Sit Mutual Funds Form 485BPOS dated November 1, 2005

485BPOS 1 sit054390_485bpos.htm FORM 485BPOS DATED OCTOBER 27, 2005 Sit Mutual Funds Form 485BPOS dated November 1, 2005




    AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 27, 2005

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    FORM N-1A

             REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933       __X__
                               (File No. 2-75152)
                         Post-Effective Amendment No. 31

                                     AND/OR

         REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940   __X__
                              (File No. 811-03343)
                         Post-Effective Amendment No. 34

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

                  3300 IDS Center, Minneapolis, Minnesota 55402
               (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

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

                             Paul E. Rasmussen, Esq.
                                Sit Mutual Funds
                                 3300 IDS Center
                          Minneapolis, Minnesota 55402
                     (NAME AND ADDRESS OF AGENT FOR SERVICE)

                                    COPY TO:
                             Michael J. Radmer, Esq.
                              Dorsey & Whitney LLP
                        Suite 1500, 50 South Sixth Street
                          Minneapolis, Minnesota 55402

It is proposed that this filing will become effective (check appropriate box)
         _____  immediately upon filing pursuant to paragraph (b)
         __X__  on November 1, 2005 pursuant to paragraph (b)
         _____  60 days after filing pursuant to paragraph (a)(1)
         _____  on (specify date) pursuant to paragraph (a)(1)
         _____  75 days after filing pursuant to paragraph (a)(2)
         _____  on (specify date) pursuant to paragraph (a)(2) of rule 485

If appropriate, check the following box:
         _____  This post-effective amendment designates a new effective date
                for a previously filed post-effective amendment.

The Registrant has registered an indefinite number or amount of securities under
the Securities Act of 1933 pursuant to Rule 24f-2 under the Investment Company
Act of 1940. A Rule 24f-2 Notice for the Registrant's most recent fiscal year
was filed with the Securities and Exchange Commission on or about July 27, 2005.



    AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 27, 2005

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    FORM N-1A

             REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933       __X__
                               (File No. 2-75151)
                         Post-Effective Amendment No. 31

                                     AND/OR

         REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940   __X__
                              (File No. 811-03342)
                         Post-Effective Amendment No. 34

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

                  3300 IDS Center, Minneapolis, Minnesota 55402
               (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

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

                             Paul E. Rasmussen, Esq.
                                Sit Mutual Funds
                                 3300 IDS Center
                          Minneapolis, Minnesota 55402
                     (NAME AND ADDRESS OF AGENT FOR SERVICE)

                                    COPY TO:
                             Michael J. Radmer, Esq.
                              Dorsey & Whitney LLP
                        Suite 1500, 50 South Sixth Street
                          Minneapolis, Minnesota 55402

It is proposed that this filing will become effective (check appropriate box)
         _____  immediately upon filing pursuant to paragraph (b)
         __X__  on November 1, 2005 pursuant to paragraph (b)
         _____  60 days after filing pursuant to paragraph (a)(1)
         _____  on (specify date) pursuant to paragraph (a)(1)
         _____  75 days after filing pursuant to paragraph (a)(2)
         _____  on (specify date) pursuant to paragraph (a)(2) of rule 485

If appropriate, check the following box:
         _____  This post-effective amendment designates a new effective date
                for a previously filed post-effective amendment.

The Registrant has registered an indefinite number or amount of securities under
the Securities Act of 1933 pursuant to Rule 24f-2 under the Investment Company
Act of 1940. A Rule 24f-2 Notice for the Registrant's most recent fiscal year
was filed with the Securities and Exchange Commission on or about July 27, 2005.



    AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 27, 2005

                       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. 28

                                     AND/OR

         REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940   __X__
                              (File No. 811-06373)
                         Post-Effective Amendment No. 29

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

                  3300 IDS Center, Minneapolis, Minnesota 55402
               (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

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

                             Paul E. Rasmussen, Esq.
                                Sit Mutual Funds
                                 3300 IDS Center
                          Minneapolis, Minnesota 55402
                     (NAME AND ADDRESS OF AGENT FOR SERVICE)

                                    COPY TO:
                             Michael J. Radmer, Esq.
                              Dorsey & Whitney LLP
                        Suite 1500, 50 South Sixth Street
                          Minneapolis, Minnesota 55402

It is proposed that this filing will become effective (check appropriate box)
         _____  immediately upon filing pursuant to paragraph (b)
         __X__  on November 1, 2005 pursuant to paragraph (b)
         _____  60 days after filing pursuant to paragraph (a)(1)
         _____  on (specify date) pursuant to paragraph (a)(1)
         _____  75 days after filing pursuant to paragraph (a)(2)
         _____  on (specify date) pursuant to paragraph (a)(2) of rule 485

If appropriate, check the following box:
         _____  This post-effective amendment designates a new effective date
                for a previously filed post-effective amendment.

The Registrant has registered an indefinite number or amount of securities under
the Securities Act of 1933 pursuant to Rule 24f-2 under the Investment Company
Act of 1940. A Rule 24f-2 Notice for the Registrant's most recent fiscal year
was filed with the Securities and Exchange Commission on or about July 27, 2005.

(SIT MUTUAL FUNDS LOGO)

Stock Funds Prospectus
November 1, 2005

Balanced Fund

Dividend Growth Fund

Large Cap Growth Fund

Mid Cap Growth Fund

International Growth Fund

Small Cap Growth Fund

Science and Technology Growth Fund

Developing Markets Growth Fund

A Family of 100% No-Load Funds

Each Sit Fund is 100% no-load, which means that you pay no sales charges or 12b-1 fees.
The Stock Funds (excluding the Balanced Fund) charge a 30-day redemption fee to
discourage short-term trading of the Funds which should benefit long-term shareholders.

(SIT MUTUAL FUNDS GRAPH)

Be sure to read this Prospectus before you invest and keep it on file for future reference.
If you have a question about any part of the Prospectus, please call 1-800-332-5580
or visit our website at www.sitfunds.com.

(SIT MUTUAL FUNDS LOGO)

Sit Mutual Funds

Stock Funds Prospectus

N O V E M B E R 1, 2 0 0 5

B A L A N C E D F U N D

D I V I D E N D G R O W T H F U N D

L A R G E C A P G R O W T H F U N D

M I D C A P G R O W T H F U N D

I N T E R N A T I O N A L G R O W T H F U N D

S M A L L C A P G R O W T H F U N D

S C I E N C E A N D T E C H N O L O G Y G R O W T H F U N D

D E V E L O P I N G M A R K E T S G R O W T H F U N D

The Securities and Exchange Commission has not approved or disapproved these securities or passed upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense.

Table of Contents


I N T R O D U C T I O N			1

F U N D S U M M A R I E S
	Investment Objectives and Principal Investment Strategies
		Balanced Fund	2
		Dividend Growth Fund	5
		Large Cap Growth Fund	6
		Mid Cap Growth Fund	7
		International Growth Fund	8
		Small Cap Growth Fund	10
		Science and Technology Growth Fund	11
		Developing Markets Growth Fund	13
	Principal Investment Risks		15
	Portfolio Holdings		19
	Performance
		Annual Total Returns	20
		Average Annual Total Returns	24
	Fees and Expenses		27

F U N D M A N A G E M E N T
	Investment Adviser		29
	Investment Sub-Adviser		30
	Portfolio Management		30
	Distributor		35
	Custodian and Transfer Agent		35


S H A R E H O L D E R I N F O R M A T I O N
	Share Price		36
	When Orders are Effective		37
	Investing Through Financial Intermediaries		37
	Other Account Policies		38
	Purchasing Shares		39
	Selling Shares		40
	General Rules for Purchasing & Selling Shares		41
	Dividends and Distributions		42
	Taxes		43
	Retirement and other Tax-Deferred Accounts		44
	Mailing of Regulatory Documents		45
	Privacy Policy		45

A D D I T I O N A L I N F O R M A T I O N
	Other Securities, Investment Practices, and Policies		46
	Financial Highlights
		Balanced Fund	48
		Dividend Growth Fund	49
		Large Cap Growth Fund	50
		Mid Cap Growth Fund	51
		International Growth Fund	52
		Small Cap Growth Fund	53
		Science and Technology Growth Fund	54
		Developing Markets Growth Fund	55
	For More Information		back cover

Introduction

Sit Mutual Funds are a family of no-load mutual funds offering a selection of Funds to investors. Each Fund has a distinctive investment objective and risk/reward profile.

T H E S I T S T O C K F U N D S C O N S I S T O F :

Domestic Growth Stock Funds


>	Balanced Fund
>	Dividend Growth Fund
>	Large Cap Growth Fund
>	Mid Cap Growth Fund
>	Small Cap Growth Fund
>	Science and Technology Growth Fund
International Growth Stock Funds
>	International Growth Fund
>	Developing Markets Growth Fund

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

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

1

FUND SUMMARIES

FUND MANAGEMENT

SHAREHOLDER INFORMATION

ADDITIONAL INFORMATION

Fund Summaries

BALANCED FUND

I N V E S T M E N T O B J E C T I V E

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

P R I N C I P A L I N V E S T M E N T S T R A T E G I E S

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

Between 35% and 65% of the Fund’s assets will be invested in common stocks and between 35% and 65% in fixed-income securities. The Fund’s allocation of assets will vary over time in response to the Adviser’s evaluation of present and anticipated market and economic conditions.

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

2

FUND SUMMARIES

FUND MANAGEMENT

SHAREHOLDER INFORMATION

ADDITIONAL INFORMATION

BALANCED FUND CONTINUED

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


>	unique product or service,
>	growing product demand,
>	dominant and growing market share,
>	management experience and capabilities, and
>	strong financial condition.

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

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


>	mortgage-backed securities (including collateralized mortgage obligations), such as securities issued by Government National Mortgage Association (GNMA securities are backed by the full faith and credit of the U.S. government), Federal Home Loan Mortgage Corporation (FHLMC) and Federal National Mortgage Association (FNMA) (FHLMC and FNMA securities are backed by the credit of the issuing governmental agency),
>	asset-backed securities collateralized by assets such as automobile and credit card receivables, utilities, manufactured (mobile) home loans, home improvement loans and home equity loans,
>	obligations of the U.S. government, its agencies and instrumentalities,
>	corporate debt securities,
>	taxable municipal securities, and
>	short-term debt obligations, including commercial paper and bank instruments, such as certificates of deposit, time deposits, and bankers’ acceptances.

The Fund invests primarily in debt securities that, at the time of purchase, are either rated investment-grade (BBB or above by Standard & Poor’s or Baa or above by Moody’s Investor Services), or, if unrated, determined to be of comparable quality by the Adviser. Unrated securities will not exceed 20% of the fixed-income portion of the Fund’s portfolio.

3

FUND SUMMARIES

FUND MANAGEMENT

SHAREHOLDER INFORMATION

ADDITIONAL INFORMATION

BALANCED FUND CONTINUED

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

R I S K S

You could lose money by investing in the Fund. The principal risks of investing in the Fund are Stock Market Risk, Management Risk, Growth Style Investing Risk, Interest Rate Risk, Prepayment Risk, Credit Risk, Income Risk and Call Risk. See pages 15-16 for a discussion of these risks.

4

FUND SUMMARIES

FUND MANAGEMENT

SHAREHOLDER INFORMATION

ADDITIONAL INFORMATION

DIVIDEND GROWTH FUND

I N V E S T M E N T O B J E C T I V E

The Fund primarily seeks to provide current income that exceeds the dividend yield of the S&P 500 Index and that grows over a period of years. Secondarily the Fund seeks long-term capital appreciation.

P R I N C I P A L I N V E S T M E N T S T R A T E G I E S

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

The Adviser invests in dividend paying growth-oriented companies it believes exhibit the potential for growth and growing dividend payments. The Adviser believes that a company’s earnings growth is a primary determinant of its potential long-term return, and that a record of increasing dividend payments is a strong indicator of financial health and growth prospects. By investing in dividend paying stocks it is anticipated that the holdings will tend to be in large to medium-sized companies (companies with market capitalizations in excess of $2 billion). The Adviser considers several factors in its evaluation of a company’s potential for above average long-term earnings, revenue, and dividend growth, including:


>	a record of paying dividends,
>	strong prospects for growing dividend payments,
>	unique product or service,
>	growing product demand,
>	dominant and growing market share,
>	management experience and capabilities, and
>	strong financial condition.

Since stocks that pay dividends tend to be less volatile and may not experience the same capital appreciation as stocks that don’t pay dividends, the Fund’s diversified portfolio of dividend paying stocks is expected to have lower volatility than that of the S&P 500 Index, but with a higher dividend yield and greater prospects for dividend growth.

The Fund may invest up to 20% of its net assets in securities of issuers domiciled outside the U.S.

When selling equity securities for the Fund, the Adviser considers several factors, including changes in a company’s fundamentals, anticipated earnings, anticipated dividend payments and financial position.

5

FUND SUMMARIES

FUND MANAGEMENT

SHAREHOLDER INFORMATION

ADDITIONAL INFORMATION

R I S K S

You could lose money by investing in the Fund. The principal risks of investing in the Fund are Stock Market Risk, Management Risk, Growth Style Investing Risk, Interest Rate Risk, Credit Risk, Dividend Paying Company Risk and Foreign Securities Risk. See pages 15-16 for a discussion of these risks.

LARGE CAP GROWTH FUND

I N V E S T M E N T O B J E C T I V E

The Fund seeks to maximize long-term capital appreciation.

P R I N C I P A L I N V E S T M E N T S T R A T E G I E S

The Fund seeks to achieve its objective by investing, under normal market conditions, at least 80% of its net assets in the common stocks of companies with capitalizations of $5 billion or more at the time of purchase.


The Adviser invests in domestic growth-oriented companies it believes exhibit the potential for superior growth. The Adviser believes that a company’s earnings growth is the primary determinant of its potential long-term return and evaluates a company’s potential for above average long-term earnings and revenue growth. Several factors are considered in the Adviser’s evaluation of a company, including:
>	unique product or service,
>	growing product demand,
>	dominant and growing market share,
>	management experience and capabilities, and
>	strong financial condition.
When selling equity securities for the Fund, the Adviser considers several factors, including changes in a company’s fundamentals and anticipated earnings.

R I S K S

You could lose money by investing in the Fund. The principal risks of investing in the Fund are Stock Market Risk, Management Risk, and Growth Style Investing Risk. See page 15 for a discussion of these risks.

(MESSAGE)


FUND SUMMARIES	FUND MANAGEMENT	SHAREHOLDER INFORMATION	ADDITIONAL INFORMATION

(MESSAGE)

MID CAP GROWTH FUND

I N V E S T M E N T O B J E C T I V E

The Fund seeks to maximize long-term capital appreciation.

P R I N C I P A L I N V E S T M E N T S T R A T E G I E S

The Fund seeks to achieve its objective by investing, under normal market conditions, at least 80% of its net assets in the common stocks of companies with capitalizations of $2 billion to $15 billion at the time of purchase.


The Adviser invests in domestic growth-oriented medium to small companies it believes exhibit the potential for superior growth. The Adviser believes that a company’s earnings growth is the primary determinant of its potential long-term return and evaluates a company’s potential for above average long-term earnings and revenue growth. Several factors are considered in the Adviser’s evaluation of a company, including:
>	unique product or service,
>	growing product demand,
>	dominant and growing market share,
>	management experience and capabilities, and
>	strong financial condition.
When selling equity securities for the Fund, the Adviser considers several factors, including changes in a company’s fundamentals and anticipated earnings.

R I S K S

You could lose money by investing in the Fund. The principal risks of investing in the Fund are Stock Market Risk, Management Risk, Growth Style Investing Risk, and Smaller Company Risk. See pages 15-16 for a discussion of these risks.

7

FUND SUMMARIES

FUND MANAGEMENT

SHAREHOLDER INFORMATION

ADDITIONAL INFORMATION

INTERNATIONAL GROWTH FUND

I N V E S T M E N T O B J E C T I V E

The Fund seeks long-term growth.

P R I N C I P A L I N V E S T M E N T S T R A T E G I E S

The Fund seeks to achieve its objective by investing, under normal market conditions, at least 90% of its net assets in common stocks of companies domiciled outside the United States.


In selecting investments for the Fund, the Sub-Adviser begins by selecting countries or regions in which to invest. In making its selections, the Sub-Adviser considers several factors affecting the economy and equity market of foreign countries and regions, including:
>	economic trends,
>	earnings outlook,
>	liquidity within the market,
>	fiscal and monetary policy,
>	currency exchange rate expectations,
>	market sentiment, and
>	social and political trends.


After the country and regional allocations are determined, the Sub-Adviser seeks industries and sectors that it believes have earnings growth prospects that are greater than the average. Within the selected industries and sectors, the Sub-Adviser invests in foreign growth-oriented companies it believes exhibit the potential for superior growth. The Sub-Adviser believes that a company’s earnings growth is the primary determinant of its potential long-term return and evaluates a company’s potential for above average long-term earnings and revenue growth. Several factors are considered in the Sub-Adviser’s evaluation of a company, including:
>	unique product or service,
>	growing product demand,
>	dominant and growing market share,
>	management experience and capabilities, and
>	strong financial condition.

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

8

FUND SUMMARIES

FUND MANAGEMENT

SHAREHOLDER INFORMATION

ADDITIONAL INFORMATION

INTERNATIONAL GROWTH FUND CONTINUED

The Fund invests in common stocks of issuers domiciled in at least three foreign countries. As of September 30, 2005, the Fund was invested in common stocks of companies domiciled in 22 foreign countries. Up to 50% of the Fund’s total assets may be invested in equity securities of small- to medium-sized emerging growth companies in developed markets (such as Germany and Japan) and developing markets (such as Thailand and Brazil). Small companies generally have a capitalization of under $2.5 billion, and medium-sized companies generally have capitalizations between $2 and $15 billion. Emerging growth companies are small- and medium-sized companies that the Sub-Adviser believes have a potential for earnings growth over time that is above the growth rate of more established companies or are early in their life cycles.

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

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

R I S K S

You could lose money by investing in the Fund. The principal risks of investing in the Fund are Stock Market Risk, Management Risk, Growth Style Investing Risk, Smaller Company Risk, Risk of International Investing, Currency Risk, Liquidity Risk, Political and Economic Risk, Foreign Tax Risk, Risk of Investment Restrictions, Foreign Securities Market Risk, Information Risk, Risk of Developing Markets and Risk of Foreign Currency Hedging Transactions. See pages 15-19 for a discussion of these risks.

9

FUND SUMMARIES

FUND MANAGEMENT

SHAREHOLDER INFORMATION

ADDITIONAL INFORMATION

SMALL CAP GROWTH FUND

I N V E S T M E N T O B J E C T I V E

The Fund seeks to maximize long-term capital appreciation.

P R I N C I P A L I N V E S T M E N T S T R A T E G I E S

The Fund seeks to achieve its objective by investing, under normal market conditions, at least 80% of its net assets in common stocks of companies with capitalizations of $2.5 billion or less at the time of purchase.


The Adviser invests in domestic growth-oriented small companies it believes exhibit the potential for superior growth. The Adviser believes that a company’s earnings growth is the primary determinant of its potential long-term return and evaluates a company’s potential for above average long-term earnings and revenue growth. Several factors are considered in the Adviser’s evaluation of a company, including:
>	unique product or service,
>	growing product demand,
>	dominant and growing market share,
>	management experience and capabilities, and
>	strong financial condition.
When selling equity securities for the Fund, the Adviser considers several factors, including changes in a company’s fundamentals and anticipated earnings.

R I S K S

(MESSAGE)

10

FUND SUMMARIES

FUND MANAGEMENT

SHAREHOLDER INFORMATION

ADDITIONAL INFORMATION

SCIENCE AND TECHNOLOGY GROWTH FUND

I N V E S T M E N T O B J E C T I V E

The Fund seeks to maximize long-term capital appreciation.

P R I N C I P A L I N V E S T M E N T S T R A T E G I E S


The Fund seeks to achieve its objective by investing, under normal market conditions, at least 80% of its net assets in common stocks of companies principally engaged in science and technology business activities. Such companies include those whose assets, gross income, or net profits are significantly committed to, or derived from, science and technology. The Adviser seeks stocks of science and technology companies having superior growth potential in virtually any industry in which they may be found. These industries may include:
>	aerospace,
>	chemistry,
>	electronic technology (including electronic components, computer systems and peripherals and networking equipment),
>	environmental services,
>	genetic engineering,
>	geology,
>	information sciences (including software, telecommunication, data processing and information technology services),
>	medicine (including pharmacology, biotechnology and biophysics), and
>	hospital supply and medical devices.

11

FUND SUMMARIES

FUND MANAGEMENT

SHAREHOLDER INFORMATION

ADDITIONAL INFORMATION

SCIENCE AND TECHNOLOGY GROWTH FUND CONTINUED


The Adviser invests in growth-oriented companies it believes exhibit the potential for superior growth. The Adviser believes that a company’s earnings growth is the primary determinant of its potential long-term return and evaluates a company’s potential for above average long- term earnings and revenue growth. The Fund’s investments will include stocks of small, mid and large cap companies. Several factors are considered in the Adviser’s evaluation of a company, including:
>	unique product or service,
>	growing product demand,
>	dominant and growing market share,
>	management experience and capabilities, and
>	strong financial condition.
When selling equity securities for the Fund, the Adviser considers several factors, including changes in a company’s fundamentals and anticipated earnings.

R I S K S

12

FUND SUMMARIES

FUND MANAGEMENT

SHAREHOLDER INFORMATION

ADDITIONAL INFORMATION

DEVELOPING MARKETS GROWTH FUND

I N V E S T M E N T O B J E C T I V E

The Fund seeks to maximize long-term capital appreciation.

P R I N C I P A L I N V E S T M E N T S T R A T E G I E S

The Fund seeks to achieve its objective by investing, under normal market conditions, at least 80% of its net assets in common stocks of companies domiciled or operating in a developing market.

Developing markets are those countries that:

>

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

>

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

>

are listed in World Bank publications as “developing.”

As of September 30, 2005, the Fund held investments in Hong Kong, Philippines, South Korea, Taiwan, Thailand, Brazil, Mexico, South Africa, Australia, China, Malaysia, Singapore, Israel, Russia, India, Indonesia, Czech Republic, Greece, Hungary, Poland, Turkey, U.K., Argentina and Peru.

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

>

economic trends,

>

earnings outlook,

>

liquidity within the market,

>

fiscal and monetary policy,

>

currency exchange rate expectations,

>

investment valuation,

>

market sentiment, and

>

social and political trends.

13

FUND SUMMARIES

FUND MANAGEMENT

SHAREHOLDER INFORMATION

ADDITIONAL INFORMATION

DEVELOPING MARKETS GROWTH FUND CONTINUED

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

>

unique product or service,

>

growing product demand,

>

regional or country dominance and growing market share,

>

management experience and capabilities, and

>

strong financial condition.

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

The Fund invests in small, medium and large sized companies. Small companies generally have capitalizations of under $2.5 billion, and large companies generally have a capitalization greater than $5 billion. The Fund may invest in securities representing underlying international securities such as sponsored American Depository Receipts, European Depository Receipts and Global Depository Receipts.

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

R I S K S

14

FUND SUMMARIES

FUND MANAGEMENT

SHAREHOLDER INFORMATION

ADDITIONAL INFORMATION

PRINCIPAL INVESTMENT RISKS

All investments carry some degree of risk which will affect the value of a Fund’s investments, investment performance, and price of its shares. It is possible to lose money by investing in the Funds.

The principal risks of investing in the Funds include:


R I S K S T H A T A P P L Y T O A L L F U N D S

>	Stock Market Risk: The value of the stocks in which a Fund invests may go up or down in response to the activities of individual companies, the stock market and general economic conditions. Stock prices may decline over short or extended periods.

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

>	Growth Style Investing Risk: Different types of stocks tend to shift into and out of favor with stock market investors depending on market and economic conditions. The Funds invest in growth style stocks. The Funds’ performance may at times be better or worse than the performance of funds that focus on other types of stocks or that have a broader investment style.

R I S K S T H A T A P P L Y P R I M A R I L Y T O T H E B A L A N C E D F U N D

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

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

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

15

FUND SUMMARIES

FUND MANAGEMENT

SHAREHOLDER INFORMATION

ADDITIONAL INFORMATION

R I S K S T H A T A P P L Y P R I M A R I L Y T O T H E
B A L A N C E D A N D D I V I D E N D G R O W T H
F U N D S


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

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

R I S K S T H A T A P P L Y P R I M A R I L Y T O T H E
D I V I D E N D G R O W T H F U N D


>	Dividend Paying Company Risk: The Fund’s income objective may limit its ability to appreciate during a broad market advance because dividend paying stocks may not experience the same capital appreciation as non-dividend paying stocks. In addition, stocks held by the Fund may reduce or stop paying dividends which could affect the Fund’s ability to generate income.

>	Foreign Securities Risk: The foreign securities the Fund may purchase are subject to risks not typically associated with domestic investing which may adversely affect the Fund’s investment including changes in currency exchange rates, political and economic instability, different financial reporting standards and taxes, and less liquidity.

R I S K   T H A T   A P P L I E S   P R I M A R I L Y   T O   T H E
M I D   C A P   G R O W T H ,   I N T E R N A T I O N A L
G R O W T H ,    S M A L L   C A P   G R O W T H ,
S C I E N C E   A N D   T E C H N O L O G Y   G R O W T H ,
A N D   D E V E L O P I N G   M A R K E T S   G R O W T H
F U N D S

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

16

FUND SUMMARIES

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SHAREHOLDER INFORMATION

ADDITIONAL INFORMATION

R I S K T H A T A P P L I E S P R I M A R I L Y T O T H E
S M A L L C A P G R O W T H F U N D

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

R I S K T H A T A P P L I E S P R I M A R I L Y T O T H E
S C I E N C E A N D T E C H N O L O G Y G R O W T H
F U N D

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

R I S K S   T H A T   A P P L Y   P R I M A R I L Y   T O   T H E
I N T E R N A T I O N A L   G R O W T H    A N D
D E V E L O P I N G   M A R K E T S   G R O W T H
F U N D S


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

>	Currency Risk: The value of the Funds’ securities computed in U.S. dollars will vary with increases and decreases in exchange rates. A decline in the value of any particular currency against the U.S. dollar will cause a decline in the U.S. dollar value of a Fund’s holdings of securities denominated in that currency.

17

FUND SUMMARIES

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SHAREHOLDER INFORMATION

ADDITIONAL INFORMATION


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

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

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

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

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

18

FUND SUMMARIES

FUND MANAGEMENT

SHAREHOLDER INFORMATION

ADDITIONAL INFORMATION


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

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

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

PORTFOLIO HOLDINGS

Each Funds’ portfolio holdings are included in that Fund’s annual and semi-annual financial reports that are mailed to shareholders of record. Additionally, a complete portfolio holdings report is filed quarterly with the SEC on Form N-Q and is available on the SEC website at www.sec.gov or upon request from a Sit Investor Service Representative. A complete description of the Funds’ portfolio holdings disclosure policies is available in the Funds’ Statement of Additional Information.

