHAREHOLDER ACCOUNTING SERVICES.

30
<PAGE>

SHAREHOLDER INFORMATION

SHARE PRICE

Your price for purchasing, selling, or exchanging shares is based on the Fund's
net asset value ("NAV") per share, which is calculated as of the close of
regular trading on the New York Stock Exchange ("NYSE") (generally 3:00 p.m.
Central time) every day the exchange is open. The NAV per share of the Funds
will fluctuate.

NAV is based on the market value of the securities in a Fund's portfolio. When
market value prices are not readily available, fair value is determined in good
faith by the Adviser using methods approved by the board of directors.
Short-term debt securities maturing in less than 60 days are valued at amortized
cost. The amortized cost method of valuation initially values a security at its
purchase cost, then consistently adjusts the cost value by amortizing/accreting
any discount or premium paid until the security's maturity without regard to
fluctuating interest rates.

International Growth Fund and Developing Markets Growth Fund will hold portfolio
securities that trade on weekends or other days when the Funds do not price
their shares. Therefore, the value of these Funds' shares may change on days
when you will be unable to purchase or redeem their shares.

WHEN ORDERS ARE EFFECTIVE

Purchase, exchange, and sale orders are received and may be accepted by Sit
Mutual Funds only on days the NYSE is open. PURCHASE, EXCHANGE, AND SALE ORDERS
RECEIVED PRIOR TO THE CLOSE OF THE NYSE (GENERALLY 3:00 P.M. CENTRAL TIME) ARE
PROCESSED AT THE NET ASSET VALUE PER SHARE CALCULATED FOR THAT BUSINESS DAY,
EXCEPT PURCHASES MADE TO AN EXISTING ACCOUNT VIA AUTOMATED CLEARING HOUSE,
"ACH," ELECTRONIC TRANSFER OF FUNDS. ACH PURCHASES ARE INVESTED AT THE NET ASSET
VALUE PER SHARE ON THE NEXT BUSINESS DAY AFTER YOUR TELEPHONE CALL TO THE FUNDS
IF YOU CALL THE FUNDS PRIOR TO THE CLOSE OF THE NYSE. Your bank account will be
debited within 1 to 2 business days.

[LOGO]
A FUND'S SHARE PRICE OR NAV IS DETERMINED BY ADDING THE TOTAL VALUE OF A FUND'S
INVESTMENTS AND OTHER ASSETS (INCLUDING ACCRUED INCOME), SUBTRACTING ITS
LIABILITIES, AND THEN DIVIDING THAT FIGURE BY THE NUMBER OF OUTSTANDING SHARES
OF THE FUND.

31
<PAGE>

SHAREHOLDER INFORMATION

IF YOUR PURCHASE, EXCHANGE, OR SALE ORDER IS RECEIVED AFTER THE CLOSE OF THE
NYSE, THE PURCHASE, EXCHANGE OR SALE WILL BE MADE AT THE NET ASSET VALUE
CALCULATED ON THE NEXT DAY THE NYSE IS OPEN.

INVESTING THROUGH A THIRD PARTY

There is no charge to invest, exchange, or sell shares when you make
transactions directly through Sit Mutual Funds.

Certain Funds may be available for purchase through a third party financial
institution. If you invest in the Funds through a third party, rather than
directly with Sit Mutual Funds, the fees and policies may be different than
described in this Prospectus. Banks, brokers, 401(k) plans, financial advisors,
and financial supermarkets may charge commissions and transaction fees and may
set different minimum investments or limitations on purchasing or selling
shares. Consult a representative of your plan or financial institution if you
are unsure of their fees and policies.

OTHER ACCOUNT POLICIES

PURCHASE RESTRICTIONS

The Funds may reject or restrict any purchase or exchange order at any time,
when, in the judgment of management, it is in the best interests of the Funds.
For example, it may be in the best interests of the Funds to reject purchase and
exchange orders that are short-term or to restrict excessive trading into and
out of the Funds since such orders may harm performance by disrupting portfolio
management strategies and increasing expenses.

ACCOUNTS WITH LOW BALANCES

If your account balance in a Fund falls below $2,000 as a result of selling or
exchanging shares, the Fund has the right to redeem your shares and send you the
proceeds. Before redeeming your account, the Fund will mail you a notice of its
intention to redeem, which will give you an opportunity to make an additional
investment. If you do not increase the value of your account to at least $2,000
within 30 days of the date the notice was mailed, the Fund may redeem your
account.

32
<PAGE>

SHAREHOLDER INFORMATION

PURCHASING SHARES

TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT
------------------------------------- --------------------------------------
BY MAIL
-------
Mail a completed account application Mail a completed investment slip for a
and your check payable to: particular fund (which you received in
your account statement) or a letter of
Sit Mutual Funds instruction, with a check payable to:
P.O. Box 5166
Westboro, MA 01581-5166 Sit Mutual Funds
P.O. Box 5166
Third party checks or starter checks Westboro, MA 01581-5166
are not accepted for initial
purchases. A letter of instruction must include
your account number, the name(s) of
Please be sure to complete the entire the registered owner(s) and the
application, including the selection Fund(s) that you want to purchase.
of which Fund(s) you want to purchase.
Starter checks are not accepted for
additional purchases.
------------------------------------- --------------------------------------
BY TELEPHONE
------------
Fax a completed account application to PAYMENT BY WIRE. Instruct your bank to
Sit Mutual Funds at 612-342-2111, and wire your investment to the Sit Mutual
then call us at 1-800-332-5580 or Funds using the wire instructions on
612-334-5888 for a new account number the back of the prospectus. Call us at
and bank wiring instructions. 1-800-332-5580 or 612-334-5888 and
notify us of the wire.
Instruct your bank to wire your
investment to us using the wire PAYMENT BY ACH. Call us at
instructions we have given you. Your 1-800-332-5580 or 612-334-5888 to
bank may charge a wire fee. Mail the request that a purchase be made
original signed account application electronically from your bank account.
to: The purchase will be effective on the
next business day following your
Sit Mutual Funds telephone request made prior to the
P.O. Box 5166 close of the NYSE.
Westboro, MA 01581-5166
Before using the ACH feature, you must
NOTE FOR IRA ACCOUNTS: An IRA account set up the ACH option on your initial
cannot be opened over the telephone. account application or a Change of
Account Options Form.
------------------------------------- --------------------------------------
AUTOMATICALLY
-------------
You cannot make a purchase You may set up an Automatic Investment
automatically. Plan on your initial account
application or on a Change of Account
Options Form. The Plan will invest in
the Fund electronically from your bank
account (via ACH) on any day the Funds
are open - either monthly, quarterly
or annually.
------------------------------------- --------------------------------------

Please see page 35 for additional general rules for purchasing and selling
shares.

33
<PAGE>

SHAREHOLDER INFORMATION

SELLING SHARES

TO EXCHANGE SHARES TO SELL SHARES
------------------------------------- --------------------------------------
BY MAIL
-------
You may sell shares of one Sit Fund Mail a written request that includes:
and purchase shares of another Sit
Fund by mailing a letter of * Account number,
instruction signed by all registered * Names and signatures of all
owners of the account to: registered owners exactly as they
appear on the account,
Sit Mutual Funds * Name of Fund and number of shares
P.O. Box 5166 or dollor amount you want to
Westboro, MA 01581-5166 sell,
* Medallion signature guarantee(s)
A letter of instruction must include if you have requested that the
your account number, the name(s) and proceeds from the sale be:
the number of shares or dollar amount * paid to anyone other
of the Fund(s) you want to sell and than the registered
the name(s) of the Fund(s) you want to account owners,
purchase. * paid by check and
mailed to an address
other than the
registered address, or
* sent via bank wire
(currently an $8 fee)
to a bank different
than the bank
authorized by you on
your account
application.
* Supporting legal documents, if
required (see "General Rules" on
the following page).
* Method of payment (check, wire
transfer, or ACH, see "General
Rules" on following page).

NOTE FOR IRA ACCOUNTS: Mail a signed
IRA Distribution Form to Sit Mutual
Funds.
------------------------------------- --------------------------------------
BY TELEPHONE
------------
You may sell shares of one Sit Fund Call us at 1-800-332-5580 or
and purchase shares of another Sit 612-334-5888 and request a sale of
Fund by calling us at 1-800-332-5580 shares.
or 612-334-5888. If you call after
business hours, you will need your Before selling shares by telephone,
Personal Identification Number to use you must set up the option on your
the automatic telephone system. initial account application or a
Change of Account Options Form.
Proceeds from the sale will be sent as
directed on your application by check,
bank wire or ACH. The Funds' bank
charges a wire fee to send the
proceeds via bank wire (currently $8).

NOTE FOR IRA ACCOUNTS: A sale of
shares from an IRA account cannot be
made over the telephone. Mail a
completed IRA Distribution Form to Sit
Mutual Funds.
------------------------------------- --------------------------------------
AUTOMATICALLY
-------------
You may set up an Automatic Exchange Shares may be sold through the
Plan on your initial account Automatic Withdrawal Plan (minimum
application or on a Change of Account $100) if the Special Services section
Options Form. The Plan will sell of the initial account application is
shares of one Sit Fund and invest in complete.
another Sit Fund automatically on any
day the Funds are open - either You may add this option by completing
monthly, quarterly or annually. a Change of Account Options Form, and
this option will begin within 10 days
of the Funds' receipt of the form.

Proceeds from the sale will be sent as
directed on your account application,
by check or ACH.
------------------------------------- --------------------------------------

Please see page 35 for additional general rules for purchasing and selling
shares.

34
<PAGE>

SHAREHOLDER INFORMATION

GENERAL RULES FOR PURCHASING AND SELLING SHARES

PURCHASING SHARES EXCHANGING SHARES
------------------------------------- --------------------------------------

Shares may be purchased on any day the You may sell shares of one or more Sit
NYSE is open with a minimum initial Mutual Funds and use the proceeds to
investment of $2,000 for each Fund; buy shares of another Sit Fund at no
additional investments must be at cost.
least $100.
Before making an exchange, please read
Uniform Gifts to Minor Act accounts the prospectus and consider the
may be opened with a $500 minimum investment objective of the Fund you
initial investment if an Automatic are purchasing.
Investment Plan is established for at
least $100 per month. An exchange of shares is a sale for
federal income tax purposes and you
These minimums do not apply to IRA may have a taxable capital gain or
accounts loss.
------------------------------------- --------------------------------------

SELLING SHARES RECEIPT OF SALE PROCEEDS
------------------------------------- --------------------------------------
Your sale proceeds will be paid as You may receive proceeds from the
soon as possible, generally not later sales of your shares in one of three
than 7 business days after the Funds' ways:
receipt of your request to sell.
However, if you purchased shares with (1) By Mail
nonguaranteed funds, such as a Your check will generally be mailed to
personal check, and you sell shares, the address of record within 7
your sale proceeds payment will be business days after receipt of your
delayed until your check clears, which request.
may take 15 days.
(2) By Wire
OTHER DOCUMENTS: Under certain Your bank account will generally be
circumstances, sales of shares may credited within 1 to 2 business days
require additional legal after receipt of your request. The
documentation, such as sales by Funds' bank charges a wire fee
estates, trusts, guardianships, (currently $8) which will be deducted
custodianships, corporations, pension from the balances of your account or
and profit sharing plans and other from the amount being wired if your
organizations. accounthas been completely redeemed.
The recipient bank may also charge a
MEDALLION SIGNATURE GUARANTEE: A wire fee.
medallion signature guarantee assures
that a signature is genuine and (3) By ACH
protects shareholders from Your bank account will generally be
unauthorized account transactions. A credited within 1 to 2 business days
medallion signature guarantee may be after receipt of your request.
obtained from a bank, brokerage firm, Proceeds from the sale of shares from
or other financial institution that is an IRA account cannot be paid using
participating in a medallion program ACH.
recognized by the Securities Transfer
Association. A notary public stamp
cannot be substituted for a medallion
signature guarantee.
------------------------------------- --------------------------------------

35
<PAGE>

SHAREHOLDER INFORMATION

DIVIDENDS AND DISTRIBUTIONS

The Balanced Fund distributes quarterly dividends from its net investment
income. Each of the other Funds distributes an annual dividend from its net
investment income. Net investment income includes dividends on stocks and
interest earned on bonds or other debt securities less operating expenses.

Capital gains, if any, are distributed at least once a year by each Fund. A
capital gain occurs if a Fund sells portfolio securities for more than its cost.

If you buy Fund shares just before a distribution, in effect, you "buy the
distribution." You will pay the full price for the shares and then receive a
portion of that price back as a taxable distribution.

Dividend and capital gain distributions are automatically reinvested in
additional shares of the Fund paying the distribution at the net asset value per
share on the distribution date. However, you may request that distributions be
automatically reinvested in another Sit Mutual Fund, or paid in cash. These
requests may be made on the application, Change of Account Options form, or by
written notice to Sit Mutual Funds. You will receive a quarterly statement
reflecting the dividend payment and, if applicable, the reinvestment of
dividends. If cash payment is requested, an ACH transfer will be initiated, or a
check normally will be mailed within five business days after the payable date.
If the check cannot be delivered because of an incorrect mailing address, the
undelivered distributions and all future distributions will automatically be
reinvested in Fund shares. No interest will accrue on uncashed distribution,
dividend, or sales proceeds checks.

36
<PAGE>

SHAREHOLDER INFORMATION

RETIREMENT AND OTHER TAX-DEFERRED ACCOUNTS

Taxes on current income can be deferred by investing in Individual Retirement
Accounts (IRAs), 401(k), pension, profit-sharing, 403(b)(7), employee benefit,
deferred compensation and other qualified retirement plans.

The Funds are available for your tax-deferred retirement plan with no minimum
investment requirements for initial or subsequent 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, Simple IRA and certain 403(b)(7) plans. You should contact the Adviser
for specific plan documentation.

The Funds are also available for Education IRAs, which are vehicles for saving
for post-secondary education on a tax-deferred basis. Contributions to an
Education IRA cannot be made after the minor turns age 18, and are not
deductible for tax purposes.

The federal tax laws governing these tax-deferred plans must be complied with to
avoid adverse tax consequences. You should consult your tax adviser before
investing

37
<PAGE>

SHAREHOLDER INFORMATION

TAXES

Some of the tax consequences of investing in the Funds are discussed below. More
information about taxes is in the Statement of Additional Information. However,
because everyone's tax situation is unique, always consult your tax professional
about federal, state and local tax consequences.

TAXES ON DISTRIBUTIONS

Each Fund pays its shareholders distributions from its net investment income and
any net capital gains that it has realized. For most investors, these
distributions will be taxable, whether paid in cash or reinvested (unless your
investment is in an IRA or other tax-advantaged account).

Distributions paid from a Fund's net investment income and short-term capital
gains, if any, are taxable as ordinary income. Distributions paid from a Fund's
long-term capital gains, if any, are taxable as long-term capital gains,
regardless of how long you have held your shares.

TAXES ON TRANSACTIONS

The sale or exchange of your shares in a Fund is a taxable transaction, and you
may incur a capital gain or loss on the transaction. If you held the shares for
more than one year, this gain or loss would be a long-term gain or loss. A gain
or loss on shares held for one year or less is considered short-term and is
taxed at the same rates as ordinary income.

FOREIGN TAX CREDITS

The International Growth Fund and Developing Markets Growth Fund may be required
to pay withholding and other taxes imposed by foreign countries. If a Fund has
more than 50% of its total assets invested in securities of foreign corporations
at the end of its taxable year, it may make an election that will permit you
either to claim a foreign tax credit with respect to foreign taxes paid by the
Fund or to deduct those amounts as an itemized deduction on your tax return. If
a Fund makes this election, you will be notified and provided with sufficient
information to calculate the amount you may deduct as foreign taxes paid or your
foreign tax credit.

38
<PAGE>

ADDITIONAL INFORMATION

OTHER SECURITIES, INVESTMENT PRACTICES, AND POLICIES

The principal investment strategies and risk factors of each Fund are outlined
in the section entitled "Fund Summaries." Below are brief discussions of certain
other investment practices of the Funds. Each Fund may invest in securities and
use investment strategies that are not described in this Prospectus but are
described in the Statement of Additional Information.

DURATION

The Balanced Fund attempts to maintain an average effective duration of 3 to 7
years for the fixed-income portion of its portfolio. Duration measures how much
the value of a security is expected to change with a given change in interest
rates. Effective duration is one means used to measure interest rate risk. The
longer a security's effective duration, the more sensitive its price to changes
in interest rates. For example, if interest rates rise by 1%, the market value
of a security with an effective duration of 2 years would decrease by 2%, with
all other factors being constant. The Adviser uses several methods to compute
duration estimates appropriate for particular securities held in the Balanced
Fund's portfolio. Duration estimates are based on assumptions by the Adviser and
subject to a number of limitations. Duration is most useful when interest rate
changes are small and occur equally in short-term and long-term securities. In
addition, it is difficult to calculate duration precisely for bonds with
prepayment options, such as mortgage-related securities, because the calculation
requires assumptions about prepayment rates.

PORTFOLIO TURNOVER

The Funds may trade securities frequently, resulting, from time to time, in an
annual portfolio turnover rate of over 100%. However, historically the Funds'
turnover rate has been less than 100%. The "Financial Highlights" section of
this Prospectus shows each Fund's historical portfolio turnover rate. Trading of
securities may produce capital gains, which are taxable to shareholders when
distributed. Active trading may also increase the amount of commissions or
mark-ups to broker-dealers that a Fund pays when it buys and sells securities,
which may decrease the Fund's yield.

