SIT MUTUAL FUNDS INC, 485BPOS, 1997-11-03

SIT MUTUAL FUNDS INC
485BPOS, 1997-11-03

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 3, 1997

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. 14

AND/OR

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
(File No. 811-6373)
Post-Effective Amendment No. 15

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

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

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

Paul E. Rasmussen, Vice President
Sit Mutual Funds
4600 Norwest Center
Minneapolis, Minnesota 55402
(NAME AND ADDRESS OF AGENT FOR SERVICE)

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

It is proposed that this filing will become effective (check appropriate box):
___ immediately upon filing pursuant to paragraph (b) of rule 485
XX on November 28, 1997 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 August 11,
1997.

<PAGE>

EXPLANATORY NOTE

Sit Mutual Funds, Inc. (the "Registrant") (Registration Nos. 33-42191
and 811-6373) offers its shares in multiple series pursuant to Section 18(f)(2)
under the Investment Company Act of 1940 and pursuant to the Registrant's
Articles of Incorporation. The Registrant's Series A common shares (representing
interests in a series named Sit International Growth Fund), Series B common
shares (representing interests in a series named Sit Balanced Fund), Series C
common shares (representing interests in a series named Sit Developing Markets
Growth Fund), and Series D common shares (representing interests in a series
named Sit Small Cap Growth Fund) have previously been registered with the
Securities and Exchange Commission (the "SEC").

Series E common shares (which will represent interest in a series to be
named Sit Science and Technology Growth Fund) was filed with the SEC on July 17,
1997 and an effective date of October 1, 1997 was designated. Post-Effective
Amendment No. 13 was filed on September 29, 1997 for the purpose of requesting
an extension of the effective date from October 1, 1997 to November 28, 1997.
Final confirmation of a November 28, 1997 effective date is pending.

Series F common shares (which will represent interest in a series to be
named Sit Regional Growth Fund) was filed with the SEC on September 17, 1997 and
an effective date of November 28, 1997 was designated. Correspondence was filed
with the SEC on October 22, 1997 for the purpose of requesting acceleration of
the effective date from December 1, 1997 to November 28, 1997. Although a
November 28, 1997 effective date was originally designated, because the
Amendment was filed on September 17, 1997 for the purpose of adding a series,
the automatic effective date 75 days after filing is December 1, 1997. Final
confirmation of a November 28, 1997 effective date is pending.

The Registrant is herewith (i.e., in connection with this
Post-Effective Amendment No. 14) submitting a combined Series E and Series F
Prospectus under Part A and a combined Series E and Series F Statement of
Additional Information under Part B and several exhibits under Part C. In
addition, the Registrant is changing the name of the Series E Fund, from Sit
Science and Technology Fund to Sit Science and Technology Growth Fund. All such
changes are non-material and do not contain disclosures which would render it
ineligible to become effective on November 28, 1997, the date designated by the
Registrant on the facing sheet of the Amendment, pursuant to Rule 485(b).

<PAGE>

SIT MUTUAL FUNDS, INC.
FORM N-1A
CROSS-REFERENCE SHEET

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

2 Synopsis Prospectus Summary

3 Condensed Financial Information Not Applicable

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

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

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

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

8 Redemption or Repurchase Redemption of Fund Shares

9 Pending Legal Proceedings Not Applicable

10 Cover Page Cover Page of Statement of Additional Information

11 Table of Contents Table of Contents

12 General Information and History Not Applicable

13 Investment Objective and Policies Additional Investment Restrictions;

14 Management of the Fund Management; Investment Adviser

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

<PAGE>

ITEM
NUMBER CAPTION STATEMENT OF ADDITIONAL INFORMATION CAPTION
- ------ ------- -------------------------------------------

16 Investment Advisory and Other Services Investment Adviser

17 Brokerage Allocation Brokerage

18 Capital Stock and Other Securities In Prospectus - Capitalization and Voting Rights

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

20 Tax Status Taxes

21 Underwriters Distributor

22 Calculation of Performance Data Calculation of Performance Data

23 Financial Statements Financial Statements

</TABLE>
<PAGE>

[wrapper]

SIT SCIENCE AND TECHNOLOGY GROWTH FUND
SIT REGIONAL GROWTH FUND

PROSPECTUS

NOVEMBER 28, 1997

THE SIT MUTUAL FUNDS
A FAMILY OF 100% NO-LOAD FUNDS

SIT MUTUAL FUNDS

<PAGE>

[wrapper]

SIT MUTUAL FUNDS

4600 Norwest Center - Minneapolis, MN 55402
www.sitfunds.com; e-mail: [email protected]
612-334-5888 or 800-332-5580

(CHART)

OUR FAMILY OF FUNDS

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

Funds:

Money Market U.S. Govt. Securities Large Cap Growth Mid Cap Growth
Balanced International Growth

Tax-Free Income Regional Growth Small Cap Growth
MN Tax-Free Income Developing Markets Growth
Bond Science and Technology Growth

Principal Stability Growth
& Current Income Potential

</TABLE>

NOT PART OF THE PROSPECTUS

<PAGE>

Prospectus Supplement
- --------------------------------------------------------------------------------

Sit Mutual Funds, Inc. is soliciting subscriptions for shares of Sit Science and
Technology Growth Fund and the Sit Regional Growth Fund during an initial
offering period currently scheduled from November 28, 1997 through December 15,
1997 (the "Subscription Period"). The subscription price will be the Funds'
initial net asset value of $10.00 per share. Orders to purchase shares of either
Fund received during the Subscription Period will be accepted when the Funds
begin operations. Checks accompanying orders received during the Subscription
Period will be held uninvested by the Fund's transfer agent until the close of
business on December 15, 1997.

There can be no guarantee that either Fund's net asset value after the close of
the Subscription Period will be more than $10.00 per share.

Supplement dated November 28, 1997 to
Prospectus dated November 28, 1997 of Sit Mutual Funds, Inc.

================================================================================

<PAGE>

PROSPECTUS

November 28, 1997

The Funds have the following investment objectives:

SCIENCE AND TECHNOLOGY GROWTH FUND
The objective of the Fund is to maximize long-term capital appreciation. The
Fund pursues this objective by investing primarily in common stocks of companies
which Sit Investment Associates, Inc. (the "Adviser") expects to benefit from
the development, improvement, advancement and use of science and technology.
During normal market conditions, at least 80% of the Fund's total assets will be
invested in such securities. The Fund emphasizes securities of companies that
the Adviser believes have potential for long-term capital growth.

REGIONAL GROWTH FUND
The objective of the Fund is to maximize long-term capital appreciation. The
Fund pursues this objective by investing primarily in common stocks of companies
with their headquarters in Minnesota, Iowa, Missouri, North Dakota, South
Dakota, Nebraska, Kansas, Wisconsin, Illinois, Michigan, Indiana, and Ohio.
During normal market conditions, at least 80% of the Fund's total assets will be
invested in such securities. The Fund emphasizes securities of companies that
the Adviser believes have potential for long-term capital growth.

This Prospectus concisely sets forth facts about the Funds that you should know
before investing and it should be retained for future reference. You should read
it to decide if either of the Funds are the right investment for you. Additional
facts about each Fund are contained in a Statement of Additional Information
(dated November 28, 1997) which has been filed with the Securities and Exchange
Commission and is incorporated herein by reference. For a free copy, call or
write the Funds. Information is also available on the Securities and Exchange
Commission's Internet web site at http://www.sec.gov.

This Prospectus does not constitute an offer or solicitation by anyone in any
state in which such offer or solicitation is not authorized or in which the
person making such offer or solicitation is not qualified to do so, or to any
person to whom it is unlawful to make such offer or solicitation.

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

<PAGE>

SIT SCIENCE AND TECHNOLOGY GROWTH FUND
SIT REGIONAL GROWTH FUND
<TABLE>
<CAPTION>

TABLE OF CONTENTS

<S> <C> <C> <C>
Summary of Fund Expenses....................... 4 Temporary Defensive Investments.......... 8
Performance.................................... 5 Ratings of Debt Securities............... 8
Investment Objectives & Policies............... 5 Fund Borrowing........................... 9
Science & Technology Growth Fund ......... 6 Computation of Net Asset Value............... 9
Regional Growth Fund...................... 6 How to Purchase Fund Shares.................. 9
Common Policies & Information.................. 7 Redemption of Fund Shares.................... 10
Securities Lending........................ 7 Exchanges.................................... 12
Puts and Calls............................ 7 Dividends.................................... 13
When Issued and Forward Retirement Accounts.......................... 13
Commitment Securities and Custodian and Transfer Agent................. 13
Repurchase Agreements............... 7 Management................................... 13
Illiquid Securities....................... 7 Taxes........................................ 14
Investment in Sit Money Market Fund....... 8 Capitalization and Voting Rights............. 15
Portfolio Turnover........................ 8 Additional Information....................... 16

</TABLE>

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<PAGE>

PROSPECTUS SUMMARY

THE FUNDS
The Funds are each 100% no-load, open-end, diversified, management investment
companies (commonly known as "mutual funds"), as defined in the Investment
Company Act of 1940 (the "1940 Act").

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

INVESTMENT ADVISER
Sit Investment Associates, Inc. (the "Adviser") serves as the investment adviser
to each Fund and receives an annual fee based on a percentage of average daily
net assets. The percentage varies from Fund to Fund. The Adviser manages more
than $5 billion for both public and private clients, including over $1 billion
for the 13 Sit Mutual Funds.

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

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

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

$2,000 MINIMUM INITIAL INVESTMENT-- $100 SUBSEQUENT INVESTMENT
NO MINIMUM INVESTMENT FOR IRAS, RETIREMENT PLANS, OR
GIFTS OR TRANSFERS TO MINORS (UGMA / UTMA) ACCOUNTS

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

-3-

<PAGE>

SUMMARY OF FUND EXPENSES

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

Science & Regional
Technology Growth
Fund Fund
---- ----
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Sales load on purchases............... none none
Sales load on reinvested dividends.... none none
Deferred sales load .................. none none
Redemption fees .................... none none
Exchange fees ...................... none none

ANNUAL FUND OPERATING EXPENSES
(as a percentage of average daily net assets)
Management fees (after fee waiver).... 1.25% 1.00%
12b-1 fees............................ none none
Other expenses ...................... none none
---- ----
Total fund operating expenses
(after fee waiver) ................ 1.25% 1.00%
==== =====
- ------------------------

EXAMPLE: You would pay the following expenses on a $1,000 investment, assuming (a) 5% annual rate of
return and (b) redemption at the end of each period.
1 year ...................... $ 13 $ 10
3 years...................... 40 32
5 years...................... 69 55
10 years..................... 152 122

</TABLE>

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

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

Each Fund has engaged the Adviser as its investment adviser pursuant to an
Investment Management Agreement. Absent voluntary fee waivers by the Adviser,
the Science and Technology Growth Fund and the Regional Growth Fund are
obligated under each Fund's Investment Management Agreement to pay the Adviser
annual management fees of 1.50%, and 1.25% per year, respectively, of the Fund's
average daily net assets; however, the Adviser is obligated to pay all of the
Fund's other expenses (other than extraordinary expenses, interest, brokerage
commissions and other transaction charges). See "Management - Investment
Adviser" for more information. For the period of inception through December 31,
1998, 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 each Fund to 1.25% and 1.00% per year, respectively, of the Fund's
average daily net assets. After December 31, 1998, this voluntary fee waiver may
be discontinued by the Adviser in its sole discretion.

-4-

<PAGE>

PERFORMANCE

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

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

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

The Standard & Poor's 500 Stock Index and the Russell 3000 Index are unmanaged
lists of common stocks frequently used as general measures of market
performance. The Pacific Stock Exchange Technology Index (the "PSE Tech 100") is
a price-weighted, broad-based index of 100 listed and over-the-counter stocks,
populating 15 industries. The annual and cumulative changes for the indices
reflect reinvestment of all distributions and changes of market prices. No
adjustment has been made for a shareholder's income tax liability on dividends
or capital gains and no brokerage commissions or other fees were factored into
these indexes. The Lipper mutual fund indices are equally weighted indices each
composed of the 30 largest mutual funds within their respective investment
objective classification, adjusted for the reinvestment of capital gains
distributions and income dividends. Lipper Analytical Services, Inc. is a large
independent evaluator of mutual funds. The risk-adjusted performance ratings
assigned by Morningstar Publications, Inc. may also be referenced.

For additional information regarding the calculation of return see "Calculation
of Performance Data" in the Statement of Additional Information. Additional
performance information regarding the Funds is included in the Funds' annual
report, which will be mailed to shareholders without charge upon request.

INVESTMENT OBJECTIVES & POLICIES

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

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

-5-
<PAGE>

SCIENCE & TECHNOLOGY GROWTH FUND
The Fund invests primarily in common stocks of companies which the Adviser
expects to benefit from the development, improvement, advancement and use of
science and technology. During normal market conditions, at least 80% of the
Fund's total assets will be invested in such securities. The Fund emphasizes
securities of companies that the Adviser believes have potential for long-term
capital growth.

Science and technology companies include those whose processes, products or
services, in the judgment of the Adviser, are or may be expected to
significantly benefit from scientific developments and the application of
technical advances in industry, manufacturing and commerce resulting from
improving technology in such fields as, for example, aerospace, chemistry,
electronic components and systems, environmental services, genetic engineering,
geology, information sciences (including computers, software and peripheral
products), medicine (including pharmacology, biotechnology and biophysics),
hospital supply and medical devices. This investment policy permits the Adviser
to seek stocks of science and technology companies having superior growth
potential in virtually any industry in which they may be found.

Since a relatively high percentage of the assets of the Fund may be invested in
the securities of issuers which will be in the same or related economic sectors,
the Fund's portfolio securities may be more susceptible to any single economic,
technological or regulatory occurrence than the portfolio securities of
investment companies which invest in a greater number of economic sectors. The
Fund may involve significantly greater risks and therefore may experience
greater volatility than such funds. Many products and services of science and
technology companies may become rapidly obsolete due to technological and
scientific advances. In addition, competitive pressures may have a significant
effect on the financial condition of science and technology companies. For
example, if technology continues to advance at an accelerated rate, and the
number of companies and product offerings continue to expand, these companies
could become increasingly sensitive to short product cycles and aggressive
pricing.

The Fund's strategies in seeking to achieve its investment objective may lead to
investments in smaller companies. Securities of smaller companies, especially
those whose business involves emerging products or concepts, may be more
volatile due to their limited product lines, markets, or financial resources as
well as their susceptibility to major setbacks or downturns.

The Fund may purchase securities convertible into common stocks, preferred
stocks and warrants. The Fund may invest in securities not listed on a national
securities exchange but generally such securities will have an established
over-the-counter market. Most of the Fund's investments are in common stocks or
securities convertible into common stocks. Current income from dividends and
interest will not be an important consideration in selecting portfolio
securities.

FOREIGN SECURITIES. The Fund may invest up to 20% of its net assets in foreign
corporate equity securities. All foreign equity securities are limited to
American Depository Receipts (ADRs), which are traded in U.S. dollars, or in
stocks listed on U.S. exchanges including NASDAQ or on the Toronto Stock
Exchange. Foreign investments are subject to certain unique risks, such as
fluctuations in the value of the currencies, and potential adverse political and
economic developments. There also may be less publicly available information
about foreign issuers, and foreign issuers generally are not subject to the
uniform accounting, auditing, and financial reporting standards and practices
applicable to domestic issuers.

REGIONAL GROWTH FUND
The Fund invests primarily in common stocks of companies with their headquarters
in Minnesota, Iowa, Missouri, North Dakota, South Dakota, Nebraska, Kansas,
Wisconsin, Illinois, Michigan, Indiana, and Ohio. During normal market
conditions, at least 80% of the Fund's total assets will be invested in such
securities. The Fund emphasizes securities of companies that the Adviser
believes have potential for long-term capital growth.

The Fund invests primarily in common stocks of grow-

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<PAGE>

ing companies which in the Adviser's opinion have the following general
characteristics: (i) potential for outstanding long-term earnings growth, (ii)
stable demand for a high quality product or service, (iii) stable product
demand, (iv) experienced and able management, and (v) a sound financial
strategy.

The Fund's investments will be concentrated in a geographic region and will be
subject to adverse economic, political or other developments in that region.
Although the region in which the Fund principally invests has a diverse
industrial base, which includes but is not limited to agriculture, mining,
retail, transportation, utilities, heavy and light manufacturing, financial and
other services, insurance, health care, computer technology and medical
technology. However, this industrial base is not as diverse as that of the
country as a whole. The Fund may be less diversified by industry and company
than other funds with similar investment objectives and no geographic
limitation.

The Fund's strategy in seeking to achieve its investment objective may lead to
investments in smaller companies. Securities of smaller companies may be more
volatile due to their limited product lines, markets, or financial resources as
well as their susceptibility to major setbacks or downturns.

COMMON POLICIES & INFORMATION

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

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

WHEN-ISSUED AND FORWARD COMMITMENT SECURITIES AND REPURCHASE AGREEMENTS
Each of the Funds may purchase securities on a "when-issued" basis and may
purchase or sell securities on a "forward commitment" basis. Each of the Funds
may invest in repurchase agreements. See the Statement of Additional Information
for further information.

ILLIQUID SECURITIES

Each of the Funds 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 particular
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

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<PAGE>

"SEC"), since such securities may be resold only subject to statutory
restrictions and delays or if registered under the 1933 Act. However, 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. The
Funds may invest without limitation in these forms of restricted securities if
such securities are determined by the Adviser to be liquid in accordance with
standards established by the Funds' Board of Directors. Under these standards,
the Adviser must consider (a) the frequency of trades and quotes for the
security, (b) the number of dealers willing to purchase or sell the security and
the number of other potential purchasers, (c) dealer undertakings to make a
market in the security, and (d) the nature of the security and the nature of the
marketplace trades (for example, the time needed to dispose of the 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 the Funds'
illiquidity to the extent that qualified institutional buyers become, for a
time, uninterested in purchasing these securities.

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

PORTFOLIO TURNOVER
To attain the investment goals of each Fund, 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 a Fund's assets
to cash or short-term securities as a temporary, defensive position.

Generally, neither Fund 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 a Fund 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. A
Fund's turnover rate may vary from year to year. For additional information,
refer to the "Taxes" section below and the "Taxes" and "Brokerage" sections in
the Statement of Additional Information. It is expected that each Fund's
portfolio turnover rates during the first year of operation will be less than
100%.

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

RATINGS OF DEBT SECURITIES
The debt securities purchased by each Fund will be investment grade at the time
of investment purchase. Investment grade debt securities are rated AAA, AA, A or
BBB by Standard & Poor's Corporation ("S& P"), Fitch

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<PAGE>

Investors Service, Inc. ("Fitch"), and Duff & Phelps Credit Rating Co. ("Duff &
Phelps"); or Aaa, Aa, A or Baa by Moodys Investors Services ("Moody's"), or if
unrated, are determined by the Adviser to be of comparable quality. See the
Statement of Additional Information for further information about ratings.

The commercial paper purchased by each Fund 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. The Fund will not be required to sell a security
in response to its rating being lowered, however, the Advisor will evaluate such
a security at that time.

FUND BORROWING
In the event of an emergency or extraordinary situation, each Fund may enter
into a temporary borrowing arrangement to meet its cash obligations. Such
temporary borrowing is limited to emergency purposes and not for the purchase of
investments, and then not in excess of 33-1/3% of the Fund's total net assets.

COMPUTATION OF NET ASSET VALUE

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

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

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

HOW TO PURCHASE FUND SHARES

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

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

INITIAL INVESTMENT

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

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<PAGE>

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

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

Wire orders will be accepted only on a day on which the Funds and the Funds'
Transfer Agent are open for business. A WIRE PURCHASE WILL NOT BE CONSIDERED
MADE UNTIL THE WIRED MONEY IS RECEIVED AND THE PURCHASE IS ACCEPTED BY THE FUND.
Any delays which may occur in wiring money, including delays which may occur in
processing by the banks, are not the responsibility of the Funds or the Funds'
Transfer Agent.

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

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

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

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

BY ACH. You may purchase shares for non-IRA accounts via electronic transfer of
funds if you have selected this option in Step 4 of the application. If you call
the Funds prior to the close of the NYSE, normally 3:00 p.m. Central time, your
purchase will be effective at the net asset value on the next business day (on
which the net asset value is calculated) after your telephone call and your bank
account will be debited within 1 to 2 business days.

BY AUTOMATIC INVESTMENT PLAN. After your initial investment you can make
automatic monthly purchases on any day of the month of $100 or more. To use this
option, you must complete the Automatic Investment Plan section of the
application or if adding this option to an existing account, the Change of
Account Options form. Changing an account option requires a signature guarantee.
You can change the amount or terminate this option by written notice to the Fund
at any time.

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

REDEMPTION OF FUND SHARES

You may redeem (sell) all or a portion of your shares at any time that the net
asset value is calculated. Shares

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<PAGE>

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

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

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

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

2. Other supporting legal documents as required for estates, trusts,
guardianships, custodianships, corporations, pension and profit
sharingplans and other organizations.

Payment will generally be made within 7 days after receipt of a redemption
request in "good order". A request for redemption cannot be canceled or revoked.
A SIGNATURE GUARANTEE IS REQUIRED IF YOU REQUEST A REDEMPTION TO BE MADE PAYABLE
TO SOMEONE OTHER THAN THE REGISTERED OWNERS AND/OR IF YOU REQUEST THE PROCEEDS
TO BE SENT TO AN ADDRESS OTHER THAN THE REGISTERED ADDRESS.

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

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

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

If you call the Funds prior to the close of the NYSE, normally 3:00 p.m. Central
time your redemption will be effective at the net asset value that same day. You
must complete the Telephone Redemption Authorization section of the application
to establish this option. THE FUND WILL EMPLOY REASONABLE PROCEDURES TO CONFIRM
THAT TELEPHONE INSTRUCTIONS ARE GENUINE, AND INCLUDING REQUIRING THAT PAYMENTS
BE MADE ONLY TO THE SHAREHOLDER'S ADDRESS OF RECORD OR THE BANK ACCOUNT
DESIGNATED ON THE APPLICATION AND REQUIRING CERTAIN MEANS OF TELEPHONIC
IDENTIFICATION. If the Fund fails to employ such procedures, it may be liable
for any losses suffered by Fund shareholders as a result of unauthorized or
fraudulent instructions. During times of chaotic economic or market
circumstances, a shareholder may have difficulty reaching the Funds by
telephone. Consequently, an exchange or redemption may be difficult to implement
at those times.

BY MAIL. Telephone redemption proceeds can be mailed to your address of record.
If you wish to change your

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<PAGE>

address, complete the Change of Account Information form, signed by all
shareholders.

BY WIRE. Telephone redemption proceeds can be wired to your bank. Proceeds will
be wired to your bank account the next business day after you request a
telephone redemption. You will be required to pay a charge for the wiring cost
(currently $8) which will be deducted from the balance of your account or from
the account being wired if your account has been completely redeemed.

BY ACH. Electronic transfer of funds via Automated Clearing House (ACH) is
available for redemption of shares for non-IRA accounts. Your bank account will
be credited within 1-2 business days after you request a telephone redemption.
To establish this option, complete Step 4 of the application.

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

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

EXCHANGES

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

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

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

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

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<PAGE>

DIVIDENDS

The policy of each of the Funds is to distribute 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.

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

Income dividends and capital gain distributions are automatically reinvested in
additional shares at the net asset value per share on the distribution date.
Dividends may be automatically directed from one Fund to another Fund. You may
request a cash payment of dividends and/or capital gain distributions on the
application or by separate written notice to the Funds. Shareholders will
receive a quarterly statement reflecting the payment and reinvestment of
dividends. If cash payment is requested, a check normally will be mailed within
five business days after the payable date. If the postal or other delivery
service is unable to deliver checks to the shareholder's address of record, such
shareholder's distribution option will automatically be converted to having all
dividend and other distributions reinvested in additional shares. No interest
will accrue on amounts represented by uncashed distribution or redemption
checks.

RETIREMENT ACCOUNTS

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

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

CUSTODIAN AND TRANSFER AGENT

The Northern Trust Company, 50 South LaSalle Street, Chicago, IL 60675, acts as
Custodian for each Fund pursuant to the terms of a Custodian Contract. The
Custodian holds all securities and cash, receives and pays for securities
purchased, delivers against payment for securities sold, receives and collects
income from investments and performs other administrative duties, all under the
supervision of officers of the Funds or the Adviser.

Pursuant to the terms of a Transfer Agency and Services Agreement and the
Accounting Services Agreement with each Fund, First Data Investor Services Group
Inc., 4400 Computer Drive, Westboro, MA 01581 is the transfer agent, dividend
disbursing agent and accounting services agent for each Fund. First Data
Investor Services processes purchase orders, redemption orders and all related
shareholder accounting services.

MANAGEMENT

BOARD OF DIRECTORS
The corporate issuer of each of the Funds, Sit Mutual Funds, Inc., has corporate
officers and a Board of Directors. Pursuant to Minnesota law, the Board of
Directors is responsible for the management of each Fund and the establishment
of each Fund's policies. The officers of the Funds manage the day-to-day
operation of each Fund.

INVESTMENT ADVISER
Sit Investment Associates, Inc. (the Adviser") was incorporated in Minnesota on
July 14, 1981 and serves as

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<PAGE>

the Funds' Investment Adviser pursuant to Investment Management Agreements (the
"Agreements"). The Adviser together with its affiliates currently manage public
and private accounts with combined assets of approximately $5 billion, including
the Sit Mutual Funds. The address of the Adviser is 4600 Norwest Center,
Minneapolis, Minnesota 55402.

The Investment Management Agreement of the Science and Technology Growth Fund
and the Regional Growth Fund obligates each Fund to pay the Adviser a flat fee
of 1.50% and 1.25% per year, respectively, of the Fund's average daily net
assets. However, for the period of inception through December 31, 1998, the
Adviser has voluntarily agreed to limit each Fund's management fee (and,
thereby, all Fund expenses except those not payable by the Adviser as set forth
above) to 1.25% and 1.00% per year, respectively, of the Fund's average daily
net assets. After December 31, 1998, these voluntary fee waivers may be
discontinued by the Adviser in its sole discretion.

PORTFOLIO MANAGEMENT
All investment decisions of the Funds are made by committee. Eugene C. Sit is
the Chief Investment Officer of the Adviser and has served as such since the
inception of the company in 1981. Eugene C. Sit oversees all investment
decisions for each of the Funds. He is the Senior Portfolio Manager for the
Science and Technology Growth Fund and the Regional Growth Fund and has held
this office since the inception of each Fund.

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

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.

TAXES

Each Fund intends to qualify as a regulated investment company under Subchapter
M of the Internal Revenue Code of 1986, as amended (the "Code") in order to be
relieved of payment of federal income taxes on amounts distributed to
shareholders (both net investment income and net realized capital gains).

Dividends paid from each Fund's net investment taxable income and net short-term
capital gains will be taxable to shareholders as ordinary income, whether or not
the shareholder elects to have such dividends automatically reinvested in
additional shares.

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

For individuals, the Taxpayer Relief Act of 1997 (the "Act") has created new
"mid-term capital gain" rates that apply to the sale of capital assets held more
than one year but not more than 18 months. Although the Act has not expressly
addressed this issue, it is expected that IRS regulations issued pursuant to the
Act will provide that regulated investment companies such as the Funds must
notify shareholders who are individuals as to whether they must treat capital
gain dividends that they receive as mid-term or long-term capital gains.

