SIERRA ASSET MANAGEMENT TRUST, N-1A EL, 1996-03-27

SIERRA ASSET MANAGEMENT TRUST
N-1A EL, 1996-03-27

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<PAGE> 1

As filed with the Securities and Exchange Commission on March 27, 1996
Securities Act File No. 33-
Investment Company Act File No. 811-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

____________________

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X /
_____
POST-EFFECTIVE AMENDMENT NO. ___

and

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / X /
_____
AMENDMENT NO. ___

Sierra Asset Management Trust
__________________________________________________
(Exact Name of Registrant as Specified in Charter)

9301 Corbin Avenue
Northridge, California 91324
_______________________________________
(Address of Principal Executive Offices)

Registrant's Telephone Number, including Area Code: (818) 725-0200

F. Brian Cerini
9301 Corbin Avenue
Northridge, California 91324
_______________________________________
(Name and Address of Agent for Service)

Copies to:
<TABLE>
<S> <C> <C>
Richard W. Grant, Esq. Lawrence Sheehan, Esq.
Morgan, Lewis & Bockius LLP O'Melveny & Myers
2000 One Logan Square 1999 Avenue of the Stars, #700
Philadelphia, Pennsylvania 19103 Los Angeles, California 90067
</TABLE>

Approximate Date of the proposed offering: As soon as practicable
after this Registration Statement becomes effective.

DECLARATION PURSUANT TO RULE 24f-2

Pursuant to Rule 24f-2 under the Investment Company Act of 1940, the
Registrant hereby declares that an indefinite number or amount of its shares of
beneficial interest, no par value, is being registered under the Securities Act
of 1933. The $500 filing fee required by said rule is paid herewith.

The Registrant hereby amends this Registration Statement under the
Securities Act of 1933 on such date or dates as may be necessary to delay its
effective date until Registrant shall file a further amendment which
specifically states that this Registration Statement shall thereafter become
effective in accordance with the provisions of Section 8(a) of the Securities
Act of 1933 or until this Registration Statement shall become effective on such
date as the Securities and Exchange Commission, acting pursuant to said Section
8(a), may determine.
<PAGE> 2

Part A - Information Required in a Prospectus
_________ ____________________________________
<TABLE>
<CAPTION>
Form N-1A
Item No. Location in Prospectus
_________ ______________________
<S> <C> <C>
1. Cover Page . . . . . . . . . Cover Page

2. Synopsis . . . . . . . . . . Fund Expenses (Class A Shares)
Fund Expenses (Class B Shares)
Expense Ratios of the Underlying Funds

3. Condensed Financial
Information . . . . . . . . Not Applicable

4. General Description of
Registrant . . . . . . . . Investments and Risk Considerations of the Funds;
Investment and Risk Considerations of the
Underlying Funds; Securities and Investment
Practices of the Funds and the Underlying Funds

5. Management of the Fund . . . The Funds in Detail -- Organization; Sierra
Services, Sierra Advisors, Its Affiliates and
Service Providers; Breakdown of Fund Expenses

5A. Management's Discussion of
Fund Performance . . . . . Not Applicable

6. Capital Stock and Other
Securities . . . . . . . . The Funds in Detail -- Organization; Dividends,
Capital Gains Distributions and Taxes

7. Purchase of Securities
Being Offered . . . . . . . Your Sierra Asset Management ("SAM") Fund
Account; Ways to Set Up Your Account;
Exchange Privileges and Restrictions

8. Redemption or Repurchase . . How to Sell Shares; Transaction Details; Exchange
Privileges and Restrictions

9. Pending Legal Proceedings. . Not Applicable
</TABLE>

<PAGE> 3

Part B - Information Required in a Statement of Additional Information
_________ _____________________________________________________________
<TABLE>
<CAPTION>
Form N-1A
Item No. Location in Statement of Additional Information
_________ _______________________________________________
<S> <C> <C>
10. Cover Page . . . . . . . . . Cover Page

11. Table of Contents . . . . . Contents

12. General Information and
History . . . . . . . . . . General Information and History

13. Investment Objectives and
Policies . . . . . . . . . Investment Objectives and Policies of the
Underlying Funds

14. Management of the Fund . . . Management of the Trust

15. Control Persons and Principal
Holders of Securities . . . Not Applicable

16. Investment Advisory and
Other Services . . . . . . How to Buy and Redeem Shares; Management of the
Trust

17. Brokerage Allocation and
Other Practices . . . . . . Portfolio Turnover; Portfolio Transactions

18. Capital Stock and Other
Securities . . . . . . . . Management of the Trust; see Prospectus --
"The Funds in Detail -- Organization" and
"Dividends, Capital Gain Distributions and
Taxes"

19. Purchase, Redemption and
Pricing of Securities
Being Offered . . . . . . . How to Buy and Redeem Shares; Net Asset Value; How
to Exchange Shares

20. Tax Status . . . . . . . . . Taxes; See Prospectus -- "Dividends, Capital Gains
Distributions and Taxes"

21. Underwriters . . . . . . . . How to Buy and Redeem Shares; Distributor

22. Calculation of Performance
Data . . . . . . . . . . . Determination of Performance; See Prospectus --
"Performance Information"

23. Financial Statements . . . . Not Applicable
</TABLE>

Part C
_______
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C to this Registration Statement.

<PAGE> 4

PROSPECTUS SIERRA ASSET MANAGEMENT TRUST
JUNE 3, 1996 9301 CORBIN AVENUE, SUITE 333
P.O. BOX 1160
NORTHRIDGE, CALIFORNIA 91328-1160
800-222-5852

FIXED FUND
VALUE FUND
BALANCED FUND
GROWTH FUND
AGGRESSIVE GROWTH FUND

This Prospectus describes the Class A Shares and Class B Shares of the Sierra
Asset Management Trust (the "Trust"). The Trust consists of five separate
diversified investment funds (each, a "Fund," and together, the "Funds") named
above. The Funds offer a range of asset allocation strategies designed to
accommodate different investors' philosophies and goals. The Class A and Class B
Shares offer investors alternative ways of paying sales charges and distribution
costs. Please read this prospectus before investing, and keep it for future
reference. It contains useful information that can help you decide whether the
investment goals of one or more of the Funds are right for you.

A Statement of Additional Information ("SAI") about the Trust, dated June 3,
1996, has been filed with the Securities and Exchange Commission (the "SEC"),
and is incorporated herein by reference (and is considered legally a part of
this prospectus). The SAI is available free upon request by calling the Trust at
800-222-5852.

The Trust is an open-end management investment company or mutual fund, and is
managed by Sierra Investment Services Corporation ("Sierra Services"). Each Fund
seeks to achieve its goal primarily by investing within certain predetermined
percentage ranges, in shares of various investment funds of the Sierra Trust
Funds, an open-end management investment company, and in the Sierra Prime Income
Fund, a closed-end management investment company (the "Underlying Funds") each
of which is managed by Sierra Investment Advisors Corporation ("Sierra
Advisors"). THIS PROSPECTUS OFFERS BOTH CLASS A SHARES AND CLASS B SHARES OF THE
FUNDS.

- --------------------------------------------------------------------------------

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

THE TRUST'S SHARES ARE NOT OBLIGATIONS, DEPOSITS OR ACCOUNTS (TRUST OR
OTHERWISE) OF, OR ENDORSED OR GUARANTEED BY, ANY BANK, OR ANY OF ITS AFFILIATES
OR CORRESPONDENTS. THE TRUST'S SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENT
AGENCY. INVESTMENT IN THE FUNDS INVOLVES RISK, INCLUDING POSSIBLE LOSS OF THE
PRINCIPAL AMOUNT INVESTED.
<PAGE> 5

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Fund Expenses............................................................................ 2
Investments and Risk Considerations of the Funds......................................... 7
Investments and Risk Considerations of the Underlying Funds.............................. 12
Performance Information.................................................................. 35
Your Account............................................................................. 38
How to Sell Shares....................................................................... 44
Exchange Privileges and Restrictions..................................................... 46
Dividends, Capital Gains and Taxes....................................................... 47
Shareholder and Account Policies......................................................... 49
The Funds in Detail...................................................................... 50
Sierra Services, Sierra Advisors, Their Affiliates and the Funds' Service Providers...... 50
Breakdown of Fund Expenses............................................................... 53
</TABLE>

FUND EXPENSES
(CLASS A SHARES)

The purpose of the following table is to help you understand the various costs
and expenses that you, as a shareholder, will bear directly in connection with
an investment in each Fund's Class A shares. In addition to these direct
expenses, Class A shares of the Funds will indirectly bear their pro rata share
of the expenses of the Underlying Portfolios. See "Expense Ratios of the
Underlying Funds."

SHAREHOLDER TRANSACTION EXPENSES
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
BALANCED AGGRESSIVE
FIXED FUND VALUE FUND FUND GROWTH FUND GROWTH FUND
---------- ---------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Maximum Sales Charge Imposed on Purchase (as a
percentage of offering price) 4.50% 4.50% 5.25% 5.25% 5.75%
Maximum Sales Charge Imposed on Reinvested
Dividends (as a percentage of offering
price) None None None None None
Maximum Contingent Deferred Sales Charge None None None None None
Redemption/Exchange Fees None None None None None
ANNUAL OPERATING EXPENSES (as a percentage of
average net assets)
- -------------------------------------------------------------------------------------------------------------
Management/Advisory Fees 0.15% 0.15% 0.15% 0.15% 0.15%
Rule 12b-1 Fees 0.25% 0.25% 0.25% 0.25% 0.25%
Other Expenses 0.73% 0.73% 0.73% 0.73% 0.73%
---------- ---------- -------- ----------- -----------
Total Operating Expenses 1.13% 1.13% 1.13% 1.13% 1.13%
</TABLE>

EXPENSE RANGE AND EXAMPLE
BASED ON THE EXPENSE RATIOS OF THE UNDERLYING FUNDS SET FORTH BELOW, THE RANGE
OF AVERAGE WEIGHTED EXPENSE RATIOS FOR CLASS A SHARES OF THE FUNDS ARE EXPECTED
TO BE AS FOLLOWS:+

<TABLE>
<CAPTION>
RANGE OF
FUND EXPENSE RATIOS
- ---- --------------
<S> <C>
Fixed Fund Class A............................................................... 1.55% to 1.85%
Value Fund Class A............................................................... 1.55% to 1.90%
Balanced Fund Class A............................................................ 1.85% to 2.15%
Growth Fund Class A.............................................................. 2.00% to 2.35%
Aggressive Growth Fund Class A................................................... 2.15% to 2.40%
</TABLE>

+ A range is provided since the average assets of each Fund invested in each of
the Underlying Funds may fluctuate.

-2-
<PAGE> 6

EXAMPLE

Using the midpoint of the ranges set forth above, an investor in a Fund would
pay the following expenses on a $1,000 investment assuming: (1) a 5% annual
return, (2) redemption at the end of each time period:

<TABLE>
<CAPTION>
1 YEAR 3 YEAR
------ ------
<S> <C> <C>
Fixed Fund Class A............................................................... $ 62 $ 96
Value Fund Class A............................................................... $ 62 $ 97
Balanced Fund Class A............................................................ $ 72 $112
Growth Fund Class A.............................................................. $ 73 $117
Aggressive Growth Fund Class A................................................... $ 79 $125
</TABLE>

THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. The purpose
of the expense tables and example is to assist the investor in understanding the
various costs and expenses that may be directly or indirectly borne by investors
in Class A shares of each Fund. A person who purchases shares through an account
with a financial institution may be charged separate fees by that institution in
addition to those set forth above. The information set forth in the foregoing
table and example relates to the Class A shares. Class A shares are subject to
the same management and advisory expenses as Class B shares, but are subject to
different distribution and shareholder servicing expenses. Additional
information may be found under "THE FUNDS IN DETAIL - SIERRA SERVICES, SIERRA
ADVISORS, THEIR AFFILIATES AND THE FUND'S SERVICE PROVIDERS" AND "THE FUNDS IN
DETAIL - BREAKDOWN OF FUND EXPENSES."

Long-term Class A shareholders may pay more than the economic equivalent of the
maximum front-end sales charges otherwise permitted by the Rules of Fair
Practice of the National Association of Securities Dealers, Inc. (the "NASD").

-3-
<PAGE> 7

FUND EXPENSES
(CLASS B SHARES)

The purpose of the following table is to help you understand the various costs
and expenses that you, as a shareholder, will bear directly in connection with
an investment in each Fund's Class B shares. In addition to these direct
expenses, Class B shares of the Funds will indirectly bear their pro rata share
of the expenses of the Underlying Funds. See "EXPENSE RATIOS OF THE UNDERLYING
FUNDS."

SHAREHOLDER TRANSACTION EXPENSES
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
AGGRESSIVE
BALANCED GROWTH
FIXED FUND VALUE FUND FUND GROWTH FUND FUND
---------- ---------- -------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Maximum Sales Charge Imposed on Purchase (as a
percentage of offering price) None None None None None
Maximum Sales Charge Imposed on Reinvested
Dividends (as a percentage of offering price) None None None None None
Maximum Contingent Deferred Sales Charge 5.00% 5.00% 5.00% 5.00% 5.00%
Redemption/Exchange Fees None None None None None

ANNUAL OPERATING EXPENSES (as a percentage of
average net assets)
Management/Advisory Fees 0.15% 0.15% 0.15% 0.15% 0.15%
Rule 12b-1 Distribution & Shareholder Servicing
Fees 1.00% 1.00% 1.00% 1.00% 1.00%
Other Expenses 0.73% 0.73% 0.73% 0.73% 0.73%
---- ---- ---- ---- ----
Total Operating Expenses 1.88% 1.88% 1.88% 1.88% 1.88%
</TABLE>

EXPENSE RANGES AND EXAMPLE

BASED ON THE EXPENSE RATIOS OF THE UNDERLYING FUNDS SET FORTH BELOW, THE RANGE
OF AVERAGE WEIGHTED EXPENSE RATIOS FOR CLASS B SHARES OF THE FUNDS ARE EXPECTED
TO BE AS FOLLOWS:+

<TABLE>
<CAPTION>
RANGE OF
FUND EXPENSE RATIOS
- ---- --------------
<S> <C>
Fixed Fund Class B............................................................... 2.30% to 2.60%
Value Fund Class B............................................................... 2.30% to 2.65%
Balanced Fund Class B............................................................ 2.60% to 2.90%
Growth Fund Class B.............................................................. 2.75% to 3.10%
Aggressive Growth Fund Class B................................................... 2.90% to 3.15%
</TABLE>

+ A range is provided since the average assets of each Fund invested in each of
the Underlying Funds may fluctuate.

-4-
<PAGE> 8

EXAMPLE

Using the midpoint of the ranges set forth above, an investor in a Fund would
pay the following expenses on a $1,000 investment assuming a 5% annual return;
and

Redemption at the end of each time period:

<TABLE>
<CAPTION>
1 YEAR 3 YEAR
------ ------
<S> <C> <C>
Fixed Fund Class B............................................................... $ 75 $106
Value Fund Class B............................................................... $ 75 $107
Balanced Fund Class B............................................................ $ 78 $115
Growth Fund Class B.............................................................. $ 80 $121
Aggressive Growth Fund Class B................................................... $ 81 $124
</TABLE>

No redemptions:

<TABLE>
<CAPTION>
1 YEAR 3 YEAR
------ ------
<S> <C> <C>
Fixed Fund Class B............................................................... $ 25 $ 76
Value Fund Class B............................................................... $ 25 $ 77
Balanced Fund Class B............................................................ $ 28 $ 85
Growth Fund Class B.............................................................. $ 30 $ 91
Aggressive Growth Fund Class B................................................... $ 31 $ 94
</TABLE>

THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. The purpose
of the expense tables and example is to assist the investor in understanding the
various costs and expenses that may be directly or indirectly borne by investors
in Class B shares of each Fund. A person who purchases shares through an account
with a financial institution may be charged separate fees by that institution in
addition to those set forth above. The information set forth in the foregoing
table and example relates to the Class B shares. Class B shares are subject to
the same management and advisory expenses as Class A shares, but are also
subject to different distribution and shareholder servicing expenses. Additional
information may be found under "THE FUNDS IN DETAIL - SIERRA SERVICES, SIERRA
ADVISORS, THEIR AFFILIATES AND THE FUND'S SERVICE PROVIDERS" AND "THE FUNDS IN
DETAIL - BREAKDOWN OF FUND EXPENSES."

Long-term Class B shareholders may pay more than the economic equivalent of the
maximum front-end sales charges otherwise permitted by the Rules of Fair
Practice of the NASD.

-5-
<PAGE> 9

EXPENSE RATIOS OF
THE UNDERLYING FUNDS

As previously stated, Class A and Class B shares of the Funds will indirectly
bear their pro rata share of fees and expenses incurred by the Underlying Funds,
which are investment funds of the Sierra Trust Funds ("STF") and Sierra Prime
Income Fund ("SPIF") and the investment returns of each class of shares of the
Funds will be net of the expenses of the Underlying Funds. The charts set forth
below provide the expense ratios for each of the Underlying Funds in which the
Funds will invest (based on estimates for the first fiscal year).

FIXED FUND

<TABLE>
<CAPTION>
UNDERLYING FUNDS UNDERLYING FUNDS'
ELIGIBLE FOR PURCHASE EXPENSE RATIOS*
- ------------------------------- -----------------
<S> <C>
STF U.S. Government Money Fund .41%
STF Global Money Fund .21%
STF Short Term High Quality
Bond Fund .31%
STF U.S. Government Fund .41%
STF Corporate Income Fund .46%
Sierra Prime Income Fund 1.16%
</TABLE>

VALUE FUND

GROWTH FUND

BALANCED FUND

AGGRESSIVE GROWTH FUND

<TABLE>
<CAPTION>
UNDERLYING FUNDS UNDERLYING FUNDS'
ELIGIBLE FOR PURCHASE EXPENSE RATIOS*
- ------------------------------- -----------------
<S> <C>
STF Global Money Fund .21%
STF Short Term High Quality
Bond Fund .31%
STF Growth and Income Fund 1.14%
STF Growth Fund 1.32%
STF Emerging Growth Fund 1.23%
STF International Growth Fund 1.30%
</TABLE>

* The Funds will purchase only Class I shares of the Underlying Funds other than
SPIF. The expense ratios of the Class I shares of the Underlying Funds other
than SPIF and the Class A Common Shares of SPIF shown above reflect existing
fee waivers or expense reimbursement arrangements that may be discontinued at
any time. Absent existing fee waivers or expense reimbursement arrangements
that may be discontinued at any time.

-6-
<PAGE> 10

Absent these fee waivers or expense reimbursements on the Class I shares
of the Underlying Funds other than SPIF and the Class A Common Shares of
SPIF, these expense ratios would be higher.

Investors in the Funds should recognize that they may invest directly in the
Underlying Funds if they do not wish to participate in the Funds' asset
allocation strategies and that, by investing in Underlying Funds through the
Funds, they will bear not only their proportionate share of the expenses of the
Funds (including operating costs and investment advisory and administrative fees
to the extent Sierra Services or Sierra Administration has not elected to waive
such fees), but will also indirectly bear similar expenses of the Underlying
Funds. Currently, Class I shares of the Underlying Funds other than SPIF are not
subject to a distribution or shareholder service fee and for the Class A Common
shares of SPIF, the sales load is waived for investments by the Funds, and
neither a distribution fee nor a shareholder service fee is charged.
Consequently, a shareholder of a Fund's shares will not indirectly bear expenses
paid by an Underlying Portfolio for the distribution of its shares. See "HOW TO
INVEST IN A SAM FUND ACCOUNT."

INVESTMENTS AND RISK CONSIDERATIONS OF THE FUNDS

The Funds offer investors the opportunity to pursue a selected asset allocation
strategy that is implemented through the Funds' investing in certain of the
Underlying Funds. The Funds are designed for long-term investors seeking total
return for tax-advantaged retirement and other long-term investment or savings
accounts, including: Individual Retirement Accounts ("IRAs"), Simplified
Employee Plans ("SEPs"), 403(b)(7) tax-sheltered retirement plans for employees
of non-profit organizations, 401(k) savings plans, profit-sharing and
money-purchase pension plans, and other corporate pension and savings plans.

In order to achieve its investment objective, each Fund typically allocates its
assets, within predetermined percentage ranges, among certain of the Underlying
Funds. The percentages reflect the extent to which each Fund will invest in the
particular market segment represented by each Underlying Fund, and the varying
degrees of potential investment risk and reward represented by each Fund's
investments in those market segments and their corresponding Underlying Funds.
Sierra Services may alter these percentage ranges when it deems appropriate. The
assets of each Fund will be allocated among each of the Underlying Funds in
accordance with its investment objective, Sierra Services' outlook for the
economy and the financial markets and the relative market valuations of the
Underlying Funds. In addition, in order to meet liquidity needs or for temporary
defensive purposes, each Fund may invest its assets directly in cash, money
market securities, or other instruments, including stock or bond index futures
and options thereon. The investment objective of each Fund is set forth below.
Each Fund's investment objective is a fundamental policy, and may not be changed
without shareholder approval. There can be no assurance that a Fund will achieve
its stated objective. For purposes of discussing Fund objectives, the "STF Fixed
Income Funds" include the STF U.S. Government Money Fund, the STF Global Money
Fund, the STF Short Term High Quality Bond Fund, the STF U.S. Government Fund
and the STF Corporate Income Fund, and the "STF Equity Funds" include the STF
Growth and Income Fund, the STF Growth Fund, the STF Emerging Growth Fund and
the STF International Growth Fund.

-7-
<PAGE> 11

FIXED FUND

The FIXED FUND seeks long term total return through reinvestment of current
income consistent with preservation of capital primarily through participation
in the domestic fixed income markets with limited participation in international
fixed income markets. In general, relative to the other Funds, the Fixed Fund
should offer investors the potential for a high level of income while
maintaining principal and subjecting investors to a low level of principal risk.
The Fund will invest in the following Underlying Funds up to the percentage
limits set forth below:

<TABLE>
FUND INVESTMENT LIMIT (PERCENT OF
UNDERLYING PORTFOLIO THE FIXED FUND'S TOTAL ASSETS)
- -------------------- ---------------------------------

<S> <C>
STF U.S. Government Money Fund.............................................................. 50%
STF Global Money Fund....................................................................... 50%
STF Short Term High Quality Bond Fund....................................................... 50%
STF U.S. Government Fund.................................................................... 50%
STF Corporate Income Fund................................................................... 50%
Sierra Prime Income Fund.................................................................... 50%
</TABLE>
The Fixed Fund must invest 100% of its total assets in STF Fixed Income Funds
and SPIF.

VALUE FUND

The VALUE FUND seeks total return consisting of reinvestment of income with some
capital appreciation, primarily through investments in domestic and
international fixed income markets with limited participation in domestic and
international equity markets. In general, relative to the other Funds, the Value
Fund should offer investors the potential for a medium to high level of
reinvestment income and the potential for a low to medium level of capital
growth, while subjecting investors to a low to medium level of principal risk.
The Fund will invest in the following Underlying Funds up to the percentage
limits set forth below:

<TABLE>
FUND INVESTMENT LIMIT (PERCENT OF THE
UNDERLYING PORTFOLIO VALUE FUND'S TOTAL ASSETS)
- -------------------- -------------------------------------
<S> <C>
STF U.S. Government Money Fund............................................................. 40%
STF Global Money Fund...................................................................... 40%
STF Short Term High Quality Bond Fund...................................................... 40%
STF U.S. Government Fund................................................................... 40%
STF Corporate Income Fund.................................................................. 40%
STF Growth and Income Fund................................................................. 30%
STF Growth Fund............................................................................ 30%
STF Emerging Growth Fund................................................................... 30%
Sierra Prime Income Fund................................................................... 30%
</TABLE>

The Value Fund must invest no more than 30% of its total assets in the STF
Equity Funds.

BALANCED FUND

The BALANCED FUND seeks total return consisting of a combination of reinvestment
income and capital appreciation, consistent with reasonable risk through limited
participation in domestic and international fixed income and equity markets. In
general, relative to other Funds, the Balanced Fund should offer investors the
potential for a medium level of income and the potential for a medium level of
capital growth while subjecting investors to a medium level

-8-
<PAGE> 12

of principal risk. The Fund will invest in the following Underlying Funds up to
the percentage limits set forth below:

<TABLE>
FUND INVESTMENT LIMIT (PERCENT OF THE
UNDERLYING PORTFOLIO BALANCED FUND'S TOTAL ASSETS)
- -------------------- -------------------------------------
<S> <C>
STF U.S. Government Money Fund............................................................. 40%
STF Global Money Fund...................................................................... 40%
STF Short Term High Quality Bond Fund...................................................... 40%
STF U.S. Government Fund................................................................... 40%
STF Corporate Income Fund.................................................................. 40%
STF Growth and Income Fund................................................................. 30%
STF Growth Fund............................................................................ 30%
STF Emerging Growth Fund................................................................... 30%
STF International Growth Fund.............................................................. 30%
Sierra Prime Income Fund................................................................... 30%
</TABLE>

Except for defensive periods, the Balanced Fund must invest no less than 30% and
no more than 70% of its total assets in the STF Fixed Income Funds and SPIF and
no less than 30% and no more than 70% of its total assets in the STF Equity
Funds.

GROWTH FUND

The GROWTH FUND seeks to provide long-term capital appreciation. In general,
relative to the other Funds, the Growth Fund should offer investors the
potential for a low level of income and the potential for a medium to high level
of capital growth while subjecting investors to a medium level of principal
risk. The Fund will invest in the following Underlying Funds up to the
percentage limits set forth below:

<TABLE>
FUND INVESTMENT LIMIT (PERCENT OF THE
UNDERLYING PORTFOLIO GROWTH FUND'S TOTAL ASSETS)
- -------------------- -------------------------------------
<S> <C>
STF U.S. Government Money Fund............................................................. 30%
STF Global Money Fund...................................................................... 30%
STF Short Term High Quality Bond Fund...................................................... 30%
STF U.S. Government Fund................................................................... 30%
STF Corporate Income Fund.................................................................. 30%
STF Growth and Income Fund................................................................. 40%
STF Growth Fund............................................................................ 40%
STF Emerging Growth Fund................................................................... 40%
STF International Growth Fund.............................................................. 40%
Sierra Prime Income Fund................................................................... 30%
</TABLE>

Except for defensive periods, the Growth Fund must invest at least 60% of its
total fund assets in STF Equity Funds.

-9-
<PAGE> 13

AGGRESSIVE GROWTH FUND

The AGGRESSIVE GROWTH FUND seeks to provide long-term capital appreciation. In
general, relative to the other Funds, the Aggressive Growth Fund should offer
investors the potential for a higher level of capital growth while subjecting
investors to corresponding levels of principal risk. The Fund will invest in the
following Underlying Funds up to the percentage limits set forth below:

<TABLE>
<CAPTION>
FUND INVESTMENT LIMIT (PERCENT OF THE
UNDERLYING PORTFOLIO AGGRESSIVE GROWTH FUND'S TOTAL ASSETS)
- -------------------- --------------------------------------
<S> <C>
STF Global Money Fund...................................................................... 50%
STF Short Term High Quality Bond Fund...................................................... 50%
STF Growth and Income Fund................................................................. 50%
STF Growth Fund............................................................................ 50%
STF Emerging Growth Fund................................................................... 50%
STF International Growth Fund.............................................................. 50%
</TABLE>

Except for defensive periods, the Aggressive Growth Fund must invest at least
75% of its total fund assets in STF Equity Funds.

GENERAL INVESTMENT POLICIES OF THE FUNDS

Each of the Funds will attempt to achieve its investment objective by purchasing
shares of the Underlying Funds within the percentage ranges for such Fund set
forth above. The SEC has issued an exemptive order to the Trust, dated [JUNE 2,
1996] (the "Order"), permitting each of the Funds to acquire up to 100% of the
shares of any of the Underlying Funds under certain conditions. Absent this
Order, the Investment Company Act of 1940, as amended (the "1940 Act"), would
substantially limit the ability of the Funds and Underlying Funds to engage in
these transactions.

In order to meet liquidity needs, or for temporary defensive purposes, the Funds
may purchase money market securities or other short-term debt instruments rated
in one of the top two categories by a nationally recognized statistical rating
organization ("NRSRO") at the time of purchase or, if not rated, determined to
be of comparable quality by Sierra Services. See "INVESTMENTS AND RISK
CONSIDERATIONS OF THE UNDERLYING FUNDS."

In addition to purchasing shares of the Underlying Funds, a Fund may use futures
contracts and options in order to remain effectively fully invested in
proportions consistent with Sierra Services' current asset allocation strategy
for the Fund in an efficient and cost effective manner. Specifically, each Fund
may enter into futures contracts and options thereon provided that the aggregate
deposits required on these contracts do not exceed 5% of the Fund's total
assets. A Fund may also use futures contracts and options for bona fide hedging
transactions.

Futures contracts and options may also be used to reallocate the Fund's assets
among asset categories while minimizing transaction costs, to maintain cash
reserves while simulating full investment, to facilitate trading, to seek higher
investment returns, or to simulate full investment when a futures contract is
priced attractively or is otherwise considered more advantageous than the
underlying security or index. While futures contracts and options can be used as
leveraged instruments, the Funds will not use futures contracts or options to
leverage their portfolios, except as indicated above.

PORTFOLIO TURNOVER OF THE FUNDS

Each Fund's portfolio turnover rate (i.e., the rate at which the Fund buys and
sells shares of the Underlying Funds) for the Fixed, Value, Balanced and Growth
Funds is not expected to exceed 75% of the Fund's total assets. The annual
turnover rate for the Aggressive Growth Fund is not expected to exceed 100%.
Asset reallocation decisions typically will occur only once every quarter.
However, if market conditions warrant, Sierra Services may make more frequent
reallocation decisions, which will result in a higher portfolio turnover rate.
The Funds will purchase or sell shares of the Underlying Funds: (a) to
accommodate purchases and redemptions of each Fund's shares; (b) in response to
market or other economic conditions; and (c) to maintain or modify the
allocation of each Fund's assets among the Underlying Funds within the
percentage limits described above or as altered by Sierra Services from

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<PAGE> 14

time to time. It is important to note, however, that the portfolio turnover rate
of certain of the Underlying Funds (i.e., the rate at which the Underlying Funds
buy and sell securities) may exceed 100%. Such a turnover rate may result in
higher transaction costs and may result in additional tax consequences for
shareholders (including the Funds).

RISK FACTORS OF THE FUNDS

Prospective investors in the Funds should consider the following factors:

- Any investment in an investment company involves risk and, although the
Funds invest in a number of Underlying Funds, this practice does not
eliminate investment risk;

- Investing in the Underlying Funds through the Funds involves certain
additional expenses and tax results that would not be present in a
direct investment in the Underlying Funds;

- Under certain circumstances, an Underlying Fund may determine to make
payment of a redemption request by a Fund wholly or partly by a
distribution in kind of securities from its portfolio, instead of cash,
in accordance with the rules of the SEC. In such cases, the Funds may
hold securities distributed by an Underlying Fund until Sierra Services
determines that it is appropriate to dispose of such securities;

- Certain Underlying Funds may: invest a portion of their assets in
foreign securities; enter into forward currency transactions; lend their
portfolio securities; enter into stock index, interest rate and currency
futures contracts, and options on such contracts; enter into interest
rate swaps or purchase or sell interest rate caps or floors; engage in
other types of options transactions; make short sales; purchase zero
coupon and payment-in-kind bonds; engage in repurchase or reverse
repurchase agreements; purchase and sell "when-issued" securities and
engage in "delayed-delivery" transactions; and engage in various other
investment practices. Further information about these investment
policies and practices can be found under "INVESTMENTS AND RISK
CONSIDERATIONS OF THE UNDERLYING FUNDS" and "SECURITIES AND INVESTMENT
PRACTICES OF THE UNDERLYING FUNDS" in this Prospectus and in the Trust's
Statement of Additional Information, and in the prospectuses of each of
the Underlying Funds;

- The Aggressive Growth Fund can invest as much as 50% of its total assets
in the STF Growth Fund and as much as 50% of its total assets in the STF
Emerging Growth Fund, each of which Underlying Funds may invest as much
as 35% of its total assets in lower-rated bonds, commonly referred to as
"junk bonds." As a result, this Fund will be subject to the risks
associated with investing in such lower-rated bonds;

- An investment in the Sierra Prime Income Fund ("SPIF") should be
considered illiquid. SPIF is a closed-end investment company designed
primarily for long-term investors and not as a trading vehicle and
shares of SPIF are not redeemable. SPIF does not intend to list its
shares for trading on any national securities exchange and there is not
expected to be any secondary trading market in such shares. In order to
provide liquidity to SPIF shares, the Board of Trustees intends, each
quarter, to authorize tender offers for a portion of the then
outstanding shares at the current net asset value. In the event that
SPIF's Board of Trustees does not authorize SPIF to engage in tender
offers for its shares, it is unlikely that a holder of its shares will
be able to otherwise sell their shares to the Fund or in any secondary
trading market. To the extent redemptions are made from a Fund invested
in SPIF, such redemptions will be made from STF Funds thereby increasing
the remaining shareholders' allocation to the SPIF;

- Certain Funds invest as much as [50%] of their total assets in the STF
Growth Fund or STF Emerging Growth Fund, each of which may invest up to
25% of its total assets in foreign equity securities and as much as 5%
of its total assets in securities in developing or emerging markets
countries. Certain Funds invest as much as [50%] of their total assets
in the STF International Growth Fund, which invests primarily in foreign
equity securities, and may invest as much as 25% of its total assets in
securities in developing or emerging markets countries. These
investments will subject such Funds to risks associated with investing
in foreign securities;

- The officers and trustees of the Trust also serve as officers and
trustees of the Underlying Funds. In addition, Sierra Services, the
investment advisor and distributor of each Fund, and Sierra Advisors,
the

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<PAGE> 15

investment advisor of the Underlying Funds, are both wholly owned
subsidiaries of Sierra Capital Management Corporation ("SCMC"). Also,
Sierra Services is the distributor of the shares of the Underlying
Funds. Conflicts may arise as these companies seek to fulfill their
fiduciary responsibilities to both the Funds and the Underlying Funds;
and

- If sufficient redemptions occur in a Fund with SPIF investments and
those redemptions exceed the value of the assets represented by the
shares of all STF Funds held by the Fund, Fund redemptions in excess of
such value may be made by distributing SPIF shares of the appropriate
amount to redeeming Fund shareholders.

INVESTMENT LIMITATIONS OF THE FUNDS

The following investment limitations are fundamental for each Fund, and may not
be changed without shareholder approval.

1. Each Fund will concentrate its investments in shares of management
investment companies.

2. Each Fund may not borrow money in an amount exceeding 33 1/3% of the
value of its total assets, provided that, for purposes of this
limitation, investment strategies which either obligate a Fund to
purchase securities or require a Fund to segregate assets are not
considered to be borrowings. Except where a Fund has borrowed money for
temporary purposes in amounts not exceeding 5% of its assets, asset
coverage of 300% is required for all borrowings.

Each Fund is subject to further fundamental and non-fundamental restrictions
which are described in the Trust's Statement of Additional Information.

INVESTMENT GOALS OF THE UNDERLYING PORTFOLIOS

The following table describes the investment goals of each Underlying Fund:

<TABLE>
<CAPTION>
UNDERLYING FUND INVESTMENT GOAL
- --------------- ---------------
<S> <C>
STF U.S. Government Money Fund................................... Income and Capital Preservation
STF Global Money Fund............................................ Income and Capital Preservation
STF Short Term High Quality Bond Fund............................ Income
STF U.S. Government Fund......................................... Income
STF Corporate Income Fund........................................ Aggressive Income
STF Growth and Income Fund....................................... Growth of Capital and Income
STF Growth Fund.................................................. Growth of Capital
STF Emerging Growth Fund......................................... Growth of Capital
STF International Growth Fund.................................... Growth of Capital
Sierra Prime Income Fund......................................... Income and Principal Stability
</TABLE>

INVESTMENTS AND RISK CONSIDERATIONS OF THE UNDERLYING FUNDS

The following section describes the investment objective and policies of each
underlying Fund and some of the risk considerations of investing in the
Underlying Funds. The "Securities and Investment Practices" section that follows
provides more information about the types of securities and investment practices
that the Underlying Funds may use, and the risk considerations related to such
securities and investment practices. There can be no assurance that the
Underlying Funds will achieve their respective investment objectives.

INVESTMENT PRINCIPLES AND RISK CONSIDERATIONS

THE MONEY FUNDS

Each of the STF U.S. Government Money Fund and STF Global Money Fund (the "Money
Funds") invests only in U.S. Dollar-denominated short-term, money market
securities that present minimal credit risks and meet the rating criteria
described below. At the time of investment, no security purchased by a Money
Fund (except

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<PAGE> 16

securities subject to repurchase agreements and variable rate demand notes) can
have a maturity exceeding 397 days, and each Money Fund's average portfolio
maturity cannot exceed 90 days. The short average maturity of the portfolios
enhances each Money Fund's ability to maintain share prices at $1.00 which, in
turn, provides both stability of value and liquidity to shareholders. There can
be no assurances, however, that any or all of the Money Funds will be able to
maintain a net asset value ("NAV") at $1.00 per share.

Each Money Fund will purchase only those instruments that meet the following
applicable quality requirements. The Money Funds will not purchase a security
(other than a U.S. Government security) unless the security or the issuer with
respect to comparable securities (i) is rated by at least two nationally
recognized statistical rating organizations ("NRSROs") (such as Standard &
Poor's Corporation ("S&P") or Moody's Investors Service, Inc. ("Moody's")) in
one of the two highest rating categories for short-term debt securities, (ii) is
rated in one of the two highest categories for short-term debt by the only NRSRO
that has issued a rating, or (iii) if not so rated, the security is determined
to be of comparable quality. In addition, with respect to the Global Money Fund,
no more than 5% of the Fund's total assets will be invested in securities rated
in the second highest rating category by the requisite NRSROs, and no more than
1% of the Fund's total assets will be invested in the securities of any one such
issuer. A description of the rating systems of S&P and Moody's is contained in
the SAI of the Underlying Funds.

Up to 10% of the assets of a Money Fund may be invested in securities and other
instruments that are not readily marketable, including repurchase agreements
with maturities greater than seven calendar days, time deposits maturing in more
than seven calendar days, and variable rate demand notes having a demand period
of more than seven days. In addition, a Money Fund may invest up to 5% of its
assets in the securities of issuers which have been in continuous operation for
less than three years. Each Money Fund may also borrow from banks for temporary
or other emergency purposes, but not for investment purposes, in an amount up to
30% of its total assets, and may pledge its assets to the same extent in
connection with such borrowings. Whenever these borrowings exceed 5% of the
value of a Money Fund's total assets, the Money Fund will not purchase any
securities. Except for the limitations on borrowing, the investment guidelines
set forth in this paragraph may be changed at any time without shareholder
consent by vote of the Board of Trustees of the Company, subject to applicable
law. A complete list of investment restrictions that identifies additional
restrictions that cannot be changed without the approval of a majority of an
affected Money Fund's outstanding shares is contained in the SAI of the
Underlying Funds.

STF GLOBAL MONEY FUND. The Fund's investment objective is to maximize current
income consistent with safety of principal and maintenance of liquidity. The
Fund pursues its objective by investing in a portfolio of short-term, money
market instruments, including obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities ("U.S. Government Securities");
repurchase agreements with respect to U.S. Government Securities; instruments
issued by U.S. and foreign banks and savings and loan institutions, such as time
deposits, certificates of deposit and bankers' acceptances; and commercial paper
and corporate obligations of U.S. and foreign issuers that meet the Fund's
quality and maturity criteria. Although the Fund is authorized to invest up to
50% of its assets in any one country (other than the United States), the Fund
normally will include in its portfolio securities of issuers collectively having
their principal business activities in at least three countries, including the
United States. The Fund may not invest more than 5% of its assets in securities
of any one issuer, except that the Fund may invest in U.S. Government Securities
without limit and may have one holding that exceeds the 5% limit for up to three
days after the acquisition of such holding. At least 25% of the Fund's total
assets will be invested in bank obligations, except during temporary defensive
periods.

STF U.S. GOVERNMENT MONEY FUND. The Fund's investment objective is to maximize
current income consistent with safety of principal and maintenance of liquidity.
The Fund pursues its objective by maintaining a portfolio of U.S. Government
Securities and entering into repurchase agreements with respect to U.S.
Government Securities.

THE BOND FUNDS

STF SHORT TERM HIGH QUALITY BOND FUND. The Fund's investment objective is to
provide as high a level of current income as is consistent with prudent
investment management and stability of principal. To accomplish its objective,
the Fund will invest primarily in short-term bonds and other fixed-income
securities. Under normal market conditions the Fund will maintain a
dollar-weighted average portfolio maturity of three years or less. The Fund may

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<PAGE> 17

hold individual securities with remaining maturities of more than three years as
long as the dollar-weighted average portfolio maturity is three years or less.
For purposes of the weighted average maturity calculation, a mortgage
instrument's average life will be considered to be its maturity.

The Fund will invest substantially all of its assets in investment-grade debt
securities, which are securities that are rated in the top four rating
categories by one or more NRSROs or, if unrated, are judged to be of comparable
quality by the Fund's Sub-Advisor. All debt securities purchased by the Fund
will be investment-grade at the time of purchase. The Fund will invest at least
65% of its total assets in United States Government obligations, corporate debt
obligations or mortgage-related securities rated in one of the two highest
categories by an NRSRO. Securities are rated in the two highest rating
categories by an NRSRO if they are rated at least Aa by Moody's or at least AA
by S&P, Duff or Fitch or, if unrated, are judged to be of comparable quality by
the Fund's Sub-Advisor. Investment-grade bonds are generally of medium to high
quality. A bond rated in the lower end of the investment-grade category
(Baa/BBB), however, may have speculative characteristics and may be more
sensitive to economic changes and changes in the financial condition of the
issuer.

The fixed-income securities in which the Fund may invest include obligations
issued or guaranteed by domestic and foreign governments and government agencies
and instrumentalities and high-grade corporate debt obligations, such as bonds,
debentures, notes, equipment lease and trust certificates, mortgage-backed
securities, collateralized mortgage obligations and asset-backed securities.

The Fund may invest up to 10% of its assets in foreign fixed-income securities,
primarily bonds of foreign governments or their political subdivisions, foreign
companies and supranational organizations, including non-U.S. Dollar-denominated
securities and U.S. Dollar-denominated debt securities issued by foreign issuers
and foreign branches of U.S. banks. Investment in foreign securities is subject
to special risks; see "Securities and Investment Practices - Foreign
Investments."

The Fund may also invest in high-quality, short-term obligations (with
maturities of 12 months or less), such as commercial paper issued by domestic
and foreign corporations, bankers' acceptances issued by domestic and foreign
banks, certificates of deposit and demand and time deposits of domestic and
foreign banks and savings and loan associations and repurchase agreements. The
Fund may engage in certain options transactions, enter into financial futures
contracts and related options for the purpose of portfolio hedging and enter
into currency forwards or futures contracts and related options for the purpose
of currency hedging.

The Fund may invest in certain illiquid investments, such as privately placed
obligations, including restricted securities. The Fund may invest up to 10% of
its assets in securities of mutual funds that are not affiliated with Sierra
Advisors or any Sub-Advisor. See "Securities and Investment Practices - Holdings
in Other Investment Companies."

The Fund currently intends to borrow money or enter into reverse repurchase
agreements or dollar roll transactions in the aggregate up to 10% of its total
assets. If the Fund borrows money, its share price may be subject to greater
fluctuation until the borrowing is paid off. To seek a high level of current
income, the Fund may enter into dollar rolls. Dollar rolls entail certain risks;
see "Securities and Investment Practices - Dollar Roll Transactions."

The Fund may invest up to 25% of its total assets in asset-backed securities,
which represent a participation in, or are secured by and payable from, a stream
of payments generated by particular assets, most often a pool of assets similar
to one another. See "Securities and Investment Practices - Asset-Backed
Securities."

Thomas M. Poor, Managing Director of Scudder, is the portfolio manager of the
STF Short Term High Quality Bond Fund. He joined Scudder in 1970 and has worked
entirely in fixed income research and institutional bond portfolio management.
Mr. Poor has had primary management responsibility for the STF Short Term High
Quality Bond Fund since its inception.

STF U.S. GOVERNMENT FUND. The Fund's investment objective is to maximize total
rate of return while providing a high level of current income, consistent with
reasonable safety of principal. The Fund pursues its objective by investing at
least 65% and up to 100% of its assets in intermediate- and long-term U.S.
Government Securities. The Fund may invest in U.S. Government Securities of
varying maturities. Securities in the Fund's portfolio are high quality
securities that will generally yield less income than lower quality securities;
higher quality securities,

-14-
<PAGE> 18

however, generally have less credit risk and are more readily marketable than
lower quality securities. Depending on market conditions, the Fund's portfolio
will consist of various types of U.S. Government Securities in varying
proportions; it may invest up to 35% of its assets in the types of securities in
which the STF Corporate Income Fund may invest except as otherwise prohibited in
this Prospectus or the SAI of the Underlying Funds, including corporate bonds,
preferred stock, convertible corporate bonds, convertible preferred stock,
government stripped mortgage-backed securities, asset-backed securities, and
interests in lease obligations. A substantial portion of the Fund's assets at
any time may consist of mortgage-backed securities. For more detailed
information regarding the types of securities in which the Corporate Income Fund
may invest, see "STF Corporate Income Fund."

The Fund may invest up to 20% of its assets in money market instruments
consisting of short-term U.S. Government Securities and repurchase agreements
with respect to such U.S. Government Securities, and for temporary defensive
purposes may invest in these instruments without limitation. In addition, the
Fund may invest up to 33 1/3% of its total assets in dollar rolls or "covered
rolls." See "Securities and Investment Practices - Dollar Roll Transactions."

The day-to-day management of the Fund's portfolio is the responsibility of a
committee composed of individuals who are officers of BlackRock. This committee
has managed the Fund since December, 1994, and is supervised by Keith Anderson
and E.G. Fisher. Mr. Anderson has been co-head of the Portfolio Management Group
of BlackRock since BlackRock's founding in 1988. Mr. Fisher has been a portfolio
manager of BlackRock since 1990 and a Principal of BlackRock since 1994.

STF CORPORATE INCOME FUND. The Fund's investment objective is to provide a high
level of current income, consistent with the preservation of capital. The Fund
pursues its investment objective by investing primarily in investment-grade
corporate bonds of United States issuers, which are bonds that are rated in the
top four rating categories by Moody's, S&P, Duff, or Fitch, or, if not rated,
that the Fund's Sub-Advisor believes to have credit characteristics equivalent
to such investment-grade rated corporate bonds. Generally, at least 65% of the
corporate bonds held by the Fund will have had remaining maturities of 10 years
or more at the date of purchase, unless the Fund's Sub-Advisor believes that
investing in corporate bonds with shorter maturities would be appropriate in
light of prevailing market conditions. Corporate bonds with longer maturities
generally tend to produce higher yields and are subject to greater market risk
than debt securities with shorter maturities. The value of the Fund's portfolio
securities can be expected to vary inversely with changes in the prevailing
interest rates.

The Fund may also invest in preferred stock, corporate bonds and preferred stock
that are convertible into or that carry the right to buy common stock, all of
which are rated investment-grade by an NRSRO, or, if not rated, that the Fund's
Sub-Advisor believes to have credit characteristics equivalent to such
investment-grade rated bonds; U.S. Government Securities (including government
stripped mortgage-backed securities); asset-backed securities; and interests in
lease obligations for which the payment of interest and principal is
unconditionally guaranteed by companies with debt rated at least
investment-grade by an NRSRO, provided that no more than 20% of the Fund's
assets will be invested in such lease obligations. The Fund may invest in
floating rate, inverse floating rate and variable rate obligations, including
participation interests therein. The Fund may invest in bonds issued by foreign
governments and corporations, provided that no more than 20% of the Fund's
assets will be invested in such bonds and no more than 5% will be denominated in
any one currency. In addition, the Fund may invest up to 33 1/3% of its total
assets in dollar rolls or "covered rolls." For temporary defensive purposes, the
Fund may also invest, without limitation, in money market instruments, including
short-term U.S. Government Securities, commercial paper rated Prime-1 by
Moody's, A-1 by S&P, Duff-1 by Duff or Fitch-1 by Fitch, and cash and cash
equivalents.

As the Fund's portfolio manager, James M. Goldberg, has had primary
responsibility for the day-to-day management of the Fund's portfolio since its
inception. Mr. Goldberg has been Managing Director of TCW Management since 1989
and Managing Director of Trust Company of the West since 1984.

SIERRA PRIME INCOME FUND. The Fund's investment objective is to provide a high
level of current income, consistent with preservation of capital. The Fund will
seek to achieve its objective by investing in a professionally managed portfolio
of interests in floating or variable rate senior loans ("Senior Loans") made
primarily to United States corporations, partnerships and other entities
("Borrowers"). Senior Loans may take the form of syndicated loans ("Syndicated
Loans") or of debt obligations of Borrowers issued directly to investors in the
form of debt securities ("Senior Notes"). Senior Loans in which the Fund will
invest generally pay interest at rates which are

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<PAGE> 19

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 ("CD") rate or other base lending rates
used by commercial lenders.

The Fund will seek to achieve over time a high effective yield. Although the
Fund's net asset value 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 net asset value as a result of changes in interest rates. While the
Fund seeks relative share price (NAV) stability, its net asset value may be
affected by changes in the credit quality of Borrowers with respect to Senior
Loan interests in which the Fund invests.

Under normal market conditions, at least 80% of the Fund's total assets will be
invested in interests, participations and assignments of Senior Loans. The
remainder of the Fund's assets may be invested in high quality, short-term debt,
money market instruments, warrants, equity securities and junior debt securities
acquired in connection with the Fund's investment in Senior Loans. There is no
restriction or percentage limitation with respect to the Fund's investment in
illiquid securities. The Fund is not subject to any restrictions with respect to
the maturity of Senior Loans held in its portfolio. It is currently anticipated
that the Fund's assets invested in Senior Loans will consist of Senior Loans
with stated maturities of between three and seven years, inclusive, and with
rates of interest which are periodically reset with reset periods typically
ranging from 30 days to one year. Investment in Senior Loans with longer
interest rate redetermination periods may increase fluctuations in the Fund's
net asset value as a result of changes in interest rates. For further discussion
of the Fund's investment objective and policies and its investment practices and
associated considerations, see "Securities and Investment Practices" in this
Prospectus.

Senior Loans generally are arranged through private negotiations between a
Borrower and several financial institutions ("Lenders") represented in each case
by one or more such Lenders acting as agent ("Agent") of the several Lenders. On
behalf of the several Lenders, the Agent, which is frequently the commercial
bank or other entity that originates the Senior Loan and the person that invites
other parties to join the lending syndicate, will be primarily responsible for
negotiating the loan agreement or agreements ("Loan Agreement") that establish
the relative terms, conditions and rights of the Borrower and the several
Lenders. Senior Loans have the most senior position in a Borrower's capital
structure, although some Senior Loans may hold an equal ranking with other
senior securities of the Borrower. The capital structure of Borrowers may
include Senior Loans, senior and junior subordinated debt (which may include
"junk bonds"), preferred stock and common stock issued by the Borrower,
typically in descending order of seniority with respect to claims on the
Borrower's assets. Senior Loans generally are secured by specific collateral,
which may include guarantees. In connection with the acquisition of
collateralized Senior Loans, the Fund may invest up to 5% of its total assets in
Senior Loans which are not secured by any collateral. Such unsecured Senior
Loans would constitute an interim financing intended to be refinanced through,
in whole or in part, a collateralized Senior Loan. In the event that the Fund
invests a portion of its assets in Senior Loans that are not secured by specific
collateral, the Fund will not enjoy the benefits associated with
collateralization with respect to such Senior Loans and such Senior Loans may
pose a greater risk of nonpayment of interest or loss of principal than do
collateralized Senior Loans.

During normal market conditions, the Fund may invest up to 20% of its total
assets in (i) high quality, short-term debt securities with remaining maturities
of one year or less (including assets maintained by the Fund as a reserve
against any additional loan commitments) and (ii) warrants, equity securities
and, in certain limited circumstances discussed above, junior debt securities
acquired in connection with the Fund's investments in Senior Loans. Such high
quality, short-term securities may include commercial paper rated at least in
the top two rating categories of either S&P or Moody's, or unrated commercial
paper considered by the Advisor to be of similar quality, interests in
short-term loans of Borrowers having short-term debt obligations rated or a
short-term credit rating at least in such top two rating categories or having no
such rating but determined by the Advisor to be of comparable quality,
certificates of deposit and bankers' acceptances and securities issued or
guaranteed by the U.S. government, its agencies or instrumentalities. Such high
quality, short-term securities may pay interest at rates which are periodically
redetermined or may pay interest at fixed rates. If the Advisor determines that
market conditions temporarily warrant a defensive investment policy, the Fund
may invest, subject to its ability to liquidate its relatively illiquid
portfolio of Senior Loans, up to 100% of its assets in cash and such high
quality, short-term debt securities. The Fund will acquire such warrants and
equity securities only as an incident to the purchase or

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<PAGE> 20

intended purchase of interests in collateralized Senior Loans. Loan Agreements
may include various restrictive covenants designed to limit the activities of
the Borrower in an effort to protect the right of the Lenders to receive timely
payments of interest on and repayment of principal of the Senior Loans. In order
to borrow money pursuant to collateralized Senior Loans, a Borrower will
frequently, for the term of the Senior Loan, pledge as collateral assets,
including but not limited to, trademarks, accounts receivable, inventory,
buildings, real estate, franchises and common and preferred stock in its
subsidiaries. In addition, in the case of some Senior Loans, there may be
additional collateral pledged in the form of guarantees by and/or securities of
affiliates of the Borrowers. In certain instances, a Senior Loan may be secured
only by stock in the Borrower or its subsidiaries. Such collateral may consist
of assets that may not be readily liquidated, and there is no assurance that the
liquidation of such assets would satisfy fully a Borrower's obligations under a
Senior Loan. Restrictive covenants may include mandatory prepayment provisions
arising from excess cash flows and typically include restrictions on dividend
payments, specific mandatory minimum financial ratios, limits on total debt and
other financial tests. Breach of such covenants, if not waived by the Lenders,
is generally an event of default under the applicable Loan Agreement and may
give the Lenders the right to accelerate principal and interest payments. The
Advisor will consider the terms of such restrictive covenants in deciding
whether to invest in Senior Loans for the Fund's portfolio. When the Fund holds
a Participation in a Senior Loan it may not have the right to vote to waive
enforcement of any restrictive covenant breached by a Borrower. Lenders voting
in connection with a potential waiver of a restrictive covenant may have
interests different from those of the Fund and such Lenders may not consider the
interests of the Fund in connection with their votes.