39
<PAGE>

ADDITIONAL INFORMATION

SECURITIES RATINGS

When debt securities are rated by one or more independent rating agencies, the
Adviser uses these ratings to determine bond quality. Investment-grade debt
securities are those that are rated within the four highest rating categories,
which are AAA, AA, A, and BBB by Standard & Poor's Rating Services, Fitch IBCA,
and Duff & Phelps Credit Rating Company, and Aaa, Aa, A and Baa by Moody's
Investor Services. If a debt security's credit quality rating is downgraded
after a Fund's purchase, the Adviser will consider whether any action, such as
selling the security, is warranted.

INVESTMENT IN THE SIT MONEY MARKET FUND

Each Fund may invest up to 25% of its total net assets in shares of the money
market funds advised by the Adviser, which includes the Sit Money Market Fund,
subject to the conditions contained in an exemptive order issued to the Funds by
the Securities and Exchange Commission. These 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.

TEMPORARY DEFENSIVE INVESTING

For temporary defensive purposes in periods of unusual market conditions, each
Fund may invest all of its total assets in cash or 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. As a result, a Fund may not achieve
its investment objective.

FINANCIAL HIGHLIGHTS

The tables that follow present performance information about the shares of each
Fund. This information is intended to help you understand each Fund's financial
performance for the past five years (or, if shorter, the period of the Fund's
operations). Some of this information reflects financial results for a single
Fund share. The total returns in the tables represent the rate that you would
have earned or lost on an investment in a Fund, assuming you reinvested all of
your dividends and distributions. This information has been audited by KPMG LLP,
independent auditors, whose report, along with the Funds' financial statements,
is included in the Funds' annual report, which is available upon request.

40
<PAGE>

ADDITIONAL INFORMATION

SIT BALANCED FUND

<TABLE>
<CAPTION>
Fiscal Years Ended June 30,

2000 1999 1998 1997 1996
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE:

Beginning of period $ 17.38 $ 16.68 $ 14.93 $ 12.57 $ 10.99
------------------------------------------------------------------------------------------------------------------------

OPERATIONS:

Net investment income 0.40 .32 .34 .33 .30
Net realized and unrealized gains (losses) on investments 2.51 1.45 2.99 2.42 1.57
------------------------------------------------------------------------------------------------------------------------
Total from operations 2.91 1.77 3.33 2.75 1.87
------------------------------------------------------------------------------------------------------------------------

DISTRIBUTIONS TO SHAREHOLDERS:

From net investment income (.37) (.31) (.35) (.32) (.29)
From realized gains (.74) (.76) (1.23) (.07) --
------------------------------------------------------------------------------------------------------------------------
Total distributions (1.11) (1.07) (1.58) (.39) (.29)
------------------------------------------------------------------------------------------------------------------------

NET ASSET VALUE:

End of period $ 19.18 $ 17.38 $ 16.68 $ 14.93 $ 12.57
------------------------------------------------------------------------------------------------------------------------
Total investment return(1) 17.28% 11.25% 23.95% 22.42% 17.26%
------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000s omitted) $19,304 $12,112 $ 7,422 $ 5,103 $ 4,062

RATIOS:

Expenses to average daily net assets 1.00% 1.00% 1.00% 1.00% 1.00%
Net investment income to average daily net assets 2.34% 2.01% 2.20% 2.48% 2.61%
Portfolio turnover rate (excluding short-term securities) 68.22% 89.37% 62.62% 38.16% 101.37%
------------------------------------------------------------------------------------------------------------------------
</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.

41
<PAGE>

ADDITIONAL INFORMATION

SIT LARGE CAP GROWTH FUND

<TABLE>
<CAPTION>
Fiscal Years Ended June 30,
2000 1999 1998 1997 1996
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE:

Beginning of period $ 52.84 $ 49.34 $ 40.39 $ 32.75 $ 28.38
---------------------------------------------------------------------------------------------------------------------------

OPERATIONS:

Net investment income (.18) (.04) .02 .07 .04
Net realized and unrealized gains (losses) on investments 14.41 6.96 13.17 10.02 6.61
---------------------------------------------------------------------------------------------------------------------------
Total from operations 14.23 6.92 13.19 10.09 6.65
---------------------------------------------------------------------------------------------------------------------------

DISTRIBUTIONS TO SHAREHOLDERS:

From net investment income -- (.01) (.07) (.03) (.04)
From realized gains (3.41) (3.41) (4.17) (2.42) (2.24)
---------------------------------------------------------------------------------------------------------------------------
Total distributions (3.41) (3.42) (4.24) (2.45) (2.28)
---------------------------------------------------------------------------------------------------------------------------

NET ASSET VALUE:

End of period $ 63.66 $ 52.84 $ 49.34 $ 40.39 $ 32.75
---------------------------------------------------------------------------------------------------------------------------
Total investment return(1) 27.75% 15.10% 35.33% 32.36% 24.48%
---------------------------------------------------------------------------------------------------------------------------
Net assets at end of year (000s omitted) $172,400 $140,258 $117,496 $ 72,226 $ 53,017

RATIOS:

Expenses to average daily net assets 1.00% 1.00% 1.00% 1.00%(2) 1.00%(2)
Net investment income to average daily net assets (0.31%) (0.09%) 0.06% 0.20%(2) 0.14%(2)
Portfolio turnover rate (excluding short-term securities) 48.95% 70.51% 43.61% 32.23% 49.99%
---------------------------------------------------------------------------------------------------------------------------
</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) During the years ended June 30, 1997 and 1996, the investment adviser
voluntarily absorbed $50,548 and $110,099, 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 1.08%,
and 1.23%, for the years ended June 30, 1997 and 1996, respectively, and
the ratio of net investment income (loss) to average daily net assets would
have been 0.11% and (0.09%), respectively.

42
<PAGE>

ADDITIONAL INFORMATION

SIT MID CAP GROWTH FUND

Beginning of period $ 14.54 $ 16.49 $ 15.43 $ 15.58 $ 13.00
---------------------------------------------------------------------------------------------------------------------------------

OPERATIONS:

Net investment income (loss) (.12) (.06) (.07) (.03) (.04)
Net realized and unrealized gains (losses) on investments 10.38 .65 3.15 2.50 4.07
---------------------------------------------------------------------------------------------------------------------------------
Total from operations 10.26 .59 3.08 2.47 4.03
---------------------------------------------------------------------------------------------------------------------------------

DISTRIBUTIONS TO SHAREHOLDERS:

From net investment income -- -- -- -- --
From realized gains (1.23) (2.54) (2.02) (2.62) (1.45)
---------------------------------------------------------------------------------------------------------------------------------
Total distributions (1.23) (2.54) (2.02) (2.62) (1.45)
---------------------------------------------------------------------------------------------------------------------------------

NET ASSET VALUE:

End of period $ 23.57 $ 14.54 $ 16.49 $ 15.43 $ 15.58
---------------------------------------------------------------------------------------------------------------------------------
Total investment return(1) 73.01% 6.94% 22.19% 17.23% 33.00%
---------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year (000s omitted) $566.639 $375,343 $404,327 $386,543 $356,317

RATIOS:

Expenses to average daily net assets 1.00%(2) 1.00%(2) 1.00%(2) 0.92%(2) 0.77%
Net investment income (loss) to average daily net assets (0.58%)(2) (0.46%)(2) (0.41%)(2) (0.20%)(2) (0.23%)
Portfolio turnover rate (excluding short-term securities) 62.21% 68.62% 52.62% 38.66% 50.38%
---------------------------------------------------------------------------------------------------------------------------------
</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) Effective November 1, 1996, total Fund expenses are contractually limited
to 1.25% of average daily net assets. However, during the years ended June
30, 2000, 1999, 1998 and 1997, the investment adviser voluntarily absorbed
$1,209,620, $865,657, $1,004,074, and $609,840, 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
1.25%, 1.25%, 1.25% and 1.09% for the years ended June 30, 2000, 1999, 1998
and 1997, respectively, and the ratio of net investment income (loss) to
average daily net assets would have been (0.83%), (0.71%), (0.66%) and
(0.37%), respectively.

43
<PAGE>

ADDITIONAL INFORMATION

SIT INTERNATIONAL GROWTH FUND

Beginning of period $ 18.77 $ 19.14 $ 18.57 $ 16.29 $ 15.71
-------------------------------------------------------------------------------------------------------------------------------

OPERATIONS:

Net investment income (loss) (.04) (.07) .02 .01 .02
Net realized and unrealized gain on investments 6.36 .84 1.25 2.70 1.50
-------------------------------------------------------------------------------------------------------------------------------
Total from operations 6.32 .77 1.27 2.71 1.52
-------------------------------------------------------------------------------------------------------------------------------

DISTRIBUTIONS TO SHAREHOLDERS:

From net investment income (.23) (.06) (.03) (.01) (.09)
From realized gains (1.28) (1.08) (.67) (.42) (.85)
-------------------------------------------------------------------------------------------------------------------------------
Total distributions (1.51) (1.14) (.70) (.43) (.94)
-------------------------------------------------------------------------------------------------------------------------------

NET ASSET VALUE:

End of period $ 23.58 $ 18.77 $ 19.14 $ 18.57 $ 16.29
-------------------------------------------------------------------------------------------------------------------------------
Total investment return(1) 33.38% 4.51% 7.50% 17.04% 10.21%
-------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000s omitted) $167,909 $ 94,982 $ 99,721 $ 99,279 $ 88,712

RATIOS:

Expenses to average daily net assets 1.50%(2) 1.50%(2) 1.50%(2) 1.50%(2) 1.50%(2)
Net investment income (loss) to average daily net assets (0.40%)(2) (0.37%)(2) 0.12%(2) 0.05%(2) 0.13%(2)
Portfolio turnover rate (excluding short-term securities) 30.61% 45.91% 43.74% 41.59% 38.55%
-------------------------------------------------------------------------------------------------------------------------------
</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 1.85% of average daily net
assets. However, during the years ended June 30, 2000, 1999, 1998, 1997,
and 1996, the investment adviser voluntarily absorbed $467,953, $325,038,
$338,651, $306,575, and $269,556, 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, 2000, 1999, 1998, 1997, and 1996, and the ratio of net
investment income (loss) to average daily net assets would have been
(0.75%), (0.72%), (0.23%), (0.30%), and (0.22%), respectively.

44
<PAGE>

ADDITIONAL INFORMATION

SIT SMALL CAP GROWTH FUND

Beginning of period $ 18.28 $ 20.35 $ 18.89 $ 19.27 $ 13.49
------------------------------------------------------------------------------------------------------------------------

OPERATIONS:

Net investment loss (.18) (.18) (.17) (.14) (.11)
Net realized and unrealized gains on investments 23.25 1.20 2.31 .57 6.03
------------------------------------------------------------------------------------------------------------------------
Total from operations 23.07 1.02 2.14 .43 5.92
------------------------------------------------------------------------------------------------------------------------

DISTRIBUTIONS TO SHAREHOLDERS:

From realized gains -- (3.09) (.68) (.81) (.14)
------------------------------------------------------------------------------------------------------------------------
Total distributions -- (3.09) (.68) (.81) (.14)
------------------------------------------------------------------------------------------------------------------------

NET ASSET VALUE:

End of period $ 41.35 $ 18.28 $ 20.35 $ 18.89 $ 19.27
------------------------------------------------------------------------------------------------------------------------
Total investment return(1) 126.20% 8.77% 11.70% 2.37% 44.13%
------------------------------------------------------------------------------------------------------------------------
Net assets at end of year (000s omitted) $190,630 $ 50,335 $ 57,472 $ 58,358 $ 50,846

RATIOS:

Expenses to average daily net assets 1.50% 1.50% 1.50% 1.50% 1.50%
Net income (loss) to average daily net assets (0.83%) (1.08%) (0.72%) (0.81%) (0.91%)
Portfolio turnover rate (excluding short-term securities) 39.31% 71.84% 79.54% 58.39% 69.92%
------------------------------------------------------------------------------------------------------------------------
</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.

45
<PAGE>

ADDITIONAL INFORMATION

SIT SCIENCE AND TECHNOLOGY GROWTH FUND

<TABLE>
<CAPTION>
Six Months
Ended
Fiscal Years Ended June 30, June 30,
2000 1999 1998
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE:

Beginning of period $ 15.23 $ 11.77 $ 10.00
----------------------------------------------------------------------------------------------------

OPERATIONS:

Net investment income (loss) (.17) (.07) (.01)
Net realized and unrealized gain on investments 18.32 3.53 1.78
----------------------------------------------------------------------------------------------------
Total from operations 18.15 3.46 1.77
----------------------------------------------------------------------------------------------------

DISTRIBUTIONS TO SHAREHOLDERS:

From net investment income -- -- --
From realized gains -- -- --
----------------------------------------------------------------------------------------------------
Total distributions .00 .00 .00
----------------------------------------------------------------------------------------------------

NET ASSET VALUE:

End of period $ 33.38 $ 15.23 $ 11.77
----------------------------------------------------------------------------------------------------
Total investment return(1) 119.17% 29.40% 17.70%
----------------------------------------------------------------------------------------------------
Net assets at end of period (000s omitted) $46,173 $14,194 $ 4,858

RATIOS:

Expenses to average daily net assets 1.25(2) 1.25%(2) 1.25%(2)
Net investment income (loss) to average daily net assets (0.86%)(2) (0.72%)(2) (0.21%)(2)
Portfolio turnover rate (excluding short-term securities) 29.60% 58.29% 19.37%
----------------------------------------------------------------------------------------------------
</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) Percentages for period ended June 30, 1998 are adjusted to an annual rate.
Total Fund expenses are contractually limited to 1.50% of average daily net
assets. However, during the period ended June 30, 2000, 1999 and 1998, the
investment adviser voluntarily absorbed $68,292, $22,008 and $4,655,
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 1.50% for the period ended June 30, 2000, 1999 and
1998, and the ratio of net investment income (loss) to average daily net
assets would have been (1.11%), (0.97%) and (0.46%), respectively.

46
<PAGE>

ADDITIONAL INFORMATION

SIT DEVELOPING MARKETS GROWTH FUND

Beginning of period $ 9.98 $ 9.05 $ 13.04 $ 10.95 $ 9.41
-----------------------------------------------------------------------------------------------------------------------

OPERATIONS:

Net investment income (loss) (.06) -- (.06) .03 --
Net realized and unrealized gains (losses) on investments 3.51 .93 (3.92) 2.06 1.55
-----------------------------------------------------------------------------------------------------------------------
Total from operations 3.45 .93 (3.98) 2.09 1.55
-----------------------------------------------------------------------------------------------------------------------

DISTRIBUTIONS TO SHAREHOLDERS:

From net investment income -- -- (.01) -- --
From realized gains -- -- -- -- (.01)
-----------------------------------------------------------------------------------------------------------------------
Total distributions -- -- (.01) -- (.01)
-----------------------------------------------------------------------------------------------------------------------

NET ASSET VALUE:

End of period $ 13.43 $ 9.98 $ 9.05 $ 13.04 $ 10.95
-----------------------------------------------------------------------------------------------------------------------
Total investment return(1) 34.57% 10.28% (30.52%) 19.09% 16.51%
-----------------------------------------------------------------------------------------------------------------------
Net assets at end of year (000s omitted) $14, 676 $11,338 $11,505 $16,789 $ 8,646

RATIOS:

Expenses to average daily net assets 2.00% 2.00% 2.00% 2.00% 2.00%
Net investment income to average daily net assets (0.55%) (0.05%) (0.52%) 0.32% 0.06%
Portfolio turnover rate (excluding short-term securities) 49.25% 98.24% 53.36% 65.88% 46.22%
-----------------------------------------------------------------------------------------------------------------------
</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.

47
<PAGE>

NOT PART OF PROSPECTUS

This Page has been Left Blank Intentionally

48
<PAGE>

NOT PART OF PROSPECTUS

This Page has been Left Blank Intentionally

49
<PAGE>

FOR MORE INFORMATION

For more information about the Funds, the following documents are available free
upon request:

STATEMENT OF ADDITIONAL INFORMATION

The SAI contains more details about the Funds and their investment policies.
The SAI is incorporated in this Prospectus by reference.

ANNUAL/SEMI-ANNUAL REPORT

The Funds' Annual and Semi-Annual Reports include a discussion of the market
conditions and investment strategies that significantly affected the Funds'
performance.

To request a copy of the documents listed above, or to obtain more information
about the Funds:

BY TELEPHONE:
(800) 332-5580 or
(612) 334-5888

BY E-MAIL:
[email protected]

ON THE INTERNET:
Visit our website at
www.sitfunds.com
Visit the SEC website at
www.sec.gov

BY REGULAR MAIL:
Sit Mutual Funds
P.O. Box 5166
Westboro, MA 01581-5166

BY EXPRESS MAIL:
Sit Mutual Funds
4400 Computer Drive
Westboro, MA 01581

TO WIRE MONEY FOR A PURCHASE:
Boston Safe Deposit & Trust, Boston, MA
ABA #011001234
DDA #056146
Sit Mutual Funds
For Further Credit: (shareholder name)
Account Number: (shareholder account #)

THE SAI AND THE FUNDS' REPORTS MAY ALSO BE REVIEWED AT THE PUBLIC REFERENCE
ROOM OF THE SECURITIES AND EXCHANGE COMMISSION IN WASHINGTON, D.C. YOU CAN GET
COPIES FREE FROM THE SEC'S WEBSITE LISTED ABOVE, OR BY MAIL, FOR A FEE, BY
CALLING THE SEC AT 1-800-SEC-0330 OR BY WRITING THE SEC'S PUBLIC REFERENCE
SECTION, 450 FIFTH STREET NW, WASHINGTON, D.C. 20549-6009.