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

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<PAGE>

who are individuals, the gain or loss will be considered long-term if the
shareholder has held the shares for more than 18 months and mid-term if the
shareholder has held the shares for more than one year but not more than 18
months.

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

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

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

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

CAPITALIZATION AND VOTING RIGHTS

Sit Mutual Funds, Inc. is the corporate issuer of each Fund's shares and is
organized as a Minnesota corporation as a series fund with one trillion shares
of common stock authorized with a par value of one tenth of one cent per share.
Sit Mutual Fund, Inc. has only one class of shares which are common shares. 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; Series E Common Shares
represent shares of Science and Technology Growth Fund and Series F Common
Shares represent shares of Regional Growth Fund. The Board of Directors of Sit
Mutual Funds, Inc. is empowered to issue other series of common stock without
shareholder approval.

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

The Funds are not required under Minnesota law to hold

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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, certain shareholders under certain circumstances may
demand a regular meeting of shareholders pursuant to Minnesota law and the
Investment Company Act of 1940. See the Statement of Additional Information for
further information.

As of the date of this Prospectus, there were 10 shares of the Science and
Technology Growth Fund and the Regional Growth Fund outstanding. All such shares
were acquired by the Adviser for investment purposes.

ADDITIONAL INFORMATION

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

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

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

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<PAGE>

Directors:

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

Director Emeritus:

Melvin C. Bahle

Officers:

Eugene C. Sit, CFA Chairman
Peter L. Mitchelson, CFA Vice Chairman
Mary K. Stern President
Erik S. Anderson, CFA Vice President - Investments
Ronald D. Sit, CFA Vice President - Investments
Gary T. Dvorchak, CFA(1) Vice President - Investments
Robert W. Sit, CFA(1) Vice President - Investments
John T. Groton, Jr. CFA(2) Vice President - Investments
John K. Butler, CFA(2) Vice President - Investments
Paul E. Rasmussen Vice President & Treasurer
Michael P. Eckert Vice President
Michael J. Radmer Secretary
Carla J. Rose Assistant Secretary
Debra A. Sit, CFA Assistant Treasurer

(1) Sit Science and Technology Growth Fund only
(2) Sit Regional Growth Fund only

NOT PART OF THE PROSPECTUS

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<PAGE>

PART B
STATEMENT OF ADDITIONAL INFORMATION

SIT SCIENCE AND TECHNOLOGY GROWTH FUND
SIT REGIONAL GROWTH FUND
(Series E and Series F of Sit Mutual Funds, Inc.)

4600 Norwest 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 which may be obtained from the Funds
without charge by contacting the Funds at 4600 Norwest Center, 90 South Seventh
Street, Minneapolis, Minnesota 55402-4130. Telephone: (612) 334-5888 or (800)
332-5580. The date of this Statement of Additional Information is November 28,
1997, and it is to be used with the Funds' prospectus dated November 28, 1997.

TABLE OF CONTENTS

Page

Additional Investment Restrictions.....................................2
Diversification........................................................3
Additional Investments.................................................3
Computation of Net Asset Value.........................................6
Calculation of Performance Data........................................7
Management.............................................................7
Investment Adviser....................................................10
Distributor...........................................................11
Brokerage.............................................................11
Control Persons and Principal Holders of Securities...................13
Taxes.................................................................13
Financial Statements..................................................14
Other Information.....................................................14
Limitation of Director Liability......................................14
Bond and Commercial Paper Ratings.............................Appendix A

<PAGE>

ADDITIONAL INVESTMENT RESTRICTIONS

The investment objective, policies and restrictions of the Funds are set forth
in the Prospectus. Certain additional investment information is set forth below.
All capitalized terms not defined herein have the same meanings as set forth in
the Prospectus. In addition to the restrictions in the Prospectus, each Fund is
subject to other restrictions which are fundamental and may not be changed
without shareholder approval. Shareholder approval, as defined in the Investment
Company Act of 1940, means the lesser of the vote of (a) 67% of the shares of
the 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 the 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.

The Funds 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 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 for emergency or extraordinary purposes
but not for the purchase of investments, and then not in excess of 33 1/3%
of the Fund's 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; or
8. 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 Funds are not fundamental. The
Funds 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 for the purpose of exercising control or management;
3. Invest more than 15% of its net assets collectively in all types of
illiquid securities;
4. Invest in more than 10% of the outstanding voting securities of any one
issuer;
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; or
6. Pledge, mortgage or hypothecate the Fund's assets, transfer, assign or
otherwise encumber them except to the extent necessary to secure the
permitted borrowings.

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

<PAGE>

DIVERSIFICATION

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

ADDITIONAL INVESTMENTS

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

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

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

OBLIGATIONS OF BANKS
Bank money instruments in which the 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

<PAGE>

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 a Fund's purchase of variable rate
certificates of deposit, it may enter into formal or informal agreements with
banks or dealers allowing the Fund to resell the certificates to the bank or
dealer, at the Fund's option. If the agreement to repurchase is informal, there
can be no assurance that the Fund would always be able to resell such
certificates. Before entering into any such transactions governed by formal
agreements, however, the Fund will comply with the provisions of SEC Release
10666 which generally provides that the repurchase agreement must be fully
collateralized. With respect to variable rate certificates of deposit maturing
in 180 days or less from the time of purchase with interest rates adjusted on a
monthly cycle, the Fund uses the period remaining until the next rate adjustment
date for purposes of determining the average weighted maturity of its portfolio.
With respect to all variable rate instruments not meeting the foregoing
criteria, the Fund uses the remaining period to maturity for purposes of
determining the average weighted maturity of its portfolio until such time as
the Securities and Exchange Commission has determined otherwise.

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

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

As a result of federal and state laws and regulations, domestic banks are, among
other things, generally required to maintain specified levels of reserves,
limited in the amount which they can loan to a single borrower, and are subject
to other regulations designed to promote financial soundness. Since the
portfolio may contain securities of foreign banks and foreign branches of
domestic banks, the 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 a Fund do not benefit materially from
insurance either from the Federal Deposit Insurance Corporation or the Federal
Savings and Loan Insurance Corporation. Certificates of deposit of foreign
branches of domestic banks are not covered by such insurance and certificates of
deposit of domestic banks purchased by a Fund are generally in denominations far
in excess of the dollar limitations on insurance coverage.

<PAGE>

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.

DEPOSITORY RECEIPTS
The Funds may hold securities of foreign issuers in the form of American
Depository Receipts ("ADRs"). Generally ADRs are U.S. dollar denominated
securities designed for use in the U.S. securities markets which represent and
may be converted into the underlying foreign security.

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

To the extent that collateral is comprised of cash, the Funds 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 the 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.

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

<PAGE>

month or more after the date of the transaction. The Funds will not accrue
income in respect of a security purchased on a forward commitment basis prior to
its stated delivery date. At the time a Fund makes the commitment to purchase
securities on a when-issued or forward commitment basis, it will record the
transaction and thereafter reflect the value of such securities in determining
its net asset value. At the time a Fund enters into a transaction on a
when-issued or forward commitment basis, a segregated account consisting of cash
and liquid high-grade debt obligations equal to the value of the when-issued or
forward commitment securities will be established and maintained with the
custodian and will be marked to the market daily. On the delivery date, the
Funds will meet 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 a 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 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
The Funds are permitted to invest in repurchase agreements. A repurchase
agreement is a contract by which a Fund acquires the security ("collateral")
subject to the obligation of the seller to repurchase the security at a fixed
price and date (within seven days). A repurchase agreement may be construed as a
loan pursuant to the 1940 Act. The Funds may enter into repurchase agreements
with respect to any securities which it may acquire consistent with its
investment policies and restrictions. The Funds' custodian will hold the
securities underlying any repurchase agreement in a segregated account. In
investing in repurchase agreements, 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, a 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 Fund 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 which it has reviewed for credit worthiness to the
Funds' directors at least quarterly for their approval.

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 the Funds' securities to materially affect the
Funds' net asset value per share. The customary national business holidays
observed by the New York Stock Exchange and on which the Fund is 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.

<PAGE>

CALCULATION OF PERFORMANCE DATA

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

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

CTR = (ERV-P)
(-----) 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.

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.
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.

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

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

a = dividends and interest earned during the periods;

b = expenses accrued for the period (net of
reimbursements);

c = the average daily number of shares outstanding during
the period that were entitled to receive dividends; and

d = the maximum offering price per share on the last day
of the period.

MANAGEMENT

Each director, who is not also an officer, is paid by the Sit Mutual Funds (the
"Sit Funds") as a group, an annual fee of $8,000, $2,000 for each meeting
attended, and receives reimbursement for travel and other expenses. The Sit
Funds are a family of thirteen no-load, open-end, diversified, management
investment companies, as defined in the 1940 Act, and includes the Sit Science
and Technology Fund and the Sit Regional Growth Fund. Sit Investment Associates,
Inc. serves as the adviser for each of the Sit Funds. The

<PAGE>

names, addresses, principal occupations and other affiliations of directors and
officers of the Funds are given below. Except as noted below, the business
address of each officer and director is the same as that of the Adviser - 4600
Norwest Center, Minneapolis, Minnesota, 55402-4130.

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

<S> <C> <C>
Eugene C. Sit * Director and Chairman, CEO and CIO Sit Investment Associates, Inc. (the
Chairman "Adviser"); Chairman and CEO of Sit/Kim International Investment
Associates, Inc. ("Sit/Kim"); Director and Chairman of the Sit Funds
and Director of SIA Securities Corp. (the "Distributor")

Peter L. Mitchelson * Director and President and Director of the Adviser; Executive Vice President and
Vice Chairman Director the of Sit/Kim; Director and Vice Chairman of the Sit Funds
and Director the Distributor

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

John E. Hulse Director Director, Vice Chairman and Chief Financial Officer at Pacific
4303 Quail Run Lane Telesis Group until June 1992; Trustee, Benild Religious &
Danville, CA 94506 Charitable Trust; Trustee, Pacific Gas & Electric Nuclear
Decommissioning Trust; Director of the Sit Funds

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

Donald W. Phillips Director President of Forstmann-Leff International, Inc.; Executive Vice
111 West Jackson Boulevard President of Equity Financial and Management Company until 1997,
Chicago, IL 60604 Chairman of Equity Institutional Investors, Inc. until 1997; Chief
Investment Officer of Ameritech, Inc., Chicago, IL until 1990;
Director of the Sit Funds

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

<PAGE>

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

<S> <C> <C>
Erik S. Anderson Vice Vice President - Equity Research & Portfolio Management of the
President- Adviser and Vice President - Investments Sit Mutual Funds, Inc., Sit
Investments Mid Cap Growth Fund, Inc., and Sit Large Cap Growth Fund, Inc.

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

Michael J. Radmer Secretary Partner of the Fund's general counsel, Dorsey & Whitney LLP;
220 South Sixth Street Secretary of the Sit Funds
Minneapolis, MN

Paul E. Rasmussen Vice President & Vice President, Secretary and Controller for the Adviser; and
Treasurer Sit/Kim; Vice President and Treasurer of the Sit Funds; President
and Treasurer of the Distributor

Ronald D. Sit Vice Vice President - Equity Research and Portfolio Management of the
President- Adviser; Vice President - Investments Sit Mutual Funds, Inc., Sit
Investments Mid Cap Growth Fund, Inc., and Sit Large Cap Growth Fund, Inc.

Mary K. Stern President President of the Sit Funds; Vice President - Mutual Funds of
Adviser; Formerly President of Mutual Fund Group and Executive Vice
President of Society Bank until 1993; Vice President of Norwest Bank
Minnesota, N.A. until 1992.

John T. Groton, Jr.** Vice Vice President - Equity Research Analyst of Adviser; Formerly
President- Senior Financial Analyst with Andersen Consulting.
Investments

John K. Butler** Vice Vice President - Equity Research Analyst of Adviser; Formerly Senior
President- Financial Analyst with Norwest Capital Advisors.
Investments

</TABLE>

* Directors who are deemed to be "interested persons" of the Fund 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 may be
deemed to be an interested person of the Fund because he is an advisory director
of the Adviser.

** Sit Regional Growth Fund only.

Mr. Ronald D. Sit is a son of Eugene C. Sit.

<PAGE>

INVESTMENT ADVISER

The Adviser has served as the investment adviser for the Funds since the
inception of each Fund.

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

COMPENSATION AND ALLOCATION OF EXPENSES
Under the Science and Technology Fund's Investment Management Agreement, the
Fund is obligated to pay the Adviser a flat monthly fee, which is equal on an
annual basis to 1.50% percent of the average daily net assets of the Fund. Under
the Regional Growth Fund's Investment Management Agreement, the Fund is
obligated to pay the Adviser a flat monthly fee, which is equal on an annual
basis to 1.25% percent of the average daily net assets of the Fund. However,
under each of the Agreements, the Adviser has agreed to bear all of the Fund's
expenses, except for extraordinary expenses (as designated by a majority of the
Fund's disinterested directors), interest, brokerage commissions and other
transaction charges relating to the investing activities of the Fund.

For the period of inception of each Fund through December 31, 1998 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 Fund's average daily net assets and 1.00% of the
Regional Growth Fund's average daily net assets. After December 31, 1998, these
voluntary fee waivers may be discontinued by the Adviser in its sole discretion.

<PAGE>

DISTRIBUTOR

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

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

BROKERAGE

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

The Adviser 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 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. Such
research or services include advice, both directly and in writing, as to the
value of securities, the advisability of investing in, purchasing or selling
securities, and the availability of securities, or purchasers or sellers of
securities. Such services also may include analyses and reports concerning
issues, industries, securities, economic factors and trends, portfolio strategy,
and the performance of accounts. This allows the Adviser to supplement its own
investment research activities and enables the Adviser 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, the Adviser receives a benefit, not capable of
valuation in dollar amounts, without providing any direct monetary benefit to
the applicable Fund from these transactions. The Adviser believes that most
research services it receives generally benefit several or all of the investment
companies

<PAGE>

and private accounts which it manages, 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.

The Adviser maintains 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 with research services
which the Adviser anticipates will be useful to it 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. The Adviser will authorize the 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 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 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 either
Fund. 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 either Fund. Most securities trades will
be executed through U.S. brokerage firms and commercial banks.

Foreign equity securities may be held in the form of American Depository
Receipts ("ADRs"). ADRs may be listed on stock exchanges, or traded in the
over-the-counter markets in the United States. ADRs, like other securities
traded in the United States, will be subject to negotiated commission rates.

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

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

Investment decisions for each Fund are made independently of those for other
clients of the Adviser, including the other investment companies. When the Funds
and other client(s) 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(s). In
some cases, this system may adversely affect the price paid or received by the
Fund or the size of the position obtainable.

<PAGE>

CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES

As of the date of this Statement of Additional Information, there were 10 shares
of the Sit Science and Technology Growth Fund and the Sit Regional Growth Fund
outstanding. All such shares were acquired by the Adviser, Sit Investment
Associates, for investment purposes. The Adviser is located at 4600 Norwest
Center, 90 South 7th Street, Minneapolis, Minnesota.

TAXES

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

To qualify under Subchapter M for tax treatment as a regulated investment
company, each Fund must, among other things: (1) distribute to its shareholders
at least 90% of its investment company taxable income (as that term is defined
in the Code determined without regard to the deduction for dividends paid) and
90% of its net tax-exempt income; (2) derive at least 90% of its gross income
from dividends, interest, payments with respect to securities loans, gains from
the sale or other disposition of stock or securities, or other income derived
with respect to its business of investing in such stocks, securities, or
currency; (3) derive less than 30% of its annual gross income from the sale or
other disposition of stock, securities, options, futures, or forward contracts
held for less than three months; and (4) diversify its holdings so that, at the
end of each fiscal quarter of the Fund, (a) at least 50% of the market value of
the Fund's assets is represented by cash, cash items, United States Government
securities and securities of other regulated investment companies, and other
securities, with these other securities limited, with respect to any one issuer,
to an amount no greater than 5% of the Fund's total assets and no greater than
10% of the outstanding voting securities of such issuer, and (b) not more than
25% of the market value of the Fund's total assets is invested in the securities
of any one issuer (other than United States Government securities or securities
of other regulated investment companies). (The requirement under clause (3)
above has been repealed, effective for the taxable year of the funds beginning
July 1, 1998).

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 the 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.

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.

<PAGE>

FINANCIAL STATEMENTS

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

OTHER INFORMATION

CUSTODIAN, COUNSEL, AND 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 Peat Marwick LLP, 4200 Norwest 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 director reasonably believes to be in the best interest of the
corporation, and with the care an ordinarily prudent person in a like position
would exercise under similar circumstances." Fiduciary duties of a director of a
Minnesota corporation include, therefore, both a duty of "loyalty" (to act in
good faith and act in a manner reasonably believed to be in the best interests
of the corporation) and a duty of "care" (to act with the care an ordinarily
prudent person in a like position would exercise under similar circumstances).
Minnesota law authorizes corporations to eliminate or limit the personal
liability of a director to the corporation or its shareholders for monetary
damages for breach of the fiduciary duty of "care". Minnesota law does not,
however, permit a corporation to eliminate or limit the liability of a director
(i) for any breach of the directors' duty of "loyalty" to the corporation or its
shareholders, (ii) for acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law, (iii) for authorizing a
dividend, stock repurchase or redemption or other distribution in violation of
Minnesota law or for violation of certain provisions of Minnesota securities
laws or (iv) for any transaction from which the director derived an improper
personal benefit. The Articles of Incorporation of the Company limit the
liability of directors to the fullest extent permitted by Minnesota statutes,
except to the extent that such liability cannot be limited as provided in the
Investment Company Act of 1940 (which Act prohibits any provisions which purport
to limit the liability of directors arising from such directors' willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of their role as directors).

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

The Funds are not required under Minnesota law to hold annual or periodically
scheduled meetings of shareholders. Minnesota corporation law provides for the
Board of Directors to convene shareholder meetings when it deems appropriate.
However, the Funds intend to hold meetings of shareholders annually. In
addition, if a regular meeting of shareholders has not been held during the
immediately preceding fifteen

<PAGE>

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

<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.

<PAGE>

FITCH INVESTORS SERVICE, INC.
AAA Highest credit quality with exceptional ability to pay interest
and repay principal.
AA Investment grade and very high credit quality ability to pay
interest and repay principal is very strong, although not quite
as strong as AAA.
A Investment grade with high credit quality. Ability to pay
interest and repay principal is strong.
BBB Investment grade and has satisfactory credit quality. Adequate
ability to pay interest and repay principal.
BB Considered speculative. Ability to pay interest and repay
principal may be affected over time by adverse economic changes.
B Considered highly speculative. Currently meeting interest and
principal obligations, but probability of continued payment
reflects limited margin of safety.
CCC Identifiable characteristics which if not remedied may lead to
default. Ability to meet obligations requires an advantageous
business and economic environment.
CC Minimally protected bonds. Default in payment of interest and/or
principal seems probable over time.
C Imminent default in payment of interest or principal.

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

DUFF & PHELPS CREDIT RATING CO.
AAA Highest credit quality, risk factors are
negligible.
AA+, AA, AA- High credit quality with moderate risk.
A+, A, A- Protection factors are average but adequate,
however, risk factors are more variable and
greater in periods of economic stress.
BBB+, BBB, BBB- Below average protection factors, but still
considered sufficient for prudent
investment.
BB+, BB, BB- Below investment grade but likely to meet
obligations when due.
B+, B, B- Below investment grade and possessing risk
that obligations will not be met when due.
CCC Well below investment grade. May be in
default or considerable uncertainty as to
timely payment of interest and/or principal.

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

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

FITCH'S
F-1+ Exceptionally strong credit quality

DUFF & PHELPS'
Category 1 (top grade):
Duff1+ Highest certainty of timely payment
Duff1 Very high certainty of timely payment
Duff1- High certainty of timely payment

<PAGE>

Part C

Other Information

Item 24. Financial Statements and Exhibits

(a) Financial Statements (incorporated by reference to Post-Effective
Amendment No. 11 to the Registrant's Registration Statement).

(b) Exhibits

1. Articles of Incorporation (incorporated by reference to
Post-Effective Amendment No. 3 to the Registrant's Registration
Statement).

1.1 Certificate of Designation (incorporated by reference to
Post-Effective Amendment No. 12 to the Registrant's Registration
Statement)

2. Amended Bylaws (filed herewith)

3. Not applicable

4. Specimen Copy of Share Certificate (filed herewith)

5. Investment Management Agreement (filed herewith)

6. Underwriting and Distribution Agreement (filed herewith)

7. Not applicable

8.1 Custodian Agreement (filed herewith)

8.2 Transfer Agency and Services Agreement (filed herewith)

8.3 Accounting Services Agreement (filed herewith)

9. Not applicable

10. Opinion and Consent of Dorsey & Whitney (filed herewith)

11. Consent of KPMG Peat Marwick (incorporated by reference to
Post-Effective Amendment No. 10 to the Registrant's Registration
Statement.)

12. Not applicable

13. Letter of Investment Intent (filed herewith.)

14. Not applicable

15. Not applicable

16. Calculations of Performance Data (incorporated by reference to
Post-Effective Amendment No. 10 to the Registrant's Registration
Statement.)

17. Powers of Attorney (incorporated by reference to Post-Effective
Amendment No. 9 to the Registrant's Registration Statement.)

Item 25. Persons Controlled by or Under Common Control with Registrant
See the section of the Prospectus entitled "Management" and the
section of the Statement of Additional Information entitled
"Investment Adviser."

Item 26. Number of Holders of Securities
The number of holders of shares of Sit Mutual Funds, Inc. as of
September 30, 1997 are:

Title of Class Number of Record Holders
Common Stock, par value of $.01 per share

Series A 2,090
Series B 134
Series C 557
Series D 1,626
Series E None
Series F None

<PAGE>

Item 27. Indemnification

The Registrant's Articles of Incorporation provides 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.

The 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
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 the Registrant, then such director generally
may not be counted for the purpose of determining either the presence of a
quorum or such director's eligibility to be indemnified.

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

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

(b) acted in good faith;

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

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

(f) had not otherwise engaged in conduct which precludes indemnification
under either Minnesota or Federal law (including, without limitation,
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).

Advances. If a person is made or threatened to be made a party to a
proceeding, the person is entitled, upon written request to the Registrant, to
payment or reimbursement by the 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 the 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.

Undertaking. The Registrant undertakes that insofar as indemnification for
liabilities arising under the Securities Act of 1933 may be permitted to
directors, officers and controlling persons of the Registrant pursuant to the
foregoing provisions, or otherwise, the 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 the Registrant of expenses incurred or paid by a director,
officer or controlling person of the 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

<PAGE>

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 issues.

Item 28. Business and other Connections of Investment Adviser
Sit Investment Associates, Inc. (the "Adviser"), serves as the investment
adviser. Below is a list of the officers and directors of the Adviser and their
business/employment during the past two years.

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

Eugene C. Sit Chairman, CIO and Treasurer of the
Adviser; Chairman and CEO of the Sit/Kim
International Investment Associates, Inc.
("Sit/Kim"); 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 Sit/Kim; Senior Portfolio Manager of the Sit
Large Cap Growth Fund; Vice Chairman & Director
of all Sit Mutual Funds.

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., Sit Mutual Funds II, Inc. and Sit
Balanced Fund.

Frederick Adler Director of the Adviser; Venture Capitalist,
Managing Partner,
Venad Management, Inc.
1520 S. Ocean Boulevard
Palm Beach, FL 33480

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

William E. Frenzel Advisory Director of the Adviser; Director of
Sit/Kim; Director of all Sit Mutual Funds
Massachusetts Avenue N.W.
Washington, D.C. 20036

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

John K. Butler Vice President - Equity Research of the Adviser

Gary T. Dvorchak Vice President - Equity Research of the Adviser

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

John T. Groton, Jr. Vice President - Equity Research of the Adviser

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

Business and Employment During Past Two Years;
<PAGE>

Name Principal Business Address
---- --------------------------

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

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

Mary K. Stern Vice President - Mutual Funds and President of
all Sit Mutual Funds

Item 29. Principal Underwriters
The Distributor for the Registrant is SIA Securities Corp., 4600 Norwest
Center, Minneapolis, MN 55402, an affiliate of the Adviser. The Distributor
distributes only shares of the Sit Mutual Funds, which include the 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;
Director Chairman and CEO of Sit/Kim International
Investment Associates, Inc. ("Sit/Kim"); Chairman
of the Board of Directors of all Sit Mutual
Funds.

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

Paul E. Rasmussen Vice President, Secretary and Controller for the
President & Adviser and Sit/Kim, Vice President & Treasurer
Treasurer of all Sit Mutual Funds

Item 30. Location of Accounts and Records

The Custodian for 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
Norwest Center, Minneapolis, MN 55402.

Item 31. Management Services Not applicable

Item 32. Undertakings

(a) Not applicable

(b) Registrant undertakes to file a post-effective amendment, using
financial statements which need not be certified, within four to six
months from the initial public offering of its Series E and Series F
common shares.

(c) Registrant undertakes to call a meeting of shareholders for the purpose
of voting upon the question of removal of a director if requested to do
so by the holders of at least 10% of such Registrant's

<PAGE>

outstanding shares and to assist in communications with other
shareholders as required by Section 16(c) of the Investment Company
Act of 1940.

(d) Registrant undertakes to furnish each person to whom a prospectus or
any series of the Registrant is sent the latest Annual Report of such
series. Such Annual Report will be furnished by the Registrant without
charge upon request by such person.

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement on Form N-1A to be signed on its behalf by the undersigned, thereunder
duly authorized, in the City of Minneapolis, State of Minnesota, on the 3rd day
of November, 1997.

SIT MUTUAL FUNDS, 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. All revisions reflected in the enclosed Amendment are stylistic or
otherwise, by themselves, would not have necessitated a Rule 485(a) filing. The
enclosed Amendment does not contain disclosures which would render it ineligible
to become effective pursuant to Rule 485(b).

Signature and Title

/s/ Eugene C. Sit Dated: November 3, 1997
- -------------------------------------------
Eugene C. Sit Chairman
(Principal Executive Officer and Director)

/s/ Paul E. Rasmussen Dated: November 3, 1997
- -------------------------------------
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 3, 1997
-------------------------------------
Eugene C. Sit, Attorney-in-fact
(Pursuant to Powers of Attorney filed
previously with the Commission.)

<PAGE>

SIT MUTUAL FUNDS, INC.

REGISTRATION STATEMENT ON FORM N-1A

EXHIBIT INDEX

EXHIBIT PAGE
NUMBER NAME OF EXHIBIT NUMBER
- ------ --------------- ------

2 Amended Bylaws C-8

4 Specimen Copy of Share Certificates C-24

5 Investment Management Agreement C-28

6 Underwriting and Distribution Agreement C-32

8.1 Custodian Agreement C-36

8.2 Transfer Agency and Services Agreement C-61

8.3 Accounting Services Agreement C-80

10 Opinion and Consent of Dorsey & Whitney C-91

13 Letters of Investment Intent C-93

EXHIBIT 2
Amended Bylaws

BYLAWS

SIT MUTUAL FUNDS, INC.
(AS AMENDED BY THE BOARD OF DIRECTORS
ON JULY 24, 1997)

ARTICLE I
OFFICES, CORPORATE SEAL

Section 1.01. Name. The name of the corporation is "SIT Mutual
Funds, Inc." The name of the series represented by the corporation's Series A
Common Shares is "SIT International Growth Fund." The name of the series
represented by the corporation's Series B Common Shares is "SIT Balanced Fund."
The name of the series represented by the corporation's Series C Common Shares
is "Sit Developing Markets Growth Fund." The name of the series represented by
the corporation's Series D Common Shares is "Sit Small Cap Growth Fund." The
name of the series represented by the corporation's Series E Common Shares shall
be "Sit Science and Technology Growth Fund." The name of the series represented
by the corporation's Series F Common Shares shall be "Sit Regional Fund."