A Lender may have certain obligations pursuant to a Loan Agreement, which may
include the obligation to make additional loans in certain circumstances. The
Fund currently intends to reserve against such contingent obligations by
segregating sufficient investments in high quality short-term, liquid
investments. The Fund will not purchase interests in Senior Loans that would
require the Fund to make any such additional loans if such additional loan
commitments would exceed 20% of the Fund's total assets or would cause the Fund
to fail to meet the diversification requirements set forth under the heading
"Diversification and Concentration."

THE EQUITY FUNDS

STF GROWTH AND INCOME FUND. The investment objective of the Fund is long-term
capital growth and current income consistent with reasonable investment risk.
The Fund pursues its investment objective by investing primarily in
dividend-paying common stock. The Fund will also invest in other equity
securities, consisting of non-dividend-paying common stock, preferred stock and
securities convertible into common stock, such as convertible preferred stock,
convertible bonds rated in the highest three rating categories by Moody's or
S&P, or, if unrated, judged to be of comparable quality by the Fund's
Sub-Advisor, and warrants. The Fund is not subject to any limit on the size of
companies in which it may invest, but intends to be primarily invested, under
normal circumstances, in the large-and medium-sized companies included in the
S&P 500 Index. The Fund may also invest up to 10% of its total assets in
American Depositary Receipts.

The Fund is designed for investors who want an actively managed diversified
portfolio of selected equity securities that seeks to outperform the total
return of the S&P 500 Index. The Fund attempts to reduce risk by investing in
many different economic sectors, industries and companies. The Fund's
Sub-Advisor may under- or over-weight selected economic sectors against the S&P
500 Index's sector weightings to seek to enhance the Fund's total return or
reduce fluctuations in market value relative to the S&P 500 Index.

During normal market conditions, the Sub-Advisor will keep the Fund essentially
fully invested in the equity securities described above. The Fund's Sub-Advisor
may, however, invest in money market instruments, including U.S. Government
Securities; short-term bank obligations rated in the highest two rating
categories by Moody's or S&P, or, if unrated, judged to be of comparable quality
by the Fund's Sub-Advisor, including certificates of deposit, time deposits and
banker's acceptances issued by U.S. and foreign banks and savings and loan
institutions with assets of at least $10 billion as of the end of their most
recent fiscal year; and commercial paper and corporate obligations, including
such securities in the form of variable rate demand notes, that are issued by
U.S. and foreign issuers and that are rated in the highest two rating categories
by Moody's or S&P, or, if unrated, are judged to be of comparable quality by the
Fund's Sub-Advisor. Under normal circumstances, the Fund will invest in such
money market instruments to invest temporary cash balances or to maintain
liquidity to meet redemptions. The Fund may

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<PAGE> 21

also, however, invest in these instruments, without limitation, as a temporary
defensive measure taken during, or in anticipation of, adverse market
conditions.

As the Fund's portfolio managers, Henry D. Cavanna, Managing Director of J.P.
Morgan, and William M. Riegel, Vice President of J.P. Morgan, have had primary
management responsibility for the Fund since September 1993. Mr. Cavanna, who
joined J.P. Morgan in 1971, is a senior portfolio manager in its Equity and
Balanced Accounts Group. Mr. Riegel, who joined J.P. Morgan in 1979, is a senior
equity portfolio manager in its Equity and Balanced Accounts Group.

STF GROWTH FUND. The Fund's primary investment objective is long-term capital
appreciation. The generation of income is not an objective of the Fund, and any
income received on the Fund's assets will be incidental to its primary
investment objective, which is a fundamental policy of the Fund. The Fund
intends to invest primarily in common stock believed by the Sub-Advisor to have
significant appreciation potential. However, no class of security offers at all
times the greatest promise for capital appreciation. Therefore, the Fund may
invest in debt securities, bonds, convertible bonds, preferred stock and
convertible preferred stock, including non-investment grade debt securities if,
in the opinion of the Sub-Advisor, doing so would further the long-term capital
appreciation objective of the Fund.

The Fund may invest up to 35% of its assets in non-investment grade debt
securities (commonly called "junk bonds"), which are securities rated Ba or BB
or below, respectively, by Moody's and S&P. Non-investment grade debt securities
are often considered to be speculative and involve greater risk of default or
price changes due to changes in the issuer's creditworthiness. The market prices
of these securities may fluctuate more than higher-rated securities and may
decline significantly in periods of general economic difficulty, which may
follow periods of rising interest rates. See "Securities and Investment
Practices - Lower-Rated Securities."

If the Sub-Advisor is unable to locate investment opportunities with desirable
risk/reward characteristics or in an effort to protect its assets against major
adverse market declines, the Fund may pursue a policy of investing part or all
of its assets in cash or cash equivalents.

The Fund may invest up to 25% of its assets in foreign securities, usually
foreign common stocks, and up to 5% of its assets in securities of companies in
(or governments of) developing or emerging countries (sometimes referred to as
"emerging markets"). A developing or emerging country is generally considered by
the international financial community, and in the opinion of Sierra Advisors or
the Sub-Advisor, to be a country that is in the initial stages of its
industrialization cycle. The Fund may also engage in certain options
transactions, enter into financial futures contracts and related options for the
purpose of portfolio hedging and enter into currency forwards or futures
contracts and related options for the purpose of currency hedging.

As portfolio manager of the Growth Fund, Warren B. Lammert has had primary
management responsibility for the Fund since its inception. Mr. Lammert is a
Vice President of Janus, the Portfolio Manager of the Janus Mercury Fund and a
Co-Portfolio Manager of the Janus Venture Fund. Mr. Lammert joined Janus in 1987
and his duties at Janus include the management of separate equity accounts.

STF EMERGING GROWTH FUND. The Fund's investment objective is long-term capital
appreciation, while income is only an incidental consideration of the Fund. The
Fund normally invests at least 50% of its equity assets in securities of
companies with market capitalization at less than $1.4 billion at the time of
purchase. A company's market capitalization is calculated by multiplying the
total number of shares of its common stock outstanding by the market price per
share of its stock. The Fund may invest up to 25% of its assets in similar
securities of foreign issuers and up to 5% of its assets in securities in
developing or emerging countries.

Small capitalization companies typically are subject to a greater degree of
change in earnings and business prospects than larger, more established
companies. In addition, securities of small capitalization companies are traded
in lower volume than those issued by larger companies and may be more volatile
and less liquid than those of larger companies. In light of these
characteristics of small capitalization companies and their securities, the Fund
may be subject to greater investment risk than that assumed when investing in
the equity securities of larger capitalization companies. The Fund has been
designed to provide investors with potentially greater long-term rewards than
those provided by an investment in a fund that seeks capital appreciation from
equity securities of larger, more established companies. Small capitalization
companies generally are not as well known to the investing public and

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<PAGE> 22

have less of an investor following than larger companies. In selecting
investments for the Fund, the Fund's Sub-Advisor seeks small capitalization
companies that it believes are undervalued in the marketplace, or that the
Fund's Sub-Advisor believes have earnings that may be expected to grow faster
than the United States economy in general.

The Fund may invest up to 35% of its assets in non-investment grade debt
securities (commonly called "junk bonds") if portfolio management believes that
doing so will be consistent with the goal of capital appreciation. Non-
investment grade debt securities are often considered to be speculative and
involve greater risk of default or price changes due to changes in the issuer's
creditworthiness. The market prices of these securities may fluctuate more than
higher-rated securities and may decline significantly in periods of general
economic difficulty, which may follow periods of rising interest rates. See
"Securities and Investment Practices - Lower-Rated Securities."

The Fund may invest in other equity securities, including convertible bonds,
convertible preferred stock and warrants to purchase common stock, as well as
cash and cash equivalents.

James P. Goff, Portfolio Manager of Janus, is the portfolio manager of the
Emerging Growth Fund and has had primary management responsibility for the Fund
since September, 1993. Mr. Goff is a Vice President of Janus, the Portfolio
Manager of the Janus Enterprise Fund and a Co-Portfolio Manager of the Janus
Venture Fund. Mr. Goff joined Janus in July, 1988 and his duties at Janus
include the management of separate equity accounts.

STF INTERNATIONAL GROWTH FUND. The Fund's investment objective is long-term
capital appreciation. The Fund invests primarily in equity securities of issuers
located in a variety of different foreign regions and countries that the Fund's
Sub-Advisor deems to have attractive investment opportunities. Income is only an
incidental consideration of the Fund. The Fund will emphasize established
companies, although it may invest in companies of varying sizes as measured by
assets, sales and capitalization.

More than 25% of the Fund's total assets may be invested in the securities of
issuers located in the same country. The relative strength or weakness of a
particular country's currency or economy may dictate whether securities of
issuers located in such country will be purchased or sold. Criteria for
determining the appropriate distribution of investments among various countries
and regions include prospects for relative economic growth among foreign
countries, expected levels of inflation, government policies influencing
business conditions, the outlook for currency relationships, and the range of
investment opportunities available to international investors.

The Fund invests in common stock and may invest in other securities with equity
characteristics, consisting of trust or limited partnership interests, preferred
stock, rights and warrants. The Fund may also invest in convertible securities,
consisting of debt securities or preferred stock that may be converted into
common stock or that carry the right to purchase common stock. The Fund invests
in securities listed on foreign or domestic securities exchanges and securities
traded in foreign or domestic over-the-counter markets, and may invest in
restricted or unlisted securities.

The Fund intends to stay invested in the securities described above to the
extent practical. Fund assets may be invested in short-term debt instruments to
meet anticipated day-to-day operating expenses, and for temporary defensive
purposes. In addition, when the Fund experiences large cash inflows, the Fund
may hold short-term investments pending availability of desirable equity
securities.

The short-term instruments in which the Fund may invest include foreign and
domestic: (i) short-term obligations of foreign governments, their agencies,
instrumentalities, authorities or political subdivisions; (ii) other short-term
debt securities rated A or higher by Moody's or S&P, or if unrated, of
comparable quality in the opinion of the Fund's Sub-Advisor; (iii) commercial
paper, including master notes; (iv) bank obligations, including negotiable
certificates of deposit, time deposits, bankers' acceptances, and Euro-currency
instruments and securities; and (v) repurchase agreements. At the time the Fund
invests in any commercial paper, bank obligations or repurchase agreements, the
issuer must have outstanding debt rated A or higher by Moody's or S&P; the
issuer's parent corporation, if any, must have outstanding commercial paper
rated Prime-1 by Moody's or A-1 by S&P; or, if no such ratings are available,
the investment must be of comparable quality in the opinion of the Fund's
Sub-Advisor.

The Fund may invest up to 25% of its assets in the securities of companies in or
governments of developing or emerging countries (sometimes referred to as
"emerging markets") approved by the Board of Trustees, provided

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<PAGE> 23

that no more than 5% of the Fund's total assets are invested in any one such
country. For temporary defensive purposes, the Fund may invest a major portion
of its assets in securities of United States issuers. Furthermore, the Fund may
invest up to 5% of its total assets in corporate debt securities having
maturities longer than one year and which are rated BBB or better by S&P,
including Euro-currency instruments and securities.

As the Fund's portfolio manager(s), [Name(s)], [Title(s)] has had primary
responsibility for the Fund since [Year]. (Add description of manager including
business experience during the past 5 years unless the Fund is managed by a
committee).

SECURITIES AND INVESTMENT PRACTICES OF THE FUNDS AND THE UNDERLYING FUNDS

The following sections contain more detailed information about types of
securities in which the Underlying Funds may invest, and strategies an
Underlying Fund's Sub-Advisor may employ in pursuit of that Underlying Fund's
investment objective. A summary of risks and restrictions associated with these
security types and investment practices is included as well. All policies and
limitations are considered at the time of purchase; the sale of securities is
not required in the event of a subsequent change in circumstances.

An Underlying Fund might not buy all of these securities or use all of these
techniques to the full extent permitted unless its Sub-Advisor, subject to
oversight by Sierra Advisors, believes that doing so will help the Underlying
Fund achieve its goal. Sierra Advisors may, from time to time, direct a
Sub-Advisor with respect to investment policies and strategies. As a
shareholder, you will receive fund reports every six months detailing your
Underlying Fund's holdings and describing recent investment practices.

Except for the limitations on borrowing, the investment guidelines set forth
below to the extent they apply to a Fund or an Underlying Fund may be changed at
any time by vote of the Board of Trustees of the Trust, Sierra Trust Funds or
SPIF, as applicable, without shareholder consent of such Fund or Underlying
Fund. A complete list of investment restrictions that identifies additional
restrictions that cannot be changed without the approval of a majority of an
affected Fund's or Underlying Fund's outstanding shares is contained in the SAI
of the Trust.

AMERICAN DEPOSITARY RECEIPTS AND EUROPEAN DEPOSITARY RECEIPTS. All Underlying
Funds (except the STF U.S. Government Fund, the STF Money Funds and SPIF) may
invest in securities of foreign issuers directly or in the form of American
Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs") or other
similar securities representing securities of foreign issuers. These securities
may not necessarily be denominated in the same currency as the securities they
represent. ADRs are receipts typically issued by a United States bank or trust
company evidencing ownership of the underlying foreign securities. EDRs are
receipts issued by a European financial institution evidencing a similar
arrangement. Generally, ADRs, in registered form, are designed for use in the
United States securities markets, and EDRs, in bearer form, are designed for use
in European securities markets.

ASSET-BACKED SECURITIES. The STF Growth and Income, STF Emerging Growth, STF
Corporate Income, STF Short Term High Quality Bond and STF U.S. Government Funds
may purchase asset-backed securities, which represent a participation in, or are
secured by and payable from, a stream of payments generated by particular
assets, most often a pool of assets similar to one another. Assets generating
such payments will consist of motor vehicle installment purchase obligations,
credit card receivables and home equity loans. These Underlying Funds will not
invest more than 10% of their total assets in asset-backed securities, except
the Short Term High Quality Bond Fund, which may invest up to 25% of its total
assets in such securities.

BANK OBLIGATIONS. All of the Underlying Funds may invest in bank obligations,
which include certificates of deposit, time deposits and bankers' acceptances of
U.S. commercial banks or savings and loan institutions with assets of at least
$500 million as of the end of their most recent fiscal year.

BORROWING. All Underlying Funds may borrow money for temporary or emergency
purposes. However, if an Underlying Fund borrows money, its share price may be
subject to greater fluctuation until the borrowing is paid off. If the
Underlying Fund makes additional investments while borrowings are outstanding,
this may be construed as a form of leverage.

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<PAGE> 24

An Underlying Fund may borrow money from banks solely for temporary or emergency
purposes, but not in an amount exceeding 30% of its total assets. For each of
the Underlying Funds except the STF U.S. Government, STF Short Term High Quality
Bond and STF Corporate Income Funds, whenever borrowings by an Underlying Fund,
including reverse repurchase agreements, exceed 5% of the value of an Underlying
Fund's total assets, the Underlying Fund will not purchase any securities. The
STF U.S. Government, STF Short Term High Quality Bond and STF Corporate Income
Funds are prohibited from borrowing money or entering reverse repurchase
agreements or dollar roll transactions, and the SPIF is prohibited from
borrowing money, in the aggregate in excess of 33 1/3% of the Underlying Fund's
total assets (after giving effect to such borrowings). This investment guideline
may be changed only with shareholder consent and by vote of the Board of
Trustees of the STF or SPIF. However, the Short Term High Quality Bond Fund
currently intends to borrow money or enter into reverse repurchase agreements or
dollar roll transactions in the aggregate in excess of 10% of its total assets
(after giving effect to such borrowings); provided, however, that it may be able
to raise this limitation up to 33 1/3% of its total assets with approval of the
Board of Trustees of the Underlying Fund.

The SPIF currently expects, however, to limit its borrowing to an amount
sufficient to meet its tender offer purchases or 10% of its assets, whichever is
greater. Under the requirements of the 1940 Act, each of the Underlying Funds,
immediately after any such borrowings, is required to have asset coverage of at
least 300%. Asset coverage is the ratio which the value of the total assets of
the Underlying Fund, less all liabilities and indebtedness not represented by
senior securities (as that term is defined in the 1940 Act), bears to the
aggregate amount of any such borrowings by the Underlying Fund.

COMMON STOCK, CONVERTIBLE SECURITIES AND OTHER EQUITY SECURITIES. The STF
Corporate Income Fund, STF U.S. Government Fund and the Equity Funds may invest
in common stocks, which represent an equity (ownership) interest in a
corporation. This ownership interest generally gives an Underlying Fund the
right to vote on measures affecting the company's organization and operations.

The Underlying Funds (including SPIF) may also buy securities such as
convertible debt, preferred stock, warrants or other securities exchangeable for
shares of common stock. In selecting equity investments for an Underlying Fund,
each Underlying Fund's Sub-Advisor will invest the Underlying Fund's assets in
industries and companies that it believes are experiencing favorable demand for
their products and services and which operate in a favorable competitive and
regulatory climate.

An Underlying Fund may not own more than 10% of the outstanding voting
securities of a single issuer and may not invest more than 10% of the Underlying
Fund's assets in securities in the aggregate where a market quotation is not
readily available.

A convertible security is a security that may be converted either at a stated
price or rate within a specified period of time into a specified number of
shares of common stock. By investing in convertible securities, an Underlying
Fund seeks the opportunity, through the conversion feature, to participate in
the capital appreciation of the common stock into which the securities are
convertible, while obtaining a higher fixed rate of return than is available in
common stocks.

CURRENCY MANAGEMENT. An Underlying Fund's flexibility to participate in higher
yielding debt markets outside of the United States may allow the Underlying Fund
to achieve higher yields than those generally obtained by domestic money market
funds and short-term bond investments. If an Underlying Fund invests
significantly in securities denominated in foreign currencies, however,
movements in foreign currency exchange rates versus the U.S. Dollar are likely
to impact the Underlying Fund's share price stability relative to domestic
short-term income funds. Fluctuations in foreign currencies can have a positive
or negative impact on returns. Normally, to the extent that the Underlying Fund
is invested in foreign securities, a weakening in the U.S. Dollar relative to
the foreign currencies underlying an Underlying Fund's investments should help
increase the NAV of the Underlying Fund. Conversely, a strengthening in the U.S.
Dollar versus the foreign currencies in which an Underlying Fund's securities
are denominated will generally lower the NAV of the Underlying Fund. An
Underlying Fund's Sub-Advisor attempts to minimize exchange rate risk through
active portfolio management, including altering currency exposure through the
use of futures, options and forward currency transactions and attempting to
identify bond markets with strong or stable currencies. Underlying Funds
authorized to invest in securities of foreign issuers may engage in currency
management strategies.

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<PAGE> 25

DEBT SECURITIES ISSUED OR GUARANTEED BY SUPRANATIONAL ORGANIZATIONS. Underlying
Funds authorized to invest in securities of foreign issuers may invest assets in
debt securities issued or guaranteed by supranational organizations, such as
obligations issued or guaranteed by the Asian Development Bank, Inter-American
Development Bank, International Bank for Reconstruction and Development (World
Bank), African Development Bank, European Coal and Steel Community, European
Economic Community, European Investment Bank and the Nordic Investment Bank.

DIVERSIFICATION. The SPIF has registered as a "non-diversified" investment
company so that it will be 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 purchased from a single Lender. To the extent
the SPIF invests a relatively high percentage of its assets in obligations of a
limited number of issuers, the SPIF will be more susceptible than a more widely
diversified investment company to any single corporate, economic, political or
regulatory occurrence.

DOLLAR ROLL TRANSACTIONS. In order to seek a high level of current income, the
STF U.S. Government, STF Short Term High Quality Bond and STF Corporate Income
Funds may enter into dollar rolls in which the Underlying Fund sells securities
for delivery in the current month and simultaneously contracts to repurchase,
typically in 30 or 60 days, substantially similar (same type, coupon and
maturity) securities on a specified future date. The proceeds of the initial
sale of securities in the dollar roll transactions may be used to purchase
long-term securities which will be held during the roll period. During the roll
period, the Underlying Fund forgoes principal and interest paid on the
securities sold at the beginning of the roll period. The Underlying Fund is
compensated by the difference between the current sales price and the forward
price for the future purchase (often referred to as the "drop") as well as by
the interest earned on the cash proceeds of the initial sale. A "covered roll"
is a specific type of dollar roll for which there is an offsetting cash position
or cash equivalent securities position that matures on or before the forward
settlement date of the dollar roll transaction. As used herein the term "dollar
roll" refers to dollar rolls that are not "covered rolls." At the end of the
roll commitment period, the Underlying Fund may or may not take delivery of the
securities the Underlying Fund has contracted to purchase. To the extent that
the proceeds of the initial sale of securities are invested in long-term bonds,
the proceeds are subject to the higher volatility in price of such long-term
bonds in comparison to short-term bonds. See "Fixed Income Obligations and
Securities" following.

The Underlying Fund will establish a segregated account with its custodian in
which it will maintain cash, U.S. Government securities or other liquid,
high-grade debt obligations equal in value at all times to its obligations in
respect of dollar rolls, and, accordingly, the Underlying Fund will not treat
such obligations as senior securities for purposes of the 1940 Act. "Covered
rolls" are not subject to these segregation requirements. Each of the Underlying
Funds is prohibited from borrowing money or entering into reverse repurchase
agreements or dollar roll transactions in the aggregate in excess of 33 1/3% of
the Underlying Fund's total assets (after giving effect to any such borrowings).
The Short Term High Quality Bond Fund intends to invest up to 10% of its total
assets in dollar roll transactions, but may invest up to 33 1/3% of its total
assets in such transactions.

EXCHANGE RATE-RELATED SECURITIES. Each of the Underlying Funds, except for the
Money Funds and SPIF, may invest in securities which are indexed to certain
specific foreign currency exchange rates. The terms of such security provide
that the principal amount or interest payments are adjusted upwards or downwards
(but not below zero) at payment to reflect fluctuations in the exchange rate
between two currencies while the obligation is outstanding, depending on the
terms of the specific security. The Underlying Fund will purchase such security
with the currency in which it is denominated and will receive interest and
principal payments thereon in the currency, but the amount of principal or
interest payable by the issuer will vary in proportion to the change (if any) in
the exchange rate between the two specified currencies between the date the
instrument is issued and the date the principal or interest payment is due. The
staff of the SEC is currently considering whether a mutual fund's purchase of
this type of security would result in the issuance of a "senior security" within
the meaning of the 1940 Act. The Underlying Funds believe that such investments
do not involve the creation of such a senior security, but nevertheless
undertakes, pending the resolution of this issue by the staff, to establish a
segregated account with respect to such investments and to maintain in such
account cash not available for investment or U.S. Government Securities or other
liquid, high quality debt securities having a value equal to the aggregate
principal amount of outstanding securities of this type.

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Investments in exchange rate-related securities entail certain risks. There is
the possibility of significant changes in rates of exchange between the U.S.
Dollar and any foreign currency to which an exchange rate-related security is
linked. In addition, there is no assurance that sufficient trading interest to
create a liquid secondary market will exist for a particular exchange
rate-related security due to conditions in the debt and foreign currency
markets. Illiquidity in the forward foreign exchange market and the high
volatility of the foreign exchange market may from time to time combine to make
it difficult to sell an exchange rate-related security prior to maturity without
incurring a significant price loss.

FIXED-INCOME OBLIGATIONS AND SECURITIES. The market value of fixed-income
obligations and securities held by an Underlying Fund and, consequently, the NAV
per share of the Underlying Fund can be expected to vary inversely to changes in
prevailing interest rates. Investors should also recognize that, in periods of
declining interest rates, the yield of the Underlying Fund will tend to be
somewhat higher than prevailing market rates and, in periods of rising interest
rates, the Underlying Fund's yield will tend to be somewhat lower. Also, when
interest rates are falling, the inflow of net new money to the Underlying Fund
from the continuous sale of its shares will likely be invested in instruments
producing lower yields than the balance of its assets, thereby reducing current
yield. In periods of rising interest rates, the opposite can be expected to
occur. While securities with longer maturities tend to produce higher yields,
the prices of longer maturity securities are also subject to greater market
fluctuations as a result of changes in interest rates. In addition, obligations
purchased by an Underlying Fund that are rated in the lowest of the top four
ratings (Baa by Moody's or BBB by S&P) are considered to have speculative
characteristics, and changes in economic conditions or other circumstances are
more likely to lead to a weakened capacity to make principal and interest
payments than is the case with higher grade securities.

FLOATING RATE, INVERSE FLOATING RATE AND VARIABLE RATE OBLIGATIONS. The STF
Corporate Income Fund may purchase floating rate, inverse floating rate and
variable rate obligations, including participation interests therein. Floating
rate obligations have an interest rate that changes whenever there is a change
in the external interest rate, while variable rate obligations provide for a
specified periodic adjustment in the interest rate. The interest rate on an
inverse floating rate obligation (an "inverse floater") can be expected to move
in the opposite direction from the market rate of interest to which the inverse
floater is indexed. The Underlying Funds may purchase floating rate, inverse
floating rate and variable rate obligations that carry a demand feature which
would permit the Underlying Funds to tender them back to the issuer or
remarketing agent at par value prior to maturity. Frequently, floating rate,
inverse floating rate and variable rate obligations are secured by letters of
credit or other credit support arrangements provided by banks.

The STF Corporate Income Fund may purchase mortgage-backed securities that are
floating rate, inverse floating rate and variable rate obligations. Municipal
Securities purchased by the Global Money Fund may include variable rate demand
notes issued by industrial development authorities and other governmental
entities, as well as participation interests therein. Although variable rate
demand notes are frequently not rated by credit rating agencies, an Underlying
Fund may purchase unrated notes that are determined by the Underlying Fund's
Sub-Advisor to be of comparable quality at the time of purchase to rated
instruments that may be purchased by the Underlying Fund. Moreover, while there
may be no active secondary market with respect to a particular variable rate
demand note purchased by an Underlying Fund, the Underlying Fund may, upon the
notice specified in the note, demand payment of the principal of and accrued
interest on the note at any time and may resell the note at any time to a third
party. The absence of such an active secondary market, however, could make it
difficult for an Underlying Fund to dispose of a particular variable rate demand
note in the event the issuer of the note defaulted on its payment obligations,
and the Underlying Fund could, for this or other reasons, suffer a loss to the
extent of the default.

An inverse floater may be considered to be leveraged to the extent that its
interest rate varies by a magnitude that exceeds the magnitude of the change in
the index rate of interest. The higher degree of leverage inherent in inverse
floaters is associated with greater volatility in their market values.
Accordingly, the duration of an inverse floater may exceed its stated final
maturity.

FOREIGN CURRENCY EXCHANGE TRANSACTIONS. All of the Underlying Funds (except the
STF U.S. Government Fund, the Money Funds and SPIF) may engage in foreign
currency exchange transactions. Underlying Funds that buy and sell securities
denominated in currencies other than the U.S. Dollar, and receive interest,
dividends and

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<PAGE> 27

sale proceeds in currencies other than the U.S. Dollar, may enter into foreign
currency exchange transactions to convert to and from different foreign
currencies and to convert foreign currencies to and from the U.S. Dollar. The
Underlying Fund either enters into these transactions on a spot (i.e., cash)
basis at the spot rate prevailing in the foreign currency exchange market, or
uses forward contracts to purchase or sell foreign currencies.

A forward foreign currency exchange contract is an obligation by the Underlying
Fund to purchase or sell a specific currency at a future date, which may be any
fixed number of days from the date of the contract. Forward foreign currency
exchange contracts establish an exchange rate at a future date. These contracts
are transferable in the interbank market conducted directly between currency
traders (usually large commercial banks) and their customers. A forward foreign
currency exchange contract generally has no deposit requirement, and is traded
at a net price without commission. Neither spot transactions nor forward foreign
currency exchange contracts eliminate fluctuations in the prices of the
Underlying Fund's portfolio securities or in foreign exchange rates, or prevent
loss if the prices of these securities should decline.

An Underlying Fund may enter into foreign currency hedging transactions in an
attempt to protect against changes in foreign currency exchange rates between
the trade and settlement dates of specific securities transactions or changes in
foreign currency exchange rates that would adversely affect a portfolio position
or an anticipated portfolio position. Although these transactions tend to
minimize the risk of loss due to a decline in the value of the hedged currency,
at the same time they tend to limit any potential gain that might be realized
should the value of the hedged currency increase. The precise matching of the
forward contract amounts and the value of the securities involved will not
generally be possible because the future value of these securities in foreign
currencies will change as a consequence of market movements in the value of
those securities between the date the forward contract is entered into and the
date it matures. The projection of currency market movements is extremely
difficult, and the successful execution of a hedging strategy is highly
uncertain. In addition, when the Sub-Advisor believes that the currency of a
specific country may deteriorate against another currency, it may enter into a
forward contract to sell the less attractive currency and buy the more
attractive one. The amount in question could be less than or equal to the value
of the Underlying Fund's securities denominated in the less attractive currency.
The Underlying Fund may also enter into a forward contract to sell a currency
which is linked to a currency or currencies in which some or all of the
Underlying Fund's portfolio securities are or could be denominated, and to buy
U.S. Dollars. These practices are referred to as "cross hedging" and "proxy
hedging."

Forward currency exchange contracts are agreements to exchange one currency for
another -- for example, to exchange a certain amount of U.S. Dollars for a
certain amount of Japanese Yen -- at a future date and specified price.
Typically, the other party to a currency exchange contract will be a commercial
bank or other financial institution. Because there is a risk of loss to the
Underlying Fund if the other party does not complete the transaction, the
Underlying Fund's Sub-Advisor will enter into foreign currency exchange
contracts only with parties approved by the Underlying Fund's Board of Trustees.

An Underlying Fund may maintain "short" positions in forward currency exchange
transactions, which would involve the Underlying Fund's agreeing to exchange
currency that it currently does not own for another currency -- for example, to
exchange an amount of Japanese Yen that it does not own for a certain amount of
U.S. Dollars -- at a future date and specified price in anticipation of a
decline in the value of the currency sold short relative to the currency that
the Underlying Fund has contracted to receive in the exchange.

While such actions are intended to protect the Underlying Fund from adverse
currency movements, there is a risk that currency movements involved will not be
properly anticipated. Use of this currency hedging technique may also be limited
by management's need to protect the status of the Underlying Fund as a regulated
investment company under the Internal Revenue Code of 1986, as amended (the
"Code"). The projection of currency market movements is extremely difficult, and
the successful execution of a hedging strategy is highly uncertain.

FOREIGN INVESTMENTS. All of the Underlying Funds (except the STF U.S. Government
Fund, STF U.S. Government Money Fund and SPIF) may invest in securities of
foreign issuers. There are certain risks involved in investing in foreign
securities, including those resulting from (i) fluctuations in currency exchange
rates, (ii) devaluation of currencies, (iii) future political or economic
developments and the possible imposition of currency exchange blockages or other
foreign governmental laws or restrictions, (iv) reduced availability of public
information concerning issuers, and (v) the fact that foreign companies are not
generally subject to uniform

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<PAGE> 28

accounting, auditing and financial reporting standards or to other regulatory
practices and requirements comparable to those applicable to domestic companies.
Moreover, securities of many foreign companies may be less liquid and the prices
more volatile than those of securities of comparable domestic companies.
Although the Underlying Funds' Sub-Advisors do not intend to expose the
Underlying Funds to such risks, with respect to certain foreign countries, there
is the possibility of expropriation, nationalization, confiscatory taxation and
limitations on the use or removal of funds or other assets of the Underlying
Funds, including the withholding of dividends. When an Underlying Fund's
Sub-Advisor believes that currency in which a portfolio security or securities
is denominated may suffer a decline against the U.S. Dollar, it may hedge such
risk by entering into a forward contract to sell an amount of foreign currency
approximating the value of some or all of the Underlying Fund's portfolio
securities denominated in such foreign currency.

Because foreign securities generally are denominated and pay dividends or
interest in foreign currencies, and the Underlying Funds hold various foreign
currencies from time to time, the value of the net assets of the Underlying
Funds as measured in U.S. Dollars will be affected favorably or unfavorably by
changes in exchange rates. Generally, the Underlying Funds' currency exchange
transactions will be conducted on a spot (i.e., cash) basis at the spot rate
prevailing in the currency exchange market. The cost of the Underlying Funds'
currency exchange transactions will generally be the difference between the bid
and offer spot rate of the currency being purchased or sold. In order to protect
against uncertainty in the level of future foreign currency exchange rates, the
Underlying Funds are authorized to enter into certain foreign currency exchange
transactions. Investors should be aware that exchange rate movements can be
significant and can endure for long periods of time. The Sub-Advisor of the STF
International Growth Fund attempts to manage exchange rate risk through active
currency management. Extensive research of the economic, political and social
factors that influence global markets is conducted by the Sub-Advisors.
Particular attention is given to country-specific analysis, reviewing the
strength or weakness of a country's overall economy, the government policies
influencing business conditions and the outlook for the country's currency.

In addition, while the volume of transactions effected on foreign stock
exchanges has increased in recent years, in most cases it remains appreciably
below that of the New York Stock Exchange ("NYSE"). Accordingly, the Underlying
Funds' foreign investments may be less liquid and their prices may be more
volatile than comparable investments in securities of United States companies.
Moreover, the settlement periods for foreign securities, which are often longer
than those for securities of United States issuers, may affect portfolio
liquidity. In buying and selling securities on foreign exchanges, the Underlying
Fund normally pays fixed commissions that are generally higher than the
negotiated commissions charged in the United States. In addition, there is
generally less governmental supervision and regulation of securities exchanges,
brokers and issuers in foreign countries than in the United States.

FUTURES AND OPTIONS ON FUTURES. When deemed advisable by its Sub-Advisor,
certain Underlying Funds may enter into financial futures and related options
that are traded on a U.S. exchange or board of trade. If entered into, these
transactions will be made for the purpose of hedging against the effects of
changes in the value of portfolio securities due to anticipated changes in
interest rates and market conditions, when the transactions are economically
appropriate to the reduction of risks inherent in the management of the
Underlying Funds, and for the other purposes described in the section "Strategic
Transactions." An Underlying Fund may not enter into futures and options
contracts for which aggregate initial margin deposits and premiums paid for
unexpired options entered into for purposes other than "bona fide hedging" (as
defined in regulations adopted by the Commodity Futures Trading Commission)
exceed 5% of the fair market value of the Underlying Fund's assets, such market
value to be determined after taking into account unrealized profits and
unrealized losses on futures contracts into which it has entered. With respect
to each long position in a futures contract or option thereon, the underlying
commodity value of such contract will always be covered by cash and cash
equivalents set aside plus accrued profits held at the futures commission
merchant.

A financial futures contract provides for the future sale by one party and the
purchase by the other party of a specified amount of a particular financial
instrument (debt security) at a specified price, date, time and place. An index
futures contract is an agreement pursuant to which two parties agree to take or
make delivery of an amount of cash equal to the difference between the value of
the index at the close of the last trading day of the contract and the price at
which the index contract was originally written. An option on a financial or
index futures contract

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<PAGE> 29

generally gives the purchaser the right, in return for the premium paid, to
assume a position in a futures contract at a specified exercise price at any
time prior to the expiration date of the option.

The purpose of entering into a futures contract by an Underlying Fund is to
protect the Underlying Fund from fluctuations in the value of its securities
caused by anticipated changes in interest rate or market conditions without
necessarily buying or selling the securities. The use of futures contracts and
options on futures contracts as hedging devices involves several risks. There
can be no assurance that there will be a correlation between price movements in
the underlying securities, currencies or index, on the one hand, and price
movements in the securities which are the subject of the hedge, on the other
hand. Positions in futures contracts and options on futures contracts may be
closed out only on the exchange or board of trade on which they were entered
into, and there can be no assurance that an active market will exist for a
particular contract or option at any particular time. If an Underlying Fund has
hedged against the possibility of an increase in interest rates or bond prices
adversely affecting the value of securities held in its portfolio and rates or
prices decreased instead, an Underlying Fund will lose part or all of the
benefit of the increased value of securities that it has hedged because it will
have offsetting losses in its futures positions. In addition, in such
situations, if an Underlying Fund has insufficient cash, it may have to sell
securities to meet daily variation margin requirements at a time when it may be
disadvantageous to do so. These sales of securities may, but will not
necessarily, be at increased prices that reflect the decline in interest rates
or bond prices, as the case may be. In addition, the Underlying Fund would pay
commissions and other costs in connection with such investments, which may
increase the Underlying Fund's expenses and reduce its return. While utilization
of options, futures contracts and similar instruments may be advantageous to the
Underlying Fund, if the Underlying Fund's Sub-Advisor is not successful in
employing such instruments in managing the Underlying Fund's investments, the
Underlying Fund's performance will be worse than if the Underlying Fund did not
make such investments. Losses incurred in hedging transactions and the costs of
these transactions will adversely affect an Underlying Fund's performance.

The Money Funds and SPIF will not invest in futures and options on futures.

GEOGRAPHICAL AND INDUSTRY CONCENTRATION. The STF Global Money Fund will invest
at least 25% of its assets in bank obligations unless the Underlying Fund is in
a temporary defensive position. As a result of this concentration policy, which
is a fundamental policy of the Underlying Fund, the Underlying Fund's
investments may be subject to greater risk than a fund that does not concentrate
in the banking industry. In particular, bank obligations may be subject to the
risks associated with interest rate volatility, changes in federal and state
laws and regulations governing banking and the inability of borrowers to pay
principal and interest when due. In addition, foreign banks present the risks of
investing in foreign securities generally and are not subject to reserve
requirements and other regulations comparable to those of U.S. banks.

GOVERNMENT STRIPPED MORTGAGE-BACKED SECURITIES. The STF Short Term High Quality
Bond, STF U.S. Government, STF Corporate Income Funds and SPIF may invest in
government stripped mortgage-backed securities issued or guaranteed by the
Government National Mortgage Association ("GNMA"), Federal National Mortgage
Association ("FNMA") and Federal Home Loan Mortgage Corporation ("FHLMC"). These
securities represent beneficial ownership interests in either periodic principal
distributions ("principal-only") or interest distributions ("interest-only") on
mortgage-backed certificates issued by GNMA, FNMA or FHLMC, as the case may be.
The certificates underlying the government stripped mortgage-backed securities
represent all or part of the beneficial interest in pools of mortgage loans. The
Underlying Funds will invest in interest-only government stripped
mortgage-backed securities in order to enhance yield or to benefit from
anticipated appreciation in value of the securities at times when the
appropriate Sub-Advisor believes that interest rates will remain stable or
increase. In periods of rising interest rates, the value of interest-only
government stripped mortgage-backed securities may be expected to increase
because of the diminished expectation that the underlying mortgages will be
prepaid. In this situation the expected increase in the value of interest-only
government stripped mortgage-backed securities may offset all or a portion of
any decline in value of the portfolio securities of the Underlying Funds.
Investing in government stripped mortgage-backed securities involves the risks
normally associated with investing in mortgage-backed securities issued by
government or government-related entities. See the "Mortgage-Backed Securities"
section. In addition, the yields on interest-only and principal-only government
stripped mortgage-backed securities are extremely sensitive to the prepayment
experience on the mortgage loans underlying the certificates collateralizing the
securities. If a decline in the level of prevailing interest rates results in a
rate of principal prepayments higher

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<PAGE> 30

than anticipated, distributions of principal will be accelerated, thereby
reducing the yield to maturity on interest-only government stripped
mortgage-backed securities and increasing the yield to maturity on
principal-only government stripped mortgage-backed securities. Conversely, if an
increase in the level of prevailing interest rates results in a rate of
principal prepayments lower than anticipated, distributions of principal will be
deferred, thereby increasing the yield to maturity on interest-only government
stripped mortgage-backed securities and decreasing the yield to maturity on
principal-only government stripped mortgage-backed securities. Sufficiently high
prepayment rates could result in the Underlying Fund's not fully recovering its
initial investment in an interest-only government stripped mortgage-backed
security. Government stripped mortgage-backed securities are currently traded in
an over-the-counter market maintained by several large investment banking firms.
There can be no assurance that the Underlying Fund will be able to effect a
trade of a government stripped mortgage-backed security at a time when it wishes
to do so. The Underlying Funds will acquire government stripped mortgage-backed
securities only if a liquid secondary market for the securities exists at the
time of acquisition.

HOLDINGS IN OTHER INVESTMENT COMPANIES. When the Sub-Advisor of each Underlying
Fund believes that it would be beneficial to the Underlying Fund and appropriate
under the circumstances, the Sub-Advisor may invest up to 10% of the Underlying
Fund's assets in securities of mutual funds that are not affiliated with Sierra
Advisors or any Sub-Advisor. As a shareholder in any such mutual fund, the
Underlying Fund will bear its ratable share of the mutual fund's expenses,
including management fees, and will remain subject to the Underlying Fund's
advisory and administration fees with respect to the assets so invested.

ILLIQUIDITY. The SPIF is a closed-end investment company designed primarily for
long-term investors and not as a trading vehicle. The SPIF does not intend to
list its shares for trading on any national securities exchange. There is not
expected to be any secondary trading market in the shares and an investment in
the shares should be considered illiquid. In order to provide liquidities for
SPIF Shares, the Board of Trustees intends, each quarter, to authorize tender
offers for a portion of the then outstanding shares at the current net asset
value. In the event that the SPIF's Board of Trustees does not authorize the
SPIF to engage in tender offers for its shares, it is unlikely that a holder of
shares will be able to otherwise sell their shares to the SPIF.

ILLIQUID SECURITIES. Up to 15% of the assets of each of the Underlying Funds
other than the Money Funds (the "Non-Money Funds"), and up to 10% of the assets
of each Money Fund, may be invested in securities that are not readily
marketable, including: (1) repurchase agreements with maturities greater than
seven calendar days; (2) time deposits maturing in more than seven calendar
days; (3) to the extent a liquid secondary market does not exist for the
instruments, futures contracts and options thereon; (4) certain over-the-counter
options, as described in the Trust's SAI; (5) certain variable rate demand notes
having a demand period of more than seven days; and (6) certain Rule 144A
restricted securities.

SPIF is not limited regarding the percentage of its assets in illiquid
securities.

LEASE OBLIGATION BONDS. Lease obligation bonds are mortgages on a facility that
is secured by the facility and are paid by a lessee over a long term. The rental
stream to service the debt as well as the mortgage are held by a collateral
trustee on behalf of the public bondholders. The primary risk of such instrument
is the risk of default. Under the lease indenture, the failure to pay rent is an
event of default. The remedy to cure default is to rescind the lease and sell
the asset. If the lease obligation is not readily marketable or market
quotations are not readily available, such lease obligations will be subject to
an Underlying Fund's 15% limit on illiquid securities. The Money Funds will not
invest in Lease Obligation Bonds.

LENDING OF SECURITIES. All of the Underlying Funds except the STF U.S.
Government Fund have the ability to lend portfolio securities to brokers and
other financial organizations. By lending its securities, an Underlying Fund can
increase its income by continuing to receive interest on the loaned securities
as well as by either investing the cash collateral in short-term instruments or
obtaining yield in the form of interest paid by the borrower when U.S.
Government Securities are used as collateral. These loans, if and when made, may
not exceed 20% of an Underlying Fund's total assets. Loans of portfolio
securities by an Underlying Fund will be collateralized by cash, letters of
credit or U.S. Government Securities that are maintained at all times in an
amount at least equal to the current market value of the loaned securities. Any
gain or loss in the market price of the securities loaned that might occur
during the term of the loan would be for the account of the Underlying Fund
involved. Each Underlying

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<PAGE> 31

Fund's Sub-Advisor will monitor on an ongoing basis the creditworthiness of the
institutions to which the Underlying Fund lends securities.

LOAN PARTICIPATIONS. The SPIF will purchase Participations in Senior Loans. With
respect to any given Senior Loan, the terms of Participations are arrived at
through private negotiations between the SPIF and the seller of such an interest
in a Senior Loan, and may result in the SPIF having rights which differ from,
and are more limited than, the rights of Lenders or of persons who acquire such
interests by Assignment. Participations typically result in the SPIF having a
contractual relationship with the Lender selling the Participation, but not with
the Borrower. In the event of the insolvency of the Lender selling the
Participation, the SPIF may be treated as a general creditor of such Lender, and
may not have any exclusive or senior claim with respect to such Lender's
interest in, or the collateral with respect to, the Senior Loan. As such, the
SPIF may incur the credit risk of the Lender selling the Participation in
addition to the credit risk of the Borrower with respect to the Senior Loan when
purchasing Participations and may not benefit directly from the security
provided by the collateral supporting the Senior Loan with respect to which such
Participation was sold. The SPIF may pay a fee or forego a portion of interest
payments when acquiring Participations or Assignments. See "Strategies Available
to SPIF -- Certain Characteristics of Senior Loan Interests" in the Trust's SAI.

LOWER-RATED SECURITIES. The STF Growth and STF Emerging Growth Funds may each
invest up to 35% of the total assets of such Underlying Funds, respectively, in
debt securities rated lower than BBB by S&P or Baa by Moody's, or of equivalent
quality as determined by that Underlying Fund's Sub-Advisor.
Non-investment-grade debt securities are securities rated BB or lower and are
commonly referred to as "junk bonds."

Securities rated below investment-grade, as well as unrated securities, usually
entail greater risk (including the possibility of default or bankruptcy of the
issuers), and generally involve greater price volatility and risk of principal
and income, and may be less liquid, than securities in higher-rated categories.
Both price volatility and illiquidity may make it difficult for the Underlying
Fund to value certain of these securities at certain times and these securities
may be difficult to sell under certain market conditions. Prices for
non-investment-grade debt securities may be affected by legislative and
regulatory developments. For further information, see "Investment Objectives and
Policies of the Underlying Funds - Strategies Available to the Growth Fund and
Emerging Growth Fund" in the SAI.

Non-investment-grade debt securities are often considered to be speculative and
involve greater risk of default or price changes due to changes in the issuer's
creditworthiness. The market prices of these securities may fluctuate more than
higher-rated securities and may decline significantly in periods of general
economic difficulty, which may follow periods of rising interest rates.

The STF Growth Fund has no pre-established minimum quality standards and may
invest in debt securities of any quality, including non-investment-grade debt
securities that may offer higher yields because of the greater risks involved in
such investments.

MORTGAGE-BACKED SECURITIES. All of the Underlying Funds may invest in
mortgage-backed U.S. Government Securities which represent an interest in a pool
of mortgage loans. Each of the Money Funds may invest in such securities
pursuant to its authority to make money market investments. The primary
government issuers or guarantors of mortgage-backed securities are GNMA, FNMA
and FHLMC. Mortgage-backed securities provide a monthly payment consisting of
interest and principal payments. Additional payments may be made out of
unscheduled repayments of principal resulting from the sale of the underlying
residential property, refinancing or foreclosure, net of fees or costs that may
be incurred. Prepayments of principal on mortgage-related securities may tend to
increase due to refinancing of mortgages as interest rates decline. Prompt
payment of principal and interest on GNMA mortgage pass-through certificates is
backed by the full faith and credit of the United States. FNMA guaranteed
mortgage pass-through certificates and FHLMC participation certificates are
solely the obligations of those entities but are supported by the discretionary
authority of the U.S. Government to purchase the agencies' obligations.
Collateralized Mortgage Obligations are a type of bond secured by an underlying
pool of mortgages or mortgages pass-through certificates that are structured to
direct payments on underlying collateral to different series or classes of the
obligations.

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<PAGE> 32

To the extent that an Underlying Fund purchases mortgage-related or
mortgage-backed securities at a premium, mortgage foreclosures and prepayments
of principal (which may be made at any time without penalty) may result in some
loss of the Underlying Fund's principal investment to the extent of the premium
paid. The yield of the Underlying Fund may be affected by reinvestment of
prepayments at higher or lower rates than the original investment. In addition,
like other debt securities, the value of mortgage-related securities, including
government and government-related mortgage pools, will generally fluctuate in
response to market interest rates.

MUNICIPAL SECURITIES AND AMT-SUBJECT BONDS. "Municipal Securities" are debt
obligations issued by states, territories and possessions of the United States,
the District of Columbia and their respective authorities, agencies,
instrumentalities and political subdivisions.

"AMT-Subject Bonds" are Municipal Securities issued to finance certain "private
activities," such as bonds used to finance airports, housing projects, student
loan programs and water and sewer projects. Interest on AMT-Subject Bonds is a
specific tax preference item for purposes of the federal individual and
corporate alternative minimum taxes. In the past, AMT-Subject Bonds have
provided, and may continue to provide, somewhat higher yields than comparable
Municipal Securities, the interest on which is not a specific tax preference
item for purposes of the federal individual and corporate alternative minimum
taxes. See "Dividends, Capital Gains and Taxes" for a discussion of the tax
consequences of investing in AMT-Subject Bonds.

NEW ISSUERS. All of the Underlying Funds except the Money Funds may invest up to
5% of its assets in the securities of issuers which have been in continuous
operation for less than three years.

OPTIONS ON SECURITIES.

Option Purchase. All of the Underlying Funds (except the Money Funds and SPIF)
may purchase put and call options on portfolio securities in which it may invest
that are traded on a U.S. or foreign securities exchange or in the
over-the-counter market. An Underlying Fund may utilize up to 10% of its assets
to purchase put options on portfolio securities and may do so at or about the
same time that it purchases the underlying security or at a later time. By
buying a put, an Underlying Fund limits its risk of loss from a decline in the
market value of the security until the put expires. Any appreciation in the
value of the underlying security, however, will be partially offset by the
amount of the premium paid for the put option and any related transaction costs.
An Underlying Fund may also utilize up to 10% of its assets to purchase call
options on securities in which it is authorized to invest. Call options may be
purchased by an Underlying Fund in order to acquire the underlying securities
for the Underlying Fund at a price that avoids any additional cost that would
result from a substantial increase in the market value of a security. An
Underlying Fund may also purchase call options to increase its return to
investors at a time when the call is expected to increase in value due to
anticipated appreciation of the underlying security. Prior to their expirations,
put and call options may be sold in closing sale transactions (sales by the
Underlying Fund, prior to the exercise of options that it has purchased, of
options of the same series), and profit or loss from the sale will depend on
whether the amount received is more or less than the premium paid for the option
plus the related transaction costs.

Covered Option Writing. Certain Underlying Funds may write put and call options
on securities for hedging purposes and the other purposes described in the
section "Strategic Transactions." An Underlying Fund realizes fees (referred to
as "premiums") for granting the rights evidenced by the options. A put option
embodies the right of its purchaser to compel the writer of the option to
purchase from the option holder an underlying security at a specified price at
any time during the option period. In contrast, a call option embodies the right
of its purchaser to compel the writer of the option to sell to the option holder
an underlying security at a specified price at any time during the option
period.

Upon the exercise of a put option written by an Underlying Fund, the Underlying
Fund may suffer a loss equal to the difference between the price at which the
Underlying Fund is required to purchase the underlying security and its market
value at the time of the option exercise, less the premium received for writing
the option. Upon the exercise of a call option written by the Underlying Fund,
the Underlying Fund may suffer a loss equal to the excess of the security's
market value at the time of the option exercise over the Underlying Fund's
acquisition cost of the security, less the premium received for writing the
option.

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<PAGE> 33

Certain Underlying Funds may write covered options on portfolio securities to
enhance current return. Accordingly, whenever an Underlying Fund writes a call
option, it will continue to own or have the present right to acquire the
underlying security without the payment of additional consideration for as long
as it remains obligated as the writer of the option. To support its obligation
to purchase the underlying security if a put option is exercised, an Underlying
Fund will either (1) deposit with its custodian in a segregated account cash or
liquid, high-grade debt securities having a value at least equal to the exercise
price of the underlying securities or (2) continue to own an equivalent number
of puts on the same "series" (that is, puts on the same underlying security
having the same exercise prices and expiration dates as those written by the
Underlying Fund), or an equivalent number of puts on the same "class" (that is,
puts on the same underlying security) with exercise prices greater than those
that it has written (or, if the exercise prices of the puts it holds are less
than the exercise prices of those it has written, it will deposit the difference
with the custodian in a segregated account).

The principal reason for writing covered call and put options on a securities
portfolio is to attempt to realize, through the receipt of premiums, a greater
return than would be realized on the securities alone. In return for a premium,
the writer of a covered call option forfeits the right to any appreciation in
the value of the underlying security above the strike price for the life of the
option (or until a closing purchase transaction can be effected). Nevertheless,
the call writer retains the risk of a decline in the price of the underlying
security. Similarly, the principal reason for writing covered put options is to
realize income in the form of premiums. The writer of the covered put option
accepts the risk of a decline in the price of the underlying security. The size
of the premiums that the Underlying Funds may receive may be adversely affected
as new or existing institutions, including other investment companies, engage in
or increase their option-writing activities.

An Underlying Fund may engage in closing purchase transactions to realize a
profit, to prevent an underlying security from being called or put or, in the
case of a call option, to unfreeze an underlying security (thereby permitting
its sale or the writing of a new option on the security prior to the outstanding
option's expiration). To effect a closing purchase transaction, an Underlying
Fund would purchase, prior to the holder's exercise of an option that the
Underlying Fund has written, an option of the same series as that on which the
Underlying Fund desires to terminate its obligation. The obligation of the
Underlying Fund under an option that it has written would be terminated by a
closing purchase transaction, but the Underlying Fund would not be deemed to own
an option as the result of the transaction. There can be no assurance that the
Underlying Fund will be able to effect closing purchase transactions at a time
when it wishes to do so. The ability of the Underlying Fund to engage in closing
transactions with respect to options depends on the existence of a liquid
secondary market. While the Underlying Fund will generally purchase or write
options only if there appears to be a liquid secondary market for the options
purchased or sold, for some options no such secondary market may exist or the
market may cease to exist. To facilitate closing purchase transactions, however,
the Underlying Fund will ordinarily write options only if a secondary market for
the options exists on a U.S. securities exchange or in the over-the-counter
market.

Option writing for the Underlying Funds may be limited by position and exercise
limits established by U.S. securities exchanges and the NASD and by requirements
of the Code for qualification as a regulated investment company. In addition to
writing covered put and call options to generate current income, the Underlying
Funds may enter into options transactions as hedges to reduce investment risk,
generally by making an investment expected to move in the opposite direction of
a portfolio position. A hedge is designed to offset a loss on a portfolio
position with a gain on the hedge position; at the same time, however, a
properly correlated hedge will result in a gain on the portfolio position's
being offset by a loss on the hedge position. The Underlying Funds bear the risk
that the prices of the securities being hedged will not move in the same amount
as the hedge. An Underlying Fund will engage in hedging transactions only when
deemed advisable by its Sub-Advisor. Successful use by the Underlying Fund of
options will depend on its Sub-Advisor's ability to correctly predict movements
in the direction of the stock underlying the option used as a hedge. Losses
incurred in hedging transactions and the costs of these transactions will
adversely affect the Underlying Fund's performance.

