SIERRA ASSET MANAGEMENT TRUST, N-1A EL/A, 1996-07-22

SIERRA ASSET MANAGEMENT TRUST
N-1A EL/A, 1996-07-22

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<PAGE> 1

As filed with the Securities and Exchange Commission on July 22, 1996
Securities Act File No. 333-01999
Investment Company Act File No. 811-07577
================================================================================

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

PRE-EFFECTIVE AMENDMENT NO. 2 / X /
-----
and

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940

AMENDMENT NO. 2 / X /
-----

Sierra Asset Management Portfolios
--------------------------------------------------
(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 LLP
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. Registrant has paid the Registration Fee upon the filing of its
Registration Statement.

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 . . . . . . . . . . Portfolio Expenses (Class A Shares);
Portfolio 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 Portfolios;
Investment and Risk Considerations of the
Underlying Funds; Securities and Investment
Practices of the Portfolios and the Underlying Funds

5. Management of the Fund . . . The Portfolios in Detail -- Organization; Sierra
Services, Sierra Advisors, Their Affiliates and the
Portfolios' Service Providers; Breakdown of their
Portfolio Expenses

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

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

7. Purchase of Securities
Being Offered . . . . . . . Your Sierra Asset Management ("SAM") Portfolio
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. . None
</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 . . . . . Table of Contents

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

13. Investment Objectives and
Policies . . . . . . . . . Investment Objectives and Policies of the Portfolios
and 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 Portfolios 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

<TABLE>
<C> <S>
PROSPECTUS SIERRA ASSET MANAGEMENT PORTFOLIOS
JULY 22, 1996 P.O. BOX 5118
WESTBOROUGH, MASSACHUSETTS 01581-5118
(800) 222-5852
</TABLE>

INCOME PORTFOLIO
VALUE PORTFOLIO
BALANCED PORTFOLIO
GROWTH PORTFOLIO
CAPITAL GROWTH PORTFOLIO

This Prospectus describes the Class A Shares and Class B Shares of the Sierra
Asset Management Portfolios (the "Trust"). The Trust consists of five separate
diversified investment funds (each, a "Portfolio," and together, the
"Portfolios") named above. The Portfolios 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 Portfolios are
right for you.

A Statement of Additional Information ("SAI") about the Trust, dated July 22,
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
Portfolio 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, subject to
regulatory approval, in the Sierra Prime Income Fund ("SPIF"), a closed-end
management investment company (the "Underlying Funds"), each of which is managed
by Sierra Investment Advisors Corporation ("Sierra Advisors"). None of the
Portfolios will invest in SPIF until the Trust supplements this Prospectus
disclosing that the Portfolios will invest in SPIF, and the extent to which the
Portfolios will invest in SPIF. THIS PROSPECTUS OFFERS BOTH CLASS A SHARES AND
CLASS B SHARES OF THE PORTFOLIOS.

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

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 PORTFOLIOS INVOLVES RISK, INCLUDING POSSIBLE LOSS OF
THE PRINCIPAL AMOUNT INVESTED.
<PAGE> 5

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Portfolio Expenses....................................................................... 2
Investments and Risk Considerations of the Portfolios.................................... 7
Investments and Risk Considerations of the Underlying Funds.............................. 13
Performance Information.................................................................. 37
Your Sierra Asset Management ("SAM") Portfolio Account................................... 38
How to Invest in a SAM Portfolio Account................................................. 41
How to Sell Shares....................................................................... 47
Exchange Privileges and Restrictions..................................................... 50
Dividends, Capital Gains and Taxes....................................................... 51
Shareholder and Account Policies......................................................... 52
The Portfolios in Detail................................................................. 53
Sierra Services, Sierra Advisors, Their Affiliates and the Portfolios' Service
Providers.............................................................................. 53
Breakdown of Portfolio Expenses.......................................................... 58
</TABLE>

PORTFOLIO 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 Portfolio's Class A Shares. In addition to these direct
expenses, Class A Shares of the Portfolios 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>
INCOME BALANCED CAPITAL GROWTH
PORTFOLIO VALUE PORTFOLIO PORTFOLIO GROWTH PORTFOLIO PORTFOLIO
----------- --------------- -------- ---------------- --------------
<S> <C> <C> <C> <C> <C>
Maximum Sales Charge Imposed on
Purchase (as a percentage of
offering price) 4.50% 4.50% 5.25% 5.50% 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(1) None None None None None
Redemption Fees(2) None None None None None
Exchange Fees(3) None None None None None
ANNUAL PORTFOLIO OPERATING EXPENSES
(DIRECT EXPENSES) (as a percentage
of average net assets)
Management/Advisory Fees (after
voluntary waivers)(4) 0% 0% 0% 0% 0%
Rule 12b-1 Fees 0.25% 0.25% 0.25% 0.25% 0.25%
Other Expenses (after voluntary
waivers and reimbursement of
expenses)(5) 0.65% 0.65% 0.65% 0.65% 0.65%
----------- ------- -------- ------- -------
Total Portfolio Operating Expenses
(after voluntary waivers and
reimbursement of expenses)(6) 0.90% 0.90% 0.90% 0.90% 0.90%
- ---------------------------------------------------------------------------------------------------
</TABLE>

(1) Certain investors who purchase Class A Shares at net asset value based on a
purchase amount of $1 million or more may be subject to a 1.0% CDSC on
redemptions within one year of purchase or a 0.5% CDSC on redemptions after
1 year but within 2 years of purchase.

-2-
<PAGE> 6

(2) A $5.00 fee may be charged for each wire transfer if shares are redeemed by
wire transfer to a shareholder's pre-authorized designated bank account.

(3) Upon 60 days' prior written notice to shareholders, the exchange privilege
may be modified or terminated and/or the Trust may begin imposing a charge
of up to $5.00 for each exchange. See "Exchange Privileges and
Restrictions."

(4) Reflects the voluntary waiver of management fees by Sierra Services. In the
absence of such voluntary waivers, Management Fees would have been 0.15% for
each Portfolio.

(5) Reflects the voluntary agreement of Sierra Services to bear certain expenses
and of Sierra Fund Administration Corporation ("Sierra Administration") to
waive certain fees to limit the total operating expenses for each Portfolio.
In the absence of such voluntary waivers and reimbursements the Other
Expenses for each Portfolio are estimated to be 0.77%.

(6) Reflects the voluntary waiver of fees and reimbursement of expenses. In the
absence of such voluntary waivers and reimbursements the total operating
expenses for each Portfolio are estimated to be 1.17%.

EXPENSE RANGES (INCLUDING INDIRECT EXPENSES)

BASED ON THE COMBINED OPERATING EXPENSES OF THE UNDERLYING FUNDS PLUS THOSE OF
EACH PORTFOLIO, THE RANGE OF AVERAGE WEIGHTED COMBINED OPERATING EXPENSES FOR
CLASS A SHARES OF THE PORTFOLIOS ARE EXPECTED TO BE AS FOLLOWS:+

<TABLE>
<CAPTION>
RANGE OF
COMBINED
PORTFOLIO OPERATING EXPENSES
- --------------------------------------------------------------------------------- ------------------
<S> <C>
Income Portfolio Class A......................................................... 1.40% to 1.85%
Value Portfolio Class A.......................................................... 1.50% to 1.90%
Balanced Portfolio Class A....................................................... 1.70% to 2.15%
Growth Portfolio Class A......................................................... 2.00% to 2.35%
Capital Growth Portfolio Class A................................................. 2.15% to 2.40%
</TABLE>

+ A range is provided since the average assets of each Portfolio invested in
each of the Underlying Funds may fluctuate. The ranges of expenses assume no
investment in the Sierra Prime Income Fund.

EXAMPLE

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

<TABLE>
<CAPTION>
1 YEAR 3 YEARS
------ -------
<S> <C> <C>
Income Portfolio Class A......................................................... $ 61 $ 94
Value Portfolio Class A.......................................................... $ 62 $ 96
Balanced Portfolio Class A....................................................... $ 71 $ 110
Growth Portfolio Class A......................................................... $ 76 $ 119
Capital Growth Portfolio 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 Portfolio. 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 PORTFOLIOS IN DETAIL - SIERRA
SERVICES, SIERRA ADVISORS, THEIR AFFILIATES AND THE PORTFOLIOS' SERVICE
PROVIDERS" and "THE PORTFOLIOS IN DETAIL - BREAKDOWN OF PORTFOLIO 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

PORTFOLIO 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 Portfolio's Class B Shares. In addition to these direct
expenses, Class B Shares of the Portfolios 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>
CAPITAL
BALANCED GROWTH
INCOME PORTFOLIO VALUE PORTFOLIO PORTFOLIO GROWTH PORTFOLIO PORTFOLIO
---------------- --------------- --------- ---------------- ---------
<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 Fees(1) None None None None None
Exchange Fees(2) None None None None None
ANNUAL PORTFOLIO OPERATING EXPENSES
(DIRECT EXPENSES) (as a percentage of
average net assets)
Management/Advisory Fees (after
voluntary waivers)(3) 0% 0% 0% 0% 0%
Rule 12b-1 & Shareholder Servicing Fees 1.00% 1.00% 1.00% 1.00% 1.00%
Other Expenses (after voluntary waivers
and reimbursement of expenses)(4) 0.65% 0.65% 0.65% 0.65% 0.65%
------- ------- --------- ------- ---------
Total Portfolio Operating Expenses
(after voluntary waivers and
reimbursement of expenses)(5) 1.65% 1.65% 1.65% 1.65% 1.65%
- -----------------------------------------------------------------------------------------------------------
</TABLE>

(1) A $5.00 fee may be charged for each wire transfer if shares are redeemed by
wire transfer to a shareholder's pre-authorized designated bank account.

(2) Upon 60 days' prior written notice to shareholders, the exchange privilege
may be modified or terminated and/or the Trust may begin imposing a charge
of up to $5.00 for each exchange. See "Exchange Privileges and
Restrictions."

(3) Reflects the voluntary waiver of management fees by Sierra Services. In the
absence of such voluntary waivers, Management Fees would have been 0.15% for
each Portfolio.

(4) Reflects the voluntary agreement of Sierra Services to bear certain expenses
and of Sierra Administration to waive certain fees to limit the total
operating expenses for each Portfolio. In the absence of such voluntary
waivers and reimbursements the Other Expenses for each Portfolio are
estimated to be 0.77%.

(5) Reflects the voluntary waiver of fees and reimbursement of expenses. In the
absence of such voluntary waivers and reimbursements the total operating
expenses for each Portfolio are estimated to be 1.92%.

-4-
<PAGE> 8

EXPENSE RANGES (INCLUDING INDIRECT EXPENSES)

BASED ON THE COMBINED OPERATING EXPENSES OF THE UNDERLYING FUNDS PLUS THOSE OF
EACH PORTFOLIO, THE RANGE OF AVERAGE WEIGHTED COMBINED OPERATING EXPENSES FOR
CLASS B SHARES OF THE PORTFOLIOS ARE EXPECTED TO BE AS FOLLOWS:+

<TABLE>
<CAPTION>
RANGE OF
COMBINED
PORTFOLIO OPERATING EXPENSES
- --------------------------------------------------------------------------------- ------------------
<S> <C>
Income Portfolio Class B......................................................... 2.15% to 2.60%
Value Portfolio Class B.......................................................... 2.25% to 2.65%
Balanced Portfolio Class B....................................................... 2.45% to 2.90%
Growth Portfolio Class B......................................................... 2.75% to 3.10%
Capital Growth Portfolio Class B................................................. 2.90% to 3.15%
</TABLE>

+ A range is provided since the average assets of each Portfolio invested in
each of the Underlying Funds may fluctuate. The ranges of expenses assume no
investment in Sierra Prime Income Fund.

EXAMPLE

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

(2) Redemption at the end of each time period

<TABLE>
<CAPTION>
1 YEAR 3 YEARS
------ -------
<S> <C> <C>
Income Portfolio Class B......................................................... $ 74 $ 104
Value Portfolio Class B.......................................................... $ 75 $ 106
Balanced Portfolio Class B....................................................... $ 77 $ 113
Growth Portfolio Class B......................................................... $ 80 $ 121
Capital Growth Portfolio Class B................................................. $ 81 $ 124
</TABLE>

(2) No redemptions

<TABLE>
<CAPTION>
1 YEAR 3 YEARS
------ -------
<S> <C> <C>
Income Portfolio Class B......................................................... $ 24 $74
Value Portfolio Class B.......................................................... $ 25 $76
Balanced Portfolio Class B....................................................... $ 27 $83
Growth Portfolio Class B......................................................... $ 30 $91
Capital Growth Portfolio 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 Portfolio. 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 subject to different distribution and shareholder servicing expenses.
Additional information may be found under "THE PORTFOLIOS IN DETAIL - SIERRA
SERVICES, SIERRA ADVISORS, THEIR AFFILIATES AND THE PORTFOLIOS' SERVICE
PROVIDERS" and "THE PORTFOLIOS IN DETAIL - BREAKDOWN OF PORTFOLIO 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 Portfolios 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, subject to regulatory approval, Sierra Prime Income Fund ("SPIF")** and the
investment returns of each class of shares of the Portfolios will be net of the
expenses of the Underlying Funds. The charts set forth below provide the
estimated expense ratios for each of the Underlying Funds in which the
Portfolios will invest based on information as of October 31, 1995.

INCOME PORTFOLIO

<TABLE>
<CAPTION>
UNDERLYING FUNDS UNDERLYING FUNDS'
ELIGIBLE FOR PURCHASE EXPENSE RATIOS*
- -------------------------------------------------------
<S> <C>
STF U.S. Government Money Fund .60%
STF Global Money Fund .40%
STF Short Term High Quality Bond Fund .50%
STF Short Term Global Government Fund .60%
STF U.S. Government Fund .60%
STF Corporate Income Fund .75%
Sierra Prime Income Fund** 1.35%
</TABLE>

VALUE PORTFOLIO

GROWTH PORTFOLIO

BALANCED PORTFOLIO

CAPITAL GROWTH PORTFOLIO

<TABLE>
<CAPTION>
UNDERLYING FUNDS UNDERLYING FUNDS'
ELIGIBLE FOR PURCHASE EXPENSE RATIOS*
- -------------------------------------------------------
<S> <C>
STF Global Money Fund .40%
STF Short Term High Quality Bond Fund .50%
STF Short Term Global Government Fund .60%
STF Growth and Income Fund 1.33%
STF Growth Fund 1.46%
STF Emerging Growth Fund 1.45%
STF International Growth Fund 1.58%
</TABLE>

-6-
<PAGE> 10

* The Portfolios will purchase only Class I Shares of the Underlying Funds
other than SPIF, and Class A Shares of SPIF. The expense ratio is the ratio
of the annual operating expenses of the Underlying Funds applicable to Class
I Shares (Class A Shares of SPIF) to the average net assets of the Underlying
Fund. The expense ratios shown above reflect existing fee waivers or expense
reimbursements arrangements that may be discontinued at any time. Set forth
below are the estimated total fund operating expenses of each Underlying Fund
absent such fee waivers and expense reimbursements. STF U.S. Government Money
Fund (1.09%); STF Global Money Fund (.96%); STF Short Term High Quality Bond
Fund (1.15%); STF Short Term Global Government Fund (1.19%); STF U.S.
Government Fund (1.05%); STF Corporate Income Fund (1.12%); STF Growth and
Income Fund (1.33%); STF Growth Fund (1.46%); STF Emerging Growth Fund
(1.45%); STF International Growth Fund (1.58%); Sierra Prime Income Fund
(1.35%).

** None of the Portfolios will invest in SPIF until the Trust supplements this
Prospectus disclosing that intention, and the extent of such investment.

Investors in the Portfolios should recognize that they may invest directly in
the Underlying Funds if they do not wish to participate in the Portfolios' asset
allocation strategies investing in Underlying Funds. Through the Portfolios,
investors will bear not only their proportionate share of the expenses of the
Portfolios (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. Class I Shares of the Underlying Funds are not subject to any
sales load or distribution or shareholder service fees. When any Portfolios
begin investing in the Class A Common Shares of SPIF, the sales load will be
waived, and neither a distribution fee nor a shareholder service fee will be
charged. Consequently, a shareholder of a Portfolio's shares will not indirectly
bear expenses paid by an Underlying Fund for the sale or distribution of its
shares. See "HOW TO INVEST IN A SAM PORTFOLIO ACCOUNT."

INVESTMENTS AND RISK CONSIDERATIONS OF THE PORTFOLIOS

The Portfolios offer investors the opportunity to pursue a selected asset
allocation strategy that is implemented through the Portfolios' investing in
certain of the Underlying Funds. The Portfolios 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 Portfolio typically allocates
its assets, within predetermined percentage ranges, among certain of the
Underlying Funds. The percentages reflect the extent to which each Portfolio
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 Portfolio'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 Portfolio 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
without limit its assets directly in cash, stock or bond index futures and
options thereon and the following short-term instruments: (i) short-term
obligations of the U.S. government, its 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 Portfolio's investment advisor; (iii) commercial paper, including master
notes; (iv) bank obligations, including negotiable certificates of deposit, time
deposits and bankers' acceptances; and (v) repurchase agreements. At the time
the Portfolio 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 Portfolio's investment advisor. The investment objective of each Portfolio
is set forth below. Each Portfolio's investment objective is a fundamental
policy, and may not be changed without shareholder approval. There can be no
assurance that a Portfolio will achieve its stated objective. For purposes of
discussing

-7-
<PAGE> 11

Portfolio objectives, the "STF Fixed Income Funds" include the STF U.S.
Government Money Fund, STF Global Money Fund, STF Short Term High Quality Bond
Fund, STF Short Term Global Government Fund, STF U.S. Government Fund and STF
Corporate Income Fund and the "STF Equity Funds" include the STF Growth and
Income Fund, STF Growth Fund, STF Emerging Growth Fund and STF International
Growth Fund.

INCOME PORTFOLIO

The INCOME PORTFOLIO 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
Portfolios, the Income Portfolio 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 Portfolio will invest in the following Underlying
Funds up to the percentage limits set forth below:

PORTFOLIO INVESTMENT LIMIT (PERCENT OF
UNDERLYING FUNDS THE INCOME PORTFOLIO'S TOTAL ASSETS)

<TABLE>
<S> <C>
STF U.S. Government Money Fund.............................................................. 50%
STF Global Money Fund....................................................................... 50%
STF Short Term High Quality Bond Fund....................................................... 50%
STF Short Term Global Government Fund....................................................... 50%
STF U.S. Government Fund.................................................................... 50%
STF Corporate Income Fund................................................................... 50%
Sierra Prime Income Fund.................................................................... 15%
</TABLE>

Except for defensive periods, the Income Portfolio must invest 100% of its total
assets in STF Fixed Income Funds and SPIF.

VALUE PORTFOLIO

The VALUE PORTFOLIO 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 Portfolios, the
Value Portfolio 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 Portfolio will invest in the following Underlying Funds up to the percentage
limits set forth below:

PORTFOLIO INVESTMENT LIMIT (PERCENT OF THE
UNDERLYING FUNDS VALUE PORTFOLIO'S TOTAL ASSETS)

<TABLE>
<S> <C>
STF U.S. Government Money Fund............................................................. 40%
STF Global Money Fund...................................................................... 40%
STF Short Term High Quality Bond Fund...................................................... 40%
STF Short Term Global Government 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................................................................... 15%
</TABLE>

Except for defensive periods, the Value Portfolio must invest no more than 30%
of its total assets in the STF Equity Funds.

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<PAGE> 12

BALANCED PORTFOLIO

The BALANCED PORTFOLIO 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 Portfolios, the Balanced Portfolio
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 of principal risk. The Portfolio will invest in the following
Underlying Funds up to the percentage limits set forth below:

PORTFOLIO INVESTMENT LIMIT (PERCENT OF THE
UNDERLYING FUNDS BALANCED PORTFOLIO'S TOTAL ASSETS)

<TABLE>
<S> <C>
STF U.S. Government Money Fund............................................................. 40%
STF Global Money Fund...................................................................... 40%
STF Short Term High Quality Bond Fund...................................................... 40%
STF Short Term Global Government 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................................................................... 15%
</TABLE>

Except for defensive periods, the Balanced Portfolio 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 PORTFOLIO

The GROWTH PORTFOLIO seeks to provide long-term capital appreciation. In
general, relative to the other Portfolios, the Growth Portfolio 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 Portfolio will invest in the following Underlying Funds up
to the percentage limits set forth below:

PORTFOLIO INVESTMENT LIMIT (PERCENT OF THE
UNDERLYING FUNDS GROWTH PORTFOLIO'S TOTAL ASSETS)

<TABLE>
<S> <C>
STF U.S. Government Money Fund............................................................. 30%
STF Global Money Fund...................................................................... 30%
STF Short Term High Quality Bond Fund...................................................... 30%
STF Short Term Global Government 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................................................................... 15%
</TABLE>

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

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<PAGE> 13

CAPITAL GROWTH PORTFOLIO

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

PORTFOLIO INVESTMENT LIMIT (PERCENT OF THE
UNDERLYING FUNDS CAPITAL GROWTH PORTFOLIO'S TOTAL ASSETS)

<TABLE>
<S> <C>
STF Global Money Fund...................................................................... 50%
STF Short Term High Quality Bond Fund...................................................... 50%
STF Short Term Global Government 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 Capital Growth Portfolio must invest at least
75% of its total fund assets in STF Equity Funds.

GENERAL INVESTMENT POLICIES OF THE PORTFOLIOS

Each of the Portfolios will attempt to achieve its investment objective by
purchasing shares of the Underlying Funds within the percentage ranges for such
Portfolio set forth above. The SEC has issued an exemptive order to the Trust,
dated June 28, 1996 (the "Order"), permitting each of the Portfolios to acquire,
under certain circumstances, up to 100% of the shares of any of the Underlying
Funds except SPIF. Absent this Order, the Investment Company Act of 1940, as
amended (the "1940 Act"), would substantially limit the ability of the
Portfolios and Underlying Funds to engage in these transactions. The Trust is
currently seeking an order from the SEC to permit each Portfolio to invest up to
15% of its assets in shares of SPIF. The Portfolios will not invest in SPIF
until it has received regulatory approval from the SEC. There can be no
assurance that the SEC will grant such approval.

In order to meet liquidity needs, or for temporary defensive purposes, the
Portfolios 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 PORTFOLIOS."

In addition to purchasing shares of the Underlying Funds, a Portfolio 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
Portfolio may enter into futures contracts and options thereon provided that the
aggregate deposits required on these contracts do not exceed 5% of the
Portfolio's total assets. A Portfolio may also use futures contracts and options
for bona fide hedging transactions.

Futures contracts and options may also be used to reallocate the Portfolio'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 Portfolios will not use futures contracts
or options to leverage their portfolios, except as indicated above.

PORTFOLIO TURNOVER OF THE PORTFOLIOS

Each Portfolio's portfolio turnover rate (i.e., the rate at which the Portfolio
buys and sells shares of the Underlying Funds) for the Income, Value, Balanced
and Growth Portfolios is not expected to exceed 125% of the Portfolio's total
assets. The annual turnover rate for the Capital Growth Portfolio is not
expected to exceed 150%. 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 Portfolios will purchase or sell shares of the
Underlying Funds: (a) to accommodate purchases and redemptions of

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<PAGE> 14

each Portfolio's shares; (b) in response to market or other economic conditions;
and (c) to maintain or modify the allocation of each Portfolio's assets among
the Underlying Funds within the percentage limits described above or as altered
by Sierra Services from 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 Portfolios).

RISK FACTORS OF THE PORTFOLIOS

Like any investment in an investment company, an investment in the Portfolios
involves risk. Prospective investors in the Portfolios should consider the
following factors:

- Investing in the Underlying Funds through the Portfolios involves
certain additional expenses and tax results that would not be present in
a direct investment in the Underlying Funds. See "Dividends, Capital
Gains and Taxes -- Taxes" for additional information about tax
implications of investing in the Portfolios.

- Under certain circumstances, an Underlying Fund may determine to make
payment of a redemption request by a Portfolio 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 Portfolios
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, some of which may be considered speculative.
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 PORTFOLIOS AND
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 Capital Growth Portfolio 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 Portfolio will be subject
to the risks associated with investing in such lower-rated bonds. See
"SECURITIES AND INVESTMENT PRACTICES OF THE PORTFOLIOS AND UNDERLYING
FUNDS -- LOWER-RATED SECURITIES" for additional information about such
risks.

- If a Portfolio were to invest in SPIF, such an investment would be
considered illiquid. None of the Portfolios would be permitted to invest
more than 15% of its net assets in the aggregate in SPIF and other
illiquid securities. 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 of SPIF 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 Portfolio
invested in SPIF, such redemptions would be made from STF Funds thereby
increasing the remaining shareholders' allocation to the SPIF.

- Certain Portfolios 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 Portfolios 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 30% of its total
assets in securities in developing or

-11-
<PAGE> 15

emerging markets countries (a country in the initial stages of its
industrialization cycle). These investments will subject such Portfolios
to risks associated with investing in foreign securities. See
"SECURITIES AND INVESTMENT PRACTICES OF THE PORTFOLIOS AND UNDERLYING
FUNDS -- FOREIGN INVESTMENTS" for additional information about such
risks.

- 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 Portfolio, and Sierra
Advisors, the 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 Portfolios and the
Underlying Funds.