19

FUND SUMMARIES

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SHAREHOLDER INFORMATION

ADDITIONAL INFORMATION

PERFORMANCE

The following bar charts show the Funds’ annual total returns for calendar years ended 12/31. This information illustrates how each Fund’s performance has varied over time, which is one indication of the risks of investing in a Fund. A Fund’s past performance does not necessarily indicate how it will perform in the future. The bar charts assume that all distributions have been reinvested.

A N N U A L T O T A L R E T U R N S for calendar years ended 12/31

(MESSAGE)

20

FUND SUMMARIES

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SHAREHOLDER INFORMATION

ADDITIONAL INFORMATION

A N N U A L T O T A L R E T U R N S (continued)

21

FUND SUMMARIES

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SHAREHOLDER INFORMATION

ADDITIONAL INFORMATION

A N N U A L T O T A L R E T U R N S (continued)

22

FUND SUMMARIES

FUND MANAGEMENT

SHAREHOLDER INFORMATION

ADDITIONAL INFORMATION

A N N U A L T O T A L R E T U R N S (continued)

23

FUND SUMMARIES

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ADDITIONAL INFORMATION

A V E R A G E A N N U A L T O T A L R E T U R N S for periods ended 12/31/04

The following tables show the Funds’ average annual total returns before and after taxes and the change in value of a broad-based market index over various periods ended December 31, 2004. The index information is intended to permit you to compare each Fund’s performance to a broad measure of market performance. The after-tax returns are intended to show the impact of federal income taxes on an investment in a Fund. The highest individual federal marginal income tax rate in effect during the specified period is assumed, and the state and local tax impact is not reflected.

A Fund’s “Return After Taxes on Distributions” shows the effect of taxable distributions (dividends and capital gain distributions), but assumes that you still hold the fund shares at the end of the period and so do not have any taxable gain or loss on your investment in the Fund.

A Fund’s “Return After Taxes on Distributions and Sale of Fund Shares” shows the effect of both taxable distributions and any taxable gain or loss that would be realized if the Fund shares were purchased at the beginning and sold at the end of the specified period.

The Funds’ past performance, before and after taxes, is not an indication of how the Funds will perform in the future. Your actual after-tax returns depend on your own tax situation and may differ from those shown. After-tax returns reflect past tax effects and are not predictive of future tax effects. After-tax returns are not relevant to investors who hold their Fund shares in a tax-deferred account (including a 401(k) or IRA account).

Balanced Fund

1 Year

5 Years

10 Years

Return before taxes

9.22

%

-2.57

%

8.51

%

Return after taxes on distributions

8.67

-3.46

7.12

Return after taxes on distributions and sale of Fund shares

7.56

-2.69

6.76

S&P 500 Index ⁽¹⁾⁽²⁾

10.88

-2.30

12.07

⁽¹⁾

Reflects no deduction for fees, expenses or taxes.

⁽²⁾

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

Dividend Growth Fund

1 Year

5 Years

Since
Inception
(12/31/03)

Return before taxes

10.91

%

n/a

10.91

%

Return after taxes on distributions

10.65

n/a

10.65

Return after taxes on distributions and sale of Fund shares

9.25

n/a

9.25

S&P 500 Index ⁽¹⁾⁽²⁾

10.88

n/a

10.88

⁽¹⁾

Reflects no deduction for fees, expenses or taxes.

⁽²⁾

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

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ADDITIONAL INFORMATION

A V E R A G E A N N U A L T O T A L R E T U R N S (continued)


Large Cap Growth Fund	1 Year			5 Years			10 Years


Return before taxes		12.79	%		-9.23	%		8.64	%

Return after taxes on distributions		12.73			-9.59			7.44

Return after taxes on distributions and sale of Fund shares		10.87			-7.58			7.26

S&P 500 Index ⁽¹⁾⁽²⁾		10.88			-2.30			12.07


⁽¹⁾	Reflects no deduction for fees, expenses or taxes.
⁽²⁾	An unmanaged index which measures the performance of 500 widely held common stocks of large-cap companies.


Mid Cap Growth Fund	1 Year			5 Years			10 Years


Return before taxes		17.02	%		-7.56	%		8.96	%

Return after taxes on distributions		17.02			-8.35			6.90

Return after taxes on distributions and sale of Fund shares		14.47			-6.24			7.22

S&P MidCap 400 Index ⁽¹⁾⁽²⁾		16.48			9.54			16.10


⁽¹⁾	Reflects no deduction for fees, expenses or taxes.
⁽²⁾	An unmanaged index which measures the performance of 400 widely held common stocks of mid cap companies.


International Growth Fund	1 Year			5 Years			10 Years


Return before taxes		12.97	%		-12.97	%		1.25	%

Return after taxes on distributions		12.86			-13.10			0.53

Return after taxes on distributions and sale of Fund shares		11.02			-10.49			0.88

Morgan Stanley Capital International EAFE Index ⁽¹⁾⁽²⁾		20.25			-1.13			5.62


⁽¹⁾	Reflects no deduction for fees, expenses or taxes.
⁽²⁾	An unmanaged index which measures the performance of international companies screened for liquidity, cross ownership, and industry representation within the stock markets of Europe, Australia, New Zealand and the Far East.

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ADDITIONAL INFORMATION

A V E R A G E A N N U A L T O T A L R E T U R N S (continued)


Small Cap Growth Fund	1 Year			5 Years			10 Years


Return before taxes		6.79	%		-4.15	%		12.48	%

Return after taxes on distributions		6.79			-4.22			11.76

Return after taxes on distributions and sale of Fund shares		5.77			-3.48			10.82

Russell 2000 Index ⁽¹⁾⁽²⁾		18.33			6.61			11.54


⁽¹⁾	Reflects no deduction for fees, expenses or taxes.
⁽²⁾	An unmanaged index which measures the performance of the 2,000 smallest companies in the Russell 3000 Index (an index of the 3,000 largest U.S. companies based on total market capitalization).


Science and Technology Growth Fund	1 Year			5 Years		Since Inception (12/31/97)


Return before taxes		7.39	%		-16.42		0.69	%

Return after taxes on distributions		7.39			-16.53		0.60

Return after taxes on distributions and sale of Fund shares		6.28			-13.00		0.66

S&P 500 Index ⁽¹⁾⁽²⁾		10.88			-2.30		4.76


⁽¹⁾	Reflects no deduction for fees, expenses or taxes.
⁽²⁾	An unmanaged index which measures the performance of 500 widely held common stocks of large-cap companies.


Developing Markets Growth Fund	1 Year			5 Years			Since Inception (7/1/94)


Return before taxes		16.54	%		-3.13	%		2.20	%

Return after taxes on distributions		16.51			-3.15			2.18

Return after taxes on distributions and sale of Fund shares		14.06			-2.64			1.89

MSCI Emerging Markets Free Index ⁽¹⁾⁽²⁾		22.45			2.07			0.96


⁽¹⁾	Reflects no deduction for fees, expenses or taxes.
⁽²⁾	An unmanaged index which measures the performance of over 1,000 international emerging companies representing the stock markets of over 25 countries.

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ADDITIONAL INFORMATION

FEES AND EXPENSES

This table describes the fees and expenses that you may pay if you buy and hold shares of the Funds. All Sit Mutual Funds are no-load so you will not pay sales charges (loads) or exchange fees when you buy or sell shares of the Funds. However, shares of each Fund, except the Balanced Fund, held for less than 30 calendar days are subject to a redemption fee of 2.00%, based on the redeemed shares’ market value.


Shareholder Fees (fees paid directly from your investment)


	Contingent Redemption Fee (only shares held less than 30 days)

Balanced		none

Large Cap Growth		2.00	%

Mid Cap Growth		2.00	%

International Growth		2.00	%

Small Cap Growth		2.00	%

Science and Technology Growth		2.00	%

Developing Markets Growth		2.00	%

Dividend Growth		2.00	%

Annual Fund Operating Expenses as a % of average net assets

(expenses that are deducted from Fund assets)

Management
Fees

Distribution
(12b-1) Fees

Other
Expenses

  Total Annual
  Fund Operating
   Expenses

Balanced

1.00%

None

1.00%

Large Cap Growth

1.00%

None

1.00%

Mid Cap Growth

1.25%

⁽¹⁾

None

1.25%

⁽¹⁾

International Growth

1.85%

⁽¹⁾

None

1.85%

⁽¹⁾

Small Cap Growth

1.50%

None

1.50%

Science and Technology Growth

1.50%

⁽¹⁾

None

1.50%

⁽¹⁾

Developing Markets Growth

2.00%

None

2.00%

Dividend Growth

1.00%

None

1.00%

⁽¹⁾

Management fee represents contractual fee and does not reflect the Adviser’s voluntary waiver of fees. Actual expenses are lower than those shown in the table because of voluntary fee waivers by the Adviser. As a result of the fee waiver, actual management fees paid by the Mid Cap Growth, International Growth, and Science and Technology Growth Funds were 1.15%, 1.50% and 1.35%, respectively, of the Fund’s average daily net assets at June 30, 2005. After December 31, 2006, these voluntary fee waivers may be terminated at any time by the Adviser.

27

FUND SUMMARIES

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ADDITIONAL INFORMATION

E X A M P L E

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


	1-Year			3-Years			5-Years			10-Years

Balanced		$	103		$	320		$	555		$	1,229
Large Cap Growth		$	103		$	320		$	555		$	1,229
Mid Cap Growth		$	128		$	399		$	690		$	1,518
International Growth		$	190		$	587		$	1,009		$	2,184
Small Cap Growth		$	154		$	477		$	824		$	1,801
Science and Technology Growth		$	154		$	477		$	824		$	1,801
Developing Markets Growth		$	205		$	633		$	1,087		$	2,345
Dividend Growth		$	103		$	320		$	555		$	1,229

E A R L Y R E D E M P T I O N F E E

Each Fund except the Balanced Fund charges a redemption fee on shares held for less than 30 calendar days. The fee is retained by the Fund for the benefit of its long-term shareholders. It is charged to discourage short-term trading of the Fund by market timers or other investors who do not share the long-term strategy of the Fund, and to reduce the expenses of long-term shareholders by reducing the trading costs and other costs associated with short-term investments in the Fund.

The “first-in, first out” (FIFO) method is used to determine the holding period; this means that if you bought shares on different days, the shares purchased first will be redeemed first for the purpose of determining whether the fee applies.

A redemption fee will not be charged on shares acquired by reinvestment of dividends or distributions from a Fund, or held in an account of a qualified retirement plan, such as a 401(k) plan. A redemption fee will be charged, however, on shares held in an IRA or 403(b) account.

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FUND SUMMARIES

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Fund Management

INVESTMENT ADVISER

Sit Investment Associates, Inc. (the “Adviser”), 3300 IDS Center, 80 South Eighth Street, Minneapolis, Minnesota 55402, is the Funds’ investment adviser. The Adviser was founded in 1981 and provides investment management services for both public and private clients. As of September 30, 2005, the Adviser and its affiliates had approximately $6.5 billion in assets under management, including approximately $1.5 billion for the 13 Sit Mutual Funds.

Under Investment Management Agreements between each Fund and the Adviser (the “Agreements”), the Adviser manages each Fund’s business and investment activities, subject to the authority of the board of directors. A discussion regarding the basis of the board of directors’ approval of the Agreements is available in the Stock Funds Annual Report to shareholders, dated June 30, 2005. The Agreements require the Adviser to bear each Fund’s expenses except interest, brokerage commissions and transaction charges and certain extraordinary expenses. Each Fund pays the Adviser a monthly fee for its services. During their most recent fiscal year, after taking into account voluntary fee waivers, the Funds paid the following advisory fees to the Adviser:


Fund	Advisory fee as a % of average daily net assets

Balanced Fund		1.00%

Large Cap Growth Fund		1.00%

Mid Cap Growth Fund		1.15%	⁽¹⁾

International Growth Fund		1.50%	⁽¹⁾

Small Cap Growth Fund		1.50%

Science and Technology Growth Fund		1.35%	⁽¹⁾

Developing Markets Growth Fund		2.00%

Dividend Growth Fund		1.00%


⁽¹⁾	Net of voluntary fee waivers. The contractual fees (without waivers) for the Mid Cap Growth, International Growth, and Science and Technology Growth Funds are 1.25%, 1.85%, and 1.50%, per year, respectively, of the Fund’s average daily net assets. After December 31, 2006, these voluntary fee waivers may be terminated at any time by the Adviser.

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FUND SUMMARIES

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INVESTMENT SUB-ADVISER

Sit/Kim International Investment Associates, Inc. (the “Sub-Adviser”), 3300 IDS Center, 80 South Eighth Street, Minneapolis, Minnesota 55402, is the Sub-Adviser for the Developing Markets Growth and International Growth Funds. The Sub-Adviser was founded in 1989 and is a majority owned subsidiary of the Adviser. The Sub-Adviser is an international investment management firm and together with its affiliate, as of September 30, 2005, had approximately $0.3 billion in assets under management. The Sub-Adviser has an office in New York.

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

PORTFOLIO MANAGEMENT

The Funds’ investment decisions are made by a team of portfolio managers and analysts who are jointly responsible for the day-to-day management of the Funds. The portfolio management team is led by Eugene C. Sit, Chief Investment Officer of the Adviser; Roger J. Sit, Executive Vice President – Research and Investment Management of the Adviser; and Peter L. Mitchelson, President of the Adviser.

Sit/Kim International Investment Associates, Inc. is the Sub-Adviser for the International Growth Fund and the Developing Markets Growth Fund. Eugene C. Sit is the Sub-Adviser’s Chief Investment Officer. Roger J. Sit is Deputy Chief Investment Officer of the Sub-Adviser.

The following table lists the individual team members that are primarily responsible for managing each Fund’s investments.

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FUND SUMMARIES

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ADDITIONAL INFORMATION


		Experience with:
		• Management Team
Portfolio Manager	Role on	• Adviser	Past 5 Years’
Title	Management Team	• Industry	Business Experience

B A L A N C E D


Eugene C. Sit Chairman, CEO and CIO	Chief Investment Officer	11 yrs 10 m 24 yrs 3 m 42 yrs 10 m	Chairman, CEO and CIO of Sit Investment Associates, Inc. (the “Adviser”) and Sit/Kim International Investment Associates, Inc. (“Sit/Kim”); Director of SIA Securities Corp. (the “Distributor”), and Chairman and CEO of Sit Investment Fixed Income Advisors, Inc. (“SF”).

Peter L. Mitchelson President	Portfolio Manager	11 yrs 10 m 24 yrs 3 m 37 yrs 5 m	Director and President of the Adviser; Director and Executive Vice President of Sit/Kim; Director of the Distributor; and Vice Chairman of SF. Director of the Sit Funds through 4/30/02.

Bryce A. Doty Vice President – Investments	Portfolio Manager	9 yrs 10 m 9 yrs 11 m 15 yrs 5 m	Vice President and Fixed Income Portfolio Manager of SF.



D I V I D E N D G R O W T H


Eugene C. Sit Chairman, CEO and CIO	Chief Investment Officer	1 yrs 10 m 24 yrs 3 m 42 yrs 10 m	See above.

Kent L. Johnson Vice President – Investments	Portfolio Manager	1 yrs 10 m 16 yrs 9 m 16 yrs 9 m	Vice President – Equity Investments of the Adviser.

Roger J. Sit Executive Vice President	Portfolio Manager	1 yrs 10 m 7 yrs 11 m 15 yrs 5 m	Executive Vice President – Research and Investment Management of the Adviser; Director, President, COO, and Deputy CIO of Sit/Kim.

Michael J. Stellmacher Investment Specialist – Research of the Adviser	Portfolio Manager	1 yrs 10 m 4 yrs 9 m 14 yrs 8 m	Investment Specialist – Research of the Adviser; Manager – Benefits Investment of the Pillsbury Company through 2000.

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		Experience with:
		• Management Team
Portfolio Manager	Role on	• Adviser	Past 5 Years’
Title	Management Team	• Industry	Business Experience

L A R G E C A P G R O W T H


Eugene C. Sit Chairman, CEO and CIO	Chief Investment Officer	23 yrs 1 m 24 yrs 3 m 42 yrs 10 m	See page 31.

Peter L. Mitchelson President	Portfolio Manager	23 yrs 1 m 24 yrs 3 m 37 yrs 5 m	See page 31.

Roger J. Sit Executive Vice President	Portfolio Manager	7 yrs 11 m 7 yrs 11 m 15 yrs 5 m	See page 31.

Ronald D. Sit Vice President – Investments	Portfolio Manager	21 yrs 4 m 21 yrs 4 m 21 yrs 4 m	Vice President – Equity Investments of the Adviser.


M I D C A P G R O W T H


Eugene C. Sit Chairman, CEO and CIO	Chief Investment Officer	23 yrs 1 m 24 yrs 3 m 42 yrs 10 m	See page 31.

Kent L. Johnson Vice President – Investments	Portfolio Manager	2 yrs 0 m 16 yrs 9 m 16 yrs 9 m	See page 31.

Matthew T. Loucks Equity Research Analyst of the Adviser	Portfolio Manager	0 yrs 7 m 0 yrs 8 m 10 yrs 3 m	Equity Research Analyst of the Adviser; Analyst, William Blair & Co. through 2/05.

Robert W. Sit Vice President – Investments	Portfolio Manager	7 yrs 10 m 14 yrs 3 m 14 yrs 3 m	Vice President – Equity Investments of the Adviser.

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		Experience with:
		• Management Team
Portfolio Manager	Role on	• Adviser	Past 5 Years’
Title	Management Team	• Industry	Business Experience

I N T E R N A T I O N A L G R O W T H


Eugene C. Sit Chairman, CEO and CIO	Chief Investment Officer	14 yrs 0 m 24 yrs 3 m 42 yrs 10 m	See page 31.

Janet K. Kinzler Equity Research Analyst of Sit/Kim	Portfolio Manager	4 yrs 2 m 4 yrs 2 m 12 yrs 2 m	Equity Research Analyst of Sit/Kim; Principal of SCA Consulting 2000 – 2001; Vice President of Credit Suisse First Boston 1997 – 1999.

Tasha M. Murdoff Equity Research Analyst of Adviser	Portfolio Manager	1 yrs 0 m 9 yrs 11 m 9 yrs 11 m	Equity Research Analyst of Adviser; Equity Research Associate of Adviser 2000 – 2004.

Roger J. Sit Executive Vice President	Portfolio Manager	7 yrs 11 m 7 yrs 11 m 15 yrs 5 m	See page 31.


S M A L L C A P G R O W T H


Eugene C. Sit Chairman, CEO and CIO	Chief Investment Officer	11 yrs 4 m 24 yrs 3 m 42 yrs 10 m	See page 31.

Kent L. Johnson Vice President – Investments	Portfolio Manager	2 yrs 0 m 16 yrs 9 m 16 yrs 9 m	See page 31.

Matthew T. Loucks Equity Research Analyst of the Adviser	Portfolio Manager	0 yrs 5 m 0 yrs 8 m 10 yrs 3 m	See page 32.

Robert W. Sit Vice President – Investments	Portfolio Manager	7 yrs 10 m 14 yrs 3 m 14 yrs 8 m	See page 32.

Michael J. Stellmacher Investment Specialist – Research of the Adviser	Portfolio Manager	4 yrs 9 m 4 yrs 9 m 14 yrs 8 m	See page 31.

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		Experience with:
		• Management Team
Portfolio Manager	Role on	• Adviser	Past 5 Years’
Title	Management Team	• Industry	Business Experience

S C I E N C E A N D T E C H N O L O G Y G R O W T H


Eugene C. Sit Chairman, CEO and CIO	Chief Investment Officer	7 yrs 10 m 24 yrs 3 m 42 yrs 10 m	See page 31.

Matthew T. Loucks Equity Research Analyst of the Adviser	Portfolio Manager	0 yrs 7 m 0 yrs 8 m 10 yrs 3 m	See page 32.

Mark A. Pepper Equity Research Analyst of Adviser	Portfolio Manager	3 yrs 6 m 3 yrs 6 m 9 yrs 8 m	Equity Research Analyst of Adviser; Financial Analyst of Goldman, Sachs & Company 1996 – 1999.

Robert W. Sit Vice President – Investments	Portfolio Manager	7 yrs 10 m 14 yrs 3 m 14 yrs 3 m	See page 31.


D E V E L O P I N G M A R K E T S G R O W T H


Eugene C. Sit Chairman, CEO and CIO	Chief Investment Officer	11 yrs 4 m 24 yrs 3 m 42 yrs 10 m	See page 31.

Roger J. Sit Executive Vice President	Portfolio Manager	7 yrs 11 m 7 yrs 11 m 15 yrs 5 m	See page 31.

Raymond E. Sit Vice President – Research & Investment Management of Sit/Kim	Portfolio Manager	11 yrs 2 m 11 yrs 2 m 13 yrs 2 m	Vice President – Research & Investment Management of Sit/Kim.

The Statement of Additional Information provides additional information about the Portfolio Managers’ compensation, other accounts managed by the Portfolio Managers, and the Portfolio Managers’ ownership of securities in the Fund, if any.

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DISTRIBUTOR

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

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

CUSTODIAN AND TRANSFER AGENT

PFPC Trust Company, located at 8800 Tinicum Boulevard, Third Floor, Philadelphia, PA 19153, is the Custodian for the Funds.

PFPC Inc., located at 101 Sabin Street, Pawtucket, RI 02860, is the Transfer Agent for the Funds.

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Shareholder Information

SHARE PRICE

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

NAV is based on the market value of the securities in a Fund’s portfolio which are valued on the basis of market quotations or official closing prices. When market quotations or official closing prices are not readily available, fair value is determined in good faith by the Adviser using procedures adopted and under the general supervision of the board of directors. If an event that is likely to affect materially the value of a portfolio security occurs after the relevant market has closed (but before the calculation of a Fund’s NAV), it may be necessary to determine the fair value of the security in light of that event, and price the security at the fair value. This situation is most likely to occur with respect to a foreign security that trades on a foreign exchange. Events that materially affect the value of a security may occur in a particular geographic region, or be specific to a particular industry, or affect only one particular company. For example, a natural disaster may affect the operations of companies located in the affected geographic region, which may require the Fund to determine the fair value of portfolio securities issued by such companies in light of such event. The Funds will determine NAV using the fair value price of a security in order to ensure that the prices of the securities reflect their value as of the time set for NAV calculation.

Using fair value to price securities may result in a value that is different from a security’s most recent closing price and from the prices used by other mutual funds to calculate their net asset values. Fair value pricing involves subjective judgements and it is possible that the fair value determined for a security is different than the value that could be realized upon the sale of that security.

Short-term debt securities maturing in less than 60 days are valued at amortized cost. The amortized cost method of valuation initially values a security at its purchase cost, then consistently adjusts the cost value by amortizing/accreting any discount or premium paid until the security’s maturity without regard to fluctuating interest rates.

(MESSAGE)

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

WHEN ORDERS ARE EFFECTIVE

Purchase, exchange, and sale orders are received and may be accepted by Sit Mutual Funds only on days the NYSE is open. Purchase, exchange, and sale orders received by the Funds or their agents prior to the close of the NYSE (generally 3:00 p.m. Central time) are processed at the net asset value per share calculated for that business day, except purchases made to an existing account via Automated Clearing House, “ACH,” electronic transfer of funds. ACH purchases are invested at the net asset value per share on the next business day after your telephone call to the Funds if you call the Funds prior to the close of the NYSE. Your bank account will be debited within 1 to 2 business days.

If your purchase, exchange, or sale order is received after the close of the NYSE, the purchase, exchange or sale will be made at the net asset value calculated on the next day the NYSE is open.

INVESTING THROUGH FINANCIAL INTERMEDIARIES

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

The Funds may authorize certain institutions acting as financial intermediaries (including banks, trust companies, brokers and investment advisers), to accept purchase, redemption and exchange orders from their customers on behalf of the Funds. These authorized intermediaries also may designate other intermediaries to accept such orders, if approved by the Funds. A Fund will be deemed to have received an order when the order is received by the authorized intermediary in good form, and the order will be priced at the Fund’s per share NAV next determined, provided that the authorized intermediary forwards the order (and payment for any purchase order) to the Funds (or their transfer agent) within agreed-upon time periods. Investors purchasing shares through a financial intermediary should read their account agreements carefully. A financial intermediary’s requirements may differ from those listed in this Prospectus. A financial intermediary also may impose account charges, such as asset allocation fees, account maintenance fees and other charges.

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OTHER ACCOUNT POLICIES

P U R C H A S E R E S T R I C T I O N S

The Funds may reject or restrict any purchase or exchange order at any time, when, in the judgment of management, it is in the best interests of the Funds. For example, see the discussion regarding “Excessive Trading in Fund Shares” below.

E X C E S S I V E T R A D I N G I N F U N D S H A R E S

The Funds discourage excessive short-term trading that could be disruptive to the management of a Fund. When large dollar amounts are involved, a Fund may have difficulty implementing long-term investment strategies, because it cannot predict how much cash it will have to invest. Excessive trading also may force a Fund to sell portfolio securities at disadvantageous times to raise the cash needed to satisfy a redemption request, and may increase brokerage expenses. These factors may hurt a Fund’s performance and its shareholders.

The Funds may, in the Funds’ discretion, reject any purchase or exchange order from a shareholder if the Funds determine that the shareholder’s short-term trading activity is excessive. The Funds’ Boards of Directors have approved policies and procedures designed to discourage excessive trading in Fund shares. For example, the Funds (except for the Balanced Fund) impose a redemption fee on shares held for less than 30 calendar days (see “Early Redemption Fee” in the “Fees and Expenses” section above). Additionally, the Funds monitor purchase orders and investigate orders that exceed certain thresholds and attempt to confirm that the investment is not being made for a short-term. The Funds have the right to modify the market timing policy at any time without advance notice. The Funds seek to apply market timing policies and procedures uniformly to all shareholders. The Funds make reasonable efforts to apply these policies and procedures to shareholders who own shares through omnibus accounts, however, it should be noted that the ability of the Funds to monitor and limit excessive short-term trading of shareholders investing in a Fund through the omnibus account of a financial intermediary may be significantly limited or absent where the intermediary maintains the underlying shareholder accounts. Despite our efforts to discourage market timing, there is no guarantee that the Funds or their agents will be able to identity market timers or curtail their trading practices.