OPTIONS ON FOREIGN CURRENCIES. The STF International Growth, STF Growth [STF
EMERGING GROWTH, STF CORPORATE INCOME] and STF Short Term High Quality Bond
Funds may purchase and write put and call options on foreign currencies for the
purpose of hedging against declines in the U.S. Dollar value of foreign
currency-denominated portfolio securities and against increases in the U.S.
Dollar cost of such securities to be acquired. As in the case of other kinds of
options, however, the writing of an option on a foreign currency constitutes
only a

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<PAGE> 34

partial hedge, up to the amount of the premium received, and the Underlying Fund
could be required to purchase or sell foreign currencies at disadvantageous
exchange rates, thereby incurring losses. The purchase of an option on a foreign
currency may constitute an effective hedge against fluctuations in exchange
rates, although, in the event of rate movements adverse to the Underlying Fund's
position, it may forfeit the entire amount of the premium plus related
transaction costs. There is no specific percentage limitation on the Underlying
Fund's investments in options on foreign currencies. See the SAI of the
Underlying Funds for further discussion of the use, risks and costs of options
on foreign currencies.

OPTIONS ON FOREIGN STOCK INDEXES. The STF International Growth, STF Growth, STF
Growth and Income, STF Emerging Growth and STF Short Term High Quality Bond
Funds may, subject to applicable securities regulations, purchase and write put
and call options on foreign stock indexes listed on foreign and domestic stock
exchanges for the purposes of hedging its portfolio. A stock index fluctuates
with changes in the market values of the stocks included in the index. Examples
of foreign stock indexes are the Canadian Market Portfolio Index (Montreal Stock
Exchange), The Financial Times -- Stock Exchange 100 (London Stock Exchange) and
the Toronto Stock Exchange Composite 300 (Toronto Stock Exchange).

Options on stock indexes are generally similar to options on stock except for
different delivery requirements. Instead of giving the right to take or make
delivery of stock at a specified price, an option on a stock index gives the
holder the right to receive a cash "exercise settlement amount" equal to (a) the
amount, if any, by which the fixed exercise price of the option exceeds (in the
case of a put) or is less than (in the case of a call) the closing value of the
underlying index on the date of exercise, multiplied by (b) a fixed "index
multiplier." Receipt of this cash amount will depend upon the closing level of
the stock index upon which the option is based being greater than, in the case
of a call, or less than, in the case of a put, the exercise price of the option.
The amount of cash received will be equal to such difference between the closing
price of the index and the exercise price of the option expressed in U.S.
Dollars or a foreign currency, as the case may be, times a specified multiple.
The writer of the option is obligated, in return for the premium received, to
make delivery of this amount. The writer may offset its position in stock index
options prior to expiration by entering into a closing transaction on an
exchange or the option may expire unexercised.

The effectiveness of purchasing or writing stock index options as a hedging
technique will depend upon the extent to which price movements in the portion of
the securities portfolio of the Underlying Fund correlate with price movements
of the stock index selected. Because the value of an index option depends upon
movements in the level of the index rather than the price of a particular stock,
whether the Underlying Fund will realize a gain or loss from the purchase or
writing of options on an index depends upon movements in the level of stock
prices in the stock market generally or, in the case of certain indexes, in an
industry or market segment, rather than movements in the price of a particular
stock. Accordingly, successful use of options on stock indexes by the Underlying
Fund will be subject to its Sub-Advisor's ability to predict correctly movements
in the direction of the stock market generally or of a particular industry. This
requires different skills and techniques than predicting changes in the price of
individual stocks.

Options on securities indexes entail risks in addition to the risks of options
on securities. Because exchange trading of options on securities indexes is
relatively new, the absence of a liquid secondary market to close out an option
position is more likely to occur, although the Underlying Fund generally will
only purchase or write such an option if the Sub-Advisor believes the option can
be closed out. Because options on securities indexes require settlement in cash,
the Underlying Fund may be forced to liquidate portfolio securities to meet
settlement obligations. The Underlying Fund will engage in stock index options
transactions only when determined by its Sub-Advisor to be consistent with its
efforts to control risk. There can be no assurance that such judgment will be
accurate or that the use of these portfolio strategies will be successful.

When the Underlying Fund writes an option on a stock index, it will establish a
segregated account with its custodian or with a foreign sub-custodian in which
the Underlying Fund will deposit cash or liquid, high grade debt securities or a
combination of both in an amount equal to the market value of the option, and
will maintain the account while the option is open.

OVER THE COUNTER OPTIONS. Each of the Underlying Funds (except the STF U.S.
Government, STF U.S. Government Money Fund and SPIF) may write or purchase
options in privately negotiated domestic or foreign

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transactions ("OTC Options"), as well as exchange-traded or "listed" options on
foreign currencies. Each of the Underlying Funds except the Money Funds may
write or purchase OTC Options on securities. OTC Options can be closed out only
by agreement with the other party to the transaction, and thus any OTC Options
purchased by an Underlying Fund will be considered an illiquid security. In
addition, certain OTC Options on foreign currencies are traded through financial
institutions acting as market-makers in such options and the underlying
currencies.

OTC Options entail risks in addition to the risks of exchange-traded options.
Exchange-traded options are in effect guaranteed by the Options Clearing
Corporation while an Underlying Fund relies on the party from whom it purchases
an OTC Option to perform if the Underlying Fund exercises the option. With OTC
Options, if the transacting dealer fails to make or take delivery of the
securities or amount of foreign currency underlying an option it has written, in
accordance with the terms of that option, the Underlying Fund will lose the
premium paid for the option as well as any anticipated benefit of the
transaction. Furthermore, OTC Options are less liquid than exchange-traded
options.

REPURCHASE AGREEMENTS. All of the Underlying Funds may enter into repurchase
agreements, which are agreements to purchase underlying debt obligations from
financial institutions, such as banks and broker-dealers, subject to the
seller's agreement to repurchase the obligations at an established time and
price. The collateral for such repurchase agreements will be held by the
Underlying Fund's custodian or a duly appointed sub-custodian. An Underlying
Fund will enter into repurchase agreements only with banks and broker-dealers
that have been determined to be creditworthy by the Underlying Fund's Board of
Trustees under criteria established with the assistance of the Advisor. The
seller under a repurchase agreement would be required to maintain the value of
the obligations subject to the repurchase agreement at not less than the
repurchase price. Default by the seller would, however, expose the Underlying
Fund to possible loss because of adverse market action or delay in connection
with the disposition of the underlying obligations. In addition, if bankruptcy
proceedings are commenced with respect to the seller of the obligations, the
Underlying Fund may be delayed or limited in its ability to sell the collateral.

REVERSE REPURCHASE AGREEMENTS. Each of the Underlying Funds except the Money
Funds may engage in reverse repurchase agreements. Reverse repurchase agreements
are the same as repurchase agreements except that, in this instance, the
Underlying Funds would assume the role of seller/borrower in the transaction.
The Underlying Funds will maintain segregated accounts with the Trust's
custodian consisting of cash or liquid, high grade debt securities that at all
times are in an amount equal to their obligations under reverse repurchase
agreements. Reverse repurchase agreements involve the risk that the market value
of the securities sold by an Underlying Fund may decline below the repurchase
price of the securities and, if the proceeds from the reverse purchase agreement
are invested in securities, that the market value of the securities bought may
decline below the repurchase price of the securities sold. Each Underlying
Fund's Sub-Advisor, acting under the supervision of the Board of Trustees of the
applicable Underlying Fund, reviews, on an ongoing basis the creditworthiness of
the partners with which it enters into reverse repurchase agreements. Under the
Investment Company Act, reverse repurchase agreements may be considered
borrowings by the seller. For each of the Underlying Funds except the STF U.S.
Government, STF Short Term High Quality Bond and STF Corporate Income Funds,
whenever borrowings by an Underlying Fund, including reverse repurchase
agreements, exceed 5% of the value of an Underlying Fund's total assets, the
Underlying Fund will not purchase any securities. The STF U.S. Government, STF
Short Term High Quality Bond and STF Corporate Income Funds are prohibited from
borrowing money or entering reverse repurchase agreements or dollar roll
transactions in the aggregate in excess of 33 1/3 percent of the Underlying
Fund's total assets (after giving effect to such borrowings).

SENIOR LOANS. Senior Loans consist of interests in floating or variable rate
senior loans made primarily to United States corporations, partnerships and
other entities. Senior Loans may take the form of syndicated loans ("Syndicated
Loans") or of debt obligations of Borrowers issued directly to investors in the
form of debt securities ("Senior Notes"). 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 ("CD") rate or other base lending rates used by commercial lenders.

Senior Loans invested by SPIF will consist of Senior Loans with stated
maturities of between three and seven years and with rates of interest which are
periodically reset with reset periods typically ranging from 30 days to one
year.

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<PAGE> 36

Senior Loans generally are not rated by nationally recognized statistical rating
organizations. Because of the collateralized and/or guaranteed nature of most
Senior Loans, the Fund and the Advisor believe that ratings of other securities
issued by a Borrower do not necessarily reflect adequately the relative quality
of a Borrower's Senior Loans. Therefore, although the Advisor may consider such
ratings in determining whether to invest in a particular Senior Loan, the
Advisor is not required to consider such ratings and such ratings will not be
the determinative factor in the Advisor's analysis. The Fund may invest in
Senior Loans, the Borrowers with respect to which have outstanding debt
securities which are rated below investment grade by a nationally recognized
statistical rating organization or are unrated but of comparable quality to such
securities. Such Borrowers are more likely to experience difficulty in meeting
payment obligations under such debt and other subordinate obligations. These
difficulties could detract from the Borrower's perceived creditworthiness or its
abilities to obtain financing to cover short-term cash flow needs and may force
the Borrower into various forms of credit restructuring. The Fund will invest
only in those Senior Loans with respect to which the Borrower, in the opinion of
the Advisor, demonstrates certain of the following characteristics: sufficient
cash flow to service debt; adequate liquidity; successful operating history;
strong competitive position; experienced management; and, with respect to
collateralized Senior Loans, collateral coverage that equals or exceeds the
outstanding principal amount of the Senior Loan. In addition, the Advisor will
consider, and may rely in part, on the analyses performed by the Agent and other
Lenders, including such persons' determinations with respect to collateral
securing a Senior Loan.

Participations by the Fund in a Lender's portion of a Senior Loan typically
result in the Fund having a contractual relationship only with such Lender, not
with the Borrower. The Fund has the right to receive payments of principal,
interest and any fees to which it is entitled only from the Lender selling the
Participation and only upon receipt by such Lender of such payments from the
Borrower. In connection with purchasing Participations, the Fund generally will
have no right to enforce compliance by the Borrower with the terms of the Loan
Agreement, nor any rights with respect to any funds acquired by other Lenders
through set-off against the Borrower and the Fund may not directly benefit from
the collateral supporting the Senior Loan in which it has purchased the
Participation. As a result, the Fund may assume the credit risk of both the
Borrower and the Lender selling the Participation. In the event of the
insolvency of the Lender selling a Participation, the Fund may be treated as a
general creditor of such Lender, and may not benefit from any set-off between
such Lender and the Borrower. The Fund has taken the following measures in an
effort to minimize such risks. The Fund will acquire Participations only if the
Lender selling the Participation, and any other persons interpositioned between
the Fund and the Lender, (i) at the time of investment has outstanding debt or
deposit obligations rated investment grade (BBB or A-3 or higher by Standard &
Poor's Ratings Group ("S&P") or Baa or P-3 or higher by Moody's Investors
Service ("Moody's")) or determined by the Advisor to be of comparable quality
and (ii) has entered into an agreement which provides for the holding of assets
in safekeeping for, or the prompt disbursement of assets to, the Fund. Long-term
debt rated BBB by S&P is regarded by S&P as having adequate capacity to pay
interest and repay principal and debt rated Baa by Moody's is regarded by
Moody's as a medium grade obligation, i.e., it is neither highly protected nor
poorly secured. Commercial paper rated A-1 by S&P indicates that the degree of
safety regarding timely payment is considered by S&P to be either overwhelming
or very strong and issues of commercial paper rated Prime-I by Moody's are
considered by Moody's to have a superior ability for repayment of senior
short-term debt obligations. The Fund ordinarily will purchase a Participation
only if, at the time of such purchase, the Fund believes that the party from
whom it is purchasing such Participation is retaining an interest in the
underlying Senior Loan.

The Fund may also purchase Assignments from Lenders. The purchaser of an
Assignment typically succeeds to all the rights and obligations under the Loan
Agreement of the assigning Lender and becomes a Lender under the Loan Agreement
with the same rights and obligations as the assigning Lender. Assignments are,
however, arranged through private negotiations between potential assignees and
potential assignors, and the rights and obligations acquired by the purchaser of
an Assignment may differ from, and be more limited than, those held by the
assigning Lender.

When the Fund is an Original Lender originating a Senior Loan it may share in a
fee paid to the Original Lenders. The Fund will never act as the Agent or
principal negotiator or administrator of a Senior Loan. When the Fund is a
Lender, it will have a direct contractual relationship with the Borrower, may
enforce compliance by the Borrower with the terms of the Loan Agreement and may
have rights with respect to any funds acquired by other Lenders through set-off.
Lenders also have full voting and consent rights under the applicable Loan
Agreement. Action

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<PAGE> 37

subject to Lender vote or consent generally requires the vote or consent of the
holders of some specified percentage of the outstanding principal amount of the
Senior Loan. Certain decisions, such as reducing the amount or increasing the
time for payment of interest on or repayment of principal of a Senior Loan, or
releasing collateral therefor, frequently require the unanimous vote or consent
of all Lenders affected.

The Fund will purchase an Assignment or act as a Lender with respect to a
syndicated Senior Loan only where the Agent with respect to such Senior Loan at
the time of investment has outstanding debt or deposit obligations rated
investment grade (BBB or A-3 or higher by S&P or Baa or P-3 or higher by
Moody's) or determined by the Advisor to be of comparable quality. In addition,
the Fund will purchase a Participation only where the Lender selling such
Participation, and any other person interpositioned between such Lender and the
Fund at the time of investment, have outstanding debt obligations rated
investment grade or determined by the Advisor to be of comparable quality.
Further, the Fund will not purchase interests in Senior Loans unless such Agent,
Lender or interpositioned person has entered into an agreement which provides
for the holding of assets in safekeeping for, or the prompt disbursement of
assets to, the Fund.

STRATEGIC TRANSACTIONS. Subject to the investment limitations and restrictions
for each of the Underlying Funds as stated elsewhere in the prospectuses and SAI
of the Underlying Funds, each of the Underlying Funds, except the Money Funds
may, but is not required to, utilize various other investment strategies as
described below to hedge various market risks, to manage the effective maturity
or duration of fixed-income securities, or to seek potentially higher returns.
Utilizing these investment strategies, the Underlying Fund may purchase and
sell, to the extent not otherwise limited or restricted for such Underlying
Fund, exchange-listed and over-the-counter put and call options on securities,
equity and fixed-income indices and other financial instruments, purchase and
sell financial futures contracts and options thereon, enter into various
interest rate transactions such as swaps, caps, floors or collars, and enter
into various currency transactions such as currency forward contracts, currency
futures contracts, currency swaps or options on currencies or currency futures
(collectively, all the above are called "Strategic Transactions").

Strategic Transactions may be used to attempt to protect against possible
changes in the market value of securities held in or to be purchased for the
Underlying Fund's portfolio resulting from securities markets or currency
exchange rate fluctuations, to protect the Underlying Fund's unrealized gains in
the value of its portfolio securities, to facilitate the sale of such securities
for investment purposes, to manage the effective maturity or duration of the
Underlying Fund's portfolio, or to establish a position in the derivatives
markets as a temporary substitute for purchasing or selling particular
securities. Some Strategic Transactions may also be used to seek potentially
higher returns, although no more than 5% of the Underlying Fund's assets will be
used as the initial margin or purchase price of options for Strategic
Transactions entered into for purposes other than "bona fide hedging" positions
as defined in the regulations adopted by the Commodity Futures Trading
Commission. Any or all of these investment techniques may be used at any time,
as use of any Strategic Transaction is a function of numerous variables
including market conditions. The use of Strategic Transactions involves special
considerations and risks, for example (1) the ability of the Underlying Fund to
utilize these Strategic Transactions successfully will depend on the
Sub-Advisor's ability to predict, which cannot be assured, pertinent market
movements; and (2) there might be imperfect correlation, or even no correlation,
between price movements of Strategic Transactions and price movements of the
related portfolio positions. Strategic Transactions can reduce risk of loss by
wholly or partially offsetting the negative effect of unfavorable price
movements or of unfavorable currency fluctuations in the related portfolio or
currency positions, but can also reduce opportunity for gain by offsetting the
positive effect of favorable price movements in positions. The Underlying Fund
will comply with applicable regulatory requirements when utilizing Strategic
Transactions. Strategic Transactions involving financial futures and options
thereon will be purchased, sold or entered into only for bona fide hedging, risk
management or portfolio management purposes. For more information see discussion
in other sections of "Securities and Investment Practices" and the SAI of the
Underlying Funds.

U.S. GOVERNMENT SECURITIES. All of the Underlying Funds may invest in U.S.
Government Securities, which include direct obligations of the U.S. Treasury
(such as U.S. Treasury bills, notes and bonds) and obligations directly issued
or guaranteed by U.S. Government agencies or instrumentalities. Some obligations
issued or guaranteed by agencies or instrumentalities of the U.S. Government are
backed by the full faith and credit of the U.S. Government (such as GNMA Bonds),
others are backed only by the right of the issuer to borrow from the

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<PAGE> 38

U.S. Treasury (such as securities of Federal Home Loan Banks) and still others
are backed only by the credit of the instrumentality (such as FNMA and FHLMC
Bonds).

WHEN-ISSUED SECURITIES AND DELAYED-DELIVERY TRANSACTIONS. In order to secure
yields or prices deemed advantageous at the time, all of the Underlying Funds
except the Money Funds may purchase or sell securities on a when-issued or a
delayed-delivery basis. The Underlying Funds will enter into a when-issued
transaction for the purpose of acquiring portfolio securities and not for the
purpose of leverage. In such transactions delivery of the securities occurs
beyond the normal settlement periods, but no payment or delivery is made by, and
no interest accrues to, the Underlying Funds prior to the actual delivery or
payment by the other party to the transaction. Due to fluctuations in the value
of securities purchased on a when-issued or a delayed-delivery basis, the yields
obtained on such securities may be higher or lower than the yields available in
the market on the dates when the investments are actually delivered to the
buyers. Similarly, the sale of securities for delayed-delivery can involve the
risk that the prices available in the market when delivery is made may actually
be higher than those obtained in the transaction itself. The Underlying Funds
will establish a segregated account with the Fund's custodian consisting of cash
or liquid high grade debt securities in an amount equal to the amount of its
when-issued and delayed-delivery commitments.

PERFORMANCE INFORMATION

YIELD

From time to time, advertisements or shareholder reports concerning the Funds
may describe the 30-day yield. The 30-day yield of the Value Fund or the
Balanced Fund refers to the income generated by an investment in such Fund over
the 30-day period identified in the advertisement, and is computed by dividing
the net investment income per share earned by the Fund during the period by the
maximum Public Offering Price per share on the last day of the 30-day period.
This income is "annualized" by assuming that the amount of income is generated
each month over a one-year period and is compounded semiannually. The annualized
income is then shown as a percentage of the maximum Public Offering Price. In
addition, the Value Fund or the Balanced Fund may advertise a similar 30-day
yield computed in the same manner except that the NAV per share is used in place
of the Public Offering Price per share.

TOTAL RETURN

From time to time, a Fund may advertise its average annual total return over
various periods of time. Such total return figures show the average percentage
change in value of an investment in the Fund from the beginning date of the
measuring period. These figures reflect changes in the price of the Fund's
shares and assume that any income dividends and/or capital gains distributions
made by the Fund during the period were reinvested in shares of the Fund.
Figures will be given for recent one-, five- and ten-year periods (if
applicable), and may be given for other periods as well (such as from
commencement of the Fund's operations, or on a year-by-year basis).

ADDITIONAL PERFORMANCE QUOTATIONS. Advertisements of total return will always
show a calculation that includes the effect of the maximum sales charge but may
also show total return without giving effect to that charge. Similarly, a Fund
may provide yield quotations in investor communications based on the Fund's NAV
(rather than its Public Offering Price) per share on the last day of the period
covered by the yield computation. Because these additional quotations will not
reflect the maximum sales charge payable, such performance quotations will be
higher than the performance quotations that include the maximum sales charge.

TOTAL RETURNS AND YIELDS ARE BASED ON PAST RESULTS AND ARE NOT A PREDICTION OF
FUTURE PERFORMANCE.

Performance information is computed separately for each Fund's Class A and Class
B Shares. Because Class B Shares bear the expense of the higher distribution and
service fees, it is expected that performance for a Fund's Class B Shares will
be lower than that for a Fund's Class A Shares. The SAI describes the methods
used to determine a Fund's performance.

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PERFORMANCE COMPARISONS

In reports or other communications to shareholders or in advertising material, a
Fund may compare the performance of its Class A and Class B Shares with that of
other mutual funds as listed in the rankings prepared by Lipper Analytical
Services, Inc., CDA Technologies, Inc. or similar independent services that
monitor the performance of mutual funds or with other appropriate indexes of
investment securities. In addition, certain indexes may be used to illustrate
historic performance of select asset classes. These may include, among others,
the Lehman Brothers Mortgage Index, the Lehman Brothers Index of Baa-rated
Corporate Bonds, the T-Bill Index, Donoghue's Money Fund Averages, Russell 2000
Index, Russell 2500 Index, Lehman Brothers Government/Corporate Index, Lehman
Brothers Aggregate Bond Index, Merrill Lynch 1 to 3 Year Corporate Index,
Merrill Lynch 5 to 7 Year Treasury Index, the IFC Index and the "Stocks, Bonds
and Inflation Index" published annually by Ibbotson Associates. The performance
information may also include evaluations of the Funds published by nationally
recognized ranking services and by financial publications that are nationally
recognized, such as Business Week, Forbes, Fortune, Institutional Investor,
Money and The Wall Street Journal. A Fund may also compare its performance to
other investments or relevant indexes consisting of Morgan Stanley Capital
International EAFE Index, the Standard & Poor's 500 Index, the Lipper Government
Index, the Lipper International Fund Index, the Lipper Growth and Income Fund
Index, the Lipper Growth Fund Index, the Lipper Emerging Growth Fund Index, the
Lipper BBB Corporate Index, the Lipper Mortgage Fund Index and the Lipper Short
Term Bond Fund Index. If a Fund compares its performance to other funds or to
relevant indexes, the Fund's performance will be stated in the same terms in
which such comparative data and indexes are stated, which is normally total
return rather than yield. For these purposes the performance of the Fund, as
well as the performance of such investment companies or indexes, may not reflect
sales charges, which, if reflected, would reduce performance results.

OBTAINING PERFORMANCE INFORMATION

Each Fund's strategies, performance, and holdings are detailed twice a year in
Trust reports, which are sent to all shareholders of the Trust. Shareholders may
call 800-222-5852 for performance information. Shareholders may make inquiries
regarding a Fund, including current total return figures, to any broker-dealer
or institution that has entered into an distribution agreement or arrangement
with Sierra Services (each, an "Authorized Dealer"), or by calling Sierra Asset
Management Shareholder Services at 800-222-5852.

YOUR SIERRA ASSET MANAGEMENT ("SAM") FUND ACCOUNT

SETTING UP YOUR SAM FUND ACCOUNT

The Trust provides an active investment management service offered by Sierra
Services that allocates your investments across a combination of Class I Shares
of certain of the Underlying Funds selected to meet long-term investment
objectives as well as, in certain circumstances, current income objectives. In
addition to the considerable diversification among individual securities you
receive by investing in a particular Underlying Fund, you can further reduce
risk through a SAM Account by spreading your assets among several different
Underlying Funds that each have different risk and return characteristics.

Sierra Services has incorporated investment strategies into the Funds to meet
the diverse financial needs of different investors. You can open a SAM Account
by meeting with one of the investment professionals of an Authorized Dealer who
will review your situation and help you identify your long-term investment
objectives. After using SAM Account criteria to determine your long-term
objectives, you can choose one of several investment strategies. Based on your
chosen strategy, your initial investment will be placed in one of the five Funds
of the Trust, which allocates its assets among a number of the Underlying Funds.

From time to time, one or more of the Underlying Funds used for investment by a
Fund may experience relatively large investments or redemptions due to
reallocations or rebalancings by the Funds as recommended by Sierra Services.
These transactions will affect the Underlying Funds, since the Underlying Funds
that experience redemptions as a result of reallocations or rebalancings may
have to sell portfolio securities and Underlying Funds that receive additional
cash will have to invest such cash. While it is impossible to predict the
overall impact of these transactions over time, there could be adverse effects
on portfolio management to the extent that the Underlying Funds may be required
to sell securities or invest cash at times when they would not otherwise do so.

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<PAGE> 40

These transactions could also have tax consequences if sales of securities
resulted in gains and could also increase transaction costs. Sierra Advisors,
representing the interests of the Underlying Funds, is committed to minimizing
the impact of Fund transactions on the Underlying Funds; Sierra Services,
representing the interest of the shareholders of the Funds, is also committed to
minimizing such impact on the Underlying Funds to the extent it is consistent
with pursuing the investment objectives of the Funds. Sierra Advisors and Sierra
Services will nevertheless face conflicts in fulfilling their respective
responsibilities because they are affiliates and employ some of the same
investment professionals. See "Initial Sales Charge Alternative: Class A
Shares," and "Exchange Privileges and Restrictions." Sierra Services and Sierra
Advisors will monitor the impact of Fund transactions on the Underlying Funds.

The Funds have been designed for long-term investors and tax-advantaged
retirement and other long-term investment and savings accounts. Shares of the
Funds are sold on a continuous basis and may be purchased directly from the
Trust's distributor, Sierra Services, or through financial institutions,
broker-dealers, or other organizations which have established a dealer agreement
or other arrangement with Sierra Services (each, an "Authorized Dealer"). This
section describes the purchase, exchange and redemption services available to
investors. Please note that the services available will vary depending upon the
class of shares in which you are investing and the Authorized Dealer, if any,
through which you are purchasing shares of the Trust.

Financial institutions may acquire shares of the Funds for their own account or
as record owner on behalf of fiduciary agency or custody accounts by placing
orders with the Trust's Transfer Agent. Shares of the Funds may be purchased
through Authorized Dealers that provide various levels of shareholder services
to their customers. Contact your Authorized Dealer for information about the
services available to you and for specific instructions on how to buy, sell and
exchange shares.

Both Class A Shares and Class B Shares are offered to tax-advantaged retirement
accounts. If you are investing in a Fund through an IRA, 401(k) or other
retirement plan, you should contract your plan sponsor for the services and
procedures which pertain to your account.

State securities laws may require financial institutions and other Authorized
Dealers purchasing shares for their customers to register as dealers pursuant to
state laws. To allow for processing and transmittal of orders to the Trust's
Transfer Agent on the same day, financial institutions and other Authorized
Dealers may impose earlier cut-off times for receipt of purchase orders directed
through them. Certain financial institutions and other Authorized Dealers may
charge separate customer account fees. Information concerning shareholder
services and any charges will be provided to the customer by the Authorized
Dealer.

The shares of the Funds you purchase through an Authorized Dealer may be held of
record by that Authorized Dealer. If you want to transfer the registration of
shares beneficially owned by you, but held of record by an Authorized Dealer,
you should call the Authorized Dealer to request this change.

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YOUR ACCOUNT

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WAYS TO SET UP YOUR ACCOUNT
- --------------------------------------------------------------------------------

INDIVIDUAL OR JOINT ACCOUNT

Individual accounts are owned by one person. Two types of joint accounts (having
two or more owners) can be opened:

(1) in a "joint tenancy" account, the surviving owner(s) automatically
receive(s) the shares of any owner(s) who die(s); and

(2) in a "tenants in common" account, the heir(s) of any deceased owner
receive(s) such owner's shares, rather than the surviving owners of the joint
account.
- --------------------------------------------------------------------------------

RETIREMENT

Retirement plans protect investment income and capital gains from current taxes.
Contributions to these accounts may be tax deductible. Retirement accounts
require special applications and typically have lower minimums.

- - INDIVIDUAL RETIREMENT ACCOUNTS ("IRAS") allow persons of legal age and under
70 1/2 years old with earned income to protect up to $2,000 per tax year from
certain tax effects. If your spouse has earned income of less than $250 per
year, you can protect an additional $250 per year in your spouse's name.

- - ROLLOVER IRAS permit persons to retain special tax advantages for certain
transfers from employer-sponsored retirement plans (often occurring when a
person changes employers).

- - SIMPLIFIED EMPLOYEE PENSION PLANS ("SEP-IRAS") provide small business owners
or those with self-employed income (and their eligible employees) with many of
the same advantages as a Keogh, but with fewer administrative requirements.
- --------------------------------------------------------------------------------

GIFTS OR TRANSFERS TO A MINOR CHILD ("UGMA," "UTMA")

These gifts or transfers provide a way to give money to a child and obtain tax
benefits. A parent or grandparent can give up to $10,000 a year to each child
without paying federal gift tax. Depending on state laws, you can set up a
custodial account under the Uniform Gifts to Minors Act (UGMA) or the Uniform
Transfers to Minors Act (UTMA).
- --------------------------------------------------------------------------------

TRUST

Trusts can be used for many purposes, including charitable contributions and
providing a regular income for a child until a certain age. The trust must be
established before an account can be opened.
- --------------------------------------------------------------------------------

CORPORATION OR OTHER ORGANIZATION

Corporations, associations, partnerships, institutions, or other groups may
invest for many purposes.
- --------------------------------------------------------------------------------

-38-
<PAGE> 42

HOW TO INVEST IN A SAM FUND ACCOUNT
<TABLE>
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
NEW ADDITIONAL
METHOD INVESTMENTS INVESTMENTS
----------------------------------------------------------------
MINIMUM $10,000 MINIMUM $2,000
($5,000 IRA/401(K)/KEOGH) ($1,000 IRA/401(K)/KEOGH)
- ------------------------------------------------------------------------------------------------
IN PERSON: Visit a Representative Visit a Representative
To Open a SAM Fund Account of an Authorized Dealer of an Authorized Dealer
Through an Authorized Dealer

- ------------------------------------------------------------------------------------------------

- ------------------------------------------------------------------------------------------------
BY TELEPHONE: A SAM Fund Account cannot be Call Shareholder Services
opened by telephone. at 1-800-222-5852,
Monday through Friday,
6:00 a.m. to 6:00 p.m.,
Pacific Time/
9:00 a.m. to 9:00 p.m.,
Eastern Time.
Saturday from
6:00 a.m. to 3:00 p.m.,
Pacific Time/
9:00 a.m. to 6:00 p.m.,
Eastern Time

- ------------------------------------------------------------------------------------------------

- ------------------------------------------------------------------------------------------------
BY MAIL: A SAM Fund Account cannot be Make your check payable to
opened by mail. "Sierra Asset Management
Trust." Indicate your Fund
account number and class of
shares on your check.
If possible, include the "next
investment" slip from your
previous
account statement. Mail the
check
and slip to the address printed
on your account statements.
Exchange by mail:
Call 800-222-5852 for
instructions.

- ------------------------------------------------------------------------------------------------

- ------------------------------------------------------------------------------------------------
BY WIRE: A SAM Account cannot be opened Instruct your bank to wire
by wire. Federal
Funds exactly as follows:
Great Western Bank
Beverly Hills, CA
aba #322270039
For credit to (Sierra Asset
Management Trust)
Account #008-852200-5
(Fund Name and Class of Shares)
(Customer's Name)
(Customer's Social Security
Number)

- ------------------------------------------------------------------------------------------------
</TABLE>

-39-
<PAGE> 43

TO PURCHASE SHARES. Purchase, sale and exchange orders received by SAM
Shareholder Services prior to the close of trading on any day that the NYSE is
open (a "Business Day") are effected at that day's NAV for the applicable class
of the Fund, plus any applicable sales charge (the "Public Offering Price").
Purchase, sale and exchange orders received after the close of the NYSE are
priced as of the time the NAV is next determined on the next Business Day.
Authorized Dealers are responsible for forwarding orders received on a Business
Day to SAM Shareholder Services by the close of trading on the NYSE the same day
and failure to do so will result in an investor being unable to obtain that
day's NAV. The NYSE is open Monday through Friday, although it is closed on most
federal holidays and on Good Friday.

Purchases of each class of Fund shares are effected at the Fund's Public
Offering Price next determined after a purchase order has been received in
proper form. A purchase order will be deemed to be in proper form when all of
the steps required, including submission of an application form, have been
completed. In the case of an investment by wire, however, the order will be
deemed to be in proper form after the telephone order and the federal funds wire
have been received. The failure of a shareholder who purchases by wire to submit
an application form in a timely fashion may cause delays in processing
subsequent redemption requests. If a telephone order is received or if payment
by wire is received after the close of the NYSE, 4:00 p.m. Eastern Time/1:00
p.m., Pacific Time, the shares will not be credited until the next Business Day.
However, SAM Shareholder Services will be open from 9:00 a.m. to 6:00 p.m.,
Eastern Time/ 6:00 a.m. to 3:00 p.m., Pacific Time, Monday through Friday,
except on NYSE holidays.

TIMING OF DIVIDENDS. Shares of certain Funds are entitled to dividends and
distributions declared beginning the day after a purchase has been credited to
an investor's account and ending on the day a redemption order is effected.

CLASS A AND B SHARES: ALTERNATIVE PURCHASE ARRANGEMENTS. The alternative
purchase arrangements offered by the Trust enable you to choose the method of
purchasing Fund shares that is most beneficial given the amount of your
purchase, the length of time you expect to hold the shares and other
circumstances. You should consider whether, during the anticipated life of your
investment in the Trust, the accumulated continuing distribution and service
fees and CDSCs on Class B Shares would be less than the initial sales charge and
accumulated distribution fee on Class A Shares purchased at the same time, and
to what extent such differential would be offset by the anticipated higher
return of Class A Shares.

As an illustration, if you qualify for significantly reduced initial sales
charges, you might elect to purchase Class A Shares, which carry an initial
sales load, because no similar reductions in CDSC are available for the Class B
Shares. Also, Class A Shares are subject to a lower distribution fee and,
accordingly, such shares are expected to pay correspondingly higher dividends on
a per share basis. However, because initial sales charges are deducted at the
time of purchase of Class A Shares, the amount of your funds actually invested
would be reduced by the amount of the sales charge and you would initially own
fewer shares. For this reason, you might determine that it would be more
advantageous to purchase Class B Shares, so that all of your funds will be
invested initially, although you would be subject to a CDSC for a six-year
period and higher ongoing distribution and service fees. In addition, if you
expect to maintain your investment for an extended period of time (and even if
you do not qualify for reduced initial sales charges), you might consider
purchasing Class A Shares because the accumulated continuing distribution
charges on Class B Shares may still exceed the initial sales charge and
distribution charges applicable to Class A Shares during the same period.

LARGE PURCHASES OF CLASS B SHARES. When choosing between classes, investors
should carefully consider the ongoing annual expenses along with the initial or
contingent deferred sales charges. The relative impact of the initial sales
charges, CDSCs and ongoing annual expenses will depend on the length of time a
share is held. In almost all cases, investors planning to purchase [$250,000 or
more] of Fund shares will pay lower aggregate charges and expenses by purchasing
Class A Shares.

INITIAL SALES CHARGE ALTERNATIVE: CLASS A SHARES. Class A Shares of the Funds
are sold at the Public Offering Price and are subject to a sales charge at
purchase as described in the following tables. 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 1.00% CDSC on redemptions within one year of
purchase or a 0.50% CDSC on redemptions during the second year after purchase
(the "Class A CDSC"). For a purchase of Class A Shares in an amount of $1
million or more,

-40-
<PAGE> 44

if the Trust receives at or before the purchase a written direction from the
Authorized Dealer of record that the Class A CDSC shall not apply, then the
Class A CDSC shall not apply and Sierra Services may pay the investor's
Authorized Dealer of record up to 0.25% of the net asset value of the purchase.
For such an amount of purchase, if the Trust does not receive at or before the
purchase a written direction from the Authorized Dealer of record that the Class
A CDSC shall not apply, then the Class A CDSC shall apply and Sierra Services
may pay the investor's Authorized Dealer of record up to 1.00% of the net asset
value of the purchase. No sales charge at time of purchase and no CDSC will be
assessed on the reinvestment of dividends or distributions on Class A Shares or
on purchases of Class A Shares under the 180-day reinvestment privilege
described in a following section. Class A Shares purchased through a qualified
401(k) or 403(b) plan may, in certain circumstances, be subject to a CDSC of
1.00% if the shares are redeemed within two years of their initial purchase. See
"APPLICATION OF CLASS A SHARES CDSCS" subsection in this section. For other
waivers of Class A Shares sales charges, see the section "WAIVERS OF CLASS A
INITIAL SALES CHARGES." The following tables illustrate the sales charges
applicable at purchase to Class A Shares at various investment levels.

FOR CLASS A SHARES OF THE FIXED FUND AND VALUE FUND

<TABLE>
<CAPTION>
Dealers'
As a % of As a % of Reallowance
Offering Price Net Asset as a % of
Amount of Transaction Per Share Value Offering Price
- --------------------- -------------- --------- --------------
<S> <C> <C> <C>
Less than $50,000..................................... 4.50% 4.71% 4.00%
$50,000 but less than $100,000........................ 4.00% 4.17% 3.50%
$100,000 but less than $250,000....................... 3.50% 3.63% 3.00%
$250,000 but less than $500,000....................... 3.00% 3.09% 2.50%
$500,000 but less than $1,000,000..................... 2.00% 2.04% 1.75%
$1,000,000 and over................................... 0% 0% 0%+
</TABLE>

FOR CLASS A SHARES OF THE BALANCED FUND

<TABLE>
<CAPTION>
Dealers'
As a % of As a % of Reallowance
Offering Price Net Asset as a % of
Amount of Transaction Per Share Value Offering Price
- --------------------- -------------- --------- --------------
<S> <C> <C> <C>
Less than $50,000..................................... 5.25% 5.54% 4.50%
$50,000 but less than $100,000........................ 4.50% 4.71% 4.00%
$100,000 but less than $250,000....................... 3.50% 3.63% 3.00%
$250,000 but less than $500,000....................... 3.00% 3.09% 2.50%
$500,000 but less than $1,000,000..................... 2.00% 2.04% 1.75%
$1,000,000 and over................................... 0% 0% 0%+
</TABLE>

FOR CLASS A SHARES OF THE AGGRESSIVE GROWTH FUND AND THE GROWTH FUND

<TABLE>
<CAPTION>
Dealers'
As a % of As a % of Reallowance
Offering Price Net Asset as a % of
Amount of Transaction Per Share Value Offering Price
- --------------------- -------------- --------- --------------
<S> <C> <C> <C>
Less than $50,000..................................... 5.75% 6.10% 5.00%
$50,000 but less than $100,000........................ 4.75% 4.99% 4.00%
$100,000 but less than $250,000....................... 3.75% 3.90% 3.00%
$250,000 but less than $500,000....................... 3.00% 3.09% 2.50%
$500,000 but less than $1,000,000..................... 2.00% 2.04% 1.75%
$1,000,000 and over................................... 0% 0% 0%+
</TABLE>

-41-
<PAGE> 45

+ Investors do not pay a sales charge at time of purchase on purchases of $1
million or more; however, except as waived by the dealer of record as stated on
the preceding page, Sierra Services may pay the investment dealers of record on
purchases of Class A Shares of $1 million or more a fee of up to 1.00% of the
net asset value of such purchase.

Sierra Services, the distributor of the shares of the Funds, will pay the
appropriate dealers' reallowance to Authorized Dealers. The dealers' reallowance
may be changed from time to time. Upon notice, Sierra Services may reallow up to
the full applicable sales charge to certain Authorized Dealers. Authorized
Dealers may receive different compensation for selling one class of a Fund
rather than another class of the Fund.

REDUCED SALES CHARGES AT PURCHASE.

QUANTITY DISCOUNTS. Quantity discounts are provided if the total amount being
invested in Class A Shares of a Fund alone, or any combination of such shares
with Class A shares of other Funds, reaches the levels indicated in the tables
on the preceding page.

RIGHT OF ACCUMULATION. Under the Right of Accumulation, a shareholder may
combine the current value of Class A Shares of a Fund with the amount invested
in Class A Shares of other Funds to receive the reduced sales charge indicated
in the tables on the preceding page.

LETTER OF INTENT. A "letter of intent" allows you to purchase Class A Shares of
Funds over a 13-month period at reduced sales loads based on the total amount
that you state in the letter. This letter is non-binding on the shareholder.
Class A Share redemptions during the period may count against the total. During
the period, SAM Shareholder Services will hold in escrow shares equal in value
to 5.00% of the amount purchased for payment of a higher sales load if the full
amount specified in the letter is not purchased within the 13-month period. The
shares will be released upon completion of the purchases stated in the letter.

REINVESTMENT PRIVILEGE. Upon redemption of Class A Shares from a Fund, a
shareholder may reinvest any or all of the redemption proceeds in Class A Shares
of a Fund without any sales charge provided the reinvestment is within 180 days
of the redemption from the Fund. The shareholder must notify the Authorized
Dealer or SAM Shareholder Services concerning the reinvestment.

WAIVERS OF CLASS A INITIAL SALES CHARGES. No initial sales charge will be
assessed with respect to Class A Shares of a Fund on: (1) purchases by (a)
employees or retired employees of Great Western Financial Corporation ("GWFC")
or any of its affiliates and members of their immediate families (spouses and
minor children) and IRAs, Keogh Plans or employee benefit plans for those
employees and retired employees; (b) directors, trustees, officers or advisory
board members, or persons retired from such positions, of any investment company
for which GWFC or an affiliate serves as investment advisor; (c) registered
representatives or full-time employees of Authorized Dealers or full-time
employees of banks affiliated with such dealers; (2) purchases by retirement
plans created pursuant to Section 457 of the Code; (3) purchases that are paid
for with the proceeds from the redemption of shares of a non-money market mutual
fund not affiliated with the Trust or Sierra Services, where the purchase occurs
within 15 Business Days of the prior redemption and is evidenced by a
confirmation of the redemption transaction or a broker-to-broker transfer
request (SAM Shareholder Services must be notified at the time of purchase that
the purchase being made qualifies for a purchase at NAV); (4) purchases by
employees of any of the Funds' Sub-Advisors; and (5) purchases by accounts as to
which an Authorized Dealer or a bank affiliated with an Authorized Dealer
charges an account management fee, provided that the Authorized Dealer or bank
has an agreement with Sierra Services, as the distributor of shares of the
Trust.

Additional groups of investors that are not subject to an initial sales charge
on purchases of Class A Shares through an Authorized Dealer include either (a)
investors purchasing Class A Shares of a Fund through an employee benefit trust
created pursuant to a plan qualified under Section 401(k) of the Code ("401(k)
Plan") that has more than 100 employee participants in the 401(k) Plan or that
has invested, in the aggregate, more than $1 million in one or more of the
Funds, or (b) investors purchasing Class A Shares of a Fund through a plan
qualified under Section 403(b) of the Code ("403(b) Plan") that has more than
100 employee participants in the 403(b) Plan or that has invested, in the
aggregate, more than $1 million in one or more of the Funds. Investors through
401(k) and

-42-
<PAGE> 46

403(b) Plans may be subject to various account fees and purchase and redemption
procedures designated by the employer who has established the 401(k) Plan or
accounts.

The foregoing waivers may be changed at any time.

APPLICATION OF CLASS A SHARES CDSCS. The Class A CDSC of 1.00% or 0.50% may be
imposed on certain redemptions within one or two years of purchase,
respectively, with respect to Class A Shares (i) purchased at NAV without a
sales charge at time of purchase due to purchases of $1 million or more, or (ii)
acquired through an exchange for Class A Shares of a Fund purchased at NAV
without a sales charge at time of purchase due to purchases of $1 million or
more. The Class A CDSC will not be imposed on Class A Shares purchased by
certain investors that have made arrangements with the Trust and whose
Authorized Dealer of record waived the fee in excess of 0.25% as previously
described. The CDSCs for Class A Shares are calculated on the lower of the
shares' cost or current net asset value, and in determining whether the CDSC is
payable, the Trust will first redeem shares not subject to any CDSC.

With respect to certain investors who purchase Class A Shares through an
Authorized Dealer and who receive a waiver of the entire initial sales charge on
Class A Shares because the Class A Shares were purchased through a 401(k) Plan
or through a 403(b) Plan meeting certain criteria, as described in "Your Account
- -Waivers of Class A Initial Sales Charges," or who hold Class A Shares of a Fund
that were acquired through an exchange for Class A Shares of a Fund that were
purchased at NAV through one of such plans, a CDSC of 1% may be imposed on the
amount that was invested through the plan in such Class A Shares and that is
redeemed (i) if, within the first two years after the plan's initial investment
in the Funds, the named fiduciary of the plan withdraws the plan from investing
in the Funds in a manner that causes all shares held by the plan's participants
to be redeemed; or (ii) by a plan participant within two years of the plan
participant's purchase of such Class A Shares. This CDSC will be waived on
redemptions in connection with certain involuntary distributions, including
distributions arising out of the death or disability of a shareholder (including
one who owns the shares as joint tenant). See "HOW TO BUY AND REDEEM SHARES" in
the SAI.

WAIVERS OF THE CLASS A SHARES CDSCS. The Class A CDSC is waived for redemptions
of Class A Shares (i) that are part of exchanges for Class A Shares of other
Funds; (ii) for distributions to pay benefits to participants from a retirement
plan qualified under Section 401(a) or 401(k) of the Code, including
distributions due to the death or disability of the participant (including one
who owns the shares as a joint tenant); (iii) for distributions from a 403(b)
Plan or an IRA due to death, disability, or attainment of age 70 1/2, including
certain involuntary distributions; (iv) for tax-free returns of excess
contributions to an IRA; (v) for distributions by other employee benefit plans
to pay benefits; and (vi) in connection with certain automatic withdrawals. See
"HOW TO BUY AND REDEEM SHARES" in the SAI.

DEFERRED SALES CHARGE ALTERNATIVE: Class B Shares. If you choose the deferred
sales charge alternative, you may purchase Class B Shares at their NAV per share
without the imposition of a sales charge at the time of purchase. Class B Shares
of the Funds that are redeemed within six years of purchase are subject to a
CDSC as described [BELOW] [ON THE FOLLOWING PAGE]. CDSC payments and
distribution fees on Class B Shares may be used to fund commissions payable to
Authorized Dealers.

No charge will be imposed with respect to shares having a value equal to any net
increase in the value of shares purchased during the preceding six years and
shares acquired by reinvestment of net investment income and capital gain
distributions. The amount of the charge is determined as a percentage of the
lesser of (1) the NAV of the Class B Shares at the time of purchase or (2) the
NAV of the Class B Shares at the time of redemption. The

-43-
<PAGE> 47

percentage used to calculate the CDSC will depend on the number of years since
you invested the dollar amount being redeemed, according to the following table:

<TABLE>
<CAPTION>
Contingent Deferred
Sales
Year of Redemption After Purchase Charge
--------------------------------- -------------------
<S> <C>
First................................... 5%
Second.................................. 4%
Third................................... 3%
Fourth.................................. 3%
Fifth................................... 2%
Sixth................................... 1%
Seventh and following................... 0
</TABLE>

All purchases are considered made on the last day of the month of purchase. To
determine the CDSC payable on a redemption of Class B Shares, a Fund will first
redeem Class B Shares not subject to a CDSC. Thereafter, to determine the
applicability and rate of any CDSC, it will be assumed that shares representing
the reinvestment of dividends and capital gain distributions are redeemed first
and shares held for the longest period of time are redeemed next. Using this
method, your sales charge, if any, will be at the lowest possible CDSC rate.

The Trust will adopt procedures to convert Class B Shares, without payment of
any sales charges, into Class A Shares, which have lower distribution fees,
after the passage of a number of years after purchase. Such conversion may occur
in approximately eight years.

WAIVERS OF THE CLASS B CDSCS. No CDSC charges will be assessed on redemptions of
Class B Shares in the case of systematic withdrawals in amounts of 1% or less
per month; death of the shareholder; and redemptions in connection with certain
involuntary distributions, including distributions arising out of the death or
disability of a shareholder, from IRAs. The foregoing waivers may be changed at
any time.

HOW TO SELL SHARES

You can arrange to take money out of your Fund account on any Business Day by
selling (redeeming) some or all of your shares. Your shares will be sold at the
NAV next determined after your order is received and accepted. Certain Class A
Shares may be subject to a CDSC as described in the "APPLICATION OF CLASS A
SHARES CDSCS" section.

Redemption proceeds are normally wired or mailed on the next Business Day, but
in no event later than seven days after receipt of a redemption request by SAM
Shareholder Services, until such time as regulations may require the Funds to
redeem proceeds within five days. However, if a shareholder is redeeming shares
recently purchased with a check, the redemption proceeds will not be paid to the
shareholder until the check has cleared. The check may take up to 15 days or
more to clear for deposit of the shareholder's funds into the Fund's account,
and the shareholder may not receive the redemption proceeds until after such
time period. The failure of a shareholder who purchased shares by wire to submit
an application form in a timely fashion may cause delays in processing
redemption requests.

If you wish to keep your Class A or Class B Shares SAM Funds Account open, leave
at least [$10,000] worth of shares in your SAM Funds Account, unless you are a
participant in the SAM Trust Automatic Investment Plan.

- - The table on the following page highlights the ways in which you can redeem
shares in your Fund account.

-44-
<PAGE> 48

WAYS TO SELL SHARES OF YOUR SIERRA TRUST FUND
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Account Type Special Requirements
<S> <C> <C>
BY PHONE All account types, except - You may exchange to the same class of
800-222-5852 retirement other funds of the Trust if both
accounts are registered with the same
name(s), address, and taxpayer ID
number. You may also redeem amounts by
telephone. Checks will be mailed to the
address of record exactly as account is
registered.
- ---------------------------------------------------------------------------------------------------------
BY MAIL Individual, Joint Accounts, Sole - The letter of instruction must be signed
Proprietorships, UGMA, UTMA** by all persons required to sign for
transactions, exactly as their names
appear on the account.** Checks will be
mailed to the address of record.
- Signature guarantee is required on
amounts of more than $50,000.
- ---------------------------------------------------------------------------------------------------------
SYSTEMATIC WITHDRAWAL All Shareholder(s) - When shares are valued at NAV at $10,000
PLAN or more shareholders may elect to
establish a Systematic Withdrawal Plan
and receive a monthly, quarterly,
semiannual or annual check. Privilege
may be terminated by the shareholder(s)
on thirty days written notice or by the
Trust at any time.
- ---------------------------------------------------------------------------------------------------------
BY WIRE All account types except - You must sign up for the wire feature
retirement before using it. To verify that it is in
place, call 800-222-5852.
- Your wire redemption request must be
received by Sierra Asset Management
Trust before 11:00 a.m., Eastern
Time/8:00 a.m., Pacific Time, for money
to be wired on the next Business Day. A
$5.00 fee may be charged for each wire
transfer. Minimum amount is $1,000.
- ---------------------------------------------------------------------------------------------------------
</TABLE>

* Corporations, trusts, and retirement plans may require additional paperwork
before shares may be redeemed. Please call 1-800-222-5852 to verify you have
the correct paperwork and to avoid delays.

-45-
<PAGE> 49

- - BY TELEPHONE

TO SET UP THE TELEPHONE WIRE REDEMPTION PROCEDURE, indicate your acceptance of
this procedure on the application form and designate a bank and bank account
number to receive the proceeds of withdrawals. To use this procedure after a SAM
Funds Account has been opened or to change instructions already given, designate
a bank and bank account number to receive redemption proceeds and send a written
notice to SAM Shareholder Services with a signature guarantee (for more
information regarding signature guarantees, see the following). For joint
accounts, all owners must sign and have their signatures guaranteed.

- - THROUGH SAM SHAREHOLDER SERVICES OR AUTHORIZED DEALERS

You may also sell your shares to the Fund through your Authorized Dealer and in
that way be certain, providing the order is timely, of receiving the NAV
established at the end of the day on which your Authorized Dealer is given the
redemption order. The Fund makes no charge for this transaction but the
Authorized Dealer may charge you a service fee.

CERTAIN WRITTEN REQUESTS MUST INCLUDE A SIGNATURE GUARANTEE. To protect you and
the Trust from fraud, a written request must include a signature guarantee if
any of the following situations apply:

- You wish to redeem more than $50,000 worth of shares,

- The redemption check is not being mailed to the address on your SAM Fund
Account (record address), or

- The check is not being made out to the SAM Fund Account owner.

You should be able to obtain a signature guarantee from a bank that is a member
of the Federal Deposit Insurance Corporation, a trust company, broker-dealer,
credit union (if authorized under state law), securities exchange or
association, clearing agency, or savings association. A notary public cannot
provide a signature guarantee. For joint accounts, all owners must sign and have
their signatures guaranteed.

REDEMPTIONS IN KIND

The Funds reserve the right to pay for redemptions of Fund shares in securities
or other assets rather than in cash. For Funds that invest in SPIF, because the
shares of SPIF are not redeemable, there is a possibility that a shareholder of
such Fund would receive securities of SPIF instead of cash upon the
shareholder's redemption of shares of the Fund under certain abnormal
circumstances. If such Fund received so many redemption requests that the assets
of the Fund that were invested in Underlying Funds other than SPIF were
exhausted in paying for redemptions in cash during a period when SPIF was not
making any tender offer for repurchase of its shares, shares of SPIF held by the
Fund could be distributed in kind to shareholders of the Fund that made the
redemption requests. Because SPIF does not intend to list its shares on a
securities exchange and the distributor of SPIF shares and the affiliates of the
distributor do not intend to make a secondary market in SPIF shares,
shareholders of SPIF, including the Funds, may sell their shares of SPIF only
during a period when SPIF is making a tender offer to repurchase its shares.
Such tender offers may be made no more often than once each calendar quarter and
may be made for only a limited amount of shares for each tender offer.
Consequently, if the Fund had no assets other than shares of SPIF, it may not be
possible for the Fund to convert such shares to cash to pay for redemptions of
the Fund's shares at the time redemption requests are made and shares of SPIF
could be distributed in kind in place of cash, to meet these requests.

EXCHANGE PRIVILEGES AND RESTRICTIONS

The exchange privilege is available only in those states where the offer and
sale of shares of a given Fund may legally be made. Upon 60 days' prior written
notice to shareholders, the Trust, in its sole discretion, may terminate or
modify the exchange privileges and restrictions and/or the Trust may begin
imposing a charge of up to [ $5.00 ] for each exchange.

