<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION JUNE 3, 1996
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
SCHEDULE 13E-4
ISSUER TENDER OFFER STATEMENT
(Pursuant to Section 13(e)(1) of the
Securities Exchange Act of 1934)
(Amendment No. )
Sierra Prime Income Fund
(Name of Issuer)
Sierra Prime Income Fund
(Name of Person(s) Filing Statement)
Class A Common Shares of Beneficial Interest with no par value
(Title of Class of Securities)
826461-105
(CUSIP Number of Class of Securities)
F. Brian Cerini
Chairman and President
Sierra Prime Income Fund
9301 Corbin Avenue, Suite 333
Northridge, CA 91324
(818) 725-0200
(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications on Behalf of Person(s) Filing Statement)
Copies to:
Lawrence J. Sheehan, Esq. Richard W. Grant, Esq.
O'Melveny & Myers Jeffrey P. Burns, Esq.
1999 Avenue of the Stars Morgan, Lewis & Bockius LLP
#700 2000 One Logan Square
Los Angeles, CA 90067 Philadelphia, PA 19103
310-553-6700 215-963-5000
June 3, 1996
(Date Tender Offer First Published,
Sent or Given to Security Holders)
CALCULATION OF FILING FEE
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Transaction Valuation $1,144,660(a) Amount of Filing Fees: $229(b)
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(a) Calculated as the aggregate maximum purchase price to be paid for 114,466
shares in the offer.
(b) Calculated as 1/50 of 1% of the Transaction Valuation.
[ ] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
Amount Previously Paid: _____________________
Form or Registration No.: _____________________
Filing Party: _________________________
Date Filed: ___________________________
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<PAGE>
ITEM 1. SECURITY AND ISSUER.
(a) The name of the issuer is the Sierra Prime Income Fund, a
non-diversified, closed-end management investment company organized as a
Massachusetts business trust (the "Trust"). The principal executive offices of
the Trust are located at 9301 Corbin Avenue, Suite 333, Northridge, CA 91324.
(b) The title of the securities being sought is Class A Common Shares of
beneficial interest with no par value (the "Class A Common Shares"). As of May
21, 1996, there were approximately 1,144,667.775 Class A Common Shares issued
and outstanding.
The Trust is seeking tenders for 114,466 Class A Common Shares at net asset
value per share, calculated on the day the tender offer expires, upon the terms
and subject to the conditions set forth in the Offer to Purchase, dated June 3,
1996 (the "Offer to Purchase"), and the related Letter of Transmittal (which
together constitute the "Offer"). A copy of each of the Offer to Purchase and
the form of Letter of Transmittal is attached hereto as Exhibit (a)(1)(ii) and
Exhibit (a)(2), respectively. Reference is hereby made to the Cover Page and
Section 1 "Price; Number of Class A Common Shares" of the Offer to Purchase,
which are incorporated herein by reference. The Trust has been informed that no
trustees, officers or affiliates of the Trust intend to tender Class A Common
Shares pursuant to the Offer.
(c) The Class A Common Shares are not currently traded on an established
trading market.
(d) Not Applicable.
ITEM 2. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a)-(b) Reference is hereby made to Section 12 "Source and Amount of Funds"
of the Offer to Purchase, which is incorporated herein by reference.
ITEM 3. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE ISSUER OR
AFFILIATE.
Reference is hereby made to Section 7 "Purpose of the Offer," Section 8
"Plans or Proposals of the Trust," Section 10 "Interest of Trustees and
Executive Officers; Transactions and Arrangements Concerning the Class A Common
Shares," Section 11 "Certain Effects of the Offer" and Section 12 "Source and
Amount of Funds" of the Offer to Purchase, which are incorporated herein by
reference. In addition, the Trust regularly purchases and sells assets in its
ordinary course of business. Except as set forth above, the Trust has no plans
or proposals which relate to or would result in (a) the acquisition by any
person of additional securities of the Trust or the disposition of securities of
the Trust; (b) an extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving the Trust; (c) a sale or transfer of a
material amount of assets of the Trust; (d) any change in the present Board of
Trustees or management of the Trust, including, but not limited to, any plans or
proposals to change the number or the term of Trustees, or to fill any existing
vacancy on the Board of Trustees or to change any material term of the
employment contract of any executive officer of the Trust; (e) any material
change in the present dividend rate or policy, or indebtedness or capitalization
of the Trust; (f) any other material change in the Trust's structure or
business, including any plans or proposals to make any changes in its investment
policy for which a vote would be required by Section 13 of the Investment
Company Act of 1940; (g) changes in the Trust's declaration of trust, bylaws or
instruments corresponding thereto or other actions which may impede the
acquisition of control of the Trust by any person; (h) a class of equity
securities of the Trust to be delisted from a national securities exchange or to
cease to be authorized to be quoted on an inter-dealer quotation system of a
registered national securities association; (i) a class of equity security of
the Trust becoming eligible for termination of registration under the Investment
Company Act of 1940; or (j) the suspension of the Trust's obligation to file
reports pursuant to Section 15(d) of the Securities Exchange Act of 1934.
ITEM 4. INTEREST IN SECURITIES OF THE ISSUER.
Reference is hereby made to Section 10 "Interest of Trustees and Executive
Officers; Transactions and Arrangements Concerning the Class A Common Shares" of
the Offer to Purchase and the financial statements included as part of Exhibit
(a)(1)(ii) attached hereto, which are incorporated herein by reference. Except
as set forth therein, there have not been any transactions involving the Class A
Common Shares of the Trust that were effected during the past 40 business days
by the Trust, any executive officer or Trustee of the Trust, any person
controlling the Trust, any executive officer or director of any corporation
ultimately in control of the Trust or by any associate or subsidiary of any of
the foregoing, including any executive officer or director of any such
subsidiary.
ITEM 5. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE ISSUER'S SECURITIES.
Reference is hereby made to Section 10 "Interest of Trustees and Executive
Officers; Transactions and Arrangements Concerning the Class A Common Shares" of
the Offer to Purchase which is incorporated herein by reference. Except as set
forth therein, the Trust does not know of any contract, arrangement,
understanding or relationship relating, directly or indirectly, to the Offer
(whether or not legally enforceable) between the Trust, any of the Trust's
executive officers or Trustees, any person controlling the Trust or any officer
or director of any corporation ultimately in control of the Trust and any person
with respect to any securities of the Trust (including, but not limited to, any
contract arrangement understanding or relationship concerning the transfer or
the voting of any such securities, joint ventures, loan or option arrangements,
puts or calls, guarantees of loans, guarantees against loss, or the giving or
withholding of proxies, consents or authorizations).
ITEM 6. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
No persons have been employed, retained or are to be compensated by or on
behalf of the Trust to make solicitations or recommendations in connection with
the Offer.
ITEM 7. FINANCIAL INFORMATION.
(a)-(b) Reference is hereby made to the financial statements included as
part of Exhibit (a)(1)(ii) attached hereto, which are incorporated herein by
reference.
ITEM 8. ADDITIONAL INFORMATION.
(a) Reference is hereby made to Section 10 "Interests of Trustees and
Executive Officers; Transactions and Arrangements Concerning the Class A Common
Shares" of the Offer to Purchase which is incorporated herein by reference.
(b)-(d) Not applicable.
(e) The Offer to Purchase, attached hereto as Exhibit (a)(1)(ii), is
incorporated herein by reference in its entirety.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
(a)(1)(i) Advertisement printed in The Wall Street Journal
(ii) Offer to Purchase (including Financial Statements).
(a)(2) Form of Letter of Transmittal (including Guidelines for
Certification of Taxpayer Identification Number).
(a)(3)(i) Form of Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.
(ii) Form of Letter to Clients of Brokers, Dealers, Commercial
Banks, Trust Companies and Other Nominees.
(iii) Form of Letter to Authorized Dealers.
(a)(4) Form of Letter to Shareholders who have requested Offer to
Purchase.
<PAGE>
(b) Not Applicable.
(c)(1) Investment Advisory Agreement between Sierra Prime Income Fund
and Sierra Investment Advisors Corporation, dated as of
February 14, 1996.
(c)(2) Investment Sub-Advisory Agreement among the Sierra Prime
Income Fund, Sierra Investment Advisors Corporation and Van
Kampen American Capital Management Inc., dated as of February
14, 1996.
(c)(3) Administration Agreement between Sierra Prime Income Fund and
Sierra Fund Administration Corporation, dated as of February
14, 1996.
(c)(4) Distribution Agreement between Sierra Prime Income Fund and
Sierra Investment Services Corporation, dated as of February
14, 1996.
(d)-(f) Not applicable.
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
SIERRA PRIME INCOME FUND
Dated: June 3, 1996 /s/ F. Brian Cerini
--------------------
F. Brian Cerini
Chairman and President
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
(a)(1)(i) Advertisement printed in The Wall Street
Journal ................................................
(a)(1)(ii) Offer to Purchase (including Financial
Statements) ............................................
(a)(2) Form of Letter of Transmittal (including Guidelines for
Certification of Tax Identification
Number) ................................................
(a)(3)(i) Form of Letter to Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees ......................
(a)(3)(ii) Form of Letter to Clients of Brokers, Dealers, Commercial
Banks, Trust Companies and Other Nominees ..............
(a)(3)(iii) Form of Letter to Authorized Dealers .....................
(a)(4) Form of Letter to Shareholders who have requested Offer to
Purchase ...............................................
(b) Not Applicable ...........................................
(c)(1) Investment Advisory Agreement between Sierra Prime Income
Fund and Sierra Investment Advisors Corporation, dated
as of February 14, 1996 ...............................
(c)(2) Investment Sub-Advisory Agreement among Sierra Prime
Income Fund, Sierra Investment Advisors Corporation
and Van Kampen American Capital Management Inc., dated
as of February 14, 1996 ................................
(c)(3) Administration Agreement between Sierra Prime Income Fund
and Sierra Fund Administration Corporation, dated as of
February 14, 1996 ......................................
(c)(4) Distribution Agreement between Sierra Prime Income Fund
and Sierra Investment Services Corporation, dated as of
February 14, 1996 ......................................
<PAGE>
EXHIBIT (a)(1)(i)
This announcement is not an offer to purchase or a
solicitation of an offer to sell Class A Common Shares. The
Offer is made only by the Offer to Purchase
dated June 3, 1996 and the related Letter of Transmittal.
The Offer is not being made to, nor will tenders be accepted from or on behalf
of, holders of Class A Common Shares in any jurisdiction in
which making or accepting the Offer would violate
that jurisdiction's laws.
SIERRA PRIME INCOME FUND
NOTICE OF OFFER TO PURCHASE FOR CASH
114,466 OF ITS ISSUED AND OUTSTANDING CLASS A COMMON SHARES
AT NET ASSET VALUE PER SHARE
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THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:30 PM PACIFIC STANDARD
TIME ON JULY 5, 1996, UNLESS THE OFFER IS EXTENDED.
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Sierra Prime Income Fund (the "Fund") is offering to purchase 114,466
of its issued and outstanding Class A common shares of beneficial interest, no
par value ("Class A Common Shares"), at a price equal to their net asset value
("NAV") determined as of 2:00 PM Pacific Standard Time on July 5, 1996, the
Expiration Date, unless extended, upon the terms and conditions set forth in the
Offer to Purchase dated June 3, 1996 and the related Letter of Transmittal
(which together constitute the "Offer"). The NAV on May 21, 1996 was $10.00 per
Class A Common Share. The purpose of the Offer is to provide liquidity to
shareholders since the Fund is unaware of any secondary market which exists for
the Class A Common Shares. The Offer is not conditioned upon the tender of any
minimum number of Class A Common Shares, but is subject to certain Conditions as
set forth in the Offer.
If more than 114,466 Class A Common Shares are duly tendered prior to
the expiration of the Offer, the Fund presently intends to, assuming no changes
in the factors originally considered by the Board of Trustees when it determined
to make the Offer and the other conditions set forth in the Offer, but is under
no obligation to, extend the Offer period, if necessary, and increase the number
of Class A Common Shares that the Fund is offering to purchase to an amount
which it believes will be sufficient to accommodate the excess Class A Common
Shares tendered as well as any Class A Common Shares tendered during the
extended Offer period, or purchase 114,466 Class A Common Shares (or such
greater number of Class A Common Shares sought) on a pro rata basis.
Class A Common Shares tendered pursuant to the Offer may be withdrawn
at any time prior to 12:30 PM Pacific Standard Time on July 5, 1996, and, if not
yet accepted for payment by the Fund, Class A Common Shares may also be
withdrawn after July 5, 1996.
The information required to be disclosed by paragraph (d)(1) of Rule
13e-4 under the Securities Exchange Act of 1934, as amended, is contained in the
Offer to Purchase and is incorporated herein by reference.
The Offer to Purchase and the related Letter of Transmittal contain
important information that should be read carefully before any decision is made
with respect to the Offer.
Questions and requests for assistance, for current NAV quotations or
for copies of the Offer to Purchase, Letter of Transmittal and any other tender
offer document, may be directed to Sierra Shareholder Services at the address
and telephone number below. Copies will be furnished promptly at no expense to
you. Shareholders who do not own Class A Common Shares directly may tender their
Class A Common Shares through their broker, dealer or nominee.
SIERRA SHAREHOLDER SERVICES
9301 CORBIN AVENUE, NORTHRIDGE, CA 91324
800-222-5852
6:00 AM to 6:00 PM Pacific Standard Time, Monday - Friday
6:00 AM to 3:00 PM Pacific Standard Time, Saturday
June 3, 1996
<PAGE>
EXHIBIT (a)(1)(ii)
SIERRA PRIME INCOME FUND
OFFER TO PURCHASE FOR CASH 114,466
OF ITS ISSUED AND OUTSTANDING CLASS A COMMON SHARES
AT NET ASSET VALUE PER SHARE
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THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:30 PM PACIFIC STANDARD
TIME ON JULY 5, 1996, UNLESS THE OFFER IS EXTENDED. TO ENSURE PROCESSING OF YOUR
REQUEST, A LETTER OF TRANSMITTAL OR A MANUALLY SIGNED FACSIMILE OF IT (TOGETHER
WITH ANY CERTIFICATES FOR CLASS A COMMON SHARES AND ALL OTHER REQUIRED
DOCUMENTS) MUST BE RECEIVED BY THE TRANSFER AGENT (AS DEFINED BELOW) ON OR
BEFORE JULY 5, 1996.
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To the Holders of Class A Common Shares of
Sierra Prime Income Fund:
Sierra Prime Income Fund, a non-diversified, closed-end management
investment company organized as a Massachusetts business trust (the "Fund"), is
offering to purchase up to 114,466 of its Class A Common Shares of beneficial
interest, with no par value ("Class A Common Shares"), for cash at a price (the
"Purchase Price") equal to their net asset value ("NAV") determined as of 2:00
PM Pacific Standard Time on the Expiration Date (as defined herein), upon the
terms and conditions set forth in this Offer to Purchase and the related Letter
of Transmittal (which together constitute the "Offer"). The Offer is scheduled
to terminate as of 12:30 PM Pacific Standard Time on July 5, 1996, unless
extended. The Class A Common Shares are not currently traded on an established
trading market. The NAV on May 21, 1996 was $10.00 per Class A Common Share. You
can obtain current NAV quotations from Sierra Shareholder Services by calling
(800) 222-5852. See Section 9.
If more than 114,466 Class A Common Shares are duly tendered prior to the
expiration of the Offer, the Fund presently intends to, subject to the condition
that there have been no changes in the factors originally considered by the
Board of Trustees when it determined to make the Offer and the other conditions
set forth in Section 6, but is under no obligation to, extend the Offer period,
if necessary, and increase the number of Class A Common Shares that the Fund is
offering to purchase to an amount which it believes will be sufficient to
accommodate the excess Class A Common Shares tendered as well as any Class A
Common Shares tendered during the extended Offer period or purchase 114,466
Class A Common Shares (or such greater number of Class A Common Shares sought)
on a pro rata basis.
THIS OFFER IS BEING MADE TO ALL SHAREHOLDERS OF THE FUND
AND IS NOT CONDITIONED UPON ANY MINIMUM NUMBER
OF CLASS A COMMON SHARES BEING TENDERED.
THIS OFFER IS SUBJECT TO CERTAIN CONDITIONS. SEE SECTION 6.
<PAGE>
IMPORTANT
If you desire to tender all or any portion of your Class A Common Shares,
you should either (1) complete and sign the Letter of Transmittal and mail or
deliver it along with any other required documents to Sierra Fund Administration
Corporation (the "Transfer Agent") or (2) request your broker, dealer,
commercial bank, trust company or other nominee to effect the transaction for
you. If your Class A Common Shares are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee, you must contact such
broker, dealer, commercial bank, trust company or other nominee if you desire to
tender your Class A Common Shares.
NEITHER THE FUND NOR ITS BOARD OF TRUSTEES MAKES ANY RECOMMENDATION TO ANY
SHAREHOLDER AS WHETHER TO TENDER OR REFRAIN FROM TENDERING ANY OR ALL OF SUCH
SHAREHOLDER'S CLASS A COMMON SHARES. SHAREHOLDERS ARE URGED TO EVALUATE
CAREFULLY ALL INFORMATION IN THE OFFER, CONSULT THEIR OWN INVESTMENT AND TAX
ADVISERS AND MAKE THEIR OWN DECISIONS WHETHER TO TENDER CLASS A COMMON SHARES
AND, IF SO, HOW MANY CLASS A COMMON SHARES TO TENDER.
NO PERSON HAS BEEN AUTHORIZED TO MAKE ANY RECOMMENDATION ON BEHALF OF THE
FUND AS TO WHETHER SHAREHOLDERS SHOULD TENDER CLASS A COMMON SHARES PURSUANT TO
THE OFFER. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THE OFFER OTHER THAN THOSE CONTAINED HEREIN
OR IN THE LETTER OF TRANSMITTAL, IF GIVEN OR MADE, SUCH RECOMMENDATION AND SUCH
INFORMATION AND REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE FUND.
Questions and requests for assistance may be directed to Sierra Shareholder
Services at the address and telephone number set forth below. Requests for
additional copies of this Offer to Purchase and the Letter of Transmittal should
be directed to Sierra Fund Administration Corporation.
June 3, 1996 SIERRA PRIME INCOME FUND
Sierra Shareholder Services SIERRA FUND ADMINISTRATION CORPORATION:
9301 Corbin Avenue, Suite 333
Northridge, CA 91324 By Mail Hand Delivery or Courier:
(800) 222-5852 9301 Corbin Avenue, Suite 333
Northridge, CA 91324
Attn: Sierra Prime Income Fund
<PAGE>
TABLE OF CONTENTS
SECTIONS PAGE
- -------- ----
1. Price; Number of Class A Common Shares.................................. 4
2. Procedure for Tendering Class A Common Shares........................... 4
3. Early Withdrawal Charge................................................. 6
4. Withdrawal Rights....................................................... 7
5. Payment for Shares...................................................... 7
6. Certain Conditions of the Offer......................................... 8
7. Purpose of the Offer.................................................... 8
8. Plans or Proposals of the Fund.......................................... 9
9. Price Range of Class A Common Shares; Dividends......................... 9
10. Interest of Trustees and Executive Officers; Transactions and
Arrangements Concerning the Class A Common Shares.................... 9
11. Certain Effects of the Offer........................................... 10
12. Source and Amount of Funds............................................. 10
13. Certain Information about the Fund..................................... 10
14. Additional Information................................................. 11
15. Certain Federal Income Tax Consequences................................ 11
16. Extension of Tender Period; Termination; Amendments.................... 12
17. Miscellaneous.......................................................... 12
EXHIBIT A: UNAUDITED FINANCIAL STATEMENTS FOR THE PERIOD ENDED MARCH 31, 1996
<PAGE>
1. PRICE; NUMBER OF CLASS A COMMON SHARES. The Fund will, upon the terms
and subject to the conditions of the Offer, accept for payment (and thereby
purchase) 114,466 or such lesser number of its issued and outstanding Class A
Common Shares which are properly tendered (and not withdrawn in accordance with
Section 4 prior to 12:30 PM Pacific Standard Time on July 5, 1996 (such time and
date being hereinafter called the "Initial Expiration Date"). The Fund reserves
the right to extend the Offer. See Section 16. The later of the Initial
Expiration Date or the latest time and date to which the Offer is extended is
hereinafter called the "Expiration Date." The Purchase Price of the Class A
Common Shares will be their NAV determined as of 2:00 PM Pacific Standard Time
on the Expiration Date. The NAV on May 21, 1996 was $10.00 per Class A Common
Share. You can obtain current NAV quotations from Sierra Shareholder Services by
calling (800) 222-5852 between the hours of 6:00 AM and 6:00 PM Pacific Standard
Time, Monday through Friday and 6:00 AM and 6:00 PM Pacific Standard Time on
Saturday, except holidays. Shareholders tendering Class A Common Shares shall be
entitled to receive all dividends declared on or prior to settlement following
the Expiration Date, but not yet paid, on Class A Common Shares tendered
pursuant to the Offer. See Section 9. The Fund will not pay interest on the
Purchase Price under any circumstances. An Early Withdrawal Charge may be
imposed on certain Class A Common Shares accepted for payment that have been
held for less than two years. See Section 3.
The Offer is being made to all shareholders of the Fund and is not
conditioned upon any minimum number of Class A Common Shares being tendered. If
the number of Class A Common Shares properly tendered prior to the Expiration
Date and not withdrawn is less than or equal to 114,466 Class A Common Shares
(or such greater number of Class A Common Shares as the Fund may elect to
purchase pursuant to the Offer), the Fund will upon the terms and subject to the
conditions of the Offer, purchase at NAV all Class A Common Shares so tendered.
If more than 114,466 Class A Common Shares are duly tendered prior to the
expiration of the Offer and not withdrawn, the Fund presently intends to,
subject to the condition that there have been no changes in the factors
originally considered by the Board of Trustees when it determined to make the
Offer and the other conditions set forth in Section 6, but is not obligated to,
extend the Offer period, if necessary, and increase the number of Class A Common
Shares that the Fund is offering to purchase to an amount which it believes will
be sufficient to accommodate the excess Class A Common Shares tendered as well
as any Class A Common Shares tendered during the extended Offer period or
purchase 114,466 Class A Common Shares (or such greater number of Class A Common
Shares sought) on a pro rata basis.
On May 21, 1996, there were approximately 1,144,667.775 Class A Common
Shares issued and outstanding and there were approximately 395 holders of record
of Class A Common Shares. The Fund has been advised that no trustees, officers
or affiliates of the Fund intend to tender any Class A Common Shares pursuant to
the Offer.
The Fund reserves the right, in its sole discretion, at any time or from
time to time, to extend the period of time during which the Offer is open by
giving oral or written notice of such extension to the Transfer Agent and making
a public announcement thereof. See Section 16. There can be no assurance,
however, that the Fund will exercise its right to extend the Offer. If the Fund
decides, in its sole discretion, to increase (except for any increase not in
excess of 2% of the outstanding Class A Common Shares) or decrease the number of
Class A Common Shares being sought and, at the time that notice of such increase
or decrease is first published, sent or given to holders of Class A Common
Shares in the manner specified below, the Offer is scheduled to expire at any
time earlier than the tenth business day from the date that such notice is first
so published, sent or given, the Offer will be extended at least until the end
of such ten business day period.