- From time to time, one or more of the Underlying Funds used for
investment by a Portfolio may experience relatively large investments or
redemptions due to reallocations or rebalancings by the Portfolios 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. 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 Portfolio
transactions on the Underlying Funds; Sierra Services, representing the
interest of the shareholders of the Portfolios, is also committed to
minimizing such impact on the Underlying Funds to the extent it is
consistent with pursuing the investment objectives of the Portfolios.
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 Portfolio transactions on the Underlying Funds.

INVESTMENT LIMITATIONS OF THE PORTFOLIOS

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

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

2. Each Portfolio may borrow money from banks solely for temporary
emergency purposes, but not in an amount exceeding 30% of its total
assets. Whenever borrowings by a Portfolio, including reverse repurchase
agreements, exceed 5% of the value of a Portfolio's total assets, the
Portfolio will not purchase any securities.

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

-12-
<PAGE> 16

INVESTMENT GOALS OF THE UNDERLYING FUNDS

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

<TABLE>
<CAPTION>
UNDERLYING FUNDS 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 Short Term Global Government 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 of the Portfolios and
Underlying Funds" 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 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 STF 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

-13-
<PAGE> 17

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
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

-14-
<PAGE> 18

branches of U.S. banks. Investment in foreign securities is subject to special
risks; see "Securities and Investment Practices of the Portfolios and the
Underlying Funds -- 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 of the
Portfolios and the Underlying Funds -- 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 of the Portfolios and the Underlying
Funds -- 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 of the Portfolios and
the Underlying Funds -- 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 SHORT TERM GLOBAL GOVERNMENT FUND. The Fund's investment objective is to
provide high current income consistent with protection of principal. Under
normal conditions, the Fund invests primarily in at least three different
countries, one of which may be the United States. The Fund maintains a
dollar-weighted average portfolio maturity not exceeding three years but may
hold individual securities with longer maturities. This policy helps minimize
the effect of interest rate changes on the Fund's share price. The Sub-Advisor's
calculation of the expected average life of a portfolio mortgage security is
used as that security's maturity with regard to determining the above average
dollar-weighted portfolio maturity calculation. The Fund's share price and yield
will fluctuate primarily due to the movement of foreign currencies against the
U.S. Dollar and changes in worldwide interest rates.

The Fund seeks to maintain greater price stability than longer-term bond funds.

Under normal market conditions, the Fund will invest at least 65% of its assets
in: (i) obligations issued or guaranteed by foreign national governments, their
agencies, instrumentalities, or political subdivisions (including any security
which is majority owned by such government, agency, instrumentality, or
political subdivision); and (ii) U.S. Government Securities.

The Fund may also invest in non-government foreign and domestic debt securities,
including debt securities issued or guaranteed by supranational organizations,
corporate debt securities, bank or bank holding company obligations (e.g.,
certificates of deposit, bankers' acceptances and time deposits),
mortgage-backed or asset-backed securities, and repurchase agreements.

To protect against credit risk, the Fund invests primarily in high-grade debt
securities. At least 65% of the Fund's investments will consist of securities
rated within the three highest rating categories of S&P (AAA, AA, A) or Moody's
(Aaa, Aa, A), or, if unrated, are judged to be of comparable quality by the
Sub-Advisor.

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<PAGE> 19

The Fund may invest up to 10% 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 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 of the Portfolios and the Underlying Funds
- -- Lower-Rated Securities."

In addition to U.S. Dollar holdings, the Fund may invest in securities
denominated in foreign currencies and in multinational currency units, such as
the European Currency Unit ("ECU"), which is a "basket" consisting of specified
amounts of the currencies of certain states of the European Community. The
specific amounts of currencies comprising the ECU may be adjusted by the Council
of Ministers of the European Community to reflect changes in the relative values
of the underlying currencies. Securities of issuers within a given country may
be denominated in the currency of another country. In addition, when the Fund's
Sub-Advisor believes that U.S. securities offer superior opportunities for
achieving the Fund's investment objective, or for temporary defensive purposes,
the Fund may invest substantially all of its assets in securities of U.S.
issuers or securities denominated in U.S. Dollars.

Adam M. Greshin is the lead portfolio manager for the Short Term Global
Government Fund. Mr. Greshin joined Scudder in 1986 as an international bond
analyst. Currently, he is Product Leader for Scudder's global and international
fixed-income investing. He was involved in the original design of the Fund and
has served as a member of the Fund's portfolio management team since its
inception. Mr. Greshin assumed responsibility for the Fund's day-to-day
management and investment strategies effective November 1995.

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, 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
total assets in (i) the types of securities in which the STF Corporate Income
Fund may invest except as otherwise prohibited in the Prospectus or 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; and (ii) commercial mortgage-backed securities, which are
mortgage-backed securities that are issued by a nongovernmental entity, such as
a trust, and include collateralized mortgage obligations and real estate
mortgage investment conduits that are rated in one of the two rating categories.
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 STF 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 of the Portfolios and
Underlying Funds -- 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 Andrew J. Phillips. Mr. Anderson has been co-head of BlackRock's Portfolio
Management Group since BlackRock's founding in 1988. Mr. Phillips has been a
portfolio manager of BlackRock since 1991 and the Vice President of BlackRock
since 1993.

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

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<PAGE> 20

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 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 of the
Portfolios and Underlying Funds" in this Prospectus.

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<PAGE> 21

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 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

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<PAGE> 22

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 qualify as a "regulated investment company" as defined under Subchapter
M of the International Revenue Code of 1986, as amended. See "Dividends, Capital
Gains and Taxes -- Taxes."

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 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

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<PAGE> 23

securities and may decline significantly in periods of general economic
difficulty, which may follow periods of rising interest rates. See "Securities
and Investment Practices of the Portfolios and Underlying Funds - 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 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 of the Portfolios and Underlying
Funds - 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.

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<PAGE> 24

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 30% 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 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.

The following people have been primarily responsible for managing the Fund since
April 8, 1996. Richard H. King, Senior Managing Director, joined the firm to
found the department and has 28 years of investment experience. Prior to joining
Warburg, Mr. King was chief investment officer and a director of Fiduciary Trust
Company International S.A. in London beginning in 1984. Nicholas P. Edwards,
Senior Vice President, has 12 years of investment experience. Prior to joining
Warburg, Mr. Edwards was a director and senior analyst at Jardine Fleming
Investment Advisers in Tokyo from 1991 to 1995. Harold W. Ehrlich, CFA, CIC,
Senior Vice President, has 13 years of investment experience. Prior to joining
Warburg, Mr. Ehrlich was a senior vice president, portfolio manager and analyst
at Templeton Investment Counsel Inc. from 1987 to 1995. Nicholas P.W. Horsley,
Senior Vice President, has 15 years of investment experience. Prior to joining
Warburg, Mr. Horsley was a director, portfolio manager and analyst at Barclays
de Zoete Wedd in New York from 1986 to 1993. Vincent J. McBride, Vice President,
has 9 years of investment experience. Prior to joining Warburg, Mr. McBride was
an international equity analyst at Smith Barney Inc. from 1993 to 1994. He was
an international equity analyst at General Electric Investments from 1992 to
1993 and a portfolio manager/analyst at United Jersey Bank from 1989 to 1992.

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<PAGE> 25

SECURITIES AND INVESTMENT PRACTICES OF THE PORTFOLIOS AND THE UNDERLYING FUNDS

The following sections contain more detailed information about types of
securities in which the Portfolios and the Underlying Funds may invest, and
strategies a Portfolio or an Underlying Fund may employ in pursuit of that
Portfolio's or 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 these securities or use 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 Portfolio 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 Portfolio 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 Portfolio'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 STF 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.

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,

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<PAGE> 26

the STF Short Term High Quality Bond 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 (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 up to 15% of each underlying Bond Fund (other than
SPIF for which there is no limit) and Equity Fund, and 10% of each Underlying
Money Fund, may be invested in securities that are not readily marketable.

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.

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.

DERIVATIVES. Each of the Portfolios and the Underlying Funds may invest in
derivatives. Derivatives are securities that derive their value from other
securities. The following are considered derivative securities: options on
futures,

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<PAGE> 27

options, swap agreements, mortgage-backed securities, when-issued securities,
delayed delivery transactions, forward commitments, floating and variable rate
securities, convertible securities, "stripped" U.S. Treasury securities and
dollar roll transactions. See elsewhere in this Prospectus for descriptions of
various instruments, the risks associated with these instruments, and
information about any investment policies or limitations applicable to their
use. See "Strategic Transactions" for additional information.

DIVERSIFICATION. 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 SPIF invests a
relatively high percentage of its assets in obligations of a limited number of
issuers, 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 the section "Fixed Income
Obligations and Securities."

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 STF 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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<PAGE> 28

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 STF 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> 29

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> 30

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 Advisor or
Sub-Advisor, certain Portfolios or 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 Portfolios or Underlying Funds, and for the other purposes
described in the section "Strategic Transactions." A Portfolio or 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 Portfolio's or 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> 31

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 a Portfolio or Underlying
Fund is to protect the Portfolio or 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 a Portfolio
or 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, the Portfolio or 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 a Portfolio or 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 Portfolio or Underlying Fund would pay commissions and other costs
in connection with such investments, which may increase the Portfolio or
Underlying Fund's expenses and reduce its return. While utilization of options,
futures contracts and similar instruments may be advantageous to the Portfolio
or Underlying Fund, if the Portfolio or Underlying Fund's Advisor or Sub-Advisor
is not successful in employing such instruments in managing the Portfolio's or
Underlying Fund's investments, the Portfolio's or Underlying Fund's performance
will be worse than if the Portfolio or Underlying Fund did not make such
investments. Losses incurred in hedging transactions and the costs of these
transactions will adversely affect a Portfolio or 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 collateraliz-

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<PAGE> 32

ing the securities. If a decline in the level of prevailing interest rates
results in a rate of principal prepayments higher 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. SPIF is a closed-end investment company designed primarily for
long-term investors and not as a trading vehicle. 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 liquidity 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 SPIF's Board of Trustees does not authorize 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 of SPIF.

ILLIQUID SECURITIES. With the exception of SPIF, up to 15% of the net assets of
each of the Underlying Funds other than the Money Funds (the "Non-Money Funds"),
and up to 10% of the net 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 invested 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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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%, and the STF Short Term Global Government Fund may invest up to
10%, 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 - Special Considerations Relating to STF
Emerging Growth Fund and STF 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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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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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. All of the Underlying Funds (except the STF U.S.
Government Fund, the Money Funds and SPIF) 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 partial hedge, up to the amount of the
premium

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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 transactions ("OTC
Options"), as well as exchange-traded or "listed" options on foreign currencies.
Each of the

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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 underlying
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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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 Underlying 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
Underlying 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 Underlying 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 Underlying Fund in a Lender's portion of a Senior Loan
typically result in the Underlying Fund having a contractual relationship only
with such Lender, not with the Borrower. The Underlying 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 Underlying 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 Underlying Funds acquired by other Lenders through set-off
against the Borrower and the Underlying Fund may not directly benefit from the
collateral supporting the Senior Loan in which it has purchased the
Participation. As a result, the Underlying 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 Underlying 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 Underlying Fund has taken the
following measures in an effort to minimize such risks. The Underlying Fund will
acquire Participations only if the Lender selling the Participation, and any
other persons interpositioned between the Underlying 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 Underlying 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
Underlying Fund ordinarily will purchase a Participation only if, at the time of
such purchase, the Underlying Fund believes that the party from whom it is
purchasing such Participation is retaining an interest in the underlying Senior
Loan.

The Underlying 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 Underlying Fund is an Original Lender originating a Senior Loan it may
share in a fee paid to the Original Lenders. The Underlying Fund will never act
as the Agent or principal negotiator or administrator of a Senior Loan. When the
Underlying 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

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with respect to any Underlying Funds acquired by other Lenders through set-off.
Lenders also have full voting and consent rights under the applicable Loan
Agreement. Action 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 Underlying 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 Underlying Fund will purchase a Participation only where the Lender selling
such Participation, and any other person interpositioned between such Lender and
the Underlying 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 Underlying 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 Underlying 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 of the Portfolios and
Underlying Funds" 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

-36-
<PAGE> 40

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 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 Underlying 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
Portfolios may describe the 30-day yield. The 30-day yield of the Income
Portfolio, Value Portfolio and the Balanced Portfolio refers to the income
generated by an investment in such Portfolio 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 Income
Portfolio, Value Portfolio and the Balanced Portfolio 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 Portfolio 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 Portfolio from the beginning
date of the measuring period. These figures reflect changes in the price of the
Portfolio's shares and assume that any income dividends and/or capital gains
distributions made by the Portfolio during the period were reinvested in shares
of the Portfolio. 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 Portfolio's operations, or on a year-by-year basis). A
Portfolio may also advertise the average annual total return of the Sierra Asset
Management program, an investment management service offered by Sierra Services
that allocates investments across a combination of the Underlying Funds. See
"Determination of Performance" in the SAI.

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
Portfolio may provide yield quotations in investor communications based on the
Portfolio'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 Portfolio'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 Portfolio's
Class B Shares will be lower than that for a Portfolio's Class A Shares. The SAI
describes the methods used to determine a Portfolio's performance.

-37-
<PAGE> 41

PERFORMANCE COMPARISONS

In reports or other communications to shareholders or in advertising material, a
Portfolio 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 Portfolios 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 Portfolio 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 Portfolio compares its performance
to other funds or to relevant indexes, the 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 Portfolio, 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 Portfolio'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 Portfolio, 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 Shareholder Services at 800-222-5852.

YOUR SIERRA ASSET MANAGEMENT ("SAM") PORTFOLIO ACCOUNT

SETTING UP YOUR SAM PORTFOLIO ACCOUNT

The Trust provides an active investment management service offered by Sierra
Services that allocates your investments primarily in a combination of Class I
Shares of certain of the Underlying Funds, except SPIF (and, possibly in the
future, the Class A Common Shares of SPIF), that are selected to meet long-term
investment objectives as well as, in certain circumstances, current income
objectives. Each Underlying Fund invests in a diversified portfolio of
securities in a manner designed to meet its own investment objective. 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 Portfolio Account by having your assets actively managed
among several different Underlying Funds that each have different risk and
return characteristics.

Sierra Services has incorporated investment strategies into the Portfolios to
meet the diverse financial needs of different investors. You can open a SAM
Portfolio 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 Portfolio Account criteria to
determine your long-term objectives, you can choose one of several investments
which allocates its assets among a number of the Underlying Funds.

The Portfolios have been designed for long-term investors and tax-advantaged
retirement and other long-term investment and savings accounts. Shares of the
Portfolios are sold on a continuous basis and may be purchased directly from the
Trust, through the Trust's distributor, Sierra Services, or through Authorized
Dealers. This section describes the purchase, exchange and redemption services
available to investors. Please note that the services

-38-
<PAGE> 42

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 Portfolios 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 Portfolios 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 Portfolio 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 Portfolios 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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<PAGE> 43

YOUR ACCOUNT

- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------

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<PAGE> 44

HOW TO INVEST IN A SAM PORTFOLIO ACCOUNT
- --------------------------------------------------------------------------------

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

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

<TABLE>
<S> <C> <C>
BY TELEPHONE: Call Sierra Shareholder Services Call Sierra Shareholder Services
at 800-222-5852, at 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
</TABLE>

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

<TABLE>
<S> <C> <C>
BY MAIL: Complete and sign the application. Make your check payable to
Make your check or negotiable "Sierra Asset Management Portfolios."
bank draft payable to "Sierra Asset Indicate your Portfolio account number
Management Portfolios." Mail the and class of shares on your check.
completed application form If possible, include the "next
and check to: investment" slip from your previous
account statement. Mail the check
Sierra Asset Management and slip to the address printed
c/o First Data Investor Services Group on your account statements.
P.O. Box 5118
Westborough, MA 01581-5118 Exchange by mail:
Call 800-222-5852 for instructions.
</TABLE>

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

<TABLE>
<S> <C> <C>
BY WIRE: 1. Telephone Shareholder Services and Instruct your bank/financial institution
give the (a) name of the account to wire Federal Funds exactly as
as you wish it to be registered; described at left under paragraph 2.
(b) address of the account;
(c) taxpayer ID number (social
security number for an individual);
and (d) Portfolio name and class of
shares.
2. Instruct your bank to wire Federal
Funds
exactly as follows:
Boston Safe Deposit Trust
Boston, MA
ABA #011-001234
For credit to Sierra
Asset Management Portfolios
Account #132012
(Portfolio Name and class of shares)
(Customer's Name)
(Customer's Social Security Number)
3. Mail the completed application form
to:
Sierra Asset Management
c/o First Data Investor Services Group
P.O. Box 5118
Westborough, MA 01581-5118
</TABLE>

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

<TABLE>
<S> <C> <C>
AUTOMATICALLY: 1. Obtain and complete an application Pre-authorized monthly investments are
form. now processed automatically. (Minimum
Amount $100).
(Minimum New Account 2. Attach a voided check or deposit slip
amount $1,000). from the bank account you would like
the investments transferred from on
the 15th of each month.
3. Mail the application to the address
listed above.
</TABLE>

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

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<PAGE> 45

TO PURCHASE SHARES. Purchase, sale and exchange orders received by Sierra
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 Portfolio, 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 Sierra 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 currently
scheduled to be closed on New Year's Day, President's Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day, and on
the preceding Friday or subsequent Monday when any of these holidays falls on a
Saturday or Sunday, respectively.

Purchases of each class of Sierra shares are effected at the Portfolio'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, 1:00 p.m., Pacific Time/4:00
p.m. Eastern Time, the shares will not be credited until the next Business Day.
However, Sierra Shareholder Services will be open from 6:00 a.m. to 6:00 p.m.,
Pacific Time/9:00 a.m. to 9:00 p.m., Eastern Time, Monday through Friday, except
on NYSE holidays and 6:00 a.m. to 3:00 p.m., Pacific Time/9:00 a.m. to 6:00
p.m., Eastern Time on Saturday.

TIMING OF DIVIDENDS. Shares of certain Portfolios 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 Portfolio 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 portfolios 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 Portfolio 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
Portfolios 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

-42-
<PAGE> 46

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").
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 INCOME PORTFOLIO AND VALUE PORTFOLIO

<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 PORTFOLIO

<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 GROWTH PORTFOLIO

<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..................................... 5.50% 5.82% 4.75%
$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>

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<PAGE> 47

FOR CLASS A SHARES OF THE CAPITAL GROWTH PORTFOLIO

<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>

+ Investors do not pay a sales charge at time of purchase on purchases of $1
million or more; however, 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 Portfolios, 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 Portfolio
rather than another class of the Portfolio.

REDUCED SALES CHARGES AT PURCHASE.

As described below, the sales charge on purchases of a Portfolio's Class A
Shares may be reduced through: (1) a Right of Accumulation; (2) Quantity
Discounts; (3) a Letter of Intent; and (4) Reinvestment Privileges. Reduced
sales charges may be modified or terminated at any time as to new purchases
and/or letters of intent and are subject to confirmation of an investor's
holdings. For more information about reduced sales charges, contact your
representative or call 800-222-5852.

RIGHT OF ACCUMULATION. Under the Right of Accumulation, the current value of an
investor's existing Class A Shares in a Non-Money Market Fund of Sierra Trust
Funds, Class B and Class S Shares in all the Funds of the Sierra Trust Funds and
Class A Common Shares of SPIF may be combined with the amount of the investor's
current purchase of Class A Shares of a Portfolio or Portfolios in determining
the sales charge applicable to such Class A Shares. In order to receive the
cumulative quantity reduction, the investor or the securities dealer must call
previous purchases of such Class A, Class B and Class S Shares to the attention
of Sierra Shareholder Services at the time of the current purchase.

QUANTITY DISCOUNTS. As shown in the tables previously and under the Right of
Accumulation section, larger purchases of the Class A Shares of the Portfolios
combined with Non-Money Fund Class A Shares, Class B and Class S Shares of all
the Sierra Trust Funds and Class A Common Shares of SPIF reduce the sales charge
paid on the Class A Shares of the Portfolios. The Portfolios will combine
purchases of the Class A Shares of the Portfolios with the Non-Money Fund Class
A Shares, Class B and Class S Shares of all the Sierra Trust Funds and Class A
Common Shares of SPIF made on the same day by the investor, spouse, and any
minor children when calculating the Portfolios' Class A Shares sales charge. In
order to receive the cumulative quantity reduction, the investor or the
securities dealer must call related purchases of such Class A Common Shares,
Class A, Class B and Class S Shares to the attention of Sierra Shareholder
Services at the time of the current purchase.

LETTER OF INTENT. An investor may qualify for a reduced sales charge on Class A
Shares of the Portfolios immediately by signing a non-binding "Letter of Intent"
stating the investor's intention to invest during the following 13 months a
specified amount in the Class A Shares of the Portfolios, Non-Money Fund Class A
Shares and/or Class A Common Shares of SPIF which, if made at one time, would
qualify for a reduced sales charge. Any redemptions of Class A Shares made
during the 13-month period will be subtracted from the amount of purchases of
Class A Shares in determining whether the terms of the Letter of Intent have
been met. During the term of a Letter of Intent, Sierra Shareholder Services
will hold Class A Shares representing 5.00% of the amount purchased in escrow
for payment of a higher sales load if the full amount specified in the Letter of
Intent is not purchased

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<PAGE> 48

within the 13-month period. The escrowed shares will be released when the full
amount specified has been purchased. If the full amount specified is not
purchased within the 13-month period, the investor will be required to pay an
amount equal to the difference in the dollar amount of sales charge actually
paid and the amount of sales charge the investor would have had to pay on the
investor's aggregate purchases of Class A Shares if the total of such purchases
had been made at a single time.

REINVESTMENT PRIVILEGE. Upon redemption of Class A Shares from a Portfolio, a
shareholder may reinvest any or all of the redemption proceeds in Class A Shares
of a Portfolio without any sales charge provided the reinvestment is within 180
days of the redemption from the Portfolio. To receive the privilege, the
shareholder must notify the Authorized Dealer or Sierra 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 Portfolio 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 (Sierra 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 Portfolios' 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
(investors may be charged an additional service or transaction fee by the
Authorized Dealer or bank).

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 Portfolio through an employee benefit
trust created pursuant to a plan qualified under Section 401(k) of the Code
("401(k) Plan") that has invested, in the aggregate, more than $1 million in the
Portfolios, or (b) investors purchasing Class A Shares of a Portfolio through a
plan qualified under Section 403(b) of the Code ("403(b) Plan") that has
invested, in the aggregate, more than $1 million in the Portfolios. Investors
through 401(k) and 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 403(b) Plan. Such investors should consult their
employer and/or account agreements for information relating to their 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 Portfolio, a Sierra Trust
Fund or SPIF purchased at NAV without a sales charge at time of purchase due to
purchases of $1 million or more. 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
Portfolio that were acquired through an exchange for Class A Shares of a
Portfolio 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 Portfolios, the named fiduciary of the plan withdraws
the plan from investing in the Portfolios in a manner that causes all shares
held by the plan's participants

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<PAGE> 49

to be redeemed; or (ii) by a plan participant in a 403(b) Plan 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
Portfolios; (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. 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 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 Portfolio 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; a redemption made within one year of the death of the shareholder
(including one who owns the shares as joint owner); 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.

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<PAGE> 50

HOW TO SELL SHARES

You can arrange to take money out of your Portfolio account on any Business Day
by selling 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
Sierra Shareholder Services, until such time as regulations may require the
Portfolios 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 to clear for deposit of the shareholder's funds into the
Portfolio'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 Portfolio Account open,
leave at least $10,000 worth of shares in your SAM Portfolio Account, unless you
are a participant in the SAM Portfolios Automatic Investment Plan.

If the value of your SAM Portfolio Account falls below $10,000 because of
shareholder redemption(s), the Portfolio may notify the shareholder, and if the
account value remains below $10,000 for a continuous 60-day period, the shares
in such account may be subject to redemption by the Portfolio and, if redeemed,
the net asset value of such shares will be promptly paid to the shareholder. The
Portfolio, however, will not redeem shares based solely upon changes in the
market that reduce the net asset value of shares. If the shares that are
redeemed in such a case are Class B Shares, the CDSC applicable to such shares
may be imposed.

- - The table on the following page highlights the ways in which you can redeem
shares in your SAM Portfolio Account.

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<PAGE> 51

WAYS TO SELL SHARES OF YOUR SIERRA ASSET MANAGEMENT PORTFOLIO

- --------------------------------------------------------------------------------
Account Type Special Requirements

<TABLE>
<S> <C> <C>
BY PHONE All account types, except - You may exchange to the same class of
800-222-5852 retirement other Portfolios 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 the Trust before 8:00 a.m.,
Pacific Time/11:00 a.m., Eastern 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 800-222-5852 to verify you have the
correct paperwork and to avoid delays.

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<PAGE> 52

- - BY TELEPHONE

A shareholder may withdraw any amount from the shareholder's account by
telephoning 800-222-5852. Redemption orders must include the shareholder's
Portfolio account name (as registered with the Portfolio) from which the
redemption is being made, the class of shares and the relevant Portfolio account
number. Otherwise, the proceeds will be sent to the shareholder by check at the
shareholder's address of record.

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
Portfolio 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 Sierra 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.

