SIERRA TRUST FUNDS, 497, 1996-01-02

SIERRA TRUST FUNDS
497, 1996-01-02

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<PAGE>

FOR PROSPECTIVE MISSOURI INVESTORS

SUPPLEMENT TO PROSPECTUS DATED OCTOBER 31, 1995
OF
SIERRA TRUST FUNDS

The prospectuses dated October 31, 1995 of the Sierra Trust Funds (the
"Trust") relating to the GLOBAL MONEY, U.S. GOVERNMENT MONEY, CALIFORNIA MONEY,
SHORT TERM HIGH QUALITY BOND, SHORT TERM GLOBAL GOVERNMENT, U.S. GOVERNMENT,
CORPORATE INCOME, CALIFORNIA MUNICIPAL, FLORIDA INSURED MUNICIPAL, CALIFORNIA
INSURED INTERMEDIATE MUNICIPAL, NATIONAL MUNICIPAL, GROWTH AND INCOME, GROWTH,
EMERGING GROWTH AND INTERNATIONAL GROWTH FUNDS (EACH, A "FUND") of the Trust are
hereby amended and supplemented by the following:

Prospective Missouri investors are hereby advised that shares of the
Trust's California Municipal and California Insured Intermediate Municipal Funds
have not been registered in Missouri and may not be sold to Missouri residents
unless and until registration has been accomplished.

THE GROWTH AND EMERGING GROWTH FUNDS MAY EACH INVEST UP TO 35%, AND THE
SHORT TERM GLOBAL GOVERNMENT FUND MAY INVEST UP TO 10%, OF THE TOTAL ASSETS OF
EACH SUCH FUND, RESPECTIVELY, IN NON-INVESTMENT GRADE DEBT SECURITIES (COMMONLY
CALLED "JUNK BONDS") if the portfolio management believes that doing so will be
consistent with the investment objective of the Fund. These 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. See "The Funds'
Investments and Risk Considerations -- Short Term Global Government Fund,"
"-- Emerging Growth Fund" and "-- Growth Fund" sections in the Prospectus,
"Securities and Investment Practices -- Lower Rated Securities" section in the
Prospectus and "Investment Objectives and Policies of the Funds -- Lower Rated
Securities" section in the Statement of Additional Information ("SAI"), for
additional information.

THE GROWTH, GROWTH AND INCOME, EMERGING GROWTH, SHORT TERM GLOBAL
GOVERNMENT AND SHORT TERM HIGH QUALITY BOND FUNDS MAY ENGAGE IN SHORT TERM
TRADING. Under certain market conditions, any of these Funds may experience high
portfolio turnover as a result of its investment strategies. As a general rule,
gains realized from portfolio transactions will be long- or short-term capital
gains and net realized long- and short-term capital gains will be taxable to
shareholders at ordinary income rates. See "Dividends, Capital Gains and Taxes"
in the Prospectus. In addition, higher portfolio turnover rates for the Funds
can result in corresponding increases in brokerage commissions. See "Portfolio
Turnover" section in the SAI, for additional information.

THE SHORT TERM HIGH QUALITY BOND, SHORT TERM GLOBAL GOVERNMENT,
CORPORATE INCOME, GROWTH AND INCOME, GROWTH, EMERGING GROWTH AND INTERNATIONAL
GROWTH FUNDS MAY MAINTAIN "SHORT POSITIONS" IN FORWARD CURRENCY EXCHANGE
TRANSACTIONS. For a description of the relatively greater risks and the
investment purposes involved in such activities, see the "Securities and
Investment Practices -- Foreign Currency Exchange Transactions" section in the
Prospectus and "Investment Objectives and Policies of the Funds -- Foreign
Currency Exchange Transactions" section in the SAI.
<PAGE>

THE GLOBAL MONEY, SHORT TERM HIGH QUALITY BOND, SHORT TERM GLOBAL
GOVERNMENT, CORPORATE INCOME, GROWTH AND INCOME, GROWTH, EMERGING GROWTH AND
INTERNATIONAL GROWTH FUNDS MAY INVEST IN FOREIGN SECURITIES, INCLUDING FOR
CERTAIN FUNDS FOREIGN COMMON STOCKS. For a description of the relatively greater
risks of investing in foreign securities, see the "Securities and Investment
Practices -- Foreign Investments" section in the Prospectus and "Investment
Objectives and Policies of the Fund -- Securities in Developing Countries" in
the SAI.

THE CORPORATE INCOME, U.S. GOVERNMENT, GROWTH AND INCOME, GROWTH,
EMERGING GROWTH AND INTERNATIONAL GROWTH FUNDS MAY INVEST IN COMMON STOCK
BELIEVED BY THE SUB-ADVISOR OF THE FUND TO HAVE APPRECIATION POTENTIAL. The
common stock in which a Fund will invest has no stated quality standards.
Investments in equity securities in general are subject to market risks that may
cause their prices to fluctuate over time. The value of convertible equity
securities is also affected by prevailing interest rates, the credit quality of
the issuer and any call provision. Fluctuations in the value of equity
securities in which the Fund invests will cause the net asset value of the Fund
to fluctuate. An investment in the Fund may be more suitable for long-term
investors who can bear the risk of short-term principal fluctuations. See
"Securities and Investment Practices -- Common Stock, Convertible Securities and
Other Equity Securities" section in the Prospectus, for additional information.

<PAGE>

FOR PROSPECTIVE OHIO INVESTORS

SUPPLEMENT TO PROSPECTUS DATED OCTOBER 31, 1995
OF
SIERRA TRUST FUNDS

The prospectuses dated October 31, 1995 (the "Prospectuses") of the
Sierra Trust Funds (the "Trust") relating to the GLOBAL MONEY, U.S. GOVERNMENT
MONEY and CALIFORNIA MONEY FUNDS of the Trust (the foregoing three funds are
referred to herein as the "MONEY FUNDS") and the SHORT TERM HIGH QUALITY BOND,
SHORT TERM GLOBAL GOVERNMENT, U.S. GOVERNMENT, CORPORATE INCOME, CALIFORNIA
MUNICIPAL, FLORIDA INSURED MUNICIPAL, CALIFORNIA INSURED INTERMEDIATE MUNICIPAL,
NATIONAL MUNICIPAL, GROWTH AND INCOME, GROWTH, EMERGING GROWTH AND INTERNATIONAL
GROWTH FUNDS (the foregoing funds, except for the Money Funds, are referred to
herein as the "NON-MONEY FUNDS") of the Trust are hereby amended and
supplemented by the following:

The separate investment limitations of each of the Non-Money Funds that
prohibit each fund from (i) investing more than 5% of its total assets in
securities of companies (including predecessors) that have been in continuous
operation for less than three years, with certain qualifications for industrial
revenue bonds purchased by the Municipal Funds (as defined in the Prospectuses)
and (ii) investing more than 10% of its total assets with respect to each of the
Money Funds, and more than 15% of its net assets with respect to each of the
Non-Money Funds, in securities that are not readily marketable, including, but
not limited to, securities of issuers that are restricted as to disposition,
exceed the investment limitation imposed on the combination of such investments
by Ohio Administrative Code 1301:6-3-09(E).

<PAGE>

FOR PROSPECTIVE ARIZONA INVESTORS

SUPPLEMENT TO PROSPECTUS DATED OCTOBER 31, 1995
OF
SIERRA TRUST FUNDS

The prospectuses dated October 31, 1995 of the Sierra Trust Funds (the
"Trust") relating to the GLOBAL MONEY FUND, U.S. GOVERNMENT MONEY FUND,
CALIFORNIA MONEY FUND, SHORT TERM HIGH QUALITY BOND FUND, SHORT TERM GLOBAL
GOVERNMENT FUND, U.S. GOVERNMENT FUND, CORPORATE INCOME FUND, CALIFORNIA
MUNICIPAL FUND, FLORIDA INSURED MUNICIPAL FUND, CALIFORNIA INSURED INTERMEDIATE
MUNICIPAL FUND, NATIONAL MUNICIPAL FUND, GROWTH AND INCOME FUND, GROWTH FUND,
EMERGING GROWTH FUND AND INTERNATIONAL GROWTH FUND of the Trust are hereby
amended and supplemented by the following:

For Shares of the FLORIDA INSURED MUNICIPAL FUND AND THE CALIFORNIA
INSURED INTERMEDIATE MUNICIPAL FUND, prospective Arizona investors are hereby
advised that the insurance referred to in each Fund's title is described in the
prospectus. The "insured obligations" in each Fund's investment portfolio are
insured by insurance companies and are not insured by the Federal Deposit
Insurance Corporation, the Federal Reserve Board, the U.S. Government, the
government of the State of Florida, State of California, or any agency or
instrumentality of any such government.

<PAGE>

FOR PROSPECTIVE VERMONT INVESTORS

SUPPLEMENT TO PROSPECTUS DATED OCTOBER 31, 1995
OF
SIERRA TRUST FUNDS

SECURITIES IN DEVELOPING COUNTRIES. Although most of the International
Growth Fund's and Growth Fund's investments are made in securities of companies
in (or governments of) developed countries, up to 25% of the International
Growth Fund's total assets, up to 5% of the Growth Fund's total assets and up to
5% of the Emerging Growth Fund's total assets, 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 International Growth Fund or Growth
Fund, to be a country that is in the initial stages of its industrialization
cycle. Investing in the equity and fixed-income markets or 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.

SOVEREIGN DEBT. Debt securities or obligations issued or guaranteed by
a foreign government or governmental agency or instrumentality are referred to
as sovereign debt. The Global Money, Short Term High Quality Bond, Short Term
Global Government, Corporate Income, Growth and Income, Growth, Emerging Growth
and International Growth Funds may invest in foreign securities, including
sovereign debt. Sovereign debt may trade at a substantial discount from face
value and may include debt securities or obligations comparable to securities
rated as low as D by Standard & Poor's Corporation or C by Moody's Investors
Service, Inc., which are non-investment grade. A Fund will invest in sovereign
debt only when the investment sub-advisor believes such investments offer
opportunities for long-term capital appreciation. Investment in sovereign debt
involves a high degree of risk and such securities or obligations are considered
to be speculative in nature.

MUNICIPAL SECURITIES. The California Money, California Municipal,
California Insured Intermediate Municipal, Florida Insured Municipal and
National Municipal Funds may invest in municipal securities, which have three
principal classifications, Municipal Bonds, which are discussed below, and
Municipal Commercial Paper and Municipal Notes, which are discussed on the
reverse side.

MUNICIPAL BONDS, which generally have a maturity of more than one year
when issued, have two principal classifications: General Obligation Bonds and
Revenue Bonds. An AMT-Subject Bond is a particular kind of Revenue Bond. The
classifications of Municipal Bonds and AMT-Subject Bonds are discussed on the
reverse side.
<PAGE>

1. GENERAL OBLIGATION BONDS. The proceeds of these obligations are used
to finance a wide range of public projects, including construction or
improvement of schools, highways and roads, and water and sewer systems. General
Obligation Bonds are secured by the issuer's pledge of its faith, credit and
taxing power for the payment of principal and interest.

2. REVENUE BONDS. Revenue Bonds are issued to finance a wide variety of
capital projects, including; electric, gas, water and sewer systems; highways,
bridges and tunnels; port and airport facilities; colleges and universities; and
hospitals. The principal security for a Revenue Bond is generally the net
revenues derived from a particular facility, group of facilities, or, in some
cases, the proceeds of a special excise or other specific revenue source.
Although the principal security behind these bonds may vary, many provide
additional security in the form of a debt service reserve fund which may be used
to make principal and interest payments on the issuer's obligations. Some
authorities provide further security in the form of a state's ability (without
obligation) to make up deficiencies in the debt service reserve fund.

3. AMT-SUBJECT BONDS. AMT-Subject Bonds are considered Municipal Bonds
if the interest paid on them is excluded from gross income for federal income
tax purposes and if they are issued by or on behalf of public authorities to
raise money to finance, for example, privately operated manufacturing or housing
facilities, publicly operated airport, dock, wharf, or mass-commuting
facilities. The payment of the principal and interest on these bonds is
dependent solely on the ability of the facility's user to meet its financial
obligations and the pledge, if any, of real and personal property so financed as
security for such payment.

Issues of MUNICIPAL COMMERCIAL PAPER typically represent short-term,
unsecured, negotiable promissory notes. These obligations are issued by agencies
of state and local governments to finance seasonal working capital needs of
municipalities or to provide interim construction financing, and are paid from
general revenues of municipalities or are refinanced with long-term debt. In
most cases, Municipal Commercial Paper is backed by letters of credit, lending
agreements, note repurchase agreements or other credit facility agreements
offered by banks or other institutions.

MUNICIPAL NOTES generally are used to provide for short-term capital
needs and generally have maturities of one year or less. Tax Anticipation Notes
are issued to finance working capital needs of municipalities. Generally, they
are issued in anticipation of various seasonal tax revenues, such as income,
sales, use and business taxes and are payable from these specific future taxes.
Revenue Anticipation Notes are issued in expectation of receipt of other kinds
of revenue, such as federal revenues available under the Federal Revenue Sharing
Program. Bond Anticipation Notes are issued to provide interim financing until
long-term financing can be arranged. In most cases, the long-term bonds provide
the money for the repayment of the notes. Construction Loan Notes are sold to
provide construction financing. Permanent financing, the proceeds of which are
applied to the payment of Construction Loan Notes, is sometimes provided by a
commitment by GNMA to purchase the loan, accompanied by a commitment by the
Federal Housing Administration to insure mortgage advances thereunder. In other
instances, permanent financing is provided by commitments of banks to purchase
the loan. A Municipal Fund will only purchase Construction Loan Notes that are
subject to GNMA or bank purchase commitments.

<PAGE>

SUPPLEMENT DATED JANUARY 1, 1996
TO PROSPECTUS DATED OCTOBER 31, 1995
OF
SIERRA TRUST FUNDS
9301 CORBIN AVENUE, SUITE 333
P.O. BOX 1160
NORTHRIDGE, CALIFORNIA 91328-1160

The prospectus dated October 31, 1995 of the Sierra Trust Funds (the
"Trust") relating to the Class A and Class B Shares of the GLOBAL MONEY, U.S.
GOVERNMENT MONEY, CALIFORNIA MONEY, SHORT TERM HIGH QUALITY BOND, SHORT TERM
GLOBAL GOVERNMENT, U.S. GOVERNMENT, CORPORATE INCOME, CALIFORNIA MUNICIPAL,
FLORIDA INSURED MUNICIPAL, CALIFORNIA INSURED INTERMEDIATE MUNICIPAL, NATIONAL
MUNICIPAL, GROWTH AND INCOME, GROWTH, EMERGING GROWTH AND INTERNATIONAL GROWTH
FUNDS of the Trust is hereby amended and supplemented effective January 1, 1996
by the following:

By deleting the eighth paragraph in "The Funds' Investments and Risk
Considerations - Investment Principles and Risk Considerations - The Bond Funds
- - Short Term Global Government Fund" section on page 38 and replacing it with
the following paragraph:

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 1991. Mr. Greshin assumed responsibility
for the Fund's day-to-day management and investment strategies
effective November 1995.

By deleting the second paragraph in the section "Performance - Performance
Comparisons" on page 70 and replacing it with the following paragraph:

In addition, the Municipal Funds and the California Money Fund
may attempt to illustrate in advertising or sales literature
the benefits of tax-free investing. For example, Table 1 on
the following page shows California investors the approximate
yield that a taxable investment must earn at various sample
income brackets to produce after-tax yields equivalent to
those of tax-exempt investments, such as the California
Municipal, California Insured Intermediate Municipal and
California Money Funds, yielding from 2.00% to 7.00%. Table 2
on the following page shows taxpayers how to translate federal
tax savings from investments, such as the National Municipal
Fund, into an equivalent yield from a taxable investment. The
yields, tax rates and income brackets following are for
illustration purposes only and are not intended to represent
current or future yields for the Funds, current tax rates or
income brackets. The yields, tax rates and income brackets
following may be higher or lower than the yields, tax rates
and income brackets shown. Calculations are computed in
accordance with standard SEC calculations of 30-day yield. The
California marginal tax rates presented assume payment of the
highest California tax rate for the particular federal
marginal tax rate quoted. The income brackets and tax rates
presented are only samples since the Internal Revenue Service
("IRS") adjusts the brackets annually for inflation, and tax
rates are subject to change by legislation. Investors should
consult their tax adviser with specific reference to their own
tax situation.
<PAGE>
By deleting Table 1 in the section "Performance - Tax Equivalent Yields" on page
71 and replacing it with the following Table 1:

<TABLE>
<CAPTION>
TABLE 1

Combined
Federal and
Federal California California Tax-Exempt Yield
Sample 1995 Federal Marginal Marginal Marginal
Taxable Income Brackets Tax Rate+ Tax Rate* Tax Rate** 2.00% 2.50% 3.00% 3.50% 4.00%
- ------------------------------------- --------- ---------- ---------- ----- ----- ----- ----- -----
Single Return Joint Return Taxable Yield
- ----------------- ----------------- ------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$0-$23,350 $0-$39,000 15% 6.00% 20.10% 2.50% 3.13% 3.75% 4.38% 5.01%
$23,350-$56,550 $39,000-$94,250 28% 9.30% 34.70% 3.06% 3.83% 4.59% 5.36% 6.13%
$56,550-$117,950 $94,250-$143,600 31% 9.30% 37.42% 3.20% 3.99% 4.79% 5.59% 6.39%
$117,950-$256,500 $143,600-$256,500 36% 9.30% 41.95% 3.44% 4.31% 5.17% 6.03% 6.89%
$256,500 and up $256,500 and up 39.6% 9.30% 45.22% 3.65% 4.56% 5.48% 6.39% 7.30%

<CAPTION>
Combined
Federal and
Federal California California Tax-Exempt Yield
Sample 1995 Federal Marginal Marginal Marginal
Taxable Income Brackets Tax Rate+ Tax Rate* Tax Rate** 4.50% 5.00% 5.50% 6.00% 6.50% 7.00%
- ------------------------------------- --------- ---------- ---------- ----- ----- ----- ----- ----- -----
Single Return Joint Return Taxable Yield
- ----------------- ----------------- --------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$0-$23,350 $0-$39,000 15% 6.00% 20.10% 5.63% 6.26% 6.88% 7.51% 8.14% 8.76%
$23,350-$56,550 $39,000-$94,250 28% 9.30% 34.70% 6.89% 7.66% 8.42% 9.19% 9.95% 10.72%
$56,550-$117,950 $94,250-$143,600 31% 9.30% 37.42% 7.19% 7.99% 8.79% 9.59% 10.39% 11.19%
$117,950-$256,500 $143,600-$256,500 36% 9.30% 41.95% 7.75% 8.61% 9.47% 10.34% 11.20% 12.06%
$256,500 and up $256,500 and up 39.6% 9.30% 45.22% 8.21% 9.13% 10.04% 10.95% 11.87% 12.78%

- ------------------------------------
<FN>
* California taxable income may differ due to differences in exemptions, itemized deductions and other items.

** Rates do not include the phase-out of personal exemptions or itemized deductions. Rates include the federal deduction of
state taxes paid.

+ Rates do not include the phase-out of personal exemptions or itemized deductions.
</FN>
</TABLE>

PLEASE RETAIN THIS SUPPLEMENT
FOR FUTURE REFERENCE

IMPMC/GD (12/95-115M)

<PAGE>
- ----------------------

PROSPECTUS
AND ACCOUNT
APPLICATION

OCTOBER 31, 1995

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

GLOBAL MONEY FUND
U.S. GOVERNMENT MONEY FUND
CALIFORNIA MONEY FUND
SHORT TERM HIGH QUALITY BOND FUND
SHORT TERM GLOBAL GOVERNMENT FUND
U.S. GOVERNMENT FUND
CORPORATE INCOME FUND
CALIFORNIA MUNICIPAL FUND
FLORIDA INSURED MUNICIPAL FUND
CALIFORNIA INSURED INTERMEDIATE
MUNICIPAL FUND
NATIONAL MUNICIPAL FUND
GROWTH AND INCOME FUND
GROWTH FUND
EMERGING GROWTH FUND
INTERNATIONAL GROWTH FUND

------------------------
SIERRA
TRUST FUNDS
------------------------
A FAMILY OF MUTUAL FUNDS
<PAGE>
This prospectus describes the Class A and Class B Shares of the Sierra Trust
Funds (the "Trust"). The Trust consists of the fifteen separate investment funds
(each, a "Fund") listed at right, and the Target Maturity 2002 Fund, which is
described in a separate prospectus. 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 the Funds are right for you.

A Statement of Additional Information ("SAI") about the Trust, dated October 31,
1995, has been filed with the Securities and Exchange Commission (the "SEC"),
and is incorporated herein by reference (is considered legally a part of this
prospectus). The SAI is available free upon request by calling the Trust at
800-222-5852.

THE GROWTH AND EMERGING GROWTH FUNDS MAY EACH INVEST UP TO 35%, AND THE SHORT
TERM GLOBAL GOVERNMENT FUND MAY INVEST UP TO 10%, OF THE FUND'S TOTAL ASSETS,
RESPECTIVELY, IN LOWER-RATED BONDS, COMMONLY REFERRED TO AS "JUNK BONDS." BONDS
OF THIS TYPE ARE CONSIDERED TO BE SPECULATIVE WITH REGARD TO THE PAYMENT OF
INTEREST AND RETURN OF PRINCIPAL. PURCHASERS SHOULD CAREFULLY ASSESS THE RISKS
ASSOCIATED WITH AN INVESTMENT IN THESE FUNDS. SEE "SECURITIES AND INVESTMENT
PRACTICES -- LOWER-RATED SECURITIES."

INVESTMENTS IN THE FUNDS ARE NOT GUARANTEED OR INSURED BY THE U.S. GOVERNMENT,
AND THERE IS NO ASSURANCE THAT THE GLOBAL MONEY, U.S. GOVERNMENT MONEY AND
CALIFORNIA MONEY FUNDS WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF
$1.00 PER SHARE.

SIERRA INVESTMENT SERVICES CORPORATION ("SIERRA SERVICES"), THE DISTRIBUTOR OF
THE TRUST'S CLASS A SHARES AND CLASS B SHARES, IS NOT A BANK. THE TRUST'S SHARES
ARE NOT OBLIGATIONS, DEPOSITS OR ACCOUNTS (TRUST OR OTHERWISE) OF, OR ENDORSED
OR GUARANTEED BY, GREAT WESTERN 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 AGENCY.

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

SIERRA TRUST FUNDS

PROSPECTUS

OCTOBER 31, 1995

SIERRA TRUST FUNDS
9301 CORBIN AVENUE, SUITE 333
P.O. BOX 1160
NORTHRIDGE, CALIFORNIA 91328-1160
800-222-5852
<PAGE>
<TABLE>
<C> <C>
CONTENTS PAGE
HIGHLIGHTS 3 GLOSSARY
3 THE SIERRA TRUST FUNDS FAMILY
4 THE FUNDS AT A GLANCE
EXPENSES AND FINANCIAL HIGHLIGHTS 12 EXPENSES
19 FINANCIAL HIGHLIGHTS The financial data the
Funds will report.
THE FUNDS' INVESTMENTS AND RISK CONSIDERATIONS 34 INVESTMENT PRINCIPLES AND RISK CONSIDERATIONS
Each Fund's overall approach to investing.
SECURITIES AND INVESTMENT PRACTICES 48 SECURITIES AND INVESTMENT PRACTICES regarding
each Fund's investments and practices.
PERFORMANCE 68 PERFORMANCE How each Fund's performance may be
measured and compared.
YOUR ACCOUNT 72 SETTING UP YOUR ACCOUNT
73 WAYS TO SET UP YOUR ACCOUNT Various ways to
set up your account, including tax-sheltered
retirement plans.
74 HOW TO BUY SHARES Opening an account and
making additional investments.
85 HOW TO SELL SHARES Taking money out
and/or closing your account.
89 EXCHANGE PRIVILEGES AND RESTRICTIONS
Exchanging shares of one Fund for another.
90 INVESTOR SERVICES Phone numbers and services
to help you manage your account.
91 DIVIDENDS, CAPITAL GAINS AND TAXES
SHAREHOLDER AND ACCOUNT POLICIES 95 TRANSACTION DETAILS Share price calculations
and the timing of purchases and redemptions.
THE FUNDS IN DETAIL 96 ORGANIZATION How each Fund is organized and
managed.
97 SIERRA ADVISORS, ITS AFFILIATES AND
SERVICE PROVIDERS
100 BREAKDOWN OF FUND EXPENSES How operating costs
are calculated and what they include.
</TABLE>
<PAGE>

HIGHLIGHTS

GLOSSARY

ADMINISTRATOR OR SIERRA ADMINISTRATION
Sierra Fund Administration Corporation, the Trust's administrator and
transfer agent.

ADVISOR OR SIERRA ADVISORS Sierra Investment Advisors Corporation, the Trust's
investment advisor.

AUTHORIZED DEALER A broker-dealer that is authorized to place orders for Fund
shares.

BOND FUNDS The Short Term High Quality Bond, Short Term Global Government,
U.S. Government, Corporate Income, California Municipal, Florida Insured
Municipal, California Insured Intermediate Municipal and National Municipal
Funds.

BUSINESS DAY Any day that the New York Stock Exchange is open.

CODE The Internal Revenue Code of 1986, as amended.

DISTRIBUTOR Sierra Investment Services Corporation ("Sierra Services") is the
Trust's distributor for Class A, Class B and Class S Shares.

EQUITY FUNDS The Growth and Income, Growth, Emerging Growth and International
Growth Funds.

LONGER TERM FUNDS All investment funds of the Trust except the Short Term High
Quality Bond and Short Term Global Government Funds.

MONEY FUNDS The Global Money, U.S. Government Money and California Money
Funds.

MUNICIPAL FUNDS The California Municipal, Florida Insured Municipal,
California Insured Intermediate Municipal and National Municipal Funds.

NASD The National Association of Securities Dealers, Inc.

NON-MONEY FUNDS All investment funds of the Trust except the Money Funds.

SAI The Sierra Trust Funds' Statement of Additional Information.

SAM ACCOUNT Sierra Asset Management Account.

SEC The Securities and Exchange Commission.

SHORT TERM FUNDS The Short Term High Quality Bond and Short Term Global
Government Funds.

TRUST The Sierra Trust Funds, an open-end investment company (mutual fund)
with sixteen investment funds.

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

THE SIERRA TRUST FUNDS FAMILY
The Sierra Trust Funds (the "Trust") is an open-end management investment
company with a family of sixteen investment funds each with its own investment
objectives and policies. This prospectus describes all of the investment
funds, except the Target Maturity 2002 Fund, (excepting the latter fund, each,
a "Fund," and together, the "Funds"). On July 1, 1994, each of the Funds began
offering three classes of shares, Class A Shares, Class B Shares and Class S
Shares. Each class has different sales charges, expenses and other features,
as described in this prospectus. All shares of a Fund that were owned by
shareholders at the time the Fund began offering the three classes of shares
are treated for all purposes as Class A Shares and have the same rights and
preferences as before such offering. Investors may purchase directly Class A
Shares of all of the Funds and Class B Shares of the Non-Money Funds. Class B
Shares of a Money Fund are offered only to shareholders exchanging Class B
Shares of other Funds and therefore may not be purchased directly by
investors. SHARES OF THE TARGET MATURITY 2002 FUND AND CLASS S SHARES OF THE
FUNDS ARE NOT OFFERED THROUGH THIS PROSPECTUS.

Please call 800-222-5852 if you would like to obtain a prospectus for the
Target Maturity 2002 Fund or the Class S Shares of the Funds.

The Funds fall into several basic categories which are presented below in
descending order of risk. Generally, investors seeking higher returns must
assume greater risks.

GROWTH FUNDS seek long-term growth by investing in stocks.

INTERNATIONAL GROWTH FUND
EMERGING GROWTH FUND
GROWTH FUND

GROWTH AND INCOME FUNDS invest in stocks, bonds and other shorter-term fixed
income debt instruments for long-term growth and income.

GROWTH AND INCOME FUND

INCOME FUNDS seek periodic income from investments in bonds and other shorter-
term fixed income debt instruments.

CORPORATE INCOME FUND
CALIFORNIA MUNICIPAL FUND
FLORIDA INSURED MUNICIPAL FUND
NATIONAL MUNICIPAL FUND
U.S. GOVERNMENT FUND
CALIFORNIA INSURED INTERMEDIATE
MUNICIPAL FUND
SHORT TERM GLOBAL GOVERNMENT FUND
SHORT TERM HIGH QUALITY BOND FUND

MONEY FUNDS seek periodic income and stability by investing in high-quality,
short-term investments.

GLOBAL MONEY FUND
CALIFORNIA MONEY FUND
U.S. GOVERNMENT MONEY FUND

THE FUNDS AT A GLANCE

GOALS: Each Fund has a different investment goal. Each Fund's investment
objective is a fundamental policy which may not be changed without the
approval of a majority of the Fund's outstanding voting securities. As with
any mutual fund, there is no assurance that a Fund will achieve its goal.

STRATEGY: Each Fund has a distinct strategy specifically designed to achieve
its goal.

INVESTMENT MANAGEMENT: Sierra Investment Advisors Corporation ("Advisor" or
"Sierra Advisors") has overall responsibility for management of the Funds.
However, each Fund has an investment sub-advisor ("Sub-Advisor") who selects
the investments made by that Fund subject to oversight and direction by Sierra
Advisors. The Sub-Advisor of each Fund is discussed in this section.

WHO MAY WANT TO INVEST: Each of the Funds may not be a suitable investment for
every investor. Also, each Fund, by itself, does not constitute a balanced
investment plan for an investor. The value of a Non-Money Fund's shares may
fluctuate. Each Money Fund is managed to keep its share price stable at $1.00
and the rate of income of each Money Fund will vary from day to day, generally
reflecting short-term interest rates. When you sell your Fund shares, they may
be worth more or less than you paid for them.

ALTERNATIVE PURCHASE ARRANGEMENTS: Each Fund offers three classes of shares
with alternative purchase and distribution fee arrangements. These differences
permit an investor to choose the method of purchasing shares that is most
beneficial given the amount of the purchase, the length of time the investor
expects to hold the shares and other circumstances. Except for the differences
between classes (and related voting rights), described as follows, each share
of a Fund, whether Class A, Class B or Class S, has the same rights and
represents an identical interest in the investments owned by that Fund. CLASS
S SHARES ARE NOT OFFERED THROUGH THIS PROSPECTUS.

CLASS A SHARES: Class A Shares of the Non-Money Funds are subject, and Class A
Shares of the Money Funds are not subject, to a sales charge at the time of
purchase. Class A Shares of each Fund may be subject to a contingent deferred
sales charge ("CDSC") if redeemed within two years of purchase, and pay an
ongoing distribution fee at an annual rate of .25% of average daily net
assets.

CLASS B SHARES: Class B Shares are not subject to a sales charge at the time
of purchase but are subject to a CDSC that is different from the Class A
Shares CDSC and Class S Shares CDSC. For Class B Shares of the Short Term
Funds, the CDSC applies if the shares are redeemed during the first four years
after purchase. The CDSC for Class B Shares of the Short Term Funds declines
from 4% during the first year of investment to zero after four years. For
Class B Shares of the Longer Term Funds, the CDSC applies if the shares are
redeemed during the first six years after purchase. The CDSC for Class B
Shares of the Longer Term Funds declines from 5% during the first year of
investment to zero after six years. Class B Shares of all the Funds pay
ongoing distribution and service fees at annual rates of 0.75% and 0.25%,
respectively, of the average daily net assets of the Class B Shares. Investors
may not purchase Class B Shares of the Money Funds directly; Class B Shares of
the Money Funds may be purchased only by exchanging Class B Shares of a Non-
Money Fund for Class B Shares of the Money Funds. Class B Shares may be
exchanged for Class S Shares of certain of the Funds if the investor has a
Sierra Asset Management prospectus and opens a Sierra Asset Management Account
("SAM Account") as described in the following section.

CLASS S SHARES: CLASS S SHARES, WHICH ARE AVAILABLE ONLY TO INVESTORS WHO OPEN
A SAM ACCOUNT, ARE DESCRIBED IN MORE DETAIL IN A SEPARATE PROSPECTUS. Class S
Shares are not subject to a sales charge at the time of purchase but are
subject to a CDSC that is different from the Class A Shares CDSC and Class B
Shares CDSC. Only the SAM Account Funds (described below) are available for
SAM Account investments; Class S Shares of the remaining Funds are available
only through exchange by investors who have closed their SAM Accounts but
remain Class S shareholders. For all Class S Shares, the CDSC applies if the
shares are redeemed during the first six years after purchase and the CDSC
declines from 5% during the first year of investment to zero after six years.
Like Class B Shares, Class S Shares pay ongoing distribution and service fees
at annual rates of 0.75% and 0.25%, respectively, of the average daily net
assets of the Class S Shares. Currently, the SAM Account Funds are:

U.S. Government Corporate Income Fund
Money Fund Growth and Income
Global Money Fund Fund
Short Term High Growth Fund
Quality Bond Fund Emerging Growth Fund
Short Term Global International Growth
Government Fund Fund
U.S. Government Fund

Prospective investors may call 800-222-5852 toll-free to obtain a prospectus
for Class S Shares and further information about Class S Shares.

RISK CONSIDERATIONS: The value of a Fund's shares will fluctuate with the
value of the underlying securities in its portfolio, and in the case of debt
securities, with the general level of interest rates. When interest rates
decline, the value of a portfolio invested in fixed-income securities can be
expected to rise. Conversely, when interest rates rise, the value of a
portfolio invested in fixed-income securities can be expected to decline. In
the case of foreign currency denominated securities, these trends may be
offset or amplified by fluctuations in foreign currencies. Investing in
securities of foreign issuers involves certain considerations not typically
associated with investing in securities of U.S. companies, including
restrictions on foreign investment and repatriation of capital invested in
foreign countries, currency fluctuations, the cost of converting foreign
currency into U.S. Dollars, potential price volatility and lesser liquidity of
shares traded on securities markets or lack of a secondary trading market for
such securities and political and economic risks, including the risk of
nationalization or expropriation of assets, difficulties in obtaining court
actions and the risk of war. In addition, disclosure of certain material
information may not be made and less information may be available to investors
investing in foreign countries than in the United States. There is also
generally less governmental regulation of the securities industry in foreign
countries. High yielding fixed-income securities, such as those in which the
Short Term Global Government Fund may invest up to 10%, and the Growth and
Emerging Growth Funds up to 35%, respectively, of total assets, are subject to
greater market fluctuations and risk of loss of income and principal than
investments in lower yielding fixed-income securities. The Funds intend to
employ from time to time certain investment techniques which are designed to
enhance income or total return or hedge against market or currency risks but
which themselves involve additional risks. These techniques include options on
securities, futures, options on futures, options on indexes, options on
foreign currencies, foreign currency exchange transactions, lending of
securities and when-issued securities and delayed-delivery transactions.
Because the Short Term Global Government Fund is non-diversified, it is
permitted greater flexibility to invest its assets in the securities of any
one issuer and therefore will be exposed to increased risk of loss if such an
investment underperforms expectations. The Funds may have higher than average
portfolio turnover which may result in higher than average brokerage
commissions and transaction costs. For additional risk information, see "The
Funds' Investments and Risk Considerations" and "Securities and Investment
Practices" in this prospectus and "Investment Objectives and Policies of the
Funds" in the Trust's Statement of Additional Information ("SAI").

THE MONEY FUNDS

GLOBAL MONEY FUND
GOAL: To maximize current income consistent with safety of principal and
maintenance of liquidity.

STRATEGY: Investing in U.S. Dollar-denominated money market instruments of
foreign and U.S. issuers.

INVESTMENT MANAGEMENT: J.P. Morgan Investment Management Inc. ("J.P. Morgan")
is the Sub-Advisor of the Fund. 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 June 30,
1995, J.P. Morgan and its affiliate had investment management authority with
respect to approximately $168 billion of assets.

WHO MAY WANT TO INVEST: Investors who would like to earn income at current
money market rates while preserving the value of their investment.

U.S. GOVERNMENT MONEY FUND
GOAL: To maximize current income consistent with safety of principal and
maintenance of liquidity.

STRATEGY: Investing primarily in obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities.

INVESTMENT MANAGEMENT: Alliance Capital Management L.P. ("Alliance") is the
Sub-Advisor of the Fund. Alliance provides a wide variety of investment
management services to individuals and institutions, including investment
companies. As of June 30, 1995, total assets under management were over $135
billion.

WHO MAY WANT TO INVEST: Investors who would like to earn income at current
money market rates while preserving the value of their investment. The Fund
offers an added measure of safety with its focus on U.S. Government
securities.

CALIFORNIA MONEY FUND
GOAL: To maximize current income that is excluded from gross income for
federal income tax purposes and is exempt from California State personal
income taxation, consistent with safety of principal and maintenance of
liquidity.

STRATEGY: Investing in obligations that are exempt from California State
personal income tax.

INVESTMENT MANAGEMENT: Alliance is the Sub-Advisor of the Fund. Alliance
provides a wide variety of investment management services to individuals and
institutions, including investment companies. As of June 30, 1995, total
assets under management were over $135 billion.

WHO MAY WANT TO INVEST: Investors who would like to earn income at current
money market rates that is exempt from federal and California income taxes
while preserving the value of their investment.

THE BOND FUNDS

SHORT TERM HIGH QUALITY BOND FUND
GOAL: To provide as high a level of current income as is consistent with
prudent investment management and stability of principal.

STRATEGY: Investing at least 65% of its assets in investment grade short-term
bonds and other fixed-income securities issued by the U.S. Government,
corporations and other issuers. The Fund may borrow money or enter into
reverse repurchase agreements or dollar roll transactions in the aggregate up
to 10% of its total assets, invest up to 25% of its total assets in asset-
backed securities and may engage in certain options transactions, financial
futures contracts and currency forwards or futures contracts and related
options. Each of these investments entails risks which are discussed in the
"Investment Principles" and "Securities and Investment Practices" sections
following.

INVESTMENT MANAGEMENT: Scudder, Stevens & Clark, Inc. ("Scudder") is the
investment Sub-Advisor of the Fund. Scudder provides investment management
services for institutions, individuals and mutual funds. As of September 30,
1995, Scudder's assets under management were in excess of $90 billion.

WHO MAY WANT TO INVEST: The Fund may be appropriate for investors who would
like to earn high current income with the protection of principal. Securities
in the Fund's portfolio are short-term high quality securities that will
generally yield less income than lower quality or longer-term securities.
Higher quality or shorter-term securities, however, generally have less credit
and market risk and are more readily marketable than either lower quality or
longer-term securities.

SHORT TERM GLOBAL GOVERNMENT FUND
GOAL: To provide high current income consistent with protection of principal.

STRATEGY: Investing at least 65% of its assets in short-term bonds and money
market instruments issued by foreign and U.S. governments and denominated in
foreign currencies or the U.S. Dollar.

INVESTMENT MANAGEMENT: Scudder is the investment Sub-Advisor of the Fund.
Scudder provides investment management services for institutions, individuals
and mutual funds. As of September 30, 1995, Scudder's assets under management
were in excess of $90 billion.

WHO MAY WANT TO INVEST: The Fund may be appropriate for investors who seek
high current income with the protection of principal. The Fund offers
investors the ability to diversify their own domestic investment portfolios
and reduce the risk of having their investments affected solely by political
and economic events in the U.S. The Fund also allows investors to participate
in the income opportunities that foreign markets can offer. Securities of
foreign issuers are subject to certain risks not typically associated with
domestic securities, as discussed under "Securities and Investment Practices."

U.S. GOVERNMENT FUND
GOAL: To maximize total rate of return while providing a high level of current
income, consistent with reasonable safety of principal.

STRATEGY: Investment in a broad range of U.S. Government securities, including
mortgage-backed securities.

INVESTMENT MANAGEMENT: BlackRock Financial Management, Inc. ("BlackRock") is
the investment Sub-Advisor of the Fund. 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, 1995, BlackRock had
aggregate assets under management or supervision of approximately $32 billion.

WHO MAY WANT TO INVEST: The Fund may be appropriate for investors who would
like to earn income with minimal risk. 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 and market risk and are more readily marketable than lower quality
securities.

CORPORATE INCOME FUND
GOAL: A high level of current income, consistent with the preservation of
capital.

STRATEGY: Investment primarily in investment grade corporate bonds of U.S.
issuers.

INVESTMENT MANAGEMENT: TCW Funds Management, Inc. ("TCW Management") is the
investment Sub-Advisor of the Fund. 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
June 30, 1995, TCW Management and its affiliated advisers had just over $50
billion under management or committed to management.

WHO MAY WANT TO INVEST: The Fund may be appropriate for investors who would
like to earn higher yields than those available from funds investing in short-
term securities and investors who can tolerate larger share price
fluctuations. 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.

CALIFORNIA MUNICIPAL FUND
GOAL: To provide California investors with as high a level of current income
exempt from federal and California State income tax as is consistent with
prudent investment management and preservation of capital.

STRATEGY: Investing in intermediate and long-term California municipal
securities.

INVESTMENT MANAGEMENT: Van Kampen American Capital Management Inc. ("Van
Kampen") is the investment Sub-Advisor of the Fund. 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 September 30, 1995, of more than
$54 billion.

WHO MAY WANT TO INVEST: The Fund may be appropriate for long-term investors
who are seeking tax sheltered current income and California residents who seek
to earn a higher after-tax return than from comparable investments that
generate taxable income.

FLORIDA INSURED MUNICIPAL FUND
GOAL: To provide Florida investors with as high a level of current income
exempt from federal income tax as is consistent with prudent investment
management and preservation of capital, and to offer investors the opportunity
to own shares exempt from Florida intangible personal property tax.

STRATEGY: Investing in intermediate and long-term Florida municipal
obligations that are "insured obligations" and offer potential for a high
level of current income relative to funds with like investment objectives.
Insured obligations are municipal obligations that at all times are fully
insured as to the scheduled payment of all installments of interest and
principal.

INVESTMENT MANAGEMENT: Van Kampen is the investment Sub-Advisor of the Fund.
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
September 30, 1995, of more than $54 billion.

WHO MAY WANT TO INVEST: The Fund may be appropriate for long-term investors
who are seeking tax sheltered current income and Florida residents who seek to
earn a higher after-tax return than from comparable investments that generate
taxable income and own shares exempt from Florida intangible personal property
tax.

CALIFORNIA INSURED INTERMEDIATE MUNICIPAL FUND
GOAL: To provide California investors with as high a level of current income
exempt from federal and California State income tax as is consistent with
prudent investment management and preservation of capital.

STRATEGY: Investing primarily in intermediate term California municipal
securities that are "insured obligations" and offer potential for a high level
of current income relative to funds with like investment objectives. It is a
fundamental policy of the Fund that it will invest at least 80% of the value
of its total assets in insured California municipal securities, except when
maintaining a temporary defensive position. Insured obligations are municipal
obligations that at all times are fully insured as to the scheduled payment of
all installments of interest and principal. The Fund may invest up to 20% of
the value of its total assets in municipal securities that are not insured
provided that such securities are at least investment grade as described in
"The Funds" Investments and Risk Considerations" section.

WHO MAY WANT TO INVEST: The Fund may be appropriate for long-term investors
who are seeking tax sheltered current income from insured municipal
obligations and California residents who seek to earn a higher after-tax
return than from comparable investments that generate taxable income.

NATIONAL MUNICIPAL FUND
GOAL: To provide investors with as high a level of current income exempt from
federal tax as is consistent with prudent investment management and
preservation of capital.

STRATEGY: Investing in intermediate and long-term fixed income municipal
obligations.

WHO MAY WANT TO INVEST: The Fund may be appropriate for long-term investors
who are seeking tax sheltered current income and who are seeking to reduce
risk by diversifying their municipal holdings nationally.

THE EQUITY FUNDS

GROWTH AND INCOME FUND
GOAL: Long-term capital growth and current income consistent with reasonable
investment risk.

STRATEGY: Investing primarily in dividend-paying common stock of well-
established companies.

INVESTMENT MANAGEMENT: J.P. Morgan is the investment Sub-Advisor of the Fund.
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 June 30, 1995, J.P. Morgan and its
affiliates had investment management authority with respect to approximately
$168 billion of assets.

WHO MAY WANT TO INVEST: The Fund may be appropriate for investors who would
like to achieve long-term capital growth and current income, consistent with
reasonable investment risk. The Fund invests primarily in dividend-paying
common stocks. It also invests in other income-producing equity securities,
including preferred stock and securities convertible into common stock as well
as fixed-income securities.

GROWTH FUND
GOAL: Long-term capital appreciation (increase in the value of the Fund's
shares).

STRATEGY: Investment primarily in common stock of U.S., multinational, and
foreign companies of all sizes that offer potential for growth.

INVESTMENT MANAGEMENT: Janus Capital Corporation ("Janus") is the investment
Sub-Advisor of the Fund. Janus has been providing investment advice to mutual
funds or other large institutional clients since 1970. As of June 30, 1995,
Janus had over $29.8 billion in assets under investment management.

WHO MAY WANT TO INVEST: The Fund may be appropriate for investors who are
seeking a long-term increase in the value of an investment in the Fund and are
willing to accept the risk of stock market fluctuations. Over time, stocks
have shown greater growth than other types of securities. In the short term,
however, stock values can fluctuate dramatically in response to company,
market, or economic news. Securities of foreign issuers are subject to certain
risks not typically associated with domestic securities, as discussed under
"Securities and Investment Practices."

EMERGING GROWTH FUND
GOAL: Long-term capital appreciation by investing primarily in equity
securities.

STRATEGY: Investment primarily in stock of small companies which are expected
to achieve accelerated growth in earnings and revenues or which are
undervalued in the marketplace.

INVESTMENT MANAGEMENT: Janus is the investment Sub-Advisor of the Fund. Janus
has been providing investment advice to mutual funds or other large
institutional clients since 1970. As of June 30, 1995, Janus had over $29.8
billion in assets under investment management.

WHO MAY WANT TO INVEST: The Fund may be appropriate for investors who are
seeking capital appreciation, are not concerned with current income, and are
long-term investors that can afford to ride out the volatility often
associated with stock market investing. Small capitalization companies
typically are subject to a greater degree of change in earnings and business
prospects than larger, more established companies. Therefore, the Fund may be
subject to greater investment risk than that assumed when investing in the
equity securities of larger capitalization companies.

INTERNATIONAL GROWTH FUND
GOAL: Long-term capital appreciation by investing primarily in equity
securities of foreign issuers.

STRATEGY: Investment in stock of leading companies located outside the United
States.

WHO MAY WANT TO INVEST: The Fund may be appropriate for investors who seek
long-term capital appreciation and are not concerned with current income.
Also, the Fund may be appropriate for investors who would like to diversify
their own domestic investment portfolios and reduce the risk of having their
investments affected solely by political and economic events in the United
States. Securities of foreign issuers are subject to certain risks not
typically associated with domestic securities, as discussed under "Securities
and Investment Practices."
<PAGE>

EXPENSES
UNDERSTANDING EXPENSES

Operating a mutual fund involves costs for distribution, management of
investments, accounting, shareholder statements, tax reporting, and other
services. As an investor, you pay some of these costs directly, for example,
each Fund's sales charge. Others are paid from each Fund's assets; the effect
of these other expenses is already factored into any quoted share price or
return.

SHAREHOLDER TRANSACTION EXPENSES are charges you pay when you buy or sell
shares of a Fund. See "Your Account -- How to Buy Shares -- Share Price," and
"Your Account -- How to Buy Shares -- Initial Sales Charge Alternative: Class
A Shares," and "Your Account -- How to Buy Shares -- Deferred Sales Charge
Alternative: Class B Shares" for an explanation of how and when these charges
apply.
<TABLE>
<CAPTION>
MAXIMUM SALES
MAXIMUM SALES CHARGE IMPOSED
CHARGE IMPOSED ON REINVESTED
ON PURCHASES DIVIDENDS
(AS A % OF (AS A % OF DEFERRED REDEMPTION EXCHANGE
OFFERING PRICE) OFFERING PRICE) SALES CHARGE FEES(4) FEES(5)
--------------- --------------- ------------ ---------- --------
<S> <C> <C> <C> <C> <C>

Global Money Fund
Class A None None None(2) None None
Class B None None 5.00%(3) None None
U.S. Government Money Fund
Class A None None None(2) None None
Class B None None 5.00%(3) None None
California Money Fund
Class A None None None(2) None None
Class B None None 5.00%(3) None None
Short Term High Quality Bond Fund
Class A 3.50%(1) None None(2) None None
Class B None None 4.00%(3) None None
Short Term Global Government Fund
Class A 3.50%(1) None None(2) None None
Class B None None 4.00%(3) None None
U.S. Government Fund
Class A 4.50%(1) None None(2) None None
Class B None None 5.00%(3) None None
Corporate Income Fund
Class A 4.50%(1) None None(2) None None
Class B None None 5.00%(3) None None
California Municipal Fund
Class A 4.50%(1) None None(2) None None
Class B None None 5.00%(3) None None
Florida Insured Municipal Fund
Class A 4.50%(1) None None(2) None None
Class B None None 5.00%(3) None None
California Insured Intermediate
Municipal Fund
Class A 4.50%(1) None None(2) None None
Class B None None 5.00%(3) None None
National Municipal Fund
Class A 4.50%(1) None None(2) None None
Class B None None 5.00%(3) None None
Growth and Income Fund
Class A 4.50%(1) None None(2) None None
Class B None None 5.00%(3) None None
Growth Fund
Class A 4.50%(1) None None(2) None None
Class B None None 5.00%(3) None None
Emerging Growth Fund
Class A 4.50%(1) None None(2) None None
Class B None None 5.00%(3) None None
International Growth Fund
Class A 4.50%(1) None None(2) None None
Class B None None 5.00%(3) None None
</TABLE>

- ----------
(1)The initial sales charge is reduced for purchases of $50,000 and
over, decreasing to zero for purchases of $1,000,000 and over for each Fund.

(2)Certain investors who purchased Non-Money Fund Class A Shares at net asset
value based on a purchase amount of $2.5 million or more before July 1, 1995
are subject to a 1.0% contingent deferred sales charge ("CDSC") on
redemptions within one year of purchase (the "Prior Class A CDSC"). Certain
investors who purchase Non-Money Fund Class A Shares at net asset value based
on a purchase amount of $1 million or more after June 30, 1995 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. Class A Shares
purchased through a qualified 401(k) or 403(b) plan may, in certain
circumstances, be subject to a CDSC of 1.0% if the shares are redeemed within
two years of their initial purchase. Money Fund Class A Shares acquired
through exchange from Non-Money Fund Class A Shares that were subject to a
CDSC at the time of exchange, may also be subject to such CDSC. SEE "HOW TO
BUY SHARES -- INITIAL SALES CHARGE ALTERNATIVE: CLASS A SHARES" AND
"APPLICATION OF CLASS A SHARES CDSCS."

(3)See "Your Account -- Deferred Sales Charge Alternative: Class B Shares."

(4)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.

(5)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 "Your Account -- Exchange Privileges and
Restrictions."

ANNUAL FUND OPERATING EXPENSES are paid as a percentage of average net assets
of a Fund's assets. Each Fund pays fees for management and other services, as
well as costs for out-of-pocket expenses. Each Fund's expenses are factored
into its share price or dividends and are not charged directly to shareholder
accounts.

- ------------------------------------------------------------------------------------------------------------------------------------
MANAGEMENT FEES
(AFTER VOLUNTARY
WAIVERS OR TOTAL FUND
REIMBURSEMENTS)(1) 12B-1FEES(2) OTHER EXPENSES(3) OPERATING EXPENSES(4)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>

Global Money Fund
Class A Shares 0.04% 0.25% 0.36% 0.65%
Class B Shares 0.04% 1.00% 0.36% 1.40%
- -----------------------------------------------------------------------------------------------------------------------------------
U.S. Government Money Fund
Class A Shares 0.04% 0.25% 0.56% 0.85%
Class B Shares 0.04% 1.00% 0.56% 1.60%
- ------------------------------------------------------------------------------------------------------------------------------------
California Money Fund
Class A Shares 0.14% 0.25% 0.46% 0.85%
Class B Shares 0.14% 1.00% 0.46% 1.60%
- ------------------------------------------------------------------------------------------------------------------------------------
Short Term High Quality
Bond Fund
Class A Shares 0.04% 0.25% 0.46% 0.75%
Class B Shares 0.04% 1.00% 0.46% 1.50%
- ------------------------------------------------------------------------------------------------------------------------------------
Short Term Global
Goverment Fund
Class A Shares 0.10% 0.25% 0.50% 0.85%
Class B Shares 0.10% 1.00% 0.50% 1.60%
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. Government Fund
Class A Shares 0.19% 0.25% 0.46% 0.90%
Class B Shares 0.19% 1.00% 0.46% 1.65%
- ------------------------------------------------------------------------------------------------------------------------------------
Corporate Income Fund
Class A Shares 0.32% 0.25% 0.43% 1.00%
Class B Shares 0.32% 1.00% 0.43% 1.75%
- ------------------------------------------------------------------------------------------------------------------------------------
California Municipal Fund
Class A Shares 0.27% 0.25% 0.43% 0.95%
Class B Shares 0.27% 1.00% 0.43% 1.70%
- ------------------------------------------------------------------------------------------------------------------------------------
Florida Insured Municipal Fund
Class A Shares 0.04% 0.25% 0.51% 0.80%
Class B Shares 0.04% 1.00% 0.51% 1.55%
- ------------------------------------------------------------------------------------------------------------------------------------
California Insured Intermediate
Municipal Fund
Class A Shares 0.04% 0.25% 0.56% 0.85%
Class B Shares 0.04% 1.00% 0.56% 1.60%
- ------------------------------------------------------------------------------------------------------------------------------------
National Municipal Fund
Class A Shares 0.30% 0.25% 0.45% 1.00%
Class B Shares 0.30% 1.00% 0.45% 1.75%
- ------------------------------------------------------------------------------------------------------------------------------------
Growth and Income Fund
Class A Shares 0.78% 0.25% 0.55% 1.58%
Class B Shares 0.78% 1.00% 0.55% 2.33%
- ------------------------------------------------------------------------------------------------------------------------------------
Growth Fund
Class A Shares 0.93% 0.25% 0.53% 1.71%
Class B Shares 0.93% 1.00% 0.53% 2.46%
- ------------------------------------------------------------------------------------------------------------------------------------
Emerging Growth Fund
Class A Shares 0.88% 0.25% 0.57% 1.70%
Class B Shares 0.88% 1.00% 0.57% 2.45%
-----------------------------------------------------------------------------------------------------------------------------------
International Growth Fund
Class A Shares 0.90% 0.25% 0.68% 1.83%
Class B Shares 0.90% 1.00% 0.68% 2.58%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1)Reflects voluntary waivers of management fees by the Advisor. In the
absence of such voluntary waivers, management fees would have been for each
of the following Funds: Global Money Fund -- 0.40%*; U.S. Government Money
Fund -- 0.40%*; California Money Fund -- 0.40%*; Short Term High Quality
Bond Fund -- 0.50%; Short Term Global Government Fund -- 0.65%; U.S.
Government Fund -- 0.55%*; Corporate Income Fund -- 0.65%; California
Municipal Fund -- 0.55%*; Florida Insured Municipal Fund -- 0.55%*;
California Insured Intermediate Municipal Fund -- 0.55%*; and National
Municipal Fund -- 0.55%*. No management fee waivers apply to the Growth and
Income, Growth, Emerging Growth and International Growth Funds. *Asterisked
fees reflect the contractual agreement of the Advisor to limit the annual
management fee.

(2)Of the 12b-1 fees for the Class B Shares, 0.75% represents an asset-based
sales charge and 0.25% is a service charge. Due to the continuous nature of
the 12b-1 fee, long-term shareholders of a Fund may pay more than the
economic equivalent of the maximum front-end sales charge otherwise
permitted by the Rules of Fair Practice of the National Association of
Securities Dealers, Inc. ("NASD").

(3)After voluntary waivers or reimbursements. Reflects the voluntary agreement
of the Advisor to bear certain expenses and Administrator to waive fees to
limit total fund expenses for the Class A and Class B Shares.

(4)The total fund operating expenses set forth in the foregoing table are
restated to reflect anticipated management fees and other expenses (after
voluntary waivers or reimbursements). Actual expenses for each Fund may
vary from day to day. The Advisor and Administrator anticipate voluntarily
waiving fees and/or bearing expenses for certain Funds that will result in
total fund operating expenses as set forth in the foregoing table; they are
under no obligation to continue to do so. Set forth on the following page
are total fund operating expenses absent such fee waivers and expense
reimbursements.

FUNDS CLASS A CLASS B
----- ------- -------
Global Money Fund 1.21% 1.96%
U.S. Government Money Fund 1.34% 2.09%
California Money Fund 1.15% 1.90%
Short Term High Quality Bond Fund 1.40% 2.15%
Short Term Global Government Fund 1.44% 2.19%
U.S. Government Fund 1.30% 2.05%
Corporate Income Fund 1.37% 2.12%
California Municipal Fund 1.27% 2.02%
Florida Insured Municipal Fund 1.43% 2.18%
California Insured Intermediate Municipal Fund 1.44% 2.19%
National Municipal Fund 1.29% 2.04%
- ----------
Waivers of fees and reimbursement of expenses have the effect of increasing
yield or improving total return for the period when such waivers and
reimbursements are in effect. These amounts are not recovered by the
Advisor or Administrator in later years. These fee waivers and agreements
to reimburse expenses are voluntary and may be discontinued at any time.
Each Fund bears its own expenses and a Fund's expenses are allocated
between classes as described in the section "Breakdown of Fund Expenses."

In addition to the Class A and Class B Shares described above, the Trust
offers Class S Shares for investors who open a SAM Account. CLASS S SHARES ARE
DESCRIBED IN MORE DETAIL IN A SEPARATE PROSPECTUS. Class S Shares are not
subject to a sales charge at the time of purchase but are subject to a CDSC
that is different from the Class A Shares CDSC and the Class B Shares CDSC.
For all Class S Shares, the CDSC applies if the shares are redeemed during the
first six years after purchase and the CDSC declines from 5% during the first
year of investment to zero after six years. Like Class B Shares, Class S
Shares pay ongoing distribution and service fees at an annual rate of .75% and
.25%, respectively, of average daily net assets of the Class S Shares.
Although each class of a Fund pays the same management fees and certain other
expenses as the other classes of the Fund, the performance of each of the
classes of a Fund may vary due to differences in sales charges and expenses.
Prospective investors may call 800-222-5852 toll-free to obtain a prospectus
and further information for Class S Shares.

EXAMPLE OF EXPENSES: You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and (2) redemption at the end of
time period.
<TABLE>
<CAPTION>

1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>

Global Money Fund
Class A(1) $ 7 $ 21 $ 36 $ 81
Class B
Assuming a complete redemption at end of period(2) $64 $ 74 $ 97 $168(3)
Assuming no redemption(4) $14 $ 44 $ 77 $168(3)
U.S. Government Money Fund
Class A(1) $ 9 $ 27 $ 47 $105
Class B
Assuming a complete redemption at end of period(2) $66 $ 80 $107 $190(3)
Assuming no redemption(4) $16 $ 50 $ 87 $190(3)
California Money Fund
Class A(1) $ 9 $ 27 $ 47 $105
Class B
Assuming a complete redemption at end of period(2) $66 $ 80 $107 $190(3)
Assuming no redemption(4) $16 $ 50 $ 87 $190(3)
Short Term High Quality Bond Fund
Class A(1) $42 $ 58 $ 75 $125
Class B
Assuming a complete redemption at end of period(2) $55 $ 67 $ 82 $179(3)
Assuming no redemption(4) $15 $ 47 $ 82 $179(3)
Short Term Global Government Fund
Class A(1) $43 $ 61 $ 80 $136
Class B
Assuming a complete redemption at end of period(2) $56 $ 70 $ 87 $190(3)
Assuming no redemption(4) $16 $ 50 $ 87 $190(3)
U.S. Government Fund
Class A(1) $54 $ 72 $ 93 $151
Class B
Assuming a complete redemption at end of period(2) $67 $ 82 $110 $195(3)
Assuming no redemption(4) $17 $ 52 $ 90 $195(3)
Corporate Income Fund
Class A(1) $55 $ 75 $ 98 $162
Class B
Assuming a complete redemption at end of period(2) $68 $ 85 $115 $206(3)
Assuming no redemption(4) $18 $ 55 $ 95 $206(3)
California Municipal Fund
Class A(1) $54 $ 74 $ 95 $156
Class B
Assuming a complete redemption at end of period(2) $67 $ 84 $112 $201(3)
Assuming no redemption(4) $17 $ 54 $ 92 $201(3)
Florida Insured Municipal Fund
Class A(1) $53 $ 69 $ 87 $140
Class B
Assuming a complete redemption at end of period(2) $66 $ 79 $104 $185(3)
Assuming no redemption(4) $16 $ 49 $ 84 $185(3)
California Insured Intermediate Municipal Fund
Class A(1) $53 $ 71 $ 90 $145
Class B
Assuming a complete redemption at end of period(2) $66 $ 80 $107 $190(3)
Assuming no redemption(4) $16 $ 50 $ 87 $190(3)
National Municipal Fund
Class A(1) $55 $ 75 $ 98 $162
Class B
Assuming a complete redemption at end of period(2) $68 $ 85 $115 $206(3)
Assuming no redemption(4) $18 $ 55 $ 95 $206(3)
Growth and Income Fund
Class A(1) $60 $ 93 $127 $224
Class B
Assuming a complete redemption at end of period(2) $74 $103 $145 $267(3)
Assuming no redemption(4) $24 $ 73 $125 $267(3)
Growth Fund
Class A(1) $62 $ 96 $134 $238
Class B
Assuming a complete redemption at end of period(2) $75 $107 $151 $280(3)
Assuming no redemption(4) $25 $ 77 $131 $280(3)
Emerging Growth Fund
Class A(1) $62 $ 96 $133 $237
Class B
Assuming a complete redemption at end of period(2) $75 $106 $151 $279(3)
Assuming no redemption(4) $25 $ 76 $131 $279(3)
International Growth Fund
Class A(1) $63 $100 $140 $250
Class B
Assuming a complete redemption at end of period(2) $76 $110 $157 $291(3)
Assuming no redemption(4) $26 $ 80 $137 $291(3)
</TABLE>

- ----------
(1)Assumes deduction at the time of purchase of maximum initial sales charge
for funds other than Global Money, U.S. Government Money and California
Money Funds.

(2)Assumes deduction of maximum applicable contingent deferred sales charge.

(3)Assumes that conversion to Class A Shares does not occur.

(4)Assumes no deduction of contingent deferred sales charge.

THESE EXAMPLES ARE NOT MEANT TO STATE ACTUAL OR EXPECTED EXPENSES OR RATES OF
RETURN, WHICH MAY BE GREATER OR LESS THAN AS SHOWN. The Advisor and the
Administrator may, at their discretion, terminate voluntary fee waivers and
expense reimbursements at any time. Absent the waiver of fees or expense
reimbursements by the Advisor and/or Administrator as described above, the
amounts in the Example above would be greater. The purpose of this table is to
assist the investor in understanding the various costs and expenses that may
be directly or indirectly borne by investors in the Funds.
<PAGE>
FINANCIAL HIGHLIGHTS
The following information, insofar as it relates to each of the respective
periods ended June 30, 1995 or earlier, has been audited by Price Waterhouse
LLP, independent accountants. Their unqualified report is included in the
Trust's Annual Report to Shareholders (the "Annual Report"). The Financial
Statements, Notes to Financial Statements and Report of Independent
Accountants sections of the Annual Report are included in the SAI. Further
information about the performance of the Funds is contained in the Annual
Report. The SAI and Annual Report can be obtained at no charge by calling
Sierra Administration at 800-222-5852.

<TABLE>
<CAPTION>
GLOBAL MONEY FUND
FINANCIAL HIGHLIGHTS

For a share outstanding throughout each period.

PERIOD
YEAR ENDED JUNE 30, ENDED
------------------------------------------------------------------------- JUNE 30,
1995(1) 1995 1994 1993 1992 1991 1990(1)
-------- --------- -------- -------- -------- ------- -------
CLASS B CLASS A
-------- -----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- --------- -------- -------- -------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.042 0.049 0.030 0.031 0.048 0.073 0.074
-------- --------- -------- -------- -------- ------- -------
Total from investment operations 0.042 0.049 0.030 0.031 0.048 0.073 0.074
LESS DISTRIBUTIONS:
Dividends from net investment income (0.042) (0.049) (0.030) (0.031) (0.048) (0.073) (0.074)
-------- --------- -------- -------- -------- ------- -------
Total distributions (0.042) (0.049) (0.030) (0.031) (0.048) (0.073) (0.074)
-------- --------- -------- -------- -------- ------- -------
Realized gain on investments distributed
to shareholders (0.000)(6) (0.000)(6) (0.000)(6) -- -- -- --
-------- --------- -------- -------- -------- ------- -------
Net asset value at end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ========= ======== ======== ======== ======= =======
TOTAL RETURN(3) 4.29% 5.06% 3.04% 3.17% 4.95% 7.51% 7.64%
======== ========= ======== ======== ======== ======= =======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 241 $110,012 $53,973 $48,283 $71,492 $92,334 $22,834
Ratio of operating expenses to average
net assets 1.29% 0.54% 0.45% 0.41% 0.42% 0.30% 1.00%(2)
Ratio of net investment income to
average net assets 4.33% 5.08% 2.99% 3.15% 4.90% 6.99% 7.54%(2)
Ratio of operating expenses to average
net assets without fee waivers and/or
expenses absorbed(4) 1.93% 1.18% 1.35% 1.32% 1.34% 1.51% 1.74%(2)
Net investment income per share without
fee waivers and/or expenses
absorbed(5) $ 0.036 $ 0.043 $ 0.021 $ 0.022 $ 0.039 $ 0.060 $ 0.067

- ----------
(1) The Fund commenced operations on July 13, 1989. On July 1, 1994, the Fund commenced selling Class B and Class S Shares in
addition to Class A Shares. Those shares in existence prior to July 1, 1994 were designated Class A Shares.
(2) Annualized
(3) Total return represents aggregate total return for the periods indicated and does not reflect any applicable sales charges.
The total returns would have been lower if certain fees had not been waived and/or expenses had not been absorbed by the
investment advisor, administrator and/or distributor.
(4) Annualized operating expense ratios without fee waivers and/or expenses absorbed by investment advisor, administrator and/or
distributor.
(5) Net investment income per share without fee waivers and/or expenses absorbed by investment advisor, administrator and/or
distributor.
(6) Amount represents less than $0.001 per share.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
U.S. GOVERNMENT MONEY FUND
FINANCIAL HIGHLIGHTS

For a share outstanding throughout each period.

TOTAL RETURN(3) 3.91% 4.67% 2.67% 2.70% 4.45% 6.65% 7.52%
==== ==== ==== ==== ==== ==== ====

RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 123 $47,492 $30,180 $36,802 $44,233 $62,473 $94,789
Ratio of operating expenses to average
net assets 1.60% 0.85% 0.85% 0.85% 0.85% 0.86% 1.00%(2)
Ratio of net investment income to
average net assets 3.88% 4.63% 2.68% 2.69% 4.43% 6.54% 7.52%(2)
Ratio of operating expenses to average
net assets without fee waivers(4) 2.00% 1.25% 1.32% 1.34% 1.35% 1.52% 1.64%(2)
Net investment income per share without
fee waivers(5) $ 0.034 $ 0.042 $ 0.022 $ 0.022 $ 0.037 $ 0.058 $ 0.067

- ----------
(1) The Fund commenced operations on July 10, 1989. On July 1, 1994, the Fund commenced selling Class B and Class S Shares in
addition to Class A Shares. Those shares in existence prior to July 1, 1994 were designated Class A Shares.
(2) Annualized
(3) Total return represents aggregate total return for the periods indicated and does not reflect any applicable sales charges.
The total returns would have been lower if certain fees had not been waived by the investment advisor, administrator and/or
distributor.
(4) Annualized operating expense ratios without fee waivers by investment advisor, administrator and/or distributor.
(5) Net investment income per share without fee waivers by investment advisor, administrator and/or distributor.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CALIFORNIA MONEY FUND
FINANCIAL HIGHLIGHTS

For a share outstanding throughout each period.

PERIOD
YEAR ENDED JUNE 30, ENDED
------------------------------------------------------------------------ JUNE 30,
1995(1) 1995 1994 1993 1992 1991 1990(1)
-------- -------- -------- -------- -------- -------- --------
CLASS B CLASS A
-------- -----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.020 0.028 0.018 0.021 0.033 0.044 0.046
-------- -------- -------- -------- -------- -------- --------
Total from investment operations 0.020 0.028 0.018 0.021 0.033 0.044 0.046
LESS DISTRIBUTIONS:
Dividends from net investment income (0.020) (0.028) (0.018) (0.021) (0.033) (0.044) (0.046)
-------- -------- -------- -------- -------- -------- --------
Total distributions (0.020) (0.028) (0.018) (0.021) (0.033) (0.044) (0.046)
-------- -------- -------- -------- -------- -------- --------
Net asset value at end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ======== ======== ========

TOTAL RETURN(3) 2.04% 2.79% 1.81% 2.07% 3.35% 4.52% 4.64%
==== ==== ==== ==== ==== ==== ====

RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 79 $48,836 $62,500 $68,404 $94,607 $113,392 $147,487
Ratio of operating expenses to average
net assets 1.60% 0.85% 0.85% 0.85% 0.85% 0.83% 1.00%(2)
Ratio of net investment income to
average net assets 1.98% 2.73% 1.80% 2.06% 3.31% 4.48% 5.07%(2)
Ratio of operating expenses to average
net assets without fee waivers(4) 1.90% 1.15% 1.27% 1.29% 1.28% 1.48% 1.64%(2)
Net investment income per share without
fee waivers(5) $ 0.017 $ 0.025 $ 0.014 $ 0.016 $ 0.029 $ 0.037 $ 0.040

For a share outstanding throughout each period.

PERIOD
YEAR ENDED JUNE 30, ENDED
---------------------------------- JUNE 30,
1995(1) 1995 1994(1)
----------- ------------ ------------
CLASS B CLASS A
----------- -----------------------------------
<S> <C> <C> <C>
Net asset value at beginning of period $ 2.39 $ 2.39 $ 2.50
----------- ------------ ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.06 0.08 0.09
Net realized and unrealized gain/(loss) on
investments 0.02 0.02 (0.11)
----------- ------------ ------------
Total from investment operations 0.08 0.10 (0.02)
LESS DISTRIBUTIONS:
Dividends from net investment income (0.06) (0.08) (0.09)
Distributions in excess of net investment
income (0.06) (0.06) --
Distributions from capital (0.00)(6) (0.00)(6) --
----------- ------------ ------------
Total distributions (0.12) (0.14) (0.09)
----------- ------------ ------------
Net asset value at end of period $ 2.35 $ 2.35 $ 2.39
=========== ============ ============

TOTAL RETURN(3) 3.64% 4.42% (0.73)%
==== ==== =====

RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 3,015 $43,811 $21,771
Ratio of operating expenses to average net
assets 1.50% 0.75% 0.00%(2)
Ratio of net investment income to average net
assets 5.35% 6.10% 5.70%(2)
Portfolio turnover rate 137% 137% 95%
Ratio of operating expenses to average net
assets without fee waivers
and/or expenses absorbed(4) 2.14% 1.39% 1.61%(2)
Net investment income per share without fee
waivers and/or expenses absorbed(5) $ 0.05 $ 0.07 $ 0.06

- ----------
(1) The Fund commenced operations on November 1, 1993. On July 1, 1994, the Fund commenced selling Class B and Class S Shares in
addition to Class A Shares. Those shares in existence prior to July 1, 1994 were designated Class A Shares.
(2) Annualized
(3) Total return represents aggregate total return for the periods indicated and does not reflect any applicable sales charges.
The total returns would have been lower if certain fees had not been waived and/or expenses had not been absorbed by the
investment advisor and/or administrator.
(4) Annualized operating expense ratios without fee waivers and/or expenses absorbed by investment advisor and/or administrator.
(5) Net investment income per share without fee waivers and/or expenses absorbed by investment advisor and/or administrator.
(6) Amount represents less than $0.01 per share.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SHORT TERM GLOBAL GOVERNMENT FUND
FINANCIAL HIGHLIGHTS

For a share outstanding throughout each period.

PERIOD
YEAR ENDED JUNE 30, ENDED
-------------------------------------------------------------- JUNE 30,
1995(1) 1995 1994 1993 1992(1)
----------- ----------- ---------- ---------- ----------
CLASS B CLASS A
----------- ----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of period $ 2.34 $ 2.34 $ 2.48 $ 2.56 $ 2.50
----------- ----------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.15 0.17 0.17 0.19 0.07
Net realized and unrealized gain/(loss) on
investments (0.12) (0.12) (0.14) (0.04) 0.07
----------- ----------- ---------- ---------- ----------
Total from investment operations 0.03 0.05 0.03 0.15 0.14
LESS DISTRIBUTIONS:
Dividends from net investment income (0.00)(6) (0.02) (0.13) (0.20) (0.08)
Distributions in excess of net investment
income (0.00)(6) (0.00)(6) (0.03) -- --
Distributions in excess of net realized gains (0.01) (0.01) (0.01) (0.03) --
Distributions from capital (0.12) (0.12) (0.00)(6)(7) -- --
----------- ----------- ---------- ---------- ----------
Total distributions (0.13) (0.15) (0.17) (0.23) (0.08)
----------- ----------- ---------- ---------- ----------
Net asset value at end of period $ 2.24 $ 2.24 $ 2.34 $ 2.48 $ 2.56
=========== =========== ========== ========== ==========

TOTAL RETURN(3) 1.33% 2.10% 1.10% 6.03% 5.34%
==== ==== ==== ==== ====

RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 1,297 $103,986 $220,824 $215,348 $106,609
Ratio of operating expenses to average net
assets 1.60% 0.85% 0.85% 0.73% 0.41%(2)
Ratio of net investment income to average
net assets 6.47% 7.22% 6.87% 7.67% 8.65%(2)
Portfolio turnover rate 217% 217% 222% 294% 81%
Ratio of operating expenses to average net
assets without fee waivers and expenses
absorbed(4) 2.19% 1.44% 1.52% 1.55% 1.92%(2)
Net investment income per share without fee
waivers and expenses absorbed(5) $ 0.14 $ 0.16 $ 0.16 $ 0.17 $ 0.06

- ----------
(1) The Fund commenced operations on February 11, 1992. On July 1, 1994, the Fund commenced selling Class B and Class S Shares in
addition to Class A Shares. Those shares in existence prior to July 1, 1994 were designated Class A Shares.
(2) Annualized
(3) Total return represents aggregate total return for the periods indicated and does not reflect any applicable sales charges.
The total returns would have been lower if certain fees had not been waived and expenses had not been absorbed by the
investment advisor, administrator and/or distributor.
(4) Annualized operating expense ratios without fee waivers and expenses absorbed by investment advisor, administrator and/or
distributor.
(5) Net investment income per share without fee waivers and expenses absorbed by investment advisor, administrator and/or
distributor.
(6) Amount represents less than $0.01 per share.
(7) Amounts distributed in excess of accumulated net investment income as determined for financial statement purposes have been
reported as distributions from paid-in capital at the fiscal year end in which the distribution is made. Certain of these
distributions which are reported as being from paid-in capital for financial statement purposes may be reported to
shareholders as taxable distributions due to differing tax and accounting rules.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
U.S. GOVERNMENT FUND
FINANCIAL HIGHLIGHTS

For a share outstanding throughout each period.

TOTAL RETURN(3) 9.36% 10.17% (4.59)% 8.87% 13.74% 10.14% 6.99%
==== ===== ===== ==== ===== ===== ====

RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $10,646 $459,968 $666,566 $842,277 $504,776 $166,920 $31,430
Ratio of operating expenses to
average net assets 1.70% 0.95% 1.05% 0.91% 0.72% 1.12% 1.13%(2)
Ratio of net investment income to
average net assets 6.83% 7.58% 7.26% 6.98% 7.67% 8.32% 8.50%(2)
Portfolio turnover rate 226% 226% 27% 67% 35% 54% 13%
Ratio of operating expenses to
average net assets without fee
waivers(4) 2.34% 1.59% 1.34% 1.34% 1.39% 1.57% 1.89%(2)
Ratio of operating expenses to average
net assets including interest expense 1.97% 1.22% 1.06% 0.91% 0.72% 1.12% 1.13%(2)
Net investment income per share without
fee waivers(5) $ 0.59 $ 0.66 $ 0.72 $ 0.70 $ 0.77 $ 0.79 $ 0.69

- ----------
(1) The Fund commenced operations on July 25, 1989. On July 1, 1994, the Fund commenced selling Class B and Class S Shares in
addition to Class A Shares. Those shares in existence prior to July 1, 1994 were designated Class A Shares.
(2) Annualized
(3) Total return represents aggregate total return for the periods indicated and does not reflect any applicable sales charges.
The total returns would have been lower if certain fees had not been waived by the investment advisor, administrator and/or
distributor.
(4) Annualized operating expense ratios without fee waivers by investment advisor, administrator and/or distributor.
(5) Net investment income per share without fee waivers by investment advisor, administrator and/or distributor.
(6) Amounts distributed in excess of accumulated net investment income as determined for financial statement purposes have been
reported as distributions from paid-in capital at the fiscal year end in which the distribution is made. Certain of these
distributions which are reported as being from paid-in capital for financial statement purposes may be reported to
shareholders as taxable distributions due to differing tax and accounting rules.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CORPORATE INCOME FUND
FINANCIAL HIGHLIGHTS

For a share outstanding throughout each period.