CLASS A SHARES. Where applicable sales charges have been paid, you may exchange
at NAV Class A shares of a Fund for Class A shares of any other Fund or
Underlying Fund and may exchange at NAV Class A shares as of any Underlying Fund
for Class A shares of any Fund. Shareholders exercising the exchange privilege
with any of the

-46-
<PAGE> 50

Funds or the Underlying Funds should review the prospectus of each such Fund or
Underlying Fund carefully prior to making an exchange. Exchanges of shares are
sales and may result in a gain or loss for federal and state income tax
purposes.

Shareholders of SPIF are entitled to exchange their shares of SPIF for shares of
the Funds or Underlying Funds only during the tender offer periods of SPIF,
during which time shares of the SPIF may be tendered to SPIF for repurchase.
Consequently, such exchanges of SPIF shares for shares of the Funds or the
Underlying Funds are permitted only during tender offer periods, which may occur
no more often than once every calendar quarter so long as SPIF makes a
repurchase offer for its shares in such quarter and so long as the SPIF
repurchase offer is sufficiently large to include the SPIF shares tendered for
exchange. See "Reduced Sales Charge at Purchase -- Exchange Privilege" and
"Repurchase (Tender Offer) of Shares" in the SPIF Prospectus.

Certain Class A shares of the Funds may be subject to a CDSC for redemptions
within one or two years of purchase as described in the "APPLICATION OF CLASS A
SHARES CDSCS" section. The CDSCs applicable to Class A Shares will not be
assessed on a redemption that is part of an exchange for Class A Shares of
another Fund or Underlying Fund, except that if the shares acquired in the
exchange or a series of exchanges were then redeemed within the CDSC period
applicable to the shares redeemed initially for the exchange or series of
exchanges, the CDSC would be assessed.

CLASS B SHARES. Class B shares of a Fund may be exchanged for Class B Shares of
any other Fund or Underlying Fund without having to pay any CDSC at the time of
the exchange. If you exchange into Class B Shares of another Fund or Underlying
Fund and subsequently redeem such shares, the period of time during which you
held your investment in Class B Shares of the previous Fund will be included in
the period during which that investment is deemed to be invested in the Fund or
Underlying Fund for purposes of calculating the CDSC. If the initial Class B
Shares purchased by the shareholder were not subject to the Class B CDSC, then
no Class B CDSC will be imposed on any subsequent exchanges or redemptions
involving those shares. In the event of redemptions of Class B Shares after
exchanges, the amount you initially invested (the "Investment Amount") will be
subject to the CDSC schedule and rate of the Fund in which the Investment Amount
was initially invested. Exchange of Class B shares for shares of SPIF is not
currently available because SPIF is not currently offering any Class B shares.

SALES LOAD DIFFERENTIALS. If the shares acquired in an exchange are subject to a
higher sales load, a sales load may be charged in an amount up to the difference
between the sales load previously paid and the initial sales load applicable to
the shares of the Fund or Underlying Fund being acquired. See "Repurchase of
Shares -- Exchange Privilege" in the SPIF Prospectus and "Your Sierra Asset
Management ("SAM") Fund Account" in the Trust's Prospectus for information
regarding the application of sales charges upon certain exchanges or
redemptions.

KEY ASPECTS OF TELEPHONE TRANSACTIONS. During periods of significant economic or
market changes, telephone transactions may be difficult to implement. Neither
the Trust nor its Transfer Agent will be responsible for any loss, liability,
cost or expense for acting upon wire instructions or upon telephone instructions
that it reasonably believes are genuine. The Trust and its Transfer Agent will
each employ procedures to confirm that telephone instructions are genuine. Such
procedures may include recording telephone calls. You should verify the accuracy
of telephone transactions immediately upon receipt of your confirmation
statement. If an investor is unable to contact SAM Shareholder Services by
telephone, an investor may deliver the transaction request to SAM Shareholder
Services at 800-222-5852. Upon 30 days' prior written notice to shareholders,
the telephone transaction privileges may be modified or terminated.

DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES

As a Fund shareholder, you are entitled to your share of the Fund's net income
and gains on its investments. The Fund passes these earnings along to its
investors as DIVIDENDS AND DISTRIBUTIONS. Each Fund intends to avoid liability
for federal income tax and federal excise tax by making sufficient dividends and
distributions to investors.

The amount of dividends of net investment income (i.e., all income other than
long- and short-term capital gains) and distributions of net realized long- and
short-term capital gains payable to shareholders will be determined separately
for each Fund. Dividends from the net investment income of the Fixed Fund, Value
Fund and Balanced

-47-
<PAGE> 51

Fund will be declared [DAILY AND PAID MONTHLY]. Dividends from the net
investment income of the Growth Fund and Aggressive Growth Fund will be declared
and paid [QUARTERLY] [SEMI-ANNUALLY] [ANNUALLY]. Distributions of any net
long-term capital gains earned by a Fund will be made annually. Distributions of
any net short-term capital gains earned by a Fund will be distributed no less
frequently than annually at the discretion of the Board of Trustees.

DISTRIBUTION OPTIONS. When you open a SAM Fund Account, specify on your
Application Form how you want to receive your distributions. The election may be
made or changed by writing to SAM Shareholder Services or by calling
800-222-5852. Each Fund offers three options:

1. REINVESTMENT OPTION. Your dividend and capital gain distributions will be
automatically reinvested in additional shares of the same Fund, unless you
instruct the Fund on the Application Form or later in writing or by telephone to
pay all distributions in cash. Distributions from a class of one Fund may be
reinvested in the same class of the same Fund or a different Fund. If the Fund
in which the reinvestment is made has an initial sales charge or CDSC, you will
not pay the initial sales charge or CDSC on the reinvested amount.

2. CASH OPTION. You will be sent a check for each dividend and capital gain
distribution.

3. SYSTEMATIC WITHDRAWAL PLAN. If you have more than [$10,000] in any SAM Fund
Account, you can elect to receive a check on a regular monthly, quarterly,
semiannual or annual basis. Withdrawals may result in a gain or loss for tax
purposes, may involve the use of principal and may eventually deplete all of the
shares in the SAM Fund Account.

FOR RETIREMENT ACCOUNTS, all distributions are automatically reinvested. When
you are over 59 1/2 years old, you can receive distributions in cash.

EX-DIVIDEND. When a Fund goes ex-dividend (deducts a dividend or distribution
from the Fund's share price), the reinvestment price is the Fund's NAV at the
close of business that day. The mailing of distribution checks will begin within
seven days thereafter. If you buy shares shortly before an ex-dividend date
("buying a dividend"), you will pay the full price for the shares and then
receive a portion of the price back as a taxable distribution.

TAXES

The following summary of federal income tax consequences is based on current tax
laws and regulations, which may be changed by legislative, judicial or
administrative action. No attempt has been made to present a detailed
explanation of the federal, state or local income tax treatment of a Fund or its
shareholders. Accordingly, shareholders are urged to consult their tax advisors
regarding specific questions as to federal, state and local income taxes.

Each Fund is treated as a separate entity for federal income tax purposes and is
not combined with the Trust's other Funds.

Each Fund intends to qualify each year as a "regulated investment company" as
defined under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code") so as to be relieved of federal income tax on that part of its
investment income which is distributed to shareholders. The requirements for
qualification may cause a Fund to restrict the extent of its short-term trading
or its transactions in options or futures contracts.

As with any investment, you should consider how you will be taxed on your
investment in the Fund. If your account is not a tax-deferred retirement
account, you should be aware of the following tax implications:

TAXES ON DISTRIBUTIONS. Distributions generally are subject to federal income
tax, and may also be subject to state or local taxes. If you live outside the
United States, your distributions could also be taxed by the country in which
you reside. Generally, your distributions are taxable when they are paid.
However, dividends declared in October, November or December of any year and
payable to shareholders of record on a date in that month are deemed to have
been paid by the Fund and received by the shareholders on the last day of
December if paid by the Fund at any time during the following January. Each
shareholder will receive after the close of the calendar year an annual
statement and such other written notices as are appropriate as to the federal
income tax status of the shareholder's distributions received from the Fund for
such calendar year.

-48-
<PAGE> 52

For federal income tax purposes, distributions of investment company taxable
income (net investment income plus the excess of net short-term capital gain
over net long-term capital loss) are taxed to shareholders as ordinary income,
whether received in cash or in additional shares. No portion of the dividends of
the Fixed Fund is expected to qualify for the dividends received deduction
available to corporate taxpayers and only a portion of the dividends paid by the
Balanced Fund is expected to qualify for the corporate dividends received
deduction. Distributions of net capital gain (the excess of net long-term
capital gain over net short-term capital loss) are not eligible for the
corporate dividends received deduction and are taxed to shareholders as
long-term capital gain regardless of how long you have held your shares.

Each Fund intends to make sufficient distributions prior to the end of each
calendar year to avoid liability for federal excise tax.

TAXES ON TRANSACTIONS. Any gain or loss recognized on a redemption, transfer, or
exchange of shares of the Fund by a shareholder who is not a dealer in
securities generally will be treated as long-term capital gain or loss if the
shares have been held for more than twelve months, and otherwise generally will
be treated as a short-term capital gain or loss. Any loss recognized by a
shareholder upon the disposition of shares of the Fund held for six months or
less, however, will be disallowed to the extent of any "exempt-interest
dividends" received by the shareholder with respect to such shares. Furthermore,
if shares on which a net capital gains distribution has been received are
subsequently disposed of and such shares have been held for six months or less,
any loss recognized will be treated as a long-term capital loss to the extent of
the net capital gains distribution.

Statements as to the tax status of each shareholder's dividends and
distributions are mailed annually to shareholders within 60 days of the close of
the calendar year. These statements set forth the dollar amount of dividends and
NAV excluded or exempt from federal income taxes and the dollar amount, if any,
subject to such taxes. Whenever you sell shares of the Fund, the Trust will send
you a confirmation statement showing how many shares you sold and at what price.
You also will receive a consolidated transaction statement every January.
However, it is up to you or your tax preparer to determine whether this sale
resulted in a capital gain and, if so, the amount of tax to be paid. You should
retain your regular account statements; the information they contain will be
essential in calculating the amount of your capital gains.

THE INFORMATION CONTAINED IN THIS PROSPECTUS IS NOT A COMPLETE DESCRIPTION OF
THE FEDERAL, STATE OR LOCAL TAX CONSEQUENCES OF INVESTING IN THE FUNDS. YOU
SHOULD CONSULT YOUR TAX ADVISOR BEFORE INVESTING IN THE FUNDS.

SHAREHOLDER AND ACCOUNT POLICIES

TRANSACTION DETAILS

The NAV of each class of the Fund is the value of a single share of the
respective class. The NAV is calculated separately for each class of the Funds
and is calculated by adding up the value of the Fund's investments, cash and
other assets, subtracting its liabilities (including the liabilities
attributable exclusively to that class), and then dividing the result by the
number of shares of that class outstanding.

Although the legal rights of Class A and Class B Shares will be identical, the
different expenses borne by each class will result in different NAVs and
dividends. The NAV of Class B Shares will generally be lower than the NAV of
Class A Shares as a result of the larger distribution fees charged to Class B
Shares. It is expected, however, that the NAV per share of these classes will
tend to converge immediately after the recording of dividends, which will differ
by approximately the amount of the distribution expense accrual differential
between the classes.

EACH FUND RESERVES THE RIGHT TO SUSPEND THE OFFERING OF CLASS A OR CLASS B
SHARES for a period of time. Each Fund also reserves the right to reject any
specific purchase order, including certain purchases by exchange. Purchase
orders may be refused if, in the opinion of SAM Shareholder Services, they are
of a size that would disrupt management of a Fund.

SAM SHAREHOLDER SERVICES MAY CHARGE A FEE FOR SPECIAL SERVICES, such as
providing historical account documents, that are beyond the normal scope of its
services.

-49-
<PAGE> 53

THE FUNDS IN DETAIL

ORGANIZATION

THE TRUST IS GOVERNED BY A BOARD OF TRUSTEES, which is responsible for
protecting the interests of shareholders. The trustees are experienced business
persons who meet throughout the year to oversee the Trust's activities, review
contractual arrangements with companies that provide services to the Funds, and
review performance. The majority of trustees are not affiliated with Sierra
Services, Sierra Advisors or Sierra Administration other than as trustees of the
Trust. The Trust was organized on March 26, 1996 under the laws of the
Commonwealth of Massachusetts as a "Massachusetts business trust."

THE FUNDS MAY HOLD SPECIAL MEETINGS AND MAIL PROXY MATERIALS. As a Massachusetts
business trust, the Funds are not required to hold annual shareholder meetings.
On occasion, however, special meetings may be called to elect or remove
trustees, change fundamental policies, approve a management contract, or for
other purposes. Trustees may be removed by shareholders at a special meeting
called upon the request of shareholders among at least 10% of the outstanding
shares of the Trust. Shareholders not attending these meetings are encouraged to
vote by proxy. Sierra Administration will mail proxy materials in advance,
including a voting card and information about the proposals to be voted on. When
matters are submitted for shareholder vote, shareholders of each Fund and class
will have one vote for each full share owned and proportionate, fractional votes
for fractional shares held and will have exclusive voting rights with respect to
matters pertaining solely to such Fund or class, respectively, such as the
distribution plan for a class.

SIERRA SERVICES, SIERRA ADVISORS, THEIR AFFILIATES AND THE FUND'S SERVICE
PROVIDERS

INVESTMENT ADVISOR OF THE FUNDS

Under an Investment Advisory Agreement with the Trust, Sierra Services, located
at 9301 Corbin Avenue, Northridge, California 91324, is the investment advisor
of each of the Funds. Sierra Services provides its proprietary asset allocation
services to the Funds, formulates the Funds' investment policies (subject to the
terms of this Prospectus), analyzes economic and market trends, exercises
investment discretion over the assets of the Funds and monitors the allocation
of each Fund's assets and each Fund's performance. [Although it is expected that
each Fund will typically be fully invested in the Underlying Funds, Sierra
Services may, from time to time, direct the investment of each Fund's cash
balances in money market securities or in other instruments, including stock or
bond index futures and options thereon.] For its investment advisory services to
the Trust, Sierra Services is entitled to a fee, which is calculated daily and
paid monthly, at an annual rate of 0.15% of each Fund's average daily net
assets.

Sierra Services became a registered broker-dealer member of the NASD and became
a registered investment advisor in [1992]. Sierra Services is a wholly-owned
subsidiary of SCMC, which is a wholly-owned subsidiary of GWFC. GWFC is a
publicly owned financial services company listed on the New York, London and
Pacific stock exchanges. Sierra Services has not previously served as an
investment advisor to an investment company, but has provided asset allocation
services since 1992 to accounts with over [$ ] in assets.

THE INVESTMENT ADVISOR AND INVESTMENT SUB-ADVISORS OF THE UNDERLYING FUNDS

INVESTMENT ADVISOR OF THE UNDERLYING FUNDS

Sierra Advisors, located at 9301 Corbin Avenue, Northridge, California 91324, is
the investment advisor of the Underlying Funds. Responsibilities of Sierra
Advisors include formulating the Underlying Funds' investment policies (subject
to the terms of this Prospectus), analyzing economic trends and directing and
evaluating the investment services provided by the Sub-Advisors and monitoring
each Underlying Fund's investment performance. In connection with these
activities, Sierra Advisors may initiate action to change a Sub-Advisor if it
deems such action to be in the best interests of an Underlying Fund and its
shareholders.

Sierra Advisors became a registered investment advisor in 1988. Sierra Advisors
is a wholly-owned subsidiary of SCMC, which is a wholly-owned subsidiary of
GWFC. GWFC is a publicly owned financial services company listed on the New
York, London and Pacific stock exchanges.

-50-
<PAGE> 54

INVESTMENT SUB-ADVISORS OF THE UNDERLYING FUNDS

The following organizations, under the supervision of Sierra Advisors, serve as
Investment Sub-Advisors to the Underlying Funds:

<TABLE>
<S> <C>
STF U.S. Government Money Fund............. Alliance Capital Management L.P. ("Alliance")
STF Global Money Fund...................... J.P. Morgan Investment Management Inc. ("J.P. Morgan")
STF Short Term High Quality Bond Fund...... Scudder, Stevens & Clark, Inc. ("Scudder")
STF U.S. Government Fund................... BlackRock Financial Management, Inc. ("BlackRock")
STF Corporate Income Fund.................. TCW Funds Management, Inc. ("TCW Management")
STF Growth and Income Fund................. J.P. Morgan
STF Growth Fund............................ Janus Capital Corporation ("Janus")
STF Emerging Growth Fund................... Janus
STF International Growth Fund.............. Warburg Pincus Counsellors, Inc. ("Warburg")
Sierra Prime Income Fund................... Van Kampen American Capital Management Inc.
("Van Kampen")
</TABLE>

ALLIANCE is the Investment Sub-Advisor of the STF U.S. Government Money Fund.
Alliance is located at 1345 Avenue of the Americas, New York, NY 10105. Alliance
is a Delaware limited partnership registered as an investment adviser under the
Investment Advisers Act of 1940, as amended. Alliance Capital Management
Corporation, an indirect wholly-owned subsidiary of The Equitable Life Assurance
Society of the United States, is the general partner of Alliance. As of
[December 31,] 1995, total assets under management were over [$ ]
billion.

BLACKROCK is the Investment Sub-Advisor of the STF U.S. Government Fund.
BlackRock is located at 345 Park Avenue, 30th floor, New York, New York 10154.
BlackRock is a corporation organized under the laws of the State of Delaware in
February, 1995. BlackRock is an indirectly, wholly-owned subsidiary of PNC Bank
Corp., a bank holding company organized under the laws of the Commonwealth of
Pennsylvania in 1983 and located at 5th Avenue and Wood Street, Pittsburgh,
Pennsylvania 15222. BlackRock and its predecessor have provided investment
advice to a wide variety of institutional and investment company-related clients
since 1988. As of [December 31,] 1995, BlackRock had aggregate assets under
management or supervision of more than [$ ] billion.

JANUS is the investment Sub-Advisor of the STF Growth Fund and STF Emerging
Growth Fund. Janus is located at 100 Fillmore Street, Suite 300, Denver,
Colorado 80206. Janus is an indirectly majority owned subsidiary of Kansas City
Southern Industries, Inc., ("KCSI"). KCSI is a publicly traded holding company
whose primary subsidiaries are engaged in transportation, information processing
and financial services. Janus has been providing investment advice to mutual
funds or other large institutional clients since 1970. As of [December 31,]
1995, Janus had over [$ ] billion in assets under investment
management.

J.P. MORGAN is the Investment Sub-Advisor of the STF Global Money Fund and STF
Growth and Income Fund. J.P. Morgan is located at 522 Fifth Avenue, New York,
New York 10036. J.P. Morgan is a wholly owned subsidiary of J.P. Morgan & Co.
Incorporated, a publicly traded company. J.P. Morgan provides investment
services to employee benefit plans of corporations, labor unions and state and
local governments and the accounts of other institutional investors. As of
[December 31,] 1995, J.P. Morgan and its affiliates had investment management
authority with respect to approximately [$ ] billion of assets.

SCUDDER is the Investment Sub-Advisor of the STF Short Term High Quality Bond
Fund. Scudder is located at Two International Place, Boston, Massachusetts
02110. Scudder is a privately held corporation owned and operated by active firm
employees, concentrating primarily on investment management. Scudder provides
investment management services for institutions, individuals and mutual funds.
As of [December 31,] 1995, Scudder's assets under management were in excess of
[$ ] billion.

TCW MANAGEMENT is the Investment Sub-Advisor of the STF Corporate Income Fund.
TCW Management is located at 865 South Figueroa, Suite 1800, Los Angeles,
California 90017. TCW Management is a wholly-owned subsidiary of The TCW Group,
Inc., a privately held company. TCW Management and its affiliates, including
Trust Company of the West, provide a variety of trust, investment management and
investment advisory services

-51-
<PAGE> 55

for institutional investors, including investment companies, and other
investment counsel clients. As of [December 31,] 1995, TCW Management and its
affiliated advisers had just over [$ ] billion under management or
committed to management.

VAN KAMPEN is the Investment Sub-Advisor of SPIF. Van Kampen is located at One
Parkview Plaza, Oakbrook Terrace, Illinois 60181. Van Kampen is a wholly-owned
subsidiary of Van Kampen American Capital, Inc., which is a wholly-owned
subsidiary of VK/AC Holding, Inc. VK/AC Holding, Inc. is controlled, through the
ownership of a substantial majority of its common stock, by The Clayton &
Dubilier Private Equity Fund IV Limited Partnership ("C&D L.P."), a Connecticut
limited partnership. C&D L.P. is managed by Clayton, Dubilier & Rice, Inc., a
New York based private investment firm. The General Partner of C&D L.P. is
Clayton & Dubilier Associates IV Limited Partnership ("C&D Assoc. L.P."). The
general partners of C&D Assoc. L.P. are Joseph L. Rice, III, B. Charles Ames,
Alberto Cribiore, Donald J. Gogel and Hubbard C. Howe. Van Kampen provides
investment advice to a wide variety of individual, institutional and investment
company clients and, together with its affiliates, had aggregate assets under
management or supervision, as of [December 31,] 1995, of more than [$ ]
billion.

WARBURG is the Investment Sub-Advisor of the STF International Growth Fund.
Warburg is located at 466 Lexington Avenue, New York, New York 10017. Warburg is
a wholly-owned subsidiary of . Warburg provides investment advice to a
wide variety of individual, institutional and investment company clients and,
together with its affiliates, had aggregate assets under management or
supervision, as of [December 31,] 1995, of more than [$ ] billion.

ADMINISTRATOR, TRANSFER AGENT AND CUSTODIAN

Sierra Administration provides shareholder service and other administrative
services to the Trust. Sierra Administration is under common control with the
Sierra Advisors and Sierra Services. Sierra Administration is located at 9301
Corbin Avenue, Northridge, California 91324. Pursuant to an Administration
Agreement, Sierra Administration is responsible for all administrative functions
with respect to the Trust, although it delegates certain of its responsibilities
to sub-administrators. Sierra Administration is entitled to a monthly fee at an
annual rate of [0.35%] of each Fund's average daily net assets. First Data
Investor Services Group, Inc. ("First Data"), a subsidiary of First Data Corp.,
serves as sub-administrator and Transfer Agent of the Trust. Sierra
Administration pays First Data for its services as sub-administrator and
transfer agent. Sierra Administration pays Boston Safe Deposit and Trust Co.
("Boston Safe"), One Boston Place, Boston, MA 02108, for its services as
custodian of the Trust. The Trust pays certain sub-transfer agent's and
sub-administrator's out-of-pocket expenses and pays Boston Safe certain
custodial transaction charges.

DISTRIBUTOR OF THE FUNDS

Sierra Services is the distributor of the Class A and Class B Shares of the
Funds and is also the distributor of the shares of the Underlying Funds.

Each of the Funds has two distribution plans, pursuant to Rule 12b-1 under the
1940 Act, one for each of the two classes of shares of the Fund (each, a "Rule
12b-1 Plan"). Each Fund intends to operate each of the Rule 12b-1 Plans in
accordance with its terms and the NASD Rules of Fair Practice concerning sales
charges. Under the applicable Rule 12b-1 Plans, Sierra Services is paid annual
fees as compensation in connection with the offering and sale of Class A and
Class B Shares of the Funds. The annual fees to be paid to Sierra Services under
the Rule 12b-1 Plan for Class A Shares ("Class A Plan") are calculated at an
annual rate of as much as 0.25% of the average daily net assets of the Class A
Shares of the Funds and under the Rule 12b-1 Plan for Class B Shares ("Class B
Plan") are calculated at an annual rate of as much as 0.75% of the average daily
net assets of the Class B Shares of the Funds. The fees under the Class A Plan
may be used to pay Sierra Services for expenses primarily intended to result in
the sale of Class A Shares of the Funds and the fees under the Class B Plan may
be used to pay Sierra Services for expenses primarily intended to result in the
sale of Class B Shares of the Funds. Sierra Services may retain any amount of
its fees that is not so expended. Class B Shares are also subject to a service
fee at an annual rate of 0.25% of the average daily net assets of the Class B
Shares of the Funds.

-52-
<PAGE> 56

The distribution-related payments under the Rule 12b-1 Plans may be used by the
Sierra Services to provide initial and ongoing sales compensation to its
investment executives and representatives and to other broker-dealers and
financial intermediaries in respect of sales of Class A Shares or Class B
Shares, to compensate third parties for the provision of recordkeeping and other
distribution-related services relating to Class A Shares or Class B Shares, and
to pay for advertising and promotional expenses in connection with the
distribution of Class A Shares or Class B Shares. These advertising and
promotional expenses may include: costs of printing and mailing prospectuses,
statements of additional information and shareholder reports to prospective
investors; preparation and distribution of sales literature; advertising of any
type; an allocation of other expenses of Sierra Services related to the
distribution of Class A Shares or Class B Shares; and payments to, and expenses
of, officers, employees or representatives of the Sierra Services, other
broker-dealers, banks or other financial institutions, and any other persons who
provide support services in connection with the distribution of the Class A
Shares or Class B Shares.

The service fees payable to the Sierra Services may be used by Sierra Services
to provide compensation to financial intermediaries for ongoing service or
maintenance of shareholder accounts with respect to Class B Shares of the
applicable Funds. Such shareholder services may include: telephone service to
shareholders, including acceptance of telephone inquiries and transaction
requests; acceptance and processing of written correspondence, new account
applications and subsequent purchases by check; mailing of confirmations,
statements and tax forms directly to shareholders; maintenance of customer
accounts, and acceptance of payment for trades by check, Federal Reserve wire or
Automatic Clearing House payment. In addition, Sierra Services will perform or
supervise the performance by others of other shareholder services in connection
with the operations of the applicable Funds, as agreed from time to time.

In addition to providing for the expenses discussed above, each Rule 12b-1 Plan
also recognizes that Sierra Services, from time to time in its sole discretion,
may use its investment advisory fees or other resources to pay expenses
associated with activities primarily intended to result in the promotion and
distribution of the Funds' shares. Sierra Services may, from time to time, pay
to other dealers, in connection with retail sales or the distribution of shares
of a Fund, material compensation as promotional incentives, in the form of cash
or other compensation, including merchandise, airline vouchers, trips and
vacation packages, to all dealers selling shares of a class of the Funds. Such
promotional incentives will be offered uniformly for all shares of a class of
the Funds and also will be offered uniformly to all dealers with respect to the
class of shares, predicated upon the amount of shares of the class of the Funds
sold by such dealer. Salespersons and any other person entitled to receive any
compensation for selling or servicing Fund shares may receive different
compensation with respect to one particular class of shares over another in the
Fund.

The Trust's Board of Trustees will evaluate the appropriateness of each of the
Rule 12b-1 Plans and its payment terms on a continuing basis and in doing so
will consider all relevant factors, including expenses borne by Sierra Services
and amounts it receives under the Rule 12b-1 Plan with respect to each class of
shares of the Funds.

It is possible that an institution may offer different categories of shares to
its customers and thus receive different compensation with respect to the
different categories. These financial institutions may also charge separate fees
to their customers.

INDEPENDENT ACCOUNTANTS

serves as the independent public accountants of the
Trust.

BREAKDOWN OF FUND EXPENSES

Like any investment companies, each Fund and each Underlying Fund pays expenses
related to its daily operations. Expenses paid out of an investment company's
assets are reflected in its share price or dividends; they are neither billed
directly to shareholders nor deducted from shareholder accounts. Each Fund pays
a management fee to Sierra Services for managing its investments and business
affairs and each Underlying Fund pays a management fee to Sierra Advisors for
managing its investments and business affairs. Sierra Advisors pays fees to the
Investment Sub-Advisors, who provide assistance with these services. Each Fund
and each Underlying Fund also pays other expenses, which are explained on the
following pages. Sierra Services, Sierra Advisors and/or Sierra Administration

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<PAGE> 57

may, from time to time, agree to waive management fees or reimburse expenses
above a specified limit. In such a case, Sierra Services, Sierra Advisors and
Sierra Administration retain the ability to be repaid by a Fund if expenses fall
below the specified limit prior to the end of the fiscal year.

MANAGEMENT FEE FOR THE UNDERLYING FUNDS

The management fee for the Underlying Funds is calculated and paid to Sierra
Advisors every month. The management fee for each Underlying Fund is based upon
a percentage of the average net assets of such Underlying Fund. Absent fee
waivers, the total management fee for each Underlying Fund as provided in the
investment advisory agreement of the Underlying Fund is as follows:

<TABLE>
<CAPTION>
=================================================================================================================================
Amount of
Assets After 50; After 75; After 100; After 125; After 150; After 200; After 300; After 400;
($ Mil.) First 50 next 25 next 25 next 25 next 25 next 50 next 100 next 100 next 10
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Each Money
Fund* .50% .50% .50% .50% .50% .50% .50% .50% .50%
- ---------------------------------------------------------------------------------------------------------------------------------
STF Short Term
Global
Government
Fund .65% .65% .65% .65% .65% .65% .65% .65% .65%
- ---------------------------------------------------------------------------------------------------------------------------------
STF U.S. Government
Fund* .60% .60% .60% .60% .60% .60% .60% .60% .60%
- ---------------------------------------------------------------------------------------------------------------------------------
STF Corporate Income
Fund .65% .65% .65% .65% .65% .65% .65% .65% .65%
- ---------------------------------------------------------------------------------------------------------------------------------
STF National Municipal
Fund* .60% .60% .60% .60% .60% .60% .60% .60% .60%
- ---------------------------------------------------------------------------------------------------------------------------------
STF Growth and
Income Fund .80% .80% .80% .75% .75% .75% .70% .70% .65%
- ---------------------------------------------------------------------------------------------------------------------------------
STF Growth Fund .95% .95% .95% .90% .90% .90% .875% .875% .875%
- ---------------------------------------------------------------------------------------------------------------------------------
STF Emerging Growth
Fund .90% .90% .90% .85% .85% .85% .85% .85% .85%
- ---------------------------------------------------------------------------------------------------------------------------------
STF International
Growth Fund .95% .85% .85% .85% .65% .65% .65% .65% .65%
- ---------------------------------------------------------------------------------------------------------------------------------
Sierra Prime Income
Fund .95% .95% .95% .95% .95% .95% .95% .95% .95%
=================================================================================================================================

<CAPTION>
=================================
Amount of
Assets Over
($ Mil.) 500
- ---------------------------------
Each Money
Fund* .40%
- ---------------------------------
STF Short Term
Global
Government
Fund .55%
- ---------------------------------
STF U.S. Government
Fund* .50%
- ---------------------------------
STF Corporate Income
Fund .50%
- ---------------------------------
STF National Municipal
Fund* .45%
- ---------------------------------
STF Growth and
Income Fund .575%
- ---------------------------------
STF Growth Fund .875%
- ---------------------------------
STF Emerging Growth
Fund .75%
- ---------------------------------
STF International
Growth Fund .65%
- ---------------------------------
Sierra Prime Income
Fund .95%
=================================
</TABLE>

* For these Underlying Funds, the Advisor has contractually agreed to limit the
annual management fees that are payable under the investment advisory agreements
with the Underlying Funds to the percentages as follows: Global Money
Fund--0.40%; U.S. Government Money Fund--0.40%; U.S. Government Fund--0.55%; and
National Municipal Fund--0.55%.

The Advisor of the Underlying Funds retains only the net amount of the foregoing
management fees after the advisory fees paid to the Investment Sub-Advisors of
the Underlying Funds are deducted. Each of the Investment Sub-Advisors of the
Underlying Funds is entitled to a fee from the Advisor of the Underlying Funds
based on a percentage of the average net assets of the Underlying Funds advised
by such Investment Sub-Advisor.

OTHER EXPENSES

While the management fee is a significant component of each Fund's and each
Underlying Fund's annual operating costs, each such fund has other expenses as
well. In addition to the management fee and other fees described previously,
each such fund pays other expenses, such as legal, audit, transfer agency and
custodian out-of-pocket fees; proxy solicitation costs; and the compensation of
trustees who are not affiliated with Sierra Advisors or Sierra Services. Most
fund expenses are allocated proportionately among all of the outstanding shares
of the fund. However, the Rule 12b-1 Plan's fees for the Class A Shares are
class expenses that are charged proportionately only to the outstanding shares
of that class and the Rule 12b-1 Plan's fees and service fees for the Class B
Shares are class expenses that are charged proportionately only to the
outstanding shares of that class.

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No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus and in the Trust's
official sales literature in connection with the offering of the Trust's shares,
and, if given or made, such other information or representations must not be
relied upon as having been authorized by the Trust. This Prospectus does not
constitute an offer in any state in which, or to any person to whom, such offer
may not lawfully be made.
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SIERRA ASSET MANAGEMENT TRUST
9301 CORBIN AVENUE, SUITE 333
P.O. BOX 1160
NORTHRIDGE, CALIFORNIA 91328-1160

STATEMENT OF ADDITIONAL INFORMATION
June 3, 1996

o Fixed Fund
o Value Fund
o Balanced Fund
o Growth Fund
o Aggressive Growth Fund

This Statement of Additional Information ("SAI") supplements the
information contained in the current Prospectus of Sierra Asset Management
Trust (the "Trust") which is dated June 3, 1996, and should be read in
conjunction with the current Prospectus.

The Trust's Prospectus may be obtained without charge by writing to
the Trust at P.O. Box 9702, Providence, Rhode Island 02940-9702 or by calling
the Trust at 800-869-2019 (for customers of Great Western, write to the address
noted at the top of this SAI cover page or call 800-222-5852). This SAI
provides information applicable to the Class A shares and Class B shares of the
Fixed, Value, Balanced, Growth and Aggressive Growth Funds of the Trust, which
are five series of units of beneficial interest ("shares") of the Trust (each
such series, a "Fund"). This SAI, although not in itself a prospectus, is
incorporated by reference into the Prospectus in its entirety.

TABLE OF CONTENTS

<TABLE>
<S> <C>
GENERAL INFORMATION AND HISTORY . . . . . . . . . . . . . . . . . . . . . . 2
MANAGEMENT OF THE TRUST . . . . . . . . . . . . . . . . . . . . . . . . . . 2
INVESTMENT OBJECTIVES AND POLICIES OF THE UNDERLYING FUNDS . . . . . . . 10
INVESTMENT RESTRICTIONS OF THE FUNDS . . . . . . . . . . . . . . . . . . 44
INVESTMENT RESTRICTIONS OF THE SIERRA TRUST FUNDS . . . . . . . . . . . . 46
INVESTMENT RESTRICTIONS OF SPIF . . . . . . . . . . . . . . . . . . . . . 51
PORTFOLIO TURNOVER . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
PORTFOLIO TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . 55
HOW TO BUY AND REDEEM SHARES . . . . . . . . . . . . . . . . . . . . . . 57
NET ASSET VALUE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
HOW TO EXCHANGE SHARES . . . . . . . . . . . . . . . . . . . . . . . . . 60
DETERMINATION OF PERFORMANCE . . . . . . . . . . . . . . . . . . . . . . 61
TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
DISTRIBUTOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
APPENDIX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
</TABLE>
<PAGE> 60
GENERAL INFORMATION AND HISTORY

The Trust is an open-end management investment company that currently
consists of the five Funds: the Fixed Fund, Value Fund, Balanced Fund, Growth
Fund and Aggressive Growth Fund. The Funds invest primarily in shares of
certain investment funds of the Sierra Trust Funds, an open-end management
investment company, and in the Sierra Prime Income Fund ("SPIF"), a closed-end
management investment company, (each of such investment funds and the SPIF are
referred to herein as the "Underlying Funds").

The Trust was established as a Massachusetts business trust pursuant
to an Agreement and Declaration of Trust dated March 26, 1996, as amended
from time to time (the "Trust Agreement"). The Agreement and Declaration of
Trust permits the Trust to offer separate series (each, a "Fund") of shares and
separate classes of each Fund. The Trust has established two classes of shares
of each Fund, the Class A shares and Class B shares. Except for differences
between the Class A shares and Class B shares pertaining to sales charges,
distribution, voting rights, dividends and transfer agent expenses, which are
described in this SAI and in the Trust's prospectus, each share of each Fund
represents an equal proportionate interest in that Fund with each other share
of that Fund.

Sierra Investment Services Corporation ("Sierra Services") is the
investment advisor of the Trust and is the distributor, principal underwriter,
of the Trust, the Sierra Trust Funds and SPIF. Sierra Investment Advisors
Corporation ("Sierra Advisors") is the investment advisor of the Sierra Trust
Funds and SPIF and Sierra Fund Administration Corporation ("Sierra
Administration") is the administrator of the Trust, Sierra Trust Funds and
SPIF.

MANAGEMENT OF THE TRUST

TRUSTEES AND OFFICERS OF THE TRUST

The names of the Trustees and executive officers of the Trust,
together with information as to their principal business occupations, are set
forth below. The executive officers of the Trust are employees of
organizations that provide services to the Trust and the Underlying Funds.
Each Trustee who is an "interested person" of the Trust, as defined in the
Investment Company Act of 1940, as amended (the "1940 Act"), is indicated by an
asterisk.

TRUSTEES:

*F. BRIAN CERINI
President
Sierra Capital Management Corporation

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9301 Corbin Avenue
Northridge, CA 91324

Since October 1990, he has served as President and CEO of Sierra
Capital Management Corporation ("SCMC"). Formed Great Western Financial
Securities Corporation ("GW Securities") in 1985 as President and also serves as
Chairman of the Trust. Prior to joining GW Securities, he served as First Vice
President, Financial Services for Bateman Eichler, Hill Richards, Inc., a
regional brokerage firm where he directed the firm's off exchange product
responsibilities and marketing. Previously, he worked for Pacific Southwest
Airlines for seven years as Assistant to the President. He holds a BA degree in
Economics from the University of Southern California and an MBA from the USC
Graduate School of Business.

ARTHUR H. BERNSTEIN, ESQ.
Managing General Partner
California Capital Investors
11661 San Vicente Blvd., #608
Los Angeles, CA 90049

Has held this position with the firm since 1981. Also President of
Bancorp Capital Group, Inc. and President of Bancorp Venture Capital, Inc.
since 1988. Previously served on the Board of Directors of Great Western
Leasing Corporation, a subsidiary of Great Western Financial Corporation, until
the subsidiary was sold in 1987. Director of Ryder System, Inc.; Trustee,
California Family Studies Center since 1984.

DAVID E. ANDERSON
Retired, Former President & CEO
GTE California, Inc.
17960 Seabreeze Drive
Pacific Palisades, CA 90272

Retired in 1988 from GTE California, Inc. after 40 years of service.
Held the position of President and CEO from 1979 to 1988. Director of
Barclay's Bank of California until 1988. Currently involved in the following
charitable organizations as a director on the following boards: public
television station KCET; Past Campaign Chairman of United Way; LA Project for
the Homeless; Task Force Chairman for The Year 2000 Partnership; and California
Economic Development Corporation. Holds BSEE degree from Iowa State.

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<PAGE> 62
EDMOND R. DAVIS, ESQ.
Partner
Brobeck, Phleger & Harrison
550 South Hope Street, 21st Floor
Los Angeles, CA 90071-2604

Joined the firm as a Partner in 1987 and is responsible for estate
planning, and trusts and estate matters in the Los Angeles office. Prior to
joining the firm, had a similar position for 20 years with the law firm of
Overton, Lyman & Prince in Los Angeles. His expertise has been recognized in
Who's Who in California, The Best Lawyers of America, and Who's Who in American
Law. Member of the Board of Directors of the following non-profit, charitable
organizations: Fifield Manors, Children's Bureau of Los Angeles, Children's
Bureau Foundation, and Braille Institute of America, Inc. Educated at
Pepperdine University and is an Order of the Coif graduate of Hastings College
of the Law.

JOHN W. ENGLISH
Retired, former Vice President & Chief Investment Officer
Ford Foundation
50 H New England Ave.
P.O. Box 640
Summit, NJ 07902-0640

Retired Vice President and Chief Investment Officer, the Ford
Foundation (a non-profit charitable organization). Chairman of the Board and
Director, The China Fund, Inc. (a closed-end mutual fund). Director, Paribas
Trust for Institutions (an open-end mutual fund). Trustee, Retail Property
Trust (a company providing management services for a shopping center).

OFFICERS:

F. BRIAN CERINI, CHAIRMAN AND PRESIDENT

Acts as a Trustee of the Trust as well as President. Information
regarding Mr. Cerini's background is listed above under "Management of the
Trust -- Trustees."

KEITH B. PIPES, EXECUTIVE VICE PRESIDENT, TREASURER AND SECRETARY

As Senior Vice President, Chief Financial Officer and Secretary of
SCMC, he is responsible for its general accounting, financial planning,
compliance administration systems development and advisory operations. Joined
Great Western Bank in 1983 as Manager of Strategic Planning for the Bank and
later served as product manager for the Bank's savings products before joining
GW Securities in 1986. Prior to joining the firm, served as Senior Planning
Analyst in the Mergers and Acquisitions Department of

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<PAGE> 63
Mattel Corporation. Holds a B.A. degree in Economics as well as
an MBA in finance from UCLA.

MICHAEL D. GOTH, SENIOR VICE PRESIDENT

Since January 1991, serves as Chief Operating Officer and Portfolio
Manager of Sierra Advisors. Prior to joining Great Western, Mr. Goth worked
for 2-1/2 years as a senior manager of Transfer Agent operations at First Data
Investor Services Group, Inc. ("First Data", formerly, The Shareholder Services
Group, Inc.) and The Boston Company. In addition, Mr. Goth has 10 years
experience as executive vice president of the GIT mutual fund group,
responsible for most aspects of that fund group, including investments. Other
experience includes 4 years as a corporate banking officer at Citibank and
1-1/2 years in investment banking with Drexel Firestone. He holds B.S. and
M.S. degrees from Rensselaer Polytechnic Institute and an MBA in finance from
Harvard Business School.

STEPHEN C. SCOTT, SENIOR VICE PRESIDENT

Joined GW Securities in August 1988 to form Sierra Advisors and
currently serves as the President and Chief Investment Officer of Sierra
Advisors. Prior to joining GW Securities, served as President and Chairman of
SDS Investment Advisors, a firm he founded in which he developed asset
allocation technology. Previously, President and Chairman of Smathers and Co.,
an investment advisory firm. For nine years, served as the Senior Pension
Investment Consultant for the Group Pension Investment Division of Equitable
Life Insurance responsible for their major corporate clients. Has served as a
member on Board of Directors of several corporations and private organizations.
For 17 years, has served as a Trustee on the Long Beach State University
Foundation and currently chairs the Investment Committee. He holds a B.A.
degree in Economics and Finance from Long Beach State University, and continued
with an MBA in finance.

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<PAGE> 64
RICHARD W. GRANT, ASSISTANT SECRETARY

Has been a Partner in the firm of Morgan, Lewis & Bockius LLP since
1989. Prior to that he was a Partner in the firm of Ballard, Spahr, Andrews &
Ingersoll beginning in 1983. He received his A.B. in 1968 from Brown
University and his J.D. in 1971 from the Boston University School of Law.

RICHARD H. ROSE, ASSISTANT TREASURER

Currently acts as Senior Vice President of First Data, a subsidiary of
First Data Corp. (prior to May 6, 1994, a subsidiary of The Boston Company
Advisors, Inc. ("Boston Advisors")). He joined Boston Advisors in 1988 as Vice
President and Fund Manager in the Fund Accounting Department. Prior to 1988,
he acted as Senior Audit Manager for Peat Marwick Main (KPMG Peat Marwick) &
Co. He holds a Master's degree in Accounting from Northeastern University, and
a B.A. in Economics from Dartmouth.

CRAIG M. MILLER, ASSISTANT TREASURER

Joined SCMC in July 1993. Currently acts as Vice President and
Controller of SCMC. Prior thereto, acted as Audit Manager for Coopers &
Lybrand LLP. He holds a Master's degree in Taxation from Bentley College,
where he also received his B.S. in Accountancy.

REMUNERATION. No director, officer or employee of Sierra Services, the
investment sub-advisors of the Underlying Funds (the "Sub-Advisors") or First
Data, the Sub-Administrator of the Underlying Funds, or any affiliate of Sierra
Services, the Sub-Advisors or First Data will receive any compensation from the
Trust for serving as an officer or Trustee of the Trust. The Trust pays each
Trustee, who is not a director, officer or employee of Sierra Services, the
Sub-Advisors, First Data or any of their affiliates, a fee of $7,500 per annum
plus $1,500 per Board meeting attended and $1,000 per Audit and Nominating
Committee meeting attended, and reimburses them for travel and out-of-pocket
expenses.

As of June 3, 1996, the Trustees and officers of the Trust owned, in
the aggregate, less than 1% of the outstanding shares of any of the Underlying
Funds.

INVESTMENT ADVISOR, ADMINISTRATOR, SUB-ADMINISTRATOR
AND TRANSFER AGENT OF THE FUNDS

Sierra Services serves as investment advisor to each of the Funds
pursuant to an investment advisory agreement. Sierra Administration serves as
Administrator, Shareholder Servicing --

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<PAGE> 65
Agent and Transfer Agent to each of the Funds and First Data serves as
Sub-Administrator to each of the Funds pursuant to separate written agreements.
Certain of the services provided by, and the fees paid to, Sierra Services,
Sierra Administration and First Data are described in the Trust's Prospectus.
Sierra Services, Sierra Administration and First Data each compensates its
respective Directors and pays the salaries of its respective officers and
employees employed by such companies respectively and by the Trust and
maintains office facilities for the Trust.

INVESTMENT ADVISOR AND SUB-ADVISORS, ADMINISTRATOR, SUB-ADMINISTRATOR AND
TRANSFER AGENT OF THE UNDERLYING FUNDS

Sierra Advisors serves as Investment Advisor to each of the Underlying
Funds and each Sub-Advisor serves as Investment Sub-Advisor to one or more
Underlying Funds pursuant to separate written agreements. Sierra
Administration serves as Administrator, Shareholder Servicing Agent and
Transfer Agent to each of the Underlying Funds and First Data serves as
Sub-Administrator to each of the Underlying Funds pursuant to separate written
agreements. Certain of the services provided by, and the fees paid to, Sierra
Advisors, the Sub-Advisors, Sierra Administration and First Data are described
in the Prospectuses of the Underlying Funds. Sierra Advisors, the
Sub-Advisors, Sierra Administration and First Data each compensates its
respective Directors and pays the salaries of its respective officers and
employees employed by such companies respectively and by the Underlying Funds
and maintains office facilities for the Sierra Trust Funds and SPIF.

Sierra Services has agreed that, if in any fiscal year the aggregate
expenses of a Fund (including investment advisory and administration fees, but
excluding interest, taxes, brokerage commissions and, if permitted by the
relevant state securities commissions, extraordinary expenses) exceed the
expense limitation of any state having jurisdiction over the Fund, Sierra
Services will reimburse the Fund for that excess expense to the extent required
by state law in the same proportion as its respective fees bear to the combined
fee for investment advisory services. An expense reimbursement, if any, will
be estimated, reconciled and paid on a monthly basis. As of the date of this
SAI, the most restrictive annual expense limitation applicable to any Fund is
2.5% of the Fund's first $30 million of average net assets, 2.0% of the next
$70 million of average net assets and 1.5% of the average net assets in excess
of $100 million. The Sierra Trust Funds or SPIF may seek waivers of such
expense limitations from time to time for certain Funds.

Sierra Advisors has agreed that, if in any fiscal year the aggregate
expenses of an Underlying Fund (including investment advisory and
administration fees, but excluding interest, taxes, brokerage commissions and,
if permitted by the relevant state

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<PAGE> 66
securities commissions, extraordinary expenses) exceed the expense limitation
of any state having jurisdiction over the Underlying Fund, Sierra Advisors will
reimburse the Underlying Fund for that excess expense to the extent required by
state law in the same proportion as its respective fees bear to the combined
fee for investment advisory services. An expense reimbursement, if any, will
be estimated, reconciled and paid on a monthly basis. As of the date of this
SAI, the most restrictive annual expense limitation applicable to any
Underlying Fund is 2.5% of the Underlying Fund's first $30 million of average
net assets, 2.0% of the next $70 million of average net assets and 1.5% of the
average net assets in excess of $100 million. The Sierra Trust Funds or SPIF
may seek waivers of such expense limitations from time to time for certain
Underlying Funds.

CUSTODIAN OF THE FUNDS AND THE UNDERLYING FUNDS

The assets of the Trust, the Sierra Trust Funds and SPIF are held
under bank custodianship in accordance with the 1940 Act. Boston Safe Deposit
and Trust Company ("Boston Safe") serves as Custodian for the Trust and the
Sierra Trust Funds. Under its custodial agreements with the Trust and the
Sierra Trust Funds, Boston Safe is authorized to appoint one or more U.S.
banking institutions as sub-custodians of assets owned by the Funds or
Underlying Funds of the Sierra Trust Funds. In addition, the Trust and the
Sierra Trust Funds may employ foreign sub-custodians that are approved by the
Board of Trustees to hold foreign assets.

State Street Bank & Trust Company located at 225 Franklin Street,
Boston, MA 02110 is the custodian of SPIF and has custody of the securities and
cash of SPIF. The custodian, among other things, attends to the collection of
principal and income and payment for and collection of proceeds of securities
bought and sold by SPIF.

COUNSEL AND AUDITOR

O'Melveny & Myers serves as counsel to the Trust, Sierra Trust Funds
and SPIF and provides legal services to Great Western Financial Corporation and
a number of its subsidiaries, including Sierra Advisors, Sierra Services,
Sierra Administration and GW Securities. Morgan, Lewis & Bockius LLP also
provides legal services to the Trust, Sierra Trust Funds and SPIF and to Great
Western Financial Corporation and a number of its subsidiaries, including
Sierra Advisors, Sierra Services, Sierra Administration and GW Securities.

Price Waterhouse LLP, independent accountants, located at 160 Federal
Street, Boston, Massachusetts 02110, serves as auditor of the Trust, Sierra
Trust Funds and SPIF.

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SHAREHOLDERS OF THE TRUST

In the interest of economy and convenience, certificates representing
shares in the Trust are not physically issued. Boston Safe, the Trust's
Custodian, and First Data, the Trust's Sub-Transfer Agent, maintain a record of
each shareholder's ownership of Trust shares. Shares do not have cumulative
voting rights, which means that holders of more than 50% of the shares voting
for the election of Trustees can elect all Trustees. Shares are transferable
but have no preemptive, conversion or subscription rights. Shareholders
generally vote by Fund or Class, except with respect to the election of
Trustees and the selection of independent accountants.

Under normal circumstances, there will be no meetings of shareholders
for the purpose of electing Trustees unless and until such time as less than a
majority of the Trustees holding office have been elected by shareholders, at
which time the Trustees then in office promptly will call a shareholders'
meeting for the election of Trustees. Under the 1940 Act, shareholders of
record of no less than two-thirds of the outstanding shares of the Trust may
remove a Trustee through a declaration in writing or by vote cast in person or
by proxy at a meeting called for that purpose. Under the Trust Agreement, the
Trustees are required to call a meeting of shareholders for the purpose of
voting upon the question of removal of any such Trustee when requested in
writing to do so by the shareholders of record of not less than 10% of the
Trust's outstanding shares.

Massachusetts law provides that shareholders, under certain
circumstances, could be held personally liable for the obligations of the
Trust. However, the Trust Agreement disclaims shareholder liability for acts
or obligations of the Trust and requires that notice of such disclaimer be
given in each agreement, obligation or instrument entered into or executed by
the Trust or a Trustee. The Trust Agreement provides for indemnification from
the Trust's property for all losses and expenses of any shareholder held
personally liable for the obligations of the Trust. Thus, the risk of a
shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which the Trust would be unable to meet its
obligations, a possibility that the Trust's management believes is remote.
Upon payment of any liability incurred by the Trust, the shareholder paying the
liability will be entitled to reimbursement from the general assets of the
Trust. The Trustees intend to conduct the operations of the Trust in such a
way so as to avoid, to the extent possible, ultimate liability of the
shareholders for liabilities of the Trust.

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INVESTMENT OBJECTIVES AND POLICIES OF THE UNDERLYING FUNDS

The Prospectuses of the Underlying Funds discuss the investment
objective or objectives of each of the Underlying Funds and the policies to be
employed to achieve such objectives. This section contains supplemental
information concerning the types of securities and other instruments in which
the Funds and the Underlying Funds may invest, the investment policies and
portfolio strategies that the Funds and the Underlying Funds may utilize and
certain risks attendant to such investments, policies and strategies. The
following are the Underlying Funds:

UNDERLYING FUNDS

Sierra Trust Funds
U.S. Government Money Fund ("STF U.S. Government Money Fund")
Global Money Fund ("STF Global Money Fund")
Short Term High Quality Bond Fund ("STF Short Term High
Quality Bond Fund")
U.S. Government Fund ("STF U.S. Government Fund")
Corporate Income Fund ("STF Corporate Income Fund")
Growth and Income Fund ("STF Growth and Income Fund")
Growth Fund ("STF Growth Fund")
Emerging Growth Fund ("STF Emerging Growth Fund")
International Growth Fund ("STF International Growth Fund")
Sierra Prime Income Fund ("SPIF")

STRATEGIES AVAILABLE TO ALL UNDERLYING FUNDS

RATINGS AS INVESTMENT CRITERIA. In general, the ratings of Moody's
Investors Service, Inc. ("Moody's") and Standard & Poor's Corporation ("S&P")
represent the opinions of these agencies as to the quality of securities which
they rate. It should be emphasized, however, that such ratings are relative
and subjective and are not absolute standards of quality. These ratings will
be used by the Underlying Funds as initial criteria for the selection of
portfolio securities, but the Underlying Funds will also rely upon the
independent advice of their respective Sub-Advisors to evaluate potential
investments. The Appendix to this SAI contains further information concerning
the ratings of Moody's and S&P and their significance. See the Prospectuses
with respect to the Global Money and U.S. Government Money Funds (the "Money
Funds") in the section entitled "The Underlying Funds' Investments, Risk
Considerations and Performance - Investment Principles - Quality Requirements",
for additional information concerning certain rating criteria.

To the extent that the rating given by Moody's or S&P for securities
may change as a result of changes in such organizations or their rating
systems, each Fund will attempt to use comparable ratings as standards for its
investments in accordance with the investment policies contained in the
Prospectuses and in this SAI.