2. PROCEDURE FOR TENDERING CLASS A COMMON SHARES. Proper Tender of Class A
Common Shares. Except as otherwise set forth under the heading "Procedures for
Authorized Dealers" below, for Class A Common Shares to be properly tendered
pursuant to the Offer, a properly completed and duly executed Letter of
Transmittal (or manually signed facsimile thereof) with any required signature
guarantees and any other documents required by the Letter of Transmittal, must
be received on or before the Expiration Date by the Transfer Agent at its
address set forth on page 2 of this Offer to Purchase.
It is a violation of Section 14(e) of the Securities and Exchange Act of
1934 (the "Exchange Act"), and Rule 14e-4 promulgated thereunder, for a person
to tender Class A Common Shares in a partial tender offer for such person's own
account unless at the time of tender and until such time as the securities are
accepted for payment the person so tendering has a net long position equal to or
greater than the amount tendered in (i) the Class A Common Shares and will
deliver or cause to be delivered such shares for purposes of tender to the Fund
prior to or on the Expiration Date, or (ii) an equivalent security and, upon the
acceptance of his or her tender will acquire the Class A Common Shares by
conversion, exchange, or exercise of such equivalent security to the extent
required by the terms of the Offer, and will deliver or cause to be delivered
the Class A Common Shares so acquired for the purpose of tender to the Fund
prior to or on the Expiration Date.
Section 14(e) and Rule 14e-4 provide a similar restriction applicable to
the tender or guarantee of a tender on behalf of another person.
The acceptance of Class A Common Shares by the Fund for payment will
constitute a binding agreement between the tendering shareholder and the Fund
upon the terms and subject to the conditions of the Offer, including the
tendering shareholder's representation that (i) such shareholder has a net long
position in the Class A Common Shares being tendered within the meaning of Rule
14e-4 promulgated under the Exchange Act and (ii) the tender of such Class A
Common Shares complies with Rule 14e-4.
Signature Guarantees and Method of Delivery. Signatures on the Letter of
Transmittal are not required to be guaranteed unless (1) the proceeds for the
tendered Class A Common Shares will amount to more than $50,000, (2) the Letter
of Transmittal is signed by someone other than the registered holder of the
Class A Common Shares tendered therewith, or (3) payment for tendered Class A
Common Shares is to be sent to a payee other than the registered owner of such
Class A Common Shares and/or to an address other than the registered address of
the registered owner of the Class A Common Shares. In those instances, all
signatures on the Letter of Transmittal must be guaranteed by a member firm of a
national securities exchange or a commercial bank or trust company having an
office, branch or agency in the United States (an "Eligible Institution"). If
Class A Common Shares are registered in the name of a person or persons other
than the signer of the Letter of Transmittal or (a) if payment is to be made to
or (b) unpurchased Class A Common Shares are to be registered in the name of any
person other than the registered owner, then the Letter of Transmittal must be
endorsed or accompanied by appropriate authorizations, in either case signed
exactly is such name or names as appear on the registration of the Class A
Common Shares with the signatures on the authorizations guaranteed by an
Eligible Institution. See Instructions 1 and 5 of the Letter of Transmittal.
Payment for Class A Common Shares tendered and accepted for payment
pursuant to the Offer will be made only after receipt by the Transfer Agent on
or before the Expiration Date of a properly completed and duly executed Letter
of Transmittal (or manually signed facsimile thereof) and any other documents
required by the Letter of Transmittal.
THE METHOD OF DELIVERY OF ANY DOCUMENTS IS AT THE ELECTION AND RISK OF THE
PARTY TENDERING CLASS A COMMON SHARES. IF DOCUMENTS ARE SENT BY MAIL, IT IS
RECOMMENDED THAT THEY BE SENT BY REGISTERED MAIL, PROPERLY INSURED, WITH RETURN
RECEIPT REQUESTED.
Procedures for Authorized Dealers. If you are a Authorized Dealer, in order
for you to tender any Class A Common Shares pursuant to the Offer, you may place
a confirmed wire order with the Transfer Agent. All confirmed wire orders used
to tender Class A Common Shares pursuant to this Offer must be placed on the
Expiration Date only (wire orders placed on any other date will not be accepted
by the Fund). Class A Common Shares tendered by a wire order are deemed to be
tendered when the Transfer Agent receives the order but subject to the condition
subsequent that the settlement instructions, including (with respect to tendered
Class A Common Shares for which the Authorized Dealer is not the registered
owner) a properly completed and duly executed Letter of Transmittal (or manually
signed facsimile thereof), any other documents required by the Letter of
Transmittal, are received by the Transfer Agent.
Determinations of Validity. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance of tenders will be
determined by the Fund, in its sole discretion, whose determination shall be
final and binding. The Fund reserves the absolute right to reject any or all
tenders determined by it not to be in appropriate form or the acceptance of or
payment for which may, in the opinion of the Fund's counsel, be unlawful. The
Fund also reserves the absolute right to waive any of the conditions of the
Offer or any defect in any tender with respect to any particular Common Share(s)
or any particular shareholder, and the Fund's interpretations of the terms and
conditions of the Offer will be final and binding. Unless waived, any defects or
irregularities in connection with tenders must be cured within such times as the
Fund shall determine. Tendered Class A Common Shares will not be accepted for
payment unless the defects or irregularities have been cured within such time or
waived. Neither the Fund, the Transfer Agent nor any other person shall be
obligated to give notice of any defects or irregularities in tenders, nor shall
any of them incur any liability for failure to give such notice.
Federal Income Tax Withholding. To prevent backup federal income tax
withholding equal to 31% of the gross payments made pursuant to the Offer, each
shareholder who has not previously submitted a Form W-9 to the Fund or does not
otherwise establish an exemption from such withholding must notify the Transfer
Agent of such shareholder's correct taxpayer identification number (or certify
that such taxpayer is awaiting a taxpayer identification number) and provide
certain other information by completing the Form W-9 enclosed with the Letter of
Transmittal. Foreign shareholders who are individuals and who have not
previously submitted a Form W-9 to the Fund must do so in order to avoid backup
withholding.
The Transfer Agent will withhold 30% of the gross payments payable to a
foreign shareholder unless the Transfer Agent determines that a reduced rate of
withholding or an exemption from withholding is applicable. (Exemption from
backup withholding does not exempt a foreign shareholder from the 30%
withholding). For this purpose, a foreign shareholder, in general is a
shareholder that is not (i) a citizen or resident of the United States, (ii) a
corporation, partnership or other entity created or organized in or under the
laws of the United States or any political subdivision thereof, or (iii) an
estate or trust the income of which is subject to United States federal income
taxation regardless of the source of such income. The Transfer Agent will
determine a shareholder's status as a foreign shareholder and eligibility for a
reduced rate of, or an exemption from, withholding by reference to the
shareholder's address and to any outstanding statements concerning eligibility
for a reduced rate of, or exemption from, withholding unless facts and
circumstances indicate that reliance is not warranted. A foreign shareholder who
has not previously submitted the appropriate statements with respect to a
reduced rate of, or exemption from, withholding for which such shareholder may
be eligible should consider doing so in order to avoid over-withholding. A
foreign shareholder may be eligible to obtain a refund of tax withheld if such
shareholder meets one of the three tests for capital gain or loss treatment
described in Section 15 or is otherwise able to establish that no tax or a
reduced amount of tax was due.
For a discussion of certain other federal income tax consequences to
tendering shareholders, see Section 15.
3. EARLY WITHDRAWAL CHARGE. The Transfer Agent may impose an early
withdrawal charge (the "Early Withdrawal Charge" or "EWC") on certain Class A
Common Shares accepted for payment which have been held less than two years. An
EWC of 1.0% or 0.5% may be imposed on certain Class A Common Shares tendered and
accepted for payment within one or two years of purchase, respectively, for
those Class A Common Shares (i) purchased at NAV without a sales charge at time
of purchase (purchases of $1 million or more), (ii) acquired through an exchange
for Class A Shares of a Non-Money Fund of the Sierra Trust Funds purchased at
NAV without a sales charge at time of purchase (purchases of $1 million or
more), (iii) purchased through an employee benefit trust created pursuant to a
plan qualified under Section 401(k) of the Code ("401(k) Plan"), or (iv)
purchased through a retirement plan qualified under Section 403(b) of the Code
("403(b) Plan"). The Class A Common Shares EWC will not be imposed on Class A
Common Shares purchased by (i) a qualified retirement plan that, at the time of
purchase, had not fewer than 500 eligible employees, (ii) a qualified retirement
plan that, at the time of purchase, had assets exceeding $100 million, or (iii)
an institution investing $5 million or more in the aggregate in the portfolios
of the Fund or Sierra Trust Funds. The EWCs for Class A Common Shares are
calculated on the lower of the shares' cost or current net asset value, and in
determining whether the EWC is payable, the Fund will first redeem shares not
subject to any EWC.
Purchases of $1 million or more and certain other purchases are not subject
to the sales charge at the time of purchase, but may be subject to a 1.0% early
withdrawal charge on repurchases or tenders within one year of purchase or a
0.5% early withdrawal charge on repurchases or tenders during the second year
after purchase. No sales charge at time of purchase and no early withdrawal
charge will be assessed on the reinvestment of dividends or distributions on
Class A Common Shares or on purchases of Class A Common Shares under the 180-day
reinvestment privilege. The Early Withdrawal Charge may be imposed on the number
of Class A Common Shares (subject to the EWC as noted above) accepted for
payment from a record holder of Class A Common Shares the value of which exceeds
the aggregate value at the time the tendered Class A Common Shares are accepted
for payment of (a) all Class A Common Shares owned by such holder that were
purchased without being subject to the EWC, (b) the Class A Common Shares owned
by such holder that were acquired through reinvestment of distributions, and (c)
the increase, if any, of value of all other Class A Common Shares owned by such
holder over the purchase price of such Class A Common Shares. The Early
Withdrawal Charge will be paid to SISC on behalf of the holder of the Class A
Common Shares. In determining whether an Early Withdrawal Charge is payable,
Class A Common Shares accepted for payment pursuant to the Offer shall be deemed
to be those Class A Common Shares purchased earliest by the Shareholder.
The following example will illustrate the operation of the Early Withdrawal
Charge. Assume that an investor purchases $1,000,000 worth of the Fund's Class A
Common Shares for cash and that 9 months later the value of the account has
grown through the reinvestment of dividends and capital appreciation to
$1,050,000. The investor then may submit for repurchase pursuant to a tender
offer up to $50,000 worth of Class A Common Shares without incurring an Early
Withdrawal Charge. If the investor should submit for repurchase pursuant to a
tender offer $75,000 worth of Class A Common Shares, an Early Withdrawal Charge
would be imposed on $25,000 worth of the Class A Common Shares submitted. The
charge would be imposed at the rate of 1% because it is in the first year after
the purchase was made and the charge would be $250.
4. WITHDRAWAL RIGHTS. Except as otherwise provided in this Section 4,
tenders of Class A Common Shares made pursuant to the Offer will be irrevocable.
You may withdraw Class A Common Shares tendered at any time prior to the
Expiration Date and, if the Class A Common Shares have not yet been accepted for
payment by the Fund, at any time after 12:30 PM Pacific Standard Time on July 5,
1996.
To be effective, a written, telegraphic, telex or facsimile transmission
notice of withdrawal must be timely received by the Transfer Agent at the
address set forth on page 2 of this Offer to Purchase. Any notice of withdrawal
must specify the name of the person having tendered the Class A Common Shares to
be withdrawn and the number of Class A Common Shares to be withdrawn.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by the Fund in its sole discretion,
whose determination shall be final and binding. None of the Fund, SISC, the
Transfer Agent or any other person is or will be obligated to give any notice of
any defects or irregularities in any notice of withdrawal, and none of them will
incur any liability for failure to give any such notice. Class A Common Shares
properly withdrawn shall not thereafter be deemed to be tendered for purposes of
the Offer. However, withdrawn Class A Common Shares may be retendered by
following the procedures described in Section 2 prior to the Expiration Date.
5. PAYMENT FOR SHARES. For purposes of the Offer, the Fund will be deemed
to have accepted for payment (and thereby purchased) Class A Common Shares which
are tendered and not withdrawn when, as and if it gives oral or written notice
to the Transfer Agent of its acceptance of such Class A Common Shares for
payment pursuant to the Offer. Upon the terms and subject to the conditions of
the Offer, the Fund will accept for payment (and thereby purchase) Class A
Common Shares properly tendered promptly after the Expiration Date.
Payment for Class A Common Shares purchased pursuant to the Offer will be
made by depositing the aggregate purchase price therefor with the Transfer
Agent, which will act as agent for tendering shareholders for the purpose of
receiving payment from the Fund and transmitting payment to the tendering
shareholders. In all cases, payment for Class A Common Shares accepted for
payment pursuant to the Offer will be made only after timely receipt by the
Transfer Agent, as required pursuant to the Offer, of a properly, completed and
duly executed Letter of Transmittal (or manually signed facsimile thereof), and
any other required documents.
The Fund will pay all transfer taxes, if any, payable on the transfer to it
of Class A Common Shares purchased pursuant to the Offer. If, however, payment
of the purchase price is to be made to, or (in the circumstances permitted by
the Offer) of unpurchased Class A Common Shares are to be registered in the name
of any person other than the registered holder the amount of any transfer taxes
(whether imposed on the registered holder or such other person) payable on
account of the transfer to such person will be deducted from the Purchase Price
unless satisfactory evidence of the payment of such taxes, or exemption
therefrom, is submitted. Shareholders tendering Class A Common Shares shall be
entitled to receive all dividends declared on or prior to settlement following
the Expiration Date, but not yet paid, on Class A Common Shares tendered
pursuant to the Offer. The Fund will not pay any interest on the Purchase Price
under any circumstances. An Early Withdrawal Charge may be imposed on certain
Class A Common Shares accepted for payment that have been held for less than two
years. See Section 3. In addition, if certain events occur, the Fund may not be
obligated to purchase Class A Common Shares pursuant to the Offer. See Section
6.
ANY TENDERING SHAREHOLDER OR OTHER PAYEE WHO HAS NOT PREVIOUSLY SUBMITTED A
COMPLETED AND SIGNED SUBSTITUTE FORM W-9 AND WHO FAILS TO COMPLETE FULLY AND
SIGN THE SUBSTITUTE FORM W-9 ENCLOSED WITH THE LETTER OF TRANSMITTAL MAY BE
SUBJECT TO REQUIRED FEDERAL INCOME TAX WITHHOLDING OF 31% OF THE GROSS PROCEEDS
PAID TO SUCH SHAREHOLDER OR OTHER PAYEE PURSUANT TO THE OFFER. SEE SECTION 2.
6. CERTAIN CONDITIONS OF THE OFFER. Notwithstanding any other provision of
the Offer, the Fund shall not be required to accept for payment, purchase or pay
for any Class A Common Shares tendered, and may terminate or amend the Offer or
may postpone the acceptance for payment of, the purchase of and payment for
Class A Common Shares tendered, if at any time at or before the time of purchase
of any such Class A Common Shares, any of the following events shall have
occurred (or shall have been determined by the Fund to have occurred) which, in
the Fund's sole judgment in any such case and regardless of the circumstances
(including any action or omission to act by the Fund), makes it inadvisable to
proceed with the Offer or with such purchase or payment: (1) in the sole and
exclusive judgment of the Trustees, there is not sufficient liquidity of the
assets of the Fund; (2) such transactions, if consummated, would (a) impair the
Fund's status as a regulated investment company under the Internal Revenue Code
(which would make the Fund a taxable entity, causing the Fund's taxable income
to be taxed at the Fund level) or (b) result in a failure to comply with
applicable asset coverage requirements; or (3) there is, in the Board of
Trustees' judgment, any (a) material legal action or proceeding instituted or
threatened challenging such transactions or otherwise materially adversely
affecting the Fund, (b) suspension of or limitation on prices for trading
securities generally on any United States national securities exchange or in the
over-the-counter market, (c) declaration of a banking moratorium by federal or
state authorities or any suspension of payment by banks in the United States,
(d) limitation affecting the Fund or the issuers of its portfolio securities
imposed by federal or state authorities on the extension of credit by lending
institutions, (e) commencement of war, armed hostilities or other international
or national calamity directly or indirectly involving the United States or (f)
other event or condition which would have a material adverse effect on the Fund
or the holders of its Class A Common Shares if the tendered Class A Common
Shares are purchased.
The foregoing conditions are for the Fund's sole benefit and may be
asserted by the Fund regardless of the circumstances giving rise to any such
condition (including any action or inaction by the Fund), and any such condition
may be waived by the Fund in whole or in part, at any time and from time to time
in its sole discretion. The Fund's failure at any time to exercise any of the
foregoing, rights shall not be deemed a waiver of any such right; the waiver of
any such right with respect to particular facts and circumstances shall not be
deemed a waiver with respect to any other facts or circumstances; and each such
right shall be deemed an ongoing right which may be asserted at any time and
from time to time. Any determination by the Fund concerning the events described
in this Section 6 shall be final and shall be binding on all parties.
If the Fund determines to terminate or amend the Offer or to postpone the
acceptance for payment of or payment for Class A Common Shares tendered, it
will, to the extent necessary, extend the period of time during which the Offer
is open as provided in Section 16. Moreover, in the event any of the foregoing
conditions arc modified or waived in whole or in part at any time, the Fund will
promptly make a public announcement of such waiver and may, depending on the
materiality of the modification. or waiver, extend the Offer period as provided
in Section 16.
7. PURPOSE OF THE OFFER. The Fund currently does not believe that an active
secondary market for its Class A Common Shares exists or is likely to develop.
In recognition of the possibility that a secondary market may not develop for
the Class A Common Shares of the Fund, or, if such a market were to develop, the
Class A Common Shares might trade at a discount, the Trustees have determined
that it would be in the best interest of its shareholders for the Fund to take
action to attempt to provide liquidity to shareholders or to reduce or eliminate
any future market value discount from NAV that might otherwise exist,
respectively. To that end, the Trustees presently intend each quarter to
consider making a tender offer to purchase Class A Common Shares at their NAV.
The purpose of this Offer is to attempt to provide liquidity to the holders of
Class A Common Shares. There can be no assurance that this Offer will provide
sufficient liquidity to all holders of Class A Common Shares that desire to sell
their Class A Common Shares or that the Fund will make any such tender offer in
the future.
NEITHER THE FUND NOR ITS BOARD OF TRUSTEES MAKES ANY RECOMMENDATION TO ANY
SHAREHOLDER AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING ANY OR ALL OF SUCH
SHAREHOLDER'S CLASS A COMMON SHARES AND HAS NOT AUTHORIZED ANY PERSON TO MAKE
ANY SUCH RECOMMENDATION. SHAREHOLDERS ARE URGED TO EVALUATE CAREFULLY ALL
INFORMATION IN THE OFFER, CONSULT THEIR OWN INVESTMENT AND TAX ADVISORS AND MAKE
THEIR OWN DECISIONS WHETHER TO TENDER CLASS A COMMON SHARES AND, IF SO, HOW MANY
CLASS A COMMON SHARES TO TENDER.
8. PLANS OR PROPOSALS OF THE FUND. The Fund has no present plan or
proposals which relate to or would result in any extraordinary transaction such
as a merger, reorganization or liquidation involving the Fund; a sale or
transfer of a material amount of assets of the Fund other than in its ordinary
course of business; any material changes in the Fund's present capitalization
(except as resulting from the Offer or otherwise set forth herein); or any other
material changes in the Fund's structure or business.
9. PRICE RANGE OF CLASS A COMMON SHARES; DIVIDENDS. The Fund's NAV per
Class A Common Share from February 14, 1996 through May 21, 1996 ranged from a
high of $10.00 to a low of $10.00. On May 21, 1996, the NAV was $10.00 per
Common Share. You can obtain current NAV quotations from Sierra Shareholder
Services by calling (800) 222-5852 between the hours of 6:00 AM and 6:00 PM
Pacific Standard Time, Monday through Friday and 6:00 AM to 6:00 PM Pacific
Standard Time on Saturday, except holidays. The Fund offers and sells its Class
A Common Shares to the public on a continuous basis through SISC as principal
underwriter. The Fund is not aware of any secondary market trading for the Class
A Common Shares. Dividends on the Class A Common Shares are declared daily and
paid monthly.
Since the commencement of the Trust's operations in February 1996 prior to
the Offer, the Fund paid the following dividends per Class A Common Share held
for the entire respective dividend period:
AMOUNT OF DIVIDEND
DIVIDEND PAYMENT PER CLASS A
DATE COMMON SHARE
- ---------------- ------------------
February 29, 1996 $0.0115
March 29, 1996 $0.0475
April 30, 1996 $0.0528
Shareholders tendering Class A Common Shares shall be entitled to receive all
dividends declared on or prior to settlement following the Expiration Date, but
not yet paid, on Class A Common Shares tendered pursuant to the Offer.
10. INTEREST OF TRUSTEES AND EXECUTIVE OFFICERS; TRANSACTIONS AND
ARRANGEMENTS CONCERNING THE CLASS A COMMON SHARES. Except as set forth in this
Section 10, as of May 21, 1996, the trustees and executive officers of the Fund
as a group beneficially owned no Class A Common Shares. The Fund has been
informed that no trustee or executive officer of the Fund intends to tender any
Class A Common Shares pursuant to the Offer.
Except as set forth in this Section 10, based upon the Fund's records and
upon information provided to the Fund by its trustees, executive officers and
affiliates (as such term is used in the Securities Exchange Act of 1934),
neither the Fund nor, to the best of the Fund's knowledge, any of the trustees
or executive officers of the Fund, nor any associates of any of the foregoing,
has effected any transactions in the Class A Common Shares during the forty
business day period prior to the date hereof.
Except as set forth in this Offer to Purchase, neither the Fund nor, to the
best of the Fund's knowledge, any of its affiliates, trustees or executive
officers, is a party to any contract, arrangement, understanding or relationship
with any other person relating, directly or indirectly, to the Offer with
respect to any securities of the Fund (including, but not limited to, any
contract, arrangement, understanding or relationship concerning the transfer or
the voting of any such securities, joint ventures, loan or option arrangements,
puts or calls, guaranties of loans, guaranties against loss or the giving or
withholding of proxies, consents or authorizations).
The Fund currently is a party to an Investment Advisory Agreement with
Sierra Investment Advisors Corporation ("Sierra Advisors" or "Adviser") under
which the Fund accrues daily and pays monthly to Sierra Advisors an investment
management fee equal to 0.95% of the average daily net assets (i.e. the daily
value of the total assets of the Fund, minus the sum of the accrued liabilities
of the Fund other than the aggregate amount of any borrowings undertaken by the
Fund). The Fund also is a party to an Administration Agreement with Sierra Fund
Administration Corporation ("Sierra Administration") and a Distribution
Agreement with Sierra Investment Services Corporation ("SISC"). Under the
Administration Agreement, the Fund pays Sierra Administration a monthly fee at
the annualized rate of 0.35% of the Fund's average daily net assets. Under the
Distribution Agreement, the Fund offers and sells its Class A Common Shares to
the public on a continuous basis through SISC, as principal underwriter. Sierra
Administration pursuant to a Sub- Administration Agreement with State Street
Bank & Trust Company ("State Street") has delegated certain administrative and
custodial services to State Street. The Fund is also a party to a Transfer
Agency and Registrar Agreement with Sierra Administration who has delegated
certain transfer agency responsibilities to First Data Investor Services Group,
Inc. ("First Data").