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P U R C H A S I N G S H A R E S


By Mail	T O O P E N A N A C C O U N T	T O A D D T O A N A C C O U N T


	Mail a completed account application and your check payable to: Sit Mutual Funds P.O. Box 9763 Providence, RI 02940 Third party checks or starter checks are not accepted for initial purchases. Please be sure to complete the entire application, including the selection of which Fund(s) you want to purchase. Prospectuses and account applications may be viewed and printed from our website, www.sitfunds.com.	Mail a completed investment slip for a particular fund (which you received in your account statement) or a letter of instruction, with a check payable to: Sit Mutual Funds P.O. Box 9763 Providence, RI 02940 A letter of instruction must include your account number, the name(s) of the registered owner(s) and the Fund(s) that you want to purchase. Starter checks are not accepted for additional purchases.








By Telephone


	Fax a completed account application to Sit Mutual Funds at 612-342-2111, and then call us at 1-800-332-5580 or 612-334-5888 for a new account number and bank wiring instructions.	Payment by Wire. Instruct your bank to wire your investment to the Sit Mutual Funds using the wire instructions on the back of the prospectus. Call us at 1-800-332-5580 or 612-334-5888 and notify us of the wire.

	Instruct your bank to wire your investment to us using the wire instructions we have given you. Your bank may charge a wire fee. Mail the original signed account application to: Sit Mutual Funds P.O. Box 9763 Providence, RI 02940	Payment by ACH. Call us at 1-800-332-5580 or 612-334-5888 to request that a purchase be made electronically from your bank account. The shares purchased will be priced on the next business day following your telephone request made prior to the close of the NYSE. Before using the ACH feature, you must set up the ACH option on your initial account application or a Change of Account Options Form.


	Note for IRA Accounts: An IRA account cannot be opened over the telephone.


Automatically

	You cannot make an initial purchase automatically.	You may set up an Automatic Investment Plan on your initial account application or on a Change of Account Options Form. The Plan will invest in the selected Fund electronically from your bank account (via ACH) on any day the Funds are open - either monthly, quarterly or annually.

Please see page 41 for additional general rules for purchasing and selling shares.

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S E L L I N G S H A R E S


T O E X C H A N G E S H A R E S	T O S E L L S H A R E S	By Mail


You may sell shares of one Sit Fund and purchase shares of another Sit Fund by mailing a letter of instruction signed by all registered owners of the account to: Sit Mutual Funds P.O. Box 9763 Providence, RI 02940 A letter of instruction must include your account number, the name(s) and the number of shares or dollar amount of the Fund(s) you want to sell and the name(s) of the Fund(s) you want to purchase.	Mail a written request that includes:
	• Account number,
	• Names and signatures of all registered owners exactly as they appear on the account,
	• Name of Fund and number of shares or dollar amount you want to sell.
	• Medallion signature guarantee(s) if you have requested that the proceeds from the sale be:
	• paid to anyone other than the registered account owners,
	• paid by check and mailed to an address other than the registered address, or
	• sent via bank wire (currently an $8 fee) to a bank different than the bank authorized by you on your account application.
	• Supporting legal documents, if required (see “General Rules” on following page)
	• Method of payment (check, wire transfer, or ACH, see “General Rules” on following page)
	Note for IRA Accounts: Mail a signed IRA Distribution Form to Sit Mutual Funds.

		By Telephone


You may sell shares of one Sit Fund and purchase shares of another Sit Fund by calling us at 1-800-332-5580 or 612-334-5888. If you call after business hours, you will need your Personal Identification Number to use the automatic telephone system.	Call us at 1-800-332-5580 or 612-334-5888 and request a sale of shares.
	Before selling shares by telephone, you must set up the option on your initial account application or a Change of Account Options Form. Proceeds from the sale will be sent as directed on your application by check, bank wire or ACH. The Funds’ bank charges a wire fee to send the proceeds via bank wire (currently $8).
	Note for IRA Accounts: A sale of shares from an IRA account cannot be made over the telephone. Mail a completed IRA Distribution Form to Sit Mutual Funds.


		Automatically


You may set up an Automatic Exchange Plan on your initial account application or on a Change of Account Options Form. The Plan will sell shares of one Sit Fund and invest in another Sit Fund automatically on any day the Funds are open - either monthly, quarterly or annually.	Shares may be sold through the Automatic Withdrawal Plan (minimum $100) if the Special Services section of the initial account application is complete.

	You may add this option by completing a Change of Account Options Form, and this option will begin within 10 days of the Funds’ receipt of the form.

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

Please see page 41 for additional general rules for purchasing and selling shares.

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G E N E R A L R U L E S F O R P U R C H A S I N G & S E L L I N G S H A R E S


		P U R C H A S I N G S H A R E S		E X C H A N G I N G S H A R E S
		Shares may be purchased on any day the NYSE is open with a minimum initial investment of $5,000 per Fund. IRA accounts (regular, Roth and SEP) require a minimum initial investment of $2,000 per Fund. Additional investments in any account must be at least $100.		You may sell shares of one or more Sit Funds and use the proceeds to buy shares of another Sit Fund. Before making an exchange, please read the prospectus and consider the investment objective of the Fund you are purchasing. You may exchange shares by mail, telephone or an automatic exchange plan as described on page 34. You may also exchange shares of the Sit Funds on our website at www.sitfunds.com. An exchange of shares is a sale for federal income tax purposes and you may have a taxable capital gain or loss.


		S E L L I N G S H A R E S		R E C E I P T O F S A L E P R O C E E D S

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

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A C C O U N T S W I T H L O W B A L A N C E S

If your account balance in a Fund falls below $5,000 as a result of selling or exchanging shares, the Fund has the right to redeem your shares and send you the proceeds. Before redeeming your account, the Fund will mail you a notice of its intention to redeem, which will give you an opportunity to make an additional investment. If you do not increase the value of your account to at least $5,000 within 30 days of the date the notice was mailed, the Fund may redeem your account.

I N V E S T O R S E R V I C E F E E S

Investor Services Representatives can provide many services to you. You will be charged a fee for some customized services, such as researching historical account statements and mailings via overnight delivery services. A schedule of services with applicable fees, if any, is available upon request.

C U S T O M E R I D E N T I F I C A T I O N P R O G R A M

Federal law requires the Funds to obtain, verify and record identifying information, which may include the name, residential or business street address, date of birth (for an individual), social security or taxpayer identification number or other identifying information for each investor who opens an account with the Funds. Applications without this information, or without an indication that a social security or taxpayer identification number has been applied for, may not be accepted. After acceptance, to the extent permitted by applicable law or its customer identification program, the Funds reserve the right to: (a) place limits on account transactions until the investor’s identity is verified; (b) refuse an investment in the Funds or (c) involuntarily redeem an investor’s shares and close an account in the event that an investor’s identity is not verified. The Funds and their agents will not be responsible for any loss in an investor’s account resulting from the investor’s delay in providing all required identifying information or from closing an account and redeeming an investor’s shares when an investor’s identity is not verified.

DIVIDENDS AND DISTRIBUTIONS

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

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Capital gains, if any, are distributed at least once a year by each Fund. A capital gain occurs if a Fund sells portfolio securities for more than its cost. If you buy Fund shares just before a distribution, in effect, you “buy the distribution.” You will pay the full price for the shares and then receive a portion of that price back as a taxable distribution.

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

TAXES

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

T A X E S O N D I S T R I B U T I O N S

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

Distributions paid from a Fund’s net investment income will be taxable as ordinary income or as qualified dividend income. Under current tax laws, ordinary income is taxed at higher rates than qualified dividend income and long-term capital gains. Generally, dividends that a Fund receives from domestic corporations and from foreign corporations whose stock is readily tradable on an established securities market in the U.S. or which are domiciled in countries on a list established

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by the Internal Revenue Service will qualify for qualified dividend treatment when paid out to investors. Absent further legislation, the reduced maximum tax rate on qualified dividend income and long-term capital gains will cease to apply to taxable years beginning after December 31, 2008.

Distributions paid from a Fund’s net short-term capital gains, if any, are taxable as ordinary income. Distributions paid from a Fund’s long-term capital gains, if any, are taxable as long-term capital gains, regardless of how long you have held your shares. The composition of distributions in any year will depend upon a variety of market and other conditions and cannot be predicted accurately.

T A X E S O N T R A N S A C T I O N S

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

F O R E I G N T A X C R E D I T S

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

RETIREMENT AND OTHER TAX-DEFERRED ACCOUNTS

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

The Funds are available for your tax-deferred retirement plan with a $2,000 minimum investment per Fund and subsequent contributions of at least $100. Such retirement plans must have a qualified plan sponsor or trustee. Tax-deferred retirement plans include 401(k), profit sharing, and money purchase plans as well as IRA, Roth IRA, SEP-IRA, and certain 403(b)(7) plans. You should

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contact the Funds for specific plan documentation. IRA and 403(b)(7) accounts with balances under $10,000 will be charged an annual $15 IRA custodial fee.

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

MAILING OF REGULATORY DOCUMENTS

The Funds’ practice is to “household,” or consolidate shareholder mailings of regulatory documents such as prospectuses, shareholder reports, and proxies to shareholders at a common address. This means that a single copy of these regulatory documents is sent to the address of record. If at any time you wish to receive multiple copies of the regulatory documents at your address, you may contact the Funds and the Funds will mail separate regulatory documents to each of your individual accounts within 30 days of your call.

We collect nonpublic personal information about you from information we receive from you on applications or other forms and information about your transactions and communications with us, our affiliates or others. We do not disclose any nonpublic personal information about our customers or former customers to anyone, except as permitted by law. We restrict access to nonpublic personal information about you to those employees who need to know that information to provide products or services to you. We maintain physical, electronic and procedural safeguards that comply with federal standards to guard our nonpublic personal information.

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Additional Information

OTHER SECURITIES, INVESTMENT PRACTICES, AND POLICIES

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

As described in the Fund Summaries section, each Fund other than Balanced Fund and International Growth Fund has a policy requiring the Fund to invest at least 80% of its net assets in the types of securities suggested by the Fund’s name. For purposes of this requirement, net assets include the amount of any borrowings for investment purposes.

D U R A T I O N

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

P O R T F O L I O T U R N O V E R

The Funds may trade securities frequently, resulting, from time to time, in an annual portfolio turnover rate of over 100%. However, historically the Funds’ turnover rates have been less than 100%. The “Financial Highlights” section of this Prospectus shows each Fund’s historical portfolio turnover rate. A high portfolio turnover rate generally will result in greater brokerage

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commission expenses borne by a Fund which may decrease a Fund’s yield. A portfolio turnover rate in excess of 100% may result in higher amounts of realized short-term capital gain, subject to the payment of taxes as ordinary income by shareholders.

S E C U R I T I E S R A T I N G S

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

I N V E S T M E N T I N T H E S I T M O N E Y M A R K E T F U N D

Each Fund may invest up to 25% of its total net assets in shares of the money market funds advised by the Adviser, which includes the Sit Money Market Fund, subject to the conditions contained in an exemptive order issued to the Funds by the Securities and Exchange Commission. These investments may be made in lieu of direct investments in short-term money market instruments if the Adviser believes that they are in the best interest of the Funds.

T E M P O R A R Y D E F E N S I V E I N V E S T I N G

For temporary defensive purposes in periods of unusual market conditions, each Fund may invest all of its total assets in cash or short-term debt securities including certificates of deposit, bankers’ acceptances and other bank obligations, corporate and direct U.S. obligation bonds, notes, bills, commercial paper and repurchase agreements. As a result, a Fund may not achieve its investment objective.

FINANCIAL HIGHLIGHTS

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

47

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SHAREHOLDER INFORMATION

ADDITIONAL INFORMATION

B A L A N C E D F U N D


	Fiscal Years Ended June 30,

	2005				2004				2003				2002				2001

Net Asset Value:

Beginning of period		$	13.80			$	12.47			$	12.29			$	15.33			$	19.18

Operations:

Net investment income⁽²⁾			.26				.21				.29				.36				.46

Net realized and unrealized gains (losses) on investments			.73				1.34				.22				(3.01	)			(3.51	)


Total from operations			.99				1.55				.51				(2.65	)			(3.05	)


Distributions to Shareholders:

From net investment income			(.26	)			(.22	)			(.33	)			(.38	)			(.48	)

From realized gains			—				—				—				(.01	)			(.32	)


Total distributions			(.26	)			.22				(.33	)			(.39	)			(.80	)


Net Asset Value:

End of period		$	14.53			$	13.80			$	12.47			$	12.29			$	15.33


Total investment return ⁽¹⁾			7.28	%			12.53	%			4.43	%			(17.62	%)			(16.39	%)


Net assets at end of period (000s omitted)		$	12,251			$	12,441			$	16,065			$	17,825			$	24,947

Ratios:

Expenses to average daily net assets			1.00	%			1.00	%			1.00	%			1.00	%			1.00	%

Net investment income to average daily net assets			1.84	%			1.58	%			2.54	%			2.52	%			2.89	%

Portfolio turnover rate (excluding short-term securities)			36.32	%			44.82	%			48.86	%			53.53	%			63.32	%


⁽¹⁾	Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of distributions at net asset value.
⁽²⁾	The net investment income (loss) per share is based on average shares outstanding for the period.

48

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SHAREHOLDER INFORMATION

ADDITIONAL INFORMATION

D I V I D E N D G R O W T H F U N D


	Fiscal Year Ended June 30, 2005				Six months ended June 30, *2004 ^()**

Net Asset Value:

Beginning of period		$	10.14			$	10.00


Operations:

Net investment income (loss)⁽²⁾			.21				.08

Net realized and unrealized gains (losses) on investments			1.01				.10


Total from operations			1.22				.18


Distributions to Shareholders:

From net investment income			(.18	)			(.04	)

From realized gains			—				—


Total distributions			(.18	)			(.04	)


Net Asset Value:

End of period		$	11.18			$	10.14

Total investment return ⁽¹⁾			12.12	%			1.75	%


Net assets at end of period (000s omitted)		$	14,196			$	6,872

Ratios:

Expenses to average daily net assets			1.00	%			1.00	%⁽³⁾

Net investment income (loss) to average daily net assets			1.94	%			1.79	%⁽³⁾

Portfolio turnover rate (excluding short-term securities)			54.89	%			13.67	%


⁽¹⁾	Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of distributions at net asset value.
⁽²⁾	The net investment income (loss) per share is based on average shares outstanding for the period.
⁽³⁾	Percentages are adjusted to an annual rate.
^(*)	Fund’s inception date was December 31, 2003.

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L A R G E C A P G R O W T H F U N D


	Fiscal Years Ended June 30,

	2005				2004				2003				2002				2001

Net Asset Value:

Beginning of period		$	31.96			$	26.92			$	26.40			$	38.99			$	63.66


Operations:

Net investment income (loss) ⁽²⁾			.16				.01				.02				(.08	)			(.16	)

Net realized and unrealized gains (losses) on investments			2.27				5.05				.50				(12.17	)			(19.48	)


Total from operations			2.43				5.06				.52				(12.25	)			(19.64	)


Distributions to Shareholders:

From net investment income			(.12	)			(.02	)			—				—				—

From realized gains			—				—				—				(.34	)			(5.03	)


Total distributions			(.12	)			(.02	)			—				(.34	)			(5.03	)


Net Asset Value:

End of period		$	34.27			$	31.96			$	26.92			$	26.40			$	38.99

Total investment return ⁽¹⁾			7.62	%			18.81	%			1.97	%			(31.63	%)			(32.92	%)

Net assets at end of year (000s omitted)		$	69,660			$	63,774			$	59,324			$	63,839			$	122,829

Ratios:

Expenses to average daily net assets			1.00	%			1.00	%			1.00	%			1.00	%			1.00	%

Net investment income (loss) to average daily net assets			0.49	%			0.02	%			0.08	%			(0.25	%)			(0.33	%)

Portfolio turnover rate (excluding short-term securities)			23.22	%			29.71	%			33.40	%			34.74	%			45.26	%


⁽¹⁾	Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of distributions at net asset value.
⁽²⁾	The net investment income (loss) per share is based on average shares outstanding for the period.

50

FUND SUMMARIES

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SHAREHOLDER INFORMATION

ADDITIONAL INFORMATION

M I D C A P G R O W T H F U N D


	Fiscal Years Ended June 30,

			2005			2004			2003			2002			2001


Net Asset Value:

Beginning of period		$	10.23		$	8.06		$	7.91		$	12.37		$	23.57



Operations:

Net investment income (loss)⁽³⁾			(.07	)		(.07	)		(.05	)		(.07	)		(.08	)

Net realized and unrealized gains (losses) on investments			1.12			2.24			.20			(4.16	)		(7.05	)


Total from operations			1.05			2.17			.15			(4.23	)		(7.13	)


Distributions to Shareholders:

From net investment income			—			—			—			—			—

From realized gains			—			—			—			(.23	)		(4.07	)


Total distributions			—			—			—			(.23	)		(4.07	)


Net Asset Value:

End of period		$	11.28		$	10.23		$	8.06		$	7.91		$	12.37

Total investment return⁽¹⁾			10.26	%		26.92	%		1.90	%		(34.66	%)		(35.21	%)

Net assets at end of year (000s omitted)		$	199,449		$	204,946		$	170,173		$	181,347		$	360,037

Ratios:
Expenses to average daily net assets			1.15	%⁽²⁾		1.15	%⁽²⁾		1.15	%⁽²⁾		1.15	%⁽²⁾		1.06	%⁽²⁾

Net investment income (loss) to average daily net assets			(0.66	%)⁽²⁾		(0.71	%)⁽²⁾		(0.73	%)⁽²⁾		(0.79	%)⁽²⁾		(0.49	%)⁽²⁾

Portfolio turnover rate (excluding short-term securities)			39.74	%		65.14	%		53.19	%		60.88	%		56.21	%


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

⁽²⁾	Total Fund expenses are contractually limited to 1.25% of average daily net assets. However, during the years ended June 30, 2005, 2004, 2003, 2002, and 2001, the investment adviser voluntarily absorbed expenses that were otherwise payable by the Fund. Had the Fund incurred these expenses, the ratio of expenses to average daily net assets would have been 1.25% for each of these periods and the ratio of net investment income (loss) to average daily net assets would have been (0.76%), (0.81%), (0.83%), (0.89%), and (0.68%), respectively.

⁽³⁾	The net investment income (loss) per share is based on average shares outstanding for the period.

51

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ADDITIONAL INFORMATION

I N T E R N A T I O N A L G R O W T H F U N D



	Fiscal Years Ended June 30,

			2005			2004			2003			2002			2001


Net Asset Value:

Beginning of period		$	11.24		$	9.39		$	10.79		$	14.61		$	23.58


Operations:

Net investment income (loss)⁽³⁾			.07			.01			.07			(.03	)		(.03	)

Net realized and unrealized gains (losses) on investments			1.03			1.92			(1.47	)		(3.79	)		(8.42	)


Total from operations			1.10			1.93			(1.40	)		(3.82	)		(8.45	)


Distributions to Shareholders:

From net investment income			(.03	)		(.08	)		—			—			—

From realized gains			—			—			—			—			(.52	)


Total distributions			(.03	)		(.08	)		—			—			(.52	)


Net Asset Value:

End of period		$	12.31		$	11.24		$	9.39		$	10.79		$	14.61

Total investment return ⁽¹⁾			9.80	%		20.63	%		(12.97	%)		(26.15	%)		(36.43	%)

Net assets at end of period (000s omitted)		$	29,152		$	34,281		$	48,533		$	69,820		$	123,085

Ratios:

Expenses to average daily net assets			1.50	%⁽²⁾		1.50	%⁽²⁾		1.50	%⁽²⁾		1.50	%⁽²⁾		1.50	%⁽²⁾

Net investment income (loss) to average daily net assets			0.56	%⁽²⁾		0.14	%⁽²⁾		0.81	%⁽²⁾		(0.22	%)⁽²⁾		(0.20	%)⁽²⁾

Portfolio turnover rate (excluding short-term securities)			28.27	%		44.37	%		21.02	%		25.78	%		25.22	%


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

⁽²⁾	Total Fund expenses are contractually limited to 1.85% of average daily net assets. However, during the years ended June 30, 2005, 2004, 2003, 2002, and 2001, the investment adviser voluntarily absorbed expenses that were otherwise payable by the Fund. Had the Fund incurred these expenses, the ratio of expenses to average daily net assets would have been 1.85% for each of these periods and the ratio of net investment income (loss) to average daily net assets would have been 0.21%, (0.21%), 0.46%, (0.57%), and (0.55%), respectively.

⁽³⁾	The net investment income (loss) per share is based on average shares outstanding for the period.

52

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SHAREHOLDER INFORMATION

ADDITIONAL INFORMATION

S M A L L C A P G R O W T H F U N D


	Fiscal Years Ended June 30,

			2005			2004			2003			2002			2001


Net Asset Value:

Beginning of period		$	25.29		$	21.64		$	21.06		$	28.99		$	41.35


Operations:
Net investment loss ⁽²⁾			(.27	)		(.27	)		(.18	)		(.24	)		(.13	)

Net realized and unrealized gains (losses) on investments			2.72			3.92			.76			(7.65	)		(11.65	)


Total from operations			2.45			3.65			.58			(7.89	)		(11.78	)


Distributions to Shareholders:

From realized gains			—			—			—			(.04	)		(.58	)


Total distributions			—			—			—			(.04	)		(.58	)


Net Asset Value:

End of period		$	27.74		$	25.29		$	21.64		$	21.06		$	28.99


Total investment return ⁽¹⁾			9.69	%		16.87	%		2.75	%		(27.24	%)		(28.79	%)

Net assets at end of year (000s omitted)		$	180,545		$	199,810		$	182,912		$	180,684		$	227,888

Ratios:

Expenses to average daily net assets			1.50	%		1.50	%		1.50	%		1.50	%		1.50	%

Net income (loss) to average daily net assets			(1.08	%)		(1.10	%)		(1.00	%)		(0.99	%)		(0.41	%)

Portfolio turnover rate (excluding short-term securities)			33.75	%		65.79	%		59.98	%		65.25	%		39.91	%


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

⁽²⁾	The net investment income (loss) per share is based on average shares outstanding for the period.

53

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SHAREHOLDER INFORMATION

ADDITIONAL INFORMATION

S C I E N C E A N D T E C H N O L O G Y G R O W T H F U N D


	Fiscal Years Ended June 30,

			2005			2004			2003			2002			2001

Net Asset Value:
Beginning of period		$	10.02		$	8.05		$	7.52		$	15.23		$	33.38


Operations:

Net investment income (loss) ⁽³⁾			(.09	)		(.11	)		(.07	)		(.12	)		(.19	)
Net realized and unrealized gains (losses) on investments			(.79	)		2.08			.60			(7.58	)		(17.10	)


Total from operations			(.88	)		1.97			.53			(7.70	)		(17.29	)


Distributions to Shareholders:
From net investment income			—			—			—			—			—
From realized gains			—			—			—			(.01	)		(.86	)


Total distributions			—			—			—			(.01	)		(.86	)


Net Asset Value:


End of period		$	9.14		$	10.02		$	8.05		$	7.52		$	15.23

Total investment return⁽¹⁾			(8.78	%)		24.47	%		7.05	%		(50.57	%)		(52.96	%)

Net assets at end of period (000s omitted)		$	14,542		$	19,054		$	15,200		$	14,018		$	30,453

Ratios:

Expenses to average daily net assets			1.35	%⁽²⁾		1.35	%⁽²⁾		1.35	%⁽²⁾		1.35	%⁽²⁾		1.29	%⁽²⁾
Net investment income (loss) to average daily net assets			(0.99	%)⁽²⁾		(1.20	%)⁽²⁾		(1.05	%)⁽²⁾		(1.06	%)⁽²⁾		(0.94	%)⁽²⁾
Portfolio turnover rate (excluding short-term securities)			37.55	%		55.54	%		49.67	%		76.78	%		34.59	%


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

⁽²⁾	Total Fund expenses are contractually limited to 1.50% of average daily net assets. However, during the periods ended June 30, 2005, 2004, 2003, 2002, and 2001, the investment adviser voluntarily absorbed expenses that were otherwise payable by the Fund. Had the Fund incurred these expenses, the ratio of expenses to average daily net assets would have been 1.50% for each of these periods and the ratio of net investment income (loss) to average daily net assets would have been (1.14%), (1.35%), (1.20%), (1.21%), and (1.15%), respectively.

⁽³⁾	The net investment income (loss) per share is based on average shares outstanding for the period.

54

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SHAREHOLDER INFORMATION

ADDITIONAL INFORMATION

D E V E L O P I N G M A R K E T S G R O W T H F U N D


	Fiscal Years Ended June 30,

			2005			2004			2003			2002			2001

Net Asset Value:
Beginning of period		$	9.89		$	8.12		$	8.10		$	9.17		$	13.43


Operations

Net investment income (loss) ⁽²⁾			.06			.04			.02			(.02	)		—
Net realized and unrealized gains (losses) on investments			3.04			1.78			—			(1.05	)		(4.26	)


Total from operations			3.10			1.82			.02			(1.07	)		(4.26	)



Distributions to Shareholders:
From net investment income			(.02	)		(.05	)		—			—			—
From realized gains			—			—			—			—			—


Total distributions			(.02	)		(.05	)		—			—			—



Net Asset Value:
End of period		$	12.97		$	9.89		$	8.12		$	8.10		$	9.17

Total investment return ⁽¹⁾			31.32	%		22.48	%		0.25	%		(11.66	%)		(31.72	%)

Net assets at end of year (000s omitted)		$	10,575		$	8,030		$	8,577		$	11,250		$	13,877

Ratios:
Expenses to average daily net assets			2.00	%		2.00	%		2.00	%		2.00	%		2.00	%

Net investment income (loss) to average daily net assets			0.55	%		0.37	%		0.31	%		(0.20	%)		0.02	%

Portfolio turnover rate (excluding short-term securities)			29.54	%		33.72	%		6.61	%		25.40	%		21.87	%


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

⁽²⁾	The net investment income (loss) per share is based on average shares outstanding for the period.

55

FUND SUMMARIES

FUND MANAGEMENT

SHAREHOLDER INFORMATION

ADDITIONAL INFORMATION

This page has been left blank intentionally

56

NOT PART OF PROSPECTUS

This page has been left blank intentionally

57

NOT PART OF PROSPECTUS

F O R M O R E I N F O R M A T I O N

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


Statement of Additional Information	Annual / Semi-Annual Report
The SAI contains more details about the	The Funds’ Annual and Semi-Annual Reports
Funds and their investment policies.	include a discussion of the market conditions
The SAI is incorporated in this Prospectus	and investment strategies that significantly
by reference.	affected the Funds’ performance.

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

By Telephone:
(800) 332-5580 or
(612) 334-5888

By E-Mail:
info@sitinvest.com

On The Internet:
Visit our website at
www.sitfunds.com
Visit the SEC website at
www.sec.gov

By Regular Mail:
Sit Mutual Funds
P.O. Box 9763
Providence, RI 02940

By Express Mail:
Sit Mutual Funds
101 Sabin Street
Pawtucket, RI 02860

To Wire Money For A Purchase:
PNC Bank, Pittsburgh, PA
ABA #031000053
Account #86-0690-5556
Sit Mutual Funds
For Further Credit: (shareholder name)
Account Number: (fund name
and account #)

The SAI and the Funds’ reports may also be reviewed at the Public Reference Room of the Securities and Exchange Commission in Washington, D.C. You can get copies free from the EDGAR database on the SEC’s Website listed above, or by mail, for a fee, by calling the SEC at 1-202-942-8090, by making an electronic request at the following email address: publicinfo@sec.gov, or by writing the SEC’s Public Reference Section, Washington, D.C. 20549-0102.