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U.S. GOVERNMENT SECURITIES. U.S. Government securities include debt
obligations of varying maturities issued or guaranteed by the U.S. Government
or its agencies or instrumentalities. U.S. Government securities include
direct obligations of the U.S. Treasury, and securities issued or guaranteed
by the Federal Housing Administration, Farmers Home Administration,
Export-Import Bank of the United States, Small Business Administration,
Government National Mortgage Association ("GNMA"), General Services
Administration, Central Bank for Cooperatives, Federal Farm Credit Banks,
Federal Home Loan Banks, Federal Home Loan Mortgage Corporation ("FHLMC"),
Federal Intermediate Credit Banks, Resolution Trust Corporation, Federal Land
Banks, Federal National Mortgage Association ("FNMA"), Maritime Administration,
Tennessee Valley Authority, District of Columbia Armory Board and Student Loan
Marketing Association. Direct obligations of the U.S. Treasury include a
variety of securities that differ in their interest rates, maturities and dates
of issuance. Because the U.S. Government is not obligated by law to provide
support to an instrumentality it sponsors, a Fund will invest in obligations
issued by such an instrumentality only if the Fund's Sub-Advisor determines
that the credit risk with respect to the instrumentality does not make its
securities unsuitable for investment by the Fund.

ILLIQUID INVESTMENTS. Up to 10% of the assets of each of the Money
Funds, and up to 15% of the assets of each of the Underlying Funds except the
Money Funds and SPIF (the "Non-Money Funds"), may be invested in securities
that are not readily marketable, including: (1) repurchase agreements with
maturities greater than seven calendar days; (2) time deposits maturing in more
than seven calendar days; (3) to the extent a liquid secondary market does not
exist for the instruments, futures contracts and options thereon; (4) certain
over-the-counter options, as described in the SAI; (5) certain variable rate
demand notes having a demand period of more than seven days; and (6) certain
Rule 144A securities as defined below. SPIF is not subject to any restrictions
or investments in illiquid investments. These securities generally cannot be
sold or disposed of in the ordinary course of business within seven days at
approximately the value at which the Underlying Fund has valued the
investments. These factors may have an adverse effect on the Underlying Fund's
ability to dispose of the particular securities at fair market value and may
limit the fund's ability to obtain accurate market quotations for purposes of
valuing the securities and calculating the net asset value of shares of the
Underlying Fund. The Underlying Funds may also purchase securities that are
not registered under the Securities Act of 1933, as amended (the "Act"), but
that can be sold to qualified institutional buyers in accordance with Rule 144A
under that Act ("Rule 144A securities"). Rule 144A securities generally must
be sold to other qualified institutional buyers. If a particular investment in
Rule 144A securities is not determined to be liquid, that investment will be
included within the 15% or 10% limitation, as applicable, on investment in
illiquid securities.

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COMBINED TRANSACTIONS. As permitted by each Fund's investment polices
and restrictions, the Underlying Funds may enter into multiple transactions,
including multiple options transactions, multiple futures transactions,
multiple foreign currency transactions (including forward foreign currency
exchange contracts) and any combination of futures, options and foreign
currency transactions (each separately, a "component" transaction), instead of
a single transaction, as part of a single hedging strategy when, in the opinion
of the Sub-Advisor, it is in the best interest of the Fund to do so. A
combined transaction, while part of a single hedging strategy, may contain
elements of risk that are present in each of its component transactions.

BANK OBLIGATIONS. Domestic commercial banks organized under federal
law are supervised and examined by the Comptroller of the Currency and are
required to be members of the Federal Reserve System and to be insured by the
Federal Deposit Insurance Corporation (the "FDIC"). Domestic banks organized
under state law are supervised and examined by state banking authorities but
are members of the Federal Reserve System only if they elect to join. Most
state banks are insured by the FDIC (although such insurance may not be of
material benefit to a Fund, depending upon the principal amount of certificates
of deposit ("CDs") of each state bank held by a Fund) and are subject to
federal examination and to a substantial body of federal law and regulation.
As a result of federal and state laws and regulations, domestic branches of
domestic banks are, among other things, generally required to maintain specific
levels of reserves, and are subject to other supervision and regulation
designed to promote financial soundness.

Obligations of foreign branches of U.S. banks and of foreign branches
of foreign banks, such as CDs and time deposits ("TDs"), may be general
obligations of the parent bank in addition to the issuing branch, or may be
limited by the terms of a specific obligation and governmental regulation.
Obligations of foreign branches of U.S. banks and foreign banks are subject to
the risks associated with investing in foreign securities generally. Foreign
branches of U.S. banks and foreign branches of foreign banks are not
necessarily subject to the same or similar regulatory requirements that apply
to U.S. banks, such as mandatory reserve requirements, loan limitations, and
accounting, auditing and financial recordkeeping requirements. In addition,
less information may be publicly available about a foreign branch of a U.S.
bank or about a foreign bank than about a U.S. bank.

Obligations of U.S. branches of foreign banks may be general
obligations of the parent bank in addition to the issuing branch, or may be
limited by the terms of a specific obligation and by federal and state
regulation as well as governmental action in the country in which the foreign
bank has its head office. A U.S branch of a foreign bank may or may not be
subject to reserve

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requirements imposed by the Federal Reserve System or by the state in which the
branch is located if the branch is licensed in that state. In addition,
branches licensed by the Comptroller of the Currency and branches licensed by
certain states ("State Branches") may or may not be required to (1) pledge to
the regulator by depositing assets with a designated bank within the state an
amount of its assets equal to 5% of its total liabilities, or (2) maintain
assets within the state in an amount equal to a specified percentage of the
aggregate amount of liabilities of the foreign bank payable at or through all
of its agencies or branches within the state. The deposits of State Branches
may not necessarily be insured by the FDIC. In addition, there may be less
publicly available information about a U.S. branch of a foreign bank than about
a U.S. bank.

In view of the foregoing factors associated with the purchase of CDs
and TDs issued by foreign banks and foreign branches of U.S. banks, the
Underlying Funds' respective Sub-Advisors will carefully evaluate such
investments on a case-by-case basis.

A Fund may purchase a CD, TD or bankers' acceptances issued by a bank,
savings and loan association or other banking institution with less than $1
billion in assets (a "Small Issuer Bank Obligation") only so long as the issuer
is a member of the FDIC or supervised by the Office of Thrift Supervision (the
"OTS") and so long as the principal amount of the Small Issuer Bank Obligation
is fully insured by the FDIC and is no more than $100,000. Each of these
Underlying Funds will at any one time hold only one Small Issuer Bank
Obligation from any one issuer.

Savings and loan associations whose CDs, TDs and bankers' acceptances
may be purchased by the Underlying Funds are supervised by the OTS and insured
by the Savings Association Insurance Fund, which is administered by the FDIC
and is backed by the full faith and credit of the United States Government. As
a result, such savings and loan associations are subject to regulation and
examination.

MORTGAGE-BACKED SECURITIES. The mortgage-backed securities in which
the Underlying Funds may invest may be classified as governmental or
government-related, depending on the issuer or guarantor. Governmental
mortgage-backed securities are backed by the full faith and credit of the
United States. GNMA, the principal U.S. guarantor of such securities, is a
wholly-owned U.S. Government corporation within the Department of Housing and
Urban Development. Government-related mortgage-backed securities which are not
backed by the full faith and credit of the United States include those issued
by FNMA and FHLMC. FNMA is a government-sponsored corporation owned entirely
by private stockholders, which is subject to general regulation by the
Secretary of Housing and Urban Development. Pass-through

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securities issued by FNMA are guaranteed as to timely payment of principal and
interest by FNMA. FHLMC is a corporate instrumentality of the United States,
the stock of which is owned by the Federal Home Loan Banks. Participation
certificates representing interests in mortgages from FHLMC's national
portfolio are guaranteed as to the timely payment of interest and ultimate
collection of principal by FHLMC.

Governmental or government-related entities may create mortgage loan
pools offering pass-through investments in addition to those described above.
The mortgages underlying these securities may be alternative mortgage
instruments, that is, mortgage instruments in which principal or interest
payments may vary or terms to maturity may be shorter than previously
customary. As new types of mortgage-backed securities are developed and
offered to investors, the Underlying Funds will, consistent with their
respective investment objectives and policies, consider making investments in
such new types of securities.

The average maturity of pass-through pools of mortgage-backed
securities varies with the maturities of the underlying mortgage instruments.
In addition, a pool's stated maturity may be shortened by unscheduled payments
on the underlying mortgages. Factors affecting mortgage prepayments include
the level of interest rates, general economic and social conditions, the
location of the mortgaged property and the age of the mortgage. Because
prepayment rates of individual mortgage pools vary widely, it is not possible
to accurately predict the average life of a particular pool. Common industry
practice, for example, is to assume that prepayments will result in a 7- to
9-year average life for pools of fixed-rate 30-year mortgages. Pools of
mortgages with other maturities of different characteristics will have varying
average life assumptions.

REPURCHASE AGREEMENTS. The Underlying Funds may invest in repurchase
agreements without limitation.

STRATEGIES AVAILABLE TO ALL UNDERLYING FUNDS EXCEPT THE MONEY FUNDS
_______________________________________________________________________________

REVERSE REPURCHASE AGREEMENTS. Under the 1940 Act, reverse repurchase
agreements may be considered borrowings by the seller; accordingly each of the
Underlying Funds will limit its aggregate investments in reverse repurchase
agreements and other borrowings to no more than 30% of its total assets, except
that each of the STF U.S. Government, STF Corporate Income and STF Short Term
High Quality Bond Funds will limit its aggregate investments in reverse
repurchase agreements, dollar roll transactions and other borrowings to no more
than 33-1/3% of its total assets. A Fund will not engage in reverse repurchase
transactions for the purpose of leverage.

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<PAGE> 73
WHEN-ISSUED SECURITIES AND DELAYED DELIVERY TRANSACTIONS. A
segregated account in the name of the Fund consisting of cash or liquid debt
securities equal to the amount of when-issued or delayed-delivery commitments
will be established at Boston Safe, the Trust's custodian. For the purpose of
determining the adequacy of the securities in the accounts, the deposited
securities will be valued at market or fair value. If the market or fair value
of the securities declines, additional cash or securities will be placed in the
account daily so that the value of the account will equal the amount of such
commitments by the Fund. On the settlement date, the Fund will meet its
obligations from then-available cash flow, the sale of securities held in the
segregated account, the sale of other securities or, although it would not
normally expect to do so, from the sale of securities purchased on a
when-issued or delayed-delivery basis themselves (which may have a greater or
lesser value than the Fund's payment obligations).

STRATEGIC TRANSACTIONS. Consistent with its investment policies and
restrictions described in the Prospectus and elsewhere in the SAI of the
Underlying Funds, an Underlying Fund may, but is not required to, utilize
various investment strategies as described below to hedge various market or
currency risks, to manage the effective maturity or duration of fixed-income
securities, or to seek potentially higher returns. Utilizing these investment
strategies and as permitted by each Fund's investment polices and restrictions,
the Fund may purchase and sell exchange-listed and over-the-counter put and
call options on securities, equity and fixed-income indices and other financial
instruments, purchase and sell financial futures contracts and options thereon,
enter into various interest rate transactions such as swaps, caps, floors or
collars, and enter into various currency transactions such as currency forward
contracts, currency futures contracts, currency swaps or options on currencies
or currency futures (collectively, all the above are called "Strategic
Transactions").

Strategic Transactions will be used to attempt to protect against
possible changes in the market value of securities held in or to be purchased
for the Fund's portfolio resulting from securities markets or currency exchange
rate fluctuations, to protect the Fund's unrealized gains in the value of its
portfolio securities, to facilitate the sale of such securities for investment
purposes, to manage the effective maturity or duration of the Fund's portfolio,
to establish a position in the derivatives markets as a temporary substitute
for purchasing or selling particular securities, or to seek potentially high
returns. No more than 5% of a Fund's assets will be used as the initial margin
or purchase price for Strategic Transactions in the aggregate entered into for
purposes other than "bona fide hedging" positions as defined in the regulations
adopted by the Commodity Futures Trading Commission ("CFTC"). Moreover, no
Fund

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currently intends to enter into Strategic Transactions, excluding Strategic
Transactions that are "covered" or entered into for bona fide hedging purposes,
that are in the aggregate principal amount in excess of 15% of the Fund's net
assets. Any or all of these investment techniques may be used at any time, as
use of any Strategic Transaction is a function of numerous variables including
market conditions. The ability of the Fund to utilize these Strategic
Transactions successfully will depend on the Sub-Advisor's ability to predict
pertinent market movements which cannot be assured. Strategic Transactions
involving financial futures and options thereon will be purchased, sold or
entered into only for bona fide hedging, risk management or portfolio
management purposes.

Strategic Transactions have associated risks including possible
default by the other party to the transaction, illiquidity and, to the extent
the Sub-Adviser's view as to certain market movements is incorrect, losses
greater than if they had not been used. For more information about the
Underlying Funds' use of put and call options, currency transactions and
options and futures transactions and the risks associated with such
transactions, see the sections relating to such strategies in this SAI and the
Appendix to the applicable Prospectus. Losses resulting from the use of
Strategic Transactions may reduce net asset value, and possibly income, and
such losses can be greater than if the Strategic Transactions had not been
utilized.

Strategic Transactions expose a Fund to an obligation to another
party. No Fund will enter into any such transactions unless it owns either (1)
an offsetting ("covered") position in securities or other options or futures
contracts or (2) cash, receivables and U.S. government securities and other
liquid, high grade debt, with a value sufficient at all times to cover its
potential obligations to the extent not covered as provided in (1) above. Each
Fund will comply with SEC guidelines regarding cover for hedging transactions
and will, if the guidelines so require, set aside cash, U.S. government
securities or other liquid, high-grade debt securities in a segregated account
with Boston Safe or with a designated sub-custodian in the prescribed amount.

The use of Strategic Transactions is subject to applicable regulations
of the SEC, the several options and futures exchanges upon which they are
traded, the CFTC and may become subject to regulation by various state
regulatory authorities. Each Fund will comply with the applicable regulatory
requirements when utilizing Strategic Transactions. In addition, a Fund's
ability to use Strategic Transactions may be limited by tax considerations.
See "Taxes."

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<PAGE> 75
Special Risks of Strategic Transactions. The use of Strategic
Transactions involves special considerations and risks, as described below.
Additional risks pertaining to particular Strategic Transactions are described
in other sections to this SAI. Successful use of most Strategic Transactions
depends upon the Sub-Advisor's ability to predict movements of the overall
securities and interest rate markets, which requires different skills then
predicting changes in the prices of individual securities. There can be no
assurance that any particular strategy adopted will succeed. There may be
imperfect correlation, or even no correlation, between price movements of
Strategic Transactions and price movements of the related portfolio or currency
positions. Such a lack of correlation might occur due to factors unrelated to
the value of the related portfolio or currency positions, such as speculative
or other pressures on the markets in which Strategic Transactions are traded.
Strategic Transactions, if successful, can reduce risk of loss or enhance
income, by wholly or partially offsetting the negative effect of, or accurately
predicting, unfavorable price movements or currency fluctuations in the related
portfolio or currency position. However, Strategic Transactions can also
reduce the opportunity for gain by offsetting the positive effect of favorable
price movements in the positions. In addition, a Fund might be required to
maintain assets as "cover," maintain segregated accounts or make margin
payments when it takes positions in Strategic Transactions involving
obligations to third parties (i.e., Strategic Transactions other than purchased
options). These requirements might impair the Fund's ability to sell a
portfolio security or currency position or make an investment at a time when it
would otherwise be favorable to do so, or require that the Fund sell a
portfolio security or currency position at a disadvantageous time.

SWAPS, CAPS, FLOORS AND COLLARS. Among the Strategic Transactions
into which a Fund may enter, consistent with the Fund's investment policies and
restrictions, are interest rate, currency and index swaps and the purchase or
sale of related caps, floors and collars. A Fund would enter into these
transactions primarily to preserve a return or spread on a particular
investment or portion of its portfolio, to protect against currently
fluctuations, as a duration management technique or to protect against any
increase in the price of securities the Fund anticipates purchasing at a later
date. A Fund will use these transactions as hedges and not speculative
investments and will not sell interest rate caps or floors where it does not
own securities or other instruments providing the income stream the Fund may be
obligated to pay. Interest rate swaps involve the exchange by a Fund with
another party of their respective commitments to pay or receive interest, e.g.,
an exchange of floating rate payments for fixed rate payments with respect to a
notional amount of principal. A currency swap is an agreement to exchange cash
flows on a notional amount of two or

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<PAGE> 76
more currencies based on the relative value differential among them and an
index swap is an agreement to swap cash flows on a notional amount based on
changes in the values of the reference indices. The purchase of a cap entitles
the purchaser to receive payments on a notional principal amount from the party
selling such cap to the extent that a specified index exceeds a predetermined
interest rate or amount. The purchase of a floor entitles the purchaser to
receive payments on a notional principal amount from the party selling such
floor to the extent that a specified index falls below a predetermined interest
rate or amount. A collar is a combination of a cap and a floor that preserves
a certain return within a predetermined range of interest rates or value.

A Fund will usually enter into swaps on a net basis, i.e., the two
payment streams are netted out in a cash settlement on the payment date or
dates specified in the instrument, with the Fund receiving or paying, as the
case may be, only the net amount of the two payments. Inasmuch as these swaps,
caps, floors and collars are entered into for good faith hedging purposes,
Sierra Advisors and the Trust believe such obligations do not constitute senior
securities under the 1940 Act and, accordingly, will not treat them as being
subject to the Fund's borrowing restrictions. If there is a default by the
counterpart, a Fund may have contractual remedies pursuant to the agreements
related to the transaction. The swap market has grown substantially in recent
years with a large number of banks and investment banking firms acting both as
principles and as agents utilizing standardized swap documentation. As a
result, the swap market has become relatively liquid. Caps, floors and collars
are more recent innovations for which standardized documentation has not yet
been fully developed and, accordingly, they are less liquid than swaps.

STRATEGIES AVAILABLE TO STF U.S. GOVERNMENT FUND, STF CORPORATE INCOME FUND,
STF SHORT TERM HIGH QUALITY BOND FUND, STF GROWTH FUND, STF EMERGING GROWTH
FUND, STF GROWTH AND INCOME FUND AND STF INTERNATIONAL GROWTH FUND

FUTURES ACTIVITIES. The Underlying Funds may enter into futures
contracts and options on futures contracts that are traded on a U.S. exchange
or board of trade. These investments may be made by the Fund involved for the
purpose of hedging against changes in the value of its portfolio securities due
to anticipated changes in interest rates and market conditions, and for
otherwise permitted Strategic Transactions. The ability of a Fund to trade in
futures contracts and options on futures contracts may be materially limited by
the requirement of the Internal Revenue Code of 1986, as amended, (the "Code"),
applicable to a regulated investment company. See "Taxes" below.

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<PAGE> 77
FUTURES CONTRACTS. An interest rate futures contract provides for the
future sale by one party and the purchase by the other party of a certain
amount of a specific financial instrument (debt security) at a specified price,
date, time and place. A bond index futures contract is an agreement pursuant
to which two parties agree to take or make delivery of an amount of cash equal
to the difference between the value of the index at the close of the last
trading day of the contract and the price at which the index contract was
originally written. No physical delivery of the underlying securities in the
index is made.

The purpose of entering into a futures contract by a Fund is to
protect the Fund from fluctuations in the value of its securities caused by
anticipated changes in interest rates or market conditions without necessarily
buying or selling the securities. For example, if the STF Corporate Income
Fund owns long-term bonds and interest rates are expected to increase, the Fund
might enter into futures contracts to sell a treasury bond. This
transaction would have much the same effect as the Fund's selling some of the
long-term bonds in its portfolio. If interest rates increase as anticipated,
the value of certain long-term fixed income securities in the portfolio would
decline, but the value of the Fund's futures contracts would increase at
approximately the same rate, thereby keeping the net asset value of the Fund
from declining as much as it otherwise would have. Of course, since the value
of portfolio securities will far exceed the value of the futures contracts
entered into by a Fund, an increase in the value of the futures contract would
only mitigate -- but not totally offset -- the decline in the value of the
portfolio.

No consideration is paid or received by a Fund upon entering into a
futures contract. Initially, a Fund would be required to deposit with the
broker an amount of cash or cash equivalents equal to approximately 1% to 10%
of the contract amount (this amount is subject to change by the board of trade
on which the contract is traded and members of such board of trade may charge a
higher amount). This amount is known as "initial margin" and is in its nature
the equivalent of a performance bond or good faith deposit on the contract,
which is returned to a Fund upon termination of the futures contract, assuming
all contractual obligations have been satisfied. Subsequent payments, known as
"variation margin," to and from the broker, will be made daily as the price of
the index or securities underlying the futures contract fluctuates, making the
long and short positions in the futures contract more or less valuable, a
process known as "marking-to-market." At any time prior to the expiration of a
futures contract, a Fund may elect to close the position by taking an opposite
position, which will operate to terminate the Fund's existing position in the
contract.

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<PAGE> 78
There are several risks in connection with the use of futures
contracts as a hedging device. Successful use of futures contracts by a Fund
is subject to the ability of the Fund's Sub-Advisor to correctly predict
movements in the direction of interest rates or changes in market conditions.
These predictions involve skills and techniques that may be different from
those involved in the management of the portfolio being hedged. In addition,
there can be no assurance that there will be a correlation between movements in
the price of the underlying index or securities and movements in the price of
the securities which are the subject of the hedge. A decision of whether, when
and how to hedge involves the exercise of skill and judgment, and even a
well-conceived hedge may be unsuccessful to some degree because of market
behavior or unexpected trends in interest rates.

Although the Underlying Funds intend to enter into futures contracts
only if there is an active market for such contracts, there is no assurance
that an active market will exist for the contracts at any particular time.
Most U.S. futures exchanges and boards of trade limit the amount of fluctuation
permitted in futures contract prices during a single trading day. Once the
daily limit has been reached in a particular contract, no trades may be made
that day at a price beyond that limit. It is possible that futures contract
prices would move to the daily limit for several consecutive trading days with
little or no trading, thereby preventing prompt liquidation of futures
positions and subjecting some futures traders to substantial losses. In such
event, and in the event of adverse price movements, a Fund would be required to
make daily cash payments of variation margin. In such circumstances, an
increase in the value of the portion of the portfolio being hedged, if any, may
partially or completely offset losses on the futures contract. However, as
described above, there is no guarantee that the price of the securities being
hedged will, in fact, correlate with the price movements in a futures contract
and thus provide an offset to losses on the futures contract.

To ensure that transactions constitute bona fide hedges in instances
involving the purchase or sale of a futures contract, the Underlying Funds will
be required to either (i) segregate sufficient cash or high-grade liquid assets
to cover the outstanding position or (ii) cover the futures contract by either
owning the instruments underlying the futures contract or by holding a
portfolio of securities with characteristics substantially similar to the
underlying index or stock index comprising the futures contract or by holding a
separate option permitting it to purchase or sell the same futures contract.
Because of the imperfect correlation between the movements in the price of
underlying indexes or stock indexes of various futures contracts and the
movement of the price of securities in the Underlying Funds' portfolios, the
Underlying Funds will

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<PAGE> 79
periodically make adjustments to its index futures contracts positions to
appropriately reflect the relationship between the underlying portfolio and the
indexes. The Fund will not maintain short positions in index or stock index
futures contracts, options written on index or stock index futures contracts
and options written on indexes or stock indexes, if in the aggregate, the value
of these positions exceeds the current market value of its securities portfolio
plus or minus the unrealized gain or loss on those positions, adjusted for the
historical volatility relationship between the portfolio and the index
contracts.

OPTIONS ON FUTURES CONTRACTS. An option on a futures contract, as
contrasted with the direct investment in such a contract, gives the purchaser
the right, in return for the premium paid, to assume a position in the futures
contract at a specified exercise price at any time prior to the expiration date
of the option. Upon exercise of an option, the delivery of the futures
position by the writer of the option to the holder of the option will be
accompanied by delivery of the accumulated balance in the writer's futures
margin account, which represents the amount by which the market price of the
futures contract exceeds, in the case of a call, or is less than, in the case
of a put, the exercise price of the option on the futures contract. The
potential loss related to the purchase of an option on futures contracts is
limited to the premium paid for the option (plus transaction costs). Because
the price of the option to the purchaser is fixed at the point of sale, there
are no daily cash payments to reflect changes in the value of the underlying
contract; however, the value of the option does change daily and that change
would be reflected in the net asset value of the Fund holding the options.

The Underlying Funds may purchase and write put and call options on
futures contracts that are traded on a U.S. exchange or board of trade as a
hedge against changes in the value of its portfolio securities, and may enter
into closing transactions with respect to such options to terminate existing
positions. There is no guarantee that such closing transactions can be
effected.

There are several risks relating to options on futures contracts. The
ability to establish and close out positions on such options will be subject to
the existence of a liquid market. In addition, the purchase of put or call
options will be based upon predictions as to anticipated interest rate and
market trends by the Underlying Funds' Sub-Advisors, which could prove to be
inaccurate. Even if the expectations of the Sub-Advisors are correct, there
may be an imperfect correlation between the change in the value of the options
and the portfolio securities hedged.

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<PAGE> 80
STRATEGIES AVAILABLE TO STF U.S. GOVERNMENT FUND, STF CORPORATE INCOME FUND,
STF SHORT TERM HIGH QUALITY BOND FUND, STF GROWTH AND INCOME FUND, STF EMERGING
GROWTH FUND, STF GROWTH FUND AND STF INTERNATIONAL GROWTH FUND
_______________________________________________________________________________

OPTIONS ON SECURITIES. The Underlying Funds may write covered put
options and covered call options on securities, purchase put and call options
on securities and enter into closing transactions. The Underlying Funds may
not write put options with respect to more than 50% of their total assets.

Options written by a Fund will normally have expiration dates between
one and nine months from the date written. The exercise price of the options
may be below, equal to or above the market values of the underlying securities
at the times the options are written. In the case of call options, these
exercise prices are referred to as "in-the-money," "at-the-money" and
"out-of-the-money," respectively. A Fund may write (1) in-the-money call
options when its Sub-Advisor expects that the price of the underlying security
will remain flat or decline moderately during the option period, (2)
at-the-money call options when its Sub-Advisor expects that the price of the
underlying security will remain flat or advance moderately during the option
period and (3) out-of-the-money call options when its Sub-Advisor expects that
the premiums received from writing the call option plus the appreciation in the
market price of the underlying security up to the exercise price will be
greater than the appreciation in the price of the underlying security alone.
In any of the preceding situations, if the market price of the underlying
security declines and the security is sold at this lower price, the amount of
any realized loss will be offset wholly or in part by the premium received.
Out-of-the-money, at-the-money and in-the-money put options (the reverse of
call options as to the relation of exercise price to market price) may be
utilized in the same market environments as such call options described above.

So long as the obligation of the Fund as the writer of an option
continues, the Fund may be assigned an exercise notice by the broker-dealer
through which the option was sold, requiring the Fund to deliver, in the case
of a call, or take delivery of, in the case of a put, the underlying security
against payment of the exercise price. This obligation terminates when the
option expires or the Fund effects a closing purchase transaction. The Fund
can no longer effect a closing purchase transaction with respect to an option
once it has been assigned an exercise notice. To secure its obligation to
deliver the underlying security when it writes a call option, or to pay for the
underlying security when it writes a put option, the Fund will be required to
deposit in escrow the underlying security or other assets in accordance with
the rules of the Options Clearing

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<PAGE> 81
Corporation (the "Clearing Corporation") and of the securities exchange on
which the option is written.

An option may be closed out only when there exists a secondary market
for an option of the same series on a recognized securities exchange or in the
over-the-counter market. In light of this fact and current trading conditions,
the Fund expects to purchase or write call or put options issued by the
Clearing Corporation, except that options on U.S. Government securities may be
purchased or written in the over-the-counter market. Over-the-counter options
can be closed out only by agreement with the primary dealer in the transaction.
National securities exchanges on which options are traded are: The Chicago
Board Options Exchange (CBOE), The Board of Trade of the City of Chicago (CBT),
American Stock Exchange (AMEX), Philadelphia Stock Exchange (PHLX), Pacific
Stock Exchange (PSE) and the New York Stock Exchange (NYSE). Any
over-the-counter option written by a Fund will be with a qualified dealer
pursuant to an agreement under which the Fund may repurchase the option at a
formula price at which the Fund would have the absolute right to repurchase an
over-the-counter option it has sold. Such options will be considered illiquid
in an amount equal to the formula price, less the amount by which the option is
"in-the-money." In the event of the insolvency of the primary dealer, the Fund
may not be able to liquidate its position in over-the-counter options, and the
ability of the Fund to enter into closing purchase transactions on options
written by the Fund may result in a material loss to the Fund.

The Fund may realize a profit or loss upon entering into closing
transactions. In cases where the Fund has written an option, it will realize a
profit if the cost of the closing purchase transaction is less than the premium
received upon writing the original option, and will incur a loss if the cost of
the closing purchase transaction exceeds the premium received upon writing the
original option. Similarly, when the Fund has purchased an option and engages
in a closing sale transaction, the Fund will realize a profit or loss to the
extent that the amount received in the closing sale transaction is more or less
than the premium the Fund initially paid for the original option plus the
related transaction costs.

To facilitate closing transactions, the Fund will generally purchase
or write only those options for which its Sub-Advisor believes there is an
active secondary market although there is no assurance that sufficient trading
interest to create a liquid secondary market on a securities exchange will
exist for any particular option or at any particular time, and for some options
no such secondary market may exist. A liquid secondary market in an option may
cease to exist for a variety of reasons. In the past, for example, higher than
anticipated trading activity or order flow, or other unforeseen events, have at
times rendered

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<PAGE> 82
certain of the facilities of the Clearing Corporation and the securities
exchanges inadequate and resulted in the institution of special procedures,
such as trading rotations, restrictions on certain types of orders or trading
halts or suspensions in one or more options. There can be no assurance that
similar events, or events that may otherwise interfere with the timely
execution of customers' orders, will not recur. In such events, it might not
be possible to effect closing transactions in particular options. If as a
covered call option writer the Fund is unable to effect a closing purchase
transaction in a secondary market, it will not be able to sell the underlying
security until the option expires or it delivers the underlying security upon
exercise.

Securities exchanges have established limitations governing the
maximum number of calls and puts of each class which may be held or written, or
exercised within certain time periods, by an investor or group of investors
acting in concert (regardless of whether the options are written on the same or
different securities exchanges or are held, written or exercised in one or more
accounts or through one or more brokers). It is possible that the particular
Fund and other clients of Sierra Advisors and its Sub-Advisors and certain of
their affiliates may be considered to be such a group. A securities exchange
may order the liquidation of positions found to be in violation of these limits
and it may impose certain other sanctions.

In the case of options written by a Fund that are deemed covered by
virtue of the Fund's holding convertible or exchangeable preferred stock or
debt securities, the time required to convert or exchange and obtain physical
delivery of the underlying security with respect to which the Fund has written
options may exceed the time within which the Fund must make delivery in
accordance with an exercise notice. In these instances, the Fund may purchase
or temporarily borrow the underlying securities for purposes of physical
delivery. By so doing, the Fund will not bear any market risk, since the Fund
will have the absolute right to receive from the issuer of the underlying
security an equal number of shares to replace the borrowed stock. The Fund may,
however, incur additional transaction costs or interest expenses in connection
with any such purchase or borrowing.

Additional risks exist with respect to mortgage-backed U.S. Government
securities for which the Fund may write covered call options. If a Fund writes
covered call options on a mortgage-backed security, the security that it holds
as cover may, because of scheduled amortization of unscheduled prepayments,
cease to be sufficient cover. The Fund will compensate by purchasing an
appropriate additional amount of mortgage-backed securities.

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<PAGE> 83
STRATEGIES AVAILABLE TO STF GROWTH AND INCOME FUND, STF EMERGING GROWTH FUND,
STF INTERNATIONAL GROWTH FUND, STF SHORT TERM HIGH QUALITY BOND FUND AND STF
GROWTH FUND
- -------------------------------------------------------------------------------

OPTIONS ON SECURITIES INDEXES. In addition to options on securities,
the Underlying Funds may also purchase and sell call and put options on
securities indexes. Such options give the holder the right to receive a cash
settlement during the term of the option based upon the difference between the
exercise price and the value of the index.

Use of options on securities indexes also entails the risk that
trading in such options may be interrupted if trading in certain securities
included in the index is interrupted. The Fund will not purchase such options
unless its Sub-Advisor believes the market is sufficiently developed for the
risk of trading in such options to be no greater than the risk of trading in
options on securities.

Price movements in the Fund's portfolio may not correlate precisely
with movements in the level of an index and, therefore, the use of options on
securities indexes cannot serve as a complete hedge. Because options on
securities indexes require settlement in cash, the Fund may be forced to
liquidate portfolio securities to meet settlement obligations.

STRATEGIES AVAILABLE TO STF CORPORATE INCOME FUND, STF EMERGING GROWTH FUND,
STF SHORT TERM HIGH QUALITY BOND FUND, STF GROWTH AND INCOME FUND, STF GROWTH
FUND AND STF INTERNATIONAL GROWTH FUND
- -------------------------------------------------------------------------------

AMERICAN, EUROPEAN AND CONTINENTAL DEPOSITARY RECEIPTS.
The Underlying Funds may invest in the securities of foreign and domestic
issuers in the form of American Depositary Receipts ("ADRs") and European
Depositary Receipts ("EDRs"). These securities may not necessarily be
denominated in the same currency as the securities into which they may be
converted. ADRs are receipts typically issued by a U.S. bank or trust company
which evidence ownership of underlying securities issued by a foreign
corporation. EDRs, which are sometimes referred to as Continental Depositary
Receipts ("CDRs"), and are receipts issued in Europe typically by non-U.S.
banking and trust companies that evidence ownership of either foreign or U.S.
securities. Generally, ADRs, in registered form, are designed

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for use in U.S. securities markets and EDRs and CDRs, in bearer form, are
designed for use in European securities markets.

FOREIGN CURRENCY EXCHANGE TRANSACTIONS. The Underlying Funds may
engage in currency exchange transactions to protect against uncertainty in the
level of future exchange rates. The Underlying Funds' dealings in forward
currency exchange contracts will be limited to hedging involving either
specific transactions or portfolio positions. Transaction hedging is the
purchase or sale of forward foreign currency with respect to specific
receivables or payables of the Fund generally arising in connection with the
purchase or sale of its portfolio securities. Position hedging is the sale of
forward foreign currency with respect to portfolio security positions
denominated or quoted in such foreign currency. A Fund may not position hedge
with respect to a particular currency to an extent greater than the aggregate
market value (at the time of making such sale) of the securities held in its
portfolio denominated or quoted in or currently convertible into that
particular currency.

If a Fund enters into a position hedging transaction, the Trust's
custodian or sub-custodian will, except in circumstances where segregated
accounts are not required by the 1940 Act and the rules adopted thereunder,
place cash, U.S. Government Securities or high grade debt obligations in a
segregated account for the Fund in an amount at least equal to the value of the
Fund's total assets committed to the consummation of the forward contract. For
each forward foreign currency exchange contract that is used to hedge a
securities position denominated in a foreign currency, but for which the
hedging position no longer provides, in the opinion of the Sub-Advisor or the
Advisor, sufficient protection to consider the contract to be a hedge, the Fund
maintains with its custodian a segregated account of cash, U.S. Government
Securities or high grade debt obligations in an amount at least equal to the
portion of the contract that is no longer sufficiently covered by such hedge.
If the value of the securities placed in the segregated account declines,
additional cash or securities will be placed in the account so that the value
of the account will equal the amount of the Fund's unhedged exposure (in the
case of securities denominated in a foreign currency) or commitment with
respect to the contract. Hedging transactions may be made from any foreign
currency into U.S. dollars or into other appropriate currencies.

At or before the maturity of a forward contract, a Fund may either
sell a portfolio security and make delivery of the currency, or retain the
security and offset its contractual obligation to deliver the currency by
purchasing a second contract pursuant to which the Fund will obtain, on the
same maturity date, the amount of the currency that it is obligated to deliver.
If the Fund retains the portfolio security and engages in an offsetting
transaction, the Fund, at the time of execution

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of the offsetting transaction, will incur a gain or a loss to the extent that
movement has occurred in forward contract prices. Should forward prices
decline during the period between the Fund's entering into a forward contract
for the sale of currency and the date it enters into an offsetting contract for
the purchase of the currency, the Fund will realize a gain to the extent the
price of the currency it has agreed to sell exceeds the price of the currency
it has agreed to purchase. Should forward prices increase, the Fund will
suffer a loss to the extent the price of the currency it has agreed to purchase
exceeds the price of the currency it has agreed to sell.

The cost to a Fund of engaging in currency transactions with factors
such as, the currency involved, the length of the contract period and the
prevailing market conditions. Because transactions in currency exchange are
usually conducted on a principal basis, no fees or commissions are involved.
The use of forward currency contracts does not eliminate fluctuations in the
underlying prices of the securities, but it does establish a rate of exchange
that can be achieved in the future. In addition, forward currency contracts
may limit the risk of loss due to a decline in the value of the hedged currency
increase.

If a devaluation of a currency is generally anticipated, a Fund may
not be able to contract to sell the currency at a price above the devaluation
level it anticipates.

The Underlying Funds, in addition, may combine forward currency
exchange contracts with investments in securities denominated in other
currencies in an attempt to create a combined investment position, the overall
performance of which will be similar to that of a security denominated in a
Fund's underlying currency. For instance, a Fund could purchase a U.S. dollar-
denominated security and at the same time enter into a forward currency
exchange contract to exchange U.S. dollars for its underlying currency at a
future date. By matching the amount of U.S. dollars to be exchanged with the
anticipated value of the U.S. dollar-denominated security, the Fund may be
able to "lock in" the foreign currency value of the security and adopt a
synthetic investment position whereby the Fund's overall investment return from
the combined position is similar to the return from purchasing a foreign
currency-denominated instrument.

There is a risk in adopting a synthetic investment position. It is
impossible to forecast with absolute precision what the market value of a
particular security will be at any given time. If the value of a security
denominated in the U.S. dollar or other foreign currency is not exactly matched
with a Fund's obligation under a forward currency exchange contract on the date
of maturity, the Fund may be exposed to some risk of loss from fluctuations in
that currency. Although each Fund's Sub-Advisor

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will attempt to hold such mismatching to a minimum, there can be no assurance
that the Fund's Sub-Advisor will be able to do so.

Although the foreign currency market is not believed to be necessarily
more volatile than the market in other commodities, there is less protection
against defaults in the forward trading to currencies than there is in trading
such currencies on an exchange because such forward contracts are not
guaranteed by an exchange or clearing house. The Commodity Futures Trading
Commission has indicated that it may assert jurisdiction over forward contracts
in foreign currencies and attempt to prohibit certain entities from engaging in
such transactions. In the event that such prohibition included the Fund, it
would cease trading such contracts. Cessation of trading might adversely
affect the performance of a Fund.

STRATEGIES AVAILABLE TO STF GROWTH FUND, STF INTERNATIONAL GROWTH FUND AND STF
SHORT TERM HIGH QUALITY BOND FUND
- -------------------------------------------------------------------------------

OPTIONS ON FOREIGN CURRENCIES. The Underlying Funds may purchase and
write put and call options on foreign currencies for the purpose of hedging
against declines in the U.S. dollar value of foreign currency-denominated
portfolio securities and against increases in the U.S. dollar cost of such
securities to be acquired. Such hedging includes cross hedging and proxy
hedging where the options to buy or sell currencies involve other currencies
besides the U.S. dollar. As one example, a decline in the U.S. dollar value
of a foreign currency in which securities are denominated will reduce the U.S.
dollar value of the securities, even if their value in the foreign currency
remains constant. To protect against diminutions in the value of securities
held by a Fund in a particular foreign currency, the Fund may purchase put
options on the foreign currency. If the value of the currency does decline,
the Fund will have the right to sell the currency for a fixed amount in U.S.
dollars and will thereby offset, in whole or in part, the adverse effect on its
portfolio that otherwise would have resulted. When an increase in the U.S.
dollar value of a currency in which securities to be acquired are denominated
is projected, thereby increasing the cost of the securities, the Fund
conversely may purchase call options on the currency. The purchase of such
options could offset, at least partially, the effects of the adverse movements
in exchange rates. As in the case of other types of options, however, the
benefit to the Fund deriving from purchases of foreign currency options will be
reduced by the amount of the premium and related transaction costs. In
addition, if currency exchange rates do not move in the direction, or to the
extent anticipated, the Fund could sustain losses on transactions in foreign
currency options that would require it to forego a portion or all of the
benefits of advantageous changes in the rates.

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<PAGE> 87
The Underlying Funds may also write covered call options on foreign
currencies for the types of hedging purposes described above. As one example,
when a Fund anticipates a decline in the U.S. dollar value of foreign
currency-denominated securities due to adverse fluctuations in exchange rates
it could, instead of purchasing a put option, write a covered call option on
the relevant currency. If the expected decline occurs, the option will most
likely not be exercised, and the diminution in value of portfolio securities
will be offset by the amount of the premium received. As in the case of other
types of options, however, the writing of a foreign currency option will
constitute only a partial hedge up to the amount of the premium, and only if
rates move in the expected direction. If this does not occur, the option may
be exercised and the Fund would be required to purchase or sell the underlying
currency at a loss that may not be offset by the amount of the premium.
Through the writing of options on foreign currencies, the Fund may also be
required to forego all or a portion of the benefits that might otherwise have
been obtained from favorable movements in exchange rates.

A call option written on a foreign currency by a Fund is "covered" if
the Fund owns the underlying foreign currency covered by the call or has an
absolute and immediate right to acquire the foreign currency without additional
cash consideration (or for additional cash consideration held in a segregated
account by Boston Safe, or by a designated sub-custodian) upon conversion or
exchange of other foreign currency held by the Fund. A call option also is
covered if the Fund has a call on the same foreign currency and in the same
principal amount as the call written when the exercise price of the call held
(1) is equal to or less than the exercise price of the call written or (2) is
greater than the exercise price of the call written if the difference is
maintained by the Fund in cash, U.S. Government Securities and other high-grade
liquid debt securities in a segregated account with Boston Safe or with a
designated sub-custodian.

Options on foreign currencies traded on national securities exchanges
are within the jurisdiction of the SEC, as are other securities traded on those
exchanges. As a result, many of the projections provided to traders on
organized exchanges will be available with respect to those transactions. In
particular, all foreign currency option positions entered into on a national
securities exchange are cleared and guaranteed by the Options Clearing
Corporation (the "OCC"), thereby reducing the risk of counterpart default.
Further, a liquid secondary market in options traded on a national securities
exchange may exist, potentially permitting the Fund to liquidate open positions
at a profit prior to their exercise or expiration, or to limit losses in the
event of adverse market movements.

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<PAGE> 88
The purchase and sale of exchange-traded foreign currency options are
subject to the risks of the availability of a liquid secondary market described
above, as well as the risks regarding adverse market movements, margining of
options written, the nature of the foreign currency market, possible
intervention by governmental authorities and the effects of other political and
economic events. In addition, exercise and settlement of exchange-traded
foreign currency options must be made exclusively through the OCC, which has
established banking relationships in applicable foreign countries for this
purpose. As a result, the OCC may, if it determines that foreign governmental
restrictions or taxes would prevent the orderly settlement of foreign currency
option exercises, or would result in undue burdens on the OCC or its clearing
member, impose special procedures on exercise and settlement, such as technical
changes in the mechanics of delivery of currency, the fixing of dollar
settlement prices or prohibitions on exercise.

SPECIAL CONSIDERATIONS RELATING TO STF INTERNATIONAL GROWTH FUND, STF EMERGING
GROWTH FUND AND STF GROWTH FUND

SECURITIES IN DEVELOPING COUNTRIES. Although most of the investments
of the STF International Growth Fund, STF Emerging Growth Fund and STF Growth
Fund are made in securities of companies in (or governments of) developed
countries, up to 25% of the total assets of the STF International Growth Fund,
up to 5% of the total assets of the STF Emerging Growth Fund and up to 5% of
the total assets of the STF Growth Fund may be invested in securities of
companies in (or governments of) developing or emerging countries (sometimes
referred to as "emerging markets") as well. A developing or emerging country
is generally considered by the international financial community, in the
opinion of Sierra Advisors or the Sub-Advisor of the STF International Growth
Fund, STF Emerging Growth Fund or STF Growth Fund, to be a country that is in
the initial stages of its industrialization cycle. Investing in the equity and
fixed-income markets of developing or emerging countries involves exposure
to economic structures that are generally less diverse and mature, and to
political systems that can be expected to have less stability than those of
developed countries. Historical experience indicates that the markets of
developing or emerging countries have been more volatile than the markets of
the more mature economies of developed countries; however, such markets often
have provided higher rates of return to investors.

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STRATEGY AVAILABLE TO STF CORPORATE INCOME FUND, STF GROWTH FUND, STF GROWTH
AND INCOME FUND, STF EMERGING GROWTH FUND, STF INTERNATIONAL GROWTH FUND, STF
GLOBAL MONEY FUND, STF U.S. GOVERNMENT MONEY FUND, STF SHORT TERM HIGH QUALITY
BOND FUND AND SPIF

LENDING OF PORTFOLIO SECURITIES. Each of the Underlying Funds will
adhere to the following conditions whenever its portfolio securities are
loaned: (1) the Fund must receive at least 100% cash collateral or equivalent
securities from the borrower; (2) the borrower must increase the collateral
whenever the market value of the securities rises above the level of the
collateral; (3) the Fund must be able to terminate the loan at any time; (4)
the Fund must receive reasonable interest on the loan, as well as any
dividends, interest or other distributions on the loaned securities and any
increase in market value; (5) the Fund may pay only reasonable custodian fees
in connection with the loan; and (6) voting rights on the loaned securities may
pass to the borrower, provided that if a material event adversely affecting the
investment occurs, the Fund's Board of Trustees must terminate the loan and
regain the right to vote the securities. From time to time, the Underlying
Funds may pay a part of the interest earned from the investment of the
collateral received for securities loaned to the borrower and/or a third party
that is unaffiliated with the Fund and that is acting as a "finder". The
Underlying Funds will not lend more than 20% of their respective total assets.

SPECIAL CONSIDERATIONS RELATING TO STF EMERGING GROWTH FUND AND STF GROWTH FUND

LOWER-RATED SECURITIES. The STF Growth and STF Emerging Growth Funds
each may invest up to 35% of the net assets of the Fund, respectively, in
non-investment grade securities (rated Ba and lower by Moody's and BB and lower
by Standard & Poor's) or unrated securities. Such securities carry a high
degree or risk (including the possibility of default or bankruptcy of the
issuer of such securities), generally involve greater volatility of price and
risk of principal and income, and may be less liquid, than securities in the
higher rating categories and are considered speculative. See the Appendix to
this Statement of Additional Information for a more complete description of the
ratings assigned by ratings organizations and their respective characteristics.

The current economic downturn disrupted the high yield market and
impaired the ability of issuers to repay principal and interest. Also, an
increase in interest rates could further adversely affect the value of such
obligations held by the Fund. Prices and yields of high yield securities will
fluctuate over time and may affect the Fund's net asset value. In addition,
investments in high yield zero coupon or pay-in-kind bonds, rather than
income-bearing high yield securities, may be more

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speculative and may be subject to greater fluctuations in value due to changes
in interest rates.

The trading market for high yield securities may be thin to the extent
that there is no established retail secondary market or because of a decline in
the value of such securities. A thin trading market may limit the ability of
the Trustees to accurately value high yield securities in the Fund's portfolio
and to dispose of those securities. Adverse publicity and investor perceptions
may decrease the value and liquidity of high yield securities. These
securities may also involve special registration responsibilities, liabilities
and costs.

Credit quality in the high yield securities market can change suddenly
and unexpectedly, and even recently-issued credit ratings may not fully reflect
the actual risks posed by a particular high yield security. For these reasons,
it is the policy of the Sub-Advisor of each of the Funds not to rely
exclusively on ratings issued by established credit rating agencies, but to
supplement such ratings with its own independent and ongoing review of credit
quality. The achievement of the Fund's investment objectives by investment in
such securities may be more dependent on its Sub-Advisor's credit analysis than
is the case for higher quality bonds. Should the rating of a portfolio
security be downgraded the Fund's Sub-Advisor will determine whether it is in
the best interest of the Fund to retain or dispose of the security.

Prices for below investment-grade securities may be affected by
legislative and regulatory developments. For example, new federal rules
require savings and loan institutions to gradually reduce their holdings of
this type of security. Also, Congress from time to time has considered
legislation which would restrict or eliminate the corporate tax deduction for
interest payments on these securities and would regulate corporate
restructurings. Such legislation may significantly depress the prices of
outstanding securities of this type.

STRATEGY AVAILABLE TO STF U.S. GOVERNMENT FUND, STF CORPORATE INCOME FUND AND
STF SHORT TERM HIGH QUALITY BOND FUND

DOLLAR ROLL TRANSACTIONS. In order to seek a high level of current
income, the Funds may enter into dollar rolls or "covered rolls" in which the
Fund sells securities for delivery in the current month and simultaneously
contracts to repurchase, typically in 30 or 60 days, substantially similar
(same type, coupon and maturity) securities on a specified future date. During
the roll period, the Fund forgoes principal and interest paid on such
securities. The Fund is compensated by the difference between the current
sales price and the forward price for the future purchase (often referred to as
the "drop") as well as by the interest earned on the cash proceeds of the
initial

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sale. A "covered roll" is a specific type of dollar roll for which there is an
offsetting cash position or cash equivalent securities position that matures on
or before the forward settlement date of the dollar roll transaction. As used
herein the term "dollar roll" refers to dollar rolls that are not "covered
rolls." At the end of the roll commitment period, the Fund may or may not take
delivery of the securities the Fund has contracted to purchase.

STRATEGIES AVAILABLE TO THE SPIF

CERTAIN CHARACTERISTICS OF SENIOR LOAN INTERESTS

The SPIF will invest in participations ("Participations") in Senior
Loans, will purchase assignments ("Assignments") of portions of Senior Loans
from third parties and may act as one of the group of Lenders originating a
Senior Loan (an "Original Lender").

It is anticipated that the proceeds of the Senior Loans in which the
SPIF will acquire interests primarily will be used to finance leveraged
buyouts, recapitalizations, mergers, acquisitions, stock repurchases, and, to a
lesser extent, to finance internal growth and for other corporate purposes of
Borrowers. The SPIF currently does not intend to acquire interests in Senior
Loans the proceeds of which would be used primarily to finance construction or
real estate development projects. Senior Loans have the most senior position
in a Borrower's capital structure, although some Senior Loans may hold an equal
ranking with other senior securities of the Borrower. The capital structure of
Borrowers may include Senior Loans, senior and junior subordinated debt (which
may include "junk bonds"), preferred stock and common stock issued by the
Borrower, typically in descending order of seniority with respect to claims on
the Borrower's assets. Senior Loans generally are secured by specific
collateral, which may include guarantees. In connection

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with the acquisition of collateralized Senior Loans, the SPIF may invest up to
5% of its total assets in Senior Loans which are not secured by any collateral.
Such unsecured Senior Loans would constitute an interim financing intended to
be refinanced through, in whole or in part, a collateralized Senior Loan. In
the event that the SPIF invests a portion of its assets in Senior Loans that
are not secured by specific collateral, the SPIF will not enjoy the benefits
associated with collateralization with respect to such Senior Loans and such
Senior Loans may pose a greater risk of nonpayment of interest or loss of
principal than do collateralized Senior Loans.

As discussed below, the SPIF may also acquire warrants and equity
securities issued by the Borrower or its affiliates as part of a package of
investments in the Borrower or its affiliates. Warrants and equity securities
will not be treated as Senior Loans and thus assets invested in such securities
will not count toward the 80% of the SPIF's total assets that normally will be
invested in Senior Loans. The SPIF will acquire such interests in unsecured
Senior Loans, warrants and equity securities only as an incident to the
intended purchase of interests in collateralized Senior Loans. Loan Agreements
may also include various restrictive covenants designed to limit the activities
of the Borrower in an effort to protect the right of the Lenders to receive
timely payments of interest on and repayment of principal of the Senior Loans.
In order to borrow money pursuant to collateralized Senior Loans, a Borrower
will frequently, for the term of the Senior Loan, pledge as collateral assets,
including but not limited to, trademarks, accounts receivable, inventory,
buildings, real estate, franchises, and common and preferred stock in its
subsidiaries. In addition, in the case of some Senior Loans, there may be
additional collateral pledged in the form of guarantees by and/or securities of
affiliates of the Borrowers. In certain instances, a Senior Loan may be
secured only by stock in the Borrower or its subsidiaries. Such collateral may
consist of assets that may not be readily liquidated, and there is no assurance
that the liquidation of such assets would satisfy fully a Borrower's
obligations under a Senior Loan.

Restrictive covenants may include mandatory prepayment provisions
arising from excess cash flows and typically include restrictions on dividend
payments, specific mandatory minimum financial ratios, limits on total debt and
other financial tests. Breach of such covenants, if not waived by the Lenders,
is generally an event of default under the applicable Loan Agreement and may
give the Lenders the right to accelerate principal and interest payments. The
Advisor will consider the terms of such restrictive covenants in deciding
whether to invest in Senior Loans for the SPIF's portfolio. When the SPIF
holds a Participation in a Senior Loan it may not have the right to vote to
waive enforcement of any restrictive covenant breached by a

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<PAGE> 93
Borrower. Lenders voting in connection with a potential waiver of a
restrictive covenant may have interests different from those of the SPIF and
such Lenders may not consider the interests of the SPIF in connection with
their votes.

Senior Loans in which the SPIF will invest generally pay interest at
rates which are periodically redetermined by reference to a base lending rate
plus a premium. As a result Lenders will pay more than the Prime Rate to the
SPIF on their Senior Loans. These base lending rates are generally the Prime
Rate, LIBOR, the CD rate or other base lending rates used by commercial
lenders. The Prime Rate quoted by a major U.S. bank is the interest rate at
which such bank is willing to lend U.S. dollars to its most creditworthy
borrowers. LIBOR, as provided for in Loan Agreements, is an average of the
interest rates quoted by several designated banks as the rates at which such
banks would offer to pay interest to major financial institutional depositors
in the London interbank market on U.S. dollar-denominated deposits for a
specified period of time. The CD rate, as generally provided for in Loan
Agreements, is the average rate paid on large certificates of deposit traded in
the secondary market.