11. CERTAIN EFFECTS OF THE OFFER. The purchase of Class A Common Shares
pursuant to the Offer will have the effect of increasing the proportionate
interest in the Fund of shareholders who do not tender their Class A Common
Shares. If you retain your Class A Common Shares you will be subject to any
increased risks that may result from the reduction in the Fund's aggregate
assets resulting from payment for the tendered Class A Common Shares (e.g.,
greater volatility due to decreased diversification and higher expenses).
However, the Fund believes that since the Fund is engaged in a continuous
offering of the Class A Common Shares, those risks would be reduced to the
extent new Class A Common Shares of the Fund are sold. All Class A Common Shares
purchased by the Fund pursuant to the Offer will be held in treasury pending
disposition.
12. SOURCE AND AMOUNT OF FUNDS. The total cost to the Fund of purchasing
the full 114,466 Class A Common Shares pursuant to the Offer would be
approximately $1,144,660 (assuming an NAV of $10.00 per Common Share on the
Expiration Date). The Fund anticipates that the Purchase Price for any Class A
Common Shares acquired pursuant to the Offer will first be derived from cash on
hand, such as proceeds from sales of new Class A Common Shares of the Fund and
specified pay-downs from the participation interests in senior corporate loans
which it has acquired, and then from the proceeds from the sale of cash
equivalents held by the Fund. Although the Fund is authorized to borrow money to
finance the repurchase of Class A Common Shares, the Fund believes that it has
sufficient liquidity to purchase the Class A Common Shares tendered pursuant to
the Offer without utilizing such borrowing. However, if, in the judgment of the
Trustees, there is not sufficient liquidity of the assets of the Fund to pay for
tendered Class A Common Shares, the Fund may terminate the Offer. See Section 6.
13. CERTAIN INFORMATION ABOUT THE FUND. The Fund was organized as a
Massachusetts business trust on October 4, 1995 and is a non-diversified,
closed-end management investment company under the Investment Company Act of
1940. The Fund seeks as high a level of current income as is consistent with the
preservation of capital by investing in a professionally managed portfolio of
interests in floating or variable rate senior loans ("Senior Loans") to United
States corporations, partnerships and other entities ("Borrowers"). Although the
Fund's NAV will vary, the Fund's policy of acquiring interests in floating or
variable rate Senior Loans is expected to minimize fluctuations in the Fund's
NAV as a result of changes in interest rates. Senior Loans in which the Fund
will invest generally pay interest at rates which are periodically redetermined
by reference to a base lending rate plus a premium. These base lending rates are
generally the prime rate offered by one or more major United States banks
("Prime Rate"), the London Inter-Bank Offered Rate ("LIBOR"), the certificate of
deposit rate or other base lending rates used by commercial lenders. The Fund
seeks to achieve over time a high effective yield. The Senior Loans in the
Fund's portfolio at all times have a dollar-weighted average time until next
interest rate redetermination of 90 days or less. As a result, as short-term
interest rates increase, the interest payable to the Fund from its investments
in Senior Loans should increase, and as short-term interest rates decrease, the
interest payable to the Fund on its investments in Senior Loans should decrease.
The amount of time required to pass before the Fund realizes the effects of
changing short-term market interest rates on its portfolio varies with the
dollar-weighted average time until next interest rate redetermination on
securities in the Fund's portfolio.
The Fund has registered as a "non-diversified" investment company so that,
subject to its investment restrictions, it is able to invest more than 5% of the
value of its assets in the obligations of any single issuer, including Senior
Loans of a single Borrower or participations in Senior Loans purchased from a
single lender. To the extent the Fund invests a relatively high percentage of
its assets in obligations of a limited number of issuers, the Fund will be more
susceptible than a more widely diversified investment company to any single
corporate, economic, political or regulatory occurrence.
SISC compensates Authorized Dealers participating in the continuous
offering of the Fund's Class A Common Shares pursuant to the following schedule:
Dealers' Reallowance
Amount of Transactions as a % of Offering Price
---------------------- ------------------------
Less than $50,000 4.00%
$50,000 but less than $100,000 3.50%
$100,000 but less than $250,000 3.00%
$250,000 but less than $500,000 2.50%
$500,000 but less than $1,000,000 1.75%
$1,000,000 and over 0%
SISC may pay Authorized Dealers a fee of up to 1.00% of net asset value for
Class A Common Share transactions over $1,000,000. The dealer reallowance may be
changed by SISC from time to time, and upon notice, SISC may reallow up to the
full applicable sales charge to certain Authorized Dealers. In addition, if
Class A Common Shares of the Fund are sold by an Authorized Dealer, Sierra
Advisors may in its discretion pay up to a maximum of 0.25% of the value of such
Common Shares to such Authorized Dealers. Such compensation is or will be paid
by Sierra Advisors out of its own assets, and not out of the assets of the Fund.
The compensation paid to such Authorized Dealers and to SISC, including the
compensation paid at the time of purchase, the quarterly payments, any
additional incentives paid from time to time and the EWC, if any, will not in
the aggregate exceed the applicable limit (currently 8%) imposed by the National
Association of Securities Dealers (the "NASD"), unless the approval of the NASD
has been received.
The principal executive offices of the Fund are located at 9301 Corbin
Avenue, Suite 333, Northridge, CA 91324.
Reference is hereby made to Section 9 of this Offer to Purchase and the
financial statements attached hereto as Exhibit A which are incorporated herein
by reference.
14. ADDITIONAL INFORMATION. The Fund has filed an Issuer Tender Offer
Statement on Schedule 13E-4 with the Securities and Exchange Commission (the
"Commission") which includes certain additional information relating to the
Offer. Such material may be inspected and copied at prescribed rates at the
Commission's public reference facilities at Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549 and 5670 Wilshire Boulevard, 11th Floor, Los
Angeles, CA 90036-3648. Copies of such material may also be obtained by mail at
prescribed rates from the Public Reference Branch of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549.
15. CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The following discussion is a
general summary of the federal income tax consequences of a sale of Class A
Common Shares pursuant to the Offer. Shareholders should consult their own tax
advisers regarding the tax consequences of a sale of Class A Common Shares
pursuant to the Offer, as well as the effects of state, local and foreign tax
laws.
The sale of Class A Common Shares pursuant to the Offer will be a taxable
transaction for federal income tax purposes, either as a "sale or exchange," or
under certain circumstances, as a "dividend." Under Section 302(b) of the
Internal Revenue Code of 1986, as amended (the "Code"), a sale of Class A Common
Shares pursuant to the Offer generally will be treated as a "sale or exchange"
if the receipt of cash: (a) results in a "complete termination" of the
shareholder's interest in the Fund, (b) is "substantially disproportionate" with
respect to the shareholder, or (c) is "not essentially equivalent to a dividend"
with respect to the shareholder. In determining whether any of these tests has
been met, Class A Common Shares actually owned, as well as Class A Common Shares
considered to be owned by the shareholder by reason of certain constructive
ownership rules set forth in Section 318 of the Code, generally must be taken
into account. If any of these three tests for "sale or exchange" treatment is
met, a shareholder will recognize gain or loss equal to the difference between
the amount of cash received pursuant to the Offer and the tax basis of the Class
A Common Shares sold. If such Class A Common Shares are held as a capital asset,
the gain or loss will be a capital gain or loss and will be long-term if such
Class A Common Shares have been held for more than one year.
If none of the tests set forth in Section 302(b) of the Code is met,
amounts received by a shareholder who sells Class A Common Shares pursuant to
the Offer will be taxable to the shareholder as a "dividend" to the extent of
such shareholder's allocable share of the Fund's current or accumulated earnings
and profits, and the excess of such amounts received over the portion that is
taxable as a dividend would constitute a non-taxable return of capital (to the
extent of the shareholder's tax basis in the Class A Common Shares sold pursuant
to the Offer) and any amounts in excess of the shareholder's tax basis would
constitute taxable gain. Thus, a shareholder's tax basis in the Class A Common
Shares sold will not reduce the amount of the "dividend." Any remaining tax
basis in the Class A Common Shares tendered to the Fund will be transferred to
any remaining Class A Common Shares held by such shareholder. In addition, if a
tender of Class A Common Shares is treated as a "dividend" to a tendering
shareholder, a constructive dividend under Section 305 (c) of the Code may
result to a non-tendering shareholder whose proportionate interest in the
earnings and assets of the Fund has been increased by such tender. The Fund
believes, however, that the nature of the repurchase will be such that a
tendering shareholder will qualify for "sale or exchange" treatment (as opposed
to "dividend" treatment).
16. EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENTS. The Fund reserves
the right, at any time and from time to time, to extend the period of time
during which the Offer is pending by making a public announcement thereof. In
the event that the Fund so elects to extend the tender period, the Purchase
Price for the Class A Common Shares tendered will be determined as of 2:00 PM
Pacific Standard Time on the Expiration Date, as extended, and the Offer will
terminate as of 12:30 PM Pacific Standard Time on the Expiration Date, as
extended. During any such extension, all Class A Common Shares previously
tendered and not purchased or withdrawn will remain subject to the Offer. The
Fund also reserves the right, at any time and from time to time up to and
including the Expiration Date, to (a) terminate the Offer and not to purchase or
pay for any Class A Common Shares or, subject to applicable law, postpone
payment for Class A Common Shares upon the occurrence of any of the conditions
specified in Section 6, and (b) amend the Offer in any respect by making a
public announcement thereof. Such public announcement will be issued no later
than 9:00 AM Pacific Standard Time on the next business day after the previously
scheduled Expiration Date and will disclose the approximate number of Class A
Common Shares tendered as of that date. Without limiting the manner in which the
Fund may choose to make a public announcement of extension, termination or
amendment, except as provided by applicable law (including Rule 13e-4(e) (2)),
the Fund shall have no obligation to publish, advertise or otherwise communicate
any such public announcement, other than by making a release to the Dow Jones
News Service.
If the Fund materially changes the terms of the Offer or the information
concerning the Offer, or if it waives a material condition of the Offer, the
Fund will extend the Offer to the extent required by Rule 13e-4 promulgated
under the Exchange Act. These rules require that the minimum period during which
an offer must remain open following material changes in the terms of the offer
or information concerning the offer (other than a change in price or a change in
percentage of securities sought) will depend on the facts and circumstances,
including the relative materiality of such terms or information. If (i) the Fund
increases or decreases the price to be paid for Class A Common Shares, or the
Fund increases the number of Class A Common Shares being sought by an amount
exceeding 2% of the outstanding Class A Common Shares, or the Fund decreases the
number of Class A Common Shares being sought and (ii) the Offer is scheduled to
expire at any time earlier than the expiration of a period ending on the tenth
business day from, and including, the date that notice of such increase or
decrease is first published, sent or given, the Offer will be extended at least
until the expiration of such period of ten business days.
17. MISCELLANEOUS. The Offer is not being made to, nor will the Fund accept
tenders from, owners of Class A Common Shares in any jurisdiction in which the
Offer or its acceptance would not comply with the securities or Blue Sky laws of
such jurisdiction. The Fund is not aware of any jurisdiction in which the making
of the Offer or the tender of Class A Common Shares would not be in compliances
with the laws of such jurisdiction. However, the Fund reserves the right to
exclude holders in any jurisdiction in which it is asserted that the Offer
cannot lawfully be made. So long as the Fund makes a good-faith effort to comply
with any state law deemed applicable to the Offer, the Fund believes that the
exclusion of holders residing in such jurisdiction is permitted under Rule
13e-4(f)(9) promulgated under the Exchange Act. In any jurisdiction the
securities or Blue Sky laws of which require the Offer to be made by a licensed
broker or dealer, the Offer shall be deemed to be made on the Fund's behalf by
one or more registered brokers or dealers licensed under the laws of such
jurisdiction.
June 3, 1996 SIERRA PRIME INCOME FUND
<PAGE>
EXHIBIT A
SIERRA PRIME INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1996 (UNAUDITED)
ASSETS
Investments, at value (Cost 7,136,023) (Note 2)
See accompanying schedule ................................ $7,135,931
Cash ........................................................ 2,119
Receivable for Fund shares sold ............................. 97,395
Interest receivable ......................................... 5,811
Unamortized organization costs (Note 7) ..................... 180,816
Receivable from investment advisor (Note 3) ................. 22,586
----------
Total Assets ............................................. 7,444,658
----------
LIABILITIES
Deferred facility fees (Note 2) ............................. 256
Dividends payable ........................................... 6,540
Administration fee payable (Note 3) ......................... 1,312
Accrued legal and audit fees ................................ 5,779
Organization expense payable (Note 7) ....................... 185,375
Accrued expenses and other payables (Note 3) ................ 13,675
----------
Total Liabilities ........................................ 212,937
----------
NET ASSETS .................................................. $7,231,721
==========
NET ASSETS CONSIST OF:
Paid in capital ............................................. 7,231,813
Net unrealized depreciation of investments .................. (92)
----------
NET ASSETS ............................................... $7,231,721
==========
Class A Common Shares Outstanding ........................... 723,181
==========
Net asset value per share of beneficial
interest outstanding* .................................... $10.00
==========
Maximum sales charge ........................................ 4.5%
Maximum offering price per share of
beneficial interest outstanding ($10.00/0.955) ........... $10.47
==========
- ----------
* Redemption price per share is equal to Net Asset Value less any applicable
contingent deferred sales charge.
See Notes to Financial Statements.
<PAGE>
SIERRA PRIME INCOME FUND
STATEMENT OF OPERATIONS
FOR THE PERIOD FEBRUARY 16, 1996* THROUGH MARCH 31, 1996
(UNAUDITED)
INVESTMENT INCOME:
Interest ........................................................ $ 22,206
Fees ............................................................ 6
--------
Total investment income ...................................... 22,212
--------
EXPENSES:
Investment advisory fee (Note 3) ................................ 3,907
Administration fee (Note 3) ..................................... 1,439
Legal and audit fees ............................................ 5,779
Trustees' fees and expenses (Note 3) ............................ 6,332
Registration and filing fees .................................... 4,180
Tender offer fees ............................................... 7,377
Amortization of organization costs .............................. 4,559
Printing and Postage ............................................ 1,967
Other ........................................................... 2,817
--------
Subtotal ..................................................... 38,357
Fees waived and expenses absorbed
by investment advisor (Note 3) ............................... (38,357)
--------
Total expenses ............................................... 0
--------
NET INVESTMENT INCOME ........................................... 22,212
--------
NET REALIZED AND UNREALIZED GAIN/(LOSS)
ON INVESTMENTS (Notes 2 and 4):
Net change in unrealized depreciation of securities ............. (92)
--------
Net realized and unrealized gain/(loss) on investments .......... (92)
--------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS .................................... $ 22,120
========
- ----------
* Commencement of operations.
See Notes to Financial Statements.
<PAGE>
SIERRA PRIME INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD FEBRUARY 16, 1996* THROUGH MARCH 31, 1996
(UNAUDITED)
Net investment income .......................................... $ 22,212
Net unrealized depreciation on investments during the period ... (92)
----------
Net increase in net assets resulting from operations ........... 22,120
----------
Distributions to shareholders from net investment income:
Class A Common Shares ....................................... (22,212)
Net increase in net assets from Fund share transactions:
Class A Common Shares ....................................... 7,131,813
----------
Net increase in net assets ..................................... 7,131,721
----------
NET ASSETS:
Beginning of year .............................................. 100,000
----------
End of year .................................................... $7,231,721
==========
AMOUNT
CLASS A COMMON SHARES:
Sold ...................................................... $7,116,461
Issued as reinvestment of dividends ....................... 15,352
----------
Net Increase .............................................. $7,131,813
==========
SHARES
CLASS A COMMON SHARES:
Sold ...................................................... 711,646
Issued as reinvestment of dividends ....................... 1,535
----------
Net Increase .............................................. 713,181
==========
- ----------
* Commencement of operations.
See Notes to Financial Statements.
<PAGE>
SIERRA PRIME INCOME FUND
FINANCIAL HIGHLIGHTS
FOR A FUND SHARE OUTSTANDING THROUGHOUT THE PERIOD
FEBRUARY 16, 1996* TO MARCH 31, 1996
(UNAUDITED)
Net asset value, beginning of period ........................... $ 10.00
-------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .......................................... .06
-------
Total from investment operations ............................... .06
-------
LESS DISTRIBUTIONS:
Dividends from net investment income ........................... (.06)
-------
Total distributions ............................................ (.06)
-------
Net asset value, end of period ................................. $ 10.00
=======
TOTAL RETURN+ .................................................. .59%
=======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) ........................... $ 7,232
Ratio of operating expenses to average net assets .............. 0.00%**
Ratio of net investment income to average net assets ........... 5.40%**
Portfolio turnover rate ........................................ 12%
Ratio of operating expenses to average net assets without fees
waived and expenses absorbed by investment advisor ............. 9.33%**
Net investment income per share without fees waived
and expenses absorbed by investment advisor .................... $(0.04)
- ----------
* Commencement of operations.
** Annualized.
+ Total return represents aggregate total return for the period indicated.
The total return would have been lower if certain fees and expenses had not
been waived and absorbed by the investment advisor.
<PAGE>
SIERRA PRIME INCOME FUND
PORTFOLIO OF INVESTMENTS
MARCH 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
Principal Loan Stated
Amount Borrower Rate* Type Maturity** Value
--------- -------- ----- ---- -------- -----
<C> <C> <C> <C> <C> <C>
SENIOR LOAN INTERESTS -- 32.6%
Broadcasting -- 3.3%
$ 119,000 SKTV, Inc.................................7.438% Term 07/31/2000 $ 119,000
119,000 Westinghouse Electric Corporation.........7.172 Term 11/24/2002 119,000
-----------
238,000
-----------
Cable -- 1.6%
119,000 Marcus Cable Operating Company, L.P.......6.865 Term 12/31/2002 118,996
-----------
Food & Beverages -- 9.1%
261,491 SC International Services, Inc............8.461 Term 09/30/2001 261,479
325,959 SC International Services, Inc............8.448 Term 09/30/2002 325,938
71,836 SC International Services, Inc............8.698 Term 09/30/2003 71,832
-----------
659,249
-----------
Food Stores -- 2.5%
119,000 Brunos, Inc...............................7.987 Term 02/18/2002 118,978
60,000 Carr - Gottstein Foods....................8.344 Term 12/31/2002 59,996
-----------
178,974
-----------
Healthcare -- 1.6%
119,000 Merit Behavioral Care Corporation.........8.063 Term 10/06/2003 118,998
-----------
Manufacturing -- 5.4%
150,000 Interco Inc...............................8.438 Term 03/29/2004 149,955
119,000 International Wire Group, Inc.............8.323 Term 09/30/2002 118,992
118,709 Thompson Minwax Company...................8.440 Term 12/31/2002 118,709
-----------
387,656
-----------
Paper -- 5.8%
117,945 Fort Howard Corporation...................8.041 Term 03/31/2002 117,950
117,083 Jefferson Smurfit Corporation.............6.894 Term 04/30/2001 117,081
119,000 S.D. Warren Company.......................7.880 Term 12/20/2001 118,997
62,000 Stone Container Corporation...............8.502 Term 04/01/2000 62,000
-----------
416,028
-----------
Retail -- 3.3%
119,000 Federated Department Stores, Inc..........6.320 Term 03/31/2000 119,010
119,000 Saks & Company............................8.750 Term 06/30/2000 119,020
-----------
238,030
-----------
Total Senior Loan Interests (cost $2,356,023)............................ 2,355,931
-----------
See Notes to Financial Statements.
<PAGE>
SIERRA PRIME INCOME FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
MARCH 31, 1996 (UNAUDITED)
Principal
Amount Borrower Value
--------- -------- -----
U.S. GOVERNMENT AGENCY DISCOUNT NOTES -- 66.1% (cost $4,780,000)
$ 4,780,000 Federal Home Loan Bank (FHLB):
5.250% due 04/01/1996.............. $ 4,780,000
-----------
TOTAL INVESTMENTS (Cost $7,136,023+) ......................... 98.7% 7,135,931
OTHER ASSETS AND LIABILITIES (Net)............................ 1.3 95,790
----- -----------
NET ASSETS ...................................................100.0% $ 7,231,721
===== ===========
<FN>
- ----------
* Senior loans in which the Sierra Prime Income Fund invests generally pay
interest at rates which are periodically redetermined by reference to a
base lending rate plus a premium. These base lending rates are generally
(i) the prime rate offered by one or more major United States banks; (ii)
the lending rate offered by one or more major European banks, such as the
London Inter-Bank Offered Rate (LIBOR); or (iii) the certificate of deposit
ratio. Senior loans are generally considered to be restricted in that the
Fund ordinarily is contractually obligated to receive approval from the
Agent Bank and/or borrower prior to the disposition of a senior loan.
Within each loan there may be different rates due to different reset dates.
The rates disclosed for each loan are the weighted average coupon rates as
of March 31, 1996.
** Senior loans in the Sierra Prime Income Fund's portfolio generally are
subject to mandatory and/or optional prepayment. Because of these mandatory
prepayment conditions and because there may be significant economic
incentives for a Borrower to prepay, prepayments of senior loans in the
Fund's portfolio may occur. As a result, the actual remaining maturity of
senior loans held in the Fund's portfolio may be substantially less than
the stated maturities shown. Although the Fund is unable to accurately
estimate the actual remaining maturity of individual senior loans, the Fund
estimates that the actual average maturity of the senior loans held in its
portfolio will be approximately 18-24 months.
+ At March 31, 1996, the aggregate cost for federal tax purposes was
$7,136,023. The gross unrealized appreciation for all securities in which
there is an excess of value over tax cost and aggregate gross unrealized
depreciation for all securities in which there is an excess of tax cost
over value were $60 and $152, respectively.
</TABLE>
See Notes to Financial Statements.
<PAGE>
SIERRA PRIME INCOME FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. ORGANIZATION AND BUSINESS
Sierra Prime Income Fund (the "Fund") is registered under the Investment Company
Act of 1940, as amended ("1940 Act"), as a non-diversified, closed-end
management investment company. The Fund was organized as a Massachusetts
business trust on October 4, 1995. During the period October 4, 1995 to February
15, 1996, the Fund had no operations other than those related to organizational
matters, including the initial capital contribution of $100,000 and the issuance
of 10,000 shares of beneficial interest to Sierra Fund Administration
Corporation.
The Trustees of the Fund authorized an unlimited number of Common Shares with
separate classes of beneficial interest. Currently there are only Class A Common
Shares continuously offered at a price equal to the next determined net asset
value ("NAV") per share plus a maximum sales charge based on a determined
schedule.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements.