(SIT MUTUAL FUNDS LOGO)

1940 Act File Nos. 811-03342; 811-03343; 811-06373

PART B
STATEMENT OF ADDITIONAL INFORMATION

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

3300 IDS Center, 80 South Eighth Street
Minneapolis, Minnesota 55402
www.sitfunds.com 800-332-5580
info@sitinvest.com 612-334-5888

This Statement of Additional Information is not a Prospectus. It should be read
in conjunction with the Funds' Prospectus. The financial statements included as
part of the Funds' Annual Report to shareholders for fiscal year ended June 30,
2005 are incorporated by reference into this Statement of Additional
Information. Copies of the Funds' Prospectus and/or Annual Report may be
obtained from the Funds without charge by contacting the Funds by telephone at
(612) 334-5888 or (800) 332-5580 or by mail at 3300 IDS Center, 80 S. Eighth
Street, Minneapolis, Minnesota 55402, or by visiting the SEC website at
www.sec.gov. This Statement of Additional Information is dated November 1, 2005,
and it is to be used with the Funds' Prospectus dated November 1, 2005.

TABLE OF CONTENTS
-------------------------------------------------------------------------------------
Page
----
FUND BACKGROUND.....................................................................2
ADDITIONAL INVESTMENT RESTRICTIONS
Balanced Fund..................................................................3
Dividend Growth Fund...........................................................4
Large Cap Growth Fund and Mid Cap Growth Fund..................................5
Science and Technology Growth Fund.............................................6
International Growth Fund......................................................7
Small Cap Growth Fund..........................................................8
Developing Markets Growth Fund.................................................9
COUNTRIES IN WHICH THE INTERNATIONAL GROWTH FUND MIGHT INVEST......................10
COUNTRIES IN WHICH THE DEVELOPING MARKETS GROWTH FUND MIGHT INVEST.................11
SPECIAL RISKS FOR INTERNATIONAL INVESTING
Corporate Disclosure Standards and Government Regulation......................12
Market Characteristics........................................................13
Currency Fluctuations.........................................................13
Foreign Taxation..............................................................14
Investment and Repatriation Restrictions......................................14
ADDITIONAL INVESTMENT POLICIES & RISKS
Common and Preferred Stocks...................................................14
Convertible Securities........................................................14
Warrants or Rights............................................................14
Commercial Paper..............................................................15
Bank Obligations..............................................................15
Obligations of the U.S. Government............................................16
Depository Receipts...........................................................16
Forward Foreign Currency Exchange Contracts...................................17
Options - Puts and Calls......................................................17
When-Issued and Forward Commitment Securities.................................18

Repurchase Agreements.........................................................18
Futures Contracts and Options on Futures Contracts............................18
Illiquid Securities...........................................................20
Sit Money Market Fund.........................................................21
ADDITIONAL BALANCED FUND INVESTMENT POLICIES & RISKS
Mortgage-Backed Securities....................................................21
Asset-Backed Securities.......................................................22
Collaterialized Mortgage Obligations..........................................23
U.S. Treasury Inflation-Protection Securities.................................23
Manufactured Home Loans.......................................................23
Municipal Securities..........................................................23
Swap Agreements...............................................................24
Variable Rate Notes...........................................................24
Zero Coupon Securities........................................................24
Trust Preferred Securities....................................................24
High Yield Securities Risks...................................................24
RATINGS OF DEBT SECURITIES.........................................................25
SECURITIES LENDING.................................................................25
PORTFOLIO TURNOVER.................................................................26
ADDITIONAL INFORMATION ABOUT SELLING SHARES
Suspension of Selling Ability.................................................26
Telephone Transactions........................................................26
Redemption-In-Kind ...........................................................27
COMPUTATION OF NET ASSET VALUE.....................................................27
MANAGEMENT.........................................................................28
Portfolio Managers............................................................31
Other Accounts Managed by Portfolio Management Team.......................31
Compensation of Investment Professionals..................................33
Fund Shares Owned by Portfolio Management Team............................33
Fund Shares Owned by Directors................................................33
Compensation of Directors.....................................................34
Code of Ethics................................................................35
INVESTMENT ADVISER.................................................................35
DISTRIBUTOR........................................................................39
BROKERAGE..........................................................................40
PROXY VOTING.......................................................................42
DISCLOSURE OF PORTFOLIO HOLDINGS...................................................43
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES................................43
TAXES..............................................................................45
FINANCIAL STATEMENTS...............................................................46
OTHER INFORMATION..................................................................46
LIMITATION OF DIRECTOR LIABILITY...................................................47
CAPITALIZATION AND VOTING RIGHTS...................................................47
APPENDIX A - BOND AND COMMERCIAL PAPER RATINGS

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

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

The Funds are open-ended funds and operate as diversified management investment
companies, as defined in the Investment Company Act of 1940. A "diversified"
investment company means a company which meets the following requirements: At
least 75% of the value of the company's total assets is represented by cash and
cash items (including receivables),

"Government Securities", securities of other investment companies, and other
securities for the purposes of this calculation limited in respect of any one
issuer to an amount not greater in value than 5% of the value of the total
assets of such management company and to not more than 10% of the outstanding
voting securities of such issuer. "Government Securities" means securities
issued or guaranteed as to principal or interest by the United States, or by a
person controlled or supervised by and acting as an instrumentality of the
Government of the United States pursuant to authority granted by the Congress of
the United States; or certificates of deposit for any of the foregoing.

Each of the Funds (or the corporate issuer of their shares) is organized as a
Minnesota corporation. The Large Cap Growth Fund and Mid Cap Growth Fund were
incorporated on July 14, 1981. The corporate issuer of the International Growth
Fund, Balanced Fund, Developing Markets Growth Fund, Small Cap Growth Fund, and
Science and Technology Growth Fund was incorporated on July 30, 1991.

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

The investment objectives and investment strategies of the Funds are set forth
in the Prospectus under "Fund Summaries." Set forth below are the fundamental
investment restrictions and policies applicable to each Fund, followed by the
non-fundamental investment restrictions and policies. Those restrictions and
policies designated as fundamental may not be changed without shareholder
approval. Shareholder approval, as defined in the Investment Company Act of
1940, means the lesser of the vote of (a) 67% of the shares of a Fund at a
meeting where more than 50% of the outstanding shares of the Fund are present in
person or by proxy or (b) more than 50% of the outstanding shares of a Fund. A
percentage limitation must be met at the time of investment and a later
deviation resulting from a change in values or net assets will not be a
violation.

Each Fund other than Balanced Fund and International Growth Fund has a
non-fundamental policy requiring the Fund, under normal market conditions, to
invest at least 80% of its net assets plus the amount of any borrowings for
investment purposes in the types of securities suggested by the Fund's name. In
appropriate circumstances, synthetic investments may be included in the 80%
basket if they have economic characteristics similar to the other investments
included in the basket. Each of these Funds has adopted a policy requiring it to
provide notice to Fund shareholders at least 60 days prior to any change in its
80% investment policy. Any such notice will be provided in plain English in a
separate written document and will contain the following prominent statement, or
a similar clear and understandable statement, in bold-faced type: "Important
Notice Regarding Change in Investment Policy." This statement will also appear
on the envelope in which the notice is delivered unless the notice is delivered
separately from other communications to investors.

BALANCED FUND
--------------------------------------------------------------------------------
The Fund is subject to the following fundamental investment restrictions. The
Fund will not:
1. Purchase securities of any issuer (other than obligations of, or guaranteed
by, the U.S. government or its agencies or instrumentalities), if as a
result, more than 5% of the Fund's net assets would be invested in
securities of that issuer. This restriction is limited to 75% of the Fund's
net assets;
2. Purchase or sell commodities or commodity futures, provided that this
restriction does not apply to financial futures contracts or options
thereon;
3. Invest in real estate (including real estate limited partnerships),
although it may invest in securities which are secured by or represent
interests in real estate;
4. Make loans except by (a) purchasing publicly distributed debt securities
such as bonds, debentures and similar securities in which the Fund may
invest consistent with its investment policies, and (b) by lending its
portfolio securities to broker-dealers, banks and other institutions in an
amount not to exceed 33-1/3% of its total net assets if such loans are
secured by collateral equal to 100% of the value of the securities lent;
5. Underwrite the securities of other issuers;
6. Borrow money, except temporarily in emergency or extraordinary situations
and then not for the purchase of investments and not in excess of 33 1/3%
of the Fund's total net assets;
7. Invest in exploration or development for oil, gas or other minerals
(including mineral leases), although it may invest in the securities of
issuers which deal in or sponsor such activities;
8. Issue senior securities as defined in the Investment Company Act of 1940,
except for borrowing as permitted in emergency or extraordinary situations
as discussed herein; or
9. Invest 25% or more of its assets in a single industry except with regard to
the purchase of obligations issued or guaranteed by the U.S. government,
its agencies or instrumentalities.

The following investment restrictions of the Fund are not fundamental. The Fund
will not:
1. Purchase on margin or sell short except to obtain short-term credit as may
be necessary for the clearance of transactions and it may make margin
deposits in connection with futures contracts;
2. Invest more than 5% of the value of its total assets in the securities of
any one investment company or more than 10% of the value of its total
assets, in the aggregate, in the securities of two or more investment
companies, or acquire more than 3% of the total outstanding voting
securities of any one investment company, except a.) as part of a merger,
consolidation, acquisition, or reorganization or b.) in a manner consistent
with the requirements of an exemptive order issued to the Fund and/or the
Adviser by the Securities and Exchange Commission;
3. Purchase or retain securities of any issuer if to the knowledge of the
Fund, officers and directors of either the Fund its investment adviser
beneficially owning more than 0.5% of such securities together own more
than 5% of such securities;
4. Invest more than 10% of its net assets in securities of issuers which, with
their predecessors have a record of less than three years continuous
operation. Securities of such issuers will not be deemed to fall within
this limitation if they are guaranteed by an entity in continuous operation
for more than three years;
5. Invest for the purpose of exercising control or management;
6. Enter into reverse repurchase agreements;
7. Invest more than 15% of its net assets collectively in all types of
illiquid securities;
8. Invest in more than 10% of the outstanding voting securities of any one
issuer;
9. Purchase more than 10% of any class of securities of any issuer except
securities issued or guaranteed by the U.S. government, its agencies or
instrumentalities. All debt securities and all preferred stocks are each
considered as one class. This restriction is limited to 75% of the Fund's
net assets;
10. Invest more than 5% of the Fund's net assets in warrants (valued at lower
of cost or market) including a maximum of 2% which are not listed on the
New York or American Stock Exchanges. For this purpose, warrants acquired
by the Fund in units or attached to other securities will be deemed to be
without value;
11. Pledge, mortgage, hypothecate or otherwise encumber the Fund's assets
except to the extent necessary to secure permitted borrowings;
12. Engage in arbitrage transactions or write unsecured put options but may
write fully covered call options;
13. Purchase put and call options provided that the aggregate premiums paid for
all such options exceed 10% of the Fund's total assets;
14. Invest more than 25% of the fixed-income portion of its portfolio in debt
securities that are rated below investment grade;
15. Invest less than 35% or more than 65% of its net assets in equity
securities and will not invest less than 35% or more than 65% of its net
assets in fixed-income securities, under normal circumstances;
16. Invest less than 25% of the fixed-income portion of its portfolio in
fixed-income senior securities; or
17. Invest more than 20% of its assets in foreign government securities or
equity securities of foreign issuers that are either listed on a U.S. or
Toronto stock exchange or represented by American Depository Receipts.

DIVIDEND GROWTH FUND
--------------------------------------------------------------------------------
The Fund is subject to the following fundamental investment restrictions. The
Fund will not:
1. Purchase securities of any issuer (other than obligations of, or guaranteed
by, the U.S. government or its agencies or instrumentalities), if as a
result, more than 5% of the Fund's net assets would be invested in
securities of that issuer. This restriction is limited to 75% of the Fund's
net assets;
2. Purchase or sell commodities or commodity futures, provided that this
restriction does not apply to financial futures contracts or options
thereon;
3. Invest in real estate (including real estate limited partnerships),
although it may invest in securities that are secured by or represent
interests in real estate;
4. Make loans except by (a) purchasing publicly distributed debt securities
such as bonds, debentures and similar securities in which the Fund may
invest consistent with its investment policies, and (b) by lending its
portfolio securities to broker-dealers, banks and other institutions in an
amount not to exceed 33-1/3% of its total net assets if such loans are
secured by collateral equal to 100% of the value of the securities lent;
5. Underwrite the securities of other issuers;
6. Borrow money, except temporarily in emergency or extraordinary situations
and then not for the purchase of investments, and not in excess of 33 1/3%
of the Fund's total net assets at the time of such borrowing. In the event
that the principal amount of the Fund's borrowing at any time exceeds 33
1/3% of the Fund's total net assets, the Fund shall, within three days
thereafter (not including Sundays and holidays) reduce the amount of its
borrowing to an amount not in excess of 33 1/3% of the Fund's total net
assets;

7. Invest in exploration or development for oil, gas or other minerals
(including mineral leases), although it may invest in the securities of
issuers which deal in or sponsor such activities;
8. Invest 25% or more of its assets in a single industry except with regard to
the purchase of obligations issued or guaranteed by the U.S. government,
its agencies or instrumentalities; or
9. Issue senior securities as defined in the Investment Company Act of 1940,
except for borrowing as permitted temporarily in emergency or extraordinary
situations as permitted within the Fund's investment restrictions.

LARGE CAP GROWTH FUND AND MID CAP GROWTH FUND
--------------------------------------------------------------------------------
The Large Cap Growth Fund and Mid Cap Growth Fund are subject to the following
fundamental investment restrictions. The Funds will not:
1. Purchase securities of any issuer (other than obligations of, or guaranteed
by, the U.S. government or its agencies or instrumentalities), if as a
result, more than 5% of the Fund's net assets would be invested in
securities of that issuer. This restriction is limited to 75% of the Fund's
net assets;
2. Purchase more than 10% of any class of securities of any issuer except
securities issued or guaranteed by the U.S. government, its agencies or
instrumentalities. All debt securities and all preferred stocks are each
considered as one class. This restriction is limited to 75% of the Fund's
net assets;
3. Invest more than 10% of the Fund's net assets in securities of companies
which have (with their predecessors) a record of less than five years
continuous operation;
4. Make loans except by (a) purchasing publicly distributed debt securities
such as bonds, debentures and similar securities in which the Fund may
invest consistent with its investment policies, and (b) by lending its
portfolio securities to broker-dealers, banks and other institutions in an
amount not to exceed 33-1/3% of its total net assets if such loans are
secured by collateral equal to 100% of the value of the securities lent;
5. Borrow money, except temporarily in emergency or extraordinary situations
and then not for the purchase of investments and not in excess of 33-1/3%
of the Fund's total net assets.
6. Invest more than 5% of the Fund's net assets in warrants (valued at lower
of cost or market) including a maximum of 2% which are not listed on the
New York or American Stock Exchanges. For this purpose, warrants acquired
by the Fund in units or attached to other securities will be deemed to be
without value;
7. Purchase on margin or sell short except to obtain short-term credit as may
be necessary for the clearance of transactions;
8. Concentrate more than 25% of its net assets in any one industry, provided
that (i) there shall be no limitation on the purchase of obligations issued
or guaranteed by the U.S. government, its agencies or instrumentalities and
(ii) utility companies will be classified according to their services, for
example, water, gas, electric and communications, and each will be
considered a separate industry;
9. Purchase or retain the securities of any issuer if, in total, the holdings
of all officers and directors of the Fund and of its investment adviser,
who individually own beneficially more than 0.5% of such securities,
together own more than 5% of such securities;
10. Invest for the purpose of controlling management of any company;
11. Invest in commodities or commodity futures contracts or in real estate,
although it may invest in securities which are secured by interests in real
estate and in securities of companies which invest or deal in real estate;

12. Invest in exploration or development for oil, gas or other minerals,
although it may invest in the securities of issuers which deal in or
sponsor such activities;
13. Underwrite the securities of other issuers;
14. Issue senior securities as defined in the Investment Company Act of 1940,
except for borrowing as permitted in emergency or extraordinary situations
as discussed herein;
15. Invest 25% or more of its assets in a single industry except with regard to
the purchase of obligations issued or guaranteed by the U.S. government,
its agencies or instrumentalities; or
16. Invest more than 15% of its net assets collectively in all types of
illiquid securities.

The following investment restrictions of the Funds are not fundamental and may
be changed by the Board of Directors of the Funds. Each Fund will not:
1. Engage in arbitrage transactions or write unsecured put options but may
write fully covered call options;
2. Purchase put and call options provided that the aggregate premiums paid for
all such options exceed 5% of the Fund's net assets;
3. Pledge, mortgage, hypothecate, or otherwise encumber the Fund's assets
except to the extent necessary to secure permitted borrowings;
4. Invest more than 5% of the value of its total assets in the securities of
any one investment company or more than 10% of the value of its total
assets, in the aggregate, in the securities of two or more investment
companies, or acquire more than 3% of the total outstanding voting
securities of any one investment company, except a.) as part of a merger,
consolidation, acquisition, or reorganization or b.) in a manner consistent
with the requirements of an exemptive order issued to the Funds and/or the
Adviser by the Securities and Exchange Commission;
5. Pledge, mortgage, hypothecate, or otherwise encumber the Fund's assets
except to the extent necessary to secure permitted borrowings;
6. Invest, under normal market conditions, less than 80% of its net assets
plus the amount of any borrowings for investment purposes in common stocks
of companies with capitalizations of $5 billion or more at the time of
purchase in the case of the Large Cap Growth Fund, and, in the case of the
Mid Cap Growth Fund, invest, under normal market conditions, at least 80 %
of its net assets in the common stocks of companies with capitalizations of
$2 billion to $15 billion at the time of purchase; or
7. Invest more than 20% of its assets in equity securities of foreign issuers
that are either listed on a U.S. or Toronto stock exchange or represented
by American Depository Receipts.

SCIENCE AND TECHNOLOGY GROWTH FUND
--------------------------------------------------------------------------------
The Fund is subject to the following fundamental investment restrictions. The
Fund will not:
1. Purchase securities of any issuer (other than obligations of, or guaranteed
by, the U.S. government or its agencies or instrumentalities), if as a
result, more than 5% of the Fund's net assets would be invested in
securities of that issuer. This restriction is limited to 75% of the Fund's
net assets;
2. Purchase or sell commodities or commodity futures, provided that this
restriction does not apply to financial futures contracts or options
thereon;
3. Invest in real estate (including real estate limited partnerships),
although it may invest in securities that are secured by or represent
interests in real estate;
4. Make loans except by (a) purchasing publicly distributed debt securities
such as bonds, debentures and similar securities in which the Fund may
invest consistent with its investment policies, and (b) by lending its
portfolio securities to broker-dealers, banks and other institutions in an
amount not to exceed 33-1/3% of its total net assets if such loans are
secured by collateral equal to 100% of the value of the securities lent;
5. Underwrite the securities of other issuers;
6. Borrow money, except temporarily in emergency or extraordinary situations
and then not for the purchase of investments, and not in excess of 33 1/3%
of the Fund's total net assets;
7. Invest in exploration or development for oil, gas or other minerals
(including mineral leases), although it may invest in the securities of
issuers which deal in or sponsor such activities;
8. Invest 25% or more of its assets in a single industry except with regard to
the purchase of obligations issued or guaranteed by the U.S. government,
its agencies or instrumentalities; or
9. Issue senior securities as defined in the Investment Company Act of 1940,
except for borrowing as permitted in emergency or extraordinary situations
as discussed herein.

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

1. Purchase on margin or sell short except to obtain short-term credit as may
be necessary for the clearance of transactions and it may make margin
deposits in connection with futures contracts;
2. Invest 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;
6. Pledge, mortgage, hypothecate or otherwise encumber either Fund's assets
except to the extent necessary to secure the permitted borrowings;
7. Invest more than 5% of the value of its total assets in the securities of
any one investment company or more than 10% of the value of its total
assets, in the aggregate, in the securities of two or more investment
companies, or acquire more than 3% of the total outstanding voting
securities of any one investment company, except a.) as part of a merger,
consolidation, acquisition, or reorganization or b.) in a manner consistent
with the requirements of an exemptive order issued to the Fund and/or the
Adviser by the Securities and Exchange Commission;
8. Engage in arbitrage transactions or write unsecured put options but may
write fully covered call options; or
9. Purchase put and call options provided that the aggregate premiums paid for
all such options exceed 5% of the Fund's net assets;
10. Invest, under normal market conditions, less than 80% of its net assets
plus the amount of any borrowings for investment purposes in common stocks
of companies principally engaged in science and technology business
activities; or
11. Invest more than 20% of its assets in equity securities of foreign issuers
that are either listed on a U.S. or Toronto stock exchange or represented
by American Depository Receipts.

INTERNATIONAL GROWTH FUND
--------------------------------------------------------------------------------
The Fund is subject to the following fundamental investment restrictions. The
Fund will not:
1. Purchase securities of any issuer (other than obligations of, or guaranteed
by, the U.S. government or its agencies or instrumentalities), if as a
result, more than 5% of the Fund's net assets would be invested in
securities of that issuer. This restriction is limited to 75% of the Fund's
net assets;
2. Purchase more than 10% of any class of securities of any issuer except
securities issued or guaranteed by the U.S. government, its agencies or
instrumentalities. All debt securities and all preferred stocks are each
considered as one class. This restriction is limited to 75% of the Fund's
net assets;
3. Invest more than 5% of the Fund's net assets in securities of companies
which have (with their predecessors) a record of less than three years
continuous operation;
4. Make loans except by (a) purchasing publicly distributed debt securities
such as bonds, debentures and similar securities in which the Fund may
invest consistent with its investment policies, and (b) by lending its
portfolio securities to broker-dealers, banks and other institutions in an
amount not to exceed 33-1/3% of its total net assets if such loans are
secured by collateral equal to 100% of the value of the securities lent;
5. Borrow money, except temporarily in emergency or extraordinary situations
and then not for the purchase of investments and not in excess of 33 1/3%
of the Fund's total net assets;
6. Invest more than 5% of the Fund's net assets in warrants (valued at lower
of cost or market) including a maximum of 2% which are not listed on the
New York Stock Exchange, American Stock Exchange or a recognized foreign
exchange. For this purpose, warrants acquired by the Fund in units or
attached to other securities will be deemed to be without value;
7. Purchase on margin or sell short except to obtain short-term credit as may
be necessary for the clearance of transactions;
8. Concentrate more than 25% of its net assets in any one industry, provided
that there shall be no limitation on the purchase of obligations issued or
guaranteed by the U.S. government, its agencies or instrumentalities;
9. Purchase or retain the securities of any issuer if, to the Fund's
knowledge, those holdings of all officers and directors of the Fund or its
affiliates, who individually own beneficially more than 0.5% of such
securities, together own more than 5% of such securities;
10. Invest for the purpose of controlling management of any company;
11. Invest in commodities or commodity futures contracts provided; however,
that the entering into of a foreign currency contract shall not be
prohibited by this restriction;

12. Invest in real estate or limited partnerships with assets invested in real
estate, although the Fund may invest in securities which are secured by
interests in real estate and in securities of companies which invest or
deal in real estate;
13. Invest in exploration or development for oil, gas or other minerals,
although it may invest in the securities of issuers which deal in or
sponsor such activities;
14. Invest more than 15% of its net assets collectively in all types of
illiquid securities;
15. Underwrite the securities of other issuers;
16. Modify the Fund's investment objective; or
17. Issue senior securities as defined in the Investment Company Act of 1940,
except for borrowing as permitted in emergency or extraordinary situations
as discussed herein.

The following investment restrictions of the Fund are not fundamental. The Fund
will not:
1. Pledge, mortgage, hypothecate or otherwise encumber the Fund's assets in an
amount exceeding the amount of the borrowing secured thereby except to the
extent necessary to secure permitted borrowings; or
2. Invest more than 5% of the value of its total assets in the securities of
any one investment company or more than 10% of the value of its total
assets, in the aggregate, in the securities of two or more investment
companies, or acquire more than 3% of the total outstanding voting
securities of any one investment company, except a.) as part of a merger,
consolidation, acquisition, or reorganization or b.) in a manner consistent
with the requirements of an exemptive order issued to the Fund and/or the
Adviser by the Securities and Exchange Commission. Or
3. Invest, under normal market conditions, less than 90% of its net assets in
common stocks of companies domiciled outside the United States.

SMALL CAP GROWTH FUND
--------------------------------------------------------------------------------
The Fund is subject to the following fundamental investment restrictions. The
Fund will not:
1. Purchase securities of any issuer (other than obligations of, or guaranteed
by, the U.S. government or its agencies or instrumentalities), if as a
result, more than 5% of the Fund's net assets would be invested in
securities of that issuer. This restriction is limited to 75% of the Fund's
net assets;
2. Purchase or sell commodities or commodity futures, provided that this
restriction does not apply to financial futures contracts or options
thereon;
3. Invest in real estate (including real estate limited partnerships),
although it may invest in securities which are secured by or represent
interests in real estate;
4. Make loans except by (a) purchasing publicly distributed debt securities
such as bonds, debentures and similar securities in which the Fund may
invest consistent with its investment policies, and (b) by lending its
portfolio securities to broker-dealers, banks and other institutions in an
amount not to exceed 33-1/3% of its total net assets if such loans are
secured by collateral equal to 100% of the value of the securities lent;
5. Underwrite the securities of other issuers;
6. Borrow money, except temporarily in emergency or extraordinary situations
and then not for the purchase of investments and not in excess of 33 1/3%
of the Fund's total net assets;
7. Invest in exploration or development for oil, gas or other minerals
(including mineral leases), although it may invest in the securities of
issuers which deal in or sponsor such activities;
8. Invest 25% or more of its assets in a single industry except with regard to
the purchase of obligations issued or guaranteed by the U.S. government,
its agencies or instrumentalities; or
9. Issue senior securities as defined in the Investment Company Act of 1940,
except for borrowing as permitted in emergency or extraordinary situations
as discussed herein.