CLASS B CLASS A
--------- ------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of period $ 9.87 $ 9.87 $ 11.33 $ 10.52 $ 9.87 $ 10.00
--------- ---------- --------- --------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.61 0.68 0.80 0.84 0.91 0.81
Net realized and unrealized gain/(loss) on
investments 0.78 0.78 (1.35) 0.84 0.64 (0.13)
--------- ---------- --------- --------- --------- ---------
Total from investment operations 1.39 1.46 (0.55) 1.68 1.55 0.68
LESS DISTRIBUTIONS:
Dividends from net investment income (0.61) (0.68) (0.78) (0.84) (0.90) (0.81)
Distributions in excess of net investment
income (0.09) (0.09) (0.01) -- -- --
Distributions from net realized gains -- -- (0.06) -- -- --
Distributions in excess of net realized
gains -- -- (0.06) -- -- --
Distributions from capital (0.04) (0.04) -- (0.03)(6) -- --
--------- ---------- --------- --------- --------- ---------
Total distributions (0.74) (0.81) (0.91) (0.87) (0.90) (0.81)
--------- ---------- --------- --------- --------- ---------
Net asset value at end of period $ 10.52 $ 10.52 $ 9.87 $ 11.33 $ 10.52 $ 9.87
========= ========== ========= ========= ========= =========

TOTAL RETURN(3) 14.73% 15.57% (5.32)% 16.64% 16.29% 7.31%
===== ===== ===== ===== ===== ====

RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $15,145 $383,642 $472,519 $396,357 $169,682 $ 35,478
Ratio of operating expenses to average
net assets 1.65% 0.90% 1.35% 1.24% 0.97% 1.21%(2)
Ratio of net investment income to
average net assets 7.51% 8.26% 7.19% 7.67% 8.29% 9.01%(2)
Portfolio turnover rate 55% 55% 30% 37% 8% 31%
Ratio of operating expenses to average
net assets without fee waivers(4) 2.15% 1.40% 1.42% 1.42% 1.48% 1.78%(2)
Net investment income per share without
fee waivers(5) $ 0.57 $ 0.64 $ 0.80 $ 0.82 $ 0.85 $ 0.76

- ----------
(1) The Fund commenced operations on July 18, 1990. On July 1, 1994, the Fund commenced selling Class B and Class S Shares in
addition to Class A Shares. Those shares in existence prior to July 1, 1994 were designated Class A Shares.
(2) Annualized
(3) Total return represents aggregate total return for the periods indicated and does not reflect any applicable sales charges.
The total returns would have been lower if certain fees had not been waived by the investment advisor, administrator and/or
distributor.
(4) Annualized operating expense ratios without fee waivers by investment advisor, administrator and/or distributor.
(5) Net investment income per share without fee waivers by investment advisor, administrator and/or distributor.
(6) Amounts distributed in excess of accumulated net investment income as determined for financial statement purposes have been
reported as distributions from paid-in capital at the fiscal year end in which the distribution is made. Certain of these
distributions which are reported as being from paid-in capital for financial statement purposes may be reported to
shareholders as taxable distributions due to differing tax and accounting rules.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CALIFORNIA MUNICIPAL FUND
FINANCIAL HIGHLIGHTS

For a share outstanding throughout each period.

PERIOD
YEAR ENDED JUNE 30, ENDED
------------------------------------------------------------------------- JUNE 30,
1995(1) 1995 1994 1993 1992 1991 1990(1)
-------- --------- --------- -------- -------- -------- -------
CLASS B CLASS A
-------- -----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of period $ 10.38 $ 10.38 $ 11.22 $ 10.45 $ 10.07 $ 10.01 $ 10.00
-------- --------- --------- -------- -------- -------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.53 0.61 0.61 0.62 0.65 0.63 0.57
Net realized and unrealized gain/(loss)
on investments 0.15 0.15 (0.82) 0.77 0.38 0.06 0.01
-------- --------- --------- -------- -------- -------- -------
Total from investment operations 0.68 0.76 (0.21) 1.39 1.03 0.69 0.58
LESS DISTRIBUTIONS:
Dividends from net investment income (0.53) (0.61) (0.61) (0.62) (0.65) (0.63) (0.57)
Distributions in excess of net investment
income -- -- (0.00)(6) -- -- -- --
Distributions from net realized gains (0.00)(6) (0.00)(6) -- -- -- -- --
Distributions in excess of net realized
gains -- -- (0.02) -- -- -- --
-------- --------- --------- -------- -------- -------- -------
Total distributions (0.53) (0.61) (0.63) (0.62) (0.65) (0.63) (0.57)
-------- --------- --------- -------- -------- -------- -------
Net asset value at end of period $ 10.53 $ 10.53 $ 10.38 $ 11.22 $ 10.45 $ 10.07 $ 10.01
======== ========= ========= ======== ======== ======== =======

TOTAL RETURN(3) 6.78% 7.57% (2.19)% 13.84% 10.56% 7.16% 5.99%
==== ==== ===== ===== ===== ==== ====

RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 7,230 $405,967 $509,223 $511,364 $309,146 $202,595 $92,972
Ratio of operating expenses to
average net assets 1.60% 0.85% 0.79% 0.80% 0.94% 1.05% 1.01%(2)
Ratio of net investment income to
average net assets 5.14% 5.89% 5.45% 5.74% 6.08% 6.30% 6.26%(2)
Portfolio turnover rate 22% 22% 50% 41% 29% 16% 38%
Ratio of operating expenses to average
net assets without fee waivers(4) 2.04% 1.29% 1.39% 1.41% 1.40% 1.60% 1.84%(2)
Net investment income per share without
fee waivers(5) $ 0.48 $ 0.56 $ 0.54 $ 0.56 $ 0.60 $ 0.58 $ 0.49
- ----------
(1) The Fund commenced operations on July 25, 1989. On July 1, 1994, the Fund commenced selling Class B and Class S Shares in
addition to Class A Shares. Those shares in existence prior to July 1, 1994 were designated Class A Shares.
(2) Annualized
(3) Total return represents aggregate total return for the periods indicated and does not reflect any applicable sales charges.
The total returns would have been lower if certain fees had not been waived by the investment advisor, administrator and/or
distributor.
(4) Annualized operating expense ratios without fee waivers by investment advisor, administrator and/or distributor.
(5) Net investment income per share without fee waivers by investment advisor, administrator and/or distributor.
(6) Amount represents less than $0.01 per share.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FLORIDA INSURED MUNICIPAL FUND
FINANCIAL HIGHLIGHTS

For a share outstanding throughout each period.

PERIOD
YEAR ENDED JUNE 30, ENDED
--------------------------------------------------- JUNE 30,
1995(1) 1995 1994 1993(1)
----------- ---------- ---------- -----------
CLASS B CLASS A
----------- ---------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value at beginning of period $ 9.40 $ 9.40 $ 10.05 $ 10.00
----------- ---------- ---------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.45 0.52 0.52 0.00(6)
Net realized and unrealized gain/(loss) on
investments 0.03(7) 0.03(7) (0.65) 0.05
----------- ---------- ---------- -----------
Total from investment operations 0.48 0.55 (0.13) 0.05
LESS DISTRIBUTIONS:
Dividends from net investment income (0.45) (0.52) (0.52) --
Distributions in excess of net investment
income -- -- (0.00)(6) --
Distributions in excess of net realized gains -- -- (0.00)(6) --
----------- ---------- ---------- -----------
Total distributions (0.45) (0.52) (0.52) --
----------- ---------- ---------- -----------
Net asset value at end of period $ 9.43 $ 9.43 $ 9.40 $ 10.05
=========== ========== ========== ===========

TOTAL RETURN(3) 5.23% 6.01% (1.50)% 0.50%
==== ==== ===== ====

RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 3,330 $33,714 $38,541 $ 4,837
Ratio of operating expenses to average net
assets 1.14% 0.39% 0.00% 0.00%(2)
Ratio of net investment income to average net
assets 4.78% 5.53% 5.09% 0.48%(2)
Portfolio turnover rate 44% 44% 83% 0%
Ratio of operating expenses to average net
assets without fee waivers and expenses
absorbed(4) 2.26% 1.51% 1.55% 5.59%(2)
Net investment income/(loss) per share
without fee waivers and expenses absorbed
(5) $ 0.35 $ 0.42 $ 0.36 $ (0.02)

- ----------

(1) The Fund commenced operations on June 7, 1993. On July 1, 1994, the Fund commenced selling Class B and Class S Shares in
addition to Class A Shares. Those shares in existence prior to July 1, 1994 were designated Class A Shares.
(2) Annualized
(3) Total return represents aggregate total return for the periods indicated and does not reflect any applicable sales charges.
The total returns would have been lower if certain fees had not been waived and expenses had not been absorbed by the
investment advisor and/or administrator.
(4) Annualized operating expense ratios without fee waivers and expenses absorbed by investment advisor and/or administrator.
(5) Net investment income per share without fee waivers and expenses absorbed by investment advisor and/or administrator.
(6) Amount represents less than $0.01 per share.
(7) The amount shown may not accord with the change in aggregate gains and losses of portfolio securities due to the timing of
sales and redemptions of Fund shares.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CALIFORNIA INSURED INTERMEDIATE MUNICIPAL FUND
FINANCIAL HIGHLIGHTS

For a share outstanding throughout each period.

PERIOD
YEAR ENDED JUNE 30, ENDED
--------------------------------- JUNE 30,
1995(1) 1995 1994(1)
----------- ----------- ----------
CLASS B CLASS A
----------- ---------------------------------
<S> <C> <C> <C>
Net asset value at beginning of period $ 10.10 $ 10.10 $ 10.00
----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.43 0.50 0.11
Net realized and unrealized gain on investments 0.35 0.35 0.11(6)
----------- ----------- -----------
Total from investment operations 0.78 0.85 0.22
LESS DISTRIBUTIONS:
Dividends from net investment income (0.43) (0.50) (0.11)
Distributions from net realized gains -- -- (0.01)
----------- ----------- -----------
Total distributions (0.43) (0.50) (0.12)
----------- ----------- -----------
Net asset value at end of period $ 10.45 $ 10.45 $ 10.10
=========== =========== ===========

TOTAL RETURN(3) 7.90% 8.71% 2.20%
==== ==== ====

RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 12,391 $54,507 $34,147
Ratio of operating expenses to average net
assets 1.17% 0.42% 0.00%(2)
Ratio of net investment income to average net
assets 4.20% 4.95% 4.25%(2)
Portfolio turnover rate 13% 13% 17%
Ratio of operating expenses to average net
assets without fee waivers and expenses
absorbed(4) 2.16% 1.41% 1.95%(2)
Net investment income per share without fee
waivers and expenses absorbed(5) $ 0.33 $ 0.40 $ 0.06

- ----------
(1) The Fund commenced operations on April 4, 1994. On July 1, 1994, the Fund commenced selling Class B and Class S Shares in
addition to Class A Shares. Those shares in existence prior to July 1, 1994 were designated Class A Shares.
(2) Annualized
(3) Total return represents aggregate total return for the periods indicated and does not reflect any applicable sales charges.
The total returns would have been lower if certain fees had not been waived and expenses had not been absorbed by the
investment advisor and/or administrator.
(4) Annualized operating expense ratios without fee waivers and expenses absorbed by investment advisor and/or administrator.
(5) Net investment income per share without fee waivers and expenses absorbed by investment advisor and/or administrator.
(6) The amount shown may not accord with the change in aggregate gains and losses of portfolio securities due to the timing of
sales and redemptions of Fund shares.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NATIONAL MUNICIPAL FUND
FINANCIAL HIGHLIGHTS

For a share outstanding throughout each period.

PERIOD
YEAR ENDED JUNE 30, ENDED
------------------------------------------------------------------- JUNE 30,
1995(1) 1995 1994 1993 1992 1991(1)
--------- ---------- --------- --------- --------- ---------
CLASS B CLASS A
--------- ------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of period $ 10.85 $ 10.85 $ 11.65 $ 10.96 $ 10.16 $ 10.00
--------- ---------- --------- --------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.56 0.64 0.65 0.67 0.72 0.64
Net realized and unrealized gain/(loss) on
investments 0.01(7) 0.01(7) (0.73) 0.75 0.79 0.16
--------- ---------- --------- --------- --------- ---------
Total from investment operations 0.57 0.65 (0.08) 1.42 1.51 0.80
LESS DISTRIBUTIONS:
Dividends from net investment income (0.56) (0.64) (0.65) (0.67) (0.71) (0.64)
Distributions in excess of net investment
income -- -- (0.00)(6) -- -- --
Distributions from net realized gains (0.01) (0.01) (0.07) (0.06) -- --
Distributions in excess of net realized
gains (0.09) (0.09) -- -- -- --
--------- ---------- --------- --------- --------- ---------
Total distributions (0.66) (0.74) (0.72) (0.73) (0.71) (0.64)
--------- ---------- --------- --------- --------- ---------
Net asset value at end of period $ 10.76 $ 10.76 $ 10.85 $ 11.65 $ 10.96 $ 10.16
========= ========== ========= ========= ========= =========

TOTAL RETURN(3) 5.54% 6.32% (0.90)% 13.41% 15.42% 8.27%
==== ==== ===== ===== ===== ====

RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 4,786 $269,033 $354,501 $390,187 $226,984 $44,915
Ratio of operating expenses to average
net assets 1.58% 0.83% 0.87% 0.86% 0.64% 0.55%(2)
Ratio of net investment income to
average net assets 5.22% 5.97% 5.60% 5.89% 6.34% 6.84%(2)
Portfolio turnover rate 23% 23% 44% 83% 61% 81%
Ratio of operating expenses to average
net assets without fee waivers and
expenses absorbed(4) 2.05% 1.30% 1.36% 1.37% 1.40% 1.68%(2)
Net investment income per share without
fee waivers and expenses absorbed(5) $ 0.51 $ 0.59 $ 0.59 $ 0.61 $ 0.63 $ 0.53

- ----------
(1) The Fund commenced operations on July 18, 1990. On July 1, 1994, the Fund commenced selling Class B and Class S Shares in
addition to Class A Shares. Those shares in existence prior to July 1, 1994 were designated Class A Shares.
(2) Annualized
(3) Total return represents aggregate total return for the periods indicated and does not reflect any applicable sales charges.
The total returns would have been lower if certain fees had not been waived and expenses had not been absorbed by the
investment advisor, administrator and/or distributor.
(4) Annualized operating expense ratios without fee waivers and expenses absorbed by investment advisor, administrator and/or
distributor.
(5) Net investment income per share without fee waivers and expenses absorbed by investment advisor, administrator and/or
distributor.
(6) Amount represents less than $0.01 per share.
(7) The amount shown may not accord with the change in aggregate gains and losses of portfolio securities due to the timing of
sales and redemptions of Fund shares.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GROWTH AND INCOME FUND
FINANCIAL HIGHLIGHTS

For a share outstanding throughout each period.

TOTAL RETURN(3) 19.67% 20.47% 6.67% 9.20% 8.65% 6.70% 3.17%
===== ===== ==== ==== ==== ==== ====

RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 6,918 $170,177 $125,249 $97,873 $83,825 $33,930 $20,964
Ratio of operating expenses to average
net assets 2.31% 1.56% 1.50% 1.46% 1.50% 1.52% 1.37%(2)
Ratio of net investment income to
average net assets 0.36% 1.11% 1.04% 1.01% 1.51% 2.48% 3.21%(2)
Portfolio turnover rate 72% 72% 127% 47% 16% 19% 16%
Ratio of operating expenses to average
net assets without fee waivers(4) 2.31% 1.56% 1.59% 1.46% 1.55% 1.78% 2.01%(2)
Net investment income per share without
fee waivers(5) $ 0.05 $ 0.13 $ 0.11 $ 0.12 $ 0.16 $ 0.21 $ 0.19

For a share outstanding throughout each period.

PERIOD
YEAR ENDED JUNE 30, ENDED
---------------------------------------------------- JUNE 30,
1995(1)(8) 1995(8) 1994 1993(1)
---------- ----------- ----------- -----------
CLASS B CLASS A
---------- -----------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value at beginning of period $ 10.73 $ 10.73 $ 10.72 $ 10.00
---------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income/(loss) (0.04) 0.05 (0.02) 0.00(6)
Net realized and unrealized gain on
investments 3.42 3.42 0.03(7) 0.72
---------- ----------- ----------- -----------
Total from investment operations 3.38 3.47 0.01 0.72
LESS DISTRIBUTIONS:
Dividends from net investment income (0.01) (0.02) -- --
Distributions from net realized gains (0.00)(6) (0.00)(6) -- --
---------- ----------- ----------- -----------
Total distributions (0.01) (0.02) -- --
---------- ----------- ----------- -----------
Net asset value at end of period $ 14.10 $ 14.18 $ 10.73 $ 10.72
========== =========== =========== ===========

TOTAL RETURN(3) 31.46% 32.33% 0.00% 7.30%
===== ===== ==== ====

RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 6,928 $154,763 $126,808 $23,323
Ratio of operating expenses to average net
assets 2.51% 1.76% 1.75% 1.44%(2)
Ratio of net investment income/(loss) to
average net assets (0.47)% 0.28% (0.35)% (0.63)%(2)
Portfolio turnover rate 233% 233% 227% 13%
Ratio of operating expenses to average net
assets without fee waivers and/or expenses
absorbed(4) 2.51% 1.76% 1.75% 2.52%(2)
Net investment income/(loss) per share
without fee waivers and/or expenses
absorbed(5) $ (0.04) $ 0.05 $ (0.02) $ (0.01)

- ----------
(1) The Fund commenced operations on April 5, 1993. On July 1, 1994, the Fund commenced selling Class B and Class S Shares in
addition to Class A Shares. Those shares in existence prior to July 1, 1994 were designated Class A Shares.
(2) Annualized
(3) Total return represents aggregate total return for the periods indicated and does not reflect any applicable sales charges.
The total returns would have been lower if certain fees had not been waived and/or expenses had not been absorbed by the
investment advisor and/or administrator.
(4) Annualized operating expense ratios without fee waivers and/or expenses absorbed by investment advisor and/or administrator.
(5) Net investment income per share without fee waivers and/or expenses absorbed by investment advisor and/or administrator.
(6) Amount represents less than $0.01 per share.
(7) The amount shown may not accord with the change in aggregate gains and losses of portfolio securities due to the timing of
sales and redemptions of Fund shares.
(8) Per share numbers have been calculated using the average shares method, which more appropriately presents the per share data
for the year since the use of the undistributed income method did not accord with results of operations.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EMERGING GROWTH FUND
FINANCIAL HIGHLIGHTS

For a share outstanding throughout each period.

PERIOD
YEAR ENDED JUNE 30, ENDED
------------------------------------------------------------------- JUNE 30,
1995(1)(8) 1995(8) 1994 1993 1992(8) 1991(1)
--------- ---------- --------- --------- --------- ---------
CLASS B CLASS A
--------- ------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of period $ 13.02 $ 13.02 $ 13.76 $ 11.67 $ 9.62 $ 10.00
--------- ---------- --------- --------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income/(loss) (0.10) (0.00)(6) (0.09) (0.02) (0.01) 0.09
Net realized and unrealized gain/(loss) on
investments 2.77 2.77 0.68 2.31 2.16 (0.40)
--------- ---------- --------- --------- --------- ---------
Total from investment operations 2.67 2.77 0.59 2.29 2.15 (0.31)
LESS DISTRIBUTIONS:
Dividends from net investment income -- -- -- -- (0.01) (0.07)
Distributions from net realized gains (0.32) (0.32) (1.33) (0.20) (0.08) --
Distributions from capital -- -- -- -- (0.01)(7) --
--------- ---------- --------- --------- --------- ---------
Total distributions (0.32) (0.32) (1.33) (0.20) (0.10) (0.07)
--------- ---------- --------- --------- --------- ---------
Net asset value at end of period $ 15.37 $ 15.47 $ 13.02 $ 13.76 $ 11.67 $ 9.62
========= ========== ========= ========= ========= =========

TOTAL RETURN(3) 20.69% 21.54% 3.40% 19.75% 22.47% (2.95)%
===== ===== ==== ===== ===== =====

RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 10,208 $185,722 $124,941 $ 96,646 $ 27,652 $ 8,490
Ratio of operating expenses to average
net assets 2.43% 1.68% 1.66% 1.59% 1.93% 1.84%(2)
Ratio of net investment income/(loss) to
average net assets (1.06)% (0.31)% (0.68)% (0.32)% (0.04)% 1.10%(2)
Portfolio turnover rate 181% 181% 224% 28% 60% 17%
Ratio of operating expenses to average
net assets without fee waivers(4) 2.43% 1.68% 1.66% 1.59% 1.93% 2.11%(2)
Net investment income/(loss) per share
without fee waivers(5) $ (0.10) $ (0.00)(6) $ (0.09) $ (0.02) $ (0.01) $ 0.07

- ----------
(1) The Fund commenced operations on July 18, 1990. On July 1, 1994, the Fund commenced selling Class B and Class S Shares in
addition to Class A Shares. Those shares in existence prior to July 1, 1994 were designated Class A Shares.
(2) Annualized
(3) Total return represents aggregate total return for the periods indicated and does not reflect any applicable sales charges.
The total returns would have been lower if certain fees had not been waived by the investment advisor and/or administrator.
(4) Annualized operating expense ratios without fee waivers by investment advisor and/or administrator.
(5) Net investment income per share without fee waivers by investment advisor and/or administrator.
(6) Amount represents less than $0.01 per share.
(7) Amounts distributed in excess of accumulated net investment income as determined for financial statement purposes have been
reported as distributions from paid-in capital at the fiscal year end in which the distribution is made. Certain of these
distributions which are reported as being from paid-in capital for financial statement purposes may be reported to
shareholders as taxable distributions due to differing tax and accounting rules.
(8) Per share numbers have been calculated using the average shares method, which more appropriately presents the per share data
for the year since the use of the undistributed income method did not accord with results of operations.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INTERNATIONAL GROWTH FUND
FINANCIAL HIGHLIGHTS

For a share outstanding throughout each period.

PERIOD
YEAR ENDED JUNE 30, ENDED
------------------------------------------------------------------- JUNE 30,
1995(1)(6) 1995(6) 1994 1993 1992 1991(1)
--------- ---------- --------- --------- --------- ---------
CLASS B CLASS A
--------- ------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of period $ 10.74 $ 10.74 $ 9.80 $ 8.82 $ 8.27 $ 10.00
--------- ---------- ---------- -------- -------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income/(loss) (0.17)(7) (0.11)(7) 0.06 0.07 0.05 0.02
Net realized and unrealized gain/(loss) on
investments (0.31) (0.31) 1.15 0.94 0.55 (1.75)
--------- ---------- ---------- -------- -------- ---------
Total from investment operations (0.48) (0.42) 1.21 1.01 0.60 (1.73)
LESS DISTRIBUTIONS:
Dividends from net investment income (0.03) (0.04) (0.02) (0.03) (0.05) --
Distributions from net realized gains (0.44) (0.44) (0.25) -- -- --
Distributions in excess of net realized
gains (0.06) (0.06) -- -- -- --
--------- ---------- ---------- -------- -------- ---------
Total distributions (0.53) (0.54) (0.27) (0.03) (0.05) --
--------- ---------- ---------- -------- -------- ---------
Net asset value at end of period $ 9.73 $ 9.78 $ 10.74 $ 9.80 $ 8.82 $ 8.27
========= ========== ========== ======== ======== =========

TOTAL RETURN(3) (4.61)% (4.01)% 12.39% 11.51% 7.28% (17.30)%
===== ===== ===== ===== ==== ======

RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 2,268 $ 91,763 $127,764 $56,962 $24,479 $11,647
Ratio of operating expenses to average
net assets 2.44% 1.69% 1.69% 1.80% 2.25% 2.24%(2)
Ratio of net investment income/(loss) to
average net assets (0.13)% 0.62% 0.54% 1.07% 0.69% 0.51%(2)
Portfolio turnover rate 81% 81% 44% 63% 66% 45%
Ratio of operating expenses to average
net assets without fee waivers(4) 2.44% 1.69% 1.69% 1.80% 2.29% 2.47%(2)
Net investment income/(loss) per share
without fee waivers(5) $ (0.17) $ (0.11) $ 0.06 $ 0.07 $ 0.04 $ 0.01

- ----------
(1) The Fund commenced operations on July 18, 1990. On July 1, 1994, the Fund commenced selling Class B and Class S Shares in
addition to Class A Shares. Those shares in existence prior to July 1, 1994 were designated Class A Shares.
(2) Annualized
(3) Total return represents aggregate total return for the periods indicated and does not reflect any applicable sales charges.
The total returns would have been lower if certain fees had not been waived by the investment advisor, administrator and/or
distributor.
(4) Annualized operating expense ratios without fee waivers by investment advisor, administrator and/or distributor.
(5) Net investment income per share without fee waivers by investment advisor, administrator and/or distributor.
(6) Per share numbers have been calculated using the average shares method, which more appropriately presents the per share data
for the year since the use of the undistributed income method did not accord with results of operations.
(7) Amount shown reflects certain reclassifications related to book to tax differences.
</TABLE>
<PAGE>
THE FUNDS' INVESTMENTS AND RISK CONSIDERATIONS

The following section describes the investment objective and policies of each
Fund and some of the risk considerations of investing in the Funds. The
"Securities and Investment Practices" section that follows provides more
information about the types of securities and investment practices that the
Funds may use and the risk considerations related to such securities and
investment practices.

INVESTMENT PRINCIPLES AND RISK CONSIDERATIONS

THE MONEY FUNDS

Each Money Fund invests only in U.S. Dollar-denominated short-term, money market
securities that present minimal credit risk 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 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.

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

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.

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.

CALIFORNIA MONEY FUND. The Fund's investment objective is to maximize current
income that is excluded from gross income for federal income tax purposes and is
exempt from California State personal income taxation, consistent with safety of
principal and maintenance of liquidity. The Fund pursues its objective by
investing in a portfolio of high grade municipal securities, which means
municipal securities that meet the Fund's quality and maturity criteria.
"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, and
"California Municipal Securities" means Municipal Securities issued by the State
of California and its political subdivisions as well as certain other
governmental issuers such as the Commonwealth of Puerto Rico. Except when the
Fund assumes a temporary defensive position, at least 80% of the Fund's total
assets will be invested in Municipal Securities and at least 65% of its total
assets will be invested in California Municipal Securities. The requirement to
invest at least 80% of the Fund's assets in Municipal Securities is a
fundamental policy that cannot be changed without the consent of the Fund's
shareholders. The Fund may invest without limitation in Municipal Securities
issued to finance certain "private activities" ("AMT-Subject Bonds"), such as
bonds used to finance airports, housing projects, student loan programs and
water and sewer projects. To reduce investment risk, the California Money Fund
may not invest more than 25% of its total assets in Municipal Securities whose
interest is paid from revenues of similar-type projects.

For temporary defensive purposes, the Fund may invest without limitation in (1)
Municipal Securities that are not exempt from California personal income tax and
(2) short-term Municipal Securities or taxable cash equivalents, including
short-term U.S. Government Securities, certificates of deposit and bankers'
acceptances, commercial paper rated Prime-1 by Moody's or A-1+ or A-1 by S&P,
repurchase agreements and securities of other money market mutual funds. Under
normal market conditions the Fund may invest up to 20% of its assets in these
taxable cash equivalents.

The California Money Fund is designed to generate tax-exempt income. A
shareholder of the California Money Fund may earn a higher after-tax return from
the Fund than from comparable investments that generate taxable income. For an
illustration of the benefits of tax-free investing, see the section entitled
"Performance." For a discussion of the tax consequences of investing in
AMT-Subject Bonds, see "Securities and Investment Practices -- Municipal
Securities and AMT-Subject Bonds" and "Dividends, Capital Gains and Taxes."

The Fund may also invest in variable rate demand obligations, stand-by
commitments, when-issued securities and forward commitments.

THE BOND FUNDS

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

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

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

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

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

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

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

Thomas M. Poor, Managing Director of Scudder, is the portfolio manager of the
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 Short Term High
Quality Bond Fund since its inception.

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); (ii) U.S. Government Securities; and (iii) debt
securities issued or guaranteed by supranational organizations, considered to be
"government securities."

The Fund may also invest in non-government foreign and domestic debt securities,
including 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.

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 often considered to be speculative and
involve greater risk of default or price changes due to changes in the issuer's
creditworthiness. The market prices of these securities may fluctuate more than
higher-rated securities and may decline significantly in periods of general
economic difficulty, which may follow periods of rising interest rates. See
"Securities and Investment Practices -- Lower-Rated Securities."

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.

Margaret Craddock, Vice President of Scudder, is the portfolio manager for the
Short Term Global Government Fund. Ms. Craddock was part of the international
bond team at Alliance Capital from 1987 to 1991, until she joined Scudder. She
has had primary management responsibility for the Short Term Global Government
Fund since the Fund's inception.

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
assets in the types of securities in which the Corporate Income Fund may invest
except as otherwise prohibited in this Prospectus or the SAI, including
corporate bonds, preferred stock, convertible corporate bonds, convertible
preferred stock, government stripped mortgage-backed securities, asset-backed
securities and interests in lease obligations. A substantial portion of the
Fund's assets at any time may consist of mortgage-backed securities. For more
detailed information regarding the types of securities in which the Corporate
Income Fund may invest, see "Corporate Income Fund."

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

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

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

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

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

CALIFORNIA MUNICIPAL FUND. The Fund's investment objective is to provide as high
a level of current income that is excluded from gross income for federal income
tax purposes and is exempt from California State personal income tax as is
consistent with prudent investment management and preservation of capital. The
Fund pursues its objective by investing in intermediate and long-term California
Municipal Securities (as described in "Securities and Investment Practices --
Municipal Securities and AMT-Subject Bonds"), although the average maturity of
the Fund will vary depending on anticipated market conditions. A fundamental
policy that cannot be changed without the consent of the Fund's shareholders is
that under normal market conditions, at least 80% of the Fund's total assets
will be invested in California Municipal Securities. The Fund may invest without
limitation in AMT-Subject Bonds, as described in "Securities and Investment
Practices -- Municipal Securities and AMT-Subject Bonds."

The Fund will invest in investment-grade Municipal Securities, which are
securities rated at the time of purchase within the four highest ratings
assigned by Moody's, S&P, Duff, or Fitch, or, if unrated, are judged to be of
comparable quality by the Fund's Sub-Advisor. The higher tax-free yields sought
by the Fund are generally obtainable from medium-quality Municipal Securities
rated A or Baa by Moody's or A or BBB by S&P. For more information, see
"Securities and Investment Practices -- Fixed-Income Obligations and
Securities."

The Fund may invest up to 20%, in the aggregate, of its assets in (1) Municipal
Securities that are not exempt from California personal income tax and (2)
short-term Municipal Securities and taxable cash equivalents, including
short-term U.S. Government Securities, certificates of deposit and bankers'
acceptances, commercial paper rated Prime-1 by Moody's or A-1+ or A-1 by S&P,
repurchase agreements and securities of other money market mutual funds (subject
to the limitations set forth under "Securities and Investment Practices") and,
for temporary defensive purposes, may invest in these securities without
limitation. The Fund may at any time invest up to 20% of its total assets in
taxable cash equivalents, although it is anticipated that under normal
circumstances substantially all of the Fund's assets will be invested in
Municipal Securities generating tax-exempt income.

The Fund may engage in hedging transactions through the use of financial
futures, bond index futures and options thereon, purchase and sell securities on
a when-issued and forward commitment basis, invest in mortgage-backed
securities, enter into repurchase agreements, invest in stand-by commitments and
lend portfolio securities. The Fund may invest in floating rate, inverse
floating rate and variable rate obligations, including participation interests
therein.

Since May 1992, Joseph A. Piraro, a Vice President of Van Kampen, has had
primary responsibility for the day-to-day management of the Fund's portfolio.
Mr. Piraro has been a Vice President of Van Kampen since January 1993 and
Assistant Vice President since June 1992. Prior to joining Van Kampen, Mr.
Piraro was a Senior Municipal Bond Trader for First National Bank of Chicago
from November 1987 to May 1992.

FLORIDA INSURED MUNICIPAL FUND. The Fund's primary investment objective is to
seek as high a level of current income, exempt from federal income tax, as is
consistent with prudent investment management and preservation of capital, and
to offer investors the opportunity to own shares the value of which is exempt
from Florida intangible personal property tax.

To accomplish this goal, the Fund will invest primarily in insured, intermediate
and long-term Florida Municipal Securities. It is a fundamental policy of the
Fund that it will invest at least 80% of the value of its total assets (except
when maintaining a temporary defensive position) in insured Florida Municipal
Securities. The Fund pursues its objective by investing in intermediate and
long-term Florida Municipal Securities, although the average maturity of the
Fund will vary depending on anticipated market conditions. The Fund may invest
without limitation in AMT-Subject Bonds, as described in "Securities and
Investment Practices -- Municipal Securities and AMT-Subject Bonds." Current
federal income tax laws limit the types and volume of bonds qualifying for the
federal income tax exemption of interest, which may have an effect on the
ability of the Fund to purchase sufficient amounts of tax-exempt securities.

The "insured obligations" in the Fund's investment portfolio are insured as to
the scheduled payment of all installments of principal and interest as they fall
due. The purpose of such insurance is to minimize credit risks to the Fund and
its shareholders associated with defaults in Florida Municipal Securities owned
by the Fund. Such insurance does not insure against market risk and therefore
does not guarantee the market value of the obligations in the Fund's investment
portfolio upon which the NAV of the Fund's shares is based. Such market value
will continue to fluctuate in response to fluctuations in interest rates or the
bond market. Similarly, such insurance does not cover or guarantee the value of
the shares of the Fund.

The investment policy requiring insurance on investments applies only to Florida
Municipal Securities in the Fund's investment portfolio and will not affect the
Fund's ability to hold its assets in cash or to invest in escrow secured and
defeased bonds or in certain short-term tax-exempt obligations as set forth
herein, or affect its ability to invest in uninsured taxable obligations for
temporary or liquidity purposes or on a defensive basis in accordance with the
investment policies and restrictions of the Fund.

The Fund will invest in investment-grade Municipal Securities, which are
securities rated at the time of purchase within the four highest ratings
assigned by Moody's, S&P, Duff, or Fitch, or, if unrated, are judged to be of
comparable quality by the Fund's Sub-Advisor. The higher tax-free yields sought
by the Fund are generally obtainable from medium-quality Municipal Securities
rated A or Baa by Moody's or A or BBB by S&P. See "Securities and Investment
Practices -- Fixed-Income Securities."

The Fund may invest up to 20%, in the aggregate, of its total assets in (1)
Municipal Securities that are not insured Municipal Securities; (2) Municipal
Securities that are not exempt from Florida intangible personal property tax;
and (3) short-term Municipal Securities and taxable cash equivalents, including
short-term U.S. Government Securities, certificates of deposit, time deposits
and bankers' acceptances, commercial paper rated Prime-1 by Moody's or A-1+ or
A-1 by S&P, repurchase agreements and securities of money market mutual funds
and, for temporary defensive purposes, may invest in these securities without
limitation except that investments in securities of money market mutual funds
are subject to the limitations set forth under "Securities and Investment
Practices -- Holdings in Other Investment Companies." The Fund may at any time
invest up to 20% of its total assets in taxable cash equivalents, although it is
anticipated that under normal circumstances substantially all of the Fund's
assets will be invested in Municipal Securities generating tax-exempt income.
The Fund may invest in floating rate, inverse floating rate and variable rate
obligations, including participation interests therein.

Florida does not impose an income tax on individuals. Distributions of
investment income and capital gains by the Fund will be subject to Florida
corporate income taxes. Florida imposes a tax on intangible personal property
owned by Florida residents. Based on a ruling the Fund has received from the
Florida Department of Revenue, if the Fund's assets consist, on the last
business day of the calendar year, solely of assets exempt from Florida
intangible personal property tax, shares of the Fund owned by Florida residents
will be exempt from Florida intangible personal property tax. Assets exempt from
Florida intangible personal property tax include obligations issued by the State
of Florida and its political subdivisions, municipalities, and public
authorities; obligations of the United States Government or its agencies; and
cash.

Since June 1995, Joseph A. Piraro, a Vice President of Van Kampen, has had
primary responsibility for the day-to-day management of the Fund's portfolio.
Mr. Piraro has been a Vice President of Van Kampen since January 1993 and
Assistant Vice President since June 1992. Prior to joining Van Kampen, Mr.
Piraro was a Senior Municipal Bond Trader for First National Bank of Chicago
from November 1987 to May 1992.

CALIFORNIA INSURED INTERMEDIATE MUNICIPAL FUND. The Fund's investment objective
is to provide California investors with as high a level of current income exempt
from federal and California State income tax as is consistent with prudent
investment management and preservation of capital. To accomplish its investment
objective, the Fund will invest primarily in insured intermediate term
California Municipal Securities (as described in "Securities and Investment
Practices -- Municipal Securities and AMT-Subject Bonds").

It is a fundamental policy of the Fund that it will invest at least 80% of the
value of its total assets (except when maintaining a temporary defensive
position) in insured California Municipal Securities. The weighted average
effective maturity of the securities in which the Fund invests will be ten years
or less and the maximum effective maturity of any Municipal Securities in which
the Fund invests will be fifteen years, such effective maturity to be the call
date of Municipal Securities with mandatory call provisions and to be the
expected average life of mortgage obligations underlying the Municipal
Securities.

The insured California Municipal Securities in which the Fund will invest are
insured under insurance policies that relate to the specific Municipal Security
in question ("Specific Issue Insurance") and that are issued by any insurer
having a claims-paying ability rated AAA by S&P or Aaa by Moody's. Five such
insurers are MBIA Insurance Corporation ("MBIA"), Financial Guaranty Insurance
Company ("FGIC"), AMBAC Indemnity Corporation ("AMBAC"), Financial Securities
Assurance Incorporated ("FSA") and Capital Guaranty Insurance Company ("CGIC").
S&P has rated the claims-paying ability of MBIA, FGIC, AMBAC, FSA and CGIC and
the Municipal Securities insured by these organizations AAA. Further information
with respect to MBIA, FGIC, AMBAC, FSA and CGIC is set forth in the SAI. Some
Specific Issue Insurance will have been obtained by the issuer of the Municipal
Securities or by an investor subsequent to the security's original issuance and
all premiums respecting such securities for the remaining lives thereof will
have been paid in advance by such issuer or investor. Such policies are
generally non-cancelable and will continue in force so long as the Municipal
Securities are outstanding and the insurer remains in business. Since such
Specific Issue Insurance remains in effect as long as the securities are
outstanding, the insurance may have an effect on the resale value of the
Municipal Securities. Therefore, such Specific Issue Insurance may be considered
to represent an element of market value in regard to Municipal Securities thus
insured, but the exact effect, if any, of this insurance on such market value
cannot be estimated.

The insured California Municipal Securities in which the Fund will invest are
insured as to the scheduled payment of all installments of principal and
interest as they fall due. The purpose of such insurance is to minimize credit
risks to the Fund and its shareholders associated with defaults in California
Municipal Securities owned by the Fund. Such insurance does not insure against
market risk and therefore does not guarantee the market value of the obligations
in the Fund's investment portfolio upon which the NAV of the Fund's shares is
based. Such market value will continue to fluctuate in response to fluctuations
in interest rates or the bond market. Similarly, such insurance does not cover
or guarantee the value of the shares of the Fund. The investment policy
requiring insurance on investments (that is applicable to California Municipal
Securities to the extent of 80% of the Fund's total assets) will not affect the
Fund's ability to hold its assets in cash or to invest in escrow secured and
defeased bonds or in certain short-term tax-exempt obligations as set forth
herein, or affect its ability to invest in uninsured taxable obligations for
temporary or liquidity purposes or on a defensive basis in accordance with the
investment policies and restrictions of the Fund.

The Fund's Sub-Advisor intends to retain any insured California Municipal
Securities that are in default or, in the opinion of the Fund's Sub-Advisor, in
significant risk of default and to place a value on the insurance which
ordinarily will be the difference between the market value of the defaulted
security and the market value of similar securities that are not in default. In
certain circumstances, however, the Fund's Sub-Advisor may determine that an
alternative value for the insurance, such as the difference between the market
value of the defaulted security and its par value, is more appropriate. The
Fund's Sub-Advisor will be unable to manage the Fund to the extent it holds
defaulted securities which may limit its ability in certain circumstances to
purchase other Municipal Securities.

All of the Municipal Securities in which the Fund will invest are
investment-grade securities, securities that are rated at the time of purchase
within the four highest ratings assigned by Moody's, S&P, Duff, or Fitch, or, if
unrated, are judged to be of comparable quality by the Fund's Sub-Advisor. The
higher tax-free yields sought by the Fund are generally obtainable from
medium-quality Municipal Securities rated A or Baa by Moody's or A or BBB by
S&P. Municipal Securities 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. For more information, see "Securities and Investment Practices --
Fixed-Income Obligations and Securities."

The Fund is designed to generate tax-exempt income. A shareholder of the Fund
may earn a higher after-tax return from the Fund than from comparable
investments that generate taxable income. Current federal income tax laws limit
the types and volume of bonds qualifying for the federal income tax exemption of
interest, which may have an effect on the ability of the Fund to purchase
sufficient amounts of tax-exempt securities. For an illustration of the benefits
of tax-free investing, see the section entitled, "Performance." The Fund may
invest without limitation in AMT-Subject Bonds, as described in "Securities and
Investment Practices -- Municipal Securities and AMT-Subject Bonds."

The Fund may invest up to 20%, in the aggregate, of its assets in (1) Municipal
Securities that are not insured Municipal Securities; (2) Municipal Securities
that are not exempt from California personal income tax; and (3) short-term
Municipal Securities and taxable cash equivalents, including short-term U.S.
Government Securities, certificates of deposit, time deposits and bankers'
acceptances, commercial paper rated Prime-1 by Moody's or A-1+ or A-1 by S&P,
repurchase agreements and securities of investment companies that are money
market funds and, for temporary defensive purposes, may invest in these
securities without limitation, except that investments in securities of money
market mutual funds are subject to the limitations set forth under "Securities
and Investment Practices -- Holdings in Other Investment Companies." The Fund
may at any time invest up to 20% of its total assets in taxable cash
equivalents, although it is anticipated that under normal circumstances
substantially all of the Fund's assets will be invested in Municipal Securities
generating tax-exempt income.

The Fund may engage in hedging transactions through the use of financial
futures, bond index futures and options thereon, purchase and sell securities on
a when-issued or forward commitment basis, invest in mortgage-backed securities,
enter into repurchase agreements, invest in stand-by commitments and lend
portfolio securities. The Fund may invest in floating rate, inverse floating
rate and variable rate obligations, including participation interests therein.

Since the Fund's inception, Joseph A. Piraro, a Vice President of Van Kampen
has had primary responsibility for the day-to-day management of the Fund's
portfolio. Mr. Piraro has been a Vice President of Van Kampen since January
1993 and Assistant Vice President since June 1992. Prior to joining Van
Kampen, Mr. Piraro was a Senior Municipal Bond Trader for First National Bank
of Chicago from November 1987 to May 1992.

NATIONAL MUNICIPAL FUND. The Fund's investment objective is to provide a high
level of current income which is exempt from federal income tax, consistent with
preservation of capital. The Fund pursues its investment objective by investing
in intermediate and long-term Municipal Securities. It is a fundamental policy
of the Fund that it will invest at least 80% of its assets in Municipal
Securities. Under normal conditions, debt obligations with intermediate and
long-term maturities can be expected to pay higher yields and experience greater
fluctuations in value than bonds with short-term maturities. Under normal market
conditions, the longer the average maturity of Municipal Securities held in the
Fund's portfolio, the greater its expected yield and price volatility. For an
illustration of the benefits of tax-free investing, see the section entitled
"Performance."

The Fund will invest substantially all of its portfolio in investment-grade
Municipal Securities, which are securities that are rated at the time of
purchase within the four highest ratings assigned by Moody's, S&P, Duff, or
Fitch, or, if unrated, that the Fund's Sub-Advisor believes to have credit
characteristics equivalent to such investment grade rated securities. The higher
tax-free yields sought by the Fund are generally obtainable from medium-quality
Municipal Securities rated A or Baa by Moody's or A or BBB by S&P. For more
information, see "Securities and Investment Practices -- Fixed-Income
Securities." The Fund may also invest in unrated tax-exempt securities that the
Fund's Sub-Advisor believes to have credit characteristics equivalent to rated
investment grade Municipal Securities.

The Fund also may invest in "Municipal Leases," which are generally
participations in intermediate and short-term debt obligations issued by
municipalities consisting of leases or installment purchase contracts for
property or equipment. In addition, the Fund may invest without limitation in
AMT-Subject Bonds as described in "Securities and Investment Practices --
Municipal Securities and AMT-Subject Bonds."

The Fund also may invest, for temporary defensive purposes in abnormal market
conditions, more than 20% of its assets in taxable cash equivalents.

The Fund also may invest in U.S. Government Securities and mortgage-backed
securities, engage in hedging transactions through the use of financial futures
contracts, bond index futures and options thereon, purchase and sell securities
on a when-issued and forward commitment basis, enter into repurchase agreements,
invest in stand-by commitments and lend portfolio securities. The Fund may
invest in floating rate, inverse floating rate and variable rate obligations,
including participation interests therein.

Since the Fund's inception, David C. Johnson, a Senior Vice President of Van
Kampen, has had primary responsibility for the day-to-day management of the
Fund's portfolio. Mr. Johnson has been the Portfolio Manager of the Fund since
its inception. Mr. Johnson has been a Senior Vice President of Van Kampen
since January 1995 and a First Vice President since January 1993. Mr. Johnson
has been employed by Van Kampen since April 1989.

THE EQUITY FUNDS

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 nondividend-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
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.

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

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

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

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

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

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 of less than $1 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 -- Lower-Rated Securities."

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.

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

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

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

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

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

The Fund may invest up to 25% of its assets in the securities of companies in or
governments of developing or emerging countries (sometimes referred to as
"emerging markets") approved by the Board of Trustees, provided that no more
than 5% of the Fund's total assets are invested in any one such country. For
temporary defensive purposes, the Fund may invest a major portion of its assets
in securities of United States issuers. Furthermore, the Fund may invest up to
5% of its total assets in corporate debt securities having maturities longer
than one year and which are rated BBB or better by S&P, including Euro-currency
instruments and securities.

As the Fund's portfolio co-managers, Douglas J. Dooley and Martyn C. Hole,
each a Vice President of J.P. Morgan, have had primary responsibility for the
Fund since its inception. Mr. Dooley joined J.P. Morgan's research department
in 1979 and he served as head of the International Research Group in London
from 1986 to 1990. Mr. Hole, CFA, joined J.P. Morgan in 1981 from Cambridge
University and is portfolio manager in the International Equity Group in
London.

SECURITIES AND INVESTMENT PRACTICES

The following pages contain more detailed information about types of securities
in which the Funds may invest, and strategies a Fund's Sub-Advisor may employ in
pursuit of that 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.

A Fund might not buy all of these securities or use all of these techniques to
the full extent permitted unless its Sub-Advisor, subject to oversight by Sierra
Advisors, believes that doing so will help the 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 Fund's holdings and describing recent investment
practices.

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

AMERICAN DEPOSITARY RECEIPTS AND EUROPEAN DEPOSITARY RECEIPTS
All Funds except the U.S. Government Fund, the Municipal Funds and the Money
Funds 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 Growth and Income, Emerging Growth, Corporate Income, Short Term High
Quality Bond, U.S. Government and Short Term Global 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 Funds will not invest more
than 10% of their total assets in asset-backed securities, except the Short Term
High Quality Bond Fund, which may invest up to 25% of its total assets in such
securities.

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

A 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 Funds
except the U.S. Government, Short Term High Quality Bond and Corporate Income
Funds, whenever borrowings by a Fund, including reverse repurchase agreements,
exceed 5% of the value of a Fund's total assets, the Fund will not purchase any
securities. The U.S. Government, Short Term High Quality Bond and 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% of
the 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 Trust. However, the Short Term High Quality Bond
Fund currently intends to borrow money or enter into reverse repurchase
agreements or dollar roll transactions in the aggregate in excess of 10% of its
total assets (after giving effect to such borrowings); provided, however, that
it may be able to raise this limitation up to 33 1/3% of its total assets with
approval of the Board of Trustees of the Trust.

COMMON STOCK, CONVERTIBLE SECURITIES AND OTHER EQUITY SECURITIES
The Corporate Income Fund, the 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 a Fund the right to vote on
measures affecting the company's organization and operations.

The Funds 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 a Fund, each Fund's Sub-Advisor will invest the
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.

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

A convertible security is a security that may be converted either at a stated
price or rate within a specified period of time into a specified number of
shares of common stock. By investing in convertible securities, a 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
A Fund's flexibility to participate in higher yielding debt markets outside of
the United States may allow the Fund to achieve higher yields than those
generally obtained by domestic money market funds and short-term bond
investments. If a 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 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 Fund
is invested in foreign securities, a weakening in the U.S. Dollar relative to
the foreign currencies underlying a Fund's investments should help increase the
NAV of the Fund. Conversely, a strengthening in the U.S. Dollar versus the
foreign currencies in which a Fund's securities are denominated will generally
lower the NAV of the Fund. A 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. Funds
authorized to invest in securities of foreign issuers may engage in currency
management strategies.

DEBT SECURITIES ISSUED OR GUARANTEED BY SUPRANATIONAL ORGANIZATION
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.

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

The 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 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 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 Fund's total assets (after giving
effect to any such borrowings). The Short Term High Quality Bond Fund intends to
invest up to 10% of its total assets in dollar roll transactions, but may invest
up to 33 1/3% of its total assets in such transactions.

EXCHANGE RATE-RELATED SECURITIES
Each of the Funds, except for the Money Funds, 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 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 Trust believes 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.

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 a Fund and,
consequently, the NAV per share of the 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 Fund will tend to be
somewhat higher than prevailing market rates and, in periods of rising interest
rates, the Fund's yield will tend to be somewhat lower. Also, when interest
rates are falling, the inflow of net new money to the 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 a 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 Municipal Funds and the 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 Funds may purchase
floating rate, inverse floating rate and variable rate obligations that carry a
demand feature which would permit the 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 Corporate Income Fund may purchase mortgage-backed securities that are
floating rate, inverse floating rate and variable rate obligations. Municipal
Securities purchased by the Municipal Funds may include floating rate, inverse
floating rate and variable rate obligations. Municipal Securities purchased by
the California Money and Global Money Funds and the Municipal Funds 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, a Fund may purchase unrated notes that are determined by the Fund's
Sub-Advisor to be of comparable quality at the time of purchase to rated
instruments that may be purchased by the Fund. Moreover, while there may be no
active secondary market with respect to a particular variable rate demand note
purchased by a Fund, the 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 a 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 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.

FLORIDA MUNICIPAL SECURITIES
The Florida Constitution and Statutes mandate that the State budget as a whole,
and each separate fund within the State budget, be kept in balance from
currently available revenues each fiscal year. Florida's Constitution permits
issuance of Florida Municipal Securities pledging the full faith and credit of
the State, with a vote of the electors, to finance or refinance fixed capital
outlay projects authorized by the Legislature provided that the outstanding
principal does not exceed 50% of the total tax revenues of the State for the two
preceding years. Florida's Constitution also provides that the Legislature shall
appropriate monies sufficient to pay debt service on State bonds pledging the
full faith and credit of the State as such debt service becomes due. All State
tax revenues, other than trust funds dedicated by Florida's Constitution for
other purposes, would be available for such an appropriation, if required. An
amendment to the State Constitution was approved by statewide ballot in the
November 8, 1994 general election which is commonly referred to as the
"Limitation on State Revenues Amendment." This amendment provides that State
revenues collected for any fiscal year shall be limited to State revenues
allowed under the amendment for the prior fiscal year plus an adjustment for
growth. Growth is defined as an amount equal to the average annual rate of
growth in State personal income over the most recent twenty quarters times the
State revenues allowed under the amendment for the prior fiscal year. State
revenues collected for any fiscal year in excess of this limitation are required
to be transferred to the budget stabilization fund until the fund reaches the
maximum balance specified in Section 19(g) of Article III of the State
Constitution, and thereafter is required to be refunded to taxpayers as provided
by general law. The limitation on State revenues imposed by the amendment may be
increased by the Legislature, by a two-thirds vote of each house.

The term "State revenues," as used in the amendment, means taxes, fees,
licenses, and charges for services imposed by the Legislature on individuals,
businesses, or agencies outside State government. However, the term "State
revenues" does not include: (i) revenues that are necessary to meet the
requirements set forth in documents authorizing the issuance of bonds by the
State; (ii) revenues that are used to provide matching funds for the federal
Medicaid program with the exception of the revenues used to support the Public
Medical Assistance Trust Fund or its successor program and with the exception of
State matching funds used to fund elective expansions made after July 1, 1994;
(iii) proceeds from the State lottery returned as prizes; (iv) receipts of the
Florida Hurricane Catastrophe Fund; (v) balances carried forward from prior
fiscal years; (vi) taxes, licenses, fees and charges for services imposed by
local, regional, or school district governing bodies; or (vii) revenue from
taxes, licenses, fees and charges for services required to be imposed by any
amendment or revision to the State Constitution after July 1, 1994. The
amendment took effect on January 1, 1995 and is applicable to State fiscal year
1995-96.

It should be noted that many of the provisions of the amendment are ambiguous,
and likely will not be clarified until State courts have ruled on their
meanings. Further, it is unclear how the Legislature will implement the language
of the amendment and whether such implementing legislation itself will be the
subject of further court interpretation.

Revenue bonds may be issued by the State or its agencies without a vote of
Florida's electors only to finance or refinance the cost of State fixed capital
outlay projects which shall be payable solely from funds derived directly from
sources other than State tax revenues. Estimated fiscal year 1994-95 General
Revenue plus Working Capital and Budget Stabilization funds available total
$14,683,000,000, an increase of approximately 6.1% over comparable figures in
fiscal 1993-94. Total effective appropriations for the 1994-95 fiscal year were
$14,330,800,000, with unencumbered reserves at the end of 1994-95 estimated at
$352,100,000. Estimated fiscal year 1995-96 General Revenue plus Working Capital
and Budget Stabilization funds available total $15,168,700,000, an increase of
approximately 3.3% over comparable figures for fiscal year 1994-95. Total
effective appropriations for the 1995- 96 fiscal year are estimated to be
$14,853,200,000, with unencumbered reserves at the end of 1995-96 estimated at
$315,500,000.

FOREIGN CURRENCY EXCHANGE TRANSACTIONS
All of the Funds except the U.S. Government Fund, the Municipal Funds and the
Money Funds may engage in foreign currency exchange transactions. Funds that buy
and sell securities denominated in currencies other than the U.S. Dollar, and
receive interest, dividends and 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 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 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 Fund's portfolio
securities or in foreign exchange rates, or prevent loss if the prices of these
securities should decline.

A 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 Fund's securities
denominated in the less attractive currency. The 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 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 Fund
if the other party does not complete the transaction, the Fund's Sub-Advisor
will enter into foreign currency exchange contracts only with parties approved
by the Fund's Board of Trustees.

A Fund may maintain "short" positions in forward currency exchange transactions,
which would involve the 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 Fund has contracted to
receive in the exchange.

While such actions are intended to protect the 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 Fund as a regulated investment
company under 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 Funds except the U.S. Government Fund, the U.S. Government Money
Fund, the California Money Fund and the Municipal Funds 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 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 Funds' Sub-Advisors do not intend to
expose the 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 Funds,
including the withholding of dividends. When a 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 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 Funds hold various foreign currencies
from time to time, the value of the net assets of the Funds as measured in U.S.
Dollars will be affected favorably or unfavorably by changes in exchange rates.
Generally, the 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 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 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-Advisors of the International Growth and Short Term Global Government Funds
attempt 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 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 Fund normally pays fixed
commissions that are generally higher than the negotiated commissions charged in
the United States. In addition, there is generally less governmental supervision
and regulation of securities exchanges, brokers and issuers in foreign countries
than in the United States.

FUTURES AND OPTIONS ON FUTURES
When deemed advisable by its Sub-Advisor, certain 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 Funds, and for the other purposes described in the section
"Strategic Transactions." A 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 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 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 Fund is to protect the 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 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, a 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 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 Fund would pay commissions
and other costs in connection with such investments, which may increase the
Fund's expenses and reduce its return. While utilization of options, futures
contracts and similar instruments may be advantageous to the Fund, if the Fund's
Sub-Advisor is not successful in employing such instruments in managing the
Fund's investments, the Fund's performance will be worse than if the Fund did
not make such investments. Losses incurred in hedging transactions and the costs
of these transactions will adversely affect a Fund's performance.

The Money Funds will not invest in futures and options on futures. In addition,
because any income earned from transactions in futures contracts and options on
futures contracts will be taxable, it is anticipated that the California
Municipal, Florida Insured Municipal, California Insured Intermediate Municipal
and National Municipal Funds will invest in these instruments only in unusual
circumstances, such as when the Fund's Sub-Advisor anticipates an extreme change
in interest rates or market conditions.

GEOGRAPHICAL AND INDUSTRY CONCENTRATION
Potential investors in the California Money, California Municipal, California
Insured Intermediate Municipal and Florida Insured Municipal Funds should
consider the possibly greater risk arising from the geographic concentration of
their investments, as well as the current and past financial condition of
California and Florida municipal issuers, respectively. Certain California and
Florida constitutional amendments, legislative measures, executive orders,
administrative regulations, court decisions and voter initiatives could result
in certain adverse consequences affecting California and Florida municipal
obligations, respectively. See the SAI for a more detailed description of these
and other risks relating to the California Money Fund's, California Municipal
Fund's and California Insured Intermediate Municipal Fund's investments in
California municipal obligations and the Florida Insured Municipal Fund's
investments in Florida municipal obligations.

The Global Money Fund will invest at least 25% of its assets in bank obligations
unless the Fund is in a temporary defensive position. As a result of this
concentration policy, which is a fundamental policy of the Fund, the 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 Short Term High Quality Bond, Short Term Global Government, U.S. Government
and Corporate Income Funds 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 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 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 "Mortgage-Backed Securities"
section. In addition, the yields on interest-only and principal-only government
stripped mortgage-backed securities are extremely sensitive to the prepayment
experience on the mortgage loans underlying the certificates collateralizing the
securities. If a decline in the level of prevailing interest rates results in a
rate of principal prepayments higher 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 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 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 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 Fund believes that it would be beneficial to the
Fund and appropriate under the circumstances, the Sub-Advisor may invest up to
10% of the 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 Fund will bear its ratable share of the mutual fund's expenses,
including management fees, and will remain subject to the Fund's advisory and
administration fees with respect to the assets so invested.

ILLIQUID SECURITIES
Up to 15% of the assets of each Non-Money Fund, and up to 10% of the assets of
each Money Fund, may be invested in securities that are not readily marketable,
including: (1) repurchase agreements with maturities greater than seven calendar
days; (2) time deposits maturing in more than seven calendar days; (3) to the
extent a liquid secondary market does not exist for the instruments, futures
contracts and options thereon; (4) certain over-the-counter options, as
described in the SAI; (5) except for the 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.

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 a Fund's 15% limit
on illiquid securities. The Money Funds will not invest in Lease Obligation
Bonds.

LENDING OF SECURITIES
All of the Funds except the U.S. Government, California Municipal and Florida
Insured Municipal Funds have the ability to lend portfolio securities to brokers
and other financial organizations. By lending its securities, a 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 a Fund's total assets. Loans of portfolio securities by a 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 Fund involved. Each Fund's Sub-Advisor will monitor on an
ongoing basis the creditworthiness of the institutions to which the Fund lends
securities.

LOWER-RATED SECURITIES
The Growth and Emerging Growth Funds may each invest up to 35%, and the Short
Term Global Government Fund may invest up to 10%, of the total assets of the
Fund, respectively, in debt securities rated lower than BBB by S&P or Baa by
Moody's, or of equivalent quality as determined by that 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 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 Funds -- Strategies Available to Short Term Global Government Fund,
Growth Fund and Emerging Growth Fund" in the SAI.

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

The 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 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 mortgage pass-through certificates
that are structured to direct payments on underlying collateral to different
series or classes of the obligations.

To the extent that a 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
Fund's principal investment to the extent of the premium paid. The yield of the
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 LEASES
The California Insured Intermediate Municipal and National Municipal Funds may
acquire participations in lease obligations or installment purchase contract
obligations (hereinafter collectively called "lease obligations") of municipal
authorities or entities. Although lease obligations do not constitute general
obligations of the municipality for which the municipality's taxing power is
pledged, a lease obligation is ordinarily backed by the municipality's covenant
to budget for, appropriate, and make the payments due under the lease
obligation. However, certain lease obligations contain "non-appropriation"
clauses which provide that the municipality has no obligation to make lease or
installment purchase payments in future years unless money is appropriated for
such purpose on a yearly basis. In addition to the "non-appropriation" risk,
these securities represent a relatively new type of financing that has not yet
developed the depth of marketability associated with more conventional bonds. In
the case of a "non-appropriation" lease, the Fund's ability to recover under the
lease in the event of non-appropriation or default will be limited solely to the
repossession of the leased property in the event foreclosure might prove
difficult.

The Fund will not invest more than 5% of its total investment assets in lease
obligations that contain "non-appropriation" clauses where (1) the nature of the
leased equipment or property is such that its ownership or use is essential to a
governmental function of the municipality, (2) the lease payments will commence
amortization of principal at an early date resulting in an average life of seven
years or less for the lease obligation, (3) appropriate covenants will be
obtained from the municipal obligor prohibiting the substitution or purchase of
similar equipment if lease payments are not appropriate, (4) the lease obligor
has maintained good market acceptability in the past, (5) the investment is of a
size that will be attractive to institutional investors, and (6) the underlying
leased equipment has elements of probability and/or use that enhance its
marketability in the event foreclosure on the underlying equipment were ever
required. The Fund will not invest in lease obligations that contain
"non-appropriation" clauses that do not meet these criteria. The Fund has not
imposed any percentage limitations with respect to its investment in lease
obligations not subject to the "non-appropriation" risk.

To reduce investment risk, the Municipal Funds may not invest more than 25% of
their respective total assets in Municipal Securities the interest on which is
paid from revenues of similar-type projects. 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
Trust. A complete list of investment restrictions that identifies additional
restrictions that cannot be changed without the approval of a majority of an
affected Fund's outstanding shares is contained in the SAI.

MUNICIPAL SECURITIES AND AMT-SUBJECT BONDS.
"Municipal Securities" means 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. "California
Municipal Securities" means Municipal Securities issued by the State of
California and its political subdivisions, as well as certain other governmental
issuers such as the Commonwealth of Puerto Rico. "Florida Municipal Securities"
are Municipal Securities issued by the State of Florida and its 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 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.

NON-DIVERSIFIED STATUS
Each of the California Money, Short Term Global Government, California
Municipal, Florida Insured Municipal and California Insured Intermediate
Municipal Funds is classified as a "non-diversified" investment company under
the 1940 Act, which means that the Fund is not limited by the 1940 Act in the
proportion of its assets that may be invested in the obligations of a single
issuer. Each of these Funds must, however, meet certain diversification
standards to qualify as a regulated investment company under the Code. See the
section "Taxes" in the SAI. Each of these Funds may assume large positions in
the obligations of a small number of issuers which may subject the Fund to
greater credit and other risks than a more broadly diversified portfolio.

OPTIONS ON SECURITIES
Option Purchase. All of the Funds except the Municipal Funds and the Money Funds
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. A 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, a 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. A 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 a Fund in order to acquire the
underlying securities for the Fund at a price that avoids any additional cost
that would result from a substantial increase in the market value of a security.
A 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 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 Funds may write put and call options on
securities for hedging purposes and the other purposes described in the section
"Strategic Transactions." A 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 a Fund, the Fund may suffer a loss
equal to the difference between the price at which the 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 Fund, the Fund may suffer a loss equal to the
excess of the security's market value at the time of the option exercise over
the Fund's acquisition cost of the security, less the premium received for
writing the option.

Certain Funds may write covered options on portfolio securities to enhance
current return. Accordingly, whenever a 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, a Fund will either (1) deposit
with the Trust's custodian in a segregated account cash, U.S. Government
Securities or other short-term, high-grade debt obligations 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 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 Funds may receive may be adversely affected as new or
existing institutions, including other investment companies, engage in or
increase their option-writing activities.

A 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, a Fund would purchase,
prior to the holder's exercise of an option that the Fund has written, an option
of the same series as that on which the Fund desires to terminate its
obligation. The obligation of the Fund under an option that it has written would
be terminated by a closing purchase transaction, but the Fund would not be
deemed to own an option as the result of the transaction. There can be no
assurance that the Fund will be able to effect closing purchase transactions at
a time when it wishes to do so. The ability of the Fund to engage in closing
transactions with respect to options depends on the existence of a liquid
secondary market. While the 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 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 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 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 Funds bear the risk that the prices of the securities
being hedged will not move in the same amount as the hedge. A Fund will engage
in hedging transactions only when deemed advisable by its Sub-Advisor.
Successful use by the 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 Fund's performance.

OPTIONS ON FOREIGN CURRENCIES
The International Growth, Growth, Short Term High Quality Bond, Short Term
Global Government and California Insured Intermediate Municipal Funds may
purchase and write put and call options on foreign currencies for the purpose of
hedging against declines in the U.S. Dollar value of foreign
currency-denominated portfolio securities and against increases in the U.S.
Dollar cost of such securities to be acquired. As in the case of other kinds of
options, however, the writing of an option on a foreign currency constitutes
only a partial hedge, up to the amount of the premium received, and the 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 Fund's position,
it may forfeit the entire amount of the premium plus related transaction costs.
There is no specific percentage limitation on the Fund's investments in options
on foreign currencies. See the SAI for further discussion of the use, risks and
costs of options on foreign currencies.

OPTIONS ON FOREIGN STOCK INDEXES
The International Growth, Growth, Growth and Income, Emerging Growth, Short Term
High Quality Bond, Short Term Global Government and California Insured
Intermediate Municipal 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 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
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 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 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 Fund
may be forced to liquidate portfolio securities to meet settlement obligations.
The 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 Fund writes an option on a stock index, it will establish a segregated
account with the Trust's custodian or with a foreign sub-custodian in which the
Fund will deposit cash or cash equivalents 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 Funds except the U.S. Government, U.S. Government Money, California
Money and Municipal Funds 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 Funds except the Municipal
and 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 a 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 a Fund relies on the party from whom it purchases an OTC
Option to perform if the 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 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 Funds may invest in 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 Fund's custodian or a duly appointed
sub-custodian. A Fund will enter into repurchase agreements only with banks and
broker-dealers that have been determined to be creditworthy by the 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 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
Fund may be delayed or limited in its ability to sell the collateral.
Investments by the California Money Fund in repurchase agreements, if any, are
limited by the restrictions of that Fund's investment in taxable instruments.

REVERSE REPURCHASE AGREEMENTS
Each of the 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 Funds would assume the role of
seller/borrower in the transaction. The Funds will maintain segregated accounts
with the Trust's custodian consisting of U.S. Government Securities, cash or
money market instruments 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 a 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 Fund's Sub-Advisor, acting under the supervision of the
Board of Trustees, reviews, on an ongoing basis, the creditworthiness of the
partners with which it enters into reverse repurchase agreements. Under the 1940
Act, reverse repurchase agreements may be considered borrowings by the seller.
For each of the Funds except the U.S. Government, Short Term High Quality Bond
and Corporate Income Funds, whenever borrowings by a Fund, including reverse
repurchase agreements, exceed 5% of the value of a Fund's total assets, the Fund
will not purchase any securities. The U.S. Government, Short Term High Quality
Bond and 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% of the Fund's total assets (after giving effect to such
borrowings).

STAND-BY COMMITMENTS
The California Money Fund and the Municipal Funds may acquire "stand-by
commitments" with respect to Municipal Securities held in their portfolios.
Under a stand-by commitment, a dealer agrees to purchase, at a Fund's option,
specified Municipal Securities at a specified price. A Fund may pay for stand-by
commitments either separately in cash or by paying a higher price for the
securities acquired with the commitment, thus increasing the cost of the
securities and reducing the yield otherwise available from them. Each Fund
intends to enter into stand-by commitments only with brokers, dealers and banks
that, in the opinion of its Sub-Advisor, present minimal credit risks. In
evaluating the creditworthiness of the issuer of a stand-by commitment, the
Sub-Advisors will periodically review relevant financial information concerning
the issuer's assets, liabilities and contingent claims. The Funds will acquire
stand-by commitments solely to facilitate portfolio liquidity and do not intend
to exercise their rights thereunder for trading purposes.

STRATEGIC TRANSACTIONS
Subject to the investment limitations and restrictions for each of the Funds as
stated elsewhere in the prospectus and SAI, each of the 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 Fund may purchase and sell,
to the extent not otherwise limited or restricted for such 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 Fund's portfolio resulting from
securities markets or currency exchange rate fluctuations, to protect the Fund's
unrealized gains in the value of its portfolio securities, to facilitate the
sale of such securities for investment purposes, to manage the effective
maturity or duration of the Fund's portfolio, 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 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 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 Fund will comply with applicable regulatory
requirements when utilizing Strategic Transactions. Strategic Transactions
involving financial futures and options thereon will be purchased, sold or
entered into only for bona fide hedging, risk management or portfolio management
purposes. For more information see discussion in other sections of "Securities
and Investment Practices" and the SAI.

U.S. GOVERNMENT SECURITIES
All of the Funds may invest in U.S. Government Securities, which include direct
obligations of the U.S. Treasury (such as U.S. Treasury bills, notes and bonds)
and obligations directly issued or guaranteed by U.S. Government agencies or
instrumentalities. Some obligations issued or guaranteed by agencies or
instrumentalities of the U.S. Government are backed by the full faith and credit
of the U.S. Government (such as GNMA Bonds), others are backed only by the right
of the issuer to borrow from the 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
Funds except the Money Funds may purchase or sell securities on a when-issued or
a delayed-delivery basis. The 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 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 Funds will establish a
segregated account with Boston Safe consisting of cash, U.S. Government
Securities or other high grade debt obligations in an amount equal to the amount
of its when-issued and delayed-delivery commitments.

WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS
The California Money Fund and the Municipal Funds may purchase Municipal
Securities offered on a "when-issued" basis and may purchase or sell Municipal
Securities on a "forward commitment" basis. When such transactions are
negotiated, the price, which is generally expressed in yield terms, is fixed at
the time the commitment is made, but delivery and payment for the securities
take place at a later date. Normally, the settlement date occurs within two
months after the transaction, but delayed settlements beyond two months may be
negotiated. During the period between a commitment and settlement, no payment is
made for the Municipal Securities purchased by the purchaser and, thus, no
interest accrues to the purchaser from the transaction. The use of when-issued
transactions and forward commitments enables the Funds to hedge against
anticipated changes in interest rates and prices. For instance, in periods of
rising interest rates and falling bond prices, a Fund might sell Municipal
Securities that it owned on a forward commitment basis to limit its exposure to
falling prices. In periods of falling interest rates and rising bond prices, a
Fund might sell a Municipal Security and purchase the same or a similar security
on a when-issued or forward commitment basis, thereby obtaining the benefit of
currently higher cash yields. However, if the relevant Fund's Sub-Advisor were
to forecast incorrectly the direction of interest rate movements, the Fund might
be required to complete such when-issued or forward transactions at prices
inferior to then-current market values.

When-issued Municipal Securities and forward commitments may be sold prior to
the settlement date, but a Fund enters into when-issued and forward commitments
only with the intention of actually receiving or delivering the Municipal
Securities, as the case may be. If a Fund, however, chooses to dispose of the
right to acquire a when-issued security prior to its acquisition or dispose of
its right to deliver or receive against a forward commitment, it may incur a
gain or loss. When-issued Municipal Securities may include bonds purchased on a
"when, as and if issued" basis, under which the issuance of the securities
depends on the occurrence of a subsequent event, such as approval of a proposed
financing by appropriate municipal authorities. Any significant commitment of a
Fund's assets to the purchase of securities on a "when, as and if issued" basis
may increase the volatility of the Fund's NAV. No when-issued or forward
commitments will be made by a Fund if, as a result, more than 20% of the value
of the Fund's total assets would be committed to such transactions.

PERFORMANCE

UNDERSTANDING PERFORMANCE
Because the Equity Funds invest in stocks, their performance is related to that
of the overall stock market performance which has been characterized by
volatility in the short run and growth in the long run. TOTAL RETURN reflects
both the reinvestment of income and the change in a Fund's share price. Because
the Bond Funds invest in debt obligations, their share price volatility and
TOTAL RETURN depend in part on interest rate changes. Share value will tend to
decrease when interest rates rise and increase when interest rates fall.
Shorter-term obligations generally offer greater stability and are less
sensitive to interest rate changes, but longer-term obligations generally offer
higher YIELDS.

EXPLANATION OF TERMS
TOTAL RETURN is the change in value of an investment in a Fund over a given
period, assuming reinvestment of any dividends and capital gains. A CUMULATIVE
TOTAL RETURN reflects actual performance over a stated period of time.

An AVERAGE ANNUAL TOTAL RETURN is a hypothetical rate of return that, if
achieved annually, would have produced the same cumulative total return if
performance had been constant over the entire period. Average annual total
returns smooth out variations in performance; they are not the same as actual
year-by-year results.

YIELD of a Fund is the income generated by an investment in the Fund over a
30-day period. See below and the SAI for a further description of these terms.

TAX EQUIVALENT YIELD demonstrates the yield from a taxable investment that is
necessary to produce an after-tax yield equivalent to that of a fund, like the
Municipal Funds, that invests in tax-exempt obligations.

Other illustrations of Fund performance may separate the Fund's total returns
into income results and capital gain or loss.

YIELD
THE MONEY FUNDS. From time to time, advertisements or shareholder reports
concerning the Money Funds may describe YIELD and EFFECTIVE YIELD. The YIELD of
a Fund refers to the income generated by an investment in the Fund over a 7-day
period identified in the advertisement. This income is then "annualized." That
is, the amount of income generated by the investment during that week is assumed
to be generated each week over a 52-week period and is shown as a percentage of
the investment. EFFECTIVE YIELD is calculated similarly but, when annualized,
the income earned by an investment in a Fund is assumed to be reinvested.
EFFECTIVE YIELD will be slightly higher than the YIELD because of the
compounding effect of this assumed reinvestment.

THE BOND FUNDS. From time to time, the Bond Funds (including the Municipal
Funds) may advertise the 30-day YIELD. The 30-day YIELD of a Bond Fund refers to
the income generated by an investment in such Fund over the 30-day period
identified in the advertisement, and is computed by dividing the net investment
income per share earned by the Fund during the period by the maximum Public
Offering Price per share on the last day of the 30-day period. This income is
"annualized" by assuming that the amount of income is generated each month over
a one-year period and is compounded semiannually. The annualized income is then
shown as a percentage of the maximum Public Offering Price. In addition, the
Bond Funds 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.

THE MUNICIPAL FUNDS. The Municipal Funds and the California Money Fund may also
quote TAX EQUIVALENT YIELD. TAX EQUIVALENT YIELD shows the taxable yields an
investor would have to earn before taxes to equal the Fund's tax-free yields. A
tax-equivalent yield is calculated by dividing a Fund's tax-exempt yield by the
result of one minus the sum of a stated federal and applicable state tax rate,
based upon the highest marginal tax rate and adjusted for the federal deduction
of state taxes paid. To the extent that a Fund's yield for a particular investor
is not taxable by cities and counties, the tax equivalent yields experienced by
the investor will be higher than the tax equivalent yields quoted by the Fund.
If only a portion of a Fund's income is tax-exempt, only that portion is
adjusted in the calculation.

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

ADDITIONAL PERFORMANCE QUOTATIONS. Advertisements of total return will always
show a calculation that includes the effect of the maximum sales charge but may
also show total return without giving effect to that charge. Similarly, a Fund
may provide yield quotations in investor communications based on the Fund's net
asset value (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 COMPARISONS
In reports or other communications to shareholders or in advertising material, a
Fund may compare the performance of its Class A and Class B Shares with that of
other mutual funds as listed in the rankings prepared by Lipper Analytical
Services, Inc., CDA Technologies, Inc. or similar independent services that
monitor the performance of mutual funds or with other appropriate indexes of
investment securities. In addition, certain indexes may be used to illustrate
historic performance of select asset classes. These may include, among others,
the Dimensional Fund Advisor's Small Cap Index, the Lehman Brothers GNMA Index,
the S&P 100 Index, the Lehman Brothers Index of Baa-rated Corporate Bonds, the
T-Bill Index, the Bank Rate Monitor, Donoghue's Money Fund Averages and the
"Stocks, Bonds and Inflation Index" published annually by Ibbotson Associates.
The performance information may also include evaluations of the Funds published
by nationally recognized ranking services and by financial publications that are
nationally recognized, such as Business Week, Forbes, Fortune, Institutional
Investor, Money and The Wall Street Journal. The International Growth, Short
Term Global Government and Growth Funds may compare their performance to other
investments or relevant indexes consisting of Salomon Brothers Short Term Global
Bond Index, J.P. Morgan Global Government Traded Index, Morgan Stanley Capital
International EAFE Index, the Standard & Poor's 500 Index, the Lipper
International Fund Index and The Financial Times World Stock Index. If a Fund
compares its performance to other funds or to relevant indexes, the Fund's
performance will be stated in the same terms in which such comparative data and
indexes are stated, which is normally total return rather than yield. For these
purposes the performance of the Fund, as well as the performance of such
investment companies or indexes, may not reflect sales charges, which, if
reflected, would reduce performance results.

In addition, the Municipal Funds and the California Money Fund may attempt to
illustrate in advertising or sales literature the benefits of tax-free
investing. For example, Table 1 shows California investors the approximate yield
that a taxable investment must earn at various sample income brackets to produce
after-tax yields equivalent to those of tax-exempt investments, such as the
California Municipal, California Insured Intermediate Municipal and California
Money Funds, yielding from 2.00% to 7.00%. Table 2 shows taxpayers how to
translate federal tax savings from investments, such as the National Municipal
Fund, into an equivalent yield from a taxable investment. The yields following
are for illustration purposes only and are not intended to represent current or
future yields for the Funds, which may be higher or lower than the yields shown.
Calculations are computed in accordance with standard SEC calculations of 30-day
yield. The California marginal tax rates presented assume payment of the highest
California tax rate for the particular federal marginal tax rate quoted. The
income brackets presented are only samples since the Internal Revenue Service
("IRS") adjusts the brackets annually for inflation. Investors should consult
their tax adviser with specific reference to their own tax situation.