Portfolio Valuation:
Because Senior Loans are not actively traded in a public market, the Advisor and
Sub-Advisor, following procedures established by the Fund's Board of
Trustees,values the Senior Loan interests held by the Fund at fair value. In
valuing a Senior Loan interest, the Advisor and Sub-Advisor considers relevant
factors, data and information, including: (i) the characteristics of and
fundamental analytical data relating to the Senior Loan, including the cost,
size, current interest rate, period until next interest rate reset, maturity and
base lending rate of the Senior Loan interest, the terms and conditions of the
Senior Loan and any related agreements, and the position of the Senior Loan in
the Borrower's debt structure; (ii) the nature, adequacy and value of the
collateral, including the Fund's rights, remedies and interests with respect to
the collateral; (iii) the creditworthiness of the Borrower's business, cash
flows, capital structure and future prospectus; (iv) information relating to the
market for Senior Loans, including price quotations for (if considered reliable)
and trading in Senior Loans and interests in similar Loans; (v) the reputation
and financial condition of the Agent and any Intermediate Participants in the
Senior Loans; and (vi) general economic and market conditions affecting the fair
value of Senior Loans.
Other Fund holdings (other than short term obligations, but including listed
issues) are valued on the basis of prices furnished by one or more pricing
services which determine prices for normal, institutional-size trading units of
such securities using market information, transactions for comparable securities
and various relationships between securities which are generally recognized by
institutional traders. In certain circumstances, portfolio securities will be
valued at the last sale price on the exchange that is the primary market for
such securities, or the average of the last quoted bid price and asked price for
those securities for which the over-the-counter market is the primary market or
for listed securities in which there were no sales during the day. The value of
interest rate swaps is determined in accordance with a discounted present value
formula and then confirmed by obtaining a bank quotation.
<PAGE>
SIERRA PRIME INCOME FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
Short-term obligations which mature in 60 days or less are valued at amortized
cost, if their original term to maturity when acquired by the Portfolio was 60
days or less, or are valued at amortized cost using their value on the 61st day
prior to maturity, if their original term to maturity when acquired by the Fund
was more than 60 days, unless in each case this is determined not to represent
fair value. Repurchase agreements will be valued by the Fund at cost plus
accrued interest. Securities for which there exist no price quotations or
valuations and all other assets are valued at fair value as determined in good
faith by or on behalf of the Board of Trustees.
Illiquid Investments:
Senior Loans in which the Fund will invest presently are not readily marketable
and may be subject to restrictions on resale. Interests in Senior Loans
generally are not listed on any national securities exchange or automated
quotation system and no regular market has developed for such interests.
Although interests in Senior Loans are traded among certain financial
institutions in private transactions between buyers and sellers these loans
continue to be considered illiquid. Senior Loans' illiquidity may impair the
Fund's ability to realize the full value of its assets in the event of a
voluntary or involuntary liquidation of such assets. Liquidity relates to the
ability of the Fund to sell an investment in a timely manner. The market for
relatively illiquid securities tends to be more volatile than the market for
more liquid securities. The Fund has no limitation on the amount of its assets
which may be invested in securities which are not readily marketable or are
subject to restriction on resale. The substantial portion of the Fund's assets
invested in relatively illiquid Senior Loan interests may restrict the ability
of the Fund to dispose of its investments in Senior Loans in a timely fashion
and at a fair price, and could result in capital losses to the Fund and holders
of Common Shares. However, many of the Senior Loans in which the Fund expects to
purchase interests are of a relatively large principal amount and are held by a
relatively large number of owners which should, in the Advisor's opinion,
enhance the relative liquidity of such interests. The risks associated with
illiquidity are particularly acute in situations where the Fund's operations
require cash, such as when the Fund tenders for its Common Shares and may result
in the Fund borrowing to meet short-term cash requirements.
Repurchase Agreements:
The Fund may enter into repurchase agreements (a purchase of, and a simultaneous
commitment to resell, a financial instrument at an agreed upon price on an
agreed upon date) only with member banks of the Federal Reserve System and
member firms of the New York Stock Exchange. When participating in repurchase
agreements, the Fund buys securities from a vendor (e.g., a bank or brokerage
firm) with the agreement that the vendor will repurchase the securities at a
higher price at a later date. Such transactions afford an opportunity for the
Fund to earn a return on available cash at minimal market risk, although the
Fund may be subject to various delays and risks of loss if the vendor is unable
to meet its obligation to repurchase. Under the 1940 Act, repurchase agreements
are deemed to be collateralized loans of money by the Fund to the seller. In
evaluating whether to enter into a repurchase agreement, the Advisor will
consider carefully the creditworthiness of the vendor. If the member bank or
member firm that is the party to the repurchase agreement petitions for
bankruptcy or otherwise becomes subject to the U.S. Bankruptcy Code, the law
regarding the rights of the Fund is unsettled. The securities underlying a
repurchase agreement will be marked to market every business day so that the
value of the collateral is at least equal to the value of the loan, including
the accrued interest thereon, and the Advisor will monitor the value or the
collateral. No specific limitations exists as to the percentage of the Fund's
assets which may be used to participate in repurchase agreements.
<PAGE>
SIERRA PRIME INCOME FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
Securities Transactions and Investment Income:
Securities transactions are recorded on trade date (the date the order to buy or
sell is executed). Realized gains and losses from securities sold are recorded
on the identified cost basis. Income is recorded on the accrual basis and
consists of interest accrued and discount earned less premiums amortized.
Facility fees are received upon the purchase of a new loan and are recognized as
income ratably over the expected life of the loan. The deferred facility fees
are the "unearned" portion of these facility fees. The Fund may purchase and
sell interest in Senior Loans and other portfolio securities on a "when issued"
and "delayed delivery" basis. No income accrues to the Fund on such interests or
securities in connection with such purchase transactions prior to the date the
Fund actually takes delivery of such interest or securities. When the Fund is
the buyer in such a transaction, however, it will maintain, in a segregated
account with its custodian, cash or high-grade portfolio securities having an
aggregate value equal to the amount of such purchase commitments until payment
is made.
Dividends and Distributions to Shareholders:
The Fund's policy is to declare daily and pay monthly distributions to holders
of Class A Common Shares of substantially all net investment income of the Fund.
Distributions of any net long-term capital gains earned by the Fund are made
annually. Distributions of any net short-term capital gains earned by the Fund
are distributed no less frequently than annually at the discretion of the Board
of Trustees. Additional distributions of net investment income and capital gains
for the Fund may be made at the discretion of the Board of Trustees in order to
avoid the application of a 4% non-deductible excise tax on certain undistributed
amounts of ordinary income and capital gains. Income distributions and capital
gain distributions are determined in accordance with income tax regulations
which may differ from generally accepted accounting principles. These
differences are primarily due to differing treatments of income and gains on
various investment securities held by the Fund, timing differences and differing
characterization of distributions made by the Fund.
Federal Income Taxes:
It is the Fund's policy to qualify as a regulated investment company by
complying with the requirements of the Internal Revenue Code of 1986, as
amended, applicable to regulated investment companies and by, among other
things, distributing substantially all of its taxable earnings to its
shareholders. Therefore, no Federal income tax provision is required.
Estimates:
The preparation of financial statements in conformity with generally accepted
accounting principles may require management to make certain estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of these financial statements and the reported amounts of income and
expenses during the reported period. Actual results could differ from those
estimates.
3. INVESTMENT ADVISORY, SUB-ADVISORY, ADMINISTRATION FEES AND OTHER TRANSACTIONS
Sierra Advisors, an indirect wholly-owned subsidiary of Great Western Financial
Corporation ("GWFC"), is the Fund's investment advisor. Sierra Advisors is
entitled to a monthly fee at an annual rate of 0.95% of the average daily net
assets of the Fund. These fees were $3,907 for the period ended March 31, 1996
and have been voluntarily waived by Sierra Advisors. Sierra Advisors pays a
monthly fee at an annual rate of 0.475% to Van Kampen American Capital
Management Inc. for services rendered as the Sub-Advisor.
<PAGE>
SIERRA PRIME INCOME FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
Sierra Fund Administration Corporation ("Sierra Administration") is the Fund's
administrator. Sierra Administration is entitled to a monthly fee at an annual
rate of 0.35% of the Fund's average daily net assets. These fees were $1,439 for
the period ended March 31, 1996. Sierra Administration pays State Street Bank &
Trust Company ("State Street") for certain administrative and custodial
services. In addition, Sierra Administration pays First Data Investor Services
Group, Inc. ("First Data") for certain transfer agency services. The Fund pays
for the sub-transfer agent, sub-administrator and custodial out-of-pocket
expenses.
Sierra Advisors has agreed to voluntarily reimburse the Fund's total operating
expenses. For the period ended March 31, 1996 the total reimbursement to the
Fund was $34,450.
The compensation of the officers and Trustees who are interested persons (as
defined in the 1940 Act) of the Advisor is paid by the Advisor or by its parent,
GWFC. The Fund pays the compensation of all other officers and Trustees of the
Fund. Trustees who are not interested persons are paid an annual fee of $5,000,
a fee of $1,000 per meeting of the Board of Trustees and a fee of $750 per
committee meeting of the Fund, plus expenses.
As of March 31, 1996 there was one shareholder who owned greater than five
percent of Class A Common Shares, representing 27.77% of the Fund at this date.
4. PURCHASE AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities, excluding
U.S. Government and short-term investments for the period ended March 31, 1996
were $2,450,000 and $93,977, respectively.
5. TENDER OF SHARES
The Board of Trustees of the Fund currently intends, each quarter, to consider
authorizing the Fund to make tender offers for a portion of its outstanding
Class A Common Shares at the then current net asset value of these Common
Shares. The Fund does not intend to list its Common Shares on any national
securities exchange and none of the Fund, the Advisor or SISC intends to make a
secondary trading market in the classes of the Common Shares at any time.
Accordingly, there is not expected to be any secondary trading market in the
Common Shares and an investment in such Common Shares should be considered
illiquid. There can be no assurance that the Fund will in fact tender for any of
its Common Shares. If the Fund tenders for Common Shares there is no guarantee
that all, or any, Common Shares tendered will be purchased. An early withdrawal
charge may be charged on those repurchases or tenders done during the first or
second year after purchase.
6. SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Fund to issue an unlimited number of full
and fractional Common Shares of beneficial interest with no par value. The Fund
initially is offering 5,000,000 Class A Common Shares in a continuous offering
pursuant to Rule 415 under the Securities Act of 1933, as amended.
7. ORGANIZATION COSTS
Expenses incurred in connection with the organization of the Fund, including
the fees and expenses of registering and qualifying its shares for
distribution under Federal and state securities regulations, are being amortized
on a straight-line basis over a period of five years from commencement of
operations of the Fund. In the event any of the initial shares of the Fund are
redeemed by any holder thereof during the amortization period, the proceeds
of such redemptions will be reduced by an amount equal to the pro-rata
portion of unamortized deferred organizational expenses in the same
proportion as the number of shares being redeemed bears to the number of
<PAGE>
SIERRA PRIME INCOME FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
initial shares of such Fund outstanding at the time of such redemption. To the
extent that proceeds of the redemptions are less than such pro-rata portion of
any unamortized organizational expenses, Sierra Administration has agreed to
reimburse the Fund.
8. SENIOR LOAN PARTICIPATIONS
The Fund invests primarily in participations, assignments, or acts as a party to
the primary lending syndicate of a Variable Rate Senior Loan interest to United
States corporations, partnerships, and other entities. When the Fund purchases a
participation of a Senior Loan interest, the Fund typically enters into a
contractual agreement with the lender or other third party selling the
participation, but not with the borrower directly. As such, the Fund assumes the
credit risk of the Borrower, Selling Participant or other persons
interpositioned between the Fund and the Borrower.
At March 31, 1996, the following sets forth the selling participants with
respect to interests in Senior Loans purchased by the Trust on a participation
basis.
Principal
Selling Participant Amount Value
- ------------------- ---------- ----------
Bankers Trust $ 60,000 $ 59,996
Chemical Bank 1,486,737 1,486,731
Nations Bank 150,000 149,955
Pearl Street L.P. 659,286 659,249
---------- ----------
$2,356,023 $2,355,931
========== ==========
<PAGE>
Exhibit (a)(2)
LETTER OF TRANSMITTAL
Regarding Class A Common Shares
of
Sierra Prime Income Fund
Tendered Pursuant to the Offer to Purchase
Dated June 3, 1996
- -------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 12:30 PM PACIFIC STANDARD TIME ON
JULY 5, 1996, UNLESS THE OFFER IS EXTENDED
- -------------------------------------------------------------------------------
Ladies and Gentlemen:
The undersigned hereby tenders to the Sierra Prime Income Fund, a
non-diversified, closed-end management investment company organized as a
Massachusetts business trust (the "Fund"), the Class A Common Shares of
beneficial interest, with no par value, of the Fund (the "Class A Common
Shares") described below in Box No. 1, at a price (the "Purchase Price") equal
to the net asset value per Class A Common Share ("NAV") determined as of 2:00 PM
Pacific Standard Time on the Expiration Date (as defined in the Offer to
Purchase) in cash, upon the terms and conditions set forth in the Offer to
Purchase, dated June 3, 1996, receipt of which is hereby acknowledged, and in
this Letter of Transmittal and the Instructions hereto (which together
constitute the "Offer"). An Early Withdrawal Charge or "EWC" (as defined in the
Offer to Purchase) may be imposed on certain Class A Common Shares accepted for
payment which have been held for less than two years.
Subject to and effective upon acceptance for payment of the Class A Common
Shares tendered hereby in accordance with the terms of the Offer (including, if
the Offer is extended or amended, the terms or conditions of any such extension
or amendment), the undersigned hereby sells, assigns and transfers to or upon
the order of the Fund all right, title and interest in and to all Class A Common
Shares tendered hereby that are purchased pursuant to the Offer and hereby
irrevocably constitutes and appoints Sierra Fund Administration Corporation (the
"Transfer Agent" or "Sierra Fund Administration") as attorney-in-fact of the
undersigned with respect to such Class A Common Shares, with full power of
substitution (such power of attorney being deemed to be an irrevocable power
coupled with an interest), to (a) transfer ownership of such Class A Common
Shares on the Fund's books, together with all accompanying evidences of transfer
and authenticity, to or upon the order of the Fund, upon receipt by the Transfer
Agent, as the undersigned's agent, of the NAV per Common Share with respect to
such Class A Common Shares; (b) deduct from the Purchase Price deposited with
the Transfer Agent any applicable Early Withdrawal Charge and remit such charge
to Sierra Investment Services Corporation; and (c) receive all benefits and
otherwise exercise all rights of beneficial ownership of such Class A Common
Shares, subject to the next paragraph, all in accordance with the terms of the
Offer.
The undersigned hereby represents and warrants that: (a) the undersigned
has a "net long position" in the Class A Common Shares tendered hereby within
the meaning of Rule 14e-4 promulgated under the Securities Act of 1934, as
amended, and has full power and authority to validly tender, sell, assign and
transfer the Class A Common Shares tendered hereby; (b) when and to the extent
the Fund accepts the Class A Common Shares for purchase, the Fund will acquire
good, marketable and unencumbered title to them, free and clear of all security
interests, liens, charges, encumbrances, conditional sales agreements or other
obligations relating to their sale or transfer, and not subject to any adverse
claim; (c) on request, the undersigned will execute and deliver any additional
documents the Transfer Agent or the Fund deems necessary or desirable to
complete the assignment, transfer and purchase of the Class A Common Shares
tendered hereby; and (d) the undersigned has read and agrees to all of the terms
of this Offer.
The names and addresses of the registered owners should be printed, if they
are not already printed, in Box 1 as they appear on the registration of the
Class A Common Shares. The number of Class A Common Shares that the undersigned
wishes to tender should be indicated in Box No. 1, which number may be
determined by indicating in Option B of such box the dollar amount of proceeds
the undersigned desires to receive pursuant to the tender offer after any
applicable Early Withdrawal Charge ("EWC") has been deducted from such proceeds.
The undersigned recognizes that under certain circumstances set forth in
the Offer to Purchase, the Fund may terminate or amend the Offer or may not be
required to purchase any of the Class A Common Shares tendered hereby.
The undersigned understands that acceptance of Class A Common Shares by the
Fund for payment will constitute a binding agreement between the undersigned and
the Fund upon the terms and subject to the conditions of the Offer.
The check for the Purchase Price of the tendered Class A Common Shares
purchased, minus any applicable Early Withdrawal Charge ("EWC"), will be issued
to the order of the undersigned and mailed to the address indicated below in Box
No. 1, unless otherwise indicated below in Box No. 2. Shareholders tendering
Class A Common Shares shall be entitled to receive all dividends declared on or
prior to settlement following the Expiration Date, but not yet paid, on Class A
Common Shares tendered pursuant to the Offer. The Fund will not pay interest on
the Purchase Price under any circumstances.
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned and all obligations of the undersigned
hereunder shall be binding upon the heirs, personal representatives, successors
and assigns of the undersigned. Except as stated in the Offer, this tender is
irrevocable.
Delivery to an address other than that shown below does not constitute
valid delivery.
By Mail, Hand or Courier
Sierra Fund Administration Corporation
9301 Corbin Avenue, Suite 333
Northridge, CA 91324
Attn: Sierra Prime Income Fund
FOR ADDITIONAL INFORMATION CALL:
(800) 222-5852
<PAGE>
This Letter of Transmittal is to be used only if the Class A Common Shares
to be tendered are registered in the shareholders' name and the necessary
documents will be transmitted to the Transfer Agent by the shareholder or his
broker, dealer or other Authorized Dealer. Do not use this form if a broker,
dealer or other Authorized Dealer is the registered owner of the Class A Common
Shares and is effecting the transaction for the shareholder.
To ensure processing of your request, this Letter of Transmittal or a
manually signed facsimile of it (together with all other required documents)
must be received by the Transfer Agent on or before the Expiration Date (July 5,
1996).
- -------------------------------------------------------------------------------
BOX NO. 1: SHAREHOLDER INFORMATION
- -------------------------------------------------------------------------------
Name and Address of
Registered Owner Shareholder Information
- ------------------- -----------------------
Please Provide: Social Security No.__________
Caesar Account No.:___________________________
Sierra Account No.:___________________________
- -------------------------------------------------------------------------------
CHECK ONE OF THE FOLLOWING AND FILL
IN THE APPROPRIATE AMOUNT
Option A: [ ] I hereby tender ________ Class A Common Shares of the Fund.
I understand that an Early Withdrawal Charge may be imposed on
certain Class A Common Shares accepted for payment that have been
held for less than two years and that such charge, if any, will be
deducted from the proceeds from such Class A Common Shares. (See
Instruction 3 and 4(f)).
OR
Option B: [ ] I hereby tender that certain number of Class A Common Shares
of the Fund necessary to receive $__________ from the Fund after
the Early Withdrawal Charge, if applicable, has been deducted from
the proceeds from such Class A Common Shares. (See Instruction 3
and 4(f)).
- -------------------------------------------------------------------------------
PLEASE NOTE: If the account indicated by the account number in this Box No. 1 is
a Sierra Prime Income Fund IRA account, an IRA distribution form MUST be
submitted with this Letter of Transmittal.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
BOX NO. 2: SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS
(See Instructions 2, 3 and 4)
- -------------------------------------------------------------------------------
To be completed ONLY if checks are to be sent or wired to someone other than the
undersigned or are to be sent to the undersigned at an address other than that
shown above in Box No. 1
- -------------------------------------------------------------------------------
Mail check to: Wire Proceeds To: [ ] Checking [ ] Savings
Minimum $5,000 to be wired. A $5.00 fee
Name(s)__________________________ may be charged for each wire transfer.)
(Please Print)
Bank______________________________________
Address:_________________________ (Name)
_________________________ Address___________________________________
(Include Zip Code)
ABA Routing No.___________________________
Account No._______________________________
(Shareholder's Bank Account No.)
- -------------------------------------------------------------------------------
<PAGE>
- -------------------------------------------------------------------------------
BOX NO. 3: SIGNATURES (See Instructions 2, 3 and 4)
- -------------------------------------------------------------------------------
A. By signing this Letter of Transmittal, you represent that you have read the
letter printed on the other side of this page and the Instructions enclosed
herewith, which Instructions form part of the terms and conditions of the
Offer.
B. This Letter of Transmittal must be signed by the registered owner(s) of the
Class A Common Shares tendered hereby or by person(s) authorized to become
registered owner(s) by documents transmitted herewith. If signature is by
attorney-in-fact, executor, administrator, trustee, guardian, officer of a
corporation or another acting in a fiduciary or representative capacity,
please set forth the full title and include the required legal documents.
(See Instruction 4)
C. Your signature MUST be guaranteed and you MUST complete the signature
guarantee in this Box No. 3 if (i) the value of the Class A Common Shares
tendered herewith pursuant to the Offer is greater than $50,000, (ii) this
Letter of Transmittal is signed by someone other than the registered holder
of the Class A Common Shares tendered herewith, or (iii) you request payment
for the Class A Common Shares tendered herewith to be sent to a person other
than the registered owner of such Class A Common Shares for the benefit of
such owner(s) and/or to an address other than the registered address of the
registered owner of the Class A Common Shares. For information with respect
to what constitutes an acceptable guarantee, please see Instruction 4(f).
D. See Instruction 8 and Form W-9 enclosed herewith regarding backup
withholding.
-----------------------------------------------
-----------------------------------------------
(Signature(s) of Owner(s) Exactly as Registered)
Dated _____________ , 19____ Daytime Telephone Number ( )________________
SIGNATURE GUARANTEE (if applicable):
------------------------------------
Bank Name
- -------------------------------------------------------------------------------
<PAGE>
INSTRUCTIONS
Forming Part of the Terms and Conditions of the Offer
1. Delivery of Letter of Transmittal. This Letter of Transmittal is to be used
only if the Class A Common Shares to be tendered are registered in the
shareholder's name and the necessary documents will be transmittal to the
Transfer Agent by the shareholder or his broker, dealer or other Authorized
Dealer. Do not use this form if a broker, dealer or other Authorized Dealer is
the registered owner of the Class A Common Shares and is effecting the
transaction for the shareholder. A PROPERLY COMPLETED AND DULY EXECUTED LETTER
OF TRANSMITTAL OR MANUALLY SIGNED FACSIMILE OF IT, ANY CERTIFICATES REPRESENTING
CLASS A COMMON SHARES TENDERED AND ANY OTHER DOCUMENTS REQUIRED BY THIS LETTER
OF TRANSMITTAL SHOULD BE MAILED OR DELIVERED TO THE TRANSFER AGENT AT THE
ADDRESS SET FORTH IN THIS LETTER OF TRANSMITTAL AND MUST BE RECEIVED BY THE
TRANSFER AGENT ON OR PRIOR TO THE EXPIRATION DATE (JULY 5, 1996).
The method of delivery of all documents is at the election and risk of the
tendering shareholder. If delivery is by mail, registered mail with return
receipt requested, properly insured, is recommended.
The Fund will not accept any alternative, conditional or contingent
tenders. All tendering shareholders, by execution of this Letter of Transmittal
(or a manually signed facsimile of it), waive any right to receive any notice of
the acceptance of their tender.