At least 80% of the SPIF's total assets normally will be invested in
Senior Loans. In normal market conditions, at least 65% of the SPIF's assets
will be invested in Senior Loans which, at the time of the SPIF's initial
investment in such Senior Loans, provide the SPIF with a rate of return which
was at least equal to the Prime Rate existing on the date of such initial
investment. The SPIF is not subject to any restrictions with respect to the
maturity of Senior Loans held in its portfolio. It is currently anticipated
that the SPIF's assets invested in Senior Loans will consist of Senior Loans
with stated maturities of between three and seven years, inclusive, and with
rates of interest which are periodically reset with reset periods typically
ranging from 30 days to one year. Investment in Senior Loans with longer
interest rate redetermination periods may increase fluctuations in the SPIF's
net asset value as a result of changes in interest rates. The Senior Loans in
the SPIF's portfolio will at all times have a dollar-weighted average time
until the next interest rate redetermination of 90 days or less. As a result,
as short-term interest rates increase, interest payable to the SPIF from its
investments in Senior Loans should increase, and as short-term interest rates
decrease, interest payable to the SPIF from its investments in Senior Loans
should decrease. The amount of time required to pass before the SPIF will
realize the effects of changing short-term market interest rates on its
portfolio will vary with the dollar-weighted average time until the next
interest rate redetermination on the Senior Loans in the SPIF's portfolio. The
SPIF may utilize certain investment practices to, among other things, shorten
the effective interest rate redetermination period of Senior Loans in

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its portfolio. In such event, the SPIF will consider such shortened period to
be the interest rate redetermination period of the Senior Loan; provided,
however, that the SPIF will not invest in Senior Loans which permit the
Borrower to select an interest rate redetermination period in excess of one
year. Because most Senior Loans in the SPIF's portfolio will be subject to
mandatory and/or optional prepayment and there may be significant economic
incentives for a Borrower to prepay its loans, prepayments of Senior Loans in
the SPIF's portfolio may occur. Accordingly, the actual remaining maturity of
the SPIF's portfolio invested in Senior Loans may vary substantially from the
average stated maturity of the Senior Loans held in the SPIF's portfolio. As a
result of expected prepayments from time to time of Senior Loans in the SPIF's
portfolio, the SPIF estimates that the actual average maturity of the Senior
Loans held in its portfolio will be approximately 18-24 months.

When interest rates decline, the value of a portfolio invested in
fixed-rate obligations can be expected to rise. Conversely, when interest
rates rise, the value of a portfolio invested in fixed-rate obligations can be
expected to decline. Although the SPIF's net asset value will vary, the SPIF's
management expects the SPIF's policy of acquiring interests in floating or
variable rate Senior Loans to minimize fluctuations in net asset value as a
result of changes in interest rates. Accordingly, the SPIF's management
expects the value of the SPIF's portfolio to fluctuate significantly less than
a portfolio of fixed-rate, longer term obligations as a result of interest rate
changes. However, changes in prevailing interest rates can be expected to
cause some fluctuation in the SPIF's net asset value. In addition to changes
in interest rates, changes in the credit quality of Borrowers will also affect
the SPIF's net asset value. Further, a serious deterioration in the credit
quality of a Borrower could cause a prolonged or permanent decrease in the
SPIF's net asset value.

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<PAGE> 95
subordinated obligations. These difficulties could detract from the Borrower's
perceived creditworthiness or its ability to obtain financing to cover
short-term cash flow needs and may face the Borrower into bankruptcy or other
forms of credit restrictions. The SPIF will invest only in those Senior Loans
with respect to which the Borrower, in the opinion of the Advisor, demonstrates
certain of the following characteristics: sufficient cash flow to service
debt; adequate liquidity, successful operating history; strong competitive
position; experienced management; and, with respect to collateralized Senior
Loans, collateral; coverage that equals or exceeds the outstanding principal
amount of the Senior Loan. In addition, the Advisor will consider, and may
rely in part, on the analyses performed by the Agent and other Lenders,
including such persons' determinations with respect to collateral securing a
Senior Loan.

The SPIF may invest up to 100% of its assets in Participations. The
selling Lenders and other persons interpositioned between such Lenders and the
SPIF with respect to such Participations will likely conduct their principal
business activities in the banking, finance and financial services industries.
Although, as discussed below, the SPIF has taken measures which it believes
significantly reduce its exposure to any risks incident to such policy, the
SPIF may be more susceptible than an investment company without such a policy
to any single economic, political or regulatory occurrence affecting such
industries. Persons engaged in such industries may be more susceptible than
are persons engaged in some other industry to, among other things, fluctuations
in interest rates, changes in the Federal Open Market Committee's monetary
policy, governmental regulations concerning such industries and concerning
capital raising activities generally and fluctuations in the financial markets
generally.

Participations by the SPIF in a Lender's portion of a Senior Loan
typically result in the SPIF having a contractual relationship only with such
Lender, not with the Borrower. The SPIF has the right to receive payments of
principal, interest and any fees to which it is entitled only from the Lender
selling the Participation and only upon receipt by such Lender of such payments
from the Borrower. In connection with purchasing Participations, the SPIF
generally will have no right to enforce compliance by the Borrower with the
terms of the Loan Agreement, nor any rights with respect to any funds acquired
by other Lenders through set-off against the Borrower and the SPIF may not
directly benefit from the collateral supporting the Senior Loan in which it has
purchased the Participation. As a result, the SPIF may assume the credit risk
of both the Borrower and the Lender selling the Participation. In the event of
the insolvency of the Lender selling a Participation, the SPIF may be treated
as a general creditor of such Lender, and may not benefit from any set-off
between such Lender and the Borrower. The SPIF has taken

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the following measures in an effort to minimize such risks. The SPIF will only
acquire Participations if the Lender selling the Participation, and any other
persons interpositioned between the SPIF and the Lender, (i) at the time of
investment has outstanding debt or deposit obligations rated investment grade
(BBB or A-3 or higher by Standard & Poor's Ratings Group ("S&P") or Baa or P-3
or higher by Moody's Investors Service ("Moody's") or determined by the
Advisor to be of comparable quality and (ii) has entered into an agreement
which provides for the holding of assets in safekeeping for, or the prompt
disbursement of assets to, the SPIF. Long-term debt rated BBB by S&P is
regarded by S&P as having adequate capacity to pay interest and repay principal
and debt rated Baa by Moody's is regarded by Moody's as a medium grade
obligation, i.e., it is neither highly protected nor poorly secured.
Commercial paper rated A-1 by S&P indicates that the degree of safety regarding
timely payment is considered by S&P to be either overwhelming or very strong
and issues of commercial paper rated Prime-1 by Moody's are considered by
Moody's to have a superior ability for repayment of senior short-term debt
obligations. The SPIF ordinarily will purchase a Participation only if, at the
time of such purchase, the SPIF believes that the party from whom it is
purchasing such Participation is retaining an interest in the underlying Senior
Loan. In the event that the SPIF does not so believe, it will only purchase
such a Participation if, in addition to the requirements set forth above, the
party from whom the SPIF is purchasing such Participation (i) is a bank, a
member of a national securities exchange or other entity designated in the
Investment Company Act of 1940, as amended, as qualified to serve as a
custodian for a registered investment company and (ii) has been approved as a
custodian by the Board of Trustees of the SPIF (a "Designated Custodian").

The SPIF may also purchase Assignments from Lenders. The purchaser of
an Assignment typically succeeds to all the rights and obligations under the
Loan Agreement of the assigning Lender and becomes a Lender under the Loan
Agreement with the same rights and obligations as the assigning Lender.
Assignments are, however, arranged through private negotiations between
potential assignees and potential assignors, and the rights and obligations
acquired by the purchaser of an Assignment may differ from, and be more limited
than, those held by the assigning Lender.

When the SPIF is an Original Lender originating a Senior Loan it may
share in a fee paid to the Original Lenders. The SPIF will never act as the
Agent or principal negotiator or administrator of a Senior Loan. When the SPIF
is a Lender, it will have a direct contractual relationship with the Borrower,
may enforce compliance by the Borrower with the terms of the Loan Agreement and
may have rights with respect to any funds acquired by other Lenders through
set-off. Lenders also have full voting and consent rights under the applicable
Loan Agreement. Action

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subject to Lender vote or consent generally requires the vote or consent of the
holders of some specified percentage of the outstanding principal amount of the
Senior Loan. Certain decisions, such as reducing the amount or increasing the
time for payment of interest on or repayment of principal of a Senior Loan, or
releasing collateral therefor, frequently require the unanimous vote or consent
of all Lenders affected.

The SPIF will purchase an Assignment or act as a Lender with respect
to a syndicated Senior Loan only where the Agent with respect to such Senior
Loan at the time of investment has outstanding debt or deposit obligations
rated investment grade (BBB or A-3 or higher by S&P or Baa or P-3 or higher by
Moody's) or determined by the Advisor to be of comparable quality. In
addition, the SPIF will purchase a Participation only where the Lender selling
such Participation, and any other person interpositioned between such Lender
and the SPIF at the time of investment have outstanding debt obligations rated
investment grade or determined by the Advisor to be of comparable quality.
Further, the SPIF will not purchase interests in Senior Loans unless such
Agent, Lender or interpositioned person has entered into an agreement which
provides for the prompt disbursement of assets to the SPIF.

Loan Agreements typically provide for the termination of the Agent's
agency status in the event that it fails to act as required under the relevant
Loan Agreement, becomes insolvent, enters FDIC receivership, or if not FDIC
insured, enters into bankruptcy. Should such an Agent, Lender or assignor with
respect to an Assignment interpositioned between the SPIF and the Borrower
become insolvent or enter FDIC receivership or bankruptcy, any interest in the
Senior Loan of such person and any loan payment held by such person for the
benefit of the SPIF should not be included in such person's estate. If,
however, any such amount were included in such person's estate, the SPIF would
incur certain costs and delays in realizing payment or could suffer a loss of
principal and/or interest. In such event, the SPIF could experience a decrease
in net asset value.

The SPIF may be required to pay and may receive various fees and
commissions in connection with purchasing, selling and holding interests in
Senior Loans. The fees normally paid by Borrowers may include three types:
facility fees, commitment fees and prepayment penalties. Facility fees are
paid to Lenders upon origination of a Senior Loan. Commitment fees are paid to
Lenders on an ongoing basis based upon the undrawn portion committed by the
Lenders of the underlying Senior Loan. Lenders may receive prepayment
penalties when a Borrower prepays all or part of a Senior Loan. The SPIF will
receive these fees directly from the Borrower if the SPIF is an Original
Lender, or, in the case of commitment fees and prepayment penalties, if the
SPIF acquires an interest in a Senior Loan by way of Assignment.

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Whether or not the SPIF receives a facility fee from the Lender in the case of
an Assignment, or any fees in the case of a Participation, depends upon
negotiations between the SPIF and the Lender selling such interests. When the
SPIF is an assignee, it may be required to pay a fee, or forgo a portion of
interest and any fees payable to it, to the Lender selling the Assignment.
Occasionally, the assignor will pay a fee to the assignee based on the portion
of the principal amount of the Senior Loan which is being assigned. A Lender
selling a Participation to the SPIF may deduct a portion of the interest and
any fees payable to the SPIF as an administrative fee prior to payment thereof
to the SPIF. The SPIF may be required to pay over or pass along to a purchaser
of an interest in a Senior Loan from the SPIF a portion of any fees that the
SPIF would otherwise be entitled to.

Pursuant to the relevant Loan Agreement, a Borrower may be required in
certain circumstances, and may have the option at any time, to prepay the
principal amount of a Senior Loan, often without incurring a prepayment
penalty. Because the interest rates on Senior Loans are periodically
redetermined at relatively short intervals, the SPIF and the Advisor believe
that the prepayment of, and subsequent reinvestment by the SPIF in, Senior
Loans will not have a materially adverse impact on the yield on the SPIF's
portfolio and may have a beneficial impact on income due to receipt of
prepayment penalties, if any, and any facility fees earned in connection with
reinvestment.

A Lender may have certain obligations pursuant to a Loan Agreement,
which may include the obligation to make additional loans in certain
circumstances. The SPIF currently intends to reserve against such contingent
obligations by segregating sufficient investments in high quality short-term,
liquid investments. The SPIF will not purchase interests in Senior Loans that
would require the SPIF to make any such additional loans if such additional
loan commitments would exceed 20% of the SPIF's total assets or would cause the
SPIF to fail to meet the diversification requirements set forth under the
heading "Investment Restrictions."

During normal market conditions, the SPIF may invest up to 20% of its
total assets in (i) high quality, short-term debt securities with remaining
maturities of one year or less (including assets maintained by the SPIF as a
reserve against any additional loan commitments) and (ii) warrants, equity
securities and, in certain limited circumstances discussed above, junior debt
securities acquired in connection with the SPIF's investments in Senior Loans.
If the Advisor determines that market conditions temporarily warrant a
defensive investment policy, the SPIF may invest, subject to its ability to
liquidate its relatively illiquid portfolio of Senior Loans, up to 100% of its
assets in cash and such high quality, short-term debt securities. The SPIF
will acquire such warrants and equity

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securities only as an incident to the purchase or intended purchase of
interests in collateralized Senior Loans. Warrants and equity securities will
not qualify as assets required to be maintained as a reserve against additional
loan commitments. Although the SPIF generally will acquire interests in
warrants and equity securities only when the Advisor believes that the relative
value being given by the SPIF in exchange for such interests is substantially
outweighed by the potential value of such instruments, investment in warrants
and equity securities entail certain risks in addition to those associated with
investments in Senior Loans. Warrants and equity securities have a subordinate
claim on a Borrower's assets as compared with debt securities, and junior debt
securities have a subordinate claim on such assets as compared with Senior
Loans. As such, the values of warrants and equity securities generally are
more dependent on the financial condition of the Borrower and less dependent on
fluctuations in interest rates than are the values of many debt securities.
The values of warrants, equity securities and junior debt securities may be
more volatile than those of Senior Loans and thus may have an adverse impact on
the ability of the SPIF to minimize fluctuations in its net asset value.

SPECIAL RISK CONSIDERATIONS

On behalf of the several Lenders, the Agent generally will be required
to administer and manage the Senior Loan and, with respect to collateralized
Senior Loans, to service or monitor the collateral. In this connection, the
valuation of assets pledged as collateral will reflect market value and the
Agent may rely on independent appraisals as to the value of specific
collateral. The Agent, however, may not obtain an independent appraisal as to
the value of assets pledged as collateral in all cases. The SPIF normally will
rely primarily on the Agent (where the SPIF is an Original Lender or owns an
Assignment) or the selling Lender (where the SPIF owns a Participation) to
collect principal of and interest on a Senior Loan. Furthermore, the SPIF
usually will rely on the Agent (where the SPIF is an Original Lender or owns an
Assignment) or the selling Lender (where the SPIF owns a Participation) to
monitor compliance by the Borrower with the restrictive covenants in the Loan
Agreement and notify the SPIF of any adverse change in the Borrower's financial
condition or any declaration of insolvency. Collateralized Senior Loans will
frequently be secured by all assets of the Borrower that qualify as collateral,
which may include common stock of the Borrower or its subsidiaries.
Additionally, the terms of the Loan Agreement may require the Borrower to
pledge additional collateral to secure the Senior Loan, and enable the Agent,
upon proper authorization of the Lenders, to take possession of and liquidate
the collateral and to distribute the liquidation proceeds pro rata among the
Lenders. If the terms of a Senior Loan do not require the Borrower to pledge
additional collateral in the event of a decline in the value of the original
collateral, the SPIF

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will be exposed to the risk that the value of the collateral will not at all
times equal or exceed the amount of the Borrower's obligations under the Senior
Loan. Lenders that have sold Participation interests in such Senior Loan will
distribute liquidation proceeds received by the Lenders pro rata among the
holders of such Participations. The Advisor will also monitor these aspects of
the SPIF's investments and, where the SPIF is an Original Lender or owns an
Assignment, will be directly involved with the Agent and the other Lenders
regarding the exercise of credit remedies. Senior Loans, like other corporate
debt obligations, are subject to the risk of non-payment of scheduled interest
or principal. Such non-payment would result in a reduction of income to the
SPIF, a reduction in the value of the Senior Loan experiencing non-payment and
a potential decrease in the net asset value of the SPIF. Although, with
respect to collateralized Senior Loans, the SPIF generally will invest only in
Senior Loans that the Advisor believes are secured by specific collateral which
may include guarantees, the value of which exceeds the principal amount of the
Senior Loan at the time of initial investment, there can be no assurance that
the liquidation of any such collateral would satisfy the Borrower's obligation
in the event of non-payment of scheduled interest or principal payments, or
that such collateral could be readily liquidated. In the event of bankruptcy
of a Borrower, the SPIF could experience delays or limitations with respect to
its ability to realize the benefits of the collateral securing a Senior Loan.
To the extent that a Senior Loan is collateralized by stock in the Borrower or
its subsidiaries, such stock may lose all or substantially all of its value in
the event of bankruptcy of the Borrower. The Agent generally is responsible
for determining that the Lenders have obtained a perfected security interest in
the collateral securing the Senior Loan. In the event that the SPIF does not
believe that a perfected security interest has been obtained with respect to a
collateralized Senior Loan, the SPIF will only obtain an interest in such
Senior Loan if the Agent is a Designated Custodian. Some Senior Loans in which
the SPIF may invest are subject to the risk that a court, pursuant to
fraudulent conveyance or other similar laws, could subordinate such Senior
Loans to presently existing or future indebtedness of the Borrower or take
other action detrimental to the holders of Senior Loans, such as the SPIF,
including, under certain circumstances, invalidating such Senior Loans.
Lenders commonly have certain obligations pursuant to the Loan Agreement, which
may include the obligation to make additional loans or release collateral in
certain circumstances.

Senior Loans in which the SPIF will invest generally will not be rated
by a nationally recognized statistical rating organization, will not be
registered with the SEC or any state securities commission and will not be
listed on any national securities exchange. Although the SPIF will generally
have access to financial and other information made available to the

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Lenders in connection with Senior Loans, the amount of public information
available with respect to Senior Loans will generally be less extensive than
that available for rated, registered and/or exchange listed securities. As a
result, the performance of the SPIF and its ability to meet its investment
objective is more dependent on the analytical ability of the Advisor than would
be the case for an investment company that invests primarily in rated,
registered and/or exchange listed securities.

Senior Loans are, at present, 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. Any secondary market
purchases and sales of Senior Loans generally are conducted in private
transactions between buyers and sellers. Senior Loans are thus relatively
illiquid, which illiquidity may impair the SPIF'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 SPIF 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 SPIF
has no limitation on the amount of its assets which may be invested in
securities which are not readily marketable or are subject to restrictions on
resale. The substantial portion of the SPIF's assets invested in relatively
illiquid Senior Loan interests may restrict the ability of the SPIF 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 SPIF and holders of Common Shares.
However, many of the Senior Loans in which the SPIF 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 SPIF's operations
require cash, such as when the SPIF tenders for its Common Shares, and may
result in the SPIF borrowing to meet short-term cash requirements.

To the extent that legislation or state or federal regulators that
regulate certain financial institutions impose additional requirements or
restrictions with respect to the ability of such institutions to make loans in
connection with highly leveraged transactions, the availability of Senior Loan
interests for investment by the SPIF may be adversely affected. In addition,
such requirements or restrictions may reduce or eliminate sources of financing
for certain Borrowers. Further, to the extent that legislation or federal or
state regulators that regulate certain financial institutions require such
institutions to dispose of Senior Loan interests relating to highly leveraged
transactions or subject such Senior Loan interests to increased regulatory
scrutiny, such financial

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institutions may determine to sell such Senior Loan interests in a manner that
results in a price which, in the opinion of the Advisor, is not indicative of
fair value. Were the SPIF to attempt to sell a Senior Loan interest at a time
when a financial institution was engaging in such a sale with respect to such
Senior Loan interest, the price at which the SPIF could consummate such a sale
might be adversely affected.

The SPIF may use various investment practices that involve special
considerations including engaging in interest rate and other hedging
transactions, lending its portfolio securities, entering into when-issued and
delayed delivery transactions and entering into repurchase and reverse
repurchase agreements. For further discussion of these practices and
associated special considerations, see "Investment Practices and Special Risks"
in the Prospectus.

INVESTMENT RESTRICTIONS OF THE FUNDS

The following investment restrictions have been adopted by the Trust
with respect to the Funds as fundamental policies. A fundamental policy may
not be changed without the vote of a majority of the outstanding voting
securities of the Company, as defined in the 1940 Act. Majority is defined in
the 1940 Act as the lesser of (a) 67% or more of the shares present at a
Company meeting, if the holders of more than 50% of the outstanding shares of
the Company are present or represented by proxy, or (b) more than 50% of the
outstanding shares. A fundamental policy affecting a particular Fund may not
be changed without the vote of a majority of the outstanding shares of the
affected Fund. Each Fund will not

(1) purchase or sell physical commodities unless acquired as a
result of ownership of securities or other instruments (except this shall not
prevent the Fund from purchasing or selling options or futures contracts or
from investing in securities or other instruments backed by physical
commodities);

(2) purchase or sell real estate, although it may purchase and
sell securities of companies that deal in real estate and may purchase and sell
securities that are secured by interests in real estate;

(3) lend any security or make any other loan if, as a result, more
than 33 1/3% of its total assets would be lent to other parties, but this
limitation does not apply to purchases of debt securities or repurchase
agreements;

(4) (i) purchase more than 10% of any class of the outstanding
voting securities of any issuer and (ii) purchase securities of an issuer
(except obligations of the U.S. Government and its agencies and
instrumentalities) if as a

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result, with respect to 75% of its total assets, more than 5% of the
Portfolio's total assets, at market value, would be invested in the securities
of such issuer;

(5) issue senior securities (as defined in the 1940 Act) except as
permitted by rule, regulation or order of the Securities and Exchange
Commission ("SEC");

(6) will not borrow, except from banks and other entities in an
amount not in excess of 33 1/3% of its total assets (including the amount
borrowed) less liabilities in accordance with its investment objectives and
policies;

(7) underwrite securities issued by others, except to the extent
that the Portfolio may be considered an underwriter within the meaning of the
1933 Act in the disposition of restricted securities; and

(8) write or acquire options or interests in oil, gas or other
mineral exploration or development programs.

In addition, each Fund has adopted non-fundamental investment
limitations as stated below and in its prospectus. Such limitations may be
changed without shareholder approval. Each Fund will not:

(1) purchase or retain securities of an issuer if those Officers
and Trustees of the Fund or its investment advisor owning more than 1/2 of 1%
of such securities together own more than 5% of such securities;

(2) pledge, mortgage, or hypothecate any of its assets except to
secure borrowings permitted by the Fund's fundamental limitation on borrowing;

(3) invest for the purpose of exercising control over management
of any company;

(4) invest its assets in securities of any investment company,
except (i) by purchase in the open market involving only customary brokers'
commissions; (ii) in connection with mergers, acquisitions of assets or
consolidations; (iii) as permitted by the Trust's SEC exemptive order; or (iv)
as otherwise permitted by the 1940 Act;

(5) invest more than 5% of its total assets in securities of
companies which have (with predecessors) a record of less than three years'
continuous operation;

(6) purchase warrants if, by reason of such purchase, more than 5%
of the value of the Fund's net assets (taken at market

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value) would be invested in warrants, valued at the lower of cost or market;
included within this amount, but not to exceed 2% of the value of the Fund's
net assets, may be warrants that are not listed on a recognized stock exchange;

(7) purchase or hold illiquid securities, which are securities
that cannot be disposed of for their approximate market value in seven days or
less (which terms include repurchase agreements and time deposits maturing in
more than seven days) if, in the aggregate, more than 15% of its net assets
would be invested in illiquid securities; and

(8) invest in oil, gas or other mineral leases.

INVESTMENT RESTRICTIONS OF THE SIERRA TRUST FUNDS

The investment restrictions numbered 1 through 16 below have been
adopted by the Sierra Trust Funds with respect to the Underlying Funds that are
series of the Sierra Trust Funds (each, an "STF Fund") as fundamental policies.
Investment restrictions 17 through 25 may be changed by vote of a majority of
the Board of Trustees of the Sierra Trust Funds at any time.

The investment policies adopted by the Sierra Trust Funds prohibit an
STF Fund from:

1. Purchasing the securities of any issuer (other than U.S. Government
securities) if as a result more than 5% of the value of the Fund's
total assets would be invested in the securities of the issuer (the
"5% Limitation"), except that up to 25% of the value of the Fund's
total assets may be invested without regard to the 5% Limitation;

2. Purchasing more than 10% of the securities of any class of any one
issuer; provided that this limitation shall not apply to investments
in U.S. Government securities; provided further that this restriction
shall not apply to the STF Growth Fund; and provided further that the
STF Growth Fund may not own more than 10% of the outstanding voting
securities of a single issuer.

3. Purchasing securities on margin, except that the STF Fund may obtain
any short-term credits necessary for the clearance of purchases and
sales of securities. For purposes of this restriction, the deposit or
payment of initial or variation margin in connection with futures
contracts or related options will not be deemed to be a purchase of
securities on margin.

4. Making short sales of securities or maintaining a short position;
provided that this restriction shall not apply to the STF
International Growth and STF Growth Funds.

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5. Borrowing money, except that (a) the Funds may (i) enter into reverse
repurchase agreements or (ii) borrow from banks for temporary or
emergency (not leveraging) purposes including the meeting of
redemption requests that might otherwise require the untimely
disposition of securities in an aggregate amount not exceeding 30% of
the value of the STF Fund's total assets (including the amount
borrowed) valued at market less liabilities (not including the amount
borrowed) at the time the borrowing is made, (b) the STF U.S.
Government, STF International Growth, STF Corporate Income, STF Short
Term High Quality Bond, STF Growth, STF Emerging Growth and STF Growth
and Income Funds may enter into futures contracts, and (c) the STF
U.S. Government, STF Corporate Income and STF Short Term High Quality
Bond Funds may engage in dollar roll transactions; provided that
whenever borrowings pursuant to (a) above (except that with respect to
the STF U.S. Government, STF Corporate Income and STF Short Term High
Quality Bond Funds, whenever borrowings pursuant to (a)(ii) above)
exceed 5% of the value of a Fund's total assets, the Fund will not
purchase any securities; and provided further that each of the STF
U.S. Government, STF Corporate Income and STF Short Term High Quality
Bond Funds is prohibited from borrowing money or entering into reverse
repurchase agreements or dollar roll transactions in the aggregate in
excess of 33 1/3% of the STF Fund's total assets (after giving effect
to any such borrowing).

6. Pledging, hypothecating, mortgaging or otherwise encumbering more than
30% of the value of the STF Fund's total assets. For purposes of this
restriction, (a) the deposit of assets in escrow in connection with
the writing of covered put or call options and the purchase of
securities on a when-issued or delayed-delivery basis and (b)
collateral arrangements with respect to (i) the purchase and sale of
options on securities, options on indexes and options on foreign
currencies, and (ii) initial or variation margin for futures contracts
will not be deemed to be pledges of an STF Fund's assets.

7. Underwriting the securities of other issuers, except insofar as the
STF Fund may be deemed an underwriter under the Securities Act of
1933, as amended, by virtue of disposing of portfolio securities.

8. Purchasing or selling real estate or interests in real estate, except
that the STF Fund may purchase and sell securities that are secured,
directly or indirectly, by real estate and may purchase securities
issued by companies that invest or deal in real estate.

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<PAGE> 106
9. Investing in commodities, except that the STF U.S. Government Fund,
STF International Growth Fund, STF Corporate Income Fund, STF Growth
Fund, STF Emerging Growth Fund, STF Growth and Income Fund and STF
Short Term High Quality Bond Fund may invest in futures contracts and
options on futures contracts. The entry into forward foreign currency
exchange contracts is not and shall not be deemed to involve investing
in commodities.

10. Investing in oil, gas or other mineral exploration or development
programs.

11. Making loans to others, except through the purchase of qualified debt
obligations, loans of portfolio securities (except in the case of the
STF U.S. Government Fund) and the entry into repurchase agreements.

12. Investing in securities of other investment companies registered or
required to be registered under the 1940 Act, except as they may be
acquired as part of a consolidation, reorganization, acquisition of
assets or an offer of exchange or as otherwise permitted by law,
including the 1940 Act.

13. Purchasing any securities that would cause more than 25% of the value
of the STF Fund's total assets at the time of purchase to be invested
in the securities of issuers conducting their principal business
activities in the same industry, except in the case of the STF Global
Money Fund, which under normal market conditions shall have at least
25% of its total assets invested in bank obligations; provided that
this limitation shall not apply to the purchase of (a) STF U.S.
Government securities, (b) municipal securities issued by governments
or political subdivisions of governments or (c) with respect to the
STF U.S. Government Money Fund, U.S. dollar-denominated bank
instruments such as certificates of deposit, time deposits, bankers'
acceptances and letters of credit that have been issued by U.S. banks.

14. Purchasing, writing or selling puts, calls, straddles, spreads or
combinations thereof; provided that this restriction shall not apply
to the STF Growth Fund and STF Short Term High Quality Bond Fund; and
provided further that (a) the STF U.S. Government Fund, STF Corporate
Income Fund, STF Growth and Income Fund, STF Emerging Growth Fund and
STF International Growth Fund may purchase, write and sell covered put
and call options on securities, (b) STF U.S. Government Fund, STF
Corporate Income Fund, STF Emerging Growth Fund, STF Growth and Income
Fund and STF International Growth Fund may purchase, write and sell
futures contracts and options on futures contracts, (c) the STF Growth
and Income Fund, STF Emerging Growth Fund and STF

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International Growth Funds may purchase and write put and call options
on stock indexes, and (d) the STF International Growth Fund may
purchase put and call options and write covered call options on
foreign currency contracts.

15. With respect to the STF Growth Fund, investing more than 35% of the
fund's assets in non-investment grade debt securities.

16. With respect to the STF Short Term High Quality Bond Fund, having a
dollar-weighted average portfolio maturity in excess of five years.

17. With respect to the STF Growth Fund, investing more than 25% of the
fund's assets in foreign securities.

18. Purchasing securities that are not readily marketable if more than 10%
of the total assets of a Money Fund, or more than 15% of the net
assets of a Non-Money Fund, would be invested in such securities,
including, but not limited to: (1) repurchase agreements with
maturities greater than seven calendar days; (2) time deposits
maturing in more than seven calendar days; (3) to the extent a liquid
secondary market does not exist for the instruments, futures contracts
and options thereon; (4) certain over-the-counter options, as
described in this SAI; (5) certain variable rate demand notes having a
demand period of more than seven days; and (6) certain Rule 144A
restricted securities that are deemed to be illiquid.

19. Investing more than 10% of its total assets in time deposits maturing
in more than seven calendar days; provided that this restriction shall
not apply to the STF Growth Fund and STF Short Term High Quality Bond
Fund.

20. Purchasing any security if as a result the STF Fund would then have
more than 5% of its total assets invested in securities of companies
(including predecessors) that have been in continuous operation for
less than three years.

21. Making investments for the purpose of exercising control or
management.

22. Purchasing or retaining securities of any company if, to the knowledge
of the Sierra Trust Funds any of the officers or Trustees of the
Sierra Trust Funds or any officer or director of Sierra Advisors or a
Sub-Advisor individually owns more than 1/2 of 1% of the outstanding
securities of such company and together they own beneficially more
than 5% of the securities.

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23. Investing in warrants, (other than warrants acquired by the STF Fund
as part of a unit or attached to securities at the time of purchase)
if, as a result, the investments (valued at the lower of cost or
market) would exceed 5% of the value of the STF Fund's net assets or
if, as a result, more than 2% of the STF Fund's net assets would be
invested in warrants not listed on a recognized United States or
foreign stock exchange, to the extent permitted by applicable state
securities laws.

24. Purchasing or selling interests in real estate limited partnerships.

25. Investing in mineral leases.

26. Entering into Strategic Transactions otherwise prohibited by the STF
Fund's investment restrictions or in the aggregate in excess of 25% of
the STF Fund's net assets, for purposes other than bona fide hedging
positions or that are not "covered," subject to such greater
percentage limitations or may be imposed by Sierra Advisors from time
to time.

With respect to the first investment limitation set forth above, as a
result of recent amendments to a rule promulgated under the 1940 Act, the
entire investment portfolio of the STF Global Money Fund is subject to the 5%
limitation. However, the STF Global Money Fund will be able to invest more
than 5% of its total assets in the securities of a single issuer for a period
of up to three Business Days after the purchase thereof; provided that the STF
Fund may not hold more than one such investment at any time.

The dollar amount of short sales of securities by the STF Growth Fund
or STF International Growth Fund at any one time shall not exceed 25% of the
net assets of such STF Fund, respectively, and the value of securities of any
one issuer in which such STF Fund is short may not exceed the lesser of 2% of
the net assets of the STF Fund or 2% of the securities of any class of any
issuer, and short sales of securities by each such STF Fund shall be subject to
the other conditions and exclusions of Rule 123.2(7) of the Texas state
securities regulations.

For purposes of the investment restrictions described above, the
issuer of a municipal security is deemed to be the entity (public or private)
ultimately responsible for the payment of the principal of and interest on the
security. For purposes of investment restriction Number 13 above, AMT-Subject
Bonds and Revenue Bonds, the payment of principal and interest on which is the
ultimate responsibility of companies within the same industry, are grouped
together as an "industry." The Sierra Trust Funds may make commitments more
restrictive than the restrictions listed above with respect to an STF Fund so
as to

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permit the sale of shares of the STF Fund in certain states. Should the Sierra
Trust Funds determine that any such commitment is no longer in the best
interests of the STF Fund and its shareholders, the Sierra Trust Funds will
revoke the commitment by terminating the sale of shares of the STF Fund in the
state involved. The percentage limitations contained in the restrictions
listed above apply at the time of purchase of securities.

INVESTMENT RESTRICTIONS OF THE SPIF

The SPIF's investment objective and the following investment restrictions are
fundamental. All other investment policies or practices are considered by the
SPIF not to be fundamental and accordingly may be changed without shareholder
approval. If a percentage restriction on investment or use of assets set forth
below is adhered to at the time a transaction is effected, later changes in
percentage resulting from changing market values will not be considered a
deviation from policy. In accordance with the foregoing, the SPIF may not:

1. Purchase any securities (other than obligations issued or
guaranteed by the United States Government or by its agencies
or instrumentalities), if as a result more than 5% of the
SPIF's total assets would then be invested in securities of a
single issuer or if as a result the SPIF would hold more than
10% of the outstanding voting securities of any single issuer;
provided that, with respect to 50% of the SPIF's assets, the
SPIF may invest up to 25% of its assets in the securities of
any one issuer. For purposes of this restriction, the term
issuer includes both the Borrower under a Loan Agreement and
the Lender selling a Participation to the SPIF together with
any other persons interpositioned between such Lender and the
SPIF with respect to a Participation.

2. Purchase any security if, as a result of such purchase, more
than 25% of the SPIF's total assets (taken at current value)
would be invested in the securities of Borrowers and other
issuers having their principal business activities in the same
industry (the electric, gas, water and telephone utility
industries, commercial banks, thrift institutions and finance
companies being treated as separate industries for purposes of
this restriction); provided, that this limitation shall not
apply with respect to obligations issued or guaranteed by the
U.S. Government or by its agencies or instrumentalities.

3. Issue senior securities (including borrowing money or entering
into reverse repurchase agreements) in excess

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of 33 1/3% of its total assets (including the amount of senior
securities issued but excluding any liabilities and
indebtedness not constituting senior securities) except that
the SPIF may borrow up to an additional 5% of its total assets
for temporary purposes, or pledge its assets other than to
secure such issuance or in connection with hedging
transactions, when-issued and delayed delivery transactions
and similar investment strategies.

4. Make loans of money or property to any person, except for
obtaining interests in Senior Loans in accordance with its
investment objective, through loans of portfolio securities or
the acquisition of securities subject to repurchase
agreements.

5. Buy any security "on margin." Neither the deposit of initial
or variation margin in connection with hedging transactions
nor short-term credits as may be necessary for the clearance
of such transactions is considered the purchase of a security
on margin.

6. Sell any security "short," write, purchase or sell puts, calls
or combinations thereof, or purchase or sell financial futures
or options, except to the extent that the hedging transactions
in which the SPIF may engage would be deemed to be any of the
foregoing transactions.

7. Act as an underwriter of securities, except to the extent the
SPIF may be deemed to be an underwriter in connection with the
sale of or granting of interests in Senior Loans or other
securities acquired by the SPIF.

8. Make investments for the purpose of exercising control or
participation in management, except to the extent that
exercise by the SPIF of its rights under Loan Agreements would
be deemed to constitute such control or participation.

9. Invest in securities of other investment companies, except as
part of a merger, consolidation or other acquisitions or
pursuant to an order granted by the Commission and in
accordance with applicable law, to the extent that deferred
compensation of the SPIF's trustees under the SPIF's deferred
compensation plan for its trustees is valued in deferred fee
accounts by reference to a hypothetical investment in such
other investment companies. The SPIF will rely on
representations of Borrowers in Loan Agreements in determining
whether such Borrowers are investment companies.

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10. Buy or sell oil, gas or other mineral leases, rights or
royalty contracts except pursuant to the exercise by the SPIF
of its rights under Loan Agreements. In addition, the SPIF
may purchase securities of issuers which deal in, represent
interests in or are secured by interests in such leases,
rights or contracts.

11. Purchase or sell real estate, commodities or commodities
contracts except pursuant to the exercise by the SPIF of its
rights under Loan Agreements, except to the extent the
interests in Senior Loans the SPIF may invest in are
considered to be interests in real estate, commodities or
commodities contracts and except to the extent that hedging
instruments the SPIF may invest in are considered to be
commodities or commodities contracts.

For purposes of investment restriction Number 2 above, the SPIF will consider
all relevant factors in determining whether to treat the Lender selling a
Participation and any persons interpositioned between such Lender and the SPIF
as an issuer, including: the terms of the Loan Agreement and other relevant
agreements (including inter-creditor agreements and any agreements between such
person and the SPIF's custodian); the credit quality of such Lender or
interpositioned person; general economic conditions applicable to such Lender
or interpositioned person; and other factors relating to the degree of credit
risk, if any, of such Lender or interpositioned person incurred by the SPIF.

The SPIF generally will not engage in the trading of securities for the purpose
of realizing short-term profits, but it will adjust its portfolio as it deems
advisable in view of prevailing or anticipated market conditions to accomplish
the SPIF's investment objective. For example, the SPIF may sell portfolio
securities in anticipation of a movement in interest rates. Frequency of
portfolio turnover will not be a limiting factor if the SPIF considers it
advantageous to purchase or sell securities. The SPIF anticipates that the
annual portfolio turnover rate of the SPIF will not be in excess of 100%. A
high rate of portfolio turnover involves correspondingly greater expenses than
a lower rate, which expenses must be borne by the SPIF and its shareholders.
High portfolio turnover also may result in the realization of substantial net
short-term capital gains. Due to the requirement for qualification as a
regulated investment company under the Code that less than 30% of the SPIF's
annual gross income be derived from the disposition of securities held for less
than three months, the SPIF may not be able to sell portfolio holdings held for
less than three months that the SPIF may wish to sell in the ordinary course of
management, which may affect adversely the SPIF's yield.

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PORTFOLIO TURNOVER

Portfolio turnover considerations for the Funds are addressed in the
Trust's prospectus.

The Money Funds attempt to increase yields by trading to take
advantage of short-term market variations, which result in high portfolio
turnover. Because purchases and sales of money market instruments are usually
effected as principal transactions, this policy does not result in high
brokerage commissions to these Funds. The STF Growth and Income Fund, STF
Emerging Growth Fund, STF Growth Fund and STF International Growth Fund
(together, the "STF Equity Funds"), the STF U.S. Government, STF Corporate
Income and STF Short Term High Quality Bond Funds (the "STF Bond Funds") do not
intend to seek profits through short-term trading. Nevertheless, the STF Funds
will not consider portfolio turnover rate a limiting factor in making
investment decisions.

Under certain market conditions, the STF U.S. Government Fund, STF
Corporate Income Fund, STF Growth Fund, STF Emerging Growth Fund, STF Growth
and Income Fund, STF International Growth Fund or STF Short Term High Quality
Bond Fund may experience increased portfolio turnover as a result of such STF
Fund's options activities. It is anticipated that the portfolio turnover rate
for the STF Short Term High Quality Bond Fund will exceed 200%. For instance,
the exercise of a substantial number of options written by the STF Fund (due to
appreciation of the underlying security in the case of call options or
depreciation of the underlying security in the case of put options) could
result in a turnover rate in excess of 100%. A portfolio turnover rate of 100%
would occur if all of the STF Fund's securities that are included in the
computation of turnover were replaced once during a period of one year. The
portfolio turnover rate is calculated by dividing the lesser of purchases or
sales of portfolio securities for the year by the monthly average value of
portfolio securities. Securities with remaining maturities of one year or less
at the date of acquisition are excluded from the calculation.

Certain other practices that may be employed by the STF Funds could
result in high portfolio turnover. For example, portfolio securities may be
sold in anticipation of a rise in interest rates (market decline) or purchased
in anticipation of a decline in interest rates (market rise) and later sold.
In addition, a security may be sold and another of comparable quality purchased
at approximately the same time to take advantage of what an STF Fund's
Sub-Advisor believes to be a temporary disparity in the normal yield
relationship between the two securities. These yield disparities may occur for
reasons not directly related to the investment quality of particular issues or
the general movement of interest rates, such as changes

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in the overall demand for, or supply of, various types of securities.

PORTFOLIO TRANSACTIONS

With respect to interests in Senior Loans, the SPIF generally will
engage in privately negotiated transactions for purchase or sale in which the
Sub-Advisor will negotiate on behalf of the SPIF. The SPIF may be required to
pay fees, or forgo a portion of interest and any fees payable to the SPIF, to
the Lender selling Participations or Assignments to the SPIF. The Sub-Advisor
will determine the Lenders from whom the SPIF will purchase Assignments and
Participations by considering their professional ability, level of service,
relationship with the Borrower, financial condition, credit standards and
quality of management. Although the SPIF intends generally to hold interests
in Senior Loans until maturity or prepayment of the Senior Loan, the
illiquidity of Senior Loans may restrict the ability of the Sub-Advisor to
locate in a timely manner persons willing to purchase the SPIF's interests in
Senior Loans at a fair price should the SPIF desire to sell such interests.
See "Strategies Available to the SPIF."

Most of the purchases and sales of securities for a Fund or an
Underlying Fund, whether transacted on a securities exchange or
over-the-counter, will be effected in the primary trading market for the
securities. Decisions to buy and sell securities for a Fund are made by Sierra
Services and for an Underlying Fund are made by its Sub-Advisor, which also is
responsible for placing these transactions, subject to the overall review of
the Trustees of the Trust, Sierra Trust Funds or SPIF. Although investment
decisions for each Fund or Underlying Fund are made independently from those of
the other accounts managed by its investment adviser or Sub-Advisor,
investments of the type the Fund or Underlying Fund may make may also be made
by those other accounts. When a Fund or Underlying Fund and one or more other
accounts managed by its investment adviser or Sub-Advisor are prepared to
invest in, or desire to dispose of, the same security, available investments or
opportunities for sales will be allocated in a manner believed by the
investment adviser or Sub-Advisor to be equitable to each. In some cases, this
procedure may adversely affect the price paid or received by a Fund or
Underlying Fund or the size of the position obtained or disposed of by the Fund
or Underlying Fund. In other cases, however, it is believed that coordination
and the ability to participate in volume transactions will be to the benefit of
the Fund or Underlying Fund.

Transactions on U.S. exchanges involve the payment of negotiated
brokerage commissions. With respect to exchanges on which commissions are
negotiated, the cost of transactions may vary among different brokers. There
is generally no stated

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commission in the case of securities traded in the over-the-counter markets,
but the prices of those securities include undisclosed commissions or
concessions, and the prices at which securities are purchased from and sold to
dealers include a dealer's mark-up or mark-down. U.S. Government securities
may be purchased directly from the U.S. Treasury or from the issuing agency or
instrumentality.

In selecting brokers or dealers to execute portfolio transactions on
behalf of a Fund or Underlying Fund, the Fund's investment advisor or
Sub-Advisor seeks the best overall terms available. In assessing the best
overall terms available for any transaction, each investment advisor or
Sub-Advisor will consider the factors the investment advisor or Sub-Advisor
deems relevant, including the 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 the commission, if any, for the specific
transaction and on a continuing basis. In addition, each advisory agreement of
the Trust, the Sierra Trust Funds and SPIF authorizes the investment advisor or
Sub-Advisor, in selecting brokers or dealers to execute a particular
transaction and in evaluating the best overall terms available, to consider the
brokerage and research services (as those terms are defined in Section 28(e) of
the Securities Exchange Act of 1934, as amended) provided to the applicable
Fund or Underlying Fund, the other Funds or Underlying Funds and/or other
accounts over which the investment advisor or Sub-Advisor or its affiliates
exercise investment discretion. The fees under such advisory agreements are
not reduced by reason of their receiving such brokerage and research services.
The Trustees of the Trust, the Sierra Trust Funds and SPIF will periodically
review the commissions paid by the Funds or Underlying Funds, respectively to
determine if the commissions paid over representative periods of time were
reasonable in relation to the benefits received by the Trust, Sierra Trust
Funds or SPIF, respectively.

Consistent with applicable provisions of the 1940 Act and the rules
and exemptions adopted by the Commission thereunder, the Board of Trustees of
the Trust, the Sierra Trust Funds and SPIF have adopted procedures pursuant to
Rule 17e-1 under the 1940 Act to ensure that all portfolio transactions with
affiliates will be fair and reasonable. Under the procedures adopted,
portfolio transactions for a Fund or Underlying Funds may be executed through
GW Securities or any other affiliated broker, including J.P. Morgan
Securities, Inc. or J.P. Morgan Securities Limited (which are affiliates of
J.P. Morgan Investment Management, Inc., the Sub-Advisor of the STF Global
Money and STF Growth and Income Funds) and Donaldson, Lufkin Jenrette
Securities Corporation (which is an affiliate of Alliance Capital Management
L.P., the Sub-Advisor of the STF U.S. Government Money Fund) if, subject to
other conditions in the Rule 17e-1 procedures, in the judgment of the
investment advisor

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or Sub-Advisor of the Fund or Underlying Fund, the use of GW Securities or an
affiliated broker is likely to result in price and execution at least as
favorable as those of other qualified broker-dealers, and if, in the
transaction, GW Securities or such other affiliated broker charges the Fund or
Underlying Fund a rate consistent with those charged for comparable
transactions in comparable accounts of the broker's most favored unaffiliated
clients. Over-the-counter purchases and sales are transacted directly with
principal market makers except in those cases in which better prices and
executions may be obtained elsewhere. Under rules adopted by the SEC, an
affiliated broker may not execute transactions for a Fund on the floor of any
national securities exchange, but may effect transactions by transmitting
orders for execution, providing for clearance and settlement, and arranging for
the performance of those functions by members of the exchange not associated
with the affiliated broker. GW Securities or an affiliated broker will be
required to pay fees charged by those persons performing the floor brokerage
elements out of the brokerage compensation it receives from a Fund or
Underlying Fund. The Trust, Sierra Trust Funds and SPIF have been advised that
on most transactions, the floor brokerage may constitute 20% or more of the
total commissions paid.

The Trust, Sierra Trust Funds and SPIF are required to identify any
securities of its "regular brokers or dealers" (as such term is defined in the
1940 Act) which the Trust, Sierra Trust Funds or SPIF, respectively has
acquired during its most recent fiscal year. As of June 3, 1996, none of the
Funds held any securities of any "regular broker or dealer" of the Trust.
Securities of any regular broker or dealer of the Sierra Trust Funds and SPIF
are disclosed in the SAI's of such trusts.

HOW TO BUY AND REDEEM SHARES

Class A and Class B Shares of the Funds may be purchased and redeemed
in the manner described in the Prospectus of the Trust and in this SAI.

COMPUTATION OF PUBLIC OFFERING PRICES

The Funds offer their shares to the public on a continuous basis. The
public offering price per Class A Share of the Funds is equal to the respective
net asset value per Class A Share next computed after receipt of a purchase
order, plus the applicable front-end sales charge, if any. The public offering
price per Class B Share of the Funds is equal to the net asset value per such
Class B Share next computed after receipt of a purchase order.

In addition to the purchases on which the sales charge is waived as
listed in the prospectus, no sales charge will be assessed on a purchase by any
other investment company in

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connection with the combination of such company with the Company by merger,
acquisition of assets or otherwise.

REDEMPTIONS

The procedures for redemption of Class A and Class B Shares of each
Fund are summarized in the Prospectus of the Trust under "Your Account - How to
Sell Shares." The right of redemption of Class A and Class B Shares of a Fund
may be suspended or the date of payment postponed (1) for any periods during
which the New York Stock Exchange is closed (other than for customary weekend
and holiday closings), (2) when trading in the markets the Fund normally
utilizes is restricted, or an emergency, as defined by the rules and
regulations of the SEC, exists making disposal of the Fund's investments or
determination of its net assets value not reasonably practicable or (3) for
such other periods as the SEC by order may permit for protection of the Fund's
shareholders.

DISTRIBUTIONS IN KIND. If the Board of Trustees determines that it
would be detrimental to the best interests of the remaining shareholders of a
Fund to make a redemption payment wholly in cash, the Company may pay, in
accordance with SEC rules, any portion of a redemption in excess of the lesser
of $250,000 or 1% of the Fund's net assets by distribution in kind of portfolio
securities in lieu of cash. Securities issued in a distribution in kind will
be readily marketable, although shareholders receiving distributions in kind
may incur brokerage commissions when subsequently redeeming shares of those
securities. For additional information concerning distributions in kind in
case the proceeds of redemptions of a Fund's shares exceed the net asset value
of the Fund represented by its holdings other than its holdings of the shares
of SPIF, see "How to Sell Shares -- Redemptions In Kind" in the Trust's
Prospectus.

SYSTEMATIC WITHDRAWAL PLAN. As described in the Prospectuses, a
Systematic Withdrawal Plan may be established by a shareholder who owns either
Class A or Class B Shares of a Fund with a value exceeding [$10,000] and who
wishes to receive specific amounts of cash periodically. Monthly, quarterly,
semiannual or annual withdrawals in a minimum amount of [$100] may be made
under the Systematic Withdrawal Plan by redeeming as many shares of the Fund as
may be necessary to cover the stipulated withdrawal payment. The CDSC on Class
B Shares is waived for withdrawals under a Systematic Withdrawal Plan that meets
certain conditions as described in "Systematic Withdrawal Plan" in the
Prospectus of the Trust. To the extent that withdrawals exceed dividends,
distributions and appreciation of a shareholder's investment in a Fund, there
will be a reduction in the value of the shareholder's investment in the
relevant class of the Fund and continued withdrawal payments may reduce the
shareholder's investment and ultimately exhaust it. Withdrawal

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payments should not be considered as income from investment in a Fund. For
additional information regarding the Systematic Withdrawal Plan, write to the
Trust at P.O. Box 9702, Providence, Rhode Island 02940-9702 or call the Trust
at 800-869-2019 (for customers of Great Western, write to the address noted at
the top of the cover page or call 1-800-222-5852).

CHECK REDEMPTION PRIVILEGE. Checkwriting is available for the Class
A Shares of the Money Funds only. Checks to redeem shares of any of the Money
Funds are drawn on the Trust's account at Boston Safe and shareholders will be
subject to the same rules and regulations that Boston Safe applies to checking
accounts and will have the same rights and duties with respect to stop payment
orders, "stale" checks, and unauthorized endorsements as bank checking account
customers do under Massachusetts Uniform Commercial Code. All notices with
regard to those rights and duties must be given to Boston Safe.

NET ASSET VALUE

The Trust will not calculate the net asset value of the Funds' Class A
and Class B Shares on certain holidays. On those days, securities held by a
Fund may nevertheless be actively traded, and the value of the Fund's shares
could be significantly affected.

A security that is primarily traded on a U.S. exchange (including
securities traded through the NASDAQ National Market System) is valued at the
last sale price on that exchange or, if there were no sales during the day, at
the current quoted bid price. Over-the-counter securities that are not traded
through the NASDAQ National Market System are valued on the basis of the bid
price at the close of business on each day. An option is generally valued at
the last sale price or, in the absence of a last sale price, the last offer
price. Investments in U.S. Government securities (other than short-term
securities) are valued at the average of the quoted bid and asked prices in the
over-the-counter market. Short term investments that mature in 60 days or less
are valued at amortized cost when the Board of Trustees determines that this
constitutes fair value; assets of the Money Funds are also valued at amortized
cost. The value of a futures contract equals the unrealized gain or loss on
the contract, which is determined by marking the contract to the current
settlement price for a like contract acquired on the day on which the futures
contract is being valued. A settlement price may not be used if the market
makes a limited move with respect to the security or index underlying the
futures contract. In such event, the futures contract will be valued at a fair
market value to be determined by or under the direction of the Board of
Trustees of the Trust.

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In carrying out the Board's valuation policies, First Data, as
Sub-Administrator, may consult with one or more independent pricing services
(each, a "Pricing Service") retained by the Trust. Debt securities of U.S.
issuers (other than U.S. Government securities and short-term investments),
including Municipal Securities, are valued by First Data, as Sub-Administrator,
after consultation with a Pricing Service. The procedures of the Pricing
Service are reviewed periodically by the officers of the Trust under the
general supervision and responsibility of the Board of Trustees of the Trust.

HOW TO EXCHANGE SHARES

Shareholders may exchange all or part of their shares of one Fund for
the same class of shares of another Fund or any of the Underlying Funds. If the
shares acquired in the exchange are subject to a higher sales load, a sales load
may be charged in an amount up to the difference between the sales load
previously paid and the initial sales load applicable to the shares of the fund
being acquired. See "Repurchase of Shares -- Exchange Privilege" in the SPIF
Prospectus and "How to Sell Shares -- Exchange Privileges and Restrictions" in
the Trust's Prospectus for information regarding the application of sales
charges to certain exchanges. Shareholders of the Trust and the Sierra Trust
Funds may exchange their Class A Shares for the Class A Common Shares of the
SPIF. Shareholders of the SPIF are entitled to exchange their shares for shares
of the Funds or Underlying Funds only during the tender offer periods of the
SPIF, during which time shares of the SPIF may be tendered to SPIF for
repurchase. Such exchanges of SPIF shares for shares of the funds are permitted
approximately once every calendar quarter so long as SPIF makes a repurchase
offer for its shares in such quarter and so long as the SPIF repurchase offer is
sufficiently large to include the SPIF shares tendered for exchange. See
"Reduced Sales Charge at Purchase -- Exchange Privilege" and "Repurchase
(Tender Offer) of Shares" in the Prospectus.

An exchange of shares is treated for federal income tax purposes as a
redemption (sale) of shares given in exchange by the shareholder, and an
exchanging shareholder may, therefore, realize a taxable gain or loss in
connection with the exchange. See "Taxes" below. Upon 60 days' prior written
notice to shareholders, the exchange privilege may be modified or terminated
and the Trust may [IN THE FUTURE] impose a charge of up to $5 for exchanges.