Section 1.02. Registered Office. The registered office of the
corporation in Minnesota shall be that set forth in the Articles of
Incorporation or in the most recent amendment of the Articles of Incorporation
or resolution of the directors filed with the Secretary of State of Minnesota
changing the registered office.

Section 1.03. Other Offices. The corporation may have such
other offices, within or without the State of Minnesota, as the directors shall,
from time to time, determine.

Section 1.04. No Corporate Seal. The corporation shall have no
corporate seal.

ARTICLE II
MEETINGS OF SHAREHOLDERS

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Section 2.01. Place and Time of Meeting. Except as provided
otherwise by Minnesota Statutes Chapter 302A, meetings of the shareholders may
be held at any place, within or without the State of Minnesota, designated by
the directors and, in the absence of such designation, shall be held at the
registered office of the corporation in the State of Minnesota. The directors
shall designate the time of day for each meeting and, in the absence of such
designation, every meeting of shareholders shall be held at ten o'clock a.m.

Section 2.02. Regular Meetings. The corporation is not
required to hold annual meetings of shareholders. Regular meetings shall be held
only with such frequency and at such times and places as provided in and
required by Minnesota Statutes Section 302A.431.

Section 2.03. Special Meetings. Special meetings of the
shareholders may be held at any time and for any purpose and may be called by
the Chairman of the Board, the President, any two directors, or by one or more
shareholders holding ten percent (10%) or more of the shares entitled to vote on
the matters to be presented to the meeting.

Section 2.04. Quorum, Adjourned Meetings. The holders of ten
percent (10%) of the shares outstanding and entitled to vote shall constitute a
quorum for the transaction of business at any regular or special meeting. In
case a quorum shall not be present at a meeting, those present in person or by
proxy shall adjourn the meeting to such day as they shall, by majority vote,
agree upon without further notice other than by announcement at the meeting at
which such adjournment is taken. If a quorum is present, a meeting may be
adjourned from time to time without notice other than announcement at the
meeting. At adjourned meetings at which a quorum is present, any business may be
transacted which might have been transacted at the meeting as originally
noticed. If a quorum is present, the shareholders may continue to transact
business until adjournment notwithstanding the withdrawal of enough shareholders
to leave less than a quorum.

Section 2.05. Voting. At each meeting of the shareholders,
every shareholder having the right to vote shall be entitled to vote either in
person or by proxy. Each shareholder, unless the Articles of Incorporation
provide otherwise, shall have one vote for each share having voting power
registered in his name on the books of the corporation. Except as otherwise
specifically provided by these Bylaws or as required by provisions of the
Investment Company Act of 1940 or other applicable laws, all questions shall be
decided by a majority vote of the number of shares entitled to vote and
represented at the meeting at the time of the vote. If the matter(s) to be
presented at a regular or special meeting relates only to particular classes or
series of the corporation, then only the shareholders of such classes or series
are entitled to vote on such matter(s).

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Section 2.06. Voting - Proxies. The right to vote by proxy
shall exist only if the instrument authorizing such proxy to act shall have been
executed in writing by the shareholder himself or by his attorney thereunto duly
authorized in writing. No proxy shall be voted after eleven months from its date
unless it provides for a longer period.

Section 2.07. Closing of Books. The Board of Directors may fix
a time, not exceeding sixty (60) days preceding the date of any meeting of
shareholders, as a record date for the determination of the shareholders
entitled to notice of, and to vote at, such meeting, notwithstanding any
transfer of shares on the books of the corporation after any record date so
fixed. The Board of Directors may close the books of the corporation against the
transfer of shares during the whole or any part of such period. If the Board of
Directors fails to fix a record date for determination of the shareholders
entitled to notice of, and to vote at, any meeting of shareholders, the record
date shall be the thirtieth (30th) day preceding the date of such meeting.

Section 2.08. Notice of Meetings. There shall be mailed to
each shareholder, shown by the books of the corporation to be a holder of record
of voting shares, at his address as shown by the books of the corporation, a
notice setting out the date, time and place of each regular meeting and each
special meeting, except where the meeting is an adjourned meeting and the date,
time and place of the meeting were announced at the time of adjournment, which
notice shall be mailed within the period required by law. Every notice of any
special meeting shall state the purpose or purposes for which the meeting has
been called, pursuant to Section 2.03, and the business transacted at all
special meetings shall be confined to the purpose stated in such notice.

Section 2.09. Waiver of Notice. Notice of any regular or
special meeting may be waived either before, at or after such meeting orally or
in a writing signed by each shareholder or representative thereof entitled to
vote the shares so represented. A shareholder by his attendance at any meeting
of shareholders, shall be deemed to have waived notice of such meeting, except
where the shareholder objects at the beginning of the meeting to the transaction
of business because the item may not lawfully be considered at that meeting and
does not participate at that meeting in the consideration of the item at that
meeting.

Section 2.10. Written Action. Any action which might be taken
at a meeting of the shareholders may be taken without a meeting if done in
writing and signed by all of the shareholders entitled to vote on that action.
If the action to be taken relates to particular classes or series of the
corporation, then only shareholders of such classes or series are entitled to
vote on such action.

ARTICLE III
DIRECTORS

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Section 3.01. Number, Qualification and Term of Office. The
number of directors shall be established by resolution of the shareholders
(subject to the authority of the Board of Directors to increase or decrease the
number of directors as permitted by law). In the absence of such shareholder
resolution, the number of directors shall be the number last fixed by the
shareholders, the Board of Directors or the Articles of Incorporation. Directors
need not be shareholders. Each of the directors shall hold office until the
regular meeting of shareholders next held after his election and until his
successor shall have been elected and shall qualify, or until the earlier death,
resignation, removal or disqualification of such director.

Section 3.02. Election of Directors. Except as otherwise
provided in Sections 3.11 and 3.12 hereof, the directors shall be elected at the
regular shareholders' meeting. In the event that directors are not elected at a
regular shareholders' meeting, then directors may be elected at a special
shareholders' meeting, provided that the notice of such meeting shall contain
mention of such purpose. At each shareholders' meeting for the election of
directors, the directors shall be elected by a plurality of the votes validly
cast at such election. Each holder of shares of each class or series of stock of
the corporation shall be entitled to vote for directors and shall have equal
voting power for each share of each class or series of the corporation.

Section 3.03. General Powers.

(a) Except as otherwise permitted by statute, the property,
affairs and business of the corporation shall be managed by the Board of
Directors, which may exercise all the powers of the corporation except those
powers vested solely in the shareholders of the corporation by statute, the
Articles of Incorporation or these Bylaws, as amended.

(b) All acts done by any meeting of the Directors or by any
person acting as a director, so long as his successor shall not have been duly
elected or appointed, shall, notwithstanding that it be afterwards discovered
that there was some defect in the election of the directors or such person
acting as aforesaid or that they or any of them were disqualified, be as valid
as if the directors or such other person, as the case may be, had been duly
elected and were or was qualified to be directors or a director of the
corporation.

Section 3.04. Power to Declare Dividends.

(a) The Board of Directors, from time to time as they may deem
advisable, may declare and pay dividends in cash or other property of the
corporation, out of any source available for dividends, to the shareholders of
each class or series of stock of the corporation according to their respective
rights and interests in the investment portfolio of the corporation issuing such
class or series of stock.

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(b) The Board of Directors shall cause to be accompanied by a
written statement any dividend payment wholly or partly from any source other
than

(i) the accumulated and accrued undistributed net income of
each class or series (determined in accordance with generally accepted
accounting practice and the rules and regulations of the Securities and
Exchange Commission then in effect) and not including profits or losses
realized upon the sale of securities or other properties; or

(ii) the net income of each class or series so determined for
the current or preceding fiscal year.

Such statement shall adequately disclose the source or sources of such payment
and the basis of calculation and shall be in such form as the Securities and
Exchange Commission may prescribe.

(c) Notwithstanding the above provisions of this Section 3.04,
the Board of Directors may at any time declare and distribute pro rata among the
shareholders of each class or series of stock a "stock dividend" out of the
authorized but unissued shares of stock of each class or series, including any
shares previously purchased by a class or series of the corporation.

Section 3.05. Board Meetings. Meetings of the Board of
Directors may be held from time to time at such time and place within or without
the State of Minnesota as may be designated in the notice of such meeting.

Section 3.06. Calling Meetings, Notice. A director may call a
board meeting by giving ten (10) days notice to all directors of the date, time
and place of the meeting; provided that if the day or date, time and place of a
board meeting have been announced at a previous meeting of the board, no notice
is required.

Section 3.07. Waiver of Notice. Notice of any meeting of the
Board of Directors may be waived by any director either before, at or after such
meeting orally or in a writing signed by such director. A director, by his
attendance and participation in the action taken at any meeting of the Board of
Directors, shall be deemed to have waived notice of such meeting, except where
the director objects at the beginning of the meeting to the transaction of
business because the item may not lawfully be considered at that meeting and
does not participate at that meeting in the consideration of the item at that
meeting.

Section 3.08. Quorum. A majority of the directors holding
office immediately prior to a meeting of the Board of Directors shall constitute
a quorum for the transaction of business at such meeting; provided however,
notwithstanding the

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above, if the Board of Directors is taking action pursuant to the Investment
Company Act of 1940, as now enacted or hereafter amended, a majority of
directors who are not "interested persons" (as defined by the Investment Company
Act of 1940, as now enacted or hereafter amended) of the corporation shall
constitute a quorum for taking such action.

Section 3.09. Advance Consent or Opposition. A director may
give advance written consent or opposition to a proposal to be acted on at a
meeting of the Board of Directors. If such director is not present at the
meeting, consent or opposition to a proposal does not constitute presence for
purposes of determining the existence of a quorum, but consent or opposition
shall be counted as a vote in favor of or against the proposal and shall be
entered in the minutes or other record of action at the meeting, if the proposal
acted on at the meeting is substantially the same or has substantially the same
effect as the proposal to which the director has consented or objected. This
procedure shall not be used to act on any investment advisory agreement or plan
of distribution adopted under Rule 12b-1 of the Investment Company Act of 1940,
as amended.

Section 3.10. Conference Communications. Any or all directors
may participate in any meeting of the Board of Directors, or of any duly
constituted committee thereof, by any means of communication through which the
directors may simultaneously hear each other during such meeting. For the
purposes of establishing a quorum and taking any action at the meeting, such
directors participating pursuant to this Section 3.11 shall be deemed present in
person at the meeting, and the place of the meeting shall be the place of
origination of the conference communication. This procedure shall not be used to
act on any investment advisory agreement or plan of distribution adopted under
Rule 12b-1 of the Investment Company Act of 1940, as amended.

Section 3.11. Vacancies; Newly Created Directorships.
Vacancies in the Board of Directors of this corporation occurring by reason of
death, resignation, removal or disqualification shall be filled for the
unexpired term by a majority of the remaining directors of the Board although
less than a quorum; newly created directorships resulting from an increase in
the authorized number of directors by action of the Board of Directors as
permitted by Section 3.01 may be filled by a two-thirds (2/3) vote of the
directors serving at the time of such increase; and each person so elected shall
be a director until his successor is elected by the shareholders at their next
regular or special meeting; provided, however, that no vacancy can be filled as
provided above if prohibited by the provisions of the Investment Company Act of
1940.

Section 3.12. Removal. The entire Board of Directors or an
individual director may be removed from office, with or without cause, by a vote
of the shareholders holding a majority of the shares entitled to vote at an
election of directors. In the event that the entire Board or any one or more
directors be so removed, new

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directors shall be elected at the same meeting, or the remaining directors may,
to the extent vacancies are not filled at such meeting, fill any vacancy or
vacancies created by such removal. A director named by the Board of Directors to
fill a vacancy may be removed from office at any time, with or without cause, by
the affirmative vote of the remaining directors if the shareholders have not
elected directors in the interim between the time of the appointment to fill
such vacancy and the time of the removal.

Section 3.13. Committees. A resolution approved by the
affirmative vote of a majority of the Board of Directors may establish
committees having the authority of the board in the management of the business
of the corporation to the extent provided in the resolution. A committee shall
consist of one or more persons, who need not be directors, appointed by
affirmative vote of a majority of the directors present. Committees are subject
to the direction and control of, and vacancies in the membership thereof shall
be filled by, the Board of Directors.

A majority of the members of the committee present at a
meeting is a quorum for the transaction of business, unless a larger or smaller
proportion or number is provided in a resolution approved by the affirmative
vote of a majority of the directors present.

Section 3.14. Written Action. Except as provided in the
Investment Company Act of 1940, as amended, any action which might be taken at a
meeting of the Board of Directors, or any duly constituted committee thereof,
may be taken without a meeting if done in writing and signed by that number of
directors or committee members that would be required to take the same action at
a meeting of the board or committee thereof at which all directors or committee
members were present; provided, however, that any action which also requires
shareholder approval may be taken by written action only if such writing is
signed by all of the directors or committee members entitled to vote on such
matter .

Section 3.15. Compensation. Directors shall receive such fixed
sum per meeting attended or such fixed annual sum as shall be determined, from
time to time, by resolution of the Board of Directors. All directors shall
receive their expenses, if any, of attendance at meetings of the Board of
Directors or any committee thereof. Nothing herein contained shall be construed
to preclude any director from serving this corporation in any other capacity and
receiving proper compensation therefor.

ARTICLE IV
OFFICERS

Section 4.01. Number. The officers of the corporation shall
consist of a Chairman of the Board (if one is elected by the Board), the
President, one or more Vice Presidents (if desired by the Board), a Secretary, a
Treasurer and such other officers and

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agents as may, from time to time, be elected by the Board of Directors. Any
number of offices may be held by the same person.

Section 4.02. Election, Term of Office and Qualifications. The
Board of Directors shall elect, from within or without their number, the
officers referred to in Section 4.01 of these Bylaws, each of whom shall have
the powers, rights, duties, responsibilities and terms in office provided for in
these Bylaws or a resolution of the Board not inconsistent therewith. The
President and all other officers who may be directors shall continue to hold
office until the election and qualification of their successors, notwithstanding
an earlier termination of their directorship.

Section 4.03. Resignation. Any officer may resign his office
at any time by delivering a written resignation to the corporation. Unless
otherwise specified therein, such resignation shall take effect upon delivery.

Section 4.04. Removal and Vacancies. Any officer may be
removed from his office by a majority of the Board of Directors with or without
cause. Such removal, however, shall be without prejudice to the contract rights
of the person so removed. If there be a vacancy among the officers of the
corporation by reason of death, resignation or otherwise, such vacancy shall be
filled for the unexpired term by the Board of Directors.

Section 4.05. Chairman of the Board. The Chairman of the
Board, if one is elected, shall preside at all meetings of the shareholders and
directors and shall have such other duties as may be prescribed, from time to
time, by the Board of Directors.

Section 4.06. President. The President shall have general
active management of the business of the corporation. In the absence of the
Chairman of the Board, he shall preside at all meetings of the shareholders and
directors. He shall be the chief executive officer of the corporation and shall
see that all orders and resolutions of the Board of Directors are carried into
effect. He shall be ex officio a member of all standing committees. He may
execute and deliver, in the name of the corporation, any deeds, mortgages,
bonds, contracts or other instruments pertaining to the business of the
corporation and, in general, shall perform all duties usually incident to the
office of the President. He shall have such other duties as may, from time to
time, be prescribed by the Board of Directors.

Section 4.07. Vice President. Each Vice President shall have
such powers and shall perform such duties as may be specified in the Bylaws or
prescribed by the Board of Directors or by the President. In the event of
absence or disability of the President, Vice Presidents shall succeed to his
power and duties in the order designated by the Board of Directors.

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Section 4.08. Secretary. The Secretary shall be secretary of,
and shall attend, all meetings of the shareholders and Board of Directors and
shall record all proceedings of such meetings in the minute book of the
corporation. He shall give proper notice of meetings of shareholders and
directors. He shall keep the seal of the corporation and shall affix the same to
any instrument requiring it and may, when necessary, attest the seal by his
signature. He shall perform such other duties as may, from time to time, be
prescribed by the Board of Directors or by the President.

Section 4.09. Treasurer. The Treasurer shall be the chief
financial officer and shall keep accurate accounts of all money of the
corporation received or disbursed. He shall deposit all moneys, drafts and
checks in the name of, and to the credit of, the corporation in such banks and
depositories as a majority of the Board of Directors shall, from time to time,
designate. He shall have power to endorse, for deposit, all notes, checks and
drafts received by the corporation. He shall disburse the funds of the
corporation, as ordered by the Board of Directors, making proper vouchers
therefor. He shall render to the President and the directors, whenever required,
an account of all his transactions as Treasurer and of the financial condition
of the corporation, and shall perform such other duties as may, from time to
time, be prescribed by the Board of Directors or by the President.

Section 4.10. Assistant Secretaries. At the request of the
Secretary, or in his absence or disability, any Assistant Secretary shall have
power to perform all the duties of the Secretary, and, when so acting, shall
have all the powers of, and be subject to all restrictions upon, the Secretary.
The Assistant Secretaries shall perform such other duties as from time to time
may be assigned to them by the Board of Directors or the President.

Section 4.11. Assistant Treasurers. At the request of the
Treasurer, or in his absence or disability, any Assistant Treasurer shall have
power to perform all the duties of the Treasurer, and when so acting, shall have
all the powers of, and be subject to all the restrictions upon, the Treasurer.
The Assistant Treasurers shall perform such other duties as from time to time
may be assigned to them by the Board of Directors or the President.

Section 4.12. Compensation. The officers of this corporation
shall receive such compensation for their services as may be determined, from
time to time, by resolution of the Board of Directors.

Section 4.13. Surety Bonds. The Board of Directors may require
any officer or agent of the corporation to execute a bond (including, without
limitation, any bond required by the Investment Company Act of 1940 and the
rules and regulations of the Securities and Exchange Commission) to the
corporation in such sum and with such surety or sureties as the Board of
Directors may determine, conditioned upon the faithful performance of his duties
to the corporation, including responsibility for

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negligence and for the accounting of any of the corporation's property, funds or
securities that may come into his hands. In any such case, a new bond of like
character shall be given at least every six years, so that the dates of the new
bond shall not be more than six years subsequent to the date of the bond
immediately preceding.

ARTICLE V
SHARES AND THEIR TRANSFER AND REDEMPTION

Section 5.01. Certificate for Shares.

(a) The corporation may have certificated or uncertificated
shares, or both, as designated by resolution of the Board of Directors. Every
owner of certificated shares of the corporation shall be entitled to a
certificate, to be in such form as shall be prescribed by the Board of
Directors, certifying the number of shares of the corporation owned by him.
Within a reasonable time after the issuance or transfer of uncertificated
shares, the corporation shall send to the new shareholder the information
required to be stated on certificates. Certificated shares shall be numbered in
the order in which they shall be issued and shall be signed, in the name of the
corporation, by the President or a Vice President and by the Secretary or an
Assistant Secretary or by such officers as the Board of Directors may designate.
Such signatures may be by facsimile if authorized by the Board of Directors.
Every certificate surrendered to the corporation for exchange or transfer shall
be cancelled, and no new certificate or certificates shall be issued in exchange
for any existing certificate until such existing certificate shall have been so
cancelled, except in cases provided for in Section 5.08.

(b) In case any officer, transfer agent or registrar who shall
have signed any such certificate, or whose facsimile signature has been placed
thereon, shall cease to be such an officer (because of death, resignation or
otherwise) before such certificate is issued, such certificate may be issued and
delivered by the corporation with the same effect as if he were such officer,
transfer agent or registrar at the date of issue.

Section 5.02. Issuance of Shares. The Board of Directors is
authorized to cause to be issued shares of the corporation up to the full amount
authorized by the Articles of Incorporation in such classes or series and in
such amounts as may be determined by the Board of Directors and as may be
permitted by law. No shares shall be allotted except in consideration of cash or
other property, tangible or intangible, received or to be received by the
corporation under a written agreement, of services rendered or to be rendered to
the corporation under a written agreement, or of an amount transferred from
surplus to stated capital upon a share dividend. At the time of such allotment
of shares, the Board of Directors making such allotments shall state, by
resolution, their determination of the fair value to the corporation in monetary
terms of any consideration other than cash for which shares are alloted. No
shares of stock issued by the corporation shall be issued, sold or exchanged by
or on behalf of the

<PAGE>

corporation for any amount less than the net asset value per share of the shares
outstanding as determined pursuant to Article X hereunder.

Section 5.03. Redemption of Shares. Upon the demand of any
shareholder, this corporation shall redeem any share of stock issued by it held
and owned by such shareholder at the net asset value thereof as determined
pursuant to Article X hereunder. The Board of Directors may suspend the right of
redemption or postpone the date of payment during any period when: (a)trading on
the New York Stock Exchange is restricted or such Exchange is closed for other
than weekends or holidays; (b)the Securities and Exchange Commission has by
order permitted such suspension; or (c) an emergency as defined by rules of the
Securities and Exchange Commission exists, making disposal of portfolio
securities or valuation of net assets of the corporation not reasonably
practicable.

If following a redemption request by any shareholder of this
corporation, the value of such shareholder's interest in the corporation falls
below the required minimum investment, as may be set from time to time by the
Board of Directors, the corporation's officers are authorized, in their
discretion and on behalf of the corporation, to redeem such shareholder's entire
interest and remit such amount, provided that such a redemption will only be
effected by the corporation following: (a)a redemption by a shareholder, which
causes the value of such shareholder's interest in the corporation to fall below
the required minimum investment; (b)the mailing by the corporation to such
shareholder of a "notice of intention to redeem"; and (c)the passage of at least
sixty (60) days from the date of such mailing, during which time the shareholder
will have the opportunity to make an additional investment in the corporation to
increase the value of such shareholder's account to at least the required
minimum investment.

Section 5.04. Transfer of Shares. Transfer of shares on the
books of the corporation may be authorized only by the shareholder named in the
certificate, or the shareholder's legal representative, or the shareholder's
duly authorized attorney-in-fact, and upon surrender of the certificate or the
certificates for such shares or a duly executed assignment covering shares held
in uncertificated form. The corporation may treat, as the absolute owner of
shares of the corporation, the person or persons in whose name shares are
registered on the books of the corporation.

Section 5.05. Registered Shareholders. The corporation shall
be entitled to treat the holder of record of any share or shares of stock as the
holder in fact thereof and accordingly shall not be bound to recognize any
equitable or other claim to or interest in such share on the part of any other
person, whether or not it shall have express or other notice thereof, except as
otherwise expressly provided by the laws of Minnesota.

Section 5.06. Transfer of Agents and Registrars. The Board of
Directors may from time to time appoint or remove transfer agents and/or
registrars of transfers

<PAGE>

of shares of stock of the corporation, and it may appoint the same person as
both transfer agent and registrar. Upon any such appointment being made all
certificates representing shares of capital stock thereafter issued shall be
countersigned by one of such transfer agents or by one of such registrars of
transfers or by both and shall not be valid unless so countersigned. If the same
person shall be both transfer agent and registrar, only one countersignature by
such person shall be required.

Section 5.07. Transfer Regulations. The shares of stock of the
corporation may be freely transferred, and the Board of Directors may from time
to time adopt rules and regulations with reference to the method of transfer of
shares of stock of the corporation.

Section 5.08. Lost, Stolen, Destroyed and Mutilated
Certificates. The holder of any stock of the corporation shall immediately
notify the corporation of any loss, theft, destruction or mutilation of any
certificate therefor, and the Board of Directors may, in its discretion, cause
to be issued to him a new certificate or certificates of stock, upon the
surrender of the mutilated certificate or in case of loss, theft or destruction
of the certificate upon satisfactory proof of such loss, theft or destruction. A
new certificate or certificates of stock will be issued to the owner of the
lost, stolen or destroyed certificate only after such owner, or his legal
representatives, gives to the corporation and to such registrar or transfer
agent as may be authorized or required to countersign such new certificate or
certificates a bond, in such sum as they may direct, and with such surety or
sureties, as they may direct, as indemnity against any claim that may be made
against them or any of them on account of or in connection with the alleged
loss, theft or destruction of any such certificate.

ARTICLE VI
DIVIDENDS

Section 6.01. The net investment income of each class or
series of the corporation will be determined, and its dividends shall be
declared and made payable at such time(s) as the Board of Directors shall
determine; dividends shall be payable to shareholders of record as of the date
of declaration.

It shall be the policy of each class or series of the
corporation to qualify for and elect the tax treatment applicable to regulated
investment companies under the Internal Revenue Code, so that such class or
series will not be subjected to federal income tax on such part of its income or
capital gains as it distributes to shareholders.

ARTICLE VII
BOOKS AND RECORDS, AUDIT, FISCAL YEAR

<PAGE>

Section 7.01. Share Register. The Board of Directors of the
corporation shall cause to be kept at its principal executive office, or at
another place or places within the United States determined by the board:

(1) a share register not more than one year old,
containing the names and addresses of the
shareholders and the number and classes or series of
shares held by each shareholder; and

(2) a record of the dates on which certificates or
transaction statements representing shares were
issued.

Section 7.02. Other Books and Records. The Board of Directors
shall cause to be kept at its principal executive office, or, if its principal
executive office is not in Minnesota, shall make available at its registered
office within ten days after receipt by an officer of the corporation of a
written demand for them made by a shareholder or other person authorized by
Minnesota Statutes Section 302A.461, originals or copies of:

(1) records of all proceedings of shareholders for the
last three years;

(2) records of all proceedings of the Board of Directors
for the last three years;

(3) its articles and all amendments currently in effect;

(4) its bylaws and all amendments currently in effect;

(5) financial statements required by Minnesota Statutes
Section 302A.463 and the financial statement for the
most recent interim period prepared in the course of
the operation of the corporation for distribution to
the shareholders or to a governmental agency as a
matter of public record;

(6) reports made to shareholders generally within the
last three years;

(7) a statement of the names and usual business addresses
of its directors and principal officers;

(8) any shareholder voting or control agreements of which
the corporation is aware; and

(9) such other records and books of account as shall be
necessary and appropriate to the conduct of the
corporate business.

Section 7.03. Audit; Accountant.

<PAGE>

(a) The Board of Directors shall cause the records and books
of account of the corporation to be audited at least once in each fiscal year
and at such other times as it may deem necessary or appropriate.

(b) The corporation shall employ an independent public
accountant or firm of independent public accountants to examine the accounts of
the corporation and to sign and certify financial statements filed by the
corporation. The independent accountant's certificates and reports shall be
addressed both to the Board of Directors and to the shareholders.

Section 7.04. Fiscal Year. The fiscal year of the corporation
shall be determined by the Board of Directors.

ARTICLE VIII
INDEMNIFICATION OF CERTAIN PERSONS

Section 8.01. The corporation 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.

ARTICLE IX
VOTING OF STOCK HELD

Section 9.01. Unless otherwise provided by resolution of the
Board of Directors, the President, any Vice President, the Secretary or the
Treasurer, may from time to time appoint an attorney or attorneys or agent or
agents of the corporation, in the name and on behalf of the corporation, to cast
the votes which the corporation may be entitled to cast as a stockholder or
otherwise in any other corporation or association, any of whose stock or
securities may be held by the corporation, at meetings of the holders of the
stock or other securities of any such other corporation or association, or to
consent in writing to any action by any such other corporation or association,
and may instruct the person or persons so appointed as to the manner of casting
such votes or giving such consent, and may execute or cause to be executed on
behalf of the corporation and under its corporate seal, or otherwise, such
written proxies, consents, waivers or other instruments as it may deem necessary
or proper; or any of such officers may themselves attend any meeting of the
holders of stock or other securities of any such corporation or association and
thereat vote or exercise any or all other rights of the corporation as the
holder of such stock or other securities of such other corporation or

<PAGE>

association, or consent in writing to any action by any such other corporation
or association.