Performance information is computed separately for each Fund's Class A and Class
B Shares. Because Class B Shares bear the expense of the higher distribution and
service fees, it is expected that performance for a Fund's Class B Shares will
be lower than that for a Fund's Class A Shares.
<PAGE>
TAX EQUIVALENT YIELDS

<TABLE>
<CAPTION>
TABLE 1
Combined
Federal and
Federal California California
Sample 1995 Federal Marginal Marginal Marginal Tax-Exempt Yield
Taxable Income Brackets Tax Rate+ Tax Rate* Tax Rate** 2.00% 2.50% 3.00% 3.50% 4.00%
- --------------------------------------------------------------------------------------------------------------------
Single Return Joint Return Taxable Yield
------------- ------------ -------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0-$ 23,350 $ 0-$ 39,000 15% 6.00% 20.10% 2.50% 3.13% 3.75% 4.38% 5.01%
$ 23,350-$ 56,550 $ 39,000-$ 94,250 28% 9.30% 34.70% 3.06% 3.83% 4.59% 5.36% 6.13%
$ 56,550-$117,950 n.a. 31% 10.00% 37.90% 3.22% 4.03% 4.83% 5.64% 6.44%
n.a. $ 94,250-$143,600 31% 9.30% 37.42% 3.20% 3.99% 4.79% 5.59% 6.39%
$117,950-$256,500 n.a. 36% 11.00% 43.04% 3.51% 4.39% 5.27% 6.14% 7.02%
n.a. $143,600-$256,500 36% 10.00% 42.04% 3.47% 4.34% 5.21% 6.08% 6.94%
$256,500 and up $256,500 and up 39.6% 11.00% 46.24% 3.72% 4.65% 5.58% 6.51% 7.44%
</TABLE>

<TABLE>
<CAPTION>
Combined
Federal and
Federal California California
Sample 1995 Federal Marginal Marginal Marginal Tax-Exempt Yield
Taxable Income Brackets Tax Rate+ Tax Rate* Tax Rate** 4.50% 5.00% 5.50% 6.00% 6.50% 7.00%
- -----------------------------------------------------------------------------------------------------------------------------
Single Return Joint Return Taxable Yield
------------- ------------ -------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0-$ 23,350 $ 0-$ 39,000 15% 6.00% 20.10% 5.63% 6.26% 6.88% 7.51% 8.14% 8.76%
$ 23,350-$ 56,550 $ 39,000-$ 94,250 28% 9.30% 34.70% 6.89% 7.66% 8.42% 9.19% 9.95% 10.72%
$ 56,550-$117,950 n.a. 31% 10.00% 37.90% 7.25% 8.05% 8.86% 9.66% 10.47% 11.27%
n.a. $ 94,250-$143,600 31% 9.30% 37.42% 7.19% 7.99% 8.79% 9.59% 10.39% 11.19%
$117,950-$256,500 n.a. 36% 11.00% 43.04% 7.90% 8.78% 9.66% 10.53% 11.41% 12.29%
n.a. $143,600-$256,500 36% 10.00% 42.40% 7.81% 8.68% 9.55% 10.42% 11.29% 12.15%
$256,500 and up $256,500 and up 39.6% 11.00% 46.24% 8.37% 9.30% 10.23% 11.16% 12.09% 13.02%
</TABLE>

<TABLE>
<CAPTION>
TABLE 2

Sample 1995 Federal Federal Marginal Tax-Exempt Yield
Taxable Income Brackets Tax Rate+ 4.50% 5.00% 5.50% 6.00% 6.50% 7.00%
- ----------------------------------------------------------------------------------------------------------------------------
Single Return Joint Return Taxable Yield
------------- ------------- -------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0-$ 23,350 $ 0-$ 39,000 15% 5.29% 5.88% 6.47% 7.06% 7.65% 8.24%
$ 23,350-$ 56,550 $ 39,000-$ 94,250 28% 6.25% 6.94% 7.64% 8.33% 9.03% 9.72%
$ 56,550-$117,950 $ 94,250-$143,600 31% 6.52% 7.25% 7.97% 8.70% 9.42% 10.14%
$117,950-$256,500 $143,600-$256,500 36% 7.03% 7.81% 8.59% 9.38% 10.16% 10.94%
$256,500 and up $256,500 and up 39.6% 7.45% 8.28% 9.11% 9.93% 10.76% 11.59%

- ----------
*California taxable income may differ due to differences in exemptions, itemized deductions and other items.
**Rates do not include the phase-out of personal exemptions or itemized deductions. Rates include the federal deduction of
state taxes paid.
+Rates do not include the phase-out of personal exemptions or itemized deductions.
</TABLE>

OBTAINING PERFORMANCE INFORMATION
Each Fund's strategies, performance, and holdings are detailed twice a year in
fund reports, which are sent to all shareholders. The SAI describes the methods
used to determine a Fund's performance. Shareholders may call 800-222-5852 for
performance information. Shareholders may make inquiries regarding a Fund,
including current total return figures, to any representative of Great Western
Financial Securities Corporation ("GW Securities"), or by calling 800-222-5852.
See "Your Account -- Setting Up Your Account" for information about such
representatives.

YOUR ACCOUNT
* ABOUT SIERRA TRUST FUNDS
There are different mutual funds for different goals. The Sierra Trust Funds
family offers a fund or combination of funds to meet the financial planning
needs of almost any investor. Although each Fund, by itself, does not constitute
a balanced investment plan for an investor, investing in a combination of the
Funds may provide a more diversified portfolio of investments. Sierra Advisors
has assembled seven of what it believes are the most respected institutions in
the country to assist as Sub-Advisors in the active management of the Funds.
Chosen for their depth of experience in a particular market sector, and
supervised by Sierra Advisors, the Sub-Advisors that handle the day-to-day buy
and sell investment decisions for one or more of the Funds are:

-- Alliance Capital Management L.P.
-- BlackRock Financial Management, Inc.
-- Janus Capital Corporation
-- J.P. Morgan Investment Management Inc.
-- Scudder, Stevens & Clark, Inc.
-- TCW Funds Management, Inc.
-- Van Kampen American Capital
Management Inc.

SETTING UP YOUR ACCOUNT
In order to invest in the Sierra Trust Funds you must first establish an
account, either by mailing in the attached application or by going through a
representative of GW Securities. For your convenience GW Securities has walk-in
centers in almost all of the branch offices of Great Western Bank in California
and Florida. You can call the Sierra Trust Funds at 800-222-5852 to get in touch
with the nearest representative of GW Securities.

The various ways to set up (register) your account with Sierra Trust Funds are
listed on the following page. The account guidelines that follow may not apply
to certain retirement accounts. If your employer offers any of the Sierra Trust
Funds through a retirement program, contact your employer for more information.
Otherwise, call Sierra Trust Funds directly at 800-222-5852.

The Funds are open to receive purchase or redemption requests 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, and Saturday from 6:00 a.m. to 3:00 p.m., Pacific Time/9:00 a.m. to 6:00
p.m., Eastern Time, except on New York Stock Exchange ("NYSE") holidays. If you
have any questions concerning the purchase or redemption of shares of the Funds
or any other procedure described in this Prospectus, please telephone Sierra
Administration toll free at 800-222-5852. See the following pages for complete
purchase instructions.

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

HOW TO BUY SHARES
If you are new to Sierra Trust Funds, complete and sign a new Account
Application and mail it along with your check. You may also open your account in
person or by wire as described on the following pages. Shares can be purchased
directly through a GW Securities representative. Payment for shares is due at GW
Securities no later than the settlement date, which is the third business day
after the order is placed. If there is no application form accompanying this
prospectus, call 800-222-5852.

CLASS B SHARES OF A MONEY FUND ARE OFFERED ONLY TO SHAREHOLDERS EXCHANGING CLASS
B SHARES OF OTHER FUNDS AND THEREFORE MAY NOT BE PURCHASED DIRECTLY BY
INVESTORS.

IF YOU ALREADY HAVE MONEY INVESTED IN A FUND OF THE SIERRA TRUST FUNDS, YOU
CAN:
* Mail in a check with the additional investment slip attached to your account
statement;
* Mail in a completed application form with a check; or
* Invest in the Fund by exchanging from another Fund in the same Class of the
Sierra Trust Funds by calling 800-222-5852.

IF YOU ARE INVESTING THROUGH A TAX-SHELTERED RETIREMENT PLAN, such as an IRA,
you will need a special application form. Retirement investing also involves its
own investment procedures. Call 800-222-5852 for more information and a
retirement application form.

GENERAL INFORMATION ABOUT PURCHASES
MINIMUM INVESTMENTS
TO OPEN A CLASS A OR
CLASS B SHARES ACCOUNT $250
For Sierra Automatic Investment Plan
Accounts and Investment of Dividends
or Distributions of a Non-Affiliated
Fund (as defined in the following
paragraph) $100
For Investment of Distributions Paid
to GW Securities Clients by Certain
Unit Investment Trusts (each,
a "UIT") $ 25
TO ADD TO A CLASS A OR
CLASS B SHARES ACCOUNT $100
For Sierra Automatic Investment Plan
Accounts and Investment of Dividends
or Distributions of a Non-Affiliated
Fund $ 25
For Investment of Distributions
Paid to GW Securities Clients by
Certain UITs $ 25
MINIMUM BALANCE FOR A CLASS A OR
CLASS B SHARES ACCOUNT $250
For Sierra Automatic Investment Plan
Accounts and Investment of Dividends
or Distributions of a Non-Affiliated
Fund None
For Investment of Distributions
Paid to GW Securities Clients by
Certain UITs $ 25

The Funds have a minimum of $250 for initial investments and $100 for subsequent
investments for Class A and Class B Shares, except that (i) shareholders who
participate in the Sierra Automatic Investment Plan (the "Plan") may establish
Fund accounts for a minimum initial investment of $100 and subsequent automatic
investments of $25 a month; (ii) shareholders of non-money market mutual funds
not affiliated with the Trust or Sierra Services (each, a "Non-Affiliated Fund")
may establish Fund accounts by investing dividends or distributions from such
Non-Affiliated Funds for a minimum initial investment of $100 and subsequent
investments of $25; and (iii) GW Securities clients may establish Fund accounts
by investing UIT distributions for a minimum initial investment of $25 and
subsequent investments of $25. See "Waivers of the Sales Charges for Class A and
Class B Shares" section. A Fund account that is reduced by a shareholder to a
value less than the minimum for that type of account may be subject to
redemption by the Fund, but only after the shareholder has been given at least
30 days in which to increase the account balance to at least the minimum for
that type of account. Any shareholder who continues to make automatic
investments through the Plan will not be subject to redemption by the Fund. See
"Your Account -- How to Buy Shares -- Sierra Automatic Investment Plan."

ACCEPTANCE OF ORDERS
The Trust reserves the right to reject any purchase order for shares of any Fund
and to suspend the offering of shares of any Fund for any period of time.

INVESTMENTS MADE BY CHECK
Money transmitted by a check drawn on a member of the Federal Reserve System is
converted to Federal Funds within one business day following receipt and is then
invested in the Fund. Checks drawn on banks that are not members of the Federal
Reserve System may take longer to be converted and invested. All payments must
be in U.S. Dollars.

IF YOU BUY SHARES BY CHECK and then sell those shares by any method other than
by exchange to another fund, the payment may be delayed for up to fifteen days
or more to ensure that your check clears.

DIVIDEND REINVESTMENT PLAN
A Dividend Reinvestment Plan will be established automatically for each
shareholder unless the shareholder specifies by completing the appropriate
section of the Fund's Account Application or otherwise notifies Shareholder
Services in writing at the address provided below. Under this plan, all income
dividends and capital gain distributions will be automatically reinvested in
additional shares of the same Class of the Fund that paid the dividend at the
net asset value ("NAV") determined on the dividend payment date. Shareholders
who wish to participate in the Systematic Withdrawal Plan ("SWP") for accounts
of $10,000 or more, which provides for the shareholder's receipt of monthly,
quarterly, semiannual or annual checks from redemptions of Fund shares, must
elect the automatic reinvestment of dividends and distributions. The election
may be made or changed by writing to Sierra Administration or by telephoning
Sierra Administration at 800-222-5852. Write to Sierra Administration at 9301
Corbin Avenue, Suite 333, P.O. Box 1160, Northridge, California 91328-1160.

SIERRA AUTOMATIC INVESTMENT PLAN (THE "PLAN")
One easy way to pursue your financial goals is to invest money regularly. While
regular investment plans do not guarantee a profit and will not protect you
against loss in a declining market, they can be an excellent way to invest for
retirement, a home, educational expenses, and other long-term financial goals.
Certain restrictions apply for retirement accounts. Call 800-222-5852 for more
information.

The Plan offers a simple way to maintain a regular investment program. With the
Plan, monthly investments (minimum $25) are made automatically from the
shareholder's account at a bank, savings and loan or credit union into the
shareholder's Fund account on the 15th of each month. The minimum for opening a
Fund account through the Plan is $100. By enrolling in the Plan, the shareholder
authorizes the Fund and its agents to withdraw funds from the designated account
at a bank or other financial institution. Such an account must have check or
draft writing privileges. This privilege may be selected by completing the
appropriate section of the Fund's Account Application or by contacting a GW
Securities representative, or Sierra Administration (800-222- 5852) for the
appropriate forms.

Once enrolled in the Plan, shareholders will receive written confirmation of
each transaction, and a debit will appear on the shareholder's bank statement.
To change the amount, the shareholder must notify Sierra Administration at
800-222-5852 at least ten business days prior to the scheduled investment date.
Shareholders who redeem their Plan accounts in full are not required to provide
prior notification to terminate the service. The Fund may immediately terminate
a shareholder's Plan in the event that any item is unpaid by the shareholder's
financial institution. Fund shares purchased through the Plan must be owned for
15 days before they may be redeemed. The Fund may terminate or modify this
privilege at any time.

RETIREMENT PLANS
Shares of the Funds are available for purchase in connection with a variety of
tax-deferred prototype retirement plans: (1) IRAs (including "rollovers" from
existing retirement plans) for individuals and their spouses; (2) Profit Sharing
and Money-Purchase Plans for corporations and self-employed individuals and
their partners to benefit themselves and their employees; and (3) 403(b) Plans.
Custodian fees may be charged in connection with these retirement plans. If you
are investing through an IRA, you will need a special application form.
Retirement investing also involves its own investment procedures. For additional
information regarding investments made by qualified plans, see "Your Account --
How to Buy Shares -- Initial Sales Charge Alternative: Class A Shares" and "--
Waivers of the Sales Charges for Class A and Class B Shares." For more
information regarding retirement plans or to receive an IRA application form,
telephone Sierra Administration at 800-222- 5852.

INVESTMENT IN FUNDS THROUGH A SAM ACCOUNT
In addition to the considerable diversification among individual securities you
receive by investing in a particular Fund, you can further reduce risk by
spreading your assets among Class A or Class S of several different Funds that
each have different risk and return characteristics. The SAM Account is an
active investment management service offered by Sierra Services, the SAM Account
investment advisor, that allocates your investments across a combination of
either Class A or Class S Shares of certain of the Funds selected to meet
long-term investment objectives as well as, in certain circumstances, current
income objectives. CLASS S SHARES ARE DESCRIBED IN MORE DETAIL IN A SEPARATE
PROSPECTUS, WHICH MAY BE OBTAINED BY CALLING 800-222-5852 TOLL-FREE.

Sierra Services has developed investment strategies for SAM Accounts to meet the
diverse financial needs of different investors. You can open a SAM Account by
meeting with one of the investment professionals of GW Securities who will
review your situation and help you identify your long-term investment
objectives. After using SAM Account criteria to determine your long-term
objectives, you can choose one of several investment strategies. Based on your
chosen strategy, your initial investment will be allocated among a number of the
Funds and the Class A or Class S Shares of such Funds. Depending on market
conditions, Sierra Services from time to time (normally quarterly) reallocates
the combination of Funds or the amounts invested in the respective Class A or
Class S Shares of each to implement your SAM investment strategy. In addition,
your SAM Account will be periodically rebalanced to maintain your SAM strategy's
current asset allocation mix, if and when Fund performance unbalances the
strategy's mix. You will pay Sierra Services a fee for the SAM Account service
that is in addition to and separate from the fees and expenses you will pay
directly or indirectly as an investor in the Funds. See "Expenses and Financial
Highlights -- Expenses" and "Your Account -- Exchange Privileges and
Restrictions."

From time to time, one or more of the Funds used for investment by the SAM
Accounts may experience relatively large investments or redemptions due to SAM
Account allocations or rebalancings recommended by Sierra Services. These
transactions will affect the Funds, since Funds that experience redemptions as a
result of reallocations or rebalancings may have to sell portfolio securities
and Funds that receive additional cash will have to invest it. 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 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. The
Advisor, representing the interests of the Funds, is committed to minimizing the
impact of SAM Account transactions on the Funds; Sierra Services, representing
the interest of the SAM Accounts, is also committed to minimizing such impact on
the Funds to the extent it is consistent with pursuing the investment objective
of the SAM Accounts. The Advisor and Sierra Services will nevertheless face
conflicts in fulfilling their respective responsibilities because they are
affiliates and employ some of the same professionals. In addition, Sierra
Services is the Fund's Distributor and is compensated on the sale of shares. See
"Your Account -- How to Buy Shares -- Initial Sales Charge Alternative: Class A
Shares," and "Your Account -- How to Sell Shares -- Exchange Privileges and
Restrictions." The Advisor will monitor the impact of SAM Account transactions
on the Funds.

<TABLE>
<CAPTION>
HOW TO INVEST IN THE FUNDS

- -------------------------------------------------------------------------------------------------------------------
TO OPEN AN ACCOUNT: MINIMUM $250* TO ADD TO AN ACCOUNT: MINIMUM $100*
- -------------------------------------------------------------------------------------------------------------------

<S> <C> <C>
BY PHONE * Exchange from another Sierra Trust * Exchange from another Sierra Trust Fund
800-222-5852 Fund account with same registration, account with the same registration,
including name, address, and taxpayer including name, address, and taxpayer ID
ID number (social security number for number.
an individual). * To transfer funds from your Great Western
* Call Sierra Administration at 800-222- Bank Checking Account or Savings Account,
5852. or your GW Securities Brokerage Account,
call your GW Securities representative.
* Call Sierra Administration at 800-222-5852.
- -------------------------------------------------------------------------------------------------------------------
BY MAIL * Complete and sign the application. * Make your check payable to "Great Western
Make your check or negotiable bank Financial Securities Corporation."
draft payable to "Great Western Indicate your Fund account number on your
Financial Securities Corporation" or check. Include the "next investment" stub
include the account number of the from your previous account statement.
Great Western account or GW Securities Mail the check and stub to the address
brokerage account from which your printed on your account statement.
investment will be drawn. * Exchange by mail: call 800-222-5852 for
Mail the completed application form instructions.
and check to:
Sierra Trust Funds
9301 Corbin Avenue, Suite 333
P.O. Box 1160
Northridge, California 91328-1160
- ------------------------------------------------------------------------------------------------------------
IN PERSON * Visit a GW Securities Representative * Visit a GW Securities Representative at
at your nearest Great Western Bank your nearest Great Western Bank branch.
branch. Call 800-222-5852 for the Call 800-222-5852 for the Great Western
Great Western Bank branch nearest you. branch nearest you.
- ------------------------------------------------------------------------------------------------------------
BY WIRE 1. Telephone Sierra Administration and * Instruct your bank/financial institution
give the (a) name of the account as to wire Federal Funds as described at
you wish it to be registered; (b) left under paragraph 2 and inform Sierra
address of the account; (c) taxpayer Administration (800) 222-5852 of the
ID number (social security number for incoming wire.
an individual); and (d) Fund name and
class of shares.
2. Instruct your bank to wire Federal
Funds exactly as follows:
Great Western Bank
Beverly Hills, California
aba #322270039
For credit to (Sierra Trust Funds)
Account #008-852200-5
(Fund Name and class of shares)
(Customer's Name)
(Customer's Social Security Number)
3. Mail the completed application form
to:
Sierra Fund Administration
Corporation
9301 Corbin Avenue, Suite 333
P.O. Box 1160
Northridge, California 91328-1160
- ------------------------------------------------------------------------------------------------------------
AUTOMATICALLY 1. Obtain and complete an application * Pre-authorized monthly investments are
form. now processed automatically.
(Minimum New Account 2. Attach a voided check or deposit slip (Minimum Amount $25)
amount $100) from the account you would like the
investments transferred from on the
15th of each month.
3. Mail the application to the address
listed above.
- ------------------------------------------------------------------------------------------------------------
*$25 minimum to open or add to an account with investment of certain UIT distributions, and $100 minimum to
open an account, and $25 minimum to add to an account, with investment of dividends or distributions from
Non-Affiliated Funds. See "General Information About Purchases -- Minimum Investments" section.
</TABLE>

SHARE PRICE
Purchase orders received by Sierra Administration 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 Class of the Fund, plus any applicable sales charge (the "Public
Offering Price"). Purchase orders received after the close of the NYSE are
priced as of the time the NAV is next determined on the next Business Day. GW
Securities is responsible for forwarding orders received on a Business Day to
Sierra Administration by the close of trading on the NYSE the same day and
failure to do so will result in an investor being unable to obtain that day's
NAV. The NYSE is open Monday through Friday, although it is closed on most
federal holidays and on Good Friday.

TIMING OF DIVIDENDS
Shares of the Funds are entitled to dividends and distributions declared
beginning the day after a purchase has been credited to an investor's account
and ending on the day a redemption order is effected. A purchase of shares by
check will be credited to an investor's account at the next computation of the
relevant Fund's net asset value on the first Business Day after the investor's
purchase order has been received by Sierra Administration in proper form in
order to allow the investment to be converted into Federal Funds. If the check
used for the purchase does not clear, the Fund involved will cancel the purchase
and the investor may be liable for losses or fees incurred. If a telephone order
is received or if payment by wire is received after the close of the NYSE, the
shares will not be credited until the next day.

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

As an illustration, if you qualify for significantly reduced sales charges, you
might elect to purchase Class A Shares, which carry an initial sales load,
because no similar reductions in CDSC are available for the Class B Shares.
Also, Class A Shares are subject to a lower distribution fee and, accordingly,
such shares are expected to pay correspondingly higher dividends on a per share
basis. However, because initial sales charges are deducted at the time of
purchase of Class A Shares, the amount of your funds actually invested would be
reduced by the amount of the sales charge and you would initially own fewer
shares. For this reason, you might determine that it would be more advantageous
to purchase Class B Shares, so that all of your funds will be invested
initially, although you would be subject to a CDSC for a four- or 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. 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.

INITIAL SALES CHARGE ALTERNATIVE: CLASS A SHARES
Class A Shares of the Sierra Trust Funds are sold at the Public Offering Price.
Investors purchasing Class A Shares of the Non-Money Funds incur 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 time of
purchase, but may be subject to a 1.0% CDSC on redemptions within one year of
purchase or a 0.5% CDSC on redemptions during the second year after purchase
(the "Class A CDSC"), including redemptions of Money Fund Class A Shares
acquired through exchange for such Non-Money Fund Class A Shares. No sales
charge at time of purchase and no CDSC will be assessed on purchases of Class A
Shares of a Money Fund, 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. Certain investors who purchased
Non-Money Fund Class A Shares at net asset value based on a purchase amount of
$2.5 million or more before July 1, 1995 are subject to the Prior Class A CDSC.
See "APPLICATION OF CLASS A SHARES CDSCS" subsection in this section. For other
waivers of the Class A Shares sales charges, see the section "WAIVERS OF THE
SALES CHARGES FOR CLASS A AND CLASS B SHARES." The following tables illustrate
the sales charges applicable at purchase to Class A Shares at various investment
levels.

FOR CLASS A SHARES OF NON-MONEY FUNDS
OTHER THAN THE SHORT TERM GLOBAL GOVERNMENT FUND
AND THE SHORT TERM HIGH QUALITY BOND FUND

DEALERS'
AS A % OF AS A % OF REALLOWANCE
OFFERING PRICE NET ASSET AS A % OF
AMOUNT OF TRANSACTION PER SHARE VALUE OFFERING PRICE
- --------------------- -------------- ---------- ---------------
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%

FOR CLASS A SHARES OF SHORT TERM GLOBAL GOVERNMENT FUND AND
THE SHORT TERM HIGH QUALITY BOND FUND
DEALERS'
AS A % OF AS A % OF REALLOWANCE
OFFERING PRICE NET ASSET AS A % OF
AMOUNT OF TRANSACTION PER SHARE VALUE OFFERING PRICE
- --------------------- -------------- ---------- ---------------
Less than $50,000................ 3.50% 3.63% 3.00%
$50,000 but less than $100,000... 3.00% 3.09% 2.50%
$100,000 but less than $250,000.. 2.50% 2.56% 2.00%
$250,000 but less than $500,000.. 2.25% 2.30% 2.00%
$500,000 but less than $1,000,000 2.00% 2.04% 1.75%
$1,000,000 and over.............. 0% 0% 0%

Sierra Services, the distributor of the shares of the Funds, will pay the
appropriate dealers' reallowance to GW Securities or other broker-dealers
authorized to place orders for Fund shares ("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 GW Securities
or certain Authorized Dealers. GW Securities or certain Authorized Dealers may
receive different compensation for selling shares of one class of a Fund
rather than shares of another class of the same Fund.

As shown in the tables, 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 0.25% of the net asset value of such purchases.

REDUCED SALES CHARGES AT PURCHASE
As described below, the sales charge on purchases of Class A Shares of the Funds
may be reduced through:

* A RIGHT OF ACCUMULATION
* QUANTITY DISCOUNTS
* A LETTER OF INTENT
* REINVESTMENT PRIVILEGES
* INVESTMENT THROUGH A SAM ACCOUNT

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 GW Securities 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 Fund and Class B and Class S Shares in all the
Funds may be combined with the amount of the investor's current purchase in
determining the sales charge applicable to 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 Administration at the time of the current purchase.

QUANTITY DISCOUNTS
As shown in the tables on the preceding page and under the Right of Accumulation
described above, larger purchases of Non-Money Fund Class A Shares combined with
Class B or Class S Shares of all the Funds reduce the sales charge paid on Class
A Shares. The Funds will combine purchases of Non-Money Fund Class A Shares
with Class B and Class S Shares made on the same day by the investor, spouse,
and any minor children when calculating the Class A sales charge. 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 Administration at the time of the current purchase.

LETTER OF INTENT
An investor may qualify for a reduced sales charge on Class A Shares 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 Class A Shares of
the Non-Money Funds which, if made at one time, would qualify for a reduced
sales charge. Any redemptions of Class A Shares of a Non-Money Fund made during
the 13-month period may be subtracted from the amount of purchases of Class A
Shares of the Non-Money Funds in determining whether the terms of the Letter of
Intent have been met. During the term of a Letter of Intent, Sierra
Administration will hold Class A Shares representing 5% 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 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 of
the Non-Money Funds if the total of such purchases had been made at a single
time.

REINVESTMENT PRIVILEGE
Upon redemption of Class A Shares, a shareholder has the right, to be exercised
within 180 days, to reinvest any or all of the redemption proceeds in Class A
Shares of a Fund without any sales charge at the next determined NAV after
receipt of the purchase order. The shareholder must notify GW Securities in
writing concerning the reinvestment in order to avoid the sales charge.

APPLICATION OF CLASS A SHARES CDSCS
The Class A CDSC of 1.0% or 0.5% 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, (ii) acquired, including Class A Shares of a Money Fund
acquired, through an exchange for Class A Shares of a Non-Money Fund purchased
at NAV without a sales charge at time of purchase due to purchases of $1 million
or more, (iii) purchased through an employee benefit trust created pursuant to a
plan qualified under Section 401(k) of the Code ("401(k) Plan"), or (iv)
purchased through a retirement plan qualified under Section 403(b) of the Code
("403(b) Plan"). The Class A CDSC and the Prior Class A CDSC will not be imposed
on Class A Shares purchased by (i) a qualified retirement plan that, at the time
of purchase, had not fewer than 500 eligible employees, (ii) a qualified
retirement plan that, at the time of purchase, had assets exceeding $100
million, or (iii) an institution investing $5 million or more in the aggregate
in one or more of the Funds. 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 Sierra Trust Funds will first redeem shares not subject
to any CDSC.

DEFERRED SALES CHARGE ALTERNATIVE: CLASS B SHARES
If you choose the deferred sales charge alternative, you will purchase Class B
Shares at their net asset value per share without the imposition of a sales
charge at the time of purchase. Class B Shares of the Longer Term Funds that are
redeemed within six years of purchase, and Class B Shares of the Short Term
Funds that are redeemed within four years of purchase, however, will be subject
to a CDSC as described below. Class B Shares of the Money Funds are not
available for purchase directly and may be purchased only by exchange for Class
B Shares of the Non-Money Funds. Shareholders acquiring Class B Shares of a
Money Fund through an exchange will do so at the net asset value per share
without the imposition of a sales charge at the time of purchase. CDSC payments
and distribution fees on Class B Shares may be used to fund commissions payable
to GW Securities or 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 or four 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 net asset value of the Class B Shares at the time of purchase
or (2) the net asset value of the Class B Shares at the time of redemption; the
percentage used to calculate the charge will depend on the number of years since
you invested the dollar amount being redeemed, according to the following table:

YEAR OF REDEMPTION CONTINGENT DEFERRED
AFTER PURCHASE SALES CHARGE
- ---------------------------------------------------- ------------------------
LONGER TERM SHORT TERM
FUNDS FUNDS
------------ ----------
First............................................... 5% 4%
Second.............................................. 4% 3%
Third............................................... 3% 2%
Fourth.............................................. 3% 1%
Fifth............................................... 2% 0
Sixth............................................... 1% 0
Seventh and following............................... 0 0

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

The following example illustrates the operation of the CDSC for Class B Shares
of a Longer Term Fund. Assume that you made an investment of $500 in Class B
Shares in January 1990 at $4.00 per share; you invest an additional $1,000 in
January 1993 at $5.00 per share; you invest an additional $2,000 in January 1996
at $10.00 per share and from January 1991 through January 1996, $1,000 of
dividends and/or capital gains distributions are paid and reinvested to purchase
an additional 175 Class B Shares. In April 1996, there are 700 Class B Shares in
your account so that if a Class B Share is worth $10.00 the total account now
has a value of $7,000. You seek to redeem $6,000. Of the $7,000 of Class B
Shares in your account, only the $1,000 investment in January 1993 and the
$2,000 investment in January 1996 were made within the last six years and
therefore only those amounts are subject to a CDSC. The remaining $4,000 is
exempt from the charge because it consists of an investment of $500 that you
have owned for more than six years, $1,000 received upon reinvestment of
dividends and capital gains distributions and $2,500 of value attributable to
unrealized appreciation of the value of investments. Of the $3,000 in your
account which is subject to a sales charge, only $2,000 is being redeemed. Of
that amount, $1,000 represents the value of an investment made more than three
years but less than four years ago, and will incur a charge of 3% or $30.00. The
remaining $1,000 which is being redeemed and is subject to a sales charge
represents the value of an investment made within the last year and will incur a
charge of 5%, or $50.00, for a total charge of $80.00.

As described in "Your Account -- Exchange Privileges and Restrictions," Class B
Shares of a Fund may be exchanged for Class B Shares of any other Fund without
having to pay any CDSC at the time of the exchange. In such an exchange, the
period of time during which you had an investment in Class B Shares of any
previous Fund will be included in the period during which your investment is
deemed to be invested in the Trust for purposes of calculating the CDSC.
Following such an exchange, your investment will continue to be subject to the
CDSC of the class of shares of the Fund in which the investment amount was
initially invested.

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.

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, contingent deferred sales charges
and ongoing annual expenses will depend on the length of time a share is held.
In almost all cases, investors planning to purchase $250,000 or more of Fund
shares will pay lower aggregate charges and expenses by purchasing Class A
Shares.

WAIVERS OF THE SALES CHARGES FOR CLASS A AND CLASS B SHARES
No sales charge will be assessed with respect to Class A Shares 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 (a
"Non-Affiliated Fund"), 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 Administration must
be notified at the time of purchase that the purchase being made qualifies for a
purchase at NAV); (4) purchases by employees of any of the Funds' Sub-Advisors;
(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 the Distributor; (6) purchases
by a GW Securities client through investment of distributions paid by a UIT
within 30 days of the payment of such distributions where the client's interests
in such UIT were acquired through GW Securities; and (7) purchases through
investment of dividends or distributions paid by a Non-Affiliated Fund within 30
days of the payment of such dividends or distributions.

No sales charge at purchase is assessed for Class A Shares purchased through a
401(k) Plan or 403(b) Plan. Investors through a 401(k) Plan or 403(b) Plan may
be subject to various account fees and purchase and redemption procedures
designated by the employer who has established such a plan. Such investors
should consult their employer or account agreements for information relating to
their accounts.

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

The CDSC applicable to Class B Shares may be waived as follows: (1) on
systematic withdrawals in amounts of 1% or less per month of the Class B Shares
investment of holders of Class B Shares who participate in the Systematic
Withdrawal Plan described on the following pages; (2) subject to confirmation of
shareholder status, for a redemption made within one year of the death of the
shareholder (including one who owns the shares as joint owner); and (3) on
redemptions in connection with certain involuntary distributions, including
distributions arising out of the death or disability of a shareholder, from
IRAs.

The foregoing waivers may be changed at any time.

HOW TO SELL SHARES
You can arrange to take money out of your Fund account on any Business Day by
selling (redeeming) some or all of your shares. Your shares will be sold at the
NAV next determined after your order is received and accepted. NAV is usually
calculated at 1:00 p.m., Pacific Time/4:00 p.m., Eastern Time. The Class B
Shares will be subject to a CDSC described under "DEFERRED SALES CHARGE
ALTERNATIVE: CLASS B SHARES." Certain Class A Shares 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.

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 Administration. However, if a shareholder is redeeming shares recently
purchased with a check, the redemption proceeds will not be paid to the
shareholder until the check has cleared. The check may take up to 15 days or
more to clear for deposit of the shareholder's funds into the Fund's account,
and the shareholder may not receive the redemption proceeds until after such
time period. The failure of a shareholder who purchased shares by wire to submit
an application form in a timely fashion may cause delays in processing
redemption requests.

If you wish to keep your Class A or Class B Shares account open, leave at least
$250 worth of shares in your account, unless you are a participant in the Sierra
Automatic Investment Plan.

* The table on the following page highlights the ways in which you can take
money out of your Fund account by selling your shares.

<TABLE>
WAYS TO SELL SHARES OF YOUR SIERRA TRUST FUND

- -------------------------------------------------------------------------------------------------
ACCOUNT TYPE SPECIAL REQUIREMENTS
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
BY CHECKWRITING All Money Fund Class A Shares * Before redeeming Class A Shares
account types through checkwriting, you must
complete the signature card
attached to the account
application. Call 800-222-5852 to
request one. Class B Shares may
not be redeemed through
checkwriting.
- -------------------------------------------------------------------------------------------------
BY PHONE All account types except retirement * For transfers to your Great
800-222-5852 Western Bank account: minimum,
$100

All account types * You may exchange to the same class
of other funds of the Trust if
both accounts are registered with
the same name(s), address, and
taxpayer ID number.
- -------------------------------------------------------------------------------------------------
BY MAIL Individual, Joint Accounts, Sole * The letter of instruction must be
Proprietorships, UGMA, UTMA signed by all persons required to
sign for transactions, exactly as
their names appear on the account.
Retirement accounts * The account owner should complete
a retirement distribution form.
Call 800-222-5852 to request one.
Trust * The trustee must sign the letter
indicating capacity as trustee. If
the trustee name is not in the
account registration, provide a
copy of the trust document
certified within the last 60 days.
Business or Organization * At least one person authorized (by
corporate resolution) to act on
the account must sign the letter.
* Include a corporate resolution
with corporate seal or for amounts
of more than $50,000 include a
signature guarantee.
Executor, Administrator, * Call 800-222-5852 for
Conservator, Guardian instructions.
- -------------------------------------------------------------------------------------------------
BY WIRE All account types except retirement * You must sign up for the wire
feature before using it. To verify
that it is in place, call 800-222-
5852.

* Your wire redemption request must
be received by Sierra Trust Funds
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.
- -------------------------------------------------------------------------------------------------
</TABLE>

* BY CHECKWRITING
Free checkwriting is available for Class A Shares of the Money Funds. With this
service, you may write checks to any person in any amount of $250 or more. To
obtain checks, you must complete the Signature Card that accompanies the
Application Form. To establish this checkwriting service after opening a Fund
account, contact Sierra Administration by telephone or mail to obtain an
Application Form. The checkwriting service is not available for Class B Shares.

You will receive the daily dividends declared on the Class A Shares to be
redeemed until the day that a check is presented to Boston Safe Deposit and
Trust Company ("Boston Safe"), the bank designated by the sub-transfer agent,
for payment. A fee of $10.00 may be imposed on your account if your check is
returned because it fails to meet the Fund's checkwriting criteria. A fee may be
imposed for requested copies of cashed checks. Upon 30 days' prior written
notice to shareholders, the checkwriting privilege may be modified or
terminated. You cannot close your account in a Fund by writing a check.

* 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 Fund
account name (as registered with the Fund) from which the redemption is being
made, the class of shares and the relevant Fund account number. If you gave
sweep instructions on your application form, redemption proceeds will be
deposited in the Great Western Bank account specified. Otherwise, the proceeds
will be sent to the shareholder by check at the shareholder's address of record.

For a wire transfer, if a telephone redemption is received by Sierra
Administration before 8:00 a.m., Pacific Time/11:00 a.m., Eastern Time, the
proceeds will be sent by wire to the designated pre-authorized account on the
next Business Day. The minimum amount for a wire is $1,000, and a $5 fee may be
charged for each wire transfer. If a telephone redemption order is received by
Sierra Administration after 8:00 a.m., Pacific Time/11:00 a.m., Eastern Time,
the proceeds will be wired in Federal Funds on the Business Day after the day on
which the wire would otherwise have been sent.

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 an
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 Administration with a signature guarantee (for more information
regarding signature guarantees, see the page after next). For joint accounts,
all owners must sign and have their signatures guaranteed.

KEY ASPECTS OF TELEPHONE REDEMPTIONS
During periods of significant economic or market changes, telephone redemptions
may be difficult to implement. Neither the Trust nor its Transfer Agent will be
responsible for any loss, liability, cost or expense for acting upon wire
instructions or upon telephone instructions that it reasonably believes are
genuine. The Trust and its Transfer Agent will each employ procedures to confirm
that telephone instructions are genuine. Such procedures may include recording
telephone calls. You should verify the accuracy of telephone transactions
immediately upon receipt of your confirmation statement. If an investor is
unable to contact Sierra Administration or GW Securities by telephone, an
investor may deliver the redemption request to Sierra Administration at the
address set forth under "How to Invest in the Funds." Upon 30 days' prior
written notice to shareholders, the telephone redemption privilege 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. Fund
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 Funds, 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 Fund 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 Buy Shares --
Deferred Sales Charge Alternative: Class B Shares," "How to Buy Shares --
Application of Class A Shares CDSCs" and "How to Buy Shares -- Waivers of the
Sales Charges for Class A and Class B Shares" sections for a description 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 GW SECURITIES
Redemption requests may be given to a GW Securities representative. Redemption
orders received by Sierra Administration prior to the close of trading on the
NYSE on any Business Day are effected at the NAV determined on that day.
Redemption orders received after the close of the NYSE are priced as of the time
the NAV is next determined on the next Business Day. GW Securities is
responsible for forwarding orders received on a Business Day to Sierra
Administration 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.
Redemption proceeds may be swept into a Great Western account or wired to a
designated bank account if the investor has selected these features on the
Application Form; otherwise, redemption proceeds will be mailed to the
shareholder's address of record.

* IN WRITING
Write a "letter of redemption" with:
* Your name,
* The Fund's name and Class of Shares,
* Your Fund account number,
* The dollar amount or number of shares to be redeemed, and
* Any other applicable requirements listed in the table entitled "Ways to Sell
Shares of Your Sierra Trust Fund."

Deliver the letter to your GW Securities representative (who is responsible for
forwarding the letter without undue delay to Sierra Administration) or mail the
letter to:

Sierra Fund Administration Corporation
9301 Corbin Avenue
Suite 333
P.O. Box 1160
Northridge, California 91328-1160

NOTE: Investors using an express delivery service should not include the Post
Office Box number in the address and should contact Sierra Administration for
alternative delivery instructions.

CERTAIN WRITTEN REQUESTS MUST INCLUDE A SIGNATURE GUARANTEE
To protect you and the Trust from fraud, your 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 Fund account
(record address), or

* The check is not being made out to the Fund account owner.

You should be able to obtain a signature guarantee from a Great Western Bank,
any bank which is a member of the Federal Deposit Insurance Corporation, a trust
company, broker-dealer (including a GW Securities representative), 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
CLASS A SHARES
Class A Shares of a Non-Money Fund may be exchanged for Class A Shares of any of
the other Funds of the Trust, including the Money Funds, without a sales charge
at purchase. If shares of the Money Funds so acquired are subsequently exchanged
again for shares of a Non-Money Fund, no sales charge at purchase will be
assessed.

Class A Shares of a Money Fund may be exchanged for Class A Shares of the other
Money Funds without a sales charge at purchase. When Class A Shares of the Money
Funds are exchanged for Class A Shares of a Non-Money Fund, the initial sales
charge applicable to such Non-Money Fund will be assessed unless the Class A
Shares of the Money Funds given in exchange were acquired through a previous
exchange or series of exchanges for shares of a Non-Money Fund. No initial sales
charge will be assessed, however, and any applicable CDSC will not be imposed
when Class A Shares of a Money Fund are exchanged for Class A Shares of a
Non-Money Fund where the purchase of shares of the Non-Money Fund through the
exchange is of any of the types described in "Waivers of the Sales Charges for
Class A and Class B Shares."

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

CLASS B SHARES
Class B Shares of a Fund may be exchanged for Class B Shares of any of the other
Funds of the Trust, including the Money Funds, without having to pay any CDSC at
the time of the exchange. If you exchange into Class B Shares of another Fund,
the period of time during which you held your investment in Class B Shares of
the previous Fund will be included in the period during which that investment is
deemed to be invested in the Trust for purposes of calculating the CDSC. If the
initial Class B Shares purchased by the shareholder were not subject to the
Class B CDSC, then no Class B CDSC will be imposed on any subsequent exchanges
or redemptions involving those shares. In the event of redemptions of Class B
Shares after exchanges, the amount you initially invested (the "Investment
Amount") will be subject to the CDSC schedule and rate of the Fund in which the
Investment Amount was initially invested. For example, if you invest an
Investment Amount in Class B Shares of a Longer Term Fund, exchange such shares
for Class B Shares of a Short Term Fund and then redeem such Short Term Fund
Shares, the Investment Amount will be subject to the longer CDSC schedule and
higher CDSC rate of the Longer Term Fund. Upon 60 days' notice to investors, the
Trust in its sole discretion may change these exchange privileges and
restrictions at any time.

Class B Shares that are subject to the longer six-year CDSC schedule and the
higher CDSC rate applicable to the Class B Shares of the Longer Term Funds may
also be exchanged for Class S Shares of a SAM Account fund if the investor (1)
has a SAM Account prior to making the exchange, or (2) opens a SAM Account prior
to making the exchange and invests at least the minimum for such SAM Account,
through any combination of such an exchange and initial purchase of Class S
Shares. ADDITIONAL INFORMATION REGARDING CLASS S SHARES AND SAM ACCOUNTS IS
AVAILABLE IN A SEPARATE PROSPECTUS WHICH YOU MAY OBTAIN WITHOUT CHARGE BY
CALLING 800-222-5852 TOLL-FREE.

GENERAL INFORMATION ABOUT EXCHANGES
Shareholders exercising the exchange privilege with any of the Funds of the
Sierra Trust Funds should review the prospectus of such Funds carefully prior to
making an exchange. The exchange privilege is available only in those states
where the offer and sale of shares of a given Fund may legally be made.

An exchange of shares may be made by telephoning Sierra Administration toll free
at 800-222-5852, by contacting your GW Securities representative, or by writing
to Sierra Administration at 9301 Corbin Avenue, Suite 333, P.O. Box 1160,
Northridge, California 91328-1160. GW Securities is responsible for forwarding
exchange requests received on a Business Day to Sierra Administration by the
close of trading on the NYSE on the same day, and failure to do so will result
in an investor being unable to obtain that day's NAV. During periods of
significant economic or market changes, telephone exchanges may be difficult to
implement. If an investor is unable to effect an exchange by telephone, an
investor may deliver the exchange request in writing to Sierra Administration.
The NAV of shares purchased and redeemed in an exchange request received on a
Business Day will be determined on the same day, provided that the exchange
request is received prior to 1:00 p.m., Pacific Time/4:00 p.m., Eastern Time.

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. 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 exchanges.

INVESTOR SERVICES
Sierra Administration provides a variety of services to help you manage your
account.

INFORMATION SERVICES
Sierra Administration telephone representatives are available Monday through
Friday, from 6:00 a.m. to 6:00 p.m., Pacific Time/9:00 a.m. to 9:00 p.m.,
Eastern Time, and Saturday from 6:00 a.m. to 3:00 p.m., Pacific Time/9:00 a.m.
to 6:00 p.m., Eastern Time, except on NYSE holidays.

Statements and reports that Sierra Administration sends to you include the
following:
* Confirmation statements (after every transaction, except reinvestment, that
affects your account balance or your account registration)
* Account statements (quarterly)
* Fund reports (every six months)

To reduce expenses, unless you instruct us otherwise, usually only one Fund
report will be mailed to all accounts that share a single tax ID number, even
if there is more than one account holder in the accounts with that tax ID
number. Call 800-222-5852 if you need additional copies of Fund reports or
historical account information.
- ------------------------------------------------------------------------------

* TELEPHONE SERVICE

ACCOUNT ASSISTANCE
800-222-5852

ACCOUNT BALANCES
800-222-5852

EXCHANGES AND REDEMPTIONS
800-222-5852

PRODUCT INFORMATION
800-222-5852

QUOTES*
800-447-6567
*Automated Service
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<PAGE>
DIVIDENDS, CAPITAL GAINS AND TAXES

UNDERSTANDING DISTRIBUTIONS
As a Fund shareholder, you are entitled to your share of the Fund's net income
and gains on its investments. The Fund passes these earnings along to its
investors as DISTRIBUTIONS.

Each Fund earns dividends from stocks and interest from bond, money market, and
other investments. This interest is passed along as DIVIDEND DISTRIBUTIONS. The
Fund realizes capital gains whenever it sells securities for a higher price than
it paid for them. These are passed along as CAPITAL GAIN DISTRIBUTIONS. A Fund
itself is not subject to federal income tax on the earnings it distributes to
investors, provided it meets certain requirements. Each Fund intends to avoid
liability for federal income tax and federal excise tax by making sufficient
distributions to investors.

The amount of dividends of net investment income (i.e., all income other than
long- and short-term capital gains) and distributions of net realized long- and
short-term capital gains payable to shareholders will be determined separately
for each Fund. Dividends from the net investment income of the Money Funds will
be declared daily and paid monthly. Dividends from the net investment income of
the Bond Funds will be declared daily and paid monthly. Dividends from the net
investment income of the Growth and Income Fund will be declared and paid
quarterly. Dividends from the net investment income of the Growth Fund will be
declared and paid semi-annually. Dividends from the net investment income of the
Emerging Growth and International Growth Funds will be declared and paid
annually. Distributions of any net long-term capital gains earned by a Fund will
be made annually. Distributions of any net short-term capital gains earned by a
Fund will be distributed no less frequently than annually at the discretion of
the Board of Trustees.

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

1. REINVESTMENT OPTION. Your dividend and capital gain distributions will be
automatically reinvested in additional shares of the same Fund, unless you
instruct the Fund on the application form or later in writing or by telephone to
pay all dividends and distributions in cash. Dividends from a class of one Fund
may be reinvested in the same class of the same Fund or a different Fund. If the
Fund in which the reinvestment is made has a sales charge, you will not pay the
sales charge 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 Sierra
Trust Fund account, you can elect to receive a check on a regular monthly,
quarterly, semiannual or annual basis. See "Your Account -- How to Sell Shares
- -- Systematic Withdrawal Plan."

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

SHARES PURCHASED THROUGH REINVESTMENT of dividend and capital gain distributions
are not subject to the Fund's sales charge at purchase. Likewise, if you direct
distributions to a Fund of the Sierra Trust Funds with a sales charge, you will
not pay a sales charge on those purchases.

TAXES
The following summary of federal income tax consequences is based on current tax
laws and regulations, which may be changed by legislative, judicial or
administrative action.

No attempt has been made to present a detailed explanation of the federal, state
or local income tax treatment of a Fund or its shareholders. Accordingly,
shareholders are urged to consult their tax advisors regarding specific
questions as to federal, state and local income taxes.

Each Fund intends to qualify separately each year as a "regulated investment
company" as defined under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"). The requirements for qualification may cause a Fund to
restrict the extent of its short-term trading or its transactions in options or
futures contracts.

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

TAXES ON DISTRIBUTIONS. Distributions are subject to federal income tax, and may
also be subject to state or local taxes. If you live outside the United States,
your distributions could also be taxed by the country in which you reside.
Generally, your distributions are taxable when they are paid. However, dividends
declared in October, November or December of any year and payable to
shareholders of record on a date in that month are deemed to have been paid by
the Fund and received by the shareholders on the last day of December if paid by
the Fund at any time during the following January. Each shareholder will receive
after the close of the calendar year an annual statement and such other written
notices as are appropriate as to the federal income tax status of the
shareholder's dividends and distributions received from the Fund 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. Distributions of net capital
gain (the excess of net long-term capital gains over net short-term capital
losses) are taxed to shareholders as long-term capital gains regardless of how
long you have held your shares. Every January, the Trust will send you and the
IRS a statement showing the amount of each taxable distribution you received in
the previous year.

Dividends paid by the Municipal Funds that are derived from interest earned on
qualifying tax-exempt obligations are "exempt-interest" dividends, which
shareholders may exclude from their gross incomes for federal income tax
purposes if at the close of each quarter of a Fund's taxable year, at least 50
percent of the Fund's total assets consist of obligations the interest on which
is excludable from gross income for federal income tax purposes. To the extent
that any of these Funds invests in AMT-Subject Bonds, any exempt-interest
dividends derived from interest on such AMT-Subject Bonds are a specific
preference item for purposes of the federal individual and corporate alternative
minimum taxes. In any event, all exempt-interest dividends will be a component
of the adjusted current earnings adjustment for purposes of the federal
corporate alternative minimum tax, and corporate shareholders may incur an
additional federal 0.12% environmental tax liability through the receipt of Fund
dividends and distributions.

Current federal income tax laws limit the types and volume of bonds qualifying
for the federal income tax exemption of interest, which may have an effect on
the ability of the Fund to purchase sufficient amounts of tax-exempt securities
to satisfy the requirements for the payment of "exempt-interest" dividends.
Current federal tax law also makes interest on certain tax-exempt bonds a tax
preference item for purposes of the individual and corporate alternative minimum
tax.

TAXES ON TRANSACTIONS. Your account redemptions -- including exchanges to other
funds of the Trust -- and transfers of shares are generally subject to tax
measured with reference to the difference between the price you paid for shares
and the price you receive when you sell them.

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 will be generally
treated as long-term capital gain or loss if the shares have been held for more
than twelve months, and otherwise will be generally treated as a short-term
capital gain or loss. Any loss recognized by a shareholder upon the sale or
redemption of shares of the Fund held for six months or less, however, will be
disallowed to the extent of any "exempt-interest dividends" received by the
shareholder with respect to such shares. If shares on which a net capital gains
distribution has been received are subsequently sold or redeemed 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.

Whenever you sell shares of the Fund, the Trust will send you a confirmation
statement showing how many shares you sold and at what price. You will also
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. Be sure to keep your regular
account statements; the information they contain will be essential in
calculating the amount of your capital gains.

Interest on indebtedness incurred by shareholders to purchase or carry shares of
the Municipal Funds and the California Money Fund is not deductible for federal
income tax purposes. The Municipal Funds and the California Money Fund may not
be an appropriate investment for persons (including corporations and other
business entities) who are substantial users (or who are related to substantial
users) of facilities financed by "private activity bonds" or certain industrial
development bonds. "Substantial user" is defined generally as including a
"non-exempt person" who regularly uses in a trade or business a part of a
facility financed from the proceeds of such bonds. Entities or persons who are
"substantial users" (or persons related to "substantial users") of facilities
financed by industrial development bonds should consult their tax advisors
before purchasing shares of the Municipal Funds or the California Money Fund.

FLORIDA INSURED MUNICIPAL FUND. Florida does not impose an income tax on
individuals. Accordingly, dividends or distributions by the Fund to an
individual who is a Florida resident are not subject to state income tax in
Florida. However, Florida imposes an intangible personal property tax on shares
of the Fund owned by a Florida resident on January 1 of each year unless such
shares qualify for an exemption from the tax.

The Fund has received a Technical Assistance Advisement from the State of
Florida, Department of Revenue, to the effect that Fund shares owned by a
Florida resident will be exempt from the intangible personal property tax so
long as the Fund's portfolio includes only assets, such as notes, bonds, and
other obligations issued by the State of Florida or its municipalities,
counties, and other taxing districts, the United States Government, and its
agencies, Puerto Rico, Guam, and the U.S. Virgin Islands, which are exempt from
that tax.

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
net asset value excluded or exempt from federal income taxes or Florida
intangible personal property taxes and the dollar amount, if any, subject to
such taxes. Moreover, these statements designate the amount of exempt-interest
dividends that is a specific preference item for purposes of the federal
individual and corporate alternative minimum taxes. Shareholders should consult
their own tax advisors with specific reference to their own tax situations.

CALIFORNIA MONEY FUND, CALIFORNIA MUNICIPAL FUND AND CALIFORNIA INSURED
INTERMEDIATE MUNICIPAL FUND. Dividends paid by the California Money Fund,
California Municipal Fund and California Insured Intermediate Municipal Fund
(the "California Funds") that are derived from interest earned on qualifying
tax-exempt obligations are "exempt-interest" dividends, which shareholders may
exclude from their gross incomes for federal income tax purposes if at the close
of each quarter of a California Fund's taxable year, at least 50 percent of the
California Fund's total assets consist of obligations the interest on which is
excludable from gross income for federal income tax purposes.

Current federal income tax laws limit the types and volume of bonds qualifying
for the federal income tax exemption of interest, which may have an effect on
the ability of the California Funds to purchase sufficient amounts of tax-exempt
securities to satisfy the requirements for the payment of "exempt-interest"
dividends. Current federal tax law also makes interest on certain tax-exempt
bonds a tax preference item for purposes of the individual and corporate
alternative minimum tax. In any event, all exempt-interest dividends will be a
component of the adjusted current earnings adjustment for purposes of the
federal corporate alternative minimum tax, and corporate shareholders may incur
an additional federal 0.12% environmental tax liability through the receipt of
Fund dividends and distributions.

Each of the California Funds is treated as a separate taxable entity for
California tax purposes, and is therefore subject to California franchise or
corporate income tax on its net income. However, each of the California Funds
intends to qualify as a regulated investment company under the Code, and if it
does so qualify, will be entitled, for California tax purposes, to a deduction
for dividends paid to shareholders. As a regulated investment company, a
California Fund will pay California franchise or corporate income tax only on
any undistributed income, net of allocable expenses.

If, at the close of each quarter of its taxable year, at least 50% of the value
of the total assets of a California Fund consists of obligations the interest on
which would be exempt from California personal income tax if the obligations
were held by an individual ("California Tax Exempt Obligations"), and if the
California Fund continues to qualify as a regulated investment company for
federal income tax purposes, then the California Fund will be qualified to pay
dividends to its shareholders that are exempt from California State personal
income tax, but not from California State franchise tax or California State
corporate income tax ("California exempt-interest dividends"). However, the
total amount of California exempt-interest dividends paid by the California
Money Fund to all of its non-corporate shareholders with respect to any taxable
year cannot exceed the amount of interest received by the Fund during such year
on California Tax Exempt Obligations less any expenses and expenditures
(including any dividends paid to corporate shareholders) deemed to have been
paid from such interest. If the aggregate dividends exceed the amount that may
be treated as California exempt-interest dividends, only that percentage of each
dividend distribution equal to the ratio of aggregate California exempt-interest
dividends to aggregate dividends will be treated as a California exempt-interest
dividend. Dividend distributions that do not qualify for treatment as California
exempt-interest dividends (including those dividend distributions to
shareholders taxable as long-term capital gains for federal income tax purposes)
will be taxable to shareholders at ordinary income tax rates for California
personal income tax purposes to the extent of the California Fund's earnings and
profits.

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

"BUYING A DIVIDEND." When a Fund goes ex-dividend, its share price is reduced by
the amount of the distribution. If you buy shares before the ex-dividend date,
you will pay the full price for the shares and then receive a portion of the
price back as a taxable distribution.

SHAREHOLDER AND ACCOUNT POLICIES

TRANSACTION DETAILS
The Funds are open for business each day the NYSE is open. The Trust usually
calculates the NAV of the Class A Shares, Class B Shares and Class S Shares and
offering price at the close of business of the NYSE, normally 1:00 p.m., Pacific
Time/4:00 p.m., Eastern Time.

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

Although the legal rights of Class A, Class B and Class S Shares will be
identical, the different expenses borne by each class will result in different
net asset values and dividends. The net asset value of Class B and Class S
Shares will generally be lower than the net asset value of Class A Shares as a
result of the larger distribution fee charged to Class B and Class S Shares. It
is expected, however, that the net asset value per share of the three 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.

Portfolio securities and other assets are valued primarily on the basis of
market quotations or, if quotations are not readily available, by a method that
the Board of Trustees believes accurately reflects fair value. Foreign
securities are valued on the basis of quotations from the primary market in
which they are traded, and are translated from the local currency into U.S.
Dollars using current exchange rates.

IF YOU ARE UNABLE TO REACH THE TRUST BY PHONE (for example, during periods of
unusual market activity), consider placing your order by mail or by contacting
your GW Securities representative.

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

TO AVOID THE COLLECTION PERIOD ASSOCIATED WITH CHECK PURCHASES AND PURCHASES BY
TRANSFER FROM ANOTHER ACCOUNT, consider buying Fund shares by bank wire, U.S.
Postal money order, U.S. Treasury check, Federal Reserve check, or Direct
Deposit instead.

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

THE FUNDS IN DETAIL

ORGANIZATION

EACH FUND IS AN INVESTMENT PORTFOLIO OF A MUTUAL FUND: a portfolio that pools
shareholders' money and invests it toward a specified goal. In technical terms,
the Trust is an open-end management investment company. The Trust was organized
on February 22, 1989 under the laws of the Commonwealth of Massachusetts as a
"Massachusetts business trust." The Trust offers shares of beneficial interest,
each without par value, for sale to the public. The Trust has the power to issue
separate series of shares and has authorized sixteen separate series, each of
which relates to a separate investment fund of the Trust. Except for the Target
Maturity 2002 Fund, which offers only Class A Shares, each of the series of
shares has been divided into three classes designated Class A, Class B and Class
S, which provide investors with alternatives as to sales load and fund expenses.
The Class A, Class B and Class S Shares of a Fund represent interests in the
assets of that Fund and have identical voting, dividend, liquidation and other
rights except that expenses related to the distribution of each class of shares
are borne solely by that class and each class of shares has exclusive voting
rights with respect to matters pertaining to the distribution plan applicable to
that class.

THE TRUST IS GOVERNED BY A BOARD OF TRUSTEES, which is responsible for
protecting the interests of shareholders. The trustees are experienced business
persons who meet throughout the year to oversee the Trust's activities, review
contractual arrangements with companies that provide services to the Funds, and
review performance. The majority of trustees are not otherwise affiliated with
Sierra Services, Sierra Advisors or Sierra Administration.

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

SIERRA ADVISORS, ITS AFFILIATES AND SERVICE PROVIDERS

ADVISOR
Sierra Advisors, located at 9301 Corbin Avenue, Northridge, California 91324, is
the investment advisor of the Funds. Responsibilities of Sierra Advisors include
formulating the 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 Fund's
investment performance. In connection with these activities, Sierra Advisors may
initiate action to change a Sub-Advisor if it deems such action to be in the
best interests of a Fund and its shareholders.

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

SUB-ADVISORS
The following organizations, under the supervision of Sierra Advisors, act as
Sub-Advisors to the Funds:

ALLIANCE is located at 1345 Avenue of the Americas, New York, New York 10105.
Alliance Capital 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 (ELAS), is the general partner of
Alliance.

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.

SCUDDER is located at Two International Place, Boston, Massachusetts 02110.
Scudder is a privately held corporation owned and operated by active firm
employees and concentrating primarily on investment management.

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.

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.

ADMINISTRATOR
Sierra Administration provides shareholder service and other administrative
services. Sierra Administration is under common control with the Advisor and
Sierra Services. Sierra Administration is located at 9301 Corbin Avenue,
Northridge, California 91324. Pursuant to an Administration Agreement, as
supplemented, Sierra Administration is responsible for all administrative
functions with respect to the Trust, although it delegates certain of its
responsibilities to the sub-administrators. Sierra Administration itself or
through sub-administrators performs many shareholder transaction and accounting
functions. In addition to such services, Sierra Administration is responsible
for performing activities as Transfer/Shareholder Servicing Agent, such as
keeping records of shareholders and handling shareholder communications. Sierra
Administration is entitled to a monthly fee at an annual rate of 0.35% of each
Non-Money Fund's average daily net assets and at an annual rate of 0.30% of each
Money Fund's average daily net assets. Sierra Administration pays The
Shareholder Services Group, Inc. ("TSSG"), a subsidiary of First Data Corp., for
its services as sub-administrator and sub-transfer agent. Sierra Administration
pays Boston Safe Deposit and Trust Co. ("Boston Safe"), for its services as
custodian. The Trust pays certain sub-transfer agent's and sub-administrator's
out-of-pocket expenses and pays Boston Safe certain custodial transaction
charges.

DISTRIBUTOR
Sierra Services is the distributor of the Class A, Class B and Class S shares of
the Funds. Sierra Services is located at 9301 Corbin Avenue, Northridge,
California 91324. Sierra Services, an indirectly wholly-owned subsidiary of
GWFC, was established in 1992 and is a registered broker-dealer with the NASD
and a registered investment advisor. GW Securities, a wholly-owned subsidiary of
GWFC, was established in 1982 and is a registered broker-dealer with the NASD.
GW Securities offers a broad range of investment products and services.

Each of the Funds has three distribution plans, pursuant to Rule 12b-1 under the
1940 Act, applicable to each class of Shares of the Trust (each, a "Rule 12b-1
Plan"). Each Fund intends to operate the Rule 12b-1 Plans in accordance with its
terms and the NASD Rules concerning sales charges. Under the applicable Rule
12b-1 Plans, Sierra Services is paid an annual fee as compensation in connection
with the offering and sale of Class A and Class B Shares of the Fund. The annual
fees to be paid to Sierra Services under Rule 12b-1 Plans are calculated with
respect to Class A Shares at an annual rate of up to .25% of the average daily
net assets of the Class A Shares of the Fund and with respect to Class B Shares
at an annual rate of up to .75% of the average daily net assets of the Class B
Shares of the Fund. These fees may be used to cover the expenses of Sierra
Services primarily intended to result in the sale of Class A and Class B Shares
of the Fund, including payments to Sierra Services' representatives or others
for selling shares. Sierra Services may retain any amount of its fee that is not
so expended. Class B Shares are also subject to a service fee at an annual rate
of .25% of the average daily net assets of the Class B Shares of the Fund.

In addition to providing for the expenses discussed above, each Rule 12b-1 Plan
also recognizes that Sierra Advisors 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 Fund's shares. Sierra Services
may, from time to time, pay to other dealers, in connection with retail sales or
the distribution of shares of a Fund, material compensation in the form of
merchandise or trips. Salespersons and any other person entitled to receive any
compensation for selling or servicing Fund shares may receive different
compensation with respect to one particular class of shares over another in the
Fund.

CUSTODIAN AND TRANSFER AGENT
Boston Safe, located at One Boston Place, Boston, Massachusetts 02108, is
custodian of the Funds' assets. Boston Safe is a wholly-owned subsidiary of
Boston Advisors. Sierra Administration acts as the Transfer Agent for the Trust.

PORTFOLIO TRANSACTIONS AND TURNOVER
All orders for the purchase or sale of securities on behalf of each Fund are
placed by the Fund's Sub-Advisor with broker-dealers that it selects. Each Fund
may, at the discretion of its Sub-Advisor, utilize GW Securities or brokers
affiliated with the Advisor or Sub-Advisor in connection with a purchase or sale
of securities in accordance with rules adopted or exemptive orders issued by the
SEC when the Fund's Sub-Advisor believes that such broker's charge for the
transaction does not exceed usual and customary levels.

Under certain market conditions, a Fund may experience high portfolio turnover
as a result of its investment strategies. For example, the purchase or sale of
securities by a Fund in anticipation of a rise or decline in interest rates or
to take advantage of yield disparities among different issues of Municipal
Securities could result in high portfolio turnover. Under certain market
conditions, the Growth Fund may experience an annual portfolio turnover rate
over 100% as a result of its investment strategies. Also, the Short Term Global
Government and Short Term High Quality Bond Funds' annual portfolio turnover
rate is expected to be as high as 200%. As a general rule, gains realized from
portfolio transactions will be long- or short-term capital gains, and net
realized long- and short-term capital gains will be taxable to shareholders at
ordinary income rates. See "Dividends, Capital Gains and Taxes." In addition,
higher portfolio turnover rates for a Fund can result in corresponding increases
in brokerage commissions. The Funds will not consider portfolio turnover rate a
limiting factor in making investment decisions consistent with their investment
objectives and policies.

BREAKDOWN OF FUND EXPENSES
Like any mutual fund, each Fund pays expenses related to its daily operations.
Expenses paid out of a Fund's assets are reflected in its share price or
dividends; they are neither billed directly to shareholders nor deducted from
shareholder accounts. Each Fund pays a MANAGEMENT FEE to Sierra Advisors for
managing its investments and business affairs. Sierra Advisors pays fees to
sub-contractors who provide assistance with these services. Each Fund also pays
OTHER EXPENSES, which are explained on the following pages. Sierra Advisors will
pay a monthly fee to the Sub-Advisor of each Fund for services rendered. Sierra
Advisors and/or Sierra Administration may, from time to time, agree to reimburse
the Funds for management fees and other expenses above a specified limit. Sierra
Advisors and Sierra Administration retain the ability to be repaid by a Fund if
expenses fall below the specified limit prior to the end of the fiscal year.

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

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
SHORT TERM
EACH SHORT TERM GLOBAL U.S. CORPORATE CALIFORNIA
MONEY HIGH QUALITY GOVERNMENT GOVERNMENT INCOME MUNICIPAL
AMOUNT OF ASSETS ($ MIL.) FUND* BOND FUND FUND FUND* FUND FUND*
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
First 50 .50% .50% .65% .60% .65% .65%
After 50; next 25 .50% .50% .65% .60% .65% .65%
After 75; next 25 .50% .50% .65% .60% .65% .65%
After 100; next 25 .50% .50% .65% .60% .65% .65%
After 125; next 25 .50% .50% .65% .60% .65% .65%
After 150; next 50 .50% .50% .65% .60% .65% .65%
After 200; next 100 .50% .45% .65% .60% .65% .65%
After 300; next 100 .50% .45% .65% .60% .65% .65%
After 400; next 100 .50% .45% .65% .60% .65% .65%
Over 500 .40% .40% .55% .50% .50% .50%
- ---------------------------------------------------------------------------------------------------
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
FLORIDA CALIFORNIA
INSURED INSURED NATIONAL GROWTH AND EMERGING INTERNATIONAL
AMOUNT OF ASSETS MUNICIPAL INTERMEDIATE MUNICIPAL INCOME GROWTH GROWTH GROWTH
($ MIL.) FUND* MUNICIPAL FUND* FUND* FUND FUND FUND FUND
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
First 50 .60% .65% .60% .80% .95% .90% .95%
After 50; next 25 .60% .65% .60% .80% .95% .90% .85%
After 75; next 25 .60% .65% .60% .80% .95% .90% .85%
After 100; next 25 .60% .65% .60% .75% .90% .85% .85%
After 125; next 25 .60% .65% .60% .75% .90% .85% .65%
After 150; next 50 .60% .65% .60% .75% .90% .85% .65%
After 200; next 100 .60% .65% .60% .70% .875% .85% .65%
After 300; next 100 .60% .65% .60% .70% .875% .85% .65%
After 400; next 100 .60% .65% .60% .65% .875% .85% .65%
Over 500 .45% .50% .45% .575% .875% .75% .65%
- ---------------------------------------------------------------------------------------------------------------------

* For these Funds, the Advisor has contractually agreed to limit the annual management fees that are payable
under the investment advisory agreements with the Funds to the percentages as set forth below. To ensure that
such limits will be met, the Advisor will not accrue in payment of its management fee for each such Fund more
than the percentage shown on a rolling quarterly basis.
Global Money Fund 0.40%
U.S. Government Money Fund 0.40%
California Money Fund 0.40%
U.S. Government Fund 0.55%
California Municipal Fund 0.55%
Florida Insured Municipal Fund 0.55%
California Insured Intermediate Municipal Fund 0.55%
National Municipal Fund 0.55%
</TABLE>

The Advisor retains only the net amount of the foregoing management fees after
the advisory fees paid to the Sub-Advisors, described below, are deducted. Out
of the total management fee received by the Advisor for each Fund, the Advisor
would pay to the Sub-Advisor, absent fee waivers by the Sub-Advisor, the
following percentages of the average net assets of each Fund:

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
SHORT TERM
EACH SHORT TERM GLOBAL U.S. CORPORATE CALIFORNIA
MONEY HIGH QUALITY GOVERNMENT GOVERNMENT INCOME MUNICIPAL
AMOUNT OF ASSETS ($ MIL.) FUND BOND FUND FUND(1) FUND(2) FUND FUND(3)
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
First 50 .15% .15% .28% (2) .30% .20%
After 50; next 25 .15% .15% .28% (2) .30% .20%
After 75; next 25 .15% .15% .28% (2) .30% .20%
After 100; next 25 .15% .15% .28% (2) .30% .20%
After 125; next 25 .15% .15% .28% (2) .30% .20%
After 150; next 50 .15% .15% .28% (2) .30% .15%
After 200; next 100 .15% .10% .10% (2) .30% .15%
After 300; next 100 .15% .10% .10% (2) .30% .15%
After 400; next 100 .15% .10% .10% (2) .30% .15%
Over 500 .15% .10% .10% (2) .25% .15%
- ---------------------------------------------------------------------------------------------------
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
FLORIDA CALIFORNIA
INSURED INSURED NATIONAL GROWTH AND EMERGING INTERNATIONAL
AMOUNT OF ASSETS MUNICIPAL INTERMEDIATE MUNICIPAL INCOME GROWTH GROWTH GROWTH
($ MIL.) FUND MUNICIPAL FUND FUND(3) FUND FUND FUND FUND
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
First 50 .20% .20% .20% .45% .55% .55% .60%
After 50; next 25 .20% .20% .20% .45% .55% .55% .50%
After 75; next 25 .125% .125% .20% .45% .55% .55% .50%
After 100; next 25 .125% .125% .20% .40% .50% .50% .50%
After 125; next 25 .125% .125% .20% .40% .50% .50% .40%
After 150; next 50 .125% .125% .15% .40% .50% .50% .40%
After 200; next 100 .125% .125% .15% .35% .50% .50% .40%
After 300; next 100 .125% .125% .15% .35% .50% .50% .40%
After 400; next 100 .125% .125% .15% .30% .50% .50% .40%
Over 500 .125% .125% .15% .30% .50% .50% .40%
- ---------------------------------------------------------------------------------------------------------------------

(1) Sierra Advisors pays the Sub-Advisor of the Short Term Global Government Fund a minimum annual fee of $137,500.

(2) BlackRock is paid fees monthly at the following annual rate under the Current Sub-Advisory Agreement for the
Fund: (i) .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) .15% of the Fund's 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) .10% of the Fund's average
daily net assets if the Government Funds' Combined Assets are more than $1,000,000,000.

(3) Pursuant to the investment sub-advisory agreements with respect to each of the California Municipal and
National Municipal Funds, when the combined average daily net assets of the California Municipal and National
Municipal Funds (the "Combined Assets") exceed $750 million, the Sub-Advisor will be paid a fee with respect to
each Fund in proportion to each Fund's average net assets at the following annual rate: .15% of the Combined
Assets up to $1 billion; plus .125% of the Combined Assets over $1 billion.
</TABLE>

Advisory fees paid by the International Growth, Short Term Global Government,
Growth and Emerging Growth Funds are higher than those paid by most other
investment companies; however, the Board of Trustees believes that the fees
are competitive with advisory fees paid by investment companies with similar
investment objectives and policies.

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

* UNDERSTANDING THE MANAGEMENT FEE
The basic fee Sierra Advisors receives is designed to be responsive to changes
in the size of a Fund. Building this variable into the fee calculation assures
shareholders that they will pay a lower rate as a Fund's assets under management
increase.
- ------------------------------------------------------------------------------

OTHER EXPENSES
While the management fee is a significant component of each Fund's annual
operating costs, each Fund has other expenses as well. In addition to the
management fee and other fees described previously, each 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. Fund expenses, other than the fees charged
under the Rule 12b-1 Plans and, for the Class B Shares and Class S Shares, the
service fees, are allocated on the relative net asset value of outstanding
shares of each class. The Rule 12b-1 Plans fees and service fees for the Class
B and Class S Shares are class expenses charged to the outstanding shares of the
class to which such fees relate.

- ------------------------------------------------------------------------------
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.
- ------------------------------------------------------------------------------
<PAGE>
G R E A T W E S T E R N
- -------------------------
FINANCIAL SECURITIES
Member NASD/SIPC

9301 Corbin Avenue
Suite 333
P.O. Box 1160
Northridge, California 91328-1160

(800) 222-5852

Distributed by:
Sierra Investment Services Corporation

[logo] PRINTED WITH
SOY INK

[recycle logo] Printed on recycled paper 4558-150M (10/95)

<PAGE>
SUPPLEMENT DATED JANUARY 1, 1996
TO PROSPECTUS DATED OCTOBER 31, 1995
OF
SIERRA TRUST FUNDS
9301 CORBIN AVENUE, SUITE 333
P.O. BOX 1160
NORTHRIDGE, CALIFORNIA 91328-1160

The prospectus dated October 31, 1995 of the Sierra Trust Funds (the
"Trust") relating to the Class A and Class S Shares of the GLOBAL MONEY, U.S.
GOVERNMENT MONEY, CALIFORNIA MONEY, SHORT TERM HIGH QUALITY BOND, SHORT TERM
GLOBAL GOVERNMENT, U.S. GOVERNMENT, CORPORATE INCOME, CALIFORNIA MUNICIPAL,
FLORIDA INSURED MUNICIPAL, CALIFORNIA INSURED INTERMEDIATE MUNICIPAL, NATIONAL
MUNICIPAL, GROWTH AND INCOME, GROWTH, EMERGING GROWTH and INTERNATIONAL GROWTH
FUNDS of the Trust is hereby amended and supplemented effective January 1, 1996
by the following:

By deleting the sixth paragraph in "The Funds' Investments and Risk
Considerations - Investment Principles and Risk Considerations - The Bond Funds
- - Short Term Global Government Fund" section on page 19 and replacing it with
the following paragraph:

By deleting the second paragraph in the section "Performance Information -
Performance Comparisons" on page 46 and replacing it with the following
paragraph:

<PAGE>
By deleting Table 1 in the section "Performance Information - Tax Equivalent
Yields" on page 47 and replacing it with the following Table 1:

<TABLE>
<CAPTION>
TABLE 1

- ------------------------------------
<FN>
* California taxable income may differ due to differences in exemptions, itemized deductions and other items.

** Rates do not include the phase-out of personal exemptions or itemized deductions. Rates include the federal deduction of
state taxes paid.

+ Rates do not include the phase-out of personal exemptions or itemized deductions.
</FN>
</TABLE>

PLEASE RETAIN THIS SUPPLEMENT
FOR FUTURE REFERENCE

ISPMC/GD (12/95-20M)

<PAGE>
PROSPECTUS
OCTOBER 31, 1995 SIERRA TRUST FUNDS
9301 CORBIN AVENUE, SUITE 333
P.O. BOX 1160
NORTHRIDGE, CALIFORNIA 91328-1160
800-222-5852

Global Money Fund Florida Insured Municipal Fund
U.S. Government Money Fund California Insured Intermediate Municipal Fund
California Money Fund National Municipal Fund
Short Term High Quality Bond Fund Growth and Income Fund
Short Term Global Government Fund Growth Fund
U.S. Government Fund Emerging Growth Fund
Corporate Income Fund International Growth Fund
California Municipal Fund

This prospectus describes the Class A and Class S Shares of the Sierra Trust
Funds (the "Trust"). The Trust consists of the fifteen separate investment funds
(each, a "Fund") named above, and the Target Maturity 2002 Fund, which is
described in a separate prospectus. The Class A and Class S 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 the Funds are right for you.

SIERRA INVESTMENT SERVICES CORPORATION ("SIERRA SERVICES"), THE DISTRIBUTOR OF
THE TRUST'S SHARES, IS NOT A BANK. THE TRUST'S SHARES ARE NOT OBLIGATIONS,
DEPOSITS OR ACCOUNTS (TRUST OR OTHERWISE) OF, OR ENDORSED OR GUARANTEED BY,
GREAT WESTERN 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 AGENCY.