[LOGO]
SIT MUTUAL FUNDS
----------------

1940 ACT FILE NOS. 811-03342; 811-03343; 811-06373
<PAGE>

PART B
STATEMENT OF ADDITIONAL INFORMATION

SIT LARGE CAP GROWTH FUND, INC.
SIT MID CAP GROWTH FUND, INC.
SIT MUTUAL FUNDS, INC, COMPRISED OF:
SIT BALANCED FUND
SIT SCIENCE AND TECHNOLOGY GROWTH FUND
SIT INTERNATIONAL GROWTH FUND
SIT SMALL CAP GROWTH FUND
SIT DEVELOPING MARKETS GROWTH FUND

4600 Wells Fargo Center, 90 S. 7th Street
Minneapolis, Minnesota 55402-4130
www.sitfunds.com; e-mail: [email protected]
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. The financial statements included as
part of the Funds' Annual Report to shareholders for fiscal year ended June 30,
2000 are incorporated by reference into this Statement of Additional
Information. Copies of the Funds' Prospectus and/or Annual Report may be
obtained from the Funds without charge by contacting the Funds by telephone at
(612) 334-5888 or (800) 332-5580 or by mail at 4600 Wells Fargo Center, 90 S.7th
Street, Minneapolis, Minnesota 55402-4130, or by visiting the SEC website at
www.sec.com. The date of this Statement of Additional Information is November 1,
2000, and it is to be used with the Funds' Prospectus dated November 1, 2000.

TABLE OF CONTENTS
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Page
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FUND BACKGROUND.............................................................. 2
ADDITIONAL INVESTMENT RESTRICTIONS
Balanced Fund........................................................... 3
Large Cap Growth Fund and Mid Cap Growth Fund........................... 4
Science and Technology Growth Fund...................................... 5
International Growth Fund............................................... 6
Small Cap Growth Fund................................................... 7
Developing Markets Growth Fund.......................................... 8
COUNTRIES IN WHICH THE INTERNATIONAL GROWTH FUND MIGHT INVEST................ 9
COUNTRIES IN WHICH THE DEVELOPING MARKETS GROWTH FUND MIGHT INVEST........... 10
SPECIAL RISKS FOR INTERNATIONAL GROWTH AND DEVELOPING MARKETS GROWTH FUNDS
Corporate Disclosure Standards and Government Regulation................ 11
Market Characteristics.................................................. 12
Currency Fluctuations................................................... 12
Foreign Taxation........................................................ 13
Investment and Repatriation Restrictions................................ 13
ADDITIONAL INVESTMENT POLICIES & RISKS
Common and Preferred Stocks............................................. 13
Convertible Securities.................................................. 13
Warrants or Rights...................................................... 13
Commercial Paper........................................................ 14
Obligations of Banks.................................................... 14
Obligations of the U.S. Government...................................... 15
Depository Receipts..................................................... 15
Forward Foreign Currency Exchange Contracts............................. 16
Options - Puts and Calls................................................ 16
When-Issued and Forward Commitment Securities........................... 17
Repurchase Agreements................................................... 17
Futures Contracts and Options on Futures Contracts...................... 17

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Illiquid Securities..................................................... 19
Sit Money Market Fund................................................... 20
ADDITIONAL RISKS AND FIXED-INCOME SECURITIES IN WHICH THE BALANCED FUND MAY
INVEST
Mortgage-Backed Securities.......................................... 20
Asset-Backed Securities............................................. 21
Collaterialized Mortgage Obligations................................ 21
U.S. Treasury Inflation-Protection Securities....................... 22
Manufactured Home Loans............................................. 22
Municipal Securities................................................ 22
Swap Agreements..................................................... 23
Variable Rate Notes................................................. 23
Zero Coupon Securities.............................................. 23
Trust Preferred Securities.......................................... 23
Balanced Fund's Risks of Investing in High Yield Securities......... 23
RATINGS OF DEBT SECURITIES................................................... 24
SECURITIES LENDING........................................................... 24
PORTFOLIO TURNOVER........................................................... 25
ADDITIONAL INFORMATION ABOUT SELLING SHARES
Suspension of Selling Ability........................................... 25
Telephone Transactions.................................................. 25
Redemption-In-Kind ..................................................... 26
COMPUTATION OF NET ASSET VALUE............................................... 26
CALCULATION OF PERFORMANCE DATA.............................................. 27
MANAGEMENT................................................................... 28
INVESTMENT ADVISER........................................................... 31
DISTRIBUTOR.................................................................. 34
BROKERAGE.................................................................... 34
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES.......................... 36
TAXES........................................................................ 37
FINANCIAL STATEMENTS......................................................... 38
OTHER INFORMATION............................................................ 38
LIMITATION OF DIRECTOR LIABILITY............................................. 38
CAPITALIZATION AND VOTING RIGHTS............................................. 39
APPENDIX A - BOND AND COMMERCIAL PAPER RATINGS............................... 41

FUND BACKGROUND
--------------------------------------------------------------------------------

Sit Mutual Funds are managed by Sit Investment Associates, Inc., (the
"Adviser"). Sit Mutual Funds are comprised of twelve 100% no-load funds. This
Statement of Additional Information contains the seven stock funds, which are:
Balanced Fund, Large Cap Growth Fund, Mid Cap Growth Fund, International Growth
Fund, Small Cap Growth Fund, Science and Technology Growth Fund, and the
Developing Markets Growth Fund (collectively, the "Funds").

All twelve Funds are open-ended funds, and all Funds (except the Minnesota
Tax-Free Income Fund) operate as a diversified management investment companies,
as defined in the Investment Company Act of 1940. 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.

Each of the Funds (or the corporate issuer of their shares) is organized as a
Minnesota corporation. The Large Cap Growth Fund and Mid Cap Growth Fund were
incorporated on July 14, 1981. The corporate issuer of the International Growth

2
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Fund, Balanced Fund, Developing Markets Growth Fund, Small Cap Growth Fund, and
Science and Technology Growth Fund was incorporated on July 30, 1991.

ADDITIONAL INVESTMENT RESTRICTIONS
--------------------------------------------------------------------------------

The investment objectives and investment strategies of the Funds are set forth
in the Prospectus under "Fund Summaries". Certain additional investment
practices and risks of investing in the Funds are set forth below. In addition
to the restrictions in the Prospectus, each Fund is subject to other
restrictions that 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.

BALANCED 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 temporarily in emergency or extraordinary situations
and then not for the purchase of investments and not in excess of 33 1/3%
of the Fund's total net assets;
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,
except for borrowing as permitted in restriction number 6; or
9. Invest more than 25% of its assets in a single industry except with regard
to the purchase of obligations issued or guaranteed by the U.S. government,
its agencies or instrumentalities.

The following investment restrictions of the Fund are not fundamental. The Fund
will not:
1. Purchase on margin or sell short except to obtain short-term credit as may
be necessary for the clearance of transactions and it may make margin
deposits in connection with futures contracts;
2. Invest 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, except a.) as part of a merger,
consolidation, acquisition, or reorganization or b.) in a manner consistent
with the requirements of an exemptive order issued to the Fund and/or the
Adviser by the Securities and Exchange Commission;
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;
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;

3
<PAGE>

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;
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;
11. Pledge, mortgage, hypothecate or otherwise encumber the Fund's assets
except to the extent necessary to secure permitted borrowings;
12. Engage in arbitrage transactions or write unsecured put options but may
write fully covered call options;
13. Purchase put and call options provided that the aggregate premiums paid for
all such options exceed 10% of the Fund's total assets;
14. Invest more than 25% of the fixed-income portion of its portfolio in debt
securities that are rated below investment grade;
15. Invest less than 40% or more than 60% of its assets in equity securities
and will not invest less than 40% or more than 60% of its assets in
fixed-income securities, under normal circumstances;
16. Invest less than 25% of the fixed-income portion of its portfolio in
fixed-income senior securities; or
17. Invest more than 20% of its assets in foreign government securities or
equity securities of foreign issuers that are either listed on a U.S. or
Toronto stock exchange or represented by American Depository Receipts.

LARGE CAP GROWTH FUND AND MID CAP GROWTH FUND
--------------------------------------------------------------------------------
The Large Cap Growth Fund and Mid Cap Growth Fund are subject to the following
fundamental investment restrictions. The Funds 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 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;
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. Borrow money, except temporarily in emergency or extraordinary situations
and then not for the purchase of investments and not in excess of 33-1/3%
of the Fund's total net assets.
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. Underwrite the securities of other issuers;

4
<PAGE>

14. Issue senior securities as defined in the Investment Company Act of 1940,
except for borrowing as permitted in restriction number 5;
15. Invest more than 25% of its assets in a single industry except with regard
to the purchase of obligations issued or guaranteed by the U.S. government,
its agencies or instrumentalities; or
16. Invest more than 15% of its net assets collectively in all types of
illiquid securities.

The following investment restrictions of the Funds are not fundamental and may
be changed by the Board of Directors of the Funds. The Funds will not:
1. Engage in arbitrage transactions or write unsecured put options but may
write fully covered call options;
2. Purchase put and call options provided that the aggregate premiums paid for
all such options exceed 5% of the Fund's net assets;
3. Pledge, mortgage, hypothecate, or otherwise encumber the Fund's assets
except to the extent necessary to secure permitted borrowings;
4. 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, except a.) as part of a merger,
consolidation, acquisition, or reorganization or b.) in a manner consistent
with the requirements of an exemptive order issued to the Funds and/or the
Adviser by the Securities and Exchange Commission;
5. Pledge, mortgage, hypothecate, or otherwise encumber the Fund's assets
except to the extent necessary to secure permitted borrowings;
6. Invest less than 65% of its total assets in common stocks of growth
companies; or
7. Invest more than 20% of its assets in equity securities of foreign issuers
that are either listed on a U.S. or Toronto stock exchange or represented
by American Depository Receipts.

SCIENCE AND TECHNOLOGY 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 that 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 temporarily in emergency or extraordinary situations
and then not for the purchase of investments, and not in excess of 33 1/3%
of the Fund's total net assets;
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. Invest more than 25% of its assets in a single industry except with regard
to the purchase of obligations issued or guaranteed by the U.S. government,
its agencies or instrumentalities; or
9. Issue senior securities as defined in the Investment Company Act of 1940,
except for borrowing as permitted in restriction number 6.

5
<PAGE>

5. Purchase more than 10% of any class of securities of any issuer except
securities issued or guaranteed by the U.S. government, its agencies or
instrumentalities. All debt securities and all preferred stocks are each
considered as one class. This restriction is limited to 75% of the Fund's
net assets;
6. Pledge, mortgage, hypothecate or otherwise encumber either Fund's assets
except to the extent necessary to secure the permitted borrowings;
7. 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, except a.) as part of a merger,
consolidation, acquisition, or reorganization or b.) in a manner consistent
with the requirements of an exemptive order issued to the Fund and/or the
Adviser by the Securities and Exchange Commission;
8. Engage in arbitrage transactions or write unsecured put options but may
write fully covered call options; or
9. Purchase put and call options provided that the aggregate premiums paid for
all such options exceed 5% of the Fund's net assets;
10. Invest less than 80% of its total assets in common stocks of companies
principally engaged in science and technology business activities; or
11. Invest more than 20% of its assets in equity securities of foreign issuers
that are either listed on a U.S. or Toronto stock exchange or represented
by American Depository Receipts.

INTERNATIONAL 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 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 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;
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. Borrow money, except temporarily in emergency or extraordinary situations
and then not for the purchase of investments and not in excess of 33 1/3%
of the Fund's total net assets;
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. 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;
17. Invest more than 15% of its net assets collectively in all types of
illiquid securities;
18. Underwrite the securities of other issuers;
19. Modify the Fund's investment objective; or

6
<PAGE>

20. Issue senior securities as defined in the Investment Company Act of 1940,
except for borrowing as permitted in restriction number 5.

The following investment restrictions of the Fund are not fundamental. The Fund
will not:
1. Pledge, mortgage, hypothecate or otherwise encumber the Fund's assets in an
amount exceeding the amount of the borrowing secured thereby except to the
extent necessary to secure permitted borrowings; or
2. 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, except a.) as part of a merger,
consolidation, acquisition, or reorganization or b.) in a manner consistent
with the requirements of an exemptive order issued to the Fund and/or the
Adviser by the Securities and Exchange Commission; or
3. Invest less than 90% of the its total assets in international equity
securities, under normal conditions.

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 temporarily in emergency or extraordinary situations
and then not for the purchase of investments and not in excess of 33 1/3%
of the Fund's total net assets;
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. Invest more than 25% of its assets in a single industry except with regard
to the purchase of obligations issued or guaranteed by the U.S. government,
its agencies or instrumentalities; or
9. Issue senior securities as defined in the Investment Company Act of 1940,
except for borrowing as permitted in restriction number 6.

The following investment restrictions of the Fund are not fundamental. The Fund
will not:
1. Purchase on margin or sell short except to obtain short-term credit as may
be necessary for the clearance of transactions and it may make margin
deposits in connection with futures contracts;
2. Invest 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, except a.) as part of a merger,
consolidation, acquisition, or reorganization or b.) in a manner consistent
with the requirements of an exemptive order issued to the Fund and/or the
Adviser by the Securities and Exchange Commission.
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;

7
<PAGE>

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;
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;
11. Pledge, mortgage, hypothecate or otherwise encumber the Fund's assets
except to the extent necessary to secure permitted borrowings;
12. Engage in arbitrage transactions or write unsecured put options but may
write fully covered call options;
13. Purchase put and call options provided that the aggregate premiums paid for
all such options exceed 5% of the Fund's net assets;
14. Invest less than 65% of its total assets in small cap common stocks, under
normal conditions; or
15. Invest more than 20% of its assets in equity securities of foreign issuers
that are either listed on a U.S. or Toronto stock exchange or represented
by American Depository Receipts.

DEVELOPING MARKETS GROWTH FUND
--------------------------------------------------------------------------------
The Fund is subject to the following restrictions which are fundamental. 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 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;
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 temporarily in emergency or extraordinary situations
and then not for the purchase of investments and not in excess of 33 1/3%
of the Fund's total net assets;
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. Invest more than 25% of its assets in a single industry except with regard
to the purchase of obligations issued or guaranteed by the U.S. government,
its agencies or instrumentalities; or
9. Issue senior securities as defined in the Investment Company Act of 1940,
except for borrowing as permitted in restriction number 6.

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;
2. 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, except a.) as part of a merger,
consolidation, acquisition, or reorganization or b.) in a manner consistent
with the requirements of an exemptive order issued to the Fund and/or the
Adviser by the Securities and Exchange Commission;
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;

8
<PAGE>

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;
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; or
10. Pledge, mortgage, hypothecate or otherwise encumber the Fund's assets
except to the extent necessary to secure permitted borrowings; or
11. Invest less than 65% of its total assets in developing market equity
securities, under normal conditions.

COUNTRIES 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.

<TABLE>
<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 Czech Republic Denmark Finland France
------- Germany Greece Hungary + Ireland Italy Luxembourg
Netherlands Norway Poland Portugal Spain Sweden
Switzerland United Kingdom

Other: Argentina Brazil Canada Chile India Mexico
------ Peru Turkey Venezuela Israel
</TABLE>

+ Indicates countries in which the Fund effectively may invest primarily
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".

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.

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 years
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.

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.

9
<PAGE>

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 nonresidents 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.

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 most of the
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 Exchanges" 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.

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.

COUNTRIES IN WHICH THE DEVELOPING MARKETS GROWTH FUND MIGHT INVEST
--------------------------------------------------------------------------------

The Fund defines "developing markets" as those countries determined by the
Sub-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" 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

10
<PAGE>

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.

<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Pacific Basin: Bangladesh China Hong Kong India Indonesia Malaysia
-------------- Pakistan Philippines Singapore South Korea Sri Lanka Taiwan
Thailand Vietnam +

Europe: Czech Rep. Greece Hungary + Poland Portugal Spain
-------

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 Canada Cyprus + Israel Jordan Kuwait +
------ Russia Turkey
</TABLE>

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. 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.

SPECIAL RISKS FOR INTERNATIONAL GROWTH AND DEVELOPING MARKETS GROWTH FUNDS
--------------------------------------------------------------------------------

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 Funds than is
available concerning U.S. companies.

11
<PAGE>

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 and/or Sub-Adviser, if applicable, 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.

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.

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.

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 from 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 that is intended to be protected, the desired
protection may not be obtained and the Funds may be exposed to risk of financial
loss.

12
<PAGE>

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.

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. For additional tax information, please
see section entitled, "Taxes" on page 37.

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. A Fund's 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.