The exchange privilege enables a shareholder to acquire the same class
of shares in a Fund or Underlying Fund with different investment objectives or
policies when the shareholder believes that a shift between Funds and/or
Underlying Funds is an appropriate investment decision. This privilege is
available to

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shareholders residing in any state in which shares of the Fund or Underlying
Fund being acquired may legally be sold.

Upon receipt of proper instructions and all necessary supporting
documents, shares submitted for exchange are redeemed at the then-current net
asset value and the proceeds are immediately invested, at a price as described
above, in the same class of shares of the Fund or Underlying Fund being
acquired. The Trust reserves the right to reject any exchange request.

DETERMINATION OF PERFORMANCE

The Fixed, Value and Balanced Funds (the "Fixed Income Funds") may
quote a 30-day yield figure (the "SEC Yield") which is calculated according to
a formula prescribed by the SEC. The formula can be expressed as follows:

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

Where: a = dividends and interest earned during the period.

b = expenses accrued for the period (net of
reimbursement).

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

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

For the purpose of determining the interest earned (variable "a" in
the formula) on debt obligations that were purchased by one of the Fixed Income
Funds at a discount or premium, the formula generally calls for amortization of
the discount or premium; the amortization schedule will be adjusted monthly to
reflect changes in the market values of the debt obligations.

In addition, the Fund may quote a 30-day yield based on actual
distributions during a 30-day period that is computed by dividing the net
investment income per share earned by the Fund during the period by the maximum
Public Offering Price per share on the last day of the 30-day period. This
income is "annualized" by assuming that the amount of income is generated each
month over a one-year period and is compounded semiannually. The annualized
income is then shown as a percentage of the maximum Public Offering Price. In
addition, the Fixed Income Funds may advertise a similar 30-day yield computed
in the same

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manner except that the NAV per share is used in place of the Public Offering
Price per share.

Capital appreciation for Class A and Class B Shares of the Fixed
Income Funds and the Growth and Aggressive Growth Funds (the "Equity Funds")
shows principal changes for the period shown, and total return combines
principal changes and dividend and interest income reinvested for the periods
shown. Principal changes are based on the difference between the beginning and
closing net asset values for the period. Actual distributions include
short-term capital gains derived from option writing or other sources. The
period selected for performance data will depend upon the purpose of reporting
the performance.

The total return of the Funds' Class A and Class B Shares may be
calculated on an "average annual total return" basis, and may also be
calculated on an "aggregate total return" basis, for various periods. Average
annual total return reflects the average annual percentage change in the value
of an investment in a Fund over the particular measuring period. Aggregate
total return reflects the cumulative percentage change in value over the
measuring period. Average annual total return figures provided for Class A and
Class B Shares of the Bond and Equity Funds will be computed according to a
formula prescribed by the SEC. The formula can be expressed as follows:

n
P(1+T) = ERV

Where: P = a hypothetical initial payment of $1,000
T = average annual total return/aggregate total return
n = number of years
ERV = Ending Redeemable Value of a hypothetical $1,000
payment made at the beginning of the 1, 5 or 10
years (or other) periods or the life of the Fund

The formula for calculating aggregate total return can be expressed as
follows:

Aggregate Total Return = [ (ERV) - 1 ]
---
P
The calculation of average annual total return and aggregate total
return assumes reinvestment of all income dividends and capital gain
distributions on the reinvestment dates during the period and includes all
recurring fees charged to all shareholder accounts. In addition, with respect
to Class A Shares, the maximum 4.5%, 5.0% or 5.75% sales charge as applicable
to the class of the Fund is deducted from the initial $1,000 payment (variable
"P" in the formula).

The ERV assumes complete redemption of the hypothetical investment at
the end of the measuring period

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and reflects deduction of all nonrecurring charges at the end of the measuring
period covered by the computation. A Fund's net investment income changes in
response to fluctuations in interest rates and the expenses of the Fund.

The performance of a Fund's Class A and Class B Shares will vary from
time to time depending upon market conditions, the composition of the Fund's
portfolio and the Fund's operating expenses. Consequently, any given
performance quotation should not be considered representative of the Fund's
performance for any specified period in the future. In addition, because
performance will fluctuate, it may not provide a basis for comparing an
investment in a Fund with certain bank deposits or other investments that pay a
fixed yield or return for a stated period of time.

Investors should recognize that, because the Fixed Income Funds will
have a high component of fixed-income securities, in periods of declining
interest rates the yields of the Fixed Income Funds will tend to be somewhat
higher than prevailing market rates, and in periods of rising interest rates
yields will tend to be somewhat lower. In addition, when interest rates are
falling, the inflow of net new money to the Fixed Income Funds from the
continuous sale of shares will likely be invested in portfolio instruments
producing lower yields than the balance of the Fixed Income Fund's securities,
thereby reducing the current yields of the Fixed Income Funds. In periods of
rising interest rates, the opposite can be expected to occur. Comparative
performance information may be used from time to time in advertising the
Company's Class A and Class B Shares, including data from Lipper Analytical
Services, Inc., the S&P 500 Composite Stock Price Index, the Dow Jones
Industrial Average and other industry publications.

PERFORMANCE COMPARISONS

In reports or other communications to shareholders or in advertising
material, a Fund may make certain performance comparisons as described in the
Trust's prospectuses. Another performance comparison one or more of the Funds
may use is the following comparison of the return on IRA accounts to the return
on conventional savings plans:

THE FOLLOWING IS A TABULAR REPRESENTATION THAT REPLACES GRAPHIC
MATERIAL FOR EDGAR FILING PURPOSES.]

The following replaces a bar graph that indicates years of investment
in increments of five years beginning at five years and ending at twenty years
on the horizontal axis and amount of total return for "Tax-Deferred Growth
(after-tax contributions and tax-deferred earnings)" and for "Conventional
Savings Plan (after-tax contributions and earnings)" on the vertical axis.

IRAS CAN HELP YOU EARN MORE

For $100,000 compounded annually at 8%

$146,933+ $215,892+ $466,096+
$128,359++ 164,761++ $271,461++
---------- ---------- ----------
5 Years 10 Years 20 Years

+ Tax-Deferred Growth *(after-tax contributions and tax-deferral
earnings

++ Conventional Savings Plan (after-tax contributions and earnings)

[END OF TABULAR REPRESENTATION THAT REPLACES GRAPHIC MATERIAL
FOR EDGAR FILING PURPOSES.]

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<PAGE> 122
* When you make withdrawals from your IRA account, you must pay taxes
on the earnings as well as on any tax-deductible contributions. Earnings on
conventional savings plans invested in various asset mediums are taxed
annually, but you are not taxed on withdrawals from such savings plans. If any
payment from your IRA account is taken before age 59 1/2, a 10% tax penalty may
be imposed.

The sole purpose of this chart is to illustrate your tax-deferred
earnings from an IRA savings account in comparison to earnings from a taxable
conventional savings plan over a period of 20 years, and the chart translates
federal tax savings from a tax-free investment into an equivalent yield from a
taxable investment. The chart assumes a 36% tax rate for all periods (before
the deduction of any fees, charges or expenses) at a fixed rate of 8%. The
chart assumes no withdrawals from the savings plans and reinvestment of all
dividends and/or income during the 20-year period shown.

This chart is for illustrative purposes only and does not represent
past, current or future yields of any of the funds of the Trust, nor does it
illustrate the effect of fluctuations in principal value.

TAXES

The following discussion of federal income tax consequences is based
on the Code and the regulations issued thereunder as in effect on the date of
this SAI. New legislation, as well as administrative changes or court
decisions, may significantly alter the conclusions expressed herein, and may
have a retroactive effect with respect to the transactions contemplated herein.

Each Fund is treated as a separate entity for federal income tax
purposes and is not combined with the Company's other Funds. Each of the Funds
intends to continue qualifying as a "regulated investment company" ("RIC") as
defined under Subchapter M of the Code. A Fund that is a RIC and distributes
to its shareholders at least 90% of its taxable net investment income
(including, for this purpose, its net realized short-term capital gains) and
90% of its tax-exempt interest income (reduced by certain expenses),

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<PAGE> 123
will not be liable for federal income taxes to the extent its taxable net
investment income and its net realized long-term and short-term capital gains,
if any, are distributed to its shareholders.

In order to qualify as a RIC under the Code, in addition to satisfying
the distribution requirement described above, each Fund must (a) derive at
least 90% of its gross income each taxable year from dividends, interest,
payments with respect to securities loans, gains from the sale or other
disposition of stock, securities, or foreign currencies, and certain other
related income, including, generally, certain gains from options futures, and
forward contracts; (b) derive less than 30% of its gross income for each
taxable year from the sale or other disposition of any of the following
investments if such investments are held for less than three months: stock,
securities, options, futures or forward contracts (other than options futures,
or forward contracts on foreign currencies), or foreign currencies (or options,
futures, or forward contracts on foreign currencies) that are not directly
related to the company's business of investing in stock or securities; and (c)
diversify its holdings so that, at the end of each fiscal quarter of the Fund's
taxable year, (i) at least 50% of the market value of the Fund's assets is
represented by cash and cash items, U.S. government securities, securities of
other RICs, and other securities, with such other securities limited, in
respect to any one issuer, to an amount that does not represent more than 10%
of the outstanding voting securities of such issuer or exceed 5% of the value
of the Fund's total assets and (ii) not more than 25% of the value of its
assets is invested in the securities (other than U.S. government securities and
securities of other RICs) of any one issuer or of two or more issuers which the
Fund controls and which are engaged in the same, similar, or related trades or
businesses.

Notwithstanding the distribution requirement described above, which
only requires a Fund to distribute at least 90% of its annual investment
company taxable income and tax-exempt interest income and does not require any
minimum distribution of net capital gain (the excess of net long-term capital
gain over net short-term capital loss), a Fund will be subject to a
nondeductible 4% federal excise tax to the extent it fails to distribute by the
end of any calendar year at least 98% of its ordinary income for that year and
at least 98% of its capital gain net income (the excess of short- and long-term
capital gains over short- and long-term capital losses) for the one-year period
ending on October 31 of that year, plus certain other amounts.

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<PAGE> 124
If a Fund fails to qualify as a regulated investment company for any
year, all of its income will be subject to tax at corporate rates, and its
distributions (including capital gains distributions) will be taxable as
ordinary income dividends to its shareholders, subject to the dividends
received deduction for corporate shareholders. Otherwise, distributions made
by the Bond Funds generally will not be eligible for the dividends received
deduction otherwise available to corporate taxpayers.

As described above and in the Prospectuses, this Fund may invest in
certain types of futures contracts and options. The Fund anticipates that
these investment activities will not prevent the Fund from qualifying as
regulated investment companies. As a general rule, these investment activities
may increase or decrease the amount of long-term and short-term capital gains
or losses realized by a Fund and, accordingly, will affect the amount of
capital gains distributed to a Fund's shareholders.

Many futures contracts entered into by a Fund, and all listed
nonequity options written or purchased by a Fund will be governed by Section
1256 of the Code. On the last trading day of the Fund's fiscal year, all such
outstanding Section 1256 positions will be marked to market (i.e., treated as
if such positions were closed out at their closing price on such day), with any
resulting gain or loss recognized as 60% long-term and 40% short-term capital
gain or loss. Under certain circumstances, entry into a futures contract to
sell a security may constitute a short sale for federal income tax purposes,
causing an adjustment in the holding period of the underlying security or a
substantially identical security in the Fund's portfolio.

Positions of a Fund which consist of at least one position not
governed by Section 1256 and at least one position governed by Section 1256
which substantially diminishes the Fund's risk of loss with respect to such
other position will be treated as a "mixed straddle." Generally, a "straddle"
is governed by Section 1092 of the Code, the operation of which may cause
deferral of losses, adjustments in holding periods of securities and conversion
of short-term capital losses into long-term capital losses. Although mixed
straddles are subject to the straddle rules of Section 1092 of the Code,
certain tax elections exist for them which may affect the operations of these
rules. Each of the Funds intends to monitor its transactions in options and
futures and may make certain tax elections in connection with those
investments.

As a general rule, a Fund's gain or loss on a sale or exchange of an
investment will be a long-term capital gain

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or loss if the Fund has held the investment for more than one year and will be
a short-term capital gain or loss if it has held the investment for one year or
less. Furthermore, as a general rule, a shareholder's gain or loss on a sale
or redemption of Fund shares will be a long-term capital gain or loss if the
shareholder has held the Fund shares for more than one year and will be a
short-term capital gain or loss if the shareholder has held the Fund shares for
one year or less.

While only the Equity Funds expect to realize a significant amount of
net long-term capital gains, any such realized gains will be distributed as
described in the Trust's Prospectus. Such distributions ("capital gain
dividends"), if any, will be taxable to shareholders as long-term capital
gains, regardless of how long a shareholder has held Fund shares, and will be
designated as capital gain dividends in a written notice mailed to the
shareholder after the close of the Fund's taxable year. Any loss on the sale
or exchange of shares in a Fund that have been held for six months or less will
be treated as a long-term capital loss to the extent of any capital gain
dividend received by the shareholder with respect to such shares.

SHAREHOLDER STATEMENTS

Each shareholder will receive after the close of the calendar year an
annual statement and such other written notices as are appropriate as to the
federal income and shareholder's dividends and distributions received from the
Fund for the prior calendar year. Shareholders should consult their tax
advisers as to any other state and local taxes that may apply to these
dividends and distributions.

If a shareholder fails to furnish a correct taxpayer identification
number, fails to report fully dividend or interest income, or fails to certify
that the taxpayer identification number is correct and that the shareholder is
not subject to "backup withholding," then the shareholder may be subject to a
31% "backup withholding" tax with respect to (1) taxable dividends and
distributions and (2) the proceeds of any redemptions of Fund shares. An
individual's taxpayer identification number is his or her social security
number. The 31% "backup withholding" tax is not an additional tax and may be
credited against a taxpayer's regular federal income tax liability.

THE FOREGOING IS ONLY A SUMMARY OF CERTAIN TAX CONSIDERATIONS
GENERALLY AFFECTING A FUND AND ITS SHAREHOLDERS, AND IS NOT INTENDED AS A
SUBSTITUTE FOR CAREFUL TAX PLANNING. SHAREHOLDERS ARE URGED TO CONSULT

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<PAGE> 126
THEIR TAX ADVISERS WITH SPECIFIC REFERENCE TO THEIR OWN TAX SITUATIONS,
INCLUDING THEIR STATE AND LOCAL TAX LIABILITIES.

DISTRIBUTOR

Sierra Services serves as the distributor for the Class A and Class B
Shares on a best efforts basis pursuant to a distribution agreement between the
Trust and Sierra Services. To compensate Sierra Services for the
distribution-related services it provides, and broker-dealers authorized by
Sierra Services, the Trust has adopted two plans of distribution (each, a
"Plan") pursuant to Rule 12b-1 under the 1940 Act, one with respect to each of
the classes of shares, the Class A and Class B Shares. Under the Plan for the
Class A Shares, Sierra Services will be entitled to receive a distribution fee,
accrued daily and paid monthly, calculated with respect to Class A Shares at
the annual rate of up to .25% of the average daily net assets of the Class A
Shares of each Fund. Under the Plan for the Class B Shares, the Class B Shares
will be charged, respectively, distribution fees at an annual rate of up to
.75% of the average daily net assets of such class of each Fund. Payments
under a Plan may be used to defray a portion of the costs incurred in rendering
distribution services to respective classes of the Funds, including costs such
as costs of advertising or sales literature or payment of commissions on the
sale of shares of the Funds. Class B Shares are also subject to a service fee
at an annual rate of .25% of the average daily net assets of each Fund. This
service fee may be used for personal service and maintenance of shareholder
accounts.

Each Plan is designed to enable Sierra Services to compensate
broker-dealers that have entered into an agreement with Sierra Services for
distribution of the Funds' shares ("Authorized Dealers"), including GW
Securities and their representatives for selling Funds' shares. Payments under
the Plans are not tied exclusively to the distribution expenses actually
incurred by Sierra Services, and such payments may exceed distribution expenses
actually incurred by Sierra Services. Sierra Services anticipates, however,
that for the foreseeable future distribution expenses incurred will greatly
exceed amounts paid under each Plan. The Board of Trustees of the Trust,
including a majority of the Trustees who are not interested persons of the
Trust and who have no direct or indirect financial interest in the operation of
the Plans ("Independent Trustees"), will evaluate the appropriateness of each
Plan and its payment terms on a continuing basis and in doing so will consider
all relevant factors, including

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<PAGE> 127
expenses borne by Sierra Services in the current year and in prior years and
amounts received under the Plan.

Under its terms, each Plan remains in effect from year to year,
provided such continuance is approved annually by vote of the Board of Trustees
of the Trust, including a majority of the Independent Trustees. A Plan may not
be amended to increase materially the amount to be spent for the services
provided by Sierra Services without approval by the shareholders of the class
of shares of the Fund to which the Plan applies, and all material amendments of
the Plan also require Board approval. A Plan may be terminated at any time,
without penalty, by vote of a majority of the Independent Trustees, or, with
respect to a class of shares of the Funds, by a vote of a majority of the
outstanding voting securities of the class of shares of the Fund (as such vote
is defined in the 1940 Act) to which the Plan applies. If a Plan is terminated
(or not renewed) with respect to any class of any one or more Funds, it may
continue in effect with respect to the same class of any Fund as to which it
has not been terminated (or has been renewed). Pursuant to the distribution
agreements, Sierra Services will provide the Board of Trustees periodic reports
of any amounts expended under each Plan and the purpose for which such
expenditures were made.

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APPENDIX

DESCRIPTION OF BOND, NOTES AND COMMERCIAL PAPER RATINGS

DESCRIPTION OF S&P CORPORATE BOND RATINGS

AAA: Bonds rated AAA have the highest rating assigned by S&P to a
debt obligation. Capacity to pay interest and repay principal is extremely
strong.

AA: Bonds rated AA have a very strong capacity to pay interest and
repay principal and differ from the highest rated issues only in small degree.

A: Bonds rated A have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than bonds in higher rated
categories.

DESCRIPTION OF MOODY'S CORPORATE BOND RATINGS

Aaa: Bonds which are rated Aaa are judged to be the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt-edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.

Aa: Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as for Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities.

A: Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper-medium grade obligations. Factors
giving security to principal and interest are considered adequate but elements
may be present which suggest a susceptibility to impairment sometime in the
future.

Moody's applies the numerical modifiers 1, 2 and 3 to each generic
rating classification from Aa through B. The modifier 1 indicates that the
issue ranks in the higher end of its generic rating category; the modifier 2
indicates a mid-range ranking;

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and the modifier 3 indicates that the issue ranks in the lower end of its
generic rating category.

DESCRIPTION OF DUFF'S CORPORATE BOND RATINGS

Bonds rated AAA by Duff are judged by Duff to be of the highest credit
quality, with negligible risk factors being only slightly more than for
risk-free U.S. Treasury debt. Bonds rated AA by Duff are judged by Duff to be
of high credit quality with strong protection factors and risk that is modest
but that may vary slightly from time to time because of economic conditions.
Bonds rated A by Duff are judged by Duff to have average but adequate
protection factors. However, risk factors are more variable and greater in
periods of economic stress. Bonds rated BBB by Duff are judged by Duff as
having below average protection factors but still considered sufficient for
prudent investment, with considerable variability in risk during economic
cycles.

DESCRIPTION OF FITCH'S CORPORATE BOND RATINGS

Bonds rated AAA by Fitch are considered to be investment grade and of
the highest credit quality. The obligor has an exceptionally strong ability to
pay interest and repay principal, which is unlikely to be affected by
reasonably foreseeable events. Bonds rated AA by Fitch are considered to be
investment grade and of very high credit quality. The obligor's ability to pay
interest and repay principal is very strong, although not quite as strong as
bonds rated AAA. Bonds rated A by Fitch are considered to be investment grade
and of high credit quality. The obligor's ability to pay interest and repay
principal is considered to be strong, but may be more vulnerable to adverse
changes in economic conditions and circumstances than bonds with higher
ratings. Bonds rated BBB by Fitch are considered to be investment grade and of
satisfactory credit quality. The obligor's ability to pay interest and repay
principal is considered to be adequate. Adverse changes in economic conditions
and circumstances, however, are more likely to have adverse impact on these
bonds, and therefore impair timely payment. The likelihood that the ratings of
these bonds will fall below investment grade is higher than for bonds with
higher ratings.

DESCRIPTION OF S&P MUNICIPAL BOND RATINGS

AAA - Prime - These bonds have the highest rating assigned by S&P.
Capacity to pay interest and repay principal is extremely strong.

General Obligation Bonds - In a period of economic stress, the issuers
will suffer the smallest declines in income and will be least susceptible to
autonomous decline. Debt burden is moderate. A strong revenue structure
appears more than adequate

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to meet future expenditure requirements. Quality of management appears
superior.

Revenue Bonds - Debt service coverage has been, and is expected to
remain, substantial. Stability of the pledged revenues is also exceptionally
strong due to the competitive position of the municipal enterprise or to the
nature of the revenues. Basic security provisions (including rate covenant,
earnings test for issuance of additional bonds, debt service reserve
requirements) are rigorous. There is evidence of superior management.

AA - High Grade - Bonds in this group have a very strong capacity to
pay interest and repay principal and differ from the highest rated debt only in
small degree.

A - Good Grade - Bonds in this category have a strong capacity to pay
interest and repay principal, although they are somewhat more susceptible to
the adverse effects of changes in circumstances and economic conditions than
bonds in higher rated categories. Regarding municipal bonds, the rating
differs from the two higher ratings because:

General Obligation Bonds - There is some weakness, either in the local
economic base, in debt burden, in the balance between revenues and expenditures
or in quality of management. Under certain adverse circumstances, any one such
weakness might impair the ability of the issuer to meet debt obligations at
some future date.

Revenue Bonds - Debt service coverage is good, but not exceptional.
Stability of the pledged revenues could show some variations because of
increased competition or economic influences on revenues. Basic security
provisions, while satisfactory, are less stringent. Management performance
appears adequate.

BBB - Medium Grade - Bonds in this group are regarded as having an
adequate capacity to pay interest and repay principal. Whereas they normally
exhibit adequate protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay interest
and repay principal for bonds in this category than for bonds in higher rated
categories.

General Obligation Bonds - Under certain adverse conditions, several
of the above factors could contribute to a lesser capacity for payment of debt
service. The difference between A and BBB ratings is that the latter shows
more than one fundamental weakness, or one very substantial fundamental
weakness, whereas the former shows only one deficiency among the factors
considered.

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Revenue Bonds - Debt coverage is only fair. Stability of the pledged
revenues could show substantial variations, with the revenue flow possibly
being subject to erosion over time. Basic security provisions are no more than
adequate. Management performance could be stronger.

BB, B, CCC, CC and C - Bonds rated BB, B, CCC, CC and C are regarded,
on balance, as predominantly speculative with respect to capacity to pay
interest and repay principal in accordance with the terms of the obligation.
BB indicates the least degree of speculation and C the highest degree of
speculation. While such bonds will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposure to adverse conditions.

D - Bonds rated D are in default, or the obligor has filed for
bankruptcy. The D rating is issued when interest or principal payments are not
made on the date due, even if the applicable grace period has not expired,
unless S&P believes that such payments will be made during such grace period.

S&P's letter ratings may be modified by the addition of a plus or a
minus sign, which is used to show relative standing within the major rating
categories, except in the AAA-Prime Grade category.

DESCRIPTION OF S&P MUNICIPAL NOTE RATINGS

Municipal notes with maturities of three years or less are usually
given note ratings (designated SP-1, -2 or -3) to distinguish more clearly the
credit quality of notes as compared to bonds. Notes rated SP-1 have a strong
capacity to pay principal and interest. Those issues determined to possess a
very strong capacity to pay debt service are given the designation of SP-1+.
Notes rated SP-2 have a satisfactory capacity to pay principal and interest,
with some vulnerability to adverse financial and economic changes over the term
of the notes.

DESCRIPTION OF MOODY'S MUNICIPAL BOND RATINGS

Aaa: Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt-edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.

Aa: Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they

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<PAGE> 132
comprise what are generally known as high grade bonds. They are rated lower
than the best bonds because margins of protection may not be as large as in Aaa
securities, or fluctuation of protective elements may be of greater amplitude,
or there may be other elements present which make the long-term risks appear
somewhat larger than in Aaa securities.

A: Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment sometime in the
future.

Baa: Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics as
well.

Ba: Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered as well assured. Often the
protection of interest and principal payments may be very moderate and thereby
not well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.

B: Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.

Moody's applies the numerical modifiers 1, 2 and 3 in each generic
rating classification from Aa through B. The modifier 1 indicates that the
security ranks in the higher end of its generic rating category; the modifier 2
indicates a mid-range ranking; and the modifier 3 indicates that the issuer
ranks in the lower end of its generic rating category.

DESCRIPTION OF MOODY'S MUNICIPAL NOTE RATINGS

Moody's ratings for state and municipal notes and other short-term
loans are designated Moody's Investment Grade (MIG) and for variable rate
demand obligations are designated Variable Moody's Investment Grade (VMIG).
This distinction recognizes the differences between short-term credit risk and
long-term risk. Loans bearing the designation MIG 1/VMIG 1 are of the best
quality, enjoying strong protection from established cash flows

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of funds for their servicing, from superior liquidity support, or from
established and broad-based access to the market for refinancing, or both.
Loans bearing the designation of MIG 2/VMIG 2 are of high quality, with margins
of protection ample, although not as large as the preceding group. Loans
bearing the designation MIG 3/VMIG 3 are of favorable quality, with all
security elements accounted for but lacking the undeniable strength of the
preceding grades. Liquidity and cash flow protection may be narrow and market
access for refinancing is likely to be less well established. Loans bearing
the designation MIG 4/VMIG 4 are of adequate quality. Protection commonly
regarded as required of an investment security is present and although not
distinctly or predominantly speculative, there is specific risk.

DESCRIPTION OF S&P COMMERCIAL PAPER RATINGS

Commercial paper rated A-1 by S&P indicates that the degree of safety
regarding timely payments is strong. Those issues determined to possess
extremely strong safety characteristics are denoted A-1+. Capacity for timely
payment on commercial paper rated A-2 is satisfactory, but the relative degree
of safety is not as high as for issues designated A-1.

DESCRIPTION OF MOODY'S COMMERCIAL PAPER RATINGS

The rating Prime-1 is the highest commercial paper rating assigned by
Moody's. Issuers rated Prime-1 (or related supporting institutions) are
considered to have a superior capacity for repayment of short-term promissory
obligations. Issuers rated Prime-2 (or related supporting institutions) are
considered to have a strong capacity for repayment of short-term promissory
obligations. This will normally be evidenced by many of the characteristics of
issuers rated Prime-1 but to a lesser degree. Earnings trends and coverage
ratios, while sound, will be more subject to variation. Capitalization
characteristics, while still appropriate, may be more affected by external
conditions. Ample alternative liquidity is maintained.

DESCRIPTION OF DUFF'S COMMERCIAL PAPER RATINGS

Paper rated Duff-1 is regarded as having very high certainty of timely
payment with excellent liquidity factors which are supported by good
fundamental protection factors. Risk factors are minor. Ratings of Duff-1 are
further refined by the gradations of "1+" and "1-". Issues rated Duff-1+ have
the highest certainty of timely payment, outstanding short term liquidity, and
safety just below risk-free U.S. Treasury short-term obligations. Issues rated
Duff-1- have high certainty of timely payment, strong liquidity factors
supported by good fundamental protection factors, and small risk factors.
Paper rated Duff-2 is regarded as having good certainty of timely

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payment, good access to capital markets and sound liquidity factors and company
fundamentals. Risk factors are small.

DESCRIPTION OF FITCH'S COMMERCIAL PAPER RATINGS

The rating F-1+ (Exceptionally Strong Credit Quality) is the highest
commercial rating assigned by Fitch and is assigned to issues regarded as
having the strongest degree of assurance for timely payment. Paper rated F-1
(Very Strong Credit Quality) is regarded as having an assurance of timely
payment only slightly less in degree than issues rated F-1+. The rating F-2
(Good Credit Quality) reflects an assurance of timely payment, but the margin
of safety is not as great as for issues assigned F-1+ or F-1 ratings.

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<PAGE> 135

SIERRA ASSET MANAGEMENT TRUST

PART C

Item 24. Financial Statements and Exhibits

<TABLE>
<S> <C>
(a) Financial Statements:

The Registrant has not conducted any business as of
the date of this filing.

(b) Exhibits

(1) Agreement and Declaration of Trust dated
March 26, 1996

(2) By-laws

(3) Not applicable.

(4) Form of Specimen Certificate of Common Shares of Beneficial Interest of Registrant (*)

(5) Form of Investment Advisory Agreement (*)

(6)(a) Form of Distribution Agreement (*)
(6)(b) Form of Selling Group Agreement (*)

(7) Not applicable

(8) Form of Custody Agreement (*)

(9)(a) Form of Administration Agreement (*)
(9)(b) Form of Sub-Administration Agreement (*)

(10) Opinion and consent of Morgan, Lewis & Bockius LLP (*)

(11) Consent of Accountant (*)
</TABLE>

_____________________
* To be filed by Amendment

C-1
<PAGE> 136
Item 25. Persons Controlled by or Under Common Control with Registrant
- -------- -------------------------------------------------------------

Registrant is controlled by its Board of Trustees.

Item 26. Number of Holders of Securities
- -------- -------------------------------

As of the filing of this Registration Statement, no shares of
beneficial interest of the Registrant had been issued.

Item 27. Indemnification
- -------- ---------------

Under Section 8.1 of Registrant's Declaration of Trust, any
past or present Trustee or officer of Registrant (including persons who serve
at Registrant's request as directors, officers or trustees of another
organization in which Registrant has any interest as a shareholder, creditor or
otherwise (hereinafter referred to as a "Covered Person"), is indemnified to
the fullest extent permitted by law against liability and all expenses
reasonably incurred by him in connection with any action, suit or proceeding to
which he may be a party or otherwise involved by reason of his being or having
been a Covered Person. This provision does not authorize indemnification when
it is determined, in the manner specified in the Declaration of Trust, that a
Covered Person has not acted in good faith in the reasonable belief that his
actions were in or not opposed to the best interests of Registrant. Moreover,
this provision does not authorize indemnification when it is determined, in the
manner specified in the Declaration of Trust, that the Covered Person would
otherwise be liable to Registrant or its shareholders by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of his duties.
Expenses may be paid by Registrant in advance of the final disposition of any
action, suit or proceeding upon receipt of an undertaking by a Covered Person
to repay those expenses to Registrant in the event that it is ultimately
determined that indemnification of the expenses is not authorized under the
Declaration of Trust and the Covered Person either provides security for such
undertaking or insures Registrant against losses from such advances or either
of the disinterested Trustees or independent legal counsel determines, in the
manner specified in the Declaration of Trust, that there is reason to believe
the Covered Person will be found to be entitled to indemnification.

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

C-2
<PAGE> 137
Item 28(a). Business and Other Connections of Investment Advisor
- ----------- ----------------------------------------------------

Sierra Investment Services Corporation ("Sierra Services") is
the investment advisor of the Funds.

Sierra Services does not currently act as depositor or
investment advisor for any other investment company.

The information required by this Item 28(a) with respect to
each director and officer of Sierra Services is incorporated by reference to
Schedule A of Form BD filed by Sierra Services pursuant to the Securities
Exchange Act of 1934 (SEC File No. 8-45144).

Item 29(a). Principal Underwriter -- Class A and B Shares
- ----------- ---------------------

Sierra Investment Services Corporation ("Sierra Services") is
the principal underwriter of the Class A and Class B Shares of the Funds and
serves as the principal underwriter of the Sierra Trust Funds, The Sierra
Variable Trust and the Sierra Prime Income Fund.

Sierra Services does not currently act as depositor or
investment advisor for any other investment company.

The information required by this Item 29(a) with respect to
each director and officer of Sierra Services is incorporated by reference to
Schedule A of Form BD filed by Sierra Services pursuant to the Securities
Exchange Act of 1934 (SEC File No. 8-45144).

Item 30. Location of Accounts and Records
- -------- --------------------------------

(1) Sierra Asset Management Trust
9301 Corbin Avenue
Northridge, California 91324
(declaration of trust and by-laws)

(2) Sierra Investment Services Corporation
9301 Corbin Avenue
Northridge, California 91324
(with respect to their services as the principal
underwriter)

(3) Great Western Financial Securities Corporation
9301 Corbin Avenue
Northridge, California 91324
(with respect to their services as a dealer)

(4) Sierra Fund Administration Corporation
9301 Corbin Avenue
Northridge, California 91324
(with respect to their services as administrator
shareholder servicing agent and transfer agent)

(5) Boston Safe Deposit and Trust Company
One Boston Place
Boston, Massachusetts 02108
(with respect to their services as custodian)

C-3
<PAGE> 138
(6) First Data Investor Services Group, Inc.
One Exchange Place
Boston, Massachusetts 02109
(with respect to their services as a
sub-administrator)

(7) Morgan, Lewis & Bockius LLP
2000 One Logan Square
Philadelphia, Pennsylvania 19103
(with respect to their services as
counsel to the Fund)

Item 31. Management Services
- -------- -------------------

Not applicable.

Item 32. Undertakings
- -------- ------------

(a) The Trust undertakes to file a post-effective
amendment, including financial statements which need not be certified, within
four to six months from the effective date of the Registrant's 1933 Act
Registration Statement.

(b) Registrant undertakes to furnish each person to whom
a prospectus is delivered with a copy of the Registrant's latest annual report
to shareholders, upon request and without charge.

C-4
<PAGE> 139
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as
amended, and the Investment Company Act of 1940, as amended, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereto duly authorized, in the City of Northridge and State of
California on the 26th day of March, 1996.

SIERRA ASSET MANAGEMENT TRUST

By: /s/ F. Brian Cerini
-----------------------------------
F. Brian Cerini
President

Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed below by the following
persons in the capacities and on the date(s) indicated.

<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ F. Brian Cerini
- ---------------------------------------
F. Brian Cerini President and Trustee March 26, 1996
(Principal Executive Officer)

/s/ Keith B. Pipes
- --------------------------------------
Keith B. Pipes Executive Vice President, March 26, 1996
(Principal Financial and Treasurer and Secretary
Accounting Officer)
</TABLE>
<PAGE> 140

EXHIBIT INDEX

<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
- ----------- ----------------------
<S> <C>
Ex-99.B(1) Agreement and Declaration of Trust dated March 26, 1996

Ex-99.B(2) By-Laws
</TABLE>

<PAGE> 1
EXHIBIT-99.B(1)

Sierra Asset Management Trust

AGREEMENT AND DECLARATION OF TRUST

March 26, 1996
<PAGE> 2

AGREEMENT AND DECLARATION OF TRUST

<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I. NAME AND DEFINITIONS 2

Section 1.1 Name 2

Section 1.2 Definitions 2
a) "Trust" 2
b) "Trustees" 2
c) "Shares" 2
d) "Series" 2
e) "Shareholder" 2
f) "1940 Act" 2
g) "Affiliated Person,"
"Assignment," "Commission,"
"Interested Person,"
"Principal Underwriter," and
"Majority Shareholder Vote" 2
h) "Declaration of Trust" 2
i) "By-Laws" 2

ARTICLE II. PURPOSE OF THE TRUST 3

Section 2.1 Purpose of the Trust 3

ARTICLE III. THE TRUSTEES 3

Section 3.1 Election, Resignation, Vacancies, etc. 3
a) Election 3
b) Effect of Death, Resignation, etc. 3
c) No Accounting 3
d) Vacancies 4

Section 3.2 Powers of Trustees 4
a) Investments 5
b) Disposition of Assets 5
c) Act as Distributor, Underwriter,
Broker, Dealer 5
d) Ownership Powers 5
e) Subscription 5
f) Form of Holding 5
g) Allocation of Assets and
Liabilities 5
h) Reorganization, etc. 5
i) Voting Trusts, etc. 6
j) Compromise 6
k) Partnerships, etc. 6
l) Borrowing 6
</TABLE>

(i)
<PAGE> 3

<TABLE>
<S> <C> <C>
m) Guarantees, etc. 6
n) Insurance 6
o) Pensions 7
p) Any Other Lawful Activity 7

Section 3.3 Advisory, Management and Distribution 7

Section 3.4 Payment of Expenses by the Trust 8

Section 3.5 Ownership of Assets of the Trust 9

ARTICLE IV. SHARES 9

Section 4.1 Beneficial Interest 9

Section 4.2 Ownership of Shares 9

Section 4.3 Investment in the Trust 10

Section 4.4 No Preemptive Rights 10

Section 4.5 Status of Shares and Limitation
of Personal Liability 10

Section 4.6 Redemption of Shares 11

ARTICLE V. SHAREHOLDERS' VOTING POWERS AND MEETINGS 11

Section 5.1 Shareholders' Voting Powers and Meetings 11

ARTICLE VI. DISTRIBUTIONS AND REPURCHASES 12

Section 6.1 Distributions 12

Section 6.2 Repurchases 12

Section 6.3 Dividends, Distributions and Repurchases 12

ARTICLE VII. COMPENSATION AND LIMITATION OF LIABILITY OF TRUSTEES 12

Section 7.1 Compensation 12

Section 7.2 Limitation of Liability 13
</TABLE>

(ii)
<PAGE> 4

<TABLE>
<S> <C> <C>
ARTICLE VIII. INDEMNIFICATION 13

Section 8.1 Trustees, Officers, etc. 13

Section 8.2 Compromise Payment 14

Section 8.3 Indemnification Not Exclusive 14

Section 8.4 Shareholders 15

ARTICLE IX. MISCELLANEOUS 15

Section 9.1 Trustees, Shareholders, etc. Not
Personally Liable; Notice 15

Section 9.2 Trustee's Good Faith Action,
Expert Advice, No Bond or Surety 16

Section 9.3 Liability of Third Persons Dealing
with Trustees 16

Section 9.4 Merger of Classes of Shares of the
Trust 16

Section 9.5 Duration and Termination of Trust 17

Section 9.6 Merger, Consolidation and Sale of Assets 18

Section 9.7 Certain Transactions 18

Section 9.8 Amendments 20

Section 9.9 Resident Agent 20

Section 9.10 Filing of Copies; References; Headings 20

Section 9.11 Applicable Law 21

Section 9.12 Provisions in Conflict with Laws
or Regulations 21

Section 9.13 Use of Name 22
</TABLE>

(iii)
<PAGE> 5

Sierra Asset Management Trust
CROSS-REFERENCE SHEET

Pursuant to CMR 116.00:

<TABLE>
<S> <C> <C>
116.03 (a) Name of organization or trust:
Sierra Asset Management Trust

(b) Date of organization:
March 26, 1996

(d) Original signature of sole trustee:
See page 22.

(e) Principal place of business:
One Exchange Place
Boston, MA 02108

(f) Statement that beneficial interest is
divided into transferable certificates of
participation or shares;
See Section 4.1, page 9.

(g) Ability to merge:
See Section 9.6, page 18.

(h) The name and address of the resident agent in Massachusetts:
The Prentice-Hall Corporation System, Inc.
84 State Street
Boston, MA 02109
</TABLE>
<PAGE> 6
Sierra Asset Management Trust
AGREEMENT AND DECLARATION OF TRUST

AGREEMENT AND DECLARATION OF TRUST made at Boston,
Massachusetts this 26th day of March, 1996, by the Trustee hereunder, and by
the holders of shares of beneficial interest to be issued hereunder as
hereinafter provided.

WITNESSETH

WHEREAS this Trust has been formed to carry on the business of
an investment company; and

WHEREAS this Trust is authorized to issue its shares of
beneficial interest in accordance with the provisions hereinafter set forth;
and

WHEREAS the Trustees have agreed to manage all property coming
into their hands as trustees of a Massachusetts business trust in accordance
with the provisions hereinafter set forth.

NOW, THEREFORE, the Trustees hereby declare that they will
hold all cash, securities and other assets which they may from time to time
acquire in any manner as Trustees hereunder IN TRUST to manage and dispose of
the same upon the following terms and conditions for the benefit of the holders
from time to time of shares of beneficial interest in this Trust.
<PAGE> 7
ARTICLE I

NAME AND DEFINITIONS

Section 1.1 Name. This Trust shall be known as the "Sierra Asset
Management Trust" and the Trustees shall conduct the business of the Trust
under that name or any other name or names as they may from time to time
determine.

Section 1.2 Definitions. Whenever used herein, unless otherwise
required by the context or specifically provided:

(a) The "Trust" refers to the Massachusetts business trust
established by this Trust Agreement, as amended from time to time;

(b) "Trustees" refers to the Trustees of the Trust hereunder named
herein or elected in accordance with Article III;

(c) "Shares" refers to the transferable units of interest into
which the beneficial interest in the Trust shall be divided from time to time;

(d) "Series" refers to Series of Shares established and designated
under or in accordance with the provisions of Article IV;

(e) "Shareholder" means a record owner of Shares;

(f) The "1940 Act" refers to the Investment Company Act of 1940
and the Rules and Regulations thereunder, all as amended from time to time;

(g) The terms "Affiliated Person," "Assignment," "Commission,"
"Interested Person," "Principal Underwriter" and "Majority Shareholder Vote"
(the 67% or 50% requirement of the third sentence of Section 2(a)(42) of the
1940 Act, whichever may be applicable) shall have the meanings given them in
the 1940 Act;

(h) "Declaration of Trust" shall mean this Agreement and
Declaration of Trust as amended or restated from time to time; and

(i) "By-Laws" shall mean the By-Laws of the Trust as amended from
time to time.

-2-
<PAGE> 8

ARTICLE II

PURPOSE OF THE TRUST

Section 2.1 Purpose of the Trust. The purpose of the Trust is to
operate as an investment company and to provide investors a managed investment
primarily in securities and other obligations and to carry on such other
business as the Trustees may from time to time determine pursuant to their
authority under this Agreement and Declaration of Trust.

ARTICLE III

THE TRUSTEES

Section 3.1 Election, Resignation, Vacancies, etc..

(a) Election. There shall initially be one Trustee who shall be
F. Brian Cerini. The number of Trustees shall be as provided in the By-laws or
as fixed from time to time by the Trustees. The Shareholders may elect
Trustees at any meeting of Shareholders called by the Trustees for that
purpose. Each Trustee shall serve during the continued lifetime of the Trust
until he or she dies, resigns or is removed, or, if sooner, until the next
meeting of Shareholders called for the purpose of electing Trustees and the
election and qualification of his or her successor. Any Trustee may resign at
any time by written instrument signed by him or her and delivered to any
officer of the Trust, to each other Trustee or to a meeting of the Trustees.
Such resignation shall be effective upon receipt unless specified to be
effective at some other time. Except to the extent expressly provided in a
written agreement with the Trust, no Trustee resigning and no Trustee removed
shall have any right to any compensation for any period following his
resignation or removal, or any right to damages on account of such removal.

(b) Effect of Death, Resignation, etc. of a Trustee. The death,
declination, resignation, retirement, removal or incapacity of the Trustees, or
any one of them, shall not operate to annul the Trust or to revoke any existing
agency created pursuant to the terms of this Declaration of Trust.

(c) No Accounting. Except to the extent required by the 1940 Act
or under circumstances which would justify his or her removal for cause, no
person ceasing to be a Trustee as a result of his or her death, resignation,
retirement, removal or incapacity (nor the estate of any such person) shall be
required to make an accounting to the Shareholders or remaining Trustees upon
such cessation.

-3-
<PAGE> 9

(d) Vacancies. Any vacancy or anticipated vacancy resulting from
any reason, including without limitation the death, resignation, retirement,
removal or incapacity of any of the Trustees, or resulting from an increase in
the number of Trustees by the other Trustees may (but so long as there are at
least two remaining Trustees, need not unless required by the 1940 Act) be
filled by a majority of the remaining Trustees, subject to the provisions of
Section 16(a) of the 1940 Act, through the appointment in writing of such other
person as such remaining Trustees in their discretion shall determine and such
appointment shall be effective upon the written acceptance of the person named
therein to serve as a Trustee and agreement by such person to be bound by the
provisions of this Declaration of Trust, except that any such appointment in
anticipation of a vacancy to occur by reason of retirement, resignation, or
increase in number of Trustees to be effective at a later date shall become
effective only at or after the effective date of said retirement, resignation,
or increase in number of Trustees. As soon as any Trustee so appointed shall
have accepted such appointment and shall have agreed in writing to be bound by
this Declaration of Trust and the appointment is effective, the Trust estate
shall vest in the new Trustee, together with the continuing Trustees, without
any further act or conveyance.

Section 3.2. Powers. Subject to the provisions of this Declaration
of Trust, the business of the Trust shall be managed by the Trustees, and they
shall have all powers necessary or convenient to carry out that responsibility.
Without limiting the foregoing, the Trustees may adopt By-laws not inconsistent
with this Declaration of Trust providing for the conduct of the business of the
Trust and may amend and repeal them to the extent that such By-laws do not
reserve that right to the Shareholders; they may enlarge or reduce their
number, may fill vacancies in their number, including vacancies caused by
enlargement of their number, and may remove Trustees with or without cause;
they may elect and remove, with or without cause, such officers and appoint and
terminate such agents as they consider appropriate; they may appoint from their
own number, and terminate, any one or more committees consisting of two or more
Trustees, including an executive committee which may, when the Trustees are not
in session, exercise some or all of the power and authority of the Trustees as
the Trustees may determine; they may employ one or more custodians of the
assets of the Trust and may authorize such custodians to employ subcustodians
and to deposit all or any part of such assets in a system or systems for the
central handling of securities, retain a transfer agent or a Shareholder
servicing agent, or both, provide for the distribution of Shares by the Trust,
through one or more principal underwriters or otherwise, set record dates for
the determination of Shareholders with respect to various matters, and in
general delegate such authority as they consider desirable to any officer

-4-
<PAGE> 10

of the Trust, to any committee of the Trustees and to any agent or employee of
the Trust or to any such custodian or underwriter.

Without limiting the foregoing, the Trustees shall have power and authority:

(a) To invest and reinvest cash, and to hold cash
uninvested;

(b) To sell, exchange, lend, pledge, mortgage,
hypothecate, write options on and lease any or all of the assets of
the Trust;

(d) To vote or give assent, or exercise any rights of
ownership, with respect to stock or other securities or property; and
to execute and deliver proxies or powers of attorney to such person or
persons as the Trustees shall deem proper, granting to such person or
persons such power and discretion with relation to securities or
property as the Trustees shall deem proper;

(e) To exercise powers and rights of subscription or
otherwise which in any manner arise out of ownership of securities;

(f) To hold any security or property in a form not
indicating any trust, whether in bearer, unregistered or other
negotiable form, or in the name of the Trustees or of the Trust or in
the name of a custodian, subcustodian or other depository or a nominee
or nominees or otherwise;

(g) To allocate assets, liabilities and expenses of the
Trust to a particular series or class of Shares or to apportion the
same among two or more series or classes of Shares, provided that any
liabilities or expenses incurred by a particular series or class of
Shares shall be payable solely out of the assets of that class.

(h) To consent to or participate in any plan for the
reorganization, consolidation or merger of any corporation or issuer,
any security of which is or was held in the Trust; to consent to any
contract, lease, mortgage, purchase or sale of property by such
corporation or issuer, and to pay calls or subscriptions with respect
to any security held in the Trust;

-5-
<PAGE> 11

(i) To join with other security holders in acting through
a committee depositary, voting trustee or otherwise, and in that
connection to deposit any security with, or transfer any security to,
any such committee, depositary or trustee, and to delegate to them
such power and authority with relation to any security (whether or not
so deposited or transferred) as the Trustees shall deem proper, and to
agree to pay, and to pay, such portion of the expenses and
compensation of such committee, depositary or trustee as the Trustees
shall deem proper;

(j) To compromise, arbitrate or otherwise adjust claims
in favor of or against the Trust or any matter in controversy,
including but not limited to claims for taxes;

(k) To enter into joint ventures, general or limited
partnerships and any other combinations or associations;

(l) To borrow funds;

(m) To endorse or guarantee the payment of any notes or
other obligations of any person; to make contracts of guaranty or
suretyship, or otherwise assume liability for payment thereof; and to
mortgage and pledge the Trust property or any part thereof to secure
any of or all such obligations;

(n) To purchase and pay for entirely out of Trust
property such insurance as they may deem necessary or appropriate for
the conduct of the business, including without limitation, insurance
policies insuring the assets of the Trust and payment of distributions
and principal on its portfolio investments, and insurance policies
insuring the Shareholders, Trustees, officers, employees, agents,
investment advisers or managers, principal underwriters, or
independent contractors of the Trust individually against all claims
and liabilities of every nature arising by reason of holding, being or
having held any such office or position, or by reason of any action
alleged to have been taken or omitted by any such person as
Shareholder, Trustee, officer, employee, agent, investment adviser or
manager, principal underwriter, or independent contractor, including
any action taken or omitted that may be determined to constitute
negligence, whether or not the Trust would have the power to indemnify
such person against such liability;

-6-
<PAGE> 12

(o) To pay pensions for faithful service, as deemed
appropriate by the Trustees, and to adopt, establish and carry out
pension, profit-sharing, share bonus, share purchase, savings, thrift
and other retirement, incentive and benefit plans, trusts and
provisions, including the purchasing of life insurance and annuity
contracts as a means of providing such retirement and other benefits,
for any or all of the Trustees, officers, employees and agents of the
Trust; and

(p) To engage in any other lawful act or activity in
which corporations organized under the Massachusetts Business
Corporation Law may engage.

The Trustees shall not in any way be bound or limited by any present
or future law or custom in regard to investments by trustees. Except as
otherwise provided herein or from time to time in the By-laws, any action to be
taken by the Trustees may be taken by a majority of the Trustees present at a
meeting of Trustees (a quorum being present), within or without Massachusetts,
including any meeting held by means of a conference telephone or other
communications equipment by means of which all persons participating in the
meeting can hear each other at the same time and participation by such means
shall constitute presence in person at a meeting, or by written consents of a
majority of the Trustees then in office.

Section 3.3 Advisory, Management and Distribution. The Trustees may,
at any time and from time to time, contract for exclusive or nonexclusive
advisory and/or management services with any corporation, trust, association or
other organization (the "Advisor"), every such contract to comply with such
requirements and restrictions as may be set forth in the By-laws; and any such
contract may provide for one or more Sub-advisers who shall perform all or part
of the obligations of the Advisor under such contract and may contain such
other terms interpretive of or in addition to said requirements and
restrictions as the Trustees may determine, including, without limitation,
authority to determine from time to time what investments shall be purchased,
held, sold or exchanged and what portion, if any, of the assets of the Trust
shall be held uninvested and to make changes in the Trust's investments. The
Trustees may also, at any time and from time to time, contract with the Advisor
or any other corporation, trust, association or other organization, appointing
it exclusive or nonexclusive distributor or principal underwriter for the
Shares, every such contract to comply with such requirements and restrictions
as may be set forth in the By-laws; and any such contract may contain such
other terms interpretive of or in addition to said requirements and
restrictions as the Trustees may determine.

-7-
<PAGE> 13

The fact that:

(i) any of the Shareholders, Trustees or officers of the
Trust is a shareholder, director, officer, partner, trustee, employee,
manager, adviser, principal underwriter or distributor or agent of or
for any corporation, trust, association, or other organization, or of
or for any parent or affiliate of any organization, with which an
advisory or management contract, or principal underwriter's or
distributor's contract, or transfer, shareholder servicing or other
agency contract may have been or may hereafter be made, or that any
such organization, or any parent or affiliate thereof, is a
Shareholder or has an interest in the Trust, or that

(ii) any corporation, trust, association or other
organization with which an advisory or management contract or
principal underwriter's or distributor's contract, or transfer,
shareholder servicing or other agency contract may have been or may
hereafter be made also has an advisory or management contract, or
principal underwriter's or distributor's contract, or transfer,
Shareholder servicing or other agency contract with one or more other
corporations, trusts, associations, or other organizations, or has
other business or interests

shall not affect the validity of any such contract or disqualify any
Shareholder, Trustee or officer of the Trust from voting upon or executing the
same or create any liability or accountability to the Trust or its
Shareholders.

Section 3.4 Payment of Expenses by the Trust. The Trustees are
authorized to pay or to cause to be paid out of the principal or income of the
Trust, or partly out of principal and partly out of income, as they deem fair,
all expenses, fees, charges, taxes and liabilities incurred or arising in
connection with the Trust, in connection with the management thereof, or in
connection with the financing of the sale of Shares, including, but not limited
to, the Trustees' compensation and such expenses and charges for the services
of the Trust's officers, employees, any investment adviser, manager, or
sub-adviser, principal underwriter, auditor, counsel, custodian, transfer
agent, shareholder servicing agent, and such other agents or independent
contractors and such other expenses and charges as the Trustees may deem
necessary or proper to incur; provided, however, that all expenses, fees,
charges, taxes and liabilities incurred or arising in connection with a
particular series or class of Shares as determined by the Trustees, shall be
payable solely out of the assets of that series or class. Any general
liabilities, expenses, costs, charges or

-8-
<PAGE> 14

reserves of the Trust which are not readily identifiable as belonging to any
particular series shall be allocated and charged by the Trustees between or
among any one or more of the series in such manner as the Trustees in their
sole discretion deem fair and equitable. Each such allocation shall be
conclusive and binding upon the Shareholders of all series for all purposes.
Any creditor of any series may look only to the assets of that series to
satisfy such creditor's debt.

The Trustees shall have the power, as frequently as they may
determine, to cause each Shareholder to pay directly, in advance or arrears,
for any and all expenses of the Trust, an amount fixed from time to time by the
Trustees, by setting off such charges due from such Shareholder from declared
but unpaid dividends owed such Shareholder and/or by reducing the number of
Shares in the account of such Shareholder by that number of full and/or
fractional Shares which represents the outstanding amount of such charges due
from such Shareholder.

Section 3.5 Ownership of Assets of the Trust. Title to all of the
assets of the Trust shall at all times be considered as vested in the Trustees.

ARTICLE IV

Section 4.1 Beneficial Interest. The Shares of the Trust shall have
no par value and shall be issued in one or more classes or series as the
Trustees may, without shareholder approval, authorize. Each class or series of
Shares shall represent an equal proportionate interest in the assets and
liabilities of the Trust, with no class or series having priority or preference
over another. If the Trustees have authorized the issuance of two or more
classes or series of Shares, then the classes or series may have such
variations as to dividends, redemption rights, voting rights, net asset values,
expenses borne by the classes or series, and other matters as the Trustees have
authorized. The number of Shares authorized shall be unlimited.