TABLE OF CONTENTS PAGE
----
Summary of Expenses & Financial Highlights ................................ 5
The Funds' Investments and Risk Considerations ............................ 15
Performance Information ................................................... 45
Your Account - How to Invest in a SAM Account ............................. 49
How to Sell Shares ........................................................ 55
Exchange Privileges and Restrictions ...................................... 57
Dividends, Capital Gains and Taxes ........................................ 58
The Funds in Detail ....................................................... 62
Sierra Advisors, Its Affiliates and Service Providers ..................... 62
Breakdown of Fund Expenses ................................................ 65
<PAGE>
THE SIERRA TRUST FUNDS FAMILY AT A GLANCE

The Sierra Trust Funds (the "Trust") is an open-end management investment
company with a family of sixteen investment funds each with its own investment
objectives and policies. This prospectus describes all of the investment funds,
except the Target Maturity 2002 Fund (excepting the latter fund, each, a "Fund"
and together, the "Funds"). Each Fund offers three classes of shares, Class A
Shares, Class B Shares and Class S Shares. Investors may invest in one or more
of the different classes, which have different sales charges, expenses and other
features. Class A Shares have a front-end sales charge, while purchasers of
Class S Shares pay sales charges only if they redeem their shares within 6
years. Class S Shares are sold to investors who select the Sierra Asset
Management ("SAM") service described in "Your Account - Investment in Funds
Through a SAM Account." Investors may purchase directly Class A Shares of all of
the Funds and Class S Shares of ten of the Funds (the "SAM Account Funds") that
currently are used for investment by SAM Accounts. SHARES OF THE TARGET MATURITY
2002 FUND AND CLASS B SHARES OF THE FUNDS ARE NOT OFFERED THROUGH THIS
PROSPECTUS. Please call 800-222-5852 if you would like to obtain a prospectus
and further information about the Target Maturity 2002 Fund or the Class B
Shares of the Funds. The Global Money, U.S. Government Money and California
Money Funds (the "Money Funds") are money market funds. The rest of the Funds of
the Trust (the "Non-Money Funds") are classified as either "Bond Funds" or
"Equity Funds."

GOALS: Each Fund has a different investment goal. Each fund's investment
objective is a fundamental policy which may not be changed without the approval
of a majority of the Fund's oustanding voting securities. As with any mutual
fund, there is no assurance that a Fund will achieve its goal.

STRATEGY: Each Fund has a distinct strategy specifically designed to achieve its
goal and these strategies entail varying degrees of risk. Generally, investors
seeking higher returns must assume greater risks.

INVESTMENT MANAGEMENT: Sierra Investment Advisors Corporation ("Advisor" or
"Sierra Advisors") has overall responsibility for management of the Funds.
However, each Fund has an investment sub-advisor ("Sub-Advisor") who selects the
investments made by that Fund subject to oversight and direction by Sierra
Advisors. The Advisor and the Sub-Advisors are discussed in "The Funds in Detail
- - Sierra Advisors, Its Affiliates and Service Providers."

RISK CONSIDERATIONS: The value of a Fund's shares will fluctuate with the value
of the underlying securities in its investment portfolio, and in the case of
debt securities, with the general level of interest rates. When interest rates
decline, the value of a portfolio invested in fixed-income securities can be
expected to rise. Conversely, when interest rates rise, the value of a portfolio
invested in fixed-income securities can be expected to decline. In the case of
foreign currency denominated securities, these trends may be offset or amplified
by fluctuations in foreign currencies. Investing in securities of foreign
issuers involves certain risks and considerations not typically associated with
investing in securities of U.S. companies. See "The Funds' Investments and Risk
Considerations - Securities and Investment Practices - Foreign Investments."
High yielding fixed-income securities, such as those in which the Short Term
Global Government Fund may invest up to 10%, and the Growth and Emerging Growth
Funds up to 35%, respectively, of total assets, are subject to greater market
fluctuations and risk of loss of income and principal than investments in lower
yielding fixed-income securities. The Funds intend to employ from time to time
certain investment techniques which are designed to enhance income or total
return or hedge against market or currency risks but which themselves involve
additional risks. These techniques include options on securities, futures,
options on futures, options on indexes, options on foreign currencies, foreign
currency exchange transactions, lending of securities and when-issued securities
and delayed-delivery transactions. Because the Short Term Global Government,
California Municipal, Florida Insured Municipal, California Insured Intermediate
Municipal and California Money Funds are non-diversified, they are permitted
greater flexibility to invest their assets in the securities of any one issuer
and therefore will be exposed to increased risk of loss if such an investment
underperforms expectations. FOR ADDITIONAL RISK INFORMATION, SEE "THE FUNDS'
INVESTMENTS AND RISK CONSIDERATIONS" AND "SECURITIES AND INVESTMENT PRACTICES"
IN THIS PROSPECTUS AND "INVESTMENT OBJECTIVES AND POLICIES OF THE FUNDS" IN THE
TRUST'S SAI.
<PAGE>
THE MONEY FUNDS

GLOBAL MONEY FUND
GOAL: To maximize current income consistent with safety of principal and
maintenance of liquidity.

STRATEGY: Investing in U.S. Dollar-denominated money market instruments of
foreign and U.S. issuers.

INVESTMENT MANAGEMENT: J.P. Morgan Investment Management Inc. ("J.P. Morgan") is
the Sub-Advisor of the Fund.

U.S. GOVERNMENT MONEY FUND
GOAL: To maximize current income consistent with safety of principal and
maintenance of liquidity.

STRATEGY: Investing primarily in obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities.

INVESTMENT MANAGEMENT: Alliance Capital Management L.P. ("Alliance") is the
Sub-Advisor of the Fund.

CALIFORNIA MONEY FUND
GOAL: To maximize current income that is excluded from gross income for federal
income tax purposes and is exempt from California State personal income
taxation, consistent with safety of principal and maintenance of liquidity.

STRATEGY: Investing in obligations that are exempt from California State
personal income tax.

INVESTMENT MANAGEMENT: Alliance is the Sub-Advisor of the Fund.

THE BOND FUNDS

SHORT TERM HIGH QUALITY BOND FUND
GOAL: To provide as high a level of current income as is consistent with prudent
investment management and stability of principal.

STRATEGY: Investing at least 65% of its assets in investment-grade short-term
bonds and other fixed-income securities issued by the U.S. Government,
corporations and other issuers. The Fund may borrow money or enter into reverse
repurchase agreements or dollar roll transactions in the aggregate up to 10% of
its total assets, invest up to 25% of its total assets in asset-backed
securities and may engage in certain options transactions, financial futures
contracts and currency forwards or futures contracts and related options. Each
of these investments entails risks which are discussed in the "Investment
Principles and Risk Considerations" and "Securities and Investment Practices"
sections following.

INVESTMENT MANAGEMENT: Scudder, Stevens & Clark, Inc. ("Scudder") is the
investment Sub-Advisor of the Fund.

SHORT TERM GLOBAL GOVERNMENT FUND
GOAL: To provide high current income consistent with protection of principal.

STRATEGY: Investing at least 65% of its assets in short-term bonds and money
market instruments issued by foreign and U.S. governments and denominated in
foreign currencies or the U.S. Dollar.

INVESTMENT MANAGEMENT: Scudder is the investment Sub-Advisor of the Fund.

U.S. GOVERNMENT FUND
GOAL: To maximize total rate of return while providing a high level of current
income, consistent with reasonable safety of principal.

STRATEGY: Investing in a broad range of U.S. Government securities, including
mortgage-backed securities.

INVESTMENT MANAGEMENT: BlackRock Financial Management, Inc. ("BlackRock") is the
investment Sub-Advisor of the Fund.
<PAGE>
CORPORATE INCOME FUND
GOAL: To provide a high level of current income, consistent with the
preservation of capital.

STRATEGY: Investing primarily in investment-grade corporate bonds of U.S.
issuers.

INVESTMENT MANAGEMENT: TCW Funds Management, Inc. ("TCW Management") is the
investment Sub-Advisor of the Fund.

CALIFORNIA MUNICIPAL FUND
GOAL: To provide as high a level of current income that is excluded from gross
income for federal income tax purposes and is exempt from California State
personal income tax as is consistent with prudent investment management and
preservation of capital.

STRATEGY: Investing in intermediate- and long-term California municipal
securities.

INVESTMENT MANAGEMENT: Van Kampen American Capital Management Inc. ("Van
Kampen") is the investment Sub-Advisor of the Fund.

FLORIDA INSURED MUNICIPAL FUND
GOAL: To seek as high a level of current income, exempt from federal income tax,
as is consistent with prudent investment management and preservation of capital,
and to offer shareholders the opportunity to own shares the value of which is
exempt from Florida intangible personal property tax.

STRATEGY: Investing in intermediate- and long-term Florida municipal obligations
that are "insured obligations" and offer potential for a high level of current
income relative to funds with like investment objectives. Insured obligations
are municipal obligations that at all times are fully insured as to the
scheduled payment of all installments of interest and principal.

INVESTMENT MANAGEMENT: Van Kampen is the investment Sub-Advisor of the Fund.

STRATEGY: Investing primarily in intermediate-term California municipal
securities that are "insured obligations" and offer potential for a high level
of current income relative to funds with like investment objectives. It is a
fundamental policy of the Fund that it will invest at least 80% of the value of
its total assets in insured California municipal securities, except when
maintaining a temporary defensive position. Insured obligations are municipal
obligations that at all times are fully insured as to the scheduled payment of
all installments of interest and principal. The Fund may invest up to 20% of the
value of its total assets in municipal securities that are not insured, provided
that such securities are at least investment-grade as described in "The Funds'
Investments and Risk Considerations" section.

INVESTMENT MANAGEMENT: Van Kampen is the investment Sub-Advisor of the Fund.

NATIONAL MUNICIPAL FUND
GOAL: To provide a high level of current income which is exempt from federal
income tax, consistent with preservation of capital.

STRATEGY: Investing in intermediate- and long-term fixed income municipal
obligations.

INVESTMENT MANAGEMENT: Van Kampen is the investment Sub-Advisor of the Fund.

THE EQUITY FUNDS

GROWTH AND INCOME FUND
GOAL: Long-term capital growth and current income consistent with reasonable
investment risk.

STRATEGY: Investing primarily in dividend-paying common stock of
well-established companies.

INVESTMENT MANAGEMENT: J.P. Morgan is the investment Sub-Advisor of the Fund.

GROWTH FUND
GOAL: Long-term capital appreciation (increase in the value of the Fund's
shares).

STRATEGY: Investing primarily in common stock of U.S., multinational, and
foreign companies of all sizes that offer potential for growth.

INVESTMENT MANAGEMENT: Janus Capital Corporation ("Janus") is the investment
Sub-Advisor of the Fund.

EMERGING GROWTH FUND
GOAL: Long-term capital appreciation by investing primarily in equity
securities.

STRATEGY: Investing primarily in stock of small companies which are expected to
achieve accelerated growth in earnings and revenues or
which are undervalued in the market place.

INVESTMENT MANAGEMENT: Janus is the investment Sub-Advisor of the Fund.

INTERNATIONAL GROWTH FUND
GOAL: Long-term capital appreciation by investing primarily in equity securities
of foreign issuers.

STRATEGY: Investing in stock of leading companies located outside the United
States.

INVESTMENT MANAGEMENT: J.P. Morgan is the investment Sub-Advisor of the Fund.
<PAGE>
<TABLE>
SUMMARY OF SIERRA TRUST FUNDS EXPENSES
<CAPTION>
SHORT SHORT TERM
U.S. TERM HIGH GLOBAL U.S
GLOBAL MONEY GOVERNMENT CALIFORNIA QUALITY BOND GOVERNMENT GOVERNMENT CORPORATE
FUND MONEY FUND MONEY FUND FUND FUND FUND INCOME FUND
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION
EXPENSES
MAXIMUM SALES CHARGE IMPOSED
ON PURCHASES (AS A
PERCENTAGE OF OFFERING PRICE)
Class A ................... None None None 3.50%(1) 3.50%(1) 4.50%(1) 4.50%(1)
Class S ................... None None None None None None None
MAXIMUM SALES CHARGE IMPOSED
ON REINVESTED DIVIDENDS (AS
A PERCENTAGE OF OFFERING PRICE)
Class A ................... None None None None None None None
Class S ................... None None None None None None None
DEFERRED SALES CHARGE
Class A ................... None(2) None(2) None(2) None(2) None(2) None(2) None(2)
Class S ................... 5.00%(3) 5.00%(3) 5.00%(3) 5.00%(3) 5.00%(3) 5.00%(3) 5.00%(3)
REDEMPTION FEES(4)
Class A ................... None None None None None None None
Class S ................... None None None None None None None
EXCHANGE FEES(5)
Class A ................... None None None None None None None
Class S ................... None None None None None None None
ANNUAL OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE
NET ASSETS)
MANAGEMENT FEES (AFTER
VOLUNTARY WAIVERS OR
REIMBURSEMENT)(6)
Class A ................... 0.04% 0.04% 0.14% 0.04% 0.10% 0.19% 0.32%
Class S ................... 0.04% 0.04% 0.14% 0.04% 0.10% 0.19% 0.32%
12b-1 FEES(7)
Class A ................... 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25%
Class S ................... 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
OTHER EXPENSES(8)
Class A ................... 0.36% 0.56% 0.46% 0.46% 0.50% 0.46% 0.43%
Class S ................... 0.36% 0.56% 0.46% 0.46% 0.50% 0.46% 0.43%
TOTAL FUND OPERATING
EXPENSES(9)
Class A ................... 0.65% 0.85% 0.85% 0.75% 0.85% 0.90% 1.00%
Class S ................... 1.40% 1.60% 1.60% 1.50% 1.60% 1.65% 1.75%
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
(1) The initial sales charge is reduced for purchases of $50,000 and over, decreasing to zero for purchases of $1,000,000 and over
for each Fund.
(2) Certain investors who purchased Non-Money Fund Class A Shares at net asset value based on a purchase amount of $2.5 million or
more before July 1, 1995 are subject to a 1.0% contingent deferred sales charge ("CDSC") on redemptions within one year of
purchase (the "Prior Class A CDSC"). Certain investors who purchase Non-Money Fund Class A Shares at net asset value based on
a purchase amount of $1 million or more after June 30, 1995 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. Class A Shares purchased through a
qualified 401(k) or 403(b) plan may, in certain circumstances, be subject to a CDSC of 1.0% if the shares are redeemed within
two years of their initial purchase. Money Fund Class A Shares acquired through exchange from Non-Money Fund Class A Shares
that were subject to a CDSC at the time of exchange may also be subject to such CDSC. See "INITIAL SALES CHARGE ALTERNATIVE:
CLASS A SHARES" and "APPLICATION OF CLASS A SHARES CDSCs."
(3) See "Your Account - Deferred Sales Charge Alternative: Class S shares."
(4) 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.
(5) 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 "Your Account - Exchange Privileges and Restrictions."
(6) Reflects voluntary waivers of management fees by the Advisor. In the absence of such voluntary waivers, management fees would
have been for each of the following Funds: Global Money Fund-0.40%*; U.S. Government Money Fund-0.40%*; California Money
Fund-0.40%*; Short Term High Quality Bond Fund-0.50%; Short Term Global Government Fund-0.65%; U.S. Government Fund-0.55%*;
Corporate Income Fund-0.65%; California Municipal Fund-0.55%*; Florida Insured Municipal Fund-0.55%*; California Insured
Intermediate Municipal Fund-0.55%*; and National Municipal Fund-0.55%*. No management fee waivers apply to the Growth and
Income, Growth, Emerging Growth and International Growth Funds. * Asterisked fees reflect the contractual agreement of the
Advisor to limit the annual management fee.
(7) Of the 12b-1 fees for the Class S Shares, 0.75% represents an asset-based sales charge and 0.25% is a service charge. Due to
the continuous nature of the 12b-1 fee, long-term shareholders of a Fund may pay more than the economic equivalent of the
maximum front-end sales charge otherwise permitted by the Rules of Fair Practice of the National Association of Securities
Dealers, Inc. ("NASD").
(8) After voluntary waivers or reimbursement. Reflects the voluntary agreement of the Advisor to bear certain expenses and
Administrator to waive fees to limit total fund expenses for the Class A and Class S Shares.
(9) The total fund operating expenses set forth in the foregoing table are restated to reflect anticipated management fees and
other expenses (after voluntary waivers or reimbursements). Actual expenses for each Fund may vary from day to day. The
<PAGE>
<CAPTION>
CALIFORNIA
FLORIDA INSURED
CALIFORNIA INSURED INTERMEDIATE NATIONAL GROWTH AND EMERGING INTERNATIONAL
MUNICIPAL MUNICIPAL MUNICIPAL MUNICIPAL INCOME GROWTH GROWTH GROWTH
FUND FUND FUND FUND FUND FUND FUND FUND
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
MAXIMUM SALES CHARGE IMPOSED
ON PURCHASES (AS A PERCENTAGE
OF OFFERING PRICE)
Class A .................. 4.50%(1) 4.50%(1) 4.50%(1) 4.50%(1) 4.50%(1) 4.50%(1) 4.50%(1) 4.50%(1)
Class S .................. None None None None None None None None
MAXIMUM SALES CHARGE IMPOSED
ON REINVESTED DIVIDENDS (AS
A PERCENTAGE OF OFFERING
PRICE)
Class A .................. None None None None None None None None
Class S .................. None None None None None None None None
DEFERRED SALES CHARGE
Class A .................. None(2) None(2) None(2) None(2) None(2) None(2) None(2) None(2)
Class S .................. 5.00%(3) 5.00%(3) 5.00%(3) 5.00%(3) 5.00%(3) 5.00%(3) 5.00%(3) 5.00%(3)
REDEMPTION FEES(4)
Class A .................. None None None None None None None None
Class S .................. None None None None None None None None
EXCHANGE FEES(5)
Class A .................. None None None None None None None None
Class S .................. None None None None None None None None
ANNUAL OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE
NET ASSETS)
MANAGEMENT FEES (AFTER
VOLUNTARY WAIVERS OR
REIMBURSEMENT)(6)
Class A .................. 0.27% 0.04% 0.04% 0.30% 0.78% 0.93% 0.88% 0.90%
Class S .................. 0.27% 0.04% 0.04% 0.30% 0.78% 0.93% 0.88% 0.90%
12b-1 FEES(7)
Class A .................. 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25%
Class S .................. 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
OTHER EXPENSES(8)
Class A .................. 0.43% 0.51% 0.56% 0.45% 0.55% 0.53% 0.57% 0.68%
Class S .................. 0.43% 0.51% 0.56% 0.45% 0.55% 0.53% 0.57% 0.68%
TOTAL FUND OPERATING
EXPENSES(9)
Class A .................. 0.95% 0.80% 0.85% 1.00% 1.58% 1.71% 1.70% 1.83%
Class S .................. 1.70% 1.55% 1.60% 1.75% 2.33% 2.46% 2.45% 2.58%
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
<F9>(continued)
Advisor and Administrator anticipate voluntarily waiving fees and/or bearing expenses for certain Funds that will result in
total fund operating expenses as set forth in theforegoing table; they are under no obligation to continue to do so. Set forth
below are total fund operating expenses absent such fee waivers and expense reimbursements.Global Money Fund, Class A-1.21%,
Class S-1.96%, U.S. Government Money Fund, Class A-1.34%, Class S-2.09%; California Money Fund, Class A-1.15%, Class S-1.90%;
Short Term High Quality Bond Fund, Class A-1.40%, Class S-2.15%; Short Term Global Government Fund, Class A-1.44%, Class
S-2.19%; U.S. Government Fund, Class A-1.30%, Class S-2.05%; Corporate Income Fund, Class A-1.37%, Class S-2.12%; California
Municipal Fund, Class A-1.27%, Class S-2.02%; Florida Insured Municipal Fund, Class A-1.43%, Class S-2.18%; California Insured
Intermediate Municipal Fund, Class A-1.44%, Class S-2.19%; and National Municipal Fund, Class A-1.29%, Class S-2.04%.

Waivers of fees and reimbursement of expenses have the effect of increasing yield or improving total return for the period when
such waivers and reimbursements are in effect. These amounts are not recovered by the Advisor or Administrator in later years.
These fee waivers and agreements to reimburse expenses are voluntary and may be discontinued at any time. Each Fund bears its
own expenses and a Fund's expenses are allocated between classes as described in the section "Breakdown of Fund Expenses."
</FN>
</TABLE>

In addition to the Class A and Class S shares described above, the Trust offers
Class B Shares for investors who invest other than through a SAM Account. CLASS
B SHARES ARE DESCRIBED IN MORE DETAIL IN A SEPARATE PROSPECTUS. Class B Shares
are not subject to a sales charge at the time of purchase but are subject to a
CDSC that is different from the Class A Shares CDSC and the Class S Shares CDSC.
For Class B Shares of the Short Term High Quality Bond and Short Term Global
Government Funds (the "Short Term Funds"), the CDSC applies if the shares are
redeemed during the first four years after purchase and the CDSC declines from
4% during the first year of investment to zero after four years. For Class B
Shares of the Funds other than the Short Term Funds (the "Long Term Funds"), the
CDSC applies if the shares are redeemed during the first six years after
purchase. The CDSC for Class B Shares of the Long Term Funds declines from 5%
during the first year of investment to zero after six years. Like Class S
Shares, Class B Shares pay ongoing distribution and service fees at an annual
rate of .75% and .25%, respectively, of average daily net assets. Although each
class of a Fund pays the same management fees and certain other expenses as the
other classes of the Fund, the performance of each of the classes of a Fund may
vary due to differences in sales charges and expenses. Prospective investors may
call 800-222-5852 toll-free to obtain a prospectus and further information for
Class B Shares.
<PAGE>
<TABLE>
SUMMARY OF SIERRA TRUST FUNDS EXPENSES

EXAMPLE:
You would pay the following expenses on a $1,000 investment, assuming (1) 5% annual return and (2) redemption at the end of
time period.
<CAPTION>
SHORT SHORT TERM
U.S. TERM HIGH GLOBAL U.S.
GLOBAL MONEY GOVERNMENT CALIFORNIA MONEY QUALITY BOND GOVERNMENT GOVERNMENT CORPORATE
FUND MONEY FUND FUND FUND FUND FUND INCOME FUND
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Class A(1)
1 Year $7 $9 $9 $42 $43 $54 $55
3 Years 21 27 27 58 61 72 75
5 Years 36 47 47 75 80 93 98
10 Years 81 105 105 125 136 151 162

Class S (Assuming a
complete redemption at end
of period)(2)
1 Year $64 $66 $66 $55 $56 $67 $68
3 Years 74 80 80 67 70 82 85
5 Years 97 107 107 82 87 110 115
10 Years(3) 168 190 190 179 190 195 206
Class S (Assuming no
redemption)(4)
1 Year $14 $16 $16 $15 $16 $17 $18
3 Years 44 50 50 47 50 52 55
5 Years 77 87 87 82 87 90 95
10 Years(3) 168 190 190 179 190 195 206
- ------------------------------------------------------------------------------------------------------------------------------------
<PAGE>
<CAPTION>
CALIFORNIA
FLORIDA INSURED
CALIFORNIA INSURED INTERMEDIATE NATIONAL GROWTH AND EMERGING INTERNATIONAL
MUNICIPAL MUNICIPAL MUNICIPAL MUNICIPAL INCOME GROWTH GROWTH GROWTH
FUND FUND FUND FUND FUND FUND FUND FUND
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A(1)
1 Year $54 $53 $53 $55 $60 $62 $62 $63
3 Years 74 69 71 75 93 96 96 100
5 Years 95 87 90 98 127 134 133 140
10 Years 156 140 145 162 224 238 237 250

Class S (Assuming a
complete redemption at end
of period)(2)
1 Year $67 $66 $66 $68 $74 $75 $75 $76
3 Years 84 79 80 85 103 107 106 110
5 Years 112 104 107 115 145 151 151 157
10 Years(3) 201 185 190 206 267 280 279 291
Class S (Assuming no
redemption)(4)
1 Year $17 $16 $16 $18 $24 $25 $25 $26
3 Years 54 49 50 55 73 77 76 80
5 Years 92 84 87 95 125 131 131 137
10 Years(3) 201 185 190 206 267 280 279 291
- -----------------------------------------------------------------------------------------------------------------------------------
<FN>
(1) Assumes deduction at the time of purchase of maximum initial sales charge for funds other than Global Money, U.S. Government
Money and California Money Funds.
(2) Assumes deduction of maximum applicable contingent deferred sales charge.
(3) Assumes that conversion to Class A shares does not occur.
(4) Assumes no deduction of contingent deferred sales charge.
</FN>
</TABLE>

The following information, insofar as it relates to each of the respective periods ended June 30, 1995 or earlier, has been
audited by Price Waterhouse LLP, independent accountants. Their unqualified report is included in the Trust's Annual Report to
Shareholders (the "Annual Report"). The Financial Statements, Notes to Financial Statements and Report of Independent Accountants
sections of the Annual Report are included in the SAI. Further information about the performance of the Funds is contained in the
Annual Report. The SAI and Annual Report can be obtained at no charge by calling Sierra Administration at 800-222-5852.
<CAPTION>
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- ------------------------------------------------------------------------------------------------------------------------------------
DIVIDENDS
NET ASSET NET REALIZED & FROM
VALUE AT NET UNREALIZED TOTAL FROM NET
BEGINNING INVESTMENT GAIN/ (LOSS) INVESTMENT INVESTMENT
FUND OF PERIOD INCOME/(LOSS) ON INVESTMENTS OPERATIONS INCOME
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
GLOBAL MONEY FUND
CLASS A SHARES
Year ended 6/30/95 ............................. $ 1.00 $ 0.049 $0.000(19) $ 0.049 $ (0.049)
Year ended 6/30/94 ............................. 1.00 0.030 0.000(19) 0.030 (0.030)
Year ended 6/30/93 ............................. 1.00 0.031 - 0.031 (0.031)
Year ended 6/30/92 ............................. 1.00 0.048 - 0.048 (0.048)
Year ended 6/30/91 ............................. 1.00 0.073 - 0.073 (0.073)
Period ended 6/30/90 (1) ....................... 1.00 0.074 - 0.074 (0.074)
CLASS S SHARES
Year ended 6/30/95 ............................. 1.00 0.042 0.000(19) 0.042 (0.042)
U.S. GOVERNMENT MONEY FUND
CLASS A SHARES
Year ended 6/30/95 ............................. 1.00 0.046 - 0.046 (0.046)
Year ended 6/30/94 ............................. 1.00 0.027 - 0.027 (0.027)
Year ended 6/30/93 ............................. 1.00 0.027 - 0.027 (0.027)
Year ended 6/30/92 ............................. 1.00 0.042 0.002 0.044 (0.042)
Year ended 6/30/91 ............................. 1.00 0.065 - 0.065 (0.065)
Period ended 6/30/90 (2) ....................... 1.00 0.073 - 0.073 (0.073)
CLASS S SHARES
Year ended 6/30/95 ............................. 1.00 0.038 - 0.038 (0.038)
CALIFORNIA MONEY FUND
CLASS A SHARES
Year ended 6/30/95 ............................. 1.00 0.028 - 0.028 (0.028)
Year ended 6/30/94 ............................. 1.00 0.018 - 0.018 (0.018)
Year ended 6/30/93 ............................. 1.00 0.021 - 0.021 (0.021)
Year ended 6/30/92 ............................. 1.00 0.033 - 0.033 (0.033)
Year ended 6/30/91 ............................. 1.00 0.044 - 0.044 (0.044)
Period ended 6/30/90 (2) ....................... 1.00 0.046 - 0.046 (0.046)
CLASS S SHARES
Year ended 6/30/95 ............................. 1.00 0.020 - 0.020 (0.020)
SHORT TERM HIGH QUALITY BOND FUND
CLASS A SHARES
Year ended 6/30/95 ............................. 2.39 0.08 0.02 0.10 (0.08)
Period ended 6/30/94 (3) ....................... 2.50 0.09 (0.11) (0.02) (0.09)
CLASS S SHARES
Year ended 6/30/95 ............................. 2.39 0.06 0.02 0.08 (0.06)
SHORT TERM GLOBAL GOVERNMENT FUND
CLASS A SHARES
Year ended 6/30/95 ............................. 2.34 0.17 (0.12) 0.05 (0.02)
Year ended 6/30/94 ............................. 2.48 0.17 (0.14) 0.03 (0.13)
Year ended 6/30/93 ............................. 2.56 0.19 (0.04) 0.15 (0.20)
Period ended 6/30/92 (4) ....................... 2.50 0.07 0.07 0.14 (0.08)
CLASS S SHARES
Year ended 6/30/95 ............................. 2.34 0.15 (0.12) 0.03 (0.00)(14)
U. S. GOVERNMENT FUND
CLASS A SHARES
Year ended 6/30/95 ............................. 9.45 0.70 0.22 0.92 (0.70)
Year ended 6/30/94 ............................. 10.65 0.75 (1.21) (0.46) (0.64)
Year ended 6/30/93 ............................. 10.52 0.74 0.16 0.90 (0.74)
Year ended 6/30/92 ............................. 10.04 0.84 0.49 1.33 (0.84)
Year ended 6/30/91 ............................. 9.93 0.84 0.13 0.97 (0.85)
Period ended 6/30/90 (5) ....................... 10.00 0.76 (0.09) 0.67 (0.74)
CLASS S SHARES
Year ended 6/30/95 ............................. 9.45 0.63 0.22 0.85 (0.63)
CORPORATE INCOME FUND
CLASS A SHARES
Year ended 6/30/95 ............................. 9.87 0.68 0.78 1.46 (0.68)
Year ended 6/30/94 ............................. 11.33 0.80 (1.35) (0.55) (0.78)
Year ended 6/30/93 ............................. 10.52 0.84 0.84 1.68 (0.84)
Year ended 6/30/92 ............................. 9.87 0.91 0.64 1.55 (0.90)
Period ended 6/30/91 (6) ....................... 10.00 0.81 (0.13) 0.68 (0.81)
CLASS S SHARES
Year ended 6/30/95 ............................. 9.87 0.61 0.78 1.39 (0.61)
- ------------------------------------------------------------------------------------------------------------------------------------
<PAGE>
<CAPTION>
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS DISTRIBUTIONS DISTRIBUTIONS NET ASSET
IN EXCESS OF FROM IN EXCESS OF DISTRIBUTIONS VALUE AT
NET INVESTMENT NET REALIZED NET REALIZED FROM TOTAL END TOTAL
INCOME GAINS GAINS CAPITAL DISTRIBUTIONS OF PERIOD RETURN(11)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
GLOBAL MONEY FUND
CLASS A SHARES
Year ended 6/30/95 ........... $- $(0.000)(19) $- $ - $(0.049) $ 1.00 5.06%
Year ended 6/30/94 ........... - (0.000)(19) - - (0.030) 1.00 3.04
Year ended 6/30/93 ........... - - - - (0.031) 1.00 3.17
Year ended 6/30/92 ........... - - - - (0.048) 1.00 4.95
Year ended 6/30/91 ........... - - - - (0.073) 1.00 7.51
Period ended 6/30/90 (1) ..... - - - - (0.074) 1.00 7.64
CLASS S SHARES
Year ended 6/30/95 ........... - (0.000)(19) - - (0.042) 1.00 4.29
U.S. GOVERNMENT MONEY FUND
CLASS A SHARES
Year ended 6/30/95 ........... - - - - (0.046) 1.00 4.67
Year ended 6/30/94 ........... - - - - (0.027) 1.00 2.67
Year ended 6/30/93 ........... - - - - (0.027) 1.00 2.70
Year ended 6/30/92 ........... - (0.002) - - (0.044) 1.00 4.45
Year ended 6/30/91 ........... - - - - (0.065) 1.00 6.65
Period ended 6/30/90 (2) ..... - - - - (0.073) 1.00 7.52
CLASS S SHARES
Year ended 6/30/95 ........... - - - - (0.038) 1.00 3.91
CALIFORNIA MONEY FUND
CLASS A SHARES
Year ended 6/30/95 ........... - - - - (0.028) 1.00 2.79
Year ended 6/30/94 ........... - - - - (0.018) 1.00 1.81
Year ended 6/30/93 ........... - - - - (0.021) 1.00 2.07
Year ended 6/30/92 ........... - - - - (0.033) 1.00 3.35
Year ended 6/30/91 ........... - - - - (0.044) 1.00 4.52
Period ended 6/30/90 (2) ..... - - - - (0.046) 1.00 4.64
CLASS S SHARES
Year ended 6/30/95 ........... - - - - (0.020) 1.00 2.04
SHORT TERM HIGH QUALITY BOND FUND
CLASS A SHARES
Year ended 6/30/95 ........... (0.06) - - (0.00)(14) (0.14) 2.35 4.42
Period ended 6/30/94 (3) ..... - - - - (0.09) 2.39 (0.73)
CLASS S SHARES
Year ended 6/30/95 ........... (0.06) - - (0.00)(14) (0.12) 2.35 3.64
SHORT TERM GLOBAL GOVERNMENT FUND
CLASS A SHARES
Year ended 6/30/95 ........... (0.00)(14) - (0.01) (0.12) (0.15) 2.24 2.10
Year ended 6/30/94 ........... (0.03) - (0.01) (0.00)(14)(16) (0.17) 2.34 1.10
Year ended 6/30/93 ........... - - (0.03) - (0.23) 2.48 6.03
Period ended 6/30/92 (4) ..... - - - - (0.08) 2.56 5.34
CLASS S SHARES
Year ended 6/30/95 ........... (0.00)(14) - (0.01) (0.12) (0.13) 2.24 1.33
U. S. GOVERNMENT FUND
CLASS A SHARES
Year ended 6/30/95 ........... - - - - (0.70) 9.67 10.17
Year ended 6/30/94 ........... - - (0.10) - (0.74) 9.45 (4.59)
Year ended 6/30/93 ........... - - - (0.03)(16) (0.77) 10.65 8.87
Year ended 6/30/92 ........... - - - (0.01)(16) (0.85) 10.52 13.74
Year ended 6/30/91 ........... - - - (0.01)(16) (0.86) 10.04 10.14
Period ended 6/30/90 (5) ..... - - - - (0.74) 9.93 6.99
CLASS S SHARES
Year ended 6/30/95 ........... - - - - (0.63) 9.67 9.36
CORPORATE INCOME FUND
CLASS A SHARES
Year ended 6/30/95 ........... (0.09) - - (0.04) (0.81) 10.52 15.57
Year ended 6/30/94 ........... (0.01) (0.06) (0.06) - (0.91) 9.87 (5.32)
Year ended 6/30/93 ........... - - - (0.03)(16) (0.87) 11.33 16.64
Year ended 6/30/92 ........... - - - - (0.90) 10.52 16.29
Period ended 6/30/91 (6) ..... - - - - (0.81) 9.87 7.31
CLASS S SHARES
Year ended 6/30/95 ........... (0.09) - - (0.04) (0.74) 10.52 14.73
- ------------------------------------------------------------------------------------------------------------------------------------
<PAGE>
<CAPTION>
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- ------------------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT RATIO OF OPERATING
RATIO OF RATIO OF NET INCOME/(LOSS) EXPENSES TO AVERAGE
NET ASSETS OPERATING INVESTMENT PER SHARE NET ASSETS
END OF EXPENSES INCOME PORTFOLIO WITHOUT FEE WAIVERS WITHOUT FEE WAIVERS
PERIOD (IN TO AVERAGE TO AVERAGE TURNOVER AND/OR EXPENSES AND/OR EXPENSES
FUND 000'S) NET ASSETS NET ASSETS RATE ABSORBED (12) ABSORBED (13)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
GLOBAL MONEY FUND
CLASS A SHARES
Year ended 6/30/95......... $110,012 0.54% 5.08% - % $0.043 1.18%
Year ended 6/30/94......... 53,973 0.45 2.99 - 0.021 1.35
Year ended 6/30/93......... 48,283 0.41 3.15 - 0.022 1.32
Year ended 6/30/92......... 71,492 0.42 4.90 - 0.039 1.34
Year ended 6/30/91......... 92,334 0.30 6.99 - 0.060 1.51
Period ended 6/30/90 (1)... 22,834 1.00(10) 7.54(10) - 0.067 1.74(10)
CLASS S SHARES
Year ended 6/30/95......... 7,399 1.29 4.33 - 0.036 1.93

U.S. GOVERNMENT MONEY FUND
CLASS A SHARES
Year ended 6/30/95......... 47,492 0.85 4.63 - 0.042 1.25
Year ended 6/30/94......... 30,180 0.85 2.68 - 0.022 1.32
Year ended 6/30/93......... 36,802 0.85 2.69 - 0.022 1.34
Year ended 6/30/92......... 44,233 0.85 4.43 - 0.037 1.35
Year ended 6/30/91......... 62,473 0.86 6.54 - 0.058 1.52
Period ended 6/30/90 (2)... 94,789 1.00(10) 7.52(10) - 0.067 1.64(10)
CLASS S SHARES
Year ended 6/30/95......... 737 1.60 3.88 - 0.034 2.00

CALIFORNIA MONEY FUND
CLASS A SHARES
Year ended 6/30/95......... 48,836 0.85 2.73 - 0.025 1.15
Year ended 6/30/94......... 62,500 0.85 1.80 - 0.014 1.27
Year ended 6/30/93......... 68,404 0.85 2.06 - 0.016 1.29
Year ended 6/30/92......... 94,607 0.85 3.31 - 0.029 1.28
Year ended 6/30/91......... 113,392 0.83 4.48 - 0.037 1.48
Period ended 6/30/90 (2)... 147,487 1.00(10) 5.07(10) - 0.040 1.64(10)
CLASS S SHARES
Year ended 6/30/95......... 10 1.60 1.98 - 0.017 1.90
SHORT TERM HIGH QUALITY BOND FUND
CLASS A SHARES
Year ended 6/30/95......... 43,811 0.75 6.10 137 0.07 1.39
Period ended 6/30/94 (3)... 21,771 0.00(10) 5.70(10) 95 0.06 1.61(10)
CLASS S SHARES
Year ended 6/30/95......... 2,303 1.50 5.35 137 0.05 2.14
SHORT TERM GLOBAL GOVERNMENT FUND
CLASS A SHARES
Year ended 6/30/95......... 103,986 0.85 7.22 217 0.16 1.44
Year ended 6/30/94......... 220,824 0.85 6.87 222 0.16 1.52
Year ended 6/30/93......... 215,348 0.73 7.67 294 0.17 1.55
Period ended 6/30/92 (4)... 106,609 0.41(10) 8.65(10) 81 0.06 1.92(10)
CLASS S SHARES
Year ended 6/30/95......... 2,286 1.60 6.47 217 0.14 2.19
U. S. GOVERNMENT FUND
CLASS A SHARES
Year ended 6/30/95......... 459,968 0.95(18) 7.58 226 0.66 1.59
Year ended 6/30/94......... 666,566 1.05(18) 7.26 27 0.72 1.34
Year ended 6/30/93......... 842,277 0.91(18) 6.98 67 0.70 1.34
Year ended 6/30/92......... 504,776 0.72(18) 7.67 35 0.77 1.39
Year ended 6/30/91......... 166,920 1.12(18) 8.32 54 0.79 1.57
Period ended 6/30/90 (5)... 31,430 1.13(10)(18) 8.50(10) 13 0.69 1.89(10)
CLASS S SHARES
Year ended 6/30/95......... 6,839 1.70(18) 6.83 226 0.59 2.34
CORPORATE INCOME FUND
CLASS A SHARES
Year ended 6/30/95......... 383,642 0.90 8.26 55 0.64 1.40
Year ended 6/30/94......... 472,519 1.35 7.19 30 0.80 1.42
Year ended 6/30/93......... 396,357 1.24 7.67 37 0.82 1.42
Year ended 6/30/92......... 169,682 0.97 8.29 8 0.85 1.48
Period ended 6/30/91 (6)... 35,478 1.21(10) 9.01(10) 31 0.76 1.78(10)
CLASS S SHARES
Year ended 6/30/95......... 8,701 1.65 7.51 55 0.57 2.15
- ------------------------------------------------------------------------------------------------------------------------------------
<PAGE>
<CAPTION>
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET NET REALIZED &
VALUE AT UNREALIZED TOTAL FROM DIVIDENDS FROM
BEGINNING NET INVESTMENT GAIN/LOSS INVESTMENT NET INVESTMENT
FUND OF PERIOD INCOME/(LOSS) ON INVESTMENTS OPERATIONS INCOME
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL FUND
CLASS A SHARES
Year ended 6/30/95................... $ 10.38 $0.61 $0.15 $0.76 $(0.61)
Year ended 6/30/94................... 11.22 0.61 (0.82) (0.21) (0.61)
Year ended 6/30/93................... 10.45 0.62 0.77 1.39 (0.62)
Year ended 6/30/92................... 10.07 0.65 0.38 1.03 (0.65)
Year ended 6/30/91................... 10.01 0.63 0.06 0.69 (0.63)
Period ended 6/30/90 (5)............. 10.00 0.57 0.01 0.58 (0.57)
CLASS S SHARES
Year ended 6/30/95................... 10.38 0.53 0.15 0.68 (0.53)
FLORIDA INSURED MUNICIPAL FUND
CLASS A SHARES
Year ended 6/30/95................... 9.40 0.52 0.03(15) 0.55 (0.52)
Year ended 6/30/94................... 10.05 0.52 (0.65) (0.13) (0.52)
Period ended 6/30/93 (7)............. 10.00 0.00(14) 0.05 0.05 -
CLASS S SHARES
Year ended 6/30/95................... 9.40 0.45 0.03(15) 0.48 (0.45)
CALIFORNIA INSURED INTERMEDIATE
MUNICIPAL FUND
CLASS A SHARES
Year ended 6/30/95................... 10.10 0.50 0.35 0.85 (0.50)
Period ended 6/30/94 (8)............. 10.00 0.11 0.11(15) 0.22 (0.11)
CLASS S SHARES
Year ended 6/30/95................... 10.10 0.43 0.35 0.78 (0.43)
NATIONAL MUNICIPAL FUND
CLASS A SHARES
Year ended 6/30/95................... 10.85 0.64 0.01(15) 0.65 (0.64)
Year ended 6/30/94................... 11.65 0.65 (0.73) (0.08) (0.65)
Year ended 6/30/93................... 10.96 0.67 0.75 1.42 (0.67)
Year ended 6/30/92................... 10.16 0.72 0.79 1.51 (0.71)
Period ended 6/30/91 (6)............. 10.00 0.64 0.16 0.80 (0.64)
CLASS S SHARES
Year ended 6/30/95................... 10.85 0.56 0.01(15) 0.57 (0.56)
GROWTH AND INCOME FUND
CLASS A SHARES
Year ended 6/30/95................... 11.30 0.13 2.04 2.17 (0.12)
Year ended 6/30/94................... 12.09 0.12 0.72 0.84 (0.12)
Year ended 6/30/93................... 11.25 0.12 0.91 1.03 (0.12)
Year ended 6/30/92................... 10.51 0.17 0.74 0.91 (0.17)
Year ended 6/30/91................... 10.12 0.23 0.43 0.66 (0.27)
Period ended 6/30/90 (5)............. 10.00 0.24 0.07 0.31 (0.19)
CLASS S SHARES
Year ended 6/30/95................... 11.30 0.05 2.04 2.09 (0.07)
GROWTH FUND
CLASS A SHARES
Year ended 6/30/95 (17) ............. 10.73 0.05 3.42 3.47 (0.02)
Year ended 6/30/94................... 10.72 (0.02) 0.03(15) 0.01 -
Period ended 6/30/93 (9)............. 10.00 0.00(14) 0.72 0.72 -
CLASS S SHARES
Year ended 6/30/95 (17) ............. 10.73 (0.04) 3.42 3.38 (0.00)(14)
EMERGING GROWTH FUND
CLASS A SHARES
Year ended 6/30/95 (17) ............. 13.02 (0.00)(14) 2.77 2.77 -
Year ended 6/30/94................... 13.76 (0.09) 0.68 0.59 -
Year ended 6/30/93................... 11.67 (0.02) 2.31 2.29 -
Year ended 6/30/92 (17).............. 9.62 (0.01) 2.16 2.15 (0.01)
Period ended 6/30/91 (6)............. 10.00 0.09 (0.40) (0.31) (0.07)
CLASS S SHARES
Year ended 6/30/95 (17) ............. 13.02 (0.10) 2.77 2.67 -
INTERNATIONAL GROWTH FUND
CLASS A SHARES
Year ended 6/30/95 (17) ............. 10.74 (0.11)(20) (0.31) (0.42) (0.04)
Year ended 6/30/94................... 9.80 0.06 1.15 1.21 (0.02)
Year ended 6/30/93................... 8.82 0.07 0.94 1.01 (0.03)
Year ended 6/30/92................... 8.27 0.05 0.55 0.60 (0.05)
Period ended 6/30/91 (6)............. 10.00 0.02 (1.75) (1.73) (0.03)
CLASS S SHARES
Year ended 6/30/95 (17) ............. 10.74 (0.17)(20) (0.31) (0.48) (0.03)
- ------------------------------------------------------------------------------------------------------------------------------------
<PAGE>
<CAPTION>
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS DISTRIBUTIONS
IN EXCESS DISTRIBUTIONS IN EXCESS NET ASSET
OF NET FROM OF NET DISTRIBUTIONS VALUE AT
INVESTMENT NET REALIZED REALIZED FROM TOTAL END
FUND INCOME GAINS GAINS CAPITAL DISTRIBUTIONS OF PERIOD
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL FUND
CLASS A SHARES
Year ended 6/30/95................... $ - $(0.00)(14) $ - $ - $(0.61) $10.53
Year ended 6/30/94................... (0.00)(14) - (0.02) - (0.63) 10.38
Year ended 6/30/93................... - - - - (0.62) 11.22
Year ended 6/30/92................... - - - - (0.65) 10.45
Year ended 6/30/91................... - - - - (0.63) 10.07
Period ended 6/30/90 (5)............. - - - - (0.57) 10.01
CLASS S SHARES
Year ended 6/30/95................... - (0.00)(14) - - (0.53) 10.53
FLORIDA INSURED MUNICIPAL FUND
CLASS A SHARES
Year ended 6/30/95................... - - - - (0.52) 9.43
Year ended 6/30/94................... (0.00)(14) - (0.00)(14) - (0.52) 9.40
Period ended 6/30/93 (7)............. - - - - - 10.05
CLASS S SHARES
Year ended 6/30/95................... - - - - (0.45) 9.43
CALIFORNIA INSURED INTERMEDIATE
MUNICIPAL FUND
CLASS A SHARES
Year ended 6/30/95.................... - - - - (0.50) 10.45
Period ended 6/30/94 (8).............. - (0.01) - - (0.12) 10.10
CLASS S SHARES
Year ended 6/30/95.................... - - - - (0.43) 10.45
NATIONAL MUNICIPAL FUND
CLASS A SHARES
Year ended 6/30/95.................... - (0.01) (0.09) - (0.74) 10.76
Year ended 6/30/94.................... (0.00)(14) (0.07) - - (0.72) 10.85
Year ended 6/30/93.................... - (0.06) - - (0.73) 11.65
Year ended 6/30/92.................... - - - - (0.71) 10.96
Period ended 6/30/91 (6).............. - - - - (0.64) 10.16
CLASS S SHARES
Year ended 6/30/95.................... - (0.01) (0.09) - (0.66) 10.76
GROWTH AND INCOME FUND
CLASS A SHARES
Year ended 6/30/95.................... - (0.77) - - (0.89) 12.58
Year ended 6/30/94.................... - (1.51) - - (1.63) 11.30
Year ended 6/30/93.................... - (0.07) - - (0.19) 12.09
Year ended 6/30/92.................... - - - - (0.17) 11.25
Year ended 6/30/91.................... - - - - (0.27) 10.51
Period ended 6/30/90 (5).............. - - - - (0.19) 10.12
CLASS S SHARES
Year ended 6/30/95.................... - (0.77) - - (0.84) 12.55
GROWTH FUND
CLASS A SHARES
Year ended 6/30/95.................... - (0.00)(14) - - (0.02) 14.18
Year ended 6/30/94.................... - - - - - 10.73
Period ended 6/30/93 (9).............. - - - - - 10.72
CLASS S SHARES
Year ended 6/30/95.................... - (0.00)(14) - - (0.00) 14.11
EMERGING GROWTH FUND
CLASS A SHARES
Year ended 6/30/95.................... - (0.32) - - (0.32) 15.47
Year ended 6/30/94.................... - (1.33) - - (1.33) 13.02
Year ended 6/30/93.................... - (0.20) - - (0.20) 13.76
Year ended 6/30/92 (17)............... - (0.08) - (0.01)(16) (0.10) 11.67
Period ended 6/30/91 (6).............. - - - - (0.07) 9.62
CLASS S SHARES
Year ended 6/30/95.................... - (0.32) - - (0.32) 15.37
<PAGE>
INTERNATIONAL GROWTH FUND
CLASS A SHARES
Year ended 6/30/95.................... - (0.44) (0.06) - (0.54) 9.78
Year ended 6/30/94.................... - (0.25) - - (0.27) 10.74
Year ended 6/30/93.................... - - - - (0.03) 9.80
Year ended 6/30/92.................... - - - - (0.05) 8.82
Period ended 6/30/91 (6).............. - - - - - 8.27
CLASS S SHARES
Year ended 6/30/95.................... - (0.44) (0.06) - (0.53) 9.73
- ------------------------------------------------------------------------------------------------------------------------------------
<PAGE>
<CAPTION>
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- ------------------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT RATIO OF OPERATING
RATIO OF RATIO OF NET INCOME/(LOSS) EXPENSES TO AVERAGE
NET ASSETS OPERATING INVESTMENT PER SHARE NET ASSETS
END OF EXPENSES INCOME PORTFOLIO WITHOUT FEE WAIVERS WITHOUT FEE WAIVERS
TOTAL PERIOD (IN TO AVERAGE TO AVERAGE TURNOVER AND/OR EXPENSES AND/OR EXPENSES
FUND RETURN(11) 000'S) NET ASSETS NET ASSETS RATE ABSORBED (12) ABSORBED (13)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL FUND
CLASS A SHARES
Year ended 6/30/95...... 7.57% $405,967 0.85% 5.89% 22% $0.56 1.29%
Year ended 6/30/94...... (2.19) 509,233 0.79 5.45 50 0.54 1.39
Year ended 6/30/93...... 13.84 511,364 0.80 5.74 41 0.56 1.41
Year ended 6/30/92...... 10.56 309,146 0.94 6.08 29 0.60 1.40
Year ended 6/30/91...... 7.16 202,595 1.05 6.30 16 0.58 1.60
Period ended 6/30/90 (5) 5.99 92,972 1.01(10) 6.26(10) 38 0.49 1.84(10)
CLASS S SHARES
Year ended 6/30/95...... 6.78 11 1.60 5.14 22 0.48 2.04
FLORIDA INSURED MUNICIPAL FUND
CLASS A SHARES
Year ended 6/30/95...... 6.01 33,714 0.39 5.53 44 0.42 1.51
Year ended 6/30/94...... (1.50) 38,541 0.00 5.09 83 0.36 1.55
Period ended 6/30/93 (7) 0.50 4,837 0.00(10) 0.48(10) 0 (0.02) 5.59(10)
CLASS S SHARES
Year ended 6/30/95...... 5.23 11 1.14 4.78 44 0.35 2.26
CALIFORNIA INSURED INTERMEDIATE
MUNICIPAL FUND
CLASS A SHARES
Year ended 6/30/95....... 8.71 54,507 0.42 4.95 13 0.40 1.41
Period ended 6/30/94 (8). 2.20 34,147 0.00(10) 4.25(10) 17 0.06 1.95(10)
CLASS S SHARES
Year ended 6/30/95....... 7.90 11 1.17 4.20 13 0.33 2.16
NATIONAL MUNICIPAL FUND
CLASS A SHARES
Year ended 6/30/95....... 6.32 269,033 0.83 5.97 23 0.59 1.30
Year ended 6/30/94....... (0.90) 354,501 0.87 5.60 44 0.59 1.36
Year ended 6/30/93....... 13.41 390,187 0.86 5.89 83 0.61 1.37
Year ended 6/30/92....... 15.42 226,984 0.64 6.34 61 0.63 1.40
Period ended 6/30/91 (6). 8.27 44,915 0.55(10) 6.84(10) 81 0.53 1.68(10)
CLASS S SHARES
Year ended 6/30/95....... 5.54 11 1.58 5.22 23 0.51 2.05
GROWTH AND INCOME FUND
CLASS A SHARES
Year ended 6/30/95....... 20.47 170,177 1.56 1.11 72 0.13 1.56
Year ended 6/30/94....... 6.67 125,249 1.50 1.04 127 0.11 1.59
Year ended 6/30/93....... 9.20 97,873 1.46 1.01 47 0.12 1.46
Year ended 6/30/92....... 8.65 83,825 1.50 1.51 16 0.16 1.55
Year ended 6/30/91....... 6.70 33,930 1.52 2.48 19 0.21 1.78
Period ended 6/30/90 (5). 3.17 20,964 1.37(10) 3.21(10) 16 0.19 2.01(10)
CLASS S SHARES
Year ended 6/30/95....... 19.75 14,368 2.31 0.36 72 0.05 2.31
GROWTH FUND
CLASS A SHARES
Year ended 6/30/95....... 32.33 154,763 1.76 0.28 233 0.05 1.76
Year ended 6/30/94....... 0.00 126,808 1.75 (0.35) 227 (0.02) 1.75
Period ended 6/30/93 (9). 7.30 23,323 1.44(10) (0.63)(10) 13 (0.01) 2.52(10)
CLASS S SHARES
Year ended 6/30/95....... 31.44 18,730 2.51 (0.47) 233 (0.04) 2.51
EMERGING GROWTH FUND
CLASS A SHARES
Year ended 6/30/95....... 21.54 185,722 1.68 (0.31) 181 (0.00)(14) 1.68
Year ended 6/30/94....... 3.40 124,941 1.66 (0.68) 224 (0.09) 1.66
Year ended 6/30/93....... 19.75 96,646 1.59 (0.32) 28 (0.02) 1.59
Year ended 6/30/92 (17).. 22.47 27,652 1.93 (0.04) 60 (0.01) 1.93
Period ended 6/30/91 (6). (2.95) 8,490 1.84(10) 1.10(10) 17 0.07 2.11(10)
CLASS S SHARES
Year ended 6/30/95....... 20.76 11,840 2.43 (1.06) 181 (0.10) 2.43

INTERNATIONAL GROWTH FUND
CLASS A SHARES
Year ended 6/30/95....... (4.01) 91,763 1.69 0.62 81 (0.11) 1.69
Year ended 6/30/94....... 12.39 127,764 1.69 0.54 44 0.06 1.69
Year ended 6/30/93....... 11.51 56,962 1.80 1.07 63 0.07 1.80
Year ended 6/30/92....... 7.28 24,479 2.25 0.69 66 0.04 2.29
Period ended 6/30/91 (6). (17.30) 11,647 2.24(10) 0.51(10) 45 0.01 2.47(10)
CLASS S SHARES
Year ended 6/30/95....... (4.61) 11,120 2.44 (0.13) 81 (0.17) 2.44
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
(1) The Fund commenced operations on July 13, 1989.*
(2) The Funds commenced operations on July 10, 1989.*
(3) The Fund commenced operations on November 1, 1993.*
(4) The Fund commenced operations on February 11, 1992.*
(5) The Funds commenced operations on July 25, 1989.*
(6) The Funds commenced operations on July 18, 1990.*
(7) The Fund commenced operations on June 7, 1993.*
(8) The Fund commenced operations on April 4, 1994.*
(9) The Fund commenced operations on April 5, 1993.*
* On July 1, 1994, the Funds commenced selling Class B and Class S shares in addition to Class A shares. Those shares in
existence prior to July 1, 1994 were designated Class A shares.
(10) Annualized.
(11) Total return represents aggregate total return for the periods indicated and does not reflect any applicable sales charges.
The total returns would have been lower if certain fees had not been waived and/or had not been absorbed by the investment
advisor, administrator, and/or distributor.
(12) Net investment income without fee waiver and/or expenses absorbed by investment advisor, administrator and/or distributor.
(13) Annualized operating expense ratios without fee waivers and/or expenses borne by investment advisor, administrator and/or
distributor.
(14) Amount represents less than $0.01 per share.
(15) The amount shown may not accord with the change in aggregate gains and losses of portfolio securities due to the timing of
sales and redemptions of Fund shares.
(16) Amounts distributed in excess of accumulated net investment income as determined for financial statement purposes have been
reported as distributions from paid-in capital at the fiscal year end in which the distribution was made. Certain of these
distributions which are reported as being from paid-in capital for financial statement purposes may be reported to
shareholders as taxable distributions due to differing tax and accounting rules.
(17) Per share numbers have been calculated using the average shares method which more appropriately presents the per share data
for the year since the use of the undistributed income method did not accord with results of operations.
(18) Ratio of operating expenses to average net assets including interest expense for the period ended June 30 each year, was,
for Class A shares 1.22% for 1995, 1.06% for 1994, 0.91% for 1993, 0.72% for 1992, 1.12% for 1991, 1.13% for 1990; for the
Class S shares 1.97% for 1995.
(19) Amount represents less than $0.001 per share.
(20) Amount shown reflects certain reclassifications related to book to tax differences.
</FN>
</TABLE>
<PAGE>
THE FUNDS' INVESTMENTS AND RISK CONSIDERATIONS

The following section describes the investment objective and policies of each
Fund and some of the risk considerations of investing in the Funds. The
"Securities and Investment Practices" section that follows provides more
information about the types of securities and investment practices that the
Funds may use, and the risk considerations related to such securities and
investment practices.

INVESTMENT PRINCIPLES AND RISK CONSIDERATIONS

THE MONEY FUNDS

Each of the Global Money, U.S. Government Money and California 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.

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.

For temporary defensive purposes, the Fund may invest without limitation in (1)
Municipal Securities that are not exempt from California personal income tax,
and (2) short-term Municipal Securities or taxable cash equivalents, including
short-term U.S. Government Securities, certificates of deposit and bankers'
acceptances, commercial paper rated Prime-1 by Moody's or A-1+ or A-1 by S&P,
repurchase agreements and securities of other money market mutual funds. Under
normal market conditions the Fund may invest up to 20% of its assets in these
taxable cash equivalents.

The California Money Fund is designed to generate tax-exempt income. A
shareholder of the California Money Fund may earn a higher after-tax return from
the Fund than from comparable investments that generate taxable income. For an
illustration of the benefits of tax-free investing, see the section entitled
"Performance Information." For a discussion of the tax consequences of investing
in AMT-Subject Bonds, see "Securities and Investment Practices - Municipal
Securities and AMT-Subject Bonds" and "Dividends, Capital Gains and Taxes."

The Fund may also invest in variable rate demand obligations, stand-by
commitments, when-issued securities and forward commitments.

THE BOND FUNDS

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 nationally recognized statistical rating organizations
("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.

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 government securities 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.

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. 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 often considered to be speculative and
involve greater risk of default or price changes due to changes in the issuer's
creditworthiness. The market prices of these securities may fluctuate more than
higher-rated securities and may decline significantly in periods of general
economic difficulty, which may follow periods of rising interest rates. See
"Securities and Investment Practices - Lower-Rated Securities."

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
assets in the types of securities in which the Corporate Income Fund may invest
except as otherwise prohibited in this Prospectus or the SAI, including
corporate bonds, preferred stock, convertible corporate bonds, convertible
preferred stock, government stripped mortgage-backed securities, asset-backed
securities; and interests in lease obligations. A substantial portion of the
Fund's assets at any time may consist of mortgage-backed securities. For more
detailed information regarding the types of securities in which the Corporate
Income Fund may invest, see "Corporate Income Fund."

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

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

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

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

CALIFORNIA MUNICIPAL FUND. The Fund's investment objective is to provide as high
a level of current income that is excluded from gross income for federal income
tax purposes and is exempt from California State personal income tax as is
consistent with prudent investment management and preservation of capital. The
Fund pursues its objective by investing in intermediate and long-term California
Municipal Securities (as described in "Securities and Investment
Practices-Municipal Securities and AMT-Subject Bonds"), although the average
maturity of the Fund will vary depending on anticipated market conditions. A
fundamental policy that cannot be changed without the consent of the Fund's
shareholders is that under normal market conditions, at least 80% of the Fund's
total assets will be invested in California Municipal Securities. The Fund may
invest without limitation in AMT-Subject Bonds, as described in "Securities and
Investment Practices - Municipal Securities and AMT-Subject Bonds."

FLORIDA INSURED MUNICIPAL FUND. The Fund's primary investment objective is to
seek as high a level of current income, exempt from federal income tax, as is
consistent with prudent investment management and preservation of capital, and
to offer shareholders the opportunity to own shares the value of which is exempt
from Florida intangible personal property tax.

To accomplish this goal, the Fund will invest primarily in insured,
intermediate- and long-term Florida Municipal Securities. It is a fundamental
policy of the Fund that it will invest at least 80% of the value of its total
assets (except when maintaining a temporary defensive position) in insured
Florida Municipal Securities. The Fund pursues its objective by investing in
intermediate- and long-term Florida Municipal Securities, although the average
maturity of the Fund will vary depending on anticipated market conditions. The
Fund may invest without limitation in AMT-Subject Bonds, as described in
"Securities and Investment Practices - Municipal Securities and AMT-Subject
Bonds." Current federal income tax laws limit the types and volume of bonds
qualifying for the federal income tax exemption of interest, which may have an
effect on the ability of the Fund to purchase sufficient amounts of tax-exempt
securities.

The Fund will invest in investment-grade Municipal Securities, which are
securities rated at the time of purchase within the four highest ratings
assigned by Moody's, S&P, Duff, or Fitch, or, if unrated, are judged to be of
comparable quality by the Fund's Sub-Advisor. The higher tax-free yields sought
by the Fund are generally obtainable from medium-quality Municipal Securities
rated A or Baa by Moody's or A or BBB by S&P. See "Securities and Investment
Practices - Fixed-Income Obligations and Securities."

The Fund may invest up to 20%, in the aggregate, of its total assets in (1)
Municipal Securities that are not insured Municipal Securities; (2) Municipal
Securities that are not exempt from Florida intangible personal property tax;
and (3) short-term Municipal Securities and taxable cash equivalents, including
short-term U.S. Government Securities, certificates of deposit, time deposits
and bankers' acceptances, commercial paper rated Prime-1 by Moody's or A-1+ or
A-1 by S&P, repurchase agreements and securities of money market mutual funds
and, for temporary defensive purposes, may invest in these securities without
limitation, except that investments in securities of money market mutual funds
are subject to the limitations set forth under "Securities and Investment
Practices - Holdings in Other Investment Companies." The Fund may at any time
invest up to 20% of its total assets in taxable cash equivalents, although it is
anticipated that under normal circumstances substantially all of the Fund's
assets will be invested in Municipal Securities generating tax-exempt income.
The Fund may invest in floating rate, inverse floating rate and variable rate
obligations, including participation interests therein.

Since June 1995, Joseph A. Piraro, a Vice President of Van Kampen, has had
primary responsibility for the day-to-day management of the Fund's portfolio.
Mr. Piraro has been a Vice President of Van Kampen since January 1993 and
Assistance Vice President since June 1992. Prior to joining Van Kampen, Mr.
Piraro was a Senior Municipal Bond Trader for First National Bank of Chicago
from November 1987 to May 1992.

CALIFORNIA INSURED INTERMEDIATE MUNICIPAL FUND. The Fund's investment objective
is to provide California investors with as high a level of current income exempt
from federal and California State income tax as is consistent with prudent
investment management and preservation of capital. To accomplish its investment
objective, the Fund will invest primarily in insured intermediate-term
California Municipal Securities (as described in "Securities and Investment
Practices - Municipal Securities and AMT-Subject Bonds").

All of the Municipal Securities in which the Fund will invest are
investment-grade securities, securities that are rated at the time of purchase
within the four highest ratings assigned by Moody's, S&P, Duff, or Fitch, or, if
unrated, are judged to be of comparable quality by the Fund's Sub-Advisor. The
higher tax-free yields sought by the Fund are generally obtainable from
medium-quality Municipal Securities rated A or Baa by Moody's or A or BBB by
S&P. Municipal Securities 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. For more information, see "Securities and Investment Practices --
Fixed-Income Obligations and Securities."

The Fund may invest up to 20%, in the aggregate, of its assets in (1) Municipal
Securities that are not insured Municipal Securities; (2) Municipal Securities
that are not exempt from California personal income tax; and (3) short-term
Municipal Securities and taxable cash equivalents, including short-term U.S.
Government Securities, certificates of deposit, time deposits and bankers'
acceptances, commercial paper rated Prime-1 by Moody's or A-1+ or A-1 by S&P,
repurchase agreements and securities of investment companies that are money
market funds and, for temporary defensive purposes, may invest in these
securities without limitation, except that investments in securities of money
market mutual funds are subject to the limitations set forth under "Securities
and Investment Practices - Holdings in Other Investment Companies." The Fund may
at any time invest up to 20% of its total assets in taxable cash equivalents,
although it is anticipated that under normal circumstances substantially all of
the Fund's assets will be invested in Municipal Securities generating tax-exempt
income.

Since the Fund's inception, Joseph A. Piraro, a Vice President of Van Kampen,
has had primary responsibility for the day-to-day management of the Fund's
portfolio. Mr. Piraro has been a Vice President of Van Kampen since January 1993
and Assistant Vice President since June 1992. Prior to joining Van Kampen, Mr.
Piraro was a Senior Municipal Bond Trader for First National Bank of Chicago
from November 1987 to May 1992.

The Fund will invest substantially all of its portfolio in investment-grade
Municipal Securities, which are securities that are rated at the time of
purchase within the four highest ratings assigned by Moody's, S&P, Duff, or
Fitch, or, if unrated, that the Fund's Sub-Advisor believes to have credit
characteristics equivalent to such investment-grade rated securities. The higher
tax-free yields sought by the Fund are generally obtainable from medium-quality
Municipal Securities rated A or Baa by Moody's or A or BBB by S&P. For more
information, see "Securities and Investment Practices - Fixed-Income
Securities." The Fund may also invest in unrated tax-exempt securities that the
Fund's Sub-Advisor believes to have credit characteristics equivalent to rated
investment-grade Municipal Securities.

The Fund also may invest, for temporary defensive purposes in abnormal market
conditions, more than 20% of its assets in taxable cash equivalents.

Since the Fund's inception, David C. Johnson, a Senior Vice President of Van
Kampen, has had primary responsibility for the day-to-day management of the
Fund's portfolio. Mr. Johnson has been the Portfolio Manager of the Fund since
its inception. Mr. Johnson has been a Senior Vice President of Van Kampen since
January 1995 and a First Vice President since January 1993. Mr. Johnson has been
employed by Van Kampen since April 1989.

THE EQUITY FUNDS

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.

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

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

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.

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

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

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

As the Fund's portfolio co-managers, Douglas J. Dooley and Martyn C. Hole, each
a Vice President of J.P. Morgan, have had primary responsibility for the Fund
since its inception. Mr. Dooley joined J.P. Morgan's research department in 1979
and he served as head of the International Research Group in London from 1986 to
1990. Mr. Hole, LFA, joined J.P. Morgan in 1981 from Cambridge University and is
portfolio manager in the International Equity Group in London.

SECURITIES AND INVESTMENT PRACTICES

AMERICAN DEPOSITARY RECEIPTS AND EUROPEAN DEPOSITARY RECEIPTS. All Funds except
the U.S. Government Fund, the Municipal Funds and the Money Funds 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 Growth and Income, Emerging Growth, Corporate
Income, Short Term High Quality Bond, U.S. Government and Short Term Global
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 Funds will not invest more than 10% of their total assets in asset-backed
securities, except the Short Term High Quality Bond Fund, which may invest up to
25% of its total assets in such securities.

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

COMMON STOCK, CONVERTIBLE SECURITIES AND OTHER EQUITY SECURITIES. The Corporate
Income Fund, 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 a Fund the right to vote on measures
affecting the company's organization and operations.

CURRENCY MANAGEMENT. A Fund's flexibility to participate in higher yielding debt
markets outside of the United States may allow the Fund to achieve higher yields
than those generally obtained by domestic money market funds and short-term bond
investments. If a 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 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 Fund
is invested in foreign securities, a weakening in the U.S. Dollar relative to
the foreign currencies underlying a Fund's investments should help increase the
NAV of the Fund. Conversely, a strengthening in the U.S. Dollar versus the
foreign currencies in which a Fund's securities are denominated will generally
lower the NAV of the Fund. A 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. Funds
authorized to invest in securities of foreign issuers may engage in currency
management strategies.

DEBT SECURITIES ISSUED OR GUARANTEED BY SUPRANATIONAL ORGANIZATIONS. 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.

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

EXCHANGE RATE-RELATED SECURITIES. Each of the Funds, except for the Money Funds,
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 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 Trust believes 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.

FIXED-INCOME OBLIGATIONS AND SECURITIES. The market value of fixed-income
obligations and securities held by a Fund and, consequently, the NAV per share
of the 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 Fund will tend to be somewhat higher than prevailing
market rates and, in periods of rising interest rates, the Fund's yield will
tend to be somewhat lower. Also, when interest rates are falling, the inflow of
net new money to the 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 a 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
Municipal Funds and the 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 Funds may purchase
floating rate, inverse floating rate and variable rate obligations that carry a
demand feature which would permit the 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.

FLORIDA MUNICIPAL SECURITIES. The Florida Constitution and Statutes mandate that
the State budget as a whole, and each separate fund within the State budget, be
kept in balance from currently available revenues each fiscal year. Florida's
Constitution permits issuance of Florida Municipal Securities pledging the full
faith and credit of the State, with a vote of the electors, to finance or
refinance fixed capital outlay projects authorized by the Legislature provided
that the outstanding principal does not exceed 50% of the total tax revenues of
the State for the two preceding years. Florida's Constitution also provides that
the Legislature shall appropriate monies sufficient to pay debt service on State
bonds pledging the full faith and credit of the State as such debt service
becomes due. All State tax revenues, other than trust funds dedicated by
Florida's Constitution for other purposes, would be available for such an
appropriation, if required. An amendment to the State Constitution was approved
by statewide ballot in the November 8, 1994 general election which is commonly
referred to as the "Limitation on State Revenues Amendment." This amendment
provides that State revenues collected for any fiscal year shall be limited to
State revenues allowed under the amendment for the prior fiscal year plus an
adjustment for growth. Growth is defined as an amount equal to the average
annual rate of growth in State personal income over the most recent twenty
quarters times the State revenues allowed under the amendment for the prior
fiscal year. State revenues collected for any fiscal year in excess of this
limitation are required to be transferred to the budget stabilization fund until
the fund reaches the maximum balance specified in Section 19(g) of Article III
of the State Constitution, and thereafter is required to be refunded to
taxpayers as provided by general law. The limitation on State revenues imposed
by the amendment may be increased by the Legislature, by a two-thirds vote of
each house.

The Fund cannot predict the impact of the amendment on State finances. To the
extent local governments traditionally receive revenues from the State which are
subject to, and limited by, the amendment, the future distribution of such State
revenues may be adversely affected by the amendment. Revenue bonds may be issued
by the State or its agencies without a vote of Florida's electors only to
finance or refinance the cost of State fixed capital outlay projects which shall
be payable solely from funds derived directly from sources other than State tax
revenues. Estimated fiscal year 1994-95 General Revenue plus Working Capital and
Budget Stabilization funds available total $14,683,000,000, an increase of
approximately 6.1% over comparable figures in fiscal 1993-94. Total effective
appropriations for the 1994-95 fiscal year were $14,330,800,000, with
unencumbered reserves at the end of 1994-95 estimated at $352,100,000. Estimated
fiscal year 1995-96 General Revenue plus Working Capital and Budget
Stabilization funds available total $15,168,700,000, an increase of
approximately 3.3% over comparable figures for fiscal year 1994-95. Total
effective appropriations for the 1995-96 fiscal year are estimated to be
$14,853,200,000, with unencumbered reserves at the end of 1995-96 estimated at
$315,500,000.

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

FOREIGN INVESTMENTS. All of the Funds except the U.S. Government Fund, the U.S.
Government Money Fund, the California Money Fund and the Municipal Funds 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 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
Funds' Sub-Advisors do not intend to expose the 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 Funds, including the withholding of dividends. When
a 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 Fund's portfolio
securities denominated in such foreign currency.

FUTURES AND OPTIONS ON FUTURES. When deemed advisable by its Sub-Advisor,
certain 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 Funds, and for the other
purposes described in the section "Strategic Transactions." A 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 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.

GEOGRAPHICAL AND INDUSTRY CONCENTRATION. Potential investors in the California
Money, California Municipal, California Insured Intermediate Municipal and
Florida Insured Municipal Funds should consider the possibly greater risk
arising from the geographic concentration of their investments, as well as the
current and past financial condition of California and Florida municipal
issuers, respectively. Certain California and Florida constitutional amendments,
legislative measures, executive orders, administrative regulations, court
decisions and voter initiatives could result in certain adverse consequences
affecting California and Florida municipal obligations, respectively. See the
SAI for a more detailed description of these and other risks relating to the
California Money Fund's, California Municipal Fund's and California Insured
Intermediate Municipal Fund's investments in California municipal obligations
and the Florida Insured Municipal Fund's investments in Florida municipal
obligations.

GOVERNMENT STRIPPED MORTGAGE-BACKED SECURITIES. The Short Term High Quality
Bond, Short Term Global Government, U.S. Government and Corporate Income Funds
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 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 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 "Mortgage-Backed Securities" section. In
addition, the yields on interest-only and principal-only government stripped
mortgage-backed securities are extremely sensitive to the prepayment experience
on the mortgage loans underlying the certificates collateralizing the
securities. If a decline in the level of prevailing interest rates results in a
rate of principal prepayments higher 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 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 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 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 Fund
believes that it would be beneficial to the Fund and appropriate under the
circumstances, the Sub-Advisor may invest up to 10% of the 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 Fund will bear its
ratable share of the mutual fund's expenses, including management fees, and will
remain subject to the Fund's advisory and administration fees with respect to
the assets so invested.

ILLIQUID SECURITIES. Up to 15% of the assets of each Non-Money Fund, and up to
10% of the assets of each Money Fund, may be invested in securities that are not
readily marketable, including: (1) repurchase agreements with maturities greater
than seven calendar days; (2) time deposits maturing in more than seven calendar
days; (3) to the extent a liquid secondary market does not exist for the
instruments, futures contracts and options thereon; (4) certain over-the-counter
options, as described in the SAI; (5) except for the 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.

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
a Fund's 15% limit on illiquid securities. The Money Funds will not invest in
Lease Obligation Bonds.

LENDING OF SECURITIES. All of the Funds except the U.S. Government, California
Municipal and Florida Insured Municipal Funds have the ability to lend portfolio
securities to brokers and other financial organizations. By lending its
securities, a 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 a Fund's total assets. Loans of portfolio
securities by a 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 Fund involved. Each Fund's Sub-Advisor
will monitor on an ongoing basis the credit worthiness of the institutions to
which the Fund lends securities.

LOWER-RATED SECURITIES. The Growth and Emerging Growth Funds may each invest up
to 35%, and the Short Term Global Government Fund may invest up to 10%, of the
total assets of the Fund, respectively, in debt securities rated lower than BBB
by S&P or Baa by Moody's, or of equivalent quality as determined by that 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 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 Funds -- Strategies Available to Short Term Global Government
Fund, Growth Fund and Emerging Growth Fund" in the SAI.

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

The 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 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.

MUNICIPAL LEASES. The California Insured Intermediate Municipal and National
Municipal Funds may acquire participations in lease obligations or installment
purchase contract obligations (hereinafter collectively called "lease
obligations") of municipal authorities or entities. Although lease obligations
do not constitute general obligations of the municipality for which the
municipality's taxing power is pledged, a lease obligation is ordinarily backed
by the municipality's covenant to budget for, appropriate, and make the payments
due under the lease obligation. However, certain lease obligations contain
"non-appropriation" clauses which provide that the municipality has no
obligation to make lease or installment purchase payments in future years unless
money is appropriated for such purpose on a yearly basis. In addition to the
"non-appropriation" risk, these securities represent a relatively new type of
financing that has not yet developed the depth of marketability associated with
more conventional bonds. In the case of a "non-appropriation" lease, the Fund's
ability to recover under the lease in the event of non-appropriation or default
will be limited solely to the repossession of the leased property in the event
foreclosure might prove difficult.

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. "California Municipal Securities"
are Municipal Securities issued by the State of California and its political
subdivisions, as well as certain other governmental issuers such as the
Commonwealth of Puerto Rico. "Florida Municipal Securities" are Municipal
Securities issued by the State of Florida and its 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 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.

NON-DIVERSIFIED STATUS. Each of the California Money, Short Term Global
Government, California Municipal, Florida Insured Municipal and California
Insured Intermediate Municipal Funds is classified as a "non-diversified"
investment company under the 1940 Act, which means that the Fund is not limited
by the 1940 Act in the proportion of its assets that may be invested in the
obligations of a single issuer. Each of these Funds must, however, meet certain
diversification standards to qualify as a regulated investment company under the
Code. See the section "Taxes" in the SAI. Each of these Funds may assume large
positions in the obligations of a small number of issuers which may subject the
Fund to greater credit and other risks than a more broadly diversified
portfolio.

OPTIONS ON SECURITIES.

Option Purchase. All of the Funds except the Municipal Funds and the Money Funds
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. A 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, a 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. A 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 a Fund in order to acquire the
underlying securities for the Fund at a price that avoids any additional cost
that would result from a substantial increase in the market value of a security.
A 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 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.

OPTIONS ON FOREIGN CURRENCIES. The International Growth, Growth, Short Term High
Quality Bond, Short Term Global Government and California Insured Intermediate
Municipal Funds may purchase and write put and call options on foreign
currencies for the purpose of hedging against declines in the U.S. Dollar value
of foreign currency-denominated portfolio securities and against increases in
the U.S. Dollar cost of such securities to be acquired. As in the case of other
kinds of options, however, the writing of an option on a foreign currency
constitutes only a partial hedge, up to the amount of the premium received, and
the 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 Fund's position, it may forfeit the entire amount of the premium plus
related transaction costs. There is no specific percentage limitation on the
Fund's investments in options on foreign currencies. See the SAI for further
discussion of the use, risks and costs of options on foreign currencies.

OPTIONS ON FOREIGN STOCK INDEXES. The International Growth, Growth, Growth and
Income, Emerging Growth, Short Term High Quality Bond, Short Term Global
Government and California Insured Intermediate Municipal 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).

OVER THE COUNTER OPTIONS. Each of the Funds except the U.S. Government, U.S.
Government Money, California Money and Municipal Funds 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 Funds except the Municipal and 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 a 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.

REPURCHASE AGREEMENTS. All of the Funds may invest in 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 Fund's custodian
or a duly appointed sub-custodian. A Fund will enter into repurchase agreements
only with banks and broker-dealers that have been determined to be creditworthy
by the 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
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
Fund may be delayed or limited in its ability to sell the collateral.
Investments by the California Money Fund in repurchase agreements, if any, are
limited by the restrictions of that Fund's investment in taxable instruments.