KEY ASPECTS OF TELEPHONE TRANSACTIONS. The Trust and its Transfer Agent will
each employ procedures to confirm that telephone instructions are genuine,
including recording telephone calls and sending written confirmations of
telephone transactions. If the Transfer Agent does not follow such procedures it
may be liable for losses due to unauthorized or fraudulent telephone
instructions. You should verify the accuracy of telephone transactions
immediately upon receipt of your confirmation statement. 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. During periods of significant economic or
market changes, telephone transactions may be difficult to implement. If an
investor is unable to contact Sierra Shareholder Services by telephone, an
investor may deliver the transaction request to Sierra Shareholder Services at
800-222-5852. Upon 30 days' prior written notice to shareholders, the telephone
transaction privileges may be modified or terminated.

- - SYSTEMATIC WITHDRAWAL PLAN

A Systematic Withdrawal Plan may be established by a new or existing shareholder
if the Class A Shares or Class B Shares in the shareholder's account, when
valued at the NAV at the time of the establishment of the Systematic Withdrawal
Plan, equals $10,000 or more. Shareholders who elect to establish a Systematic
Withdrawal Plan may receive a monthly, quarterly, semiannual or annual check in
a stated amount, not less than $100, on the 10th or 20th of the month. Portfolio
shares will be redeemed as necessary to meet withdrawal payments. 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 account. To protect
shareholders and the Portfolios, if the Systematic Withdrawal Plan is not
established when an account is opened, a signature guarantee (see following
page) is required to establish a Systematic Withdrawal Plan. Also, a signature
guarantee is required if withdrawal payments are directed to an address other
than the address of record, or if a change of address request has been submitted
in the last 30 days. A Systematic Withdrawal Plan may be terminated by a
shareholder on 30 days' written notice or by the Trust at any time.

The CDSC on Class B Shares is waived for withdrawals under the Systematic
Withdrawal Plan of a maximum of 1% per month, 3% per quarter, 6% semiannually or
12% annually, of a shareholder's investment in, and any dividends or
distributions on, Class B Shares of a Portfolio at the time the Systematic
Withdrawal Plan commences, provided that the shareholder elects to have all
dividends and distributions on the shareholder's Class B Shares automatically
reinvested in additional Class B Shares. Under this CDSC waiver policy, amounts
withdrawn each month will be paid by redeeming first Class B Shares not subject
to a CDSC because the shares were purchased by the reinvestment of dividends or
capital gains distributions, the CDSC period has elapsed or some other waiver of
the CDSC applies. If no Class B Shares not subject to the CDSC are available, or
not enough such shares are available, Class B Shares having a CDSC will be
redeemed next beginning with such shares held for the longest period of time
(having the lowest CDSC payable upon redemption) and continuing with shares held
the next longest period of time until shares held the shortest period of time
are redeemed. Under this policy, the least amount of CDSC will be waived by
withdrawals under the Systematic Withdrawal Plan. See "How to Invest in a SAM
Portfolio Account -- Deferred Sales Charge Alternative: Class B Shares,"
"Application of Class A Shares CDSCs," "Waivers of the Class A Shares CDSCs" and
"Waivers of the Class B CDSCs" sections for a description

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<PAGE> 53

of the circumstances under which a CDSC on Class B Shares and on Class A Shares,
respectively, may be assessed on redemptions of such shares made through the
Systematic Withdrawal Plan as described above.

- - THROUGH SIERRA SHAREHOLDER SERVICES OR AUTHORIZED DEALERS

You may sell shares of the Portfolio 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 Portfolio 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
Portfolio Account (record address), or

- The check is not being made out to the SAM Portfolio 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.

EXCHANGE PRIVILEGES AND RESTRICTIONS

The exchange privilege is available only in those states where the offer and
sale of shares of a given Portfolio 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 impose 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 Portfolio for Class A Shares of any other Portfolio,
a Sierra Trust Fund or SPIF. Shareholders exercising the exchange privilege with
any of the Portfolios or the Underlying Funds should review the prospectus of
each such Portfolio or Underlying Fund carefully prior to making an exchange.
Initially, shareholders of Sierra Trust Funds or SPIF are not permitted to
exchange their shares for shares of the SAM Portfolios. Exchanges of shares are
sales and may result in a gain or loss for federal and state income tax
purposes.

Certain Class A Shares of the Portfolios 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 Portfolio 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 Portfolio may be exchanged for Class B
Shares of any other Portfolio or Underlying Fund or Class S Shares of any
Underlying Fund without having to pay any CDSC at the time of the exchange. If
you exchange into Class B Shares of another Portfolio or Underlying Fund or
Class S Shares of any Underlying Fund and subsequently redeem such shares, the
period of time during which you held your investment in Class B Shares of the
previous Portfolio will be included in the period during which that investment
is deemed to be invested in the Portfolio 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 or Class S Shares after exchanges, the amount you
initially invested (the "Investment Amount") will be subject to the CDSC
schedule and rate of the Portfolio 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 Class B Shares.

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<PAGE> 54

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 Portfolio or Underlying Fund being acquired.

DIVIDENDS, CAPITAL GAINS AND TAXES

As a Portfolio shareholder, you are entitled to your share of the Portfolio's
net income and gains on its investments. The Portfolio passes these earnings
along to its investors as DIVIDENDS AND DISTRIBUTIONS. Each Portfolio 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 Portfolio. Dividends from the net investment income of the Income
Portfolio, Value Portfolio and Balanced Portfolio will be declared daily and
paid monthly. Dividends from the net investment income of the Growth Portfolio
will be declared and paid quarterly and the Capital Growth Portfolio will be
declared and paid semi-annually. Distributions of any net long-term capital
gains earned by a Portfolio will be distributed no less frequently than annually
at the discretion of the Board of Trustees.

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

1. REINVESTMENT OPTION. Your dividend and capital gain distributions will be
automatically reinvested in additional shares of the same Portfolio, unless you
instruct the Portfolio on the Application Form or later in writing or by
telephone to pay all distributions in cash. Distributions from a class of one
Portfolio may be reinvested in the same class of the same Portfolio or a
different Portfolio. 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
Portfolio 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 Portfolio 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 Portfolio goes ex-dividend (deducts a dividend or
distribution from the Portfolio's share price), the reinvestment price is the
Portfolio'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 Portfolio
or its shareholders. Accordingly, shareholders are urged to consult their tax
advisors regarding specific questions as to federal, state and local income
taxes.

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

Each Portfolio 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

-51-
<PAGE> 55

part of its investment income which is distributed to shareholders. The
requirements for qualification may cause a Portfolio 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 Portfolio. 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 Portfolio and received by the shareholders on the last day of
December if paid by the Portfolio 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 Portfolio
for such calendar year.

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 Income Portfolio is expected to qualify for the dividends received deduction
available to corporate taxpayers and only a portion of the dividends paid by the
Balanced Portfolio 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 Portfolio 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 Portfolio, 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 PORTFOLIOS. YOU
SHOULD CONSULT YOUR TAX ADVISOR BEFORE INVESTING IN THE PORTFOLIOS.

SHAREHOLDER AND ACCOUNT POLICIES

TRANSACTION DETAILS

The NAV of each class of the Portfolio is the value of a single share of the
respective class. The NAV is calculated separately for each class of the
Portfolios and is calculated by adding up the value of the Portfolio'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.

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<PAGE> 56

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 PORTFOLIO RESERVES THE RIGHT TO SUSPEND THE OFFERING OF CLASS A OR CLASS B
SHARES for a period of time. Each Portfolio 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 Sierra Services, they are of a size
that would disrupt management of a Portfolio.

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

THE PORTFOLIOS 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 Portfolios,
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 Trust has
no operating history prior to the date of this Prospectus.

THE PORTFOLIOS MAY HOLD SPECIAL MEETINGS AND MAIL PROXY MATERIALS. As a
Massachusetts business trust, the Portfolios 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 holding 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
Portfolio 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
Portfolio or class, respectively, such as the distribution plan for a class.
Matters may be submitted by the Underlying Funds for vote by the shareholders of
the Underlying Funds, in which case the Portfolios, as shareholders of the
Underlying Funds will be entitled to vote the shares they hold. Each Portfolio
will vote its Underlying Fund shares in proportion to the votes of all other
shareholders of each respective Underlying Fund.

SIERRA SERVICES, SIERRA ADVISORS, THEIR AFFILIATES AND THE PORTFOLIOS' SERVICE
PROVIDERS

INVESTMENT ADVISOR OF THE PORTFOLIOS

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 Portfolios. Sierra Services provides its proprietary asset
allocation services to the Portfolios, formulates the Portfolios' investment
policies (subject to the terms of this Prospectus), analyzes economic and market
trends, exercises investment discretion over the assets of the Portfolios and
monitors the allocation of each Portfolio's assets and each Portfolio's
performance. Although it is expected that each Portfolio will typically be fully
invested in the Underlying Funds, Sierra Services may, from time to time, direct
the investment of each Portfolio'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 Portfolios, Sierra Services is
entitled to a fee, which is calculated daily and paid monthly, at an annual rate
of 0.15% of each Portfolio's average daily net assets.

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<PAGE> 57

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 $735 million in assets.

PORTFOLIO MANAGER

Stephen C. Scott, Senior Vice President of the Trust and of Sierra Services
since 1996, is the portfolio manager of each of the Portfolios. He joined Great
Western Financial Securities Corporation ("GW Securities") in August 1988 and
currently serves as the President and Chief Investment Officer of Sierra
Investment Advisors Corporation. Prior to joining GW Securities, he served as
President and Chairman of SDS Investment Advisors, a firm he founded in which he
developed asset allocation technology. Mr. Scott has had primary management
responsibility for the Portfolios since their inception.

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. Each Underlying Fund has a
sub-advisor who selects the investments made by the Underlying Fund subject to
oversight and direction by Sierra Advisors. 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.

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 Short Term Global Government Fund...... 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, New York 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 May 31, 1996, total assets under management were over $162 billion.

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<PAGE> 58

The advisor pays Alliance a fee based on annual percentage rate of 0.15% of the
average net assets of the STF U.S. Government Money Fund.

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 June 30, 1996, BlackRock had aggregate assets under management
or supervision of more than $41 billion.

BlackRock is paid fees monthly at the following annual rate under the Current
Sub-Advisory Agreement for the Fund: (i) 0.185% of the Fund's average daily net
assets if the combined average daily net assets of the Fund and The Sierra
Variable Trust's U.S. Government Fund (together, the "Government Funds' Combined
Assets") are equal to or less than $650,000,000; (ii) 0.15% of the Funds'
average daily net assets if the Government Funds' Combined Assets are more than
$650,000,000 but less than $1,000,000,000; or (iii) 0.10% of the Fund's average
daily net assets if the Government Funds' Combined Assets are more than
$1,000,000,000.

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 June 30, 1996,
Janus had over $38.8 billion in assets under management.

The advisor pays Janus a fee based on an annual percentage rate of the average
net assets of the STF Growth Fund, STF Emerging Growth Fund (.55% of the first
$100 million of assets, 0.50% of assets over $100 million).

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 March
31, 1996, J.P. Morgan and its affiliates had investment management authority
with respect to approximately $183 billion of assets.

The advisor pays J.P. Morgan a fee based on an annual percentage rate of the
average net assets of the STF Global Money Fund (0.15% of assets), STF Growth
and Income Fund (0.45% of the first $100 million of assets, 0.40% of the next
$100 million of assets, 0.35% of the next $200 million of assets, 0.30% of
assets over $400 million).

SCUDDER is the Investment Sub-Advisor of the STF Short Term High Quality Bond
and STF Short Term Global Government Funds. 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 March 31, 1996, Scudder's
assets under management were in excess of $105 billion.

The advisor pays Scudder a fee based on an annual percentage rate of the average
net assets of the STF Short Term High Quality Bond Fund (0.15% of the first $200
million, 0.10% of assets over $200 million) and STF Short Term Global Government
Fund (0.28% of the first $200 million, 0.10% of assets over $200 million).

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 for institutional investors, including investment
companies, and other investment counsel clients. As of March 31, 1996, TCW
Management and its affiliated advisers had just over $53.3 billion under
management or committed to management.

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<PAGE> 59

The advisor pays TCW Management a fee based on an annual percentage rate of the
average net assets of the STF Corporate Income Fund (0.30% of the first $500
million, 0.25% of assets over $500 million).

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. On June 24, 1996, VK/AC
Holding, Inc. announced it had entered into an Agreement and Plan of Merger
among Morgan Stanley Group Inc., MSAM Holdings II, Inc. and MSAM Acquisition
Inc., pursuant to which MSAM Acquisition Inc. will be merged with and into VK/AC
Holding, Inc. and VK/AC Holding, Inc. will be the surviving corporation. MSAM
Acquisition Inc. is a wholly owned subsidiary of MSAM Holdings II, Inc. which,
in turn, is a wholly owned subsidiary of Morgan Stanley Group Inc. Subject to a
number of conditions being met, it is currently anticipated that a closing will
occur on or about November 29, 1996. Thereafter, VK/AC Holding, Inc. and its
affiliated entities shall be part of Morgan Stanley Group Inc. 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 June 30, 1996, of more than $57
billion.

The advisor pays Van Kampen a fee based on an annual percentage rate of .475% of
the average net assets of the Sierra Prime Income Fund.

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
was incorporated in 1970 and is a wholly-owned subsidiary of Warburg, Pincus
Counsellors G.P. ("Counsellors G.P."), a New York general partnership. E.M.
Warburg, Pincus & Co., Inc. ("EMW") controls Warburg through its ownership of a
class of voting preferred stock of Warburg, Lionel I. Pincus may be deemed a
controlling person of EMW. Counsellors G.P. has no business other than being a
holding company of Warburg and its subsidiaries. Warburg is a professional
investment counselling firm which provides investment services to investment
endowment funds, foundations and other institutions and individuals. As of June
30, 1996, Warburg managed approximately $16 billion of assets, including
approximately $7 billion of investment company assets.

The advisor pays Warburg a fee based on an annual percentage rate of the average
net assets of the STF International Growth Fund (0.50% of net assets).

ADMINISTRATOR, TRANSFER AGENT AND CUSTODIAN

Sierra Administration provides 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,
including aggregating and processing purchase and redemption orders, forwarding
shareholder communications, and providing sub-accounting services. Sierra
Administration is entitled to a monthly fee at an annual rate of 0.50% of each
Portfolio's average daily net assets. First Data Investor Services Group, Inc.
("First Data"), a subsidiary of First Data Corp., serves as a sub-administrator
and Transfer Agent of the Trust. Sierra Administration pays First Data for its
services as a sub-administrator while the Trust pays First Data for its services
as transfer agent. Sierra Administration also 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 of the transfer agent's and
sub-administrator's out-of-pocket expenses and pays Boston Safe certain
custodial transaction charges.

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<PAGE> 60

DISTRIBUTOR OF THE PORTFOLIOS

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

Each of the Portfolios has two distribution plans, pursuant to Rule 12b-1 under
the 1940 Act, one for each of the two classes of shares of the Portfolio (each,
a "Rule 12b-1 Plan"). Each Portfolio 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 Portfolios. 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 Portfolios and under the Rule 12b-1 Plan for
Class B Shares ("Class B Plan") are calculated at an annual rate of 1.00% of the
average daily net assets of the Class B Shares of the Portfolios. 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 Portfolios and as much
as 0.75% of 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
Portfolios. Sierra Services may retain any amount of its fees that is not so
expended. A portion of the fees under the Class B Plan, calculated at an annual
rate of 0.25% of the average daily net assets of the Class B Shares of the
Portfolios, is designated a Shareholder Service Fee.

The distribution-related payments under the Rule 12b-1 Plans may be used by
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 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 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 Portfolios. 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 Portfolios, 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 Portfolios' shares. Sierra Services may, from time to time,
pay to other dealers, in connection with retail sales or the distribution of
shares of a Portfolio, 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
Portfolios. Such promotional incentives will be offered uniformly for all shares
of a class of the Portfolios 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 Portfolios sold by such dealer. Salespersons and any other person
entitled to receive any compensation for selling or servicing Portfolio shares
may receive different compensation with respect to one particular class of
shares over another in the Portfolio.

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<PAGE> 61

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 Portfolios.

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

Price Waterhouse LLP serves as the independent accountants of the Trust.

BREAKDOWN OF PORTFOLIO EXPENSES

Like any investment company, each Portfolio 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
Portfolio 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 Portfolio and each Underlying Fund also pays other expenses, which are
explained on the following pages. Sierra Services, Sierra Advisors and/or Sierra
Administration 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 may recover waived fees or reimbursed
expenses prior to the end of the fiscal year in which the fees were waived or
expenses reimbursed, but may not recover such waived fees or reimbursed expenses
in later years.

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<PAGE> 62

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>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------
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 100
-----------------------------------------------------------------------------------------------------------------------
Each Money
Fund* .50% .50% .50% .50% .50% .50% .50% .50% .50%
-----------------------------------------------------------------------------------------------------------------------
STF Short Term
High Quality
Bond
Fund .50% .50% .50% .50% .50% .50% .45% .45% .45%
-----------------------------------------------------------------------------------------------------------------------
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 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
High Quality
Bond
Fund .40%
-----------------
STF Short Term
Global
Government
Fund .55%
-----------------
STF U.S. Government
Fund* .50%
-----------------
STF Corporate Income
Fund .50%
-----------------
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%; and U.S. Government 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 Portfolio'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 Portfolio and Underlying 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 a 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. Class I Shares of the Underlying Funds
in which the Portfolios invest are not subject to Rule 12b-1 Plan fees.

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<PAGE> 63

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

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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<PAGE> 64
(800) 222-5852
LOGO
P.O. Box 5118
Westborough, Massachusetts 01581-5118
- --------------------------------------------------------------------------------

1. YOUR ACCOUNT REGISTRATION Check one box for the account you wish to open and
complete information.

<TABLE>
<S> <C>
/ / Individual Name ______________________________ SS#/Tax ID _______
/ / Joint Tenant Name of Add'l Owner _______________ SS#/Tax ID _______
/ / Tenants in Common
/ / Transfer to Minors __________________________ As Custodian For _________________________
NAME OF CUSTODIAN NAME OF MINOR
Under the ____________ Uniform Transfers (Gifts) to Minors Act ______ Minor's SS# ______________
(STATE) (AGE)
/ / Other Indicate name of Corporation, other organization or fiduciary; if Trust, include date of instrument:
(Additional forms, such as a Corporate Resolution may be required. Call (800) 222-5852 for information)
Name _________________________________ Tax ID ______________________________________
/ / I am a United States Citizen. If not, please specify Country ___________________________________________
Street Address ________________________________________________ Home Phone ( ) ___________________________
City __________________________________ State __________ Zip _________ Business Phone ( ) ________________
</TABLE>

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

2. YOUR INVESTMENT SELECTION (Minimum initial $10,000 or $2,000 for IRAs;
Minimum subsequent $2,000 or $1,000 for IRAs)

Portfolio Investment Amount
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
Income Portfolio
Class A Shares $ ----------------------------
Class B Shares $ ----------------------------
Value Portfolio
Class A Shares $ ----------------------------
Class B Shares $ ----------------------------
Balanced Portfolio
Class A Shares $ ----------------------------
Class B Shares $ ----------------------------
Growth Portfolio
Class A Shares $ ----------------------------
Class B Shares $ ----------------------------
Capital Growth Portfolio
Class A Shares $ ----------------------------
Class B Shares $ ----------------------------
Total Investment $ ----------------------------
</TABLE>

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

3. YOUR PAYMENT METHOD FOR INITIAL INVESTMENT

/ / CHECK: $______________________ Make check payable to Sierra Asset
Management Portfolios.

/ / WIRE: Call (800) 222-5852 for instructions.
- --------------------------------------------------------------------------------

4. YOUR BROKER/DEALER

Dealer Number _________ Branch Number _________ Representative's Number ________

Firm Name _____________________ Representative's Last Name _____________________

Branch Address ___________________ City __________ State ________ Zip __________

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

5. SPECIAL FEATURES AND PRIVILEGES

A. TELEPHONE PRIVILEGES PERMITS TRANSFER OF MONEY BY WIRE ($1,000 MINIMUM)
BETWEEN YOUR SIERRA ASSET MANAGEMENT PORTFOLIOS AND YOUR DESIGNATED BANK
ACCOUNT.

/ / YES / / NO If "Yes," Please wire monies to the following bank:

Name of your Bank ___________________________________________________________

Acct. Name ___________________________ Acct. No. ____________________________

Bank Address ___________________ City ___________ State ________ Zip ________

<PAGE> 65

B. DIVIDEND AND DISTRIBUTION PLANS Check one only; if none are checked, all
dividends/distributions will be reinvested.

/ / FULL REINVESTMENT -- Reinvest all dividends and distributions at net
asset value.

/ / CASH -- / / Pay all income dividends and distributions by check and
mail/deposit to my bank per instructions in Section "A" above.
/ / Pay all income dividends and distributions by check and mail to the address
provided in Section 1.

/ / SYSTEMATIC (AUTOMATIC) WITHDRAWAL PLAN -- If you have more than $10,000
in a Sierra Asset Management Portfolio account, you can elect to receive
a regular check as follows:

Frequency: / / Monthly / / Quarterly / / Semi-Annually / / Annually Amount (not
less than $100): $___________________________

Check the date of payment you prefer: / / 10th day OR / / 20th day of month

C. SAM PORTFOLIOS AUTOMATIC INVESTMENT PLAN (optional)

----------------------------
ATTACH VOIDED CHECK HERE

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

I authorize the Portfolio's Agent to withdraw funds from the bank account
provided below in the amount of $________(minimum $100), on the / / 15th of
________________(month) and on the same day of each month thereafter. If the
date falls on a weekend or holiday, funds will be invested on the next Business
Day. The investment will be applied to this Portfolio account.

Name of Bank __________________________________ Bank Account No. _______________

(the account must have check or draft writing privileges)

Address_________________________________________________________________________

City __________________________________ State _____________________ Zip________

D. LETTER OF INTENT (LOI):

/ / I agree to the terms of the Letter of Intent and provisions for reservation
of shares as set forth in the Prospectus. Although I am not obligated to do so,
it is my intention to invest over a 13-month period in Class A Shares of one or
more Portfolios, the Sierra Trust Funds (excluding Money Funds) and SPIF an
aggregate amount at least equal to the amount indicated below:

/ / $50,000 / / $100,000 / / $250,000 / / $500,000 / / $1,000,000

Effective Date ____________________ Note: The effective date can be no more
than 90 days prior to today's date.

_________________________________________________ __________________
Signature(s) Date

E. RIGHT OF ACCUMULATION (ROA):

In order for a cumulative quantity discount (as described in the Portfolios
prospectus) to be made available, the shareholder or his or her securities
dealer must notify Sierra Shareholder Services (800-222-5852) or the Portfolio's
transfer agent of the total holdings in our group (excluding all Sierra Trust
Funds Money Market Funds Class A Shares) each time an order is placed.

/ / I own shares in other Portfolios, Sierra Trust Funds or Sierra Prime Income
Fund which may entitle this purchase to have a reduced sales charge under the
provisions in the Portfolios prospectus. My other account numbers are:

____________________________________ ______________________________________

_________________________________________________ __________________
Signature(s) Date

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

6. CLIENT SIGNATURES AND TAXPAYER CERTIFICATION (Please read and sign below.)
I am of legal age, have received and read the Prospectus, agree to its terms and
understand that by signing below (a) neither the Portfolios nor Sierra
Investment Services Corporation is a bank; and Portfolio shares are not backed
or guaranteed by any bank nor insured by the FDIC; (b) my (our) account will
automatically have the Exchange Privilege capability and that all information
provided above (if applicable) will apply to any Portfolio into which my (our)
shares may be exchanged; (c) I hereby ratify any instructions given on this
account and any account into which I exchange relating to items on this
application and agree that the Portfolios, Sierra Investment Services
Corporation and Sierra Fund Administration Corporation will not be liable for
any loss, cost or expense for acting upon such instructions (by telephone or in
writing) believed by it to be genuine and in accordance with the procedures
described in the Prospectus; (d) it is my responsibility to read the Prospectus;
(e) I affirm that I/we have entered into a broker/dealer cash account
relationship with Sierra Investment Services Corporation; and (f) I represent
and warrant that I have full right, power and authority to give the foregoing
affirmations, certifications and authorizations, and to make the investments
applied for pursuant to this Application Form and, if signing on behalf of the
beneficial owner, represent and warrant that I am duly authorized to sign this
Application Form and to purchase and redeem shares (or to deposit and withdraw
funds) on behalf of the beneficial owner.

TAXPAYER IDENTIFICATION NUMBER CERTIFICATION: As required by federal law, I (we)
certify under penalties of perjury (1) that the Social Security Number ("SSN")
or Taxpayer Identification Number ("TIN") provided above is correct and (2) that
the IRS has never notified me (us) that I (we) am (are) subject to 31% backup
withholding, or has notified me (us) that I (we) am (are) no longer subject to
such backup withholding. (NOTE: IF ANY OR ALL OF PART (2) OF THE PRECEDING
SENTENCE IS NOT TRUE IN YOUR CASE, PLEASE STRIKE OUT THAT PART BEFORE SIGNING.)
If I (we) fail to furnish my (our) correct SSN or TIN, I (we) may be subject to
a penalty for each failure and my (our) account may be subject to 31% backup
withholding on distribution and redemption proceeds.