Section 4.2 Ownership of Shares. The ownership of Shares shall be
recorded on the books of the Trust or a transfer or similar agent. No
certificates certifying the ownership of Shares shall be issued except as the
Trustees may otherwise determine from time to time. The Trustees may make such
rules as they consider appropriate for the issuance of Share certificates, the
transfer of Shares and similar matters. The record books of the Trust as kept
by the Trust or any transfer or similar agent, as the case may be, shall be
conclusive as to who are the Shareholders of each class or

-9-
<PAGE> 15

series and as to the number of Shares of each class or series held from time to
time by each Shareholder.

Section 4.3 Investment in the Trust. The Trustees shall accept
investments in the Trust from such persons and on such terms and for such
consideration, which may consist of cash or tangible or intangible property or
a combination thereof, as they from time to time authorize.

All consideration received by the Trust for the issue or sale of
Shares of each class or series of Shares, together with all income, earnings,
profits, and proceeds thereof, including any proceeds derived from the sale,
exchange or liquidation thereof, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be, shall
irrevocably belong to the class or series of Shares with respect to which the
same were received by the Trust for all purposes, subject only to the rights of
creditors, and shall be so handled upon the books of account of the Trust and
are herein referred to as "assets of" such class or series of shares.

Section 4.4 No Preemptive Rights. Shareholders shall have no
preemptive or other right to subscribe to any additional Shares or other
securities issued by the Trust.

Section 4.5 Status of Shares and Limitation of Personal Liability.
Shares shall be deemed to be personal property giving only the rights provided
in this instrument. Every Shareholder by virtue of having become a Shareholder
shall be held to have expressly assented and agreed to the terms hereof and to
have become a party hereto. The death of a Shareholder during the continuance
of the Trust shall not operate to terminate the same nor entitle the
representative of any deceased Shareholder to an accounting or to take any
action in court or elsewhere against the Trust or the Trustees, but only to the
rights of said decedent under this Trust. Ownership of Shares shall not
entitle the Shareholder to any title in or to the whole or any part of the
Trust property or right to call for a partition or division of the same or for
an accounting, nor shall the ownership of Shares constitute the Shareholders
partners. Neither the Trust nor the Trustees, nor any officer, employee or
agent of the Trust shall have any power to bind personally any Shareholder, nor
except as specifically provided herein to call upon any Shareholder for the
payment of any sum of money or assessment whatsoever other than such as the
Shareholder may at any time personally agree to pay.

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<PAGE> 16

Section 4.6

(a) Redemption by Shareholder. Each holder of Shares of a
particular class or series of Shares shall have the right at such times as may
be permitted by the Trust, but no less frequently than once each week, to
require the Trust to redeem all or any part of his Shares of that class or
series of Shares at a redemption price equal to the net asset value per Share
of that class or series of Shares next determined in accordance with the
By-laws of the Trust after the Shares are properly tendered for redemption.
Payment of the redemption price shall be in cash; provided, however, that if
the Trustees determine, which determination shall be conclusive, that
conditions exist which make payment wholly in cash unwise or undesirable, the
Trust may make payment wholly or partly in securities or other assets belonging
to the class or series of Shares of which the Shares being redeemed are part at
the value of such securities or assets used in such determination of net asset
value.

Notwithstanding the foregoing, the Trust may postpone payment of the
redemption price and may suspend the right of the holders of Shares of any
class or series of Shares to require the Trust to redeem Shares of that class
or series of Shares during any period or at any time when and to the extent
permissible under the 1940 Act.

(b) Redemption by Trust. Each Share of each series or class that
has been established and designated is subject to redemption by the Trust at
the redemption price which would be applicable if such Share was then being
redeemed by the Shareholder pursuant to subsection (a) of this Section 4.6:
(a) at any time, if the Trustees determine in their sole discretion that
failure to so redeem may have materially adverse consequences to the holders of
the Shares of the Trust or any class or series of Shares thereof, or (b) upon
such other conditions as may from time to time be determined by the Trustees
and set forth in a then current Prospectus of the Trust with respect to
maintenance of Shareholder accounts of a minimum amount. Upon such redemption
the holders of the Shares so redeemed shall have no further right with respect
thereto other than to receive payment of such redemption price.

ARTICLE V

SHAREHOLDERS' VOTING POWERS AND MEETINGS

Section 5.1 Shareholders' Voting Powers and Meetings. Shareholders
shall have such power to vote as is provided for in,

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<PAGE> 17

and may hold meetings and take actions pursuant to, the provisions of the
By-laws.

ARTICLE VI

DISTRIBUTIONS AND REPURCHASES

Section 6.1 Distributions. The Trustees may each year, or more
frequently if they so determine, distribute to the Shareholders of each class
or series of Shares such income and capital gains, accrued or realized, as the
Trustees may determine, after providing for actual and accrued expenses and
liabilities (including such reserves as the Trustees may establish) determined
in accordance with good accounting practices. The Trustees shall have full
discretion to determine which items shall be treated as income and which items
as capital and their determination shall be binding upon the Shareholders.
Distributions of each year's income of each class or series of Shares shall be
distributed pro rata to Shareholders in proportion to the number of Shares of
each class or series held by each of them. Such distributions shall be made in
cash or Shares or a combination thereof as determined by the Trustees. Any
such distribution paid in Shares will be paid at the net asset value thereof as
determined in accordance with the By-laws.

Section 6.2 Repurchases. The Trustees may in their business judgment
authorize the Trust to repurchase all or a portion of its outstanding classes
or series of Shares at the net asset value of such Shares thereof as determined
in accordance with the By-Laws. Such Share repurchases are expected to be in
the form of tender offers by the Trust to the Shareholders.

Section 6.3 Dividends, Distributions and Repurchases. No dividend or
distribution (including, without limitation, any distribution paid upon
termination of the Trust or of a class or series of Shares) with respect to the
Shares shall be effected by the Trust other than from the assets of such Trust.
The Trust may borrow against its assets for the purpose of funding said
repurchase of Shares.

ARTICLE VII

COMPENSATION AND LIMITATION OF LIABILITY OF TRUSTEES

Section 7.1 Compensation. the Trustees as such shall be entitled to
reasonable compensation from the Trust; they may fix the amount of their
compensation. Nothing herein shall in any way prevent the employment of any
Trustee for advisory, management, legal, accounting, investment banking,
underwriting, brokerage, or

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<PAGE> 18

investment dealer or other services and payment for the same by the Trust.

Section 7.2 Limitation of Liability. The Trustees shall not be
responsible or liable in any event for any neglect or wrongdoing of any
officer, agent, employee, manager or principal underwriter of the Trust, nor
shall any Trustee be responsible for the act or omission of any other Trustee,
but nothing herein contained shall protect any Trustee against any liability to
which he or she would otherwise be subject by reason of wilful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of his or her office.

Every note, bond, contract, instrument, certificate, Share or
undertaking and every other act or thing whatsoever executed or done by or on
behalf of the Trust or the Trustees or any of them in connection with the Trust
shall be conclusively deemed to have been executed or done only in or with
respect to their or his or her capacity as Trustees or Trustee, and such
Trustees or Trustee shall not be personally liable thereon.

ARTICLE VIII

INDEMNIFICATION

Section 8.1 Trustees, Officers, etc. The Trust shall indemnify each
of its Trustees and officers (including persons who serve at the Trust's
request as directors, officers or trustees of another organization in which the
Trust has any interest as a shareholder, creditor or otherwise) (hereinafter
referred to as a "Covered Person") against all liabilities and expenses,
including but not limited to amounts paid in satisfaction of judgments, in
compromise or as fines and penalties, and counsel fees reasonably incurred by
any Covered Person in connection with the defense or disposition of any action,
suit or other proceeding, whether civil or criminal, before any court or
administrative or legislative body, in which such Covered Person may be or may
have been involved as a party or otherwise or with which such Covered Person
may be or may have been threatened, while in office or thereafter, by reason of
being or having been such a Covered Person except with respect to any matter as
to which such Covered Person shall have been finally adjudicated in any such
action, suit or other proceeding to be liable to the Trust or its Shareholders
by reason of wilful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of such Covered Person's
office. Expenses, including counsel fees so incurred by any such Covered
Person (but excluding amounts paid in satisfaction of judgments, in compromise
or as fines or penalties), shall be paid from time to time by the Trust in
advance of the final disposition of any such action, suit or proceeding upon
receipt of an undertaking by or on

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<PAGE> 19

behalf of such Covered Person to repay amounts so paid to the Trust if it is
ultimately determined that indemnification of such expenses is not authorized
under this Article; provided, however, that either (a) such Covered Person
shall have provided appropriate security for such undertaking, (b) the Trust
shall be insured against losses arising from any such advance payments or (c)
either a majority of the disinterested Trustees acting on the matter (provided
that a majority of the disinterested Trustees then in office act on the
matter), or independent legal counsel in a written opinion, shall have
determined, based upon a review of readily available facts (as opposed to a
full trial type inquiry) that there is reason to believe that such Covered
Person will be found entitled to indemnification under this Article.

Section 8.2 Compromise Payment. As to any matter disposed of
(whether by a compromise payment, pursuant to a consent decree or otherwise)
without an adjudication by a court, or by any other body before which the
proceeding was brought, that such Covered Person is liable to the Trust or its
Shareholders by reason of wilful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his or her office,
indemnification shall be provided if (a) approved, after notice that it
involves such indemnification, by at least a majority of the disinterested
Trustees acting on the matter (provided that a majority of the disinterested
Trustees then in office act on the matter) upon a determination, based upon a
review of readily available facts (as opposed to a full trial type inquiry)
that such Covered Person is not liable to the Trust or its Shareholders by
reasons of wilful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his or her office, or (b)
there has been obtained an opinion in writing of independent legal counsel,
based upon a review of readily available facts (as opposed to a full trial type
inquiry) to the effect that such indemnification would not protect such Person
against any liability to the Trust or to its shareholders to which he or she
would otherwise be subject by reason of wilful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office. Any approval pursuant to this Section shall not prevent the recovery
from any Covered Person of any amount paid to such Covered Person in accordance
with this Section as indemnification if such Covered Person is subsequently
adjudicated by a court of competent jurisdiction to have been liable to the
Trust or its Shareholders by reason of wilful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of such
Covered Person's office.

Section 8.3 Indemnification Not Exclusive. The right of
indemnification hereby provided shall not be exclusive of or affect any other
rights to which such Covered Person may be entitled. As

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<PAGE> 20

used in this Article VIII, the term "Covered Person" shall include such
person's heirs, executors and administrators and a "disinterested Trustee" is a
Trustee who is not an "interested person" of the Trust as defined in Section 2
(a)(19) of the Investment Company Act of 1940, as amended, (or who has been
exempted from being an "interested person" by any rule, regulation or order of
the Commission) and against whom none of such actions, suits or other
proceedings or another action, suit or other proceeding on the same or similar
grounds is then or has been pending. Nothing contained in this Article shall
affect any rights to indemnification to which personnel of the Trust, other
than Trustees or officers, and other persons may be entitled by contract or
otherwise under law, nor the power of the Trust to purchase and maintain
liability insurance on behalf of any such person.

Section 8.4 Shareholders. In case any Shareholder or former
Shareholder shall be held to be personally liable solely by reason of his or
her being or having been a Shareholder and not because of his or her acts or
omissions or for some other reason, the Shareholder or former Shareholder (or
his or her heirs, executors, administrators or other legal representatives or
in the case of a corporation or other entity, its corporate or other general
successor) shall be entitled to be held harmless from and indemnified against
all loss and expense arising from such liability, but only out of the assets of
the particular class or series of Shares of which he or she is or was a
Shareholder.

ARTICLE IX

MISCELLANEOUS

Section 9.1 Trustees, Shareholders, etc. Not Personally Liable;
Notice. All persons extending credit to, contracting with or having any claim
against the Trust shall look only to the assets of the Trust for payment under
such credit, contract or claim; and neither the Shareholders nor the Trustees,
nor any of the Trust's officers, employees or agents, whether past, present or
future, shall be personally liable therefor. Nothing in this Declaration of
Trust shall protect any Trustee against any liability to which such Trustee
would otherwise be subject by reason of wilful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of the
office of Trustee.

Every note, bond, contract, instrument, certificate or undertaking
made or issued by the Trustees or by any officer or officers shall give notice
that this Declaration of Trust is on file with the Secretary of the
Commonwealth of Massachusetts and shall recite that the same was executed or
made by or on behalf of the Trust or by them as Trustee or Trustees or as
officers or

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<PAGE> 21

officer and not individually and that the obligations of such instrument are
not binding upon any of them or the Shareholders individually but are binding
only upon the assets and property of the Trust, and may contain such further
recital as he or she or they may deem appropriate, but the omission thereof
shall not operate to bind any Trustee or Trustees or officer or officers or
Shareholder or Shareholders individually.

Section 9.2 Trustee's Good Faith Action, Expert Advice, No Bond or
Surety. The exercise by the Trustees of their powers and discretions hereunder
shall be binding upon everyone interested. A Trustee shall be liable for his
or her own wilful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of the office of Trustee, and
for nothing else, and shall not be liable for errors of judgment or mistakes of
fact or law. The Trustees may take advice of counsel or other experts with
respect to the meaning and operation of this Declaration of Trust, and shall be
under no liability for any act or omission in accordance with such advice or
for failing to follow such advice. The Trustees shall not be required to give
any bond as such, nor any surety if a bond is required.

Section 9.3 Liability of Third Persons Dealing with Trustees. No
person dealing with the Trustees shall be bound to make any inquiry concerning
the validity of any transaction made or to be made by the Trustees or to see to
the application of any payments made or property transferred to the Trust or
upon its order.

Section 9.4 Merger or Combination of Classes or Series of Shares of
the Trust. If permitted by regulatory authorities, the Trust, by resolution of
its Board of Trustees, may direct that the separate portfolios of two or more
classes or series of the Trust's shares be combined into a single portfolio on
such terms as the Board of Trustees may deem appropriate or which regulatory
authorities may require for the protection of the rights of holders of each
class or series of shares. If portfolios are combined, the following
provisions shall apply to the classes or series of shares:

(a) The assets of the combined portfolio and the income
from investment and reinvestment of the assets shall be allocated to
each class or series of shares in accordance with the number of shares
of that class or series outstanding for purposes of determining the
net asset value of each class or series of shares, the amounts
distributable to holders of shares of each class or series of shares
in the event of dissolution and liquidation of the Trust and the
dividends payable with

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<PAGE> 22

respect to shares of each class or series of shares.

(b) The liabilities and expenses of the Trust with
respect to a class or series of the Trust's shares shall be charged to
that class or series. Liabilities and expenses chargeable to more
than one class of shares shall be allocated by or in accordance with
procedures adopted by the Board of Trustees. The determination of the
Board of Trustees shall be conclusive as to the charging or allocation
of liabilities.

(c) Each class or series of shares shall be entitled to
such dividends or distributions, in shares or cash or both, as may be
declared by the Board of Trustees with respect to such class or
series. Dividends or distributions may be paid only out of net income
or surplus of that class or series.

(d) In the event of the liquidation or dissolution of the
Trust, the holders of each class or series of the Trust's shares shall
be entitled to receive that class or series share of the assets of the
Trust less the liabilities of the Trust allocable to that class or
series as determined by or in accordance with procedures adopted by
the Board of Trustees. The assets so distributable to the holders of
a particular class or series shall be distributed among them in
proportion to the number of shares of the class or series held by each
of them and recorded on the books of the Trust.

If the Board of Trustees orders the combination of portfolios of classes or
series of shares, it may at any time thereafter by resolution order that the
portfolios be segregated or combined with portfolios of other classes or series
on such terms as the Board of Trustees determines are desirable for the
protection of the interests of the Trust and its shareholders or to comply with
regulatory requirements.

Section 9.5 Duration and Termination of Trust. Unless terminated as
provided herein, the Trust shall continue without limitation of time. The
Trust may be terminated at any time by the vote of Shareholders holding at
least a majority of the Shares entitled to vote or by the Trustees by written
notice to the Shareholders. Any class or series of Shares may be terminated at
any time by vote of Shareholders holding at least a majority of the Shares of
such class or series entitled to vote or by the Trustees by written notice to
the Shareholders of such class or series.

Upon termination of the Trust or of any one or more classes or series
of Shares, after paying or otherwise providing

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<PAGE> 23

for all charges, taxes, expenses and liabilities, whether due or accrued or
anticipated, of the Trust or of the particular class or series as may be
determined by the Trustees, the Trust shall, in accordance with such procedures
as the Trustees shall consider appropriate, reduce the remaining assets to
distributable form in cash or shares or other securities, or any combination
thereof, and distribute the proceeds to the Shareholders of the series
involved, ratably according to the aggregate net asset value of Shares of such
class or series of Shares held by the several Shareholders of such class or
series of Shares on the date of termination.

Section 9.6 Merger, Consolidation and Sale of Assets. Subject to
Section 9.8, the Trust may merge or consolidate with any other corporation,
association, trust or other organization, or may sell, lease or exchange all or
substantially all of the Trust Property, including its goodwill, upon such
terms and conditions and for such consideration when and as authorized at any
meeting of the Shareholders called for the purpose by the affirmative vote of
the holders of not less than two-thirds of the Shares outstanding and entitled
to vote, or by an instrument or instruments in writing without a meeting,
consented to by the holders of not less than two-thirds of the Shares,
provided, however, that if such merger, consolidation, sale, lease or exchange
is recommended by the Trustees, the vote or written consent of the holders of a
majority of the Shares outstanding and entitled to vote shall be sufficient
authorization and any such merger, consolidation, sale, lease or exchange shall
be deemed for all purposes to have been accomplished under and pursuant to the
statutes of the Commonwealth of Massachusetts.

Section 9.7 Certain Transactions. (a) Notwithstanding any other
provision of this Declaration and subject to the exceptions provided in
paragraph (d) of this Section, the types of transactions described in paragraph
(c) of this Section shall require the affirmative vote or consent of the
holders of not less than two-thirds of the Shares outstanding and entitled to
vote when a Principal Shareholder (as defined in paragraph (b) of this Section)
is a party to the transaction. Such affirmative vote or consent shall be in
addition to the vote or consent of the holders of the Shares otherwise required
by law or any agreement between the Trust and any national securities exchange.

(b) The term "Principal Shareholder" shall mean any
corporation, person or other entity which is the beneficial owner, directly or
indirectly, of more than five percent (5%) of the outstanding Shares and shall
include any affiliate or associate, as such terms are defined in clause (ii)
below, of a Principal Shareholder. For the purposes of this Section, in
addition to the Shares which a corporation, person or other entity beneficially
owns directly, (a) any corporation, person or other entity shall be

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<PAGE> 24

deemed to be the beneficial owner of any Shares (i) which it has the right to
acquire pursuant to any agreement or upon exercise of conversion rights or
warrants, or otherwise (but excluding share options granted by the Trust), or
(ii) which are beneficially owned, directly or indirectly (including Shares
deemed owned through application of clause (i) above, by any other corporation,
person or entity with which it or its "affiliate" or "associate" (as defined
below) has any agreement, arrangement or understanding for the purpose of
acquiring, holding, voting or disposing of Shares, or which is its "affiliate"
or "associate" as those terms are defined in Rule 12b-2 under the Securities
Exchange Act of 1934, as amended, and (b) the outstanding Shares shall include
Shares deemed owned through application of clauses (i) and (ii) above but shall
not include any other Shares which may be issuable pursuant to any agreement,
or upon exercise of conversion rights or warrants, or otherwise.

(1) The merger or consolidation of the
Trust or any subsidiary of the Trust with or into any Principal
Shareholder.

(2) The issuance of any securities of
the Trust to any Principal Shareholder for cash.

(3) The sale, lease or exchange of all
or any substantial part of the assets of the Trust to any Principal
Shareholder (except assets having an aggregate fair market value of
less than $1,000,000, aggregating for the purpose of such computation
all assets sold, leased or exchanged in any series of similar
transactions within a twelve-month period).

(4) The sale, lease or exchange to the
Trust or any subsidiary thereof, in exchange for securities of the
Trust of any assets of any Principal Shareholder (except assets having
an aggregate fair market value of less than $1,000,000, aggregating
for the purposes of such computation all assets sold, leased or
exchanged in any series of similar transactions within a twelve-month
period).

(d) The provisions of this Section shall not be
applicable to (i) any of the transactions described in paragraph (c) of this
Section if the Trustees shall by resolution have approved a memorandum of
understanding with such Principal Shareholder with respect to and substantially
consistent with such transaction, or (ii) any such transaction with any
corporation of

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which a majority of the outstanding shares of all classes of stock normally
entitled to vote in elections of trustees is owned of record or beneficially by
the Trust and its subsidiaries.

(e) The Trustees shall have the power and duty to
determine for the purposes of this Section, on the basis of information known
to the Trust, whether (i) a corporation, person or entity beneficially owns
more than five percent (5%) of the outstanding Shares, (ii) a corporation,
person or entity is an "affiliate" or "associate" (as defined above) of
another, (iii) the assets being acquired or leased to or by the Trust, or any
subsidiary thereof, constitute a substantial part of the assets of the Trust
and have an aggregate fair market value of less than $1,000,000, and (iv) the
memorandum of understanding referred to in paragraph (d) hereof is
substantially consistent with the transaction covered thereby. Any such
determination shall be conclusive and binding for all purposes of this Section.

Section 9.8 Amendments. This Declaration of Trust may be amended at
any time by an instrument in writing signed by a majority of the then Trustees
when authorized to do so by vote of Shareholders holding a majority of the
Shares of each class or series entitled to vote, except that an amendment which
shall affect the holders of one or more classes or series of Shares but not the
holders of all outstanding class or series shall be authorized by vote of the
Shareholders holding a majority of the Shares entitled to vote of each class or
series affected and no vote of Shareholders of a class or series not affected
shall be required. Any amendment which shall affect the holders of Shares of
one or more classes of a series but not the holders of all Shares of a series
shall be authorized by vote of the Shareholders holding a majority of the
Shares of such classes affected by the amendment voting together as a single
class, and no vote of Shareholders of the classes not affected shall be
required. Amendments having the purpose of changing the name of the Trust, of
establishing, changing, or eliminating the par value of the shares or of
supplying any omission, curing any ambiguity or curing, correcting or
supplementing any defective or inconsistent provision contained herein shall
not require authorization by Shareholder vote.

Section 9.9 Resident Agent. The Trust may appoint and maintain a
resident agent in the Commonwealth of Massachusetts.

Section 9.10 Filing of Copies; References; Headings. The original or
a copy of this instrument and of each amendment hereto shall be kept at the
office of the Trust where it may be inspected by any Shareholder. A copy of
this instrument and of each amendment hereto shall be filed by the Trust with
the Secretary of the Commonwealth of Massachusetts and with the Boston City
Clerk,

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as well as any other governmental office where such filing may from time to
time be required, but the failure to make any such filing shall not impair the
effectiveness of this instrument or any such amendment. Anyone dealing with
the Trust may rely on a certificate by an officer of the Trust as to whether or
not any such amendments have been made, as to the identities of the Trustees
and officers, and as to any matters in connection with the Trust hereunder;
and, with the same effect as if it were the original, may rely on a copy
certified by an officer of the Trust to be a copy of this instrument or of any
such amendments. In this instrument and in any such amendment, references to
this instrument, and all expressions like "herein", "hereof" and "hereunder"
shall be deemed to refer to this instrument as a whole as the same may be
amended or affected by any such amendments. The masculine gender shall include
the feminine and neuter genders. Headings are placed herein for convenience of
reference only and shall not be taken as a part hereof or control or affect the
meaning, construction or effect of this instrument. This instrument may be
executed in any number of counterparts each of which shall be deemed an
original.

Section 9.11 Applicable Law. This Declaration of Trust is made in
the Commonwealth of Massachusetts, and it is created under and is to be
governed by and construed and administered according to the laws of said
Commonwealth, including the Massachusetts Business Corporation Law as the same
may be amended from time to time, to which reference is made with the intention
that matters not specifically covered herein or as to which an ambiguity may
exist shall be resolved as if the Trust were a business corporation organized
in Massachusetts, but the reference to said Business Corporation Law is not
intended to give the Trust, the Trustees, the Shareholders or any other person
any right, power, authority or responsibility available only to or in
connection with an entity organized in corporate form. The Trust shall be of
the type referred to in Section 1 of Chapter 182 of the Massachusetts General
Laws and of the type commonly called a Massachusetts business trust, and
without limiting the provisions hereof, the Trust may exercise all powers which
are ordinarily exercised by such a trust.

Section 9.12 Provisions in Conflict with Laws and Regulations. (a)
The provisions of this Declaration of Trust are severable, and if the Trustees
shall determine, with the advice of counsel, that any of such provisions is in
conflict with the 1940 Act, the regulated investment company provisions of the
Internal Revenue Code of 1986, or any amendments or successor statute thereto,
or with other applicable laws and regulations, the conflicting provision shall
be deemed not to constitute and never to have constituted a part of the
Declaration; provided, however, that such determination shall not affect any of
the remaining

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<PAGE> 27

provisions of the Declaration of Trust or render invalid or improper any action
taken or omitted prior to such determination.

(b) If any provision of the Declaration of Trust shall be
held invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall apply only to such provision in such jurisdiction and
shall not in any manner affect such provision in any other jurisdiction or any
other provision of the Declaration in any jurisdiction.

Section 9.13 Use of the Name. Sierra Investment Advisors
Corporation ("Sierra Advisors") has consented to the use by the Trust of the
identifying word or name "Sierra" in the name of the Trust. Such consent is
conditioned upon the employment of Sierra Advisors, its successors or any
affiliate thereof as Investment Advisor or administrator of the Trust. As
between the Trust and Sierra, Sierra controls the use of the name of the Trust
insofar as such name contains "Sierra." The name or identifying word "Sierra"
may be used from time to time in other connections and for other purposes by
Sierra or affiliated entities. Sierra may require the Trust to cease using
"Sierra" in the name of the Trust if the Trust ceases to employ, for any
reason, Sierra, an affiliate or any successor as Investment Advisor of the
Trust.

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<PAGE> 28

IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
for himself and his assigns, as of the 25th day of March, 1996.

/s/ F. Brian Cerini
--------------------------------
F. Brian Cerini

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<PAGE> 29

THE STATE OF CALIFORNIA

COUNTY OF LOS ANGELES
March 25, 1996

Then personally appeared the above-named F. Brian Cerini and
acknowledged the foregoing instrument to be his free act and deed, before me.

/s/ Azie Avanian
-------------------------------
Notary Public
My Commission expires:

[Notary Seal]

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<PAGE> 1

EXHIBIT-99.B(2)

BY-LAWS
OF
SIERRA ASSET MANAGEMENT TRUST

ARTICLE 1
Agreement and Declaration of Trust and Principal Office

1.1 Agreement and Declaration of Trust. These By-laws shall be
subject to the Agreement and Declaration of Trust, as from time to time in
effect (the "Declaration of Trust"), of the Sierra Asset Management Trust, the
Massachusetts business trust established by the Declaration of Trust (the
"Trust").

1.2 Principal Office of the Trust. A principal office of the
Trust shall be located in Boston, Massachusetts. The Trust may have such other
offices within or without Massachusetts as the Trustees may determine or as
they may authorize.

ARTICLE 2
Meetings of Trustees

2.1 Regular Meetings. Regular meetings of the Trustees may be
held without call or notice at such places and at such times as the Trustees
may from time to time determine, provided that notice of the first regular
meeting following any such determination shall be given to absent Trustees.

2.2 Special Meetings. Special meetings of the Trustees may be
held at any time and at any place designated in the call of the meeting when
called by the Chairman of the Trustees, the President or the Treasurer or by
two or more Trustees, sufficient notice thereof being given to each Trustee by
the Secretary or an Assistant Secretary or by the officer or the Trustees
calling the meeting.

2.3 Notice. It shall be sufficient notice to a Trustee of a
special meeting to send notice by mail at least forty-eight hours or by
telegram, telex or telecopy or other electronic facsimile transmission method
at least twenty-four hours before the meeting addressed to the Trustee at his
or her usual or last known business or residence address or to give notice to
him or her in person or by telephone at least twenty-four hours before the
meeting. Notice of a meeting need not be given to any Trustee if a written
waiver of notice, executed by him or her before the meeting, is filed with the
records of the meeting, or to any Trustee who attends the meeting without
protesting prior thereto or at its commencement the lack of notice to him or
her. Neither notice of a meeting nor a waiver of a notice need specify the
purposes of the meeting.
<PAGE> 2

2.4 Quorum. At any meeting of the Trustees a majority of the
Trustees then in office shall constitute a quorum. Any meeting may be
adjourned from time to time by a majority of the votes cast upon the question,
whether or not a quorum is present, and the meeting may be held as adjourned
without further notice.

2.5 Participation by Telephone. One or more of the Trustees or of
any committee of the Trustees may participate in a meeting thereof by means of
a conference telephone or similar communications equipment allowing all persons
participating in the meeting to hear each other at the same time.
Participation by such means shall constitute presence in person at a meeting.

ARTICLE 3
Officers

3.1 Enumeration; Qualification. The officers of the Trust shall
be a President, a Treasurer, a Secretary, and such other officers, including a
Chairman of the Trustees and a Controller, if any, as the Trustees from time to
time may in their discretion elect. The Trust may also have such agents as the
Trustees from time to time may in their discretion appoint. The Chairman of
the Trustees, if one is elected, shall be a Trustee and may but need not be a
shareholder; and any other officer may but not need be a Trustee or a
shareholder. Any two or more offices may be held by the same person.

3.2 Election. The President, the Treasurer, and the Secretary
shall be elected annually by the Trustees. Other officers, if any, may be
elected or appointed by the Trustees at such or any other time. Vacancies in
any office may be filled at any time.

3.3 Tenure. The Chairman of the Trustees, if one is elected, the
President, the Treasurer and the Secretary shall hold office until their
respective successors are chosen and qualified, or in each case until he or she
sooner dies, resigns, is removed or becomes disqualified. Each other officer
shall hold office and each agent shall retain authority at the pleasure of the
Trustees.

3.4 Powers. Subject to the other provisions of these By-laws,
each officer shall have, in addition to the duties and powers herein and in the
Declaration of Trust set forth, such duties and powers as are commonly incident
to the office occupied by him or her as if the Trust were organized as a
Massachusetts business corporation and such other duties and powers as the
Trustees may from time to time designate.

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<PAGE> 3

3.5 Chairman; President. Unless the Trustees otherwise provide,
the Chairman of the Trustees or, if there is none or in the absence of the
Chairman, the President shall preside at all meetings of the shareholders and
of the Trustees. The President shall be the chief executive officer.

3.6 Treasurer and Controller. The Treasurer shall be the chief
financial officer and, if no Controller is elected, chief accounting officer of
the Trust, and shall, subject to the provisions of the Declaration of Trust and
to any arrangement made by the Trustees with a custodian, investment adviser or
manager, or transfer, shareholder servicing or similar agent, be in charge of
the valuable papers and, if no Controller is elected, the books of account and
accounting records of the Trust, and shall have such other duties and powers as
may be designated from time to time by the Trustees or by the President.

The Controller, if any, shall be the chief accounting officer of the
Trust and shall be in charge of its books of account and accounting records.
The Controller shall be responsible for preparation of financial statements of
the Trust and shall have such other duties and powers as may be designated from
time to time by the Trustees or the President.

3.7 Secretary. The Secretary shall record all proceedings of the
shareholders and the Trustees in books to be kept therefor, which books or a
copy thereof shall be kept at the principal office of the Trust or at the
office of the Trust's counsel. In the absence of the Secretary from any
meeting of the shareholders or Trustees, an assistant Secretary, or if there be
none or if he or she is absent, a temporary Secretary chosen at such meeting
shall record the proceedings thereof in the aforesaid books.

3.8 Resignations. Any Trustee or officer may resign at any time
by written instrument signed by him or her and delivered to the Chairman, the
President or the Secretary or to a meeting of the Trustees. Such resignation
shall be effective upon receipt unless specified to be effective at some other
time. Except to the extent expressly provided in a written agreement with the
Trust, no officer resigning and no officer removed shall have any right to any
compensation for any period following his or her resignation or removal, or any
right to damages on account of such removal.

3.9 Other Officers and Duties. The Trustees may elect such other
officers and assistant officers as they shall form time to time determine to be
necessary or desirable in order to conduct the business of the Trust.
Assistant officers shall act generally in the absence of the officer whom they
assist and shall assist that officer in the duties of his office. Each
officer, employee and agent of the Trust shall have such other

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<PAGE> 4

duties and authority as may be conferred upon him by the Trustees or delegated
to him by the President.

ARTICLE 4
Committees

4.1 General. The Trustees, by vote of a majority of the Trustees
then in office, may elect from their number an Executive Committee or certain
other committees and may delegate thereto some or all of their powers except
those which by law, by the Master Trust Agreement, or by these By-Laws may not
be delegated. Except as the Trustees may otherwise determine, any such
committee may make rules for the conduct of its business, but unless otherwise
provided by the Trustees or in such rules, its business shall be conducted so
far as possible in the same manner as is provided by these By-Laws for the
Trustees themselves. All members of such committees shall hold such offices at
the pleasure of the Trustees. The Trustees may abolish any such committee at
any time. Any committee to which the Trustees delegate any of their powers or
duties shall keep records of its meetings and shall report its action to the
Trustees. The Trustees shall have power to rescind any action of any
committee, but no such rescission shall have retroactive effect.

4.2 Quorum; Voting. A majority of the members of any Committee of
the Trustees shall constitute a quorum for the transaction of business, and any
action of such a Committee may be taken at a meeting by a vote of a majority of
the members present (a quorum being present) or evidenced by one or more
writings signed by such a majority. Members of a Committee may participate in
a meeting of such Committee by means of a conference telephone or other
communications equipment by means of which all persons participating in the
meeting can hear each other at the same time and participation by such means
shall constitute presence in person at a meeting.

ARTICLE 5
Reports

5.1 General. The Trustees and officers shall render reports at
the time and in the manner required by the Declaration of Trust or any
applicable law. Officers and Committees shall render such additional reports
as they may deem desirable or as may from time to time be required by the
Trustees.

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ARTICLE 6
Fiscal Year

6.1 General. Except as from time to time otherwise provided by
the Trustees, the initial fiscal year of the Trust shall end on such date as is
determined in advance or in arrears by the Treasurer, and subsequent fiscal
years shall end on such date in subsequent years.

ARTICLE 7
Seal

7.1 General. The seal of the Trust shall consist of a flat-faced
die with the word "Massachusetts", together with the name of the Trust and the
year of its organization cut or engraved thereon but, unless otherwise required
by the Trustees, the seal shall not be necessary to be placed on, and its
absence shall not impair the validity of, any document, instrument or other
paper executed and delivered by or on behalf of the Trust.

ARTICLE 8
Execution of Papers

8.1 General. Except as the Trustees may generally or in
particular cases authorize the execution thereof in some other manner, all
deeds, leases, contracts, notes and other obligations made by the Trustees
shall be signed by the President or by the Treasurer and need not bear the seal
of the Trust.

ARTICLE 9
Share Certificates

9.1 Share Certificates. No certificates certifying the ownership
of shares shall be issued except as the Trustees may otherwise authorize. In
the event that the Trustees authorize the issuance of share certificates,
subject to the provisions of Section 9.3, each shareholder shall be entitled to
a certificate stating the number of shares and the series or class owned by him
or her, in such form as shall be prescribed from time to time by the Trustees.
Such certificates shall be signed by the President or any Vice-President and by
the Treasurer or any Assistant Treasurer. Such signatures may be facsimiles if
the certificate is signed by a transfer agent, or by a registrar, other than a
Trustee, officer or employee of the Trust. In case any officer who has signed
or whose facsimile signature has been placed on such certificate shall cease to
be such officer before such certificate is issued, it may be issued

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<PAGE> 6

by the Trust with the same effect as if he or she were such officer at the time
of its issue.

In lieu of issuing certificates for shares, the Trustees or the
transfer agent may either issue receipts therefor or may keep accounts upon the
books of the Trust for the record holders of such shares, who shall in either
case be deemed, for all purposes hereunder, to be the holders of certificates
for such shares as if they had accepted such certificates and shall be held to
have expressly assented and agreed to the terms hereof.

9.2 Loss of Certificates. In case of the alleged loss or
destruction or the mutilation of a share certificate, a duplicate certificate
may be issued in place thereof, upon such terms as the Trustees may prescribe.

9.3 Issuance of New Certificate to Pledgee. A pledgee of shares
transferred as collateral security shall be entitled to a new certificate if
the instrument of transfer substantially describes the debt or duty that is
intended to be secured thereby. Such new certificate shall express on its face
that it is held as collateral security, and the name of the pledgor shall be
stated thereon, who alone shall be liable as a shareholder, and entitled to
vote thereon.

9.4 Discontinuance of Issuance of Certificates. The Trustees may
at any time discontinue the issuance of share certificates and may, by written
notice to each shareholder, require the surrender of share certificates to the
Trust for cancellation. Such surrender and cancellation shall not effect the
ownership of shares in the Trust.

ARTICLE 10
Provisions Relating to the Conduct of the Trust's Business

10.1 Certain Definitions. When used herein the following words
shall have the following meanings: "Distributor" shall mean any one or more
corporations, firms, or associations which have distributor's or principal
underwriter's contracts in effect with the Trust providing that redeemable
shares issued by the Trust shall be offered and sold by such Distributor.
"Advisor" shall mean any corporation, firm or association which may at the time
have an advisory or management contract with the Trust and any corporation,
firm or association which may at any time have a sub-advisory contract relating
to the Trust with any such Advisor.

10.2 Limitation on Holdings by the Trust of Certain Securities and
on Dealings with Officers or Trustees. The Trust may not purchase or retain
shares or securities issued by an

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issuer if one or more of the holders of the shares or securities issued by an
issuer or one or more of the officers or directors of such issuer is an officer
or Trustee of the Trust or officer or director of the Advisor and if one or
more of such officers, Trustees or directors owns beneficially more than 1/2 of
1% of the shares or securities, or both, of such issuer and such officers,
Trustees and directors owning more than 1/2 of 1% of such shares or securities
together own beneficially more than 5% of such shares or securities. Each
officer and Trustee of the Trust shall keep the Treasurer of the Trust informed
of the names of all issuers shares or securities of which are held in the
portfolio of the Trust and in which such officer or Trustee owns as much as 1/2
of 1% of the outstanding shares or securities.

The Trust will not lend any of its assets to the Distributor or
Manager or to any officer or director of the Distributor or Advisor or any
officer or Trustee of the Trust, and shall not permit any officer or Trustee or
any officer or director of the Distributor or Advisor to deal for or on behalf
of the Trust with himself or herself as principal or agent, or with any
partnership, association or corporation in which he or she has a financial
interest; provided that the foregoing provisions shall not prevent (a) officers
and Trustees of the Trust or officers and directors of the Distributor or
Advisor from buying, holding or selling shares in the Trust or from being
partners, offices or directors of or otherwise financially interested in the
Distributor or the Advisor; (b) purchases or sales of securities or other
property if such transaction is permitted by or is exempt or exempted from the
provisions of the Investment Company Act of 1940, as amended, or any Rule or
Regulation thereunder (together, the "1940 Act"); (c) employment of legal
counsel, registrar, transfer agent, shareholder servicing agent, dividend
disbursing agent or custodian who is, or has a partner, shareholder, officer or
director who is, an officer or Trustee of the Trust or an officer or director
of the Distributor or Advisor; and (d) sharing statistical, research, legal and
management expenses and office hire and expenses with any other investment
company in which an officer or Trustee of the Trust or an officer or director
of the Distributor or Advisor is an officer or director or otherwise
financially interested.

10.3 Limitation on Dealing in Securities of the Trust by Certain
Officers, Trustees, Distributor or Advisor. Neither the Distributor nor
Advisor, nor any officer or Trustee of the Trust or officer or director of the
Distributor or Advisor shall take long or short positions in securities issued
by the Trust; provided, however, that:

(a) the Distributor may purchase from the Trust and otherwise deal
in shares issued by the Trust pursuant to the terms of its
contract with the Trust;

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<PAGE> 8

(b) any officer or Trustee of the Trust or officer or director of
the Distributor or Advisor or any trustee or fiduciary for the
benefit of any of them may at any time, or from time to time,
purchase from the Trust or from the Distributor shares issued
by the Trust at the price available to the public or to such
officer, Trustee, director, trustee or fiduciary, no such
purchase to be in contravention of any applicable state or
federal requirement; and

(c) the Distributor or the Advisor may at any time, or from time
to time, purchase for investment shares issued by the Trust.

10.4 Securities and Cash of the Trust to be held by Custodian subject
to certain Terms and Conditions.

(a) All securities and cash owned by this Trust shall be held by
or deposited with one or more banks or trust companies having
(according to its last published report) not less than
$5,000,000 aggregate capital, surplus and undivided profits
(any such bank or trust company being hereby designated as
"Custodian"), provided such a Custodian can be found ready and
willing to act; subject to such rules, regulations and orders,
if any, as the Securities and Exchange Commission may adopt,
this Trust may, or may permit any Custodian to, deposit all or
any part of the securities owned by this Trust in a system for
the central handling of securities pursuant to which all
securities of any particular class or series of any issue
deposited within the system may be transferred or pledged by
bookkeeping entry, without physical delivery. The Custodian
may appoint, subject to the approval of the Trustees, one or
more subcustodians.

(b) The Trust shall enter into a written contract with each
Custodian regarding the powers, duties and compensation of
such Custodian with respect to the cash and securities of the
Trust held by such Custodian. Said contract and all
amendments thereto shall be approved by the Trustees.

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<PAGE> 9

(i) in case of such resignation or inability to serve, use its
best efforts to obtain a successor Custodian;

(ii) require that the cash and securities owned by the Trust
be delivered directly to the successor Custodian; and

(iii) in the event that no successor Custodian can be found,
submit to the shareholders, before permitting delivery of the
cash and securities owned by the Trust otherwise than to a
successor Custodian, the question whether the Trust shall be
liquidated or shall function without a Custodian.

10.5 Requirements and Restrictions Regarding the Management Contract.
Every advisory or management contract entered into by the Trust shall provide
that in the event that the total expenses of any series of shares of the Trust
for any fiscal year should exceed the limits imposed on investment company
expenses imposed by any statute or regulatory authority of any jurisdiction in
which shares of the Trust are offered for 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.

10.6 Reports to Shareholders: Distributions from Realized Gains.
The Trust shall send to each shareholder of record at least semiannually a
statement of the condition of the Trust and of the results of its operations,
containing all information required by applicable laws or regulations.

10.7 Determination of Net Asset Value Per Share. Net asset value per
share of each series or class of shares of the Trust shall mean: (i) the value
of all the assets of such series or class of shares; (ii) less total
liabilities of such series or class of shares; (iii) divided by the number of
shares of such series or class of shares outstanding, in each case at the time
of each determination. The net asset value per share of each series or class
of shares shall be determined as of the normal close of trading on the New York
Stock Exchange on each day on which such Exchange is open. As of any time
other than the normal close of trading on such Exchange, the Trustees may cause
the net asset value per share last determined to be determined again in a
similar manner or adjusted to reflect changes in market values of securities in
the portfolio, such adjustment to be made on the basis of changes in selected
security prices determined by the Trustees to be relevant to the portfolio of
such series or class of shares or in averages or in other standard and readily
ascertainable market data, and the Trustees may fix the time when such
redetermined or adjusted net asset

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value per share of each series or class of shares shall become effective.

In valuing the portfolio investments of any series or class of shares
for determination of net asset value per share of such series, securities for
which market quotations are readily available shall be valued at prices which,
in the opinion of the Trustees or the person designated by the Trustees to make
the determination, most nearly represent the market value of such securities,
and other securities and assets shall be valued at their fair value as
determined by or pursuant to the direction of the Trustees, which in the case
of short-term debt obligations, commercial paper and repurchase agreements may,
but need not, be on the basis of quoted yields for securities of comparable
maturity, quality and type, or on the basis of amortized cost. Expenses and
liabilities of the Trust shall be accrued each day. Liabilities may include
such reserves for taxes, estimated accrued expenses and contingencies as the
Trustees or their designates may in their sole discretion deem fair and
reasonable under the circumstances. No accruals shall be made in respect of
taxes on unrealized appreciation of securities owned unless the Trustees shall
otherwise determine. Dividends payable by the Trust shall be deducted as at
the time of but immediately prior to the determination of net asset value per
share on the record date therefor.

10.8. Derivative Claims. No Shareholder shall have the right to
bring or maintain any court action, proceeding or claim on behalf of the Trust
or any series or class thereof without first making demand on the Trustees
requesting the Trustees to bring or maintain such action, proceeding or claim.
Such demand shall be excused only when the plaintiff makes a specific showing
that irreparable injury to the Trust or series or class would otherwise result.
Such demand shall be made to the Secretary or the Trust at the Trust's
principal office and shall set forth in reasonable detail the nature of the
proposed court action, proceeding or claim and the essential facts relied upon
by the Shareholder to support the allegations made in the demand. The Trustees
shall consider such demand within 45 days of its receipt by the Trust. In
their sole discretion, the Trustees may submit the matter to a vote of
Shareholders of the Trust or series or class, as appropriate. Any decision by
the Trustees to bring, maintain or settle (or not to bring, maintain or settle)
such court action, proceeding or claim, or to submit the matter to a vote of
Shareholders shall be made by the Trustees in their business judgment and shall
be binding upon the Shareholders. Any decision by the Trustees to bring or
maintain a court action, proceeding or suit on behalf of the Trust or a series
or class shall be subject to the right of the Shareholders under Section 1 of
Article 11 of these By-laws to vote on whether or not such court action,
proceeding or suit should or should not be brought or maintained.

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ARTICLE 11
Shareholders' Voting Powers and Meetings

11.1 Voting Powers. The Shareholders shall have power to vote only
(i) for the election of Trustees as provided in Article III, Section 3.1 of the
Declaration of Trust, provided, however, that no meeting of Shareholders is
required to be called for the purpose of electing Trustees unless and until
such time as less than a majority of the Trustees have been elected by the
Shareholders, (ii) with respect to any Advisor or Sub-Adviser as provided in
Article III, Section 3.1 of the Declaration of Trust to the extent required by
the 1940 Act, (iii) with respect to any termination of this Trust to the extent
and as provided in Article IX, Section 9.5 of the Declaration of Trust, (iv)
with respect to any amendment of the Declaration of Trust to the extent and as
provided in Article IX Section 9.9 of the Declaration of Trust, (v) to the same
extent as the stockholders of a Massachusetts business corporation as to
whether or not a court action, proceeding or claim should or should not be
brought or maintained derivatively or as a class action on behalf of the Trust
or the Shareholders, and (vi) with respect to such additional matters relating
to the Trust as may be required by law, the Declaration of Trust, these By-laws
or any registration of the Trust with the Commission (or any successor agency)
or any state, or as the Trustees may consider necessary or desirable. Each
whole Share shall be entitled to one vote as to any matter on which it is
entitled to vote and each fractional Share shall be entitled to a proportionate
fractional vote. The Shareholders of any particular series or class shall not
be entitled to vote on any matters as to which such series or class is not
affected. Except with respect to matters as to which the Trustees have
determined that only the interests of one or more particular series or classes
are affected or as required by law, all of the Shares of each series or class
shall, on matters as to which such series or class is entitled to vote, vote
with other series or classes so entitled as a single class. Notwithstanding
the foregoing, with respect to matters which would otherwise be voted on by two
or more series or classes as a single class, the Trustees may, in their sole
discretion, submit such matters to the Shareholders of any or all such series
or classes, separately. There shall be no cumulative voting in the election of
Trustees. Shares may be voted in person or by proxy. The placing of a
Shareholder's name on a proxy pursuant to telephonic or electronically
transmitted instructions obtained pursuant to procedures reasonably designed to
verify that such instructions have been authorized by such Shareholder shall
constitute election of such proxy by or on behalf of such Shareholder. A proxy
with respect to Shares held in the name of two or more persons shall be valid
if executed by any one of them unless at or prior to exercise of the proxy the
Trust receives a specific written notice to the contrary from any one of them.
A proxy purporting to be executed by or on behalf of a Shareholder shall

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be deemed valid unless challenged at or prior to its exercise and the burden of
proving invalidity shall rest on the challenger. Until Shares are issued, the
Trustees may exercise all rights of Shareholders and may take any action
required by law, the Declaration of Trust or these By-laws to be taken by
shareholders.

11.2 Voting Power and Meetings. Meetings of the Shareholders of the
Trust or of one or more series or classes of shares may be called by the
Trustees for the purpose of electing Trustees as provided in Article III,
Section 3.1 of the Declaration of Trust and for such other purposes as may be
prescribed by law, by the Declaration of Trust or by these By-laws. Meetings
of the Shareholders of the Trust or of one or more series or classes of shares
may also be called by the Trustees from time to time for the purpose of taking
action upon any other matter deemed by the Trustees to be necessary or
desirable. A meeting of Shareholders may be held at any place designated by
the Trustees. Written notice of any meeting of Shareholders shall be given or
caused to be given by the Trustees by mailing such notice at least seven days
before such meeting, postage prepaid, stating the time and place of the
meeting, to each Shareholder at the Shareholder's address as it appears on the
records of the Trust. Whenever notice of a meeting is required to be given to
a Shareholder under the Declaration of Trust or these By-laws, a written waiver
thereof, executed before or after the meeting by such Shareholder or his
attorney thereunto authorized and filed with the records of the meeting, shall
be deemed equivalent to such notice.

11.3 Quorum and Required Vote. Thirty percent (30%) of Shares
entitled to vote shall be a quorum for the transaction of business at a
Shareholders' meeting, except that where any provision of law or of the
Declaration of Trust or these By-laws permits or requires that holders of any
series or class of shares shall vote as a series or class, as the case may be,
then thirty percent (30%) of the aggregate number of Shares of that series or
that class entitled to vote shall be necessary to constitute a quorum for the
transaction of business by that series or class. Any lesser number shall be
sufficient for adjournments. Any adjourned session or sessions may be held,
within a reasonable time after the date set for the original meeting, without
the necessity of further notice. Except when a larger vote is required by any
provision of law or the Declaration of Trust or these By-laws, a majority of
the Shares voted shall decide any questions and a plurality shall elect a
Trustee, provided that where any provision of law or of the Declaration of
Trust or these By-laws permits or requires that the holders of any series or
class shall vote as a series or class, as the case may be, then a majority of
the Shares of that series or that class voted on the matter (or a plurality
with respect to the election of a

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Trustee) shall decide that matter insofar as that series or class is concerned.

11.4 Action by Written Consent. Any action taken by Shareholders may
be taken without a meeting if a majority of Shareholders entitled to vote on
the matter (or such larger proportion thereof as shall be required by any
express provision of law or the Declaration of Trust or these By-laws) consent
to the action in writing and such written consents are filed with the records
of the meetings of Shareholders. Such consent shall be treated for all
purposes as a vote taken at a meeting of Shareholders.

11.5 Record Dates. For the purpose of determining the shareholders
who are entitled to vote or act at any meeting or any adjournment thereof, or
who are entitled to receive payment of any dividend or of any other
distribution, or for the purpose of any other action related to the
shareholders, the Trustees may from time to time fix a time, which shall be not
more than 60 days before the date of any meeting of shareholders or the date
for the payment of any dividend or of any other distribution, as the record
date for determining the shareholders having the right to notice of and to vote
at such meeting and any adjournment thereof or the right to receive such
dividend or distribution, or the right with respect to any other action related
to the shareholders and in such case only shareholders of record on such record
date shall have such right notwithstanding any transfer of shares on the books
of the Trust after the record date; or without fixing such record date the
Trustees may for any of such purposes close the register or transfer books for
all or any part of such period.

11.6 Removal of Trustees. No natural person shall serve as Trustee
after the holders of record of not less than two-thirds of the outstanding
Shares (as defined in the Declaration of Trust) have declared that such Trustee
be removed from that office either by declaration in writing filed with the
Trust's custodian or by votes cast in person or by proxy at a meeting called
for the purpose. The Trustees shall promptly call a meeting of shareholders
for the purpose of voting upon the question of removal of any Trustee when
requested in writing so to do by the record holders of not less than 10 per
centum of the outstanding Shares.

Whenever ten or more shareholders of record who have been such for at
least six months preceding the date of application, and who hold in the
aggregate Shares having a net asset value of at least 21 per centum of the
outstanding Shares shall apply to the Trustees in writing, stating that they
wish to communicate with other shareholders with a view to obtaining signatures
to a request for a meeting pursuant to this Section and accompanied by a form
of communication and request which they

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wish to transmit, the Trustees shall within five business days after receipt of
such application either (a) afford to such applicants access to a list of the
names and addresses of all shareholders as recorded on the books of the Trust;
or (b) inform such applicants as to the approximate number of shareholders of
record, and the approximate cost of mailing to them the proposed communication
and form of request. If the Trustees elect to follow the course specified in
clause (b) above, the Trustees, upon the written request of such applicants,
accompanied by a tender of the material to be mailed and of the reasonable
expenses of mailing, shall, with reasonable promptness, mail such material to
all shareholders of record at their addressees as recorded on the books of the
Trust, unless within five business days after such tender the Trustees shall
mail to such applicants and file with the Securities and Exchange Commission,
together with a copy of the material proposed to be mailed, a written statement
signed by at least a majority of the Trustees to the effect that in their
opinion either such material contains untrue statements of fact or omits to
state facts necessary to make the statements contained therein not misleading,
or would be in violation of applicable law, and specifying the basis of such
opinion. If the Securities and Exchange Commission shall enter an order
refusing to sustain any of the objections specified in the written statement so
filed, or if, after the entry of an order sustaining one or more of such
objections, the Securities and Exchange Commission shall find, after notice and
opportunity for hearing, that all objections so sustained have been met, and
shall enter an order so declaring, the Trustees shall mail copies of such
material to all shareholders with reasonable promptness after the entry of such
order and the renewal of such tender.

ARTICLE 12
Amendments to the By-laws

12.1 General. These By-laws may be amended or repealed, in whole or
in part, by a majority of the Trustees then in office at any meeting of the
Trustees, or by one or more writings signed by such a majority.

ARTICLE 13
Declaration of Trust

13.1 General. The Master Trust Agreement establishing Sierra Asset
Management Trust dated March 20, 1996, a copy of which, together with all
amendments thereto, is on file in the office of the Secretary of the
Commonwealth of Massachusetts, provides that the name Sierra Asset Management
Trust refers to the Trustees under the Master Trust Agreement collectively as
Trustees, but not as individuals or personally; and no Trustee, shareholder,
officer, employee or agent of the Sierra Asset Management Trust shall be held
to any personal

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liability, nor shall resort be had to their private property, for the
satisfaction of any obligation or claim or otherwise, in connection with the
affairs of the Trust, but the trust estate of the Trust only shall be liable.

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