REVERSE REPURCHASE AGREEMENTS. Each of the 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 Funds would
assume the role of seller/borrower in the transaction. The Funds will maintain
segregated accounts with the Trust's custodian consisting of U.S. Government
Securities, cash or money market instruments 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 a 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 Fund's Sub-Advisor, acting under the
supervision of the Board of Trustees, reviews, on an ongoing basis the
creditworthiness of the partners with which it enters into reverse repurchase
agreements. Under the 1940 Act, reverse repurchase agreements may be considered
borrowings by the seller. For each of the Funds except the U.S. Government,
Short Term High Quality Bond and Corporate Income Funds, whenever borrowings by
a Fund, including reverse repurchase agreements, exceed 5% of the value of a
Fund's total assets, the Fund will not purchase any securities. The U.S.
Government, Short Term High Quality Bond and 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
Fund's total assets (after giving effect to such borrowings).

STAND-BY COMMITMENTS. The California Money Fund and the Municipal Funds may
acquire "stand-by commitments" with respect to Municipal Securities held in
their portfolios. Under a stand-by commitment, a dealer agrees to purchase, at a
Fund's option, specified Municipal Securities at a specified price. A Fund may
pay for stand-by commitments either separately in cash or by paying a higher
price for the securities acquired with the commitment, thus increasing the cost
of the securities and reducing the yield otherwise available from them. Each
Fund intends to enter into stand-by commitments only with brokers, dealers and
banks that, in the opinion of its Sub-Advisor, present minimal credit risks. In
evaluating the creditworthiness of the issuer of a stand-by commitment, the
Sub-Advisors will periodically review relevant financial information concerning
the issuer's assets, liabilities and contingent claims. The Funds will acquire
stand-by commitments solely to facilitate portfolio liquidity and do not intend
to exercise their rights thereunder for trading purposes.

STRATEGIC TRANSACTIONS. Subject to the investment limitations and restrictions
for each of the Funds as stated elsewhere in the prospectus and SAI, each of the
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 Fund may
purchase and sell, to the extent not otherwise limited or restricted for such
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
Fund's portfolio resulting from securities markets or currency exchange rate
fluctuations, to protect the Fund's unrealized gains in the value of its
portfolio securities, to facilitate the sale of such securities for investment
purposes, to manage the effective maturity or duration of the Fund's portfolio,
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
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
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 Fund will comply
with applicable regulatory requirements when utilizing Strategic Transactions.
Strategic Transactions involving financial futures and options thereon will be
purchased, sold or entered into only for bona fide hedging, risk management or
portfolio management purposes. For more information see discussion in other
sections of "Securities and Investment Practices" and the SAI.

U.S. GOVERNMENT SECURITIES. All of the Funds may invest in U.S. Government
Securities, which include direct obligations of the U.S. Treasury (such as U.S.
Treasury bills, notes and bonds) and obligations directly issued or guaranteed
by U.S. Government agencies or instrumentalities. Some obligations issued or
guaranteed by agencies or instrumentalities of the U.S. Government are backed by
the full faith and credit of the U.S. Government (such as GNMA Bonds), others
are backed only by the right of the issuer to borrow from the 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 Funds except the
Money Funds may purchase or sell securities on a when-issued or a
delayed-delivery basis. The 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 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 Funds will establish a
segregated account with Boston Safe consisting of cash, U.S. Government
Securities or other high grade debt obligations in an amount equal to the amount
of its when-issued and delayed-delivery commitments.

WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS. The California Money Fund and
the Municipal Funds may purchase Municipal Securities offered on a "when-issued"
basis and may purchase or sell Municipal Securities on a "forward commitment"
basis. When such transactions are negotiated, the price, which is generally
expressed in yield terms, is fixed at the time the commitment is made, but
delivery and payment for the securities take place at a later date. Normally,
the settlement date occurs within two months after the transaction, but delayed
settlements beyond two months may be negotiated. During the period between a
commitment and settlement, no payment is made for the Municipal Securities
purchased by the purchaser and, thus, no interest accrues to the purchaser from
the transaction.

The use of when-issued transactions and forward commitments enables the Funds to
hedge against anticipated changes in interest rates and prices. For instance, in
periods of rising interest rates and falling bond prices, a Fund might sell
Municipal Securities that it owned on a forward commitment basis to limit its
exposure to falling prices. In periods of falling interest rates and rising bond
prices, a Fund might sell a Municipal Security and purchase the same or a
similar security on a when-issued or forward commitment basis, thereby obtaining
the benefit of currently higher cash yields. However, if the relevant Fund's
Sub-Advisor were to forecast incorrectly the direction of interest rate
movements, the Fund might be required to complete such when-issued or forward
transactions at prices inferior to then-current market values.

PERFORMANCE INFORMATION

YIELD

THE MONEY FUNDS. From time to time, advertisements or shareholder reports
concerning the Money Funds may describe YIELD and EFFECTIVE YIELD. The YIELD of
a Fund refers to the income generated by an investment in the Fund over a 7-day
period identified in the advertisement. This income is then "annualized." That
is, the amount of income generated by the investment during that week is assumed
to be generated each week over a 52-week period and is shown as a percentage of
the investment. EFFECTIVE YIELD is calculated similarly but, when annualized,
the income earned by an investment in a Fund is assumed to be reinvested.
EFFECTIVE YIELD will be slightly higher than the YIELD because of the
compounding effect of this assumed reinvestment.

TOTAL RETURN

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

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

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

PERFORMANCE COMPARISONS

In reports or other communications to shareholders or in advertising material, a
Fund may compare the performance of its Class A and Class S 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 Dimensional Fund Advisor's Small Cap Index, the Lehman Brothers GNMA Index,
the S&P 100 Index, the Lehman Brothers Index of Baa-rated Corporate Bonds, the
T-Bill Index, the Bank Rate Monitor, Donoghue's Money Fund Averages and the
"Stocks, Bonds and Inflation Index" published annually by Ibbotson Associates.
The performance information may also include evaluations of the Funds published
by nationally recognized ranking services and by financial publications that are
nationally recognized, such as BUSINESS WEEK, FORBES, FORTUNE, INSTITUTIONAL
INVESTOR, MONEY and THE WALL STREET JOURNAL. The International Growth, Short
Term Global Government and Growth Funds may compare their performance to other
investments or relevant indexes consisting of Salomon Brothers Short Term Global
Bond Index, J.P. Morgan Global Government Traded Index, Morgan Stanley Capital
International EAFE Index, the Standard & Poor's 500 Index, the Lipper
International Fund Index and The Financial Times World Stock Index. If a Fund
compares its performance to other funds or to relevant indexes, the Fund's
performance will be stated in the same terms in which such comparative data and
indexes are stated, which is normally total return rather than yield. For these
purposes the performance of the Fund, as well as the performance of such
investment companies or indexes, may not reflect sales charges, which, if
reflected, would reduce performance results.

In addition, the Municipal Funds and the California Money Fund may attempt to
illustrate in advertising or sales literature the benefits of tax-free
investing. For example, Table 1 on the following page shows California investors
the approximate yield that a taxable investment must earn at various sample
income brackets to produce after-tax yields equivalent to those of tax-exempt
investments, such as the California Municipal, California Insured Intermediate
Municipal and California Money Funds, yielding from 2.00% to 7.00%. Table 2 on
the following page shows taxpayers how to translate federal tax savings from
investments, such as the National Municipal Fund, into an equivalent yield from
a taxable investment. The yields following are for illustration purposes only
and are not intended to represent current or future yields for the Funds, which
may be higher or lower than the yields shown. Calculations are computed in
accordance with standard SEC calculations of 30-day yield. The California
marginal tax rates presented assume payment of the highest California tax rate
for the particular federal marginal tax rate quoted. The income brackets
presented are only samples since the Internal Revenue Service ("IRS") adjusts
the brackets annually for inflation. Investors should consult their tax adviser
with specific reference to their own tax situation.

Performance information is computed separately for each Fund's Class A and Class
S Shares. Because Class S Shares bear the expense of the higher distribution and
service fees, it is expected that performance for a Fund's Class S Shares will
be lower than that for a Fund's Class A Shares.
<PAGE>
<TABLE>
<CAPTION>
TAX EQUIVALENT YIELDS

Table 1
Combined
Federal and
Federal California California Tax-Exempt Yield
Sample 1995 Federal Marginal Marginal Marginal ----------------
Taxable Income Brackets Tax Rate+ Tax Rate* Tax Rate** 2.00% 2.50% 3.00% 3.50% 4.00%
----------------------------------- --------- ---------- -----------
Single Return Joint Return Taxable Yield
------------- ------------ --------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$0-$23,350 $0-$39,000 15% 6.00% 20.10% 2.50% 3.13% 3.75% 4.38% 5.01%
$23,350-$56,550 $39,000-$94,250 28% 9.30% 34.70% 3.06% 3.83% 4.59% 5.36% 6.13%
$56,550-$117,950 n.a. 31% 10.00% 37.90% 3.22% 4.03% 4.83% 5.64% 6.44%
n.a. $94,250-$143,600 31% 9.30% 37.42% 3.20% 3.99% 4.79% 5.59% 6.39%
$117,950-$256,500 n.a. 36% 11.00% 43.04% 3.51% 4.39% 5.27% 6.14% 7.02%
n.a. $143,600-$256,500 36% 10.00% 42.40% 3.47% 4.34% 5.21% 6.08% 6.94%
$256,500 and up $256,500 and up 39.6% 11.00% 46.24% 3.72% 4.65% 5.58% 6.51% 7.44%

<CAPTION>
Combined
Federal and
Federal California California Tax-Exempt Yield
Sample 1995 Federal Marginal Marginal Marginal ----------------
Taxable Income Brackets Tax Rate+ Tax Rate* Tax Rate** 4.50% 5.00% 5.50% 6.00% 6.50% 7.00%
----------------------------------- --------- ---------- -----------
Single Return Joint Return Taxable Yield
------------- ------------ -------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$0-$23,350 $0-$39,000 15% 6.00% 20.10% 5.63% 6.26% 6.88% 7.51% 8.14% 8.76%
$23,350-$56,550 $39,000-$94,250 28% 9.30% 34.70% 6.89% 7.66% 8.42% 9.19% 9.95% 10.72%
$56,550-$117,950 n.a. 31% 10.00% 37.90% 7.25% 8.05% 8.86% 9.66% 10.47% 11.27%
n.a. $94,250-$143,600 31% 9.30% 37.42% 7.19% 7.99% 8.79% 9.59% 10.39% 11.19%
$117,950-$256,500 n.a. 36% 11.00% 43.04% 7.90% 8.78% 9.66% 10.53% 11.41% 12.29%
n.a. $143,600-$256,500 36% 10.00% 42.40% 7.81% 8.68% 9.55% 10.42% 11.29% 12.15%
$256,500 and up $256,500 and up 39.6% 11.00% 46.24% 8.37% 9.30% 10.23% 11.16% 12.09% 13.02%

<CAPTION>
Table 2
Federal Tax-Exempt Yield
Sample 1995 Federal Marginal ----------------
Taxable Income Brackets Tax Rate+ 4.50% 5.00% 5.50% 6.00% 6.50% 7.00%
----------------------------------- ---------
Single Return Joint Return Taxable Yield
------------- ------------ ----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$0-$23,350 $0-$39,000 15% 5.29% 5.88% 6.47% 7.06% 7.65% 8.24%
$23,350-$56,550 $39,000-$94,250 28% 6.25% 6.94% 7.64% 8.33% 9.03% 9.72%
$56,550-$117,950 $94,250-$143,600 31% 6.52% 7.25% 7.97% 8.70% 9.42% 10.14%
$117,950-$256,500 $143,600-$256,500 36% 7.03% 7.81% 8.59% 9.38% 10.16% 10.94%
$256,500 and up $256,500 and up 39.6% 7.45% 8.28% 9.11% 9.93% 10.76% 11.59%

- -----------------------------
<FN>
* California taxable income may differ due to differences in exemptions, itemized deductions and other items.
** Rates do not include the phase-out of personal exemptions or itemized deductions. Rates include the federal deduction of state
taxes paid.
+ Rates do not include the phase-out of personal exemptions or itemized deductions.
</FN>
</TABLE>

OBTAINING PERFORMANCE INFORMATION

Each Fund's strategies, performance, and holdings are detailed twice a year in
fund reports, which are sent to all shareholders. The SAI describes the methods
used to determine a Fund's performance. Shareholders may call 800-222-5852 for
performance information. Shareholders may make inquiries regarding a Fund,
including current total return figures, to any representative of Great Western
Financial Securities Corporation ("GW Securities") or by calling Sierra
Administration at 800-222-5852.
<PAGE>
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.

o 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.

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

o 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.
<PAGE>
HOW TO INVEST IN A SAM ACCOUNT

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
NEW ADDITIONAL
METHOD INVESTMENTS INVESTMENTS
MINIMUM $10,000 MINIMUM $2,000
($5,000 IRA/401(K)/KEOGH) ($1,000 IRA/401(K)/KEOGH)
- ------------------------------------------------------------------------------------------------------------------
<C> <C> <C>
IN PERSON: Visit a GW Securities Representative Visit a GW Securities Representative
To Open a SAM Account Through
a GW Securities Representative
- ------------------------------------------------------------------------------------------------------------------

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

- ------------------------------------------------------------------------------------------------------------------
BY MAIL: A SAM Account cannot be opened by Make your check payable to
mail. "Great Western Financial Securities
Corporation." Indicate your Fund
account number on your check. If
possible, include the "next
investment" slip from your previous
account statement. Mail the check and
slip to the address printed on your
account statements.

Exchange by mail:
Call 800-222-5852 for instructions.
- ------------------------------------------------------------------------------------------------------------------

- ------------------------------------------------------------------------------------------------------------------
BY WIRE: A SAM Account cannot be opened by Instruct your bank to wire Federal
wire. Funds exactly as follows:

Great Western Bank
Beverly Hills, CA
aba #322270039

For credit to (Sierra Trust Funds)
Account #008-852200-5
(Fund Name and Class of Shares)
(Customer's Name)
(Customer's Social Security
Number)
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
INVESTMENT IN FUNDS THROUGH A SAM ACCOUNT. In addition to the considerable
diversification among individual securities you receive by investing in a
particular Fund, you can further reduce risk by spreading your assets among
Class A or Class S Shares of several different SAM Account Funds that each have
different risk and return characteristics. The SAM Account is an active
investment management service offered by Sierra Investment Services Corporation
("Sierra Services"), the SAM Account investment advisor, that allocates your
investments across a combination of either Class A or Class S Shares of the SAM
Account Funds selected to meet long-term investment objectives as well as, in
certain circumstances, current income objectives.

Sierra Services has developed investment strategies for SAM Accounts to meet the
diverse financial needs of different investors. You can open a SAM Account by
meeting with one of the investment professionals of GW Securities who will
review your situation and help you identify your long-term investment
objectives. After using SAM Account criteria to determine your long-term
objectives, you can choose one of several investment strategies. Based on your
chosen strategy, your initial investment will be allocated among either Class A
or Class S Shares of a number of the SAM Account Funds. Depending on market
conditions, Sierra Services from time to time (normally quarterly) reallocates
the combination of SAM Account Funds or the amounts invested in the respective
Class A or Class S Shares of each to implement your SAM investment strategy. In
addition, your SAM Account will be periodically rebalanced to maintain your SAM
strategy's current asset allocation mix, if and when fund performance unbalances
the strategy's mix. You will pay Sierra Services a fee for the SAM Account
service that is in addition to and separate from the fees and expenses you will
pay directly or indirectly as an investor in the Funds. See "Summary of Sierra
Trust Funds Expenses" and "Exchange Privileges and Restrictions."

From time to time, one or more of the Funds used for investment by the SAM
Accounts may experience relatively large investments or redemptions due to SAM
Account allocations or rebalancings recommended by Sierra Services. These
transactions will affect the Funds, since Funds that experience redemptions as a
result of reallocations or rebalancings may have to sell portfolio securities
and Funds that receive additional cash will have to invest it. 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 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. The
Advisor, representing the interests of the Funds, is committed to minimizing the
impact of SAM Account transactions on the Funds; Sierra Services, representing
the interest of the SAM Accounts, is also committed to minimizing such impact on
the Funds to the extent it is consistent with pursuing the investment objective
of the SAM Accounts. The Advisor and Sierra Services will nevertheless face
conflicts in fulfilling their respective responsibilities because they are
affiliates and employ some of the same professionals. In addition, Sierra
Services is the Fund's distributor and is compensated on the sale of shares and
may be compensated for distribution services on the sale of certain Class B and
Class S Shares. See "Initial Sales Charge Alternative: Class A Shares" and
"Exchange Privileges and Restrictions." The Advisor will monitor the impact of
SAM Account transactions on the Funds.

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

Purchases of each Class of the Fund shares are effected at the Fund's Public
Offering Price next determined after a purchase order has been received in
proper form. A purchase order will be deemed to be in proper form when all of
the steps required, including submission of an application form, have been
completed. In the case of an investment by wire, however, the order will be
deemed to be in proper form after the telephone order and the federal funds wire
have been received. The failure of a shareholder who purchases by wire to submit
an application form in a timely fashion may cause delays in processing
subsequent redemption requests. If a telephone order is received or if payment
by wire is received after the close of the NYSE, 4:00 p.m. Eastern Time/1:00
p.m., Pacific Time, the shares will not be credited until the next Business Day.
However, Sierra Administration 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 New
York Stock Exchange ("NYSE") holidays.

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

DIVIDEND REINVESTMENT PLAN. A Dividend Reinvestment Plan will be established
automatically for each SAM Account, except for SAM Accounts invested in one of
the SAM strategies (the "Income Strategy"). The Income Strategy was developed by
Sierra Services to provide for the periodic payment of income to investors and
is designed to pay monthly dividends by check. With the exception of the Income
Strategy, under this Dividend Reinvestment Plan, all income dividends and
capital gain distributions for Class A or Class S Shares of a SAM Account Fund
will be automatically reinvested in additional Class A or Class S Shares,
respectively, of the SAM Account Fund that paid the dividend at the NAV
determined on the dividend payment date.

CLASS A AND S SHARES: ALTERNATIVE PURCHASE ARRANGEMENTS. The alternative
purchase arrangements offered by the Trust enable you to choose the method of
purchasing Fund shares that is most beneficial given the amount of your
purchase, the length of time you expect to hold the shares and other
circumstances. You should consider whether, during the anticipated life of your
investment in the Trust, the accumulated continuing distribution and service
fees and CDSCs on Class S 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 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 S Shares.
Also, Class A Shares are subject to a lower distribution fee and, accordingly,
such shares are expected to pay correspondingly higher dividends on a per share
basis. However, because initial sales charges are deducted at the time of
purchase of Class A Shares, the amount of your funds actually invested would be
reduced by the amount of the sales charge and you would initially own fewer
shares. For this reason, you might determine that it would be more advantageous
to purchase Class S 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 S
Shares may still exceed the initial sales charge and distribution charges
applicable to Class A Shares during the same period.

LARGE PURCHASES OF CLASS S 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, contingent deferred sales charges and ongoing annual expenses will
depend on the length of time a share is held. In almost all cases, investors
planning to purchase $250,000 or more of Fund shares will pay lower aggregate
charges and expenses by purchasing Class A Shares.
<PAGE>
INITIAL SALES CHARGE ALTERNATIVE: CLASS A SHARES. Class A Shares of the Sierra
Trust Funds are sold at the Public Offering Price. Investors purchasing Class A
Shares of the Non-Money Funds incur a sales charge at purchase as described in
the following tables. Purchases of $1 million or more and certain other
purchases are not subject to the sales charge at the time of purchase, but may
be subject to a 1.0% CDSC on redemptions within one year of purchase or a 0.5%
CDSC on redemptions during the second year after purchase (the "Class A CDSC"),
including redemptions of Money Fund Class A Shares acquired through exchange for
such Non-Money Fund Class A Shares. No sales charge at time of purchase and no
CDSC will be assessed on purchases of Class A Shares of a Money Fund, 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. Certain investors who purchased Non-Money Fund Class A Shares at net
asset value based on a purchase amount of $2.5 million or more before July 1,
1995 are subject to the Prior Class A CDSC. See "APPLICATION OF CLASS A SHARES
CDSCs" subsection in this section. For other waivers of the 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.

<TABLE>
<CAPTION>
FOR CLASS A SHARES OF NON-MONEY FUNDS OTHER THAN THE SHORT TERM GLOBAL GOVERNMENT FUND
AND THE SHORT TERM HIGH QUALITY BOND FUND
Dealers'
Reallowance as
As a % of Offering As a % of a % of
Amount of Transaction Price Per Share Net Asset 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%+

<CAPTION>
FOR CLASS A SHARES OF SHORT TERM GLOBAL GOVERNMENT FUND AND
THE SHORT TERM HIGH QUALITY BOND FUND
Dealers'
Reallowance as
As a % of Offering As a % of a % of
Amount of Transaction Price Per Share Net Asset Value Offering Price
- --------------------- ------------------ --------------- --------------
<S> <C> <C> <C>
Less than $50,000 3.50% 3.63% 3.00%
$50,000 but less than $100,000 3.00% 3.09% 2.50%
$100,000 but less than $250,000 2.50% 2.56% 2.00%
$250,000 but less than $500,000 2.25% 2.30% 2.00%
$500,000 but less than $1,000,000 2.00% 2.04% 1.75%
$1,000,000 and over 0% 0% 0%+
<FN>
+ 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 0.25% of the net asset value of such purchases.
</FN>
</TABLE>

Sierra Services, the distributor of the shares of the Funds, will pay the
appropriate dealers' reallowance to GW Securities and other broker-dealers
authorized to place orders for Fund shares ("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 GW Securities or certain
Authorized Dealers. GW Securities and Authorized Dealers may receive different
compensation for selling one class of a Fund rather than another class of the
Fund.

REDUCED SALES CHARGES AT PURCHASE

QUANTITY DISCOUNTS are provided if the total amount being invested in Class A
Shares of the Non-Money Fund alone, or any combination of such shares with
shares of the Funds other than Money Fund Class A Shares, reaches the levels
indicated in the table on the previous page.

RIGHT OF ACCUMULATION. Under the Right of Accumulation, a shareholder may
combine current value of Non-Money Fund Class A Shares with the amount invested
in shares of Funds other than Money Fund Class A Shares to receive the reduced
sales charge indicated in the table on the previous page.

LETTER OF INTENT. A "letter of intent" allows you to purchase Class A Shares of
Funds over a 13-month period at reduced sales loads based on the total amount
that you state in the letter. This letter is non-binding on the shareholder.
Class A Share redemptions during the period may count against the total. During
the period, Sierra Administration will hold in escrow shares equal in value to
5% of the amount purchased for payment of a higher sales load if the full amount
specified in the letter is not purchased within the 13-month period. The shares
will be released upon completion of the letter.

REINVESTMENT PRIVILEGE. Upon redemption of Class A Shares, a shareholder may
reinvest any or all of the redemption proceeds in Class A Shares of a Fund
without any sales charge provided the reinvestment is within 180 days. The
shareholder must notify Sierra Administration or GW Securities concerning the
reinvestment. Write to Sierra Trust Funds at 9301 Corbin Avenue, Suite 333, P.O.
Box 1160, Northridge, California 91328-1160.

WAIVERS OF CLASS A INITIAL SALES CHARGES. No sales charge will be assessed with
respect to Class A Shares 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 (a "Non-Affiliated Fund"), 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 Administration must be notified at the time of purchase that the
purchase being made qualifies for a purchase at NAV); (4) purchases by employees
of any of the Funds' Sub-Advisors; (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 the Distributor; (6) purchases by a GW Securities client through
investment of distributions paid by a unit investment trust ("UIT") within 30
days of the payment of such distributions where the client's interests in such
UIT were acquired through GW Securities; and (7) purchases through investment of
dividends or distributions paid by a Non-Affiliated Fund within 30 days of the
payment of such dividends or distributions.

No sales charge at purchase is assessed for Class A Shares purchased through an
employee benefit trust created pursuant to a plan qualified under Section 401(k)
of the Code ("401(k) Plan") or through a retirement plan qualified under Section
403(b) of the Code ("403(b) Plan"). Investors through a 401(k) Plan or 403(b)
Plan may be subject to various account fees and purchase and redemption
procedures designated by the employer who has established such a plan. Such
investors should consult their employer 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 1.0% or 0.5% 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, (ii)
acquired, including Class A Shares of a Money Fund acquired, through an exchange
for Class A Shares of a Non-Money Fund purchased at NAV without a sales charge
at time of purchase due to purchases of $1 million or more, (iii) purchased
through an employee benefit trust created pursuant to a 401(k) Plan, or (iv)
purchased through a 403(b) Plan. The Class A CDSC and the Prior Class A CDSC
will not be imposed on Class A Shares purchased by (i) a qualified retirement
plan that, at the time of purchase, had not fewer than 500 eligible employees,
(ii) a qualified retirement plan that, at the time of purchase, had assets
exceeding $100 million, or (iii) an institution investing $5 million or more in
the aggregate in one or more of the Funds. The CDSCs for Class A Shares are
calculated on the lower of the shares' cost and current net asset value, and in
determining whether the CDSC is payable, the Sierra Trust Funds will first
redeem shares not subject to any CDSC.

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

DEFERRED SALES CHARGE ALTERNATIVE: CLASS S SHARES. If you choose the deferred
sales charge alternative, you will purchase Class S Shares of the SAM Account
Funds at their NAV per share without the imposition of a sales charge at the
time of purchase. (Class S Shares of certain Funds are not available for
purchase directly.) Class S Shares that are redeemed within six years of
purchase, however, will be subject to a CDSC as described below. CDSC payments
and distribution fees on Class S Shares may be used to fund commissions payable
to GW Securities and 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 S Shares at the time of purchase or (2) the
NAV of the Class S 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:

Year of Contingent
Redemption Deferred Sales
After Purchase Charge
-------------- -------
First............................... 5%
Second.............................. 4%
Third............................... 3%
Fourth.............................. 3%
Fifth............................... 2%
Sixth............................... 1%
Seventh and following............... 0

All purchases are considered made on the last day of the month of purchase. To
determine the CDSC payable on a redemption of Class S Shares, a Fund will first
redeem Class S 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.

If the investor's SAM Account is closed, the investor is not required to redeem
his or her Class S Shares, but may continue to hold Class S Shares and may
exchange Class S Shares of one Fund for Class S Shares of any other Fund without
paying a sales charge at the time of the exchange.

The Trust will adopt procedures to convert Class S 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 S CDSCs. No CDSC charges will be assessed on redemptions of
Class S Shares in the case of the death of the shareholder and redemptions in
connection with certain involuntary distributions, including distributions
arising out of the death or disability of a shareholder, from IRAs.

HOW TO SELL SHARES

You can arrange to take money out of your Fund account on any Business Day by
selling (redeeming) some or all of your shares. Your shares will be sold at the
NAV next determined after your order is received and accepted. Certain Class A
Shares may be subject to a CDSC as described in the "HOW TO BUY SHARES -
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 Administration, until such time as regulations may require the Funds to
redeem proceeds within five days. However, if a shareholder is redeeming shares
recently purchased with a check, the redemption proceeds will not be paid to the
shareholder until the check has cleared. The check may take up to 15 days or
more to clear for deposit of the shareholder's funds into the Fund's account,
and the shareholder may not receive the redemption proceeds until after such
time period. The failure of a shareholder who purchased shares by wire to submit
an application form in a timely fashion may cause delays in processing
redemption requests.

If you wish to keep your Class A or Class S Shares account open, leave at least
$250 worth of shares in your account.
<PAGE>
o The table below highlights the ways in which you can redeem shares in your
Fund account.

WAYS TO SELL SHARES OF YOUR SIERRA TRUST FUND
- --------------------------------------------------------------------------------
Account Type Special Requirements
- --------------------------------------------------------------------------------

BY PHONE All account types, except o For transfers to your Great
800-222-5852 retirement Western Bank account:
minimum, $100.

All account types o You may exchange to the same
class of other funds of the
Trust if both accounts are
registered with the same
name(s), address, and
taxpayer ID number. You may
also redeem amounts by
telephone. Checks will be
mailed to the address of
record exactly as account is
registered.

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

BY MAIL Individual, Joint Accounts, Sole o The letter of instruction
Proprietorships, UGMA, UTMA* must be signed 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.

o Signature guarantee is
required on amounts of more
than $50,000.

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

BY WIRE All account types except o You must sign up for the
retirement wire feature before using
it. To verify that it is in
place, call 800-222-5852.

o Your wire redemption request
must be received by Sierra
Trust Funds 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.

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

o BY TELEPHONE

TO SET UP THE TELEPHONE WIRE REDEMPTION PROCEDURE, indicate your acceptance of
this procedure on the application form and designate a bank and bank account
number to receive the proceeds of withdrawals. To use this procedure after an
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 Administration 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.

o THROUGH GW SECURITIES

You may also sell your shares to the Fund through Sierra Administration or GW
Securities and in that way be certain, providing the order is timely, of
receiving the NAV established at the end of the day on which Sierra
Administration or GW Securities is given the redemption order. The Fund makes no
charge for this transaction but Sierra Administration or GW Securities 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:

o You wish to redeem more than $50,000 worth of shares,
o The redemption check is not being mailed to the address on your Fund account
(record address), or
o The check is not being made out to the Fund account owner.

EXCHANGE PRIVILEGES AND RESTRICTIONS

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

CLASS A SHARES. You may exchange at NAV shares of any class of Funds, where
applicable sales charges have been paid, for any Fund within the same class of
shares. Shareholders exercising the exchange privilege with any of the Funds of
the Sierra Trust Funds should review the prospectus of each Fund carefully prior
to making an exchange. Exchanges of shares are sales and may result in a gain or
loss for federal or state income tax purposes.

Certain Class A Shares may be subject to a CDSC for redemptions within one or
two years of purchase as described in the "HOW TO BUY SHARES - APPLICATION OF
CLASS A SHARES CDSCS" section. The CDSCs applicable to Class A Shares will not
be assessed on a redemption that is part of an exchange for Class A Shares of
another Fund, 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 S SHARES. For purposes of investments in a SAM Account and where a
shareholder continues to hold Class S Shares after closing the SAM Account,
Class S Shares of a SAM Account Fund may be exchanged for Class S Shares of
other Funds of the Trust, including the Money Funds, without having to pay any
CDSC at the time of the exchange. If you exchange into Class S Shares of another
Fund and subsequently redeem such shares, the period of time during which you
held your investment in Class S Shares of the previous Fund will be included in
the period during which that investment is deemed to be invested in the Trust
for purposes of calculating the CDSC. If the initial Class S Shares purchased by
the investor were not subject to the Class S CDSC, then no Class S CDSC will be
imposed on any subsequent exchanges or redemptions involving those shares. In
the event of redemptions of Class S Shares after exchanges, the amount you
initially invested in Class S Shares will be subject to the six-year CDSC
schedule applicable to all Class S Shares.

Class B Shares that are subject to the longer six-year CDSC schedule and higher
CDSC rate applicable to the Class B Shares of the Funds other than the Short
Term High Quality and Short Term Global Government Funds, may be exchanged for
Class S Shares of a SAM Account Fund if the investor has a SAM Account prior to
making the exchange or opens a SAM Account prior to making the exchange and
invests at least the minimum for such SAM Account, through any combination of
such an exchange and initial purchase of Class S Shares. No CDSC is required to
be paid at the time of such an exchange. Once Class B Shares are exchanged into
Class S Shares, the Class S Shares may not be exchanged back into Class B
Shares, even if the SAM Account is later closed. In the event you redeem an
amount originally invested in Class B Shares that was later exchanged into Class
S Shares, the period of time during which you held your investment in Class B
Shares of the previous Fund will be included in the period during which that
investment is deemed to be invested in the Trust for purposes of calculating the
CDSC. The amount initially invested (the "Investment Amount") in the Class B
Shares that are exchanged will continue to be subject to the CDSC schedule and
rate applicable to the Class B Shares of the Fund in which the Investment Amount
was initially invested.

KEY ASPECTS OF TELEPHONE TRANSACTIONS. During periods of significant economic or
market changes, telephone transactions may be difficult to implement. Neither
the Trust nor its Transfer Agent will be responsible for any loss, liability,
cost or expense for acting upon wire instructions or upon telephone instructions
that it reasonably believes are genuine. The Trust and its Transfer Agent will
each employ procedures to confirm that telephone instructions are genuine. Such
procedures may include recording telephone calls. You should verify the accuracy
of telephone transactions immediately upon receipt of your confirmation
statement. If an investor is unable to contact Sierra Administration or GW
Securities by telephone, an investor may deliver the transaction request to
Sierra Administration by writing to Sierra Trust Funds, 9301 Corbin Avenue,
Suite 333, P.O. Box 1160, Northridge, California 91328-1160. Upon 30 days' prior
written notice to shareholders, the telephone transaction privileges may be
modified or terminated.

DIVIDENDS, CAPITAL GAINS AND TAXES

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

DISTRIBUTION OPTIONS. When you open an account, specify on your Application Form
how you want to receive your distributions. The election may be made or changed
by writing to Sierra Administration or by calling 800-222-5852. For SAM
Accounts, each Fund offers two options:

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

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

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

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

TAXES

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

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

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. Distributions of net capital
gain (the excess of net long-term capital gain over net short-term capital loss)
are taxed to shareholders as long-term capital gain regardless of how long you
have held your shares.

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

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

ADDITIONAL CONSIDERATIONS FOR SHAREHOLDERS OF THE MUNICIPAL FUNDS AND THE
CALIFORNIA MONEY FUND. Dividends paid by any of the Municipal Funds or the
California Money Fund that are derived from interest earned on qualifying
tax-exempt obligations will be "exempt-interest" dividends, which shareholders
may exclude from their gross incomes for federal income tax purposes, if at the
close of each quarter of that Fund's taxable year, at least 50 percent of the
Fund's total assets consist of obligations the interest on which is excludable
from gross income for federal income tax purposes. To the extent that any of
these Funds invests in AMT-Subject Bonds, any exempt-interest dividends derived
from interest on such AMT-Subject Bonds are a specific preference item for
purposes of the federal individual and corporate alternative minimum taxes. In
any event, all exempt-interest dividends will be a component of adjusted current
earnings for purposes of computing the federal corporate alternative minimum tax
and the federal corporate environmental tax.

Current federal income tax laws limit the types and volume of bonds qualifying
for the federal income tax exemption of interest, which may have an effect on
the ability of the Municipal Funds to purchase sufficient amounts of tax-exempt
securities to satisfy the requirements for the payment of "exempt-interest"
dividends.

Interest on indebtedness incurred or continued by shareholders to purchase or
carry shares of the Municipal Funds and the California Money Fund is not
deductible for federal income tax purposes. The Municipal Funds and the
California Money Fund may not be an appropriate investment for persons
(including corporations and other business entities) who are not currently
subject to federal income tax (such as certain qualified retirement accounts) or
who are substantial users (or who are related to substantial users) of
facilities financed by "private activity bonds" or certain industrial
development bonds. "Substantial user" is defined generally as including a
"non-exempt person" who regularly uses in a trade or business a part of a
facility financed from the proceeds of such bonds. Entities or persons who are
"substantial users" (or persons related to "substantial users") should consult
their tax advisors before purchasing shares of the Municipal Funds or the
California Money Fund.

ADDITIONAL CONSIDERATIONS FOR SHAREHOLDERS OF THE FLORIDA INSURED MUNICIPAL
FUND. Florida does not impose an income tax on individuals. Accordingly,
dividends or distributions by the Florida Insured Municipal Fund to an
individual who is a Florida resident are not subject to state income tax in
Florida. However, Florida imposes an intangible personal property tax on shares
of the Fund owned by a Florida resident on January 1 of each year unless such
shares qualify for an exemption from the tax.

ADDITIONAL CONSIDERATIONS FOR SHAREHOLDERS OF THE CALIFORNIA MONEY FUND,
CALIFORNIA MUNICIPAL FUND AND CALIFORNIA INSURED INTERMEDIATE MUNICIPAL FUND.
Each of the California Money Fund, California Municipal Fund and California
Insured Intermediate Municipal Fund (the "California Funds") is treated as a
separate taxable entity for California tax purposes, and is therefore subject to
California franchise or corporate income tax on its net income. However, each of
the California Funds intends to qualify as a regulated investment company under
the Code, and if it does so qualify, will be entitled, for California tax
purposes, to a deduction for dividends paid to shareholders. As a regulated
investment company, a California Fund will pay California franchise or corporate
income tax only on any undistributed income, net of allocable expenses.

If, at the close of each quarter of its taxable year, at least 50% of the value
of the total assets of a California Fund consists of obligations the interest on
which would be exempt from California personal income tax if the obligations
were held by an individual ("California Tax Exempt Obligations"), and if the
California Fund continues to qualify as a regulated investment company for
federal income tax purposes, then the California Fund will be qualified to pay
dividends, subject to certain limitations, to its shareholders that are exempt
from California State personal income tax, but not from California State
franchise tax or California State corporate income tax ("California
exempt-interest dividends"). However, the total amount of California
exempt-interest dividends paid by the California Money Fund to all of its
non-corporate shareholders with respect to any taxable year cannot exceed the
amount of interest received by the Fund during such year on California Tax
Exempt Obligations less any expenses and expenditures (including any dividends
paid to corporate shareholders) deemed to have been paid from such interest. If
the aggregate dividends exceed the amount that may be treated as California
exempt-interest dividends, only that percentage of each dividend distribution
equal to the ratio of aggregate California exempt-interest dividends to
aggregate dividends will be treated as a California exempt-interest dividend.
Dividend distributions that do not qualify for treatment as California
exempt-interest dividends (including those dividend distributions to
shareholders taxable as long-term capital gains for federal income tax purposes)
will be taxable to shareholders at ordinary income tax rates for California
personal income tax purposes to the extent of the California Fund's earnings and
profits.

SHAREHOLDER AND ACCOUNT POLICIES

TRANSACTION DETAILS

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

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

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

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

THE FUNDS IN DETAIL

ORGANIZATION

THE TRUST IS GOVERNED BY A BOARD OF TRUSTEES, which is responsible for
protecting the interests of shareholders. The trustees are experienced business
persons who meet throughout the year to oversee the Trust's activities, review
contractual arrangements with companies that provide services to the Funds, and
review performance. The majority of trustees are not affiliated with Sierra
Services, Sierra Advisors or Sierra Administration other than as trustees of the
Trust. The Trust was organized on February 22, 1989 under the laws of the
Commonwealth of Massachusetts as a "Massachusetts business trust."

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

SIERRA ADVISORS, ITS AFFILIATES AND SERVICE PROVIDERS

ADVISOR

Sierra Advisors, located at 9301 Corbin Avenue, Northridge, California 91324, is
the investment advisor of the Funds. Responsibilities of Sierra Advisors include
formulating the 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 Fund's
investment performance. In connection with these activities, Sierra Advisors may
initiate action to change a Sub-Advisor if it deems such action to be in the
best interests of a Fund and its shareholders.

SUB-ADVISORS

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

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 June 30, 1995, total assets under management were over $135 billion.

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, 1995, BlackRock had aggregate assets under management
or supervision of more than $32 billion.

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, 1995, Janus had
over $29.8 billion in assets under investment management.

J.P. MORGAN is located at 522 Fifth Avenue, New York, New York 10036. J.P.
Morgan and Morgan Guaranty Trust Company of New York are wholly owned
subsidiaries 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 June 30, 1995, J.P. Morgan and its affiliates had
investment management authority with respect to approximately $168 billion of
assets.

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 September 30, 1995, Scudder's assets under management were in excess of
$90 billion.

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 June 30, 1995, TCW
Management and its affiliated advisers had just over $50 billion under
management or committed to management.

VAN KAMPEN is located at One Parkview Plaza, Oakbrook Terrace, Illinois 60181.
Van Kampen is a wholly-owned subsidiary of Van Kampen American Capital, Inc.,
which is a wholly-owned subsidiary of VK/AC Holding, Inc. VK/AC Holding, Inc. is
controlled, through the ownership of a substantial majority of its common stock,
by The Clayton & Dubilier Private Equity Fund IV Limited Partnership ("C&D
L.P."), a Connecticut limited partnership. C&D L.P. is managed by Clayton,
Dubilier & Rice, Inc., a New York based private investment firm. The General
Partner of C&D L.P. is Clayton & Dubilier Associates IV Limited Partnership
("C&D Assoc. L.P."). The general partners of C&D Assoc. L.P. are Joseph L. Rice,
III, B. Charles Ames, Alberto Cribiore, Donald J. Gogel and Hubbard C. Howe. Van
Kampen provides investment advice to a wide variety of individual, institutional
and investment company clients and, together with its affiliates, had aggregate
assets under management or supervision, as of September 30, 1995, of more than
$54 billion.

ADMINISTRATOR, TRANSFER AGENT AND CUSTODIAN

Sierra Administration provides shareholder service and other administrative
services. Sierra Administration is under common control with the Advisor and
Sierra Services. Sierra Administration is located at 9301 Corbin Avenue,
Northridge, California 91324. Pursuant to an Administration Agreement, Sierra
Administration is responsible for all administrative functions with respect to
the Trust, although it delegates certain of its responsibilities to
sub-administrators. Sierra Administration also serves as Transfer Agent. Sierra
Administration is entitled to a monthly fee at an annual rate of 0.35% of each
Non-Money Fund's average daily net assets and at an annual rate of 0.30% of each
Money Fund's average daily net assets. Sierra Administration pays The
Shareholder Services Group, Inc. ("TSSG"), a subsidiary of First Data Corp., for
its services as sub-administrator and sub-transfer agent. Sierra Administration
pays Boston Safe Deposit and Trust Co. ("Boston Safe"), One Boston Place,
Boston, MA 02108, for its services as custodian. The Trust pays certain
sub-transfer agent's and sub-administrator's out-of-pocket expenses and pays
Boston Safe certain custodial transaction charges.

DISTRIBUTOR

Sierra Services is the distributor of the Class A, Class B and Class S shares of
the Funds. Sierra Services is located at 9301 Corbin Avenue, Northridge,
California 91324. Sierra Services, an indirectly wholly-owned subsidiary of
GWFC, was established in 1992 and is a registered broker-dealer with the NASD
and a registered investment advisor. GW Securities, a wholly-owned subsidiary of
GWFC, was established in 1982 and is a registered broker-dealer with the NASD.
GW Securities offers a broad range of investment products and services.

Each of the Funds has three distribution plans, pursuant to Rule 12b-1 under the
1940 Act, applicable to each class of Shares of the Trust (each, a "Rule 12b-1
Plan"). Each Fund intends to operate the Rule 12b-1 Plans in accordance with its
terms and the NASD Rules concerning sales charges. Under the applicable Rule
12b-1 Plans, Sierra Services is paid an annual fee as compensation in connection
with the offering and sale of Class A and Class S Shares of the Funds. The
annual fees to be paid to Sierra Services under Rule 12b-1 Plans are calculated
with respect to Class A Shares at an annual rate of up to .25% of the average
daily net assets of the Class A Shares of the Fund and with respect to Class S
Shares at an annual rate of up to .75% of the average daily net assets of the
Class S Shares of the Fund. These fees may be used to cover the expenses of
Sierra Services primarily intended to result in the sale of Class A and Class S
Shares of the Funds, including payments to Sierra Services' representatives or
others for selling shares. Sierra Services may retain any amount of its fee that
is not so expended. Class S Shares are also subject to a service fee at an
annual rate of .25% of the average daily net assets of the Class S Shares of the
Fund.

PORTFOLIO TRANSACTIONS AND TURNOVER. All orders for the purchase or sale of
securities on behalf of each Fund are placed by the Fund's Sub-Advisor with
broker-dealers that it selects. Each Fund may, at the discretion of its
Sub-Advisor, utilize GW Securities or brokers affiliated with the Advisor or
Sub-Advisor in connection with a purchase or sale of securities in accordance
with rules adopted or exemptive orders issued by the SEC when the Fund's
Sub-Advisor believes that such broker's charge for the transaction does not
exceed usual and customary levels.

Each Fund's turnover rate varies from year to year, depending on market
conditions and investment strategies. High turnover rates increase transaction
costs, and may increase taxable capital gains. The Growth and Short Term Global
Government Funds may experience an annual portfolio turnover rate over 100% as a
result of its investment strategies. Also, the Short Term High Quality Bond
Fund's annual portfolio turnover rate is expected to be as high as 200%. The
Funds will not consider portfolio turnover rate a limiting factor in making
investment decisions consistent with their investment objectives and policies.

BREAKDOWN OF FUND EXPENSES

Like any mutual fund, each Fund pays expenses related to its daily operations.
Expenses paid out of a Fund's assets are reflected in its share price or
dividends; they are neither billed directly to shareholders nor deducted from
shareholder accounts. Each Fund pays a MANAGEMENT FEE to Sierra Advisors for
managing its investments and business affairs. Sierra Advisors pays fees to
sub-contractors, including the Sub-Advisors, who provide assistance with these
services. Each Fund also pays OTHER EXPENSES, which are explained on the
following pages. Sierra Advisors and/or Sierra Administration may, from time to
time, agree to reimburse the Funds for management fees and other expenses above
a specified limit. Sierra Advisors and Sierra Administration retain the ability
to be repaid by a Fund if expenses fall below the specified limit prior to the
end of the fiscal year.
<PAGE>
<TABLE>
MANAGEMENT FEE

The management fee is calculated and paid to Sierra Advisors every month. The management fee for each Fund is based upon a
percentage of the average net assets of such Fund. Absent fee waivers, the total management fee for each Fund as provided in
the investment advisory agreement of the Fund is as follows:
<CAPTION>
===============================================================================================================================
After After After After After After After After
Amount of First 50; next 75; next 100; next 125; next 150; next 200; next 300; next 400; next
Assets ($ Mil.) 50 25 25 25 25 50 100 100 100 Over 500
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Each Money
Fund* .50% .50% .50% .50% .50% .50% .50% .50% .50% .40%
- -------------------------------------------------------------------------------------------------------------------------------
Short Term
High Quality
Bond Fund .50% .50% .50% .50% .50% .50% .45% .45% .45% .40%
- -------------------------------------------------------------------------------------------------------------------------------
Short Term
Global
Government
Fund .65% .65% .65% .65% .65% .65% .65% .65% .65% .55%
- -------------------------------------------------------------------------------------------------------------------------------
U.S.
Government
Fund* .60% .60% .60% .60% .60% .60% .60% .60% .60% .50%
- -------------------------------------------------------------------------------------------------------------------------------
Corporate
Income Fund .65% .65% .65% .65% .65% .65% .65% .65% .65% .50%
- -------------------------------------------------------------------------------------------------------------------------------
California
Municipal Fund* .65% .65% .65% .65% .65% .65% .65% .65% .65% .50%
- -------------------------------------------------------------------------------------------------------------------------------
Florida Insured
Municipal Fund* .60% .60% .60% .60% .60% .60% .60% .60% .60% .45%
- -------------------------------------------------------------------------------------------------------------------------------
California Insured
Intermediate
Municipal Fund* .65% .65% .65% .65% .65% .65% .65% .65% .65% .50%
- -------------------------------------------------------------------------------------------------------------------------------
National
Municipal Fund* .60% .60% .60% .60% .60% .60% .60% .60% .60% .45%
- -------------------------------------------------------------------------------------------------------------------------------
Growth and
Income Fund .80% .80% .80% .75% .75% .75% .70% .70% .65% .575%
- -------------------------------------------------------------------------------------------------------------------------------
Growth Fund .95% .95% .95% .90% .90% .90% .875% .875% .875% .875%
- -------------------------------------------------------------------------------------------------------------------------------
Emerging Growth
Fund .90% .90% .90% .85% .85% .85% .85% .85% .85% .75%
- -------------------------------------------------------------------------------------------------------------------------------
International
Growth Fund .95% .85% .85% .85% .65% .65% .65% .65% .65% .65%
===============================================================================================================================

* For these Funds, the Advisor has contractually agreed to limit the annual management fees that are payable under the
investment advisory agreements with the Funds to the percentages as set forth in footnote 6 to the Summary of Sierra
Trust Funds Expenses table.
</TABLE>
<PAGE>
<TABLE>
The Advisor retains only the net amount of the foregoing management fees after the advisory fees paid to the Sub-Advisors
described below, are deducted. Out of the total management fee received by the Advisor for each Fund, the Advisor would pay to
the Sub-Advisor, absent fee waivers by the Sub-Advisor, the following percentages of the average net assets of each Fund:
<CAPTION>
===============================================================================================================================
After After After After After After After After
Amount of First 50; next 75; next 100; next 125; next 150; next 200; next 300; next 400; next
Assets ($ Mil.) 50 25 25 25 25 50 100 100 100 Over 500
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Each Money
Fund .15% .15% .15% .15% .15% .15% .15% .15% .15% .15%
- -------------------------------------------------------------------------------------------------------------------------------
Short Term
High Quality
Bond Fund .15% .15% .15% .15% .15% .15% .10% .10% .10% .10%
- -------------------------------------------------------------------------------------------------------------------------------
Short Term
Global
Government
Fund(1) .28% .28% .28% .28% .28% .28% .10% .10% .10% .10%
- -------------------------------------------------------------------------------------------------------------------------------
U.S.
Government
Fund (2) (2) (2) (2) (2) (2) (2) (2) (2) (2)
- -------------------------------------------------------------------------------------------------------------------------------
Corporate
Income Fund .30% .30% .30% .30% .30% .30% .30% .30% .30% .25%
- -------------------------------------------------------------------------------------------------------------------------------
California
Municipal
Fund(3) .20% .20% .20% .20% .20% .15% .15% .15% .15% .15%
- -------------------------------------------------------------------------------------------------------------------------------
Florida
Insured
Municipal
Fund .20% .20% .125% .125% .125% .125% .125% .125% .125% .125%
- -------------------------------------------------------------------------------------------------------------------------------
California
Insured
Intermediate
Municipal
Fund .20% .20% .125% .125% .125% .125% .125% .125% .125% .125%
- -------------------------------------------------------------------------------------------------------------------------------
National
Municipal
Fund(3) .20% .20% .20% .20% .20% .15% .15% .15% .15% .15%
- -------------------------------------------------------------------------------------------------------------------------------
Growth and
Income Fund .45% .45% .45% .40% .40% .40% .35% .35% .30% .30%
- -------------------------------------------------------------------------------------------------------------------------------
Growth Fund .55% .55% .55% .50% .50% .50% .50% .50% .50% .50%
- -------------------------------------------------------------------------------------------------------------------------------
Emerging
Growth Fund .55% .55% .55% .50% .50% .50% .50% .50% .50% .50%
- -------------------------------------------------------------------------------------------------------------------------------
International
Growth Fund .60% .50% .50% .50% .40% .40% .40% .40% .40% .40%
===============================================================================================================================
<FN>
(1) Sierra Advisors pay the Sub-Advisor of the Short Term Global Government Fund a minimum annual fee of $137,500.
(2) BlackRock is paid fees monthly at the following annual rate under the Current Sub-Advisory Agreement for the Fund: (i)
.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) .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) .10% of the Funds' average daily net assets if the Government
Funds' Combined Assets are more than $1,000,000,000.
(3) Pursuant to the investment sub-advisory agreements with respect to each of the California Municipal and National
Municipal Funds, when the combined average daily net assets of the California Municipal and National Municipal Funds
(the "Combined Assets") exceed $750 million, the Sub-Advisor will be paid a fee with respect to each Fund in proportion
to each Fund's average net assets at the following annual rate: .15% of the Combined Assets up to $1 billion; plus
.125% of the Combined Assets over $1 billion.
</FN>
</TABLE>
<PAGE>
Advisory fees paid by the International Growth, Growth and Income, Growth and
Emerging Growth Funds are higher than those paid by most other investment
companies; however, the Board of Trustees believes that the fees are competitive
with advisory fees paid by investment companies with similar investment
objectives and policies.

OTHER EXPENSES

While the management fee is a significant component of each Fund's annual
operating costs, each Fund has other expenses as well. In addition to the
management fee and other fees described previously, each 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. Most Fund expenses are allocated
proportionately among all of the outstanding shares of the Fund. However, the
Rule 12b-1 Plans' fees and service fees for the Class S Shares are class
expenses that are charged proportionately only to the outstanding shares of that
class.

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

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.

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

<PAGE>

SUPPLEMENT DATED JANUARY 1, 1996
TO PROSPECTUS DATED OCTOBER 31, 1995
OF
SIERRA TRUST FUNDS
P.O. BOX 9702
PROVIDENCE, RHODE ISLAND 02940-9702

By deleting the sixth paragraph in "The Funds' Investments and Risk
Considerations - Investment Principles and Risk Considerations - The Bond
Funds - Short Term Global Government Fund" section on page 19 and replacing it
with the following paragraph:

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 1991. Mr. Greshin assumed responsibility
for the Fund's day-to-day management and investment strategies
effective November 1995.

By deleting the second paragraph in the section "Performance Information -
Performance Comparisons" on page 46 and replacing it with the following
paragraph:

By deleting Table 1 in the section "Performance Information - Tax Equivalent
Yields" on page 47 and replacing it with the following Table 1:

TABLE 1

COMBINED
FEDERAL
AND
FEDERAL CALIFORNIA CALIFORNIA TAX-EXEMPT YIELD
SAMPLE 1995 FEDERAL MARGINAL MARGINAL MARGINAL ----------------
TAXABLE INCOME BRACKETS TAX RATE+ TAX RATE* TAX RATE** 4.50% 5.00% 5.50% 6.00% 6.50% 7.00%
----------------------------------- ---------- ---------- ---------- ---------------------------------------
SINGLE RETURN JOINT RETURN TAXABLE YIELD
----------------- ---------------- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$0-$23,350 $0-$39,000 15% 6.00% 20.10% 5.63% 6.26% 6.88% 7.51% 8.14% 8.76%
$23,350-$56,550 $39,000-$94,250 28% 9.30% 34.70% 6.89% 7.66% 8.42% 9.19% 9.95% 10.72%
$56,550-$117,950 $94,250-$143,600 31% 9.30% 37.42% 7.19% 7.99% 8.79% 9.59% 10.39% 11.19%
$117,950-$256,500 $143,600-$256,500 36% 9.30% 41.95% 7.75% 8.61% 9.47% 10.34% 11.20% 12.06%
$256,500 and up $256,500 and up 39.6% 9.30% 45.22% 8.21% 9.13% 10.04% 10.95% 11.87% 12.78%
</TABLE>
- --------
* California taxable income may differ due to differences in exemptions,
itemized deductions and other items.
** Rates do not include the phase-out of personal exemptions or itemized
deductions. Rates include the federal deduction of state taxes paid.
+ Rates do not include the phase-out of personal exemptions or itemized
deductions.

PLEASE RETAIN THIS SUPPLEMENT
FOR FUTURE REFERENCE

OMPMC/RRD(12/95-31M)

2
<PAGE>

<TABLE>
<S> <C>
PROSPECTUS SIERRA TRUST FUNDS
OCTOBER 31, 1995 P.O. BOX 9702
PROVIDENCE, RHODE ISLAND 02940-9702
800-869-2019

GLOBAL MONEY FUND FLORIDA INSURED MUNICIPAL FUND
U.S. GOVERNMENT MONEY FUND CALIFORNIA INSURED INTERMEDIATE MUNICIPAL FUND
CALIFORNIA MONEY FUND NATIONAL MUNICIPAL FUND
SHORT TERM HIGH QUALITY BOND FUND GROWTH AND INCOME FUND
SHORT TERM GLOBAL GOVERNMENT FUND GROWTH FUND
U.S. GOVERNMENT FUND EMERGING GROWTH FUND
CORPORATE INCOME FUND INTERNATIONAL GROWTH FUND
CALIFORNIA MUNICIPAL FUND
</TABLE>

This prospectus describes the Class A and Class B Shares of the Sierra Trust
Funds (the "Trust"). The Trust consists of the fifteen separate investment
funds (each, a "Fund") named above, and the Target Maturity 2002 Fund, which is
described in a separate prospectus. 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 the Funds are right for you.

TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>

Summary of Expenses & Financial Highlights.............. 5
The Funds' Investments and Risk Considerations.......... 15
Performance Information................................. 45
Your Account............................................ 48
How to Sell Shares...................................... 55
Exchange Privileges and Restrictions.................... 57
Dividends, Capital Gains and Taxes...................... 58
The Funds in Detail..................................... 62
Sierra Advisors, Its Affiliates and Service Providers... 62
Breakdown of Fund Expenses.............................. 65
</TABLE>
<PAGE>

THE SIERRA TRUST FUNDS FAMILY AT A GLANCE

The Sierra Trust Funds (the "Trust") is an open-end management investment
company with a family of sixteen investment funds each with its own investment
objectives and policies. This prospectus describes all of the investment funds,
except the Target Maturity 2002 Fund (excepting the latter fund, each, a "Fund"
and together, the "Funds"). Each Fund offers three classes of shares, Class A
Shares, Class B Shares and Class S Shares. Investors may invest in one or more
of the different classes, which have different sales charges, expenses and other
features. Class A Shares have a front-end sales charge, while purchasers of
Class B Shares pay sales charges only if they redeem their shares within 4 or 6
years, depending on the Fund involved. Class S Shares are sold to investors who
select the Sierra Asset Management ("SAM") service described in "Your Account -
Investment in Funds Through a SAM Account." Investors may purchase directly
Class A Shares of all of the Funds and Class B Shares of the Non-Money Funds,
which are the Funds other than the Global Money Fund, U.S. Government Money Fund
and California Money Fund (the "Money Funds"). Class B Shares of the Money
Funds are offered only to shareholders exchanging Class B Shares of other Funds
and therefore may not be purchased directly by investors. SHARES OF THE TARGET
MATURITY 2002 FUND AND CLASS S SHARES OF THE FUNDS ARE NOT OFFERED THROUGH THIS
PROSPECTUS. Please call 800-869-2019 if you would like to obtain a prospectus
and further information about the Target Maturity 2002 Fund or the Class S
Shares of the Funds.

GOALS: Each Fund has a different investment goal. Each fund's investment
objective is a fundamental policy which may not be changed without the approval
of a majority of the Fund's outstanding voting securities. As with any mutual
fund, there is no assurance that a Fund will achieve its goal.

INVESTMENT MANAGEMENT: Sierra Investment Advisors Corporation ("Advisor" or
"Sierra Advisors") has overall responsibility for management of the Funds.
However, each Fund has an investment sub-advisor ("Sub-Advisor") who selects the
investments made by that Fund subject to oversight and direction by Sierra
Advisors. The Advisor and the Sub-Advisors are discussed in "The Funds in
Detail - Sierra Advisors, Its Affiliates and Service Providers."

RISK CONSIDERATIONS: The value of a Fund's shares will fluctuate with the value
of the underlying securities in its investment portfolio, and in the case of
debt securities, with the general level of interest rates. When interest rates
decline, the value of a portfolio invested in fixed-income securities can be
expected to rise. Conversely, when interest rates rise, the value of a
portfolio invested in fixed-income securities can be expected to decline. In
the case of foreign currency denominated securities, these trends may be offset
or amplified by fluctuations in foreign currencies. Investing in securities of
foreign issuers involves certain risks and considerations not typically
associated with investing in securities of U.S. companies. See "The Funds'
Investments and Risk Considerations - Securities and Investment Practices -
Foreign Investments." High yielding fixed-income securities, such as those in
which the Short Term Global Government Fund may invest up to 10%, and the Growth
and Emerging Growth Funds up to 35%, respectively, of total assets, are subject
to greater market fluctuations and risk of loss of income and principal than
investments in lower yielding fixed-income securities. The Funds intend to
employ from time to time certain investment techniques which are designed to
enhance income or total return or hedge against market or currency risks but
which themselves involve additional risks. These techniques include options on
securities, futures, options on futures, options on indexes, options on foreign
currencies, foreign currency exchange transactions, lending of securities and
when-issued securities and delayed-delivery transactions. Because the Short
Term Global Government, California Municipal, Florida Insured Municipal,
California Insured Intermediate Municipal and California Money Funds are non-
diversified, they are permitted greater flexibility to invest their assets in
the securities of any one issuer and therefore will be exposed to increased risk
of loss if such an investment under performs expectations. FOR ADDITIONAL RISK
INFORMATION, SEE "THE FUNDS' INVESTMENTS AND RISK CONSIDERATIONS" AND
"SECURITIES AND INVESTMENT PRACTICES" IN THIS PROSPECTUS AND "INVESTMENT
OBJECTIVES AND POLICIES OF THE FUNDS" IN THE TRUST'S SAI.

-1-
<PAGE>

THE MONEY FUNDS

GLOBAL MONEY FUND
- -----------------
GOAL: To maximize current income consistent with safety of principal and
maintenance of liquidity.
STRATEGY: Investing in U.S. Dollar-denominated money market instruments of
foreign and U.S. issuers.
INVESTMENT MANAGEMENT: J.P. Morgan Investment Management Inc. ("J.P. Morgan")
is the Sub-Advisor of the Fund.

U.S. GOVERNMENT MONEY FUND
- --------------------------
GOAL: To maximize current income consistent with safety of principal and
maintenance of liquidity.
STRATEGY: Investing primarily in obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities.
INVESTMENT MANAGEMENT: Alliance Capital Management L.P. ("Alliance") is the
Sub-Advisor of the Fund.

CALIFORNIA MONEY FUND
- ---------------------
GOAL: To maximize current income that is excluded from gross income for federal
income tax purposes and is exempt from California State personal income
taxation, consistent with safety of principal and maintenance of liquidity.
STRATEGY: Investing in obligations that are exempt from California State
personal income tax.
INVESTMENT MANAGEMENT: Alliance is the Sub-Advisor of the Fund.

THE BOND FUNDS

SHORT TERM HIGH QUALITY BOND FUND
- ---------------------------------
GOAL: To provide as high a level of current income as is consistent with prudent
investment management and stability of principal.
STRATEGY: Investing at least 65% of its assets in investment-grade short-term
bonds and other fixed-income securities issued by the U.S. Government,
corporations and other issuers. The Fund may borrow money or enter into reverse
repurchase agreements or dollar roll transactions in the aggregate up to 10% of
its total assets, invest up to 25% of its total assets in asset-backed
securities and may engage in certain options transactions, financial futures
contracts and currency forwards or futures contracts and related options. Each
of these investments entails risks which are discussed in the "Investment
Principles and Risk Considerations" and "Securities and Investment Practices"
sections following.
INVESTMENT MANAGEMENT: Scudder, Stevens & Clark, Inc. ("Scudder") is the
investment Sub-Advisor of the Fund.

SHORT TERM GLOBAL GOVERNMENT FUND
- ---------------------------------
GOAL: To provide high current income consistent with protection of principal.
STRATEGY: Investing at least 65% of its assets in short-term bonds and money
market instruments issued by foreign and U.S. governments and denominated in
foreign currencies or the U.S. Dollar.
INVESTMENT MANAGEMENT: Scudder is the investment Sub-Advisor of the Fund.

U.S. GOVERNMENT FUND
- --------------------
GOAL: To maximize total rate of return while providing a high level of current
income, consistent with reasonable safety of principal.
STRATEGY: Investing in a broad range of U.S. Government securities, including
mortgage-backed securities.
INVESTMENT MANAGEMENT: BlackRock Financial Management, Inc. ("BlackRock") is
the investment Sub-Advisor of the Fund.

-2-
<PAGE>

CORPORATE INCOME FUND
- ---------------------
GOAL: To provide a high level of current income, consistent with the
preservation of capital.
STRATEGY: Investing primarily in investment-grade corporate bonds of U.S.
issuers.
INVESTMENT MANAGEMENT: TCW Funds Management, Inc. ("TCW Management") is the
investment Sub-Advisor of the Fund.

CALIFORNIA MUNICIPAL FUND
- -------------------------
GOAL: To provide as high a level of current income that is excluded from gross
income for federal income tax purposes and is exempt from California State
personal income tax as is consistent with prudent investment management and
preservation of capital.
STRATEGY: Investing in intermediate- and long-term California municipal
securities.
INVESTMENT MANAGEMENT: Van Kampen American Capital Management Inc. ("Van
Kampen") is the investment Sub-Advisor of the Fund.

FLORIDA INSURED MUNICIPAL FUND
- ------------------------------
GOAL: To seek as high a level of current income, exempt from federal income tax,
as is consistent with prudent investment management and preservation of capital,
and to offer shareholders the opportunity to own shares the value of which is
exempt from Florida intangible personal property tax.
STRATEGY: Investing in intermediate- and long-term Florida municipal obligations
that are "insured obligations" and offer potential for a high level of current
income relative to funds with like investment objectives. Insured obligations
are municipal obligations that at all times are fully insured as to the
scheduled payment of all installments of interest and principal.
INVESTMENT MANAGEMENT: Van Kampen is the investment Sub-Advisor of the Fund.

CALIFORNIA INSURED INTERMEDIATE MUNICIPAL FUND
- ----------------------------------------------
GOAL: To provide California investors with as high a level of current income
exempt from federal and California State income tax as is consistent with
prudent investment management and preservation of capital.
STRATEGY: Investing primarily in intermediate-term California municipal
securities that are "insured obligations" and offer potential for a high level
of current income relative to funds with like investment objectives. It is a
fundamental policy of the Fund that it will invest at least 80% of the value of
its total assets in insured California municipal securities, except when
maintaining a temporary defensive position. Insured obligations are municipal
obligations that at all times are fully insured as to the scheduled payment of
all installments of interest and principal. The Fund may invest up to 20% of
the value of its total assets in municipal securities that are not insured,
provided that such securities are at least investment-grade as described in "The
Funds' Investments and Risk Considerations" section.
INVESTMENT MANAGEMENT: Van Kampen is the investment Sub-Advisor of the Fund.

NATIONAL MUNICIPAL FUND
- -----------------------
GOAL: To provide a high level of current income which is exempt from federal
income tax, consistent with preservation of capital.
STRATEGY: Investing in intermediate- and long-term fixed income municipal
obligations.
INVESTMENT MANAGEMENT: Van Kampen is the investment Sub-Advisor of the Fund.

THE EQUITY FUNDS
GROWTH AND INCOME FUND
- ----------------------
GOAL: Long-term capital growth and current income consistent with reasonable
investment risk.
STRATEGY: Investing primarily in dividend-paying common stock of well-
established companies.
INVESTMENT MANAGEMENT: J.P. Morgan is the investment Sub-Advisor of the Fund.

-3-
<PAGE>

GROWTH FUND
- -----------
GOAL: Long-term capital appreciation (increase in the value of the Fund's
shares).
STRATEGY: Investing primarily in common stock of U.S., multinational, and
foreign companies of all sizes that offer potential for growth.
INVESTMENT MANAGEMENT: Janus Capital Corporation ("Janus") is the investment
Sub-Advisor of the Fund.

EMERGING GROWTH FUND
- --------------------
GOAL: Long-term capital appreciation by investing primarily in equity
securities.
STRATEGY: Investing primarily in stock of small companies which are expected to
achieve accelerated growth in earnings and revenues or which are undervalued in
the market place.
INVESTMENT MANAGEMENT: Janus is the investment Sub-Advisor of the Fund.

INTERNATIONAL GROWTH FUND
- -------------------------
GOAL: Long-term capital appreciation by investing primarily in equity securities
of foreign issuers.
STRATEGY: Investing in stock of leading companies located outside the United
States.
INVESTMENT MANAGEMENT: J.P. Morgan is the investment Sub-Advisor of the Fund.

-4-
<PAGE>
<TABLE>
<CAPTION>

SUMMARY OF SIERRA TRUST FUNDS EXPENSES
SHORT SHORT TERM
GLOBAL U.S. TERM HIGH GLOBAL U.S.
MONEY GOVERNMENT CALIFORNIA QUALITY BOND GOVERNMENT GOVERNMENT CORPORATE
FUND MONEY FUND MONEY FUND FUND FUND FUND INCOME FUND
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION
EXPENSES

MAXIMUM SALES CHARGE IMPOSED
ON PURCHASES (AS A
PERCENTAGE OF OFFERING
PRICE)
Class A................... None None None 3.50%(1) 3.50%(1) 4.50%(1) 4.50%(1)
Class B................... None None None None None None None

MAXIMUM SALES CHARGE IMPOSED
ON REINVESTED DIVIDENDS (AS
A PERCENTAGE OF OFFERING
PRICE)
Class A................... None None None None None None None
Class B................... None None None None None None None

DEFERRED SALES CHARGE
Class A................... None(2) None(2) None(2) None(2) None(2) None(2) None(2)
Class B................... 5.00%(3) 5.00%(3) 5.00%(3) 4.00%(3) 4.00%(3) 5.00%(3) 5.00%(3)

REDEMPTION FEES(4)
Class A................... None None None None None None None
Class B................... None None None None None None None

EXCHANGE FEES(5)
Class A................... None None None None None None None
Class B................... None None None None None None None

ANNUAL OPERATING EXPENSES (AS
A PERCENTAGE OF AVERAGE NET
ASSETS)

MANAGEMENT FEES (AFTER
VOLUNTARY WAIVERS OR
REIMBURSEMENT)(6)
Class A................... 0.04% 0.04% 0.14% 0.04% 0.10% 0.19% 0.32%
Class B................... 0.04% 0.04% 0.14% 0.04% 0.10% 0.19% 0.32%

12b-1 FEES(7)
Class A................... 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25%
Class B................... 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%

OTHER EXPENSES(8)
Class A................... 0.36% 0.56% 0.46% 0.46% 0.50% 0.46% 0.43%
Class B................... 0.36% 0.56% 0.46% 0.46% 0.50% 0.46% 0.43%

TOTAL FUND OPERATING
EXPENSES(9)
Class A................... 0.65% 0.85% 0.85% 0.75% 0.85% 0.90% 1.00%
Class B................... 1.40% 1.60% 1.60% 1.50% 1.60% 1.65% 1.75%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The initial sales charge is reduced for purchases of $50,000 and over,
decreasing to zero for purchases of $1,000,000 and over for each Fund.

(2) Certain investors who purchased Non-Money Fund Class A Shares at net asset
value based on a purchase amount of $2.5 million or more before July 1, 1995
are subject to a 1.0% contingent deferred sales charge ("CDSC") on
redemptions within one year of purchase (the "Prior Class A CDSC"). Certain
investors who purchase Non-Money Fund Class A Shares at net asset value
based on a purchase amount of $1 million or more after June 30, 1995 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. Class A
Shares purchased through a qualified 401(k) or 403(b) plan may, in certain
circumstances, be subject to a CDSC of 1.0% if the shares are redeemed
within two years of their initial purchase. Money Fund Class A Shares
acquired through exchange from Non-Money Fund Class A Shares that were
subject to a CDSC at the time of exchange may also be subject to such CDSC.
SEE "INITIAL SALES CHARGE ALTERNATIVE: CLASS A SHARES" AND "APPLICATION OF
CLASS A SHARES CDSCs."

(3) See "Your Account - Deferred Sales Charge Alternative: Class B Shares."

(4) 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.

(5) 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 "Your Account - Exchange Privileges
and Restrictions."

(6) Reflects voluntary waivers of management fees by the Advisor. In the
absence of such voluntary waivers, management fees would have been for each
of the following Funds: Global Money Fund-0.40%*; U.S. Government Money
Fund-0.40%*; California Money Fund-0.40%*; Short Term High Quality Bond
Fund-0.50%; Short Term Global Government Fund-0.65%; U.S. Government Fund-
0.55%*; Corporate Income Fund-0.65%; California Municipal Fund-0.55%*;
Florida Insured Municipal Fund-0.55%*; California Insured Intermediate
Municipal Fund-0.55%*; and National Municipal Fund-0.55%*. No management fee
waivers apply to the Growth and Income, Growth, Emerging Growth and
International Growth Funds. * Asterisked fees reflect the contractual
agreement of the Advisor to limit the annual management fee.

(7) Of the 12b-1 fees for the Class B Shares, 0.75% represents an asset-based
sales charge and 0.25% is a service charge. Due to the continuous nature of
the 12b-1 fee, long-term shareholders of a Fund may pay more than the
economic equivalent of the maximum front-end sales charge otherwise
permitted by the Rules of Fair Practice of the National Association of
Securities Dealers, Inc. ("NASD").

(8) After voluntary waivers or reimbursement. Reflects the voluntary
agreement of the Advisor to bear certain expenses and Administrator to waive
fees to limit total fund expenses for the Class A and Class B Shares.

(9) The total fund operating expenses set forth in the foregoing table are
restated to reflect anticipated management fees and other expenses (after
voluntary waivers or reimbursements). Actual expenses for each Fund may vary
from day to day. The Advisor and Administrator anticipate voluntarily
waiving fees and/or bearing expenses for certain Funds that will result in
total fund operating expenses as set forth in the foregoing table; they are
under no obligation

-5-
<PAGE>
SUMMARY OF SIERRA TRUST FUNDS EXPENSES (CONTINUED)
<TABLE>
<CAPTION>
CALIFORNIA
CALIFORNIA FLORIDA INSURED INSURED NATIONAL
MUNICIPAL MUNICIPAL INTERMEDIATE MUNICIPAL
FUND FUND MUNICIPAL FUND FUND
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION
EXPENSES

MAXIMUM SALES CHARGE IMPOSED
ON PURCHASES (AS A
PERCENTAGE OF OFFERING
PRICE)
Class A................... 4.50%(1) 4.50%(1) 4.50%(1) 4.50%(1)
Class B................... None None None None

MAXIMUM SALES CHARGE IMPOSED
ON REINVESTED DIVIDENDS (AS
A PERCENTAGE OF OFFERING
PRICE)
Class A................... None None None None
Class B................... None None None None

DEFERRED SALES CHARGE
Class A................... None(2) None(2) None(2) None(2)
Class B................... 5.00%(3) 5.00%(3) 5.00%(3) 5.00%(3)

REDEMPTION FEES(4)
Class A................... None None None None
Class B................... None None None None

EXCHANGE FEES(5)
Class A................... None None None None
Class B................... None None None None

ANNUAL OPERATING EXPENSES (AS
A PERCENTAGE OF AVERAGE NET
ASSETS)

MANAGEMENT FEES (AFTER
VOLUNTARY WAIVERS OR
REIMBURSEMENT)(6)
Class A................... 0.27% 0.04% 0.04% 0.30%
Class B................... 0.27% 0.04% 0.04% 0.30%

12b-1 FEES(7)
Class A................... 0.25% 0.25% 0.25% 0.25%
Class B................... 1.00% 1.00% 1.00% 1.00%

OTHER EXPENSES(8)
Class A................... 0.43% 0.51% 0.56% 0.45%
Class B................... 0.43% 0.51% 0.56% 0.45%

TOTAL FUND OPERATING
EXPENSES(9)
Class A................... 0.95% 0.80% 0.85% 1.00%
Class B................... 1.70% 1.55% 1.60% 1.75%
- ----------------------------------------------------------------------------------------

<CAPTION>
GROWTH
AND EMERGING
INCOME GROWTH GROWTH INTERNATIONAL
FUND FUND FUND GROWTH FUND
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION
EXPENSES

MAXIMUM SALES CHARGE IMPOSED
ON PURCHASES (AS A
PERCENTAGE OF OFFERING
PRICE)
Class A................... 4.50%(1) 4.50%(1) 4.50%(1) 4.50%(1)
Class B................... None None None None

MAXIMUM SALES CHARGE IMPOSED
ON REINVESTED DIVIDENDS (AS
A PERCENTAGE OF OFFERING
PRICE)
Class A................... None None None None
Class B................... None None None None

DEFERRED SALES CHARGE
Class A................... None(2) None(2) None(2) None(2)
Class B................... 5.00%(3) 5.00%(3) 5.00%(3) 5.00%(3)

REDEMPTION FEES(4)
Class A................... None None None None
Class B................... None None None None

EXCHANGE FEES(5)
Class A................... None None None None
Class B................... None None None None

ANNUAL OPERATING EXPENSES (AS
A PERCENTAGE OF AVERAGE NET
ASSETS)

MANAGEMENT FEES (AFTER
VOLUNTARY WAIVERS OR
REIMBURSEMENT)(6)
Class A................... 0.78% 0.93% 0.88% 0.90%
Class B................... 0.78% 0.93% 0.88% 0.90%

12b-1 FEES(7)
Class A................... 0.25% 0.25% 0.25% 0.25%
Class B................... 1.00% 1.00% 1.00% 1.00%

OTHER EXPENSES(8)
Class A................... 0.55% 0.53% 0.57% 0.68%
Class B................... 0.55% 0.53% 0.57% 0.68%

TOTAL FUND OPERATING
EXPENSES(9)
Class A................... 1.58% 1.71% 1.70% 1.83%
Class B................... 2.33% 2.46% 2.45% 2.58%
- ----------------------------------------------------------------------------------------
</TABLE>

to continue to do so. Set forth below are total fund operating expenses
absent such fee waivers and expense reimbursements. Global Money Fund, Class
A-1.21%, Class B-1.96%, U.S. Government Money Fund, Class A-1.34%, Class B-
2.09%; California Money Fund, Class A-1.15%, Class B-1.90%; Short Term High
Quality Bond Fund, Class A-1.40%, Class B-2.15%; Short Term Global Government
Fund, Class A-1.44%, Class B-2.19%; U.S. Government Fund, Class A-1.30%,
Class B-2.05%; Corporate Income Fund, Class A-1.37%, Class B-2.12%;
California Municipal Fund, Class A-1.27%, Class B-2.02%; Florida Insured
Municipal Fund, Class A-1.43%, Class B-2.18%; California Insured Intermediate
Municipal Fund, Class A-1.44%, Class B-2.19%; and National Municipal Fund,
Class A-1.29%, Class B-2.04%.

Waivers of fees and reimbursement of expenses have the effect of increasing
yield or improving total return for the period when such waivers and
reimbursements are in effect. These amounts are not recovered by the Advisor
or Administrator in later years. These fee waivers and agreements to
reimburse expenses are voluntary and may be discontinued at any time. Each
Fund bears its own expenses and a Fund's expenses are allocated between
classes as described in the section "Breakdown of Fund Expenses."