<TABLE>
<S> <C>
X
- ---------------------------------------------------- ------------------------------------------------
Registered Representative's Name and Number SIGNATURE

Date X
------------------------------------------------ ------------------------------------------------
SIGNATURE
</TABLE>
<PAGE> 66

SIERRA ASSET MANAGEMENT PORTFOLIOS
P. O. Box 5118
Westborough, Massachusetts 01581-5118

STATEMENT OF ADDITIONAL INFORMATION
July 22, 1996

o Income Portfolio
o Value Portfolio
o Balanced Portfolio
o Growth Portfolio
o Capital Growth Portfolio

This Statement of Additional Information ("SAI") supplements the
information contained in the current Prospectus of Sierra Asset Management
Portfolios (the "Trust") which is dated July 22, 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 the address listed above or by calling the Trust at 800-222-5852. This
SAI provides information applicable to the Class A shares and Class B shares of
the Income, Value, Balanced, Growth and Capital Growth Portfolios of the Trust,
which are five series of units of beneficial interest ("shares") of the Trust
(each such series, a "Portfolio"). 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 PORTFOLIOS AND THE
UNDERLYING FUNDS . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
INVESTMENT RESTRICTIONS OF THE PORTFOLIOS . . . . . . . . . . . . . . . . 43
INVESTMENT RESTRICTIONS OF THE SIERRA TRUST FUNDS . . . . . . . . . . . . 46
INVESTMENT RESTRICTIONS OF SPIF . . . . . . . . . . . . . . . . . . . . . 51
PORTFOLIO TURNOVER . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
PORTFOLIO TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . 54
HOW TO BUY AND REDEEM SHARES . . . . . . . . . . . . . . . . . . . . . . 56
NET ASSET VALUE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
HOW TO EXCHANGE SHARES . . . . . . . . . . . . . . . . . . . . . . . . . 59
DETERMINATION OF PERFORMANCE . . . . . . . . . . . . . . . . . . . . . . 59
TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
DISTRIBUTOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
APPENDIX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .A-1
</TABLE>

<PAGE> 67
GENERAL INFORMATION AND HISTORY

The Trust is an open-end management investment company that currently
consists of the five Portfolios: the Income Portfolio, Value Portfolio, Balanced
Portfolio, Growth Portfolio and Capital Growth Portfolio. The Portfolios invest
primarily in shares of certain investment funds of the Sierra Trust Funds, an
open-end management investment company, and, subject to regulatory approval, in
the Sierra Prime Income Fund ("SPIF"), a closed-end management investment
company, (each of such investment funds and SPIF are referred to herein as the
"Underlying Funds"). None of the Portfolios will invest in SPIF until the Trust
supplements the prospectus disclosing that intent and the extent of the
investment.

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 "Portfolio") of shares and separate
classes of each Portfolio. The Trust has established two classes of shares of
each Portfolio, 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 prospectus, each share of each Portfolio
represents an equal proportionate interest in that Portfolio with each other
share of that Portfolio.

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 (1/23/51)
President
Sierra Capital Management Corporation
9301 Corbin Avenue
Northridge, CA 91324

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Since October 1990, he has served as President and CEO of Sierra
Capital Management Corporation ("SCMC"). He 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. (6/8/25)
President
Bancorp Capital Group, Inc.
11661 San Vicente Blvd., #405
Los Angeles, CA 90049

President of Bancorp Capital Group, Inc. and President of Bancorp
Venture Capital, Inc. since 1988. He has been a Trustee of Sierra Trust Funds
since 1989. Previously served on the Board of Directors of Great Western
Leasing Corporation, a subsidiary of Great Western Financial Corporation
("GWFC"), until the subsidiary was sold in 1987. Director of Ryder System,
Inc.; Chairman of the Board of Trustees of the California Family Studies Center
and Phillips Graduate Institute since 1984. He was educated at Cornell
University and a graduate of the Cornell Law School.

DAVID E. ANDERSON (11/17/26)
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: Board Chairman, Children's
Bureau Foundation; Board Member, Upward Bound House of Santa Monica; Past
Campaign Chairman of United Way; Past Chairman, Los Angeles Area Chamber of
Commerce. Holds BSEE degree from Iowa State.

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<PAGE> 69

EDMOND R. DAVIS, ESQ. (9/4/28)
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 (3/27/33)
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).

ALFRED E. OSBORNE, JR. PH.D. (12/7/44)
Professor
The Harold Price Center for Entrepreneurial Studies at UCLA
110 Westwood Plaza, Suite C305
Los Angeles, California 90095-1481

University professor, researcher and administrator at UCLA since 1972.
Director, Times Mirror Company, ReadiCare, Inc., United States Filter
Corporation, Nordstrom, Inc., Seda Specialty Packing Corporation and Greyhound
Lines, Inc. Independent general partner, Technology Funding Venture Partners v.
Governor of the National Association of Securities Dealers, Inc.

OFFICERS:

F. BRIAN CERINI (1/23/51), 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 (12/20/55), 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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Mattel Corporation. Holds a B.A. degree in Economics as well as
an MBA in finance from UCLA.

MICHAEL D. GOTH (8/13/45), SENIOR VICE PRESIDENT

Since January 1991, serves as Chief Operating Officer and Portfolio
Manager of Sierra Investment Advisors Corporation ("Sierra Advisors"). Prior to
joining Sierra Advisors, 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 (1/18/45), SENIOR VICE PRESIDENT

In August 1988 joined GW Securities to form Sierra Advisors and
currently serves as the President and Chief Investment Officer of Sierra
Advisors and Senior Vice President of Sierra Services. Prior to joining Sierra
Advisors, 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 chaired 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> 71

CRAIG M. MILLER (10/7/59), ASSISTANT TREASURER

Joined SCMC in 1993 as Vice President, and Controller and also serves
as Assistant Treasurer for the Sierra Family of Mutual Funds. Prior to joining
Sierra Capital, he acted as Audit Manager in the Boston office of Coopers &
Lybrand, L.L.P. Prior to joining Coopers & Lybrand, L.L.P., he worked for two
other Certified Public Accounting firms, for a total of four and one half years,
as an accountant providing both audit and tax services to financial
institutions, small manufacturing and service industry clients. He holds a
Master's degree in Taxation from Bentley College, where he also received his
B.S. in Accountancy.

RICHARD W. GRANT (10/25/45), 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.

Each of the Trustees and officers of the Trust is also a trustee or
officer of Sierra Trust Funds ("STF"), The Sierra Variable Trust ("SVT") or
Sierra Prime Income Fund ("SPIF"). STF, SVT and SPIF is each an investment
company advised by Sierra Advisors.

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 and Transfer Agent 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 $250 per Board meeting attended and $200 per Audit and Executive 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 PORTFOLIOS

Sierra Services serves as investment advisor to each of the Portfolios
pursuant to an investment advisory agreement. Sierra Administration serves as
Administrator

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<PAGE> 72
to each of the Portfolios and First Data serves as Sub-Administrator and
Transfer Agent to each of the Portfolios 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 to each of the Underlying Funds. First Data serves as
Sub-Administrator to each of the Underlying Funds pursuant to separate
written agreements. First Data also serves as transfer agent for SPIF and
the Sierra Trust Funds. 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 Portfolio (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 Portfolio, Sierra
Services will reimburse the Portfolio 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. The Trust may
seek waivers of such expense limitations from time to time for certain
Portfolios.

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> 73
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. The Sierra Trust Funds or
SPIF may seek waivers of such expense limitations from time to time for certain
Underlying Funds.

As of the date of the SAI, the most restrictive annual expense
limitation applicable to any Portfolio, Underlying Fund or SPIF is 2.5% of the
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.

CUSTODIAN OF THE PORTFOLIOS 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 Portfolios 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 LLP serves as counsel to the Trust, Sierra Trust
Funds and SPIF and provides legal services to GWFC 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 GWFC 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 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 Portfolio or class, except with respect to the election of
Trustees, the selection of independent accountants and other matters affecting
the entire Trust.

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 PORTFOLIOS
AND THE UNDERLYING FUNDS

The Trust's Prospectus and 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 Portfolios and the Underlying Funds may invest, the
investment policies and portfolio strategies that the Portfolios 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")
Short Term Global Government Fund ("STF Short Term Global
Government 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 net assets of each of the STF
U.S. Government Money and STF Global Money Funds (the "Money Funds"), and up to
15% of the net assets of each of the Underlying Funds except the Money Funds and
SPIF (the "Non-Money Funds") and of each of the Portfolios, may be invested in
securities that are not readily marketable. SPIF is not subject to any
restrictions on investments in illiquid investments. Shares of SPIF held by a
Portfolio will be treated as illiquid securities. For the Underlying Funds,
such illiquid investments may include, but are 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 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. Illiquid
securities generally cannot be sold or disposed of in the ordinary course of
business within seven days at approximately the value at which the Portfolio or
the Underlying Fund has valued the investments. These factors may have an
adverse effect on the ability of the Portfolio or the Underlying Fund to dispose
of the particular securities at fair market value and may limit such 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 Underlying 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 Underlying 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 an Underlying Fund, depending upon the principal amount of
certificates of deposit ("CDs") of each state bank held by an Underlying 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.

An Underlying 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. In addition, the U.S. Government Fund may
invest in commercial mortgage-backed securities. While these securities
generally are structured with one or more types of credit enhancement, they are
issued by non-governmental entities and are not guaranteed by a governmental
agency or instrumentality.

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 Portfolios and 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. An Underlying Fund will not engage in reverse
repurchase transactions for the purpose of leverage.

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<PAGE> 80
WHEN-ISSUED SECURITIES AND DELAYED DELIVERY TRANSACTIONS. A segregated
account in the name of the Underlying 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 Underlying Fund. On the settlement date, the Underlying 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 Underlying 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 Underlying Fund's investment polices and
restrictions, the Underlying 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 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, 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 an
Underlying 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 Underlying 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 Underlying
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 Underlying 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 an Underlying Fund to an obligation to
another party. No Underlying 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 Underlying 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 its custodian 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 Underlying Fund will comply with the applicable
regulatory requirements when utilizing Strategic Transactions. In addition, an
Underlying Fund's ability to use Strategic Transactions may be limited by tax
considerations. See the section "Taxes."

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<PAGE> 82
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 than
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, an Underlying 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 Underlying 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 Underlying Fund sell
a portfolio security or currency position at a disadvantageous time.

SWAPS, CAPS, FLOORS AND COLLARS. Among the Strategic Transactions into
which an Underlying Fund may enter, consistent with the Underlying Fund's
investment policies and restrictions, are interest rate, currency and index
swaps and the purchase or sale of related caps, floors and collars. An
Underlying 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 Underlying Fund
anticipates purchasing at a later date. An Underlying 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 Underlying Fund may be obligated to
pay. Interest rate swaps involve the exchange by an Underlying 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> 83
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.

An Underlying 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 Underlying 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 Underlying Fund's borrowing restrictions. If there
is a default by the counterpart, an Underlying 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 THE PORTFOLIOS, STF U.S. GOVERNMENT FUND, STF CORPORATE
INCOME FUND, STF SHORT TERM GLOBAL GOVERNMENT 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 Portfolios and the Underlying Funds listed
above 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 Portfolio or the Underlying 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 an Underlying 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 the section "Taxes."

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<PAGE> 84
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 Portfolio or an
Underlying Fund is to protect the Portfolio or the Underlying 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, it might enter into futures
contracts to sell a treasury bond. This transaction would have much the same
effect as its 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 its futures
contracts would increase at approximately the same rate, thereby keeping its
net asset value 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 it entered into, 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 Portfolio or an Underlying
Fund upon entering into a futures contract. Initially, a Portfolio or an
Underlying 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
the Portfolio or the Underlying 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 Portfolio or an Underlying Fund may elect
to close the position by taking an opposite position, which will operate to
terminate the Portfolio's or Underlying Fund's existing position in the
contract.

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<PAGE> 85
There are several risks in connection with the use of futures contracts
as a hedging device. Successful use of futures contracts by a Portfolio or an
Underlying Fund is subject to the ability of the Advisor or Sub-Advisor of the
Portfolio or Underlying Fund 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 Portfolios and 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 Portfolio or an
Underlying 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 Portfolios or
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 Portfolios or
Underlying Funds' portfolios, the Portfolios or Underlying Funds will

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<PAGE> 86
periodically make adjustments to its index futures contracts positions to
appropriately reflect the relationship between the underlying portfolio and the
indexes. The Portfolio or Underlying 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 Portfolio or the Underlying
Fund holding the options.

The Portfolios or 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 Advisor or Sub-Advisor of the Portfolios or Underlying
Funds, which could prove to be inaccurate. Even if the expectations of an
Advisor or Sub-Advisor 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> 87
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 SHORT TERM GLOBAL GOVERNMENT 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 an Underlying 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. 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 Underlying Fund as the writer of an
option continues, the Underlying Fund may be assigned an exercise notice by the
broker-dealer through which the option was sold, requiring the Underlying 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 Underlying Fund effects a closing
purchase transaction. The Underlying 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 Underlying 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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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 Underlying 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 an Underlying Fund will be with a
qualified dealer pursuant to an agreement under which the Underlying Fund may
repurchase the option at a formula price at which the Underlying 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 Underlying Fund may not be able to
liquidate its position in over-the-counter options, and the ability of the
Underlying Fund to enter into closing purchase transactions on options written
by the Underlying Fund may result in a material loss to the Underlying Fund.

The Underlying Fund may realize a profit or loss upon entering into
closing transactions. In cases where the Underlying 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
Underlying Fund has purchased an option and engages in a closing sale
transaction, the Underlying 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 Underlying Fund initially paid for the original option plus the
related transaction costs.

To facilitate closing transactions, the Underlying 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> 89
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 Underlying 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
Underlying 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 an Underlying Fund that are deemed
covered by virtue of the Underlying 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 Underlying Fund has written options may exceed the time within which the
Underlying Fund must make delivery in accordance with an exercise notice. In
these instances, the Underlying Fund may purchase or temporarily borrow the
underlying securities for purposes of physical delivery. By so doing, the
Underlying Fund will not bear any market risk, since the Underlying 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 Underlying 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 Underlying Fund may write covered call options. If an
Underlying 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 Underlying Fund
will compensate by purchasing an appropriate additional amount of
mortgage-backed securities.

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<PAGE> 90
STRATEGIES AVAILABLE TO STF SHORT TERM GLOBAL GOVERNMENT FUND, 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 Underlying 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 Underlying 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 Underlying 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 GLOBAL GOVERNMENT 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
securities, typically issued by a U.S. financial institution (a depositary),
that evidence ownership interests in a security or a pool of securities issued
by a foreign issuer (the "underlying issuer") and deposited with the depositary.
ADRs include American Depositary Shares and New York Shares and may be
"sponsored" or "unsponsored." Sponsored ADRs are established jointly by a
depositary and the underlying issuer, whereas unsponsored ADRs may be
established by a depositary without participation by the underlying issuer.
Holders of unsponsored Depositary Receipts generally bear all the costs
associated with establishing the unsponsored Depositary Receipt. The depositary
of an unsponsored Depositary Receipt is under no obligation to distribute
shareholder communications received from the underlying issuer or to pass
through to the holders of the unsponsored Depositary Receipt voting rights with
respect to the deposited securities or pool of securities. 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 Underlying 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. An Underlying 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 an Underlying Fund enters into a position hedging transaction, the
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 Underlying Fund in an amount at least equal to the
value of the Underlying 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 Underlying 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 Underlying 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, an Underlying 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 Underlying Fund
will obtain, on the same maturity date, the amount of the currency that it is
obligated to deliver. If the Underlying Fund retains the portfolio security and
engages in an offsetting transaction, the Underlying Fund, at the time of
execution

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<PAGE> 92
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 Underlying 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 Underlying 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 Underlying 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 an Underlying 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, an Underlying
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 an
Underlying Fund's underlying currency. For instance, an Underlying 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 Underlying Fund may be able to "lock in" the foreign currency value of the
security and adopt a synthetic investment position whereby the Underlying 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 an Underlying Fund's obligation under a forward currency exchange contract
on the date of maturity, the Underlying Fund may be exposed to some risk of loss
from fluctuations in that currency. Although each Underlying Fund's Sub-Advisor

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<PAGE> 93
will attempt to hold such mismatching to a minimum, there can be no assurance
that the Underlying 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 Underlying
Fund, it would cease trading such contracts. Cessation of trading might
adversely affect the performance of an Underlying Fund.

STRATEGIES AVAILABLE TO STF SHORT TERM GLOBAL GOVERNMENT FUND, 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 an Underlying Fund in a particular foreign currency, the Underlying
Fund may purchase put options on the foreign currency. If the value of the
currency does decline, the Underlying 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 Underlying 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 Underlying 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
Underlying 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> 94
The Underlying Funds may also write covered call options on foreign
currencies for the types of hedging purposes described above. As one example,
when an Underlying 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 Underlying 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 Underlying
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 an Underlying Fund is
"covered" if the Underlying 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 the Underlying Fund's custodian,
or by a designated sub-custodian) upon conversion or exchange of other foreign
currency held by the Underlying Fund. A call option also is covered if the
Underlying 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 Underlying Fund in cash, U.S. Government Securities and other
high-grade liquid debt securities in a segregated account with the Underlying
Fund's custodian 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> 95
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 30% 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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<PAGE> 96
STRATEGY AVAILABLE TO STF CORPORATE INCOME FUND, STF SHORT TERM GLOBAL
GOVERNMENT 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 Underlying 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 Underlying Fund must be able to terminate the loan at
any time; (4) the Underlying 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 Underlying 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 Underlying 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
Underlying 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 its assets of, 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.

An economic downturn may disrupt the high yield market and impair 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 Underlying Fund. Prices and yields of high yield securities will
fluctuate over time and may affect the Underlying 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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<PAGE> 97
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 [or Sierra Advisors or the Underlying Fund's Sub-Advisor] to
accurately value high yield securities in the Underlying 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 Underlying 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 Underlying 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 Underlying Fund's Sub-Advisor will
determine whether it is in the best interest of the Underlying 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 Underlying Funds may enter into dollar rolls or "covered 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. During the roll period, the Underlying Fund forgoes
principal and interest paid on such securities. 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

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<PAGE> 98
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.

STRATEGIES AVAILABLE TO SPIF

CERTAIN CHARACTERISTICS OF SENIOR LOAN INTERESTS

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 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. 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, 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 SPIF invests a portion of its assets in Senior Loans that
are not secured by specific collateral, 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, 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 SPIF's total assets that normally will be
invested in Senior Loans. 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 SPIF's portfolio. When 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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Borrower. Lenders voting in connection with a potential waiver of a
restrictive covenant may have interests different from those of SPIF and
such Lenders may not consider the interests of SPIF in connection with
their votes.

Senior Loans in which SPIF 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 a
Major United States Bank "Prime Rate", LIBOR, the CD rate or other base lending
rates used by commercial Lenders. As a result Lenders will pay more than the
Prime Rate to SPIF on their Senior Loans. 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 SPIF's total assets normally will be invested in Senior
Loans. In normal market conditions, at least 65% of SPIF's assets will be
invested in Senior Loans which, at the time of SPIF's initial investment in such
Senior Loans, provide SPIF with a rate of return which was at least equal to the
Prime Rate existing on the date of such initial investment. SPIF is not subject
to any restrictions with respect to the maturity of Senior Loans held in its
portfolio. It is currently anticipated that 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 SPIF's net asset value as a result of changes in interest rates.
The Senior Loans in 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 SPIF
from its investments in Senior Loans should increase, and as short-term interest
rates decrease, interest payable to SPIF from its investments in Senior Loans
should decrease. The amount of time required to pass before 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 SPIF's portfolio. 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, SPIF will consider such shortened period to
be the interest rate redetermination period of the Senior Loan; provided,
however, that 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 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
SPIF's portfolio may occur. Accordingly, the actual remaining maturity of
SPIF's portfolio invested in Senior Loans may vary substantially from the
average stated maturity of the Senior Loans held in SPIF's portfolio. As a
result of expected prepayments from time to time of Senior Loans in SPIF's
portfolio, 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 SPIF's net asset value will vary, SPIF's
management expects 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, SPIF's management expects the value of
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 SPIF's
net asset value. In addition to changes in interest rates, changes in the
credit quality of Borrowers will also affect SPIF's net asset value. Further, a
serious deterioration in the credit quality of a Borrower could cause a
prolonged or permanent decrease in SPIF's net asset value.

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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 force the Borrower into bankruptcy or other
forms of credit restrictions. 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.

SPIF may invest up to 100% of its assets in Participations. The
selling Lenders and other persons interpositioned between such Lenders and 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, SPIF has taken measures which it believes significantly
reduce its exposure to any risks incident to such policy, 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.

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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 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 SPIF should not be included in such person's estate. If,
however, any such amount were included in such person's estate, SPIF would
incur certain costs and delays in realizing payment or could suffer a loss of
principal and/or interest. In such event, SPIF could experience a decrease
in net asset value.

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. SPIF will receive these
fees directly from the Borrower if SPIF is an Original Lender, or, in the case
of commitment fees and prepayment penalties, if SPIF acquires an interest in a
Senior Loan by way of Assignment.

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Whether or not 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 SPIF and the Lender selling such interests. When 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 SPIF may deduct a portion of the interest and any fees payable
to SPIF as an administrative fee prior to payment thereof to SPIF. SPIF may be
required to pay over or pass along to a purchaser of an interest in a Senior
Loan from SPIF a portion of any fees that 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, SPIF and the Advisor believe
that the prepayment of, and subsequent reinvestment by SPIF in, Senior
Loans will not have a materially adverse impact on the yield on 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. SPIF currently intends to reserve against such contingent
obligations by segregating sufficient investments in high quality short-term,
liquid investments. SPIF will not purchase interests in Senior Loans that would
require SPIF to make any such additional loans if such additional loan
commitments would exceed 20% of SPIF's total assets or would cause SPIF to fail
to meet the diversification requirements set forth under the heading "Investment
Restrictions."

During normal market conditions, 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 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 SPIF's investments in Senior Loans.
If the Advisor determines that market conditions temporarily warrant a
defensive investment policy, 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. 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 SPIF generally will acquire interests in
warrants and equity securities only when the Advisor believes that the relative
value being given by 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 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. SPIF normally will
rely primarily on the Agent (where SPIF is an Original Lender or owns an
Assignment) or the selling Lender (where SPIF owns a Participation) to
collect principal of and interest on a Senior Loan. Furthermore, SPIF
usually will rely on the Agent (where SPIF is an Original Lender or owns an
Assignment) or the selling Lender (where SPIF owns a Participation) to
monitor compliance by the Borrower with the restrictive covenants in the Loan
Agreement and notify 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, 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
SPIF's investments and, where 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 SPIF, a
reduction in the value of the Senior Loan experiencing non-payment and a
potential decrease in the net asset value of SPIF. Although, with respect to
collateralized Senior Loans, 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, 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 SPIF does not believe
that a perfected security interest has been obtained with respect to a
collateralized Senior Loan, SPIF will only obtain an interest in such Senior
Loan if the Agent is a Designated Custodian. Some Senior Loans in which 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 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 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 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 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 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 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. 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 SPIF's assets invested in relatively
illiquid Senior Loan interests may restrict the ability of 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 SPIF and holders of Common Shares.
However, many of the Senior Loans in which 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 SPIF's operations
require cash, such as when SPIF tenders for its Common Shares, and may
result in 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 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 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 SPIF could consummate such a sale
might be adversely affected.

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 PORTFOLIOS

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 Trust, 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 shareholder meeting,
if the holders of more than 50% of the outstanding shares of the Trust are
present or represented by proxy, or (b) more than 50% of the outstanding shares.
A fundamental policy affecting a particular Portfolio may not be changed without
the vote of a majority of the outstanding shares of the affected Portfolio.
Each Portfolio 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 including limited partnership interests,
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. make loans to any person, except loans of portfolio securities to the
extent that no 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 (except other investment companies as defined
in the 1940 Act) and (ii) purchase securities of an issuer (except
obligations of the U.S. Government and its agencies and
instrumentalities and securities of other investment companies as
defined in the 1940 Act) 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 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 Portfolio's
total assets (including the amount borrowed) valued at market less
liabilities (not including the amount borrowed) at the time the
borrowing is made; and whenever borrowings by a Portfolio, including
reverse repurchase agreements, exceed 5% of the value of a Portfolio's
total assets, the Portfolio will not purchase any securities;

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

1. purchase or retain securities of an issuer if those officers and
trustees of the Portfolio 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 Portfolio'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 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 Portfolio'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;

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

9. purchase 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.

10. purchase or hold lower rated bonds ("junk bonds"), directly or
indirectly, if, in the aggregate, 35% or more of its net assets would
be invested, directly or indirectly, in junk bonds.

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 STF 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 STF Fund's
total assets may be invested without regard to the 5% Limitation;
provided that this restriction shall not apply to the STF Short Term
Global Government Fund.

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 and STF Short Term Global Government
Funds; 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, STF Growth and STF Short Term Global Goverment
Funds.

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5. Borrowing money, except that (a) the STF 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, STF Growth and
Income and STF Short Term Global Government 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 an STF
Fund's total assets, the STF 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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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, STF Short Term
High Quality Bond Fund and STF Short Term Global Government 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 and STF Short Term Global Government 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 STF
Short Term Global Government 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 net 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) except
for the STF Short Term Global Government Fund, 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, STF Short Term Global Government 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 as 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 SPIF

SPIF's investment objective and the following investment restrictions are
fundamental. All other investment policies or practices are considered by 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, 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 SPIF's total assets would then be
invested in securities of a single issuer or if as a result SPIF would
hold more than 10% of the outstanding voting securities of any single
issuer; provided that, with respect to 50% of SPIF's assets, 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 SPIF together with any other persons interpositioned between such
Lender and SPIF with respect to a Participation.