ARTICLE X
VALUATION OF NET ASSET VALUE

10.01. The net asset value per share of each class or series
of stock of the corporation shall be determined in good faith by or under
supervision of the officers of the corporation as authorized by the Board of
Directors as often and on such days and at such time(s) as the Board of
Directors shall determine, or as otherwise may be required by law, rule,
regulation or order of the Securities and Exchange Commission.

ARTICLE XI
CUSTODY OF ASSETS

Section 11.01. All securities and cash owned by this
corporation shall, as hereinafter provided, be held by or deposited with a bank
or trust company having (according to its last published report) not less than
Two Million Dollars ($2,000,000) aggregate capital, surplus and undivided
profits (the "Custodian").

This corporation shall enter into a written contract with the
custodian regarding the powers, duties and compensation of the Custodian with
respect to the cash and securities of this corporation held by the Custodian.
Said contract and all amendments thereto shall be approved by the Board of
Directors of this corporation. In the event of the Custodian's resignation or
termination, the corporation shall use its best efforts promptly to obtain a
successor Custodian and shall require that the cash and securities owned by this
corporation held by the Custodian be delivered directly to such successor
Custodian.

ARTICLE XII
AMENDMENTS

Section 12.01. These Bylaws may be amended or altered by a
vote of the majority of the Board of Directors at any meeting provided that
notice of such proposed amendment shall have been given in the notice given to
the directors of such meeting. Such authority in the Board of Directors is
subject to the power of the shareholders to change or repeal such bylaws by a
majority vote of the shareholders present or represented at any regular or
special meeting of shareholders called for such purpose, and the Board of
Directors shall not make or alter any Bylaws fixing a quorum for meetings of
shareholders, prescribing procedures for removing directors or filling vacancies
in the Board of Directors, or fixing the number of directors or their

<PAGE>

classifications, qualifications or terms of office, except that the Board of
Directors may adopt or amend any Bylaw to increase or decrease their number.

ARTICLE XIII
MISCELLANEOUS

Section 13.01. Interpretation. When the context in which words
are used in these Bylaws indicates that such is the intent, singular words will
include the plural and vice versa, and masculine words will include the feminine
and neuter genders and vice versa.

Section 13.02. Article and Section Titles. The titles of
Sections and Articles in these Bylaws are for descriptive purposes only and will
not control or alter the meaning of any of these Bylaws as set forth in the
text.

EXHIBIT 4
Specimen Copy of Share Certificate

[side one]

Number _______________ Shares_______________

Incorporated under the laws of the state of Minnesota

SIT MUTUAL FUNDS, INC.
Series E Common Shares representing shares of
Sit Science and Technology Growth Fund

This Certifies that _______________________ is the owner of ___________________
___________ fully paid and non-assessable Shares of the above Corporation
transferable only on the book of the Corporation by the holder hereof in person
or by duly authorized Attorney upon surrender of this Certificate properly
endorsed.

IN WITNESS WHEREOF, the said Corporation has caused this Certificate to be
signed by its duly authorized officers.

Eugene C. Sit Paul E. Rasmussen
Chairman Vice President & Treasurer

<PAGE>

[side two]

These Shares may be redeemed by the record holder in accordance with the Bylaws
of the Corporation.

For value received, the undersigned hereby sells, assigns and transfers unto

[Please Print or Type Name and Address of Assignee]
_____________________________________________________________________________

_____________________________________________________________________________

_____________________________________________________________________________
Social Security or EIN
_____________________________________________________________________________

represented by the within Certificate, and hereby irrevocable constitutes and
appoints

_____________________________________________________________________________

Attorney to transfer the said shares on the books of the within-named
Corporation with full power of substitution in the premises.

Dated,____________

in presence of______________

NOTICE: The signature to this assignment must correspond with the name
as written upon the face of the certificate in every particular without
alteration or enlargement, or any change whatever.

<PAGE>

side one]

Number____________________ Shares_______________

Incorporated under the laws of the state of Minnesota

SIT MUTUAL FUNDS, INC.
Series F Common Shares representing shares of
Sit Regional Growth Fund

This Certifies that ________________________________________ is the owner of
_________________________________fully paid and non-assessable Shares of the
above Corporation transferable only on the book of the Corporation by the holder
hereof in person or by duly authorized Attorney upon surrender of this
Certificate properly endorsed.

IN WITNESS WHEREOF, the said Corporation has caused this Certificate to be
signed by its duly authorized officers.

Eugene C. Sit Paul E. Rasmussen
Chairman Vice President & Treasurer

<PAGE>

[side two]

These Shares may be redeemed by the record holder in accordance with the Bylaws
of the Corporation.

For value received, the undersigned hereby sells, assigns and transfers unto
[Please Print or Type Name and Address of Assignee]
_____________________________________________________________________________

_____________________________________________________________________________

_____________________________________________________________________________
Social Security or EIN
_____________________________________________________________________________

represented by the within Certificate, and hereby irrevocable constitutes and
appoints
_____________________________________________________________________________

Attorney to transfer the said shares on the books of the within-named
Corporation with full power of substitution in the premises.

Dated,____________
in presence of__________________

NOTICE: The signature to this assignment must correspond with the name
as written upon the face of the certificate in every particular without
alteration or enlargement, or any change whatever.

EXHIBIT 5
Investment Management Agreement

INVESTMENT MANAGEMENT AGREEMENT

This Agreement, made as of this 1st day of November 1992, by
and between Sit "New Beginning" Mutual Funds, Inc., a Minnesota corporation (the
"Company"), on behalf of each portfolio represented by a series of shares of
common stock of the Company that adopts this Agreement (the "Funds") (the Funds,
together with the date each Fund adopts this Agreement, are set forth in Exhibit
A hereto, which shall be updated from time to time to reflect additions,
deletions or other changes thereto), and Sit Investment Associates, Inc., a
Minnesota corporation ("SIA").

WITNESSETH:

1. INVESTMENT MANAGEMENT SERVICES.

(a) The Company hereby engages SIA on behalf of the Funds, and SIA
hereby agrees to act, as investment adviser for, and to manage the investment of
the assets of, the Funds.

(b) The investment of the assets of each Fund shall at all times be
subject to the applicable provisions of the Articles of Incorporation, Bylaws,
Registration Statement and current Prospectus and the Statement of Additional
Information of the Company and each Fund and shall conform to the policies and
purposes of each Fund as set forth in such documents and as interpreted from
time to time by the Board of Directors of the Company. Within the framework of
the investment policies of each Fund, and except as otherwise permitted by this
Agreement, SIA shall have the sole and exclusive responsibility for the
management of each Fund's investment portfolio and for making and executing all
investment decisions for each Fund. SIA shall report to the 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 SIA to the investment policies of the Funds.

(c) SIA shall, at its own expense, furnish all office facilities,
equipment and personnel necessary to discharge its responsibilities and duties
hereunder. SIA shall arrange, if requested by the Company, for officers or
employees of SIA to serve without compensation from any Fund as directors,
officers, or employees of the Company if duly elected to such positions by the
shareholders of the applicable Funds or directors of the Company.

(d) SIA hereby acknowledges that all records pertaining to each Fund's
investments are the property of the Company, and in the event that a transfer of
investment management services to someone other than SIA should ever occur, SIA
will promptly, and at its own cost, take all steps necessary to segregate such
records and deliver them to the Company

(e) SIA shall not be liable hereunder for any loss suffered by any Fund
in connection with the matters to which this Agreement relate, except losses
resulting from willful misfeasance, bad faith or gross negligence on the part of
SIA in the performance of its obligations and duties or by reason of its
reckless disregard of its obligations and duties under this Agreement.

(f) SIA may, at its option and at its expense, appoint a subadviser,
which shall assume all or such responsibilities and obligations of SIA pursuant
to this Agreement as shall

<PAGE>

be delegated to the subadviser; provided, however, that any discretionary
investment decisions made by the subadviser on behalf of any Fund shall be
subject to approval or ratification by SIA, and provided further that any
appointment of a subadviser and assumption of responsibilities and obligations
of SIA by such subadviser shall be subject to approval by the Board of Directors
of the Company and, to the extent necessary, shareholders of the applicable Fund
or Funds; and provided, further, that the appointment of any subadviser shall in
no way limit or diminish SIA's obligations and responsibilities hereunder.

2. COMPENSATION FOR SERVICES.

In payment for the investment advisory and management services to be
rendered by SIA hereunder, each Fund shall pay to SIA a fee, which fee shall be
paid to SIA on a monthly basis not later than the fifth business day of the
month following the month in which said services were rendered. The fee payable
by each Fund shall be as set forth in Exhibit A hereto. The fee payable by each
Fund shall be based on the average of the net asset values of all of the issued
and outstanding shares of the Fund as determined as at the close of each
business day of the month pursuant to the Articles of Incorporation, Bylaws, and
currently effective Prospectus and Statement of Additional Information of the
Company and the Fund.

3. ALLOCATION OF EXPENSES.

The provisions governing the allocation of expenses between each Fund
and SIA shall be set forth in Exhibit A hereto..

4. FREEDOM TO DEAL WITH THIRD PARTIES.

SIA shall be free to render services to others similar to those
rendered under this Agreement or of a different nature except as such services
may conflict with the services to be rendered or the duties to be assumed
hereunder.

5. EFFECTIVE DATE, DURATION, TERMINATION, AMENDMENT OF AGREEMENT.

(a) The effective date of this Agreement with respect to each Fund
shall be the date set forth on Exhibit A hereto, which date shall not precede
the date that this Agreement is approved by a vote of the holders of at least a
majority of the outstanding voting securities of such Fund.

(b) Unless sooner terminated as hereinafter provided, this Agreement
shall continue in effect with respect to each Fund for a period more than two
years from the date of its execution but only as long as such continuance is
specifically approved at least annually by (i) the Board of Directors of the
Company or by the vote of a majority of the outstanding voting securities of the
applicable Fund, and (ii) by the vote of a majority of the directors of the
Company who are not parties to this Agreement or "interested persons" (as
defined in the Investment Company Act of 1940, as amended) of SIA or of the
Company cast in person at a meeting called for the purpose of voting on such
approval.

(c) This Agreement may be terminated with respect to any Fund at any
time, without the payment of any penalty, by the Board of Directors of the
Company or by the vote of a majority of the outstanding voting securities of
such Fund, or by SIA, upon 60 days' written notice to the other party.

(d) This Agreement shall automatically terminate in the event of its
"assignment" (as defined in the Investment Company Act of 1940, as amended).

<PAGE>

(e) No amendment to this Agreement shall be effective until approved by
the vote of: (i) a majority of the directors of the Company who are not parties
to this Agreement or "interested persons" (as defined in the Investment Company
Act of 1940, as amended) of SIA or of the Company cast in person at a meeting
called for the purpose of voting on such approval; and (ii) a majority of the
outstanding voting securities of the applicable Fund.

(f) Wherever referred to in this Agreement, the vote or approval of the
holders of a majority of the outstanding voting securities or shares of a Fund
shall mean the lesser of (i) the vote of 67% or more of the voting securities of
such Fund present at a regular or special meeting of shareholders duly called,
if more than 50% of the Fund's outstanding voting securities are present or
represented by proxy, or (ii) the vote of more than 50% of the outstanding
voting securities of such Fund.

6. NOTICES.

Any notice under this Agreement shall be in writing, addressed,
delivered or mailed, postage prepaid, to the other party at such address as such
other party may designate in writing for receipt of such notice.

7. INTERPRETATION; GOVERNING LAW.

This Agreement shall be subject to and interpreted in accordance with
all applicable provisions of law including, but not limited to, the Investment
Company Act of 1940, as amended, and the rules and regulations promulgated
thereunder. To the extent that the provisions herein contained conflict with any
such applicable provisions of law, the latter shall control. The laws of the
State of Minnesota shall otherwise govern the construction, validity and effect
of this Agreement.

IN WITNESS WHEREOF, the Fund and SIA have caused this Agreement to be
executed by their duly authorized officers as of the day and year first above
written.

SIT "NEW BEGINNING" MUTUAL FUNDS, INC.

By /S/ Jean S. Taylor
Its Vice President and Treasurer

SIT INVESTMENT ASSOCIATES, INC.

By /S/ Eugene C. Sit
Its President

<PAGE>

EXHIBIT A
to
INVESTMENT MANAGEMENT AGREEMENT

<S> <C> <C>
ANNUAL MANAGEMENT FEE
FUND EFFECTIVE DATE (AS % OF AVERAGE DAILY NET ASSETS)
- ----------------------------- -------------- ----------------------------------
Sit International Growth Fund
(Series A) November 1, 1992 1.85% of average daily net assets (1)

Sit Balanced Fund
(Series B) December 31, 1993 1.00% of average daily net assets (1)

Sit Developing Markets Fund
(Series C) March 31, 1994 2.00% of average daily net assets (1)

Sit Small Cap Growth Fund
(Series D) March 31, 1994 1.50% of average daily net assets (1)

Sit Science and Technology
Growth Fund
(Series E) November 28, 1997 1.50% of average daily net assets (1)

Sit Regional Growth Fund
(Series F) November 28, 1997 1.25% of average daily net assets (1)
</TABLE>

(1) Except for extraordinary expenses (as so designated by a majority of
the directors of the Company, including a majority of said directors
who are not "interested persons" of the Company or of SIA, as defined
in the Investment Company Act of 1940, as amended), interest, brokerage
commissions and other transaction charges relating to investing
activities incurred by the Company on behalf of each aforementioned
Fund, SIA shall bear all of each Fund's expenses.

IN WITNESS WHEREOF, the Company and SIA have caused this Exhibit A to
the Investment Management Agreement dated as of November 1, 1992 between the
Company and SIA to be executed as of October 21, 1997.

SIT MUTUAL FUNDS, INC.

By /s/ Paul E. Rasmussen
Its Vice President

SIT INVESTMENT ASSOCIATES, INC.

By /s/ Eugene C. Sit
Its Chairman

EXHIBIT 6
Underwriting and Distribution Agreement

UNDERWRITING AND DISTRIBUTION AGREEMENT

THIS AGREEMENT, made this first day of April, 1994, by and between Sit
Mutual Funds, Inc. (the "Fund") and SIA Securities Corp., a Minnesota
corporation ("Securities"),

WITNESSETH:

1. UNDERWRITING SERVICES.

The Fund hereby engages Securities, and Securities hereby agrees to
act, as principal underwriter for the Fund in connection with the sale and
distribution of the shares of the Fund's Series (as defined below) to the
public, either through dealers or otherwise. Securities agrees 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. As used herein, "Series" is defined as
Sit International Growth Fund (Series A) and Sit Balanced Fund (Series B) and
any other Series which may hereafter be created by the Board of Directors of the
Fund.

2. SALE OF FUND SHARES.

Such shares are to be sold only on the following terms:
(a) Only subscriptions, offers or sales of any shares of the Funds by
Securities shall be subject to this Agreement. All subscriptions, offers or
sales shall be subject to acceptance or rejection by the Fund. Any offer or sale
shall be conclusively presumed to have been accepted by the Fund if the Fund
shall fail to notify Securities of the rejection of such offer or sale prior to
the computation of the net asset value of the Fund's shares next following
receipt by the Fund of notice of such offer or sale.
(b) No share of any Series of the Fund shall be sold by Securities for
any consideration other than cash or for any amount less than the net asset
value of such share, computed as provided in the Bylaws of the Fund.

3. INVESTMENT OF DIVIDEND AND DISTRIBUTIONS.

The Fund may extend to its shareholders the right to purchase shares
issued by each Series of the Fund at the net asset value thereof with the
proceeds of any dividend or capital gain distribution paid or payable by the
Fund (or any other fund for which Securities serves as underwriter) to its
shareholders.

4. REGISTRATION OF SHARES.

The Fund agrees to make prompt and reasonable efforts to effect and
keep in effect, at its own expense, the registration or qualification of its
shares for sale in such jurisdictions as the Fund may designate.

<PAGE>

5. INFORMATION TO BE FURNISHED SECURITIES.

The Fund agrees that it will furnish Securities with such information
with respect to the affairs and accounts of the Fund as Securities may from time
to time reasonably require, and further agrees that Securities, at all
reasonable times, shall be permitted to inspect the books and records of the
Fund.

6. ALLOCATION OF EXPENSES.

During the period of this contract, the Fund shall pay or cause to be
paid all expenses, costs and fees incurred by the Fund which are not assumed by
Securities or Sit Investment Associates, Inc. ("SIA"). SIA shall pay all
promotional expenses in connection with the distribution of the Fund's shares
including paying for prospectuses and shareholder reports for new shareholders,
and the costs of sales literature

7. COMPENSATION TO SECURITIES.

It is understood and agreed by the parties hereto that sales of Fund
shares will benefit SIA, an affiliate of Securities; therefore, Securities will
receive no additional compensation for services it performs hereunder.

8. LIMITATION OF SECURITIES' AUTHORITY.

Securities shall be deemed to be an independent contractor and, except
as specifically provided or authorized herein, shall have no authority to act
for or represent the Fund. In connection with its role as underwriter of Fund
shares, Securities shall at all times be deemed an agent of the Fund and shall
sell Fund shares to purchasers thereof as agent and not as principal.

9. SUBSCRIPTION FOR SHARES--REFUND FOR CANCELED ORDERS.

Securities shall effect the subscription of Fund shares as agent for
the Fund. In the event that an order for the purchase of shares of the Fund is
placed with Securities by a customer or dealer and subsequently canceled,
Securities, on behalf of such customer or dealer, shall forthwith cancel the
subscription for such shares entered on the books of the Fund, and, if customer
has paid the Fund for such shares, the customer shall be entitled to receive
from the Fund in refund of such payment the lesser of:

(a) the consideration received by the Fund for said
shares;
(b) the net asset value of such shares at the time of
cancellation by Securities.

10. INDEMNIFICATION OF THE FUND

Securities agrees to indemnify the Fund against any and all litigation
and other legal proceedings of any kind or nature and against any liability,
judgment, cost or penalty imposed as a result of such litigation or proceedings
in any way arising out of or in connection with the sale or distribution of the
shares of the Fund by Securities. In the event of the threat or institution of
any such litigation or legal proceedings against the Fund, Securities shall
defend such action on behalf of the Fund at its own expense, and shall pay any
such liability, judgment, cost or penalty resulting therefrom, whether

<PAGE>

imposed by legal authority or agreed upon by way of compromise and settlement;
provided, however, Securities shall not be required to pay or reimburse the Fund
for any liability, judgment, cost or penalty incurred as a result of information
supplied by, or as the result of the omission to supply information by, the Fund
to Securities, or to Securities by a director, officer, or employee of the Fund
who is not an interested person of Securities, unless the information so
supplied or omitted was available to Securities or the Fund's investment adviser
without recourse to the Fund or any such interested person of the Fund.

11. FREEDOM TO DEAL WITH THIRD PARTIES.

Securities shall be free to render to others services of a nature
either similar to or different from those rendered under this contract, except
such as may impair As performance of the services and duties to be rendered by
it hereunder.

12. EFFECTIVE DATE, DURATION AND TERMINATION OF AGREEMENT.

This Agreement shall be effective on April 1, 1994. Wherever referred
to in this Agreement, the vote or approval of the holders of a majority of the
outstanding voting securities of a Series or the Fund shall mean the vote of 67%
or more of such securities if the holders of more than 50% of such securities
are present in person or by proxy or the vote of more than 50% of such
securities, whichever is less.

Unless sooner terminated as hereinafter provided, this Agreement shall
continue in effect only so long as such continuance is specifically approved at
least annually (a) by the Board of Directors of the Fund, or with respect to a
particular Series, by the vote of the holders of a majority of the outstanding
voting securities of such Series, and (b) by a majority of the directors who are
not interested persons of Securities or of the Fund cast in person at a meeting
called for the purpose of voting on such approval provided that, if a majority
of the outstanding voting securities of any of the Series approves this
Agreement, this Agreement shall continue in effect with respect to such
approving Series whether or not the shareholders of any other Series of the Fund
approve this Agreement.

This Agreement may be terminated at any time without the payment of any
penalty by the vote of the Board of Directors of the Fund or by the vote of the
holders of a majority of the outstanding voting securities of the Fund, or by
Securities, upon sixty (60) days written notice to the other party. This
Agreement may be terminated with respect to a particular Series at any time
without the payment of any penalty by the vote of the holders of a majority of
the outstanding voting securities of such Series, upon sixty (60) days written
notice to Securities. This Agreement shall automatically terminate in the event
of its assignment.

13. AMENDMENTS TO AGREEMENT.

No material amendment to this Agreement shall be effective until
approved by a vote of the Board of Directors of the Fund, including a majority
of the Directors who are not interested persons of the Fund and who have no
direct or indirect financial interest in this Agreement, cast in person at a
meeting called for the purpose of voting on such amendment.

<PAGE>

14. NOTICES.

Any notice under this Agreement shall be in writing, addressed,
delivered or mailed, postage prepaid to the other party at such address as such
other party may designate in writing for receipt of such notice.

IN WITNESS WHEREOF, the Fund and Securities have caused this Agreement
to be executed by their duly authorized officers as of the day and year first
above written.

SIA SECURITIES CORP.

By _/s/ Parnell Kingsley____
Its Vice President_______

SIT MUTUAL FUNDS, INC.

By _ /s/ Paul E. Rasmussen___
Its Vice President_______

EXHIBIT 8.1
Custodian Agreement

CUSTODY AGREEMENT

AGREEMENT dated as of April 1, 1996, between SIT Mutual Funds, Inc., a
corporation organized under the laws of the State of Minnesota, having its
principal office and place of business at 4600 Norwest Center, 90 South Seven
Street, Minneapolis, Minnesota 554022-4130 (the "Company"), and THE NORTHERN
TRUST COMPANY (the "Custodian"), an Illinois Company with its principal place of
business at 50 South LaSalle Street, Chicago, Illinois 60675.

WITNESSETH:

That for and in consideration of the mutual promises hereinafter set
forth, the Company and the Custodian agree as follows:

1. Definitions.

Whenever used in this Agreement or in any Schedules to this Agreement,
the following words and phrases, unless the context otherwise requires, shall
have the following meanings

(a) The "1940 Act" shall mean the Investment Company Act of 1940, and
the Rules and Regulations thereunder, all as amended from time to time.

(b) "Authorized Person" shall be deemed to include the Chairman of the
Board of Directors, the President, and any Vice President, the
Secretary, the Treasurer or any other person, whether or not any such
person is an officer or employee of the Company, duly authorized by the
Board of Directors to give Oral Instructions and Written Instructions
on behalf of the Company and listed in the certification annexed hereto
as Schedule A or such other certification as may be received by the
Custodian from time to time.

(d) "Book-Entry System" shall mean the Federal Reserve/ Treasury
book-entry system for United States and federal agency Securities, its
successor or successors and its nominee or nominees.

(e) "Certificate" shall mean any notice, instruction or other
instrument in writing, authorized or required by this Agreement to be
given to the Custodian, which is actually received by the Custodian and
signed on behalf of the Company by any two Authorized Persons or any
two officers thereof.

<PAGE>

(f) "Articles of Incorporation and Certificate of Designation" shall
mean the Articles of Incorporation and Certificate of Designation of
the Company dated July 30, 1991, as amended.

(g) "Depository" shall mean The Depository Trust Company, a clearing
agency registered with the Securities and Exchange Commission under
Section 17(a) of the Securities Exchange Act of 1934, as amended, its
successor or successors and its nominee or nominees, in which the
Custodian is hereby specifically authorized to make deposits. The term
"Depository" shall further mean and include any other person to be
named in a Certificate authorized to act as a depository under the 1940
Act, its successor or successors and its nominee or nominees.

(h) "Fund Accountant" shall mean the person appointed by the Company
who performs the daily calculations of the net asset values of the
Portfolios and determines the amount of cash available in each
Portfolio on a daily basis for investment. The Fund Accountant shall be
identified to the Custodian in writing.

(i) "Money Market Security" shall be deemed to include, without
limitation, debt obligations issued or guaranteed as to interest and
principal by the Government of the United States or agencies or
instrumentalities thereof, commercial paper, bank certificates of
deposit, bankers' acceptances and short-term corporate obligations,
where the purchase or sale of such securities normally requires
settlement in federal funds on the same day as such purchase or sale,
and repurchase agreements with respect to any of the foregoing types of
securities.

(j) "Oral Instructions" shall mean an oral communication actually
received by the Custodian from a person reasonably believed by the
Custodian to be an Authorized Person.

(k) "Portfolio" refers to the portfolios identified in the attached
Exhibit 1, or any such other separate and distinct investment portfolio
as may from time to time be created and designated by the Company in
accordance with the provisions of Articles of Incorporation and
certificate of designation and which the Company and Custodian shall
have agreed in writing shall be subject to this Agreement pursuant to
the provisions of section 5(b).

(l) "Prospectus" shall mean the Company's current prospectus and
statement of additional information relating to the registration of the
Portfolio's Shares under the Securities Act of 1933, as amended.

(m) "Shares" refers to the shares of the Portfolio.

<PAGE>

(n) "Security" or "Securities" shall be deemed to include bonds,
debentures, notes, stocks, shares, evidences of indebtedness, and other
securities, commodity interests and investments from time to time owned
by the Portfolio.

(o) "Sub-Custodian" shall mean and include (i) any branch of the
Custodian, (ii) any branch of a "qualified U.S. bank," as that term is
defined in Rule 17f-5 under the 1940 Act, (iii) any "eligible foreign
custodian," as that term is defined in Rule 17f-5 under the 1940 Act,
approved by the Board of Directors and having a contract with the
Custodian which contract has been approved by the Board of Directors,
and (iv) any securities depository or clearing agency, incorporated or
organized under the laws of a country other than the United States,
which operates the central system for handling of securities or
equivalent book-entries in that country or a transnational system for
the central handling of securities or equivalent book-entries, which
securities depository or clearing agency has been approved by the Board
of Directors; provided, that the Custodian or a SubCustodian has
entered into an agreement with such securities depository or clearing
agency.

(p) "Transfer Agent" shall mean the person which performs as the
transfer agent, dividend disbursing agent and shareholder servicing
agent for the Company.

(q) "Written Instructions" shall mean a written communication actually
received by the Custodian from a person reasonably believed by the
Custodian to be an Authorized Person by any system whereby the receiver
of such communication is able to verify through codes or otherwise with
a reasonable degree of certainty the authenticity of the sender of such
communication; however, "Written Instructions" from the Company to the
Custodian shall mean a facsimile or electronic communication
transmitted by the Company or the Fund Accountant (who has been
provided an access code by the Company) and actually received by the
Custodian. Except as otherwise provided in this Agreement, "Written
Instructions" may include instructions given on a standing basis.

2. Appointment of Custodian.

(a) The Company hereby constitutes and appoints the Custodian as
custodian of all the Securities and monies owned by or in the
possession of the Portfolio during the period of this Agreement.

(b) The Custodian hereby accepts appointment as such custodian and
agrees to perform the duties thereof as hereinafter set forth.