In addition to the Class A and Class B shares described above, the Trust offers
Class S Shares for investors who open a SAM Account. CLASS S SHARES ARE
DESCRIBED IN MORE DETAIL IN A SEPARATE PROSPECTUS. Class S Shares are not
subject to a sales charge at the time of purchase but are subject to a CDSC that
is different from the Class A shares CDSC and the Class B shares CDSC. For all
Class S Shares, the CDSC applies if the shares are redeemed during the first six
years after purchase and the CDSC declines from 5% during the first year of
investment to zero after six years. Like Class B shares, Class S Shares pay
ongoing distribution and service fees at an annual rate of .75% and .25%,
respectively, of average daily net assets of the Class S Shares. Although each
class of a Fund pays the same management fees and certain other expenses as the
other classes of the Fund, the performance of each of the classes of a Fund may
vary due to differences in sales charges and expenses. Prospective investors
may call 800-869-2019 toll-free to obtain a prospectus and further information
for Class S Shares.

-6-
<PAGE>

SUMMARY OF SIERRA TRUST FUNDS EXPENSES

EXAMPLE:
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of time period.

SHORT SHORT TERM
GLOBAL U.S. TERM HIGH GLOBAL U.S.
MONEY GOVERNMENT CALIFORNIA QUALITY GOVERNMENT GOVERNMENT CORPORATE
FUND MONEY FUND MONEY FUND BOND FUND FUND FUND INCOME FUND
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Class A (1)..................
1 Year $7 $9 $9 $42 $43 $54 $55
3 Years 21 27 27 58 61 72 75
5 Years 36 47 47 75 80 93 98
10 Years 81 105 105 125 136 151 162

Class B (Assuming a
complete redemption at end
of period) (2)...............
1 Year $64 $66 $66 $55 $56 $67 $68
3 Years 74 80 80 67 70 82 85
5 Years 97 107 107 82 87 110 115
10 Years(3) 168 190 190 179 190 195 206

Class B (Assuming no
redemption) (4)..............
1 Year $14 $16 $16 $15 $16 $17 $18
3 Years 44 50 50 47 50 52 55
5 Years 77 87 87 82 87 90 95
10 Years(3) 168 190 190 179 190 195 206
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Assumes deduction at the time of purchase of maximum initial sales charge
for funds other than Global Money, U.S. Government Money and California
Money Funds.
(2) Assumes deduction of maximum applicable contingent deferred sales charge.
(3) Assumes that conversion to Class A Shares does not occur.
(4) Assumes no deduction of contingent deferred sales charge.

-7-
<PAGE>
SUMMARY OF SIERRA TRUST FUNDS EXPENSES (Continued)
<TABLE>
<CAPTION>
CALIFORNIA
INSURED
CALIFORNIA FLORIDA INSURED INTERMEDIATE NATIONAL GROWTH AND
MUNICIPAL FUND MUNICIPAL FUND MUNICIPAL FUND MUNICIPAL FUND INCOME FUND
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A (1)..................
1 Year $54 $53 $53 $55 $60
3 Years 74 69 71 75 93
5 Years 95 87 90 98 127
10 Years 156 140 145 162 224

Class B (Assuming a
complete redemption at end
of period) (2)...............
1 Year $67 $66 $66 $68 $74
3 Years 84 79 80 85 103
5 Years 112 104 107 115 145
10 Years(3) 201 185 190 206 267

Class B (Assuming no
redemption) (4)..............
1 Year $17 $16 $16 $18 $24
3 Years 54 49 50 55 73
5 Years 92 84 87 95 125
10 Years(3) 201 185 190 206 267
- --------------------------------------------------------------------------------------------------------------------

<CAPTION>
EMERGING INTERNATIONAL
GROWTH FUND GROWTH FUND GROWTH FUND
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
Class A (1)..................
1 Year $62 $62 $63
3 Years 96 96 100
5 Years 134 133 140
10 Years 238 237 250

Class B (Assuming a
complete redemption at end
of period) (2)...............
1 Year $75 $75 $76
3 Years 107 106 110
5 Years 151 151 157
10 Years(3) 280 279 291

Class B (Assuming no
redemption) (4)..............
1 Year $25 $25 $26
3 Years 77 76 80
5 Years 131 131 137
10 Years(3) 280 279 291
- -------------------------------------------------------------------------------
</TABLE>

-8-
<PAGE>

FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET NET REALIZED &
VALUE AT UNREALIZED GAIN/ TOTAL FROM DIVIDENDS FROM
BEGINNING NET INVESTMENT (LOSS) ON INVESTMENT NET INVESTMENT
FUND OF PERIOD INCOME/(LOSS) INVESTMENTS OPERATIONS INCOME
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
GLOBAL MONEY FUND
CLASS A SHARES
Year ended 6/30/95.......... $ 1.00 $0.049 $0.000(19) $ 0.049 $ (0.049)
Year ended 6/30/94.......... 1.00 0.030 0.000(19) 0.030 (0.030)
Year ended 6/30/93.......... 1.00 0.031 - 0.031 (0.031)
Year ended 6/30/92.......... 1.00 0.048 - 0.048 (0.048)
Year ended 6/30/91.......... 1.00 0.073 - 0.073 (0.073)
Period ended 6/30/90 (1).... 1.00 0.074 - 0.074 (0.074)
CLASS B SHARES
Year ended 6/30/95.......... 1.00 0.042 0.000(19) 0.042 (0.042)
U.S. GOVERNMENT MONEY FUND
CLASS A SHARES
Year ended 6/30/95.......... 1.00 0.046 - 0.046 (0.046)
Year ended 6/30/94.......... 1.00 0.027 - 0.027 (0.027)
Year ended 6/30/93.......... 1.00 0.027 - 0.027 (0.027)
Year ended 6/30/92.......... 1.00 0.042 0.002 0.044 (0.042)
Year ended 6/30/91.......... 1.00 0.065 - 0.065 (0.065)
Period ended 6/30/90 (2).... 1.00 0.073 - 0.073 (0.073)
CLASS B SHARES
Year ended 6/30/95.......... 1.00 0.038 - 0.038 (0.038)
CALIFORNIA MONEY FUND
CLASS A SHARES
Year ended 6/30/95.......... 1.00 0.028 - 0.028 (0.028)
Year ended 6/30/94.......... 1.00 0.018 - 0.018 (0.018)
Year ended 6/30/93.......... 1.00 0.021 - 0.021 (0.021)
Year ended 6/30/92.......... 1.00 0.033 - 0.033 (0.033)
Year ended 6/30/91.......... 1.00 0.044 - 0.044 (0.044)
Period ended 6/30/90 (2).... 1.00 0.046 - 0.046 (0.046)
CLASS B SHARES
Year ended 6/30/95.......... 1.00 0.020 - 0.020 (0.020)
SHORT TERM HIGH QUALITY BOND FUND
CLASS A SHARES
Year ended 6/30/95.......... 2.39 0.08 0.02 0.10 (0.08)
Period ended 6/30/94 (3).... 2.50 0.09 (0.11) (0.02) (0.09)
CLASS B SHARES
Year ended 6/30/95.......... 2.39 0.06 0.02 0.08 (0.06)
SHORT TERM GLOBAL GOVERNMENT FUND
CLASS A SHARES
Year ended 6/30/95.......... 2.34 0.17 (0.12) 0.05 (0.02)
Year ended 6/30/94.......... 2.48 0.17 (0.14) 0.03 (0.13)
Year ended 6/30/93.......... 2.56 0.19 (0.04) 0.15 (0.20)
Period ended 6/30/92 (4).... 2.50 0.07 0.07 0.14 (0.08)
CLASS B SHARES
Year ended 6/30/95.......... 2.34 0.15 (0.12) 0.03 (0.00)(14)
U. S. GOVERNMENT FUND
CLASS A SHARES
Year ended 6/30/95.......... 9.45 0.70 0.22 0.92 (0.70)
Year ended 6/30/94.......... 10.65 0.75 (1.21) (0.46) (0.64)
Year ended 6/30/93.......... 10.52 0.74 0.16 0.90 (0.74)
Year ended 6/30/92.......... 10.04 0.84 0.49 1.33 (0.84)
Year ended 6/30/91.......... 9.93 0.84 0.13 0.97 (0.85)
Period ended 6/30/90 (5).... 10.00 0.76 (0.09) 0.67 (0.74)
CLASS B SHARES
Year ended 6/30/95.......... 9.45 0.63 0.22 0.85 (0.63)
CORPORATE INCOME FUND
CLASS A SHARES
Year ended 6/30/95.......... 9.87 0.68 0.78 1.46 (0.68)
Year ended 6/30/94.......... 11.33 0.80 (1.35) (0.55) (0.78)
Year ended 6/30/93.......... 10.52 0.84 0.84 1.68 (0.84)
Year ended 6/30/92.......... 9.87 0.91 0.64 1.55 (0.90)
Period ended 6/30/91 (6).... 10.00 0.81 (0.13) 0.68 (0.81)
CLASS B SHARES
Year ended 6/30/95.......... 9.87 0.61 0.78 1.39 (0.61)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-9-
<PAGE>

SAI. Further information about the performance of the Funds is contained in the
Annual Report. The SAI and Annual Report can be obtained at no charge by
calling Shareholder Services at 800-869-2019.

<TABLE>
<CAPTION>
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- ---------------------------------------------------------------------------------------------------------
DISTRIBUTIONS DISTRIBUTIONS
IN EXCESS DISTRIBUTIONS IN EXCESS
OF NET FROM OF NET DISTRIBUTIONS
INVESTMENT NET REALIZED REALIZED FROM
INCOME GAINS GAINS CAPITAL
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
GLOBAL MONEY FUND
CLASS A SHARES
Year ended 6/30/95.......... $ - $(0.000)(19) $ - $ -
Year ended 6/30/94.......... - (0.000)(19) - -
Year ended 6/30/93.......... - - - -
Year ended 6/30/92.......... - - - -
Year ended 6/30/91.......... - - - -
Period ended 6/30/90 (1).... - - - -
CLASS B SHARES
Year ended 6/30/95.......... - (0.000)(19) - -
U.S. GOVERNMENT MONEY FUND
CLASS A SHARES
Year ended 6/30/95.......... - - - -
Year ended 6/30/94.......... - - - -
Year ended 6/30/93.......... - - - -
Year ended 6/30/92.......... - (0.002) - -
Year ended 6/30/91.......... - - - -
Period ended 6/30/90 (2).... - - - -
CLASS B SHARES
Year ended 6/30/95.......... - - - -
CALIFORNIA MONEY FUND
CLASS A SHARES
Year ended 6/30/95.......... - - - -
Year ended 6/30/94.......... - - - -
Year ended 6/30/93.......... - - - -
Year ended 6/30/92.......... - - - -
Year ended 6/30/91.......... - - - -
Period ended 6/30/90 (2).... - - - -
CLASS B SHARES
Year ended 6/30/95.......... - - - -
SHORT TERM HIGH QUALITY BOND FUND
CLASS A SHARES
Year ended 6/30/95.......... (0.06) - - (0.00)(14)
Period ended 6/30/94 (3).... - - - -
CLASS B SHARES
Year ended 6/30/95.......... (0.06) - - (0.00)(14)
SHORT TERM GLOBAL GOVERNMENT FUND
CLASS A SHARES
Year ended 6/30/95.......... (0.00)(14) - (0.01) (0.12)
Year ended 6/30/94.......... (0.03) - (0.01) (0.00)(14)(16)
Year ended 6/30/93.......... - - (0.03) -
Period ended 6/30/92 (4).... - - - -
CLASS B SHARES
Year ended 6/30/95.......... (0.00)(14) - (0.01) (0.12)
U. S. GOVERNMENT FUND
CLASS A SHARES
Year ended 6/30/95.......... - - - -
Year ended 6/30/94.......... - - (0.10) -
Year ended 6/30/93.......... - - - (0.03)(16)
Year ended 6/30/92.......... - - - (0.01)(16)
Year ended 6/30/91.......... - - - (0.01)(16)
Period ended 6/30/90 (5).... - - - -
CLASS B SHARES
Year ended 6/30/95.......... - - - -
CORPORATE INCOME FUND
CLASS A SHARES
Year ended 6/30/95.......... (0.09) - - (0.04)
Year ended 6/30/94.......... (0.01) (0.06) (0.06) -
Year ended 6/30/93.......... - - - (0.03)(16)
Year ended 6/30/92.......... - - - -
Period ended 6/30/91 (6).... - - - -
CLASS B SHARES
Year ended 6/30/95.......... (0.09) - - (0.04)
- -----------------------------------------------------------------------------------------------------------

<CAPTION>
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- --------------------------------------------------------------------------------------------
NET ASSET
VALUE AT
TOTAL END TOTAL
FUND DISTRIBUTIONS OF PERIOD RETURN(11)
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
GLOBAL MONEY FUND
CLASS A SHARES
Year ended 6/30/95.......... $(0.049) $ 1.00 5.06%
Year ended 6/30/94.......... (0.030) 1.00 3.04
Year ended 6/30/93.......... (0.031) 1.00 3.17
Year ended 6/30/92.......... (0.048) 1.00 4.95
Year ended 6/30/91.......... (0.073) 1.00 7.51
Period ended 6/30/90 (1).... (0.074) 1.00 7.64
CLASS B SHARES
Year ended 6/30/95.......... (0.042) 1.00 4.29
U.S. GOVERNMENT MONEY FUND
CLASS A SHARES
Year ended 6/30/95.......... (0.046) 1.00 4.67
Year ended 6/30/94.......... (0.027) 1.00 2.67
Year ended 6/30/93.......... (0.027) 1.00 2.70
Year ended 6/30/92.......... (0.044) 1.00 4.45
Year ended 6/30/91.......... (0.065) 1.00 6.65
Period ended 6/30/90 (2).... (0.073) 1.00 7.52
CLASS B SHARES
Year ended 6/30/95.......... (0.038) 1.00 3.91
CALIFORNIA MONEY FUND
CLASS A SHARES
Year ended 6/30/95.......... (0.028) 1.00 2.79
Year ended 6/30/94.......... (0.018) 1.00 1.81
Year ended 6/30/93.......... (0.021) 1.00 2.07
Year ended 6/30/92.......... (0.033) 1.00 3.35
Year ended 6/30/91.......... (0.044) 1.00 4.52
Period ended 6/30/90 (2).... (0.046) 1.00 4.64
CLASS B SHARES
Year ended 6/30/95.......... (0.020) 1.00 2.04
SHORT TERM HIGH QUALITY BOND FUND
CLASS A SHARES
Year ended 6/30/95.......... (0.14) 2.35 4.42
Period ended 6/30/94 (3).... (0.09) 2.39 (0.73)
CLASS B SHARES
Year ended 6/30/95.......... (0.12) 2.35 3.64
SHORT TERM GLOBAL GOVERNMENT FUND
CLASS A SHARES
Year ended 6/30/95.......... (0.15) 2.24 2.10
Year ended 6/30/94.......... (0.17) 2.34 1.10
Year ended 6/30/93.......... (0.23) 2.48 6.03
Period ended 6/30/92 (4).... (0.08) 2.56 5.34
CLASS B SHARES
Year ended 6/30/95.......... (0.13) 2.24 1.33
U. S. GOVERNMENT FUND
CLASS A SHARES
Year ended 6/30/95.......... (0.70) 9.67 10.17
Year ended 6/30/94.......... (0.74) 9.45 (4.59)
Year ended 6/30/93.......... (0.77) 10.65 8.87
Year ended 6/30/92.......... (0.85) 10.52 13.74
Year ended 6/30/91.......... (0.86) 10.04 10.14
Period ended 6/30/90 (5).... (0.74) 9.93 6.99
CLASS B SHARES
Year ended 6/30/95.......... (0.63) 9.67 9.36
CORPORATE INCOME FUND
CLASS A SHARES
Year ended 6/30/95.......... (0.81) 10.52 15.57
Year ended 6/30/94.......... (0.91) 9.87 (5.32)
Year ended 6/30/93.......... (0.87) 11.33 16.64
Year ended 6/30/92.......... (0.90) 10.52 16.29
Period ended 6/30/91 (6).... (0.81) 9.87 7.31
CLASS B SHARES
Year ended 6/30/95.......... (0.74) 10.52 14.73
- -------------------------------------------------------------------------------------------
</TABLE>

-10-
<PAGE>

U.S. GOVERNMENT MONEY FUND
CLASS A SHARES
Year ended 6/30/95.......... 47,492 0.85 4.63 - 0.042 1.25
Year ended 6/30/94.......... 30,180 0.85 2.68 - 0.022 1.32
Year ended 6/30/93.......... 36,802 0.85 2.69 - 0.022 1.34
Year ended 6/30/92.......... 44,233 0.85 4.43 - 0.037 1.35
Year ended 6/30/91.......... 62,473 0.86 6.54 - 0.058 1.52
Period ended 6/30/90 (2).... 94,789 1.00(10) 7.52(10) - 0.067 1.64(10)
CLASS B SHARES
Year ended 6/30/95.......... 123 1.60 3.88 - 0.034 2.00

CALIFORNIA MONEY FUND
CLASS A SHARES
Year ended 6/30/95.......... 48,836 0.85 2.73 - 0.025 1.15
Year ended 6/30/94.......... 62,500 0.85 1.80 - 0.014 1.27
Year ended 6/30/93.......... 68,404 0.85 2.06 - 0.016 1.29
Year ended 6/30/92.......... 94,607 0.85 3.31 - 0.029 1.28
Year ended 6/30/91.......... 113,392 0.83 4.48 - 0.037 1.48
Period ended 6/30/90 (2).... 147,487 1.00(10) 5.07(10) - 0.040 1.64(10)
CLASS B SHARES
Year ended 6/30/95.......... 79 1.60 1.98 - 0.017 1.90

SHORT TERM HIGH QUALITY BOND
FUND
CLASS A SHARES
Year ended 6/30/95.......... 43,811 0.75 6.10 137 0.07 1.39
Period ended 6/30/94 (3).... 21,771 0.00(10) 5.70(10) 95 0.06 1.61(10)
CLASS B SHARES
Year ended 6/30/95.......... 3,015 1.50 5.35 137 0.05 2.14

SHORT TERM GLOBAL GOVERNMENT
FUND
CLASS A SHARES
Year ended 6/30/95.......... 103,986 0.85 7.22 217 0.16 1.44
Year ended 6/30/94.......... 220,824 0.85 6.87 222 0.16 1.52
Year ended 6/30/93.......... 215,348 0.73 7.67 294 0.17 1.55
Period ended 6/30/92 (4).... 106,609 0.41(10) 8.65(10) 81 0.06 1.92(10)
CLASS B SHARES
Year ended 6/30/95.......... 1,297 1.60 6.47 217 0.14 2.19

U.S. GOVERNMENT FUND
CLASS A SHARES
Year ended 6/30/95.......... 459,968 0.95(18) 7.58 226 0.66 1.59
Year ended 6/30/94.......... 666,566 1.05(18) 7.26 27 0.72 1.34
Year ended 6/30/93.......... 842,277 0.91(18) 6.98 67 0.70 1.34
Year ended 6/30/92.......... 504,776 0.72(18) 7.67 35 0.77 1.39
Year ended 6/30/91.......... 166,920 1.12(18) 8.32 54 0.79 1.57
Period ended 6/30/90 (5).... 31,430 1.13(10)(18) 8.50(10) 13 0.69 1.89(10)
CLASS B SHARES
Year ended 6/30/95.......... 10,646 1.70(18) 6.83 226 0.59 2.34

CORPORATE INCOME FUND
CLASS A SHARES
Year ended 6/30/95.......... 383,642 0.90 8.26 55 0.64 1.40
Year ended 6/30/94.......... 472,519 1.35 7.19 30 0.80 1.42
Year ended 6/30/93.......... 396,357 1.24 7.67 37 0.82 1.42
Year ended 6/30/92.......... 169,682 0.97 8.29 8 0.85 1.48
Period ended 6/30/91 (6).... 35,478 1.21(10) 9.01(10) 31 0.76 1.78(10)
CLASS B SHARES
Year ended 6/30/95.......... 15,145 1.65 7.51 55 0.57 2.15
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

-11-
<PAGE>

<TABLE>
<CAPTION>
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET NET REALIZED &
VALUE AT UNREALIZED GAIN/ TOTAL FROM DIVIDENDS FROM
BEGINNING NET INVESTMENT (LOSS) ON INVESTMENT NET INVESTMENT
FUND OF PERIOD INCOME/(LOSS) INVESTMENTS OPERATIONS INCOME
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL FUND
CLASS A SHARES
Year ended 6/30/95.......... $10.38 $0.61 $ 0.15 $ 0.76 $(0.61)
Year ended 6/30/94.......... 11.22 0.61 (0.82) (0.21) (0.61)
Year ended 6/30/93.......... 10.45 0.62 0.77 1.39 (0.62)
Year ended 6/30/92.......... 10.07 0.65 0.38 1.03 (0.65)
Year ended 6/30/91.......... 10.01 0.63 0.06 0.69 (0.63)
Period ended 6/30/90 (5).... 10.00 0.57 0.01 0.58 (0.57)
CLASS B SHARES
Year ended 6/30/95.......... 10.38 0.53 0.15 0.68 (0.53)
FLORIDA INSURED MUNICIPAL FUND
CLASS A SHARES
Year ended 6/30/95.......... 9.40 0.52 0.03(15) 0.55 (0.52)
Year ended 6/30/94.......... 10.05 0.52 (0.65) (0.13) (0.52)
Period ended 6/30/93 (7).... 10.00 0.00(14) 0.05 0.05 -
CLASS B SHARES
Year ended 6/30/95.......... 9.40 0.45 0.03(15) 0.48 (0.45)
CALIFORNIA INSURED INTERMEDIATE
MUNICIPAL FUND
CLASS A SHARES
Year ended 6/30/95.......... 10.10 0.50 0.35 0.85 (0.50)
Period ended 6/30/94 (8).... 10.00 0.11 0.11(15) 0.22 (0.11)
CLASS B SHARES
Year ended 6/30/95.......... 10.10 0.43 0.35 0.78 (0.43)
NATIONAL MUNICIPAL FUND
CLASS A SHARES
Year ended 6/30/95.......... 10.85 0.64 0.01(15) 0.65 (0.64)
Year ended 6/30/94.......... 11.65 0.65 (0.73) (0.08) (0.65)
Year ended 6/30/93.......... 10.96 0.67 0.75 1.42 (0.67)
Year ended 6/30/92.......... 10.16 0.72 0.79 1.51 (0.71)
Period ended 6/30/91 (6).... 10.00 0.64 0.16 0.80 (0.64)
CLASS B SHARES
Year ended 6/30/95.......... 10.85 0.56 0.01(15) 0.57 (0.56)
GROWTH AND INCOME FUND
CLASS A SHARES
Year ended 6/30/95.......... 11.30 0.13 2.04 2.17 (0.12)
Year ended 6/30/94.......... 12.09 0.12 0.72 0.84 (0.12)
Year ended 6/30/93.......... 11.25 0.12 0.91 1.03 (0.12)
Year ended 6/30/92.......... 10.51 0.17 0.74 0.91 (0.17)
Year ended 6/30/91.......... 10.12 0.23 0.43 0.66 (0.27)
Period ended 6/30/90 (5).... 10.00 0.24 0.07 0.31 (0.19)
CLASS B SHARES
Year ended 6/30/95.......... 11.30 0.05 2.04 2.09 (0.07)
GROWTH FUND
CLASS A SHARES
Year ended 6/30/95(17)...... 10.73 0.05 3.42 3.47 (0.02)
Year ended 6/30/94.......... 10.72 (0.02) 0.03(15) 0.01 -
Period ended 6/30/93 (9).... 10.00 0.00(14) 0.72 0.72 -
CLASS B SHARES
Year ended 6/30/95(17)...... 10.73 (0.04) 3.42 3.38 (0.01)
EMERGING GROWTH FUND
CLASS A SHARES
Year ended 6/30/95(17)...... 13.02 (0.00)(14) 2.77 2.77 -
Year ended 6/30/94.......... 13.76 (0.09) 0.68 0.59 -
Year ended 6/30/93.......... 11.67 (0.02) 2.31 2.29 -
Year ended 6/30/92 (17)..... 9.62 (0.01) 2.16 2.15 (0.01)
Period ended 6/30/91 (6).... 10.00 0.09 (0.40) (0.31) (0.07)
CLASS B SHARES
Year ended 6/30/95(17)...... 13.02 (0.10) 2.77 2.67 -
INTERNATIONAL GROWTH FUND
CLASS A SHARES
Year ended 6/30/95(17)...... 10.74 (0.11)(20) (0.31) (0.42) (0.04)
Year ended 6/30/94.......... 9.80 0.06 1.15 1.21 (0.02)
Year ended 6/30/93.......... 8.82 0.07 0.94 1.01 (0.03)
Year ended 6/30/92.......... 8.27 0.05 0.55 0.60 (0.05)
Period ended 6/30/91 (6).... 10.00 0.02 (1.75) (1.73) -
CLASS B SHARES
Year ended 6/30/95(17)...... 10.74 (0.17)(20) (0.31) (0.48) (0.03)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

-12-
<PAGE>

<TABLE>
<CAPTION>
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- ------------------------------------------------------------------------------------------------------------------------------------

DISTRIBUTIONS DISTRIBUTIONS
IN EXCESS OF NET DISTRIBUTIONS IN EXCESS OF NET ASSET
INVESTMENT FROM NET NET REALIZED DISTRIBUTIONS TOTAL VALUE AT END
FUND INCOME REALIZED GAINS GAINS FROM CAPITAL DISTRIBUTIONS OF PERIOD
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL
FUND
CLASS A SHARES
Year ended 6/30/95.......... $ - $(0.00)(14) $ - $ - $(0.61) $10.53
Year ended 6/30/94.......... (0.00)(14) - (0.02) - (0.63) 10.38
Year ended 6/30/93.......... - - - - (0.62) 11.22
Year ended 6/30/92.......... - - - - (0.65) 10.45
Year ended 6/30/91.......... - - - - (0.63) 10.07
Period ended 6/30/90 (5).... - - - - (0.57) 10.01
CLASS B SHARES
Year ended 6/30/95.......... - (0.00)(14) - - (0.53) 10.53
FLORIDA INSURED MUNICIPAL
FUND
CLASS A SHARES
Year ended 6/30/95.......... - - - - (0.52) 9.43
Year ended 6/30/94.......... (0.00)(14) - (0.00)(14) - (0.52) 9.40
Period ended 6/30/93 (7).... - - - - - 10.05
CLASS B SHARES
Year ended 6/30/95.......... - - - - (0.45) 9.43
CALIFORNIA INSURED
INTERMEDIATE
MUNICIPAL FUND
CLASS A SHARES
Year ended 6/30/95.......... - - - - (0.50) 10.45
Period ended 6/30/94 (8).... - (0.01) - - (0.12) 10.10
CLASS B SHARES
Year ended 6/30/95.......... - - - - (0.43) 10.45
NATIONAL MUNICIPAL FUND
CLASS A SHARES
Year ended 6/30/95.......... - (0.01) (0.09) - (0.74) 10.76
Year ended 6/30/94.......... (0.00)(14) (0.07) - - (0.72) 10.85
Year ended 6/30/93.......... - (0.06) - - (0.73) 11.65
Year ended 6/30/92.......... - - - - (0.71) 10.96
Period ended 6/30/91 (6).... - - - - (0.64) 10.16
CLASS B SHARES
Year ended 6/30/95.......... - (0.01) (0.09) - (0.66) 10.76
GROWTH AND INCOME FUND
CLASS A SHARES
Year ended 6/30/95.......... - (0.77) - - (0.89) 12.58
Year ended 6/30/94.......... - (1.51) - - (1.63) 11.30
Year ended 6/30/93.......... - (0.07) - - (0.19) 12.09
Year ended 6/30/92.......... - - - - (0.17) 11.25
Year ended 6/30/91.......... - - - - (0.27) 10.51
Period ended 6/30/90 (5).... - - - - (0.19) 10.12
CLASS B SHARES
Year ended 6/30/95.......... - (0.77) - - (0.84) 12.55
GROWTH FUND
CLASS A SHARES
Year ended 6/30/95(17)...... - (0.00)(14) - - (0.02) 14.18
Year ended 6/30/94.......... - - - - - 10.73
Period ended 6/30/93 (9).... - - - - - 10.72
CLASS B SHARES
Year ended 6/30/95(17)...... - (0.00)(14) - - (0.01) 14.10
EMERGING GROWTH FUND
CLASS A SHARES
Year ended 6/30/95(17)...... - (0.32) - - (0.32) 15.47
Year ended 6/30/94.......... - (1.33) - - (1.33) 13.02
Year ended 6/30/93.......... - (0.20) - - (0.20) 13.76
Year ended 6/30/92 (17)..... - (0.08) - (0.01)(16) (0.10) 11.67
Period ended 6/30/91 (6).... - - - - (0.07) 9.62
CLASS B SHARES
Year ended 6/30/95(17)...... - (0.32) - - (0.32) 15.37
INTERNATIONAL GROWTH FUND
CLASS A SHARES
Year ended 6/30/95(17)...... - (0.44) (0.06) - (0.54) 9.78
Year ended 6/30/94.......... - (0.25) - - (0.27) 10.74
Year ended 6/30/93.......... - - - - (0.03) 9.80
Year ended 6/30/92.......... - - - - (0.05) 8.82
Period ended 6/30/91 (6).... - - - - - 8.27
CLASS B SHARES
Year ended 6/30/95(17)...... - (0.44) (0.06) - (0.53) 9.73
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

-13-
<PAGE>

<TABLE>
<CAPTION>
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- ------------------------------------------------------------------------------------------------------------------------------------
RATIO OF
OPERATING
NET NET INVESTMENT EXPENSES TO
ASSETS RATIO OF RATIO OF NET INCOME/(LOSS) PER AVERAGE NET
END OF OPERATING INVESTMENT SHARE WITHOUT FEE ASSETS WITHOUT
PERIOD EXPENSES TO INCOME TO PORTFOLIO WAIVERS AND/OR FEE WAIVERS
TOTAL (IN AVERAGE NET AVERAGE NET TURNOVER EXPENSES AND/OR EXPENSES
FUND RETURN(11) 000'S) ASSETS ASSETS RATE ABSORBED(12) ABSORBED(13)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL
FUND
CLASS A SHARES
Year ended 6/30/95...... 7.57% $405,967 0.85% 5.89% 22% $ 0.56 1.29%
Year ended 6/30/94...... (2.19) 509,233 0.79 5.45 50 0.54 1.39
Year ended 6/30/93...... 13.84 511,364 0.80 5.74 41 0.56 1.41
Year ended 6/30/92...... 10.56 309,146 0.94 6.08 29 0.60 1.40
Year ended 6/30/91...... 7.16 202,595 1.05 6.30 16 0.58 1.60
Period ended 6/30/90 (5) 5.99 92,972 1.01(10) 6.26(10) 38 0.49 1.84(10)
CLASS B SHARES
Year ended 6/30/95...... 6.78 7,230 1.60 5.14 22 0.48 2.04
FLORIDA INSURED MUNICIPAL
FUND
CLASS A SHARES
Year ended 6/30/95.. 6.01 33,714 0.39 5.53 44 0.42 1.51
Year ended 6/30/94. (1.50) 38,541 0.00 5.09 83 0.36 1.55
Period ended 6/30/93 (7) 0.50 4,837 0.00(10) 0.48(10) 0 (0.02) 5.59(10)
CLASS B SHARES
Year ended 6/30/95.... 5.23 3,330 1.14 4.78 44 0.35 2.26
CALIFORNIA INSURED
INTERMEDIATE
MUNICIPAL FUND
CLASS A SHARES
Year ended 6/30/95....... 8.71 54,507 0.42 4.95 13 0.40 1.41
Period ended 6/30/94 (8). 2.20 34,147 0.00(10) 4.25(10) 17 0.06 1.95(10)
CLASS B SHARES
Year ended 6/30/95....... 7.90 12,391 1.17 4.20 13 0.33 2.16
NATIONAL MUNICIPAL FUND
CLASS A SHARES
Year ended 6/30/95....... 6.32 269,033 0.83 5.97 23 0.59 1.30
Year ended 6/30/94....... (0.90) 354,501 0.87 5.60 44 0.59 1.36
Year ended 6/30/93....... 13.41 390,187 0.86 5.89 83 0.61 1.37
Year ended 6/30/92....... 15.42 226,984 0.64 6.34 61 0.63 1.40
Period ended 6/30/91 (6). 8.27 44,915 0.55(10) 6.84(10) 81 0.53 1.68(10)
CLASS B SHARES
Year ended 6/30/95....... 5.54 4,786 1.58 5.22 23 0.51 2.05
GROWTH AND INCOME FUND
CLASS A SHARES
Year ended 6/30/95....... 20.47 170,177 1.56 1.11 72 0.13 1.56
Year ended 6/30/94....... 6.67 125,249 1.50 1.04 127 0.11 1.59
Year ended 6/30/93....... 9.20 97,873 1.46 1.01 47 0.12 1.46
Year ended 6/30/92....... 8.65 83,825 1.50 1.51 16 0.16 1.55
Year ended 6/30/91....... 6.70 33,930 1.52 2.48 19 0.21 1.78
Period ended 6/30/90 (5). 3.17 20,964 1.37(10) 3.21(10) 16 0.19 2.01(10)
CLASS B SHARES
Year ended 6/30/95....... 19.67 6,918 2.31 0.36 72 0.05 2.31
GROWTH FUND
CLASS A SHARES
Year ended 6/30/95(17)... 32.33 154,763 1.76 0.28 233 0.05 1.76
Year ended 6/30/94....... 0.00 126,808 1.75 (0.35) 227 (0.02) 1.75
Period ended 6/30/93 (9). 7.30 23,323 1.44(10) (0.63)(10) 13 (0.01) 2.52(10)
CLASS B SHARES
Year ended 6/30/95(17)... 31.46 6,928 2.51 (0.47) 233 (0.04) 2.51
EMERGING GROWTH FUND
CLASS A SHARES
Year ended 6/30/95(17)... 21.54 185,722 1.68 (0.31) 181 (0.00)(14) 1.68
Year ended 6/30/94....... 3.40 124,941 1.66 (0.68) 224 (0.09) 1.66
Year ended 6/30/93....... 19.75 96,646 1.59 (0.32) 28 (0.02) 1.59
Year ended 6/30/92 (17).. 22.47 27,652 1.93 (0.04) 60 (0.01) 1.93
Period ended 6/30/91 (6). (2.95) 8,490 1.84(10) 1.10(10) 17 0.07 2.11(10)
CLASS B SHARES
Year ended 6/30/95(17)... 20.69 10,208 2.43 (1.06) 181 (0.10) 2.43
INTERNATIONAL GROWTH FUND
CLASS A SHARES
Year ended 6/30/95(17)... (4.01) 91,763 1.69 0.62 81 (0.11) 1.69
Year ended 6/30/94....... 12.39 127,764 1.69 0.54 44 0.06 1.69
Year ended 6/30/93....... 11.51 56,962 1.80 1.07 63 0.07 1.80
Year ended 6/30/92....... 7.28 24,479 2.25 0.69 66 0.04 2.29
Period ended 6/30/91 (6). (17.30) 11,647 2.24(10) 0.51(10) 45 0.01 2.47(10)
CLASS B SHARES
Year ended 6/30/95(17)... (4.61) 2,268 2.44 (0.13) 81 (0.17) 2.44
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

-14-
<PAGE>

(1) The Fund commenced operations on July 13, 1989.*
(2) The Funds commenced operations on July 10, 1989.*
(3) The Fund commenced operations on November 1, 1993.*
(4) The Fund commenced operations on February 11, 1992.*
(5) The Funds commenced operations on July 25, 1989.*
(6) The Funds commenced operations on July 18, 1990.*
(7) The Fund commenced operations on June 7, 1993.*
(8) The Fund commenced operations on April 4, 1994.*
(9) The Fund commenced operations on April 5, 1993.*
* On July 1, 1994, the Funds commenced selling Class B and Class S shares
in addition to Class A shares. Those shares in existence prior to July
1, 1994 were designated Class A shares.
(10) Annualized.
(11) Total return represents aggregate total return for the periods indicated
and does not reflect any applicable sales charges. The total returns would
have been lower if certain fees had not been waived and/or expenses had not
been absorbed by investment advisor, administrator and/or distributor.
(12) Net investment income per share without fee waivers and/or expenses
absorbed by investment advisor, administrator and/or distributor.
(13) Annualized operating expense ratios without fee waivers and/or expenses
absorbed by investment advisor, administrator and/or distributor.
(14) Amount represents less than $0.01 per share.
(15) The amount shown may not accord with the change in aggregate gains and
losses of portfolio securities due to the timing of sales and redemptions
of Fund shares .
(16) Amounts distributed in excess of accumulated net investment income as
determined for financial statement purposes have been reported as
distributions from paid-in capital at the fiscal year end in which the
distribution was made. Certain of these distributions which are reported as
being from paid-in capital for financial statement purposes may be reported
to shareholders as taxable distributions due to differing tax and
accounting rules.
(17) Per share numbers have been calculated using the average shares method
which more appropriately presents the per share data for the year since the
use of the undistributed income method did not accord with results of
operations.
(18) Ratio of operating expenses to average net assets including interest
expense for the period ended June 30 each year, was, for Class A shares
1.22% for 1995, 1.06% for 1994, 0.91% for 1993, 0.72% for 1992, 1.12% for
1991, 1.13% for 1990; for the Class B shares 1.97% for 1995.
(19) Amount represents less than $0.001 per share.
(20) Amount shown reflects certain reclassifications related to book to tax
difference.

THE FUNDS' INVESTMENTS AND RISK CONSIDERATIONS

The following section describes the investment objective and policies of each
Fund and some of the risk considerations of investing in the Funds. The
"Securities and Investment Practices" section that follows provides more
information about the types of securities and investment practices that the
Funds may use, and the risk considerations related to such securities and
investment practices.

INVESTMENT PRINCIPLES AND RISK CONSIDERATIONS

THE MONEY FUNDS

Each Money Fund 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 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.

-15-
<PAGE>

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.

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.

-16-
<PAGE>

The California Money Fund is designed to generate tax-exempt income. A
shareholder of the California Money Fund may earn a higher after-tax return from
the Fund than from comparable investments that generate taxable income. For an
illustration of the benefits of tax-free investing, see the section entitled
"Performance Information." For a discussion of the tax consequences of
investing in AMT-Subject Bonds, see "Securities and Investment Practices -
Municipal Securities and AMT-Subject Bonds" and "Dividends, Capital Gains and
Taxes."

The Fund may also invest in variable rate demand obligations, stand-by
commitments, when-issued securities and forward commitments.

THE BOND FUNDS

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 nationally recognized statistical rating organizations
("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.

-17-
<PAGE>

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

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 government securities 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.

-18-
<PAGE>

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 often considered to be speculative and
involve greater risk of default or price changes due to changes in the issuer's
creditworthiness. The market prices of these securities may fluctuate more than
higher-rated securities and may decline significantly in periods of general
economic difficulty, which may follow periods of rising interest rates. See
"Securities and Investment Practices - Lower-Rated Securities."

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
assets in the types of securities in which the Corporate Income Fund may invest
except as otherwise prohibited in this Prospectus or the SAI, including
corporate bonds, preferred stock, convertible corporate bonds, convertible
preferred stock, government stripped mortgage-backed securities, asset-backed
securities; and interests in lease obligations. A substantial portion of the
Fund's assets at any time may consist of mortgage-backed securities. For more
detailed information regarding the types of securities in which the Corporate
Income Fund may invest, see "Corporate Income Fund."

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

-19-
<PAGE>

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

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

CALIFORNIA MUNICIPAL FUND. The Fund's investment objective is to provide as
high a level of current income that is excluded from gross income for federal
income tax purposes and is exempt from California State personal income tax as
is consistent with prudent investment management and preservation of capital.
The Fund pursues its objective by investing in intermediate and long-term
California Municipal Securities (as described in "Securities and Investment
Practices-Municipal Securities and AMT-Subject Bonds"), although the average
maturity of the Fund will vary depending on anticipated market conditions. A
fundamental policy that cannot be changed without the consent of the Fund's
shareholders is that under normal market conditions, at least 80% of the Fund's
total assets will be invested in California Municipal Securities. The Fund may
invest without limitation in AMT-Subject Bonds, as described in "Securities and
Investment Practices - Municipal Securities and AMT-Subject Bonds."

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<PAGE>

including short-term U.S. Government Securities, certificates of deposit and
bankers' acceptances, commercial paper rated Prime-1 by Moody's or A-1+ or A-1
by S&P, repurchase agreements and securities of other money market mutual funds
(subject to the limitations set forth under "Securities and Investment
Practices") and, for temporary defensive purposes, may invest in these
securities without limitation. The Fund may at any time invest up to 20% of its
total assets in taxable cash equivalents, although it is anticipated that under
normal circumstances substantially all of the Fund's assets will be invested in
Municipal Securities generating tax-exempt income.

FLORIDA INSURED MUNICIPAL FUND. The Fund's primary investment objective is to
seek as high a level of current income, exempt from federal income tax, as is
consistent with prudent investment management and preservation of capital, and
to offer shareholders the opportunity to own shares the value of which is exempt
from Florida intangible personal property tax.

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<PAGE>
obtainable from medium-quality Municipal Securities rated A or Baa by Moody's or
A or Bbb by S&P. See "Securities and Investment Practices - Fixed-Income
Securities."

The Fund may invest up to 20%, in the aggregate, of its total assets in (1)
Municipal Securities that are not insured Municipal Securities; (2) Municipal
Securities that are not exempt from Florida intangible personal property tax;
and (3) short-term Municipal Securities and taxable cash equivalents, including
short-term U.S. Government Securities, certificates of deposit, time deposits
and bankers' acceptances, commercial paper rated Prime-1 by Moody's or A-1+ or
A-1 by S&P, repurchase agreements and securities of money market mutual funds
and, for temporary defensive purposes, may invest in these securities without
limitation, except that investments in securities of money market mutual funds
are subject to the limitations set forth under "Securities and Investment
Practices - Holdings in Other Investment Companies." The Fund may at any time
invest up to 20% of its total assets in taxable cash equivalents, although it is
anticipated that under normal circumstances substantially all of the Fund's
assets will be invested in Municipal Securities generating tax-exempt income.
The Fund may invest in floating rate, inverse floating rate and variable rate
obligations, including participation interests therein.

Florida does not impose an income tax on individuals. Distributions of
investment income and capital gains by the Fund will be subject to Florida
corporate income taxes. Florida imposes a tax on intangible personal property
owned by Florida residents. Based on a ruling the Fund has received from the
Florida Department of Revenue, if the Fund's assets consist, on the last
business day of the calendar year, solely of assets exempt from Florida
intangible personal property tax, shares of the Fund owned by Florida residents
will be exempt from Florida intangible personal property tax. Assets exempt
from Florida intangible personal property tax include obligations issued by the
State of Florida and its political subdivisions, municipalities, and public
authorities; obligations of the United States Government or its agencies; and
cash.

Since June 1995, Joseph A. Piraro, a Vice President of Van Kampen, has had
primary responsibility for the day-to-day management of the Fund's portfolio.
Mr. Piraro has been a Vice President of Van Kampen since January 1993 and
Assistance Vice President since June 1992. Prior to joining Van Kampen, Mr.
Piraro was a Senior Municipal Bond Trader for First National Bank of Chicago
from November 1987 to May 1992.

CALIFORNIA INSURED INTERMEDIATE MUNICIPAL FUND. The Fund's investment objective
is to provide California investors with as high a level of current income exempt
from federal and California State income tax as is consistent with prudent
investment management and preservation of capital. To accomplish its investment
objective, the Fund will invest primarily in insured intermediate-term
California Municipal Securities (as described in "Securities and Investment
Practices - Municipal Securities and AMT-Subject Bonds").

The insured California Municipal Securities in which the Fund will invest are
insured under insurance policies that relate to the specific Municipal Security
in question ("Specific Issue Insurance") and that are issued by any insurer
having a claims-paying ability rated AAA by S&P or Aaa by Moody's. Five such
insurers are MBIA Insurance Corporation ("MBIA"), Financial Guaranty Insurance
Company ("FGIC"), AMBAC Indemnity Corporation ("AMBAC"), Financial Securities
Assurance Incorporated ("FSA") and Capital Guaranty Insurance Company ("CGIC").
S&P has rated the claims-paying ability of MBIA, FGIC, AMBAC, FSA and CGIC and
the Municipal Securities insured by these organizations AAA. Further
information with respect to MBIA, FGIC, AMBAC, FSA and CGIC is set forth in the
SAI. Some Specific Issue Insurance will have been obtained by the issuer of the
Municipal Securities or by an investor subsequent to the security's original
issuance and all
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<PAGE>
premiums respecting such securities for the remaining lives thereof will have
been paid in advance by such issuer or investor. Such policies are generally
non-cancelable and will continue in force so long as the Municipal Securities
are outstanding and the insurer remains in business. Since such Specific Issue
Insurance remains in effect as long as the securities are outstanding, the
insurance may have an effect on the resale value of the Municipal Securities.
Therefore, such Specific Issue Insurance may be considered to represent an
element of market value in regard to Municipal Securities thus insured, but the
exact effect, if any, of this insurance on such market value cannot be
estimated.

All of the Municipal Securities in which the Fund will invest are investment-
grade securities, securities that are rated at the time of purchase within the
four highest ratings assigned by Moody's, S&P, Duff, or Fitch, or, if unrated,
are judged to be of comparable quality by the Fund's Sub-Advisor. The higher
tax-free yields sought by the Fund are generally obtainable from medium-quality
Municipal Securities rated A or Baa by Moody's or A or BBB by S&P. Municipal
Securities 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. For more
information, see "Securities and Investment Practices -- Fixed-Income
Obligations and Securities."

The Fund is designed to generate tax-exempt income. A shareholder of the Fund
may earn a higher after-tax return from the Fund than from comparable
investments that generate taxable income. Current federal income tax laws limit
the types and volume of bonds qualifying for the federal income tax exemption of
interest, which may have an effect on the ability of the Fund to purchase
sufficient amounts of tax-exempt securities. For an illustration of the
benefits of tax-free investing, see the section entitled, "Performance
Information." The Fund may invest without limitation in AMT-Subject Bonds, as
described in "Securities and Investment Practices - Municipal Securities and
AMT-Subject Bonds."

The Fund may invest up to 20%, in the aggregate, of its assets in (1) Municipal
Securities that are not insured Municipal Securities; (2) Municipal Securities
that are not exempt from California personal income tax; and (3) short-term
Municipal Securities and taxable cash equivalents, including short-term U.S.
Government Securities, certificates of deposit, time deposits and bankers'
acceptances, commercial paper rated Prime-1 by Moody's or A-1+ or A-1 by S&P,
repurchase agreements and securities of investment companies that are money
market
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<PAGE>
funds and, for temporary defensive purposes, may invest in these securities
without limitation, except that investments in securities of money market mutual
funds are subject to the limitations set forth under "Securities and Investment
Practices - Holdings in Other Investment Companies." The Fund may at any time
invest up to 20% of its total assets in taxable cash equivalents, although it is
anticipated that under normal circumstances substantially all of the Fund's
assets will be invested in Municipal Securities generating tax-exempt income.

Since the Fund's inception, Joseph A. Piraro, a Vice President of Van Kampen,
has had primary responsibility for the day-to-day management of the Fund's
portfolio. Mr. Piraro has been a Vice President of Van Kampen since January
1993 and Assistant Vice President since June 1992. Prior to joining Van Kampen,
Mr. Piraro was a Senior Municipal Bond Trader for First National Bank of Chicago
from November 1987 to May 1992.

NATIONAL MUNICIPAL FUND. The Fund's investment objective is to provide a high
level of current income which is exempt from federal income tax, consistent with
preservation of capital. The Fund pursues its investment objective by investing
in intermediate and long-term Municipal Securities. It is a fundamental policy
of the Fund that it will invest at least 80% of its assets in Municipal
Securities. Under normal conditions, debt obligations with intermediate and
long-term maturities can be expected to pay higher yields and experience greater
fluctuations in value than bonds with short-term maturities. Under normal
market conditions, the longer the average maturity of Municipal Securities held
in the Fund's portfolio, the greater its expected yield and price volatility.
For an illustration of the benefits of tax-free investing, see the section
entitled "Performance Information."

The Fund will invest substantially all of its portfolio in investment-grade
Municipal Securities, which are securities that are rated at the time of
purchase within the four highest ratings assigned by Moody's, S&P, Duff, or
Fitch, or, if unrated, that the Fund's Sub-Advisor believes to have credit
characteristics equivalent to such investment-grade rated securities. The
higher tax-free yields sought by the Fund are generally obtainable from medium-
quality Municipal Securities rated A or Baa by Moody's or A or BBB by S&P. For
more information, see "Securities and Investment Practices - Fixed-Income
Securities." The Fund may also invest in unrated tax-exempt securities that the
Fund's Sub-Advisor believes to have credit characteristics equivalent to rated
investment-grade Municipal Securities.

The Fund also may invest, for temporary defensive purposes in abnormal market
conditions, more than 20% of its assets in taxable cash equivalents.

Since the Fund's inception, David C. Johnson, a Senior Vice President of Van
Kampen, has had primary responsibility for the day-to-day management of the
Fund's portfolio. Mr. Johnson has been the Portfolio
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<PAGE>
Manager of the Fund since its inception. Mr. Johnson has been a Senior Vice
President of Van Kampen since January 1995 and a First Vice President since
January 1993. Mr. Johnson has been employed by Van Kampen since April 1989.

THE EQUITY FUNDS

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 nondividend-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.

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.

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<PAGE>

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

The Fund may invest 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.

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 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 - 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.

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<PAGE>
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.

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.

As the Fund's portfolio co-managers, Douglas J. Dooley and Martyn C. Hole, each
a Vice President of J.P. Morgan, have had primary responsibility for the Fund
since its inception. Mr. Dooley joined J.P. Morgan's research department in
1979 and he served as head of the International Research Group in London from
1986 to
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<PAGE>
1990. Mr. Hole, CFA, joined J.P. Morgan in 1981 from Cambridge University and is
portfolio manager in the International Equity Group in London.

SECURITIES AND INVESTMENT PRACTICES

The following pages contain more detailed information about types of securities
in which the Funds may invest, and strategies a Fund's Sub-Advisor may employ in
pursuit of that 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.

BANK OBLIGATIONS. All of the 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.

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<PAGE>

agreements, exceed 5% of the value of a Fund's total assets, the Fund will not
purchase any securities. The U.S. Government, Short Term High Quality Bond and
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% of the 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 Trust. However, the Short Term High Quality
Bond Fund currently intends to borrow money or enter into reverse repurchase
agreements or dollar roll transactions in the aggregate in excess of 10% of its
total assets (after giving effect to such borrowings); provided, however, that
it may be able to raise this limitation up to 33 1/3% of its total assets with
approval of the Board of Trustees of the Trust.

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, a 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. A Fund's flexibility to participate in higher yielding
debt markets outside of the United States may allow the Fund to achieve higher
yields than those generally obtained by domestic money market funds and short-
term bond investments. If a 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 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 Fund is invested in foreign securities, a weakening in
the U.S. Dollar relative to the foreign currencies underlying a Fund's
investments should help increase the NAV of the Fund. Conversely, a
strengthening in the U.S. Dollar versus the foreign currencies in which a Fund's
securities are denominated will generally lower the NAV of the Fund. A 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. Funds authorized to invest in
securities of foreign issuers may engage in currency management strategies.

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<PAGE>

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

The 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 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 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 Fund's total assets (after giving
effect to any such borrowings). The Short Term High Quality Bond Fund intends
to invest up to 10% of its total assets in dollar roll transactions, but may
invest up to 33 1/3% of its total assets in such transactions.

EXCHANGE RATE-RELATED SECURITIES. Each of the Funds, except for the Money
Funds, 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 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 Trust believes 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.

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.

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<PAGE>
FIXED-INCOME OBLIGATIONS AND SECURITIES. The market value of fixed-income
obligations and securities held by a Fund and, consequently, the NAV per share
of the 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 Fund will tend to be somewhat higher than prevailing
market rates and, in periods of rising interest rates, the Fund's yield will
tend to be somewhat lower. Also, when interest rates are falling, the inflow of
net new money to the 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 a 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.

An amendment to the State Constitution was approved by statewide ballot in the
November 8, 1994 general election which is commonly referred to as the
"Limitation on State Revenues Amendment." This amendment provides that State
revenues collected for any fiscal year shall be limited to State revenues
allowed under the amendment for the prior fiscal year plus an adjustment for
growth. Growth is defined as an amount equal to the average annual rate of
growth in State personal income over the most recent twenty quarters times the
State revenues allowed under the amendment for the prior fiscal year. State
revenues collected for any fiscal year in excess of this limitation are required
to be transferred to the budget stabilization fund until the fund reaches the
maximum balance specified in Section 19(g) of Article III of the State
Constitution, and thereafter is required to be refunded to taxpayers as provided
by general law. The limitation on State revenues imposed by the amendment may be
increased by the Legislature, by a two-thirds vote of each house.

It should be noted that many of the provisions of the amendment are ambiguous,
and likely will not be clarified until State courts have ruled on their
meanings. Furthermore, it is unclear how the Legislature will implement the
language of the amendment and whether such implementing legislation itself will
be the subject of further court interpretation.

Revenue bonds may be issued by the State or its agencies without a vote of
Florida's electors only to finance or refinance the cost of State fixed capital
outlay projects which shall be payable solely from funds derived directly from
sources other than State tax revenues. Estimated fiscal year 1994-95 General
Revenue plus Working Capital and Budget Stabilization funds available total
$14,683,000,000, an increase of approximately 6.1% over comparable figures in
fiscal 1993-94. Total effective appropriations for the 1994-95 fiscal year were
$14,330,800,000, with unencumbered reserves at the end of 1994-95 estimated at
$352,100,000. Estimated fiscal year 1995-96 General Revenue plus Working
Capital and Budget Stabilization funds available total $15,168,700,000, an
increase of approximately 3.3% over comparable figures for fiscal year 1994-95.
Total effective appropriations for the 1995-96 fiscal year are estimated to be
$14,853,200,000, with unencumbered reserves at the end of 1995-96 estimated at
$315,500,000.

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<PAGE>
The 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 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
Fund's portfolio securities or in foreign exchange rates, or prevent loss if the
prices of these securities should decline.

A 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 Fund's securities
denominated in the less attractive currency. The 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 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
Fund if the other party does not complete the transaction, the Fund's Sub-
Advisor will enter into foreign currency exchange contracts only with parties
approved by the Fund's Board of Trustees.

While such actions are intended to protect the 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 Fund as a regulated investment
company under the Code. The projection of currency market movements is
extremely difficult, and the successful execution of a hedging strategy is
highly uncertain.

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 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 Funds' Sub-Advisors do not intend to expose the 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 Funds, including the withholding
of dividends. When a 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
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 Funds hold various foreign currencies
from time to time, the value of the net assets of the Funds as measured in U.S.
Dollars will be affected favorably or unfavorably by changes in exchange rates.
Generally, the 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 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 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-
Advisors of the International Growth and Short Term Global Government Funds
attempt 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 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 Fund normally pays fixed
commissions that are generally higher than the negotiated commissions charged in
the United States. In addition, there is generally less governmental
supervision and regulation of securities exchanges, brokers and issuers in
foreign countries than in the United States.

FUTURES AND OPTIONS ON FUTURES. When deemed advisable by its Sub-Advisor,
certain 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 Funds,
and for the other purposes described in the section "Strategic Transactions." A
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
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.

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The purpose of entering into a futures contract by a Fund is to protect the Fund
from fluctuations in the value of its securities caused by anticipated changes
in interest 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 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, a 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 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 Fund would pay commissions
and other costs in connection with such investments, which may increase the
Fund's expenses and reduce its return. While utilization of options, futures
contracts and similar instruments may be advantageous to the Fund, if the Fund's
Sub-Advisor is not successful in employing such instruments in managing the
Fund's investments, the Fund's performance will be worse than if the Fund did
not make such investments. Losses incurred in hedging transactions and the
costs of these transactions will adversely affect a Fund's performance.

GEOGRAPHICAL AND INDUSTRY CONCENTRATION. Potential investors in the California
Money, California Municipal, California Insured Intermediate Municipal and
Florida Insured Municipal Funds should consider the possibly greater risk
arising from the geographic concentration of their investments, as well as the
current and past financial condition of California and Florida municipal
issuers, respectively. Certain California and Florida constitutional
amendments, legislative measures, executive orders, administrative regulations,
court decisions and voter initiatives could result in certain adverse
consequences affecting California and Florida municipal obligations,
respectively. See the SAI for a more detailed description of these and other
risks relating to the California Money Fund's, California Municipal Fund's and
California Insured Intermediate Municipal Fund's investments in California
municipal obligations and the Florida Insured Municipal Fund's investments in
Florida municipal obligations.

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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 Short Term High Quality
Bond, Short Term Global Government, U.S. Government and Corporate Income Funds
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 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 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 "Mortgage-Backed Securities" section. In
addition, the yields on interest-only and principal-only government stripped
mortgage-backed securities are extremely sensitive to the prepayment experience
on the mortgage loans underlying the certificates collateralizing the
securities. If a decline in the level of prevailing interest rates results in a
rate of principal prepayments higher 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
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
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 Funds will acquire government
stripped mortgage-backed securities only if a liquid secondary market for the
securities exists at the time of acquisition.

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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 a Fund's 15% limit on illiquid securities. The Money Funds will not
invest in Lease Obligation Bonds.

LENDING OF SECURITIES. All of the Funds except the U.S. Government, California
Municipal and Florida Insured Municipal Funds have the ability to lend portfolio
securities to brokers and other financial organizations. By lending its
securities, a 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 a Fund's total assets. Loans of
portfolio securities by a 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 Fund involved. Each Fund's
Sub-Advisor will monitor on an ongoing basis the credit worthiness of the
institutions to which the Fund lends securities.

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 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 Funds -- Strategies Available to Short Term Global Government Fund,
Growth Fund and Emerging Growth Fund" in the SAI.

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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.

To the extent that a 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
Fund's principal investment to the extent of the premium paid. The yield of the
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.

The Fund will not invest more than 5% of its total investment assets in lease
obligations that contain "non-appropriation" clauses where (1) the nature of the
leased equipment or property is such that its ownership or use is essential to a
governmental function of the municipality, (2) the lease payments will commence
amortization of principal at an early date resulting in an average life of seven
years or less for the lease obligation, (3) appropriate covenants will be
obtained from the municipal obligor prohibiting the substitution or purchase of
similar equipment if lease payments are not appropriate, (4) the lease obligor
has maintained good market acceptability in the past, (5) the investment is of a
size that will be attractive to institutional investors, and (6) the underlying
leased equipment has elements of probability and/or use that enhance its
marketability in the event foreclosure on the underlying equipment were ever
required. The Fund will not invest in lease obligations that contain "non-
appropriation" clauses that do not meet these criteria. The Fund has not
imposed any percentage limitations with respect to its investment in lease
obligations not subject to the "non-appropriation" risk.

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as the Commonwealth of Puerto Rico. "Florida Municipal Securities" are Municipal
Securities issued by the State of Florida and its political subdivisions.

NEW ISSUERS. All of the 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 Funds except the Municipal Funds and the Money
Funds 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. A 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, a 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. A 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 a Fund in order to acquire the
underlying securities for the Fund at a price that avoids any additional cost
that would result from a substantial increase in the market value of a security.
A 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 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 Funds may write put and call options on
securities for hedging purposes and the other purposes described in the section
"Strategic Transactions." A 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.

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<PAGE>

by the Fund, the Fund may suffer a loss equal to the excess of the security's
market value at the time of the option exercise over the Fund's acquisition cost
of the security, less the premium received for writing the option.

Certain Funds may write covered options on portfolio securities to enhance
current return. Accordingly, whenever a 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, a Fund will either (1)
deposit with the Trust's custodian in a segregated account cash, U.S. Government
Securities or other short-term, high-grade debt obligations 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 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).

A 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, a Fund would purchase,
prior to the holder's exercise of an option that the Fund has written, an option
of the same series as that on which the Fund desires to terminate its
obligation. The obligation of the Fund under an option that it has written
would be terminated by a closing purchase transaction, but the Fund would not be
deemed to own an option as the result of the transaction. There can be no
assurance that the Fund will be able to effect closing purchase transactions at
a time when it wishes to do so. The ability of the Fund to engage in closing
transactions with respect to options depends on the existence of a liquid
secondary market. While the 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 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 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 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 Funds bear the risk that the prices of the
securities being hedged will not move in the same amount as the hedge. A Fund
will engage in hedging transactions only when deemed advisable by its Sub-
Advisor. Successful use by the Fund of options will depend on its Sub-Advisor's
ability to correctly predict movements in the direction of the stock underlying
the option

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<PAGE>

used as a hedge. Losses incurred in hedging transactions and the costs of these
transactions will adversely affect the Fund's performance.

OPTIONS ON FOREIGN CURRENCIES. The International Growth, Growth, Short Term
High Quality Bond, Short Term Global Government and California Insured
Intermediate Municipal Funds may purchase and write put and call options on
foreign currencies for the purpose of hedging against declines in the U.S.
Dollar value of foreign currency-denominated portfolio securities and against
increases in the U.S. Dollar cost of such securities to be acquired. As in the
case of other kinds of options, however, the writing of an option on a foreign
currency constitutes only a partial hedge, up to the amount of the premium
received, and the 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 Fund's position, it may forfeit the entire amount of the premium plus
related transaction costs. There is no specific percentage limitation on the
Fund's investments in options on foreign currencies. See the SAI for further
discussion of the use, risks and costs of options on foreign currencies.

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option if the Sub-Advisor believes the option can be closed out. Because options
on securities indexes require settlement in cash, the Fund may be forced to
liquidate portfolio securities to meet settlement obligations. The 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.

OVER THE COUNTER OPTIONS. Each of the Funds except the U.S. Government, U.S.
Government Money, California Money and Municipal Funds 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 Funds except the Municipal and 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 a 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.

REPURCHASE AGREEMENTS. All of the Funds may invest in 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 Fund's custodian
or a duly appointed sub-custodian. A Fund will enter into repurchase agreements
only with banks and broker-dealers that have been determined to be creditworthy
by the 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 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 Fund may be delayed or limited in its ability to sell the
collateral. Investments by the California Money Fund in repurchase agreements,
if any, are limited by the restrictions of that Fund's investment in taxable
instruments.

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by the seller. For each of the Funds except the U.S. Government, Short Term High
Quality Bond and Corporate Income Funds, whenever borrowings by a Fund,
including reverse repurchase agreements, exceed 5% of the value of a Fund's
total assets, the Fund will not purchase any securities. The U.S. Government,
Short Term High Quality Bond and 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 Fund's total
assets (after giving effect to such borrowings).

STAND-BY COMMITMENTS. The California Money Fund and the Municipal Funds may
acquire "stand-by commitments" with respect to Municipal Securities held in
their portfolios. Under a stand-by commitment, a dealer agrees to purchase, at
a Fund's option, specified Municipal Securities at a specified price. A Fund
may pay for stand-by commitments either separately in cash or by paying a higher
price for the securities acquired with the commitment, thus increasing the cost
of the securities and reducing the yield otherwise available from them. Each
Fund intends to enter into stand-by commitments only with brokers, dealers and
banks that, in the opinion of its Sub-Advisor, present minimal credit risks. In
evaluating the creditworthiness of the issuer of a stand-by commitment, the Sub-
Advisors will periodically review relevant financial information concerning the
issuer's assets, liabilities and contingent claims. The Funds will acquire
stand-by commitments solely to facilitate portfolio liquidity and do not intend
to exercise their rights thereunder for trading purposes.

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
Fund's portfolio resulting from securities markets or currency exchange rate
fluctuations, to protect the Fund's unrealized gains in the value of its
portfolio securities, to facilitate the sale of such securities for investment
purposes, to manage the effective maturity or duration of the Fund's portfolio,
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 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
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 Fund will comply
with applicable regulatory requirements when utilizing Strategic Transactions.
Strategic Transactions involving financial futures and options thereon will be
purchased, sold or entered into only for bona fide hedging, risk management or
portfolio management purposes. For more information see discussion in other
sections of "Securities and Investment Practices" and the SAI.

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WHEN-ISSUED SECURITIES AND DELAYED-DELIVERY TRANSACTIONS. In order to secure
yields or prices deemed advantageous at the time, all of the Funds except the
Money Funds may purchase or sell securities on a when-issued or a delayed-
delivery basis. The 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 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 Funds will establish a segregated
account with Boston Safe consisting of cash, U.S. Government Securities or other
high grade debt obligations in an amount equal to the amount of its when-issued
and delayed-delivery commitments.

The use of when-issued transactions and forward commitments enables the Funds to
hedge against anticipated changes in interest rates and prices. For instance,
in periods of rising interest rates and falling bond prices, a Fund might sell
Municipal Securities that it owned on a forward commitment basis to limit its
exposure to falling prices. In periods of falling interest rates and rising
bond prices, a Fund might sell a Municipal Security and purchase the same or a
similar security on a when-issued or forward commitment basis, thereby obtaining
the benefit of currently higher cash yields. However, if the relevant Fund's
Sub-Advisor were to forecast incorrectly the direction of interest rate
movements, the Fund might be required to complete such when-issued or forward
transactions at prices inferior to then-current market values.

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PERFORMANCE INFORMATION

YIELD

THE BOND FUNDS. From time to time, the Bond Funds (including the Municipal
Funds) may advertise the 30-day YIELD. The 30-day YIELD of a Bond Fund refers
to the income generated by an investment in such Fund over the 30-day period
identified in the advertisement, and is computed by dividing the net investment
income per share earned by the Fund during the period by the maximum Public
Offering Price per share on the last day of the 30-day period. This income is
"annualized" by assuming that the amount of income is generated each month over
a one-year period and is compounded semiannually. The annualized income is then
shown as a percentage of the maximum Public Offering Price. In addition, the
Bond Funds 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.

THE MUNICIPAL FUNDS. The Municipal Funds and the California Money Fund may also
quote TAX EQUIVALENT YIELD. TAX EQUIVALENT YIELD shows the taxable yields an
investor would have to earn before taxes to equal the Fund's tax-free yields. A
tax-equivalent yield is calculated by dividing a Fund's tax-exempt yield by the
result of one minus the sum of a stated federal and applicable state tax rate,
based upon the highest marginal tax rate and adjusted for the federal deduction
of state taxes paid. To the extent that a Fund's yield for a particular
investor is not taxable by cities and counties, the tax equivalent yields
experienced by the investor will be higher than the tax equivalent yields quoted
by the Fund. If only a portion of a Fund's income is tax-exempt, only that
portion is adjusted in the calculation.

TOTAL RETURN

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

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

-45-
<PAGE>

PERFORMANCE COMPARISONS

In reports or other communications to shareholders or in advertising material, a
Fund may compare the performance of its Class A and Class B Shares with that of
other mutual funds as listed in the rankings prepared by Lipper Analytical
Services, Inc., CDA Technologies, Inc. or similar independent services that
monitor the performance of mutual funds or with other appropriate indexes of
investment securities. In addition, certain indexes may be used to illustrate
historic performance of select asset classes. These may include, among others,
the Dimensional Fund Advisor's Small Cap Index, the Lehman Brothers GNMA Index,
the S&P 100 Index, the Lehman Brothers Index of Baa-rated Corporate Bonds, the
T-Bill Index, the Bank Rate Monitor, Donoghue's Money Fund Averages and the
"Stocks, Bonds and Inflation Index" published annually by Ibbotson Associates.
The performance information may also include evaluations of the Funds published
by nationally recognized ranking services and by financial publications that are
nationally recognized, such as BUSINESS WEEK, FORBES, FORTUNE, INSTITUTIONAL
INVESTOR, MONEY and THE WALL STREET JOURNAL. The International Growth, Short
Term Global Government and Growth Funds may compare their performance to other
investments or relevant indexes consisting of Salomon Brothers Short Term Global
Bond Index, J.P. Morgan Global Government Traded Index, Morgan Stanley Capital
International EAFE Index, the Standard & Poor's 500 Index, the Lipper
International Fund Index and The Financial Times World Stock Index. If a Fund
compares its performance to other funds or to relevant indexes, the Fund's
performance will be stated in the same terms in which such comparative data and
indexes are stated, which is normally total return rather than yield. For these
purposes the performance of the Fund, as well as the performance of such
investment companies or indexes, may not reflect sales charges, which, if
reflected, would reduce performance results.

In addition, the Municipal Funds and the California Money Fund may attempt to
illustrate in advertising or sales literature the benefits of tax-free
investing. For example, Table 1 on the following page shows California
investors the approximate yield that a taxable investment must earn at various
sample income brackets to produce after-tax yields equivalent to those of tax-
exempt investments, such as the California Municipal, California Insured
Intermediate Municipal and California Money Funds, yielding from 2.00% to 7.00%.
Table 2 on the following page shows taxpayers how to translate federal tax
savings from investments, such as the National Municipal Fund, into an
equivalent yield from a taxable investment. The yields following are for
illustration purposes only and are not intended to represent current or future
yields for the Funds, which may be higher or lower than the yields shown.
Calculations are computed in accordance with standard SEC calculations of 30-day
yield. The California marginal tax rates presented assume payment of the
highest California tax rate for the particular federal marginal tax rate quoted.
The income brackets presented are only samples since the Internal Revenue
Service ("IRS") adjusts the brackets annually for inflation. Investors should
consult their tax adviser with specific reference to their own tax situation.

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

-46-
<PAGE>
TAX EQUIVALENT YIELDS

TABLE 1
<TABLE>
<CAPTION>
Combined
Federal
Federal and
Marginal California California Tax-Exempt Yield
Sample 1995 Federal Tax Marginal Marginal ----------------
Taxable Income Brackets Rate+ Tax Rate* Tax Rate** 2.00% 2.50% 3.00% 3.50% 4.00%
- ------------------------------------------------- -------- ---------- ---------- ----------------------------------------
Single Return Joint Return Taxable Yield
- ----------------------------- ----------------- ----------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$0-$23,350 $0-$39,000 15% 6.00% 20.10% 2.50% 3.13% 3.75% 4.38% 5.01%

$23,350-$56,550 $39,000-$94,250 28% 9.30% 34.70% 3.06% 3.83% 4.59% 5.36% 6.13%

$56,550-$117,950 n.a. 31% 10.00% 37.90% 3.22% 4.03% 4.83% 5.64% 6.44%

n.a. $94,250-$143,600 31% 9.30% 37.42% 3.20% 3.99% 4.79% 5.59% 6.39%

$117,950-$256,500 n.a. 36% 11.00% 43.04% 3.51% 4.39% 5.27% 6.14% 7.02%

n.a. $143,600-$256,500 36% 10.00% 42.40% 3.47% 4.34% 5.21% 6.08% 6.94%

$256,500 and up $256,500 and up 39.6% 11.00% 46.24% 3.72% 4.65% 5.58% 6.51% 7.44%

</TABLE>

<TABLE>
<CAPTION>
Combined
Federal
Federal and
Marginal California California Tax-Exempt Yield
Sample 1995 Federal Tax Marginal Marginal ----------------
Taxable Income Brackets Rate+ Tax Rate* Tax Rate** 4.50% 5.00% 5.50% 6.00% 6.50% 7.00%
- ---------------------------------------- -------- ---------- ---------- --------------------------------------------------
Single Return Joint Return Taxable Yield
- -------------------- ----------------- --------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$0-$23,350 $0-$39,000 15% 6.00% 20.10% 5.63% 6.26% 6.88% 7.51% 8.14% 8.76%

$23,350-$56,550 $39,000-$94,250 28% 9.30% 34.70% 6.89% 7.66% 8.42% 9.19% 9.95% 10.72%

$56,550-$117,950 n.a. 31% 10.00% 37.90% 7.25% 8.05% 8.86% 9.66% 10.47% 11.27%

n.a. $94,250-$143,600 31% 9.30% 37.42% 7.19% 7.99% 8.79% 9.59% 10.39% 11.19%

$117,950-$256,500 n.a. 36% 11.00% 43.04% 7.90% 8.78% 9.66% 10.53% 11.41% 12.29%

n.a. $143,600-$256,500 36% 10.00% 42.40% 7.81% 8.68% 9.55% 10.42% 11.29% 12.15%

$256,500 and up $256,500 and up 39.6% 11.00% 46.24% 8.37% 9.30% 10.23% 11.16% 12.09% 13.02%
</TABLE>

TABLE 2

Tax-Exempt Yield
Sample 1995 Federal Federal Marginal ----------------
Taxable Income Brackets Tax Rate+ 4.50% 5.00% 5.50% 6.00% 6.50% 7.00%
- ------------------------------------------- ------------------ ---------------------------------------------------------
Single Return Joint Return Taxable Yield
- ---------------------- ----------------- ---------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$0-$23,350 $0-$39,000 15% 5.29% 5.88% 6.47% 7.06% 7.65% 8.24%

$22,350-$56,550 $39,000-$94,250 28% 6.25% 6.94% 7.64% 8.33% 9.03% 9.72%

$56,550-$117,950 $94,250-$143,600 31% 6.52% 7.25% 7.97% 8.70% 9.42% 10.14%

$117,950-$256,500 $143,600-$256,500 36% 7.03% 7.81% 8.59% 9.38% 10.16% 10.94%

$256,500 and up $256,500 and up 39.6% 7.45% 8.28% 9.11% 9.93% 10.76% 11.59%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

- ------------
* California taxable income may differ due to differences in exemptions,
itemized deductions and other items.
** Rates do not include the phase-out of personal exemptions or itemized
deductions. Rates include the federal deduction of state taxes paid.
+ Rates do not include the phase-out of personal exemptions or itemized
deductions.

OBTAINING PERFORMANCE INFORMATION

-47-
<PAGE>

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

. 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")

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

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.

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

-48-
<PAGE>

HOW TO INVEST IN THE FUNDS

To Open an Account: Minimum $250 To Add to an Account: Minimum $100

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
BY PHONE . Exchange from another Sierra Trust Fund . Exchange from another Sierra Trust Fund
800-869-2019 account with same registration, including account with the same registration,
name, address, and taxpayer ID number including name, address, and taxpayer ID
(social security number for an individual). number.

. Call Shareholder Services at 800-869- . Call Shareholder Services at 800-869-
2019. (9:00 a.m. to 6:00 p.m., Eastern 2019.
Time/6:00 a.m. to 3:00 p.m., Pacific
Time, weekdays)

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

BY MAIL . Complete and sign the application. Make . Make your check payable to "Sierra Trust
your check or negotiable bank draft Funds." Indicate your Fund account
payable to "Sierra Trust Funds." number on your check. Include the "next
investment" stub from your previous
Mail the completed application form and account statement. Mail the check and
check to: stub to the address printed on your
account statement.
Sierra Trust Funds
P.O. Box 9702
Providence, RI 02940-9702 . Exchange by mail: call 800-869-2019 for
instructions.
- --------------------------------------------------------------------------------------------------------------------------------

BY WIRE 1. Telephone Shareholder Services and give . Instruct your bank/financial institution
the (a) name of the account as you wish to wire Federal Funds as described at left
it to be registered; (b) address of the under paragraph 2.
account; (c) taxpayer ID number (social
security number for an individual); and (d)
Fund 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
DDA# 167053
Custody Shareholder Services
Division
Attn: Sierra Trust Funds
(Fund Name and class of shares)
(Customer's Name)
(Customer's Social Security Number)

3. Mail the completed application form to:

Sierra Trust Funds
P.O. Box 9702
Providence, RI 02940-9702

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

AUTOMATICALLY 1. Obtain and complete an application form. . Pre-authorized monthly investments are
2. Attach a voided check or deposit slip from now processed automatically.
(Minimum New the bank account you would like the (Minimum Amount $25)
Account amount investments transferred from on the 15th
$100) of each month.
3. Mail the application to the address
listed above.
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-49-
<PAGE>

INVESTMENT IN FUNDS THROUGH A SAM ACCOUNT. In addition to the considerable
diversification among individual securities you receive by investing in a
particular Fund, you can further reduce risk by spreading your assets among
several different Funds that each have different risk and return
characteristics. The SAM Account is an active investment management service
offered by Sierra Investment Services Corporation ("Sierra Services"), the SAM
Account investment advisor, that allocates your investments across a combination
of either Class A or Class S Shares of certain of the Funds selected to meet
long-term investment objectives as well as, in certain circumstances, current
income objectives. CLASS S SHARES ARE DESCRIBED IN MORE DETAIL IN A SEPARATE
PROSPECTUS, WHICH MAY BE OBTAINED BY CALLING 800-869-2019 TOLL-FREE.

Sierra Services has developed investment strategies for SAM Accounts to meet the
diverse financial needs of different investors. You can open a SAM Account by
meeting with one of the investment professionals of an Authorized Dealer who
will review your situation and help you identify your long-term investment
objectives. After using SAM Account criteria to determine your long-term
objectives, you can choose one of several investment strategies. Based on your
chosen strategy, your initial investment will be allocated among a number of the
Funds and the Class A or Class S Shares of such Funds. Depending on market
conditions, Sierra Services from time to time (normally quarterly) reallocates
the combination of Funds or the amounts invested in the respective Class A or
Class S Shares of each to implement your SAM investment strategy. In addition,
your SAM Account will be periodically rebalanced to maintain your SAM strategy's
current asset allocation mix, if and when Fund performance unbalances the
strategy's mix. You will pay Sierra Services a fee for the SAM Account service
that is in addition to and separate from the fees and expenses you will pay
directly or indirectly as an investor in the Funds. See "Summary of Sierra
Trust Funds Expenses" and "Exchange Privileges and Restrictions."

From time to time, one or more of the Funds used for investment by the SAM
Accounts may experience relatively large investments or redemptions due to SAM
Account allocations or rebalancings recommended by Sierra Services. These
transactions will affect the Funds, since Funds that experience redemptions as a
result of reallocations or rebalancings may have to sell portfolio securities
and Funds that receive additional cash will have to invest it. 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 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. The
Advisor, representing the interests of the Funds, is committed to minimizing the
impact of SAM Account transactions on the Funds; Sierra Services, representing
the interest of the SAM Accounts, is also committed to minimizing such impact on
the Funds to the extent it is consistent with pursuing the investment objective
of the SAM Accounts. The Advisor and Sierra Services will nevertheless face
conflicts in fulfilling their respective responsibilities because they are
affiliates and employ some of the same professionals. In addition, Sierra
Services is the Fund's distributor and is compensated on the sale of shares and
may be compensated for distribution services on the sale of certain Class B and
Class S Shares. See "Initial Sales Charge Alternative: Class A Shares," and
"Exchange Privileges and Restrictions." The Advisor will monitor the impact of
SAM Account transactions on the Funds.