4. Invest more than 10% of its net assets in securities of issuers which, with
their predecessors have a record of less than three years continuous
operation. Securities of such issuers will not be deemed to fall within
this limitation if they are guaranteed by an entity in continuous operation
for more than three years;
5. Invest for the purpose of exercising control or management;
6. Enter into reverse repurchase agreements;
7. Invest more than 15% of its net assets collectively in all types of
illiquid securities;
8. Invest in more than 10% of the outstanding voting securities of any one
issuer;
9. Purchase more than 10% of any class of securities of any issuer except
securities issued or guaranteed by the U.S. government, its agencies or
instrumentalities. All debt securities and all preferred stocks are each
considered as one class. This restriction is limited to 75% of the Fund's
net assets;
10. Invest more than 5% of the Fund's net assets in warrants (valued at lower
of cost or market) including a maximum of 2% which are not listed on the
New York or American Stock Exchanges. For this purpose, warrants acquired
by the Fund in units or attached to other securities will be deemed to be
without value;
11. Pledge, mortgage, hypothecate or otherwise encumber the Fund's assets
except to the extent necessary to secure permitted borrowings;
12. Engage in arbitrage transactions or write unsecured put options but may
write fully covered call options;
13. Purchase put and call options provided that the aggregate premiums paid for
all such options exceed 5% of the Fund's net assets;
14. Invest, under normal market conditions, less than 80% of its net assets
plus the amount of any borrowings for investment purposes in common stocks
of companies with capitalizations of $2.5 billion or less at the time of
purchase; or
15. Invest more than 20% of its assets in equity securities of foreign issuers
that are either listed on a U.S. or Toronto stock exchange or represented
by American Depository Receipts.

DEVELOPING MARKETS GROWTH FUND
--------------------------------------------------------------------------------
The Fund is subject to the following restrictions which are fundamental. The
Fund will not:
1. Purchase securities of any issuer (other than obligations of, or guaranteed
by, the U.S. government or its agencies or instrumentalities), if as a
result, more than 5% of the Fund's net assets would be invested in
securities of that issuer. This restriction is limited to 75% of the Fund's
net assets;
2. Purchase or sell commodities or commodity contracts, provided that this
restriction does not apply to financial futures contracts or options
thereon;
3. Invest in real estate (including real estate limited partnerships),
although it may invest in securities which are secured by or represent
interests in real estate;
4. Make loans except by (a) purchasing publicly distributed debt securities
such as bonds, debentures and similar securities in which the Fund may
invest consistent with its investment policies, and (b) by lending its
portfolio securities to broker-dealers, banks and other institutions in an
amount not to exceed 33-1/3% of its total net assets if such loans are
secured by collateral equal to 100% of the value of the securities lent;
5. Underwrite the securities of other issuers;
6. Borrow money, except temporarily in emergency or extraordinary situations
and then not for the purchase of investments and not in excess of 33 1/3%
of the Fund's total net assets;
7. Invest in exploration or development for oil, gas or other minerals
(including mineral leases), although it may invest in the securities of
issuers which deal in or sponsor such activities;
8. Invest 25% or more of its assets in a single industry except with regard to
the purchase of obligations issued or guaranteed by the U.S. government,
its agencies or instrumentalities; or
9. Issue senior securities as defined in the Investment Company Act of 1940,
except for borrowing as permitted in emergency or extraordinary situations
as discussed herein.

The following investment restrictions of the Fund are not fundamental and may be
changed by the Board of Directors of the Fund. The Fund will not:
1. Purchase on margin or sell short except to obtain short-term credit as may
be necessary for the clearance of transactions and it may make margin
deposits in connection with futures contracts;
2. Invest more than 5% of the value of its total assets in the securities of
any one investment company or more than 10% of the value of its total
assets, in the aggregate, in the securities of two or more investment
companies, or acquire more than 3% of the total outstanding voting
securities of any one investment company, except a.) as part of a merger,
consolidation, acquisition, or reorganization or b.) in a manner consistent
with the requirements of an exemptive order issued to the Fund and/or the
Adviser by the Securities and Exchange Commission;

3. Purchase or retain the securities of any issuer if, to the Fund's
knowledge, those holdings of all officers and directors of the Fund or its
affiliates, who individually own beneficially more than 0.5% of such
securities, together own more than 5% of such securities;
4. Invest more than 5% of its net assets in securities of companies which have
(with their predecessors) a record of less than three years' continuous
operation;
5. Invest for the purpose of exercising control or management;
6. Invest more than 5% of the Fund's net assets in warrants (valued at lower
of cost or market) including a maximum of 2% which are not listed on the
New York Stock Exchange, American Stock Exchange or a recognized foreign
exchange. For this purpose, warrants acquired by the Fund in units or
attached to other securities will be deemed to be without value;
7. Enter into reverse repurchase agreements;
8. Invest more than 15% of its net assets collectively in all types of
illiquid securities;
9. Purchase more than 10% of any class of securities of any issuer except
securities issued or guaranteed by the U.S. government, its agencies or
instrumentalities. All debt securities and all preferred stocks are
considered as one class. This restriction is limited to 75% of the Fund's
net assets;
10. Pledge, mortgage, hypothecate or otherwise encumber the Fund's assets
except to the extent necessary to secure permitted borrowings; or
11. Invest, under normal market conditions, less than 80% of its net assets
plus the amount of any borrowings for investment purposes in common stocks
of companies domiciled or operating in a developing market.

COUNTRIES IN WHICH THE INTERNATIONAL GROWTH FUND MIGHT INVEST
--------------------------------------------------------------------------------

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

Pacific Basin: Australia Hong Kong Indonesia Japan Malaysia New Zealand
------------- Philippines Singapore South Korea Taiwan Thailand

Europe: Austria Belgium Czech Republic Denmark Finland France
------ Germany Greece Hungary + Ireland Italy Luxembourg
Netherlands Norway Poland Portugal Spain Sweden
Switzerland United Kingdom

Other: Argentina Brazil Canada Chile India Mexico
----- Peru Turkey Venezuela Israel

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

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

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

JAPAN. Japan is organized politically as a democratic, parliamentary republic
and has a population of approximately 127 million people. The Japanese economy
is heavily industrial and export oriented, and is especially sensitive to trade
barriers and disputes. Japan is dependent upon foreign economies for raw
materials.

The Japanese securities markets are generally less regulated than the U.S.
markets. Japan has eight stock exchanges located throughout the country, but the
majority of all trading is conducted on the Tokyo Stock Exchange. Prices of
stocks listed on the Japanese stock exchange are quoted continuously during
regular business hours. Trading commissions are at fixed scale rates that vary
by the type and the value of the transaction, but can be negotiable for large
transactions.

UNITED KINGDOM OF GREAT BRITAIN AND NORTHERN IRELAND. The United Kingdom of
Great Britain and Northern Ireland ("U.K.") is a constitutional monarchy and
consists of England, Scotland, Wales and Northern Ireland. The population of the
U.K. is approximately 60 million people. Industry in the U.K. is predominantly
owned in the private sector.

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

THE FEDERAL REPUBLIC OF GERMANY. The Federal Republic of Germany ("Germany") is
a federated republic with a population of approximately 82 million people and a
democratic parliamentary form of government. The German economy is organized
primarily on the basis of private sector ownership, with the state exerting
major influence through ownership only in certain sectors, including
transportation, communication and energy. Industrial activity makes the largest
contribution to the German gross national product. Historically the German
economy has been strongly export oriented. Privatization of formerly state owned
enterprise in what was once East Germany is in progress, but will make little
difference to the predominance of large-scale businesses in overall industrial
activity.

German equity securities trade predominantly on the country's eight independent
local stock exchanges, and the Frankfurt exchange accounts for most of the
turnover. Subject to the provisions of pertinent securities law, the council,
management and other executive organs of the stock exchanges constitute
self-administering and self-regulatory bodies. The "Working Group of German
Stock Exchanges" headquartered in Frankfurt, of which all eight stock exchanges
are members, addresses all policy and administrative questions of national and
international character. Trading volume tends to concentrate on relatively few
companies with both large capitalizations and broad stock ownership. Prices for
active stocks, including those for larger companies, are quoted continuously
during stock exchange hours. Less actively traded stocks are quoted only once a
day. Equity shares are normally fully paid and nonassessable. Orders for stocks
executed for large customers on the stock exchanges are negotiable. A federal
stock exchange turnover tax, ranging up to 0.25%, is levied on all securities
transactions other than those between banks acting as principal. Nonresidents
such as the Fund are charged half these rates.

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

The Fund defines "developing markets" as those countries that have "emerging
stock markets" as defined by Morgan Stanley Capital International Inc. Countries
currently not considered as having "developing markets" include: Australia,
Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Hong Kong,
Ireland, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal,
Singapore, Spain, Sweden, Switzerland, the United Kingdom, and the United
States.

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

Pacific Basin: Bangladesh China India Indonesia Malaysia
------------- Pakistan Philippines South Korea Sri Lanka Taiwan
Thailand Vietnam +

Europe: Czech Rep. Hungary + Poland
------

Latin America: Argentina Barbados Belize Bolivia Brazil Chile
------------- Colombia Costa Rica Ecuador Jamaica Mexico Panama
Paraguay Peru Trinidad & Tobago Uruguay Venezuela

Africa: Botswana Egypt Ghana+ Ivory Coast + Kenya + Mauritius +
------ Morocco Namibia + Nigeria South Africa Swaziland + Tunisia
Zimbabwe

Other: Bermuda Cyprus + Israel Jordan Kuwait + Russia
----- Turkey

DEVELOPING MARKETS DEBT SECURITIES. The Fund also may invest in certain debt
securities issued by the governments of developing market countries that are or
may be eligible for conversion into investments in developing market companies
under debt conversion programs sponsored by such governments. To the extent such
debt securities are convertible to equity securities, they are considered by the
Fund to be equity derivative securities. Debt securities (defined as bonds,
notes, debentures, commercial paper, certificates of deposit, time deposits and
bankers' acceptances) may offer opportunities for long-term capital
appreciation. The Fund will only invest in debt securities rated at least C by
Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's ("S&P") at the
time of purchase or, if unrated, of comparable quality as determined by the
Adviser or Sub-Adviser. The Fund will not invest more than 5% of its total
assets in debt securities rated Baa or lower by Moody's or BBB or lower by S&P
at the time of purchase or, if unrated, of comparable quality as determined by
the Adviser or Sub-Adviser. Debt securities rated Baa or BBB may have some
speculative elements. Debt securities rated C are regarded as having
predominantly speculative characteristics. Subject to the above limitations, it
is likely that a portion of the debt securities in which the Fund will invest
may be unrated. Subsequent to their purchase, particular securities or other
investments may cease to be rated or their ratings may be reduced below the
minimum rating required for purchase by the Fund. Neither event will require the
elimination of an investment from the Fund's portfolio, but the Adviser or
Sub-Adviser will consider such an event in its determination of whether the Fund
should continue to hold the security.

SPECIAL RISKS FOR INTERNATIONAL INVESTING
--------------------------------------------------------------------------------
The International Growth Fund may invest at least 90% of its net assets in
securities of issuers domiciled outside the United States; the Developing
Markets Growth Fund may invest at least 80% of its net assets in securities in
issuers domiciled in outside the United States, in a developing markets; and the
Dividend Growth Fund may invest up to 20% of its net assets in securities of
issuers domiciled outside the United States. The foreign securities these Funds
may purchase are subject to risks not typically associated with domestic
investing.

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

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

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

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

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

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

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

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

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

FOREIGN TAXATION
--------------------------------------------------------------------------------
The Funds' interest and dividend income from foreign issuers may be subject to
non-U.S. withholding taxes. The Funds also may be subject to taxes on trading
profits in some countries. In addition, many of the countries in the Pacific
Basin have a transfer or stamp duties tax on certain securities transactions.
The imposition of these taxes will increase the cost to the Fund of investing in
any country imposing such taxes. For United States tax purposes, United States
shareholders may be entitled to a credit or deduction to the extent of any
foreign income taxes paid by the Fund. For additional tax information, please
see section entitled, "Taxes" on page 45.

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

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

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

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

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

WARRANTS OR RIGHTS
--------------------------------------------------------------------------------
Each Fund other than the Dividend Growth Fund may acquire warrants or rights in
connection with other securities or separately. Investments in warrants or
rights are limited to 5% of total assets for Large Cap Growth Fund, Balanced
Fund, International Growth Fund, Small Cap Growth Fund and Developing Markets
Growth Fund. Warrants are options to buy a stated number of shares of common
stock at a specified price any time during the life of the warrants (generally
two or more

years). Warrants or rights acquired in units or attached to securities will be
deemed to be without value for purposes of International Growth Fund's and
Developing Markets Growth Fund's 5% restriction.

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

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

BANK OBLIGATIONS
--------------------------------------------------------------------------------
Bank money instruments in which the Funds may invest include certificates of
deposit, including variable rate certificates of deposit, bankers' acceptances
and time deposits. "Bank" includes commercial banks, savings banks and savings
and loan associations. Certificates of deposit are generally short-term,
interest-bearing negotiable certificates issued by commercial banks or savings
and loan associations against funds deposited in the issuing institution.
Variable rate certificates of deposit are certificates of deposit on which the
interest rate is periodically adjusted prior to their stated maturity, usually
at 30, 90 or 180 day intervals ("coupon dates"), based upon a specified market
rate, which is tied to the then prevailing certificate of deposit rate, with
some premium paid because of the longer final maturity date of the variable rate
certificate of deposit. As a result of these adjustments, the interest rate on
these obligations may be increased or decreased periodically. Variable rate
certificates of deposit normally carry a higher interest rate than fixed rate
certificates of deposit with shorter maturities, because the bank issuing the
variable rate certificate of deposit pays the investor a premium as the bank has
the use of the investor's money for a longer period of time. Variable rate
certificates of deposit can be sold in the secondary market. In addition,
frequently banks or dealers sell variable rate certificates of deposit and
simultaneously agree, either formally or informally, to repurchase such
certificates, at the option of the purchaser of the certificate, at par on the
coupon dates. In connection with the Fund's purchase of variable rate
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 Balanced Fund uses the period remaining until the next rate
adjustment date for purposes of determining the average weighted maturity of the
fixed income portion of its portfolio. With respect to all variable rate
instruments not meeting the foregoing criteria, the Balanced Fund uses the
remaining period to maturity for purposes of determining the average weighted
maturity of the fixed income portion of its portfolio until such time as the
Securities and Exchange Commission has determined otherwise.

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

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

As a result of federal and state laws and regulations, domestic banks are, among
other things, generally required to maintain specified levels of reserves,
limited in the amount which they can loan to a single borrower, and are subject
to other

regulations designed to promote financial soundness. Since each Fund's portfolio
may contain securities of foreign banks and foreign branches of domestic banks,
the Funds may be subject to additional investment risks that are different in
some respects from those incurred by a fund that invests only in debt
obligations of domestic banks.

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

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

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

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

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

DEPOSITORY RECEIPTS
--------------------------------------------------------------------------------
The Funds may hold securities of foreign issuers in the form of sponsored and
unsponsored American Depository Receipts ("ADRs"), European Depository Receipts
("EDRs"), Government Depository Receipts ("GDRs") and other similar global
instruments available in developing markets, or other securities convertible
into securities of eligible issuers. These securities may not necessarily be
denominated in the same currency as the securities for which they may be
exchanged. Generally, ADRs in registered form are designed for use in United
States securities markets, and EDRs and other similar global instruments in
bearer form are designed for use in European securities markets. For purposes of
each Fund's investment policies, the Fund's investment in ADRs, EDRs, and
similar instruments will be deemed to be investments in the equity securities
representing securities of foreign issuers into which they may be converted.
Unsponsored ADRs are offered by companies which are not prepared to meet either
the reporting or accounting standards of the U.S. While readily exchangeable
with stock in local markets, unsponsored ADRs may be less liquid than sponsored
ADRs. Additionally, there generally is less publicly available information with
respect to unsponsored ADRs.

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

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

Developing Markets Growth Fund may write covered put and call options and
purchase put and call options on securities or securities indices that are
traded on United States and foreign exchanges or in the over-the-counter
markets. The value of the underlying securities on which options may be written
at any one time will not exceed 15% of the total assets of Developing Markets
Growth Fund. In addition, the Fund will not purchase put or call options if the
aggregate premium paid for such options would exceed 5% of its total assets at
the time of purchase.

An option on a security is a contract that gives the purchaser of the option, in
return for the premium paid, the right to buy a specified security (in the case
of a call option) or sell a specified security (in the case of a put option)
from or to the writer of the option at a designated price during the term of the
option. An option on a securities index gives the purchaser of the option, in
return for the premium paid, the right to receive from the seller cash equal to
the difference between the closing price of the index and the exercise price of
the option. A Fund may write a call or, in the case of Developing Markets Growth
Fund, a put option to generate income, and will do so only if the option is
"covered." This means that so long as a Fund is obligated as the writer of a
call option, it will own the underlying securities subject to the call, or hold
a call at the same or lower exercise price, for the same exercise period, and on
the same securities as the written call. A put is covered if a Fund maintains
liquid assets with value at least equal to the exercise price in a segregated
account, or holds a put on the same underlying securities at an equal or greater
exercise price. By writing a call option, a Fund might lose the potential for
gain on the underlying security while the option is open, and by writing a put
option a Fund might become obligated to purchase the underlying security for
more than its current market price upon exercise. If a Fund purchases a put or
call option, any loss to the Fund is limited to the premium paid for, and
transaction costs paid in connection with, the option. The use of options also
involves the risk of limited liquidity in the even that a Fund seeks to close
out an options position before expiration by entering into an offsetting
transaction.

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

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

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

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

DESCRIPTION OF FUTURES CONTRACTS. A futures contract sale creates an obligation
by a Fund, as seller, to deliver the type of financial instrument called for in
the contract at a specified future time for a stated price. A futures contract
purchase creates an obligation by the Fund, as purchaser, to take delivery of
the underlying financial instrument at a specified future time for a stated
price. A futures contract on an index obligates the seller to deliver, and
entitles the purchaser to receive, an amount of cash equal to a specific dollar
amount times the difference between the value of the index at the expiration
date of the contract and the index value specified in the contract.

Although futures contracts by their terms call for actual delivery or acceptance
of the underlying financial instrument, in most cases the contracts are closed
out before the settlement date without the making or taking of delivery. Closing
out a futures contract sale is effected by purchasing a futures contract for the
same aggregate amount of the specific type of financial instrument and the same
delivery date. If the price of the initial sale of the futures contract exceeds
the price of the

offsetting purchase, the Fund is paid the difference and realizes a gain. If the
price of the offsetting purchase exceeds the price of the initial sale, the Fund
pays the difference and realizes a loss. Similarly, the closing out of a futures
contract purchase is effected by the Fund entering into a futures contract sale.
If the offsetting sale price exceeds the purchase price, the Fund realizes a
gain, and if the purchase price exceeds the offsetting sale price, the Fund
realizes a loss.

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

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

The Funds may use futures solely to hedge against anticipated interest rate,
market or currency movements and not for speculation. The Funds presently could
accomplish similar results to that which they hope to achieve through the use of
futures contracts by purchasing or selling securities or currencies. For
example, Balanced Fund could sell debt securities with long maturities and
invest in debt securities with short maturities when interest rates are expected
to increase, or conversely, sell short-term debt securities and invest in
long-term debt securities when interest rates are expected to decline. However,
because of the liquidity that is often available in the futures market, such
protection is more likely to be achieved, perhaps at a lower cost and without
changing the rate of interest being earned by the Funds, through using futures
contracts.

DESCRIPTION OF OPTIONS ON FUTURES CONTRACTS. The Funds may purchase put and call
options on futures contracts as a hedge against interest rate, market or
currency movements, and will enter into closing transactions with respect to
such options to terminate existing positions. An option on a futures contract
gives the purchaser the right, in return for the premium paid, to assume a
position in a futures contract at a specified exercise price at any time prior
to the expiration dates of the option. A call option gives the purchaser of such
option the right to buy, and obliges its writer to sell, a specified underlying
futures contract at a specified exercise price at any time prior to the
expiration date of the option. A purchaser of a put option has the right to
sell, and the writer has the obligation to buy, such contract at the exercise
price during the option period.

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

Successful use of futures contracts by the Funds for hedging purposes is also
subject to the Adviser's ability to correctly predict movements in the direction
of the market. It is possible that, when a Fund has sold futures to hedge its
portfolio against a decline in the market, the index, indices, or instruments
underlying futures might advance, and the value of the underlying instruments
held in a Fund's portfolio might decline. If this were to occur, the Fund would
lose money on the

futures and also would experience a decline in value in its underlying
instruments. It is also possible that, if a Fund were to hedge against the
possibility of a decline in the market and prices instead increased, the Fund
would lose part or all of the benefit of increased value of those underlying
instruments that it had hedged because it would have offsetting losses in its
futures positions. In addition, in such situations, if the Fund had insufficient
cash, it might have to sell underlying instruments to meet daily mark-to-market
and variation margin requirements. Such sales of underlying instruments might
be, but would not necessarily be, at increased prices (which would reflect the
rising market). A Fund might have to sell underlying instruments at a time when
it would be disadvantageous to do so.

Another risk is that the Adviser or Sub-Adviser would be incorrect in its
expectation as to the extent of various interest rate, market, or currency
movements or the time span within which the movements take place and other
economic factors. For example, closing out an interest rate futures contract
purchase at a loss because of higher interest rates will generally have one or
two consequences depending on whether, at the time of closing out, the "yield
curve" is normal (long-term rates exceeding short-term). If the yield curve is
normal, it is possible that the Fund will still be engaged in a program of
buying long-term securities. Thus, closing out the futures contract purchase at
a loss will reduce the benefit of the reduced price of the securities purchased.
If the yield curve is inverted, it is possible that the Fund will retain its
investments in short-term securities earmarked for purchase of longer term
securities. Thus, closing out of a loss will reduce the benefit of the
incremental income that the Fund will experience by virtue of the high
short-term rates. Although futures contracts are traded only on commodity
exchanges, there can be no assurance that a liquid secondary market will exist
for any particular future, and theoretically losses from investing in futures
transactions are potentially unlimited.

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

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

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

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

ILLIQUID SECURITIES
--------------------------------------------------------------------------------
Each Fund may invest up to 15% of its net assets in all forms of "illiquid
securities." An investment is generally deemed to be "illiquid" if it cannot be
disposed of within seven days in the ordinary course of business at
approximately the amount at which such securities are valued by the Fund.
Restricted securities are securities which were originally sold in private
placements and which have not been registered under the Securities Act of 1933
(the "1933 Act"). Such securities generally have been considered illiquid by the
staff of the Securities and Exchange Commission (the "SEC"), since such
securities may be resold only subject to statutory restrictions and delays or if
registered under the 1933 Act. However, the SEC has recently acknowledged that a
market exists for certain restricted securities (for example, securities
qualifying for resale to certain "qualified institutional buyers" pursuant to
Rule 144A under the 1933 Act). Additionally, a similar

market exists for commercial paper issued pursuant to the private placement
exemption of Section 4(2) of the 1933 Act. As a fundamental policy, the Funds
may invest without limitation in these forms of restricted securities if such
securities are determined by the Adviser or Sub-Adviser to be liquid in
accordance with standards established by the Funds' Board of Directors.

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

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

SIT MONEY MARKET FUND
--------------------------------------------------------------------------------
The Funds may invest up to 25% of their total net assets in shares of money
market funds advised by the Adviser, which includes the Money Market Fund,
subject to the conditions contained in an exemptive order (the "Exemptive
Order") issued to the Funds and the Adviser by the Securities and Exchange
Commission.

Such investments may be made in lieu of direct investments in short term money
market instruments if the Adviser believes that they are in the best interest of
the Funds. The Exemptive Order requires the Adviser and its affiliates, in their
capacities as service providers for the Money Market Fund, to remit to the
Funds, or waive, an amount equal to all fees otherwise due to them under their
advisory and other agreements with the Money Market Fund to the extent such fees
are based upon a Fund's assets invested in shares of the Money Market Fund. This
requirement is intended to prevent shareholders of the Funds from being
subjected to double management and other asset-based fees as a result of a
Fund's investments in the Money Market Fund.

ADDITIONAL BALANCED FUND INVESTMENT POLICIES & RISKS
--------------------------------------------------------------------------------

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

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

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

The Federal Home Loan Mortgage Corporation ("FHLMC") also pools mortgage loans
and issues pass-through securities. FHLMC is a government sponsored enterprise
owned entirely by private stockholders and was created by Congress in 1970 for
the purpose of increasing the availability of mortgage credit for residential
housing. FHLMC issues Participation Certificates ("PC's") which represent
interest in mortgages from FHLMC's national portfolio. FHLMC guarantees the
timely

payment of interest and ultimate collection of principal; however, PC's are not
backed by the full faith and credit of the U.S. government.

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

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

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

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

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

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

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

COLLATERIALIZED MORTGAGE OBLIGATIONS (CMOS)
--------------------------------------------------------------------------------
The Balanced Fund may invest in CMOs. CMOs are hybrid instruments with
characteristics of both mortgage-backed bonds and mortgage pass-through
securities. Similar to a bond, interest and principal on a CMO are paid, in most
cases, monthly. CMOs may be collateralized by whole mortgage loans, but are more
typically collateralized by portfolios of mortgage pass-through securities
guaranteed by GNMA, FHLMC, or FNMA. Since CMOs derive their return from
underlying mortgages, they are commonly referred to as derivative securities,
but are not subject to Balanced Fund's 10% limitation on investments in
derivative instruments discussed below under "Swap Agreements." CMOs are
structured into multiple classes, with each class bearing a different stated
maturity. Monthly payments of principal, including prepayments, are first
returned to investors holding the shortest maturity class; investors holding the
longer maturity classes receive principal only after the earlier classes have
been retired. CMOs that are issued or guaranteed by the U.S. Government or by
any of its agencies or instrumentalities will be considered U.S. Government
securities by the Balanced Fund, while other CMOs, even if collateralized by
U.S. Government securities, will have the same status as other privately issued
securities for purposes of applying the Fund's diversification tests.

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

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

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

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

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

MUNICIPAL SECURITIES
--------------------------------------------------------------------------------
Municipal securities in which the Balanced Fund may invest include securities
that are issued by states, territories and possessions of the United States and
the District of Columbia and their agencies, instrumentalities and political
subdivisions.

The yields on municipal securities are dependent on a variety of factors,
including the general level of interest rates, the financial condition of the
issuer, general conditions of the tax-exempt securities market, the size of the
issue, the maturity of

the obligation and the rating of the issue. Ratings are general, and not
absolute, standards of quality. Consequently, securities of the same maturity,
interest rate and rating may have different yields, while securities of the same
maturity and interest rate with different ratings may have the same yield.

SWAP AGREEMENTS
--------------------------------------------------------------------------------
Swap agreements are two party contracts entered into primarily by institutional
investors in which two parties agree to exchange the returns (or differential
rates of return) earned or realized on particular predetermined investments or
instruments.