3. Appointment and Removal of Sub-Custodians.

(a) The Custodian may appoint one or more Sub-Custodians to act as

<PAGE>

Depository or Depositories or as sub-custodian or sub-custodians of
Securities and moneys at any time owned by any Portfolio, upon terms
and conditions as are specified in this Agreement. The Custodian shall
oversee the maintenance of any Securities or moneys of any Portfolio by
any Sub-Custodian.

(b) If, after the initial approval of Sub-Custodians by the Board of
Directors in connection with this Agreement, the Custodian wishes to
appoint other SubCustodians to hold property of the Portfolios, it will
so notify the Company and provide it with information reasonably
necessary to determine any such new SubCustodian's eligibility under
Rule 17f-5 under the 1940 Act, including a copy of the proposed
agreement with such Sub-Custodian. The Company shall at the meeting of
the Board of Directors next following receipt of such notice and
information give a written approval or disapproval of the proposed
action.

(c) The Agreement between the Custodian and each Sub-Custodian acting
hereunder shall contain the required provisions set forth in Rule
17f-5(a)(1)(iii).

(d) If the Custodian intends to remove any Sub-Custodian previously
approved by the Board of Directors, it shall so notify the Company and
move the property of the Portfolio(s) deposited with such Sub-Custodian
to another Sub-Custodian previously approved by the Board of Directors.
The Custodian shall promptly take such steps as may be required to
remove any Sub-Custodian that has ceased to meet the requirements of
Rule 17f-5 under the 1940 Act.

(e) The Custodian hereby warrants to the Company that in its opinion,
after due inquiry, the established procedures to be followed by each
Sub-Custodian (that is not being used as a foreign securities
depository or clearing agency) in connection with the safekeeping of
property of the Portfolio pursuant to this Agreement afford protection
for such property not materially different from that afforded by the
Custodian's established safekeeping procedures with respect to similar
property held by it (and its securities depositories) in Chicago,
Illinois.

4. Use of Sub-Custodians.

With respect to property of a Portfolio which is maintained by the
Custodian in the custody of a Sub-Custodian pursuant to Section 3:

(a) The Custodian will identify on its books as belonging to the
particular Portfolio any property held by such Sub-Custodian.

(b) In the event that a Sub-Custodian permits any of the Securities
placed in its care to be held in an eligible foreign securities
depository, such Sub-Custodian will be required by its agreement with
the Custodian to identify on its books such Securities as being held
for the account of the Custodian as a custodian for its customers.

<PAGE>

(c) Any Securities held by a Sub-Custodian will be subject only to the
instructions of the Custodian or its agents; and any Securities held in
an eligible foreign securities depository for the account of a
Sub-Custodian will be subject only to the instructions of such
Sub-Custodian.

(d) The Custodian will only deposit property of a Portfolio in an
account with a Sub-Custodian which includes exclusively the assets held
by the Custodian for its customers, and will cause such account to be
designated by such Sub-Custodian as a special custody account for the
exclusive benefit of customers of the Custodian.

5. Compensation.

(a) The Custodian shall be entitled to compensation for its services
hereunder as set forth in a separate agreement between the Custodian
and the Fund Accountant. The Custodian will bill the Fund Accountant
directly for all such amounts.

6. Custody of Cash and Securities

(a) Receipt and Holding of Assets. The Company will deliver or cause to
be delivered to the Custodian and the Sub-Custodians all Securities and
monies owned by the Portfolio at any time during the period of this
Agreement and shall specify the Portfolio to which the Securities and
monies are to be specifically allocated. The Custodian will not be
responsible for such Securities and monies until actually received by
it or by a Sub-Custodian. The Company shall instruct the Custodian from
time to time in its sole discretion, by means of Written Instructions,
as to the manner in which and in what amounts Securities, and monies of
a Portfolio are to be deposited on behalf of such Portfolio in the
Book-Entry System or a Depository; provided, however, that prior to the
deposit of Securities of a Portfolio in the Book-Entry System or a
Depository, including a deposit in connection with the settlement of a
purchase or sale, the Custodian shall have received a Certificate
specifically approving such deposits by the Custodian or a
Sub-Custodian in the Book-Entry System or a Depository. Securities and
monies of a Portfolio deposited in the Book-Entry System or a
Depository will be deposited in accounts which include only assets held
by the Custodian for its customers.

(b) Accounts and Disbursements. The Custodian shall establish and
maintain a separate account for each Portfolio and shall credit to the
separate account all monies received by it or a Sub-Custodian for the
account of such Portfolio and shall disburse, or cause a Sub-Custodian
to disburse, the same only:

<PAGE>

1. In payment for Securities purchased for the Portfolio, as
provided in Section 7 hereof;

2. In payment of dividends or distributions with respect to
the Shares of such Portfolio, as provided in Section 10
hereof;

3. In payment of original issue or other taxes with respect to
the Shares of such Portfolio, as provided in Section 11(c)
hereof;

4. In payment for Shares which have been redeemed by such
Portfolio, as provided in Section 11 hereof;

5. In payment of fees and in reimbursement of the expenses and
liabilities of the Custodian attributable to the Company, as
provided in Sections 5 and 15(h) hereof;

6. Pursuant to Written Instructions setting forth the name of
the Portfolio and the name and address of the person to whom
the payment is to be made, the amount to be paid and the
purpose for which payment is to be made.

(c) Fail Float. In the event that any payment made for a Portfolio
under this Section 6 exceeds the funds available in that Portfolio's
account, the Custodian or relevant Sub-Custodian, as the case may be,
may, in its discretion, advance the Company on behalf of that Portfolio
an amount equal to such excess and such advance shall be deemed an
overdraft from the Custodian or such Sub-Custodian to that Portfolio
payable on demand, bearing interest at the rate of interest customarily
charged by the Custodian or such Sub-Custodian on similar overdrafts.

(d) Confirmation and Statements. Promptly after the close of business
on each business day, the Custodian shall furnish the Company with
confirmations and a summary of all transfers to or from the account of
each Portfolio during said day. Such summary shall include without
limitation, as to property acquired for a Portfolio, the identity of
the entity having physical possession of such property. Where
securities purchased by a Portfolio are in a fungible bulk of
securities registered in the name of the Custodian (or its nominee) or
shown on the Custodian's account on the books of a Depository, the
Book-Entry System or a Sub-Custodian, the Custodian shall by book entry
or otherwise identify the quantity of those securities belonging to
such Portfolio. At least monthly, the Custodian shall furnish the
Company with a detailed statement of the Securities and monies held by
it and all Sub-Custodians for each Portfolio. In the absence of the
filing in writing with the Custodian by the Company of exceptions or
objections to any such statement within 60 days after the date that a
material defect is reasonably discoverable, the Company shall be deemed
to have approved

<PAGE>

such statement; and in such case or upon written approval of the
Company of any such statement the Custodian shall, to the extent
permitted by law and provided the Custodian has met the standard of
care in Section 14 hereof, be released, relieved and discharged with
respect to all matters and things set forth in such statement as though
such statement had been settled by the decree of a court of competent
jurisdiction in an action in which the Company and all persons having
any equity interest in the Company were parties.

(e) Registration of Securities and Physical Separation. All Securities
held for a Portfolio which are issued or issuable only in bearer form,
except such Securities as are held in the Book-Entry System, shall be
held by the Custodian or a SubCustodian in that form; all other
Securities held for a Portfolio may be registered in the name of that
Portfolio, in the name of any duly appointed registered nominee of the
Custodian or a Sub-Custodian as the Custodian or such Sub-Custodian may
from time to time determine, or in the name of the Book-Entry System or
a Depository or their successor or successors, or their nominee or
nominees. The Company reserves the right to instruct the Custodian as
to the method of registration and safekeeping of the Securities. The
Company agrees to furnish to the Custodian appropriate instruments to
enable the Custodian or any SubCustodian to hold or deliver in proper
form for transfer, or to register in the name of its registered nominee
or in the name of the Book-Entry System or a Depository, any Securities
which the Custodian of a Sub-Custodian may hold for the account of a
Portfolio and which may from time to time be registered in the name of
a Portfolio. The Custodian shall hold all such Securities specifically
allocated to a Portfolio which are not held in the Book-Entry System or
a Depository in a separate account for such Portfolio in the name of
such Portfolio physically segregated at all times from those of any
other person or persons.

(f) Segregated Accounts. Upon receipt of a Written Instruction, the
Custodian will establish segregated accounts on behalf of a Portfolio
to hold liquid or other assets as it shall be directed by a Written
Instruction and shall increase or decrease the assets in such
Segregated Accounts only as it shall be directed by subsequent Written
Instruction.

(g) Collection of Income and Other Matters Affecting Securities. Unless
otherwise instructed to the contrary by a Written Instruction, the
Custodian, by itself or through the use of the Book-Entry System or a
Depository with respect to Securities therein deposited, shall, or
shall instruct the relevant Sub-Custodian to:

1. Collect all income due or payable with respect to
Securities held for a Portfolio in accordance with this
Agreement;

2. Present for payment and collect the amount payable upon all
Securities which may mature or be called, redeemed or retired,
or otherwise become payable;

<PAGE>

3. Surrender Securities in temporary form for derivative
Securities;

4. Execute any necessary declarations or certificates of
ownership under the federal income tax laws or the laws or
regulations of any other taxing authority now or hereafter in
effect; and

5. Hold directly, or through the Book-Entry System or a
Depository with respect to Securities therein deposited, for
the account of each Portfolio all rights and similar
Securities issued with respect to any Securities held by the
Custodian or relevant Sub-Custodian for each Portfolio.

If the Custodian or any Sub-Custodian causes the
account of a Portfolio to be credited on the payable date for
interest, dividends or redemptions, the particular Portfolio
involved will promptly return to the Custodian any such amount
or property so credited upon oral or written notification that
neither the custodian nor the relevant Sub-Custodian can
collect such amount or property in the ordinary course of
business. The Custodian or such Sub-Custodian, as the case may
be, shall have no duty or obligation to institute legal
proceedings, file a claim or proof of claim in any insolvency
proceeding or take any other action with respect to the
collection of such amount or property beyond its ordinary
collection procedures unless it is specifically requested to
do so by the Company and indemnified to its satisfaction for
any liability, cost or expense arising therefrom.

(h) Delivery of Securities and Evidence of Authority. Upon receipt of a
Written Instruction and not otherwise, except for subparagraphs 5, 6,
7, and 8 of this section 6(h) which may be effected by Oral or Written
Instructions, the Custodian, directly or through the use of the
Book-Entry System or a Depository, shall, or shall instruct the
relevant Sub-Custodian to:

1. Execute and deliver or cause to be executed and delivered
to such persons as may be designated in such Written
Instructions, proxies, consents, authorizations, and any other
instruments whereby the authority of the Company as owner of
any Securities may be exercised;

2. Deliver or cause to be delivered any Securities held for a
Portfolio in exchange for other Securities or cash issued or
paid in connection with the liquidation, reorganization,
refinancing, merger, consolidation or recapitalization of any
corporation, or the exercise of any conversion privilege;

<PAGE>

3. Deliver or cause to be delivered any Securities held for a
Portfolio to any protective committee, reorganization
committee or other person in connection with the
reorganization, refinancing, merger, consolidation or
recapitalization or sale of assets of any corporation, and
receive and hold under the terms of this Agreement in the
separate account for each such Portfolio certificates of
deposit, interim receipts or other instruments or documents as
may be issued to it to evidence such delivery;

4. Make or cause to be made such transfers or exchanges of the
assets specifically allocated to the separate account of a
Portfolio and take such other steps as shall be stated in
Written Instructions to be for the purpose of effectuating any
duly authorized plan of liquidation, reorganization, merger,
consolidation or recapitalization of the Company;

5. Deliver Securities upon sale of such Securities for the
account of a Portfolio pursuant to Section 7;

6. Deliver Securities upon the receipt of payment in
connection with any repurchase agreement related to such
Securities entered into by a Portfolio;

7. Deliver Securities owned by a Portfolio to the issuer
thereof or its agent when such Securities are called,
redeemed, retired or otherwise become payable; provided,
however, that in any such case the cash or other consideration
is to be delivered to the Custodian or Sub-Custodian, as the
case may be;

8. Deliver Securities for delivery in connection with any
loans of securities made by a Portfolio but only against
receipt of adequate collateral as agreed upon from time to
time by the Custodian and the Company which may be in the form
of cash or obligations issued by the United States Government,
its agencies or instrumentalities;

9. Deliver Securities for delivery as security in connection
with any borrowings by a Portfolio requiring a pledge of
Portfolio assets, but only against receipt of the amounts
borrowed;

10. Deliver Securities to the Transfer Agent or to the holders
of Shares in connection with distributions in kind, as may be
described from time to in the Prospectus, in satisfaction of
requests by holders of Shares for repurchase or redemption;

11. Deliver Securities owned by any Portfolio for any purpose
expressly permitted by and in accordance with procedures
described in the Prospectus; and

<PAGE>

12. Deliver Securities owned by any Portfolio for any other
proper business purpose, but only upon receipt of, in addition
to Written Instructions, a certified copy of a resolution of
the Board of Directors signed by an Authorized Person and
certified by the Secretary of the Company, specifying the
Securities to be delivered, setting forth the purpose for
which such delivery is to be made, declaring such purpose to
be a proper business purpose, and naming the person or persons
to whom delivery of such Securities shall be made.

(i) Endorsement and Collection of Checks. Etc. The Custodian is hereby
authorized to endorse and collect all checks, drafts or other orders
for the payment of money received by the Custodian for the account of a
Portfolio.

7. Purchase and Sale of Investments of a Portfolio.

(a) Promptly after each purchase of Securities for a Portfolio, the
Company shall deliver to the Custodian (i) with respect to each
purchase of Securities which are not Money Market Securities, a Written
Instruction and (ii) with respect to each purchase of Money Market
Securities, either a Written Instruction or Oral Instruction, in either
case specifying with respect to each purchase: (1) the name of the
Portfolio to which such Securities are to be specifically allocated;
(2) the name of the issuer and the title of the Securities; (3) the
number of shares or the principal amount purchased and accrued
interest, if any; (4) the date of purchase and settlement; (5) the
purchase price per unit; (6) the total amount payable upon such
purchase; and 7) the name of the person from whom or the broker through
whom the purchase was made, if any. The Custodian or specified
Sub-Custodian shall receive the Securities purchased by or for a
Portfolio and upon receipt thereof shall pay to the broker or other
person designated by the Company out of the monies held for the account
of such Portfolio the total amount payable upon such purchase, provided
that the same conforms to the total amount payable as set forth in such
Written or Oral Instruction.

(b) Promptly after each sale of Securities of a Portfolio, the Company
shall deliver to the Custodian (i) with respect to each sale of
Securities which are not Money Market Securities, a Written
Instruction, and (ii) with respect to each sale of Money Market
Securities, either Written Instructions or Oral Instructions, in either
case specifying with respect to such sale: (1) the name of the
Portfolio to which the Securities sold were specifically allocated; (2)
the name of the issuer and the title of the Securities; (3) the number
of shares or principal amount sold, and accrued interest, if any; (4)
the date of sale; (5) the sale price per unit; (6) the total amount
payable to the Portfolio upon such sale; and (7) the name of the broker
through whom or the person to whom the sale was made. The Custodian or
relevant Sub-Custodian shall deliver or cause to be delivered the
Securities to the broker or other person designated by the Company upon
receipt of the total

<PAGE>

amount payable to such Portfolio upon such sale, provided that the same
conforms to the total amount payable to such Portfolio as set forth in
such Written or Oral Instruction. Subject to the foregoing, the
Custodian or relevant Sub-Custodian may accept payment in such form as
shall be satisfactory to it, and may deliver Securities and arrange for
payment in accordance with the customs prevailing among dealers in
Securities.

(c) Notwithstanding (a) and (b) above, cash in any of the Portfolios
may be invested by the Custodian for short term purposes pursuant to
standing Written Instructions from the Company.

8. Lending of Securities.

If any Portfolio is permitted by the terms of the Articles of
Incorporation and Certificate of Designation and the Prospectus to lend
Securities, then the Board of Directors may approve a separate written
agreement between the Company and the Custodian authorizing the
Custodian to lend such Securities. Such agreement may provide for the
payment of additional reasonable compensation to the Custodian.

9. Investment in Futures and Options

The Custodian shall pursuant to Written Instructions (which may be
standing instructions) from an Authorized Person (i) transfer initial
margin to a safekeeping bank or, with respect to options, broker, (ii)
pay or demand variation margin to or from a designated futures
commission merchant or other broker based on daily marking to market
calculations and in accordance with accepted industry practices, and
(iii) subject to the consent of the Custodian, enter into separate
procedural, safekeeping or other agreements with safekeeping banks,
futures commission merchants and other brokers pursuant to which such
banks and, in the case of options, brokers, will act as custodian for
initial margin deposits in transactions involving futures contracts and
options. The Custodian shall have no custodial or investment
responsibility for any assets transferred to a safekeeping bank,
futures commission merchant or broker pursuant to this paragraph.

10. Payment of Dividends or Distributions.

(a) The Company shall furnish to the Custodian the vote of the Board of
Directors or the Dividend Committee thereof, as the case may be,
certified by the Secretary of the Company (i) authorizing the
declaration of distributions with respect to a Portfolio on a specified
periodic basis and authorizing the Custodian to rely on Oral or Written
Instructions specifying the date of the declaration of such
distribution, the date of payment thereof, the record date as of which
shareholders entitled to payment shall be determined, the amount
payable per Share to the shareholders of record as of the record date
and the total amount

<PAGE>

payable to the Transfer Agent on the payment date, or (ii) setting
forth the date of declaration of any distribution by a Portfolio, the
date of payment thereof, the record date as of which shareholders
entitled to payment shall be determined, the amount payable per share
to the shareholders of record as of the record date and the total
amount payable to the Transfer Agent on the Payment date.

(b) Upon the payment date specified in such vote, Oral Instructions, or
Written Instructions, as the case may be, the Custodian shall pay the
total amount payable to the Transfer Agent out of the monies
specifically allocated to and held for the account of the appropriate
Portfolio.

11. Sale and Redemption of Shares of the Company.

(a) Whenever the Company shall sell any Shares of a Portfolio, the
Company shall deliver or cause to be delivered to the Custodian a
Written Instruction duly specifying:

1. The name of the Portfolio whose Shares were sold;

2. The number of Shares sold, trade date, and price; and

3. The amount of money to be received by the Custodian for the
sale of such Shares.

The Custodian understands and agrees that Written Instructions may be
furnished subsequent to the purchase of Shares of a Portfolio and that
the information contained therein will be derived from the sales of
Shares as reported to the Company by the Transfer Agent.

(b) Upon receipt of such money from the Transfer Agent, the Custodian
shall credit such money to the separate account of the Portfolio
specified in (a)(1) above.

(c) Upon issuance of any Shares of a Portfolio in accordance with the
foregoing provisions of this Section 11, the Custodian shall pay all
original issue or other taxes required to be paid in connection with
such issuance upon the receipt of a Written Instruction specifying the
amount to be paid.

(d) Except as provided hereafter, whenever any Shares of a Portfolio
are redeemed, the Company shall cause the Transfer Agent to promptly
furnish to the Custodian Written Instructions specifying:

1. The name of the Portfolio whose Shares were redeemed;

2. The number of Shares redeemed; and

<PAGE>

3. The amount to be paid for the Shares redeemed.

The Custodian further understands that the information
contained in such Written Instructions will be derived from the
redemption of Shares as reported to the Company by the Transfer Agent.

(e) Upon receipt from the Transfer Agent of advice setting forth the
number of Shares of a Portfolio being redeemed pursuant to valid
instructions as described in the Prospectus, the Custodian shall make
payment to the Transfer Agent out of the monies specifically allocated
to and held for the account of the Portfolio specified in (d)(l) above
of the total amount specified in a Written Instruction issued pursuant
to paragraph (d) of this Section 11.

12. Indebtedness.

(a) The Company will cause to be delivered to the Custodian by any bank
(excluding the Custodian) from which the Company borrows money, using
Securities as collateral, a notice or undertaking in the form currently
employed by any such bank setting forth the amount which such bank will
loan to the Company against delivery of a stated amount of collateral.
The Company shall promptly deliver to the Custodian Written
Instructions stating with respect to each such borrowing: (1) the name
of the Portfolio for which the borrowing is to be made; (2) the name of
the bank; (3) the amount and terms of the borrowing, which may be set
forth by incorporating by reference an attached promissory note, duly
endorsed by the Company, or other loan agreement; (4) the time and
date, if known, on which the loan is to be entered into (the "borrowing
date"); (5) the date on which the loan becomes due and payable; (6) the
total amount payable to the Company for the separate account of the
Portfolio on the borrowing date; (7) the market value of Securities to
be delivered as collateral for such loan, including the name of the
issuer, the title and the number of shares or the principal amount of
any particular Securities; (8) whether the Custodian is to deliver such
collateral through the Book-Entry System or a Depository; and (9) a
statement that such loan is in conformance with the 1940 Act and the
Prospectus.

(b) Upon receipt of the Written Instruction referred to in paragraph
(a) above, the Custodian shall deliver on the borrowing date the
specified collateral and the executed promissory note, if any, against
delivery by the lending bank of the total amount of the loan payable,
provided that the same conforms to the total amount payable as set
forth in the Written Instruction. The Custodian may, at the option of
the lending bank, keep such collateral in its possession, but such
collateral shall be subject to all rights therein given the lending
bank by virtue of any promissory note or loan agreement. The Custodian
shall deliver as additional collateral in the manner directed by the
Company from time to time such Securities specifically allocated to
such Portfolio as may be specified in Written Instruction to

<PAGE>

collateralize further any transaction described in this Section 12. The
Company shall cause all Securities released from collateral status to
be returned directly to the Custodian, and the Custodian shall receive
from time to time such return of collateral as may be tendered to it.
In the event that the Company fails to specify in Written Instruction
all of the information required by this Section 12, the Custodian shall
not be under any obligation to deliver any Securities. Collateral
returned to the Custodian shall be held hereunder as it was prior to
being used as collateral.

13. Corporate Action

Whenever the Custodian or any Sub-Custodian (other than a foreign
securities depository or clearing agency) receives information
concerning Securities held for a Portfolio which requires discretionary
action by the beneficial owner of the Securities (other than a proxy),
such as subscription rights, bond issues, stock repurchase plans and
rights offerings, or legal notices or other material intended to be
transmitted to Securities holders ("Corporate Actions"), the Custodian
will give the Fund Accountant notice of such Corporate Actions to the
extent that the Custodian's central corporate actions department has
actual knowledge of a Corporate Action in time to notify its customers.

When a rights entitlement or a fractional interest resulting from a
rights issue, stock dividend, stock split or similar Corporate Action
is received which bears an expiration date, the Custodian will endeavor
to obtain Written or Oral Instructions from the Company or the Fund
Accountant, but if such Instructions are not received in time for the
Custodian to take timely action, or actual notice of such Corporate
Action was received too late to seek such Instructions, the Custodian
is authorized to sell, or cause a Sub-Custodian to sell, such rights
entitlement or fractional interest and to credit the applicable account
with the proceeds and to take any other action it deems, in good faith,
to be appropriate, in which case, provided it has met the standard of
care in Section 15 hereof, it shall be held harmless by the particular
Portfolio involved for any such action.

The Custodian will deliver proxies to the Company or its designated
agent pursuant to special arrangements which may have been agreed to in
writing between the parties hereto. Such proxies shall be executed in
the appropriate nominee name relating to Securities registered in the
name of such nominee but without indicating the manner in which such
proxies are to be voted; and where bearer Securities are involved,
proxies will be delivered in accordance with Written or Oral
Instructions from Authorized Persons.

14. Persons Having Access of the Portfolios.

(a) No Company or agent of the Company, and no officer, director,
employee or agent of the Company's investment adviser, of any
sub-investment adviser of

<PAGE>

the Company, shall have physical access to the assets of any Portfolio
held by the Custodian or any Sub-Custodian or be authorized or
permitted to withdraw any investments of a Portfolio, nor shall the
Custodian or any Sub-Custodian deliver any assets of a Portfolio to any
such person. No officer, director, employee or agent of the Custodian
who holds any similar position with the Company's investment adviser,
with any sub-investment adviser of the Company or with the
Administrator shall have access to the assets of any Portfolio.

(b) Nothing in this Section 14 shall prohibit any officer, employee or
agent of the Company, or any officer, director, employee or agent of
the investment adviser, of any sub investment adviser of the Company,
from giving Oral Instructions or Written Instructions to the Custodian
or executing a Certificate so long as it does not result in delivery of
or access to assets of a Portfolio prohibited by paragraph (a) of this
Section 14.

(c) The Custodian represents that it maintains a system that is
reasonably designed to prevent unauthorized persons from having access
to the assets that it holds (by any means) for its customers.

15. Concerning the Custodian.

(a) Scope of Services. The Custodian shall be obligated to perform only
such services as are set forth in this Agreement or expressly contained
in a Certificate, Written Instructions or Oral Instructions given to
the Custodian which are not contrary.

(b) Standard of Care.

1. The Custodian will use reasonable care with respect to its
obligations under this Agreement and the safekeeping of
property of the Portfolios. The Custodian shall be liable to,
and shall indemnify and hold harmless the Company from and
against any loss which shall occur as the result of the
failure of the Custodian or a Sub-Custodian (other than a
foreign securities depository or clearing agency) to exercise
reasonable care with respect to their respective obligations
under this Agreement and the safekeeping of such property. The
determination of whether the Custodian or Sub-Custodian has
exercised reasonable care in connection with the safekeeping
of Portfolio property shall be made in light of the standards
applicable to the Custodian with respect to similar property
held by it in Chicago, Illinois. The determination of whether
the Custodian or Sub-Custodian has exercised reasonable care
in connection with their other obligations under this
Agreement shall be made in light of prevailing standards
applicable to professional custodians in the jurisdiction in
which such custodial services are performed. In the event of
any loss to the Company by reason of the failure of the
Custodian or a Sub-Custodian

<PAGE>

(other than a foreign securities depository or clearing
agency) to exercise reasonable care, the Custodian shall be
liable to the Company only to the extent of the Company's
direct damages and expenses, which damages, for purposes of
property only, shall be determined based on the market value
of the property which is the subject of the loss at the date
of discovery of such loss and without reference to any special
condition or circumstances.

2. The Custodian will not be responsible for any act,
omission, default or for the solvency of any foreign
securities depository or clearing agency approved by the Board
of Directors pursuant to Section (l)(n) or Section 3 hereof.

3. The Custodian will not be responsible for any act,
omission, default or for the solvency of any broker or agent
(not referred to in paragraph (b)(2) above) which it or a
Sub-Custodian appoints and uses unless such appointment and
use is made or done negligently or in bad faith. In the event
such an appointment and use is made or done negligently or in
bad faith, the Custodian shall be liable to the Company only
for direct damages and expenses (determined in the manner
described in paragraph (b)(1) above) resulting from such
appointment and use and, in the case of any loss due to an
act, omission or default of such agent or broker, only to the
extent that such loss occurs as a result of the failure of the
agent or broker to exercise reasonable care ("reasonable care"
for this purpose to be determined in light of the prevailing
standards applicable to agents or brokers, as appropriate, in
the jurisdiction where services are performed).

4. The Custodian shall be entitled to rely, and may act upon
the advice of counsel (who may be counsel for the Company) on
all matters and shall be without liability for any action
reasonably taken or omitted in good faith and without
negligence pursuant to such advice.