2. Completing this Letter of Transmittal. If you intend to tender any Class A
Common Shares pursuant to the Offer, please complete the Letter of Transmittal
as follows:
(a) Read the Letter of Transmittal in its entirety. By signing the Letter of
Transmittal in Box No. 3, you agree to its terms.
(b) Complete Box No. 1 by providing your Social Security Number, your Caesar
or Sierra account number and selecting and completing either Option A or
Option B.
(c) Complete Box No. 2 any check issued in the name of a person other than
the signer of the Letter of Transmittal are to be sent or wired to someone
other than such signer or to the signer at an address other than that shown.
in Box No. 1.
(d) Complete Box No. 3 in accordance with Instruction 4 set forth below.
3. Signatures on Letter of Transmittal, Authorizations and Endorsements.
(a) If this Letter of Transmittal is signed by the registered owner(s) of the
Class A Common Shares tendered hereby, the signatures) must correspond
exactly with the name(s) in which the Class A Common Shares are registered.
(b) If the Class A Common Shares are held of record by two or more joint
owners, each such owner must sign this Letter of Transmittal.
(c) If any tendered Class A Common Shares are registered in different names,
it will be necessary to complete, sign and submit as many separate Letters of
Transmittal (or manually signed facsimiles of it) as there are different
registrations of Class A Common Shares.
(d) When this Letter of Transmittal is signed by the registered owner(s) of
the Class A Common Shares listed and transmitted hereby, no endorsements
representing such Class A Common Shares or separate authorizations are
required. If, however, payment is to be made to a person other than the
registered owner(s), any unpurchased Class A Common Shares are to be
registered in the name of any person other than the registered owner(s) must
be endorsed or accompanied by appropriate authorizations, in either case
signed exactly as such name(s) appear on the registration of the Class A
Common Shares and such endorsements or authorizations must be guaranteed by
an institution described in Box No. 3.
(e) If this Letter of Transmittal or any authorizations are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity,
such persons should so indicate when signing and must submit proper evidence
satisfactory to the Fund of their authority so to act.
(f) Your signature MUST be guaranteed and you MUST complete the signature
guarantee in Box No. 3 if (i) the value of the Class A Common Shares tendered
herewith pursuant to the Offer is greater than $50,000, (ii) this Letter of
Transmittal is signed by someone other than the registered holder of the
Class A Common Shares tendered herewith, or (iii) you request payment for the
Class A Common Shares tendered herewith to be sent to a payee other than the
registered owner of such Class A Common Shares and/or to an address other
than the registered address of the registered owner of the Class A Common
Shares. An acceptable guarantee is one made by a commercial bank or trust
company having an office, branch or agency in the United States, a member
firm of a registered national securities exchange, a credit union or a
savings association. The guarantee must state the words "Signature
Guaranteed" along with the name of the granting institution. Shareholders
should verify with the institution that it is an eligible guarantor prior to
signing. A guarantee from a notary public is not acceptable.
4. Transfer Taxes. The Fund will pay all share transfer taxes, if any, payable
on the transfer to it of Class A Common Shares purchased pursuant to the Offer.
If, however, (a) payment of the Purchase Price is to be made to any person other
than the registered owner(s), (b) (in the circumstances permitted by the Offer)
unpurchased Class A Common Shares are to be registered in the name(s) of any
person other than the person(s) signing this Letter of Transmittal, the amount
of any transfer taxes (whether imposed on the registered owner(s) or such other
persons) payable on account of the transfer to such person(s) will be deducted
from the Purchase Price by the Transfer Agent unless satisfactory evidence of
the payment of such taxes, or exemption therefrom, is submitted.
5. Irregularities. All questions as to the validity, form, eligibility
(including time of receipt) and acceptance of any tender of Class A Common
Shares will be determined by the Fund in its sole discretion, whose
determination shall be firm and binding on all parties. The Fund reserves the
absolute right to reject any or all tenders determined by it not to be in
appropriate form or the acceptance of or payment for any Class A Common Shares
which may, in the opinion of the Fund's counsel, be unlawful. The Fund also
reserves the absolute right to waive any of the conditions of the Offer or any
defect or irregularity in tender of any particular Class A Common Shares or any
particular shareholder, and the Fund's interpretations of the terms and
conditions of the Offer (including these Instructions) will be final and binding
on all parties. Unless waived, any defects or irregularities in connection with
tenders must be cured within such time as the Fund shall determine. Tendered
Class A Common Shares will not be accepted for payment unless all defects and
irregularities have either been cured within such time or waived by the Fund.
None of the Fund, Sierra Investment Services Corporation, the Transfer Agent, or
any other person shall be obligated to give notice of defects or irregularities
in tenders, nor shall any of them incur any liability for failure to give any
such notice.
6. Questions and Requests for Assistance and Additional Copies. Questions and
requests for assistance may be directed to, and additional copies of the Offer
to Purchase and this Letter of Transmittal may be obtained from Sierra
Shareholder Services located at 9301 Corbin Avenue, Suite 333, Northridge,
California 91324, or by telephoning (800) 222-5852.
7. Form W-9. Each tendering shareholder who has not already submitted a
completed and signed Form W-9 to the Fund is required to provide the Transfer
Agent with a correct taxpayer identification number ("TIN") on Form W-9 which is
enclosed herewith. Failure to provide the information on the form may subject
the tendering shareholder to 31% federal income tax withholding on the payments
made to the shareholder or other payee with respect to Class A Common Shares
purchased pursuant to the Offer.
8. Withholding on Foreign Shareholders. The Transfer Agent will withhold federal
income taxes equal to 30% of the gross payments payable to a foreign shareholder
unless the Transfer Agent determined that a reduced rate of withholding or an
exemption from withholding is applicable. For this purpose, a foreign
shareholder is any shareholder that is not (i) a citizen or resident of the
United States, (ii) a corporation, partnership or other entity created or
organized in or under the laws of the United States or any political subdivision
thereof, or (iii) any estate or trust the income of which is subject to United
States federal income taxation regardless of the source of such income. The
Transfer Agent will determine a shareholder's status as a foreign shareholder
and eligibility for a reduced rate of, or an exemption from, withholding by
reference to the shareholder's address or statements concerning eligibility for
a reduced rate of, or exemption from, withholding unless facts and circumstances
indicate that reliance is not warranted. A foreign shareholder who has not
previously submitted the appropriate statements with respect to a reduced rate
of, or an exemption from, withholding for which such shareholder may be eligible
should consider doing so in order to avoid overwithholding. A foreign
shareholder may be eligible to obtain a refund of tax withheld if such
shareholder meets one of the three tests for capital gain or loss treatment
described in Section 15 of the Offer to Purchase or is otherwise able to
establish that no tax or a reduced amount of tax was due.
IMPORTANT: The Letter of Transmittal or a manually signed facsimile of it
(together with all other required documents) must be received by the Transfer
Agent on or before the Expiration Date.
<PAGE>
EXHIBIT (a)(3)(i)
Offer By
Sierra Prime Income Fund
To Purchase For Cash 114,466
Of Its Class A Common Shares At
Net Asset Value Per Common Share
June 3, 1996
To Brokers, Dealers, Commercial Banks,
Fund Companies and other Nominees:
Pursuant to your request, we are enclosing herewith the material listed
below relating to the offer of Sierra Prime Income Fund (the "Fund") to purchase
up to 114,466 of its Class A Common Shares of beneficial interest with no par
value (the "Class A Common Shares") for cash at net asset value per Common Share
("NAV") determined as of 2:00 PM Pacific Standard Time on the Expiration Date
(defined below) upon the terms and subject to the conditions set forth in the
Offer to Purchase dated June 3, 1996, and in the related Letter of Transmittal
(which together constitute the "Offer"). The Offer and withdrawal rights will
expire at 12:30 PM Pacific Standard Time on July 5, 1996, unless extended (the
"Expiration Date"). An "Early Withdrawal Charge" or "EWC" may be imposed on
certain Class A Common Shares accepted for payment which have been held for less
than two years. The Offer is not conditioned upon any minimum number of Class A
Common Shares being tendered but is subject to certain conditions as set forth
in the Offer to Purchase.
If more than 114,466 Class A Common Shares are duly tendered prior to
the expiration of the Offer, the Fund presently intends to, assuming no changes
in the factors originally considered by the Board of Trustees when it determined
to make the Offer and the other conditions set forth in the Offer, but is not
obligated to, extend the Offer period, if necessary, and increase the number of
Class A Common Shares that the Fund is offering to purchase to an amount which
it believes will be sufficient to accommodate the excess Class A Common Shares
tendered as well as any Class A Common Shares tendered during the extended Offer
period or purchase 114,466 Class A Common Shares (or such greater number of
Class A Common Shares sought) on a pro rata basis.
No fees or commissions will be payable to brokers, dealers or other
persons for soliciting tenders of Class A Common Shares pursuant to the Offer.
The Fund will, however, upon request, reimburse you for customary mailing and
handling expenses incurred by you in forwarding any of the enclosed materials to
those of your clients who have requested such materials. The Fund will pay all
transfer taxes on its purchase of shares, subject to Instruction 6 of the Letter
of Transmittal. However, backup tax withholding at a 31% rate may be required
unless an exemption is proved or unless the required tax identification
information is or has previously been provided. See Section 15 of the Offer to
Purchase and Instructions 10 and 11 to the Letter of Transmittal.
For your information and for forwarding to those of your clients who
have requested them, we are enclosing the following documents:
(1) Offer to Purchase dated June 3, 1996;
(2) Letter of Transmittal to be used by holders of Class A Common
Shares to tender such shares to the Transfer Agent directly or
through their broker, dealer or other nominee who is not the
registered owner,
(3) Guidelines for Certification of Taxpayer Identification
Number;
(4) Letter to Clients which may be sent to your clients for whose
account you hold Class A Common Shares registered in your name
(or in the name of your nominee, with space provided for
obtaining such clients' instructions with regard to the
Offer); and
(5) Return envelope addressed to the Transfer Agent.
PLEASE NOTE THAT THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 12:30 PM PACIFIC
STANDARD TIME ON JULY 5, 1996, UNLESS THE OFFER IS EXTENDED. TO ENSURE
PROCESSING OF YOUR OR YOUR CLIENT'S REQUEST, A LETTER OF TRANSMITTAL OR A
MANUALLY SIGNED FACSIMILE OF IT (TOGETHER WITH ANY CERTIFICATES FOR CLASS A
COMMON SHARES AND ALL OTHER REQUIRED DOCUMENTS) MUST BE RECEIVED BY THE TRANSFER
AGENT ON OR BEFORE THE EXPIRATION DATE JULY 5, 1996).
The Offer is not being made to (nor will tenders be accepted from or on
behalf of) holders of Class A Common Shares residing in any jurisdiction in
which the making of the Offer or the acceptance thereof would not be in
compliance with the laws of such jurisdiction.
Additional copies of the enclosed material may be obtained from Sierra
Shareholder Services at the appropriate address and telephone number set forth
in the Offer to Purchase. Any questions you have with respect to the Offer
should be directed to Sierra Shareholder Services at (800) 222-5852.
Very truly yours,
SIERRA PRIME INCOME FUND
- ------------------------------------------------------------------------------
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE
YOU OR ANY OTHER PERSON THE AGENT OF THE FUND OR THE TRANSFER AGENT OR
AUTHORIZE YOU OR ANY OTHER PERSON TO MAKE ANY STATEMENTS OR USE ANY
MATERIAL ON THEIR BEHALF WITH RESPECT TO THE OFFER, OTHER THAN THE
MATERIAL ENCLOSED HEREWITH AND THE STATEMENTS SPECIFICALLY SET FORTH IN
SUCH MATERIAL.
- ------------------------------------------------------------------------------
<PAGE>
EXHIBIT (a)(3)(ii)
Offer By
Sierra Prime Income Fund
To Purchase For Cash 114,466
Of Its Class A Common Shares At
Net Asset Value Per Common Share
To Our Clients:
Enclosed for your consideration are the Offer to Purchase, dated June
3, 1996, of Sierra Prime Income Fund (the "Fund") and related Letter of
Transmittal pursuant to which the Fund is offering to purchase up to 114,466 of
its Class A Common Shares of beneficial interest with no par value (the "Class A
Common Shares") for cash at the net asset value per Common Share ("NAV")
determined as of 2:00 PM Pacific Standard Time on the Expiration Date (defined
below) upon the terms and subject to the conditions set forth in the Offer to
Purchase and the Letter of Transmittal (which together constitute the "Offer").
An "Early Withdrawal Charge" or "EWC" may be imposed on certain Class A Common
Shares accepted for payment which have been held for less than two years.
The Offer to Purchase and the Letter of Transmittal are being forwarded
to you as the beneficial owner of Class A Common Shares held by us for your
account but not registered in your name. A tender of such shares can be made
only by us as the holder of record and only pursuant to your instructions. We
are sending you the Letter of Transmittal for your information only, you cannot
use it to tender Class A Common Shares we hold for your account.
Your attention is called to the following:
(1) The tender price is the NAV per Common Share in cash
determined as of 2:00 PM Pacific Standard Time on the Expiration Date.
An "Early Withdrawal Charge" or "EWC" may be imposed on certain Class A
Common Shares accepted for payment which have been held for less than
two years.
(2) The Offer is not conditioned upon any minimum number of
Class A Common Shares being tendered, but is subject to certain
conditions set forth in the Offer to Purchase.
(3) The Offer and withdrawal rights expire at 12:30 PM Pacific
Standard Time on July 5, 1996, unless extended (the "Expiration Date").
(4) The Offer is for 114,466 Class A Common Shares,
constituting approximately 10% of the Class A Common Shares outstanding
as of May 21, 1996.
(5) Tendering shareholders will not be obligated to pay
brokerage commissions or, subject to Instruction 6 of the Letter of
Transmittal, transfer taxes on the purchase of Class A Common Shares by
the Fund pursuant to the Offer. However, a broker, dealer or Authorized
Dealer may charge a fee for processing the transaction on your behalf.
(6) If more than 114,466 Class A Common Shares are duly
tendered prior to the expiration of the Offer, the Fund presently
intends to, assuming no changes in the factors originally considered by
the Board of Trustees when it determined to make the Offer and the
other conditions set forth in the Offer, but is under no obligation to,
extend the Offer period, if necessary, and increase the number of Class
A Common Shares that the Fund is offering to purchase to an amount
which it believes will be sufficient to accommodate the excess Class A
Common Shares tendered as well as any Common Shares, tendered during
the extended Offer period or purchase 114,466 Class A Common Shares (or
such greater number of Class A Common Shares sought) on a pro rata
basis.
If you wish to have us tender any or all of your Class A Common Shares,
please so instruct us by completing, executing and returning to us the attached
instruction form. An envelope to return your instructions to us is enclosed. If
you authorize us to tender your Class A Common Shares, all such Class A Common
Shares will be tendered unless you specify otherwise on the attached instruction
form. WE MUST RECEIVE YOUR INSTRUCTIONS, IF ANY, SUFFICIENTLY IN ADVANCE OF THE
EXPIRATION DATE (JULY 5, 1996) TO PROVIDE US WITH TIME TO PROCESS SUCH
INSTRUCTIONS AND FORWARD THEM TO THE TRANSFER AGENT SO THAT THE TRANSFER AGENT
WILL RECEIVE THEM ON OR PRIOR TO SUCH EXPIRATION DATE. THE OFFER AND WITHDRAWAL
RIGHTS EXPIRE AT 12:30 PM PACIFIC STANDARD TIME ON JULY 5, 1996, UNLESS THE
OFFER IS EXTENDED.
The Fund is not making the Offer to, nor will it accept tenders from or
on behalf of, owners of Class A Common Shares in any jurisdiction in which the
Offer or its acceptance would violate the securities, Blue Sky or other laws of
such jurisdiction. In any jurisdiction the securities or Blue Sky laws of which
require the Offer to be made by a licensed broker or dealer, the Offer shall be
deemed to be made on the Fund's behalf by one or more registered brokers or
dealers licensed under the laws of such jurisdiction.
<PAGE>
INSTRUCTIONS
WITH RESPECT TO OFFER BY
SIERRA PRIME INCOME FUND
To Purchase For Cash 114,466
Of its Class A Common Shares At
Net Asset Value Per Common Share
THIS FORM IS NOT TO BE USED TO TENDER CLASS A COMMON SHARES DIRECTLY TO
THE TRANSFER AGENT. IT SHOULD BE SENT TO YOUR BROKER ONLY IF YOUR BROKER IS THE
HOLDER OF RECORD OF YOUR CLASS A COMMON SHARES AND WILL BE EFFECTING THE TENDER
ON YOUR BEHALF. IT SHOULD BE SENT TO SUCH BROKER SUFFICIENTLY IN ADVANCE OF THE
EXPIRATION DATE (JULY 5, 1996) TO PROVIDE THE BROKER WITH TIME TO PROCESS THESE
INSTRUCTIONS AND FORWARD THEM TO THE TRANSFER AGENT SO THAT THE TRANSFER AGENT
WILL RECEIVE THEM ON OR PRIOR TO THE EXPIRATION DATE (JULY 5, 1996).
The undersigned acknowledge(s) receipt of your letter and the enclosed
Offer to Purchase, dated June 3, 1996, and the related Letter of Transmittal
(which together constitute the "Offer"), in connection with the offer by Sierra
Prime Income Fund (the "Fund") to purchase 114,466 Class A Common Shares of
beneficial interest with no par value (the "Class A Common Shares") at the net
asset value per Common Share determined as of 2:00 PM Pacific Standard Time on
the Expiration Date on the terms and subject to the conditions of the Offer. The
undersigned acknowledges that an "Early Withdrawal Charge" or "EWC" may be
imposed on certain Class A Common Shares accepted for payment which have been
held for less than two years.
The undersigned hereby instructs you to tender to the Fund the number
of Class A Common Shares indicated below (or, if no number is indicated below,
all Class A Common Shares) which are held by you for the account of the
undersigned, upon the terms and subject to the conditions of the Offer.
- ------------------------------------------------------------------------------
Aggregate number of Class A Common Shares to be tendered
by you for us (fill in number below)
__________ Class A Common Shares
- ------------------------------------------------------------------------------
<PAGE>
Unless otherwise indicated above, it will be assumed that all of the
Class A Common Shares held for the account of the undersigned are to be
tendered.
SIGNATURE(S)
- ------------------------------------------------------------------------------
...................................................................
...................................................................
(Signature(s) of Beneficial Owners)
...................................................................
(Account Number)
...................................................................
(Please print Name(s) and Addresses here)
...................................................................
(Area Code and Telephone Number)
...................................................................
(Tax Identification or Social Security Number)
- ------------------------------------------------------------------------------
Date , 1996
<PAGE>
EXHIBIT (a)(3)(iii)
[SIERRA FUND ADMINISTRATION CORPORATION LETTERHEAD]
June 3, 1996
RE: Sierra Prime Income Fund
Commencement of Tender Offer
To Our Authorized Dealers:
As you may be aware, it is the policy of the Board of Trustees of the
Sierra Prime Income Fund to consider on a quarterly basis whether to make a
tender offer for the Class A Common Shares of the Fund. We are pleased to
announce that the Board has authorized the Fund's first tender offer commencing
today, June 3, 1996, for the purpose of providing liquidity to its shareholders.
The commencement of the tender offer was announced in the Wall Street Journal
today.
The Fund is offering to purchase up to 114,466 of its Class A Common
Shares (approximately 10% of its issued and outstanding Class A Common Shares)
for cash at a price equal to the net asset value per Class A Common Shares of
the Fund determined as of 2:00 PM Pacific Standard Time on the Expiration Date
of the Offer. The Offer is scheduled to terminate as of 12:30 PM Pacific
Standard Time on July 5, 1996, the expiration date of the offer (unless
extended). An "Early Withdrawal Charge" or "EWC" may be imposed on certain Class
A Common Shares accepted for payment that have been held for less than two
years.
Terms and conditions of the tender offer are contained in the Fund's
Offer to Purchase dated June 3, 1996, and the related Letter of Transmittal,
copies of which are available to you upon request.
Should you have any questions regarding the tender offer, please
contact Sierra Shareholder Services at 1-800-222-5852.
Sincerely,
SIERRA FUND ADMINISTRATION CORPORATION
<PAGE>
EXHIBIT (a)(4)
Dear Shareholder
As you requested, we are enclosing a copy of the Sierra Prime Income
Fund ("Fund") Offer to Purchase 114,466 of its issued and outstanding Class A
Common Shares of beneficial interest ("Class A Common Shares") and the related
Letter of Transmittal (which together constitute the "Offer"). The Offer is for
cash at the net asset value ("NAV") per Class A Common Share determined as of
2:00 PM Pacific Standard Time on the Expiration Date of the Offer. An "Early
Withdrawal Charge" or "EWC" may be imposed on certain Class A Common Shares
accepted for payment that have been held for less than two years. Please read
the enclosed documents carefully, as well as the Fund's most current financial
statements.
If, after reviewing the information set forth in the Offer, you wish to
tender Class A Common Shares for purchase by the Fund, please contact your Great
Western Financial Securities Representative or follow the instructions contained
in the Offer to Purchase and Letter of Transmittal.
Neither the Fund nor its Board of Trustees is making any recommendation
to any Sierra Prime Income Fund shareholder as to whether to tender Class A
Common Shares. Each shareholder is urged to consult his or her investment
representative or tax adviser before deciding whether to tender any Class A
Common Shares.
The Fund's NAV per Class A Common Share from February 14, 1996 through
May 21, 1996 ranged from a high of $10.00 to a low of $10.00. On May 21, 1996
the NAV was $10.00 per Common Share. You can obtain current NAV quotations from
Sierra Shareholder Services by calling (800) 222-5852 between the hours of 6:00
AM and 6:00 PM Pacific Standard Time, Monday through Friday, and 6:00 AM to 3:00
PM Pacific Standard Time, on Saturday, except holidays. The Fund offers and
sells its Class A Common Shares to the public on a continuous basis. The Fund is
not aware of any secondary market trading for the Class A Common Shares.
Should you have any questions on the enclosed material, please do not
hesitate to call Sierra Shareholder Services at (800) 222-5852 during ordinary
business hours. We appreciate your continued interest in the Sierra Prime Income
Fund.
Sincerely,
SIERRA PRIME INCOME FUND
- --------------------------------------------------------------------------------
TO ENSURE PROCESSING OF YOUR REQUEST, A LETTER OF TRANSMITTAL OR A MANUALLY
SIGNED FACSIMILE OF IT (TOGETHER WITH ANY CERTIFICATES FOR CLASS A COMMON SHARES
AND ALL OTHER REQUIRED DOCUMENTS) MUST BE RECEIVED BY THE TRANSFER AGENT ON OR
BEFORE THE EXPIRATION DATE (JULY 5, 1996).
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT (C)(1)
INVESTMENT ADVISORY AGREEMENT
Investment Advisory Agreement executed as of February 14, 1996, between
SIERRA PRIME INCOME FUND, a Massachusetts business trust (the "Trust") and
SIERRA INVESTMENT ADVISORS CORPORATION, a California corporation (the
"Advisor").