ADDITIONAL INVESTMENT POLICIES & RISKS
--------------------------------------------------------------------------------

COMMON AND PREFERRED STOCKS
--------------------------------------------------------------------------------
Each Fund may invest in common and preferred stocks. Stocks represent shares of
ownership in a company. Generally, preferred stock has a specified dividend and
ranks after bonds and before common stocks in its claim on income for dividend
payments and on assets should the company be liquidated. After other claims are
satisfied, common stockholders participate in company profits on a pro rata
basis; profits may be paid out in dividends or reinvested in the company to help
it grow. Increases and decreases in earnings are usually reflected in a
company's stock price, so common stocks generally have the greatest appreciation
and depreciation potential of all corporate securities.

CONVERTIBLE SECURITIES
--------------------------------------------------------------------------------
Each Fund may invest in debt or preferred stock convertible into or exchangeable
for common stock. Traditionally, convertible securities have paid dividends or
interest at rates higher than common stocks but lower than non-convertible
securities. They generally participate in the appreciation or depreciation of
the underlying stock into which they are convertible, but to a lesser degree. In
recent years, convertibles have been developed which combine higher or lower
current income with options and other features.

WARRANTS OR RIGHTS
--------------------------------------------------------------------------------
Each Fund may acquire warrants or rights in connection with other securities or
separately. Investments in warrants or rights are limited to 5% of total assets
for Large Cap Growth Fund, Balanced Fund, International Growth Fund, Small Cap
Growth Fund and Developing Markets Growth Fund. Warrants are options to buy a
stated number of shares of common stock at a

13
<PAGE>

specified price any time during the life of the warrants (generally two or more
years). Warrants or rights acquired in units or attached to securities will be
deemed to be without value for purposes of International Growth Fund's and
Developing Markets Growth Fund's 5% restriction.

COMMERCIAL PAPER
--------------------------------------------------------------------------------
Short-term debt instruments purchased by the Funds 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 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.

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

14
<PAGE>

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 each Fund's
portfolio may contain securities of foreign banks and foreign branches of
domestic banks, the Funds 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 Funds only purchase 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 Funds 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 Funds are generally
in applicable 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 Funds. 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.

OBLIGATIONS OF, OR GUARANTEED BY, THE UNITED STATES GOVERNMENT, ITS AGENCIES OR
INSTRUMENTALITIES
--------------------------------------------------------------------------------
Each Fund may invest in obligations of the U.S. 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.

DEPOSITORY RECEIPTS
--------------------------------------------------------------------------------
The Funds may hold securities of foreign issuers in the form of sponsored and
unsponsored 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
each 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.
Unsponsored ADRs are offered by companies which are not prepared to meet either
the reporting or accounting standards of the U.S. While readily

15
<PAGE>

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.

FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
--------------------------------------------------------------------------------
The Balanced Fund, 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. A Fund 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 Sub-Adviser believes that a foreign currency or currencies
may suffer a substantial decline against the U.S. dollar, the Fund may enter
into a forward currency contract to sell an amount of a foreign currency
approximating the value of some or all of the Fund's portfolio securities
denominated in such foreign currency or related currencies that the Sub-Adviser
feels demonstrate correlation in exchange rate movements (such a practice is
called "crosshedging"), or when the Sub-Adviser believes that the U.S. dollar
may suffer a substantial decline against a foreign currency or currencies, the
Fund may enter into a forward contract to buy a foreign currency for a fixed
dollar amount. In connection with each Fund's forward contract transactions, an
amount of the Fund's 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
they had not engaged in such contracts. The Funds will generally not enter into
forward foreign currency exchange contract with terms greater than one year.

OPTIONS - PUTS AND CALLS
--------------------------------------------------------------------------------
Large Cap Growth Fund, Mid Cap Growth Fund, Small Cap Growth Fund, Science and
Technology Growth Fund, Balanced Fund and International Growth Fund may write
exchange-traded call options on securities and may purchase and sell
exchange-traded put and call options on securities written by others, or
combinations or such options. All call options written by such Funds must be
fully covered. Such Funds may not write put options. The aggregate cost of all
outstanding options purchased and held by a Fund will at no time exceed 5% of
the Fund's total assets.

Developing Markets Growth Fund may write 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. 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 Developing Markets
Growth Fund. In addition, 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.

An option on a security is a contract that gives 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 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 gives 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. A Fund may write a call or, in the case of Developing Markets Growth
Fund, a put option to generate income, and will do so only if the option is
"covered." This means that so long as a 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 exercise price, for the same exercise period, and on
the same securities as the written call. A put is covered if a 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. By writing a call option, a Fund might lose the potential for
gain on the underlying security while the option is open, and by writing a put
option a Fund might become obligated to purchase the underlying security for
more than its current market price upon exercise. If a Fund purchases a put or
call option, any loss to the Fund is limited to the premium paid for, and
transaction costs paid in connection with, the option. The

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<PAGE>

use of options also involves the risk of limited liquidity in the even that a
Fund seeks to close out an options position before expiration by entering into
an offsetting transaction.

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 on
securities purchased on a forward commitment basis prior to their 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 a Fund enters into a transaction on a when-issued
or forward commitment basis, a segregated account consisting of cash and liquid
securities equal to the value of the when-issued or forward commitment
securities will be established and maintained with the custodian and will be
marked to the market daily. On the delivery date, the Fund will meet its
obligations from securities that are then maturing or sales of the securities
held in the segregated asset account and/or from then available cash flow. If a
Fund disposes of the right to acquire a when-issued security prior to its
acquisition or disposes of its right to deliver or receive against a forward
commitment, it can incur a gain or loss due to market fluctuation.

There is always a risk that the securities may not be delivered and that the
Fund may incur a loss or will have lost the opportunity to invest the amount set
aside for such transaction in the segregated asset account. Settlements in the
ordinary course of business, which may take substantially more than five
business days for non-U.S. securities, are not treated by the Funds 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. Each Fund 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, a Fund's risk is limited to the ability of
the seller to pay the agreed-upon price at the maturity of the repurchase
agreement. In the opinion of the Adviser, such risk is not material, since in
the event of default, barring extraordinary circumstances, the Fund would be
entitled to sell the underlying securities or otherwise receive adequate
protection under federal bankruptcy laws for its interest in such securities.
However, to the extent that proceeds from any sale upon a default are less than
the repurchase price, the Funds could suffer a loss. In addition, a Fund may
incur certain delays in obtaining direct ownership of the collateral. The
Adviser will continually monitor the value of the underlying securities to
ensure that their value always equals or exceeds the repurchase price. The
Adviser will submit a list of recommended issuers of repurchase agreements and
other short-term securities that it has reviewed for credit worthiness to the
Funds' directors at least quarterly for their approval.

FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
--------------------------------------------------------------------------------
The Balanced Fund, Developing Markets Growth Fund and International Growth Fund
may invest in futures contracts and options on futures contracts for the purpose
of hedging (and not for speculative purposes). As a result of entering into
futures contracts, no more than 5% of a Fund's net assets may be committed to
margin. Each such Fund may enter into interest rate futures, interest rate index
futures and options thereon. In addition, Developing Markets Growth Fund and
International Growth Fund may enter into stock index futures contracts,
contracts for the future delivery of foreign currencies, and options on such
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.

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<PAGE>

Although futures contracts by their terms call for actual delivery or acceptance
of the underlying financial instrument, 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.

The Funds may use futures solely to hedge against anticipated interest rate,
market or currency movements and not for speculation. The Funds presently could
accomplish similar results to that which they hope to achieve through the use of
futures contracts by purchasing or selling securities or currencies. For
example, Balanced Fund could sell debt securities with long maturities and
invest in debt securities with short maturities when interest rates are expected
to increase, or conversely, sell short-term debt securities and invest 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 OPTIONS ON FUTURES CONTRACTS. The Funds may purchase put and call
options on futures contracts as a hedge against interest rate, market or
currency movements, and will enter into closing transactions with respect to
such options to terminate existing positions. An option on a futures contract
gives the purchaser the right, in return for the premium paid, to assume a
position in a futures contract at a specified exercise price at any time prior
to the expiration dates of the option. A call option gives the purchaser of such
option the right to buy, and obliges its writer to sell, a specified underlying
futures contract at a specified exercise price at any time prior to the
expiration date of the option. A purchaser of a put option has the right to
sell, and the writer has the obligation to buy, such contract at the exercise
price during the option period.

RISKS OF 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 that 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 market trends by the Adviser or Sub-Adviser
may still not result in a successful transaction.

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<PAGE>

Another risk is that the Adviser or Sub-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 and other economic factors. Closing out an interest rate
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. Although futures contracts are traded only on commodity
exchanges, there can be no assurance that a liquid secondary market will exist
for any particular future, and theoretically losses from investing in futures
transactions are potentially unlimited.

RISKS OF OPTIONS ON FUTURES CONTRACTS. The use of options on futures contracts
also involves additional risk. Compared to the purchase or sale of futures
contracts, the purchase of 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 or
Sub-Adviser deems it desirable to do so. Although the Fund will enter into an
option position only if the Adviser or Sub-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 or currencies.

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.

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 restrictions 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 or Sub-Adviser to be liquid in accordance with
standards established by the Funds' Board of Directors.

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<PAGE>

Under these standards, the Adviser or Sub-Adviser must consider (a) the
frequency of trades and quotes for the security, (b) the number of dealers
willing to purchase or sell the security and the number of other potential
purchasers, (c) dealer undertakings to make a market in the security, and (d)
the nature of the security and the nature of the marketplace trades (for
example, the time needed to dispose of the security, the method of soliciting
offers and the mechanics of transfer).

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

SIT MONEY MARKET FUND
--------------------------------------------------------------------------------
The Funds may invest up to 25% of their total net assets in shares of money
market funds advised by the Adviser, which includes the Money Market Fund,
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 the Money Market Fund to the extent such fees
are based upon a Fund's assets invested in shares of the 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 the Money Market Fund.

ADDITIONAL RISKS AND FIXED-INCOME SECURITIES IN WHICH THE BALANCED FUND MAY
INVEST
--------------------------------------------------------------------------------

MORTGAGE-BACKED SECURITIES
--------------------------------------------------------------------------------
The mortgage-backed securities in which the Balanced Fund may invest provide
funds for mortgage loans made to residential home buyers. These include
securities that 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, servicer, 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 issue mortgage pass-through securities and guarantee, with
the full faith and credit of the U.S. government, the timely payment of
principal and interest on loans originated by approved institutions and backed
by pools of FHA-insured or VA-guaranteed mortgages.

The Federal Home Loan Mortgage Corporation ("FHLMC") also pools mortgage loans
and issues pass-through securities. 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.

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<PAGE>

The Federal National 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.

ASSET-BACKED SECURITIES
--------------------------------------------------------------------------------
The Balanced Fund may invest in asset-backed securities that are backed by
consumer credit such as automobile receivables, consumer credit card
receivables, and home equity loans. Asset-backed securities are generally
privately issued and, similar to mortgage-backed securities, pass through cash
flows to investors. Generally, asset-backed securities include many of the risks
associated with mortgage-related securities. In general, however, the collateral
supporting asset-backed securities is of shorter maturity than mortgage loans.
In addition, prepayments are less sensitive to changes in interest rates than
mortgage pass-throughs. Asset-backed securities involve certain risks that are
not posed by mortgage-backed securities, resulting mainly from the fact that
asset-backed securities do not usually contain the complete benefit of a
security interest in the related collateral. For example, credit card
receivables generally are unsecured and the debtors are entitled to the
protection of a number of state and federal consumer credit laws, including the
bankruptcy laws, some of which may reduce the ability to obtain full payment. In
the case of automobile receivables, due to various legal and economic factors,,
proceeds for repossessed collateral may not always be sufficient to support
payments on these securities.

COLLATERIALIZED MORTGAGE OBLIGATIONS (CMOs)
--------------------------------------------------------------------------------
The Balanced Fund may invest in CMOs. CMOs are hybrid instruments with
characteristics of both mortgage-backed bonds and mortgage pass-through
securities. Similar to a bond, interest and principal on a CMO are paid, in most
cases, monthly. CMOs may be collateralized by whole mortgage loans, but are more
typically collateralized by portfolios of

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<PAGE>

mortgage pass-through securities guaranteed by GNMA, FHLMC, or FNMA. Since CMOs
derive their return from underlying mortgages, they are commonly referred to as
derivative securities, but are not subject to Balanced Fund's 10% limitation on
investments in derivative instruments discussed above under "Swap Agreements."
CMOs are structured into multiple classes, with each class bearing a different
stated maturity. Monthly payments of principal, including prepayments, are first
returned to investors holding the shortest maturity class; investors holding the
longer maturity classes receive principal only after the earlier classes have
been retired. CMOs that are issued or guaranteed by the U.S. Government or by
any of its agencies or instrumentalities will be considered U.S. Government
securities by the Balanced Fund, while other CMOs, even if collateralized by
U.S. Government securities, will have the same status as other privately issued
securities for purposes of applying the Fund's diversification tests.

U.S. TREASURY INFLATION-PROTECTION SECURITIES
--------------------------------------------------------------------------------
U.S. Treasury inflation-protection securities are a type of U.S. government
obligation. The Balanced Fund may invest in inflation-protection securities,
which are marketable book-entry securities issued by the United States
Department of Treasury ("Treasury") with a nominal return linked to the
inflation rate in prices. The index used to measure inflation is the
non-seasonably adjusted U.S. City Average All Items Consumer Price Index for All
Urban Consumers ("CPI-U").

The principal value of an inflation-protection security is adjusted for
inflation, and every six months the security pays interest, which is an amount
equal to a fixed percentage of the inflation-adjusted value of the principal.
The final payment of principal of the security will not be less than the
original par amount of the security at issuance.

The principal of an inflation-protection security is indexed to the
non-seasonally adjusted CPI-U. To calculate the inflation-adjusted principal
value for a particular valuation date, the value of the principal at issuance is
multiplied by the index ratio applicable to that valuation date. The index ratio
for any date is the ratio of the reference CPI applicable to such date to the
reference CPI applicable to the original issue date. Semiannual coupon interest
is determined by multiplying the inflation-adjusted principal amount by one-half
of the stated rate of interest on each interest payment date.

Inflation-adjusted principal or the original par amount, whichever is larger, is
paid on the maturity date as specified in the applicable offering announcement.
If at maturity the inflation-adjusted principal is less than the original
principal value of the security, an additional amount is paid at maturity so
that the additional amount plus the inflation-adjusted principal equals the
original principal amount. Some inflation-protection securities may be stripped
into principal and interest components. In the case of a stripped security, the
holder of the stripped principal would receive this additional amount. The final
interest payment, however, will be based on the final inflation-adjusted
principal value, not the original par amount.

MANUFACTURED HOME LOANS
--------------------------------------------------------------------------------
The Balanced Fund invests in GNMA manufactured home loan pass-through
securities. Manufactured home loans are fixed-rate loans secured by a
manufactured home unit. In certain instances the loan may be collateralized by a
combination of a manufactured home unit and a developed lot of land upon which
the unit can be placed. Manufactured home loans are generally not mortgages;
however, because of the structural and operational similarities with mortgage
backed pass-through securities and the role of GNMA, industry practice often
groups the securities within the spectrum of GNMA mortgage backed pass-through
securities for listing purposes. Manufactured home loans have key
characteristics different from mortgage backed securities including different
prepayment rates. Prepayment rates tend to fluctuate with interest rates and
other economic variables. Manufactured home loan prepayment rates generally tend
to be less volatile than the prepayment rates experienced by mortgage backed
securities. See the above discussion regarding mortgage backed securities.

MUNICIPAL SECURITIES
--------------------------------------------------------------------------------
Municipal securities in which the Balanced 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.

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.

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<PAGE>

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 Balanced Fund may enter into swap agreements for purposes of attempting to
obtain a particular investment return at a lower cost to the Funds than if the
Funds 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"). The Balanced Fund may invest up
to 10% of its assets in certain derivative instruments, including futures,
options, options on futures, and enter into swap agreements.

VARIABLE RATE NOTES
--------------------------------------------------------------------------------
The Balanced 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 permits 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.

ZERO COUPON SECURITIES
--------------------------------------------------------------------------------
The Balanced 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. 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.

TRUST PREFERRED SECURITIES
--------------------------------------------------------------------------------
The Balanced Fund may purchase trust preferred securities issued primarily by
financial institutions such as banks and insurance companies. Trust preferred
securities purchased by the Fund generally have a stated par value, a stated
maturity typically of 30 years, are callable after a set time period of
typically five or ten years and pay interest quarterly or semi-annually. The
proceeds from the issuance of the securities are placed in a single asset trust
controlled by the issuer holding company, and the trust in-turn purchases
long-term junior subordinated debt of the issuer holding company. The junior
subordinated debt held by the trust is senior to all common and preferred stock
of the issuer. The junior subordinated debt instruments include deferral
provisions whereby the issuer holding company may defer interest payments for up
to five years under certain circumstances, provided that no dividend payments
are made with respect to outstanding common and preferred stock, and during a
period of interest deferral the securities earn compounded interest which is
accrued by the issuer as an interest expense. The Federal Reserve Bank limits
the amount of trust preferred securities that an issuer may have outstanding
such that the total of cumulative preferred stock and trust preferred securities
outstanding may not exceed 25 percent of the issuer's Tier 1 capital base. The
securities provide that they are immediately callable in the event of a change
in the tax law whereby the interest paid by the issuer is no longer treated as
an interest expense deduction by the issuer.