2. Purchase any security if, as a result of such purchase, more than 25%
of 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 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 SPIF may
engage would be deemed to be any of the foregoing transactions.

7. Act as an underwriter of securities, except to the extent 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 SPIF.

8. Make investments for the purpose of exercising control or participation
in management, except to the extent that exercise by 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 SPIF's trustees under 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. 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 SPIF of its rights under
Loan Agreements. In addition, 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 SPIF of its rights under Loan
Agreements, except to the extent the interests in Senior Loans SPIF may
invest in are considered to be interests in real estate, commodities or
commodities contracts and except to the extent that hedging instruments
SPIF may invest in are considered to be commodities or commodities
contracts.

For purposes of investment restriction Number 2 above, SPIF will consider
all relevant factors in determining whether to treat the Lender selling a
Participation and any persons interpositioned between such Lender and 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 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 SPIF.

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
SPIF's investment objective. For example, SPIF may sell portfolio
securities in anticipation of a movement in interest rates. Frequency of
portfolio turnover will not be a limiting factor if SPIF considers it
advantageous to purchase or sell securities. SPIF anticipates that the
annual portfolio turnover rate of 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 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 SPIF's
annual gross income be derived from the disposition of securities held for less
than three months, SPIF may not be able to sell portfolio holdings held for
less than three months that SPIF may wish to sell in the ordinary course of
management, which may affect adversely SPIF's yield.

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PORTFOLIO TURNOVER

Portfolio turnover considerations for the Portfolios 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 the Money 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.

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PORTFOLIO TRANSACTIONS

Most of the purchases and sales of securities for a Portfolio 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 Portfolio 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 Portfolio 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 Portfolio or Underlying Fund may
make may also be made by those other accounts. When a Portfolio 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 Portfolio or Underlying Fund or the size of the position obtained
or disposed of by the Portfolio 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 Portfolio or Underlying Fund.

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In selecting brokers or dealers to execute portfolio transactions on
behalf of a Portfolio or Underlying Fund, the Portfolio's or Underlying 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 Portfolio or Underlying Fund, the other Portfolios 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 Portfolios 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 Portfolio or Underlying Fund 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 Portfolio 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 Portfolio or Underlying 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 Portfolio 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.

With respect to interests in Senior Loans, SPIF generally will
engage in privately negotiated transactions for purchase or sale in which the
Sub-Advisor will negotiate on behalf of SPIF. SPIF may be required to
pay fees, or forgo a portion of interest and any fees payable to SPIF, to
the Lender selling Participations or Assignments to SPIF. The Sub-Advisor
will determine the Lenders from whom 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 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 SPIF's interests in Senior Loans at a
fair price should SPIF desire to sell such interests. See "Strategies
Available to SPIF." As of July 22, 1996, none of the Portfolios held any
securities of any "regular broker or dealer" of the Trust.

HOW TO BUY AND REDEEM SHARES

Class A and Class B Shares of the Portfolios 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 Portfolios offer their shares to the public on a continuous basis.
The public offering price per Class A Share of the Portfolios 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 Portfolios 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 Trust by merger,
acquisition of assets or otherwise.

REDEMPTIONS

The procedures for redemption of Class A and Class B Shares of each
Portfolio are summarized in the Prospectus of the Trust under "How to Sell
Shares." The right of redemption of Class A and Class B Shares of a Portfolio
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 Portfolio'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 Portfolio's
shareholders.

REDEMPTIONS IN KIND. If the Board of Trustees determines that it would
be detrimental to the best interests of the remaining shareholders of a
Portfolio to make a redemption payment wholly in cash, the Trust may pay, in
accordance with SEC rules, any portion of a redemption in excess of the lesser
of $250,000 or 1% of the Portfolio's net assets by distributions, in kind, of
portfolio securities in lieu of cash. Securities issued in a redemption in
kind, other than shares of SPIF, will be readily marketable. Shareholders
receiving shares of the Underlying Funds in a redemption in kind will continue
to bear the ongoing operating expenses and market risk of the Underlying Funds
and may incur brokerage commissions when subsequently redeeming shares of those
securities.

SYSTEMATIC WITHDRAWAL PLAN. As described in the Trust's Prospectus, a
Systematic Withdrawal Plan may be established by a shareholder who owns either
Class A or Class B Shares of a Portfolio 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
Portfolio 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
Portfolio, there will be a reduction in the value of the shareholder's
investment in the relevant class of the Portfolio 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 Portfolio. For
additional information regarding the Systematic Withdrawal Plan, write to the
Trust at c/o First Data Investor Services Group, P.O. Box 5118, Westborough, MA
01581-5118, or call the Trust at 800-222-5852.

NET ASSET VALUE

The Trust will not calculate the net asset value of the Portfolio's
Class A and Class B Shares on certain holidays. On those days, securities held
by a Portfolio may nevertheless be actively traded, and the value of the
Portfolio'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. 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 Portfolio
for the same class of shares of another Portfolio or any of the Sierra Trust
Funds or SPIF. 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. Initially, Shareholders of Sierra Trust
Funds and/or SPIF are not permitted to exchange their shares for shares of the
Portfolios.

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 the section "Taxes" below. Upon 60 days'
prior written notice to shareholders, the exchange privilege may be modified or
terminated and the Trust may impose a charge of up to $5 for exchanges.

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

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shareholders residing in any state in which shares of the Portfolio 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 Portfolio or Underlying Fund being
acquired. The Trust reserves the right to reject any exchange request.

DETERMINATION OF PERFORMANCE

The Income, Value and Balanced Portfolios (the "Fixed Income
Portfolios") 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
Portfolios 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 Portfolio 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 Portfolio 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 Portfolios 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
Portfolios and the Growth and Capital Growth Portfolios (the "Equity
Portfolios") 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 Portfolios' 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 Portfolio 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 Fixed Income and Equity Portfolios 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%, 5.25%, 5.50% or 5.75% sales charge as
applicable to the class of the Portfolio 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 Portfolio's net investment income changes
in response to fluctuations in interest rates and the expenses of the Portfolio.

The performance of a Portfolio's Class A and Class B Shares will vary
from time to time depending upon market conditions, the composition of the
Portfolio's portfolio securities and the Portfolio's operating expenses.
Consequently, any given securities performance quotation should not be
considered representative of the Portfolio'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 Portfolio 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 Portfolios
will have a high component of fixed-income securities, in periods of declining
interest rates the yields of the Fixed Income Portfolios 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 Portfolios from the
continuous sale of shares will likely be invested in portfolio instruments
producing lower yields than the balance of the Fixed Income Portfolio's
securities, thereby reducing the current yields of the Fixed Income Portfolios.
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 Portfolios' 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.

Each Portfolio is modeled after an investment strategy used by the
Sierra Asset Management ("SAM") program, an investment management service
offered by Sierra Services that allocates investments across a combination of
the Underlying Funds. Set forth below is certain performance data for those
strategies, which is deemed relevant because each strategy was managed using
virtually the same investment objectives, policies and restrictions as those
used by the Portfolios. Nonetheless, the performance data is not necessarily
indicative of the future performance of the Portfolios.

Because of certain differences in the expenses applicable to the SAM
program and the Portfolios, the following performance information has been
adjusted by applying the current total expense ratios for the Class A Shares of
the Portfolios. The average annual total return of the following investment
strategies for the one-year period, the five-year period and the period from
inception of the strategy ended June 30, 1996, was as follows:

<TABLE>
<CAPTION>
STRATEGY/PORTFOLIO 1 YEAR 5 YEARS FROM INCEPTION*
- ------------------ ------ ------- ---------------
<S> <C> <C> <C>
The Fixed Strategy/
Income Portfolio (0.80%) 5.64% 6.46%

The Balanced Strategy/
Balanced Portfolio 7.86% 8.58% 9.32%

The Value Strategy/
Value Portfolio 3.56% -- 4.60%

The Growth Strategy/
Growth Portfolio 14.32% 11.41% 12.41%

The Aggressive Growth Strategy/
Capital Growth Portfolio 16.27% -- 18.90%

</TABLE>
- --------------
*September 30, 1990 for the Fixed Strategy, the Balanced Strategy and the
Growth Strategy; March 31, 1993 for the Value Strategy; and May 31, 1995 for
the Aggressive Growth Strategy.

PERFORMANCE COMPARISONS

In reports or other communications to shareholders or in advertising
material, a Portfolio may make certain performance comparisons as described in
the Trust's prospectuses. Another performance comparison one or more of the
Portfolios 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-deferred
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> 128
* 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 Portfolios 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 Portfolio is treated as a separate entity for federal income tax
purposes and is not combined with the Trust's other Portfolios. Each of the
Portfolios intends to continue qualifying as a "regulated investment company"
("RIC") as defined under Subchapter M of the Code. A Portfolio 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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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 Portfolio 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
Trust's business of investing in stock or securities; and (c) diversify its
holdings so that, at the end of each fiscal quarter of the Portfolio's taxable
year, (i) at least 50% of the market value of the Portfolio'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
Portfolio'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
Portfolio controls and which are engaged in the same, similar, or related trades
or businesses.

Notwithstanding the distribution requirement described above, which
only requires a Portfolio 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 Portfolio 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> 130
If a Portfolio 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
Fixed Income Portfolios generally will not be eligible for the dividends
received deduction otherwise available to corporate taxpayers.

As described above and in the Prospectus, the Portfolios may invest in
certain types of futures contracts and options. The Portfolio anticipates that
these investment activities will not prevent the Portfolios 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 Portfolio and, accordingly, will affect the amount of
capital gains distributed to a Portfolio's shareholders.

Many futures contracts entered into by a Portfolio, and all listed
nonequity options written or purchased by a Portfolio will be governed by
Section 1256 of the Code. On the last trading day of the Portfolio'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 Portfolio's
portfolio of securities.

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 Portfolio'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 Portfolio 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 Portfolio shares will be a long-term capital gain or loss if
the shareholder has held the Portfolio shares for more than one year and will be
a short-term capital gain or loss if the shareholder has held the Portfolio
shares for one year or less.

While only the Equity Portfolios 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 Portfolio shares, and will be
designated as capital gain dividends in a written notice mailed to the
shareholder after the close of the Portfolio's taxable year. Any loss on the
sale or exchange of shares in a Portfolio 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
Portfolio 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 Portfolio 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 PORTFOLIO AND ITS SHAREHOLDERS, AND IS NOT INTENDED AS A SUBSTITUTE
FOR CAREFUL TAX PLANNING. SHAREHOLDERS ARE URGED TO CONSULT

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<PAGE> 132
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 Portfolio. 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 Portfolio. Payments
under a Plan may be used to defray a portion of the costs incurred in rendering
distribution services to respective classes of the Portfolios, including costs
such as costs of advertising or sales literature or payment of commissions on
the sale of shares of the Portfolios. Under the Plan for the Class B Shares,
Class B Shares are also subject to a service fee at an annual rate of .25% of
the average daily net assets of the Portfolio. 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 Portfolios' shares ("Authorized Dealers"), including GW
Securities and their representatives for selling Portfolios' 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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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 Portfolio 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 Portfolios, by a vote of a majority of the
outstanding voting securities of the class of shares of the Portfolio (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
Portfolios, it may continue in effect with respect to the same class of any
Portfolio 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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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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REPORT OF INDEPENDENT ACCOUNTANTS

To the Shareholder and Board of Trustees
of Sierra Asset Management Portfolios

In our opinion, the accompanying statements of assets and liabilities present
fairly, in all material respects, the financial position of each of the five
portfolios constituting Sierra Asset Management Portfolios (the "Trust") at
July 15, 1996, in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Trust's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.

/s/ Price Waterhouse LLP
- -------------------------
Price Waterhouse LLP
Boston, Massachusetts
July 16, 1996

<PAGE> 142

SIERRA ASSET MANAGEMENT PORTFOLIOS
STATEMENTS OF ASSETS AND LIABILITIES
JULY 15, 1996

<TABLE>
<CAPTION>
CAPITAL
INCOME VALUE BALANCED GROWTH GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
ASSETS:
Cash . . . . . . . . . . . . . . . . $ 20,000 $ 20,000 $ 20,000 $ 20,000 $ 20,000
Deferred organizational expenses and
offering costs (Note 1) . . . . . . . 59,350 59,350 59,350 59,350 59,350
------ ------ ------ ------ ------

Total Net Assets . . . . . . . . 79,350 79,350 79,350 79,350 79,350

LIABILITIES:
Accrued organizational expenses and
offering costs (Note 1) . . . . . . . 59,350 59,350 59,350 59,350 59,350
------ ------ ------ ------ ------

NET ASSETS:
Class A Shares . . . . . . . . . $ 10,000 $ 10,000 $ 10,000 $ 10,000 $ 10,000
========== ========== ========== ========== ==========
Class B Shares . . . . . . . . . $ 10,000 $ 10,000 $ 10,000 $ 10,000 $ 10,000
========== ========== ========== ========== ==========

SHARES OF BENEFICIAL INTEREST
(UNLIMITED NUMBER OF SHARES AUTHORIZED)
OUTSTANDING:
Class A Shares . . . . . . . . . 1,000 1,000 1,000 1,000 1,000
Class B Shares . . . . . . . . . 1,000 1,000 1,000 1,000 1,000

CLASS A SHARES:
Net asset value per share of
beneficial interest
outstanding* . . . . . . . . . . . . $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00
========== ========== ========== ========== ==========

Maximum sales charge . . . . . . . . 4.50% 4.50% 5.25% 5.50% 5.75%

Maximum offering price per share of
beneficial interest . . . . . . . . . $ 10.47 $ 10.47 $ 10.55 $ 10.58 $ 10.61
========== ========== ========== ========== ==========

CLASS B SHARES:
Net asset value and offering price per
share of beneficial
interest* . . . . . . . . . . . . . . $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00
- ------------------ ========== ========== ========== ========== ==========

</TABLE>

* Redemption price is equal to NAV less any applicable CDSC.

<PAGE> 143

NOTES TO STATEMENTS OF ASSETS AND LIABILITIES

1. Sierra Asset Management Portfolios (the "Trust") was organized as a
Massachusetts Business Trust under the laws of the Commonwealth of
Massachusetts on March 26, 1996 and is registered under the Investment Company
Act of 1940, as amended, as an open-end management investment company. The
Trust was established in order to offer a range of asset allocation strategies
to accommodate different investment philosophies and goals. The Trust offers
five Portfolios (the "Portfolios") each with two classes of shares: Class A and
Class B. Class A Shares and Class B Shares will indirectly bear their pro-rata
share of fees and expenses incurred by the underlying funds they invest in.
Pursuant to an exemptive order dated June 28, 1996, the Trust will begin
investing, within certain percentage ranges, in newly created Class I Shares of
The Sierra Trust Funds Global Money, U.S. Government Money, Short Term High
Quality Bond, Short Term Global Government, U.S. Government, Corporate Income,
Growth and Income, Growth, Emerging Growth and International Growth Funds and
possibly in the future, subject to regulatory approval, Sierra Prime Income
Fund, a closed-end management investment company. The Trust has had no
operations other than organizational matters and the issuance and sale of 1,000
Class A and 1,000 Class B Shares of each of the Portfolios to Sierra Fund
Administration Corporation ("Sierra Administration"), the Trust's
Administrator, which is an indirect wholly-owned subsidiary of Great Western
Financial Corporation ("GWFC").

Costs incurred by the Portfolios in connection with their organization and the
initial offering of their shares are estimated to be $59,350 for each
Portfolio. The organizational costs will be deferred and amortized on a
straight line basis over the period of benefit not to exceed sixty months from
the date upon which each Portfolio commences its investment operations. If any
of the initial shares are redeemed during the amortization period by any holder
thereof, the redemption proceeds will be reduced by a pro rata portion of the
then unamortized organization costs.

2. Agreements and Transactions with Affiliates

The Trust has entered into an Investment Advisory Agreement with Sierra
Investment Services Corporation ("Sierra Services"), an indirect wholly-owned
subsidiary of GWFC. For its investment advisory services to the Portfolios,
Sierra Services is entitled to a fee, which is calculated daily and paid
monthly, at an annual rate of 0.15% of each Portfolio's average daily net
assets.

Sierra Administration provides shareholder service and other administrative
services to the Trust. Pursuant to an Administration Agreement, Sierra
Administration is entitled to a fee, which is calculated daily and paid
monthly, at an annual rate of 0.50% of each Portfolio's average daily net
assets. Out of this fee, Sierra Administration pays First Data Investor
Services Group, Inc. for its services as sub-administrator. Sierra
Administration also pays Boston Safe Deposit and Trust Company for its services
as custodian of the Trust.

Sierra Services is the distributor of the Class A and Class B Shares of the
Portfolios. Each of the Portfolios has adopted two distribution plans,
pursuant to Rule 12b-1 under the 1940 Act, one for the Class A Shares ("Class A
Plan") and one for the Class B Shares ("Class B Plan"). Under the Class A
Plan, Sierra Services is to be paid an annual distribution fee of up to 0.25%
of the average daily net assets of the Class A Shares of each Portfolio for
activities primarily intended to result in the sale of Class A Shares of the
Portfolios. Under the Class B Plan, Sierra Services is to be paid an annual
distribution fee of up to 0.75% of the average daily net assets of the Class B
Shares for activities primarily intended to result in the sale of Class B
Shares. In addition, under the Class B Plan, Class B Shares are also subject
to a shareholder service fee at an annual rate of 0.25% of the average daily
net assets of the Class B Shares. The shareholder service fee is paid by the
Portfolios to Sierra Services.

<PAGE> 144

SIERRA ASSET MANAGEMENT PORTFOLIOS

PART C

Item 24. Financial Statements and Exhibits

<TABLE>
<S> <C>
(a) Financial Statements:
Report of Independent Certified Public Accountants
Statement of Assets and Liabilities

(b) Exhibits

(1) Agreement and Declaration of Trust dated March 26, 1996
Amended and Restated July 19, 1996
(Replaces Agreement and Declaration of Trust dated March 26, 1996
which was filed with the Securities and Exchange Commission
on March 27, 1996.)

(2) By-laws (1)

(3) Not applicable

(4) Not applicable

(5) Form of Investment Advisory Agreement (2)

(6)(a) Form of Class A Distribution Agreement (2)
(6)(b) Form of Class B Distribution Agreement (2)

(7) Not applicable

(8) Form of Custody Agreement

(9)(a) Form of Administration Agreement
(9)(b) Form of Sub-Administration Agreement (First Data Investor Services Group, Inc.) (2)
(9)(c) Form of Sub-Administration Agreement (Dealers)
(9)(d) Form of Transfer Agency and Services Agreement

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

(11) Consent of Accountant

(12) Not applicable

(13) Not applicable

(14) Not applicable

(15)(a) Class A Distribution Plan (2)
(15)(b) Class B Distribution Plan (2)

(16) Not applicable

(17) Not applicable

(18) Rule 18f-3 Multiple Class Plan (2)
</TABLE>

_____________________
(1) Incorporated by reference to this Registration Statement as filed with the
Securities and Exchange Commission on March 27, 1996.
(2) Incorporated by reference to this Registration Statement as filed with the
Securities and Exchange Commission on June 17, 1996.

C-1

<PAGE> 145
Item 25. Persons Controlled by or Under Common Control with Registrant
- -------- -------------------------------------------------------------

See the Prospectus and the Statement of Additional Information
regarding the Registrant's control relationships.

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
("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> 146
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 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. Principal Underwriter -- 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 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 Portfolios
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)

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

C-3
<PAGE> 147

(6) First Data Investor Services Group, Inc.
One Exchange Place
Boston, Massachusetts 02109
(with respect to their services as a
sub-administrator, shareholder servicing agent and
transfer agent)

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

(8) O'Melveny & Myers LLP
1999 Avenue of the Stars, #700
Los Angeles, CA 90067
(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) Registrant hereby undertakes to call a meeting of
shareholders for the purpose of voting upon the question of removal of a
Trustee(s) when requested in writing to do so by the holders or at least 10% of
Registrant's outstanding shares and in connection with such meetings to comply
with the provisions of Section 16(c) of the 1940 Act.

C-4
<PAGE> 148
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended
("1933 Act"), and the Investment Company Act of 1940, as amended, the Registrant
has duly caused this Pre-Effective Amendment No. 2 to be signed on its behalf by
the undersigned, thereto duly authorized, in the City of Northridge and State of
California on the 19th day of July, 1996.

SIERRA ASSET MANAGEMENT PORTFOLIOS

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

Pursuant to the requirements of the 1933 Act, this Pre-Effective
Amendment No. 2 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 July 19, 1996
(Principal Executive Officer)

/s/ KEITH B. PIPES
- --------------------------------------
Keith B. Pipes Executive Vice President, July 19, 1996
Treasurer and Secretary
(Principal Financial and
Accounting Officer)

/s/ ARTHUR H. BERNSTEIN
- --------------------------------------
Arthur H. Bernstein Trustee July 19, 1996

/s/ DAVID E. ANDERSON
- --------------------------------------
David E. Anderson Trustee July 19, 1996

/s/ EDMOND R. DAVIS
- --------------------------------------
Edmond R. Davis Trustee July 19, 1996

/s/ JOHN W. ENGLISH
- --------------------------------------
John W. English Trustee July 19, 1996

/s/ ALFRED E. OSBORNE
- --------------------------------------
Alfred E. Osborne Trustee July 19, 1996

</TABLE>

<PAGE> 149

EXHIBIT INDEX

<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
- ----------- ----------------------
<S> <C>
Ex-99.B(1) Agreement and Declaration of Trust dated March 26, 1996. Amended and Restated
July 19, 1996 (Replaces Agreement and Declaration of Trust dated March 26, 1996
which was filed with the Securities and Exchange Commission on March 27, 1996.)

(2) By-Laws (1)

(3) Not applicable

(4) Not applicable

(5) Form of Investment Advisory Agreement(2)

(6)(a) Form of Class A Distribution Agreement(2)

(6)(b) Form of Class B Distribution Agreement(2)

(7) Not applicable

Ex-99.B(8) Form of Custody Agreement

Ex-99.B(9)(a) Form of Administration Agreement

(9)(b) Form of Sub-Administration Agreement (First Data Investor Services Group, Inc.)(2)

Ex-99.B(9)(c) Form of Sub-Administration Agreement (Dealers)
Ex-99.B(9)(d) Form of Transfer Agency and Service Agreement

Ex-99.B(10) Opinion and consent of Morgan, Lewis & Bockius LLP

Ex-99.B(11) Consent of Accountant

(12) Not applicable

(13) Not applicable

(14) Not applicable

(15)(a) Class A Distribution Plan(2)

(15)(b) Class B Distribution Plan(2)

(16) Not applicable

(17) Not applicable

(18) Rule 18f-3 Multiple Class Plan(2)
</TABLE>
- -------------------

(1) Incorporated by reference to this Registration Statement as filed with the
Securities and Exchange Commission on March 27, 1996.

(2) Incorporated by reference to this Registration Statement as filed with the
Securities and Exchange Commission on June 17, 1996.

<PAGE> 1

EXHIBIT 1

Sierra Asset Management Trust, now known as;

Sierra Asset Management Portfolios

AGREEMENT AND DECLARATION OF TRUST

DATED MARCH 26, 1996

AMENDED AND RESTATED

JULY 19, 1996

<PAGE> 2

AMENDED AND RESTATED 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 Portfolios
AGREEMENT AND DECLARATION OF TRUST
Dated March 26, 1996
As Amended and Restated
July 19, 1996

AGREEMENT AND DECLARATION OF TRUST made at Boston,
Massachusetts the 26th day of March, 1996, by the sole Trustee, as amended and
restated this 19th day of July, 1996 by the Trustees hereunder.

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.

-1-
<PAGE> 6
ARTICLE I

NAME AND DEFINITIONS

Section 1.1 Name. This Trust shall be known as the "Sierra Asset
Management Portfolios" 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> 7

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> 8

(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

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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;

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<PAGE> 10

(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;

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<PAGE> 11

(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.

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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

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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

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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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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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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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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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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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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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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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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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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> 23

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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<PAGE> 24

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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<PAGE> 25

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> 26

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> 27

IN WITNESS WHEREOF, the undersigned have executed this instrument as
of the 19th day of July, 1996.

/s/ F. BRIAN CERINI
--------------------------------
F. Brian Cerini

/s/ ARTHUR H. BERNSTEIN
--------------------------------
Arthur H. Bernstein

/s/ DAVID E. ANDERSON
--------------------------------
David E. Anderson

/s/ EDMOND R. DAVIS
--------------------------------
Edmond R. Davis

/s/ JOHN W. ENGLISH
--------------------------------
John W. English

/s/ ALFRED E. OSBORNE
--------------------------------
Alfred E. Osborne

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<PAGE> 1

EXHIBIT 8

FORM OF
CUSTODY AGREEMENT

AGREEMENT dated as of [______________ _____], 1996, between SIERRA
ASSET MANAGEMENT PORTFOLIOS (the "Trust") , a business trust organized under
the laws of the Commonwealth of Massachusetts, and registered as an investment
company under the 1940 Act, having its principal office and place of business
at 9301 Corbin Avenue, Suite 333, Northridge, California 91324, on behalf of
its managed investment series funds currently existing or as may from time to
time be created and designated by the Trust and covered under this Agreement
pursuant to Section 2 hereof (individually, a "Fund" and collectively, the
"Funds") and BOSTON SAFE DEPOSIT AND TRUST COMPANY (the "Custodian"), a
Massachusetts trust company with its principal place of business at One Boston
Place, Boston, Massachusetts 02108.