Witnesseth:
That in consideration of the mutual covenants herein contained, it is
agreed as follows:
1. SERVICES TO BE RENDERED BY ADVISOR TO THE TRUST.
(a) Subject always to the control of the Board of Trustees, the
Advisor will, at its expense, furnish continuously an investment program for the
Trust, will make investment decisions on behalf of the Trust and will, subject
to the provisions of paragraph (c), place all orders for the purchase and sale
of its portfolio securities. Subject always to the control of the Trustees, the
Advisor will also manage, supervise and conduct the other affairs and business
of the Trust and matters incidental thereto. In the performance of its duties,
the Advisor will comply with the provisions of the Agreement and Declaration of
Trust, the By-laws of the Trust and the Trust's stated investment objectives,
policies and restrictions as set forth in its Registration Statement on Form
N-2, File No. 33- 98824 and will use its best efforts to safeguard and promote
the welfare of the Trust and to comply with other policies which the Trustees
may from time to time determine.
(b) The Advisor, at its expense, will furnish all necessary
office space and equipment, bookkeeping and clerical services (excluding
securities accounting and transfer agency services) required for it to perform
its duties hereunder and will pay all salaries, fees and expenses of Officers
and Trustees of the Trust who are affiliated with the Advisor.
(c) In the selection of banks, syndicated loan agents, brokers,
dealers, futures commissions merchants or any other sources of portfolio
investments for the Trust (hereafter, "brokers or dealers") and the placing of
orders for the purchaser and/or sale of portfolio investments for the Trust, the
Advisor shall seek to obtain the most favorable price and execution available,
except to the extent it may be permitted to pay higher brokerage commissions for
brokerage and research services as described below. In using its best efforts to
obtain for the Trust the most favorable price and execution available, the
Advisor, bearing in mind the Trust's best interests at all times, shall consider
all factors it deems relevant, including, by way of illustration, price, the
size of the transaction, the nature of the market for the security, the amount
of the commission, the timing of the transaction taking into account market
prices and trends, the reputation, experience and financial stability of the
broker or dealer involved and the quality of service rendered by the broker or
dealer in other transactions. Subject to such policies as the Trustees may
determine, the Advisor shall not be deemed to have acted unlawfully or to have
breached any duty created by this Contract or otherwise solely by reason of its
having caused the Trust to pay, a broker or dealer that provides brokerage and
research services to the Advisor an amount of commission for effecting a
portfolio investment transaction in excess of the amount of commission another
broker or dealer would have charged for effecting that transaction, if the
Advisor determines in good faith that such amount of commission was reasonable
in relation to the value of the brokerage and research services provided by such
broker or dealer, viewed in terms of either that particular transaction or the
Advisor's overall responsibilities with respect to the Trust and to other
clients of the Advisor as to which the Advisor exercised investment discretion.
The Trust hereby agrees with the Advisor and with any Sub-Advisor selected by
the Advisor as provided in Section 1(d) that any entity or person associated
with the Advisor or such Sub-Advisor which is a member of a national securities
exchange is authorized to effect any transaction on such exchange for the
account of the Trust which is permitted by Section 11(a)(1)(H) of the Securities
Exchange Act of 1934 and Rule 11a2-2(T) thereunder, and the Trust hereby
consents to the retention of compensation for such transactions in accordance
with Rule 11a2-2(T)(a)(2)(iv).
(d) Subject to the provisions of the Agreement and Declaration
of Trust of the Trust and the Investment Company Act of 1940, the Advisor, at
its expense, may select and contract with one or more investment advisers (the
"Sub-Adviser") for the Trust to perform some or all of the services for which it
is responsible pursuant to paragraph (a) of this Section 1 (and any related
facilities or services for which it is responsible under paragraph (b) of this
Section 1). The Advisor will compensate any Sub-Adviser of the Trust for its
services to the Trust. The Advisor may terminate the services of any Sub-Adviser
at any time in its sole discretion, and shall at such time assume the
responsibilities of such Sub-Advisor unless and until a successor Sub-Adviser is
selected.
(e) The Advisor shall not be obligated to pay any expenses of or
for the Trust not expressly assumed by the Advisor pursuant to this Section
other than as provided in Section 3.
2. OTHER AGREEMENTS, ETC.
It is understood that any of the shareholders, Trustees officers and
employees of the Trust may be a shareholder, director, officer or employee of,
or be otherwise interested in, the Advisor, and in any person controlled by or
under common control with the Advisor, and that the Advisor and any person
controlled by or under common control with the Advisor may have an interest in
the Trust.
The Trust also understands that the Advisor now acts, will continue to
act and may act in the future as investment adviser to fiduciary and other
managed accounts and as investment adviser to one or more other investment
companies or series of investment companies, and the Trust has no objection to
the Advisor so acting, provided that whenever the Trust and one or more other
accounts or investment companies advised by the Advisor have available funds for
investment, investments suitable and appropriate for each will be allocated in
accordance with procedures believed to be equitable to each entity. Similarly,
opportunities to sell securities will be allocated in an equitable manner. The
Trust recognizes that in some cases this procedure may adversely affect the size
of the position that may be acquired or disposed of for the Trust. In addition,
the Trust understands that the persons employed by the Advisor to assist the
performance of the Advisor's duties hereunder will not devote their full time to
such services and nothing contained herein shall be deemed to limit or restrict
the right of the Advisor or any affiliate of the Advisor to engage in and devote
time and attention to other businesses or to render services of whatever kind or
nature.
3. COMPENSATION TO BE PAID BY THE TRUST TO THE ADVISOR.
The Trust will pay to the Advisor as compensation for services
rendered, for the facilities furnished and for the expenses borne by the Advisor
pursuant to Section 1, a fee, computed and paid monthly at the annual rate of
.95% of the value of the Trust's average daily net assets. Such average daily
net asset value of the Trust shall be determined by taking an average of all of
the determinations of such net asset value during such month at the close of
business on each business day during such month while this Agreement is in
effect. Such fee shall be payable for each month within five (5) business days
after the end of such month.
In the event that expenses of the Trust for any fiscal year (not
including any interest, taxes, brokerage, extraordinary expenses or distribution
expenses paid by the Trust pursuant to any distribution plan) should exceed the
expense limitation on investment company expenses enforced by any statute or
regulatory authority of any jurisdiction in which shares of the Trust are
qualified for offer and sale, the compensation due the Advisor for such fiscal
year shall be reduced by the amount of such excess by a reduction or refund
thereof. In the event that the expenses of the Trust exceed any expense
limitation which the Advisor may, by written notice to the Trust, voluntarily
declare to be effective with respect to the Trust, subject to such terms and
conditions as the Advisor may prescribe in such notice, the compensation due the
Advisor shall be reduced, and, if necessary, the Advisor shall bear the Trust's
expenses to the extent required by such expense limitation.
The Advisor shall not be required to reimburse any amount in excess of
the compensation paid to it pursuant to Section 3. If the Advisor shall serve
for less than the whole of a month, the foregoing compensation shall be
prorated.
4. ASSIGNMENT TERMINATES THIS AGREEMENT; AMENDMENTS OF THIS AGREEMENT.
This Agreement shall automatically terminate, without the payment of
any penalty, in the event of its assignment; and this Agreement shall not be
amended unless such amendment is approved at a meeting by the affirmative vote
of a majority of the outstanding shares of the Trust, and by the vote, cast in
person at a meeting called for the purpose of voting on such approval, of a
majority of the Board of Trustees who are not interested persons of the Trust or
of the Advisor or of any Sub-Adviser of the Trust as defined in the Investment
Company Act of 1940, as amended .
5. EFFECTIVE PERIOD AND TERMINATION OF THIS AGREEMENT.
This Agreement shall become effective upon its execution, and shall
remain in full force and effect continuously thereafter (unless terminated
automatically as set forth in Section 4) until terminated as follows:
(a) Either party hereto may at any time terminate this
Agreement by not more than sixty days' written notice delivered or
mailed by registered mail, postage prepaid, to the other party, or
(b) If (i) the Board of Trustees or the shareholders by
the affirmative vote of a majority of the outstanding shares of the Trust, and
(ii) a majority of the Board of Trustees who are not interested persons of the
Trust or of the Advisor, as defined in the Investment Company Act of 1940, as
amended, by vote cast in person at a meeting called for the purpose of voting on
such approval, do not specifically approve at least annually the continuance of
this Agreement, then this Agreement shall automatically terminate at the close
of business on the second anniversary of its execution, or upon the expiration
of one year from the effective date of the last such continuance, whichever is
later; provided, however, that if the continuance of this Agreement is submitted
to the shareholders of the Trust for their approval and such shareholders fail
to approve such continuance of this Agreement as provided herein, the Advisor
may continue to serve hereunder in a manner consistent with the Investment
Company Act of 1940 and the rules and regulations thereunder.
Action by the Trust under paragraph (a) above may be taken either (i)
by vote of a majority of its Trustees, or (ii) by the affirmative vote of a
majority of the outstanding shares of the Trust.
Termination of this Agreement pursuant to this Section 5 shall be
without the payment of any penalty.
1. CERTAIN INFORMATION.
The Advisor shall promptly notify the Trust in writing of the
occurrence of any of the following events: (a) the Advisor shall fail to be
registered as an investment adviser under the Investment Company Act of 1940, as
amended, from time to time, and under the laws of any jurisdiction in which the
Advisor is required to be registered as an investment adviser in order to
perform its obligations under this Agreement, (b) the Advisor shall have been
served or otherwise have notice of any action, suit, proceeding, inquiry or
investigation, at law or in equity, before or by any court, public board or
body, involving the affairs of the Trust and (c) there shall be any change in
the control of the Advisor.
2. CERTAIN DEFINITIONS.
For the purposes of this Agreement, the "affirmative vote of a majority
of the outstanding shares" of the Trust means the affirmative vote, at a duly
called and held meeting of shareholders, (a) of the holders of 67% or more of
the shares of the Trust present (in person or by proxy) and entitled to vote at
such meeting, if the holders of more than 50% of the outstanding shares of the
Trust entitled to vote at such meeting are present in person or by proxy, or (b)
of the holders of more than 50% of the outstanding shares of the Trust entitled
to vote at such meeting, whichever is less.
For the purposes of this Agreement, the terms "affiliated person",
"control", "interested person" and "assignment" shall have their respective
meanings defined in the Investment Company Act of 1940, as amended, and the
rules and regulations thereunder, subject, however, to such exemptions as may be
granted by the Securities and Exchange Commission under said Act; the term
"specifically approve at least annually" shall be construed in a manner
consistent with the Investment Company Act of 1940 and the rules and regulations
thereunder; and the term "brokerage and research services" shall have the
meaning given in the Securities Exchange Act of 1934, as amended, and the rules
and regulations thereunder.
3. NONLIABILITY OF ADVISOR.
The Advisor shall exercise its best judgement in rendering its services
under this Agreement. In the absence of willful misfeasance, bad faith or gross
negligence on the part of the Advisor, or reckless disregard of its obligations
and duties hereunder, the Advisor shall not be subject to any liability to the
Trust, or to any shareholder of the Trust, for any act or omission in the course
of, or connected with, rendering services hereunder.
4. USE OF NAME.
The Advisor owns the name "Sierra", which may be used by the Trust only
with the consent of the Advisor. The Advisor consents to the use by the Trust of
the name "Sierra Prime Income Fund" or any other name embodying the name
"Sierra", but only on condition and so long as (i) this Agreement shall remain
in full force, (ii) the Trust shall fully perform, fulfill and comply with all
provisions of this Agreement expressed herein to be performed, fulfilled or
complied with by it, and (iii) Sierra Investment Advisors Corporation is the
Advisor of the Trust. No such name shall be used by the Trust at any time or in
any place or for any purposes or under any conditions except as provided in this
section. The foregoing authorization by the Advisor to the Trust to use the name
"Sierra" as part of a business or name is not exclusive of the right of the
Advisor itself to use, or to authorize others to use, the same; the Trust
acknowledges and agrees that as between the Advisor and the Trust, the Advisor
has the exclusive right so to use, or authorize others to use, said name, and
the Trust agrees to take such action as may reasonably be requested by the
Advisor to give full effect to the provisions of this section (including,
without limitation, consenting to such use of said name). Without limiting the
generality of the foregoing, the Trust agrees that, upon (i) any termination of
this Agreement by either party, (ii) the violation of any of its provisions by
the Trust or (iii) termination of this Investment Advisor Agreement between the
Advisor and the Trust, the Trust will, at the request of the Advisor, within six
months after such termination or violation, use its best efforts to change the
name of the Trust so as to eliminate all reference, if any, to the name "Sierra"
and will not thereafter transact any business in a name containing the name
"Sierra" in any form or combination whatsoever, or designate itself as the same
entity as or successor to an entity of such name, or otherwise use the name
"Sierra" or any other reference to the Advisor. Such covenants on the part of
the Trust shall be binding upon it, its trustees, offices, stockholders,
creditors and all other persons claiming under or through it.
5. LIMITATION OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS.
A copy of the Agreement and Declaration of Trust of the Trust is on
file with the Secretary of The Commonwealth of Massachusetts, and notice is
hereby given that this instrument is executed on behalf of the Trustees of the
Trust, as Trustees, and not individually and that the obligations of this
instrument are not binding upon any of the Trustees or shareholders individually
but are binding only upon the assets and property of the Trust.
6. COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original, but such counterparts shall together,
constitute only one instrument.
IN WITNESS WHEREOF, SIERRA PRIME INCOME FUND and SIERRA INVESTMENT
ADVISORS CORPORATION have each caused this instrument to be signed in
counterparts on its behalf by its duly authorized representative, all as of the
day and year first above written.
SIERRA PRIME INCOME FUND
By /s/ Keith Pipes
-----------------------------------
Title: Executive Vice President and
Treasurer
SIERRA INVESTMENT ADVISORS CORPORATION
By /s/ Michael D. Goth
-----------------------------------
Title: Chief Operating Officer
<PAGE>
EXHIBIT (C)(2)
INVESTMENT SUB-ADVISORY AGREEMENT
February 14, 1996
Van Kampen American Capital Management Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
Dear Sirs:
Sierra Prime Income Fund (the "Trust"), an unincorporated
business trust organized under the laws of the Commonwealth of Massachusetts,
and Sierra Investment Advisors Corporation ("Sierra Advisors"), a corporation
organized under the laws of the State of California, hereby agree with Van
Kampen American Management Inc. (the "Sub-advisor"), a corporation organized
under the laws of the State of Delaware, as follows:
1. INVESTMENT DESCRIPTION; APPOINTMENT
-----------------------------------
The Trust desires to employ the capital of the Trust by
investing and reinvesting in investments of the kind and in accordance with the
limitations specified in its Agreement and Declaration of Trust, as amended
("Declaration of Trust"), and in its Prospectus and Statement of Additional
Information relating to the Trust as in effect and which may be amended from
time to time, and in such manner and to such extent as may from time to time be
approved by the Board of Trustees of the Trust. Copies of the Trust's Prospectus
and Statement of Additional Information and the Trust's Declaration of Trust, as
amended or restated, have been or will be submitted to the Sub- advisor. The
Trust agrees to provide copies of all amendments to or restatements of the
Trust's Prospectus and Statement of Additional Information and the Trust's
Declaration of Trust to the Sub- advisor on a timely and on-going basis but in
all events prior to such time as said amendments or restatements become
effective. The Sub-advisor will be entitled to rely on all such documents
furnished to it by the Trust or Sierra Advisors. The Trust desires to employ and
hereby appoints the Sub-advisor to act as investment sub-advisor to the Trust.
The Sub-advisor accepts the appointment and agrees to furnish the services
described herein for the compensation set forth below.
2. SERVICES AS INVESTMENT SUB-ADVISOR
-----------------------------------
Subject to the supervision of the Board of Trustees of the
Trust and of Sierra Advisors, the Trust's investment advisor, the Sub-advisor
will (a) act in conformity with the Trust's Declaration of Trust, the Investment
Company Act of 1940, the Investment Advisers Act of 1940 and the Internal
Revenue Code of 1986, as the same may from time to time be amended, (b) make
investment decisions for the Trust in accordance with the Trust's investment
objectives and policies as stated in the Trust's Prospectus(es) and Statement of
Additional Information as in effect and, after timely notice to the Sub-advisor,
which may be amended from time to time, (c) place purchase and sale orders on
behalf of the Trust to effectuate the investment decisions made, (d) maintain
books and records with respect to the securities transactions of the Trust and
will furnish the Trust's Board of Trustees such periodic, regular and special
reports as the Board may reasonably request; and (e) treat confidentially and as
proprietary information of the Trust, all records and other information
specifically relative to the Trust and prior, present or potential shareholders;
and will not use such records and information for any purpose other than
performance of its responsibilities and duties hereunder, except after prior
notification to and approval in writing by the Trust, which approval shall not
be unreasonably withheld or delayed and such records may not be withheld where
the Sub-advisor is subject to audit by the U.S. Securities and Exchange
Commission or other regulatory, administrative or judicial proceeding or audit
or where the Sub-advisor may be exposed to civil or criminal contempt
proceedings for failure to comply, when requested to divulge such information by
duly constituted authorities, or when so requested by the Trust. In providing
those services, the Sub- advisor will supervise the Trust's investments and
conduct a continual program of investment, evaluation and, if appropriate, sale
and reinvestment of the Trust's assets. In addition, the Sub- advisor will
furnish the Trust or Sierra Advisors with whatever statistical information the
Trust or Sierra Advisors may reasonably request with respect to the instruments
that the Trust may hold or contemplate purchasing.
<PAGE>
3. BROKERAGE
---------
In executing transactions for the Trust and selecting banks,
syndicated loan agents, brokers or dealers (hereinafter referred to as "brokers
or dealers"), the Sub-advisor will use its best efforts to seek the best overall
terms available and shall execute or direct the execution of all such
transactions in a manner permitted by law and in a manner that is in the best
interest of the Trust and its shareholders. In assessing the best overall terms
available for any Trust transaction, with respect to the lenders from whom the
Trust will purchase assignments and participations in Senior Loans the
Sub-advisor will consider all factors it deems relevant including, but not
limited to their professional ability, level of service, relationship with the
borrower, financial condition, credit standards and quality of management. With
respect to investments other than Senior Loans, the Sub-advisor will consider
all factors it deems relevant including, but not limited to, breadth of the
market in the security, the price of the security, the financial condition and
execution capability of the broker or dealer and the reasonableness of any
commission for the specific transaction and on a continuing basis. Pursuant to
its investment determinations for the Trust, in placing orders with brokers or
dealers, the Sub-advisor will attempt to obtain the best net price and the most
favorable execution of its orders. Consistent with this obligation, when the
execution and price offered by two or more brokers or dealers are comparable,
the Sub-advisor may, in its discretion, purchase and sell portfolio securities
to and from brokers or dealers who provide the Trust with research advice and
other services.
4. INFORMATION PROVIDED TO THE TRUST
---------------------------------
The Sub-advisor will keep the Trust and Sierra Advisors
informed of developments materially affecting the Trust, and will on its own
initiative, furnish the Trust and Sierra Advisors on at least a quarterly basis
with whatever information the Sub-advisor reasonably believes is appropriate for
this purpose.
5. STANDARD OF CARE
----------------
The Sub-advisor shall exercise its reasonable best judgment in
rendering the services described in Paragraphs 2 and 3 above. The Sub-advisor
shall not be liable for any error of judgment or mistake of law or for any loss
suffered by the Trust or the Advisor in connection with the matters to which
this Agreement relates, except (a) a loss resulting from a breach of fiduciary
duty with respect to the receipt of compensation for services (in which case any
award of damages shall be limited to the period and the amount set forth in
Section 36(b)(3) of the Investment Company Act of 1940, as amended) or (b) a
loss resulting from willful misfeasance, bad faith or gross negligence on its
part in the performance of its duties or from reckless disregard by it of its
obligations and duties under this Agreement (each such breach, act or omission
described in (a) or (b) shall be referred to as "Disqualifying Conduct").
6. COMPENSATION
------------
In consideration of the services rendered pursuant to this
Agreement, Sierra Advisors will pay the Sub-advisor on the first business day of
each month a fee for the previous month at an annual rate of .475% of the
Trust's average daily net assets. The Sub-advisor shall have no right to obtain
compensation directly from the Trust or the Trust for services provided
hereunder and agrees to look solely to Sierra Advisors for payment of fees due.
Upon any termination of this Agreement before the end of a month, the fee for
such part of that month shall be prorated according to the proportion that such
period bears to the full monthly period and shall be payable upon the date of
termination of this Agreement. For the purpose of determining fees payable to
the Sub- advisor, the value of the Trust's net assets shall be computed at the
times and in the manner specified in the Trust's Prospectus and/or Statement of
Additional Information relating to the Trust as from time to time in effect.
7. EXPENSES
--------
The Sub-advisor will bear all expenses in connection with the
performance of its services under this Agreement, which expenses shall not
include brokerage fees or commissions in connection with the effectuation of
securities transactions. The Trust (or Sierra Advisors) will bear certain other
expenses to be incurred in its operation, including but not limited to:
organizational expenses, taxes, interest, brokerage fees and commissions, if
any; fees of Trustees of the Trust who are not officers, directors or employees
of the Sub-advisor, Sierra Advisors, the Trust's sub- administrator or any of
their affiliates; Securities and Exchange Commission fees and state Blue Sky
qualification fees; out-of-pocket expenses of custodians, transfer and dividend
disbursing agents and the Trust's sub-administrator and transaction charges of
custodians; insurance premiums; outside auditing and legal expenses; costs of
maintenance of the Trust's existence; costs attributable to investor services,
including without limitation, telephone and personnel expenses; costs of
preparing and printing prospectuses and statements of additional information for
regulatory purposes and for distribution to existing shareholders; costs of
shareholders' reports and meetings of the shareholders of the Trust and of the
officers or Board of Trustees of the Trust; and any extraordinary expenses.
8. SERVICES TO OTHER COMPANIES OR ACCOUNTS
---------------------------------------
The Trust understands that the Sub-advisor now acts, will
continue to act and may act in the future as investment adviser to fiduciary and
other managed accounts and as investment advisor or sub-investment advisor to
one or more other investment companies or series of investment companies, and
the Trust has no objection to the Sub-advisor so acting, provided that whenever
the Trust and one or more other accounts or investment companies advised by the
Sub-advisor have available funds for investment, investments suitable and
appropriate for each will be allocated in accordance with procedures believed to
be equitable to each entity. Similarly, opportunities to sell securities will be
allocated in an equitable manner. The Trust recognizes that in some cases this
procedure may limit the size of the position that may be acquired or disposed of
for the Trust. In addition, the Trust understands that the persons employed by
the Sub-advisor to assist in the performance of the Sub-advisor's duties
hereunder will not devote their full time to such service and nothing contained
herein shall be deemed to limit or restrict the right of the Sub-advisor or any
affiliate of the Sub-advisor to engage in and devote time and attention to other
business or to render services of whatever kind or nature.