The Balanced Fund may enter into swap agreements for purposes of attempting to
obtain a particular investment return at a lower cost to the Fund than if the
Fund had invested directly in an instrument that provided that desired return.
The Fund bears the risk of default by its swap counterpart and may not be able
to terminate its obligations under the agreement when it is most advantageous to
do so. In addition, certain tax aspects of swap agreements are not entirely
clear and their use, therefore, may be limited by the requirements relating to
the qualification of the Fund as a regulated investment company under the
Internal Revenue Code of 1986, as amended (the "Code").

The Balanced Fund may invest up to 10% of its assets in certain derivative
instruments, including futures, options, options on futures, and swap
agreements, as discussed above.

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

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

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

HIGH YIELD SECURITIES RISKS
--------------------------------------------------------------------------------
Balanced Fund may invest up to 25% of its total assets in securities rated below
investment-grade. SECURITIES RATED BELOW INVESTMENT GRADE ARE REFERRED TO AS
HIGH YIELD SECURITIES OR "JUNK BONDS." Junk bonds are regarded as being

predominantly speculative as to the issuer's ability to make payments of
principal and interest. Investment in such securities involves substantial risk.
Issuers of junk bonds may be highly leveraged and may not have available to them
more traditional methods of financing. Therefore, the risks associated with
acquiring the securities of such issuers generally are greater than is the case
with higher rated securities. For example, during an economic downturn or a
sustained period of rising interest rates, issuers of junk bonds may be more
likely to experience financial stress, especially if such issuers are highly
leveraged. During such periods, such issuers may not have sufficient cash flows
to meet their interest payment obligations. The issuer's ability to service its
debt obligations also may be adversely affected by specific issuer developments,
or the issuer's inability to meet specific projected business forecasts, or the
unavailability of additional financing. The risk of loss due to default by the
issuer is significantly greater for the holders of junk bonds because such
securities may be unsecured and may be subordinated to the creditors of the
issuer. While most of the junk bonds in which Balanced Fund may invest do not
include securities which, at the time of investment, are in default or the
issuers of which are in bankruptcy, there can be no assurance that such events
will not occur after the Fund purchases a particular security, in which case the
Fund may experience losses and incur costs. Junk bonds frequently have call or
redemption features that would permit an issuer to repurchase the security from
the Fund. If a call were exercised by the issuer during a period of declining
interest rates, the Fund likely would have to replace such called security with
a lower yielding security, thus decreasing the net investment income to the Fund
and dividends to shareholders.

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

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

Investment grade debt securities are rated AAA, AA, A or BBB by Standard &
Poor's ("S& P") or Fitch Ratings ("Fitch"); or Aaa, Aa, A or Baa by Moody's
Investors Services ("Moody's"). Investment grade municipal notes are rated MIG
1, MIG 2, MIG 3 or MIG 4 (VMIG 1, VMIG 2, VMIG 3 or VMIG 4 for notes with a
demand feature) by Moodys or SP-1 or SP-2 by S&P. Securities rated Baa, MIG 4,
VMIG 4 or BBB are medium grade, involve some speculative elements and are the
lowest investment grade available. These securities generally have less certain
protection of principal and interest payments than higher rated securities.
Securities rated Ba or BB (in which Large Cap Fund, Balanced Fund and Developing
Markets Growth Fund may invest) are judged to have some speculative elements
with regard to capacity to pay interest and repay principal. Debt securities
rated C (in which the Developing Markets Growth Fund may invest) are regarded as
having predominantly speculative characteristics. DEBT SECURITIES RATED BELOW
INVESTMENT GRADE ARE COMMONLY KNOWN AS JUNK BONDS. Presently, other than with
respect to the Balanced Fund, the Adviser intends to invest only in debt
securities rated at investment grade at the time of purchase, or if not rated,
deemed by the Adviser to be of comparable quality. See Appendix A for further
information about ratings.

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

Each Fund may lend portfolio securities to brokers, dealers and other financial
institutions needing to borrow securities to complete certain transactions. Such
loans may not exceed 33-1/3% of the value of a Fund's total assets. The lending
of portfolio securities may increase the average annual return to shareholders.
Lending of portfolio securities also involves certain risks to a Fund. As with
other extensions of credit, there are risks of delay in recovery of loaned
securities, or even loss of rights in collateral pledged by the borrower, should
the borrower fail financially. However, the Funds will only enter into loan
agreements with broker-dealers, banks, and other institutions that the Adviser
has determined are creditworthy.

The Funds may also experience a loss if, upon the failure of a borrower to
return loaned securities, the collateral is not sufficient in value or liquidity
to cover the value of such loaned securities (including accrued interest
thereon). However, the borrower will be required to pledge collateral that the
custodian for a Fund's portfolio securities will take into possession before any
securities are loaned. Additionally, the borrower may pledge only cash,
securities issued or guaranteed by the U.S. Government or its agencies and
instrumentalities, certificates of deposit or other high-grade, short-term
obligations or interest-bearing cash equivalents as collateral. There will be a
daily procedure to ensure that the pledged collateral is equal in value to at
least 100% of the value of the securities loaned. Under such procedure, the
value of the collateral pledged by the borrower as of any particular business
day will be determined on the next succeeding business day. If such value is
less than 100% of the value of the securities loaned, the borrower will be
required to pledge additional collateral. The risks of borrower default (and the
resultant risk of loss to a Fund) also are reduced by lending only securities
for which a ready market exists. This will reduce the risk that the borrower
will not be able to return such securities due to its inability to cover its
obligation by purchasing such securities on the open market.

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

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

PORTFOLIO TURNOVER
--------------------------------------------------------------------------------

To attain the investment goals of the Funds, the Adviser will usually hold
securities for the long-term. However, if weak or declining market values for
stocks are anticipated, the Adviser may convert any portion of these Fund assets
to cash or short-term securities as a temporary, defensive position.

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

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

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

SUSPENSION OF SELLING ABILITY
--------------------------------------------------------------------------------
Each Fund may suspend selling privileges or postpone the date of payment:
- During any period that the NYSE is closed other than customary weekend or
holiday closings, or when trading is restricted, as determined by the
Securities and Exchange Commission ("SEC");
- During any period when an emergency exists, as determined by the SEC, as a
result of which it is not reasonably practical for the Fund to dispose of
securities owned by it or to fairly determine the value of its assets;
- For such other periods as the SEC may permit.

TELEPHONE TRANSACTIONS
--------------------------------------------------------------------------------
Once you place a telephone transaction request to Sit Mutual Funds, it cannot be
canceled or modified. The Funds use reasonable procedures to confirm that
telephone instructions are genuine, including requiring that payments be made
only to the shareholder's address of record or the bank account designated on
the application and requiring certain means of telephone identification. If the
Fund fails to employ such procedures, it may be liable for any losses suffered
by Fund

shareholders as a result of unauthorized or fraudulent instructions. During
times of chaotic economic or market circumstances, a shareholder may have
difficulty reaching the Funds by telephone. Consequently, a redemption or
exchange by telephone may be difficult to implement at those times.

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

COMPUTATION OF NET ASSET VALUE
--------------------------------------------------------------------------------

Net asset value is determined as of the close of the New York Stock Exchange on
each day that the exchange is open for business. The customary national business
holidays observed by the New York Stock Exchange and on which the Funds are
closed are: New Year's Day, Martin Luther King Jr. Day, President's Day, Good
Friday, Memorial Day, July Fourth, Labor Day, Thanksgiving Day and Christmas
Day. The net asset value per share will not be determined on these national
holidays. The net asset value is calculated by dividing the total value of a
Fund's investments and other assets (including accrued income), less any
liabilities, by the number of shares outstanding. The net asset value per share
of each Fund will fluctuate.

Securities which are traded on an exchange or on the NASDAQ over-the-counter
market are valued at the last quoted sale price of the day. Lacking a last sale
price, a security is generally valued at its last bid price. All other
securities for which over-the-counter market quotations are readily available
are valued at their last bid price. When market quotations are not readily
available, when restricted securities are being valued, or when an event occurs
between the close of the principal trading market and close of the New York
Stock Exchange that materially affects the values of securities, 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 may utilize matrix pricing and
valuation models to derive vaules for normal institutional-size trading units of
debt securities without regard to sale or bid prices. When prices are not
readily available from a pricing service, or when restricted or illiquid
securities are being valued, securities may be valued at fair value using
methods selected in good faith by the Boards of Directors. Short-term
investments in debt securities with maturities of less than 60 days when
acquired, or which subsequently are within 60 days of maturity, are valued by
using the amortized cost method of valuation. The amortized cost method of
valuation will be used only if the Boards of Directors, in good faith, determine
that the fair value of the securities shall be their amortized cost value,
unless the particular circumstances dictate otherwise.

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

Foreign securities trading may not take place on all days on which the New York
Stock Exchange is open, and trading takes place in various foreign markets on
days on which the New York Stock Exchange is not open and therefore the Fund's
net asset value is not calculated. As a result, the Developing Markets Growth
Fund or International Growth Fund's net asset value may be significantly
affected by such trading on days when the Fund is not open for shareholder
purchases and redemptions. In addition, trading in foreign securities markets
may be completed before the close of business on the New York Stock Exchange and
as a result the calculation of the International Growth Fund and Developing
Markets Growth Fund's net asset value may not take place contemporaneously with
the determination of the prices of securities held by these Funds. Events
affecting the values of portfolio securities that occur between the time their
prices are determined and the close of the New York Stock Exchange will not be
reflected in the Developing Markets Growth Fund

or International Growth Fund's net asset value unless management, under the
supervision of the Board of Directors, determines that the particular event
would materially affect the net asset value.

On June 30, 2005, the net asset value and public offering price per share for
each Fund was calculated as follows:

(net assets / shares outstanding) = net asset value (NAV) per share = public offering price per share

shares NAV and public
Fund net assets outstanding offering price
---- ---------- ----------- --------------
Balanced Fund $12,251,246 843,387 $14.53
Dividend Growth Fund 14,195,667 1,269,273 11.18
Large Cap Growth Fund 69,660,344 2,032,629 34.27
Mid Cap Growth Fund 199,448,901 17,683,908 11.28
International Growth Fund 29,151,987 2,367,846 12.31
Small Cap Growth Fund 180,544,930 6,508,875 27.74
Science and Technology Growth Fund 14,542,207 1,591,754 9.14
Developing Markets Growth Fund 10,574,894 815,289 12.97

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

The Sit Mutual Funds are a family of 13 no-load mutual funds. The eight Stock
Funds described in this Statement of Additional Information are the Sit Large
Cap Growth Fund, Sit Mid Cap Growth Fund, Sit International Growth Fund, Sit
Balanced Fund, Sit Dividend Growth Fund, Sit Developing Markets Growth Fund, Sit
Small Cap Growth Fund and the Sit Science and Technology Growth Fund (the
"Funds" or individually, a "Fund"). The five Bond Funds within the Sit Mutual
Fund family are described in a separate Statement of Additional Information. The
Large Cap Growth Fund, Mid Cap Growth Fund, and the corporate issuer of the
Balanced Fund, Dividend Growth Fund, International Growth Fund, Small Cap Growth
Fund, Science and Technology Growth Fund and Developing Markets Growth Fund,
have corporate officers and Boards of Directors. Pursuant to Minnesota law, the
Boards of Directors are responsible for the management of the Funds and the
establishment of the Funds' policies. The officers of the Funds manage the
day-to-day operation of the Funds.

The Board of Directors has established an Audit Committee. The Audit Committee
is composed entirely of directors who are not interested persons of the Fund
(except in their capacities as directors) as defined in section 2(a)(19) of the
Investment Company Act of 1940. A member of an Audit Committee may not accept
any consulting, advisory, or other compensatory fee from the Fund other than in
his or her capacity as a member of the Audit Committee, the Board of Directors,
or any other Board committee. The function of the Audit Committees is oversight.
The primary responsibilities of the Audit Committee is to oversee the Fund's
accounting and financial reporting policies and practices; its internal controls
over financial reporting, and the internal controls of the Fund's accounting,
transfer agency and custody service providers; to oversee the Fund's financial
reporting and the independent audit of the Fund's financial statements; and to
oversee, or, as appropriate, assist the full Boards' oversight of, the Fund's
compliance with legal and regulatory requirements that relate to the Fund's
accounting and financial reporting, internal control over financial reporting
and independent audits; to act as a liaison between the Fund's independent
auditors and the full Boards of Directors. The members of the Audit Committee
include: Melvin C. Bahle, John E. Hulse, Sidney L. Jones, Bruce C. Lueck and
Donald W. Phillips.

Information pertaining to the directors and officers of the Funds is set forth
below. Except as noted, the business address of each officer and director is the
same as that of the Adviser - 3300 IDS Center, 80 South Eighth Street,
Minneapolis, Minnesota.

----------------------------------------------------------------------------------------------------------------------------------
NUMBER OF
FUNDS IN FUND OTHER
NAME, POSITION TERM OF OFFICE(1) COMPLEX DIRECTORSHIPS
ADDRESS AND HELD WITH THE AND LENGTH OF TIME PRINCIPAL OCCUPATIONS OVERSEEN BY HELD BY
AGE FUNDS SERVED DURING PAST FIVE YEARS DIRECTOR DIRECTOR(4)
----------------------------------------------------------------------------------------------------------------------------------
INTERESTED DIRECTORS:
----------------------------------------------------------------------------------------------------------------------------------
Eugene C. Sit (2) Director and Director since Chairman, CEO and CIO of 13 Corning
Age: 67 Chairman inception. Sit Investment Associates, Incorporated;
Inc. (the "Adviser") and Smurfit - Stone
Sit/Kim International Container
Investment Associates, Inc. Corporation
("Sit/Kim"); Director of
SIA Securities Corp. (the
"Distributor"), and
Chairman and CEO of Sit
Investment Fixed Income
Advisors, Inc. ("SF").
----------------------------------------------------------------------------------------------------------------------------------
William E. Frenzel (2) Director Director since 1991 Guest Scholar at The 13 None.
Age: 77 or the Fund's Brookings Institution and
inception if later. member of several
government policy
committees, foundations and
organizations; Advisory
Director of the Adviser;
Director of Sit/Kim and
SF.
----------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT DIRECTORS:
----------------------------------------------------------------------------------------------------------------------------------
Melvin C. Bahle Director Director since Director and/or officer of 13 None.
Age: 86 10/05; Director several foundations and
Emeritus since 1995. charitable organizations.
----------------------------------------------------------------------------------------------------------------------------------
John E. Hulse Director Director since 1995. Trustee, Pacific Gas & 13 None.
Age: 72 Electric Nuclear
Decommissioning Master
Trust.
----------------------------------------------------------------------------------------------------------------------------------
Sidney L. Jones Director Director from 1988 Lecturer, Washington Campus 13 None.
Age: 72 to 1989 and from Consortium of 17
1993 or the Fund's Universities;
inception if later. Senior Advisor to Lawrence
and Co., Toronto, Canada
(investment management).
----------------------------------------------------------------------------------------------------------------------------------
Bruce C. Lueck Director Director since 2004 Consultant for Zephyr 13 None.
Age: 64 Management, L.P.
(investment management) and
committee member of several
investment funds and
foundations. President &
Chief Investment Officer,
Okabena Investment
Services, Inc. from 1985 to
2003; Board Member, Okabena
Company from 1985 to 2003.
----------------------------------------------------------------------------------------------------------------------------------
Donald W. Phillips Director Director of the CEO and CIO of WestLB Asset 13 None.
Age: 57 International Fund Management (USA) LLC, 4/00
since 1993, and to present;
since 1990 or the President of Forstmann-Leff
Fund's inception if International, Inc. (an
later for all other investment adviser) from
Funds. 1997 to 4/00.
----------------------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------------
NUMBER OF
FUNDS IN FUND OTHER
NAME, POSITION TERM OF OFFICE(1) COMPLEX DIRECTORSHIPS
ADDRESS AND HELD WITH THE AND LENGTH OF TIME PRINCIPAL OCCUPATIONS OVERSEEN BY HELD BY
AGE FUNDS SERVED DURING PAST FIVE YEARS DIRECTOR DIRECTOR(4)
----------------------------------------------------------------------------------------------------------------------------------
OFFICERS:
----------------------------------------------------------------------------------------------------------------------------------
Kelly K. Boston Assistant Re-Elected by the Staff Attorney of the N/A N/A
Age: 37 Secretary & Boards annually; Adviser.
Assistant Officer since 2000.
Treasurer
----------------------------------------------------------------------------------------------------------------------------------
Bryce A. Doty Vice Re-Elected by the Vice President and Fixed N/A N/A
Age: 38 President - Boards annually; Income Portfolio Manager of
Investments. Officer since 1996. SF.
Balanced
Fund only
----------------------------------------------------------------------------------------------------------------------------------
Kent L. Johnson Vice Re-Elected by the Vice President - Equity N/A N/A
Age: 40 President - Boards annually; Investments of the
Investments Officer since 2003. Adviser.
----------------------------------------------------------------------------------------------------------------------------------
Peter L. Mitchelson President Re-Elected by the Director and President of N/A N/A
Age: 64 Boards annually; the Adviser; Director and
Officer since Executive Vice President of
inception. Sit/Kim; Director of the
Distributor; and Vice
Chairman of SF. Director
of the Sit Funds through
4/30/02.
----------------------------------------------------------------------------------------------------------------------------------
Michael J. Radmer Secretary Re-Elected by the Partner of the Funds' N/A N/A
50 S. 6th Street Boards annually; general counsel, Dorsey &
Minneapolis, MN 55401 Officer since 1984. Whitney, LLP
Age: 60
----------------------------------------------------------------------------------------------------------------------------------
Paul E. Rasmussen Vice Re-Elected by the Vice President, Secretary, N/A N/A
Age: 44 President and Boards annually; Controller and Chief
Treasurer Officer since 1994. Compliance Officer of the
Adviser; Vice President,
Secretary, and Chief
Compliance Officer of
Sit/Kim and SF; President &
Treasurer of the
Distributor.
----------------------------------------------------------------------------------------------------------------------------------
Carla J. Rose Vice Re-Elected by the Vice President, N/A N/A
Age: 39 President, Boards annually; Administration & Deputy
Assistant Officer since 2000. Controller of the Adviser;
Secretary & Vice President,
Assistant Administration and
Treasurer Controller of Sit/Kim;
Controller and Treasurer of
SF.
----------------------------------------------------------------------------------------------------------------------------------
Robert W. Sit (3) Vice Re-Elected by the Vice President - Equity N/A N/A
Age: 36 President - Boards annually; Investments of the
Investments Officer since 1997. Adviser.
----------------------------------------------------------------------------------------------------------------------------------
Roger J. Sit (3) Executive Re-Elected by the Executive Vice President - N/A N/A
Age: 43 Vice President Boards annually; Research and Investment
Officer since 1998. Management
of the Adviser; Director,
President, COO, and Deputy
CIO of Sit/Kim.
----------------------------------------------------------------------------------------------------------------------------------
Ronald D. Sit (3) Vice Re-Elected by the Vice President - Equity N/A N/A
Age: 46 President - Boards annually; Investments of the
Investments Officer since 1985. Adviser.
----------------------------------------------------------------------------------------------------------------------------------
1) Directors serve until their death, resignation, removal or the next
shareholder meeting at which election of directors is an agenda item
and a successor is duly elected and qualified.

2) Directors who are deemed to be "interested persons" of the Funds as
that term is defined by the Investment Company Act of 1940. Mr. Sit
is considered an "interested person" because he is an officer and
shareholder of Sit Investment Associates, Inc., the Fund's investment
adviser. Mr. Frenzel is deemed to be an interested person because he
is an director and shareholder of the Fund's investment adviser.
3) Roger Sit, Ronald Sit and Robert Sit are sons of Eugene C. Sit.
4) Includes only directorships of companies required to report under
the Securities Exchange Act of 1934 (i.e. public companies) or other
investment companies registered under the 1940 Act.

PORTFOLIO MANAGERS
--------------------------------------------------------------------------------
The Funds' investment decisions are made by a team of portfolio managers and
analysts who are jointly responsible for the day-to-day management of the Funds.
The portfolio management team is led by Eugene C. Sit, Chief Investment Officer
of the Adviser; Roger J. Sit, Executive Vice President - Research and Investment
Management of the Adviser, and Peter L. Mitchelson, President of the Adviser.

OTHER ACCOUNTS MANAGED BY PORTFOLIO MANAGEMENT TEAM, AS OF JUNE 30, 2005.
-----------------------------------------------------------------------------------------------------------------------
Total assets of
Number of accounts accounts with
Number of with performance performance based
Type of account accounts Total assets based advisory fee advisory fee
-----------------------------------------------------------------------------------------------------------------------
EUGENE C. SIT
-----------------------------------------------------------------------------------------------------------------------
Registered investment companies 8 526,466,409 None 0
-----------------------------------------------------------------------------------------------------------------------
Other pooled investment vehicles 12 150,699,336 None 0
-----------------------------------------------------------------------------------------------------------------------
Other accounts 47 1,849,614,946 None 0
-----------------------------------------------------------------------------------------------------------------------
Total 67 2,526,780,691 None 0
-----------------------------------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------------------------------
BRYCE A. DOTY
-----------------------------------------------------------------------------------------------------------------------
Registered investment companies 2 266,836,624 None 0
-----------------------------------------------------------------------------------------------------------------------
Other pooled investment vehicles 4 35,670,187 3 24,838,642
-----------------------------------------------------------------------------------------------------------------------
Other accounts 71 1,782,160,199 3 132,160,812
-----------------------------------------------------------------------------------------------------------------------
Total 77 2,084,667,010 6 0
-----------------------------------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------------------------------
Total of all accounts 83 2,241,666,464
-----------------------------------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------------------------------
KENT L. JOHNSON
-----------------------------------------------------------------------------------------------------------------------
Registered investment companies 3 394,497,082 None 0
-----------------------------------------------------------------------------------------------------------------------
Other pooled investment vehicles 2 18,091,033 None 0
-----------------------------------------------------------------------------------------------------------------------
Other accounts 13 429,245,721 None 0
-----------------------------------------------------------------------------------------------------------------------
Total 18 839,833,836 None 0
-----------------------------------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------------------------------
JANET K. KINZLER
-----------------------------------------------------------------------------------------------------------------------
Registered investment companies 1 29,161,492 None 0
-----------------------------------------------------------------------------------------------------------------------
Other pooled investment vehicles 1 1,763,134 None 0
-----------------------------------------------------------------------------------------------------------------------
Other accounts 1 39,167,834 None 0
-----------------------------------------------------------------------------------------------------------------------
Total 3 70,092,460 None 0
-----------------------------------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------------------------------
MATT T. LOUCKS
-----------------------------------------------------------------------------------------------------------------------
Registered investment companies 3 394,957,038 None 0
-----------------------------------------------------------------------------------------------------------------------
Other pooled investment vehicles 2 18,091,033 None 0
-----------------------------------------------------------------------------------------------------------------------
Other accounts 13 427,245,721 None 0
-----------------------------------------------------------------------------------------------------------------------
Total 18 840,293,792 None 0
-----------------------------------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------------------------------
PETER L. MITCHELSON
-----------------------------------------------------------------------------------------------------------------------
Registered investment companies 2 77,771,025 None 0
-----------------------------------------------------------------------------------------------------------------------
Other pooled investment vehicles 1 2,262,118 None 0
-----------------------------------------------------------------------------------------------------------------------
Other accounts 24 1,128,103,148 None 0
-----------------------------------------------------------------------------------------------------------------------
Total 27 1,351,132,073 None 0
-----------------------------------------------------------------------------------------------------------------------

(TABLE CONTINUED)
-----------------------------------------------------------------------------------------------------------------------
Total assets of
Number of accounts accounts with
Number of with performance performance based
Type of account accounts Total assets based advisory fee advisory fee
-----------------------------------------------------------------------------------------------------------------------
TASHA M. MURDOFF
-----------------------------------------------------------------------------------------------------------------------
Registered investment companies 1 29,161,492 None 0
-----------------------------------------------------------------------------------------------------------------------
Other pooled investment vehicles 1 1,763,134 None 0
-----------------------------------------------------------------------------------------------------------------------
Other accounts 1 39,167,834 None 0
-----------------------------------------------------------------------------------------------------------------------
Total 3 70,092,460 None 0
-----------------------------------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------------------------------
MARK A. PEPPER
-----------------------------------------------------------------------------------------------------------------------
Registered investment companies 1 14,574,036 None 0
-----------------------------------------------------------------------------------------------------------------------
Other pooled investment vehicles 0 0 None 0
-----------------------------------------------------------------------------------------------------------------------
Other accounts 0 0 None 0
-----------------------------------------------------------------------------------------------------------------------
Total 1 14,574,036 None 0
-----------------------------------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------------------------------
RAYMOND E. SIT
-----------------------------------------------------------------------------------------------------------------------
Registered investment companies 1 10,462,774 None 0
-----------------------------------------------------------------------------------------------------------------------
Other pooled investment vehicles 3 20,309,220 None 0
-----------------------------------------------------------------------------------------------------------------------
Other accounts 1 3,665,010 None 0
-----------------------------------------------------------------------------------------------------------------------
Total 5 34,437,004 None 0
-----------------------------------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------------------------------
ROBERT W. SIT
-----------------------------------------------------------------------------------------------------------------------
Registered investment companies 3 394,957,038 None 0
-----------------------------------------------------------------------------------------------------------------------
Other pooled investment vehicles 2 18,901,033 None 0
-----------------------------------------------------------------------------------------------------------------------
Other accounts 13 427,245,721 None 0
-----------------------------------------------------------------------------------------------------------------------
Total 18 840,293,792 None 0
-----------------------------------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------------------------------
ROGER J. SIT
-----------------------------------------------------------------------------------------------------------------------
Registered investment companies 4 123,372,837 None 0
-----------------------------------------------------------------------------------------------------------------------
Other pooled investment vehicles 10 132,608,303 None 0
-----------------------------------------------------------------------------------------------------------------------
Other accounts 31 1,395,362,012 None 0
-----------------------------------------------------------------------------------------------------------------------
Total 45 1,651,343,152 None 0
-----------------------------------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------------------------------
RONALD D. SIT
-----------------------------------------------------------------------------------------------------------------------
Registered investment companies 1 69,,634,491 None 0
-----------------------------------------------------------------------------------------------------------------------
Other pooled investment vehicles 1 2,262,118 None 0
-----------------------------------------------------------------------------------------------------------------------
Other accounts 24 1,128,103,148 None 0
-----------------------------------------------------------------------------------------------------------------------
Total 26 1,199,999,757 None 0
-----------------------------------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------------------------------
MICHAEL J. STELLMACHER
-----------------------------------------------------------------------------------------------------------------------
Registered investment companies 2 194,797,399 None 0
-----------------------------------------------------------------------------------------------------------------------
Other pooled investment vehicles 2 18,091,033 None 0
-----------------------------------------------------------------------------------------------------------------------
Other accounts 10 343,056,5518 None 0
-----------------------------------------------------------------------------------------------------------------------
Total 14 555,944,950 None 0
-----------------------------------------------------------------------------------------------------------------------

The Adviser and its affiliates provide investment management and other services
to clients who may or may not have investment policies, objectives and
investments similar to those of the Fund. Sit may give advice and take actions
on behalf of such clients which differ from advice given or actions taken in
respect to the Fund. The Adviser and its affiliates do not manage accounts that
have investment strategies that materially conflict with the investment strategy
of the Funds.