5. The Custodian shall be entitled to rely upon any
Certificate, notice or other instrument in writing received by
the Custodian and reasonably believed by the Custodian to be
genuine and to be signed by two officers of the Company. The
Custodian shall be entitled to rely upon any Written
Instructions or Oral Instructions actually received by the
Custodian pursuant to the applicable Sections of this
Agreement and reasonably believed by the Custodian to be
genuine and to be given by an Authorized Person. The Company
agrees to forward to the Custodian Written Instructions from
an Authorized Person confirming such Oral Instructions in such
manner so that such Written Instructions are received by the
Custodian, whether by hand delivery, telex or otherwise, by
the close of business on the same day that such Oral
Instructions are given to the Custodian. The Company agrees
that the fact that such confirming

<PAGE>

instructions are not received by the Custodian shall in no way
affect the validity of the transactions or enforceability of
the transactions hereby authorized by the Company. The Company
agrees that the Custodian shall incur no liability to the
Company in (i) acting upon Oral Instructions given to the
Custodian hereunder concerning such transactions provided such
instructions reasonably appear to have been received from a
duly Authorized Person or (ii) deciding not to act solely upon
Oral Instructions, provided that the Custodian shall be
required to contact the giver of such Oral Instructions and
request written confirmation immediately following any such
decision not to act.

6. The Custodian shall supply the Fund Accountant with such
daily information regarding the cash and securities positions
and activity of each Portfolio as the Custodian and the Fund
Accountant shall from time to time agree. It is understood
that such information will not be audited by Custodian and
Custodian represents that such information will be the best
information then available to the Custodian. The Custodian
shall have no responsibility whatsoever for the pricing of
Portfolio Securities or for the failure of the Fund Accountant
to reconcile differences between the information supplied by
the Custodian and information obtained by the Fund Accountant
from other sources, including but not limited to pricing
vendors and the Company's investment adviser. Subject to the
foregoing, to the extent that any miscalculation by the Fund
Accountant of a Portfolio's net asset value is attributable to
the willful misfeasance, bad faith or negligence of the
Custodian (including any Sub-Custodian other than a foreign
securities depository or clearing agency) in supplying or
omitting to supply the Fund Accountant with information as
aforesaid, the Custodian shall be liable to the Company for
any resulting loss (subject to such de minims rule of change
in value as the Board of Directors may from time to time
adopt).

(c) Limit of Duties. Without limiting the generality of the foregoing,
the Custodian shall be under no duty or obligation to inquire into, and
shall not be liable for:

1. The validity of the issue of any Securities purchased by
any Portfolio, the legality of the purchase thereof, or the
propriety of the amount specified by the Company for payment
therefor;

2. The legality of the sale of any Securities by any Portfolio
or the propriety of the amount of consideration for which the
same are sold;

3. The legality of the issue or sale of any Shares, or the
sufficiency of the amount to be received therefor;

<PAGE>

4. The legality of the redemption of any Shares, or the
propriety of the amount to be paid therefor;

5. The legality of the declaration or payment of any
distribution of any Portfolio;

6. The legality of any borrowing.

(d) The Custodian need not maintain any insurance for the exclusive
benefit of the Company, but hereby warrants that as of the date of this
Agreement it is maintaining a bankers Blanket Bond and hereby agrees to
notify the Company in the event that such bond is canceled or otherwise
lapses.

(e) Consistent with and without limiting the language contained in
Section 1 5(b), it is specifically acknowledged that the Custodian
shall have no duty or responsibility to:

1. Question Written Instructions or Oral Instructions or make
any suggestions to the Company or an Authorized Person
regarding such Instructions;

2. Supervise or make recommendations with respect to
investments or the retention of Securities:

3. Subject to Section 15(b)(3) hereof, evaluate or report to
the Company or an Authorized Person regarding the financial
condition of any broker, agent or other party to which
Securities are delivered or payments are made pursuant to this
Agreement: or

4. Review or reconcile trade confirmations received from
brokers.

(f) Amounts Due for Transfer Agent. The Custodian shall not be under
any duty or obligation to take action to effect collection of any
amount due to any Portfolio from the Transfer Agent nor to take any
action to effect payment or distribution by the Transfer Agent of any
amount paid by the Custodian to the Transfer Agent in accordance with
this Agreement.

(g) No Duty to Ascertain Authority. The Custodian shall not be under
any duty or obligation to ascertain whether any Securities at any time
delivered to or held by it for the Company and specifically allocated
to a Portfolio are such as may properly be held by the Company under
the provisions of the Articles of Incorporation and Certificate of
Designation and the Prospectus.

(h) Indemnification. The Company agrees to indemnify and hold the
Custodian harmless from all loss, cost, taxes, charges, assessments,
claims, and

<PAGE>

liabilities (including, without limitation, liabilities arising under
the Securities Act of 1933, the Securities Exchange Act of 1934 and the
1940 Act and state or foreign securities laws) and expenses (including
reasonable attorneys fees and disbursements) arising directly or
indirectly from any action taken or omitted by the Custodian (i) at the
request or on the direction of or in reliance on the advice of the
Company or in reasonable reliance upon the Prospectus or (ii) upon a
Certificate or Oral or Written Instructions; provided, that the
aforegoing indemnity shall not apply to any loss, cost, tax, charge,
assessment, claim, liability or expense to the extent the same is
attributable to the Custodian's or any Sub-Custodian's (other than a
foreign securities depository or clearing agency) negligence, willful
misconduct, bad faith or reckless disregard of duties and obligations
under this Agreement or any other agreement relating to the custody of
Company property.

(i) The Company on behalf of the particular Portfolio involved agrees
to hold the Custodian harmless from any liability or loss resulting
from the imposition or assessment of any taxes or other governmental
charges on a Portfolio.

(j) Without limiting the foregoing, the Custodian shall not be liable
for any loss which results from:

1. the general risk of investing, or

2. subject to Section 15(b) hereof, investing or holding
property in a particular country including, but not limited
to, losses resulting from nationalization, expropriation or
other governmental actions; regulation of the banking or
securities industry; currency restrictions, devaluations or
fluctuations; and market conditions which prevent the orderly
execution of securities transactions or affect the value of
property held pursuant to this Agreement.

(k) No party shall be liable to the other for any loss due to forces
beyond their control including but not limited to strikes or work
stoppages, acts of war or terrorism, insurrection, revolution, nuclear
fusion, fission or radiation, or acts of god.

(1) Inspection of Books and Records. The books and records of the
Custodian shall be open to inspection and audit at reasonable times by
officers and auditors employed by the Company and by the appropriate
employees of the Securities and Exchange Commission.

(m) Accounting Control Reports. The Custodian shall provide the Company
with any report obtained by the Custodian on the system of internal
accounting control of the Book-Entry System, each Depository, and each
Sub-Custodian and with an annual report on its own systems of internal
accounting control.

<PAGE>

16. Term and Termination.

(a) This Agreement shall become effective on the date first set forth
above (the "Effective Date") and shall continue in effect thereafter as
the parties may, mutually agree.

(b) Either of the parties hereto may terminate this Agreement with
respect to any Portfolio by giving to the other party a notice in
writing specifying the date of such termination, which, in case the
Company is the terminating party, shall be not less than 60 days after
the date of receipt of such notice or, in case the Custodian is the
terminating party, shall be not less than 90 days after the date of
receipt of such notice. In the event such notice is given by the
Company, it shall be accompanied by a certified vote of the Board of
Directors, electing to terminate this Agreement with respect to any
Portfolio and designating a successor custodian or custodians, which
shall be a person qualified to so act under the 1940 Act.

In the event such notice is given by the Custodian, the Company shall,
on or before the termination date, deliver to the Custodian a certified
vote of the Board of Directors, designating a successor custodian or
custodians. In the absence of such designation by the Company, the
Custodian may designate a successor custodian, which shall be a person
qualified to so act under the 1940 Act. If the Company fails to
designate a successor custodian with respect to any Portfolio, the
Company shall upon the date specified in the notice of termination of
this Agreement and upon the delivery by the Custodian of all Securities
(other than Securities held in the Book-Entry System which cannot be
delivered to the Company) and monies then owned by such Portfolio, be
deemed to be its own custodian and the Custodian shall thereby be
relieved of all duties and responsibilities pursuant to this Agreement,
other than the duty with respect to Securities held in the Book-Entry
System which cannot be delivered to the Company.

(c) Upon the date set forth in such notice under paragraph (b) of this
Section 16, this Agreement shall terminate to the extent specified in
such notice, and the Custodian shall upon receipt of a notice of
acceptance by the successor custodian on that date deliver directly to
the successor custodian all Securities and monies then held by the
Custodian and specifically allocated to the Portfolio or Portfolios
specified, after deducting all fees, expenses and other amounts for the
payment or reimbursement of which it shall then be entitled with
respect to such Portfolio or Portfolios.

17. Limitation of Liability.

The Company and the Custodian agree that the obligations of the Company
under this Agreement shall not be binding upon any of the Directors,
shareholders,

<PAGE>

nominees, officers, employees or agents, whether past, present or
future, of the Company individually, but are binding only upon the
assets and property of the Company or of the appropriate Portfolio(s)
thereof. The execution and delivery of this Agreement have been
authorized by the Board of Directors of the Company, and signed by an
authorized officer of the Company, acting as such, and neither such
authorization by such the Board of Directors nor such execution and
delivery by such officer shall be deemed to have been made by any of
them or any shareholder of the Company individually or to impose any
liability on any of them or any shareholder of the Company personally,
but shall bind only the assets and property of the Company or of the
appropriate Portfolio(s) thereof.

18. Miscellaneous.

(a) Annexed hereto as Schedule A is a certification signed by two of
the present officers of the Company setting forth the names and the
signatures of the present Authorized Persons. The Company agrees to
furnish to the Custodian a new certification in similar form in the
event that any such present Authorized Person ceases to be such an
Authorized Person or in the event that other or additional Authorized
Persons are elected or appointed. Until such new certification shall be
received, the Custodian shall be fully protected in acting under the
provisions of this Agreement upon Oral Instructions or signatures of
the present Authorized Persons as set forth in the last delivered
certification.

(b) Any notice or other instrument in writing, authorized or required
by this Agreement to be given to the Custodian, shall be sufficiently
given if addressed to the Custodian and mailed or delivered to it at
its offices at its address stated on the first page hereof or at such
other place as the Custodian may from time to time designate in
writing.

(c) Any notice or other instrument in writing, authorized or required
by this Agreement to be given to the Company, shall be sufficiently
given if addressed to the Company and mailed or delivered to it at its
offices at its address shown on the first page hereof or at such other
place as the Company may from time to time designate in writing, with a
copy to:

(d) This Agreement may not be amended or modified in any manner except
by a written agreement executed by both parties with the same formality
as this Agreement, (i) authorized and approved by a vote of the Board
of Directors, including a majority of the members of the Board of
Directors who are not "interested persons" of the Company (as defined
in the 1940 Act), or (ii) authorized and approved by such other
procedures as may be permitted or required by the 1940 Act.

(e) This Agreement shall extend to and shall be binding upon the
parties hereto, and their respective successors and assigns; provided,
however, that this

<PAGE>

Agreement shall not be assignable by the Company without the written
consent of the Custodian, or by the Custodian without the written
consent of the Company authorized or approved by a vote of the Board of
Directors, and any attempted assignment without such written consent
shall be null and void.

(f) This Agreement shall be construed in accordance with the laws of
the State of Illinois.

(g) The captions of the Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions
hereof or otherwise affect their construction or effect.

(h) This Agreement may be executed in any number of counterparts, each
of which shall be deemed to be an original, but such counterparts
shall, together, constitute only one instrument.

IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective representatives duly authorized as
of the day and year first above written.

SIT MUTUAL FUNDS, INC.

By: /s/ Paul E. Rasmussen
Name: Paul E. Rasmussen
Title: V.P., Treasurer

THE NORTHERN TRUST COMPANY

By: /s/ Peggy O'Leary
Name: Peggy O'Leaery
Title: Vice President

<PAGE>

Exhibit 1
to
Custody Agreement
Between
Sit Mutual Funds, Inc. and
The Northern Trust Company

Dated as of October 21, 1997

Sit International Growth Fund (Series A)
Sit Balanced Fund (Series B)
Sit Developing Markets Growth Fund (Series C)
Sit Small Cap Growth Fund (Series D)
Sit Science and Technology Growth Fund (Series E)
Sit Regional Growth Fund (Series F)

SIT MUTUAL FUNDS, INC.

By: /s/ Paul E. Rasmussen
Name: Paul E. Rasmussen
Title: V.P., Treasurer

THE NORTHERN TRUST COMPANY

By: /s/ Peggy O'Leary
Name: Peggy O'Leaery
Title: Vice President

<PAGE>

Schedule A
to
Custody Agreement
Between
SIT Mutual Funds, Inc. and
The Northern Trust Company

Authorized Persons

Written Instructions Only

Erik S. Anderson Vice President - Investments
Ronald D. Sit Vice President - Investments
Debra A Sit Vice President - Investments, Assistant Treasurer
Michael P. Eckert Vice President - Group Manager
Michael J. Radmer Secretary
Carla J. Rose Assistant Secretary

Written and Oral Instructions

Eugene C. Sit Chairman
Peter L. Mitchelson Vice President
Mary K. Stern President
Michael C. Brilley Senior Vice President
Paul E. Rasmussen Vice President & Treasurer

<PAGE>

SUPPLEMENTAL NOTE TO CUSTODY AGREEMENT
Between
Sit Mutual Funds, Inc. and
The Northern Trust Company

A Schedule of Remuneration is contained in Exhibit 8.3: Accounting Services
Agreement between Sit Mutual Funds, Inc. and First Data Investor Services Group.

EXHIBIT 8.2
Transfer Agency and Services Agreement
Sit Mutual Funds, Inc.

TRANSFER AGENCY AND SERVICES AGREEMENT

THIS AGREEMENT, dated as of this 31st day of December, 1995 between SIT
MUTUAL FUNDS, INC. (the "Fund"), a Minnesota corporation, having its principal
place of business at 4600 Norwest Center, Minneapolis, Minnesota 55402 and FIRST
DATA INVESTOR SERVICES GROUP, INC. ("FDISG"), a Massachusetts corporation with
principal offices at One Exchange Place, 53 State Street, Boston, Massachusetts
02109.

WITNESSETH

WHEREAS, the Fund desires to appoint FDISG as its transfer agent,
dividend disbursing agent and agent in connection with certain other activities
and FDISG desires to accept such appointment;

NOW, THEREFORE, in consideration of the mutual covenants and promises
hereinafter set forth, the Fund and FDISG agree as follows:

Article 1 Definitions.

1.1 Whenever used in this Agreement, the following words and phrases,
unless the context otherwise requires, shall have the following meanings:

(a) "Articles of Incorporation" shall mean the Articles of
Incorporation, Declaration of Trust, or other similar organizational
document as the case may be, of the Fund as the same may be amended
from time to time.

(b) "Authorized Person" shall be deemed to include (i) any
authorized officer of the Fund; or (ii) any person, whether or not such
person is an officer or employee of the Fund, duly authorized to give
Oral Instructions or Written Instructions on behalf of the Fund as
indicated in writing to FDISG from time to time.

(d) "Commission" shall mean the Securities and Exchange
Commission.

(e) "Custodian" refers to any custodian or subcustodian of
securities and other property which the Fund may from time to time
deposit, or cause to be deposited or held under the name or account of
such a custodian pursuant to a Custodian Agreement.

(f) "1934 Act" shall mean the Securities Exchange Act of 1934
and the rules and regulations promulgated thereunder, all as amended
from time to time.

(g) "1940 Act" shall mean the Investment Company Act of 1940
and the

<PAGE>

rules and regulations promulgated thereunder, all as amended from time
to time.

(h) "Oral Instructions" shall mean instructions, other than
Written Instructions, actually received by FDISG from a person
reasonably believed by FDISG to be an Authorized Person;

(i) "Prospectus" shall mean the most recently dated Fund
Prospectus and Statement of Additional Information, including any
supplements thereto if any, which have become effective under the
Securities Act of 1933 and the 1940 Act.

(j) "Shares" refers collectively to such shares of capital
stock or beneficial interest, as the case may be, or class thereof, of
the Fund as may be issued from time to time.

(k) "Shareholder" shall mean a record owner of Shares of the
Fund.

(l) "Written Instructions" shall mean a written communication
signed by a person reasonably believed by FDISG to be an Authorized
Person and actually received by FDISG. Written Instructions shall
include manually executed originals and authorized electronic
transmissions, including telefacsimile of a manually executed original
or other process.

Article 2 Appointment of FDISG.

The Fund hereby appoints and constitutes FDISG as transfer agent and
dividend disbursing agent for Shares of the Fund and as shareholder servicing
agent for the Fund and FDISG hereby accepts such appointments and agrees to
perform the duties hereinafter set forth.

Article 3 Duties of FDISG.

3.1 FDISG shall be responsible for:

(a) Administering and/or performing the customary services of
a transfer agent; acting as service agent in connection with dividend
and distribution functions; and for performing shareholder account and
administrative agent functions in connection with the issuance,
transfer and redemption or repurchase (including coordination with the
Custodian) of Shares of the Fund, as more fully described in the
written schedule of Duties of FDISG annexed hereto as Schedule A and
incorporated herein, and in accordance with the terms of the Prospectus
of the Fund, applicable law and the procedures established from time to
time between FDISG and the Fund.

(b) Recording the issuance of Shares and maintaining pursuant
to Rule 17Ad-10(e) of the 1934 Act a record of the total number of
Shares of the Fund which are authorized, based upon data provided to it
by the Fund, and issued and outstanding. FDISG shall provide the Fund
on a regular basis with the total number of Shares of the Fund which
are authorized and issued and outstanding and shall have no obligation,
when recording the issuance of Shares, to monitor the issuance of such
Shares or to take cognizance of any laws relating to the issue or sale
of such Shares, which functions shall be the sole responsibility of the
Fund.

<PAGE>

FDISG shall be under no duty or obligation to inquire into, and shall
not be liable for: (i) the legality of the issuance or sale of any
Shares or the sufficiency of the amount to be received therefor; (ii)
the legality of the redemption of any Shares, or the propriety of the
amount to be paid therefor; (iii) the legality of the declaration of
any dividend by the Board of Directors, or the legality of the issuance
of any Shares in payment of any dividend; or (iv) the legality of any
recapitalization or readjustment of the Shares.

3.2 FDISG agrees that it shall perform the services set forth herein in
accordance with the written schedule of Quality Standard Levels annexed hereto
as Schedule B.

3.3 In addition, the Fund shall (i) identify to FDISG in writing those
transactions and assets to be treated as exempt from blue sky reporting for each
State and (ii) verify the establishment of transactions for each State on the
system prior to activation and thereafter monitor the daily activity for each
State. The responsibility of FDISG for the Fund's blue sky State registration
status is solely limited to the initial establishment of transactions subject to
blue sky compliance by the Fund and the reporting of such transactions to the
Fund as provided above.

3.4 In addition to the duties set forth herein, FDISG shall perform
such other duties and functions, and shall be paid such amounts therefor, as may
from time to time be agreed upon in writing between the Fund and FDISG.

Article 4 Recordkeeping and Other Information.

4.1 FDISG shall create and maintain all records required of it pursuant
to its duties hereunder and as set forth in Schedule A in accordance with all
applicable laws, rules and regulations, including records required by Section
31(a) of the 1940 Act. Where applicable, such records shall be maintained by
FDISG for the periods and in the places required by Rule 31a-2 under the 1940
Act.

4.2 To the extent required by Section 31 of the 1940 Act, FDISG agrees
that all such records prepared or maintained by FDISG relating to the services
to be performed by FDISG hereunder are the property of the Fund and will be
preserved, maintained and made available in accordance with such section, and
will be surrendered promptly to the Fund on and in accordance with the Fund's
request.

4.3 In case of any requests or demands for the inspection of
Shareholder records of the Fund, FDISG will endeavor to notify the Fund of such
request and secure Written Instructions as to the handling of such request.
FDISG reserves the right, however, to exhibit the Shareholder records to any
person whenever it is advised by its counsel that it may be held liable for the
failure to comply with such request.

Article 5 Fund Instructions.

5.1 FDISG will have no liability when acting upon Written or Oral
Instructions believed to have been executed or orally communicated by an
Authorized Person and will not be held to have any notice of any change of
authority of any person until receipt of a Written Instruction thereof from the
Fund. FDISG will also have no liability when processing Share certificates which
it reasonably believes to bear the proper manual or facsimile signatures of the
officers of the Fund and the proper countersignature of FDISG.

<PAGE>

5.2 At any time, FDISG may request Written Instructions from the Fund
and may seek advice from legal counsel for the Fund, or its own legal counsel,
with respect to any matter arising in connection with this Agreement, and it
shall not be liable for any action taken or not taken or suffered by it in good
faith in accordance with such Written Instructions or in accordance with the
opinion of counsel for the Fund or for FDISG. Written Instructions requested by
FDISG will be provided by the Fund within a reasonable period of time.

5.3 FDISG, its officers, agents or employees, shall accept Oral
Instructions or Written Instructions given to them by any person representing or
acting on behalf of the Fund only if said representative is an Authorized
Person. The Fund agrees that all Oral Instructions shall be followed within one
business day by confirming Written Instructions, and that the Fund's failure to
so confirm shall not impair in any respect FDISG's right to rely on Oral
Instructions.

Article 6 Compensation.

6.1 The Fund will compensate FDISG for the performance of its
obligations hereunder in accordance with the fees set forth in the written Fee
Schedule annexed hereto as Schedule C and incorporated herein.

6.2 In addition to those fees set forth in Section 6.1 above, the Fund
agrees to pay, and will be billed separately for, out-of-pocket expenses
incurred by FDISG in the performance of its duties hereunder. Out-of-pocket
expenses shall include, but shall not be limited to, the items specified in the
written schedule of out-of-pocket charges annexed hereto as Schedule D and
incorporated herein. Schedule C may be modified by written agreement between the
parties. Unspecified out-of-pocket expenses shall be limited to those
out-of-pocket expenses reasonably incurred by FDISG in the performance of its
obligations hereunder.

6.3 The Fund agrees to pay all fees and out-of-pocket expenses within
fifteen (15) days following the receipt of the respective invoice.

6.4 Any compensation agreed to hereunder may be adjusted from time to
time by attaching to Schedule C, a revised Fee Schedule executed and dated by
the parties hereto.

6.5 The Fund acknowledges that the fees that FDISG charges the Fund
under this Agreement reflect the allocation of risk between the parties,
including the disclaimer of warranties in Section 9.3 and the limitations on
liability and exclusion of remedies in Section 11.2 and Article 12. Modifying
the allocation of risk from what is stated here would affect the fees that FDISG
charges, and in consideration of those fees, the Fund agrees to the stated
allocation of risk.

Article 7 Documents.

In connection with the appointment of FDISG, the Fund shall, on or
before the date this Agreement goes into effect, but in any case within a
reasonable period of time for FDISG to prepare to perform its duties hereunder,
deliver or caused to be delivered to FDISG the documents set forth in the
written schedule of Fund Documents annexed hereto as Schedule E.

Article 8 Transfer Agent System.

<PAGE>

8.1 FDISG shall retain title to and ownership of any and all data
bases, computer programs, screen formats, report formats, interactive design
techniques, derivative works, inventions, discoveries, patentable or
copyrightable matters, concepts, expertise, patents, copyrights, trade secrets,
and other related legal rights utilized by FDISG in connection with the services
provided by FDISG to the Fund herein (the "FDISG System").

8.2 FDISG hereby grants to the Fund a limited license to the FDISG
System for the sole and limited purpose of having FDISG provide the services
contemplated hereunder and nothing contained in this Agreement shall be
construed or interpreted otherwise and such license shall immediately terminate
with the termination of this Agreement.

Article 9 Representations and Warranties.

9.1 FDISG represents and warrants to the Fund that:

(a) it is a corporation duly organized an existing and in good
standing under the laws of the Commonwealth of Massachusetts;

(b) it is empowered under applicable laws and by its Articles
of Incorporation and By-Laws to enter into and perform this Agreement;

(d) it is duly registered with its appropriate regulatory
agency as a transfer agent and such registration will remain in effect
for the duration of this Agreement; and

(e) it has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and
obligations under this Agreement.

9.2 The Fund represents and warrants to FDISG that:

(a) it is duly organized and existing and in good standing
under the laws of the jurisdiction in which it is organized;

(b) it is empowered under applicable laws and by its Article
of Incorporation and By-Laws to enter into this Agreement;

(c) all corporate proceedings required by said Articles of
Incorporation, By-Laws and applicable laws have been taken to
authorized it to enter into this Agreement;

(d) a registration statement under the Securities Act of 1933,
as amended, and the 1940 Act on behalf of each of the Fund is currently
effective and will remain effective, and all appropriate state
securities law filings have been made and will continue to be made,
with respect to all Shares of the Fund being offered for sale;

(e) all outstanding Shares are validly issued, fully paid and
non-assessable and when Shares are hereafter issued in accordance with
the terms of the Fund's Articles of Incorporation and its Prospectus,
such Shares shall be validly issued, fully paid and non-assessable.

9.3 THIS IS A SERVICE AGREEMENT. EXCEPT AS EXPRESSLY PROVIDED

<PAGE>

IN THIS AGREEMENT, FDISG DISCLAIMS ALL OTHER REPRESENTATIONS OR WARRANTIES,
EXPRESS OR IMPLIED, MADE TO THE FUND OR ANY OTHER PERSON, INCLUDING, WITHOUT
LIMITATION, ANY WARRANTIES REGARDING QUALITY, SUITABILITY, MERCHANTABILITY,
FITNESS FOR A PARTICULAR PURPOSE OR OTHERWISE (IRRESPECTIVE OF ANY COURSE OF
DEALING, CUSTOM OR USAGE OF TRADE) OF ANY SERVICES OR ANY GOODS PROVIDED
INCIDENTAL TO SERVICES PROVIDED UNDER THIS AGREEMENT. FDISG DISCLAIMS ANY
WARRANTY OF TITLE OR NON-INFRINGEMENT EXCEPT AS OTHERWISE SET FORTH IN THIS
AGREEMENT.

Article 10 Indemnification.

10.1 FDISG shall not be responsible for and the Fund shall indemnify
and hold FDISG harmless from and against any and all claims, costs, expenses
(including reasonable attorneys' fees), losses, damages, charges, payments and
liabilities of any sort or kind which may be asserted against FDISG or for which
FDISG may be held to be liable (a "Claim") arising out of or attributable to any
of the following:

(a) Any actions of FDISG required to be taken pursuant to this
Agreement unless such Claim resulted from a negligent act or omission
to act or bad faith by FDISG in the performance of its duties
hereunder.

(b) FDISG's reasonable reliance on, or reasonable use of
information, data, records and documents (including but not limited to
magnetic tapes, computer printouts, hard copies and microfilm copies)
received by FDISG from the Fund, or any authorized third party acting
on behalf of the Fund, including but not limited the prior transfer
agent for the Fund, in the performance of FDISG's duties and
obligations hereunder.

(c) The reliance on, or the implementation of, any Written or
Oral Instructions or any other instructions or requests of the Fund.

(d) The offer or sales of shares in violation of any
requirement under the securities laws or regulations of any state that
such shares be registered in such state or in violation of any stop
order or other determination or ruling by any state with respect to the
offer or sale of such shares in such state.

(e) The Fund's refusal or failure to comply with the terms of
this Agreement, or any Claim which arises out of the Fund's negligence
or misconduct or the breach of any representation or warranty of the
Fund made herein.

10.2 The Fund shall not be responsible for and FDISG shall indemnify
and hold the Fund harmless from and against any and all Claims made by third
parties which result from a negligent act or omission to act or bad faith by
FDISG in the performance of its duties hereunder.