9. TERM OF AGREEMENT
-----------------
This Agreement shall become effective as of the date first
written above, shall continue in effect for a period of two years thereafter,
and shall continue in effect for a period of more than two years thereafter only
so long as such continuance is specifically approved at least annually by (i)
the Board of Trustees of the Trust or (ii) a vote of a "majority" (as defined in
the Investment Company Act of 1940, as amended) of the Trust's outstanding
voting securities, provided that in either event the continuance is also
approved by a majority of the Board of Trustees who are not "interested persons"
(as defined in said Act) of any party to this Agreement, by vote cast in person
at a meeting called for the purpose of voting on such approval. This Agreement
is terminable, without penalty, on 30 days' written notice, by Sierra Advisors,
the Board of Trustees of the Trust or by vote of holders of a majority of the
Trust's shares, or upon 90 days' written notice, by the Sub-advisor and, will
terminate automatically upon any termination of the advisory agreement between
the Trust and Sierra Advisors. In addition, this Agreement will also terminate
automatically in the event of its assignment (as defined in said Act). The
Sub-advisor agrees to notify the Trust of any circumstances that might result in
this Agreement being deemed to be assigned.
10. REPRESENTATIONS OF THE TRUST AND THE SUB-ADVISOR
------------------------------------------------
The Trust represents that (i) a copy of its Agreement and
Declaration of Trust, dated October 4, 1995, and Amended Agreement and
Declaration of Trust dated January 18, 1996, together with all amendments
thereto, is on file in the office of the Secretary of the Commonwealth of
Massachusetts, (ii) the appointment of Sierra Advisors has been duly authorized,
(ii) the appointment of the Sub-advisor has been duly authorized, and (iv) it
has acted and will continue to act in conformity with the Investment Company Act
of 1940, as amended, and other applicable laws.
Sierra Advisors represents that (i) it is authorized to
perform the services herein, (ii) the appointment of the Sub-advisor has been
duly authorized, and (iii) it will act in conformity with the Investment Company
Act of 1940, as amended, and other applicable laws.
The Sub-advisor represents that it is authorized to perform
the services described herein.
<PAGE>
11. INDEMNIFICATION
---------------
Sierra Advisors shall indemnify and hold harmless the
Sub-advisor, its officers, directors, employee control persons and affiliated
persons (as defined in the Investment Company Act of 1940, as amended) from and
against any and all claims, losses, liabilities or damages (including reasonable
attorneys' fees and other related expenses), arising from or in connection with
this Agreement or the performance by the Sub-advisor of its duties hereunder;
provided, however, that nothing contained herein shall require that the
Sub-advisor be indemnified for Disqualifying Conduct.
12. AMENDMENT OF THIS AGREEMENT
---------------------------
No provision of this Agreement may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed by
the party against which enforcement of the change, waiver, discharge or
termination is sought. No amendment of this Agreement shall be effective with
respect to the Trust until approved by vote of a majority of the outstanding
voting securities.
13. LIMITATION OF LIABILITY
-----------------------
This Agreement has been executed on behalf of the Trust by the
undersigned officer of the Trust in his capacity as an officer of the Trust. The
obligations of this Agreement shall be binding upon the assets and property of
the Trust only and shall not be binding upon any Trustee, officer or shareholder
of the Trust individually.
14. ENTIRE AGREEMENT
----------------
This Agreement constitutes the entire agreement between the
parties hereto.
15. GOVERNING LAW
-------------
This Agreement shall be governed in accordance with the laws
of the Commonwealth of Massachusetts.
16. COUNTERPARTS
------------
This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original, but such counterparts shall
together, constitute only one instrument.
If the foregoing accurately sets forth our agreement, kindly
indicate your acceptance hereof by signing and returning the enclosed copy
hereof.
Very truly yours,
SIERRA PRIME INCOME FUND
By /s/ Keith B. Pipes
--------------------------------------
Title: Executive Vice President & Treasurer
SIERRA INVESTMENT ADVISORS CORPORATION
By /s/ Michael D. Goth
--------------------------------------
Title: Chief Operating Officer
Accepted:
VAN KAMPEN AMERICAN CAPITAL MANAGEMENT INC.
By /s/ Dennis J. McDonnell
-----------------------------
Title: President and Chief Operating Officer
<PAGE>
EXHIBIT (c)(3)
ADMINISTRATION AGREEMENT
February 14, 1996
Sierra Fund Administration Corporation
9301 Corbin Avenue, Suite 333
Northridge, California 91324
Ladies and Gentlemen:
The Sierra Prime Income Fund (the "Trust"), an unincorporated business
trust organized under the laws of the Commonwealth of Massachusetts, confirms
its Agreement with Sierra Fund Administration Corporation ("Sierra
Administration"), a corporation organized under the laws of the state of
California, regarding administrative services to be provided by Sierra
Administration in connection with the Trust. Sierra Administration agrees to
provide services upon the following terms and conditions:
1. INVESTMENT DESCRIPTION; APPOINTMENT
-----------------------------------
The Trust desires to employ its capital by investing and reinvesting
(a) in investments of the kind and in accordance with the limitations specified
in (i) the Agreement and Declaration of Trust dated October 4, 1995 and the
Amended Agreement and Declaration of Trust dated January 18, 1996, as amended
from time to time (the "Declaration of Trust"), and (ii) the prospectus (the
"Prospectus") and statement of additional information (the "Statement") relating
to the Trust contained in the Registration statement on Form N-2, File No.
33-98824, filed with the Securities and Exchange Commission (the "Registration
Statement") and (b) in such manner and to such extent as may from time to time
be approved by the Trust's Board of Trustees. Copies of the Prospectus, the
Statement of Additional Information and the Declaration of Trust have been
submitted to Sierra Administration. The Trust desires to employ and hereby
appoints Sierra Administration to act as its administrator. Sierra
Administration accepts this appointment and agrees to furnish the services
described herein for the compensation set forth below.
2. SERVICES AS ADMINISTRATOR
-------------------------
Subject to the supervision and direction of the Board of Trustees,
Sierra Administration is responsible for all administrative functions with
respect to the Trust and will (a) assist in supervising all aspects of the
operations of the Trust except those performed by the investment adviser and
sub- advisers under their respective investment management and sub-advisory
agreements; (b) supply the Trust with office facilities (which may be in Sierra
Administration's own offices, statistical and research data, data processing
services, clerical, accounting and bookkeeping services (including, but not
limited to, the calculation of the net asset value of shares of the Trust),
internal auditing and legal services, internal executive and administrative
services, and stationery and office supplies; (c) prepare reports to the Trust's
shareholders and materials for the Board of Trustees; (d) prepare tax returns,
and (e) prepare reports to and filings with the Securities and Exchange
Commission and state regulatory authorities. The services to be performed by
Sierra Administration hereunder may be delegated by it, in whole or in part, to
a sub-administrator provided that any delegation of duties to the
sub-administrator shall not relieve Sierra Administration of its
responsibilities hereunder.
3. SERVICES AS TRANSFER AND SHAREHOLDER SERVICING AGENT
----------------------------------------------------
The Trust hereby employs and appoints Sierra Administration to act as,
and Sierra Administration agrees to act as, transfer and shareholder servicing
agent with respect to the authorized and issued shares of beneficial interest of
the Trust which are held in accounts (individually an "Account" or collectively
the "Accounts") for shareholders and prospective shareholders of the Trust.
Sierra Administration agrees that it will perform, in accordance with procedures
established from time to time by agreement between the Trust and Sierra
Administration, a variety of services which may include one or more of the
following services:
(i) aggregate and process purchase, redemption and exchange
requests for shareholders and record such purchase, redemption
and exchange requests in the records of the Trust;
(ii) respond to all inquiries from shareholders or their authorized
representatives regarding the status of Accounts;
(iii) respond to correspondence from shareholders or their authorized
representatives regarding the status of Accounts or information
related to Accounts;
(iv) provide information periodically to shareholders showing their
positions in shares;
(v) arrange for bank wires;
(vi) as required by law, forward shareholder communications from the
Trust (such as proxies, shareholder reports, annual and
semi-annual financial statements and dividend, distribution and
tax notices) to shareholders;
(vii) keep such records on behalf of the Trust as required under
federal and state law;
(viii) establish procedures to ensure that the Trust's transfer agency
and shareholder relations functions are efficiently carried
out; and
(ix) provide such other similar services as the Trust may reasonably
request to the extent permitted under application statutes,
rules and regulations.
The services to be performed by Sierra Administration hereunder may be
delegated by it, in whole or in part, to a sub-transfer agent, provided that any
delegation of duties to the sub-transfer agent shall not relieve Sierra
Administration of its responsibilities hereunder.
4. COMPENSATION
------------
(a) In consideration of services rendered pursuant to this Agreement,
the Trust will pay Sierra Administration on the first business day of each month
a fee for the previous month at an annual rate of 0.35% of the Trust's average
daily net assets, out of which fee Sierra Administration shall pay expenses as
described in Section 5 including, without limitation, fees of any sub-
administrator or sub-transfer agent engaged by Sierra Administration and the
base fees and charges (but not transaction-based fees and out-of-pocket
expenses) of the Trust's custodian. The fee for the period from the date the
Trust commences operations to the end of that month shall be prorated according
to the proportion such period bears to the full monthly period.
(b) Upon any termination of this Agreement before the end of any month,
the fee for such part of a month shall be prorated according to the proportion
which such period bears to the full monthly period and shall be payable upon the
date of termination of this Agreement. For the purpose of determining fees
payable to Sierra Administration, the value of the Trust's net assets shall be
computed at the times and in the manner specified in the Prospectus and/or the
Statement of Additional Information as from time to time in effect.
5. EXPENSES
--------
Sierra Administration will bear all expenses in connection with the
performance of its services under this Agreement, including, without limitation,
payment of the fee to the custodian, and any sub-administrator, or sub-transfer
agent described in Paragraph 4 above. The Trust will bear certain other expenses
to be incurred in its operation, including: organizational expenses; taxes,
interest, brokerage fees and commissions, if any; fees of trustees of the Trust
who are not officers, directors, or employees of Sierra Investment Advisors
Corporation, the Trust's sub-adviser or sub- administrator, sub-transfer agent
or any of their affiliates; Securities and Exchange Commission fees and state
Blue Sky qualification fees; out-of-pocket expenses of custodians, transfer and
dividend disbursing agents and the Trust's sub-administrator or sub-transfer
agent and transaction charges of custodians; insurance premiums; outside
auditing and legal expenses; costs of maintenance of the Trust's existence;
costs attributable to investor services, including, without limitation,
telephone and personnel expenses; costs of preparing and printing prospectuses
and statements of additional information for regulatory purposes and for
distribution to existing shareholders; costs of shareholders' reports and
meetings of the shareholders of the Trust and of the officers or Board of
Trustees of the Trust; and any extraordinary expenses.
6. STANDARD OF CARE
----------------
Sierra Administration shall exercise its best judgment in rendering the
services listed in Paragraph 2 above. Sierra Administration shall not be liable
for any error of judgment or mistake of law or for any loss suffered by the
Trust in connection with the matters to which this Agreement relates, except a
loss resulting from willful misfeasance, bad faith or gross negligence on its
part in the performance of its duties or from reckless disregard by it of its
obligations and duties under this Agreement.
7. TERM OF AGREEMENT
-----------------
This Agreement shall become effective as of the date the Trust
commences its investment operations and shall continue for an initial two-year
term and shall continue automatically from year-to-year thereafter unless
terminated in accordance with the following sentence. This Agreement is
terminable at any time, without penalty, on 60 days' written notice, by the
Board of Trustees of the Trust or upon 90 days' written notice, by Sierra
Administration.
8. SERVICE TO OTHER COMPANIES OR ACCOUNTS
--------------------------------------
The Trust understands that Sierra Administration may act in the future
as administrator to other investment companies or series of investment
companies, and the Trust has no objection to Sierra Administration's so acting.
The Trust understands that the persons employed by Sierra Administration to
assist in the performance of Sierra Administration's duties under this Agreement
will not devote their full time to such services and nothing contained in this
Agreement shall be deemed to limit or restrict the right of Sierra
Administration or any affiliate of Sierra Administration to engage in and devote
time and attention to other businesses or to render services of whatever kind or
nature.
9. REPRESENTATIONS OF THE TRUST AND SIERRA ADMINISTRATION
------------------------------------------------------
The Trust represents that (i) a copy of the Declaration of Trust is on
file in the office of the Secretary of the Commonwealth of Massachusetts, (ii)
the appointment of Sierra Administration has been duly authorized and (iii) it
has acted and will continue to act in conformity with the Investment Company Act
of 1940, as amended (the "1940 Act") and other applicable laws. Sierra
Administration represents that it is authorized to perform the services
described herein.
10. LIMITATION OF LIABILITY
-----------------------
This Agreement has been executed on behalf of the Trust by the
undersigned officer of the Trust in his capacity as an officer of the Trust. The
obligations of this Agreement shall be binding only upon the assets and property
of the Trust and shall not be binding upon any Trustee, officer, or shareholder
of the Trust individually.
11. ENTIRE AGREEMENT
----------------
This Agreement constitutes the entire agreement between the parties
hereto.
12. GOVERNING LAW
-------------
This Agreement shall be governed in accordance with the laws of the
Commonwealth of Massachusetts.
13. COUNTERPARTS
------------
This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original, but such counterparts shall together,
constitute only one instrument.
<PAGE>
If the foregoing accurately sets forth our agreement, kindly indicate
your acceptance hereof by signing and returning the enclosed copy hereof.
Very truly yours,
SIERRA PRIME INCOME FUND
By: /s/ F. Brian Cerini
----------------------
President
Accepted:
SIERRA FUND ADMINISTRATION CORPORATION
By: /s/ Keith Pipes
------------------------------------------
Chief Financial Officer and Secretary
<PAGE>
EXHIBIT (c)(4)
DISTRIBUTION AGREEMENT
Sierra Investment Services Corporation
9301 Corbin Avenue, Suite 333
Northridge, California 91324
Ladies and Gentlemen:
This is to confirm that, whereas the undersigned Sierra Prime Income
Fund (the "Trust"), a business trust organized under the laws of the
Commonwealth of Massachusetts and registered as a closed-end, management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"), and Sierra Investment Services Corporation ("Sierra Services"), a
corporation organized under the laws of the State of California, have entered
into a Distribution Agreement dated as of February 14, 1996 pursuant to which
the Trust and Sierra Services have agreed that Sierra Services shall act as a
distributor of the classes of Common Shares of beneficial interest of the Trust.
Now, therefore, in consideration of the mutual promises and covenants
hereinafter contained, the Trust and Sierra Services do agree as follows:
1. APPOINTMENT
-----------
The Trust hereby appoints Sierra Services as agent of the Trust to act,
for the period and on the terms set forth in this Agreement, as a distributor of
the Trust Shares covered by the Trust's registration statement (the
"Registration Statement"), prospectuses and statements of additional information
as in effect from time to time under the Securities Act of 1933, as amended (the
"1933 Act"), and the 1940 Act, and Sierra Services accepts such appointment and
agrees to render the services herein described for the compensation herein
provided.
As used in this Agreement, the terms "registration statement,"
"prospectus," and "statement of additional information" shall mean any
registration statement, prospectus and statement of additional information filed
by the Trust with the Securities and Exchange Commission ("SEC" or "Commission")
and any amendments thereof and supplements thereto which at any time shall have
been filed with the SEC. "Prospectus" shall mean, with respect to any Shares of
the Trust at any time, the then-current prospectus and statement of additional
information relating to such Shares. The Trust and Sierra Services acknowledge
expressly that references in this Agreement to the "term" or "period" of this
Agreement shall include the term or period of this Original Agreement.
2. SALES OF SHARES
---------------
A. AUTHORIZATION. The Trust hereby authorizes Sierra Services to sell
-------------
Shares of the Trust, and Sierra Services agrees to use its best efforts to
solicit orders for the sale of such Shares, at such Shares' public offering
price, as determined in accordance with the Registration Statement. Sierra
Services shall have the right to order from the Trust the Shares of the Funds
needed, but not more than needed (correcting for any clerical errors or errors
of transmission), to fill such orders as are unconditional.
B. SELLING BROKER-DEALERS AND OTHER AGENTS. Sierra Services may, as
---------------------------------------
principal and on its own behalf, enter into agreements ("Dealer Agreements"), on
such terms and conditions as Sierra Services determines are not inconsistent
with this Agreement, with (a) any broker-dealer who is (i) registered under the
Securities Exchange Act of 1934, as amended (the "1934 Act"), (ii) registered as
required under applicable state securities or blue sky laws, and (iii) a member
in good standing of the National Association of Securities Dealers, Inc.
("NASD"); and (b) any other person (as such term is defined in the 1934 Act)
that is not required, for purposes of effecting transactions in securities, to
be registered under the 1934 Act, but is registered as required under applicable
state securities or blue sky laws, authorizing such broker-dealers and other
persons (collectively, "Brokers") to act as agents in connection with the sale
of the Shares of the Trust (which may include accepting orders for the purchase
or redemption of Shares, responding to inquiries regarding the Trust or the
Funds, and performing other related functions). Expulsion or suspension from the
NASD of any Broker required to be registered under the 1934 Act shall
automatically terminate such Broker's Dealer Agreement with Sierra Services for
sales of Shares as of the effective date of such expulsion or suspension.
C. REFUSAL AND SUSPENSION OF SALES. Each of Sierra Services and the
-------------------------------
Trust reserves the right to refuse at any time or times (a) to sell any Shares
for any reason, and (b) to accept an order for Shares for any reason. Sierra
Services acknowledges specifically that, whenever in the judgment of the Trust's
officers such action is warranted for any reason, including, without limitation,
market, economic or political conditions, the Trust may decline to accept any
orders for, or make any sales of, any Shares until such time as those officers
deem it advisable to accept such orders and to make such sales.
No Shares shall be offered and no orders for the purchase or sale of
Shares under any provisions of this Agreement shall be accepted by the Trust (a)
if and so long as the effectiveness of the Registration Statement or any
necessary amendments thereto shall be suspended under any provisions of the 1933
Act, or (b) if and so long as a current prospectus as required by Section
5(b)(2) of the 1933 Act is not on file with the SEC.
3. DISTRIBUTION SERVICES AND EXPENSES
----------------------------------
A. DISTRIBUTION EXPENSES. Sierra Services will bear all expenses in
---------------------
connection with the performance of its services and the incurring of
distribution expenses under this Agreement. For purposes of this Agreement,
"distribution expenses" of Sierra Services shall mean all expenses borne by
Sierra Services or by any other person with which Sierra Services has an
agreement (including but not limited to Dealer Agreements) approved by the
Trust, which expenses represent payment for activities primarily intended to
result in the sale of Shares, including, but not limited to, the following
(provided, that "distribution expenses" shall not include any expenditures in
connection with services that Sierra Services or any other person have agreed to
bear or provide without reimbursement or compensation):
(1) payments made to, and expenses of, registered representatives
and other employees of Sierra Services or of Brokers;
(2) payments made to, and expenses of, persons providing support
services in connection with the distribution of Shares,
including but not limited to office space and equipment,
telephone facilities, answering routine inquiries regarding
the Trust, and processing transactions;
(3) costs relating to the formulation and implementation of
marketing and promotional activities, including but not
limited to direct mail promotions and television, radio,
newspaper, magazine and other mass media advertising, and
costs involved in preparing, printing and distributing
advertising and sales literature pertaining to the Trust;
(4) costs of printing and distributing Prospectuses and reports
of the Trust to prospective Shareholders;
(5) costs involved in obtaining whatever information, analyses
and reports with respect to marketing and promotional
activities that the Trust may, from time to time, deem
advisable; and
(6) costs of financing any of the foregoing.
B. SCOPE OF DISTRIBUTION SERVICES. Distribution services rendered
------------------------------
pursuant to this Agreement with respect to any Share of the Trust shall be
deemed to be complete upon the issuance and sale of such Share.
C. TRUST EXPENSES. Sierra Services shall not be liable to assume any
--------------
other expenses of the Trust, which other expenses may include without
limitation: investment advisory fees; charges and expenses of any registrar,
custodian or depositary appointed by the Trust for safekeeping of its cash,
portfolio securities, or other property, and any transfer, dividend or
accounting agent(s) appointed by the Trust; brokers' commissions chargeable to
the Trust in connection with its portfolio securities transactions; all taxes,
including securities issuance and transfer taxes; all costs and expenses in
connection with maintenance of registration of the Trust, any Fund and the
Shares with the SEC, various states, and other jurisdictions (including filing
and legal fees and disbursements of counsel); expenses of printing, including
typesetting, and distributing Prospectuses to the Trust's shareholders; all
expenses of shareholders' and Trustees' meetings and of preparing, printing and
mailing proxy statements and reports to shareholders; fees and expenses of
Trustees; all expenses incident to the payment of any dividend, distribution,
withdrawal or redemption, whether in Shares or in cash; charges and expenses of
any outside service used for pricing of Shares; charges and expenses of legal
counsel and independent accountants, in connection with any matter relating to
the Trust; membership dues of industry associations; interest payable on
borrowings; postage; insurance premiums on property or personnel (including
officers and Trustees) of the Trust that inure to its benefit; extraordinary
expenses (including but not limited to legal claims and liabilities and
litigation costs and any indemnification related thereto); and all other charges
and costs of operations unless otherwise explicitly provided herein.
4. COMPENSATION
------------
The Distributor will receive no compensation from the Trust in
consideration of its services in connection with the distribution of Shares of
the Trust.
A. EARLY WITHDRAWAL CHARGES. The Trust shall cause its transfer agent
------------------------
(the "Transfer Agent") to withhold, from repurchase proceeds payable to holders
of Shares of the Funds, all early withdrawal sales charges properly payable by
such holders in accordance with the terms of the Prospectuses relating to such
Shares ("EWCs") and shall cause the Transfer Agent to pay such amounts over as
promptly as possible after the settlement date for each repurchase of such
Shares.
B. OTHER SERVICES; SERVICE FEE. Upon request of the Trust's Board of
---------------------------
Trustees, Sierra Services may, but shall be under no duty to, perform additional
services on behalf of the Trust, which services are not required by this
Agreement but may be performed by Sierra Services in conformity with applicable
law. Any such services will be performed on behalf of the Trust, and Sierra
Services may impose additional charges for such services, which charges may be
billed to the Trust and subject to examination by the Trust's independent
accountants. Sierra Services's payment or assumption of any expense of the Trust
that Sierra Services is not required to pay or assume under this Agreement shall
not relieve Sierra Services of any of its obligations to the Trust or obligate
Sierra Services to pay or assume any similar expense on any subsequent occasion.
Any shareholder services provided by Sierra Services to the Trust,
which services may include processing of shareholder transactions, responding to
inquiries from shareholders concerning the status of their accounts and the
operations of the Trust communicating with the Trust and its transfer agent on
behalf of such shareholders, or providing other shareholder services, nor for
any expenses associated with the provision of such shareholder services,
including office space and equipment, and telephone facilities, shall be
provided pursuant to a separate agreement.