W I T N E S S E T H:

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

1. Definitions.

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

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

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

(c) "Business Day" shall mean any day on which any Fund and the
Custodian are open for business.
<PAGE> 2
(d) "Certificate" shall mean any notice, instruction or other
instrument in writing, authorized or required by this Agreement to be
given by the Trust to the Custodian, which is actually received by the
Custodian and signed on behalf of the Trust by any two Authorized
Persons or any two officers thereof.

(e) "Master Trust Agreement" shall mean the Agreement and
Declaration of Trust of the Trust dated March 26, 1996, as the same
may be amended from time to time.

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

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

(h) "Oral Instruction" shall mean one or more verbal instructions
actually received by the Custodian from a person reasonably believed
by the Custodian to be an Authorized Person.

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

(j) "Shares" refers to units of beneficial interest of any of the
Funds.

(k) "Security" or "Securities" shall be deemed to include bonds,
debentures, notes, stocks, shares, evidences of indebtedness, and all
other securities, commodities interests and investments from time to
time owned by any of the Funds.

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<PAGE> 3
(l) "Transfer Agent" shall mean the person that performs the
transfer agent, dividend disbursing agent and shareholder servicing
agent functions for the Funds.

(m) "Written Instruction" shall mean one or more written
communications actually received by the Custodian from a person
reasonably believed by the Custodian to be an Authorized Person by any
system whereby the receiver of such communication is able to verify
through codes or otherwise with a reasonable degree of certainty the
authenticity of the sender of such communication.

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

2. Appointment of Custodian.

(a) The Trust hereby constitutes and appoints the Custodian as
custodian of all the Securities and monies at the time owned by or in
the possession of the Trust and specifically allocated to a Fund
during the period of this Agreement.

(b) In the event that the Trust establishes one or more investment
series funds other than the Funds with respect to which the Trust
decides to retain the Custodian to provide custody services, the Trust
shall so notify the Custodian in writing. If the Custodian is willing
to render such services, the Custodian shall notify the Trust in
writing, whereupon each such investment series fund shall be deemed a
Fund hereunder as provided in Section 2(c) below.

(c) Any Fund may be added to or deleted from coverage under this
Agreement by attaching a revised Schedule C to this Agreement
reflecting such addition or termination, dated and signed by an
authorized officer or representative of each party hereto.

(d) The Custodian hereby accepts appointment as such custodian for
each Fund and agrees to perform the duties thereof as set forth
herein.

3. Compensation.

(a) The Trust will compensate the Custodian for its services
rendered under this Agreement in accordance with the fees set forth in
the Fee Schedule annexed hereto as Schedule A and incorporated herein.
Such Fee Schedule does not include commercially reasonable
out-of-pocket disbursements of the Custodian for which the Custodian
shall

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<PAGE> 4
be entitled to bill separately. Commercially reasonable out-of-pocket
disbursements shall include, but shall not be limited to, the items
specified in the Schedule of Out-of-Pocket Charges annexed hereto as
Schedule B and incorporated herein, which schedule may be modified by
the Custodian (i) upon not less than thirty days prior written notice
to the Trust and (ii) agreement of the Trust. In addition, the
expenses that the Custodian may charge a Fund include, but are not
limited to, the usual and customary expenses of Sub- Custodians and
foreign branches of the Custodian incurred in settling transactions
outside of Boston, Massachusetts or New York City, New York involving
the purchase and sale of Securities of such Fund.

(b) Any compensation agreed to hereunder may be adjusted from time
to time by attaching to Schedule A and/or Schedule B of this Agreement
a revised Fee Schedule and/or Schedule of Out-of-Pocket Charges, dated
and signed by an Authorized Person or authorized representative of
each party hereto.

(c) The Custodian will bill the Trust for each Fund as soon as
practicable after the end of each calendar month, and said billings
will be detailed in accordance with the Fee Schedule and Schedule of
Out-of-Pocket Charges for each Fund. The Trust will promptly pay to
the Custodian the amount of such billing. In the alternative, the
Custodian may charge against any monies specifically allocated to a
Fund and held on behalf of the Trust pursuant to this Agreement such
compensation and any reasonable expenses incurred by the Custodian in
the performance of its duties with respect to such Fund pursuant to
this Agreement. The Custodian shall also be entitled to place in an
escrow account with a third party escrow agent that is agreeable to
the Custodian and the Trust (provided that such approval of the third
party escrow agent shall not be unreasonably withheld by either
party), any monies held by the Custodian and specifically allocated to
a Fund on behalf of the Trust pursuant to this Agreement in the amount
of any loss, damage, liability or expense incurred with respect to
such Fund, including counsel fees, for which the Custodian shall be
entitled to reimbursement under the provisions of this Agreement;
provided, that the Custodian shall promptly notify such Fund in
writing of such placement of monies in escrow and shall not withdraw
for the account of the Custodian any monies from such escrow except as
mutually agreed in writing between the Custodian and the Fund; and
provided further, that in the event that the Custodian and the Fund
can not agree as to the withdrawal of any amount of monies from such
escrow, the amount of monies to be withdrawn shall be determined by
arbitration conducted as mutually agreed by the Custodian and the
Trust.

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<PAGE> 5
4. Custody of Monies and Securities.

(a) Receipt and Holding of Assets.

The Trust will deliver or cause to be delivered to the Custodian all
Securities and monies owned by it at any time during the period of
this Agreement and shall specify the Fund to which the Securities and
monies are to be specifically allocated. The Custodian will not be
responsible for such Securities and monies until actually received by
it. The Trust shall instruct the Custodian from time to time in its
sole discretion, by means of a Written Instruction, or, in connection
with the purchase or sale of Money Market Securities, by means of an
Oral Instruction or a Written Instruction, as to the manner in which
and in what amounts Securities and monies of a Fund are to be
deposited on behalf of such Fund in the Book-Entry System or a
Depository and specifically allocated on the books of the Custodian to
such Fund; provided, however, that prior to the deposit of Securities
of a Fund in the Book-Entry System or a Depository, including a
deposit in connection with the settlement of a purchase or sale, the
Custodian shall have received a Certificate specifically approving
such deposits by the Custodian in the Book-Entry System or a
Depository. Securities and monies of a Fund deposited in the
Book-Entry System or a Depository will be represented in accounts
which include only assets held by the Custodian for customers,
including but not limited to accounts which the Custodian acts in a
fiduciary or representative capacity.

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

1. In payment for Securities purchased for such Fund, as
provided in Section 5 hereof;

2. In payment of dividends or distributions with respect
to the Shares of such Fund, as provided in Section 7
hereof;

3. In payment of original issue or other taxes with
respect to the Shares of such Fund, as provided in
Section 8 hereof;

4. In payment for Shares of such Fund which have been
redeemed by that Fund, as provided in Section 8
hereof;

5. Pursuant to a Written Instruction, or with respect to
Money Market Securities, an Oral Instruction or a

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<PAGE> 6
Written Instruction, setting forth the name of such Fund, the
name and address of the person to whom the payment is to be
made, the amount to be paid and the purpose for which payment
is to be made; or

6. In payment of fees and in reimbursement of the
expenses and liabilities of the Custodian attributable to such
Fund, as provided in Sections 3 and 11(j) hereof.

(c) Confirmation and Statements. Promptly after the close of
business on each day, the Custodian shall furnish the Trust with
confirmations and a summary of all transfers to or from the account of
each Fund during such day. Where securities purchased by a Fund are
in a fungible bulk of securities registered in the name of the
Custodian (or its nominee) or shown on the Custodian's account on the
books of a Depository or the Book-Entry System, the Custodian shall by
book entry or otherwise identify the quantity of those securities
belonging to such Fund. At least monthly, the Custodian shall furnish
the Trust with a detailed statement of the Securities and monies held
for each Fund under this Agreement.

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

(e) Segregated Accounts. Upon receipt of a Written Instruction
the Custodian will establish segregated accounts on behalf of each
Fund to hold liquid or other assets as it

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<PAGE> 7
shall be directed by such Written Instruction and shall increase or
decrease the assets in such Segregated Accounts only as it shall be
directed by any subsequent Written Instructions.

(f) Collection of Income and Other Matters Affecting Securities.
Unless otherwise instructed to the contrary by a Written Instruction,
the Custodian by itself, or through the use of the Book-Entry System
or a Depository with respect to Securities therein deposited, shall
with respect to all Securities held for a Fund in accordance with this
Agreement:

1. Collect all income due or payable;

2. Present for payment and collect the amount payable
upon all Securities which may mature or be called, redeemed or
retired, or otherwise become payable. The Custodian also
shall have the responsibility to each Fund for monitoring or
ascertaining any call, redemption or retirement dates with
respect to put bonds which are owned by that Fund and held by
the Custodian or its nominees;

3. Surrender Securities in temporary form for definitive
Securities;

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

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

(g) Delivery of Securities and Evidence of Authority. Upon
receipt of a Written Instruction and not otherwise, except for
subparagraphs 5, 6, 7, and 8 of this section 4(g) which may be
effected by either an Oral or Written Instruction, the Custodian,
directly or through the use of the Book-Entry System or a Depository,
shall:

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

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<PAGE> 8
2. Deliver or cause to be delivered any Securities held
for a Fund in exchange for other Securities or monies issued
or paid in connection with the liquidation, reorganization,
refinancing, merger, consolidation or recapitalization of any
corporation, or the exercise of any conversion privilege;

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

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

5. Deliver Securities owned by a Fund upon sale of such
Securities for the account of that Fund pursuant to
Section 5;

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

7. Deliver Securities owned by a Fund to the issuer
thereof or its agent when such Securities are called,
redeemed, retired or otherwise become payable; provided,
however, that in any such case the monies or other
consideration is to be delivered to the Custodian. The
Custodian also shall have the responsibility to each Fund for
monitoring or ascertaining any call, redemption or retirement
dates with respect to the put bonds which are owned by that
Fund and held by the Custodian or its nominee;

8. Deliver Securities owned by a Fund to the issuer
thereof, or its agent, for transfer into the name of that Fund
or into the name of any nominee or nominees of the Custodian
or into the name or nominee name of any agent or any
sub-custodian appointed pursuant to Section 11(g) hereof; or
for exchange for a different

- 8 -
<PAGE> 9
number of bonds, certificates or other evidence representing
the same aggregate face amount or number of units; provided,
however, that in any such case, the new Securities are to be
delivered to the Custodian;

9. Deliver Securities owned by a Fund to the broker for
examination in accordance with "street delivery" custom;

10. Deliver Securities owned by a Fund in accordance with
the provisions of any agreement among a Fund, the Custodian
and any broker-dealer or any similar organization or
organizations relating to compliance with the rules of any
options clearing entity or securities or commodities exchange,
regarding escrow or other arrangements in connection with
transactions by the Fund;

11. Deliver Securities owned by a Fund in accordance with
the provisions of any agreement among that Fund, the Custodian
and an individual or organization registered under the
Commodity Exchange Act, relating to compliance with the rules
of the Commodity Futures Trading Commission and/or any
Contract Market, or any similar organization or organizations,
regarding account deposits in connection with transactions by
that Fund;

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

13. Deliver Securities owned by a Fund for delivery as
security in connection with any borrowings by that Fund
requiring a pledge of that Fund's assets, but only against
receipt of amounts borrowed;

14. Deliver Securities owned by a Fund upon receipt of a
Written Instruction from that Fund for delivery to the
Transfer Agent or to the holders of Shares of that Fund in
connection with distributions in kind, as may be described
from time to time in that Fund's Prospectus, in satisfaction
of requests by holders of Shares for repurchase or redemption;

15. Deliver Securities as collateral in connection with
short sales of securities by a Fund;

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<PAGE> 10
16. Deliver Securities for any purpose expressly
permitted by and in accordance with procedures described in a
Fund's Prospectus or resolution adopted by the Trust's Board
of Trustees signed by an Authorized Person and certified by
the Secretary of the Trust; and

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

(h) Endorsement and Collection of Checks, Etc. The Custodian is
hereby authorized to endorse and collect all checks, drafts or other
orders for the payment of money received by the Custodian for the
account of a Fund; provided, however, that the Custodian shall not be
liable for any monies, whether or not represented by check, draft, or
other instrument for the payment of money, received by it on behalf of
that Fund, until the Custodian actually receives and collects such
monies directly or by the final crediting of the account representing
that Fund's interest in the Book-Entry System or a Depository.

5. Purchase and Sale of Investments of the Funds.

(a) Promptly after each purchase of Securities for a Fund, the
Trust shall deliver to the Custodian (i) with respect to each purchase
of Securities that are not Money Market Securities, a Written
Instruction, and (ii) with respect to each purchase of Money Market
Securities, either a Written Instruction or Oral Instruction, in
either case specifying with respect to each purchase: (1) the name of
the Fund to which such Securities are to be specifically allocated;
(2) the name of the issuer and the title of the Securities; (3) the
number of shares or the principal amount purchased, and accrued
interest, if any; (4) the date of purchase and settlement; (5) the
purchase price per unit; (6) the total amount payable upon such
purchase; (7) the name of the person from whom or the broker through
whom the purchase was made, if any; (8) whether or not such purchase
is to be settled through the Book-Entry System or a Depository; and
(9) whether the Securities purchased are to be deposited in the
Book-Entry System or a Depository. The Custodian shall receive the
Securities purchased by or for a Fund and upon receipt of such
Securities shall pay out of the monies held

- 10 -
<PAGE> 11
for the account of such Fund the total amount payable upon such
purchase, provided that the same conforms to the total amount payable
as set forth in such Written or Oral Instruction.

(b) Promptly after each sale of Securities of a Fund, the Trust
shall deliver to the Custodian (i) with respect to each sale of
Securities which are not Money Market Securities, a Written
Instruction, and (ii) with respect to each sale of Money Market
Securities, either a Written Instruction or Oral Instruction, in
either case specifying with respect to such sale: (1) the name of the
Fund to which the Securities sold were specifically allocated; (2) the
name of the issuer and the title of the Securities; (3) the number of
shares or principal amount sold, and accrued interest, if any; (4) the
date of sale; (5) the sale price per unit; (6) the total amount
payable to such Fund upon such sale; (7) the name of the broker
through whom or the person to whom the sale was made; and (8) whether
or not such sale is to be settled through the Book-Entry System or a
Depository. The Custodian shall deliver or cause to be delivered the
Securities to the broker or other person designated by the Trust upon
receipt of the total amount payable to such Fund upon such sale,
provided that the same conforms to the total amount payable to such
Fund as set forth in such Written or Oral Instruction. Subject to the
foregoing, the Custodian may accept payment in such form as shall be
satisfactory to it, and may deliver Securities and arrange for payment
in accordance with the customs prevailing among dealers in Securities.

6. Lending of Securities.

If any Fund is permitted by the terms of the Master Trust
Agreement and as disclosed in the Fund's Prospectus to lend Securities
specifically allocated to that Fund, within 24 hours after each loan
of Securities, the Trust shall deliver to the Custodian a Written
Instruction specifying with respect to each such loan: (a) the name
of the Fund to which the loaned Securities are specifically allocated;
(b) the name of the issuer and the title of the Securities; (c) the
number of shares or the principal amount loaned; (d) the date of loan
and delivery; (e) the total amount to be delivered to the Custodian,
and specifically allocated to such Fund against the loan of the
Securities, including the amount of cash collateral and the premium,
if any, separately identified; (f) the name of the broker, dealer or
financial institution to which the loan was made; and (g) whether the
Securities loaned are to be delivered through the Book-Entry System or
a Depository.

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<PAGE> 12
Promptly after each termination of a loan of Securities
specifically allocated to a Fund, the Trust shall deliver to the
Custodian a Written Instruction specifying with respect to each such
loan termination and return of Securities: (a) the name of the Fund
to which such loaned Securities are specifically allocated; (b) the
name of the issuer and the title of the Securities to be returned; (c)
the number of shares or the principal amount to be returned; (d) the
date of termination; (e) the total amount to be delivered by the
Custodian (including the cash collateral for such Securities minus any
offsetting credits as described in said Written Instruction); (f) the
name of the broker, dealer or financial institution from which the
Securities will be returned; and (g) whether such return is to be
effected through the Book-Entry System or a Depository. The Custodian
shall receive all Securities returned from the broker, dealer or
financial institution to which such Securities were loaned and upon
receipt thereof shall pay, out of the monies specifically allocated to
such Fund, the total amount payable upon such return of Securities as
set forth in the Written Instruction. Securities returned to the
Custodian shall be held as they were prior to such loan.

7. Payment of Dividends or Distributions.

(a) The Trust shall furnish to the Custodian the vote of the Board
of Trustees of the Trust certified by the Secretary (i) authorizing
the declaration of distributions with respect to a Fund on a specified
periodic basis and authorizing the Custodian to rely on an Oral
Instruction or a Written Instruction specifying the date of the
declaration of such distribution, the date of payment thereof, the
record date as of which shareholders entitled to payment shall be
determined, the amount payable per Share to the shareholders of record
as of the record date and the total amount payable to the Transfer
Agent on the payment date, or (ii) setting forth the date of
declaration of any distribution by a Fund, the date of payment
thereof, the record date as of which shareholders entitled to payment
shall be determined, the amount payable per share to the shareholders
of record as of the record date and the total amount payable to the
Transfer Agent on the payment date.

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

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<PAGE> 13
8. Sale and Redemption of Shares of the Funds.

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

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

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

3. The amount of monies to be received by the Custodian
for the sale of such Shares and specifically allocated to such
Fund.

The Custodian understands and agrees that a Written
Instruction may be furnished subsequent to the purchase of Shares of a
Fund and that the information contained therein will be derived from
the sales of Shares specifically allocated to that Fund as reported to
the Trust by the Transfer Agent.

(b) Upon receipt of such monies from the Transfer Agent, the
Custodian shall credit such monies to the separate account of the Fund
specified in subparagraph (1) of paragraph (a) of this Section 8.

(c) Upon issuance of any Shares of a Fund in accordance with the
foregoing provisions of this Section 8, the Custodian shall pay, out
of all the monies specifically allocated and held for the account of
such Fund, all original issue or other taxes required to be paid in
connection with such issuance upon the receipt of a Written
Instruction specifying the amount to be paid.

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

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

2. The number of Shares redeemed; and

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

The Custodian further understands that the information
contained in any such Written Instruction will be derived from the
redemption of Shares specifically allocated to that Fund as reported
to the Trust by the Transfer Agent.

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<PAGE> 14
(e) Upon receipt from the Transfer Agent of advice setting forth
the number of Shares of a Fund received by the Transfer Agent for
redemption and that such Shares are valid and in good form for
redemption, the Custodian shall make payment to the Transfer Agent out
of the monies specifically allocated to and held for the account of
the Fund specified as provided in subparagraph (1) of paragraph (d) of
this Section 8.

(f) Notwithstanding the above provisions regarding the redemption
of Shares of a Fund, whenever such Shares are redeemed pursuant to any
check redemption privilege which may from time to time be offered by
the Fund, the Custodian, unless otherwise instructed by a Written
Instruction shall, upon receipt of advice from the Fund or its agent
stating that the redemption is in good form for redemption in
accordance with the check redemption procedure, honor the check
presented as part of such check redemption privilege out of the monies
specifically allocated to the Fund in such advice for such purpose.

9. Indebtedness.

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

(b) Upon receipt of the Written Instruction referred to in
subparagraph (a) of this Section 9, the Custodian shall

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<PAGE> 15
deliver on the borrowing date the specified collateral and the
executed promissory note, if any, against delivery by the lending bank
of the total amount of the loan payable, provided that the same
conforms to the total amount payable as set forth in the Written
Instruction. The Custodian may, at the option of the lending bank,
keep such collateral in its possession, but such collateral shall be
subject to all rights therein given the lending bank by virtue of any
promissory note or loan agreement. The Custodian shall deliver as
additional collateral in the manner directed by the Trust from time to
time such Securities specifically allocated to such Fund as may be
specified in a Written Instruction to collateralize further any
transaction described in this Section 9. The Trust shall cause all
Securities released from collateral status to be returned directly to
the Custodian, and the Custodian shall receive from time to time such
return of collateral as may be tendered to it. In the event that the
Trust fails to specify in a Written Instruction all of the information
required by this Section 9, the Custodian shall not be under any
obligation to deliver any Securities and will promptly notify the
Trust of such deficient Written Instruction and the information that
is required by this Section 9 that is missing. Collateral returned to
the Custodian shall be held hereunder as it was prior to being used as
collateral.

10. Persons Having Access to Assets of the Funds.

(a) No Trustee, officer, employee or agent of the Trust, and no
officer, director, trustee, employee or agent of the Funds' investment
adviser, of any investment sub-adviser of a Fund, or of the Funds'
administrator or sub-administrator, shall have physical access to the
assets of a Fund held by the Custodian or be authorized or permitted
to withdraw any investments of a Fund, nor shall the Custodian deliver
any assets of a Fund to any such person. No officer, director,
employee or agent of the Custodian who holds any similar position with
the Funds' investment adviser with any sub-adviser of the Funds or
with the Funds' administrator or sub- administrator shall have access
to the assets of a Fund.

(b) Nothing in this Section 10 shall prohibit any trustee,
officer, employee or agent of the Trust, or any officer, director,
trustee, employee or agent of a Fund's investment adviser, of any
investment sub-adviser of a Fund or of the Funds' administrator or
sub-administrator, from giving an Oral Instruction or a Written
Instruction to the Custodian or executing a Certificate so long as it
does not result in delivery of or access to assets of the Trust
prohibited by paragraph (a) of this Section 10.

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<PAGE> 16
11. Concerning the Custodian.

(a) Qualification. The Custodian represents and warrants to the
Trust that the Custodian is qualified under Section 17(f) of the 1940
Act and the rules and regulations thereunder to be a custodian for the
securities and similar investments of the Trust, as a registered
investment company, and of the Funds, as series of a registered
investment company.

(b) Standard of Conduct. Except as otherwise provided herein,
neither the Custodian nor its nominee shall be liable for any loss or
damage, including counsel fees, resulting from its action or omission
to act or otherwise, except for any such loss or damage arising out of
its own negligence or willful misconduct. The Custodian may, with
respect to questions of law, apply for and obtain the advice and
opinion of counsel to the Trust or of its own counsel, at the expense
of the Trust, and shall be fully protected with respect to anything
done or omitted by it in good faith in conformity with such advice or
opinion. The Custodian shall be liable to the Trust for any loss or
damage resulting from the use of the Book-Entry System or a Depository
arising by reason of any negligence, misfeasance or misconduct on the
part of the Custodian or any of its employees or agents.

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

1. The validity of the issue of any Securities purchased
by a Fund, the legality of the purchase thereof, or the
propriety of the amount paid therefor;

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

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

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

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

6. The legality of any borrowing for temporary or
emergency administrative purposes.

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<PAGE> 17
(d) No Liability Until Receipt. The Custodian shall not be liable
for, or considered to be the Custodian of, any monies, whether or not
represented by any check, draft, or other instrument for the payment
of money, received by it on behalf of a Fund until the Custodian
actually receives and collects such monies directly or by the final
crediting of the account representing the Trust's or such Fund's
interest in the Book-Entry System or a Depository. The Custodian
shall exercise reasonable diligence in pursuing payment on any such
instrument, or any dividend, interest or other receivable of the
Trust.

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

(f) Collection Where Payment Refused. The Custodian shall not be
under any duty or obligation to take action to effect collection of
any amount, if the Securities upon which such amount is payable are in
default, or if payment is refused after due demand or presentation,
unless and until (a) it shall be directed to take such action by a
Certificate and (b) it shall be assured to its satisfaction of
reimbursement of its costs and expenses in connection with any such
action.

(g) Appointment of Agents and Sub-Custodians. The Custodian may
appoint one or more banking institutions, including but not limited to
banking institutions located in foreign countries (provided that each
such institution shall constitute an "Eligible Foreign Custodian"
within the meaning of Rule 17f-5 under the 1940 Act), to act as
Depository or Depositories or as Sub-Custodian or as Sub- Custodians
of Securities and monies at any time owned by a Fund, upon terms and
conditions specified in a Certificate. The Custodian shall use
reasonable care in selecting a Depository and/or Sub-Custodian located
in a country other than the United States ("Foreign Sub-Custodian"),
and shall oversee the maintenance of any Securities or monies of a
Fund by any Foreign Sub-Custodian. The Custodian shall not appoint
any Foreign Sub-Custodian until the Board of Trustees of the Trust, if
required by Rule 17f-5 or Rule 17f-4, under the 1940 Act, shall have
made the determinations and approved the written contract with such
Foreign Sub-Custodian. In addition, the Custodian shall hold the
Trust harmless from, and indemnify the Trust against, any loss that
occurs as a result of the failure of any Foreign Sub-Custodian to
exercise reasonable care with

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<PAGE> 18
respect to the safekeeping of Securities and monies of any Fund.
Notwithstanding the generality of the foregoing, however, the
Custodian shall not be liable for any losses resulting from or caused
by events or circumstances beyond its reasonable control, including
but not limited to, losses resulting from nationalization,
expropriation, devaluation, revaluation, confiscation, seizure,
cancellation, destruction or similar action by any governmental
authority, de facto or de jure; or enactment, promulgation, imposition
or enforcement by any such governmental authority or currency
restrictions, exchange controls, taxes, levies or other charges
affecting the Trust's property; or acts of war, terrorism,
insurrection or revolution; or any other similar act or event beyond
the Custodian's control.