10.3 In any case in which the either party (the "Indemnifying Party")
may be asked to indemnify or hold the other (the "Indemnified Party") harmless,
the Indemnified Party will notify the Indemnifying Party promptly after
identifying any situation which it believes presents or appears likely to
present a claim for indemnification against the Indemnifying Party although the
failure to do so shall not prevent recovery by the Indemnified Party and shall
keep the Indemnifying Party advised with respect to all developments concerning
such situation. The

<PAGE>

Indemnifying Party shall have the option to defend the Indemnified Party against
any Claim which may be the subject of this indemnification, and, in the event
that the Indemnifying Party so elects, such defense shall be conducted by
counsel chosen by the Indemnifying Party and satisfactory to the Indemnified
Party, and thereupon the Indemnifying Party shall take over complete defense of
the Claim and the Indemnified Party shall sustain no further legal or other
expenses in respect of such Claim. The Indemnified Party will not confess any
Claim or make any compromise in any case in which the Indemnifying Party will be
asked to provide indemnification, except with the Indemnifying Party's prior
written consent. The obligations of the parties hereto under this Article 10
shall survive the termination of this Agreement.

10.4 Any claim for indemnification under this Agreement must be made
prior to one year after the applicable party becomes aware of the event for
which indemnification is claimed.

10.5 Except for remedies that cannot be waived as a matter of law (and
injunctive or provisional relief), the provisions of this Article 10 shall be
FDISG's sole and exclusive remedy for claims or other actions or proceedings to
which the Fund's indemnification obligations pursuant to this Article 10 may
apply.

Article 11 Standard of Care.

11.1 FDISG shall at all times act in good faith and agrees to use its
best efforts within commercially reasonable limits to ensure the accuracy of all
services performed under this Agreement, but assumes no responsibility for loss
or damage to the Fund unless said errors are caused by FDISG's own negligence,
bad faith or willful misconduct or that of its employees.

11.2 Notwithstanding the foregoing Section 11.1 or anything else
contained in this Agreement to the contrary, FDISG's entire liability to the
Fund for any loss or damage, direct or indirect for any cause whatsoever
(including but not limited to those arising out of this Agreement), and
regardless of the form of action, shall be limited to the Fund's actual direct
out-of-pocket expenses which are reasonably incurred by the Fund, but shall not
under any circumstances exceed the lesser of (i) an amount equivalent to the
average of twelve month's fees paid to FDISG under this Agreement; or (ii)
one-million dollars ($1,000,000). The foregoing limitation of liability shall
not apply to damages occasioned by the intentional misconduct or gross
negligence of either party.

Article 12 Consequential Damages.

NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, IN NO EVENT
SHALL FDISG, ITS AFFILIATES OR ANY OF ITS OR THEIR DIRECTORS, OFFICERS,
EMPLOYEES, AGENTS OR SUBCONTRACTORS BE LIABLE UNDER ANY THEORY OF TORT,
CONTRACT, STRICT LIABILITY OR OTHER LEGAL OR EQUITABLE THEORY FOR LOST PROFITS,
EXEMPLARY, PUNITIVE, SPECIAL, INCIDENTAL, INDIRECT OR CONSEQUENTIAL DAMAGES,
EACH OF WHICH IS HEREBY EXCLUDED BY AGREEMENT OF THE PARTIES REGARDLESS OF
WHETHER SUCH DAMAGES WERE FORESEEABLE OR WHETHER EITHER PARTY OR ANY ENTITY HAS
BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.

Article 13 Term and Termination.

13.1 This Agreement shall be effective on the date first written above
and shall continue

<PAGE>

for a period of five (5) years (the "Initial Term"), unless earlier terminated
pursuant to the terms of this Agreement. Thereafter, this Agreement shall
automatically be renewed for successive terms of three (3) years ("Renewal
Terms") each.

13.2 Either party may terminate this Agreement at the end of the
Initial Term or any subsequent Renewal Term upon not less than ninety (90) days
or more than one-hundred eighty (180) days prior written notice to the other
party.

13.3 Nothwithstanding the foregoing provisions in Section 13.1 and
13.2, the Fund may terminate this Agreement as follows:

(a) the Fund may terminate this Agreement after year three
upon ninety (90) days written notice to FDISG. Such notice must be
received by FDISG no earlier than ninety (90) days prior to the end of
the third year of the Agreement and no later than the end of the third
year of the Agreement, otherwise the Agreement shall continue in full
force and effect; or

(b) the Fund may terminate this Agreement after year four upon
ninety (90) days written notice to FDISG. Such notice must be received
by FDISG no earlier than ninety (90) days prior to the end of the
fourth year of the Agreement and no later than the end of the fourth
year of the Agreement, otherwise the Agreement shall continue in full
force and effect.

13.4 In the event that this Agreement is terminated pursuant to
provisions in Sections 13.3 (a) or (b) above, the Fund shall pay to FDISG its
allocable portion of the aggregate early termination fee prior to the effective
date of such termination such that the total termination fee paid by investment
companies within the SIT Mutual Fund Group (SIT Mutual Fund Group as used in
Section 13 is defined as investment companies for which SIT Investment
Associates, Inc. serves as the investment manager and sponsor and which have
entered into similar transfer agency and services agreements as this Agreement
with FDISG) equals:

(a) if termination under Section 13.3(a) - $150,000.00; or
(b) if termination under Section 13.3(b) - $100,000.00.

13.5 In the event a termination notice is given by the Fund, all
expenses associated with movement of records and materials and conversion
thereof to a successor transfer agent will be borne by the Fund.

13.6 If a party hereto is guilty of a material failure to perform its
duties and obligations hereunder (a "Defaulting Party") the other party (the
"Non-Defaulting Party") may give written notice thereof to the Defaulting Party,
and if such material breach shall not have been remedied within thirty (30) days
after such written notice is given, then the Non-Defaulting Party may terminate
this Agreement by giving thirty (30) days written notice of such termination to
the Defaulting Party; provided however, that no such cure period shall be
allowed for any such material breach which occurs more than twice in any one
year period. If FDISG is the Non-Defaulting Party, its termination of this
Agreement shall not constitute a waiver of any other rights or remedies of FDISG
with respect to services performed prior to such termination or rights of FDISG
to be reimbursed for out-of-pocket expenses. In all cases, termination by the
Non-Defaulting Party shall not constitute a waiver by the Non-Defaulting Party
of any other rights it might have under this Agreement or otherwise against the
Defaulting Party.

Article 14 Confidentiality.

<PAGE>

14.1 The parties agree that the Proprietary Information (defined below)
and the contents of this Agreement (collectively "Confidential Information") are
confidential information of the parties and their respective licensors. The Fund
and FDISG shall exercise at least the same degree of care, but not less than
reasonable care, to safeguard the confidentiality of the Confidential
Information of the other as it would exercise to protect it's own confidential
information of a similar nature. The Fund and FDISG may use the Confidential
Information only to exercise its rights under this Agreement. The Fund and FDISG
shall not duplicate, sell or disclose to others the Confidential Information of
the other, in whole or in part, without the prior written permission of the
other party. The Fund and FDISG may, however, disclose Confidential Information
to its employees who have a need to know the Confidential Information to perform
work for the other, provided that each shall use reasonable efforts to ensure
that the Confidential Information is not duplicated or disclosed by its
employees in breach of this Agreement. The Fund and FDISG may also disclose the
Confidential Information to independent contractors, auditors, and professional
advisors, provided they first agree in writing to be bound by the
confidentiality obligations substantially similar to this Section 14.1.
Notwithstanding the previous sentence, in no event shall either the Fund or
FDISG disclose the Confidential Information to any competitor of the other
without specific, prior written consent.

14.2 Proprietary Information means:

(a) any data or information that is competitively sensitive
material, and not generally known to the public, including, but not
limited to, information about product plans, marketing strategies,
finance, operations, customer relationships, customer profiles, sales
estimates, business plans, and internal performance results relating to
the past, present or future business activities of the Fund or FDISG,
their respective subsidiaries and affiliated companies and the
customers, clients and suppliers of any of them;

(b) any scientific or technical information, design, process,
procedure, formula, or improvement that is commercially valuable and
secret in the sense that its confidentiality affords the Fund or FDISG
a competitive advantage over its competitors; and

(c) all confidential or proprietary concepts, documentation,
reports, data, specifications, computer software, source code, object
code, flow charts, databases, inventions, know-how, show-how and trade
secrets, whether or not patentable or copyrightable.

14.3 Confidential Information includes, without limitation, all
documents, inventions, substances, engineering and laboratory notebooks,
drawings, diagrams, specifications, bills of material, equipment, prototypes and
models, and any other tangible manifestation of the foregoing of either party
which now exist or come into the control or possession of the other.

Article 15 Force Majeure.

No party shall be liable for any default or delay in the performance of
its obligations under this Agreement if and to the extent such default or delay
is caused, directly or indirectly, by (i) fire, flood, elements of nature or
other acts of God; (ii) any outbreak or escalation of hostilities, war, riots or
civil disorders in any country, (iii) any act or omission of the other party or
any governmental authority; (iv) any labor disputes (whether or not the
employees' demands

<PAGE>

are reasonable or within the party's power to satisfy); or (v) nonperformance by
a third party or any similar cause beyond the reasonable control of such party,
including without limitation, failures or fluctuations in telecommunications or
other equipment. In any such event, the non-performing party shall be excused
from any further performance and observance of the obligations so affected only
for as long as such circumstances prevail and such party continues to use
commercially reasonable efforts to recommence performance or observance as soon
as practicable.

Article 16 Amendments.

No change, termination, modification, or waiver of any term or
condition of the Agreement shall be valid unless in writing signed by each
party. A party's waiver of a breach of any term or condition in the Agreement
shall not be deemed a waiver of any subsequent breach of the same or another
term or condition.

Article 17 Assignment and Subcontracting.

This Agreement, its benefits and obligations shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns. This Agreement may not be assigned or otherwise transferred
by either party hereto, without the prior written consent of the other party,
which consent shall not be unreasonably withheld. FDISG may, in its sole
discretion, engage subcontractors to perform any of the obligations contained in
this Agreement to be performed by FDISG.

Article 18 Notice.

Any notice or other instrument authorized or required by this Agreement to be
given in writing to the Fund or FDISG, shall be sufficiently given if addressed
to that party and received by it at its office set forth below or at such other
place as it may from time to time designate in writing.

To the Fund:

SIT Mutual Funds, Inc.
4600 Norwest Center
Minneapolis, MN 55402
Attention: President

To FDISG:

First Data Investor Services Group, Inc.
One Exchange Place
53 State Street
Boston, Massachusetts 02109
Attention: President

with a copy to FDISG's General Counsel

Article 19 Successors.

This Agreement shall extend to and shall be binding upon the parties
hereto, and their respective successors and assigns, provided, however, that
this Agreement shall not be assigned to any person other than a person
controlling, controlled by or under common control with the

<PAGE>

assignor without the written consent of the other party, which consent shall not
be unreasonably withheld.

Article 20 Governing Law/Venue.

The laws of the Commonwealth of Massachusetts, excluding the laws on
conflicts of laws, shall govern the interpretation, validity, and enforcement of
this agreement. All actions arising from or related to this Agreement shall be
brought in the state and federal courts sitting in the City of Boston, and FDISG
and the Fund hereby submit themselves to the exclusive jurisdiction of those
courts.

Article 21 Counterparts.

This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original; but such counterparts shall, together,
constitute only one instrument.

Article 22 Captions.

The captions of this Agreement are included for convenience of
reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.

Article 23 Publicity.

Neither FDISG nor the Fund shall release or publish news releases,
public announcements, advertising or other publicity relating to this Agreement
or to the transactions contemplated by it without the prior review and written
approval of the other party; provided, however, that either party may make such
disclosures as are required by legal, accounting or regulatory requirements
after making reasonable efforts in the circumstances to consult in advance with
the other party.

Article 24 Relationship of Parties.

The parties agree that they are independent contractors and not
partners or co-venturers and nothing contained herein shall be interpreted or
construed otherwise.

Article 25 Entire Agreement; Severability.

25.1 This Agreement, including Schedules, Addenda, and Exhibits hereto,
constitutes the entire Agreement between the parties with respect to the subject
matter hereof and supersedes all prior and contemporaneous proposals,
agreements, contracts, representations, and understandings, whether written or
oral, between the parties with respect to the subject matter hereof. No change,
termination, modification, or waiver of any term or condition of the Agreement
shall be valid unless in writing signed by each party. A party's waiver of a
breach of any term or condition in the Agreement shall not be deemed a waiver of
any subsequent breach of the same or another term or condition.

25.2 The parties intend every provision of this Agreement to be
severable. If a court of competent jurisdiction determines that any term or
provision is illegal or invalid for any reason, the illegality or invalidity
shall not affect the validity of the remainder of this Agreement. In such case,
the parties shall in good faith modify or substitute such provision consistent
with

<PAGE>

the original intent of the parties. Without limiting the generality of this
paragraph, if a court determines that any remedy stated in this Agreement has
failed of its essential purpose, then all other provisions of this Agreement,
including the limitations on liability and exclusion of damages, shall remain
fully effective.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers, as of the day and year first above
written.

SIT MUTUAL FUNDS, INC.

By: /s/ Mary K. Stern
Title: President

FIRST DATA INVESTOR SERVICES GROUP, INC.

By: /s/ Gerald Kokos
Title: Executive Vice President

Exhibit 1

LIST OF PORTFOLIOS
Dated as of October 14, 1997

Sit International Growth Fund (Series A)

Sit Balanced Fund (Series B)

Sit Developing Markets Growth Fund (Series C)

Sit Small Cap Growth Fund (Series D)

Sit Science and Technology Growth Fund (Series E)

Sit Regional Growth Fund (Series F)

SIT MUTUAL FUNDS, INC.

By: /s/ Mary K. Stern
Title: President

FIRST DATA INVESTOR SERVICES GROUP, INC.

By: /s/ Gerald Kokos
Title: Executive Vice President

Schedule A

<PAGE>

DUTIES OF FDISG

1. Shareholder Information. FDISG shall maintain a record of the number
of Shares held by each Shareholder of record which shall include name, address,
taxpayer identification and which shall indicate whether such Shares are held in
certificates or uncertificated form.

2. Shareholder Services. FDISG shall respond as appropriate to all
inquiries and communications from Shareholders relating to Shareholder accounts
with respect to its duties hereunder and as may be from time to time mutually
agreed upon between FDISG and the Fund.

3. Share Certificates.
(a) At the expense of the Fund, the Fund shall supply FDISG
with an adequate supply of blank share certificates to meet FDISG requirements
therefor. Such Share certificates shall be properly signed by facsimile. The
Fund agrees that, notwithstanding the death, resignation, or removal of any
officer of the Fund whose signature appears on such certificates, FDISG or its
agent may continue to countersign certificates which bear such signatures until
otherwise directed by Written Instructions.

(b) FDISG shall issue replacement Share certificates in lieu
of certificates which have been lost, stolen or destroyed, upon receipt by FDISG
of properly executed affidavits and lost certificate bonds, in form satisfactory
to FDISG, with the Fund and FDISG as obligees under the bond.

(c) FDISG shall also maintain a record of each certificate
issued, the number of Shares represented thereby and the Shareholder of record.
With respect to Shares held in open accounts or uncertificated form (i.e., no
certificate being issued with respect thereto) FDISG shall maintain comparable
records of the Shareholders thereof, including their names, addresses and
taxpayer identification. FDISG shall further maintain a stop transfer record on
lost and/or replaced certificates.

4. Mailing Communications to Shareholders; Proxy Materials. FDISG will
address and mail to Shareholders of the Fund, all reports to Shareholders,
dividend and distribution notices and proxy material for the Fund's meetings of
Shareholders. In connection with meetings of Shareholders, FDISG will prepare
Shareholder lists, mail and certify as to the mailing of proxy materials,
process and tabulate returned proxy cards, report on proxies voted prior to
meetings, act as inspector of election at meetings and certify Shares voted at
meetings.

5. Sale of Shares
(a) FDISG shall not be required to issue any Shares of the
Fund where it has received a Written Instruction from the Fund or official
notice from any appropriate authority that the sale of the Shares of the Fund
has been suspended or discontinued. The existence of such Written Instructions
or such official notice shall be conclusive evidence of the right of FDISG to
rely on such Written Instructions or official notice.

(b) In the event that any check or other order for the payment
of money is returned unpaid for any reason, FDISG will endeavor to: (i) give
prompt notice of such return to the Fund or its designee; (ii) place a stop
transfer order against all Shares issued as a result of such check or order; and
(iii) take such actions as FDISG may from time to time deem appropriate.

<PAGE>

6. Transfer and Repurchase
(a) FDISG shall process all requests to transfer or redeem
Shares in accordance with the transfer or repurchase procedures set forth in the
Fund's Prospectus.

(b) FDISG will transfer or repurchase Shares upon receipt of
Oral or Written Instructions or otherwise pursuant to the Prospectus and Share
certificates, if any, properly endorsed for transfer or redemption, accompanied
by such documents as FDISG reasonably may deem necessary.

(c) FDISG reserves the right to refuse to transfer or
repurchase Shares until it is satisfied that the endorsement on the instructions
is valid and genuine. FDISG also reserves the right to refuse to transfer or
repurchase Shares until it is satisfied that the requested transfer or
repurchase is legally authorized, and it shall incur no liability for the
refusal, in good faith, to make transfers or repurchases which FDISG, in its
good judgement, deems improper or unauthorized, or until it is reasonably
satisfied that there is no basis to any claims adverse to such transfer or
repurchase.

(d) When Shares are redeemed, FDISG shall, upon receipt of the
instructions and documents in proper form, deliver to the Custodian and the Fund
or its designee a notification setting forth the number of Shares to be
repurchased. Such repurchased shares shall be reflected on appropriate accounts
maintained by FDISG reflecting outstanding Shares of the Fund and Shares
attributed to individual accounts.

(e) FDISG, upon receipt of the monies paid to it by the
Custodian for the repurchase of Shares, pay such monies as are received from the
Custodian, all in accordance with the procedures described in the written
instruction received by FDISG from the Fund.

(f) FDISG shall not process or effect any repurchase with
respect to Shares of the Fund after receipt by FDISG or its agent of
notification of the suspension of the determination of the net asset value of
the Fund.

7. Dividends
(a) Upon the declaration of each dividend and each capital
gains distribution by the Board of Directors of the Fund with respect to Shares
of the Fund, the Fund shall furnish or cause to be furnished to FDISG Written
Instructions setting forth the date of the declaration of such dividend or
distribution, the ex-dividend date, the date of payment thereof, the record date
as of which Shareholders entitled to payment shall be determined, the amount
payable per Share to the Shareholders of record as of that date, the total
amount payable to FDISG on the payment date and whether such dividend or
distribution is to be paid in Shares at net asset value.

(b) On or before the payment date specified in such resolution
of the Board of Directors, the Fund will pay to FDISG sufficient cash to make
payment to the Shareholders of record as of such payment date.

(c) If FDISG does not receive sufficient cash from the Fund to
make total dividend and/or distribution payments to all Shareholders of the Fund
as of the record date, FDISG will, upon notifying the Fund, withhold payment to
all Shareholders of record as of the record date until sufficient cash is
provided to FDISG.

<PAGE>

8. In addition to and neither in lieu nor in contravention of the
services set forth above, FDISG shall: (i) perform all the customary services of
a transfer agent, registrar, dividend disbursing agent and agent of the dividend
reinvestment and cash purchase plan as described herein consistent with those
requirements in effect as at the date of this Agreement. The detailed
definition, frequency, limitations and associated costs (if any) set out in the
attached fee schedule, include but are not limited to: maintaining all
Shareholder accounts, preparing Shareholder meeting lists, mailing proxies,
tabulating proxies, mailing Shareholder reports to current Shareholders,
withholding taxes on U.S. resident and non-resident alien accounts where
applicable, preparing and filing U.S. Treasury Department Forms 1099 and other
appropriate forms required with respect to dividends and distributions by
federal authorities for all Shareholders.

Schedule B
QUALITY STANDARD LEVELS

1. TIMELINESS OF RESEARCH REQUESTS

SERVICE DESCRIPTION:
FDISG will provide a research and problem resolution service to the
Shareholders. On a daily basis, the Fund, using either the Impress CSS
system or by fax, will communicate research requests to FDISG.

FDISG'S OBJECTIVE:
FDISG's objective is to accurately respond to 98% of the research
requests within the periods set forth below.

Wire: Complete within 24 hours
Financial: Complete within 48 hours
Non-Financial: Complete within 72 hours

2. MANUAL DATA ENTRY

SERVICE DESCRIPTION:
FDISG provides a manual data entry service to the Fund for establishing
new Shareholder accounts and monitoring existing account records.

FDISG'S OBJECTIVE:

FDISG's objective is to establish new accounts with a data accuracy
rate of 98%.

3. ACCURACY AND TIMELINESS OF SHAREHOLDER STATEMENTS

SERVICE DESCRIPTION:
Based on the mail frequency of the Fund, FDISG will produce and mail
periodic statements to Shareholders. FDISG will provide the Fund with a
mailing report from its Print/Mail vendor which will indicate the date
on which all Shareholder statements were mailed.

FDISG'S OBJECTIVE:
FDISG's objective is to manage this service so that 99% of all
statements from the Fund are accurate and are mailed no later than five
(5) business days after the statement date.

<PAGE>

4. ACCURACY AND TIMELINESS OF DAILY ADVICE MAILINGS

SERVICE DESCRIPTION:

FDISG will produce and send, deliver or distribute an advice to the
Shareholder's account, except where suppressed pursuant to instructions
received from the Fund. FDISG will provide the Fund with a mailing
report from its Print/Mail vendor which will indicate the date on which
all advises were mailed.

FDISG'S OBJECTIVES:
FDISG's objective is to manage this service so that 99% of such advices
are accurate and are mailed no later than two (2) business days
following the date of the transaction.

5. TIMELINESS OF DISTRIBUTION CHECKS AND DIVIDEND MAILINGS

SERVICE DESCRIPTION:
Periodically, FDISG will create and mail checks for Fund's respective
Shareholders. FDISG will provide the Fund with a mailing report from
its Print/ Mail vendor indicating the date on which all dividend or
distribution checks were mailed.

FDISG'S OBJECTIVE:
FDISG's objective is to manage this service so that 99% of such advices
are accurate and are mailed no later than two (2) business days
following the date of the transaction.

6. FINANCIAL CONTROL

SERVICE DESCRIPTION:
FDISG will provide daily fund settlement reports to the Fund's
accounting and custodian service providers. FDISG will reconcile the
Fund's Demand Deposit Accounts on a daily basis, including investments
and disbursements. Acceptable DDA Item Exceptions beyond five days
include:

- Client Originated Item
- Shareholder Reclaim
- Bank (Cash Manager) Error
- Shareholder Fraudulent Activity
- Fed Wire Recall
- System Data Processing Limitations
- Miscellaneous Funding Issues with Shareholder, Cash
Manager, or Custodian

FDISG'S OBJECTIVE:
FDISG's objective is to reconcile all DDA transactions within five (5)
business days of the transaction post date. Any exceptions, including
items greater than five (5) business days, will be reported to the Fund
with a general item description. Any exception must be approved by the
Fund to be considered within standard.

Schedule C
FEE SCHEDULE
SIT MUTUAL FUNDS, INC.

<PAGE>

Annual Fees:

Open Account Fees: $13.50 per open account
Closed Account Fees: $ 2.40 per closed account
Fund Minimums: $24,000 per fund per year
Conversion Costs: Free set-up fee

Value Added Services:

Cost Basis Accounting: Free set-up fee
Adhoc SQL: Free set-up fee; $1,000 per hour
AVR Solution: Free set-up fee
$.2125 per minute charge
$.0775 per minute telecom charge
$.10 per call

FundServ: Free set-up fee, $.15 per trade plus
$.10 same day trades
Asset Allocation/Reallocation: Free set-up fee, $.25 per trade via
NSCC
Direct Access Zip Link: Free set-up fee, $1,000 per month,
$.03/record plus $.015/price record

CONSOLIDATED STATEMENTS PRICE DETERMINED BY PROJECT SCOPE.
CUSTOMIZED PROGRAMMING BILLABLE AT $100/HOUR.

General:

1.1 FDISG may charge a service fee equal to the lesser of (i) one and one
half percent (1 1/2%) per month of (ii) the highest interest rate
legally permitted on any unpaid amounts, unless such amounts are
ultimately determined not due in accordance with the Payment Dispute
Procedure. The Fund shall also reimburse FDISG for all reasonable
expenses to collect delinquent amounts, including reasonable attorneys'
fees and court costs.

1.2 FDISG may adjust any annual or monthly fees once per calendar year,
upon thirty (30) days prior written notice, in an amount not to exceed
the cumulative percentage increase in the Consumer Price Index for All
Urban Consumers (CIP-U) U.S. City Average, All Items (unadjusted) -
(1982-84 = 100), published by the U.S. Department of Labor since the
last such adjustment in Client's monthly fees (or the effective Date
absent a prior such adjustment).

Schedule D
OUT-OF-POCKET EXPENSES

The Fund shall reimburse FDISG monthly for applicable out-of-pocket
expenses, including, but not limited to the following items:

- Microfiche/microfilm production
- Magnetic media tapes and freight
- Printing costs, including certificates, envelopes, checks and
stationery
- Postage (bulk, pre-sort, ZIP+4, barcoding, first class)
direct pass through to the Fund
- Due diligence mailings
- Telephone and telecommunication costs, including all lease,
maintenance and line costs

<PAGE>

- Special Ad hoc reports requested by the Fund
- Proxy solicitations, mailings and tabulations
- Daily & Distribution advice mailings
- Shipping, Certified and Overnight mail and insurance
- Year-end form production and mailings
- Duplicating services
- Courier services
- Incoming and outgoing wire charges
- Federal Reserve charges for check clearance
- Overtime, as approved by the Fund
- Temporary staff, as approved by the Fund
- Travel and entertainment, as approved by the Fund
- Record retention, retrieval and destruction costs, including,
but not limited to exit fees charged by third party record
keeping vendors
- Third party audit reviews
- All Systems enhancements after the conversion at the rate of
$100.00 per hour - Insurance
- Such other miscellaneous expenses reasonably incurred by FDISG
in performing its duties and responsibilities under this
Agreement.

The Fund agrees that postage and mailing expenses will be paid on the
day of or prior to mailing as agreed with FDISG. In addition, the Fund will
promptly reimburse FDISG for any other unscheduled expenses incurred by FDISG
whenever the Fund and FDISG mutually agree that such expenses are not otherwise
properly borne by FDISG as part of its duties and obligations under the
Agreement.

Schedule E
FUND DOCUMENTS

- Certified copy of the Articles of Incorporation of the Fund,
as amended

- Certified copy of the By-laws of the Fund, as amended,

- Copy of the resolution of the Board of Directors authorizing
the execution and delivery of this Agreement

- Specimens of the certificates for Shares of the Fund, if
applicable, in the form approved by the Board of Directors of
the Fund, with a certificate of the Secretary of the Fund as
to such approval

- All account application forms and other documents relating to
Shareholder accounts or to any plan, program or service
offered by the Fund

- Certified list of Shareholders of the Fund with the name,
address and taxpayer identification number of each
Shareholder, and the number of Shares of the Fund held by
each, certificate numbers and denominations (if any
certificates have been issued), lists of any accounts against
which stop transfer orders have been placed, together with the
reasons therefore, and the number of Shares redeemed by the
Fund

<PAGE>

- All notices issued by the Fund with respect to the Shares in
accordance with and pursuant to the Articles of Incorporation
or By-laws of the Fund or as required by law and shall perform
such other specific duties as are set forth in the Articles of
Incorporation including the giving of notice of any special or
annual meetings of shareholders and any other notices required
thereby.