BALANCED FUND'S RISKS OF INVESTING IN HIGH YIELD SECURITIES
--------------------------------------------------------------------------------
Balanced Fund may invest up to 25% of its total assets in securities rated below
investment-grade. Securities rated below investment grade are referred to as
high yield securities or "junk bonds." Junk bonds are regarded as being
predominantly speculative as to the issuer's ability to make payments of
principal and interest. Investment in such securities involves substantial risk.
Issuers of junk bonds may be highly leveraged and may not have available to them
more traditional methods of financing. Therefore, the risks associated with
acquiring the securities of such issuers generally are greater than is the case
with higher rated securities. For example, during an economic downturn or a
sustained period of rising

23
<PAGE>

interest rates, issuers of junk bonds may be more likely to experience financial
stress, especially if such issuers are highly leveraged. In addition, the market
for junk bonds is relatively new and has not weathered a major economic
recession, and it is unknown what effects such a recession might have on such
securities. During such periods, such issuers may not have sufficient cash flows
to meet their interest payment obligations. The issuer's ability to service its
debt obligations also may be adversely affected by specific issuer developments,
or the issuer's inability to meet specific projected business forecasts, or the
unavailability of additional financing. The risk of loss due to default by the
issuer is significantly greater for the holders of junk bonds because such
securities may be unsecured and may be subordinated to the creditors of the
issuer. While most of the junk bonds in which Balanced Fund may invest do not
include securities which, at the time of investment, are in default or the
issuers of which are in bankruptcy, there can be no assurance that such events
will not occur after the Fund purchases a particular security, in which case the
Fund may experience losses and incur costs. Junk bonds frequently have call or
redemption features that would permit an issuer to repurchase the security from
the Fund. If a call were exercised by the issuer during a period of declining
interest rates, the Fund likely would have to replace such called security with
a lower yielding security, thus decreasing the net investment income to the Fund
and dividends to shareholders.

Junk bonds tend to be more volatile than higher-rated fixed income securities,
so that adverse economic events may have a greater impact on the prices of junk
bonds than on higher-rated fixed income securities. Factors adversely affecting
the market value of such securities are likely to affect adversely the Fund's
net asset value. Like higher-rated fixed income securities, junk bonds generally
are purchased and sold through dealers who make a market in such securities for
their own accounts. However, there are fewer dealers in the junk bond market,
which may be less liquid than the market for higher-rated fixed income
securities, even under normal economic conditions. Also there may be significant
disparities in the prices quoted for junk bonds by various dealers. Adverse
economic conditions and investor perceptions thereof (whether or not based on
economic fundamentals) may impair the liquidity of this market and may cause the
prices the Fund receives for its junk bonds to be reduced. In addition, the Fund
may experience difficulty in liquidating a portion of its portfolio when
necessary to meet the Fund's liquidity needs or in response to a specific
economic event such as a deterioration in the creditworthiness of the issuer.
Under such conditions, judgment may play a greater role in valuing certain of
the Fund's portfolio securities than in the case of securities trading in a more
liquid market. In addition, the Fund may incur additional expenses to the extent
that it is required to seek recovery upon a default on a portfolio holding or to
participate in the restructuring of the obligation.

RATINGS OF DEBT SECURITIES
--------------------------------------------------------------------------------

Investment grade debt securities are rated AAA, AA, A or BBB by Standard &
Poor's Ratings Services ("S& P"), Fitch IBCA ("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 Large Cap 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 characteristics. DEBT SECURITIES RATED BELOW
INVESTMENT GRADE ARE COMMONLY KNOWN AS JUNK BONDS. Presently, other than with
respect to the Balanced Fund, the Adviser intends to invest only in debt
securities rated at investment grade at the time of purchase, or if not rated,
deemed by the Adviser to be of comparable quality. See Appendix A for further
information about ratings.

SECURITIES LENDING
--------------------------------------------------------------------------------

Each Fund may lend portfolio securities to brokers, dealers and other financial
institutions needing to borrow securities to complete certain transactions. Such
loans may not exceed 33-1/3% of the value of a Fund's total assets. The lending
of portfolio securities 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 that the Adviser
has determined are creditworthy.

24
<PAGE>

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 that 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.

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.

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. 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 "Brokerage" and "Taxes"
sections below. The portfolio turnover rates for each of the Funds are contained
in the Financial Highlights tables in the prospectus.

ADDITIONAL INFORMATION ABOUT SELLING SHARES
--------------------------------------------------------------------------------

SUSPENSION OF SELLING ABILITY
--------------------------------------------------------------------------------
Each Fund may suspend selling privileges or postpone the date of payment:
- During any period that the NYSE is closed other than customary weekend or
holiday closings, or when trading is restricted, as determined by the
Securities and Exchange Commission ("SEC");
- During any period when an emergency exists, as determined by the SEC, 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;
- For such other periods as the SEC may permit.

TELEPHONE TRANSACTIONS
--------------------------------------------------------------------------------
Once you place a telephone transaction request to Sit Mutual Funds, it cannot be
canceled or modified. The Funds use reasonable procedures to confirm that
telephone instructions are genuine, including requiring that payments be made
only to the shareholder's address of record or the bank account designated on
the application and requiring certain means of

25
<PAGE>

telephone identification. If the Fund fails to employ such procedures, it may be
liable for any losses suffered by Fund shareholders as a result of unauthorized
or fraudulent instructions. During times of chaotic economic or market
circumstances, a shareholder may have difficulty reaching the Funds by
telephone. Consequently, a redemption or exchange by telephone may be difficult
to implement at those times.

REDEMPTION-IN-KIND
--------------------------------------------------------------------------------
If the Adviser determines that existing conditions make cash payments
undesirable, redemption payments may be made in whole or in part in securities
or other financial assets, valued for this purpose as they are valued in
computing the NAV for a Fund's shares, consistent with Rule 18(f)(1) of the
Investment Company Act of 1940. Shareholders receiving securities or other
financial assets on redemption may realize a gain or loss for tax purposes and
will incur any costs of sale, as well as the associated inconveniences.

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, Martin Luther King Jr. Day, President's Day, Good Friday,
Memorial Day, July Fourth, Labor Day, Thanksgiving Day and Christmas Day. The
net asset value per share will not be determined on these national holidays. 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 Boards 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

26
<PAGE>

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.

On June 30, 2000, the net asset value and public offering price per share for
each Fund was calculated as follows:

Balanced Fund:
net assets $19,303,515
--------------------------------
shares outstanding 1,006,252 = net asset value (NAV) per share =
public offering price per share $19.18

Large Cap Growth Fund:
net assets $172,400,272
--------------------------------
shares outstanding 2,708,014 = NAV per share = public offering price
per share $63.66

Mid Cap Growth Fund:
net assets $566,639,137
--------------------------------
shares outstanding 24,040,686 = NAV per share = public offering price
per share $23.57

International Growth Fund:
net assets $167,909,105
--------------------------------
shares outstanding 7,120,972 = NAV per share = public offering price
per share $23.58

Small Cap Growth Fund:
net assets $190,629,606
--------------------------------
shares outstanding 4,609,831 = NAV per share = public offering price
per share $41.35

Science and Technology Growth Fund:
net assets $46,172,724
--------------------------------
shares outstanding 1,383,370 = NAV per share = public offering price
per share $33.38

Developing Markets Growth Fund:
net assets $14,675,790
--------------------------------
shares outstanding 1,092,637 = NAV per share = public offering price
per share $13.43

CALCULATION OF PERFORMANCE DATA
--------------------------------------------------------------------------------
Advertisements and other sales literature for the Funds may refer to cumulative
total return and average annual total return. 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. 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.

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:

(ERV - P)
CTR = ------- x 100
P

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

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

27
<PAGE>

The Funds' cumulative total returns for the period ended June 30, 2000 were:

1-Year 5-Years 10-Years Inception
------ ------- -------- ---------
Balanced Fund 17.28% 132.13% -- 163.98%(1)
Large Cap Growth Fund 27.75 227.84 435.70% 1706.45(2)
Mid Cap Growth Fund 73.01 252.48 536.13 2909.89(2)
International Growth Fund 33.38 93.31 -- 214.02(3)
Small Cap Growth Fund 126.20 305.51 -- 449.84(4)
Science and Technology Growth Fund 119.17 -- -- 233.80(5)
Developing Markets Growth Fund 34.57 43.06 -- 35.29(4)
(1) 12/31/93 Fund inception
(2) 9/2/82 Fund inception
(3) 11/1/91 Fund inception
(4) 7/1/94 Fund inception
(5) 12/31/97 Fund inception

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

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

The Funds' average annual total returns for the period ended June 30, 2000 were:

1-Year 5-Years 10-Years Inception
------ ------- -------- ---------
Balanced Fund 17.28% 18.34% -- 16.10%(1)
Large Cap Growth Fund 27.75 26.80 18.27% 17.61(2)
Mid Cap Growth Fund 73.01 28.66 20.32 21.03(2)
International Growth Fund 33.38 14.09 -- 14.11(3)
Small Cap Growth Fund 126.20 32.31 -- 32.84(4)
Science and Technology Growth Fund 119.17 -- -- 62.00 (5)
Developing Markets Growth Fund 34.57 7.43 -- 5.16 (4)
(1) 12/31/93 Fund inception
(2) 9/2/82 Fund inception
(3) 11/1/91 Fund inception
(4) 7/1/94 Fund inception
(5) 12/31/97 Fund inception

MANAGEMENT
--------------------------------------------------------------------------------

The Large Cap Growth Fund, Mid Cap Growth Fund, and the corporate issuer of the
Balanced Fund, International Growth Fund, Small Cap Growth Fund, Science and
Technology Growth Fund and Developing Markets 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 the establishment
of the Funds' policies. The officers of the Funds manage the day-to-day
operation of the Funds.

Through December 31, 1999, the Sit Funds as a group (a total of 13 Funds) paid
each director, who is not also an officer, an annual total fee of $12,000,
$2,000 for each meeting attended, and provided reimbursement for travel and
other expenses. Effective January 1, 2000, the Sit Funds pay each director, who
is not also an officer, an annual total fee of $15,000, $2,500 for each meeting
attended, and provide reimbursement for travel and other expenses. The following
table

28
<PAGE>

sets forth the aggregate compensation received by each Director for services
provided to the funds of the Sit Mutual Funds for the fiscal year ended June 30,
2000. Pursuant to each Fund's investment management agreement with the Adviser,
the Adviser is obligated to pay the Funds' expenses, including fees paid to the
directors. (See discussion under "Investment Adviser" below.) Directors who are
officers of the Adviser or any of its affiliates did not receive any such
compensation and are not included in the table.

<TABLE>
<CAPTION>
Aggregate Pension or
Compensation For Retirement Benefits Estimated Total
Services Rendered Accrued As Part Annual Benefits Compensation From
Director to Each Fund of Fund Expenses Upon Retirement Fund Complex
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
John E. Hulse $1,730 None None $22,500
William E. Frenzel 1,730 None None 22,500
Sidney L. Jones 1,730 None None 22,500
Donald W. Phillips 1,730 None None 22,500
</TABLE>

The Funds and their investment adviser and principal underwriter have adopted a
code of ethics under rule 17j-1 of the Investment Company Act which permits
personnel subject to the code to invest in securities, including securities that
may be purchased or held by the Funds.

The names, ages, 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 Wells Fargo Center, Minneapolis, Minnesota.

<TABLE>
<CAPTION>
NAME (AGE) & ADDRESS POSITION WITH THE FUNDS PRINCIPAL OCCUPATION DURING PAST 5 YEARS
-------------------- ----------------------- ----------------------------------------
<S> <C> <C>
Eugene C. Sit, CFA (62)* Director and Chairman Chairman, CEO and CIO of Sit Investment Associates, Inc.
(the "Adviser"); Chairman, CEO and CIO of Sit/Kim
International Investment Associates, Inc. (the "Sub-Adviser");
Director and Chairman of the Funds and Director of SIA
Securities Corp. (the "Distributor")

Peter L. Mitchelson, CFA (59)* Director and Vice President and Director of the Adviser; Executive Vice
Chairman; Sr. Portfolio President and Director of the Sub-Adviser; Director and
Manager - Large Cap Vice Chairman of the Funds; Director of the Distributor
Growth and Balanced Funds

William E. Frenzel (72)* Director Director of the Funds; Advisory Director of the Adviser;
6310 Stoneham Lane Director of the Sub-Adviser; Senior Visiting Scholar at The
McLean, VA 22101 Brookings Institution; Former 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 (67) Director Director of the Funds; Director, Trustee, Benilde Religious
4303 Quail Run Lane & Charitable Trust; Trustee, Pacific Gas & Electric Nuclear
Danville, CA 94506 Decommissioning Trust

Sidney L. Jones (66) Director Director of the Funds; Adjunct Faculty, Center for Public
8505 Parliament Drive Policy Education, The Brookings Institution; Visiting
Potomac, MD 20854 Research Associate in Economics at Carleton College; Former
Assistant Secretary for Economic Policy, United States
Department of the Treasury
</TABLE>

29
<PAGE>

<TABLE>
<CAPTION>
NAME (AGE) & ADDRESS POSITION WITH THE FUNDS PRINCIPAL OCCUPATION DURING PAST 5 YEARS
-------------------- ----------------------- ----------------------------------------
<S> <C> <C>
Donald W. Phillips (52) Director Director of the Funds; President of Phillips Capital
10 S. Wacker Drive, #2960 Management; President of Forstmann-Leff International Inc.
Chicago, IL 60606 until 2000; Executive Vice President and Director of Equity
Financial and Management Company until 1997; Chairman of
Equity Institutional Investors, Inc. until 1997

Melvin C. Bahle (80) Director Emeritus Director Emeritus of the Funds; Director of the Funds until
#1 Muirfield Lane October 1995; Financial consultant; Director and/or Officer of
St. Louis, MO 63141 several companies, foundations and religious organizations

Roger J. Sit (38) Executive Vice President Executive Vice President of the Adviser and the Sub-Adviser;
Vice President and Senior Equity Research Analyst for
Goldman Sachs & Company until January, 1998

Paul E. Rasmussen (39) Vice President & Treasurer Vice President, Secretary and Controller for the Adviser and
Sub-Adviser; Vice President and Treasurer of the Funds;
President and Treasurer of the Distributor

Erik S. Anderson, CFA (57) Vice President - Investments Vice President - Equity Research and Portfolio Management
of the Adviser

Ronald D. Sit, CFA (41) Vice President - Investments Vice President - Equity Research and Portfolio Management
of the Adviser

Bryce A. Doty, CFA (33) Vice President - Investments Vice President - Fixed Income Research and Portfolio
Balanced Fund Management of the Balanced Fund

John T. Groton, Jr., CFA (34) Vice President - Investments Vice President - Equity Research Analyst of the Adviser

Robert W. Sit, CFA (31) Vice President - Investments Vice President - Equity Research Analyst of the Adviser

Michael P. Eckert (45) Vice President Vice President - Institutional Client Group

Shelley H. Shutes (43) Vice President Vice President - Investor Services of the Funds

Carla J. Rose (34) Vice President, Assistant Vice President - Administration & Deputy Controller
Secretary & Assistant Treasurer

Kelly K. Orning (32) Assistant Secretary & Staff Attorney of the Adviser
Assistant Treasurer

Michael J. Radmer (55) Secretary Secretary of the Funds; Partner of the Funds' general counsel,
220 South Sixth Street Dorsey & Whitney LLP
Minneapolis, MN
</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 and shareholder of the
Adviser.

Mr. Roger Sit, Mr. Ron Sit, and Mr. Robert Sit are sons of Eugene C. Sit.

30
<PAGE>

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 Agreement provides that the Adviser will 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.

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. Each Agreement is
terminable upon 60 days' written notice by the Adviser or the Fund and will
terminate automatically in the event of its "assignment" (as defined in the 1940
Act).

COMPENSATION AND ALLOCATION OF EXPENSES
--------------------------------------------------------------------------------
Under each of the Fund's Investment Management Agreement, the Fund is obligated
to pay the Adviser a flat monthly fee, which is equal on an annual basis to the
following percentages of the average daily net assets of the Funds:
Sit Balanced Fund 1.00%
Sit Large Cap Growth Fund, Inc. 1.00%
Sit Mid Cap Growth Fund, Inc. 1.25%(1)
Sit International Growth Fund 1.85%(2)
Sit Small Cap Growth Fund 1.50%
Sit Science and Technology Growth Fund 1.50%(3)
Sit Developing Markets Growth Fund 2.00%
(1) For the period November 1, 1996 through December 31, 2000, 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 Mid Cap Growth Fund to 1.00% of the Fund's average daily net assets.
From January 1, 2001, through December 31, 2001, 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 Mid Cap Growth Fund to 1.15% of the Fund's average daily net assets.
After December 31, 2001, this voluntary fee waiver may be discontinued by
the Adviser in its sole discretion.
(2) For the period January 1, 1994 through December 31, 2001, 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, 2001, this voluntary fee waiver may be
discontinued by the Adviser in its sole discretion.

31
<PAGE>

(3) For the period December 31, 1997 (date of inception) through December 31,
2000, the Adviser has voluntarily agreed to limit the management fee (and
thereby, all Fund expenses, except those not payable by the Adviser as set
forth above) to 1.25% of the Science and Technology Growth Fund's average
daily net assets. From January 1, 2001, through December 31, 2001, the
Adviser has voluntarily agreed to limit the management fee (and thereby,
all Fund expenses, except those not payable by the Adviser as set forth
above) to 1.35% of the Science and Technology Growth Fund's average daily
net assets. After December 31, 2001, this voluntary fee waiver may be
discontinued by the Adviser in its sole discretion.