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

-50-
<PAGE>

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

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

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

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

-51-
<PAGE>

record up to 1.00% of the net asset value of the purchase. No sales charge at
time of purchase and no CDSC will be assessed on purchases of Class A Shares of
a Money Fund, 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. Certain investors who purchased Non-
Money Fund Class A Shares at net asset value based on a purchase amount of $2.5
million or more before July 1, 1995 are subject to the Prior Class A CDSC. Class
A Shares purchased through a qualified 401(k) or 403(b) plan may, in certain
circumstances, be subject to a CDSC of 1.0% 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 NON-MONEY FUNDS
OTHER THAN THE SHORT TERM GLOBAL GOVERNMENT FUND
AND THE SHORT TERM HIGH QUALITY BOND FUND
<TABLE>
<CAPTION>
DEALERS'
AS A % OF AS A % OF REALLOWANCE
OFFERING PRICE NET ASSET AS A % OF
AMOUNT OF TRANSACTION PER SHARE VALUE OFFERING PRICE
- ------------------------------------ -------------- --------- ---------------
<S> <C> <C> <C>
Less than $50,000 4.50% 4.71% 4.00%
$50,000 but less than $100,000 4.00% 4.17% 3.50%
$100,000 but less than $250,000 3.50% 3.63% 3.00%
$250,000 but less than $500,000 3.00% 3.09% 2.50%
$500,000 but less than $1,000,000 2.00% 2.04% 1.75%
$1,000,000 and over 0% 0% 0%+
</TABLE>

FOR CLASS A SHARES OF SHORT TERM GLOBAL GOVERNMENT FUND
AND THE SHORT TERM HIGH QUALITY BOND FUND

<TABLE>
<CAPTION>
DEALERS'
AS A % OF AS A % OF REALLOWANCE
OFFERING PRICE NET ASSET AS A % OF
AMOUNT OF TRANSACTION PER SHARE VALUE OFFERING PRICE
- ------------------------------------ -------------- --------- ---------------
<S> <C> <C> <C>
Less than $50,000 3.50% 3.63% 3.00%
$50,000 but less than $100,000 3.00% 3.09% 2.50%
$100,000 but less than $250,000 2.50% 2.56% 2.00%
$250,000 but less than $500,000 2.25% 2.30% 2.00%
$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, except as waived by the dealer of record as stated on
the preceding page, Sierra Services may pay the investment dealers of record on
purchases of Class A Shares of $1 million or more a fee of up to 1.00% of the
net asset value of such purchase.

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

-52-
<PAGE>

REDUCED SALES CHARGES AT PURCHASE.

LETTER OF INTENT. A "letter of intent" allows you to purchase Class A Shares of
Funds over a 13-month period at reduced sales loads based on the total amount
that you state in the letter. This letter is non-binding on the shareholder.
Class A Share redemptions during the period may count against the total. During
the period, shareholder services will hold in escrow shares equal in value to 5%
of the amount purchased for payment of a higher sales load if the full amount
specified in the letter is not purchased within the 13-month period. The shares
will be released upon completion of the letter.

REINVESTMENT PRIVILEGE. Upon redemption of Class A Shares, a shareholder may
reinvest any or all of the redemption proceeds in Class A Shares of a Fund
without any sales charge provided the reinvestment is within 180 days. The
shareholder must notify the Authorized Dealer or 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 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 (Shareholder
Services must be notified at the time of purchase that the purchase being made
qualifies for a purchase at NAV); (4) purchases by employees of any of the
Funds' Sub-Advisors; and (5) purchases by accounts as to which an Authorized
Dealer or a bank affiliated with an Authorized Dealer charges an account
management fee, provided that the Authorized Dealer or bank has an agreement
with the Distributor.

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

-53-
<PAGE>

APPLICATION OF CLASS A SHARES CDSCS. The Class A CDSC of 1.0% or 0.5% 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, including Class A Shares of a Money Fund acquired, through an exchange
for Class A Shares of a Non-Money Fund purchased at NAV without a sales charge
at time of purchase due to purchases of $1 million or more. The Class A CDSC
will not be imposed on Class A Shares purchased by certain investors that have
made arrangements with Sierra Trust Funds and whose dealer of record waived the
fee in excess of 0.25% as previously described. Class A Shares purchased before
July 1, 1995 that were purchased at NAV without a sales charge at time of
purchase because the amount of the purchase was $2.5 million or more may be
subject to the Prior Class A CDSC, a 1.0% CDSC on redemptions made within one
year of purchase. 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 Sierra Trust Funds 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 plan
qualified under Section 401(k) of the Code ("401(k) Plan") or through a plan
qualified under Section 403(b) of the Code ("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 Money Fund that were acquired through
an exchange for Non-Money Fund Class A Shares that were purchased at NAV through
one of such plans, a CDSC of 1% may be imposed on the amount that was invested
through the plan in such Class A Shares and that is redeemed (i) if, within the
first two years after the plan's initial investment in the Funds, the named
fiduciary of the plan withdraws the plan from investing in the Funds in a manner
that causes all shares held by the plan's participants to be redeemed; or (ii)
by a plan participant within two years of the plan participant's purchase of
such Class A Shares. This CDSC will be waived on redemptions in connection with
certain involuntary distributions, including distributions arising out of the
death or disability of a shareholder (including one who owns the shares as joint
tenant). See "HOW TO BUY AND REDEEM SHARES" in the SAI.

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

DEFERRED SALES CHARGE ALTERNATIVE: CLASS B SHARES. If you choose the deferred
sales charge alternative, you will 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 Short Term High Quality Bond and Short Term Global Government
Funds (the "Short Term Funds") that are redeemed within four years of purchase,
and Class B Shares of the remaining Funds (the "Long Term Funds") that are
redeemed within six years of purchase, however, will be subject to a CDSC as
described on the following page. CDSC payments and distribution fees on Class B
Shares may be used to fund commissions payable to Authorized Dealers.

No charge will be imposed with respect to shares having a value equal to any net
increase in the value of shares purchased during the preceding four or 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:

-54-
<PAGE>

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

</TABLE>

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

HOW TO SELL SHARES

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
Shareholder Services, until such time as regulations may require the Funds to
redeem proceeds within five days. However, if a shareholder is redeeming shares
recently purchased with a check, the redemption proceeds will not be paid to the
shareholder until the check has cleared. The check may take up to 15 days or
more to clear for deposit of the shareholder's funds into the Fund's account,
and the shareholder may not receive the redemption proceeds until after such
time period. The failure of a shareholder who purchased shares by wire to
submit an application form in a timely fashion may cause delays in processing
redemption requests.

If you wish to keep your Class A or Class B Shares account open, leave at least
$250 worth of shares in your account, unless you are a participant in the Sierra
Automatic Investment Plan.

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

-55-
<PAGE>

<TABLE>
<CAPTION>
WAYS TO SELL SHARES OF YOUR SIERRA TRUST FUND
Account Type Special Requirements
<S> <C> <C>

BY CHECKWRITING All Money Fund Class A Shares . Before redeeming Class A Shares
account types through checkwriting, you must
complete the signature card. Call 800-
869-2019 to request one. Class B
Shares may not be redeemed through
checkwriting. Minimum $250 or more
and $10 fee for returned check.*
------------------------------------------------------------------------------------------------------------

BY PHONE All account types, except . You may exchange to the same class
800-869-2019 retirement of other funds of the Trust if both
accounts are registered with the same
name(s), address, and taxpayer ID
number. You may also redeem
amounts by telephone. Checks will be
mailed to the address of record exactly
as account is registered.
- ------------------------------------------------------------------------------------------------------------

BY MAIL Individual, Joint Accounts, . The letter of instruction must be
Sole Proprietorships, UGMA, signed by all persons required to sign
UTMA** 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
PLAN $10,000 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 800-869-2019.

. Your wire redemption request must be
received by Sierra Trust Funds before
11:00 a.m., Eastern Time/8:00 a.m.,
Pacific Time, for money to be wired on
the next Business Day. A $5.00 fee
may be charged for each wire transfer.
Minimum amount is $1,000.
- ------------------------------------------------------------------------------------------------------------
</TABLE>
* Upon 30 days' prior written notice to shareholders, the privilege may be
modified or terminated.
** Corporations, trusts, and retirement plans may require additional paperwork
before shares may be redeemed. Please call 1-800-869-2019 to verify you have
the correct paperwork and to avoid delays.

-56-
<PAGE>

. BY TELEPHONE

TO SET UP THE TELEPHONE WIRE REDEMPTION PROCEDURE, indicate your acceptance of
this procedure on the application form and designate a bank and bank account
number to receive the proceeds of withdrawals. To use this procedure after an
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 Shareholder Services with a signature guarantee (for more information
regarding signature guarantees, see the following). For joint accounts, all
owners must sign and have their signatures guaranteed.

. THROUGH SHAREHOLDER SERVICES OR AUTHORIZED DEALERS

You may also sell your shares to the Fund through your Authorized Dealer and in
that way be certain, providing the order is timely, of receiving the NAV
established at the end of the day on which your Authorized Dealer is given the
redemption order. The Fund makes no charge for this transaction but the 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 Fund account
(record address), or
. The check is not being made out to the Fund account owner.

You should be able to obtain a signature guarantee from a bank which 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

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

CLASS B SHARES. Class B Shares of a Fund may be exchanged for Class B Shares of
any other Fund (including the Money Funds) without having to pay any CDSC at the
time of the exchange. If you exchange into Class B Shares of another Fund and
subsequently redeem such shares, the period of time during which you held your

-57-
<PAGE>

investment in Class B Shares of the previous Fund will be included in the period
during which that investment is deemed to be invested in the Trust for purposes
of calculating the CDSC. If the initial Class B Shares purchased by the
shareholder were not subject to the Class B CDSC, then no Class B CDSC will be
imposed on any subsequent exchanges or redemptions involving those shares. In
the event of redemptions of Class B Shares after exchanges, the amount you
initially invested (the "Investment Amount") will be subject to the CDSC
schedule and rate of the Fund in which the Investment Amount was initially
invested.

Class B Shares that are subject to the longer six-year CDSC schedule and the
higher CDSC rate applicable to the Class B Shares of the Long Term Funds may
also be exchanged for Class S Shares of a SAM Account fund if the investor (1)
has a SAM Account prior to making the exchange, or (2) opens a SAM Account prior
to making the exchange and invests at least the minimum for such SAM Account,
through any combination of such an exchange and initial purchase of Class S
Shares. ADDITIONAL INFORMATION REGARDING CLASS S SHARES AND SAM ACCOUNTS IS
AVAILABLE IN A SEPARATE PROSPECTUS WHICH YOU MAY OBTAIN WITHOUT CHARGE BY
CALLING 800-869-2019 TOLL-FREE.

KEY ASPECTS OF TELEPHONE TRANSACTIONS. During periods of significant economic
or market changes, telephone transactions may be difficult to implement.
Neither the Trust nor its Transfer Agent will be responsible for any loss,
liability, cost or expense for acting upon wire instructions or upon telephone
instructions that it reasonably believes are genuine. The Trust and its
Transfer Agent will each employ procedures to confirm that telephone
instructions are genuine. Such procedures may include recording telephone
calls. You should verify the accuracy of telephone transactions immediately
upon receipt of your confirmation statement. If an investor is unable to
contact Shareholder Services by telephone, an investor may deliver the
transaction request to Shareholder Services at P.O. Box 9702, Providence, Rhode
Island 02940-9702. Upon 30 days' prior written notice to shareholders, the
telephone transaction privileges may be modified or terminated.

DIVIDENDS, CAPITAL GAINS AND TAXES

The amount of dividends of net investment income (i.e., all income other than
long- and short-term capital gains) and distributions of net realized long- and
short-term capital gains payable to shareholders will be determined separately
for each Fund. Dividends from the net investment income of the Money Funds will
be declared daily and paid monthly. Dividends from the net investment income of
the Bond Funds will be declared daily and paid monthly. Dividends from the net
investment income of the Growth and Income Fund will be declared and paid
quarterly. Dividends from the net investment income of the Growth Fund will be
declared and paid semi-annually. Dividends from the net investment income of
the Emerging Growth and International Growth Funds will be declared and paid
annually. Distributions of any net long-term capital gains earned by a Fund
will be made annually. Distributions of any net short-term capital gains earned
by a Fund will be distributed no less frequently than annually at the discretion
of the Board of Trustees.

DISTRIBUTION OPTIONS. When you open an account, specify on your Application
Form how you want to receive your distributions. The election may be made or
changed by writing to Shareholder Services or by calling 800-869-2019. Each
Fund offers three options:

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

-58-
<PAGE>

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 Trust
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 account.

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

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

TAXES

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. Distributions of net capital
gain (the excess of net long-term capital gain over net short-term capital loss)
are taxed to shareholders as long-term capital gain regardless of how long you
have held your shares.

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

-59-
<PAGE>

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 or Florida intangible
personal property taxes and the dollar amount, if any, subject to such taxes.
Whenever you sell shares of the Fund, the Trust will send you a confirmation
statement showing how many shares you sold and at what price. You also will
receive a consolidated transaction statement every January. However, it is up
to you or your tax preparer to determine whether this sale resulted in a capital
gain and, if so, the amount of tax to be paid. You should retain your regular
account statements; the information they contain will be essential in
calculating the amount of your capital gains.

ADDITIONAL CONSIDERATIONS FOR SHAREHOLDERS OF THE MUNICIPAL FUNDS AND THE
CALIFORNIA MONEY FUND. Dividends paid by any of the Municipal Funds or the
California Money Fund that are derived from interest earned on qualifying tax-
exempt obligations will be "exempt-interest" dividends, which shareholders may
exclude from their gross incomes for federal income tax purposes, if at the
close of each quarter of that Fund's taxable year, at least 50 percent of the
Fund's total assets consist of obligations the interest on which is excludable
from gross income for federal income tax purposes. To the extent that any of
these Funds invests in AMT-Subject Bonds, any exempt-interest dividends derived
from interest on such AMT-Subject Bonds are a specific preference item for
purposes of the federal individual and corporate alternative minimum taxes. In
any event, all exempt-interest dividends will be a component of adjusted current
earnings for purposes of computing the federal corporate alternative minimum tax
and the federal corporate environmental tax.

Interest on indebtedness incurred or continued by shareholders to purchase or
carry shares of the Municipal Funds and the California Money Fund is not
deductible for federal income tax purposes. The Municipal Funds and the
California Money Fund may not be an appropriate investment for persons
(including corporations and other business entities) who are not currently
subject to federal income tax (such as certain qualified retirement accounts) or
who are substantial users (or who are related to substantial users) of
facilities financed by "private activity bonds" or certain industrial
development bonds. "Substantial user" is defined generally as including a "non-
exempt person" who regularly uses in a trade or business a part of a facility
financed from the proceeds of such bonds. Entities or persons who are
"substantial users" (or persons related to "substantial users") should consult
their tax advisors before purchasing shares of the Municipal Funds or the
California Money Fund.

-60-
<PAGE>

separate taxable entity for California tax purposes, and is therefore subject to
California franchise or corporate income tax on its net income. However, each
of the California Funds intends to qualify as a regulated investment company
under the Code, and if it does so qualify, will be entitled, for California tax
purposes, to a deduction for dividends paid to shareholders. As a regulated
investment company, a California Fund will pay California franchise or corporate
income tax only on any undistributed income, net of allocable expenses.

If, at the close of each quarter of its taxable year, at least 50% of the value
of the total assets of a California Fund consists of obligations the interest on
which would be exempt from California personal income tax if the obligations
were held by an individual ("California Tax Exempt Obligations"), and if the
California Fund continues to qualify as a regulated investment company for
federal income tax purposes, then the California Fund will be qualified to pay
dividends, subject to certain limitations, to its shareholders that are exempt
from California State personal income tax, but not from California State
franchise tax or California State corporate income tax ("California exempt-
interest dividends"). However, the total amount of California exempt-interest
dividends paid by the California Money Fund to all of its non-corporate
shareholders with respect to any taxable year cannot exceed the amount of
interest received by the Fund during such year on California Tax Exempt
Obligations less any expenses and expenditures (including any dividends paid to
corporate shareholders) deemed to have been paid from such interest. If the
aggregate dividends exceed the amount that may be treated as California exempt-
interest dividends, only that percentage of each dividend distribution equal to
the ratio of aggregate California exempt-interest dividends to aggregate
dividends will be treated as a California exempt-interest dividend. Dividend
distributions that do not qualify for treatment as California exempt-interest
dividends (including those dividend distributions to shareholders taxable as
long-term capital gains for federal income tax purposes) will be taxable to
shareholders at ordinary income tax rates for California personal income tax
purposes to the extent of the California Fund's earnings and profits.

SHAREHOLDER AND ACCOUNT POLICIES

TRANSACTION DETAILS

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

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

EACH FUND RESERVES THE RIGHT TO SUSPEND THE OFFERING OF CLASS A OR CLASS B
SHARES for a period of time. Each Fund also reserves the right to reject any
specific purchase order, including certain purchases by

-61-
<PAGE>

exchange. Purchase orders may be refused if, in the opinion of Shareholder
Services, they are of a size that would disrupt management of a Fund.

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 FUNDS IN DETAIL

ORGANIZATION

THE TRUST IS GOVERNED BY A BOARD OF TRUSTEES, which is responsible for
protecting the interests of shareholders. The trustees are experienced business
persons who meet throughout the year to oversee the Trust's activities, review
contractual arrangements with companies that provide services to the Funds, and
review performance. The majority of trustees are not affiliated with Sierra
Services, Sierra Advisors or Sierra Administration other than as trustees of the
Trust. The Trust was organized on February 22, 1989 under the laws of the
Commonwealth of Massachusetts as a "Massachusetts business trust."

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

SIERRA ADVISORS, ITS AFFILIATES AND SERVICE PROVIDERS

ADVISOR

Sierra Advisors, located at 9301 Corbin Avenue, Northridge, California 91324, is
the investment advisor of the Funds. Responsibilities of Sierra Advisors
include formulating the 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 Fund's
investment performance. In connection with these activities, Sierra Advisors
may initiate action to change a Sub-Advisor if it deems such action to be in the
best interests of a Fund and its shareholders.

SUB-ADVISORS

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

ALLIANCE is located at 1345 Avenue of the Americas, New York, NY 10105.
Alliance is a Delaware limited partnership registered as an investment adviser
under the Investment Advisers Act of 1940, as amended.

Alliance Capital Management Corporation, an indirect wholly-owned subsidiary of
The Equitable Life

-62-
<PAGE>

Assurance Society of the United States, is the general partner of Alliance. As
of June 30, 1995, total assets under management were over $135 billion.

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, 1995, BlackRock had aggregate assets under
management or supervision of more than $32 billion.

J.P. MORGAN is located at 522 Fifth Avenue, New York, New York 10036. J.P.
Morgan and Morgan Guaranty Trust Company of New York are wholly owned
subsidiaries 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 June 30, 1995, J.P. Morgan and its affiliates
had investment management authority with respect to approximately $168 billion
of assets.

-63-
<PAGE>

ADMINISTRATOR, TRANSFER AGENT AND CUSTODIAN

Sierra Administration provides shareholder service and other administrative
services. Sierra Administration is under common control with the Advisor and
Sierra Services. Sierra Administration is located at 9301 Corbin Avenue,
Northridge, California 91324. Pursuant to an Administration Agreement, Sierra
Administration is responsible for all administrative functions with respect to
the Trust, although it delegates certain of its responsibilities to sub-
administrators. Sierra Administration also serves as Transfer Agent. Sierra
Administration is entitled to a monthly fee at an annual rate of 0.35% of each
Non-Money Fund's average daily net assets and at an annual rate of 0.30% of each
Money Fund's average daily net assets. Sierra Administration pays The
Shareholder Services Group, Inc. ("TSSG"), a subsidiary of First Data Corp., for
its services as sub-administrator and sub-transfer agent. Sierra Administration
pays Boston Safe Deposit and Trust Co. ("Boston Safe"), One Boston Place,
Boston, MA 02108, for its services as custodian. The Trust pays certain sub-
transfer agent's and sub-administrator's out-of-pocket expenses and pays Boston
Safe certain custodial transaction charges.

DISTRIBUTOR

Each of the Funds has three distribution plans, pursuant to Rule 12b-1 under the
1940 Act, applicable to each class of Shares of the Trust (each, a "Rule 12b-1
Plan"). Each Fund intends to operate the Rule 12b-1 Plans in accordance with
its terms and the NASD Rules concerning sales charges. Under the applicable
Rule 12b-1 Plans, Sierra Services is paid an annual fee as compensation in
connection with the offering and sale of Class A and Class B Shares of the
Funds. The annual fees to be paid to Sierra Services under Rule 12b-1 Plans are
calculated with respect to Class A Shares at an annual rate of up to .25% of the
average daily net assets of the Class A Shares of the Fund and with respect to
Class B Shares at an annual rate of up to .75% of the average daily net assets
of the Class B Shares of the Fund. These fees may be used to cover the expenses
of Sierra Services primarily intended to result in the sale of Class A and Class
B Shares of the Funds, including payments to Sierra Services' representatives or
others for selling shares. Sierra Services may retain any amount of its fee
that is not so expended. Class B Shares are also subject to a service fee at an
annual fee of .25% of the average daily net assets of the Class B Shares of the
Fund.

PORTFOLIO TRANSACTIONS AND TURNOVER. All orders for the purchase or sale of
securities on behalf of each Fund are placed by the Fund's Sub-Advisor with
broker-dealers that it selects. Each Fund may, at the discretion of its Sub-
Advisor, utilize Authorized Dealers or brokers affiliated with the Advisor or
Sub-Advisor in connection with a purchase or sale of securities in accordance
with rules adopted or exemptive orders issued by the SEC when the Fund's Sub-
Advisor believes that such broker's charge for the transaction does not exceed
usual and customary levels.

-64-
<PAGE>

investment strategies. Also, the Short Term High Quality Bond Fund's annual
portfolio turnover rate is expected to be as high as 200%. The Funds will not
consider portfolio turnover rate a limiting factor in making investment
decisions consistent with their investment objectives and policies.

BREAKDOWN OF FUND EXPENSES

MANAGEMENT FEE

-65-
<PAGE>

<TABLE>
<CAPTION>
====================================================================================================================================
After After After
After After After After After 200; 300; 400;
Amount of First 50; 75; 100; 125; 150; next next next Over
Assets ($ Mil.) 50 next 25 next 25 next 25 next 25 next 50 100 100 100 500
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Each Money
Fund* .50% .50% .50% .50% .50% .50% .50% .50% .50% .40%
- ------------------------------------------------------------------------------------------------------------------------------------
Short Term High
Quality Bond
Fund .50% .50% .50% .50% .50% .50% .45% .45% .45% .40%
- ------------------------------------------------------------------------------------------------------------------------------------
Short Term
Global
Government
Fund .65% .65% .65% .65% .65% .65% .65% .65% .65% .55%
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. Government
Fund* .60% .60% .60% .60% .60% .60% .60% .60% .60% .50%
- ------------------------------------------------------------------------------------------------------------------------------------
Corporate
Income Fund .65% .65% .65% .65% .65% .65% .65% .65% .65% .50%
- ------------------------------------------------------------------------------------------------------------------------------------
California
Municipal Fund* .65% .65% .65% .65% .65% .65% .65% .65% .65% .50%
- ------------------------------------------------------------------------------------------------------------------------------------
Florida Insured
Municipal Fund* .60% .60% .60% .60% .60% .60% .60% .60% .60% .45%
- ------------------------------------------------------------------------------------------------------------------------------------
California Insured
Intermediate
Municipal Fund* .65% .65% .65% .65% .65% .65% .65% .65% .65% .50%
- ------------------------------------------------------------------------------------------------------------------------------------
National
Municipal Fund* .60% .60% .60% .60% .60% .60% .60% .60% .60% .45%
- ------------------------------------------------------------------------------------------------------------------------------------
Growth and
Income Fund .80% .80% .80% .75% .75% .75% .70% .70% .65% .575%
- ------------------------------------------------------------------------------------------------------------------------------------
Growth Fund .95% .95% .95% .90% .90% .90% .875% .875% .875% .875%
- ------------------------------------------------------------------------------------------------------------------------------------
Emerging Growth
Fund .90% .90% .90% .85% .85% .85% .85% .85% .85% .75%
- ------------------------------------------------------------------------------------------------------------------------------------
International
Growth Fund .95% .85% .85% .85% .65% .65% .65% .65% .65% .65%
====================================================================================================================================
</TABLE>

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<PAGE>

The Advisor retains only the net amount of the foregoing management fees after
the advisory fees paid to the Sub-Advisors described below, are deducted. Out
of the total management fee received by the Advisor for each Fund, the Advisor
would pay to the Sub-Advisor, absent fee waivers by the Sub-Advisor, the
following percentages of the average net assets of each Fund:
<TABLE>
<CAPTION>
Amount of Assets First After 50; After 75; After 100; After 125; After 150; After 200; After 300; After 400; Over
($ Mil.) 50 next 25 next 25 next 25 next 25 next 50 next 100 next 100 next 100 500
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>

Each Money Fund .15% .15% .15% .15% .15% .15% .15% .15% .15% .15%

Short Term High Quality
Bond Fund .15% .15% .15% .15% .15% .15% .10% .10% .10% .10%

Short Term Global
Government Fund(1) .28% .28% .28% .28% .28% .28% .10% .10% .10% .10%

U.S. Government Fund (2) (2) (2) (2) (2) (2) (2) (2) (2) (2)

Corporate Income Fund .30% .30% .30% .30% .30% .30% .30% .30% .30% .25%

California Municipal
Fund(3) .20% .20% .20% .20% .20% .15% .15% .15% .15% .15%

Florida Insured
Municipal Fund .20% .20% .125% .125% .125% .125% .125% .125% .125% .125%

California Insured
Intermediate Municipal
Fund .20% .20% .125% .125% .125% .125% .125% .125% .125% .125%

National Municipal
Fund(3) .20% .20% .20% .20% .20% .15% .15% .15% .15% .15%

Growth and Income Fund .45% .45% .45% .40% .40% .40% .35% .35% .30% .30%

Growth Fund .55% .55% .55% .50% .50% .50% .50% .50% .50% .50%

Emerging Growth Fund .55% .55% .55% .50% .50% .50% .50% .50% .50% .50%

International Growth
Fund .60% .50% .50% .50% .40% .40% .40% .40% .40% .40%
</TABLE>
(1) Sierra Advisors pay the Sub-Advisor of the Short Term Global Government Fund
a minimum annual fee of $137,500.
(2) BlackRock is paid fees monthly at the following annual rate under the
Current Sub-Advisory Agreement for the Fund: (i) .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) .15%
of the Fund's 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)
.10% of the Fund's average daily net assets if the Government Funds'
Combined Assets are more than $1,000,000,000.
(3) Pursuant to the investment sub-advisory agreements with respect to each of
the California Municipal and National Municipal Funds, when the combined
average daily net assets of the California Municipal and National Municipal
Funds (the "Combined Assets") exceed

-67-
<PAGE>

$750 million, the Sub-Advisor will be paid a fee with respect to each Fund in
proportion to each Fund's average net assets at the following annual rate:
.15% of the Combined Assets up to $1 billion; plus .125% of the Combined
Assets over $1 billion.

Advisory fees paid by the International Growth, Growth and Income, Growth and
Emerging Growth Funds are higher than those paid by most other investment
companies; however, the Board of Trustees believes that the fees are competitive
with advisory fees paid by investment companies with similar investment
objectives and policies.

OTHER EXPENSES

While the management fee is a significant component of each Fund's annual
operating costs, each Fund has other expenses as well. In addition to the
management fee and other fees described previously, each 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. Most Fund expenses are allocated
proportionately among all of the outstanding shares of the Fund. However, the
Rule 12b-1 Plans' fees and service fees for the Class B Shares are class
expenses that are charged proportionately only to the outstanding shares of that
class.

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

-68-
<PAGE>
<TABLE>
<CAPTION>
- -------------------------
S I E R R A TRUST FUNDS P.O. Box 9702 (800)869-2019
A Family of Mutual Funds Providence, RI 02940-9702
- -------------------------
===================================================================================================================================
<S> <C>
1. YOUR ACCOUNT REGISTRATION Check one box for the account you wish to open and complete information.
[ ] 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) 869-2019 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( )
--------------------------------------------------- ----------- ---------- -----------------------
====================================================================================================================================
2. YOUR INVESTMENT SELECTION (Minimum initial $250; Minimum subsequent $100)
Fund Investment Amount Fund Investment Amount
- --------------------------------------------------------------- ----------------------------------------------------------------
U.S. Government Money Fund Florida Insured Municipal Fund
Class A Shares $_________________ Class A Shares $_________________
California Money Fund Class B Shares $_________________
Class A Shares $_________________ National Municipal Fund
Global Money Fund Class A Shares $_________________
Class A Shares $_________________ Class B Shares $_________________
Short Term High Quality Bond Fund Growth and Income Fund
Class A Shares $_________________ Class A Shares $_________________
Class B Shares $_________________ Class B Shares $_________________
Short Term Global Government Fund Growth Fund
Class A Shares $_________________ Class A Shares $_________________
Class B Shares $_________________ Class B Shares $_________________
U.S. Government Fund International Growth Fund
Class A Shares $_________________ Class A Shares $_________________
Class B Shares $_________________ Class B Shares $_________________
Corporate Income Fund Emerging Growth Fund
Class A Shares $_________________ Class A Shares $_________________
Class B Shares $_________________ Class B Shares $_________________
California Municipal Fund
Class A Shares $_________________ Other ________________________ $_________________
Class B Shares $_________________
California Insured Intermediate Total Investment $_________________
Municipal Fund
Class A Shares $_________________
Class B Shares $_________________
====================================================================================================================================
3. YOUR PAYMENT METHOD FOR INITIAL INVESTMENT

[ ] CHECK: $_______________ Make check payable to Sierra Trust Funds.

[ ] WIRE: Call (800) 869-2019 for instructions.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------

4. YOUR BROKER/DEALER [ATTACH VOIDED CHECK HERE.]

Dealer Branch Representative's
Number _________________ Number __________________ Number _________________

Representative's
Firm Name _____________________________ 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 TRUST FUND 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 ________

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 Trust Funds mutual fund 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. CHECKWRITING PRIVILEGES Available for Class A Shares of the money market
funds only; minimum of $250 per check.

If you wish to redeem monies by check, complete the Signature Card (see
following page).

D. SIERRA AUTOMATIC INVESTMENT PLAN (OPTIONAL).

I authorize the Fund's Agent to withdraw funds from the bank account provided
below in the amount of $ _________ (minimum $25), 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 Fund account.

Name of Bank
Bank _____________________________________________ Account No. _______________
(the account must have check or draft writing privileges)

Address ________________________________________________________________________

City _______________________________________________ State ____ Zip ____________

E. 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 funds (excluding all Sierra Trust Funds Money Market Funds) an aggregate
amount at least equal to the amount indicated below:

[ ] $50,000 [ ] $100,000 [ ] $250,000 [ ] $500,000 [ ] $1,000,000

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

________________________________________________________ ______________________
Signature(s) Date

APPLICATION CONTINUED ON THE NEXT PAGE
<PAGE>

F. RIGHT OF ACCUMULATION (ROA):

In order for a cumulative quantity discount (as described in the Fund
prospectus) to be made available, the shareholder or his or her securities
dealer must notify Sierra Fund Administration Corporation (800-869-2019) or the
Fund'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 Sierra Trust Funds which may entitle this purchase to
have a reduced sales charge under the provisions in the Fund 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 this Fund nor Sierra Investment
Services Corporation is a bank; and Fund 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 Fund 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 Fund,
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.

______________________________________ X_____________________________________
Registered Representative's SIGNATURE
Name and Number

Date _________________________________ X_____________________________________
SIGNATURE

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

----------- Please check the Fund(s) for which you wish to
S I E R R A have Checkwriting Privileges:
TRUST FUNDS [ ] U.S. GOVERNMENT MONEY FUND
----------- [ ] CALIFORNIA MONEY FUND
A Family of Mutual Funds [ ] GLOBAL MONEY FUND

PLEASE PRINT

Last Name _____________________ First Name _________________ Mid. Init. ________

SIGNATURE CARD
Boston Safe Deposit X_______________________________________________
and Trust Co. SIGNATURE

_______________________________
Account Number

Last Name _____________________ First Name _________________ Mid. Init. ________

All Registered Owners must X_______________________________________________
sign this Signature Card. SIGNATURE

[ ] Check here if only one signature If neither box is checked,
is required on checks. all checks will require both
[ ] Check here if both signatures are signatures.
required on checks.

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

<PAGE>

The payment of redemption proceeds is authorized by the signature(s) appearing
on the reverse side. Each signatory guarantees the genuineness of the other
signatures.

Boston Safe Deposit and Trust Co. ("Boston Safe") is hereby appointed agent by
the person(s) signing this card (the "Shareholder(s)") and, as agent is
authorized and directed, upon presentment of checks to Boston Safe to, in the
case of investments in the U.S. Government, California Money and Global Money
Funds (the "Funds"), transmit such checks to the Fund or its transfer agent as
requests to redeem shares registered in the name of the Shareholders in the
amounts of such checks for deposit in this checking account; Sierra Fund
Administration Corporation is hereby further authorized to accept and execute
instructions relating to such withdrawals.

This checking arrangement is subject to the applicable terms and restrictions,
including charges, set forth in the current prospectus for each Sierra Trust
Funds mutual fund to which the Shareholder has arranged to redeem shares or
withdraw funds by checkwriting. Boston Safe is further authorized to effect
withdrawals or redemptions to defray Boston Safe's charges relating to this
checking arrangement. The Shareholder agrees that he/she shall be subject to the
rules and regulations of Boston Safe pertaining to this checking arrangement as
amended from time to time; that Boston Safe has the right not to honor checks
which do not meet Boston Safe's normal standards for checks presented to it,
that Boston Safe and Sierra Trust Funds have the right to change, modify or
terminate this checkwriting service at any time, and that Boston Safe, with
respect to these checkwriting services shall be liable to the Shareholder and/or
the Funds only for its own willful misfeasance, bad faith or gross negligence.

Please sign and return this Card (with any necessary authorizing documentation)
to:

SIERRA TRUST FUNDS
P.O. Box 9702
Providence, Rhode Island 02940-9702

<PAGE>

SUPPLEMENT DATED JANUARY 1, 1996
TO PROSPECTUS DATED OCTOBER 31, 1995
OF
SIERRA TRUST FUNDS
P.O. BOX 9702
PROVIDENCE, RHODE ISLAND 02940-9702

The prospectus dated October 31, 1995 of the Sierra Trust Funds (the
"Trust") relating to the Class A and Class S Shares of the GLOBAL MONEY, U.S.
GOVERNMENT MONEY, CALIFORNIA MONEY, SHORT TERM HIGH QUALITY BOND, SHORT TERM
GLOBAL GOVERNMENT, U.S. GOVERNMENT, CORPORATE INCOME, CALIFORNIA MUNICIPAL,
FLORIDA INSURED MUNICIPAL, CALIFORNIA INSURED INTERMEDIATE MUNICIPAL, NATIONAL
MUNICIPAL, GROWTH AND INCOME, GROWTH, EMERGING GROWTH AND INTERNATIONAL GROWTH
FUNDS of the Trust is hereby amended and supplemented effective January 1,
1996 by the following:

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 1991. Mr. Greshin assumed responsibility
for the Fund's day-to-day management and investment strategies
effective November 1995.

By deleting the second paragraph in the section "Performance Information -
Performance Comparisons" on page 46 and replacing it with the following
paragraph:

By deleting Table 1 in the section "Performance Information - Tax Equivalent
Yields" on page 47 and replacing it with the following Table 1:

TABLE 1

COMBINED
FEDERAL
AND
FEDERAL CALIFORNIA CALIFORNIA TAX-EXEMPT YIELD
SAMPLE 1995 FEDERAL MARGINAL MARGINAL MARGINAL ----------------
TAXABLE INCOME BRACKETS TAX RATE+ TAX RATE* TAX RATE** 4.50% 5.00% 5.50% 6.00% 6.50% 7.00%
----------------------------------- ---------- ---------- ---------- ----------------------------------------
SINGLE RETURN JOINT RETURN TAXABLE YIELD
----------------- ---------------- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$0-$23,350 $0-$39,000 15% 6.00% 20.10% 5.63% 6.26% 6.88% 7.51% 8.14% 8.76%
$23,350-$56,550 $39,000-$94,250 28% 9.30% 34.70% 6.89% 7.66% 8.42% 9.19% 9.95% 10.72%
$56,550-$117,950 $94,250-$143,600 31% 9.30% 37.42% 7.19% 7.99% 8.79% 9.59% 10.39% 11.19%
$117,950-$256,500 $143,600-$256,500 36% 9.30% 41.95% 7.75% 8.61% 9.47% 10.34% 11.20% 12.06%
$256,500 and up $256,500 and up 39.6% 9.30% 45.22% 8.21% 9.13% 10.04% 10.95% 11.87% 12.78%
</TABLE>
- --------
* California taxable income may differ due to differences in exemptions,
itemized deductions and other items.
** Rates do not include the phase-out of personal exemptions or itemized
deductions. Rates include the federal deduction of state taxes paid.
+ Rates do not include the phase-out of personal exemptions or itemized
deductions.

PLEASE RETAIN THIS SUPPLEMENT
FOR FUTURE REFERENCE

OSPMC/RRD(12/95-25M)

2
<PAGE>

PROSPECTUS SIERRA TRUST FUNDS
OCTOBER 31, 1995 P.O. BOX 9702
PROVIDENCE, RHODE ISLAND 02940-9702
800-869-2019

This prospectus describes the Class A and Class S Shares of the Sierra Trust
Funds (the "Trust"). The Trust consists of the fifteen separate investment
funds (each, a "Fund") named above, and the Target Maturity 2002 Fund, which is
described in a separate prospectus. The Class A and Class S 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 the Funds are right for you.

TABLE OF CONTENTS
PAGE
----
<S> <C>
Summary of Expenses & Financial Highlights.............. 5
The Funds' Investments and Risk Considerations.......... 15
Performance Information................................. 45
Your Account - How to Invest in a SAM Account........... 48
How to Sell Shares...................................... 55
Exchange Privileges and Restrictions.................... 57
Dividends, Capital Gains and Taxes...................... 58
The Funds in Detail..................................... 62
Sierra Advisors, Its Affiliates and Service Providers... 62
Breakdown of Fund Expenses.............................. 65
</TABLE>
<PAGE>

THE SIERRA TRUST FUNDS FAMILY AT A GLANCE

The Sierra Trust Funds (the "Trust") is an open-end management investment
company with a family of sixteen investment funds, each with its own investment
objectives and policies. This prospectus describes all of the investment fund,
except the Target Maturity 2002 Fund (excepting the latter fund, each, a "Fund"
and together, the "Funds"). Each Fund offers three classes of shares, Class A
Shares, Class B Shares and Class S Shares. Investors may invest in one or more
of the different classes, which have different sales charges, expenses and other
features. Class A Shares have a front-end sales charge, while purchasers of
Class S Shares pay sales charges only if they redeem their shares within 6
years. Class S Shares are sold to investors who select the Sierra Asset
Management ("SAM") service described in "Your Account - Investment in Funds
Through a SAM Account." Investors may purchase directly Class A Shares of all
of the Funds and Class S Shares of ten of the Funds (the "SAM Account Funds")
that currently are used for investment by SAM Accounts. SHARES OF THE TARGET
MATURITY 2002 FUND AND CLASS B SHARES ARE NOT OFFERED THROUGH THIS PROSPECTUS.
Please call 800-869-2019 if you would like to obtain a prospectus and further
information about the Target Maturity 2002 Fund or the Class B Shares of the
Funds. The Global Money, U.S. Government Money and California Money Funds (the
"Money Funds") are money market funds. The rest of the Funds of the Trust (the
"Non-Money Funds") are classified as either "Bond Funds" or "Equity Funds."

GOALS: Each Fund has a different investment goal. Each fund's investment
objective is a fundamental policy which may not be changed without the approval
of a majority of the Fund's outstanding voting securities. As with any mutual
fund, there is no assurance that a Fund will achieve its goal.

INVESTMENT MANAGEMENT: Sierra Investment Advisors Corporation ("Advisor" or
"Sierra Advisors") has overall responsibility for management of the Funds.
However, each Fund has an investment sub-advisor ("Sub-Advisor") who selects the
investments made by that Fund subject to oversight and direction by Sierra
Advisors. The Advisor and the Sub-Advisors are discussed in "The Funds in
Detail - Sierra Advisors, Its Affiliates and Service Providers".

RISK CONSIDERATIONS: The value of a Fund's shares will fluctuate with the value
of the underlying securities in its investment portfolio, and in the case of
debt securities, with the general level of interest rates. When interest rates
decline, the value of a portfolio invested in fixed-income securities can be
expected to rise. Conversely, when interest rates rise, the value of a
portfolio invested in fixed-income securities can be expected to decline. In
the case of foreign currency denominated securities, these trends may be offset
or amplified by fluctuations in foreign currencies. Investing in securities of
foreign issuers involves certain risks and considerations not typically
associated with investing in securities of U.S. companies. See "The Funds'
Investments and Risk Considerations - Securities and Investment Practices -
Foreign Investments." High yielding fixed-income securities, such as those in
which the Short Term Global Government Fund may invest up to 10%, and the Growth
and Emerging Growth Funds up to 35%, respectively, of total assets, are subject
to greater market fluctuations and risk of loss of income and principal than
investments in lower yielding fixed-income securities. The Funds intend to
employ from time to time certain investment techniques which are designed to
enhance income or total return or hedge against market or currency risks but
which themselves involve additional risks. These techniques include options on
securities, futures, options on futures, options on indexes, options on foreign
currencies, foreign currency exchange transactions, lending of securities and
when-issued securities and delayed-delivery transactions. Because the Short
Term Global Government, California Municipal, Florida Insured Municipal,
California Insured Intermediate Municipal and California Money Funds are non-
diversified, they are permitted greater flexibility to invest their assets in
the securities of any one issuer and therefore will be exposed to increased risk
of loss if such an investment underperforms expectations. FOR ADDITIONAL RISK
INFORMATION, SEE "THE FUNDS' INVESTMENTS AND RISK CONSIDERATIONS" AND
"SECURITIES AND INVESTMENT PRACTICES" IN THIS PROSPECTUS AND "INVESTMENT
OBJECTIVES AND POLICIES OF THE FUNDS" IN THE TRUST'S SAI.

-1-
<PAGE>

THE MONEY FUNDS

THE BOND FUNDS

-2-
<PAGE>

THE EQUITY FUNDS

GROWTH AND INCOME FUND
- ----------------------
GOAL: Long-term capital growth and current income consistent with reasonable
investment risk.
STRATEGY: Investing primarily in dividend-paying common stock of well-
established companies.
INVESTMENT MANAGEMENT: J.P. Morgan is the investment Sub-Advisor of the Fund.

-3-
<PAGE>

-4-
<PAGE>

SUMMARY OF SIERRA TRUST FUNDS EXPENSES
<TABLE>
<CAPTION>
SHORT SHORT TERM
U.S. TERM HIGH GLOBAL U.S.
GLOBAL GOVERNMENT CALIFORNIA QUALITY BOND GOVERNMENT GOVERNMENT CORPORATE
MONEY FUND MONEY FUND MONEY FUND FUND FUND FUND INCOME FUND
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION
EXPENSES

MAXIMUM SALES CHARGE IMPOSED
ON PURCHASES (AS A
PERCENTAGE OF OFFERING
PRICE)
Class A...................... None None None 3.50%(1) 3.50%(1) 4.50%(1) 4.50%(1)
Class S...................... None None None None None None None

MAXIMUM SALES CHARGE IMPOSED
ON REINVESTED DIVIDENDS (AS
A PERCENTAGE OF OFFERING
PRICE)
Class A...................... None None None None None None None
Class S...................... None None None None None None None

DEFERRED SALES CHARGE
Class A...................... None(2) None(2) None(2) None(2) None(2) None(2) None(2)
Class S...................... 5.00%(3) 5.00%(3) 5.00%(3) 5.00%(3) 5.00%(3) 5.00%(3) 5.00%(3)

REDEMPTION FEES(4)
Class A...................... None None None None None None None
Class S...................... None None None None None None None

EXCHANGE FEES(5)
Class A...................... None None None None None None None
Class S...................... None None None None None None None

ANNUAL OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE
NET ASSETS)

MANAGEMENT FEES (AFTER
VOLUNTARY WAIVERS OR
REIMBURSEMENT)(6)
Class A...................... 0.04% 0.04% 0.14% 0.04% 0.10% 0.19% 0.32%
Class S...................... 0.04% 0.04% 0.14% 0.04% 0.10% 0.19% 0.32%

12b-1 FEES(7)
Class A...................... 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25%
Class S...................... 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%

OTHER EXPENSES(8)
Class A...................... 0.36% 0.56% 0.46% 0.46% 0.50% 0.46% 0.43%
Class S...................... 0.36% 0.56% 0.46% 0.46% 0.50% 0.46% 0.43%

TOTAL FUND OPERATING
EXPENSES(9)
Class A...................... 0.65% 0.85% 0.85% 0.75% 0.85% 0.90% 1.00%
Class S...................... 1.40% 1.60% 1.60% 1.50% 1.60% 1.65% 1.75%
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The initial sales charge is reduced for purchases of $50,000 and over,
decreasing to zero for purchases of $1,000,000 and over for each Fund.

(2) Certain investors who purchased Non-Money Fund Class A Shares at net asset
value based on a purchase amount of $2.5 million or more before July 1, 1995
are subject to a 1.0% contingent deferred sales charge ("CDSC") on
redemptions within one year of purchase (the "Prior Class A CDSC"). Certain
investors who purchase Non-Money Fund Class A Shares at net asset value
based on a purchase amount of $1 million or more after June 30, 1995 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. Class A
Shares purchased through a qualified 401(k) or 403(b) plan may, in certain
circumstances, be subject to a CDSC of 1.0% if the shares are redeemed
within two years of their initial purchase. Money Fund Class A Shares
acquired through exchange from Non-Money Fund Class A Shares that were
subject to a CDSC at the time of exchange may also be subject to such CDSC.
See "INITIAL SALES CHARGE ALTERNATIVE: CLASS A SHARES" and "APPLICATION OF
CLASS A SHARES CDSCs."

(3) See "Your Account - Deferred Sales Charge Alternative: Class S Shares."

(4) 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.

(5) 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 "Your Account - Exchange Privileges
and Restrictions."

(6) Reflects voluntary waivers of management fees by the Advisor. In the absence
of such voluntary waivers, management fees would have been for each of the
following Funds: Global Money Fund-0.40%*; U.S. Government Money Fund-
0.40%*; California Money Fund-0.40%*; Short Term High Quality Bond Fund-
0.50%; Short Term Global Government Fund-0.65%; U.S. Government Fund-0.55%*;
Corporate Income Fund-0.65%; California Municipal Fund-0.55%*; Florida
Insured Municipal Fund-0.55%*; California Insured Intermediate Municipal
Fund-0.55%*; and National Municipal Fund-0.55%*. No management fee waivers
apply to the Growth and Income, Growth, Emerging Growth and International
Growth Funds. * Asterisked fees reflect the contractual agreement of the
Advisor to limit the annual management fee.

(7) Of the 12b-1 fees for the Class S Shares, 0.75% represents an asset-based
sales charge and 0.25% is a service charge. Due to the continuous nature of
the 12b-1 fee, long-term shareholders of a Fund may pay more than the
economic equivalent of the maximum front-end sales charge otherwise
permitted by the Rules of Fair Practice of the National Association of
Securities Dealers, Inc. ("NASD").

(8) After voluntary waivers or reimbursement. Reflects the voluntary agreement
of the Advisor to bear certain expenses and Administrator to waive fees to
limit total fund expenses for the Class A and Class S Shares.

-5-
<PAGE>

SUMMARY OF SIERRA TRUST FUNDS EXPENSES (Continued)

<TABLE>
<CAPTION>
FLORIDA CALIFORNIA
INSURED INSURED NATIONAL
CALIFORNIA MUNICIPAL INTERMEDIATE MUNICIPAL
MUNICIPAL FUND FUND MUNICIPAL FUND FUND
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION
EXPENSES

MAXIMUM SALES CHARGE IMPOSED
ON PURCHASES (AS A
PERCENTAGE OF OFFERING
PRICE)
Class A...................... 4.50%(1) 4.50%(1) 4.50%(1) 4.50%(1)
Class S...................... None None None None

MAXIMUM SALES CHARGE IMPOSED
ON REINVESTED DIVIDENDS (AS
A PERCENTAGE OF OFFERING
PRICE)
Class A...................... None None None None
Class S...................... None None None None

DEFERRED SALES CHARGE
Class A...................... None(2) None(2) None(2) None(2)
Class S...................... 5.00%(3) 5.00%(3) 5.00%(3) 5.00%(3)

REDEMPTION FEES(4)
Class A...................... None None None None
Class S...................... None None None None

EXCHANGE FEES(5)
Class A...................... None None None None
Class S...................... None None None None

ANNUAL OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE
NET ASSETS)

MANAGEMENT FEES (AFTER
VOLUNTARY WAIVERS OR
REIMBURSEMENT)(6)
Class A...................... 0.27% 0.04% 0.04% 0.30%
Class S...................... 0.27% 0.04% 0.04% 0.30%

12b-1 FEES(7)
Class A...................... 0.25% 0.25% 0.25% 0.25%
Class S...................... 1.00% 1.00% 1.00% 1.00%

OTHER EXPENSES(8)
Class A...................... 0.43% 0.51% 0.56% 0.45%
Class S...................... 0.43% 0.51% 0.56% 0.45%

TOTAL FUND OPERATING
EXPENSES(9)
Class A...................... 0.95% 0.80% 0.85% 1.00%
Class S...................... 1.70% 1.55% 1.60% 1.75%
- --------------------------------------------------------------------------------------------------------

<CAPTION>
GROWTH
AND EMERGING
INCOME GROWTH GROWTH INTERNATIONAL
FUND FUND FUND GROWTH FUND
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION
EXPENSES

MAXIMUM SALES CHARGE IMPOSED
ON PURCHASES (AS A
PERCENTAGE OF OFFERING
PRICE)
Class A...................... 4.50%(1) 4.50%(1) 4.50%(1) 4.50%(1)
Class S...................... None None None None

MAXIMUM SALES CHARGE IMPOSED
ON REINVESTED DIVIDENDS (AS
A PERCENTAGE OF OFFERING
PRICE)
Class A...................... None None None None
Class S...................... None None None None

DEFERRED SALES CHARGE
Class A...................... None(2) None(2) None(2) None(2)
Class S...................... 5.00%(3) 5.00%(3) 5.00%(3) 5.00%(3)

REDEMPTION FEES(4)
Class A...................... None None None None
Class S...................... None None None None

EXCHANGE FEES(5)
Class A...................... None None None None
Class S...................... None None None None

ANNUAL OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE
NET ASSETS)

MANAGEMENT FEES (AFTER
VOLUNTARY WAIVERS OR
REIMBURSEMENT)(6)
Class A...................... 0.78% 0.93% 0.88% 0.90%
Class S...................... 0.78% 0.93% 0.88% 0.90%

12b-1 FEES(7)
Class A...................... 0.25% 0.25% 0.25% 0.25%
Class S...................... 1.00% 1.00% 1.00% 1.00%

OTHER EXPENSES(8)
Class A...................... 0.55% 0.53% 0.57% 0.68%
Class S...................... 0.55% 0.53% 0.57% 0.68%

TOTAL FUND OPERATING
EXPENSES(9)
Class A...................... 1.58% 1.71% 1.70% 1.83%
Class S...................... 2.33% 2.46% 2.45% 2.58%
- -----------------------------------------------------------------------------------
</TABLE>

to continue to do so. Set forth below are total fund operating expenses
absent such fee waivers and expense reimbursements.Global Money Fund, Class
A-1.21%, Class S-1.96%, U.S. Government Money Fund, Class A-1.34%, Class S-
2.09%; California Money Fund, Class A-1.15%, Class S-1.90%; Short Term High
Quality Bond Fund, Class A-1.40%, Class S-2.15%; Short Term Global
Government Fund, Class A-1.44%, Class S-2.19%; U.S. Government Fund, Class
A-1.30%, Class S-2.05%; Corporate Income Fund, Class A-1.37%, Class S-2.12%;
California Municipal Fund, Class A-1.27%, Class S-2.02%; Florida Insured
Municipal Fund, Class A-1.43%, Class S-2.18%; California Insured
Intermediate Municipal Fund, Class A-1.44%, Class S-2.19%; and National
Municipal Fund, Class A-1.29%, Class S-2.04%.

Waivers of fees and reimbursement of expenses have the effect of increasing
yield or improving total return for the period when such waivers and
reimbursements are in effect. These amounts are not recovered by the Advisor
or Administrator in later years. These fee waivers and agreements to
reimburse expenses are voluntary and may be discontinued at any time. Each
Fund bears its own expenses and a Fund's expenses are allocated between
classes as described in the section "Breakdown of Fund Expenses."

In addition to the Class A and Class S shares described above, the Trust offers
Class B Shares for investors who invest other than through a SAM Account. CLASS
B SHARES ARE DESCRIBED IN MORE DETAIL IN A SEPARATE PROSPECTUS. Class B Shares
are not subject to a sales charge at the time of purchase but are subject to a
CDSC that is different from the Class A Shares CDSC and the Class S Shares CDSC.
For Class B Shares of the Short Term High Quality Bond and Short Term Global
Government Funds (the "Short Term Funds"), the CDSC applies if the shares are
redeemed during the first four years after purchase and the CDSC declines from
4% during the first year of investment to zero after four years. For Class B
Shares of the Funds other than the Short Term Funds (the "Long Term Funds"), the
CDSC applies if the shares are redeemed during the first six years after
purchase. The CDSC for Class B Shares of the Long Term Funds declines from 5%
during the first year of investment to zero after six years. Like Class S
Shares, Class B Shares pay ongoing distribution and service fees at an annual
rate of .75% and .25%, respectively, of average daily net assets. Although each
class of a Fund pays the same management fees and certain other expenses as the
other classes of the Fund, the performance of each of the classes of a Fund may
vary due to differences in sales charges and expenses. Prospective investors
may call 800-869-2019 toll-free to obtain a prospectus and further information
for Class B Shares.

-6-
<PAGE>

SUMMARY OF SIERRA TRUST FUNDS EXPENSES

EXAMPLE:
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of time period.

<TABLE>
<CAPTION>
SHORT SHORT TERM
U.S. TERM HIGH GLOBAL U.S.
GLOBAL GOVERNMENT CALIFORNIA QUALITY GOVERNMENT GOVERNMENT CORPORATE
MONEY FUND MONEY FUND MONEY FUND BOND FUND FUND FUND INCOME FUND
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Class A (1)..................
1 Year $ 7 $ 9 $ 9 $ 42 $ 43 $ 54 $ 55
3 Years 21 27 27 58 61 72 75
5 Years 36 47 47 75 80 93 98
10 Years 81 105 105 125 136 151 162

Class S (Assuming a
complete redemption at end
of period) (2)..............
1 Year $ 64 $ 66 $ 66 $ 55 $ 56 $ 67 $ 68
3 Years 74 80 80 67 70 82 85
5 Years 97 107 107 82 87 110 115
10 Years(3) 168 190 190 179 190 195 206

Class S (Assuming no
redemption) (4).............
1 Year $ 14 $ 16 $ 16 $ 15 $ 16 $ 17 $ 18
3 Years 44 50 50 47 50 52 55
5 Years 77 87 87 82 87 90 95
10 Years(3) 168 190 190 179 190 195 206
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Assumes deduction at the time of purchase of maximum initial sales charge
for funds other than Global Money, U.S. Government Money and California
Money Funds.
(2) Assumes deduction of maximum applicable contingent deferred sales charge.
(3) Assumes that conversion to Class A Shares does not occur.
(4) Assumes no deduction of contingent deferred sales charge.

-7-
<PAGE>

SUMMARY OF SIERRA TRUST FUNDS EXPENSES (Continued)

<TABLE>
<CAPTION>
FLORIDA CALIFORNIA
INSURED INSURED NATIONAL
CALIFORNIA MUNICIPAL INTERMEDIATE MUNICIPAL
MUNICIPAL FUND FUND MUNICIPAL FUND FUND
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A (1)..................
1 Year $54 $ 53 $ 53 $ 55
3 Years 74 69 71 75
5 Years 95 87 90 98
10 Years 156 140 145 162

Class S (Assuming a
complete redemption at end
of period) (2)..............
1 Year $67 $ 66 $ 66 $ 68
3 Years 84 79 80 85
5 Years 112 104 107 115
10 Years(3) 201 185 190 206

Class S (Assuming no
redemption) (4).............
1 Year $17 $ 16 $ 16 $ 18
3 Years 54 49 50 55
5 Years 92 84 87 95
10 Years(3) 201 185 190 206
- -------------------------------------------------------------------------------------------------

<CAPTION>
GROWTH
AND
INCOME GROWTH EMERGING INTERNATIONAL
FUND FUND GROWTH FUND GROWTH FUND
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A (1)..................
1 Year $ 60 $ 62 $ 62 $ 63
3 Years 93 96 96 100
5 Years 127 134 133 140
10 Years 224 238 237 250

Class S (Assuming a
complete redemption at end
of period) (2)..............
1 Year $ 74 $ 75 $ 75 $ 76
3 Years 103 107 106 110
5 Years 145 151 151 157
10 Years(3) 267 280 279 291

Class S (Assuming no
redemption) (4).............
1 Year $ 24 $ 25 $ 25 $ 26
3 Years 73 77 76 80
5 Years 125 131 131 137
10 Years(3) 267 280 279 291
- -------------------------------------------------------------------------------------------------
</TABLE>
-8-
<PAGE>

FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET NET REALIZED &
VALUE AT NET UNREALIZED TOTAL FROM DIVIDENDS FROM
BEGINNING INVESTMENT GAIN/(LOSS) INVESTMENT NET INVESTMENT
FUND OF PERIOD INCOME/(LOSS) ON INVESTMENTS OPERATIONS INCOME
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
GLOBAL MONEY FUND
CLASS A SHARES
Year ended 6/30/95................. $ 1.00 $0.049 $0.000(19) $0.049 $(0.049)
Year ended 6/30/94................. 1.00 0.030 0.000(19) 0.030 (0.030)
Year ended 6/30/93................. 1.00 0.031 - 0.031 (0.031)
Year ended 6/30/92................. 1.00 0.048 - 0.048 (0.048)
Year ended 6/30/91................. 1.00 0.073 - 0.073 (0.073)
Period ended 6/30/90 (1)........... 1.00 0.074 - 0.074 (0.074)
CLASS S SHARES
Year ended 6/30/95................. 1.00 0.042 0.000(19) 0.042 (0.042)

U.S. GOVERNMENT MONEY FUND
CLASS A SHARES
Year ended 6/30/95................. 1.00 0.046 - 0.046 (0.046)
Year ended 6/30/94................. 1.00 0.027 - 0.027 (0.027)
Year ended 6/30/93................. 1.00 0.027 - 0.027 (0.027)
Year ended 6/30/92................. 1.00 0.042 0.002 0.044 (0.042)
Year ended 6/30/91................. 1.00 0.065 - 0.065 (0.065)
Period ended 6/30/90 (2)........... 1.00 0.073 - 0.073 (0.073)
CLASS S SHARES
Year ended 6/30/95................. 1.00 0.038 - 0.038 (0.038)

CALIFORNIA MONEY FUND
CLASS A SHARES
Year ended 6/30/95................. 1.00 0.028 - 0.028 (0.028)
Year ended 6/30/94................. 1.00 0.018 - 0.018 (0.018)
Year ended 6/30/93................. 1.00 0.021 - 0.021 (0.021)
Year ended 6/30/92................. 1.00 0.033 - 0.033 (0.033)
Year ended 6/30/91................. 1.00 0.044 - 0.044 (0.044)
Period ended 6/30/90 (2)........... 1.00 0.046 - 0.046 (0.046)
CLASS S SHARES
Year ended 6/30/95................. 1.00 0.020 - 0.020 (0.020)

SHORT TERM HIGH QUALITY BOND FUND
CLASS A SHARES
Year ended 6/30/95................. 2.39 0.08 0.02 0.10 (0.08)
Period ended 6/30/94 (3)........... 2.50 0.09 (0.11) (0.02) (0.09)
CLASS S SHARES
Year ended 6/30/95................. 2.39 0.06 0.02 0.08 (0.06)

SHORT TERM GLOBAL GOVERNMENT FUND
CLASS A SHARES
Year ended 6/30/95................. 2.34 0.17 (0.12) 0.05 (0.02)
Year ended 6/30/94................. 2.48 0.17 (0.14) 0.03 (0.13)
Year ended 6/30/93................. 2.56 0.19 (0.04) 0.15 (0.20)
Period ended 6/30/92 (4)........... 2.50 0.07 0.07 0.14 (0.08)
CLASS S SHARES
Year ended 6/30/95................. 2.34 0.15 (0.12) 0.03 (0.00)(14)

U. S. GOVERNMENT FUND
CLASS A SHARES
Year ended 6/30/95................. 9.45 0.70 0.22 0.92 (0.70)
Year ended 6/30/94................. 10.65 0.75 (1.21) (0.46) (0.64)
Year ended 6/30/93................. 10.52 0.74 0.16 0.90 (0.74)
Year ended 6/30/92................. 10.04 0.84 0.49 1.33 (0.84)
Year ended 6/30/91................. 9.93 0.84 0.13 0.97 (0.85)
Period ended 6/30/90 (5)........... 10.00 0.76 (0.09) 0.67 (0.74)
CLASS S SHARES
Year ended 6/30/95................. 9.45 0.63 0.22 0.85 (0.63)

CORPORATE INCOME FUND
CLASS A SHARES
Year ended 6/30/95................. 9.87 0.68 0.78 1.46 (0.68)
Year ended 6/30/94................. 11.33 0.80 (1.35) (0.55) (0.78)
Year ended 6/30/93................. 10.52 0.84 0.84 1.68 (0.84)
Year ended 6/30/92................. 9.87 0.91 0.64 1.55 (0.90)
Period ended 6/30/91 (6)........... 10.00 0.81 (0.13) 0.68 (0.81)
CLASS S SHARES
Year ended 6/30/95................. 9.87 0.61 0.78 1.39 (0.61)
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>

-9-
<PAGE>

SAI. Further information about the performance of the Funds is contained in the
Annual Report. The SAI and Annual Report can be obtained at no charge by
calling Shareholder Services at 800-869-2019.

<TABLE>
<CAPTION>
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- ---------------------------------------------------------------------------------------------------------
DISTRIBUTIONS DISTRIBUTIONS
IN EXCESS DISTRIBUTIONS IN EXCESS
OF NET FROM OF NET
INVESTMENT NET REALIZED REALIZED
FUND INCOME GAINS GAINS
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
GLOBAL MONEY FUND
CLASS A SHARES
Year ended 6/30/95................. $- $(0.000)(19) $-
Year ended 6/30/94................. - (0.000)(19) -
Year ended 6/30/93................. - - -
Year ended 6/30/92................. - - -
Year ended 6/30/91................. - - -
Period ended 6/30/90 (1)........... - - -
CLASS S SHARES
Year ended 6/30/95................. - (0.000)(19) -

U.S. GOVERNMENT MONEY FUND
CLASS A SHARES
Year ended 6/30/95................. - - -
Year ended 6/30/94................. - - -
Year ended 6/30/93................. - - -
Year ended 6/30/92................. - (0.002) -
Year ended 6/30/91................. - - -
Period ended 6/30/90 (2)........... - - -
CLASS S SHARES
Year ended 6/30/95................. - - -

CALIFORNIA MONEY FUND
CLASS A SHARES
Year ended 6/30/95................. - - -
Year ended 6/30/94................. - - -
Year ended 6/30/93................. - - -
Year ended 6/30/92................. - - -
Year ended 6/30/91................. - - -
Period ended 6/30/90 (2)........... - - -
CLASS S SHARES
Year ended 6/30/95................. - - -

SHORT TERM HIGH QUALITY BOND FUND
CLASS A SHARES
Year ended 6/30/95................. (0.06) - -
Period ended 6/30/94 (3)........... - - -
CLASS S SHARES
Year ended 6/30/95................. (0.06) - -

SHORT TERM GLOBAL GOVERNMENT FUND
CLASS A SHARES
Year ended 6/30/95................. (0.00)(14) - (0.01)
Year ended 6/30/94................. (0.03) - (0.01)
Year ended 6/30/93................. - - (0.03)
Period ended 6/30/92 (4)........... - - -
CLASS S SHARES
Year ended 6/30/95................. (0.00)(14) - (0.01)

U. S. GOVERNMENT FUND
CLASS A SHARES
Year ended 6/30/95................. - - -
Year ended 6/30/94................. - - (0.10)
Year ended 6/30/93................. - - -
Year ended 6/30/92................. - - -
Year ended 6/30/91................. - - -
Period ended 6/30/90 (5)........... - - -
CLASS S SHARES
Year ended 6/30/95................. - - -

CORPORATE INCOME FUND
CLASS A SHARES
Year ended 6/30/95................. (0.09) - -
Year ended 6/30/94................. (0.01) (0.06) (0.06)
Year ended 6/30/93................. - - -
Year ended 6/30/92................. - - -
Period ended 6/30/91 (6)........... - - -
CLASS S SHARES
Year ended 6/30/95................. (0.09) - -
- ---------------------------------------------------------------------------------------------------------

<CAPTION>
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- ---------------------------------------------------------------------------------------------------------
NET ASSET
DISTRIBUTIONS VALUE AT
FROM TOTAL END TOTAL
FUND CAPITAL DISTRIBUTIONS OF PERIOD RETURN(11)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
GLOBAL MONEY FUND
CLASS A SHARES
Year ended 6/30/95................. $ - $(0.049) $ 1.00 5.06%
Year ended 6/30/94................. - (0.030) 1.00 3.04
Year ended 6/30/93................. - (0.031) 1.00 3.17
Year ended 6/30/92................. - (0.048) 1.00 4.95
Year ended 6/30/91................. - (0.073) 1.00 7.51
Period ended 6/30/90 (1)........... - (0.074) 1.00 7.64
CLASS S SHARES
Year ended 6/30/95................. - (0.042) 1.00 4.29

U.S. GOVERNMENT MONEY FUND
CLASS A SHARES
Year ended 6/30/95................. - (0.046) 1.00 4.67
Year ended 6/30/94................. - (0.027) 1.00 2.67
Year ended 6/30/93................. - (0.027) 1.00 2.70
Year ended 6/30/92................. - (0.044) 1.00 4.45
Year ended 6/30/91................. - (0.065) 1.00 6.65
Period ended 6/30/90 (2)........... - (0.073) 1.00 7.52
CLASS S SHARES
Year ended 6/30/95................. - (0.038) 1.00 3.91

CALIFORNIA MONEY FUND
CLASS A SHARES
Year ended 6/30/95................. - (0.028) 1.00 2.79
Year ended 6/30/94................. - (0.018) 1.00 1.81
Year ended 6/30/93................. - (0.021) 1.00 2.07
Year ended 6/30/92................. - (0.033) 1.00 3.35
Year ended 6/30/91................. - (0.044) 1.00 4.52
Period ended 6/30/90 (2)........... - (0.046) 1.00 4.64
CLASS S SHARES
Year ended 6/30/95................. - (0.020) 1.00 2.04

SHORT TERM HIGH QUALITY BOND FUND
CLASS A SHARES
Year ended 6/30/95................. (0.00)(14) (0.14) 2.35 4.42
Period ended 6/30/94 (3)........... - (0.09) 2.39 (0.73)
CLASS S SHARES
Year ended 6/30/95................. (0.00)(14) (0.12) 2.35 3.64

SHORT TERM GLOBAL GOVERNMENT FUND
CLASS A SHARES
Year ended 6/30/95................. (0.12) (0.15) 2.24 2.10
Year ended 6/30/94................. (0.00)(14)(16) (0.17) 2.34 1.10
Year ended 6/30/93................. - (0.23) 2.48 6.03
Period ended 6/30/92 (4)........... - (0.08) 2.56 5.34
CLASS S SHARES
Year ended 6/30/95................. (0.12) (0.13) 2.24 1.33

U. S. GOVERNMENT FUND
CLASS A SHARES
Year ended 6/30/95................. - (0.70) 9.67 10.17
Year ended 6/30/94................. - (0.74) 9.45 (4.59)
Year ended 6/30/93................. (0.03)(16) (0.77) 10.65 8.87
Year ended 6/30/92................. (0.01)(16) (0.85) 10.52 13.74
Year ended 6/30/91................. (0.01)(16) (0.86) 10.04 10.14
Period ended 6/30/90 (5)........... - (0.74) 9.93 6.99
CLASS S SHARES
Year ended 6/30/95................. - (0.63) 9.67 9.36

CORPORATE INCOME FUND
CLASS A SHARES
Year ended 6/30/95................. (0.04) (0.81) 10.52 15.57
Year ended 6/30/94................. - (0.91) 9.87 (5.32)
Year ended 6/30/93................. (0.03)(16) (0.87) 11.33 16.64
Year ended 6/30/92................. - (0.90) 10.52 16.29
Period ended 6/30/91 (6)........... - (0.81) 9.87 7.31
CLASS S SHARES
Year ended 6/30/95................. (0.04) (0.74) 10.52 14.73
- ---------------------------------------------------------------------------------------------------------
</TABLE>

-10-
<PAGE>

CLASS S SHARES
Year ended 6/30/95.......... 7,399 1.29 4.33 - 0.036 1.93

CLASS S SHARES
Year ended 6/30/95.......... 737 1.60 3.88 - 0.034 2.00

CLASS S SHARES
Year ended 6/30/95.......... 10 1.60 1.98 - 0.017 1.90

SHORT TERM HIGH QUALITY BOND
FUND
CLASS A SHARES
Year ended 6/30/95.......... 43,811 0.75 6.10 137 0.07 1.39
Period ended 6/30/94 (3).... 21,771 0.00(10) 5.70(10) 95 0.06 1.61(10)

CLASS S SHARES
Year ended 6/30/95.......... 2,303 1.50 5.35 137 0.05 2.14

CLASS S SHARES
Year ended 6/30/95.......... 2,286 1.60 6.47 217 0.14 2.19

U. S. GOVERNMENT FUND
CLASS A SHARES
Year ended 6/30/95.......... 459,968 0.95(18) 7.58 226 0.66 1.59
Year ended 6/30/94.......... 666,566 1.05(18) 7.26 27 0.72 1.34
Year ended 6/30/93.......... 842,277 0.91(18) 6.98 67 0.70 1.34
Year ended 6/30/92.......... 504,776 0.72(18) 7.67 35 0.77 1.39
Year ended 6/30/91.......... 166,920 1.12(18) 8.32 54 0.79 1.57
Period ended 6/30/90 (5).... 31,430 1.13(10)(18) 8.50(10) 13 0.69 1.89(10)

CLASS S SHARES
Year ended 6/30/95.......... 6,839 1.70(18) 6.83 226 0.59 2.34

CLASS S SHARES
Year ended 6/30/95.......... 8,701 1.65 7.51 55 0.57 2.15
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

-11-
<PAGE>

<TABLE>
<CAPTION>
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET NET REALIZED &
VALUE AT UNREALIZED TOTAL FROM DIVIDENDS FROM
BEGINNING NET INVESTMENT GAIN/(LOSS) ON INVESTMENT NET INVESTMENT
FUND OF PERIOD INCOME/(LOSS) INVESTMENTS OPERATIONS INCOME
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL FUND
CLASS A SHARES
Year ended 6/30/95............. $10.38 $ 0.61 $ 0.15 $ 0.76 $(0.61)
Year ended 6/30/94............. 11.22 0.61 (0.82) (0.21) (0.61)
Year ended 6/30/93............. 10.45 0.62 0.77 1.39 (0.62)
Year ended 6/30/92............. 10.07 0.65 0.38 1.03 (0.65)
Year ended 6/30/91............. 10.01 0.63 0.06 0.69 (0.63)
Period ended 6/30/90 (5)....... 10.00 0.57 0.01 0.58 (0.57)

CLASS S SHARES
Year ended 6/30/95............. 10.38 0.53 0.15 0.68 (0.53)

FLORIDA INSURED MUNICIPAL FUND
CLASS A SHARES
Year ended 6/30/95............. 9.40 0.52 0.03(15) 0.55 (0.52)
Year ended 6/30/94............. 10.05 0.52 (0.65) (0.13) (0.52)
Period ended 6/30/93 (7)....... 10.00 0.00(14) 0.05 0.05 -

CLASS S SHARES
Year ended 6/30/95............. 9.40 0.45 0.03(15) 0.48 (0.45)

CALIFORNIA INSURED INTERMEDIATE
MUNICIPAL FUND
CLASS A SHARES
Year ended 6/30/95............. 10.10 0.50 0.35 0.85 (0.50)
Period ended 6/30/94 (8)....... 10.00 0.11 0.11(15) 0.22 (0.11)

CLASS S SHARES
Year ended 6/30/95............. 10.10 0.43 0.35 0.78 (0.43)

NATIONAL MUNICIPAL FUND
CLASS A SHARES
Year ended 6/30/95............. 10.85 0.64 0.01(15) 0.65 (0.64)
Year ended 6/30/94............. 11.65 0.65 (0.73) (0.08) (0.65)
Year ended 6/30/93............. 10.96 0.67 0.75 1.42 (0.67)
Year ended 6/30/92............. 10.16 0.72 0.79 1.51 (0.71)
Period ended 6/30/91 (6)....... 10.00 0.64 0.16 0.80 (0.64)

CLASS S SHARES
Year ended 6/30/95............. 10.85 0.56 0.01(15) 0.57 (0.56)

GROWTH AND INCOME FUND
CLASS A SHARES
Year ended 6/30/95............. 11.30 0.13 2.04 2.17 (0.12)
Year ended 6/30/94............. 12.09 0.12 0.72 0.84 (0.12)
Year ended 6/30/93............. 11.25 0.12 0.91 1.03 (0.12)
Year ended 6/30/92............. 10.51 0.17 0.74 0.91 (0.17)
Year ended 6/30/91............. 10.12 0.23 0.43 0.66 (0.27)
Period ended 6/30/90 (5)....... 10.00 0.24 0.07 0.31 (0.19)

CLASS S SHARES
Year ended 6/30/95............. 11.30 0.05 2.04 2.09 (0.07)

GROWTH FUND
CLASS A SHARES
Year ended 6/30/95 (17)........ 10.73 0.05 3.42 3.47 (0.02)
Year ended 6/30/94............. 10.72 (0.02) 0.03(15) 0.01 -
Period ended 6/30/93 (9)....... 10.00 0.00 0.72 0.72 -

CLASS S SHARES
Year ended 6/30/95 (17)........ 10.73 (0.04) 3.42 3.38 (0.00)(14)

EMERGING GROWTH FUND
CLASS A SHARES
Year ended 6/30/95 (17)........ 13.02 (0.00)(14) 2.77 2.77 -
Year ended 6/30/94............. 13.76 (0.09) 0.68 0.59 -
Year ended 6/30/93............. 11.67 (0.02) 2.31 2.29 -
Year ended 6/30/92 (17)........ 9.62 (0.01) 2.16 2.15 (0.01)
Period ended 6/30/91 (6)....... 10.00 0.09 (0.40) (0.31) (0.07)

CLASS S SHARES
Year ended 6/30/95 (17)........ 13.02 (0.10) 2.77 2.67 -

INTERNATIONAL GROWTH FUND
CLASS A SHARES
Year ended 6/30/95 (17)........ 10.74 (0.11)(20) (0.31) (0.42) (0.04)
Year ended 6/30/94............. 9.80 0.06 1.15 1.21 (0.02)
Year ended 6/30/93............. 8.82 0.07 0.94 1.01 (0.03)
Year ended 6/30/92............. 8.27 0.05 0.55 0.60 (0.05)
Period ended 6/30/91 (6)....... 10.00 0.02 (1.75) (1.73) -

CLASS S SHARES
Year ended 6/30/95 (17)........ 10.74 (0.17)(20) (0.31) (0.48) (0.03)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

-12-
<PAGE>

<TABLE>
<CAPTION>
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- ------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS NET
IN EXCESS DISTRIBUTIONS DISTRIBUTIONS ASSET
OF NET FROM IN EXCESS DISTRIBUTIONS VALUE
INVESTMENT NET REALIZED OF NET REALIZED FROM TOTAL AT END
FUND INCOME GAINS GAINS CAPITAL DISTRIBUTIONS OF PERIOD
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL FUND
CLASS A SHARES
Year ended 6/30/95........ $ - $(0.00)(14) $ - $ - $(0.61) $10.53
Year ended 6/30/94........ (0.00)(14) - (0.02) - (0.63) 10.38
Year ended 6/30/93........ - - - - (0.62) 11.22
Year ended 6/30/92........ - - - - (0.65) 10.45
Year ended 6/30/91........ - - - - (0.63) 10.07
Period ended 6/30/90 (5).. - - - - (0.57) 10.01

CLASS S SHARES
Year ended 6/30/95........ - (0.00)(14) - - (0.53) 10.53

FLORIDA INSURED MUNICIPAL
FUND
CLASS A SHARES
Year ended 6/30/95........ - - - - (0.52) 9.43
Year ended 6/30/94........ (0.00)(14) - (0.00)(14) - (0.52) 9.40
Period ended 6/30/93 (7).. - - - - - 10.05

CLASS S SHARES
Year ended 6/30/95........ - - - - (0.45) 9.43

CALIFORNIA INSURED
INTERMEDIATE MUNICIPAL FUND
CLASS A SHARES
Year ended 6/30/95........ - - - - (0.50) 10.45
Period ended 6/30/94 (8).. - (0.01) - - (0.12) 10.10