EXHIBIT 8.3

Accounting Services Agreement
Sit Mutual Funds, Inc.

ACCOUNTING SERVICES AGREEMENT

THIS ACCOUNTING SERVICES AGREEMENT is made as of April 1, 1996 (the
"Agreement"), by and between Sit Mutual Funds, a Minnesota corporation (the
"Company"), and First Data Investor Services Group, Inc., a Massachusetts
corporation ("FDISG").

WHEREAS, the Company is registered as a diversified open-end management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"); and

WHEREAS, the Company wishes to retain FDISG to provide certain fund
accounting services with respect to each investment portfolio listed in Schedule
A hereto, as the same may be amended from time to time by the parties hereto
(collectively, the "Funds"), and FDISG is willing to furnish such services;

WITNESSETH:

NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:

1. Appointment. The Company hereby appoints FDISG to provide certain
fund accounting services required by the Company for each Fund for the period
and on the terms set forth in this Agreement. FDISG accepts such appointment and
agrees to furnish the services herein set forth in return for the compensation
as provided in Section 4 of this Agreement. In the event that the Company
decides to retain FDISG to act as fund accountant hereunder with respect to one
or more portfolios other than the Funds, the Company shall notify FDISG in
writing. If FDISG is willing to render such services, it shall notify the
Company in writing whereupon such portfolio shall become a Fund hereunder.

2. Delivery of Documents. The Company has furnished FDISG with copies
properly certified or authenticated of each of the following:

(a) Resolutions of the Company's Board of Directors
authorizing FDISG to provide certain fund accounting services to the Company and
approving this Agreement;

(b) The Company's Articles of Incorporation (the "Articles")
filed with the State of Minnesota and all amendments thereto;

(d) The Investment Advisory Agreement between SIT Investment
Associates, Inc. (the "Adviser") and the Company dated as of November 1, 1992
and all amendments thereto (the "Advisory Agreement");

<PAGE>

(e) The Custody Agreement between The Northern Trust Company
(the "Custodian") and the Company dated as of April 1, 1996 and all amendments
thereto (the "Custody Agreement");

(f) The Transfer Agency and Registrar Agreement between First
Data Investor Services Group, Inc. (the "Transfer Agent") and the Company dated
as of January 1, 1996 and all amendments thereto;

(g) The Company's Registration Statement on Form N-1A (the
"Registration Statement") under the Securities Act of 1933 and under the
Investment Company Act of 1940 (the "1940 Act") (File Nos. 2-75151 and
811-03342), as declared effective by the Securities and Exchange Commission (the
"SEC") on September 2, 1982, relating to shares of beneficial interest of the
Company (the "Shares"), and all amendments thereto; and

(h) Each Fund's most recent prospectus and statement of
additional information and all amendments and supplements thereto (collectively,
the "Prospectuses").

The Company will furnish FDISG from time to time with copies, properly
certified or authenticated, of all amendments of or supplements to the
foregoing, if any. Furthermore, the Company will provide FDISG with any other
documents that FDISG may reasonably request and will notify FDISG as soon as
possible of any matter materially affecting the performance by FDISG of its
services under this Agreement.

3. Services and Duties. Subject to the supervision and control of the
Company, FDISG undertakes to provide the following specific services:

(a) Accounting and bookkeeping services (including the
maintenance of such accounts, books and records of the Company as may be
required by Section 31(a) of the 1940 Act and the rules thereunder);

(b) Internal auditing;

(c) Valuing the assets of each Fund and calculating the net
asset value of the shares of the Fund at the close of trading on the New York
Stock Exchange ("NYSE") on each day on which the NYSE is open for trading, and
at such other times as the Board of Directors may reasonably request;

(d) Accumulating information for and, subject to approval by
the Company's Treasurer, preparing reports to the Company's shareholders of
record and the SEC including, but not necessarily limited to, Annual Reports and
Semi-Annual Reports on Form N-SAR;

(e) Assisting the Adviser, at the Adviser's request, in
monitoring and developing compliance procedures for the Company which will
include, among other matters, procedures to assist the Adviser in monitoring
compliance with each Fund's investment objective, policies, restrictions, tax
matters and applicable laws and regulations; and

(f) Preparing and furnishing the Company (at the Company's
request) with performance information (including yield and total return
information) calculated in accordance

<PAGE>

with applicable U.S. securities laws and reporting to external databases such
information as may reasonably be requested.

In performing its duties under this Agreement, FDISG: (a) will act in
accordance with the Articles, By-Laws, Prospectuses and with the instructions
and directions of the Company and will conform to and comply with the
requirements of the 1940 Act and all other applicable Federal or state laws and
regulations; and (b) will consult with legal counsel to the Company, as
necessary and appropriate. Furthermore, FDISG shall not have or be required to
have any authority to supervise the investment or reinvestment of the securities
or other properties which comprise the assets of the Company or any of its Funds
and shall not provide any investment advisory services to the Company or any of
its Funds.

4. Compensation and Allocation of Expenses.

(a) For the services to be rendered, the facilities to be
furnished and the payments to be made by FDISG, as provided for in this
Agreement, the Company, on behalf of each Fund, will pay FDISG on the first
business day of each month a fee for the previous month at the annual rate of
.055 of 1.00% of the value of the Fund's average daily net assets. Within
fifteen (15) days after FDISG has received both the monthly fee set forth herein
from the Company and the monthly bill from the Custodian, FDISG shall (pursuant
to the Client Services Agreement, dated as of April 1, 1996, between FDISG and
the Custodian (the "Client Services Agreement") and the Custody Agreement) pay
to the Custodian, with respect to each Fund, a fee which shall serve as full
payment for the Custodian's services to the Fund under the Custody Agreement and
the Client Services Agreement for the preceding month at the annual rate of .01
of 1.00% of the value of the Fund's average daily net assets (plus out-of-pocket
expenses). For the purposes of calculating the fees described herein, the Fund's
average daily net assets will be deemed to be the average daily value of the
Fund's total assets minus the sum of the Fund's liabilities (excluding the
aggregate liquidation preference on the outstanding shares of the Fund's auction
rate preferred stock and accumulated dividends, if any, thereon). Fees for the
period from the date the Registration Statement is declared effective by the SEC
to the end of the month during which the Registration Statement is declared
effective shall be prorated according to the proportion that such period bears
to the full monthly period.

(b) The Company shall compensate FDISG for its services rendered
pursuant to this Agreement in accordance with the fees set forth above. Such
fees do not include out-of-pocket disbursements of FDISG for which FDISG shall
be entitled to bill separately. Out-of-pocket disbursements shall include, but
shall not be limited to, the items specified in Schedule B annexed hereto and
incorporated herein. Schedule B may be modified by FDISG upon not less than
thirty days' prior written notice to the Company.

(c) FDISG shall not be required to pay any of the following
expenses incurred by the Company: membership dues in the Investment Company
Institute or any similar organization; transfer agency expenses; investment
advisory expenses; costs of printing and mailing stock certificates,
prospectuses, reports and notices; interest on borrowed money; brokerage
commissions; taxes and fees payable to Federal, state and other governmental
agencies; fees of Directors of the Company who are not affiliated with FDISG;
outside auditing expenses; outside legal expenses; or other expenses not
specified in this Section 4 which may be properly payable by the Company.

<PAGE>

(d) FDISG will bill the Company as soon as practicable after the
end of each calendar month for out-of-pocket disbursements, and said billings
will be detailed in accordance with this Section and Schedule B. The Company
will pay to FDISG the amount of such billing within 30 days of such billing.

(e) Upon any termination of this Agreement before the end of any
month, the fee for such period shall be prorated according to the proportion
which such period bears to the full month period. For purposes of determining
fees payable to FDISG, the value of each Fund's net assets shall be computed at
the time and in the manner specified in the most recent Prospectuses.

(f) The Company acknowledges that the fees that FDISG charges the
Company under this Agreement reflect the allocation of risk between the parties,
including the disclaimer of warranties in Section 7 and the limitations on
liability in Section 5. Modifying the allocation of risk from what is stated
here would affect the fees that FDISG charges, and in consideration of those
fees, the Company agrees to the stated allocation of risk.

(g) FDISG will from time to time employ or associate itself with
such person or persons as FDISG may believe to be particularly suited to assist
it in performing services under this Agreement. Such person or persons may be
officers and employees who are employed by both FDISG and the Company. The
compensation of such person or persons shall be paid by FDISG and no obligation
shall be incurred on behalf of the Company in such respect.

(5) Limitation of Liability

(a) FDISG, its directors, officers, employees, shareholders
and agents shall not be liable for any error of judgment or mistake of law or
for any loss suffered by the Company or a Fund in connection with the
performance of this Agreement, except a loss resulting from willful misfeasance,
bad faith, or negligence on the part of FDISG in the performance of its
obligations and duties under this Agreement.

(b) Notwithstanding any provision in this Agreement to the
contrary, FDISG's cumulative liability (to the Company) for all losses, claims,
suits, controversies, breaches, or damages for any cause whatsoever (including
but not limited to those arising out of or related to this Agreement) and
regardless of the form of action or legal theory shall not exceed the lesser of
(i) $1,000,000 or (ii) the fees received by FDISG for services provided under
this Agreement during the twelve months immediately prior to the date of such
loss or damage.

(c) Neither party may assert any cause of action against the
other party under this Agreement that accrued more than two (2) years prior to
the filing of the suit (or commencement of arbitration proceedings) alleging
such cause of action.

(d) Each party shall have the duty to mitigate damages for
which the other party may become responsible.

(e) NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE
CONTRARY, IN NO EVENT SHALL FDISG, ITS AFFILIATES OR ANY OF ITS OR THEIR
DIRECTORS, OFFICERS, EMPLOYEES, AGENTS OR SUBCONTRACTORS BE LIABLE UNDER ANY
THEORY OF TORT, CONTRACT, STRICT LIABILITY OR OTHER LEGAL OR EQUITABLE THEORY
FOR LOST PROFITS, EXEMPLARY, PUNITIVE, SPECIAL,

<PAGE>

INCIDENTAL, INDIRECT OR CONSEQUENTIAL DAMAGES, EACH OF WHICH IS HEREBY EXCLUDED
BY AGREEMENT OF THE PARTIES REGARDLESS OF WHETHER SUCH DAMAGES WERE FORESEEABLE
OR WHETHER EITHER PARTY OR ANY ENTITY HAS BEEN ADVISED OF THE POSSIBILITY OF
SUCH DAMAGES.

6. Indemnification.

(a) The Company shall indemnify and hold FDISG harmless from
and against any and all claims, costs, expenses (including reasonable attorneys'
fees), losses, damages, charges, payments and liabilities of any sort or kind
which may be asserted against FDISG or for which FDISG may be held to be liable
in connection with this Agreement or FDISG's performance hereunder (a "Claim"),
unless such Claim resulted from a negligent act or omission to act or bad faith
by FDISG in the performance of its duties hereunder.

(b) The Company or a Fund, its officers, employees,
shareholders and agents shall not be liable for, and FDISG shall indemnify and
hold the Company and each Fund harmless from and against any and all claims,
made by third parties, including costs, expenses (including reasonable
attorneys' fees), losses, damages, charges, payments and liabilities of any sort
or kind, which result from a negligent act or omission to act or bad faith by
FDISG in the performance of its duties hereunder.

(c) In any case in which either party (the "Indemnifying
Party") may be asked to indemnify or hold the other party (the "Indemnified
Party") harmless, the Indemnified Party will notify the Indemnifying Party
promptly after identifying any situation which it believes presents or appears
likely to present a claim for indemnification against the Indemnifying Party,
although the failure to do so shall not prevent recovery by the Indemnified
Party, and shall keep the Indemnifying Party advised with respect to all
developments concerning such situation. The Indemnifying Party shall have the
option to defend the Indemnified Party against any claim which may be the
subject of this indemnification, and, in the event that the Indemnifying Party
so elects, such defense shall be conducted by counsel chosen by the Indemnifying
Party and satisfactory to the Indemnified Party, and thereupon the Indemnifying
Party shall take over complete defense of the claim and the Indemnified Party
shall sustain no further legal or other expenses in respect of such claim. The
Indemnified Party will not confess any claim or make any compromise in any case
in which the Indemnifying Party will be asked to provide indemnification, except
with the Indemnifying Party's prior written consent. The obligations of the
parties hereto under this Section 6 shall survive the termination of this
Agreement.

7. EXCLUSION OF WARRANTIES. THIS IS A SERVICE AGREEMENT. EXCEPT AS
EXPRESSLY PROVIDED IN THIS AGREEMENT, FDISG DISCLAIMS ALL OTHER REPRESENTATIONS
OR WARRANTIES, EXPRESS OR IMPLIED, MADE TO THE FUND OR ANY OTHER PERSON,
INCLUDING, WITHOUT LIMITATION, ANY WARRANTIES REGARDING QUALITY, SUITABILITY,
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR OTHERWISE (IRRESPECTIVE OF
ANY COURSE OF DEALING, CUSTOM OR USAGE OF TRADE) OF ANY SERVICES OR ANY GOODS
PROVIDED INCIDENTAL TO SERVICES PROVIDED UNDER THIS AGREEMENT. FDISG DISCLAIMS
ANY WARRANTY OF TITLE OR NON-INFRINGEMENT EXCEPT AS OTHERWISE SET FORTH IN THIS
AGREEMENT.

8. Termination of Agreement.

<PAGE>

(a) This Agreement shall be effective on the date first
written above and shall continue for a period of three (3) years (the "Initial
Term"), unless earlier terminated pursuant to the terms of this Agreement.
Thereafter, this Agreement shall automatically be renewed for successive terms
of three (3) years ("Renewal Terms") each.

(b) Either party may terminate this Agreement at the end of
the Initial Term or at the end of any subsequent Renewal Term upon not than less
than ninety (90) days or more than one hundred-eighty (180) days prior written
notice to the other party.

(c) In the event a termination notice is given by the Company,
all expenses associated with movement of records and materials and conversion
thereof will be borne by the Company.

(d) If a party hereto is guilty of a material failure to
perform its duties and obligations hereunder (a "Defaulting Party") resulting in
a material loss to the other party, such other party (the "Non-Defaulting
Party") may give written notice thereof to the Defaulting Party, and if such
material breach shall not have been remedied within thirty (30) days after such
written notice is given, then the Non-Defaulting Party may terminate this
Agreement by giving thirty (30) days written notice of such termination to the
Defaulting Party. If FDISG is the Non-Defaulting Party, its termination of this
Agreement shall not constitute a waiver of any other rights or remedies of FDISG
with respect to services performed prior to such termination or rights of FDISG
to be reimbursed for out-of-pocket expenses. In all cases, termination by the
Non-Defaulting Party shall not constitute a waiver by the Non-Defaulting Party
of any other rights it might have under this Agreement or otherwise against the
Defaulting Party.

9. Modifications and Waivers. No change, termination, modification, or
waiver of any term or condition of the Agreement shall be valid unless in
writing signed by each party. No such writing shall be effective as against
FDISG unless said writing is executed by a Senior Vice President, Executive Vice
President or President of FDISG. A party's waiver of a breach of any term or
condition in the Agreement shall not be deemed a waiver of any subsequent breach
of the same or another term or condition.

10. No Presumption Against Drafter. FDISG and the Company have jointly
participated in the negotiation and drafting of this Agreement. The Agreement
shall be construed as if drafted jointly by the Company and FDISG, and no
presumptions arise favoring any party by virtue of the authorship of any
provision of this Agreement.

11. Publicity. Neither FDISG nor the Company shall release or publish
news releases, public announcements, advertising or other publicity relating to
this Agreement or to the transactions contemplated by it without prior review
and written approval of the other party; provided, however, that either party
may make such disclosures as are required by legal, accounting or regulatory
requirements after making reasonable efforts in the circumstances to consult in
advance with the other party.

12. Severability. The parties intend every provision of this Agreement
to be severable. If a court of competent jurisdiction determines that any term
or provision is illegal or invalid for any reason, the illegality or invalidity
shall not affect the validity of the remainder of this Agreement. In such case,
the parties shall in good faith modify or substitute such provision

<PAGE>

consistent with the original intent of the parties. Without limiting the
generality of this paragraph, if a court determines that any remedy stated in
this Agreement has failed of its essential purpose, then all other provisions of
this Agreement, including the limitations on liability and exclusion of damages,
shall remain fully effective.

13. Miscellaneous.

(a) Any notice or other instrument authorized or required by
this Agreement to be given in writing to the Company or FDISG shall be
sufficiently given if addressed to that party and received by it at its office
set forth below or at such other place as it may from time to time designate in
writing.

To the Company:

SIT Mutual Fund Group
4600 Norwest Center
90 South Seventh Street
Minneapolis, MN 55402
Attention: President

To FDISG:

First Data Investor Services Group, Inc.
53 State Street BOS 425
Boston, Massachusetts 02109-2873
Attention: Patricia Bickimer, Esq.

(b) This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns and is not intended to confer upon any other person any rights or
remedies hereunder. This Agreement may not be assigned or otherwise transferred
by either party hereto, without the prior written consent of the other party,
which consent shall not be unreasonably withheld; provided, however, that FDISG
may, in its sole discretion, assign all its right, title and interest in this
Agreement to an affiliate, parent or subsidiary, or to the purchaser of
substantially all of its business. FDISG may, in its sole discretion, engage
subcontractors to perform any of the obligations contained in this Agreement to
be performed by FDISG.

(c) The laws of the Commonwealth of Massachusetts, excluding
the laws on conflicts of laws, shall govern the interpretation, validity, and
enforcement of this Agreement. All actions arising from or related to this
Agreement shall be brought in the state and federal courts sitting in the City
of Boston, and FDISG and the Company hereby submit themselves to the exclusive
jurisdiction of those courts.

(d) This Agreement may be executed in any number of
counterparts each of which shall be deemed to be an original and which
collectively shall be deemed to constitute only one instrument.

<PAGE>

(e) The captions of this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect.

14. Confidentiality.

(a) The parties agree that the Proprietary Information
(defined below) and the contents of this Agreement (collectively "Confidential
Information") are confidential information of the parties and their respective
licensers. The Company and FDISG shall exercise reasonable care to safeguard the
confidentiality of the Confidential Information of the other. The Company and
FDISG may each use the Confidential Information only to exercise its rights or
perform its duties under this Agreement. The Company and FDISG shall not
duplicate, sell or disclose to others the Confidential Information of the other,
in whole or in part, without the prior written permission of the other party.
The Company and FDISG may, however, disclose Confidential Information to its
employees who have a need to know the Confidential Information to perform work
for the other, provided that each shall use reasonable efforts to ensure that
the Confidential Information is not duplicated or disclosed by its employees in
breach of this Agreement. The Company and FDISG may also disclose the
Confidential Information to independent contractors, auditors and professional
advisors, provided they first agree in writing to be bound by the
confidentiality obligations substantially similar to this Section 14.
Notwithstanding the previous sentence, in no event shall either the Company or
FDISG disclose the Confidential Information to any competitor of the other
without specific, prior written consent.

(b) Proprietary Information means:

(i) any data or information that is completely sensitive
material, and not generally known to the public, including, but not limited to,
information about product plans, marketing strategies, finance, operations,
customer relationships, customer profiles, sales estimates, business plans, and
internal performance results relating to the past, present or future business
activities of the Company or FDISG, their respective subsidiaries and affiliated
companies and the customers, clients and suppliers of any of them;

(ii) any scientific or technical information, design,
process, procedure, formula, or improvement that is commercially valuable and
secret in the sense that its confidentiality affords the Company or FDISG a
competitive advantage over its competitors; and

(iii) all confidential or proprietary concepts,
documentation, reports, data, specifications, computer software, source code,
object code, flow charts, databases, inventions, know-how, show-how and trade
secrets, whether or not patentable or copyrightable.

(c) Confidential Information includes, without limitation, all
documents, inventions, substances, engineering and laboratory notebooks,
drawings, diagrams, specifications, bills of material, equipment, prototypes and
models, and any other tangible manifestation of the foregoing of either party
which now exist or come into the control or possession of the other.

(d) The parties acknowledge that breach of the restrictions on
use, dissemination or disclosure of any Confidential Information would result in
immediate and irreparable harm,

<PAGE>

and money damages would be inadequate to compensate the other party for that
harm. The non-breaching party shall be entitled to equitable relief, in addition
to all other available remedies, to redress any such breach.

15. Force Majeure. No party shall be liable for any default or delay in
the performance of its obligations under this Agreement if and to the extent
such default or delay is caused, directly or indirectly, by (i) fire, flood,
elements of nature or other acts of God; (ii) any outbreak or escalation of
hostilities, war, riots or civil disorders in any country, (iii) any act or
omission of the other party or any governmental authority; (iv) any labor
disputes (whether or not the employees' demands are reasonable or within the
party's power to satisfy); or (v) nonperformance by a third party or any similar
cause beyond the reasonable control of such party, including without limitation,
failures or fluctuations in telecommunications or other equipment. In any such
event, the non-performing party shall be excused from any further performance
and observance of the obligations so affected only for so long as such
circumstances prevail and such party continues to use commercially reasonable
efforts to recommence performance or observance as soon as practicable.

16. Entire Agreement. This Agreement, including all Schedules hereto,
constitutes the entire Agreement between the parties with respect to the subject
matter hereof and supersedes all prior and contemporaneous proposals,
agreements, contracts, representations, and understandings, whether written or
oral, between the parties with respect to the subject matter hereof.

IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be duly executed and delivered by their duly authorized officers as of the date
first written above.

FIRST DATA INVESTOR SERVICES GROUP, INC.

By: /s/ Neil Forrest

Name: Neil Forrest
Title: Vice President

SIT MUTUAL FUNDS, INC.

By: /s/ Mary K. Stern

Name: Mary K. Stern
Title: President

<PAGE>

SCHEDULE A
Dated as of October 14, 1997

SIT INTERNATIONAL GROWTH FUND (SERIES A)

SIT BALANCED FUND (SERIES B)

SIT DEVELOPING MARKETS GROWTH FUND (SERIES C)

SIT SMALL CAP GROWTH FUND (SERIES D)

SIT SCIENCE AND TECHNOLOGY GROWTH FUND (SERIES E)

SIT REGIONAL GROWTH FUND (SERIES F)

FIRST DATA INVESTOR SERVICES GROUP, INC.

By: /s/ Neil Forrest

Name: Neil Forrest
Title: Vice President

SIT MUTUAL FUNDS, INC.

By: /s/ Mary K. Stern

Name: Mary K. Stern
Title: President

<PAGE>

SCHEDULE B
OUT-OF-POCKET EXPENSES

Out-of-pocket expenses include, but are not limited to, the following:
- Overnight delivery and courier service

- Telephone and telecommunications charges (including fax)

- Pricing services

- Terminals, transmitting lines and any expenses incurred in
connection with such lines

- Travel to and from Board Meetings outside the city of Boston,
Massachusetts (subject to prior approval from the Company)

- Any other unusual expenses in association with the operation
of the Company, such as excessive duplicating charges

FDISG RESERVES THE RIGHT TO RENEGOTIATE THE FEES SET FORTH ON THIS SCHEDULE B
AND IN SECTION 4 OF THE AGREEMENT SHOULD THE ACTUAL SERVICES VARY MATERIALLY
FROM THE ASSUMPTIONS PROVIDED.

EXHIBIT 10

Opinion and Consent of Dorsey & Whitney

DORSEY & WHITNEY LLP
PILLSBURY CENTER SOUTH
220 SOUTH SIXTH STREET
MINNEAPOLIS, MINNESOTA 55402

October 14, 1997

Sit Mutual Funds, Inc.
4600 Norwest Center
Minneapolis, Minnesota 55402

Ladies and Gentlemen:

We have acted as counsel to Sit Mutual Funds, Inc., a
Minnesota corporation (the "Company"), in rendering the opinions hereinafter set
forth with respect to the authorization of the Company's Series E Common Shares
(which represent interests in a series named Sit Science and Technology Growth
Fund) and Series F Common Shares (which represents interests in a series named
Sit Regional Growth Fund). The shares of the Company referred to above are
referred to herein collectively as the "Shares."

We understand that the Shares are being registered under the
Securities Act of 1933, as amended, and the Investment Company Act of 1940, as
amended, pursuant to the Company's Registration Statement on Form N-1A relating
to such shares (the "Registration Statement"). In rendering the opinions
hereinafter expressed, we have reviewed the corporate proceedings taken by the
Company in connection with the authorization and issuance of the Shares, and we
have reviewed such questions of law and examined copies of such corporate
records of the Company, certificates of public officials and of responsible
officers of the Company, and other documents as we have deemed necessary as a
basis for such opinions. As to the various matters of fact material to such
opinions, we have, when such facts were not independently established, relied to
the extent we deem proper on certificates of public officials and of responsible
officers of the Company. In connection with such review and examination, we have
assumed that all copies of documents provided to us conform to the originals and
that all signatures are genuine.

In addition, in rendering the opinions hereinafter expressed,
we have assumed, with the concurrence of the Company, that all of the Shares
will

<PAGE>

be issued and sold upon the terms and in the manner set forth in the
Registration Statement; that the Company will not issue Shares in excess of the
numbers authorized in the Company's Articles of Incorporation (and Certificates
of Designation) as in effect at the respective dates of issuance; and that the
Company will maintain its corporate existence and good standing under the laws
of the State of Minnesota in effect at all times after the date of this opinion.

Based on the foregoing, it is our opinion that:

1. The Company is validly existing as a corporation in good
standing under the laws of the State of Minnesota.

2. The Shares issued from and after the date hereof, when
issued and delivered by the Company as described in the Registration Statement,
will be legally issued and fully paid and non-assessable; and the issuance of
such Shares is not subject to preemptive rights.

In rendering the foregoing opinions, we express no opinion as
to the laws of any jurisdiction other than the State of Minnesota. We hereby
consent to the filing of this opinion letter as an exhibit to the Registration
Statement.

Very truly yours,

/s/ Dorsey & Whitney, LLP
Dorsey & Whitney, LLP

EXHIBIT 13

Letter of Investment Intent

SIT INVESTMENT ASSOCIATES, INC.
LETTER OF INVESTMENT INTENT

Purchase of
Sit Mutual Funds, Inc.
Series E Common Shares
Sit Science and Technology Growth Fund

Sit Investment Associates, Inc. ("SIA") intends to purchase approximately ten
(10) Series E Common Shares of Sit Mutual Funds, Inc. for $10 per share on or
before November 28, 1997. SIA will hold said shares for investment purposes.

SIT INVESTMENT ASSOCIATES, INC.

By: /s/ Eugene C. Sit

Its Chairman

DATED: October 31, 1997

<PAGE>

SIT INVESTMENT ASSOCIATES, INC.
LETTER OF INVESTMENT INTENT

Purchase of
Sit Mutual Funds, Inc.
Series F Common Shares
Sit Regional Growth Fund

Sit Investment Associates, Inc. ("SIA") intends to purchase approximately ten
(10) Series F Common Shares of Sit Mutual Funds, Inc. for $10 per share on or
before November 28, 1997. SIA will hold said shares for investment purposes.

SIT INVESTMENT ASSOCIATES, INC.

By: /s/ Eugene C. Sit

Its Chairman

DATED: October 31, 1997