Set forth below are the investment management fees and other expenses paid by
each of the Large Cap Growth Fund, Mid Cap Growth Fund, Small Cap Growth Fund,
Balanced Fund, International Growth Fund, and Developing Markets Growth Fund
during the fiscal years ended June 30, 2000, 1999, and 1998. Fees and expenses
of the Funds waived or paid by the Adviser during such fiscal years are also set
forth below.

<TABLE>
<CAPTION>
LARGE CAP MID CAP SMALL CAP
GROWTH GROWTH GROWTH BALANCED
2000 FUND FUND FUND FUND
---- ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
AVERAGE NET ASSETS $154,614,370 $484,377,716 $103,163,344 $14,770,724
Investment Advisory Fees 1,545,264 6,048,102 1,541,681 147,510
Expenses Waived 00 (1,209,620) 00 00
Net Fund Expenses 1,545,264 4,838,482 1,541,681 147,510
Ratio of expenses to average
daily net assets 1.00% 1.00% 1.50% 1.00%
</TABLE>

<TABLE>
<CAPTION>
SCIENCE AND DEVELOPING
TECHNOLOGY INT'L MARKETS
GROWTH GROWTH GROWTH
2000 (CONTINUED) FUND FUND FUND
---- ----------- ------------ -----------
<S> <C> <C> <C>
AVERAGE NET ASSETS $27,404,403 $133,900,690 $12,849,730
Investment Advisory Fees 409,752 2,473,465 256,816
Expenses Waived (68,292) (467,953) 00
Net Fund Expenses 341,460 2,005,512 256,816
Ratio of expenses to average
daily net assets 1.25% 1.50% 2.00%
</TABLE>

<TABLE>
<CAPTION>
LARGE CAP MID CAP SMALL CAP REGIONAL
GROWTH GROWTH GROWTH GROWTH
1999 FUND FUND FUND FUND
---- ------------ ------------ ----------- ----------
<S> <C> <C> <C> <C>
AVERAGE NET ASSETS $125,102,962 $346,171,200 $45,544,647 $5,945,176
Investment Advisory Fees 1,250,402 4,328,283 683,493 74,226
Expenses Waived 00 (865,657) 00 (14,845)
-- -------- -- -------
Net Fund Expenses 1,250,402 3,462,626 683,493 59,381
Ratio of expenses to average
daily net assets 1.00% 1.00% 1.50% 1.00%
</TABLE>

<TABLE>
<CAPTION>
SCIENCE AND DEVELOPING
TECHNOLOGY INT'L MARKETS
GROWTH BALANCED GROWTH GROWTH
1999 (CONTINUED) FUND FUND FUND FUND
---- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
AVERAGE NET ASSETS $8,828,949 $8,708,561 $92,851,503 $10,435,959
Investment Advisory Fees 132,050 86,957 1,718,057 208,718
Expenses Waived (22,008) 00 (325,038) 00
------- -- -------- ---
Net Fund Expenses 110,042 86,957 1,393,019 208,718
Ratio of expenses to average
daily net assets 1.25% 1.00% 1.50% 2.00%
</TABLE>

32
<PAGE>

<TABLE>
<CAPTION>
LARGE CAP MID CAP SMALL CAP REGIONAL
GROWTH GROWTH GROWTH GROWTH
1998 FUND FUND FUND FUND
---- ----------- ------------ ----------- ----------
<S> <C> <C> <C> <C>
AVERAGE NET ASSETS $88,152,918 $401,679,671 $64,558,158 $3,944,416
Investment Advisory Fees 880,285 5,020,370 968,377 23,035
Expenses Waived 00 (1,004,074) 00 (3,611)
-- ---------- -- ------
Net Fund Expenses 880,285 4,016,296 968,377 19,424
Ratio of expenses to average
daily net assets 1.00% 1.00% 1.50% .49%*
</TABLE>

<TABLE>
<CAPTION>
SCIENCE AND DEVELOPING
TECHNOLOGY INT'L MARKETS
GROWTH BALANCED GROWTH GROWTH
1998 (CONTINUED) FUND FUND FUND FUND
---- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
AVERAGE NET ASSETS $3,760,994 $5,969,736 $96,761,406 $13,914,844
Investment Advisory Fees 27,931 59,634 1,790,014 278,595
Expenses Waived (3,611) 00 (338,651) 00
------ -- -------- ---
Net Fund Expenses 23,276 59,634 1,451,363 278,595
Ratio of expenses to average
daily net assets .62%* 1.00% 1.50% 2.00%
</TABLE>

*December 31, 1997 (date of inception) through June 31, 1998

THE SUB-ADVISER - INTERNATIONAL GROWTH FUND AND DEVELOPING MARKETS GROWTH FUND
--------------------------------------------------------------------------------
The International Growth Fund's and Developing Markets Growth Fund's Investment
Management Agreements authorize 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 International
Growth Fund's and Developing Markets Growth Fund's Sub-Adviser.

The current Sub-Advisory Agreement provides that the Sub-Adviser agrees to
manage the investment of International Growth Fund's and Developing Markets
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 Funds' 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 International Growth Fund's
and Developing Markets Growth Fund's average daily net assets:

<TABLE>
<CAPTION>
International Growth Developing Markets
Fund Growth Fund
-------------------- ------------------
<S> <C> <C>
First $100 million of average daily net assets .75% .75%
Next $100 million of average daily net assets .50% .60%
Assets in excess of $200 million .40% .50%
</TABLE>

Pursuant to the Investment Management Agreement the Adviser paid the Sub-Adviser
fees of $627,994, $602,981 and $822,626 for the fiscal years ended June 30,
1998, 1999 and 2000, respectively, with respect to services provided on behalf
of the International Growth Fund; and fees of $104,245, $78,208 and $96,849 for
the fiscal years ended June 30, 1998, 1999 and 2000, respectively, with respect
to services provided on behalf of the Developing Markets Growth Fund.

33
<PAGE>

The Sub-Advisory Agreement continues in effect from year to year with respect to
a Fund 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
--------------------------------------------------------------------------------

Each of the Funds have entered into Underwriting and Distribution Agreements
with SIA Securities Corp. ("Securities"), an affiliate of the Adviser, pursuant
to which Securities acts as each Fund's principal underwriter. Securities
markets each Fund's shares only to certain institutional investors and all other
sales of each Fund's shares are 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.

Securities or the Adviser may enter into agreements with various brokerage or
other firms pursuant to which such firms provide certain administrative services
with respect to customers who are beneficial owners of shares of the Funds. The
Adviser or Securities may compensate such firms for the services provided, which
compensation is based on the aggregate assets of customers that are invested in
the Funds.

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 an account trading and order
management system and analyses and reports concerning investment issues,
industries, securities, economic factors

34
<PAGE>

and trends, portfolio strategy, and the performance of certain accounts. Some
services may require the use of hardware provided by the information provider.
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. Some investment companies enter into
arrangements under which a broker-dealer agrees to pay the cost of certain
products or services (not including research services) in exchange for fund
brokerage ("brokerage/services arrangements"). Under a typical brokerage/service
arrangement, a broker agrees to pay a fund's custodian fees or transfer agent
fees and, in exchange, the fund agrees to direct a minimum amount of brokerage
to the broker. The Adviser does not intend to enter into such brokerage/service
arrangements on behalf of the Funds. Some investment companies enter into
arrangements that provide for specified or reasonably ascertainable fee
reductions in exchange for the use of fund assets ("expense offset
arrangements"). Under such expense offset agreements, expenses are reduced by
foregoing income rather than by re-characterizing them as capital items. For
example, a fund may have a "compensating balance" agreement with its custodian
under which the custodian reduces its fee if the fund maintains cash or deposits
with the custodian in non-interest bearing accounts. The Adviser does not intend
to enter into expense offset agreements involving assets of the Funds

Most 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
and Developing Markets 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.

35
<PAGE>

The Adviser has entered into agreements with Capital Institutional Services,
Inc. ("CIS"), and Autranet, Inc. ("AI"), unaffiliated registered broker-dealers.
All transactions placed with CIS and LAS are subject to the above criteria. CIS
and AI provide the Adviser with a wide variety of economic, performance, and
investment research information from (but not limited to) Egan-Jones Rating
Company, Fitch Investors Service, Inc., Moody's Investors Service Inc.,
Municipal Market Data, Standard & Poor's Corporation, Bloomburg, L.P.,
Institutional Investor, TradWeb Service, Ried, Thurnberg & Co., Inc., and Stone
& McCarthy Research Associates.

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 three
most recent fiscal years, as well as commissions paid to firms that supplied the
Funds and Adviser with statistical and research services, are set forth below.

<TABLE>
<CAPTION>
2000 1999 1998
AMT PAID TO AMT PAID TO AMT PAID TO
TOTAL FIRMS FOR TOTAL FIRMS FOR TOTAL FIRMS FOR
BROKERAGE SERVICES & BROKERAGE SERVICES & BROKERAGE SERVICES &
FUND COMMISSION RESEARCH COMMISSION RESEARCH COMMISSION RESEARCH
---- ---------- -------- ---------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Balanced $13,080 $4,305 $6,571 $3,962 $3,578 $1,608
Large Cap Growth 166,427 80,905 126,142 74,829 82,201 40,346
Mid Cap Growth 713,700 194,314 603,028 398,377 459,643 237,865
International Growth 281,342 201,924 288,891 266,092 247,731 196,276
Small Cap Growth 208,122 49,527 146,914 34,423 147,191 23,910
Science and Technology Growth 32,001 2,598 13,053 2,280 4,102 480
Developing Markets Growth 76,363 33,797 79,045 75,952 50,695 44,935
</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 October 18, 2000:

<TABLE>
<CAPTION>
Record Beneficially Of Record &
Person Only Only Beneficially
------ ------ ------------ ------------
<S> <C> <C> <C>
BALANCED FUND
-------------
Charles Schwab & Co., Inc., Special Custody Acct FBO Cust., 101
Montgomery Street, San Francisco, CA 16.74%
National Financial Services Corp., FBO Cust., Church Street
Station, P.O. Box 3908, New York, NY 11.63%
Sit Investment Associates (various accounts) 4600 Wells Fargo Center
Minneapolis, MN 10.11%
Comerica Bank, FBO Pulte Corp. Inc., P.O. Box 75000/MC3446
Detroit, MI 6.56%

LARGE CAP GROWTH FUND
----------------------
Charles Schwab & Co., Inc., Special Custody Acct FBO Cust., 101
Montgomery Street, San Francisco, CA 8.38%

MID CAP GROWTH FUND
-------------------
Charles Schwab & Co., Inc., Special Custody Acct FBO Cust., 101
Montgomery Street, San Francisco, CA 11.39%
</TABLE>

36
<PAGE>

<TABLE>
<CAPTION>
Record Beneficially Of Record &
Person Only Only Beneficially
------ ------ ------------ ------------
<S> <C> <C> <C>
INTERNATIONAL GROWTH FUND
-------------------------
State Street Corporation, FBO Northrup Grumman Corp.,
1840 Century Park East, Los Angeles, CA 25.09%
Charles Schwab & Co., Special Custody Acct FBO Cust., 101
Montgomery St., San Francisco, CA 8.76%

SMALL CAP GROWTH FUND
---------------------
Charles Schwab & Co., Special Custody Acct FBO Cust., 101
Montgomery St., San Francisco, CA 34.72%
National Financial Services Corp., FBO Cust., Church Street
Station, P.O. Box 3908, New York, NY 13.13%

DEVELOPING MARKETS GROWTH FUND
------------------------------
Charles Schwab & Co., Special Custody Acct FBO Cust., 101
Montgomery St., San Francisco, CA 38.04%
National Financial Services Corp., FBO Cust., Church Street
Station, P.O. Box 3908, New York, NY 7.89%
</TABLE>

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; and (3) 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.

Some of the investment practices that may be employed by the Funds will be
subject to special provisions that, among other things, may defer the use of
certain losses of such Funds, affect the holding period of the securities held
by the Funds and,

37
<PAGE>

particularly in the case of transactions in or with respect to foreign
currencies, affect the character of the gains or losses realized. These
provisions may also require the Funds to mark-to market some of the positions in
their respective portfolios (i.e., treat them as closed out) or to accrue
original discount, both of which may cause such Funds to recognize income
without receiving cash with which to make distributions in amounts necessary to
satisfy the distribution requirements for qualification as a regulated
investment company and for avoiding income and excise taxes. Accordingly, in
order to make the required distributions, a Fund may be required to borrow or
liquidate securities. Each Fund will monitor its transactions and may make
certain elections in order to mitigate the effect of these rules and prevent
disqualification of the Funds as regulated investment companies.

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.

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.

If more than 50% of the Developing Markets Growth Fund's and the International
Growth Fund's total assets at the close of its fiscal year consist of securities
of foreign corporations, each Fund will be eligible to, and may, file an
election with the Internal Revenue Service pursuant to which shareholders will
be required to include their pro rata portions of foreign taxes paid by the Fund
as income received by them. Shareholders may then either deduct such pro rata
portions in computing their taxable income or use them as foreign tax credits
against their United States income taxes. If either Fund makes such an election,
it will report annually to each shareholder the amount of foreign taxes to be
included in income and then either deducted or credited.

Dividends paid by Developing Markets Growth Fund and International Growth Fund
will not be eligible for the 70% deduction for dividends received by
corporations if, as expected, none of those Funds' income consists of dividends
paid by U.S. corporations.

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 financial statements included in the Funds' annual reports to shareholders
for the fiscal year ended June 30, 2000 are incorporated by reference in this
Statement of Additional Information.

OTHER INFORMATION
--------------------------------------------------------------------------------

CUSTODIAN; SUB-CUSTODIAN; COUNSEL; ACCOUNTANTS
--------------------------------------------------------------------------------
The Northern Trust Company, 50 South LaSalle Street, Chicago, IL 60675 acts as
custodian of the Funds' assets and portfolio securities; Dorsey & Whitney LLP,
220 South Sixth Street, Minneapolis, Minnesota 55402, is the independent General
Counsel for the Funds; and KPMG LLP, 4200 Wells Fargo Center, Minneapolis,
Minnesota 55402, acts as the Funds' independent accountants.

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

38
<PAGE>

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.

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 Large Cap Growth Fund and the Mid Cap
Growth 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. Sit Mutual Funds,
Inc., is the corporate issuer of the International Growth Fund, Balanced Fund,
Developing Markets Growth Fund, and Small Cap Growth Fund, and Science and
Technology Growth Fund. Sit Mutual Funds, Inc. has one trillion shares of common
stock authorized with 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
of six series: Series A Common Shares represent shares of International Growth
Fund; Series B Common Shares represent shares of Balanced Fund; Series C Common
Shares represent shares of Developing Markets Growth Fund; Series D Common
Shares represent shares of Small Cap Growth Fund; and Series E Common Shares
represent shares of Science and Technology 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 that 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.

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, Minnesota law allows a shareholder or
shareholders holding three percent or more of the voting shares of the Funds to
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. Ninety
days after receipt of the demand, a regular meeting of shareholders must be held
at the expense of the Funds. Additionally, the

39
<PAGE>

Investment Company Act of 1940 Act requires shareholder votes for all amendments
to fundamental investment policies and restrictions and for all investment
advisory contracts and amendments thereto.

40
<PAGE>

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 IBCA
----------
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.

41
<PAGE>

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

<PAGE>

PART C
OTHER INFORMATION

Item 23. Exhibits

Explanatory Notes: This Registration Statement contains the combined Part
C for the Sit Large Cap Growth Fund, Inc., Mid Cap Growth Fund, Inc. and
Sit Mutual Funds, Inc.

(a) Articles of Incorporation
1. Sit Large Cap Growth Fund, Inc. (Incorporated by reference to
Post-Effective Amendment No. 20 to the Fund's Registration
Statement.)
2. Sit Mid Cap Growth Fund, Inc. (Incorporated by reference to
Post-Effective Amendment No. 20 to the Fund's Registration
Statement.)
3. Sit Mutual Funds, Inc. (Incorporated by reference to
Post-Effective Amendment No. 3 to the Fund's Registration
Statement.)

(b) Bylaws
1. Sit Large Cap Growth Fund, Inc. (Incorporated by reference to
Post-Effective Amendment No. 20 to the Fund's Registration
Statement.)
2. Sit Mid Cap Growth Fund, Inc. (Incorporated by reference to
Post-Effective Amendment No. 20 to the Fund's Registration
Statement.)
3. Sit Mutual Funds, Inc. (Incorporated by reference to
Post-Effective Amendment No. 10 to the Fund's Registration
Statement.)

(d) Investment Management Agreement
1. Sit Large Cap Growth Fund, Inc. (Incorporated by reference to
Post-Effective Amendment No. 20 to the Fund's Registration
Statement.)
2. Sit Mid Cap Growth Fund, Inc. (Incorporated by reference to
Post-Effective Amendment No. 20 to the Fund's Registration
Statement.)
3. Sit Mutual Funds, Inc. (Incorporated by reference to
Post-Effective Amendment No. 2 to the Fund's Registration
Statement.)