The Custodian shall maintain such records as shall be
necessary to identify the assets of each Fund held by each Foreign
Sub-Custodian. The Custodian shall furnish to the Trust such
periodic reports as the Trust shall reasonably request with respect to
the assets of each Fund held by each Foreign Sub-Custodian, and shall
furnish to the Trust such notices of transfers of securities, deposits
or other assets to or from each Fund's account by each Foreign
Sub-Custodian as the Trust shall request.

The Custodian shall advise the Trust promptly if it learns
that any Foreign Sub-Custodian no longer constitutes an "Eligible
Foreign Custodian" and of any failure by any Foreign Sub-Custodian to
observe any material term or condition of its appointment. If the
Board of Trustees of the Trust determines that a Fund's assets should
be withdrawn from a Foreign Sub-Custodian pursuant to Rule 17f-5 under
the 1940 Act, the Custodian shall withdraw the Fund's assets from the
care of such Foreign Sub-Custodian as soon as reasonably practicable,
and in any event within 180 days of the date of such determination by
the Board of Trustees of the Trust.

The Custodian may authorize one or more of the Foreign
Sub-Custodians to use the facilities of one or more foreign central
securities depositories or clearing agencies as may hereafter be
approved by resolution of the Trustees of the Trust; provided that any
such organization shall constitute an "Eligible Foreign Custodian."

In the event that any Foreign Sub-Custodian fails to perform
any of its obligations under the terms of its appointment, the
Custodian shall use its best efforts to cause such Foreign
Sub-Custodian to perform such obligations. At the written request of
the Trust, the Custodian shall use its best efforts to assert and
collect any claim for liability for any loss or damage incurred by a

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<PAGE> 19
Fund arising out of the failure of any such Foreign Sub-Custodian to
perform such obligations.

(h) No Duty to Ascertain Authority. The Custodian shall not be
under any duty or obligation to ascertain whether any Securities at
any time delivered to or held by it for the Trust and specifically
allocated to a Fund are such as may properly be held by the Trust and
specifically allocated to such Fund under the provisions of the Master
Trust Agreement and the Prospectus.

(i) Reliance on Certificates and Instructions. The Custodian
shall be entitled to rely upon any Certificate, notice or other
instrument in writing received from the Trust by the Custodian and
reasonably believed by the Custodian to be genuine and to be signed by
two officers of the Trust. The Custodian shall be entitled to rely
upon any Written Instruction or Oral Instruction actually received by
the Custodian pursuant to the applicable Sections of this Agreement
and reasonably believed by the Custodian to be genuine and to be given
by an Authorized Person. The Trust agrees to forward to the Custodian
a Written Instruction from an Authorized Person confirming such Oral
Instruction in such manner so that such Written Instruction are
received by the Custodian, whether by hand delivery, telex or
otherwise, by the close of business on the same day that such Oral
Instruction is given to the Custodian. The Trust agrees that the fact
that such confirming instructions are not received by the Custodian
shall in no way affect the validity of the transactions or
enforceability of the transactions hereby authorized by the Trust.
The Trust agrees that the Custodian shall incur no liability to the
Trust in acting upon an Oral Instruction given to the Custodian
hereunder concerning such transactions provided such instructions
reasonably appear to have been received from a duly Authorized Person.

(j) Overdrafts. In the event that the Custodian is directed by
Written Instruction (or Oral Instruction confirmed in writing in
accordance with Section 11(i) hereof) to make any payment or transfer
of monies on behalf of any Fund for which there would be, at the close
of business on the date of such payment or transfer, insufficient
monies held by the Custodian on behalf of the Fund, the Custodian may,
in its sole discretion and as permitted by applicable law, provide an
overdraft (an "Overdraft") to the Fund in an amount sufficient to
allow the completion of such payment or transfer. Any Overdraft
provided hereunder: (a) shall be payable on the next Business Day,
unless otherwise agreed by such Fund and the Custodian; (b) shall
accrue interest from the date of the Overdraft to the date of payment
in full by such Fund at a

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<PAGE> 20
rate agreed upon in writing, from time to time, by the Custodian and
such Fund. The Custodian and the Fund acknowledge that the purpose of
such Overdraft is to temporarily finance the purchase of Securities
for prompt delivery in accordance with the terms hereof, to meet
unanticipated or unusual redemption, to allow the settlement of
foreign exchange contracts or to meet other emergency expenses not
reasonably foreseeable by such Fund. In the event that the Custodian
becomes aware that an Overdraft may occur in time to prevent the
Overdraft, the Custodian will promptly notify the Fund, to the extent
practicable, and cooperate with the Fund, to the extent possible, in
the Fund's attempt to avoid the Overdraft. The Custodian shall
promptly notify such Fund in writing (an "Overdraft Notice") of any
Overdraft by facsimile transmission or in such other manner as such
Fund and the Custodian may agree in writing. The Fund shall be liable
to pay the charge for the Overdraft to the extent that the Fund is
responsible for causing such Overdraft and the Custodian shall be
liable to pay the charge for the Overdraft to the extent that the
Custodian is responsible for causing such Overdraft. To secure
payment of any Overdraft, the Fund hereby grants to the Custodian a
continuing security interest in and right of setoff against the
Securities and monies in such Fund's account from time to time in the
full amount of such Overdraft. Should the Fund fail to pay promptly
any amounts owed hereunder, the Custodian shall be entitled to use
available monies in such Fund's account and to liquidate Securities in
the account as is necessary to meet such Fund's obligations under the
Overdraft; provided, that the Fund shall be entitled to choose which
Securities shall be liquidated. In any such case, and without
limiting the foregoing, the Custodian shall be entitled, to the extent
permitted by applicable law, to take such other action(s) or exercise
such other options, powers and rights as the Custodian now or
hereafter has as a secured creditor under the Massachusetts Uniform
Commercial Code or any other applicable law.

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

The Custodian shall provide the Trust with any report obtained
by the Custodian on the system of internal accounting control of the
Book-Entry System or a Depository and with such reports on its own
systems of internal accounting control as the Trust may reasonably
request from time to time.

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<PAGE> 21
12. Term and Termination.

(a) This Agreement shall be effective as of the date first set
forth above (the "Effective Date") and shall continue in effect
thereafter until such time as this Agreement may be terminated in
accordance with the provisions hereof.

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

(c) In the event that the Custodian is no longer qualified as
provided in Section 11(a) hereof, the Custodian shall immediately give
notice to the Trust as provided herein and this Agreement shall
automatically terminate as to all of the Funds as soon as it is
practicable for all the Securities and monies of the Trust and the
Funds to be delivered to the Trust or to a new custodian as provided
below and upon such delivery.

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

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<PAGE> 22
(d) If the Trust or the Custodian designates a successor custodian
for the Fund or Funds, upon the date set forth in such notice under
paragraph (c) of this Section 12 or upon the date of automatic
termination of this Agreement, as provided above, as the case may be,
this Agreement shall terminate to the extent specified in such notice,
and the Custodian shall upon receipt of a notice of acceptance by the
successor custodian on that date (i) deliver directly to the successor
custodian all Securities and monies then held by the Custodian and
specifically allocated to the Fund or Funds specified, after deducting
all fees, expenses and other amounts for the payment or reimbursement
of which it shall then be entitled with respect to such Fund or Funds;
and (ii) will otherwise cooperate in the transfer of its duties and
responsibilities to the successor custodian hereunder.

13. Limitation of Liability.

The Trust and the Custodian agree that the obligations of the
Trust under this Agreement shall not be binding upon any of the
Trustees, shareholders, nominees, officers, employees or agents,
whether past, present or future, of the Trust, individually, but are
binding only upon the assets and property of the Trust and the Funds
covered under this Agreement, as provided in the Master Trust
Agreement. The execution and delivery of this Agreement have been
authorized by the Trustees of the Trust, and signed by an authorized
officer of the Trust, acting as such, and neither such authorization
by such Trustees nor such execution and delivery by such officer shall
be deemed to have been made by any of them or any shareholder of the
Trust individually or to impose any liability on any of them or any
shareholder of the Trust personally, but shall bind only the assets
and property of the Trust and the Funds covered under this Agreement
as provided in the Master Trust Agreement.

14. Miscellaneous.

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

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<PAGE> 23
Authorized Persons as set forth in the last delivered certification.

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

(c) The Custodian shall provide the Trust and/or its investment
advisers and investment sub-advisers such reports on securities and
cash positions, transaction fails, aging of receivables and other
relevant data as the Trust or its investment advisers and investment
sub-advisers may reasonably require and shall reconcile any
differences with the records of such pricing and bookkeeping agent.
The Custodian will also timely provide the Trust's pricing and
bookkeeping agent with such information in the Custodian's possession
as the pricing and bookkeeping agent may reasonably require.

(d) Any notice or other instrument in writing, authorized or
required by this Agreement to be given to the Custodian, shall be
sufficiently given if addressed to the Custodian and mailed or
delivered to it at its offices first set forth above; or at such other
place or in such other manner as the Custodian may from time to time
designate in writing.

(e) Any notice or other instrument in writing, authorized or
required by this Agreement to be given to the Trust, shall be
sufficiently given if addressed to the Trust and mailed or delivered
to it at its principal office and place of business first set forth
above; or at such other place or in such other manner as the Trust may
from time to time designate in writing.

(f) This Agreement may not be amended or modified in any manner
except by a written agreement executed by both parties with the same
formality as this Agreement, as may be permitted or required by the
1940 Act.

(g) This Agreement shall extend to and shall be binding upon the
parties hereto, and their respective successors and assigns; provided,
however, that this Agreement shall not be assignable by the Trust
without the written consent of the Custodian, or by the Custodian
without the written consent

- 23 -
<PAGE> 24
of the Trust authorized or approved by a vote of the Board of Trustees
of the Trust, and any attempted assignment without such written
consent shall be null and void.

(h) The Trust represents that a copy of the Master Trust Agreement
is on file with the Secretary of the Commonwealth of Massachusetts and
with the Boston City Clerk.

(i) This Agreement shall be construed in accordance with the laws
of the Commonwealth of Massachusetts.

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

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

- 24 -
<PAGE> 25
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective representatives duly authorized as
of the day and year first above written.

SIERRA ASSET MANAGEMENT PORTFOLIOS

By
------------------------------
Name:
Title:

BOSTON SAFE DEPOSIT AND TRUST COMPANY

By
------------------------------
Name:
Title:

- 25 -
<PAGE> 26
APPENDIX A

We, F. Brian Cerini, President, and Keith B. Pipes, Executive
Vice President, Treasurer and Secretary, of Sierra Asset Management Portfolios,
a business trust organized under the laws of the Commonwealth of Massachusetts
(the "Trust"), do hereby certify that:

The following individuals have been duly authorized as
Authorized Persons to give Oral Instructions and Written Instructions on behalf
of the Trust.

<TABLE>
<CAPTION>
Name Position Signature
---- -------- ---------
<S> <C> <C>
F. Brian Cerini President _______________________

Keith B. Pipes Executive Vice President, _______________________
Treasurer and Secretary

Michael D. Goth Senior Vice President _______________________

Stephen C. Scott Senior Vice President _______________________

Craig M. Miller Assistant Treasurer _______________________
</TABLE>

_____________________ ______________________
F. Brian Cerini Keith B. Pipes
President Executive Vice President,
Secretary and Treasurer

- 26 -
<PAGE> 27
APPENDIX B

The following individuals serve in the following positions
with the Trust and each individual has been duly elected or appointed to each
such position and qualified therefor in conformity with the Trust's Master
Trust Agreement and the signatures set forth opposite their respective names
are their true and correct signatures:

<TABLE>
<CAPTION>
Name Position Signature
---- -------- ---------
<S> <C> <C>
F. Brian Cerini President _______________________

Keith B. Pipes Executive Vice President, Treasurer _______________________
and Secretary

Michael D. Goth Senior Vice President _______________________

Stephen C. Scott Senior Vice President _______________________

Craig M. Miller Assistant Treasurer _______________________

Richard W. Grant Assistant Secretary _______________________
</TABLE>

______________________ _______________________
F. Brian Cerini Keith B. Pipes
President Executive Vice President,
Secretary and Treasurer

- 27 -
<PAGE> 28
SCHEDULE A

BOSTON SAFE DEPOSIT AND TRUST COMPANY

CUSTODY FEE SCHEDULE

[Please Insert]

- 28 -
<PAGE> 29
SCHEDULE A
(continued)

BOSTON SAFE DEPOSIT AND TRUST COMPANY

GLOBAL CUSTODY FEE SCHEDULE

[Please Insert]

- 29 -
<PAGE> 30
SCHEDULE A
(continued)

COUNTRY GROUPS

[Please Insert]

SIERRA ASSET MANAGEMENT PORTFOLIOS

BY:
--------------------------
NAME:
TITLE:

BOSTON SAFE DEPOSIT AND TRUST
COMPANY

BY:
--------------------------
NAME:
TITLE:

Dated: July ____, 1996

- 30 -
<PAGE> 31
SCHEDULE B

OUT-OF-POCKET CHARGES

The Trust will pay to the Custodian as soon as possible after the end
of each month all out-of-pocket expenses reasonably incurred in connection with
the assets of each Fund of the Trust.

SIERRA ASSET MANAGEMENT PORTFOLIOS

By
------------------------------
Name:
Title:

BOSTON SAFE DEPOSIT AND TRUST COMPANY

By
------------------------------
Name:
Title:

Dated: July ____, 1996

- 31 -
<PAGE> 32
SCHEDULE C

FUNDS OF SIERRA ASSET MANAGEMENT PORTFOLIOS
COVERED UNDER THIS CUSTODY AGREEMENT

Income Portfolio
Value Portfolio
Balanced Portfolio
Growth Portfolio
Capital Growth Portfolio
SIERRA ASSET MANAGEMENT PORTFOLIOS

By
------------------------------
Name:
Title:

BOSTON SAFE DEPOSIT AND TRUST COMPANY

By
------------------------------
Name:
Title:

Dated: July ____, 1996

- 32 -

<PAGE> 1
FORM OF EXHIBIT (9)(a)
ADMINISTRATION AGREEMENT

[__________ ____], 1996

Sierra Fund Administration Corporation
9301 Corbin Avenue, Suite 333
Northridge, California 91324

Ladies and Gentlemen:

The Sierra Asset Management Portfolios (the "Trust"), a business trust
organized under the laws of the Commonwealth of Massachusetts, confirms its
agreements with Sierra Fund Administration Corporation ("Sierra
Administration"), a corporation organized under the laws of the State of
California, regarding administration services to be provided by Sierra
Administration in connection with each of the investment funds offered from time
to time by the Trust (individually, a "Fund" and together, the "Funds"). Sierra
Administration agrees to provide services upon the following terms and
conditions:

1. Investment Description; Appointment
-----------------------------------

The Trust desires to employ the Trust's capital by investing and
reinvesting (a) in investments of the kind and in accordance with the
limitations specified in (i) the Trust's Agreement and Declaration of Trust
dated March 26, 1996 (the "Trust Agreement"), and (ii) the prospectus(es) (the
"Prospectus") and statement(s) of additional information (the "Statement")
relating to the Funds contained in the Trust's Registration Statement on Form
N-1A filed with the Securities and Exchange Commission (the "Registration
Statement") and (b) in such manner and to such extent as may from time to time
be approved by the Trust's Board of Trustees. Copies of the Prospectus, the
Statement and the Trust Agreement have been submitted to Sierra Administration.
The Trust desires to employ and hereby appoints Sierra Administration to act as
the Funds' administrator. Sierra Administration accepts this appointment and
agrees to furnish the services described herein for the compensation set forth
below.

2. Services as Administrator
-------------------------

Subject to the supervision and direction of the Board of Trustees of the
Trust, Sierra Administration is responsible for all administrative functions
with respect to the Trust and will (a) assist in supervising all aspects of the
operations of the Trust except those performed by the Trust's investment adviser
under its investment advisory agreement; (b) supply the Trust with office
facilities (which may be in Sierra Administration's own offices), statistical
and research data, data processing services, clerical, accounting and
bookkeeping services (including, but not limited to, the calculation of (i) the
net asset values of shares of the Trust, (ii) applicable contingent deferred
sales charges and (iii) distribution fees), internal auditing and legal
services, internal executive and administrative services, and stationery and
office supplies; (c) prepare reports to the Trust's shareholders and materials
for the Board of Trustees of the Trust; (d) prepare tax returns and reports to
and filings with the Securities and Exchange Commission and state Blue Sky
authorities; (e) cooperate with the Trust's transfer agent for the purpose of
establishing the implementing procedures to ensure that the Trust's transfer
agency and shareholder relations functions are efficiently carried out; and (f)
provide such other similar services as the Trust may reasonably request to the
extent permitted under application statutes, rules and regulations. The services
to be performed by Sierra Administration hereunder may be delegated by it, in
whole or in part, to one or more sub-administrators provided that any delegation
of duties to a sub-administrator shall not relieve Sierra Administration of its
responsibilities hereunder. Notwithstanding anything to the contrary in this
Agreement, Sierra Administration shall not be responsible for the performance of
any duties which are required to be performed by the Trust's transfer agent.

3. Compensation
------------

(a) In consideration of services rendered pursuant to this Agreement, the
Trust will pay Sierra Administration on the first business day of each month a
fee for the previous month at an annual rate of [___% of the average daily net

- 1 -
<PAGE> 2

assets of each Fund]; out of which fee Sierra Administration shall pay expenses
as described in Section 4 including, without limitation, fees to any
sub-administrator and the custodian. The fee for the period from the date of
this Agreement to the end of the first calendar month of the term of this
Agreement shall be prorated according to the proportion that such period bears
to the full monthly period.

(b) Upon any termination of this Agreement before the end of any month, the
fee for such part of a month shall be prorated according to the proportion which
such period bears to the full monthly period and shall be payable upon the date
of termination of this Agreement. For the purpose of determining fees payable to
Sierra Administration, the value of each Fund's net assets shall be computed at
the times and in the manner specified in the Prospectus and/or the Statement
relating to the Fund as from time to time in effect.

4. Expenses
--------

Sierra Administration will bear all expenses in connection with the
performance of its services under this Agreement, including, without limitation,
payment of the fee to the sub-administrator and custodian described in
Paragraph 3 above. The Trust will bear certain other expenses to be incurred in
its operation, including: organizational expenses; taxes, interest, brokerage
fees and commissions, if any; fees of trustees of the Trust who are not
officers, directors, or employees of Sierra Investment Services Corporation,
each sub-administrator or any of their affiliates; Securities and Exchange
Commission fees and state Blue Sky qualification fees; out-of-pocket expenses of
custodians, transfer and dividend disbursing agents and the Trust's
sub-administrator and transaction charges of custodians; insurance premiums;
outside auditing and legal expenses; costs of maintenance of the Trust's
existence; costs attributable to investor services, including, without
limitation, telephone and personnel expenses; costs of preparing and printing
prospectuses and statements of additional information for regulatory purposes
and for distribution to existing shareholders; costs of shareholders' reports
and meetings of the shareholders of the Trust and of the officers or Board of
Trustees of the Trust; and any extraordinary expenses. In addition, each Fund
pays a distribution fee pursuant to terms of a Distribution Plan adopted under
Rule 12b-1 of the Investment Company Act of 1940, as amended (the "1940 Act").

5. Standard of Care
----------------

Sierra Administration shall exercise its best judgment in rendering the
services listed in Paragraph 2 above. Sierra Administration shall not be liable
for any error of judgment or mistake of law or for any loss suffered by the Fund
in connection with the matters to which this Agreement relates, except (a) a
loss resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services (in which case any award of damages shall be limited
to the period and the amount set forth in Section 36(b)(3) of the 1940 Act), or
(b) a loss resulting from willful misfeasance, bad faith or gross negligence on
its part in the performance of its duties or from reckless disregard by it of
its obligations and duties under this Agreement.

6. Term of Agreement
-----------------

This Agreement shall become effective as of the date set forth above and
shall continue for an initial two-year term and shall continue automatically
from year-to-year thereafter unless terminated in accordance with the following
sentence. This Agreement is terminable at any time, without penalty, on 60 days'
written notice by the Board of Trustees of the Trust, or upon 90 days' written
notice by Sierra Administration.

7. Service to Other Companies or Accounts
--------------------------------------

The Trust understands that Sierra Administration may act in the future as
administrator to other investment companies or series of investment companies,
and the Trust has no objection to Sierra Administration's so acting in such
capacity. The Trust understands that the persons employed by Sierra
Administration to assist in the performance of Sierra Administration's duties
under this Agreement will not devote their full time to such service and nothing
contained in this Agreement shall be deemed to limit or restrict the right of
Sierra Administration or any affiliate of Sierra Administration to engage in and

- 2 -
<PAGE> 3
devote time and attention to other businesses or to render services of whatever
kind or nature.

8. Representations of the Trust and Sierra Administration
------------------------------------------------------

The Trust represents that (i) a copy of the Trust Agreement is on file in
the office of the Secretary of The Commonwealth of Massachusetts, (ii) the
appointment of Sierra Administration has been duly authorized and (iii) it has
acted and will continue to act in conformity with the 1940 Act and other
applicable laws. Sierra Administration represents that it is authorized to
perform the services described herein.

9. Limitation of Liability
-----------------------

The copy of the Trust Agreement is on file with the Secretary of The
Commonwealth of Massachusetts, and notice is hereby given that this instrument
is executed on behalf of the Trustees of the Trust as Trustees and not
individually and that the obligations of this instrument are not binding upon
any of the Trustees, officers or shareholders individually but are binding only
upon the assets and property of the Trust.

10. Entire Agreement
----------------

This Agreement constitutes the entire agreement between the parties hereto.

11. Governing Law
-------------

This Agreement shall be governed in accordance with the laws of The
Commonwealth of Massachusetts.

If the foregoing accurately sets forth our agreement, kindly indicate your
acceptance hereof by signing and returning the enclosed copy hereof.

Very truly yours,

SIERRA ASSET MANAGEMENT PORTFOLIOS

By
------------------------------
Name: F. Brian Cerini
Title: Chairman of the Board
and President

Accepted:

SIERRA FUND ADMINISTRATION
CORPORATION

By
-------------------------------------
Name: Keith B. Pipes
Title: Director, Secretary and Treasurer

- 3 -

<PAGE> 1

EXHIBIT (9)(c)

FORM OF

SUB-ADMINISTRATION AGREEMENT

June __, 1996

This Sub-Administration Agreement (the "Agreement") is made and
entered into between Sierra Fund Administration Corporation ("Sierra
Administration"), a California corporation having its principal business
offices at 9301 Corbin Avenue, Suite 333, Northridge, California 91324, and
undersigned sub-administrator ("Sub-Administrator").

WITNESSETH:

WHEREAS, the investment companies identified on Schedule A (each a
"Company" and jointly the "Companies") for which Sierra Administration or any
other entity controlling, controlled by or under common control with Sierra
Administration, acts as administrator, each of which is a management investment
company registered under the Investment Company Act of 1940, as amended (the
"1940 Act").

WHEREAS, each Company has entered into an administration agreement
with Sierra Administration (the "Administration Agreement");

WHEREAS, Sub-Administrator desires to agree with Sierra Administration
to provide certain administrative services for each Company to the customers of
the Sub-Administrator;

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

1. Definition of Terms. As used herein, the term "Customers" means
Customers of Sub-Administrator that purchase shares of each Company.

2. Services as Sub-Administrator. Subject to the supervision and
direction of Sierra Administration, Sub-Administrator will, at the
direction of and to the extent specifically delegated to it from time
to time by Sierra Administration, (a) aggregate and process purchase
and redemption orders; (b) forward shareholder communications; (c)
provide sub-accounting services for shares held beneficially, and (d)
assist in other aspects of the administration of each Company.

3. Compensation. Sierra Administration agrees, subject to the other
terms and conditions of this Agreement, to pay Sub-Administrator a
fee, and Sub-Administrator agrees to accept the same as full payment
therefor, accrued daily and payable quarterly in accordance with
Schedule A hereto. The fee
<PAGE> 2
shall be based on the average daily net assets of shares of each
Company held by Customers. Accrual of such fee by Sub-Administrator
shall commence with respect to each such share upon settlement.
Sub-Administrator acknowledges that the fee will be paid solely by
Sierra Administration from administration fees received by Sierra
Administration pursuant to the Administration Agreement.

4. Expenses. Sub-Administrator will bear all expenses in connection
with the performance of its services under this Agreement.

5. Standard of Care. Sub-Administrator shall exercise its best judgment
in rendering the services listed in Paragraph 2 above. Sub-
Administrator shall not be liable for any error of judgment or mistake
of law or for any loss suffered by each Company in connection with the
matters to which this Agreement relates, except a loss resulting from
willful misfeasance, bad faith or gross negligence on its part in the
performance of its duties or from reckless disregard by it of its
obligations and duties under this Agreement.