C. DIRECTED PAYMENT; ALLOCABLE PORTION CALCULATIONS. Sierra Services
------------------------------------------------
may direct the Trust to pay any part or all of the EWCs payable to Sierra
Services in respect of any Shares directly to persons providing funds to Sierra
Services to cover or otherwise enable the incurring of expenses associated with
distribution services, and the Trust agrees to accept and to comply with such
direction. Sierra Services shall, at its own expense and not the expense of the
Trust, provide the Trust with any necessary calculations of Sierra Services's
Allocable Portion of any EWCs, and the Trust shall be entitled to rely
conclusively on such calculations, without prejudice to any claim it may have
concerning the accuracy of such calculations.
D. MAXIMUM CHARGES. Notwithstanding anything to the contrary contained
---------------
in this Agreement, EWCs paid to Sierra Services by any class of shares of the
Trust shall not exceed the amount permitted by the Rules of Fair Practice of the
NASD ("NASD Rules"), as in effect from time to time, and the aggregate amount of
EWCs paid to Sierra Services by any class of shares of the Trust shall not
exceed 8.50% of the offering price (determined in accordance with the NASD Rules
in effect from time to time).
5. DISCLOSURE AND SALES MATERIALS
------------------------------
A. TRUST GOVERNING DOCUMENTS. The Trust shall have furnished Sierra
-------------------------
Services with copies, properly certified or authenticated as Sierra Services may
reasonably request, of the following documents and of all amendments or
supplements thereto ("Governing Documents"):
(1) The Agreement and Declaration of Trust, as amended and in
effect as of the date of this Agreement (such Declaration of
Trust, as they may be amended from time to time hereafter, the
"Declaration of Trust");
(2) The Trust's Bylaws, as amended and in effect as of the date of
this Agreement (such Bylaws, as they may be amended from time
to time hereafter, the "Bylaws");
(3) Resolutions of the Trust's Board of Trustees authorizing the
appointment of Sierra Services as a Distributor of the Shares
and authorizing this Agreement as hereby amended and restated;
(4) The Trust's Notification of Registration filed pursuant to
Section 8(a) of the 1940 Act on Form N-8A under the 1940 Act,
as filed with the Securities and Exchange Commission (the
"SEC") on October 31, 1995;
(5) The Trust's registration statement on Form N-2 under the 1933
Act, (File No. 33-27489) and under the 1940 Act as filed with
the SEC on October 31, 1995 relating to the Shares of the Fund,
and all amendments thereto;
(6) The most recent Prospectus relating to the Shares; and
(7) All documents, notices and reports filed with the SEC.
The Trust authorizes Sierra Services and any Broker with whom Sierra
Services has entered into Dealer Agreements to use, in connection with the sale
of Shares, any Prospectus furnished by the Trust from time to time. Sierra
Services shall not, and shall take reasonable steps to ensure that no Broker
will, give any information nor make any representations, concerning any aspect
of the Shares or the Trust to any persons or entity unless such information or
representations are contained in the Registration Statement and/or the pertinent
Prospectus, or are contained in sales or promotional literature approved by the
Trust. Sierra Services shall not use, and shall take reasonable steps to ensure
that no Broker will, use any sales promotion material or advertising that has
not been previously approved by the Trust.
6. DUTIES OF THE TRUST
-------------------
A. The Trust agrees at its own expense to execute any and all
documents, to furnish any and all information and to take any other actions that
may be reasonably necessary in connection with (a) the registration of Shares
under the 1933 Act and (b) the qualification, pursuant to state securities laws,
of the Shares for sale in those states that Sierra Services may designate.
B. INFORMATION REPORTS; FINANCIAL DATA. The Trust shall furnish to
-----------------------------------
Sierra Services from time to time, for use in connection with the sale of the
Shares, such information reports with respect to the Trust and the Shares as
Sierra Services may reasonably request. Such reports shall be signed by officers
of the Trust duly authorized; the Trust warrants the statements contained in any
reports so signed to be true and correct. The Trust shall furnish to Sierra
Services, upon its request, (a) annual audits of the Trust's books and accounts
made by independent public accountants regularly retained by the Trust, (b)
semiannual unaudited financial statements pertaining to the Trust, (c) quarterly
earnings statements prepared by the Trust, (d) a monthly itemized list of the
securities in the portfolio of the Trust, (e) monthly balance sheets as soon as
practicable after the end of each month and (f) such additional information
regarding the Trust's financial condition as Sierra Services may reasonably
request from time to time.
7. COMPLIANCE; STANDARD OF CARE
----------------------------
A. COMPLIANCE. In performing any activity as distributor for the
----------
Shares pursuant to this Agreement, Sierra Services shall comply
with:
(1) all applicable provisions of the 1940 Act and any rules and
regulations thereunder;
(2) all provisions of the Registration Statement relating to the
Trust;
(3) all provisions of the Trust's Governing Documents;
(4) all rules and regulations of the NASD and all other
self-regulatory organizations applicable to the sale of
investment company shares; and
(5) any other applicable provisions of federal and state law.
Sierra Services shall use its best efforts to maintain all required
licenses and registrations for itself as a broker or dealer, and for its
registered representatives or other associated persons, under the 1934 Act and
applicable state securities or blue sky laws. Sierra Services shall be
responsible for ensuring that each Broker and its representatives engaged in
selling Shares of the Trust shall be duly and appropriately licensed, registered
and otherwise qualified to do so under the 1934 Act and any applicable blue sky
laws of each state or other jurisdiction in which such Shares may be sold.
Sierra Services shall be responsible for ensuring that each Broker supervises
its representatives. Expulsion or suspension of Sierra Services from the NASD
shall automatically terminate this Agreement on the effective date of such
expulsion or suspension.
B. DIRECTION OF THE BOARD. Any distribution activities undertaken by
----------------------
Sierra Services pursuant to this Agreement or any other services undertaken by
Sierra Services on behalf of the Trust, shall at all times be subject to any
directives of the Board of Trustees of the Trust.
C. STANDARD OF CARE. In performing its duties under this Agreement,
----------------
Sierra Services shall be obligated to exercise care and diligence and to act in
good faith and to use its best efforts within reasonable limits in performing
all services provided for under this Agreement, but shall not be liable for any
act or omission not constituting Sierra Services's willful misfeasance, bad
faith or gross negligence, or Sierra Services's reckless disregard of its duties
under this Agreement.
8. REPRESENTATIONS AND WARRANTIES
------------------------------
A. REGISTRATION STATEMENTS AND PROSPECTUSES. The Trust represents to
----------------------------------------
Sierra Services that all Registration Statements and Prospectuses filed by the
Trust with the SEC under the 1933 Act and the 1940 Act with respect to the
Shares are in conformity with the requirements of the 1933 Act, the 1940 Act and
the rules and regulations of the SEC thereunder. The Trust represents and
warrants to Sierra Services that any Registration Statement or Prospectus, when
it becomes effective, will include all statements required to be contained
therein in conformity with the 1933 Act, the 1940 Act and the rules and
regulations of the SEC; that all statements of fact contained in any
Registration Statement or Prospectus will be true and correct when such
Registration Statement or Prospectus becomes effective; and that no Registration
Statement nor any Prospectus, when the same shall become effective, will include
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading to a purchaser of Shares. Sierra Services may, but shall not be
obligated to, propose from time to time such amendment(s) to any Registration
Statement and such supplement(s) to any Prospectus as, in the light of future
developments, may, in the opinion of Sierra Services or its counsel, be
necessary or advisable. The Trust shall not file any amendment to any
Registration Statement or supplement to any Prospectus without giving Sierra
Services reasonable notice thereof in advance; provided, however, that nothing
contained in this Agreement shall in any way limit the Trust's right to file at
any time such amendment(s) to any Registration Statement and supplement(s) to
any Prospectus, of whatever character, as the Trust may deem advisable, such
right being in all respects absolute and unconditional.
B. CHARTER. The Trust represents that a copy of its Agreement and
-------
Declaration of Trust dated October 4, 1995, together with all amendments
thereto, is on file in the office of the Secretary of the Commonwealth of
Massachusetts and the office of the City Clerk of Boston, Massachusetts.
C. AUTHORIZATION. Sierra Services represents to the Trust that it is
-------------
authorized to perform the services described herein.
D. NASD. Sierra Services represents to the Trust that it is a member in
----
good standing of the NASD.
9. INDEMNIFICATION
---------------
A. Indemnification by the Trust. The Trust agrees to indemnify, defend
----------------------------
and hold Sierra Services, its officers, directors, agents, employees, and any
person who controls Sierra Services within the meaning of Section 15 of the 1933
Act (Sierra Services and such persons, collectively, "Sierra Services
Indemnified Persons"), free and harmless from and against any and all claims,
demands, liabilities and expenses (including the cost of investigating or
defending such claims, demands or liabilities and any counsel fees incurred in
connection therewith) that any Sierra Services Indemnified Person may incur
under the 1933 Act, the 1940 Act or common law or otherwise, arising out of or
based upon any untrue statement (or alleged untrue statement) of a material fact
contained in any Registration Statement or Prospectus relating to Shares of the
Trust, or arising out of or based upon any omission (or alleged omission) to
state a material fact required to be stated in any Registration Statement or
Prospectus relating to Shares of the Trust, or necessary to make the statements
in such Registration Statement or Prospectus not misleading, or arising out of
or based upon the Trust's material breach of this Agreement; provided, however,
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that the Trust's agreement to indemnify Sierra Services Indemnified Persons
shall not be deemed to cover any claims, demands, liabilities or expenses
arising out of or based upon any statements or representations made by Sierra
Services or its representatives or agents other than such statements and
representations as are contained in any Registration Statement or Prospectus and
in such financial and other statements regarding the Shares as are furnished to
Sierra Services pursuant to Sections 5a and 6b of this Agreement; provided
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further, that the Trust's agreement to indemnify Sierra Services and the Trust's
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representations and warranties hereinbefore set forth in Section 8 of this
Agreement shall not be deemed to cover any liability to the Trust or its
shareholders to which Sierra Services would otherwise be subject by reason of
Sierra Services' willful misfeasance, bad faith or gross negligence in the
performance of its duties, or by reason of Sierra Services' reckless
disregard of its obligations and duties under this Agreement; and provided
further, that this Section 9 shall apply to all acts or omissions by the parties
hereto that occur on or after the date first written above and the
indemnification provisions of this Agreement shall apply to all acts or
omissions by the parties hereto that occur prior to such date.
The Trust's agreement to indemnify Sierra Services Indemnified Persons
is expressly conditioned upon such Sierra Services Indemnified Person's
notifying the Trust, or causing the Trust to be notified, of any action brought
against such Sierra Services Indemnified Person, such notification to be given
by letter, telegram, telecopy or facsimile addressed to the Trust at its
principal office, within ten (10) days after the summons or other first legal
process shall be served; provided that the failure to provide such notification
within such time limit shall limit the Trust's obligation to indemnify such
persons only to the extent such failure causes prejudice to the interests of the
Trust with respect to such action. The failure so to notify the Trust of any
such action shall not relieve the Trust from any liability that the Trust may
have to the person against whom such action is brought by reason of any such
untrue (or alleged untrue) statement or omission (or alleged omission) otherwise
than on account of the Trust's indemnity agreement contained in this Section 9a.
The Trust's indemnification agreement contained in this Section 9a and the
Trust's representations and warranties in this Agreement shall remain operative
and in full force and effect regardless of any investigation made by or on
behalf of any Sierra Services Indemnified Person, and shall survive the delivery
of any Shares and, to the extent permitted by law, the termination of this
Agreement. This agreement of indemnity will inure exclusively to the benefit of
Sierra Services Indemnified Persons and their respective estates or successors,
as applicable.
B. INDEMNIFICATION BY SIERRA SERVICES. Sierra Services agrees to
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indemnify, defend and hold the Trust, its officers, directors, agents,
employees, and any person who controls the Trust within the meaning of Section
15 of the 1933 Act (the Trust and such persons, collectively, "Trust Indemnified
Persons"), free and harmless from and against any and all claims, demands,
liabilities and expenses (including the costs of investigating or defending such
claims, demands or liabilities and any counsel fees incurred in connection
therewith) that any Trust Indemnified Person may incur under the 1933 Act, the
1940 Act or common law or otherwise, but only to the extent that such liability
or expense incurred by such Trust Indemnified Person shall arise out of or be
based upon (a) any unauthorized sales literature, advertisements, information,
statements or representations or (b) any untrue statement (or alleged untrue
statement) of a material fact contained in information furnished in writing by
Sierra Services to the Trust and used in the answers to any of the items of the
Registration Statement or in the corresponding statements made in any
Prospectus, or shall arise out of or be based upon any omission (or alleged
omission) to state a material fact in connection with such information furnished
in writing by Sierra Services to the Trust and required to be stated in such
answers or necessary to make such information not misleading, or shall arise out
of or be based upon Sierra Services' material breach of this Agreement;
provided, that this Section 9 shall apply to all acts or omissions by the
parties hereto that occur on or after the date first written above and the
indemnification provisions of the Original Agreement shall apply to all acts or
omissions by the parties hereto that occur prior to such date.
Sierra Services' agreement to indemnify Trust Indemnified Persons is
expressly conditioned upon such Trust Indemnified Person's notifying Sierra
Services, or causing Sierra Services to be notified, of any action brought
against such Trust Indemnified Person, such notification to be given by letter,
telegram, telecopy or facsimile addressed to Sierra Services at its principal
office, within ten (10) days after the summons or other first legal process
shall be served; provided that the failure to provide such notification within
such time limit shall limit Sierra Services' obligation to indemnify such
persons only to the extent such failure causes prejudice to the interests of
Sierra Services with respect to such action. The failure so to notify Sierra
Services of any such action shall not relieve Sierra Services from any liability
that Sierra Services may have to the Trust Indemnified Person by reason of any
such untrue (or alleged untrue) statement or omission (or alleged omission)
otherwise than on account of Sierra Services' indemnity agreement contained in
this Section 9b. Sierra Services' indemnification agreement contained in this
Section 9b and its representations and warranties in this Agreement shall remain
operative and in full force and effect regardless of any investigation made by
or on behalf of any Trust Indemnified Person, and shall survive the delivery of
any Shares and, to the extent permitted by law, the termination of this
Agreement. This agreement of indemnity will inure exclusively to the benefit of
Trust Indemnified Persons and their respective estates or successors, as
applicable.
C. ASSUMPTION OF DEFENSE. An indemnifying party will be entitled to
---------------------
assume the defense of any suit brought to enforce any such claim, demand or
liability, but, in such case, such defense shall be conducted by counsel of good
standing chosen by the indemnifying party and approved by the indemnified party
(provided that such counsel shall not, except with the consent of an indemnified
party that is a Sierra Services Indemnified Person, be counsel to any investment
fund of the Trust); provided that the indemnified party shall be entitled to
conduct its own defense with counsel selected by it if such indemnified party is
advised by counsel that there may be a conflict of interest between the
indemnified party and the indemnifying party with respect to such defense. In
the event the indemnifying party elects to assume the defense of any such suit
and retain counsel of good standing approved by the indemnified party, the
defendant or defendants in such suit shall bear the fees and expenses of any
additional counsel retained by any of them; but in case the indemnifying party
does not elect or is not permitted to assume the defense of any such suit, or in
case the indemnified party does not approve of counsel chosen by the
indemnifying party, the indemnifying party will reimburse the indemnified party
named as defendant or defendants in such suit, for the fees and expenses of any
counsel retained by such indemnified party.
D. NOTICE. Each of Sierra Services and the Trust agrees to notify the
------
other promptly of the commencement of any litigation or proceedings against it
or any of its officers or directors or Trustees, as applicable, in connection
with the issuance and sale of any Shares.
E. CONTRIBUTION. If the indemnification provided for in this Section
------------
shall for any reason be unavailable to or insufficient to hold harmless a party
indemnified hereunder in respect of any claim, demand, liability or expense, or
any action in respect thereof, referred to therein, then each indemnifying party
shall, in lieu of indemnifying such indemnified party, contribute to the amount
paid or payable by such indemnified party as a result of such claim, demand,
liability or expense, or action in respect thereof, (a) in such proportion as
shall be appropriate to reflect the relative benefits received by the Trust on
the one hand and Sierra Services on the other from the offering of the Shares or
(b) if the allocation provided by clause (a) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (a) above but also the relative fault of
the Trust (and its agents other than Sierra Services) on the one hand and Sierra
Services on the other with respect to the statements or omissions which resulted
in such claim, demand, liability or expense, or action in respect thereof, as
well as any other relevant equitable considerations. The relative benefits
received by the Trust on the one hand and Sierra Services on the other with
respect to the offering of the Shares shall be deemed to be in the same
proportion as the total net proceeds from the offering of the Shares purchased
under this agreement (before deducting expenses) received by the Trust bear to
the total net underwriting discounts and commissions received by Sierra Services
with respect to the Shares purchased under this Agreement and retained by Sierra
Services after payments to the selling agents retained by it. The relative fault
shall be determined by reference to whether the untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a material
fact relates to information supplied by the Trust (or any of its agents other
than Sierra Services) or by Sierra Services, the intent of the parties and their
relative knowledge, access to information and opportunity to correct or prevent
such statement or omission. The Trust and Sierra Services agree that it would
not be just and equitable if contributions pursuant to this Section were to be
determined by pro rata allocation or by any other method of allocation which
does not take into account the equitable considerations referred to herein. The
amount paid or payable by an indemnified party as a result of the claim, demand,
liability or expense, or action in respect thereof, referred to above in this
Section shall be deemed to include, for purposes of this Section, any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section, Sierra Services shall not be required to contribute
any amount in excess of the amount by which the total net underwriting discounts
and commissions received by Sierra Services with respect to the Shares purchased
under this Agreement and retained by Sierra Services after payments to the
selling agents retained by it exceed the amount of any damages which Sierra
Services has otherwise paid or become liable to pay by reason of any untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933
Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation.
10. NOTICE TO SIERRA SERVICES.
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A. The Trust agrees to advise Sierra Services immediately in writing:
(1) of any request by the SEC for amendments to the Registration
Statement or Prospectus then in effect or for additional
information;
(2) in the event of the issuance by the SEC of any stop order
suspending the effectiveness of the Registration Statement or
Prospectus then in effect or the initiation of any proceeding
for that purpose;
(3) of the happening of any event that makes untrue any statement
of a material fact made in the Registration Statement or
Prospectus then in effect or that requires the making of a
change in such Registration Statement or Prospectus in order
to make the statements therein not misleading; and
(4) of all actions of the SEC with respect to any amendment to any
Registration Statement or Prospectus that may from time to
time be filed with the SEC.
11. TERM OF AGREEMENT.
-----------------
A. This Agreement shall become effective as of the date first set forth
above, shall remain in effect for an initial period of two years, and shall
continue thereafter from year to year for so long as such continuance is
specifically approved at least annually by
(1) the Trust's Board of Trustees or a vote of a "majority of the
----
outstanding voting securities" (as defined in the 1940 Act) of
the Trust; and
(2) a vote of a majority of the Trustees who are not "interested
persons" (as defined in the 1940 Act) of the Trust and who
have no direct or indirect financial interest in the operation
of the Plan, in this Agreement or any other agreement related
to the Plan (the "Qualified Trustees"), such vote cast in
person at a meeting called for the purpose of the voting on
such approval.
12. TERMINATION.
-----------
A. TERMINATION ON ASSIGNMENT. This Agreement shall terminate
-------------------------
automatically in the event of its "assignment" (as defined in the 1940 Act), it
being understood that this Agreement has been approved by the Trustees,
including the Qualified Trustees. Sierra Services agrees to notify the Trust of
any circumstances that might result in this Agreement being deemed to be
assigned.
B. VOLUNTARY TERMINATION. The Trust may terminate this Agreement with
---------------------
respect to the Trust, or in its entirety, without penalty, on 60 days' written
notice to Sierra Services, by vote of a majority of the Qualified Trustees or by
vote of a "majority of the outstanding voting securities" of the Trust, as the
case may be. Sierra Services may terminate this Agreement on 90 days' written
notice to the Trust. Termination of this Agreement with respect to any class of
shares of the Trust shall not cause this Agreement to terminate with respect to
any other class of shares of such Trust. Notice of termination as provided for
in this Section may be waived by either party, such waiver to be in writing.
13. MISCELLANEOUS.
-------------
A. NON-EXCLUSIVITY. The Trust recognizes that Sierra Services and its
---------------
affiliates shall be free to render distribution or other services to others
(including other investment companies) and to engage in other activities. The
Trust agrees that the directors, officers and employees of Sierra Services shall
not be prohibited by reason of this Agreement from engaging in any other
business activity or from rendering services to any other person, or from
serving as partners, directors, trustees or officers of any other firm or
corporation, including the Trust and other investment companies. Sierra Services
acknowledges that its appointment as distributor pursuant to this Agreement is
not exclusive, and that the Trust may appoint one or more other persons to act
as distributor for the Shares of one or more Funds.
B. INDEPENDENT CONTRACTOR. Sierra Services and any Broker shall be
----------------------
independent contractors and none of them nor any of their directors, officers or
employees shall, as such, be deemed employees of the Trust.
C. NOTICES. Any notices under this Agreement shall be in writing,
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mailed postage paid or sent by telegram, telecopy, or facsimile to the other
party at such address as such other party may designate from time to time for
the receipt of such notice.
D. INTEGRATION; AMENDMENT; COUNTERPARTS; GOVERNING LAW.
---------------------------------------------------
This Agreement constitutes the entire agreement between the parties
hereto with respect to the subject matter hereof, and may not be modified,
amended, or waived except by a written instrument duly executed by the party
against whom such modification, amendment, or waiver is sought to be enforced.
If any provisions of this Agreement shall be held or made invalid by a court
decision, statute rule or otherwise, the remainder of this Agreement shall not
be affected thereby.
This Agreement shall be subject to the provisions of the 1940 Act and
the 1934 Act and the rules, regulations and rulings thereunder, and of the
applicable rules and regulations of the NASD, from time to time in effect, and
the terms hereof shall be interpreted and construed in accordance therewith.
This Agreement may be executed in any number of counterparts, each of
which will be deemed an original, but all of which together will constitute one
and the same instrument.
This Agreement shall be governed in accordance with the internal
substantive laws of the Commonwealth of Massachusetts.
It is expressly agreed that the obligations of the Trust hereunder shall
not be binding upon any of the Trustees, shareholders, nominees, officers,
agents or employees of the Trust personally, but bind only the trust property of
the Trust, as provided in the Trust Agreement. The execution and delivery of
this Agreement have been authorized by the Trustees and effected by an
authorized officer of the Trust, acting as such, and neither such authorization
nor such execution and delivery shall be deemed to have been made by any Trustee
or officer individually or to impose any liability on any of them personally,
but shall bind only the trust property of the Trust as provided in the Trust
Agreement.
Please confirm that the foregoing accurately sets forth our agreement by
indicating your acceptance hereof at the place below indicated, whereupon it
shall become a binding agreement between us as of the date first set forth
above.
Very truly yours,
Sierra Prime Income Fund
By /s/ F. Brian Cerini
-----------------------------------
Title: President
ACCEPTED:
Sierra Investment Services Corporation
By /s/ Keith B. Pipes
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Title: Senior Vice President and Secretary