(d.1) Sub-Advisory Agreement
1. Sit Mutual Funds, Inc. (Incorporated by reference to
Post-Effective Amendment No. 2 to the Fund's Registration
Statement.)

(e) Underwriting and Distribution Agreement
1. Sit Large Cap Growth Fund, Inc. (Incorporated by reference to
Post-Effective Amendment No. 17 to the Fund's Registration
Statement.)
2. Sit Mid Cap Growth Fund, Inc. (Incorporated by reference to
Post-Effective Amendment No. 17 to the Fund's Registration
Statement.)
3. Sit Mutual Funds, Inc. (Incorporated by reference to
Post-Effective Amendment No. 6 to the Fund's Registration
Statement.)

(f) Bonus or Profit Sharing Contracts
Not applicable.

<PAGE>

(g) Custodian Agreement
1. Sit Large Cap Growth Fund, Inc. (Incorporated by reference to
Post-Effective Amendment No. 23 to the Fund's Registration
Statement.)
2. Sit Mid Cap Growth Fund, Inc. (Incorporated by reference to
Post-Effective Amendment No. 23 to the Fund's Registration
Statement.)
3. Sit Mutual Funds, Inc. (Incorporated by reference to
Post-Effective Amendment No. 18 to the Fund's Registration
Statement.)

(h.1) Transfer Agency and Services Agreement
1. Sit Large Cap Growth Fund, Inc. (Incorporated by reference to
Post-Effective Amendment No. 20 to the Fund's Registration
Statement.)
2. Sit Mid Cap Growth Fund, Inc. (Incorporated by reference to
Post-Effective Amendment No. 20 to the Fund's Registration
Statement.)
3. Sit Mutual Funds, Inc. (Incorporated by reference to
Post-Effective Amendment No. 10 to the Fund's Registration
Statement.)

(h.2) Accounting Services Agreement
1. Sit Large Cap Growth Fund, Inc. (Incorporated by reference to
Post-Effective Amendment No. 23 to the Fund's Registration
Statement.)
2. Sit Mid Cap Growth Fund, Inc. (Incorporated by reference to
Post-Effective Amendment No. 23 to the Fund's Registration
Statement.)
3. Sit Mutual Funds, Inc. (Incorporated by reference to
Post-Effective Amendment No. 18 to the Fund's Registration
Statement.)

(i) Opinions and Consents of Dorsey & Whitney
1. Sit Large Cap Growth Fund, Inc. (Incorporated by reference to
Post-Effective Amendment No. 13 to the Fund's Registration
Statement.)
2. Sit Mid Cap Growth Fund, Inc. (Incorporated by reference to
Post-Effective Amendment No. 13 to the Fund's Registration
Statement.)
3. Sit Mutual Funds, Inc. (Incorporated by reference to
Pre-Effective Amendment No. 1 to the Fund's original
Registration Statement.)

(j) Consent of KPMG LLP
1. Sit Large Cap Growth Fund, Inc. (Filed herewith.)
2. Sit Mid Cap Growth Fund, Inc. (Filed herewith.)
3. Sit Mutual Funds, Inc. (Filed herewith.)

(k) Omitted Financial Statements
Not applicable.

(l) Letter of Investment Intent
1. Sit Large Cap Growth Fund, Inc. (Incorporated by reference to
Post-Effective Amendment No. 14 to the Fund's Registration
Statement.)
2. Sit Mid Cap Growth Fund, Inc. (Incorporated by reference to
Post-Effective Amendment No. 14 to the Fund's Registration
Statement.)
3. Sit Mutual Funds, Inc. (Incorporated by reference to
Post-Effective Amendment No. 2 to the Fund's original
Registration Statement.)

(m) Rule 12b-1 Plan
Not applicable.

C-2
<PAGE>

(n) Rule 18f-3 Plan
Not applicable.

(o) Reserved.

(p) Codes of Ethics
1. Sit Large Cap Growth Fund, Inc. (Filed herewith.)
2. Sit Mid Cap Growth Fund, Inc. (Filed herewith.)
3. Sit Mutual Funds, Inc. (Filed herewith.)

Item 24. Persons Controlled by or Under Common Control with Registrant

See the section of the Prospectus entitled "Investment Adviser" and
"Investment Sub-Adviser" and the section of the Statement of Additional
Information entitled "Investment Adviser."

Item 25. 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 shareholders
of the Registrant as set forth in Section 302A.521, by special legal counsel
selected by the board or a committee thereof for the purpose of making such 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;
(c) received no improper personal benefit;
(d) in the case of criminal proceedings, had no reasonable cause to
believe the conduct was unlawful;
(e) reasonably believed that the conduct was in the best interest of 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.

C-3
<PAGE>

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 26. Business and other Connections of Investment Adviser

Sit Investment Associates, Inc. (the "Adviser"), serves as the investment
adviser. Sit/Kim International Investment Associates, Inc. (the "Sub-Adviser")
serves as the Sub-Adviser of the Series A and Series C of Sit Mutual Funds, Inc.
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, CEO, CIO and Treasurer of the Adviser;
Chairman and CEO of the Sub-Adviser; Director of
SIA Securities Corp. (the "Distributor"); Chairman
& Director of all Sit Mutual Funds

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

Roger J. Sit Executive Vice President - Research & Investment
Management of the Adviser; Assistant to the
Sit/Kim International Chief Investment Officer for
Investment Policy and Portfolio Management

Frederick Adler Director of the Adviser; Senior Partner, Fulbright
& Jaworski
1520 S. Ocean Boulevard
Palm Beach, FL 33480

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

William E. Frenzel Advisory Director of the Adviser; Director of Sit
Mutual Funds; Director of the Sub-Adviser; Senior
Visiting Scholar at the Brookings Institution
1775 Massachusetts Avenue N.W.
Washington, D.C. 20036

Charles W. Battey Director of the Sub-Adviser
7500 West 110th Street
Overland Park, KS 66210

C-4
<PAGE>

Business and Employment During Past Two Years;
Name Principal Business Address
---- --------------------------------------------------
David L. Redo Director of the Sub-Adviser; Managing Director of
Fremont Investment Advisors, Inc.
333 Market Street, Suite 2600
San Francisco, CA 94105

Michael C. Brilley Senior Vice President and Senior Fixed Income
Officer of the Adviser; Director and Senior Vice
President of Sit U.S. Government Securities Fund,
Inc., Sit Money Market Fund, Inc., and Sit Mutual
Funds II, Inc. and Sit Balanced Fund

Debra A. Sit Vice President - Bond Investments of the Adviser;
Assistant Treasurer of the Sub-Adviser; Vice
President - Investments of Sit U.S. Government
Securities Fund, Inc., Sit Money Market Fund,
Inc., and Sit Mutual Funds II, Inc.

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

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

John T. Groton, Jr. Vice President - Research and Investment
Management of the Adviser

Kent L. Johnson Vice President - Research and Investment
Management of the Adviser

Robert W. Sit Vice President - Research and Investment
Management of the Adviser

Paul E. Rasmussen Vice President, Secretary and Controller of the
Adviser and the Sub-Adviser; Vice President and
Treasurer of all Sit Mutual Funds.

David A. Brown Vice President - Client Relations Marketing of the
Adviser

Carla J. Rose Vice President - Administration & Deputy
Controller of the Adviser

Debra K. Beaudet Vice President - Staff Operations of the Adviser

Item 27. Principal Underwriters

The Distributor for each Registrant is SIA Securities Corp., 4600 Wells
Fargo Center, Minneapolis, MN 55402, an affiliate of the Adviser. The
Distributor 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; Director of
the Distributor; Chairman of the Board of
Directors of all Sit Mutual Funds

Peter L. Mitchelson President and Director of the Adviser; Director
and Executive Vice President of the Sub-Adviser;
Senior Portfolio Manager of the Sit Large Cap
Growth Fund; Director of the Distributor; Vice
Chairman & Director of all Sit Mutual Funds

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

C-5
<PAGE>

Item 28. Location of Accounts and Records

The Custodian for each Registrant is The Northern Trust Company, 50 South
LaSalle Street, Chicago, IL 60675. The Transfer Agent for each Registrant is
First Data Investor Services, 4400 Computer Drive, Westboro, MA 01581. Other
books and records are maintained by the Adviser, which is located at 4600 Wells
Fargo Center, Minneapolis, MN 55402 and the Sub-Adviser, which is located at the
same address.

Item 29. Management Services

Not applicable.

Item 30. Undertakings

Not applicable.

C-6
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has 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 1st day
of November, 2000.

SIT LARGE CAP 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: November 1, 2000
------------------------------------------
Eugene C. Sit, Chairman
(Principal Executive Officer and Director)

/s/ Paul E. Rasmussen Dated: November 1, 2000
-------------------------------------------
Paul E. Rasmussen, Treasurer
(Principal Financial Officer and Accounting Officer)

William E. Frenzel, Director*

John E. Hulse, Director*

Sidney L. Jones, Director*

Peter L. Mitchelson, Director*

Donald W. Phillips, Director*

*By /s/ Eugene C. Sit Dated: November 1, 2000
---------------------------------------
Eugene C. Sit, Attorney-in-fact
(Pursuant to Powers of Attorney filed
previously with the Commission.)

C-7
<PAGE>

SIGNATURES

SIT MID CAP GROWTH FUND, INC.
(Registrant)

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

Signature and Title
-------------------

/s/ Eugene C. Sit Dated: November 1, 2000
------------------------------------------
Eugene C. Sit, Chairman
(Principal Executive Officer and Director)

/s/ Paul E. Rasmussen Dated: November 1, 2000
-------------------------------------------
Paul E. Rasmussen, Treasurer
(Principal Financial Officer and Accounting Officer)

William E. Frenzel, Director*

John E. Hulse, Director*

Sidney L. Jones, Director*

Peter L. Mitchelson, Director*

Donald W. Phillips, Director*

*By /s/ Eugene C. Sit Dated: November 1, 2000
---------------------------------------
Eugene C. Sit, Attorney-in-fact
(Pursuant to Powers of Attorney filed
previously with the Commission.)

C-8
<PAGE>

SIGNATURES

SIT MUTUAL FUNDS, INC.
(Registrant)

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

Signature and Title
-------------------

/s/ Eugene C. Sit Dated: November 1, 2000
------------------------------------------
Eugene C. Sit, Chairman
(Principal Executive Officer and Director)

/s/ Paul E. Rasmussen Dated: November 1, 2000
-------------------------------------------
Paul E. Rasmussen, Treasurer
(Principal Financial Officer and Accounting Officer)

William E. Frenzel, Director*

John E. Hulse, Director*

Sidney L. Jones, Director*

Peter L. Mitchelson, Director*

Donald W. Phillips, Director*

*By /s/ Eugene C. Sit Dated: November 1, 2000
---------------------------------------
Eugene C. Sit, Attorney-in-fact
(Pursuant to Powers of Attorney filed
previously with the Commission.)

C-9
<PAGE>

REGISTRATION STATEMENT ON FORM N-1A

EXHIBIT INDEX

EXHIBIT NO. NAME OF EXHIBIT PAGE NO.
----------- --------------- --------

(j) Independent Auditors' Consent C-11

(p) Code of Ethics C-12
(Combined Code of Ethics for each Registrant)

C-10
<PAGE>

EXHIBIT (j)
Independent Auditors' Consent

The Board of Directors and Shareholders
Sit Mutual Funds, Inc.
Sit Large Cap Growth Fund, Inc.
Sit Mid Cap Growth Fund, Inc.

We consent to the use of our report dated August 4, 2000 incorporated herein by
reference and to the references to our Firm under the headings "Financial
Highlights" in Part A and "Custodian; Sub-Custodian; Counsel; Accountants" in
Part B of the Registration Statement.

/s/ KPMG LLP

KPMG LLP
Minneapolis, Minnesota
October 30, 2000

C-11
<PAGE>

EXHIBIT (p)
Code of Ethics

CODE OF ETHICS
FOR
SIT INVESTMENT ASSOCIATES, INC.,
SIT INVESTMENT FIXED INCOME ADVISORS, INC.
SIT FIXED INCOME ADVISORS II, LLC
SIT/KIM INTERNATIONAL INVESTMENT ASSOCIATES, INC.
SIT/KIM INTERNATIONAL INVESTMENT ASSOCIATES II, LLC
AND SIT MUTUAL FUNDS

I. PURPOSE AND CONSTRUCTION

This Code of Ethics ("Code") is adopted by Sit Investment Associates, Inc.
("Adviser"), Sit Investment Fixed Income Advisors, Inc. ("Fixed Income"), Sit
Fixed Income Advisors II, LLC ("Fixed Income II") Sit/Kim International
Investment Associates, Inc. ("International"), Sit/Kim International Investment
Associates II, LLC ("International II") and the Sit Mutual Funds ("Funds") in an
effort to prevent violations of Section 17 of the 1940 Act and the Rules and
Regulations thereunder. This Code is designed to prevent investment activities
by persons with access to certain information that might be harmful to the Funds
or which might enable such persons to illicitly profit from their relationship
with the Funds. This Code is also designed to codify the written policies and
procedures designed to prevent the misuse of material, nonpublic information in
violation of the 1934 Act or the Advisers Act, or the Rules and Regulations
thereunder, as required by Section 15(f) of the 1934 Act and Section 204A of the
Advisers Act. Each Associated Person must read and retain a copy of this Code,
and execute the acknowledgment attached hereto.

II. DEFINITIONS

A. "Access Person" means any director, officer, general partner,
or Advisory Person of a Fund or of Adviser, Fixed Income,
Fixed Income II, International, or International II.
B. "Advisers Act" means the Investment Advisers Act of 1940, 15
U.S.C.ss.30b-1 toss.30b-21.
C. "Advisory Person" means:
1. Any employee of a Fund or of Adviser, Fixed Income,
Fixed Income II, International, or International II
(or of any company in a control relationship to a
Fund or to Adviser, Fixed Income, Fixed Income II,
International, or International II) who, in
connection with his regular functions or duties,
makes, participates in, or obtains information
regarding the purchase or sale of a security by a
Fund, or whose functions or duties relate to the
making of any recommendations with respect to such
purchases or sales; and
2. Any natural person in a control relationship to a
Fund or to Adviser, Fixed Income, Fixed Income II,
International, or International II who obtains
information concerning recommendations made to a Fund
with regard to the purchase or sale of a security.
D. "Affiliated Person" of another person means:
1. Any person directly or indirectly owning,
controlling, or holding with power to vote, five
percent (5%) or more of the outstanding voting
securities of such other person;
2. Any person, five percent (5%) or more of whose
outstanding voting securities are directly or
indirectly owned, controlled, or held with power to
vote, by such other person;
3. Any person directly or indirectly controlling,
controlled by, or under common control with, such
other person;
4. Any officer, director, partner, co-partner, or
employee of such other person;
5. If such other person is an investment company, any
investment adviser thereof or any member of an
advisory board thereof; and

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6. If such other person is an unincorporated investment
company not having a board of directors, the
depositor thereof.
E. "Associated Person" means any partner, officer, director, or
branch manager of Adviser, Fixed Income, Fixed Income II,
International, or International II (or any person occupying a
similar status or performing similar functions), any person
directly or indirectly controlling, controlled by, or under
common control with Adviser, Fixed Income, Fixed Income II,
International, or International II, or any employee of
Adviser, Fixed Income, Fixed Income II, International, or
International II.
F. "Control" shall have the meaning as that set forth in section
2(a)(9) of the 1940 Act.
G. "Fund" means any investment company registered under the 1940
Act for which Adviser, Fixed Income, Fixed Income II,
International, or International II acts as the investment
adviser and manager; provided, however, that for purposes of
Sections III.A, D., E., and F., "Fund" shall also include all
other accounts managed by Adviser, Fixed Income, Fixed Income
II, International, and International II. References herein to
"Adviser" shall be deemed to include Fixed Income, Fixed
Income II, International, and International II, unless the
context clearly implies to the contrary.
H. "Insider" means Adviser or the Funds, or an Associated Person
of Adviser or the Funds, or any Affiliated Person thereof, or
any member of his immediate family. Additionally, a person is
deemed an "Insider" if he enters into a special confidential
relationship in the conduct of the affairs of Adviser or the
Funds, or any Affiliated Person thereof, and as a result is
given access to material, nonpublic information. Examples of
such Insiders include accountants, consultants, advisers,
attorneys, bank lending officers, and the employees of such
organizations.
I. "Insider Trading" means the use of material, nonpublic
information to trade in a Security (whether or not one is an
Insider) or the communication of material, nonpublic
information to others. While the meaning of the term is not
static, "Insider Trading" generally includes:
1. Trading in a Security by an Insider, while in
possession of material, nonpublic information;
2. Trading in a Security by a person who is not an
Insider, while in possession of material, nonpublic
information, where the information either was
disclosed to such person in violation of an Insider's
duty to keep it confidential or was misappropriated;
and
3. Communicating material, nonpublic information to any
person, who then trades in a Security while in
possession of such information.
J. "Material information" means information for which there is a
substantial likelihood that a reasonable investor would
consider it important in making investment decisions, or
information that is reasonably certain to have a substantial
effect on the price of a company's securities. Examples of
material information include information regarding dividend
changes, earnings estimates, changes in previously released
earnings estimates, significant merger or acquisition
proposals or agreements, major litigation, liquidation
problems, and extraordinary management developments.
K. "Member of immediate family" of a person includes such
person's spouse, children under the age of twenty-five years
residing with such person, and any trust or estate in which
such person or any other member of his immediate family has a
substantial beneficial interest, unless neither such person
nor any other member of his immediate family is able to
control or participate in the investment decisions of such
trust or estate.
L. "Nonpublic information" means information that has not been
effectively communicated to the market place.
M. "Purchase or sale of a Security" includes, inter alia, the
writing of an option to purchase or sell a Security.
N. "Security" shall have the meaning set forth in Section
2(a)(36) of the 1940 Act, except that it shall not include
securities issued by the Government of the United States,
bankers' acceptances, bank certificates of deposit, commercial
paper, or shares of registered open-end investment companies;
provided, however, that for purposes of the Insider Trading
prohibition of Section III.A., "Security" shall include all
securities set forth in Section 2(a)(36) of the 1940 Act.
O. "Security held or to be acquired" by a registered investment
company means any Security which, within the most recent 15
days, (i) is or has been held by such company, or (ii) is
being or has been considered by such company or its investment
adviser for purchase by such company.
P. "1934 Act" means the Securities Exchange Act of 1934, 15
U.S.C.ss.78a to 78kk.