COMPENSATION OF INVESTMENT PROFESSIONALS. The Funds do not pay any salary,
bonus, deferred compensation, pension or retirement plan on behalf of the
portfolio managers or any other employees of the Adviser. The portfolio managers
of the Funds receive compensation from the Adviser. The compensation of the
portfolio managers and analysts is comprised of a base salary, an annual bonus,
and periodic deferred compensation bonuses which may include phantom stock
plans. Portfolio managers and analysts also participate in the profit sharing
401(k) plan of the Adviser. Competitive pay in the marketplace is considered in
determining total compensation. The bonus awards are based on the attainment of
personal and company goals which are comprised of a number of factors,
including: the composite investment performance of the Adviser's accounts, which
may include one or more of the Funds, relative to the investment accounts'
benchmark index; marketing results; profitability of the Adviser; and the
quality of investment research efforts. Contributions made to the Adviser's
profit sharing 401(k) plan are subject to the limitations of the Internal
Revenue Code and Regulations.

FUND SHARES OWNED BY PORTFOLIO MANAGEMENT TEAM. The table below indicates the
dollar range of Fund ownership in each of the Funds by each member of the
portfolio management team, as of June 30, 2005.

-----------------------------------------------------------------------------------------------------------------------------------------
INTERNATIONAL SMALL CAP SCIENCE AND DEVELOPING
NAME OF BALANCED DIVIDEND LARGE CAP MID CAP GROWTH GROWTH TECHNOLOGY MARKETS
PORTFOLIO MANAGER FUND GROWTH FUND GROWTH FUND GROWTH FUND FUND FUND GROWTH FUND GROWTH FUND
-----------------------------------------------------------------------------------------------------------------------------------------
$100,001 - $100,001 - Over Over Over Over $500,001- $100,001 -
EUGENE C. SIT $500,000 $500,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $500,000
-----------------------------------------------------------------------------------------------------------------------------------------
$10,001 $50,001 - $50,001 - $10,001 $10,001 $1 -
BRYCE A. DOTY -$50,000 $100,000 $100,000 -$50,000 None -$50,000 $10,000 None
-----------------------------------------------------------------------------------------------------------------------------------------
$50,001 - $1 - $10,001 $10,001 $10,001 $10,001
KENT L. JOHNSON None $100,000 $10,000 -$50,000 -$50,000 -$50,000 None -$50,000
-----------------------------------------------------------------------------------------------------------------------------------------
$1 - $1 - $1 - $10,001 $1 - $1 -
JANET K. KINZLER None $10,000 $10,000 $10,000 -$50,000 $10,000 None $10,000
-----------------------------------------------------------------------------------------------------------------------------------------

MATTHEW T. LOUCKS None None None None None None None None
-----------------------------------------------------------------------------------------------------------------------------------------
$100,001 - $100,001 - $500,001- $100,001 - $500,001-
PETER L. MITCHELSON None $500,000 $500,000 $1,000,000 $500,000 $1,000,000 None None
-----------------------------------------------------------------------------------------------------------------------------------------
$1 - $10,001 $10,001 $10,001 $10,001 $1 - $1 -
TASHA M. MURDOFF None $10,000 -$50,000 -$50,000 -$50,000 -$50,000 $10,000 $10,000
-----------------------------------------------------------------------------------------------------------------------------------------
$1 - $1 - $1 - $1 -
MARK A. PEPPER $10,000 None $10,000 $10,000 None $10,000 None None
-----------------------------------------------------------------------------------------------------------------------------------------
$1 - $10,001 Over $10,001 Over $10,001 $10,001
RAYMOND W. SIT None $10,000 -$50,000 $1,000,000 -$50,000 $1,000,000 -$50,000 -$50,000
-----------------------------------------------------------------------------------------------------------------------------------------
$10,001 $100,001 - $50,001 - $100,001 - $500,001- $50,001 - $10,001
ROBERT W. SIT -$50,000 None $500,000 $100,000 $500,000 $1,000,000 $100,000 -$50,000
-----------------------------------------------------------------------------------------------------------------------------------------
$10,001 $1 - $100,001 - $100,001 - $100,001 - $500,001- $10,001 $1 -
ROGER J. SIT -$50,000 $10,000 $500,000 $500,000 $500,000 $1,000,000 -$50,000 $10,000
-----------------------------------------------------------------------------------------------------------------------------------------
$50,001 - $100,001 - $100,001 - $100,001 - $50,001 - $50,001 - $100,001 -
RONALD D. SIT None $100,000 $500,000 $500,000 $500,000 $100,000 $100,000 $500,000
-----------------------------------------------------------------------------------------------------------------------------------------
$10,001 $1 - $10,001 $1 - $10,001 $1 -
MICHAEL J. STELLMACHER None -$50,000 $10,000 -$50,000 $10,000 -$50,000 None $10,000
-----------------------------------------------------------------------------------------------------------------------------------------

FUND SHARES OWNED BY DIRECTORS
--------------------------------------------------------------------------------
The table below indicates the dollar range of each Board member's ownership of
Fund shares and shares of other funds in the Sit Family of Funds for which he is
a Board member, in each case as of December 31, 2004.

------------------------------------------------------------------------------------------------------------------------------
EUGENE C. MELVIN C. WILLIAM E. JOHN E. SIDNEY L. BRUCE C. DONALD W.
SIT (1) BAHLE FRENZEL (1) HULSE JONES LUECK PHILLIPS
------------------------------------------------------------------------------------------------------------------------------
BALANCED Over
FUND $100,000 None None None None None None
------------------------------------------------------------------------------------------------------------------------------
DIVIDEND Over Over $10,001 - $1 - $10,001 -
GROWTH FUND $100,000 $100,000 $50,000 None $10,000 $50,000 None
------------------------------------------------------------------------------------------------------------------------------
LARGE CAP Over Over Over Over $50,001 -
GROWTH FUND $100,000 $100,000 $100,000 $100,000 $100,000 None None
------------------------------------------------------------------------------------------------------------------------------

(TABLE CONTINUED)
------------------------------------------------------------------------------------------------------------------------------
EUGENE C. MELVIN C. WILLIAM E. JOHN E. SIDNEY L. BRUCE C. DONALD W.
SIT (1) BAHLE FRENZEL (1) HULSE JONES LUECK PHILLIPS
------------------------------------------------------------------------------------------------------------------------------
MID CAP Over Over Over Over $50,001 - $50,001 - $1 -
GROWTH FUND $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $10,000
------------------------------------------------------------------------------------------------------------------------------
INTERNATIONAL Over $50,001 - Over Over $10,001 -
GROWTH FUND $100,000 $100,000 $100,000 $100,000 None None $50,000
------------------------------------------------------------------------------------------------------------------------------
SMALL CAP Over Over Over Over $50,001 - $10,001 - $1 -
GROWTH FUND $100,000 $100,000 $100,000 $100,000 $100,000 $50,000 $10,000
------------------------------------------------------------------------------------------------------------------------------
SCIENCE AND TECHNOLOGY Over $50,001 - Over Over $10,001 -
GROWTH FUND $100,000 $100,000 $100,000 $100,000 None $50,000 None
------------------------------------------------------------------------------------------------------------------------------
DEVELOPING MARKETS Over $10,001 - $10,001 -
GROWTH FUND $100,000 $50,000 $50,000 None None None None
------------------------------------------------------------------------------------------------------------------------------
AGGREGATE DOLLAR RANGE OF
EQUITY SECURITIES IN THE 13 Over Over Over Over Over Over Over
SIT MUTUAL FUNDS (2) $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000
------------------------------------------------------------------------------------------------------------------------------
1) Directors who are deemed to be "interested persons" of the Funds as that
term is defined by the Investment Company Act of 1940. Mr. Sit is
considered an "interested person" because he is an officer of Sit
Investment Associates, Inc., the Fund's investment adviser. Mr. Frenzel
is deemed to be an interested person because he is a director and
shareholder of the Fund's investment adviser.
2) The Sit Mutual Funds consist of 13 no-load mutual funds; the eight Stock
Funds described in this Statement of Additional Information and five Bond
Funds described in a separate Prospectus and Statement of Additional
Information.

The table below indicates the amount of securities owned beneficially, or of
record, by each independent Director, and their immediate family members, in (i)
an investment advisor or principal underwriter of the Fund and (ii) a person
(other than a registered investment company) directly or indirectly controlling,
controlled by, or under common control with an investment advisor or principal
underwriter of the Funds. Information provided is as of December 31, 2004.

--------------------------------------------------------------------------------------------------------------------------------
TITLE
NAME OF OWNERS AND OF VALUE OF PERCENT OF
NAME OF DIRECTOR RELATIONSHIPS TO DIRECTOR COMPANY CLASS SECURITIES CLASS
--------------------------------------------------------------------------------------------------------------------------------
Melvin C. Bahle --- --- --- --- ---
--------------------------------------------------------------------------------------------------------------------------------
John E. Hulse --- --- --- --- ---
--------------------------------------------------------------------------------------------------------------------------------
Sidney L. Jones --- --- --- --- ---
--------------------------------------------------------------------------------------------------------------------------------
Bruce C. Lueck Bruce C. Lueck Sit Capital Fund, L.P. (1) L.P.(2) $176,665 0.4%
--------------------------------------------------------------------------------------------------------------------------------
Donald W. Phillips Phillips Financial, L.P. Sit Capital Fund II, L.P. (1) L.P.(2) $891,067 4.1%
--------------------------------------------------------------------------------------------------------------------------------
1) Sit Investment Associates, Inc. is the general partner and a limited partner.
2) Limited partner interest.

COMPENSATION OF DIRECTORS
--------------------------------------------------------------------------------
The following table sets forth the aggregate compensation received by each
Director from each Fund and from all fourteen of the Sit Mutual Funds for the
fiscal year ended June 30, 2005. Pursuant to each Fund's investment management
agreement with the Adviser, the Adviser is obligated to pay the Funds' expenses,
including fees paid to the Directors. (See discussion under "Investment Adviser"
below.) The Directors who are not paid employees or officers of the Funds
receive an annual retainer of $25,000. In addition, the Directors receive $2,500
for attendance at Board of Directors meetings, and $1,000 for attendance at
Audit Committee meetings. Audit Committee meetings are held two times a year,
following the February and October Board meetings. Mr. Hulse is Chair of the
Audit Committee and Mr. Bahle, Mr. Jones, Mr. Lueck and Mr. Phillips are
committee members. These amounts are evenly allocated among the Funds and listed
in the following table. Directors are also reimbursed for their out-of-pocket
expenses incurred while traveling to attend Board and Committee meetings, on
Fund business, and to attend mutual fund industry conferences or seminars. Mr.
Eugene C. Sit is an officer of the Adviser and its affiliates and did not
receive any such compensation and is not included in the table.

---------------------------------------------------------------------------------------------------------
PENSION OR ESTIMATED
AGGREGATE RETIREMENT ANNUAL TOTAL
COMPENSATION BENEFITS ACCRUED BENEFITS COMPENSATION
FROM EACH AS PART OF FUND UPON FROM FUND
NAME OF DIRECTOR FUND EXPENSES RETIREMENT COMPLEX
---------------------------------------------------------------------------------------------------------
Melvin C. Bahle $2,692 None None $35,000
---------------------------------------------------------------------------------------------------------
John E. Hulse 2,846 None None 37,000
---------------------------------------------------------------------------------------------------------
Sidney L. Jones 2,846 None None 37,000
---------------------------------------------------------------------------------------------------------
Bruce C. Lueck 2,846 None None 37,000
---------------------------------------------------------------------------------------------------------
Donald W. Phillips 2,654 None None 34,500
---------------------------------------------------------------------------------------------------------
William E. Frenzel 2,692 None None 35,000
---------------------------------------------------------------------------------------------------------

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

INVESTMENT ADVISER
--------------------------------------------------------------------------------

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

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

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

Each Agreement provides that the Adviser will bear all of the Fund's expenses,
except for extraordinary expenses (as designated by a majority of the Fund's
disinterested directors), interest, brokerage commissions and other transaction
charges relating to the investing activities of the Fund.

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

COMPENSATION AND ALLOCATION OF EXPENSES
--------------------------------------------------------------------------------
Under each of the Fund's Investment Management Agreement, the Fund is obligated
to pay the Adviser a flat monthly fee, which is equal on an annual basis to the
following percentages of the average daily net assets of the Funds:

Sit Balanced Fund 1.00%
Sit Dividend Growth Fund 1.00%
Sit Large Cap Growth Fund, Inc. 1.00%
Sit Mid Cap Growth Fund, Inc. 1.25%(1)
Sit International Growth Fund 1.85%(2)
Sit Small Cap Growth Fund 1.50%
Sit Science and Technology Growth Fund 1.50%(3)
Sit Developing Markets Growth Fund 2.00%
(1) For the period November 1, 1996 through December 31, 2000, the Adviser
voluntarily agreed to limit the management fee (and thereby, all Fund
expenses, except those not payable by the Adviser as set forth above)
of the Mid Cap Growth Fund to 1.00% of the Fund's average daily net
assets. From January 1, 2001, through December 31, 2006, the Adviser
has voluntarily agreed to limit the management fee (and thereby, all
Fund expenses, except those not payable by the Adviser as set forth
above) of the Mid Cap Growth Fund to 1.15% of the Fund's average daily
net assets. After December 31, 2006, this voluntary fee waiver may be
discontinued by the Adviser in its sole discretion.
(2) For the period January 1, 1994 through December 31, 2006, the Adviser
has voluntary agreed to limit the management fee (and thereby, all
Fund expenses, except those not payable by the Adviser as set forth
above) of the International Growth Fund to 1.50% per year of the
Fund's average daily net assets. After December 31, 2006, this
voluntary fee waiver may be discontinued by the Adviser in its sole
discretion.
(3) For the period December 31, 1997 (date of inception) through December
31, 2000, the Adviser voluntarily agreed to limit the management fee
(and thereby, all Fund expenses, except those not payable by the
Adviser as set forth above) to 1.25% of the Science and Technology
Growth Fund's average daily net assets. From January 1, 2001, through
December 31, 2006, the Adviser has voluntarily agreed to limit the
management fee (and thereby, all Fund expenses, except those not
payable by the Adviser as set forth above) to 1.35% of the Science and
Technology Growth Fund's average daily net assets. After December 31,
2006, this voluntary fee waiver may be discontinued by the Adviser in
its sole discretion.

Set forth below are the investment management fees and other expenses paid by
each of the Large Cap Growth Fund, Mid Cap Growth Fund, Small Cap Growth Fund,
Balanced Fund, Dividend Growth, International Growth Fund, and Developing
Markets Growth Fund during the fiscal years ended June 30, 2005, 2004, and 2003.
Fees and expenses of the Funds waived or paid by the Adviser during such fiscal
years are also set forth below.

Developing
Large Cap Mid Cap Small Cap Dividend Science and International Markets
Growth Growth Growth Balanced Growth Technology Growth Growth
Fund Fund Fund Fund Fund (1) Growth Fund Fund Fund
---- ---- ---- ---- -------- ----------- ---- ----
2005
----
Investment Advisory Fees 624,057 2,440,857 2,677,362 120,216 94,298 239,494 593,769 175,433
Fees Waived 0 (195,269) 0 0 0 (23,949) (112,335) 0
------- --------- --------- ------- ------ ------- ------- -------
Net Fund Expenses 624,057 2,245,588 2,677,362 120,216 94,298 215,545 481,434 175,433
2004
----
Investment Advisory Fees 619,904 2,374,046 3,144,929 158,200 26,384 266,261 892,289 184,656
Fees Waived 0 (189,924) 0 0 0 (26,626) (168,811) 0
------- --------- --------- ------- ------ ------- ------- -------
Net Fund Expenses 619,904 2,184,122 3,144,929 158,200 26,384 239,635 723,478 184,656
2003
----
Investment Advisory Fees 565,330 1,935,217 2,362,299 158,894 --- 190,028 962,154 178,798
Fees Waived 0 (154,818) 0 0 --- (19,003) (182,029) 0
------- --------- --------- ------- ------ ------- ------- -------
Net Fund Expenses 565,330 1,780,399 2,362,299 158,894 --- 171,025 780,125 178,798
(1) Sit Dividend Growth Fund's inception date was December 31, 2003.

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

Adviser's obligations and responsibilities under the Investment Management
Agreement. Pursuant to this authority, the Sub-Adviser serves as International
Growth Fund's and Developing Markets Growth Fund's Sub-Adviser.

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

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

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

Pursuant to the Investment Management Agreement the Adviser paid the Sub-Adviser
fees of $334,889, $313,397 and $208,572 for the fiscal years ended June 30,
2003, 2004 and 2005 respectively, with respect to services provided on behalf of
the International Growth Fund; and fees of $66,464, $69,277 and $65,853 for the
fiscal years ended June 30, 2003, 2004 and 2005 respectively, with respect to
services provided on behalf of the Developing Markets Growth Fund.

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

RE-APPROVAL OF INVESTMENT MANAGEMENT AGREEMENTS AND SUB-ADVISORY AGREEMENTS
--------------------------------------------------------------------------------
At their joint meeting held on October 17, 2005 the Boards of Directors of the
Sit Mutual Funds unanimously approved the continuation for another one year
period the investment management agreements entered into by and between Sit
Investment Associates, Inc. ("SIA") and Sit Mid Cap Growth Fund, Inc. dated
November 1, 1996; Sit Large Cap Growth Fund, Inc. dated November 1, 1996; Sit
Mutual Funds Inc., dated November 1, 1992; Sit Mutual Funds II, Inc. dated
November 1, 1992; Sit U.S. Government Securities Fund, Inc. dated November 1,
1992; Sit Money Market Fund, Inc. dated November 1, 1992; and Sit Mutual Funds
Trust dated December 15, 2003 (the "Advisory Agreements"); and with respect to
the Sit International Growth Fund and the Sit Developing Markets Growth Fund,
also unanimously approved the continuation for another one year period the
sub-advisory agreements entered into by and between SIA and Sit/Kim
International Investment Associates, Inc. ("Sit/Kim") dated March 31, 1992 and
March 31, 1994 (the "Sub-Advisory Agreements, " and the Advisory Agreements and
Sub-Advisory Agreements jointly referred to as the "Agreements").

The Boards approved the Agreements after a lengthy discussion and consideration
of various factors relating to both the Boards' selection of SIA as the
investment adviser and Sit/Kim as the sub-adviser, and the Boards' approval of
the fees to be paid under the Agreements. Reference to SIA includes Sit/Kim with
respect to the Sit International Growth Fund and the Sit Developing Markets
Growth Fund.

INVESTMENT ADVISER CRITERIA. The Directors began their analysis by discussing
their criteria for determining the quality of an investment adviser. The
Directors' noted that their analysis is similar to that used by institutional
investors in evaluating and selecting investment advisers. The Directors
discussed several factors used to determine the overall quality of an investment
adviser, including the following:

INVESTMENT PHILOSOPHY AND PROCESS. The Directors considered SIA's philosophy of
managing assets. With respect to equity securities, SIA identifies
growth-oriented securities issued by companies with the potential for earnings
growth at a faster rate than the general economy and market index. With respect
to fixed income securities, SIA stresses the consistent attainment of superior
risk-adjusted returns using a conservative investment management approach that
identifies pricing anomalies in the market and management of portfolio duration.

Regarding equity securities, SIA believes that earnings growth is the primary
determinant of superior long-term returns for equity securities, and invests in
companies it believes exhibit above market and consistent growth as well as
conservative and cyclical growth companies. SIA's actively managed portfolios
not only concentrate on the best growth opportunities but do so at reasonable
valuation levels. The Directors determined that the Stock Funds' investment
objectives are consistent with SIA's investment philosophy and growth style. The
Directors reviewed the Stock Funds' portfolio characteristics, and noted that
SIA has consistently managed the Stock Funds in a growth style and the Directors
found no indication of style drift away from growth stocks over market cycles.
The Directors noted that during the past three years during which growth stocks
have under-performed relative to value stocks, many funds with a stated growth
style objective have actually strayed from the growth style and invested a
portion of their portfolios in value stocks. This has been especially true with
funds investing in international equity securities. In these instances, the
Stock Funds may at times not rank favorably in comparisons with other funds
investing in value stocks because the Stock Funds were disciplined in
maintaining their growth style.

With respect to fixed income securities, SIA seeks investment grade securities
with a special emphasis on interest income and significant stability of
principal value. SIA's style seeks to avoid excessive return volatility and
generate consistent results over an economic cycle. The Directors noted that the
Bond Funds' objectives are to seek high current income. The Directors reviewed
the Bond Funds' characteristics, and noted that SIA has consistently managed the
Bond Funds in this style. The Directors noted that since the Bond Funds
emphasize income, they may at times not rank highly in total return comparisons
with other funds during certain periods.

The Directors discussed SIA's consistent and well-defined investment process.
With respect to equity securities, SIA utilizes a team based top-down and
bottom-up investment decision making process. With respect to fixed income
securities, the portfolio managers are responsible for implementing the strategy
set forth in the Chief Fixed Income Officer's duration targets and the Chief
Investment Officer's interest rate projections.

INVESTMENT PROFESSIONALS. The Directors discussed the experience, knowledge and
organizational stability of SIA and its investment professionals. The Directors
noted that SIA's senior founding professionals are actively involved in the
investment process and have led the organization since its inception in 1981
which has provided not only organizational stability, but a consistent portfolio
management style. The senior professionals of SIA are among the most experienced
professionals in the industry.

The Directors discussed the depth of SIA's investment staff. The Directors noted
that SIA has over 30 investment professionals. Given the investment products
offered by SIA and the assets under management, the Directors determined that
SIA's investment staff is well positioned to meet the current needs of its
clients, including the Funds, and to accommodate growth in the number of clients
and assets under management for the near future. The Directors concluded that
the depth of the investment staff, and in particular senior management and
investment analysts, is actually greater than the Funds currently require at
their present asset size. The Directors noted that SIA has the resources of a $6
billion investment firm working for the benefit of the Fund shareholders.

INVESTMENT PERFORMANCE. The Directors reviewed and discussed the Funds'
investment performance on an absolute and comparable basis for various periods
as discussed below. The Directors noted that the investment performance of the
Funds has generally been competitive with indices and other funds with similar
investment styles as the Funds, such as equity growth funds and fixed income
funds seeking to maximize income.

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

REVIEW OF SPECIFIC FACTORS. The Directors continued their analysis by reviewing
specific information on SIA and the Funds and specific terms of the Agreements,
including the following.

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

FEES AND EXPENSES. The Directors noted that the Funds pay SIA a monthly fee and
SIA is responsible for all of the Funds' expenses except interest, brokerage
commissions and transaction charges and certain extraordinary expenses. The
Directors reviewed fees paid in prior years and the fees to be paid under the
Agreements, both before and after the voluntary waiver of fees by SIA with
respect to the Mid Cap Growth Fund, International Growth Fund, Science &
Technology Fund, Tax-Free Income Fund, U.S. Government Fund and Money Market
Fund. The Directors reviewed the average and median expense ratios of mutual
funds within the same investment category for each Fund. The Directors noted
that each Fund's total expense ratio compares favorably to the total expense
ratios of other no-load funds within the Fund's Morningstar category, and are
lower than the average total expense ratio for the full Morningstar category.
The Directors concluded that the fees paid by the Funds are reasonable and
appropriate.

The Directors reviewed the extent to which the fees to be paid under the
Agreements by each Fund may be affected by an increase in the Fund's assets,
which included reviewing each Fund's current and historical assets and the
likelihood and magnitude of future increases in the Fund's assets. It was noted
that the Tax-Free Income Fund, U.S. Government Fund, and Money Market Fund have
tiered investment fee schedules after SIA's voluntary fee waiver. The Directors
agreed that it is appropriate that the Funds benefit from improved economies of
scale as the Funds' assets increase. However, the Directors concluded that given
the limited size of the Funds, negotiating a graduated fee structure for each
Fund is unnecessary since it is unlikely that the size of the Funds will
increase enough to justify a graduated fee schedule within the near future.

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

The Directors reviewed SIA's investment advisory fee schedule for investment
management services provided to other clients. The Directors compared the
services provided to the Funds and other clients of SIA, and recognized that the
Funds' expenses are borne by SIA. The Directors concluded that the fees paid by
the Funds in relation to the fees paid by other SIA clients were appropriate and
reasonable. The Directors also concluded that SIA's profit margin with respect
to the management of the Funds was appropriate.

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

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

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

DISTRIBUTOR
--------------------------------------------------------------------------------

Each of the Funds have entered into Underwriting and Distribution Agreements
with SIA Securities Corp. ("Securities"), an affiliate of the Adviser, pursuant
to which Securities acts as each Fund's principal underwriter. Securities
markets each

Fund's shares only to certain institutional investors and all other sales of
each Fund's shares are made by each Fund. The Adviser will pay all expenses of
Securities in connection with such services and Securities is otherwise not
entitled to any other compensation under the Underwriting and Distribution
Agreement. Each Fund will incur no additional fees in connection with the
Underwriting and Distribution Agreement.

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

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

BROKERAGE
--------------------------------------------------------------------------------

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

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

Both the Adviser and the Sub-Adviser maintain an informal list of
broker-dealers, which is used from time to time as a general guide in the
placement of Fund business, in order to encourage certain broker-dealers to
provide the Adviser and the

Sub-Adviser with research services which the Adviser and the Sub-Adviser
anticipate will be useful to them in managing the Funds. Because the list is
merely a general guide, which is to be used only after the primary criterion for
the selection of broker-dealers (discussed above) has been met, substantial
deviations from the list are permissible and may be expected to occur. Each of
the Adviser and the Sub-Adviser will authorize a Fund to pay an amount of
commission for effecting a securities transaction in excess of the amount of
commission another broker-dealer would have charged only if the Adviser (or
Sub-Adviser, as applicable) determines in good faith that such amount of
commission is reasonable in relation to the value of the brokerage and research
services provided by such broker-dealer, viewed in terms of either that
particular transaction or the Adviser's or Sub-Adviser's overall
responsibilities with respect to the accounts as to which it exercises
investment discretion. Generally, the Funds pay 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 and Sub-Adviser do not intend to enter into such
brokerage/service arrangements on behalf of the Funds. Some investment companies
enter into arrangements that provide for specified or reasonably ascertainable
fee reductions in exchange for the use of fund assets ("expense offset
arrangements"). Under such expense offset agreements, expenses are reduced by
foregoing income rather than by re-characterizing them as capital items. For
example, a fund may have a "compensating balance" agreement with its custodian
under which the custodian reduces its fee if the fund maintains cash or deposits
with the custodian in non-interest bearing accounts. The Adviser and Sub-Adviser
do not intend to enter into expense offset agreements involving assets of the
Funds.