6. Term of Agreement. This Agreement shall become effective as of the
date a Company commences its investment operations and shall continue
for an initial two year term and shall continue automatically from
year-to-year thereafter unless terminated in accordance with the
following sentence. This Agreement is terminable at any time, without
penalty, on 60 days' written notice, by the Board of Trustees of a
Company or Sierra Administration or upon 90 days' written notice, by
Sub-Administrator. This Agreement may not be assigned by either party
without the prior written consent of the other party hereto.

7. Service to Other Companies or Accounts. Neither this Agreement nor
the performance of the services of the respective parties hereunder
shall be considered to constitute an exclusive arrangement. Sierra
Administration understands that Sub-Administrator now acts, will
continue to act and/or may act in the future as sub-administrator to
fiduciary and other managed accounts, and the Companies have no
objection to Sub-Administrator's so acting. Sierra Administration
understands that the persons employed by Sub-Administrator to assist
in the performance of Sub-Administrator's duties under this Agreement
may not devote their full time to such service and nothing contained
in this Agreement shall be deemed to limit or restrict the right of
Sub-Administrator or any affiliate of Sub-Administrator to engage in
and devote time and attention to other businesses or to render
services of whatever kind of nature.

-2-
<PAGE> 3

8. Capacity. Sub-Administrator hereby represents and warrants that: (a)
Sub-Administrator is a corporation, partnership or other entity duly
organized and validly existing in good standing under the laws of the
jurisdiction in which Sub-Administrator is organized; (b) the
execution and delivery of this Agreement and the performance of the
services contemplated hereby have been duly authorized by all
necessary action and all other authorizations and approvals (if any)
required for Sub-Administrator's lawful execution and delivery of this
Agreement and Sub-Administrator's performance hereunder have been
obtained; and (c) upon execution and delivery by Sub-Administrator,
and assuming due and valid execution and delivery by Sierra
Administration, this Agreement will constitute a valid and binding
agreement, enforceable against Sub-Administrator in accordance with
its terms.

9. Entire Agreement. To the extent permitted by law or regulation, this
Agreement, including any schedules hereto, shall be deemed amended as
provided in any written notice delivered by Administrator to
Sub-Administrator and otherwise may be amended only by a written
instrument signed by both of the parties hereto. This Agreement,
including any schedules hereto, constitutes the entire agreement
between the parties hereto.

10. Governing Law. This Agreement shall be governed by, and construed in
accordance with, the internal laws of the State of California, without
giving effect to principles of conflict of laws.

-3-
<PAGE> 4
IN WITNESS WHEREOF the parties hereto have caused the Agreement to be
duly executed as of the date first written above.

ATTEST: SIERRA FUND ADMINISTRATION CORPORATION

By:
- ------------------------------- -------------------------------
Name: Name:
Title: Title:

ATTEST: NAME OF SUB-ADMINISTRATOR:

- ------------------------------- ----------------------------------
Name: (Print or Type)
Title:
By
-------------------------------
Name:
Title:

Address:
-------------------------

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

Telephone Number:
----------------

Fax Number:
----------------------

-4-
<PAGE> 5
Schedule A
to the
Sub-Administration Agreement
between
Sierra Fund Administration Corporation
and
Sub-Administrator

Pursuant to Article 3, the Administrator shall pay the Sub-Administrator
compensation for sub-advisory services to the following Companies at the
following annual rate:

Sierra Asset Management Portfolios 0.__%

-5-

<PAGE> 1
EXHIBIT 9(d)

TRANSFER AGENCY AND SERVICES AGREEMENT

THIS AGREEMENT, dated as of this ___ day of _____, 1996 between Sierra
Asset Management Portfolios (the "Fund"), a Massachusetts business trust having
its principal place of business at 9301 Corbin Avenue, Northridge, California
91324 and FIRST DATA INVESTOR SERVICES GROUP, INC. ("FDISG"), a Massachusetts
corporation with principal offices at One Exchange Place, 53 State Street,
Boston, Massachusetts 02109.

WITNESSETH

WHEREAS, the Fund is authorized to issue Shares in separate series,
with each such series representing interests in a separate portfolio of
securities and other assets;

WHEREAS, the Fund initially intends to offer shares in those
Portfolios identified in the attached Exhibit 1, each such Portfolio, together
with all other Portfolios subsequently established by the Fund shall be subject
to this Agreement in accordance with Article 14;

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

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

Article 1 Definitions.

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

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

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

(c) "Board of Directors" shall mean the Board of
Directors or Board of Trustees of the Fund, as the case may be.
<PAGE> 2
(d) "Commission" shall mean the Securities and Exchange
Commission.

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

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

(g) "1940 Act" shall mean the Investment Company Act of
1940 and the rules and regulations promulgated thereunder, all as
amended from time to time.

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

(I) "Portfolio" shall mean each separate series of shares
offered by the Fund representing interest in a separate portfolio of
securities and other assets;

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

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

(l) "Shareholder" shall mean a record owner of Shares of
each respective Portfolio of the Fund.

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

Article 2 Appointment of FDISG.

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

2
<PAGE> 3
Article 3 Duties of FDISG.

3.1 FDISG shall be responsible for:

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

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

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

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

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

3.4 FDISG agrees to provide the services described herein in
accordance with the

3
<PAGE> 4
Performance Standards annexed hereto as Exhibit 1 of Schedule A and
incorporated herein. Such Performance Standards may be amended from time to
time upon written agreement by the parties.

Article 4 Recordkeeping and Other Information.

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

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

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

Article 5 Fund Instructions.

5.1 FDISG will have no liability when acting upon Written or Oral
Instructions believed to have been executed or orally communicated by an
Authorized Person and will not be held to have any notice of any change of
authority of any person until receipt of a Written Instruction thereof from the
Fund.

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

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

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<PAGE> 5
Article 6 Compensation.

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

6.2 In the event that FDISG has failed to meet a specific
Performance Standard, as set forth on Exhibit 1 of Schedule A, in each of two
consecutive calendar months after FDISG receives written notice of such
failure, the Fund may reduce the total amount of fees due to FDISG under this
Agreement, excluding out-of-pocket expenses, by an amount equal to five percent
(5%) of the fees for each succeeding, consecutive month in which the same
standard is not met. This five percent (5%) penalty is the total penalty that
shall be applied to all failures to meet these standards in the aggregate.

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

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

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

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

Article 7 Documents.

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

Article 8 Transfer Agent System.

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<PAGE> 6
8.1 FDISG shall retain title to and ownership of any and all data
bases, computer programs, screen formats, report formats, interactive design
techniques, derivative works, inventions, discoveries, patentable or
copyrightable matters, concepts, expertise, patents, copyrights, trade secrets,
and other related legal rights utilized by FDISG in connection with the
services provided by FDISG to the Fund herein (the "FDISG System").

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

8.3 FDISG agrees to maintain a dedicated transmission link to the
Funds broker-dealer system in order to allow for automated entry of
transactions and new accounts initiated by Great Western Financial Securities
into the Fund.

Article 9 Representations and Warranties.

9.1 FDISG represents and warrants to the Fund that:

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

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

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

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

9.2 The Fund represents and warrants to FDISG that:

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

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

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<PAGE> 7
Laws and applicable laws have been taken to authorize it to enter into
this Agreement;

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

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

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

Article 10 Indemnification.

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

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

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

(c) the reliance on, or the implementation of, any
Written or Oral Instructions or any other instructions or requests of
the Fund on behalf of the applicable Portfolio;

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<PAGE> 8
(d) the offer or sales of shares in violation of any
requirement under the securities laws or regulations of any state that
such shares be registered in such state or in violation of any stop
order or other determination or ruling by any state with respect to
the offer or sale of such shares in such state; and

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

10.2 In any case in which the Fund may be asked to indemnify or hold
FDISG harmless, FDISG will notify the Fund promptly after identifying any
situation which it believes presents or appears likely to present a claim for
indemnification against the Fund although the failure to do so shall not
prevent recovery by FDISG and shall keep the Fund advised with respect to all
developments concerning such situation. The Fund shall have the option to
defend FDISG against any Claim which may be the subject of this
indemnification, and, in the event that the Fund so elects, such defense shall
be conducted by counsel chosen by the Fund and satisfactory to FDISG, and
thereupon the Fund shall take over complete defense of the Claim and FDISG
shall sustain no further legal or other expenses in respect of such Claim.
FDISG will not confess any Claim or make any compromise in any case in which
the Fund will be asked to provide indemnification, except with the Fund's prior
written consent. The obligations of the parties hereto under this Article 10
shall survive the termination of this Agreement.

10.3 Any claim for indemnification under this Agreement must be
made prior to the earlier of:

(a) one year after the Fund becomes aware of the event
for which indemnification is claimed; or

(b) one year after the earlier of the termination of this
Agreement or the expiration of the term of this Agreement.

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

Article 11 Standard of Care.

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

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<PAGE> 9
11.2 Notwithstanding any provision in this Agreement to the contrary,
FDISG's cumulative liability (to the Fund) for all losses, claims, suits,
controversies, breaches, or damages for any cause whatsoever (including but not
limited to those arising out of or related to this Agreement) and regardless of
the form of action or legal theory shall not exceed (i) four million dollars
($4,000,000) or (ii) the fees received by FDISG for services provided under
this Agreement during the twelve months immediately prior to the date of such
loss or damage. Fund understands the limitation on FDISG's damages to be a
reasonable allocation of risk and Fund expressly consents with respect to such
allocation of risk. In allocating risk under the Agreement, the parties agree
that the damage limitation set forth above shall apply to any alternative
remedy ordered by a court in the event such court determines that sole and
exclusive remedy provided for in the Agreement fails of its essential purpose.

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

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

Article 12 Consequential Damages.

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

Article 13 Term and Termination.

13.1 This Agreement shall be effective on the date first written
above and shall continue for a period of five (5) years (the "Initial Term").

13.2 Upon the expiration of the Initial Term, this Agreement shall
automatically renew for successive terms of three (3) years ("Renewal Terms")
each, unless the Fund or FDISG provides written notice to the other of its
intent not to renew. Such notice must be received not less than ninety (90)
days and not more than one-hundred eighty (180) days prior to the expiration of
the Initial Term or the then current Renewal Term.

13.3 In the event a termination notice is given by the Fund, all
expenses associated with

9
<PAGE> 10
movement of records and materials and conversion thereof to a successor
transfer agent will be borne by the Fund.

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

13.5 The Fund may terminate this Agreement if either: (i) one
quarter or more of the Performance Standards listed in Exhibit 1 of Schedule A
are not met by FDISG for four consecutive months, or (ii) any six months during
a 12 month period. Unless the Fund provides FDISG with written notice of the
Fund's intent to exercise this option within 60 days of the occurrence, the
Fund shall have waived its option to terminate under this provision.

Article 14 Additional Portfolios.

In the event that the Fund establishes one or more Portfolios in
addition to those identified in Exhibit 1, with respect to which the Fund
desires to have FDISG render services as transfer agent under the terms hereof,
the Fund shall so notify FDISG in writing, and if FDISG agrees in writing to
provide such services, Exhibit 1 shall be amended to include such additional
Portfolios.

Article 15 Confidentiality.

15.1 The parties agree that the Proprietary Information (defined
below) and the contents of this Agreement (collectively "Confidential
Information") are confidential information of the parties and their respective
licensors. The Fund and FDISG shall exercise at least the same degree of care,
but not less than reasonable care, to safeguard the confidentiality of the
Confidential Information of the other as it would exercise to protect it's own
confidential information of a similar nature. The Fund and FDISG may use the
Confidential Information only to exercise its rights under this Agreement. The
Fund and FDISG shall not duplicate, sell or disclose to others the Confidential
Information of the other, in whole or in part, without the prior written
permission of the other party. The Fund and FDISG may, however, disclose
Confidential Information to its employees who have a need to know the
Confidential Information to perform work for the other, provided that each
shall use reasonable efforts to ensure that the Confidential Information is not
duplicated or disclosed by its employees in breach of this Agreement. The Fund
and FDISG may also disclose the Confidential Information to independent
contractors, auditors, and professional

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<PAGE> 11
advisors, provided they first agree in writing to be bound by the
confidentiality obligations substantially similar to this Section 15.1.
Notwithstanding the previous sentence, in no event shall either the Fund or
FDISG disclose the Confidential Information to any competitor of the other
without specific, prior written consent.

15.2 Proprietary Information means:

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

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

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

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

Article 16 Force Majeure.

No party shall be liable for any default or delay in the performance
of its obligations under this Agreement if and to the extent such default or
delay is caused, directly or indirectly, by (I) fire, flood, elements of nature
or other acts of God; (ii) any outbreak or escalation of hostilities, war,
riots or civil disorders in any country, (iii) any act or omission of the other
party or any governmental authority; (iv) any labor disputes (whether or not
the employees' demands are reasonable or within the party's power to satisfy);
or (v) nonperformance by a third party or any similar cause beyond the
reasonable control of_such party, including without limitation,_failures or
fluctuations in telecommunications or other equipment. In any such event, the
non-performing party shall be excused from any further performance and
observance of the obligations so affected only for as long as such
circumstances prevail and such party continues to use commercially reasonable
efforts to recommence performance or observance as soon as practicable.

Article 17 Assignment and Subcontracting.

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<PAGE> 12
This Agreement, its benefits and obligations shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns. This Agreement may not be assigned or otherwise transferred
by either party hereto, without the prior written consent of the other party,
which consent shall not be unreasonably withheld; provided, however, that FDISG
may, in its sole discretion, assign all its right, title and interest in this
Agreement to an affiliate, parent or subsidiary, or to the purchaser of
substantially all of its business. FDISG may, in its sole discretion, engage
subcontractors to perform any of the obligations contained in this Agreement to
be performed by FDISG.

Article 18 Arbitration.

18.1 Any claim or controversy arising out of or relating to this
Agreement, or breach hereof, shall be settled by arbitration administered by
the American Arbitration Association in Boston, Massachusetts in accordance
with its applicable rules, except that the Federal Rules of Evidence and the
Federal Rules of Civil Procedure with respect to the discovery process shall
apply.

18.2 The parties hereby agree that judgment upon the award rendered
by the arbitrator may be entered in any court having jurisdiction.

18.3 The parties acknowledge and agree that the performance of the
obligations under this Agreement necessitates the use of instrumentalities of
interstate commerce and, notwithstanding other general choice of law provisions
in this Agreement, the parties agree that the Federal Arbitration Act shall
govern and control with respect to the provisions of this Article 18.

Article 19 Notice.

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

To the Fund:

Sierra Asset Management Portfolios
9301 Corbin Avenue
Northridge, California 91324

Attention: __________________

To FDISG:

First Data Investor Services Group, Inc.

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<PAGE> 13
One Exchange Place
53 State Street
Boston, Massachusetts 02109
Attention: President

with a copy to FDISG's General Counsel

Article 20 Governing Law/Venue.

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

Article 21 Counterparts.

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

Article 22 Captions.

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

Article 23 Publicity.

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

Article 24 Relationship of Parties/Non-Solicitation.

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

24.2 During the term of this Agreement and for one (1) year
afterward, the Fund shall not recruit, solicit, employ or engage, for the Fund
or others, FDISG's employees.

Article 25 Entire Agreement; Severability.

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

25.2 The parties intend every provision of this Agreement to be
severable. If a court of competent jurisdiction determines that any term or
provision is illegal or invalid for any reason, the illegality or invalidity
shall not affect the validity of the remainder of this Agreement. In such
case, the parties shall in good faith modify or substitute such provision
consistent with the original intent of the parties. Without limiting the
generality of this paragraph, if a court determines that any remedy stated in
this Agreement has failed of its essential purpose, then all other provisions
of this Agreement, including the limitations on liability and exclusion of
damages, shall remain fully effective.

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<PAGE> 15
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their duly authorized officers, as of the day and year first
above written.

SIERRA ASSET MANAGEMENT PORTFOLIOS

By:_______________________________________________________

Title:____________________________________________________

FIRST DATA INVESTOR SERVICES GROUP, INC.

By:_______________________________________________________

Title:____________________________________________________

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<PAGE> 16
Exhibit 1
Sierra Asset Management Portfolios
LIST OF PORTFOLIOS

Income Portfolio
Value Portfolio
Balanced Portfolio
Growth Portfolio
Capital Growth Portfolio

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<PAGE> 17
Schedule A

DUTIES OF FDISG

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

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

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

4. Sales of Shares

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

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

5. Transfer and Repurchase

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

(b) FDISG will transfer or repurchase Shares upon receipt of
Oral or Written Instructions or otherwise pursuant to the Prospectus and Share
certificates, if any, properly

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<PAGE> 18
endorsed for transfer or redemption, accompanied by such documents as FDISG
reasonably may deem necessary.

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

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

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

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

6. Dividends

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

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

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

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

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<PAGE> 20
Exhibit 1 of Schedule A

Performance Standards

FDISG will use a statistical sampling defined below as a percentage of
transactions processed through the transaction processing and quality control
units of FDISG providing services to the Fund and will track and report to the
Fund on the accuracy of the transactions processed. Examining the sampling
against predetermined FDISG criteria for accuracy, FDSIG will provide an
accurate rate as represented by a "percent", measured to the last Friday of
each month from the last Friday of the previous month. The Fund reserves the
right to inspect, or have a third party inspect, the Quality Assurance
Procedures and documentation and all documents reviewed and considered in
determining the accuracy of processing.

I. Transaction Processing

Turnaround from QA Statistical Accuracy
date of receipt Sampling % Standard

A. New Accounts 15%

-Purchases T 98%
-Exchanges T 98%
-Transfer T + 3 98%

B. Purchases 5%

-Directs T 98%
-Wire Orders T 98%

C. Redemptions 10%

-Direct T 98%
-Wire Orders T 98%

D. Exchanges T 5-10% 98%

E. Transfers T + 3 10% 98%

F. Adjustments 10%

-Priority T + 1 98%
-Non-Priority T + 4 98%
-OCF Cancel/Rebill T + 1 98%

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<PAGE> 21

II. Shareholders Services

Turnaround from QA Statistical Accuracy
date of receipt Sampling % Standard

A. Research 5%

-Priority T + 1 95%
-Non-Priority T + 4 95%
-Transcripts T + 9 95%

B. Telephone
Responsiveness T 2% 98%

(Excluding calls abandoned within 20 seconds)

C. Correspondence 10%

-Priority
(Financial) T + 3 98%
-Non-Priority
(Other) T + 5 98%

III. Administration

Mail Date

A. Duplicate
Confirmation T + 2

B. Checks T + 1
(Includes redemptions, Swp's and replacement checks)

C. Statements T + 2

Quality Assurance

FDISG will use a statistical sampling defined categorically in Section I-III of
transaction processed through the transaction processing and the quality
control units of FDISG providing services to the Fund and will track and report
to the Fund on the accuracy of the transaction processed. Examining the
sampling against pre-determined FDISG criteria for accuracy, FDISG will provide
a 98% accuracy rate, measured monthly by their independent Quality Assurance
Department and reported to the Fund by the 20th of the following month.

21
<PAGE> 22
Schedule B
FEE SCHEDULE
SIERRA ASSET MANAGEMENT PORTFOLIOS

1) Per Account Fee $16.00 per Shareholder account

Closed Account Fee $2.50

2) Dedicated Systems Development Team:

The Fund shall pay $275,000.00 annually for a dedicated
systems development team consisting of 1.5 programmers, .5
system manager and .5 BSA. In the event that the Fund desires
to discontinue this service, the Fund shall provide FDISG 60
days written notice. In the event of such termination, the
Fund shall be responsible for the pro rata share of the stated
annual decicated System Development Team fee.

FEES INCLUDE:
- - Shareholder and Broker Servicing
- - Transaction Processing, Correspondence, and Research
- - Settlement and Reconciliation
- - Corporate Actions
- - Tax Reporting and Compliance
- - NSCC Support

22
<PAGE> 23
- - Management Company and Broker/Dealer Support
- - Asset Allocation Processing for all distribution channels
- - Cost Basis Accounting [For those Shareholder Accounts defined in the
attached Exhibit 1 to this Schedule B]

ADDITIONAL FEES:
- - NSCC charges
- - Banking fees
- - Standard Out-of Pocket-expenses

VALUE ADDED SERVICES

1. DAZL Pricing:
Set Up Fee: $5,000.00
Monthly Usage Fee: $1,000.00
Transmission Charge:$.03 per record (Price record transmission cost is
$.015 per record.)

2. Voice Response Unit (VRU)
$25,000 set up fee
$.29 per minute maintenance charge

The Dedicated Systems Development Team and the Value Added Services Fees set
forth above represent the total fee to be paid jointly by the Sierra Capital
Management mutual funds which have entered into similar transfer agency and
services agreements with FDISG.

23
<PAGE> 24
Schedule C

OUT-OF-POCKET EXPENSES

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

- Microfiche/microfilm production
- Magnetic media tapes and freight
- Printing costs, including certificates, envelopes, checks and
stationery
- Postage (bulk, pre-sort, ZIP+4, barcoding, first class)
direct pass through to the Fund
- Due diligence mailings
- Telephone and telecommunication costs, including all lease,
maintenance and line costs
- Ad hoc reports
- Proxy solicitations, mailings and tabulations
- Daily & Distribution advice mailings
- Shipping, Certified and Overnight mail and insurance
- Year-end form production and mailings
- Terminals, communication lines, printers and other equipment
and any expenses incurred in connection with such terminals
and lines
- Duplicating services
- Courier services
- Incoming and outgoing wire charges
- Federal Reserve charges for check clearance
- Overtime, as approved by the Fund
- Temporary staff, as approved by the Fund
- Travel and entertainment, as approved by the Fund
- Record retention, retrieval and destruction costs, including,
but not limited to exit fees charged by third party record
keeping vendors
- Third party audit reviews
- Ad hoc SQL time
- All Systems enhancements after the conversion at the rate of
$100.00 per hour
- Insurance
- Such other miscellaneous expenses reasonably incurred by FDISG
in performing its duties and responsibilities under this
Agreement.

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

24
<PAGE> 25
Schedule D

Fund Documents

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

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

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

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

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

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

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

<PAGE> 1
Exhibit 10

July 19, 1996

Sierra Asset Management Portfolios
9301 Corbin Avenue
Northridge, California 91324

Ladies and Gentlemen:

We are furnishing this opinion with respect to the proposed offer and sale from
time to time of an indefinite number of units of beneficial interest, without
par value (the "Shares"), of Sierra Asset Management Portfolios (the "Trust"), a
Massachusetts business trust, in registration under the Securities Act of 1933
by a Registration Statement on Form N-1A (File No. 333-01999; 811-07577) as
amended from time to time (the "Registration Statement").

We have acted as counsel to the Trust since its inception, and we are familiar
with the actions taken by its Trustees to authorize the issuance of the Shares.
We have reviewed the Declaration of Trust, the By-laws, and the minute books of
the Trust, and such other certificates, documents and opinions of counsel as we
deem necessary for the purpose of this opinion.

We have reviewed the Trust's Notification of Registration on Form N-8A under the
Investment Company Act of 1940. We have assisted in the preparation of the
Trust's Registration Statement, including all pre-effective amendments thereto,
filed or to be filed with the Securities and Exchange Commission.

In our review we have assumed the genuineness of all signatures, the
authenticity and completeness of all documents purporting to be originals
(whether reviewed by us in original or in copy form), and the conformity to the
originals of all documents purporting to be copies.

We have assumed the appropriate action will be taken to register or qualify the
sale of the Shares under any applicable state and federal laws regulating sales
and offerings of securities.

Based upon the foregoing, we are of the opinion that:

1. The Trust is a business trust validly existing under the laws of the
Commonwealth of Massachusetts. The Trust is authorized under its
Declaration of Trust to issue an unlimited number of Shares in series
representing interests in the Income Portfolio - Class A, Income
Portfolio - Class B, Value Portfolio - Class A, Value Portfolio - Class
B, Balanced Portfolio - Class A, Balanced Portfolio - Class B, Growth
Portfolio - Class A, Growth Portfolio - Class B, Capital

<PAGE> 2
Growth Portfolio - Class A and Capital Growth Portfolio - Class B, and
in such other series or classes as the Trustees may hereafter duly
authorize.

2. Upon the issuance of any Shares of any of the series or classes of the
Trust for payment therefor as described in, and in accordance with the
Registration Statement and the Declaration of Trust and By-laws of the
Trust, the Shares so issued will be validly issued, fully paid and
non-assessable, except that, as set forth in the Registration
Statement, shareholders of the Shares of the Trust may under certain
circumstances be held personally liable for its obligations.

This opinion is intended only for your use in connection with the
offering of Shares and may not be relied upon by any other person.

We hereby consent to the inclusion of this opinion as Exhibit 10 to the
Trust's Pre-Effective Amendment No. 2 to be filed with the Securities
and Exchange Commission and to the reference to our firm under the
caption "Counsel and Auditor" in the Statement of Additional
Information filed as part of such Amendment.

Very truly yours,

/s/ Morgan, Lewis & Bockius LLP
- -------------------------------

<PAGE> 1
Exhibit 11

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the use in the Statement of Additional Information
constituting part of this Pre-Effective Amendment No. 2 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated July
16, 1996, relating to the statements of assets and liabilities of each of the
five portfolios constituting Sierra Asset Management Portfolios which appear in
such Statement of Additional Information. We also consent to the reference to
us under the heading "Counsel and Auditor" in such Statement of Additional
Information.

/s/ PRICE WATERHOUSE LLP
Price Waterhouse LLP
Boston, Massachusetts
July 16, 1996