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<PAGE>

Q. "1940 Act" means the Investment Company Act of 1940, 15
U.S.C.ss.80a-1 toss.80a-64.
R. "Restricted List" means a list of Securities maintained by the
Adviser in which proprietary and personal transactions are
prohibited.

III. RESTRICTIONS

A. Nonpublic Information.
1. An Insider shall use due care to ensure that
material, nonpublic information remains secure and
shall not divulge to any person any material,
nonpublic information, except in the performance of
his duties. For example, files containing material,
nonpublic information should be sealed, and access to
computer files containing material, nonpublic
information should be restricted.
2. No Insider shall engage in Insider Trading, on behalf
of himself or others.
3. An Access Person shall not divulge to any person
contemplated or completed securities transactions of
a Fund, except in the performance of his duties,
unless such information previously has become a
matter of public knowledge.
4. Questions regarding whether the information is
material and/or nonpublic may be directed to the
Chairman of Adviser or his designee.
B. Section 17(d) Limitations. No Affiliated Person of a Fund, or
any Affiliated Person of such person, acting as principal,
shall effect any transaction in which a Fund, or a company
controlled by a Fund, is a joint or a joint and several
participant with such person or Affiliated Person, in
contravention of such rules and regulations as the Securities
and Exchange Commission may prescribe under Section 17(d) of
the 1940 Act for the purpose of limiting or preventing
participation by the Funds or controlled companies on a basis
different from or less advantageous than that of such other
participant.
C. Prescribed Activities Under Rule 17j-l(a). Rule 17j-l(a) under
the 1940 Act provides: It shall be unlawful for any affiliated
person of or principal underwriter for a registered investment
company, or any affiliated person of an investment adviser of
or principal underwriter for a registered investment company
in connection with the purchase or sale, directly, or
indirectly, by such a person of a security held or to be
acquired, as defined in this section, by such registered
investment company --
(1) To employ any device, scheme or artifice to defraud
such registered investment company;
(2) To make to such registered investment company any
untrue statement of a material fact or omit to state
to such registered investment company a material fact
necessary in order to make the statements made, in
light of the circumstances under which they were
made, not misleading;
(3) To engage in any act, practice, or course of business
which operates or would operate as a fraud or deceit
upon any such registered investment company; or
(4) To engage in any manipulative practice with respect
to such registered investment company. Any violation
of Rule 17j-1(a) shall be deemed to be a violation of
the Code.
D. Covenant to Exercise Best Judgment. An Advisory Person shall
act on his best judgment in effecting, or failing to effect,
any Fund transaction and such Advisory Person shall not take
into consideration his personal financial situation in
connection with decisions regarding Fund portfolio
transactions.
E. Limitations on Transactions.
1. An executive officer or an Advisory Person of
Adviser, or any member of his or her immediate
family, shall not purchase or sell any Security in
which he or she has, or by reason of such transaction
acquires, any direct or indirect beneficial ownership
if at the time of such purchase or sale such
Security:
(a) is included on the Restricted List
maintained by the Adviser; or
(b) is held or to be acquired by the
Fund.

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<PAGE>

However, the purchase or sale of a Security more than
ten (10) trading days prior to or ten (10) trading
days after a Fund's purchase or sale of such Security
shall not be a violation of this Paragraph III.E.1(b)
and provided that the ten day waiting period does not
apply if a Fund has sold all its interest in that
Security.
2. An executive officer or an Advisory Person of
Adviser, or any member of his or her immediate family
shall not purchase securities offered in an Initial
Public Offering.
3. An executive officer or an Advisory Person of
Adviser, or any member of his or her immediate
family, shall not purchase and sell the same (or
equivalent) securities within 60 calendar days; and
shall not sale and purchase the same (or equivalent)
securities within 60 calendar days.
4. An executive officer or an Advisory Person of
Adviser, or any member of his or her immediate
family, shall not effect more than the lesser of the
following number of purchase and/or sale transactions
a.) twenty (20) transactions within one calendar
quarter or b.) fifty (50) transactions within one
calendar year, without the advance written approval
of the Chairman of the Adviser or his designee.
Multiple purchases or sales of the same security
effected contemporaneously shall be considered a
single transaction for purposes of this Paragraph
III.E.4.
F. Prior Clearance. Prior to the sale or purchase of Securities,
an executive officer or an Advisory Person of Adviser, or any
member of his immediate family, must obtain written clearance
for the transaction from the Chairman of Adviser or his
designee.

IV. REPORTING REQUIREMENTS

A. Initial Holdings Report. Not later than ten (10) days after
becoming an Associated Person or Access Person, such person
shall submit an initial holdings report listing all securities
beneficially owned by such person, and listing any securities
account such person maintains with a broker, dealer or bank.
B. Annual Holdings Report. On or before January 30 of each year,
each Associated Person and each Access Person shall submit an
annual holdings report containing the following information:
the title, number of shares and principal amount of each
security in which such person had any direct or indirect
beneficial ownership, and the name of any broker, dealer or
bank with whom such person maintains an account in which any
securities are held for the direct or indirect benefit of such
person.
C. Quarterly Report. Not later than ten (10) days after the end
of each calendar quarter, each Associated Person and each
Access Person shall submit a report which shall specify the
following information with respect to transactions during the
then ended calendar quarter in any Security in which such
Associated Person or Access Person has, or by reason of such
transaction acquired, any direct or indirect beneficial
ownership in the Security:
1. The date of the transaction, the title and the number
of shares, and the principal amount of each Security
involved;
2. The nature of the transaction (i.e., purchase, sale,
or any other type of acquisition or disposition);
3. The price at which the transaction was effected;
4. The name of the broker, dealer, or bank with or
through whom the transaction was effected; and
5. The date the report was submitted.
If no transactions have occurred during the period,
the report shall so indicate. With respect to any
account established by the Associated Person or
Access Person in which any securities were held
during the quarter for the direct or indirect benefit
of such person, the report shall contain the name of
the broker, dealer or bank with whom the Access
Person established the account and the date the
account was established.
D. Broker Statements and Confirmations. Each Associated Person
and each Access Person shall insure that the Adviser receives
duplicate copies of his or her and any member of his or her
immediate family's, including for purposes of this section any
relative living in the same household, confirmations and
statements directly from all brokerage firms.

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<PAGE>

E. Disclosure of Holdings. An executive officer or an Advisory
Person of the Adviser shall immediately notify the Adviser of
any Security held by him or her (including any member of his
or her immediate family) that he or she knows or should know
is included on the Restricted List maintained by the Adviser
or which is being considered for purchase by a Fund. A
Security is being considered for purchase or sale when a
recommendation to purchase or sell a security has been made
and communicated and, with respect to the persons making the
recommendation, when such person seriously considers making
such a recommendation.
F. Limitation on Reporting Requirements. Notwithstanding the
provisions of Sections IV.A., B., C., D. and E., no Access
Person shall be required to make a report:
1. With respect to transactions effected for any account
over which such person does not have any direct or
indirect influence or control; or
2. If such a person is not an "interested person" of a
Fund as defined in Section 2(a)(19) of the 1940 Act
and would be required to make such a report solely by
reason of begin a director of a Fund, except where
such director knew or, in the ordinary course of
fulfilling his official duties as a director of a
Fund, should have known that during the 15-day period
immediately preceding or after the date of the
transaction in a Security by the director, such
Security is or was purchased or sold by a Fund or
such purchase or sale by a Fund is or was considered
by such Fund or Adviser, such director is required to
file a quarterly report pursuant to the provisions of
Section IV. C.; or
3. Where a report made to Adviser would duplicate
information recorded pursuant to Rules 204-2(a)(12)
or 204-2(a)(13) under the Advisers Act.
G. Reports of Violations. In addition to the quarterly reports
required under this Article IV, Associated Persons and Access
Persons promptly shall report any transaction which is, or
might appear to be, in violation of this Code. Such report
shall contain the information required in quarterly reports
filed pursuant to Sections IV.A.
H. Filing of Reports. All reports prepared pursuant to this
Article IV shall be filed with the Chairman of Adviser or his
designee.
I. Certification to General Counsel of Funds. Prior to February 1
of each year, Adviser shall prepare and deliver to the General
Counsel of the Funds a report which shall describe in detail
violations of this Code for the prior calendar year, unless
such violations have previously been reported to the General
Counsel of the Funds.
J. Dissemination of Reports. The General Counsel of the Funds
shall have the right at any time to receive copies of any
reports submitted pursuant to this Article IV. Such General
Counsel shall keep all reports confidential except as
disclosure thereof to the Boards of Directors of the Funds or
of Adviser or other appropriate persons may be reasonably
necessary to accomplish the purposes of this Code.

V. SUPERVISORY PROCEDURES

The following supervisory procedures shall be implemented:
A. Prevention of Insider Trading. To prevent Insider Trading, the
Chairman of Adviser or his designee shall:
1. Take appropriate measures to familiarize Associated
Persons with the Code;
2. Answer questions regarding the Code;
3. Resolve issues of whether information received by an
Insider is material and/or nonpublic; and
4. Review and update the Code as necessary.
B. Detection of Insider Trading. To detect Insider Trading, the
Chairman of Adviser or his designee shall:
1. Review the trading activity and holdings reports
filed by each Associated Person and Access Person;
and
2. Review the trading activity of Adviser and the Funds.
C. Administration of the Code. The Chairman of Adviser or his
designee shall, at least annually, provide the Funds' Board
with a written report that:

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<PAGE>

1. Describes any issues arising under the Code or
procedures since the last report to the Boards of
Directors, including, but not limited to, information
about material violations of the Code or procedures
and sanctions imposed in response to the material
violations; and
2. Certifies that the fund, investment adviser or
principal underwriter, as applicable, has adopted
procedures reasonable necessary to prevent Associated
Persons and Access Persons from violating the Code.

VI. ENFORCEMENT AND SANCTIONS

A. General. Any Affiliated Person of Adviser who is found to have
violated any provision of this Code may be permanently
dismissed, reduced in salary or position, temporarily
suspended from employment, or sanctioned in such other manner
as may be determined by the Board of Directors of Adviser in
its discretion. If an alleged violator is not affiliated with
Adviser, the Board of Directors of the Fund or Funds involved
shall have the responsibility for enforcing this Code and
determining appropriate sanctions. In determining sanctions to
be imposed for violations of this Code, the Board of Directors
may consider any factors deemed relevant, including without
limitation:
1. The degree of willfulness of the violation;
2. The severity of the violation;
3. The extent, if any, to which the violator profited or
benefited from the violation.
4. The adverse effect, if any, of the violation on the
Fund or Funds;
5. The market value and liquidity of the class of
Securities involved in the violation;
6. The prior violations of the Code, if any, by the
violator;
7. The circumstances of discovery of the violation; and
8. If the violation involved the purchase or sale of
Securities in violation of this Code, (a) the price
at which the Fund purchase or sale was made and (b)
the violator's justification for making the purchase
or sale, including the violator's tax situation, the
extent of the appreciation or depreciation of the
Securities involved, and the period the Securities
have been held.
B. Violations of Section III.E.
1. At its election, a Fund may choose to treat a
transaction prohibited under Section III.E. of this
Code as having been made for its account. Such an
election may be made only by a majority vote of the
directors of the Fund who are not Affiliated Persons
of Adviser. Notice of an election under this
Paragraph B.1 shall not be effective unless given to
Adviser within sixty (60) days after the Fund is
notified of such transaction. In the event of a
violation involving more than one Fund, recovery
shall be allocated between the affected Funds in
proportion to the relative net asset values of the
Funds as of the date of the violation. A violator
shall be obligated to pay the Fund any sums due to
said Fund pursuant to paragraph B.2 below due to a
violation by a member of the immediate family of such
violator.
2. If Securities purchased in violation of Section
III.E. of this Code have been sold by the violator in
a bona fide sale, the Fund shall be entitled to
recover the profit made by the violator. If such
Securities are still owned by the violator, or have
been disposed of by such violator other than by a
bona fide sale at the time notice of election is
given by the Fund, the Fund shall be entitled to
recover the difference between the cost of such
Securities to the violator and the fair market value
of such Securities on the date the Fund acquired such
Securities. If the violation consists of a sale of
Securities in violation of Section III.E. of this
Code, the Fund shall be entitled to recover the
difference between the net sale price per share
received by the violator and the net sale price per
share received by the Fund, multiplied by the number
of shares sold by the violator. Each violation shall
be treated individually and no offsetting or netting
of violations shall be permitted.
3. Knowledge on the part of the General Counsel of a
Fund of a transaction in violation of Section III.E.
of this Code shall be deemed to be notice to the Fund
under Paragraph VI.B.1. Knowledge on the part of a
director or officer of a Fund who is an Affiliated
Person of

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<PAGE>

Adviser of a transaction in violation of this Code
shall not be deemed to be notice under Paragraph
VI.B.1.
4. If the Board of Directors of a Fund determine that a
violation of this Code has caused financial detriment
to such Fund, upon reasonable notice to Adviser,
Adviser shall use its best efforts, including such
legal action as may be required, to cause a person
who has violated this Code to deliver to the Fund
such Securities, or to pay to the Fund such sums, as
the Fund shall declare to be due under this Section
VI.B., provided that:
a. Adviser shall not be required to
bring legal action if the amount
recoverable reasonably would not be
expected to exceed $2,500;
b. In lieu of bringing a legal action
against the violator, Adviser may
elect to pay to the Fund such sums
as the Fund shall declare to be due
under this Section VI.B.; and
c. Adviser shall have no obligation to
bring any legal action if the
violator was not an Affiliated
Person of Adviser.
C. Rights of Alleged Violator. A person charged with a violation
of this Code shall have the opportunity to appear before the
Board of Directors as may have authority to impose sanctions
pursuant to this Code, at which time such person shall have
the opportunity, orally or in writing, to deny any and all
charges, set forth mitigating circumstances, and set forth
reasons why the sanctions for any violations should not be
severe.
D. Notification to General Counsel of Funds. The General Counsel
of the Fund involved shall be advised promptly of the
initiation and outcome of any enforcement actions hereunder.
E. Delegation of Duties. The Board of Directors may delegate its
enforcement duties under this Article VI to a special
committee of the Board of Directors comprised of at least
three persons; provided, however, that no director shall serve
on such committee or participate in the deliberations of the
Board of Directors hereunder who is charged with a violation
of this Code.
F. Non-exclusivity of Sanctions. The imposition of sanctions
hereunder by the Board of Directors of Adviser shall not
preclude the imposition of additional sanctions by the Board
of Directors of the Funds and shall not be deemed a waiver of
any rights by the Funds. In addition to sanctions which may be
imposed by the Boards of Directors of Adviser and the Funds,
persons who violate this Code may be subject to various
penalties and sanctions including, for example, (i)
injunctions; (ii) treble damages; (iii) disgorgement of
profits; (iv) fines to the person who committed the violation
of up to three times the profit gained or loss avoided,
whether nor not the person actually benefited; and (v) jail
sentences.

VII. MISCELLANEOUS PROVISIONS

A. Identification of Associated Persons and Access Persons.
Adviser shall, on behalf of the Funds, identify all Associated
Persons and Access Persons who are under a duty to make
reports under Section IV.A. and shall inform such persons of
such duty.
B. Maintenance of Records. Adviser shall, on behalf of the Funds,
maintain and make available records as required by Rule
17j-l(d).
C. Prior Clearance Procedure. Prior to effecting a transaction in
a Security, an Insider (other than persons covered under
Section III.F.) may notify Adviser of the proposed
transaction, and the name, title, and amount of the Security
involved. Adviser shall determine whether such proposed
transaction would, may, or would not be consistent with this
Code. Such conclusion shall be promptly communicated to the
Insider making such request. Absent extraordinary
circumstances, no Insider shall be deemed to have violated
this Code for effecting a Securities transaction, if such
Insider has been advised by Adviser that the transaction would
be consistent with this Code. Adviser shall make written
records of actions under this Section VII.C., which records
shall be maintained and made available in the manner required
by Rule 17j-l(d).
D. Effective Date. The effective date of this Code shall be April
28, 1989.
E. Disclosure of Code of Ethics. This Code is on public file
with, and available from, the Securities and Exchange
Commission ("SEC"), as an exhibit to the Funds' Registration
Statement.

C-18