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

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

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

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

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

Amount paid to Amount paid
Total firms for soft to firms for
brokerage dollar & trade, principal
Fund commission research & other
---- ---------- -------- -------

Twelve months through 6/30/05:
------------------------------
Balanced $5,404 $3,924 $1,480
Dividend Growth 25,712 7,696 18,016
Large Cap Growth 42,592 31,190 11,401
Mid Cap Growth 270,325 229,986 40,338
International Growth 57,448 50,390 7,059
Small Cap Growth 324,135 290,032 34,104
Science and Technology Growth 32,853 27,754 23,404
Developing Markets Growth 15,265 13,176 2,088

Twelve months through 6/30/04:
------------------------------
Balanced $17,640 $11,342 $6,298
Dividend Growth 9,844 2,218 7,626
Large Cap Growth 59,531 55,706 3,825
Mid Cap Growth 357,846 328,092 29,754
International Growth 151,960 149,905 2,055
Small Cap Growth 548,916 451,047 97,869
Science and Technology Growth 54,414 37,644 16,770
Developing Markets Growth 26,000 24,642 1,358

Twelve months through 6/30/03:
------------------------------
Balanced $20,155 $15,299 $4,856
Large Cap Growth 72,253 70,808 1,445
Mid Cap Growth 319,079 270,118 48,961
International Growth 75,153 71,845 3,308
Small Cap Growth 448,641 334,842 113,799
Science and Technology Growth 31,430 26,224 5,206
Developing Markets Growth 12,045 11,629 416

PROXY VOTING
--------------------------------------------------------------------------------

The corporate issuer of each Fund, on behalf of the Funds, has delegated the
voting of portfolio securities to the Adviser. The Adviser has adopted proxy
voting policies and procedures (the "Proxy Voting Policy") for the voting of
proxies on behalf of client accounts for which the Adviser has voting
discretion, including the Funds. Under the Proxy Voting Policy, shares are to be
voted in the best interests of the Funds. Each Funds' proxy voting record for
the most recent twelve-month period ending June 30 is available without charge,
upon request by calling the Funds at 1-800-332-5580, and is also available on
the SEC's website at www.sec.gov.

A Proxy Committee comprised of senior management is responsible for the
development and implementation of the Proxy Voting Policy, and oversees and
manages the day-to-day operations of the Adviser's Proxy Voting Policies.

Generally, the Adviser exercises proxy voting discretion on proxy proposals in
accordance with guidelines (the "Proxy Guidelines") set forth in the Proxy
Voting Policy. The Proxy Guidelines address issues which are frequently included
in proxy proposals. Such issues include, for example, proposals seeking
shareholder approval of equity-based compensation plans, changes in corporate
control or shareholder rights, poison pills, corporate restructuring, and
significant transactions. Proxy proposals which contain novel issues, include
unique circumstances, or otherwise are not addressed in the Proxy Guidelines are
reviewed by the Proxy Committee or it's designates(s). The Proxy Committee or
its designee(s) review each non-routine issue and determine the Adviser's vote.
The Proxy Committee considers the facts and circumstances of a proposal and
retains the flexibility to exercise its discretion and apply the Proxy
Guidelines in the best interests of the Fund.

The Adviser has retained an independent third party (the "Service Firm") to
provide the Adviser with proxy analysis, vote execution, record keeping, and
reporting services.

It is possible, but unlikely, that the Adviser may be subject to conflicts of
interest in the voting of proxies due to business or personal relationships with
persons having an interest in the outcome of certain votes. For example, the
Adviser may provide investment management services to accounts owned or
controlled by companies whose management is soliciting proxies, or the Adviser
may have business or personal relationships with other proponents of proxy
proposals, participants in proxy contests, corporate directors or candidates for
directorships. The Proxy Committee shall take steps to ensure a decision to vote
the proxy was based on the Fund's best interest and was not the product of the
material conflict. To resolve a material conflict of interest, the Proxy
Committee may (but is not limited to) base its vote on pre-determined guidelines
or polices which requires little discretion of Adviser's personnel; disclose the
conflict to the Fund's board of directors and obtain their consent prior to
voting; or base its vote on the analysis and recommendation of an independent
third party.

DISCLOSURE OF PORTFOLIO HOLDINGS
--------------------------------------------------------------------------------

The Funds' Boards of Directors and Trustees has adopted procedures and policies
regarding the disclosure of portfolio holdings in order to assist the Funds in
preventing the misuse of material nonpublic information and to ensure that
shareholders and other interested parties continue to receive portfolio
information on a uniform basis. The Chief Compliance Officer oversees
application of the policies and provides the Boards with periodic reports
regarding the Funds' compliance with the policies.

Complete portfolio holdings are included in the Funds' annual and semi-annual
reports. The annual and semi-annual reports are mailed to all shareholders, and
are filed with the SEC. Copies of the Funds' reports are available on the Funds'
website. The Funds file their complete portfolio holdings with the SEC within 60
days after the end of their first and third quarters on Form N-Q. Copies of the
Funds' reports and Forms N-Q are available free on the EDGAR Database on the
SEC's website at www.sec.gov, and may be reviewed and copied at the Commission's
Public Reference Room in Washington, D.C. Information on the operation of the
SEC's Public Reference Room may be obtained by calling the SEC at
1-202-942-8090. Copies are available for a fee from the SEC by calling the SEC
at 1-202-942-8090, by making an e-mail request at publicinfo@sec.gov, or by
writing the SEC's Public Reference Section, Washington, D.C. 20549-01102.

A complete portfolio holdings report as of the end of each calendar quarter is
available to all shareholders, prospective shareholders, intermediaries that
distribute the Funds' shares, third-party service providers, rating and ranking
organizations and affiliated persons of the Funds. A copy of the report may be
obtained by contacting a Mutual Fund Service Representative.

The Funds' Chairman and the chief investment officer of Sit Investment
Associates, Inc. ("SIA") (the Funds' investment adviser) may authorize
disclosure of portfolio holdings at a time or times other than the calendar
quarter end provided that a.) the chief investment officer determines that the
disclosure of the portfolio information is for a legitimate business reason and
in the best interest of the Funds; b.) the recipients are subject to a duty of
confidentiality (and non-use) if appropriate; and c) the Funds provide a report
of the disclosure to the Boards of Directors at the Boards' next regularly
scheduled meetings. The prohibition against the disclosure of non-public
portfolio holdings information to an unaffiliated third party does not apply to
information sharing with the Funds' service providers, including the Adviser and
Sub-Adviser, the Funds' auditor, counsel, accountant, transfer agent or
custodian, who require access to such information in order to fulfill their
contractual duties to the Funds.

Information regarding the Funds' aggregate portfolio characteristics may be
disclosed at any time. Disclosure of the ownership of a particular portfolio
holding may be made at any time provided the security has been included in a
Fund's quarterly portfolio holdings report.

The Funds, SIA or any affiliate may not receive compensation or other
consideration in connection with the disclosure of information about portfolio
securities.

CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
--------------------------------------------------------------------------------

The following persons owned of record or beneficially 5% or more of the
respective Fund's outstanding shares as of August 29, 2005:

Record Beneficially Record &
Person Only Only Beneficially
------ ---- ---- ------------
BALANCED FUND
-------------
Charles Schwab & Co., Inc., Special Custody Acct FBO Cust. 10.42%
101 Montgomery Street, San Francisco, CA
Christ Presbyterian Church 8.67%
6901 Normandale Road, Minneapolis, MN
Sit Investment Associates, Inc. (various accounts) 16.73%
3300 IDS Center, Minneapolis, MN
Olcoba Co., C/O Stanton Trust Company 5.46%
3405 Annapolis Lane, Minneapolis, MN

DIVIDEND GROWTH FUND
--------------------
Eide Baily Employee Benefits, FBO Sit Investment 401K Plan 5.60%
5601 Green Valley Drive, Bloomington, MN

LARGE CAP GROWTH FUND
---------------------
Charles Schwab & Co., Inc., Special Custody Acct FBO Cust. 12.77%
101 Montgomery Street, San Francisco, CA

MID CAP GROWTH FUND
-------------------
Charles Schwab & Co., Inc., Special Custody Acct FBO Cust. 5.40%
101 Montgomery Street, San Francisco, CA
VALIC Separate Account 10.84%
2919 Allen Parkway, Houston, TX

INTERNATIONAL GROWTH FUND
-------------------------
Eugene C. Sit and Gail V. Sit, JTWROS 6.10%
P.O. Box 2132, Minneapolis, MN
Sit Investment Associates, Inc. (various accounts) 5.21%
3300 IDS Center, Minneapolis, MN
Charles Schwab & Co., Inc., Special Custody Acct FBO Cust. 5.11%
101 Montgomery Street, San Francisco, CA

SMALL CAP GROWTH FUND
---------------------
Charles Schwab & Co., Inc., Special Custody Acct FBO Cust. 8.43%
101 Montgomery Street, San Francisco, CA
National Financial Services Corp., FBO Cust., 5.44%
Church Street Station, P.O. Box 3908, New York, NY
VALIC Separate Account 48.12%
2919 Allen Parkway, Houston, TX

DEVELOPING MARKETS GROWTH FUND
------------------------------
Charles Schwab & Co., Inc., Special Custody Acct FBO Cust. 15.92%
101 Montgomery Street, San Francisco, CA
National Financial Services Corp., FBO Cust. 23.21%
Church Street Station, P.O. Box 3908, New York, NY

SCIENCE AND TECHNOLOGY GROWTH FUND
----------------------------------
Sit Investment Associates, Inc. (various accounts) 14.96%
3300 IDS Center, Minneapolis, MN

As of August 29, 2005, the officers and directors of the Sit Funds, as a group,
owned the following percentage of each Fund's shares:

Balanced 1.72% Small Cap Growth 5.06%
Large Cap Growth 5.97% Science and Technology Growth 9.35%
Mid Cap Growth 8.73% Developing Markets Growth 4.10%
International Growth 12.87% Dividend Growth Fund 11.91%

TAXES
--------------------------------------------------------------------------------

Each Fund intends to fulfill the requirements of Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"), as a regulated investment
company. If so qualified, each Fund will not be liable for federal income taxes
to the extent it distributes its taxable income to its shareholders.

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

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

It is expected that the Funds' distributions will consist primarily of capital
gains. However, it is possible that the Funds will make distributions from
investment earnings. Such distributions, if any, are taxable as ordinary income
or as qualified dividend income. Ordinary income is subject to graduated federal
tax rates as high as 35%; qualified dividend income is subject to a maximum
federal tax rate of 15%. Each Fund will designate the portion of its
distributions from investment earnings during each year that constitute
qualified dividend income. Generally, dividends that a Fund receives from
domestic corporations and from foreign corporations whose stock is readily
tradable on an established securities market in the U.S. or which are domiciled
in countries on a list established by the Internal Revenue Service will qualify
for qualified dividend treatment when paid out to investors.

For federal income tax purposes, each Fund is generally permitted to carry
forward a net capital loss in any year to offset its own capital gains, if any,
during the eight years following the year of the loss. When a Fund has a capital
loss carryover, it generally does not make capital gains distributions until the
loss has been offset or expired. As of June 30, 2005, the Funds listed in the
table below anticipated the following capital loss carryovers:

----------------------------------------------------------------------
CAPITAL LOSS
FUND CARRYOVER EXPIRATION DATE
----------------------------------------------------------------------
Balanced $5,429,946 2010 - 2013
----------------------------------------------------------------------
Large Cap Growth 21,850,429 2010 - 2012
----------------------------------------------------------------------
Mid Cap Growth 41,402,552 2010 - 2012
----------------------------------------------------------------------
International Growth 34,433,548 2009 - 2014
----------------------------------------------------------------------
Small Cap Growth 63,138,159 2010 - 2012
----------------------------------------------------------------------
Science and Technology Growth 21,986,091 2010 - 2013
----------------------------------------------------------------------
Developing Markets Growth 2,397,397 2008 - 2011
----------------------------------------------------------------------

When shares of a Fund are sold or otherwise disposed of, the Fund shareholder
will realize a capital gain or loss equal to the difference between the purchase
price and the sale price of the shares disposed of, if, as is usually the case,
the Fund shares are a capital asset in the hands of the Fund shareholder. In
addition, pursuant to a special provision in the Code, if Fund shares with
respect to which a long-term capital gain distribution has been made are held
for six months or less, any loss on the sale or other disposition of such shares
will be a long-term capital loss to the extent of such long-term capital gain
distribution. Any loss on the sale or exchange of shares of a Fund generally
will be disallowed to the extent that a shareholder acquires or contracts to
acquire shares of the same Fund within 30 days before or after such sale or
exchange.

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

It is expected that any net gain realized from the closing out of forward
currency contracts will be considered gain from the sale of securities or
currencies and therefore be qualifying income for purposes of the 90% of gross
income from qualified sources requirement, as discussed above.

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

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

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

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

FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

The financial statements included in the Funds' annual reports to shareholders
for the fiscal year ended June 30, 2005 are incorporated by reference in this
Statement of Additional Information.

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

CUSTODIAN; SUB-CUSTODIAN; COUNSEL; ACCOUNTANTS
--------------------------------------------------------------------------------
PFPC Trust Company, 8800 Tinicum Boulevard, Third Floor, Philadelphia, PA 19153
acts as custodian of the Funds' assets and portfolio securities; Dorsey &
Whitney LLP, 50 South Sixth Street, Suite 1500, Minneapolis, Minnesota 55402, is
the General Counsel for the Funds; and KPMG LLP, 4200 Wells Fargo Center,
Minneapolis, Minnesota 55402, acts as the Funds' independent registered public
accounting firm.

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.

CAPITALIZATION AND VOTING RIGHTS
--------------------------------------------------------------------------------

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

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

The Funds are not required under Minnesota law to hold annual or periodically
scheduled meetings of shareholders. Minnesota corporation law provides for the
Board of Directors to convene shareholder meetings when it deems appropriate. If
a regular meeting of shareholders has not been held during the immediately
preceding fifteen months, Minnesota law allows a shareholder or shareholders
holding three percent or more of the voting shares of the Funds to

demand a regular meeting of shareholders by written notice of demand given to
the chief executive officer or the chief financial officer of the Funds. Ninety
days after receipt of the demand, a regular meeting of shareholders must be held
at the expense of the Funds. Additionally, the Investment Company Act of 1940
Act requires shareholder votes for all amendments to fundamental investment
policies and restrictions and for all investment advisory contracts and
amendments thereto.

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
-----------------
AAA Highest grade obligations and possess the ultimate degree of
protection as to principal and interest
AA Also qualify as high grade obligations, and in the majority
of instances differ from AAA issues only in small degree
A Regarded as upper medium grade, have considerable investment
strength but are not entirely free from adverse effects of
changes in economic and trade conditions, interest and
principal are regarded as safe
BBB Considered investment grade with adequate capacity to pay
interest and repay principal.
BB Judged to be speculative with some inadequacy to meet timely
interest and principal payments.
B Has greater vulnerability to default than other speculative
grade securities. Adverse economic conditions will likely
impair capacity or willingness to pay interest and principal.
CCC Has a vulnerability to default and is dependent upon favorable
business, financial and economic conditions to meet timely
payment of interest and repayment of principal.
CC Applied to debt subordinated to senior debt
C Applied to debt subordinated to senior debt that is assigned
an actual or implied CCC debt rating

Standard & Poor's applies indicators "+", no character, and "-" to the
above rating categories AA through BB. The indicators show relative
standing within the major rating categories.

FITCH RATINGS
-------------
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.

A-1

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. The modifier "+" indicates that the security is in
the higher end of this rating category.

FITCH RATINGS
-------------
F-1+ Exceptionally strong credit quality
F-1 Strong credit quality

A-2

PART C
OTHER INFORMATION

Item 23. Exhibits
-----------------

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

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

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

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

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

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

(f) Bonus or Profit Sharing Contracts
---------------------------------
Not applicable.

C-1

(g) Custodian Agreement
-------------------
1. Sit Large Cap Growth Fund, Inc. Incorporated by
reference to Post-Effective Amendments No. 23, 25,
and 30 to the Fund's Registration Statement.
2. Sit Mid Cap Growth Fund, Inc. Incorporated by
reference to Post-Effective Amendments No. 23, 25,
and 30 to the Fund's Registration Statement.
3. Sit Mutual Funds, Inc. Incorporated by reference to
Post-Effective Amendments No. 17, 19, and 27 to the
Fund's Registration Statement.

(h.1) Transfer Agency and Services Agreement
--------------------------------------
1. Sit Large Cap Growth Fund, Inc. Incorporated by
reference to Post-Effective Amendments No. 20, 25 and
26 to the Fund's Registration Statement.
2. Sit Mid Cap Growth Fund, Inc. Incorporated by
reference to Post-Effective Amendments No. 20, 25 and
26 to the Fund's Registration Statement.
3. Sit Mutual Funds, Inc. Incorporated by reference to
Post-Effective Amendments No. 10, 19 and 20 to the
Fund's Registration Statement.

(h.2) Accounting Services Agreement
-----------------------------
1. Sit Large Cap Growth Fund, Inc. Incorporated by
reference to Post-Effective Amendment No. 29 to the
Fund's Registration Statement.
2. Sit Mid Cap Growth Fund, Inc. Incorporated by
reference to Post-Effective Amendment No. 29 to the
Fund's Registration Statement.
3. Sit Mutual Funds, Inc. Incorporated by reference to
Post-Effective Amendment No. 26 to the Fund's
Registration Statement.

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

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

(k) Omitted Financial Statements
----------------------------
Not applicable.

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

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

C-2

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

(o) Reserved.
---------

(p) Codes of Ethics
---------------
1. Sit Large Cap Growth Fund, Inc. Incorporated by
reference to Post-Effective Amendment No. 24 to the
Fund's Registration Statement.
2. Sit Mid Cap Growth Fund, Inc. Incorporated by
reference to Post-Effective Amendment No. 24 to the
Fund's Registration Statement.
3. Sit Mutual Funds, Inc. Incorporated by reference to
Post-Effective Amendment No. 18 to the Fund's
Registration Statement.

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

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

Item 25. Indemnification
------------------------

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

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

In any case, indemnification is proper only if the eligibility determining body
decides that the person seeking indemnification:
(a) has not received indemnification for the same conduct from any
other party or organization;
(b) acted in good faith;
(c) received no improper personal benefit;
(d) in the case of criminal proceedings, had no reasonable cause
to believe the conduct was unlawful;
(e) reasonably believed that the conduct was in the best interest
of a Registrant, or in certain contexts, was not opposed to
the best interest of a Registrant; and
(f) had not otherwise engaged in conduct which precludes
indemnification under either Minnesota or Federal law
(including, but not limited to, conduct constituting willful
misfeasance, bad faith, gross negligence, or reckless
disregard of duties as set forth in Section 17(h) and (i) of
the Investment Company Act of 1940).

If a person is made or threatened to be made a party to a proceeding, the person
is entitled, upon written request to a Registrant, to payment or reimbursement
by a Registrant of reasonable expenses, including attorneys' fees and
disbursements, incurred by the person in advance of the final disposition of the
proceeding, (a) upon receipt by a Registrant of a written affirmation by the
person of a good faith belief that the criteria for indemnification set forth in
Section 302A.521 have been satisfied and a written undertaking by the person to
repay all amounts so paid or reimbursed by the Registrant, if it is ultimately
determined that the criteria for indemnification have not been satisfied, and
(b) after a determination that the facts then known to those making the
determination would not

C-3

preclude indemnification under Section 302A.521. The written undertaking
required by clause (a) is an unlimited general obligation of the person making
it, but need not be secured and shall be accepted without reference to financial
ability to make the repayment.

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

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

Item 26. Business and other Connections of Investment Adviser
-------------------------------------------------------------

Sit Investment Associates, Inc. (the "Adviser"), serves as the investment
adviser. Sit/Kim International Investment Associates, Inc. (the "Sub-Adviser")
serves as the Sub-Adviser of the Series A and Series C of Sit Mutual Funds, Inc.
SIA Securities Corp. (the "Distributor") serves as Distributor for each
Registrant. Below is a list of the officers and directors of the Adviser and the
Sub-Adviser and their business/employment during the past two years. Unless
otherwise indicated, the principal business address of each individual is the
same as the adviser, 3300 IDS Center, 80 South Eighth Street, Minneapolis, MN
55402.

Name Business and Employment During Past Two Years; Principal Business Address
---- -------------------------------------------------------------------------
Eugene C. Sit Chairman, CEO, and CIO of the Adviser; Chairman, CEO and CIO of the Sub-Adviser; Director of
the Distributor.

Peter L. Mitchelson President, Senior Investment Officer, and Director of the Adviser; Director and Executive
Vice President of the Sub-Adviser; Director of the Distributor.

Roger J. Sit Executive Vice President - Research & Investment Management and Director of the Adviser;
President and Deputy CIO of the Sub-Adviser.

Frederick Adler Director of the Adviser; Of Counsel, Fulbright & Jaworski, 666 5th Avenue, New York, NY 10103.

Ralph L. Strangis Director of the Adviser; Founding member of law firm Kaplan, Strangis and Kaplan, P.A., 5500
Wells Fargo Center, 90 S. 7th Street, Minneapolis MN 55402.

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

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

David L. Redo Director of the Sub-Adviser, Principal of Wetherby Asset Management, 417 Montgomery Street,
Third Floor, San Francisco, CA 94104.

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

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

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

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

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

C-4

Name Business and Employment During Past Two Years; Principal Business Address
---- -------------------------------------------------------------------------
Carla J. Rose Vice President - Administration & Deputy Controller of the Adviser; Vice President,
Administration and Controller of Sub-Adviser.

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

Raymond E. Sit Vice President - Research and Investment Management of the Sub-Adviser.

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

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

Item 27. Principal Underwriters
-------------------------------

The Distributor for each Registrant is SIA Securities Corp., 3300 IDS Center,
Minneapolis, MN 55402, an affiliate of the Adviser. The Distributor distributes
only shares of each Registrant.

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

Name Business and Employment During Past Two Years; Principal Business Address
---- -------------------------------------------------------------------------
Eugene C. Sit Chairman, CEO and CIO of the Adviser; Chairman, CEO and CIO of the Sub-Adviser; Director
of the Distributor; Chairman of the Board of Directors of all Sit Mutual Funds

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

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

Item 28. Location of Accounts and Records
-----------------------------------------

The Custodian for each Registrant is PFPC Trust Company, 8800 Tinicum Boulevard,
Third Floor, Philadelphia, PA 19153. The Transfer Agent for each Registrant is
PFPC, Inc., 101 Sabin Street, Pawtucket, RI 02860. Other books and records are
maintained by the Adviser, which is located at 3300 IDS Center, 80 South Eighth
Street, Minneapolis, MN 55402 and the Sub-Adviser, which is located at the same
address.

Item 29. Management Services
----------------------------
Not applicable.

Item 30. Undertakings
---------------------
Not applicable.

C-5

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has caused this Registration
Statement on Form N-1A to be signed on its behalf by the undersigned, thereunder
duly authorized, in the City of Minneapolis, State of Minnesota, on the 27th day
of October 2005.

SIT LARGE CAP GROWTH FUND, INC.
(Registrant)

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

Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment to the Registrant's Registration Statement has been signed below by
the following persons in the capacities and on the dates indicated. All
revisions 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 that would render it ineligible to become effective
pursuant to Rule 485(b).

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

/s/ Eugene C. Sit Dated: October 27, 2005
-----------------
Eugene C. Sit, Chairman
(Principal Executive Officer and Director)

/s/ Paul E. Rasmussen Dated: October 27, 2005
---------------------
Paul E. Rasmussen, Treasurer
(Principal Financial Officer and Accounting Officer)

Melvin C. Bahle, Director*

William E. Frenzel, Director*

John E. Hulse, Director*

Sidney L. Jones, Director*

Bruce C. Lueck, Director*

Donald W. Phillips, Director*

*By /s/ Eugene C. Sit Dated: October 27, 2005
-----------------
Eugene C. Sit, Attorney-in-fact
(Pursuant to Powers of Attorney filed
previously with the Commission.)

C-6

SIGNATURES

SIT MID CAP GROWTH FUND, INC.
(Registrant)

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

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

/s/ Eugene C. Sit Dated: October 27, 2005
-----------------
Eugene C. Sit, Chairman
(Principal Executive Officer and Director)

/s/ Paul E. Rasmussen Dated: October 27, 2005
---------------------
Paul E. Rasmussen, Treasurer
(Principal Financial Officer and Accounting Officer)

Melvin C. Bahle, Director*

William E. Frenzel, Director*

John E. Hulse, Director*

Sidney L. Jones, Director*

Bruce C. Lueck, Director*

Donald W. Phillips, Director*

*By /s/ Eugene C. Sit Dated: October 27, 2005
-----------------
Eugene C. Sit, Attorney-in-fact
(Pursuant to Powers of Attorney filed
previously with the Commission.)

C-7

SIGNATURES

SIT MUTUAL FUNDS, INC.
(Registrant)

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

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

/s/ Eugene C. Sit Dated: October 27, 2005
-----------------
Eugene C. Sit, Chairman
(Principal Executive Officer and Director)

/s/ Paul E. Rasmussen Dated: October 27, 2005
---------------------
Paul E. Rasmussen, Treasurer
(Principal Financial Officer and Accounting Officer)

Melvin C. Bahle, Director*

William E. Frenzel, Director*

John E. Hulse, Director*

Sidney L. Jones, Director*

Bruce C. Lueck, Director*

Donald W. Phillips, Director*

*By /s/ Eugene C. Sit Dated: October 27, 2005
-----------------
Eugene C. Sit, Attorney-in-fact
(Pursuant to Powers of Attorney filed
previously with the Commission.)

C-8

REGISTRATION STATEMENT ON FORM N-1A

EXHIBIT INDEX

Exhibit No. Name of Exhibit Page No.
----------- --------------- --------

(j.) Consent of Independent Registered Public Accounting Firm C-10
(Combined Consent for each Registrant to be filed by
amendment prior to Registrants' effective date).

C-9


>	have emerging stock markets as defined by the International Finance Corporation,
>	have low- to middle-income economies according to the World Bank, or
>	are listed in World Bank publications as “developing.”
As of September 30, 2005, the Fund held investments in Hong Kong, Philippines, South Korea, Taiwan, Thailand, Brazil, Mexico, South Africa, Australia, China, Malaysia, Singapore, Israel, Russia, India, Indonesia, Czech Republic, Greece, Hungary, Poland, Turkey, U.K., Argentina and Peru.

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


>	unique product or service,
>	growing product demand,
>	regional or country dominance and growing market share,
>	management experience and capabilities, and
>	strong financial condition.
When selling equity securities for the Fund, the Sub-Adviser considers several factors, including changes in a company’s fundamentals and anticipated earnings.