CLASS S SHARES
Year ended 6/30/95........ - - - - (0.43) 10.45

NATIONAL MUNICIPAL FUND
CLASS A SHARES
Year ended 6/30/95........ - (0.01) (0.09) - (0.74) 10.76
Year ended 6/30/94........ (0.00)(14) (0.07) - - (0.72) 10.85
Year ended 6/30/93........ - (0.06) - - (0.73) 11.65
Year ended 6/30/92........ - - - - (0.71) 10.96
Period ended 6/30/91 (6).. - - - - (0.64) 10.16

CLASS S SHARES
Year ended 6/30/95........ - (0.01) (0.09) - (0.66) 10.76

GROWTH AND INCOME FUND
CLASS A SHARES
Year ended 6/30/95........ - (0.77) - - (0.89) 12.58
Year ended 6/30/94........ - (1.51) - - (1.63) 11.30
Year ended 6/30/93........ - (0.07) - - (0.19) 12.09
Year ended 6/30/92........ - - - - (0.17) 11.25
Year ended 6/30/91........ - - - - (0.27) 10.51
Period ended 6/30/90 (5).. - - - - (0.19) 10.12

CLASS S SHARES
Year ended 6/30/95........ - (0.77) - - (0.84) 12.55

GROWTH FUND
CLASS A SHARES
Year ended 6/30/95 (17)... - (0.00)(14) - - (0.02) 14.18
Year ended 6/30/94........ - - - - - 10.73
Period ended 6/30/93 (9).. - - - - - 10.72

CLASS S SHARES
Year ended 6/30/95 (17)... - (0.00)(14) - - (0.00) 14.11

EMERGING GROWTH FUND
CLASS A SHARES
Year ended 6/30/95 (17)... - (0.32) - - (0.32) 15.47
Year ended 6/30/94........ - (1.33) - - (1.33) 13.02
Year ended 6/30/93........ - (0.20) - - (0.20) 13.76
Year ended 6/30/92 (17)... - (0.08) - (0.01)(16) (0.10) 11.67
Period ended 6/30/91 (6).. - - - - (0.07) 9.62

CLASS S SHARES
Year ended 6/30/95 (17)... - (0.32) - - (0.32) 15.37

INTERNATIONAL GROWTH FUND
CLASS A SHARES
Year ended 6/30/95 (17)... - (0.44) (0.06) - (0.54) 9.78
Year ended 6/30/94........ - (0.25) - - (0.27) 10.74
Year ended 6/30/93........ - - - - (0.03) 9.80
Year ended 6/30/92........ - - - - (0.05) 8.82
Period ended 6/30/91 (6).. - - - - - 8.27

CLASS S SHARES
Year ended 6/30/95 (17)... - (0.44) (0.06) - (0.53) 9.73
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>

-13-
<PAGE>

<TABLE>
<CAPTION>
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD (Continued)
- --------------------------------------------------------------------------------------------------------
RATIO OF NET
NET ASSETS RATIO OF OPERATING INVESTMENT
END OF EXPENSES INCOME
TOTAL PERIOD (IN TO AVERAGE TO AVERAGE
FUND RETURN(11) 000'S) NET ASSETS NET ASSETS
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL FUND
CLASS A SHARES
Year ended 6/30/95........ 7.57% $405,967 0.85% 5.89%
Year ended 6/30/94........ (2.19) 509,233 0.79 5.45
Year ended 6/30/93........ 13.84 511,364 0.80 5.74
Year ended 6/30/92........ 10.56 309,146 0.94 6.08
Year ended 6/30/91........ 7.16 202,595 1.05 6.30
Period ended 6/30/90 (5).. 5.99 92,972 1.01(10) 6.26(10)

CLASS S SHARES
Year ended 6/30/95........ 6.78 11 1.60 5.14

FLORIDA INSURED MUNICIPAL
FUND
CLASS A SHARES
Year ended 6/30/95........ 6.01 33,714 0.39 5.53
Year ended 6/30/94........ (1.50) 38,541 0.00 5.09
Period ended 6/30/93 (7).. 0.50 4,837 0.00(10) 0.48(10)

CLASS S SHARES
Year ended 6/30/95........ 5.23 11 1.14 4.78

CALIFORNIA INSURED
INTERMEDIATE MUNICIPAL FUND
CLASS A SHARES
Year ended 6/30/95........ 8.71 54,507 0.42 4.95
Period ended 6/30/94 (8).. 2.20 34,147 0.00(10) 4.25(10)

CLASS S SHARES
Year ended 6/30/95........ 7.90 11 1.17 4.20

NATIONAL MUNICIPAL FUND
CLASS A SHARES
Year ended 6/30/95........ 6.32 269,033 0.83 5.97
Year ended 6/30/94........ (0.90) 354,501 0.87 5.60
Year ended 6/30/93........ 13.41 390,187 0.86 5.89
Year ended 6/30/92........ 15.42 226,984 0.64 6.34
Period ended 6/30/91 (6).. 8.27 44,915 0.55(10) 6.84(10)

CLASS S SHARES
Year ended 6/30/95........ 5.54 11 1.58 5.22

GROWTH AND INCOME FUND
CLASS A SHARES
Year ended 6/30/95........ 20.47 170,177 1.56 1.11
Year ended 6/30/94........ 6.67 125,249 1.50 1.04
Year ended 6/30/93........ 9.20 97,873 1.46 1.01
Year ended 6/30/92........ 8.65 83,825 1.50 1.51
Year ended 6/30/91........ 6.70 33,930 1.52 2.48
Period ended 6/30/90 (5).. 3.17 20,964 1.37(10) 3.21(10)

CLASS S SHARES
Year ended 6/30/95........ 19.75 14,368 2.31 0.36

GROWTH FUND
CLASS A SHARES
Year ended 6/30/95 (17)... 32.33 154,763 1.76 0.28
Year ended 6/30/94........ 0.00 126,808 1.75 (0.35)
Period ended 6/30/93 (9).. 7.30 23,323 1.44(10) (0.63)(10)

CLASS S SHARES
Year ended 6/30/95 (17)... 31.44 18,730 2.51 (0.47)

EMERGING GROWTH FUND
CLASS A SHARES
Year ended 6/30/95 (17)... 21.54 185,722 1.68 (0.31)
Year ended 6/30/94........ 3.40 124,941 1.66 (0.68)
Year ended 6/30/93........ 19.75 96,646 1.59 (0.32)
Year ended 6/30/92 (17)... 22.47 27,652 1.93 (0.04)
Period ended 6/30/91 (6).. (2.95) 8,490 1.84(10) 1.10(10)

CLASS S SHARES
Year ended 6/30/95 (17)... 20.76 11,840 2.43 (1.06)

INTERNATIONAL GROWTH FUND
CLASS A SHARES
Year ended 6/30/95 (17)... (4.01) 91,763 1.69 0.62
Year ended 6/30/94........ 12.39 127,764 1.69 0.54
Year ended 6/30/93........ 11.51 56,962 1.80 1.07
Year ended 6/30/92........ 7.28 24,479 2.25 0.69
Period ended 6/30/91 (6).. (17.30) 11,647 2.24(10) 0.51(10)

CLASS S SHARES
Year ended 6/30/95 (17)... (4.61) 11,120 2.44 (0.13)
- --------------------------------------------------------------------------------------------------------

<CAPTION>
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD (Continued)
- -----------------------------------------------------------------------------------------------------------
NET INVESTMENT RATIO OF OPERATING
INCOME/(LOSS) PER EXPENSES TO AVERAGE NET
PORTFOLIO SHARE WITHOUT FEE ASSETS WITHOUT FEE
TURNOVER WAIVERS AND/OR WAIVERS AND/OR EXPENSES
FUND RATE EXPENSES ABSORBED(12) ABSORBED(13)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CALIFORNIA MUNICIPAL FUND
CLASS A SHARES
Year ended 6/30/95........ 22% $0.56 1.29%
Year ended 6/30/94........ 50 0.54 1.39
Year ended 6/30/93........ 41 0.56 1.41
Year ended 6/30/92........ 29 0.60 1.40
Year ended 6/30/91........ 16 0.58 1.60
Period ended 6/30/90 (5).. 38 0.49 1.84(10)

CLASS S SHARES
Year ended 6/30/95........ 22 0.48 2.04

FLORIDA INSURED MUNICIPAL
FUND
CLASS A SHARES
Year ended 6/30/95........ 44 0.42 1.51
Year ended 6/30/94........ 83 0.36 1.55
Period ended 6/30/93 (7).. 0 (0.02) 5.59(10)

CLASS S SHARES
Year ended 6/30/95........ 44 0.35 2.26

CALIFORNIA INSURED
INTERMEDIATE MUNICIPAL FUND
CLASS A SHARES
Year ended 6/30/95........ 13 0.40 1.41
Period ended 6/30/94 (8).. 17 0.06 1.95(10)

CLASS S SHARES
Year ended 6/30/95........ 13 0.33 2.16

NATIONAL MUNICIPAL FUND
CLASS A SHARES
Year ended 6/30/95........ 23 0.59 1.30
Year ended 6/30/94........ 44 0.59 1.36
Year ended 6/30/93........ 83 0.61 1.37
Year ended 6/30/92........ 61 0.63 1.40
Period ended 6/30/91 (6).. 81 0.53 1.68(10)

CLASS S SHARES
Year ended 6/30/95........ 23 0.51 2.05

GROWTH AND INCOME FUND
CLASS A SHARES
Year ended 6/30/95........ 72 0.13 1.56
Year ended 6/30/94........ 127 0.11 1.59
Year ended 6/30/93........ 47 0.12 1.46
Year ended 6/30/92........ 16 0.16 1.55
Year ended 6/30/91........ 19 0.21 1.78
Period ended 6/30/90 (5).. 16 0.19 2.01(10)

CLASS S SHARES
Year ended 6/30/95........ 72 0.05 2.31

GROWTH FUND
CLASS A SHARES
Year ended 6/30/95 (17)... 233 0.05 1.76
Year ended 6/30/94........ 227 (0.02) 1.75
Period ended 6/30/93 (9).. 13 (0.01) 2.52(10)

CLASS S SHARES
Year ended 6/30/95 (17)... 233 (0.04) 2.51

EMERGING GROWTH FUND
CLASS A SHARES
Year ended 6/30/95 (17)... 181 (0.00)(14) 1.68
Year ended 6/30/94........ 224 (0.09) 1.66
Year ended 6/30/93........ 28 (0.02) 1.59
Year ended 6/30/92 (17)... 60 (0.01) 1.93
Period ended 6/30/91 (6).. 17 0.07 2.11(10)

CLASS S SHARES
Year ended 6/30/95 (17)... 181 (0.10) 2.43

INTERNATIONAL GROWTH FUND
CLASS A SHARES
Year ended 6/30/95 (17)... 81 (0.11) 1.69
Year ended 6/30/94........ 44 0.06 1.69
Year ended 6/30/93........ 63 0.07 1.80
Year ended 6/30/92........ 66 0.04 2.29
Period ended 6/30/91 (6).. 45 0.01 2.47(10)

CLASS S SHARES
Year ended 6/30/95 (17)... 81 (0.17) 2.44
- --------------------------------------------------------------------------------------------------------
</TABLE>

(1) The Fund commenced operations on July 13, 1989.*
(2) The Funds commenced operations on July 10, 1989.*
(3) The Fund commenced operations on November 1, 1993.*

-14-
<PAGE>

(4) The Fund commenced operations on February 11, 1992.*
(5) The Funds commenced operations on July 25, 1989.*
(6) The Funds commenced operations on July 18, 1990.*
(7) The Fund commenced operations on June 7, 1993.*
(8) The Fund commenced operations on April 4, 1994.*
(9) The Fund commenced operations on April 5, 1993.*
* On July 1, 1994, the Funds commenced selling Class B and Class S shares
in addition to Class A shares. Those shares in existence prior to
July 1, 1994 were designated Class A shares.
(10) Annualized.
(11) Total return represents aggregate total return for the periods indicated
and does not reflect any applicable sales charges. The total returns would
have been lower if certain fees had not been waived and/or expenses had not
been absorbed by investment advisor, administrator and/or distributor.
(12) Net investment income per share without fee waivers and/or expenses
absorbed by investment advisor, administrator and/or distributor.
(13) Annualized operating expense ratios without fee waivers and/or expenses
absorbed by investment advisor, administrator and/or distributor.
(14) Amount represents less than $0.01 per share.
(15) The amount shown may not accord with the change in aggregate gains and
losses of portfolio securities due to the timing of sales and redemptions
of Fund shares.
(16) Amounts distributed in excess of accumulated net investment income as
determined for financial statement purposes have been reported as
distributions from paid-in capital at the fiscal year end in which the
distribution was made. Certain of these distributions which are reported
as being from paid-in capital for financial statement purposes may be
reported to shareholders as taxable distributions due to differing tax and
accounting rules.
(17) Per share numbers have been calculated using the average shares method,
which more appropriately presents the per share data for the year since the
use of the undistributed income method did not accord with results of
operations.
(18) Ratio of operating expenses to average net assets including interest
expense for the period ended June 30 each year, was, for Class A shares
1.22% for 1995, 1.06% for 1994, 0.91% for 1993, 0.72% for 1992, 1.12% for
1991, 1.13% for 1990; for the Class S shares 1.97% for 1995.
(19) Amount represents less than $0.001 per share.
(20) Amount shown reflects certain reclassifications related to book to tax
differences.

THE FUNDS' INVESTMENTS AND RISK CONSIDERATIONS

The following section describes the investment objective and policies of each
Fund and some of the risk considerations of investing in the Funds. The
"Securities and Investment Practices" section that follows provides more
information about the types of securities and investment practices that the
Funds may use, and the risk considerations related to such securities and
investment practices.

INVESTMENT PRINCIPLES AND RISK CONSIDERATIONS

THE MONEY FUNDS

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

-15-
<PAGE>

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

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.

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.

-16-
<PAGE>

equivalents, including short-term U.S. Government Securities, certificates of
deposit and bankers' acceptances, commercial paper rated Prime-1 by Moody's or
A-1+ or A-1 by S&P, repurchase agreements and securities of other money market
mutual funds. Under normal market conditions the Fund may invest up to 20% of
its assets in these taxable cash equivalents.

The California Money Fund is designed to generate tax-exempt income. A
shareholder of the California Money Fund may earn a higher after-tax return from
the Fund than from comparable investments that generate taxable income. For an
illustration of the benefits of tax-free investing, see the section entitled
"Performance Information." For a discussion of the tax consequences of
investing in AMT-Subject Bonds, see "Securities and Investment Practices -
Municipal Securities and AMT-Subject Bonds" and "Dividends, Capital Gains and
Taxes."

The Fund may also invest in variable rate demand obligations, stand-by
commitments, when-issued securities and forward commitments.

THE BOND FUNDS

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

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<PAGE>

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

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 government securities 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.

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<PAGE>

price changes due to changes in the issuer's creditworthiness. The market
prices of these securities may fluctuate more than higher-rated securities and
may decline significantly in periods of general economic difficulty, which may
follow periods of rising interest rates. See "Securities and Investment
Practices - Lower-Rated Securities."

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
assets in the types of securities in which the Corporate Income Fund may invest
except as otherwise prohibited in this Prospectus or the SAI, including
corporate bonds, preferred stock, convertible corporate bonds, convertible
preferred stock, government stripped mortgage-backed securities, asset-backed
securities; and interests in lease obligations. A substantial portion of the
Fund's assets at any time may consist of mortgage-backed securities. For more
detailed information regarding the types of securities in which the Corporate
Income Fund may invest, see "Corporate Income Fund."

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

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<PAGE>

credit characteristics equivalent to such investment-grade rated corporate
bonds. Generally, at least 65% of the corporate bonds held by the Fund will
have had remaining maturities of 10 years or more at the date of purchase,
unless the Fund's Sub-Advisor believes that investing in corporate bonds with
shorter maturities would be appropriate in light of prevailing market
conditions. Corporate bonds with longer maturities generally tend to produce
higher yields and are subject to greater market risk than debt securities with
shorter maturities. The value of the Fund's portfolio securities can be
expected to vary inversely with changes in the prevailing interest rates.

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

CALIFORNIA MUNICIPAL FUND. The Fund's investment objective is to provide as
high a level of current income that is excluded from gross income for federal
income tax purposes and is exempt from California State personal income tax as
is consistent with prudent investment management and preservation of capital.
The Fund pursues its objective by investing in intermediate and long-term
California Municipal Securities (as described in "Securities and Investment
Practices-Municipal Securities and AMT-Subject Bonds"), although the average
maturity of the Fund will vary depending on anticipated market conditions. A
fundamental policy that cannot be changed without the consent of the Fund's
shareholders is that under normal market conditions, at least 80% of the Fund's
total assets will be invested in California Municipal Securities. The Fund may
invest without limitation in AMT-Subject Bonds, as described in "Securities and
Investment Practices - Municipal Securities and AMT-Subject Bonds."

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<PAGE>

paper rated Prime-1 by Moody's or A-1+ or A-1 by S&P, repurchase agreements and
securities of other money market mutual funds (subject to the limitations set
forth under "Securities and Investment Practices") and, for temporary defensive
purposes, may invest in these securities without limitation. The Fund may at
any time invest up to 20% of its total assets in taxable cash equivalents,
although it is anticipated that under normal circumstances substantially all of
the Fund's assets will be invested in Municipal Securities generating tax-exempt
income.

FLORIDA INSURED MUNICIPAL FUND. The Fund's primary investment objective is to
seek as high a level of current income, exempt from federal income tax, as is
consistent with prudent investment management and preservation of capital, and
to offer shareholders the opportunity to own shares the value of which is exempt
from Florida intangible personal property tax.

To accomplish this goal, the Fund will invest primarily in insured,
intermediate- and long-term Florida Municipal Securities. It is a fundamental
policy of the Fund that it will invest at least 80% of the value of its total
assets (except when maintaining a temporary defensive position) in insured
Florida Municipal Securities. The Fund pursues its objective by investing in
intermediate- and long-term Florida Municipal Securities, although the average
maturity of the Fund will vary depending on anticipated market conditions. The
Fund may invest without limitation in AMT-Subject Bonds, as described in
"Securities and Investment Practices -Municipal Securities and AMT-Subject
Bonds." Current federal income tax laws limit the types and volume of bonds
qualifying for the federal income tax exemption of interest, which may have an
effect on the ability of the Fund to purchase sufficient amounts of tax-exempt
securities.

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<PAGE>

obtainable from medium-quality Municipal Securities rated A or Baa by Moody's or
A or BBB by S&P. See "Securities and Investment Practices - Fixed-Income
Securities."

The Fund may invest up to 20%, in the aggregate, of its total assets in (1)
Municipal Securities that are not insured Municipal Securities; (2) Municipal
Securities that are not exempt from Florida intangible personal property tax;
and (3) short-term Municipal Securities and taxable cash equivalents, including
short-term U.S. Government Securities, certificates of deposit, time deposits
and bankers' acceptances, commercial paper rated Prime-1 by Moody's or A-1+ or
A-1 by S&P, repurchase agreements and securities of money market mutual funds
and, for temporary defensive purposes, may invest in these securities without
limitation, except that investments in securities of money market mutual funds
are subject to the limitations set forth under "Securities and Investment
Practices - Holdings in Other Investment Companies." The Fund may at any time
invest up to 20% of its total assets in taxable cash equivalents, although it is
anticipated that under normal circumstances substantially all of the Fund's
assets will be invested in Municipal Securities generating tax-exempt income.
The Fund may invest in floating rate, inverse floating rate and variable rate
obligations, including participation interests therein.

Florida does not impose an income tax on individuals. Distributions of
investment income and capital gains by the Fund will be subject to Florida
corporate income taxes. Florida imposes a tax on intangible personal property
owned by Florida residents. Based on a ruling the Fund has received from the
Florida Department of Revenue, if the Fund's assets consist, on the last
business day of the calendar year, solely of assets exempt from Florida
intangible personal property tax, shares of the Fund owned by Florida residents
will be exempt from Florida intangible personal property tax. Assets exempt
from Florida intangible personal property tax include obligations issued by the
State of Florida and its political subdivisions, municipalities, and public
authorities; obligations of the United States Government or its agencies; and
cash.

CALIFORNIA INSURED INTERMEDIATE MUNICIPAL FUND. The Fund's investment objective
is to provide California investors with as high a level of current income exempt
from federal and California State income tax as is consistent with prudent
investment management and preservation of capital. To accomplish its investment
objective, the Fund will invest primarily in insured intermediate-term
California Municipal Securities (as described in "Securities and Investment
Practices - Municipal Securities and AMT-Subject Bonds").

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<PAGE>
by the issuer of the Municipal Securities or by an investor subsequent to the
security's original issuance and all premiums respecting such securities for the
remaining lives thereof will have been paid in advance by such issuer or
investor. Such policies are generally non-cancelable and will continue in force
so long as the Municipal Securities are outstanding and the insurer remains in
business. Since such Specific Issue Insurance remains in effect as long as the
securities are outstanding, the insurance may have an effect on the resale value
of the Municipal Securities. Therefore, such Specific Issue Insurance may be
considered to represent an element of market value in regard to Municipal
Securities thus insured, but the exact effect, if any, of this insurance on such
market value cannot be estimated.

All of the Municipal Securities in which the Fund will invest are investment-
grade securities, securities that are rated at the time of purchase within the
four highest ratings assigned by Moody's, S&P, Duff, or Fitch, or, if unrated,
are judged to be of comparable quality by the Fund's Sub-Advisor. The higher
tax-free yields sought by the Fund are generally obtainable from medium-quality
Municipal Securities rated A or Baa by Moody's or A or BBB by S&P. Municipal
Securities 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. For more
information, see "Securities and Investment Practices -- Fixed-Income
Obligations and Securities."

The Fund is designed to generate tax-exempt income. A shareholder of the Fund
may earn a higher after-tax return from the Fund than from comparable
investments that generate taxable income. Current federal income tax laws limit
the types and volume of bonds qualifying for the federal income tax exemption of
interest, which may have an effect on the ability of the Fund to purchase
sufficient amounts of tax-exempt securities. For an illustration of the
benefits of tax-free investing, see the section entitled, "Performance." The
Fund may invest without limitation in AMT-Subject Bonds, as described in
"Securities and Investment Practices - Municipal Securities and AMT-Subject
Bonds."

A-1+ or A-1 by S&P, repurchase agreements and securities of investment companies
that are money market funds and, for temporary defensive purposes, may invest in
these securities without limitation, except that investments in securities of
money market mutual funds are subject to the limitations set forth under
"Securities and Investment Practices - Holdings in Other Investment Companies."
The Fund may at any time invest up to 20% of its total assets in taxable cash
equivalents, although it is anticipated that under normal circumstances
substantially all of the Fund's assets will be invested in Municipal Securities
generating tax-exempt income.

Since the Fund's inception, Joseph A. Piraro, a Vice President of Van Kampen,
has had primary responsibility for the day-to-day management of the Fund's
portfolio. Mr. Piraro has been a Vice President of Van Kampen since January
1993 and Assistant Vice President since June 1992. Prior to joining Van Kampen,
Mr. Piraro was a Senior Municipal Bond Trader for First National Bank of Chicago
from November 1987 to May 1992.

NATIONAL MUNICIPAL FUND. The Fund's investment objective is to provide a high
level of current income which is exempt from federal income tax, consistent with
preservation of capital. The Fund pursues its investment objective by investing
in intermediate and long-term Municipal Securities. It is a fundamental policy
of the Fund that it will invest at least 80% of its assets in Municipal
Securities. Under normal conditions, debt obligations with intermediate and
long-term maturities can be expected to pay higher yields and experience greater
fluctuations in value than bonds with short-term maturities. Under normal
market conditions, the longer the average maturity of Municipal Securities held
in the Fund's portfolio, the greater its expected yield and price volatility.
For an illustration of the benefits of tax-free investing, see the section
entitled "Performance."

The Fund will invest substantially all of its portfolio in investment-grade
Municipal Securities, which are securities that are rated at the time of
purchase within the four highest ratings assigned by Moody's, S&P, Duff, or
Fitch, or, if unrated, that the Fund's Sub-Advisor believes to have credit
characteristics equivalent to such investment-grade rated securities. The
higher tax-free yields sought by the Fund are generally obtainable from medium-
quality Municipal Securities rated A or Baa by Moody's or A or BBB by S&P. For
more information, see "Securities and Investment Practices - Fixed-Income
Securities." The Fund may also invest in unrated tax-exempt securities that the
Fund's Sub-Advisor believes to have credit characteristics equivalent to rated
investment-grade Municipal Securities.

The Fund also may invest, for temporary defensive purposes in abnormal market
conditions, more than 20% of its assets in taxable cash equivalents.

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<PAGE>

Since the Fund's inception, David C. Johnson, a Senior Vice President of Van
Kampen, has had primary responsibility for the day-to-day management of the
Fund's portfolio. Mr. Johnson has been the Portfolio Manager of the Fund since
its inception. Mr. Johnson has been a Senior Vice President of Van Kampen since
January 1995 and a First Vice President since January 1993. Mr. Johnson has
been employed by Van Kampen since April 1989.

THE EQUITY FUNDS

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 nondividend-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.

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.

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<PAGE>

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

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.

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 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 - Lower-Rated Securities."

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<PAGE>

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.

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.

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<PAGE>

As the Fund's portfolio co-managers, Douglas J. Dooley and Martyn C. Hole, each
a Vice President of J.P. Morgan, have had primary responsibility for the Fund
since its inception. Mr. Dooley joined J.P. Morgan's research department in
1979 and he served as head of the International Research Group in London from
1986 to 1990. Mr. Hole, CFA, joined J.P. Morgan in 1981 from Cambridge
University and is portfolio manager in the International Equity Group in London.

SECURITIES AND INVESTMENT PRACTICES

The following pages contain more detailed information about types of securities
in which the Funds may invest, and strategies a Fund's Sub-Advisor may employ in
pursuit of that 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.

BANK OBLIGATIONS. All of the 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.

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<PAGE>

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, a 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. A Fund's flexibility to participate in higher yielding
debt markets outside of the United States may allow the Fund to achieve higher
yields than those generally obtained by domestic money market funds and short-
term bond investments. If a 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 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 Fund is invested in foreign securities, a weakening in
the U.S. Dollar relative to the foreign currencies underlying a Fund's
investments should help increase the NAV of the Fund. Conversely, a
strengthening in the U.S. Dollar versus the foreign currencies in which a Fund's
securities are denominated will generally lower the NAV of the Fund. A 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. Funds authorized to invest in
securities of foreign issuers may engage in currency management strategies.

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Development Bank, European Coal and Steel Community, European Economic
Community, European Investment Bank and the Nordic Investment Bank.

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

The 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 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 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 Fund's total assets (after giving
effect to any such borrowings). The Short Term High Quality Bond Fund intends
to invest up to 10% of its total assets in dollar roll transactions, but may
invest up to 33 1/3% of its total assets in such transactions.

EXCHANGE RATE-RELATED SECURITIES. Each of the Funds, except for the Money
Funds, 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 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 Trust believes 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.

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.

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sufficient to pay debt service on State bonds pledging the full faith and credit
of the State as such debt service becomes due. All State tax revenues, other
than trust funds dedicated by Florida's Constitution for other purposes, would
be available for such an appropriation, if required.

Revenue bonds may be issued by the State or its agencies without a vote of
Florida's electors only to finance or refinance the cost of State fixed capital
outlay projects which shall be payable solely from funds derived directly from
sources other than State tax revenues. Estimated fiscal year 1994-95 General
Revenue plus Working Capital and Budget Stabilization funds available total
$14,683,000,000, an increase of approximately 6.1% over comparable figures in
fiscal 1993-94. Total effective appropriations for the 1994-95 fiscal year were
$14,330,800,000, with unencumbered reserves at the end of 1994-95 estimated at
$352,100,000. Estimated fiscal year 1995-96 General Revenue plus Working
Capital and Budget Stabilization funds available total $15,168,700,000, an
increase of approximately 3.3% over comparable figures for fiscal year 1994-95.
Total effective appropriations for the 1995-96 fiscal year are estimated to be
$14,853,200,000, with unencumbered reserves at the end of 1995-96 estimated at
$315,500,000.

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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
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 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
Fund's portfolio securities or in foreign exchange rates, or prevent loss if the
prices of these securities should decline.

A 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 Fund's securities
denominated in the less attractive currency. The 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 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
Fund if the other party does not complete the transaction, the Fund's Sub-
Advisor will enter into foreign currency exchange contracts only with parties
approved by the Fund's Board of Trustees.

While such actions are intended to protect the 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 Fund as a regulated investment
company under the Code. The projection of currency market movements is
extremely difficult, and the successful execution of a hedging strategy is
highly uncertain.

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FOREIGN INVESTMENTS. All of the Funds except the U.S. Government Fund, the U.S.
Government Money Fund, the California Money Fund and the Municipal Funds 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 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 Funds' Sub-Advisors do not intend to expose the 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 Funds, including the withholding of dividends.
When a 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 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 Funds hold various foreign currencies
from time to time, the value of the net assets of the Funds as measured in U.S.
Dollars will be affected favorably or unfavorably by changes in exchange rates.
Generally, the 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 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 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-
Advisors of the International Growth and Short Term Global Government Funds
attempt 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 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 Fund normally pays fixed
commissions that are generally higher than the negotiated commissions charged in
the United States. In addition, there is generally less governmental
supervision and regulation of securities exchanges, brokers and issuers in
foreign countries than in the United States.

FUTURES AND OPTIONS ON FUTURES. When deemed advisable by its Sub-Advisor,
certain 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 Funds,
and for the other purposes described in the section "Strategic Transactions." A
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
Fund's assets, such market value to be determined after

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<PAGE>

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.

The purpose of entering into a futures contract by a Fund is to protect the Fund
from fluctuations in the value of its securities caused by anticipated changes
in interest 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 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, a 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 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 Fund would pay commissions
and other costs in connection with such investments, which may increase the
Fund's expenses and reduce its return. While utilization of options, futures
contracts and similar instruments may be advantageous to the Fund, if the Fund's
Sub-Advisor is not successful in employing such instruments in managing the
Fund's investments, the Fund's performance will be worse than if the Fund did
not make such investments. Losses incurred in hedging transactions and the
costs of these transactions will adversely affect a Fund's performance.

GEOGRAPHICAL AND INDUSTRY CONCENTRATION. Potential investors in the California
Money, California Municipal, California Insured Intermediate Municipal and
Florida Insured Municipal Funds should consider the possibly greater risk
arising from the geographic concentration of their investments, as well as the
current and past financial condition of California and Florida municipal
issuers, respectively. Certain California and Florida constitutional
amendments, legislative measures, executive orders, administrative regulations,
court decisions and voter initiatives could result in certain adverse
consequences affecting California and Florida municipal obligations,
respectively. See the SAI for a more detailed description of these and other
risks relating to the California Money Fund's, California Municipal Fund's and
California Insured Intermediate Municipal Fund's investments in California
municipal obligations and the Florida Insured Municipal Fund's investments in
Florida municipal obligations.

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<PAGE>
The Global Money Fund will invest at least 25% of its assets in bank obligations
unless the Fund is in a temporary defensive position. As a result of this
concentration policy, which is a fundamental policy of the Fund, the 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 Short Term High Quality
Bond, Short Term Global Government, U.S. Government and Corporate Income Funds
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 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 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 "Mortgage-Backed Securities" section. In
addition, the yields on interest-only and principal-only government stripped
mortgage-backed securities are extremely sensitive to the prepayment experience
on the mortgage loans underlying the certificates collateralizing the
securities. If a decline in the level of prevailing interest rates results in a
rate of principal prepayments higher 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
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
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 Funds will acquire government
stripped mortgage-backed securities only if a liquid secondary market for the
securities exists at the time of acquisition.

(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) except for the 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.

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 a Fund's 15% limit on illiquid securities. The Money Funds will not
invest in Lease Obligation Bonds.

LENDING OF SECURITIES. All of the Funds except the U.S. Government, California
Municipal and Florida Insured Municipal Funds have the ability to lend portfolio
securities to brokers and other financial organizations. By lending its
securities, a 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 a Fund's total assets. Loans of
portfolio securities by a 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 Fund involved. Each Fund's
Sub-Advisor will monitor on an ongoing basis the credit worthiness of the
institutions to which the Fund lends securities.

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 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 Funds -- Strategies Available to Short Term Global Government Fund,
Growth Fund and Emerging Growth Fund" in the SAI.

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<PAGE>

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.

To the extent that a 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
Fund's principal investment to the extent of the premium paid. The yield of the
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.

The Fund will not invest more than 5% of its total investment assets in lease
obligations that contain "non-appropriation" clauses where (1) the nature of the
leased equipment or property is such that its ownership or use is essential to a
governmental function of the municipality, (2) the lease payments will commence
amortization of principal at an early date resulting in an average life of seven
years or less for the lease obligation, (3) appropriate covenants will be
obtained from the municipal obligor prohibiting the substitution or purchase of
similar equipment if lease payments are not appropriate, (4) the lease obligor
has maintained good market acceptability in the past, (5) the investment is of a
size that will be attractive to institutional investors, and (6) the underlying
leased equipment has elements of probability and/or use that enhance its
marketability in the event foreclosure on the underlying equipment were ever
required. The Fund will not invest in lease obligations that contain "non-
appropriation" clauses that do not meet these criteria. The Fund has not
imposed any percentage limitations with respect to its investment in lease
obligations not subject to the "non-appropriation" risk.

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<PAGE>
restrictions that identifies additional restrictions that cannot be changed
without the approval of a majority of an affected Fund's outstanding shares is
contained in the SAI.

NEW ISSUERS. All of the 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 Funds except the Municipal Funds and the Money
Funds 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. A 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, a 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. A 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 a Fund in order to acquire the
underlying securities for the Fund at a price that avoids any additional cost
that would result from a substantial increase in the market value of a security.
A 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 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 Funds may write put and call options on
securities for hedging purposes and the other purposes described in the section
"Strategic Transactions." A Fund realizes fees (referred to as "premiums") for
granting the rights evidenced by the options. A put option embodies the right
of its purchaser

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<PAGE>
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 a Fund, the Fund may suffer a loss
equal to the difference between the price at which the 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 Fund, the Fund may suffer a loss equal to the
excess of the security's market value at the time of the option exercise over
the Fund's acquisition cost of the security, less the premium received for
writing the option.

Certain Funds may write covered options on portfolio securities to enhance
current return. Accordingly, whenever a 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, a Fund will either (1)
deposit with the Trust's custodian in a segregated account cash, U.S. Government
Securities or other short-term, high-grade debt obligations 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 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).

A 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, a Fund would purchase,
prior to the holder's exercise of an option that the Fund has written, an option
of the same series as that on which the Fund desires to terminate its
obligation. The obligation of the Fund under an option that it has written
would be terminated by a closing purchase transaction, but the Fund would not be
deemed to own an option as the result of the transaction. There can be no
assurance that the Fund will be able to effect closing purchase transactions at
a time when it wishes to do so. The ability of the Fund to engage in closing
transactions with respect to options depends on the existence of a liquid
secondary market. While the 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 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.

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 Funds bear the risk that the prices of the securities being
hedged will not move in the same amount as the hedge. A Fund will engage in
hedging transactions only when deemed advisable by its Sub-Advisor. Successful
use by the 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 Fund's performance.

OPTIONS ON FOREIGN CURRENCIES. The International Growth, Growth, Short Term
High Quality Bond, Short Term Global Government and California Insured
Intermediate Municipal Funds may purchase and write put and call options on
foreign currencies for the purpose of hedging against declines in the U.S.
Dollar value of foreign currency-denominated portfolio securities and against
increases in the U.S. Dollar cost of such securities to be acquired. As in the
case of other kinds of options, however, the writing of an option on a foreign
currency constitutes only a partial hedge, up to the amount of the premium
received, and the 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 Fund's position, it may forfeit the entire amount of the premium plus
related transaction costs. There is no specific percentage limitation on the
Fund's investments in options on foreign currencies. See the SAI for further
discussion of the use, risks and costs of options on foreign currencies.

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the price of a particular stock. Accordingly, successful use of options on
stock indexes by the 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.

OVER THE COUNTER OPTIONS. Each of the Funds except the U.S. Government, U.S.
Government Money, California Money and Municipal Funds 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 Funds except the Municipal and 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 a 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.

REPURCHASE AGREEMENTS. All of the Funds may invest in 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 Fund's custodian
or a duly appointed sub-custodian. A Fund will enter into repurchase agreements
only with banks and broker-dealers that have been determined to be creditworthy
by the 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 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 Fund may be delayed or limited in its ability to sell the
collateral. Investments by the California Money Fund in repurchase agreements,
if any, are limited by the restrictions of that Fund's investment in taxable
instruments.

REVERSE REPURCHASE AGREEMENTS. Each of the Funds except the Money Funds may
engage in reverse repurchase agreements. Reverse repurchase agreements are the
same as repurchase agreements except that, in
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this instance, the Funds would assume the role of seller/borrower in the
transaction. The Funds will maintain segregated accounts with the Trust's
custodian consisting of U.S. Government Securities, cash or money market
instruments 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 a 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 Fund's Sub-Advisor, acting under the supervision of the Board of Trustees,
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 Funds except the U.S. Government, Short Term High Quality Bond and
Corporate Income Funds, whenever borrowings by a Fund, including reverse
repurchase agreements, exceed 5% of the value of a Fund's total assets, the Fund
will not purchase any securities. The U.S. Government, Short Term High Quality
Bond and 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 Fund's total assets (after giving effect to such
borrowings).

STAND-BY COMMITMENTS. The California Money Fund and the Municipal Funds may
acquire "stand-by commitments" with respect to Municipal Securities held in
their portfolios. Under a stand-by commitment, a dealer agrees to purchase, at
a Fund's option, specified Municipal Securities at a specified price. A Fund
may pay for stand-by commitments either separately in cash or by paying a higher
price for the securities acquired with the commitment, thus increasing the cost
of the securities and reducing the yield otherwise available from them. Each
Fund intends to enter into stand-by commitments only with brokers, dealers and
banks that, in the opinion of its Sub-Advisor, present minimal credit risks. In
evaluating the creditworthiness of the issuer of a stand-by commitment, the Sub-
Advisors will periodically review relevant financial information concerning the
issuer's assets, liabilities and contingent claims. The Funds will acquire
stand-by commitments solely to facilitate portfolio liquidity and do not intend
to exercise their rights thereunder for trading purposes.

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 Fund will comply with applicable regulatory
requirements when utilizing Strategic Transactions. Strategic Transactions
involving financial futures and options thereon will be purchased, sold or
entered into only for bona fide hedging, risk management or portfolio management
purposes. For more information see discussion in other sections of "Securities
and Investment Practices" and the SAI.

WHEN-ISSUED SECURITIES AND DELAYED-DELIVERY TRANSACTIONS. In order to secure
yields or prices deemed advantageous at the time, all of the Funds except the
Money Funds may purchase or sell securities on a when-issued or a delayed-
delivery basis. The 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 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 Funds will establish a segregated
account with Boston Safe consisting of cash, U.S. Government Securities or other
high grade debt obligations in an amount equal to the amount of its when-issued
and delayed-delivery commitments.

The use of when-issued transactions and forward commitments enables the Funds to
hedge against anticipated changes in interest rates and prices. For instance,
in periods of rising interest rates and falling bond prices, a Fund might sell
Municipal Securities that it owned on a forward commitment basis to limit its
exposure to falling prices. In periods of falling interest rates and rising
bond prices, a Fund might sell a Municipal Security and purchase the same or a
similar security on a when-issued or forward commitment basis, thereby obtaining
the benefit of currently higher cash yields. However, if the relevant Fund's
Sub-Advisor were to forecast incorrectly the direction of interest rate
movements, the Fund might be required to complete such when-issued or forward
transactions at prices inferior to then-current market values.

-44-
<PAGE>

delivering the Municipal Securities, as the case may be. If a Fund, however,
chooses to dispose of the right to acquire a when-issued security prior to its
acquisition or dispose of its right to deliver or receive against a forward
commitment, it may incur a gain or loss. When-issued Municipal Securities may
include bonds purchased on a "when, as and if issued" basis, under which the
issuance of the securities depends on the occurrence of a subsequent event, such
as approval of a proposed financing by appropriate municipal authorities. Any
significant commitment of a Fund's assets to the purchase of securities on a
"when, as and if issued" basis may increase the volatility of the Fund's NAV.
No when-issued or forward commitments will be made by a Fund if, as a result,
more than 20% of the value of the Fund's total assets would be committed to such
transactions.

PERFORMANCE INFORMATION

YIELD

THE BOND FUNDS. From time to time, the Bond Funds (including the Municipal
Funds) may advertise the 30-day YIELD. The 30-day YIELD of a Bond Fund refers
to the income generated by an investment in such Fund over the 30-day period
identified in the advertisement, and is computed by dividing the net investment
income per share earned by the Fund during the period by the maximum Public
Offering Price per share on the last day of the 30-day period. This income is
"annualized" by assuming that the amount of income is generated each month over
a one-year period and is compounded semiannually. The annualized income is then
shown as a percentage of the maximum Public Offering Price. In addition, the
Bond Funds 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.

THE MUNICIPAL FUNDS. The Municipal Funds and the California Money Fund may also
quote TAX EQUIVALENT YIELD. TAX EQUIVALENT YIELD shows the taxable yields an
investor would have to earn before taxes to equal the Fund's tax-free yields. A
tax-equivalent yield is calculated by dividing a Fund's tax-exempt yield by the
result of one minus the sum of a stated federal and applicable state tax rate,
based upon the highest marginal tax rate and adjusted for the federal deduction
of state taxes paid. To the extent that a Fund's yield for a particular
investor is not taxable by cities and counties, the tax equivalent yields
experienced by the investor will be higher than the tax equivalent yields quoted
by the Fund. If only a portion of a Fund's income is tax-exempt, only that
portion is adjusted in the calculation.

TOTAL RETURN

-45-
<PAGE>

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

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

PERFORMANCE COMPARISONS

In reports or other communications to shareholders or in advertising material, a
Fund may compare the performance of its Class A and Class S 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 Dimensional Fund Advisor's Small Cap Index, the Lehman Brothers GNMA Index,
the S&P 100 Index, the Lehman Brothers Index of Baa-rated Corporate Bonds, the
T-Bill Index, the Bank Rate Monitor, Donoghue's Money Fund Averages and the
"Stocks, Bonds and Inflation Index" published annually by Ibbotson Associates.
The performance information may also include evaluations of the Funds published
by nationally recognized ranking services and by financial publications that are
nationally recognized, such as Business Week, Forbes, Fortune, Institutional
------------- ------ ------- -------------
Investor, Money and The Wall Street Journal. The International Growth, Short
- -------- ----- -----------------------
Term Global Government and Growth Funds may compare their performance to other
investments or relevant indexes consisting of Salomon Brothers Short Term Global
Bond Index, J.P. Morgan Global Government Traded Index, Morgan Stanley Capital
International EAFE Index, the Standard & Poor's 500 Index, the Lipper
International Fund Index and The Financial Times World Stock Index. If a Fund
compares its performance to other funds or to relevant indexes, the Fund's
performance will be stated in the same terms in which such comparative data and
indexes are stated, which is normally total return rather than yield. For these
purposes the performance of the Fund, as well as the performance of such
investment companies or indexes, may not reflect sales charges, which, if
reflected, would reduce performance results.

In addition, the Municipal Funds and the California Money Fund may attempt to
illustrate in advertising or sales literature the benefits of tax-free
investing. For example, Table 1 on the following page shows California
investors the approximate yield that a taxable investment must earn at various
sample income brackets to produce after-tax yields equivalent to those of tax-
exempt investments, such as the California Municipal, California Insured
Intermediate Municipal and California Money Funds, yielding from 2.00% to 7.00%.
Table 2 on the following page shows taxpayers how to translate federal tax
savings from investments, such as the National Municipal Fund, into an
equivalent yield from a taxable investment. The yields following are for
illustration purposes only and are not intended to represent current or future
yields for the Funds, which may be higher or lower than the yields shown.
Calculations are computed in accordance with standard SEC calculations of 30-day
yield. The California marginal tax rates presented assume payment of the
highest California tax rate for the particular federal marginal tax rate quoted.
The income brackets presented are only samples since the Internal Revenue
Service ("IRS") adjusts the brackets annually for inflation. Investors should
consult their tax adviser with specific reference to their own tax situation.

Performance information is computed separately for each Fund's Class A and Class
S Shares. Because Class S Shares bear the expense of the higher distribution
and service fees, it is expected that performance for a Fund's Class S Shares
will be lower than that for a Fund's Class A Shares.

-46-
<PAGE>

TAX EQUIVALENT YIELDS
<TABLE>
<CAPTION>

TABLE 1
Combined
Federal and
Federal California California Tax-Exempt Yield
Sample 1995 Federal Marginal Marginal Marginal ----------------
Taxable Income Brackets Tax Rate+ Tax Rate* Tax Rate** 2.00% 2.50% 3.00% 3.50% 4.00%
- ------------------------------------- --------- ---------- ----------- ---------------------------------------
Single Return Joint Return Taxable Yield
- ----------------- ----------------- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$0-$23,350 $0-$39,000 15% 6.00% 20.10% 2.50% 3.13% 3.75% 4.38% 5.01%

$23,350-$56,550 $39,000-$94,250 28% 9.30% 34.70% 3.06% 3.83% 4.59% 5.36% 6.13%

$56,550-$117,950 n.a. 31% 10.00% 37.90% 3.22% 4.03% 4.83% 5.64% 6.44%

n.a. $94,250-$143,600 31% 9.30% 37.42% 3.20% 3.99% 4.79% 5.59% 6.39%

$117,950-$256,500 n.a. 36% 11.00% 43.04% 3.51% 4.39% 5.27% 6.14% 7.02%

n.a. $143,600-$256,500 36% 10.00% 42.40% 3.47% 4.34% 5.21% 6.08% 6.94%

$256,500 and up $256,500 and up 39.6% 11.00% 46.24% 3.72% 4.65% 5.58% 6.51% 7.44%
<CAPTION>
Combined
Federal and
Federal California California Tax-Exempt Yield
Sample 1995 Federal Marginal Marginal Marginal ----------------
Taxable Income Brackets Tax Rate+ Tax Rate* Tax Rate** 4.50% 5.00% 5.50% 6.00% 6.50% 7.00%
- ------------------------------------- --------- ---------- ----------- ----------------------------------------------------
Single Return Joint Return Taxable Yield
- ----------------- ----------------- ----------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$0-$23,350 $0-$39,000 15% 6.00% 20.10% 5.63% 6.26% 6.88% 7.51% 8.14% 8.76%

$23,350-$56,550 $39,000-$94,250 28% 9.30% 34.70% 6.89% 7.66% 8.42% 9.19% 9.95% 10.72%

$56,550-$117,950 n.a. 31% 10.00% 37.90% 7.25% 8.05% 8.86% 9.66% 10.47% 11.27%

n.a. $94,250-$143,600 31% 9.30% 37.42% 7.19% 7.99% 8.79% 9.59% 10.39% 11.19%

$117,950-$256,500 n.a. 36% 11.00% 43.04% 7.90% 8.78% 9.66% 10.53% 11.41% 12.29%

n.a. $143,600-$256,500 36% 10.00% 42.40% 7.81% 8.68% 9.55% 10.42% 11.29% 12.15%

$256,500 and up $256,500 and up 39.6% 11.00% 46.24% 8.37% 9.30% 10.23% 11.16% 12.09% 13.02%

<CAPTION>
TABLE 2
Tax-Exempt Yield
Sample 1995 Federal Federal Marginal ----------------
Taxable Income Brackets Tax Rate+ 4.50% 5.00% 5.50% 6.00% 6.50% 7.00%
- ------------------------------------- ---------------- --------------------------------------------------------------------
Single Return Joint Return Taxable Yield
- ----------------- ----------------- --------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$0-$23,350 $0-$39,000 15% 5.29% 5.88% 6.47% 7.06% 7.65% 8.24%

$23,350-$56,550 $39,000-$94,250 28% 6.25% 6.94% 7.64% 8.33% 9.03% 9.72%

$117,950-$256,500 $94,250-$143,600 31% 6.52% 7.25% 7.97% 8.70% 9.42% 10.14%

$117,950-$256,500 $143,600-$256,500 36% 7.03% 7.81% 8.59% 9.38% 10.16% 10.94%

$256,500 and up $256,500 and up 39.6% 7.45% 8.28% 9.11% 9.93% 10.76% 11.59%

</TABLE>

- ------------------------------------
* California taxable income may differ due to differences in exemptions,
itemized deductions and other items.
** Rates do not include the phase-out of personal exemptions or itemized
deductions. Rates include the federal deduction of state taxes paid.
+ Rates do not include the phase-out of personal exemptions or itemized
deductions.

OBTAINING PERFORMANCE INFORMATION

-47-
<PAGE>

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 oweners) 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

RETIREMENT

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

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

TRUST

CORPORATION OR OTHER ORGANIZATION

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

-48-
<PAGE>

<TABLE>
<CAPTION>
HOW TO INVEST IN A SAM ACCOUNT
<S> <C> <C>

NEW ADDITIONAL
METHOD INVESTMENTS INVESTMENTS
----------------------------------------------------------------------
MINIMUM $10,000 MINIMUM $2,000
($5,000 IRA/401(k)/KEOGH) ($1,000 IRA/401(k)/KEOGH)
- --------------------------------------------------------------------------------------------------------
IN PERSON: Visit the Representative of an Visit the Representative of an
To Open a SAM Account Through Authorized Dealer Authorized Dealer
an Authorized Dealer
- --------------------------------------------------------------------------------------------------------

BY TELEPHONE: A SAM Account cannot be opened Call Shareholder Services
by telephone. at 1-800-869-2019,
Monday through Friday,
9:00 a.m. to 6:00 p.m.,
Eastern Time/
6:00 a.m. to 3:00 p.m.,
Pacific Time.

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

BY MAIL: A SAM Account cannot be opened Make your check payable to
by mail. "Sierra Trust Funds," and send to:

Sierra Trust Funds
P.O. Box 9702
Providence, RI 02940-9702

Indicate your Fund account number
and class of shares purchased on
your check.

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

BY WIRE: A SAM Account cannot be opened Instruct your bank to wire Federal
by wire. Funds exactly as follows:

Boston Safe Deposit Trust
Boston, MA
ABA# 011-001234
DDA# 167053
Custody Shareholder Services
Attention Sierra Trust Funds
(Fund Name and Class of Shares)
(Customer's Name)
(Customer's Social Security
Number)

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

-49-
<PAGE>

INVESTMENT IN FUNDS THROUGH A SAM ACCOUNT. In addition to the considerable
diversification among individual securities you receive by investing in a
particular Fund, you can further reduce risk by spreading your assets among
Class A or Class S Shares of several different SAM Account Funds that each have
different risk and return characteristics. The SAM Account is an active
investment management service offered by Sierra Investment Services Corporation
("Sierra Services"), the SAM Account investment advisor, that allocates your
investments across a combination of either Class A or Class S Shares of the SAM
Account Funds selected to meet long-term investment objectives as well as, in
certain circumstances, current income objectives.

Sierra Services has developed investment strategies for SAM Accounts to meet the
diverse financial needs of different investors. You can open a SAM Account by
meeting with one of the investment professionals of an Authorized Dealer who
will review your situation and help you identify your long-term investment
objectives. After using SAM Account criteria to determine your long-term
objectives, you can choose one of several investment strategies. Based on your
chosen strategy, your initial investment will be allocated among either Class A
or Class S Shares of a number of the SAM Account Funds. Depending on market
conditions, Sierra Services from time to time (normally quarterly) reallocates
the combination of SAM Account Funds or the amounts invested in the respective
Class A or Class S Shares of each to implement your SAM investment strategy. In
addition, your SAM Account will be periodically rebalanced to maintain your SAM
strategy's current asset allocation mix, if and when fund performance unbalances
the strategy's mix. You will pay Sierra Services a fee for the SAM Account
service that is in addition to and separate from the fees and expenses you will
pay directly or indirectly as an investor in the Funds. See "Summary of Sierra
Trust Funds Expenses" and "Exchange Privileges and Restrictions."

From time to time, one or more of the Funds used for investment by the SAM
Accounts may experience relatively large investments or redemptions due to SAM
Account allocations or rebalancings recommended by Sierra Services. These
transactions will affect the Funds, since Funds that experience redemptions as a
result of reallocations or rebalancings may have to sell portfolio securities
and Funds that receive additional cash will have to invest it. 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 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. The
Advisor, representing the interests of the Funds, is committed to minimizing the
impact of SAM Account transactions on the Funds; Sierra Services, representing
the interest of the SAM Accounts, is also committed to minimizing such impact on
the Funds to the extent it is consistent with pursuing the investment objective
of the SAM Accounts. The Advisor and Sierra Services will nevertheless face
conflicts in fulfilling their respective responsibilities because they are
affiliates and employ some of the same professionals. In addition, Sierra
Services is the Fund's distributor and is compensated on the sale of shares and
may be compensated for distribution services on the sale of certain Class B and
Class S Shares. See "Initial Sales Charge Alternative: Class A Shares" and
"Exchange Privileges and Restrictions." The Advisor will monitor the impact of
SAM Account transactions on the Funds.

-50-
<PAGE>

form when all of the steps required, including submission of an application
form, have been completed. In the case of an investment by wire, however, the
order will be deemed to be in proper form after the telephone order and the
federal funds wire have been received. The failure of a shareholder who
purchases by wire to submit an application form in a timely fashion may cause
delays in processing subsequent redemption requests. If a telephone order is
received or if payment by wire is received after the close of the NYSE, 4:00
p.m. Eastern Time/1:00 p.m., Pacific Time, the shares will not be credited until
the next Business Day. However, Shareholder Services will be open from 9:00
a.m. to 6:00 p.m., Eastern Time/6:00 a.m. to 3:00 p.m., Pacific Time, Monday
through Friday, except on New York Stock Exchange ("NYSE") holidays.

DIVIDEND REINVESTMENT PLAN. A Dividend Reinvestment Plan will be established
automatically for each SAM Account, except for SAM Accounts invested in one of
the SAM strategies (the "Income Strategy"). The Income Strategy was developed
by Sierra Services to provide for the periodic payment of income to investors
and is designed to pay monthly dividends by check. With the exception of the
Income Strategy, under this Dividend Reinvestment Plan, all income dividends and
capital gain distributions for Class A or Class S Shares of a SAM Account Fund
will be automatically reinvested in additional Class A or Class S Shares,
respectively, of the SAM Account Fund that paid the dividend at the NAV
determined on the dividend payment date.

As an illustration, if you qualify for significantly reduced 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 S Shares.
Also, Class A Shares are subject to a lower distribution fee and, accordingly,
such shares are expected to pay correspondingly higher dividends on a per share
basis. However, because initial sales charges are deducted at the time of
purchase of Class A Shares, the amount of your funds actually invested would be
reduced by the amount of the sales charge and you would initially own fewer
shares. For this reason, you might determine that it would be more advantageous
to purchase Class S 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 S
Shares may still exceed the initial sales charge and distribution charges
applicable to Class A Shares during the same period.

-51-
<PAGE>

INITIAL SALES CHARGE ALTERNATIVE: CLASS A SHARES. Class A Shares of the Sierra
Trust Funds are sold at the Public Offering Price. Investors purchasing Class A
Shares of the Non-Money Funds incur a sales charge at purchase as described in
the following tables. Purchases of $1 million or more and certain other
purchases are not subject to the sales charge at the time of purchase, but may
be subject to a 1.0% CDSC on redemptions within one year of purchase or a 0.5%
CDSC on redemptions during the second year after purchase (the "Class A CDSC"),
including redemptions of Money Fund Class A Shares acquired through exchange for
such Non-Money Fund Class A Shares. For a purchase of Class A Shares in an
amount of $1 million or more, if the Trust receives at or before the purchase a
written direction from the dealer of record that the Class A CDSC shall not
apply, then the Class A CDSC shall not apply and Sierra Services may pay the
investor's dealer of record up to 0.25% of the net asset value of the purchase.
For such a purchase, if the Trust does not receive at or before the purchase a
written direction from the dealer of record that the Class A CDSC shall not
apply, then the Class A CDSC shall apply and Sierra Services may pay the
investor's dealer of record up to 1.00% of the net asset value of the purchase.
No sales charge at time of purchase and no CDSC will be assessed on purchases of
Class A Shares of a Money Fund, 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. Certain investors
who purchased Non-Money Fund Class A Shares at net asset value based on a
purchase amount of 2.5% million or more before July 1, 1995 are subject to the
Prior Class A CDSC. Class A Shares purchased through a qualified 401(k) or
403(b) plan may, in certain circumstances, be subject to a CDSC of 1.0% 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 NON-MONEY FUNDS OTHER THAN THE SHORT TERM GLOBAL
GOVERNMENT FUND AND THE SHORT TERM HIGH QUALITY BOND FUND

<TABLE>
<CAPTION>
Dealers'
Reallowance as
As a % of Offering As a % of a % of
Amount of Transaction Price Per Share Net Asset 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 SHORT TERM GLOBAL GOVERNMENT FUND
AND THE SHORT TERM HIGH QUALITY BOND FUND

<TABLE>
<CAPTION>
Dealers'
Reallowance as
As a % of Offering As a % of a % of
Amount of Transaction Price Per Share Net Asset Value Offering Price
- ------------------------------------ ------------------ --------------- --------------
<S> <C> <C> <C>
Less than $50,000 3.50% 3.63% 3.00%
$50,000 but less than $100,000 3.00% 3.09% 2.50%
$100,000 but less than $250,000 2.50% 2.56% 2.00%
$250,000 but less than $500,000 2.25% 2.30% 2.00%
$500,000 but less than $1,000,000 2.00% 2.04% 1.75%
$1,000,000 and over 0% 0% 0%+
- ----------------------------------------------------------------------------------------------
</TABLE>

-52-
<PAGE>

REDUCED SALES CHARGES AT PURCHASE

LETTER OF INTENT. A "letter of intent" allows you to purchase Class A Shares of
Funds over a 13-month period at reduced sales loads based on the total amount
that you state in the letter. This letter is non-binding on the shareholder.
Class A Share redemptions during the period may count against the total. During
the period, shareholder services will hold in escrow shares equal in value to 5%
of the amount purchased for payment of a higher sales load if the full amount
specified in the letter is not purchased within the 13-month period. The shares
will be released upon completion of the letter.

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

-53-
<PAGE>

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 1.0% or 0.5% 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, including Class A Shares of a Money Fund acquired, through an exchange
for Class A Shares of a Non-Money Fund purchased at NAV without a sales charge
at time of purchase (purchases of $1 million or more). The Class A CDSC will
not be imposed on Class A Shares purchased by certain investors that have made
arrangements with Sierra Trust Funds and whose dealer of record waived the fee
in excess of 0.25% as previously described. Class A Shares purchased before
July 1, 1995 that were purchased at NAV without a sales charge at time of
purchase because the amount of the purchase was $2.5 million or more may be
subject to the Prior Class A CDSC, a 1.0% CDSC on redemptions made within one
year of purchase. 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 Sierra Trust Funds will first redeem shares not subject to any
CDSC.

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

DEFERRED SALES CHARGE ALTERNATIVE: CLASS S SHARES. If you choose the deferred
sales charge alternative, you will purchase Class S Shares of the SAM Account
Funds at their NAV per share without the imposition of a sales charge at the
time of purchase. (Class S Shares of certain Funds are not available for
purchase directly.) Class S Shares that are redeemed within six years of
purchase, however, will be subject to a CDSC as described on the following page.
CDSC payments and distribution fees on Class S Shares may be used to fund
commissions payable to Authorized Dealers.

-54-
<PAGE>

capital gain distributions. The amount of the charge is determined as a
percentage of the lesser of (1) the NAV of the Class S Shares at the time of
purchase or (2) the NAV of the Class S Shares at the time of redemption. No
charge will be imposed with respect to shares acquired by reinvestment of net
investment income and capital gain distributions. 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:

Year of Contingent
Redemption Deferred Sales
After Purchase Charge
-------------- --------------
First................... 5%
Second.................. 4%
Third................... 3%
Fourth.................. 3%
Fifth................... 2%
Sixth................... 1%
Seventh and following... 0

WAIVERS OF THE CLASS S CDSCs. No CDSC charges will be assessed on redemptions
of Class S Shares in the case of the death of the shareholder, redemptions in
connection with certain involuntary distributions, including distributions
arising out of the death or disability of a shareholder, from IRAs. The
foregoing waivers may be changed at any time.

HOW TO SELL SHARES

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<PAGE>

The check may take up to 15 days or more to clear for deposit of the
shareholder's funds into the Fund's account, and the shareholder may not receive
the redemption proceeds until after such time period. The failure of a
shareholder who purchased shares by wire to submit an application form in a
timely fashion may cause delays in processing redemption requests.

If you wish to keep your Class A or Class S Shares account open, leave at least
$250 worth of shares in your account.

. The table below highlights the ways in which you can redeem shares in your
Fund account.

WAYS TO SELL SHARES OF YOUR SIERRA TRUST FUND
<TABLE>
<CAPTION>

Account Type Special Requirements
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
BY PHONE All account types, except . You may exchange to the same class
800-869-2019 retirement of other funds of the Trust if both
accounts are registered with the same
name(s), address, and taxpayer ID
number. You may withdraw 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.
- ------------------------------------------------------------------------------------------------------

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 800-869-2019.

. Your wire redemption request must be
received by Sierra Trust Funds before
11:00 a.m., Eastern Time/8:00 a.m.,
Pacific Time, for money to be wired on
the next Business Day. A $5.00 fee
may be charged for each wire transfer.
Minimum amount is $1,000.
- ------------------------------------------------------------------------------------------------------
</TABLE>
* Corporations, trusts and retirement plans may require additional paperwork
before shares may be redeemed. Please call 1-800-869-2019 to verify you have
the correct paperwork and to avoid delays.

-56-
<PAGE>

. BY TELEPHONE

TO SET UP THE TELEPHONE WIRE REDEMPTION PROCEDURE, indicate your acceptance of
this procedure on the application form and designate a bank and bank account
number to receive the proceeds of withdrawals. To use this procedure after an
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 Shareholder Services with a signature guarantee (for more information
regarding signature guarantees, see the following). For joint accounts, all
owners must sign and have their signatures guaranteed.

. THROUGH SHAREHOLDER SERVICES OR AUTHORIZED DEALERS

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

EXCHANGE PRIVILEGES AND RESTRICTIONS

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<PAGE>

be included in the period during which that investment is deemed to be invested
in the Trust for purposes of calculating the CDSC. If the initial Class S
Shares purchased by the investor were not subject to the Class S CDSC, then no
Class S CDSC will be imposed on any subsequent exchanges or redemptions
involving those shares. In the event of redemptions of Class S Shares after
exchanges, the amount you initially invested in Class S Shares will be subject
to the six-year CDSC schedule applicable to all Class S Shares.

KEY ASPECTS OF TELEPHONE TRANSACTIONS. During periods of significant economic
or market changes, telephone transactions may be difficult to implement.
Neither the Trust nor its Transfer Agent will be responsible for any loss,
liability, cost or expense for acting upon wire instructions or upon telephone
instructions that it reasonably believes are genuine. The Trust and its
Transfer Agent will each employ procedures to confirm that telephone
instructions are genuine. Such procedures may include recording telephone
calls. You should verify the accuracy of telephone transactions immediately
upon receipt of your confirmation statement. If an investor is unable to
contact Shareholder Services by telephone, an investor may deliver the
transaction request to Shareholder Services at P.O. Box 9702, Providence, Rhode
Island 02940-9702. Upon 30 days' prior written notice to shareholders, the
telephone transaction privileges may be modified or terminated.

DIVIDENDS, CAPITAL GAINS AND TAXES

The amount of dividends of net investment income (i.e., all income other than
long- and short-term capital gains) and distributions of net realized long- and
short-term capital gains payable to shareholders will be determined separately
for each Fund. Dividends from the net investment income of the Money Funds will
be declared daily and paid monthly. Dividends from the net investment income of
the Bond Funds will be declared daily and paid monthly. Dividends from the net
investment income of the Growth and Income Fund will be declared and paid
quarterly. Dividends from the net investment income of the Growth Fund will be
declared and paid semi-annually. Dividends from the net investment income of
the Emerging Growth and International Growth Funds will be declared and paid
annually. Distributions of any net long-term capital gains earned by a Fund
will be made annually. Distributions of any net short-term capital gains earned
by a Fund will be distributed no less frequently than annually at the discretion
of the Board of Trustees.

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<PAGE>

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

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

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

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

TAXES

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. Distributions of net capital
gain (the excess of net long-term capital gain over net short-term capital loss)
are taxed to shareholders as long-term capital gain regardless of how long you
have held your shares.

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<PAGE>

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

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

ADDITIONAL CONSIDERATIONS FOR SHAREHOLDERS OF THE MUNICIPAL FUNDS AND THE
CALIFORNIA MONEY FUND. Dividends paid by any of the Municipal Funds or the
California Money Fund that are derived from interest earned on qualifying tax-
exempt obligations will be "exempt-interest" dividends, which shareholders may
exclude from their gross incomes for federal income tax purposes, if at the
close of each quarter of that Fund's taxable year, at least 50 percent of the
Fund's total assets consist of obligations the interest on which is excludable
from gross income for federal income tax purposes. To the extent that any of
these Funds invests in AMT-Subject Bonds, any exempt-interest dividends derived
from interest on such AMT-Subject Bonds are a specific preference item for
purposes of the federal individual and corporate alternative minimum taxes. In
any event, all exempt-interest dividends will be a component of adjusted current
earnings for purposes of computing the federal corporate alternative minimum tax
and the federal corporate environmental tax.

Interest on indebtedness incurred or continued by shareholders to purchase or
carry shares of the Municipal Funds and the California Money Fund is not
deductible for federal income tax purposes. The Municipal Funds and the
California Money Fund may not be an appropriate investment for persons
(including corporations and other business entities) who are not currently
subject to federal income tax (such as certain qualified retirement accounts) or
who are substantial users (or who are related to substantial users) of
facilities financed by "private activity bonds" or certain industrial
development bonds. "Substantial user" is defined generally as including a "non-
exempt person" who regularly uses in a trade or business a part of a facility
financed from the proceeds of such bonds. Entities or persons who are
"substantial users" (or persons related to "substantial users") should consult
their tax advisors before purchasing shares of the Municipal Funds or the
California Money Fund.

-60-
<PAGE>

obligations issued by the State of Florida or its municipalities, counties, and
other taxing districts, the United States Government, and its agencies, Puerto
Rico, Guam, and the U.S. Virgin Islands, which are exempt from that tax.

ADDITIONAL CONSIDERATIONS FOR SHAREHOLDERS OF THE CALIFORNIA MONEY FUND,
CALIFORNIA MUNICIPAL FUND AND CALIFORNIA INSURED INTERMEDIATE MUNICIPAL FUND.
Each of the California Money Fund, California Municipal Fund and California
Insured Intermediate Municipal Fund (the "California Funds") is treated as a
separate taxable entity for California tax purposes, and is therefore subject to
California franchise or corporate income tax on its net income. However, each
of the California Funds intends to qualify as a regulated investment company
under the Code, and if it does so qualify, will be entitled, for California tax
purposes, to a deduction for dividends paid to shareholders. As a regulated
investment company, a California Fund will pay California franchise or corporate
income tax only on any undistributed income, net of allocable expenses.

If, at the close of each quarter of its taxable year, at least 50% of the value
of the total assets of a California Fund consists of obligations the interest on
which would be exempt from California personal income tax if the obligations
were held by an individual ("California Tax Exempt Obligations"), and if the
California Fund continues to qualify as a regulated investment company for
federal income tax purposes, then the California Fund will be qualified to pay
dividends, subject to certain limitations, to its shareholders that are exempt
from California State personal income tax, but not from California State
franchise tax or California State corporate income tax ("California exempt-
interest dividends"). However, the total amount of California exempt-interest
dividends paid by the California Money Fund to all of its non-corporate
shareholders with respect to any taxable year cannot exceed the amount of
interest received by the Fund during such year on California Tax Exempt
Obligations less any expenses and expenditures (including any dividends paid to
corporate shareholders) deemed to have been paid from such interest. If the
aggregate dividends exceed the amount that may be treated as California exempt-
interest dividends, only that percentage of each dividend distribution equal to
the ratio of aggregate California exempt-interest dividends to aggregate
dividends will be treated as a California exempt-interest dividend. Dividend
distributions that do not qualify for treatment as California exempt-interest
dividends (including those dividend distributions to shareholders taxable as
long-term capital gains for federal income tax purposes) will be taxable to
shareholders at ordinary income tax rates for California personal income tax
purposes to the extent of the California Fund's earnings and profits.

SHAREHOLDER AND ACCOUNT POLICIES

TRANSACTION DETAILS

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

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<PAGE>

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

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 FUNDS IN DETAIL

ORGANIZATION

THE TRUST IS GOVERNED BY A BOARD OF TRUSTEES, which is responsible for
protecting the interests of shareholders. The trustees are experienced business
persons who meet throughout the year to oversee the Trust's activities, review
contractual arrangements with companies that provide services to the Funds, and
review performance. The majority of trustees are not affiliated with Sierra
Services, Sierra Advisors or Sierra Administration other than as trustees of the
Trust. The Trust was organized on February 22, 1989 under the laws of the
Commonwealth of Massachusetts as a "Massachusetts business trust."

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

SIERRA ADVISORS, ITS AFFILIATES AND SERVICE PROVIDERS

ADVISOR

Sierra Advisors, located at 9301 Corbin Avenue, Northridge, California 91324, is
the investment advisor of the Funds. Responsibilities of Sierra Advisors
include formulating the 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 Fund's
investment performance. In connection with these activities, Sierra Advisors
may initiate action to change a Sub-Advisor if it deems such action to be in the
best interests of a Fund and its shareholders.

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<PAGE>

SUB-ADVISORS

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

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, 1995, BlackRock had aggregate assets under
management or supervision of more than $32 billion.

J.P. MORGAN is located at 522 Fifth Avenue, New York, New York 10036. J.P.
Morgan and Morgan Guaranty Trust Company of New York are wholly owned
subsidiaries 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 June 30, 1995, J.P. Morgan and its affiliates
had investment management authority with respect to approximately $168 billion
of assets.

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<PAGE>

affiliates, had aggregate assets under management or supervision, as of
September 30, 1995, of more than $54 billion.

ADMINISTRATOR, TRANSFER AGENT AND CUSTODIAN

Sierra Administration provides shareholder service and other administrative
services. Sierra Administration is under common control with the Advisor and
Sierra Services. Sierra Administration is located at 9301 Corbin Avenue,
Northridge, California 91324. Pursuant to an Administration Agreement, Sierra
Administration is responsible for all administrative functions with respect to
the Trust, although it delegates certain of its responsibilities to sub-
administrators. Sierra Administration also serves as Transfer Agent. Sierra
Administration is entitled to a monthly fee at an annual rate of 0.35% of each
Non-Money Fund's average daily net assets and at an annual rate of 0.30% of each
Money Fund's average daily net assets. Sierra Administration pays The
Shareholder Services Group, Inc. ("TSSG"), a subsidiary of First Data Corp., for
its services as sub-Administrator and sub-transfer agent. Sierra Administration
pays Boston Safe Deposit and Trust Co. ("Boston Safe"), One Boston Place,
Boston, MA 02108, for its services as custodian. The Trust pays certain sub-
transfer agent's and sub-administrator's out-of-pocket expenses and pays Boston
Safe certain custodial transaction charges.

DISTRIBUTORS

Sierra Services is the distributor of the Class A, Class B and Class S Shares of
the Funds. Sierra Services is located at 9301 Corbin Avenue, Northridge,
California 91324. Sierra Services, an indirectly wholly-owned subsidiary of
GWFC, was established in 1992 and is a registered broker-dealer with the NASD
and a registered investment advisor.

Each of the Funds has three distribution plans, pursuant to Rule 12b-1 under the
1940 Act, applicable to each class of Shares of the Trust (each, a "Rule 12b-1
Plan"). Each Fund intends to operate the Rule 12b-1 Plans in accordance with
its terms and the NASD Rules concerning sales charges. Under the applicable
Rule 12b-1 Plans, Sierra Services is paid an annual fee as compensation in
connection with the offering and sale of Class A and Class S Shares of the
Funds. The annual fees to be paid to Sierra Services under Rule 12b-1 Plans are
calculated with respect to Class A Shares at an annual rate of up to .25% of the
average daily net assets of the Class A Shares of the Fund and with respect to
Class S Shares at an annual rate of up to .75% of the average daily net assets
of the Class S Shares of the Fund. These fees may be used to cover the expenses
of Sierra Services primarily intended to result in the sale of Class A and Class
S Share of the Funds, including payments to Sierra Services' representatives or
others for selling shares. Sierra Services may retain any amount of its fee
that is not so expended. Class S Share are also subject to a service fee at an
annual rate of .25% of the average daily net assets of the Class S Shares of the
Fund.

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<PAGE>

PORTFOLIO TRANSACTIONS AND TURNOVER. All orders for the purchase or sale of
securities on behalf of each Fund are placed by the Fund's Sub-Advisor with
broker-dealers that it selects. Each Fund may, at the discretion of its Sub-
Advisor, utilize Authorized Dealers or brokers affiliated with the Advisor or
Sub-Advisor in connection with a purchase or sale of securities in accordance
with rules adopted or exemptive orders issued by the SEC when the Fund's Sub-
Advisor believes that such broker's charge for the transaction does not exceed
usual and customary levels.

BREAKDOWN OF FUND EXPENSES

-65-
<PAGE>

MANAGEMENT FEE

After After After After
After 75; 100; 125; After After After 400;
Amount of First 50; next next next 150; 200; 300; next Over
Assets ($ Mil.) 50 next 25 25 25 25 next 50 next 100 next 100 100 500
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Each Money Fund* .50% .50% .50% .50% .50% .50% .50% .50% .50% .40%

Short Term High
Quality Bond
Fund .50% .50% .50% .50% .50% .50% .45% .45% .45% .40%

Short Term Global
Government Fund .65% .65% .65% .65% .65% .65% .65% .65% .65% .55%

U.S. Government Fund* .60% .60% .60% .60% .60% .60% .60% .60% .60% .50%

Corporate Income Fund .65% .65% .65% .65% .65% .65% .65% .65% .65% .50%

California Municipal
Fund* .65% .65% .65% .65% .65% .65% .65% .65% .65% .50%

Florida Insured
Municipal Fund* .60% .60% .60% .60% .60% .60% .60% .60% .60% .45%

California Insured
Intermediate
Municipal Fund* .65% .65% .65% .65% .65% .65% .65% .65% .65% .50%

National Municipal Fund* .60% .60% .60% .60% .60% .60% .60% .60% .60% .45%

Growth and Income Fund .80% .80% .80% .75% .75% .75% .70% .70% .65% .575%

Growth Fund .95% .95% .95% .90% .90% .90% .875% .875% .875% .875%

Emerging Growth Fund .90% .90% .90% .85% .85% .85% .85% .85% .85% .75%

International Growth
Fund .95% .85% .85% .85% .65% .65% .65% .65% .65% .65%
=============================================================================================================================
</TABLE>

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<PAGE>

<TABLE>
<CAPTION>
====================================================================================================================================
Amount of After After After After After After After After
Assets 50; 75; 100; 125; 150; 200; 300; 400;
($ Mil.) next next next next next next next next
First 50 25 25 25 25 50 100 100 100 Over 500
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Each Money
Fund .15% .15% .15% .15% .15% .15% .15% .15% .15% .15%
- ------------------------------------------------------------------------------------------------------------------------------------
Short Term
High Quality
Bond Fund .15% .15% .15% .15% .15% .15% .10% .10% .10% .10%
- ------------------------------------------------------------------------------------------------------------------------------------
Short Term
Global
Government
Fund(1) .28% .28% .28% .28% .28% .28% .10% .10% .10% .10%
- ------------------------------------------------------------------------------------------------------------------------------------
U.S.
Government
Fund (2) (2) (2) (2) (2) (2) (2) (2) (2) (2)
- ------------------------------------------------------------------------------------------------------------------------------------
Corporate
Income Fund .30% .30% .30% .30% .30% .30% .30% .30% .30% .25%
- ------------------------------------------------------------------------------------------------------------------------------------
California
Municipal
Fund(3) .20% .20% .20% .20% .20% .15% .15% .15% .15% .15%
- ------------------------------------------------------------------------------------------------------------------------------------
Florida
Insured
Municipal
Fund .20% .20% .125% .125% .125% .125% .125% .125% .125% .125%
- ------------------------------------------------------------------------------------------------------------------------------------
California
Insured
Intermediate
Municipal
Fund .20% .20% .125% .125% .125% .125% .125% .125% .125% .125%
- ------------------------------------------------------------------------------------------------------------------------------------
National
Municipal
Fund(3) .20% .20% .20% .20% .20% .15% .15% .15% .15% .15%
- ------------------------------------------------------------------------------------------------------------------------------------
Growth and
Income Fund .45% .45% .45% .40% .40% .40% .35% .35% .30% .30%
- ------------------------------------------------------------------------------------------------------------------------------------
Growth Fund .55% .55% .55% .50% .50% .50% .50% .50% .50% .50%
- ------------------------------------------------------------------------------------------------------------------------------------
Emerging
Growth Fund .55% .55% .55% .50% .50% .50% .50% .50% .50% .50%
- ------------------------------------------------------------------------------------------------------------------------------------
International
Growth Fund .60% .50% .50% .50% .40% .40% .40% .40% .40% .40%
====================================================================================================================================
</TABLE>
(1) Sierra Advisors pay the Sub-Advisor of the Short Term Global Government
Fund a minimum annual fee of $137,500.
(2) BlackRock is paid fees monthly at the following annual rate under the
Current Sub-Advisory Agreement for the Fund: (i) .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) .15% of the Fund's 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) .10% of the Fund's average daily net assets if
the Government Funds' Combined Assets are more than $1,000,000,000.
(3) Pursuant to the investment sub-advisory agreements with respect to each of
the California Municipal and National Municipal Funds, when the combined
average daily net assets of the California Municipal and National
Municipal Funds (the "Combined Assets") exceed $750

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<PAGE>

million, the Sub-Advisor will be paid a fee with respect to each Fund in
proportion to each Fund's average net assets at the following annual rate:
.15% of the Combined Assets up to $1 billion; plus .125% of the Combined
Assets over $1 billion.

OTHER EXPENSES

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

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